1 00:00:05,080 --> 00:00:08,280 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Lisa A. 2 00:00:08,320 --> 00:00:11,640 Speaker 2: Bromwoyd's along with Tom Keen and Jonathan Farrow, join us 3 00:00:11,680 --> 00:00:15,280 Speaker 2: each day for insight from the best in economics, geopolitics, 4 00:00:15,320 --> 00:00:16,440 Speaker 2: finance and investment. 5 00:00:16,760 --> 00:00:18,760 Speaker 1: Subscribe to Bloomberg Surveillance. 6 00:00:18,320 --> 00:00:21,840 Speaker 2: On demand on Apple, Spotify and anywhere you get your podcasts, 7 00:00:22,120 --> 00:00:25,200 Speaker 2: and always on Bloomberg dot Com, the Bloomberg Terminal, and 8 00:00:25,200 --> 00:00:27,680 Speaker 2: the Bloomberg Business App. And right now, I don't want 9 00:00:27,680 --> 00:00:30,840 Speaker 2: you delay a great conversation coming up. Bloomberg's owner Yusef 10 00:00:30,880 --> 00:00:34,320 Speaker 2: Gamela Aldin is joining us, sitting by with Jennifer Johnson, 11 00:00:34,400 --> 00:00:37,320 Speaker 2: President and CEO of Franklin Templeton In Riad. 12 00:00:37,600 --> 00:00:39,040 Speaker 1: Let's head over, Yousef, Hey. 13 00:00:39,040 --> 00:00:39,600 Speaker 3: Hey Lisa. 14 00:00:39,680 --> 00:00:41,800 Speaker 4: Yeah, So let's pick up on the big debate on 15 00:00:41,840 --> 00:00:43,840 Speaker 4: the health of the US economy and a few other 16 00:00:43,840 --> 00:00:46,840 Speaker 4: angles as well. Jenny, thank you for making the time 17 00:00:46,960 --> 00:00:50,080 Speaker 4: so we had Jamie Diamond come out strong. He's saying 18 00:00:50,080 --> 00:00:52,200 Speaker 4: there should be a lot more humility from central banks. 19 00:00:52,200 --> 00:00:56,080 Speaker 4: They got all their forecasts wrong. Ray dallyus pessimistic. I 20 00:00:56,120 --> 00:00:59,160 Speaker 4: want to know where Jenny Johnson stands in this debate. 21 00:01:00,160 --> 00:01:03,800 Speaker 5: Well, I mean I have a little concern about US 22 00:01:03,920 --> 00:01:07,360 Speaker 5: debt and its impact on interest rates, right. I mean, 23 00:01:07,560 --> 00:01:11,000 Speaker 5: I think the conversation on rates is constantly focused on 24 00:01:11,040 --> 00:01:14,800 Speaker 5: what Pal's going to do next month or December, and 25 00:01:14,840 --> 00:01:18,039 Speaker 5: I actually think the bigger story is really around you know, 26 00:01:18,080 --> 00:01:21,760 Speaker 5: we've got a US debt that is gone from nine 27 00:01:21,840 --> 00:01:24,840 Speaker 5: trillion to thirty one trillion, and you have to have 28 00:01:24,880 --> 00:01:27,040 Speaker 5: buyers of that debt, and that means you have to 29 00:01:27,080 --> 00:01:30,160 Speaker 5: have a rate that's reasonably priced to attract debt, and 30 00:01:30,200 --> 00:01:32,920 Speaker 5: it potentially crowds out some of the other investment opportunities. 31 00:01:32,920 --> 00:01:35,440 Speaker 5: So you know, that's that's a concern. And you've got 32 00:01:35,640 --> 00:01:38,600 Speaker 5: a deficit this year that's gonna add two trillion dollars to. 33 00:01:39,520 --> 00:01:43,039 Speaker 6: The debt, So I think that can weigh on the economy. 34 00:01:43,080 --> 00:01:45,800 Speaker 3: And when do you see interest rates going then? 35 00:01:45,840 --> 00:01:48,040 Speaker 4: I mean, two weeks ago you still had to view 36 00:01:48,040 --> 00:01:51,040 Speaker 4: that there's one more hike in the in the plan. 37 00:01:51,200 --> 00:01:52,120 Speaker 3: You still stand by that. 38 00:01:52,320 --> 00:01:55,000 Speaker 5: I think Pell kind of came out and said, probably 39 00:01:55,040 --> 00:01:57,280 Speaker 5: won't do it in November, but he's watching the data, 40 00:01:57,400 --> 00:01:59,559 Speaker 5: so I think, you know, maybe he'll do December. 41 00:01:59,560 --> 00:02:02,560 Speaker 6: I think he'll be data driven. Uh, maybe he'll just 42 00:02:02,720 --> 00:02:04,960 Speaker 6: kind of leave it for where it is and see 43 00:02:05,000 --> 00:02:05,800 Speaker 6: how it plays out. 44 00:02:06,560 --> 00:02:08,280 Speaker 5: I think the bigger story has been around the ten 45 00:02:08,360 --> 00:02:10,680 Speaker 5: year and I think that's more of an issue around 46 00:02:10,720 --> 00:02:11,840 Speaker 5: the you know, US debt. 47 00:02:12,120 --> 00:02:14,360 Speaker 4: I mean, you've seen the volatility and treasury yields and 48 00:02:14,440 --> 00:02:17,480 Speaker 4: of course some of the you know, prolific commentators, let 49 00:02:17,520 --> 00:02:21,520 Speaker 4: me put it that way, including mister Actman and many others. Uh, 50 00:02:21,800 --> 00:02:23,920 Speaker 4: do you think that we're gonna start consolidating now at 51 00:02:23,919 --> 00:02:24,639 Speaker 4: the current levels? 52 00:02:24,720 --> 00:02:26,600 Speaker 3: I mean, what's going to bring them down? 53 00:02:26,720 --> 00:02:28,120 Speaker 4: Because there was a big debate on what's going to 54 00:02:28,160 --> 00:02:29,680 Speaker 4: carry them up if they are going to go down 55 00:02:29,680 --> 00:02:30,000 Speaker 4: from here? 56 00:02:30,040 --> 00:02:31,680 Speaker 3: Where you know, what's gonna push them down? 57 00:02:31,720 --> 00:02:33,240 Speaker 6: I mean, honestly, there's a lot of things. 58 00:02:33,320 --> 00:02:33,520 Speaker 7: You know. 59 00:02:33,680 --> 00:02:36,399 Speaker 5: I think that the Fed has done a good job 60 00:02:36,440 --> 00:02:38,560 Speaker 5: on kind of jamming on the brakes and raising rates 61 00:02:38,560 --> 00:02:41,360 Speaker 5: and slowing things. But you know, there's tremendous headwinds to 62 00:02:41,480 --> 00:02:47,000 Speaker 5: slowing inflation. Oil prices are inflationary. Uh. You know, some 63 00:02:47,120 --> 00:02:51,760 Speaker 5: of the union wage negotiations are inflationary. 64 00:02:52,360 --> 00:02:54,359 Speaker 6: Uh. So there's factors that makes it tough. 65 00:02:54,360 --> 00:02:58,160 Speaker 5: The the you know, spending on things like renewable energy, 66 00:02:58,200 --> 00:03:00,880 Speaker 5: government spending and incentives on renewal energy, and things like 67 00:03:00,919 --> 00:03:04,320 Speaker 5: the Chipsack are all pumping money into the system. That 68 00:03:04,400 --> 00:03:07,760 Speaker 5: becomes a headwind to somebody who's trying to tamp down inflation. 69 00:03:07,919 --> 00:03:09,640 Speaker 4: One of the stories that's been trending the last twenty 70 00:03:09,639 --> 00:03:12,280 Speaker 4: four hours on the terminal is about six hundred billion 71 00:03:12,320 --> 00:03:15,080 Speaker 4: dollars worth of client cash that it's headed for the 72 00:03:15,120 --> 00:03:18,000 Speaker 4: exits from some of the bigger investment funds, and it 73 00:03:18,120 --> 00:03:21,480 Speaker 4: raises the question, how does Franklin sort of thrive amid 74 00:03:21,480 --> 00:03:24,000 Speaker 4: a shift to more passive solution. 75 00:03:24,600 --> 00:03:27,720 Speaker 5: Well, first of all, let me take on the back 76 00:03:27,720 --> 00:03:30,400 Speaker 5: on the passer active. Right, anytime you have a full 77 00:03:30,440 --> 00:03:33,880 Speaker 5: momentum market where you've literally had central banks printing money 78 00:03:34,240 --> 00:03:36,160 Speaker 5: right and interest rate zero, the only place to go 79 00:03:36,240 --> 00:03:38,560 Speaker 5: is the equity markets. Have pumped the equity markets up 80 00:03:38,880 --> 00:03:41,920 Speaker 5: but today right, And first of all, nobody ever talks 81 00:03:41,920 --> 00:03:45,400 Speaker 5: about market beta or passive as going up or down 82 00:03:45,400 --> 00:03:45,760 Speaker 5: a risk. 83 00:03:46,120 --> 00:03:48,120 Speaker 6: The day Tesla was added to the S. 84 00:03:48,080 --> 00:03:51,160 Speaker 5: And P five hundred, market beta became more risky, right, 85 00:03:51,440 --> 00:03:53,320 Speaker 5: and we don't talk about that. 86 00:03:53,440 --> 00:03:56,600 Speaker 6: Now you're sitting here today, You've got a market where you. 87 00:03:56,520 --> 00:03:58,760 Speaker 5: Look at it and say it's up thirteen percent, but 88 00:03:58,840 --> 00:04:01,760 Speaker 5: actually most of it that's because of seven stocks and 89 00:04:01,840 --> 00:04:04,840 Speaker 5: Magnificent seven, you're seeing the highest concentration. 90 00:04:05,320 --> 00:04:06,720 Speaker 6: You know, at the peak ofthe dot. 91 00:04:06,520 --> 00:04:09,480 Speaker 5: Com ten stocks and count for twenty five percent on 92 00:04:09,560 --> 00:04:14,240 Speaker 5: market cap today that's thirty percent, so you're thirty two percent, right, 93 00:04:14,280 --> 00:04:16,920 Speaker 5: so you're even higher from a concentration usually doesn't end 94 00:04:16,960 --> 00:04:21,320 Speaker 5: well after that. And from the return standpoint, top five 95 00:04:21,360 --> 00:04:24,520 Speaker 5: stocks have a PE ratio of forty nine and the 96 00:04:24,560 --> 00:04:27,160 Speaker 5: rest of the market has a PA ratio of like fourteen. 97 00:04:27,720 --> 00:04:31,080 Speaker 5: So you know those are really different from a risk scenario. 98 00:04:31,360 --> 00:04:33,320 Speaker 5: Now you've got to navigate interest rates. You got to 99 00:04:33,320 --> 00:04:35,720 Speaker 5: figure out the impact of rates on different companies. 100 00:04:35,880 --> 00:04:37,400 Speaker 6: I think it's a time for app Yeah. 101 00:04:37,480 --> 00:04:39,880 Speaker 4: That's that warrants its own debate. I want to get 102 00:04:39,920 --> 00:04:42,359 Speaker 4: to your meetings here in Saudi Arabia. Talk to me 103 00:04:42,560 --> 00:04:46,440 Speaker 4: about the opportunity set here and where you could sort 104 00:04:46,480 --> 00:04:47,839 Speaker 4: of lock in additional growth. 105 00:04:48,560 --> 00:04:48,920 Speaker 6: Yeah. 106 00:04:48,960 --> 00:04:51,120 Speaker 5: So you know, I'm here at FII, and you know 107 00:04:51,160 --> 00:04:53,520 Speaker 5: one of the reasons to be here is because you 108 00:04:53,520 --> 00:04:55,680 Speaker 5: can you have Franklin Templeton's a global company. We have 109 00:04:55,680 --> 00:04:59,080 Speaker 5: clients in one hundred and sixty countries. You come to FII, 110 00:04:59,200 --> 00:05:02,280 Speaker 5: you can meet your clients from Asia from the US, 111 00:05:02,320 --> 00:05:04,520 Speaker 5: from Europe, from and all Africa, all over the world, 112 00:05:04,520 --> 00:05:05,640 Speaker 5: and so it's a great place to. 113 00:05:05,640 --> 00:05:07,600 Speaker 6: Convene and efficiently meet with clients. 114 00:05:07,880 --> 00:05:11,800 Speaker 5: But it's also I mean, I tend to think energy transition. 115 00:05:12,000 --> 00:05:12,640 Speaker 6: A lot of the. 116 00:05:12,560 --> 00:05:15,719 Speaker 5: Innovation is coming out of this region, and I know 117 00:05:15,760 --> 00:05:19,279 Speaker 5: that sort of sounds counterintuitive, but what you find is 118 00:05:19,320 --> 00:05:23,039 Speaker 5: a mentality of multiple generations, thinking about how do we 119 00:05:23,080 --> 00:05:26,200 Speaker 5: position ourselves for generations, and a recognition that at at 120 00:05:26,240 --> 00:05:27,599 Speaker 5: some point oil goes away, we. 121 00:05:27,680 --> 00:05:29,080 Speaker 6: Better diversify the economy. 122 00:05:29,320 --> 00:05:34,080 Speaker 5: And you see initiatives like in Saudi Arabia where by 123 00:05:34,120 --> 00:05:36,680 Speaker 5: twenty thirty they want fifty percent of their energy. 124 00:05:36,360 --> 00:05:37,440 Speaker 6: Coming from renewables. 125 00:05:38,080 --> 00:05:40,320 Speaker 5: UAE, I think has said by twenty fifty they want 126 00:05:40,320 --> 00:05:42,960 Speaker 5: fifty percent. This is a region that has the will 127 00:05:43,200 --> 00:05:46,000 Speaker 5: and the capital to actually focus on that innovation. 128 00:05:46,880 --> 00:05:51,120 Speaker 4: We're closely monitoring what's happening with the Israel Gaza conflict. 129 00:05:51,160 --> 00:05:53,280 Speaker 3: That's a human tragedy in the first instance. 130 00:05:54,000 --> 00:05:57,320 Speaker 4: In terms of sort of second round effects capital markets, 131 00:05:57,640 --> 00:06:00,320 Speaker 4: what extent is that going to take away from some 132 00:06:00,360 --> 00:06:03,240 Speaker 4: of the ambitions that the golf has as an investment 133 00:06:03,279 --> 00:06:05,000 Speaker 4: destination longer term. 134 00:06:05,760 --> 00:06:10,039 Speaker 5: Well, first of all, I mean it's an absolute humanitarian crisis. 135 00:06:10,080 --> 00:06:12,400 Speaker 6: It is a terrible, terrible situation. 136 00:06:12,440 --> 00:06:16,280 Speaker 5: It's very difficult to watch it unfold, and it's awful. 137 00:06:18,680 --> 00:06:23,920 Speaker 5: If it stays contained, it probably won't have longer term 138 00:06:24,000 --> 00:06:29,200 Speaker 5: impacts other than in obviously tremendous impacts in the areas 139 00:06:29,400 --> 00:06:33,960 Speaker 5: in both Israel and Gaza. But as long as it's remains, 140 00:06:34,080 --> 00:06:37,680 Speaker 5: you know, contained, then I think it doesn't slow things down. 141 00:06:37,720 --> 00:06:40,040 Speaker 6: And honestly, I think, you know, places like. 142 00:06:40,040 --> 00:06:42,919 Speaker 5: Saudi and the UAE are so motivated to try to 143 00:06:43,000 --> 00:06:46,760 Speaker 5: come up with a resolution because they don't want to 144 00:06:46,800 --> 00:06:50,560 Speaker 5: derail the progress that they're making on their visions, you know, 145 00:06:50,640 --> 00:06:52,800 Speaker 5: and trying to attract capital into the region. 146 00:06:52,880 --> 00:06:56,840 Speaker 4: So closing question on broader strategy, you've been acquisitive, what's 147 00:06:56,880 --> 00:06:57,839 Speaker 4: sort of next. 148 00:06:57,720 --> 00:07:01,839 Speaker 3: On the purchase list? How much are you willing to allocate? 149 00:07:02,440 --> 00:07:05,800 Speaker 5: Well, we've been very open about the fact that we 150 00:07:05,839 --> 00:07:08,040 Speaker 5: think sort of the last area that we'd love to 151 00:07:08,120 --> 00:07:11,360 Speaker 5: fill is infrastructure. I think the spending on infrastructure, whether 152 00:07:11,400 --> 00:07:16,320 Speaker 5: it's energy transition or even just updating infrastructure. 153 00:07:17,400 --> 00:07:19,040 Speaker 6: Across the globe because so many. 154 00:07:18,880 --> 00:07:21,720 Speaker 5: Of the develop markets have aged infrastructure, is a great opportunity. 155 00:07:21,960 --> 00:07:23,760 Speaker 5: So that would probably be the last area that we'd 156 00:07:23,760 --> 00:07:27,760 Speaker 5: feel we need to complete sort of our product capabilities. 157 00:07:28,080 --> 00:07:30,080 Speaker 3: Denny, great to touch base. Thank you very much. 158 00:07:30,440 --> 00:07:32,400 Speaker 4: Less of luck with your meetings over the next couple 159 00:07:32,440 --> 00:07:36,080 Speaker 4: of days. It's Jenny Johnson, the CEO of Franklin Templeton 160 00:07:40,880 --> 00:07:41,560 Speaker 4: joining me now. 161 00:07:41,840 --> 00:07:45,560 Speaker 8: Is mendeep seeing senior tech analysts for Bloomberg Intelligence. 162 00:07:45,800 --> 00:07:48,320 Speaker 9: It's a relief to see me rather than the other three. 163 00:07:48,520 --> 00:07:50,800 Speaker 8: Ah okay, so we're going to get a few more 164 00:07:51,000 --> 00:07:53,240 Speaker 8: tech results. Part of Magnificent seven are going to get 165 00:07:53,280 --> 00:07:58,600 Speaker 8: delivered today. Talk to me about Google owner, Alphabet, Google, 166 00:07:58,720 --> 00:07:59,600 Speaker 8: whatever weight run. 167 00:07:59,640 --> 00:08:00,640 Speaker 9: Do you like to look at it? 168 00:08:00,880 --> 00:08:03,760 Speaker 8: Are they more immune just simply because I've got to 169 00:08:03,840 --> 00:08:08,440 Speaker 8: advertise on the platform relative let's say Mata or to Snap. 170 00:08:08,480 --> 00:08:10,000 Speaker 8: I mean, that's the consensus in the story. 171 00:08:10,040 --> 00:08:11,040 Speaker 9: Do you believe that? 172 00:08:11,520 --> 00:08:11,760 Speaker 10: Yes? 173 00:08:11,920 --> 00:08:16,000 Speaker 7: And also the divergence and expectations. So Meta is expected 174 00:08:16,040 --> 00:08:19,480 Speaker 7: to grow twenty one percent, Google ten percent, and when 175 00:08:19,520 --> 00:08:22,560 Speaker 7: you parse through their business segments, you know the search 176 00:08:22,920 --> 00:08:25,680 Speaker 7: will likely be resilient. We know they're not losing any 177 00:08:25,720 --> 00:08:30,040 Speaker 7: share to Open AI and bing and YouTube. I mean 178 00:08:30,080 --> 00:08:33,800 Speaker 7: that ten percent is a low bogie, so you probably 179 00:08:33,800 --> 00:08:37,920 Speaker 7: should expect some upside there cloud another big segment for them, 180 00:08:38,080 --> 00:08:39,760 Speaker 7: And you mean we really. 181 00:08:39,640 --> 00:08:42,080 Speaker 8: Used to get very obsessed. Well not uc are obsessed, 182 00:08:42,080 --> 00:08:44,520 Speaker 8: but we are absolutely obsessed. What happens in cloud at Amazon, 183 00:08:44,520 --> 00:08:48,320 Speaker 8: what happens in cloud with Alphabet, How has that grown 184 00:08:48,559 --> 00:08:50,719 Speaker 8: and where can that get to and how important is it? 185 00:08:50,920 --> 00:08:51,160 Speaker 9: Yeah? 186 00:08:51,200 --> 00:08:54,600 Speaker 7: So, think of the three hyperscalers Amazon, Microsoft and Google. 187 00:08:54,679 --> 00:08:56,920 Speaker 7: That makes up about one hundred and eighty billion in 188 00:08:56,960 --> 00:08:59,920 Speaker 7: cloud revenue, and they were growing at north of thirty percent. 189 00:09:00,160 --> 00:09:03,320 Speaker 7: This year, the growth has decelerated to about eighteen to 190 00:09:03,360 --> 00:09:06,960 Speaker 7: twenty percent. So what everyone is looking for that acceleration 191 00:09:07,160 --> 00:09:09,880 Speaker 7: next year because these are the companies that are buying 192 00:09:09,880 --> 00:09:13,640 Speaker 7: all the nvidio GPUs and if that doesn't translate into 193 00:09:13,640 --> 00:09:16,160 Speaker 7: real revenue, then we got a problem. But so far, 194 00:09:16,559 --> 00:09:19,520 Speaker 7: the story has been that hyperscalers will provide the GPU 195 00:09:19,559 --> 00:09:23,200 Speaker 7: capacity for generative AI, and that's going to reflect in 196 00:09:23,280 --> 00:09:25,160 Speaker 7: twenty twenty four numbers, and. 197 00:09:25,040 --> 00:09:27,959 Speaker 8: That those hyperscalers are also critically important to Amazon as well, 198 00:09:27,960 --> 00:09:31,240 Speaker 8: aren't they? And Amazon's going to be a lovely insight 199 00:09:31,440 --> 00:09:35,320 Speaker 8: into how strong we are or not on the consumer 200 00:09:35,400 --> 00:09:36,040 Speaker 8: side as well. 201 00:09:36,280 --> 00:09:36,520 Speaker 10: Yeah. 202 00:09:36,559 --> 00:09:39,400 Speaker 7: So Amazon is the largest player in the public cloud 203 00:09:39,400 --> 00:09:41,840 Speaker 7: one hundred and eighty billion dollar revenue that I mentioned, 204 00:09:41,880 --> 00:09:45,640 Speaker 7: it's about forty five percent. Microsoft is the second big player, 205 00:09:45,679 --> 00:09:49,160 Speaker 7: and in the case of Amazon, everyone is thinking they 206 00:09:49,160 --> 00:09:52,640 Speaker 7: are behind in that generative AI race and the other 207 00:09:52,679 --> 00:09:55,360 Speaker 7: two are ahead, but clearly you know they are the 208 00:09:56,000 --> 00:09:59,080 Speaker 7: largest player in cloud and if anything, this generative AI 209 00:09:59,280 --> 00:10:02,560 Speaker 7: wave is going to accelerate that shift to cloud because 210 00:10:02,720 --> 00:10:05,360 Speaker 7: you can only do AI training on the cloud. You 211 00:10:05,400 --> 00:10:06,480 Speaker 7: can't do it on prem. 212 00:10:06,280 --> 00:10:08,000 Speaker 8: Are you going to be on AI workkind in this 213 00:10:08,520 --> 00:10:11,160 Speaker 8: reporting season and magnificent seven, I mean, it's all you 214 00:10:11,240 --> 00:10:13,360 Speaker 8: got to do is print those two letters and you're 215 00:10:13,400 --> 00:10:14,160 Speaker 8: off to the races. 216 00:10:14,320 --> 00:10:16,280 Speaker 10: Well, now I think the time has come. 217 00:10:16,160 --> 00:10:18,680 Speaker 9: To guide to make it a bit more discerning, and. 218 00:10:18,640 --> 00:10:20,760 Speaker 10: The twenty twenty four guide is very important. 219 00:10:20,840 --> 00:10:23,160 Speaker 7: So that's where you are going to see companies that 220 00:10:23,360 --> 00:10:27,240 Speaker 7: actually guide to that lift from GPU revenue on the cloud. 221 00:10:27,640 --> 00:10:30,280 Speaker 7: That's where you're going to see, you know, the multiples 222 00:10:30,320 --> 00:10:31,960 Speaker 7: and the estimates go up. 223 00:10:32,000 --> 00:10:34,680 Speaker 10: But so far it's been a huge investment here. 224 00:10:34,880 --> 00:10:37,520 Speaker 7: Everyone is hoping twenty twenty four is when it translates 225 00:10:37,520 --> 00:10:38,360 Speaker 7: into revenue. 226 00:10:38,559 --> 00:10:41,800 Speaker 8: And then if I talk about Microsoft, Microsoft is interesting 227 00:10:41,880 --> 00:10:44,040 Speaker 8: for all of the aspects that We've just touched on 228 00:10:44,080 --> 00:10:46,880 Speaker 8: a little bit of AI, a great deal of cloud, 229 00:10:46,920 --> 00:10:50,480 Speaker 8: but also for them there's the hardware sign of this 230 00:10:50,600 --> 00:10:53,760 Speaker 8: as well. Where does Microsoft fit into the Magnificent seven. 231 00:10:54,200 --> 00:10:58,080 Speaker 7: Well, Microsoft clearly had that early open AI partnership and 232 00:10:58,120 --> 00:11:00,559 Speaker 7: that helped them, you know, in terms of publishing that 233 00:11:00,679 --> 00:11:04,199 Speaker 7: generative AI leadership. But I think the PC side is 234 00:11:04,240 --> 00:11:07,760 Speaker 7: still weak and you're seeing that decline in that Windows revenue. 235 00:11:07,800 --> 00:11:10,959 Speaker 7: Clearly that hasn't changed. Everyone is calling for a PC 236 00:11:11,120 --> 00:11:13,080 Speaker 7: bottom this quarter, but we don't know. 237 00:11:13,040 --> 00:11:15,439 Speaker 10: If that's going to be the case. And in the case. 238 00:11:15,320 --> 00:11:17,920 Speaker 8: Though dine next year, it could be that Microsoft takes 239 00:11:17,920 --> 00:11:20,080 Speaker 8: the bigger hits perhaps out of this grouping. 240 00:11:20,320 --> 00:11:23,600 Speaker 7: Well, so Microsoft has a lot of application software revenue, 241 00:11:23,679 --> 00:11:27,559 Speaker 7: and if they don't, you know, add those co pilots 242 00:11:27,600 --> 00:11:30,800 Speaker 7: to really complement that, and if there is actually real 243 00:11:30,920 --> 00:11:34,400 Speaker 7: destruction from generative AI, I would argue Microsoft is at risk. 244 00:11:34,440 --> 00:11:37,920 Speaker 7: But nobody doubts that office you know, will continue to 245 00:11:37,960 --> 00:11:41,200 Speaker 7: be strong because they added these copilots and that will 246 00:11:41,200 --> 00:11:43,160 Speaker 7: be a nice add on to you know, what you 247 00:11:43,160 --> 00:11:44,600 Speaker 7: already have from the office suite. 248 00:11:44,640 --> 00:11:46,600 Speaker 9: So Europe is under pressure. 249 00:11:47,360 --> 00:11:51,480 Speaker 8: Technically, we can argue about recession China. You can debate 250 00:11:51,520 --> 00:11:53,360 Speaker 8: whether they're going to make five percent growth or not, 251 00:11:53,440 --> 00:11:56,840 Speaker 8: but it's tough in China at the moment with those 252 00:11:56,840 --> 00:12:02,040 Speaker 8: two global markets very much under pressure. Sure, who is 253 00:12:02,160 --> 00:12:05,640 Speaker 8: perhaps the weakest link in the Magnificent seven vicariously exposed 254 00:12:05,640 --> 00:12:06,600 Speaker 8: to the China story. 255 00:12:06,840 --> 00:12:09,360 Speaker 10: I mean, I would say Apple, no doubt about it. 256 00:12:09,880 --> 00:12:13,120 Speaker 7: To buy a new Apple fix revenue perspective, twenty percent 257 00:12:13,240 --> 00:12:16,679 Speaker 7: revenue and the supply chain exposure is huge, So there 258 00:12:16,760 --> 00:12:19,600 Speaker 7: is a big risk that clearly lies with Apple. The 259 00:12:19,679 --> 00:12:22,280 Speaker 7: other ones are somewhat insulated because they don't have a 260 00:12:22,280 --> 00:12:25,640 Speaker 7: lot of revenue exposure. And that's where the Internet names 261 00:12:25,679 --> 00:12:28,439 Speaker 7: like alphabet and Meta, I mean, they have no exposure 262 00:12:28,480 --> 00:12:31,120 Speaker 7: at all. So clearly Apple is the one to watch 263 00:12:31,120 --> 00:12:33,760 Speaker 7: out for in terms of that geo revenue exposure. 264 00:12:33,840 --> 00:12:35,320 Speaker 8: Okay, and then of course we have the friends showing 265 00:12:35,400 --> 00:12:36,760 Speaker 8: on shore and let's see what the numbers are when 266 00:12:36,760 --> 00:12:39,679 Speaker 8: they drop. Thank you so much for stopping buy That 267 00:12:39,840 --> 00:12:49,800 Speaker 8: is Mandy sing on All Things Technology. 268 00:12:48,840 --> 00:12:52,400 Speaker 2: Mans Cranny and Cameron Dawson CIO at New Edge Wealth 269 00:12:52,520 --> 00:12:54,480 Speaker 2: both with us right now in Marcuts. 270 00:12:54,520 --> 00:12:56,480 Speaker 1: We can see a bit of a lift. We do 271 00:12:56,559 --> 00:12:57,160 Speaker 1: see those. 272 00:12:57,000 --> 00:13:01,440 Speaker 2: Earnings coming out and Cameron, it's just been catching my eye. 273 00:13:01,520 --> 00:13:03,480 Speaker 1: Everything has been beating. 274 00:13:03,440 --> 00:13:07,240 Speaker 11: Yeah, much better than expected when it's looking at the consumer, 275 00:13:07,280 --> 00:13:10,240 Speaker 11: better than expected, some industrials better than expected. We just 276 00:13:10,280 --> 00:13:13,840 Speaker 11: got share. When Williams come out, they raise guidance significantly. 277 00:13:14,240 --> 00:13:17,520 Speaker 11: That's a housing related stuff, right, it's paint people spending 278 00:13:17,520 --> 00:13:20,760 Speaker 11: more in their houses. So clearly the consumer in these 279 00:13:20,800 --> 00:13:24,800 Speaker 11: earnings is holding up better than expected, somewhat confirming that 280 00:13:24,840 --> 00:13:26,920 Speaker 11: better retail sales that we got in September. 281 00:13:27,120 --> 00:13:29,680 Speaker 8: Do you think the whole narrative, the whole story about 282 00:13:29,720 --> 00:13:34,720 Speaker 8: excess savings running off is we're overplaying it when you 283 00:13:34,720 --> 00:13:36,880 Speaker 8: look at the wealth report that we both all three 284 00:13:36,920 --> 00:13:38,600 Speaker 8: of us looked at yesterday. So do you think the 285 00:13:38,720 --> 00:13:43,280 Speaker 8: xcess savings narrative dropping so aggressively is folly? 286 00:13:43,520 --> 00:13:45,560 Speaker 9: You should be. You know, the resilience of the consumer 287 00:13:45,920 --> 00:13:47,160 Speaker 9: is a bind in these numbers. 288 00:13:47,520 --> 00:13:50,280 Speaker 11: I think that it's a fading tailwind, but it's not 289 00:13:50,480 --> 00:13:53,120 Speaker 11: a headwind because the consumer balance she is healthy. 290 00:13:53,120 --> 00:13:54,440 Speaker 8: The risk is it turns into a head too in 291 00:13:54,440 --> 00:13:56,120 Speaker 8: twenty twenty four. That's the debate, isn't it. 292 00:13:56,320 --> 00:13:59,720 Speaker 11: Certainly, But if you look at things like consumer credit 293 00:13:59,760 --> 00:14:03,199 Speaker 11: card as a percentage of disposable income. They're just back 294 00:14:03,240 --> 00:14:06,120 Speaker 11: to their twenty nineteen levels, meaning that it's gone up 295 00:14:06,240 --> 00:14:09,560 Speaker 11: a lot. Consumers are using more debt, but it's not 296 00:14:09,960 --> 00:14:12,680 Speaker 11: nearly where it was during the Great Financial Crisis. So 297 00:14:12,840 --> 00:14:16,280 Speaker 11: ASTs have been growing faster than liabilities pretty much consistently 298 00:14:16,320 --> 00:14:18,880 Speaker 11: for the last seven years. The consumer balance sheet still 299 00:14:18,960 --> 00:14:22,480 Speaker 11: is healthy, even though at the margins it's deteriorating. 300 00:14:22,520 --> 00:14:25,800 Speaker 2: So there's a real sort of bigger picture question about composition. 301 00:14:25,800 --> 00:14:28,680 Speaker 2: And we're talking about this with Tom Sousaurus yesterday when 302 00:14:28,680 --> 00:14:30,880 Speaker 2: it came on and said, what you're seeing is that 303 00:14:30,920 --> 00:14:35,320 Speaker 2: the Fed policy rates have really affected lower income individuals 304 00:14:35,640 --> 00:14:37,880 Speaker 2: as smaller businesses disproportionately. 305 00:14:37,960 --> 00:14:39,440 Speaker 1: You have seen this again and again. 306 00:14:39,480 --> 00:14:42,600 Speaker 2: So when do they start to have a bigger impact 307 00:14:42,720 --> 00:14:46,040 Speaker 2: on the overall general narrative, or can you see this 308 00:14:46,160 --> 00:14:49,760 Speaker 2: dispersion and continue where the overall averages keep chugging along. 309 00:14:49,920 --> 00:14:50,080 Speaker 3: Well. 310 00:14:50,120 --> 00:14:53,000 Speaker 11: The thing that lower income individuals and smaller businesses have 311 00:14:53,080 --> 00:14:55,160 Speaker 11: in common is that they tend to have more of 312 00:14:55,200 --> 00:14:59,160 Speaker 11: that floating rate debt. It's bigger companies and higher income 313 00:14:59,200 --> 00:15:01,920 Speaker 11: people who are a to turn out their debt borrow 314 00:15:02,000 --> 00:15:05,760 Speaker 11: at thirty year mortgages or issue thirty year bonds, and 315 00:15:05,840 --> 00:15:09,440 Speaker 11: so it's those larger borrowers that have not been pinched 316 00:15:09,480 --> 00:15:12,160 Speaker 11: by these higher interest rates. It's why small caps and 317 00:15:12,240 --> 00:15:15,920 Speaker 11: microcaps are underperforming so much, they have more floating rate debt. 318 00:15:16,120 --> 00:15:18,280 Speaker 8: But this was the we were just talking about this 319 00:15:18,560 --> 00:15:20,640 Speaker 8: in the break, as Gina left I said, I thought 320 00:15:20,640 --> 00:15:22,480 Speaker 8: we were supposed to run into some kind of a 321 00:15:22,560 --> 00:15:26,120 Speaker 8: significant debt cliff moment for corporates refinancing. 322 00:15:26,160 --> 00:15:27,359 Speaker 9: They have refinancing. 323 00:15:27,720 --> 00:15:30,160 Speaker 8: Now, we haven't made a huge deal out of anybody 324 00:15:30,240 --> 00:15:34,200 Speaker 8: missing the refinancing yet, but as you look at debt 325 00:15:34,280 --> 00:15:39,280 Speaker 8: costs going forward, and you look at the returns going 326 00:15:39,320 --> 00:15:41,880 Speaker 8: forward with debt costs, surely that begins to impinge as 327 00:15:41,920 --> 00:15:42,520 Speaker 8: well well. 328 00:15:42,560 --> 00:15:46,120 Speaker 11: Certainly because eventually you have to refinance that debt. And 329 00:15:46,160 --> 00:15:49,600 Speaker 11: if you look at the corporate treasury market, a lot 330 00:15:49,680 --> 00:15:52,560 Speaker 11: or corporate bond market, a lot of them have average 331 00:15:52,640 --> 00:15:55,920 Speaker 11: yields that are less than the entirety of the treasury curve. 332 00:15:56,320 --> 00:15:58,920 Speaker 11: Entirety of the treasury curve. So eventually you will have 333 00:15:59,000 --> 00:16:02,280 Speaker 11: to refinance at these much higher rates. And that's the 334 00:16:02,320 --> 00:16:05,200 Speaker 11: reality of higher for longer starting to bite. 335 00:16:05,400 --> 00:16:07,800 Speaker 2: This is what everyone thought, Okay, and this to me, 336 00:16:07,840 --> 00:16:10,000 Speaker 2: I'm so glad you brought this up. Mannis, because to me, 337 00:16:10,560 --> 00:16:13,960 Speaker 2: there's been this sort of overhang. Back in twenty fifteen, 338 00:16:13,960 --> 00:16:15,800 Speaker 2: twenty sixteen, we were. 339 00:16:15,640 --> 00:16:17,080 Speaker 1: Talking about beer goggles. 340 00:16:17,320 --> 00:16:20,360 Speaker 2: Dallas FED President Kaplan came on and said, everyone's looking 341 00:16:20,440 --> 00:16:22,640 Speaker 2: at this world with beer goggles of low rates, and 342 00:16:22,640 --> 00:16:25,720 Speaker 2: that's why they're buying anything. Anything can look beautiful when 343 00:16:25,720 --> 00:16:28,040 Speaker 2: you go out and you take a little assets with 344 00:16:28,120 --> 00:16:31,720 Speaker 2: low rates, with zero rates, and now you're expecting armageddon 345 00:16:31,760 --> 00:16:34,680 Speaker 2: because you've had a world refinance at that and you haven't. 346 00:16:35,040 --> 00:16:38,120 Speaker 2: And that's really sort of the surprise. How much can 347 00:16:38,160 --> 00:16:43,000 Speaker 2: companies survive by just basically relying on investors to force 348 00:16:43,080 --> 00:16:46,640 Speaker 2: them to stay afloat so the investors don't get totally 349 00:16:46,680 --> 00:16:48,560 Speaker 2: slammed with losses, right, I mean, this is something that 350 00:16:48,560 --> 00:16:51,480 Speaker 2: they've you've been seeing with helping refinance at decent rates. 351 00:16:51,680 --> 00:16:54,560 Speaker 11: I think we're just now starting to see the pinch 352 00:16:54,640 --> 00:16:57,680 Speaker 11: come through because we've been in this for eighteen months 353 00:16:57,720 --> 00:17:01,080 Speaker 11: a little almost two years now. That's allowed extend and 354 00:17:01,120 --> 00:17:04,439 Speaker 11: pretend you can try to push off the refinancing as 355 00:17:04,520 --> 00:17:07,720 Speaker 11: much as possible, because remember we're also conditioned for the 356 00:17:07,760 --> 00:17:10,320 Speaker 11: FED to come in and cut rates really quickly, and 357 00:17:10,359 --> 00:17:12,479 Speaker 11: the Fed's telling you they're not going to do that. 358 00:17:12,600 --> 00:17:16,040 Speaker 11: So it's the reality setting in that, Hey, I've delayed 359 00:17:16,080 --> 00:17:18,720 Speaker 11: refinancing as long as possible. Now I kind of have 360 00:17:18,800 --> 00:17:20,959 Speaker 11: to face the music, and the end result is much 361 00:17:21,040 --> 00:17:21,639 Speaker 11: higher rates. 362 00:17:21,720 --> 00:17:23,760 Speaker 1: So have you shifted your views over the past couple 363 00:17:23,840 --> 00:17:24,240 Speaker 1: of weeks. 364 00:17:24,720 --> 00:17:28,840 Speaker 11: Yeah, So we have been underweight duration for the entirety 365 00:17:28,880 --> 00:17:31,359 Speaker 11: of the year, thinking that there was this floor under 366 00:17:31,359 --> 00:17:34,159 Speaker 11: interest rates because of that higher for longer and an 367 00:17:34,240 --> 00:17:37,000 Speaker 11: upward bias to interest rates. But now we're starting to 368 00:17:37,000 --> 00:17:39,480 Speaker 11: see a world where the risk reward simply looks better. 369 00:17:39,800 --> 00:17:42,040 Speaker 11: If you take a one hundred basis point move higher 370 00:17:42,040 --> 00:17:44,800 Speaker 11: in yields versus lower in yields, at least you have 371 00:17:44,880 --> 00:17:48,480 Speaker 11: this higher base yield offsetting some of those losses. So 372 00:17:48,560 --> 00:17:51,000 Speaker 11: when we think for long term investors, we're starting to 373 00:17:51,040 --> 00:17:54,919 Speaker 11: find interest in compelling opportunities, not just within treasuries but 374 00:17:54,960 --> 00:17:58,880 Speaker 11: within munis. We're not tactically going full overweight duration, saying 375 00:17:58,920 --> 00:18:00,960 Speaker 11: the peak and yields is in. There's still a lot 376 00:18:01,000 --> 00:18:03,720 Speaker 11: of risk, but that's where we're starting to find opportunities 377 00:18:03,720 --> 00:18:04,160 Speaker 11: at the market. 378 00:18:04,160 --> 00:18:06,440 Speaker 8: It's almos going to give cameras are like her introductor 379 00:18:06,640 --> 00:18:08,760 Speaker 8: drum drum roll, because she's in good company and she 380 00:18:08,840 --> 00:18:13,920 Speaker 8: used got wayly from Black Walk. She's got Alliance Alliance 381 00:18:13,960 --> 00:18:16,400 Speaker 8: alongside you. So what goes through my mind and I'm 382 00:18:16,400 --> 00:18:18,280 Speaker 8: just going to I'm going to slightly combat you there, 383 00:18:18,280 --> 00:18:20,439 Speaker 8: which is isn't it just fear of being left behind 384 00:18:20,440 --> 00:18:23,760 Speaker 8: that you've got to pivot on your duration call? 385 00:18:23,880 --> 00:18:25,960 Speaker 11: Certainly, of course we don't want to be too cute 386 00:18:26,000 --> 00:18:28,880 Speaker 11: with it with the timing, but we're long term investors. 387 00:18:28,920 --> 00:18:30,480 Speaker 11: And if you think of it just in terms of 388 00:18:30,520 --> 00:18:32,879 Speaker 11: asset liability matching and thinking. 389 00:18:32,720 --> 00:18:36,280 Speaker 8: So aplication you're shifting, is it a dramatic shifting in 390 00:18:36,320 --> 00:18:38,399 Speaker 8: you're taking a duration or is it incremental manners? In 391 00:18:38,440 --> 00:18:41,119 Speaker 8: other words, we see an opportunity and we add incrementally. 392 00:18:41,320 --> 00:18:44,600 Speaker 11: It's incremental because tactically we have not made this call 393 00:18:44,640 --> 00:18:46,720 Speaker 11: that we say we've seen a peek and yields. We 394 00:18:46,840 --> 00:18:49,560 Speaker 11: still see this supply and demand issue where we do 395 00:18:49,680 --> 00:18:52,879 Speaker 11: know we have higher deficits and that is increasing supply 396 00:18:52,960 --> 00:18:55,560 Speaker 11: at the same time that demand is falling. Hue is 397 00:18:55,560 --> 00:18:57,399 Speaker 11: not here to save the day. We don't have the 398 00:18:57,400 --> 00:18:59,719 Speaker 11: flight to safety bid. Yet We'll have to see how 399 00:18:59,760 --> 00:19:02,880 Speaker 11: data emerges, and we shouldn't forget we have this big 400 00:19:02,960 --> 00:19:05,960 Speaker 11: unknown about the Bank of Japan and potential changes to 401 00:19:06,040 --> 00:19:09,040 Speaker 11: yield curve control policy. What could that mean for demand 402 00:19:09,040 --> 00:19:11,040 Speaker 11: for treasuries as we go into twenty four. 403 00:19:10,840 --> 00:19:12,359 Speaker 2: Do you think that that could have been underpinning some 404 00:19:12,400 --> 00:19:15,240 Speaker 2: of the wild moves over the past couple of days. 405 00:19:14,840 --> 00:19:18,560 Speaker 11: You can track the ownership of treasuries by Japan and 406 00:19:18,600 --> 00:19:22,520 Speaker 11: it's actually gone up slightly. They've sold more corporate bonds, 407 00:19:22,560 --> 00:19:25,239 Speaker 11: so I don't know if that's necessarily, but it is 408 00:19:25,280 --> 00:19:28,000 Speaker 11: the fear that they could be less buyers on the margin. 409 00:19:28,080 --> 00:19:30,600 Speaker 2: Like just I'm wondering though, just going forward, when you 410 00:19:30,640 --> 00:19:33,840 Speaker 2: talk about how you are legging in just on the 411 00:19:33,880 --> 00:19:36,800 Speaker 2: margin to duration, is it out of equity risk because 412 00:19:36,840 --> 00:19:38,480 Speaker 2: we heard this yesterday from Katie Nixon. 413 00:19:39,080 --> 00:19:41,560 Speaker 11: Yeah, you have to do it in a very tax 414 00:19:41,680 --> 00:19:44,560 Speaker 11: efficient way, because if you're selling equities with big gains 415 00:19:44,600 --> 00:19:47,280 Speaker 11: and layering into bonds, that may not be the best trade. 416 00:19:47,280 --> 00:19:49,240 Speaker 11: One of the ways that we've been doing it is saying, 417 00:19:49,400 --> 00:19:53,000 Speaker 11: if we have dibbitting income, instead of reinvesting into equities, 418 00:19:53,160 --> 00:19:55,760 Speaker 11: we'll reinvest into fixed income. Because at the end of 419 00:19:55,800 --> 00:19:58,360 Speaker 11: the day. If you can get your same return at 420 00:19:58,440 --> 00:20:01,720 Speaker 11: less risk, then maybe you've should do that. Now, how 421 00:20:01,840 --> 00:20:04,879 Speaker 11: unrisky is long bonds given the fact that the TLT 422 00:20:05,080 --> 00:20:07,520 Speaker 11: is down forty five percent in the last two years. 423 00:20:07,800 --> 00:20:09,359 Speaker 8: Listen, you know what, when you get to my juncts 424 00:20:09,400 --> 00:20:11,119 Speaker 8: used to say, you know what, ten year paper actually 425 00:20:11,119 --> 00:20:11,880 Speaker 8: doesn't look too bad. 426 00:20:11,920 --> 00:20:13,720 Speaker 9: Maybe at five percent. 427 00:20:13,760 --> 00:20:15,720 Speaker 2: Well that's what a lot of people seem to say. Basically, 428 00:20:15,760 --> 00:20:18,800 Speaker 2: it got five percent. The market basically said we reject that. 429 00:20:19,040 --> 00:20:20,680 Speaker 1: No, you know, we're going to pounce on that, but it. 430 00:20:20,600 --> 00:20:23,560 Speaker 8: Comes Actually, you're back into sort of general historical norms. 431 00:20:23,600 --> 00:20:25,960 Speaker 8: If I'm not wrong, I mean, you know, we are 432 00:20:26,560 --> 00:20:29,199 Speaker 8: many people out there are flum ex by rates at 433 00:20:29,200 --> 00:20:32,000 Speaker 8: five percent, paranoid at the risk of five and a 434 00:20:32,040 --> 00:20:34,000 Speaker 8: half percent. The reality is, when I took my first 435 00:20:34,000 --> 00:20:36,800 Speaker 8: mortgage in nineteen ninety four, it was not seven percent. 436 00:20:36,840 --> 00:20:39,840 Speaker 8: In the United Kingdom. I have lived through seven percent 437 00:20:39,880 --> 00:20:42,240 Speaker 8: and fifteen percent. So for me, okay, it was free 438 00:20:42,240 --> 00:20:43,960 Speaker 8: money as zero. It was free money at zero. Now 439 00:20:43,960 --> 00:20:44,720 Speaker 8: I'm choking at eight. 440 00:20:44,720 --> 00:20:47,000 Speaker 2: I've got to be honest, these conversations, when people say 441 00:20:47,040 --> 00:20:49,359 Speaker 2: this kind of stuff, they kind of bug me a 442 00:20:49,400 --> 00:20:49,760 Speaker 2: little bit. 443 00:20:49,800 --> 00:20:50,680 Speaker 1: Wow, no offense. 444 00:20:50,800 --> 00:20:53,840 Speaker 2: But just because the world was so different then prices 445 00:20:53,880 --> 00:20:57,080 Speaker 2: were different. They were more adjusted to a seven percent rate. 446 00:20:57,280 --> 00:21:01,080 Speaker 2: How much to the prices of assets change the scenario 447 00:21:01,480 --> 00:21:03,880 Speaker 2: when you have high prices that were backed by low 448 00:21:04,000 --> 00:21:05,320 Speaker 2: rates and then all of a sudden you've got to 449 00:21:05,359 --> 00:21:07,320 Speaker 2: deal with the rate going back to where it used 450 00:21:07,359 --> 00:21:07,520 Speaker 2: to be. 451 00:21:07,920 --> 00:21:10,640 Speaker 11: Yeah, you were able to see house prices go up 452 00:21:10,680 --> 00:21:15,400 Speaker 11: twenty percent coming out of the pandemic shutdown simply because 453 00:21:15,440 --> 00:21:18,560 Speaker 11: the average mortgage rate did not reflect that because mortgage 454 00:21:18,600 --> 00:21:20,920 Speaker 11: rates were falling so much or the average cost of 455 00:21:21,240 --> 00:21:23,880 Speaker 11: paying for that mortgage. So now when you add very 456 00:21:23,920 --> 00:21:27,080 Speaker 11: high prices to very low interest rates, that's where it 457 00:21:27,080 --> 00:21:28,120 Speaker 11: becomes simply on the floor. 458 00:21:28,240 --> 00:21:28,520 Speaker 10: Beat O. 459 00:21:29,000 --> 00:21:31,560 Speaker 2: No, you can come back at me next time, because honestly, 460 00:21:31,920 --> 00:21:34,240 Speaker 2: you are correct, and I think that it's a valid point. 461 00:21:34,240 --> 00:21:35,680 Speaker 2: But so many people have come on here and said 462 00:21:36,200 --> 00:21:37,440 Speaker 2: right around, Well you. 463 00:21:37,400 --> 00:21:39,919 Speaker 1: Weren't around, but I remember I took out a mortgage tech. 464 00:21:40,040 --> 00:21:41,439 Speaker 1: Well you know, come on. 465 00:21:41,440 --> 00:21:47,880 Speaker 2: It's a little bit of a different scenario. Paul Jacobson, 466 00:21:48,000 --> 00:21:50,879 Speaker 2: CFO of General Motors joining us. Now, you did report 467 00:21:50,920 --> 00:21:54,119 Speaker 2: earnings earlier this morning. You beat estimates, but you withdrew 468 00:21:54,200 --> 00:21:58,760 Speaker 2: your fourteen billion dollar profit forecast because of the uncertainty 469 00:21:58,920 --> 00:22:01,760 Speaker 2: due to these strikes. Do you think that it will 470 00:22:01,760 --> 00:22:05,400 Speaker 2: materially affect the outlook given the contours of where negotiations 471 00:22:05,400 --> 00:22:08,480 Speaker 2: are right now of twenty three to thirty percent increase. 472 00:22:10,480 --> 00:22:12,840 Speaker 12: Well, good morning, Lisa, and thanks for having me. You know, 473 00:22:13,119 --> 00:22:14,920 Speaker 12: just before I start, I would like to just give 474 00:22:14,960 --> 00:22:17,840 Speaker 12: a big thank you to the entire GM team for 475 00:22:18,000 --> 00:22:22,040 Speaker 12: an outstanding quarter across the board, including the employees that 476 00:22:22,119 --> 00:22:25,040 Speaker 12: are working every day and producing the high quality vehicles 477 00:22:25,040 --> 00:22:28,280 Speaker 12: that our customers love. It's a strong testament to everything 478 00:22:28,359 --> 00:22:30,760 Speaker 12: that we're going through right now. You know, when we 479 00:22:30,880 --> 00:22:32,960 Speaker 12: made the decision to withdraw the guidance, it was really 480 00:22:33,000 --> 00:22:35,639 Speaker 12: based on not wanting to speculate on the length or 481 00:22:35,720 --> 00:22:38,399 Speaker 12: scope of the strike. You know, clearly this has been 482 00:22:39,080 --> 00:22:44,480 Speaker 12: a very different UAW leadership strategy and one that we've 483 00:22:44,480 --> 00:22:47,480 Speaker 12: adapted to. But at the same time, given that we 484 00:22:47,640 --> 00:22:49,919 Speaker 12: don't want to speculate where the next plant might be 485 00:22:50,080 --> 00:22:52,080 Speaker 12: or how long that might be out, we thought the 486 00:22:52,119 --> 00:22:54,879 Speaker 12: prudent thing to do was to withdraw guidance, despite the 487 00:22:54,880 --> 00:22:58,159 Speaker 12: fact that the underlying business was actually performing at the 488 00:22:58,160 --> 00:23:01,080 Speaker 12: top end of our range prior to this, so we'll 489 00:23:01,119 --> 00:23:03,400 Speaker 12: provide an update with investors as soon as it's over, 490 00:23:03,760 --> 00:23:06,280 Speaker 12: but we're still focused on making sure that we execute 491 00:23:06,320 --> 00:23:06,720 Speaker 12: every day. 492 00:23:06,880 --> 00:23:09,000 Speaker 2: Can GM make a profit with a twenty five percent 493 00:23:09,119 --> 00:23:12,840 Speaker 2: raise for the UAW like Sean Fayin has requested. 494 00:23:14,400 --> 00:23:17,040 Speaker 12: You know, what we need to do is obviously strike 495 00:23:17,080 --> 00:23:19,840 Speaker 12: a balance. We've said from the beginning that we really 496 00:23:19,880 --> 00:23:21,960 Speaker 12: want to reward our people for the quality work that 497 00:23:22,000 --> 00:23:24,840 Speaker 12: they're doing at each and every plant, each and every day, 498 00:23:24,960 --> 00:23:28,040 Speaker 12: and that's a testament to the demand that we've created 499 00:23:28,040 --> 00:23:30,399 Speaker 12: for the vehicles that we're producing, which I think is 500 00:23:30,440 --> 00:23:34,200 Speaker 12: the best portfolio in GM's history. So what we've also 501 00:23:34,240 --> 00:23:35,600 Speaker 12: got to do is make sure that we sign an 502 00:23:35,600 --> 00:23:38,320 Speaker 12: agreement that allows us to compete in the global marketplace 503 00:23:38,600 --> 00:23:41,280 Speaker 12: when we look at the pressures and the challenges on 504 00:23:41,359 --> 00:23:45,359 Speaker 12: ev profitability as well as some of our foreign competitors. 505 00:23:45,400 --> 00:23:47,280 Speaker 12: We've got to make sure we can continue to price 506 00:23:47,320 --> 00:23:50,840 Speaker 12: our vehicles and produce our vehicles profitably, which gives us 507 00:23:50,840 --> 00:23:53,960 Speaker 12: the cash to be able to invest in the next generation, 508 00:23:54,200 --> 00:23:57,440 Speaker 12: not only the models, but the plant refurbishments and the 509 00:23:57,880 --> 00:24:00,080 Speaker 12: transformations that we have to do. So we've got to 510 00:24:00,080 --> 00:24:02,320 Speaker 12: be able to strike that balance of rewarding our people 511 00:24:02,600 --> 00:24:05,159 Speaker 12: but making sure that we're absolutely able to invest in 512 00:24:05,160 --> 00:24:05,639 Speaker 12: our future. 513 00:24:05,760 --> 00:24:07,600 Speaker 1: Just twenty five percent allow you to strike that. 514 00:24:07,560 --> 00:24:11,879 Speaker 12: Balance, you know, I think it does. We're not going 515 00:24:11,920 --> 00:24:14,280 Speaker 12: to sign a deal that doesn't allow us to be competitive. 516 00:24:14,960 --> 00:24:17,800 Speaker 12: You know, there are obviously challenges that the teams responded 517 00:24:17,840 --> 00:24:19,919 Speaker 12: to over the last few years, whether it be COVID 518 00:24:20,160 --> 00:24:24,919 Speaker 12: or the semiconductor shortage or supply chain issues. The team's 519 00:24:24,960 --> 00:24:27,920 Speaker 12: been remarkably resilient, and I think this is another challenge, 520 00:24:28,080 --> 00:24:30,680 Speaker 12: but one that we can rise to, and I believe 521 00:24:30,720 --> 00:24:31,959 Speaker 12: that we can still hit our goals. 522 00:24:32,320 --> 00:24:34,760 Speaker 8: Paul, very good morning to you. You've withdrawn the guidance. 523 00:24:35,000 --> 00:24:37,480 Speaker 8: We've cleared that away. I'm curious to know if you're 524 00:24:37,480 --> 00:24:40,720 Speaker 8: withdrawing guidance. Is there any risk to anything to do 525 00:24:40,760 --> 00:24:44,080 Speaker 8: with dividend, any guidance on that. Obviously, dividend and buybacks 526 00:24:44,080 --> 00:24:46,880 Speaker 8: were re insteaded just last year after two year hiatus, 527 00:24:46,880 --> 00:24:49,119 Speaker 8: So is there any any quirk there? 528 00:24:50,720 --> 00:24:52,720 Speaker 12: Well, Manics, I would say that, you know, our balance 529 00:24:52,720 --> 00:24:56,560 Speaker 12: sheet is incredibly strong right now, with about fifty billion 530 00:24:56,600 --> 00:25:00,119 Speaker 12: dollars in total liquidity available to us. We went out 531 00:25:00,119 --> 00:25:03,119 Speaker 12: and we got an additional line of credit about a 532 00:25:03,119 --> 00:25:06,439 Speaker 12: month ago to make sure we're prepared, because while the 533 00:25:06,520 --> 00:25:09,320 Speaker 12: uncertainty and while the team is working at the bargaining 534 00:25:09,359 --> 00:25:11,240 Speaker 12: table in order to try to find a deal, we've 535 00:25:11,240 --> 00:25:13,240 Speaker 12: got to make sure that the business continues to run. 536 00:25:13,560 --> 00:25:16,720 Speaker 12: We make the investments we can, we fulfill the commitment 537 00:25:16,760 --> 00:25:19,600 Speaker 12: we've made to our shareholders, and we continue to do 538 00:25:19,600 --> 00:25:22,159 Speaker 12: business as usual the best we can. And the strong 539 00:25:22,200 --> 00:25:23,800 Speaker 12: balance sheet's going to enable us to do that. 540 00:25:24,760 --> 00:25:26,960 Speaker 8: As I was sort of getting more familiar with the 541 00:25:27,520 --> 00:25:29,919 Speaker 8: dynamics of this strike, I've just landed in this country 542 00:25:30,480 --> 00:25:33,000 Speaker 8: after five years some more else. The question that goes 543 00:25:33,040 --> 00:25:35,119 Speaker 8: through my mind to close these strike deals and to 544 00:25:35,200 --> 00:25:38,199 Speaker 8: deliver on pensions, it's a very British thing. I'm curious, 545 00:25:38,200 --> 00:25:40,679 Speaker 8: do you have a number that you will have to 546 00:25:40,720 --> 00:25:43,600 Speaker 8: contribute to the defined pension? This is one of the 547 00:25:43,640 --> 00:25:46,600 Speaker 8: most contentious parts of the negotiations as I understand, So 548 00:25:46,720 --> 00:25:47,879 Speaker 8: is there a number that you're going to have to 549 00:25:47,920 --> 00:25:50,760 Speaker 8: make good and restitution to the pension to make this 550 00:25:50,880 --> 00:25:51,359 Speaker 8: deal good? 551 00:25:53,280 --> 00:25:56,040 Speaker 12: Well, our defined benefit plan, which has been frozen for 552 00:25:56,119 --> 00:26:00,960 Speaker 12: quite some time, is actually funded very very strongly right now, 553 00:26:01,000 --> 00:26:03,920 Speaker 12: and we feel good about that. You know, the participants 554 00:26:03,920 --> 00:26:07,840 Speaker 12: participate in a defined contribution plan where under the current 555 00:26:07,880 --> 00:26:11,880 Speaker 12: agreement we contribute six point four percent before an employee 556 00:26:11,880 --> 00:26:15,160 Speaker 12: has contributed anything. So there's a there's a good balance 557 00:26:15,160 --> 00:26:18,080 Speaker 12: across the retirement plans, and we think one that's very 558 00:26:18,080 --> 00:26:21,320 Speaker 12: favorable and one that that you know, we we've been 559 00:26:21,359 --> 00:26:23,919 Speaker 12: able to adjust the business to make sure that we 560 00:26:23,960 --> 00:26:26,399 Speaker 12: can put into the calculus going forward. So anything that 561 00:26:26,440 --> 00:26:29,159 Speaker 12: we do to retirement goes into that bucket of what 562 00:26:29,160 --> 00:26:31,560 Speaker 12: I would what I said earlier, which is we need 563 00:26:31,560 --> 00:26:34,399 Speaker 12: to be able to compete in the global marketplace. And 564 00:26:34,960 --> 00:26:37,560 Speaker 12: you know, where we spend our money isn't isn't necessarily 565 00:26:37,560 --> 00:26:40,040 Speaker 12: as important as how we spend it. So we're really 566 00:26:40,080 --> 00:26:42,119 Speaker 12: trying to strike the balance as to what's important with 567 00:26:42,119 --> 00:26:42,720 Speaker 12: the UAW. 568 00:26:43,280 --> 00:26:45,080 Speaker 8: If you had Elon Musk in front of you and 569 00:26:45,080 --> 00:26:47,600 Speaker 8: I and you were talking about prices, I bet you 570 00:26:47,640 --> 00:26:50,520 Speaker 8: wouldn't be having a nice conversation. I mean, how how 571 00:26:50,560 --> 00:26:53,960 Speaker 8: brutal have his price cuts been for your plans for 572 00:26:54,000 --> 00:26:54,719 Speaker 8: twenty twenty four? 573 00:26:54,800 --> 00:26:55,400 Speaker 9: In ev. 574 00:26:57,359 --> 00:26:59,720 Speaker 12: Well, when you when you look at what our average 575 00:26:59,720 --> 00:27:02,040 Speaker 12: trends action prices have done this year, they've actually been 576 00:27:02,080 --> 00:27:05,480 Speaker 12: remarkably stable. In the midst of it. Now that's primarily 577 00:27:05,520 --> 00:27:09,560 Speaker 12: the internal combustion engine portfolio, which I would say is 578 00:27:09,560 --> 00:27:13,359 Speaker 12: not necessarily a direct competitor with evs, although evs do 579 00:27:14,040 --> 00:27:17,400 Speaker 12: work to try to disrupt ice vehicles as much as 580 00:27:17,400 --> 00:27:20,280 Speaker 12: they can, So it's one that we've been really competitive. 581 00:27:20,280 --> 00:27:22,959 Speaker 12: When you look at our ev slate, we've kept our 582 00:27:23,000 --> 00:27:26,560 Speaker 12: pricing very stable, and while we're delivering in smaller quantities 583 00:27:26,600 --> 00:27:29,919 Speaker 12: than some of our competitors, we are expanding rapidly. We 584 00:27:29,960 --> 00:27:33,520 Speaker 12: have a strong order book that we're fulfilling, and customers 585 00:27:33,560 --> 00:27:35,960 Speaker 12: have stuck with us through this. So in the third 586 00:27:36,080 --> 00:27:40,080 Speaker 12: quarter we've produced about two x the number of Altium 587 00:27:40,119 --> 00:27:43,080 Speaker 12: platform vehicles as we did in the second quarter. So 588 00:27:43,119 --> 00:27:46,320 Speaker 12: we're growing rapidly and pricing has been very stable for 589 00:27:46,440 --> 00:27:50,359 Speaker 12: us and our products and our customers have stayed with it. 590 00:27:50,680 --> 00:27:52,359 Speaker 2: Well, do you think that the prices of vehicles are 591 00:27:52,359 --> 00:27:54,480 Speaker 2: going to go up because of the strikes. 592 00:27:55,920 --> 00:27:58,919 Speaker 12: Well, you know, we've seen some tension, and obviously when 593 00:27:58,960 --> 00:28:02,520 Speaker 12: you look at the inventor levels, there's a little bit 594 00:28:02,560 --> 00:28:05,480 Speaker 12: of challenge. We saw some increases in the used car 595 00:28:05,560 --> 00:28:10,199 Speaker 12: market in particular leading up to the labor stoppage, so 596 00:28:11,280 --> 00:28:15,320 Speaker 12: we're watching that closely. Obviously, the consumer has seen a 597 00:28:15,359 --> 00:28:17,879 Speaker 12: lot of pressure on monthly payments as a result of 598 00:28:17,960 --> 00:28:20,000 Speaker 12: higher interest rates over the last couple of years. But 599 00:28:20,040 --> 00:28:23,800 Speaker 12: that's something that we strike a strong balance with. But 600 00:28:24,160 --> 00:28:28,280 Speaker 12: it all starts with having strong demand for your portfolio vehicles, 601 00:28:28,320 --> 00:28:31,560 Speaker 12: and right now, GM's got a very very good demand book. 602 00:28:31,680 --> 00:28:34,040 Speaker 2: How much is demand starting to wan though, especially you 603 00:28:34,080 --> 00:28:36,680 Speaker 2: talk about taking out loans and how much interest rates 604 00:28:36,720 --> 00:28:40,000 Speaker 2: have gone up, and we've seen that subprime auto loans 605 00:28:40,040 --> 00:28:42,840 Speaker 2: are seeing delinquities at rates that are unprecedented in data 606 00:28:42,840 --> 00:28:45,480 Speaker 2: going back to the early nineteen nineties. How much is 607 00:28:45,520 --> 00:28:48,320 Speaker 2: that impacting How much do you expect demand to grow 608 00:28:48,400 --> 00:28:49,000 Speaker 2: going forward. 609 00:28:51,480 --> 00:28:53,800 Speaker 12: We really haven't seen much of an impact lease on 610 00:28:54,840 --> 00:28:57,480 Speaker 12: that demand. It's been pretty consistent. So when you look 611 00:28:57,480 --> 00:29:01,360 Speaker 12: at our average transaction prices actually up year over year. 612 00:29:02,560 --> 00:29:05,720 Speaker 12: Wholesale volumes were up about two percent in the third quarter. 613 00:29:06,040 --> 00:29:08,360 Speaker 12: They've been up about eight percent year to date, and 614 00:29:08,520 --> 00:29:11,600 Speaker 12: inventory hasn't built, so we're moving the vehicles that we're 615 00:29:11,600 --> 00:29:15,480 Speaker 12: producing despite the fact that that monthly payments have gone 616 00:29:15,560 --> 00:29:17,760 Speaker 12: up and prices have gone up. So I think that's 617 00:29:17,800 --> 00:29:20,120 Speaker 12: a strong testament to the products that we have, We've 618 00:29:20,160 --> 00:29:23,080 Speaker 12: obviously got to watch that uh and and make sure 619 00:29:23,120 --> 00:29:27,040 Speaker 12: that we're running the business to be resilient. And that's 620 00:29:27,040 --> 00:29:28,640 Speaker 12: one of the things that we have to strike in 621 00:29:28,680 --> 00:29:32,479 Speaker 12: the in the in the labor negotiations is we've got 622 00:29:32,520 --> 00:29:35,720 Speaker 12: to strike that balance of making sure that we're rewarding 623 00:29:35,760 --> 00:29:38,920 Speaker 12: our people while balancing the need to compete in the 624 00:29:38,920 --> 00:29:39,840 Speaker 12: global marketplace. 625 00:29:39,960 --> 00:29:42,560 Speaker 2: Just real quick here, Paul Ken of us truly compete 626 00:29:42,600 --> 00:29:45,440 Speaker 2: with China when it comes to EV production, when it 627 00:29:45,440 --> 00:29:46,040 Speaker 2: comes to EV. 628 00:29:46,000 --> 00:29:50,360 Speaker 12: Sales, well, I think when you when you when you 629 00:29:50,360 --> 00:29:52,120 Speaker 12: look at what Tesla has done, when you look at 630 00:29:52,120 --> 00:29:55,080 Speaker 12: the infrastructure that we're building, not just in the in 631 00:29:55,120 --> 00:29:57,720 Speaker 12: the battery joint ventures, but also in the raw materials, 632 00:29:57,720 --> 00:30:01,920 Speaker 12: we believe we can be competitive with China. And our 633 00:30:02,000 --> 00:30:05,840 Speaker 12: vehicles that we've gotten now the customers love them, and 634 00:30:06,480 --> 00:30:08,440 Speaker 12: we think there's a lot more to come from the 635 00:30:08,480 --> 00:30:09,320 Speaker 12: General Motors team. 636 00:30:09,560 --> 00:30:12,480 Speaker 2: Paul Jacobs in General Motors CFO, thank you so much 637 00:30:12,600 --> 00:30:21,120 Speaker 2: for being with us. The International Energy Agency was created 638 00:30:21,120 --> 00:30:24,440 Speaker 2: fifty years ago in the wake of price fikes and 639 00:30:24,520 --> 00:30:28,760 Speaker 2: all sorts of geopolitical violence. Today, we're facing a similar 640 00:30:28,880 --> 00:30:31,360 Speaker 2: type of moment. Joining us right now Fadi b Role, 641 00:30:31,440 --> 00:30:33,800 Speaker 2: Executive Director of the ie A, and Fadi I want 642 00:30:33,800 --> 00:30:36,600 Speaker 2: to start there even as you put out your report, 643 00:30:36,680 --> 00:30:39,800 Speaker 2: which has a lot of really interesting projections, how is 644 00:30:39,880 --> 00:30:42,000 Speaker 2: today similar to nineteen seventy four? 645 00:30:44,360 --> 00:30:48,840 Speaker 13: Thank you Aman. The main similarity is once again a 646 00:30:49,080 --> 00:30:54,560 Speaker 13: major geopolitical crisis in a Middle East and once again 647 00:30:54,800 --> 00:31:03,200 Speaker 13: a oil marqus risk to provide major shock with a 648 00:31:03,320 --> 00:31:08,719 Speaker 13: high and volatile oil prices, oil securities at risk is 649 00:31:08,760 --> 00:31:13,520 Speaker 13: the But one third of the global oil exports come 650 00:31:13,640 --> 00:31:17,840 Speaker 13: from the region, especially for Asia, so there are some 651 00:31:18,280 --> 00:31:21,440 Speaker 13: similarities between now and fifty years ago. 652 00:31:22,280 --> 00:31:23,120 Speaker 9: Fatty, good morning. 653 00:31:23,200 --> 00:31:26,800 Speaker 8: Every time there is a moment of real angst than 654 00:31:26,800 --> 00:31:28,480 Speaker 8: we are at the moment of war here. So it's 655 00:31:28,480 --> 00:31:32,320 Speaker 8: not just angst, it's war between Hamas and Israel. The 656 00:31:32,400 --> 00:31:37,240 Speaker 8: question is the boundaries, the risk, the risk to Iranian 657 00:31:37,360 --> 00:31:41,280 Speaker 8: crude moving, the risk to the rest of the Persian 658 00:31:41,360 --> 00:31:44,760 Speaker 8: Gulf from this Israel Gaza crisis. 659 00:31:44,920 --> 00:31:47,480 Speaker 9: How do you look at that right now? 660 00:31:47,560 --> 00:31:50,440 Speaker 8: And what is the risk of major escalation in your 661 00:31:50,520 --> 00:31:52,080 Speaker 8: view and the risk of the oil market. 662 00:31:53,800 --> 00:32:00,720 Speaker 13: So if one or more oil major oil producing exporting 663 00:32:00,800 --> 00:32:04,240 Speaker 13: countries are involved in this crisis, we have all the 664 00:32:04,320 --> 00:32:09,040 Speaker 13: reasons to expected the process will go up, not only 665 00:32:09,080 --> 00:32:13,880 Speaker 13: in terms of production export supply cuts, but there is 666 00:32:14,200 --> 00:32:21,360 Speaker 13: a strait, the state of Homos, which is responsible about 667 00:32:21,640 --> 00:32:25,760 Speaker 13: bantward of the global oil transit and the major part 668 00:32:25,800 --> 00:32:31,080 Speaker 13: of the global energy natural gas transit. We may well 669 00:32:31,240 --> 00:32:36,600 Speaker 13: see substantial impacts on the oil and natural gas markets. 670 00:32:36,640 --> 00:32:38,520 Speaker 13: Of course, we don't know, at least I don't know 671 00:32:38,880 --> 00:32:44,800 Speaker 13: how the geopolitical developments will go in the next days 672 00:32:44,920 --> 00:32:48,120 Speaker 13: or the weeks to come, but the risk is rather 673 00:32:48,320 --> 00:32:50,920 Speaker 13: high for the energy markets. 674 00:32:51,520 --> 00:32:54,200 Speaker 8: One of the narratives that is either at the moment 675 00:32:55,040 --> 00:32:57,920 Speaker 8: is that obviously you still have unilateral counts from Saudi 676 00:32:57,920 --> 00:33:01,360 Speaker 8: Arabia and from Russia. No back has made a care. 677 00:33:01,400 --> 00:33:03,080 Speaker 8: It's too soon to talk about what they would do 678 00:33:03,360 --> 00:33:08,440 Speaker 8: in November. If there is a significant escalation, is that 679 00:33:08,600 --> 00:33:11,160 Speaker 8: step one of an immediate release five to the market, 680 00:33:11,160 --> 00:33:14,840 Speaker 8: of where Siety and Russia may well put out some 681 00:33:15,040 --> 00:33:18,640 Speaker 8: narrative in regards to the unilateral cuts or indeed act 682 00:33:18,840 --> 00:33:20,040 Speaker 8: before the November meeting. 683 00:33:21,560 --> 00:33:25,000 Speaker 13: It's a good point in fact, when we look at 684 00:33:25,000 --> 00:33:29,480 Speaker 13: the station today, even before the crisis, is this geopratical 685 00:33:29,520 --> 00:33:36,440 Speaker 13: crisis started. We hit oil prices around ninety dollars, very 686 00:33:36,760 --> 00:33:42,080 Speaker 13: high prices compared to averages. Why we have it for 687 00:33:42,160 --> 00:33:47,440 Speaker 13: two reasons. One, global oil demand is strong, mainly is 688 00:33:47,480 --> 00:33:50,720 Speaker 13: a result of the rebound in the Chinese economy after 689 00:33:50,800 --> 00:33:56,240 Speaker 13: the COVID. But second, the point you mentioned, the Russia 690 00:33:56,560 --> 00:34:02,480 Speaker 13: deliberately cut the oil production and since beginning of this year, 691 00:34:02,600 --> 00:34:06,520 Speaker 13: the International Agency we said, if you go in that direction, 692 00:34:06,680 --> 00:34:10,400 Speaker 13: we may well see titened oil markets, which could be 693 00:34:10,440 --> 00:34:15,360 Speaker 13: a major problem for the global economy and for inflation, 694 00:34:15,600 --> 00:34:19,600 Speaker 13: especially for emerging and developing countries. Now, this crisis come 695 00:34:19,719 --> 00:34:23,880 Speaker 13: on top of the ninety dollars oil prices, and the 696 00:34:23,920 --> 00:34:27,879 Speaker 13: one of course plausible scenario here if we see such 697 00:34:27,920 --> 00:34:31,759 Speaker 13: a crisis, and if we see a deepening of this 698 00:34:31,880 --> 00:34:35,200 Speaker 13: crisis as a result of some other countries being part 699 00:34:35,280 --> 00:34:42,319 Speaker 13: of this geopedical crisis there then one possible option is 700 00:34:42,440 --> 00:34:47,840 Speaker 13: the Saudi ab and Russia would change their production policies, 701 00:34:48,080 --> 00:34:53,120 Speaker 13: and they have ample amount of spare production capacity they 702 00:34:53,560 --> 00:34:54,880 Speaker 13: comfort the markets. There. 703 00:34:55,880 --> 00:34:57,479 Speaker 14: Can we zoom out a little bit and talk about 704 00:34:57,480 --> 00:34:59,800 Speaker 14: your long term views on what's going to happen in 705 00:34:59,800 --> 00:35:02,880 Speaker 14: the energy complex. I mean, we've got this great World 706 00:35:02,960 --> 00:35:06,760 Speaker 14: Energy Outlook report out today from your organization talking about 707 00:35:06,800 --> 00:35:09,880 Speaker 14: in the long term, global fossil fueld demand will peak 708 00:35:09,920 --> 00:35:10,840 Speaker 14: by twenty thirty. 709 00:35:10,960 --> 00:35:12,520 Speaker 1: As we see the transition occur. 710 00:35:13,000 --> 00:35:16,680 Speaker 14: Does that presume that the geopolitical tensions is what are 711 00:35:16,719 --> 00:35:19,720 Speaker 14: the presumptions behind that peak forecast by twenty thirty. 712 00:35:21,280 --> 00:35:25,000 Speaker 13: Now we are an agial organization, We cannot focus what 713 00:35:25,640 --> 00:35:29,280 Speaker 13: geopoltical context. But the reason that we see, for example, 714 00:35:29,360 --> 00:35:34,520 Speaker 13: oil were talking about oil demand to peak in the 715 00:35:34,560 --> 00:35:39,200 Speaker 13: next five for six years is the following. There is 716 00:35:39,239 --> 00:35:43,520 Speaker 13: a big move on the transportation sector, which is a 717 00:35:43,640 --> 00:35:49,520 Speaker 13: big chunk of the global oil consumption. Electric cars. When 718 00:35:49,640 --> 00:35:53,040 Speaker 13: you look at the electric cars two years ago, one 719 00:35:53,120 --> 00:35:56,680 Speaker 13: out of twenty five cars sold in the wort was electric. 720 00:35:56,960 --> 00:35:59,919 Speaker 13: One out of twenty five two years ago. This year, 721 00:36:00,440 --> 00:36:04,400 Speaker 13: one out of five cars sold is electric and in 722 00:36:04,440 --> 00:36:10,000 Speaker 13: twenty thirty, with the current investment plans, current policies, every 723 00:36:10,040 --> 00:36:13,880 Speaker 13: second car sold will be an electric car in twenty thirty. 724 00:36:13,920 --> 00:36:16,360 Speaker 13: This is one on the consumption side will be biger 725 00:36:16,480 --> 00:36:19,360 Speaker 13: the second and most important one. And I am surprised 726 00:36:19,400 --> 00:36:24,560 Speaker 13: that the analysts don't see this. China. China changed the 727 00:36:24,640 --> 00:36:27,279 Speaker 13: energy markets in the last ten years, and Chinese is 728 00:36:27,400 --> 00:36:30,640 Speaker 13: changing itself Now, when you look at the last ten years, 729 00:36:31,040 --> 00:36:34,760 Speaker 13: more than two thirds of the global oil demand growth 730 00:36:34,840 --> 00:36:38,520 Speaker 13: came from China, only more than two thirds, and Chinese 731 00:36:38,600 --> 00:36:43,440 Speaker 13: economy increased over six percent per year on average, and 732 00:36:43,520 --> 00:36:46,520 Speaker 13: this was the main driver. And we all know it's 733 00:36:46,560 --> 00:36:50,359 Speaker 13: a consensus view include the Chinese government. Chinese economy will 734 00:36:50,440 --> 00:36:53,800 Speaker 13: slowed down and this will be another driver for the 735 00:36:53,840 --> 00:36:56,279 Speaker 13: global oil demand peak in the next year's to cast. 736 00:36:56,320 --> 00:36:58,000 Speaker 1: But you only have a minute left. But this is 737 00:36:58,040 --> 00:36:58,960 Speaker 1: a really important point. 738 00:36:59,000 --> 00:37:02,000 Speaker 2: Are you saying that even if China has an economic boom, 739 00:37:02,200 --> 00:37:04,720 Speaker 2: it is not going to increase the demand for oil 740 00:37:04,760 --> 00:37:06,400 Speaker 2: based on the changes in that economy. 741 00:37:07,160 --> 00:37:10,960 Speaker 13: I mean, China may have growth in the economy as 742 00:37:11,000 --> 00:37:13,360 Speaker 13: a result of studness a year or so, but the 743 00:37:13,440 --> 00:37:17,759 Speaker 13: structure Chinese economy, when you look at the structure, the 744 00:37:17,880 --> 00:37:21,760 Speaker 13: balass in the Chinese economy, the cement production, the idens 745 00:37:21,760 --> 00:37:25,360 Speaker 13: cry production, the household stocks, they all come to a 746 00:37:25,400 --> 00:37:29,320 Speaker 13: situation on a decline, China wouldn't need major amount of energy. 747 00:37:29,440 --> 00:37:33,960 Speaker 13: So China will be determinated next year's the fate of 748 00:37:34,719 --> 00:37:37,040 Speaker 13: fossil fuse. And also at the same time, of course, 749 00:37:37,239 --> 00:37:39,640 Speaker 13: clid energy. Is there a champion that as. 750 00:37:39,600 --> 00:37:42,279 Speaker 1: Well Fatty by role of the International entertain Agency. Thank 751 00:37:42,320 --> 00:37:44,080 Speaker 1: you so much for taking the time. 752 00:37:44,760 --> 00:37:48,200 Speaker 2: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and 753 00:37:48,280 --> 00:37:51,640 Speaker 2: anywhere else you get your podcasts. Listen live every weekday 754 00:37:51,719 --> 00:37:54,319 Speaker 2: starting at seven am Eastern on Bloomberg dot com, the 755 00:37:54,360 --> 00:37:56,680 Speaker 2: iHeartRadio app tune In, and the. 756 00:37:56,600 --> 00:37:57,719 Speaker 1: Bloomberg Business app. 757 00:37:58,040 --> 00:38:00,719 Speaker 2: You can watch us live on Bloomberg telep Vision and 758 00:38:00,880 --> 00:38:04,839 Speaker 2: always on the Bloomberg terminal. Thanks for listening. I'm Lisa Abramowitz, 759 00:38:04,880 --> 00:38:05,920 Speaker 2: and this is Bloomberg.