Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, sun Cloud, Bloomberg dot com,
Speaker 1: and of course on the Bloomberg Terminal. Neil Data with
Speaker 1: Economic Forecast out one hundred years joined us now head
Speaker 1: of US economic Research at Renaissance Macro, and he has
Speaker 1: been a strident optimist through gloomy times. Neil, what does
Speaker 1: the gloom coup get wrong on this Monday morning? Well, first,
Speaker 1: I mean, I think it's important to recognize that the
Speaker 1: recession chatter is ubiquitous. I mean it's everywhere. I think.
Speaker 1: I was reading an article in The Economist talking about
Speaker 1: recession risk rising. Obviously, we're seeing a number of major
Speaker 1: cuth side research houses, um, you know, mark up their
Speaker 1: expectations or probabilities for recession. Um. But you know, my
Speaker 1: view is at the risk of recession is really no
Speaker 1: higher right now than it normally is. I mean, I
Speaker 1: still think we're more or less in this inflationary boom
Speaker 1: type of economy, and I think that's more or less
Speaker 1: going to persist, um, you know, for the next twelve months. Um,
Speaker 1: you know, when I look at you know, what's going
Speaker 1: to drive the recession right now? I mean we're talking
Speaker 1: about how homes aren't being built and how cars are
Speaker 1: not getting built. So I mean what's really stretched I
Speaker 1: mean potentially durable goods consumption. But it's hard to see
Speaker 1: how that in and of itself is going to drive
Speaker 1: a recession, particularly the time when consumers are still sort
Speaker 1: of flush with cash and seeing a very strong labor market. Um,
Speaker 1: you know, outlook, So Neil, we see a lot of
Speaker 1: calls for recession, but is that really what's being priced in?
Speaker 1: I mean, yes, we have seen some declines that we
Speaker 1: have seen some areas that have gotten really hit, but
Speaker 1: also read just as many to report saying lean into cyclicals,
Speaker 1: go into retail. You know, by the dip. How much
Speaker 1: have we actu priced and pessimism. I mean, if you
Speaker 1: look at most surveys of investor you know, sentiment, it's
Speaker 1: not exactly in a bullish so I mean consumers, for example,
Speaker 1: the Conference Board does data on you know, do you
Speaker 1: think stock prices are going to go up over the
Speaker 1: next twelve months or down, and you know, more consumers
Speaker 1: are saying they're gonna go down. So you know, I
Speaker 1: wouldn't say that there's optimism in the markets. Um, I
Speaker 1: think that, you know, uh, I think a sentiment around
Speaker 1: around equities over the next year are pretty are pretty negative. Frankly,
Speaker 1: So how would you say, how would you position this?
Speaker 1: I mean the other way of looking at this is
Speaker 1: how aggressive should you get leaning into risk? And I
Speaker 1: know that we were you know, frame this, how to
Speaker 1: frame this? And rightly? So is that you've been a
Speaker 1: bull and frankly you've been right. Uh, but then how
Speaker 1: much do you say, Okay, well then you need to
Speaker 1: buy everything that's beaten up. You need to go into
Speaker 1: the Russell two thousand, you need to buy banks. I mean,
Speaker 1: where are you where are you taking that optimism right now? Well,
Speaker 1: I mean it's a it's a difficult situation because right now,
Speaker 1: you know, I mean interest rate We're in a rising
Speaker 1: interest rate environment and that's going to have a a
Speaker 1: negative impact on you know, certain industries that constituted very
Speaker 1: large waiting in the equity markets, like tech, right, I mean,
Speaker 1: so we're seeing that, I guess the way way, the
Speaker 1: way I'm thinking about it right now, is really how
Speaker 1: much more room is there for the markets to price
Speaker 1: in a more aggressive FED for this year? And I
Speaker 1: don't really think there's much more the markets can do.
Speaker 1: We're basically pricing in neutral by year end. It's hard
Speaker 1: to see the FED getting more hawkish than that. They've
Speaker 1: signaled that they want to get up to neutral um,
Speaker 1: and I think they'll do that, but you know, the
Speaker 1: markets are already there. So perhaps that brings some reprieve
Speaker 1: in terms of the interest rate backdrop for the back
Speaker 1: half of the year, and maybe that provides some catalyst
Speaker 1: for some of these cyclical areas of the market. But
Speaker 1: I think looking beyond that, you know, it's I still
Speaker 1: think that would probably be a trade you'd want to
Speaker 1: rent as opposed to own, because I do think that
Speaker 1: the markets fundamentally are haven't gotten their heads around just
Speaker 1: how far the FED is likely to go in this cycle. UM.
Speaker 1: I don't think the term no rate is gonna be um,
Speaker 1: you know, two and three quarters per cent. I think
Speaker 1: it's gonna be higher than that. Why do you know
Speaker 1: how high? How high do you think it's going to go?
Speaker 1: I mean, right now, I'll say higher it's you know,
Speaker 1: you're I mean, this is one of these classic questions
Speaker 1: where you're like, what do you think the tenure is
Speaker 1: gonna do? I mean, I have no idea, but I
Speaker 1: think it's like we haven't stopped. I mean, to the
Speaker 1: accept the markets are pricing and cuts in twenty four
Speaker 1: because of some sort of recession risk. I think those
Speaker 1: cuts are gonna get priced out. So I do think
Speaker 1: that there's probably some upside to the longer end of
Speaker 1: the yield curfew. UM. I don't see why the terminal
Speaker 1: rate can't be three and a half or four. UM.
Speaker 1: You know, nominal GDP. We're in a very strong nominal
Speaker 1: GDP environment, and consumers are flush with cash. They're sitting
Speaker 1: on a large pile of excess savings, and they have
Speaker 1: substantial rooms, substantial room to absorb more normal levels of
Speaker 1: credit appetite. At the same time, we've seen basically China
Speaker 1: and potentially Europe slip in to economic weakness this year.
Speaker 1: Do we really think that's gonna be with US and
Speaker 1: twenty four? The U S economy is unlikely to go
Speaker 1: into a recession with China, and you're probably re accelerating
Speaker 1: in those years. Neil I gotta interrupt the show. I
Speaker 1: think this is so important. You've just framed out, as
Speaker 1: Lisa notes, a terminal rate of three and a half
Speaker 1: to four percent of radio and TV listeners worldwide, was
Speaker 1: suggest that throws America into some form of stagflation, growth
Speaker 1: recession or outright n b er recession. Are you saying
Speaker 1: it won't Well, I mean, I think what you're seeing
Speaker 1: that may. But but I think the issue is where
Speaker 1: does the consensus think the terminal ratings? And you know
Speaker 1: to me that the consensus thinks the terminal rate is
Speaker 1: basically what like two and a half percent, right, I
Speaker 1: mean that's why, uh, you know some of these parts
Speaker 1: of the curves are are already inverted. Um. I think
Speaker 1: that's frankly too low. So I think the markets underestimate
Speaker 1: the extent to which the FED can go without breaking
Speaker 1: being economy productivities slowly rising, the labor force participation rate
Speaker 1: is continuing to climb. That all means that the FED
Speaker 1: can go longer without breaking the economy. Neils speaking of
Speaker 1: why the FED will go as far as it goes,
Speaker 1: CPI data tomorrow doesn't have any real bearing on the
Speaker 1: decisions that policymakers will make at least come may no,
Speaker 1: the DIACE cast, the DIACE cast. So then when does
Speaker 1: the data start to matter again? What would it take? Well,
Speaker 1: I mean I think that for me, I primarily view
Speaker 1: these questions around the labor market. And you know, to me,
Speaker 1: it's about jobs, hours, and earnings. And when you look
Speaker 1: at the some product of those three things, it's growing,
Speaker 1: you know, eight nine at an annual rate um, you know,
Speaker 1: so far this year, and eventually that should slow. I mean,
Speaker 1: as you know, participation rates climb, we just start to moderate.
Speaker 1: He won't say strong jobs growth at low rates of unemployment.
Speaker 1: So maybe that starts to cool off somewhe um. And
Speaker 1: that could take some pressure off of inflation, because obviously
Speaker 1: whatever doesn't go into uh, into quantity, whatever is not real,
Speaker 1: we'll just the remaining will be inflation. Um. So we
Speaker 1: have to see. But to me, it's really about the
Speaker 1: labor market. I don't think that's gonna happen anytime soon,
Speaker 1: because I do think there's probably additional downside to the
Speaker 1: unemployment rate over the next several months. I mean, you're
Speaker 1: going to be in a situation where, uh, you know,
Speaker 1: the feed is probably gonna mark down their estimates for
Speaker 1: for unemployment UM, but I do think it's primarily about
Speaker 1: the labor markets. On the subject of unemployment, the Fed
Speaker 1: thinks three and a half percent is going to stay
Speaker 1: the case through three even if it moves aggressively. Do
Speaker 1: you buy that argument? No, No, I think they would
Speaker 1: have to go much more aggressively in order to keep
Speaker 1: the unemployment rate at that rate. At at three and
Speaker 1: a half percent, will probably be in the low threes
Speaker 1: by the end of the year. So you know, either
Speaker 1: one of two things can happen, right, I mean, the
Speaker 1: Fed can basically UM pencil in more rate hikes UM
Speaker 1: in future years to make sure that the unemployment rate
Speaker 1: UM stays at three and a half percent or UM.
Speaker 1: They don't change their estimates for rates, and the unemployment
Speaker 1: rate continues to punch you a primer. Thank you so much,
Speaker 1: Really appreciate that. Really important comments there. Our interview O
Speaker 1: the day on yield and it is yield up and
Speaker 1: it is decidedly priced down. Marilyn Watson is head of
Speaker 1: Global Fundamental fixed Income Strategy at black Rock and has
Speaker 1: a wonderful view of this strange idea. If it's not
Speaker 1: just about yield, it's about price as well. Maryland. I
Speaker 1: just took the Age fifteen ten ure series back to
Speaker 1: the time of bocre and we had lower yields and
Speaker 1: higher prices of five standard deviations. In the pandemic scared
Speaker 1: a low low yields, we reversed and we are up,
Speaker 1: but up only one standard deviation off that long term
Speaker 1: create moderation. Can you and black Rocks say that the
Speaker 1: Great Moderation is over? I don't think that yet we
Speaker 1: can say that the Great Moderation is necessarily over. I
Speaker 1: think what we're seeing now is we are in this
Speaker 1: period of correction having had incredibly suppressed yields for going
Speaker 1: back several years now and then exacerbated during obviously the pandemic.
Speaker 1: So I think what we're really seeing now is an
Speaker 1: increase in volatility as the market really is positioning itself
Speaker 1: for the FED to be more aggressive in terms of
Speaker 1: quantitative tightening, both in terms of raising interest rates and
Speaker 1: also the runoff in the balance sheet that potentially will
Speaker 1: come maybe in May or in June um And I
Speaker 1: think as we do start to see the FED really
Speaker 1: start to shift away and try to move towards a
Speaker 1: neutral point, then it's you know, it's understandable that we're
Speaker 1: seeing a lot more volatility in the market. I think
Speaker 1: it's also incredibly important when we continue to look at
Speaker 1: inflation just how high it is in the US and
Speaker 1: elsewhere around the world. Um, And as you mentioned before,
Speaker 1: there are a number of factors that are really exacerbating this,
Speaker 1: whether it be the lockdown in China and Changhai due
Speaker 1: to COVID restrictions, whether it's energy and the massive impact
Speaker 1: that that's having in Europe in particular for example. So
Speaker 1: I think the whole confluence of factors are really you know,
Speaker 1: exacerbating the volatility and yields and the market's expectation of
Speaker 1: what we can see from interest rates from the FED
Speaker 1: and also from the ECB as well as you go
Speaker 1: forward this year. Merilyan Maryland. Earlier this morning, Tom Kennedy
Speaker 1: of JP Morgan at a private bank asked a really
Speaker 1: good question, how high do yields have to go to
Speaker 1: restrain inflation? What's your view on that? Yeah, and so
Speaker 1: so at the moment, we do think that rates could
Speaker 1: go definitely a bit higher from here. It is our
Speaker 1: view that inflation will probably start to roll over pretty soon.
Speaker 1: It is obviously at very high levels, but given base effects,
Speaker 1: UM and other things that will sort of come into play.
Speaker 1: We do think that inflation will start to tack down,
Speaker 1: but obviously from very incredibly high levels. I think that's
Speaker 1: why you know, the FED has indicated it it will
Speaker 1: be more aggressive. I think that's also why the ECB
Speaker 1: has started to signal that, you know, it's maybe potentially
Speaker 1: ending its asset purchase program maybe you know, in the July,
Speaker 1: the third quarter of this year, and it's too itself
Speaker 1: up to potentially raise rates as well by the end
Speaker 1: of this year. So I do think that rates could
Speaker 1: go higher. UM. I think could definitely go higher from here,
Speaker 1: but we also do need to keep a firm iron inflation,
Speaker 1: and I think they're the risks are huge. As I mentioned,
Speaker 1: there are risks in terms of you know, pushing inflation
Speaker 1: higher if we start to see issues around you know,
Speaker 1: the restrictions in China, energy elsewhere, or we could start
Speaker 1: to see inflation actually roll over UM and the and
Speaker 1: the part of the equation of course is growth. You know,
Speaker 1: there's a large risks route now around the growth in
Speaker 1: the Eurozone. I think that's certainly a factor that was
Speaker 1: coming to play as we look at what the e
Speaker 1: C B may do later in this year. But also
Speaker 1: when you look at the U US as well, I
Speaker 1: think growth, you know, remains relatively strong. The labor market
Speaker 1: is incredibly type um, you know, and will also you know,
Speaker 1: continue to see the consumer um and the high level
Speaker 1: of houssle savings that they still have the stud to
Speaker 1: run those down as they still continue to purchase when
Speaker 1: see vitail sales and other things. And it really depends
Speaker 1: whether we see a shift in sentiments like how much
Speaker 1: further that has to go. But for the time being,
Speaker 1: I think growth remains relatively solid in the US, and
Speaker 1: really inflation and inflation data is absolutely crysical. Now, So
Speaker 1: in the Wall of Warrior Maryland that you talked about
Speaker 1: the potential potential increase in inflation, potential slow down in growth,
Speaker 1: what do you do? How much do you lean into
Speaker 1: a risk at a time when people already are somewhat bearish.
Speaker 1: I would just say people, I'm not gonna specify. So
Speaker 1: at the moment that we have been short duration, now
Speaker 1: we're relatively i would say neutral, and we still have
Speaker 1: relatively low duration. But I think now given that the
Speaker 1: risks are two sided, you know, we are being very
Speaker 1: flexible we now are starting to get a little bit
Speaker 1: will carry um in you know, front hand rates um,
Speaker 1: So we're starting to you know, just invess a little
Speaker 1: bit more there. We do like some mosment's securitized investment grade,
Speaker 1: and we are looking to be very, very diversified. That
Speaker 1: being said, of course, we are still relatively conservative at
Speaker 1: the moment. I think the next two months when we
Speaker 1: see you know, the further inflation data, further data around growth,
Speaker 1: we see developments ongoing around you know, the situation in Ukraine,
Speaker 1: the impact of sanctions. So I think there's a lot
Speaker 1: that still needs to be factors in and that we
Speaker 1: really need to see evidence either way of how things
Speaker 1: are starting to shape out. But I think there are
Speaker 1: areas now where we can see value, where we are
Speaker 1: starting to get some yield um, and I think diversification
Speaker 1: is really the name of the game, but also really
Speaker 1: really understanding liquidity and the risk reward and the liquidity
Speaker 1: around each position that we currently hold. Maryland, you talked
Speaker 1: to her about some geopolitical risk factors that need to
Speaker 1: be put into the equation. What about domestic politics. I'm
Speaker 1: thinking specifically of France here and looking at a ten
Speaker 1: year yield that started marched around forty basis points were
Speaker 1: now in and around one what would happen to the
Speaker 1: French bond market if Marine Lapin were to win the
Speaker 1: runoff on April. So we have seen, as you mentioned,
Speaker 1: a lot of politility also around around France around the
Speaker 1: potential election, and the market is clearly signaling that's positioning
Speaker 1: itself for it has a preference for in the market,
Speaker 1: in the euro in terms of keeping much of the same,
Speaker 1: so lacrowd obviously staying in power. It does remain to
Speaker 1: be seen. And we have this run off on the April,
Speaker 1: and I think we will start to see a lot
Speaker 1: of volitility around that event. Um. If le pen does win,
Speaker 1: I think it's too hard to say at the moment.
Speaker 1: I mean, she has really been quite clear I think
Speaker 1: around some of her economic policies, um, and I think
Speaker 1: it really remains to be seen if she were to
Speaker 1: get into power, what her you know, the policies that
Speaker 1: she actually implements would be. I do think it's maybe
Speaker 1: a little case of sort of as well, sort of
Speaker 1: just trading around this volatility, sort of like you know,
Speaker 1: buying the room with all the fact potentially as well.
Speaker 1: So I think for the time being it's more around
Speaker 1: the potential trade off between the two candidates, but in
Speaker 1: either scenario it really remains to be seen what policies
Speaker 1: would be implemented. Marilyn, Thank you so much. Marilan Watson
Speaker 1: there of black Rock, This is a true joy. He
Speaker 1: is a prolific writer on Shankai check. He is a
Speaker 1: writer on Frances definitive. The History of modern France is
Speaker 1: an important read. I've read it cover to cover, but
Speaker 1: also a one volume on what there was before McCraw,
Speaker 1: before lepan and that is, of course his magisterial book
Speaker 1: on General de gall It can only be Jonathan Fenby. Jonathan,
Speaker 1: thank you so much for joining us. Can you explain
Speaker 1: the collapse of the center in the right around the
Speaker 1: thirty nine year old maverick Mr McCraw in his second term?
Speaker 1: What degall rot seems to be politically destroyed? Is it? Well?
Speaker 1: The conventional left center, left, center right division on which
Speaker 1: the Fifth Republic has rested really for the last and
Speaker 1: fifty years or more, is now destroyed. Makon took away
Speaker 1: a lot of the support from the socialist last time around,
Speaker 1: and this time he seems to have taken away a
Speaker 1: lot of support from the center right Republicans. Add to that,
Speaker 1: the rise of le Pen and other extremists on both
Speaker 1: left and right, and Francis politics have become completely fragmented
Speaker 1: in the in the tumult of America. There was a
Speaker 1: massive turnout in the last election, Mr Trump, of course,
Speaker 1: note seventy four million people chose to vote for Trump.
Speaker 1: Tell us the mystery of this turnout, April Well, The
Speaker 1: question and now is how many of the people who
Speaker 1: voted for the hard left wing candidate Jean Luc Millen
Speaker 1: sew and there were twenty two percent went for him,
Speaker 1: which was an unusually high and unexpectedly high number. How
Speaker 1: many of those will who don't like Macon will still
Speaker 1: hold their noses and vote for him, or how many
Speaker 1: will abstain? And it's really in that uh equation that
Speaker 1: probably the outcome of the runoff on will be decided. Jonathan,
Speaker 1: how much is the move toward marine le Pen indicative
Speaker 1: of this shift away from the Western order, something that
Speaker 1: we saw with the Trump presidency and certainly that we've
Speaker 1: seen on the margins in a number of nations. It
Speaker 1: is in part that, but the even harder right candidate
Speaker 1: Eric Zamore, who played the values card much more strongly
Speaker 1: than the PEN. He didn't do as well as many
Speaker 1: people thought he might have done. And the PEN really
Speaker 1: picked up a lot of votes yesterday on cost of
Speaker 1: living issues, security, law and order, all these kind of
Speaker 1: grassroots issues which she made the center of her campaign.
Speaker 1: And what does Emmanuel mcral need to do as he
Speaker 1: campaigns between now in April? What is his largest task?
Speaker 1: His largest task is to show that he cares for
Speaker 1: the French people. His opponents made the argument going into
Speaker 1: the first round that he was to obsess with his
Speaker 1: position as an international statesman, having once described the president
Speaker 1: as Jupiter like, that he floated above everyday concerns and
Speaker 1: he's got to get show the French that he cares
Speaker 1: for them. John, I'm absolutely fascinating by this and that
Speaker 1: in folks, this is very different than America. Paris is
Speaker 1: roughly thirty of the GDP of France. I mean, it's
Speaker 1: Paris centric. Is this John? Just simply you know, as
Speaker 1: a generalization Paris and mc krow against the nation of
Speaker 1: the rest of France. That is certainly the way Lapin
Speaker 1: will try to pitch it. I think for the second
Speaker 1: round you're a metropolitan elitist who cares for the rest
Speaker 1: of the world, the the upper elite class looking after them,
Speaker 1: the president of the rich, and you've got the rest
Speaker 1: of France which is being left in the doldrums. And
Speaker 1: that's really been her main campaign theme. Okay, but John,
Speaker 1: here here's the issue to our viewers in radio and TV.
Speaker 1: Their view of France, as you well know, is table twelve,
Speaker 1: table dues at oh petite France or petite sweets overlooking
Speaker 1: the Luxembourg Garden. I mean, you sit there in the
Speaker 1: sun and everything's great. That's not France. Is that what
Speaker 1: Frances saying to McCrow. You're not France. Absolutely, Tom, You've
Speaker 1: got it absolutely right there. The rest of France, those
Speaker 1: who voted for La penn and fer melon Chan and
Speaker 1: I emphasized again that he got twenty two percent of
Speaker 1: the vote, althoughy finished third. They're basically telling Macon, Look,
Speaker 1: France doesn't just exist in the smart parts of Paris.
Speaker 1: It exists in run down towns and suburbs and deserted
Speaker 1: farm lands. And you've got to start paying some attention
Speaker 1: to us how much popular support is there within France.
Speaker 1: Jonathan for France's approach to Russia towards going on in Ukraine. Well,
Speaker 1: Ukraine in a sense has been It's been there all
Speaker 1: through the campaign. But Macon's conversations with Putin I don't
Speaker 1: think did him any harm because he was seen as
Speaker 1: putting France on the world stage. On the other hand,
Speaker 1: the far left and far right candidates who paled up
Speaker 1: to Putin earlier on are somewhat embarrassed by this, and
Speaker 1: Macrawl will make a lot of their those panels big
Speaker 1: loan for a Russian bank, for instance, A lot of
Speaker 1: that will come up in the campaign for the second round.
Speaker 1: Jonathan Fenby, thank you so much, greatly appreciate it. Wonderful
Speaker 1: to catch up with you again in folks. I can't
Speaker 1: say enough about Mr Fenby's commitment to writing of France
Speaker 1: or been other great books on France, great one volumes
Speaker 1: under go. But Fenby is the one who over the
Speaker 1: years has just put together truly thousands of pages on
Speaker 1: this interesting, interesting nation. I know all right now ellen
Speaker 1: Will joined senior fellow in Atlantic Council and definitive as
Speaker 1: well on the Saudis ellen Wald. With the oil issues
Speaker 1: and with demand in China, what did the Saudis do
Speaker 1: The saudia Is I think are actually in a somewhat
Speaker 1: difficult position at the moment with problems and in terms
Speaker 1: of these lockdowns and potentially really could into demand in China,
Speaker 1: especially with Russian crewde being available at a discount for
Speaker 1: the Chinese. They may really need to make their products
Speaker 1: more competitive. So they do have long term contracts with
Speaker 1: certain Chinese refineries, particularly the petrochemical and refinaries that they
Speaker 1: themselves that that a Ramco has stakes in, so they
Speaker 1: don't need to worry about that supply. But it's basically
Speaker 1: everything else on the margins that they're used to selling
Speaker 1: to the Chinese that they may need to make their
Speaker 1: products a little bit more competitive to uh, you know,
Speaker 1: keep with this too, breac and oil and you could
Speaker 1: see them offer a price cut. Okay, of our price cut, Ellen,
Speaker 1: let's go to walled one on one. Is oil one
Speaker 1: price this morning? One global price or not? Well, it's
Speaker 1: never really one global price. We've gotten the benchmarks and
Speaker 1: then we've got you know, the different blends that are sold.
Speaker 1: They saw the benchmarks. So Russian crew can you know,
Speaker 1: the Chinese can get this Russian crews for you know,
Speaker 1: it could be as much as thirty dollars off of
Speaker 1: the Brent benchmark, and that's a really good deal for China.
Speaker 1: Even if they're experiencing a drop in demand, they could
Speaker 1: use this opportunity to um put more into storage. So
Speaker 1: I'm not sure that will necessarily see fewer in courts
Speaker 1: going into China if China thinks they can get a discount,
Speaker 1: but consumption in China could definitely go down and that
Speaker 1: would hurt the independent refinery business, which does a lot
Speaker 1: of you know business making products and selling them around Asia.
Speaker 1: And if there's no demand coming for these products from
Speaker 1: you know, China and other areas, that could definitely hurt
Speaker 1: that sector in China. Is there a historical corollary for
Speaker 1: this period in terms of uncertainty in terms of volatility
Speaker 1: and oil price in terms of the fact that we're
Speaker 1: asking the question is there a global price for oil
Speaker 1: or is it basically choose your own adventure. Yeah, it's
Speaker 1: I really think that that this is a very unprecedented
Speaker 1: period in historically because there is so much effect in
Speaker 1: terms of speculation and of all of these different prices
Speaker 1: going around uh in the market today. We used to
Speaker 1: you know, there were previous times when we had big
Speaker 1: oil incidents. We you know, remember the nineteen seventies oil shocks,
Speaker 1: we had the Iranian revolution. Those were all massive issues
Speaker 1: in the oil market, except that at that time, uh,
Speaker 1: there wasn't this kind of financialization of the oil markets.
Speaker 1: You didn't have you know, traders trading oil every minute,
Speaker 1: or you didn't have algorithms that we're asking on the
Speaker 1: market in near seconds or even less than seconds. And
Speaker 1: all of this financialization introduces more volatility, and it makes
Speaker 1: any move much more uh, it makes it much more attenuated.
Speaker 1: So you know, we may see, uh, the effects of
Speaker 1: these Chinese blockdowns, but the fact that there's so much
Speaker 1: money and so much trading and so much attention to
Speaker 1: the oil market just makes these swings even larger and
Speaker 1: even more volatile. Ellen you mentioned there are the Iranian revolution.
Speaker 1: Let's talk about around in a different context. It's saying
Speaker 1: today that the nuclear deal is in the emergency room.
Speaker 1: It's not dead, but it's in the emergency room. What
Speaker 1: is your base case on whether or not a deal
Speaker 1: can ultimately be reached and how that will reflect in
Speaker 1: oil prices. Yeah, this is this is I think a
Speaker 1: significant issue, particularly because um several months ago, there was
Speaker 1: a lot of optimism that we would get in Iran deal.
Speaker 1: I remember speaking with people who are very much in
Speaker 1: tune in in the Iran analysis area, and they were
Speaker 1: very very positive that a deal would get done before March.
Speaker 1: And now looking at the situation, it's a different ball game.
Speaker 1: And I do think that the incredible rise in oil
Speaker 1: prices and the war in Ukraine has given Iran an
Speaker 1: advantage because they are still selling their oil and they're
Speaker 1: making much more money, and so that doesn't that reduces
Speaker 1: the pressure on them to come to the table and
Speaker 1: to make concessions. So it's really created a situation in
Speaker 1: which Iran is in the driver's seat here. Ellen, Well,
Speaker 1: thank you so much. On a global view, Bond can't
Speaker 1: say enough about her one volume on Saudi in the
Speaker 1: Royalty just a superb effort on Saudi Arabia. This is
Speaker 1: the Bloomberg Surveillance Podcast. Thanks for listening. Join us live
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