WEBVTT - Bloomberg Surveillance TV: May 14, 2024 0:00:02.440 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.840 terminal and the Bloomberg Business app. 0:00:36.159 --> 0:00:38.639 And we did get this morning, an Marie a response 0:00:38.680 --> 0:00:39.839 from China yep. 0:00:39.680 --> 0:00:41.880 The Ministry of Commerce coming out and saying they vow 0:00:41.960 --> 0:00:43.760 to take measures to defend their rights. 0:00:44.080 --> 0:00:44.639 They say that. 0:00:44.640 --> 0:00:47.479 They resolutely oppose what the US is doing this morning 0:00:47.960 --> 0:00:52.120 with these tariffs. They say the decision is quote political manipulation, 0:00:52.560 --> 0:00:55.440 and also Lisa urging the US to cancel the ector 0:00:55.520 --> 0:00:57.520 tariffs and correct this quote wrongdoing. 0:00:57.600 --> 0:00:58.680 Let's see whether that works. 0:00:58.760 --> 0:01:00.440 Joining us for the rest of the hour is former 0:01:00.520 --> 0:01:03.920 National Economic Council Director Gary Cohene. Gary so much to 0:01:03.960 --> 0:01:07.319 work through here in terms of whether it's tariffs, whether 0:01:07.360 --> 0:01:09.800 it's the fiscal policy or whether it's the deficit. 0:01:10.160 --> 0:01:12.000 I want to start more broadly. 0:01:11.800 --> 0:01:14.440 This question of how much are from some of the 0:01:14.440 --> 0:01:18.280 fiscal policies directing investment theories right now in terms of 0:01:18.319 --> 0:01:20.560 where some of the money is going and what gates 0:01:20.560 --> 0:01:21.360 are being put up. 0:01:22.200 --> 0:01:26.600 Well, Look, fiscal policy and monetary policy are directly impacting 0:01:26.920 --> 0:01:29.440 how money is being spent, what money is available today, 0:01:29.560 --> 0:01:30.560 and I think that's even. 0:01:30.400 --> 0:01:31.800 A more important topic. 0:01:32.640 --> 0:01:35.600 We have gone through a pretty vicious cycle over the 0:01:35.640 --> 0:01:38.120 last four years where we went from a cycle of 0:01:38.240 --> 0:01:42.240 zero interest rates, an abundance of capital capital available for 0:01:42.319 --> 0:01:45.839 almost all startups in this country and funding at various 0:01:45.840 --> 0:01:48.440 stages of your progression from startup to early stage, to 0:01:48.520 --> 0:01:52.040 mid stage to late stage to IPO, to a place 0:01:52.080 --> 0:01:55.280 where we are today where there's very little investment capital 0:01:55.320 --> 0:01:59.160 available for young companies and startup companies and the IPO 0:01:59.240 --> 0:02:02.720 market just starting to reopen. So that is all a 0:02:02.920 --> 0:02:07.920 function of fiscal policy monetary policy, because they're interstricably linked. 0:02:08.240 --> 0:02:10.720 And when people were not getting a return on their 0:02:10.720 --> 0:02:13.320 capital in the bank and there was a zero risk return, 0:02:13.560 --> 0:02:18.800 zero risk assets out there, people bought assets that they 0:02:18.840 --> 0:02:21.360 thought could provide an enhanced return for them, so they 0:02:21.360 --> 0:02:23.400 were willing to take more risk. They were willing to 0:02:23.680 --> 0:02:27.000 invest in startup companies. Today you can go out and 0:02:27.040 --> 0:02:28.880 buy a six month treasure bill and get five point 0:02:28.880 --> 0:02:33.200 three five point four percent on a tax preferential asset. 0:02:33.320 --> 0:02:36.799 So we have changed the whole mentality of the way 0:02:36.840 --> 0:02:41.560 people think about holding capital, investing capital, recirculating capital. Also, 0:02:41.600 --> 0:02:44.240 with the capital markets have that then closed for so long. 0:02:44.360 --> 0:02:47.160 A lot of that capital that was invested in three four, five, six, 0:02:47.240 --> 0:02:49.760 seven years ago, many of those people thought it had 0:02:49.800 --> 0:02:52.440 a three four, five six year duration. They would get 0:02:52.520 --> 0:02:55.400 liquified by taking those companies public, and then they would 0:02:55.440 --> 0:02:59.160 recirculate that risk capital back into the financial markets. They 0:02:59.160 --> 0:03:02.200 have not been liquefied because the capital market has been closed, 0:03:02.240 --> 0:03:05.839 so therefore that risk capital does not get to recirculate back. 0:03:05.880 --> 0:03:07.040 So a little bit of. 0:03:06.919 --> 0:03:10.480 The natural cadence of capital moving in and out of 0:03:10.560 --> 0:03:13.720 risk assets has changed, both because of fiscal policy and 0:03:13.800 --> 0:03:14.480 monetary policy. 0:03:14.480 --> 0:03:16.600 There's a lot to impact right there, are you basically 0:03:16.680 --> 0:03:19.400 saying that On the monetary policy side, low rates usually 0:03:19.440 --> 0:03:22.320 benefit the smaller, more leverage companies. Rates go up, that 0:03:22.360 --> 0:03:24.640 benefits more some of the larger companies that are able 0:03:24.680 --> 0:03:27.359 to be sort of turn out their debt structures in 0:03:27.400 --> 0:03:30.480 a more considerable way. Are you saying that fiscal policy 0:03:30.520 --> 0:03:33.160 also benefits the bigger companies more because they're the ones 0:03:33.160 --> 0:03:34.800 that are eligible for some of these grants. 0:03:35.720 --> 0:03:37.360 I didn't really say what you're saying. 0:03:37.400 --> 0:03:40.800 I don't think higher rates help anyone. Okay, if you're 0:03:40.840 --> 0:03:45.640 a large company and you're still running a large debt portfolio, 0:03:46.160 --> 0:03:49.960 you're always you're always worried about your weighted average cost 0:03:49.960 --> 0:03:50.240 of debt. 0:03:50.240 --> 0:03:51.320 You're whackedy, so. 0:03:51.520 --> 0:03:54.320 You're thinking about what that is, and the lower it is, 0:03:54.360 --> 0:03:55.160 the better it is. 0:03:55.280 --> 0:03:56.840 You know, ultimately, at the end. 0:03:56.720 --> 0:03:59.600 Of the day, you sell your goods or you sell 0:03:59.640 --> 0:04:02.839 your services to your customers. Then you've got your expense line, 0:04:02.880 --> 0:04:05.560 which is usually the biggest line, and the expenses is 0:04:06.000 --> 0:04:08.440 salaries and costs. But then if you get down a 0:04:08.440 --> 0:04:10.880 little bit down, cost of debt is a big item. 0:04:11.240 --> 0:04:13.280 So to the extent that cost of debt goes up, 0:04:13.280 --> 0:04:15.640 the price of your goods or service has to go up. 0:04:15.960 --> 0:04:19.440 So companies, you know, either the profit margins contract as 0:04:19.520 --> 0:04:21.240 interest rates go up, or they have to raise the 0:04:21.320 --> 0:04:22.600 price of their goods. 0:04:22.800 --> 0:04:25.360 So in a perfect. 0:04:24.960 --> 0:04:28.040 World, no one really wants interest rates to go up, 0:04:28.040 --> 0:04:31.880 but there is a sort of middle ground where interest 0:04:31.960 --> 0:04:34.800 rates are a level low enough where they're not really 0:04:34.839 --> 0:04:39.960 affecting and the economy is growing without fiscal stimulus from 0:04:40.000 --> 0:04:43.000 the federal government. The question is really more when fiscal 0:04:43.160 --> 0:04:47.159 stimulus from the government comes in, how does that react. 0:04:47.440 --> 0:04:49.120 And right now we actually have one of the most 0:04:49.160 --> 0:04:51.440 unique periods of time because we've got, on one hand, 0:04:51.440 --> 0:04:53.720 we've got the Federal Reserve, which is trying to raise 0:04:53.800 --> 0:04:57.840 rates to slow down economic growth to get inflation under control, 0:04:58.040 --> 0:05:00.040 and we've got the federal government on fiscal policy on 0:05:00.040 --> 0:05:03.720 the other side, looking to invest capital to grow the economy. 0:05:04.000 --> 0:05:07.560 Those two things are countervailing forces. We don't see a 0:05:07.560 --> 0:05:09.680 lot of times in our economic history when we've got 0:05:09.720 --> 0:05:11.120 both of those things going on at. 0:05:11.040 --> 0:05:13.000 The same time. Usually we're in unison. 0:05:13.440 --> 0:05:16.280 Usually the Fed's trying to grow the economy by lowing 0:05:16.360 --> 0:05:19.680 rates and the government is trying to spend money to 0:05:19.760 --> 0:05:20.599 grow the economy. 0:05:20.960 --> 0:05:22.279 That's normally what you see. 0:05:22.120 --> 0:05:24.200 Is you're coming out of a very tough economic period. 0:05:24.240 --> 0:05:27.040 When you're in a very robust economic period, the Federal 0:05:27.080 --> 0:05:29.160 Reserve is raising interest rates trying to slow it down, 0:05:29.360 --> 0:05:31.760 and the federal government does not need to spend money 0:05:31.760 --> 0:05:35.120 because you're in a very robust economic time. This time 0:05:35.560 --> 0:05:37.839 it's very different than the historical past. 0:05:38.440 --> 0:05:41.360 As an investor, who do you bet on winning the 0:05:41.400 --> 0:05:44.240 FED or fiscal policy? 0:05:44.320 --> 0:05:46.000 You know, I don't know if there's a winner or 0:05:46.080 --> 0:05:46.599 a loser. 0:05:46.720 --> 0:05:49.119 I think you have to be realistic to what's going 0:05:49.160 --> 0:05:52.799 on and who's trying to do what. The Biden administration 0:05:52.839 --> 0:05:57.880 has been pretty consistent on their fiscal policy agenda. They 0:05:57.960 --> 0:06:00.000 have been trying to spend money and put money into 0:06:00.040 --> 0:06:03.080 the economy since day one, since the first COVID relief 0:06:03.279 --> 0:06:05.919 to one point nine trillion dollars they put in early, 0:06:06.720 --> 0:06:11.120 and they continuously find ways to put money into the economy, 0:06:11.160 --> 0:06:15.080 as recently as relief of student loans. So they're continuously 0:06:15.120 --> 0:06:18.600 looking at ways to fiscally stimulate the economy. The FED, 0:06:18.680 --> 0:06:22.359 on the other hand, is responding to the outcome of 0:06:22.360 --> 0:06:23.760 that money being put in the economy. 0:06:23.800 --> 0:06:24.480 There's a cause and. 0:06:24.400 --> 0:06:27.320 Effect, you know, many of us think there's the effect 0:06:27.520 --> 0:06:29.640 is so much money being put in the economy, the 0:06:29.640 --> 0:06:32.960 money supply expanding so quickly that you've got too much 0:06:33.000 --> 0:06:36.680 money chasing too few goods, and therefore you had an 0:06:36.680 --> 0:06:40.400 inflationary time, inflationary pressures. So the FED is responding to 0:06:40.480 --> 0:06:42.920 the to the effect of the cause, and they are 0:06:43.000 --> 0:06:46.720 raising rates trying to slow that down. So if I 0:06:46.760 --> 0:06:49.599 were going to bet the Biden administration will continue with 0:06:49.640 --> 0:06:52.600 fiscal stimulus. In fact, they have a lot of stimulus 0:06:52.640 --> 0:06:56.200 already approved where they have not given out the money, 0:06:56.200 --> 0:06:58.880 so that money has not fed through the economy, and 0:06:58.920 --> 0:07:02.080 the FED will continue to monitor the financial conditions, and 0:07:02.960 --> 0:07:06.600 most importantly, they'll continue to monitor the path of inflation 0:07:06.960 --> 0:07:09.120 based on the data that they get, and they will 0:07:09.160 --> 0:07:11.720 decide what great policy looks like based on that. 0:07:11.840 --> 0:07:13.680 Gary, I want to ask you about the next fiscal fight, 0:07:13.720 --> 0:07:16.920 which is the Trump error tax cuts. They are coming, 0:07:17.080 --> 0:07:19.760 they're expiring next year. Do you think they should be extended? 0:07:20.400 --> 0:07:20.520 So? 0:07:21.120 --> 0:07:23.400 I think tariffs is one of the most interesting topics 0:07:23.440 --> 0:07:26.280 that we dealt with when I was in the White House, 0:07:26.320 --> 0:07:28.760 and I think the Biden administration's dealing with now. 0:07:29.280 --> 0:07:30.160 You know, it's interesting. 0:07:30.200 --> 0:07:33.680 Despite a lot of rhetoric, the policies are starting to 0:07:33.720 --> 0:07:36.880 bend towards each other. It's hard to know the difference 0:07:36.880 --> 0:07:40.560 between the two let's call them candidates policies to tariffs, 0:07:40.760 --> 0:07:41.560 they're evaries. 0:07:41.720 --> 0:07:42.760 I'll talk about tariffs. 0:07:43.000 --> 0:07:46.720 So when you look at tariffs and you think about 0:07:46.840 --> 0:07:50.320 tariffs on things that we manufacture in the United States 0:07:50.560 --> 0:07:54.080 and we can sustain ourselves, I think it makes sense 0:07:54.120 --> 0:07:58.840 to tariff a country that is importing things in the United. 0:07:58.560 --> 0:08:01.040 States at a buli low cost. 0:08:01.480 --> 0:08:04.960 So we know that China has some real economic advantages. 0:08:05.040 --> 0:08:07.400 We know that they don't pay fair market labor. We 0:08:07.440 --> 0:08:09.360 know that they don't have a cost of capital. We 0:08:09.440 --> 0:08:13.240 know that they don't have environmental restrictions that US companies have, 0:08:13.680 --> 0:08:15.920 so we know they've got a competitive vantage. 0:08:15.920 --> 0:08:17.800 So if they're using that competitive. 0:08:17.400 --> 0:08:19.920 Vantage to dump products in the United States that we 0:08:20.040 --> 0:08:24.080 make and therefore they're displacing US manufacturers and US jobs, 0:08:24.320 --> 0:08:27.600 yes we should protect our border. On the flip side, 0:08:27.800 --> 0:08:31.880 if they are exporting and we are importing goods that 0:08:31.960 --> 0:08:34.080 we need that we do not make in the United 0:08:34.120 --> 0:08:37.720 States and there's no replacement for us in the United States, 0:08:37.760 --> 0:08:40.400 and we put a terrify on it, it basically becomes a 0:08:40.440 --> 0:08:42.600 consumption tax. You and I and all of us are 0:08:42.640 --> 0:08:45.160 going to buy those products. We're now just paying more 0:08:45.200 --> 0:08:46.120 for the same product. 0:08:46.440 --> 0:08:47.800 Do you think that we're going to see more of 0:08:47.840 --> 0:08:49.960 these walls go up, whether or not Biden or Trump 0:08:49.960 --> 0:08:52.040 get in the lighthouse next year, Like how high are 0:08:52.040 --> 0:08:52.520 we talking? 0:08:52.840 --> 0:08:55.839 You know, I think there's a thought right now that 0:08:55.960 --> 0:08:58.600 the walls should go higher. I think at some point 0:08:58.679 --> 0:09:01.640 there is diminishing re turns. You know, we've got a 0:09:01.640 --> 0:09:04.600 lot of historical data on putting tariffs in whether there 0:09:04.600 --> 0:09:09.080 were old steel tariffs on their other presence. When I 0:09:09.160 --> 0:09:10.679 was in the White House, we did a three oh 0:09:10.800 --> 0:09:13.760 one on washing machines, and if you look at the 0:09:13.800 --> 0:09:16.800 whole theory of what happened with washing machines, it's quite interesting. Yeah, 0:09:16.800 --> 0:09:18.800 we put teriffs on washing machines, but the prices of 0:09:18.880 --> 0:09:21.640 dryers went up equally with washing machines, because you know, 0:09:22.160 --> 0:09:25.160 the manufacturers think, well, people think washers and dryers cost 0:09:25.200 --> 0:09:26.920 the same thing, even one had even though one had 0:09:27.000 --> 0:09:29.960 terriffts on it and one didn't, you know, very inflationary 0:09:30.080 --> 0:09:32.280 to buy a washing machine and a dryer. Did it 0:09:32.440 --> 0:09:34.160 bring manufacturing back to the United States? 0:09:34.240 --> 0:09:34.920 Yes, it did. 0:09:35.000 --> 0:09:38.240 We brought the foreign manufacturers, you know, the LG's and 0:09:38.280 --> 0:09:40.640 the samsings that were that were importing in the United States. 0:09:40.720 --> 0:09:43.000 Did they open manufacturing United states, Yes they did. 0:09:43.440 --> 0:09:46.480 So we did create some jobs, but we really increased 0:09:46.520 --> 0:09:49.520 the price of the washing machine and the dryer. So 0:09:49.559 --> 0:09:52.040 there's a lot of historical data on what happens when 0:09:52.040 --> 0:09:52.520 you tariff. 0:09:52.559 --> 0:10:05.120 Bi WTI hovering around seventy nine dollars a barrel as 0:10:05.160 --> 0:10:09.000 traders await Ope's next move and inflation data. Meanwhile, on 0:10:09.040 --> 0:10:12.120 the other side, copper touching its highest level since twenty 0:10:12.280 --> 0:10:16.160 twenty two, fueled by forecasts of a global supply deficit. 0:10:16.480 --> 0:10:19.079 Jeff Curry of Carlisle joining US now and Jeff, that's 0:10:19.080 --> 0:10:22.640 where I want to start. Traditionally people focused on oil prices. 0:10:22.840 --> 0:10:25.520 Right now, what we're seeing is oil steadying. For seeing 0:10:25.520 --> 0:10:27.400 the rest of the oil, the rest of the commodity 0:10:27.440 --> 0:10:31.400 complex surging ahead, up some eight point two percent since 0:10:31.800 --> 0:10:33.280 the end of February. 0:10:33.679 --> 0:10:35.600 What makes for the divergence. 0:10:36.480 --> 0:10:38.400 Copper is the new oil. We put out a piece 0:10:38.440 --> 0:10:42.080 back in twenty twenty one. Now making these bullish arguments, 0:10:42.080 --> 0:10:43.880 and by the way, they haven't worked out. But I 0:10:43.920 --> 0:10:46.040 talk to a lot of people who will say copper 0:10:46.400 --> 0:10:47.760 is their highest conviction trade. 0:10:47.800 --> 0:10:50.319 I wear my copper bracelet right here. It is the 0:10:50.400 --> 0:10:52.120 highest conviction trade I've ever seen. 0:10:52.160 --> 0:10:57.280 If you've got decarbonization, green cap backs demand, AI, data 0:10:57.280 --> 0:11:01.760 center demand, military demand, it takes twelve, sometimes twenty six 0:11:01.880 --> 0:11:03.200 years to bring on new supply. 0:11:03.600 --> 0:11:05.480 You can't come up with a better story. 0:11:05.720 --> 0:11:08.400 But the bottom line, we've been telling this story for 0:11:08.480 --> 0:11:11.280 three years, and maybe now it's beginning to work. I'm 0:11:11.320 --> 0:11:14.360 confident that this time it's liftof and I think we're 0:11:14.360 --> 0:11:16.920 going to see more momentum behind it because you have 0:11:17.320 --> 0:11:21.480 three sources of demand this time around, meaning green cap X, 0:11:21.720 --> 0:11:25.480 AI plus military. Back in twenty twenty one, all we 0:11:25.520 --> 0:11:27.800 had was the green capex demand, and now it's. 0:11:27.600 --> 0:11:31.040 In full force. Supplies not there, Inventories are tight. 0:11:31.200 --> 0:11:33.920 Prices have more than doubled going back to March of 0:11:33.920 --> 0:11:36.800 twenty twenty and I'm looking right now, how far more 0:11:37.240 --> 0:11:39.160 is there to rally at a time where you're still 0:11:39.160 --> 0:11:40.440 wearing your copper bracelet. 0:11:41.840 --> 0:11:44.560 I think, you know, our target was fifteen thousand dollars 0:11:44.600 --> 0:11:46.800 a ton, when it's trading you know, just a little 0:11:46.800 --> 0:11:49.640 bit above ten thousand as of this morning, which means 0:11:49.640 --> 0:11:51.000 you know, it's got a long ways to go. 0:11:51.200 --> 0:11:53.959 Where do we come up with that fifteen thousand? It 0:11:54.000 --> 0:11:57.040 was the highest real price ever reached in nineteen sixty 0:11:57.080 --> 0:11:57.720 eight during. 0:11:57.600 --> 0:12:02.320 That housing boom. So we don't know where demand destruction occurs. 0:12:02.400 --> 0:12:04.960 All we do know is that bringing on new supply 0:12:05.120 --> 0:12:05.920 is very difficult. 0:12:06.040 --> 0:12:07.160 So we're going to learn. 0:12:07.160 --> 0:12:09.680 Where those price levels are where you begin to kick 0:12:09.679 --> 0:12:10.840 out demand. 0:12:10.840 --> 0:12:12.199 But I go back to the two. 0:12:12.040 --> 0:12:15.400 Thousands and that's bullish on oil then as I am 0:12:15.480 --> 0:12:18.640 copper today. You know, oil ended up going up from 0:12:18.679 --> 0:12:21.760 twenty to one hundred and forty seven times, so you know, 0:12:21.800 --> 0:12:25.480 the upside on copper think is very significant. 0:12:25.720 --> 0:12:27.960 We're seeing a lot of supply when it comes to 0:12:28.160 --> 0:12:31.840 countries outside of OPEC. Plus, Jeff, do you think that 0:12:31.920 --> 0:12:34.520 potentially we're on a bearish trajectory when it comes to 0:12:34.520 --> 0:12:36.280 the oil market for this year and next. 0:12:37.800 --> 0:12:38.560 Absolutely not. 0:12:38.760 --> 0:12:41.199 You know that one of the big sources of oil 0:12:41.280 --> 0:12:45.079 supply over the last eighteen months came from sanctioned countries, you. 0:12:45.040 --> 0:12:48.600 Know, Venezuela, Iran, Russia. 0:12:49.000 --> 0:12:52.280 Yes, they've attacked these these sanctions and clapped down, but 0:12:52.320 --> 0:12:54.960 they don't come into effect until after the election one 0:12:55.040 --> 0:12:57.560 hundred and eighty days from now. So that's been one 0:12:57.559 --> 0:13:00.040 of the big drivers and also an energy to I 0:13:00.040 --> 0:13:03.200 don't forget the massive surge in coal production that occurred 0:13:03.240 --> 0:13:06.840 in China, Indonesia, and India over that same time period. 0:13:06.880 --> 0:13:09.080 So there's a lot of energy in the system that 0:13:09.120 --> 0:13:12.000 has backed up that needs to be eaten through. When 0:13:12.000 --> 0:13:14.800 we think about the underlying demand, you know, it's not 0:13:14.960 --> 0:13:16.439 spectacular like it is in. 0:13:16.440 --> 0:13:18.280 Copper, but it's rock solid. 0:13:18.320 --> 0:13:21.480 You know, it's well above long term average growth rates. 0:13:21.600 --> 0:13:23.640 You're going into the gasoline. 0:13:23.120 --> 0:13:26.120 Driving season jet fuel and by the way, I remember, 0:13:26.200 --> 0:13:28.760 global warming means your cooling season is going to create 0:13:28.800 --> 0:13:32.080 more demand. In the past, we didn't build inventory, so 0:13:32.400 --> 0:13:35.680 that three Q bowl story is still very much intact 0:13:35.800 --> 0:13:39.600 driven by fundamentals, even without any geopolitical risk price team. 0:13:39.880 --> 0:13:41.920 Also on oil, I want to note that when we 0:13:41.920 --> 0:13:45.239 look at positioning, it's down to the fourteen percentile. 0:13:45.440 --> 0:13:45.640 Now. 0:13:45.800 --> 0:13:49.960 This market is basically no long positioning in it right now, 0:13:50.280 --> 0:13:53.320 and we're still sitting at eighty three eighty four dollars 0:13:53.320 --> 0:13:56.400 a barrow, which is a testament to the underlying strength. 0:13:56.120 --> 0:13:56.280 You know. 0:13:56.440 --> 0:13:59.400 Putting it all together, I want to emphasize commodities are 0:13:59.440 --> 0:14:02.400 still the best performing an asset class despite the pullback 0:14:02.440 --> 0:14:03.560 in oil prices. 0:14:04.040 --> 0:14:06.280 Jeff, let's talk about gold for a moment. I'm not 0:14:06.360 --> 0:14:09.360 wearing any gold that I can hold up. But it's 0:14:09.360 --> 0:14:13.280 a time where investors can get real yields in short 0:14:13.360 --> 0:14:14.960 term parts of the market. 0:14:15.559 --> 0:14:17.480 Why are gold prices still. 0:14:17.200 --> 0:14:20.280 Going up and how much of that is activity by 0:14:20.280 --> 0:14:21.760 the central bankers. 0:14:22.360 --> 0:14:26.440 Well, I think a big difference between this commodity rally 0:14:27.000 --> 0:14:29.960 and any other commodity rally most any human being alive. 0:14:29.720 --> 0:14:33.160 Has ever seen before is it's not accompanied. 0:14:32.520 --> 0:14:37.560 With dollar resigning. I meaning think about the petro dollar system. 0:14:37.760 --> 0:14:41.640 Oil prices go up, Saudi Arabia accumulates more dollars, they 0:14:41.720 --> 0:14:45.440 plow it into US treasuries, puts downward pressure on rates. 0:14:45.760 --> 0:14:49.200 Dollar begins to weaken, which reinforces the reflation, and it 0:14:49.280 --> 0:14:53.480 becomes a virtuous cycle between oil prices and the dollar, 0:14:53.560 --> 0:14:55.480 reinforcing higher commodity prices. 0:14:55.680 --> 0:14:57.160 That's not playing out this time. 0:14:57.560 --> 0:15:01.320 Why because many of the bricks country back in November 0:15:01.320 --> 0:15:04.440 of last year, decided to start to trade with one 0:15:04.440 --> 0:15:09.240 another using local currencies and then settle the differences in gold. 0:15:09.400 --> 0:15:11.280 So what we've replaced. 0:15:10.840 --> 0:15:16.240 Dollar recycling with is gold recycling, and that has created 0:15:16.280 --> 0:15:19.840 this upticking gold despite a stronger dollar. Normally, you would 0:15:19.880 --> 0:15:22.400 look at the fundamentals today and you would go, oh, 0:15:22.720 --> 0:15:26.000 gold should be going down, real rates are higher, dollars stronger. 0:15:26.200 --> 0:15:28.680 Those are all the dynamics that put down where pressure 0:15:28.720 --> 0:15:30.520 on gold. Instead, gold's going up. 0:15:30.800 --> 0:15:33.600 What's driving it is that strong demand coming out of 0:15:33.600 --> 0:15:38.320 these emerging markets where they're now recycling into gold as 0:15:38.320 --> 0:15:42.000 opposed to US treasuries creating that dollar recycling theme. So 0:15:42.280 --> 0:15:44.720 this still things still has more lights to it. You know, 0:15:45.200 --> 0:15:47.680 we see more upside in gold prices from here. 0:15:47.760 --> 0:15:49.800 I guess, Jeff, what we're trying to get at is 0:15:49.840 --> 0:15:52.560 there some stories that people have been banding about all year, 0:15:52.640 --> 0:15:54.880 whether it's the ev transition or some of the great 0:15:54.960 --> 0:15:58.040 buildout that's going to require more copper usage, whether it's 0:15:58.080 --> 0:16:01.120 some of the central banks shifting more to why do 0:16:01.200 --> 0:16:01.920 they have so. 0:16:01.960 --> 0:16:03.080 Much further to go? 0:16:03.200 --> 0:16:05.880 If it's a lot being priced in and speculators coming 0:16:05.880 --> 0:16:07.680 in and trying to get ahead of them and putting 0:16:07.720 --> 0:16:10.000 it up even further, what gives you a sense that 0:16:10.040 --> 0:16:12.680 there could be a catalyst for another leg higher in 0:16:12.720 --> 0:16:13.760 the near term. 0:16:14.440 --> 0:16:18.800 Because you need to destroy demand right now. You're running 0:16:18.840 --> 0:16:19.760 on fumes of. 0:16:19.880 --> 0:16:24.560 Very low inventories, particularly of copper. You have no way 0:16:24.600 --> 0:16:25.840 to bring on new to supply. 0:16:26.440 --> 0:16:28.000 Once you're rout, when. 0:16:27.840 --> 0:16:30.320 Prices began to spike, they got a spike high enough 0:16:30.360 --> 0:16:32.720 to bring demand back in line with supply. That's we're 0:16:32.720 --> 0:16:37.720 going to find out where that elasticity of demand really exists. 0:16:37.880 --> 0:16:38.680 The only one way you. 0:16:38.680 --> 0:16:41.520 Can ever observe is going back to the nineteen sixties, 0:16:41.800 --> 0:16:43.920 which suggests maybe it's fifteen. 0:16:43.520 --> 0:16:46.680 Thousand, but we really don't know. We're going to find out. 0:16:46.720 --> 0:16:50.280 We didn't find out in the two thousands bull market 0:16:50.320 --> 0:16:53.320 because China was never forced into a situation where it 0:16:53.360 --> 0:16:55.680 had to consume and you had to ration demand out. 0:16:55.800 --> 0:16:58.760 That's why we peeked out in that ten thousand dollars 0:16:59.160 --> 0:17:02.880 ton range to where we are right now. So going forward, 0:17:03.200 --> 0:17:06.560 no inventory, remember really strong demand from all those sources 0:17:06.600 --> 0:17:08.560 you talked about, There's not enough to go around. 0:17:08.880 --> 0:17:10.440 Somebody's going to have to drop. 0:17:10.320 --> 0:17:12.480 Out, and that's where we're going to find out where 0:17:12.520 --> 0:17:15.159 the high the high print is on this market. 0:17:15.320 --> 0:17:16.840 Jeff, if I could just go back to your answer 0:17:16.840 --> 0:17:18.760 earlier on the oil market, and you see this very 0:17:18.800 --> 0:17:21.760 bullish market happening, and you see potentially we're not even 0:17:21.800 --> 0:17:24.800 at peak driving season. If we do see gasoline prices 0:17:24.840 --> 0:17:27.879 in the United States go pass four dollars a gallon. 0:17:27.920 --> 0:17:32.160 Are you expecting the US to tap the spr. 0:17:31.760 --> 0:17:34.440 Yeah, there's a lot of other levers that can pull 0:17:34.520 --> 0:17:36.760 to put downward pressure on oil prices. 0:17:36.960 --> 0:17:39.160 That's why, you know, I'm far more bullish on. 0:17:39.680 --> 0:17:43.760 Base metals copper than I am on oil, particularly until 0:17:43.800 --> 0:17:46.159 you get after the election. Because you know, when you 0:17:46.240 --> 0:17:51.840 look at what drives elections, what drives the populace focus, 0:17:52.280 --> 0:17:56.520 it is the economy and inflation. So keeping oil prices 0:17:56.520 --> 0:18:00.159 and gasoline prices under wraps over the course of the 0:18:00.200 --> 0:18:02.320 next six months I think is going to be critical 0:18:02.359 --> 0:18:05.320 to the administration and the government. And we've seen this 0:18:05.400 --> 0:18:08.280 play out election after election, so I can't see why 0:18:08.280 --> 0:18:10.600 this one would be any different. What is that limit 0:18:10.720 --> 0:18:12.560 you know on the oil means you can get up 0:18:12.560 --> 0:18:14.760 into the high nineties. Maybe you know, you could toppo 0:18:14.840 --> 0:18:17.359 over one hundred or something like that in the midst 0:18:17.359 --> 0:18:20.960 of the cooling season, but you know, would it be lasting. No, 0:18:21.080 --> 0:18:25.040 it's not like the underlying copper story where it doesn't 0:18:25.080 --> 0:18:28.480 really impact the underlying inflation. Now you throw in something 0:18:28.600 --> 0:18:31.440 like a you know, some surprise problem in the Middle 0:18:31.480 --> 0:18:34.240 East or something like that that could open up the upside. 0:18:34.280 --> 0:18:36.840 But I think you know, you're you're going to see 0:18:37.040 --> 0:18:40.000 governments around the world doing everything they can to fight this. 0:18:40.119 --> 0:18:42.119 In One of the ways is you know, turning a 0:18:42.160 --> 0:18:45.680 blind eye to you know, sanctioned oil, sanctioned. 0:18:45.200 --> 0:18:48.360 Products, you know. So there's a lot of methods. 0:18:47.920 --> 0:18:51.040 Other than tapping the spr that can be used to 0:18:51.320 --> 0:18:52.520 you know. 0:18:52.280 --> 0:18:54.400 Also relaxing environmental regulations. 0:18:54.440 --> 0:18:56.160 We've seen them use that in the past as well, 0:18:56.200 --> 0:18:58.280 So there's lots of tools at their disposal. 0:18:58.560 --> 0:19:01.480