WEBVTT - Surveillance: Pipeline Hack With Amrita Sen 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.040 and of course on the Bloomberg Terminal. Right now, in 0:00:30.080 --> 0:00:32.800 Oil with a global view on what we've witnessed with 0:00:32.880 --> 0:00:35.559 cyber attacks in the United States, Amrita send joins US 0:00:35.960 --> 0:00:40.680 Energy Aspects Director of Research in chief Oil Analysts Emery Day. 0:00:40.680 --> 0:00:44.680 If as you look at the distribution of hydro carbons worldwide, 0:00:45.240 --> 0:00:51.440 how vulnerable are they to a cyber attack? Well, in 0:00:51.560 --> 0:00:55.680 great question, I would say pretty much everywhere. More and more, 0:00:55.720 --> 0:00:58.560 I think everybody is. I mean, the Colonial pipeline is 0:00:58.840 --> 0:01:01.520 a great example, but look at the Middleast, a lot 0:01:01.560 --> 0:01:05.319 of even up kick to that matter, there were elements 0:01:05.760 --> 0:01:09.000 um of kind of cyber attacks involved in that, but 0:01:09.080 --> 0:01:12.120 even more recently within the Middle East you do get 0:01:12.160 --> 0:01:17.440 a lot of infrastructure um, not necessarily disruptions, but targets 0:01:18.000 --> 0:01:19.959 um And I think this is just the new normal. 0:01:20.240 --> 0:01:23.200 There are more and more companies spending on this and 0:01:23.319 --> 0:01:25.360 it just needs to get higher from here, because you 0:01:25.400 --> 0:01:29.520 know it's not the warfedge generally is changing. The landscapes 0:01:29.560 --> 0:01:32.760 completely changed. I mean in Malaysia they're they're doing a 0:01:32.840 --> 0:01:36.920 twenty four mile thirty mile key pipeline having to do 0:01:37.000 --> 0:01:39.240 with the distribution. I believe it's up the west coast 0:01:39.280 --> 0:01:42.679 of Malaysia. How many spots do you perceive to be 0:01:42.880 --> 0:01:47.440 out there like the colonial pipeline worldwide? Is it ten 0:01:47.480 --> 0:01:52.360 other hot spots or is it hundreds? It's gonna be hundreds, 0:01:52.400 --> 0:01:54.520 because if you think about the distribution, I mean, if 0:01:54.720 --> 0:01:57.720 if you're really going down that route, you're talking about 0:01:57.880 --> 0:02:02.120 a huge distribution or pipeline net works within China, within India, 0:02:02.160 --> 0:02:04.840 even Europe. Europe has a huge network both for crew 0:02:04.880 --> 0:02:08.000 down for products. Looking more broadly then and racon when 0:02:08.000 --> 0:02:09.760 way to talk to any one of the commodity market. 0:02:09.919 --> 0:02:13.280 Right now, they're not concerned about this colonial pipeline shut down. 0:02:13.320 --> 0:02:15.520 There's just a belief that will adjust, it will come 0:02:15.520 --> 0:02:17.840 back online and will get back to normal. Any aspects 0:02:17.840 --> 0:02:21.960 of the infrastructure, the distribution in America, the transportation of 0:02:22.080 --> 0:02:27.120 energy that you would be concerned about, No, I mean 0:02:27.160 --> 0:02:29.520 not right now, and not the scale at which this 0:02:29.560 --> 0:02:32.520 attack has happened. I do agree with what you just said. 0:02:32.520 --> 0:02:35.520 I think the pipeline and just generally everything should be 0:02:35.520 --> 0:02:38.160 back up and running in about three to five days. 0:02:38.240 --> 0:02:41.080 But you don't never say never. This is it's definitely 0:02:41.160 --> 0:02:44.639 unprecedented in the scale at at which is happening, So 0:02:45.320 --> 0:02:49.240 it will require coordination from various government bodies and that 0:02:49.320 --> 0:02:52.320 can take some time. Um. I don't think there's going 0:02:52.360 --> 0:02:53.880 to be more and I think after this attack, I 0:02:54.200 --> 0:02:57.640 do think a lot of US networks natural gas as well. 0:02:57.720 --> 0:03:00.440 Let's not forget that they will probably tight and up 0:03:00.520 --> 0:03:03.359 what they can do to protect their networks going forward. 0:03:03.400 --> 0:03:05.000 I'm ready to coming forward from here build on the 0:03:05.000 --> 0:03:07.160 other issues surrounding the old market. Right now, we've talked 0:03:07.160 --> 0:03:09.520 a ton about supply, let's talk about it a little 0:03:09.520 --> 0:03:12.240 bit more out if Iran can we open things up 0:03:12.240 --> 0:03:14.320 a little bit more. What the negotiations look like. If 0:03:14.360 --> 0:03:16.840 you said twelve eighteen months ago that we'd have a 0:03:16.840 --> 0:03:20.720 president Joe Biden, a democratic sweep, we'd be talking potentially 0:03:20.760 --> 0:03:23.320 about loosening things up with Iran, and we still having 0:03:23.360 --> 0:03:27.919 that discussion. Yeah, we are, and you know we've always 0:03:27.960 --> 0:03:30.760 said that we're expecting some kind of a breakthrough over 0:03:31.160 --> 0:03:33.680 kind of April and May and then sanctions relieved by July. 0:03:33.840 --> 0:03:37.160 I will say, however, talks are progressing, but progressing probably 0:03:37.160 --> 0:03:41.200 a bit slower than we've been expecting. No, no major changes. 0:03:41.280 --> 0:03:43.760 But the thing I will warn is that everybody is 0:03:43.800 --> 0:03:46.960 expecting a deal in the coming weeks and then sanctions 0:03:46.960 --> 0:03:50.760 relief over Q three UM. But if there isn't a 0:03:50.800 --> 0:03:53.320 deal before they are in an elections, which are next month, 0:03:53.720 --> 0:03:56.440 that's the thing to watch out for because then it 0:03:56.520 --> 0:03:59.680 could get dragged on and then the deal becomes a 0:04:00.240 --> 0:04:02.560 twenty two story. I don't think that's in the price 0:04:02.600 --> 0:04:06.040 at all. What is the link em right up that 0:04:06.200 --> 0:04:09.480 you see between oil is a huge weighting of c 0:04:09.760 --> 0:04:13.840 RB or the Bloomberg Commodity Index with all the other commodities. 0:04:13.920 --> 0:04:18.359 They don't trade and lack step do they No, not 0:04:18.480 --> 0:04:20.240 at all. And I mean if you you guys were 0:04:20.240 --> 0:04:22.400 saying as well, just s and B it recordized. But 0:04:22.400 --> 0:04:25.360 if you look at metals, metals markets are soaring, and 0:04:25.400 --> 0:04:28.160 you know oil oil has been a very strong performance 0:04:28.160 --> 0:04:32.000 this year, but still hasn't been um as a strong 0:04:32.040 --> 0:04:34.719 as some of the other commodities and part of that 0:04:34.880 --> 0:04:38.279 is because you know, transportation was the worst hit during COVID. 0:04:38.520 --> 0:04:41.080 It is coming back, but it's not fully back yet. 0:04:41.400 --> 0:04:44.320 But there's also so much kind of talks around working 0:04:44.360 --> 0:04:46.360 from home, how much are we going to lose permanently 0:04:46.360 --> 0:04:48.160 for oil demand? But I mean, I will say, there's 0:04:48.160 --> 0:04:51.839 all the data we're getting right now. Personal incomes are 0:04:51.960 --> 0:04:54.359 back at pre COVID levels, and many many parts of 0:04:54.360 --> 0:04:56.719 the world. I think the summer is going to be huge. 0:04:56.800 --> 0:04:59.080 People are going to spend, and the bounce back in 0:04:59.160 --> 0:05:02.240 oil demand it's probably going to be significantly more than 0:05:02.279 --> 0:05:04.680 people have been expecting. That is the line that Jeff 0:05:04.680 --> 0:05:06.720 carry A government is pushing too. I'm Reachel, it sounds 0:05:06.720 --> 0:05:08.160 like you're on the same page. It's gonna hear from you. 0:05:08.200 --> 0:05:16.799 I'm ready to send their energy aspects. We're talking about 0:05:16.800 --> 0:05:20.000 this huge environmental transition on top of a demand boom. 0:05:20.040 --> 0:05:22.960 Two pins some of that as well. So the traditional 0:05:23.000 --> 0:05:25.359 sychnical rate that you might get from copper it's a 0:05:25.400 --> 0:05:28.480 little bit distorted this time around, given the political environment 0:05:28.480 --> 0:05:30.600 that we're in at the moment. The clear message of 0:05:30.640 --> 0:05:33.200 two thousand twenty one being different from two thousand two 0:05:33.240 --> 0:05:36.320 from Mr curry at Golden Saxon. That has always been 0:05:36.360 --> 0:05:39.480 a consistent theme with Ian Bremer of Eurasia Group, whose 0:05:39.480 --> 0:05:42.200 books are too many to mention. I can pick one 0:05:42.240 --> 0:05:44.120 of them, one of their titles and say it is 0:05:44.160 --> 0:05:47.480 also about this moment. We welcome Dr Bremer this morning 0:05:47.760 --> 0:05:51.440 as we speak of every nation for itself. Dr Bremmer, 0:05:51.520 --> 0:05:57.200 once again, food dynamics. Rice in Cambodia really matters rice 0:05:57.360 --> 0:06:00.800 in America less. So what does the food dynamic that 0:06:00.920 --> 0:06:05.240 you observe a this commodity lift. It just tells me 0:06:05.680 --> 0:06:09.440 that the gap between rich and four countries on the 0:06:09.480 --> 0:06:13.120 back of the pandemic and the rebound from the pandemic 0:06:13.560 --> 0:06:18.360 is being felt so so greatly differently. Um, you know 0:06:18.640 --> 0:06:23.440 this is UH that you already have UH before the pandemic. 0:06:23.520 --> 0:06:26.360 Yet about a quarter, for example, of everyone in Yemen 0:06:26.480 --> 0:06:28.840 being food stressed, not being able to have enough to eat, 0:06:29.080 --> 0:06:32.640 and Sudan numbers are similar. Those numbers are doubling on 0:06:32.760 --> 0:06:35.479 the back of the pandemic right now. One of the 0:06:35.600 --> 0:06:39.480 one of the most disheartening statistics that was indirect from 0:06:39.520 --> 0:06:42.400 the pandemic was the fact that we had an increase 0:06:42.400 --> 0:06:46.080 of fifty million of extreme four people around the world. 0:06:46.160 --> 0:06:48.760 The first time that number has gone up UM in 0:06:49.000 --> 0:06:52.479 well over uh in generations. It's like forty years since 0:06:52.480 --> 0:06:55.720 that numbers increased year on year. That's that's that's you know, 0:06:56.279 --> 0:06:59.200 that means food insecurity, that's first and foremost the most 0:06:59.240 --> 0:07:01.720 important things to be that kid. And you're gonna see 0:07:01.720 --> 0:07:03.360 that play out in so many of these contries with 0:07:03.480 --> 0:07:05.880 these prices have gone up and the people, the governments 0:07:05.880 --> 0:07:09.400 don't have any capacity to provide support. And I'm sure 0:07:09.400 --> 0:07:12.760 you saw Arama Chander Gua's magnificent essay and the ft 0:07:12.920 --> 0:07:15.840 I'm gonna say ten days ago about the collapse of 0:07:15.960 --> 0:07:18.560 his India. Do you eurise your group? Look at this 0:07:18.640 --> 0:07:23.240 pandemic and the horrific news from India is being politically 0:07:23.640 --> 0:07:29.240 and your Aisia group destabilizing for the region. Um, It's 0:07:29.320 --> 0:07:33.679 it's not destabilizing inside India. You know on India's Prime 0:07:33.680 --> 0:07:39.280 Minister Modi, despite having incredibly badly mishandled the last wave 0:07:39.400 --> 0:07:44.160 of this crisis, um is still um. You know, the 0:07:44.200 --> 0:07:47.200 popularity base that he had was higher coming in that 0:07:47.360 --> 0:07:49.720 of any other major leader. So he has a long 0:07:49.760 --> 0:07:53.000 way to go Before you talk about domestic instability domestic 0:07:53.760 --> 0:07:56.840 opposition would have a long way to strengthen before they 0:07:56.880 --> 0:08:00.400 could be cohesive and and really pose a chat olenge 0:08:00.440 --> 0:08:03.640 to him. But but there's no question that when you 0:08:03.680 --> 0:08:07.480 see the India variant spreading as much as it is 0:08:07.720 --> 0:08:11.080 across Southeast Asia. Now, when you see the fact that 0:08:11.120 --> 0:08:15.320 the Indians, who have been the largest producers of vaccines 0:08:15.440 --> 0:08:19.240 around the world, and now they have massive shortages inside 0:08:19.240 --> 0:08:23.120 their own country, they've had to suspend all export. Most 0:08:23.200 --> 0:08:27.040 of that export was going to other countries in the region. 0:08:27.400 --> 0:08:31.960 So this is now where the broader epicenter of coronavirus 0:08:32.000 --> 0:08:35.240 crisis is. It's India, but it's also South and Southeast Asia. 0:08:35.480 --> 0:08:37.320 It's also the region that's going to have some of 0:08:37.360 --> 0:08:41.520 the least capacity to actually fight it. And and by 0:08:41.559 --> 0:08:45.200 the way, um, the the India based and Chinese based 0:08:45.280 --> 0:08:47.960 vaccines aren't as effective as the m R and A vaccines. 0:08:47.960 --> 0:08:51.720 And I saw some extremely disturbing UH news. I don't 0:08:51.720 --> 0:08:54.720 know if you noticed this from the Seychells say Shells 0:08:54.760 --> 0:08:57.720 has had more vaccine rollout than any other country in 0:08:57.760 --> 0:09:01.280 the world for their small population. They now also have 0:09:02.000 --> 0:09:06.199 more human to humans spread per capita in cases new 0:09:06.240 --> 0:09:11.240 cases than India. That's astonishing, and that's because most of 0:09:11.240 --> 0:09:15.480 the vaccines are are coming from coming from China and 0:09:15.520 --> 0:09:18.480 they don't have the efficacy in stopping spread. That's again 0:09:18.559 --> 0:09:22.360 a serious problem for the developing world right now, largely 0:09:22.480 --> 0:09:25.880 isn't about Madearna Advisor, which is much more efficacy. So yeah, 0:09:26.120 --> 0:09:28.400 I'm actually quite worried about what this is gonna look 0:09:28.440 --> 0:09:30.120 like over the coming month. How the West can have 0:09:30.320 --> 0:09:32.040 that's the big question right now, and I've got to 0:09:32.040 --> 0:09:33.880 say the answer to that question is so in some 0:09:33.880 --> 0:09:36.440 real division between Europe and the United States at the moment, 0:09:36.679 --> 0:09:39.600 the US, as you know, in trying to suspend IP 0:09:39.600 --> 0:09:41.520 protection at least trying to push that issue through the 0:09:41.679 --> 0:09:44.160 w c O, and then you've got Europe turning around 0:09:44.160 --> 0:09:46.079 and saying, well, we don't think that's going to help. 0:09:46.240 --> 0:09:49.360 Germany is looking at the United States for holding vaccines 0:09:49.360 --> 0:09:51.160 and not exporting them. What did you make of the 0:09:51.240 --> 0:09:54.280 U S decision last week? And without bringing the allies 0:09:54.320 --> 0:09:56.800 on board, because this is playing out quite publicly, and 0:09:56.800 --> 0:09:59.360 it did so through the weekend. Yeah, this is playing 0:09:59.360 --> 0:10:01.640 out publicly. But you know the funny thing, first of all, 0:10:01.720 --> 0:10:04.440 I mean the German response, um that this is not 0:10:04.520 --> 0:10:06.560 the way to actually provide help in the near term. 0:10:06.760 --> 0:10:08.680 That's true. I mean it would take a very long time. 0:10:08.679 --> 0:10:10.800 We're talking about not just weeks or months with his 0:10:11.000 --> 0:10:13.760 urgent need right now, but but a year or more 0:10:14.320 --> 0:10:17.040 to get the kind of manufacturing capacity that would be 0:10:17.080 --> 0:10:19.600 aligned with just opening up the patent. So it's it's 0:10:19.640 --> 0:10:23.720 important symbolically um for a lot of progressives in the 0:10:23.760 --> 0:10:27.080 Democratic Party, and Biden will will benefit from that. But 0:10:27.160 --> 0:10:29.160 this isn't what's going to move the needle for the 0:10:29.200 --> 0:10:32.520 problem that we just talked about. The big issue is 0:10:32.559 --> 0:10:35.840 that here's a Biden administration trying to do the right 0:10:35.920 --> 0:10:40.400 thing and not coordinating with allies in advance. That's the mistake. 0:10:40.400 --> 0:10:43.960 It feels just like the announcement to leave Afghanistan. I mean, 0:10:44.000 --> 0:10:47.040 when your allies are absolutely critical, you shouldn't be in 0:10:47.080 --> 0:10:50.200 a position where the German government, where the EU is 0:10:50.240 --> 0:10:54.560 caught blindsided by you saying you're gonna suspend IP protection. 0:10:54.800 --> 0:10:57.880 The Americans in talking about helping the rest of the 0:10:57.920 --> 0:11:01.760 world in terms of this endemic, we need to be 0:11:01.840 --> 0:11:05.240 talking in advance of our announcements with all of the 0:11:05.320 --> 0:11:07.960 key allies. It's such an easy thing to do. The 0:11:08.000 --> 0:11:10.760 Biden team should be good at this. This is where 0:11:10.760 --> 0:11:16.680 they're following. Um. I think because they're used to do. 0:11:16.800 --> 0:11:19.520 These are experienced men and women that have been around 0:11:19.600 --> 0:11:24.120 foreign policy establishment for decades and for them, UM, you know, 0:11:24.240 --> 0:11:27.520 multilateralism means the United States does the right thing and 0:11:27.520 --> 0:11:30.959 other allies just go along with us. It doesn't mean 0:11:31.000 --> 0:11:33.800 that we actually might be wrong or might have to compromise. 0:11:34.080 --> 0:11:36.880 Because we've been a position of such strength and because 0:11:36.920 --> 0:11:40.240 the alliance itself has been so much more cohesive. That's 0:11:40.280 --> 0:11:42.760 not as true today. Part of that has been four 0:11:42.840 --> 0:11:44.959 years in the Trump administration, but part of that is 0:11:45.000 --> 0:11:47.839 just Europe itself is moving in a different direction. There. 0:11:47.880 --> 0:11:51.199 Their feeling of their social contract, their feeling of the 0:11:51.480 --> 0:11:55.880 effectiveness of their representative democracy, UM, just is different than 0:11:55.960 --> 0:11:57.880 that of the United States right now, and I think 0:11:57.880 --> 0:12:00.839 we're living that experience a firm or your top risks 0:12:00.920 --> 0:12:03.400 of two thousand twenty one, you have been out front 0:12:03.440 --> 0:12:06.240 and saying we have to pay attention to cyber. You 0:12:06.320 --> 0:12:10.080 talk about a cyber tipping point in January, and here 0:12:10.080 --> 0:12:13.040 we are talking about it for real with this pipeline 0:12:13.080 --> 0:12:16.440 across the nation. Give us an update on the tipping point, 0:12:16.520 --> 0:12:19.600 you see. Yeah, I mean the funny thing is, I 0:12:19.640 --> 0:12:22.480 don't think the tipping point is between the US and Russia, 0:12:22.640 --> 0:12:25.640 between the US and China, because there is a level 0:12:25.720 --> 0:12:30.040 of deterrence on cyber attacks between those countries. We do 0:12:30.200 --> 0:12:34.240 espionage against them, they do espionage against us. We use 0:12:34.320 --> 0:12:36.480 the data in ways that are useful for US, but 0:12:36.559 --> 0:12:39.000 we don't break things. We don't go in and and 0:12:39.040 --> 0:12:42.000 destroy critical infrastructure. We don't take the kind of actions 0:12:42.040 --> 0:12:46.600 that could precipitate a kinetic response a hot war where 0:12:47.040 --> 0:12:50.120 when you the problem is unlike news where you had 0:12:50.160 --> 0:12:52.640 that nuclear balance, but those were only the the only 0:12:52.679 --> 0:12:56.200 countries that had that capacity in the Cold War. Um 0:12:56.240 --> 0:12:59.800 in the case of cyber you know, we stop the 0:13:00.080 --> 0:13:03.000 audience from developing News were trying to get back into 0:13:03.000 --> 0:13:04.920 a deal to do that. We haven't stopped them from 0:13:04.920 --> 0:13:08.319 developing some of the world's most effective offensive cyber capabilities. 0:13:08.600 --> 0:13:12.760 Criminal networks in Russia and Eastern Europe, in the United States, 0:13:12.800 --> 0:13:19.440 around the world have incredibly sophisticated cyber capacity to destroy things. 0:13:19.840 --> 0:13:23.920 And we see that with the smash and grab both 0:13:24.040 --> 0:13:28.280 on the data of this critical pipeline over the weekend, 0:13:28.920 --> 0:13:32.439 but also in the in the the ransomware attack to 0:13:32.559 --> 0:13:36.200 shut them down. UM, and you know, we just don't 0:13:36.240 --> 0:13:40.800 have cyber defenses to deal with this. I was I've 0:13:41.000 --> 0:13:44.079 particularly worried that they were going to shut down hospitals 0:13:44.600 --> 0:13:47.160 UM in the middle of vaccine rollout. You know, in 0:13:47.160 --> 0:13:49.520 the early days, that was something they were clearly capable 0:13:49.559 --> 0:13:52.600 of doing, these these criminal networks, and thankfully for us, 0:13:52.640 --> 0:13:57.360 they didn't. But the vulnerabilities massive and it's gonna catch 0:13:58.679 --> 0:14:06.360 he writes, A great president and found a let's brink in. 0:14:06.440 --> 0:14:08.840 Jared woods Champ, we thank for America Securities, Head of 0:14:08.920 --> 0:14:11.920 Research Investment Committee. Can we just start with the supply 0:14:12.080 --> 0:14:15.440 side at the moment, Jared, whether it's the Colonial pipeline 0:14:15.440 --> 0:14:17.920 and the issues there, we can solve them with higher prices. 0:14:17.960 --> 0:14:20.520 If you want to import some gasoline from Europe, if 0:14:20.560 --> 0:14:23.320 it's the labor market shortage, you can hire, put up wages. 0:14:23.560 --> 0:14:25.560 What do you see in that dynamic on the supply side. 0:14:25.560 --> 0:14:29.520 Can it all be addressed with higher prices? Well, some 0:14:29.600 --> 0:14:31.160 of it can be addressed, not all of it. I 0:14:31.160 --> 0:14:33.440 mean semi conductors is the big one. I think that's 0:14:33.760 --> 0:14:37.520 that's an affected even the labor market possibly, uh in 0:14:37.840 --> 0:14:40.200 that latest report, and something is going to take a 0:14:40.240 --> 0:14:42.520 little while to sort out as far as we can tell. UM. 0:14:42.560 --> 0:14:45.600 But it's also not, you know, a sort of catastrophe. 0:14:46.000 --> 0:14:48.600 But most of the big headlines, whether it's in commodities 0:14:48.880 --> 0:14:51.520 or or in labor, we think can be addressed with 0:14:51.640 --> 0:14:55.400 higher prices, higher wages UM. And you know, it's it's 0:14:55.560 --> 0:14:58.920 uh kind of a two period market. I think everyone's 0:14:58.960 --> 0:15:01.320 ready and I think proper should be strapped in for 0:15:01.480 --> 0:15:03.800 what could be very wild summer. But if we look 0:15:03.840 --> 0:15:06.200 ahead six months, we looked at the end of the year, UM, 0:15:06.240 --> 0:15:10.800 we expect fairly normal conditions, even inflation back down to 0:15:11.000 --> 0:15:14.000 levels that were more consistent with what we saw before 0:15:14.040 --> 0:15:17.720 the pandemic. Sign on bonuses transitory, JAREDS. You've made this 0:15:17.760 --> 0:15:20.280 point that the conversation Tom and I were having early 0:15:20.320 --> 0:15:23.400 this morning ten minutes ago on the labor market, Steve 0:15:23.440 --> 0:15:27.600 Fault offering an appreciation bonus UBS for certain bankers getting 0:15:27.600 --> 0:15:30.280 a bonus if they get a promotion. That is all 0:15:30.360 --> 0:15:33.120 discretion were spending, Jared, in terms of just the extra bonus. 0:15:33.120 --> 0:15:35.560 It's not base salary. And Jared, I just wonder from 0:15:35.560 --> 0:15:37.560 your perspective whether that plays into the fed's hands a 0:15:37.560 --> 0:15:39.760 little bit on the labor market that on either end 0:15:39.760 --> 0:15:42.640 of the waste spectrum, we're talking about bonuses and we're 0:15:42.680 --> 0:15:46.280 not talking about higher base. Yeah, that's this is exactly 0:15:46.280 --> 0:15:48.640 what the third wants. I think if if you're if 0:15:48.640 --> 0:15:52.200 you're worried about long term wage price spiral, I think 0:15:52.240 --> 0:15:54.720 I think you you can relax a little bit here 0:15:54.760 --> 0:15:56.920 because assigning bonus is not a raise. You know, whether 0:15:56.960 --> 0:15:59.480 it's fifty dollars to show up for McDonald's you know, 0:15:59.560 --> 0:16:04.400 job and review or yeah then I mean or at 0:16:04.440 --> 0:16:06.280 the high end, these higher bonuses at the high end, 0:16:06.280 --> 0:16:09.240 these are not permanent salary increases. If they were, that's 0:16:09.240 --> 0:16:11.480 a different conversation. But so far there's no evidence of 0:16:11.520 --> 0:16:16.280 anything persistent because employers and workers both understand that. Again, 0:16:16.360 --> 0:16:18.560 six and nine months from now, things are probably gonna 0:16:18.560 --> 0:16:21.800 be a lot more uh normal than we expect. Yeah, John, 0:16:21.800 --> 0:16:23.560 it was great. All from New Jersey sent me a 0:16:23.600 --> 0:16:26.480 fifty dollar check and said, sure there's change liftover. How 0:16:26.520 --> 0:16:29.040 did you count on McDonald's. I don't know. It was great. 0:16:29.680 --> 0:16:32.200 There were two value meal and you know what coffee? 0:16:33.280 --> 0:16:35.480 I went large. I got the extra large fries just 0:16:35.560 --> 0:16:38.000 to get me through today, Jared, you have a single 0:16:38.120 --> 0:16:41.640 sentence in your note that's just so so important and 0:16:41.760 --> 0:16:45.440 really wise. You gotta have the courage to buy inflation 0:16:45.600 --> 0:16:49.400 surge when there's no inflation. But then, what do you 0:16:49.480 --> 0:16:53.400 do when inflation expectations finally go? What do you do 0:16:53.440 --> 0:16:58.520 when the expectations of inflation are finally there to sell? Well, look, 0:16:58.560 --> 0:17:01.160 let's let's look a little bit of history. Okay, our 0:17:01.200 --> 0:17:04.560 economists expect I think three point six percent cp I 0:17:04.680 --> 0:17:08.119 this quarter. Um, you know, I think that's exactly right. 0:17:08.240 --> 0:17:09.720 And if you look at what's happened in the past, 0:17:09.880 --> 0:17:12.600 we've seen inflation surgeries above three and a half percent 0:17:13.000 --> 0:17:14.720 just the past thirty years. There's been quite a few 0:17:14.720 --> 0:17:17.399 of those occasions. We looked at the market, you know, 0:17:17.440 --> 0:17:20.880 impact market data around those prints, and if you bought 0:17:20.920 --> 0:17:24.160 all the inflation trades and commodities, you know you're versus us, 0:17:24.280 --> 0:17:28.439 etcetera on those occasions past thirty years, on average, one 0:17:28.520 --> 0:17:31.960 year later your inflation trades loss money. Now, So that 0:17:32.080 --> 0:17:34.000 so to me, that says that if you believe the 0:17:34.000 --> 0:17:36.439 inflation trade, now you know it is something you have 0:17:36.520 --> 0:17:38.719 to buy when it's already priced into the market at 0:17:38.720 --> 0:17:40.760 those trades, some of those trades have already done really well, 0:17:41.080 --> 0:17:42.680 then you've got to be convinced that this is the 0:17:42.720 --> 0:17:45.120 big one, and we just don't see any evidence of that. Instead, 0:17:45.359 --> 0:17:47.639 we we think investors still have to keep a kind 0:17:47.640 --> 0:17:50.240 of a balanced approach within the inflation trades. Within the 0:17:50.280 --> 0:17:53.159 inflation trades, we still like financials very much, but I 0:17:53.200 --> 0:17:55.960 think that the you know, the commodities and materials and energy, 0:17:56.080 --> 0:17:57.840 there's just not enough evidence on that on the on 0:17:57.880 --> 0:18:00.359 that side, and if you do see more more dips 0:18:00.800 --> 0:18:03.960 um corrections, even in attack and the growth kind of trades, 0:18:04.200 --> 0:18:07.320 for a long term investor, those have to be viable opportunities. Jared, 0:18:07.359 --> 0:18:09.479 what do you think of the fans David Costons at 0:18:09.480 --> 0:18:11.960 the dust Star, Gold and Sex making a big splash 0:18:12.000 --> 0:18:15.480 this weekend on valuation of the things. Do you agree 0:18:15.520 --> 0:18:20.959 that the fangs actually offer value given their growth characteristics 0:18:21.080 --> 0:18:24.960 versus the ten uere yield. I think the trading vehicles, 0:18:25.280 --> 0:18:27.399 you know, perhaps at this point some of these big 0:18:27.880 --> 0:18:31.120 megacap growth trades um and so you can use they're 0:18:31.119 --> 0:18:33.640 they're they're almost kind of like a macro expression of 0:18:33.680 --> 0:18:36.359 what's happen with growth inflation. But but they're not. I 0:18:36.359 --> 0:18:38.760 don't think people are looking at them as devalue. But 0:18:38.880 --> 0:18:41.360 by any means, if you if you like the sort 0:18:41.359 --> 0:18:44.000 of the tech and and and and growth type stocks, 0:18:44.000 --> 0:18:46.960 I think small and midcaps are more attractive here. Jed 0:18:47.000 --> 0:18:48.359 caught up with a Greater to a black Rock a 0:18:48.400 --> 0:18:50.720 couple of days ago on Friday, and he was talking 0:18:50.760 --> 0:18:53.840 about running a higher cash position across some of the portfolio. 0:18:53.960 --> 0:18:57.120 Was something in the double digits mad teens. Maybe does 0:18:57.119 --> 0:18:59.399 that make sense going into some attempt that dry powder. 0:19:01.280 --> 0:19:03.239 I think it does make sense to have to have 0:19:03.320 --> 0:19:05.440 some cash ready to deploy if it's if it's a 0:19:05.520 --> 0:19:08.560 question of something tactical to to be ready. If there's 0:19:08.560 --> 0:19:10.639 some big dislocations you know and I or either end, 0:19:10.640 --> 0:19:14.439 we could see overheated reflation trades um that you know 0:19:14.480 --> 0:19:16.680 you want to sell to go rotate back into growth. 0:19:16.760 --> 0:19:18.520 You could see the reverse where we get another bad 0:19:18.560 --> 0:19:21.880 job sprint and people start to really get gloomy. Either case, 0:19:21.880 --> 0:19:23.840 you want to have cash ready. I don't think it's 0:19:23.840 --> 0:19:26.320 a it's a good moment to be sort of allocating 0:19:26.440 --> 0:19:30.600 higher permanent portfolio positions into into cash or anything else 0:19:30.880 --> 0:19:33.920 that's um that's gonna change your fundamental mix because right now, 0:19:34.240 --> 0:19:36.280 you know, there's so many cross currents. You can roll 0:19:36.320 --> 0:19:37.840 the dice and and and any you know, it's can 0:19:37.840 --> 0:19:39.960 tell you any number of ten different things. When there's 0:19:39.960 --> 0:19:42.200 that much confusion in the market, that much confusion the 0:19:42.280 --> 0:19:44.480 labor data, I don't think it's a good time to 0:19:44.520 --> 0:19:46.920 make permanent decisions just quickly without challenge. What would fund 0:19:46.920 --> 0:19:50.879 that position? Would you trind broadly or some hi specific Well, 0:19:50.880 --> 0:19:52.760 it would trade some of the mega cap stocks, whether 0:19:52.800 --> 0:19:55.800 it's tech or or otherwise. Um, my colleagues to be 0:19:55.800 --> 0:19:58.800 the superman, and is I think been fairly you know, uh, 0:19:58.960 --> 0:20:00.960 you know, neutral on on some of the mega cap 0:20:01.000 --> 0:20:03.520 stocks for a while and and uh and at the 0:20:03.520 --> 0:20:06.159 bank where we're much more favorable on small and mint caps. 0:20:06.240 --> 0:20:08.160 So I think that the trades that have already done 0:20:08.240 --> 0:20:11.119 very well, the really liquid names, are the obvious places 0:20:11.160 --> 0:20:13.720 to look for cash um and and that can even 0:20:13.760 --> 0:20:17.000 include an investment great credit for multist portfolios. We're kind 0:20:17.000 --> 0:20:18.919 of bearish on on that part of the credit market 0:20:19.119 --> 0:20:22.320 and see better opportunities elsewhere. Gonna see you gotta cash 0:20:22.359 --> 0:20:23.919 up on a range of asuas John would have been 0:20:25.040 --> 0:20:34.399 head of Research Investment Committee, this is the right person 0:20:34.480 --> 0:20:37.720 at the right time to talk about the retail cadence 0:20:37.760 --> 0:20:41.440 of America. Friday, we get retail from the lowest price 0:20:41.520 --> 0:20:44.600 point to the highest price point. And Steve Sadov is 0:20:44.800 --> 0:20:49.040 expert at this. Mr Sadoff is with master Card senior advisor. 0:20:49.160 --> 0:20:53.320 But that barely describes his contribution and retail herbal lessons 0:20:53.320 --> 0:20:56.040 and all that boom a million years ago in shampoo. 0:20:56.440 --> 0:21:00.199 It's Sadov's fault and he's the guy at SAX who 0:21:00.520 --> 0:21:04.200 exclusive is literally inventing that out of pixie. Does Steve say, 0:21:04.480 --> 0:21:08.160 let me talk about MasterCard and the knowledge that MasterCard 0:21:08.280 --> 0:21:11.120 has tick by tick and you say it even goes 0:21:11.160 --> 0:21:16.600 over to the department stores are enjoying this resurgence. Good 0:21:16.640 --> 0:21:18.520 to see you, Tom, And yeah, I think that the 0:21:18.560 --> 0:21:22.320 month of April, the master Card spending pulse numbers show 0:21:22.400 --> 0:21:25.280 that the consumer is really coming back with a vengeance. 0:21:25.560 --> 0:21:28.600 You saw overall sales and this is now not just 0:21:28.640 --> 0:21:32.120 the MasterCard sales, but it cuts across all forms of tender. 0:21:32.520 --> 0:21:36.000 Sales were up twenty three point three percent versus year 0:21:36.359 --> 0:21:38.920