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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com,

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Speaker 1: and of course, on the Bloomberg terminal. Jonathan Pinkel joins

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Speaker 1: us out chief US economist at UBS with a really

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Speaker 1: concise note on all of this. Jonathan, do you look

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Speaker 1: at this as gospel or do you believe it will

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Speaker 1: be amended in a second and third Look, well, I

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Speaker 1: so gospel is a little strong. Um. You know, these

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Speaker 1: numbers do revise. Um. I think the key takeaway though, is,

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Speaker 1: you know, I mean chere Powell tried to downplay this

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Speaker 1: a little bit yesterday in his you know, post meeting

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Speaker 1: press conference, but I mean, you know, going back to

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Speaker 1: what Mike said, I mean, and we've been pointing out,

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Speaker 1: I mean for Q two, you you know, the guts

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Speaker 1: of the report, you know, just just look weak. I mean,

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Speaker 1: real personal consumption expenditures rising one per cent um is soft. Um.

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Speaker 1: You know, coming into this year, we all thought the

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Speaker 1: abundant household savings, pent up demand hail winds would be

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Speaker 1: more of a support. Um and and and and to

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Speaker 1: your point earlier Tom with with you know, prices eroding

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Speaker 1: real incomes. Um, you know, the consumers just shaped up

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Speaker 1: much more sluggishly than expected. And I and that I

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Speaker 1: think is sort of the main takeaway from from the

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Speaker 1: Q two GDP report, Jonathan mrs DI Inflation all over,

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Speaker 1: Basically the idea that we're seeing inflation remaining high and

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Speaker 1: going higher, with that GDP price component coming in at

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Speaker 1: the hottest going back to one, at the same time

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Speaker 1: that you're getting what some would call a technical recession

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Speaker 1: of two straight quarters of negative growth. How much can

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Speaker 1: the Fed really back away from their rate hiking as

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Speaker 1: the market has been believing as what you're seeing in

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Speaker 1: that to year yield coming in at a time when

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Speaker 1: inflation is not stowing signs of coming down all that

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Speaker 1: quick play. Yeah, No, I think it's I think it's

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Speaker 1: very hard for the Fed to walk away. I mean,

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Speaker 1: I you know, yesterday was a really interesting meeting. You know,

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Speaker 1: cheer Powell came out swinging with tough talk against inflation

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Speaker 1: right off the top, and as prepared remarks left the

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Speaker 1: door open for another seventy five basis point rate hike,

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Speaker 1: But the broader message that seemed to get sent was

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Speaker 1: that they were transitioning to a slower pace of rate hikes,

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Speaker 1: you know, which which is fair? And this goes back

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Speaker 1: and I caught the clip with Dennis Lockhart. They are

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Speaker 1: moving on to this second stage now that they've brought

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Speaker 1: policy to a kind of more neutral level, but inflation

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Speaker 1: just remains too hot for them to think you're gonna

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Speaker 1: they're gonna stop. I mean, we're expecting a fifty basis

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Speaker 1: point rate hike at the September meeting and have been

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Speaker 1: for for some time. But you know, there's just there's

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Speaker 1: just too much inflation in the pipeline for them really

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Speaker 1: to relent yet. And Jonathan, with the greatest of respect

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Speaker 1: for economic historians, does it matter from your perspective whether

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Speaker 1: the nb UH caused this a recession or not. Shouldn't

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Speaker 1: market participants just be treading on the data in front

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Speaker 1: of us, And if it's waker, it's waker. Into lasist

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Speaker 1: point that with nine percent inflation, it's problematic, isn't it. Yeah, No,

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Speaker 1: I think that's right. I mean, the n b R

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Speaker 1: isn't isn't gospel either. But but the NBR does set

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Speaker 1: a threshold for sort of how broad the weaknesses. It

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Speaker 1: hasn't shown up in payroll employment yet. Um and also

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Speaker 1: a certain amount of the severity. I mean right now,

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Speaker 1: you know, as much as consumer spending has been weak,

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Speaker 1: I mean it is positive. I mean, we're just chugging

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Speaker 1: along at at at pretty weak growth Q one, and

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Speaker 1: the report was held down by a lot of the

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Speaker 1: noisy components coming off the very strong Q four. So yeah,

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Speaker 1: I would downplay a little bit these sort of the

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Speaker 1: technical recession signal. But you know, going back to what

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Speaker 1: Mike said, I mean, the fact of the matter is,

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Speaker 1: and we've been sort of writing about this is the

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Speaker 1: problem with the Q two report. The Q two reports

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Speaker 1: weak for domestic demand. I mean, it's it's the US

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Speaker 1: stuff that looks weak in Q two, and that doesn't

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Speaker 1: really bode well looking ahead, Jonathan, do you see the

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Speaker 1: spreading to the labor market and how quickly? Because one

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Speaker 1: thing I think we'll hear from the administration later is

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Speaker 1: that the consumer is holding up. They'll say things like

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Speaker 1: the labor market is still strong. Do you see it

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Speaker 1: remain that way through the next quarter? Uh, we have.

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Speaker 1: We have a pretty meaningful slowdown in payroll employment. We

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Speaker 1: actually would make a case that it has been sort

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Speaker 1: of artificially supported somewhat um in recent months. You've seen

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Speaker 1: substantially more weakening and initial claims continuing claims the household

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Speaker 1: survey data, and given the severity of the slowdown and

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Speaker 1: aggregate demand, we would certainly expect the labor market to follow.

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Speaker 1: You know, we're looking for payrolls to UH at some

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Speaker 1: point in the third quarter, you know, run under two

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Speaker 1: hundred k a month as part of that slowing on

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Speaker 1: the way to further slowing in Q four. Do you

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Speaker 1: wish you hadn't adjusted your your forecast yesterday? Kevin that

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Speaker 1: it's pretty much money for the optics of getting these

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Speaker 1: inventory deflators correct and everything. We were pretty close and

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Speaker 1: getting the decline so and the and and and and

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Speaker 1: altogether the components were sort of structured the way we expected.

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Speaker 1: So I'm pretty happy because the original estimate was basically

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Speaker 1: on the money. Chung anyway, Jonathan is good to catch up,

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Speaker 1: Jonathan thing of that of ups. Francis Donald with US

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Speaker 1: now Global Chief Economist strategist manual life very good at

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Speaker 1: the workings of our g d P. What are we

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Speaker 1: not analyzing in today's g d P? First look, francis,

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Speaker 1: what's the big mystery? The big mystery is not today's

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Speaker 1: g d P at all. Today's GDP will tell us

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Speaker 1: what we already know, which is that this economy has

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Speaker 1: materially slowed down. We are not in the roaring twenties.

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Speaker 1: We are not in the reflation trade. And if you

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Speaker 1: told most people that last year, they would not have

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Speaker 1: believed you. The big mystery is what is the next

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Speaker 1: four to six quarters look like? And this is really

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Speaker 1: what concerns me. Is not recession or no recession this

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Speaker 1: year or even three, it's what do we do if

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Speaker 1: we're stuck in one percent growth for four to six quarters.

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Speaker 1: That's much harder to trade, much harder for central banks

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Speaker 1: to respond to. And francis, what's so important? I mean,

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Speaker 1: I featured this earlier in Austin Fox of Bloomberg Opinion

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Speaker 1: has done great work on it. Powell really scirted yesterday

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Speaker 1: the housing plug in to j d P, which is,

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Speaker 1: if we get yields up, mortgages are slammed, house ownership

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Speaker 1: is slammed, and that means rent sustaining go higher. How

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Speaker 1: does that work into the g d P of the nation. Well,

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Speaker 1: comments like to say housing leads the market. Nail housing,

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Speaker 1: you're gonna get the economy outlook pretty good. In fact,

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Speaker 1: one of my favorite charts is one that shows that

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Speaker 1: housing leads retail sales. So you know, really focusing on

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Speaker 1: the housing side of the story is going to be critical.

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Speaker 1: It is going to bring down inflation to a certain respect,

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Speaker 1: and it's also very very bad. Every data point we

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Speaker 1: have on housing is trending downwards. Frankly, Tom, Every data

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Speaker 1: point we have across the gamut of major primary data

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Speaker 1: points is pointing downwards. Right now, There's not a lot

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Speaker 1: of places you can look for for optimism unless you

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Speaker 1: do what Powell did yesterday, which is to call initial

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Speaker 1: jobless claims rise not real, or to question the validity

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Speaker 1: of the GDP number. Three weeks of it now and

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Speaker 1: we might have a fourth week if it lights to Francis.

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Speaker 1: Tell me why the market's been rallying then over the

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Speaker 1: last month, why credit spreads have been tightening, and what

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Speaker 1: you make if that using of financial conditions we've seen,

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Speaker 1: oh bear market rallies, they get bigger the deeper you

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Speaker 1: get into that bear market. I do not believe what

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Speaker 1: we saw yesterday from Chair Powell was a pivot, although

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Speaker 1: it certainly was the path towards the pivot, and markets

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Speaker 1: care about second derivatives. But what Chair Powell told us

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Speaker 1: is well, he's data dependent. Unfortunately. I don't think that

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Speaker 1: inflation number is gonna come down fast enough in the

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Speaker 1: next two to three months to take out too much

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Speaker 1: of the pricing for two. But what this market is

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Speaker 1: gonna do, in my opinion, is pricing more cuts for three.

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Speaker 1: And gosh, that makes the fens job harder. Just like

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Speaker 1: we saw yesterday. The weaker the outlook, the more we

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Speaker 1: see those financial conditions fall, the more offsets what the

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Speaker 1: Feds really trying to do, which is tightened. Look at

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Speaker 1: the break even yesterday, the rallying that shouldn't be happening.

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Speaker 1: When the Fed's tightening sending five bases points, they're probably

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Speaker 1: not happy. That's actually funny that you mentioned next. I

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Speaker 1: was just looking at the five year five year forward

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Speaker 1: break evens, and they've been steadily rising. The more people

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Speaker 1: believe in this FED pivot. So what do you expect

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Speaker 1: in terms of pushing back against this? How does the

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Speaker 1: FED react to a market that's not cooperating and getting

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Speaker 1: ahead of itself, well, I wouldn't be surprised. And in

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Speaker 1: the next few days, the next few weeks, we do

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Speaker 1: see beneficials who come out and really try to walk back.

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Speaker 1: Some of that speak to some of the hawkish risks

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Speaker 1: that exists in this market. And that's why I think

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Speaker 1: it's dangerous to make too big of a change in

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Speaker 1: your fedue afriter a single meeting. And as we've seen

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Speaker 1: this year, and a little bit of laughter, you could

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Speaker 1: have these big rallies on FED day that are then

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Speaker 1: reverse course the very next day. So fed Er Powell

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Speaker 1: told us they wanted to be nimble. I think now

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Speaker 1: is the time for economists and strategies to be nimble

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Speaker 1: as well. Some people who are watching the show Francs

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Speaker 1: are probably saying, oh my goodness, here she goes again

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Speaker 1: being bearish. Thomas saying, we're sick of talking about recession.

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Speaker 1: Company is adapt and we are hearing around the margin

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Speaker 1: signs that the rally that we've been seeing is a

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Speaker 1: signal that we've priced in so much bad news that

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Speaker 1: people are beginning to find value. What's your argument against that, Well,

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Speaker 1: I'm not sure if the she is you or me,

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Speaker 1: but Parish has been effectively the right way to do this.

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Speaker 1: And if you look at the economy, it is still

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Speaker 1: trending downwards. Historically, what we would see is that when

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Speaker 1: the economy is about two thirds of the way through

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Speaker 1: its downturn, you can start to look for opportunities. And

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Speaker 1: I will be the first to say that macro does

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Speaker 1: not rule all. There will be pockets of advantage here.

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Speaker 1: I think we should watch. I think the curb will

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Speaker 1: still flatten, but we will reach a point in the

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Speaker 1: next few months where you want that steep in our

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Speaker 1: back on and there are always bottom up trades to

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Speaker 1: be had. So the cool relation on macro, it does

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Speaker 1: change over time. It's not the be all end all,

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Speaker 1: but the macro does not look good. What it does

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Speaker 1: I'll be bullish again, francis. What do our listeners in

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Speaker 1: our viewers do is they jump from forward guidance and

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Speaker 1: the comedy that it was to actually just looking at

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Speaker 1: the data. How do you actually get through a week,

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Speaker 1: get through a month, get through a core or where

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Speaker 1: you are data dependent? The great question, Tom, because we

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Speaker 1: don't know exactly what data the FET is looking at.

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Speaker 1: And sure we asked him, and he said, well, we're

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Speaker 1: looking at inflation. We want to see compelling evidence. What's

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Speaker 1: compelling evidence probably a few months of month over month

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Speaker 1: improvements in inflation that is heading downwards. They're looking at

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Speaker 1: labor supply and demand, but not all data, apparently, because

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Speaker 1: there's plenty of data that says jobless claims and unemployment

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Speaker 1: is moving in the wrong direction. So we don't know

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Speaker 1: the Fed's reaction function as much today as we did

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Speaker 1: even forty hours ago. And that's going to make a

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Speaker 1: lot more market volatility, a lot more two sided conversations.

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Speaker 1: One of my fears is that we're gonna have a

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Speaker 1: lot of beneficials speaking to both sides of the argument.

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Speaker 1: So the clarity on what happens next has been reduced

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Speaker 1: very significantly. And if you're at home and you're thinking,

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Speaker 1: what do I look at, well, I'm in the same boat.

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Speaker 1: Francis can sense the frustration, so let's address it. What

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Speaker 1: do they need to do better? I'm not it's frustration

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Speaker 1: so much And how much harder are you making the

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Speaker 1: job of knowing what you're gonna do next? And the

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Speaker 1: fence job isn't to make my job easier. The fence

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Speaker 1: job is to contain inflation and and really improve the

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Speaker 1: employment outlook. But what would be helpful is if the

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Speaker 1: FED had more clarity on what elements of inflation they're

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Speaker 1: looking at now. Two meetings ago we heard from share

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Speaker 1: Powell that he was very focused on the headline inflation.

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Speaker 1: But yesterday and he said core is the best leading indicator.

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Speaker 1: So I'd love to hear more about what really are

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Speaker 1: you targeting because we know that, for example, inflation expectations

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Speaker 1: for consumers are driven much more by gasoline prices than

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Speaker 1: they are by FED policy. So which elements of this

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Speaker 1: are you really trying to control? And do you fundamentally

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Speaker 1: believe that it's your job only only your job to

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Speaker 1: contain inflation because inflation came from a lot of places.

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Speaker 1: It's going to take a lot of places to fix.

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Speaker 1: I'd love it if he could make count job Easia.

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Speaker 1: I'll say I've been incredibly frustrikes it by the last

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Speaker 1: few news conferences. Francis don'tald the of manual Life Investment Management.

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Speaker 1: This is important and what you need to know is

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Speaker 1: you need to hear the conversations while we're on commercial break.

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Speaker 1: John Farrell and Walter pisk of light. Jed on the

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Speaker 1: absolute tensions of the front line of Liverpool. This is

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Speaker 1: Sala and Monte Walter, Liverpool their front end. They're not

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Speaker 1: on the same page. I mean there's some real tension.

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Speaker 1: There is Apple on the same page or is it

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Speaker 1: a Salomon a metaphor? First of all, Tom for not

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Speaker 1: being on the same page. Liverpool almost pulled off four

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Speaker 1: trophies last year. Was it was tight at the end,

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Speaker 1: but that's and I guess Apple being on the same

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Speaker 1: page with earnings this quarter probably, but as you know,

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Speaker 1: with the kind of concern over inflation and the economy,

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Speaker 1: a lot of the a lot of the focus is

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Speaker 1: gonna be on the elect for next quarter. I want

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Speaker 1: you to discuss the pricing power Apple has to manage

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Speaker 1: down the income statement. I never hear a discussion of

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Speaker 1: if they go margins are under threat at whatever line

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Speaker 1: on the income statement. Do they have pricing power? I

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Speaker 1: mean they have pricing power for the quality of the products.

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Speaker 1: But I mean Apple has been known to reduce the

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Speaker 1: price of their product in certain markets, and I think

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Speaker 1: there was some reports even last week in China Um

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Speaker 1: there was some reduction in the price of iPhones. Have

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Speaker 1: done this in other markets throughout the world. Why you

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Speaker 1: don't necessarily see it crush their margins as you've had

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Speaker 1: this mix shift over the years in terms of services,

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Speaker 1: which has been a higher margin business for them, so

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Speaker 1: they've been able to to generate a very strong margin.

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Speaker 1: Currencies are a hard thing to fight, though, right this

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Speaker 1: is a this is a global company, so I think

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Speaker 1: you know, currencies are certainly something they're gonna They're gonna

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Speaker 1: have an impact also in terms of the guidance, and

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Speaker 1: they can't do much about that well to the top

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Speaker 1: tier iPhone though going on sale, that seems pretty read

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Speaker 1: to me. Are you saying that's not a big deal

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Speaker 1: as some people are making it. I think it's a

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Speaker 1: big deal because it's China, and China has been such

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Speaker 1: a big part of the growth gen you've seen in

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Speaker 1: other emerging markets in the past, which I think it

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Speaker 1: may be more understandable, but China has been able to

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Speaker 1: grow without seeing these types of price cuts. So I

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Speaker 1: think when we're all looking for kind of tea leaves

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Speaker 1: on what's the impact of economic weakness, you can't ignore

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Speaker 1: that as as one of those things to watch, and

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Speaker 1: maybe that's going to be indicative of how they look

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Speaker 1: for growth or what their outlook is for growth for

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Speaker 1: next quarter and the following quarter. So they're all these nodes, right.

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Speaker 1: We've heard from Qualcom, We've heard from other chip providers

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Speaker 1: that there has been diminishing demand for smartphones for a

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Speaker 1: number of other personal computing devices. How much is baked

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Speaker 1: in in terms of disappointment versus the unknown unknown right

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Speaker 1: of an even bigger slowdown than expected. I think a

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Speaker 1: lot of that is baked in. But remember the iPhone

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Speaker 1: is of the revenue and even a greater percent of

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Speaker 1: the profit of the company. And you have to look

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Speaker 1: at what's going on in Telco Land right now, where

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Speaker 1: they had a surge of growth during the pandemic in

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Speaker 1: terms of number of customers signing up uh, and then

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Speaker 1: there was a lull. And if they want to fight

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Speaker 1: each other to grab customers, their willingness to subsidize I

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Speaker 1: think could increase or sustain. Like Verizon as an example,

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Speaker 1: which is struggling to try to generate any type of

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Speaker 1: subscriber growth, doesn't seem like they're going to give up

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Speaker 1: in trying to give you eight hundred dollars or nine

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Speaker 1: dollars to get a new iPhone, and I think that's

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Speaker 1: the data that we're seeing. So I think that's one

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Speaker 1: of the offsets to a weaker customer and their ability

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Speaker 1: to buy a very expensive iPhone is the willingness of

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Speaker 1: wireless operators around the world, but particularly in these markets

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Speaker 1: that are still huge for Apple and these you know,

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Speaker 1: these high high paying markets to subsidize that customer to

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Speaker 1: upgrade their phone. Which raises the question of how much

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Speaker 1: the behemoths have an advantage in this environment, how much

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Speaker 1: are used to seeing a distinguishing a factor of the

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Speaker 1: haves and the have nots within big tech as this

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Speaker 1: earning season grinds on. I mean, that's a great point

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Speaker 1: in terms of you know, the people in society, they're

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Speaker 1: getting impacted. It's it's you know, those that are buying

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Speaker 1: iPhones might have a different impact than you know, some

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Speaker 1: of the off that you're seeing me getting announced by

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Speaker 1: some of these major companies. But again, like if you

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Speaker 1: have economic weakness globally and you're trying to sell a

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Speaker 1: twelve product, you can't just ignore that that's going to

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Speaker 1: have some impact. There. There will be some mitigating factors

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Speaker 1: like again an operator willing to pay you um to

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Speaker 1: to stay on their network or to switch over to

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Speaker 1: your network. But that's still a pretty big headwind depending

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Speaker 1: on how long this lasts. And we've got delayed bills

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Speaker 1: in the mix. Well to T Mobile talked about the

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Speaker 1: same thing as well, what do you make of that?

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Speaker 1: What's the connection there? I mean, first of all, I

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Speaker 1: think a T T was a couple of days, so

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Speaker 1: to me, that was more frankly an excuse because they

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Speaker 1: gave very bad free cash flow guidance earlier in the year.

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Speaker 1: But you're right. G Mobile tried to spin this yesterday.

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Speaker 1: But the bottom line is if you read through what

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Speaker 1: this CEO Mike Seaver said, they're buildings. The payments there

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Speaker 1: were also getting delayed. So yeah, I mean you're you're

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Speaker 1: seeing in Walmart, obviously you've seen evidence of, you know,

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Speaker 1: a weakening consumer um. Again, it's just if you're week

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Speaker 1: and someone's willing to pay for your phone, maybe you're

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Speaker 1: more willing to do it. The challenge here is what

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Speaker 1: the operators want to get out of this is if

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Speaker 1: they give you that free phone, they're not they're not,

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Speaker 1: you know, they're not. They're They're expecting something back and

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Speaker 1: they want you to upgrade to a higher end rape

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Speaker 1: plan and at some point the consumers not that they

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Speaker 1: recognize what's happening and say, look, I don't want to

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Speaker 1: pay an extra ten twenty bucks a month on my

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Speaker 1: rape plan. So even if you're gonna give me eight

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Speaker 1: dollars for her phone, it doesn't resonate. And I think

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Speaker 1: we saw that with with Veries in this quarter. They

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Speaker 1: were willing to pay customers, you know, for these phones,

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Speaker 1: and they still didn't get people switching to their network.

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Speaker 1: It's I don't understand why the company continues to do that,

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Speaker 1: but at the moment, this is why. This is what

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Speaker 1: these operators are saying, that they're willing to continue to

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Speaker 1: try and subsidize and keep these customers. Well, it's just awesome.

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Speaker 1: As always what as there of light shed This is

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Speaker 1: a lot of fun because she comes with bulletproof academics.

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Speaker 1: Berkeley was known for decades for chemistry, and part of that,

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Speaker 1: of course, is chemical engineering. She's a chemy out of Berkeley.

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Speaker 1: Gennine Way joins us right now with Barclayser, senior US

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Speaker 1: Oil and Gas Exploration and production analyst, Jenny, and I'm

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Speaker 1: gonna cut to the chase. The airlines needed one to

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Speaker 1: three crises before they got capital discipline, before they got

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Speaker 1: the religion of operations. How is oil doing in this

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Speaker 1: boom at capital discipline? Are they going to go off

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Speaker 1: to the New Siberia and wasted all the way? Oh?

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Speaker 1: Good morning, Thanks for having Barclay's I love it. Let's

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Speaker 1: just get right at it. Um. You know, I think

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Speaker 1: you're hitting at the crux of the issue. It's capital discipline.

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Speaker 1: Whether it's going to hold is the number one question

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Speaker 1: from investors. There's a ton of skepticism on that in

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Speaker 1: the bucket, and that's kept people away. We just checked

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Speaker 1: in with all of our companies ahead of the quarter,

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Speaker 1: and every single conversation the companies were still on the

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Speaker 1: right narrative, which was low growth, backstree cash flow. Okay,

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Speaker 1: well let's go, let's go right to the chase Juning.

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Speaker 1: Just because of time, Chevron has always been the wild card.

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Speaker 1: They're the Arco of the modern world, explained Chevron's capital discipline.

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Speaker 1: Who is keeping them in line? Investors are keeping Chevron

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Speaker 1: in line, just like how they're keeping every other company

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Speaker 1: in line. Energy was the worst performing sector for a

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Speaker 1: number of years. Then that's because they were destroying value.

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Speaker 1: No returns. Nothing was getting returned to shareholders that was

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Speaker 1: anything meaningful, and the shareholders are spoken. And what Chevron

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Speaker 1: did was a reducer capolics budget by five billion dollars

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Speaker 1: a year for the next five years, which is huge,

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Speaker 1: and they've embarked on a big buyback program. You know,

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Speaker 1: the buyback right now is five to ten billion, and

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Speaker 1: we think that they're going to raise the low end

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Speaker 1: of that. We're already at ten billion for the year

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Speaker 1: and we think our investors are also at ten billions.

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Speaker 1: So the market has really instilled capital discipline on the

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Speaker 1: whole sector. Janine earlier this morning, she'll posted a record

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Speaker 1: profit for the second straight quarter and they also accelerated

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Speaker 1: by backs. Tomorrow we get the likes of XA and

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Speaker 1: other oil majors that are reporting in the US. What's

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Speaker 1: the political risk as they start to report these blockbuster

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Speaker 1: bonanza earnings and the heels of oil prices that have

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Speaker 1: become a campaign speaking point. Right we have mid term

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Speaker 1: elections coming up in November. It's a huge focus. UM

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Speaker 1: oil companies are definitely in the crosshairs because of all

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Speaker 1: the profits that they're making. But let's just face it,

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Speaker 1: you know, the companies are making a lot of money

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Speaker 1: because oil prices are up, but they didn't make a

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Speaker 1: lot of money for a lot of the other years.

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Speaker 1: So what they've been doing with the cash is they've

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Speaker 1: been enhancing the balance sheet and they're giving the money back.

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Speaker 1: So you know, we already saw that companies are delivering

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Speaker 1: on this show me the money mentality that investors have

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Speaker 1: right now. Um, we think that Exxon could potentially talk

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Speaker 1: about their thirty billion dollar buyback program. They just tripled

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Speaker 1: it last quarter, so it's unlikely that they increase it

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Speaker 1: this quarter, but we think that maybe there could be

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Speaker 1: some shifting our front end loading of that. We just

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Speaker 1: talked about Chevron how we think they're going to raise

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Speaker 1: the bottom end of their buy back guidance and so

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Speaker 1: that will vote very well. But you know, companies have

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Speaker 1: a couple of options. They can either reinvest in growth

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Speaker 1: with all that cash, and that's pretty much no not

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Speaker 1: right now. They can pay it out via dividend and

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Speaker 1: by backs, which we think they're doing, or they can

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Speaker 1: hold the cash. But that's exactly the point. It's a

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Speaker 1: no note right now to invest in more production at

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Speaker 1: a time when a lot of politicians are saying that's

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Speaker 1: exactly what's required of these companies. What is the risk?

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Speaker 1: How do you price out the chance of perhaps some

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Speaker 1: sort of excess tax put on these companies if they

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Speaker 1: don't invest in production or some other policy kind of

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Speaker 1: check to try to, if nothing else, be a talking

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Speaker 1: point heading into the mid terms. That that's a good point.

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Speaker 1: We think the political risk in the headlines is very high,

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Speaker 1: again because we have mid term elections, UM, but in

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Speaker 1: terms of anything actually getting through, we think the risk

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Speaker 1: is low. So we've seen a windfall tax in the UK.

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Speaker 1: We think that's highly unlikely in the US right now.

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Speaker 1: UM oil companies they need a more consistent, friendly fiscal

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Speaker 1: regime and a constant regulatory environment in order for them

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Speaker 1: to really commit to plans and to increase growth. And

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Speaker 1: they don't have certainty in what taxes are going to be,

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Speaker 1: permits are going to go through, if frackinge is going

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Speaker 1: to be allowed. Now, that's when they're not able to plan,

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Speaker 1: and then you won't see as much production growth and

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Speaker 1: policy continuity. It's a massive problem has been for a

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Speaker 1: while now. Jename, Thank you, Jenna lay That of Bankley's

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Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join

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Speaker 1: the terminal. I'm Tom keene In. This is Bloomer h