Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com,
Speaker 1: and of course, on the Bloomberg terminal. Jonathan Pinkel joins
Speaker 1: us out chief US economist at UBS with a really
Speaker 1: concise note on all of this. Jonathan, do you look
Speaker 1: at this as gospel or do you believe it will
Speaker 1: be amended in a second and third Look, well, I
Speaker 1: so gospel is a little strong. Um. You know, these
Speaker 1: numbers do revise. Um. I think the key takeaway though, is,
Speaker 1: you know, I mean chere Powell tried to downplay this
Speaker 1: a little bit yesterday in his you know, post meeting
Speaker 1: press conference, but I mean, you know, going back to
Speaker 1: what Mike said, I mean, and we've been pointing out,
Speaker 1: I mean for Q two, you you know, the guts
Speaker 1: of the report, you know, just just look weak. I mean,
Speaker 1: real personal consumption expenditures rising one per cent um is soft. Um.
Speaker 1: You know, coming into this year, we all thought the
Speaker 1: abundant household savings, pent up demand hail winds would be
Speaker 1: more of a support. Um and and and and to
Speaker 1: your point earlier Tom with with you know, prices eroding
Speaker 1: real incomes. Um, you know, the consumers just shaped up
Speaker 1: much more sluggishly than expected. And I and that I
Speaker 1: think is sort of the main takeaway from from the
Speaker 1: Q two GDP report, Jonathan mrs DI Inflation all over,
Speaker 1: Basically the idea that we're seeing inflation remaining high and
Speaker 1: going higher, with that GDP price component coming in at
Speaker 1: the hottest going back to one, at the same time
Speaker 1: that you're getting what some would call a technical recession
Speaker 1: of two straight quarters of negative growth. How much can
Speaker 1: the Fed really back away from their rate hiking as
Speaker 1: the market has been believing as what you're seeing in
Speaker 1: that to year yield coming in at a time when
Speaker 1: inflation is not stowing signs of coming down all that
Speaker 1: quick play. Yeah, No, I think it's I think it's
Speaker 1: very hard for the Fed to walk away. I mean,
Speaker 1: I you know, yesterday was a really interesting meeting. You know,
Speaker 1: cheer Powell came out swinging with tough talk against inflation
Speaker 1: right off the top, and as prepared remarks left the
Speaker 1: door open for another seventy five basis point rate hike,
Speaker 1: But the broader message that seemed to get sent was
Speaker 1: that they were transitioning to a slower pace of rate hikes,
Speaker 1: you know, which which is fair? And this goes back
Speaker 1: and I caught the clip with Dennis Lockhart. They are
Speaker 1: moving on to this second stage now that they've brought
Speaker 1: policy to a kind of more neutral level, but inflation
Speaker 1: just remains too hot for them to think you're gonna
Speaker 1: they're gonna stop. I mean, we're expecting a fifty basis
Speaker 1: point rate hike at the September meeting and have been
Speaker 1: for for some time. But you know, there's just there's
Speaker 1: just too much inflation in the pipeline for them really
Speaker 1: to relent yet. And Jonathan, with the greatest of respect
Speaker 1: for economic historians, does it matter from your perspective whether
Speaker 1: the nb UH caused this a recession or not. Shouldn't
Speaker 1: market participants just be treading on the data in front
Speaker 1: of us, And if it's waker, it's waker. Into lasist
Speaker 1: point that with nine percent inflation, it's problematic, isn't it. Yeah, No,
Speaker 1: I think that's right. I mean, the n b R
Speaker 1: isn't isn't gospel either. But but the NBR does set
Speaker 1: a threshold for sort of how broad the weaknesses. It
Speaker 1: hasn't shown up in payroll employment yet. Um and also
Speaker 1: a certain amount of the severity. I mean right now,
Speaker 1: you know, as much as consumer spending has been weak,
Speaker 1: I mean it is positive. I mean, we're just chugging
Speaker 1: along at at at pretty weak growth Q one, and
Speaker 1: the report was held down by a lot of the
Speaker 1: noisy components coming off the very strong Q four. So yeah,
Speaker 1: I would downplay a little bit these sort of the
Speaker 1: technical recession signal. But you know, going back to what
Speaker 1: Mike said, I mean, the fact of the matter is,
Speaker 1: and we've been sort of writing about this is the
Speaker 1: problem with the Q two report. The Q two reports
Speaker 1: weak for domestic demand. I mean, it's it's the US
Speaker 1: stuff that looks weak in Q two, and that doesn't
Speaker 1: really bode well looking ahead, Jonathan, do you see the
Speaker 1: spreading to the labor market and how quickly? Because one
Speaker 1: thing I think we'll hear from the administration later is
Speaker 1: that the consumer is holding up. They'll say things like
Speaker 1: the labor market is still strong. Do you see it
Speaker 1: remain that way through the next quarter? Uh, we have.
Speaker 1: We have a pretty meaningful slowdown in payroll employment. We
Speaker 1: actually would make a case that it has been sort
Speaker 1: of artificially supported somewhat um in recent months. You've seen
Speaker 1: substantially more weakening and initial claims continuing claims the household
Speaker 1: survey data, and given the severity of the slowdown and
Speaker 1: aggregate demand, we would certainly expect the labor market to follow.
Speaker 1: You know, we're looking for payrolls to UH at some
Speaker 1: point in the third quarter, you know, run under two
Speaker 1: hundred k a month as part of that slowing on
Speaker 1: the way to further slowing in Q four. Do you
Speaker 1: wish you hadn't adjusted your your forecast yesterday? Kevin that
Speaker 1: it's pretty much money for the optics of getting these
Speaker 1: inventory deflators correct and everything. We were pretty close and
Speaker 1: getting the decline so and the and and and and
Speaker 1: altogether the components were sort of structured the way we expected.
Speaker 1: So I'm pretty happy because the original estimate was basically
Speaker 1: on the money. Chung anyway, Jonathan is good to catch up,
Speaker 1: Jonathan thing of that of ups. Francis Donald with US
Speaker 1: now Global Chief Economist strategist manual life very good at
Speaker 1: the workings of our g d P. What are we
Speaker 1: not analyzing in today's g d P? First look, francis,
Speaker 1: what's the big mystery? The big mystery is not today's
Speaker 1: g d P at all. Today's GDP will tell us
Speaker 1: what we already know, which is that this economy has
Speaker 1: materially slowed down. We are not in the roaring twenties.
Speaker 1: We are not in the reflation trade. And if you
Speaker 1: told most people that last year, they would not have
Speaker 1: believed you. The big mystery is what is the next
Speaker 1: four to six quarters look like? And this is really
Speaker 1: what concerns me. Is not recession or no recession this
Speaker 1: year or even three, it's what do we do if
Speaker 1: we're stuck in one percent growth for four to six quarters.
Speaker 1: That's much harder to trade, much harder for central banks
Speaker 1: to respond to. And francis, what's so important? I mean,
Speaker 1: I featured this earlier in Austin Fox of Bloomberg Opinion
Speaker 1: has done great work on it. Powell really scirted yesterday
Speaker 1: the housing plug in to j d P, which is,
Speaker 1: if we get yields up, mortgages are slammed, house ownership
Speaker 1: is slammed, and that means rent sustaining go higher. How
Speaker 1: does that work into the g d P of the nation. Well,
Speaker 1: comments like to say housing leads the market. Nail housing,
Speaker 1: you're gonna get the economy outlook pretty good. In fact,
Speaker 1: one of my favorite charts is one that shows that
Speaker 1: housing leads retail sales. So you know, really focusing on
Speaker 1: the housing side of the story is going to be critical.
Speaker 1: It is going to bring down inflation to a certain respect,
Speaker 1: and it's also very very bad. Every data point we
Speaker 1: have on housing is trending downwards. Frankly, Tom, Every data
Speaker 1: point we have across the gamut of major primary data
Speaker 1: points is pointing downwards. Right now, There's not a lot
Speaker 1: of places you can look for for optimism unless you
Speaker 1: do what Powell did yesterday, which is to call initial
Speaker 1: jobless claims rise not real, or to question the validity
Speaker 1: of the GDP number. Three weeks of it now and
Speaker 1: we might have a fourth week if it lights to Francis.
Speaker 1: Tell me why the market's been rallying then over the
Speaker 1: last month, why credit spreads have been tightening, and what
Speaker 1: you make if that using of financial conditions we've seen,
Speaker 1: oh bear market rallies, they get bigger the deeper you
Speaker 1: get into that bear market. I do not believe what
Speaker 1: we saw yesterday from Chair Powell was a pivot, although
Speaker 1: it certainly was the path towards the pivot, and markets
Speaker 1: care about second derivatives. But what Chair Powell told us
Speaker 1: is well, he's data dependent. Unfortunately. I don't think that
Speaker 1: inflation number is gonna come down fast enough in the
Speaker 1: next two to three months to take out too much
Speaker 1: of the pricing for two. But what this market is
Speaker 1: gonna do, in my opinion, is pricing more cuts for three.
Speaker 1: And gosh, that makes the fens job harder. Just like
Speaker 1: we saw yesterday. The weaker the outlook, the more we
Speaker 1: see those financial conditions fall, the more offsets what the
Speaker 1: Feds really trying to do, which is tightened. Look at
Speaker 1: the break even yesterday, the rallying that shouldn't be happening.
Speaker 1: When the Fed's tightening sending five bases points, they're probably
Speaker 1: not happy. That's actually funny that you mentioned next. I
Speaker 1: was just looking at the five year five year forward
Speaker 1: break evens, and they've been steadily rising. The more people
Speaker 1: believe in this FED pivot. So what do you expect
Speaker 1: in terms of pushing back against this? How does the
Speaker 1: FED react to a market that's not cooperating and getting
Speaker 1: ahead of itself, well, I wouldn't be surprised. And in
Speaker 1: the next few days, the next few weeks, we do
Speaker 1: see beneficials who come out and really try to walk back.
Speaker 1: Some of that speak to some of the hawkish risks
Speaker 1: that exists in this market. And that's why I think
Speaker 1: it's dangerous to make too big of a change in
Speaker 1: your fedue afriter a single meeting. And as we've seen
Speaker 1: this year, and a little bit of laughter, you could
Speaker 1: have these big rallies on FED day that are then
Speaker 1: reverse course the very next day. So fed Er Powell
Speaker 1: told us they wanted to be nimble. I think now
Speaker 1: is the time for economists and strategies to be nimble
Speaker 1: as well. Some people who are watching the show Francs
Speaker 1: are probably saying, oh my goodness, here she goes again
Speaker 1: being bearish. Thomas saying, we're sick of talking about recession.
Speaker 1: Company is adapt and we are hearing around the margin
Speaker 1: signs that the rally that we've been seeing is a
Speaker 1: signal that we've priced in so much bad news that
Speaker 1: people are beginning to find value. What's your argument against that, Well,
Speaker 1: I'm not sure if the she is you or me,
Speaker 1: but Parish has been effectively the right way to do this.
Speaker 1: And if you look at the economy, it is still
Speaker 1: trending downwards. Historically, what we would see is that when
Speaker 1: the economy is about two thirds of the way through
Speaker 1: its downturn, you can start to look for opportunities. And
Speaker 1: I will be the first to say that macro does
Speaker 1: not rule all. There will be pockets of advantage here.
Speaker 1: I think we should watch. I think the curb will
Speaker 1: still flatten, but we will reach a point in the
Speaker 1: next few months where you want that steep in our
Speaker 1: back on and there are always bottom up trades to
Speaker 1: be had. So the cool relation on macro, it does
Speaker 1: change over time. It's not the be all end all,
Speaker 1: but the macro does not look good. What it does
Speaker 1: I'll be bullish again, francis. What do our listeners in
Speaker 1: our viewers do is they jump from forward guidance and
Speaker 1: the comedy that it was to actually just looking at
Speaker 1: the data. How do you actually get through a week,
Speaker 1: get through a month, get through a core or where
Speaker 1: you are data dependent? The great question, Tom, because we
Speaker 1: don't know exactly what data the FET is looking at.
Speaker 1: And sure we asked him, and he said, well, we're
Speaker 1: looking at inflation. We want to see compelling evidence. What's
Speaker 1: compelling evidence probably a few months of month over month
Speaker 1: improvements in inflation that is heading downwards. They're looking at
Speaker 1: labor supply and demand, but not all data, apparently, because
Speaker 1: there's plenty of data that says jobless claims and unemployment
Speaker 1: is moving in the wrong direction. So we don't know
Speaker 1: the Fed's reaction function as much today as we did
Speaker 1: even forty hours ago. And that's going to make a
Speaker 1: lot more market volatility, a lot more two sided conversations.
Speaker 1: One of my fears is that we're gonna have a
Speaker 1: lot of beneficials speaking to both sides of the argument.
Speaker 1: So the clarity on what happens next has been reduced
Speaker 1: very significantly. And if you're at home and you're thinking,
Speaker 1: what do I look at, well, I'm in the same boat.
Speaker 1: Francis can sense the frustration, so let's address it. What
Speaker 1: do they need to do better? I'm not it's frustration
Speaker 1: so much And how much harder are you making the
Speaker 1: job of knowing what you're gonna do next? And the
Speaker 1: fence job isn't to make my job easier. The fence
Speaker 1: job is to contain inflation and and really improve the
Speaker 1: employment outlook. But what would be helpful is if the
Speaker 1: FED had more clarity on what elements of inflation they're
Speaker 1: looking at now. Two meetings ago we heard from share
Speaker 1: Powell that he was very focused on the headline inflation.
Speaker 1: But yesterday and he said core is the best leading indicator.
Speaker 1: So I'd love to hear more about what really are
Speaker 1: you targeting because we know that, for example, inflation expectations
Speaker 1: for consumers are driven much more by gasoline prices than
Speaker 1: they are by FED policy. So which elements of this
Speaker 1: are you really trying to control? And do you fundamentally
Speaker 1: believe that it's your job only only your job to
Speaker 1: contain inflation because inflation came from a lot of places.
Speaker 1: It's going to take a lot of places to fix.
Speaker 1: I'd love it if he could make count job Easia.
Speaker 1: I'll say I've been incredibly frustrikes it by the last
Speaker 1: few news conferences. Francis don'tald the of manual Life Investment Management.
Speaker 1: This is important and what you need to know is
Speaker 1: you need to hear the conversations while we're on commercial break.
Speaker 1: John Farrell and Walter pisk of light. Jed on the
Speaker 1: absolute tensions of the front line of Liverpool. This is
Speaker 1: Sala and Monte Walter, Liverpool their front end. They're not
Speaker 1: on the same page. I mean there's some real tension.
Speaker 1: There is Apple on the same page or is it
Speaker 1: a Salomon a metaphor? First of all, Tom for not
Speaker 1: being on the same page. Liverpool almost pulled off four
Speaker 1: trophies last year. Was it was tight at the end,
Speaker 1: but that's and I guess Apple being on the same
Speaker 1: page with earnings this quarter probably, but as you know,
Speaker 1: with the kind of concern over inflation and the economy,
Speaker 1: a lot of the a lot of the focus is
Speaker 1: gonna be on the elect for next quarter. I want
Speaker 1: you to discuss the pricing power Apple has to manage
Speaker 1: down the income statement. I never hear a discussion of
Speaker 1: if they go margins are under threat at whatever line
Speaker 1: on the income statement. Do they have pricing power? I
Speaker 1: mean they have pricing power for the quality of the products.
Speaker 1: But I mean Apple has been known to reduce the
Speaker 1: price of their product in certain markets, and I think
Speaker 1: there was some reports even last week in China Um
Speaker 1: there was some reduction in the price of iPhones. Have
Speaker 1: done this in other markets throughout the world. Why you
Speaker 1: don't necessarily see it crush their margins as you've had
Speaker 1: this mix shift over the years in terms of services,
Speaker 1: which has been a higher margin business for them, so
Speaker 1: they've been able to to generate a very strong margin.
Speaker 1: Currencies are a hard thing to fight, though, right this
Speaker 1: is a this is a global company, so I think
Speaker 1: you know, currencies are certainly something they're gonna They're gonna
Speaker 1: have an impact also in terms of the guidance, and
Speaker 1: they can't do much about that well to the top
Speaker 1: tier iPhone though going on sale, that seems pretty read
Speaker 1: to me. Are you saying that's not a big deal
Speaker 1: as some people are making it. I think it's a
Speaker 1: big deal because it's China, and China has been such
Speaker 1: a big part of the growth gen you've seen in
Speaker 1: other emerging markets in the past, which I think it
Speaker 1: may be more understandable, but China has been able to
Speaker 1: grow without seeing these types of price cuts. So I
Speaker 1: think when we're all looking for kind of tea leaves
Speaker 1: on what's the impact of economic weakness, you can't ignore
Speaker 1: that as as one of those things to watch, and
Speaker 1: maybe that's going to be indicative of how they look
Speaker 1: for growth or what their outlook is for growth for
Speaker 1: next quarter and the following quarter. So they're all these nodes, right.
Speaker 1: We've heard from Qualcom, We've heard from other chip providers
Speaker 1: that there has been diminishing demand for smartphones for a
Speaker 1: number of other personal computing devices. How much is baked
Speaker 1: in in terms of disappointment versus the unknown unknown right
Speaker 1: of an even bigger slowdown than expected. I think a
Speaker 1: lot of that is baked in. But remember the iPhone
Speaker 1: is of the revenue and even a greater percent of
Speaker 1: the profit of the company. And you have to look
Speaker 1: at what's going on in Telco Land right now, where
Speaker 1: they had a surge of growth during the pandemic in
Speaker 1: terms of number of customers signing up uh, and then
Speaker 1: there was a lull. And if they want to fight
Speaker 1: each other to grab customers, their willingness to subsidize I
Speaker 1: think could increase or sustain. Like Verizon as an example,
Speaker 1: which is struggling to try to generate any type of
Speaker 1: subscriber growth, doesn't seem like they're going to give up
Speaker 1: in trying to give you eight hundred dollars or nine
Speaker 1: dollars to get a new iPhone, and I think that's
Speaker 1: the data that we're seeing. So I think that's one
Speaker 1: of the offsets to a weaker customer and their ability
Speaker 1: to buy a very expensive iPhone is the willingness of
Speaker 1: wireless operators around the world, but particularly in these markets
Speaker 1: that are still huge for Apple and these you know,
Speaker 1: these high high paying markets to subsidize that customer to
Speaker 1: upgrade their phone. Which raises the question of how much
Speaker 1: the behemoths have an advantage in this environment, how much
Speaker 1: are used to seeing a distinguishing a factor of the
Speaker 1: haves and the have nots within big tech as this
Speaker 1: earning season grinds on. I mean, that's a great point
Speaker 1: in terms of you know, the people in society, they're
Speaker 1: getting impacted. It's it's you know, those that are buying
Speaker 1: iPhones might have a different impact than you know, some
Speaker 1: of the off that you're seeing me getting announced by
Speaker 1: some of these major companies. But again, like if you
Speaker 1: have economic weakness globally and you're trying to sell a
Speaker 1: twelve product, you can't just ignore that that's going to
Speaker 1: have some impact. There. There will be some mitigating factors
Speaker 1: like again an operator willing to pay you um to
Speaker 1: to stay on their network or to switch over to
Speaker 1: your network. But that's still a pretty big headwind depending
Speaker 1: on how long this lasts. And we've got delayed bills
Speaker 1: in the mix. Well to T Mobile talked about the
Speaker 1: same thing as well, what do you make of that?
Speaker 1: What's the connection there? I mean, first of all, I
Speaker 1: think a T T was a couple of days, so
Speaker 1: to me, that was more frankly an excuse because they
Speaker 1: gave very bad free cash flow guidance earlier in the year.
Speaker 1: But you're right. G Mobile tried to spin this yesterday.
Speaker 1: But the bottom line is if you read through what
Speaker 1: this CEO Mike Seaver said, they're buildings. The payments there
Speaker 1: were also getting delayed. So yeah, I mean you're you're
Speaker 1: seeing in Walmart, obviously you've seen evidence of, you know,
Speaker 1: a weakening consumer um. Again, it's just if you're week
Speaker 1: and someone's willing to pay for your phone, maybe you're
Speaker 1: more willing to do it. The challenge here is what
Speaker 1: the operators want to get out of this is if
Speaker 1: they give you that free phone, they're not they're not,
Speaker 1: you know, they're not. They're They're expecting something back and
Speaker 1: they want you to upgrade to a higher end rape
Speaker 1: plan and at some point the consumers not that they
Speaker 1: recognize what's happening and say, look, I don't want to
Speaker 1: pay an extra ten twenty bucks a month on my
Speaker 1: rape plan. So even if you're gonna give me eight
Speaker 1: dollars for her phone, it doesn't resonate. And I think
Speaker 1: we saw that with with Veries in this quarter. They
Speaker 1: were willing to pay customers, you know, for these phones,
Speaker 1: and they still didn't get people switching to their network.
Speaker 1: It's I don't understand why the company continues to do that,
Speaker 1: but at the moment, this is why. This is what
Speaker 1: these operators are saying, that they're willing to continue to
Speaker 1: try and subsidize and keep these customers. Well, it's just awesome.
Speaker 1: As always what as there of light shed This is
Speaker 1: a lot of fun because she comes with bulletproof academics.
Speaker 1: Berkeley was known for decades for chemistry, and part of that,
Speaker 1: of course, is chemical engineering. She's a chemy out of Berkeley.
Speaker 1: Gennine Way joins us right now with Barclayser, senior US
Speaker 1: Oil and Gas Exploration and production analyst, Jenny, and I'm
Speaker 1: gonna cut to the chase. The airlines needed one to
Speaker 1: three crises before they got capital discipline, before they got
Speaker 1: the religion of operations. How is oil doing in this
Speaker 1: boom at capital discipline? Are they going to go off
Speaker 1: to the New Siberia and wasted all the way? Oh?
Speaker 1: Good morning, Thanks for having Barclay's I love it. Let's
Speaker 1: just get right at it. Um. You know, I think
Speaker 1: you're hitting at the crux of the issue. It's capital discipline.
Speaker 1: Whether it's going to hold is the number one question
Speaker 1: from investors. There's a ton of skepticism on that in
Speaker 1: the bucket, and that's kept people away. We just checked
Speaker 1: in with all of our companies ahead of the quarter,
Speaker 1: and every single conversation the companies were still on the
Speaker 1: right narrative, which was low growth, backstree cash flow. Okay,
Speaker 1: well let's go, let's go right to the chase Juning.
Speaker 1: Just because of time, Chevron has always been the wild card.
Speaker 1: They're the Arco of the modern world, explained Chevron's capital discipline.
Speaker 1: Who is keeping them in line? Investors are keeping Chevron
Speaker 1: in line, just like how they're keeping every other company
Speaker 1: in line. Energy was the worst performing sector for a
Speaker 1: number of years. Then that's because they were destroying value.
Speaker 1: No returns. Nothing was getting returned to shareholders that was
Speaker 1: anything meaningful, and the shareholders are spoken. And what Chevron
Speaker 1: did was a reducer capolics budget by five billion dollars
Speaker 1: a year for the next five years, which is huge,
Speaker 1: and they've embarked on a big buyback program. You know,
Speaker 1: the buyback right now is five to ten billion, and
Speaker 1: we think that they're going to raise the low end
Speaker 1: of that. We're already at ten billion for the year
Speaker 1: and we think our investors are also at ten billions.
Speaker 1: So the market has really instilled capital discipline on the
Speaker 1: whole sector. Janine earlier this morning, she'll posted a record
Speaker 1: profit for the second straight quarter and they also accelerated
Speaker 1: by backs. Tomorrow we get the likes of XA and
Speaker 1: other oil majors that are reporting in the US. What's
Speaker 1: the political risk as they start to report these blockbuster
Speaker 1: bonanza earnings and the heels of oil prices that have
Speaker 1: become a campaign speaking point. Right we have mid term
Speaker 1: elections coming up in November. It's a huge focus. UM
Speaker 1: oil companies are definitely in the crosshairs because of all
Speaker 1: the profits that they're making. But let's just face it,
Speaker 1: you know, the companies are making a lot of money
Speaker 1: because oil prices are up, but they didn't make a
Speaker 1: lot of money for a lot of the other years.
Speaker 1: So what they've been doing with the cash is they've
Speaker 1: been enhancing the balance sheet and they're giving the money back.
Speaker 1: So you know, we already saw that companies are delivering
Speaker 1: on this show me the money mentality that investors have
Speaker 1: right now. Um, we think that Exxon could potentially talk
Speaker 1: about their thirty billion dollar buyback program. They just tripled
Speaker 1: it last quarter, so it's unlikely that they increase it
Speaker 1: this quarter, but we think that maybe there could be
Speaker 1: some shifting our front end loading of that. We just
Speaker 1: talked about Chevron how we think they're going to raise
Speaker 1: the bottom end of their buy back guidance and so
Speaker 1: that will vote very well. But you know, companies have
Speaker 1: a couple of options. They can either reinvest in growth
Speaker 1: with all that cash, and that's pretty much no not
Speaker 1: right now. They can pay it out via dividend and
Speaker 1: by backs, which we think they're doing, or they can
Speaker 1: hold the cash. But that's exactly the point. It's a
Speaker 1: no note right now to invest in more production at
Speaker 1: a time when a lot of politicians are saying that's
Speaker 1: exactly what's required of these companies. What is the risk?
Speaker 1: How do you price out the chance of perhaps some
Speaker 1: sort of excess tax put on these companies if they
Speaker 1: don't invest in production or some other policy kind of
Speaker 1: check to try to, if nothing else, be a talking
Speaker 1: point heading into the mid terms. That that's a good point.
Speaker 1: We think the political risk in the headlines is very high,
Speaker 1: again because we have mid term elections, UM, but in
Speaker 1: terms of anything actually getting through, we think the risk
Speaker 1: is low. So we've seen a windfall tax in the UK.
Speaker 1: We think that's highly unlikely in the US right now.
Speaker 1: UM oil companies they need a more consistent, friendly fiscal
Speaker 1: regime and a constant regulatory environment in order for them
Speaker 1: to really commit to plans and to increase growth. And
Speaker 1: they don't have certainty in what taxes are going to be,
Speaker 1: permits are going to go through, if frackinge is going
Speaker 1: to be allowed. Now, that's when they're not able to plan,
Speaker 1: and then you won't see as much production growth and
Speaker 1: policy continuity. It's a massive problem has been for a
Speaker 1: while now. Jename, Thank you, Jenna lay That of Bankley's
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Speaker 1: the terminal. I'm Tom keene In. This is Bloomer h