WEBVTT - Weak Oil Demand May Push Price Back Near $30: Schork 0:00:01.360 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Swiney, along 0:00:04.120 --> 0:00:06.200 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.320 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.600 along with essential market moving news. Find the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple Podcasts or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.040 and on Bloomberg dot com find I'm looking at the 0:00:21.120 --> 0:00:23.800 chart of w t I crude here looking back. Just 0:00:23.840 --> 0:00:27.560 since during the month of September, uh w t I 0:00:27.600 --> 0:00:30.360 has gone from about forty three dollars a barrel down 0:00:30.360 --> 0:00:33.360 to where we are today at thirty seven sixty five barrel, 0:00:33.400 --> 0:00:36.320 so quite a move down. When we talk oil, we 0:00:36.400 --> 0:00:39.280 talked supply models, we talked demand models, and when we 0:00:39.320 --> 0:00:41.680 do that, there's no one better to chat with than 0:00:41.720 --> 0:00:44.640 Stephen Short, President of the Short Group. Steven, thanks so 0:00:44.680 --> 0:00:47.559 much for joining us here. Again, this is a commodity 0:00:47.560 --> 0:00:49.360 that had been trading in north of forty dollars a 0:00:49.440 --> 0:00:52.680 barrel pretty consistently. Now we pulled back to under thirty eight. 0:00:52.880 --> 0:00:55.480 What's going on in the global oil market? We have 0:00:55.560 --> 0:00:58.920 to keep in mind all commodity markets trade in seasonal blocks, 0:00:59.080 --> 0:01:01.120 so of course back in the spring we had that 0:01:01.160 --> 0:01:05.360 that debacle with oil prices going negative. Then we snapped 0:01:05.400 --> 0:01:08.840 back and we stayed in that forty low forty mid 0:01:08.880 --> 0:01:12.680 forty dollar range for the entire summer. Now, the problem 0:01:12.800 --> 0:01:15.800 was the summer is your peak demand season for oil 0:01:15.840 --> 0:01:19.480 for gasoline, and on that snap back from the debacle, 0:01:19.840 --> 0:01:22.400 we only got as high as to where we were 0:01:22.480 --> 0:01:26.600 right before prices tanked, so we couldn't get much higher 0:01:26.640 --> 0:01:29.120 and we stayed in a very tight range. We demand 0:01:29.480 --> 0:01:33.000 historically is at its highest, but of course this is 0:01:33.000 --> 0:01:36.399 not a normal year. Demand for crude oil average two 0:01:36.440 --> 0:01:39.480 point five to two point seven million barrels a day 0:01:39.520 --> 0:01:43.160 below normal. Now that we have the Labor Day holiday, 0:01:43.200 --> 0:01:46.640 it's September, we now go into that next seasonal block. 0:01:46.760 --> 0:01:49.680 We're going from the peak demand season to the negative 0:01:49.880 --> 0:01:53.120 of the demand season. So over the next two months, 0:01:53.160 --> 0:01:57.440 as refineries go into their maintenance season they buy fewer barrels, 0:01:57.640 --> 0:02:00.640 we'll see demand dropped by an additional nine hundred thousands 0:02:00.680 --> 0:02:03.480 to a million barrels a day. So it's clearly a 0:02:03.520 --> 0:02:06.960 demand story right now. The US producer has done a 0:02:07.080 --> 0:02:10.320 great job taking two million barrels a day of production 0:02:10.440 --> 0:02:13.239 out of the market. But as I said before, it's 0:02:13.280 --> 0:02:17.079 not good enough because demand is still greater than two 0:02:17.120 --> 0:02:19.360 million barrels a day. So the producer has done a 0:02:19.400 --> 0:02:22.000 great job, but they're gonna have to continue. And it's 0:02:22.040 --> 0:02:24.560 all about the demand right now, and we're going into 0:02:24.600 --> 0:02:28.040 the weakest demand part of the year. How in the 0:02:28.120 --> 0:02:32.440 longer run does China impact things? China we know it 0:02:32.520 --> 0:02:36.480 wants to increase it's reserves of crude beginning in one 0:02:36.480 --> 0:02:40.560 does that impact US producers at all? Absolutely? The US 0:02:40.680 --> 0:02:44.280 now is of course a virgin in UH exporter of 0:02:44.400 --> 0:02:48.280 crude oil, and in fact, since last October, five out 0:02:48.280 --> 0:02:50.560 of every nine weeks, the US has been a net 0:02:50.560 --> 0:02:54.359 exporter that is, petroleum products, which is not news. Now 0:02:54.440 --> 0:02:57.280 States has been a net export of petroleum products guestline 0:02:57.320 --> 0:02:59.960 diesel for a number of years. Now what has chain 0:03:00.040 --> 0:03:02.639 change days over the year. We're now an exporter of 0:03:02.800 --> 0:03:05.359 crude oil. So five out of the nine weeks we 0:03:05.440 --> 0:03:08.240 have more oil going out of the Nited States than 0:03:08.360 --> 0:03:10.959 coming in. And of course with China, a lot of 0:03:11.000 --> 0:03:14.440 that oil is destined for those markets. Oil at these 0:03:14.600 --> 0:03:18.040 levels are is competitive for the Chinese consumer. So that's 0:03:18.080 --> 0:03:22.200 certainly when we transition back into the demand season. We'll 0:03:22.280 --> 0:03:24.920 see a peak later in this year as we get 0:03:24.960 --> 0:03:28.239 into the holidays, then we'll go into another decline in 0:03:28.320 --> 0:03:31.320 demand through the first quarter, and then we look ahead 0:03:31.360 --> 0:03:34.160 to the winter and demand picks up again. So clearly, 0:03:34.280 --> 0:03:37.279 out in the long run, China certainly is a significant 0:03:37.920 --> 0:03:42.600 force the supportive of US energy production. Steven, aside from 0:03:42.600 --> 0:03:47.200 the seasonal qualities or variabilities, is there a sense do 0:03:47.200 --> 0:03:50.360 you have a sense that demand for oil post pandemic 0:03:50.520 --> 0:03:54.040 will in fact be structurally lower. Yes, absolutely, I think 0:03:54.120 --> 0:03:55.960 this is the way we've been going in a number 0:03:56.000 --> 0:03:59.600 of years. The oil market is clearly a a twilight 0:03:59.800 --> 0:04:04.480 in history as we make greater uh stribes for technology, 0:04:05.200 --> 0:04:09.720 electric hybrid so forth, battery storage. Uh. Clearly, this is 0:04:09.840 --> 0:04:13.320 the market was moving there naturally, especially when you look 0:04:13.360 --> 0:04:16.440 at like I'm a dinosaur. I'm in my fifties, but 0:04:16.600 --> 0:04:19.720 my children, all of our children, UH that they want 0:04:19.760 --> 0:04:22.440 they're they're making the push. That's where your next market 0:04:22.560 --> 0:04:25.800 segment is for the next generation. So clearly we were 0:04:25.800 --> 0:04:28.640 already moving in that direction, and I think what we've 0:04:28.720 --> 0:04:31.559 seen now in the pandemic, I think that will even 0:04:32.000 --> 0:04:35.440 further it along at a quicker pace Stephen. How many 0:04:35.480 --> 0:04:37.840 more bankruptcies are we going to see or what kind 0:04:37.880 --> 0:04:40.200 of consolidation are we going to see before the pandemic 0:04:40.320 --> 0:04:44.560 is over. Absolutely so. When we had our original downturn 0:04:44.640 --> 0:04:49.080 in oil prices and then followed again earlier this year, 0:04:49.480 --> 0:04:52.760 all the concern was for the smaller shell producer. But 0:04:52.839 --> 0:04:55.080 now we're starting to see some of the big boys 0:04:55.480 --> 0:04:59.120 in the room. They're struggling. Uh you know the latest 0:04:59.160 --> 0:05:01.320 news being x on are they are they not going 0:05:01.400 --> 0:05:04.360 to cut the dividend? How many employees are they going 0:05:04.480 --> 0:05:06.560 to lay off? Now? I'm not saying the big guys 0:05:06.640 --> 0:05:10.760 are going going down the tubes, but certainly the smaller producer. 0:05:11.200 --> 0:05:14.160 I think we've we've we've seen the bankruptcy is already, 0:05:14.400 --> 0:05:18.160 We're seeing consolidation, and as we take in I'm fearful 0:05:18.440 --> 0:05:21.960 we take another leg down during this the nature of demand. 0:05:22.000 --> 0:05:24.479 Over the next two months, we see oil back into 0:05:24.520 --> 0:05:27.160 the mid to low thirties, potentially back into the twenties, 0:05:27.480 --> 0:05:31.479 and certainly that's going to hasten another I think round 0:05:31.520 --> 0:05:36.320 of consolidation in this industry. And of course we continue 0:05:36.400 --> 0:05:39.599 to get inventory reports, a couple of them per week, 0:05:39.680 --> 0:05:41.520 so we will keep a very very close eye on 0:05:41.560 --> 0:05:44.039 the oil prices right now still in New York below 0:05:44.400 --> 0:05:47.239 forty a barrel. Or thanks very much to Stephen Shork 0:05:47.640 --> 0:05:50.280 coming to us all the way from Villanova, Pennsylvania. Or 0:05:50.440 --> 0:05:52.680 is thrilled to have the editor of the short report on. 0:05:55.120 --> 0:05:58.080 So it appears that some employees that JP Morgan Chase 0:05:58.160 --> 0:06:00.720 and may have had on some very naughty thing. It's 0:06:01.000 --> 0:06:03.680 really quite a disturbing story. And Michelle Davison's freetar and 0:06:03.760 --> 0:06:06.919 not a rag and investigated and found that JP Morgan 0:06:06.960 --> 0:06:09.760 found some of its employees and probably applied for and 0:06:09.960 --> 0:06:15.800 received COVID relief money that was intended for legitimate US businesses. So, 0:06:15.880 --> 0:06:19.480 Michelle Davis, welcome and thanks for a phenomenal story. Please 0:06:19.520 --> 0:06:23.920 give us some of the details. Yeah. So JP Morgan 0:06:24.040 --> 0:06:27.080 earlier this week surprised a lot of folks when they 0:06:27.279 --> 0:06:29.560 spent out a memo to all two d fifty six 0:06:29.600 --> 0:06:33.080 thousand of their workers saying that they had found instances 0:06:33.160 --> 0:06:36.560 in which customers had misused government relief programs. And they 0:06:36.600 --> 0:06:39.400 said that they were probing employees involvement in that. And 0:06:39.920 --> 0:06:42.520 this memo earlier in the week didn't satisfy exactly what 0:06:42.760 --> 0:06:45.520 employees had done. But a store is confirmed to us 0:06:45.720 --> 0:06:49.880 wait yesterday that JP Morgan found that employees had some 0:06:49.960 --> 0:06:53.160 of the employees had improperly applied for and received funds 0:06:53.200 --> 0:06:56.600 as part of the Economic Injury Disafter Loan Program or 0:06:57.120 --> 0:07:00.680 the ideal for short. That program is different from the 0:07:00.760 --> 0:07:03.680 p p P program that has gotten a lot more 0:07:03.720 --> 0:07:07.360 press coverage. UM you know the Small Business Administration's program 0:07:07.480 --> 0:07:10.920 that UH provided forgivable loans to businesses through the e 0:07:11.080 --> 0:07:14.200 I d L program, Businesses could basically get grants of 0:07:14.880 --> 0:07:17.800 one dollar to ten thousand dollars um as long as 0:07:17.840 --> 0:07:21.240 they applied directly through the s b A. And with 0:07:21.560 --> 0:07:26.800 this program, UH, companies didn't have to apply through banks. 0:07:26.880 --> 0:07:28.840 The money was just dis first directly to the applicants. 0:07:28.880 --> 0:07:30.680 The only requirement was that they had a bank account. 0:07:30.720 --> 0:07:34.480 And so what we found was that JP Morgan discovered 0:07:34.560 --> 0:07:36.320 this fraud because it turns up that some of their 0:07:36.360 --> 0:07:40.880 employees had fraudulently received this money and it had been 0:07:40.920 --> 0:07:44.400 deposited into their checking accounts, into their personal JP Morgan 0:07:44.520 --> 0:07:48.040 checking accounts, and so JP Morgan's discovered it because they 0:07:48.440 --> 0:07:50.680 were on the alert to look out for fraud in 0:07:50.720 --> 0:07:53.960 this program. These people have now been let go. But 0:07:54.080 --> 0:07:56.840 we understand that JP Morgan has found a ton of 0:07:56.920 --> 0:08:00.800 fraud among its customer base across UH all of the 0:08:00.920 --> 0:08:04.800 government relief programs that were ruled out because of COVID, 0:08:05.040 --> 0:08:07.440 not only to PPP but also the ideals as we 0:08:07.520 --> 0:08:11.160 were just talking about, and also through unemployment benefit some 0:08:11.320 --> 0:08:14.640 shows already. Are these just random employees within the sprawling 0:08:14.760 --> 0:08:18.920 JPMorgan complex or is there some kind of systematic issue here. 0:08:19.920 --> 0:08:24.440 So what we understand is that the employees that participated 0:08:24.440 --> 0:08:27.040 in this, we're not acting as agents of the bank. 0:08:27.080 --> 0:08:30.120 It's it's not like they were, you know, people in 0:08:30.240 --> 0:08:33.719 charge of applying of approving p PP loans and you 0:08:33.800 --> 0:08:37.199 know they knowingly allowed fraud to happen. This seems like 0:08:37.640 --> 0:08:41.160 employees that we're just randomly scattered across the bank that 0:08:41.280 --> 0:08:45.439 saw an opportunity to get money basically free money out 0:08:45.480 --> 0:08:48.440 of the I d L program and you know, applied 0:08:48.480 --> 0:08:52.599 for and received this money. Um, we also understand that 0:08:52.840 --> 0:08:55.800 of the fraud JP Morgan has found so far, and 0:08:56.200 --> 0:08:59.680 they're they're still working with authorities right now to monitor 0:08:59.840 --> 0:09:01.680 check the accounts, just you know, to see if there's 0:09:01.679 --> 0:09:05.120 any suspicious behavior, suspicious amounts of money hitting people's checking 0:09:05.160 --> 0:09:09.360 accounts or or you know, being used to purchase Lamborghinis 0:09:09.440 --> 0:09:11.880 or what have you. Um, it's our understanding that all 0:09:11.960 --> 0:09:14.079 of that that they're looking at right now, of that, 0:09:14.320 --> 0:09:19.240 only a small percentage has been tied back to employees. Right. 0:09:19.360 --> 0:09:22.320 In the memo sent out to staff on Tuesday, Javie 0:09:22.320 --> 0:09:25.000 Morgan said it identified conduct by customers that didn't make 0:09:25.040 --> 0:09:27.040 different sils and may even believe illegal, and that some 0:09:27.160 --> 0:09:30.839 employees had fallen shorths on ethical standards to However, for 0:09:30.920 --> 0:09:33.480 this story, a spokeswoman declined to comment. Do we know 0:09:33.880 --> 0:09:38.600 roughly how many actual employees took the ideal funds? Michelle? 0:09:38.640 --> 0:09:40.959 Do any idea whether this is just a small number 0:09:41.440 --> 0:09:44.400 that you know, may have taken a thousand dollars or 0:09:44.400 --> 0:09:48.599 two thousand dollars and will be taken care of immediately 0:09:48.720 --> 0:09:51.760 when they're identified, I'm sure by Japan Morgan, or if 0:09:51.800 --> 0:09:54.160 it's if it's actually a lot more widespread than that. 0:09:55.640 --> 0:09:59.719 At this point, we don't know. We know that it's several, um, 0:10:00.040 --> 0:10:04.600 but that's as much as we know. Uh. The one 0:10:04.920 --> 0:10:07.760 right spot is that the e I d L program, 0:10:08.240 --> 0:10:11.040 which seems to have been the most heavily abused um 0:10:12.040 --> 0:10:15.679 in terms of fraud. Uh the money ran, It ran 0:10:15.720 --> 0:10:18.800 out of money in the middle of July. So it 0:10:18.920 --> 0:10:21.320 doesn't seem like, you know, there's a chance that more 0:10:21.360 --> 0:10:24.160 fraud is going to be committed. It's just there might 0:10:24.200 --> 0:10:28.360 be more fraud detected at this point. So Muchel, you 0:10:28.720 --> 0:10:31.320 mentioned that, are you reported that the bank had fired 0:10:31.400 --> 0:10:34.040 these employees. Is what's been the overall response from the 0:10:34.120 --> 0:10:41.760 institution here. Uh So, my understanding is that JT. Morrigan, 0:10:42.400 --> 0:10:45.760 in disclosing to employees all two d fifty six global 0:10:46.320 --> 0:10:49.240 two hundred fifty six thousand global employees and disclosing this, 0:10:49.679 --> 0:10:52.400 they went against the grain. You know, you don't normally 0:10:52.440 --> 0:10:56.000 see a bank telling people, you know, are some of 0:10:56.040 --> 0:10:58.120 our employees may have done illegal things and a lot 0:10:58.120 --> 0:11:00.480 of our customers have done illegal things. And what we 0:11:00.600 --> 0:11:04.839 understand is that the bank's leaders kind of made a 0:11:05.040 --> 0:11:08.199 calculation where they thought, Okay, this could hit our reputation 0:11:08.360 --> 0:11:11.640 by disclosing this. But the view was that it made 0:11:11.679 --> 0:11:15.600 more sense to tell employees to be alert for fraud 0:11:15.720 --> 0:11:19.679 so that they could help catch it, um than just 0:11:19.800 --> 0:11:22.920 staying silent. So that is that explains some of why 0:11:22.960 --> 0:11:26.440 they did this. Yeah, so so according to your source, 0:11:26.600 --> 0:11:31.240 the bank does you know, has already fired people that 0:11:31.320 --> 0:11:36.160 it believes improperly tap the money, correct, Michelle, that's correct. Yeah, 0:11:36.520 --> 0:11:39.839 I understand that there's still they're they're still investigating, so 0:11:40.720 --> 0:11:42.920 there could be more people fired, but at this point, 0:11:43.000 --> 0:11:45.160 the people that have been confirmed to have committed fraud, 0:11:45.360 --> 0:11:47.840 they have been let go. Michelle, thank you so much 0:11:47.880 --> 0:11:51.320 for that. We really appreciate this excellent reporting. Michelle Davis, 0:11:51.400 --> 0:11:54.120 financial porter for Bloomberg News. Just a crazy story of Annie. 0:11:54.559 --> 0:11:57.079 I guess there's so much money slashing around there that 0:11:57.160 --> 0:12:00.200 there's bound to be fraud throughout the system. But again, 0:12:00.200 --> 0:12:02.560 when you see it at the bank, lebots a little. Yeah. 0:12:02.600 --> 0:12:05.320 I mean, it's it's terribly sad. It's very very disturbing. 0:12:05.520 --> 0:12:08.720 It takes away grants and loans from people who really 0:12:08.800 --> 0:12:11.319 needed it as opposed to be get over employed therefore 0:12:11.640 --> 0:12:13.760 presumably didn't also have a small business on the side 0:12:13.920 --> 0:12:19.640 or need it, and it's just it's just terrifying. Well, 0:12:19.720 --> 0:12:22.000 let's start with the US economic data. Plenty to talk 0:12:22.040 --> 0:12:24.599 about in Europe today as well, but this morning we 0:12:24.679 --> 0:12:26.960 got initial topless claims coming in a little more than 0:12:27.040 --> 0:12:31.280 expected eight hundred eighty four thousand, continuing claims much higher 0:12:31.600 --> 0:12:35.080 thirteen point three eight five million. And we also got 0:12:35.200 --> 0:12:39.600 p p I data a little higher than expected both 0:12:39.880 --> 0:12:43.520 for the final demand month over month headline figure and 0:12:43.640 --> 0:12:46.240 also you know ex food and energy year over year, 0:12:46.280 --> 0:12:48.400 which rules quite substantially. Let's bring in someone who can 0:12:48.480 --> 0:12:50.319 make sensible all this for a Steve Blitz is chief 0:12:50.440 --> 0:12:54.680 US economist for T. S. Lombard. Steve, can we begin 0:12:54.760 --> 0:12:56.599 with the p p I data, because we all know 0:12:56.760 --> 0:12:59.559 that the labor market is in a terrible way. What 0:12:59.760 --> 0:13:05.320 does the PPI data say about inflation? Nothing? It says 0:13:05.320 --> 0:13:08.640 a lot of It says a lot about prices. UM, 0:13:08.960 --> 0:13:12.760 and there's a difference between prices and inflation. And what 0:13:12.920 --> 0:13:17.120 the p p I is reflecting is shortages and supply 0:13:17.320 --> 0:13:21.280 chain issues that are still um kind of getting back 0:13:21.840 --> 0:13:25.720 online in some case, in some cases still disrupted. Uh. 0:13:25.960 --> 0:13:28.120 And you've got a big rush to get back to 0:13:28.559 --> 0:13:30.640 produce things because he was shut down for a while. 0:13:30.720 --> 0:13:35.160 So UM. I think of these price changes really as 0:13:35.280 --> 0:13:38.400 healthy in the sense that this is doing what the 0:13:39.280 --> 0:13:42.760 FED prevents the capital markets from doing, which is price 0:13:42.920 --> 0:13:47.240 changes to direct effort and money and all that. Uh. 0:13:47.559 --> 0:13:50.520 In different directions, and that's where the well functioning market 0:13:50.559 --> 0:13:54.000 economy does so. So Steve, when you say nothing in 0:13:54.160 --> 0:13:57.199 terms of inflation, explained to us the p p i 0:13:57.760 --> 0:14:00.640 X food and energy, so all other goods. Doucers are 0:14:00.679 --> 0:14:04.840 paying point six more in August than they were last year, 0:14:06.040 --> 0:14:08.880 and economist are looking for them to paying point more. 0:14:09.040 --> 0:14:12.240 How is that not more difficult for producers to pay 0:14:12.400 --> 0:14:18.640 and therefore inflationary well, because over time the prices that 0:14:18.840 --> 0:14:22.920 they are paying for these inputs will go down as 0:14:23.000 --> 0:14:28.480 supply chains come back on. In addition, you talk about 0:14:29.160 --> 0:14:34.760 moving those prices forward with high levels of unemployment, where 0:14:34.760 --> 0:14:38.000 you're continuing to add people to the unemployment roles in 0:14:38.320 --> 0:14:42.120 terms of initial well above the prior recession. UH, then 0:14:42.920 --> 0:14:47.000 the demand side, broadly speaking, it's going to be weak. 0:14:47.920 --> 0:14:51.920 And so that is not a combination that is going 0:14:52.040 --> 0:14:56.520 to allow firms to pass through these prices and sustain margins. 0:14:57.080 --> 0:15:00.200 So their input costs will go down over time as 0:15:00.320 --> 0:15:04.680 these UH supply issues change and the demand's not going 0:15:04.720 --> 0:15:07.320 to be there. And that's why I say it's not inflation. 0:15:07.840 --> 0:15:12.120 Inflation in this country. You get inflation when you've got 0:15:12.240 --> 0:15:16.200 a lot of leverage buying going on, uh to buy 0:15:16.320 --> 0:15:20.360 real goods and UH, that kind of leverage is what 0:15:20.800 --> 0:15:23.440 this is what Defense been trying to create for the 0:15:23.560 --> 0:15:27.760 last and odd years. Uh. That's when you start to 0:15:27.840 --> 0:15:31.960 get a real inflation. Uh, this is just price changes. 0:15:32.760 --> 0:15:36.160 Prices are up, now, prices can go down. All right, Steve, 0:15:36.240 --> 0:15:38.080 let's switch. Here is a little bit and more data 0:15:38.160 --> 0:15:41.800 this morning out the jobless claims UH came in at 0:15:41.840 --> 0:15:46.840 eight thousand. The expectation consensus was eight. Give us your 0:15:46.920 --> 0:15:49.440 sense of kind of where we are in the jobs market, 0:15:49.480 --> 0:15:55.280 seems like or at the stubbornly high level of jobless claims. Yeah. 0:15:55.560 --> 0:16:00.320 And as I mentioned just before, I think sick hundred 0:16:00.320 --> 0:16:02.640 and eighty thousand or something was the peak month of 0:16:02.760 --> 0:16:06.480 January of two thousand nine in the last procession. So 0:16:06.640 --> 0:16:09.920 that just tells you how high this initial claims number 0:16:09.960 --> 0:16:16.920 really is. UH. And that was ten unemployment. Now you've 0:16:17.000 --> 0:16:20.040 got two job markets, and that's what makes these gross 0:16:20.360 --> 0:16:24.040 backgrod numbers so difficult to discern. You've got the people 0:16:24.080 --> 0:16:27.280 who are temporarily laid off back in the spring, and 0:16:27.400 --> 0:16:31.040 about half of them are back on the job. As 0:16:31.240 --> 0:16:34.560 the reopenings continue, I would expect more people to get 0:16:34.600 --> 0:16:36.920 back on the job. And that's all a very very 0:16:37.040 --> 0:16:41.840 positive event. By the same token, there is an emerging 0:16:42.040 --> 0:16:47.200 recession as firms recalibrate their expectations for growth going forward, 0:16:47.600 --> 0:16:50.480 but to build back cash loss in Q two all 0:16:50.560 --> 0:16:55.280 sorts of things, and the number of people who are 0:16:55.400 --> 0:16:59.040 unemployed and say their jobs have been permanently lost is 0:16:59.120 --> 0:17:03.240 up over four million. It jump in August. Uh, if 0:17:03.280 --> 0:17:07.600 you go back to April, that huge number of people 0:17:07.720 --> 0:17:11.040 got unemployed. A of that was people said that job 0:17:11.119 --> 0:17:15.360 loss was temporary. What I have been saying since April 0:17:15.560 --> 0:17:19.200 and still saying and watching, it's the permanent job loss 0:17:19.720 --> 0:17:24.320 because that's the number that reflects an underlying recessionary environment 0:17:25.000 --> 0:17:28.399 that as the reopening start to fade simply because you know, 0:17:28.480 --> 0:17:31.080 everything's reopened there has reopened as much as people feel 0:17:31.119 --> 0:17:36.120 safe to reopen everything, um, that number and the impact 0:17:36.240 --> 0:17:41.840 that that number has on spending, etcetera will begin to 0:17:42.680 --> 0:17:47.840 dominate the data. So, Steve, what should we be looking 0:17:47.920 --> 0:17:50.480 for incoming weeks? I mean, obviously we got the news 0:17:50.640 --> 0:17:53.600 that indoor dining will start out a quarter capacity in 0:17:53.680 --> 0:17:56.240 New York City, which hopefully might bring back a few 0:17:56.320 --> 0:17:59.359 more jobs here and there. But what will the data 0:17:59.480 --> 0:18:03.719 that you be most concentrated on the well, right now, 0:18:04.080 --> 0:18:07.040 the word unfortunately it comes every month, right, I think 0:18:07.080 --> 0:18:09.440 there's all that high frequency data that tells you that 0:18:09.680 --> 0:18:13.240 reopenings are continuing. And I think that's that's great and 0:18:13.400 --> 0:18:15.640 very happy is in New York City resident, Very happy 0:18:15.680 --> 0:18:18.760 to see, he said, at least indoor dining because the 0:18:18.800 --> 0:18:20.520 winning where all these restaurants are gonna do when it 0:18:20.880 --> 0:18:23.040 gets to be too cold to sit outside to eat. 0:18:23.600 --> 0:18:29.720 But um, the number to watch every single month is 0:18:29.840 --> 0:18:34.320 this job losses, permanent job losses, and that's really the 0:18:34.520 --> 0:18:38.159 number and that will and then the second part of 0:18:38.240 --> 0:18:41.560 that is that as that continues to go, watch these 0:18:41.720 --> 0:18:46.600 forward expectations numbers because the forward expect because those phone 0:18:46.680 --> 0:18:51.200 expectation numbers never really dipped as one would have expected 0:18:51.280 --> 0:18:53.760 in their normal recession. All right, Steve, thank you so 0:18:53.920 --> 0:18:56.520 much for Joiner's got leave it there. Steve Blitz, chief 0:18:56.600 --> 0:18:59.560 US economist for T. S. Lombard, giving us his thoughts 0:18:59.600 --> 0:19:03.879 on current economic conditions. We're just looking at the SP 0:19:04.080 --> 0:19:06.479 five here. We're off about seven or eight percent off 0:19:06.520 --> 0:19:09.040 of that recent high of just several days ago. But 0:19:09.160 --> 0:19:12.960 let's be clear here, we're over off of that March low, 0:19:13.040 --> 0:19:15.639 so a tremendous move up in the market despite some 0:19:16.160 --> 0:19:18.399 recent pullbacks here. To get a sense of where we 0:19:18.600 --> 0:19:20.920 go from here and what the drivers are that we 0:19:21.000 --> 0:19:24.320 should be focusing on, let's welcome Michael Scaling, portfolio manager 0:19:24.320 --> 0:19:27.400 of Manu Menu Life Asset Management based in Boston. Michael, 0:19:27.400 --> 0:19:29.399 thanks so much for joining us here. So we've had 0:19:29.400 --> 0:19:32.040 a little bit of a pullback here. Uh, the question 0:19:32.200 --> 0:19:34.680 is you know what's driving it and how do we 0:19:35.040 --> 0:19:36.840 What we really think about is over the next couple 0:19:36.840 --> 0:19:40.480 of quarters, heeries as it relates to the equity markets. Sure, well, 0:19:40.520 --> 0:19:42.720 good morning and thanks for having me. Um. I think 0:19:42.840 --> 0:19:45.640 that after we've seen as you just reference, that huge 0:19:45.720 --> 0:19:47.960 move off of the bottom of fifty plus percent, not 0:19:48.080 --> 0:19:49.919 surprising at all to see us give a little bit 0:19:49.960 --> 0:19:53.920 of that back and consolidate some gains, especially when you 0:19:54.080 --> 0:19:57.680 driver consider that the majority of this big move that 0:19:57.760 --> 0:20:00.360 we've seen has been multiple expansion on the SM five. 0:20:00.840 --> 0:20:03.640 So UM, I think that while it's been a big 0:20:03.760 --> 0:20:06.159 move in in a short amount of time, I wouldn't 0:20:06.200 --> 0:20:09.680 read too much into the more recent results on the market. 0:20:09.760 --> 0:20:12.040 Is it you know, the market just doesn't climb to 0:20:12.080 --> 0:20:17.280 the sky forever. What are you anticipating will be the 0:20:17.359 --> 0:20:20.159 catalyst for the next move for this market, whether at 0:20:20.200 --> 0:20:23.359 the upboard down. Well, I think it's going to be 0:20:23.440 --> 0:20:27.320 more driven. I'm really less focused on the the actual 0:20:27.440 --> 0:20:29.440 move in the market and just more focused on the 0:20:29.480 --> 0:20:32.600 individual stocks. I mean, it certainly feels like this has 0:20:32.640 --> 0:20:35.680 been the best pure stock picking market that's seen since 0:20:35.720 --> 0:20:39.160 prior to the financial crisis. Uh. And you've certainly seem 0:20:39.240 --> 0:20:42.480 differentiation in individual stocks. I mean a lot of people 0:20:42.560 --> 0:20:44.600 like to talk about the move and the fangs, but 0:20:44.800 --> 0:20:47.359 what what's that really reflective of is a great stock 0:20:47.440 --> 0:20:50.960 pickers environment. Um. One thing I would keep in mind 0:20:51.000 --> 0:20:53.000 on the market as you look at it is I 0:20:53.080 --> 0:20:55.920 talked about before about the multiple expanding. I mean, it's 0:20:55.960 --> 0:20:58.800 not surprising that the market is trading at very elevated 0:20:59.320 --> 0:21:02.560 valuation today, and frankly, I would expect that that's going 0:21:02.640 --> 0:21:06.080 to continue for a very long time, meaning years as 0:21:06.440 --> 0:21:09.640 you can no longer fund any liabilities from the fixed 0:21:09.640 --> 0:21:14.320 income markets after the collapse in US interest rates. All Right, 0:21:14.440 --> 0:21:16.600 so where do we go from here? What are some 0:21:16.680 --> 0:21:18.520 of the sectors that we should be looking at here? 0:21:18.600 --> 0:21:22.120 Because it appears that the economy, while it's coming back, 0:21:22.280 --> 0:21:27.040 is coming back very very slowly, despite the incredible accommodation 0:21:27.240 --> 0:21:30.280 provided by the foot of Reserve. Yeah, it's been interesting. 0:21:30.320 --> 0:21:32.600 So this week there's actually been a few industry conferences 0:21:32.680 --> 0:21:34.760 which have been attending, and was on one just right 0:21:34.800 --> 0:21:37.440 before we came on live here. UM. I think what's 0:21:37.480 --> 0:21:39.639 interesting is that, you know, heading into this week with 0:21:39.720 --> 0:21:43.320 a lot of the retailers and consumer stables companies presenting 0:21:43.359 --> 0:21:46.920 at various conferences. UM. Frankly, I was expecting to hear 0:21:47.000 --> 0:21:49.959 more about kind of a late August slowdown and stimulus 0:21:50.320 --> 0:21:55.159 UM and the enhanced unemployment benefits were unwound UM and 0:21:55.560 --> 0:21:58.160 just the slowing and foot traffic its stores and those 0:21:58.200 --> 0:22:00.160 kind of things. But frankly, you haven't heard that from 0:22:00.160 --> 0:22:03.159 anybody at any of these conferences. Uh. They continue to 0:22:03.240 --> 0:22:06.200 talk about a solid demand environment, a little bit of 0:22:06.240 --> 0:22:10.080 the unknown if there isn't another stimulus package passed. UH. 0:22:10.160 --> 0:22:12.000 And the other thing they continue to talk a lot 0:22:12.080 --> 0:22:15.840 about is just UM it concerns around securing enough inventory 0:22:16.440 --> 0:22:19.520 as some of the supply chains have been disrupted as 0:22:19.560 --> 0:22:23.320 we saw the depth of COVID earlier this year. I 0:22:23.480 --> 0:22:27.200 would love your thoughts on the succession plan at City 0:22:27.359 --> 0:22:31.800 that came out today. Yeah, so, uh, in the John 0:22:31.800 --> 0:22:34.040 Hancock Violence Fund that I run, we don't own shares 0:22:34.080 --> 0:22:37.240 of City Group. Um. It's uh, the woman that was 0:22:37.240 --> 0:22:41.040 announced to the CEO, I'm not familiar with her. Um. Frankly, 0:22:41.040 --> 0:22:44.520 a little bit surprised that Michael Corbett is retiring so quickly. 0:22:44.640 --> 0:22:47.040 I mean, I don't know that that was on the 0:22:47.080 --> 0:22:51.200 immediate radar of any shareholder. Um. But obviously you know, 0:22:51.560 --> 0:22:54.160 in terms of humanity, a great day that she's gonna 0:22:54.160 --> 0:22:56.480 be the first woman wondering running one of these large 0:22:56.520 --> 0:23:00.240 global banks. How about on the technology front, give us 0:23:00.240 --> 0:23:03.040 you later thoughts on Apple that's been such a leader 0:23:03.240 --> 0:23:06.440