WEBVTT - BofA Dashes Hopes For Hefty Trader Bonuses This Year 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.240 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.400 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.440 --> 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 podcast or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.720 and on Bloomberg dot com. Okay, having worked on Wall 0:00:21.760 --> 0:00:23.920 Street for twenty years, there's a story on the terminal 0:00:23.960 --> 0:00:26.880 today that really hit close to home for me. It's 0:00:26.880 --> 0:00:30.120 a story where a Bank of America is floating an 0:00:30.160 --> 0:00:34.360 idea to its traders to keep bonuses flat relative to 0:00:34.440 --> 0:00:37.680 last year despite a huge profit year UH in the 0:00:37.880 --> 0:00:41.400 trading environment. To get some more details here, we welcome 0:00:41.479 --> 0:00:44.800 Lenon new in Financial reporter for Bloomberg News. Lennan, I've 0:00:44.800 --> 0:00:48.360 sat across the desk from my manager many many times 0:00:48.400 --> 0:00:51.360 around this time of year, arguing for a higher bonus. Hey, 0:00:51.440 --> 0:00:53.720 look how well I did. Look how profitable our desk 0:00:53.920 --> 0:00:58.680 was that. I think, what's can I borrow you? For 0:00:58.720 --> 0:01:02.440 a humanus like manager? And I need to me exactly right. So, Lenan, 0:01:02.520 --> 0:01:04.839 it doesn't sound like there's gonna be some open ears 0:01:04.840 --> 0:01:08.040 for that kind of discussion this year. That's right, Paul, 0:01:08.080 --> 0:01:11.080 I think these sources we spoke to across the street obviously, 0:01:11.400 --> 0:01:15.160 I think that this is not enough. You know, it's 0:01:15.160 --> 0:01:17.840 been a manner year for trading desks. The reality is 0:01:17.920 --> 0:01:20.640 that they have jumped, you know, huge amounts, and Bank 0:01:20.680 --> 0:01:22.960 of America I think is on the lower end of 0:01:23.000 --> 0:01:26.600 the desks that have done extremely well throughout this year. Um. 0:01:26.640 --> 0:01:28.640 So it comes as a kind of bitter pill at 0:01:28.680 --> 0:01:31.920 your end to see that their bonuses are probably being 0:01:32.319 --> 0:01:34.640 going to be flat and that you know, managers are 0:01:34.680 --> 0:01:40.640 managing expectations about a more gloomy environment. So I mean, 0:01:40.720 --> 0:01:43.240 given that a lot of people are experiencing reductions and 0:01:43.319 --> 0:01:46.200 pay will it be something that traders will just have 0:01:46.280 --> 0:01:48.400 to eat or will they look to other banks to 0:01:48.440 --> 0:01:52.640 see what they're doing. How does this go down? Well, 0:01:52.760 --> 0:01:54.360 vunny right now, it's going down like a red bull, 0:01:54.920 --> 0:01:58.360 as you can imagine. But BA is a consumer bank, 0:01:58.720 --> 0:02:00.240 you know, right now, less than a fifth of its 0:02:00.320 --> 0:02:03.040 net income comes from trading. And on top of that, 0:02:03.200 --> 0:02:05.720 you know, there is this legacy of a financial crisis 0:02:05.760 --> 0:02:09.280 and rank of the optics of paying big bonuses when 0:02:09.320 --> 0:02:11.880 the rest of the economy is doing so poorly. It's 0:02:11.919 --> 0:02:14.760 something I think the banks leadership is acutely aware of. 0:02:15.000 --> 0:02:17.880 So I don't think there are a lot of options here. 0:02:17.919 --> 0:02:20.720 Of course, as Paul says, you know, managers will advocate 0:02:20.760 --> 0:02:23.560 for their staff. They will point to those strong pm 0:02:23.639 --> 0:02:25.359 L numbers and say, hey, look, we made a big 0:02:25.360 --> 0:02:29.080 contribution to the banks making money this year. Um, so 0:02:29.120 --> 0:02:31.440 we need to be properly compensated for it. But I'm 0:02:31.480 --> 0:02:34.400 not sure that that's going to be particularly convincing given 0:02:34.440 --> 0:02:36.720 this terrible environment that the rest of the U. S. 0:02:36.760 --> 0:02:39.840 Economy is in. So Lennon, when I worked on Wall Street, 0:02:39.919 --> 0:02:43.360 you know, bonuses would make up, particularly for senior people, 0:02:43.400 --> 0:02:49.160 maybe of their total compensation. I believe that's changed really 0:02:49.240 --> 0:02:51.680 since the financial crisis, is that they've gone to more 0:02:51.680 --> 0:02:55.280 of a fixed salary model. But still, uh, the bonuses 0:02:55.320 --> 0:02:57.400 have a big, big impact for a lot of folks. 0:02:58.680 --> 0:03:00.960 That's right, Pearl, And well, we're not talking about the 0:03:01.000 --> 0:03:04.040 outsized bonuses that you know you might have been discussing 0:03:04.080 --> 0:03:07.440 in the nineties, but we're looking bonuses are still a 0:03:07.520 --> 0:03:11.160 huge deal for everyone on Wall Street. So this comes 0:03:11.240 --> 0:03:15.320 as a very disappointing signal. You know, the managers are 0:03:15.320 --> 0:03:19.040 managing expectations, and as Bonnie said, other banks are watching 0:03:19.040 --> 0:03:22.280 this closely as well to see how they'll compensate their 0:03:22.320 --> 0:03:24.920 staff and to kind of see what the herd is doing. Right, 0:03:25.000 --> 0:03:27.560 this might be cover for other banks to say, hey, listen, 0:03:27.639 --> 0:03:30.040 Via is not paying as much, and um, you know, 0:03:30.160 --> 0:03:32.840 the environment is bad for everyone. On top of which, 0:03:32.960 --> 0:03:36.200 we have other banks that are actually planning to cut staff. 0:03:36.320 --> 0:03:38.560 So right now, Beve has said they're going to keep 0:03:38.600 --> 0:03:41.840 everyone's jobs fast this year, but then again they're managing 0:03:41.840 --> 0:03:44.320 expectations that that might mean that everyone doesn't get paid 0:03:44.320 --> 0:03:49.120 as well. So what options do dissatisfied traders have? I mean, 0:03:49.640 --> 0:03:53.760 can they just walk across the street anymore? It sounds 0:03:53.800 --> 0:03:56.440 like that's not really an option, and I think everyone 0:03:56.600 --> 0:03:59.040 is fully aware of that. Right It's still early days, 0:03:59.040 --> 0:04:03.200 and it's possible that managers can go back to executives 0:04:03.200 --> 0:04:05.840 and say, look, my team deserves more and lobby really 0:04:05.880 --> 0:04:09.720 hard for more. But still, you know, the jobs are 0:04:09.760 --> 0:04:12.640 are hard to come by these days on Wall Street, 0:04:12.720 --> 0:04:15.080 and I think everyone is pretty aware of that. So 0:04:15.240 --> 0:04:17.279 right now, I think a lot of traders are happy 0:04:17.320 --> 0:04:20.320 to still have their jobs. Um, and so you know, 0:04:20.640 --> 0:04:23.440 they don't really have a lot of options, particularly if 0:04:23.480 --> 0:04:25.720 we think that next year there may be some more 0:04:25.760 --> 0:04:28.840 cuts to come across the industry. So have we heard 0:04:28.839 --> 0:04:31.960 anything leland from some of the other big players the 0:04:32.400 --> 0:04:35.479 Goldman Sachs is the Morgan Stanley's of the world, or 0:04:35.920 --> 0:04:39.440 a kind of upfront floating this idea. I think the 0:04:39.520 --> 0:04:41.800 ave is early floating this idea. And again I have 0:04:41.880 --> 0:04:45.040 to stress that these are very early conversations, Paul. You 0:04:45.040 --> 0:04:48.000 know that you know there are some expectations being managed 0:04:48.000 --> 0:04:51.880 early on, but that obviously this will raise the level 0:04:51.880 --> 0:04:53.919 of the discussion and you know, cause a lot of 0:04:54.040 --> 0:04:56.520 debate I think, to go on internally about how much 0:04:56.520 --> 0:04:59.360 trader should be paid. UM. We are watching the other 0:04:59.400 --> 0:05:02.200 banks very closely as well to see what indications are 0:05:02.200 --> 0:05:06.120 coming out of them. UM, and the survey consultants that 0:05:06.160 --> 0:05:08.320 we talked to, you know, the recruitment consultants and the 0:05:08.400 --> 0:05:12.160 pay consultants have guided higher on trading. And so this 0:05:12.200 --> 0:05:15.159 comes as a real disappointment because the expectations are already 0:05:15.160 --> 0:05:18.719 set high for this trading bonanza and now we're already 0:05:18.720 --> 0:05:21.320 starting to see early signs that that's really being tamped 0:05:21.320 --> 0:05:23.760 down across the street. And I think that that may 0:05:23.800 --> 0:05:26.280 be a trend that we see with other banks coming 0:05:26.279 --> 0:05:28.360 in the in the next couple of weeks. I mean, 0:05:28.400 --> 0:05:30.000 what can you do. It's not exactly like you can 0:05:30.040 --> 0:05:33.279 call in the union what happens in cases like this, 0:05:33.640 --> 0:05:37.560 and surely we've seen it before. Yeah, it's interesting because 0:05:38.120 --> 0:05:40.560 I think on the street, Um, you know, people talk 0:05:40.600 --> 0:05:44.359 about everything being very merit and performance based, right, and 0:05:44.400 --> 0:05:45.920 so a lot of people in the street, if they 0:05:46.240 --> 0:05:48.760 if their division that their desk brought in you know, 0:05:49.800 --> 0:05:52.880 bumping revenues, then they expect to get you know, not 0:05:52.880 --> 0:05:56.520 not exactly that amount, but at least directionally a good 0:05:56.520 --> 0:06:00.839 bump in their compensation, right. And so I think this 0:06:00.960 --> 0:06:03.599 kind of flies in the face of what people on 0:06:03.640 --> 0:06:07.040 the street, um, you know, really think they deserve. And um, 0:06:07.240 --> 0:06:09.599 it's it's going to be a bit of a cultural shock, 0:06:09.640 --> 0:06:13.240 I believe, because you know, it's just a very strange year. 0:06:13.560 --> 0:06:16.120 In a normal year, if the trading test made a 0:06:16.200 --> 0:06:19.000 lot of money, you'd expect to get a decent bonus. 0:06:19.080 --> 0:06:21.880 And this year, I think, just because of the broader 0:06:21.920 --> 0:06:25.360 context we're in the banks simply are aware that you know, 0:06:25.400 --> 0:06:27.880 paying big banker bonuses is not going to be a 0:06:27.880 --> 0:06:30.640 good look. Let's also just point out that they're still 0:06:30.680 --> 0:06:33.000 getting bonuses, just not more than last year, but they're 0:06:33.080 --> 0:06:36.200 the sales and trading pool is at last year's level, 0:06:36.520 --> 0:06:38.920 even though revenue obviously has done this year. And we 0:06:38.960 --> 0:06:40.520 have to leave it there. But thank you for your 0:06:40.560 --> 0:06:43.320 story from lannan noon, and you can see on your 0:06:43.320 --> 0:06:46.560 Bloomberg about Bank of America and traders getting jewelhood. There 0:06:49.320 --> 0:06:51.720 a slew of data to pass through today. We had 0:06:51.720 --> 0:06:54.920 a whole bunch of jobs data earlier this morning, durable 0:06:55.000 --> 0:06:57.920 goods orders, We have the fo m C minutes later 0:06:57.960 --> 0:07:00.320 this afternoon, and then of course the non nation of 0:07:00.400 --> 0:07:04.479 Janet Yellen to be Secretary of the Treasury. When you 0:07:04.520 --> 0:07:06.760 have days like that, you just have to speak to 0:07:06.880 --> 0:07:10.760 Danielle di Martino, Booth CEO and director of Intelligence at 0:07:10.840 --> 0:07:14.119 Quill Intelligence. She's a former advisor at the Dallas Federal 0:07:14.160 --> 0:07:17.440 Reserve and a Bloomberg opinion columnist. Danielle, thanks so much 0:07:17.480 --> 0:07:21.520 for joining us on a very busy Thanksgiving Eve. First off, 0:07:21.520 --> 0:07:24.840 I list love to get your thoughts on the nomination 0:07:24.880 --> 0:07:29.640 of Janet Yellen for Secretary of the Treasury. Well, I 0:07:29.680 --> 0:07:33.480 think that this was a very convenient political move on 0:07:33.720 --> 0:07:37.120 president like Biden's part, I'm I'm no big fan of it, 0:07:37.160 --> 0:07:39.200 and in fact, I wrote a long book about it 0:07:39.880 --> 0:07:44.760 about and I detailed Janet Yellen's philosophy in it. And 0:07:44.800 --> 0:07:48.880 we have to remember that she is a trained labor economists. 0:07:49.400 --> 0:07:51.320 So you think back to her days at the San 0:07:51.360 --> 0:07:55.160 Francisco Fete and companies that we haven't talked about in years, 0:07:55.240 --> 0:07:59.440 like New Century and Countrywide Mortgage. These were in her backyard. 0:07:59.720 --> 0:08:02.880 And at the root of being unaware of the subprime 0:08:03.000 --> 0:08:08.680 crisis building on the West Coast was Janney Ellen's unappreciation 0:08:08.800 --> 0:08:12.520 and lack of knowledge and experience with the financial markets. 0:08:12.800 --> 0:08:15.280 If you think back to a year ago when we 0:08:15.280 --> 0:08:19.400 were in the not QE era and overnight repo funding 0:08:19.480 --> 0:08:22.720 strains and reserves not being kind of. These are very 0:08:22.760 --> 0:08:25.720 technical type of issues that as Secretary of the Treasury 0:08:25.960 --> 0:08:28.920 you would need to be highly familiar with. So again, 0:08:29.160 --> 0:08:32.000 I think markets are applauding the fact that she has 0:08:32.000 --> 0:08:34.560 said that that that you could reopen the Fed Reserve 0:08:34.600 --> 0:08:37.440 Act and allow the Federal reserves by stocks, that negative 0:08:37.440 --> 0:08:41.360 interest rates could be imposed under the under certain circumstances. 0:08:41.400 --> 0:08:45.160 I think she would certainly spearhead a digital currency in 0:08:45.280 --> 0:08:49.040 order to deliver money directly to individuals, helicopter money, so 0:08:49.120 --> 0:08:52.360 to speak. But again, um, these are these are the 0:08:52.440 --> 0:08:56.320 types of policies that have tended to UH to help 0:08:56.320 --> 0:09:00.640 out the top one percent looking back in history, and 0:09:00.640 --> 0:09:04.640 and end up being a backlash, if you will, against 0:09:04.679 --> 0:09:09.120 those who need it the most. Yes, do you think 0:09:09.200 --> 0:09:11.840 that just for the moment, she will work a sort 0:09:11.840 --> 0:09:14.120 of hand in hand with the FED and try and 0:09:14.160 --> 0:09:19.160 do something in terms of retrievings some of those emergency 0:09:19.200 --> 0:09:23.320 funds that Stephen manutition is as buddhiside. Well, I certainly 0:09:23.320 --> 0:09:26.240 think that that will be priority number one. Of course, 0:09:26.520 --> 0:09:29.920 it's not as easy as look. I think of the 0:09:29.960 --> 0:09:32.160 months and months we've been watching Minutian go back and 0:09:32.200 --> 0:09:35.959 forth between McConnell and Pelosi. These are these You need 0:09:36.000 --> 0:09:40.520 an extremely savvy politician UH to make these deals. And 0:09:40.559 --> 0:09:42.800 it's not just a matter of flipping a switch. You 0:09:42.880 --> 0:09:46.960 have to get congressional approval UH to have these funds reallocated. 0:09:47.320 --> 0:09:51.520 And we don't know for sure what Manutions motivations are, 0:09:51.800 --> 0:09:55.280 but this could be such that McConnell could, in the 0:09:55.320 --> 0:09:59.360 Continuing Resolution December the eleventh, have his skinny stimulus bill 0:09:59.480 --> 0:10:02.440 of a half trillion. You tack on what has been 0:10:02.800 --> 0:10:05.280 taken away from the Fed and you get to a trillion. 0:10:05.600 --> 0:10:08.760 But politically, the optics from McConnell would be very favorable 0:10:08.920 --> 0:10:11.600 because there would only be a new half a trillion 0:10:11.640 --> 0:10:15.480 stimulus package attached. So again, we don't know where Minutan 0:10:15.559 --> 0:10:18.320 is coming from, but we do know that Congress would 0:10:18.360 --> 0:10:22.360 have to would have to sign into law reopening these lines, 0:10:22.440 --> 0:10:26.800 these credit uh facilities at the Reserve. All right, Daniel, 0:10:26.840 --> 0:10:29.600 let's go to the ECO page on the Bloomberg terminal here. 0:10:29.880 --> 0:10:32.120 What are some of your key takeaways here from some 0:10:32.200 --> 0:10:36.440 of the economic data we saw this morning. So, you know, 0:10:37.280 --> 0:10:39.920 besides the you know, as we were listening um coming 0:10:39.960 --> 0:10:43.000 into the segment, the back to back increases in regular 0:10:43.040 --> 0:10:47.560 state initial jobless claims. Yet we're trying at GROL Intelligence 0:10:47.640 --> 0:10:51.240 right now to kind of back into what the survey 0:10:51.280 --> 0:10:55.040 week looks like for non farm payrolds. Next week is 0:10:55.040 --> 0:10:57.760 when we finally get the we call it the bathtub 0:10:57.800 --> 0:11:00.640 where you get every source of a mayor are consclaiming 0:11:00.679 --> 0:11:05.040 unemployment insurance in some form. We saw that tick up 0:11:05.720 --> 0:11:08.080 this week for the weekend in November seventh to the 0:11:08.120 --> 0:11:11.640 first time since August, and we know that the last 0:11:11.640 --> 0:11:14.240 two weeks have come up, so we're anticipating that when 0:11:14.240 --> 0:11:16.520 we get that final print for the survey week, which 0:11:16.520 --> 0:11:18.960 always includes the twelfth of the month, we get that 0:11:18.960 --> 0:11:22.000 next Thursday morning, right before the payroll report, we're anticipating 0:11:22.000 --> 0:11:25.000 that that number goes up again. So you're seeing economists 0:11:25.040 --> 0:11:28.800 across the street scrambled to take down their their November 0:11:28.840 --> 0:11:32.840 unemployment payrolls forecast. And if you look inside the weeds 0:11:33.040 --> 0:11:36.320 of the University of Mission Consumer Confidence report, you also 0:11:36.400 --> 0:11:40.280 saw that employment expectations came in at the lowest levels 0:11:40.360 --> 0:11:45.040 in April. So we're definitely starting to see some backtracking 0:11:45.280 --> 0:11:47.640 in the labor data, which is of course key to 0:11:47.720 --> 0:11:51.880 a consumer driven economy. So what are you anticipating, Danielle, 0:11:52.040 --> 0:11:55.920 Does this economy show more scarring zone we're seeing forecast 0:11:56.040 --> 0:12:00.600 of I don't think. I think we're about six weeks 0:12:00.720 --> 0:12:06.040 behind Europe in terms of the coronavirus UH and by 0:12:06.040 --> 0:12:11.240 the way, not imposing restrictions. So I do see economists 0:12:11.280 --> 0:12:14.600 across the pond taking down their Q four estimates, and 0:12:14.600 --> 0:12:17.080 I would foresee that the United States could easily slip 0:12:17.120 --> 0:12:20.439 back into contractions into recession at the end of the 0:12:20.480 --> 0:12:25.360 fourth quarter going into the first quarter of given purely 0:12:25.400 --> 0:12:28.480 what we're seeing in terms of of of of people 0:12:28.679 --> 0:12:32.559 choosing to be less mobile in states where there are 0:12:32.559 --> 0:12:35.800 not even restrictions, and what we're seeing in terms of 0:12:35.840 --> 0:12:39.360 small business revenues and small businesses that are open. These 0:12:39.360 --> 0:12:43.640 are declining figures. Leisure and hospitality, job openings have come 0:12:43.840 --> 0:12:48.000 down appreciately. There's their lowest August. These are all signs 0:12:48.080 --> 0:12:51.800 that the economy is going into a retrenchment because the 0:12:51.840 --> 0:12:55.520 coronavirus is becoming so severe in the United States that 0:12:55.559 --> 0:13:00.440 it cannot be ignored. Danielle, we appears that we have 0:13:00.760 --> 0:13:04.439 a new president here. Um it appears that it might 0:13:04.480 --> 0:13:07.880 be a split government once again in terms of UH. 0:13:07.920 --> 0:13:11.360 It appears that the Republicans may continue to control the center. 0:13:11.440 --> 0:13:13.840 Off to see what happens in Georgia. How did you 0:13:14.000 --> 0:13:17.040 view what was your key takeaway from this political season 0:13:17.040 --> 0:13:20.640 and kind of where we find ourselves now? Well, I 0:13:20.679 --> 0:13:23.679 think I think more than anything else, the American voters 0:13:24.040 --> 0:13:27.880 have spoken that they're not divided at all, They're in 0:13:27.920 --> 0:13:32.199 the middle. When you look at the least appreciative appreciated 0:13:32.320 --> 0:13:36.800 story of this last election. It is the change of 0:13:36.800 --> 0:13:40.400 of the change of the guard in the House of Representatives. 0:13:41.240 --> 0:13:43.000 And you know, Nancy Pelosi is going to have the 0:13:43.040 --> 0:13:47.920 slimmest margin of majority in two decades, and that I 0:13:48.000 --> 0:13:53.040 think is less appreciated because you will have more of 0:13:53.080 --> 0:13:57.880 a bifurcation between the administration, assuming these two Georgia's seats 0:13:57.920 --> 0:14:00.600 go to the GOP, which is a big assumption. Assuming 0:14:00.640 --> 0:14:05.120 that that is the case, you really will have an 0:14:05.120 --> 0:14:11.360 administration in one party in a Congress largely in the other. Danielle, 0:14:11.360 --> 0:14:13.200 really quickly, because we're out of time. Do we get 0:14:13.200 --> 0:14:17.000 a fourth round of to meet us fiscal Oh? Oh, absolutely. 0:14:17.040 --> 0:14:18.800 I think that this will be priority number one. You're 0:14:18.800 --> 0:14:21.160 not going to see mass addictions and the Cares Act 0:14:21.280 --> 0:14:25.200 unemployment benefits expire when upwards of thirteen million Americans are 0:14:25.200 --> 0:14:29.760 collecting these emergency forms of unemployment insurance. Danielle, thank you 0:14:29.880 --> 0:14:32.200 so much for joining us once again today. Danielle Di 0:14:32.320 --> 0:14:36.480 Martineo Booth is CEO and director of Quill Intelligence, former 0:14:36.520 --> 0:14:40.480 advisor of Course after Dallas FED also Bloomberg Opinion Columns, 0:14:40.480 --> 0:14:44.200 and she's based in Dallas typically and we thank her again. 0:14:44.360 --> 0:14:48.160 That raft of economic data today will pitch forward to 0:14:48.200 --> 0:14:51.160 the f O m C meeting and all of that 0:14:51.360 --> 0:14:54.240 later on, So do tune in from two pm onwards 0:14:54.320 --> 0:15:00.000 for all that emerges from there. For the longest time 0:15:00.320 --> 0:15:03.160 during this pandemic, oil has been just really hovering around 0:15:03.160 --> 0:15:05.600 that forty level. We've actually had a lift here over 0:15:05.640 --> 0:15:08.200 the past a week or so. We're up another one 0:15:08.200 --> 0:15:11.000 percent today oil w t I oil trading at forty 0:15:11.000 --> 0:15:15.200 five dollars thirty five cents per gown again, a lift 0:15:15.200 --> 0:15:17.960 off of that forty range it had been hovering out 0:15:17.960 --> 0:15:19.120 for a long time. To get a sense of kind 0:15:19.120 --> 0:15:23.200 of what this means, what's driving it, we welcome John Kilduff. 0:15:23.320 --> 0:15:26.320 He joins us. He's a founder of Again Capital. John, 0:15:26.320 --> 0:15:28.440 thanks so much for joining us here. You know, it's 0:15:28.520 --> 0:15:32.200 it appears that investors across various asset classes here are 0:15:32.280 --> 0:15:34.960 willing to look towards the other side of this pandemic 0:15:35.000 --> 0:15:38.320 and start to really discount uh pick up an economic 0:15:38.360 --> 0:15:41.480 activity UH next year. What do you see in the 0:15:41.520 --> 0:15:47.320 supply demand of the oil markets globally, I mean, for oil, 0:15:47.360 --> 0:15:49.760 there's no doubt that that is a key factor here. 0:15:50.400 --> 0:15:54.000 Oil has really been the covid trade or pandemic trade 0:15:54.080 --> 0:15:58.120 or now vaccine trade across all the markets. Um. I mean, 0:15:58.440 --> 0:16:01.840 we had a significant dip and things were looking rather bleak, 0:16:01.960 --> 0:16:04.600 just as several weeks ago when we saw those renewed 0:16:04.640 --> 0:16:07.920 lockdowns in Europe, and of course the raising Caselow is here, 0:16:07.960 --> 0:16:11.400 but now with the successive VEX positive vaccine news, that's 0:16:11.400 --> 0:16:14.880 exactly it. And the sort of connecting the dots here 0:16:14.920 --> 0:16:17.640 is that you can see the pent up demand, um, 0:16:17.720 --> 0:16:21.280 you know, for for transportation, for travel, um, just what 0:16:21.360 --> 0:16:23.080 we saw over the weekend where there was you know, 0:16:23.160 --> 0:16:27.480 the highest number of airport visitors since early March, and 0:16:27.560 --> 0:16:32.840 so jet fuel has been crushed consistently down Paul, versus 0:16:32.880 --> 0:16:35.720 that you know year on year measures um, and it's 0:16:35.720 --> 0:16:38.040 really been weighing. That factor has really been weighing on 0:16:38.040 --> 0:16:41.080 this market. And the pent up demand is obvious and 0:16:41.120 --> 0:16:43.880 it's kind of come roaring back. And I really see 0:16:44.880 --> 0:16:48.440 a big pick up next year for gasoline and for 0:16:48.440 --> 0:16:51.480 for jet fuel and diesel fuels. John, why are you 0:16:51.520 --> 0:16:57.520 convinced that this is longer than just a Thanksgiving blip? Well, 0:16:57.520 --> 0:17:03.360 I think there's the hopefulness out there and and and 0:17:03.560 --> 0:17:04.960 you know, I hate to say it, but the apparently 0:17:05.040 --> 0:17:09.600 almost even disregard uh for for folks that they are 0:17:09.680 --> 0:17:11.920 going to uh, they're going to travel. I mean they're 0:17:11.960 --> 0:17:14.320 they're they're going to travel after this Thanksgiving. I think 0:17:14.359 --> 0:17:16.240 that there's the setup is gonna be that you're gonna 0:17:16.240 --> 0:17:18.840 go travel for Christmas as well, um, and get in 0:17:18.880 --> 0:17:22.000 their cars this time even more so and and continue 0:17:22.000 --> 0:17:23.760 to travel. The other thing too, is I think people 0:17:23.760 --> 0:17:26.880 are starting to realize that it appears that air travel 0:17:27.520 --> 0:17:31.120 is safe, that the the that the the planes air 0:17:31.160 --> 0:17:37.440 systems are not engendering or in inculcating uh COVID nineteen cases. 0:17:37.760 --> 0:17:39.520 And I think that word is getting out there and 0:17:39.560 --> 0:17:42.320 that is helping as well. So we're sitting we're seeing 0:17:42.320 --> 0:17:44.760 the beginning of the rebound. But the thing about it 0:17:44.800 --> 0:17:47.000 is that, as Paul mentioned, we're looking ahead here and 0:17:47.040 --> 0:17:48.960 there's a ton of pent up demand that's going to 0:17:49.080 --> 0:17:52.160 hit the petroleum market. All right, So, John, so that's 0:17:52.240 --> 0:17:55.480 kind of the demand side of the equation. Talk to 0:17:55.560 --> 0:17:59.480 us about the supply side globally here, How is OPEC behaving, 0:17:59.480 --> 0:18:04.800 how's RUSH behaving and meeting the US, Well, they're they're 0:18:04.800 --> 0:18:09.879 they're OPEC plus, which includes Russia, UM have been rather disciplined. 0:18:09.920 --> 0:18:12.119 I mean, there they are itching to put more oil 0:18:12.160 --> 0:18:14.320 on the market, which is going to I think hold 0:18:14.359 --> 0:18:18.679 back any kind of potentially substantial UH price rise. But 0:18:18.760 --> 0:18:22.760 I think the discipline should prove sufficient to get UH, 0:18:22.880 --> 0:18:26.040 certainly brent over fifty dollars a barrel with relative ease 0:18:26.160 --> 0:18:28.680 come the beginning of the new year, UH and push 0:18:28.880 --> 0:18:33.160 w T I prices similarly up towards that level. Right now, 0:18:33.320 --> 0:18:36.320 if if things were to snap back meaningfully, UH, we 0:18:36.560 --> 0:18:40.280 find ourselves in a very tightly supplied situation and and 0:18:40.280 --> 0:18:43.840 see a draw down pretty quickly of global inventories. So 0:18:43.960 --> 0:18:46.240 I mean, to the extent that these vaccines work out, 0:18:46.240 --> 0:18:48.479 and again this thesis of mine that the pent up 0:18:48.480 --> 0:18:52.399 demand is there, UM, it's gonna get real interesting in 0:18:52.400 --> 0:18:55.480 in terms of prices in the US. Two now haven't 0:18:55.480 --> 0:18:59.240 been you know, just raked over by this low price environment. 0:18:59.680 --> 0:19:02.960 Um we UH, the US is going to be a 0:19:02.960 --> 0:19:05.680 diminished factor and certainly won't get the encouragement in terms 0:19:05.720 --> 0:19:09.679 of drilling uh an exploration activity under the Biden administration 0:19:09.720 --> 0:19:12.240 that they had under the Trump administration. So that's also 0:19:12.280 --> 0:19:14.920 a factor. So what do companies do at a time 0:19:15.000 --> 0:19:17.560 like this, when their stock prices are just all over 0:19:17.600 --> 0:19:19.520 the place, John, You know, every time oil goes up, 0:19:19.640 --> 0:19:22.240 they see a nice gain and then a law something. 0:19:22.359 --> 0:19:27.360 Do they just ignore their daily stock market fluctuations. Well, 0:19:27.359 --> 0:19:29.720 they have to and I and actually what they've been doing, 0:19:30.040 --> 0:19:33.640 uh is well suffering under it, suffering under the environment, 0:19:33.680 --> 0:19:38.120 and and really retrenching. I mean there's been considerable capital 0:19:38.119 --> 0:19:43.520 expenditure cutbacks, considerable you know, even self examination of what 0:19:43.600 --> 0:19:46.880 their future holes in terms, especially with the climate uh 0:19:47.160 --> 0:19:50.919 pushback movement. So um, but yeah, I mean so you know, 0:19:50.960 --> 0:19:52.920 but you've seen the companies that have really done a 0:19:53.200 --> 0:19:56.400 Holman's work on this, like Chevron get making themselves almost 0:19:56.400 --> 0:19:59.479 a bulletproof Now. I think going forward and the prices 0:19:59.480 --> 0:20:02.280 pick up, they'll only benefit. I think it's on Mobile 0:20:02.320 --> 0:20:05.399 to a to a lesser degree. But um and the 0:20:05.440 --> 0:20:08.280 other players that the companies that are left standing in 0:20:08.320 --> 0:20:10.480 the aftermath of this are going to do well. It's 0:20:10.480 --> 0:20:13.400 like almost a free call option on oil prices going 0:20:13.480 --> 0:20:16.720 up from here. I think it's a very attractive sector, uh, 0:20:16.840 --> 0:20:19.640 for for the upcoming year. John. And we can see 0:20:19.640 --> 0:20:21.680 some more pain in the oil patch here. Maybe it's 0:20:21.680 --> 0:20:24.360 more consolidation of some of the weaker balance heated players. 0:20:25.320 --> 0:20:27.320 There's no doubt the pain. It's not over yet, and 0:20:27.359 --> 0:20:29.919 I think to the extent that the prospects start to 0:20:29.960 --> 0:20:32.960 look brighter price wise and industry wide. Uh, you'll see 0:20:32.960 --> 0:20:37.000 another round of the stronger, you know, like the Chevrons 0:20:37.160 --> 0:20:40.160 getting back out there on the acquisition trail and and 0:20:40.280 --> 0:20:43.720 consolidating uh, their position even more so. So you're gonna 0:20:43.760 --> 0:20:48.000 have a smaller group of stronger players with the bigger 0:20:48.119 --> 0:20:52.119 portfolios of production, but also of discipline that they won't 0:20:52.160 --> 0:20:54.840 just drill for drilling sake or to cover cash flow 0:20:54.880 --> 0:20:58.600 requirements for their for their loans and inventures. They're gonna 0:20:58.680 --> 0:21:01.400 they're gonna be moderate, and that would that should also 0:21:01.480 --> 0:21:04.880 help to sort of set us up for a more 0:21:05.280 --> 0:21:09.560 consistent higher price than what we just went through. All right, John, 0:21:09.600 --> 0:21:11.760 Always a pleasure of speaking with you and getting an update. 0:21:11.920 --> 0:21:15.120 That is, John killed off their founding partner again Capital 0:21:15.600 --> 0:21:18.080 and of course crude oil today above forty five dollars 0:21:18.119 --> 0:21:20.720 of barrel once again forty five thirty three of one 0:21:20.760 --> 0:21:23.520 percent or forty two cents for a barrel of w 0:21:23.680 --> 0:21:27.959 T I and Brent crude is above forty eight dollars 0:21:27.960 --> 0:21:30.040 of arrel. Of course, there's always that spread there between 0:21:30.040 --> 0:21:36.000 Brent and w T I. So a couple of little 0:21:36.000 --> 0:21:37.680 items to take note all of the f o MC 0:21:37.840 --> 0:21:41.080 meeting a little later on today, some more certainty as 0:21:41.080 --> 0:21:43.960 to who we might be seeing populating the Treasury as 0:21:44.000 --> 0:21:45.880 well as of course the Federal Reserve over the next 0:21:46.040 --> 0:21:49.200 couple of years, and the possibility that those people might 0:21:49.240 --> 0:21:52.440 actually cooperate. So let's bring in Laird Landman to see 0:21:52.440 --> 0:21:54.520 what all this means for markets. Starred Landman is co 0:21:54.560 --> 0:21:57.440 director for Fixed Income at tc W, which is two 0:21:57.760 --> 0:22:01.359 thirty five billion dollars under management firm wide. So, Laard, 0:22:01.480 --> 0:22:06.240 how different does the landscape look today versus just last week. 0:22:08.000 --> 0:22:10.200 I think it's got We've gotten a lot of clarification 0:22:10.320 --> 0:22:14.080 because of these political appointments that things are probably not 0:22:14.160 --> 0:22:18.200 going to be quite as radical as uh people might 0:22:18.200 --> 0:22:21.960 have initially feared in terms of policy changes. Obviously there 0:22:22.040 --> 0:22:25.880