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

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Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Lee. We bring

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Speaker 1: you insight from the best and economics, finance, investment, and

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Speaker 1: international relations. Find Bloomberg Surveillance, an Apple podcast, Suncloud, Bloomberg

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Speaker 1: dot Com, and of course on the Bloomberg Terminal. Bruce

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Speaker 1: Casman joins US now chief economist and had a global

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Speaker 1: economic research at JP Morgan. Bruce, fantastic to cash up

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Speaker 1: with you, sir. It's divided government the best now come.

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Speaker 1: As far as your concern, do you have any pushback

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Speaker 1: against that whatsoever? Well, I think divided government means you're

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Speaker 1: not going to get very strong action in terms of

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Speaker 1: things like fiscal policy and in the context of how

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Speaker 1: high are deficit is and how much we've already done.

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Speaker 1: That's a good thing. I think the concern is that

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Speaker 1: if you have a need for action because of the

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Speaker 1: recession or some other crisis, it's gonna be hard to

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Speaker 1: see government mobilized. Also, you have to worry about brinksmanship,

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Speaker 1: things like death ceiling crisis, government shutdowns. Those are going

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Speaker 1: to come back into the picture. Uh. Clearly, as we

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Speaker 1: moved towards next year to first we blame politicians for inflation?

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Speaker 1: Can politicians cure high inflation? I think inflation is always

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Speaker 1: an interaction between things happening in the global economy which

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Speaker 1: are not in the hands of politicians, and also what

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Speaker 1: the political economy, not only the central banks do in

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Speaker 1: response to that. Uh. And I think what we could

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Speaker 1: say about the inflation spiked over the last year and

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Speaker 1: a half is it's not primarily a central bank phenomenon,

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Speaker 1: not primarily a political phenomenon. But how this is going

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Speaker 1: to play out over the next couple of years is

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Speaker 1: largely going to be a response by policy how much

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Speaker 1: they're committed to bringing it down. Um, we think that

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Speaker 1: inflation and is moving down, and it's going to move

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Speaker 1: down in the core number this week, and I think

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Speaker 1: we'll continue, but it's not going to move down by

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Speaker 1: it by enough to get us back to two percent,

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Speaker 1: and that's going to require the FED and unfortunately probably

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Speaker 1: at some point require a recession in the US to

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Speaker 1: deliver that. Unwine Bruce La, what components are you watching

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Speaker 1: within the inflation prynt to understand the pace of how

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Speaker 1: much is coming down? Well, I think what we're gonna

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Speaker 1: see is UH really a big dynamic of goods prices moderating.

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Speaker 1: The energy story is going to pop up this month,

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Speaker 1: but it's still on a broad downward trajectory. But I

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Speaker 1: think core goods fall both because supply UH side pressures

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Speaker 1: around the pandemic are starting to ease, as well as

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Speaker 1: the dollar having moved up here. We see import prices

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Speaker 1: falling for five straight months in the US. That's going

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Speaker 1: to be magnified by what's happening in the auto sector,

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Speaker 1: where prices are coming down. Is also some help coming.

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Speaker 1: I think in healthcare prices in the CPI that's a

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Speaker 1: bit more of a technical issue, but rental shelter price

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Speaker 1: inflation is going to be the fact that that's going

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Speaker 1: to keep things up here and prevent us from getting

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Speaker 1: a more substantial fall in the next number of months.

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Speaker 1: We think we're on track for point for this week.

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Speaker 1: Point three is in the next three or four months.

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Speaker 1: That's a significant step down, but it's not bringing us

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Speaker 1: back to where we need to be. Bruce. Over the

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Speaker 1: past few weeks, we've been talking extensively about whether it's

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Speaker 1: reopening in China, whether an acceleration than the Chinese economy

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Speaker 1: would be a good thing, very bad thing, right, And

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Speaker 1: from a supply chain perspective, perhaps that would be a

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Speaker 1: good thing for the US economy, and we're broadly because

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Speaker 1: it eases some of those pressures that we're seeing, for

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Speaker 1: example with the iPhone fourteen right now. But on the

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Speaker 1: flip side, there is this question of bidding up a

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Speaker 1: lot of commodities, and this question of competition, and this

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Speaker 1: question of well does that increase demand so much that

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Speaker 1: the supplies can't keep pace? So how do you even

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Speaker 1: begin to think about this? Well, I think the the

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Speaker 1: the issue about the supply chain in China normalizing and

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Speaker 1: Asian more generally, is a big disinflationary impulse, and that

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Speaker 1: is built into our forecast. I actually think the big

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Speaker 1: story about China is how much is it's slowing after

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Speaker 1: a reopening bounce in the third quarter. The housing sector

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Speaker 1: is problematic, Uh, there still is COVID problems, you know.

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Speaker 1: So we see China actually slowing quite sharply into year end,

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Speaker 1: probably growing less than five percent, which for China is

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Speaker 1: a relatively weak outcome. So from our point of view,

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Speaker 1: the bigger issue on Chinese is going to be a

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Speaker 1: negative impulse on global demand. Obviously if it was strong,

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Speaker 1: that would tilt in the other direction on the global

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Speaker 1: inflation scene. Bruce. Over the last twelve months or so,

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Speaker 1: this administration a few times has floated some tram balloons

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Speaker 1: around changing policy over the tariffs on China. The one

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Speaker 1: thing that people agree on down here in Washington, d C.

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Speaker 1: Is a strong tough stance against the Chinese Communist Party.

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Speaker 1: Are you expecting that to change it so all after

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Speaker 1: these mid terms? Not? Really. There may be some opportunity

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Speaker 1: for a relaxation on tariffs, It's not built into our forecast.

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Speaker 1: If that would happen, it would help a little bit

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Speaker 1: on the inflation scene. I don't think that's going to

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Speaker 1: be the main story on US inflation, and I don't

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Speaker 1: think it's going to be the main story in US policy.

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Speaker 1: Where I think you're correct. I think in tech, I

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Speaker 1: think in other errors we're getting tougher. There's more of

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Speaker 1: a decoupling taking place here and more I think contentious

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Speaker 1: policy that's going to continue in US China relations. Hey, Bruce,

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Speaker 1: wonderful to hear from you so wise, Bruce. Kassman. There

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Speaker 1: of JP Mulcan asset management right now joining US in

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Speaker 1: Arkansas has been a wonderful support to the show. His

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Speaker 1: name is french Hill. He is the Republican from Arkansas

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Speaker 1: waiting for election results tonight. I don't know french if

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Speaker 1: I can say widely presumed, but at least I can

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Speaker 1: say in the zeitgeist as a Republican victory, french Hill

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Speaker 1: with the victory tonight be like the shock that we

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Speaker 1: saw in Well, Tom Lasia, Jonathan, great to be with you.

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Speaker 1: You know, I don't think it will be the shock

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Speaker 1: we had in n because Republicans said and charge UH

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Speaker 1: in the House of Representatives for forty years at that point,

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Speaker 1: so we've seen the House flip before in the last decade.

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Speaker 1: House Republicans are ready UH to lead on trying to

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Speaker 1: control inflation, go back to pre pandemic spending priorities, lead

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Speaker 1: on unleashing American energy and focusing on security, security in

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Speaker 1: our communities, at the border and the challenges that we

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Speaker 1: face around the world. Is the largest superpower? How is

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Speaker 1: your party in majority in the House distracted by former

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Speaker 1: President Trump, who has every right to run again, but

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Speaker 1: distracted by that moment. Well, President Trump is a fighter.

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Speaker 1: President Trump has strong views and there's no doubt that

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Speaker 1: members of Congress. Uh, many members of Congress follow his

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Speaker 1: views on topics, and so if he weighs in on

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Speaker 1: a topic in the midst of a debate in the House,

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Speaker 1: I don't have any doubt that he would have uh

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Speaker 1: influence inside the Republican Party. Look, that's the mission of

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Speaker 1: Kevin McCarthy, who I expect to be elected as the

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Speaker 1: Speaker of the House if the Republicans take control tonight,

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Speaker 1: and Kevin will have that responsibility to build a consensus

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Speaker 1: among a majority of Republican members on how to go

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Speaker 1: forward on these critical issues. French, there's an assumption in

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Speaker 1: markets and beyond, certainly in Europe, that Republicans right now

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Speaker 1: are less excited about continuing some of the aid to

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Speaker 1: Ukraine and want to focus more on reducing inflation domestically

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Speaker 1: on keeping natural gas here in the United States. What's

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Speaker 1: your view on that. Should there be some sort of

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Speaker 1: restriction on exports if prices do rise beyond a certain amount, Well,

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Speaker 1: we do face a tough winner and energy markets with

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Speaker 1: rising prices, and we don't have supply where we want it.

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Speaker 1: I think the President's proposal of cutting the Strategic Patrol

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Speaker 1: and Reserve by two million barrels down to level was

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Speaker 1: a bad and dangerous policy. And this is exactly why, Lisa,

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Speaker 1: because that strategic petroleum reserve is in case of major

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Speaker 1: shortage and impact on the US. So I think he's

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Speaker 1: contributed to this enter crisis this winter by the decision

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Speaker 1: in all fairness, So natural gas is a different story, right,

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Speaker 1: and the natural gas exports from the US is really

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Speaker 1: what's in question, because that's really what Europe and Germany

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Speaker 1: in particular really needs right now. So what would your

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Speaker 1: stance be on the threshold to restrict some of that

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Speaker 1: of those exports. Well, I wouldn't restrict exports unless we

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Speaker 1: rent an absolute energy emergency here, which we have. We

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Speaker 1: need to be smart about and that's why I raised

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Speaker 1: the reserve on the oil side. But look, Europe needs

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Speaker 1: natural gas and Joe Biden has been terrible on producing

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Speaker 1: natural gas here. He's taken a lot of decisions that

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Speaker 1: have made it very hard to get our inner gendersty

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Speaker 1: back up to pre pandemic production and with a positive outlook,

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Speaker 1: that production will produce a solid internal rate of return

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Speaker 1: in the future, because we need to be having our

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Speaker 1: natural gas here, but we need to be exporting natural

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Speaker 1: gas and this energy crisis to our allies in Europe,

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Speaker 1: A Congressman, isn't the damage done? And even if we

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Speaker 1: get a Republican Congress from these midtimes, if you're an

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Speaker 1: oil producer right now trying to make multi decade decisions

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Speaker 1: as far as that concerned, isn't this story over? Well?

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Speaker 1: I don't think so, Jonathan. I think we have to

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Speaker 1: be four in all the above energy policy during this transition,

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Speaker 1: whether you're in Europe or the United States or in Asia.

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Speaker 1: We need to be moving to natural gas from coal,

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Speaker 1: We need to be investing in nuclear, and we need

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Speaker 1: to have our energy companies recognize and governments have to

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Speaker 1: recognize that it takes a hundred million barrel a day

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Speaker 1: equivalent to run the global industrial economy. And to premature

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Speaker 1: lee cut that back or injure it without the offsetting

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Speaker 1: cleaner alternatives, you're in troub well as an economy, and

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Speaker 1: the Third World will pay the highest price not only

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Speaker 1: from exporting America's inflation, but by these policies that curtail

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Speaker 1: the use of energy in the Third World. Congressman, fantastic

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Speaker 1: to catch up with you, Sa french Hill as a wife,

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Speaker 1: Thank you, sir. We go to the other side and

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Speaker 1: arguably the most interesting Democrat Party experiment in America, and

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Speaker 1: that is Vermont. I spoke with Senator Lahy a number

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Speaker 1: of weeks ago his wonderful new book out the Path

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Speaker 1: of Senator lay over the decades, and it's been a

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Speaker 1: path shared by his colleague Peter Welch as well, Congressman

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Speaker 1: and of course in a dash for the Senate here

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Speaker 1: on this Tuesday. Uh, let me start with a Vermont tradition, Congressman,

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Speaker 1: will you vote early? Will you vote often? Well, I'll

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Speaker 1: vote early to vote often. It's a cargo tradition. So

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Speaker 1: just one and done. We'll we'll leave that to Mayor

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Speaker 1: Daily and the rest. I need to talk about the

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Speaker 1: transformation of Vermont and what is unspoken. I remember White

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Speaker 1: River Junction years and years ago, impoverished up the Connecticut River,

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Speaker 1: and it is now bustling. It is a boom economy

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Speaker 1: with an unemployment rate I believe under two percent. What

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Speaker 1: is the Vermont pixie dust that makes for prosperity? Well,

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Speaker 1: White Rivers where I first came nineteen seventy four, and

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Speaker 1: it was the town you described, and now it's doing

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Speaker 1: extremely well. But you know, I think there's a real

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Speaker 1: civic tradition here where our businesses UH and our government

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Speaker 1: had worked very well together in a partnership, and we've

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Speaker 1: had a commitment to our environment through Republican and Democratic governors.

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Speaker 1: We've had a commitment to in tough times trying to

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Speaker 1: support people who needed help UH, and then lower taxes

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Speaker 1: when when times were good. So there's I think a

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Speaker 1: very functional government here through Republican and Democratic administrations where

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Speaker 1: there's been UH, social liberalism and economic stewardship UH. And

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Speaker 1: we pay our bills here in Vermont. As time moves on,

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Speaker 1: as Senator Sanders retires, Senator Lady retires, do you suggest

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Speaker 1: a Democratic Party that will move to a national center

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Speaker 1: away from a more East coast and West coast liberality. Well,

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Speaker 1: you know, let's define that liberality. I think what has

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Speaker 1: worked for us, and I think it is good for

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Speaker 1: the National Democratic Party UH is to have a commitment

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Speaker 1: to the environment and understanding that there's got to be

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Speaker 1: partnerships between government and the private sector in order to

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Speaker 1: get things done. And frankly, I think that's what you

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Speaker 1: see with the Inflation Reduction Act on the climate change

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Speaker 1: where there's a lot of tax incentives that's going to

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Speaker 1: help create a market dynamic. Uh. And there's a there's

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Speaker 1: a good deal of civic cooperation you're in where people

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Speaker 1: here listen more than they talk, where when we disagree

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Speaker 1: with somebody, we don't assume bad motives. I mean, I

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Speaker 1: actually think the way we do things here in Vermont.

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Speaker 1: We've got a Republican governor, and we've got a Democratic

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Speaker 1: plus independent of course in Bernie Sanders in the in

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Speaker 1: the Congress, but where that mutual respect is something that

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Speaker 1: we need. Uh. And we certainly don't have election deniers

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Speaker 1: here in the state of Vermont. But congressmen talking about

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Speaker 1: the green transition, there's been so much pushback of late

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Speaker 1: because of the need to invest in fossil fuels in

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Speaker 1: the near term. How do you dovetail a message that

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Speaker 1: is supportive for the oil and gas that people rely

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Speaker 1: on to heat their homes in a winter that's going

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Speaker 1: to potentially be fraught with very high prices with the

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Speaker 1: idea that you need to invest long term, with the

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Speaker 1: idea that people don't want to spend too much money

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Speaker 1: in the face of inflation. Well, no, you're exactly right.

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Speaker 1: I Mean, the bottom line here is if we're going

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Speaker 1: to get to clean energy, and I think everybody knows

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Speaker 1: we need to do that. It's got to be affordable. Uh.

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Speaker 1: You know, if a person is going to want to

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Speaker 1: get a truck and they want an off in fifty electric,

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Speaker 1: that ultimately has to be an affordable purchase for them.

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Speaker 1: And that's in order for that to happen. And this

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Speaker 1: has been the case in many other technological transformations. Government

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Speaker 1: policy plays a big role with tax incentives that then

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Speaker 1: encourage private investment. We saw that with solar, the cost

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Speaker 1: of panels coming way down, but that we are not

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Speaker 1: yet there in some of these how they are areas

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Speaker 1: like the electric vehicles. Uh in so I think the

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Speaker 1: combination of public policy and incentives to make that gradual transition.

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Speaker 1: But in the meantime, you know, if people are going

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Speaker 1: to get through the winter, we've got to make sure

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Speaker 1: that they have affordable eating fuel and that will be

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Speaker 1: a big issue for us. I think when we return

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Speaker 1: to Washington, Congressman, are you worried about the perception of

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Speaker 1: the Democratic Party is have having gotten too extreme on

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Speaker 1: the left side. Well, it's certainly in the campaign. You know,

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Speaker 1: the campaign reduces things down to kind of an absurd

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Speaker 1: narrow definition. Uh. And in fact, when you look at

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Speaker 1: our record, there has been significant focus on economic development,

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Speaker 1: in jobs and uh. You know, the big challenge we're

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Speaker 1: facing right now is coming out of COVID. We've got

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Speaker 1: inflation in this country, but we've got inflation around the world.

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Speaker 1: It's even worse than ours, and we've got to take

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Speaker 1: the steps to bring it down. And the choice that

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Speaker 1: we have here, this is what is going to await

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Speaker 1: us tomorrow after we get the verdict of the voters.

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Speaker 1: We've got history with this Republican Party, particularly in the House,

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Speaker 1: where they're pretty extreme policies, and we'll be hearing a

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Speaker 1: lot of talk about getting government spending under control by

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Speaker 1: reducing social security. Will have a lot of discussion about

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Speaker 1: getting the government spending under control by defaulting on our debt.

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Speaker 1: We've been through that and colleagues of mine in the

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Speaker 1: House are saying that they want to default time the

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Speaker 1: debt unless they get their way on their spending proposals.

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Speaker 1: So there's a lot of jeopardy here depending on what

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Speaker 1: the outcome of the selection is. Where we start going

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Speaker 1: in the House back to the impeachment's impeachment and Hunter

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Speaker 1: Biden maybe the impeachment of Joe Biden, default time, the

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Speaker 1: debt is the threat government shutdown, and all of that's

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Speaker 1: chaos for the well being of our of our economy. Comblishment,

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Speaker 1: thanks for paying with us today, pay to watch that.

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Speaker 1: Thank the accomlishment. Right now we drive forward the conversation

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Speaker 1: with a Beltway insider with the Rock Creek crew. Alfia

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Speaker 1: dor Walla joins us. Now they're managing director. Thank you

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Speaker 1: so much for getting up. It's way too early for

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Speaker 1: what I mean. Even on election day, Washington doesn't get

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Speaker 1: up to Oh no, we're we're up. We're financed people,

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Speaker 1: so we're up. It's exciting. Explain election day in Washington.

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Speaker 1: French Hill was in Arkansas as you should be today.

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Speaker 1: Is Washington deserted on election Day? You know? I don't

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Speaker 1: know if it's as exciting as people want to think

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Speaker 1: Washington is on the election day. Everyone's working from home anyway,

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Speaker 1: especially the government. So I don't know if we are

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Speaker 1: getting a lot of excitement today. And I think markets are,

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Speaker 1: as you said, pricing in a little bit of a split. Um.

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Speaker 1: You know, Congress, and what that means for markets, What

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Speaker 1: are the risks around that for you? From your perspective,

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Speaker 1: is that good or bad? Because we're told overwhelmingly it

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Speaker 1: is good, you know, I mean, you could be in good.

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Speaker 1: It could be right, less inflationary pressure because you don't

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Speaker 1: have as much fiscal spending. You could see a week

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Speaker 1: or dollar, all of those things could price into markets,

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Speaker 1: and um, you know, be being a little bit more positive.

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Speaker 1: But honestly, I do think that the midterm elections will

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Speaker 1: just be a small blip in what we see in markets. Unfortunately,

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Speaker 1: everyone's kind of probably sick and tired of hearing this,

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Speaker 1: but it's all about inflation once the longer term consequence

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Speaker 1: of the fisc corresponse probably not being there regardless of

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Speaker 1: who gets elected into the White House. Even Yeah, no,

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Speaker 1: I mean, I think it's interesting because we don't talk

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Speaker 1: a lot about the Inflation Reduction Act as well, right,

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Speaker 1: and the investment implications of the i r A. We've

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Speaker 1: been looking a lot and doing a lot of research

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Speaker 1: to see what are the different areas that we can

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Speaker 1: actually invest in that are going to get tail winds

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Speaker 1: from some of that IRA money. And there are places

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Speaker 1: and there's pockets of opportunity there. You manage cautious money,

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Speaker 1: conservative money, if there's a new risk free rate. I

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Speaker 1: mentioned the two year yield where it is. How does

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Speaker 1: that change? And I don't mean it's a direct pension basis,

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Speaker 1: but how does it change the actuarial or return assumption

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Speaker 1: of international money. It's part of the building blocks of

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Speaker 1: your capital market return assumptions, right, And we manage money

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Speaker 1: for endowment's foundations, pensions. They want to have their money

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Speaker 1: there in perpetuity and so having um you know, these

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Speaker 1: type of rates. In the fixed income market, we are

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Speaker 1: talking so much more about how to manage our fixed

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Speaker 1: income exposure. One of the best trades now is putting

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Speaker 1: your cash in six months. Else, how do you manage

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Speaker 1: your fixed income losses of the last couple of years,

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Speaker 1: everybody's enjoyed that, yeah, you know, I mean sixteen what

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Speaker 1: the US bond market is down about sixteen percent this year, right,

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Speaker 1: Equity markets are down about We've had a very diversified

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Speaker 1: fixed income exposure. We've also included tips gold floating rate funds.

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Speaker 1: There are a lot of pockets. We've stayed away from

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Speaker 1: high yield, so we've been very short duration as well,

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Speaker 1: which has actually helped us manage our and limit our

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Speaker 1: losses on the downside. One thing we've been trying to

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Speaker 1: work out is whether we operate with the underlying assumption

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Speaker 1: that we're going to have FED funds to say three

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Speaker 1: point five to five for the next couple of years.

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Speaker 1: It's that your basic assumption now. It is our basic

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Speaker 1: assumption right now. But we are looking very closely right

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Speaker 1: and when the Fed's gonna pause, when they're going to pivot,

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Speaker 1: and that's going to completely change some of the rotation

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Speaker 1: in terms of portfolios and where you want to be

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Speaker 1: putting your money. You might want to be increasing your duration,

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Speaker 1: you might want to be increasing or fixed fixed income exposure.

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Speaker 1: You're gonna want to see where equities are in terms

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Speaker 1: of valuations across the globe. When do you think you'll

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Speaker 1: see sixty kind of portfolio start to reassert itself in

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Speaker 1: a positive way? I think you know, I mean timeline.

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Speaker 1: I I think you're out at least twelve eighteen months

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Speaker 1: before you start to see any sort of appreciation in

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Speaker 1: the in the sixty type of portfolio. And we're looking

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Speaker 1: for just a diversified portfolio a lot of alternatives today

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Speaker 1: as well. Where does the diversification come from? Then, if

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Speaker 1: we're basically faced with a positive equity bond correlation for

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Speaker 1: the foresamable future. You talked about diversifying. Where does it

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Speaker 1: come from. So we have the advantage of being able

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Speaker 1: to invest in private markets, right, And as much as

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Speaker 1: we've seen valuations come down in private markets as well,

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Speaker 1: they haven't come down as much in public markets. And

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Speaker 1: there's so much innovation going on, and there are lots

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Speaker 1: of sectors that are actually less cyclical. I mean, there

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Speaker 1: are less economically sensitive and less cyclical than what we're

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Speaker 1: seeing in tech today. So we're investing in food, we're

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Speaker 1: investing in agg we're investing in climate related areas, all

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Speaker 1: things that we think are going to be ten year

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Speaker 1: or fold investment. Private markets adjusted, Yet when you look

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Speaker 1: at them, if they really adjusted yet, well, private markets

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Speaker 1: never adjusted. That's the beauty of private markets, right. Okay,

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Speaker 1: nothing doesn't trade, doesn't mean that it doesn't go down

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Speaker 1: in value. Do you think that anyone's going to have

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Speaker 1: to sell and walk in the decline that people are Yeah,

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Speaker 1: that's the point. So if you look at the venture

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Speaker 1: side of things, right, if you look at some of

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Speaker 1: the companies that are most well run, they have twenty

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Speaker 1: four eighteen to twenty four months of runway in terms

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Speaker 1: of cash. That's not that that could get you through

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Speaker 1: a period where you don't have to go to market

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Speaker 1: very soon. So there's going to be a bifurcation in

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Speaker 1: terms of companies that have been able to manage their

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Speaker 1: balance sheets well and those that haven't, even in the

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Speaker 1: private markets. Got to say it aside that of Rock

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Speaker 1: Cli Croup, Dan, you're going to joins us this morning,

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Speaker 1: Commanding Heights. It is the most optimistic modern treatment of

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Speaker 1: capitalism that is out there. Has the optimism evaporated when

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Speaker 1: you look at the commanding Heights of America? Have we

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Speaker 1: given up the optimism? I think certainly. We can put

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Speaker 1: it Tom in terms of the balance of confidence in markets,

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Speaker 1: which was very strong, has received and it has shifted.

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Speaker 1: We've seen, you know, in terms of the last four years,

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Speaker 1: really since the financial crisis of two thousand and eight,

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Speaker 1: kind of reassertion of stronger government role across the economy.

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Speaker 1: Lisa and Joe, I want to jump in here with

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Speaker 1: a lot of other questions in a two hour conversation

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Speaker 1: with you. I'm kidding, folks, we get Dan, You're good

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Speaker 1: for some precious minutes. Are we a two party nation

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Speaker 1: or are we fracturing our historic two party system? Well,

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Speaker 1: I think it's hard to see us not having a

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Speaker 1: two party system, but we probably at this point have

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Speaker 1: a four party system, moderates in the Democrats, moderates and Republicans,

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Speaker 1: and then at the two sides of the party. We

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Speaker 1: need to talk about how we're going to build out

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Speaker 1: refining capacity in this country. I've heard from Republicans at

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Speaker 1: their fossil fuels and that hopeful that they can change

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Speaker 1: the story. I think a lot of us have our

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Speaker 1: doubts about that. You know better than most, in fact,

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Speaker 1: better than pretty much if when we speak to that,

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Speaker 1: these individuals, these companies make multi decade decisions, and no

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Speaker 1: one's wanting to make that decision right now. Can we

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Speaker 1: change that story? And I don't think so. I think

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Speaker 1: you'll see some modest you'll see de bottlenecking of refineries

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Speaker 1: and some expansion to some building, but basically, uh, nobody's

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Speaker 1: going to commit, as you say, to a long term

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Speaker 1: investment because you don't know what the regulations will be

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Speaker 1: in three or four years. And in recent years the

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Speaker 1: regulations have really encourage people to shut down refineries. So

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Speaker 1: how has this really changed the political lines? The fault

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Speaker 1: lines around the world. We thought we talked about how

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Speaker 1: India has refined a lot of oil from Russia and

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Speaker 1: then imported it or exported excuse me, back to Europe.

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Speaker 1: How much is the US Is Europe willing to crack

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Speaker 1: down on those types of partnerships that are getting closer

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Speaker 1: at a time when they need the ultimate product? I

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Speaker 1: think it's going to be very difficult. India was importing

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Speaker 1: less about one pent of its oil from Russia year ago,

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00:23:37,359 --> 00:23:40,159
Speaker 1: now it's twenty three in. The Indian Foreign Minister just

433
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Speaker 1: a day or so ago in Moscow said that Russias,

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00:23:43,920 --> 00:23:45,960
Speaker 1: what do you say, a steady and time tested partner.

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00:23:46,400 --> 00:23:49,199
Speaker 1: And of course they're indicating they're not going to go

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00:23:49,240 --> 00:23:53,359
Speaker 1: along with a price cap, although Janet Yellen is is

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00:23:53,400 --> 00:23:55,840
Speaker 1: going to New Delhi to encourage them to do that.

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Speaker 1: But the Indians, I mean, this is a pretty strong

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00:23:58,280 --> 00:24:01,159
Speaker 1: assertion of their long term lationship with Russia. You know.

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00:24:01,200 --> 00:24:04,359
Speaker 1: Liam Donning a calumnist Bloomberg Opinion. It wrote a story

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00:24:04,359 --> 00:24:06,760
Speaker 1: about how five dollar gasoline is a big problem for

442
00:24:06,840 --> 00:24:10,080
Speaker 1: the Democrats, but it's not a big problem for for drivers.

443
00:24:10,160 --> 00:24:14,240
Speaker 1: Are politicians trying to adopt the case for oil and

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00:24:14,320 --> 00:24:16,840
Speaker 1: fossil fuels and policy when really they've got very little

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00:24:16,840 --> 00:24:19,680
Speaker 1: control over it at this point. Well, I think that's true.

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00:24:19,680 --> 00:24:22,720
Speaker 1: I mean, even you talk about windfall profits, I mean

447
00:24:22,760 --> 00:24:25,040
Speaker 1: the companies. I mean, it's really a global market. It's

448
00:24:25,080 --> 00:24:27,200
Speaker 1: a very big global market, with a hundred million barrels

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00:24:27,320 --> 00:24:32,200
Speaker 1: a day. But nevertheless, we do know that gasoline prices

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00:24:32,280 --> 00:24:36,160
Speaker 1: have an outsize symbolic impact as well as a real

451
00:24:36,200 --> 00:24:39,000
Speaker 1: impact in terms of how people vote. When was the

452
00:24:39,080 --> 00:24:42,360
Speaker 1: last time you saw relations between Riant and Washington as

453
00:24:42,359 --> 00:24:44,280
Speaker 1: bad as they are right now? Well, I just came

454
00:24:44,359 --> 00:24:47,320
Speaker 1: back from there. Uh, And I would say it's pretty tense.

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Speaker 1: I think it's been you have to go back a

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00:24:49,280 --> 00:24:52,040
Speaker 1: few years. There's been earlier periods, obviously because Shoki was

457
00:24:52,080 --> 00:24:55,160
Speaker 1: one period, but right now it was you know, it's

458
00:24:55,200 --> 00:24:57,720
Speaker 1: just you could feel the palpable tension between the U

459
00:24:57,800 --> 00:25:00,879
Speaker 1: S and Saudi Arabia. Although a strict GGIC interests they

460
00:25:01,160 --> 00:25:04,200
Speaker 1: do coincide. Do you think they can reconcile that differences?

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00:25:04,240 --> 00:25:06,200
Speaker 1: And if they don't at this point as things stand,

462
00:25:06,400 --> 00:25:09,520
Speaker 1: one are the consequences. Well, I think that that's a

463
00:25:09,600 --> 00:25:12,240
Speaker 1: very good question. I think ultimately this Uh and I

464
00:25:12,320 --> 00:25:15,600
Speaker 1: got into dialogues about that actually in uh In there.

465
00:25:15,800 --> 00:25:19,679
Speaker 1: I think that ultimately the strategic interests will coincide, but

466
00:25:19,840 --> 00:25:22,000
Speaker 1: it's it's a it's a rocky period right now, and

467
00:25:22,040 --> 00:25:25,960
Speaker 1: obviously the cotton production a month before the U S

468
00:25:26,000 --> 00:25:29,720
Speaker 1: election was very incendiary. I think the temperature has to

469
00:25:29,760 --> 00:25:31,120
Speaker 1: be brought down because there are a lot of other

470
00:25:31,160 --> 00:25:34,680
Speaker 1: big issues there, including Iran. There is a new map, Dan,

471
00:25:35,560 --> 00:25:37,840
Speaker 1: but what the new map is is about the tradition,

472
00:25:38,000 --> 00:25:43,199
Speaker 1: the tradition, the fear of America that's seen in isolationism.

473
00:25:43,320 --> 00:25:47,920
Speaker 1: What's our isolationism look right now with Ukraine and frankly

474
00:25:47,920 --> 00:25:51,080
Speaker 1: with attensions. John mentioned so than it did a few

475
00:25:51,160 --> 00:25:54,800
Speaker 1: years ago because we're really revivified our basic coalitions with

476
00:25:54,880 --> 00:25:58,400
Speaker 1: Europe and with our Asian partners. So I think that part,

477
00:25:58,600 --> 00:26:01,240
Speaker 1: that part is different. We are, you know, with this

478
00:26:01,400 --> 00:26:04,080
Speaker 1: war is so uncertain and you could still have an

479
00:26:04,119 --> 00:26:06,760
Speaker 1: accident that could carry it into a much more serious state.

480
00:26:07,640 --> 00:26:09,720
Speaker 1: Fund a question and is a tough one, so forgive

481
00:26:09,760 --> 00:26:13,080
Speaker 1: me for asking it. This administration has found it very

482
00:26:13,160 --> 00:26:16,800
Speaker 1: very difficult to square this circle, to say drill please,

483
00:26:17,040 --> 00:26:19,879
Speaker 1: and also to say no more drilling. How do they

484
00:26:19,920 --> 00:26:22,199
Speaker 1: square that circle? Well, I think you've just said it.

485
00:26:22,200 --> 00:26:24,600
Speaker 1: It's it's a very hard circle to square. It's a

486
00:26:24,640 --> 00:26:26,960
Speaker 1: short term we want more oil. Long term we want

487
00:26:27,000 --> 00:26:29,520
Speaker 1: to get off oil. And it's a very confusing message

488
00:26:29,560 --> 00:26:31,880
Speaker 1: because of course, if you're an investor, you're putting money

489
00:26:31,880 --> 00:26:34,560
Speaker 1: in not for just tomorrow, but for the next few years.

490
00:26:34,760 --> 00:26:37,040
Speaker 1: And so I think that along with the all the

491
00:26:37,040 --> 00:26:40,000
Speaker 1: battles about E s G is hindering investments. So US

492
00:26:40,040 --> 00:26:42,240
Speaker 1: production is up, but not as much this year as

493
00:26:42,280 --> 00:26:46,280
Speaker 1: people would have expected. Lisa, I just think this is

494
00:26:46,280 --> 00:26:49,119
Speaker 1: a fascinating issue, which just means higher prices longer term, right,

495
00:26:49,160 --> 00:26:50,760
Speaker 1: I mean then basically that's what this means. If you

496
00:26:50,840 --> 00:26:53,760
Speaker 1: reduce prices, if you reduce supplies, the only thing that

497
00:26:53,800 --> 00:26:56,359
Speaker 1: you can end up doing is basically try to price

498
00:26:56,359 --> 00:26:59,199
Speaker 1: it out of existence. But that's not political plist and

499
00:26:59,240 --> 00:27:01,439
Speaker 1: I think you were talking about before. And it's amazing

500
00:27:01,480 --> 00:27:04,040
Speaker 1: to see that the oil price fluctuates on whether China

501
00:27:04,200 --> 00:27:07,320
Speaker 1: is on the number of COVID cases in China, because

502
00:27:07,359 --> 00:27:09,080
Speaker 1: you're missing maybe a million and a half barrels a

503
00:27:09,160 --> 00:27:11,560
Speaker 1: day of demand from China. If you do that, we'd

504
00:27:11,600 --> 00:27:15,000
Speaker 1: have a really tight market here. Elephant and donkey in

505
00:27:15,040 --> 00:27:17,359
Speaker 1: the room, give us a one year prediction on a

506
00:27:17,400 --> 00:27:20,760
Speaker 1: girl and a guess or because we run out the

507
00:27:20,760 --> 00:27:28,760
Speaker 1: clock here, Well, I think we'll look at I think

508
00:27:28,800 --> 00:27:31,720
Speaker 1: I was just looking at our economic forecast for three

509
00:27:31,720 --> 00:27:34,840
Speaker 1: if if, if the global economy is weak next year,

510
00:27:34,920 --> 00:27:37,840
Speaker 1: then that will put some uh price. But I think

511
00:27:37,840 --> 00:27:40,600
Speaker 1: there's probably a floor around seventy or eighty dollars on

512
00:27:40,640 --> 00:27:42,760
Speaker 1: a barrel of oil. Dan can see the clock counting up.

513
00:27:44,200 --> 00:27:47,679
Speaker 1: It's just hoping that it gets that quick look at

514
00:27:47,680 --> 00:27:50,960
Speaker 1: the time. Fantastic to see it. Great to have you

515
00:27:50,960 --> 00:27:53,240
Speaker 1: with a thank you, said Dank and the wonderful Dangan

516
00:27:53,560 --> 00:27:56,360
Speaker 1: of SMP Global, and of course of so much more.

517
00:27:57,760 --> 00:28:01,520
Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join

518
00:28:01,600 --> 00:28:04,680
Speaker 1: us live weekdays from seven to ten a m. Eastern

519
00:28:04,880 --> 00:28:08,920
Speaker 1: on Bloomberg Radio and on Bloomberg Television each day from

520
00:28:09,000 --> 00:28:14,280
Speaker 1: six to nine am for insight from the best in economics, finance, investment,

521
00:28:14,400 --> 00:28:19,439
Speaker 1: and international relations. And subscribe to the Surveillance podcast on

522
00:28:19,520 --> 00:28:23,320
Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on

523
00:28:23,440 --> 00:28:27,640
Speaker 1: the terminal. I'm Tom keene In. This is Bloomberg