WEBVTT - Why Morgan Stanley Is Revising Its GDP Outlook 0:00:00.080 --> 0:00:12.799 Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:12.800 --> 0:00:16.239 with David Gura. Daily we bring you insight from the 0:00:16.239 --> 0:00:21.640 best of economics, finance, investment, and international relations. Find Bloomberg 0:00:21.720 --> 0:00:27.000 Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course, 0:00:27.320 --> 0:00:34.320 on the Bloomberg Good Morning everyone, David Geran, Tom Keene, 0:00:34.320 --> 0:00:37.360 Bloomberg Surveillance, Our studios in New York, Mr gurl Off, 0:00:37.360 --> 0:00:41.959 Francie Aqua in our studios in London, Francine, Prime Minister May. 0:00:42.120 --> 0:00:45.320 Is she in Japan on her way? What's that? So? 0:00:45.360 --> 0:00:47.280 I think she just landed in Japan. We just spoke 0:00:47.360 --> 0:00:50.560 to Alex Moraless on TV. He's traveling with the Prime Minister. Tom. 0:00:50.800 --> 0:00:53.199 This is actually quite significant. She's gone to Japan in 0:00:53.240 --> 0:00:56.160 the hope of some kind of commitment for a free 0:00:56.160 --> 0:00:58.560 trade deal. Of course they can't actually sign anything, but 0:00:58.560 --> 0:01:00.920 if she comes back a failure, that's not gonna look 0:01:01.000 --> 0:01:03.960 very great. I mean, this is a massive Brexit theme. 0:01:04.920 --> 0:01:08.080 Am I going to suggest? Mr Johnson? Boris Johnson's theme 0:01:08.440 --> 0:01:11.440 that we are going to become a trading empire again? 0:01:11.760 --> 0:01:15.160 And I agree it starts with Japan, doesn't it. Yeah? 0:01:15.200 --> 0:01:17.360 I don't. I don't know about the trading empire. Certainly 0:01:17.680 --> 0:01:19.520 in his mind and maybe a couple of people that 0:01:19.600 --> 0:01:21.760 voted for breaks it, that's certainly what they aim for. 0:01:22.680 --> 0:01:24.240 But if you think about it, Look, it's going to 0:01:24.319 --> 0:01:26.479 be quite difficult to pull this thing off. I think 0:01:26.560 --> 0:01:29.560 negotiations with the EU lost it for almost a decade 0:01:29.560 --> 0:01:32.440 before they could actually, you know, be in these final 0:01:32.520 --> 0:01:34.800 stages of this free trade agreement. Okay, here's what we're 0:01:34.800 --> 0:01:37.360 gonna do. One question with YenS Nordvig on the business 0:01:37.360 --> 0:01:39.520 at hand, the dollar, and then we want to talk 0:01:39.560 --> 0:01:43.240 to him about global Wall Street dollar dynamics, the massive 0:01:43.319 --> 0:01:48.120 miscall of the summer strong dollar euro parity, all of 0:01:48.160 --> 0:01:50.920 it was reversed. Let's start with why why did everybody 0:01:50.920 --> 0:01:54.000 get the strong dollar call wrong? Well, I think that 0:01:54.200 --> 0:01:57.640 the hope about what the administration could do was just 0:01:57.720 --> 0:02:00.160 two elevations. It's linked to Trump the election. The just 0:02:00.200 --> 0:02:01.880 think there's a part of that, and I think there 0:02:02.000 --> 0:02:06.640 was there's too much concern about the European political risk, right, 0:02:06.720 --> 0:02:11.400 So it was something that focused everybody minds around the 0:02:11.440 --> 0:02:14.160 French election, and they were worried about the downside risk. 0:02:14.520 --> 0:02:16.440 But in fact, now we have upside rice in terms 0:02:16.440 --> 0:02:20.000 of politics and Europe. Maybe mccollan Mentel can actually get 0:02:20.000 --> 0:02:22.359 a deal together in coming months, so that would be 0:02:22.400 --> 0:02:25.800 a positive thing. Francine has led our coverage on mithid 0:02:25.960 --> 0:02:31.200 my fed How how do you pronounce the chase mythic method? Method? 0:02:31.240 --> 0:02:35.919 One another method you've lived in. You've gone from major 0:02:35.960 --> 0:02:39.280 firms Coleman, Saxon number to where you've got to shingle out. 0:02:39.360 --> 0:02:43.960 You're hugely successful talking to elites. There can only be 0:02:44.200 --> 0:02:47.560 so many Yen's nordvigs. What are the mere mortals of 0:02:47.680 --> 0:02:51.720 research in intellectual content? What are the mere mortals do 0:02:52.200 --> 0:02:56.079 in the city and in New York? Well, so I 0:02:56.120 --> 0:02:58.000 can talk a little bit about what what we are 0:02:58.120 --> 0:03:00.760 trying to do, right, because you're it that if it's 0:03:00.800 --> 0:03:03.920 based on a single individual, then you can't scale a 0:03:03.960 --> 0:03:06.040 business that's just going to stop there, right, So you 0:03:06.080 --> 0:03:08.639 need to have some kind of infrastructure that gives you 0:03:08.680 --> 0:03:10.400 an edge. Right. So what we're trying to do is 0:03:10.400 --> 0:03:13.399 we're trying to really build unique data. You need models 0:03:13.440 --> 0:03:15.400 that we can show to people and that gives them 0:03:15.400 --> 0:03:18.440 an edge. So that's what we're trying to scale the business. 0:03:18.520 --> 0:03:21.359 But I think you're right. If you are a pretty 0:03:21.360 --> 0:03:25.360 good analysis that sits in a bank or independent research 0:03:25.400 --> 0:03:27.200 into choosing pretty good is not going to cut it. 0:03:27.520 --> 0:03:29.920 You have to be among the very best to get 0:03:29.919 --> 0:03:33.280 paid specific before your research, and that's the competition that 0:03:33.320 --> 0:03:35.640 everybody is going to be in. Now. Yes, I can't 0:03:35.680 --> 0:03:37.760 really make sense of it. So I understand these are 0:03:38.480 --> 0:03:41.120 very important rules to make everything more transparent. But then 0:03:41.280 --> 0:03:43.360 we speak to Danskin Bank and they say they're trying 0:03:43.360 --> 0:03:45.920 to figure out whether research on this need to charge 0:03:45.920 --> 0:03:49.080 for routine phone calls. Why do we not know yet? 0:03:49.200 --> 0:03:52.119 We're what August or twenty nine? This you know goes 0:03:52.160 --> 0:03:56.840 in place January three. I think one major problem is 0:03:56.960 --> 0:04:02.160 that the banks setting prices now for their research, and 0:04:02.320 --> 0:04:05.360 you can see that they're coming down down, down, deut 0:04:05.440 --> 0:04:08.040 your bank without announcement the other day exactly, and they 0:04:08.080 --> 0:04:09.920 we don't know where the floor is. We don't know 0:04:10.080 --> 0:04:13.280 where regulators going to say, Okay, that price is just 0:04:13.480 --> 0:04:16.560 actually it doesn't match any any of the cost you having. 0:04:16.560 --> 0:04:19.200 It's just a fake price. So the regulators have to 0:04:19.200 --> 0:04:21.960 come out and give some guidance as to what pricing 0:04:22.000 --> 0:04:24.799 they would would accept, and we just don't have that yet. Okay, 0:04:24.800 --> 0:04:27.320 do we have any idea of where that accepted prices? 0:04:27.480 --> 0:04:29.280 Because if you if you low ball it, right, if 0:04:29.279 --> 0:04:31.280 you say, well, I'm hardly going to pay anything at all, 0:04:32.040 --> 0:04:34.520 not only the regulators saying that's not good enough, but 0:04:34.600 --> 0:04:37.320 they could also do an investigation on it. Yeah. No, 0:04:37.480 --> 0:04:40.240 So I think that's the core of a problem. That 0:04:40.320 --> 0:04:43.120 guidance has not been given and we're only a couple 0:04:43.120 --> 0:04:44.880 of months away from when they're supposed to come to 0:04:44.920 --> 0:04:47.359 into effect, and it's kind of paralyzing everybody because we 0:04:47.440 --> 0:04:49.360 just don't know how research is going to be a price. 0:04:49.720 --> 0:04:52.920 It's away from your world of foreign exchange. But in equities, 0:04:53.000 --> 0:04:57.320 Collins Rockwell Collins, the merger with ut X Collins, and 0:04:57.360 --> 0:05:03.200 the Bloomberg has an analysts following it. From where you sit, 0:05:03.279 --> 0:05:06.400 are those days over well, I think you can already 0:05:06.400 --> 0:05:09.000 see it in the equity space that there are more 0:05:09.000 --> 0:05:13.200 and more players withdrawing from like traditional equity research, and 0:05:13.240 --> 0:05:16.320 therefore we have less analysts covering certain stocks, and we 0:05:16.400 --> 0:05:21.400 have also less stocks overall being covered. So in a way, this, 0:05:21.400 --> 0:05:23.320 this is the regulation is going to mean that there's 0:05:23.440 --> 0:05:26.960 less information available to trade on. Okay, does that mean 0:05:27.040 --> 0:05:29.160 for example, that if you're a great you know, if 0:05:29.200 --> 0:05:31.480 you bring your research in house so you stop paying 0:05:31.560 --> 0:05:33.839 for it from others, that actually will give you the 0:05:33.880 --> 0:05:36.480 real advantage. How much is the financial landscape really going 0:05:36.520 --> 0:05:39.040 to change because you'll see the people that are really 0:05:39.080 --> 0:05:42.000 good out of their own research actually making the trades. Yeah, 0:05:42.040 --> 0:05:43.800 I think I think you're seeing that that there's more 0:05:43.839 --> 0:05:46.600 and more by side firms that says, Okay, it's going 0:05:46.640 --> 0:05:48.640 to be too expensive, we have to do it internally. 0:05:48.680 --> 0:05:51.080 So there's certainly players that are doing it that way. 0:05:51.400 --> 0:05:53.360 They're doing it very quickly. I know you've got to 0:05:53.400 --> 0:05:55.440 go to a client call right now, but yes, this 0:05:55.520 --> 0:05:59.000 is critical. Have you seen any evidence that anyone's going 0:05:59.040 --> 0:06:03.960 to quote unquote take foreign exchange coverage internally? So the 0:06:04.000 --> 0:06:06.920 foreign exchange market was special in that it's not about 0:06:07.000 --> 0:06:10.080 thousands of companies. Is like a couple of key crosses. 0:06:11.080 --> 0:06:14.359 So I think in general, the big currency traders in 0:06:14.400 --> 0:06:17.160 the world, they will have a mix of internal research 0:06:17.279 --> 0:06:20.200 and they also pay for the best they can get outside. 0:06:20.279 --> 0:06:22.240 They're still gonna send people to the New York Rangers, 0:06:22.279 --> 0:06:25.320 Montreal Canadians game all that rack. It's gonna still continue 0:06:25.320 --> 0:06:29.320 against nord Vig. Thank you so much with Elexante data 0:06:29.360 --> 0:06:43.279 here and I'm an important call for those of you 0:06:43.680 --> 0:06:47.680 interested in the energy assets of a Beliger Golf of Mexico. 0:06:47.800 --> 0:06:51.080 This is, without question the interview of the day. Jacques 0:06:51.120 --> 0:06:55.480 Roussou is with clear view energy partners, but barely describes 0:06:56.000 --> 0:07:00.800 decades of work on the pipelines the refineries of our 0:07:00.920 --> 0:07:05.720 American energy infrastructure. Jack an open question first, our our 0:07:05.880 --> 0:07:09.679 assets at risk? Do we thirty days from now, sixty 0:07:09.720 --> 0:07:13.120 days from now, ninety days from now, move on with 0:07:13.200 --> 0:07:17.400 Harvey as a memory. That's a difficult question to answer. 0:07:17.440 --> 0:07:20.480 I think one way to think about it is during Katrina, 0:07:20.560 --> 0:07:23.679 it took about three months for these refineries to get 0:07:23.680 --> 0:07:26.720 back up to a full production level. So that is 0:07:26.800 --> 0:07:28.960 one marker to think about. But you just never know. 0:07:29.640 --> 0:07:32.840 You mentioned uh earlier this morning when we spoke on 0:07:32.880 --> 0:07:38.840 television about the unique place of electricity to oil into 0:07:38.960 --> 0:07:42.080 gas in the region. Explain that. Give us a Lehigh 0:07:42.200 --> 0:07:47.320 University exclamation. Exclamation of explanation, I'll get it out, explanation 0:07:47.640 --> 0:07:53.240 of how electricity folds into hydrocarbons. Sure, I think what 0:07:53.280 --> 0:07:57.560 you want to think about is refineries, pumping stations, for pipelines, 0:07:58.320 --> 0:08:01.880 chemical plants. Uh, there's a lot of electricity that powers 0:08:01.920 --> 0:08:05.040 the plants, and if that has gotten flooded and knocked out, 0:08:05.320 --> 0:08:07.360 you know, there can be a lengthy recovery time to 0:08:07.400 --> 0:08:10.800 repair that. Alright, I'm looking at some of the refineries 0:08:10.840 --> 0:08:13.360 and there's a great function on the Bloomberg terminal for 0:08:13.400 --> 0:08:16.080 those that have one, Jack talk to me about what 0:08:16.280 --> 0:08:19.360 is more concerning. Is it refineries shutting or the pipeline 0:08:19.480 --> 0:08:22.760 being blocked off? Well, right now we're looking on the 0:08:22.800 --> 0:08:25.400 refinery side. If you think about the United States, about 0:08:25.440 --> 0:08:28.560 fifty percent of refining capacity is in the Gulf Coast, 0:08:29.320 --> 0:08:32.880 of that in Louisiana, of that in Texas. From what 0:08:33.000 --> 0:08:36.280 we've seen now, there's been reported eighteen percent or so 0:08:36.400 --> 0:08:41.079 of US refining capacity is either down or working at 0:08:41.480 --> 0:08:44.319 restricted rates. So that is kind of the key thing 0:08:44.360 --> 0:08:47.240 to focus on right now because if those refineries stay 0:08:47.280 --> 0:08:49.880 down for an extended period of time, that is what 0:08:49.960 --> 0:08:53.199 the market is thinking with gasoline going up. How much 0:08:53.240 --> 0:08:56.959 does a hurricane actually impact the demands, not the supply side, 0:08:56.960 --> 0:09:00.000 but the demand side of things. That's a great question, 0:09:00.080 --> 0:09:02.160 and I think you can see that in oil price 0:09:02.320 --> 0:09:05.840 because what we're seeing for w T I is that 0:09:06.160 --> 0:09:09.600 the United States is down roughly eight hundred thousand barrels 0:09:09.640 --> 0:09:13.040 per day of oil supply due to the hurricane. But 0:09:13.160 --> 0:09:17.080 oil demand to the hurricane is a bigger number because 0:09:17.120 --> 0:09:20.400 that's the refining side of the equation. Is that we're 0:09:20.400 --> 0:09:23.120 seeing over three million barrels per day of refining capacity 0:09:23.200 --> 0:09:27.520 down and so that's cutting um the gasoline, which is 0:09:27.559 --> 0:09:31.199 the way the government calculates it in terms of products supplied, 0:09:31.320 --> 0:09:33.800 is what they call demand. I mean, flooding is not 0:09:33.840 --> 0:09:36.920 the only Flooding seems to be a jack the primary 0:09:37.080 --> 0:09:41.280 problem for refineries, right, but it's not the only one, sure, 0:09:41.400 --> 0:09:43.480 I mean you have a lot of Do you have 0:09:43.559 --> 0:09:47.479 ability to get oil? Do you have ability to access pipelines? 0:09:47.640 --> 0:09:50.440 You know, there's there's definitely a lot of infrastructure issues 0:09:50.480 --> 0:09:52.480 that need to be worked out, and I think we 0:09:52.520 --> 0:09:54.840 will see this over the next few days. We will 0:09:54.880 --> 0:09:58.680 get reports from the different companies on the status um 0:09:58.720 --> 0:10:01.560 As I recall from the Trina days, you know, there 0:10:01.720 --> 0:10:05.000 was a lot of information flow once companies could actually 0:10:05.000 --> 0:10:09.520 get back into the assets. Brian Mound, Big Hill, West 0:10:09.559 --> 0:10:15.000 Heckberry and buy you Chuck Taw. That's where our strategic 0:10:15.280 --> 0:10:20.000 oil reserve. Is is our strategic oil reserve up to 0:10:20.040 --> 0:10:23.760 its eyeballs and water this morning? Uh, that's a hard 0:10:23.800 --> 0:10:25.520 one to say. I mean, I think what you want 0:10:25.559 --> 0:10:28.160 to think about is do we need that oil? And um, 0:10:28.200 --> 0:10:31.600 you know that's not what this This hurricane has caused 0:10:31.600 --> 0:10:34.040 a shortage of oil. So we're we're not in a 0:10:34.120 --> 0:10:36.760 situation where we need oil, but it may get to 0:10:36.760 --> 0:10:39.520 the point where companies need to borrow some oil. And 0:10:39.640 --> 0:10:43.560 during Katrina, companies actually borrowed ten million barrels of oil 0:10:44.000 --> 0:10:47.000 and then actually returned it in the subsequent months. Many 0:10:47.000 --> 0:10:49.400 more questions. Let's continue with a chuck or so were 0:10:49.440 --> 0:10:52.760 this with clear view energy partners, we are being smarter 0:10:52.920 --> 0:10:55.360 on hydrocarbons today, for instance the quart in London. I'm 0:10:55.400 --> 0:10:58.280 Tom keenan New York chacker. So with this with clear 0:10:58.360 --> 0:11:01.200 view energy partners, as we could continue to look at 0:11:01.240 --> 0:11:05.800 what has become a tropical storm. What is the the 0:11:05.880 --> 0:11:11.000 infrastructure need of our pipelines and refineries? Is it as 0:11:11.120 --> 0:11:16.560 ugly as our many bridges worn out across this nation? Oh, 0:11:16.600 --> 0:11:20.360 I wouldn't say that. You know, these assets are taken 0:11:20.360 --> 0:11:23.240 care of very well. Obviously if they weren't there would 0:11:23.240 --> 0:11:26.440 be a lot more significant problems to that. So, um, 0:11:26.480 --> 0:11:29.200 it's just a matter of dealing with, um the flooding 0:11:29.200 --> 0:11:31.880 and figuring out what actually happened. I mean, are the 0:11:32.080 --> 0:11:36.280 new facilities we think of all the stereotypes of refineries 0:11:36.600 --> 0:11:39.160 built after World War Two that are being pieced together 0:11:39.240 --> 0:11:41.840 with duct tape. Is that's not the case down there, 0:11:41.880 --> 0:11:45.680 is it? Well, there's not too many new refineries. Marathon 0:11:45.760 --> 0:11:49.280 Petroleum had built one near New Orleans a few years back, 0:11:49.600 --> 0:11:52.359 but most of them have been around for a while. Obviously, 0:11:52.400 --> 0:11:58.200 there's there's maintenance that occurs on routine bases. What is 0:11:58.240 --> 0:12:02.400 the things are that we understand or misunderstand about shale 0:12:02.400 --> 0:12:05.160 production from the U S. If you look at you know, 0:12:05.200 --> 0:12:08.640 the I guess the break even price, I'm hearing everything 0:12:08.720 --> 0:12:13.360 from thirty to sixty. Yeah. Obviously we've seen a big 0:12:13.400 --> 0:12:17.120 move up in shale production, UM with the move up 0:12:17.160 --> 0:12:21.840 an oil price since the OPEQ announcement to start cutting production, 0:12:21.880 --> 0:12:25.959 and that is becoming a marginal supply out there. I mean, 0:12:26.000 --> 0:12:28.360 I think what you need to look at going forward 0:12:28.400 --> 0:12:30.440 in the back half of the year is that the 0:12:30.480 --> 0:12:32.400 world uses a lot more oil in the second half 0:12:32.400 --> 0:12:35.080 of the year, just seasonally, and this is opex big 0:12:35.200 --> 0:12:39.200 chance to reduce inventories, supply and demands very close. So 0:12:39.240 --> 0:12:41.440 we have a lot of wild cards out there that 0:12:41.480 --> 0:12:43.640 could go either way, and we've got a new one 0:12:43.679 --> 0:12:46.600 with the hurricane because, as we're mentioning before, this is 0:12:46.640 --> 0:12:50.080 going to uh clip demand in the US some If 0:12:50.120 --> 0:12:52.520 you if you look at Libya's oil production right it's 0:12:52.600 --> 0:12:55.560 dropped I think by around three sixty one thousand barrels 0:12:55.600 --> 0:12:58.200 a day. That's thirty five percent of output lost month. 0:12:58.520 --> 0:13:01.400 How much does that help OPAQUE and it's struggled to 0:13:01.400 --> 0:13:05.080 reduce this global glut. That's a great question, and Libya 0:13:05.280 --> 0:13:07.439 is one of the wild cards. You've got Libya, You've 0:13:07.440 --> 0:13:11.040 got Nigeria, You've got Venezuela. Iraq has not come close 0:13:11.120 --> 0:13:14.000 to to meeting their production cuts. So this is what 0:13:14.040 --> 0:13:16.679 OPEC needs, is they need a few of these countries 0:13:16.760 --> 0:13:20.439 to for their oil to move down UM to offset 0:13:20.480 --> 0:13:22.839 any sort of demand loss that we might get because 0:13:22.880 --> 0:13:29.640 of the hurricane. Jacque. One final question, is America energy independent? Oh? 0:13:29.679 --> 0:13:32.880 On the way for sure, but there's still a significant 0:13:32.880 --> 0:13:36.600 amount of imported oil that we need every day to 0:13:36.920 --> 0:13:39.520 UM to keep the gasoline and keep our cars going. 0:13:40.280 --> 0:13:42.160 Very good, Jack on short nose, Thank you so much, 0:13:42.200 --> 0:13:45.239 jacqu Roussou with clear view energy partners, with great perspective, 0:13:45.280 --> 0:13:50.360 particularly of a troubled Gulf of Mexico coastline. And again 0:13:50.679 --> 0:13:54.800 all of our reports, folks, seriousness of the hurricane and 0:13:54.840 --> 0:13:59.840 no tropical Storm Harvey. The rescue efforts continue across much 0:13:59.840 --> 0:14:03.120 of Houston and to the eastern clients. For our global audience, 0:14:03.160 --> 0:14:05.720 this is Houston and the Gulf of Mexico over to 0:14:05.760 --> 0:14:08.800 the Louisiana border on the way to New Orleans. Not 0:14:08.840 --> 0:14:11.319 to get to New Orleans, that would be a misstatement. 0:14:23.120 --> 0:14:25.200 So here's the theme, folks, with all the news slow 0:14:25.240 --> 0:14:29.160 that's going on, you know, the hunch like two weeks ago, 0:14:29.240 --> 0:14:31.960 as you know, we're gonna reset September. It's supposed to 0:14:31.960 --> 0:14:36.640 be Labor Day, you know, five days after Labor Day. No, 0:14:37.040 --> 0:14:40.640 it's starting now with the amazing news flow that we've gotten, 0:14:40.680 --> 0:14:43.040 not only out of Washington and London, with the Prime 0:14:43.080 --> 0:14:46.880 Minister traveling to Japan, but now with Hurricane Harvey and 0:14:46.920 --> 0:14:49.800 all that, we need reset in one way to do 0:14:49.840 --> 0:14:54.960 that in a decade financial crisis is without exaggeration, I 0:14:55.000 --> 0:14:57.760 will say one of the five most important books of 0:14:57.880 --> 0:15:00.960 the last decade on what we do with surveillance, and 0:15:00.960 --> 0:15:04.640 that is the Age of Oversupply. There was at some 0:15:04.680 --> 0:15:07.640 point forty seven books on my desk, and the world 0:15:07.720 --> 0:15:10.600 changed when Martin Wolf of the Ft said, shut up 0:15:10.600 --> 0:15:15.000 and read Dan Albert's Age of Oversupply. Dan, you've retired 0:15:15.360 --> 0:15:18.080 off of the royalties of Age of Oversupply, right, I 0:15:18.120 --> 0:15:19.960 just wish. I don't think I've earned back the advantage. 0:15:19.960 --> 0:15:25.080 When's the movie out? This is the is the is 0:15:25.120 --> 0:15:28.360 a movie come out? Here? Like Memorial Day two thousand twenty? 0:15:28.640 --> 0:15:32.000 Kit Harrington? What is what? Where'd you get the title? 0:15:32.240 --> 0:15:35.280 What is the Age of Oversupply? Is very funny. The 0:15:35.280 --> 0:15:39.000 the original title was supposed to be managed Capitalism. It 0:15:39.160 --> 0:15:42.080 was basically looking back and saying, you know, we pursued 0:15:42.120 --> 0:15:45.320 free market strategies for thirty years and there needs to 0:15:45.320 --> 0:15:48.560 be a new look taken a capitalism. Everybody basically said 0:15:48.600 --> 0:15:51.560 to me, that's an really insidious title. Don't do that. 0:15:52.520 --> 0:15:55.680 The first chapter was called the Age of Oversupply, and 0:15:55.680 --> 0:15:57.800 the publisher came back to me and said, it's a 0:15:57.840 --> 0:16:00.280 great title for the book. That's what we did, right, 0:16:00.280 --> 0:16:02.800 so so what is it being oversupplied? Oh? Well, the 0:16:02.840 --> 0:16:05.600 whole concept is that that the emergence of the post 0:16:05.640 --> 0:16:12.040 socialist states after beginning nineteen and thereafter h really created 0:16:12.080 --> 0:16:16.360 this massive oversupply of labor relative to aggregate demand globally uh. 0:16:16.360 --> 0:16:19.640 And that in turn created a huge, huge oversupply production 0:16:20.000 --> 0:16:24.480 and therefore capital excess. Capital UH defined as I guess 0:16:24.520 --> 0:16:26.560 by Bernanke as the savings glatt. And then we came 0:16:26.600 --> 0:16:29.360 to understand it a little bit better, which you know, 0:16:29.480 --> 0:16:32.760 basically flowed back into markets seeking risk free returns in 0:16:33.240 --> 0:16:37.000 bonds and mortgage backed securities in such there any way, 0:16:37.320 --> 0:16:39.040 there's any number of ways to go with us. I'm 0:16:39.040 --> 0:16:41.480 going to go to the brain power of chapter eight, 0:16:41.880 --> 0:16:46.960 which is bad values. Why sticky wages and prices block 0:16:47.120 --> 0:16:51.600 a real recovery? Now, that can go either way, depression, advance, etcetera. 0:16:51.920 --> 0:16:54.520 But when you wrote the Age of Oversupply, did you 0:16:54.680 --> 0:16:58.040 predict or think about the lack of wage growth we 0:16:58.120 --> 0:17:01.880 see right now? Well, wage growth, you know, really this 0:17:01.920 --> 0:17:04.760 is the big debate because we've had such an enormous 0:17:04.840 --> 0:17:09.960 expansion and service jobs relative to goods producing jobs. If 0:17:09.960 --> 0:17:13.280 you actually net it out, going back to the previous 0:17:13.320 --> 0:17:16.080 height two thousand and seven, we've only added net net 0:17:16.119 --> 0:17:19.440 about a million something in UH in goods producing jobs 0:17:19.480 --> 0:17:22.440 or high wage high hours jobs, i should say. And 0:17:22.600 --> 0:17:25.639 the rest of it, for plus million has been low wage, 0:17:25.680 --> 0:17:29.280 low hour jobs, really crappy jobs. Um and and so 0:17:29.760 --> 0:17:32.280 all of that is a is a manifestation of the 0:17:32.359 --> 0:17:36.520 lack of demand for UH labor in all but the 0:17:36.560 --> 0:17:40.760 most high tech sectors of the economy. And and it's 0:17:40.960 --> 0:17:43.720 it's all of this is a global phenomenon. You have 0:17:43.800 --> 0:17:48.040 to go back to what what happened, you know, in 0:17:48.040 --> 0:17:50.600 the age of oversupply, which is just this enormous amount 0:17:50.600 --> 0:17:54.120 of productive labor that is willing to work relatively and expensively. 0:17:54.200 --> 0:17:56.359 And you know, people have for years said, oh, the 0:17:56.480 --> 0:17:59.280 Chinese thing is over. It's it's now, you know, they're 0:17:59.280 --> 0:18:01.159 going to have to find cheaper labor somewhere else. But 0:18:01.240 --> 0:18:03.679 China isn't over. Neither is India. And the reason for 0:18:03.760 --> 0:18:08.520 that is there urbanized population is still a fraction of 0:18:08.720 --> 0:18:11.920 its total population. China is still only about half urbanized, 0:18:11.960 --> 0:18:13.920 and now the rest of the people are not really 0:18:14.000 --> 0:18:18.320 part of the global economy UM and India is only 0:18:18.320 --> 0:18:22.920 about sixty urbanize I'm sorry urbanized. So you know, you 0:18:23.240 --> 0:18:26.400 have this mess of bench strength that can continue to 0:18:26.440 --> 0:18:29.479 add labor to the problem, which tamps down the value 0:18:29.520 --> 0:18:31.639 of labor in the developed world. But don how do 0:18:31.680 --> 0:18:34.080 you fix it? Do you bring jobs American jobs abroad 0:18:34.160 --> 0:18:36.400 or you do you bring foreigners to America. I'm looking 0:18:36.400 --> 0:18:38.879 at a group great Bloomberg chart, right, and it's what 0:18:38.880 --> 0:18:41.080 you were talking about. So the difference between unfilled job 0:18:41.119 --> 0:18:44.600 openings and workers highed. There were six point one million 0:18:44.920 --> 0:18:48.280 unfilled job openings on June. I think that's, you know, 0:18:48.359 --> 0:18:51.159 the most since data was compiled in two thousands, and 0:18:51.200 --> 0:18:53.960 it's a massive myth. The myth is that there are 0:18:54.000 --> 0:18:57.040 all these job openings, but their job openings at a wage. 0:18:57.840 --> 0:19:01.640 And that is the key to understand the old statistics. Uh, 0:19:01.760 --> 0:19:05.080 you don't have this massive unfilled inventory when you have 0:19:05.160 --> 0:19:08.760 a huge unemployed labor base that's going into jobs at 0:19:08.800 --> 0:19:11.760 low wages and low hours just to make ends meet. Um. 0:19:11.800 --> 0:19:17.360 These these jolt statistics are very grossly misleadings and unfortunately 0:19:17.840 --> 0:19:20.920 the federalize a lot on them. I will editorialize your 0:19:20.960 --> 0:19:27.080 fencing anecdotally. Mr Alpert is correct. It is absolutely unreal 0:19:27.359 --> 0:19:31.119 disinterest people have in those skilled jobs at the wage offered. 0:19:31.800 --> 0:19:35.920 You know, you see it anecdotally every single day, Frenzy. Yeah. 0:19:36.280 --> 0:19:38.560 But what I'm asking done is how do you fix this? Right? 0:19:38.560 --> 0:19:40.800 So you're you're saying this is not true, but again 0:19:40.840 --> 0:19:45.080 you still have the the unemployment or the labor forces conundrum, 0:19:45.119 --> 0:19:47.240 let's call it that. So this is the big issue 0:19:47.280 --> 0:19:49.280 going into the fall. Right, We're going to be talking 0:19:49.280 --> 0:19:52.159 about tax reform in the United States, the issue of 0:19:52.160 --> 0:19:55.199 whether or not the economic nationalist agenda is going to 0:19:55.280 --> 0:19:57.879 prevail or continue to prevail under I don't know if 0:19:57.880 --> 0:19:59.879 it ever prevailed, but I mean I'm going to prevail 0:20:00.040 --> 0:20:04.040 under under under the Trump administration. These big issues are 0:20:04.080 --> 0:20:07.240 all oriented at what he had promised in his campaign 0:20:07.320 --> 0:20:10.800 and what the American electorate apparently seems to to to want, 0:20:11.160 --> 0:20:13.119 or at least a good chunk of them, which is 0:20:13.480 --> 0:20:17.760 better jobs. And the notion that trickle down tax reform 0:20:18.000 --> 0:20:21.040 is going to help, I think is highly specious. Uh. 0:20:21.080 --> 0:20:24.320 And of course when it comes to tariffs and other 0:20:24.359 --> 0:20:28.080 protectionist measures, I favor some measures because we can't go 0:20:28.119 --> 0:20:30.880 on like this forever in the United States. Uh. And 0:20:30.880 --> 0:20:32.720 and there are some very good things that we could 0:20:32.720 --> 0:20:35.240 be doing. But at the end of the day, you 0:20:35.320 --> 0:20:38.760 have to ask yourself the quintessential question, which is can 0:20:38.800 --> 0:20:43.119 the private sector in the United States actually shift people 0:20:43.160 --> 0:20:46.600 back into more gainful, higher paying jobs when there is 0:20:46.640 --> 0:20:51.879 this massive exogenous labor force offshore um And at my conclusion, 0:20:51.920 --> 0:20:53.600 the conclusion that I reached in the book and my 0:20:53.640 --> 0:20:57.280 conclusion today, especially looking at the last ten years, is 0:20:57.400 --> 0:21:01.840 it's very difficult. You have terrific power points. I'll steal 0:21:01.840 --> 0:21:03.960 any number of these charts folks, in of course take 0:21:03.960 --> 0:21:07.679 credit for them myself. But it does go back then 0:21:07.720 --> 0:21:10.720 to what can government policymakers do. Now you mentioned the 0:21:10.720 --> 0:21:14.200 FED earlier, and they're struggling against Nordvig talking about one 0:21:14.760 --> 0:21:19.080 uh one uh uh FED increase out to the end 0:21:19.119 --> 0:21:22.280 of next year. What does Dan Elpert demand from the 0:21:22.400 --> 0:21:25.920 legislative branch or from the executive office? Now, I mean, 0:21:26.000 --> 0:21:30.199 is it just as simple as targeted investment tax credits? No, 0:21:30.359 --> 0:21:32.800 it's not. And and uh you know this, this gets 0:21:32.800 --> 0:21:35.320 down to the big debate. We have a huge number 0:21:35.480 --> 0:21:40.480 of people who found it politically expedient to use uh, 0:21:40.520 --> 0:21:43.879 the national debt as a whipping boy. We have and 0:21:43.960 --> 0:21:45.840 you look at the bond today. I don't I'm not 0:21:45.880 --> 0:21:47.240 looking at it on the screen in front of me. 0:21:47.280 --> 0:21:49.800 But my recollections the ten years back down to two, one, 0:21:49.880 --> 0:21:53.680 three or something two, and you can tell that the 0:21:54.080 --> 0:21:59.360 relentless UH, lack of inflationary pressures and the the enormous 0:21:59.600 --> 0:22:03.640 demand for for bonds makes the government extremely cheap to finance. 0:22:03.800 --> 0:22:06.760 And so the government really needs to step in and 0:22:06.760 --> 0:22:10.640 and actually go back rebuild our infrastructure, spend trillions of dollars, 0:22:10.640 --> 0:22:12.600 and put people back to work and gainful jobs. Here 0:22:12.640 --> 0:22:14.680 we go back to infrastructure and the mystery of why 0:22:14.720 --> 0:22:16.720 that can occur. Dan Olpert, is there a beach read 0:22:16.760 --> 0:22:18.560 on this book? Are you're doing, you know with a 0:22:18.640 --> 0:22:21.159 movie rights sold? Are you're doing an afterward where, you know, 0:22:21.240 --> 0:22:24.480 for the holiday purchase? One of the things is is 0:22:24.680 --> 0:22:27.359 I've done a lot of work recently with the Coalition 0:22:27.359 --> 0:22:30.800 for American Prosperity, which is UH trade group that that 0:22:30.920 --> 0:22:34.280 is very focused on this issue. I've determined that you know, 0:22:34.359 --> 0:22:37.080 given the fact that people communicate today, including the President 0:22:37.119 --> 0:22:40.520