Speaker 1: Who you put your trust in matters. Investors have put
Speaker 1: their trust in independent registered investment advisors to the tune
Speaker 1: of four trillion dollars. Why learn more and find your
Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best in economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and
Speaker 1: of course, on the Bloomberg. It is always a good
Speaker 1: time to speak with David blanche Flower of Dartmouth College.
Speaker 1: He is someone we can talk to our austerity on
Speaker 1: the FED. We can talk to him about the mysteries
Speaker 1: of economic growth. What we can really talk to him
Speaker 1: about is the labor economics of Italy is classic. The
Speaker 1: wage curve from a good twenty years ago was controversial
Speaker 1: with us Ian Shepherdson as well. This morning from Pantheon
Speaker 1: macro Economics, Professor Blanche Flower, I would suggest the wage
Speaker 1: curve for Italy is destroyed. Here's the chart we showed
Speaker 1: earlier under twenty five year old unemployment. His balloon from
Speaker 1: to thirty seven percent. Danny Blanche Flowers labor economics doesn't
Speaker 1: work in Italy, doesn't. No, not really in a sense
Speaker 1: that to put it technically, there are long flatbits. What
Speaker 1: we mean by that is when unemployments really high, labor
Speaker 1: markets kind of stopped working. So think about when the
Speaker 1: unemployment rates and it moves to a team doesn't change
Speaker 1: things very much. So so this is a labor market
Speaker 1: that hasn't been working, isn't working um and obviously that
Speaker 1: has implications. I mean the big thing you see actually
Speaker 1: if you look at in Britain as an awful lot
Speaker 1: of Italian academics, they come out of the Italian labor
Speaker 1: market moved to the UK. Young Italians do the same.
Speaker 1: But this is clearly a labor market in crisis. Well,
Speaker 1: it's a labor market in crisis. What are the incentives
Speaker 1: to the people that the Italian government must initiate. Not
Speaker 1: macroeconomic mumbo jumbo, but how do you incentivize these people
Speaker 1: under to go get a job? Well, obviously there's two
Speaker 1: parts to it. You obviously want to make sure on
Speaker 1: the supply side that they have the skills, but the
Speaker 1: reality is on the demand side, you've actually got to
Speaker 1: offer adequate numbers of jobs and you said, talked to
Speaker 1: Blanche Flower about wages and growth and austerity, and blanch
Speaker 1: Flower would obviously come back and say, fiscal policies overly
Speaker 1: tight as it's been throughout the European Union, um, and
Speaker 1: we have very little incentive on the part of Italian
Speaker 1: employers to hire young Italians. And so that's the problem.
Speaker 1: Firms are not moving to Italy. But that's exactly where
Speaker 1: I wanted to go. Tom bring up your chart right,
Speaker 1: when you look at youth unemployment in Italy, it's huge.
Speaker 1: When you look at Spain, look after that forty two percent.
Speaker 1: Let's just think about this. Forty people between twenty five
Speaker 1: and thirty five are unemployed in Spain. Danny, My question
Speaker 1: to you is, how do you do Do you do
Speaker 1: reforms that actually make employers want to hire but also
Speaker 1: fire a lot of the people in it They are
Speaker 1: holding back from hiring because then you're stuck with someone
Speaker 1: for twenty years. Right, So the obvious thing, you've got
Speaker 1: to raise the level of aggregate demand. Give firms incentives
Speaker 1: to hire young people. You can do it through the
Speaker 1: tax code. You give firms incentives. You say, if you
Speaker 1: hire a young person, will give you this this tax credit.
Speaker 1: We're not seeing any credible government in Italy focused on
Speaker 1: those kinds of issues. That one thing you would actually say,
Speaker 1: the surprise is actually these young people have been pretty compliant.
Speaker 1: You would have thought they'd have been on the streets.
Speaker 1: High levels of youth unemployment like that generally generates social disorder.
Speaker 1: They haven't, and so that's obviously a big puzzle. But
Speaker 1: you need to break this youth unemployment problem. What we
Speaker 1: know that the famous line is a youth unemployment actually
Speaker 1: generates a permanent scar rather than a temporary blemish on people.
Speaker 1: So it's not just an individual problem. It's down the road.
Speaker 1: The society is going to be heard by the fact
Speaker 1: that these people haven't got into the label. Fritz, you
Speaker 1: don't want to jump in. This is so critical. This
Speaker 1: is the history recess that Olivier Blanchard and wren Somers
Speaker 1: talks about. This is like, absolutely it is. But you
Speaker 1: know what, talking to your point, let's start talking mumbo jumbo, Danny,
Speaker 1: what needs to happen, because actually Materrancy was empowered. He's
Speaker 1: forty one years old and he's in and the focus
Speaker 1: was meant to get people back into jobs, and he's
Speaker 1: been unable to do that. Well, I don't know about
Speaker 1: mumbo jumbo. I mean there's a reality is that this
Speaker 1: labor market has been in trouble for two or three decades.
Speaker 1: The government doesn't seem to have any kind of ability
Speaker 1: to do that. The fiscal framework is too tight. You
Speaker 1: need to give firms incentives to hire, You need to
Speaker 1: give incentives for mobility. You need to get the labor
Speaker 1: market working, the capital market working, the housing market working,
Speaker 1: and you need to loosen the levels of aggregate demaut
Speaker 1: and give incentives for employers to hire the young. And
Speaker 1: that's not what's been happening. Okay, we got Ian Shepherdson
Speaker 1: and David Blanchelire where this this is what surveillance is
Speaker 1: all about. Bring up the chart. This is from fokars Landau,
Speaker 1: which is the idea here of they need a Lira.
Speaker 1: And I'm not speaking for David fokars land off Deutsche Bank,
Speaker 1: but Beppy Greenlow France been clearly says he wants an
Speaker 1: independent Lira. Ian Shepherdson, what would happen two days or
Speaker 1: two weeks after an independent Lira other than wealth destruction
Speaker 1: for the elites of Italy that there would be gigantic
Speaker 1: wealth destruction and extended period of total chaos at the breakup.
Speaker 1: You couldn't have Italy leaving the Eurozone without the rest
Speaker 1: of the Eurozone falling apart. So it's kind of the
Speaker 1: end of the world event where things would lie six months,
Speaker 1: one to three years down the line. That's a different question,
Speaker 1: and it may well be that after a period of
Speaker 1: extraordinary extended pain that actually a much weaker sovereign Italian
Speaker 1: currency would would be would put it really into into
Speaker 1: a better position. But I've got to say the transition
Speaker 1: from where we are now to that would be horrendous
Speaker 1: and it would be short term things would be much
Speaker 1: worse without a doubt, right And Danny, so Tom keeps sudden,
Speaker 1: you know, talking about the switch to Lira. I mean
Speaker 1: this is extremely unlikely, right to Danny blanch when you
Speaker 1: when you look at even Beppy Grille, I mean he
Speaker 1: doesn't really have the best craft of economic so you
Speaker 1: don't see how this would work. Do we just need
Speaker 1: to have a prime minister with more power that has
Speaker 1: a much more aggressive mandating reforms? Well, what what you want?
Speaker 1: A credible market driven reforms where firms feel that there's
Speaker 1: some certainty going forward that they can invest and higher.
Speaker 1: I mean, what you and Tom have been talking about
Speaker 1: is a country in chaos. I mean, we've seen similar
Speaker 1: problems in the UK with Brexit. Has calm um. If
Speaker 1: you can't form a government, you can't get a policy.
Speaker 1: You you know, we don't know where this country is going.
Speaker 1: Why would firms go in and hire young Italians? So
Speaker 1: you've got to break that first. There's this great chicken
Speaker 1: an egg, and if you're an employer, you'd say, well,
Speaker 1: I think I'll go to Germany. Actually, but David, I
Speaker 1: want to get this on the record. Professor Blanche or Is,
Speaker 1: you're one of our true international authorities. What would be
Speaker 1: the pain of an individual separate Lira? I mean, bring
Speaker 1: up the chart here, Jose and the idea here. Ian
Speaker 1: Shepherdson says there would be massive instability. Is lira depreciated?
Speaker 1: Do you agree? Well, I mean he's completely right that
Speaker 1: if suddenly you say we're going to go to the lira,
Speaker 1: that would cause the collapse of the euro Zone. That
Speaker 1: would have huge cataclysts, make effects for for quite some time.
Speaker 1: But he's also right in that what you have here
Speaker 1: is a currency that is overvalued for the Italian The
Speaker 1: point of saying you would go to a lira would
Speaker 1: be at least that would make the country competitive, and
Speaker 1: so that is that is in some way attractive. So
Speaker 1: it is completely right, um that a lower valued currency
Speaker 1: could help. It's hard to see how you get to
Speaker 1: the benefits of that lower currency without the cut this
Speaker 1: terrible collapse that he's talked about. It's hard to know
Speaker 1: where you go from here. But this does threaten us
Speaker 1: the whole being of the euro Zone, right and tom
Speaker 1: there are people out there saying that the market is
Speaker 1: just a little bit too complacent ahead of that referendum
Speaker 1: to do the leap from the referendum to actually getting
Speaker 1: the lira bag is you know, it's humongous a lot.
Speaker 1: You know, very few people are doing that leap at
Speaker 1: the moment. Also, compared to Brexit, you can't constitution that
Speaker 1: you can't put a referendum on whether to leave the
Speaker 1: Eurozone or not to the at in So absolutely, December
Speaker 1: four is a referendum in Italy, one that will be
Speaker 1: closely watched in Italy, in Europe, indeed around the world.
Speaker 1: Swatter Thing is a senior economist at T. S. Lombard,
Speaker 1: a research and she joins us now by phone. We've
Speaker 1: been told here that there's a continuum between the Brexit referendum,
Speaker 1: the presidential election here in the US, and now this
Speaker 1: referendum in Italy. And what you urge some caution there?
Speaker 1: You say this is likely just to be a side show. Um. Yes, absolutely, Hi,
Speaker 1: good morning there. So we think the you know, investors
Speaker 1: are excessively focused on the referendum of thember of the vote. UM.
Speaker 1: But I guess it's just it will just be a
Speaker 1: side show in the largest game of things. Things will
Speaker 1: not dramatically change after the referendum. In fact, they will
Speaker 1: the trigger points for this sort of political days in in, in, in,
Speaker 1: in Europe, last summer else. UM. Italy nonetheless remains a
Speaker 1: key threat to a key medium term threat to UH
Speaker 1: your area stability. But a no vote in the referendum,
Speaker 1: while it will intensify near term volatility, it does not
Speaker 1: spell doom. UM. And in the same way, yes vote
Speaker 1: does not guarantee a recovery or reforms or recapitalization. UM.
Speaker 1: I guess what I'm trying to say is that the
Speaker 1: Italian problems are are very much supply side related, UH,
Speaker 1: and they're deeply ingrained. UM. Vote on the referendum does
Speaker 1: not change the story. Um. In fact, where the twelve
Speaker 1: month horizon ECB policies and trumponomics, so to speak, a
Speaker 1: strong dollar truth trumponomics I will actually provide a temporary
Speaker 1: tailwind to two Italians. For me? Is it is Italy
Speaker 1: an emerging market? Um? Well, if you look at the
Speaker 1: performance of the the spreads every time there was a
Speaker 1: political tremor, you might be tempted to believe it. I
Speaker 1: believe so, UM, But I guess it depends how you
Speaker 1: define emoting market. Um. The one of the ways I
Speaker 1: try to define the MS is the the you know,
Speaker 1: the correlation between stocks and heels that does not hold
Speaker 1: so well in Italian In Italian case, well, you may
Speaker 1: argue it's because of e c D policies. Um. But
Speaker 1: it shows a lot of characteristics. But well, not not
Speaker 1: yet animoting market. Not yet anyway, you know. I We've
Speaker 1: talked an awful lot here about the banking sector, and
Speaker 1: I wonder what you see is the path forward there
Speaker 1: through in a sixty billion euros in non performing loans
Speaker 1: there on the books, tremendously over banked country exclusive of
Speaker 1: this referendum, how does that begin to get fixed? Right?
Speaker 1: Um Um. Now, the Italian banking problem, UH, it's it's
Speaker 1: it's it's a lot more difficult to rectify it because
Speaker 1: of three important critiquy reasons. The first is the the
Speaker 1: dominant share of these bad loans or sorry, the dominant
Speaker 1: share of bank debt is held by retail investors um
Speaker 1: as compared to in in other in other countries, So
Speaker 1: one third of senior debt is held by retail investors,
Speaker 1: while half of the junior debt is held by uh
Speaker 1: A retail investors. And it's junior debt that will be
Speaker 1: used if the banks have if if banks have to
Speaker 1: be recapitalized. The second important reason is that the the
Speaker 1: government itself, policymakers themselves have been have played a role
Speaker 1: in in sort of selling this these bad potentially bad
Speaker 1: assets to to the household sector. And third, it's the
Speaker 1: the timing of the the eu Blian rules which came
Speaker 1: in affect earlier this year, which prohibit or make it
Speaker 1: very punitive to to for state aid uh to recap
Speaker 1: the banking sector. So it's the culmination of these three
Speaker 1: problems that's really making matters worse. Um. There was a
Speaker 1: way out the advance uptil Solvent. Well, if you exclude
Speaker 1: monted Departe, that is, there was a way out. They
Speaker 1: can they can use the precautionary clause. They can uh
Speaker 1: compensate the retail investors for miss selling. Um. Well, but
Speaker 1: but but you have to you need political will to
Speaker 1: go through that. That's lacking in Italy's case, and there's
Speaker 1: always a reason before their friends they did not want
Speaker 1: to disappoint policymakers or a retail investors. After the referendum,
Speaker 1: attention will shift to the elections. Sing with us with
Speaker 1: the definitive report and Italy from her Lombard Street Research.
Speaker 1: Your report Shadow which I need to recover the cover
Speaker 1: all twenty eight pages, shows that incentives are critical to Italy.
Speaker 1: When you and Charles Duma sit around a cup of
Speaker 1: coffee with Jonathan Fenby, what's the key incentive that big
Speaker 1: ins to nudge Italy towards a modern economy? Um, the
Speaker 1: key incenter would probably have to be, you know, um,
Speaker 1: directing capital uh and and and labor, all the productive
Speaker 1: resources towards the right area. We've seen as a massive
Speaker 1: increase in this allocation in the manufacturing sector and it
Speaker 1: has continued to increase, of course dramatically since the you're
Speaker 1: since that joined the Euro and after the global financial crisis. UM.
Speaker 1: I guess there are a lot of rigidities within the
Speaker 1: economy itself, whether you look at the product market, whether
Speaker 1: you look at the the label sector, labor segments, the
Speaker 1: the capital segments. And I guess one of the key problems,
Speaker 1: UH is is the there's a dominance of state of
Speaker 1: small and medium enterprises. In Italy. Almost eighty five percent
Speaker 1: of employment comes from the small and medium medium uh
Speaker 1: small industries, and that sort of restricts the gains you
Speaker 1: could enjoy from economy of scale. UH. You know, when
Speaker 1: you speak to a various small businesses, they say they
Speaker 1: did they preferred turban small because the the tax code
Speaker 1: and it's so intense. UM. And then you you have
Speaker 1: various restrictions in terms of how many farms we can
Speaker 1: have within a certain area. And it also extends to
Speaker 1: various other retail segments. Did the mark up on the
Speaker 1: the on the retail prices is significantly higher in Italy
Speaker 1: than in any any European economy. As you were saying earlier,
Speaker 1: it's it's an overbanked country. And I guess The reflection
Speaker 1: of all these weaknesses is the fact that the activity
Speaker 1: growth has been stagnant for almost a decade. And how
Speaker 1: sure you you in that very lucid report right about
Speaker 1: the small window of opportunity Italy has here to to
Speaker 1: write its economic and financial malaise. How small a window
Speaker 1: were we talking about here? And I wonder if that
Speaker 1: is going to happen under Matteo Rensey's leadership. The window
Speaker 1: of opportunity is is getting smaller because uh, you know
Speaker 1: as all because at least for the next twelve months
Speaker 1: you have support from ECB, Dewy and UH and a
Speaker 1: strong dollar thanks to h tromponomics so to speak. Um.
Speaker 1: But you know, very gradually we will see uh, well
Speaker 1: will see strengthening in the euro Uh. The ECB will
Speaker 1: have to start tapering its asset purchases and that means
Speaker 1: we will be even more exposed to a higher global
Speaker 1: youth and there will be increase in political uncertainty across Europe.
Speaker 1: We have elections in the Netherlands, um in in in
Speaker 1: France and in Germany. So it's it's a combination of
Speaker 1: all these factors. Not to forget it really might be
Speaker 1: heading towards another towards its own general elections. So I
Speaker 1: guess the visitor really is narrowing, especially if you look
Speaker 1: at the banking sector. Um. Uh So at this point
Speaker 1: in time, what is helping the sector survive is whatever
Speaker 1: literally nominal GDP broad that they have and and and
Speaker 1: a chief actor driving back to the weaker Euro. So
Speaker 1: once these things take to roy it will it will
Speaker 1: be quite a nasty scenario. Okay, you just hit on
Speaker 1: the discussion point. They've got to get away from the
Speaker 1: over value euro. Do they do that within the euro
Speaker 1: model or do you just presume some form of depreciation
Speaker 1: towards a renewed Italian lira. Um. I guess, but I
Speaker 1: think stands it will have to you know, the the
Speaker 1: need to suppose at this at least at this point
Speaker 1: in time, it's coming from the c D two. But
Speaker 1: gradually want the your stars to strength, and thanks to
Speaker 1: strength in the German economy for example, uh, improving corny
Speaker 1: concerts in your in your area, I guess the the
Speaker 1: burden of balancing will will fall back on on Themandi
Speaker 1: station Uh. And that's really quite a punitive way to
Speaker 1: address the problem. Uh. Notwithstanding the very very high non
Speaker 1: performing loan version of the banking sector. I would struck
Speaker 1: in your report. Uh, the degree to which so much
Speaker 1: of of the Italian economy's troubles right now you attribute
Speaker 1: to what happened with the w t O and China
Speaker 1: signed onto the w t O. Why would that happen?
Speaker 1: Was Italy hit so profoundly hard? Um? Yeah, So we
Speaker 1: call it three strikes and you're out. So the first
Speaker 1: strike was the information and communications technology, which Italian of
Speaker 1: businesses quite well, we're quite a lagged in terms of
Speaker 1: adopting those technologies. And again the reasons are, you know,
Speaker 1: this this sort of relationship based U based businesses where
Speaker 1: where people are not really and managerial incentives are not
Speaker 1: really inclined towards profit for example. The second time was
Speaker 1: was Italy joining the euro and that meant that ment
Speaker 1: the the policy tool that was that it's Italian authority
Speaker 1: is so frequently used that the devaluation was no longer
Speaker 1: an option to them. And the third strike was was
Speaker 1: Italy joining sorry, was China joining the w and and
Speaker 1: the reason why this this hurt Italian economy a lot
Speaker 1: more than it did the other European economies is that
Speaker 1: Italian exports are very similar to Chinese exports. They're concentrated
Speaker 1: at the lower value added seconds um and and the
Speaker 1: d the rigidity on the product product labor, and there
Speaker 1: is other institutional weaknesses. Thanked that really was more exposed
Speaker 1: to these three forces external forces than many other economy
Speaker 1: within the area. We continue to see that. Try to
Speaker 1: thank you so much, saying with Lombard Street Research this
Speaker 1: morning and Italy, who you put your trust in matters.
Speaker 1: Investors have put their trust in independent registered investment advisors
Speaker 1: to the tune of four trillion dollars. Why they see
Speaker 1: their role is to serve, not sell. That's why Charles
Speaker 1: Schwab is committed to the success of over seven thousand
Speaker 1: independent financial advisors who passionately dedicate themselves to helping people
Speaker 1: achieve their financial goals. Learn more and find your independent
Speaker 1: advisor dot com we go now at. Stephen Shork, editor
Speaker 1: of the eponymous Short Report out of Philadelphia, spoke with
Speaker 1: him yesterday. He expressed some skepticism that OPEC delegates would
Speaker 1: be able to come to an agreement on a production freeze. Indeed,
Speaker 1: Bloomberg News reporting this morning according to two delegates they
Speaker 1: have agreed to a freeze here on this the first
Speaker 1: day of that OPEC meeting in Vienna at Stephen Shork.
Speaker 1: Great to have you with us here is that it
Speaker 1: all said and done. We haven't a great It's really
Speaker 1: this simple, right. So I was on bloomberg yest today
Speaker 1: expressed my skepticism that we would get it. I'm on
Speaker 1: today and the premise of that my skepticism still holds
Speaker 1: that I based it on the fact that without a
Speaker 1: material concession by Iran, I couldn't see how Saudi Arabia
Speaker 1: could ever sign off on this deal, and hence why
Speaker 1: they've been at loggerheads now for the past two years.
Speaker 1: So with the preliminary data coming out, what I'm reading
Speaker 1: off of my Bloomberg here is that OPEC has agreed
Speaker 1: and let's let's let's mind you this isn't official. It
Speaker 1: is coming from an anonymous source, but OPEC has agreed
Speaker 1: to cut production by one point two million barrels a day. Now.
Speaker 1: Interestingly enough, Iran is going to be able to up
Speaker 1: its production to three point nine million barrels a day,
Speaker 1: So at three point seven currently with Iran, that means
Speaker 1: i Ran adds two hundred thousand barrels to the market,
Speaker 1: which means now other OPEC members have to cut one
Speaker 1: point four million arles a day. So of course that's
Speaker 1: going to be meaning that Saudi Arabia and Iraq are
Speaker 1: going to have to bury the brunt of this. And
Speaker 1: and once again, guys, I'm extremely skeptical of this report.
Speaker 1: I don't see how Saudi Arabia signs off on it.
Speaker 1: But in the here and the now, that's the headline
Speaker 1: and the markets rage respect. I don't know if you've
Speaker 1: seen it. I put it on Twitter, Stephen Short because
Speaker 1: my good morning. There is a spectacular Bloomberg gad Fly
Speaker 1: article for Liam Dunning and right co writing and it
Speaker 1: focuses on demand. Gus what you see for oil demand?
Speaker 1: Gad Fly says it's gonna vapor away. China is at
Speaker 1: the margin. But what is oil demand in the United States?
Speaker 1: Steve that you own, I mean, what what does demand
Speaker 1: like in Kansas or Florida or Washington State? Well, in
Speaker 1: the here, in the miror And this is the premise
Speaker 1: why I think OPEC should and would want to keep
Speaker 1: oil prices as low as possible because demand here in
Speaker 1: the United States, we just came out of last summer
Speaker 1: with the greatest demand for gasoline that we've ever seen.
Speaker 1: And why was that. It's because of a losticity of demand.
Speaker 1: Two dollars a gallon, you get a lot more people
Speaker 1: on the road, driving bigger, larger, longer distances. Uh. And
Speaker 1: so demand was very strong. And this is what OPEC
Speaker 1: essentially needs to have to happen, because what I also
Speaker 1: spoke about on Bloomer yesterday is the Tesla effect. You
Speaker 1: remember ten years ago we're all talking about. Well, I
Speaker 1: wasn't because I always thought it was a fallacy. But
Speaker 1: peak oil supply today, because of alternative fuels, we are
Speaker 1: talking about peak oil demand. And so each dollar you
Speaker 1: raised the barrel of oil is a marginal decrease in
Speaker 1: the entry barrier for alternative fuels. So even driving into
Speaker 1: the studio yesterday into Philadelphia on the school goal, I
Speaker 1: saw four teslas. This is Philadelphia, for crying out live
Speaker 1: driving Tesla's in Philadelphia. That means this is really a
Speaker 1: harding to take off. And so we're looking into we're
Speaker 1: talking about the long term relevancy of OPEC and if
Speaker 1: they succeed in driving oil prices to a level where
Speaker 1: we start to see gasoline prices well above three dollars. Well,
Speaker 1: that is only going to eat into demand longer term out.
Speaker 1: So this is a long this is a long term
Speaker 1: existential threat to back in all oil producers in here
Speaker 1: and they now, uh right now because me in the future.
Speaker 1: Right now, what we have is this is great news
Speaker 1: help for US producer. Yes, Steven, We've been talking a
Speaker 1: lot about the role that Moscow is playing here, the
Speaker 1: role of Russia here, and I wonder what that says
Speaker 1: about the the the medium term future, the future of
Speaker 1: OPEC that so much emphasis was placed on Russia. An
Speaker 1: opaque member. Yeah, and I trust, I mean, I trust
Speaker 1: the crimblin, don't you I'm putin seems like a pretty
Speaker 1: stand up guy. And and why why wouldn't we believe
Speaker 1: anything that comes out of Russia nowadays? Uh So, that said,
Speaker 1: if we look about if we go back to April,
Speaker 1: this is when US production hit a modern day record.
Speaker 1: Since April two, US producers have taken off the market
Speaker 1: one point one million bars a day. At that same time,
Speaker 1: OPEC has added two point six million barrels a day.
Speaker 1: Russia has added in additional six barrels a day, So essentially,
Speaker 1: for everyone, barrel the U S producer took off Opec
Speaker 1: in Russia added back three barrels. So now we're talking
Speaker 1: about trying to take some of that added oil back
Speaker 1: to the market. Um, to take that oil back off
Speaker 1: the market from Opec in Russia. Him again, highly skeptical.
Speaker 1: I don't believe a thing that comes out of if
Speaker 1: put put it this way. Putin's lips are moving. He's lying,
Speaker 1: So I don't know why. But again, markets up three
Speaker 1: dollars and fifty cents. But this is great news to
Speaker 1: the Canadian producer and the US because they're gonna start
Speaker 1: to add out a lot barrel and one minute left,
Speaker 1: one minute left. What is the dynamics of price on
Speaker 1: the downside if we get a Steve short break, Yes,
Speaker 1: forty a big resistance or could we revisit twenty nine
Speaker 1: dollars a barrel? Oh? I think we can. Yeah, if
Speaker 1: this all turns out to be smoking mirrors, and if
Speaker 1: they come out with their official statement and they and
Speaker 1: they punt and um, then this obviously this is going
Speaker 1: to um evaporate. So yes we can. Forty is nothing
Speaker 1: but a psychological moment. There's nothing magical about that. But
Speaker 1: certainly with stagnant demand growth. And that's not me, that's
Speaker 1: the I e. A. Saying stagnant demand growth through next year.
Speaker 1: We could certainly see sub thirty dollars oil if if
Speaker 1: this deal turns out to be a far but in
Speaker 1: here and the now, stay away from it. We're headed
Speaker 1: back to over fifty dollars if this, if they do
Speaker 1: make good on the deal. Stephen Shark, thank you so much.
Speaker 1: A Shark report on oil and gas and valves and
Speaker 1: pipelines and all things energy. I mean, you know, Francy
Speaker 1: mentioned it brilliantly today. David Girl, We in America don't
Speaker 1: understand the frenzy of an opaqu com meeting. You're saying,
Speaker 1: so you wish you could cover one with you. I've
Speaker 1: never been, but Francine says, it's bizarre. It's all these
Speaker 1: informal little chit chats with reporters and a handline will
Speaker 1: come out stopping doors stopping. Yeah, they're stopping exactly, and
Speaker 1: there's like a single headline comes out in granted, Bloomberg
Speaker 1: is the fastest and best, and headlines are heard and
Speaker 1: the oil price moves and then here's a new one.
Speaker 1: Just kneel hum out on Twitter and it's a Bloomberg headline.
Speaker 1: OPEC ministers still debating details of oil. I'll put cut
Speaker 1: proposal for some countries. I have no idea what I'm reading,
Speaker 1: but there is there are more informal breakfast to be had.
Speaker 1: Any way to run a cartel exactly well said, I mean,
Speaker 1: how do you run the microeconomics of a cartel? By
Speaker 1: scrum Francine is a pro at this Yes, thanks to
Speaker 1: Javier bloss In our oil team, they are there. Stewart
Speaker 1: Wallace leading our we do. Stewart Wallace leads a coverage
Speaker 1: in London. Stewart Wallace was with John Rockefeller at the
Speaker 1: first oil oil Derek east of Cleveland. I mean he
Speaker 1: goes Stuart Wallace goes back that far. Our next because
Speaker 1: David Girl is going to bring in our next guess.
Speaker 1: Anthony Scaramuchi. You may not know the name. Mr Trump
Speaker 1: knows his name because he was out early and often
Speaker 1: for Donald Trump when any and all doubted. Mr Scaramuchi
Speaker 1: is an interesting guy, toughs economics, Harvard Law School. And
Speaker 1: what is great, uh David about Mr Scaramucci is there
Speaker 1: is an there's like a Mike Piazza energy there like
Speaker 1: day one let's like, let's go. And what's great about
Speaker 1: this is he bought Mike Piazza's jersey years ago, which
Speaker 1: one is wonderful. Game after September eleventh, David, why don't
Speaker 1: you help us? Uh? Maybe is can he make a
Speaker 1: Can he make an announcement right now? Can he transit? If?
Speaker 1: Following Anthony scar A, co founder of Skybridge Capital, executive
Speaker 1: comittee for the Trump transition team. And that's where I
Speaker 1: want to start. Anthony, you had a front row seat
Speaker 1: for the parade as it passed through Bedminster and along
Speaker 1: Fifth Avenue. Donald Trump looking at many people for this
Speaker 1: job of Treasury Secretary? Why did he settle on Stephen Nuchin?
Speaker 1: I first want to say, if I had Tom's height,
Speaker 1: anything could have been possible for me. Gave it. But
Speaker 1: on on on the topic of the of the transition
Speaker 1: and Treasury, Stephen Manuchin is a perfect pick for many
Speaker 1: reasons that I'm gonna give you the top three. Number
Speaker 1: one twenty plus year relationship with Donald Trump and with
Speaker 1: Wilbur Ross, the new Income and Commerce Secretary. Number two.
Speaker 1: He is a phenomenal guy and a number of different businesses.
Speaker 1: He's worked in Hollywood, He's worked on Wall Street. And
Speaker 1: he also built from scratch the finance operation which power
Speaker 1: us through to the presidency. And he was critical in
Speaker 1: the policy piece of our website UH and building the
Speaker 1: tax plan, in all the white papers around the economic
Speaker 1: and trade policy for the Trump campaign. So I know
Speaker 1: this is UH something that it will carry through with
Speaker 1: him into the administration. And I've had the opportunities know
Speaker 1: Steve now for a quarter century, Anthony. A lot of
Speaker 1: people here saying we know the background, we know about Goldman, Sachs,
Speaker 1: we know about Hollywood. They want clarity about how Stephen
Speaker 1: Manutin is going to run the Treasury Department. Give us
Speaker 1: some sense of that. Well, listen, he's a very organized guy.
Speaker 1: He's super meticulous. My my, My guess is he's going
Speaker 1: to start with the first order of shop is the
Speaker 1: tax policy and the implementation of the tax policy. UH.
Speaker 1: He's already going through the U S. Trade representative list
Speaker 1: with our transition team this morning, Deputy and Under Secretaries
Speaker 1: of Treasury. But the first order of action is going
Speaker 1: to be on taxes and getting the Trump tax plan
Speaker 1: into the Congress immediately within the first for days. The
Speaker 1: second big piece of this is working in coordination with
Speaker 1: the President, Secretary of Commerce, and the US trade representatives
Speaker 1: to focus on fair deals and right siding these trade deals.
Speaker 1: As you guys both know, our economic history in the
Speaker 1: United States is that we've uneven these trade deals to
Speaker 1: benefit the emerging economies, as we believe that economic interdependence
Speaker 1: would lead to less violence around the world. That has
Speaker 1: been very, very successful. But the side product of the
Speaker 1: side that is that hurt the middle class families and
Speaker 1: the working class families in the United States. And so
Speaker 1: these guys they understand the Trump trade philosophy better than anybody,
Speaker 1: and they're gonna go back through these deals and you
Speaker 1: saw what happened to Carrier last night, and go back
Speaker 1: through these deals and re fashion them for the American
Speaker 1: worker and for the American middle class. So that's how
Speaker 1: we're gonna run things. Anthony helped me understand Trump trade policy.
Speaker 1: Every economist I talked to says, when he or she
Speaker 1: is forecasting for the next year, the biggest X factor
Speaker 1: here is what's going to happen with trade. They're worried
Speaker 1: about tariffs. They're worried what that could mean for the
Speaker 1: economy defined for us, what the trade policy is under
Speaker 1: Donald J. Trump. Really, I really feel that people that
Speaker 1: are worried about tariffs are not really understanding the trade policy.
Speaker 1: He talked about it, they talked about him on the
Speaker 1: campaign trail. Well, well, no, we're taking a very superficial view.
Speaker 1: What do you what do you have said about tariffs
Speaker 1: on the view is that he had, I mean, you
Speaker 1: know on the campaign trail is that he would use
Speaker 1: them as a bargaining chip if people did not want
Speaker 1: to go through the formal review process and even up
Speaker 1: these trade deals. And so you know that we've had
Speaker 1: back channel discussions with many many nations at this point. Uh.
Speaker 1: And my guess is is that we are in the
Speaker 1: United States, the largest economy, twenty three point six percent
Speaker 1: of the global GDP our trading partners are going to
Speaker 1: want to deal with us, and I think Mr Trump
Speaker 1: is sending them a message same way he did to
Speaker 1: Carrier over the weekend, Uh, that we want the things
Speaker 1: to be fair, and want the things to be fair
Speaker 1: for the American worker. The tariffs are a last resort
Speaker 1: proposition if people are making a decision that they don't
Speaker 1: want to treat us fairly. And that's really all there
Speaker 1: is to it. And so This is a free fair
Speaker 1: trade proposition by the Trump administration. And I can't think
Speaker 1: of any two better people in the United States the
Speaker 1: prosecute this than Stephen Manuchin and Wilber Ross Anthon. We
Speaker 1: got about thirty seconds left here. Donald Trump tweeting this
Speaker 1: morning that he is going to give a press conference
Speaker 1: on the fifte December talking about leaving his business. What
Speaker 1: does the Trump organization look like come December fift and
Speaker 1: is this in response to criticism of those back channel
Speaker 1: deals you're talking about with foreign governments, worries about conflicts
Speaker 1: of interest? Well, listen, you know we're working super hard
Speaker 1: on this. Someone that not not really mentioned it, Don McGann,
Speaker 1: the White Asse Council. You're going to see Mr Trump
Speaker 1: completely removed from the Trump organization. He's leaving that to
Speaker 1: his children are going to stay in the organization, and
Speaker 1: it will be a very thick wall between the two.
Speaker 1: In fact that what do you mean to say a wall?
Speaker 1: They're not even gonna be talking to each other. As
Speaker 1: as it's a phenomenal trophy business. And my guests is
Speaker 1: the children are gonna do a really good job on
Speaker 1: that business without the dad, and he's going to be
Speaker 1: extremely focused on the American pief All right, Anthony Scaramuchi.
Speaker 1: Remember if Donald Trump's transition team's executive committee, This is Bloomberg.
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