1 00:00:05,080 --> 00:00:08,440 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along 2 00:00:08,480 --> 00:00:12,000 Speaker 1: with Jonathan Farrell and Lisa are Bramoweds join us each 3 00:00:12,080 --> 00:00:16,800 Speaker 1: day for insight from the best in economics, geopolitics, financing, investment. 4 00:00:17,239 --> 00:00:22,000 Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 5 00:00:22,239 --> 00:00:26,560 Speaker 1: anywhere you get your podcasts, and always I'm Bloomberg dot Com, 6 00:00:26,600 --> 00:00:30,880 Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. Seven years ago, 7 00:00:30,920 --> 00:00:33,199 Speaker 1: if I tried to talk about Formula one on this program, 8 00:00:33,200 --> 00:00:35,200 Speaker 1: Tom would what are you doing? What are you doing 9 00:00:35,240 --> 00:00:38,000 Speaker 1: with formula what? What's Formula one all about? Back in 10 00:00:38,080 --> 00:00:40,839 Speaker 1: twenty fifteen, the former F one boss Bernie eccleston had 11 00:00:40,840 --> 00:00:42,960 Speaker 1: this to say to ESPN. He said, we ought to 12 00:00:42,960 --> 00:00:45,200 Speaker 1: try to break America, but it's hard for me because 13 00:00:45,240 --> 00:00:48,200 Speaker 1: I'm not very enthusiastic about the country. It's difficult because 14 00:00:48,200 --> 00:00:50,680 Speaker 1: they are sort of isolated. They are a big island, 15 00:00:50,800 --> 00:00:53,400 Speaker 1: and they're slowly starting to learn about what other people 16 00:00:53,440 --> 00:00:56,080 Speaker 1: in the world do well. Mister ecclestone was wrong. It 17 00:00:56,200 --> 00:00:58,640 Speaker 1: seems the United States has learned quickly. Following the sale 18 00:00:58,640 --> 00:01:01,120 Speaker 1: of Formula one to Uspace Nobody Media and with the 19 00:01:01,160 --> 00:01:03,920 Speaker 1: help of Netflix's Drive to Survive series. Look at the 20 00:01:03,960 --> 00:01:06,959 Speaker 1: TV audience here, Tom, average race viewership in the US 21 00:01:07,319 --> 00:01:09,960 Speaker 1: has gone from about half a million bank in twenty 22 00:01:09,959 --> 00:01:13,039 Speaker 1: seven yesterday to one point two million last year. Where 23 00:01:13,080 --> 00:01:15,640 Speaker 1: was it yesterday? Probably bigger for the season, probably bigger. 24 00:01:15,680 --> 00:01:17,760 Speaker 1: This is a join our Christian Horner to join us, 25 00:01:17,760 --> 00:01:20,040 Speaker 1: and of course mister Farrell will lead this with legit 26 00:01:20,120 --> 00:01:23,240 Speaker 1: knowledge on Formula one. But all I can say is 27 00:01:23,240 --> 00:01:25,399 Speaker 1: what is so dominant here and is it's a safe 28 00:01:25,400 --> 00:01:29,600 Speaker 1: free zone from Manchester United this morning, Bloomberg surveillance is 29 00:01:29,640 --> 00:01:33,080 Speaker 1: a safe free zone for everybody in Formula one that 30 00:01:33,240 --> 00:01:37,200 Speaker 1: cut their clocks cleaned yesterday. Just ridiculous dominance time. Absolutely. 31 00:01:37,280 --> 00:01:40,280 Speaker 1: Christine Horner, the team principal of Red Bull Racing F one, 32 00:01:40,360 --> 00:01:42,720 Speaker 1: joined us right now. Christin, congratulations on the window for 33 00:01:42,720 --> 00:01:45,520 Speaker 1: the weekend and let's start there. What goes into it 34 00:01:45,680 --> 00:01:48,200 Speaker 1: over the winter to turn up in race one and 35 00:01:48,320 --> 00:01:52,200 Speaker 1: absolutely dominate the way you did well. First of all, 36 00:01:52,200 --> 00:01:53,960 Speaker 1: thanks very much. I mean it was a great start 37 00:01:54,000 --> 00:01:58,080 Speaker 1: for us yesterday. And the regulations you know, they're constantly 38 00:01:58,120 --> 00:02:01,800 Speaker 1: being tuned and of evolving. But the basis of the 39 00:02:01,840 --> 00:02:04,080 Speaker 1: car is similar to the twenty twenty two rags. So 40 00:02:04,120 --> 00:02:06,800 Speaker 1: the team have done a great job in evolving the 41 00:02:06,920 --> 00:02:10,639 Speaker 1: car and involving every single detail. Almost every component is 42 00:02:10,720 --> 00:02:12,760 Speaker 1: new for this year, and with only three days of 43 00:02:13,440 --> 00:02:17,919 Speaker 1: practicing of testing, it was great to get that first 44 00:02:17,960 --> 00:02:20,720 Speaker 1: big scoring yesterday with the one to finish Christian. We've 45 00:02:20,720 --> 00:02:23,680 Speaker 1: all heard about the rule changes in the last eighteen months. 46 00:02:24,000 --> 00:02:26,040 Speaker 1: It was meant to make it more competitive, and I 47 00:02:26,080 --> 00:02:27,600 Speaker 1: think a lot of people over the weekend might be 48 00:02:27,639 --> 00:02:30,120 Speaker 1: looking at the front two and saying, what happened? What 49 00:02:30,320 --> 00:02:32,600 Speaker 1: is it about this set up, these rule changes that 50 00:02:32,639 --> 00:02:35,840 Speaker 1: you think suits you and the team so well. I 51 00:02:35,880 --> 00:02:38,760 Speaker 1: think we've only run the cars at this track in 52 00:02:38,880 --> 00:02:41,120 Speaker 1: bar Rain. We tested there and we raced there and 53 00:02:41,160 --> 00:02:44,120 Speaker 1: it certainly suited our car, you know, incredibly well. But 54 00:02:44,440 --> 00:02:47,200 Speaker 1: you know, the former one calendar is twenty three different races, 55 00:02:47,320 --> 00:02:52,000 Speaker 1: twenty three different circuits, different asphalts, different conditions, and the 56 00:02:52,120 --> 00:02:54,880 Speaker 1: big question is is that kind of performance going to 57 00:02:54,960 --> 00:02:57,640 Speaker 1: carry over into the different variants of circuits that we have. 58 00:02:57,800 --> 00:03:00,120 Speaker 1: So it's going to take two or three races. I 59 00:03:00,120 --> 00:03:01,799 Speaker 1: know a lot of people are saying, ah that you know, 60 00:03:01,840 --> 00:03:04,120 Speaker 1: Rebel are going to run away with it, But you know, 61 00:03:04,120 --> 00:03:06,959 Speaker 1: we're certainly not thinking like that, and we need to 62 00:03:07,000 --> 00:03:09,359 Speaker 1: see a few more races to see how things how 63 00:03:09,400 --> 00:03:12,080 Speaker 1: things pan out. Christian, we started this conversation by talking 64 00:03:12,080 --> 00:03:15,480 Speaker 1: about the changes we've seen in your sport, the attention 65 00:03:15,520 --> 00:03:17,680 Speaker 1: it now gets from the rest of the world. Can 66 00:03:17,680 --> 00:03:19,519 Speaker 1: you give us a flavor of that, just how maybe 67 00:03:19,600 --> 00:03:22,000 Speaker 1: some of the nature and the size of the sponsorship 68 00:03:22,040 --> 00:03:26,520 Speaker 1: deals have adapted changed increased over the last couple of years. Well, look, 69 00:03:26,520 --> 00:03:29,160 Speaker 1: we've seen massive growth. I think that the whole phenomenon 70 00:03:29,240 --> 00:03:32,239 Speaker 1: through Drives and Survivors just introduced fomaller one to a 71 00:03:32,280 --> 00:03:35,040 Speaker 1: whole new audience, a younger audience, and very much an 72 00:03:35,040 --> 00:03:38,440 Speaker 1: American audience. So I think out of the twenty five 73 00:03:38,960 --> 00:03:41,600 Speaker 1: new partners that we've introduced in the last three years, 74 00:03:41,600 --> 00:03:45,240 Speaker 1: twenty one of them are US based, and you know 75 00:03:45,280 --> 00:03:48,560 Speaker 1: three of them are in the Fortune five hundred And 76 00:03:49,160 --> 00:03:51,640 Speaker 1: it's just Formula one is on far at the moment. 77 00:03:51,680 --> 00:03:54,200 Speaker 1: And what Drives and Survivor has done is it's it's 78 00:03:54,280 --> 00:03:57,880 Speaker 1: done a great job of explaining the sport and bringing 79 00:03:57,880 --> 00:04:00,920 Speaker 1: a new fan base in a young and base female 80 00:04:00,960 --> 00:04:05,040 Speaker 1: fan base as well, and it's shown some of the 81 00:04:05,120 --> 00:04:09,240 Speaker 1: characters and some of the competition you know that goes 82 00:04:09,280 --> 00:04:11,240 Speaker 1: on behind the scene. So it's a bit like you know, 83 00:04:11,360 --> 00:04:15,200 Speaker 1: the Kardashians on wheels at the time, Chris, and I'm 84 00:04:15,240 --> 00:04:16,960 Speaker 1: sure that's Salon in a big way. Does that work 85 00:04:17,000 --> 00:04:21,160 Speaker 1: for you time? The Karsassians on the side of Max's 86 00:04:21,240 --> 00:04:24,600 Speaker 1: car Kardashians, I'm not sure Max would go with that, Christian. 87 00:04:24,640 --> 00:04:27,000 Speaker 1: There are some hardcore fans, if you will, that are 88 00:04:27,040 --> 00:04:30,080 Speaker 1: disappointed by some of the new tracks, including last year 89 00:04:30,400 --> 00:04:33,440 Speaker 1: in Florida. Is there a risk that we sacrifice track 90 00:04:33,480 --> 00:04:38,280 Speaker 1: and race quality for commercial and geographic expansion. I don't 91 00:04:38,320 --> 00:04:39,880 Speaker 1: think so. I think you've got to protect, you know, 92 00:04:39,960 --> 00:04:43,480 Speaker 1: the old circuits like the Monacos and the silver Stones 93 00:04:43,520 --> 00:04:45,719 Speaker 1: and the Monsters, but then to bring in new circuits. 94 00:04:45,760 --> 00:04:49,120 Speaker 1: I mean, we have Miami last year as a new venue. 95 00:04:49,200 --> 00:04:51,360 Speaker 1: This year we got Las Vegas and I have never 96 00:04:51,400 --> 00:04:54,560 Speaker 1: seen hype around a race like that. I think it's 97 00:04:54,600 --> 00:04:57,720 Speaker 1: going to be the biggest sporting event on the globe 98 00:04:57,720 --> 00:05:00,320 Speaker 1: this year, and you know the demand for that race 99 00:05:00,640 --> 00:05:04,400 Speaker 1: is off the chart, so of course, you know, the 100 00:05:04,440 --> 00:05:07,320 Speaker 1: commercial demand for the sport is at an all time 101 00:05:07,440 --> 00:05:11,240 Speaker 1: high with twenty three races at twenty three different venues 102 00:05:11,279 --> 00:05:14,080 Speaker 1: around the world, so you know there's a mixture of 103 00:05:14,120 --> 00:05:16,600 Speaker 1: street tracks and some of the old classic circuits. So 104 00:05:17,480 --> 00:05:20,400 Speaker 1: I think it does data forever then Christian, unlike some 105 00:05:20,480 --> 00:05:23,039 Speaker 1: of the owners and the elites of Formula one, you've 106 00:05:23,080 --> 00:05:27,240 Speaker 1: actually raced the cars. I'm fascinated what you think about 107 00:05:27,240 --> 00:05:31,279 Speaker 1: the expansion of four more cars within Formula one. I 108 00:05:31,320 --> 00:05:34,800 Speaker 1: know a six hundred million dollars buy in is out there. 109 00:05:34,839 --> 00:05:38,320 Speaker 1: To me, that seems low, but can the track take 110 00:05:38,680 --> 00:05:43,560 Speaker 1: four more cars in the first dangerous turn? I think 111 00:05:44,120 --> 00:05:47,719 Speaker 1: the tracks are certified to be able to take more cars. 112 00:05:47,800 --> 00:05:51,320 Speaker 1: I think it boils down to, you know, the practicalities 113 00:05:51,360 --> 00:05:55,400 Speaker 1: you mentioned an entry, an entry criteria, and of course 114 00:05:55,640 --> 00:05:59,279 Speaker 1: the commercials, like in any business you know, are going 115 00:05:59,320 --> 00:06:02,080 Speaker 1: to drive the Asian making you know on this Effectively, 116 00:06:02,080 --> 00:06:04,400 Speaker 1: you've got a ten franchise set up at the moment 117 00:06:04,480 --> 00:06:11,320 Speaker 1: that uh, you know, have their value through the exclusivity 118 00:06:11,400 --> 00:06:14,359 Speaker 1: of you know, those ten franchises, and I think Liberty 119 00:06:14,360 --> 00:06:17,120 Speaker 1: are keen to protect that as the custodians and the 120 00:06:17,120 --> 00:06:20,800 Speaker 1: owner of the commercial rights holder, the FIA, the regulator 121 00:06:21,000 --> 00:06:23,760 Speaker 1: obviously they're looking to see you know, cam more teams 122 00:06:23,839 --> 00:06:27,160 Speaker 1: be accommodated, and so inevitably they'll need to be a 123 00:06:27,160 --> 00:06:31,680 Speaker 1: compromise founders found at some point. But at the end 124 00:06:31,720 --> 00:06:33,560 Speaker 1: of the day, it's going to come down to who 125 00:06:33,640 --> 00:06:36,960 Speaker 1: pays for it. Christian, you're talking about expanding to the 126 00:06:37,080 --> 00:06:39,200 Speaker 1: US and that things won't be sacrificed. But with the 127 00:06:39,279 --> 00:06:43,000 Speaker 1: nature of the sponsors and the nature of the audience, 128 00:06:43,360 --> 00:06:46,320 Speaker 1: which target audience are you going after? Is formula one 129 00:06:46,400 --> 00:06:49,719 Speaker 1: going after in the United States? Well, we're bringing in 130 00:06:50,000 --> 00:06:52,400 Speaker 1: a young audience and we're signed you know, we've signed 131 00:06:52,440 --> 00:06:54,960 Speaker 1: up so many partners, you know, recently like Oracle and 132 00:06:55,080 --> 00:06:58,000 Speaker 1: hard Rock and Rocks and cash app and so and 133 00:06:58,040 --> 00:07:01,000 Speaker 1: of course the big announcement for us last months the 134 00:07:01,000 --> 00:07:04,599 Speaker 1: announcement with Ford for twenty twenty six on our power train, 135 00:07:04,680 --> 00:07:08,039 Speaker 1: and you know we're bringing we're looking to appeal to 136 00:07:08,080 --> 00:07:11,960 Speaker 1: a younger demographic. Red Bull is an edgy team. You know, 137 00:07:12,000 --> 00:07:14,680 Speaker 1: we've got drivers that push the boundaries. Were a team 138 00:07:14,680 --> 00:07:18,680 Speaker 1: that pushes the boundaries. And you know, our following in 139 00:07:18,720 --> 00:07:22,080 Speaker 1: the US is bigger than any other bigger than any 140 00:07:22,080 --> 00:07:24,800 Speaker 1: other team. And I think it's only a matter of 141 00:07:24,800 --> 00:07:27,440 Speaker 1: time in future years that the you know, an American 142 00:07:27,560 --> 00:07:30,080 Speaker 1: driver will be running at the front in Formula One, 143 00:07:30,080 --> 00:07:32,720 Speaker 1: and again we want to be at the forefront of that. 144 00:07:32,880 --> 00:07:35,800 Speaker 1: So you know, we're looking to make sure that we 145 00:07:35,840 --> 00:07:38,720 Speaker 1: protect the die hard fans, but that we attract a 146 00:07:38,840 --> 00:07:42,440 Speaker 1: new audience, a younger audience, and a more diverse audience 147 00:07:42,520 --> 00:07:45,520 Speaker 1: into the sport a Christian. That's going to mean cheaper tickets. 148 00:07:45,800 --> 00:07:47,720 Speaker 1: Maybe I was just looking at some of the prices 149 00:07:48,320 --> 00:07:50,440 Speaker 1: in Vegas. It was cheaper for some of us on 150 00:07:50,480 --> 00:07:52,360 Speaker 1: the East Coast. I think just to fly to Europe 151 00:07:52,360 --> 00:07:54,240 Speaker 1: to go to Silverston Christian then try and get a 152 00:07:54,240 --> 00:07:56,600 Speaker 1: ticket at some of the tracks here in the United States. 153 00:07:56,600 --> 00:08:00,560 Speaker 1: What can be done about that? Well, look, I think 154 00:08:00,560 --> 00:08:03,800 Speaker 1: it's again it's supply and demand, design and demand. For Vegas. 155 00:08:03,880 --> 00:08:06,760 Speaker 1: He's just off the charts. Anybody that's anyone is going 156 00:08:06,800 --> 00:08:11,840 Speaker 1: to be at that that weekend and I think it's 157 00:08:11,880 --> 00:08:14,680 Speaker 1: going to be the most watch sporting venue, as I say, 158 00:08:14,720 --> 00:08:16,720 Speaker 1: of the year. But we do need to look after 159 00:08:16,760 --> 00:08:19,800 Speaker 1: the fans. We need to have a sensible entry price 160 00:08:19,840 --> 00:08:24,680 Speaker 1: that fans can come and see ignal precon see these 161 00:08:24,720 --> 00:08:26,920 Speaker 1: incredible cars, because until you see it live, you can't 162 00:08:27,240 --> 00:08:30,400 Speaker 1: comprehend the speed of these machines and what you know, 163 00:08:30,440 --> 00:08:33,640 Speaker 1: a human being is actually able to control around the 164 00:08:33,679 --> 00:08:36,640 Speaker 1: streets for example of Las Vegas. So you know that's 165 00:08:36,640 --> 00:08:39,880 Speaker 1: a responsibility that we as teams and the commercial rights 166 00:08:39,880 --> 00:08:42,560 Speaker 1: holder have to protect and look after. You know, the 167 00:08:42,640 --> 00:08:44,839 Speaker 1: diehard fans Chris and you mentioned Ford, they're going to 168 00:08:44,880 --> 00:08:46,520 Speaker 1: have a role in the speed of Red Bull racing 169 00:08:46,880 --> 00:08:49,080 Speaker 1: in a few years time. Can you just discuss the 170 00:08:49,160 --> 00:08:51,760 Speaker 1: risks arounding new relationship with a new partner and when 171 00:08:51,760 --> 00:08:56,040 Speaker 1: the planning really begins. Well, you know, for twenty twenty 172 00:08:56,040 --> 00:09:00,199 Speaker 1: six it's new regulations for a new engine and as 173 00:09:00,240 --> 00:09:03,839 Speaker 1: Red Bull decided to take on that challenge ourselves as 174 00:09:03,880 --> 00:09:06,280 Speaker 1: an independent you know, as a subsidiary of an energy 175 00:09:06,360 --> 00:09:10,040 Speaker 1: drinks manufacturer taking on Mercedes and Ferrari and now Audi 176 00:09:10,200 --> 00:09:14,800 Speaker 1: and Reno and so so we felt that it was 177 00:09:14,920 --> 00:09:17,520 Speaker 1: right for us to align ourselves with a with a 178 00:09:17,600 --> 00:09:21,079 Speaker 1: manufacturer to give us, you know, access to some of 179 00:09:21,120 --> 00:09:23,679 Speaker 1: the R and D that that they're investing, for example 180 00:09:23,679 --> 00:09:28,240 Speaker 1: in electrification and discussing with you know, Jim Farley from 181 00:09:28,280 --> 00:09:31,560 Speaker 1: with from Ford and Bill Ford, um, they were looking 182 00:09:31,600 --> 00:09:34,600 Speaker 1: at at Formula one and therefore, you know a partnership 183 00:09:34,800 --> 00:09:38,160 Speaker 1: with Red Bull was a very natural thing on both 184 00:09:38,200 --> 00:09:40,520 Speaker 1: sides to do, and um, you know we're going to 185 00:09:40,600 --> 00:09:43,000 Speaker 1: benefit from their knowledge and their technical know how in 186 00:09:43,880 --> 00:09:47,160 Speaker 1: you know, certainly in the electrification and you know we're 187 00:09:47,360 --> 00:09:50,319 Speaker 1: that process has started already because twenty twenty six, as 188 00:09:50,320 --> 00:09:53,800 Speaker 1: far as the engines is literally tomorrow. Christen, I want 189 00:09:53,840 --> 00:09:56,160 Speaker 1: to bring up someone else over the weekend. I think 190 00:09:56,160 --> 00:09:58,000 Speaker 1: he joked that there were three red bulls on the 191 00:09:58,080 --> 00:10:00,880 Speaker 1: podium over the weekend. Number three is the Aston Martin 192 00:10:01,200 --> 00:10:04,440 Speaker 1: of Fernando Alonzo Kristin, you've been in a car before, 193 00:10:04,679 --> 00:10:08,640 Speaker 1: can you describe how crazy it is what Finando Alonso 194 00:10:08,760 --> 00:10:12,160 Speaker 1: is doing in his early forties. Well, look, I mean, 195 00:10:12,200 --> 00:10:15,800 Speaker 1: Fernando is a fantastic driver. He's you know, one of 196 00:10:15,800 --> 00:10:20,440 Speaker 1: the best of all time, and he's finally got himself 197 00:10:20,440 --> 00:10:23,880 Speaker 1: in a competitive car and forty one years of age, 198 00:10:23,880 --> 00:10:26,960 Speaker 1: he's giving all of forty something's something a root for 199 00:10:27,120 --> 00:10:29,960 Speaker 1: and he's showed yesterday he's lost none of that racing 200 00:10:30,000 --> 00:10:34,240 Speaker 1: spirit or drive or determination or skill. And you know, 201 00:10:34,280 --> 00:10:36,840 Speaker 1: he's in great shape and he's going to be a 202 00:10:36,840 --> 00:10:41,040 Speaker 1: competitive you know, driver and team this year for us, 203 00:10:41,080 --> 00:10:43,000 Speaker 1: and we've got to know very much keep an eye 204 00:10:43,040 --> 00:10:45,160 Speaker 1: on them because I think they could be the dark 205 00:10:45,160 --> 00:10:47,320 Speaker 1: horse of this championship. Well, I was hoping that you'd 206 00:10:47,320 --> 00:10:49,439 Speaker 1: say Ferrari, but maybe it's going to be Aston Martin, 207 00:10:49,480 --> 00:10:53,120 Speaker 1: t K. Ferrari just not getting it done over the weekend, 208 00:10:53,400 --> 00:10:57,760 Speaker 1: that's all, Christian. Congratulations on a dominant race weekend. I 209 00:10:57,760 --> 00:10:59,400 Speaker 1: hope we can do this again soon, and please come 210 00:10:59,440 --> 00:11:01,440 Speaker 1: to the studio in New York when you might cove 211 00:11:01,480 --> 00:11:04,000 Speaker 1: to the States. Christine Hana. That a red bull racing 212 00:11:14,040 --> 00:11:16,920 Speaker 1: right now. Leadership from James Bianco, Jim Bianco's founder and 213 00:11:16,960 --> 00:11:20,400 Speaker 1: president of Bianco a Research. Jim, I'm just thrilled to 214 00:11:20,440 --> 00:11:23,240 Speaker 1: have you on here on a hallmark day of three months. 215 00:11:23,360 --> 00:11:26,560 Speaker 1: Liebor at five percent, what does that signal to you? 216 00:11:27,760 --> 00:11:29,920 Speaker 1: That short rates are going to keep going higher, that 217 00:11:30,120 --> 00:11:32,680 Speaker 1: defeat at a minimum is going to be higher for longer. 218 00:11:33,240 --> 00:11:36,240 Speaker 1: And the aggressive call right now is that they're going 219 00:11:36,280 --> 00:11:39,400 Speaker 1: to move maybe seventy five or another hundred basis points 220 00:11:39,400 --> 00:11:42,200 Speaker 1: and we could be talking about a sixth handle before 221 00:11:42,240 --> 00:11:45,360 Speaker 1: the end of the year on the funds rate. But 222 00:11:45,640 --> 00:11:48,160 Speaker 1: short rates are going to keep going up, and that 223 00:11:48,280 --> 00:11:50,720 Speaker 1: I think is the big driver of why the yield 224 00:11:50,720 --> 00:11:54,600 Speaker 1: curve has become a new record inversion because it's all 225 00:11:54,640 --> 00:11:57,080 Speaker 1: been driven by the long end. When the tenure rallies, 226 00:11:57,120 --> 00:12:00,000 Speaker 1: we get record inversions. When the tenure rises in the yield, 227 00:12:00,360 --> 00:12:02,720 Speaker 1: we get some flattening of the Yeel curve, maybe less 228 00:12:02,720 --> 00:12:04,880 Speaker 1: in version of the Yeel curve. And I think that 229 00:12:04,880 --> 00:12:07,679 Speaker 1: that story is going to continue with the bond market. Jim, 230 00:12:07,800 --> 00:12:11,000 Speaker 1: Jim expect Chamanpan will be reluctant to lean into that argument, 231 00:12:11,000 --> 00:12:15,719 Speaker 1: given with still whiteson for Payrose Friday and cpon next week. No, 232 00:12:15,840 --> 00:12:17,840 Speaker 1: I don't think he will. I think that you know 233 00:12:17,920 --> 00:12:20,040 Speaker 1: the data, You're right, I heard you before saying, you know, 234 00:12:20,040 --> 00:12:22,079 Speaker 1: it's just one month of data, and it's all been very, 235 00:12:22,160 --> 00:12:24,920 Speaker 1: very strong. But the arc of data that we've seen 236 00:12:24,960 --> 00:12:27,600 Speaker 1: over the last several months has not been weak. It 237 00:12:27,679 --> 00:12:31,480 Speaker 1: has not been what Elizabeth Warren, a senator from Massachusetts, 238 00:12:31,360 --> 00:12:33,800 Speaker 1: has been calling, you know, millions of people losing their jobs. 239 00:12:34,679 --> 00:12:38,440 Speaker 1: It hasn't happened. Maybe it does, but it hasn't happened yet, 240 00:12:38,640 --> 00:12:40,400 Speaker 1: and a lot of people thought it would have happened 241 00:12:40,440 --> 00:12:42,959 Speaker 1: by now. So I think he's probably going to stay 242 00:12:43,120 --> 00:12:46,240 Speaker 1: with the more aggressive move that the Fed is going 243 00:12:46,240 --> 00:12:49,120 Speaker 1: to continue to go at least two or three more 244 00:12:49,200 --> 00:12:52,400 Speaker 1: rate hikes, and if you're right, if the payroll data 245 00:12:52,480 --> 00:12:55,360 Speaker 1: is strong, or if the CPI data is strong, that 246 00:12:55,440 --> 00:12:58,439 Speaker 1: we'll be talking about fifty for the March meeting. Right now, 247 00:12:58,440 --> 00:13:01,480 Speaker 1: the market is putting about a third percent chance that 248 00:13:01,559 --> 00:13:04,160 Speaker 1: the Fed will go fifty basis points at the March meeting. 249 00:13:04,400 --> 00:13:07,240 Speaker 1: It wouldn't take much to push that over fifty percent 250 00:13:07,480 --> 00:13:09,680 Speaker 1: and get people talking about it. With a strong payroll 251 00:13:09,760 --> 00:13:12,679 Speaker 1: number or CPI next week and the potential for a 252 00:13:12,840 --> 00:13:15,520 Speaker 1: short term rates to go even higher. As the reason 253 00:13:15,559 --> 00:13:18,360 Speaker 1: why we've been talking all morning about this inversion, this 254 00:13:18,440 --> 00:13:20,960 Speaker 1: yield curve in version, the two tents spread the most 255 00:13:21,000 --> 00:13:23,880 Speaker 1: inverted going back to nineteen eighty one. Some people are 256 00:13:23,880 --> 00:13:26,839 Speaker 1: dismissing this and saying, ah, you can't read too much 257 00:13:26,880 --> 00:13:28,880 Speaker 1: into it. Other people are saying, historically it has been 258 00:13:28,880 --> 00:13:31,280 Speaker 1: one of the best indicators of recession to come. What 259 00:13:31,480 --> 00:13:34,720 Speaker 1: is the correct read on this, Jim that a yield 260 00:13:34,760 --> 00:13:38,720 Speaker 1: curve in version is a forward the indicator of recession. 261 00:13:38,840 --> 00:13:42,760 Speaker 1: But more inversion does not mean a faster or harder 262 00:13:42,800 --> 00:13:46,280 Speaker 1: recession than less inversion. It's a binary thing. Once you 263 00:13:46,320 --> 00:13:48,719 Speaker 1: go inverted, you should be looking for a recession. Now, 264 00:13:48,720 --> 00:13:51,520 Speaker 1: that thing about the yield curve is it can lead 265 00:13:51,559 --> 00:13:54,600 Speaker 1: as much as eighteen months before you eventually have that 266 00:13:54,679 --> 00:13:57,400 Speaker 1: recession that would put you in the first or second 267 00:13:57,480 --> 00:14:00,199 Speaker 1: quarter of next year. And I think that the whole 268 00:14:00,280 --> 00:14:02,800 Speaker 1: narrative around the recession that a lot of people don't 269 00:14:02,840 --> 00:14:05,000 Speaker 1: have that kind of patience. They think that the slowdown 270 00:14:05,120 --> 00:14:07,520 Speaker 1: is going to happen in the next couple of months, 271 00:14:07,840 --> 00:14:11,440 Speaker 1: as opposed to an early twenty four story. So, yes, 272 00:14:11,520 --> 00:14:14,480 Speaker 1: the eal curve is a very powerful signal that we 273 00:14:14,559 --> 00:14:16,680 Speaker 1: might be seeing a very big slowdown in the economy. 274 00:14:17,160 --> 00:14:19,720 Speaker 1: But just because it's inverting more does not mean it's 275 00:14:19,760 --> 00:14:21,720 Speaker 1: gonna be worse, and it could still be up to 276 00:14:21,760 --> 00:14:24,280 Speaker 1: a year away. Do you think that based on that 277 00:14:24,520 --> 00:14:26,720 Speaker 1: and based on the readjustment that we've seen in markets 278 00:14:26,800 --> 00:14:30,040 Speaker 1: for the past four months, do you think that there 279 00:14:30,160 --> 00:14:33,480 Speaker 1: is a position that seems obviously crowded amid all of 280 00:14:33,520 --> 00:14:37,960 Speaker 1: this uncertainty. Oh, that's a good one right now. I 281 00:14:37,960 --> 00:14:40,160 Speaker 1: think that if there isn't a position that is very 282 00:14:40,160 --> 00:14:44,040 Speaker 1: crowded in the bond market, it's definitely, you know, higher 283 00:14:44,080 --> 00:14:47,320 Speaker 1: short rates that you've seen a lot of speculative positions 284 00:14:47,320 --> 00:14:49,920 Speaker 1: and a lot of people lining up to basically make 285 00:14:49,920 --> 00:14:52,440 Speaker 1: a bet that short term interest rates to your note, 286 00:14:52,920 --> 00:14:55,400 Speaker 1: you know, the live or the Fed funds rate or whatever, 287 00:14:55,560 --> 00:14:57,720 Speaker 1: is going to continue to go higher. Now, the thing 288 00:14:57,720 --> 00:15:01,640 Speaker 1: about those kind of overcrowded trades is those are less 289 00:15:01,680 --> 00:15:05,040 Speaker 1: market driven and more federal reserve policy driven type of trades, 290 00:15:05,360 --> 00:15:08,080 Speaker 1: so they can be right at times. Other than that, 291 00:15:08,120 --> 00:15:09,960 Speaker 1: if you want to look for crowded trades, I'd have 292 00:15:10,000 --> 00:15:13,800 Speaker 1: to meander outside of interest rates and maybe say, the 293 00:15:13,960 --> 00:15:16,480 Speaker 1: reopening in China is probably on my radar as being 294 00:15:16,520 --> 00:15:19,040 Speaker 1: the biggest crowded trade that we're seeing right now. Everybody's 295 00:15:19,080 --> 00:15:21,560 Speaker 1: in on that trade, and with the idea that they're 296 00:15:21,640 --> 00:15:24,320 Speaker 1: only pushing five percent growth for this year, was a 297 00:15:24,360 --> 00:15:26,800 Speaker 1: bit of a disappointment for that trade. Jemmy, you suggesting 298 00:15:26,880 --> 00:15:29,720 Speaker 1: we may have sent the reopening tried to play out already, Yeah, 299 00:15:29,760 --> 00:15:33,160 Speaker 1: I think so. I mean reopening. Yes, the economy is 300 00:15:33,200 --> 00:15:35,600 Speaker 1: going to reopen, it's going to be stronger than it was. 301 00:15:36,120 --> 00:15:38,400 Speaker 1: But this whole idea that it's going to be rip 302 00:15:38,520 --> 00:15:41,480 Speaker 1: warring in China, that they are going to produce a 303 00:15:41,560 --> 00:15:44,400 Speaker 1: ton of stuff, put it on cargo ships, send it 304 00:15:44,440 --> 00:15:48,920 Speaker 1: to the US and collapse goods inflation in the US. 305 00:15:48,960 --> 00:15:51,440 Speaker 1: I think that trade is a little bit overdone right now, 306 00:15:51,440 --> 00:15:53,840 Speaker 1: and there's really no evidence than any of that is 307 00:15:53,840 --> 00:15:55,840 Speaker 1: going to come to pass. Jim want for the cast, 308 00:15:55,840 --> 00:15:57,760 Speaker 1: show meany to get you thought sense. Always looking forward 309 00:15:57,800 --> 00:16:03,800 Speaker 1: to hearing moll from you through the week. The Federal 310 00:16:03,800 --> 00:16:06,440 Speaker 1: Reserve Chair used to phrase in the last couple of months. 311 00:16:06,440 --> 00:16:09,960 Speaker 1: He said that disinflationary process has started. And our next 312 00:16:09,960 --> 00:16:12,840 Speaker 1: guest had something to say about that. David Lebovitz, global 313 00:16:12,840 --> 00:16:15,120 Speaker 1: market is trying to just at jpmulgan as in management. David, 314 00:16:15,120 --> 00:16:17,240 Speaker 1: I remember you sang it your words. You said that 315 00:16:17,320 --> 00:16:19,840 Speaker 1: phrase might go on the schaf with transit tree. Has 316 00:16:19,840 --> 00:16:22,200 Speaker 1: that gone on the schaff with transit tree? I think 317 00:16:22,240 --> 00:16:23,760 Speaker 1: it has. I mean, when you look at the data 318 00:16:23,760 --> 00:16:25,680 Speaker 1: that's come out so far this year, whether you look 319 00:16:25,680 --> 00:16:28,400 Speaker 1: at the hard data being the job's numbers, whether you 320 00:16:28,400 --> 00:16:30,400 Speaker 1: look at the soft data. I mean, the survey data 321 00:16:30,400 --> 00:16:33,800 Speaker 1: for February was very robust. This is clearly an economy 322 00:16:33,840 --> 00:16:35,920 Speaker 1: that's proving to be more resilient than a lot of 323 00:16:35,960 --> 00:16:38,640 Speaker 1: people expected. And I'm not sure that that disinflation the 324 00:16:38,680 --> 00:16:41,160 Speaker 1: market was really grabbing onto at the start of the 325 00:16:41,240 --> 00:16:44,360 Speaker 1: year is necessarily going to come through. I mean, particularly 326 00:16:44,360 --> 00:16:47,000 Speaker 1: when you look at where job growth has been most robust, 327 00:16:47,000 --> 00:16:49,960 Speaker 1: where wage growth has been most robust, it's in leisure, 328 00:16:49,960 --> 00:16:52,720 Speaker 1: in hospitality, it's in the service sector more broadly, and 329 00:16:52,840 --> 00:16:55,520 Speaker 1: the reality is that services are not really showing any 330 00:16:55,560 --> 00:16:57,960 Speaker 1: signs of slowing down. The leisure in hospitality. That's what 331 00:16:57,960 --> 00:17:00,800 Speaker 1: we're doing right here. We're leisure in hospitality. I mean, 332 00:17:00,840 --> 00:17:04,200 Speaker 1: that's what we do at Bloomberg Surveillance every day. You're 333 00:17:04,440 --> 00:17:08,520 Speaker 1: in the calm patient long term business, what do you 334 00:17:08,600 --> 00:17:12,439 Speaker 1: say to JP Morgan clients in a panic about the 335 00:17:12,480 --> 00:17:14,840 Speaker 1: people that say not only we're going to drop, but 336 00:17:14,920 --> 00:17:18,439 Speaker 1: we're going to drop at some point precipitously. So I 337 00:17:18,560 --> 00:17:20,800 Speaker 1: think the first point that we've been trying to make 338 00:17:20,800 --> 00:17:23,400 Speaker 1: to people is that a lot of folks are suffering 339 00:17:23,400 --> 00:17:26,000 Speaker 1: from recency bias. Right when they start to get agitated, 340 00:17:26,000 --> 00:17:28,200 Speaker 1: they immediately think about one of two things. They either 341 00:17:28,240 --> 00:17:30,720 Speaker 1: think about twenty twenty or they think about two thousand 342 00:17:30,760 --> 00:17:33,439 Speaker 1: and eight. Statistically, those are very much outliers, and so 343 00:17:33,480 --> 00:17:35,720 Speaker 1: when we look at the fundamental data, when we look 344 00:17:35,720 --> 00:17:38,680 Speaker 1: at say the cyclical sectors of the economy, we don't 345 00:17:38,720 --> 00:17:41,359 Speaker 1: really see anything that is so far offsides that it 346 00:17:41,480 --> 00:17:45,720 Speaker 1: suggests an outsized downturn when one does materialize. And so 347 00:17:45,920 --> 00:17:47,720 Speaker 1: I think what we've been trying to lean on is, 348 00:17:47,880 --> 00:17:50,400 Speaker 1: you know, look, this economy has more momentum, and yes, 349 00:17:50,440 --> 00:17:53,640 Speaker 1: that has implications for inflation. But if the FED decides 350 00:17:53,680 --> 00:17:55,760 Speaker 1: to crash the ship at some point down the road, 351 00:17:56,000 --> 00:17:58,000 Speaker 1: we don't really see the pieces in place the way 352 00:17:58,000 --> 00:17:59,960 Speaker 1: that they were say in OH seven and O eight 353 00:18:00,040 --> 00:18:02,959 Speaker 1: with respect to housing, and certainly don't foresee another global 354 00:18:02,960 --> 00:18:05,919 Speaker 1: pandemic coming anytime did it take for the FED to 355 00:18:06,000 --> 00:18:09,040 Speaker 1: crash this party? So I think, you know, the one 356 00:18:09,200 --> 00:18:11,160 Speaker 1: thing that we've been spending a lot of time thinking 357 00:18:11,200 --> 00:18:13,000 Speaker 1: about is that at the end of the day, this 358 00:18:13,080 --> 00:18:15,800 Speaker 1: is really an exercise in central banks and the FED 359 00:18:15,840 --> 00:18:18,760 Speaker 1: in particular, defending their credibility. I mean, the FED can 360 00:18:18,800 --> 00:18:21,119 Speaker 1: get inflation to wherever they want it to be, they 361 00:18:21,119 --> 00:18:22,879 Speaker 1: can get growth to wherever they want it to be. 362 00:18:23,240 --> 00:18:25,159 Speaker 1: The question is what needs to happen to rates, and 363 00:18:25,240 --> 00:18:28,399 Speaker 1: more specifically, what does the terminal rate actually look like? 364 00:18:28,440 --> 00:18:31,400 Speaker 1: If this is a more inflationary economy, what that means 365 00:18:31,480 --> 00:18:33,399 Speaker 1: is that our star isn't two and a half percent, 366 00:18:33,440 --> 00:18:36,520 Speaker 1: it's probably somewhere higher, and that has implications for what 367 00:18:36,560 --> 00:18:38,960 Speaker 1: the FED needs to do in order to snuff this 368 00:18:39,000 --> 00:18:42,200 Speaker 1: inflation candle out. And so to me, the worst case 369 00:18:42,200 --> 00:18:46,040 Speaker 1: scenario is a FED that gets very frustrated with their 370 00:18:46,119 --> 00:18:49,840 Speaker 1: inability seeming inability to get inflation back into check and 371 00:18:49,880 --> 00:18:52,359 Speaker 1: they keep hiking and hiking and hiking, and throw that 372 00:18:52,440 --> 00:18:54,800 Speaker 1: whole theory about leads and lags and it takes time 373 00:18:54,840 --> 00:18:57,000 Speaker 1: for this to work its way through the economy very 374 00:18:57,080 --> 00:18:58,760 Speaker 1: much into the wind. That's the big risk to the 375 00:18:58,760 --> 00:19:01,639 Speaker 1: economy this year. Do you game out that risk and 376 00:19:01,720 --> 00:19:04,480 Speaker 1: you're investing because right now you're talking about perhaps we're 377 00:19:04,480 --> 00:19:06,239 Speaker 1: not going back to another two thousand and seven two 378 00:19:06,240 --> 00:19:09,639 Speaker 1: thousand and eight kind of crisis. So if you see resilience, 379 00:19:09,640 --> 00:19:12,399 Speaker 1: that could be good for stocks, not necessarily bad unless 380 00:19:12,440 --> 00:19:14,320 Speaker 1: there is that downside risk. Well, I think it's a 381 00:19:14,320 --> 00:19:15,919 Speaker 1: good short term and I think that a lot of 382 00:19:15,920 --> 00:19:18,440 Speaker 1: the concerns about profits are going to collapse by thirty 383 00:19:18,440 --> 00:19:21,280 Speaker 1: percent that we've talked about together over the past couple 384 00:19:21,280 --> 00:19:24,320 Speaker 1: of months. That's not necessarily going to come to fruition. 385 00:19:24,359 --> 00:19:27,240 Speaker 1: If the economy is still humming along and inflation is 386 00:19:27,280 --> 00:19:29,440 Speaker 1: taking longer to come down. So I do think that 387 00:19:29,600 --> 00:19:32,520 Speaker 1: near term there is an opportunity in risk, and risk 388 00:19:32,560 --> 00:19:35,760 Speaker 1: could certainly end up performing well again in the short run. 389 00:19:36,280 --> 00:19:38,440 Speaker 1: I think that the challenge is how do you get 390 00:19:38,520 --> 00:19:41,439 Speaker 1: inflation back in the bottle? Well, you reduce demand and 391 00:19:41,480 --> 00:19:43,760 Speaker 1: at some point that shows up in corporate revenues and 392 00:19:43,800 --> 00:19:47,160 Speaker 1: corporate profits, and when earnings begin to really fall apart, 393 00:19:47,200 --> 00:19:48,960 Speaker 1: that to me is what's going to lead the market 394 00:19:49,000 --> 00:19:51,919 Speaker 1: back down, not necessarily to a new low, but perhaps 395 00:19:51,920 --> 00:19:54,040 Speaker 1: the levels that we saw back in October in June 396 00:19:54,040 --> 00:19:57,320 Speaker 1: of last year. Do you see evidence that earnings are 397 00:19:57,400 --> 00:20:01,720 Speaker 1: quote unquote falling apart? I think that earnings estimates are 398 00:20:01,720 --> 00:20:03,600 Speaker 1: coming back down to earth, and I think that that's 399 00:20:03,640 --> 00:20:05,560 Speaker 1: a good thing. You know, the twenty twenty three number 400 00:20:05,600 --> 00:20:08,160 Speaker 1: is down, call it seven eight percent so far year 401 00:20:08,240 --> 00:20:11,119 Speaker 1: to date. The challenges when you think about what the 402 00:20:11,160 --> 00:20:13,240 Speaker 1: market price is off of the market price is off 403 00:20:13,280 --> 00:20:15,879 Speaker 1: of a forward multiple. So every day that we go 404 00:20:15,960 --> 00:20:18,280 Speaker 1: through in twenty twenty three, we're picking up a year 405 00:20:18,280 --> 00:20:21,440 Speaker 1: of average earnings in twenty twenty four, because those estimates 406 00:20:21,440 --> 00:20:25,719 Speaker 1: certainly don't multiple statistic right now? Where's the multiple forward 407 00:20:25,840 --> 00:20:28,000 Speaker 1: right now? So the forward multiple is about seventeen and 408 00:20:28,000 --> 00:20:30,160 Speaker 1: a half eighteen times today. You know, we think that's 409 00:20:30,200 --> 00:20:33,640 Speaker 1: about two turns expensive relative where it should be. And furthermore, 410 00:20:33,640 --> 00:20:36,240 Speaker 1: it's really a question about twenty twenty four earnings because 411 00:20:36,560 --> 00:20:38,480 Speaker 1: everybody was talking about how this was going to be 412 00:20:38,560 --> 00:20:41,240 Speaker 1: a year where profits came under pressure. But if the 413 00:20:41,280 --> 00:20:44,680 Speaker 1: economy's proving to more resilient, that story is getting shifted 414 00:20:44,720 --> 00:20:46,960 Speaker 1: down the road. And I'm not sure that markets necessarily 415 00:20:46,960 --> 00:20:49,320 Speaker 1: appreciate that, and I certainly don't think that it's in 416 00:20:49,359 --> 00:20:50,760 Speaker 1: the price. So what do you do with a frenzy 417 00:20:50,800 --> 00:20:53,399 Speaker 1: of tech priced out of twenty two twenty five? Some 418 00:20:53,520 --> 00:20:56,000 Speaker 1: of its growth is some of it's less profitable, but 419 00:20:56,080 --> 00:20:58,280 Speaker 1: there's a lot of cash flow generators there as well. 420 00:20:58,320 --> 00:21:01,600 Speaker 1: Are they worth the premium off seven and eighteen? So 421 00:21:01,640 --> 00:21:03,960 Speaker 1: I don't think that they're there quite yet. I don't 422 00:21:03,960 --> 00:21:06,440 Speaker 1: think that they're necessarily worth it yet. The reason why 423 00:21:06,520 --> 00:21:08,719 Speaker 1: is that when we look around the markets today, there 424 00:21:08,720 --> 00:21:10,639 Speaker 1: are plenty of other interesting things to do. I mean, 425 00:21:10,680 --> 00:21:13,880 Speaker 1: the layup continues to be traps. This is the key question. 426 00:21:14,400 --> 00:21:17,480 Speaker 1: Is John Deer or whatever trading at nine, ten, twelve 427 00:21:17,560 --> 00:21:21,360 Speaker 1: times earnings? Are they value traps? Where they sit there forever. 428 00:21:21,720 --> 00:21:23,840 Speaker 1: I only think that they're value traps if the FED 429 00:21:23,920 --> 00:21:25,920 Speaker 1: returns to zero, and I don't think that the FED 430 00:21:26,000 --> 00:21:28,680 Speaker 1: is returning to zero. I think my base case assumption 431 00:21:28,760 --> 00:21:30,359 Speaker 1: is that there's going to be some sort of cost 432 00:21:30,359 --> 00:21:32,679 Speaker 1: of capital in the market going forward, and that's going 433 00:21:32,760 --> 00:21:36,800 Speaker 1: to make equities less about one thing ie megacap long 434 00:21:36,880 --> 00:21:39,400 Speaker 1: duration growth, and a bit more balanced like we saw 435 00:21:39,400 --> 00:21:41,600 Speaker 1: in the past. I actually think businesses that can generate 436 00:21:41,640 --> 00:21:44,240 Speaker 1: productivity are going to be the ones that perform best 437 00:21:44,240 --> 00:21:48,120 Speaker 1: in this environment because investors aren't going to reward earnings 438 00:21:48,160 --> 00:21:51,359 Speaker 1: growth simply that is a function of rising prices, right. 439 00:21:51,359 --> 00:21:53,639 Speaker 1: They want to see business plans changing, and that's going 440 00:21:53,680 --> 00:21:56,080 Speaker 1: to make or break investments going You say value tramps 441 00:21:56,080 --> 00:21:58,200 Speaker 1: and not just think Europe and then it feels nice 442 00:21:58,200 --> 00:22:02,560 Speaker 1: something's changed yet today European David the flant, what's that about? So? 443 00:22:02,680 --> 00:22:04,520 Speaker 1: I think part of it is is the sigh of 444 00:22:04,560 --> 00:22:07,080 Speaker 1: relief trade. I mean, it's been what a decade since 445 00:22:07,119 --> 00:22:10,040 Speaker 1: the Eurozone crisis and Europe finally seems to be kind 446 00:22:10,040 --> 00:22:13,120 Speaker 1: of shaking off its scabs and coming back into the limelight. 447 00:22:13,320 --> 00:22:15,720 Speaker 1: I think part of it might be a very long 448 00:22:15,840 --> 00:22:19,399 Speaker 1: overdue dead cat bounce. I also think generally there's an 449 00:22:19,400 --> 00:22:22,240 Speaker 1: expectation getting baked into that market that the ECB is 450 00:22:22,240 --> 00:22:24,600 Speaker 1: going to have to do more. And like the FED, 451 00:22:24,760 --> 00:22:27,159 Speaker 1: when the ECB pauses, it's going to be a pause. 452 00:22:27,160 --> 00:22:29,800 Speaker 1: They're not going to turn around and cut. Generally speaking, 453 00:22:29,840 --> 00:22:33,000 Speaker 1: that's just a healthier environment for the banks. And furthermore, 454 00:22:33,040 --> 00:22:36,320 Speaker 1: the European banks are very different today than they were 455 00:22:36,359 --> 00:22:38,600 Speaker 1: in a seven and o eight, seeing much better behavior. 456 00:22:38,680 --> 00:22:40,840 Speaker 1: Is the way I would categorize it. What's that Disney line? 457 00:22:40,840 --> 00:22:44,160 Speaker 1: You used tom a whole New WoT? So that's from 458 00:22:44,160 --> 00:22:47,800 Speaker 1: a ladness? Right? It's a song? Yeah? I know, But 459 00:22:49,160 --> 00:22:50,720 Speaker 1: why would I refer to it? I didn't know what 460 00:22:50,760 --> 00:22:52,600 Speaker 1: movie was about. Well, I don't know. I thought maybe 461 00:22:52,640 --> 00:22:54,399 Speaker 1: you were just saying it's a Disney song. It sounds 462 00:22:54,400 --> 00:22:57,080 Speaker 1: like it, you know. He goes off lesson forget it, David, 463 00:22:57,160 --> 00:23:10,000 Speaker 1: Thank you, David leave Fitz of Chype Mulkin Ellen, Will 464 00:23:10,119 --> 00:23:13,040 Speaker 1: let's get serious here on China and five percent? Will 465 00:23:13,119 --> 00:23:16,919 Speaker 1: that drive oil up ten dollars a barrel? You know 466 00:23:17,200 --> 00:23:20,280 Speaker 1: it could? I think what we're seeing with China is 467 00:23:20,320 --> 00:23:25,040 Speaker 1: that consumer demand is returning. Industrial demand is not returning 468 00:23:25,040 --> 00:23:27,720 Speaker 1: as quickly, and so we're still in this kind of 469 00:23:27,840 --> 00:23:31,119 Speaker 1: slower climb up. I remember when when they started the 470 00:23:31,160 --> 00:23:34,719 Speaker 1: reopening and everyone was anticipating this huge surge in oil demand, 471 00:23:34,960 --> 00:23:36,399 Speaker 1: and I said, well, I don't know if it's going 472 00:23:36,480 --> 00:23:39,280 Speaker 1: to happen quite as fast as we saw in the 473 00:23:39,280 --> 00:23:41,320 Speaker 1: Western economies. I think it's going to be more of 474 00:23:41,320 --> 00:23:44,120 Speaker 1: a slow climb up. And the question is really when 475 00:23:44,200 --> 00:23:47,240 Speaker 1: is that going to start going to start hitting. And 476 00:23:47,320 --> 00:23:50,120 Speaker 1: it does seem like now the consensus is not till 477 00:23:50,119 --> 00:23:53,439 Speaker 1: age two, and that's when we're going to see you know, 478 00:23:53,640 --> 00:23:57,639 Speaker 1: hundred dollars one hundred dollars oil potentially of course, you 479 00:23:57,680 --> 00:23:59,720 Speaker 1: know that hits right in the middle of the summer, 480 00:24:00,119 --> 00:24:03,879 Speaker 1: potentially very high temperatures and lots of driving demand, especially 481 00:24:03,920 --> 00:24:06,879 Speaker 1: in the US. So I do think that that's really 482 00:24:06,920 --> 00:24:09,919 Speaker 1: more of where we're looking at in terms of a 483 00:24:10,040 --> 00:24:13,919 Speaker 1: surge in oil prices. And of course, you know, everyone 484 00:24:13,960 --> 00:24:16,560 Speaker 1: who's predicted high oil prices, you know, we've we've seen 485 00:24:16,640 --> 00:24:19,440 Speaker 1: oil jump up and then go go back down on 486 00:24:20,080 --> 00:24:23,760 Speaker 1: recessionary fears. So I do think we're headed more in 487 00:24:23,800 --> 00:24:27,320 Speaker 1: an upward trend, but there's always that potential for things 488 00:24:27,359 --> 00:24:30,280 Speaker 1: to kind of wobble. One of the most notable sort 489 00:24:30,280 --> 00:24:32,119 Speaker 1: of trends over the past couple of months Ellen is 490 00:24:32,119 --> 00:24:34,560 Speaker 1: the number of people who have just abandoned calls for 491 00:24:34,640 --> 00:24:36,800 Speaker 1: one hundred dollars oil and saying, actually, you know what, 492 00:24:37,000 --> 00:24:38,680 Speaker 1: it's never going to come back. This is basically where 493 00:24:38,680 --> 00:24:39,919 Speaker 1: we're going to stay. I mean, it feels like the 494 00:24:39,960 --> 00:24:42,679 Speaker 1: market's a bit of a I don't know a child 495 00:24:42,720 --> 00:24:45,359 Speaker 1: who who's basically all or nothing sometimes, at least for 496 00:24:45,359 --> 00:24:47,440 Speaker 1: the past couple of months. Do you get the sense 497 00:24:47,640 --> 00:24:50,760 Speaker 1: that that is becoming one of the main things, the 498 00:24:50,800 --> 00:24:53,080 Speaker 1: dominant themes that you keep hearing from the people you 499 00:24:53,119 --> 00:24:56,959 Speaker 1: talk with. Yeah, I do think that we are seeing 500 00:24:57,119 --> 00:25:00,720 Speaker 1: on the whole people kind of walking back there their predictions. 501 00:25:00,760 --> 00:25:02,760 Speaker 1: I remember at the end of twenty twenty two, we 502 00:25:02,840 --> 00:25:05,560 Speaker 1: kept seeing, you know, these incredible predictions oil is going 503 00:25:05,560 --> 00:25:08,760 Speaker 1: to be a one twenty one, one thirty in twenty 504 00:25:08,800 --> 00:25:12,399 Speaker 1: twenty three, and now we're seeing revisions down to well, 505 00:25:12,560 --> 00:25:15,480 Speaker 1: maybe we might hit one hundred dollars a barrel. I 506 00:25:15,560 --> 00:25:18,720 Speaker 1: do think that we are headed, in general towards a 507 00:25:18,840 --> 00:25:23,240 Speaker 1: period of tightness of a supply being more of a concern. 508 00:25:23,560 --> 00:25:27,560 Speaker 1: I do think that there is potential in certain areas 509 00:25:27,640 --> 00:25:33,320 Speaker 1: to increase supply to meet that demand. That the place 510 00:25:33,400 --> 00:25:35,560 Speaker 1: is not necessarily the United States, though, I don't think 511 00:25:35,560 --> 00:25:39,360 Speaker 1: we can depend on US producers to ramp up production 512 00:25:39,440 --> 00:25:42,040 Speaker 1: as much as we have in the past, and that 513 00:25:42,040 --> 00:25:45,320 Speaker 1: that is something that is not necessarily being reflected in 514 00:25:45,359 --> 00:25:49,879 Speaker 1: the forecast we're seeing from say the EIA. I do 515 00:25:49,920 --> 00:25:53,720 Speaker 1: think Saudi Arabia and UAE have potential. There's also potential 516 00:25:53,760 --> 00:25:56,560 Speaker 1: from Iraq, and I do think that if things get 517 00:25:56,640 --> 00:26:01,160 Speaker 1: really tight, we will see OPEC moving to increase their 518 00:26:01,240 --> 00:26:04,800 Speaker 1: their quotas um you know, but maybe not really until June, 519 00:26:04,880 --> 00:26:08,560 Speaker 1: July or even August. Some people say that stockpiles have 520 00:26:08,640 --> 00:26:11,440 Speaker 1: gone up and that the price has remained relatively low 521 00:26:11,520 --> 00:26:15,680 Speaker 1: relative to US expectations because of the increase in electric 522 00:26:15,760 --> 00:26:19,960 Speaker 1: vehicle usage. Do you buy into this idea, No, I 523 00:26:20,040 --> 00:26:23,520 Speaker 1: do not. I think definitely we we're seeing more people 524 00:26:23,520 --> 00:26:26,280 Speaker 1: buy electric vehicles, but I don't think that these are 525 00:26:27,480 --> 00:26:31,120 Speaker 1: that these are a main driver in uh, you know, stockpiles, 526 00:26:31,160 --> 00:26:36,359 Speaker 1: because electric vehicles are still limited in their range and 527 00:26:36,480 --> 00:26:38,359 Speaker 1: when you look at you know, big driving, I mean 528 00:26:38,480 --> 00:26:42,840 Speaker 1: it's it's not you know, people driving an electric vehicle, 529 00:26:43,320 --> 00:26:46,359 Speaker 1: you know, twenty miles to you know, do some errands 530 00:26:46,359 --> 00:26:49,119 Speaker 1: around town. So I really don't think we're seeing that bite. 531 00:26:49,200 --> 00:26:51,080 Speaker 1: I think, you know, if you really want to look 532 00:26:51,080 --> 00:26:54,720 Speaker 1: at the big drivers in demand, we're talking about China 533 00:26:54,760 --> 00:26:58,080 Speaker 1: and India, and these are not places where electric vehicles 534 00:26:58,080 --> 00:27:01,919 Speaker 1: are necessarily having the huge impact. I know, it looks 535 00:27:01,920 --> 00:27:04,880 Speaker 1: like a big increase because when you're starting from very 536 00:27:04,920 --> 00:27:07,960 Speaker 1: little and you get an increase, it's very big. But 537 00:27:08,040 --> 00:27:11,239 Speaker 1: you know, for every EV that's sold, how many you know, 538 00:27:11,280 --> 00:27:13,919 Speaker 1: internal combustion engine cars are still on the road and 539 00:27:13,960 --> 00:27:16,199 Speaker 1: still being driven. So I don't think that that is 540 00:27:16,560 --> 00:27:21,840 Speaker 1: cutting demand in the places where demand is really increasing 541 00:27:22,000 --> 00:27:25,080 Speaker 1: all that much. I do think that they're you know, 542 00:27:25,160 --> 00:27:28,680 Speaker 1: they are definitely growing in interest, but I think that 543 00:27:28,720 --> 00:27:31,840 Speaker 1: there is a limit to how beneficial they are, given 544 00:27:32,200 --> 00:27:35,400 Speaker 1: how range bound. A lot of these vehicles are looking 545 00:27:35,400 --> 00:27:38,320 Speaker 1: forward to chatta with you, Adam Walked. They're putting Adam 546 00:27:38,320 --> 00:27:40,919 Speaker 1: Wald if the Atlantic cants, so thank you. Subscribe to 547 00:27:40,960 --> 00:27:44,920 Speaker 1: the Bloomberg Surveillance podcasts on Apple, Spotify and anywhere else 548 00:27:45,200 --> 00:27:49,240 Speaker 1: you get your podcasts. Listen live every weekday starting at 549 00:27:49,280 --> 00:27:53,560 Speaker 1: seven am Eastern. I'm Bloomberg dot Com, the iHeartRadio app 550 00:27:53,920 --> 00:27:57,520 Speaker 1: tune In, and the Bloomberg Business app. You can watch 551 00:27:57,680 --> 00:28:01,959 Speaker 1: us live. I'm Bloomberg Television and always I'm the Bloomberg Terminal. 552 00:28:02,359 --> 00:28:06,560 Speaker 1: Thanks for listening. I'm Tom Keene, and this is Bloomberg