Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Farrell and Lisa are Bramoweds join us each
Speaker 1: day for insight from the best in economics, geopolitics, financing, investment.
Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and
Speaker 1: anywhere you get your podcasts, and always I'm Bloomberg dot Com,
Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. Seven years ago,
Speaker 1: if I tried to talk about Formula one on this program,
Speaker 1: Tom would what are you doing? What are you doing
Speaker 1: with formula what? What's Formula one all about? Back in
Speaker 1: twenty fifteen, the former F one boss Bernie eccleston had
Speaker 1: this to say to ESPN. He said, we ought to
Speaker 1: try to break America, but it's hard for me because
Speaker 1: I'm not very enthusiastic about the country. It's difficult because
Speaker 1: they are sort of isolated. They are a big island,
Speaker 1: and they're slowly starting to learn about what other people
Speaker 1: in the world do well. Mister ecclestone was wrong. It
Speaker 1: seems the United States has learned quickly. Following the sale
Speaker 1: of Formula one to Uspace Nobody Media and with the
Speaker 1: help of Netflix's Drive to Survive series. Look at the
Speaker 1: TV audience here, Tom, average race viewership in the US
Speaker 1: has gone from about half a million bank in twenty
Speaker 1: seven yesterday to one point two million last year. Where
Speaker 1: was it yesterday? Probably bigger for the season, probably bigger.
Speaker 1: This is a join our Christian Horner to join us,
Speaker 1: and of course mister Farrell will lead this with legit
Speaker 1: knowledge on Formula one. But all I can say is
Speaker 1: what is so dominant here and is it's a safe
Speaker 1: free zone from Manchester United this morning, Bloomberg surveillance is
Speaker 1: a safe free zone for everybody in Formula one that
Speaker 1: cut their clocks cleaned yesterday. Just ridiculous dominance time. Absolutely.
Speaker 1: Christine Horner, the team principal of Red Bull Racing F one,
Speaker 1: joined us right now. Christin, congratulations on the window for
Speaker 1: the weekend and let's start there. What goes into it
Speaker 1: over the winter to turn up in race one and
Speaker 1: absolutely dominate the way you did well. First of all,
Speaker 1: thanks very much. I mean it was a great start
Speaker 1: for us yesterday. And the regulations you know, they're constantly
Speaker 1: being tuned and of evolving. But the basis of the
Speaker 1: car is similar to the twenty twenty two rags. So
Speaker 1: the team have done a great job in evolving the
Speaker 1: car and involving every single detail. Almost every component is
Speaker 1: new for this year, and with only three days of
Speaker 1: practicing of testing, it was great to get that first
Speaker 1: big scoring yesterday with the one to finish Christian. We've
Speaker 1: all heard about the rule changes in the last eighteen months.
Speaker 1: It was meant to make it more competitive, and I
Speaker 1: think a lot of people over the weekend might be
Speaker 1: looking at the front two and saying, what happened? What
Speaker 1: is it about this set up, these rule changes that
Speaker 1: you think suits you and the team so well. I
Speaker 1: think we've only run the cars at this track in
Speaker 1: bar Rain. We tested there and we raced there and
Speaker 1: it certainly suited our car, you know, incredibly well. But
Speaker 1: you know, the former one calendar is twenty three different races,
Speaker 1: twenty three different circuits, different asphalts, different conditions, and the
Speaker 1: big question is is that kind of performance going to
Speaker 1: carry over into the different variants of circuits that we have.
Speaker 1: So it's going to take two or three races. I
Speaker 1: know a lot of people are saying, ah that you know,
Speaker 1: Rebel are going to run away with it, But you know,
Speaker 1: we're certainly not thinking like that, and we need to
Speaker 1: see a few more races to see how things how
Speaker 1: things pan out. Christian, we started this conversation by talking
Speaker 1: about the changes we've seen in your sport, the attention
Speaker 1: it now gets from the rest of the world. Can
Speaker 1: you give us a flavor of that, just how maybe
Speaker 1: some of the nature and the size of the sponsorship
Speaker 1: deals have adapted changed increased over the last couple of years. Well, look,
Speaker 1: we've seen massive growth. I think that the whole phenomenon
Speaker 1: through Drives and Survivors just introduced fomaller one to a
Speaker 1: whole new audience, a younger audience, and very much an
Speaker 1: American audience. So I think out of the twenty five
Speaker 1: new partners that we've introduced in the last three years,
Speaker 1: twenty one of them are US based, and you know
Speaker 1: three of them are in the Fortune five hundred And
Speaker 1: it's just Formula one is on far at the moment.
Speaker 1: And what Drives and Survivor has done is it's it's
Speaker 1: done a great job of explaining the sport and bringing
Speaker 1: a new fan base in a young and base female
Speaker 1: fan base as well, and it's shown some of the
Speaker 1: characters and some of the competition you know that goes
Speaker 1: on behind the scene. So it's a bit like you know,
Speaker 1: the Kardashians on wheels at the time, Chris, and I'm
Speaker 1: sure that's Salon in a big way. Does that work
Speaker 1: for you time? The Karsassians on the side of Max's
Speaker 1: car Kardashians, I'm not sure Max would go with that, Christian.
Speaker 1: There are some hardcore fans, if you will, that are
Speaker 1: disappointed by some of the new tracks, including last year
Speaker 1: in Florida. Is there a risk that we sacrifice track
Speaker 1: and race quality for commercial and geographic expansion. I don't
Speaker 1: think so. I think you've got to protect, you know,
Speaker 1: the old circuits like the Monacos and the silver Stones
Speaker 1: and the Monsters, but then to bring in new circuits.
Speaker 1: I mean, we have Miami last year as a new venue.
Speaker 1: This year we got Las Vegas and I have never
Speaker 1: seen hype around a race like that. I think it's
Speaker 1: going to be the biggest sporting event on the globe
Speaker 1: this year, and you know the demand for that race
Speaker 1: is off the chart, so of course, you know, the
Speaker 1: commercial demand for the sport is at an all time
Speaker 1: high with twenty three races at twenty three different venues
Speaker 1: around the world, so you know there's a mixture of
Speaker 1: street tracks and some of the old classic circuits. So
Speaker 1: I think it does data forever then Christian, unlike some
Speaker 1: of the owners and the elites of Formula one, you've
Speaker 1: actually raced the cars. I'm fascinated what you think about
Speaker 1: the expansion of four more cars within Formula one. I
Speaker 1: know a six hundred million dollars buy in is out there.
Speaker 1: To me, that seems low, but can the track take
Speaker 1: four more cars in the first dangerous turn? I think
Speaker 1: the tracks are certified to be able to take more cars.
Speaker 1: I think it boils down to, you know, the practicalities
Speaker 1: you mentioned an entry, an entry criteria, and of course
Speaker 1: the commercials, like in any business you know, are going
Speaker 1: to drive the Asian making you know on this Effectively,
Speaker 1: you've got a ten franchise set up at the moment
Speaker 1: that uh, you know, have their value through the exclusivity
Speaker 1: of you know, those ten franchises, and I think Liberty
Speaker 1: are keen to protect that as the custodians and the
Speaker 1: owner of the commercial rights holder, the FIA, the regulator
Speaker 1: obviously they're looking to see you know, cam more teams
Speaker 1: be accommodated, and so inevitably they'll need to be a
Speaker 1: compromise founders found at some point. But at the end
Speaker 1: of the day, it's going to come down to who
Speaker 1: pays for it. Christian, you're talking about expanding to the
Speaker 1: US and that things won't be sacrificed. But with the
Speaker 1: nature of the sponsors and the nature of the audience,
Speaker 1: which target audience are you going after? Is formula one
Speaker 1: going after in the United States? Well, we're bringing in
Speaker 1: a young audience and we're signed you know, we've signed
Speaker 1: up so many partners, you know, recently like Oracle and
Speaker 1: hard Rock and Rocks and cash app and so and
Speaker 1: of course the big announcement for us last months the
Speaker 1: announcement with Ford for twenty twenty six on our power train,
Speaker 1: and you know we're bringing we're looking to appeal to
Speaker 1: a younger demographic. Red Bull is an edgy team. You know,
Speaker 1: we've got drivers that push the boundaries. Were a team
Speaker 1: that pushes the boundaries. And you know, our following in
Speaker 1: the US is bigger than any other bigger than any
Speaker 1: other team. And I think it's only a matter of
Speaker 1: time in future years that the you know, an American
Speaker 1: driver will be running at the front in Formula One,
Speaker 1: and again we want to be at the forefront of that.
Speaker 1: So you know, we're looking to make sure that we
Speaker 1: protect the die hard fans, but that we attract a
Speaker 1: new audience, a younger audience, and a more diverse audience
Speaker 1: into the sport a Christian. That's going to mean cheaper tickets.
Speaker 1: Maybe I was just looking at some of the prices
Speaker 1: in Vegas. It was cheaper for some of us on
Speaker 1: the East Coast. I think just to fly to Europe
Speaker 1: to go to Silverston Christian then try and get a
Speaker 1: ticket at some of the tracks here in the United States.
Speaker 1: What can be done about that? Well, look, I think
Speaker 1: it's again it's supply and demand, design and demand. For Vegas.
Speaker 1: He's just off the charts. Anybody that's anyone is going
Speaker 1: to be at that that weekend and I think it's
Speaker 1: going to be the most watch sporting venue, as I say,
Speaker 1: of the year. But we do need to look after
Speaker 1: the fans. We need to have a sensible entry price
Speaker 1: that fans can come and see ignal precon see these
Speaker 1: incredible cars, because until you see it live, you can't
Speaker 1: comprehend the speed of these machines and what you know,
Speaker 1: a human being is actually able to control around the
Speaker 1: streets for example of Las Vegas. So you know that's
Speaker 1: a responsibility that we as teams and the commercial rights
Speaker 1: holder have to protect and look after. You know, the
Speaker 1: diehard fans Chris and you mentioned Ford, they're going to
Speaker 1: have a role in the speed of Red Bull racing
Speaker 1: in a few years time. Can you just discuss the
Speaker 1: risks arounding new relationship with a new partner and when
Speaker 1: the planning really begins. Well, you know, for twenty twenty
Speaker 1: six it's new regulations for a new engine and as
Speaker 1: Red Bull decided to take on that challenge ourselves as
Speaker 1: an independent you know, as a subsidiary of an energy
Speaker 1: drinks manufacturer taking on Mercedes and Ferrari and now Audi
Speaker 1: and Reno and so so we felt that it was
Speaker 1: right for us to align ourselves with a with a
Speaker 1: manufacturer to give us, you know, access to some of
Speaker 1: the R and D that that they're investing, for example
Speaker 1: in electrification and discussing with you know, Jim Farley from
Speaker 1: with from Ford and Bill Ford, um, they were looking
Speaker 1: at at Formula one and therefore, you know a partnership
Speaker 1: with Red Bull was a very natural thing on both
Speaker 1: sides to do, and um, you know we're going to
Speaker 1: benefit from their knowledge and their technical know how in
Speaker 1: you know, certainly in the electrification and you know we're
Speaker 1: that process has started already because twenty twenty six, as
Speaker 1: far as the engines is literally tomorrow. Christen, I want
Speaker 1: to bring up someone else over the weekend. I think
Speaker 1: he joked that there were three red bulls on the
Speaker 1: podium over the weekend. Number three is the Aston Martin
Speaker 1: of Fernando Alonzo Kristin, you've been in a car before,
Speaker 1: can you describe how crazy it is what Finando Alonso
Speaker 1: is doing in his early forties. Well, look, I mean,
Speaker 1: Fernando is a fantastic driver. He's you know, one of
Speaker 1: the best of all time, and he's finally got himself
Speaker 1: in a competitive car and forty one years of age,
Speaker 1: he's giving all of forty something's something a root for
Speaker 1: and he's showed yesterday he's lost none of that racing
Speaker 1: spirit or drive or determination or skill. And you know,
Speaker 1: he's in great shape and he's going to be a
Speaker 1: competitive you know, driver and team this year for us,
Speaker 1: and we've got to know very much keep an eye
Speaker 1: on them because I think they could be the dark
Speaker 1: horse of this championship. Well, I was hoping that you'd
Speaker 1: say Ferrari, but maybe it's going to be Aston Martin,
Speaker 1: t K. Ferrari just not getting it done over the weekend,
Speaker 1: that's all, Christian. Congratulations on a dominant race weekend. I
Speaker 1: hope we can do this again soon, and please come
Speaker 1: to the studio in New York when you might cove
Speaker 1: to the States. Christine Hana. That a red bull racing
Speaker 1: right now. Leadership from James Bianco, Jim Bianco's founder and
Speaker 1: president of Bianco a Research. Jim, I'm just thrilled to
Speaker 1: have you on here on a hallmark day of three months.
Speaker 1: Liebor at five percent, what does that signal to you?
Speaker 1: That short rates are going to keep going higher, that
Speaker 1: defeat at a minimum is going to be higher for longer.
Speaker 1: And the aggressive call right now is that they're going
Speaker 1: to move maybe seventy five or another hundred basis points
Speaker 1: and we could be talking about a sixth handle before
Speaker 1: the end of the year on the funds rate. But
Speaker 1: short rates are going to keep going up, and that
Speaker 1: I think is the big driver of why the yield
Speaker 1: curve has become a new record inversion because it's all
Speaker 1: been driven by the long end. When the tenure rallies,
Speaker 1: we get record inversions. When the tenure rises in the yield,
Speaker 1: we get some flattening of the Yeel curve, maybe less
Speaker 1: in version of the Yeel curve. And I think that
Speaker 1: that story is going to continue with the bond market. Jim,
Speaker 1: Jim expect Chamanpan will be reluctant to lean into that argument,
Speaker 1: given with still whiteson for Payrose Friday and cpon next week. No,
Speaker 1: I don't think he will. I think that you know
Speaker 1: the data, You're right, I heard you before saying, you know,
Speaker 1: it's just one month of data, and it's all been very,
Speaker 1: very strong. But the arc of data that we've seen
Speaker 1: over the last several months has not been weak. It
Speaker 1: has not been what Elizabeth Warren, a senator from Massachusetts,
Speaker 1: has been calling, you know, millions of people losing their jobs.
Speaker 1: It hasn't happened. Maybe it does, but it hasn't happened yet,
Speaker 1: and a lot of people thought it would have happened
Speaker 1: by now. So I think he's probably going to stay
Speaker 1: with the more aggressive move that the Fed is going
Speaker 1: to continue to go at least two or three more
Speaker 1: rate hikes, and if you're right, if the payroll data
Speaker 1: is strong, or if the CPI data is strong, that
Speaker 1: we'll be talking about fifty for the March meeting. Right now,
Speaker 1: the market is putting about a third percent chance that
Speaker 1: the Fed will go fifty basis points at the March meeting.
Speaker 1: It wouldn't take much to push that over fifty percent
Speaker 1: and get people talking about it. With a strong payroll
Speaker 1: number or CPI next week and the potential for a
Speaker 1: short term rates to go even higher. As the reason
Speaker 1: why we've been talking all morning about this inversion, this
Speaker 1: yield curve in version, the two tents spread the most
Speaker 1: inverted going back to nineteen eighty one. Some people are
Speaker 1: dismissing this and saying, ah, you can't read too much
Speaker 1: into it. Other people are saying, historically it has been
Speaker 1: one of the best indicators of recession to come. What
Speaker 1: is the correct read on this, Jim that a yield
Speaker 1: curve in version is a forward the indicator of recession.
Speaker 1: But more inversion does not mean a faster or harder
Speaker 1: recession than less inversion. It's a binary thing. Once you
Speaker 1: go inverted, you should be looking for a recession. Now,
Speaker 1: that thing about the yield curve is it can lead
Speaker 1: as much as eighteen months before you eventually have that
Speaker 1: recession that would put you in the first or second
Speaker 1: quarter of next year. And I think that the whole
Speaker 1: narrative around the recession that a lot of people don't
Speaker 1: have that kind of patience. They think that the slowdown
Speaker 1: is going to happen in the next couple of months,
Speaker 1: as opposed to an early twenty four story. So, yes,
Speaker 1: the eal curve is a very powerful signal that we
Speaker 1: might be seeing a very big slowdown in the economy.
Speaker 1: But just because it's inverting more does not mean it's
Speaker 1: gonna be worse, and it could still be up to
Speaker 1: a year away. Do you think that based on that
Speaker 1: and based on the readjustment that we've seen in markets
Speaker 1: for the past four months, do you think that there
Speaker 1: is a position that seems obviously crowded amid all of
Speaker 1: this uncertainty. Oh, that's a good one right now. I
Speaker 1: think that if there isn't a position that is very
Speaker 1: crowded in the bond market, it's definitely, you know, higher
Speaker 1: short rates that you've seen a lot of speculative positions
Speaker 1: and a lot of people lining up to basically make
Speaker 1: a bet that short term interest rates to your note,
Speaker 1: you know, the live or the Fed funds rate or whatever,
Speaker 1: is going to continue to go higher. Now, the thing
Speaker 1: about those kind of overcrowded trades is those are less
Speaker 1: market driven and more federal reserve policy driven type of trades,
Speaker 1: so they can be right at times. Other than that,
Speaker 1: if you want to look for crowded trades, I'd have
Speaker 1: to meander outside of interest rates and maybe say, the
Speaker 1: reopening in China is probably on my radar as being
Speaker 1: the biggest crowded trade that we're seeing right now. Everybody's
Speaker 1: in on that trade, and with the idea that they're
Speaker 1: only pushing five percent growth for this year, was a
Speaker 1: bit of a disappointment for that trade. Jemmy, you suggesting
Speaker 1: we may have sent the reopening tried to play out already, Yeah,
Speaker 1: I think so. I mean reopening. Yes, the economy is
Speaker 1: going to reopen, it's going to be stronger than it was.
Speaker 1: But this whole idea that it's going to be rip
Speaker 1: warring in China, that they are going to produce a
Speaker 1: ton of stuff, put it on cargo ships, send it
Speaker 1: to the US and collapse goods inflation in the US.
Speaker 1: I think that trade is a little bit overdone right now,
Speaker 1: and there's really no evidence than any of that is
Speaker 1: going to come to pass. Jim want for the cast,
Speaker 1: show meany to get you thought sense. Always looking forward
Speaker 1: to hearing moll from you through the week. The Federal
Speaker 1: Reserve Chair used to phrase in the last couple of months.
Speaker 1: He said that disinflationary process has started. And our next
Speaker 1: guest had something to say about that. David Lebovitz, global
Speaker 1: market is trying to just at jpmulgan as in management. David,
Speaker 1: I remember you sang it your words. You said that
Speaker 1: phrase might go on the schaf with transit tree. Has
Speaker 1: that gone on the schaff with transit tree? I think
Speaker 1: it has. I mean, when you look at the data
Speaker 1: that's come out so far this year, whether you look
Speaker 1: at the hard data being the job's numbers, whether you
Speaker 1: look at the soft data. I mean, the survey data
Speaker 1: for February was very robust. This is clearly an economy
Speaker 1: that's proving to be more resilient than a lot of
Speaker 1: people expected. And I'm not sure that that disinflation the
Speaker 1: market was really grabbing onto at the start of the
Speaker 1: year is necessarily going to come through. I mean, particularly
Speaker 1: when you look at where job growth has been most robust,
Speaker 1: where wage growth has been most robust, it's in leisure,
Speaker 1: in hospitality, it's in the service sector more broadly, and
Speaker 1: the reality is that services are not really showing any
Speaker 1: signs of slowing down. The leisure in hospitality. That's what
Speaker 1: we're doing right here. We're leisure in hospitality. I mean,
Speaker 1: that's what we do at Bloomberg Surveillance every day. You're
Speaker 1: in the calm patient long term business, what do you
Speaker 1: say to JP Morgan clients in a panic about the
Speaker 1: people that say not only we're going to drop, but
Speaker 1: we're going to drop at some point precipitously. So I
Speaker 1: think the first point that we've been trying to make
Speaker 1: to people is that a lot of folks are suffering
Speaker 1: from recency bias. Right when they start to get agitated,
Speaker 1: they immediately think about one of two things. They either
Speaker 1: think about twenty twenty or they think about two thousand
Speaker 1: and eight. Statistically, those are very much outliers, and so
Speaker 1: when we look at the fundamental data, when we look
Speaker 1: at say the cyclical sectors of the economy, we don't
Speaker 1: really see anything that is so far offsides that it
Speaker 1: suggests an outsized downturn when one does materialize. And so
Speaker 1: I think what we've been trying to lean on is,
Speaker 1: you know, look, this economy has more momentum, and yes,
Speaker 1: that has implications for inflation. But if the FED decides
Speaker 1: to crash the ship at some point down the road,
Speaker 1: we don't really see the pieces in place the way
Speaker 1: that they were say in OH seven and O eight
Speaker 1: with respect to housing, and certainly don't foresee another global
Speaker 1: pandemic coming anytime did it take for the FED to
Speaker 1: crash this party? So I think, you know, the one
Speaker 1: thing that we've been spending a lot of time thinking
Speaker 1: about is that at the end of the day, this
Speaker 1: is really an exercise in central banks and the FED
Speaker 1: in particular, defending their credibility. I mean, the FED can
Speaker 1: get inflation to wherever they want it to be, they
Speaker 1: can get growth to wherever they want it to be.
Speaker 1: The question is what needs to happen to rates, and
Speaker 1: more specifically, what does the terminal rate actually look like?
Speaker 1: If this is a more inflationary economy, what that means
Speaker 1: is that our star isn't two and a half percent,
Speaker 1: it's probably somewhere higher, and that has implications for what
Speaker 1: the FED needs to do in order to snuff this
Speaker 1: inflation candle out. And so to me, the worst case
Speaker 1: scenario is a FED that gets very frustrated with their
Speaker 1: inability seeming inability to get inflation back into check and
Speaker 1: they keep hiking and hiking and hiking, and throw that
Speaker 1: whole theory about leads and lags and it takes time
Speaker 1: for this to work its way through the economy very
Speaker 1: much into the wind. That's the big risk to the
Speaker 1: economy this year. Do you game out that risk and
Speaker 1: you're investing because right now you're talking about perhaps we're
Speaker 1: not going back to another two thousand and seven two
Speaker 1: thousand and eight kind of crisis. So if you see resilience,
Speaker 1: that could be good for stocks, not necessarily bad unless
Speaker 1: there is that downside risk. Well, I think it's a
Speaker 1: good short term and I think that a lot of
Speaker 1: the concerns about profits are going to collapse by thirty
Speaker 1: percent that we've talked about together over the past couple
Speaker 1: of months. That's not necessarily going to come to fruition.
Speaker 1: If the economy is still humming along and inflation is
Speaker 1: taking longer to come down. So I do think that
Speaker 1: near term there is an opportunity in risk, and risk
Speaker 1: could certainly end up performing well again in the short run.
Speaker 1: I think that the challenge is how do you get
Speaker 1: inflation back in the bottle? Well, you reduce demand and
Speaker 1: at some point that shows up in corporate revenues and
Speaker 1: corporate profits, and when earnings begin to really fall apart,
Speaker 1: that to me is what's going to lead the market
Speaker 1: back down, not necessarily to a new low, but perhaps
Speaker 1: the levels that we saw back in October in June
Speaker 1: of last year. Do you see evidence that earnings are
Speaker 1: quote unquote falling apart? I think that earnings estimates are
Speaker 1: coming back down to earth, and I think that that's
Speaker 1: a good thing. You know, the twenty twenty three number
Speaker 1: is down, call it seven eight percent so far year
Speaker 1: to date. The challenges when you think about what the
Speaker 1: market price is off of the market price is off
Speaker 1: of a forward multiple. So every day that we go
Speaker 1: through in twenty twenty three, we're picking up a year
Speaker 1: of average earnings in twenty twenty four, because those estimates
Speaker 1: certainly don't multiple statistic right now? Where's the multiple forward
Speaker 1: right now? So the forward multiple is about seventeen and
Speaker 1: a half eighteen times today. You know, we think that's
Speaker 1: about two turns expensive relative where it should be. And furthermore,
Speaker 1: it's really a question about twenty twenty four earnings because
Speaker 1: everybody was talking about how this was going to be
Speaker 1: a year where profits came under pressure. But if the
Speaker 1: economy's proving to more resilient, that story is getting shifted
Speaker 1: down the road. And I'm not sure that markets necessarily
Speaker 1: appreciate that, and I certainly don't think that it's in
Speaker 1: the price. So what do you do with a frenzy
Speaker 1: of tech priced out of twenty two twenty five? Some
Speaker 1: of its growth is some of it's less profitable, but
Speaker 1: there's a lot of cash flow generators there as well.
Speaker 1: Are they worth the premium off seven and eighteen? So
Speaker 1: I don't think that they're there quite yet. I don't
Speaker 1: think that they're necessarily worth it yet. The reason why
Speaker 1: is that when we look around the markets today, there
Speaker 1: are plenty of other interesting things to do. I mean,
Speaker 1: the layup continues to be traps. This is the key question.
Speaker 1: Is John Deer or whatever trading at nine, ten, twelve
Speaker 1: times earnings? Are they value traps? Where they sit there forever.
Speaker 1: I only think that they're value traps if the FED
Speaker 1: returns to zero, and I don't think that the FED
Speaker 1: is returning to zero. I think my base case assumption
Speaker 1: is that there's going to be some sort of cost
Speaker 1: of capital in the market going forward, and that's going
Speaker 1: to make equities less about one thing ie megacap long
Speaker 1: duration growth, and a bit more balanced like we saw
Speaker 1: in the past. I actually think businesses that can generate
Speaker 1: productivity are going to be the ones that perform best
Speaker 1: in this environment because investors aren't going to reward earnings
Speaker 1: growth simply that is a function of rising prices, right.
Speaker 1: They want to see business plans changing, and that's going
Speaker 1: to make or break investments going You say value tramps
Speaker 1: and not just think Europe and then it feels nice
Speaker 1: something's changed yet today European David the flant, what's that about? So?
Speaker 1: I think part of it is is the sigh of
Speaker 1: relief trade. I mean, it's been what a decade since
Speaker 1: the Eurozone crisis and Europe finally seems to be kind
Speaker 1: of shaking off its scabs and coming back into the limelight.
Speaker 1: I think part of it might be a very long
Speaker 1: overdue dead cat bounce. I also think generally there's an
Speaker 1: expectation getting baked into that market that the ECB is
Speaker 1: going to have to do more. And like the FED,
Speaker 1: when the ECB pauses, it's going to be a pause.
Speaker 1: They're not going to turn around and cut. Generally speaking,
Speaker 1: that's just a healthier environment for the banks. And furthermore,
Speaker 1: the European banks are very different today than they were
Speaker 1: in a seven and o eight, seeing much better behavior.
Speaker 1: Is the way I would categorize it. What's that Disney line?
Speaker 1: You used tom a whole New WoT? So that's from
Speaker 1: a ladness? Right? It's a song? Yeah? I know, But
Speaker 1: why would I refer to it? I didn't know what
Speaker 1: movie was about. Well, I don't know. I thought maybe
Speaker 1: you were just saying it's a Disney song. It sounds
Speaker 1: like it, you know. He goes off lesson forget it, David,
Speaker 1: Thank you, David leave Fitz of Chype Mulkin Ellen, Will
Speaker 1: let's get serious here on China and five percent? Will
Speaker 1: that drive oil up ten dollars a barrel? You know
Speaker 1: it could? I think what we're seeing with China is
Speaker 1: that consumer demand is returning. Industrial demand is not returning
Speaker 1: as quickly, and so we're still in this kind of
Speaker 1: slower climb up. I remember when when they started the
Speaker 1: reopening and everyone was anticipating this huge surge in oil demand,
Speaker 1: and I said, well, I don't know if it's going
Speaker 1: to happen quite as fast as we saw in the
Speaker 1: Western economies. I think it's going to be more of
Speaker 1: a slow climb up. And the question is really when
Speaker 1: is that going to start going to start hitting. And
Speaker 1: it does seem like now the consensus is not till
Speaker 1: age two, and that's when we're going to see you know,
Speaker 1: hundred dollars one hundred dollars oil potentially of course, you
Speaker 1: know that hits right in the middle of the summer,
Speaker 1: potentially very high temperatures and lots of driving demand, especially
Speaker 1: in the US. So I do think that that's really
Speaker 1: more of where we're looking at in terms of a
Speaker 1: surge in oil prices. And of course, you know, everyone
Speaker 1: who's predicted high oil prices, you know, we've we've seen
Speaker 1: oil jump up and then go go back down on
Speaker 1: recessionary fears. So I do think we're headed more in
Speaker 1: an upward trend, but there's always that potential for things
Speaker 1: to kind of wobble. One of the most notable sort
Speaker 1: of trends over the past couple of months Ellen is
Speaker 1: the number of people who have just abandoned calls for
Speaker 1: one hundred dollars oil and saying, actually, you know what,
Speaker 1: it's never going to come back. This is basically where
Speaker 1: we're going to stay. I mean, it feels like the
Speaker 1: market's a bit of a I don't know a child
Speaker 1: who who's basically all or nothing sometimes, at least for
Speaker 1: the past couple of months. Do you get the sense
Speaker 1: that that is becoming one of the main things, the
Speaker 1: dominant themes that you keep hearing from the people you
Speaker 1: talk with. Yeah, I do think that we are seeing
Speaker 1: on the whole people kind of walking back there their predictions.
Speaker 1: I remember at the end of twenty twenty two, we
Speaker 1: kept seeing, you know, these incredible predictions oil is going
Speaker 1: to be a one twenty one, one thirty in twenty
Speaker 1: twenty three, and now we're seeing revisions down to well,
Speaker 1: maybe we might hit one hundred dollars a barrel. I
Speaker 1: do think that we are headed, in general towards a
Speaker 1: period of tightness of a supply being more of a concern.
Speaker 1: I do think that there is potential in certain areas
Speaker 1: to increase supply to meet that demand. That the place
Speaker 1: is not necessarily the United States, though, I don't think
Speaker 1: we can depend on US producers to ramp up production
Speaker 1: as much as we have in the past, and that
Speaker 1: that is something that is not necessarily being reflected in
Speaker 1: the forecast we're seeing from say the EIA. I do
Speaker 1: think Saudi Arabia and UAE have potential. There's also potential
Speaker 1: from Iraq, and I do think that if things get
Speaker 1: really tight, we will see OPEC moving to increase their
Speaker 1: their quotas um you know, but maybe not really until June,
Speaker 1: July or even August. Some people say that stockpiles have
Speaker 1: gone up and that the price has remained relatively low
Speaker 1: relative to US expectations because of the increase in electric
Speaker 1: vehicle usage. Do you buy into this idea, No, I
Speaker 1: do not. I think definitely we we're seeing more people
Speaker 1: buy electric vehicles, but I don't think that these are
Speaker 1: that these are a main driver in uh, you know, stockpiles,
Speaker 1: because electric vehicles are still limited in their range and
Speaker 1: when you look at you know, big driving, I mean
Speaker 1: it's it's not you know, people driving an electric vehicle,
Speaker 1: you know, twenty miles to you know, do some errands
Speaker 1: around town. So I really don't think we're seeing that bite.
Speaker 1: I think, you know, if you really want to look
Speaker 1: at the big drivers in demand, we're talking about China
Speaker 1: and India, and these are not places where electric vehicles
Speaker 1: are necessarily having the huge impact. I know, it looks
Speaker 1: like a big increase because when you're starting from very
Speaker 1: little and you get an increase, it's very big. But
Speaker 1: you know, for every EV that's sold, how many you know,
Speaker 1: internal combustion engine cars are still on the road and
Speaker 1: still being driven. So I don't think that that is
Speaker 1: cutting demand in the places where demand is really increasing
Speaker 1: all that much. I do think that they're you know,
Speaker 1: they are definitely growing in interest, but I think that
Speaker 1: there is a limit to how beneficial they are, given
Speaker 1: how range bound. A lot of these vehicles are looking
Speaker 1: forward to chatta with you, Adam Walked. They're putting Adam
Speaker 1: Wald if the Atlantic cants, so thank you. Subscribe to
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Speaker 1: Thanks for listening. I'm Tom Keene, and this is Bloomberg