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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg Surveillance Podcast. Catch us live weekdays

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Speaker 2: at seven am Eastern on applecar Player, Android Auto with

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Speaker 2: the Bloomberg Business App. Listen on demand wherever you get

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Speaker 2: your podcasts, or watch us live on YouTube.

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Speaker 3: I really can't say enough about this folks. His book

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Speaker 3: on the crisis of two thousand and seven thirteen bankers.

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Speaker 3: It was my book of the year. It is the

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Speaker 3: definitive short read on the crater that we all live through.

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Speaker 4: In seven eight, he.

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Speaker 3: Of course has gone on to extraordinary extraordinary academics at

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Speaker 3: MIT on technology and growth. The new book is Power

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Speaker 3: and Progress. Newly minted Nobel Prize winner Simon Johnson.

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Speaker 4: Simon, when Rudy.

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Speaker 3: Dornbush was beating you to death at MRT years ago,

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Speaker 3: do you think dorn Bush ever would have thought young Johnson,

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Speaker 3: the mouth you one from the United Kingdom would win

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Speaker 3: a Nobel Prize.

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Speaker 5: No, I'm pretty sure he would be just as surprised

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Speaker 5: as I am today.

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Speaker 3: Tom, just wonderful, Simon Johnson. Let's talk about the why

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Speaker 3: of this Nobel Prize of James Robinson of Chicago and

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Speaker 3: of course Darren and you over at m I T.

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Speaker 3: There's a pressor at ten am, folks, Simon Johnson, why

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Speaker 3: should we study, fear or enjoy our modern technology?

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Speaker 5: I think technology drives everything, Tom, You're well aware of that.

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Speaker 5: And the question is who's technology? Who has what priority?

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Speaker 5: What's that vision? Is it an inclusive vision or is

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Speaker 5: it a vision which only a few people have good

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Speaker 5: jobs and everybody else is really scrambling. That's been super

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Speaker 5: important over the last two and fifty years. We've had

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Speaker 5: some good episodes and some really bad ones. And I

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Speaker 5: think it's all in play again with artificial intelligence.

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Speaker 3: In play with this, Simon Johnson, is this election? I

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Speaker 3: mentioned this the other day A parallels eighteen forty eighteen fifty.

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Speaker 3: There's almost a ludite part of America that is afraid

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Speaker 3: of the consequences of technology. What is the Asimogulu Johnson

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Speaker 3: Robinson prescription.

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Speaker 5: Well drawn and Jim to speak for themselves. But my view,

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Speaker 5: Tom is that technology has for people. We've had excessive

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Speaker 5: automation in the past forty years. We've not generated enough

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Speaker 5: new good jobs, so jobs where you actually get paid

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Speaker 5: good money and you can live well. And we've got

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Speaker 5: to do better on that. I think that that's really

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Speaker 5: a fundamental driving importance, irrespective of the election outcome. Where

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Speaker 5: the good job's going to come from? And can we

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Speaker 5: keep pace we will get ahead of automation because you

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Speaker 5: know automation is going to happen, like it or not.

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Speaker 5: So you've really got to work a lot harder to

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Speaker 5: generate more science, more technology, deploy that, commercialize that, scale

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Speaker 5: it up and generate more good jobs all across the country.

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Speaker 5: Can be done, but it's a top priority, and I

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Speaker 5: think it needs to be elevated as a priority right now.

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Speaker 6: All right, so simon with your two colleagues and your

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Speaker 6: work here. I mean, it just raises a question which

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Speaker 6: is so relevant even today, discerning why some countries are

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Speaker 6: rich and some much poorer. How should we think about

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Speaker 6: that big, big picture question these days?

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Speaker 5: I suggest we think about it in two ways. One

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Speaker 5: is the sort of deep history and recognize that we've

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Speaker 5: all got these legacies that we're living with, and some

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Speaker 5: of these legacies, particularly if you were colonized in a

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Speaker 5: harsh way by the Europeans, that's a very tough legacy

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Speaker 5: to overcome. But the second thing is there's no predestination.

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Speaker 5: It's all about the choices that you make, including technology

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Speaker 5: that we just talked about. If you're in the United States,

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Speaker 5: but around the world, I would point to corruption. I

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Speaker 5: mean corruption has been, as you guys know, talked about

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Speaker 5: a lot over the past thirty forty years. But what

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Speaker 5: do we have. We still have immense amounts of corruption

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Speaker 5: and there's two side set there, the people who pay

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Speaker 5: the bribes and the people who take the bribes. And

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Speaker 5: that's a big part of what holds a lot of

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Speaker 5: countries deeply in the poverty that you see today.

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Speaker 4: So what can institutions do?

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Speaker 3: I mean, this is you know, I'm going to go

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Speaker 3: back to Douglas Norris and the seminal work at Washington

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Speaker 3: University in Saint Louis, Professor Johnson. What do our institutions

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Speaker 3: need to improve on to help they have notts of technology?

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Speaker 3: What is your IMF where you served, what does it

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Speaker 3: need to do?

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Speaker 4: Oh?

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Speaker 5: Well, I was in the IMF a long time, agoes,

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Speaker 5: you know, so I'm not going to speak to their

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Speaker 5: current policies and stance. But I think the key thing,

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Speaker 5: and it made you sound like a rhetorical device, Tom,

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Speaker 5: but it's real is focus on inclusive prosperity. How are

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Speaker 5: you getting more good jobs created for more people and

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Speaker 5: make sure they can access those jobs, make sure they

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Speaker 5: have the skills, make sure they are empowered themselves, and

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Speaker 5: they recognize that. So the bumper sticker for me out

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Speaker 5: of all of this is more good jobs.

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Speaker 3: Sloan one oh one, Come on, Simon, let's do it.

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Speaker 3: Simon Johnson on tariffs.

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Speaker 5: Oh, I don't, okay. If you want to blow up

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Speaker 5: the world, in the world treading system and really damage

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Speaker 5: poorer Americans, slap a massive tariff on all the importance because,

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Speaker 5: as you know, poor America spent a lot on things

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Speaker 5: that have imported content. So massive tariff war terrible ideas.

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Speaker 4: Right, Simon, One more question.

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Speaker 3: We want to get you on your day huge press

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Speaker 3: commitments now in this important press conference with Darren ASIMOVLOK

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Speaker 3: scheduled at ten am. Circling in all this academics is

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Speaker 3: Olivier Blanchard. Tell us what Olivia did for MIT.

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Speaker 4: Oh.

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Speaker 5: I think Olivia Blanchard is one of the greatest economists

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Speaker 5: of this or any generation. And his presence and his

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Speaker 5: toughness and his rigor has been present throughout my career.

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Speaker 5: And I started at MIT as a grad student in

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Speaker 5: September nineteen eighty five. So I've been thirty nine years

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Speaker 5: on and off with the Institute. So Olivia Blanchard is

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Speaker 5: one of the modern grades.

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Speaker 4: Absolutely, Simon Johnson.

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Speaker 3: Congratulations Simon Johnson, the Massachusetts Institute of Technology.

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Speaker 2: You're listening to the Bloomberg Surveillance Podcast live weekday afternoons

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Speaker 2: from seven to ten am Eastern. Listen on Apple car

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Speaker 2: Play and Android Auto with a Bloomberg Business app, or

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Speaker 2: want us live on YouTube right now.

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Speaker 3: This is an important conversation Lori Kelvicina with US RBC

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Speaker 3: Capital Markets. Laurie, I'm really not a big one of

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Speaker 3: linking elections into equity market performance. The adults at RBC

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Speaker 3: Capital Markets go there link the election to the twenty.

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Speaker 4: Twenty five equity performance.

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Speaker 7: So in terms of looking ahead, I hate to break

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Speaker 7: it to you, Tom, but I think stocks tend to

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Speaker 7: do well in any balance of power environment. We've actually

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Speaker 7: back tested that over time. I think that any election

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Speaker 7: issues that we have in the equity market are the

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Speaker 7: nature of short term repricings that we have to work through,

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Speaker 7: and there are clearly, you know, a lot of people

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Speaker 7: out there who do care about those short term repricings.

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Speaker 7: If you look historically, though, whether it's Democrats control everything,

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Speaker 7: Republicans control everything, different variations of split government docs dent

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Speaker 7: do tend to go up. And what's interesting to me

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Speaker 7: is that the two best historical scenarios Republicans control everything

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Speaker 7: or democratic presidency with a split Congress, those are the

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Speaker 7: two that have been most in focus for investors recently.

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Speaker 7: So I think the election is something we've got to

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Speaker 7: get through. We'll deal with it, we'll reprice what we

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Speaker 7: need to reprice, and then we'll move on.

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Speaker 3: Just can I rip on the scripture, folks? And we

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Speaker 3: have the best radio studio.

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Speaker 4: In the world. It's incredibly wired in.

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Speaker 3: Right now on television, there's not Bloomberg TV on all

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Speaker 3: of American television. For those of you internationally, there's young

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Speaker 3: studs standing in front of Pole results Paul in their hands.

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Speaker 3: Their hands are all going like this. On radio, they're

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Speaker 3: like certain, they're pointing in this. Do we have a

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Speaker 3: clue Paul Swening about the polls?

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Speaker 6: I do not. I just I assume my polls, Oh,

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Speaker 6: almost worthless. It's like entertainment, and it's not just here

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Speaker 6: in the US. And you think about what happened in

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Speaker 6: Brexit and O the other places where the polls just

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Speaker 6: I think.

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Speaker 4: Well said, really well, said Laurie.

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Speaker 6: We're getting into the earning season here. This is something

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Speaker 6: we can really sink our teeth into. Earning share What

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Speaker 6: do you need to see this earning season? What does

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Speaker 6: a market need to see this earning season?

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Speaker 7: So it's a great question, Paul. You know, we put

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Speaker 7: out our weekly this morning and I basically I made

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Speaker 7: some housekeeping adjustments to my earning's number, and I said,

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Speaker 7: you know what, we did this. It's not that important

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Speaker 7: at this point in time. The numbers for the year

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Speaker 7: are pretty much set. Companies have a way of achieving

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Speaker 7: those bars. So I really don't care about beat stats,

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Speaker 7: you know, any of that kind of stuff. And frankly,

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Speaker 7: companies are not going to be giving us a lot

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Speaker 7: of guidance this time of year in terms of official numbers.

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Speaker 7: I'm looking for two things. Number one, what are the

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Speaker 7: qualitative comments around things like the US election, the FED

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Speaker 7: and interest rates, the health of the consumer. I think

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Speaker 7: those are all big things that we've got a monitor.

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Speaker 7: They've been in focus. But really, frankly, Paul, these have

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Speaker 7: been you know the comments. I'm hearing for companies have

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Speaker 7: been one of the big things keeping me in the

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Speaker 7: soft landing camp, even at times when that soft landing

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Speaker 7: thesis has been doubted. I'm going to be watching that.

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Speaker 7: The second thing I think we need to watch, and

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Speaker 7: this is more quantitative, but can megacap growth continue its

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Speaker 7: earnings dominance going forward? Or can the rest of the

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Speaker 7: market And I'm thinking more S and P X mag

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Speaker 7: seven here, but can they step up and really become

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Speaker 7: the dominant force on earnings? So far hasn't really happened yet,

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Speaker 7: and I think that's why the rotation trade keeps happening,

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Speaker 7: then fits and starts.

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Speaker 4: Lori Calvacina. My chart of the weekend was a simple

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Speaker 4: two line chart, and one line.

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Speaker 3: Was the S and P going up, up, up, up,

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Speaker 3: up over eight nine, ten years in international markets.

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Speaker 4: Just going nowhere. Bring that over to your.

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Speaker 3: Expertise in mid caps and small caps? Is there finally

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Speaker 3: a lift looking out three years to mid caps and

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Speaker 3: small caps?

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Speaker 2: Oh?

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Speaker 7: You know, Tom, would I would like to say so?

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Speaker 7: I can't quite get there. I've been feeling a little

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Speaker 7: bit better about the small caps recently, just from the

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Speaker 7: perspective of the economic tailwinds are returning. US economic surprises

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Speaker 7: are turning positive. GDP forecasts are a nudging up. But

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Speaker 7: we have to two problems in small cap right now.

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Speaker 7: Number One, they're not cheap anymore. We're trading at about

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Speaker 7: a sixteen and a half times weighted medium PE multiple.

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Speaker 7: The average is around fifteen, so it really the bar

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Speaker 7: for them to do well is pretty high at this

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Speaker 7: point in time. Secondly, you know, we have seen a

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Speaker 7: number of rallies in small cap over the last year

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Speaker 7: year and a half. They started when the stocks are cheap,

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Speaker 7: people get excited about the FED. I think that FED

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Speaker 7: aspect has played out at this point. But the other

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Speaker 7: thing we've seen when those rallies have gotten started is

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Speaker 7: that small caps look over sold on the CFTC data.

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Speaker 7: And guess what, a couple of weeks ago they actually

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Speaker 7: saw positioning surge and we're back up to levels that

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Speaker 7: are pretty darn close to the twenty sixteen, twenty seventeen

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Speaker 7: and twenty eighteen high. So oddly enough, even though the

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Speaker 7: performance has been you know, kind of choppy and we

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Speaker 7: haven't had that big sustainable lift, it does look to

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Speaker 7: me like the positioning's kind of starting to get full again.

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Speaker 6: Look at that she's going, Yes, it's she knows what

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Speaker 6: she's doing, Lorie, which screens well for you guys. These days,

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Speaker 6: it feels like this market's a little long and into

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Speaker 6: any new ideas for folks to think about.

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Speaker 7: Yeah, so you know, we actually, you know, did our

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Speaker 7: big analyst survey that we do once a quarter. We

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Speaker 7: did that last week, and we made some changes on

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Speaker 7: our sector recommendations. We kept our overweights on for financials

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Speaker 7: and materials. Our analysts levels of enthusiasm are pretty bullish there,

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Speaker 7: and the valuations look pretty reasonable to me. But those

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Speaker 7: are continued calls. The thing that we did that was

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Speaker 7: new was that we downgraded utilities from overweight to market weight,

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Speaker 7: and we upgraded healthcare from market weight to overweight in

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Speaker 7: its place. And I would tell you a couple of

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Speaker 7: things on healthcare. One very very robust outlooks from my analysts,

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Speaker 7: So we like that vote of confidence. My utility analysts

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Speaker 7: are constructive, but not quite as much. Secondly, we think

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Speaker 7: we've got a better valuation story and health care than utilities.

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Speaker 7: We upgraded utilities to start the year when it was cheap.

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Speaker 7: We kind of unlocked our way into the AI trade.

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Speaker 7: But we think that valuation moment is passed, and you know, look,

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Speaker 7: healthcare flows have been improving. They're not wildly positive yet,

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Speaker 7: but we think we're turning the corner. And also I

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Speaker 7: think the election risk is behind it, and neither Canada

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Speaker 7: is talking much about how what's great.

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Speaker 3: About this CFA level four. There's an entire section on

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Speaker 3: dumb law.

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Speaker 4: Yeah.

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Speaker 6: I love it when somebody smart like Laurie, he says

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Speaker 6: he every once in a while you get like, oh.

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Speaker 3: You have no idea, Laurie Kelvicita, thank you so much

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Speaker 3: for dumblock.

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Speaker 4: Greatly appreciate it. RBC Capital Markets.

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Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 2: starting at seven am Eastern on applecar Play and Android

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Speaker 2: Auto with the Bloomberg Business app. You can also listen

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Speaker 2: live on Amazon Alexa from our flagship New York station

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Speaker 2: Just say Alexa playing Bloomberg eleven thirty.

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Speaker 3: You want to show out you're an expert on China

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Speaker 3: out of Hong Kong with City Group?

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Speaker 4: Is Citygroup?

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Speaker 3: Is China falling behind technologically? If SMO, Bluo, Johnson or

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Speaker 3: Robinson looked at China, are they technology losers?

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Speaker 1: I think there's no one size blanket, you know, kind

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Speaker 1: of statement, because it depends on which part of technology.

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Speaker 1: I mean, clearly in some parts of technology in China

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Speaker 1: is winning, right when it comes to clean tech, when

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Speaker 1: it comes to dominating supply chain, you know, and metals

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Speaker 1: and minerals, they pretty much you know, have it down

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Speaker 1: to path to the point that Western nations are now

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Speaker 1: all running after each other putting tariffs. But obviously, I mean,

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Speaker 1: they're still catching up on semiconductors, which is one of

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Speaker 1: the weak points, and that's what Biden administration has been

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Speaker 1: trying to do. So obviously that's inducing them to double

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Speaker 1: down an industrial policy, and that's why people are very

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Speaker 1: worried because this type of strategy of industrial policy, which

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Speaker 1: is very supply friendly and lack of demand support, is

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Speaker 1: basically a recipe for deflationary pressures, and people are worried

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Speaker 1: that that's not being sufficiently addressed, which is why people

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Speaker 1: have all been waiting for this mof press conference over

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Speaker 1: the weekend.

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Speaker 6: And what did you take from this?

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Speaker 1: Yeah, So it's interesting, right, you look at the price

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Speaker 1: action in the market, it's very mixed, right, So you

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Speaker 1: see onshore kind of rally offshore obviously disappointed. So people

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Speaker 1: are still kind of grappling with how to interpret it.

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Speaker 1: And the way I look at it is it's kind

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Speaker 1: of a mixed bag. So basically, people were looking for

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Speaker 1: three things in the stimulus. They were looking for a

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Speaker 1: numerical target of what type of stimulus amount. They were

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Speaker 1: looking for composition of the stimulus, and people were really

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Speaker 1: hoping for some new demand side support, especially for consumption.

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Speaker 1: And then the third thing is people were looking for

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Speaker 1: forward guidance, any clarity of what else. You know, it's

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Speaker 1: already October, so you really need to look for forward

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Speaker 1: guidance next year onwards. And what we got was kind

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Speaker 1: of underwhelming. On the first two basically we didn't get

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Speaker 1: numerical target and you know, and actually it was very disappointing.

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Speaker 1: There was very little. A lot of the focus on

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Speaker 1: the Ford incremental policy was more about local government. These

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Speaker 1: are important problems local government, finances, property, but they only

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Speaker 1: unveiled a little bit on student subsidies. Really nothing, there's

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Speaker 1: no signs of a major kind of pivot towards new

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Speaker 1: additional demand stimulus or consumption support. And then they announced

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Speaker 1: they talked about bank recapitalization. But then on the third

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Speaker 1: thing on the forward guidance. This is where I think

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Speaker 1: things actually surprised a little bit more on the upside

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Speaker 1: because I think the Finance Minister land and this was

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Speaker 1: more reassuring than the NDRC press conference. He did say that,

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Speaker 1: you know, central government has a lot of room for

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Speaker 1: debt to increase the debt and the deficit. So in

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Speaker 1: a big source of contention in China's they've been stuck

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Speaker 1: with this three percent deficit ceiling. So the fact that

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Speaker 1: they're signaling more room is kind of a very reassuring sign.

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Speaker 1: And then the other thing that was also kind of

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Speaker 1: forward guidance was a little bit more encouraging is the

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Speaker 1: fact that they were talking about potentially a largest ever

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Speaker 1: kind of local government debt swap and they're talking about

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Speaker 1: using special bond quota to buy housing and land supply.

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Speaker 3: But it hasn't changed Hong Kong where you are, and

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Speaker 3: everybody on our team there says it's changed dramatically. Do

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Speaker 3: you see Beijing changing from a certitude of whatever the

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Speaker 3: modern Marxist Londonist state is. Do you see them amending

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Speaker 3: their politics to jump start their nominal GDP and frankly

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Speaker 3: to protect that you want.

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Speaker 1: Look I think there is some sign I mean, obviously

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Speaker 1: we've had a lot of state intervention obviously during the

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Speaker 1: pandemic and the regulatory shocks and the you know, a

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Speaker 1: lot of the sectors which really impacted animal spirits. I

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Speaker 1: think there are obviously the signaling from she now is

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Speaker 1: trying to become much more friendly to private sector. But

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Speaker 1: you know how it is, right, once trust is lost,

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Speaker 1: it takes a long time to regain. So although there's

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Speaker 1: a lot of verbal rhetoric to kind of support private

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Speaker 1: sector level the playing field he is trying to open up.

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Speaker 1: I mean, people have been so scarred, it's like post

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Speaker 1: traumatic stress syndrome. It takes a while, so people are

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Speaker 1: still very skeptical. So I think there is a verbal shift,

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Speaker 1: but it's not yet sufficient really to turn around animal spirits.

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Speaker 1: And then the problem is really that we haven't had

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Speaker 1: any kind of significant kind of consumer household support, and

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Speaker 1: so the deflationary pressures continue to linger. You know, real

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Speaker 1: estate continues to be on the down cycle. So the

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Speaker 1: countercyclical policy support, not to mention the lack of animal spirits,

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Speaker 1: the trust deficit, which takes time, there's also a lack

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Speaker 1: of countercyclical fiscal support to get people to feel confident

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Speaker 1: about their job and income prospects. So you kind of

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Speaker 1: have this kind of negative feedback loop which they're trying

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Speaker 1: to arrest. So I think since September twenty four, when

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Speaker 1: we have the joint press conference with the BBOC and

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Speaker 1: all the there's clearly a sign that government realized they

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Speaker 1: have to pivot. There's clearly a sign. It's just a

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Speaker 1: question of trying to figure out is it enough. And

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Speaker 1: like I said, it's kind of a mixed bag what

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Speaker 1: we got over the weekend because seems like we're going

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Speaker 1: to do something, but we don't have details. And even

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Speaker 1: though the policy in the short term seems kind of incremental,

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Speaker 1: hopefully we'll get some more clarity end of the month.

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Speaker 6: I want to see. I'm speaking for all the luxury

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Speaker 6: retailers on Fifth Avenue and Madison Avenue. They've seen the

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Speaker 6: European tourists come back, they have not seen the Chinese.

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Speaker 6: Why are the Chinese not traveling and spending Because there's

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Speaker 6: a lot of people out there would like to see

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Speaker 6: the Chinese, but folks be out there and spending and traveling.

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Speaker 1: Well, first of all, I think she Shepingk's priority is

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Speaker 1: not the luxury, that's not the target. Look, I think

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Speaker 1: there's been a lot of things that's happened.

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Speaker 5: Right.

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Speaker 1: We clearly have significant precautionary savings behavior happening in China

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Speaker 1: right now. I mean, household deposits are still so well

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Speaker 1: above trend even though they reopen, you know, for a

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Speaker 1: while now. So part of it is a lot of

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Speaker 1: uncertainty about their income and job prospects. Housing we're still

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Speaker 1: you know, third year into housing down market. That's still

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Speaker 1: the two thirds of their household. Well, so that obviously,

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Speaker 1: and there's also a little bit of policy pushed towards

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Speaker 1: you know, there's a little bit more nationalism, more domestic travel,

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Speaker 1: and that's the other factor.

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Speaker 4: On a S.

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Speaker 3: Peter basis, Let's bring it back to Harvard and we

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Speaker 3: got to go the bottom line is they have to

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Speaker 3: inflict creative destruction upon a Chinese economy and from a

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Speaker 3: high extandpoint clear the market. Do you see any indication

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Speaker 3: they can clear this market and move on.

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Speaker 1: Well, to be fair, what's happened in the real estate

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Speaker 1: is quite dramatic, right, the fact that they preemptively prick

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Speaker 1: the bubble in twenty twenty one to try to deflate

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Speaker 1: the real estate is a signed they realize this is

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Speaker 1: not where it's to go, and we are seeing I mean,

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Speaker 1: we saw massive defaults, so that is part of the destruction.

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Speaker 1: And obviously they're creating new avenues of technology. But then

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Speaker 1: the question is we need something beyond kind of state

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Speaker 1: led industrial policy.

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Speaker 4: A private sector city group suggest we're going to get.

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Speaker 1: It so right now, no, I mean, look, the strategy

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Speaker 1: is we still have the ramification of the real estate

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Speaker 1: hurting local government. So obviously the priority now is to

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Speaker 1: stabilize local government finances so they don't cut back a

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Speaker 1: lot of public services and create a negative feedback loop.

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Speaker 1: And they need to address the excess supply in housing

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Speaker 1: because people are not going to be confident you can't

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Speaker 1: give you know, you give them the housing stabilizes, so

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Speaker 1: you need something on supply as well as demand to

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Speaker 1: kind of reach an equilibrium, hopefully a little faster.

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Speaker 4: I'm joining it. Sure, Thank you so much.

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Speaker 3: She is the City Group, Hong Kong, head of Asia

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Speaker 3: and Pacific Economics and An Nows. Thank you for those

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Speaker 3: wonderful comments at Martin Feldstein.

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Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 2: starting at seven am Eastern on Applecarplay and Android Auto

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Speaker 2: with the Bloomberg Business app. You can also watch us

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Speaker 2: live every weekday on YouTube and always on the Bloomberg terminal.

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Speaker 3: We've got lady am Rita sent we're giving her promotions

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Speaker 3: that she aspects as well, and Rita just.

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Speaker 4: We're thrilled here. I got to go to oil in

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Speaker 4: a minute.

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Speaker 3: But the first hundred days for labor forget about labor

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Speaker 3: tory and all that, but the first hundred days for

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Speaker 3: secure has been a challenge, right.

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Speaker 8: It has been a challenge. I think from an energy

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Speaker 8: policy standpoint, very few people are happy about certain kind

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Speaker 8: of policies that are being talked about right now. Not

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Speaker 8: a lot of clarity for investments for companies, so that's

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Speaker 8: a challenge. But I think overall though, there's still a

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Speaker 8: bit more stability in terms of Regardless of the challenge,

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Speaker 8: I'm hoping that, you know, take the energy bit out.

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Speaker 8: You know, we just kind of peace and calm.

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Speaker 3: I have to talk about energy aspects abilities, which is incredible.

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Speaker 4: Microeconomics around the price of oil.

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Speaker 3: The zeitgeist over the weekend is MBS in Saudi Arabia

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Speaker 3: are beginning to flex their productive muscles describe what Saudi

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Speaker 3: Arabia wants to do when they see kazakh Stan overproducing.

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Speaker 8: So I think, Tom, you will be the only one

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Speaker 8: who'll understand when I say this, right, because I've struggled

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Speaker 8: explaining this. What's how the Arabia is saying is we

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Speaker 8: don't want to free ride a problem. We don't want

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Speaker 8: to be the ones produce production and you take advantage

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Speaker 8: of us, and you are increasing production now. However, they

438
00:21:05,560 --> 00:21:08,000
Speaker 8: are not saying for a second we're going to repeat

439
00:21:08,000 --> 00:21:11,919
Speaker 8: twenty twenty flood the market by pushing production to twelve

440
00:21:11,920 --> 00:21:14,760
Speaker 8: million barrels per day. They're saying, we want to go

441
00:21:14,800 --> 00:21:19,240
Speaker 8: ahead with the small planned increases as we've already announced

442
00:21:19,240 --> 00:21:22,480
Speaker 8: to the world, because you are supposed to be cutting

443
00:21:22,480 --> 00:21:24,560
Speaker 8: and you have compensation cuts. So even if we bring

444
00:21:24,560 --> 00:21:27,119
Speaker 8: back production net net, there shouldn't be any oil in

445
00:21:27,160 --> 00:21:27,560
Speaker 8: the market.

446
00:21:27,720 --> 00:21:29,800
Speaker 3: Well, this is like a conversation you and I would

447
00:21:29,840 --> 00:21:32,200
Speaker 3: have had in nineteen eighty six when we were both

448
00:21:32,280 --> 00:21:34,800
Speaker 3: driving VW diesels exactly.

449
00:21:35,240 --> 00:21:39,000
Speaker 6: So I'm what do you estimate the risk premiums for

450
00:21:39,040 --> 00:21:42,040
Speaker 6: geopolitics today in the market today, Because it seemed like

451
00:21:42,080 --> 00:21:44,520
Speaker 6: prices were coming down, coming down coming down, and then

452
00:21:44,520 --> 00:21:46,960
Speaker 6: we had that escalation just over the last month or so.

453
00:21:47,080 --> 00:21:49,639
Speaker 8: I mean, you could argue that since that news broke

454
00:21:49,720 --> 00:21:53,800
Speaker 8: we've been about we're about eight ten dollars higher, But

455
00:21:53,960 --> 00:21:56,120
Speaker 8: I would also flip it around the other way and say,

456
00:21:56,480 --> 00:22:00,199
Speaker 8: weren't be a bit too low regardless of all the

457
00:22:00,280 --> 00:22:02,720
Speaker 8: kind of fundamental bearishness that said they're in the market.

458
00:22:03,000 --> 00:22:06,000
Speaker 8: What I'm really grappling with this year is inventories for

459
00:22:06,080 --> 00:22:10,400
Speaker 8: crude oil are incredibly low everywhere. Cushing, yeah, very low.

460
00:22:10,400 --> 00:22:14,520
Speaker 8: Cushing in Oklahoma has been near record lows. Globally, we

461
00:22:14,560 --> 00:22:17,760
Speaker 8: are pretty much at record lows on a day's of

462
00:22:17,800 --> 00:22:20,640
Speaker 8: forward cover basis. But the market doesn't care about that

463
00:22:20,720 --> 00:22:25,480
Speaker 8: because they expect huge bills next year. So somehow we've

464
00:22:25,600 --> 00:22:28,480
Speaker 8: kind of skipped a step and we're talking about next year.

465
00:22:28,880 --> 00:22:31,520
Speaker 8: And that's why I mean, otherwise Israel around, would we

466
00:22:31,600 --> 00:22:33,280
Speaker 8: be at seventy five dollars, We would be at one

467
00:22:33,320 --> 00:22:34,840
Speaker 8: hundred and twenty or higher.

468
00:22:35,160 --> 00:22:38,640
Speaker 6: So what's different though, just in the last X number

469
00:22:38,640 --> 00:22:40,840
Speaker 6: of years, is that the US is now a net exporter.

470
00:22:41,840 --> 00:22:45,199
Speaker 6: Are they good? Are they good partners in the global

471
00:22:45,320 --> 00:22:49,040
Speaker 6: energy market? Are they efficient? Are they reasonable? Or you know,

472
00:22:50,080 --> 00:22:51,840
Speaker 6: how is the US producer these days?

473
00:22:52,400 --> 00:22:56,200
Speaker 8: I think the US producer has completely shifted the paradigm

474
00:22:56,280 --> 00:22:59,359
Speaker 8: right in terms of supply risks how markets look at

475
00:22:59,400 --> 00:23:01,800
Speaker 8: generally political supply race. Because the US has been a

476
00:23:01,800 --> 00:23:05,639
Speaker 8: steady source of growth. My concern is US production is

477
00:23:05,720 --> 00:23:09,320
Speaker 8: starting to kind of plateau, you know, doesn't mean it's

478
00:23:09,359 --> 00:23:12,520
Speaker 8: going to start declining. This year, US production is flat

479
00:23:12,800 --> 00:23:16,679
Speaker 8: versus last year. Some issues with gas constraints because they

480
00:23:16,720 --> 00:23:19,280
Speaker 8: didn't have enough gas pipelines. Now they are starting up,

481
00:23:19,280 --> 00:23:21,879
Speaker 8: so we'll get some production growth next year. But Perman

482
00:23:21,920 --> 00:23:24,440
Speaker 8: producers are telling us they're running out of good quality acreage.

483
00:23:24,480 --> 00:23:27,200
Speaker 8: Barking producers are saying the same thing. So I don't

484
00:23:27,240 --> 00:23:30,600
Speaker 8: think fast forward two years, the US is necessarily going

485
00:23:30,640 --> 00:23:33,399
Speaker 8: to be the kind of savior it has been in

486
00:23:33,440 --> 00:23:35,960
Speaker 8: this market. And I just sense a huge amount of

487
00:23:35,960 --> 00:23:39,800
Speaker 8: complacency in this market because there's a lot of recency bias.

488
00:23:40,280 --> 00:23:42,760
Speaker 4: So we're you know, let's call it just under eighty

489
00:23:42,800 --> 00:23:43,520
Speaker 4: dollars a barrel.

490
00:23:43,640 --> 00:23:47,520
Speaker 3: Everyone listening and watching now it's good morning on YouTube

491
00:23:48,640 --> 00:23:51,480
Speaker 3: is like, wait, why isn't oil higher given the Eastern

492
00:23:51,560 --> 00:23:57,920
Speaker 3: Mediterranean his geopolitical what's your number value of geopolitical risk.

493
00:23:58,320 --> 00:24:01,479
Speaker 3: If we actually get geopolitical risk, is it ten dollars

494
00:24:01,480 --> 00:24:01,919
Speaker 3: a barrel?

495
00:24:02,040 --> 00:24:03,960
Speaker 8: I think it's going to be higher because everybody in

496
00:24:04,000 --> 00:24:07,400
Speaker 8: this market is short. But now, what is a geopolitical risk?

497
00:24:07,440 --> 00:24:10,199
Speaker 8: I think the market is tired of putting in a

498
00:24:10,240 --> 00:24:13,280
Speaker 8: premium because over the last five years, we haven't lost

499
00:24:13,359 --> 00:24:17,160
Speaker 8: supplies because of geopolitical risk headlines. What the market will

500
00:24:17,160 --> 00:24:20,679
Speaker 8: have to see is an actual supply loss. If you

501
00:24:20,840 --> 00:24:23,520
Speaker 8: do see that, then I think the upside is significantly higher.

502
00:24:23,520 --> 00:24:24,200
Speaker 3: How about Russia.

503
00:24:24,359 --> 00:24:26,679
Speaker 6: Wasn't that a supply loss or is that oil still gase?

504
00:24:26,760 --> 00:24:29,399
Speaker 8: It's just redirected, right, And I think that was a big,

505
00:24:29,520 --> 00:24:31,879
Speaker 8: big turning point for the market because a lot of

506
00:24:31,920 --> 00:24:35,760
Speaker 8: traders bet on Russian oil being lost, but the sanctions

507
00:24:35,760 --> 00:24:38,480
Speaker 8: were pretty toothless in terms of actual supply losses. It

508
00:24:38,600 --> 00:24:41,680
Speaker 8: just was always about hurting revenues. So we've had all

509
00:24:41,680 --> 00:24:43,479
Speaker 8: that oil go to the East. Indian and China are

510
00:24:43,480 --> 00:24:46,000
Speaker 8: buying all that oil and that's not been a problem.

511
00:24:46,359 --> 00:24:47,760
Speaker 6: Is it not a problem for Europe? I mean, is

512
00:24:47,760 --> 00:24:53,080
Speaker 6: Europe weaned itself off of Russian energy by force?

513
00:24:53,200 --> 00:24:53,440
Speaker 5: Yes?

514
00:24:53,600 --> 00:24:56,480
Speaker 8: I mean Europe still consumes fourteen to fifteen million barrels

515
00:24:56,520 --> 00:24:59,679
Speaker 8: per day of crude oil as in refines about that much.

516
00:24:59,720 --> 00:25:02,320
Speaker 8: I mean varies depending on your definition of Europe and

517
00:25:02,359 --> 00:25:04,680
Speaker 8: so on, so it's not paying up for it. It's

518
00:25:04,680 --> 00:25:05,760
Speaker 8: more expensive for Europe.

519
00:25:05,880 --> 00:25:07,840
Speaker 3: I want to audible here. We can do this with

520
00:25:08,040 --> 00:25:13,400
Speaker 3: Emri de Sin as we prepare for as we prepare

521
00:25:13,520 --> 00:25:18,359
Speaker 3: for a conversation with kir Starmer. The compare is with

522
00:25:18,520 --> 00:25:22,359
Speaker 3: Tony Blair. From where you sit in London, Emri de

523
00:25:22,480 --> 00:25:26,600
Speaker 3: Sin he wants to capture that pixie dust of Tony Blair,

524
00:25:27,240 --> 00:25:29,639
Speaker 3: but he just can't do it in this time and place.

525
00:25:29,920 --> 00:25:30,560
Speaker 4: Am I right?

526
00:25:31,280 --> 00:25:34,000
Speaker 8: I think that's fair. And I'm not one hundred percent

527
00:25:34,080 --> 00:25:38,119
Speaker 8: sure that he necessarily wants to be the next Tony

528
00:25:38,160 --> 00:25:40,600
Speaker 8: Blair either, given everything else that's going on in the

529
00:25:40,600 --> 00:25:43,240
Speaker 8: Middle East. And I think he's been very clear about

530
00:25:43,640 --> 00:25:47,679
Speaker 8: where UK's position is. But I think he does have

531
00:25:47,720 --> 00:25:51,480
Speaker 8: a lot of challenges at hand, and again it's not

532
00:25:51,600 --> 00:25:54,600
Speaker 8: been easy. The UK economy isn't doing particularly well either,

533
00:25:54,920 --> 00:25:58,680
Speaker 8: so all of his energy has to focus on getting

534
00:25:58,720 --> 00:26:02,360
Speaker 8: the economy up and running and you know, reducing unemployment

535
00:26:03,240 --> 00:26:04,600
Speaker 8: and just kind of creating growth.

536
00:26:04,960 --> 00:26:07,320
Speaker 3: But he went to the University of Leeds, he's not

537
00:26:07,400 --> 00:26:10,760
Speaker 3: you know, Oxbridge and all that. The bottom line is

538
00:26:11,200 --> 00:26:16,440
Speaker 3: the economy's prospering. What in two miles of London in Edinburgh?

539
00:26:16,560 --> 00:26:19,280
Speaker 3: Maybe what's he going to do or the Tories going

540
00:26:19,320 --> 00:26:21,639
Speaker 3: to do to be bipartisan, what are they going to

541
00:26:21,680 --> 00:26:24,880
Speaker 3: do for Leeds and the challenges of Leeds England.

542
00:26:25,320 --> 00:26:27,840
Speaker 8: I think that's that's essentially exactly like you said, the

543
00:26:27,880 --> 00:26:30,240
Speaker 8: issue London is booming, but that's not the same for

544
00:26:30,280 --> 00:26:33,240
Speaker 8: the rest of the UK, and therefore the challenges do become.

545
00:26:33,320 --> 00:26:35,960
Speaker 8: You know, is their tax reform on the cards? Is

546
00:26:35,960 --> 00:26:37,720
Speaker 8: it going to be more pushed towards green energy to

547
00:26:37,720 --> 00:26:40,399
Speaker 8: at least stimulate more of the domestic economy. There's a

548
00:26:40,520 --> 00:26:41,640
Speaker 8: lot to be done.

549
00:26:41,880 --> 00:26:43,600
Speaker 4: Are you moving to New York? Is there?

550
00:26:44,080 --> 00:26:46,439
Speaker 5: You know what I'm saying in London, but you're not

551
00:26:46,440 --> 00:26:46,919
Speaker 5: in Houston?

552
00:26:46,960 --> 00:26:47,480
Speaker 6: Back and forth.

553
00:26:47,560 --> 00:26:49,800
Speaker 8: I do go to Houston, back and forth. And let's

554
00:26:49,840 --> 00:26:51,119
Speaker 8: not talk about US election.

555
00:26:51,600 --> 00:26:54,280
Speaker 3: I'll say in London, Russia and oil can putin move

556
00:26:54,320 --> 00:26:56,120
Speaker 3: the price of oil at thirty seconds.

557
00:26:56,400 --> 00:26:59,119
Speaker 8: No, not anymore. He's not in control, well unless he

558
00:26:59,200 --> 00:27:00,879
Speaker 8: decides to turn it off, which he can't because he

559
00:27:00,920 --> 00:27:01,600
Speaker 8: needs the revenues.

560
00:27:01,800 --> 00:27:04,440
Speaker 3: Yeah, okay, Amrita sent, thank you so much in studio

561
00:27:04,480 --> 00:27:08,840
Speaker 3: with Energysmarts and again we protect the copyright of Emerita

562
00:27:08,960 --> 00:27:12,160
Speaker 3: send and all of our guests look to Energy Aspects

563
00:27:12,240 --> 00:27:16,400
Speaker 3: London for their brilliant breakout. I can't say enough. It's

564
00:27:16,440 --> 00:27:19,560
Speaker 3: like Adam Saminsky Paul at Deutsche Bank years ago. With

565
00:27:19,680 --> 00:27:23,919
Speaker 3: Paul Sink. It's like all supply and demand dynamics, the

566
00:27:23,920 --> 00:27:27,359
Speaker 3: price theory, the microeconomics. It's not you know, some people

567
00:27:27,400 --> 00:27:30,400
Speaker 3: go sixty thousand feet and all that, and Rita goes

568
00:27:30,480 --> 00:27:32,760
Speaker 3: right into the dynamics of it.

569
00:27:32,760 --> 00:27:32,920
Speaker 7: Pa.

570
00:27:33,040 --> 00:27:34,919
Speaker 6: I can actually understand it. That's why I like her.

571
00:27:35,040 --> 00:27:36,880
Speaker 4: Yes, I get this.

572
00:27:37,400 --> 00:27:38,560
Speaker 6: I understand what you just said.

573
00:27:38,600 --> 00:27:40,880
Speaker 4: There, Amrita said, thank you so much.

574
00:27:41,400 --> 00:27:45,840
Speaker 2: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

575
00:27:46,000 --> 00:27:49,640
Speaker 2: and anywhere else you get your podcasts. Listen live each

576
00:27:49,680 --> 00:27:53,160
Speaker 2: weekday seven to ten am Eastern on Bloomberg dot Com,

577
00:27:53,200 --> 00:27:56,800
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578
00:27:57,080 --> 00:27:59,960
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579
00:28:00,440 --> 00:28:02,240
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