Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. Catch us live weekdays
Speaker 2: at seven am Eastern on applecar Player, Android Auto with
Speaker 2: the Bloomberg Business App. Listen on demand wherever you get
Speaker 2: your podcasts, or watch us live on YouTube.
Speaker 3: I really can't say enough about this folks. His book
Speaker 3: on the crisis of two thousand and seven thirteen bankers.
Speaker 3: It was my book of the year. It is the
Speaker 3: definitive short read on the crater that we all live through.
Speaker 4: In seven eight, he.
Speaker 3: Of course has gone on to extraordinary extraordinary academics at
Speaker 3: MIT on technology and growth. The new book is Power
Speaker 3: and Progress. Newly minted Nobel Prize winner Simon Johnson.
Speaker 4: Simon, when Rudy.
Speaker 3: Dornbush was beating you to death at MRT years ago,
Speaker 3: do you think dorn Bush ever would have thought young Johnson,
Speaker 3: the mouth you one from the United Kingdom would win
Speaker 3: a Nobel Prize.
Speaker 5: No, I'm pretty sure he would be just as surprised
Speaker 5: as I am today.
Speaker 3: Tom, just wonderful, Simon Johnson. Let's talk about the why
Speaker 3: of this Nobel Prize of James Robinson of Chicago and
Speaker 3: of course Darren and you over at m I T.
Speaker 3: There's a pressor at ten am, folks, Simon Johnson, why
Speaker 3: should we study, fear or enjoy our modern technology?
Speaker 5: I think technology drives everything, Tom, You're well aware of that.
Speaker 5: And the question is who's technology? Who has what priority?
Speaker 5: What's that vision? Is it an inclusive vision or is
Speaker 5: it a vision which only a few people have good
Speaker 5: jobs and everybody else is really scrambling. That's been super
Speaker 5: important over the last two and fifty years. We've had
Speaker 5: some good episodes and some really bad ones. And I
Speaker 5: think it's all in play again with artificial intelligence.
Speaker 3: In play with this, Simon Johnson, is this election? I
Speaker 3: mentioned this the other day A parallels eighteen forty eighteen fifty.
Speaker 3: There's almost a ludite part of America that is afraid
Speaker 3: of the consequences of technology. What is the Asimogulu Johnson
Speaker 3: Robinson prescription.
Speaker 5: Well drawn and Jim to speak for themselves. But my view,
Speaker 5: Tom is that technology has for people. We've had excessive
Speaker 5: automation in the past forty years. We've not generated enough
Speaker 5: new good jobs, so jobs where you actually get paid
Speaker 5: good money and you can live well. And we've got
Speaker 5: to do better on that. I think that that's really
Speaker 5: a fundamental driving importance, irrespective of the election outcome. Where
Speaker 5: the good job's going to come from? And can we
Speaker 5: keep pace we will get ahead of automation because you
Speaker 5: know automation is going to happen, like it or not.
Speaker 5: So you've really got to work a lot harder to
Speaker 5: generate more science, more technology, deploy that, commercialize that, scale
Speaker 5: it up and generate more good jobs all across the country.
Speaker 5: Can be done, but it's a top priority, and I
Speaker 5: think it needs to be elevated as a priority right now.
Speaker 6: All right, so simon with your two colleagues and your
Speaker 6: work here. I mean, it just raises a question which
Speaker 6: is so relevant even today, discerning why some countries are
Speaker 6: rich and some much poorer. How should we think about
Speaker 6: that big, big picture question these days?
Speaker 5: I suggest we think about it in two ways. One
Speaker 5: is the sort of deep history and recognize that we've
Speaker 5: all got these legacies that we're living with, and some
Speaker 5: of these legacies, particularly if you were colonized in a
Speaker 5: harsh way by the Europeans, that's a very tough legacy
Speaker 5: to overcome. But the second thing is there's no predestination.
Speaker 5: It's all about the choices that you make, including technology
Speaker 5: that we just talked about. If you're in the United States,
Speaker 5: but around the world, I would point to corruption. I
Speaker 5: mean corruption has been, as you guys know, talked about
Speaker 5: a lot over the past thirty forty years. But what
Speaker 5: do we have. We still have immense amounts of corruption
Speaker 5: and there's two side set there, the people who pay
Speaker 5: the bribes and the people who take the bribes. And
Speaker 5: that's a big part of what holds a lot of
Speaker 5: countries deeply in the poverty that you see today.
Speaker 4: So what can institutions do?
Speaker 3: I mean, this is you know, I'm going to go
Speaker 3: back to Douglas Norris and the seminal work at Washington
Speaker 3: University in Saint Louis, Professor Johnson. What do our institutions
Speaker 3: need to improve on to help they have notts of technology?
Speaker 3: What is your IMF where you served, what does it
Speaker 3: need to do?
Speaker 4: Oh?
Speaker 5: Well, I was in the IMF a long time, agoes,
Speaker 5: you know, so I'm not going to speak to their
Speaker 5: current policies and stance. But I think the key thing,
Speaker 5: and it made you sound like a rhetorical device, Tom,
Speaker 5: but it's real is focus on inclusive prosperity. How are
Speaker 5: you getting more good jobs created for more people and
Speaker 5: make sure they can access those jobs, make sure they
Speaker 5: have the skills, make sure they are empowered themselves, and
Speaker 5: they recognize that. So the bumper sticker for me out
Speaker 5: of all of this is more good jobs.
Speaker 3: Sloan one oh one, Come on, Simon, let's do it.
Speaker 3: Simon Johnson on tariffs.
Speaker 5: Oh, I don't, okay. If you want to blow up
Speaker 5: the world, in the world treading system and really damage
Speaker 5: poorer Americans, slap a massive tariff on all the importance because,
Speaker 5: as you know, poor America spent a lot on things
Speaker 5: that have imported content. So massive tariff war terrible ideas.
Speaker 4: Right, Simon, One more question.
Speaker 3: We want to get you on your day huge press
Speaker 3: commitments now in this important press conference with Darren ASIMOVLOK
Speaker 3: scheduled at ten am. Circling in all this academics is
Speaker 3: Olivier Blanchard. Tell us what Olivia did for MIT.
Speaker 4: Oh.
Speaker 5: I think Olivia Blanchard is one of the greatest economists
Speaker 5: of this or any generation. And his presence and his
Speaker 5: toughness and his rigor has been present throughout my career.
Speaker 5: And I started at MIT as a grad student in
Speaker 5: September nineteen eighty five. So I've been thirty nine years
Speaker 5: on and off with the Institute. So Olivia Blanchard is
Speaker 5: one of the modern grades.
Speaker 4: Absolutely, Simon Johnson.
Speaker 3: Congratulations Simon Johnson, the Massachusetts Institute of Technology.
Speaker 2: You're listening to the Bloomberg Surveillance Podcast live weekday afternoons
Speaker 2: from seven to ten am Eastern. Listen on Apple car
Speaker 2: Play and Android Auto with a Bloomberg Business app, or
Speaker 2: want us live on YouTube right now.
Speaker 3: This is an important conversation Lori Kelvicina with US RBC
Speaker 3: Capital Markets. Laurie, I'm really not a big one of
Speaker 3: linking elections into equity market performance. The adults at RBC
Speaker 3: Capital Markets go there link the election to the twenty.
Speaker 4: Twenty five equity performance.
Speaker 7: So in terms of looking ahead, I hate to break
Speaker 7: it to you, Tom, but I think stocks tend to
Speaker 7: do well in any balance of power environment. We've actually
Speaker 7: back tested that over time. I think that any election
Speaker 7: issues that we have in the equity market are the
Speaker 7: nature of short term repricings that we have to work through,
Speaker 7: and there are clearly, you know, a lot of people
Speaker 7: out there who do care about those short term repricings.
Speaker 7: If you look historically, though, whether it's Democrats control everything,
Speaker 7: Republicans control everything, different variations of split government docs dent
Speaker 7: do tend to go up. And what's interesting to me
Speaker 7: is that the two best historical scenarios Republicans control everything
Speaker 7: or democratic presidency with a split Congress, those are the
Speaker 7: two that have been most in focus for investors recently.
Speaker 7: So I think the election is something we've got to
Speaker 7: get through. We'll deal with it, we'll reprice what we
Speaker 7: need to reprice, and then we'll move on.
Speaker 3: Just can I rip on the scripture, folks? And we
Speaker 3: have the best radio studio.
Speaker 4: In the world. It's incredibly wired in.
Speaker 3: Right now on television, there's not Bloomberg TV on all
Speaker 3: of American television. For those of you internationally, there's young
Speaker 3: studs standing in front of Pole results Paul in their hands.
Speaker 3: Their hands are all going like this. On radio, they're
Speaker 3: like certain, they're pointing in this. Do we have a
Speaker 3: clue Paul Swening about the polls?
Speaker 6: I do not. I just I assume my polls, Oh,
Speaker 6: almost worthless. It's like entertainment, and it's not just here
Speaker 6: in the US. And you think about what happened in
Speaker 6: Brexit and O the other places where the polls just
Speaker 6: I think.
Speaker 4: Well said, really well, said Laurie.
Speaker 6: We're getting into the earning season here. This is something
Speaker 6: we can really sink our teeth into. Earning share What
Speaker 6: do you need to see this earning season? What does
Speaker 6: a market need to see this earning season?
Speaker 7: So it's a great question, Paul. You know, we put
Speaker 7: out our weekly this morning and I basically I made
Speaker 7: some housekeeping adjustments to my earning's number, and I said,
Speaker 7: you know what, we did this. It's not that important
Speaker 7: at this point in time. The numbers for the year
Speaker 7: are pretty much set. Companies have a way of achieving
Speaker 7: those bars. So I really don't care about beat stats,
Speaker 7: you know, any of that kind of stuff. And frankly,
Speaker 7: companies are not going to be giving us a lot
Speaker 7: of guidance this time of year in terms of official numbers.
Speaker 7: I'm looking for two things. Number one, what are the
Speaker 7: qualitative comments around things like the US election, the FED
Speaker 7: and interest rates, the health of the consumer. I think
Speaker 7: those are all big things that we've got a monitor.
Speaker 7: They've been in focus. But really, frankly, Paul, these have
Speaker 7: been you know the comments. I'm hearing for companies have
Speaker 7: been one of the big things keeping me in the
Speaker 7: soft landing camp, even at times when that soft landing
Speaker 7: thesis has been doubted. I'm going to be watching that.
Speaker 7: The second thing I think we need to watch, and
Speaker 7: this is more quantitative, but can megacap growth continue its
Speaker 7: earnings dominance going forward? Or can the rest of the
Speaker 7: market And I'm thinking more S and P X mag
Speaker 7: seven here, but can they step up and really become
Speaker 7: the dominant force on earnings? So far hasn't really happened yet,
Speaker 7: and I think that's why the rotation trade keeps happening,
Speaker 7: then fits and starts.
Speaker 4: Lori Calvacina. My chart of the weekend was a simple
Speaker 4: two line chart, and one line.
Speaker 3: Was the S and P going up, up, up, up,
Speaker 3: up over eight nine, ten years in international markets.
Speaker 4: Just going nowhere. Bring that over to your.
Speaker 3: Expertise in mid caps and small caps? Is there finally
Speaker 3: a lift looking out three years to mid caps and
Speaker 3: small caps?
Speaker 2: Oh?
Speaker 7: You know, Tom, would I would like to say so?
Speaker 7: I can't quite get there. I've been feeling a little
Speaker 7: bit better about the small caps recently, just from the
Speaker 7: perspective of the economic tailwinds are returning. US economic surprises
Speaker 7: are turning positive. GDP forecasts are a nudging up. But
Speaker 7: we have to two problems in small cap right now.
Speaker 7: Number One, they're not cheap anymore. We're trading at about
Speaker 7: a sixteen and a half times weighted medium PE multiple.
Speaker 7: The average is around fifteen, so it really the bar
Speaker 7: for them to do well is pretty high at this
Speaker 7: point in time. Secondly, you know, we have seen a
Speaker 7: number of rallies in small cap over the last year
Speaker 7: year and a half. They started when the stocks are cheap,
Speaker 7: people get excited about the FED. I think that FED
Speaker 7: aspect has played out at this point. But the other
Speaker 7: thing we've seen when those rallies have gotten started is
Speaker 7: that small caps look over sold on the CFTC data.
Speaker 7: And guess what, a couple of weeks ago they actually
Speaker 7: saw positioning surge and we're back up to levels that
Speaker 7: are pretty darn close to the twenty sixteen, twenty seventeen
Speaker 7: and twenty eighteen high. So oddly enough, even though the
Speaker 7: performance has been you know, kind of choppy and we
Speaker 7: haven't had that big sustainable lift, it does look to
Speaker 7: me like the positioning's kind of starting to get full again.
Speaker 6: Look at that she's going, Yes, it's she knows what
Speaker 6: she's doing, Lorie, which screens well for you guys. These days,
Speaker 6: it feels like this market's a little long and into
Speaker 6: any new ideas for folks to think about.
Speaker 7: Yeah, so you know, we actually, you know, did our
Speaker 7: big analyst survey that we do once a quarter. We
Speaker 7: did that last week, and we made some changes on
Speaker 7: our sector recommendations. We kept our overweights on for financials
Speaker 7: and materials. Our analysts levels of enthusiasm are pretty bullish there,
Speaker 7: and the valuations look pretty reasonable to me. But those
Speaker 7: are continued calls. The thing that we did that was
Speaker 7: new was that we downgraded utilities from overweight to market weight,
Speaker 7: and we upgraded healthcare from market weight to overweight in
Speaker 7: its place. And I would tell you a couple of
Speaker 7: things on healthcare. One very very robust outlooks from my analysts,
Speaker 7: So we like that vote of confidence. My utility analysts
Speaker 7: are constructive, but not quite as much. Secondly, we think
Speaker 7: we've got a better valuation story and health care than utilities.
Speaker 7: We upgraded utilities to start the year when it was cheap.
Speaker 7: We kind of unlocked our way into the AI trade.
Speaker 7: But we think that valuation moment is passed, and you know, look,
Speaker 7: healthcare flows have been improving. They're not wildly positive yet,
Speaker 7: but we think we're turning the corner. And also I
Speaker 7: think the election risk is behind it, and neither Canada
Speaker 7: is talking much about how what's great.
Speaker 3: About this CFA level four. There's an entire section on
Speaker 3: dumb law.
Speaker 4: Yeah.
Speaker 6: I love it when somebody smart like Laurie, he says
Speaker 6: he every once in a while you get like, oh.
Speaker 3: You have no idea, Laurie Kelvicita, thank you so much
Speaker 3: for dumblock.
Speaker 4: Greatly appreciate it. RBC Capital Markets.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 2: starting at seven am Eastern on applecar Play and Android
Speaker 2: Auto with the Bloomberg Business app. You can also listen
Speaker 2: live on Amazon Alexa from our flagship New York station
Speaker 2: Just say Alexa playing Bloomberg eleven thirty.
Speaker 3: You want to show out you're an expert on China
Speaker 3: out of Hong Kong with City Group?
Speaker 4: Is Citygroup?
Speaker 3: Is China falling behind technologically? If SMO, Bluo, Johnson or
Speaker 3: Robinson looked at China, are they technology losers?
Speaker 1: I think there's no one size blanket, you know, kind
Speaker 1: of statement, because it depends on which part of technology.
Speaker 1: I mean, clearly in some parts of technology in China
Speaker 1: is winning, right when it comes to clean tech, when
Speaker 1: it comes to dominating supply chain, you know, and metals
Speaker 1: and minerals, they pretty much you know, have it down
Speaker 1: to path to the point that Western nations are now
Speaker 1: all running after each other putting tariffs. But obviously, I mean,
Speaker 1: they're still catching up on semiconductors, which is one of
Speaker 1: the weak points, and that's what Biden administration has been
Speaker 1: trying to do. So obviously that's inducing them to double
Speaker 1: down an industrial policy, and that's why people are very
Speaker 1: worried because this type of strategy of industrial policy, which
Speaker 1: is very supply friendly and lack of demand support, is
Speaker 1: basically a recipe for deflationary pressures, and people are worried
Speaker 1: that that's not being sufficiently addressed, which is why people
Speaker 1: have all been waiting for this mof press conference over
Speaker 1: the weekend.
Speaker 6: And what did you take from this?
Speaker 1: Yeah, So it's interesting, right, you look at the price
Speaker 1: action in the market, it's very mixed, right, So you
Speaker 1: see onshore kind of rally offshore obviously disappointed. So people
Speaker 1: are still kind of grappling with how to interpret it.
Speaker 1: And the way I look at it is it's kind
Speaker 1: of a mixed bag. So basically, people were looking for
Speaker 1: three things in the stimulus. They were looking for a
Speaker 1: numerical target of what type of stimulus amount. They were
Speaker 1: looking for composition of the stimulus, and people were really
Speaker 1: hoping for some new demand side support, especially for consumption.
Speaker 1: And then the third thing is people were looking for
Speaker 1: forward guidance, any clarity of what else. You know, it's
Speaker 1: already October, so you really need to look for forward
Speaker 1: guidance next year onwards. And what we got was kind
Speaker 1: of underwhelming. On the first two basically we didn't get
Speaker 1: numerical target and you know, and actually it was very disappointing.
Speaker 1: There was very little. A lot of the focus on
Speaker 1: the Ford incremental policy was more about local government. These
Speaker 1: are important problems local government, finances, property, but they only
Speaker 1: unveiled a little bit on student subsidies. Really nothing, there's
Speaker 1: no signs of a major kind of pivot towards new
Speaker 1: additional demand stimulus or consumption support. And then they announced
Speaker 1: they talked about bank recapitalization. But then on the third
Speaker 1: thing on the forward guidance. This is where I think
Speaker 1: things actually surprised a little bit more on the upside
Speaker 1: because I think the Finance Minister land and this was
Speaker 1: more reassuring than the NDRC press conference. He did say that,
Speaker 1: you know, central government has a lot of room for
Speaker 1: debt to increase the debt and the deficit. So in
Speaker 1: a big source of contention in China's they've been stuck
Speaker 1: with this three percent deficit ceiling. So the fact that
Speaker 1: they're signaling more room is kind of a very reassuring sign.
Speaker 1: And then the other thing that was also kind of
Speaker 1: forward guidance was a little bit more encouraging is the
Speaker 1: fact that they were talking about potentially a largest ever
Speaker 1: kind of local government debt swap and they're talking about
Speaker 1: using special bond quota to buy housing and land supply.
Speaker 3: But it hasn't changed Hong Kong where you are, and
Speaker 3: everybody on our team there says it's changed dramatically. Do
Speaker 3: you see Beijing changing from a certitude of whatever the
Speaker 3: modern Marxist Londonist state is. Do you see them amending
Speaker 3: their politics to jump start their nominal GDP and frankly
Speaker 3: to protect that you want.
Speaker 1: Look I think there is some sign I mean, obviously
Speaker 1: we've had a lot of state intervention obviously during the
Speaker 1: pandemic and the regulatory shocks and the you know, a
Speaker 1: lot of the sectors which really impacted animal spirits. I
Speaker 1: think there are obviously the signaling from she now is
Speaker 1: trying to become much more friendly to private sector. But
Speaker 1: you know how it is, right, once trust is lost,
Speaker 1: it takes a long time to regain. So although there's
Speaker 1: a lot of verbal rhetoric to kind of support private
Speaker 1: sector level the playing field he is trying to open up.
Speaker 1: I mean, people have been so scarred, it's like post
Speaker 1: traumatic stress syndrome. It takes a while, so people are
Speaker 1: still very skeptical. So I think there is a verbal shift,
Speaker 1: but it's not yet sufficient really to turn around animal spirits.
Speaker 1: And then the problem is really that we haven't had
Speaker 1: any kind of significant kind of consumer household support, and
Speaker 1: so the deflationary pressures continue to linger. You know, real
Speaker 1: estate continues to be on the down cycle. So the
Speaker 1: countercyclical policy support, not to mention the lack of animal spirits,
Speaker 1: the trust deficit, which takes time, there's also a lack
Speaker 1: of countercyclical fiscal support to get people to feel confident
Speaker 1: about their job and income prospects. So you kind of
Speaker 1: have this kind of negative feedback loop which they're trying
Speaker 1: to arrest. So I think since September twenty four, when
Speaker 1: we have the joint press conference with the BBOC and
Speaker 1: all the there's clearly a sign that government realized they
Speaker 1: have to pivot. There's clearly a sign. It's just a
Speaker 1: question of trying to figure out is it enough. And
Speaker 1: like I said, it's kind of a mixed bag what
Speaker 1: we got over the weekend because seems like we're going
Speaker 1: to do something, but we don't have details. And even
Speaker 1: though the policy in the short term seems kind of incremental,
Speaker 1: hopefully we'll get some more clarity end of the month.
Speaker 6: I want to see. I'm speaking for all the luxury
Speaker 6: retailers on Fifth Avenue and Madison Avenue. They've seen the
Speaker 6: European tourists come back, they have not seen the Chinese.
Speaker 6: Why are the Chinese not traveling and spending Because there's
Speaker 6: a lot of people out there would like to see
Speaker 6: the Chinese, but folks be out there and spending and traveling.
Speaker 1: Well, first of all, I think she Shepingk's priority is
Speaker 1: not the luxury, that's not the target. Look, I think
Speaker 1: there's been a lot of things that's happened.
Speaker 5: Right.
Speaker 1: We clearly have significant precautionary savings behavior happening in China
Speaker 1: right now. I mean, household deposits are still so well
Speaker 1: above trend even though they reopen, you know, for a
Speaker 1: while now. So part of it is a lot of
Speaker 1: uncertainty about their income and job prospects. Housing we're still
Speaker 1: you know, third year into housing down market. That's still
Speaker 1: the two thirds of their household. Well, so that obviously,
Speaker 1: and there's also a little bit of policy pushed towards
Speaker 1: you know, there's a little bit more nationalism, more domestic travel,
Speaker 1: and that's the other factor.
Speaker 4: On a S.
Speaker 3: Peter basis, Let's bring it back to Harvard and we
Speaker 3: got to go the bottom line is they have to
Speaker 3: inflict creative destruction upon a Chinese economy and from a
Speaker 3: high extandpoint clear the market. Do you see any indication
Speaker 3: they can clear this market and move on.
Speaker 1: Well, to be fair, what's happened in the real estate
Speaker 1: is quite dramatic, right, the fact that they preemptively prick
Speaker 1: the bubble in twenty twenty one to try to deflate
Speaker 1: the real estate is a signed they realize this is
Speaker 1: not where it's to go, and we are seeing I mean,
Speaker 1: we saw massive defaults, so that is part of the destruction.
Speaker 1: And obviously they're creating new avenues of technology. But then
Speaker 1: the question is we need something beyond kind of state
Speaker 1: led industrial policy.
Speaker 4: A private sector city group suggest we're going to get.
Speaker 1: It so right now, no, I mean, look, the strategy
Speaker 1: is we still have the ramification of the real estate
Speaker 1: hurting local government. So obviously the priority now is to
Speaker 1: stabilize local government finances so they don't cut back a
Speaker 1: lot of public services and create a negative feedback loop.
Speaker 1: And they need to address the excess supply in housing
Speaker 1: because people are not going to be confident you can't
Speaker 1: give you know, you give them the housing stabilizes, so
Speaker 1: you need something on supply as well as demand to
Speaker 1: kind of reach an equilibrium, hopefully a little faster.
Speaker 4: I'm joining it. Sure, Thank you so much.
Speaker 3: She is the City Group, Hong Kong, head of Asia
Speaker 3: and Pacific Economics and An Nows. Thank you for those
Speaker 3: wonderful comments at Martin Feldstein.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 2: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 2: with the Bloomberg Business app. You can also watch us
Speaker 2: live every weekday on YouTube and always on the Bloomberg terminal.
Speaker 3: We've got lady am Rita sent we're giving her promotions
Speaker 3: that she aspects as well, and Rita just.
Speaker 4: We're thrilled here. I got to go to oil in
Speaker 4: a minute.
Speaker 3: But the first hundred days for labor forget about labor
Speaker 3: tory and all that, but the first hundred days for
Speaker 3: secure has been a challenge, right.
Speaker 8: It has been a challenge. I think from an energy
Speaker 8: policy standpoint, very few people are happy about certain kind
Speaker 8: of policies that are being talked about right now. Not
Speaker 8: a lot of clarity for investments for companies, so that's
Speaker 8: a challenge. But I think overall though, there's still a
Speaker 8: bit more stability in terms of Regardless of the challenge,
Speaker 8: I'm hoping that, you know, take the energy bit out.
Speaker 8: You know, we just kind of peace and calm.
Speaker 3: I have to talk about energy aspects abilities, which is incredible.
Speaker 4: Microeconomics around the price of oil.
Speaker 3: The zeitgeist over the weekend is MBS in Saudi Arabia
Speaker 3: are beginning to flex their productive muscles describe what Saudi
Speaker 3: Arabia wants to do when they see kazakh Stan overproducing.
Speaker 8: So I think, Tom, you will be the only one
Speaker 8: who'll understand when I say this, right, because I've struggled
Speaker 8: explaining this. What's how the Arabia is saying is we
Speaker 8: don't want to free ride a problem. We don't want
Speaker 8: to be the ones produce production and you take advantage
Speaker 8: of us, and you are increasing production now. However, they
Speaker 8: are not saying for a second we're going to repeat
Speaker 8: twenty twenty flood the market by pushing production to twelve
Speaker 8: million barrels per day. They're saying, we want to go
Speaker 8: ahead with the small planned increases as we've already announced
Speaker 8: to the world, because you are supposed to be cutting
Speaker 8: and you have compensation cuts. So even if we bring
Speaker 8: back production net net, there shouldn't be any oil in
Speaker 8: the market.
Speaker 3: Well, this is like a conversation you and I would
Speaker 3: have had in nineteen eighty six when we were both
Speaker 3: driving VW diesels exactly.
Speaker 6: So I'm what do you estimate the risk premiums for
Speaker 6: geopolitics today in the market today, Because it seemed like
Speaker 6: prices were coming down, coming down coming down, and then
Speaker 6: we had that escalation just over the last month or so.
Speaker 8: I mean, you could argue that since that news broke
Speaker 8: we've been about we're about eight ten dollars higher, But
Speaker 8: I would also flip it around the other way and say,
Speaker 8: weren't be a bit too low regardless of all the
Speaker 8: kind of fundamental bearishness that said they're in the market.
Speaker 8: What I'm really grappling with this year is inventories for
Speaker 8: crude oil are incredibly low everywhere. Cushing, yeah, very low.
Speaker 8: Cushing in Oklahoma has been near record lows. Globally, we
Speaker 8: are pretty much at record lows on a day's of
Speaker 8: forward cover basis. But the market doesn't care about that
Speaker 8: because they expect huge bills next year. So somehow we've
Speaker 8: kind of skipped a step and we're talking about next year.
Speaker 8: And that's why I mean, otherwise Israel around, would we
Speaker 8: be at seventy five dollars, We would be at one
Speaker 8: hundred and twenty or higher.
Speaker 6: So what's different though, just in the last X number
Speaker 6: of years, is that the US is now a net exporter.
Speaker 6: Are they good? Are they good partners in the global
Speaker 6: energy market? Are they efficient? Are they reasonable? Or you know,
Speaker 6: how is the US producer these days?
Speaker 8: I think the US producer has completely shifted the paradigm
Speaker 8: right in terms of supply risks how markets look at
Speaker 8: generally political supply race. Because the US has been a
Speaker 8: steady source of growth. My concern is US production is
Speaker 8: starting to kind of plateau, you know, doesn't mean it's
Speaker 8: going to start declining. This year, US production is flat
Speaker 8: versus last year. Some issues with gas constraints because they
Speaker 8: didn't have enough gas pipelines. Now they are starting up,
Speaker 8: so we'll get some production growth next year. But Perman
Speaker 8: producers are telling us they're running out of good quality acreage.
Speaker 8: Barking producers are saying the same thing. So I don't
Speaker 8: think fast forward two years, the US is necessarily going
Speaker 8: to be the kind of savior it has been in
Speaker 8: this market. And I just sense a huge amount of
Speaker 8: complacency in this market because there's a lot of recency bias.
Speaker 4: So we're you know, let's call it just under eighty
Speaker 4: dollars a barrel.
Speaker 3: Everyone listening and watching now it's good morning on YouTube
Speaker 3: is like, wait, why isn't oil higher given the Eastern
Speaker 3: Mediterranean his geopolitical what's your number value of geopolitical risk.
Speaker 3: If we actually get geopolitical risk, is it ten dollars
Speaker 3: a barrel?
Speaker 8: I think it's going to be higher because everybody in
Speaker 8: this market is short. But now, what is a geopolitical risk?
Speaker 8: I think the market is tired of putting in a
Speaker 8: premium because over the last five years, we haven't lost
Speaker 8: supplies because of geopolitical risk headlines. What the market will
Speaker 8: have to see is an actual supply loss. If you
Speaker 8: do see that, then I think the upside is significantly higher.
Speaker 3: How about Russia.
Speaker 6: Wasn't that a supply loss or is that oil still gase?
Speaker 8: It's just redirected, right, And I think that was a big,
Speaker 8: big turning point for the market because a lot of
Speaker 8: traders bet on Russian oil being lost, but the sanctions
Speaker 8: were pretty toothless in terms of actual supply losses. It
Speaker 8: just was always about hurting revenues. So we've had all
Speaker 8: that oil go to the East. Indian and China are
Speaker 8: buying all that oil and that's not been a problem.
Speaker 6: Is it not a problem for Europe? I mean, is
Speaker 6: Europe weaned itself off of Russian energy by force?
Speaker 5: Yes?
Speaker 8: I mean Europe still consumes fourteen to fifteen million barrels
Speaker 8: per day of crude oil as in refines about that much.
Speaker 8: I mean varies depending on your definition of Europe and
Speaker 8: so on, so it's not paying up for it. It's
Speaker 8: more expensive for Europe.
Speaker 3: I want to audible here. We can do this with
Speaker 3: Emri de Sin as we prepare for as we prepare
Speaker 3: for a conversation with kir Starmer. The compare is with
Speaker 3: Tony Blair. From where you sit in London, Emri de
Speaker 3: Sin he wants to capture that pixie dust of Tony Blair,
Speaker 3: but he just can't do it in this time and place.
Speaker 4: Am I right?
Speaker 8: I think that's fair. And I'm not one hundred percent
Speaker 8: sure that he necessarily wants to be the next Tony
Speaker 8: Blair either, given everything else that's going on in the
Speaker 8: Middle East. And I think he's been very clear about
Speaker 8: where UK's position is. But I think he does have
Speaker 8: a lot of challenges at hand, and again it's not
Speaker 8: been easy. The UK economy isn't doing particularly well either,
Speaker 8: so all of his energy has to focus on getting
Speaker 8: the economy up and running and you know, reducing unemployment
Speaker 8: and just kind of creating growth.
Speaker 3: But he went to the University of Leeds, he's not
Speaker 3: you know, Oxbridge and all that. The bottom line is
Speaker 3: the economy's prospering. What in two miles of London in Edinburgh?
Speaker 3: Maybe what's he going to do or the Tories going
Speaker 3: to do to be bipartisan, what are they going to
Speaker 3: do for Leeds and the challenges of Leeds England.
Speaker 8: I think that's that's essentially exactly like you said, the
Speaker 8: issue London is booming, but that's not the same for
Speaker 8: the rest of the UK, and therefore the challenges do become.
Speaker 8: You know, is their tax reform on the cards? Is
Speaker 8: it going to be more pushed towards green energy to
Speaker 8: at least stimulate more of the domestic economy. There's a
Speaker 8: lot to be done.
Speaker 4: Are you moving to New York? Is there?
Speaker 5: You know what I'm saying in London, but you're not
Speaker 5: in Houston?
Speaker 6: Back and forth.
Speaker 8: I do go to Houston, back and forth. And let's
Speaker 8: not talk about US election.
Speaker 3: I'll say in London, Russia and oil can putin move
Speaker 3: the price of oil at thirty seconds.
Speaker 8: No, not anymore. He's not in control, well unless he
Speaker 8: decides to turn it off, which he can't because he
Speaker 8: needs the revenues.
Speaker 3: Yeah, okay, Amrita sent, thank you so much in studio
Speaker 3: with Energysmarts and again we protect the copyright of Emerita
Speaker 3: send and all of our guests look to Energy Aspects
Speaker 3: London for their brilliant breakout. I can't say enough. It's
Speaker 3: like Adam Saminsky Paul at Deutsche Bank years ago. With
Speaker 3: Paul Sink. It's like all supply and demand dynamics, the
Speaker 3: price theory, the microeconomics. It's not you know, some people
Speaker 3: go sixty thousand feet and all that, and Rita goes
Speaker 3: right into the dynamics of it.
Speaker 7: Pa.
Speaker 6: I can actually understand it. That's why I like her.
Speaker 4: Yes, I get this.
Speaker 6: I understand what you just said.
Speaker 4: There, Amrita said, thank you so much.
Speaker 2: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
Speaker 2: and anywhere else you get your podcasts. Listen live each
Speaker 2: weekday seven to ten am Eastern on Bloomberg dot Com,
Speaker 2: the iHeartRadio app, tune In, and the Bloomberg Business app.
Speaker 2: You can also watch us live every weekday on YouTube
Speaker 2: and always on the Bloomberg terminal