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Speaker 3: I was at a university college, Dublin, coolest campus in Europe.
Speaker 3: Derek Halpenny with us. He is iconic with MUFG and automy.
Speaker 3: Clear they're a Japanese bank, it's inappropriate for mister Hallpenny
Speaker 3: to discuss the executive intervention processes of the bank. But
Speaker 3: we're thrilled you could join us. Head of Research Global
Speaker 3: Markets EMA for mu FG. Derek, it's just been way,
Speaker 3: way too long. Why is the dollar resilient? Is it
Speaker 3: about the dollar or is it about everybody else?
Speaker 4: I think primarily I would point more recently obviously to
Speaker 4: the shifting expectations about the FED higher for longer, the
Speaker 4: resilience of the data, which certainly by January febru time
Speaker 4: the markets we're not expecting. So this kind of latest
Speaker 4: leg stronger is more about the US dollar side, but
Speaker 4: certainly from our perspective in terms of the forecast going forward,
Speaker 4: I think it's important to remember the broader economic conditions
Speaker 4: and if you're going to be in a position to
Speaker 4: sell the US dollar, obviously you have to have currencies
Speaker 4: to buy, and up until now the global backdrop hasn't
Speaker 4: been particularly favorable. But we think that's changing, not dramatically,
Speaker 4: but enough to limit dollar by And of course the
Speaker 4: GDP data today in the UK is one small.
Speaker 3: Example exactly what is the outcoming? And Governor Bailey mentioned
Speaker 3: in that yesterday. Jack Halpenny, what does it mean for
Speaker 3: our listeners and viewers on YouTube if we have a
Speaker 3: stable dollar? I don't think there's enough talk about this, Paul.
Speaker 3: What if we get a stable dollar forward?
Speaker 4: Well, I think probably most center bankers for a start,
Speaker 4: would certainly welcome that. And I think you know, stable
Speaker 4: foreign exchange generally is indicative of relatively reasonable conditions more
Speaker 4: broadly in the financial markets, and I think FX stability
Speaker 4: going forward would obviously probably reflect a relatively coordinated monetary
Speaker 4: policy approach going forward. And again I think for broader
Speaker 4: financial market conditions, FX stability in that context would would
Speaker 4: be welcomed.
Speaker 5: So Derek, give us just kind of your broad overview
Speaker 5: what you have seen with the Japanese yen over the
Speaker 5: last several weeks. Again, we pushed up on that one
Speaker 5: to sixty level a couple of weeks ago where he
Speaker 5: caught people by surprise. Here, What do you think is
Speaker 5: going on at there?
Speaker 4: Yeah, I think I think this is really interesting. Like
Speaker 4: obviously the price action last week, you know, I can
Speaker 4: say that it certainly looks like there was there was intervention,
Speaker 4: there's there's that's that's pretty obvious. And I think there's
Speaker 4: definitely an elevated level of concern politically, at least in
Speaker 4: relation to the depreciation of the Japanese yen. That has
Speaker 4: an impact on household consumption, It has an impact on
Speaker 4: household sentiment, and there is still a chance that the
Speaker 4: Kashida administration will push for a general election before the
Speaker 4: LDP leadership elections in September. Certainly from Kashida as standpoints,
Speaker 4: having a general election victory, the measure of victory, of
Speaker 4: course we can determine and debate that raises his prospects
Speaker 4: of remaining leader after the leadership election in September, So
Speaker 4: I wouldn't rule it out. And certainly politically there's definitely
Speaker 4: an elevated level of concerns. And of course we've had
Speaker 4: this meeting this week between Governor Ueda and Prime Minister Kashida.
Speaker 4: Luida has then come out and the BOJ certainly seems
Speaker 4: a lot more hawkish now today than there were a
Speaker 4: week ago, and that certainly raises the prospect of a
Speaker 4: more active BOJ policy stance going forward from here.
Speaker 5: So if the US dollar is maybe stabilized, maybe even
Speaker 5: if there's a little bit of softness in the US dollar,
Speaker 5: when you talk to your clients, do they have combetists
Speaker 5: go ahead and buy anything else that used to be
Speaker 5: the dollar?
Speaker 4: Well, you know, look at Japan and today we've had
Speaker 4: data on cross border flows, and you know, foreign investor
Speaker 4: appetite for Japanese equities remains very, very strong. And again,
Speaker 4: you know, I think if there's a fundamental, compelling story
Speaker 4: to tell, investors are interested notwithstanding the high levels of rates,
Speaker 4: notwithstanding the very high level of the US dollar, that
Speaker 4: points to potential volatility ahead if there's a real fundamental
Speaker 4: story that can trump all of that, and I think
Speaker 4: that's what's going on in Japan at the moment, where
Speaker 4: clearly corporate Japan is changing, dividend yields are picking up,
Speaker 4: share buybacks are picking up, focus on return on equity,
Speaker 4: and that is a compelling story in terms of Japanese
Speaker 4: equities at the moment.
Speaker 3: So what is your six months out play on yen?
Speaker 3: Which pair do you take on yen here to make
Speaker 3: a speculation?
Speaker 4: Well, you know, I think in in terms of where
Speaker 4: we've had probable intervention and given our view in terms
Speaker 4: of where the rates pricing across G ten is at
Speaker 4: the moment, and by that I mean there's more pushback
Speaker 4: on yields to come back down based on our view
Speaker 4: that the FED is going to cut three times this year,
Speaker 4: and given the fact that we think the BOJ is
Speaker 4: going to raise rates in July, possibly on the same
Speaker 4: day that the FED is cutting, I do think there's
Speaker 4: scope there for dolly en to move certainly back into
Speaker 4: the one forties, for there to be a bigger move
Speaker 4: than maybe what the markets are expecting.
Speaker 3: We're going to get you. That's twenty big figures, are
Speaker 3: fifteen big figures. We got to get you. Back on
Speaker 3: Derek Halpennie, thank you so much from MUFG there on
Speaker 3: foreign exchange. I'm going to break a rule here, folks.
Speaker 3: Usually because they are always so product product touchy feely
Speaker 3: with Apple, they go to Dan Ives and they go,
Speaker 3: you know, should I get the brown one or the
Speaker 3: red one? You know, I don't do that. I do
Speaker 3: financials and like can you make money or lose money
Speaker 3: in Apple? And all that? Right now, I'm gonna rip
Speaker 3: up the script with Daniel Ives. He's with web Bush
Speaker 3: on Apple, Dan Apple Insider, Mark German and the others.
Speaker 3: They have a lot of paragraphs right now on what
Speaker 3: AI is going to do for the iPhone? Is it
Speaker 3: nothing more than a glorified search engine enhancement?
Speaker 6: I disagree, And I think this is the start of
Speaker 6: a game changing strategy at Apple with AI, and I
Speaker 6: think it's gonna be on AI services as well as
Speaker 6: on the iPhone. But Tom, they're not putting their new
Speaker 6: chip to focus on AI. If this is just for
Speaker 6: enhance search.
Speaker 3: Okay, well, what's it for? I mean, right now on
Speaker 3: a Friday in May, Paul you mentioned the June meeting,
Speaker 3: is like, you know, Ive goes to that he ws
Speaker 3: a tuxedo. You should see the color of that tuxedo. Dan,
Speaker 3: I think there's a mystery here on what AI is
Speaker 3: going to mean for the public on the toy they
Speaker 3: all carry around. Do you agree at least that there's
Speaker 3: a mystery.
Speaker 6: Yeah, but I think the mystery in the popcorn moment
Speaker 6: that's gonna be revealed at WWDC next month by Cook.
Speaker 6: I think it's going to start what I really view
Speaker 6: is probably the most important event for Apple in a decade,
Speaker 6: because it's unveiling AI on services, what I believe is
Speaker 6: going to be in a new AI app store and
Speaker 6: the start of it, and then what's going to be
Speaker 6: built into iPhone sixteen. From an LM perspective.
Speaker 5: Hey, Dan and Tom. I bumped into Dan at Newark
Speaker 5: Airport yesterday. I was going up to Boston. He's getting
Speaker 5: off the Red Eye from San Francisco.
Speaker 3: No idea what's going on middle place? I have no
Speaker 3: I I mean the web Bush golf stream usually doesn't
Speaker 3: go down.
Speaker 5: I know, I know that he's fine with the people. Hey, Dan,
Speaker 5: when you talk to investors, what's the biggest challenge here
Speaker 5: for this stock? I see it down four percent year
Speaker 5: to date, which for Apple is really really underperformance. Is
Speaker 5: it China?
Speaker 3: Is it Ai?
Speaker 5: How do you prioritize kind of what Apple needs to
Speaker 5: get right over the next you know, one to two
Speaker 5: to three years.
Speaker 6: Yeah, it's a great question. I think it's really it's
Speaker 6: China because that we're used to seeing that as growth
Speaker 6: and it's actually been negative. But if you look out
Speaker 6: over the next six twelve months, the headwind becomes a talent.
Speaker 6: I mean, China, I think starts to grow next few quarters.
Speaker 6: June will be its last negative quarter. And that's why
Speaker 6: right now in New York City, cab drivers barish and Apple.
Speaker 6: But you have this pent up upgrade cycle, two into
Speaker 6: seventy million that have an upgrade, and four plus years
Speaker 6: plus now AI coming to Cooper Tino with one hundred
Speaker 6: and ten billion dollar buy back. I mean, that's like
Speaker 6: going up against Brunt in the playoffs.
Speaker 5: Good, good analogy, Mike. The concern in the back of
Speaker 5: my mind, Dan, and I'm guessing I'm not the only one.
Speaker 5: Is this growing? I guess cold war between China and
Speaker 5: the West. That's spilling over into consumer behavior and maybe
Speaker 5: people on the margin are not going to buy Apple
Speaker 5: products to the same degree they did in the past
Speaker 5: because of that. Is that did the numbers show that
Speaker 5: at all?
Speaker 6: I think the doomsday scenarios never really came true this quarter.
Speaker 6: I mean that's and I think that was that was
Speaker 6: evident because yeah, they have some geopolitical ahead winds the
Speaker 6: Huawei issues, but you build the best products in the
Speaker 6: world like they do. Consumers, whether they're in China, New
Speaker 6: Jersey or wherever else, they're gonna want iPhones.
Speaker 5: All right, So at this developer conference, how do you
Speaker 5: think it's gonna play out? Because it feels like they're
Speaker 5: all is important to Apple, They're always important to the stock,
Speaker 5: but this one because there may be this AI component,
Speaker 5: what do you what would you like to see happen
Speaker 5: at this June uh get together?
Speaker 6: Yeah, and this and German's talked about this, but this
Speaker 6: is all focused on developers, yep. So the big thing
Speaker 6: here is really them unveiling a foundational platform for developers
Speaker 6: where they're gonna build AI apps within the app store.
Speaker 6: And what that's really gonna do?
Speaker 3: I mean, kings King's.
Speaker 6: Talked about this a lot. But the A as AI
Speaker 6: comes to the consumer, it has to come through Apple
Speaker 6: till Apple dives into deep of the pool AI and
Speaker 6: then it could all start.
Speaker 3: I feel like I'm doing a lovelte conversation. This is
Speaker 3: so non time keen Dan Ives and so we're are
Speaker 3: Google and Apple frenemies right now? I mean, if they
Speaker 3: need the Google platform to make AI happen, how does that?
Speaker 3: How forget about the regulation in the litigation? This weekend,
Speaker 3: they're gonna chit chat over an expensive latte out in
Speaker 3: Cooper Tino. Are they fre enemies?
Speaker 6: Oh? I mean I'd say they're just actually friends and
Speaker 6: to some extent that that's getting closer and closer because
Speaker 6: they need each other. You will, Google needs Apple just
Speaker 6: like Apple needs Google. And that's something when it comes
Speaker 6: to AI. What's what's made them more BFFs is actually Microsoft.
Speaker 6: Because this Microsoft has aggressively really wed this. It's actually
Speaker 6: forced Apple and Google to look in the mirror and
Speaker 6: realize instead of enemies, they're actually friends.
Speaker 5: The great thing about chat with Dan Ives Thomas, you
Speaker 5: can just go all over the place. So I'm gonna
Speaker 5: switch gear.
Speaker 3: Just tearing them up on the live chat. Everybody wants
Speaker 3: to know where he got his shirt up. I mean,
Speaker 3: you know, they don't care about Apple. They just you know,
Speaker 3: did you get that at Lord and Taylor? That's what
Speaker 3: they want to know.
Speaker 6: Now I got I got this one in this in Milan.
Speaker 6: It's no, this is It's like it's like a pul
Speaker 6: special right from Milan.
Speaker 3: Can we have Dan luxury for me? Is like ll Beam.
Speaker 5: At the thrift store?
Speaker 3: Can you see Dana eyes and ll Beam? Now of
Speaker 3: course they don't.
Speaker 5: Hey Dan, I'm looking at our good friends Tesla and
Speaker 5: stock down thirty percent here? How does that narrative need
Speaker 5: to change for Elon, you know, over the next several
Speaker 5: quarters here to get this stock moving.
Speaker 3: Yeah.
Speaker 6: Look, I mean obviously it's been a dark few quarters,
Speaker 6: but I think it all started with this last conference
Speaker 6: call in terms of turning it around. What I've used
Speaker 6: this up thirty thousand dollars vehicle next year. They've had
Speaker 6: to make some difficult cost cuts, but now I think
Speaker 6: growth will start to return in China. That's the key.
Speaker 6: And then you look at this time ahead it's really
Speaker 6: full self driving autonomous. That vision now is starting to
Speaker 6: become something close to reality. And that's the longer term
Speaker 6: Tesla story here is that you know they've been through
Speaker 6: this before. This is not the end of the Tesla
Speaker 6: growth story. It's still second third in it.
Speaker 3: Dan, I gotta get some news out here. I mean,
Speaker 3: you're in the office, you go back to your house.
Speaker 3: I understand you're published at any moment. You're out at
Speaker 3: a two fifty on Apple? Can we make some news
Speaker 3: here with a price lift? Can you go? Can you
Speaker 3: give me two seventy here on Bloomberg Serioce?
Speaker 6: Well, well, what I will tell you, Tom Will I
Speaker 6: think the AI story is worth forty to fifty dollars
Speaker 6: per share to the Apple store, and that is not
Speaker 6: being factored in here. Sentiments negative and we I think
Speaker 6: we sit here a year from now and and that's
Speaker 6: that's gonna be what I've used a game changer. It's
Speaker 6: the underestimation of Cook and Coopatina with am.
Speaker 3: Can I put a headline out ives of Milan?
Speaker 5: Yes?
Speaker 3: Sure, Apple three hundred dollars a share? Did I hear that? Dan?
Speaker 3: I've thank you with web Bush's the way the shirt.
Speaker 3: You know, I don't know what to say that. I've
Speaker 3: never done that folks. I've never done more touchy pheely
Speaker 3: with Dan ives on Apple, but I think this AI
Speaker 3: thing a real mystery and a real debate. David Miracle
Speaker 3: is one of the toughest PhDs in the land that
Speaker 3: under Greg Man Q at Harvard with Golden Sacks, David,
Speaker 3: thank you so much for joining. I want to get
Speaker 3: to immigration in a moment. How much algebra was there
Speaker 3: with Man Q. I mean, I can't fathom the algebra
Speaker 3: rigger you had to put up with under Greg Man Q.
Speaker 7: Well, you do move from algebra to calculus when you
Speaker 7: stick around millions.
Speaker 3: Okay, Well, David, thank you for being with us. Your
Speaker 3: essay on immigration is the debate of the moment for
Speaker 3: this nation. With your research at Goldben Sachs, can you
Speaker 3: say that immigration has moved the needle on our labor economy?
Speaker 7: I think it's you know, it's clearly had a mechanic
Speaker 7: whole impact on things like job growth and GDP growth.
Speaker 7: That part's pretty easy. More people, more entrance to the workforce,
Speaker 7: you can put more people to work. GDP can grow
Speaker 7: a little bit faster. Maybe the more contentious part is
Speaker 7: what impact all of this had on wage growth and inflation,
Speaker 7: where you know, we saw a big increase at a
Speaker 7: time when immigration was extremely low because the borders were
Speaker 7: closed and fewer people were coming. Then we saw a
Speaker 7: big decline in wage growth and inflation when immigration surged,
Speaker 7: and it naturally raises the question is there's some link there.
Speaker 7: My take is it probably did play a modest and
Speaker 7: secondary role as one of several factors. But you know,
Speaker 7: I don't think it was the main story. Normally. You know,
Speaker 7: a lot of people I think quickly think of immigrants
Speaker 7: as well. You have more workers that should help to
Speaker 7: rebalance the labor market. Economists is of course going to
Speaker 7: point out, well, you know, now that they've come to
Speaker 7: the US, they're consuming in the US as well, not
Speaker 7: just producing in the US, so you've boosted both supply
Speaker 7: and demand, and under normal conditions, I'd probably say is
Speaker 7: I think most people would say that it would be
Speaker 7: a wash, that it doesn't matter too much that you know,
Speaker 7: when we economists and markets think about forecasting wage growth
Speaker 7: and inflation, this is just not something at the top
Speaker 7: of our list that we're considering. I do think this
Speaker 7: recent episode, though, was a little bit different, because if
Speaker 7: you remember back to the beginning, of the immigration surge,
Speaker 7: we had probably the tightest peacetime labor market in the
Speaker 7: history of the United States. So I think under those
Speaker 7: unique circumstances where you had a huge supply demand imbalance
Speaker 7: in the labor market, and in particular, the low wage
Speaker 7: part of the labor market was just red hot, generating
Speaker 7: really hot wage growth. Under those unique circumstances, I think
Speaker 7: it's fair to say that an influx of another million,
Speaker 7: mostly low wage workers probably helped cool.
Speaker 5: So, David, given that backdrop here, how would you characterize
Speaker 5: the US labor market. We've got, I guess, a headline
Speaker 5: of three point nine percent unemployment, three point eight percent unemployment.
Speaker 5: How do you characterized the labor market? How do you
Speaker 5: think the FED views the US labor market?
Speaker 7: Yeah, I think basically we've restored the pre pandemic balance,
Speaker 7: but things are a little bit more complicated. So if
Speaker 7: you look at a lot of different measures of how
Speaker 7: tight the labor market is, the unemployment rate, our jobs
Speaker 7: workers gap, survey based measures, many other data points, and
Speaker 7: you just average all of them, the average is basically
Speaker 7: where it was in twenty nineteen, down a long way
Speaker 7: from twenty twenty two. I think the FED would say
Speaker 7: that's ideal. In twenty nineteen, we kind of had the
Speaker 7: you know, in retrospect, the best of all possible worlds,
Speaker 7: abundant job opportunities, low unemployment, but we didn't have an
Speaker 7: inflation problem. By twenty twenty two, we'd probably overshot. You know,
Speaker 7: twenty nineteen was one of the tightest labor markets in history.
Speaker 7: Twenty twenty two was kind of drastically tighter, and I
Speaker 7: think most FED officials concluded that's not the right place
Speaker 7: to be, especially when you have a big inflation problem.
Speaker 7: At this point, though, I think, you know, we can
Speaker 7: kind of say now and fact, we could say by
Speaker 7: last fall that we have restored that pre pandemic balance.
Speaker 7: The reason I say it's more complicated is that there's
Speaker 7: more dispersion among these indicators. They tell a less consistent story,
Speaker 7: and you know, that means you can be a little
Speaker 7: bit less confident about where we are than if they
Speaker 7: all told exactly the same story.
Speaker 5: Hey, David, I'm looking at your team's note from early April.
Speaker 5: You talk about GDP forecast a little bit higher than
Speaker 5: consensus PCE inflation falling pretty significantly, leading maybe the FED
Speaker 5: to cut maybe as many as three times this year.
Speaker 5: Is that's still the Goldman Sex call?
Speaker 7: We think twice at this point, once in July, once
Speaker 7: in November. And you know, I'd be the first to
Speaker 7: acknowledge that that decision is going to be very, very
Speaker 7: sensitive to very small surprises on the inflation data. With
Speaker 7: you know, I don't think anyone can be certain about.
Speaker 3: Well when you look at the you know, with you
Speaker 3: and your Hatzia is having to put together a call
Speaker 3: Peter Oppenheimer over in London, you put together call do
Speaker 3: you have not certitude? But do you have a confidence
Speaker 3: in the summer and into the end of the year.
Speaker 3: Are you basically flying blind till you do your next
Speaker 3: conference call to figure out what the view is? Well?
Speaker 7: There, you know, there's always some interplay between the economic
Speaker 7: side and the market side. We try to incorporate that
Speaker 7: through our Financial Conditions index framework, and so it's very
Speaker 7: helpful to be able to work with our strategists to
Speaker 7: get some sense of how that impulse from changing financial
Speaker 7: conditions broadly might matter for our economic forecast.
Speaker 3: So where's your nominal GDP call? Now, that's been one
Speaker 3: of our themes this morning, is a lot of people
Speaker 3: looking at resilient rates figure in a resilient inflation in
Speaker 3: that you know, we may not get nominal GDP under
Speaker 3: four percent or can you can you be more cautious?
Speaker 7: Yeah, so we would have it this year at a
Speaker 7: little bit over five percent, but by the end of
Speaker 7: twenty twenty five approaching that four percent number you mentioned.
Speaker 3: Wow, Wow, interesting.
Speaker 5: So David, us about the consumer here? The US consumer?
Speaker 3: What's your call here?
Speaker 5: I know we're going to hear from Walmart and a
Speaker 5: bunch of other retailers in the coming week or so
Speaker 5: when we'll get a better handle on it, But how
Speaker 5: do you guys think about the US consumer?
Speaker 3: Sure?
Speaker 7: Look, I think there's been a bit of a disconnect
Speaker 7: between how we and other people looking at macro data
Speaker 7: would think about this and how people who have been
Speaker 7: focused on some of these company reports might think about it.
Speaker 7: Our take is a little bit more optimistic. I think
Speaker 7: of this as a pretty simple, straightforward story, basically the
Speaker 7: twenty twenty three story, just in water down form. What
Speaker 7: I mean by that is, you know, there was a
Speaker 7: lot of gloominess in twenty twenty three too, but we
Speaker 7: looked at the data and we thought, real income is
Speaker 7: going to grow at a pretty robust pace. People's spending
Speaker 7: power is growing robustly because wages are growing faster than inflation.
Speaker 7: We're putting a lot of people to work, and there
Speaker 7: are a couple other sources of income like interest income
Speaker 7: and some government transfers that we kind of knew were coming.
Speaker 7: And if your income's rising quickly and household balance sheets
Speaker 7: are basically the strongest in history than the natural assumption
Speaker 7: I think is that consumption keeps growing at a healthy pace.
Speaker 7: Now this year, we're not going to put two hundred
Speaker 7: and fifty thousand people to work per month. We just
Speaker 7: don't have that many workers. So economy's income growth is
Speaker 7: going to slow. Everything's going to slow, including consumption. But
Speaker 7: we're at about two and a half percent, a little
Speaker 7: bit stronger than I think is sustainable in the long run,
Speaker 7: but not a blowout number.
Speaker 3: David got to run, David miracle, Thank you so much
Speaker 3: for that briefund Gold and Sacks and to me the headline,
Speaker 3: there is a sprightly nominal GDP even out in to
Speaker 3: next year. Long ago and far away. You had to
Speaker 3: read Robert Lacy. I believe it was three or four
Speaker 3: books in Saudi Arabia. You had to read various others
Speaker 3: out of England, and then there was a more modern
Speaker 3: book by ellen Wald Saudi Inc. And all I know
Speaker 3: is right now my head is spinning simply because time
Speaker 3: has moved on, and I'm not sure the Royal Family
Speaker 3: of Saudi Arabia is the same as the royal family
Speaker 3: that I think I knew of Saudi Arabia, or at
Speaker 3: least what David Lean gave us and Lawrence of Arabia.
Speaker 3: Ellen Wall joins us the book is the one volume
Speaker 3: Saudi Yank. She's with the Atlantic Council on Energy. Ellen.
Speaker 3: Just as simple as I can put it, Who is
Speaker 3: the new Royal family of Saudi Arabia? And are they
Speaker 3: our ally?
Speaker 1: That's a really good question. I would say, in some
Speaker 1: ways they're very different, but in other ways they're very
Speaker 1: much the same. Are they our ally? I think the
Speaker 1: answer to that is no. I would say they're probably
Speaker 1: more of a strategic partner. But I think that Saudi
Speaker 1: Arabia sees America as their ally, and that can complicate
Speaker 1: things a lot.
Speaker 5: So I know there was or there's a deal in
Speaker 5: the works between the US and Saudi, you know, encompassing
Speaker 5: a lot of technological issues, a lot of economic issues.
Speaker 5: Can you summarize kind of what the discussion are between
Speaker 5: the US and the Saudis right now?
Speaker 1: Yeah, this was the really kind of big story earlier
Speaker 1: in the week that this US Saudi weapons diplomatic economic
Speaker 1: deal is nearing the finish line. And essentially it seems
Speaker 1: like the US's goal is really to limit Chinese influence
Speaker 1: in terms of Saudi technology. So they don't want Saudi
Speaker 1: Arabia using Chinese technology and their sensitive networks and things
Speaker 1: like that. So the US is going to provide as
Speaker 1: they call investments in ai Wantum computing. And yeah, also.
Speaker 3: And I don't mean to interrupt, but this is the
Speaker 3: first thing I dealt with this morning. So basically, we
Speaker 3: want to tell Saudi Arabia what to do with Chinese technology.
Speaker 3: Do we want to tell them they can't drive Chinese
Speaker 3: electric vehicles?
Speaker 1: That's a really good question. I think that they probably
Speaker 1: rather that Saudi's drive Rivian or not sorry, not Rivian
Speaker 1: out Lucid did vehicles, which the PIF has a big
Speaker 1: stake in that company. It's really unlikely that people in
Speaker 1: Saudi Arabia are going to be driving evs, considering the
Speaker 1: same they drive really long distances.
Speaker 5: I even got that right on the A Little World
Speaker 5: test exactly, all right, So so Ellen's let's talk about it.
Speaker 5: Brought out to kind of the global energy markets here,
Speaker 5: we've had both WTI and Brent Crew pull back a
Speaker 5: little bit from recent highs here. What's your kind of
Speaker 5: sense of where oil may be heading here and in
Speaker 5: your future?
Speaker 1: Yeah, this is a really good question, and does in
Speaker 1: some respects depend on on Saudi Arabia. It does seem
Speaker 1: like there's some economic weaknesses, some indications of economic weaknesses.
Speaker 1: We're looking at a lot of kind of some weaknesses
Speaker 1: in diesel and middle dissolates, which can be a troubling
Speaker 1: economic sign. In the past that has definitely signaled oncoming
Speaker 1: economic weakness.
Speaker 7: But on the other hand, it may not.
Speaker 1: We're looking at strong summer demand, though I think that
Speaker 1: once summer demand and you know, kind of rolls through,
Speaker 1: it's really quite questionable what we're going to be seeing
Speaker 1: in the fall. Globally, obviously, China matters a lot, and
Speaker 1: it's kind of unclear. There are sides of weaknesses, but
Speaker 1: then again, you never know what the Chinese government is
Speaker 1: going to do, and there's still importing a lot of oil.
Speaker 1: When it comes to kind of oil prices going up
Speaker 1: and down, I think we're seeing a pullback from a
Speaker 1: lot of the risk premium that had come on back
Speaker 1: when it looked like Iran and Israel might kind of
Speaker 1: destroy each other. I think that traders really thought there
Speaker 1: was a real possibility of war. But when you look
Speaker 1: at kind of the facts on the ground, neither of
Speaker 1: those countries is equipped to fight a war against each
Speaker 1: other at all. So I think it was much more
Speaker 1: likely that we were going to see kind of a
Speaker 1: cooling of tensions as opposed to continuing escalation.
Speaker 5: So Ellen, I guess OPEK next meeting around June.
Speaker 3: First.
Speaker 5: I'm just not sure how much we should all pay
Speaker 5: attention to OPEK these days. Are you going to approach it?
Speaker 1: That's a good point, especially because when I think when
Speaker 1: OPEK is doing its job well, we don't really need
Speaker 1: to pay attention to it because their job is really
Speaker 1: to keep prices stable, and actually prices have been fairly stable.
Speaker 1: They've really kept a lid on production. They've managed to,
Speaker 1: you know, to kind of keep everyone in line. But
Speaker 1: I do think that this US Saudi deal could have
Speaker 1: some impact because there is a sense that if it
Speaker 1: goes through, the Biden administration is going to be expecting
Speaker 1: the Saudis to increase production so that oil prices come
Speaker 1: down by the time November rolls around, and I'm not
Speaker 1: sure that the Saudis are really prepared or interested in
Speaker 1: doing that unless they get this full deal. So's it's
Speaker 1: going to be quite interesting. I think they might increase
Speaker 1: production in age two, or at least for one quarter
Speaker 1: if things are really tight for the summer.
Speaker 3: I mean, you don't do you don't do a market call.
Speaker 3: I get it. We're not doing market economics. You know,
Speaker 3: we're not trying to game out a barrel of oil.
Speaker 3: But we've gone ninety to eighty. As you say, do
Speaker 3: you have in your head a geopolitics a dynamic of
Speaker 3: supply and demand that gets you to seventy dollars rent?
Speaker 3: Or dare I say six zero sixty dollars rent?
Speaker 1: I think that's really tough in the current inflationary area
Speaker 1: where we are because a lot we always think of
Speaker 1: oil prices as causing inflation, but inflation also acts on
Speaker 1: oil prices. So we're talking about rise and costs in
Speaker 1: all aspects of oil production. Plus we've now got a
Speaker 1: very much consolidated US shale industry which is not going
Speaker 1: to re enter this kind of produce that all costs time.
Speaker 1: So I really don't think that unless we see some
Speaker 1: kind of economic collapse or recession, I don't think that
Speaker 1: there are the conditions in terms of supply to put
Speaker 1: us back into that sixty barrel rate.
Speaker 3: Just for a moment there, Ellen Walt sounded like Emerita
Speaker 3: send you know I mean, I mean, it's just great
Speaker 3: market oil nomics with Ellen. Ellen, thank you so much.
Speaker 3: We look forward to the next volume of Saudi Ink.
Speaker 3: It's dude, to say the least with all the changes.
Speaker 3: Ellen Wald with the Atlantic Council a wonderful book, really
Speaker 3: can't say enough and also Transversial Consulting founder. This is
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