1 00:00:00,080 --> 00:00:13,880 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm m Keene Jelie. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,720 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. The 5 00:00:27,840 --> 00:00:30,640 Speaker 1: big question, how do you tilt away from the United 6 00:00:30,680 --> 00:00:34,360 Speaker 1: States when it is the home of mega cap growth stocks. 7 00:00:34,360 --> 00:00:37,240 Speaker 1: I want to begin this show by asking that question 8 00:00:37,320 --> 00:00:40,120 Speaker 1: to James Affy of Aberdeen Standard Investments. James helped me 9 00:00:40,200 --> 00:00:45,120 Speaker 1: understand that it is the home to mega cap tech Apple, Amazon, Microsoft, 10 00:00:45,280 --> 00:00:47,720 Speaker 1: surging this year and back at all time highs for 11 00:00:47,760 --> 00:00:50,480 Speaker 1: all three of those stocks. Why would you tilt away 12 00:00:50,479 --> 00:00:54,760 Speaker 1: from that story towards the rest of the world. Yeah, 13 00:00:54,800 --> 00:00:57,040 Speaker 1: good morning, John. I mean if you had done so, 14 00:00:57,680 --> 00:01:01,560 Speaker 1: for whatever reason, then then obviously you would under performed significantly, 15 00:01:01,680 --> 00:01:07,560 Speaker 1: because globally equities have you had nowhere near the performance 16 00:01:07,560 --> 00:01:10,520 Speaker 1: that we've seen from some of these megacaptech names that 17 00:01:10,600 --> 00:01:14,720 Speaker 1: you've just described there. And that's not just in the 18 00:01:14,800 --> 00:01:18,880 Speaker 1: you know, immediate pre and a media post COVID period. 19 00:01:18,959 --> 00:01:20,840 Speaker 1: That is something which has been going on for some time. 20 00:01:20,880 --> 00:01:24,320 Speaker 1: I mean the Eurostocks Index is not far from the 21 00:01:24,360 --> 00:01:26,679 Speaker 1: same level it was at in the late nineties. When 22 00:01:26,720 --> 00:01:29,520 Speaker 1: you compare that to the performance of the US indices, 23 00:01:29,840 --> 00:01:33,280 Speaker 1: that the divergence is stark. So if you are a 24 00:01:33,360 --> 00:01:37,320 Speaker 1: value investor and you look at things like price to 25 00:01:37,400 --> 00:01:39,600 Speaker 1: earnings or price to sales, and you look at tech 26 00:01:39,680 --> 00:01:41,960 Speaker 1: names and say, I just can't justify own in these 27 00:01:42,040 --> 00:01:45,080 Speaker 1: names with such multiples, then obviously you've missed out to 28 00:01:45,120 --> 00:01:47,560 Speaker 1: this point. It is essentially a leap of faith. There 29 00:01:47,640 --> 00:01:50,480 Speaker 1: is no possible way that you can do a calculation 30 00:01:50,520 --> 00:01:54,280 Speaker 1: to justify the valuation of those big tech names. You 31 00:01:54,320 --> 00:01:57,520 Speaker 1: are merely investing in a narrative, in a belief that 32 00:01:57,560 --> 00:02:01,000 Speaker 1: they are able to turn what are either dominant market 33 00:02:01,000 --> 00:02:05,720 Speaker 1: positions currently or emerging market positions currently. In this in 34 00:02:05,720 --> 00:02:08,200 Speaker 1: the case of a name like Teslaw, you believe they 35 00:02:08,200 --> 00:02:10,440 Speaker 1: can convert that into you know, the winner takes all 36 00:02:10,520 --> 00:02:14,000 Speaker 1: and become a true global monopoly. And again you can't 37 00:02:14,000 --> 00:02:18,600 Speaker 1: prove that that is merely a leap of faith. I agree, James, 38 00:02:18,600 --> 00:02:22,040 Speaker 1: if there's different companies involved in these great roth stacks. 39 00:02:22,040 --> 00:02:24,880 Speaker 1: But what I find fascinating is what will be the 40 00:02:25,080 --> 00:02:29,360 Speaker 1: action of the value laggers. Do you just assume we 41 00:02:29,440 --> 00:02:32,839 Speaker 1: get one big combination, one big roll up of all 42 00:02:32,919 --> 00:02:37,720 Speaker 1: these companies generating low single digit revenue growth, and that 43 00:02:37,960 --> 00:02:42,280 Speaker 1: good cash flows well. For the way that the market 44 00:02:43,120 --> 00:02:47,680 Speaker 1: has evolved in time in recent years, certainly it doesn't 45 00:02:47,760 --> 00:02:50,240 Speaker 1: lend itself to that idea where there has been a 46 00:02:50,320 --> 00:02:55,639 Speaker 1: movement away from truly active bottom up stock picking investment 47 00:02:56,120 --> 00:03:01,680 Speaker 1: towards a factor investing, towards set to investing, towards passive 48 00:03:01,720 --> 00:03:04,840 Speaker 1: investing in all its form, and towards more sort of 49 00:03:04,840 --> 00:03:09,280 Speaker 1: price dominated strategies like like momentums and and such like. 50 00:03:09,520 --> 00:03:13,280 Speaker 1: And that does have the tendency to lump together similar 51 00:03:13,280 --> 00:03:19,160 Speaker 1: companies through various dimensions into one um, you know, analogous group, 52 00:03:19,360 --> 00:03:24,280 Speaker 1: and that really does presumably look attractive then to people 53 00:03:24,320 --> 00:03:26,919 Speaker 1: who are doing fundamental research and looking at the company's 54 00:03:27,120 --> 00:03:31,240 Speaker 1: bottom up. But you're you're wrong until until the masses 55 00:03:31,520 --> 00:03:34,120 Speaker 1: start to see the same things that you are, and 56 00:03:34,160 --> 00:03:37,000 Speaker 1: that can take a lot longer than than most investors 57 00:03:37,040 --> 00:03:40,200 Speaker 1: are patients can last. So it's a very tricky. It's 58 00:03:40,240 --> 00:03:42,520 Speaker 1: a very tricky situation. I think in that environment, to 59 00:03:42,560 --> 00:03:45,240 Speaker 1: be a value investor, to be a bottom up stock picker, 60 00:03:45,560 --> 00:03:47,200 Speaker 1: you have to be very long term, and you have 61 00:03:47,240 --> 00:03:49,200 Speaker 1: to accept that you may look wrong for a period 62 00:03:49,200 --> 00:03:51,720 Speaker 1: of time, and you also have to accept that markets 63 00:03:51,760 --> 00:03:54,960 Speaker 1: are not being moved around on a daily basis by 64 00:03:55,000 --> 00:03:57,320 Speaker 1: people who are doing the same type of analysis that 65 00:03:57,360 --> 00:04:01,440 Speaker 1: you are. You sound scope tical, James, and you're not alone. 66 00:04:01,480 --> 00:04:03,400 Speaker 1: A lot of people are very skeptical of this rally. 67 00:04:03,720 --> 00:04:06,200 Speaker 1: Yet it continues, and it continues on the heels of 68 00:04:06,440 --> 00:04:09,840 Speaker 1: very cheap money as well as governments around the world 69 00:04:10,080 --> 00:04:13,720 Speaker 1: pumping cash into their economies to try to keep things afloat. 70 00:04:14,200 --> 00:04:17,560 Speaker 1: Or your is your negativity being translated into a barish 71 00:04:17,680 --> 00:04:20,800 Speaker 1: view on US equities, on risk assets or is it 72 00:04:20,880 --> 00:04:23,240 Speaker 1: just sort of a displeasure at the moment, at this 73 00:04:23,320 --> 00:04:27,240 Speaker 1: uncomfortable moment that we're in. It's probably both, Lisa, to 74 00:04:27,279 --> 00:04:30,719 Speaker 1: be honesty, I'm definitely skeptical. Again, I think without being 75 00:04:30,760 --> 00:04:33,279 Speaker 1: so broad brush and just saying hey, big tech, you 76 00:04:33,320 --> 00:04:35,279 Speaker 1: know tech, tech, tech, tech, and you just say the 77 00:04:35,320 --> 00:04:37,400 Speaker 1: word tech a lot on and that that counts as 78 00:04:37,560 --> 00:04:40,320 Speaker 1: as an investment thesis. You know, I would look within 79 00:04:40,400 --> 00:04:43,000 Speaker 1: the tech group and say, there's quite a big difference 80 00:04:43,040 --> 00:04:46,000 Speaker 1: between what Amazon is doing and what and how Amazon 81 00:04:46,120 --> 00:04:49,560 Speaker 1: is able to manage its business through an economic cycle 82 00:04:49,920 --> 00:04:53,120 Speaker 1: versus Facebook. And there is also probably quite a big 83 00:04:53,120 --> 00:04:57,200 Speaker 1: difference between Amazon and its ability to not just survive, 84 00:04:57,279 --> 00:05:00,760 Speaker 1: but probably thrive in the post cove in a world 85 00:05:01,040 --> 00:05:04,240 Speaker 1: versus an auto manufacturer like Tesla. I just think that 86 00:05:04,320 --> 00:05:08,320 Speaker 1: the challenges that these businesses face are dramatically different and 87 00:05:08,400 --> 00:05:10,840 Speaker 1: that doesn't seem to be being reflected in stock prices, 88 00:05:10,880 --> 00:05:14,240 Speaker 1: which again I think is is part of this psychological 89 00:05:14,400 --> 00:05:18,120 Speaker 1: driver of equity returns that that's dominating at the moment. 90 00:05:18,120 --> 00:05:21,880 Speaker 1: I don't think it's it's necessarily to do with analysis, 91 00:05:21,920 --> 00:05:24,640 Speaker 1: but it's very much to do with psychology. Does that 92 00:05:24,720 --> 00:05:28,680 Speaker 1: make me bearish, Yes, it does. I truly believe that. 93 00:05:28,720 --> 00:05:31,320 Speaker 1: You know, my role as an investor is to is 94 00:05:31,360 --> 00:05:34,240 Speaker 1: to invest based on the fundamental research that I do, 95 00:05:34,279 --> 00:05:38,839 Speaker 1: that we do, and when things are expensive relative to 96 00:05:39,000 --> 00:05:42,960 Speaker 1: our understanding of what's going on in reality, then it 97 00:05:43,040 --> 00:05:45,200 Speaker 1: then it behooves us to to reflect that in our 98 00:05:45,240 --> 00:05:48,200 Speaker 1: portfolio positioning. And you know, again, I'm just looking at 99 00:05:48,240 --> 00:05:50,239 Speaker 1: some of these big tech names, looking at the change 100 00:05:50,240 --> 00:05:52,520 Speaker 1: in price of Tesla. I'm going to pick on Tesla, 101 00:05:52,560 --> 00:05:54,320 Speaker 1: but just looking at the change in price just in 102 00:05:54,400 --> 00:05:58,640 Speaker 1: five days, I can't possibly think that the outlook for 103 00:05:58,720 --> 00:06:02,719 Speaker 1: that company selling all tones of questionable quality in recent 104 00:06:02,800 --> 00:06:05,559 Speaker 1: years has changed so dramatically in such a short space 105 00:06:05,600 --> 00:06:07,360 Speaker 1: of time, and that would make me want to lean 106 00:06:07,360 --> 00:06:10,760 Speaker 1: in the opposite direction. James, I'd love to think that 107 00:06:10,760 --> 00:06:13,320 Speaker 1: the investor committee meeting Aberdeen Standard is a little bit 108 00:06:13,320 --> 00:06:16,080 Speaker 1: more sophisticated than you are, screaming tech multiple times around 109 00:06:16,080 --> 00:06:19,200 Speaker 1: the table for several hours. A narrative that has built 110 00:06:19,320 --> 00:06:21,440 Speaker 1: up over the last several days is that tiled away 111 00:06:21,440 --> 00:06:24,480 Speaker 1: from the United States, not because a style, not because 112 00:06:24,480 --> 00:06:27,880 Speaker 1: the composition of the indices, but because people believe that 113 00:06:27,920 --> 00:06:31,560 Speaker 1: the economic recovery that's being engineered in places like Europe, 114 00:06:31,760 --> 00:06:36,200 Speaker 1: places like China is more dependable, reliable than what we're 115 00:06:36,240 --> 00:06:38,720 Speaker 1: seeing play out here in the United States, which is 116 00:06:38,760 --> 00:06:42,440 Speaker 1: becoming increasingly more uncertain over the last several weeks. What 117 00:06:42,520 --> 00:06:44,680 Speaker 1: do you make of that argument, James, Yeah, I think 118 00:06:44,680 --> 00:06:46,760 Speaker 1: it's a really interesting one. John, I'm you know, my 119 00:06:47,760 --> 00:06:50,240 Speaker 1: before I'd even started to look into this, I was 120 00:06:50,320 --> 00:06:53,599 Speaker 1: skeptical immediately for for really the main reason being that 121 00:06:53,640 --> 00:06:55,719 Speaker 1: when the U s sneezes, the world catches a cold, 122 00:06:55,760 --> 00:06:58,520 Speaker 1: and the recent history has made that view. I think 123 00:06:58,560 --> 00:07:02,040 Speaker 1: stronger rather than weaker. The US is the only large 124 00:07:03,200 --> 00:07:07,160 Speaker 1: major economy which permanently runs the current account deficit, therefore 125 00:07:07,279 --> 00:07:10,560 Speaker 1: is a source of demand globally. China has been a 126 00:07:10,600 --> 00:07:14,400 Speaker 1: source of demand globally also, but that's that demand is 127 00:07:14,440 --> 00:07:18,200 Speaker 1: secondary to demand elsewhere predominantly, at least it has been 128 00:07:18,200 --> 00:07:21,920 Speaker 1: through history. The Chinese consumer is not yet there, consumption 129 00:07:21,920 --> 00:07:25,160 Speaker 1: maybe fifty of GDP in China, whereas it's closer to 130 00:07:25,760 --> 00:07:28,360 Speaker 1: in the US. So to me, it's very difficult for 131 00:07:28,360 --> 00:07:31,360 Speaker 1: the global economy to really be firing on all cylinders 132 00:07:31,400 --> 00:07:33,720 Speaker 1: without the US, so first and foremost, I think that 133 00:07:33,760 --> 00:07:36,560 Speaker 1: makes me skeptical. I think the other issue really is 134 00:07:36,600 --> 00:07:39,360 Speaker 1: that what we're seeing at the moment is the sugar high. 135 00:07:39,400 --> 00:07:41,920 Speaker 1: It doesn't really tell us anything about what the medium 136 00:07:41,960 --> 00:07:45,640 Speaker 1: term trajectory for economies is. With Europe, you run into 137 00:07:45,720 --> 00:07:49,160 Speaker 1: the same issues which have bedogged that region since the 138 00:07:49,280 --> 00:07:52,440 Speaker 1: late nineties when they've decided to form this monetary union. 139 00:07:52,440 --> 00:07:54,960 Speaker 1: And that is to say that it is it is incomplete. 140 00:07:55,400 --> 00:08:00,920 Speaker 1: There are structural rigidities, There are divergences across the YS economies, 141 00:08:01,400 --> 00:08:05,080 Speaker 1: and that does make it very difficult to generate sufficient 142 00:08:05,120 --> 00:08:07,640 Speaker 1: demand to get those economies up to capacity and start 143 00:08:07,680 --> 00:08:10,040 Speaker 1: to generate what wage and price pressures in a way 144 00:08:10,080 --> 00:08:14,120 Speaker 1: which would suggest an economy really motoring forward. So I 145 00:08:14,120 --> 00:08:16,320 Speaker 1: think it's interesting. I would also throw the currency in there. 146 00:08:16,520 --> 00:08:18,320 Speaker 1: The currency is a bit of a problem again, it's 147 00:08:18,320 --> 00:08:20,880 Speaker 1: a current account surplus region. It's more sensitive to the 148 00:08:20,920 --> 00:08:23,760 Speaker 1: currency than than potentially the US is. And so if 149 00:08:23,800 --> 00:08:27,320 Speaker 1: investors run too fast, too far, that can actually get 150 00:08:27,320 --> 00:08:29,200 Speaker 1: in the way of the recovery, so that that will 151 00:08:29,240 --> 00:08:33,280 Speaker 1: be want to watch as well, James Effete, appreciate your 152 00:08:33,280 --> 00:08:35,400 Speaker 1: time this morning. You want to get from Aberdeen Standard 153 00:08:35,440 --> 00:08:37,880 Speaker 1: Investments on one of the debates of the moment, Tom King, 154 00:08:37,960 --> 00:08:40,240 Speaker 1: which is the rest of award versus the United States. 155 00:08:40,440 --> 00:08:43,000 Speaker 1: But it's a different debate. Now there's a belief, how 156 00:08:43,160 --> 00:08:45,640 Speaker 1: by somehow, by many, not by me, that maybe because 157 00:08:45,640 --> 00:08:48,160 Speaker 1: the United States might be the source of instability for 158 00:08:48,200 --> 00:08:50,360 Speaker 1: the global economy, given what we're seeing play out in 159 00:08:50,360 --> 00:08:53,000 Speaker 1: many states in America right now, that your money, your 160 00:08:53,040 --> 00:08:57,000 Speaker 1: capital is better out swear in regions like Europe and 161 00:08:57,000 --> 00:09:11,920 Speaker 1: in places like China. Isaac Wilkansky out of Ohio Wesleyan 162 00:09:12,240 --> 00:09:16,199 Speaker 1: has a beautiful Midwest field for the policy of all 163 00:09:16,240 --> 00:09:19,880 Speaker 1: these Congress people, all these Senate people as well. He 164 00:09:19,960 --> 00:09:23,640 Speaker 1: joins us down from compass research, Isaac, I love within 165 00:09:23,720 --> 00:09:27,640 Speaker 1: your detailed note, how you gross up to one point 166 00:09:27,679 --> 00:09:32,720 Speaker 1: five trillion. So we're talking one trillion, Isaac Boltanski is 167 00:09:32,760 --> 00:09:36,360 Speaker 1: talking one point five trillion. Does that tell me the 168 00:09:36,400 --> 00:09:40,960 Speaker 1: eventual bill is going to be two trillion dollars? It 169 00:09:41,040 --> 00:09:43,240 Speaker 1: tells you it's going to be higher than a trillion, 170 00:09:43,400 --> 00:09:46,040 Speaker 1: And it tells you that this Congress is more willing 171 00:09:46,120 --> 00:09:50,240 Speaker 1: than any Congress before it to spend money. And the 172 00:09:50,320 --> 00:09:54,400 Speaker 1: reality is, deficit hawks are an endangered species on Capitol Hill. 173 00:09:54,840 --> 00:09:57,640 Speaker 1: And so when we know that there's going to be 174 00:09:57,679 --> 00:10:00,800 Speaker 1: a legislative vehicle, which we know there will be a 175 00:10:00,800 --> 00:10:05,800 Speaker 1: Phase four vehicle, it will become law before the conventions. 176 00:10:05,840 --> 00:10:09,319 Speaker 1: So investors should expect it to become law by early August. 177 00:10:10,280 --> 00:10:13,200 Speaker 1: That vehicle was moving and everyone is going to try 178 00:10:13,240 --> 00:10:16,839 Speaker 1: to hang their ornament on the Christmas tree, and tom 179 00:10:16,960 --> 00:10:19,800 Speaker 1: when that happens, the price tad gets bigger. And so 180 00:10:19,880 --> 00:10:22,520 Speaker 1: I'm telling my folks a trillion and a half is 181 00:10:22,520 --> 00:10:26,800 Speaker 1: a fair assumption. At this point in time, Isaac, nobody 182 00:10:26,840 --> 00:10:29,360 Speaker 1: is worried about a deepening deficit in the United States, 183 00:10:29,400 --> 00:10:33,000 Speaker 1: as you said, whether they be Republicans, whether they be Democrats, 184 00:10:33,040 --> 00:10:35,640 Speaker 1: Which brings us to the election in November, people saying 185 00:10:35,679 --> 00:10:39,520 Speaker 1: that perhaps if Joe Biden wins, it won't mark much 186 00:10:39,640 --> 00:10:42,000 Speaker 1: of a change to policy. We might not get that 187 00:10:42,080 --> 00:10:44,920 Speaker 1: increase in taxes, and you'll get a doubling down on 188 00:10:44,960 --> 00:10:48,640 Speaker 1: some sort of infrastructure spending leading to a market neutral 189 00:10:48,760 --> 00:10:52,000 Speaker 1: or even market positive event. Can you pass through your 190 00:10:52,000 --> 00:10:56,240 Speaker 1: thinking there? Yeah, So when I talk to my clients 191 00:10:56,240 --> 00:10:59,520 Speaker 1: about what a blue wave scenario looks like, I think 192 00:10:59,559 --> 00:11:04,720 Speaker 1: it's easy just to bucket the issues into legislative and administrative. 193 00:11:05,400 --> 00:11:10,520 Speaker 1: On the legislative front, we will have a torrent of proposals, 194 00:11:10,559 --> 00:11:13,240 Speaker 1: everything from the Green New Deal to Medicare for all. 195 00:11:13,800 --> 00:11:16,400 Speaker 1: But you have to look at the votes and the 196 00:11:16,480 --> 00:11:19,680 Speaker 1: reality is if Democrats win the Senate, they will have 197 00:11:19,760 --> 00:11:24,360 Speaker 1: a very slim majority, and within that majority are red 198 00:11:24,600 --> 00:11:30,800 Speaker 1: state centrist Democrats like Mansion to Me Cinema. So you 199 00:11:30,840 --> 00:11:33,600 Speaker 1: have that three the co work there, who I think 200 00:11:33,600 --> 00:11:35,800 Speaker 1: will really dictate terms in the Senate and make it 201 00:11:35,880 --> 00:11:38,640 Speaker 1: much more difficult, if not impossible, we'll get some of 202 00:11:38,640 --> 00:11:42,400 Speaker 1: these priorities through. So I think that ultimately you would 203 00:11:42,440 --> 00:11:44,559 Speaker 1: see a tax bill by the end of next year 204 00:11:44,600 --> 00:11:47,439 Speaker 1: in a blue sweep, but it wouldn't be as onerous 205 00:11:47,480 --> 00:11:50,439 Speaker 1: as the Biden campaign has proposed. I think the corporate 206 00:11:50,480 --> 00:11:53,079 Speaker 1: rate would be three to four points higher, but it 207 00:11:53,080 --> 00:11:59,240 Speaker 1: wouldn't be nearly as expansive as the campaign is. As outlined, Isaac, 208 00:11:59,320 --> 00:12:01,160 Speaker 1: A lot of people agree with you, and we're seeing 209 00:12:01,160 --> 00:12:04,080 Speaker 1: an increasing number of notes that say something similar that 210 00:12:04,360 --> 00:12:06,680 Speaker 1: if we do get a Biden win as well as 211 00:12:06,760 --> 00:12:09,560 Speaker 1: Democratic sweep, it wouldn't be that negative from markets, I'm 212 00:12:09,600 --> 00:12:13,960 Speaker 1: wondering how much people are factoring a potential anti trust, 213 00:12:14,320 --> 00:12:18,360 Speaker 1: a regulatory push to break up companies, particularly big tech, 214 00:12:18,640 --> 00:12:22,160 Speaker 1: as they get bigger and bigger. So this is I 215 00:12:22,200 --> 00:12:24,280 Speaker 1: think this is the most important point. While we don't 216 00:12:24,320 --> 00:12:28,120 Speaker 1: need to fear the legislative agenda nearly as much, we 217 00:12:28,240 --> 00:12:33,080 Speaker 1: must be as investors cognizant of the administrative agenda, especially 218 00:12:33,120 --> 00:12:37,079 Speaker 1: as the administrative state has grown materially in recent decades. 219 00:12:37,120 --> 00:12:39,520 Speaker 1: And so I think that the easiest way to think 220 00:12:39,559 --> 00:12:44,600 Speaker 1: about this is to say, where has the proverbial pendulum 221 00:12:44,679 --> 00:12:47,839 Speaker 1: swung the most under the Trump administration, and we should 222 00:12:47,840 --> 00:12:51,480 Speaker 1: expect it to swing back the other direction with similar 223 00:12:51,520 --> 00:12:55,920 Speaker 1: force and here we're talking about energy, the environment, and healthcare. 224 00:12:56,240 --> 00:13:01,080 Speaker 1: Most notably the second tier is financial services UM and 225 00:13:01,160 --> 00:13:07,000 Speaker 1: so sorry, no, it's great. I mean I'm worried about 226 00:13:07,000 --> 00:13:09,920 Speaker 1: the Cleveland Indians getting renamed in the Washington Redskins. There's 227 00:13:09,920 --> 00:13:15,280 Speaker 1: all these other diversions Isaac away from actual policy prescription. 228 00:13:15,480 --> 00:13:18,880 Speaker 1: Come on, you're from Ohio. You know what's an election 229 00:13:18,960 --> 00:13:22,280 Speaker 1: year and all that matters forward is the election. Over 230 00:13:22,320 --> 00:13:26,800 Speaker 1: as John Farrell mentioned earlier, overlay the election. Now on 231 00:13:26,920 --> 00:13:30,200 Speaker 1: the next six weeks of fiscal stimulus, how does that 232 00:13:30,320 --> 00:13:34,680 Speaker 1: election ballet filter into getting to year one point five trillion. 233 00:13:37,040 --> 00:13:41,560 Speaker 1: Politicians aren't good at taking things away in any year, 234 00:13:41,960 --> 00:13:45,160 Speaker 1: especially not an election year when they're running for something. 235 00:13:45,760 --> 00:13:49,400 Speaker 1: And so with that motivation, lawmakers are going to return 236 00:13:49,440 --> 00:13:51,920 Speaker 1: to town and they are going to stroke a big 237 00:13:52,000 --> 00:13:56,680 Speaker 1: check aimed at unemployment insurance, another's round of recovery rebates, 238 00:13:57,080 --> 00:13:59,760 Speaker 1: and anywhere from five hundred to seven hundred fifty billion 239 00:13:59,800 --> 00:14:03,760 Speaker 1: dollars for states and local municipalities. There will be a big, 240 00:14:04,080 --> 00:14:08,160 Speaker 1: big fiscal package coming out of PC by early August, 241 00:14:08,240 --> 00:14:11,280 Speaker 1: in part because there is an election in November and 242 00:14:11,400 --> 00:14:19,000 Speaker 1: lawmakers are realizing that reopening is not synonymous with recovery, 243 00:14:19,320 --> 00:14:21,760 Speaker 1: and so there's going to be another slug of fiscal 244 00:14:21,800 --> 00:14:27,240 Speaker 1: assistance coming. Isaac. Fantastic work as a wise and appreciate 245 00:14:27,240 --> 00:14:30,160 Speaker 1: your time this morning, I said Boltanski that of compass point, 246 00:14:38,800 --> 00:14:41,240 Speaker 1: let's get started right now. We're gonna focus on the dollar. 247 00:14:41,280 --> 00:14:43,400 Speaker 1: We have. We've really been remissing on that over the 248 00:14:43,480 --> 00:14:46,160 Speaker 1: last number of days. Let's catch up quickly. Jordan Rochester 249 00:14:46,280 --> 00:14:50,440 Speaker 1: with us. He writes exceptionally acute notes for Numura, usually 250 00:14:50,480 --> 00:14:52,800 Speaker 1: about you know, Sterling. There was a point where Jordan 251 00:14:52,920 --> 00:14:56,960 Speaker 1: was Brexit this Brexit, that Brexit, Brexit, Brexit Brexit. But 252 00:14:57,200 --> 00:15:00,120 Speaker 1: right now he's really focused on this great mystery of 253 00:15:00,200 --> 00:15:04,360 Speaker 1: two thousand nineteen, which was a resiliency of the dollar. 254 00:15:04,680 --> 00:15:10,640 Speaker 1: Jordan Rochester, Can the dollar finally give way? And we can? Yes, 255 00:15:10,760 --> 00:15:12,960 Speaker 1: it can. I mean I was a dollar ball for 256 00:15:13,040 --> 00:15:16,280 Speaker 1: kuhit a long time towards the end of twenty into 257 00:15:16,320 --> 00:15:19,040 Speaker 1: this year, and it was a few factors driving at 258 00:15:19,040 --> 00:15:21,520 Speaker 1: the US performer story. And when it comes to the 259 00:15:21,560 --> 00:15:24,400 Speaker 1: big dollar, you can talk about so many different topics 260 00:15:25,120 --> 00:15:27,440 Speaker 1: to express a view, but really Tom it boils down 261 00:15:27,480 --> 00:15:30,720 Speaker 1: to do you think the US growth will outperform the 262 00:15:30,760 --> 00:15:33,040 Speaker 1: rest of the world. That's it. If you know those 263 00:15:33,320 --> 00:15:36,320 Speaker 1: that simple variable, that that differential, you know where the 264 00:15:36,360 --> 00:15:39,120 Speaker 1: dollars going to go. And what's quite different about this 265 00:15:39,320 --> 00:15:43,640 Speaker 1: crisis is we've had an extra ordinary response from Europe 266 00:15:43,720 --> 00:15:48,320 Speaker 1: compared to the last crisis before a decade ago, and 267 00:15:48,440 --> 00:15:51,600 Speaker 1: also the policies they've used as well, So these sort 268 00:15:51,640 --> 00:15:54,280 Speaker 1: of job retention schemes which are much more widespread in 269 00:15:54,320 --> 00:15:57,040 Speaker 1: the Euro Area and the UK compared to the US. 270 00:15:57,640 --> 00:16:00,200 Speaker 1: It should mean that when we do reopen, which we are, 271 00:16:00,680 --> 00:16:03,080 Speaker 1: we have a snap back where you have everybody back 272 00:16:03,120 --> 00:16:06,360 Speaker 1: at at work to some degree at least, and it's 273 00:16:06,440 --> 00:16:09,160 Speaker 1: much faster as well, where in the US there's going 274 00:16:09,200 --> 00:16:11,800 Speaker 1: to be a bit more of a sluggish recovery as 275 00:16:11,920 --> 00:16:14,240 Speaker 1: the market's going to do the job instead, and so 276 00:16:14,360 --> 00:16:16,600 Speaker 1: you just see people having to look for jobs. And yes, 277 00:16:16,680 --> 00:16:19,480 Speaker 1: there will be an improvement in the jobs market as 278 00:16:19,560 --> 00:16:22,280 Speaker 1: the economy reopened, but at the same time, it won't 279 00:16:22,280 --> 00:16:25,240 Speaker 1: be that snap back that's merely full employment that the 280 00:16:25,320 --> 00:16:28,560 Speaker 1: governments in the Euro Area have tried to construct here. 281 00:16:28,880 --> 00:16:30,880 Speaker 1: So for that reason alone, we've got a much more 282 00:16:30,960 --> 00:16:34,400 Speaker 1: optimistic outlook for the Euro Area this year into next, 283 00:16:34,840 --> 00:16:37,040 Speaker 1: and then that's before I talk about all the other 284 00:16:37,080 --> 00:16:39,680 Speaker 1: things going on, such as the sort of second wave 285 00:16:39,840 --> 00:16:42,560 Speaker 1: risks in the US. The lockdown has taken place right 286 00:16:42,600 --> 00:16:44,720 Speaker 1: now and the risks to that, and then there's the 287 00:16:44,800 --> 00:16:47,000 Speaker 1: U S election as well. Before I get into all 288 00:16:47,040 --> 00:16:49,840 Speaker 1: of that, plants. That's why I think things are. US 289 00:16:49,920 --> 00:16:53,440 Speaker 1: growth underperformed the Euro area and as a result, the 290 00:16:53,560 --> 00:16:57,600 Speaker 1: dollar weekend. It's Jordan's Sometimes it is really simple. Show 291 00:16:57,680 --> 00:16:59,600 Speaker 1: me where global risk appetite is and I'll show you 292 00:16:59,640 --> 00:17:01,320 Speaker 1: that our action of the dollar. But you're asking me 293 00:17:01,400 --> 00:17:03,760 Speaker 1: to imagine something a little bit different. It's a world 294 00:17:03,800 --> 00:17:08,600 Speaker 1: where the US stumbles and risk appetite remains elevated elsewhere. 295 00:17:09,359 --> 00:17:13,240 Speaker 1: Is that really a world you can imagine? It's possible, John, 296 00:17:13,440 --> 00:17:16,040 Speaker 1: I know it's not normal. We're used to whenever the 297 00:17:16,520 --> 00:17:20,360 Speaker 1: US sneezes, the world get to cough. Well, in this circumstance, 298 00:17:20,440 --> 00:17:23,040 Speaker 1: it's possible that the US still grows, John, but it 299 00:17:23,119 --> 00:17:24,960 Speaker 1: doesn't grow as facts as everywhere else. So that's the 300 00:17:25,080 --> 00:17:28,640 Speaker 1: scenario we're talking about. So there will be abound back 301 00:17:28,680 --> 00:17:31,240 Speaker 1: in American growth. There's not be too pessimistic. The point 302 00:17:31,280 --> 00:17:33,119 Speaker 1: we're making is it will the speed less than how 303 00:17:33,200 --> 00:17:35,639 Speaker 1: to where and then okay, let's talk a little bit 304 00:17:35,680 --> 00:17:38,920 Speaker 1: about the other factors driving this. So, because you've got 305 00:17:39,240 --> 00:17:42,480 Speaker 1: rising cases in the US, it's pretty clear from the data, 306 00:17:42,600 --> 00:17:46,200 Speaker 1: it's common sense to rising cases leads to less economic 307 00:17:46,240 --> 00:17:48,960 Speaker 1: activity as folks are just worried about going to the restaurant, 308 00:17:49,200 --> 00:17:51,800 Speaker 1: going to the bar. We're already seeing that play out 309 00:17:52,359 --> 00:17:55,520 Speaker 1: in the mobility statistics for certain states and certain areas, 310 00:17:55,880 --> 00:17:58,200 Speaker 1: even in this early stage of that sort of revived 311 00:17:58,240 --> 00:18:01,240 Speaker 1: second wave, sort of rolling wave stories in the US. 312 00:18:01,640 --> 00:18:03,960 Speaker 1: So you're going to have in this quarter in the 313 00:18:04,119 --> 00:18:07,720 Speaker 1: US struggling with COVID nineteen cases. And then when we 314 00:18:07,760 --> 00:18:11,160 Speaker 1: get to the August period, we'll be talking about Joe 315 00:18:11,200 --> 00:18:14,560 Speaker 1: Biden vice presidential pick, We'll be talking about higher taxes 316 00:18:14,600 --> 00:18:17,399 Speaker 1: in the US, and as a result, you'll have the 317 00:18:17,520 --> 00:18:21,760 Speaker 1: market pricing a less optimistic view on US assets versus 318 00:18:21,800 --> 00:18:24,880 Speaker 1: the rest of the world. Well, Jordan, show me where 319 00:18:24,880 --> 00:18:26,920 Speaker 1: to push through that dollar weakness in a world where 320 00:18:26,960 --> 00:18:32,200 Speaker 1: no one wants a stronger currency. Yes, that's good point. Well, 321 00:18:32,280 --> 00:18:34,760 Speaker 1: you're seeing it play out already. You've seeing some Chinese 322 00:18:34,760 --> 00:18:38,040 Speaker 1: remombi strengths this week. You're seeing euros start to go higher, 323 00:18:38,080 --> 00:18:41,440 Speaker 1: and I think the way policymakers at central banks will 324 00:18:41,560 --> 00:18:45,240 Speaker 1: square the circle is it's okay, John, if your currency 325 00:18:45,320 --> 00:18:49,600 Speaker 1: appreciates for good reasons. In the past, we've had episodes 326 00:18:49,680 --> 00:18:52,640 Speaker 1: where we were dealing with deflation risks in the Eurozone 327 00:18:52,720 --> 00:18:55,200 Speaker 1: that we had a strong currency. I'm thinking back to 328 00:18:55,720 --> 00:18:58,040 Speaker 1: seventeen and so that was when it was a pretty 329 00:18:58,080 --> 00:19:00,920 Speaker 1: tricky issue for the e TB. But I've think policymakers 330 00:19:00,960 --> 00:19:04,520 Speaker 1: globally will be happy if they're able to successfully reopen 331 00:19:04,600 --> 00:19:08,800 Speaker 1: their economies without COVID nineteen picking up too strongly successfully 332 00:19:08,840 --> 00:19:11,240 Speaker 1: reopened them about too much damage to the labor market. 333 00:19:12,000 --> 00:19:13,680 Speaker 1: I think the current is gonna be laughing on their 334 00:19:13,720 --> 00:19:16,360 Speaker 1: mind as if they can get those two things done 335 00:19:16,720 --> 00:19:21,200 Speaker 1: with a good success rate. Jordan, one of the bull 336 00:19:21,240 --> 00:19:25,000 Speaker 1: cases that you mentioned for the Eurozone was their supplemental 337 00:19:25,119 --> 00:19:27,560 Speaker 1: income to people who had lost their jobs or lost 338 00:19:27,640 --> 00:19:31,040 Speaker 1: work as a result of the coronavirus. And yet you 339 00:19:31,160 --> 00:19:33,960 Speaker 1: have economists from a number of places saying this is 340 00:19:34,080 --> 00:19:37,359 Speaker 1: only going to perpetuate zombie jobs and zombie companies and 341 00:19:37,440 --> 00:19:39,960 Speaker 1: will lead to a lack of productivity in the region 342 00:19:40,320 --> 00:19:43,920 Speaker 1: and a slower recovery going forward, especially because some of 343 00:19:44,000 --> 00:19:46,199 Speaker 1: these programs may not be reupt and if they are, 344 00:19:46,440 --> 00:19:49,480 Speaker 1: it will cause a huge deficit in the region. What's 345 00:19:49,480 --> 00:19:53,200 Speaker 1: your counter argument to that? I guess I mean there's 346 00:19:53,240 --> 00:19:55,720 Speaker 1: some points that are definitely valid. If you're propping up 347 00:19:55,760 --> 00:19:58,360 Speaker 1: a job that does no longer exist, then that needs 348 00:19:58,400 --> 00:20:01,080 Speaker 1: to set some come to an end. Well that the 349 00:20:01,200 --> 00:20:04,119 Speaker 1: question is how many jobs no longer exists anymore? We 350 00:20:04,240 --> 00:20:06,919 Speaker 1: don't know. And the other point is those workers who 351 00:20:06,960 --> 00:20:09,680 Speaker 1: are currently on that job retention scheme, they're not getting 352 00:20:09,720 --> 00:20:11,960 Speaker 1: that full salary, they're getting a portion of that, and 353 00:20:12,040 --> 00:20:14,200 Speaker 1: they also they want to go to work too, so 354 00:20:14,560 --> 00:20:17,360 Speaker 1: while they're in this furlough period, they might be looking 355 00:20:17,400 --> 00:20:20,560 Speaker 1: for jobs elsewhere. So what it's doing is it's providing 356 00:20:20,600 --> 00:20:24,080 Speaker 1: that social cursed suffer in the meantime to allow those 357 00:20:24,160 --> 00:20:27,040 Speaker 1: workers to find the new jobs at a sort of 358 00:20:27,080 --> 00:20:29,400 Speaker 1: pace that's better for them, rather than rushing into things. 359 00:20:29,680 --> 00:20:32,240 Speaker 1: So my counsel ivance day is it's never going to 360 00:20:32,320 --> 00:20:35,800 Speaker 1: be forever. And the second point is as long as 361 00:20:35,840 --> 00:20:38,320 Speaker 1: the governments don't try to pay it back quickly, the 362 00:20:38,440 --> 00:20:40,639 Speaker 1: recovery should be okay. What do I mean by that? 363 00:20:41,240 --> 00:20:44,120 Speaker 1: As long as we avoid austerity in the same way 364 00:20:44,160 --> 00:20:46,520 Speaker 1: we saw in two thousand and ten and eleven, things 365 00:20:46,560 --> 00:20:48,800 Speaker 1: should be better to the Eurozone benefit, the global growth 366 00:20:49,160 --> 00:20:52,280 Speaker 1: better for the UK as long as governments don't follow 367 00:20:52,400 --> 00:20:54,680 Speaker 1: that sort of old Playbork from two thousand and ten, 368 00:20:55,080 --> 00:21:00,040 Speaker 1: the recovery should remain. In fact, Jodan right, should a 369 00:21:00,160 --> 00:21:02,520 Speaker 1: quick question here away from euro dollar what is the 370 00:21:02,600 --> 00:21:07,760 Speaker 1: best way to express dollar weakness? Which pair works well? 371 00:21:07,840 --> 00:21:10,280 Speaker 1: We're looking at sort of risk on proxies, so we 372 00:21:10,400 --> 00:21:13,480 Speaker 1: have the likes of uh sort of long or kiwi 373 00:21:13,640 --> 00:21:17,080 Speaker 1: long er. Again. I would usually talk about how we 374 00:21:17,280 --> 00:21:20,159 Speaker 1: should see that the dollar block out performing this global 375 00:21:20,200 --> 00:21:23,719 Speaker 1: growth rather such as a dollar but emerging markets might 376 00:21:23,760 --> 00:21:25,840 Speaker 1: be the better play here, such as what's going on 377 00:21:25,920 --> 00:21:30,119 Speaker 1: the China got the ball Chinese exuties this week, and 378 00:21:30,280 --> 00:21:32,800 Speaker 1: our guys in China are saying, don't argue against it. 379 00:21:33,440 --> 00:21:35,879 Speaker 1: That's saying, essentially what we wanted to see in China 380 00:21:36,119 --> 00:21:38,960 Speaker 1: is actually much more fiscal steamless in the pipeline and 381 00:21:39,040 --> 00:21:41,920 Speaker 1: as a result, don't fight the ball rally that was 382 00:21:41,960 --> 00:21:45,080 Speaker 1: seeing in China. Tom JOHNA Rochester, always great to catch 383 00:21:45,160 --> 00:21:57,359 Speaker 1: up with you joining us from Nomora right now. We 384 00:21:57,440 --> 00:21:59,880 Speaker 1: could have a two hour conversation with our next guest, 385 00:22:00,040 --> 00:22:02,800 Speaker 1: Edward Morris, joins us from City Group, of person known 386 00:22:02,880 --> 00:22:08,720 Speaker 1: globally for just incredibly pressing global macro views on hydrocarbons 387 00:22:08,760 --> 00:22:12,000 Speaker 1: and yes on commodities in general. But today we have 388 00:22:12,080 --> 00:22:14,080 Speaker 1: to rip up the script. We have Ed Morris with 389 00:22:14,240 --> 00:22:16,919 Speaker 1: us of City Group, and what it must be about 390 00:22:17,359 --> 00:22:21,160 Speaker 1: is what Mr Buffett did yesterday. And there is upstream 391 00:22:21,520 --> 00:22:24,960 Speaker 1: maybe that's the world of Ed Morris, And there's downstream 392 00:22:25,000 --> 00:22:29,320 Speaker 1: where Lisa fills the homer age too full of the 393 00:22:29,440 --> 00:22:32,720 Speaker 1: latest flavor of gasoline. And then there's that thing Ed 394 00:22:32,800 --> 00:22:38,760 Speaker 1: Morris midstream where Mr Buffett Daly yesterday looking at pipelines 395 00:22:38,840 --> 00:22:44,720 Speaker 1: of dominion tell us about the midstream value play that's 396 00:22:44,840 --> 00:22:48,320 Speaker 1: out there? Are there many more dominions to be played 397 00:22:48,400 --> 00:22:52,080 Speaker 1: by the big money there there are. I mean, we 398 00:22:52,280 --> 00:22:55,880 Speaker 1: were in a distressed environment at the moment. You can't 399 00:22:56,160 --> 00:23:00,280 Speaker 1: overexaggerate that. Uh. And we're looking forward. And as you 400 00:23:00,359 --> 00:23:03,320 Speaker 1: look forward to the American production of oil and gas 401 00:23:03,520 --> 00:23:07,320 Speaker 1: is going to grow UM. And as it grows, those 402 00:23:07,359 --> 00:23:09,960 Speaker 1: who have the capacity to move it from wherever it's 403 00:23:09,960 --> 00:23:12,359 Speaker 1: produced to wherever it's needed are going to get a 404 00:23:12,440 --> 00:23:16,200 Speaker 1: throughput boost UM. And that throughput boost you know, will 405 00:23:16,280 --> 00:23:20,000 Speaker 1: increase the value of those stream properties, depending of course 406 00:23:20,040 --> 00:23:22,680 Speaker 1: on where they are. But yes, it's was a savvy play. 407 00:23:22,760 --> 00:23:26,200 Speaker 1: Do you think all right is a savvy play on 408 00:23:26,320 --> 00:23:30,200 Speaker 1: the pipeline industry or on the natural gas universe, which 409 00:23:30,240 --> 00:23:35,520 Speaker 1: has been particularly beaten up. Uh, the natural gas has 410 00:23:35,560 --> 00:23:38,359 Speaker 1: been beaten up in a different way from the oil side. 411 00:23:38,400 --> 00:23:42,479 Speaker 1: They're both opportunities. Um. We had another thing that happened yesterday, 412 00:23:42,600 --> 00:23:47,399 Speaker 1: namely a court deciding that the Dakota Access pipeline had 413 00:23:47,440 --> 00:23:50,440 Speaker 1: to be shut on August five, UM, and that could 414 00:23:50,520 --> 00:23:54,080 Speaker 1: create another opportunity for another condiment stream play. Uh. If 415 00:23:54,200 --> 00:23:56,480 Speaker 1: you can't get it out by pipe from Dakota, you 416 00:23:56,600 --> 00:23:58,920 Speaker 1: have to get it out somehow, and rail is the 417 00:23:59,000 --> 00:24:02,520 Speaker 1: next best things. Uh, there are there are other other 418 00:24:03,200 --> 00:24:06,600 Speaker 1: dislocations in the country other than the one that's on 419 00:24:06,680 --> 00:24:09,480 Speaker 1: the East coast, and the east coast problem is in 420 00:24:09,640 --> 00:24:13,160 Speaker 1: part of a problem related to the southeast, in particular, 421 00:24:13,280 --> 00:24:17,800 Speaker 1: where natural gas is no longer seen as the incremental 422 00:24:18,520 --> 00:24:23,240 Speaker 1: um choice of fuels for for the, for the, for the, 423 00:24:23,760 --> 00:24:26,760 Speaker 1: for the for the electricity industry. So the power sector 424 00:24:27,240 --> 00:24:29,840 Speaker 1: is looking at kind of stagnant growth on the end 425 00:24:29,920 --> 00:24:34,440 Speaker 1: use side and in that stagnant growth, there's increase in renewables, 426 00:24:34,480 --> 00:24:36,560 Speaker 1: and the increase in new renewables will come at the 427 00:24:36,640 --> 00:24:40,280 Speaker 1: expense of natural gas. That's kind of un increment, But 428 00:24:40,440 --> 00:24:42,200 Speaker 1: there's plenty of flow that's going to go through in 429 00:24:42,240 --> 00:24:47,200 Speaker 1: the meantime. And Tom was sort of the conversation aptly 430 00:24:47,359 --> 00:24:51,120 Speaker 1: talking about the difference between upstream and midstream and downstream. 431 00:24:51,640 --> 00:24:55,200 Speaker 1: Notwithstanding his discussion of my hummer usage, I will say 432 00:24:55,640 --> 00:24:59,240 Speaker 1: there is a question about whether Warren Buffett's play, not 433 00:24:59,359 --> 00:25:02,840 Speaker 1: only with this particular purchase, but also the occidental equity 434 00:25:02,920 --> 00:25:05,640 Speaker 1: investment that he made earlier this year, is a bet 435 00:25:05,800 --> 00:25:08,560 Speaker 1: that the so often fossil fuels has gone too far, 436 00:25:08,760 --> 00:25:12,600 Speaker 1: too fast. Do you think that that view holds merriage, 437 00:25:12,640 --> 00:25:15,719 Speaker 1: that we can see further upside in the entire fossil 438 00:25:15,760 --> 00:25:20,960 Speaker 1: fuel complex, given how beaten up it has gotten this year, Yes, 439 00:25:21,080 --> 00:25:22,760 Speaker 1: we think so. And if you if you look at 440 00:25:22,800 --> 00:25:26,679 Speaker 1: the data, uh, you know, the the biggest drop has 441 00:25:26,760 --> 00:25:31,520 Speaker 1: been in the upstream side. Drilling activity has collapsed from 442 00:25:32,200 --> 00:25:34,920 Speaker 1: over six d eighty oil directed ricks at the beginning 443 00:25:34,960 --> 00:25:37,840 Speaker 1: of the year to under two hundred right now. Uh. 444 00:25:38,040 --> 00:25:41,520 Speaker 1: PRAT crews have collapsed from the three hundred level too, 445 00:25:41,800 --> 00:25:44,919 Speaker 1: well under a hundred UM and we think that's the bottom. 446 00:25:45,080 --> 00:25:48,520 Speaker 1: So I think if you look back to July, from 447 00:25:48,760 --> 00:25:52,720 Speaker 1: September and even more from next January, we'll see that 448 00:25:52,760 --> 00:25:55,320 Speaker 1: we're probably at the bottom right now. Uh, And that 449 00:25:55,760 --> 00:25:58,000 Speaker 1: given where prices are and where we expect them to go, 450 00:25:58,480 --> 00:26:01,200 Speaker 1: we're going to see a pickup of of drilling activity 451 00:26:01,359 --> 00:26:05,240 Speaker 1: and the pickup of completion activity. And uh, that will 452 00:26:05,280 --> 00:26:08,000 Speaker 1: be the case in both the oil and gas. On 453 00:26:08,080 --> 00:26:11,800 Speaker 1: the gas side, the pickup is gonna be very priced driven. 454 00:26:12,040 --> 00:26:15,000 Speaker 1: In our judgment, we saw prices getting out of the 455 00:26:15,600 --> 00:26:18,879 Speaker 1: Dallas seventy range for gas into above a dollar eighty 456 00:26:19,920 --> 00:26:23,480 Speaker 1: very quickly. That's because of somewhere weather. As we project 457 00:26:23,600 --> 00:26:26,119 Speaker 1: where the gas market is now in terms of supply 458 00:26:26,200 --> 00:26:28,600 Speaker 1: and demand and think about where it will be next year. 459 00:26:28,640 --> 00:26:31,880 Speaker 1: With thinking prices are going to be kind of from 460 00:26:31,920 --> 00:26:35,600 Speaker 1: their second quarter average probably double by the second quarter 461 00:26:35,800 --> 00:26:38,239 Speaker 1: of next year. So we are, we think at an 462 00:26:38,280 --> 00:26:43,360 Speaker 1: inflection point, UM and maybe buying assets at the distress 463 00:26:43,480 --> 00:26:47,919 Speaker 1: level um is is a wise move. UM. It depends 464 00:26:47,960 --> 00:26:49,560 Speaker 1: on you know what you're looking at in terms of 465 00:26:49,600 --> 00:26:52,879 Speaker 1: transactional analysis. But uh, you know, we think they'll be 466 00:26:52,960 --> 00:26:57,959 Speaker 1: consolidation ahead, and that consolidation is probably gonna lag by 467 00:26:58,000 --> 00:27:01,240 Speaker 1: another sixt eight months, but it'll certainly very likely to 468 00:27:01,320 --> 00:27:03,760 Speaker 1: be on the horizon by the first quarter next year, 469 00:27:05,440 --> 00:27:07,800 Speaker 1: and very quickly. Here a final question, if there is 470 00:27:07,880 --> 00:27:10,760 Speaker 1: an inflection on point that means of price in flex 471 00:27:10,840 --> 00:27:14,520 Speaker 1: as well, not out one year, but out two, three, 472 00:27:14,720 --> 00:27:18,800 Speaker 1: four years, where do you see brent crude a settling 473 00:27:18,960 --> 00:27:23,520 Speaker 1: at Is it substantially higher? Sure? I mean, if you 474 00:27:23,720 --> 00:27:26,320 Speaker 1: let's look at the very short to medium term horizon 475 00:27:26,400 --> 00:27:28,800 Speaker 1: and beyond the medium term horizon. So if we just 476 00:27:28,960 --> 00:27:31,400 Speaker 1: look at where the curtailments and capital spending have been, 477 00:27:31,520 --> 00:27:35,240 Speaker 1: where we expect US production to splyde to Canadian production 478 00:27:35,280 --> 00:27:39,440 Speaker 1: to splyde two as the global economy recovers, we're looking 479 00:27:39,680 --> 00:27:43,479 Speaker 1: at h at Brent at fifty h and above by 480 00:27:43,520 --> 00:27:45,560 Speaker 1: the end of the year and sixty by the end. 481 00:27:47,119 --> 00:27:49,919 Speaker 1: How durable that will be? Is? Is it? Very open question? 482 00:27:50,440 --> 00:27:53,200 Speaker 1: If you look at the economics of pure economics of 483 00:27:54,160 --> 00:27:57,720 Speaker 1: of drilling activity in the world as a whole, U 484 00:27:58,240 --> 00:28:01,480 Speaker 1: the world ought to be able to sustain not much 485 00:28:01,520 --> 00:28:04,160 Speaker 1: more than forty five to fift dollars about brent related 486 00:28:04,400 --> 00:28:07,560 Speaker 1: on a on a long term sustainable basis, because at 487 00:28:07,600 --> 00:28:10,240 Speaker 1: that price level, the world can produce an awful lot 488 00:28:10,280 --> 00:28:12,199 Speaker 1: of oil out of shale, out of deep water, out 489 00:28:12,200 --> 00:28:15,440 Speaker 1: of oil sat let alone, out of conventional But as 490 00:28:15,520 --> 00:28:19,479 Speaker 1: we get over you know this particular short term crunch, 491 00:28:20,080 --> 00:28:22,000 Speaker 1: we think Brent goes to sixty by the end of 492 00:28:22,080 --> 00:28:26,200 Speaker 1: next year. Interesting, Ed Morris, Thank you so much. Edward Morris' 493 00:28:26,280 --> 00:28:29,480 Speaker 1: City group, of course, how did their commodities research? Most 494 00:28:29,560 --> 00:28:33,360 Speaker 1: time we are particularly on what Mr Buffett wrought yesterday. 495 00:28:34,119 --> 00:28:38,200 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 496 00:28:38,400 --> 00:28:43,680 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 497 00:28:43,760 --> 00:28:48,000 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 498 00:28:48,040 --> 00:28:52,240 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.