WEBVTT - Surveillance: Oil At Inflection Point, Morse Says 0:00:00.080 --> 0:00:13.880 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm m Keene Jelie. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.720 Bloomberg dot Com, and of course on the Bloomberg. The 0:00:27.840 --> 0:00:30.640 big question, how do you tilt away from the United 0:00:30.680 --> 0:00:34.360 States when it is the home of mega cap growth stocks. 0:00:34.360 --> 0:00:37.240 I want to begin this show by asking that question 0:00:37.320 --> 0:00:40.120 to James Affy of Aberdeen Standard Investments. James helped me 0:00:40.200 --> 0:00:45.120 understand that it is the home to mega cap tech Apple, Amazon, Microsoft, 0:00:45.280 --> 0:00:47.720 surging this year and back at all time highs for 0:00:47.760 --> 0:00:50.480 all three of those stocks. Why would you tilt away 0:00:50.479 --> 0:00:54.760 from that story towards the rest of the world. Yeah, 0:00:54.800 --> 0:00:57.040 good morning, John. I mean if you had done so, 0:00:57.680 --> 0:01:01.560 for whatever reason, then then obviously you would under performed significantly, 0:01:01.680 --> 0:01:07.560 because globally equities have you had nowhere near the performance 0:01:07.560 --> 0:01:10.520 that we've seen from some of these megacaptech names that 0:01:10.600 --> 0:01:14.720 you've just described there. And that's not just in the 0:01:14.800 --> 0:01:18.880 you know, immediate pre and a media post COVID period. 0:01:18.959 --> 0:01:20.840 That is something which has been going on for some time. 0:01:20.880 --> 0:01:24.320 I mean the Eurostocks Index is not far from the 0:01:24.360 --> 0:01:26.679 same level it was at in the late nineties. When 0:01:26.720 --> 0:01:29.520 you compare that to the performance of the US indices, 0:01:29.840 --> 0:01:33.280 that the divergence is stark. So if you are a 0:01:33.360 --> 0:01:37.320 value investor and you look at things like price to 0:01:37.400 --> 0:01:39.600 earnings or price to sales, and you look at tech 0:01:39.680 --> 0:01:41.960 names and say, I just can't justify own in these 0:01:42.040 --> 0:01:45.080 names with such multiples, then obviously you've missed out to 0:01:45.120 --> 0:01:47.560 this point. It is essentially a leap of faith. There 0:01:47.640 --> 0:01:50.480 is no possible way that you can do a calculation 0:01:50.520 --> 0:01:54.280 to justify the valuation of those big tech names. You 0:01:54.320 --> 0:01:57.520 are merely investing in a narrative, in a belief that 0:01:57.560 --> 0:02:01.000 they are able to turn what are either dominant market 0:02:01.000 --> 0:02:05.720 positions currently or emerging market positions currently. In this in 0:02:05.720 --> 0:02:08.200 the case of a name like Teslaw, you believe they 0:02:08.200 --> 0:02:10.440 can convert that into you know, the winner takes all 0:02:10.520 --> 0:02:14.000 and become a true global monopoly. And again you can't 0:02:14.000 --> 0:02:18.600 prove that that is merely a leap of faith. I agree, James, 0:02:18.600 --> 0:02:22.040 if there's different companies involved in these great roth stacks. 0:02:22.040 --> 0:02:24.880 But what I find fascinating is what will be the 0:02:25.080 --> 0:02:29.360 action of the value laggers. Do you just assume we 0:02:29.440 --> 0:02:32.839 get one big combination, one big roll up of all 0:02:32.919 --> 0:02:37.720 these companies generating low single digit revenue growth, and that 0:02:37.960 --> 0:02:42.280 good cash flows well. For the way that the market 0:02:43.120 --> 0:02:47.680 has evolved in time in recent years, certainly it doesn't 0:02:47.760 --> 0:02:50.240 lend itself to that idea where there has been a 0:02:50.320 --> 0:02:55.639 movement away from truly active bottom up stock picking investment 0:02:56.120 --> 0:03:01.680 towards a factor investing, towards set to investing, towards passive 0:03:01.720 --> 0:03:04.840 investing in all its form, and towards more sort of 0:03:04.840 --> 0:03:09.280 price dominated strategies like like momentums and and such like. 0:03:09.520 --> 0:03:13.280 And that does have the tendency to lump together similar 0:03:13.280 --> 0:03:19.160 companies through various dimensions into one um, you know, analogous group, 0:03:19.360 --> 0:03:24.280 and that really does presumably look attractive then to people 0:03:24.320 --> 0:03:26.919 who are doing fundamental research and looking at the company's 0:03:27.120 --> 0:03:31.240 bottom up. But you're you're wrong until until the masses 0:03:31.520 --> 0:03:34.120 start to see the same things that you are, and 0:03:34.160 --> 0:03:37.000 that can take a lot longer than than most investors 0:03:37.040 --> 0:03:40.200 are patients can last. So it's a very tricky. It's 0:03:40.240 --> 0:03:42.520 a very tricky situation. I think in that environment, to 0:03:42.560 --> 0:03:45.240 be a value investor, to be a bottom up stock picker, 0:03:45.560 --> 0:03:47.200 you have to be very long term, and you have 0:03:47.240 --> 0:03:49.200 to accept that you may look wrong for a period 0:03:49.200 --> 0:03:51.720 of time, and you also have to accept that markets 0:03:51.760 --> 0:03:54.960 are not being moved around on a daily basis by 0:03:55.000 --> 0:03:57.320 people who are doing the same type of analysis that 0:03:57.360 --> 0:04:01.440 you are. You sound scope tical, James, and you're not alone. 0:04:01.480 --> 0:04:03.400 A lot of people are very skeptical of this rally. 0:04:03.720 --> 0:04:06.200 Yet it continues, and it continues on the heels of 0:04:06.440 --> 0:04:09.840 very cheap money as well as governments around the world 0:04:10.080 --> 0:04:13.720 pumping cash into their economies to try to keep things afloat. 0:04:14.200 --> 0:04:17.560 Or your is your negativity being translated into a barish 0:04:17.680 --> 0:04:20.800 view on US equities, on risk assets or is it 0:04:20.880 --> 0:04:23.240 just sort of a displeasure at the moment, at this 0:04:23.320 --> 0:04:27.240 uncomfortable moment that we're in. It's probably both, Lisa, to 0:04:27.279 --> 0:04:30.719 be honesty, I'm definitely skeptical. Again, I think without being 0:04:30.760 --> 0:04:33.279 so broad brush and just saying hey, big tech, you 0:04:33.320 --> 0:04:35.279 know tech, tech, tech, tech, and you just say the 0:04:35.320 --> 0:04:37.400 word tech a lot on and that that counts as 0:04:37.560 --> 0:04:40.320 as an investment thesis. You know, I would look within 0:04:40.400 --> 0:04:43.000 the tech group and say, there's quite a big difference 0:04:43.040 --> 0:04:46.000 between what Amazon is doing and what and how Amazon 0:04:46.120 --> 0:04:49.560 is able to manage its business through an economic cycle 0:04:49.920 --> 0:04:53.120 versus Facebook. And there is also probably quite a big 0:04:53.120 --> 0:04:57.200 difference between Amazon and its ability to not just survive, 0:04:57.279 --> 0:05:00.760 but probably thrive in the post cove in a world 0:05:01.040 --> 0:05:04.240 versus an auto manufacturer like Tesla. I just think that 0:05:04.320 --> 0:05:08.320 the challenges that these businesses face are dramatically different and 0:05:08.400 --> 0:05:10.840 that doesn't seem to be being reflected in stock prices, 0:05:10.880 --> 0:05:14.240 which again I think is is part of this psychological 0:05:14.400 --> 0:05:18.120 driver of equity returns that that's dominating at the moment. 0:05:18.120 --> 0:05:21.880 I don't think it's it's necessarily to do with analysis, 0:05:21.920 --> 0:05:24.640 but it's very much to do with psychology. Does that 0:05:24.720 --> 0:05:28.680 make me bearish, Yes, it does. I truly believe that. 0:05:28.720 --> 0:05:31.320 You know, my role as an investor is to is 0:05:31.360 --> 0:05:34.240 to invest based on the fundamental research that I do, 0:05:34.279 --> 0:05:38.839 that we do, and when things are expensive relative to 0:05:39.000 --> 0:05:42.960 our understanding of what's going on in reality, then it 0:05:43.040 --> 0:05:45.200 then it behooves us to to reflect that in our 0:05:45.240 --> 0:05:48.200 portfolio positioning. And you know, again, I'm just looking at 0:05:48.240 --> 0:05:50.239 some of these big tech names, looking at the change 0:05:50.240 --> 0:05:52.520 in price of Tesla. I'm going to pick on Tesla, 0:05:52.560 --> 0:05:54.320 but just looking at the change in price just in 0:05:54.400 --> 0:05:58.640 five days, I can't possibly think that the outlook for 0:05:58.720 --> 0:06:02.719 that company selling all tones of questionable quality in recent 0:06:02.800 --> 0:06:05.559 years has changed so dramatically in such a short space 0:06:05.600 --> 0:06:07.360 of time, and that would make me want to lean 0:06:07.360 --> 0:06:10.760 in the opposite direction. James, I'd love to think that 0:06:10.760 --> 0:06:13.320 the investor committee meeting Aberdeen Standard is a little bit 0:06:13.320 --> 0:06:16.080 more sophisticated than you are, screaming tech multiple times around 0:06:16.080 --> 0:06:19.200 the table for several hours. A narrative that has built 0:06:19.320 --> 0:06:21.440 up over the last several days is that tiled away 0:06:21.440 --> 0:06:24.480 from the United States, not because a style, not because 0:06:24.480 --> 0:06:27.880 the composition of the indices, but because people believe that 0:06:27.920 --> 0:06:31.560 the economic recovery that's being engineered in places like Europe, 0:06:31.760 --> 0:06:36.200 places like China is more dependable, reliable than what we're 0:06:36.240 --> 0:06:38.720 seeing play out here in the United States, which is 0:06:38.760 --> 0:06:42.440 becoming increasingly more uncertain over the last several weeks. What 0:06:42.520 --> 0:06:44.680 do you make of that argument, James, Yeah, I think 0:06:44.680 --> 0:06:46.760 it's a really interesting one. John, I'm you know, my 0:06:47.760 --> 0:06:50.240 before I'd even started to look into this, I was 0:06:50.320 --> 0:06:53.599 skeptical immediately for for really the main reason being that 0:06:53.640 --> 0:06:55.719 when the U s sneezes, the world catches a cold, 0:06:55.760 --> 0:06:58.520 and the recent history has made that view. I think 0:06:58.560 --> 0:07:02.040 stronger rather than weaker. The US is the only large 0:07:03.200 --> 0:07:07.160 major economy which permanently runs the current account deficit, therefore 0:07:07.279 --> 0:07:10.560 is a source of demand globally. China has been a 0:07:10.600 --> 0:07:14.400 source of demand globally also, but that's that demand is 0:07:14.440 --> 0:07:18.200 secondary to demand elsewhere predominantly, at least it has been 0:07:18.200 --> 0:07:21.920 through history. The Chinese consumer is not yet there, consumption 0:07:21.920 --> 0:07:25.160 maybe fifty of GDP in China, whereas it's closer to 0:07:25.760 --> 0:07:28.360 in the US. So to me, it's very difficult for 0:07:28.360 --> 0:07:31.360 the global economy to really be firing on all cylinders 0:07:31.400 --> 0:07:33.720 without the US, so first and foremost, I think that 0:07:33.760 --> 0:07:36.560 makes me skeptical. I think the other issue really is 0:07:36.600 --> 0:07:39.360 that what we're seeing at the moment is the sugar high. 0:07:39.400 --> 0:07:41.920 It doesn't really tell us anything about what the medium 0:07:41.960 --> 0:07:45.640 term trajectory for economies is. With Europe, you run into 0:07:45.720 --> 0:07:49.160 the same issues which have bedogged that region since the 0:07:49.280 --> 0:07:52.440 late nineties when they've decided to form this monetary union. 0:07:52.440 --> 0:07:54.960 And that is to say that it is it is incomplete. 0:07:55.400 --> 0:08:00.920 There are structural rigidities, There are divergences across the YS economies, 0:08:01.400 --> 0:08:05.080 and that does make it very difficult to generate sufficient 0:08:05.120 --> 0:08:07.640 demand to get those economies up to capacity and start 0:08:07.680 --> 0:08:10.040 to generate what wage and price pressures in a way 0:08:10.080 --> 0:08:14.120 which would suggest an economy really motoring forward. So I 0:08:14.120 --> 0:08:16.320 think it's interesting. I would also throw the currency in there. 0:08:16.520 --> 0:08:18.320 The currency is a bit of a problem again, it's 0:08:18.320 --> 0:08:20.880 a current account surplus region. It's more sensitive to the 0:08:20.920 --> 0:08:23.760 currency than than potentially the US is. And so if 0:08:23.800 --> 0:08:27.320 investors run too fast, too far, that can actually get 0:08:27.320 --> 0:08:29.200 in the way of the recovery, so that that will 0:08:29.240 --> 0:08:33.280 be want to watch as well, James Effete, appreciate your 0:08:33.280 --> 0:08:35.400 time this morning. You want to get from Aberdeen Standard 0:08:35.440 --> 0:08:37.880 Investments on one of the debates of the moment, Tom King, 0:08:37.960 --> 0:08:40.240 which is the rest of award versus the United States. 0:08:40.440 --> 0:08:43.000 But it's a different debate. Now there's a belief, how 0:08:43.160 --> 0:08:45.640 by somehow, by many, not by me, that maybe because 0:08:45.640 --> 0:08:48.160 the United States might be the source of instability for 0:08:48.200 --> 0:08:50.360 the global economy, given what we're seeing play out in 0:08:50.360 --> 0:08:53.000 many states in America right now, that your money, your 0:08:53.040 --> 0:08:57.000 capital is better out swear in regions like Europe and 0:08:57.000 --> 0:09:11.920 in places like China. Isaac Wilkansky out of Ohio Wesleyan 0:09:12.240 --> 0:09:16.199 has a beautiful Midwest field for the policy of all 0:09:16.240 --> 0:09:19.880 these Congress people, all these Senate people as well. He 0:09:19.960 --> 0:09:23.640 joins us down from compass research, Isaac, I love within 0:09:23.720 --> 0:09:27.640 your detailed note, how you gross up to one point 0:09:27.679 --> 0:09:32.720 five trillion. So we're talking one trillion, Isaac Boltanski is 0:09:32.760 --> 0:09:36.360 talking one point five trillion. Does that tell me the 0:09:36.400 --> 0:09:40.960 eventual bill is going to be two trillion dollars? It 0:09:41.040 --> 0:09:43.240 tells you it's going to be higher than a trillion, 0:09:43.400 --> 0:09:46.040 And it tells you that this Congress is more willing 0:09:46.120 --> 0:09:50.240 than any Congress before it to spend money. And the 0:09:50.320 --> 0:09:54.400 reality is, deficit hawks are an endangered species on Capitol Hill. 0:09:54.840 --> 0:09:57.640 And so when we know that there's going to be 0:09:57.679 --> 0:10:00.800 a legislative vehicle, which we know there will be a 0:10:00.800 --> 0:10:05.800 Phase four vehicle, it will become law before the conventions. 0:10:05.840 --> 0:10:09.319 So investors should expect it to become law by early August. 0:10:10.280 --> 0:10:13.200 That vehicle was moving and everyone is going to try 0:10:13.240 --> 0:10:16.839 to hang their ornament on the Christmas tree, and tom 0:10:16.960 --> 0:10:19.800 when that happens, the price tad gets bigger. And so 0:10:19.880 --> 0:10:22.520 I'm telling my folks a trillion and a half is 0:10:22.520 --> 0:10:26.800 a fair assumption. At this point in time, Isaac, nobody 0:10:26.840 --> 0:10:29.360 is worried about a deepening deficit in the United States, 0:10:29.400 --> 0:10:33.000 as you said, whether they be Republicans, whether they be Democrats, 0:10:33.040 --> 0:10:35.640 Which brings us to the election in November, people saying 0:10:35.679 --> 0:10:39.520 that perhaps if Joe Biden wins, it won't mark much 0:10:39.640 --> 0:10:42.000 of a change to policy. We might not get that 0:10:42.080 --> 0:10:44.920 increase in taxes, and you'll get a doubling down on 0:10:44.960 --> 0:10:48.640 some sort of infrastructure spending leading to a market neutral 0:10:48.760 --> 0:10:52.000 or even market positive event. Can you pass through your 0:10:52.000 --> 0:10:56.240 thinking there? Yeah, So when I talk to my clients 0:10:56.240 --> 0:10:59.520 about what a blue wave scenario looks like, I think 0:10:59.559 --> 0:11:04.720 it's easy just to bucket the issues into legislative and administrative. 0:11:05.400 --> 0:11:10.520 On the legislative front, we will have a torrent of proposals, 0:11:10.559 --> 0:11:13.240 everything from the Green New Deal to Medicare for all. 0:11:13.800 --> 0:11:16.400 But you have to look at the votes and the 0:11:16.480 --> 0:11:19.680 reality is if Democrats win the Senate, they will have 0:11:19.760 --> 0:11:24.360 a very slim majority, and within that majority are red 0:11:24.600 --> 0:11:30.800 state centrist Democrats like Mansion to Me Cinema. So you 0:11:30.840 --> 0:11:33.600 have that three the co work there, who I think 0:11:33.600 --> 0:11:35.800 will really dictate terms in the Senate and make it 0:11:35.880 --> 0:11:38.640 much more difficult, if not impossible, we'll get some of 0:11:38.640 --> 0:11:42.400 these priorities through. So I think that ultimately you would 0:11:42.440 --> 0:11:44.559 see a tax bill by the end of next year 0:11:44.600 --> 0:11:47.439 in a blue sweep, but it wouldn't be as onerous 0:11:47.480 --> 0:11:50.439 as the Biden campaign has proposed. I think the corporate 0:11:50.480 --> 0:11:53.079 rate would be three to four points higher, but it 0:11:53.080 --> 0:11:59.240 wouldn't be nearly as expansive as the campaign is. As outlined, Isaac, 0:11:59.320 --> 0:12:01.160 A lot of people agree with you, and we're seeing 0:12:01.160 --> 0:12:04.080 an increasing number of notes that say something similar that 0:12:04.360 --> 0:12:06.680 if we do get a Biden win as well as 0:12:06.760 --> 0:12:09.560 Democratic sweep, it wouldn't be that negative from markets, I'm 0:12:09.600 --> 0:12:13.960 wondering how much people are factoring a potential anti trust, 0:12:14.320 --> 0:12:18.360 a regulatory push to break up companies, particularly big tech, 0:12:18.640 --> 0:12:22.160 as they get bigger and bigger. So this is I 0:12:22.200 --> 0:12:24.280 think this is the most important point. While we don't 0:12:24.320 --> 0:12:28.120 need to fear the legislative agenda nearly as much, we 0:12:28.240 --> 0:12:33.080 must be as investors cognizant of the administrative agenda, especially 0:12:33.120 --> 0:12:37.079 as the administrative state has grown materially in recent decades. 0:12:37.120 --> 0:12:39.520 And so I think that the easiest way to think 0:12:39.559 --> 0:12:44.600 about this is to say, where has the proverbial pendulum 0:12:44.679 --> 0:12:47.839 swung the most under the Trump administration, and we should 0:12:47.840 --> 0:12:51.480 expect it to swing back the other direction with similar 0:12:51.520 --> 0:12:55.920 force and here we're talking about energy, the environment, and healthcare. 0:12:56.240 --> 0:13:01.080 Most notably the second tier is financial services UM and 0:13:01.160 --> 0:13:07.000 so sorry, no, it's great. I mean I'm worried about 0:13:07.000 --> 0:13:09.920 the Cleveland Indians getting renamed in the Washington Redskins. There's 0:13:09.920 --> 0:13:15.280 all these other diversions Isaac away from actual policy prescription. 0:13:15.480 --> 0:13:18.880 Come on, you're from Ohio. You know what's an election 0:13:18.960 --> 0:13:22.280 year and all that matters forward is the election. Over 0:13:22.320 --> 0:13:26.800 as John Farrell mentioned earlier, overlay the election. Now on 0:13:26.920 --> 0:13:30.200 the next six weeks of fiscal stimulus, how does that 0:13:30.320 --> 0:13:34.680 election ballet filter into getting to year one point five trillion. 0:13:37.040 --> 0:13:41.560 Politicians aren't good at taking things away in any year, 0:13:41.960 --> 0:13:45.160 especially not an election year when they're running for something. 0:13:45.760 --> 0:13:49.400 And so with that motivation, lawmakers are going to return 0:13:49.440 --> 0:13:51.920 to town and they are going to stroke a big 0:13:52.000 --> 0:13:56.680 check aimed at unemployment insurance, another's round of recovery rebates, 0:13:57.080 --> 0:13:59.760 and anywhere from five hundred to seven hundred fifty billion 0:13:59.800 --> 0:14:03.760 dollars for states and local municipalities. There will be a big, 0:14:04.080 --> 0:14:08.160 big fiscal package coming out of PC by early August, 0:14:08.240 --> 0:14:11.280 in part because there is an election in November and 0:14:11.400 --> 0:14:19.000 lawmakers are realizing that reopening is not synonymous with recovery, 0:14:19.320 --> 0:14:21.760 and so there's going to be another slug of fiscal 0:14:21.800 --> 0:14:27.240 assistance coming. Isaac. Fantastic work as a wise and appreciate 0:14:27.240 --> 0:14:30.160 your time this morning, I said Boltanski that of compass point, 0:14:38.800 --> 0:14:41.240 let's get started right now. We're gonna focus on the dollar. 0:14:41.280 --> 0:14:43.400 We have. We've really been remissing on that over the 0:14:43.480 --> 0:14:46.160 last number of days. Let's catch up quickly. Jordan Rochester 0:14:46.280 --> 0:14:50.440 with us. He writes exceptionally acute notes for Numura, usually 0:14:50.480 --> 0:14:52.800 about you know, Sterling. There was a point where Jordan 0:14:52.920 --> 0:14:56.960 was Brexit this Brexit, that Brexit, Brexit, Brexit Brexit. But 0:14:57.200 --> 0:15:00.120 right now he's really focused on this great mystery of 0:15:00.200 --> 0:15:04.360 two thousand nineteen, which was a resiliency of the dollar. 0:15:04.680 --> 0:15:10.640 Jordan Rochester, Can the dollar finally give way? And we can? Yes, 0:15:10.760 --> 0:15:12.960 it can. I mean I was a dollar ball for 0:15:13.040 --> 0:15:16.280 kuhit a long time towards the end of twenty into 0:15:16.320 --> 0:15:19.040 this year, and it was a few factors driving at 0:15:19.040 --> 0:15:21.520 the US performer story. And when it comes to the 0:15:21.560 --> 0:15:24.400 big dollar, you can talk about so many different topics 0:15:25.120 --> 0:15:27.440 to express a view, but really Tom it boils down 0:15:27.480 --> 0:15:30.720 to do you think the US growth will outperform the 0:15:30.760 --> 0:15:33.040 rest of the world. That's it. If you know those 0:15:33.320 --> 0:15:36.320 that simple variable, that that differential, you know where the 0:15:36.360 --> 0:15:39.120 dollars going to go. And what's quite different about this 0:15:39.320 --> 0:15:43.640 crisis is we've had an extra ordinary response from Europe 0:15:43.720 --> 0:15:48.320 compared to the last crisis before a decade ago, and 0:15:48.440 --> 0:15:51.600 also the policies they've used as well, So these sort 0:15:51.640 --> 0:15:54.280 of job retention schemes which are much more widespread in 0:15:54.320 --> 0:15:57.040 the Euro Area and the UK compared to the US. 0:15:57.640 --> 0:16:00.200 It should mean that when we do reopen, which we are, 0:16:00.680 --> 0:16:03.080 we have a snap back where you have everybody back 0:16:03.120 --> 0:16:06.360 at at work to some degree at least, and it's 0:16:06.440 --> 0:16:09.160 much faster as well, where in the US there's going 0:16:09.200 --> 0:16:11.800 to be a bit more of a sluggish recovery as 0:16:11.920 --> 0:16:14.240 the market's going to do the job instead, and so 0:16:14.360 --> 0:16:16.600 you just see people having to look for jobs. And yes, 0:16:16.680 --> 0:16:19.480 there will be an improvement in the jobs market as 0:16:19.560 --> 0:16:22.280 the economy reopened, but at the same time, it won't 0:16:22.280 --> 0:16:25.240 be that snap back that's merely full employment that the 0:16:25.320 --> 0:16:28.560 governments in the Euro Area have tried to construct here. 0:16:28.880 --> 0:16:30.880 So for that reason alone, we've got a much more 0:16:30.960 --> 0:16:34.400 optimistic outlook for the Euro Area this year into next, 0:16:34.840 --> 0:16:37.040 and then that's before I talk about all the other 0:16:37.080 --> 0:16:39.680 things going on, such as the sort of second wave 0:16:39.840 --> 0:16:42.560 risks in the US. The lockdown has taken place right 0:16:42.600 --> 0:16:44.720 now and the risks to that, and then there's the 0:16:44.800 --> 0:16:47.000 U S election as well. Before I get into all 0:16:47.040 --> 0:16:49.840 of that, plants. That's why I think things are. US 0:16:49.920 --> 0:16:53.440 growth underperformed the Euro area and as a result, the 0:16:53.560 --> 0:16:57.600 dollar weekend. It's Jordan's Sometimes it is really simple. Show 0:16:57.680 --> 0:16:59.600 me where global risk appetite is and I'll show you 0:16:59.640 --> 0:17:01.320 that our action of the dollar. But you're asking me 0:17:01.400 --> 0:17:03.760 to imagine something a little bit different. It's a world 0:17:03.800 --> 0:17:08.600 where the US stumbles and risk appetite remains elevated elsewhere. 0:17:09.359 --> 0:17:13.240 Is that really a world you can imagine? It's possible, John, 0:17:13.440 --> 0:17:16.040 I know it's not normal. We're used to whenever the 0:17:16.520 --> 0:17:20.360 US sneezes, the world get to cough. Well, in this circumstance, 0:17:20.440 --> 0:17:23.040 it's possible that the US still grows, John, but it 0:17:23.119 --> 0:17:24.960 doesn't grow as facts as everywhere else. So that's the 0:17:25.080 --> 0:17:28.640 scenario we're talking about. So there will be abound back 0:17:28.680 --> 0:17:31.240 in American growth. There's not be too pessimistic. The point 0:17:31.280 --> 0:17:33.119 we're making is it will the speed less than how 0:17:33.200 --> 0:17:35.639 to where and then okay, let's talk a little bit 0:17:35.680 --> 0:17:38.920 about the other factors driving this. So, because you've got 0:17:39.240 --> 0:17:42.480 rising cases in the US, it's pretty clear from the data, 0:17:42.600 --> 0:17:46.200 it's common sense to rising cases leads to less economic 0:17:46.240 --> 0:17:48.960 activity as folks are just worried about going to the restaurant, 0:17:49.200 --> 0:17:51.800 going to the bar. We're already seeing that play out 0:17:52.359 --> 0:17:55.520 in the mobility statistics for certain states and certain areas, 0:17:55.880 --> 0:17:58.200 even in this early stage of that sort of revived 0:17:58.240 --> 0:18:01.240 second wave, sort of rolling wave stories in the US. 0:18:01.640 --> 0:18:03.960 So you're going to have in this quarter in the 0:18:04.119 --> 0:18:07.720 US struggling with COVID nineteen cases. And then when we 0:18:07.760 --> 0:18:11.160 get to the August period, we'll be talking about Joe 0:18:11.200 --> 0:18:14.560 Biden vice presidential pick, We'll be talking about higher taxes 0:18:14.600 --> 0:18:17.399 in the US, and as a result, you'll have the 0:18:17.520 --> 0:18:21.760 market pricing a less optimistic view on US assets versus 0:18:21.800 --> 0:18:24.880 the rest of the world. Well, Jordan, show me where 0:18:24.880 --> 0:18:26.920 to push through that dollar weakness in a world where 0:18:26.960 --> 0:18:32.200 no one wants a stronger currency. Yes, that's good point. Well, 0:18:32.280 --> 0:18:34.760 you're seeing it play out already. You've seeing some Chinese 0:18:34.760 --> 0:18:38.040 remombi strengths this week. You're seeing euros start to go higher, 0:18:38.080 --> 0:18:41.440 and I think the way policymakers at central banks will 0:18:41.560 --> 0:18:45.240 square the circle is it's okay, John, if your currency 0:18:45.320 --> 0:18:49.600 appreciates for good reasons. In the past, we've had episodes 0:18:49.680 --> 0:18:52.640 where we were dealing with deflation risks in the Eurozone 0:18:52.720 --> 0:18:55.200 that we had a strong currency. I'm thinking back to 0:18:55.720 --> 0:18:58.040 seventeen and so that was when it was a pretty 0:18:58.080 --> 0:19:00.920 tricky issue for the e TB. But I've think policymakers 0:19:00.960 --> 0:19:04.520 globally will be happy if they're able to successfully reopen 0:19:04.600 --> 0:19:08.800 their economies without COVID nineteen picking up too strongly successfully 0:19:08.840 --> 0:19:11.240 reopened them about too much damage to the labor market. 0:19:12.000 --> 0:19:13.680 I think the current is gonna be laughing on their 0:19:13.720 --> 0:19:16.360 mind as if they can get those two things done 0:19:16.720 --> 0:19:21.200 with a good success rate. Jordan, one of the bull 0:19:21.240 --> 0:19:25.000 cases that you mentioned for the Eurozone was their supplemental 0:19:25.119 --> 0:19:27.560 income to people who had lost their jobs or lost 0:19:27.640 --> 0:19:31.040 work as a result of the coronavirus. And yet you 0:19:31.160 --> 0:19:33.960 have economists from a number of places saying this is 0:19:34.080 --> 0:19:37.359 only going to perpetuate zombie jobs and zombie companies and 0:19:37.440 --> 0:19:39.960 will lead to a lack of productivity in the region 0:19:40.320 --> 0:19:43.920 and a slower recovery going forward, especially because some of 0:19:44.000 --> 0:19:46.199 these programs may not be reupt and if they are, 0:19:46.440 --> 0:19:49.480 it will cause a huge deficit in the region. What's 0:19:49.480 --> 0:19:53.200 your counter argument to that? I guess I mean there's 0:19:53.240 --> 0:19:55.720 some points that are definitely valid. If you're propping up 0:19:55.760 --> 0:19:58.360 a job that does no longer exist, then that needs 0:19:58.400 --> 0:20:01.080 to set some come to an end. Well that the 0:20:01.200 --> 0:20:04.119 question is how many jobs no longer exists anymore? We 0:20:04.240 --> 0:20:06.919 don't know. And the other point is those workers who 0:20:06.960 --> 0:20:09.680 are currently on that job retention scheme, they're not getting 0:20:09.720 --> 0:20:11.960 that full salary, they're getting a portion of that, and 0:20:12.040 --> 0:20:14.200 they also they want to go to work too, so 0:20:14.560 --> 0:20:17.360 while they're in this furlough period, they might be looking 0:20:17.400 --> 0:20:20.560 for jobs elsewhere. So what it's doing is it's providing 0:20:20.600 --> 0:20:24.080 that social cursed suffer in the meantime to allow those 0:20:24.160 --> 0:20:27.040 workers to find the new jobs at a sort of 0:20:27.080 --> 0:20:29.400 pace that's better for them, rather than rushing into things. 0:20:29.680 --> 0:20:32.240 So my counsel ivance day is it's never going to 0:20:32.320 --> 0:20:35.800 be forever. And the second point is as long as 0:20:35.840 --> 0:20:38.320 the governments don't try to pay it back quickly, the 0:20:38.440 --> 0:20:40.639 recovery should be okay. What do I mean by that? 0:20:41.240 --> 0:20:44.120 As long as we avoid austerity in the same way 0:20:44.160 --> 0:20:46.520 we saw in two thousand and ten and eleven, things 0:20:46.560 --> 0:20:48.800 should be better to the Eurozone benefit, the global growth 0:20:49.160 --> 0:20:52.280 better for the UK as long as governments don't follow 0:20:52.400 --> 0:20:54.680 that sort of old Playbork from two thousand and ten, 0:20:55.080 --> 0:21:00.040 the recovery should remain. In fact, Jodan right, should a 0:21:00.160 --> 0:21:02.520 quick question here away from euro dollar what is the 0:21:02.600 --> 0:21:07.760 best way to express dollar weakness? Which pair works well? 0:21:07.840 --> 0:21:10.280 We're looking at sort of risk on proxies, so we 0:21:10.400 --> 0:21:13.480 have the likes of uh sort of long or kiwi 0:21:13.640 --> 0:21:17.080 long er. Again. I would usually talk about how we 0:21:17.280 --> 0:21:20.159 should see that the dollar block out performing this global 0:21:20.200 --> 0:21:23.719 growth rather such as a dollar but emerging markets might 0:21:23.760 --> 0:21:25.840 be the better play here, such as what's going on 0:21:25.920 --> 0:21:30.119 the China got the ball Chinese exuties this week, and 0:21:30.280 --> 0:21:32.800 our guys in China are saying, don't argue against it. 0:21:33.440 --> 0:21:35.879 That's saying, essentially what we wanted to see in China 0:21:36.119 --> 0:21:38.960 is actually much more fiscal steamless in the pipeline and 0:21:39.040 --> 0:21:41.920 as a result, don't fight the ball rally that was 0:21:41.960 --> 0:21:45.080 seeing in China. Tom JOHNA Rochester, always great to catch 0:21:45.160 --> 0:21:57.359 up with you joining us from Nomora right now. We 0:21:57.440 --> 0:21:59.880 could have a two hour conversation with our next guest, 0:22:00.040 --> 0:22:02.800 Edward Morris, joins us from City Group, of person known 0:22:02.880 --> 0:22:08.720 globally for just incredibly pressing global macro views on hydrocarbons 0:22:08.760 --> 0:22:12.000 and yes on commodities in general. But today we have 0:22:12.080 --> 0:22:14.080 to rip up the script. We have Ed Morris with 0:22:14.240 --> 0:22:16.919 us of City Group, and what it must be about 0:22:17.359 --> 0:22:21.160 is what Mr Buffett did yesterday. And there is upstream 0:22:21.520 --> 0:22:24.960 maybe that's the world of Ed Morris, And there's downstream 0:22:25.000 --> 0:22:29.320 where Lisa fills the homer age too full of the 0:22:29.440 --> 0:22:32.720 latest flavor of gasoline. And then there's that thing Ed 0:22:32.800 --> 0:22:38.760 Morris midstream where Mr Buffett Daly yesterday looking at pipelines 0:22:38.840 --> 0:22:44.720 of dominion tell us about the midstream value play that's 0:22:44.840 --> 0:22:48.320 out there? Are there many more dominions to be played 0:22:48.400 --> 0:22:52.080 by the big money there there are. I mean, we 0:22:52.280 --> 0:22:55.880 were in a distressed environment at the moment. You can't 0:22:56.160 --> 0:23:00.280 overexaggerate that. Uh. And we're looking forward. And as you 0:23:00.359 --> 0:23:03.320 look forward to the American production of oil and gas 0:23:03.520 --> 0:23:07.320