WEBVTT - Markets Weigh Rate Cut and Geopolitical Risks 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.119 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen, and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:46.879 the Bloomberg Terminal, and the Bloomberg Business app. Let's get 0:00:46.920 --> 0:00:48.159 right to it. Let me give you the history of 0:00:48.200 --> 0:00:49.880 Paul's going to bring him in. Matt was Zaddi with 0:00:49.920 --> 0:00:53.920 Deutsche Bank and the team over there absolutely nailed a 0:00:53.960 --> 0:00:56.680 graceful recession called years ago that came out and they said, 0:00:56.680 --> 0:00:59.080 you know, there's going to be a recession off the pandemic. 0:00:59.520 --> 0:01:01.560 But the first day they said it, Paul, they said, 0:01:01.680 --> 0:01:04.960 we don't know when, and they had a huge humility 0:01:05.000 --> 0:01:08.080 at the time, trying not to cherry pick the gloom 0:01:08.160 --> 0:01:11.119 of recession. And so there we are. Is it really 0:01:11.160 --> 0:01:14.959 hasn't happened stimulus and you know, an update here as 0:01:14.959 --> 0:01:16.480 we go into all this labor data, why don't you 0:01:16.480 --> 0:01:17.839 bring in mister Lozetti exactly? 0:01:17.920 --> 0:01:20.720 The economic data has been solid, inflation coming down. It's 0:01:20.760 --> 0:01:22.920 a you know what question is it a soft landing? 0:01:22.920 --> 0:01:25.160 Matt Lazetti joins us. He's a chief US economist for 0:01:25.160 --> 0:01:27.240 Deutsche Bank. The last time I saw him, Tom was 0:01:27.240 --> 0:01:29.680 in the Veil airport and I said, Hey, how was 0:01:29.720 --> 0:01:32.759 your skiing? He didn't ski, he was at there for business. 0:01:32.920 --> 0:01:34.000 Oh yeah, who does that? 0:01:34.800 --> 0:01:38.000 I mean immediately I took my I vote away from them. 0:01:38.160 --> 0:01:40.240 You know so, Matt, thanks so much for joining us. 0:01:40.240 --> 0:01:43.760 Here is Thom was saying, here this economy, I guess 0:01:43.840 --> 0:01:45.800 what do you guys make of a Deutsche Bank? I 0:01:45.840 --> 0:01:49.080 think most people, the marketplace broadly defined, is pleasantly surprised 0:01:49.080 --> 0:01:51.880 about the US economy, particularly relative to other parts of 0:01:51.880 --> 0:01:52.279 the world. 0:01:52.760 --> 0:01:54.480 You have to be pleasantly surprised. I think if you 0:01:54.480 --> 0:01:56.320 look back to twenty twenty three, it was the best 0:01:56.320 --> 0:01:58.680 possible outcome for the economy, the best possible outcome from 0:01:58.680 --> 0:02:02.120 the Fed's perspective. You had above three percent real GDP growth, 0:02:02.120 --> 0:02:04.320 You had the unemployment rate down to three point seven percent, 0:02:04.720 --> 0:02:06.600 and over the back half of last year, you had 0:02:06.640 --> 0:02:09.079 core PC inflation, which is what the FED focus is on, 0:02:09.400 --> 0:02:13.000 below two percent. That was a remarkable outcome I think 0:02:13.040 --> 0:02:15.040 for a FED that raised rates by over five hundred 0:02:15.040 --> 0:02:18.239 basis points that was undertaking a very aggressive QT outcome. 0:02:18.760 --> 0:02:19.440 Question is you know. 0:02:19.440 --> 0:02:22.760 Where do we go from here? We still now continue 0:02:22.800 --> 0:02:26.079 to see this very resilient economy continuing, the labor market 0:02:26.120 --> 0:02:28.640 looking resilient. Will get an update with data this week. 0:02:29.000 --> 0:02:31.960 Key question will be, especially from the Fed's perspective, how 0:02:32.040 --> 0:02:33.959 much of the disinflation trend that we got last year 0:02:34.080 --> 0:02:37.720 continues or is the strong inflation prints that we got 0:02:37.720 --> 0:02:40.080 over January and February is that a new trend that 0:02:40.080 --> 0:02:42.280 work that we're seeing that How to Fed strap about that, because. 0:02:42.040 --> 0:02:45.400 That's probably one of the forefront issues for the market, 0:02:45.480 --> 0:02:47.880 is boy, that are we seeing a resurgence in inflation? 0:02:47.960 --> 0:02:49.880 What do you guys think? Yeah, so you have to 0:02:49.880 --> 0:02:52.440 acknowledge I think January was a very strong inflation print, 0:02:52.440 --> 0:02:54.200 and when we got data last week, core PC was 0:02:54.200 --> 0:02:57.680 actually revised a little bit higher. February was better, but 0:02:57.720 --> 0:02:59.600 not good enough. From the Fed's perspective, I think when 0:02:59.639 --> 0:03:02.639 you look at the components that drove it, shelter inflation 0:03:03.440 --> 0:03:06.040 both in January and February was higher than anticipated. You know, 0:03:06.080 --> 0:03:08.120 we do continue to expect that will come down. We 0:03:08.160 --> 0:03:10.240 have these private sector estimates of rents that have come 0:03:10.280 --> 0:03:12.200 down a lot, So I think that's still going to happen, 0:03:12.360 --> 0:03:14.160 but it's more uncertain than it was three months ago. 0:03:15.240 --> 0:03:17.160 And you know, when you look at these other core 0:03:17.200 --> 0:03:19.560 services items, there was actually a lot of disinflation in 0:03:19.600 --> 0:03:20.960 them in the February date. I thought that was a 0:03:20.960 --> 0:03:23.320 good data point from the Fed's perspective in terms of 0:03:23.320 --> 0:03:25.079 supercore The morning after. 0:03:24.960 --> 0:03:29.680 The invasion of Ukraine by mister Putin, David Folkertslando of 0:03:29.720 --> 0:03:34.840 Deutsche Bank was adamant that we would see government stimulus, 0:03:34.960 --> 0:03:39.600 we would see fiscal policy across Europe and across the world. 0:03:39.800 --> 0:03:43.160 Clearly we've seen that in the United States. Is this 0:03:43.280 --> 0:03:47.560 great underestimation of our boom economy? Is it just because 0:03:47.560 --> 0:03:49.080 of the three stimuli we had? 0:03:49.680 --> 0:03:52.000 No, I think it is absolutely part of it. If 0:03:52.040 --> 0:03:54.160 you look at the budget deficit last year relatively the 0:03:54.200 --> 0:03:57.520 unemployment rate, we were running a very loose fiscal policy 0:03:57.680 --> 0:04:00.640 relative to the stance of the economy not the only thing. 0:04:00.680 --> 0:04:03.040 I think we've seen greater focus on the supply side 0:04:03.040 --> 0:04:05.320 of the economy, especially from the FED, and there's great 0:04:05.320 --> 0:04:09.480 work from Brookings the CBO recently just looking at net 0:04:09.520 --> 0:04:12.280 immigration flows, how much that added to labor the labor 0:04:12.320 --> 0:04:15.080 market over the past year. And was this really positive 0:04:15.080 --> 0:04:17.520 supply side story for the economy. I think it allowed 0:04:17.600 --> 0:04:21.160 us to have strong growth, but disinflation as part of that. 0:04:21.520 --> 0:04:22.880 And then you just have to say that the Fed's 0:04:22.880 --> 0:04:26.360 monetary policy tightening was probably just had less traction than anticipated. 0:04:26.560 --> 0:04:28.400 You know, markets didn't crumble as much as I would 0:04:28.400 --> 0:04:31.359 have thought under a five percent FED funds rate, people 0:04:31.360 --> 0:04:33.719 were able to lock in low interest rates, and mortgage 0:04:33.720 --> 0:04:35.400 debt ratios are still quite low. 0:04:35.400 --> 0:04:38.320 Where was your real nominal GDP run rate right now, 0:04:38.600 --> 0:04:40.080 you know, going out three four quarters? 0:04:40.080 --> 0:04:41.760 So I think if you look at what I think 0:04:41.800 --> 0:04:44.240 potential growth is for the economy, at least in the 0:04:44.279 --> 0:04:46.880 near term, I think it's probably closer to and a 0:04:46.960 --> 0:04:49.800 quarter or so. I think it's meaningfully above what the 0:04:49.800 --> 0:04:54.440 FED has real GDP potential. Now, I think that there's 0:04:54.600 --> 0:04:56.839 there's obviously lots of it turned here on that the 0:04:56.880 --> 0:04:59.240 labor supply story has been really important there. But I 0:04:59.240 --> 0:05:02.640 think there's a really constructive productivity growth story for the 0:05:02.680 --> 0:05:04.800 US economy if you look over the next several years. 0:05:05.040 --> 0:05:05.200 Now. 0:05:05.240 --> 0:05:05.880 Part of that could. 0:05:05.720 --> 0:05:08.480 Certainly be AI. We as a house are very constructive 0:05:08.520 --> 0:05:10.440 on AI, but I think there's a lot of uncertainty 0:05:10.760 --> 0:05:13.880 in quantifying that. The reason to be positive is that 0:05:14.000 --> 0:05:17.200 you typically see tight labor markets followed by very strong 0:05:17.200 --> 0:05:19.800 productivity growth. And the idea is that firms are forced 0:05:19.880 --> 0:05:24.039 to do capital deepening. Do cap X find productivity enhands 0:05:24.080 --> 0:05:24.880 in those projects? 0:05:25.120 --> 0:05:26.880 We call that the Boston red SOX. 0:05:27.080 --> 0:05:32.479 Right, So, Matt, given that backdrop, Matt, what's our federal 0:05:32.480 --> 0:05:34.200 reserve going to do? I mean, I don't know. We 0:05:34.360 --> 0:05:37.159 started the year thinking six rate cuts, and now we're 0:05:37.160 --> 0:05:39.080 pricing less than I don't know, three, maybe a little 0:05:39.080 --> 0:05:41.000 bit less than three. How do you guys think about that? 0:05:41.640 --> 0:05:45.440 Yeah, so we have them cutting first in June. I 0:05:45.480 --> 0:05:48.279 think what we've heard almost uniformly from Fed officials is 0:05:48.279 --> 0:05:50.520 that they're not in a rush today, and they're not 0:05:50.560 --> 0:05:52.360 in a rush today, both because the economy is hanging 0:05:52.360 --> 0:05:55.200 in better than anticipated and so there's no urgency to cut, 0:05:55.720 --> 0:05:58.920 but also because inflation has surprised the upside, so there's 0:05:58.920 --> 0:06:01.320 greater uncertainty about the inflation trend. I think if you 0:06:01.320 --> 0:06:03.560 get softter inflation prints over the next few months, the 0:06:03.600 --> 0:06:05.920 FED probably does cut in June. But I think the 0:06:05.960 --> 0:06:08.400 bigger question will be what does this overall cutting profile 0:06:08.440 --> 0:06:11.360 look like. And I think there's a very strong case 0:06:11.400 --> 0:06:14.000 to be made that perhaps the FED only does two 0:06:14.160 --> 0:06:16.440 or three insurance cuts. We think of it as a 0:06:16.440 --> 0:06:18.680 little bit more of a mid cycle adjustment, and that 0:06:18.800 --> 0:06:21.440 any cuts beyond that become a lot more uncertain. 0:06:21.520 --> 0:06:23.279 This is a great half far I got. Matt Lazzetti 0:06:23.400 --> 0:06:26.039 was the Deutsche Bank, and then Edward Morse will join 0:06:26.160 --> 0:06:29.200 US Emeritis City Group with his new effort in looking 0:06:29.279 --> 0:06:31.640 at geo politics and oil. I want to link the 0:06:31.680 --> 0:06:35.120 two together. Deutsche Bank fifteen twenty years ago on the 0:06:35.200 --> 0:06:38.640 high ground on oil analysis, it was Adam Saminsky and 0:06:38.680 --> 0:06:42.839 Paul Sank Nobody world what everybody read it? Everybody read 0:06:42.839 --> 0:06:46.520 the Deutsche Bank Excel spreadsheets on supply and demand. What 0:06:46.560 --> 0:06:50.279 does ninety dollars brent crude mean to you? How does 0:06:50.320 --> 0:06:54.240 that change the American calculus of oil? 0:06:54.520 --> 0:06:56.120 To be honest, I don't think it changes it all 0:06:56.160 --> 0:06:58.400 that much. You know, I think as we think about 0:07:00.120 --> 0:07:02.720 from a growth perspective, at least from a downside risk perspective, 0:07:03.000 --> 0:07:05.280 it's usually oil price shocks that drives that, and so 0:07:05.400 --> 0:07:07.960 you need to break out of what a recent range 0:07:07.960 --> 0:07:10.120 has been. Ninety dollars is still within the recent range 0:07:10.160 --> 0:07:13.640 over the past several years. The economy is very different 0:07:13.680 --> 0:07:16.600 than it was ten years ago. Okay, so it's not 0:07:16.640 --> 0:07:19.080 just about how it impacts the US consumer and disposed income. 0:07:19.400 --> 0:07:23.000 But you do have shale, you have net exports. 0:07:22.480 --> 0:07:24.960 Well, but you model out like JP Morgan, do you 0:07:25.000 --> 0:07:27.440 model out that if you get an emerging market boom, 0:07:27.840 --> 0:07:31.239 you get oil well over one hundred even out to one. 0:07:31.320 --> 0:07:33.400 Sure, you know, I think it's it's certainly possible that 0:07:33.440 --> 0:07:35.760 you get there. What drives that is really important for 0:07:35.760 --> 0:07:38.920 the economy. So if it is a supply side driven story, 0:07:39.000 --> 0:07:41.280 then that acts as a shock that's more negative for growth. 0:07:41.520 --> 0:07:44.200 If it is organically driven by stronger demand, you know 0:07:44.360 --> 0:07:46.480 certainly that that can weigh on US consumers, but overall 0:07:46.480 --> 0:07:47.720 it's a less negative story for you. 0:07:48.000 --> 0:07:50.280 I get twenty seconds. It is a true Villanova's looking 0:07:50.280 --> 0:07:52.240 at you to sell it as a basketball. 0:07:53.400 --> 0:07:54.400 No I don't think so. 0:07:54.600 --> 0:07:57.240 Okay, that was Odie, Thank you so much. Out of 0:07:57.320 --> 0:08:01.000 Villanova and you see there with Deutsch and yes, Edward 0:08:01.040 --> 0:08:14.320 Morse coming up in a moment, Tom King and Paul 0:08:14.320 --> 0:08:19.560 Swiney worldwide right now. With Edward Morris definitive at citing 0:08:19.560 --> 0:08:21.800 group for years. They threw him up. Jane called him up. 0:08:21.800 --> 0:08:24.720 He went down to his office and said, I see you. Well, 0:08:24.720 --> 0:08:27.680 that's not quite what happened. He's iconic in oil and 0:08:27.960 --> 0:08:30.320 of course with a geopolitical study to it, has worked 0:08:30.360 --> 0:08:33.480 with a consul and foreign relations and you know, I'm like, okay, 0:08:33.760 --> 0:08:37.560 he can't retire. Where's he going to land? Yeah? And 0:08:37.600 --> 0:08:40.880 what's so cool about hard training is this is Amorada 0:08:40.880 --> 0:08:45.400 Hesse from a million years ago. And then oak Tree 0:08:45.480 --> 0:08:49.120 Management took out Amarada's interest. So there's a heritage here 0:08:49.120 --> 0:08:53.200 of global oil along with the intellectual acuity of oak Tree. 0:08:53.240 --> 0:08:55.720 And they've picked up ed Morse because he was looking 0:08:55.760 --> 0:08:58.280 for a job whereund and the doctor Morris joins us 0:08:58.640 --> 0:09:02.280 this morning where Morres, congratulations on this new effort. I'm 0:09:02.280 --> 0:09:04.920 glad to see you slow down to a sixty hour week. 0:09:05.480 --> 0:09:10.559 And where's the marginal geopolitical interest right now, Which region, 0:09:10.960 --> 0:09:14.839 which country, which part of Brent crude is the most 0:09:15.000 --> 0:09:15.600 interest to. 0:09:15.640 --> 0:09:19.480 Edward Morse, I think it really is the Middle East. 0:09:19.600 --> 0:09:22.520 And it's the Middle East for obvious reasons, not just 0:09:22.679 --> 0:09:28.240 because of what's happening in Israel, but the after math 0:09:28.320 --> 0:09:32.440 of all of that, and struggles internally and externally involving 0:09:32.440 --> 0:09:37.080 Iran and Iraq, and of course we've got Saudi Arabia, 0:09:37.160 --> 0:09:41.120 which is along with Russia, leading the charge with opek plus. 0:09:41.600 --> 0:09:45.120 So if you look at the politics of managing markets 0:09:45.440 --> 0:09:48.560 and the risks to the management of markets, the Middle 0:09:48.600 --> 0:09:51.120 East is the main focus. But you know, honestly, if 0:09:51.160 --> 0:09:55.320 you're trading in the Western Hemisphere and you're trading around 0:09:55.360 --> 0:09:59.400 Houston and you look at a new Mexican refinery that's 0:09:59.559 --> 0:10:03.240 likely to o that, you know, the sweet sour relationship 0:10:03.240 --> 0:10:05.360 with the US Gulf Coast is also changing. So it 0:10:05.440 --> 0:10:08.000 depends on where you are globally. It's really been the 0:10:08.080 --> 0:10:08.560 least you know. 0:10:08.760 --> 0:10:10.440 I was talking to Jane and I said, why'd you 0:10:10.480 --> 0:10:12.080 let him go? I mean, he had the call of 0:10:12.120 --> 0:10:14.439 the pandemic. Everybody else Paul is looking for one hundred 0:10:14.440 --> 0:10:17.000 and twenty dollars barrel oil and Morse is up on 0:10:17.040 --> 0:10:20.440 the soapbox screen and no, you're wrong. We're going down 0:10:20.480 --> 0:10:23.840 to sixty or seventy whatever it was at massive call 0:10:23.880 --> 0:10:28.480 as well. Do you see pushing against that a nascent 0:10:28.640 --> 0:10:31.920 global demand that gets us to this Brent crew ninety 0:10:32.120 --> 0:10:32.720 or higher. 0:10:34.240 --> 0:10:36.960 Well, I don't think it's the demand side, Tom, I 0:10:36.960 --> 0:10:39.480 think it's really the supply side. I think it's a 0:10:39.520 --> 0:10:42.840 combination of factors. On the supply side. That combination of 0:10:42.880 --> 0:10:46.680 factors is a restraint that major producers are having and 0:10:46.720 --> 0:10:50.680 putting crude oil into the market, and the distortions in 0:10:50.720 --> 0:10:52.520 the market that need to be worked out, and they 0:10:52.559 --> 0:10:55.360 will be worked out that come from the blockages of 0:10:55.400 --> 0:10:59.240 the Seuss Canal and leading. You know, Sumed pipeline is 0:10:59.240 --> 0:11:02.640 the only way to really get sustainable flows into the 0:11:02.640 --> 0:11:04.800 Med and out of the Med from the Middle East 0:11:04.800 --> 0:11:07.000 and to the Middle East. So we're going to have, 0:11:07.120 --> 0:11:11.080 as we did with Russia Ukraine, working out of freight 0:11:11.160 --> 0:11:15.839 rates and working out of that distortion weighing on prices eventually, 0:11:17.000 --> 0:11:20.560 And what we don't really know is what the response 0:11:20.679 --> 0:11:24.760 is going to be on the demand side with respect 0:11:24.800 --> 0:11:29.520 to buying oil from the Middle East and elsewhere. Particularly 0:11:29.600 --> 0:11:32.719 in China. We've got a country that has shifted its 0:11:32.760 --> 0:11:35.880 gears as a major importer, shifting its skiers in terms 0:11:35.880 --> 0:11:39.280 of deciding for geopolitical reasons, it's going to be building 0:11:39.320 --> 0:11:45.080 a massive inventory. We reckoned roughly another five hundred million 0:11:45.120 --> 0:11:48.880 barrels of storage capacity can be filled all of storage, 0:11:48.880 --> 0:11:51.920 and China is strategic and the yet to high prices, 0:11:52.000 --> 0:11:55.040 China is not only not going to be importing more 0:11:55.080 --> 0:11:57.760 than they consume, they're going to be exporting. That's the 0:11:57.800 --> 0:12:00.760 pattern that we've learned to anticipate that we should learn 0:12:00.760 --> 0:12:04.920 to anticipate it as oil breaches ninety dollars, which looks 0:12:04.920 --> 0:12:07.439 like an almost certainty in the next couple of months. 0:12:07.920 --> 0:12:09.840 And one of the things that is relatively new in 0:12:09.840 --> 0:12:11.760 the global oil space is the fact that the US 0:12:11.800 --> 0:12:14.400 has gone from being a net importer to a net exporter. 0:12:14.880 --> 0:12:17.760 Why don't our friends done, and I don't know, Texas 0:12:17.800 --> 0:12:19.920 and Oklahoma just start fracking some more oil. 0:12:21.480 --> 0:12:23.720 Well, I think that's exactly what's going to happen. You 0:12:23.840 --> 0:12:28.520 have several new incentives to fract more. One of them 0:12:29.000 --> 0:12:31.040 is where the price is, where the COVID curves are, 0:12:31.480 --> 0:12:33.920 and where you can make money if you're a publicly 0:12:33.960 --> 0:12:39.920 creded company by shifting to rapid response petroleum production. And 0:12:39.960 --> 0:12:44.440 then there's on top of that the technological advances that 0:12:44.480 --> 0:12:47.600 are being made. There are lots of talks on your 0:12:47.640 --> 0:12:52.360 shows and others about the revolutionary impacts of artificial intelligence. 0:12:52.800 --> 0:12:55.840 Artificial intelligence is also working its way into the oil patch, 0:12:56.160 --> 0:13:00.400 and that artificial intelligence is bringing up productivity levels in 0:13:00.520 --> 0:13:03.280 terms of how do you manage tracking crews, how you 0:13:03.320 --> 0:13:09.600 manage track production or track utilization. And I think we're 0:13:09.600 --> 0:13:15.720 going to see a response to that. We had basically 0:13:15.760 --> 0:13:20.960 a worldwide webinar from SMP earlier in a few days 0:13:20.960 --> 0:13:25.080 ago in which they said, you know, their their deck 0:13:25.120 --> 0:13:28.600 deck increase in US production of eight hundred thousand barrels 0:13:28.600 --> 0:13:31.520 a day may have to be revised upward because of 0:13:31.559 --> 0:13:32.920 the high prices that we're now seeing. 0:13:33.520 --> 0:13:36.680 So how about OPEK plus. What is the role of 0:13:36.720 --> 0:13:39.680 OPEC plus now in the global marketplace? 0:13:41.080 --> 0:13:45.000 Well, OPECK plus is a response to the failure of OPEK. 0:13:45.760 --> 0:13:49.079 OPEK and I have written about this a nauseam always 0:13:49.120 --> 0:13:52.760 wrong that we're seeing the end of OPEC. But the 0:13:52.800 --> 0:13:56.520 survival of OPEC dependent upon bringing in Russia and Central 0:13:56.520 --> 0:14:00.360 Asian countries and other non OPEC members. They you know, 0:14:00.440 --> 0:14:03.240 they've got a very big hold on the market. H 0:14:03.360 --> 0:14:06.720 and then and their aim is to maximize revenues uh, 0:14:06.800 --> 0:14:10.960 and not to maximize them too much where they get 0:14:10.679 --> 0:14:14.400 a drop in oil demand. So uh, that's it. That's 0:14:14.400 --> 0:14:16.160 its role. And they're going to stall as long as 0:14:16.200 --> 0:14:19.760 they can to see where prices are going before you know, 0:14:19.840 --> 0:14:21.880 lifting the thing. We will see whether they lift it 0:14:21.880 --> 0:14:22.280 in June. 0:14:22.440 --> 0:14:24.560 And I got two two minutes left. Do you drive 0:14:24.600 --> 0:14:26.960 an electric car? Do you drive an electric car or 0:14:27.000 --> 0:14:27.560 a hybrid? 0:14:28.600 --> 0:14:29.480 I drive a Tesla? 0:14:29.800 --> 0:14:32.400 You drive a Tesla? See I knew that well Ed 0:14:32.480 --> 0:14:36.560 Morris on electric cars? Is the bloom off the rose? 0:14:36.640 --> 0:14:40.400 Or do you think there's an immediate sustainability this say 0:14:40.440 --> 0:14:44.400 President Biden would want an immediate sustainability. I see it 0:14:44.400 --> 0:14:46.400 in the United Kingdom, I see it in Europe. Does 0:14:46.480 --> 0:14:49.480 Edmore's think they're here to stay? Or is it one off? 0:14:49.520 --> 0:14:52.360 And we go back to ye to uh the internal 0:14:52.400 --> 0:14:53.440 combustion engine. 0:14:54.480 --> 0:14:56.120 I doubt think we're going to see it rush back 0:14:56.160 --> 0:14:59.920 the internal combustion engines. We may see a rush into 0:15:00.040 --> 0:15:03.600 the hybrid vehicles. We're certainly seeing public policy in the 0:15:03.640 --> 0:15:06.320 city that we live in or work in is one 0:15:06.440 --> 0:15:11.160 where we're seeing delivery vans based on fossil fuels and 0:15:11.240 --> 0:15:15.920 buses based purely on fossil fuels being eliminated, and hybrid 0:15:16.040 --> 0:15:19.840 vehicles are certainly one way to go and on electric. 0:15:19.880 --> 0:15:23.000 It depends on you which country you're in. China certainly 0:15:23.880 --> 0:15:26.600 is seeing an end to gasoline demand because of their 0:15:26.640 --> 0:15:30.640 ev policy. The US isn't because we're not short distance drivers. 0:15:30.680 --> 0:15:36.080 We're long distance drivers, and drivers are awaiting technological change 0:15:36.120 --> 0:15:38.560 to see a long and lasting battery in terms of 0:15:38.600 --> 0:15:40.920 miles driven. But I can tell you it is the 0:15:40.960 --> 0:15:43.800 most fun car I've ever driven, even better than the 0:15:43.880 --> 0:15:44.840 MGS I used to drive. 0:15:45.960 --> 0:15:48.240 There you go and yours. I can just see him 0:15:48.280 --> 0:15:50.640 in the MGTD. Oh that was the one on the 0:15:50.720 --> 0:15:53.040 wooden slats in the bottom. My father wouldn't let me 0:15:53.040 --> 0:15:57.560 buy it. Ed Morris's father less short high one. Ed Morris, 0:15:57.680 --> 0:16:02.080 wonderful to speak to. Congratulations on this important position at Hartree, 0:16:02.200 --> 0:16:12.120 mister Morris, on our marginal barrel of oil. With the 0:16:12.160 --> 0:16:17.240 shock of the Erdowuan losses in Turkey in municipal elections, 0:16:17.240 --> 0:16:21.040 there is exactly oh one, two, maybe three experts I'd 0:16:21.040 --> 0:16:23.280 want to talk to. But the most successible one for 0:16:23.360 --> 0:16:26.640 you is my book of the year, The Loom of 0:16:26.760 --> 0:16:30.360 Time for twenty twenty three. It transfix me. It is 0:16:30.520 --> 0:16:33.440 Robert D. Klatt Kaplin doing what he's doing. He moves 0:16:33.440 --> 0:16:37.160 from Morocco over to the various stands to the east. 0:16:37.280 --> 0:16:41.320 It is a spectacular book. In chapter three we find 0:16:41.440 --> 0:16:47.200 Robert T. Clatt Kaplan slowly walking around this architecturally complex 0:16:47.280 --> 0:16:52.400 and monumental structure known as Constantinople. Robert Caplin, thank you 0:16:52.520 --> 0:16:55.120 so much for joining us today. Is Airedwan done? 0:16:56.960 --> 0:16:57.040 No? 0:16:57.240 --> 0:16:58.880 First of all, it's a pleasure to be with you, 0:16:58.960 --> 0:17:01.880 Tom No. One is not done. He's not up for 0:17:01.960 --> 0:17:05.120 re election for a number of years now. And look 0:17:05.119 --> 0:17:08.520 at it this way. He's been in power twenty years. Yeah, 0:17:08.640 --> 0:17:11.720 you don't stay in power for twenty years in a 0:17:11.920 --> 0:17:17.000 partial or a full democracy without ultimately going downhill. So 0:17:17.440 --> 0:17:22.240 he's still got some ammunition up his sleeve. And the 0:17:22.359 --> 0:17:27.280 big question for Turkey though, is look imagine if Donald 0:17:27.359 --> 0:17:29.879 Trump had been in power in the United States for 0:17:30.000 --> 0:17:33.720 twenty four years like Airdwan has, what would be the 0:17:33.800 --> 0:17:39.600 state of institutions, the Justice Department, etc. Airediwan has destroyed 0:17:39.760 --> 0:17:44.320 Turkish institutions. So the question for Turkey is even if 0:17:44.320 --> 0:17:47.240 there is a new prime minister, a new president in 0:17:47.240 --> 0:17:51.760 a few years like Imma Moglu who won the mayorship 0:17:51.840 --> 0:17:54.879 of istam Bul the other day and a big victory, 0:17:55.160 --> 0:17:59.720 even if he becomes prime minister, will there be institutions 0:17:59.760 --> 0:18:02.280 to work with or will Turkey have a kind of 0:18:02.480 --> 0:18:05.040 wiemar chaotic situation. 0:18:05.400 --> 0:18:08.360 Out of his childhood and is you know, the interesting 0:18:08.480 --> 0:18:10.920 childhood of Aridiwana. In the twenty two years that he's 0:18:11.800 --> 0:18:14.720 been the leader, his foreign policy has been to look 0:18:14.800 --> 0:18:20.320 south and take his Islamic view across levant, across all 0:18:20.359 --> 0:18:22.480 of your the loom of time, the arc of the 0:18:22.520 --> 0:18:26.439 Middle East. Is he diminished in his influence in the 0:18:26.480 --> 0:18:29.440 Middle East now because of these election losses? 0:18:30.320 --> 0:18:33.440 Yet yes, he is. You lose this big in a 0:18:33.560 --> 0:18:37.080 nationwide election, which is what this really was. He not 0:18:37.119 --> 0:18:41.200 only lost in Istanbul, he lost across the country. This 0:18:41.440 --> 0:18:45.720 lowers his credibility throughout the region, which was never you know, 0:18:45.800 --> 0:18:50.439 which was problematic to begin with because the major mistake 0:18:50.720 --> 0:18:54.040 he made a long time ago was to back the 0:18:54.280 --> 0:18:59.680 radicals in the Middle East, not the conservative Sunni Arab regimes. 0:19:00.200 --> 0:19:02.840 So it wasn't as if he was pro Arab and 0:19:02.920 --> 0:19:06.840 anti Israel. He was pro radical Arab and as a result, 0:19:06.920 --> 0:19:08.400 he misread the region. 0:19:09.080 --> 0:19:11.440 All right, speaking of another region of the world, let's 0:19:11.520 --> 0:19:15.440 go to Asia. President. President. She spoke by phone about 0:19:15.480 --> 0:19:19.639 a number of key issues here, Robert, where how do 0:19:19.680 --> 0:19:22.439 you view that part of the world right now? And 0:19:22.640 --> 0:19:25.120 the US role and how the US should act over 0:19:25.119 --> 0:19:27.320 the coming months and quarters and maybe a year. 0:19:28.320 --> 0:19:31.760 I think between now and the election and next November, 0:19:31.880 --> 0:19:36.399 the Biden administration is going to try to orchestrate a 0:19:36.560 --> 0:19:41.000 rap pro schmat with China because that will look good 0:19:41.040 --> 0:19:44.600 in elections, you know, you know, lower the talk of conflict, 0:19:44.760 --> 0:19:48.800 you know, stabilize the relationship, that will look good with voters. 0:19:49.080 --> 0:19:54.720 And also the relationship has gotten so toxic, so so dangerous, 0:19:55.080 --> 0:19:56.680 that something has to be done. 0:19:56.800 --> 0:19:57.000 You know. 0:19:57.119 --> 0:20:01.160 The markets, financial markets have priced in war in Ukraine, 0:20:01.280 --> 0:20:05.280 they've priced in Gaza, all of that nicely. But if 0:20:05.320 --> 0:20:08.880 there were ever a real shooting war between the two 0:20:09.040 --> 0:20:13.879 the world's two largest economies, in a high end military conflict, 0:20:14.280 --> 0:20:20.480 it would be devastating for financial markets, absolutely devastating. And 0:20:20.520 --> 0:20:23.359 that's if the war only lasted a few days. It 0:20:23.400 --> 0:20:27.320 could go on longer. So it's imperative of the Biden 0:20:27.359 --> 0:20:31.720 administration now I think the Chinese authorities as well, not 0:20:31.840 --> 0:20:36.200 to solve their problems, but to build a parameter around them, 0:20:36.240 --> 0:20:39.840 to build rules of the road so that the so 0:20:39.880 --> 0:20:44.720 that the downward turn in relations is at least stabilized. 0:20:45.600 --> 0:20:47.640 Robert again, there's so many ways we could go here, 0:20:47.640 --> 0:20:50.679 we have limited time. Let's switch gears yet again, go 0:20:50.760 --> 0:20:54.639 to the Middle East. It appears that Israel is just 0:20:54.680 --> 0:20:58.520 not backing down on any sneer exactly, Tommy exactly. And 0:20:58.560 --> 0:21:02.000 it seems like the Biden inistration and others are growing 0:21:02.040 --> 0:21:05.000 a little weary of Israel's position here. 0:21:05.080 --> 0:21:07.320 Where are we there? 0:21:07.320 --> 0:21:10.760 We are? We are in essentially a war with Iran 0:21:10.920 --> 0:21:16.880 that started on October seventh. The October seventh atrocities were 0:21:16.920 --> 0:21:20.240 so be steel, they were so intimate that I believe 0:21:20.280 --> 0:21:25.440 it changed the Israeli calculus on how to deal with Iran. 0:21:25.520 --> 0:21:27.960 And we saw an example of this the other day 0:21:28.000 --> 0:21:31.359 where they where they killed a number of Iranian generals. 0:21:31.920 --> 0:21:35.760 This is going to go on because October seventh, even 0:21:35.800 --> 0:21:41.040 if the Iranians were not directly implicated, they were fundamentally 0:21:41.200 --> 0:21:45.520