WEBVTT - Bloomberg Surveillance: Geopolitical Risks on Markets 0:00:05.040 --> 0:00:08.639 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:08.680 --> 0:00:12.040 with Paul Sweeney. Join us each day for insight from 0:00:12.039 --> 0:00:16.240 the best in economics, finance, investment, and international relations. You 0:00:16.239 --> 0:00:19.599 can also watch the show live on YouTube. Visit the 0:00:19.600 --> 0:00:24.360 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:24.360 --> 0:00:27.400 mornings from seven to ten am Eastern from our global 0:00:27.440 --> 0:00:32.080 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:32.440 --> 0:00:36.000 or anywhere else you listen, and always on Bloomberg Radio, 0:00:36.200 --> 0:00:39.360 the Bloomberg Terminal, and the Bloomberg Business app. 0:00:39.560 --> 0:00:40.320 This is a joy. 0:00:40.520 --> 0:00:46.080 Every research report is the character of the individual. Stephen 0:00:46.200 --> 0:00:52.080 Schork knows every valve in the Northeast on oil. He's 0:00:52.080 --> 0:00:55.000 gone out there, He's turned them. When you say what's 0:00:55.080 --> 0:00:58.080 Harbor doing, he could give you six flavors of the 0:00:58.120 --> 0:01:00.240 price of oil in New York Harbor. It is an 0:01:00.240 --> 0:01:04.160 acuity on oil and gas like we've never seen. 0:01:04.520 --> 0:01:05.680 He's a shark. Report. 0:01:06.280 --> 0:01:08.960 Can't say enough about his work, Stephen, Good morning. As 0:01:08.959 --> 0:01:12.720 simple as I can. Are we energy independent? 0:01:12.840 --> 0:01:18.840 Now? Within the holistic Shark report? Is this nation energy independent? 0:01:20.240 --> 0:01:24.640 Absolutely not? Tom, We were up until a few years ago. 0:01:25.480 --> 0:01:28.440 That is to say, we were reducing a tremendous amount 0:01:28.440 --> 0:01:31.279 of oil. Now we're back to those levels, and actually 0:01:31.280 --> 0:01:34.760 we're at record levels. But the investments that we are 0:01:34.800 --> 0:01:39.320 seeing have certainly held us back. And there is a 0:01:39.360 --> 0:01:44.720 misnomer out there when people hear energy independent, they kind 0:01:44.720 --> 0:01:48.480 of think, well, hey, we're not reliant on imports or 0:01:48.520 --> 0:01:49.080 so forth. 0:01:50.160 --> 0:01:50.680 We are. 0:01:51.720 --> 0:01:56.480 We do export a considerable amount of products gasoline, diesel, 0:01:56.560 --> 0:01:59.960 jet fuels, so forth. And we're also at Tom's signific 0:02:00.320 --> 0:02:03.040 exporters of crude oil. That was never the case up 0:02:03.120 --> 0:02:06.320 until a few years ago. This is Ina Davian. 0:02:06.360 --> 0:02:08.360 I just want to say on YouTube, all the secrets 0:02:08.400 --> 0:02:11.120 are given away. Steve Short is coming to us from 0:02:11.440 --> 0:02:15.640 right off the ninth at the Ocean Forest Golf Club, 0:02:15.760 --> 0:02:17.480 Sea Island, Georgia this morning. 0:02:17.919 --> 0:02:20.000 You know, we getting them in the middle of his games. 0:02:19.840 --> 0:02:22.040 That's a good Sea Island. You should be going shooting 0:02:22.080 --> 0:02:23.240 ski shooting down in Sea Island. 0:02:23.240 --> 0:02:27.520 Stephen, No, no, no, no, I'm actually doing market research 0:02:28.280 --> 0:02:32.640 in working this quarter from cursu So and we're on 0:02:32.680 --> 0:02:35.360 the south part of the island with direct sidelines to 0:02:35.440 --> 0:02:40.120 the Venezuelan shipping lanes. It's been very interesting. So I 0:02:40.160 --> 0:02:42.880 was watching the tankers go back and forth. So this 0:02:42.960 --> 0:02:44.280 is all work related. 0:02:44.440 --> 0:02:45.760 There's an umbrella in his tank. 0:02:46.000 --> 0:02:48.959 Yeah, sure, Steve, and I have to ask you. We 0:02:49.000 --> 0:02:51.320 have Brent here at seventy nine oh six grappling with 0:02:51.360 --> 0:02:54.320 the psychological eighty dollars a hour level, you know, level 0:02:54.320 --> 0:02:56.840 it hasn't seen since November. Quite honestly, my question for 0:02:56.880 --> 0:02:59.680 you is in the futures complex, you mentioned open interest 0:02:59.760 --> 0:03:02.280 on the rise, volumes rise, What are you getting from sentiment? 0:03:02.360 --> 0:03:04.520 What are options markets telling you? 0:03:05.639 --> 0:03:09.480 It's so right now we're starting to see some activity 0:03:09.520 --> 0:03:12.639 building up. We've had we've been in this significant downturn 0:03:12.680 --> 0:03:15.920 and oil prices since October, since the start of and 0:03:15.960 --> 0:03:19.000 I'm going to call it a RAN's war with the West, 0:03:19.520 --> 0:03:22.760 and we've only seen prices go lower at this time. 0:03:22.800 --> 0:03:25.640 And I'm of the opinion that really traders are whistling 0:03:25.680 --> 0:03:28.960 past the graveyard here. But what we're seeing now in 0:03:29.000 --> 0:03:32.560 the complex, the futures complex is first and foremost, open 0:03:32.600 --> 0:03:37.240 interest is rising now algebraic notation and prices are falling. 0:03:37.280 --> 0:03:41.880 That's a negative. Multiply that by rising positive you have 0:03:42.160 --> 0:03:44.240 a lot of money that's been coming into the market 0:03:44.280 --> 0:03:45.360 that's been short yep. 0:03:45.560 --> 0:03:46.840 And in fact, when. 0:03:46.640 --> 0:03:49.600 We look at the large speculators, they are short the 0:03:49.640 --> 0:03:52.840 equivalent of about six hundred and seventy million barrels of oil. 0:03:53.320 --> 0:03:56.800 That's about ninety five percent of the strategic patroller deserve equivalent. 0:03:57.440 --> 0:04:01.160 So you have a tremendous amount of bearish and volume 0:04:01.360 --> 0:04:04.840 intensity has been building now just based on I just 0:04:04.880 --> 0:04:08.520 looked at the numbers coming in up until this point, volatility, 0:04:08.600 --> 0:04:11.880 price variance has been falling. That's starting to rise now 0:04:12.000 --> 0:04:15.160 and the spreads. You're starting to see a premium being 0:04:15.200 --> 0:04:18.240 placed into this spot market. So this is clearly a 0:04:18.320 --> 0:04:22.240 sign that the market's getting ready to potentially explode. You 0:04:22.279 --> 0:04:23.920 have a lot of money in the market, A lot 0:04:23.920 --> 0:04:26.720 of that money is short. Trading volume has been intense 0:04:27.120 --> 0:04:31.119 now volatility is picking up. All you need is hence 0:04:31.200 --> 0:04:33.880 one more headline, I e. Something out of the Middle East. 0:04:34.000 --> 0:04:37.119 You got really see oil take off from this point. 0:04:37.520 --> 0:04:39.400 You're taking the words right out of my mouth, Steven Opik. 0:04:39.400 --> 0:04:41.680 Plus can they keep the supply cuts up? Are you 0:04:41.760 --> 0:04:43.839 expecting them to be able to hold fast in the 0:04:43.839 --> 0:04:45.960 face of brincrude below eighty dollars? 0:04:47.279 --> 0:04:50.320 I know I'm not, and I think with OPEC. People 0:04:50.400 --> 0:04:53.920 kind of think it's it's not a corporation. It's not that, Okay, 0:04:53.960 --> 0:04:56.200 the board or the CEO makes a decision and. 0:04:56.160 --> 0:04:57.520 The company carries it out. 0:04:57.960 --> 0:05:02.920 No, it is an organization that is a multifaceted, all 0:05:02.920 --> 0:05:06.640 different countries, all acting on their own self interest. And 0:05:06.720 --> 0:05:10.640 of course Saudi Arabia they're trying to our rate in production, 0:05:10.760 --> 0:05:15.360 but mainly your African producers need the cash at this point, 0:05:15.640 --> 0:05:18.480 so it's really difficult now for OPRAT i e. 0:05:18.560 --> 0:05:20.560 Saudi Arabia to keep control of production. 0:05:20.680 --> 0:05:22.640 One find a question Stephen Short and I look at 0:05:22.640 --> 0:05:24.280 this with a gale and a guest, John Tucker's down. 0:05:24.279 --> 0:05:26.279 You're gonna give us a gal and a gas update 0:05:26.279 --> 0:05:29.159 with a hummer. But are we are we anywhere near 0:05:29.600 --> 0:05:32.280 a gallon of gas where we shift to electric vehicles? 0:05:32.360 --> 0:05:35.560 What are six months it's been in the electric vehicle debate. 0:05:35.600 --> 0:05:41.000 You've provided real leadership here. Electric vehicles need a higher 0:05:41.279 --> 0:05:43.600 gallon of gas price to succeed. 0:05:44.880 --> 0:05:45.159 Yeah. 0:05:45.200 --> 0:05:48.000 Absolutely, and Tom, as you know, in economics, there are 0:05:48.040 --> 0:05:53.080 two variables that drive prices and demand, and that's essentially 0:05:53.120 --> 0:05:55.919 price shocks, which since the Arab oil and margo in. 0:05:55.920 --> 0:05:56.599 The early seventies. 0:05:56.640 --> 0:05:58.920 We've had plenty of shocks to the market, but we've 0:05:58.920 --> 0:06:01.080 never had that secondariable until recently. 0:06:01.320 --> 0:06:02.839 I eat the substitute. 0:06:03.279 --> 0:06:06.960 But the problem now with substitutes or or with evs 0:06:07.560 --> 0:06:10.039 is technology. And I'm only to speaking, you know, from 0:06:10.040 --> 0:06:14.279 my own perspective anecdotally. I have an electric high bred 0:06:14.360 --> 0:06:16.839 plug in and I love the garden thing. But the 0:06:16.880 --> 0:06:19.920 problem is I'm not buying them. I'm just leasing them 0:06:20.120 --> 0:06:24.159 because every three years they technology improved. So now and 0:06:24.240 --> 0:06:26.960 I'm not the only one, so there's this overhang of 0:06:27.160 --> 0:06:28.960 used evs that's no one's buying. 0:06:29.080 --> 0:06:31.680 So no one's buying those. It's going to be very difficult. 0:06:31.800 --> 0:06:35.560 So prices right now under that four dollar gallon are 0:06:35.600 --> 0:06:39.320 not high enough to really push consumers back to complete ev. 0:06:39.400 --> 0:06:41.799 Steven Shark thank you so much for short report coming 0:06:41.839 --> 0:06:43.039 from his studios and. 0:06:43.080 --> 0:06:56.520 Play a lagoton curse out. We literally have research notes. 0:06:56.560 --> 0:07:00.440 It's say, Doc Electaco, I mean mister doct. 0:07:02.120 --> 0:07:04.320 Ed to see here Mark, and you know people like 0:07:04.360 --> 0:07:04.880 Mark Crumpton. 0:07:04.920 --> 0:07:08.240 He knows everybody's name cold and I'm like useless. 0:07:08.520 --> 0:07:11.360 So they got a big flashing billboard here. Gregory daka 0:07:11.520 --> 0:07:13.640 like Taco wonderful to have you here with Ernst in 0:07:13.680 --> 0:07:17.160 young Ey he's our chief economist. And it's more than 0:07:17.280 --> 0:07:20.640 just like market economics, what's GDP going to do. It's 0:07:20.680 --> 0:07:24.000 like the fabric the makeup of our economics as well. 0:07:24.040 --> 0:07:27.360 And Greg, I've got to go seriously here to this 0:07:27.480 --> 0:07:30.720 analysis of the new productivity? Do you and e Y, 0:07:30.800 --> 0:07:35.720 with all of your abilities in corporate America have any 0:07:35.840 --> 0:07:38.000 understanding of the new productivity? Or do we have to 0:07:38.000 --> 0:07:39.640 wait five years to find out what it is? 0:07:40.680 --> 0:07:43.520 Do we have to wait until it happens to actually 0:07:43.520 --> 0:07:45.000 talk about it now? I think we can talk about 0:07:45.000 --> 0:07:48.840 it today. I think what's very interesting in our insights 0:07:48.840 --> 0:07:50.600 that we gather at e WHY is that we talked 0:07:50.600 --> 0:07:52.160 to a lot of CEOs. We talked to a lot 0:07:52.160 --> 0:07:55.560 of business leaders as to how they're navigating things highly 0:07:55.640 --> 0:07:59.960 uncertain environment where inflation and cost fatigue remained very much 0:08:00.080 --> 0:08:04.280 constraint on economic activity and where supply remains very much fragile. 0:08:04.640 --> 0:08:08.080 And there's a lot of effort happening from CEOs across 0:08:08.120 --> 0:08:11.080 the different sectors of the US economy that are trying 0:08:11.120 --> 0:08:14.520 to alleviate some of these pressures. They're looking at ways 0:08:14.560 --> 0:08:19.920 to improve processes and stimulate efficiency gains via these process improvements. 0:08:20.040 --> 0:08:22.880 But they're also looking at technology as an avenue to 0:08:22.920 --> 0:08:25.240 stimulate stronger growth and less inflation. 0:08:25.440 --> 0:08:27.800 And that's where to me, this is the heart of 0:08:27.840 --> 0:08:30.120 the matter. Is we go tech and we say ai 0:08:30.320 --> 0:08:32.160 AI and it's all ei eio. 0:08:32.000 --> 0:08:35.080 It's all technology. And the answer is what matters is 0:08:35.160 --> 0:08:38.800 tech on Monsanto right exactly? Or tech on DuPont it 0:08:38.840 --> 0:08:39.720 matters just as much. 0:08:39.800 --> 0:08:41.720 Well, Greg, first of all, let me apologize your father 0:08:41.760 --> 0:08:45.400 for butchering for computing the doctor last name. But you know, 0:08:45.520 --> 0:08:49.160 in your most recent macropulsey you're talking about the disinflationary 0:08:49.160 --> 0:08:50.920 winds that are still blowing. And I wonder if you 0:08:50.960 --> 0:08:54.520 could just help us understand why the market is so 0:08:54.800 --> 0:08:58.840 hyper focused on next Friday's PCE print. What's so important 0:08:58.840 --> 0:09:00.000 about it? What should be looking for? 0:09:00.440 --> 0:09:02.160 Well, the simple answer is that the FED will be 0:09:02.240 --> 0:09:05.120 reacting mechanically to inflation developments over the course of this year, 0:09:05.280 --> 0:09:08.040 and that's why there's a lot of focus on the 0:09:08.080 --> 0:09:09.040 next data print. 0:09:09.559 --> 0:09:11.240 And I think, now, what are we expecting there? 0:09:11.280 --> 0:09:15.000 Is it? We'll show, We'll show you know, lower inflation. 0:09:15.040 --> 0:09:18.240 We're going to see this ongoing disinflationary momentum. We'll likely 0:09:18.240 --> 0:09:21.600 have core inflation ending twenty twenty three below three percent, 0:09:21.640 --> 0:09:23.160 which is something that very few. 0:09:22.960 --> 0:09:25.319 Four only three and a half. Two and a half 0:09:25.400 --> 0:09:26.440 is the number we're looking for. 0:09:26.360 --> 0:09:30.280 There well, core inflation under three percent, which is quite 0:09:30.080 --> 0:09:33.480 the feat. I think the disinflationary currents will continue. We 0:09:33.559 --> 0:09:37.920 have an environment where we're seeing gradually moderating final demand growth. 0:09:37.920 --> 0:09:41.800 We're seeing supply that is relatively well served. We're seeing 0:09:41.800 --> 0:09:45.000 an environment where businesses are looking for wage growth compression 0:09:45.080 --> 0:09:48.120 as an avenue to limit costs. We're also seeing an 0:09:48.160 --> 0:09:51.320 environment where there is less pressing power and much more 0:09:51.400 --> 0:09:55.400 sensitivity to increases in prices. And then rent disinflation is 0:09:55.400 --> 0:09:57.719 still very much in the pipeline. So that's the right 0:09:57.840 --> 0:09:59.439 combo to get more disinflation. 0:09:59.520 --> 0:10:02.880 You know, look ahead in the next week into February 0:10:02.920 --> 0:10:04.200 into twenty twenty four. 0:10:04.520 --> 0:10:05.760 Rent disinflation to. 0:10:05.720 --> 0:10:08.680 Me is absolutely of course, it is, of course, But 0:10:08.720 --> 0:10:10.160 you know, I mean, we could talk about shelter, and 0:10:10.160 --> 0:10:12.600 we could talk about inflation until we're blue in the face, Greg. 0:10:12.640 --> 0:10:14.440 But you know, one of the interesting pieces you just 0:10:14.440 --> 0:10:16.680 put out is on Genai, and you know, Tom is 0:10:16.720 --> 0:10:20.040 not convinced on Ai. Okay, I'm just gonna preface that, 0:10:20.080 --> 0:10:23.000 and yet I'm reading this wonderful piece about the productivity 0:10:23.000 --> 0:10:25.440 boost and you know what the impact of it is 0:10:25.520 --> 0:10:27.880 and job reshuffling. Talk to us a little bit about 0:10:27.880 --> 0:10:30.560 what you believe the economic impact of Jenai is going 0:10:30.640 --> 0:10:30.800 to be. 0:10:31.200 --> 0:10:33.480 I think the economic impact of Jenai is going to 0:10:33.480 --> 0:10:37.160 be felt across most sectors. It may not necessarily be 0:10:37.760 --> 0:10:41.160 a game changer in the sense that it multiplies the 0:10:41.240 --> 0:10:43.760 pace of growth by a factor of two or three, 0:10:44.160 --> 0:10:46.439 but it is going to have a significant impact. The 0:10:46.480 --> 0:10:48.240 way we look at it is that there's going to 0:10:48.280 --> 0:10:50.839 be a need and a desire to invest a lot 0:10:50.880 --> 0:10:53.960 in Genai. There is a need to invest in the infrastructure, 0:10:54.000 --> 0:10:57.120 the software, the company adoption that is going to lead 0:10:57.120 --> 0:11:00.319 to a boost of GDP. After that, we're also going 0:11:00.320 --> 0:11:03.679 to see significant productivity gains. We estimate that over the 0:11:03.679 --> 0:11:05.880 next decade for the US economy, we could have a 0:11:05.920 --> 0:11:07.439 boost of three and a half percent of gend. 0:11:07.600 --> 0:11:10.280 Okay, guys like you and fancy you see how Greg 0:11:10.360 --> 0:11:13.120 is dressing now, He said, Ey, he used to dress 0:11:13.160 --> 0:11:16.360 like a market economist. Now this looks like he's consulting 0:11:16.400 --> 0:11:17.960 to somebody at ten thousand. 0:11:17.640 --> 0:11:20.160 Dollars an hour down in Dallas, flying in. 0:11:20.280 --> 0:11:23.040 We're in contacts. Now you ditch the ditch the glasses. 0:11:23.280 --> 0:11:24.720 That's the heart of the matter. 0:11:24.840 --> 0:11:28.080 Now, did you get wonky or I'm looking at productivity 0:11:28.080 --> 0:11:30.720 and we, of course we lost this year the giant 0:11:30.720 --> 0:11:35.640 of productivities, Robert Solo of MIT I got capital dynamics, 0:11:35.640 --> 0:11:37.360 I got labor dynamics, and I got this. 0:11:37.320 --> 0:11:41.520 Wackle thing called total factor productivity. Which of those three 0:11:41.720 --> 0:11:45.520 is the shock forward to our new American productivity? 0:11:45.760 --> 0:11:48.240 Well, it's it's a timing issue, right. Initially you have 0:11:48.280 --> 0:11:51.600 to invest. So initially the boost to economic activity actually 0:11:51.600 --> 0:11:55.840 comes from the additional investment capital deepening in the capital 0:11:55.880 --> 0:12:00.160 deepening and capital investment generally in technology. After that you 0:12:00.200 --> 0:12:02.840 get the benefits in terms of productivity growth, and it's 0:12:02.880 --> 0:12:05.880 not going to be some magical number that comes out 0:12:05.880 --> 0:12:09.320 of nowhere. It's actually going to be more efficiency in 0:12:09.360 --> 0:12:11.880 the way we do our jobs, and it's going to 0:12:11.920 --> 0:12:14.079 be across sectors. And I think we have to step 0:12:14.120 --> 0:12:16.840 away from this notion that it's only going to be 0:12:17.160 --> 0:12:20.880 low skilled jobs. Actually, high skilled jobs can be augmented 0:12:20.960 --> 0:12:24.160 quite tremendously by Jenai. 0:12:23.920 --> 0:12:26.400 Let me quantify this for our audience here. Greg estimates 0:12:26.400 --> 0:12:28.120 and the team D and Y estimate that the lift 0:12:28.120 --> 0:12:30.520 to global GDP from stronger productivity to total Are you 0:12:30.600 --> 0:12:33.280 ready for this? Between one point two and two point 0:12:33.280 --> 0:12:36.920 four trillion dollars over the next decade. But that's not 0:12:37.040 --> 0:12:38.719 just the US now, is it? Where do you think 0:12:38.760 --> 0:12:40.880 the impact of that productivity boost is going to be 0:12:40.920 --> 0:12:42.679 felt most? Is it going to be the US? Is 0:12:42.720 --> 0:12:43.880 it Europe? Is at Asia? 0:12:44.000 --> 0:12:46.240 I think the US is going to benefit most from 0:12:46.320 --> 0:12:49.480 that because the US is essentially leading the way when 0:12:49.480 --> 0:12:52.640 it comes to these new technologies. But Europe is investing 0:12:52.679 --> 0:12:55.560 a lot. And then after that you have China and 0:12:55.600 --> 0:12:58.080 the rest of Asia that's also falling very closely. So 0:12:58.120 --> 0:12:59.800 that's going to be a positive booth in terms of 0:13:00.000 --> 0:13:00.760 global economics. 0:13:00.760 --> 0:13:04.079 How do you an eye treat China hang saying is greatering, 0:13:04.200 --> 0:13:05.200 et cetera, et cetera. 0:13:05.640 --> 0:13:09.040 What is the ey summary of how China will recover? 0:13:09.600 --> 0:13:09.760 Well? 0:13:09.800 --> 0:13:11.720 I think we have to understand that China is no 0:13:11.760 --> 0:13:13.640 longer going to be the global engine of growth that 0:13:13.720 --> 0:13:15.720 it once was. We're going to be in an environment 0:13:15.760 --> 0:13:18.640 where there are cyclical headwinds in terms of economic activity. 0:13:18.640 --> 0:13:22.400 We're seeing less spending in terms of retail sales, industrials activity, 0:13:22.840 --> 0:13:25.720 the real estate sector. But we're also and very importantly, 0:13:25.880 --> 0:13:29.640 seeing structural headwinds. The population is not only aging, it's 0:13:29.679 --> 0:13:32.880 also shrinking. That is a big drag on the economy's 0:13:32.880 --> 0:13:35.560 potential growth. And I wouldn't be surprised that in the 0:13:35.600 --> 0:13:38.400 next five to ten years China grows at an advanced 0:13:38.440 --> 0:13:41.400 economy pace rather than as an emerging economy. 0:13:40.960 --> 0:13:45.360 Pervidak with Ey just really really valuable in a lot 0:13:45.360 --> 0:13:47.400 of different You get a whole different perspective from the 0:13:47.440 --> 0:13:50.720 major accountancies and consultants than you do from people going, 0:13:50.760 --> 0:13:51.400 you know what's. 0:13:51.160 --> 0:13:53.200 GDP got no skin in the game. That's right, it's 0:13:53.200 --> 0:13:55.000 an unfiltered, unbiased opinion. 0:14:00.280 --> 0:14:03.840 Now, Brian Lovett with Invesco, Brian, I got some chit chat. 0:14:03.880 --> 0:14:06.360 But because the time, let's get right to it now. 0:14:06.760 --> 0:14:09.199 Is cash an asset for Invesco? 0:14:10.720 --> 0:14:13.600 Well, investors are clearly viewing it as an asset, and 0:14:13.600 --> 0:14:16.000 I think it does hold the place at certain times. 0:14:16.000 --> 0:14:20.160 The challenges Right now with yields above five percent, investors 0:14:20.200 --> 0:14:23.239 are loving it. The risks that they have is reinvestment. 0:14:23.360 --> 0:14:25.880 And so if we're right, and the Federal Reserve is 0:14:25.880 --> 0:14:28.280 going to be normalizing the yield curve, well, then those 0:14:28.320 --> 0:14:31.200 yields will come down. We've been telling people lock it in. 0:14:31.600 --> 0:14:34.040 If you like yields for thirty days, you'll probably love 0:14:34.080 --> 0:14:35.320 them for five or ten years. 0:14:35.440 --> 0:14:37.160 Brian, I want you to put on your foreign exchange 0:14:37.160 --> 0:14:38.920 hat for me for a second. I'm going to talk 0:14:38.960 --> 0:14:41.360 about one of your close colleagues, Alethio de Longez, who's 0:14:41.360 --> 0:14:44.360 a senior PM head of Global Tactical Asset Allocation at Investco, 0:14:44.400 --> 0:14:47.880 and his work on factor investment in foreign exchange. Talk 0:14:47.920 --> 0:14:50.120 to us about the beta regime that we're coming out of, 0:14:50.160 --> 0:14:53.680 one where FX performance has really been driven by rate differentials. 0:14:53.720 --> 0:14:56.280 Are we moving into a new regime where value is 0:14:56.280 --> 0:14:57.120 going to take control of that? 0:14:57.320 --> 0:14:59.760 Talk to us well, I think over the next couple 0:14:59.760 --> 0:15:02.920 of year years we will Typically what happens is the 0:15:02.920 --> 0:15:06.200 FED normalizes, the ye'll curb. You start to unlock some 0:15:06.280 --> 0:15:08.600 of the value that exists in the world, whether that's 0:15:08.640 --> 0:15:12.600 in US value stocks, whether that's in right now international market. 0:15:12.680 --> 0:15:15.640 The challenge we have in the near term is that 0:15:15.720 --> 0:15:18.200 we got a lot of returns in November and December. 0:15:18.240 --> 0:15:20.760 I wish we would have taste them out over a 0:15:20.800 --> 0:15:24.520 longer period of time. So you've growth below trend right now. 0:15:24.560 --> 0:15:27.480 The market recalibrating where the Fed's going to be in 0:15:27.560 --> 0:15:29.800 March and by the end of the year, so you 0:15:29.880 --> 0:15:32.880 may see a little bit of a quality growthy trade 0:15:33.000 --> 0:15:36.600 again in here. But if you're an intermediate term investor 0:15:37.040 --> 0:15:40.120 expecting the FED to normalize the yelk curb, then yeah, 0:15:40.240 --> 0:15:43.320 value oriented investments should perform well over the next couple 0:15:43.320 --> 0:15:43.680 of years. 0:15:43.840 --> 0:15:46.520 And talk to us a little bit about the the 0:15:46.600 --> 0:15:48.680 end of QT. I mean there's been some talk that's 0:15:48.720 --> 0:15:51.200 going to end early. Talk to us about central bank runoff. 0:15:51.240 --> 0:15:53.400 Does this have the potential to crowd out other fixed 0:15:53.440 --> 0:15:54.400 and comac and classes. 0:15:55.040 --> 0:15:57.240 I don't think it does. I mean the fixed and 0:15:57.240 --> 0:16:01.240 cume market has been behaving, I would say appropriately. If 0:16:01.280 --> 0:16:04.120 you look at where the tenure treasury has been, it's 0:16:04.400 --> 0:16:07.360 now hovering around what the nominal growth potential of this 0:16:07.480 --> 0:16:10.520 country likely is. So I don't think that this is 0:16:10.600 --> 0:16:13.880 being significantly manipulated one way or the other. And as 0:16:13.880 --> 0:16:17.920 the FED has wound down its balance sheet, the markets 0:16:17.960 --> 0:16:21.880 have operated. The markets have operated just fine. I think 0:16:21.920 --> 0:16:24.040 it makes sense right now. Policy is just too tight, 0:16:24.200 --> 0:16:26.480 you know, five and a quarter on the funds rate, 0:16:28.000 --> 0:16:31.240 slowly winding down the balance sheet when growth is slowing. 0:16:31.320 --> 0:16:34.280 Policy is too tight, so we should expect an easier 0:16:34.400 --> 0:16:35.440 environment going forward. 0:16:35.640 --> 0:16:37.760 Brian Levitt, thank you so much. Too short of visit. 0:16:37.800 --> 0:16:39.920 We'll do it again soon, sin soon. Brian Levits with 0:16:39.960 --> 0:16:45.440 Invesco there with a more holistic view on your asset allocation. 0:16:56.160 --> 0:16:59.880 Now joining us a gentleman of inherent optimism. 0:17:00.200 --> 0:17:03.240 There's points where he can wax philosophical and get gloomy. 0:17:03.240 --> 0:17:04.120 But Neil Dutta with. 0:17:04.160 --> 0:17:07.159 Us with run back, and I made very clear he 0:17:07.320 --> 0:17:10.800 was out front with optimism amid the gloom. 0:17:11.000 --> 0:17:15.159 I'm gonna call it fourteen months ago or so. I 0:17:15.240 --> 0:17:16.960 just looked at Atlanta GDP and. 0:17:16.920 --> 0:17:20.680 After a four point x percent Q three, we're modeling 0:17:20.720 --> 0:17:23.760 out somewhere in the vicinity of a normal American economy. 0:17:23.800 --> 0:17:27.639 Two point three percent. That seems better than good versus 0:17:27.680 --> 0:17:30.560 a gloom of recession. Neil Dutta, thank you so much 0:17:30.560 --> 0:17:33.960 for joining us. Is two point three percent a run 0:17:34.040 --> 0:17:36.840 rate for the American economy? 0:17:38.600 --> 0:17:39.280 Yeah, I think so. 0:17:39.440 --> 0:17:41.720 I mean, I think we're probably in a range of 0:17:41.720 --> 0:17:43.679 around two to two and a half percent. I mean, 0:17:43.680 --> 0:17:45.840 it's important to note, as you did, that we're coming 0:17:45.880 --> 0:17:48.240 off of a very strong quarter in the third quarter, 0:17:48.400 --> 0:17:52.080 so it was I think inevitable that the economy would 0:17:52.119 --> 0:17:54.040 buckle a little bit under its own weight. I mean, 0:17:54.080 --> 0:17:56.480 you can't sustain that kind of momentum. But I think 0:17:56.520 --> 0:18:01.880 what's important, Tom, is that you know that estimate you mentioned, 0:18:02.080 --> 0:18:05.840 you know, Atlanta fed around you know, let's say two percent. 0:18:06.600 --> 0:18:11.400 I mean that's despite a pretty significant decline in inventory investment. 0:18:11.440 --> 0:18:14.600 In other words, inventories are cutting GDP growth, and so 0:18:14.840 --> 0:18:19.240 final sales look pretty healthy. And you know, I think 0:18:19.240 --> 0:18:23.119 that's important because you know, ultimately firms are going to 0:18:23.160 --> 0:18:27.280 replenish inventories, and when that happens, supports the local areas 0:18:27.280 --> 0:18:27.960 of the economy. 0:18:28.160 --> 0:18:30.800 Bob Burgess, Sir Robert Burgess of Bloomberg News, as my 0:18:30.960 --> 0:18:33.159 chart of the week, folks, it's a log regression of 0:18:33.240 --> 0:18:36.040 retail sales since time began. I think he goes back 0:18:36.040 --> 0:18:38.719 to the War of eighteen twelve, And the answer is, 0:18:38.840 --> 0:18:41.320 with the noise around the Great Financial Crisis and noise 0:18:41.359 --> 0:18:46.400 around COVID, with the stimulus, we've had a massive retail boom. 0:18:46.600 --> 0:18:51.000 Money questioned Neil data. Does retail consumption sales do they 0:18:51.040 --> 0:18:54.440 come back to trend line or do we assume at 0:18:54.480 --> 0:18:58.719 some point we see diminished consumption off long term trend. 0:19:01.000 --> 0:19:03.280 Well, I don't think it's coming back to that trend line. 0:19:03.320 --> 0:19:05.879 I mean absence some kind of a recession. You know, 0:19:05.920 --> 0:19:08.320 people tend to keep on spending money so long as 0:19:08.359 --> 0:19:11.160 the economy and employment are growing, and that's what's happening, 0:19:12.600 --> 0:19:14.080 you know, I do. I mean, you mentioned a lot 0:19:14.119 --> 0:19:17.840 about the stimulus, but I really think that that's you know, 0:19:17.960 --> 0:19:21.399 yesterday's story. I mean, ultimately, what's driving consumers spending at 0:19:21.440 --> 0:19:27.840 this point is a revival in real incomes. Right, So 0:19:28.880 --> 0:19:31.760 inflation has slowed, the labor markets are steady, and as 0:19:31.800 --> 0:19:36.160 a result, real incomes have been accelerating. So that's ultimately 0:19:36.200 --> 0:19:39.520 what's driving consumer spending. And I think that that's poised 0:19:39.560 --> 0:19:42.879 to continue. It's one of the reasons why consumers are 0:19:42.920 --> 0:19:45.880 a bit more confident. I mean, the fact that prices 0:19:45.920 --> 0:19:49.040 have come down and that'll likely continue over the next 0:19:49.520 --> 0:19:50.400 couple of quarters. 0:19:51.760 --> 0:19:52.520 That's important. 0:19:52.680 --> 0:19:57.119 And you know that decline in price inflation lifts in 0:19:57.400 --> 0:20:00.840 real incomes obviously, and that in turn supports consumer spending. 0:20:00.920 --> 0:20:04.320 This story you know, the excess savings, fiscal stimulus. You know, 0:20:04.400 --> 0:20:07.040 these arguments I think have really outlived their usefulness. 0:20:07.240 --> 0:20:11.919 Neo financial markets appear infatuated, infatuated with next week's GDP 0:20:12.000 --> 0:20:14.760 sorry PCE deflator print. Talk to us about that. What 0:20:14.800 --> 0:20:15.920 are you looking for next week? 0:20:17.840 --> 0:20:19.679 Well, I think it'll be a soft point two. I 0:20:19.680 --> 0:20:22.520 think the Bloomberg News consensus is point two. I think 0:20:22.520 --> 0:20:24.359 it's a soft point too. But you know, what I 0:20:24.359 --> 0:20:27.640 would say is that, you know, for all this talk 0:20:27.680 --> 0:20:30.960