WEBVTT - Surveillance: 2020 Will Be Quite Weak, Shepherdson Says 0:00:00.080 --> 0:00:12.960 Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Leie. 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 --> 0:00:33.640 Bloomberg dot Com, and of course, on the Bloomberg Let's 0:00:33.640 --> 0:00:36.280 Talk About Trade Show. We investors struggling to work out 0:00:36.360 --> 0:00:39.279 just what was agreed in Argentina. Larry Cutolo called them 0:00:39.280 --> 0:00:42.680 commitments that both sides would presumably implement. There was also 0:00:42.760 --> 0:00:46.200 confusion over when the ninety day tariff truce would begin, 0:00:46.320 --> 0:00:49.360 with Cutlos saying January one, which the White House later 0:00:49.400 --> 0:00:54.000 corrected to December one. China has remained largely silent in 0:00:54.080 --> 0:00:57.560 Shepherds and Joint US now Pantheon macro Economics chief Economists, 0:00:57.560 --> 0:01:01.320 So ian just what was agreed? Well, nothing very substantive. 0:01:01.720 --> 0:01:05.120 The the ninety day delayed to the implantation of the 0:01:06.040 --> 0:01:08.920 tariffs was apparently agreed, although that didn't appear in the 0:01:09.000 --> 0:01:12.720 Chinese statement. Uh, and nothing else. An agreement to talk 0:01:13.480 --> 0:01:17.640 h and an agreement to pursue a more sustainable trading relationship. 0:01:17.920 --> 0:01:21.880 But ninety days is nothing like enough. I suspect to 0:01:21.959 --> 0:01:25.600 draw up a fundamental change in China's trading relationship with 0:01:25.600 --> 0:01:27.840 the US. So I guess what we're now hoping for, 0:01:27.920 --> 0:01:30.240 is it in ninety days time or preferably before that 0:01:30.440 --> 0:01:32.280 the can will be kicked a bit further down the 0:01:32.319 --> 0:01:35.160 road and will continue to talk uh, and we won't 0:01:35.319 --> 0:01:39.040 ultimately see the imposition of those tariffs. So markets like 0:01:39.360 --> 0:01:41.440 that bit. But then the closer you look at it, 0:01:42.200 --> 0:01:44.440 the less of real substance that there is. We're getting 0:01:44.440 --> 0:01:46.520 this slow drip feed of more information. There was no 0:01:46.640 --> 0:01:49.600 mention of autos on the statement released by the United 0:01:49.600 --> 0:01:52.240 States or the statement released by China. Then the President 0:01:52.240 --> 0:01:54.520 tweeted about it, and everyone's scrambling to work out what 0:01:54.560 --> 0:01:59.080 the agreement is exactly. Currently the terrorists for it's going 0:01:59.120 --> 0:02:01.520 to be fifteen for the rest of the world. Are 0:02:01.560 --> 0:02:03.160 they talking about coming down to the rest of the 0:02:03.160 --> 0:02:05.440 world or coming down to zero? Well, we don't know 0:02:05.480 --> 0:02:09.160 because China hasn't said so. Jan Ping and his economic 0:02:09.360 --> 0:02:12.600 entourage are still traveling and the silence is kind of deafening. 0:02:13.080 --> 0:02:16.519 So presumably we'll hear something more definitive in due course, 0:02:16.600 --> 0:02:19.880 but right now we're kind of scrambling now from from 0:02:19.919 --> 0:02:23.480 a macro perspective, I think what markets really wanted to 0:02:23.520 --> 0:02:26.160 hear was simply that the tariffs wouldn't be imposed January one, 0:02:26.200 --> 0:02:29.080 which was the original plan. So we're happy about that, 0:02:29.320 --> 0:02:31.600 and from a macro perspective, everything else is kind of detail. 0:02:31.639 --> 0:02:34.440 Though for individual sectors and for autos in particular, that 0:02:34.520 --> 0:02:38.480 potential shift from forty down to fifteen possibly would be 0:02:38.480 --> 0:02:41.400 an enormously big deal, but right now there isn't There 0:02:41.480 --> 0:02:43.600 is no hard information on this. And let's tig into 0:02:43.680 --> 0:02:46.920 your base case for where growth will be in just 0:02:46.919 --> 0:02:49.560 looking at the Bloomberg e CFC, the function on the 0:02:49.600 --> 0:02:52.000 Bloomberg terminal gives me a very quick snapshot of the 0:02:52.040 --> 0:02:55.600 median estimate of Wall Street for growth projections forecast two 0:02:55.639 --> 0:02:58.919 point six percent. We roll over to one point nine 0:02:58.960 --> 0:03:02.600 percent into twenty. Are you in and around those kind 0:03:02.600 --> 0:03:05.760 of figures? Two and a half I think is reasonable, 0:03:05.800 --> 0:03:07.920 But it's it's a year of two halves because I 0:03:07.960 --> 0:03:09.320 think in the second half it will be a great 0:03:09.360 --> 0:03:11.919 deal slower, and so I'm not with the market for twenty. 0:03:11.960 --> 0:03:15.120 I think twenty likely will be quite weak. I wouldn't 0:03:15.120 --> 0:03:18.120 be surprised to see a mild recession. I stressed mild 0:03:18.400 --> 0:03:22.520 in but at this point that is very contingent on 0:03:22.560 --> 0:03:26.040 the trade war not flaring up again and certainly not 0:03:26.240 --> 0:03:28.920 to the point where we end at tariffs are on 0:03:28.960 --> 0:03:32.440 the two billion currently tariff to ten percent, and certainly 0:03:32.480 --> 0:03:34.800 not any tariffs on consumer goods, which is another two 0:03:35.240 --> 0:03:38.000 seventy billion. So this is very much a kind of 0:03:38.000 --> 0:03:40.400 a binary position here that if we do go down 0:03:40.440 --> 0:03:42.560 the rabbit hole on tariffs and then the growth outlook 0:03:42.600 --> 0:03:45.400 will deteriorate in a heartbeat, and that two and a 0:03:45.440 --> 0:03:48.200 half number for next year will become extremely difficult to 0:03:48.200 --> 0:03:50.120 achieve and it will be a real mess. There is 0:03:50.160 --> 0:03:52.280 always something to worry about. I and the latest worry 0:03:52.320 --> 0:03:54.680 of the last twenty four hours once again worries about 0:03:54.920 --> 0:03:59.440 the yield curve resurfacing two year yields, three year yields 0:03:59.520 --> 0:04:03.720 trading slightly above where the five year yielded just a 0:04:03.760 --> 0:04:06.160 little bit of curve in version for the first a 0:04:06.200 --> 0:04:08.440 long time. Yeah, no, it is. It is the first 0:04:08.480 --> 0:04:10.160 time in a long time. I think that to me, 0:04:10.360 --> 0:04:12.880 markets have got shall we say, a little bit ahead 0:04:12.880 --> 0:04:16.280 of themselves on this disinflation story. You know, I don't 0:04:16.360 --> 0:04:19.480 buy the idea that we're heading into a materially lower 0:04:19.480 --> 0:04:21.839 inflation environment in the US because I think the labor 0:04:21.920 --> 0:04:24.480 market is so tight that the wage growth, which really 0:04:24.520 --> 0:04:27.000 is the big driver, is much more likely to head 0:04:27.040 --> 0:04:29.440 north and south for the foreseeable future. I think people 0:04:29.440 --> 0:04:31.120 are putting too much emphasis on the impact of the 0:04:31.120 --> 0:04:33.160 stronger dollar, which, yeah, it pulls down the price of 0:04:33.200 --> 0:04:37.280 imported everything, but most of the CPI is not imported goods. 0:04:37.279 --> 0:04:40.640 It's services. It's about wages. And the housing thing as well, 0:04:40.640 --> 0:04:42.239 which I think has really got a lot of attention, 0:04:42.279 --> 0:04:44.760 the idea of the housing markets rolling over, and it isn't. 0:04:44.880 --> 0:04:47.520 It's softening, it's not rolling. Well. What's interesting about this 0:04:47.560 --> 0:04:50.040 is the dollar has been weaker in the last two sessions, 0:04:50.080 --> 0:04:53.000 crude has been firmer in the last two sessions, yet 0:04:53.000 --> 0:04:54.839 the long end of the treasury curve is bid. I 0:04:54.880 --> 0:04:57.360 see that again this morning. Yeah, because you know, we 0:04:57.600 --> 0:04:59.560 need to see the impact of the of the dollar, 0:04:59.600 --> 0:05:02.200 and I couple of days of a dollar weakening doesn't 0:05:02.440 --> 0:05:04.800 doesn't reverse the seven percent appreciation in the trade way 0:05:04.880 --> 0:05:06.920 to dollar over the last year, and that's really what's 0:05:06.920 --> 0:05:10.200 been pushing down goods prices. The yield that we have. 0:05:10.400 --> 0:05:13.160 What does it signal to our listeners. I think the 0:05:13.160 --> 0:05:16.720 base feel of all our listeners would be it just 0:05:16.800 --> 0:05:21.039 means economic slowdown. Is there another signal there? Well? Economic 0:05:21.080 --> 0:05:24.520 slowdown all lower inflation. And at the moment, I think 0:05:24.520 --> 0:05:26.640 the market is playing with both of those stories. I 0:05:27.000 --> 0:05:30.240 think they might be premature on them both, because you know, 0:05:30.560 --> 0:05:32.560 global growth certainly has lost a bit of its edge. 0:05:32.560 --> 0:05:34.040 How much of that is due to tariffs and how 0:05:34.120 --> 0:05:36.240 much of it is due to China's trend slowdown is 0:05:36.320 --> 0:05:40.680 another question. But the US is strong. Growth here is strong. 0:05:40.760 --> 0:05:43.080 The labor market here is super tight. We have a 0:05:43.160 --> 0:05:46.480 three point seven unemployment rate and we've got zero real 0:05:46.640 --> 0:05:52.120 short have wage increases there are above three percent now 0:05:52.320 --> 0:05:55.239 a couple get more med and than anything else. Yeah, 0:05:55.279 --> 0:05:57.599 you know, when guys like you say wages are people 0:05:57.640 --> 0:06:00.839 are like, are you out of your mind? Way? Wages 0:06:00.839 --> 0:06:02.839 are up. They're not up as much as as a 0:06:02.880 --> 0:06:05.919 lot of people would like, that's for sure. But especially 0:06:05.920 --> 0:06:07.040 if you're in a in a in a part of 0:06:07.040 --> 0:06:09.920 the country where the lab market is even tighter than average, 0:06:09.920 --> 0:06:12.359 and there are some places but unemployments well below three percent, 0:06:13.560 --> 0:06:15.919 wage growth in those places is faster. If you're in 0:06:16.160 --> 0:06:19.640 a very tight sector like transportation trucking. You know, there's 0:06:19.640 --> 0:06:22.400 some big wage games, but not everywhere. Not everyone. Email 0:06:22.480 --> 0:06:26.080 just came in from John unless your city, no one cares. 0:06:26.160 --> 0:06:29.240 Talked to Ian about the sale of Newcastle United. Why 0:06:29.279 --> 0:06:31.800 is it so hard to sell a Premier League football team? 0:06:32.080 --> 0:06:34.200 We want to Sally because the guy, the guy who 0:06:34.200 --> 0:06:36.680 owns it, wants an insane price for it. That's that's 0:06:36.720 --> 0:06:39.480 the problem. Rumors that you were bidding, but you know, 0:06:39.680 --> 0:06:42.200 I mean, I'd love to, but I'm you know, a 0:06:42.240 --> 0:06:44.800 few hundred million short. Is there usually want to Sally? 0:06:44.880 --> 0:06:48.839 And if if I went in with former million in 0:06:48.839 --> 0:06:51.440 a black suitcase this afternoon, he would take it. But 0:06:51.440 --> 0:06:52.880 but known in their right mind and to pay that. 0:06:53.080 --> 0:06:55.920 Let's translate this for the US audience. Is Newcast United 0:06:55.960 --> 0:06:57.839 like the Kansas City Royals. And I say that with 0:06:57.880 --> 0:07:01.120 great respect for the memory of George Brett. I mean, 0:07:01.640 --> 0:07:04.280 is it a smaller market team or it can't compete 0:07:04.279 --> 0:07:07.640 with the you know, one of the big Manchester United 0:07:07.680 --> 0:07:09.920 and the others. It's all about the ownership because the 0:07:10.240 --> 0:07:13.200 ownership then, you know, if you're owned, as Manchester City 0:07:13.280 --> 0:07:15.160 is effectively by the state of ABU Dabbi, you have 0:07:15.160 --> 0:07:20.360 a limitless amount of money to spend. Newcastles owned by 0:07:20.400 --> 0:07:24.400 so Mike Ashley, who runs Newcastle United is a big 0:07:24.440 --> 0:07:26.880 sort of main street retail player as well. He's not 0:07:27.000 --> 0:07:29.400 very popular in that sense either. Tom used to be 0:07:29.440 --> 0:07:31.680 owned by a gentleman called Freddie Shepherd. These were like 0:07:31.680 --> 0:07:35.760 the glory days of Newcastle United in the nineties. Newcastle 0:07:35.760 --> 0:07:38.480 would great transfer records. They would be that good. They 0:07:38.520 --> 0:07:41.360 could compete for the best talent on the planet. Things 0:07:41.360 --> 0:07:44.800 have changed, Things have changed. We've had a negative net 0:07:44.840 --> 0:07:46.800 spend last year. Well are they going to be is 0:07:46.840 --> 0:07:50.160 it the right word relegated? They probably not, because fortunately 0:07:50.160 --> 0:07:52.320 there are three teams worse than us, which is quite 0:07:52.320 --> 0:07:54.360 an achievement. But I think right now that it is 0:07:54.360 --> 0:07:57.000 the case. Well, we measure our teams by economists. I mean, 0:07:57.040 --> 0:08:00.880 I see Blanche Flowers one notch below Shepherdson, Yeah, am 0:08:00.880 --> 0:08:03.280 I right on there? And west Ham Steve Major's team 0:08:03.400 --> 0:08:07.920 beat right now at the weekend. Yeah yeah, but Major 0:08:07.960 --> 0:08:11.040 got the yield call, right, So that's that's that's that's right, 0:08:11.160 --> 0:08:13.440 That's right. Okay, we'll leave it. We can have an 0:08:13.440 --> 0:08:18.520 economist ranking of the Premier League type we should on 0:08:18.680 --> 0:08:21.760 the back of all the teams in the Economists is identified. 0:08:21.960 --> 0:08:25.360 Who's identified with Crystal Palace. Oh, I don't know, although 0:08:25.400 --> 0:08:28.600 we did have a listener right in about Crystal Palace recently. 0:08:28.680 --> 0:08:32.240 So there is a Crystal Michael Crystal Palace, Michael Barr. 0:08:32.240 --> 0:08:34.800 Would that be good? Well? I used to love the 0:08:34.800 --> 0:08:36.840 Pistons when they played at the Palace, but that's another 0:08:37.120 --> 0:08:40.679 that's another story completely. I and Shepherdson thank you so much, 0:08:40.720 --> 0:08:44.040 particularly for your comments for the morning on the protests 0:08:44.080 --> 0:08:58.320 in the press conference in France. Widely knowing that John 0:08:58.320 --> 0:09:02.280 Ferre and I don't get along, but contrary to the belief, 0:09:02.320 --> 0:09:05.080 we actually almost listen to each other. We rarely talk, 0:09:05.200 --> 0:09:07.520 but we listened to each other in the break and 0:09:07.559 --> 0:09:10.719 Iro Jersey with us from Bloomberg Intelligence, just wonderful on 0:09:10.840 --> 0:09:13.360 bonds and this is the Bond interview of the day. 0:09:14.440 --> 0:09:18.400 I was thunderstruck by something that John Farroll said, which 0:09:18.480 --> 0:09:21.000 is it's not where the yield curve is or all 0:09:21.000 --> 0:09:24.559 these dynamics, it's the way we're getting there. Just seems 0:09:24.679 --> 0:09:30.160 so odd right now? How odd is it? So? Well, 0:09:30.640 --> 0:09:34.319 so the headlines aren't basically keeping up with the with 0:09:34.679 --> 0:09:37.760 what the markets doing. The market is someone saying by 0:09:37.800 --> 0:09:42.280 a bond yield, lower price higher correct, and and you 0:09:42.280 --> 0:09:45.440 wouldn't expect that given what's happened with equities, given you know, 0:09:45.520 --> 0:09:48.640 the um some of the some of the headlines that 0:09:48.720 --> 0:09:50.880 came out over the weekend with you know, maybe an 0:09:50.880 --> 0:09:53.000 easing of trade tensions, even though that that seems to 0:09:53.040 --> 0:09:55.640 be um, you know, walking back a little bit um, 0:09:55.640 --> 0:09:57.880 but you would have expected at least I would have 0:09:57.880 --> 0:10:01.760 expected some steepening and probably bear steepening. So basically ten 0:10:01.840 --> 0:10:04.079 year yields, thirty year yields selling off. But instead we're 0:10:04.080 --> 0:10:07.000 getting exactly the opposite. So why is that, Well, that's 0:10:07.000 --> 0:10:10.920 the market telling you that they're skeptical that economy and 0:10:11.600 --> 0:10:14.520 the economy and inflation are likely to be significantly higher 0:10:14.760 --> 0:10:16.480 in the future than they are now. But I mean, 0:10:16.520 --> 0:10:18.480 these moves are not massive, right, We're talking about a 0:10:18.480 --> 0:10:20.319 few basis points. It's not like this is a major 0:10:21.480 --> 0:10:24.199 I'm gonna do my stand fisher here on a percentage 0:10:24.240 --> 0:10:26.960 change basis. These are big deals. We've gone from twenty 0:10:27.000 --> 0:10:30.400 two to thirteen beeps on the two stents spread. That's 0:10:30.440 --> 0:10:33.960 not massive. So if you think about it from a 0:10:34.160 --> 0:10:36.360 from a total return perspective depending on how you you 0:10:36.440 --> 0:10:39.560 size your risk. If you did that in say, you know, 0:10:39.600 --> 0:10:43.160 buying fifty million of one and and um and ten 0:10:43.200 --> 0:10:47.240 million of another, then um, you wind up with you know, 0:10:47.320 --> 0:10:50.040 reasonable returns. But it's not it's not going to make 0:10:50.040 --> 0:10:52.400 your year, right, that's not what's something that's going to 0:10:52.480 --> 0:10:54.360 make your year. But you know, if you had that 0:10:54.440 --> 0:10:57.120 trade right, you did well. Obviously I don't know how 0:10:57.160 --> 0:10:59.000 many people were, which I think might be one of 0:10:59.000 --> 0:11:01.040 the reasons that this is a ring that people were 0:11:01.040 --> 0:11:03.320 in steep Nurse. The only thing that made my year 0:11:03.440 --> 0:11:06.280 was when John Ferrell canceled his two egg vocation. That's 0:11:06.280 --> 0:11:07.960 what the British do. Do you know? It's sound one 0:11:08.040 --> 0:11:11.480 year anniversary today? Did you know? That? Is it? And 0:11:11.640 --> 0:11:13.720 I didn't get you guys a car one year on 0:11:13.920 --> 0:11:18.559 Bloomberg Surveillance Radio together. Yeah, O cake. Nothing. I thought 0:11:18.600 --> 0:11:22.200 they'd bringing us a cake, but nothing. I didn't get anything. 0:11:23.040 --> 0:11:26.200 Don't I get a reward for this for last than 0:11:26.240 --> 0:11:31.079 a year? The wise really interesting. I just want to 0:11:31.120 --> 0:11:32.880 have a look at what we're now sort of signaling 0:11:32.880 --> 0:11:34.680 for people, because I think for a lot of equity 0:11:34.679 --> 0:11:37.920 investors they've been conditioned to worry about this a great deal. 0:11:38.559 --> 0:11:41.640 Inversion from front to belly, So from sort of the 0:11:41.679 --> 0:11:45.199 two year space into the five year is actually quite 0:11:45.280 --> 0:11:48.599 normal at this kind of time. It's quite normal for 0:11:48.640 --> 0:11:49.959 a lot of people to be thinking about. Just to 0:11:50.000 --> 0:11:51.760 help them get their heads around it, that's what you 0:11:51.800 --> 0:11:55.360 expect to happen first, correct, and then several years later 0:11:55.520 --> 0:11:58.160 is really when you start to see the economy rollover right, 0:11:58.200 --> 0:12:00.520 and more importantly, I think, is when you wind up 0:12:00.520 --> 0:12:02.800 getting the whole curve in version. Right. So when twos 0:12:02.840 --> 0:12:05.400 to tend to the two years to the tenure inverts, 0:12:05.440 --> 0:12:08.360 that's kind of been the signal in the past. It said, um, 0:12:08.480 --> 0:12:11.640 you know, eighteen months later you expect a recession, um. 0:12:11.720 --> 0:12:14.400 And but that only happens in this environment if the 0:12:14.400 --> 0:12:16.760 Fed goes too far. So right now we're pricing for 0:12:16.800 --> 0:12:19.000 a December hike, We're pricing for one hike in two 0:12:19.040 --> 0:12:22.480 thousand nineteen. Unless the Fed goes more than that, then 0:12:22.520 --> 0:12:26.000 inverting that whole curve is will probably be avoided. That 0:12:26.080 --> 0:12:28.760 being said, and as Tom noted, you know, the curve 0:12:28.840 --> 0:12:31.120 has flattened quite a lot the last couple of days, 0:12:31.160 --> 0:12:34.280 and that's really something that I think some people are 0:12:34.280 --> 0:12:36.280 going to be concerned with in the long term. But 0:12:36.559 --> 0:12:39.320 it's also saying I think at some level that we 0:12:39.400 --> 0:12:41.320 think that the FED is going to stop, and we 0:12:41.400 --> 0:12:43.320 do think that at some point in the next ten 0:12:43.400 --> 0:12:45.240 years we're going to see your recess. So this rise 0:12:45.320 --> 0:12:46.760 is a big question for a lot of people. I 0:12:46.760 --> 0:12:48.400 know some people will be trying to gain this and 0:12:48.440 --> 0:12:51.480 it's incredibly difficult to do. We started to think about 0:12:51.480 --> 0:12:53.600 when the next right cup comes, and I'm not talking 0:12:53.640 --> 0:12:55.360 about in the next twelve months, but when you start 0:12:55.400 --> 0:12:57.719 to think out where the next right cup comes, you're 0:12:57.760 --> 0:13:00.439 looking across the treasury curve to work out where in 0:13:00.520 --> 0:13:03.840 the curve looks cheap relative to the idea that say, 0:13:03.880 --> 0:13:06.800 the five year ultimately becomes where the Fed funds right 0:13:06.960 --> 0:13:09.160 is because that maturity will be what you want to 0:13:09.160 --> 0:13:11.200 buy when they sort of cut right. So why are 0:13:11.200 --> 0:13:14.360 we thinking on the curve the think looks cheap where 0:13:14.400 --> 0:13:16.680 really in several years time is going to be most 0:13:16.760 --> 0:13:19.040 lightly impacted by right cut. So when you look at 0:13:19.040 --> 0:13:21.440 the the overnight index swap market, which is based on 0:13:21.440 --> 0:13:23.960 where the FED funds rate is expected to be at 0:13:24.000 --> 0:13:26.640 some period of time, we're not pricing that right now 0:13:26.960 --> 0:13:30.839 UM basically at all um so, but we're basically saying 0:13:30.840 --> 0:13:33.439 in two thousand nineteen, the market saying in two thousand nineteen, 0:13:33.440 --> 0:13:36.839 the Fed's gonna stop, We're gonna stay there four years, right, 0:13:36.880 --> 0:13:38.559 And that's one reason why you can have this flat 0:13:38.640 --> 0:13:41.680 curve from two year to five year UM. And you 0:13:41.720 --> 0:13:44.560 know there is some chance maybe in twenty one that 0:13:44.559 --> 0:13:46.880 they'll cut, but the market tends not the price for 0:13:46.880 --> 0:13:50.079 that until there's a little bit more visibility into UM 0:13:50.320 --> 0:13:52.320 into things that far out. The market tends to be 0:13:52.320 --> 0:13:54.480 pretty good at the next two years, not so good 0:13:54.480 --> 0:13:57.640 when you get significant further all these generations away from 0:13:57.640 --> 0:14:00.960 full faith and credit. The you know, his corporate act 0:14:01.000 --> 0:14:03.960 in the same way yields into so corporate well yields 0:14:03.960 --> 0:14:06.199 are yields and corporates have come down a little bit, 0:14:06.200 --> 0:14:08.040 but that's mainly because of the rate move, it's not 0:14:08.080 --> 0:14:11.480 because of spreads. So corporate spreads haven't really moved a 0:14:11.520 --> 0:14:13.800 whole heck of a lot recently. What are find portfolio 0:14:13.920 --> 0:14:16.280 is doing right now? You know, what's a typical total 0:14:16.360 --> 0:14:20.000 return fund manager doing besides a yeah, so you know 0:14:20.040 --> 0:14:22.280 a lot of people I think had had pretty poor 0:14:22.360 --> 0:14:24.880 years just because of what's happened, you know in uh 0:14:25.240 --> 0:14:27.960 UM in the market with significant sell off. So earlier 0:14:28.000 --> 0:14:29.480 in the year, a total return for a lot of 0:14:29.480 --> 0:14:32.440 total return managers did very well because they were underweight 0:14:32.520 --> 0:14:34.920 duration there or might might have been short interest rates. 0:14:34.920 --> 0:14:36.800 And when interest rates went up they did very well. 0:14:37.120 --> 0:14:40.160 But they kept that view instead of instead of reversing 0:14:40.160 --> 0:14:42.360 it um. But you look at you look at things 0:14:42.400 --> 0:14:47.680 like speculative um positioning in treasury futures, and and everyone 0:14:47.800 --> 0:14:50.600 was so massively short. In fact, just about six weeks 0:14:50.600 --> 0:14:55.040 ago they hit the shortest ever. Now they've cut that 0:14:55.040 --> 0:14:57.760 short by almost half. Don't be a stranger. This was great. 0:14:57.800 --> 0:15:00.360 This will be out on podcast Ira Jersey with your 0:15:00.440 --> 0:15:04.040 bond briefing for the day. This is just great for 0:15:04.120 --> 0:15:19.720 Global Wall Street. John, this is great. Kevin Book writes 0:15:19.760 --> 0:15:24.560 in English on oil at clear View Energy and he 0:15:24.680 --> 0:15:29.440 calls it green span on the Danube. That green span 0:15:29.640 --> 0:15:32.160 on the Danube. What we're gonna see out of Vienna 0:15:32.760 --> 0:15:35.360 and a Marie Horden with that great Saudi Arabian interview 0:15:35.400 --> 0:15:38.520 earlier today, we would not be surprised to find a 0:15:38.560 --> 0:15:44.160 brain twisting, circumlocutive jumble of word jazz from the clarinet 0:15:44.240 --> 0:15:47.640 is similar to some of the more obtrue statements that 0:15:47.800 --> 0:15:52.560 former FED Chairman Alan Greenspan issued during his uh A tenure. Kevin, 0:15:52.600 --> 0:15:55.520 that's a great way to put it within the verbi edge. 0:15:55.600 --> 0:16:00.200 What are we gonna look for from the cartel? Good 0:16:00.200 --> 0:16:02.600 morning time. I think the number is what we're looking for, 0:16:02.720 --> 0:16:05.880 and the number that won't inflame President Trump is why 0:16:05.880 --> 0:16:09.320 it comes in code one point four million. Is that 0:16:09.520 --> 0:16:13.000 I think in a pretty consensus expectations for what it'll 0:16:13.040 --> 0:16:16.000 take to balance the market. It helps to have Canada 0:16:16.080 --> 0:16:19.120 pulling oil off the market itself. It helps to have 0:16:19.160 --> 0:16:23.200 a slightly tighter Iran supply picture showing up in the numbers. 0:16:23.200 --> 0:16:25.280 But at one point for is what we're looking for, 0:16:25.360 --> 0:16:28.160 a one point four coordinated cut, Kevin. To be clear here, 0:16:28.200 --> 0:16:30.160 do you think that press release could be for an 0:16:30.200 --> 0:16:35.080 audience of one? Well, it's never just for an audience 0:16:35.120 --> 0:16:37.080 of one, but I think it's going to be worded 0:16:37.120 --> 0:16:41.880 with a particular wariness for that one. That's fascinating to 0:16:41.920 --> 0:16:44.920 me that the President has this must impact on opaque, 0:16:44.920 --> 0:16:48.520 the cartel, not just the Saudias. How will the other 0:16:48.600 --> 0:16:53.440 individual groups, countries, nations respond? To the pressure the Saudias 0:16:53.520 --> 0:16:58.480 arunta to do this. As you know, it's never easy, uh. 0:16:58.600 --> 0:17:02.600 There's there's always big contributions from the kingdom uh, and 0:17:02.640 --> 0:17:06.000 then pennies from some of the others. In this particular case, 0:17:06.080 --> 0:17:08.840 it's it's also a question of persuading Russia to stay 0:17:08.920 --> 0:17:11.920 in the game. For for Russia, right now, this is 0:17:11.960 --> 0:17:15.480 still looking like good economic self interest. But as you 0:17:15.480 --> 0:17:17.720 start to see the see the peeling a way of 0:17:17.760 --> 0:17:20.480 cutter and start to ask whether or not this is 0:17:20.560 --> 0:17:23.000 really going to stay in Russia's long term self in 0:17:23.080 --> 0:17:25.240 First it has to do with whether or not there's 0:17:25.240 --> 0:17:28.840 a new regional realignment taking place, and whether Russia's other 0:17:28.880 --> 0:17:34.280 economic goals including selling nuclear power plants and natural gas 0:17:34.320 --> 0:17:37.879 and other aspects of their their portfolio to Turkey and 0:17:38.040 --> 0:17:41.240 other partners in the region, start to predominate. For now, 0:17:41.320 --> 0:17:43.880 it looks like coordination high five goes a long way 0:17:43.920 --> 0:17:46.800 towards setting expectation, So Kevin and high five. But it's 0:17:46.800 --> 0:17:49.560 easy to high five when you boast boosting output at 0:17:49.560 --> 0:17:52.160 record amounts. I mean, we've got record production in Russia, 0:17:52.240 --> 0:17:55.280 record production and Saudi arab but what would you consider 0:17:55.359 --> 0:17:59.080 a material cut? Going back to the levels of before 0:17:59.119 --> 0:18:01.160 the summer, going to the levels of ELIO this year. 0:18:01.200 --> 0:18:05.080 What would a real cut be, thorough peck Well, the 0:18:05.119 --> 0:18:08.040 real concern is that they might undercut relative to where 0:18:08.080 --> 0:18:12.080 demand might take us. We have a fairly barished demand outlook, 0:18:12.160 --> 0:18:15.960 just thinking about the frictional impacts of the nascent trade war. 0:18:16.320 --> 0:18:18.840 It's hard to prove. We can't see the investments that 0:18:18.960 --> 0:18:22.439 don't happen, you can't see the demand that didn't materialize, 0:18:22.640 --> 0:18:26.080 and downward convisions are the stuff of oil analysis, right 0:18:26.160 --> 0:18:29.719 but still sorry, go on, no, no, it's fine, I'm listening. 0:18:29.840 --> 0:18:32.840 I'm I'm loving it, Kevin book. But the the issue Kevin, 0:18:33.560 --> 0:18:36.960 for me is six weeks ago we were talking about 0:18:36.960 --> 0:18:38.760 a bond market that was going to go to three 0:18:38.760 --> 0:18:41.320 and a half per cent tenure. Eight weeks ago, you 0:18:41.400 --> 0:18:44.000 tell me exactly oil was going to a hundred dollars 0:18:44.000 --> 0:18:47.960 of barrel. These these fancy people show up in Vienna, 0:18:48.480 --> 0:18:50.720 and am I right that they're showing up within a 0:18:50.720 --> 0:18:54.720 cacophony of instability? I mean, do they have any clue 0:18:54.720 --> 0:19:00.320 what the underlying microeconomics are. I think that there's nobody, 0:19:00.520 --> 0:19:04.160 nobody is particularly comfortable with the the instability of an 0:19:04.240 --> 0:19:09.080 unsynchronized global growth picture. Uh, the idea of oil war 0:19:09.480 --> 0:19:13.080 roaring ahead as we all go straight into the you know, 0:19:13.119 --> 0:19:16.240 the three and a half four percent sugar juice vp 0:19:16.440 --> 0:19:19.800 HI of the United States. That's over right. So we 0:19:19.880 --> 0:19:22.560 have such an incredibly strong GDP linkage in the non 0:19:22.560 --> 0:19:24.800 O E C d H. In addition to that, there's 0:19:24.880 --> 0:19:28.640 growing price sensitivity and some of those non consumers recruit. 0:19:28.960 --> 0:19:32.280 So when you start to see China respond to high prices, 0:19:32.480 --> 0:19:35.760 when you see currency adjusted acquisition costs tamping down demand, 0:19:36.040 --> 0:19:40.280 when you see effective trade stagnation, if not outright war 0:19:40.640 --> 0:19:44.119 starting to crimp investment, those are the warning signs that 0:19:44.200 --> 0:19:46.600 made me think, gosh, you know, maybe maybe things are 0:19:46.600 --> 0:19:48.480 a little weaker out there for well than we thought. 0:19:48.800 --> 0:19:50.840 What happens with the U s off the Bank of 0:19:50.840 --> 0:19:54.640 the outpect decision this week, Well, the brakes are off 0:19:54.920 --> 0:19:57.560 a lot worse than the accelerator. The problem with shale 0:19:57.920 --> 0:20:01.160 is that the latency takes a while. The on the downside, 0:20:01.560 --> 0:20:04.280 we saw we saw what happened in it was you know, 0:20:04.320 --> 0:20:07.080 six to nine months in some formations for things really 0:20:07.119 --> 0:20:10.439 slowed down. And how quickly can zip back to answer 0:20:10.480 --> 0:20:13.360 the call from demand when it resurfaces. So I think 0:20:13.400 --> 0:20:17.200 you probably are in some ways blessed by the constraints 0:20:17.280 --> 0:20:19.560 coming out of some of the most prolific producing areas 0:20:19.600 --> 0:20:22.639 like Permian. At this point it's not that easy to 0:20:22.680 --> 0:20:25.520 get the additional group to market. Uh. That makes some 0:20:25.600 --> 0:20:28.560 of the costs an issue. But once those wells start, 0:20:28.800 --> 0:20:31.120 people are going to run those wells. I can interview 0:20:31.200 --> 0:20:33.000 US production. Just to be clear, though the rick count 0:20:33.000 --> 0:20:36.439 has never recovered from the collapse, has it? Is this 0:20:36.520 --> 0:20:41.480 a region regions that are doing more with less? Absolutely 0:20:41.600 --> 0:20:43.720 it didn't need to recover because they're getting more out 0:20:43.720 --> 0:20:46.680 of the ground with fewer rigs. Doing more with less 0:20:46.720 --> 0:20:50.520 is terrific. Higher efficiency wells are terrific. Remember those wells 0:20:50.600 --> 0:20:53.119 run right, We don't We don't shut stuff off. Spare 0:20:53.160 --> 0:20:58.959 capacity isn't for for US producers. What is the likelihood 0:20:59.200 --> 0:21:03.720 or probable of the I should say, of revisiting of 0:21:03.760 --> 0:21:06.760