WEBVTT - Ukraine, Commodities, and Retail (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.080 at Bloomberg dot com slash podcast. Matt, you know, I 0:00:22.079 --> 0:00:23.720 think I'm probably like a lot of people trying to 0:00:23.760 --> 0:00:27.360 figure out what exactly happened in Poland. I thought you're 0:00:27.360 --> 0:00:30.200 gonna say, no, we're gonna go a little bit ten 0:00:30.280 --> 0:00:32.120 fifteen minutes free here of that, We're gonna talk some 0:00:32.240 --> 0:00:36.440 real stuff. Uh NATO and Poland see no intentional Russian 0:00:36.520 --> 0:00:40.600 strike as crisis eases. That's the Bloomberg headline. But I 0:00:40.680 --> 0:00:43.640 need to get the expert opinion, the boots on the ground, 0:00:43.680 --> 0:00:47.680 and for that returned to Maria today. Oh she's your reporter, Bloomberg. 0:00:47.920 --> 0:00:50.040 You're not Bloomberg Opinion anymore. You're back to Bloomberg News, 0:00:50.080 --> 0:00:52.879 I believe, But no, I'm not. Guys, Yes, I know 0:00:53.880 --> 0:00:56.760 that I caught that Maria in our notes, So you're 0:00:56.760 --> 0:00:59.320 not a Bloomberg back backup Bloomberg News thankfully, because we 0:00:59.400 --> 0:01:03.160 need or objective reporting here. What do we know now 0:01:03.200 --> 0:01:07.240 about what happened in Poland yesterday? No opinion, just fact. 0:01:07.440 --> 0:01:10.640 And I think we're mat Miller if I believe that 0:01:10.760 --> 0:01:14.840 was his his side of relief, that that I overheard 0:01:14.920 --> 0:01:17.760 that really yeah, I had even really actually encapsulates a 0:01:17.760 --> 0:01:20.360 lot of the responses and and and and some of 0:01:20.400 --> 0:01:23.640 the text messages that I've been exchanging with a number 0:01:23.680 --> 0:01:27.880 of diplomats today in in Brussels. There was real concerned 0:01:27.920 --> 0:01:31.520 yesterday when that AP headline hit two people that in 0:01:31.640 --> 0:01:35.640 Poland a Russian missile that went over the border into Poland. 0:01:36.080 --> 0:01:38.800 Of course, not to give anyone a history lesson here, 0:01:38.840 --> 0:01:41.440 but we know that Poland is a member of NATO, 0:01:41.720 --> 0:01:44.760 is a member of the European Union, had a very 0:01:45.120 --> 0:01:48.680 very difficult relationship with Russia for a number of historical 0:01:49.280 --> 0:01:52.280 reasons that I'm sure Mam Miller also uh well knows well, 0:01:52.440 --> 0:01:55.000 going back to the Nazi Soviet Pact. This is a 0:01:55.120 --> 0:01:59.240 very tense relationship that they have, and of course this 0:01:59.360 --> 0:02:01.960 could have been a real game changer if Russia had 0:02:02.080 --> 0:02:08.120 indeed intentionally no targeted Poland. Well, we've heard even accidentally right, 0:02:08.160 --> 0:02:12.840 because the initial I think report, everybody thought, Okay, Russia 0:02:12.919 --> 0:02:16.280 accidentally lobbed a missile into Poland because they're fighting close 0:02:16.360 --> 0:02:19.560 to the border. If they don't, obviously the Ukrainian soldiers 0:02:19.600 --> 0:02:22.760 will amass there as kind of a safe zone. Um, 0:02:22.800 --> 0:02:24.880 that still would be bad. And now it seems like 0:02:24.919 --> 0:02:28.800 everyone is trying as hard as possible to come up 0:02:28.840 --> 0:02:32.840 with any other possibility. You know, maybe it was a 0:02:32.919 --> 0:02:36.960 Ukrainian air defense missile that knocked the Russian missile into Poland. 0:02:37.080 --> 0:02:40.400 Maybe it was a Ukrainian air defense missile itself that 0:02:40.760 --> 0:02:44.400 caused the explosion in Poland. So what do we know? Indeed, 0:02:44.400 --> 0:02:46.919 and you know, just too got trad actually answer the question. 0:02:47.120 --> 0:02:50.800 Uh yeah, basically that's what we heard very early on 0:02:50.880 --> 0:02:53.880 today from President Biden. A lot of people that I 0:02:53.919 --> 0:02:55.960 was texting at seven a m. In the morning were 0:02:56.000 --> 0:02:58.360 kind of very relieved by that, where he said the 0:02:58.440 --> 0:03:02.240 trajectory of this uh well, miss ilead or air defense 0:03:02.240 --> 0:03:04.960 potentially too, would suggest that it did not come directly 0:03:05.560 --> 0:03:08.800 from Russia. Then of course you have the Polish uh 0:03:09.120 --> 0:03:11.560 themselves come out and say we do not believe this 0:03:11.680 --> 0:03:15.440 was intentional, and then NATO suggesting In fact, what happened 0:03:15.480 --> 0:03:18.840 here is that on a day where Ukraine was pounded 0:03:19.680 --> 0:03:21.720 by Russian missiles, and just to give you a little 0:03:21.720 --> 0:03:24.200 bit of color here, it was so bad that even 0:03:24.600 --> 0:03:28.359 neighboring countries like Moldova lost power. Because sometimes we talk 0:03:28.400 --> 0:03:31.000 about the war in Ukraine, but just just imagine that 0:03:31.280 --> 0:03:33.400 in your head for a moment. It was so bad 0:03:33.720 --> 0:03:37.440 that even the neighbors had blackouts, they had powered down, 0:03:37.480 --> 0:03:40.240 and they're not even related or fighting this war. And 0:03:40.320 --> 0:03:42.640 essentially what happens is, you know very well, or defense 0:03:42.680 --> 0:03:44.360 will try to blow up a missile in the air, 0:03:44.600 --> 0:03:46.600 but then of course it falls down and you never 0:03:46.680 --> 0:03:48.400 know where it's going to fall, the damage you can 0:03:48.440 --> 0:03:51.760 do on the fall, and then allegedly, well today nature 0:03:51.800 --> 0:03:55.000 suggesting this is exactly what happened Ukraine and our defense 0:03:55.000 --> 0:03:57.720 shot it down. The ben fell on the Polish side, 0:03:57.800 --> 0:04:00.640 and for a lot of people, that's massive lead in 0:04:00.720 --> 0:04:03.000 a real reminder by the way, that this war is 0:04:03.040 --> 0:04:05.160 in a very active stage and the risk of a 0:04:05.240 --> 0:04:08.720 spillover are many and very real. By the way. Yeah, 0:04:08.760 --> 0:04:10.840 and you know, one of the things I noticed yesterday, Maria, 0:04:11.200 --> 0:04:14.920 after the initial reports was the number of I guess 0:04:14.960 --> 0:04:18.200 tweets coming from countries all in that region, all around 0:04:18.360 --> 0:04:23.560 NATO voicing very strong support for Poland going forward. So 0:04:24.360 --> 0:04:26.680 and they and they have to I mean a NATO 0:04:26.760 --> 0:04:30.760 member if they invoke Article five, then you know NATO 0:04:30.839 --> 0:04:34.120 has to go to their defense. Now before that, as 0:04:34.160 --> 0:04:37.800 a precursor, you invoke Article four. And the question I 0:04:37.839 --> 0:04:42.479 think is will Poland today or this week invoke Article four? 0:04:42.520 --> 0:04:44.760 What do we know on that you know it might 0:04:44.839 --> 0:04:48.680 view they won't smack. I think the version that everyone 0:04:48.760 --> 0:04:51.039 has agreed with, or that kind of sticks with, is 0:04:51.520 --> 0:04:54.120 do you have use intelligence suggesting this is not Russia? 0:04:54.800 --> 0:04:57.880 You have NATO come out Today's Secretary General say this 0:04:58.000 --> 0:05:01.560 is our defense. Nobody, by the way, blaming Ukraine on 0:05:01.600 --> 0:05:04.440 that too. They said, this is not Ukraine's faults. These 0:05:04.440 --> 0:05:07.840 are the risks that happened when Russia, knowing full well 0:05:07.920 --> 0:05:10.479 by the way, they're very close to the Polish border, 0:05:10.520 --> 0:05:13.960 can actually happen. Nobody's blaming Ukraine. But I think what 0:05:14.080 --> 0:05:16.599 I get today is that there's a sense that this 0:05:16.680 --> 0:05:19.279 was so close to the brink everyone wants a breather. 0:05:19.520 --> 0:05:22.320 Let's take a step back, Okay. I just and we 0:05:22.320 --> 0:05:25.720 we reported that the President of Poland andre Duda said 0:05:25.760 --> 0:05:29.400 his country is unlikely to invoke article for I have 0:05:29.480 --> 0:05:31.919 seen the Fox News headline that says they're expected to. 0:05:32.760 --> 0:05:35.839 So this once again is one of those confusing situations, 0:05:35.839 --> 0:05:37.600 and I guess it will be we have to wait 0:05:37.640 --> 0:05:40.040 for the smoke to clear to some extent. Maria, what 0:05:40.040 --> 0:05:42.320 what should be the next data point that we should 0:05:42.320 --> 0:05:45.279 look for in the next couple of days. Look, I 0:05:45.279 --> 0:05:48.560 think in terms of data point, this this is anything 0:05:48.760 --> 0:05:51.000 and and for a lot of Europeans this morning this 0:05:51.200 --> 0:05:54.920 is really the reality check. We've kind of gotten used 0:05:54.920 --> 0:05:56.800 to this idea that yes, there's a war going on 0:05:56.839 --> 0:06:00.000 in Ukraine. Yes as brutal, Yes people die, Yes they're 0:06:00.040 --> 0:06:03.279 fighters on. Yes, Vladimir Putting can be world less, Yes, 0:06:03.400 --> 0:06:05.479 Ukraine answered fighting back. But today, I think for a 0:06:05.480 --> 0:06:08.080 lot of Europeans was a real reminder that the war 0:06:08.240 --> 0:06:10.880 is happening at the heart of Europe. Matt, you lived 0:06:10.920 --> 0:06:12.800 in Berlin. I mean, you know the geography of this 0:06:12.800 --> 0:06:15.400 place is this is really in the center of Europe. 0:06:15.440 --> 0:06:18.080 This is not just somewhere in the middle of nowhere, 0:06:18.160 --> 0:06:20.440 far from everything. And I think you alluded to this 0:06:21.080 --> 0:06:23.800 in your question the Eastern Europeans yesterday came out of 0:06:23.880 --> 0:06:26.680 Fort Seeing was a born NATO. We are NATO with 0:06:26.800 --> 0:06:29.120 stand with Ukraine and with sand with poor and and 0:06:29.279 --> 0:06:31.480 for them it is always this idea that Russia is 0:06:31.560 --> 0:06:34.159 always a threat. Ye, Maria, thank you so much for 0:06:34.200 --> 0:06:36.719 your time. We know you're super busy. You're based in Brussels, 0:06:36.720 --> 0:06:38.200 so you're right in the middle of all of what's 0:06:38.200 --> 0:06:41.040 happening in Europe. That's Maria today. Oh, she is our 0:06:41.520 --> 0:06:45.880 outstanding European reporter for Bloomberg News, getting the latest on 0:06:46.320 --> 0:06:49.960 Ukraine and appears they have avoided the worst case sent 0:06:50.000 --> 0:06:57.160 there a little more coming up. This is Bloomberg. Let's 0:06:57.120 --> 0:06:59.080 suck a little commodities here, and you want to talk 0:06:59.120 --> 0:07:02.400 commodities in a serious way. On the Bloomberg terminal, you 0:07:02.440 --> 0:07:05.719 type in BI space c O M D. That brings 0:07:05.800 --> 0:07:10.280 up the Bloomberg Intelligence Commodities Dashboard. It's got it all 0:07:10.360 --> 0:07:12.520 that you could ever need, the best research analysis on 0:07:12.560 --> 0:07:16.560 the street, the best data for energy metals aggs, all 0:07:16.560 --> 0:07:19.559 that kind of stuff, and now cryptos. And the person 0:07:19.600 --> 0:07:22.760 who kind of runs this dashboarder runs our commodities researchers. 0:07:22.800 --> 0:07:25.600 Mike mcgloan joins us here in a Bloomberg interactor broker 0:07:25.720 --> 0:07:29.040 studio Mike, before we get the crypto, just give me 0:07:29.240 --> 0:07:33.480 one real commodities thing that I need to focus on. 0:07:33.480 --> 0:07:36.040 Here am I buying pork bellies? My buying corn? What 0:07:36.080 --> 0:07:39.640 am I doing here? Gold? Gold? Let's bring it back 0:07:39.640 --> 0:07:43.560 to little history. In ninety six, I did a report 0:07:43.600 --> 0:07:46.560 for Social Studies class and the energy crisis and who 0:07:46.560 --> 0:07:49.280 doesn't well exactly, And I just remember the key theme 0:07:49.320 --> 0:07:52.200 back there when you're impressionable twelve year old was we 0:07:52.200 --> 0:07:54.080 don't have enough supply, We're gonna run out of crude 0:07:54.120 --> 0:07:57.000 oil and we're gonna go into recession. That was seventy six. 0:07:57.080 --> 0:07:59.400 It's the same thing every time I remember hearing it, 0:07:59.640 --> 0:08:02.720 you know, years ago, peak supply, and again again this 0:08:02.800 --> 0:08:07.280 year peaks. Who was that, Charlie weiss er Um. Peak 0:08:07.360 --> 0:08:10.679 oil just never kind of happened. It's peak consumption happened 0:08:10.680 --> 0:08:12.880 in this country. We peaked around two thousand five, and 0:08:12.880 --> 0:08:14.760 it's the same thing. So I think what's happening now 0:08:14.840 --> 0:08:18.400 is we're entering I think one of the greatest macroeconomic 0:08:18.640 --> 0:08:21.960 resets of our lifetimes. And it was somewhat spiked by 0:08:22.240 --> 0:08:25.080 crude oil spiking, baiting the FED, the Titan More. Now 0:08:25.080 --> 0:08:27.160 Crudel is doing what it always does, is going back down. 0:08:27.440 --> 0:08:29.679 So I see it's still heading towards fifty. It's around 0:08:29.680 --> 0:08:32.160 eighty six now and it's doing what it always does. 0:08:32.520 --> 0:08:35.040 We're heading to a significant recession and this is Bloomberg 0:08:35.080 --> 0:08:37.880 economics across the board. And the key thing I asked 0:08:37.880 --> 0:08:40.320 myself is what stops this? And right now it's not 0:08:40.320 --> 0:08:43.520 gonna be the fat but how so Bloomberg Economics does 0:08:43.520 --> 0:08:47.400 say we're gonna have we have a chance of recession, right, 0:08:47.880 --> 0:08:50.000 which is not so? But um, is it going to 0:08:50.080 --> 0:08:53.559 be a deep, long recession or is it going to be, 0:08:53.679 --> 0:08:55.600 you know, like a short, sharp shock. Is it going 0:08:55.640 --> 0:08:58.880 to be shallow and hardly noticeable? That That's the key 0:08:58.960 --> 0:09:01.360 question in my bias is how could we avoid a 0:09:01.440 --> 0:09:04.520 deep recession after what happened? This is historic? Now we 0:09:04.520 --> 0:09:07.040 had the biggest pump in money supply ever on the 0:09:07.080 --> 0:09:09.079 back of the plague and we're now we're getting to 0:09:09.120 --> 0:09:11.800 miss the biggest dump ever on a global scale. So 0:09:11.840 --> 0:09:13.720 where is the demand pool going to come from? Clearly 0:09:13.720 --> 0:09:17.400 not China, Clearly not Europe and our models from the US, 0:09:17.440 --> 0:09:19.640 so to me, this is the big one and right now. 0:09:19.800 --> 0:09:22.760 Typically by this stage we'd see signs of FED easing 0:09:22.880 --> 0:09:24.440 on the forward curve at least a year from now, 0:09:24.480 --> 0:09:26.400 and it's still at tightening. But why do you say, 0:09:26.520 --> 0:09:29.920 why would you buy gold here, especially as inflation comes 0:09:29.960 --> 0:09:34.880 down and UH monetary policy gets tight everywhere. Nobody can 0:09:34.920 --> 0:09:38.360 open the fiscal gates anymore. Not yet, But it's typically 0:09:38.360 --> 0:09:40.240 a sign that overall gold is one of the best 0:09:40.240 --> 0:09:43.280 performing commodities on a totally turn basis, most notably versus 0:09:43.280 --> 0:09:45.760 crude oil. But it's when you see that signs of 0:09:45.800 --> 0:09:49.280 the FED, as as noorla Roubini says, wimping out. And 0:09:49.320 --> 0:09:51.720 it's also key. Think piggyback in my colleaguey or Jersey, 0:09:51.720 --> 0:09:53.679 he's nailed this year. He thinks yields have pete. If 0:09:53.720 --> 0:09:56.520 that's the case, if that sledgehammer is done pounding, I'm 0:09:56.520 --> 0:09:58.280 not saying they're gonna ease. Gold should be one of 0:09:58.320 --> 0:10:00.320 the best performers as we tilt towards the res seshion, 0:10:01.080 --> 0:10:03.280 So so as we get closer to a pause or 0:10:03.360 --> 0:10:08.360 even dare I say a pivot, gold will soar on that. Yeah, 0:10:08.400 --> 0:10:10.120 well it should. I mean that's been the key thing 0:10:10.160 --> 0:10:11.959 holding it down this year. And again we're the signs 0:10:11.960 --> 0:10:14.320 already there. Gold seems like it's bottom pretty good from that. 0:10:14.480 --> 0:10:16.600 It got down around sixteen hundred for a while. Now 0:10:16.640 --> 0:10:19.040 the dollars is peeked in the short term. But that's 0:10:19.080 --> 0:10:21.640 the macro. It's that's pounding sledgehammer on a on a 0:10:21.679 --> 0:10:24.720 scale one to ten, that's a ten everywhere fed pounding hard, 0:10:24.840 --> 0:10:27.640 and it's already still showing signs of pivoty and oil 0:10:27.679 --> 0:10:30.679 to fifty. Yes. So the key thing about that is now, 0:10:30.800 --> 0:10:33.960 I he's got the big truck, so he needs that 0:10:34.000 --> 0:10:37.360 bread Is that you gotta say? Even my wife's hybrid 0:10:38.280 --> 0:10:41.240 as soon as the electric power ends, you know, after 0:10:41.920 --> 0:10:44.320 fifty sixty miles or whatever, right then she gets the 0:10:44.360 --> 0:10:47.720 same mileage as I get in my truck, but she 0:10:47.800 --> 0:10:49.200 has it. I have the same thing. I have a 0:10:49.200 --> 0:10:51.120 plug in hybrid and I've had it for almost ten years. 0:10:51.120 --> 0:10:53.040 It's a wonderful vehicle. The vote we talked about that, 0:10:53.080 --> 0:10:56.920 Ye love the thing about fifties, it's really not profound 0:10:57.400 --> 0:10:59.400 if we have this recession, which we view as a 0:10:59.480 --> 0:11:01.920 hundred percent Now it's not just us. You look at 0:11:01.960 --> 0:11:03.840 demand pull you look imports from trying to have rolled 0:11:03.880 --> 0:11:05.960 over Now people say that's because the COVID lockdowns, but 0:11:06.000 --> 0:11:08.000 if you see what's happening with the property crisis and 0:11:08.040 --> 0:11:11.160 the political situation, that's badness. Well, you know, we pointed 0:11:11.200 --> 0:11:14.080 out for years, US unlended gas peaked on a fifty 0:11:14.080 --> 0:11:16.960 two week basis unlended gas deman in June, which was 0:11:17.280 --> 0:11:19.959 prime driving scenes. So that's rolling over just like two 0:11:20.360 --> 0:11:23.120 eight fifty dollars is still above the US cost of production, 0:11:23.160 --> 0:11:25.599 the world's largest producer. Average cost of production in this 0:11:25.640 --> 0:11:28.160 country is around forty. And also the key thing that 0:11:28.240 --> 0:11:31.160 people are missing its stocks to use, it's bottoming stocks 0:11:31.160 --> 0:11:33.560 to use. Is just um it's a sign of the 0:11:33.640 --> 0:11:37.200 stocks well to demand in the US, it's bottoming and 0:11:37.400 --> 0:11:40.200 in the global basis body and typically signed a peak 0:11:40.240 --> 0:11:43.000 and prices, but it's also not profound. Fifty is basically 0:11:43.000 --> 0:11:45.400 about the average price since the big breakdown in two 0:11:45.400 --> 0:11:47.520 thousand four for a barrel of what west X interviewed 0:11:47.640 --> 0:11:49.400 w t I, w t I. It's a key thing. 0:11:49.400 --> 0:11:52.599 Also recently Brent reached good resistance around hunter bucks of 0:11:52.640 --> 0:11:55.840 barrel and I checked out the open interest plunging open 0:11:55.840 --> 0:11:58.959 interests of futures, which meant shortcovering do you want to 0:11:58.960 --> 0:12:00.640 talk crypto. I mean, we held off as long as 0:12:00.640 --> 0:12:03.640 we pustle otherwise I'm going into port bellage. We kind 0:12:03.640 --> 0:12:06.280 of I thought we kind of were. I mean, so 0:12:06.480 --> 0:12:09.240 crypto affects all of these assets, and you do see 0:12:09.240 --> 0:12:12.600 it as small as it is relative to obviously giant 0:12:12.679 --> 0:12:17.600 markets like um oil and uh f X, it really 0:12:17.679 --> 0:12:21.840 has affected for example, UM. Peter Cheer from Academy Securities 0:12:21.840 --> 0:12:24.640 the other day was saying the f t X blow 0:12:24.720 --> 0:12:28.000 up was responsible for a crappy ten year auction. That 0:12:28.080 --> 0:12:30.480 was it's the contagion. I mean, it's the fastest horse 0:12:30.480 --> 0:12:32.800 in the race. And man, you nailed this back in January. 0:12:32.840 --> 0:12:34.440 You would get on air and you point out, well, 0:12:34.640 --> 0:12:37.079 bitcoins moving. It was moving on Saturday and Sun and 0:12:37.120 --> 0:12:39.760 giving indication where things are going. Obviously it started going down, 0:12:40.200 --> 0:12:42.280 but it's not just bitcoin, it's crypto. So I like 0:12:42.320 --> 0:12:44.400 to point out the boombergal because the crypto inex has 0:12:44.440 --> 0:12:46.200 been still a good perform and went up too far, 0:12:46.280 --> 0:12:48.600 too fast. But Bitcoin is the number one and it's 0:12:48.600 --> 0:12:50.760 set contagion factors. So that some of my other colleagues 0:12:50.760 --> 0:12:52.880 and b I started write about this means people are 0:12:52.960 --> 0:12:55.319 more likely hit that trigger stop and I look at it. 0:12:55.480 --> 0:12:57.880 I'm x X traitor, X hedge fund guy, and cover 0:12:57.960 --> 0:13:00.520 those guys on the phones and they're just sitting there 0:13:00.520 --> 0:13:03.240 with their algorithm systems, with their value at risk models, 0:13:03.240 --> 0:13:05.880 and if it triggers something, they'll hit a stop and 0:13:05.880 --> 0:13:08.160 it triggered. It's the it's the domino effect. By the way, 0:13:08.200 --> 0:13:12.760 I don't know how many times we've left bitcoin for dead, um, 0:13:12.800 --> 0:13:16.800 and I've been covering it for ten years, and every uh, 0:13:16.840 --> 0:13:19.520 every time we have one of these draw downs, they 0:13:19.559 --> 0:13:24.319 are huge, seventy five eight percent, you know. Um. People 0:13:24.320 --> 0:13:26.240 are like, oh, that's the end of bitcoin, and now 0:13:26.440 --> 0:13:28.400 you know the reputational damage is going to kill the 0:13:28.440 --> 0:13:31.840 whole thing. But I just can't believe it will. I 0:13:31.880 --> 0:13:33.880 completely agree with you there. But in the meantime, it's 0:13:33.920 --> 0:13:36.040 the hammer hitting hard. And I like to use the 0:13:36.120 --> 0:13:38.960 example bitcoins like the dollar. It never goes down a 0:13:38.960 --> 0:13:40.839 lot unless it goes up a lot first. It has 0:13:40.880 --> 0:13:43.439 to get those new highs. So it's bitcoin. Did cryptos dada? 0:13:43.440 --> 0:13:45.800 We got really expensive last year. We're backing up. But 0:13:45.840 --> 0:13:48.480 look at the theory. UM. Just a couple of years ago, 0:13:48.480 --> 0:13:50.600 it was trained around a hundred bucks of a hundred dollars. 0:13:50.600 --> 0:13:53.000 I'm sorry. Right now it's twelve, so it's up ten x. 0:13:53.040 --> 0:13:55.040 It's gone up way too much. But it's part of 0:13:55.080 --> 0:13:58.400 that revolution of this system. I look at it like futures, 0:13:58.440 --> 0:14:01.800 what futures did into finance, Like what ets did for investing. 0:14:01.880 --> 0:14:04.240 It's there just right now. We're in that. Yes, we 0:14:04.320 --> 0:14:08.000 got two speculative, excessive, we got silly, you know, people 0:14:08.000 --> 0:14:10.840 like FTX got extend. Imagine how much Imagine how much 0:14:10.920 --> 0:14:14.240 ether you could fit into a barrel? Yes, exactly, all 0:14:14.280 --> 0:14:16.520 of it, all of it, exactly. All right, we need 0:14:16.559 --> 0:14:18.920 to get you at an audience with Jamie Diamond. That 0:14:18.920 --> 0:14:21.160 would be a fun conversation to watch. Mike McLoone versus 0:14:21.240 --> 0:14:24.600 Jamie Diamond. Yeah, well, you know what I guess Jamie 0:14:24.720 --> 0:14:28.200 Diamond thinks it's worthless. He said that he thinks that 0:14:28.280 --> 0:14:30.840 means it's going to zero. But when all right, we'll see, 0:14:30.840 --> 0:14:34.800 all right. Mike mcglogan, senior commodity strategist Bloomberg Intelligence. Uh, 0:14:34.800 --> 0:14:36.360 he's based out of Miami. We got him a couple 0:14:36.360 --> 0:14:37.960 of days up here in New York. So we got 0:14:38.000 --> 0:14:44.200 him in the studio, which is good stuff. I want 0:14:44.200 --> 0:14:46.440 to get right to our next guest, Fernando Valley. He's 0:14:46.480 --> 0:14:50.280 a senior energy analyst for Bloomberg Intelligence, and Fernando, we 0:14:50.280 --> 0:14:52.840 were just talking to Mike mcgloan, who covers commodities for 0:14:53.360 --> 0:14:55.400 b I, and he, you know, he's been out there 0:14:55.440 --> 0:14:58.720 with this. He think oil goes to fifty dollars a 0:14:58.800 --> 0:15:01.720 hour before it goes to one fifty. Is that kind 0:15:01.720 --> 0:15:04.880 of what you're hearing from the big companies that you 0:15:05.000 --> 0:15:10.040 talked to? Well, well, I kind of tend to agree 0:15:10.080 --> 0:15:13.000 with Mike that that that is definitely a possibility. But 0:15:13.040 --> 0:15:17.400 the companies themselves, they they typically refuse to answer questions 0:15:17.480 --> 0:15:20.520 on their oil prices. Outlook, what they will say is 0:15:20.560 --> 0:15:23.680 that there has been a lack of investment in in 0:15:23.800 --> 0:15:27.640 growth um and which we agree with. And if you 0:15:27.720 --> 0:15:32.600 look from twenty fifteen to today, UH investment levels have 0:15:32.680 --> 0:15:37.920 been about twenty three below the period before proceeding that, 0:15:38.040 --> 0:15:41.600 the twenty two thousand nine to two thousand fourteen period. 0:15:41.840 --> 0:15:45.280 So that's a supply side issue. And Mike's argument is 0:15:45.320 --> 0:15:47.320 that demand is going to fall off a cliff if 0:15:47.320 --> 0:15:50.280 we go into a big global recession. How much of 0:15:50.320 --> 0:15:53.080 a concern is that, especially with China opening, because it 0:15:53.120 --> 0:15:55.400 seems like if China opens back up, that should be 0:15:55.560 --> 0:15:59.000 a real boost to demand. Yeah, I would argue that 0:15:59.040 --> 0:16:01.840 demand is already feeling some of those crimps when you 0:16:01.880 --> 0:16:04.480 look at Europe for example. Uh, you know a lot 0:16:04.520 --> 0:16:07.520 of the ways that they've managed to refill their inventories 0:16:07.520 --> 0:16:13.640 has been by reducing industrial activity. Smelters, cement plants, refineries, 0:16:14.320 --> 0:16:18.480 you name it. Uh. And I agree the China reopening 0:16:18.640 --> 0:16:22.360 theoretically would be a big boost to consumption. The question 0:16:22.480 --> 0:16:25.480 is when and how they reopen. And then the second 0:16:25.480 --> 0:16:29.200 part is, as we saw with our own reopenings, there 0:16:29.240 --> 0:16:32.880 are still effects on your economic activity. Remember that Chinese 0:16:32.880 --> 0:16:38.960 consumer has significant leverage. Uh. They also have endured now 0:16:39.080 --> 0:16:42.560 the paying of lockdowns and that strange savings. And then 0:16:42.560 --> 0:16:45.880 you get into an issue where the real state marketing 0:16:46.000 --> 0:16:50.080 China is significantly leveraged, as are the provinces and financial 0:16:50.120 --> 0:16:53.720 systems to this real estate issue, and they are huge 0:16:53.760 --> 0:16:57.480 consumers are not just oil directly, but also plastics, which 0:16:57.480 --> 0:17:01.440 are petrochemicals, and energy in general. Hey, for now I'm 0:17:01.480 --> 0:17:05.600 looking at the sp energy sector indexes where the stocks 0:17:05.600 --> 0:17:09.560 have just ripped this year up close to when when 0:17:09.560 --> 0:17:12.000 you talk to your institutional investor clients. I mean, is 0:17:12.000 --> 0:17:14.920 the thinking the money has been made, this trade is 0:17:14.960 --> 0:17:17.480 played out, or is there more room to go on 0:17:17.520 --> 0:17:22.800 the energy space. Yeah, but we've doubled the weight of 0:17:22.920 --> 0:17:27.960 energy and the s and P and uh. We start 0:17:28.040 --> 0:17:31.440 to see folks saying the easy money has been made because, 0:17:31.480 --> 0:17:35.480 as you said, the stocks are ripped. Um. We disagree 0:17:35.520 --> 0:17:39.080 on a part of that, just because the pre cash flow, 0:17:39.240 --> 0:17:42.480 it's story is continuing. Even if we get down to 0:17:42.680 --> 0:17:46.920 sixty fifty is a little bit more challenging. But even 0:17:46.960 --> 0:17:49.480 at sixty dollars, if you look at how they've cleaned 0:17:49.520 --> 0:17:52.480 up their balance sheets, um, the kids of the Europeans, 0:17:52.520 --> 0:17:57.480 They've resized their dividends, um, and they've taken costs out 0:17:57.480 --> 0:18:01.520 of the system. These companies maintain their diffidends now even 0:18:01.560 --> 0:18:05.760 in a fifty scenario, no problem. So their distribution will continue. 0:18:06.080 --> 0:18:09.000 And then you have companies like Chevron and Exxon who 0:18:09.240 --> 0:18:12.000 actually are building so much cash they could be net 0:18:12.000 --> 0:18:17.080 cash as of the second quarter of this year. They 0:18:17.080 --> 0:18:20.000 will continue to buy back. That's that's part of their 0:18:20.040 --> 0:18:23.119 strategy is if prices dip and I guess, alluding to 0:18:23.160 --> 0:18:26.479 your previous question, less about what they say, but what 0:18:26.520 --> 0:18:29.880 they do. They're building significant cash reserves that they could 0:18:30.040 --> 0:18:35.280 either buy back stock or acquire struggling producers if there 0:18:35.359 --> 0:18:38.159 is a dip in in oil prices. UH. So we 0:18:38.560 --> 0:18:41.320 think that there is still room to go just because 0:18:41.359 --> 0:18:44.200 of how strong the balance streets are and because we've 0:18:44.200 --> 0:18:46.679 see in the second half of the next year the 0:18:46.720 --> 0:18:51.000 supply gap emergence. By the way, how well is Europe 0:18:51.000 --> 0:18:57.320 set up for this winter better than we would have expected, 0:18:57.440 --> 0:19:02.480 but because they've reduced consumption and um we we also 0:19:02.520 --> 0:19:05.879 had the mild weather in October that's helped lower the 0:19:06.160 --> 0:19:10.920 the UH, the draws and inventories, but they may still 0:19:10.960 --> 0:19:14.600 have to refill if winter is as cold as is 0:19:14.640 --> 0:19:18.679 currently expected, which is slightly above average, and we're starting 0:19:18.720 --> 0:19:22.240 to see it shift in weather patterns here and in 0:19:22.280 --> 0:19:28.200 the northern hemisphere in the northeastern from their current levels. 0:19:26.840 --> 0:19:32.760 So oh well l m G primarily UH and there 0:19:32.800 --> 0:19:36.640 there will be especially freeport comes back online, there will 0:19:36.640 --> 0:19:40.120 be enough likely that they won't they won't go cold. 0:19:40.119 --> 0:19:43.160 They may have to again restrict economic activity in order 0:19:43.200 --> 0:19:46.080 to make it last. The bigger question is where the 0:19:46.119 --> 0:19:50.600 inventories end up at the end of winter, and then 0:19:50.840 --> 0:19:56.280 how does that look filling filling inventories into the following 0:19:56.359 --> 0:20:01.119 winter because there will be less capacity from Russia, there 0:20:01.160 --> 0:20:04.679 will be even less ability to refill those inventories at 0:20:04.720 --> 0:20:07.320 the clip that they did this year. So for now, 0:20:07.359 --> 0:20:10.760 do you followed the big big integrated oil companies. Are 0:20:10.760 --> 0:20:14.280 they spending money to look for more energy like drill 0:20:14.400 --> 0:20:16.760 on different places and stuff like that. Are they just 0:20:16.840 --> 0:20:19.840 kind of keeping that in check and building up all 0:20:19.880 --> 0:20:24.879 the cash flow that they've promised they are? They raised 0:20:24.960 --> 0:20:28.520 spending by about eight percent relative to one Uh. They 0:20:29.160 --> 0:20:32.200 we expect they're part of their increased free cash will 0:20:32.240 --> 0:20:35.520 will go towards new exploration and development. There is an 0:20:35.520 --> 0:20:38.760 issue though that uh. You know, when you look at 0:20:38.800 --> 0:20:42.760 an investment in North America, it's tempered by the the 0:20:42.880 --> 0:20:47.679 push to the carbonize and you look at uh California 0:20:47.760 --> 0:20:53.719 banking ice vehicles by President Biden speaking similarly, Canada instituting 0:20:54.240 --> 0:20:57.280 a large carbon tax and the renewable fuel standard. Uh, 0:20:57.359 --> 0:21:00.560 the investments in North America become more challenging. And then 0:21:00.640 --> 0:21:02.720 when you go elsewhere, there just hasn't been a lot 0:21:02.720 --> 0:21:05.679 of money spent on exploration. So there has to be 0:21:05.720 --> 0:21:09.040 a shift of where that money is spent, and we 0:21:09.080 --> 0:21:12.960 need to find new province is to develop Brazilian giana 0:21:12.960 --> 0:21:15.440 are two of those, but they are they aren't sufficient 0:21:15.480 --> 0:21:17.919