WEBVTT - Inflation Data, Crypto Legislation, EV Outlook 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 --> 0:00:15.560 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 --> 0:00:22.240 at Bloomberg dot com slash podcast. Let's go to Ira Jersey. 0:00:22.280 --> 0:00:26.280 Ira Jersey, our chief US rate strategists from Bloomberg Intelligences. Right, 0:00:26.680 --> 0:00:29.440 and Ira, what do you think here? I'm calling your 0:00:29.480 --> 0:00:33.280 Federal Reserve? Your Federal Reserve looks at the inflation data 0:00:33.320 --> 0:00:35.680 we got today? What do you think it took away 0:00:35.680 --> 0:00:40.280 from that data? A happy happy holidays guys. Um, last 0:00:40.479 --> 0:00:42.479 last hit of the year here. Um, you know, I 0:00:42.720 --> 0:00:45.760 think the Fed takes away that we're continue to be 0:00:45.800 --> 0:00:48.960 on trend for lower but still not low inflation growth. 0:00:49.080 --> 0:00:51.120 And and when you look at a lot of the 0:00:51.200 --> 0:00:54.440 data today, like like I wanted to crunching some numbers, 0:00:54.440 --> 0:00:56.120 and when you look at the trends just from the 0:00:56.200 --> 0:00:59.360 last three months and things like personal income and then 0:00:59.400 --> 0:01:03.120 you use oaths, the core and the headline PC deflator, 0:01:03.320 --> 0:01:06.039 what you realize is actually real incomes at least at 0:01:06.040 --> 0:01:10.160 the aggregate level, are actually growing now, sow, and that 0:01:10.280 --> 0:01:14.360 the first month we've seen that, because I this morning, 0:01:14.400 --> 0:01:18.040 it's the second month. Um. But yes, it's it's actually 0:01:18.319 --> 0:01:20.800 you know, and and that that might actually be a 0:01:21.520 --> 0:01:23.480 um that I actually might be a worry for the 0:01:23.480 --> 0:01:26.840 Federal Reserve because when you have personal incomes that are 0:01:27.000 --> 0:01:30.600 higher than than inflation than that means that basically your 0:01:30.600 --> 0:01:33.319 real disposable income is higher, and that means people actually 0:01:33.319 --> 0:01:35.520 have more money to spend, which going into the holiday 0:01:35.520 --> 0:01:38.360 season might have been a pretty good, uh, you know, 0:01:38.360 --> 0:01:42.399 pretty good action potentially for for holiday shopping when you know, 0:01:42.440 --> 0:01:44.760 now all of a sudden, for the first time, you know, 0:01:44.800 --> 0:01:47.000 basically in a year and a half that we've seen 0:01:47.520 --> 0:01:50.840 but we've seen incomes higher than than inflation. Um. Now, 0:01:50.960 --> 0:01:54.840 by the way, personal income came in a growth of 0:01:54.920 --> 0:01:57.880 zero point four percent. The estimate was for zero point 0:01:57.880 --> 0:02:01.760 three percent, so take better. Per spending came in with 0:02:01.760 --> 0:02:04.960 the growth zero point one percent the estimates for zero 0:02:05.000 --> 0:02:07.960 point two percent, so a tick worse. If this happened 0:02:07.960 --> 0:02:13.840 in my household, I think my wife would love me again. Yeah, 0:02:13.840 --> 0:02:16.960 and but keeping keep in mind that um, you know, 0:02:17.000 --> 0:02:19.000 it's hard to judge some of these things on a 0:02:19.040 --> 0:02:21.800 one month basis because you know they are seasonally adjusted. 0:02:21.800 --> 0:02:24.520 And when we look at things like spending, UM, you know, 0:02:24.639 --> 0:02:28.520 over the pandemic period, you actually had people, you know, 0:02:28.560 --> 0:02:31.359 buying more online and doing more of their holiday shopping 0:02:31.360 --> 0:02:33.720 in November than you did in December. So so even 0:02:33.760 --> 0:02:36.680 though you know it was only up slightly UM, you know, 0:02:36.680 --> 0:02:38.440 compared to the last couple of years, it was still 0:02:38.440 --> 0:02:42.160 a pretty reasonably robust number UM on a nominal basis 0:02:42.240 --> 0:02:45.240 for for November spending UM. And keep in mind also 0:02:45.280 --> 0:02:47.920 October was revised up attempts, so when when you average 0:02:47.960 --> 0:02:51.280 those out, it was basically as expected UM. And and 0:02:51.720 --> 0:02:55.520 you know importantly UM, you know, with spending UH, you 0:02:55.560 --> 0:02:58.840 know continuing to grow even a little bit UM, you 0:02:58.840 --> 0:03:01.760 know that will continue to booie prices in some sectors 0:03:01.760 --> 0:03:05.160 and in particular services. So so again digging deep into 0:03:05.200 --> 0:03:08.680 this data and looking at things like core services spending 0:03:09.120 --> 0:03:11.680 UH and core good spending, goods prices have just been 0:03:11.680 --> 0:03:15.320 plummeting and goods prices are not growing anywhere near where 0:03:15.360 --> 0:03:18.560 they were earlier in the year. But services spending continue 0:03:18.639 --> 0:03:21.720 and services prices continue to be growing at a reasonably 0:03:21.720 --> 0:03:26.040 good clip. And because services spending and prices tend to 0:03:26.040 --> 0:03:29.160 be stickier. Um, that means that inflation might not come 0:03:29.240 --> 0:03:31.240 down as quickly as the FED would like. And again 0:03:31.280 --> 0:03:33.280 this is the reason why I think that the FED 0:03:33.360 --> 0:03:35.600 might be pretty reluctant to cut interest rates later in 0:03:35.640 --> 0:03:38.720 the year, even if we have a reasonably I gotta say, 0:03:38.800 --> 0:03:42.200 you're singing from the same hymnal as Barry Nap, with 0:03:42.200 --> 0:03:44.640 whom I spoke earlier this morning. Do you know this guy? 0:03:44.760 --> 0:03:48.440 Do you know Berry from I know he's I know 0:03:48.480 --> 0:03:50.520 he's a soccer guy. I mean I talked to you know, 0:03:50.560 --> 0:03:52.920 I know Rick Reader and some other people at AH 0:03:53.240 --> 0:03:55.600 at Black Rock, but I don't know Berry. Yeah, um 0:03:55.680 --> 0:03:58.920 not not not in the I'll get you two guys together, 0:03:58.920 --> 0:04:00.720 you can talk so anymore. Hey, now he's out in 0:04:00.800 --> 0:04:02.600 Veil I know. And so all right, so he went 0:04:02.640 --> 0:04:05.400 to Veil the first drop of a pandemic and he's 0:04:05.480 --> 0:04:11.280 never ever coming back. So anyway, so you know, I 0:04:11.320 --> 0:04:12.800 want to get him. I want to get his take 0:04:12.840 --> 0:04:15.960 if we could one where where does the market expect 0:04:16.160 --> 0:04:19.040 rates to go? Um? You know, we hit florin a 0:04:19.160 --> 0:04:22.320 quarter on the ten year what two months ago about 0:04:23.320 --> 0:04:25.880 and people are asking was that the peak? Was it? Not? 0:04:26.160 --> 0:04:29.840 What what's the consensus for the path of the ten 0:04:29.920 --> 0:04:34.680 year yield? In so so, actually there's there's kind of 0:04:34.839 --> 0:04:37.680 two camps. It's very it's a pretty bifurcated market. Very 0:04:37.680 --> 0:04:40.240 few people think that that the tenure yield are gonna 0:04:40.240 --> 0:04:42.279 stay where they are right now. Um, So you have 0:04:42.440 --> 0:04:44.720 a camp that's led by like Goldman Sachs and and 0:04:44.800 --> 0:04:48.480 some of my my friends over there calling four yields 0:04:48.560 --> 0:04:50.240 upwards of four and a quarter to four and a 0:04:50.279 --> 0:04:52.880 half percent again and making new yield ties in the 0:04:52.920 --> 0:04:55.880 tenure um. I think that's predicated in part on the 0:04:55.920 --> 0:04:57.880 idea that the Fed is actually gonna be too easy 0:04:57.960 --> 0:04:59.840 and that the economy is going to hold up much 0:05:00.000 --> 0:05:03.200 better um than than others think. And and we're probably 0:05:03.200 --> 0:05:05.080 in the other end of the spectrum. Actually we I 0:05:05.120 --> 0:05:07.680 actually think that we're going to see yields below three 0:05:07.720 --> 0:05:10.040 percent by the end of next year, in part because 0:05:10.160 --> 0:05:12.760 not because we're gonna be necessarily in a deep procession 0:05:13.200 --> 0:05:15.360 next year, but that the market is going to price 0:05:15.440 --> 0:05:18.440 for very deep interest rate cuts and and a slower 0:05:18.480 --> 0:05:23.240 economy come five. So it's really a timing issue. And 0:05:23.240 --> 0:05:25.520 and because of that, long term interest rates can fall, 0:05:25.600 --> 0:05:28.159 whereas short term interest rates might um follo at a 0:05:28.240 --> 0:05:32.760 much slower pace just because um, the the the economy, 0:05:33.240 --> 0:05:36.240 the market is going to anticipate very slow growth and 0:05:36.320 --> 0:05:39.480 much lower inflation on a forward basis. Alright, World Cup 0:05:39.560 --> 0:05:44.000 is over? Now what do I do for my soccer fix? Well, 0:05:44.080 --> 0:05:47.240 obviously Wednesday night you missed the MLS Uh, the College 0:05:47.240 --> 0:05:50.080 Super Draft. Um. You know, there were a lot of 0:05:50.320 --> 0:05:52.760 players and from us L League two who were taken 0:05:52.760 --> 0:05:56.839 by MLS teams and um. Unfortunately that the R two 0:05:56.839 --> 0:05:59.359 players that were draft eligible uh and we're on the 0:05:59.400 --> 0:06:02.320 draft list did not get drafted. Um. Although some big 0:06:02.320 --> 0:06:04.280 news about one of them. It will come out in 0:06:04.279 --> 0:06:07.360 the next week or two. Um. But importantly, I think 0:06:07.720 --> 0:06:10.560 you know, for soccer wise, Monday is a Boxing day, 0:06:10.600 --> 0:06:13.279 so there's always a full slate of games in England 0:06:13.720 --> 0:06:16.160 on Boxing Day. So that will be the next the 0:06:16.360 --> 0:06:18.880 next round of fixtures for people to watch fixtures, that's 0:06:19.200 --> 0:06:22.239 games I think their schedule or something I don't know. Alright, 0:06:22.240 --> 0:06:25.000 Ira Jersey he does the interest rate stuff for Bloomberg Intelligence. 0:06:25.040 --> 0:06:27.760 He also is our residence soccer person tells us kind 0:06:27.760 --> 0:06:31.280 of where we need to focus our soccer interests around 0:06:31.360 --> 0:06:37.480 the world. Nathan Dean, senior US policy analyst of Bloomberg 0:06:37.520 --> 0:06:41.200 Intelligence UH, and Joe Matthew most of Bloomberg Sound on. 0:06:41.320 --> 0:06:43.080 Joe's in the studio. As a matter of fact, All 0:06:43.120 --> 0:06:46.479 Star panel. I know, good stuff. I mean they have 0:06:46.600 --> 0:06:49.520 to deal with the sausage making that is Washington, d C. 0:06:49.839 --> 0:06:51.400 And they to let me start with you on on 0:06:51.440 --> 0:06:54.320 the policy side. Isn't there like a big bill winding 0:06:54.360 --> 0:06:56.960 us way through Congress, like about funding the government and 0:06:57.000 --> 0:06:59.640 stuff like that. Give us the latest. Yeah, so you 0:06:59.640 --> 0:07:01.760 know this is the government's spending bill, also known as 0:07:01.800 --> 0:07:05.600 the Omnibus. It's one point seven trillion and overall spending. Uh. 0:07:05.640 --> 0:07:07.640 The Senate's already passed it. The House has to go 0:07:07.720 --> 0:07:10.920 through today and try and get it out. But if 0:07:10.960 --> 0:07:13.800 not that the Senate has given them until December thirty. 0:07:13.960 --> 0:07:16.480 In terms of a short term funding, what this bill 0:07:16.520 --> 0:07:19.120 really does go for markets is really two things. One 0:07:19.160 --> 0:07:21.640 there's the funding angle and then there's the policy writer angle. 0:07:21.960 --> 0:07:24.440 On the funding side, you know, this gives sixties or 0:07:24.480 --> 0:07:28.160 seventy six billion dollars increase to the defense industry. The 0:07:28.200 --> 0:07:32.760 defense industry likes this obviously if they hadn't, uh Secretary 0:07:32.760 --> 0:07:35.040 of Defense that's said earlier this year or earlier this 0:07:35.080 --> 0:07:37.320 month that they were going to be problems other things 0:07:37.320 --> 0:07:40.360 in here, additional eighty billion dollars to speed up the 0:07:40.440 --> 0:07:43.560 Chips Act. So if you're in the semi conductor industry, uh, 0:07:43.560 --> 0:07:46.040 this is actually gonna speed up the fifty two billion 0:07:46.080 --> 0:07:48.560 dollars that they approved earlier. And then on the policy 0:07:48.560 --> 0:07:50.800 writer's side, look, there's tons of policy writers, but the 0:07:50.840 --> 0:07:53.640 one thing that we're really focused on right now is 0:07:53.720 --> 0:07:57.360 it's mandating employers to auto enroll their employees in for 0:07:57.640 --> 0:07:59.800 one case, So if you're a for one key provider, 0:08:00.880 --> 0:08:03.520 there could be quite a bit of increase in assets 0:08:03.600 --> 0:08:06.480 under management because you're gonna be forced to contribute three 0:08:06.800 --> 0:08:08.600 in your first year, all the way up to temper cent. 0:08:08.680 --> 0:08:10.360 So there's a lot of stuff in this bill, but 0:08:10.960 --> 0:08:12.360 we do think it's going to pass and we're not 0:08:12.400 --> 0:08:14.760 gonna have a government show and forced. Well, you mean 0:08:14.800 --> 0:08:18.960 it'll just be automatic unless you opt out. That's that's correct. Okay, Joe, 0:08:19.000 --> 0:08:24.120 how's this playing out politically? I mean, um, the Congress 0:08:24.120 --> 0:08:27.360 seemed to start splitting a little bit in terms of 0:08:27.400 --> 0:08:30.120 support for Ukraine. For example, there were a few Republicans 0:08:30.160 --> 0:08:33.880 who are vocally against at least continuing at these levels. 0:08:34.160 --> 0:08:37.199 And it also strikes me that so much spending I 0:08:37.200 --> 0:08:39.840 think it's one point seven trillion dollars in total, could 0:08:39.880 --> 0:08:44.920 be inflationary. It could be inflationary or stimulative according to some, 0:08:45.040 --> 0:08:47.200 although we tend not to think of budgets that way, 0:08:47.280 --> 0:08:50.120 since you know it's not a stimulus bill. But either way, yes, 0:08:50.120 --> 0:08:51.959 there are a lot of Republicans who are really upset 0:08:51.960 --> 0:08:55.280 about the way this was done. It's not a continuing resolution, 0:08:55.440 --> 0:08:58.040 as as we were just discussing here, this is an omnibus, 0:08:58.080 --> 0:09:01.280 which is which is a which is better um? And 0:09:01.320 --> 0:09:04.439 Republicans scored a couple of major wins here. Mitch McConnell, 0:09:04.480 --> 0:09:08.800 for instance, signed off on this early, having succeeded in 0:09:08.840 --> 0:09:12.320 getting a massive increase in defense spending, in fact, even 0:09:12.320 --> 0:09:16.840 more than was seen for domestic spending. And and he 0:09:17.000 --> 0:09:19.120 was whipping his members early and off and on this. 0:09:19.240 --> 0:09:21.240 You have to remember the period of time that we're 0:09:21.240 --> 0:09:24.040 in right now, is Republicans prepared to take the majority 0:09:24.080 --> 0:09:26.920 in the House. There's a lot of bluster. Kevin McCarthy 0:09:27.040 --> 0:09:30.360 was supposedly whipping against this bill, but if this had 0:09:30.360 --> 0:09:33.800 not passed, that would have been a huge problem for him. 0:09:33.840 --> 0:09:35.760 He was saved by the bell. He doesn't have to 0:09:35.800 --> 0:09:38.600 worry about now crafting a budget in a divided Congress. 0:09:38.760 --> 0:09:41.719 A couple of weeks from now, Hey, Joe asiphrom the 0:09:42.400 --> 0:09:44.720 policy issues when we get back, then, is there a 0:09:44.760 --> 0:09:47.440 postmortem here with a day or two in a rear 0:09:47.480 --> 0:09:50.480 view mirror about the January six committee and kind of 0:09:50.520 --> 0:09:52.800 just give us an update of where we are and 0:09:52.840 --> 0:09:56.240 what might be next steps. Well, they dropped the report 0:09:56.360 --> 0:09:58.320 last night, which is a pretty big deal. This is, 0:09:58.559 --> 0:10:01.760 by the way, that Omnibus four thousand, one fifty pages 0:10:01.800 --> 0:10:06.400 before the amendments. This report is eight hundred and fourteen pages, 0:10:06.400 --> 0:10:08.240 So you guys have a lot of reading to do 0:10:08.320 --> 0:10:11.640 this weekend. Um. Look, it's uh, it's a deep dive 0:10:11.760 --> 0:10:14.280 with a lot of information you've already heard, but it 0:10:14.320 --> 0:10:16.679 also adds more and they're going to continue adding more 0:10:16.720 --> 0:10:19.720 to this report. In terms of the verbate from these 0:10:19.760 --> 0:10:23.520 actual witness interviews, the testimony that we haven't heard were 0:10:23.559 --> 0:10:27.080 seen in their entirety. But there's a list of eleven recommendations, 0:10:27.080 --> 0:10:29.240 and I'll bring you back a couple of days because 0:10:29.240 --> 0:10:31.240 this has been a really busy week. Remember we had 0:10:31.240 --> 0:10:34.440 that final meeting just a few days back in which 0:10:34.480 --> 0:10:38.760 they voted to refer criminal charges against Donald Trump, John Eastman, 0:10:38.800 --> 0:10:42.000 and some others. This is the follow on the final 0:10:42.120 --> 0:10:46.079 document here that they believe is for posterity, the historical 0:10:46.120 --> 0:10:48.400 document people can look back many many years now as 0:10:48.400 --> 0:10:52.040 opposed to the Department of Justice investigation that may well 0:10:52.360 --> 0:10:56.480 end in criminal charges. But the eleven recommendations include one. 0:10:56.600 --> 0:10:58.640 We already checked this box, and it brings us back 0:10:58.679 --> 0:11:02.000 to the Omnibus bill. That's the Electoral count Act that 0:11:02.080 --> 0:11:04.800 clarifies that a vice president does not have authority to 0:11:04.880 --> 0:11:08.240 reject electoral slates. There'll never be another Mike Pence. There'll 0:11:08.240 --> 0:11:10.199 never be another January six, at least the way we 0:11:10.240 --> 0:11:12.679 saw it. Now that this is in there, all right, 0:11:12.800 --> 0:11:16.120 that's so, that's interesting. Eight hundred pages. I'll get to 0:11:16.160 --> 0:11:19.760 that as soon. How many did you say? We're in 0:11:19.760 --> 0:11:22.400 the omnibus four thousand, one hundred fifty five. And it's 0:11:22.440 --> 0:11:27.720 pretty sick that I know that four thousand, four thousand pages. 0:11:27.800 --> 0:11:30.719 Nathan's all over that well, Nathan, here's what last night. 0:11:30.920 --> 0:11:33.600 If it goes, if they're passing around the Congress, does 0:11:33.640 --> 0:11:36.800 anybody can they slip in a few pages about the 0:11:36.800 --> 0:11:40.920 state and local tax deduction? You know, it's funny. They 0:11:40.920 --> 0:11:43.800 had about fifteen amendments in the Senate yesterday. A couple 0:11:43.840 --> 0:11:46.320 of them did pass, so there will be more pages 0:11:46.320 --> 0:11:48.200 than that. And you know, if if you like the 0:11:48.240 --> 0:11:51.520 back room sausage making here. The only reason why the 0:11:51.559 --> 0:11:53.360 House didn't get the vote on it overnight, which was 0:11:53.400 --> 0:11:55.960 the original plan. Everyone was supposed to be gone by now, 0:11:56.520 --> 0:11:58.079 is because this thing is so big they have to 0:11:58.120 --> 0:12:01.000 actually have this transcribed on the parchment, and it takes 0:12:01.000 --> 0:12:03.319 all night to do that. So they didn't actually receive 0:12:03.400 --> 0:12:05.800 the bill until just about now, and then the House 0:12:05.840 --> 0:12:07.800 will do its work to pass this along. All right, 0:12:07.880 --> 0:12:10.080 So Nathan, let's let's be honest here. Let's just, I 0:12:10.080 --> 0:12:12.400 don't know, assume this gets done because if for no 0:12:12.440 --> 0:12:15.080 other reason the House wants to get to the airport, 0:12:15.120 --> 0:12:19.720 and will there be any safe banking in this that no, 0:12:19.840 --> 0:12:23.280 there's not the safe banking and nothing didn't didn't make 0:12:23.320 --> 0:12:25.520 it into the bill. That's a big blow for the 0:12:25.640 --> 0:12:27.640 folks that are invested in m S O s E 0:12:27.760 --> 0:12:31.120 t F and marijuana potstocks. There actually was a writer 0:12:31.240 --> 0:12:34.240 in this bill that prohibits states in the District of 0:12:34.320 --> 0:12:38.280 Columbia from using faralled dollars to actually implement legalization of 0:12:38.360 --> 0:12:41.360 marijuana state initiatives. So this this is gonna go to 0:12:41.440 --> 0:12:46.840 next year the fun police who you know, it was 0:12:46.880 --> 0:12:49.760 probably some Probably there was one person who really wanted 0:12:49.760 --> 0:12:51.160 it in there, and they got it in there. But 0:12:51.600 --> 0:12:53.280 when it comes to safe banking, when it comes to 0:12:53.320 --> 0:12:56.600 pot marijuana and legalization and so forth, I think legislators 0:12:56.600 --> 0:12:59.040 are going to hit a great pause. I don't see 0:12:59.120 --> 0:13:02.600 much momentum going into next year because you know, the House, 0:13:02.920 --> 0:13:06.559 sorry Republican leadership uh showed that they didn't want to 0:13:06.600 --> 0:13:10.880 actually support this. Senator McConnell made a pretty stringent statement 0:13:10.880 --> 0:13:13.360 about that, and you know, I just don't see the 0:13:13.400 --> 0:13:17.959 political capital being used to push this over the line. So, uh, 0:13:18.000 --> 0:13:20.240 it's certainly feasible, it's got to take time to cook. 0:13:20.360 --> 0:13:22.800 It may pass a year from now, but I just 0:13:22.840 --> 0:13:26.400 don't see anybody paying attention to it outside of April 0:13:26.400 --> 0:13:29.440 twenty when all these issues pop up. What's you're taking, Nathan, 0:13:29.440 --> 0:13:31.839 what's your take on salt. Is there any chance it's 0:13:31.840 --> 0:13:36.120 ever coming back? Uh? You know it's And I'm saying 0:13:36.120 --> 0:13:38.079 I'm apologizing to the folks in New New York and 0:13:38.120 --> 0:13:40.520 New Jersey right now, but there are a lot of 0:13:40.559 --> 0:13:43.480 tax issues, and I will say so, really, I don't 0:13:43.480 --> 0:13:45.600 think it's gonna come back, but I will say that 0:13:45.640 --> 0:13:48.520 the Trump air at tax cuts for consumers are going 0:13:48.559 --> 0:13:51.599 to expire in and that means that people who have 0:13:51.640 --> 0:13:54.280 already started talking about what can we do to extend 0:13:54.280 --> 0:13:57.360 those or make those permanent? And you know, I'm sure 0:13:57.400 --> 0:14:00.120 that the great you know, uh policymakers from New in 0:14:00.160 --> 0:14:02.560 New Jersey are going to be inserting a salt into 0:14:02.600 --> 0:14:05.960 those discussions. Hey, Joe, give us a sense of the 0:14:06.000 --> 0:14:10.200 next two years. Are Are we just in mode already 0:14:10.240 --> 0:14:13.840 in Washington? Oh? We are? I mean the idea. Of course, 0:14:13.960 --> 0:14:16.280 we know that Joe Biden's He's gonna be, I believe, 0:14:16.360 --> 0:14:19.040 somewhere very warm with the family, uh the next week, 0:14:19.080 --> 0:14:21.000 and they're gonna be talking about that, and it's expected 0:14:21.000 --> 0:14:23.560 he will announce his candidacy shortly after the holiday. So 0:14:23.760 --> 0:14:26.520 it's on. I mean, Donald Trump's already running. You're gonna 0:14:26.560 --> 0:14:28.560 have Joe Biden out there and that's gonna that's gonna 0:14:28.640 --> 0:14:31.400 drive the conversation. And in this divided government, it's right. 0:14:31.440 --> 0:14:34.080 I mean, there's there's very little that we're going to 0:14:34.160 --> 0:14:36.520 be passing through here. And in terms of the Safe 0:14:36.520 --> 0:14:39.360 Banking Act, that thing passed the House fifteen times ed 0:14:39.400 --> 0:14:43.400 Pearl Mutter is now retiring without safe Banking, which became 0:14:43.480 --> 0:14:46.960 his his career long cause up there. But to get 0:14:46.960 --> 0:14:49.960 that through Mitch McConnell's chamber, and in seeing Kevin McCarthy 0:14:50.000 --> 0:14:52.800 coming in the House, it's highly unlike Wait, Joe, has 0:14:52.800 --> 0:14:55.760 a sitting president ever been primaried? I mean, is is 0:14:55.800 --> 0:14:57.880 it possible that Biden says I'm gonna run and then 0:14:57.920 --> 0:15:01.400 the Democrats put someone else forth? That would be shocking. 0:15:01.560 --> 0:15:04.640 I can't imagine who it would be because you know, look, 0:15:04.680 --> 0:15:06.600 there's a lot of talk about the Democratic bench being 0:15:06.600 --> 0:15:09.360 a little bit thin. Uh. When you start talking about 0:15:09.360 --> 0:15:12.320 the Gavin Newsom's and some of the other players in 0:15:12.480 --> 0:15:14.960 the Democratic Party who might actually be able to stage 0:15:15.760 --> 0:15:18.320 a challenge Pete Buddha Jedge for instance, they could use 0:15:18.360 --> 0:15:20.120 a couple of years to cook. You know that that's 0:15:20.120 --> 0:15:23.960 probably a story we're looking at great stuff. Joe Matthew, 0:15:24.080 --> 0:15:27.440 Washington correspondent and he's host of Sound On that's weekdays 0:15:27.480 --> 0:15:29.840 at five pm Wall Street Time. He's with Bloomberg News 0:15:29.880 --> 0:15:34.120 down in our DC studio. Nathan Dean, he's our senior 0:15:34.160 --> 0:15:35.800 US policy There's a lot of Nathans, and we're going 0:15:35.840 --> 0:15:38.440 back to him. Nathan Dean, senior gust policy analyst who 0:15:38.440 --> 0:15:43.000 actually speaks with great enthusiasm about policy stuff. I don't 0:15:43.000 --> 0:15:45.080 know how he gets that enthusiast, but I'm so glad 0:15:45.080 --> 0:15:46.800 we have him. I'm so glad we have him because 0:15:46.800 --> 0:15:49.480 he's all over that stuff. He's with Bloomberg Intelligence based 0:15:49.520 --> 0:15:54.440 in Washington as well. Brutal, brutal ear for stocks when 0:15:54.440 --> 0:15:57.400 you look in the rear view, brutal year four bonds 0:15:57.400 --> 0:15:58.880 as you look in your rear view. But what area 0:15:58.920 --> 0:16:03.000 that actually ranked in two was energy? I'm like, you know, 0:16:03.040 --> 0:16:04.640 you look at some of these names up fifty six. 0:16:05.520 --> 0:16:07.720 I want to get a sense of have I missed it? 0:16:07.880 --> 0:16:10.160 Did I missed that trade? Or is there still something left. 0:16:10.280 --> 0:16:12.440 We're gonna break it down with David d senior investment 0:16:12.440 --> 0:16:16.320 strategist at Pepack Private Wealth Management and Rob Thummel, portfolio 0:16:16.360 --> 0:16:19.720 manager toward us. Uh, they're joining us on the phone. Rob, 0:16:19.760 --> 0:16:22.360 let's start with you here. Okay, I'm a little late 0:16:22.400 --> 0:16:24.840 to the party, I admit it. Have I missed the 0:16:24.960 --> 0:16:27.960 energy trade here? Not only so, Paul, I think you 0:16:28.000 --> 0:16:29.480 still have plenty of time if you just look at 0:16:29.480 --> 0:16:31.680 the energy stock, you know, and you look at what 0:16:31.720 --> 0:16:34.840 investors want. They want the dividend yields and high free 0:16:34.840 --> 0:16:37.040 cash flow, and the free cash flow yield. The energy 0:16:37.080 --> 0:16:40.400 sectors still probably doubled out of the so and the 0:16:40.440 --> 0:16:43.680 dividend yields probably double or or or maybe triple though 0:16:43.760 --> 0:16:46.280 to the and some in some stocks of the S 0:16:46.320 --> 0:16:48.600 and P five hundreds. So there's still plenty of room 0:16:48.640 --> 0:16:52.560 to run. The sectors still trading a discount to historical norms, 0:16:52.640 --> 0:16:54.920 and and have you know, we'll have delivered some very 0:16:54.920 --> 0:16:57.680 solid earnings into next year. So I still think there's 0:16:57.680 --> 0:17:02.600 a lot of opportunity and energy interesting. So David, how 0:17:02.760 --> 0:17:04.720 what are you? What are your clients? When when I 0:17:04.760 --> 0:17:07.840 think about the energy space, you know, it's back in 0:17:07.880 --> 0:17:09.840 the day when I started, energy was a really really 0:17:09.840 --> 0:17:12.080 big sector. Everybody wanted to talk about it, and then 0:17:12.080 --> 0:17:14.239 it really just shrink in size in terms of make 0:17:14.320 --> 0:17:17.560 up the SMP. How do you and your clients, you know, 0:17:17.600 --> 0:17:20.600 think about energy in the portfolio? Well, so, in the 0:17:20.720 --> 0:17:23.840 last few years, there's no question about it that because 0:17:23.840 --> 0:17:27.120 of the poor performance of energy stocks plus I think 0:17:27.200 --> 0:17:31.879 E s G concerns, energy was not considered to be 0:17:32.000 --> 0:17:36.240 a favorite area in people's portfolios. But quite frankly, we are, 0:17:36.400 --> 0:17:39.480 for the reasons that our other guests talked about, continued 0:17:39.520 --> 0:17:42.080 to be optimistic on the area. I mean, you look 0:17:42.119 --> 0:17:46.320 at the backdrop. The backdrop is policy makers, activists and 0:17:46.359 --> 0:17:52.640 so forth are discouraging further production of of fossil fuels. 0:17:52.680 --> 0:17:55.359 But the fact of the matter is that the production 0:17:55.480 --> 0:17:59.440 decreases I think will be faster than consumers can wean 0:17:59.560 --> 0:18:02.920 themselves off of using fossil fuels for their cars to 0:18:03.040 --> 0:18:05.320 heat their homes. So you're gonna have this mismatch, and 0:18:05.400 --> 0:18:08.480 that typically means prices have to rise higher to even 0:18:08.480 --> 0:18:12.879 out to reduce supply in consuming demand, Rob, what do 0:18:12.920 --> 0:18:15.600 you think about the demand? I mean, this is the 0:18:15.640 --> 0:18:17.720 first time in a long time I can remember that 0:18:17.760 --> 0:18:20.879 we actually have a debate about whether or not demand 0:18:20.960 --> 0:18:22.920 is going to rise or not. There's so many issues 0:18:22.960 --> 0:18:27.040 around energy, um but the main one I guess China. 0:18:27.480 --> 0:18:30.720 Is the reopening gonna boost demand or is everyone they're 0:18:30.720 --> 0:18:34.480 gonna get COVID and they're all going to stay home. Yeah. Yeah, 0:18:34.560 --> 0:18:36.840 And well I think we've we've seen we've seen that 0:18:36.840 --> 0:18:39.080 playbook play out already here in the US a certain extent. 0:18:39.160 --> 0:18:41.359 So probably in the short term there's probably some challenges, 0:18:41.400 --> 0:18:44.520 clearly some challenges in China's as the economy, uh, and 0:18:44.760 --> 0:18:47.440 then people start to open back up. But longer term, 0:18:47.480 --> 0:18:49.160 what you do know is that China is a big 0:18:49.240 --> 0:18:52.359 driver of demand for for for all energy, in particular 0:18:52.400 --> 0:18:54.880 oil and in natural gas to a large extent. So 0:18:55.240 --> 0:18:57.800 if you look into next year, at some point in time, 0:18:58.240 --> 0:19:02.879 you know, to Chinese demand for for oil was actually negative. 0:19:02.920 --> 0:19:05.600 We haven't had negative oil growth UM out of China 0:19:05.640 --> 0:19:09.040 for for decades, and so uh likely see pretty strong 0:19:09.040 --> 0:19:12.359 demand growth at some point in or into four out 0:19:12.400 --> 0:19:15.480 of China, and and that will really be the driver 0:19:15.640 --> 0:19:19.480 of of likely higher oil prices um going forward in 0:19:19.520 --> 0:19:23.880 the next And hey, David, you know when we talk 0:19:23.920 --> 0:19:27.240 about energy and energy stocks, you know, the conversation over 0:19:27.240 --> 0:19:29.240 the last four or five years has had to include 0:19:29.520 --> 0:19:33.160 discussions about e s G, environmental, social, and governance. How 0:19:33.160 --> 0:19:35.119 do your clients think about E s G is a 0:19:35.240 --> 0:19:37.720 front and center for them or is it just you know, 0:19:38.320 --> 0:19:41.400 invest wherever you wherever you get the best returns. Well, 0:19:41.680 --> 0:19:45.119 I think our typical client wants to do well with 0:19:45.240 --> 0:19:49.280 their portfolio if possible. And for many years, of course, 0:19:49.440 --> 0:19:51.640 you know, the tech stocks did so well which had 0:19:52.160 --> 0:19:55.200 higher E s G ratings, and so you could outperform 0:19:55.760 --> 0:19:58.280 and score high on those E s G scores. But 0:19:58.400 --> 0:20:00.400 now what we've seen in the least eighteen on since 0:20:00.440 --> 0:20:02.919 the E s G portfolios are starting to fall short, 0:20:03.280 --> 0:20:05.600 and that's where people are getting a little bit nervous 0:20:05.640 --> 0:20:08.199 here and taking another look at it. I think the 0:20:08.240 --> 0:20:11.439 other thing is this key Russia Ukraine conflict, you know, 0:20:11.680 --> 0:20:14.399 the you know, the question is, of course, is do 0:20:14.480 --> 0:20:17.400 you want to you know, support commodities and so forth 0:20:17.400 --> 0:20:21.600