WEBVTT - Surveillance: Post-Pandemic Growth With Yergin 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com 0:00:23.920 --> 0:00:30.440 and of course on the Bloomberg Terminal. This is an 0:00:30.480 --> 0:00:33.479 immense joy. The book The Prize was a classic, The 0:00:33.560 --> 0:00:36.360 Commanding Heights a classic, and there's been a set of 0:00:36.400 --> 0:00:39.479 books along the way where late last year it was 0:00:39.600 --> 0:00:42.839 instantly my book of the year. The New Map is 0:00:42.880 --> 0:00:46.040 by Daniel Jurgen, I h S Vice Chairman, and we're 0:00:46.080 --> 0:00:48.680 thrilled we could get an oil update from Dr Jorgen 0:00:49.400 --> 0:00:52.800 right now on the Triumph. Really wonderful, wonderful book to 0:00:52.880 --> 0:00:56.680 read on oil and the new Map of our geo politics. 0:00:57.080 --> 0:00:59.320 Dr Jurgen, thank you so much for joining you talk 0:00:59.440 --> 0:01:03.000 late in your work about the disrupted future. It's seventy 0:01:03.080 --> 0:01:06.360 dollars a barrel, up from forty five dollars a barrel 0:01:06.400 --> 0:01:09.560 when your book was released. What does the disrupted future 0:01:09.680 --> 0:01:13.320 of oil look like? Thank you, Tom, and glad to 0:01:13.360 --> 0:01:15.000 be with you. And I have to say thank you 0:01:15.040 --> 0:01:18.360 for making the new map of the surveillance Bloomberg Surveillance 0:01:18.400 --> 0:01:20.600 Book of the Year, and it did. The book does 0:01:20.640 --> 0:01:22.959 talk about disruption of what we're seeing now. I think 0:01:23.000 --> 0:01:25.920 we're moving. We're in the post pandemic economy right now, 0:01:26.400 --> 0:01:29.600 and uh, after all of the obitras and everything we're 0:01:29.600 --> 0:01:32.480 written for commodities, for oil, you're seeing a rebound and 0:01:32.520 --> 0:01:34.200 it's telling you that we're in a very in a 0:01:34.240 --> 0:01:37.520 strong world economy, we're probably in our number is going 0:01:37.560 --> 0:01:40.040 to be looking at a six percent global economic growth 0:01:40.080 --> 0:01:42.720 this year. That will bleed into demand. How do you 0:01:42.840 --> 0:01:46.080 frame the price of oil? Are we here or you 0:01:46.120 --> 0:01:49.120 go to eighty dollars of barrel as we've heard from technicians, 0:01:49.480 --> 0:01:52.560 or can Daniel Jurgen speak of a hundred dollars of barrel? 0:01:53.560 --> 0:01:55.440 I think a hundred dollars a barrel would have to 0:01:55.480 --> 0:01:58.880 be some really big disruption. I think we've been thinking 0:01:58.880 --> 0:02:01.040 that we were in a sixty seven many five dollar range. 0:02:01.040 --> 0:02:04.160 It could touch eighty, but we're still using around seventies 0:02:04.240 --> 0:02:06.200 the price for the year, which is where we happen 0:02:06.240 --> 0:02:09.880 to be right now, and it's as the economies open 0:02:09.960 --> 0:02:12.680 up around the world. Motorists on the road referring to 0:02:12.760 --> 0:02:16.840 drive and places, and the OPEC countries and the OPEC 0:02:16.880 --> 0:02:19.919 plus countries putting oil back in the market, and even 0:02:19.960 --> 0:02:22.720 the prospect of a RAN coming back into the market 0:02:22.760 --> 0:02:25.720 fairly soon if there is finally a new nuclear agreement 0:02:25.919 --> 0:02:28.320 still hasn't riled the market. Well, there's this idea of 0:02:28.360 --> 0:02:32.200 discipline that a lot of the oil producers having regained 0:02:32.240 --> 0:02:35.480 discipline and are not going to overproduce for fear of 0:02:35.560 --> 0:02:38.560 cannibalizing from their future profits. At what point does the 0:02:38.639 --> 0:02:42.400 shale complex come back on see higher prices is something 0:02:42.639 --> 0:02:46.480 they just can't miss and and perhaps enhance their production. 0:02:47.320 --> 0:02:49.640 That's a question obviously not in the SHIL producers, but 0:02:49.680 --> 0:02:53.000 that that OPEC Plus are looking at pretty carefully. We're 0:02:53.000 --> 0:02:56.320 going to see at this point the shil producer returning 0:02:56.360 --> 0:02:59.920 capital to investors. That's what their focus is on right now. 0:03:00.520 --> 0:03:03.040 And uh, the increase in recount that we see is 0:03:03.080 --> 0:03:06.560 among private operators, not the major companies. So I think 0:03:06.560 --> 0:03:08.720 we will see obviously this second half of the year, 0:03:08.720 --> 0:03:11.600 we'll see US oil production starting to go up again, 0:03:11.800 --> 0:03:13.800 but I think at a modest rate, and I think 0:03:14.120 --> 0:03:17.320 there is a new social contract between the shale producers 0:03:17.639 --> 0:03:20.440 and their investors, and that does mean that maintaining a 0:03:20.480 --> 0:03:23.360 certain discipline and not going for growth at any cost. 0:03:23.520 --> 0:03:25.360 Hold on, It's like, can you elaborate what this social 0:03:25.400 --> 0:03:27.639 contract is? Does it have to do with climate change 0:03:27.840 --> 0:03:29.440 or does it have to do with the idea that 0:03:29.480 --> 0:03:32.280 they're dead, that their equity has been whips ode by 0:03:32.280 --> 0:03:35.840 the different price action in oil and that investors don't 0:03:35.840 --> 0:03:38.880 want to see that again. It is your second option. 0:03:39.000 --> 0:03:44.240 It's about money and that many shale producers were spending 0:03:44.360 --> 0:03:47.520 beyond their cash flow. Now they've turned around. Some have 0:03:47.680 --> 0:03:51.280 dividends or sort of variable dividends there, paying down debt. 0:03:51.800 --> 0:03:54.480 That's been their focus. That they have to show two 0:03:54.520 --> 0:03:57.720 investors that they will be prudent managers, and that comes 0:03:57.720 --> 0:04:01.400 with consolidation. We used to follow uh at S market 0:04:01.480 --> 0:04:05.040 six T SHL companies as consolidation proceeds. As some companies 0:04:05.040 --> 0:04:08.840 disappeared with down really getting closer to DAN. It would 0:04:08.840 --> 0:04:11.040 be rude if we did not ask. And let us 0:04:11.040 --> 0:04:14.520 go back from Mobile to XN to s O. You 0:04:14.600 --> 0:04:17.040 and I remember s O and the roll ups there 0:04:17.040 --> 0:04:22.040 of different hydrocarbon gasoline companies across this nation. S SO 0:04:22.240 --> 0:04:25.760 and climate change, what does it mean that the climate 0:04:25.839 --> 0:04:29.440 change activists have assaulted the board of directors of X 0:04:29.640 --> 0:04:32.640 and what does it symbolize? Well, I think I think 0:04:32.800 --> 0:04:35.560 if you read the documents, it was not only climate change. 0:04:35.560 --> 0:04:37.760 It was an argument about how the company has been 0:04:37.800 --> 0:04:41.000 spending money, about investment, and I think that's been kind 0:04:41.000 --> 0:04:44.200 of lost Tom to some degree in the focus about 0:04:44.200 --> 0:04:47.000 the climate. I think all companies are getting on board 0:04:47.200 --> 0:04:52.479 about kind of net zero carbon by which has become 0:04:53.440 --> 0:04:59.000 almost the rule book, and that's what US and other 0:04:59.040 --> 0:05:02.400 countries are going to seek to put into place in 0:05:02.400 --> 0:05:04.440 a much stronger way when they have their next UN 0:05:04.520 --> 0:05:07.800 meeting in Glasgow in November. But I think that what 0:05:07.839 --> 0:05:10.160 we've seen about the board of directors at Excellent and 0:05:10.200 --> 0:05:13.440 Mobile is also it's a question about strategy, about where 0:05:13.440 --> 0:05:16.280 you invest, and obviously climate change has been part of it, 0:05:16.400 --> 0:05:19.200 but that's not the only thing. Daniel. When do we 0:05:19.240 --> 0:05:24.440 get peak oil? Ah? Sometimes I think we'll someday we'll 0:05:24.440 --> 0:05:27.520 have peak conversation about peak oil. I think uh in 0:05:27.880 --> 0:05:30.080 the new map, you know, I take the view that 0:05:30.120 --> 0:05:33.039 it's probably around twenty we're going to see strong demand. 0:05:33.600 --> 0:05:36.800 Right now, that's what we're seeing demand increasing seven million 0:05:36.880 --> 0:05:39.479 barrels a day from the first quarter to the third quarter. 0:05:39.720 --> 0:05:41.320 So I think, and I spent a lot of time 0:05:41.400 --> 0:05:43.000 think about this in terms of the new map, and 0:05:43.560 --> 0:05:47.560 but I think around is when demand really starts to peak. 0:05:47.920 --> 0:05:50.400 I mean, this year we're selling about three of the 0:05:50.440 --> 0:05:53.600 new cars in the US are electric cars. Fuel efficiency 0:05:53.640 --> 0:05:56.320 has a big impact. But recovery in the world, if 0:05:56.360 --> 0:05:59.960 we have a strong recovery, that's going to propel demand. 0:06:00.120 --> 0:06:06.960 So I was still used around as the expectation. Thank you, sir, 0:06:07.240 --> 0:06:16.920 Always appreciate your perspective. Chess mal Kid, Vice chairman. Right 0:06:16.960 --> 0:06:19.120 now there is no one like Douglas Cass joining us 0:06:19.120 --> 0:06:22.600 some sea breeze and Doug, I love, love, love your 0:06:22.600 --> 0:06:27.600 note yesterday afternoon, which is where is the uproar that 0:06:27.680 --> 0:06:31.440 we've all become hourly traders? I mean, how do we 0:06:31.560 --> 0:06:35.840 extricate ourselves from this? A wise one. First, let me 0:06:35.920 --> 0:06:38.720 say that I love following Jack Ablom. In the morning, 0:06:39.440 --> 0:06:42.480 he texted me that he's watching and all I would 0:06:42.480 --> 0:06:45.000 say is that Jack Ablin has one of the best 0:06:45.040 --> 0:06:48.080 long games in the investment business, but his short game 0:06:48.080 --> 0:06:50.760 and golf is a totally different. It's a disaster. It's 0:06:50.800 --> 0:06:52.720 like embarrassing in and I know the reason that you 0:06:52.839 --> 0:06:57.320 play golf. He's that bad, but seriously done on the market. 0:06:57.480 --> 0:07:03.320 I quoted Wrestling Icon on Rowdy Roddy Piper. I have 0:07:03.440 --> 0:07:05.960 come here to chew bubblegum and kick ass, and I'm 0:07:06.040 --> 0:07:12.040 out of bubblegum. I'm reasonably convinced that the markets upside 0:07:12.120 --> 0:07:14.800 reward is dwarfed by the downside risk. It doesn't mean 0:07:14.840 --> 0:07:16.920 that the market is going to fade immediately, but all 0:07:16.960 --> 0:07:23.400 the signs are there. UM valuations, investor expectations are really inflated. 0:07:23.520 --> 0:07:26.200 Speculation is run a buck as you just described with 0:07:26.360 --> 0:07:30.760 the discussion of AMC. But are they compartmentalized, Mr Cass 0:07:30.880 --> 0:07:34.880 or do you lump it altogether? Ablin said that, you know, 0:07:34.960 --> 0:07:38.240 it's a little ambivalent right now where we where we are, 0:07:38.320 --> 0:07:43.240 But do you lump it all together? Or is yeah, 0:07:43.320 --> 0:07:46.960 I lumped it all together. I see it as endemic 0:07:47.840 --> 0:07:52.480 um to what's going on in the market. Um the artificiality, 0:07:52.680 --> 0:07:57.520 the absence of natural price discovery created by obviously zero 0:07:57.560 --> 0:08:01.840 interest rate policy. It's become Paul and Tom so conspicuous 0:08:01.880 --> 0:08:06.640 that it can't be ignored by any investor that requires 0:08:06.640 --> 0:08:09.960 a margin of safety when they invest. All right, Doug, 0:08:10.040 --> 0:08:13.040 I appreciate a rowdy roddy piper reference as much as 0:08:13.040 --> 0:08:15.360 the next person. But I also note in your most 0:08:15.400 --> 0:08:18.600 recent note that you are not yet net short. What 0:08:18.640 --> 0:08:22.600 would get you to become net short? Yeah? I'm respectful 0:08:22.640 --> 0:08:26.440 of the market's momentum, which we all know is fueled, 0:08:27.080 --> 0:08:29.600 as I said, in large measure because of liquidity from 0:08:29.600 --> 0:08:34.880 physical monetary policy. I think it's important that we recognize 0:08:35.000 --> 0:08:38.280 that tops of processes. I think we're making an important 0:08:38.320 --> 0:08:43.559 top bottoms. By contrast, or more typically, events and the 0:08:43.679 --> 0:08:46.920 bull markets are typically born out of bad news. If 0:08:46.960 --> 0:08:51.000 you consider March two thousand nine, the generational low inequities 0:08:51.000 --> 0:08:55.319 which I described, or March um at both junches I 0:08:55.400 --> 0:08:59.120 got really bullish. It doesn't pay to be dogmatic, neither 0:08:59.200 --> 0:09:03.760 a per a bowl or permanent bear v I um 0:09:03.840 --> 0:09:08.080 and um uh. You know. In fact, if you remember 0:09:08.080 --> 0:09:12.400 our conversations on surveillance throughout, I called for rip your 0:09:12.400 --> 0:09:15.400 face rally and mother of all short squeezes, which we've had. 0:09:15.559 --> 0:09:18.080 But bear markets are born out of good news. If 0:09:18.120 --> 0:09:21.000 you consider early two thousand, fall of two thousand and seven, 0:09:21.280 --> 0:09:26.079 and maybe even June. It happens when demand for stocks 0:09:26.120 --> 0:09:29.880 is sated. It happens when you have a promotional CEO 0:09:30.000 --> 0:09:34.959 of a company like AMC, where there's tremendous misallocate allocation 0:09:35.000 --> 0:09:39.920 of capital UM and there's play money on steroids UM, 0:09:40.000 --> 0:09:43.680 and you have someone by contrast, Madrick but Modrick Capital 0:09:44.000 --> 0:09:46.920 who becomes the smartest man in the room and and 0:09:47.120 --> 0:09:51.840 plays Reddit and Wall Street bets and David fortnit um 0:09:51.880 --> 0:09:55.800 to a fairly well and makes thirty million as UM, 0:09:55.880 --> 0:09:58.400 an hourly trader, not a day trader. To reference your 0:09:58.480 --> 0:10:02.160 question about the you know whether we're all day traders now? Um. 0:10:02.280 --> 0:10:04.320 So when stocks are cheap, I buy them when they're 0:10:04.320 --> 0:10:07.600 expensively short. I'm starting up a hedge fund this week, 0:10:08.280 --> 0:10:11.600 Seabreez Capital Partners LP, to take advantage of what I 0:10:11.640 --> 0:10:17.480 think are uh in certain cases ludicrously valued prices classic 0:10:17.840 --> 0:10:25.200 short shore short. Most long short guys are long biased. 0:10:25.480 --> 0:10:27.640 I run a long short book with a short bias. 0:10:28.480 --> 0:10:31.320 What I do during my days is analyzed companies. I'm 0:10:31.320 --> 0:10:34.840 not looking at the forums and Reddit Wall Street bets. 0:10:35.480 --> 0:10:38.720 Hopefully I'm producing an intelligent judgment of value. You'll apply 0:10:38.880 --> 0:10:43.400 leverage I don't apply. I never use leverage. I tried 0:10:43.440 --> 0:10:48.040 to create excess returns alpha by superior stock selection. The 0:10:48.080 --> 0:10:51.079 bottom line is that I feel a lot of people 0:10:51.120 --> 0:10:53.840 today are ignoring the fact that the SMP has doubled 0:10:54.120 --> 0:10:56.800 since the March Lows. I think looking at the rear 0:10:56.840 --> 0:11:00.680 view mirror is not the fountain for delivering superior returns 0:11:01.040 --> 0:11:04.440 to meet. Buying here is like drinking contaminated water. So 0:11:04.520 --> 0:11:07.280 I'm not yet shut Paul. I've one step out the door, 0:11:08.120 --> 0:11:10.480 and I hope that my hedge fund launch is timely 0:11:10.520 --> 0:11:13.840 from the standpoint of setting up shorts. But as I 0:11:13.880 --> 0:11:15.760 look at the major and I'd be happy to go 0:11:15.840 --> 0:11:18.440 through most of them very quickly. As I look at 0:11:19.400 --> 0:11:23.800 most asset classes, most market sectors, and individual stocks, I'm 0:11:23.800 --> 0:11:28.839 pretty er sign is Doug is the catalyst for a 0:11:28.960 --> 0:11:32.680 market contraction in your mind, the FED stepping in here 0:11:32.720 --> 0:11:36.480 and tapering. If not start talking about raising rates, I'm 0:11:36.520 --> 0:11:39.920 different than everyone else. I listened to Laura earlier on 0:11:39.960 --> 0:11:43.680 Bloomberg TV, UM, I listened to your other guests were 0:11:43.679 --> 0:11:47.360 all smart. Um, I just think it happens. Let's look 0:11:47.360 --> 0:11:50.839 for example, of the disgorging and SPACs. There were three 0:11:50.880 --> 0:11:54.200 hundred SPACs. They raised a hundred and twenty billion dollars 0:11:54.640 --> 0:11:59.120 late two thousand twenty in early How fast was that 0:11:59.200 --> 0:12:02.640 graze over? It was over as fast as frasier as 0:12:03.000 --> 0:12:07.880 a Frasier hitting a walk off home run last night 0:12:07.920 --> 0:12:10.960 at the bottom of the eleven, or as or as 0:12:11.240 --> 0:12:16.360 John Sterling said, Tom, oh did we need that? Yeah? Okay, 0:12:16.360 --> 0:12:18.959 well just because broad so I see a broad of 0:12:19.040 --> 0:12:21.760 discorge from in the head, not only not only for 0:12:21.960 --> 0:12:24.120 a Tampa Bay, but for the market. Doug cass, I 0:12:24.120 --> 0:12:26.480 gotta switch gears here on the raging debate that we're 0:12:26.480 --> 0:12:29.720 having and everybody else's on the new baseball. I'm a 0:12:29.800 --> 0:12:32.480 huge fan, frankly of the new game. And I go 0:12:32.600 --> 0:12:35.199 back to a pitcher who was in the Baseball Hall 0:12:35.240 --> 0:12:37.120 of Fame by the time he was thirty six years 0:12:37.160 --> 0:12:41.559 old and pitched from a higher mount. Would Sandy Kofax 0:12:41.679 --> 0:12:44.080 complain about lower in the mound right now to make 0:12:44.120 --> 0:12:50.000 things work? Um, Sandy's giddy about his investment portfolio, and 0:12:50.080 --> 0:12:53.400 I don't think he would be concerned about the difference 0:12:53.400 --> 0:12:56.240 in the mound. Yeah, I mean I don't. I don't, 0:12:56.280 --> 0:12:58.200 I don't feel so. I mean you and I remember 0:12:58.280 --> 0:13:01.160 these guys were fearsome, They were up way, Hi, Bob Gibson, one, 0:13:01.200 --> 0:13:03.480 Marichelle and the rest of him, and they brought it 0:13:03.520 --> 0:13:05.960 in all the games. You know. That's why Sandy's games 0:13:05.960 --> 0:13:08.840 were two to one. Um. You know. The Yankees, by 0:13:08.840 --> 0:13:12.240 the way, getting back to baseball, uncharacteristically have s forward 0:13:12.640 --> 0:13:15.320 two or less runs and nine of the least thirteen games. 0:13:15.640 --> 0:13:18.960 The last time that happened was seventy one. Aaron Boone, 0:13:19.120 --> 0:13:22.400 the manager wasn't and I think Brian was four years old. 0:13:22.640 --> 0:13:25.040 I got time for one last question. It's a really 0:13:25.080 --> 0:13:27.840 really important question because you're living at Doug Cast. The 0:13:27.880 --> 0:13:29.559 rest of us are up here in the snow. You're 0:13:29.559 --> 0:13:32.880 living at large in Florida, our Tampa Bay, the San 0:13:32.920 --> 0:13:36.880 Diego Padres, l A Dodgers, and the San Francisco Giants 0:13:36.920 --> 0:13:39.440 doing so well because the players want to play in 0:13:39.480 --> 0:13:47.640 that perfect weather. No, no, it's it's you're a Red 0:13:47.720 --> 0:13:50.560 Sox fan. For God's sake. You know it's early in 0:13:50.600 --> 0:13:53.840 the season. Talk to me in August. Got that right, 0:13:54.480 --> 0:13:56.880 We'll leave it there, Go away, Doug Cast. Good luck 0:13:56.920 --> 0:14:01.200 with your new long short escapade here. That will be interesting. 0:14:01.920 --> 0:14:03.960 No leverage. That's really important for those of you that 0:14:03.960 --> 0:14:08.000 aren't sophisticates on this. That's a really important uh statement 0:14:08.000 --> 0:14:10.520 by Mr Cass. Yeah, I think he's just as strict 0:14:10.600 --> 0:14:12.960 long short. It sounds like a bottom's up, Doug Cass. 0:14:13.400 --> 0:14:15.480 I'm a stock selector, and that that's going to generate 0:14:15.600 --> 0:14:18.920 my alpha. I I can't remember the paper, but really 0:14:19.080 --> 0:14:23.160 Matthew really sophisticated twenty five years ago said if you 0:14:23.200 --> 0:14:26.960 go over two point three eight times leverage, bad things happened. 0:14:27.000 --> 0:14:29.320 That was where the math laid out in cast goes 0:14:29.400 --> 0:14:32.520 the other way with no leverage. Doesn't of baseball talk 0:14:38.960 --> 0:14:42.640 right now on inflation, which he does link into Washington 0:14:42.720 --> 0:14:46.160 Gregory Gregory Valier joins us with a g F Investments 0:14:46.200 --> 0:14:48.880 this morning note is a mustardyad and all of Washington 0:14:48.880 --> 0:14:52.320 it really can't say enough about it. I want to 0:14:52.320 --> 0:14:55.960 go back to whip inflation now, Greg Valier, and I 0:14:56.000 --> 0:14:58.000 don't know if we're gonna have a redo of that 0:14:58.120 --> 0:15:01.320 here with about him inflay Shan, But I was just 0:15:01.680 --> 0:15:06.000 inflation is treated differently by the GOP or by the Democrats. 0:15:06.120 --> 0:15:10.440 Discussed that well. First of all, I'm old enough time 0:15:10.520 --> 0:15:13.800 to remember the seventies when inflation did tremendous damage to 0:15:13.880 --> 0:15:17.640 Jimmy Carter's presidency, and I do think it's a real 0:15:17.760 --> 0:15:20.960 vulnerability for Joe Biden. You know, we all talk about 0:15:21.000 --> 0:15:23.080 the impact that the fed or the markets, but there's 0:15:23.080 --> 0:15:27.040 a big political impact. You see an extreme shortage of meat, 0:15:27.520 --> 0:15:31.240 you see gasoline prices higher, you see a really acute 0:15:31.240 --> 0:15:34.480 shortage of labor, and you see housing prices on fire. 0:15:34.560 --> 0:15:36.760 And I think a lot of consumers will look at 0:15:36.840 --> 0:15:40.280 this stuff intend to blame the incumbent president seventy one. 0:15:40.720 --> 0:15:45.880 Baron brand explain, you're the politics of a gallon of gas. Well, 0:15:45.920 --> 0:15:49.120 it's visceral. People see it, uh So clearly when they 0:15:49.160 --> 0:15:52.040 fill their tank, they see the price of meat. There's 0:15:52.040 --> 0:15:54.080 a story in the Washington Post this morning about a 0:15:54.080 --> 0:15:57.360 house in the DC suburbs that went for one million 0:15:57.440 --> 0:16:01.560 dollars above the asking price. So everywhere you look, you 0:16:01.560 --> 0:16:04.520 you see signs of it. And the Republicans, who have 0:16:04.600 --> 0:16:07.520 been desperate for issues that will give them traction may 0:16:07.600 --> 0:16:12.120 have an issue. Greg, what are the politics of higher wages? Well, 0:16:12.120 --> 0:16:14.360 that that is well, I think that when you see 0:16:14.400 --> 0:16:17.720 stories Lisa, like the Bank of America paying twenty five 0:16:18.120 --> 0:16:21.600 an hour, when you see stories about bidding wars by 0:16:21.680 --> 0:16:24.400 companies that people are saying, I've got to pay all 0:16:24.400 --> 0:16:27.880 these higher prices. I need higher wages, and I think 0:16:27.960 --> 0:16:30.800 that's the big issue for the FED. It's not corn 0:16:30.920 --> 0:16:34.040 or copper, it's wages. All right, Well, this really raises 0:16:34.040 --> 0:16:36.800 a question because inflation has been highly political, and the 0:16:36.840 --> 0:16:39.760 way that we normally talk about it is that Republicans 0:16:39.800 --> 0:16:42.720 have been raising the issue of inflation to push back 0:16:42.760 --> 0:16:45.640 on some of Biden's plans. But you're saying that the 0:16:45.720 --> 0:16:48.360 here and now of inflation that we're seeing commodity prices 0:16:48.440 --> 0:16:51.400 is already eroding confidence in some of the spending. Is 0:16:51.440 --> 0:16:55.200 that what you're saying or what you're hearing from the polls. Yes, 0:16:55.320 --> 0:16:58.560 I'm hearing Lisa that the Republicans who need issues. I mean, 0:16:58.600 --> 0:17:01.000 they can talk about urban cry I'm an immigration, but 0:17:01.040 --> 0:17:03.400 they need more issues. And I think if they can 0:17:03.480 --> 0:17:06.480 say the reason why we've got high prices everywhere you 0:17:06.520 --> 0:17:09.480 look is because of the Biden spending Binge, I'm not 0:17:09.520 --> 0:17:11.560 sure I believe that. By the way, I don't think 0:17:11.640 --> 0:17:14.199 Joe Biden is to blame for computer chips being in 0:17:14.280 --> 0:17:17.800 short supply, but the Republicans may try to link the 0:17:17.840 --> 0:17:22.879 two issues to Biden's detriment. Greg Ville. West Virginia is 0:17:22.880 --> 0:17:26.600 such an original and interesting state. Here we have two 0:17:26.680 --> 0:17:32.000 senators with uncommon power. Explain the power of the senator's 0:17:32.280 --> 0:17:36.040 was Virginia even as one meets with Biden today. Well, 0:17:36.160 --> 0:17:37.960 first of all, time, you start with the fact that 0:17:38.000 --> 0:17:41.159 it's among the most conservative states in the country. So 0:17:41.280 --> 0:17:45.359 Joe Manson, a modern Democrat, can't stray very far. Shelley 0:17:45.359 --> 0:17:47.800 more Caputo, who will be at the White House negotiating 0:17:47.840 --> 0:17:51.399 with the President, can't stray very much either. So I 0:17:51.880 --> 0:17:55.919 think ironically their state needs a lot of money for infrastructure, 0:17:56.119 --> 0:17:59.040 but I think they'd be reluctant to sign on to 0:17:59.160 --> 0:18:03.600 a plan that the Democrats support. That said, they're getting closer. 0:18:04.119 --> 0:18:07.160 Late last week the Republicans came close to one trillion. 0:18:07.480 --> 0:18:10.080 Biden's come down from two point to five trillion to 0:18:10.160 --> 0:18:13.560 one point seven. They're getting closer. I wouldn't be shocked 0:18:13.760 --> 0:18:17.080 to see a deal start to come into focusing. You and, yeah, 0:18:17.320 --> 0:18:21.760 you think they will defeat gridlock with this legislation. Yeah, 0:18:21.840 --> 0:18:24.159 it's not going to satisfy the progressive left. They're going 0:18:24.200 --> 0:18:26.960 to be very upset. And but what Biden has to 0:18:27.000 --> 0:18:29.640 do or say, look, I'll take this now, we'll come 0:18:29.680 --> 0:18:32.439 back for more. Maybe the next bill will use budget 0:18:32.480 --> 0:18:35.760 reconciliation and shove it through Congress. But I think Biden 0:18:35.840 --> 0:18:38.840 needs a win. I think it gives him momentum. I 0:18:38.880 --> 0:18:41.520 think a deal is doable, all right, He needs a win. 0:18:42.040 --> 0:18:44.679 Is he losing popularity among his own Democratic Party or 0:18:44.720 --> 0:18:47.440 is he actually gaining some cloud as he actually moves 0:18:47.480 --> 0:18:51.479 toward accomplishing something two points quickly number one his His 0:18:51.600 --> 0:18:55.400 overall numbers are pretty good, even with ras Mussin poll 0:18:55.440 --> 0:18:58.919 takers that are conservative. Biden's well into the fifties. Trump 0:18:58.960 --> 0:19:02.320 never got there. But among his own progressives there's a 0:19:02.400 --> 0:19:06.120 growing suspicion that he may opt out of a very 0:19:06.160 --> 0:19:09.360 aggressive deal and go for something a little more modest 0:19:09.640 --> 0:19:12.639 that worries the left. Greg I just want to wrap up, 0:19:12.920 --> 0:19:14.640 kind of taking a left turn here. We've been talking 0:19:14.640 --> 0:19:17.520 about the hacks coming out of Russia that have affected 0:19:17.680 --> 0:19:21.080 both meat processing and previously the colonial pipeline, and we've 0:19:21.119 --> 0:19:23.240 seen some pretty big kinks that have thrown into a 0:19:23.280 --> 0:19:26.400 supply chain. It's already strained as a result of these 0:19:26.440 --> 0:19:29.919 hacks and these uh, these malware events. I'm wondering what 0:19:30.040 --> 0:19:33.680 the US response you expect to be, whether it's against China, 0:19:33.920 --> 0:19:37.080 against Russia, or whether it's against just creating a better 0:19:37.119 --> 0:19:40.399 barrier on a national level. Well, i'd say lee. So, 0:19:40.480 --> 0:19:42.840 first of all, the meeting between Putin and Biden on 0:19:42.920 --> 0:19:45.960 June six is going to be pretty chilly. I don't 0:19:46.000 --> 0:19:51.400 expect any big breakthrough. I think Biden will threaten to retaliate. 0:19:51.880 --> 0:19:54.560 I think relations between the US and Russia could get 0:19:54.560 --> 0:19:57.679 worse before they get better. Greg gotta leave it there, 0:19:58.520 --> 0:20:07.720 I t F. Laura Raym joins US now with FF's investment. 0:20:07.800 --> 0:20:11.240 She is definitive on foreign exchanges and taking it over 0:20:11.280 --> 0:20:15.600 as chief US economist at FS Investor's. Laura, I love, love, 0:20:15.760 --> 0:20:19.840 love your research note where you say here's one of 0:20:19.880 --> 0:20:22.720 the fears. I want you to talk right now about 0:20:22.760 --> 0:20:27.760 the fear everybody has a quote unquote policy mistake. What 0:20:27.920 --> 0:20:32.600 can your own Powell get wrong? So unfortunately, I think 0:20:32.600 --> 0:20:35.160 that there's a lot that can go wrong at this stage. 0:20:35.320 --> 0:20:38.679 And you know, I feel like everybody always labels me 0:20:38.720 --> 0:20:41.280 as the pessimist, But what's the point in another person 0:20:41.359 --> 0:20:43.280 telling us the economy strong? Right? We got to look 0:20:43.280 --> 0:20:46.560 at what could possibly go wrong here and what has 0:20:46.640 --> 0:20:50.480 caused the end of every expansion that we've had. It's 0:20:50.520 --> 0:20:54.600 been either rates going up too fast or inter inter 0:20:55.000 --> 0:21:00.960 business cycle, we've had miscommunication that is sparked significant latility. 0:21:01.040 --> 0:21:03.320 So I think that's an area where the FED is 0:21:03.680 --> 0:21:07.080 trying to be much more regimented. But let's face it, 0:21:07.119 --> 0:21:10.600 they haven't really started the tough discussion, which is, how 0:21:10.600 --> 0:21:13.600 are they going to remove this policy accommodation and what 0:21:13.720 --> 0:21:15.840 it's going to mean at a time when the economy 0:21:15.920 --> 0:21:19.760 is already facing other constraints. If they have to move, Laura, 0:21:19.840 --> 0:21:23.399 do they move with a green Spaniard measured approach quarter 0:21:23.440 --> 0:21:26.119 point quarter point quarter point or do they got to 0:21:26.160 --> 0:21:28.879 go back to burns and make some real jumps or 0:21:28.880 --> 0:21:32.320 at least one jump condition to get back to something 0:21:32.359 --> 0:21:35.640 that's in the textbooks. You know, they're I think they're 0:21:35.640 --> 0:21:38.640 going to be extremely cautious. This is of course what 0:21:38.680 --> 0:21:43.199 they've said. And yet markets are forward looking, so you know, 0:21:43.280 --> 0:21:47.200 we've seen markets before get ahead of themselves as far 0:21:47.359 --> 0:21:50.960 as um. You know, concerns about speak, concerns about reaction 0:21:51.160 --> 0:21:55.720 to the inflation. The mini cycle of inflation that we're 0:21:55.800 --> 0:21:59.080 going to start seeing really evolved after we get this 0:21:59.160 --> 0:22:02.480 technical glitch out of the way of you know, year 0:22:02.520 --> 0:22:05.720 on year higher inflation. So what we really need to 0:22:05.720 --> 0:22:08.840 think about is um the fact that the FED has 0:22:08.920 --> 0:22:13.480 boxed themselves in with getting markets so addicted to this 0:22:13.880 --> 0:22:18.359 strong liquidity, and two is going to be a year 0:22:18.440 --> 0:22:21.480 of deceleration. Economy is gonna be strong, but it's gonna 0:22:21.480 --> 0:22:24.640 be growing slower. Earnings may well be solid that they're 0:22:24.680 --> 0:22:28.560 going to be growing slower. How's the FED gonna start 0:22:28.720 --> 0:22:33.280 removing quantitative easing in a place that's already uncomfortable for markets? Well, 0:22:33.320 --> 0:22:35.639 before we get into the reaction function, there's also a 0:22:35.720 --> 0:22:38.200 question law of where we are right now in the cycle, 0:22:38.280 --> 0:22:40.959 both the economic and the labor cycle. And people are 0:22:40.960 --> 0:22:43.240 talking about mid cycle, some people are saying late cycle, 0:22:43.280 --> 0:22:46.000 even Jim Bullard saying that perhaps the labor market is 0:22:46.040 --> 0:22:48.679 tighter than it seems. Where do you fall in this debate. 0:22:49.920 --> 0:22:53.439 I'm firmly in the mid cycle camp, and I would 0:22:53.800 --> 0:22:56.480 I would argue that what we're seeing in the labor 0:22:56.520 --> 0:23:01.880 market shows constraints that are deeply under are appreciated. Um 0:23:01.920 --> 0:23:05.159 when he says that they're tight, I recognize that, you know, 0:23:05.240 --> 0:23:08.760 we're dealing with this labor supply mismatch. People still can't. 0:23:09.320 --> 0:23:12.640 They're tight because people are having to pay more for workers. 0:23:12.680 --> 0:23:16.639 But the labor market is the most inefficient market that 0:23:16.680 --> 0:23:20.160 we have, maybe except for real estate. And the fact 0:23:20.200 --> 0:23:23.800 that we've had significant labor migration, the fact that we've 0:23:23.800 --> 0:23:27.840 had some industries requiring much less labor whereas others are 0:23:27.880 --> 0:23:31.760