Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com
Speaker 1: and of course on the Bloomberg Terminal. This is an
Speaker 1: immense joy. The book The Prize was a classic, The
Speaker 1: Commanding Heights a classic, and there's been a set of
Speaker 1: books along the way where late last year it was
Speaker 1: instantly my book of the year. The New Map is
Speaker 1: by Daniel Jurgen, I h S Vice Chairman, and we're
Speaker 1: thrilled we could get an oil update from Dr Jorgen
Speaker 1: right now on the Triumph. Really wonderful, wonderful book to
Speaker 1: read on oil and the new Map of our geo politics.
Speaker 1: Dr Jurgen, thank you so much for joining you talk
Speaker 1: late in your work about the disrupted future. It's seventy
Speaker 1: dollars a barrel, up from forty five dollars a barrel
Speaker 1: when your book was released. What does the disrupted future
Speaker 1: of oil look like? Thank you, Tom, and glad to
Speaker 1: be with you. And I have to say thank you
Speaker 1: for making the new map of the surveillance Bloomberg Surveillance
Speaker 1: Book of the Year, and it did. The book does
Speaker 1: talk about disruption of what we're seeing now. I think
Speaker 1: we're moving. We're in the post pandemic economy right now,
Speaker 1: and uh, after all of the obitras and everything we're
Speaker 1: written for commodities, for oil, you're seeing a rebound and
Speaker 1: it's telling you that we're in a very in a
Speaker 1: strong world economy, we're probably in our number is going
Speaker 1: to be looking at a six percent global economic growth
Speaker 1: this year. That will bleed into demand. How do you
Speaker 1: frame the price of oil? Are we here or you
Speaker 1: go to eighty dollars of barrel as we've heard from technicians,
Speaker 1: or can Daniel Jurgen speak of a hundred dollars of barrel?
Speaker 1: I think a hundred dollars a barrel would have to
Speaker 1: be some really big disruption. I think we've been thinking
Speaker 1: that we were in a sixty seven many five dollar range.
Speaker 1: It could touch eighty, but we're still using around seventies
Speaker 1: the price for the year, which is where we happen
Speaker 1: to be right now, and it's as the economies open
Speaker 1: up around the world. Motorists on the road referring to
Speaker 1: drive and places, and the OPEC countries and the OPEC
Speaker 1: plus countries putting oil back in the market, and even
Speaker 1: the prospect of a RAN coming back into the market
Speaker 1: fairly soon if there is finally a new nuclear agreement
Speaker 1: still hasn't riled the market. Well, there's this idea of
Speaker 1: discipline that a lot of the oil producers having regained
Speaker 1: discipline and are not going to overproduce for fear of
Speaker 1: cannibalizing from their future profits. At what point does the
Speaker 1: shale complex come back on see higher prices is something
Speaker 1: they just can't miss and and perhaps enhance their production.
Speaker 1: That's a question obviously not in the SHIL producers, but
Speaker 1: that that OPEC Plus are looking at pretty carefully. We're
Speaker 1: going to see at this point the shil producer returning
Speaker 1: capital to investors. That's what their focus is on right now.
Speaker 1: And uh, the increase in recount that we see is
Speaker 1: among private operators, not the major companies. So I think
Speaker 1: we will see obviously this second half of the year,
Speaker 1: we'll see US oil production starting to go up again,
Speaker 1: but I think at a modest rate, and I think
Speaker 1: there is a new social contract between the shale producers
Speaker 1: and their investors, and that does mean that maintaining a
Speaker 1: certain discipline and not going for growth at any cost.
Speaker 1: Hold on, It's like, can you elaborate what this social
Speaker 1: contract is? Does it have to do with climate change
Speaker 1: or does it have to do with the idea that
Speaker 1: they're dead, that their equity has been whips ode by
Speaker 1: the different price action in oil and that investors don't
Speaker 1: want to see that again. It is your second option.
Speaker 1: It's about money and that many shale producers were spending
Speaker 1: beyond their cash flow. Now they've turned around. Some have
Speaker 1: dividends or sort of variable dividends there, paying down debt.
Speaker 1: That's been their focus. That they have to show two
Speaker 1: investors that they will be prudent managers, and that comes
Speaker 1: with consolidation. We used to follow uh at S market
Speaker 1: six T SHL companies as consolidation proceeds. As some companies
Speaker 1: disappeared with down really getting closer to DAN. It would
Speaker 1: be rude if we did not ask. And let us
Speaker 1: go back from Mobile to XN to s O. You
Speaker 1: and I remember s O and the roll ups there
Speaker 1: of different hydrocarbon gasoline companies across this nation. S SO
Speaker 1: and climate change, what does it mean that the climate
Speaker 1: change activists have assaulted the board of directors of X
Speaker 1: and what does it symbolize? Well, I think I think
Speaker 1: if you read the documents, it was not only climate change.
Speaker 1: It was an argument about how the company has been
Speaker 1: spending money, about investment, and I think that's been kind
Speaker 1: of lost Tom to some degree in the focus about
Speaker 1: the climate. I think all companies are getting on board
Speaker 1: about kind of net zero carbon by which has become
Speaker 1: almost the rule book, and that's what US and other
Speaker 1: countries are going to seek to put into place in
Speaker 1: a much stronger way when they have their next UN
Speaker 1: meeting in Glasgow in November. But I think that what
Speaker 1: we've seen about the board of directors at Excellent and
Speaker 1: Mobile is also it's a question about strategy, about where
Speaker 1: you invest, and obviously climate change has been part of it,
Speaker 1: but that's not the only thing. Daniel. When do we
Speaker 1: get peak oil? Ah? Sometimes I think we'll someday we'll
Speaker 1: have peak conversation about peak oil. I think uh in
Speaker 1: the new map, you know, I take the view that
Speaker 1: it's probably around twenty we're going to see strong demand.
Speaker 1: Right now, that's what we're seeing demand increasing seven million
Speaker 1: barrels a day from the first quarter to the third quarter.
Speaker 1: So I think, and I spent a lot of time
Speaker 1: think about this in terms of the new map, and
Speaker 1: but I think around is when demand really starts to peak.
Speaker 1: I mean, this year we're selling about three of the
Speaker 1: new cars in the US are electric cars. Fuel efficiency
Speaker 1: has a big impact. But recovery in the world, if
Speaker 1: we have a strong recovery, that's going to propel demand.
Speaker 1: So I was still used around as the expectation. Thank you, sir,
Speaker 1: Always appreciate your perspective. Chess mal Kid, Vice chairman. Right
Speaker 1: now there is no one like Douglas Cass joining us
Speaker 1: some sea breeze and Doug, I love, love, love your
Speaker 1: note yesterday afternoon, which is where is the uproar that
Speaker 1: we've all become hourly traders? I mean, how do we
Speaker 1: extricate ourselves from this? A wise one. First, let me
Speaker 1: say that I love following Jack Ablom. In the morning,
Speaker 1: he texted me that he's watching and all I would
Speaker 1: say is that Jack Ablin has one of the best
Speaker 1: long games in the investment business, but his short game
Speaker 1: and golf is a totally different. It's a disaster. It's
Speaker 1: like embarrassing in and I know the reason that you
Speaker 1: play golf. He's that bad, but seriously done on the market.
Speaker 1: I quoted Wrestling Icon on Rowdy Roddy Piper. I have
Speaker 1: come here to chew bubblegum and kick ass, and I'm
Speaker 1: out of bubblegum. I'm reasonably convinced that the markets upside
Speaker 1: reward is dwarfed by the downside risk. It doesn't mean
Speaker 1: that the market is going to fade immediately, but all
Speaker 1: the signs are there. UM valuations, investor expectations are really inflated.
Speaker 1: Speculation is run a buck as you just described with
Speaker 1: the discussion of AMC. But are they compartmentalized, Mr Cass
Speaker 1: or do you lump it altogether? Ablin said that, you know,
Speaker 1: it's a little ambivalent right now where we where we are,
Speaker 1: But do you lump it all together? Or is yeah,
Speaker 1: I lumped it all together. I see it as endemic
Speaker 1: um to what's going on in the market. Um the artificiality,
Speaker 1: the absence of natural price discovery created by obviously zero
Speaker 1: interest rate policy. It's become Paul and Tom so conspicuous
Speaker 1: that it can't be ignored by any investor that requires
Speaker 1: a margin of safety when they invest. All right, Doug,
Speaker 1: I appreciate a rowdy roddy piper reference as much as
Speaker 1: the next person. But I also note in your most
Speaker 1: recent note that you are not yet net short. What
Speaker 1: would get you to become net short? Yeah? I'm respectful
Speaker 1: of the market's momentum, which we all know is fueled,
Speaker 1: as I said, in large measure because of liquidity from
Speaker 1: physical monetary policy. I think it's important that we recognize
Speaker 1: that tops of processes. I think we're making an important
Speaker 1: top bottoms. By contrast, or more typically, events and the
Speaker 1: bull markets are typically born out of bad news. If
Speaker 1: you consider March two thousand nine, the generational low inequities
Speaker 1: which I described, or March um at both junches I
Speaker 1: got really bullish. It doesn't pay to be dogmatic, neither
Speaker 1: a per a bowl or permanent bear v I um
Speaker 1: and um uh. You know. In fact, if you remember
Speaker 1: our conversations on surveillance throughout, I called for rip your
Speaker 1: face rally and mother of all short squeezes, which we've had.
Speaker 1: But bear markets are born out of good news. If
Speaker 1: you consider early two thousand, fall of two thousand and seven,
Speaker 1: and maybe even June. It happens when demand for stocks
Speaker 1: is sated. It happens when you have a promotional CEO
Speaker 1: of a company like AMC, where there's tremendous misallocate allocation
Speaker 1: of capital UM and there's play money on steroids UM,
Speaker 1: and you have someone by contrast, Madrick but Modrick Capital
Speaker 1: who becomes the smartest man in the room and and
Speaker 1: plays Reddit and Wall Street bets and David fortnit um
Speaker 1: to a fairly well and makes thirty million as UM,
Speaker 1: an hourly trader, not a day trader. To reference your
Speaker 1: question about the you know whether we're all day traders now? Um.
Speaker 1: So when stocks are cheap, I buy them when they're
Speaker 1: expensively short. I'm starting up a hedge fund this week,
Speaker 1: Seabreez Capital Partners LP, to take advantage of what I
Speaker 1: think are uh in certain cases ludicrously valued prices classic
Speaker 1: short shore short. Most long short guys are long biased.
Speaker 1: I run a long short book with a short bias.
Speaker 1: What I do during my days is analyzed companies. I'm
Speaker 1: not looking at the forums and Reddit Wall Street bets.
Speaker 1: Hopefully I'm producing an intelligent judgment of value. You'll apply
Speaker 1: leverage I don't apply. I never use leverage. I tried
Speaker 1: to create excess returns alpha by superior stock selection. The
Speaker 1: bottom line is that I feel a lot of people
Speaker 1: today are ignoring the fact that the SMP has doubled
Speaker 1: since the March Lows. I think looking at the rear
Speaker 1: view mirror is not the fountain for delivering superior returns
Speaker 1: to meet. Buying here is like drinking contaminated water. So
Speaker 1: I'm not yet shut Paul. I've one step out the door,
Speaker 1: and I hope that my hedge fund launch is timely
Speaker 1: from the standpoint of setting up shorts. But as I
Speaker 1: look at the major and I'd be happy to go
Speaker 1: through most of them very quickly. As I look at
Speaker 1: most asset classes, most market sectors, and individual stocks, I'm
Speaker 1: pretty er sign is Doug is the catalyst for a
Speaker 1: market contraction in your mind, the FED stepping in here
Speaker 1: and tapering. If not start talking about raising rates, I'm
Speaker 1: different than everyone else. I listened to Laura earlier on
Speaker 1: Bloomberg TV, UM, I listened to your other guests were
Speaker 1: all smart. Um, I just think it happens. Let's look
Speaker 1: for example, of the disgorging and SPACs. There were three
Speaker 1: hundred SPACs. They raised a hundred and twenty billion dollars
Speaker 1: late two thousand twenty in early How fast was that
Speaker 1: graze over? It was over as fast as frasier as
Speaker 1: a Frasier hitting a walk off home run last night
Speaker 1: at the bottom of the eleven, or as or as
Speaker 1: John Sterling said, Tom, oh did we need that? Yeah? Okay,
Speaker 1: well just because broad so I see a broad of
Speaker 1: discorge from in the head, not only not only for
Speaker 1: a Tampa Bay, but for the market. Doug cass, I
Speaker 1: gotta switch gears here on the raging debate that we're
Speaker 1: having and everybody else's on the new baseball. I'm a
Speaker 1: huge fan, frankly of the new game. And I go
Speaker 1: back to a pitcher who was in the Baseball Hall
Speaker 1: of Fame by the time he was thirty six years
Speaker 1: old and pitched from a higher mount. Would Sandy Kofax
Speaker 1: complain about lower in the mound right now to make
Speaker 1: things work? Um, Sandy's giddy about his investment portfolio, and
Speaker 1: I don't think he would be concerned about the difference
Speaker 1: in the mound. Yeah, I mean I don't. I don't,
Speaker 1: I don't feel so. I mean you and I remember
Speaker 1: these guys were fearsome, They were up way, Hi, Bob Gibson, one,
Speaker 1: Marichelle and the rest of him, and they brought it
Speaker 1: in all the games. You know. That's why Sandy's games
Speaker 1: were two to one. Um. You know. The Yankees, by
Speaker 1: the way, getting back to baseball, uncharacteristically have s forward
Speaker 1: two or less runs and nine of the least thirteen games.
Speaker 1: The last time that happened was seventy one. Aaron Boone,
Speaker 1: the manager wasn't and I think Brian was four years old.
Speaker 1: I got time for one last question. It's a really
Speaker 1: really important question because you're living at Doug Cast. The
Speaker 1: rest of us are up here in the snow. You're
Speaker 1: living at large in Florida, our Tampa Bay, the San
Speaker 1: Diego Padres, l A Dodgers, and the San Francisco Giants
Speaker 1: doing so well because the players want to play in
Speaker 1: that perfect weather. No, no, it's it's you're a Red
Speaker 1: Sox fan. For God's sake. You know it's early in
Speaker 1: the season. Talk to me in August. Got that right,
Speaker 1: We'll leave it there, Go away, Doug Cast. Good luck
Speaker 1: with your new long short escapade here. That will be interesting.
Speaker 1: No leverage. That's really important for those of you that
Speaker 1: aren't sophisticates on this. That's a really important uh statement
Speaker 1: by Mr Cass. Yeah, I think he's just as strict
Speaker 1: long short. It sounds like a bottom's up, Doug Cass.
Speaker 1: I'm a stock selector, and that that's going to generate
Speaker 1: my alpha. I I can't remember the paper, but really
Speaker 1: Matthew really sophisticated twenty five years ago said if you
Speaker 1: go over two point three eight times leverage, bad things happened.
Speaker 1: That was where the math laid out in cast goes
Speaker 1: the other way with no leverage. Doesn't of baseball talk
Speaker 1: right now on inflation, which he does link into Washington
Speaker 1: Gregory Gregory Valier joins us with a g F Investments
Speaker 1: this morning note is a mustardyad and all of Washington
Speaker 1: it really can't say enough about it. I want to
Speaker 1: go back to whip inflation now, Greg Valier, and I
Speaker 1: don't know if we're gonna have a redo of that
Speaker 1: here with about him inflay Shan, But I was just
Speaker 1: inflation is treated differently by the GOP or by the Democrats.
Speaker 1: Discussed that well. First of all, I'm old enough time
Speaker 1: to remember the seventies when inflation did tremendous damage to
Speaker 1: Jimmy Carter's presidency, and I do think it's a real
Speaker 1: vulnerability for Joe Biden. You know, we all talk about
Speaker 1: the impact that the fed or the markets, but there's
Speaker 1: a big political impact. You see an extreme shortage of meat,
Speaker 1: you see gasoline prices higher, you see a really acute
Speaker 1: shortage of labor, and you see housing prices on fire.
Speaker 1: And I think a lot of consumers will look at
Speaker 1: this stuff intend to blame the incumbent president seventy one.
Speaker 1: Baron brand explain, you're the politics of a gallon of gas. Well,
Speaker 1: it's visceral. People see it, uh So clearly when they
Speaker 1: fill their tank, they see the price of meat. There's
Speaker 1: a story in the Washington Post this morning about a
Speaker 1: house in the DC suburbs that went for one million
Speaker 1: dollars above the asking price. So everywhere you look, you
Speaker 1: you see signs of it. And the Republicans, who have
Speaker 1: been desperate for issues that will give them traction may
Speaker 1: have an issue. Greg, what are the politics of higher wages? Well,
Speaker 1: that that is well, I think that when you see
Speaker 1: stories Lisa, like the Bank of America paying twenty five
Speaker 1: an hour, when you see stories about bidding wars by
Speaker 1: companies that people are saying, I've got to pay all
Speaker 1: these higher prices. I need higher wages, and I think
Speaker 1: that's the big issue for the FED. It's not corn
Speaker 1: or copper, it's wages. All right, Well, this really raises
Speaker 1: a question because inflation has been highly political, and the
Speaker 1: way that we normally talk about it is that Republicans
Speaker 1: have been raising the issue of inflation to push back
Speaker 1: on some of Biden's plans. But you're saying that the
Speaker 1: here and now of inflation that we're seeing commodity prices
Speaker 1: is already eroding confidence in some of the spending. Is
Speaker 1: that what you're saying or what you're hearing from the polls. Yes,
Speaker 1: I'm hearing Lisa that the Republicans who need issues. I mean,
Speaker 1: they can talk about urban cry I'm an immigration, but
Speaker 1: they need more issues. And I think if they can
Speaker 1: say the reason why we've got high prices everywhere you
Speaker 1: look is because of the Biden spending Binge, I'm not
Speaker 1: sure I believe that. By the way, I don't think
Speaker 1: Joe Biden is to blame for computer chips being in
Speaker 1: short supply, but the Republicans may try to link the
Speaker 1: two issues to Biden's detriment. Greg Ville. West Virginia is
Speaker 1: such an original and interesting state. Here we have two
Speaker 1: senators with uncommon power. Explain the power of the senator's
Speaker 1: was Virginia even as one meets with Biden today. Well,
Speaker 1: first of all, time, you start with the fact that
Speaker 1: it's among the most conservative states in the country. So
Speaker 1: Joe Manson, a modern Democrat, can't stray very far. Shelley
Speaker 1: more Caputo, who will be at the White House negotiating
Speaker 1: with the President, can't stray very much either. So I
Speaker 1: think ironically their state needs a lot of money for infrastructure,
Speaker 1: but I think they'd be reluctant to sign on to
Speaker 1: a plan that the Democrats support. That said, they're getting closer.
Speaker 1: Late last week the Republicans came close to one trillion.
Speaker 1: Biden's come down from two point to five trillion to
Speaker 1: one point seven. They're getting closer. I wouldn't be shocked
Speaker 1: to see a deal start to come into focusing. You and, yeah,
Speaker 1: you think they will defeat gridlock with this legislation. Yeah,
Speaker 1: it's not going to satisfy the progressive left. They're going
Speaker 1: to be very upset. And but what Biden has to
Speaker 1: do or say, look, I'll take this now, we'll come
Speaker 1: back for more. Maybe the next bill will use budget
Speaker 1: reconciliation and shove it through Congress. But I think Biden
Speaker 1: needs a win. I think it gives him momentum. I
Speaker 1: think a deal is doable, all right, He needs a win.
Speaker 1: Is he losing popularity among his own Democratic Party or
Speaker 1: is he actually gaining some cloud as he actually moves
Speaker 1: toward accomplishing something two points quickly number one his His
Speaker 1: overall numbers are pretty good, even with ras Mussin poll
Speaker 1: takers that are conservative. Biden's well into the fifties. Trump
Speaker 1: never got there. But among his own progressives there's a
Speaker 1: growing suspicion that he may opt out of a very
Speaker 1: aggressive deal and go for something a little more modest
Speaker 1: that worries the left. Greg I just want to wrap up,
Speaker 1: kind of taking a left turn here. We've been talking
Speaker 1: about the hacks coming out of Russia that have affected
Speaker 1: both meat processing and previously the colonial pipeline, and we've
Speaker 1: seen some pretty big kinks that have thrown into a
Speaker 1: supply chain. It's already strained as a result of these
Speaker 1: hacks and these uh, these malware events. I'm wondering what
Speaker 1: the US response you expect to be, whether it's against China,
Speaker 1: against Russia, or whether it's against just creating a better
Speaker 1: barrier on a national level. Well, i'd say lee. So,
Speaker 1: first of all, the meeting between Putin and Biden on
Speaker 1: June six is going to be pretty chilly. I don't
Speaker 1: expect any big breakthrough. I think Biden will threaten to retaliate.
Speaker 1: I think relations between the US and Russia could get
Speaker 1: worse before they get better. Greg gotta leave it there,
Speaker 1: I t F. Laura Raym joins US now with FF's investment.
Speaker 1: She is definitive on foreign exchanges and taking it over
Speaker 1: as chief US economist at FS Investor's. Laura, I love, love,
Speaker 1: love your research note where you say here's one of
Speaker 1: the fears. I want you to talk right now about
Speaker 1: the fear everybody has a quote unquote policy mistake. What
Speaker 1: can your own Powell get wrong? So unfortunately, I think
Speaker 1: that there's a lot that can go wrong at this stage.
Speaker 1: And you know, I feel like everybody always labels me
Speaker 1: as the pessimist, But what's the point in another person
Speaker 1: telling us the economy strong? Right? We got to look
Speaker 1: at what could possibly go wrong here and what has
Speaker 1: caused the end of every expansion that we've had. It's
Speaker 1: been either rates going up too fast or inter inter
Speaker 1: business cycle, we've had miscommunication that is sparked significant latility.
Speaker 1: So I think that's an area where the FED is
Speaker 1: trying to be much more regimented. But let's face it,
Speaker 1: they haven't really started the tough discussion, which is, how
Speaker 1: are they going to remove this policy accommodation and what
Speaker 1: it's going to mean at a time when the economy
Speaker 1: is already facing other constraints. If they have to move, Laura,
Speaker 1: do they move with a green Spaniard measured approach quarter
Speaker 1: point quarter point quarter point or do they got to
Speaker 1: go back to burns and make some real jumps or
Speaker 1: at least one jump condition to get back to something
Speaker 1: that's in the textbooks. You know, they're I think they're
Speaker 1: going to be extremely cautious. This is of course what
Speaker 1: they've said. And yet markets are forward looking, so you know,
Speaker 1: we've seen markets before get ahead of themselves as far
Speaker 1: as um. You know, concerns about speak, concerns about reaction
Speaker 1: to the inflation. The mini cycle of inflation that we're
Speaker 1: going to start seeing really evolved after we get this
Speaker 1: technical glitch out of the way of you know, year
Speaker 1: on year higher inflation. So what we really need to
Speaker 1: think about is um the fact that the FED has
Speaker 1: boxed themselves in with getting markets so addicted to this
Speaker 1: strong liquidity, and two is going to be a year
Speaker 1: of deceleration. Economy is gonna be strong, but it's gonna
Speaker 1: be growing slower. Earnings may well be solid that they're
Speaker 1: going to be growing slower. How's the FED gonna start
Speaker 1: removing quantitative easing in a place that's already uncomfortable for markets? Well,
Speaker 1: before we get into the reaction function, there's also a
Speaker 1: question law of where we are right now in the cycle,
Speaker 1: both the economic and the labor cycle. And people are
Speaker 1: talking about mid cycle, some people are saying late cycle,
Speaker 1: even Jim Bullard saying that perhaps the labor market is
Speaker 1: tighter than it seems. Where do you fall in this debate.
Speaker 1: I'm firmly in the mid cycle camp, and I would
Speaker 1: I would argue that what we're seeing in the labor
Speaker 1: market shows constraints that are deeply under are appreciated. Um
Speaker 1: when he says that they're tight, I recognize that, you know,
Speaker 1: we're dealing with this labor supply mismatch. People still can't.
Speaker 1: They're tight because people are having to pay more for workers.
Speaker 1: But the labor market is the most inefficient market that
Speaker 1: we have, maybe except for real estate. And the fact
Speaker 1: that we've had significant labor migration, the fact that we've
Speaker 1: had some industries requiring much less labor whereas others are
Speaker 1: requiring significantly more, the pivot that our economy has made
Speaker 1: towards goods production of manufacturing. A lot of these things
Speaker 1: are you can't just press a button and wake all
Speaker 1: these workers back up again, especially the you know, labor
Speaker 1: force participation having fallen. I think it's gonna be harder
Speaker 1: to resolve a lot of this than other people think.
Speaker 1: So what's your view that basically the Fed is doing
Speaker 1: the right thing and staying on hold, and that they
Speaker 1: ought to, and that inflation is not going to surprise
Speaker 1: to the upside the way that some people think. I
Speaker 1: think they're going to have a lot of trouble with
Speaker 1: the fact that I think the labor market gets much
Speaker 1: You're much harder to improve from here, and inflation is
Speaker 1: going to be uncomfortably high, and no matter what they say,
Speaker 1: it's going to continue to be a hot button issue
Speaker 1: for markets. It's going to continue to cause these sort
Speaker 1: of bouts of volatility, and the fet is going to
Speaker 1: really have trouble talking out of both sides of their
Speaker 1: mouth on this one. Lauren want to dovetail your economic
Speaker 1: work in ff IS investments with the lore of Laura
Speaker 1: ram in the foreign exchange market? How do you interpret
Speaker 1: dollar dynamics now around the next six months of the
Speaker 1: American economy? So so much strength has been priced in
Speaker 1: for growth. I actually think that this could be a
Speaker 1: place for the dollar weekends. Further from here, what are
Speaker 1: we going to do? You know, we see the fact
Speaker 1: that um our economy is going to modestly decelerate from
Speaker 1: such a strong level. So with so much good news
Speaker 1: already priced in, I think we're seeing real rates continue
Speaker 1: to slide. I think there's a strong argument to be
Speaker 1: made that the tenure actually falls a little bit from here.
Speaker 1: All of that against the backdrop of still positive news,
Speaker 1: possible upside surprises possible and the rest of the world.
Speaker 1: It's been amazing that ages had so much struggle to
Speaker 1: really reopen and get themselves fully back online. I think
Speaker 1: there's a lot of room for that to go better. Finally,
Speaker 1: we really need that um and further, you want to
Speaker 1: continue to appreciate as well. So I think all of
Speaker 1: those things speak to a dollar negative out of here.
Speaker 1: But again this goes back to classic demand pull cost
Speaker 1: push debate about inflation. I don't want to go all
Speaker 1: nineteen sixties on you, but if we have a pacific
Speaker 1: rim resurgence, that has to have help aggregate demand worldwide,
Speaker 1: and that's where the gloom fades away, right, Yes, of course,
Speaker 1: to some degree. But I think what we've seen in
Speaker 1: the US is that we can't sustain these strong growth
Speaker 1: rates for long. I mean, all this time, our trade
Speaker 1: of is it's incredibly wide. We've been sucking in goods
Speaker 1: from the rest of the world this whole time. I
Speaker 1: think what growth they've had has really been already significantly
Speaker 1: helped by the U. S consumer, which once again is
Speaker 1: kind of the the engine driving not just US growth,
Speaker 1: but global growth as well. So I think what we
Speaker 1: really I think the story of the NEST six months
Speaker 1: is a story of business investment. Of course, you know,
Speaker 1: I've heard your infrastructure conversation with the last guests, so interesting.
Speaker 1: I think how that plays out is going to be important.
Speaker 1: But I think as far as consumer goods go, We're
Speaker 1: gonna now pivot to a lot of business investment stories
Speaker 1: and for that, um, you know, I think it's more
Speaker 1: closing the gap of demands, of unfulfilled demands, than it
Speaker 1: is a fresh leg up. We're speaking with Laura ray
Speaker 1: M of FS Investments on this moment of a lack
Speaker 1: of conviction when it comes to the outlook, an idiosyncratic moment,
Speaker 1: unprecedented in economic history. And John was just talking about
Speaker 1: the word out of Caterpillar, the idea that they are
Speaker 1: seeing some easing in the supply of goods that they
Speaker 1: use to manufacture their objects. Meanwhile, you've got Elon Musk
Speaker 1: on the other side of things, tweeting this morning. Our
Speaker 1: biggest challenges supply chain, especially micro controller chips. Never seen
Speaker 1: anything like it. He indicated that this was obviously temporary.
Speaker 1: Do you agree or do you think that supply chain
Speaker 1: kinks will become a feature of the post pandemic economy.
Speaker 1: I think they'll resolve eventually. But the real I think
Speaker 1: question is if it will change behavior going forward. Will
Speaker 1: we start bringing some of this manufacturing back to the US.
Speaker 1: We've been running soaked in on inventories for decades we've
Speaker 1: been eroting those inventories. Will companies start stockpiling more? Obviously
Speaker 1: you know that would give us some near term boost
Speaker 1: in d KEY, but um, you know that would just
Speaker 1: sort of frontload that consumption, that business investment. So you
Speaker 1: know that's me is the real issue. Do we sort
Speaker 1: of change? Does it change long run behavior of how
Speaker 1: companies had their supply chains to be less vulnerable to
Speaker 1: this kind of disruption? I know I sure would. All
Speaker 1: Rank gotta run FS Investments Chief the US economist on
Speaker 1: the latest situation and the mismatch between DEMANDUS supply. This
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