WEBVTT - Surveillance: OECD's Growth Prediction 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.840 --> 0:00:23.560 To find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot 0:00:23.560 --> 0:00:30.840 Com and of course on the Bloomberg terminal of our prayer. 0:00:30.960 --> 0:00:34.159 Joins us now acting chief Economist at the O E 0:00:34.280 --> 0:00:37.520 c D intercourse with his Portuguese economics and i'd also 0:00:37.600 --> 0:00:40.960 point out of our your British Columbia cred which tells 0:00:41.000 --> 0:00:44.040 me that it's all econom metrics. How good are you 0:00:44.120 --> 0:00:48.320 now at O E c D of guessing the statistic? 0:00:48.600 --> 0:00:52.000 Is it? Do you have a lot of confidence and 0:00:52.080 --> 0:00:54.840 degrees of freedom and trying to guest estimate out to 0:00:54.880 --> 0:00:59.520 two thousands. It's a very very challenging environment, but we 0:00:59.600 --> 0:01:02.720 have very confident of out our forecasts. We we we've 0:01:02.720 --> 0:01:06.040 been as you said, we we warned about to slow down, 0:01:06.800 --> 0:01:09.399 and right now we're saying that listen, we are. We 0:01:09.440 --> 0:01:13.760 are facing the largest energy crisis since the nineteen seventies, 0:01:13.840 --> 0:01:16.560 and we have a dramatic picture that shows exactly that 0:01:17.160 --> 0:01:21.560 governments around the U cd are spending around of GDP 0:01:21.760 --> 0:01:24.600 just in energy, and this is as as much as 0:01:24.640 --> 0:01:26.720 we did in the seventies and eighties and so very 0:01:26.800 --> 0:01:30.440 challenging environment. So feel very comfortable about our forecast with 0:01:30.480 --> 0:01:34.600 your GDP growth slow down from whatever it wasn't two 0:01:34.600 --> 0:01:37.120 thousand twenty one down to three point whatever down to 0:01:37.160 --> 0:01:42.080 two point two how does China play into that vector? Well, 0:01:42.160 --> 0:01:44.800 for China, we are for remember this year was the 0:01:44.840 --> 0:01:47.520 lowest growth for China since the nineteen seventies, with the 0:01:47.520 --> 0:01:50.120 exception of the height of the pandemic. And we are 0:01:50.160 --> 0:01:53.520 forecasting China next year to rebound to about four point 0:01:53.600 --> 0:01:57.200 six percent, but going down to four to twenty four. 0:01:57.600 --> 0:02:00.720 But there's two risks that we think that can plague 0:02:00.720 --> 0:02:06.080 this central scenario. First of all, um it's fairly possible 0:02:06.480 --> 0:02:10.040 that if the street COVID lockdowns continue and they become 0:02:10.080 --> 0:02:13.560 more pervasive, then certainly growth is going to be a 0:02:13.600 --> 0:02:16.399 lot less than we are forecasting. And the second one 0:02:16.440 --> 0:02:19.840 has to do with real estate market. If the adjustment 0:02:19.840 --> 0:02:22.440 on the real estate market is less smooth than we 0:02:22.440 --> 0:02:25.120 would like it to be, it's very possible that also 0:02:25.200 --> 0:02:30.000 growth will be negatively affected in China. So we are 0:02:30.120 --> 0:02:33.440 seeing a bit of a rebounding in in China, but 0:02:33.720 --> 0:02:37.280 risks are certainly fairly high over there too. Although you 0:02:37.400 --> 0:02:40.079 pointed out that this is really an energy crisis, which 0:02:40.080 --> 0:02:42.160 isn't necessarily the way that everybody else would frame it. 0:02:42.200 --> 0:02:44.000 They would view it as a pandemic crisis. They would 0:02:44.040 --> 0:02:47.399 view it as a free money for decades kind of crisis, 0:02:47.520 --> 0:02:48.959 that's kind that have come to a head. They would 0:02:49.000 --> 0:02:52.560 view it as an inflation crisis. More broadly, why do 0:02:52.600 --> 0:02:56.560 you view it through the lens of energy primarily? Well, 0:02:56.560 --> 0:02:59.519 first of all, the energy crisis is a direct consequence 0:02:59.520 --> 0:03:02.680 of Russia's aggression on Ukraine, right and so, which has 0:03:02.760 --> 0:03:08.239 led to lower growth and more prices rising everywhere. We 0:03:08.360 --> 0:03:11.840 see that even before the war, prices was starting to 0:03:11.840 --> 0:03:15.119 go up, so you're absolutely right about that. But clearly 0:03:15.800 --> 0:03:20.160 inflation became a lot more pervasive, more entrenched, and also 0:03:20.480 --> 0:03:25.400 the pressures have intensified after the war. We have I 0:03:25.440 --> 0:03:29.160 think a very interesting estimation our forecast which is trying 0:03:29.200 --> 0:03:31.600 to see whether this is mostly because of a supply 0:03:31.680 --> 0:03:34.280 shock or it's mostly a demand shock. Well, if it 0:03:34.400 --> 0:03:37.320 started as a supply shock, right now in many countries 0:03:38.040 --> 0:03:40.240 of the U City you can see that it really 0:03:40.360 --> 0:03:42.640 right now, it doesn't matter, it's it's demand and supply. 0:03:42.920 --> 0:03:45.160 In fact, in centric some some countries, like the UK, 0:03:45.600 --> 0:03:48.880 demand factors are now having more an impact than the 0:03:48.920 --> 0:03:52.680 supply factors. So right now, what we're talking about very 0:03:52.760 --> 0:03:57.040 large inflation. Uh in many parts of the world. Montery 0:03:57.080 --> 0:04:00.600 policy has to continue to be the size has to 0:04:01.200 --> 0:04:04.000 do what montary policy has to do in order to 0:04:04.040 --> 0:04:06.240 get out of this situation. I think we're starting to 0:04:06.240 --> 0:04:08.320 see some positive signs in some parts of the world. 0:04:08.680 --> 0:04:10.720 So over all you say that you think that probably 0:04:10.800 --> 0:04:14.640 try to economy will recover next year, which might actually 0:04:14.680 --> 0:04:17.960 increase demand for certain goods, including energy. How will this 0:04:18.120 --> 0:04:21.599 factor into how much developed markets have to be hiking 0:04:21.680 --> 0:04:24.640 rates have to be countering that increase in demand, the 0:04:24.760 --> 0:04:29.719 increase momentum that we see heading over from the east. Well, 0:04:29.760 --> 0:04:33.600 what we highlight as well is that this inflation is 0:04:33.640 --> 0:04:36.440 having a tremendous impact on people's incomes. Right if you 0:04:36.520 --> 0:04:40.000 all across the world, we have a dramatic picture on 0:04:40.240 --> 0:04:42.800 real wages and all across the world, real ways that 0:04:42.880 --> 0:04:44.960 are going down. And that's why we focus so much 0:04:45.000 --> 0:04:46.760 that right now, if you want to ease the pain. 0:04:47.120 --> 0:04:49.839 If you want to pain to be as short as possible, 0:04:50.200 --> 0:04:53.240 it is absolutely essential that we continue to be determined 0:04:53.279 --> 0:04:56.560 in this fight against inflation. If the economy starts recovering 0:04:56.600 --> 0:04:59.000 as we expect in the second half of next year, 0:04:59.440 --> 0:05:04.760 then certainly this will will give a bit more pressures 0:05:04.760 --> 0:05:07.440 on prices. But I think as long as Monterrey policy 0:05:07.480 --> 0:05:10.960 is doing what it's doing and remain steady fast on 0:05:10.960 --> 0:05:14.279 on fighting inflation, we'll be able to have lower inflation 0:05:14.400 --> 0:05:18.400 going forward. Over when Bloomberg Surveillance visits you at Central 0:05:18.440 --> 0:05:23.280 Portugal for the ECB confab here next year, you're modeling 0:05:23.279 --> 0:05:28.320 out six percent global inflation. Every single central banker is 0:05:28.360 --> 0:05:32.040 going to say that's unacceptable. Do you perceive that as 0:05:32.080 --> 0:05:35.280 a stopping point or do you have a different statistic 0:05:35.520 --> 0:05:39.160 where we get to a vaunted tent tailor perfection? What 0:05:39.200 --> 0:05:42.680 do we do when we get inflation down to six 0:05:42.720 --> 0:05:46.080 point eight or dare I say five percent? I think 0:05:46.080 --> 0:05:48.200 what matters right now is when when we're going to 0:05:48.240 --> 0:05:52.360 have inflation picking and uh and coming down steadily, and 0:05:52.400 --> 0:05:55.000 so the trend is going to be very important. I'll 0:05:55.000 --> 0:05:59.039 give a good example Brazil. When they started there was 0:05:59.240 --> 0:06:02.840 one of The first kind is to face significant inflationary pressures, 0:06:03.160 --> 0:06:06.360 and there's central bank decided to hike interest rates very 0:06:06.400 --> 0:06:09.359 decisively for a few months, and now it's starting to 0:06:09.360 --> 0:06:11.360 pay off. I think the last reading we had also 0:06:11.480 --> 0:06:14.440 from the United States is positive, and so what we 0:06:14.520 --> 0:06:17.359 need to do around the world is exactly to assess 0:06:17.400 --> 0:06:20.920 the situation. Some countries have acted a lot more than others. 0:06:20.960 --> 0:06:22.400 But what matters right now is to get to a 0:06:22.440 --> 0:06:25.880 situation which inflation picks and starts to come down durably. 0:06:26.160 --> 0:06:28.400 It has to be durably, cannot be only one data point, 0:06:28.720 --> 0:06:31.080 and this is what we need to monitor. In our forecast, 0:06:31.200 --> 0:06:35.560 we forecast that basically inflation will start to pivot around 0:06:35.680 --> 0:06:38.240 a mid next year and we will continue to come down, 0:06:38.279 --> 0:06:41.000 even though it will remain fairly high in some countries 0:06:41.360 --> 0:06:42.880 at the end of twenty three. I don't want to 0:06:42.880 --> 0:06:44.280 get you in trouble, but I'm gonna get you in 0:06:44.360 --> 0:06:47.560 trouble with your academics and potically teaching at the University 0:06:47.560 --> 0:06:50.479 of British Columbia. How do you respond to a central 0:06:50.480 --> 0:06:54.320 banker gaining out a two year recession, as we got 0:06:54.360 --> 0:06:56.680 from the Governor of the Bank of England you have 0:06:56.720 --> 0:07:01.159 a confidence and establishing a real g d P view 0:07:01.360 --> 0:07:05.080 our twenty four months or dare I say thirty six months. Well, 0:07:05.120 --> 0:07:07.360 listen in all these forecasts, you know, and I know 0:07:07.480 --> 0:07:12.240 that all these forecasts, our best scenario, are our what 0:07:12.440 --> 0:07:15.720 we expect. Things will evolve, Things change. You know, nobody 0:07:15.760 --> 0:07:19.400 expected a pandemic three years ago. Nobody expected award, you know, 0:07:19.520 --> 0:07:22.760 just just just a few months ago. So things change. 0:07:23.280 --> 0:07:26.160 What I can tell is that our forecasts, given what 0:07:26.280 --> 0:07:29.360 we know today, what we see in the data, we 0:07:29.560 --> 0:07:33.720 fair we We are fairly confident about our central forecast 0:07:33.840 --> 0:07:36.600 right now. But risks, as as I said before, arising 0:07:37.120 --> 0:07:41.400 and so risks that think can go wrong are there. 0:07:41.440 --> 0:07:43.800 But right now our central scenario is not a recession. 0:07:44.160 --> 0:07:47.280 Sluggish growth, but not a recession. This has been wonderful. 0:07:47.320 --> 0:07:49.320 Don't prayer. Thank you so much for joining us of 0:07:49.360 --> 0:08:02.880 our prayer. At the O E c D. We migrate 0:08:02.920 --> 0:08:05.840 to something more stable, and that would be economics. Dana 0:08:05.840 --> 0:08:10.240 Peterson joins US of Wesleyan and University of Wisconsin Economics 0:08:10.240 --> 0:08:13.160 at Madison and thrilled that she could join us. This morning, 0:08:13.600 --> 0:08:15.640 O E c D came out with a big fancy 0:08:15.720 --> 0:08:19.200 report Dana, yours is more important. How have you tweaked 0:08:19.240 --> 0:08:23.160 your view for next year on real g d P. Well, 0:08:23.200 --> 0:08:25.200 we think that the economy is probably going to be 0:08:25.240 --> 0:08:28.200 flat next year, and that incorporates a couple of quarters 0:08:28.200 --> 0:08:31.520 of recession. Maybe the fourth quarter of this year is 0:08:31.560 --> 0:08:33.480 a little bit negative, but really most of the brunt 0:08:33.520 --> 0:08:36.080 we think will be in the first quarter of next 0:08:36.160 --> 0:08:38.520 year minus one and a half percent, and then second 0:08:38.600 --> 0:08:41.680 quarter and minus four tents and then kind of a 0:08:41.720 --> 0:08:44.480 moderate increase in the back half of next year, so 0:08:44.520 --> 0:08:47.720 all folding up into pretty much again flat growth for 0:08:47.760 --> 0:08:50.720 the economy. Well, how do you respond to what the 0:08:50.760 --> 0:08:53.599 conference board is seeing over the many decades of what 0:08:53.720 --> 0:08:57.720 inflation spikes up as a general rule, it's stochastic and 0:08:57.840 --> 0:09:00.760 comes down with quite a plunge with great a pidity. 0:09:00.880 --> 0:09:03.120 Do you buy that that we could see that? Well, 0:09:03.120 --> 0:09:05.440 when I look at the components of what's driving inflation 0:09:05.600 --> 0:09:08.440 right now, a lot of its rents, right and then 0:09:08.480 --> 0:09:12.800 the other aspects are services, um, non housing services. But 0:09:12.840 --> 0:09:14.920 when you look at rents, they're really sticky and they 0:09:14.960 --> 0:09:18.040 tend to reflect what has already happened in the housing market. 0:09:18.520 --> 0:09:20.760 And we know that rents are are difficult to come 0:09:20.760 --> 0:09:23.880 off because certainly, people being pushed out of the new 0:09:23.960 --> 0:09:26.120 and existing home sales market, they're going to go into 0:09:26.120 --> 0:09:29.120 the rental market. So that means that we're probably going 0:09:29.160 --> 0:09:31.520 to have a period of time where rents are still 0:09:31.520 --> 0:09:34.520 going to continue to push up inflation data. How much 0:09:34.559 --> 0:09:37.680 do you buy this idea of a shallow recession, Well, 0:09:37.720 --> 0:09:40.960 our own forecast suggests that, yes, the recession will be shallow, 0:09:41.360 --> 0:09:44.560 and indeed, along with that you might not have a 0:09:44.679 --> 0:09:47.000 really big hit to the labor market. And a lot 0:09:47.040 --> 0:09:49.800 of that's a function of labor shortages. So if you 0:09:49.880 --> 0:09:53.920 have companies hoarding workers and still also hiring people, especially 0:09:53.960 --> 0:09:56.960 in those in person services and other types of jobs 0:09:57.000 --> 0:09:59.080 where you physically have to be at work, that's going 0:09:59.120 --> 0:10:01.520 to support con omption. And so we may not have 0:10:01.600 --> 0:10:04.800 a really deep procession. But that sort of is a 0:10:04.840 --> 0:10:07.079 bit of a bed on the fact that things will 0:10:07.120 --> 0:10:10.320 deteriorate quickly enough for the FED to pause, for the 0:10:10.400 --> 0:10:13.240 lag effects to actually kick in and show us that 0:10:13.320 --> 0:10:15.880 there is some sort of active deceleration and inflation that 0:10:15.920 --> 0:10:18.640 gives the FED confidence, right, I mean, without that if 0:10:18.640 --> 0:10:21.480 there is momentum, how much does that really cast this 0:10:21.559 --> 0:10:24.040 idea of a shallow recession aside, Well, I think the 0:10:24.040 --> 0:10:27.840 FED is looking at the data right. So already the 0:10:27.840 --> 0:10:32.839 housing market tends to react very quickly to interest rate hikes, 0:10:32.840 --> 0:10:36.079 and we're also started to see consumers dial back their 0:10:36.120 --> 0:10:39.240 expectations for how many like durable goods they're going to purchase, 0:10:39.360 --> 0:10:42.360 especially things that need to be financed. So the FED 0:10:42.520 --> 0:10:46.120 is already seeing some of that evidence. But certainly there 0:10:46.160 --> 0:10:49.000 are lags, and it's not clear how long those lags are. 0:10:49.360 --> 0:10:51.440 But I would suggest that the Fed, you know, still 0:10:51.480 --> 0:10:54.199 has some way to go in terms of raising interest rates, 0:10:54.200 --> 0:10:56.319 but that those interest rate hikes are probably going to 0:10:56.400 --> 0:11:00.280 be smaller than what we've seen. Dana, I'm fascinating did 0:11:00.360 --> 0:11:03.040 And again this is the heritage of the Conference Board, 0:11:03.480 --> 0:11:08.200 which going back to seven has always aggregated our economics. 0:11:08.640 --> 0:11:12.360 Are we so polarized as a society of the halves 0:11:12.360 --> 0:11:17.040 and have nots that you can't aggregate your macro analysis 0:11:17.559 --> 0:11:21.240 as the Conference Board is done for decades. Well, I 0:11:21.240 --> 0:11:23.240 mean the good news is that even though we do 0:11:23.400 --> 0:11:27.120 have arrogance, we also look at individual income groups, especially 0:11:27.200 --> 0:11:30.600 with our consumer confidence. What do you see them? Well, 0:11:30.920 --> 0:11:33.640 the youngest and the oldest groups are you know, a 0:11:33.640 --> 0:11:35.880 little bit more disgruntled than the folks in the middle, 0:11:35.920 --> 0:11:38.880 and certainly um people who are at the lower end 0:11:38.920 --> 0:11:42.280 of the income spectrum are being hit harder by inflation, 0:11:42.840 --> 0:11:48.720 So we can look at those details there. I'm well, 0:11:48.960 --> 0:11:51.880 I'm actually wondering just how much this has to do 0:11:51.880 --> 0:11:54.600 with home ownership, right If the younger people are not 0:11:54.720 --> 0:11:58.280 able to get into homes and they're seeing their rents increase, 0:11:58.360 --> 0:12:01.120 and it's absolutely prohibitive to go and buy a home 0:12:01.200 --> 0:12:03.480 for the first time because interest rates, because mortgage rates 0:12:03.480 --> 0:12:06.520 are seven percent, how much is that the distinguishing feature 0:12:06.600 --> 0:12:09.319 right now between the halves and I have not Well, 0:12:09.400 --> 0:12:12.200 certainly is a distinguishing feature. But let's not forget during 0:12:12.200 --> 0:12:16.320 the pandemic, the biggest increase in homeownership was among the 0:12:16.400 --> 0:12:21.160 younger groups, right, Jen, Jen, Well, the millennials, right, because 0:12:21.200 --> 0:12:23.920 many of them, you know, have children. Now, they have 0:12:24.200 --> 0:12:27.080 been able to get jobs, and they've accumulated some savings, 0:12:27.080 --> 0:12:30.680 and certainly there were injections of cash for the fiscal stimulus, 0:12:30.720 --> 0:12:33.480 so that did help them at least during the pandemic. 0:12:33.800 --> 0:12:36.320 Those who were going got in there early to buy homes. 0:12:36.600 --> 0:12:40.520 The millennials have their kids playing investing in Doge off 0:12:40.559 --> 0:12:43.240 their couch. I mean, that's how bad it is. Dan, 0:12:43.360 --> 0:12:44.880 I want to go back to what we're gonna see 0:12:44.880 --> 0:12:48.440 here on the inflation guestimate for December before the FED meeting. 0:12:48.800 --> 0:12:51.160 Is that a mystery to you? Already have some confidence 0:12:51.160 --> 0:12:54.839 in the conference board pick for what inflation will be 0:12:54.840 --> 0:12:59.400 before December four. Well, we think that inflation is going 0:12:59.440 --> 0:13:02.000 to continue to ease. We probably reached a peak earlier 0:13:02.040 --> 0:13:04.840 this year. Um. We're seeing food and energy prices come 0:13:04.840 --> 0:13:07.120 off certainly in the last few months in terms of 0:13:07.160 --> 0:13:10.360 their contributions, and that's really important in terms of bringing 0:13:10.360 --> 0:13:13.800 down the aggregate level of inflation, and also things like 0:13:13.920 --> 0:13:16.800 utilities for for hope for people who know all the 0:13:16.840 --> 0:13:20.360 people who live in homes. Um. But certainly we're concerned 0:13:20.360 --> 0:13:24.160 about again the rents and services prices continuing to rise 0:13:24.160 --> 0:13:27.600 and place pressure on upward pressure on inflation. Dania Peterson, 0:13:27.720 --> 0:13:35.040 thank you so much with the conference board on Denmark, 0:13:35.600 --> 0:13:38.160 I believe playing it against nord Vic joins this, founder 0:13:38.160 --> 0:13:42.200 and CEO of Accenting Data. Come on, Yen's World stops Denwark, Denmark, 0:13:42.400 --> 0:13:44.880 Tunisia as well. What do you think Denmark is really 0:13:44.920 --> 0:13:48.720 percolating with a chance here to make some noise. Yeah, 0:13:48.720 --> 0:13:51.040 we'll hope they can do a little bit like England 0:13:51.040 --> 0:13:56.480 and yesterday. Okay, sours Furst comment there. Yeah, let's get 0:13:56.520 --> 0:13:58.320 to it with a dollar. What is the two thousand 0:13:58.360 --> 0:14:00.800 twenty three view here on the dollar? There's been big 0:14:00.840 --> 0:14:04.400 figures moves, uh this year? Can there be big figure 0:14:04.440 --> 0:14:10.280 moves next year? So this year has been essentially one 0:14:10.360 --> 0:14:12.720 of the strongest in the history of the dollar, right, 0:14:13.080 --> 0:14:15.640 massive run up against some of the biggest currencies in 0:14:15.640 --> 0:14:18.120 the world, Like I've seen the yen move and so forth, 0:14:18.200 --> 0:14:23.000 and then in the last couple of weeks we've seen, uh, 0:14:23.160 --> 0:14:28.040 a big reversal within that ball move. And like our 0:14:28.320 --> 0:14:32.640 opposition in indicators that we track at Exante Data have 0:14:32.640 --> 0:14:36.320 have had some of the most extreme signals. Right, real 0:14:36.360 --> 0:14:40.480 money investors were very very overweight dollars, all the trend 0:14:40.520 --> 0:14:45.840 following investors were really max long dollars, and we had 0:14:45.880 --> 0:14:50.800 this very violent washout. So now everybody kind of has 0:14:50.840 --> 0:14:54.960 to decide, Okay, is this really a big change in 0:14:55.040 --> 0:14:57.640 trend or is it just some kind of repositioning in 0:14:57.680 --> 0:15:01.240 the market. And the reposition was Steph only a big 0:15:01.320 --> 0:15:03.200 piece of what was going on, and we could already 0:15:03.240 --> 0:15:06.240 see as soon as the news from China, which was 0:15:06.280 --> 0:15:08.760 actually quite important to the turn in the dollar overall, 0:15:08.960 --> 0:15:12.160 as soon as that is less positive, the dollar kind 0:15:12.160 --> 0:15:13.880 of looks like it wants to go back to the 0:15:13.920 --> 0:15:18.000 appreciating trend. Right, So I think for me, the key 0:15:18.280 --> 0:15:21.240 is global growth. We can talk about the fete on 0:15:21.280 --> 0:15:23.760 the fet is important, but the most important verbal for 0:15:23.800 --> 0:15:25.920 the dollar is what's going on with global growth. And 0:15:26.000 --> 0:15:30.440 if we still have a problematic growth situation in China, 0:15:30.520 --> 0:15:33.120 if e doesn't recover, then it's hard for me to 0:15:33.160 --> 0:15:35.160 see that there's going to be a strategic turn in 0:15:35.200 --> 0:15:37.040 the dollar. We can have like wiggles, and we had 0:15:37.080 --> 0:15:39.280 a big wiggle now over the last couple of weeks, 0:15:39.680 --> 0:15:42.360 but a strategic turn requires that global growth is going 0:15:42.400 --> 0:15:45.880 to get better, and for me, that's too early to 0:15:45.960 --> 0:15:48.360 make that call. We can go into detail with that. Yes, 0:15:48.560 --> 0:15:50.880 you're talking about China, and that was sort of giving 0:15:50.920 --> 0:15:53.480 some fuel to this risk capitite, the idea that perhaps 0:15:53.480 --> 0:15:56.080 they were tiptoeing away from COVID zero. It seems like 0:15:56.080 --> 0:15:58.040 it's the opposite today, and yet the narrative and the 0:15:58.040 --> 0:16:00.520 market is not cooperating. You're not seeing the off move 0:16:00.600 --> 0:16:03.760 in equities, You're not seeing a strengthening dollar. What do 0:16:03.800 --> 0:16:05.720 you make of this the idea that a lot of 0:16:05.720 --> 0:16:08.400 the reasons behind the rally are turning on their head, 0:16:08.440 --> 0:16:12.120 but the market is not so. So the first thing 0:16:12.120 --> 0:16:16.240 I would say is that there's been optimism around China, right, 0:16:16.440 --> 0:16:19.880 and the optimism was based on the notion that there 0:16:19.960 --> 0:16:24.960 was going to be a move away from cyri COVID policy. 0:16:25.320 --> 0:16:28.440 And what we're seeing in China is that there might 0:16:28.520 --> 0:16:32.880 be a desire to somehow relax those policies that have 0:16:32.960 --> 0:16:36.160 had a disastrous impact on the economy. But is it 0:16:36.240 --> 0:16:40.520 really feasible? Right, We now have cases that are skyrocketing. 0:16:41.000 --> 0:16:43.600 We have a population that has been told that COVID 0:16:43.720 --> 0:16:46.240 was very scary and something that should be avoided at 0:16:46.240 --> 0:16:50.800 all costs. And this could go on for a long 0:16:50.840 --> 0:16:53.440 time in the sense that they only have around called 0:16:53.440 --> 0:16:57.520 the cases today, right, Like go back to when we 0:16:57.560 --> 0:16:59.680 had a peak in United States, which is a smaller 0:16:59.760 --> 0:17:02.920 coun tree population wise, where we had a million a day. Right, 0:17:02.960 --> 0:17:06.040 So this were in the early phase of an acceleration, 0:17:06.080 --> 0:17:07.840 and this could go on for a long time. And 0:17:08.320 --> 0:17:11.600 they are they're just gonna let it run. That's that's 0:17:11.760 --> 0:17:14.280 would be a pretty pretty strange way for them to 0:17:14.320 --> 0:17:16.720 go from one extreme to the other. So it's gonna 0:17:16.760 --> 0:17:20.480 be a gradual, messy process here. I think it's going 0:17:20.560 --> 0:17:22.199 to be hard for the market to cope with that, 0:17:22.720 --> 0:17:24.880 although that seems like they're coping with it right now. 0:17:25.000 --> 0:17:27.920 Heading into three, it seems like the consensus is you 0:17:28.000 --> 0:17:30.920 might see some more dollar strength and then it will 0:17:30.920 --> 0:17:33.760 turn into dollar weakness. You will see Europe start to outperform, 0:17:33.800 --> 0:17:36.080 you will see Asia start to outperform, you will see 0:17:36.080 --> 0:17:39.159 the US underperform. Where do you push back against the 0:17:39.160 --> 0:17:43.960 consensus right now? Yeah? Um it all it all comes 0:17:44.000 --> 0:17:47.960 down to the inflation and inflation expectations. Right. We saw 0:17:48.880 --> 0:17:53.080 after the CPI print, one CPI print that was better 0:17:53.119 --> 0:17:57.040 than the trend we have had, market rallied enormously. There 0:17:57.080 --> 0:17:59.760 was also after that that the dollar had one of 0:17:59.800 --> 0:18:03.960 the one of its biggest moves ever in a few days. Um, 0:18:04.000 --> 0:18:06.399 So it really comes down to inflation. Have we turned 0:18:06.400 --> 0:18:09.520 the corner? Well, we're gonna have stick services prices. We 0:18:09.760 --> 0:18:12.040 I think it's it's pretty clear that goods prices are 0:18:12.400 --> 0:18:15.720 sounds are normalize. But the market is also hoping that 0:18:15.720 --> 0:18:19.000 that services prices will also normalize. If that's not the case, 0:18:19.320 --> 0:18:21.119 it's going to be a big problem of risk ances, 0:18:21.200 --> 0:18:23.840 right because that's been priced now that the worst is 0:18:23.880 --> 0:18:26.359 over inflation. If that's not the case, we're gonna be 0:18:26.440 --> 0:18:29.760 back to having risk asses under pressure. Yes, thank you, 0:18:29.800 --> 0:18:32.359 go down. Markins Norg with us is a sounding day. 0:18:32.480 --> 0:18:34.000 I want him to point out again he want the 0:18:34.000 --> 0:18:38.159 beauty contest institutional investor three years in a row in 0:18:38.280 --> 0:18:40.640 foreign exchange. I can think I can say no one's 0:18:40.680 --> 0:18:55.120 ever done there. I may stand corrected on that. Here's 0:18:55.160 --> 0:18:59.119 what you need to know. Zeteco Pipeline was a phenomenal 0:18:59.200 --> 0:19:02.119 song by Aaron Novel years ago. Daniel Leno produced it 0:19:02.160 --> 0:19:04.880 down to New Orleans and it is a key, key 0:19:05.080 --> 0:19:09.639 oil pipeline along the Gulf of Mexico. It is the 0:19:09.800 --> 0:19:13.760 focus now of our next Stephen. Short is principle of 0:19:13.920 --> 0:19:18.760 narrowness and acuity on the hydrocarbon market. It's short, group Stephen, 0:19:18.800 --> 0:19:21.560 let me summarize for our audience. We're up to our 0:19:21.640 --> 0:19:25.119 eyeballs and petroleum and the price is gonna go down. 0:19:25.320 --> 0:19:28.160 Do I have that right? Well? In the near term, 0:19:28.480 --> 0:19:31.600 we certainly our risk to the downside. So we had 0:19:31.640 --> 0:19:34.119 the market that switched into contango. This is the no 0:19:34.280 --> 0:19:37.359 mix w t I crude oil market contango, meaning that 0:19:37.440 --> 0:19:40.240 the price this month is cheaper than the price next 0:19:40.320 --> 0:19:44.120 month that occurred on yesterday's expiration in the December contract. 0:19:44.440 --> 0:19:47.920 Why are we in contango, Well, simply because to your point, 0:19:47.960 --> 0:19:51.160 the Ydeico pipeline, which is a significant pipeline that takes 0:19:51.440 --> 0:19:53.920 oil from the shell patch in West Texas that's being 0:19:53.920 --> 0:19:57.120 produced and takes it to the export market in Houston. Well, 0:19:57.160 --> 0:20:00.280 there's maintenance now that's gonna last well into December on 0:20:00.320 --> 0:20:03.880 that pipeline. So your oil flows are lower, but you're 0:20:03.920 --> 0:20:06.400 still producing oil in West Texas. So if you can't 0:20:06.440 --> 0:20:08.680 move it into Houston, you have to put it somewhere. 0:20:08.920 --> 0:20:11.440 And it's very important as far as the NAMIX is concerned, 0:20:11.600 --> 0:20:13.920 because where that something is going to be is up 0:20:13.960 --> 0:20:17.119 at the NAMIX Terminal complex up in Christian, Oklahoma. So 0:20:17.160 --> 0:20:19.399 we're looking at a situation where we're gonna be building 0:20:19.440 --> 0:20:22.639 supplies at the NAMIX Terminal Complex in the next Week's 0:20:22.680 --> 0:20:25.639 a surprise to me. Stephen is an amateur. Is West 0:20:25.640 --> 0:20:29.440 Texas Intermediate breaches seventy dollars, we get a sixty nine 0:20:29.520 --> 0:20:34.879 print on American oil? Is that in your realm of possibility? 0:20:35.720 --> 0:20:39.119 Excuming yes, with regard to now, this was one of 0:20:39.119 --> 0:20:41.879 our more bearish cases, and this is really at the 0:20:41.920 --> 0:20:45.399 tail end of our modeling of where we could go. 0:20:45.680 --> 0:20:49.480 But certainly I do expect to see um oil find 0:20:49.520 --> 0:20:51.879 a base here, assuming we do not go into a 0:20:51.880 --> 0:20:54.560 significant recession. And we have to keep in mind, this 0:20:54.600 --> 0:20:57.760 is the Biden put right, This is the level seventy 0:20:57.760 --> 0:20:59.960 dollar oil and low seventies that the White has a said, 0:21:00.359 --> 0:21:02.560 this is the level we're going to start buying oil 0:21:02.640 --> 0:21:05.920 to refill the spr So if you're sitting there, why 0:21:05.960 --> 0:21:08.399 would you sell seventy dollar oil when the United States 0:21:08.400 --> 0:21:10.760 government's gonna come in and start buying two hundred million 0:21:10.760 --> 0:21:14.400 barrels at that price, so they're in effect without recession? 0:21:14.520 --> 0:21:16.680 Is your floor in the market, tome? So what about 0:21:16.680 --> 0:21:18.879 the ceiling? Right? Because we were talking about the type 0:21:18.920 --> 0:21:21.600 market about you know, two minutes ago, and we were 0:21:21.600 --> 0:21:23.720 talking about how oil prices are going to rise beyond 0:21:23.760 --> 0:21:27.280 a hundred and twenty barrel on certainly Brent and close 0:21:27.320 --> 0:21:31.359 to that on w T I what's changed so materially 0:21:31.480 --> 0:21:36.400 in the physical market to make that completely an obsolete argument. Yeah, 0:21:36.400 --> 0:21:40.440 well absolutely so the one hundred thirty, which is where 0:21:40.440 --> 0:21:42.600 we were in the first quarter of second quarter of 0:21:42.680 --> 0:21:46.200 last year, that's unattainable. That to say that we can 0:21:46.240 --> 0:21:48.600 get back up there, but we can't stay there because 0:21:48.600 --> 0:21:51.439 that's where we sell. The demand destruction so that is 0:21:51.880 --> 0:21:55.560 short of something catastrophic happing and supply in the market, 0:21:55.600 --> 0:21:58.800 that market cannot go up and beyond that. So what 0:21:58.920 --> 0:22:02.600 has changed now, of course, is the weekending economies around 0:22:02.600 --> 0:22:05.800 the globe. So it is a near term barished picture 0:22:05.880 --> 0:22:08.560 at this point. As we said, the Russians are front 0:22:08.640 --> 0:22:10.919 running the price caps, so they've dumped a lot of 0:22:10.920 --> 0:22:13.680 oil on in the market. There are fineries in Europe 0:22:14.040 --> 0:22:16.480 fearful of that price cap, have bought all that oil. 0:22:16.760 --> 0:22:20.159