1 00:00:00,320 --> 00:00:04,160 Speaker 1: Who you put your trust in matters. Investors have put 2 00:00:04,200 --> 00:00:07,600 Speaker 1: their trust in independent registered investment advisors to the tune 3 00:00:07,640 --> 00:00:12,240 Speaker 1: of four trillion dollars. Why learn more and find your 4 00:00:12,240 --> 00:00:27,480 Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:27,560 --> 00:00:31,600 Speaker 1: I'm Tom Keane. Always with Michael McKee. Daily we bring 6 00:00:31,640 --> 00:00:35,519 Speaker 1: you insight from the best in economics, finance, investment, and 7 00:00:35,640 --> 00:00:41,760 Speaker 1: international relations. Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, 8 00:00:41,840 --> 00:00:50,120 Speaker 1: and of course on the Bloomberg. Biggest moves in the 9 00:00:50,200 --> 00:00:56,360 Speaker 1: markets the oil markets today West Texas four by almost 10 00:00:56,360 --> 00:01:00,800 Speaker 1: two percent on the day. Brent crude at also an 11 00:01:00,800 --> 00:01:05,119 Speaker 1: almost two percent move on the day. What's causing that, Well, 12 00:01:05,120 --> 00:01:11,640 Speaker 1: the proximate cause the the forecast that a few that 13 00:01:11,959 --> 00:01:17,520 Speaker 1: stockpiles in the United States dropped significantly. We had the 14 00:01:17,520 --> 00:01:20,720 Speaker 1: the Petroleum Institute numbers out yesterday at ten thirty. This 15 00:01:20,760 --> 00:01:23,840 Speaker 1: morning we get the Department of Energy figures and we'll 16 00:01:23,840 --> 00:01:27,600 Speaker 1: see what they show. Uh. There was, of course a 17 00:01:27,720 --> 00:01:30,560 Speaker 1: turn in oil price is not long ago when OPEC 18 00:01:30,600 --> 00:01:32,520 Speaker 1: announced that it was going to try to put some 19 00:01:32,560 --> 00:01:35,840 Speaker 1: sort of production caps in. The interesting thing is after 20 00:01:36,240 --> 00:01:39,640 Speaker 1: prices went up, analysts piled into the market saying not 21 00:01:39,680 --> 00:01:44,760 Speaker 1: gonna happen. Uh. So let's get an experts view on this. 22 00:01:44,920 --> 00:01:48,840 Speaker 1: Jeff Curry is a head of Global Commodities Investment Research 23 00:01:49,800 --> 00:01:54,320 Speaker 1: that Goldban Sachs and he's with US now. Um, when 24 00:01:54,320 --> 00:01:58,120 Speaker 1: OPEC says it's going to lower production, however they do it, 25 00:01:58,200 --> 00:02:00,800 Speaker 1: whether it's a cap, whether it's a what ever. Uh 26 00:02:00,960 --> 00:02:05,440 Speaker 1: never works. Um, So why did prices turn around if 27 00:02:05,520 --> 00:02:09,760 Speaker 1: everybody knows that, Well, I'm gonna be careful here that 28 00:02:09,960 --> 00:02:14,119 Speaker 1: it never works. Well. When you look at demand shocks, um, 29 00:02:14,200 --> 00:02:17,240 Speaker 1: they typically work. But that's because when these producers have 30 00:02:17,360 --> 00:02:20,440 Speaker 1: nobody to get their barrels to they have to actually 31 00:02:20,440 --> 00:02:22,680 Speaker 1: shut in that they does work under that environment. And 32 00:02:22,680 --> 00:02:25,120 Speaker 1: typically every time you see one of these announcements, you 33 00:02:25,120 --> 00:02:27,480 Speaker 1: do see trading volatility to upside, which is what I 34 00:02:27,480 --> 00:02:30,160 Speaker 1: think we thought. But I think your point, when it's 35 00:02:30,240 --> 00:02:34,600 Speaker 1: a supply driven bear market, there's no evidence that these, um, 36 00:02:34,760 --> 00:02:38,520 Speaker 1: these Cartel announcements work. But I think the key here 37 00:02:38,840 --> 00:02:42,280 Speaker 1: we have yet to hear from Saudi Arabia. The outcome 38 00:02:42,320 --> 00:02:45,400 Speaker 1: of this and the success of it hinges on Saudi Arabia. Well, 39 00:02:45,400 --> 00:02:48,640 Speaker 1: Saudi Arabia is the swing producer in OPEC. They're the 40 00:02:48,639 --> 00:02:50,839 Speaker 1: ones with the excess capacity, They're the ones who can 41 00:02:50,960 --> 00:02:55,920 Speaker 1: cut back, but they're struggling financially right now. So do 42 00:02:55,960 --> 00:02:59,960 Speaker 1: they have any motivation to really do this? They definitely 43 00:03:00,040 --> 00:03:02,639 Speaker 1: they have a motivation to do it. But will they 44 00:03:02,680 --> 00:03:05,200 Speaker 1: be successful is the real question, And I think there's 45 00:03:05,200 --> 00:03:11,560 Speaker 1: several factors to consider. One is they excluded Nigeria, Libya 46 00:03:11,680 --> 00:03:14,720 Speaker 1: in Iran from the agreement, which means that there's a 47 00:03:14,720 --> 00:03:18,239 Speaker 1: possibility that these three producers could add another million barrels 48 00:03:18,280 --> 00:03:20,880 Speaker 1: per day of production over the course of the next year. 49 00:03:21,160 --> 00:03:23,359 Speaker 1: If they did that, then any type of production cut 50 00:03:23,400 --> 00:03:25,440 Speaker 1: would be negated by that group. So that's point one 51 00:03:25,600 --> 00:03:28,600 Speaker 1: point to shale response. You get prices into that fifty 52 00:03:29,520 --> 00:03:31,480 Speaker 1: barrel range, You're like to say, you just seeing it 53 00:03:31,600 --> 00:03:34,480 Speaker 1: five hundred thousand barrel per day increase in shale output, 54 00:03:34,520 --> 00:03:37,280 Speaker 1: which will negate it um The other factor, demand will 55 00:03:37,320 --> 00:03:40,240 Speaker 1: likely be weaker, and then there's brownfield production from places 56 00:03:40,280 --> 00:03:41,840 Speaker 1: like Canada and other parts of the world. So the 57 00:03:42,280 --> 00:03:44,960 Speaker 1: bottom line, this thing is likely to be self negating 58 00:03:45,360 --> 00:03:47,760 Speaker 1: towards the end of seventeen. But as I understand it, 59 00:03:48,680 --> 00:03:55,440 Speaker 1: the idea is cut back by seven thousand barrels a day, uh, 60 00:03:55,600 --> 00:03:58,320 Speaker 1: less than one percent of global production. So what kind 61 00:03:58,360 --> 00:04:00,840 Speaker 1: of impact it's supposed it worked. What kind of impact 62 00:04:00,880 --> 00:04:03,000 Speaker 1: could it have on price? And now that numbers a 63 00:04:03,040 --> 00:04:06,440 Speaker 1: million because they had a target of thirty two point 64 00:04:06,480 --> 00:04:10,640 Speaker 1: five million barrels a day UM last month's production numbers 65 00:04:10,640 --> 00:04:12,760 Speaker 1: where where you got that seven hundred and forty We 66 00:04:12,840 --> 00:04:16,440 Speaker 1: just got the new UM production numbers which which were 67 00:04:16,480 --> 00:04:19,960 Speaker 1: thirty three point five which balance update us. So it's 68 00:04:19,960 --> 00:04:21,960 Speaker 1: a million barrel per day cut now. But but if 69 00:04:21,960 --> 00:04:24,240 Speaker 1: we look at the impact that would likely have on 70 00:04:24,279 --> 00:04:27,400 Speaker 1: the market, there's several offsetting factors to think about. One, 71 00:04:27,560 --> 00:04:29,800 Speaker 1: you'll likely get a five hundred thousand barrel per day 72 00:04:29,880 --> 00:04:33,720 Speaker 1: increase in shale output too, you will likely weak in 73 00:04:33,800 --> 00:04:37,120 Speaker 1: demand by about two hundred thousand barrels a day UM, 74 00:04:37,279 --> 00:04:40,839 Speaker 1: and then three UM you would likely see a modest 75 00:04:41,240 --> 00:04:45,240 Speaker 1: improvement in m brown field deliveries. Let's say that's a million, 76 00:04:45,279 --> 00:04:47,479 Speaker 1: So you can come up with an eight hundred thousand 77 00:04:47,520 --> 00:04:50,200 Speaker 1: barrel per day offset like that, which only leaves the 78 00:04:50,480 --> 00:04:52,800 Speaker 1: impact of about two hundred thousand barrels per day, which 79 00:04:52,839 --> 00:04:56,320 Speaker 1: becomes relatively small. So only the people in New Jersey 80 00:04:56,360 --> 00:04:59,840 Speaker 1: are going to pay more for gas at least in 81 00:04:59,880 --> 00:05:02,160 Speaker 1: the very near term. That even then he's going to 82 00:05:02,279 --> 00:05:07,720 Speaker 1: come up. Yes, well yeah, the text overlay alone will 83 00:05:07,800 --> 00:05:10,720 Speaker 1: kill you. Bloomberg Surveyings, Good morning, folks, Bloomberg's I'm a 84 00:05:10,720 --> 00:05:13,159 Speaker 1: little out of it, Mike. I was up watching the 85 00:05:13,200 --> 00:05:16,280 Speaker 1: Oriels Derby. You made a better choice than I did, 86 00:05:16,279 --> 00:05:20,400 Speaker 1: although the game went longer than the debate. So um, 87 00:05:20,560 --> 00:05:24,440 Speaker 1: but much more exciting. Jeff Curry um with Goldman, sax 88 00:05:24,600 --> 00:05:28,359 Speaker 1: with us. How Cartelly is the cartel right now? I 89 00:05:28,360 --> 00:05:31,240 Speaker 1: don't know how Cartelly the cartel has been over the 90 00:05:31,279 --> 00:05:34,039 Speaker 1: course of the last fifteen twenty year agreed, But is it? 91 00:05:34,160 --> 00:05:36,080 Speaker 1: Is it a new cartel now? Is it singing old, 92 00:05:36,080 --> 00:05:39,440 Speaker 1: same old? You know? One of the more fascinating aspects 93 00:05:39,440 --> 00:05:42,200 Speaker 1: of this announcement that came out last week is that 94 00:05:42,279 --> 00:05:46,080 Speaker 1: there was no reference to price, and typically a cartel 95 00:05:46,839 --> 00:05:52,120 Speaker 1: targets a price level, and instead they talked about inventory overhang. 96 00:05:52,160 --> 00:05:55,080 Speaker 1: So does even have the words of old? Do you 97 00:05:55,080 --> 00:05:58,279 Speaker 1: go back? The last time they actually cut production in 98 00:05:58,320 --> 00:06:00,840 Speaker 1: the wake of the financial crisis two thousand and eight, 99 00:06:00,839 --> 00:06:03,280 Speaker 1: they had a target of seventy eight dollars barrel. Now 100 00:06:03,320 --> 00:06:07,160 Speaker 1: most people argue that there's an implicit target of fifty 101 00:06:07,200 --> 00:06:09,479 Speaker 1: to sixty, but it's interesting they haven't come out to 102 00:06:09,480 --> 00:06:12,560 Speaker 1: do it. I think that the key issue is that, 103 00:06:12,720 --> 00:06:16,960 Speaker 1: and they understand this, running a cartel in the current environment, 104 00:06:17,360 --> 00:06:21,800 Speaker 1: given the advent of shale, is extremely difficult. A Matthew 105 00:06:21,880 --> 00:06:27,760 Speaker 1: question then, elasticity or responses of the money floating around 106 00:06:27,800 --> 00:06:31,960 Speaker 1: the world on oil. I'm assuming the elasticities were different 107 00:06:31,960 --> 00:06:35,560 Speaker 1: than a hundred dollar barrel than they are in this range. Now, 108 00:06:36,080 --> 00:06:39,080 Speaker 1: is it a more supple oil market, a more accurate 109 00:06:39,200 --> 00:06:42,200 Speaker 1: moment to moment oil market, or is it stuck in 110 00:06:42,240 --> 00:06:45,600 Speaker 1: a sludge if you will, within this range. Well, I 111 00:06:46,360 --> 00:06:49,400 Speaker 1: think that the key differences when we think about that 112 00:06:49,520 --> 00:06:51,599 Speaker 1: period that we were in a hundred dollars a barrel 113 00:06:52,320 --> 00:06:55,160 Speaker 1: is that the world was really short supply, and so 114 00:06:55,320 --> 00:06:58,800 Speaker 1: prices had to go high enough to get the Americans 115 00:06:58,800 --> 00:07:01,359 Speaker 1: to let go of the oil they were consuming, so 116 00:07:01,400 --> 00:07:03,320 Speaker 1: the Chinese consume it, and that's how we got up 117 00:07:03,360 --> 00:07:06,000 Speaker 1: to those levels. In the current environment, there's more than 118 00:07:06,160 --> 00:07:09,080 Speaker 1: enough supply for everybody to consume almost as much as 119 00:07:09,080 --> 00:07:12,920 Speaker 1: they want, which is why we're now in this relatively 120 00:07:13,040 --> 00:07:16,480 Speaker 1: lackluster trading range at prices close to what we call 121 00:07:16,600 --> 00:07:20,280 Speaker 1: equilibrium value. So what that points to is a relatively 122 00:07:20,800 --> 00:07:23,400 Speaker 1: boring low ball market compared to what we saw over 123 00:07:23,440 --> 00:07:26,560 Speaker 1: the previous decade. So UM, I don't know if I 124 00:07:26,600 --> 00:07:29,480 Speaker 1: got an exact answer from you, but right now we're 125 00:07:29,560 --> 00:07:34,440 Speaker 1: right around fifty bucks for both UM benchmarks. Where do 126 00:07:34,480 --> 00:07:36,960 Speaker 1: you think we go from here? And how long? You know, 127 00:07:37,000 --> 00:07:38,480 Speaker 1: how high does it go and how long does it 128 00:07:38,520 --> 00:07:42,040 Speaker 1: hold that well our expectations and I think you know, 129 00:07:42,080 --> 00:07:44,520 Speaker 1: given the the implications of the storm going on the 130 00:07:44,560 --> 00:07:46,960 Speaker 1: Gulf right now, the impact that's having on imports means 131 00:07:46,960 --> 00:07:48,679 Speaker 1: that you can trade up on me above this fifty 132 00:07:48,680 --> 00:07:51,920 Speaker 1: dollar barrel range. We look at our forecast for next 133 00:07:52,000 --> 00:07:55,120 Speaker 1: year's roughly on average fifty dollars a barrel UM. We 134 00:07:55,520 --> 00:07:58,400 Speaker 1: initially had the market going from forty five to fifty 135 00:07:58,440 --> 00:08:03,000 Speaker 1: next year. Given the OPEC announcement, we would reverse that. 136 00:08:03,040 --> 00:08:05,080 Speaker 1: We would have it going from fifty five down to 137 00:08:05,200 --> 00:08:08,160 Speaker 1: forty five because any impact of a production cut is 138 00:08:08,160 --> 00:08:11,800 Speaker 1: going to be near term, and UH put upward pressure 139 00:08:11,960 --> 00:08:13,960 Speaker 1: on near term prices, but it starts to have a 140 00:08:14,000 --> 00:08:16,360 Speaker 1: negative effect as you move towards the end of next year. 141 00:08:16,720 --> 00:08:19,840 Speaker 1: Jeffrey Curry from Golden Sacks on oil, and maybe we'll 142 00:08:19,920 --> 00:08:22,880 Speaker 1: touch on a couple of other commodities Tom, including Red 143 00:08:22,880 --> 00:08:26,440 Speaker 1: Sox tickets. Oh, that would be a good commodity. I'm 144 00:08:26,480 --> 00:08:29,560 Speaker 1: sorry to see the Baltimore Orioles. Good morning to everyone 145 00:08:29,560 --> 00:08:32,880 Speaker 1: in Toronto getting ready for the maple leafs and enjoying 146 00:08:32,880 --> 00:08:34,800 Speaker 1: the blue jays. But I'm sorry, I'm sorry to see 147 00:08:34,840 --> 00:08:39,160 Speaker 1: the orioles about out go mats. That's what we're looking 148 00:08:39,160 --> 00:08:42,400 Speaker 1: at here in New York. Where's Jeffrey Curry of Goldman 149 00:08:42,440 --> 00:08:46,320 Speaker 1: Sacks and update on oil. Jeffrey frame for me the 150 00:08:46,360 --> 00:08:49,320 Speaker 1: Golden Sex belief between what we see in a set 151 00:08:49,360 --> 00:08:54,400 Speaker 1: of interviews of range bound to higher prices with a 152 00:08:54,559 --> 00:08:57,679 Speaker 1: terminal value that can vary from fifty five to seventy 153 00:08:57,679 --> 00:09:00,679 Speaker 1: five dollars a barrel, and am I already viewed that 154 00:09:00,720 --> 00:09:03,800 Speaker 1: says this is a house of microeconomic cards and if 155 00:09:03,840 --> 00:09:07,760 Speaker 1: anything will break the range and give an exogenous supply shocks, 156 00:09:07,760 --> 00:09:11,400 Speaker 1: we could even go with a lower price. Where do 157 00:09:11,440 --> 00:09:15,040 Speaker 1: you fit into that mix? We would be in the 158 00:09:15,120 --> 00:09:19,840 Speaker 1: camp of more range bound currently um with risk to 159 00:09:19,920 --> 00:09:23,360 Speaker 1: the downside because our long term terminal value is fifty 160 00:09:23,360 --> 00:09:26,400 Speaker 1: dollars als so we're sitting on those numbers, but essentially 161 00:09:26,520 --> 00:09:29,559 Speaker 1: right now, um, so we would argue would be more 162 00:09:29,600 --> 00:09:31,680 Speaker 1: skewed to the downside in terms. That's right where I 163 00:09:31,679 --> 00:09:34,319 Speaker 1: wanted to go fifty dollars of barrel. I'm gonna call 164 00:09:34,400 --> 00:09:39,200 Speaker 1: his bordering outlier terminal value versus the rest of the 165 00:09:39,240 --> 00:09:43,000 Speaker 1: world when they wake up and figure out Golden Sex 166 00:09:43,160 --> 00:09:46,720 Speaker 1: is right, what will be the shock to oil companies, 167 00:09:47,320 --> 00:09:51,280 Speaker 1: sovereign wealth funds and others when they migrate down five 168 00:09:51,360 --> 00:09:55,240 Speaker 1: dollars on their terminal value or ten dollars. Well, I 169 00:09:55,640 --> 00:09:58,160 Speaker 1: think a lot of what's driving this is a is 170 00:09:58,200 --> 00:10:01,600 Speaker 1: a downward shifting in the under lying cost structure, and 171 00:10:01,640 --> 00:10:03,760 Speaker 1: that's being driven a lot about what's going on in 172 00:10:03,800 --> 00:10:06,400 Speaker 1: the underlying macro as you said, are to see a 173 00:10:06,440 --> 00:10:09,040 Speaker 1: stronger dollar puts downward pressure on the constructure. So I 174 00:10:09,080 --> 00:10:12,960 Speaker 1: want to be cautious here about the catastrophic nature of 175 00:10:13,120 --> 00:10:15,760 Speaker 1: every evaluation here. In fact, I thinct I was up 176 00:10:15,800 --> 00:10:18,679 Speaker 1: in Canada speaking with some really high cost players when 177 00:10:18,720 --> 00:10:21,120 Speaker 1: they looked at the evaluation of projects at a hundred 178 00:10:21,120 --> 00:10:24,640 Speaker 1: dollars a barrel back in two thousand, twelve and thirteen. 179 00:10:25,040 --> 00:10:27,000 Speaker 1: The economics of a lot of those projects are the 180 00:10:27,040 --> 00:10:30,680 Speaker 1: same today because the macro changes um in this underlying environment. 181 00:10:30,720 --> 00:10:33,360 Speaker 1: So we start thinking about those longer term terminal values. 182 00:10:33,720 --> 00:10:35,599 Speaker 1: You really have to put it in the context of 183 00:10:35,640 --> 00:10:38,959 Speaker 1: the cost structure and the overall macro. So yes, it's 184 00:10:39,160 --> 00:10:40,760 Speaker 1: they do need to revalue that. I think one of 185 00:10:40,760 --> 00:10:43,520 Speaker 1: the key reasons why they're hesitant to do it is 186 00:10:43,600 --> 00:10:48,440 Speaker 1: that asset values provide them collateral for leverage to access 187 00:10:48,480 --> 00:10:51,040 Speaker 1: to debt markets, and if they lose that, they lose 188 00:10:51,080 --> 00:10:57,160 Speaker 1: that access. Mike XN oil down hundred fifty XN down 189 00:10:57,320 --> 00:11:02,640 Speaker 1: six from the top of the majors. Though the vertical 190 00:11:02,840 --> 00:11:06,120 Speaker 1: ones with more vertically integrating they're in better shape than 191 00:11:06,559 --> 00:11:10,560 Speaker 1: the independent producers because they go midstream and you know, 192 00:11:10,960 --> 00:11:15,840 Speaker 1: different places to get some revenue. Yeah, I absolutely agree 193 00:11:15,880 --> 00:11:17,880 Speaker 1: with that. And we like to say we're taking the 194 00:11:18,000 --> 00:11:21,040 Speaker 1: E out of E n P, meaning we're not doing 195 00:11:21,080 --> 00:11:24,000 Speaker 1: exploration anymore. We're focused on production. And what do the 196 00:11:24,000 --> 00:11:27,880 Speaker 1: integrated oils do they do P very well. What do 197 00:11:27,960 --> 00:11:30,520 Speaker 1: the independent oil and gas guys do they do E 198 00:11:30,880 --> 00:11:33,760 Speaker 1: very well. Now there are some exceptional cases, you know, 199 00:11:33,840 --> 00:11:36,760 Speaker 1: the Permian shall players in the US, But when you 200 00:11:36,760 --> 00:11:39,719 Speaker 1: start to look at the smaller independence and E m 201 00:11:39,760 --> 00:11:43,640 Speaker 1: P companies more broadly and globally. Um, the outlook there 202 00:11:43,760 --> 00:11:47,040 Speaker 1: is going to be have have significant headwins. If I 203 00:11:47,080 --> 00:11:49,000 Speaker 1: may think like a trader for a moment, which means 204 00:11:49,040 --> 00:11:53,400 Speaker 1: I'm gonna have a time horizon about three minutes, UM, 205 00:11:53,600 --> 00:11:58,760 Speaker 1: we're getting the production numbers, and the U A EI 206 00:11:58,880 --> 00:12:03,280 Speaker 1: numbers went down. Uh, the API nembers went down. Uh 207 00:12:03,720 --> 00:12:06,360 Speaker 1: where did that oil go? I mean what we've seen 208 00:12:06,400 --> 00:12:10,360 Speaker 1: some declines in stockpiles. Why are we seeing that now? Well, 209 00:12:10,440 --> 00:12:13,480 Speaker 1: for one, UM, your imports have been down over the 210 00:12:13,480 --> 00:12:15,160 Speaker 1: course of the last sever months because you have had 211 00:12:15,160 --> 00:12:16,960 Speaker 1: a lot of storms in the Gulf and so the 212 00:12:17,000 --> 00:12:20,120 Speaker 1: ships are unable to come in and actually deliver that oil. 213 00:12:20,200 --> 00:12:22,760 Speaker 1: So that's more of a temporary issue than it is 214 00:12:22,840 --> 00:12:25,960 Speaker 1: one that I think is fundamental and lasting and likely 215 00:12:26,040 --> 00:12:27,640 Speaker 1: resolve itself. So you look at a lot of the 216 00:12:27,720 --> 00:12:30,439 Speaker 1: rally we've seen in prices over the course of the 217 00:12:30,520 --> 00:12:32,959 Speaker 1: last week and a half, it's one trying to price 218 00:12:33,000 --> 00:12:36,440 Speaker 1: in that OPEC news and to pricing in the lack 219 00:12:36,480 --> 00:12:39,800 Speaker 1: of imports in the US and the decline in those stockpiles. UM. 220 00:12:39,920 --> 00:12:44,640 Speaker 1: So you look beyond that, these longer term fundamental drivers 221 00:12:44,679 --> 00:12:47,360 Speaker 1: become more important. I think the real issue is will 222 00:12:47,440 --> 00:12:50,400 Speaker 1: we see a real supply cut out of opec um 223 00:12:50,440 --> 00:12:52,720 Speaker 1: And the jury is still out on that. When you 224 00:12:52,760 --> 00:12:57,720 Speaker 1: say fifty dollars for what time period? In terms of 225 00:12:57,760 --> 00:13:01,800 Speaker 1: looking at our our forecasts for next year, um, we 226 00:13:01,880 --> 00:13:04,719 Speaker 1: have a fifty two dollar and fifty average price. When 227 00:13:04,720 --> 00:13:06,840 Speaker 1: we think about actually right now it's I think it's fifty. 228 00:13:07,320 --> 00:13:11,079 Speaker 1: When we look at the longer term value it's also fifty. 229 00:13:11,120 --> 00:13:15,320 Speaker 1: So we really don't have a significant view here relative 230 00:13:15,360 --> 00:13:17,719 Speaker 1: to where current prices are and the forward curves it's 231 00:13:17,720 --> 00:13:20,520 Speaker 1: a little bit of so we'd be slightly negative. Um. 232 00:13:20,559 --> 00:13:23,800 Speaker 1: And just to clarify, this is for Brent or w 233 00:13:23,880 --> 00:13:27,520 Speaker 1: t w t w okay. So there you have it, 234 00:13:29,679 --> 00:13:33,360 Speaker 1: Jeffrey Curry, thank you so much, particularly getting us ready 235 00:13:33,360 --> 00:13:35,320 Speaker 1: for the colise and in the summer. If you didn't 236 00:13:35,320 --> 00:13:37,880 Speaker 1: hear it folks earlier with Mr Kurr, the idea of 237 00:13:37,880 --> 00:13:41,000 Speaker 1: a commodity bottom and a lift you commodity to help 238 00:13:41,080 --> 00:13:44,520 Speaker 1: those eye in inf nations looking for a better commodity world, 239 00:13:44,800 --> 00:14:00,719 Speaker 1: maybe not so much. What did you guys do for 240 00:14:00,880 --> 00:14:04,560 Speaker 1: your science project? Mike and Tom I did the same 241 00:14:04,559 --> 00:14:06,360 Speaker 1: thing you did, you know, you dropped the mentos and 242 00:14:06,400 --> 00:14:09,880 Speaker 1: the coke bo I's out the bocado right right, because 243 00:14:09,920 --> 00:14:11,880 Speaker 1: it was more fun to make a mask that you know. 244 00:14:13,080 --> 00:14:16,240 Speaker 1: I guess you can't mark it that Tom probably did. 245 00:14:16,360 --> 00:14:19,000 Speaker 1: You guys are not old enough to know what a 246 00:14:19,120 --> 00:14:23,800 Speaker 1: Gilbert Kem set is. And what did you make with that? 247 00:14:24,280 --> 00:14:29,760 Speaker 1: You took logwood and you mixed it with something approaching 248 00:14:29,800 --> 00:14:33,600 Speaker 1: an acid and your mother would come racing down the 249 00:14:33,640 --> 00:14:40,120 Speaker 1: basement stairs. What does that smell? Gilbert Kem said, was 250 00:14:40,760 --> 00:14:43,440 Speaker 1: how you did this? Jeffrey Dennis probably doesn't know what 251 00:14:43,440 --> 00:14:47,240 Speaker 1: that Gilbert Kem said as he's with ubs looking at internationally, 252 00:14:47,280 --> 00:14:51,280 Speaker 1: and I was, jeff did you do chemistry? Oh? Allion 253 00:14:51,720 --> 00:14:54,640 Speaker 1: a million years ago? And I've forgotten all about exactly. 254 00:14:55,000 --> 00:14:56,680 Speaker 1: You know. That's where I am on it as well, 255 00:14:57,200 --> 00:15:00,760 Speaker 1: Jeffrey Dennis. We have important meetings in Washington. The International 256 00:15:00,800 --> 00:15:03,960 Speaker 1: Monetary Fund is always there is a back story. What 257 00:15:04,080 --> 00:15:07,800 Speaker 1: is your back story for the next few days? Um? 258 00:15:07,840 --> 00:15:10,080 Speaker 1: I mean, I think in my world and in emerging 259 00:15:10,600 --> 00:15:14,040 Speaker 1: what would be interesting to come out of Washington would 260 00:15:14,120 --> 00:15:16,800 Speaker 1: be to what extent we see any initiatives that could 261 00:15:16,840 --> 00:15:20,520 Speaker 1: be taken to improve the growth story in the global economy. 262 00:15:20,560 --> 00:15:23,120 Speaker 1: I mean, although emerging markets have had a really really 263 00:15:23,120 --> 00:15:26,440 Speaker 1: great year of course so far bigger for the develop markets. 264 00:15:26,800 --> 00:15:29,800 Speaker 1: We're still doing against the background of a very weak 265 00:15:29,880 --> 00:15:33,120 Speaker 1: growth a person you should call it sluggish growth about 266 00:15:33,120 --> 00:15:35,360 Speaker 1: four pus in them, around one and a half to 267 00:15:35,360 --> 00:15:37,960 Speaker 1: two percent in d M. And the extent we're seeing 268 00:15:37,960 --> 00:15:40,760 Speaker 1: equity is doing better, it's because of things like the 269 00:15:40,760 --> 00:15:43,440 Speaker 1: week of dollar, the rheumatic commology, prises, et cetera. So 270 00:15:44,000 --> 00:15:45,800 Speaker 1: we'd like to know if there's any top line growth 271 00:15:45,880 --> 00:15:48,120 Speaker 1: coming through an acceleration. So that's what I want to 272 00:15:48,120 --> 00:15:51,320 Speaker 1: see from from the events in Washington, d C. But 273 00:15:51,480 --> 00:15:55,080 Speaker 1: you never do. I mean, the world never gets together 274 00:15:55,360 --> 00:16:00,200 Speaker 1: and agrees on this stuff. So so what's NB No. 275 00:16:00,320 --> 00:16:02,360 Speaker 1: I mean, I think to be fair. Plan B is 276 00:16:02,440 --> 00:16:04,600 Speaker 1: what we've been focusing on in our research, lady, and 277 00:16:04,640 --> 00:16:08,160 Speaker 1: that is to try to identify stock opportunities in a 278 00:16:08,560 --> 00:16:11,160 Speaker 1: in what we're calling a slow growth world. Because I 279 00:16:11,200 --> 00:16:12,920 Speaker 1: couldn't agree with you more that I don't think we're 280 00:16:12,920 --> 00:16:15,000 Speaker 1: gonna get anything out of this, but we're looking for, 281 00:16:15,440 --> 00:16:17,760 Speaker 1: you know, the obvious level initiative that could help would 282 00:16:17,800 --> 00:16:19,920 Speaker 1: be some sort of sense of you need some fiscal 283 00:16:19,960 --> 00:16:22,640 Speaker 1: expansion generally, but I'm sure that doesn't get decided this weekend. 284 00:16:22,720 --> 00:16:25,720 Speaker 1: But a humor and a slow growth environment. Still we're 285 00:16:25,800 --> 00:16:29,040 Speaker 1: focusing is still on possibility in terms of the heart 286 00:16:29,080 --> 00:16:31,680 Speaker 1: free yield given upond sorts of very low in the 287 00:16:31,720 --> 00:16:33,880 Speaker 1: developed world, and where there's yield opportunities in the M. 288 00:16:33,960 --> 00:16:37,320 Speaker 1: And also we're trying to find identify areas where you're 289 00:16:37,320 --> 00:16:40,800 Speaker 1: seeing improvements in profitability in the over and above just 290 00:16:40,880 --> 00:16:43,160 Speaker 1: simply an acceleration of the revenue line, but that's not 291 00:16:43,240 --> 00:16:45,400 Speaker 1: going to come through, and so we're looking for companies 292 00:16:45,400 --> 00:16:47,480 Speaker 1: that are controlling their costs better than are cutting back 293 00:16:47,480 --> 00:16:49,600 Speaker 1: on their capex. So I think there are things to 294 00:16:49,680 --> 00:16:52,200 Speaker 1: do any M, but we'd love to see some more growth, 295 00:16:52,280 --> 00:16:54,000 Speaker 1: and as you say, I'm not sure we get that 296 00:16:54,040 --> 00:16:59,680 Speaker 1: out of Washington this weekend. If if any particular country 297 00:17:00,360 --> 00:17:05,080 Speaker 1: is UH is likely to add to the growth scenario, 298 00:17:05,240 --> 00:17:07,239 Speaker 1: would it be the United States? Do you think at 299 00:17:07,280 --> 00:17:10,200 Speaker 1: this point I would have thought so. I think in 300 00:17:10,240 --> 00:17:13,200 Speaker 1: the events of whoever wins this election, this possibility of 301 00:17:13,280 --> 00:17:15,520 Speaker 1: some fist expansion. I think it's fair to say in 302 00:17:15,600 --> 00:17:17,879 Speaker 1: Europe there's a bit less fits tightening than the wards 303 00:17:17,960 --> 00:17:20,960 Speaker 1: and think that was the obvious two and the extentual leverage. 304 00:17:20,960 --> 00:17:22,680 Speaker 1: So that is an emerging market. It will be helpful, 305 00:17:22,720 --> 00:17:24,520 Speaker 1: but frankly, I don't think this is a big story. 306 00:17:24,600 --> 00:17:26,560 Speaker 1: I just like to see some positive views on that front, 307 00:17:26,600 --> 00:17:28,680 Speaker 1: but I'm not sure we're not start going to get it. 308 00:17:28,840 --> 00:17:32,000 Speaker 1: Jeff Dennis brings it in buried in his research report 309 00:17:32,240 --> 00:17:35,600 Speaker 1: is a screaming cry to own Turkey. Jeff Dennis down 310 00:17:36,680 --> 00:17:40,320 Speaker 1: from the peak of two thousand thirteen, UBS is overweight 311 00:17:40,400 --> 00:17:44,480 Speaker 1: Turkey state your case, Yeah, I mean it's UM. It's 312 00:17:44,520 --> 00:17:47,040 Speaker 1: a market that has did very well earlier in the 313 00:17:47,119 --> 00:17:49,159 Speaker 1: year with a favorable of the quiddit conditions that it 314 00:17:49,400 --> 00:17:52,080 Speaker 1: touris badly, not least because of the politics. Of course, 315 00:17:52,480 --> 00:17:55,160 Speaker 1: it's very cheap trade at eight times for it. It's 316 00:17:55,280 --> 00:17:57,919 Speaker 1: UM the cheapest market in the m apart from Russia. 317 00:17:58,440 --> 00:18:02,080 Speaker 1: UM it's a company typically are quite resilient to UM, 318 00:18:02,560 --> 00:18:07,360 Speaker 1: you know macro developments, and they're very generally relatively profitable. UM. 319 00:18:07,880 --> 00:18:10,000 Speaker 1: You've got a bit of a pick up an earnings momentum, 320 00:18:10,080 --> 00:18:13,280 Speaker 1: and you still have a relatively benign global backdrop. We 321 00:18:13,359 --> 00:18:15,240 Speaker 1: think the FED moves rates into some of the shore 322 00:18:15,600 --> 00:18:17,560 Speaker 1: but it's not like the global backdrops are back to 323 00:18:17,640 --> 00:18:22,160 Speaker 1: cheerate dramatically. Liquidity will still be there. So cheap market underperforming. 324 00:18:22,320 --> 00:18:24,720 Speaker 1: Like the story and the deception is if you look 325 00:18:24,760 --> 00:18:28,480 Speaker 1: at it. In the Turkish lira, it's rich elevated, but 326 00:18:28,640 --> 00:18:32,879 Speaker 1: in US dollars it's cheap, cheap, cheap. Do you do 327 00:18:33,000 --> 00:18:37,360 Speaker 1: you your ownership? I mean you could do. We don't 328 00:18:37,400 --> 00:18:41,080 Speaker 1: tend to advise clients about that, the secular strategy, but 329 00:18:41,280 --> 00:18:44,280 Speaker 1: you could do. Having said all of that, we don't 330 00:18:44,320 --> 00:18:47,440 Speaker 1: see the much downside of the Turkish lira over the 331 00:18:47,560 --> 00:18:52,639 Speaker 1: next several months, compared to say, other em currencies that 332 00:18:52,720 --> 00:18:55,159 Speaker 1: we didn't look more overboard, like South African ran So 333 00:18:55,160 --> 00:18:57,520 Speaker 1: there's always currency risk in a place like Turkey, but 334 00:18:57,920 --> 00:19:00,400 Speaker 1: actually we see less rids there than we do elsewhere, 335 00:19:00,440 --> 00:19:05,399 Speaker 1: and so I'm not sure hedging is necessarily you know, 336 00:19:06,000 --> 00:19:09,040 Speaker 1: it has to be necessary at this point. Is there 337 00:19:09,040 --> 00:19:14,240 Speaker 1: a geopolitical risk priced into that market? Well, I think certainly. 338 00:19:14,320 --> 00:19:17,639 Speaker 1: One of the reasons evaluations are low is because of geopolitics. 339 00:19:17,720 --> 00:19:20,399 Speaker 1: I mean, clearly, it's such a terrible situation in the 340 00:19:20,440 --> 00:19:23,000 Speaker 1: Middle East, and you of course got the event in 341 00:19:23,080 --> 00:19:26,200 Speaker 1: scient Turkey itself. But I think you have to say, 342 00:19:26,600 --> 00:19:28,960 Speaker 1: we know about all of that. Could it get any worse? 343 00:19:29,080 --> 00:19:32,159 Speaker 1: Of course it could. It did domestically in Turkey in 344 00:19:32,240 --> 00:19:35,359 Speaker 1: the middle of July, but we doubt it gets much 345 00:19:35,400 --> 00:19:37,760 Speaker 1: worse from here. And we think that it's fairly well 346 00:19:37,880 --> 00:19:41,160 Speaker 1: priced into the market and investors like to look for bargains, 347 00:19:41,200 --> 00:19:43,240 Speaker 1: and this is a cheap This is a cheap market 348 00:19:43,359 --> 00:19:45,919 Speaker 1: in an after class. Frankly, that's got a little bit 349 00:19:46,000 --> 00:19:50,439 Speaker 1: on the rich side overall, and one standard deviation. Michael, 350 00:19:50,800 --> 00:19:53,160 Speaker 1: it's been a little bit cheaper, as Mr Dennis states, 351 00:19:53,240 --> 00:19:56,159 Speaker 1: But you go back to two thousand nine, then you 352 00:19:56,280 --> 00:19:59,400 Speaker 1: go back to two thousand three, and you can even 353 00:19:59,520 --> 00:20:07,040 Speaker 1: wander a is evaluation. Now there's a lot of fancy 354 00:20:07,119 --> 00:20:12,280 Speaker 1: math there, but that and of course Turkey's positions improved 355 00:20:12,359 --> 00:20:15,520 Speaker 1: dramatically in terms of the performance of its economy, whatever 356 00:20:15,560 --> 00:20:17,560 Speaker 1: you might want to say about the politics, has improved 357 00:20:17,640 --> 00:20:19,760 Speaker 1: dramatically in the last ten years. And I think you 358 00:20:19,840 --> 00:20:23,120 Speaker 1: know of your warrants is slightly multiple and the logical 359 00:20:23,200 --> 00:20:25,119 Speaker 1: a very good reason why it sold off because of 360 00:20:25,160 --> 00:20:28,159 Speaker 1: the domestic events, but it should be out performing in 361 00:20:28,200 --> 00:20:30,200 Speaker 1: this sort of global environment we've got this year, and 362 00:20:30,240 --> 00:20:32,080 Speaker 1: said we're looking for some of that caps we've made 363 00:20:32,160 --> 00:20:36,400 Speaker 1: up over the next several months. What is your view 364 00:20:36,760 --> 00:20:39,480 Speaker 1: on China, which um, you know is on the border 365 00:20:39,560 --> 00:20:43,720 Speaker 1: of emerging markets, but has such an impact on other 366 00:20:44,359 --> 00:20:48,240 Speaker 1: UH emerging markets around the world. It's a big question. 367 00:20:48,320 --> 00:20:51,920 Speaker 1: Of course. We think in China the slowdown continues. We 368 00:20:52,040 --> 00:20:54,840 Speaker 1: don't expect it to end up in an economic collapse 369 00:20:54,920 --> 00:20:57,280 Speaker 1: or hard landing if you like. The slowdown will continue. 370 00:20:57,720 --> 00:20:59,840 Speaker 1: The short term bance you getting in the property sector 371 00:21:00,000 --> 00:21:03,480 Speaker 1: we think will be relatively limited, will will eventually actually, 372 00:21:03,480 --> 00:21:07,600 Speaker 1: say Peter Art in terms of timing, So the slowdown continues. UM. 373 00:21:08,000 --> 00:21:10,760 Speaker 1: I do think the amount of death that's been put 374 00:21:10,840 --> 00:21:13,080 Speaker 1: on board by the Chinese and could create a problem 375 00:21:13,160 --> 00:21:15,680 Speaker 1: for the economy and the markets down the road. UM. 376 00:21:16,000 --> 00:21:18,960 Speaker 1: But as I say, I think the ceases here is 377 00:21:19,040 --> 00:21:23,359 Speaker 1: more of a general slowdown UM over the next several quarters. UM. 378 00:21:23,880 --> 00:21:27,919 Speaker 1: The currency is not going to have a hard major evaluation. 379 00:21:28,040 --> 00:21:30,960 Speaker 1: I think that risk is also subsided, so into there 380 00:21:31,080 --> 00:21:33,560 Speaker 1: it's not going to stimulate commodity of mind. Frankly, the 381 00:21:33,600 --> 00:21:36,320 Speaker 1: slowdown is going to continue, but we down look for 382 00:21:36,480 --> 00:21:39,000 Speaker 1: hard landing scenario. We think that's too negative. It's been 383 00:21:39,040 --> 00:21:41,480 Speaker 1: a real themed this week because the idea of what 384 00:21:41,600 --> 00:21:44,240 Speaker 1: to do with commanders Jeff denis how does the US 385 00:21:44,280 --> 00:21:47,400 Speaker 1: dollar fold into all this? You follow so many countries 386 00:21:47,480 --> 00:21:50,920 Speaker 1: just in one hungry. You go from hungry to Indonesia, 387 00:21:51,280 --> 00:21:54,200 Speaker 1: which becomes a blur for people, and they filter that 388 00:21:54,320 --> 00:21:58,879 Speaker 1: through dollar dynamics. Correct. Correct. Our view is that the 389 00:21:58,920 --> 00:22:02,760 Speaker 1: dollars peaked together to develop MYRC currencies generally, so there's 390 00:22:02,760 --> 00:22:05,080 Speaker 1: gonna be some variability of performance when we don't see 391 00:22:05,080 --> 00:22:07,320 Speaker 1: a lot of appreciation about any preachers and a tool 392 00:22:07,320 --> 00:22:10,440 Speaker 1: of the jump against the euro um with think Sterling 393 00:22:10,480 --> 00:22:12,560 Speaker 1: has probably done this thing for the time being against 394 00:22:12,640 --> 00:22:14,639 Speaker 1: the dollar for this year, so we don't see a 395 00:22:14,680 --> 00:22:17,960 Speaker 1: lot of dollar strength from here, and what that means 396 00:22:18,080 --> 00:22:20,200 Speaker 1: is therefore you're not going to get a generalized move 397 00:22:20,320 --> 00:22:23,400 Speaker 1: down of imagering my currencies against the dollar in our view. 398 00:22:23,480 --> 00:22:25,920 Speaker 1: But there are some currencies that have got overboard this 399 00:22:26,040 --> 00:22:29,359 Speaker 1: year on this huge surge into em this huge carry traits, 400 00:22:29,640 --> 00:22:31,840 Speaker 1: and the obvious ones would be to a certainly so 401 00:22:32,040 --> 00:22:34,879 Speaker 1: Brazil certainly in the South African round, not so much 402 00:22:34,920 --> 00:22:37,480 Speaker 1: of the Jurkish era. And then depending of course on 403 00:22:37,560 --> 00:22:40,000 Speaker 1: how the election itself plays out, in the US, arguably 404 00:22:40,040 --> 00:22:43,360 Speaker 1: the Mexican pacer as well. So we see selective weakness 405 00:22:43,440 --> 00:22:46,359 Speaker 1: of EM currencies against the dollar on across the board weakness. 406 00:22:46,440 --> 00:22:48,280 Speaker 1: The reason for that is we just don't see the 407 00:22:48,320 --> 00:22:50,520 Speaker 1: dollar going up that much higher the next several months 408 00:22:50,560 --> 00:22:54,480 Speaker 1: against EM currencies generally. Well, that that was kind of 409 00:22:54,520 --> 00:22:59,560 Speaker 1: where I wanted to go in term currencies, which ones 410 00:22:59,760 --> 00:23:02,440 Speaker 1: were are most likely to move in? Why is it? 411 00:23:03,480 --> 00:23:07,159 Speaker 1: It's not just is it the idea of what they 412 00:23:07,280 --> 00:23:10,840 Speaker 1: owe in dollar terms or is it something else? No, 413 00:23:10,960 --> 00:23:13,200 Speaker 1: I think it's more it's it's obviously in terms of 414 00:23:13,280 --> 00:23:15,800 Speaker 1: brothers competitiveness, if you had a very big blue fire. 415 00:23:15,840 --> 00:23:18,960 Speaker 1: I think it's a domestic fundamentals in terms of we 416 00:23:19,160 --> 00:23:21,600 Speaker 1: just to the economy, pressure on the fistical side, pressure 417 00:23:21,640 --> 00:23:23,879 Speaker 1: on the current account side as well, and then in 418 00:23:23,960 --> 00:23:26,440 Speaker 1: the in the case of South Africa, obviously the risk 419 00:23:26,520 --> 00:23:29,840 Speaker 1: at some point does they're downgraded by the ratings agencies, 420 00:23:29,880 --> 00:23:31,800 Speaker 1: which is some of the markets are concerned about. So 421 00:23:31,840 --> 00:23:34,399 Speaker 1: I think it's a center which she currently degree got 422 00:23:34,520 --> 00:23:38,480 Speaker 1: overbought from a pure carry trade liquidity point of view, 423 00:23:38,600 --> 00:23:41,920 Speaker 1: and you fold into that domestic fundamentals such as you know, 424 00:23:42,040 --> 00:23:44,960 Speaker 1: the fismal situation as opposed to worrying about what debt 425 00:23:45,080 --> 00:23:48,240 Speaker 1: levels are. Debt levels generally in the foreign currency debt 426 00:23:48,280 --> 00:23:50,119 Speaker 1: levels a lot lower than there used to be several 427 00:23:50,240 --> 00:23:52,399 Speaker 1: years ago. I think that's the big driver. I think 428 00:23:52,400 --> 00:23:55,400 Speaker 1: it's more domestic fundamentals and frankly, have they simply become 429 00:23:55,520 --> 00:23:58,600 Speaker 1: other value. Jeff Jonnas, thank you so much, greatly appreciated 430 00:23:58,640 --> 00:24:01,280 Speaker 1: with the u B s UM and their global Emerging 431 00:24:01,320 --> 00:24:05,520 Speaker 1: Emerging Markets equity strategy, UH team, all of this folding 432 00:24:05,600 --> 00:24:08,280 Speaker 1: into I love the idea there of Turkey flat on 433 00:24:08,440 --> 00:24:12,080 Speaker 1: his back on a financial spaces you hear Mr Dennis, 434 00:24:12,720 --> 00:24:16,679 Speaker 1: you know, remove himself from what seemed to be brutal politics. 435 00:24:17,200 --> 00:24:19,240 Speaker 1: And Mike, do you have an idea what the backstory 436 00:24:19,320 --> 00:24:21,600 Speaker 1: will be in the hallways? The I m F. It's 437 00:24:21,640 --> 00:24:26,159 Speaker 1: always something totally different than the agenda, isn't it. Uh? 438 00:24:26,359 --> 00:24:30,399 Speaker 1: This year probably you know, fiscal policy and whether or 439 00:24:30,440 --> 00:24:33,800 Speaker 1: not anybody's going to do it, and how things are changing. 440 00:24:33,840 --> 00:24:36,920 Speaker 1: But obviously people are going to be very focused on 441 00:24:37,040 --> 00:24:41,000 Speaker 1: Brexit and what that means for the world. So you 442 00:24:41,080 --> 00:24:44,040 Speaker 1: know there's sort of two themes. Uh. Well, you know, 443 00:24:44,680 --> 00:24:50,040 Speaker 1: put this way, the overarching theme maybe uh, populism around 444 00:24:50,080 --> 00:24:53,120 Speaker 1: the world, because that folds into Brexit, it folds into 445 00:24:53,160 --> 00:24:57,199 Speaker 1: the race here in the US, and certainly UH in Europe, 446 00:24:58,080 --> 00:25:02,440 Speaker 1: the presidential races for next year in Germany and France, Austria, 447 00:25:02,600 --> 00:25:06,000 Speaker 1: all of them dealing with this issue. So globalization, in 448 00:25:06,040 --> 00:25:10,840 Speaker 1: the end of globalization or the threatened end of globalization. UH, 449 00:25:11,080 --> 00:25:18,440 Speaker 1: that's probably what you'll pick up without doubting. Who you 450 00:25:18,560 --> 00:25:22,399 Speaker 1: put your trust in matters. Investors have put their trust 451 00:25:22,520 --> 00:25:25,800 Speaker 1: in independent registered investment advisors to the tune of four 452 00:25:25,960 --> 00:25:30,399 Speaker 1: trillion dollars. Why they see their role is to serve, 453 00:25:30,920 --> 00:25:34,119 Speaker 1: not sell. That's why Charles Schwab is committed to the 454 00:25:34,200 --> 00:25:38,840 Speaker 1: success of over seven thousand independent financial advisors who passionately 455 00:25:38,920 --> 00:25:43,280 Speaker 1: dedicate themselves to helping people achieve their financial goals. Learn 456 00:25:43,359 --> 00:25:53,359 Speaker 1: more and find your independent advisor dot com. Well, the 457 00:25:53,440 --> 00:25:56,000 Speaker 1: I m F is gathering the next couple of days 458 00:25:56,080 --> 00:25:59,240 Speaker 1: down in Washington to take stock of the global economy. 459 00:25:59,320 --> 00:26:02,159 Speaker 1: And there are those who suggest the global economy not 460 00:26:02,320 --> 00:26:05,280 Speaker 1: doing as well as it could be doing, even in 461 00:26:05,440 --> 00:26:10,080 Speaker 1: this world of recovery from the Great Recession. Alan Greenspan 462 00:26:10,160 --> 00:26:12,359 Speaker 1: has been watching the global economy and the U. S 463 00:26:12,400 --> 00:26:17,000 Speaker 1: economy for many, many years as a member of the 464 00:26:17,160 --> 00:26:21,080 Speaker 1: US government in various capacities, ending up as the Chairman 465 00:26:21,160 --> 00:26:23,240 Speaker 1: of the Federal Reserve, and we welcome him to the 466 00:26:23,320 --> 00:26:26,000 Speaker 1: program this morning. Good morning to you, was Chairman uh 467 00:26:26,840 --> 00:26:31,639 Speaker 1: the I want to start with a headline posed in 468 00:26:31,680 --> 00:26:34,920 Speaker 1: a Bloomberg story previewing the I m F meeting, and 469 00:26:35,000 --> 00:26:38,439 Speaker 1: that is that the world and the policymakers who are 470 00:26:38,520 --> 00:26:42,119 Speaker 1: gathering in Washington face something of an existential crisis because 471 00:26:42,680 --> 00:26:46,680 Speaker 1: for decades we have believed that globalization was a good thing, 472 00:26:46,800 --> 00:26:50,040 Speaker 1: that unfettered free trade was a good thing, that the 473 00:26:50,320 --> 00:26:54,320 Speaker 1: global economy was better off. And now there seems to 474 00:26:54,400 --> 00:26:57,920 Speaker 1: be a growing feeling, if not a consensus yet, but 475 00:26:58,080 --> 00:27:01,680 Speaker 1: certainly a large number of people who feel that maybe 476 00:27:01,800 --> 00:27:05,520 Speaker 1: that is no longer the case. Well, they're One thing 477 00:27:05,640 --> 00:27:09,119 Speaker 1: that's very obvious is that after a number of years 478 00:27:10,080 --> 00:27:14,920 Speaker 1: of trade exports or imports as a present of g 479 00:27:15,080 --> 00:27:20,359 Speaker 1: d P H we've seen those data grow fairly dramatically 480 00:27:20,560 --> 00:27:25,960 Speaker 1: year after year, meaning trade increased relative to the GDP. 481 00:27:26,760 --> 00:27:29,480 Speaker 1: The last couple of years, that has not been the case. 482 00:27:29,680 --> 00:27:35,600 Speaker 1: It's slowing down. And obviously it's a different environment that 483 00:27:35,800 --> 00:27:40,440 Speaker 1: we live in today. But The arguments for globalization go 484 00:27:40,720 --> 00:27:46,600 Speaker 1: back hundreds of years, and the evidence unequivocally indicates that 485 00:27:46,760 --> 00:27:51,480 Speaker 1: it is a very major advance in world economic conditions. 486 00:27:51,560 --> 00:27:55,920 Speaker 1: If you have globalization, and the question only is who 487 00:27:56,200 --> 00:28:00,320 Speaker 1: is most benefited by that, there is an over roll 488 00:28:00,520 --> 00:28:05,240 Speaker 1: net plus. But in the process you're losing some of 489 00:28:05,359 --> 00:28:09,280 Speaker 1: the people who aren't in indeed losers as a consequence 490 00:28:09,359 --> 00:28:13,040 Speaker 1: of trade, and that's become a major political issue. Well, 491 00:28:13,480 --> 00:28:17,480 Speaker 1: why do you think that is now, given that there 492 00:28:17,520 --> 00:28:20,800 Speaker 1: are always losers. We used to make a lot of 493 00:28:20,840 --> 00:28:24,440 Speaker 1: shoes in this country. We haven't for years. Uh, textile 494 00:28:24,840 --> 00:28:28,520 Speaker 1: factories moved away decades ago. Why does it come up now. 495 00:28:29,640 --> 00:28:34,000 Speaker 1: It's come up now largely because of something else, namely 496 00:28:34,240 --> 00:28:39,160 Speaker 1: that there is global stagnation. If you look across the spectrum, 497 00:28:39,320 --> 00:28:44,440 Speaker 1: especially in the developed world, output products at his productivity 498 00:28:45,280 --> 00:28:49,360 Speaker 1: has slowed to a halt, and rising standards of living, 499 00:28:49,440 --> 00:28:52,400 Speaker 1: which is so general in the post World War two period, 500 00:28:53,200 --> 00:28:57,400 Speaker 1: have largely been put on the shelves. We in the 501 00:28:57,480 --> 00:29:01,880 Speaker 1: United States are barely growing, and no one else is. 502 00:29:02,680 --> 00:29:06,000 Speaker 1: But very rare acceptions is there's just very few countries 503 00:29:06,040 --> 00:29:10,960 Speaker 1: in the world which they're growing, above China being one. 504 00:29:11,080 --> 00:29:18,040 Speaker 1: Obviously the Philippines surprising everybody, but it's basically the stat 505 00:29:18,120 --> 00:29:23,120 Speaker 1: nation that is causing the disillusionment. Well, we've had this 506 00:29:24,120 --> 00:29:28,880 Speaker 1: before in American politics. Certainly in the late eighteen hundreds 507 00:29:29,440 --> 00:29:33,959 Speaker 1: we saw this. We saw it after the Great Depression 508 00:29:34,200 --> 00:29:38,360 Speaker 1: and the America First Arguments that came up. So it's 509 00:29:38,400 --> 00:29:42,560 Speaker 1: not unusual to see the kind of populous movement we're seeing. 510 00:29:42,600 --> 00:29:44,880 Speaker 1: But do you think it is still cyclical? Now? Will 511 00:29:45,000 --> 00:29:50,480 Speaker 1: this pass or is there a danger that that we 512 00:29:50,600 --> 00:29:54,600 Speaker 1: adopt policies that are not in our best interest because 513 00:29:55,360 --> 00:30:01,120 Speaker 1: of the political climate we're in. Well, you're quite correct 514 00:30:01,200 --> 00:30:04,520 Speaker 1: and drawing on history, because history shows you go up 515 00:30:04,560 --> 00:30:11,960 Speaker 1: and you go down. The major problem is in international trade. Uh, 516 00:30:12,760 --> 00:30:16,440 Speaker 1: there is a net gain that occurs for the world 517 00:30:16,600 --> 00:30:20,000 Speaker 1: as a whole as a consequence of that, and the 518 00:30:20,200 --> 00:30:23,760 Speaker 1: only issue is who benefits the most or who benefits 519 00:30:23,840 --> 00:30:28,520 Speaker 1: the least. And apparently there's a very significant short term 520 00:30:29,200 --> 00:30:36,040 Speaker 1: disinterest in getting involved in this process. It's a wholly 521 00:30:36,120 --> 00:30:39,520 Speaker 1: a political issue. It's got nothing to do with economics. 522 00:30:39,600 --> 00:30:45,640 Speaker 1: The economics are unequivocal. Trade, especially global trade, is a 523 00:30:45,840 --> 00:30:50,200 Speaker 1: positive good for the for the global markets as a whole, 524 00:30:51,280 --> 00:30:54,760 Speaker 1: and to the extent of everyone benefits from that. That's 525 00:30:54,800 --> 00:31:00,120 Speaker 1: why it's always been relatively popular over the generations. But 526 00:31:00,320 --> 00:31:03,160 Speaker 1: we run into periods such as today for the last 527 00:31:03,240 --> 00:31:07,239 Speaker 1: several years, where the economy is slowed to such an 528 00:31:07,280 --> 00:31:14,600 Speaker 1: extent that the kick has been as strong as I've 529 00:31:14,640 --> 00:31:17,880 Speaker 1: seen it, and I certainly trust that it goes away 530 00:31:17,960 --> 00:31:23,280 Speaker 1: sooner rather than later, because the history of this type 531 00:31:23,360 --> 00:31:31,160 Speaker 1: of reaction is clearly negative in the long run for everybody. Well, 532 00:31:31,240 --> 00:31:34,280 Speaker 1: would you argue there is a role for government at 533 00:31:34,320 --> 00:31:36,680 Speaker 1: this point to play, maybe a fiscal role in the 534 00:31:36,800 --> 00:31:41,400 Speaker 1: sense that you've always been a of a libertarian small 535 00:31:41,640 --> 00:31:45,880 Speaker 1: libertarian bent. But is government the only one that can 536 00:31:46,000 --> 00:31:50,080 Speaker 1: solve the problem? Now? Well, if your question is what 537 00:31:50,360 --> 00:31:54,360 Speaker 1: means what what does the solution mean? We've had periods. 538 00:31:54,800 --> 00:31:59,520 Speaker 1: Remember we had huge increases in tariffs, and the basic 539 00:31:59,720 --> 00:32:03,880 Speaker 1: purp this of that was to protect the domestic industries. 540 00:32:05,160 --> 00:32:09,080 Speaker 1: H And we finally got away from that when the 541 00:32:09,200 --> 00:32:13,680 Speaker 1: Smoot Hawley tariffs in the in there is a major 542 00:32:13,800 --> 00:32:18,240 Speaker 1: factor in the stock market crash and the collapsed in 543 00:32:18,320 --> 00:32:22,160 Speaker 1: the economy in the nineteen thirties and in the post 544 00:32:22,240 --> 00:32:25,160 Speaker 1: World War two period, we got away from all of that, 545 00:32:25,960 --> 00:32:30,000 Speaker 1: and indeed we've been functioning mainly in the context of 546 00:32:30,280 --> 00:32:33,960 Speaker 1: open global markets, and in fact we have an international 547 00:32:34,080 --> 00:32:38,080 Speaker 1: organization which CAT, which is we're supposed to keep it 548 00:32:38,240 --> 00:32:42,360 Speaker 1: open and then keep trade moving. Uh. But when you 549 00:32:42,480 --> 00:32:45,640 Speaker 1: get the economy slowing down, it's a begger thy neighbor 550 00:32:45,880 --> 00:32:49,400 Speaker 1: type of environment, and you have the only solution to 551 00:32:49,520 --> 00:32:54,760 Speaker 1: this problem is to get productivity rising again and standards 552 00:32:54,840 --> 00:32:59,920 Speaker 1: of living rising at the equivalent of a productivity growth rates, 553 00:33:00,040 --> 00:33:03,479 Speaker 1: say two point two percent a year, which is our 554 00:33:03,560 --> 00:33:07,480 Speaker 1: long history the way below that. Now we're speaking with 555 00:33:07,560 --> 00:33:10,360 Speaker 1: former Federal Reserve Chairman Alan Greenspan and the eve of 556 00:33:10,520 --> 00:33:14,360 Speaker 1: the i m F meetings in Washington, UH. Miss Chairman. 557 00:33:14,400 --> 00:33:18,040 Speaker 1: The i m F putting out its annual Global Financial 558 00:33:18,120 --> 00:33:22,840 Speaker 1: Stability Report this morning, saying that financial markets have benefited 559 00:33:22,840 --> 00:33:27,480 Speaker 1: from central banks unprecedented actions and monetary policy does need 560 00:33:27,600 --> 00:33:30,800 Speaker 1: to remain loose. However, it says some policies such as 561 00:33:30,880 --> 00:33:34,200 Speaker 1: negative rates, are reaching the limits of their effectiveness and 562 00:33:34,280 --> 00:33:36,880 Speaker 1: the side effects of low rates are rising for banks 563 00:33:36,960 --> 00:33:41,160 Speaker 1: and other financial institutions. They're undermining the resilience, particularly of 564 00:33:41,200 --> 00:33:44,520 Speaker 1: European and Japanese banks, as well as insurance companies, and 565 00:33:44,640 --> 00:33:48,400 Speaker 1: that raises the risk of global financial instability. Would you 566 00:33:48,840 --> 00:33:53,800 Speaker 1: disagree or agree with the folks at the International Monetary Fund, Oh, 567 00:33:54,040 --> 00:33:56,720 Speaker 1: I most certainly would agree. I mean, when they're dealing 568 00:33:56,880 --> 00:34:04,200 Speaker 1: with an issue where income from financial intermediation approaches zero, 569 00:34:05,160 --> 00:34:09,960 Speaker 1: a whole major segment of the financial system, which has 570 00:34:10,120 --> 00:34:15,840 Speaker 1: always been a the factor in assisting economic growth, is 571 00:34:15,880 --> 00:34:20,399 Speaker 1: in trouble. You can't have a whole series not only 572 00:34:20,440 --> 00:34:25,200 Speaker 1: insurance companies, but you can't obviously help any any institution 573 00:34:25,360 --> 00:34:30,520 Speaker 1: which requires interest income as in trouble. You can handle 574 00:34:30,560 --> 00:34:32,480 Speaker 1: it for a short while, but we're now in a 575 00:34:32,640 --> 00:34:36,080 Speaker 1: period where it's now beginning to grab and I think 576 00:34:36,160 --> 00:34:38,120 Speaker 1: I haven't read the i m F report for it 577 00:34:38,600 --> 00:34:42,080 Speaker 1: for conclusion. I think is wholly consistent with where the 578 00:34:42,280 --> 00:34:45,480 Speaker 1: type of fears that I've had. Well, does that argue 579 00:34:45,800 --> 00:34:49,839 Speaker 1: for getting off the zero bound around the world, Well, 580 00:34:49,920 --> 00:34:54,200 Speaker 1: I think it will happen automatically. You can't keep interest 581 00:34:54,320 --> 00:34:59,160 Speaker 1: rates below what I would call their psychological normal normal 582 00:35:00,200 --> 00:35:04,800 Speaker 1: interest rates from aspect of human time preference. And the 583 00:35:04,920 --> 00:35:07,320 Speaker 1: one thing about interest rates is you go all the 584 00:35:07,400 --> 00:35:11,680 Speaker 1: way back to ancient Rome, even ancient Greece, and they're 585 00:35:11,719 --> 00:35:15,600 Speaker 1: not terribly different from where they are today. And since 586 00:35:15,680 --> 00:35:20,000 Speaker 1: sixteen ninety four we have a daily discount rate from 587 00:35:20,080 --> 00:35:25,319 Speaker 1: the Bank of England, and until the post World War 588 00:35:25,400 --> 00:35:30,239 Speaker 1: two period that rate has stayed between five and ten 589 00:35:30,360 --> 00:35:37,400 Speaker 1: percent AH for generation upon generation. There's something fundamental are 590 00:35:37,480 --> 00:35:41,680 Speaker 1: the way human beings behave that sets the interest rate, 591 00:35:42,040 --> 00:35:45,080 Speaker 1: or should say, sets the time preference. But the time 592 00:35:45,160 --> 00:35:50,239 Speaker 1: preference is most evident in the interest rate, and our 593 00:35:50,840 --> 00:35:55,960 Speaker 1: history is unequivocal on this. Rates cannot stay down at 594 00:35:56,040 --> 00:36:01,560 Speaker 1: this being suppressed abnormally, and I think they will start 595 00:36:01,680 --> 00:36:08,320 Speaker 1: to move reasonably soon, wholly independently of central bank policy, 596 00:36:09,120 --> 00:36:11,640 Speaker 1: except that when you have a buyer of last resort, 597 00:36:11,719 --> 00:36:16,360 Speaker 1: whose pricing sensitive, who has basically said, uh that it 598 00:36:16,480 --> 00:36:22,960 Speaker 1: will buy up the huge amounts of financial assets, then 599 00:36:23,560 --> 00:36:26,960 Speaker 1: you take the market price out of it, do you not? No, 600 00:36:27,360 --> 00:36:32,040 Speaker 1: Because basically what will happen is that the rates will 601 00:36:32,200 --> 00:36:37,280 Speaker 1: rise wholly independently of what people are doing. In otherwids, 602 00:36:38,000 --> 00:36:41,160 Speaker 1: We've never had a situation in which the government can 603 00:36:41,280 --> 00:36:46,719 Speaker 1: continuously print money without prices beginning to move. There is 604 00:36:46,840 --> 00:36:50,560 Speaker 1: a zero number of cases in which that has happened 605 00:36:50,920 --> 00:36:55,719 Speaker 1: over the generations. As students inflation begins to move, it 606 00:36:55,880 --> 00:37:01,520 Speaker 1: will then the whole structure of the impact between money 607 00:37:02,040 --> 00:37:06,000 Speaker 1: and prices is going to change. But we've talked about 608 00:37:06,000 --> 00:37:08,720 Speaker 1: this on the show with other people. Have we seen 609 00:37:08,960 --> 00:37:12,880 Speaker 1: a structural change in the nature of inflation dynamics that 610 00:37:13,040 --> 00:37:18,360 Speaker 1: either makes that less likely to happen or slows the 611 00:37:18,440 --> 00:37:23,000 Speaker 1: process down significantly? Because we have had six years of 612 00:37:23,200 --> 00:37:27,840 Speaker 1: extraordinary policy and yet we have no inflation. We have 613 00:37:28,000 --> 00:37:31,520 Speaker 1: no growth either. I mean, basically, what's keeping the inflation 614 00:37:31,640 --> 00:37:36,680 Speaker 1: rate down is the fact that productivity growth is virtually zero. 615 00:37:38,080 --> 00:37:41,200 Speaker 1: The growth in the economy as a whole is close 616 00:37:41,320 --> 00:37:45,920 Speaker 1: to zero, and under those conditions, the demands for goods 617 00:37:45,960 --> 00:37:50,759 Speaker 1: and services is extremely weak, and that has been reflected 618 00:37:51,520 --> 00:37:56,440 Speaker 1: in the extent to which prices have inhaled down. But 619 00:37:57,320 --> 00:38:01,040 Speaker 1: that can only go on for a short time. I 620 00:38:01,120 --> 00:38:06,680 Speaker 1: would say, it can't go on for a while. But eventually, Uh, 621 00:38:07,040 --> 00:38:09,160 Speaker 1: you're going to get the economy is starting to pick 622 00:38:09,280 --> 00:38:13,960 Speaker 1: up normally, and that in turn will do extraordinary things 623 00:38:14,120 --> 00:38:18,359 Speaker 1: to the price level. What we have had this argument that, um, 624 00:38:19,080 --> 00:38:23,560 Speaker 1: we're in an extraordinary time new normal. Uh, someone like 625 00:38:23,680 --> 00:38:26,839 Speaker 1: Ken Rogoff and Carmen Reinhardt, where are you what it's 626 00:38:26,880 --> 00:38:28,880 Speaker 1: not really different. It's just that we're we had a 627 00:38:28,920 --> 00:38:34,000 Speaker 1: different kind of financial crisis, economic crisis. It was a 628 00:38:34,080 --> 00:38:37,080 Speaker 1: financial crisis, and that just takes a long time, uh 629 00:38:37,160 --> 00:38:40,160 Speaker 1: to uh come to an end. Do you see us 630 00:38:40,280 --> 00:38:43,720 Speaker 1: getting to the end of a recovery from a finance 631 00:38:43,760 --> 00:38:50,200 Speaker 1: based crisis? The economy growth starting to pick up again, 632 00:38:50,920 --> 00:38:55,399 Speaker 1: held down by the kind of recovery you get when 633 00:38:55,440 --> 00:38:59,600 Speaker 1: you have a banking system that basically caused it, rather 634 00:38:59,680 --> 00:39:03,600 Speaker 1: than the kind of imbalances that produce traditional recessions. The 635 00:39:04,400 --> 00:39:07,120 Speaker 1: interest rates are being held down in the short end 636 00:39:07,160 --> 00:39:12,200 Speaker 1: of the market, largely because the interest rate paid on 637 00:39:12,440 --> 00:39:19,080 Speaker 1: reserve balances to those who hold reserve deposits at the 638 00:39:19,160 --> 00:39:26,480 Speaker 1: twelve central Central the branches of the say feral reserve system. Uh. 639 00:39:27,080 --> 00:39:33,960 Speaker 1: What you have is a situation which cannot go on indefinitely, 640 00:39:34,840 --> 00:39:37,799 Speaker 1: and it's only a question of when it breaks out. 641 00:39:38,680 --> 00:39:41,200 Speaker 1: I don't think there's any This is not a new normal. 642 00:39:41,960 --> 00:39:46,319 Speaker 1: Is the probability that is negligible. You've got to look 643 00:39:46,400 --> 00:39:55,480 Speaker 1: back over history and this is fundamentally not It hasn't 644 00:39:55,680 --> 00:40:00,760 Speaker 1: changed in the fundamentals. Uh. It's interesting to know, for example, 645 00:40:01,440 --> 00:40:04,040 Speaker 1: that we are beginning now to see the money supply 646 00:40:04,280 --> 00:40:10,320 Speaker 1: growth accelerate. When money supply growth accelerates a hundred times 647 00:40:10,400 --> 00:40:13,520 Speaker 1: out of a hundred times, the price level begins to 648 00:40:13,600 --> 00:40:18,239 Speaker 1: move up. It's just starting now. I don't know how 649 00:40:18,360 --> 00:40:23,880 Speaker 1: long this sub normal level inflation is going to persist, 650 00:40:24,719 --> 00:40:28,440 Speaker 1: but I would be almost certain within two years it's 651 00:40:28,440 --> 00:40:31,719 Speaker 1: going to look different. Much of what the central banks 652 00:40:31,760 --> 00:40:35,240 Speaker 1: around the world have done over the last six years 653 00:40:35,320 --> 00:40:39,279 Speaker 1: has been experimental. It's been stuff that economists talked about 654 00:40:39,320 --> 00:40:43,080 Speaker 1: in theory but had never had a real laboratory situation 655 00:40:43,520 --> 00:40:47,839 Speaker 1: to use, negative interest rates being one good example. Um, 656 00:40:48,520 --> 00:40:51,320 Speaker 1: what do you think now looking surveying the world, what 657 00:40:51,440 --> 00:40:53,120 Speaker 1: do you think has worked and not worked? If you 658 00:40:53,239 --> 00:40:55,959 Speaker 1: were going to put the toolkit together for the next 659 00:40:56,040 --> 00:40:58,440 Speaker 1: time a central bank has to respond, what would you 660 00:40:58,480 --> 00:41:01,600 Speaker 1: put in? What would you leave out? Well, I don't 661 00:41:01,640 --> 00:41:05,160 Speaker 1: think the issue is a central banking right now. It's 662 00:41:05,239 --> 00:41:09,880 Speaker 1: the economy. If the economy remains as sluggish as as 663 00:41:09,920 --> 00:41:16,960 Speaker 1: it is, then effectively you can't have inflation UH and 664 00:41:17,560 --> 00:41:21,319 Speaker 1: unmusten Until the economy starts to pick up, you will 665 00:41:21,360 --> 00:41:25,279 Speaker 1: see no inflation. But that means that we're going to 666 00:41:25,480 --> 00:41:30,160 Speaker 1: live in a state UH, which is close to zero 667 00:41:31,160 --> 00:41:34,400 Speaker 1: GDP growth, and I would say that as a politically 668 00:41:34,480 --> 00:41:39,400 Speaker 1: unstable position, something is going to give. It may be 669 00:41:39,719 --> 00:41:42,920 Speaker 1: political and it may be economic, but this is an 670 00:41:43,239 --> 00:41:48,080 Speaker 1: not not a sustainable equilibrium. When you survey the economy, 671 00:41:48,600 --> 00:41:50,080 Speaker 1: before we let you go, let me ask you this, 672 00:41:50,239 --> 00:41:53,480 Speaker 1: how long do you think the expansion has to go 673 00:41:53,719 --> 00:41:58,960 Speaker 1: before we run into recession, either caused by bad policies 674 00:41:59,239 --> 00:42:05,719 Speaker 1: or the normal cyclical things that happened during a recession. Well, 675 00:42:06,000 --> 00:42:10,440 Speaker 1: I think that we're moving in what we used to 676 00:42:10,560 --> 00:42:17,880 Speaker 1: call stagflation. We've had the structural, structural zero near zero 677 00:42:18,000 --> 00:42:22,040 Speaker 1: growth rate, but we had no inflation associated with it. 678 00:42:23,040 --> 00:42:27,880 Speaker 1: I think history tells us that the next step is stagflation, 679 00:42:28,000 --> 00:42:31,640 Speaker 1: which we had during the nineteen seventies, and that's when 680 00:42:31,680 --> 00:42:34,800 Speaker 1: the things begin to change. And so what I'd be 681 00:42:34,920 --> 00:42:39,400 Speaker 1: looking for is one with the tightness of the labor 682 00:42:39,480 --> 00:42:45,880 Speaker 1: market developing. We're getting wages rising, but profit margins are falling, 683 00:42:46,680 --> 00:42:51,080 Speaker 1: and hence the rise in wage costs is being muted 684 00:42:51,320 --> 00:42:54,800 Speaker 1: by the fact that margins are absorbing it. Going to 685 00:42:54,880 --> 00:42:58,120 Speaker 1: have to leave it there. Thank you very much. Alan Greensband, 686 00:42:58,239 --> 00:43:08,360 Speaker 1: former Federal Reserve Chairman, Thanks for listening to the Bloomberg 687 00:43:08,400 --> 00:43:13,920 Speaker 1: Surveillance Podcast. Subscribe and listen to interviews on iTunes, SoundCloud, 688 00:43:14,280 --> 00:43:18,239 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 689 00:43:18,320 --> 00:43:23,040 Speaker 1: Tom Keane. Michael McKee is at Economy Before the podcast, 690 00:43:23,160 --> 00:43:38,359 Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio. Who 691 00:43:38,520 --> 00:43:42,200 Speaker 1: you put your trust in matters. Investors have put their 692 00:43:42,239 --> 00:43:45,560 Speaker 1: trust in independent registered investment advisors to the tune of 693 00:43:45,680 --> 00:43:50,600 Speaker 1: four trillion dollars. Why learn more and find your independent 694 00:43:50,680 --> 00:43:51,600 Speaker 1: advisor dot com.