1 00:00:00,080 --> 00:00:13,040 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,639 Speaker 1: Bloomberg dot com, and of course on the Bloomberg. You know, 5 00:00:28,680 --> 00:00:31,639 Speaker 1: we've got a guest here that he's done forensic accounting 6 00:00:31,680 --> 00:00:34,160 Speaker 1: on all these unicorns. We can bring in, Michael Holland 7 00:00:34,159 --> 00:00:36,279 Speaker 1: Holland and Company, Cham and Michael. Great to have you 8 00:00:36,280 --> 00:00:38,519 Speaker 1: with us in New York. Let's begin with the I 9 00:00:38,640 --> 00:00:40,640 Speaker 1: p O that Watson and may not be for a 10 00:00:40,680 --> 00:00:43,720 Speaker 1: long long time. What's your takeaway from this whole SANKA 11 00:00:44,000 --> 00:00:47,440 Speaker 1: over the last few months. It started Jonathan before then, 12 00:00:47,479 --> 00:00:49,400 Speaker 1: first of all, thank you for having me on. It 13 00:00:49,560 --> 00:00:54,240 Speaker 1: started well before the we Works budding fiasco. Zoom and 14 00:00:54,280 --> 00:00:57,760 Speaker 1: Slack have been crucified in the market recently. These are 15 00:00:57,760 --> 00:01:01,440 Speaker 1: two companies that came out of private equity. Venture capital 16 00:01:01,520 --> 00:01:07,560 Speaker 1: had treated it historically crazy numbers relative to their sales, 17 00:01:07,560 --> 00:01:10,919 Speaker 1: which had been growing rapidly. But as we saw with Uber, 18 00:01:11,720 --> 00:01:14,480 Speaker 1: Uber I think may have been the genesis of some 19 00:01:14,600 --> 00:01:19,000 Speaker 1: of this U S German drying because people were projecting 20 00:01:19,040 --> 00:01:22,120 Speaker 1: the growth in revenues to be something that would somehow 21 00:01:22,240 --> 00:01:26,000 Speaker 1: relate to growth and earnings, which never occurred. There are 22 00:01:26,040 --> 00:01:28,880 Speaker 1: no earnings, and when companies like Slack and Zoom should 23 00:01:28,880 --> 00:01:33,399 Speaker 1: know show no indication of earnings in our lifetimes, people 24 00:01:33,440 --> 00:01:36,600 Speaker 1: begin to question the valuations at thirty times revenues. What's 25 00:01:36,600 --> 00:01:39,360 Speaker 1: been interesting about this drama as we focused almost exclusively 26 00:01:39,360 --> 00:01:41,560 Speaker 1: over the last couple of weeks on the governance issues. 27 00:01:41,600 --> 00:01:44,199 Speaker 1: But this guy's way beyond government's issues, isn't it? Michael. 28 00:01:44,480 --> 00:01:47,160 Speaker 1: You don't go from a forty seven billion dollar evaluation 29 00:01:47,200 --> 00:01:49,560 Speaker 1: to ten to fifty in a number of months just 30 00:01:49,560 --> 00:01:52,360 Speaker 1: because of governance issues. So you're right, you're absolutely right. 31 00:01:52,360 --> 00:01:55,640 Speaker 1: Now we're talking mania. Go ahead, town, thank you, you're 32 00:01:55,680 --> 00:02:02,880 Speaker 1: running the show now. Um cricket. Cricket took three minutes 33 00:02:02,880 --> 00:02:06,600 Speaker 1: from Michael to appreciate what I got through exactly. Michael, 34 00:02:07,200 --> 00:02:10,800 Speaker 1: where are the bankers on this? These these I gotta 35 00:02:10,800 --> 00:02:14,720 Speaker 1: be careful here, these good people, these young turks doing 36 00:02:14,840 --> 00:02:19,920 Speaker 1: financial innovation and unicorn nous. They're supposed to have advisors 37 00:02:19,960 --> 00:02:22,560 Speaker 1: that give counsel on pricing. What was the one the 38 00:02:22,560 --> 00:02:27,400 Speaker 1: other day's Smile Dental Dental smile, smile, direct, that's it. 39 00:02:27,639 --> 00:02:29,400 Speaker 1: So do I need it? What do you think you do? 40 00:02:31,639 --> 00:02:35,600 Speaker 1: But where are the bankers here? Where are the Goldmen, Sects, Morgan, Stanleys, 41 00:02:35,639 --> 00:02:39,560 Speaker 1: JP Morgan to lend advice? So these embarrassments don't happen. 42 00:02:39,600 --> 00:02:41,960 Speaker 1: Nobody's listening to them, from what I can tell, correct 43 00:02:42,000 --> 00:02:45,840 Speaker 1: and think the nineties where the bankers are. Unfortunately for 44 00:02:45,880 --> 00:02:48,280 Speaker 1: too many of them, they're in the line collecting fees 45 00:02:48,639 --> 00:02:52,799 Speaker 1: and that's their job. And when they have no earnings 46 00:02:52,800 --> 00:02:55,800 Speaker 1: to price things from, they can just use comparable. So 47 00:02:55,840 --> 00:02:58,960 Speaker 1: if some if if one company is trading it twenty 48 00:02:59,040 --> 00:03:01,280 Speaker 1: five times of the news, you can praise at a 49 00:03:01,720 --> 00:03:04,480 Speaker 1: three and say it's cheap at the praise. Meanwhile, Microsoft 50 00:03:04,520 --> 00:03:07,440 Speaker 1: is it seven times revenues? What's new about all of this? 51 00:03:07,760 --> 00:03:10,480 Speaker 1: You're a banker, You go to a company, the private 52 00:03:10,560 --> 00:03:12,079 Speaker 1: they want to go public. You look at the last 53 00:03:12,120 --> 00:03:14,320 Speaker 1: funding ground, you make up the story to get the feet, 54 00:03:14,360 --> 00:03:16,040 Speaker 1: turn around and say, you know what, I think we 55 00:03:16,080 --> 00:03:19,200 Speaker 1: can take this a sixty. You give us the fee, 56 00:03:19,400 --> 00:03:22,680 Speaker 1: we'll take the Did you see cutting in Illinois coming? 57 00:03:23,960 --> 00:03:26,360 Speaker 1: Actually knew? I knew George Baker, Yeah I know, But 58 00:03:26,400 --> 00:03:28,679 Speaker 1: did you see the debacco coming, And the answer is no, 59 00:03:28,960 --> 00:03:31,240 Speaker 1: it was pretty ugly. It was ugly, But did we 60 00:03:31,320 --> 00:03:33,520 Speaker 1: see the reason it was so ugly because no inside coming. 61 00:03:33,520 --> 00:03:35,840 Speaker 1: I mean, that's in our collective memory. That's a deep 62 00:03:35,880 --> 00:03:39,640 Speaker 1: misty past, John. It was like Northern Rock, frankly, I mean, 63 00:03:39,720 --> 00:03:43,320 Speaker 1: did anybody no? And perhaps we should have done, because 64 00:03:43,320 --> 00:03:45,640 Speaker 1: looking back, all the signs were there. Let's focus on 65 00:03:45,680 --> 00:03:48,440 Speaker 1: what's happening in private markets. That's the concern for many people. 66 00:03:48,440 --> 00:03:50,720 Speaker 1: How did we ever get to evaluation of forty seven 67 00:03:50,720 --> 00:03:55,120 Speaker 1: billion dollars for this company? And Michael, how distorted is 68 00:03:55,160 --> 00:03:59,120 Speaker 1: that market still distorted, Jonathan, because you have you have 69 00:03:59,280 --> 00:04:04,280 Speaker 1: companies still trading at extreme valuations. Albeit the prices are 70 00:04:04,320 --> 00:04:06,760 Speaker 1: down in the friend the public market, but anyone who 71 00:04:06,760 --> 00:04:09,960 Speaker 1: owns a private firm is now looking at very suspect 72 00:04:10,040 --> 00:04:14,240 Speaker 1: valuations for their home portfolio. Do you own Amazon? You 73 00:04:14,320 --> 00:04:18,120 Speaker 1: own Amazon? Everybody wants to be Amazon. I think the root, 74 00:04:18,240 --> 00:04:21,040 Speaker 1: the root, the root. Yeah, And Doug has written beautifully, 75 00:04:21,040 --> 00:04:22,840 Speaker 1: thank God, about the long term. He's out in a a 76 00:04:23,000 --> 00:04:25,880 Speaker 1: Holland time frame on that don't like as his usual 77 00:04:25,960 --> 00:04:30,800 Speaker 1: date trading that he does. Michael Holland on Amazon. The 78 00:04:30,920 --> 00:04:33,880 Speaker 1: root caused John of this UNICORNUS and we dog is. 79 00:04:33,920 --> 00:04:37,120 Speaker 1: They all want to be Amazon, right, but you can't 80 00:04:37,240 --> 00:04:42,680 Speaker 1: rationalize the actual business plan of cardboard boxes in a 81 00:04:42,760 --> 00:04:46,960 Speaker 1: lobby was some of these other unicorn this products right? Correct. 82 00:04:47,160 --> 00:04:50,240 Speaker 1: Software in the case of Zoom and slack is is 83 00:04:50,360 --> 00:04:54,159 Speaker 1: very different because you have Microsoft there. Amazon never had 84 00:04:54,200 --> 00:04:57,560 Speaker 1: a Microsoft. They became Microsoft. What's really going on here? 85 00:04:57,600 --> 00:05:00,680 Speaker 1: His kids told him, Dad, lone up, load up on 86 00:05:00,839 --> 00:05:09,040 Speaker 1: slack out. Kids got into this whenever Michael comes by, 87 00:05:09,080 --> 00:05:10,840 Speaker 1: But I want to just talk about single names. I'd 88 00:05:10,839 --> 00:05:13,479 Speaker 1: like to lean on his experience in China as well. 89 00:05:13,640 --> 00:05:16,039 Speaker 1: Let's just get the macro back drop ready as well, Michael, 90 00:05:16,839 --> 00:05:21,200 Speaker 1: the dates when China is really not improving. This stimulus 91 00:05:21,240 --> 00:05:25,080 Speaker 1: effort so far has been targeted and gradual, and I 92 00:05:25,160 --> 00:05:27,440 Speaker 1: just wonder whether it stays that way as they try 93 00:05:27,480 --> 00:05:30,520 Speaker 1: and stabilize the situation, or whether we're about to get 94 00:05:30,560 --> 00:05:33,080 Speaker 1: something new, something different. What's your reading? What's happening there 95 00:05:33,160 --> 00:05:35,960 Speaker 1: right now? Michael Jonathan that you've watch says as I 96 00:05:36,040 --> 00:05:40,479 Speaker 1: have this current regime, UH doesn't like to be bullied 97 00:05:40,560 --> 00:05:43,000 Speaker 1: into doing things, so they don't want to appear that 98 00:05:43,040 --> 00:05:46,039 Speaker 1: they're being frantic. And what they do read that Hong 99 00:05:46,120 --> 00:05:49,479 Speaker 1: Kong or what's going on with Trump in the case 100 00:05:49,520 --> 00:05:52,240 Speaker 1: of Mr she and I think that when you get 101 00:05:52,279 --> 00:05:55,719 Speaker 1: the reserve ratio requirement residuced a little bit and you 102 00:05:55,760 --> 00:05:58,560 Speaker 1: get different things going on, those are minor things that 103 00:05:58,560 --> 00:06:02,600 Speaker 1: they're doing. I think they are very concerned about as 104 00:06:02,640 --> 00:06:06,039 Speaker 1: they always are, about unemployment and the economy. They that's 105 00:06:06,040 --> 00:06:08,680 Speaker 1: a big problem for them and if they if they 106 00:06:08,720 --> 00:06:11,680 Speaker 1: can't get this economy moving better. And they say they 107 00:06:11,680 --> 00:06:13,440 Speaker 1: have lots of tools, and they have some, but I 108 00:06:13,480 --> 00:06:14,920 Speaker 1: don't think they've used a lot of them yet. I 109 00:06:14,960 --> 00:06:16,480 Speaker 1: think they have to do what you're talking about. I 110 00:06:16,520 --> 00:06:19,799 Speaker 1: think we will see sometimes then they're not too distant future. Uh, 111 00:06:19,880 --> 00:06:21,520 Speaker 1: if they don't do a deal with Trump, which I 112 00:06:21,520 --> 00:06:24,680 Speaker 1: don't think they're gonna do, but if they do. Um, 113 00:06:24,720 --> 00:06:26,200 Speaker 1: if they don't do it, they're gonna have to come 114 00:06:26,240 --> 00:06:28,920 Speaker 1: up with a lot of things. Final theme, banks banks 115 00:06:28,920 --> 00:06:31,600 Speaker 1: for John Can we say banks for disappointment for two 116 00:06:31,600 --> 00:06:35,080 Speaker 1: thousand and eighteen. In the last couple of weeks, banks, 117 00:06:36,040 --> 00:06:40,320 Speaker 1: I mean the American financial institutions prospered out of the crisis, 118 00:06:40,400 --> 00:06:43,239 Speaker 1: unlike the European banks. Do you buy the value trap 119 00:06:43,360 --> 00:06:46,080 Speaker 1: or the value of deeply discounted Europe or do you 120 00:06:46,160 --> 00:06:50,040 Speaker 1: climb on board the existing American banking structure. Europe's a 121 00:06:50,360 --> 00:06:52,680 Speaker 1: big stretch for me, Tom, I don't really understand the 122 00:06:52,720 --> 00:06:54,880 Speaker 1: problems and how when it can solve them over there. 123 00:06:55,600 --> 00:06:58,880 Speaker 1: I think the US banks, led by Jamie diamond are 124 00:06:59,320 --> 00:07:01,840 Speaker 1: where I want to be, and Jamie Diamonds Bank is 125 00:07:01,880 --> 00:07:04,880 Speaker 1: one of my larger holdings. So and and once again, 126 00:07:04,880 --> 00:07:06,800 Speaker 1: as we were talking a little bit earlier this morning, 127 00:07:07,240 --> 00:07:10,080 Speaker 1: very reasonably priced twelve times runnings and two and a 128 00:07:10,120 --> 00:07:13,000 Speaker 1: half times, how do you respond to the actual assumption 129 00:07:13,080 --> 00:07:16,720 Speaker 1: of four point one percent the United Kingdom annuities right now? 130 00:07:16,960 --> 00:07:18,840 Speaker 1: It just keeps coming down, down down. Do you have 131 00:07:18,920 --> 00:07:21,360 Speaker 1: single digit gloom about equities or they can they do 132 00:07:21,440 --> 00:07:24,440 Speaker 1: better than that? I don't know, but I think we 133 00:07:24,680 --> 00:07:27,400 Speaker 1: would be foolish to presume we're going to have the 134 00:07:27,440 --> 00:07:29,320 Speaker 1: next ten years like the last TURS. Doesn't make any 135 00:07:29,360 --> 00:07:31,440 Speaker 1: sense to me. It could happen, but I don't think so. Yeah, 136 00:07:31,520 --> 00:07:35,000 Speaker 1: Muhamma Hilarian just uh emailed and he says, say please 137 00:07:35,000 --> 00:07:36,880 Speaker 1: say hello to Michael holl And. He wants to know 138 00:07:37,040 --> 00:07:39,040 Speaker 1: could you be a quarterback for the New York Jets. 139 00:07:39,560 --> 00:07:43,160 Speaker 1: Who it's too bad. Odell Beckham Jr. Did a number 140 00:07:43,240 --> 00:07:45,280 Speaker 1: last night. They went through Michael Barr. Would they go 141 00:07:45,360 --> 00:07:48,200 Speaker 1: through four or five quarterbacks? Oh? That that was awful. 142 00:07:48,720 --> 00:07:53,480 Speaker 1: First you have and then then the I mean the mono, 143 00:07:53,600 --> 00:07:55,200 Speaker 1: then you have the injury to the back up and 144 00:07:55,760 --> 00:07:59,640 Speaker 1: for the third string. Monday. Miss you missed, missed this 145 00:08:00,600 --> 00:08:05,040 Speaker 1: You miss jeffs Browns. Lucky you miss Jeff Browns. I'm sorry. 146 00:08:05,280 --> 00:08:08,080 Speaker 1: What do we go on? Michael Holland, thank you very much. 147 00:08:09,040 --> 00:08:11,119 Speaker 1: Tom a word on the banks just quickly, Jp Morgan. 148 00:08:11,200 --> 00:08:18,440 Speaker 1: This year City City up. So it might feel bad, 149 00:08:18,960 --> 00:08:21,400 Speaker 1: but it's actually been pretty deep. So drinks around. Michael 150 00:08:22,240 --> 00:08:37,360 Speaker 1: definitely on Michael and Michael get to see you. Thank you. 151 00:08:39,920 --> 00:08:42,840 Speaker 1: It's an important book, John Ferrell diving into it cover 152 00:08:42,920 --> 00:08:46,840 Speaker 1: to cover, and it's on a set of narratives. He 153 00:08:46,920 --> 00:08:49,240 Speaker 1: joins us. Now the author of that book, Robert Shillen 154 00:08:49,600 --> 00:08:55,040 Speaker 1: University Professor, Bold Prize winner and the author of Narrative Economics, 155 00:08:55,040 --> 00:09:00,320 Speaker 1: How Stories Go viral and drive major economic events. Professor, 156 00:09:00,400 --> 00:09:02,480 Speaker 1: let's just begin with how important this field is, and 157 00:09:02,480 --> 00:09:05,040 Speaker 1: how relatively new it is, and how much work still 158 00:09:05,080 --> 00:09:07,280 Speaker 1: needs to be done. Just talk to us about it. Well, 159 00:09:07,320 --> 00:09:10,600 Speaker 1: I think there's a revolution going on in economics starting 160 00:09:11,000 --> 00:09:14,920 Speaker 1: with the new UH data on. You can now search 161 00:09:15,200 --> 00:09:21,040 Speaker 1: you can search everything, newspapers, magazines, shows, um diaries, sermons 162 00:09:21,640 --> 00:09:24,319 Speaker 1: all over, and so we we we can now get 163 00:09:24,400 --> 00:09:27,920 Speaker 1: closer to reality than before when we just had aggregates 164 00:09:28,000 --> 00:09:31,800 Speaker 1: like GDP to to study. Now we can get into 165 00:09:31,880 --> 00:09:35,360 Speaker 1: what I think really drives the economy. It's changing patterns 166 00:09:35,360 --> 00:09:39,760 Speaker 1: of thinking and changing narratives that interpret the events for 167 00:09:39,880 --> 00:09:43,160 Speaker 1: us and also give an emotional color to it and 168 00:09:43,240 --> 00:09:45,160 Speaker 1: can shape the events as well. And I think that's 169 00:09:45,160 --> 00:09:47,240 Speaker 1: what's crucial to the to the field you're talking about 170 00:09:47,240 --> 00:09:48,920 Speaker 1: at the moment. Talk to me about how this is 171 00:09:48,920 --> 00:09:51,839 Speaker 1: different to say, the theory of reflexivity that George Sorice 172 00:09:51,880 --> 00:09:55,160 Speaker 1: has really pushed along for markets, that markets can influence 173 00:09:55,160 --> 00:09:58,000 Speaker 1: and shape the events they anticipate this feedback leak. There's 174 00:09:58,000 --> 00:10:00,360 Speaker 1: two way loops. Why is this different and how does 175 00:10:00,400 --> 00:10:03,680 Speaker 1: this build on that work in any way shape or form. Well, 176 00:10:03,760 --> 00:10:07,240 Speaker 1: I read Sorrows book years ago and I thought that 177 00:10:07,440 --> 00:10:12,760 Speaker 1: it was uh, it was intuitive and on target. I 178 00:10:13,160 --> 00:10:16,720 Speaker 1: thought he wasn't good at citing earlier people who said 179 00:10:16,760 --> 00:10:19,800 Speaker 1: similar things. It goes back to For example, in the 180 00:10:19,880 --> 00:10:24,880 Speaker 1: nineteen forties, Robert K. Merton, sociologist, invented the term self 181 00:10:24,920 --> 00:10:28,959 Speaker 1: fulfilling prophecy. So it goes it goes back to the 182 00:10:29,040 --> 00:10:32,600 Speaker 1: nineteenth century if you searched properly. This is my habit. 183 00:10:32,720 --> 00:10:35,920 Speaker 1: I always try to find win an idea appeared, So 184 00:10:36,080 --> 00:10:39,400 Speaker 1: Reflectivity wasn't. It was a good book because it was 185 00:10:39,400 --> 00:10:42,480 Speaker 1: written by a successful man who was writing it from 186 00:10:42,520 --> 00:10:45,120 Speaker 1: the straight from the heart. He really believed this, and 187 00:10:45,160 --> 00:10:47,559 Speaker 1: I think he was on target. You focus on a 188 00:10:47,640 --> 00:10:49,120 Speaker 1: range of things. What I'd like to focus on with 189 00:10:49,120 --> 00:10:53,120 Speaker 1: you this morning is how public confidence is shaped and 190 00:10:53,200 --> 00:10:55,840 Speaker 1: influenced and where we are now. For those of you 191 00:10:55,920 --> 00:10:57,160 Speaker 1: that don't get hold of the book, there was a 192 00:10:57,200 --> 00:10:59,720 Speaker 1: great article of the weekend altered by you, I believe 193 00:11:00,280 --> 00:11:03,000 Speaker 1: in the New York Times, setting off a recession with 194 00:11:03,120 --> 00:11:05,599 Speaker 1: words I believe that came out last week told to 195 00:11:05,640 --> 00:11:07,720 Speaker 1: me about how public opinion is right now, and used 196 00:11:07,720 --> 00:11:10,360 Speaker 1: that as an example to explain to our listeners why 197 00:11:10,360 --> 00:11:14,400 Speaker 1: this field is so important. It's an important new field. 198 00:11:14,440 --> 00:11:16,560 Speaker 1: That doesn't mean that I've conquered it. I think it 199 00:11:16,600 --> 00:11:21,199 Speaker 1: will take decades for research to really give us some 200 00:11:21,280 --> 00:11:24,280 Speaker 1: kind of accounting of the impact of narrative. There's always 201 00:11:24,320 --> 00:11:27,160 Speaker 1: many narratives. A lot of them are not what I 202 00:11:27,200 --> 00:11:29,600 Speaker 1: call economic narratives. They don't have anything to do with 203 00:11:29,760 --> 00:11:34,280 Speaker 1: economic activity, but it's certain ones of them do have. So. 204 00:11:34,440 --> 00:11:37,840 Speaker 1: For example, the best example of a narrative is our 205 00:11:37,880 --> 00:11:41,679 Speaker 1: president Donald Trump. He has captured the imagination of the 206 00:11:41,920 --> 00:11:46,640 Speaker 1: entire world. It's all over. Uh, And why is it 207 00:11:46,720 --> 00:11:49,200 Speaker 1: so fascinating? This is this is Uh? Why is he 208 00:11:49,280 --> 00:11:52,560 Speaker 1: so fascinating? Well, obviously he got elected president, but how 209 00:11:52,600 --> 00:11:56,959 Speaker 1: did he get there? I think that these things are 210 00:11:57,080 --> 00:12:00,440 Speaker 1: poorly understood. And also the direct impact act that he 211 00:12:00,480 --> 00:12:05,360 Speaker 1: has on economic confidence and on willingness to spend are 212 00:12:05,400 --> 00:12:09,120 Speaker 1: also complicated. But did we get President Trump in the 213 00:12:09,200 --> 00:12:12,840 Speaker 1: many new populisms that we have simply because of a 214 00:12:12,920 --> 00:12:17,679 Speaker 1: new damp and GDP growth and indeed possibly a generational 215 00:12:18,480 --> 00:12:24,000 Speaker 1: terminal value that's less than acceptable for society and for politicians. 216 00:12:25,240 --> 00:12:29,240 Speaker 1: GDP growth first became popular in the nineteen thirties. That's 217 00:12:29,240 --> 00:12:36,400 Speaker 1: a narrative, uh, and uh, it's a religion now Uh yeah, well, uh. 218 00:12:37,160 --> 00:12:40,000 Speaker 1: I think narratives tap into our deep feelings. And you 219 00:12:40,120 --> 00:12:45,240 Speaker 1: might sometimes think of narratives as representing a religion. So 220 00:12:45,400 --> 00:12:49,200 Speaker 1: the idea that GDP growth is the primal measurement of 221 00:12:49,280 --> 00:12:53,800 Speaker 1: success is obviously wrong because GDP growth is highest in wartime, 222 00:12:53,800 --> 00:12:56,480 Speaker 1: when we're generally not happy at all, or maybe some 223 00:12:56,520 --> 00:12:59,880 Speaker 1: people are happy in wartime. I don't know. I mentioned 224 00:12:59,880 --> 00:13:03,160 Speaker 1: it increasingly polarized at times of war. Professor, Let's just 225 00:13:03,200 --> 00:13:05,240 Speaker 1: finish up by talking about a news event this week, 226 00:13:05,600 --> 00:13:08,800 Speaker 1: the Federal Reserve, and then fold in this field that 227 00:13:08,840 --> 00:13:11,240 Speaker 1: you're starting to explore in a much deeper way, how 228 00:13:11,320 --> 00:13:16,320 Speaker 1: policymakers can influence beliefs and shape outcomes. How the chairman 229 00:13:16,360 --> 00:13:19,440 Speaker 1: of the Federal Reserve can identify what the popular narrative 230 00:13:19,520 --> 00:13:24,600 Speaker 1: is right now in the public and then influence shape outcomes. Well, 231 00:13:24,640 --> 00:13:29,199 Speaker 1: I think Federal Reserve chair people know that it's very 232 00:13:29,240 --> 00:13:32,920 Speaker 1: important not just what they do, but what they say, 233 00:13:33,160 --> 00:13:38,080 Speaker 1: uh and uh and so the problem is they don't 234 00:13:38,160 --> 00:13:42,199 Speaker 1: have a discipline. They don't have scholarly research that will 235 00:13:42,280 --> 00:13:47,360 Speaker 1: help them know what. In stense, you have to read history. 236 00:13:47,880 --> 00:13:50,840 Speaker 1: So a lot of people are a major in history 237 00:13:50,880 --> 00:13:54,560 Speaker 1: in college because you learn examples, and if it's good history, 238 00:13:54,760 --> 00:13:58,240 Speaker 1: it gets into the narratives and the stories. So in 239 00:13:58,280 --> 00:14:01,920 Speaker 1: the past, uh, people have made miss So I'll give 240 00:14:01,920 --> 00:14:03,720 Speaker 1: you an example of what might have been a mistake, 241 00:14:04,080 --> 00:14:06,600 Speaker 1: and that is cutting the lower bound for the federal 242 00:14:06,640 --> 00:14:11,720 Speaker 1: funds rate to zero uh in right after the financial crisis. 243 00:14:12,559 --> 00:14:15,440 Speaker 1: That might have been considered as completing the job, but 244 00:14:15,520 --> 00:14:18,679 Speaker 1: it also brings on a scary narrative. It reminds us 245 00:14:18,720 --> 00:14:22,160 Speaker 1: of Japan and it's lost decade, and the narrative might 246 00:14:22,160 --> 00:14:24,000 Speaker 1: have been more. Maybe they shouldn't have cut it all 247 00:14:24,040 --> 00:14:26,600 Speaker 1: the way to zero. We need to think about that. 248 00:14:26,840 --> 00:14:29,840 Speaker 1: We'll come back Robert Schiller with this. We have another 249 00:14:29,880 --> 00:14:33,240 Speaker 1: conversation with him coming up in the weeks on negative 250 00:14:33,320 --> 00:14:52,400 Speaker 1: interest rates in Europe. John True and Tom Keenan, this 251 00:14:52,480 --> 00:14:54,560 Speaker 1: is great. We love when our team goes out and 252 00:14:54,600 --> 00:14:59,000 Speaker 1: finds good conversation without hysterics on whatever the issue of 253 00:14:59,000 --> 00:15:02,120 Speaker 1: the moment is. John, what was cool is years ago 254 00:15:02,240 --> 00:15:04,840 Speaker 1: you were cool on campus if you walked around with 255 00:15:04,960 --> 00:15:08,320 Speaker 1: something Robert Lacey wrote, and then you were cool. And 256 00:15:08,360 --> 00:15:11,440 Speaker 1: this took forever where you had the prize by Daniel 257 00:15:11,480 --> 00:15:13,800 Speaker 1: Jurgen and only twelve people read it because it was 258 00:15:13,840 --> 00:15:16,200 Speaker 1: so thick. Let me tell you you were walking around 259 00:15:16,200 --> 00:15:19,560 Speaker 1: with that book, you were shredded that that waits so much. Yeah, 260 00:15:19,800 --> 00:15:22,600 Speaker 1: really I was cutting chiseled back then, but aways you 261 00:15:22,800 --> 00:15:26,520 Speaker 1: you carried around Jurgen's surprise. Recently the book is ellen 262 00:15:26,600 --> 00:15:30,000 Speaker 1: walled Saudi Inc. And it's just only like a year 263 00:15:30,080 --> 00:15:34,720 Speaker 1: two old, and it's just become definitive on the machinery 264 00:15:34,800 --> 00:15:37,960 Speaker 1: of the oil combine in Saudi, the Arabian Kingdom's pursuit 265 00:15:38,040 --> 00:15:40,760 Speaker 1: of profit and power. Place to say that anam world 266 00:15:41,080 --> 00:15:42,920 Speaker 1: is with us here in the studio of the Atlantic 267 00:15:42,960 --> 00:15:46,640 Speaker 1: Council Global Energy Center. Good Monituellen, Good morning. Let's just 268 00:15:46,680 --> 00:15:49,120 Speaker 1: believe we'll have a look into this story right in 269 00:15:49,160 --> 00:15:50,880 Speaker 1: front of our face right now, which is what is 270 00:15:50,920 --> 00:15:54,000 Speaker 1: happening with Saudi Aramco and Saudi Arabian all production. There 271 00:15:54,040 --> 00:15:56,280 Speaker 1: was a little bit of daylight between what the Kingdom 272 00:15:56,360 --> 00:15:58,120 Speaker 1: is towning us about the output and when it comes 273 00:15:58,120 --> 00:16:00,800 Speaker 1: back online and what a Ramco is town Guess it 274 00:16:00,800 --> 00:16:04,080 Speaker 1: does seem that we're getting some conflicting signals that the 275 00:16:04,160 --> 00:16:08,480 Speaker 1: Kingdom is really talking about very severe damage possibly months 276 00:16:08,520 --> 00:16:11,400 Speaker 1: to get back online. And then we're also hearing though 277 00:16:11,400 --> 00:16:14,640 Speaker 1: from the company that they see a production coming back 278 00:16:14,720 --> 00:16:18,600 Speaker 1: much more quickly and also potentially by the end of September, 279 00:16:18,680 --> 00:16:24,160 Speaker 1: even most of production returning. Who's that is the question 280 00:16:24,200 --> 00:16:26,800 Speaker 1: of the hour and in charge of the company. We've 281 00:16:26,840 --> 00:16:32,240 Speaker 1: got Amnoster who's the CEO. Very reliable, very very professional people. 282 00:16:32,320 --> 00:16:35,320 Speaker 1: This is a very professional company. It's run like an 283 00:16:35,320 --> 00:16:39,360 Speaker 1: American company based on its its American roots. They really 284 00:16:39,400 --> 00:16:44,080 Speaker 1: pride themselves in working basically like like Exxon. But then 285 00:16:44,120 --> 00:16:47,120 Speaker 1: on the other side, you've got the Saudi royal family. 286 00:16:47,160 --> 00:16:50,120 Speaker 1: You've got the government, the monarchy, and of course Mohammad 287 00:16:50,120 --> 00:16:54,120 Speaker 1: bin Salman, who has other priorities in mind. Potentially you 288 00:16:54,280 --> 00:16:57,280 Speaker 1: nail it with your epilog page tune in fifty three. 289 00:16:57,640 --> 00:17:01,000 Speaker 1: For their sons, there's been this trance for a royal 290 00:17:01,160 --> 00:17:05,520 Speaker 1: power and royal prerogative. Do the son's in your book? 291 00:17:05,840 --> 00:17:08,040 Speaker 1: Did they look at a Ramco and all that oil 292 00:17:08,280 --> 00:17:12,280 Speaker 1: is ours? Or is there really any understanding of spinning 293 00:17:12,280 --> 00:17:14,800 Speaker 1: it off to some public ownership. And this is the 294 00:17:14,920 --> 00:17:17,560 Speaker 1: real question. And I actually addressed that in a new 295 00:17:17,600 --> 00:17:20,440 Speaker 1: epilogue that has just been written and comes out with 296 00:17:20,480 --> 00:17:24,720 Speaker 1: the paperback version of the book, which is that's the plunk, 297 00:17:25,720 --> 00:17:32,919 Speaker 1: that's the um. It's actually available now in bookstores wherever 298 00:17:32,960 --> 00:17:36,119 Speaker 1: good books are sold. That's enough anyway. But but the 299 00:17:36,200 --> 00:17:39,520 Speaker 1: question is is really really gets a heart of the matter, 300 00:17:39,600 --> 00:17:43,080 Speaker 1: because for many years the Saudi royal family saw this 301 00:17:43,160 --> 00:17:47,040 Speaker 1: company as their life blood. Do they stage well, that 302 00:17:47,200 --> 00:17:50,399 Speaker 1: is the question. Do we know well? Prince Mohammed and 303 00:17:50,480 --> 00:17:53,080 Speaker 1: Salma has said that he sees the company as an 304 00:17:53,080 --> 00:17:56,760 Speaker 1: asset to be sold, which is very different from how 305 00:17:56,880 --> 00:17:59,880 Speaker 1: his forefathers and forebears saw the company. When when you're 306 00:18:00,000 --> 00:18:02,240 Speaker 1: got a RAM call, what's your knowledge of the pipes 307 00:18:02,280 --> 00:18:03,840 Speaker 1: of valves? I mean, have you been out there and 308 00:18:03,880 --> 00:18:07,480 Speaker 1: actually seen these refineries? Um, I've seen some of them. Yes, 309 00:18:07,600 --> 00:18:10,200 Speaker 1: they're all modern, state of the art, right. Oh, this 310 00:18:10,280 --> 00:18:13,159 Speaker 1: is this is top of the line equipment. This is 311 00:18:13,240 --> 00:18:15,760 Speaker 1: top of the line stuff. If a RAM who is 312 00:18:15,800 --> 00:18:18,520 Speaker 1: the best that? Why can't they fix this quickly? I mean, 313 00:18:18,520 --> 00:18:20,719 Speaker 1: I understand there was colossal damage and we don't know yet, 314 00:18:20,800 --> 00:18:24,000 Speaker 1: John Dewey, we really don't. But come on, I mean, 315 00:18:24,160 --> 00:18:26,320 Speaker 1: you know, you bring in the U. S Military and 316 00:18:26,400 --> 00:18:29,200 Speaker 1: the Kuwaiti Navy or whatever and you get this fixed, right. 317 00:18:29,560 --> 00:18:32,320 Speaker 1: So part of the issue is that they're very concerned 318 00:18:32,320 --> 00:18:37,400 Speaker 1: about safety and the sites that were hit UM contained 319 00:18:37,520 --> 00:18:40,280 Speaker 1: very volatile material and so they had to shut down 320 00:18:40,280 --> 00:18:43,439 Speaker 1: the entire facility in order to assess the damage. But 321 00:18:43,560 --> 00:18:48,320 Speaker 1: only some of the particular goosps the gas oil separation 322 00:18:48,320 --> 00:18:51,679 Speaker 1: plans were damaged. Others are completely undamaged, and it's expected 323 00:18:51,840 --> 00:18:54,320 Speaker 1: that they're going to bring that back online very quickly. 324 00:18:54,680 --> 00:18:57,040 Speaker 1: And then the other thing that a RAMCO does is 325 00:18:57,240 --> 00:19:00,360 Speaker 1: they have a lot of built in resiliency and they 326 00:19:00,440 --> 00:19:03,320 Speaker 1: know how to have the parts and bring the parts 327 00:19:03,320 --> 00:19:05,760 Speaker 1: in and repair it, so we can I think we 328 00:19:05,800 --> 00:19:09,320 Speaker 1: can expect that they may bring production back online faster 329 00:19:09,480 --> 00:19:13,560 Speaker 1: than is expected. I've always found diplomacy within OPAQUE absolutely 330 00:19:13,560 --> 00:19:16,360 Speaker 1: fascinating how countries like Saudi Arabia and Iran can get 331 00:19:16,359 --> 00:19:18,679 Speaker 1: along with each other within OPEC, and then obviously outside 332 00:19:18,720 --> 00:19:21,160 Speaker 1: of OPEC there's major issues. I just wonder how much 333 00:19:21,160 --> 00:19:24,720 Speaker 1: more complicated it gets now Alpha has gone and he's 334 00:19:24,760 --> 00:19:28,960 Speaker 1: been replaced by Prince Amtulasie has been sellow. How complicated 335 00:19:29,000 --> 00:19:32,240 Speaker 1: there things now that someone a member of the family 336 00:19:33,040 --> 00:19:38,080 Speaker 1: is running energy policy within OPEQ. And that's an entirely 337 00:19:38,240 --> 00:19:42,200 Speaker 1: new area to get into because the Saudis have never 338 00:19:42,359 --> 00:19:46,720 Speaker 1: had a royal family member running oil policy and oil diplomacy. 339 00:19:46,720 --> 00:19:49,960 Speaker 1: They've always had a professional, either someone from a RAMCO 340 00:19:50,480 --> 00:19:53,520 Speaker 1: or really someone dedicated in the ministry who's not a 341 00:19:53,560 --> 00:19:58,159 Speaker 1: family member. So that OPEC meeting in December in Vienna 342 00:19:58,240 --> 00:20:00,480 Speaker 1: is going to be a big, big deal. Are seeing 343 00:20:00,520 --> 00:20:04,080 Speaker 1: how Iran and Saudi Arabia get along there? If you're 344 00:20:04,119 --> 00:20:07,080 Speaker 1: just joining us, ellen Wald, with us out of Jacksonville University, 345 00:20:07,119 --> 00:20:09,560 Speaker 1: and also with the Atlantic Council of course the important 346 00:20:09,560 --> 00:20:13,399 Speaker 1: book Saudi inc The Arabian Kingdom's pursuit of profit and power. 347 00:20:13,600 --> 00:20:16,320 Speaker 1: Thrilled that she could join John and uh Me this morning. 348 00:20:16,320 --> 00:20:20,320 Speaker 1: Your future is flat, allen Wald, if if we look 349 00:20:20,400 --> 00:20:23,800 Speaker 1: at the sum total of Saudi, there's always been and 350 00:20:23,840 --> 00:20:26,440 Speaker 1: this is where your Middle East history expertise really comes 351 00:20:26,480 --> 00:20:32,720 Speaker 1: in a narrowness or separateness to their religious Islamic experiment 352 00:20:32,920 --> 00:20:36,600 Speaker 1: versus the adjacent Arab states. Is that at play here 353 00:20:36,720 --> 00:20:41,040 Speaker 1: in their response or are they communicating with their adjacent 354 00:20:41,200 --> 00:20:44,080 Speaker 1: states in a new more modern way. Well, believe it 355 00:20:44,160 --> 00:20:46,480 Speaker 1: or not, we just had news that this howdy government 356 00:20:46,680 --> 00:20:52,360 Speaker 1: is instructing the leaders in mosques to discuss what happened 357 00:20:52,359 --> 00:20:54,760 Speaker 1: with a Ramco in their Friday sermons and what is 358 00:20:54,760 --> 00:20:57,199 Speaker 1: the symbolism of them. Well, it's a symbolism that you 359 00:20:57,400 --> 00:21:01,160 Speaker 1: really cannot totally disconnect one from the other, and that 360 00:21:01,400 --> 00:21:04,119 Speaker 1: the importance of the mosque and the importance of the 361 00:21:04,160 --> 00:21:09,040 Speaker 1: relationship between the Saudi monarchy and the Islamic clerical establishment 362 00:21:09,440 --> 00:21:11,960 Speaker 1: is really still key and plays a key role in 363 00:21:12,200 --> 00:21:15,080 Speaker 1: how they communicate with their people. Explain, I'm going to 364 00:21:15,240 --> 00:21:18,120 Speaker 1: understand that the distance from Yemen to Saudi means it's 365 00:21:18,200 --> 00:21:21,439 Speaker 1: clearly this was not an attack from Yemen. But explain 366 00:21:21,520 --> 00:21:26,919 Speaker 1: the triangulation of riod Yemen and Tehran, so they're clearly 367 00:21:26,960 --> 00:21:30,479 Speaker 1: pretty close to each other. Um, Iran is across the Gulf, 368 00:21:30,520 --> 00:21:32,919 Speaker 1: and Yemen is is now below. But there is this 369 00:21:33,000 --> 00:21:38,080 Speaker 1: association between the rebels and Yemen, the Hoothies and the Iranians, 370 00:21:38,200 --> 00:21:41,159 Speaker 1: and for a while that that connection was a bit suspect. 371 00:21:41,400 --> 00:21:44,680 Speaker 1: But I've even heard of American military people have told 372 00:21:44,720 --> 00:21:46,920 Speaker 1: me that when they were on tour in the Gulf, 373 00:21:46,960 --> 00:21:50,840 Speaker 1: they saw the little boats ferrying things from Iran to 374 00:21:51,200 --> 00:21:54,600 Speaker 1: Yemen right across across the Gulf and ferrying the supplise. 375 00:21:55,280 --> 00:21:58,120 Speaker 1: So it's it's clear that, Um, you know that there 376 00:21:58,240 --> 00:22:02,560 Speaker 1: is an association between Iran and the rebels in Yemen, 377 00:22:02,720 --> 00:22:06,359 Speaker 1: and that there is coordination involved in these attacks on 378 00:22:06,400 --> 00:22:08,960 Speaker 1: Saudi Arabia. Why do you think we'll end up in 379 00:22:09,000 --> 00:22:11,040 Speaker 1: the blame game? Just read the Ta Leaves force as 380 00:22:11,080 --> 00:22:13,159 Speaker 1: you see things right now. Yeah, this is this is 381 00:22:13,160 --> 00:22:16,560 Speaker 1: a big question. The US is pretty firmly identifying Iran 382 00:22:16,760 --> 00:22:19,640 Speaker 1: as the culport here, but Saudi Arabia seems to be 383 00:22:20,080 --> 00:22:22,439 Speaker 1: taking a step back and saying, well, we think the 384 00:22:22,440 --> 00:22:24,480 Speaker 1: equipment came from Iran, but we're not going to go 385 00:22:24,520 --> 00:22:27,240 Speaker 1: ahead and blame them entirely. Let's bring in the U 386 00:22:27,320 --> 00:22:29,280 Speaker 1: n And I think that this is a recognition of 387 00:22:29,280 --> 00:22:32,200 Speaker 1: the fact that NBS doesn't want to go to war 388 00:22:32,240 --> 00:22:34,960 Speaker 1: against Iran, and if he comes out and says Iran 389 00:22:35,000 --> 00:22:38,520 Speaker 1: attacked us, he would be incumbent upon him to respond, 390 00:22:38,680 --> 00:22:40,879 Speaker 1: and he can't or he knows he doesn't want to 391 00:22:40,920 --> 00:22:43,040 Speaker 1: get into that. We mentioned the heritage here of all 392 00:22:43,080 --> 00:22:45,840 Speaker 1: of our reading on air the Arab States, Robert Lacey 393 00:22:45,920 --> 00:22:49,880 Speaker 1: and Daniel Jurgen and others. How far removed are we 394 00:22:50,000 --> 00:22:54,600 Speaker 1: from our myths and our stereotypes of our relationship and 395 00:22:54,760 --> 00:22:57,879 Speaker 1: oil in the Arab States. In Saudi Arabia, so oil 396 00:22:57,920 --> 00:23:01,120 Speaker 1: has always operated kind of outside of a lot of 397 00:23:01,160 --> 00:23:05,919 Speaker 1: the traditional issues in terms of say, Sunnisia conflict. Oil 398 00:23:05,960 --> 00:23:08,439 Speaker 1: has always been been kind of outside of that. And 399 00:23:08,600 --> 00:23:12,320 Speaker 1: like you said, Iran and Saudi Arabia can work together 400 00:23:12,440 --> 00:23:16,040 Speaker 1: in oil, whereas in other respects they can't. But they 401 00:23:16,080 --> 00:23:20,040 Speaker 1: don't always get along in oil. The countries have different objectives, 402 00:23:20,119 --> 00:23:23,320 Speaker 1: so they are able to step step out of that 403 00:23:23,560 --> 00:23:27,800 Speaker 1: context at times. Okay, we we've learned that you're Our 404 00:23:28,440 --> 00:23:30,720 Speaker 1: entourage has learned that you're a New York Giants fan. 405 00:23:31,400 --> 00:23:35,359 Speaker 1: I am. Here's Manning done. I don't think he's done yet. 406 00:23:35,920 --> 00:23:39,600 Speaker 1: I think he's got at least another season in him. Okay, 407 00:23:39,640 --> 00:23:41,800 Speaker 1: there we go. Now we've got some real information we 408 00:23:41,800 --> 00:23:45,600 Speaker 1: can use. And then thank you. I'm getting them screaming 409 00:23:45,640 --> 00:23:48,800 Speaker 1: in my ass. She's got to go dr Wild. Thank 410 00:23:48,840 --> 00:23:56,960 Speaker 1: you so much. Wonderful books. The Arabian Kingdom's pursuit of profits. Now, 411 00:23:55,200 --> 00:23:59,240 Speaker 1: don't they don't talk to me. They just talk to 412 00:23:59,280 --> 00:24:01,720 Speaker 1: you and tell me anything. Oh, I think she's going 413 00:24:01,720 --> 00:24:06,720 Speaker 1: to the TV chat. Well it's good. I don't know. 414 00:24:20,119 --> 00:24:23,000 Speaker 1: I'm not distressed because in the studio is the right 415 00:24:23,000 --> 00:24:26,280 Speaker 1: guy to talk about oil supply and demand. Here is 416 00:24:26,320 --> 00:24:29,439 Speaker 1: Paul Sanky with missol. Paul, I've got to ask you 417 00:24:29,480 --> 00:24:33,320 Speaker 1: this question. I've got an Oxford Institute twenty one page 418 00:24:33,640 --> 00:24:38,840 Speaker 1: uh paper on the dynamics of supply and demand as 419 00:24:38,880 --> 00:24:41,159 Speaker 1: we go into Saudian and a Ramco. How tight was 420 00:24:41,240 --> 00:24:44,000 Speaker 1: the market on Friday? On Friday, the market wasn't tight 421 00:24:44,080 --> 00:24:48,240 Speaker 1: at all. Everyone was worried about Actually we did see 422 00:24:48,560 --> 00:24:52,280 Speaker 1: inventory's drawing in the second half now um, but we 423 00:24:52,359 --> 00:24:55,960 Speaker 1: had a really significant non opaque, non US growth in 424 00:24:56,000 --> 00:24:57,919 Speaker 1: the market as well as the US growth, and that 425 00:24:58,040 --> 00:25:01,440 Speaker 1: was looking overwhelming for all this happened. The thrust of 426 00:25:01,480 --> 00:25:04,439 Speaker 1: the paper is demand really matters? What's the backdrop of 427 00:25:04,480 --> 00:25:09,080 Speaker 1: global oil demand? Given what the shock that Saudi's head, well, 428 00:25:09,440 --> 00:25:11,360 Speaker 1: I think the numbers were drifting as low as only 429 00:25:11,400 --> 00:25:15,240 Speaker 1: six hundred thousand barrels a day of demand growth next year. 430 00:25:15,280 --> 00:25:18,160 Speaker 1: That was sort of the new paradigm of concerns about 431 00:25:18,200 --> 00:25:20,840 Speaker 1: the economy. All the various indicators that we see slowing 432 00:25:20,840 --> 00:25:25,200 Speaker 1: down economically globally, the major agencies are still above a 433 00:25:25,240 --> 00:25:28,560 Speaker 1: million of growth next year. It is very obviously very 434 00:25:28,800 --> 00:25:32,040 Speaker 1: GDP sensitive, so we'll have to see. For example, these 435 00:25:32,080 --> 00:25:35,560 Speaker 1: attacks are obviously a challenge for China in terms of 436 00:25:35,600 --> 00:25:38,879 Speaker 1: their dependence on imported Middle Eastern oil so we'll have 437 00:25:38,960 --> 00:25:41,720 Speaker 1: to see how things roll through. We're still at around 438 00:25:41,760 --> 00:25:43,600 Speaker 1: a million barrels a day of growth for next year. 439 00:25:43,640 --> 00:25:46,960 Speaker 1: What we've done is we've aggressively cut our Saudi numbers obviously, 440 00:25:47,440 --> 00:25:49,679 Speaker 1: so Paul, it's in a sense getting a sense of 441 00:25:49,680 --> 00:25:51,399 Speaker 1: where to cut your Saudi numbers. It seems like the 442 00:25:51,400 --> 00:25:53,119 Speaker 1: news coming out of day out of the Kingdom is 443 00:25:53,359 --> 00:25:56,600 Speaker 1: this might be a little bit longer than a that 444 00:25:56,840 --> 00:25:59,160 Speaker 1: maybe what we thought yesterday, This might be in terms 445 00:25:59,200 --> 00:26:01,520 Speaker 1: of disruption to play a little bit longer. Yeah, the 446 00:26:01,320 --> 00:26:04,200 Speaker 1: new the new Oil Minister is doing a press conference 447 00:26:04,200 --> 00:26:07,479 Speaker 1: at one fifteen Eastern New York time this afternoon, so 448 00:26:07,560 --> 00:26:11,239 Speaker 1: presumably we'll get an update there. We're all struck by 449 00:26:11,280 --> 00:26:16,439 Speaker 1: the accuracy of the attacks. Every tank was hit almost 450 00:26:16,480 --> 00:26:19,399 Speaker 1: identical spot. Yeah. What we're also hearing is that some 451 00:26:19,480 --> 00:26:22,280 Speaker 1: of the missiles didn't make it. So they have the missiles, 452 00:26:22,280 --> 00:26:23,439 Speaker 1: so they're going to be able to do a lot 453 00:26:23,480 --> 00:26:27,399 Speaker 1: of intelligence on the ones that didn't explode. But everyone 454 00:26:27,480 --> 00:26:30,560 Speaker 1: right now is pointing towards the border of Iran Iraq 455 00:26:30,680 --> 00:26:32,600 Speaker 1: as the source of the missile, so we'll see if 456 00:26:32,600 --> 00:26:34,879 Speaker 1: they have anything to add on that. When the All 457 00:26:34,920 --> 00:26:37,560 Speaker 1: Minister speaks no doubt the all Minister given Saudi has 458 00:26:37,600 --> 00:26:40,800 Speaker 1: been very good at communicating to the market. We'll be 459 00:26:40,880 --> 00:26:43,119 Speaker 1: talking about the outage and how long it's going to last. 460 00:26:43,160 --> 00:26:46,160 Speaker 1: But as noted by Tom, it seems a sorry by you. 461 00:26:46,840 --> 00:26:50,720 Speaker 1: It seems it seems that this outage is gonna Actually, 462 00:26:50,720 --> 00:26:52,880 Speaker 1: my anti missile defenses are up, Tom, whenever I come 463 00:26:52,880 --> 00:26:55,800 Speaker 1: on the radio with you, nervously waiting for you to 464 00:26:55,840 --> 00:26:58,600 Speaker 1: put a humbling around me. But no, you know, I 465 00:26:58,640 --> 00:27:02,440 Speaker 1: think the first reports were it's going to be back 466 00:27:02,480 --> 00:27:05,879 Speaker 1: by Monday were inexplicable, inexplicable, couldn't cann't work that out 467 00:27:05,920 --> 00:27:08,359 Speaker 1: at all, And we were very skeptical were coming into 468 00:27:08,400 --> 00:27:11,000 Speaker 1: this particular issue. I had a kind of felt like 469 00:27:11,000 --> 00:27:13,240 Speaker 1: what was really driving oil? Talking to people like you 470 00:27:13,320 --> 00:27:15,840 Speaker 1: as more of the demand side of the equation, and 471 00:27:15,840 --> 00:27:18,520 Speaker 1: and you know, thinking about maybe perhaps a global recession 472 00:27:18,560 --> 00:27:20,919 Speaker 1: coming and that's really pushing down oil prices. But now 473 00:27:20,960 --> 00:27:22,720 Speaker 1: that you have to that's the supply side of the 474 00:27:22,720 --> 00:27:26,200 Speaker 1: equation of your business comes much more into play now. Yeah, 475 00:27:26,280 --> 00:27:28,320 Speaker 1: all things being equal, and I'm thinking back to the 476 00:27:28,320 --> 00:27:32,200 Speaker 1: global financial crisis. But let's say a normal recession, there 477 00:27:32,240 --> 00:27:34,760 Speaker 1: isn't that much range on demand. You know, let's say 478 00:27:34,840 --> 00:27:36,680 Speaker 1: it's between a half a million in a very bad 479 00:27:36,760 --> 00:27:40,600 Speaker 1: year this population pressure obviously, and then one one and 480 00:27:40,600 --> 00:27:42,960 Speaker 1: a half you know, million of growth would be a 481 00:27:43,040 --> 00:27:45,720 Speaker 1: very good year. So there's only a one million range arguably. 482 00:27:46,200 --> 00:27:47,639 Speaker 1: And as you know, what we've seen here is a 483 00:27:47,720 --> 00:27:50,919 Speaker 1: five point seven million loss of supply from the Central 484 00:27:50,920 --> 00:27:54,399 Speaker 1: Bank of Oil. You know, that's kind of far bigger 485 00:27:54,400 --> 00:27:56,240 Speaker 1: than anything that will happen on the demand side, although 486 00:27:56,280 --> 00:27:58,040 Speaker 1: demand can be weak too here of course on a 487 00:27:58,040 --> 00:28:01,000 Speaker 1: substitute basis. Can people at the margin just put it 488 00:28:01,040 --> 00:28:05,840 Speaker 1: on where we're in or Nigeria or Kuwait or Russia 489 00:28:06,000 --> 00:28:08,840 Speaker 1: or America put it on at the margins, so it's 490 00:28:10,160 --> 00:28:14,320 Speaker 1: the gap evapiate evaporates quickly, No, because there's no spell capacity. 491 00:28:14,359 --> 00:28:16,399 Speaker 1: I mean, the only specupacity we have is in U 492 00:28:16,440 --> 00:28:18,399 Speaker 1: A E and Q eight right right around where the 493 00:28:18,440 --> 00:28:21,000 Speaker 1: action is. Because what we're all terrified and on tents 494 00:28:21,040 --> 00:28:23,040 Speaker 1: hooks about here is what's the Saudi response is going 495 00:28:23,080 --> 00:28:24,240 Speaker 1: to be. I mean, are they just going to sit 496 00:28:24,280 --> 00:28:25,639 Speaker 1: back and take this or is there going to be 497 00:28:25,680 --> 00:28:28,359 Speaker 1: some sort of military response? And what will the US 498 00:28:28,440 --> 00:28:33,359 Speaker 1: do in that context? So there's no specpassion and Venezuela. 499 00:28:33,440 --> 00:28:35,760 Speaker 1: There is maybe some in Nigeria, but they've been producing 500 00:28:35,760 --> 00:28:38,400 Speaker 1: full on. There's none in One risk is Libya, which 501 00:28:38,440 --> 00:28:40,560 Speaker 1: is performing quite well right now, that could go down 502 00:28:41,040 --> 00:28:43,200 Speaker 1: and then of course a doubt that sanctions are going 503 00:28:43,280 --> 00:28:45,640 Speaker 1: to be alleviated on Iran given the current news play. 504 00:28:45,920 --> 00:28:49,120 Speaker 1: What does Kuwait do to defend those fields? I mean, 505 00:28:49,120 --> 00:28:51,960 Speaker 1: this is a Falklands work question. After the exercise missile 506 00:28:52,000 --> 00:28:58,160 Speaker 1: took how does Kuwait defend themselves into this this Tuesday 507 00:28:58,200 --> 00:29:01,080 Speaker 1: evening into Wednesday? As a mayor, your question, if Saudi 508 00:29:01,160 --> 00:29:04,520 Speaker 1: has spent as much as Saudi has spent on defense, um, 509 00:29:04,800 --> 00:29:07,800 Speaker 1: you know, puts towards a hundred billion dollars of spending 510 00:29:07,800 --> 00:29:11,000 Speaker 1: on on we thought defense against this kind of attack, 511 00:29:11,040 --> 00:29:13,200 Speaker 1: and it seems like there was zero defense when it hits. 512 00:29:13,240 --> 00:29:16,160 Speaker 1: So I'm sure the quwaities and others are all reviewing 513 00:29:16,920 --> 00:29:19,240 Speaker 1: everything that you know, everything that they're doing in terms 514 00:29:19,280 --> 00:29:22,720 Speaker 1: of safety because this was a totally shocking and very 515 00:29:22,800 --> 00:29:26,040 Speaker 1: dramatically impactful attack. Give us a sense for here in 516 00:29:26,040 --> 00:29:28,360 Speaker 1: the US, we always hear about shale shale share. We 517 00:29:28,360 --> 00:29:30,400 Speaker 1: can flood the market with crewe, but that's not the issue. 518 00:29:30,440 --> 00:29:34,080 Speaker 1: As you mentioned, it's just the refining capacity, it's just 519 00:29:34,120 --> 00:29:35,640 Speaker 1: not there. Is that also true here in the US, 520 00:29:36,720 --> 00:29:39,320 Speaker 1: And well, we're okay. For the main problem in refining 521 00:29:39,360 --> 00:29:41,680 Speaker 1: at the moment is actually the type of crew that's available. 522 00:29:41,720 --> 00:29:43,840 Speaker 1: So we've got too much light sweet basically and not 523 00:29:44,000 --> 00:29:46,280 Speaker 1: enough heavy sour and a big part of that sweet 524 00:29:46,360 --> 00:29:49,640 Speaker 1: versus heavy sour. Yeah, So essentially the refining system in 525 00:29:49,640 --> 00:29:52,960 Speaker 1: the US is optimized to use a harder to refine 526 00:29:53,320 --> 00:29:58,520 Speaker 1: higher sulfur barrel, which is typically cheaper than the US 527 00:29:58,560 --> 00:30:01,600 Speaker 1: shale growth, which is a it's easier to refine low 528 00:30:01,640 --> 00:30:03,840 Speaker 1: self for barrel. It's not the end of the world 529 00:30:03,880 --> 00:30:06,280 Speaker 1: because you can actually refine light sweet in a heavy 530 00:30:06,280 --> 00:30:09,360 Speaker 1: sour refinery. It's just not optimal. But you can't refine 531 00:30:09,360 --> 00:30:11,640 Speaker 1: heavy sour and a light sweet refinery. So, you know, 532 00:30:11,680 --> 00:30:14,920 Speaker 1: we watched carefully for for for the capacity issues that 533 00:30:14,960 --> 00:30:18,600 Speaker 1: we're facing. The capex of the industry in general refining 534 00:30:18,760 --> 00:30:22,320 Speaker 1: and e MP is constrained at the moment. It's a 535 00:30:22,320 --> 00:30:25,240 Speaker 1: new theme for e MP, and we're urging the companies 536 00:30:25,320 --> 00:30:27,320 Speaker 1: not to go out and chase the higher price, but 537 00:30:27,400 --> 00:30:31,320 Speaker 1: to please finally generate free cash FLA I got twenty 538 00:30:31,400 --> 00:30:34,400 Speaker 1: seconds left. What will you listen for this one pm 539 00:30:34,440 --> 00:30:39,040 Speaker 1: press conference? Well he's new, so that's interesting. We know him, 540 00:30:39,040 --> 00:30:42,480 Speaker 1: but it is his first major announcement as energy minister. 541 00:30:42,840 --> 00:30:44,360 Speaker 1: We want to know how long this stuff is out for, 542 00:30:44,480 --> 00:30:46,560 Speaker 1: you know, how when are the when are what barrel's 543 00:30:46,600 --> 00:30:48,800 Speaker 1: coming back and what time frame. At the moment, we're 544 00:30:48,840 --> 00:30:51,959 Speaker 1: forecasting seven million a day of Staudy production in Q four, 545 00:30:52,400 --> 00:30:54,920 Speaker 1: so that's are over under For what we take away 546 00:30:54,960 --> 00:30:58,040 Speaker 1: from this definitive Paul Sanky, missour, we are thrilled you 547 00:30:58,040 --> 00:31:00,880 Speaker 1: could find time to come by to Mr Sank. He 548 00:31:00,920 --> 00:31:03,240 Speaker 1: has been doing this for a few years. It's far back. 549 00:31:03,240 --> 00:31:05,640 Speaker 1: I remember him and Adams Saminsky at Deutsche Bank. It 550 00:31:05,640 --> 00:31:10,720 Speaker 1: comes to just stopped. They had a spreadsheet on the back, Paul, 551 00:31:10,800 --> 00:31:14,000 Speaker 1: and you read it like gosp Of course, the Saminsky 552 00:31:14,120 --> 00:31:33,200 Speaker 1: Sanky brilliance here he is. You get lucky and we 553 00:31:33,360 --> 00:31:36,360 Speaker 1: do with the Natamadi. She's Parker Professor of Economics and 554 00:31:36,400 --> 00:31:40,959 Speaker 1: Finance as Stanford University, squirming here uncontrollably listening to the 555 00:31:41,000 --> 00:31:45,160 Speaker 1: capitalist gates James Madison. If memory angels, no government would 556 00:31:45,200 --> 00:31:49,600 Speaker 1: be necessary. Is it necessary to break up the tech companies? Well, 557 00:31:49,640 --> 00:31:53,320 Speaker 1: I agree with with the the gates here in the 558 00:31:53,360 --> 00:31:55,120 Speaker 1: sense that we have to see what it is we 559 00:31:55,160 --> 00:31:58,120 Speaker 1: don't like and we have to go at that. So 560 00:31:58,240 --> 00:32:00,880 Speaker 1: breaking up by itself, it's the same for banks. It's 561 00:32:00,960 --> 00:32:05,320 Speaker 1: just that sort of quickie SoundBite, but exactly what problem. 562 00:32:05,720 --> 00:32:08,520 Speaker 1: In other ways, the size becomes a symptom of the problem, 563 00:32:08,600 --> 00:32:10,960 Speaker 1: and so treating just a symptom is not going to 564 00:32:11,080 --> 00:32:13,680 Speaker 1: necessarily take care of the underlying problem. So if the 565 00:32:13,760 --> 00:32:18,440 Speaker 1: underlying problem anti competitive behaviors or dark pattern use of 566 00:32:18,960 --> 00:32:23,240 Speaker 1: contract or whatever, we have to outload that. Where are 567 00:32:23,240 --> 00:32:26,840 Speaker 1: the shadows right now? In banking Even your harshest critics 568 00:32:27,040 --> 00:32:30,200 Speaker 1: hang on your every word so they can think smarter 569 00:32:30,440 --> 00:32:34,160 Speaker 1: about what's out there. Where are the shadows in two 570 00:32:34,160 --> 00:32:37,120 Speaker 1: thousand twenty, Well, I mean we have a lot of 571 00:32:37,200 --> 00:32:41,840 Speaker 1: places where fragilities can can hit the banking system. I 572 00:32:41,840 --> 00:32:45,239 Speaker 1: mean there's a lot of rumbling in Europe, there's uh 573 00:32:45,920 --> 00:32:49,080 Speaker 1: all kinds of trade wars going on, there's lots of 574 00:32:49,080 --> 00:32:52,960 Speaker 1: there's cyber always there. There could be anything that could 575 00:32:53,400 --> 00:32:59,720 Speaker 1: hit a deck of cards that power um Tom. I 576 00:32:59,760 --> 00:33:02,280 Speaker 1: also to bring our viewers and of course the professor 577 00:33:02,320 --> 00:33:04,600 Speaker 1: up to date with what's going on right now in 578 00:33:04,600 --> 00:33:07,920 Speaker 1: the nind Kingdom, which is Boris Johnson and his lawyers, 579 00:33:07,920 --> 00:33:10,560 Speaker 1: though he's not actually going there himself at the High Court, 580 00:33:10,920 --> 00:33:14,240 Speaker 1: but his strategy certainly is coming under scrutiny at the 581 00:33:14,240 --> 00:33:17,440 Speaker 1: Supreme Court of the UK. Hearings have become in London 582 00:33:17,840 --> 00:33:20,360 Speaker 1: and they will laugh about three days. The court actually 583 00:33:20,360 --> 00:33:22,960 Speaker 1: has not given a ruling date, but of course we'll 584 00:33:23,000 --> 00:33:26,640 Speaker 1: continuing will be continuing to watch this live stream and 585 00:33:26,920 --> 00:33:29,160 Speaker 1: bring you up to date with anything that we're hearing. 586 00:33:29,200 --> 00:33:32,080 Speaker 1: Let's get back to and at Mty the finance and 587 00:33:32,080 --> 00:33:36,000 Speaker 1: economics professor at Stanford and professor when you look at 588 00:33:36,040 --> 00:33:38,280 Speaker 1: some of the concerns right, it's basically that we still 589 00:33:38,320 --> 00:33:42,480 Speaker 1: have a fragile and unhealthy financial system. What would make 590 00:33:42,480 --> 00:33:45,640 Speaker 1: it better? What regulation would you look at so that 591 00:33:45,680 --> 00:33:49,160 Speaker 1: we feel safer in the next crisis. Well, one thing 592 00:33:49,200 --> 00:33:51,680 Speaker 1: I've been arguing for is that we have to first 593 00:33:51,680 --> 00:33:56,880 Speaker 1: of all assess the level of fragility and indebtedness and 594 00:33:56,920 --> 00:33:59,240 Speaker 1: interconnectedness in this market, and then that we have to 595 00:33:59,680 --> 00:34:02,440 Speaker 1: act reduce it. Because the incentives in the system are 596 00:34:02,560 --> 00:34:07,640 Speaker 1: to remain fragile. People within it benefit from that, and 597 00:34:07,720 --> 00:34:11,040 Speaker 1: the rest of us are endangered. So a fragile system 598 00:34:11,080 --> 00:34:14,080 Speaker 1: is sort of inherent in banking, but not for good reasons. 599 00:34:14,520 --> 00:34:17,399 Speaker 1: So just basically, once you fragile, you want to just 600 00:34:17,760 --> 00:34:20,759 Speaker 1: basically live on debt all the time, and it just 601 00:34:20,840 --> 00:34:24,839 Speaker 1: gets ratcheted up and shortened maturities, and not all of 602 00:34:24,840 --> 00:34:27,959 Speaker 1: it is for for for good. Everybody chasing yields now 603 00:34:28,160 --> 00:34:31,359 Speaker 1: and and and going for their short term you know, 604 00:34:31,640 --> 00:34:36,000 Speaker 1: dividends or pay out on their co cot securities or 605 00:34:36,040 --> 00:34:38,480 Speaker 1: whatever it is, and so all of that ends up 606 00:34:38,560 --> 00:34:41,200 Speaker 1: building up more fragility in the system. So I think, 607 00:34:41,600 --> 00:34:44,400 Speaker 1: but we need to take care of that. The professor 608 00:34:44,520 --> 00:34:46,200 Speaker 1: is the right person to regulate this, right, because I 609 00:34:46,280 --> 00:34:48,960 Speaker 1: keep on being told that actually, you know, no matter what, 610 00:34:49,120 --> 00:34:51,520 Speaker 1: bankers don't want to out of regulate themselves because they 611 00:34:51,640 --> 00:34:54,520 Speaker 1: always try and get away with as much as they can, 612 00:34:54,719 --> 00:34:58,560 Speaker 1: and regulators, you know, probably don't understand as much as 613 00:34:58,560 --> 00:35:01,840 Speaker 1: the complex issues as they should it. That's right. So 614 00:35:01,840 --> 00:35:05,960 Speaker 1: so regulators are using all kinds of metrics for safety 615 00:35:06,120 --> 00:35:08,840 Speaker 1: and stress tess and a lot of complicated things that 616 00:35:09,280 --> 00:35:11,399 Speaker 1: involve a lot of assumptions. And we saw that before 617 00:35:11,400 --> 00:35:14,880 Speaker 1: the financial crisis, and I'm sorry to say that in principle. 618 00:35:15,120 --> 00:35:18,400 Speaker 1: They're using some of the same approaches to this system 619 00:35:18,480 --> 00:35:22,000 Speaker 1: and the same structure of the flawed structure of the regulation, 620 00:35:22,400 --> 00:35:27,479 Speaker 1: and that's that's kind of dismaying. Let's say negative interest rates. 621 00:35:27,640 --> 00:35:30,000 Speaker 1: You've got a lot of smart people out of Stanford. 622 00:35:30,000 --> 00:35:32,080 Speaker 1: We were talking to Professor Schulder of a school on 623 00:35:32,120 --> 00:35:36,520 Speaker 1: the East coast earlier about this. How do you fold 624 00:35:36,600 --> 00:35:40,200 Speaker 1: a not a body, the shadows in the dynamics of 625 00:35:40,239 --> 00:35:43,480 Speaker 1: the balance sheets into this thing. You didn't study it 626 00:35:43,560 --> 00:35:46,359 Speaker 1: Yale when you took your PhD. You're a negative interest rates, 627 00:35:46,560 --> 00:35:48,919 Speaker 1: the negative interest it's not in our textbook. We're gonna 628 00:35:48,920 --> 00:35:52,160 Speaker 1: have to rewrite. That's a social extory, isn't it not? 629 00:35:52,320 --> 00:35:57,000 Speaker 1: Clear markets? Right, it's upside down. Everything about negative interest 630 00:35:57,080 --> 00:35:59,520 Speaker 1: rate is kind of but on a hiacheon basis we 631 00:35:59,600 --> 00:36:02,839 Speaker 1: have a fear of loss, don't we? Yes? I mean we. 632 00:36:03,680 --> 00:36:06,960 Speaker 1: It's it's all like, you know, puts you in a 633 00:36:07,800 --> 00:36:11,200 Speaker 1: territory that we don't. I'm not sure you know your 634 00:36:11,239 --> 00:36:14,600 Speaker 1: next week title. Extend and pretend. That's what we're doing here, right, 635 00:36:14,920 --> 00:36:18,080 Speaker 1: Very good one, because the kicking camps down road. Extending 636 00:36:18,080 --> 00:36:20,440 Speaker 1: and pretending is just the name been the name of 637 00:36:20,480 --> 00:36:23,560 Speaker 1: the game in in certainly in the financial sector for 638 00:36:23,560 --> 00:36:28,360 Speaker 1: forever alright, a professor does the next recession or is 639 00:36:28,360 --> 00:36:31,520 Speaker 1: the next financial crisis? You know, is it around the corner? 640 00:36:31,760 --> 00:36:34,520 Speaker 1: And is it because of what you've just laid out 641 00:36:34,640 --> 00:36:38,280 Speaker 1: quite clearly, you know, a frangile system is just prone 642 00:36:38,320 --> 00:36:43,480 Speaker 1: to to you know, something happening and triggering a collapse 643 00:36:43,560 --> 00:36:47,480 Speaker 1: potentially or panic and runs. Uh. You know. Jamie Diamond 644 00:36:47,600 --> 00:36:51,840 Speaker 1: told the Financial Crisis Inquiry Commission that he told his 645 00:36:51,920 --> 00:36:55,520 Speaker 1: daughter around the time of the financial crisis um when 646 00:36:55,520 --> 00:36:58,120 Speaker 1: she asked him what that, what's a financial crisis? He said, Oh, 647 00:36:58,160 --> 00:37:00,840 Speaker 1: it's just something that happens every know what he said, 648 00:37:00,880 --> 00:37:03,719 Speaker 1: five seven, ten years So by that count, we're kind 649 00:37:03,719 --> 00:37:06,120 Speaker 1: of doful one since it was the big one ten 650 00:37:06,200 --> 00:37:09,279 Speaker 1: years ago, and we are kind of uh extending and 651 00:37:09,320 --> 00:37:12,880 Speaker 1: pretending since then. So I now have in my slides, 652 00:37:13,239 --> 00:37:16,000 Speaker 1: you know, I take the latest headlines of where it's 653 00:37:16,040 --> 00:37:18,239 Speaker 1: going to come from, and you know, people are gonna 654 00:37:18,239 --> 00:37:19,759 Speaker 1: say it's gonna come from the same place as before, 655 00:37:19,840 --> 00:37:23,640 Speaker 1: leverage loans or clos or something else. And you know, 656 00:37:23,800 --> 00:37:25,560 Speaker 1: so it's not clear. Are you in New York to 657 00:37:25,600 --> 00:37:28,520 Speaker 1: see James Diamond that you came. He came to talk 658 00:37:28,560 --> 00:37:31,279 Speaker 1: to Mr Diamond about the future banking. No, but but 659 00:37:31,360 --> 00:37:34,759 Speaker 1: there were there were bankers in a conference and to 660 00:37:34,920 --> 00:37:38,439 Speaker 1: big to faime financial stability bodies. Professor, wonderful to catch 661 00:37:38,520 --> 00:37:42,640 Speaker 1: up in. Congratulations on your continuing research at Stanford, Professor 662 00:37:42,760 --> 00:37:49,239 Speaker 1: Body Partner, Professor at Stanford GSP. Thanks for listening to 663 00:37:49,280 --> 00:37:53,799 Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on 664 00:37:53,880 --> 00:37:59,680 Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm 665 00:37:59,719 --> 00:38:03,040 Speaker 1: on Winter at Tom Keane before the podcast. You can 666 00:38:03,080 --> 00:38:06,280 Speaker 1: always catch us worldwide. I'm Bloomberg Radio