Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast and I'm term
Speaker 1: Keene jay Leye. We bring you insight from the best
Speaker 1: in economics, finance, investment, and international relations. Find Bloomberg Surveillance
Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course,
Speaker 1: on the Bloomberg. One of our top stories, the president's
Speaker 1: latest FED nominee, Stephen Moore, continues to call for a
Speaker 1: central bank to reverse course. According to The New York Times,
Speaker 1: Mr Moore defended his view that they Fed was wrong
Speaker 1: to raise interest rates in September and December. He said
Speaker 1: the FED should immediately reverse course and cut rates by
Speaker 1: half a percentage point. To discuss on the phone. Joining
Speaker 1: us now, Allen Zentner, Morgan Stanley's chief US economist, what
Speaker 1: do you make of that, Allen, the latest call from
Speaker 1: the least FED nominee. Well, I think it echoes sentiment. Um.
Speaker 1: You know, almost widely held across the street that that
Speaker 1: I don't know about September as well, but that the
Speaker 1: FED might not have needed to hike uh in December uh.
Speaker 1: And so I don't think it's unusual to you add
Speaker 1: his voice to those saying that the FED may have
Speaker 1: made a mistake. But expecting the FED to just take
Speaker 1: a look back where they're sitting right now and say
Speaker 1: we went fifty basis too far, let's cut. You know,
Speaker 1: that's really um it is suggests that there's an exact
Speaker 1: science to this. The FED feels pretty comfortable that we're
Speaker 1: somewhere right around neutral. I don't think you'd find anyone
Speaker 1: on the FED that agrees with with Stephen Moore's view
Speaker 1: that they should cut right now without a catalyst. Uh,
Speaker 1: by fifty basis points, what's your base elent for the
Speaker 1: year for the Federal Reserve as it goes on, So
Speaker 1: we don't count them out for the year. I mean
Speaker 1: one thing that so we do have them hiking at
Speaker 1: the tail end of the year in December, so on
Speaker 1: hold for almost the entire year. One thing that I
Speaker 1: was really perplexed about in this latest FED meeting is
Speaker 1: that they're there. I've never seen such a convoluted mess
Speaker 1: in in a summary of economic projections table. I mean,
Speaker 1: you've got a FED that's extraordinarily patient, that has now
Speaker 1: provided so much easing and financial conditions by moving to
Speaker 1: the sidelines and communicating it's stopping the runoff of its
Speaker 1: balance sheet that essentially we've we've done a rate cut.
Speaker 1: If you put financial conditions easing into FED funds equivalent,
Speaker 1: it's worth a rate cut. And for that, their summary
Speaker 1: of economic projections showed that growth continues to deteriorate over
Speaker 1: the next couple of years. Where is the benefit to
Speaker 1: this patient policy. It should be showing up by lifting
Speaker 1: their forecasts, not depressing their forecast now that they've moved
Speaker 1: to the side. I think it ignores the fact that
Speaker 1: they've provided a powerful amount of of easing, which should
Speaker 1: help the economic backdrop. Ellen, good morning, wonderful to speaking
Speaker 1: this morning. Uh I look Ellen, it within the Stephen
Speaker 1: Moore th Kneeler went Tankerossly piece in the New York Times.
Speaker 1: Mr Moore's and there's been ever changing theories for more,
Speaker 1: but he's basically going back to early Marxism, which is
Speaker 1: to found some form of financial system or monetary policy
Speaker 1: off commodity pricing, which I find, you know, my my
Speaker 1: quick take on it is almost early Marxist. Is there
Speaker 1: any modern history of using commodity prices to judge what
Speaker 1: we do with our economy and jobs and inflation? No,
Speaker 1: I just think that it's it's been well proven for
Speaker 1: many decades now that uh, that's too volatile of a measure.
Speaker 1: I mean, if your you know, the your job as
Speaker 1: a central banker is to keep the economy on steady keel. Uh,
Speaker 1: low volatility helps the expansion last for longer. I mean
Speaker 1: tying something to commodity prices. We've learned what's the wrong
Speaker 1: way to go quite some time ago. Um, And so
Speaker 1: it's quite an antiquated, antiquated view at point. And he's
Speaker 1: certainly an outlier. Well, but it's a nostalgia that President
Speaker 1: Trump seems extremely comfortable with to get back to something
Speaker 1: that's not only pre nine twelve but borders on you know,
Speaker 1: I don't even want to give it, you know, folks,
Speaker 1: not to turn this into an academic lecture, but it's
Speaker 1: pre leon valrus of general equilibrium theory. It's like back
Speaker 1: to Thomas Soul's take on the early classicist economists. Is
Speaker 1: that what the president and what Stephen Moore want, you know,
Speaker 1: I don't really know. I mean, I don't know why
Speaker 1: they would propose these policies and lessons because they're comfortable
Speaker 1: with a mercantilistic thought, pre Valessian right, right, But Also,
Speaker 1: you know, you're you're being advised by people that are
Speaker 1: probably old enough to have practiced economics at that time.
Speaker 1: I think I think that that's where some of these
Speaker 1: antiquated views come. Ellen, you gotta see it. I wish
Speaker 1: you were here and are wonderful interactive broker studios. John
Speaker 1: Pharaohs shaking his head, going what are they talking about?
Speaker 1: Magnan decide? John just wrote a beautiful book, My Book
Speaker 1: of the Summer two years ago, on the difficulties that
Speaker 1: modern economists like Zentner have on equilibrium of finding very well,
Speaker 1: I just didn't realize what's stop speaking Greek six minutes
Speaker 1: into the shot. No, we were, but but but Ellen,
Speaker 1: this is critical and that we have a president comfortable
Speaker 1: with the neo or pseudo mercantilism that's pre the modern age,
Speaker 1: right right, But you know, in terms of the FED policy, lucky, luckily,
Speaker 1: they don't share that same sentiment. And you know, let's
Speaker 1: let's I don't believe the odds are very high that
Speaker 1: you confirmed Stephen Moore to the board. But let's say
Speaker 1: he is confirmed to the board. Well, you could try to,
Speaker 1: you know, put lipstick on a pig, so to speak,
Speaker 1: and say, well, look, he's going to be another UM
Speaker 1: source of diversity. Diversity of views is important UM, and
Speaker 1: he can drive in a of his own to try
Speaker 1: to talk through these UH measures and changes at the head.
Speaker 1: And certainly jare Pal has shown that he is completely
Speaker 1: open to discussing everything about how they implement monetary policy
Speaker 1: and so leave it open for debate. But it's not
Speaker 1: something that they're all going to come to consensus on.
Speaker 1: And I don't I believe that the people have also
Speaker 1: taken this too far to assume that because Stephen Moore
Speaker 1: has said the FED should cut by fifty basis points
Speaker 1: that if he gets onto the board UH, that he
Speaker 1: would that they would immediately cut rates. Cutting rates is
Speaker 1: not out of the realm of possibility. When you're at neutrals,
Speaker 1: there should be an equal probability your next move is
Speaker 1: up or down. But it won't be because Steven Moore
Speaker 1: joined the board and said we should cut. It will
Speaker 1: be because economic conditions warrant it. And next next I
Speaker 1: think it's next week, we have book John Stewart Mill
Speaker 1: will join us on the cornal. Is that right, Yes,
Speaker 1: it's that right. We're gonna go way back. Thank you,
Speaker 1: Chief US economist Homma meant to come back from that.
Speaker 1: I'm trying not to insert my opinion of this, but
Speaker 1: I think we're talking early Marxist. Is that you trying,
Speaker 1: I'm trying. No one to Ellen's point, Stephen Moore may
Speaker 1: or may not not get nominated to the Fed. If
Speaker 1: he gets nominated the Fed, he's going to have a
Speaker 1: very difficult time getting the rest of the committee to
Speaker 1: come round to his view. Yeah. I think we understand that,
Speaker 1: at least the way he explains his ultimate objective. I
Speaker 1: actually think the committee may well come round to the
Speaker 1: idea that they might need to cut rates pretty quickly.
Speaker 1: The market's coming round to that idea, Tom. The bond
Speaker 1: market has had a massive move over the last couple
Speaker 1: of weeks, and it's stunning to see the front end
Speaker 1: of the yield curve and yields grind lower once again
Speaker 1: today just Wednesday. Wednesday's always a critical day for Johann Ferroll.
Speaker 1: Is the real yield Where John is to decide, of
Speaker 1: the hours of planning that have on the early week,
Speaker 1: do they stay with it or does he blow up
Speaker 1: the show? And John Tucker and I can see in
Speaker 1: the Bloomberg Interactive Broker's studios. The tension here on the
Speaker 1: blowing up the show and it's like the gey Go
Speaker 1: commercial when you know the whole Wednesday thing, hump day, easy, easy, Okay.
Speaker 1: There's so much to talk about, but we brought in
Speaker 1: a guest who can help you drive for your decision making,
Speaker 1: some structuring. Sometimes sometimes she graces us with her pressures
Speaker 1: on Real Yo two and often on Bloomberg Surveillance pre
Speaker 1: a miserat TV Security's head of global race strategy. Good
Speaker 1: morning to your Prayer. Looking at your latest comments, the
Speaker 1: rates market is too pessimistic. Thank you, thank you, thank you,
Speaker 1: which which show really in shure. I mean, I think
Speaker 1: we need more people who do talk about fixed incomes.
Speaker 1: I'm glad you do that. Thanks Prayer. I appreciate that.
Speaker 1: Good continue that. I'm going to continue. I just wanted
Speaker 1: to look at your face for a little bit. The
Speaker 1: rights market is too pessimistic about the outlook. That's your tape.
Speaker 1: Prier Y. You know we're pricing in now more than
Speaker 1: one uh TWI base points ease this year, so we're
Speaker 1: pricing in a little over thirty based points of cuts. Um.
Speaker 1: I think you know the FED was extremely do wished
Speaker 1: last week. I actually think that's changing the narrative a
Speaker 1: little bit. Here we're going away from We're moving away
Speaker 1: from the market pricing in this you know, dovish Fed goldilocks, Uh,
Speaker 1: you know carry trades equity should do well. So now
Speaker 1: I think the fair is What does the FED know
Speaker 1: that we don't know is the cycle? Has the cycle ended?
Speaker 1: Are we heading into a recession? I think over the
Speaker 1: last week, if you look at price action and fixed income,
Speaker 1: I would even look at drisk assets, and it doesn't
Speaker 1: look like goldilocks is getting priced in again. I think
Speaker 1: now we're talking about you know, it is a recession
Speaker 1: around the corner, and I think the market the reason
Speaker 1: I think the market is still too pessimistic is you
Speaker 1: look at the fundamentals of you as growth. Now we
Speaker 1: do have a lot of payroll later we're gonna get
Speaker 1: the first look at March data in the next couple
Speaker 1: of weeks. I don't think we're falling off a cliff here,
Speaker 1: and so to price and eases, I think the threshold
Speaker 1: is high. Growth needs to be closer to zero. We're
Speaker 1: forecasting above two percent GDP for this year, slower than
Speaker 1: last year, but you know, I think there's a stock
Speaker 1: of recession and eases. I think it's the market reading
Speaker 1: from the devilsh fed. I just don't think we've had
Speaker 1: data that suggests that the US is slowing that materially. Prayer.
Speaker 1: There are so many conflicting signals in the global bond
Speaker 1: market right now, and I'm struggling to understand whether this
Speaker 1: is just a massive monster reach for yield or whether
Speaker 1: it is a market that shifted aggressively towards risk aversion.
Speaker 1: Because if you look at what's handing the credit market,
Speaker 1: with spread still tight and with treasuries rallying, buns rallying,
Speaker 1: but bond markets outside of core government bond markets doing
Speaker 1: pretty terrifically as well, kind of makes me think that
Speaker 1: this is just a global reach for yield at the
Speaker 1: same time as the rates market is pricing in a
Speaker 1: rate cut um. It's difficult to reconcile some of these
Speaker 1: things Prayer right now. I think you raise a good point.
Speaker 1: I think the rates market has made that leap now
Speaker 1: from just to reach field, and I do think that
Speaker 1: was part of the move. I think we've had a
Speaker 1: lot of convexity hedging flows. But again, the you know,
Speaker 1: to your point, pricing in eases is not really an
Speaker 1: extension of the cycle. So I would think that the
Speaker 1: risk asset complexes is only now starting to price in
Speaker 1: that if we are heading into recession extremely most low
Speaker 1: in credit. Let's unpack the jargon convexity hedging. What is
Speaker 1: that fair point? It is? You know this technical term
Speaker 1: that we use in the bond market. So essentially, if
Speaker 1: you are a mortgage investor and you hold a bunch
Speaker 1: of mortgages, interest rates when they fall too much, your
Speaker 1: mortgage duration shortens. Now, if you want to keep a
Speaker 1: certain a certain duration of your portfolio, you have to
Speaker 1: go and buy treasuries. And I think that has been
Speaker 1: a part of the move. Okay, last, so we've had
Speaker 1: to move, and we've had some of these pro dynamic,
Speaker 1: excellent pro choices which are priced up yield lower. But
Speaker 1: are you suggesting that than the bigger picture clicks in
Speaker 1: and we have even more price up and yield lower. Right,
Speaker 1: So I think convexity typically does not trigger a move.
Speaker 1: So the move was triggered I would say by the
Speaker 1: Dovish Fed, this wish fed, and the sphere of a recession.
Speaker 1: I think that took creates two below their lows for
Speaker 1: the year. Then that brings in convexity. The convexity so
Speaker 1: I would say, it's it's a technical flow, it's it's
Speaker 1: reach yield. In a short period of time, people hedge.
Speaker 1: Then it goes back to fundamentals. I we have a
Speaker 1: lot of feed speak. I don't hear any of them
Speaker 1: saying that they're about to ease. So I think fundamentals
Speaker 1: will ultimately matter once we get this convexity flow behind us.
Speaker 1: So I would say there's two basic phases here, tom.
Speaker 1: So we've had the first phase, which essentially as a
Speaker 1: monster reach for yield. Treasury yields got lower, Bundy yields
Speaker 1: got lower, credit spreads tighten up, even the likes of
Speaker 1: BTPs rally Italian bond yields come in as well. And
Speaker 1: then we face the prospect of the market looking at
Speaker 1: the likelihood of a right cut. And this is where
Speaker 1: two things become very hard to reconcile. If you believe
Speaker 1: a rate cut is around the corner, that is not
Speaker 1: an environment where the risk assets perform well. You can't
Speaker 1: have an environment where the FED needs to cut where
Speaker 1: also simultaneously the credit spreads are going to be tied.
Speaker 1: So you need to reconcile those two things. Which one
Speaker 1: breaks so you go into phase two. Phase two essentially,
Speaker 1: as credit spread starts are wide and or you start
Speaker 1: to price out the right cut one or the other,
Speaker 1: something has to give. The question is which, which one
Speaker 1: do you think gives. I'm more in the camp that
Speaker 1: interest rates have become a little bit you know, do pessimistic.
Speaker 1: So I think if if the data suggests that actually
Speaker 1: the economy is growing at you know, one in three
Speaker 1: quarters two, it takes all the reason for the FED
Speaker 1: to hike, but it also does not provide a reason
Speaker 1: for the FED to ease. So I do think the
Speaker 1: interest rates have some room to rise. Now if the
Speaker 1: data all falls apart, then you know, I would agree.
Speaker 1: I think then the rate market may be pricing this
Speaker 1: in fine, but then risk as look a lot more vulnerable.
Speaker 1: On January of this year was a one two year yield. Roughly,
Speaker 1: you know, just a quick look at the chart. When
Speaker 1: we're getting back there rapidly, we're taking out some of
Speaker 1: the right hikes from the fat has been away from
Speaker 1: full faith in credit. How does the full faith in
Speaker 1: credit German tenure the US two year How does it
Speaker 1: readound over the corporate bond space. I think you know,
Speaker 1: particularly when you look at US front end yiels, they're
Speaker 1: actually pretty attractive on a real rate basis in terms
Speaker 1: of how much return you get for the riscue taking.
Speaker 1: So I actually think when full faith and credit risk
Speaker 1: free rates rise, and they have in the US and
Speaker 1: the front end, that actually provides a pretty viable hiding
Speaker 1: place for credit investors. So if I'm a credit investent,
Speaker 1: I'm worried about a recession, maybe I should not be
Speaker 1: in a five year credit piece of paper. I should
Speaker 1: be in three month treasury bills, which is actually giving
Speaker 1: me higher yield than the tenure treasury. So I think
Speaker 1: you do you see these interesting fund flows um fiction
Speaker 1: come investors when they start looking at risk reward doesn't
Speaker 1: look that attractive to take that much risk. So what
Speaker 1: economic data changes that difference in yield the curve of
Speaker 1: the treasury bill to the treasury no three months of
Speaker 1: the tenure. What kind of economic data changes your world? Right?
Speaker 1: I think it's forward looking indicators of of you as growth,
Speaker 1: So I non manufacturing, I think that will matter if
Speaker 1: it's if you're not heading into a recession, I sm
Speaker 1: is still at let's say, then you know you should
Speaker 1: start pricing out some of these cuts and so the
Speaker 1: front and can still stay very anchored, but the long
Speaker 1: instart selling off, so you get a little bit of
Speaker 1: curve steepening. Priam, thank you so much, TV Securities greatly,
Speaker 1: thanks to I understood about it. Thank you for the
Speaker 1: support primus. You know you want to bring into our
Speaker 1: esteem guests absolutely, um, you know, obviously we are are
Speaker 1: here at the Bloomberg Equality Summer Broadcasting Life from the
Speaker 1: link at our world headquarters here in Lectionton Avenue, fifty
Speaker 1: ninth Street, and we think about Hollywood. It's been said
Speaker 1: that Hollywood is one of the least welcoming industries for women.
Speaker 1: And I love this point that I think our guests made.
Speaker 1: Even the coal industry does a better job deally being
Speaker 1: accepting in supportive of women than this Hollywood. So it
Speaker 1: helps us kind of dig through this issue. We welcome
Speaker 1: our our guest, Maria Geiss. She has a writer and director.
Speaker 1: Maria's thanks so much for joining us here at Bloomberg.
Speaker 1: How did it ever get so bad for women in Hollywood?
Speaker 1: What's the history there? Well, let's see, let's start with
Speaker 1: what Hollywood does today. I mean, Hollywood pays out seven
Speaker 1: billion dollars in wages every year, It creates eight percent
Speaker 1: of the media content that's distributed globally, and it helps
Speaker 1: form our cultural narrative through the stories that are told there.
Speaker 1: This is an incredibly powerful industry and it's run by
Speaker 1: a very small group of mostly white liberal men. UM
Speaker 1: the history of of Hollywood, as told so beautifully in
Speaker 1: the film by Tom Donahue called This Changes Everything Screen
Speaker 1: here Last Night, UM shows that in the pioneer days
Speaker 1: of of Hollywood, which began in eighteen ninety six with
Speaker 1: the invention of the movie camera, the cinematograph um invited
Speaker 1: women in and there were lots and lots of women directors, writers,
Speaker 1: and producers up until the big money came in. And
Speaker 1: as soon as the big Wall Street money came in,
Speaker 1: women got pushed out. So we really saw almost no
Speaker 1: women in the industry as storytellers from about nineteen thirty
Speaker 1: until nineteen seventy nine. After the civil rights movement of
Speaker 1: the nineteen sixties and the women's lib movement of the
Speaker 1: nineteen seventies, and then we began to see some shift.
Speaker 1: So really one can look at this as an economic issue,
Speaker 1: a battle for resources. It's a patriarch have has the
Speaker 1: so to what extent has the meat too? This is
Speaker 1: just recent history. To what extent has the meat too movement?
Speaker 1: Do you think going going to impact Hollywood going forward?
Speaker 1: Because it seems to be of the Me too movement?
Speaker 1: UM came in based on the work of the A
Speaker 1: C l U and the e O c SO. On
Speaker 1: October six, the e O C the Equal Rights um
Speaker 1: Commission of the United States Department of Justice started an
Speaker 1: investigation for women directors in Hollywood and UH. Two years later,
Speaker 1: almost the day, on October five, the New York Times
Speaker 1: finally had the Kahan s to publish the expose s
Speaker 1: on Harvey Weinstein. Incidentally that they had been holding onto
Speaker 1: since two thousand and four for thirteen years. So when
Speaker 1: Hillary Clinton was in the Clintons were no longer in power,
Speaker 1: and Trump was now in power. UH, the major media
Speaker 1: was emboldened to publish these stories. It was a watershed moment,
Speaker 1: there's no question about it. But I believe, you know,
Speaker 1: also a diversion because Hollywood has been able to use
Speaker 1: me too and the stories of sexual harassment and abuse
Speaker 1: in the workplace and actresses to um control the narrative.
Speaker 1: And that's what they're doing because when you talk about
Speaker 1: equal employment Opportunity law and the enforcement of Title Federal
Speaker 1: enforcement Title seven in Hollywood, you're talking about fundamentally a
Speaker 1: redistribution of jobs from men to women. And that is
Speaker 1: something that Hollywood doesn't want you very quickly here just
Speaker 1: because of time. You came out of U c l A.
Speaker 1: There's other combines of screenwriting and directing around the world.
Speaker 1: Out of Tish came out and Bowden and Ryan Fleck
Speaker 1: and they're doing Captain Marvel in that do women have
Speaker 1: to advance and succeed going from small movies and working
Speaker 1: up the food time like you did, Frankly, or can
Speaker 1: they jump in now at a higher level. Uh? Basically,
Speaker 1: the way it stands right now, women directed, women were
Speaker 1: directing of episodic TV shows four percent of studio features
Speaker 1: and through Amazon and Netflix. Know that fundamentally, what is
Speaker 1: happening here is that women can work if they work
Speaker 1: for free. Women are doing the lower end of it's
Speaker 1: it's the exception. Lawrence said four years ago, she's sick
Speaker 1: of being adorable. I mean that's simple. Yeah, that women
Speaker 1: need to demand their rights under our laws. You see
Speaker 1: that changing over the grill at the Beverly Hills Hilton
Speaker 1: or at the Sunset Tourro Hotel. Is the dynamic changing? Um?
Speaker 1: I think that there is a great deal of pressure
Speaker 1: right now on the industry. I think the federal investigation
Speaker 1: and the work of the a C L you rock
Speaker 1: to the industry to its core, and they're worried about
Speaker 1: lawsuits and so um they're going to move those numbers
Speaker 1: up through inside efforts, but those will have not historically
Speaker 1: proven to be enduring. Is Disney Fox good for women?
Speaker 1: Is James Wurdock and the rest of them out there
Speaker 1: with Mr Igoran Disney Fox in the new combination? Nobody
Speaker 1: is good for women. Nobody is good for women. All
Speaker 1: all of these the organizations that make up Hollywood, including
Speaker 1: the unions, the talent agencies at studios, and the network
Speaker 1: streaming giants, they all need to be challenged by by
Speaker 1: by a legal action. Is that coming? Is that forthcoming?
Speaker 1: Do you think? I? My belief is because the a
Speaker 1: E O C has been um conducting this investigation and
Speaker 1: perhaps has been in settlement talks for three years and
Speaker 1: four months six months almost and we UM, don't know
Speaker 1: what is going on with that, because uh, they function
Speaker 1: in total confidentiality. However, we have been a small group
Speaker 1: of us have been working very very hard to move
Speaker 1: this into the court system, and I do believe that
Speaker 1: that is the necessary thing. This needs to end up
Speaker 1: in the Supreme Court. Right. It sounds like it sounds
Speaker 1: like pressure is building. It sounds like the me too
Speaker 1: movement might might accelerate that. So very interesting, married guys,
Speaker 1: thank you so much for joining us. Thank you Maria
Speaker 1: as a writer and directors who joins us here talking
Speaker 1: about this equality issue in Hollywood, which again very very
Speaker 1: difficult place historically for women to do well, even harder
Speaker 1: than the coal industry. Believe it or not, but hopefully
Speaker 1: change is coming to Hollywood. What an interesting time. I
Speaker 1: should point out we haven't mentioned it much of West Texas.
Speaker 1: Back to sixty dollars six zero dollars a barrel with
Speaker 1: Brent crude on the edge of seventy. This gets my attention.
Speaker 1: Sixty dollars a barrel and Brent crude with a style.
Speaker 1: Paul Sankey of Missouri and ons incredibly important, your folks,
Speaker 1: is to realize that a decade or more ago the
Speaker 1: world stop when Sankey and company at Deutsche Bank would
Speaker 1: put out a spreadsheet of supply and demand dynamics, and
Speaker 1: they were so influential you'd go over every number of it.
Speaker 1: Mr Sanky is causing great advantage to Missouri America's where
Speaker 1: he is there oil and guest analyst and a legend
Speaker 1: in his own time. Paul, wonderful to have you with us.
Speaker 1: X on mobile is returned five percent a year for
Speaker 1: the last ten years. Why should I own a big
Speaker 1: oil blue chip? Thanks for the intro, Tom, you always
Speaker 1: made me smile. Um, yes, So why should you own
Speaker 1: a big blue ship? Well? Why why you shouldn't as
Speaker 1: the market's worried about technology? Uh, In fact, market wants
Speaker 1: to own technology rightly for the future, and technology, of course,
Speaker 1: in theory, will lower oil demand and raise the oil supply.
Speaker 1: So face value. The answer is you shouldn't. But in reality,
Speaker 1: as I was saying to you earlier on television with Bloomberg,
Speaker 1: the fact is that oil demand is exceeding expect aans
Speaker 1: and efficiency is not learning demand in the way anticipated.
Speaker 1: So if the oil companies can get their act together
Speaker 1: and return cash to shareholders and pay the pay out
Speaker 1: at the end of the oil age, which I think
Speaker 1: they will. I'm not sure about Exxon. We're neutral on
Speaker 1: the store, but certainly in the case of Chevron, we
Speaker 1: can see a ten percent plus cash return to shareholders
Speaker 1: on a sustained basis as achievable by Chevron these kind
Speaker 1: of prices. So if we're in the seventy range, assuming
Speaker 1: that the industry has learned a new year of capital discipline,
Speaker 1: I think returns will be very good and that becomes
Speaker 1: the reason for owning these names. So, Paul, you know,
Speaker 1: one of the things you know, Tom mentioned you know
Speaker 1: your legendary supply and demand models, and I know that
Speaker 1: you and uh, you know, all energy analysts. You can
Speaker 1: rely heavily on those types of models to give you
Speaker 1: a sense of where pricing is going. But one of
Speaker 1: the things that's always, you know, challenged me is just
Speaker 1: kind of where does OPEC want oil to be? Uh,
Speaker 1: that's the question, and kind of where do you think
Speaker 1: they are right now? Well, there's an interesting dynamic here. Firstly,
Speaker 1: Saudi for the first time is actually talking about a
Speaker 1: price range which is seventy to eighty dollar brent. And
Speaker 1: as you say, we're knocking on the door of seventy
Speaker 1: today heading into driving seasons, so I think they'll achieve
Speaker 1: that number. The risk for US is that they actually
Speaker 1: lose control of the market on the upside, particularly if
Speaker 1: we get Iranian sanctions in late April. But one interesting
Speaker 1: dynamic is, firstly, Saudi is what matters the most, but
Speaker 1: we don't have this new member of OPEC called Russia,
Speaker 1: and they actually the companies that don't want such higher prices.
Speaker 1: The tax regime there dist incentivizes them from wanting super
Speaker 1: high prices because it tends to appreciate the ruble and
Speaker 1: increase their costs, while they don't benefit from the higher
Speaker 1: price because of a tax system. But what really matters
Speaker 1: ultimately is Saudi, and Saudi is staying seventy two eighty.
Speaker 1: So what when I think about the U s shell,
Speaker 1: I mean the whole market just over the last few
Speaker 1: years to this, you know, lay person myself kind of
Speaker 1: looking at the energy space, it's really just totally changed
Speaker 1: with the advent of US shale production. So there's a
Speaker 1: sense that this growing commitment in the US to the
Speaker 1: development of the US shale oil output. Does that suggest
Speaker 1: oils lower for longer? It suggests that there's far far
Speaker 1: more supply than would have been argued in the two thousand's.
Speaker 1: We were never peak oil advocates in any way. We
Speaker 1: always said, look, you can crush coal at a hundred
Speaker 1: and fifty dollars a barrel. You know, it's ultimately everything
Speaker 1: is oil. But this new unlocking of technology is absolutely staggering.
Speaker 1: And you've got to keep in mind that the recovery
Speaker 1: rates in the Permian at the moment around twelve percent
Speaker 1: of the oil in place. So the supply side looks
Speaker 1: abundant to say the least. And our argument, obul argument
Speaker 1: is based on the fact that we think demand continues
Speaker 1: to outstrip more negative view of efficiency gains, and you
Speaker 1: know what we call the Tesla effect, and that the
Speaker 1: simple arithmetic of that is widely overstated of the market.
Speaker 1: That's well, that's where I wanted to go. Where is
Speaker 1: the dynamic right now? The dynamic right now for demand
Speaker 1: is it? Is it airplanes flying around in the sky?
Speaker 1: Is it just trucks and cars? I mean, where's that
Speaker 1: at the margin? Where is that demand dynamic? Well, it's
Speaker 1: distillate and so that that it's plans. Jet fuels is
Speaker 1: diesel and jet fuel essentially Hunter million people a year.
Speaker 1: According to Boeing take a plane for the first time
Speaker 1: every year, so that continues to grow. Well, um, just
Speaker 1: at the time we got left Wall, Well, I'm sure
Speaker 1: all of our listeners want to know this from Paul Sanki.
Speaker 1: At the time we've got left, somebody's also precious if
Speaker 1: they got money, they're driving at Tesla Pulse Reny. What
Speaker 1: are they driving if they don't have money? Uh, maybeuver whatever,
Speaker 1: But then they're taking their plane to London or they're
Speaker 1: plane to Washington and their plane to all hair what
Speaker 1: what How does a pro like you respond to a
Speaker 1: guy saving being green in an electric car when they're
Speaker 1: jutting around the world. Well, it's simple, simple arithmetic. I mean,
Speaker 1: the fact of the matter is, with a sixteen year
Speaker 1: life cycle of an American car and the current makeup
Speaker 1: of cars and trucks being sold, there's almost no effect
Speaker 1: from electric vehicles for the next fifteen years. It's it's
Speaker 1: really marginal. As you say, Tesla is very much a
Speaker 1: luxury vehicle. Everyone else is basically built buying gasoline fired
Speaker 1: somewhat more efficient cars and less efficient trucks, but trucks
Speaker 1: for the far more. But every time I get on
Speaker 1: the shuttle to Washington, is it a gas guzzler? Am
Speaker 1: I burning up tons of oil? Well in a car
Speaker 1: or plan, of course. I mean there's no real potential
Speaker 1: for an electric plane at the moment they are testing them,
Speaker 1: but it's pretty early day. And you know, the main
Speaker 1: thing is is trucks and an economic activity are all
Speaker 1: distillate diesel fired. And as long as that keeps coming.
Speaker 1: The other thing is Tom sheer weight of global population
Speaker 1: is still estimated Chinese. Well, we gotta lead it there.
Speaker 1: Paul Sanka Bazoo on Cyclopedic Love to have a model.
Speaker 1: We'll do this again soon. Paul Sanky on oil Now
Speaker 1: a four hour interview with IDEALU of City Private Bank
Speaker 1: as well. We could start with Asia fashion and Vivia
Speaker 1: tam and I was taken over the world. We could
Speaker 1: go to your work in mergers in acquisitions years ago,
Speaker 1: and I remember the Warner Lambert transaction, among many others.
Speaker 1: We could move from this to what you're doing with
Speaker 1: City Group in the demands of high net worth, or
Speaker 1: we could actually talk about Bloomers Equality Summit and anyway,
Speaker 1: that's why we're here to Okay, so take it down
Speaker 1: to four minutes and then we'll go from there. So
Speaker 1: i'd just talk about you know, one of the things
Speaker 1: about the this Equality Summit has been, UM, gender lens investing.
Speaker 1: Give us a sense of what that is for investors
Speaker 1: in your clients, absolutely, Paul. So what we've seen is
Speaker 1: a increased focus on feeling good investments, investments that are
Speaker 1: going to make a strong social impact, and one of
Speaker 1: those aspects is gender lens investing. Today, it's estimated that
Speaker 1: gender lens investing is roughly four and a half billion
Speaker 1: in private and public investment, and that has doubled in
Speaker 1: the last year, so we're on an upward trajectory, but
Speaker 1: it's still a very very small amount. However, there is
Speaker 1: a huge interest in it. Um. You see that you
Speaker 1: can do great investments without giving up any of these
Speaker 1: That's where I wanted to go. I mean Wellesley College.
Speaker 1: I'm sure you're studying with a great Carl Case and
Speaker 1: you would have the facts. Chip Case would have said,
Speaker 1: it's all a great touchy feely wonder wonder. But I
Speaker 1: know you have done the sensitivity chart. I don't mean
Speaker 1: equality sensitivity, I mean a sensitivity analysis of wonder. This
Speaker 1: lens of investing doesn't sacrifice profit, does it. It absolutely
Speaker 1: does not. In fact, it generate more alpha. It has
Speaker 1: been proven time and well. You can pick up which
Speaker 1: it shows that in public companies, women CEOs generate more
Speaker 1: r o I than not. You see companies that have
Speaker 1: women on the boards generating much greater returns over time.
Speaker 1: You see women in the technology sectors that get much
Speaker 1: less funding. Three percent of venture capital funding goes to women,
Speaker 1: and yet they outperform and returns of their male counterparts.
Speaker 1: By These are just some of the facts, but no
Speaker 1: matter what, it goes to show that the diversity of
Speaker 1: the gender lens, diversity, having diverse teams definitely outperforms. So
Speaker 1: it's an alpha and a feel good investment. So how
Speaker 1: about when you sit down with your high net worth
Speaker 1: clients at City, are they open to this type of
Speaker 1: investment or do you really have to prove it to
Speaker 1: them with numbers. So, Paul, it's interesting because a lot
Speaker 1: of our investors are coming to us and asking about
Speaker 1: e s G investments, impact investment, environmental sustainable sustainability governance UM.
Speaker 1: And in addition to that, a lot of our clients,
Speaker 1: particularly are female clients, are very interested in gender lens investing,
Speaker 1: So we do that in a very customized format for
Speaker 1: our female clients. We look at the public and the
Speaker 1: private side. On the public side, we look at companies
Speaker 1: that have great representation of women on boards and management teams,
Speaker 1: diversity initiatives within the company. On the private side, we
Speaker 1: look at investing into female startups, into micro finance loans
Speaker 1: for small businesses, et cetera. It's okay, so there's a
Speaker 1: I don't know if the chip case tell you there's
Speaker 1: an index that has five hundred stocks in it, how
Speaker 1: many of five of the stocks of the standard impos
Speaker 1: kindex are are are IDEALU approved? I mean, I mean seriously,
Speaker 1: out of five stocks, how many pass the e s
Speaker 1: G test? You know at the moment it's less than no, no, no,
Speaker 1: it's about a third that passed the e s G test.
Speaker 1: And by the way, there are plenty of other portfolio
Speaker 1: management companies indexes that have been launched since that. Yeah,
Speaker 1: many of them that focused particularly on now, particularly an
Speaker 1: institutional basic city group. What are the two thirds that
Speaker 1: are not e s G approved? Are they in a
Speaker 1: panic to become e s G approved? Tom, I would
Speaker 1: think that everyone is focused on being E s G
Speaker 1: focused because, as I mentioned earlier, it drives returns. It's good,
Speaker 1: it's a good thing to do. It drives returns, and uh,
Speaker 1: I don't see why they wouldn't be more focused on
Speaker 1: doing that well. And it's interesting. On the Bloomberg terminal,
Speaker 1: one of the most highly hit function is F a
Speaker 1: financial analysis where it does income statement balance sheet analysis
Speaker 1: and one of the tabs is the E s G
Speaker 1: tab for every company and that just we have a
Speaker 1: lot of statistics there that just helps investors. Were got
Speaker 1: a company from an E s G perspective because it
Speaker 1: is becoming a bigger part. You mentioned Silicon Valley UM
Speaker 1: and that three percent numbers just staggering. And I mean,
Speaker 1: and I've heard that before. I've heard that, you know,
Speaker 1: as tough as Wall Street maybe for women, Silicon Valley
Speaker 1: is even tougher. Are there any any efforts underway to
Speaker 1: try to change that at all? You know, I don't
Speaker 1: know about efforts per se. But we've had the huge
Speaker 1: ME two movement. We've seen all of the efforts around
Speaker 1: a lot of companies like City who are putting out
Speaker 1: gender equality based information. We were very proud to be
Speaker 1: part of the Bloomberg Gender Equality Index for the fourth
Speaker 1: year in a row. We we have a many things
Speaker 1: that we're working on in terms of disclosure representation of
Speaker 1: fifty of our basis women, So we are doing the
Speaker 1: right things as a public company in the financial services sector.
Speaker 1: I've seen that happen a lot in the financial services sector.
Speaker 1: On the VC private equity side, they're they're coming along, right.
Speaker 1: I think they're coming along a little slower than we
Speaker 1: than we would like. But my world stops when Mary
Speaker 1: Meeker puts out her eighty six page power point in
Speaker 1: every year, whatever it is, I go over. Folks are
Speaker 1: stupid about this. I go over every page of it
Speaker 1: with a pencil as well. What is a Mary Meeker
Speaker 1: with all of reclaim in Silicon Valley? Think about the
Speaker 1: impatience to move this forward. I'm sure that Mary and
Speaker 1: I can't speak for Mary, but I'm sure that Mary
Speaker 1: can be frustrated about about the movement. But that's why
Speaker 1: we have people like Mary and other women launching their
Speaker 1: own initiative looking at ways to invest in to help
Speaker 1: move forward the gender based um. Folks, you see them
Speaker 1: define benefit and define contribution, pension plans or real desire
Speaker 1: for this and where does the marginal move on your
Speaker 1: four trillion dollars. Where does that marginal move go in
Speaker 1: the next five years. I certainly hope it goes very quickly, Tom,
Speaker 1: because that for four four and a half billion that
Speaker 1: we have today, and you know, hopefully we want it
Speaker 1: to to increase exponentially, and the only way that we're
Speaker 1: going to do that is by further engagement. Well not
Speaker 1: only engagement, but the alpha pickup is tangible. I mean,
Speaker 1: that's what it is. More and more is I'd mentioned that,
Speaker 1: you know, the more and more the research that comes
Speaker 1: out from academia to other places about the diversity, about E.
Speaker 1: S G. About that it does have significant return implications
Speaker 1: for investors. It can't be ignored anymore. I guess it's
Speaker 1: the point. And Paul, you know, if if we did
Speaker 1: have gender quality today, that would add twenty eight trillion
Speaker 1: to global GDP over the next five years. Twenty eight trillion,
Speaker 1: it's global gender. Can we get quality? Sure? Craft highs
Speaker 1: on your list to be To be honest with you,
Speaker 1: I I didn't look at Craft times and all those
Speaker 1: guys and the up and they're building up the good.
Speaker 1: She's like, how can I get away from no, No, no, no,
Speaker 1: no no, but there's a whole macho guy. But you
Speaker 1: know what, Tom, Also, that's a very different approach than
Speaker 1: what we do for our clients. So we aren't single
Speaker 1: stock pickers at all for our clients. Okay, so we
Speaker 1: are strategic asset allocators, were active managers of our clients assets,
Speaker 1: and we never pick single stocks. In other words, we
Speaker 1: will put together a group that makes sense. We get
Speaker 1: a little punch when they let us out of the studio.
Speaker 1: Thank you so much for City Private Bank here at
Speaker 1: the Bloomberg Equality Summit. Thanks for listening to the Bloomberg
Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keene before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio.