Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Lisa A.
Speaker 2: Bromwoyds, along with Tom Keane and Jonathan Farrow. Join us
Speaker 2: each day for insight from the best in economics, geopolitics,
Speaker 2: finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple,
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Speaker 2: Right now, I am so pleased to say my colleague
Speaker 2: David Weston joined over with Bank of America Chair and
Speaker 2: CEO Brian Moinihan.
Speaker 1: David, we are.
Speaker 3: Joined now by Brian moynean. He is sharing CEO of
Speaker 3: Bank of America. Brian, thank you so much for joining
Speaker 3: us here at the end of the year.
Speaker 4: David, it's great to have you here in happy holidays,
Speaker 4: and you can see our teammates out there working away
Speaker 4: on the trading floor here at one Brian Park.
Speaker 3: Yeah, and we're going to go back to the trading
Speaker 3: floor because you had quite a year in trading. But
Speaker 3: first talk about the year overall. There have been a
Speaker 3: fair number of surprises given what some people expect at
Speaker 3: the beginning of the year. Certainly, stock Mark has done
Speaker 3: very very well. We had more interest rate hikes than
Speaker 3: we thought we would have. Unemployment has really held down
Speaker 3: pretty well, and we didn't have that recession so many
Speaker 3: people thought we would. Now, I must say, when I
Speaker 3: talked to you throughout the year, you kept saying it
Speaker 3: kind of looks pretty strong. Some of your compatriots were saying, oh, no,
Speaker 3: hurricanes and tornadoes and things like that. So how'd you
Speaker 3: get it right?
Speaker 4: Well, we just we just try to follow the data,
Speaker 4: and I think there were unexpected events. They're unexpected events
Speaker 4: in every year, you know, And so whether it's the
Speaker 4: regional banking crisis early on in the year, or whether
Speaker 4: it was another Hamas attack on Israel and October seventh,
Speaker 4: whether it was escalation and continuation Ukraine, whether it's attentions
Speaker 4: in China. These are all things that happen and they
Speaker 4: go on all the time. But what we look at
Speaker 4: is what goes on in our core customer base, and
Speaker 4: we try to talk about what is going on as
Speaker 4: opposed to what could go on and plan for what
Speaker 4: could go on. And you know, that's been relatively strong
Speaker 4: and our team, you know, the spending continues even today.
Speaker 5: At about four to five percent over.
Speaker 4: Last year, half the growth rate of twenty two to
Speaker 4: twenty one, showing the consumer has slowed down, consistent with
Speaker 4: inflation getting under control, consistent with you know, the using
Speaker 4: the rate structure to choke off some of the activity.
Speaker 5: And it's happened.
Speaker 4: But overall it's been a decent year and the economy's grown,
Speaker 4: unemployment stayed low, and the bank's done very well.
Speaker 3: Let's talk about the consumer. You are the largest consumer
Speaker 3: banking operation in the country. We are in the middle
Speaker 3: towards the end now the holiay season. What are you
Speaker 3: seeing there? I knew until now I was holding up
Speaker 3: pretty well. Where is it right now the consumer as
Speaker 3: of today?
Speaker 5: Sure?
Speaker 4: So, if you looked at it November of twenty three
Speaker 4: over November of twenty two, and this is across about
Speaker 4: three or four hundred billion dollars a month of activity
Speaker 4: customer spending money out of their accounts, that was up
Speaker 4: about four and a half percent. So far in December
Speaker 4: it's holding about the same and again that's about half
Speaker 4: the rate it was growing at last year at this
Speaker 4: time versus the year prior. And that's because the overactivity
Speaker 4: is slowing down what's been interesting is this broaden out
Speaker 4: to all things. There were these periodic things since the pandemic.
Speaker 4: First people hold up and bought stuff with their house.
Speaker 4: Then they started to go out and travel some. Then
Speaker 4: they went to restaurants. Then they had another set of travel,
Speaker 4: different kind of travel, international travel, and then they got
Speaker 4: to concerts and things. That's all through The system is
Speaker 4: spending kind of evenly across. Retail stores are doing fine.
Speaker 4: Online sales are strong. You know, they're all two three
Speaker 4: percent flatish two four percent, depending on what it is.
Speaker 4: So everything's kind of normalized for the US consumer and
Speaker 4: how they're spending money. They are in very good shape.
Speaker 4: They have money in and accounts, they're employed, and the
Speaker 4: wages are growing. It doesn't mean inflation didn't affect certain
Speaker 4: parts of the American public hard, but in general, when
Speaker 4: unemployment rate's still in the mid threes to mid upper threes,
Speaker 4: that is a very strong place for the consumer.
Speaker 5: But it has slowed down.
Speaker 3: You say they're in good shape. That's why I was
Speaker 3: going to ask you, they're spending money, can they afford it?
Speaker 3: What are you seeing in terms of their bank balances?
Speaker 3: I believe those have come down some how, fast are
Speaker 3: they coming down.
Speaker 4: So it's a little bit of two different types of customers.
Speaker 4: For consumers that had a lot of access cash, of course,
Speaker 4: when the rate they could get on that cash one
Speaker 4: from twenty five basis points to five percent plus, guess
Speaker 4: what it did.
Speaker 5: It moved the market.
Speaker 4: So the very upper balances of consumer and our wealth
Speaker 4: manager customers move the market. But if you look at
Speaker 4: the consumers that the accounts are more than money come
Speaker 4: in and out, they're still sitting with multiples of what
Speaker 4: they had pre pandemic. So a cohort of consumers I
Speaker 4: had between two and five thousand dollars in their account's
Speaker 4: pre pandemic average about thirty two to thirty four hundred.
Speaker 4: They're now still sitting with about thirteen thousand accounts. It
Speaker 4: has come down from a peak of thirteen four down
Speaker 4: to about twelve eight, so it's come down a bit,
Speaker 4: but still much higher than it was before. That's due
Speaker 4: to all the stimulus and stuff, and then holding on
Speaker 4: to that. Where they go next is going to be
Speaker 4: launching question. They've slowed down their spending because things got
Speaker 4: more expensive. They slow down their spending because they got
Speaker 4: worried a little bit worried about their job. They slowed
Speaker 4: down their spending because the rates on car loans or
Speaker 4: all the things became more expensive. But they're still spending
Speaker 4: more than they did last year. And that's a decent
Speaker 4: setup for a soft landing.
Speaker 3: Are you seeing any softness and consumer credit? I mean,
Speaker 3: are you seeing bounces go up, delinquencies go up?
Speaker 4: Well, bounce has gone up in credit cards back to
Speaker 4: where they were pre pandemic for us in the industry,
Speaker 4: and people are like, oh my gosh, up above that
Speaker 4: even that, But if adjusted for the size of the economy,
Speaker 4: they're actually still down, and so the consumer capacity bar
Speaker 4: is strong.
Speaker 5: Mortgaged mortgages are all locked in low rates that the
Speaker 5: best asset for a lot of households is actually their
Speaker 5: low interest cost liability.
Speaker 4: It's mixing two different things on a balance sheet, but
Speaker 4: the reality is is a three percent mortgage is an
Speaker 4: asset for people right now because it means they are
Speaker 4: payments to have it moved.
Speaker 5: So that's good news.
Speaker 4: The home equity borrowings are down for US from thirty
Speaker 4: billion to twenty some billion. That means that they're not
Speaker 4: using that equin in your house enters more equity in
Speaker 4: your house. On the credit cards, the delinquencies are really
Speaker 4: consistent within nineteen and everybody says, well, it's back to
Speaker 4: nineteen was one of the best credit years in the
Speaker 4: company's history, in the industry's credit history. So that's a
Speaker 4: very strong place, and so we feel good about.
Speaker 5: Consumer credit as long as the employment levels stay there.
Speaker 4: It's a little hard to believe that you'd have it
Speaker 4: now lower FICO scores. You hear people talk about a
Speaker 4: little more noise, but the general consumer is basically a
Speaker 4: prime borrower and they're doing fine.
Speaker 3: What about the commercial side, You're very big in middle market,
Speaker 3: smaller and medium sized enterprises. Is there loan and demand?
Speaker 3: What's the sentiment there?
Speaker 4: So, you know, if you think about the consumer, we
Speaker 4: keep growing customers, keep growing house or keep growing this company.
Speaker 4: If you think about in the commercial we keep growing customers.
Speaker 4: There is more logos as that our teammates called, you know,
Speaker 4: companies that we do business with a record number this year.
Speaker 4: The thing about it is they're not using their lines
Speaker 4: as much. So the loan balance growth on a commercial
Speaker 4: side has been a.
Speaker 5: Little bit sluggish, little bit flatish.
Speaker 4: Looks like it a bounced around on low single DIGITSUS quarter.
Speaker 5: Now, why is that happening?
Speaker 4: Line usage before the pandemic for middle market clients was
Speaker 4: forty percent, dropped to thirty percent, got back up to
Speaker 4: thirty six percent, and then fell a cup hundred basin points.
Speaker 4: Why would companies borrow less at this point? They're worried
Speaker 4: about final demand. It's also a lot more expensive, So
Speaker 4: the FED is having the impact, which is a loan
Speaker 4: that was like three percent four percent is now seven
Speaker 4: to eight you know, seven to eight percent people think
Speaker 4: about using it. So the line uses is down, meaning
Speaker 4: that not beings aggressive buying equipment or hiring people or
Speaker 4: extending inventories, mostly because they're worried about.
Speaker 5: Economy sawing down.
Speaker 4: And when we say a soft landing, it doesn't mean
Speaker 4: the economy goes into recession.
Speaker 5: It says no.
Speaker 4: But what our team is saying Cannabis browning plot and
Speaker 4: researching is that we're slowing from almost a four to
Speaker 4: five percent growth rate to one percent growth rate is
Speaker 4: still a major slowdown, and the business community is wrestling
Speaker 4: with that right now, trying to get that balance right.
Speaker 3: One of the big surprises this year came toward the
Speaker 3: end of the year with the FED decision and then
Speaker 3: the news conference with Jpile that really signaled, at least
Speaker 3: to most of us, Yeah, they're really seriously considering rate cuts.
Speaker 3: It looks like they're coming next year. Were you surprising?
Speaker 3: Why do you think they did it? Do you think
Speaker 3: they're seeing data about the economy that is slowing faster
Speaker 3: than we appreciate.
Speaker 4: Yeah, so let's talk about our economics. Tell me and
Speaker 4: we feed in. We have the number one research team
Speaker 4: in the business, and Kansas and the team do a
Speaker 4: great job. Basically, they just shifted yesterday literally and they
Speaker 4: moved to more rate cuts.
Speaker 5: In twenty four.
Speaker 4: But the real key was what do they see in
Speaker 4: the economy, And they basically have moved from a half
Speaker 4: a percent growth rate annualized for the first three quarters
Speaker 4: next year up above one percent. They've softened their soft landing,
Speaker 4: let's just say that. And by doing that, they've said
Speaker 4: when the FED is seeing inflation slow as fast as
Speaker 4: it is, they basically think we get down to the
Speaker 4: low twos inflation by the year and next year twenty five,
Speaker 4: and it carries into twenty five. The FED needs to
Speaker 4: bring the rate structure down. They're saying, basically two hundred
Speaker 4: basis points of rate cuts one hundred next year and
Speaker 4: one hundred and twenty five, which still leaves you at
Speaker 4: three and a quarter to three and a half. Now,
Speaker 4: the last time we were fundamentally at that rate structure
Speaker 4: was almost was eighteen years ago by time we get there,
Speaker 4: so we've had a long stretch of very low rates
Speaker 4: except for what happened very recently, and so that fueled
Speaker 4: a lot of activity, and now the rate structure can
Speaker 4: be fundamentally higher. It's more structurally sound, and the Fed
Speaker 4: is pivot is it's not really pivot to say we
Speaker 4: got to normalize this because we're seeing the economy and
Speaker 4: the inflation come in. Not done yet, but all indications
Speaker 4: are doing there and everything we can see that consumer
Speaker 4: spending is consistent with a two percent inflation economy. That
Speaker 4: level of spending growth in our customers was where it
Speaker 4: was in seventeen eighteen nineteen when the FED raised rates
Speaker 4: to bring the economy back and sink.
Speaker 3: So the stock market did pretty well this year up
Speaker 3: until that Fed decision, and then it's off to the races.
Speaker 5: Since then.
Speaker 3: Your trading desk has done particularly well this year to
Speaker 3: give us a sense of where it is. Right now,
Speaker 3: Are you going to finish the year as strongly as
Speaker 3: you have been going the quarter so far?
Speaker 4: Well, you can from your lips to their ears. So
Speaker 4: they've got a few weeks left now. They're doing fine.
Speaker 4: We said that they be up up year every year,
Speaker 4: which is kind of countered the trend in the market.
Speaker 5: They Jimmy DeMar and the team have done a great job.
Speaker 4: And what's interesting, it's rounded out and it's fixed income,
Speaker 4: its equities, and it's much more consistent. They've I'm not
Speaker 4: quite sure it's exactly true, but basically have made money
Speaker 4: every single trading day this year. And so there's been volatility,
Speaker 4: there's been news, there's been this, and they and that's
Speaker 4: because they have a balance in the business in a
Speaker 4: way that goes through We increase the size of the
Speaker 4: business three or four years ago under Tom Montag's leadership
Speaker 4: and Jimmy's leadership, and that's born fruit and they are
Speaker 4: keep gaining market share and they're doing a great job.
Speaker 3: So I'm glad you raised because three or four years ago
Speaker 3: I was here with you at Back of America and
Speaker 3: you said, you know what, you're going to have to
Speaker 3: devote more capital, more people into that business. You did it,
Speaker 3: you seem to you having success going forward. Is there
Speaker 3: yet more capital that you're going to allocate into trading.
Speaker 4: Yeah, as long as they can get the returns. You know,
Speaker 4: at the end of the day, our return on equities
Speaker 4: you have fifteen percent of the company this business because
Speaker 4: all of regularly in the capital is a little lower
Speaker 4: in that but is well bubber cost of capital. As
Speaker 4: long as they can keep deployment, We'll keep pushing capital
Speaker 4: because it's a great business in great format, and we're
Speaker 4: gaining market share honestly across the world, and it's a
Speaker 4: global business so it can access much deeper client base.
Speaker 4: And team's done a great job, so they'll keep getting
Speaker 4: more commitments consistent with them being able to get the
Speaker 4: returns on them.
Speaker 3: One last one, Brian, are you concerned at all of
Speaker 3: the markets maybe overreacting to what they heard from shairpo.
Speaker 4: I think he's got this challenge that you know he was,
Speaker 4: you know, the Fed in our own mission it was
Speaker 4: late to cutting off inflation.
Speaker 5: Now he's been a careful.
Speaker 4: Not to be late to stop cutting off inflation, and
Speaker 4: the market's going to have and flow.
Speaker 5: But I think people have to be a little careful.
Speaker 5: This is trading talk.
Speaker 4: This is you know, the ten year moving around between
Speaker 4: you know, three ninety and four fifty four seventy. It's
Speaker 4: not the real kind. Real economy is still heavily impacted
Speaker 4: by the overall rate level is very restrictive, and it's
Speaker 4: still coming through the system. Against that, we still have
Speaker 4: a lot of stimulus coming through the system, you know,
Speaker 4: the infrastructure, build a chipsack to IRA.
Speaker 5: Those are all still coming through the system.
Speaker 4: So that's a tuggle where he's up against it, but
Speaker 4: overall we believe he's engineer soft landing through the interest
Speaker 4: rate environment.
Speaker 3: Brian, thank you so much. As Brian moynahan, he's chair
Speaker 3: and CEO of Bank of America.
Speaker 2: This is a conversation that to me caps off one
Speaker 2: of the most fascinating periods of FED history and economic
Speaker 2: history that I've ever seen. Rich Clarida, a former FED
Speaker 2: Vice chair, as well as Columbia University professor and PIMCO
Speaker 2: Global Economic Advisor, as well as renowned singer. Rich Clarida,
Speaker 2: thank you so much for being here in person. I
Speaker 2: just want to start with what you make of the
Speaker 2: past week FED Chair Powell's comments and the market's reaction.
Speaker 6: Well, the chairs comments took me by surprise, and he
Speaker 6: had a difficult mission because it's the last meeting of
Speaker 6: the year, natural to look ahead. But yes, I thought
Speaker 6: both the press conference and the FMC statement were more
Speaker 6: dubvish than I expected. You know, there is a soft
Speaker 6: landing base case. We're all hoping for it, and I
Speaker 6: think the markets are really focused on that. He didn't
Speaker 6: say mission accomplished. I'm not sure if he thinks mission accomplished,
Speaker 6: but that's being interpreted that way. And of course, as
Speaker 6: you've mentioned on air, we've had a little bit of
Speaker 6: pushback recently, so we're all now trying to assess, you know,
Speaker 6: what message they would like to deliver.
Speaker 2: Well, that's exactly what I wanted to ask you. What
Speaker 2: do you make of the pushback?
Speaker 6: Well, I think the delicate challenge, and we've discussed this
Speaker 6: on the show in the past, is a tug of
Speaker 6: war between their guidance and market pricing. You know, part
Speaker 6: of the reason LISA inflation is expected to come down
Speaker 6: next year to two points something is because financial conditions
Speaker 6: have tightened. Well as the markets think mission accomplished. In
Speaker 6: rate cuts, six cuts are coming in next year devil
Speaker 6: ease conditions. That makes it less likely that inflation comes down.
Speaker 6: So it's a tricky point right now for the FED.
Speaker 1: Do you think that Fed Shair Powell made a mistake.
Speaker 6: I don't think so. I think I think he was
Speaker 6: reflecting his committee, and I think in the press conference
Speaker 6: sometimes chairs concerted distance themselves, and I think he was
Speaker 6: embracing the baseline view. But there is a risk case
Speaker 6: as well, and I think perhaps some of the pushback
Speaker 6: is to remind folks about those other scenarios.
Speaker 2: Mary Daily, in a Wall Street Journal discussion yesterday, came
Speaker 2: out and said, even if the FED cuts rates by
Speaker 2: three times next year, the Fed's benchmark rate will still
Speaker 2: be quite restrictive. Even if in that scenario, And then
Speaker 2: you want to say, we have to be forward looking
Speaker 2: and make sure that we don't give people price stability
Speaker 2: but take away jobs.
Speaker 1: Is this a new emphasis for the Fed?
Speaker 6: Well, Lisa, I think at the margin it is because
Speaker 6: I think inflation was so high for so long. I
Speaker 6: think the FED effectively had a single mandate for a
Speaker 6: couple of years. We got to get inflation lower. The
Speaker 6: federal course has a dual mandate. But I do think
Speaker 6: and I, of course work closely with Mary. I'm a
Speaker 6: big fan of her. I do think the issue is
Speaker 6: here is that the Committee itself emphasizes financial conditions. Indeed,
Speaker 6: financial conditions made an appearance in the November statement and
Speaker 6: reappeared in December. It is true that one element is
Speaker 6: the real funds rate, but other financial conditions are easy, which,
Speaker 6: as we said, makes it less likely that inflation does come.
Speaker 2: Down, which raises this question about whether you are right
Speaker 2: the two point something kind of view of inflation is
Speaker 2: kind of what the FED is embracing right now in
Speaker 2: order not to jeopardize the labor market.
Speaker 7: Is that what your sense is, Well, I've always thought
Speaker 7: that two points something would be the point at which
Speaker 7: they start to think about cutting, So that is playing
Speaker 7: out in their projection.
Speaker 6: I do believe down to the individual there are nineteen
Speaker 6: of them. They all want inflation to get to two,
Speaker 6: and I do agree with them that if they hold
Speaker 6: off cutting rates at all until inflation gets to two,
Speaker 6: they're probably going to overshoot. But the timing is delicate,
Speaker 6: and I think there is a you know, there's a
Speaker 6: risk case on both sides. But I do think they
Speaker 6: are emphasizing now the dual mandate more than they have been.
Speaker 2: Do you think it's because they're seeing something that other
Speaker 2: people aren't, or they're at least emphasizing in their own
Speaker 2: data some of the weakness that maybe is overlooked by
Speaker 2: people who are piling into the market.
Speaker 6: I'm not really sure of that. I think it's important
Speaker 6: for them. You know, the FED was criticized a lot
Speaker 6: in twenty twenty one and twenty twenty two for being
Speaker 6: behind the curve. I think it's appropriate to step back
Speaker 6: and acknowledge the progress and disinflation, and I think they're
Speaker 6: seeing that, but I think there's still still a ways
Speaker 6: to go, and I think in particular, the labor market
Speaker 6: may require more adjustment than they're factoring in.
Speaker 1: Sorry, no, it's all right. I'll let you get breath.
Speaker 2: It's a confusing moment for all of us, and I'm
Speaker 2: wondering if you think it helps or hurts the cause
Speaker 2: to see the FED come out feed show j Powell
Speaker 2: with one message and then Austin Goolsby saying, you guys,
Speaker 2: I'm surprised by a reaction and hearing from John william
Speaker 2: saying we're not really talking about rate cuts.
Speaker 6: That's you know, that's not that's not something you'd like
Speaker 6: to see coming out of a of a meeting. I
Speaker 6: think the market reaction easing financial conditions is something that
Speaker 6: they are trying to push back against. I don't know
Speaker 6: how successful that they they can be.
Speaker 2: However, do you think that easing and financial conditions does
Speaker 2: have ultimately an inflationary impact?
Speaker 1: Right now?
Speaker 6: Well, to the to the to the same extent that
Speaker 6: if you titan financial conditions, it lowers inflation if they're
Speaker 6: if they're eased on a sustainable basis, credit spreads are
Speaker 6: type borrowing cost or lower valuations are up at the margin.
Speaker 6: It supports demand and if you think there's a demand
Speaker 6: piece to inflation, then yes, So.
Speaker 2: Right now, do you think that it is potentially concerning
Speaker 2: encounter to what the FED is looking for? Given the
Speaker 2: all in feeling and frankly, I mean we just heard
Speaker 2: this morning the FED shot the bears. The FED wants
Speaker 2: to make people happy.
Speaker 1: I was bearished, but now I'm really bullish. I mean,
Speaker 1: is this a positive thing?
Speaker 6: Well, look, I'm very convinced that the power FED will
Speaker 6: do what it takes. I think that the communications challenges,
Speaker 6: which were substantial in twenty twenty three maybe even more
Speaker 6: substantial in twenty twenty four.
Speaker 2: There's been speculation from a number of guests that there
Speaker 2: is a political element to this, that the calendar is tricky. Yeah,
Speaker 2: for the Federal Reserve, considering that heading into November everything
Speaker 2: is going to be really politicized. Do you buy any
Speaker 2: of that argument that would encourage them to make a
Speaker 2: move earlier in the year.
Speaker 6: Look, the history shows, in fact, I checked before I
Speaker 6: came on ear the FED has actually adjusted rates in
Speaker 6: most presidential election years. In fact, they cut rates in
Speaker 6: ninety two and cut rates in eight although for other reasons,
Speaker 6: and they've hiked rates as well in election years. So historically,
Speaker 6: the FED doesn't let the political calendar dictate the outcome
Speaker 6: at the margin. Could it influence timing, say between a
Speaker 6: June move and a September move, I'm not sure, but
Speaker 6: I think that the number of rate adjustments we get
Speaker 6: next year will be the adjustments that the Committee thinks
Speaker 6: is appropriate given the economy.
Speaker 2: Given that we are talking about the politicization, do you
Speaker 2: think that this jeopardizes some of the credibility of the FED,
Speaker 2: given that so many people have come on here and speculated,
Speaker 2: and we don't have any ability to basically know or
Speaker 2: not know. But is there some other consequence of just
Speaker 2: that speculation.
Speaker 6: I really don't think so, Lisa. In the end, the
Speaker 6: FED will be judged by returning to price stability and
Speaker 6: ideally doing so at minimal cost to the labor market.
Speaker 6: And so I think the fedes credibility and the animal
Speaker 6: rise and fall with delivering price stability.
Speaker 2: When you talk about the potential for a reacceleration of
Speaker 2: inflation and a stickiness, do you see that coming through
Speaker 2: the services sector in a material way? Which areas of
Speaker 2: the economy could we see a more material reignition?
Speaker 6: Yeah, so I think, I think exactly so. I think
Speaker 6: goods goods prices are now falling, so we've had goods
Speaker 6: disinflation deflation. The service sector typically lags behind. I would
Speaker 6: also say, I think the real where the rubber will
Speaker 6: hit the road, Lisa, is in the labor market. So
Speaker 6: we've had a substantial adjustment in the labor market without
Speaker 6: any rise in unemployment.
Speaker 1: And that is great.
Speaker 6: I will say. My good friend and former colleague Chris
Speaker 6: Waller nailed that back in the summer of twenty twenty two,
Speaker 6: so that's wonderful. I do think however, that you cannot
Speaker 6: have two percent price inflation target if wages are going
Speaker 6: up four or five percent, which is where we are now.
Speaker 6: So I think I would be if I were there,
Speaker 6: I'd be looking at the labor market adjustment as well
Speaker 6: as the services sector as well. You know, one of
Speaker 6: the measures, which is core services x housing, has basically
Speaker 6: not adjusted at all in the last several months, so
Speaker 6: still elevated.
Speaker 2: A lot of people are talking about how the economic
Speaker 2: data has been really positive, and how the FED has
Speaker 2: been doing a good job, and how we have seen
Speaker 2: unemployment stay low even with inflation coming down.
Speaker 1: Why do you think people feel so bad?
Speaker 6: Well, I think there's a distinction, and it's certainly one
Speaker 6: I've thought about and written about. Economists tend to focus
Speaker 6: on inflation, that's the change in prices, but individuals in
Speaker 6: the economy tend to think about the level of prices.
Speaker 6: So even if inflation returns to two percent, the level
Speaker 6: of things going to the grocery store, going to the movies,
Speaker 6: rent on your apartment, those numbers are all, you know,
Speaker 6: a lot higher than they were four four years ago.
Speaker 6: So I think when inflation's low and stable, we tend
Speaker 6: to ignore that but when we've had a big move
Speaker 6: in the level of prices, I think it does create
Speaker 6: more concern among households than you may infer just by
Speaker 6: looking at the inflation data.
Speaker 2: I want to ask you though, also about the housing marketing.
Speaker 2: You mentioned rents being higher. We just got housing starts
Speaker 2: and building permits come in higher than expected.
Speaker 1: We do see some of the.
Speaker 2: Treasury rally pair back, which is what you would expect.
Speaker 2: Does the high price of homes, in addition to the
Speaker 2: lack of any volumes, also create some sort of real
Speaker 2: dampening effect sentiment? Well.
Speaker 6: I think the high valuation for homes obviously makes the
Speaker 6: people who own homes happier, but there's a distributional consequence,
Speaker 6: especially for younger parts of the population, Folks in their
Speaker 6: twenties and thirties who have not yet acquired that first home,
Speaker 6: and whatever they thought about the cost of ownership three
Speaker 6: or four years ago, it's a lot higher. But there's
Speaker 6: a huge wealth effect, positive wealth effect for folks who
Speaker 6: own homes. Presumably they're happy about that.
Speaker 2: Well, but it raises this question about what this does
Speaker 2: longer term to the inflation dynamic, but also to sentiment,
Speaker 2: particularly for younger individuals who haven't gotten in.
Speaker 6: Yeah, well it does. And I think that this is
Speaker 6: an unusual period, Lisa, in the sense that because so
Speaker 6: many folks refinanced into low rate mortgages in the prior decade,
Speaker 6: the FED, including when I was there, it was doing
Speaker 6: to support the mortgage market, and because these are fifteen
Speaker 6: and thirty or fixed rate mortgages, it is having this
Speaker 6: effect on supply that may be with us for a while.
Speaker 2: We're we're here with Richard Clarita of PIMCO, formerly FED
Speaker 2: Vice chair. We are going to be having a conversation
Speaker 2: with my colleague David Weston with Brian moynihan of Bank
Speaker 2: of America, and I do want to get your take,
Speaker 2: rich on whether you are seeing the stability in banks
Speaker 2: as one reason why a soft landing can materialize. Right,
Speaker 2: that's sort of one tailwist tailwind to a lot.
Speaker 1: Of this rally that was not there.
Speaker 6: Say in March, Lisa, absolutely, you know, the global financial
Speaker 6: crisis triggered a major rethink of the way that we
Speaker 6: regulate and supervised banks in the US as a whole.
Speaker 6: If you look at all the banks, they have lots
Speaker 6: of capital, lots of liquidity, and Indeed, in twenty twenty,
Speaker 6: when we were going through the dark days of the pandemic,
Speaker 6: you know, banks were a source of stability and increasing lending. Absolutely,
Speaker 6: I do think it's an important reason to think of
Speaker 6: the banking system as supporting the economy and not being
Speaker 6: a headwind.
Speaker 2: Rich Clarida, thank you so much for taking the time,
Speaker 2: as always be wonderful to get your insights.
Speaker 8: Chris Heisei joins US now chief Investment Officer and Maryland
Speaker 8: Bank of America Private Bank. Chris, let's start here with
Speaker 8: the dream, the story for next year, if you will.
Speaker 8: This is the story. So inflation's going to keep coming down,
Speaker 8: growth is going to be okay, the Federal Reserve is
Speaker 8: going to cut interest rates, and the equity market's going
Speaker 8: to keep it exploding higher. So that's the story. Can
Speaker 8: you tell us how expensive is that story now for
Speaker 8: next year given them rany we've had in the last
Speaker 8: two months.
Speaker 9: Well, it appears expensive because how fast it's been priced in,
Speaker 9: But we have a long way to go. There's still
Speaker 9: a lot of cash on the sidelines, not just from
Speaker 9: an investor perspective, institutional and private client, but also the
Speaker 9: corporate cash still earning a very healthy return at the
Speaker 9: short end of the curve.
Speaker 10: That's keeping more margins wide.
Speaker 9: And with the debt structure in the corporate markets right now, overall,
Speaker 9: their liabilities are still low, so we can chunk out
Speaker 9: some very solid earnings here. And Lisa was talking about
Speaker 9: this echo of inflation. I think that's the perfect way
Speaker 9: to think about it.
Speaker 10: There are echoes. There's going to be a lot of
Speaker 10: echoes about are we having us offt landing.
Speaker 9: There will be pockets of bumpiness and that'll keep investors
Speaker 9: a little bit still concerned. Right now, the wall of worry,
Speaker 9: you know, maybe a little bit lower than normal, but
Speaker 9: that wall doesn't go away. That wall ends up rising
Speaker 9: a little bit as we get into next year.
Speaker 8: There's like five bricks left in it. Chris, I'm not
Speaker 8: sure what you're talking about. What bears are left.
Speaker 10: Well, there's a lot of bears.
Speaker 9: They'll come out of the cuvered again and out of
Speaker 9: the cave as soon as you see one bad number
Speaker 9: either on the earnings front, in the inflation front, or
Speaker 9: something like that, and that will actually cause some second guessing.
Speaker 9: But we think there's a lot of room to go here.
Speaker 9: We're out out of the woods. And we have a
Speaker 9: lot of work to do, but we're not fully priced in.
Speaker 2: So Chris, you're saying that the the Bears still exist,
Speaker 2: You're just not one of them. After hearing from Jason
Speaker 2: Trent at the FED shot the Bears and from Avy
Speaker 2: Sheffeld that Palace press conference reminded us that the Fed's
Speaker 2: ultimate goal is not price stability and full employment, but
Speaker 2: rather to.
Speaker 1: Make people happy.
Speaker 2: So, in other words, how much can people remain bearish
Speaker 2: with a Fed that essentially has a big put and
Speaker 2: they're putting it in.
Speaker 9: Well, I think the bears got very frustrated this past year,
Speaker 9: and rightfully so.
Speaker 10: They expected hertings to decline. They expected stickiness on inflation.
Speaker 9: The number one surprise for most people was that inflation
Speaker 9: came down as sharp as it already has. That really
Speaker 9: shouldn't have been a surprise when you had quantitative tightening
Speaker 9: plus all the hikes that went through. Now, granted, the
Speaker 9: FED did add a lot of liquidity to the program,
Speaker 9: to the markets itself that helped grease the train tracks,
Speaker 9: But overall, what we've noticed is this, the bears ultimately
Speaker 9: go away for a while. They come back after you
Speaker 9: start to see some of consternation in some of the
Speaker 9: economic data.
Speaker 10: Europe could surprise to the downside.
Speaker 9: We don't know what China's growth it's going to be,
Speaker 9: and that could be exported to the United States.
Speaker 10: So we're still going to.
Speaker 9: Grow below trend and everyone's happy right now and the
Speaker 9: drum beat of soft landing is there. But as soon
Speaker 9: as you get some bumpiness, the market will pull back
Speaker 9: a little bit, probably.
Speaker 10: Late January early February, and we.
Speaker 9: Think that that is a buying opportunity because it's all
Speaker 9: about earnings next year.
Speaker 2: Chris, I got to say, I knew what you were
Speaker 2: going to say before you said it, because that's what
Speaker 2: everyone's saying in January. Were going to get turbulence and
Speaker 2: buy the dip. And so at a certain point, this
Speaker 2: really is exact same setup that we had this year,
Speaker 2: which was when you get a decline by the dip.
Speaker 1: We didn't really get a decline.
Speaker 2: We did a little bit and people just came in gangbusters.
Speaker 2: Is this by the dip going to be the broadening
Speaker 2: out that we see now? Is this basically the playbook
Speaker 2: for next year?
Speaker 1: Just a little bit premature?
Speaker 9: Yeah, So the bulls are beating the drum on the
Speaker 9: megatech still in some cases that makes sense because that's
Speaker 9: the area of healthiest balance sheets, high quality. But the
Speaker 9: question is going to become how much can they surprise
Speaker 9: about the earnings expectations. But the broadening out of the
Speaker 9: market is the one area that some are now starting
Speaker 9: to warm up to. They've been left for dead much
Speaker 9: of the rest of the market, particularly small caps and
Speaker 9: value overall, we think the next story, beginning already this
Speaker 9: past month, carrying into next year, for the next five years,
Speaker 9: the leadership are those areas predominantly because of their underpriced
Speaker 9: movement versus the large quality, high quality area of the market,
Speaker 9: not just this past year, but over the past quite
Speaker 9: a few number of years last. But not at least
Speaker 9: I'd say this, Lisa, those bears in terms of what
Speaker 9: they're looking at right now, they're looking at the what
Speaker 9: could be versus the what is, and the ultimately when
Speaker 9: that conclusion doesn't come through, about what could be stickiness
Speaker 9: or resumption.
Speaker 10: Of inflation or much lower maybe.
Speaker 9: The negative leading economic indicators indicate lower growth, negative growth,
Speaker 9: that's what could be versus what is and what the
Speaker 9: data is telling us.
Speaker 8: Chris, you mentioned a small camps. We've started to see
Speaker 8: that participation. In the last few months, smo caps started
Speaker 8: to do Wow. The banks have absolutely ripped. There's one
Speaker 8: area of the stock market that hasn't participated. It's been
Speaker 8: left for debt. It's been the energy stocks, the energy names.
Speaker 8: As we've seen this Randy play out double digit percentage
Speaker 8: point gains on the S and P five hundred. Energy
Speaker 8: is negative on the SMP. Chris, what's behind that and
Speaker 8: what changes that story if it's all into next year.
Speaker 9: Yeah, Jonathan, And this was in the face of basically
Speaker 9: a year's worth of gain in a month and a half.
Speaker 9: You really think about the broad market itself, small caps,
Speaker 9: the rest of the market outside the Magnificent seven rallied
Speaker 9: over twelve thirteen percent from the Flatlin level and they've
Speaker 9: actually outperformed. But the one sector, as you said, energy
Speaker 9: high free cash flow, actually better balancing. Some people think,
Speaker 9: I think there's a growth worry there for the energy sector.
Speaker 10: We've been overweight. The energy sector has not worked this year.
Speaker 9: We expect that angle in terms of investor is looking
Speaker 9: for free cash flow again to start to come in.
Speaker 9: But it's all about the oil price right now. It's
Speaker 9: weakness in Europe it's the below trend growth in the US.
Speaker 9: It's a lot of stories of a cloud hanging over
Speaker 9: what traditionally would be an area that you would hunt
Speaker 9: for is particularly when financials are working. You would think
Speaker 9: that some of the other areas like energy would but
Speaker 9: right now it's pushed off the blodder. It's not on
Speaker 9: the buying bladder of a lot of the asset managers,
Speaker 9: and they're waiting for signs at oil prices are going
Speaker 9: to come back up again, Chris.
Speaker 2: When you talk with it clients, how willing are they
Speaker 2: to actually deploy cash right now? How much are they
Speaker 2: feeling the holiday season of bullishness.
Speaker 9: Just two months ago, it was all about what's around
Speaker 9: the corner too.
Speaker 10: Actually, for any extra rally.
Speaker 9: Now it's all about, Okay, where should I be as
Speaker 9: it relates to the market. Not significant enthusiasm because the
Speaker 9: geopolitical curve and volatility is still there as you talked
Speaker 9: about before in the Red Sea, but ultimately heading into
Speaker 9: next year, the common question is always how should we
Speaker 9: be positioned? Now it's about how how much and when
Speaker 9: should I be adding to areas of equities and longer
Speaker 9: duration fixed income.
Speaker 10: We talked about it in the summer. We talked about
Speaker 10: it again.
Speaker 9: In the ball no one throws up a flare gun,
Speaker 9: no one rings the bell when that's going to happen.
Speaker 10: There's always a surprise that comes in. That surprise came
Speaker 10: with the Fed pivot, particularly Powell.
Speaker 9: We expect a couple more surprises to the upside early
Speaker 9: next year.
Speaker 8: The psychology of Marcus, it's just phenomenal. Chris Heise, Chris,
Speaker 8: thank you, sir. Enjoyed the Christmas break of Marridon. Bank
Speaker 8: of America Private Bank. Let's get to the bond markets.
Speaker 8: Sabatra Jeaffer, head of US Ray Strategy as sockjen Stra,
Speaker 8: I want to talk about your call on the bond market.
Speaker 5: It's refreshing.
Speaker 8: It's not super bearish, it's not super bullish. It's just neutral. Sapetra,
Speaker 8: Why is it neutral?
Speaker 11: Well into your end, I think we've already seen a
Speaker 11: very large rally in ties in just the last few weeks,
Speaker 11: so it doesn't make any sense.
Speaker 12: For the market to continue to rally.
Speaker 11: From your on, we think that the bond market, at
Speaker 11: least over the near drum, is going to lose some
Speaker 11: momentum given the fact that we're priced nearly for six
Speaker 11: cuts for net year, so.
Speaker 12: That seems a little bit dramatic.
Speaker 11: I think our view is that the Fed will deliver
Speaker 11: a height starting in May, but a March straight cut
Speaker 11: definitely seems a little bit premature at the current time.
Speaker 11: As you were discussing earlier, John, you're looking at an
Speaker 11: outlook where finacial conditions have eased quite dramatically.
Speaker 12: Inflation is coming down very nicely.
Speaker 11: Gas prices or oil prices in general have declined quite meaningfully,
Speaker 11: so the consumer is still relatively strong. So the risk
Speaker 11: here is that we might see a resurgence in services
Speaker 11: SAT inflation.
Speaker 8: Let's build on that a little bit more. Where would
Speaker 8: that leaves a call on the yield curve because traditionally,
Speaker 8: when we're talking about maybe the end of cycle, maybe
Speaker 8: the st have a right, cunning, right game, you'd get
Speaker 8: that bull stake and come through the curve. Savantra, what's
Speaker 8: the core for you and the team now through next year.
Speaker 11: So our call in our outlook that we published in
Speaker 11: the end of November was that the first move would
Speaker 11: be towards a bull flattener with the front end pegg
Speaker 11: and the long end rally.
Speaker 12: But that hasn't happened.
Speaker 11: The market has priced in a lot of cuts in
Speaker 11: a very short amount of time. But the long long
Speaker 11: end is also rally So the Tuesday's part of the
Speaker 11: of the Yelk curve is still quite inverted. You are
Speaker 11: going to see that disinvert and steepen out with the
Speaker 11: you know as we progress, but that's going to be
Speaker 11: more of a mid twenty twenty four story. When the
Speaker 11: FED starts to cut rates aggressively, you're going to see
Speaker 11: that you know curves steeping out. So for now, I
Speaker 11: think that inversion is very much in play because investors
Speaker 11: are getting back into the bond market in a big way.
Speaker 12: Across the curve. You're seeing this for.
Speaker 11: More trade play out, and that that would mean that
Speaker 11: with the front end pegg to FED expectationations, investors are
Speaker 11: going to also buy the long end.
Speaker 2: I was struck by the Bank of America Global fund
Speaker 2: manager survey that showed people really going out of cash
Speaker 2: and into bonds. Cash was cut to a two year
Speaker 2: low and people were the most overweight bonds in fifteen years.
Speaker 2: Have we already seen the rotation out of cash out
Speaker 2: of money market funds that would have transpired given the
Speaker 2: potential for rate cuts.
Speaker 11: Well, I think that what you're seeing is an asset
Speaker 11: allocation towards bonds given the fat that you know, people
Speaker 11: have concluded that bond yields have topped around tens Around
Speaker 11: five percent is as high as it gets. If that's
Speaker 11: the case, you're going to get the best yield you've
Speaker 11: ever had in the last couple of decades. So it
Speaker 11: makes sense to allocate into bonds as well as perhaps
Speaker 11: all the assets, but bonds first, because the sequencing, the
Speaker 11: way it's going to work is, you know, as the
Speaker 11: Fed prepares to cut rates, the economy slows down, you're
Speaker 11: going to see bonds rally for and then we do
Speaker 11: see a recession like we're expecting at South Gen by
Speaker 11: the middle of next year, then you should see some
Speaker 11: weakness inequities, and then you'll see the acid allocation into equities.
Speaker 12: But that's really not how it's playing on.
Speaker 11: There's just a lot of cash in the system six
Speaker 11: trillion or so close.
Speaker 12: To that in money market funds, and.
Speaker 11: That cash is just being reallocated into other assets where
Speaker 11: you could potentially get higher returns over the longer run.
Speaker 2: So can you give us a sense of how much
Speaker 2: lower you think ten year yields are going to end
Speaker 2: next year given the fact that there still is a
Speaker 2: lot of cash to flow into bonds, and you do
Speaker 2: expect weakness in the economy.
Speaker 11: So you know, our call for tenure yels is for
Speaker 11: tends to get around three seventy five by the middle
Speaker 11: of next year. And the reason for that is is
Speaker 11: because we think that the US economy goes into recession,
Speaker 11: so we do see more room for ten yure years
Speaker 11: to to rally. I mean, granted, when we put out
Speaker 11: these forecasting years, we're close to five percent, so three
Speaker 11: seventy five seem like a stretch, but we're almost.
Speaker 12: There in a very short amount of time.
Speaker 11: So yeah, we could we see you know, ten years
Speaker 11: dip below three cent fad perhaps, But really, the core
Speaker 11: story that I think that I'm sticking with is the
Speaker 11: fact that the sort of turned premium build up that
Speaker 11: we saw over the last you know, i'd say since
Speaker 11: August to the end.
Speaker 12: Of October, that story is still very much in play.
Speaker 11: You're seeing the supply demand imbalances continuing to plague the market.
Speaker 11: You know, you're seeing tailed options. There's just not as
Speaker 11: much demand for treasuries as we've seen in.
Speaker 12: The past, and the Fed you know, our.
Speaker 11: Call is that the FED is going to continue to
Speaker 11: do QT not just into the end of twenty twenty four,
Speaker 11: but also into twenty twenty five. So given that sort
Speaker 11: of dynamic, it makes sense if you start seeing a
Speaker 11: build up in term premiere once the FED starts cutting
Speaker 11: rates and the economy starts to stabilize.
Speaker 8: So bet, this was excellent, just fantastical here from you,
Speaker 8: Thank you Savatar Jape of selk gent On. This bond
Speaker 8: market joining us right now from the Atlantic Council is
Speaker 8: anam world. Allan. This is a big, big story. Traffic
Speaker 8: going through the SEUs Canal, the Red Sea grinding to
Speaker 8: a hole. Can you walk us through the additional time
Speaker 8: that's required if you can't go through that and you
Speaker 8: need to go around the southern tip of Africa? What
Speaker 8: are we talking about here?
Speaker 13: Yeah, it seems that we're talking about an additional twelve
Speaker 13: to fourteen days of travel time to go around Africa.
Speaker 13: But that's not the only issue here. We're also talking
Speaker 13: about increased fuel for ships.
Speaker 12: A longer trip for the crews on board.
Speaker 13: It's going to cost more, they're going to emit more
Speaker 13: carbon and so this isn't just you know, it's not
Speaker 13: safe for the SEUs Canal is closed.
Speaker 12: We've had that before.
Speaker 13: This is a very significant journey, and it's particularly important
Speaker 13: right now because it used to be that Europe was
Speaker 13: getting a lot of it's oil from Russia. That's not
Speaker 13: happening now and it's relying a lot more on oil
Speaker 13: from the Middle East. And so if that oil can't
Speaker 13: go through the Suez Canal, then now we're talking an
Speaker 13: extra twelve to fourteen day trip around Africa. And it
Speaker 13: also cuts out the Siumed pipeline because that pipeline is accessible. Also,
Speaker 13: you have to go through the Red Sea to access
Speaker 13: that pipeline as well. So essentially only you can get
Speaker 13: Saudi oil if it leaves the west coast of Saudi Arabia,
Speaker 13: which isn't a place where that much oil leaves Saudi Arabia.
Speaker 13: That can get to the Suez Canal or the Siumed
Speaker 13: pipeline without a threat of Houti activity, but otherwise everybody
Speaker 13: else is stuck.
Speaker 8: So if this was twenty twenty one, this would be
Speaker 8: dreadful twenty twenty two chaos. We'd be talking about higher
Speaker 8: prices and inflation spiraling down of control. In twenty twenty three.
Speaker 8: It just feels like supply chains are a better place,
Speaker 8: and then can you describe them all? We in a
Speaker 8: better place.
Speaker 13: Yeah, we're definitely in a better place. This is not
Speaker 13: We're not going to see oil shortages. We're not going
Speaker 13: to see gas lines. You know, during the Suez Canal
Speaker 13: crisis in nineteen fifty six, that's what we saw when
Speaker 13: the Suez Canal was closed. We also didn't have at
Speaker 13: that time the very large crude carrier, which were these
Speaker 13: massive crude oil carriers which they basically invented in order
Speaker 13: to take crude oil around Africa so that they could
Speaker 13: get enough to Europe. So we've got that now, So
Speaker 13: we're not talking devastation, but we are talking about increased
Speaker 13: time at a time when we've already got increased time
Speaker 13: to get oil shipments to Europe, and we're talking about
Speaker 13: increased costs.
Speaker 2: Are you surprised that we haven't seen more of a
Speaker 2: pop and oil prices as a result, Ellen.
Speaker 13: You know, I'm not that surprised because this is something
Speaker 13: that's been going on for a while and it's only
Speaker 13: recently i think escalated to the point where tankers and
Speaker 13: shipping companies that are not direct connected with any kind
Speaker 13: of Israeli interests are getting concerned and are making moves.
Speaker 13: So I think that the market has kind of been
Speaker 13: anticipating this for a bit of time, and then you've
Speaker 13: also got these overall kind of economic issues waiting on
Speaker 13: the market. I think that maybe they should be more concerned,
Speaker 13: especially because the idea that suddenly the US Defense Secretary
Speaker 13: is only now setting up a commission to deal with
Speaker 13: this that doesn't bode.
Speaker 2: Well, and there are questions around what that commission can
Speaker 2: actually do, what they are willing to do, and what
Speaker 2: exactly the conversations are between the US and Riad, for example,
Speaker 2: which might have more influence over the.
Speaker 1: Hoo Thies than say Canada.
Speaker 2: So how much from your perspective do you think that
Speaker 2: the right people are involved in these conversations, and do
Speaker 2: you have a sense of what the potential allies in
Speaker 2: the region might be willing and able to do.
Speaker 13: I think that rio I would love nothing more than
Speaker 13: a green light from the United States to just bomb
Speaker 13: the heck out of the hoo these in Yemen. I
Speaker 13: don't think they're going to get that. I think the
Speaker 13: real issue here is where is getting this technology and
Speaker 13: these drones to buzz these ships and cause these issues.
Speaker 13: And that's the answer to that is Iran. And when
Speaker 13: you look at the likelihood of maybe a US Iranian
Speaker 13: confrontation over this, that's not something I think the US
Speaker 13: is willing to risk. So the question is really what
Speaker 13: kind of show of force is the United States and
Speaker 13: potentially an international coalition because a safe passage in the seas,
Speaker 13: essentially freedom of the seas is an international issue. This
Speaker 13: is not just a US issue or a US British issue.
Speaker 13: This is really an international issue that China should be
Speaker 13: concerned about, Korea and we've got everyone should be much
Speaker 13: more concerned about this than they are. But the question
Speaker 13: is who's going to actually put put the muscle where
Speaker 13: it needs to be and I'm not sure that we're
Speaker 13: seeing willingness to do that.
Speaker 8: You touched on potential losers. I believe you mentioned European importers.
Speaker 8: Can we talk about winners? Who wins from this situation?
Speaker 13: Allan Africa. I'm sure that South Africa is absolutely thrilled
Speaker 13: to see lots of increased traffic at its ports in
Speaker 13: an extra tilt to fourteen day trip sealers. They're going
Speaker 13: to want to stop they're going to want to, you know,
Speaker 13: have a break, They're going to want to go, you know,
Speaker 13: on land. And so I think Africa is definitely a
Speaker 13: winner here because they're seeing a lot more traffic and
Speaker 13: that means they can charge for it. I do think
Speaker 13: that Egypt is a huge loser here that really can't
Speaker 13: be overlooked because if we're seeing a lot less traffic
Speaker 13: in the Sewers Canal, they're losing money over this, and
Speaker 13: a lot of money.
Speaker 8: And just to finish on prices oil versus gas, Is
Speaker 8: it a bigger issue for one versus the other or
Speaker 8: the same?
Speaker 13: I don't think so, because also when we talk about
Speaker 13: oil going through the Suez Canal, we often talk about
Speaker 13: it in terms of petroleum products. Overall, we're not really
Speaker 13: differentiating between crude oil and products here. So I think
Speaker 13: it's it's all, it's all tied.
Speaker 8: In allan, thank you, I appreciate the update. Want to
Speaker 8: watch a developing story over the last week for sure,
Speaker 8: Alan Weld at the Atlantic Council.
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