1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,200 --> 00:00:13,200 Speaker 1: with Jonathan Ferrell and Lisa Bramowitz. Daily we bring you 3 00:00:13,280 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,840 --> 00:00:23,799 Speaker 1: To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:30,240 Speaker 1: and of course on the Bloomberg terminal. Ron Temple makes 6 00:00:30,240 --> 00:00:33,240 Speaker 1: it smarter this morning, go ahead, a multi asset head 7 00:00:33,320 --> 00:00:36,640 Speaker 1: and with lasired asset Management and Ron, I want to 8 00:00:36,680 --> 00:00:39,839 Speaker 1: cut right to the equity paragraph. And you're always crystal 9 00:00:39,880 --> 00:00:42,800 Speaker 1: clear note, which is you are focused on the grand 10 00:00:42,840 --> 00:00:47,000 Speaker 1: conundrum in the next year, which is measuring the persistency 11 00:00:47,320 --> 00:00:51,400 Speaker 1: of cash flow, the persistency of free cash flow. How 12 00:00:51,440 --> 00:00:55,000 Speaker 1: do you actually do that? Well, this is all about 13 00:00:55,040 --> 00:00:57,400 Speaker 1: doing the bottom up fundamental analysis, Tom, I'm sure you're 14 00:00:57,400 --> 00:00:59,520 Speaker 1: familiar with that. I mean looking out and trying to 15 00:00:59,800 --> 00:01:03,000 Speaker 1: un understand what makes a company generate higher returns on 16 00:01:03,040 --> 00:01:05,800 Speaker 1: capitol and what are the drivers of whether that return 17 00:01:05,840 --> 00:01:08,760 Speaker 1: on capital can stay high or whether it declines. And 18 00:01:08,800 --> 00:01:10,959 Speaker 1: so we're really focused here in terms of you know, 19 00:01:11,000 --> 00:01:13,080 Speaker 1: what I'm looking at in the equity market is trying 20 00:01:13,120 --> 00:01:16,200 Speaker 1: to avoid the speculative growth stocks that are all about 21 00:01:16,280 --> 00:01:19,400 Speaker 1: earnings that might come down the pike, say five, seven, 22 00:01:19,480 --> 00:01:22,000 Speaker 1: ten years, where all of the value of the companies 23 00:01:22,000 --> 00:01:24,240 Speaker 1: in that terminal value and it's much more vulnerable to 24 00:01:24,319 --> 00:01:28,080 Speaker 1: hire discount rates and avoiding the deep value cyclical stocks. 25 00:01:28,080 --> 00:01:29,679 Speaker 1: They are most at risk if you have a recession 26 00:01:29,920 --> 00:01:32,319 Speaker 1: and sticking right in the middle of that kind of continuum. 27 00:01:32,760 --> 00:01:35,679 Speaker 1: On the quality stocks, the companies with high returns on capital, 28 00:01:35,959 --> 00:01:39,800 Speaker 1: that a pricing power, brand advantages, um, strong management, strong 29 00:01:39,840 --> 00:01:41,720 Speaker 1: balance sheets, and that's where you really want to do 30 00:01:41,760 --> 00:01:44,920 Speaker 1: the work to understand what makes a company so strong 31 00:01:45,280 --> 00:01:48,120 Speaker 1: and how they can maintain that position over time. Rod, 32 00:01:48,160 --> 00:01:50,880 Speaker 1: We've heard this before from other people who are trying 33 00:01:50,920 --> 00:01:53,320 Speaker 1: to gird for a recession, But it feels like the 34 00:01:53,320 --> 00:01:56,360 Speaker 1: mood shifted this week. Have you shifted anything about your 35 00:01:56,400 --> 00:01:58,560 Speaker 1: thesis and the heels of the CPI report and p 36 00:01:58,720 --> 00:02:01,320 Speaker 1: p I and even what we're seeing in terms of 37 00:02:01,320 --> 00:02:05,800 Speaker 1: Fed funds futures. I think the market is reacting to 38 00:02:06,040 --> 00:02:09,440 Speaker 1: the positive sign that we've probably seen the peak and inflation. 39 00:02:09,919 --> 00:02:12,680 Speaker 1: We've finally seen inflation roll over, and it's more of 40 00:02:12,680 --> 00:02:15,760 Speaker 1: those cyclical items, the items that we all thought were 41 00:02:15,760 --> 00:02:18,560 Speaker 1: transitory about a year ago that are rolling over. If 42 00:02:18,560 --> 00:02:20,440 Speaker 1: you look at the decline and cp I that we 43 00:02:20,480 --> 00:02:23,280 Speaker 1: saw this week from last month from June to July 44 00:02:24,840 --> 00:02:28,240 Speaker 1: basis points of the forty basis point deceleration was cars 45 00:02:28,240 --> 00:02:30,919 Speaker 1: and airfare. So those are factors that we knew would 46 00:02:31,040 --> 00:02:33,880 Speaker 1: roll over at some point. What I'm really watching is 47 00:02:34,120 --> 00:02:36,920 Speaker 1: rent of shelter. What I'm watching is wage growth. And 48 00:02:36,960 --> 00:02:39,560 Speaker 1: so I think investors should be careful because you know, 49 00:02:39,560 --> 00:02:41,280 Speaker 1: as I listened to you for the last few minutes, 50 00:02:41,560 --> 00:02:44,760 Speaker 1: I think there's a propensity in the market to say, Okay, 51 00:02:44,800 --> 00:02:46,720 Speaker 1: this story is over. We're gonna go back to the 52 00:02:46,720 --> 00:02:49,079 Speaker 1: old playbook. The FED won't have to raise rates as much, 53 00:02:49,440 --> 00:02:52,240 Speaker 1: and I can buy these companies that are growthy kind 54 00:02:52,240 --> 00:02:54,959 Speaker 1: of call options. I don't think that's the right call. 55 00:02:55,040 --> 00:02:56,960 Speaker 1: I think we're in the midst of a paradigm shift 56 00:02:57,000 --> 00:02:59,720 Speaker 1: on inflation, and when inflation does settle, I think it's 57 00:02:59,760 --> 00:03:02,280 Speaker 1: going to settle with a three handle, not a one 58 00:03:02,320 --> 00:03:03,960 Speaker 1: and a half to two percent like we saw for 59 00:03:04,000 --> 00:03:06,680 Speaker 1: the decade into nine. So I would be a little 60 00:03:06,919 --> 00:03:08,679 Speaker 1: a lot more careful than I think I'm seeing in 61 00:03:08,680 --> 00:03:11,840 Speaker 1: the markets of kind of overreacting to data in the 62 00:03:11,840 --> 00:03:14,720 Speaker 1: short term Okay, so Ron, if you're more careful, does 63 00:03:14,760 --> 00:03:17,079 Speaker 1: that mean you still view what we've seen is more 64 00:03:17,120 --> 00:03:20,839 Speaker 1: of a bear market rally than a bona fide sustainable rally. 65 00:03:21,720 --> 00:03:23,760 Speaker 1: I I do still believe it's a bear market rally. 66 00:03:23,880 --> 00:03:26,080 Speaker 1: I could always be proven wrong. We always have that risk. 67 00:03:26,480 --> 00:03:27,840 Speaker 1: But when I look at is, I think we need 68 00:03:27,880 --> 00:03:30,200 Speaker 1: to wait for data next month. I expect CPI to 69 00:03:30,240 --> 00:03:33,880 Speaker 1: come down again. I'm very interested to see the job numbers. 70 00:03:34,280 --> 00:03:36,360 Speaker 1: There's their mixed signals in the job market. We had 71 00:03:36,400 --> 00:03:39,160 Speaker 1: a great payroll number last Friday, but if you look 72 00:03:39,160 --> 00:03:42,320 Speaker 1: at the Jolt State of the Job Opening Labor Turnover Survey, 73 00:03:42,760 --> 00:03:46,040 Speaker 1: we've seen a million job decrease in the number of 74 00:03:46,120 --> 00:03:48,800 Speaker 1: unfilled positions in the last two months. Now, again that 75 00:03:48,880 --> 00:03:51,440 Speaker 1: data is a month lagged relative to payroll data. But 76 00:03:51,520 --> 00:03:53,840 Speaker 1: what I want to see is are those unfilled jobs 77 00:03:53,880 --> 00:03:57,720 Speaker 1: going away, which then means labor has less negotiating power, 78 00:03:58,040 --> 00:04:00,080 Speaker 1: which then means you're less likely to see wage with 79 00:04:00,120 --> 00:04:02,000 Speaker 1: which would is less likely than to pass through the 80 00:04:02,080 --> 00:04:04,960 Speaker 1: prices going up for goods and services. So so I 81 00:04:04,960 --> 00:04:06,840 Speaker 1: think we need to watch more data. But right now 82 00:04:06,880 --> 00:04:09,160 Speaker 1: I think this is a bear market rally. As a 83 00:04:09,200 --> 00:04:12,000 Speaker 1: base case assumption. And again, I would be careful of 84 00:04:12,080 --> 00:04:14,200 Speaker 1: running back to the playbook that worked for the last 85 00:04:14,200 --> 00:04:16,719 Speaker 1: ten fifteen years, because I think that playbooks should probably 86 00:04:16,720 --> 00:04:18,760 Speaker 1: be thrown out. We're on a temple. If we throw 87 00:04:18,839 --> 00:04:22,240 Speaker 1: out quality large cap stocks, which is the mantra right now, 88 00:04:22,320 --> 00:04:25,039 Speaker 1: we're all going to read about it five times this weekend. 89 00:04:25,480 --> 00:04:28,640 Speaker 1: What is the new mantra going to be? Well, to 90 00:04:28,640 --> 00:04:31,280 Speaker 1: be careful, I think quality is the playbook you want. 91 00:04:31,320 --> 00:04:33,480 Speaker 1: I think the playbook for the last ten fifteen years 92 00:04:33,480 --> 00:04:36,160 Speaker 1: that worked was by the call option by the company 93 00:04:36,200 --> 00:04:39,159 Speaker 1: that is a really cool business plan that's getting access 94 00:04:39,200 --> 00:04:43,560 Speaker 1: to capital at zero interest rates, unlimited capital. I think 95 00:04:43,600 --> 00:04:45,360 Speaker 1: that's gonna be much tougher. So it's that into the 96 00:04:45,360 --> 00:04:48,160 Speaker 1: spectrum I think is more at risk. I think quality. 97 00:04:48,279 --> 00:04:51,320 Speaker 1: It's interesting, Tom, there's been a Venn diagram overlap right 98 00:04:51,360 --> 00:04:53,040 Speaker 1: where a lot of the quality and the growth were 99 00:04:53,080 --> 00:04:56,040 Speaker 1: the same company. I still like the quality growth companies, 100 00:04:56,200 --> 00:04:58,440 Speaker 1: you know, those companies that can generate high cash flow 101 00:04:58,520 --> 00:05:01,320 Speaker 1: and grow. That's great to share at the right valuation. 102 00:05:01,839 --> 00:05:04,200 Speaker 1: Ronald Temple, thank you is by the way, the valuations 103 00:05:04,200 --> 00:05:06,279 Speaker 1: have come down, so thank you. Well they have Ronald 104 00:05:06,320 --> 00:05:08,320 Speaker 1: Temple thank you so much for starting us off strong 105 00:05:08,320 --> 00:05:20,200 Speaker 1: with lazard asset management. Right now and hugely anticipated for 106 00:05:20,320 --> 00:05:24,240 Speaker 1: November is a book. But when Stephen Roach writes a 107 00:05:24,240 --> 00:05:28,120 Speaker 1: book on China, it has a focus and intent on 108 00:05:28,200 --> 00:05:32,039 Speaker 1: their economics and politics like no other. The book is 109 00:05:32,200 --> 00:05:38,240 Speaker 1: Accidental Conflict America, China and the Clash of False Narratives. 110 00:05:38,240 --> 00:05:42,120 Speaker 1: This is hugely anticipated by the Chinese watching community. The 111 00:05:42,200 --> 00:05:45,240 Speaker 1: gentleman from Yale in the Saudi China Center at Yale 112 00:05:45,279 --> 00:05:48,039 Speaker 1: Law School joins us this morning. Dr Roach, thank you 113 00:05:48,080 --> 00:05:50,599 Speaker 1: so much for joining. You've written three or four books 114 00:05:50,640 --> 00:05:53,320 Speaker 1: on China. Why is this one different? What is the 115 00:05:53,440 --> 00:05:56,760 Speaker 1: tension at this moment? Is Mr She goes to the 116 00:05:56,800 --> 00:06:01,520 Speaker 1: Party Congress. Well, Tom. In the past five years, we've 117 00:06:01,600 --> 00:06:05,960 Speaker 1: gone from trade war to tech War two, now a 118 00:06:06,080 --> 00:06:12,320 Speaker 1: cold war conflict is escalating. There is no real framework 119 00:06:12,400 --> 00:06:17,680 Speaker 1: to manage this conflict effectively, let alone conceive of even 120 00:06:18,120 --> 00:06:22,200 Speaker 1: the slightest semblance of resolution. And in a period of 121 00:06:22,320 --> 00:06:26,640 Speaker 1: escalating conflict, the smallest spark can lead to a major 122 00:06:27,560 --> 00:06:31,120 Speaker 1: uh clash, and we certainly have seen one in the 123 00:06:31,240 --> 00:06:35,680 Speaker 1: last week over Taiwan. And I'm very worried about the 124 00:06:35,720 --> 00:06:39,560 Speaker 1: possibility of you know, a military accident in the Taiwan 125 00:06:39,680 --> 00:06:44,760 Speaker 1: Straits occurring in the context of this escalating economic and 126 00:06:44,800 --> 00:06:50,960 Speaker 1: technology conflict that could really lead to a serious UH 127 00:06:51,000 --> 00:06:54,919 Speaker 1: outbreak between the United States and China. The thesis of 128 00:06:54,920 --> 00:06:58,320 Speaker 1: the book is the conflict would not have happened were 129 00:06:58,320 --> 00:07:01,880 Speaker 1: it not for the false narratives that both the nation's 130 00:07:01,960 --> 00:07:06,159 Speaker 1: harbor with respect to other and I developed these narratives 131 00:07:06,160 --> 00:07:09,279 Speaker 1: in detail in the new book. Well, what is important 132 00:07:09,320 --> 00:07:12,160 Speaker 1: here is what matter of diplomacy has needed. What is 133 00:07:12,200 --> 00:07:16,440 Speaker 1: the roach approach to a new diplomacy that can perhaps 134 00:07:17,040 --> 00:07:21,960 Speaker 1: calm down these pressure points. Well, my idea and I 135 00:07:22,000 --> 00:07:25,200 Speaker 1: developed it in detail on the final part of the book, 136 00:07:25,560 --> 00:07:31,040 Speaker 1: is that the current structure of engagement, whether it's you know, 137 00:07:32,200 --> 00:07:34,880 Speaker 1: leader to leader phone calls between Biden and hijin Ping 138 00:07:35,520 --> 00:07:40,040 Speaker 1: or earlier strategic and economic dialogues as grand summons, has 139 00:07:40,120 --> 00:07:46,200 Speaker 1: failed miserably. And so I am proposing a permanent institution 140 00:07:46,320 --> 00:07:48,720 Speaker 1: that I call for lack of a better term, at 141 00:07:48,800 --> 00:07:54,880 Speaker 1: US China Secretariat that meets full time seven UH staffed 142 00:07:54,880 --> 00:07:59,400 Speaker 1: by an equal number of professionals on both sides of 143 00:07:59,560 --> 00:08:03,840 Speaker 1: the the relationship, whose full time job is to deal 144 00:08:03,920 --> 00:08:07,760 Speaker 1: with all aspects of the relationship, from economics and trade 145 00:08:08,240 --> 00:08:11,760 Speaker 1: to cyber and human rights. And we need a new approach. 146 00:08:11,800 --> 00:08:14,520 Speaker 1: And this is uh, you know, one idea may not 147 00:08:14,640 --> 00:08:18,440 Speaker 1: be perfect, but it certainly beats the current failed approach Stephen. 148 00:08:18,800 --> 00:08:21,680 Speaker 1: There might be a lot of uncertainty on the policy side, 149 00:08:21,800 --> 00:08:23,960 Speaker 1: but businesses have to make moves. They have to either 150 00:08:24,000 --> 00:08:27,160 Speaker 1: expand and double down on their expansion plans in China, 151 00:08:27,240 --> 00:08:29,040 Speaker 1: or they have to withdraw, which we've seen a number 152 00:08:29,040 --> 00:08:31,560 Speaker 1: of companies do on the margins. And we hear more 153 00:08:31,640 --> 00:08:35,200 Speaker 1: and more about reshoring or on shoring of US companies 154 00:08:35,280 --> 00:08:38,839 Speaker 1: away from China. How materially will that shift the dynamic 155 00:08:39,000 --> 00:08:40,760 Speaker 1: of trade at a time when a lot of people 156 00:08:40,800 --> 00:08:45,160 Speaker 1: say this will be inflationary, Well, I think I think 157 00:08:45,160 --> 00:08:49,000 Speaker 1: it will be inflationary. I think that the trench word 158 00:08:49,040 --> 00:08:53,960 Speaker 1: re short reshoring is an unmistakable our growth of geostrategic 159 00:08:54,080 --> 00:08:57,320 Speaker 1: tensions between the United States and China. They can better 160 00:08:57,360 --> 00:09:01,000 Speaker 1: be addressed through a structure such as the one I 161 00:09:01,080 --> 00:09:05,000 Speaker 1: just outlined, Lisa. But you know, make no mistake, this 162 00:09:05,080 --> 00:09:09,079 Speaker 1: is very destabilizing, uh, not just for the US and inflation, 163 00:09:09,640 --> 00:09:14,360 Speaker 1: but also for China. China benefited the most of any 164 00:09:14,480 --> 00:09:18,960 Speaker 1: nation in the world from the upswing of globalization, and 165 00:09:19,000 --> 00:09:22,400 Speaker 1: it has the most to lose. I think as we 166 00:09:22,480 --> 00:09:27,559 Speaker 1: now move from globalization to deglobalization. There's a larger issue 167 00:09:27,559 --> 00:09:29,520 Speaker 1: though for the economy. And this is something that we 168 00:09:29,520 --> 00:09:31,640 Speaker 1: were just hearing about from Ron Temple. How he thinks 169 00:09:31,679 --> 00:09:33,559 Speaker 1: that perhaps will get back down to a three percent 170 00:09:33,600 --> 00:09:36,200 Speaker 1: inflation rate, but not much below that because we are 171 00:09:36,200 --> 00:09:38,680 Speaker 1: in a new paradigm. And I wonder how much is 172 00:09:38,760 --> 00:09:41,840 Speaker 1: China the main part of that. If you have reshoring, 173 00:09:42,080 --> 00:09:45,440 Speaker 1: which incurs more expense, and you have slower growth in 174 00:09:45,520 --> 00:09:48,200 Speaker 1: China because of exactly what you said, Because this is 175 00:09:48,240 --> 00:09:51,720 Speaker 1: going to affect the world's second biggest economy significantly, how 176 00:09:51,800 --> 00:09:55,640 Speaker 1: much does this portend a slower growth, higher inflation environment 177 00:09:55,679 --> 00:09:59,600 Speaker 1: for a longer term. Well, you know, we debate how 178 00:09:59,679 --> 00:10:03,480 Speaker 1: much China has held down US inflation over the past 179 00:10:03,520 --> 00:10:07,560 Speaker 1: twenty years, but it's been significant, as has uh the 180 00:10:07,720 --> 00:10:11,960 Speaker 1: rapid expansion of global value chains or global supply chains, 181 00:10:12,520 --> 00:10:17,040 Speaker 1: and as supply chains are disrupted by China and other 182 00:10:17,520 --> 00:10:21,520 Speaker 1: developments around the world as we moved from offshore to onshore. 183 00:10:22,520 --> 00:10:25,679 Speaker 1: Good luck in getting inflation down to three It's it's 184 00:10:25,760 --> 00:10:29,160 Speaker 1: gonna be a very difficult goal to achieve. Steph, I've 185 00:10:29,160 --> 00:10:31,880 Speaker 1: been trying to ask you this. She built Morgan Stanley Economics. 186 00:10:31,880 --> 00:10:34,320 Speaker 1: You were the first American economists I know that tried 187 00:10:34,360 --> 00:10:38,080 Speaker 1: to make a three leg FED policy of unemployment inflation 188 00:10:38,160 --> 00:10:40,920 Speaker 1: and you said, watch the balance sheet, the expansion of 189 00:10:40,920 --> 00:10:43,720 Speaker 1: the balance sheet. All that came true as you wrote 190 00:10:43,720 --> 00:10:46,800 Speaker 1: about years ago. What's the FED theory now, if you 191 00:10:46,840 --> 00:10:50,080 Speaker 1: were to if you were to parachute into Jackson Hall 192 00:10:50,600 --> 00:10:53,120 Speaker 1: here at the end of office, what is the theory 193 00:10:53,200 --> 00:10:58,440 Speaker 1: you're gonna find about central banking? Well, you know, hard 194 00:10:58,480 --> 00:11:00,880 Speaker 1: for me to know how they're in a phrase of 195 00:11:00,960 --> 00:11:03,480 Speaker 1: Tom but I think the FED theory has got to 196 00:11:03,520 --> 00:11:07,080 Speaker 1: go back to basics. You know, forget this UH QUI 197 00:11:07,400 --> 00:11:12,000 Speaker 1: balance sheet asset dependent economy. It's blown up repeatedly since 198 00:11:12,360 --> 00:11:18,040 Speaker 1: Greenspan and Bernankey tried to UH in the the nineties 199 00:11:18,080 --> 00:11:21,719 Speaker 1: and in the early two thousands. The FETs got to 200 00:11:21,760 --> 00:11:26,160 Speaker 1: go back to inflation targeting, not average inflation targeting, but 201 00:11:26,320 --> 00:11:30,920 Speaker 1: plain old inflation targeting. UH and UH we need a 202 00:11:31,200 --> 00:11:34,200 Speaker 1: you know, a dose of the very simplistic but tough 203 00:11:34,240 --> 00:11:38,920 Speaker 1: and disciplined approach by Paul Vulker. J. Powell is you know, 204 00:11:39,360 --> 00:11:43,400 Speaker 1: says he's very much committed to doing this. The FET's 205 00:11:43,440 --> 00:11:46,560 Speaker 1: taken some big steps, but you know, child played compared 206 00:11:46,600 --> 00:11:48,880 Speaker 1: to what they have to do, the real federal funds 207 00:11:48,960 --> 00:11:51,800 Speaker 1: rate is still sharply negative. You're not going to control 208 00:11:52,520 --> 00:11:56,400 Speaker 1: inflation with a sharply negative federal that's on that's on 209 00:11:56,480 --> 00:11:58,560 Speaker 1: the LM side. Okay, help me here with the real 210 00:11:58,600 --> 00:12:02,240 Speaker 1: economy and the unemployment rate. If we go Laurence Summers 211 00:12:02,280 --> 00:12:05,240 Speaker 1: this morning and pop it up, as Annawanga Bloomberg says, 212 00:12:05,559 --> 00:12:08,600 Speaker 1: to a four percent or five percent regime, what does 213 00:12:08,600 --> 00:12:12,840 Speaker 1: that do to America's unemployment rate? It's gonna go up. Tom. 214 00:12:12,880 --> 00:12:14,920 Speaker 1: I mean, you know, we give me a magnitude here, 215 00:12:14,960 --> 00:12:17,920 Speaker 1: no one's watching. Give me, give me a magnitude somewhere 216 00:12:17,960 --> 00:12:20,520 Speaker 1: in the four to five percent zone, which is, you know, 217 00:12:20,640 --> 00:12:23,640 Speaker 1: a small price to pay, not for those who are 218 00:12:23,640 --> 00:12:26,320 Speaker 1: affected by of course, but a small price to pay 219 00:12:26,360 --> 00:12:31,080 Speaker 1: to to get inflation back under a more UH stable 220 00:12:31,679 --> 00:12:35,680 Speaker 1: UH path consistent with sustainable growth in the US. The 221 00:12:35,679 --> 00:12:40,040 Speaker 1: path we're on right now doesn't cut it, okay, So Stephen, 222 00:12:40,160 --> 00:12:44,199 Speaker 1: obviously there is a trade off potentially between keeping inflation 223 00:12:44,280 --> 00:12:47,520 Speaker 1: in check and supporting growth and to tie it back 224 00:12:47,559 --> 00:12:50,400 Speaker 1: to China. The PBOC earlier this week was saying, we 225 00:12:50,440 --> 00:12:52,520 Speaker 1: aren't going to go with massive stimulus to support the 226 00:12:52,559 --> 00:12:54,960 Speaker 1: economy despite the turmoil and the property sector of the 227 00:12:54,960 --> 00:12:58,080 Speaker 1: COVID zero policy causing issues, because we are worried about 228 00:12:58,120 --> 00:13:01,839 Speaker 1: the specter of inflation. Do you expect that eventually, if 229 00:13:01,960 --> 00:13:04,800 Speaker 1: China isn't going to take steps to breach a five 230 00:13:04,840 --> 00:13:07,000 Speaker 1: and a half percent growth target, that the Federal Reserve 231 00:13:07,040 --> 00:13:11,360 Speaker 1: is going to BOK two? Well, I think you know. 232 00:13:12,200 --> 00:13:15,360 Speaker 1: Are you asking about the Fed's concerns over US economic growth? 233 00:13:17,240 --> 00:13:23,319 Speaker 1: I think you know the mandate is going from duel 234 00:13:23,400 --> 00:13:27,199 Speaker 1: to single. Inflation is the focus, and they can't afford 235 00:13:27,920 --> 00:13:33,280 Speaker 1: to flinch on bringing inflation back because of political pressures 236 00:13:33,320 --> 00:13:36,920 Speaker 1: that will be evident as the unemployment rate starts to rise, 237 00:13:36,960 --> 00:13:40,000 Speaker 1: and and the Fed has just got to be fierce 238 00:13:40,200 --> 00:13:45,000 Speaker 1: and focused on its independence and on its desire to 239 00:13:45,040 --> 00:13:48,760 Speaker 1: bring inflation down as soon as possible. Steven Roads, wonderful 240 00:13:48,800 --> 00:13:50,880 Speaker 1: to catch up with you today, of course at Yale 241 00:13:50,960 --> 00:13:53,760 Speaker 1: Law School and formally where the Wall Street firm name 242 00:13:53,840 --> 00:14:01,280 Speaker 1: Morgan Stanley. Right now, we're gonna it's a digress here. 243 00:14:01,320 --> 00:14:03,920 Speaker 1: I thought what Lisa was talking when Dr Schiller about 244 00:14:03,960 --> 00:14:06,360 Speaker 1: on the break was really really important. Wendy schillers with 245 00:14:06,400 --> 00:14:10,320 Speaker 1: Brown University, director of the Talbin Center for American Politics 246 00:14:10,400 --> 00:14:14,679 Speaker 1: and a writer of core textbooks on our civics as well. 247 00:14:15,200 --> 00:14:18,360 Speaker 1: We've alluded to this before, Wendy, but I want to 248 00:14:18,400 --> 00:14:22,200 Speaker 1: talk about two candidates who I believe will be seventy 249 00:14:22,280 --> 00:14:27,600 Speaker 1: eight and eight d two in two thousand twenty four, 250 00:14:28,520 --> 00:14:31,160 Speaker 1: and that means, if my math is right, there'll be 251 00:14:31,240 --> 00:14:33,920 Speaker 1: eighty two and eighties six on the way out the 252 00:14:33,960 --> 00:14:39,840 Speaker 1: door in two thousand. How did we get the fossils 253 00:14:40,320 --> 00:14:45,240 Speaker 1: running for president? Well, I think general trends and aging 254 00:14:45,360 --> 00:14:49,000 Speaker 1: are are good, and people are aging better across the country, 255 00:14:49,040 --> 00:14:51,960 Speaker 1: so that's a good thing. I think in time, we 256 00:14:52,040 --> 00:14:54,080 Speaker 1: came out of a very long where people thought it 257 00:14:54,160 --> 00:14:57,000 Speaker 1: was a very long recession. Uh, and the world has 258 00:14:57,040 --> 00:14:59,960 Speaker 1: become less stable. Obviously, Cold War ended and we all 259 00:15:00,200 --> 00:15:03,080 Speaker 1: celebrated freedom around the world, but freedom brought with it 260 00:15:03,280 --> 00:15:06,360 Speaker 1: a lot of unpredictability, and then of course we had 261 00:15:06,560 --> 00:15:08,640 Speaker 1: the wars in Iraq and Afghanistan. And when you have 262 00:15:08,760 --> 00:15:11,520 Speaker 1: that much tumult and uncertainty, and certainly even the not 263 00:15:11,640 --> 00:15:15,320 Speaker 1: eleven attacks. People want comfort, They want people who've been 264 00:15:15,320 --> 00:15:16,960 Speaker 1: around a long time. You can tell them this too, 265 00:15:17,160 --> 00:15:20,200 Speaker 1: this too shall pass. People look to the familiar. They 266 00:15:20,240 --> 00:15:23,360 Speaker 1: look to people with quote unquote experience. Donald Trump had 267 00:15:23,400 --> 00:15:27,440 Speaker 1: business experience that he touted, and Joe Biden had more 268 00:15:27,480 --> 00:15:31,520 Speaker 1: than thirty years in government. Wendy, I'm struggling with that 269 00:15:31,600 --> 00:15:34,480 Speaker 1: idea because we've seen poll after pole is saying that 270 00:15:34,480 --> 00:15:36,720 Speaker 1: they would like to see new blood who leading the 271 00:15:36,720 --> 00:15:39,280 Speaker 1: Democratic Party. They would like to see a younger slew 272 00:15:39,360 --> 00:15:42,760 Speaker 1: of Congress members across the board as we enter into 273 00:15:42,840 --> 00:15:45,280 Speaker 1: a very new phase. Is it a good thing or 274 00:15:45,320 --> 00:15:48,440 Speaker 1: a bad thing for the Democrats that President Biden denounced 275 00:15:48,440 --> 00:15:51,680 Speaker 1: his intention to run again. I think it's a good thing. 276 00:15:51,760 --> 00:15:54,680 Speaker 1: You can't have a president not even ending his second year, 277 00:15:54,720 --> 00:15:57,400 Speaker 1: full year in office, who says, well, I'm not in anymore. 278 00:15:57,440 --> 00:16:00,000 Speaker 1: I mean, even if there's the slightest chance Biden can 279 00:16:00,080 --> 00:16:02,160 Speaker 1: still beat President a couple of years from now, that 280 00:16:02,240 --> 00:16:04,120 Speaker 1: makes a difference in terms of influence, That makes the 281 00:16:04,120 --> 00:16:06,400 Speaker 1: difference in terms of public opinion. You just can't be 282 00:16:06,440 --> 00:16:08,880 Speaker 1: written off. We saw this with Clinton after the Republicans 283 00:16:08,920 --> 00:16:12,239 Speaker 1: won the mid terms in ninety four, you know, always irrelevant. 284 00:16:12,280 --> 00:16:15,120 Speaker 1: He doesn't. He won two years later relatively easily. You 285 00:16:15,240 --> 00:16:18,000 Speaker 1: have to maintain the exercise of power and the illusion 286 00:16:18,280 --> 00:16:20,160 Speaker 1: that you want to keep that power. So I think 287 00:16:20,160 --> 00:16:22,120 Speaker 1: that's a strategically important thing for Biden to do, and 288 00:16:22,160 --> 00:16:23,520 Speaker 1: there is no reason for him not to do it. 289 00:16:23,600 --> 00:16:25,600 Speaker 1: So you think that this is more about the visual, 290 00:16:25,600 --> 00:16:27,800 Speaker 1: it's more about the illusion and less about a true 291 00:16:27,800 --> 00:16:31,040 Speaker 1: intention to run. Well, I think he can stay. He 292 00:16:31,080 --> 00:16:32,960 Speaker 1: can stay in this race until somebody in the primary 293 00:16:33,000 --> 00:16:34,880 Speaker 1: starts to beat him. And and you know, the myth 294 00:16:34,960 --> 00:16:36,920 Speaker 1: that primaries are bad for our parties at the presidential 295 00:16:37,000 --> 00:16:39,640 Speaker 1: levels and has been debunked. Now we know that it 296 00:16:39,680 --> 00:16:42,840 Speaker 1: generates more turnout, It generates people registering to vote, knowing 297 00:16:42,840 --> 00:16:45,720 Speaker 1: a pulling places, they get out the door. There's you know, 298 00:16:46,000 --> 00:16:49,160 Speaker 1: we know that it increases turnout amongst the party members. 299 00:16:49,160 --> 00:16:51,760 Speaker 1: So that means that it's a good thing to have 300 00:16:51,880 --> 00:16:55,760 Speaker 1: some fighting, some challenging, uh, some anticipation. So if he's 301 00:16:55,800 --> 00:16:57,800 Speaker 1: in it and other people want to challenge him, that 302 00:16:57,880 --> 00:17:00,760 Speaker 1: just means more Democrats get in the games to vote, 303 00:17:00,960 --> 00:17:04,280 Speaker 1: and we know the Republicans will be very, very energized 304 00:17:04,280 --> 00:17:07,080 Speaker 1: in twenty four, about whom they will be loyal. We 305 00:17:07,080 --> 00:17:09,200 Speaker 1: don't know who they're gonna pick. You know, I think 306 00:17:09,200 --> 00:17:11,200 Speaker 1: there'll be more than one person in that race. Yeah, 307 00:17:11,240 --> 00:17:14,200 Speaker 1: it's a good point, Wendy. Obviously there's multiple variables at play. 308 00:17:14,280 --> 00:17:17,240 Speaker 1: Let's just assume for the moment that candidate on the 309 00:17:17,240 --> 00:17:20,720 Speaker 1: Republican side hypothetically would be President Trump. Is there anyone 310 00:17:20,800 --> 00:17:24,520 Speaker 1: on the Democratic side of likely potential candidates who would 311 00:17:24,520 --> 00:17:28,000 Speaker 1: be able to beat him other than President Biden? Well, 312 00:17:28,040 --> 00:17:31,080 Speaker 1: if the election were held today, unclear to me that 313 00:17:31,119 --> 00:17:34,119 Speaker 1: anybody could accept for Biden. And again, people like what 314 00:17:34,160 --> 00:17:36,040 Speaker 1: they're used to. There's been a lot of victories lately 315 00:17:36,080 --> 00:17:39,080 Speaker 1: for the Democrats, you know, of economications, you know, ease up. 316 00:17:39,359 --> 00:17:42,480 Speaker 1: I think that you know, the president, former President Trump 317 00:17:42,520 --> 00:17:45,280 Speaker 1: is facing a lot of different inquiries. Some of them 318 00:17:45,320 --> 00:17:47,720 Speaker 1: aren't more scary than others. I think to voters, and 319 00:17:47,760 --> 00:17:50,760 Speaker 1: again that that core of independent suburban voters is key. 320 00:17:50,880 --> 00:17:54,200 Speaker 1: They rejected Trump in twenty uh and I think there 321 00:17:54,200 --> 00:17:55,960 Speaker 1: isn't any reason to think they're gonna welcome them back 322 00:17:56,080 --> 00:17:58,320 Speaker 1: local arms in twenty four. So I think that's what 323 00:17:58,400 --> 00:18:00,879 Speaker 1: the Democrats are counting on. But you know, we got 324 00:18:00,920 --> 00:18:04,240 Speaker 1: Pritzkur in Illinois, big state go Gavin Newsom, the California 325 00:18:04,280 --> 00:18:06,879 Speaker 1: big state Kathy Hokele if she wins again, big in 326 00:18:06,920 --> 00:18:09,000 Speaker 1: New York becomes a player. And then of course it's 327 00:18:09,000 --> 00:18:11,160 Speaker 1: got a couple of ones cabinet that might want to run, 328 00:18:11,240 --> 00:18:14,800 Speaker 1: which makes for awkward cabinet meetings theoretically later on. But 329 00:18:15,000 --> 00:18:17,359 Speaker 1: you know, we we are seeing energy, energy on the 330 00:18:17,400 --> 00:18:19,680 Speaker 1: Republican side, and now we're starting to see a little 331 00:18:19,680 --> 00:18:21,560 Speaker 1: bit more energy on the Democratic side. You have to 332 00:18:21,600 --> 00:18:23,560 Speaker 1: maintain the energy, so you have to give him choice. 333 00:18:23,760 --> 00:18:25,800 Speaker 1: But you are the most powerful person in the world. 334 00:18:26,080 --> 00:18:28,280 Speaker 1: And why you would walk away from that two years early, 335 00:18:28,720 --> 00:18:31,000 Speaker 1: you know, that's just that's political malpractice. And when he 336 00:18:31,040 --> 00:18:33,000 Speaker 1: finally if we could just look to the more immediate 337 00:18:33,040 --> 00:18:35,600 Speaker 1: future and the mid terms in November, there was a 338 00:18:35,640 --> 00:18:38,399 Speaker 1: sense prior to this week that Democratic momentum was building. 339 00:18:38,440 --> 00:18:41,800 Speaker 1: You have the inflation reduction, at gas prices are coming down. 340 00:18:41,800 --> 00:18:43,639 Speaker 1: It is looking a little bit more optimistic for the 341 00:18:43,640 --> 00:18:46,320 Speaker 1: Biden administration. And yet, as you allude to, you now 342 00:18:46,320 --> 00:18:49,040 Speaker 1: have this galvanizing force when it comes to President Trump's 343 00:18:49,040 --> 00:18:51,679 Speaker 1: base because of the FBI search of Mara Lago. Do 344 00:18:51,720 --> 00:18:54,120 Speaker 1: those two forces cancel each other out, and we're now 345 00:18:54,240 --> 00:18:55,679 Speaker 1: left with kind of the same outlook on the mid 346 00:18:55,800 --> 00:18:59,639 Speaker 1: terms as we had before. That's an outstanding question I 347 00:18:59,680 --> 00:19:03,240 Speaker 1: think for Democrats though, and again, this independent group if 348 00:19:03,280 --> 00:19:05,720 Speaker 1: Trump looks like this base of Trump's is going to 349 00:19:05,800 --> 00:19:08,000 Speaker 1: get out the door and there and they are behaving 350 00:19:08,000 --> 00:19:11,359 Speaker 1: in ways that are frightening to some people, like trying 351 00:19:11,400 --> 00:19:14,679 Speaker 1: to bust into an FBI office with you know, being armored, 352 00:19:14,800 --> 00:19:18,280 Speaker 1: U being armed. I think that scares suburban voters, that 353 00:19:18,359 --> 00:19:21,080 Speaker 1: scares independent voters, And it looks like this will give 354 00:19:21,160 --> 00:19:24,280 Speaker 1: Trump momentum. I think the same forces that go out 355 00:19:24,280 --> 00:19:26,479 Speaker 1: the door in eighteen on the Democratic side will get 356 00:19:26,480 --> 00:19:28,960 Speaker 1: out the door again. You load up abortion on that 357 00:19:29,080 --> 00:19:32,280 Speaker 1: and key states it's gonna be a referend statewide. I 358 00:19:32,320 --> 00:19:34,480 Speaker 1: think that is going to help the Democrats. I don't 359 00:19:34,480 --> 00:19:36,280 Speaker 1: know if it saves them for the House, but it 360 00:19:36,320 --> 00:19:38,880 Speaker 1: could very well save them for the Senate. Many shoulders. 361 00:19:38,880 --> 00:19:41,439 Speaker 1: Thank you so much for joining us with an August update. 362 00:19:41,520 --> 00:19:44,600 Speaker 1: She is at Brown University. Here on the politics of 363 00:19:44,880 --> 00:19:53,040 Speaker 1: the moment right now. Dennis Scarpan joins here with Futures 364 00:19:53,040 --> 00:19:56,000 Speaker 1: of fourteen. Always good to speak. The gentleman, chairman of 365 00:19:56,000 --> 00:19:59,359 Speaker 1: the University of Akron's Endowmond Fund. And he's retired. No, 366 00:19:59,480 --> 00:20:02,480 Speaker 1: he's not still writing the garment letter on an hour 367 00:20:02,560 --> 00:20:06,240 Speaker 1: by our basis and joins us today. Dennis Lisa wants 368 00:20:06,240 --> 00:20:10,959 Speaker 1: to talk about bonds. I want to talk about hydrocarbons. 369 00:20:11,000 --> 00:20:13,400 Speaker 1: You know, they're out of control in Europe. They've got 370 00:20:13,400 --> 00:20:16,560 Speaker 1: a modest matter of a war. Are we going to 371 00:20:16,680 --> 00:20:22,320 Speaker 1: see methane natural gas? Are we going to see different 372 00:20:22,359 --> 00:20:28,720 Speaker 1: forms of gasoline in America surge like electricity in France? Probably, 373 00:20:28,840 --> 00:20:30,960 Speaker 1: so propane is probably gonna go a lot higher, and 374 00:20:31,000 --> 00:20:32,840 Speaker 1: that gas is probably gonna go a lot higher. At 375 00:20:32,880 --> 00:20:36,400 Speaker 1: inventories are extremely limited here in the United States. They're 376 00:20:36,480 --> 00:20:41,159 Speaker 1: unbelievably limited in Europe. If we start pushing nearby that 377 00:20:41,359 --> 00:20:43,919 Speaker 1: gas through nine dollars per million British thermal units, and 378 00:20:43,920 --> 00:20:45,960 Speaker 1: we're training about eight dollars and fifty eight dollars and 379 00:20:46,000 --> 00:20:48,800 Speaker 1: sixty cents per million British thermal units. If we start 380 00:20:48,880 --> 00:20:51,399 Speaker 1: moving through nine dollars, you start to go back to 381 00:20:51,400 --> 00:20:53,560 Speaker 1: where we were in two thousand five, two thousand six, 382 00:20:53,560 --> 00:20:56,080 Speaker 1: and two thousand seven, When we get thirteen dollars per 383 00:20:56,119 --> 00:20:58,959 Speaker 1: million British thermal units, so you have to be very careful. 384 00:20:59,040 --> 00:21:01,520 Speaker 1: Things are very tight and likely to get tighter. So 385 00:21:01,960 --> 00:21:04,000 Speaker 1: it's it's not a pretty sign out there right now, 386 00:21:04,200 --> 00:21:06,240 Speaker 1: and you're talking about natural gas tennis. But you could 387 00:21:06,240 --> 00:21:09,200 Speaker 1: also apply this to certain oil inventory reports. There are 388 00:21:09,240 --> 00:21:12,120 Speaker 1: some different ones, and I wonder how much we are 389 00:21:12,240 --> 00:21:15,320 Speaker 1: fragile heading into the winter to see a spike in 390 00:21:15,400 --> 00:21:18,199 Speaker 1: oil that could reverse some of the optimism about the 391 00:21:18,200 --> 00:21:22,119 Speaker 1: disinflation that we've seen in this week's reports. Keep an 392 00:21:22,119 --> 00:21:24,240 Speaker 1: eye on the term structure. That's that tells you more 393 00:21:24,240 --> 00:21:27,160 Speaker 1: than anything else about what goes on in crude oil, 394 00:21:27,400 --> 00:21:30,680 Speaker 1: specifically especially a historable commodities such as crude oil. We're 395 00:21:30,680 --> 00:21:33,359 Speaker 1: in a small backwardation. We were at a larger backwardation 396 00:21:33,400 --> 00:21:35,960 Speaker 1: a month and a half ago. The backwardation has narrowed, 397 00:21:36,000 --> 00:21:38,600 Speaker 1: but in the past couple of days as prices of 398 00:21:38,680 --> 00:21:41,200 Speaker 1: crude oil have fallen just a little bit taken we 399 00:21:41,320 --> 00:21:43,240 Speaker 1: got what the ut I down to eighty eight dollars 400 00:21:43,200 --> 00:21:46,359 Speaker 1: prepaire the other day, and the nearby backwardation began to 401 00:21:46,480 --> 00:21:52,200 Speaker 1: widen marginally. Acwardation is where sophisticated and inform money leaves 402 00:21:52,240 --> 00:21:55,200 Speaker 1: its footprints and If the backwardation starts to widen a bit, 403 00:21:55,400 --> 00:21:57,880 Speaker 1: we're gonna start seeing crude oil start to go higher again. 404 00:21:57,920 --> 00:21:59,600 Speaker 1: So I think you've seen most of the decline in 405 00:21:59,640 --> 00:22:02,679 Speaker 1: crude oil dedicated upon a decline and driving miles here 406 00:22:02,720 --> 00:22:04,639 Speaker 1: in the United States and the demand and decline and 407 00:22:04,680 --> 00:22:07,199 Speaker 1: demand for gasoline and diesel. I think you start to 408 00:22:07,200 --> 00:22:09,480 Speaker 1: see at eighty eight dollars a barrel, that's probably the 409 00:22:09,480 --> 00:22:12,400 Speaker 1: low and I bet we I bet we trade seven 410 00:22:12,400 --> 00:22:14,639 Speaker 1: and not too distant future. So keep an eye on 411 00:22:14,680 --> 00:22:18,000 Speaker 1: the backwardation. A widening backwardation is always bullish for the 412 00:22:18,000 --> 00:22:21,640 Speaker 1: crude oil market. Wow. So let's transfer that ninety six 413 00:22:21,680 --> 00:22:27,800 Speaker 1: dollar barrel barrels forecast here into your projection for the 414 00:22:27,840 --> 00:22:30,840 Speaker 1: economy for markets, especially because a lot of the trading 415 00:22:30,880 --> 00:22:34,480 Speaker 1: activity has hinged on this lower oil price. How much 416 00:22:34,480 --> 00:22:36,400 Speaker 1: does that reverse some of the gains that we've seen 417 00:22:36,400 --> 00:22:40,440 Speaker 1: in stocks and send yields higher. I'm afraid that we're 418 00:22:40,480 --> 00:22:43,440 Speaker 1: seeing that the low on yields. We're going to see 419 00:22:43,440 --> 00:22:46,400 Speaker 1: the much higher prices in in in yield, much much 420 00:22:46,440 --> 00:22:49,280 Speaker 1: lower prices and bonds. You have something that occurred last 421 00:22:49,320 --> 00:22:51,240 Speaker 1: week which I think not enough people are paying attention 422 00:22:51,240 --> 00:22:53,760 Speaker 1: to you had an outside reversal week and an outside 423 00:22:53,800 --> 00:22:56,960 Speaker 1: reversal day in the long bond future, very rare circumstance. 424 00:22:57,000 --> 00:22:59,640 Speaker 1: We've only seen it one time before here, and we've 425 00:22:59,640 --> 00:23:01,240 Speaker 1: only the two or three times in the course of 426 00:23:01,280 --> 00:23:03,199 Speaker 1: the last five or six years. When you have an 427 00:23:03,200 --> 00:23:05,320 Speaker 1: outside of reversal, I pay attention to it. It's one 428 00:23:05,359 --> 00:23:07,200 Speaker 1: of the it's one of the technicals that I paid great, 429 00:23:07,440 --> 00:23:10,360 Speaker 1: great deal of heed too. And an outside reversal week 430 00:23:10,720 --> 00:23:13,720 Speaker 1: is a very rare event. Probably means lower bond prices, 431 00:23:13,920 --> 00:23:15,800 Speaker 1: probably means higher yields over the course of the next 432 00:23:15,800 --> 00:23:18,679 Speaker 1: several weeks, the next several months. Be careful, and I 433 00:23:18,720 --> 00:23:21,560 Speaker 1: think that that's the decline that we've had in the 434 00:23:21,600 --> 00:23:23,720 Speaker 1: long bond for long bond yields over the course of 435 00:23:23,720 --> 00:23:26,240 Speaker 1: the last month and a half was predicated upon a 436 00:23:26,280 --> 00:23:30,119 Speaker 1: decline in in inflation, decline in crude oil prices, decline 437 00:23:30,119 --> 00:23:32,879 Speaker 1: in grain prices, decline in livestock prices, and decline in 438 00:23:32,960 --> 00:23:35,800 Speaker 1: copper prices, and all those seon turning around and turning 439 00:23:35,800 --> 00:23:37,640 Speaker 1: back to the upside. So be careful up there, keep 440 00:23:37,640 --> 00:23:39,520 Speaker 1: an eye on gold. If both starts to get to 441 00:23:40,800 --> 00:23:43,359 Speaker 1: the game changes completely well. Dennis. We know the story 442 00:23:43,359 --> 00:23:45,359 Speaker 1: in the first half of the year was when yields 443 00:23:45,400 --> 00:23:47,359 Speaker 1: go up, it's bad for the equity market. That is 444 00:23:47,359 --> 00:23:49,840 Speaker 1: why we saw grows stocks under performing to such a degree. 445 00:23:49,880 --> 00:23:52,840 Speaker 1: They have staged a pretty remarkable comeback over the last month. 446 00:23:52,880 --> 00:23:55,399 Speaker 1: Is essentially what you're saying. If yields are going higher 447 00:23:55,400 --> 00:23:58,640 Speaker 1: from here, that's not gonna last much longer. I don't 448 00:23:58,640 --> 00:24:00,920 Speaker 1: think it lasts much longer. As the chairman of the 449 00:24:00,960 --> 00:24:03,040 Speaker 1: University of Akrons, and then I got us to move 450 00:24:03,119 --> 00:24:06,160 Speaker 1: a good fourteen or fifteen percent of the portfolio out. 451 00:24:06,560 --> 00:24:08,960 Speaker 1: We got very lucky we did in December thirty one. 452 00:24:09,280 --> 00:24:11,520 Speaker 1: And as I've always said to everybody in a bear market, 453 00:24:11,520 --> 00:24:13,439 Speaker 1: he or she who loses the least will be the winner. 454 00:24:13,840 --> 00:24:16,719 Speaker 1: We've lost less than most other endowments. We have a 455 00:24:16,720 --> 00:24:18,640 Speaker 1: meeting next week and I'm probably gonna say we need 456 00:24:18,680 --> 00:24:21,520 Speaker 1: to reduce our exposure just a tad more. You're gonna 457 00:24:21,520 --> 00:24:26,240 Speaker 1: reduce equities. You're gonna reduce equities exposure even with this 458 00:24:26,600 --> 00:24:31,439 Speaker 1: ginormous rally we've seen from June sixteenth, Tentnis at the 459 00:24:31,480 --> 00:24:34,200 Speaker 1: margin probably another one or two or three percent. Nothing dramatic, 460 00:24:34,280 --> 00:24:37,919 Speaker 1: nothing extraordinary. But I think the rally has been a 461 00:24:38,040 --> 00:24:41,600 Speaker 1: rally bear market. The volume has not been as a 462 00:24:41,680 --> 00:24:44,400 Speaker 1: lustrative or as the dramatic as it should be on 463 00:24:44,080 --> 00:24:46,240 Speaker 1: a on a move to the upside, and over the 464 00:24:46,240 --> 00:24:48,760 Speaker 1: course of the past six months or seven months, volume 465 00:24:48,800 --> 00:24:50,840 Speaker 1: seems to come in on the downside rather than on 466 00:24:50,880 --> 00:24:53,560 Speaker 1: the up side. Another technical circumstance to pay attention to. 467 00:24:53,720 --> 00:24:56,800 Speaker 1: So I'm gonna my position will be that I'd like 468 00:24:56,840 --> 00:24:58,840 Speaker 1: to reduce our exposure juice to tad whether I get 469 00:24:58,880 --> 00:25:00,840 Speaker 1: the rest of the committee to agree another story, What 470 00:25:00,880 --> 00:25:02,119 Speaker 1: do you do with it? What do you do the 471 00:25:02,160 --> 00:25:04,920 Speaker 1: rest of it? By options in the Cincinnati Reds, or 472 00:25:05,880 --> 00:25:08,320 Speaker 1: do you do you go into cash? What do you do? 473 00:25:08,960 --> 00:25:11,119 Speaker 1: It was a good game last night and watching the 474 00:25:11,119 --> 00:25:14,119 Speaker 1: Cincinnati Reds. But I think cash is probably not a 475 00:25:14,119 --> 00:25:15,919 Speaker 1: bad place to be. In fact, I think cash is 476 00:25:15,920 --> 00:25:17,720 Speaker 1: a very good place to be. Cash being two year 477 00:25:17,720 --> 00:25:21,000 Speaker 1: at bonds and under two year treasuries and under Dennison 478 00:25:21,080 --> 00:25:23,560 Speaker 1: to continue to invert it's it's been inverted for now 479 00:25:23,640 --> 00:25:25,600 Speaker 1: for a month and a half. It's probably gonna. I 480 00:25:25,600 --> 00:25:27,640 Speaker 1: think the two versus tends get to gets to eighty 481 00:25:27,680 --> 00:25:30,320 Speaker 1: basis points without too much difficulty Dennis, we've heard that 482 00:25:30,359 --> 00:25:32,399 Speaker 1: this week. Thank you so much, Dennis Gartment with us 483 00:25:32,400 --> 00:25:35,000 Speaker 1: with the University of Eckmen and Domind Fund, and of 484 00:25:35,080 --> 00:25:42,480 Speaker 1: course the acclaimed Gartment letters. Paul Sanky, founder and lead 485 00:25:42,480 --> 00:25:48,119 Speaker 1: analysts at Sanky Research, with decades and decades of experience 486 00:25:48,280 --> 00:25:52,520 Speaker 1: of the microeconomic analysis of all this, Paul, how close 487 00:25:52,800 --> 00:25:58,280 Speaker 1: is America to the many deviation leaps that we're seeing 488 00:25:58,480 --> 00:26:02,960 Speaker 1: in European? How ydric carbons are we delinked or linked 489 00:26:03,280 --> 00:26:07,119 Speaker 1: to those war events? Well, good news is, you know, Tomas, 490 00:26:07,160 --> 00:26:09,320 Speaker 1: that we produce a vast amount of oil and gas here. 491 00:26:09,440 --> 00:26:12,600 Speaker 1: So ten years ago we were net importers of eight 492 00:26:12,640 --> 00:26:14,800 Speaker 1: million barrels a day of oil, believe it or not. 493 00:26:14,880 --> 00:26:18,160 Speaker 1: Now we're net neutral. So the US oil and gas 494 00:26:18,200 --> 00:26:20,639 Speaker 1: industry has done a phenomenal job, not only of oil, 495 00:26:20,680 --> 00:26:23,480 Speaker 1: but we're also now the world's largest natural gas exports 496 00:26:23,520 --> 00:26:25,760 Speaker 1: are And as you know, the problem in Europe is 497 00:26:25,800 --> 00:26:28,960 Speaker 1: that they really don't produce a whole lot of domestic 498 00:26:29,040 --> 00:26:32,399 Speaker 1: energy full stop, certainly since they shut their nuclear and coals, 499 00:26:32,400 --> 00:26:35,280 Speaker 1: so they've added to their own problems. So the big 500 00:26:35,320 --> 00:26:37,280 Speaker 1: pool here is going to be a concern, which is 501 00:26:37,400 --> 00:26:41,159 Speaker 1: exports to the Europe. And whether or not that drives 502 00:26:41,800 --> 00:26:44,560 Speaker 1: double gas prices very high, as natural gas prices very high, 503 00:26:44,640 --> 00:26:47,639 Speaker 1: is quite possible. You can parse a barrel of oil 504 00:26:47,720 --> 00:26:50,080 Speaker 1: like no one, let's wind her over to methane and 505 00:26:50,240 --> 00:26:53,760 Speaker 1: natural gas. When Paul, thank you sees n G one 506 00:26:53,840 --> 00:26:56,679 Speaker 1: go from two to eight, what is that signal for you? 507 00:26:57,800 --> 00:27:00,919 Speaker 1: Probably that we're going to send The price in Europe, 508 00:27:00,960 --> 00:27:04,920 Speaker 1: as you know, is more like fifty for mm btu 509 00:27:05,040 --> 00:27:08,439 Speaker 1: I mean extraordinary prices. So the draw there if it 510 00:27:08,480 --> 00:27:12,080 Speaker 1: costs you about five eight dollars to cross the Atlantic, 511 00:27:12,720 --> 00:27:15,879 Speaker 1: there's obviously implicitly a massive pull on our exports and 512 00:27:15,920 --> 00:27:18,480 Speaker 1: that's I think going to be sufficiently large to pressure 513 00:27:18,560 --> 00:27:21,560 Speaker 1: natural gas prices into winter. It now becomes a question 514 00:27:21,560 --> 00:27:25,440 Speaker 1: of weather. We've got hurricane season, which hasn't really happened 515 00:27:25,480 --> 00:27:29,000 Speaker 1: yet at all. And then of course the really concerning question, 516 00:27:29,080 --> 00:27:31,440 Speaker 1: and it's a major concern, is how cold it gets 517 00:27:31,440 --> 00:27:34,160 Speaker 1: this winter. And if we get a globally cold winter, 518 00:27:34,240 --> 00:27:37,520 Speaker 1: we're going to have death. I'm afraid. Well, that's on 519 00:27:37,520 --> 00:27:39,879 Speaker 1: the natural gas side, and that's a pretty dire projection 520 00:27:39,960 --> 00:27:43,000 Speaker 1: on this Friday. On the oil side, the I A 521 00:27:43,119 --> 00:27:48,119 Speaker 1: saying that an increasing number of gas relying electricity providers 522 00:27:48,160 --> 00:27:51,000 Speaker 1: are turning to gas to oil prices to oil in 523 00:27:51,119 --> 00:27:54,840 Speaker 1: order to stave off some of the shortages. How underfunded 524 00:27:54,960 --> 00:27:57,720 Speaker 1: is this market? How cheap is this market relative to 525 00:27:57,720 --> 00:27:59,120 Speaker 1: where it will be at the end of this year? 526 00:28:00,640 --> 00:28:02,600 Speaker 1: The U S prices, I mean, it's way below as 527 00:28:02,600 --> 00:28:04,280 Speaker 1: I said, I mean, you know, as I said, we're 528 00:28:04,280 --> 00:28:06,159 Speaker 1: over fifty dollars per and b to you more or 529 00:28:06,200 --> 00:28:09,159 Speaker 1: less in Europe and quite possibly going higher based on 530 00:28:09,320 --> 00:28:12,480 Speaker 1: what Tom and I were just discussing European electricity prices. 531 00:28:12,520 --> 00:28:15,120 Speaker 1: They've they're just you know, they've gone as he said, 532 00:28:15,840 --> 00:28:19,439 Speaker 1: exponential essentially. But I mean in terms of oil prices, 533 00:28:19,480 --> 00:28:21,160 Speaker 1: that's where I was going with this, with this idea 534 00:28:21,240 --> 00:28:24,480 Speaker 1: that we've seen this disinflationary input. Yeah, okay, So the 535 00:28:24,520 --> 00:28:27,640 Speaker 1: oil situation is a bit different because essentially Russia makes 536 00:28:27,680 --> 00:28:30,399 Speaker 1: more money from oil and continues to supply oil to 537 00:28:30,440 --> 00:28:34,120 Speaker 1: the market. So the oil crisis is not a crisis 538 00:28:34,400 --> 00:28:37,520 Speaker 1: to the extent that the gas crisis is. So there's 539 00:28:37,520 --> 00:28:41,200 Speaker 1: going to be a major pressure upwards on natural gas prices. 540 00:28:41,520 --> 00:28:44,080 Speaker 1: At the moment, there is marginal use of oil, which 541 00:28:44,080 --> 00:28:47,800 Speaker 1: the idea is highlighted as you said, not least propane, 542 00:28:47,880 --> 00:28:51,000 Speaker 1: for example, is a direct substitute for natural gas. But 543 00:28:51,160 --> 00:28:54,520 Speaker 1: also generally the use of oil and coal is going 544 00:28:54,560 --> 00:28:57,320 Speaker 1: to be driven by by the problems in Europe, no question. 545 00:28:57,400 --> 00:28:59,920 Speaker 1: It's just that the Russians really haven't reduced their supply 546 00:29:00,120 --> 00:29:02,760 Speaker 1: a boil anything like what they've done to the natural 547 00:29:02,840 --> 00:29:06,600 Speaker 1: gas side, Paul. Here in the United States, later today, 548 00:29:06,800 --> 00:29:09,920 Speaker 1: the House is expected to pass the Inflation Reduction Act 549 00:29:09,960 --> 00:29:13,560 Speaker 1: and eventually the President assumably will sign it. The measures 550 00:29:13,640 --> 00:29:16,440 Speaker 1: within that, some of them including the tax on methane emissions. 551 00:29:16,520 --> 00:29:20,280 Speaker 1: How do you expect that could impact the supply landscape 552 00:29:20,320 --> 00:29:24,000 Speaker 1: here in the US. It's significant. It's split the industry. 553 00:29:24,240 --> 00:29:26,640 Speaker 1: So the big, the big oils, the excellence of Chevrons, 554 00:29:26,760 --> 00:29:30,880 Speaker 1: Iconic Phillips already have very strong methane limits and continue 555 00:29:30,920 --> 00:29:34,680 Speaker 1: to pursue zero flaring as a target, for example. And 556 00:29:34,720 --> 00:29:37,840 Speaker 1: then you have this enormous tale of companies. I think 557 00:29:37,880 --> 00:29:41,120 Speaker 1: there's six thousand US oil and gas companies, of which 558 00:29:41,360 --> 00:29:45,400 Speaker 1: I can only name fifty. So if at best, so 559 00:29:45,520 --> 00:29:48,440 Speaker 1: this enormous tale is under direct threat and it could 560 00:29:48,480 --> 00:29:52,080 Speaker 1: be assuming that it passes and then it's implemented strongly, 561 00:29:52,680 --> 00:29:54,880 Speaker 1: it will be a major pressure to the downside on 562 00:29:55,000 --> 00:29:57,840 Speaker 1: marginal US gas production, no question. So is there a 563 00:29:58,080 --> 00:30:00,840 Speaker 1: threat the Inflation Reduction Act at least when it comes 564 00:30:00,840 --> 00:30:05,400 Speaker 1: to energy prices, actually becomes more inflationary. Yes, all right, 565 00:30:05,920 --> 00:30:08,760 Speaker 1: Paula or Paul, I think we probably should leave it there, Tom, 566 00:30:08,800 --> 00:30:10,920 Speaker 1: what do you say? I think? Paul? Thank you, Thank 567 00:30:10,960 --> 00:30:12,960 Speaker 1: you on short notice for joining us here today with 568 00:30:13,080 --> 00:30:16,240 Speaker 1: what has been underreported in the American present. This is 569 00:30:16,280 --> 00:30:20,240 Speaker 1: the Bloomberg Surveillance Podcast. Thanks for listening. Join us live 570 00:30:20,400 --> 00:30:24,160 Speaker 1: weekdays from seven to ten am Eastern on Bloomberg Radio 571 00:30:24,400 --> 00:30:28,000 Speaker 1: and on Bloomberg Television each day from six to nine 572 00:30:28,040 --> 00:30:32,440 Speaker 1: am for insight from the best in economics, finance, investment, 573 00:30:32,640 --> 00:30:37,600 Speaker 1: and international relations. And subscribe to the Surveillance podcast on 574 00:30:37,720 --> 00:30:41,560 Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on 575 00:30:41,680 --> 00:30:45,800 Speaker 1: the terminal. I'm Tom Keene and this is Bloomberg