WEBVTT - Surveillance: Temple Sees Inflation Paradigm Shift (Podcast) 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Bramowitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.840 --> 0:00:23.799 To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.240 and of course on the Bloomberg terminal. Ron Temple makes 0:00:30.240 --> 0:00:33.240 it smarter this morning, go ahead, a multi asset head 0:00:33.320 --> 0:00:36.640 and with lasired asset Management and Ron, I want to 0:00:36.680 --> 0:00:39.839 cut right to the equity paragraph. And you're always crystal 0:00:39.880 --> 0:00:42.800 clear note, which is you are focused on the grand 0:00:42.840 --> 0:00:47.000 conundrum in the next year, which is measuring the persistency 0:00:47.320 --> 0:00:51.400 of cash flow, the persistency of free cash flow. How 0:00:51.440 --> 0:00:55.000 do you actually do that? Well, this is all about 0:00:55.040 --> 0:00:57.400 doing the bottom up fundamental analysis, Tom, I'm sure you're 0:00:57.400 --> 0:00:59.520 familiar with that. I mean looking out and trying to 0:00:59.800 --> 0:01:03.000 un understand what makes a company generate higher returns on 0:01:03.040 --> 0:01:05.800 capitol and what are the drivers of whether that return 0:01:05.840 --> 0:01:08.760 on capital can stay high or whether it declines. And 0:01:08.800 --> 0:01:10.959 so we're really focused here in terms of you know, 0:01:11.000 --> 0:01:13.080 what I'm looking at in the equity market is trying 0:01:13.120 --> 0:01:16.200 to avoid the speculative growth stocks that are all about 0:01:16.280 --> 0:01:19.400 earnings that might come down the pike, say five, seven, 0:01:19.480 --> 0:01:22.000 ten years, where all of the value of the companies 0:01:22.000 --> 0:01:24.240 in that terminal value and it's much more vulnerable to 0:01:24.319 --> 0:01:28.080 hire discount rates and avoiding the deep value cyclical stocks. 0:01:28.080 --> 0:01:29.679 They are most at risk if you have a recession 0:01:29.920 --> 0:01:32.319 and sticking right in the middle of that kind of continuum. 0:01:32.760 --> 0:01:35.679 On the quality stocks, the companies with high returns on capital, 0:01:35.959 --> 0:01:39.800 that a pricing power, brand advantages, um, strong management, strong 0:01:39.840 --> 0:01:41.720 balance sheets, and that's where you really want to do 0:01:41.760 --> 0:01:44.920 the work to understand what makes a company so strong 0:01:45.280 --> 0:01:48.120 and how they can maintain that position over time. Rod, 0:01:48.160 --> 0:01:50.880 We've heard this before from other people who are trying 0:01:50.920 --> 0:01:53.320 to gird for a recession, But it feels like the 0:01:53.320 --> 0:01:56.360 mood shifted this week. Have you shifted anything about your 0:01:56.400 --> 0:01:58.560 thesis and the heels of the CPI report and p 0:01:58.720 --> 0:02:01.320 p I and even what we're seeing in terms of 0:02:01.320 --> 0:02:05.800 Fed funds futures. I think the market is reacting to 0:02:06.040 --> 0:02:09.440 the positive sign that we've probably seen the peak and inflation. 0:02:09.919 --> 0:02:12.680 We've finally seen inflation roll over, and it's more of 0:02:12.680 --> 0:02:15.760 those cyclical items, the items that we all thought were 0:02:15.760 --> 0:02:18.560 transitory about a year ago that are rolling over. If 0:02:18.560 --> 0:02:20.440 you look at the decline and cp I that we 0:02:20.480 --> 0:02:23.280 saw this week from last month from June to July 0:02:24.840 --> 0:02:28.240 basis points of the forty basis point deceleration was cars 0:02:28.240 --> 0:02:30.919 and airfare. So those are factors that we knew would 0:02:31.040 --> 0:02:33.880 roll over at some point. What I'm really watching is 0:02:34.120 --> 0:02:36.920 rent of shelter. What I'm watching is wage growth. And 0:02:36.960 --> 0:02:39.560 so I think investors should be careful because you know, 0:02:39.560 --> 0:02:41.280 as I listened to you for the last few minutes, 0:02:41.560 --> 0:02:44.760 I think there's a propensity in the market to say, Okay, 0:02:44.800 --> 0:02:46.720 this story is over. We're gonna go back to the 0:02:46.720 --> 0:02:49.079 old playbook. The FED won't have to raise rates as much, 0:02:49.440 --> 0:02:52.240 and I can buy these companies that are growthy kind 0:02:52.240 --> 0:02:54.959 of call options. I don't think that's the right call. 0:02:55.040 --> 0:02:56.960 I think we're in the midst of a paradigm shift 0:02:57.000 --> 0:02:59.720 on inflation, and when inflation does settle, I think it's 0:02:59.760 --> 0:03:02.280 going to settle with a three handle, not a one 0:03:02.320 --> 0:03:03.960 and a half to two percent like we saw for 0:03:04.000 --> 0:03:06.680 the decade into nine. So I would be a little 0:03:06.919 --> 0:03:08.679 a lot more careful than I think I'm seeing in 0:03:08.680 --> 0:03:11.840 the markets of kind of overreacting to data in the 0:03:11.840 --> 0:03:14.720 short term Okay, so Ron, if you're more careful, does 0:03:14.760 --> 0:03:17.079 that mean you still view what we've seen is more 0:03:17.120 --> 0:03:20.839 of a bear market rally than a bona fide sustainable rally. 0:03:21.720 --> 0:03:23.760 I I do still believe it's a bear market rally. 0:03:23.880 --> 0:03:26.080 I could always be proven wrong. We always have that risk. 0:03:26.480 --> 0:03:27.840 But when I look at is, I think we need 0:03:27.880 --> 0:03:30.200 to wait for data next month. I expect CPI to 0:03:30.240 --> 0:03:33.880 come down again. I'm very interested to see the job numbers. 0:03:34.280 --> 0:03:36.360 There's their mixed signals in the job market. We had 0:03:36.400 --> 0:03:39.160 a great payroll number last Friday, but if you look 0:03:39.160 --> 0:03:42.320 at the Jolt State of the Job Opening Labor Turnover Survey, 0:03:42.760 --> 0:03:46.040 we've seen a million job decrease in the number of 0:03:46.120 --> 0:03:48.800 unfilled positions in the last two months. Now, again that 0:03:48.880 --> 0:03:51.440 data is a month lagged relative to payroll data. But 0:03:51.520 --> 0:03:53.840 what I want to see is are those unfilled jobs 0:03:53.880 --> 0:03:57.720 going away, which then means labor has less negotiating power, 0:03:58.040 --> 0:04:00.080 which then means you're less likely to see wage with 0:04:00.120 --> 0:04:02.000 which would is less likely than to pass through the 0:04:02.080 --> 0:04:04.960 prices going up for goods and services. So so I 0:04:04.960 --> 0:04:06.840 think we need to watch more data. But right now 0:04:06.880 --> 0:04:09.160 I think this is a bear market rally. As a 0:04:09.200 --> 0:04:12.000 base case assumption. And again, I would be careful of 0:04:12.080 --> 0:04:14.200 running back to the playbook that worked for the last 0:04:14.200 --> 0:04:16.719 ten fifteen years, because I think that playbooks should probably 0:04:16.720 --> 0:04:18.760 be thrown out. We're on a temple. If we throw 0:04:18.839 --> 0:04:22.240 out quality large cap stocks, which is the mantra right now, 0:04:22.320 --> 0:04:25.039 we're all going to read about it five times this weekend. 0:04:25.480 --> 0:04:28.640 What is the new mantra going to be? Well, to 0:04:28.640 --> 0:04:31.280 be careful, I think quality is the playbook you want. 0:04:31.320 --> 0:04:33.480 I think the playbook for the last ten fifteen years 0:04:33.480 --> 0:04:36.160 that worked was by the call option by the company 0:04:36.200 --> 0:04:39.159 that is a really cool business plan that's getting access 0:04:39.200 --> 0:04:43.560 to capital at zero interest rates, unlimited capital. I think 0:04:43.600 --> 0:04:45.360 that's gonna be much tougher. So it's that into the 0:04:45.360 --> 0:04:48.160 spectrum I think is more at risk. I think quality. 0:04:48.279 --> 0:04:51.320 It's interesting, Tom, there's been a Venn diagram overlap right 0:04:51.360 --> 0:04:53.040 where a lot of the quality and the growth were 0:04:53.080 --> 0:04:56.040 the same company. I still like the quality growth companies, 0:04:56.200 --> 0:04:58.440 you know, those companies that can generate high cash flow 0:04:58.520 --> 0:05:01.320 and grow. That's great to share at the right valuation. 0:05:01.839 --> 0:05:04.200 Ronald Temple, thank you is by the way, the valuations 0:05:04.200 --> 0:05:06.279 have come down, so thank you. Well they have Ronald 0:05:06.320 --> 0:05:08.320 Temple thank you so much for starting us off strong 0:05:08.320 --> 0:05:20.200 with lazard asset management. Right now and hugely anticipated for 0:05:20.320 --> 0:05:24.240 November is a book. But when Stephen Roach writes a 0:05:24.240 --> 0:05:28.120 book on China, it has a focus and intent on 0:05:28.200 --> 0:05:32.039 their economics and politics like no other. The book is 0:05:32.200 --> 0:05:38.240 Accidental Conflict America, China and the Clash of False Narratives. 0:05:38.240 --> 0:05:42.120 This is hugely anticipated by the Chinese watching community. The 0:05:42.200 --> 0:05:45.240 gentleman from Yale in the Saudi China Center at Yale 0:05:45.279 --> 0:05:48.039 Law School joins us this morning. Dr Roach, thank you 0:05:48.080 --> 0:05:50.599 so much for joining. You've written three or four books 0:05:50.640 --> 0:05:53.320 on China. Why is this one different? What is the 0:05:53.440 --> 0:05:56.760 tension at this moment? Is Mr She goes to the 0:05:56.800 --> 0:06:01.520 Party Congress. Well, Tom. In the past five years, we've 0:06:01.600 --> 0:06:05.960 gone from trade war to tech War two, now a 0:06:06.080 --> 0:06:12.320 cold war conflict is escalating. There is no real framework 0:06:12.400 --> 0:06:17.680 to manage this conflict effectively, let alone conceive of even 0:06:18.120 --> 0:06:22.200 the slightest semblance of resolution. And in a period of 0:06:22.320 --> 0:06:26.640 escalating conflict, the smallest spark can lead to a major 0:06:27.560 --> 0:06:31.120 uh clash, and we certainly have seen one in the 0:06:31.240 --> 0:06:35.680 last week over Taiwan. And I'm very worried about the 0:06:35.720 --> 0:06:39.560 possibility of you know, a military accident in the Taiwan 0:06:39.680 --> 0:06:44.760 Straits occurring in the context of this escalating economic and 0:06:44.800 --> 0:06:50.960 technology conflict that could really lead to a serious UH 0:06:51.000 --> 0:06:54.919 outbreak between the United States and China. The thesis of 0:06:54.920 --> 0:06:58.320 the book is the conflict would not have happened were 0:06:58.320 --> 0:07:01.880 it not for the false narratives that both the nation's 0:07:01.960 --> 0:07:06.159 harbor with respect to other and I developed these narratives 0:07:06.160 --> 0:07:09.279 in detail in the new book. Well, what is important 0:07:09.320 --> 0:07:12.160 here is what matter of diplomacy has needed. What is 0:07:12.200 --> 0:07:16.440 the roach approach to a new diplomacy that can perhaps 0:07:17.040 --> 0:07:21.960 calm down these pressure points. Well, my idea and I 0:07:22.000 --> 0:07:25.200 developed it in detail on the final part of the book, 0:07:25.560 --> 0:07:31.040 is that the current structure of engagement, whether it's you know, 0:07:32.200 --> 0:07:34.880 leader to leader phone calls between Biden and hijin Ping 0:07:35.520 --> 0:07:40.040 or earlier strategic and economic dialogues as grand summons, has 0:07:40.120 --> 0:07:46.200 failed miserably. And so I am proposing a permanent institution 0:07:46.320 --> 0:07:48.720 that I call for lack of a better term, at 0:07:48.800 --> 0:07:54.880 US China Secretariat that meets full time seven UH staffed 0:07:54.880 --> 0:07:59.400 by an equal number of professionals on both sides of 0:07:59.560 --> 0:08:03.840 the the relationship, whose full time job is to deal 0:08:03.920 --> 0:08:07.760 with all aspects of the relationship, from economics and trade 0:08:08.240 --> 0:08:11.760 to cyber and human rights. And we need a new approach. 0:08:11.800 --> 0:08:14.520 And this is uh, you know, one idea may not 0:08:14.640 --> 0:08:18.440 be perfect, but it certainly beats the current failed approach Stephen. 0:08:18.800 --> 0:08:21.680 There might be a lot of uncertainty on the policy side, 0:08:21.800 --> 0:08:23.960 but businesses have to make moves. They have to either 0:08:24.000 --> 0:08:27.160 expand and double down on their expansion plans in China, 0:08:27.240 --> 0:08:29.040 or they have to withdraw, which we've seen a number 0:08:29.040 --> 0:08:31.560 of companies do on the margins. And we hear more 0:08:31.640 --> 0:08:35.200 and more about reshoring or on shoring of US companies 0:08:35.280 --> 0:08:38.839 away from China. How materially will that shift the dynamic 0:08:39.000 --> 0:08:40.760 of trade at a time when a lot of people 0:08:40.800 --> 0:08:45.160 say this will be inflationary, Well, I think I think 0:08:45.160 --> 0:08:49.000 it will be inflationary. I think that the trench word 0:08:49.040 --> 0:08:53.960 re short reshoring is an unmistakable our growth of geostrategic 0:08:54.080 --> 0:08:57.320 tensions between the United States and China. They can better 0:08:57.360 --> 0:09:01.000 be addressed through a structure such as the one I 0:09:01.080 --> 0:09:05.000 just outlined, Lisa. But you know, make no mistake, this 0:09:05.080 --> 0:09:09.079 is very destabilizing, uh, not just for the US and inflation, 0:09:09.640 --> 0:09:14.360 but also for China. China benefited the most of any 0:09:14.480 --> 0:09:18.960 nation in the world from the upswing of globalization, and 0:09:19.000 --> 0:09:22.400 it has the most to lose. I think as we 0:09:22.480 --> 0:09:27.559 now move from globalization to deglobalization. There's a larger issue 0:09:27.559 --> 0:09:29.520 though for the economy. And this is something that we 0:09:29.520 --> 0:09:31.640 were just hearing about from Ron Temple. How he thinks 0:09:31.679 --> 0:09:33.559 that perhaps will get back down to a three percent 0:09:33.600 --> 0:09:36.200 inflation rate, but not much below that because we are 0:09:36.200 --> 0:09:38.680 in a new paradigm. And I wonder how much is 0:09:38.760 --> 0:09:41.840 China the main part of that. If you have reshoring, 0:09:42.080 --> 0:09:45.440 which incurs more expense, and you have slower growth in 0:09:45.520 --> 0:09:48.200 China because of exactly what you said, Because this is 0:09:48.240 --> 0:09:51.720 going to affect the world's second biggest economy significantly, how 0:09:51.800 --> 0:09:55.640 much does this portend a slower growth, higher inflation environment 0:09:55.679 --> 0:09:59.600 for a longer term. Well, you know, we debate how 0:09:59.679 --> 0:10:03.480 much China has held down US inflation over the past 0:10:03.520 --> 0:10:07.560 twenty years, but it's been significant, as has uh the 0:10:07.720 --> 0:10:11.960 rapid expansion of global value chains or global supply chains, 0:10:12.520 --> 0:10:17.040 and as supply chains are disrupted by China and other 0:10:17.520 --> 0:10:21.520 developments around the world as we moved from offshore to onshore. 0:10:22.520 --> 0:10:25.679 Good luck in getting inflation down to three It's it's 0:10:25.760 --> 0:10:29.160 gonna be a very difficult goal to achieve. Steph, I've 0:10:29.160 --> 0:10:31.880 been trying to ask you this. She built Morgan Stanley Economics. 0:10:31.880 --> 0:10:34.320 You were the first American economists I know that tried 0:10:34.360 --> 0:10:38.080 to make a three leg FED policy of unemployment inflation 0:10:38.160 --> 0:10:40.920 and you said, watch the balance sheet, the expansion of 0:10:40.920 --> 0:10:43.720 the balance sheet. All that came true as you wrote 0:10:43.720 --> 0:10:46.800 about years ago. What's the FED theory now, if you 0:10:46.840 --> 0:10:50.080 were to if you were to parachute into Jackson Hall 0:10:50.600 --> 0:10:53.120 here at the end of office, what is the theory 0:10:53.200 --> 0:10:58.440 you're gonna find about central banking? Well, you know, hard 0:10:58.480 --> 0:11:00.880 for me to know how they're in a phrase of 0:11:00.960 --> 0:11:03.480 Tom but I think the FED theory has got to 0:11:03.520 --> 0:11:07.080 go back to basics. You know, forget this UH QUI 0:11:07.400 --> 0:11:12.000 balance sheet asset dependent economy. It's blown up repeatedly since 0:11:12.360 --> 0:11:18.040 Greenspan and Bernankey tried to UH in the the nineties 0:11:18.080 --> 0:11:21.719 and in the early two thousands. The FETs got to 0:11:21.760 --> 0:11:26.160 go back to inflation targeting, not average inflation targeting, but 0:11:26.320 --> 0:11:30.920 plain old inflation targeting. UH and UH we need a 0:11:31.200 --> 0:11:34.200 you know, a dose of the very simplistic but tough 0:11:34.240 --> 0:11:38.920 and disciplined approach by Paul Vulker. J. Powell is you know, 0:11:39.360 --> 0:11:43.400 says he's very much committed to doing this. The FET's 0:11:43.440 --> 0:11:46.560 taken some big steps, but you know, child played compared 0:11:46.600 --> 0:11:48.880 to what they have to do, the real federal funds 0:11:48.960 --> 0:11:51.800 rate is still sharply negative. You're not going to control 0:11:52.520 --> 0:11:56.400 inflation with a sharply negative federal that's on that's on 0:11:56.480 --> 0:11:58.560 the LM side. Okay, help me here with the real 0:11:58.600 --> 0:12:02.240 economy and the unemployment rate. If we go Laurence Summers 0:12:02.280 --> 0:12:05.240 this morning and pop it up, as Annawanga Bloomberg says, 0:12:05.559 --> 0:12:08.600 to a four percent or five percent regime, what does 0:12:08.600 --> 0:12:12.840 that do to America's unemployment rate? It's gonna go up. Tom. 0:12:12.880 --> 0:12:14.920 I mean, you know, we give me a magnitude here, 0:12:14.960 --> 0:12:17.920 no one's watching. Give me, give me a magnitude somewhere 0:12:17.960 --> 0:12:20.520 in the four to five percent zone, which is, you know, 0:12:20.640 --> 0:12:23.640 a small price to pay, not for those who are 0:12:23.640 --> 0:12:26.320 affected by of course, but a small price to pay 0:12:26.360 --> 0:12:31.080 to to get inflation back under a more UH stable 0:12:31.679 --> 0:12:35.680 UH path consistent with sustainable growth in the US. The 0:12:35.679 --> 0:12:40.040 path we're on right now doesn't cut it, okay, So Stephen, 0:12:40.160 --> 0:12:44.199 obviously there is a trade off potentially between keeping inflation 0:12:44.280 --> 0:12:47.520 in check and supporting growth and to tie it back 0:12:47.559 --> 0:12:50.400 to China. The PBOC earlier this week was saying, we 0:12:50.440 --> 0:12:52.520 aren't going to go with massive stimulus to support the 0:12:52.559 --> 0:12:54.960 economy despite the turmoil and the property sector of the 0:12:54.960 --> 0:12:58.080 COVID zero policy causing issues, because we are worried about 0:12:58.120 --> 0:13:01.839 the specter of inflation. Do you expect that eventually, if 0:13:01.960 --> 0:13:04.800 China isn't going to take steps to breach a five 0:13:04.840 --> 0:13:07.000 and a half percent growth target, that the Federal Reserve 0:13:07.040 --> 0:13:11.360 is going to BOK two? Well, I think you know. 0:13:12.200 --> 0:13:15.360 Are you asking about the Fed's concerns over US economic growth? 0:13:17.240 --> 0:13:23.319 I think you know the mandate is going from duel 0:13:23.400 --> 0:13:27.199 to single. Inflation is the focus, and they can't afford 0:13:27.920 --> 0:13:33.280 to flinch on bringing inflation back because of political pressures 0:13:33.320 --> 0:13:36.920 that will be evident as the unemployment rate starts to rise, 0:13:36.960 --> 0:13:40.000 and and the Fed has just got to be fierce 0:13:40.200 --> 0:13:45.000 and focused on its independence and on its desire to 0:13:45.040 --> 0:13:48.760 bring inflation down as soon as possible. Steven Roads, wonderful 0:13:48.800 --> 0:13:50.880 to catch up with you today, of course at Yale 0:13:50.960 --> 0:13:53.760 Law School and formally where the Wall Street firm name 0:13:53.840 --> 0:14:01.280 Morgan Stanley. Right now, we're gonna it's a digress here. 0:14:01.320 --> 0:14:03.920 I thought what Lisa was talking when Dr Schiller about 0:14:03.960 --> 0:14:06.360 on the break was really really important. Wendy schillers with 0:14:06.400 --> 0:14:10.320 Brown University, director of the Talbin Center for American Politics 0:14:10.400 --> 0:14:14.679 and a writer of core textbooks on our civics as well. 0:14:15.200 --> 0:14:18.360 We've alluded to this before, Wendy, but I want to 0:14:18.400 --> 0:14:22.200 talk about two candidates who I believe will be seventy 0:14:22.280 --> 0:14:27.600 eight and eight d two in two thousand twenty four, 0:14:28.520 --> 0:14:31.160 and that means, if my math is right, there'll be 0:14:31.240 --> 0:14:33.920 eighty two and eighties six on the way out the 0:14:33.960 --> 0:14:39.840 door in two thousand. How did we get the fossils 0:14:40.320 --> 0:14:45.240 running for president? Well, I think general trends and aging 0:14:45.360 --> 0:14:49.000 are are good, and people are aging better across the country, 0:14:49.040 --> 0:14:51.960 so that's a good thing. I think in time, we 0:14:52.040 --> 0:14:54.080 came out of a very long where people thought it 0:14:54.160 --> 0:14:57.000 was a very long recession. Uh, and the world has 0:14:57.040 --> 0:14:59.960 become less stable. Obviously, Cold War ended and we all 0:15:00.200 --> 0:15:03.080 celebrated freedom around the world, but freedom brought with it 0:15:03.280 --> 0:15:06.360 a lot of unpredictability, and then of course we had 0:15:06.560 --> 0:15:08.640 the wars in Iraq and Afghanistan. And when you have 0:15:08.760 --> 0:15:11.520 that much tumult and uncertainty, and certainly even the not 0:15:11.640 --> 0:15:15.320 eleven attacks. People want comfort, They want people who've been 0:15:15.320 --> 0:15:16.960 around a long time. You can tell them this too, 0:15:17.160 --> 0:15:20.200 this too shall pass. People look to the familiar. They 0:15:20.240 --> 0:15:23.360 look to people with quote unquote experience. Donald Trump had 0:15:23.400 --> 0:15:27.440 business experience that he touted, and Joe Biden had more 0:15:27.480 --> 0:15:31.520 than thirty years in government. Wendy, I'm struggling with that 0:15:31.600 --> 0:15:34.480 idea because we've seen poll after pole is saying that 0:15:34.480 --> 0:15:36.720 they would like to see new blood who leading the 0:15:36.720 --> 0:15:39.280 Democratic Party. They would like to see a younger slew 0:15:39.360 --> 0:15:42.760 of Congress members across the board as we enter into 0:15:42.840 --> 0:15:45.280 a very new phase. Is it a good thing or 0:15:45.320 --> 0:15:48.440 a bad thing for the Democrats that President Biden denounced 0:15:48.440 --> 0:15:51.680 his intention to run again. I think it's a good thing. 0:15:51.760 --> 0:15:54.680 You can't have a president not even ending his second year, 0:15:54.720 --> 0:15:57.400 full year in office, who says, well, I'm not in anymore. 0:15:57.440 --> 0:16:00.000 I mean, even if there's the slightest chance Biden can 0:16:00.080 --> 0:16:02.160 still beat President a couple of years from now, that 0:16:02.240 --> 0:16:04.120 makes a difference in terms of influence, That makes the 0:16:04.120 --> 0:16:06.400 difference in terms of public opinion. You just can't be 0:16:06.440 --> 0:16:08.880 written off. We saw this with Clinton after the Republicans 0:16:08.920 --> 0:16:12.239 won the mid terms in ninety four, you know, always irrelevant. 0:16:12.280 --> 0:16:15.120 He doesn't. He won two years later relatively easily. You 0:16:15.240 --> 0:16:18.000 have to maintain the exercise of power and the illusion 0:16:18.280 --> 0:16:20.160 that you want to keep that power. So I think 0:16:20.160 --> 0:16:22.120 that's a strategically important thing for Biden to do, and 0:16:22.160 --> 0:16:23.520 there is no reason for him not to do it. 0:16:23.600 --> 0:16:25.600 So you think that this is more about the visual, 0:16:25.600 --> 0:16:27.800 it's more about the illusion and less about a true 0:16:27.800 --> 0:16:31.040 intention to run. Well, I think he can stay. He 0:16:31.080 --> 0:16:32.960 can stay in this race until somebody in the primary 0:16:33.000 --> 0:16:34.880 starts to beat him. And and you know, the myth 0:16:34.960 --> 0:16:36.920 that primaries are bad for our parties at the presidential 0:16:37.000 --> 0:16:39.640 levels and has been debunked. Now we know that it 0:16:39.680 --> 0:16:42.840 generates more turnout, It generates people registering to vote, knowing 0:16:42.840 --> 0:16:45.720 a pulling places, they get out the door. There's you know, 0:16:46.000 --> 0:16:49.160 we know that it increases turnout amongst the party members. 0:16:49.160 --> 0:16:51.760 So that means that it's a good thing to have 0:16:51.880 --> 0:16:55.760 some fighting, some challenging, uh, some anticipation. So if he's 0:16:55.800 --> 0:16:57.800 in it and other people want to challenge him, that 0:16:57.880 --> 0:17:00.760 just means more Democrats get in the games to vote, 0:17:00.960 --> 0:17:04.280 and we know the Republicans will be very, very energized 0:17:04.280 --> 0:17:07.080 in twenty four, about whom they will be loyal. We 0:17:07.080 --> 0:17:09.200 don't know who they're gonna pick. You know, I think 0:17:09.200 --> 0:17:11.200 there'll be more than one person in that race. Yeah, 0:17:11.240 --> 0:17:14.200 it's a good point, Wendy. Obviously there's multiple variables at play. 0:17:14.280 --> 0:17:17.240 Let's just assume for the moment that candidate on the 0:17:17.240 --> 0:17:20.720 Republican side hypothetically would be President Trump. Is there anyone 0:17:20.800 --> 0:17:24.520 on the Democratic side of likely potential candidates who would 0:17:24.520 --> 0:17:28.000 be able to beat him other than President Biden? Well, 0:17:28.040 --> 0:17:31.080 if the election were held today, unclear to me that 0:17:31.119 --> 0:17:34.119 anybody could accept for Biden. And again, people like what 0:17:34.160 --> 0:17:36.040 they're used to. There's been a lot of victories lately 0:17:36.080 --> 0:17:39.080 for the Democrats, you know, of economications, you know, ease up. 0:17:39.359 --> 0:17:42.480 I think that you know, the president, former President Trump 0:17:42.520 --> 0:17:45.280 is facing a lot of different inquiries. Some of them 0:17:45.320 --> 0:17:47.720 aren't more scary than others. I think to voters, and 0:17:47.760 --> 0:17:50.760 again that that core of independent suburban voters is key. 0:17:50.880 --> 0:17:54.200 They rejected Trump in twenty uh and I think there 0:17:54.200 --> 0:17:55.960 isn't any reason to think they're gonna welcome them back 0:17:56.080 --> 0:17:58.320 local arms in twenty four. So I think that's what 0:17:58.400 --> 0:18:00.879 the Democrats are counting on. But you know, we got 0:18:00.920 --> 0:18:04.240 Pritzkur in Illinois, big state go Gavin Newsom, the California 0:18:04.280 --> 0:18:06.879 big state Kathy Hokele if she wins again, big in 0:18:06.920 --> 0:18:09.000 New York becomes a player. And then of course it's 0:18:09.000 --> 0:18:11.160 got a couple of ones cabinet that might want to run, 0:18:11.240 --> 0:18:14.800 which makes for awkward cabinet meetings theoretically later on. But 0:18:15.000 --> 0:18:17.359 you know, we we are seeing energy, energy on the 0:18:17.400 --> 0:18:19.680 Republican side, and now we're starting to see a little 0:18:19.680 --> 0:18:21.560 bit more energy on the Democratic side. You have to 0:18:21.600 --> 0:18:23.560 maintain the energy, so you have to give him choice. 0:18:23.760 --> 0:18:25.800 But you are the most powerful person in the world. 0:18:26.080 --> 0:18:28.280 And why you would walk away from that two years early, 0:18:28.720 --> 0:18:31.000 you know, that's just that's political malpractice. And when he 0:18:31.040 --> 0:18:33.000 finally if we could just look to the more immediate 0:18:33.040 --> 0:18:35.600 future and the mid terms in November, there was a 0:18:35.640 --> 0:18:38.399 sense prior to this week that Democratic momentum was building. 0:18:38.440 --> 0:18:41.800 You have the inflation reduction, at gas prices are coming down. 0:18:41.800 --> 0:18:43.639 It is looking a little bit more optimistic for the 0:18:43.640 --> 0:18:46.320 Biden administration. And yet, as you allude to, you now 0:18:46.320 --> 0:18:49.040 have this galvanizing force when it comes to President Trump's 0:18:49.040 --> 0:18:51.679 base because of the FBI search of Mara Lago. Do 0:18:51.720 --> 0:18:54.120 those two forces cancel each other out, and we're now 0:18:54.240 --> 0:18:55.679 left with kind of the same outlook on the mid 0:18:55.800 --> 0:18:59.639 terms as we had before. That's an outstanding question I 0:18:59.680 --> 0:19:03.240 think for Democrats though, and again, this independent group if 0:19:03.280 --> 0:19:05.720 Trump looks like this base of Trump's is going to 0:19:05.800 --> 0:19:08.000 get out the door and there and they are behaving 0:19:08.000 --> 0:19:11.359 in ways that are frightening to some people, like trying 0:19:11.400 --> 0:19:14.679 to bust into an FBI office with you know, being armored, 0:19:14.800 --> 0:19:18.280 U being armed. I think that scares suburban voters, that 0:19:18.359 --> 0:19:21.080 scares independent voters, And it looks like this will give 0:19:21.160 --> 0:19:24.280 Trump momentum. I think the same forces that go out 0:19:24.280 --> 0:19:26.479 the door in eighteen on the Democratic side will get 0:19:26.480 --> 0:19:28.960 out the door again. You load up abortion on that 0:19:29.080 --> 0:19:32.280 and key states it's gonna be a referend statewide. I 0:19:32.320 --> 0:19:34.480 think that is going to help the Democrats. I don't 0:19:34.480 --> 0:19:36.280 know if it saves them for the House, but it 0:19:36.320 --> 0:19:38.880 could very well save them for the Senate. Many shoulders. 0:19:38.880 --> 0:19:41.439 Thank you so much for joining us with an August update. 0:19:41.520 --> 0:19:44.600 She is at Brown University. Here on the politics of 0:19:44.880 --> 0:19:53.040 the moment right now. Dennis Scarpan joins here with Futures 0:19:53.040 --> 0:19:56.000 of fourteen. Always good to speak. The gentleman, chairman of 0:19:56.000 --> 0:19:59.359 the University of Akron's Endowmond Fund. And he's retired. No, 0:19:59.480 --> 0:20:02.480 he's not still writing the garment letter on an hour 0:20:02.560 --> 0:20:06.240 by our basis and joins us today. Dennis Lisa wants 0:20:06.240 --> 0:20:10.959 to talk about bonds. I want to talk about hydrocarbons. 0:20:11.000 --> 0:20:13.400 You know, they're out of control in Europe. They've got 0:20:13.400 --> 0:20:16.560 a modest matter of a war. Are we going to 0:20:16.680 --> 0:20:22.320 see methane natural gas? Are we going to see different 0:20:22.359 --> 0:20:28.720 forms of gasoline in America surge like electricity in France? Probably, 0:20:28.840 --> 0:20:30.960 so propane is probably gonna go a lot higher, and 0:20:31.000 --> 0:20:32.840 that gas is probably gonna go a lot higher. At 0:20:32.880 --> 0:20:36.400 inventories are extremely limited here in the United States. They're 0:20:36.480 --> 0:20:41.159 unbelievably limited in Europe. If we start pushing nearby that 0:20:41.359 --> 0:20:43.919 gas through nine dollars per million British thermal units, and 0:20:43.920 --> 0:20:45.960 we're training about eight dollars and fifty eight dollars and 0:20:46.000 --> 0:20:48.800 sixty cents per million British thermal units. If we start 0:20:48.880 --> 0:20:51.399 moving through nine dollars, you start to go back to 0:20:51.400 --> 0:20:53.560 where we were in two thousand five, two thousand six, 0:20:53.560 --> 0:20:56.080 and two thousand seven, When we get thirteen dollars per 0:20:56.119 --> 0:20:58.959 million British thermal units, so you have to be very careful. 0:20:59.040 --> 0:21:01.520 Things are very tight and likely to get tighter. So 0:21:01.960 --> 0:21:04.000 it's it's not a pretty sign out there right now, 0:21:04.200 --> 0:21:06.240 and you're talking about natural gas tennis. But you could 0:21:06.240 --> 0:21:09.200 also apply this to certain oil inventory reports. There are 0:21:09.240 --> 0:21:12.120 some different ones, and I wonder how much we are 0:21:12.240 --> 0:21:15.320 fragile heading into the winter to see a spike in 0:21:15.400 --> 0:21:18.199 oil that could reverse some of the optimism about the 0:21:18.200 --> 0:21:22.119 disinflation that we've seen in this week's reports. Keep an 0:21:22.119 --> 0:21:24.240 eye on the term structure. That's that tells you more 0:21:24.240 --> 0:21:27.160 than anything else about what goes on in crude oil, 0:21:27.400 --> 0:21:30.680 specifically especially a historable commodities such as crude oil. We're 0:21:30.680 --> 0:21:33.359 in a small backwardation. We were at a larger backwardation 0:21:33.400 --> 0:21:35.960 a month and a half ago. The backwardation has narrowed, 0:21:36.000 --> 0:21:38.600 but in the past couple of days as prices of 0:21:38.680 --> 0:21:41.200 crude oil have fallen just a little bit taken we 0:21:41.320 --> 0:21:43.240 got what the ut I down to eighty eight dollars 0:21:43.200 --> 0:21:46.359 prepaire the other day, and the nearby backwardation began to 0:21:46.480 --> 0:21:52.200