Speaker 1: Welcome to the Bloombergs Surveillance Podcast Downtown Keene. Along with
Speaker 1: Jonathan Ferroll and Lisa Brownwitz Jay Leye, we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance and Apple Podcast SoundCloud, Bloomberg dot Com
Speaker 1: and of course on the Bloomberg Terminal. The top story
Speaker 1: though worldwide, has to be the ship stuck in the
Speaker 1: Suez Canal. So let me go through some of the
Speaker 1: numbers for you, because the numbers are important. Nine point
Speaker 1: six billion dollars worth the traffic a day going through
Speaker 1: that very very important waterway. That's according to estimates from
Speaker 1: the likes of Lloyd's, and the estimates around the amount
Speaker 1: of ships that are waiting to get through there right
Speaker 1: now varies. For us here at Bloomberg, what we're tracking
Speaker 1: about a hundred and eighty five vessels as of yesterday,
Speaker 1: I think Lloyd's estimating that's about a hundred and sixty five.
Speaker 1: What we need to figure out is what is on
Speaker 1: these ships and how bad could things get and how
Speaker 1: bad could things get quickly? So let's do that right
Speaker 1: now with Alan gelder Wood Mackenzie, Vice President of refining,
Speaker 1: chemicals and oil markets. Now, Alan, we all know about
Speaker 1: the proliferation of just in time supply chains that came
Speaker 1: out of Japan and really really gained traction in the
Speaker 1: United States of the eighties and beyond. So, but it's
Speaker 1: important when things like this start to get blocked up.
Speaker 1: I guess my question to you, Alan, is when things
Speaker 1: get critical? Is it days? Is it weeks? And critical
Speaker 1: for who and wear? It's a really good quote. It's
Speaker 1: a really good question and becoming a bit more relevant
Speaker 1: given the news of ship unblocked, but the satellites and
Speaker 1: mid sure it's still layer until certinceing the timing, we
Speaker 1: think the biggest impact we're seeing from all the vessel
Speaker 1: tracking that we do is really around some bulks and
Speaker 1: contain and container shipping, in which case it's all of
Speaker 1: those things that moves on containers, which it's basically across
Speaker 1: the whole global economy. We see less of an impact
Speaker 1: on sort of oil, oil products and l en G,
Speaker 1: but those things sort of the impact on those gets
Speaker 1: bigger if we're still in this situation in a few days,
Speaker 1: so the blockage will have lasted about a week or more. Yeah,
Speaker 1: And then the reason I go to these questions because
Speaker 1: I think it's too easy just to put up the
Speaker 1: pretty pictures and let's say, look at this digger trying
Speaker 1: to get out the big ship and talk about that
Speaker 1: for a number of ads for business people, for I
Speaker 1: think for international traders right now, looking at this situation,
Speaker 1: they want to understand how important it really is and
Speaker 1: when things get critical. So from your perspective, when you
Speaker 1: see that straight through the Suez Canal, I'm trying to
Speaker 1: understand what is on the ships and what can be rerouted.
Speaker 1: One and two if in the oil business, the pipelines
Speaker 1: around there you can use instead, how much capacity is there,
Speaker 1: how much alternatives are they're out there to try and
Speaker 1: tackle some of these issues. If this issues is still
Speaker 1: around for another week or so, we think of think
Speaker 1: of all, there is the Suma pipeline from for the
Speaker 1: south up the city career in the north. That's there's
Speaker 1: plenty of capacity there. The oil market in Europe, there's
Speaker 1: plenty of crew, there's plenty of products. Because we're lockdowns
Speaker 1: are being extent. Lockdowns are being extended, so we don't
Speaker 1: see a problem in sort of Middle East crewed making
Speaker 1: its way to Europe. We're not really seeing much diversion,
Speaker 1: plenty of stock, there's some issues potentially going the other way.
Speaker 1: It's more products. It may be petrochemical feedstocks because they
Speaker 1: tend to flow for the Mediterranean through the Sewers Canal
Speaker 1: and anto Asia seen some price action there. And then
Speaker 1: you've also got some sort of Russian crewed Caspian crew
Speaker 1: that comes out the Black Sea that often goes some
Speaker 1: of that goes through the Sewers Canal. That will be
Speaker 1: restricted with seeing some of those differentials moving, but it's
Speaker 1: relatively small. The oil market isn't isn't a big deal
Speaker 1: um llen g. If we'd last a bit longer, becomes
Speaker 1: a bit of a problem. But in terms of the
Speaker 1: l energy market, the good thing is actually now this
Speaker 1: is the shoulder season where demands relatively low. But if
Speaker 1: the canal still is blocked, some people have to make
Speaker 1: a decision do they go all the way around the
Speaker 1: Cape Cape Cape Horn and that adds nine days, in
Speaker 1: which case the shipping market gets tighter and that will
Speaker 1: then get ultimately get reflected reflected in pricing. We think
Speaker 1: at the moment, the market sitting and waiting and hope
Speaker 1: looking fingers crossed on the news that the whales should
Speaker 1: be cleared like Monday, Tuesday next week. That's some of
Speaker 1: the news that's been gone, but we need to see
Speaker 1: Alan John was talking about people wanting to talk about
Speaker 1: that digger next to the big ship, and frankly, I'm
Speaker 1: among them. I also am curious about the conversations in
Speaker 1: the cockpit of this massive shipping container ship. The reason why, though,
Speaker 1: is a bigger issue, and that is the exhaustion after
Speaker 1: people bought more and more goods to enable themselves to
Speaker 1: hunker down during the pandemic at a time when there
Speaker 1: were more people who are out of commission not able
Speaker 1: to work. Can you talk about the larger story about
Speaker 1: stress points at some of these shipping centers, the idea
Speaker 1: that people are exhausted, they have been stranded at sea
Speaker 1: for days, I mean for months. Frankly, there have been
Speaker 1: stories that does that concern you in a longer lasting way,
Speaker 1: and the oil market and the chemicals market. I think
Speaker 1: it's one of those things that's largely gone hidden, actually,
Speaker 1: the coronavirus global pandemic, the lockdowns there are there have
Speaker 1: been mariners that have been at sea for Argub eighteen months,
Speaker 1: Argue eighteen months or not, and I still have no
Speaker 1: means of getting and have no means of getting home
Speaker 1: so working. So how much fatigue played in the played
Speaker 1: in this incident, I wouldn't want to speculate, but if
Speaker 1: you look at it, we've got supply systems and supply
Speaker 1: chains that are under quite quite a degree of stress.
Speaker 1: And if systems under stress, then mistakes and accidents happen.
Speaker 1: So it's something that the industry needs to be I
Speaker 1: think he's very the shipping industry is very aware of
Speaker 1: and he's trying. He is trying to resolve, and I'd
Speaker 1: love to catch up again about this because if this
Speaker 1: does continue, as you know, it can take about a
Speaker 1: month to get a container ship from say China over
Speaker 1: to the UK for India Mumbai over to Europe as well,
Speaker 1: I can say anywhere from twenty to thirty days too,
Speaker 1: And I think at some point you have to start
Speaker 1: thinking about what that root is gonna look like in
Speaker 1: the months to come for some of these big, big
Speaker 1: journeys with these massive ships. And it's great catch up,
Speaker 1: So we appreciate your time as always. Alan out of
Speaker 1: there of Wood Mackenzie, let's bringing Mamma Dunis now Counter
Speaker 1: editor in chief Mohammed Let's start there the perceptions of
Speaker 1: a rival superpower, how we should engage a rival superpower.
Speaker 1: What have you learned in the polling you've done recently well?
Speaker 1: Within our World Affair survey that we conducted in the
Speaker 1: second of the first half of February, we basically asked
Speaker 1: Americans about the favorability of perceptions of a series of
Speaker 1: nations UM. What we found is a record low in
Speaker 1: favorability of China, and this trend goes back to the
Speaker 1: nine Today of Americans say they have a favorable view
Speaker 1: of China. In this UH pole, we also ask about
Speaker 1: perceptions of who the greatest enemy is of the United States.
Speaker 1: In the past, North Korea got a lot of attention
Speaker 1: back in eighteen when there were a lot of UH
Speaker 1: missile launches and rhetoric going back and forth. This year
Speaker 1: was the highest record ever and this trend goes back
Speaker 1: to two thousand and one, where forty percent of Americans
Speaker 1: viewed China as UM the greatest enemy that the United
Speaker 1: States currently faces. It's interesting that half of Americans also
Speaker 1: perceived China's economy to be the leading economy of the
Speaker 1: world UM. And when we ask Americans about the critical
Speaker 1: threats to the vital interests of the United States. China
Speaker 1: is one of the many actually areas where there is
Speaker 1: agreement on both the right and the left in terms
Speaker 1: of viewing its economic rise as a threat to the
Speaker 1: United States. So seventy eight percent of Republicans say it's
Speaker 1: a critical threat of Democrats and about six and ten
Speaker 1: Americans overall. Mohammed always think language is important. Whenever we
Speaker 1: talk about is tompict try to use the words Chinese
Speaker 1: Communist Party and talk about the government and not the Chinese.
Speaker 1: And I know a lot of people do that innocently,
Speaker 1: without malice. They will refer to China as the Chinese
Speaker 1: and not the Chinese Communist Party. But the reason I
Speaker 1: think this is important right now is because I do wonder,
Speaker 1: at a really tense moment for the Asian American community
Speaker 1: and the deep issues, deeply upsetting issues that are being
Speaker 1: increasingly highlighted over the last several months, whether there is
Speaker 1: a risk of conflating the issues around the Chinese Communist
Speaker 1: Party and they bleed over and spill into and exacerbate
Speaker 1: maybe much more nastier cultural issues here at home. Absolutely,
Speaker 1: and it's a now more important time than ever to
Speaker 1: really make that distinction, and I'm happy to give me
Speaker 1: the opportunity to do that. UM. First of all, in
Speaker 1: terms of favorability, Americans on the whole really do distinguish
Speaker 1: between sort of China and just Asian people in general.
Speaker 1: The data actually hand that out. Japan has one of
Speaker 1: the highest favorability ratings of any country we ask among Americans.
Speaker 1: Taiwan's favorability reading is on par with Israel. UM. So
Speaker 1: the notion that the favorability of China or Chinese policies
Speaker 1: in specific with trade, and we have data to show
Speaker 1: that that's really where the concern is with the vast
Speaker 1: majority of Americans certainly shouldn't be read to mean, UM,
Speaker 1: suddenly that everybody in America or of people in America
Speaker 1: have negative feelings towards Chinese people or citizens. UM. Of course,
Speaker 1: we've seen a series of very horrific hate crimes UM,
Speaker 1: not only in Atlanta, but many smaller ones across the
Speaker 1: United States. It's not really new UM for the United States.
Speaker 1: But what we know from the past, UM is that
Speaker 1: take trade, for example, Americans are very positive on trade.
Speaker 1: They tend to be very positive on trade with most
Speaker 1: countries that have a major trade relationship with the United
Speaker 1: States Mexico, Canada, the EU, etcetera. But they consistently had
Speaker 1: a less positive perception of the trade relationship with China
Speaker 1: in particular. So we definitely don't want to conflate these
Speaker 1: two issues, um first and foremost, because human beings, of
Speaker 1: course should always be treated as such, a not a
Speaker 1: reverberation of policy. Somebody in Muhammad in the United States,
Speaker 1: I can comfortably uh say that I strongly believe in that.
Speaker 1: But in addition to the fact that these issues are
Speaker 1: real um their longstanding and a lot of the you know,
Speaker 1: rhetoric that we saw even around the COVID virus um
Speaker 1: had likely agged on some of that concerned. But that
Speaker 1: doesn't change the fact that most Americans still know the
Speaker 1: origin of this pandemic wasn't China. There's a huge issue
Speaker 1: with the World Health Organization and information about the origins
Speaker 1: of it. So the issues are real, but it's absolutely essential,
Speaker 1: of course, that we separate policies from persons. Mohammed, we
Speaker 1: only have about forty five seconds. What is the implication
Speaker 1: of public feeling right now in the United States? Increasingly
Speaker 1: that China is the biggest economic threat. Is it military
Speaker 1: action or is it just more support for actions down
Speaker 1: in Washington, d C. I think overwhelmingly Americans view this
Speaker 1: really as an economic challenge. Um from the perspective of
Speaker 1: public opinion. Obviously there's a huge security element to this.
Speaker 1: But the more that we ask Americans about the trade issues,
Speaker 1: the more that we find most of them actually focused
Speaker 1: on it. For example, when we ask about the situation
Speaker 1: between the conflict between China and Taiwan, only of Americans
Speaker 1: view that as a critical threat to the vital interests
Speaker 1: of the United States versus, of course the economic rise
Speaker 1: of China. What an important conversation. How mud stay close
Speaker 1: and come back soon. I'd love to push this one further.
Speaker 1: How M a junist there the Gallup editor in Chapehan
Speaker 1: principal Global Investors chief strategists from over at Principle. Let's
Speaker 1: start there, Sama, Do you think the cycnical tries breaking
Speaker 1: down or just taking a pause? I think it's taking
Speaker 1: a pause, But I have to say that that the
Speaker 1: number one question I've received in the last week from
Speaker 1: investors is it is the cyclical trade getting a bit
Speaker 1: too frothy? And when do we know when it's time
Speaker 1: to shift. So this is already very pertinent in people's minds,
Speaker 1: and I think one of the reasons is is that
Speaker 1: the market is very much one sided. In the last
Speaker 1: few weeks, it's very much, you know, very optimistic about
Speaker 1: GDP growth, very optimistic about reopening the vaccines, and you know,
Speaker 1: as we've seen that a lot of people really concerned
Speaker 1: about inflation rather than COVID, and you know what, COVID
Speaker 1: hasn't gone away. So I think this is a good reminder.
Speaker 1: But really the underlying story is still one of very
Speaker 1: strong fiscal stimulus eventual reopening, even if the timing isn't
Speaker 1: too certain seeming. What I've found fascinating, it's just the
Speaker 1: lack of differentiation through much of the year until recently
Speaker 1: we came into the year in the conversation and we
Speaker 1: said repeatedly on this show with you two was around
Speaker 1: synchronized global growth. But the vaccine rollout has been anything
Speaker 1: but synchronized globally, and the outlook for growth has been
Speaker 1: anything but synchronized as well. When it comes to the
Speaker 1: upgrades to expectations, we've seen the revisions over the last
Speaker 1: couple of weeks, Yet what have we seen. We've seen
Speaker 1: US banks up for good reason, US yeld tire. We've
Speaker 1: seen European banks rally too, even though we're told that
Speaker 1: the outlook for European growth is inconsistent with the move
Speaker 1: we saw from yields. That was from the e c B,
Speaker 1: not from me. We've seeing e M equities do well
Speaker 1: as well, even with China and Chinese growth and credit
Speaker 1: impulse rolling over and growth maturing. Do you think that
Speaker 1: the breakdown in the cyclical trade on a global basis
Speaker 1: needed to consolidate before we can start to look at
Speaker 1: some real differentiation between regions as we start to build
Speaker 1: out this year again, Yeah, absolutely, I think you know
Speaker 1: increasingly the big question is you know which one is
Speaker 1: going to be the winner because not everyone, unlike we've
Speaker 1: experienced in the last year, not everyone is going to
Speaker 1: be doing particularly well. And as you said, that vaccine
Speaker 1: roll up is probably going to be the game change
Speaker 1: of picking out who's gonna be good and who's gonna
Speaker 1: be bad and kind of I was listening to some
Speaker 1: of your discussion earlier about Europe, and yes, you it
Speaker 1: will accelerate, that vaccine roll up will accelerate, but they
Speaker 1: are falling further and further behind, and by autumn they
Speaker 1: absolutely need to get their house in order, because that
Speaker 1: is when we're also expecting another way. So I think,
Speaker 1: you know, you really does have a task on its hand.
Speaker 1: And from a macro perspective, you know, Europe, even in
Speaker 1: the second half of the year, I wonder if it's
Speaker 1: really going to be able to catch up with the US.
Speaker 1: See how much are you actively changing your guidance in
Speaker 1: terms of what you think people should be investing in. Yeah,
Speaker 1: we we have in the last few weeks we have
Speaker 1: reduced our allocation to emerging markets concerns again about the dollar.
Speaker 1: You know, we came into this year expecting generally everyon
Speaker 1: to be on level terms a week a dollar story,
Speaker 1: and you know, we've seen that narrative significantly change along
Speaker 1: the lines as we've seen the fiscal stimmers package be
Speaker 1: introducing the US. We've also reduced allocation to Europe that
Speaker 1: was a little bit before the end of last year.
Speaker 1: Um and also maybe you know, reconsidering some of the
Speaker 1: small cup moves, we do think that maybe it's gone
Speaker 1: quite far and needs to take a little bit bit
Speaker 1: of time of retrenchment before we get back in that one,
Speaker 1: What are you looking at to decide whether or not
Speaker 1: there's going to be more retrenchent retrenchment in the Russell
Speaker 1: two thousand, is it an idea of the retail investor
Speaker 1: and are perhaps being as present? Is it the idea
Speaker 1: that oath isn't going to necessarily accelerate as quickly as
Speaker 1: people have thought, or are the signposts? I have to say,
Speaker 1: I don't think it's that straightforward as maybe it has been.
Speaker 1: You know, we really need to start looking at the
Speaker 1: evaluation indicators. A lot of the position the retail investor
Speaker 1: is clearly very important here. I think one of the
Speaker 1: things is is that there's been so much market complacency
Speaker 1: around this cyclical trade um that some of those concerns
Speaker 1: inevitably start creeping in. And that's what we're seeing at
Speaker 1: the moment. I think it may last for a few
Speaker 1: more weeks before we will probably be a little bit
Speaker 1: more confident about getting back into some of those more
Speaker 1: cyclical areas. When you say complacency, are you're looking at
Speaker 1: various trades here in the United States or on a
Speaker 1: global basis of regional story, Well, it's come to your
Speaker 1: point is that it's been there was so much consensus
Speaker 1: view coming into this year about which ones are gonna
Speaker 1: do well, about the cyclical trade, about the value trade,
Speaker 1: um and inevitably, when you've got a consent to such
Speaker 1: a significant consensus move, there is going to be a
Speaker 1: moment where things start to break down. And I think
Speaker 1: that's where we are. But you know, we we want
Speaker 1: to look at it as a long term investor. Generally,
Speaker 1: we want to be looking at the fundamentals, and to us,
Speaker 1: the fundamental story is still very strong for the US,
Speaker 1: but of course you need to start having a closer
Speaker 1: look at the regions that I think you're investing in
Speaker 1: that that's where the dispersion is going to show up.
Speaker 1: I've been asking the impossible question, Seema over the last
Speaker 1: couple of weeks, and Lisa, you and I have been
Speaker 1: talking about at LEASA where the growth expectations are peaking
Speaker 1: and you have no way of knowing that right now,
Speaker 1: But we've had a series of guests on this program
Speaker 1: who have said not yet. We think we can still
Speaker 1: surprise to the upside. And I've just seen a data
Speaker 1: point on US retail foot traffic rising fifty eight percent
Speaker 1: last week from a year earlier. This is the base effects.
Speaker 1: We're going to start to see this a whole lot more,
Speaker 1: least in the months ahead. The base effects will kick in.
Speaker 1: And even though a lot of this is highly predictable,
Speaker 1: I think a conversation you and I have had repeatedly
Speaker 1: is how surprised some people will be by some of
Speaker 1: the numbers we might see in the next two months.
Speaker 1: I'm saying that July four the sort of the key moment, Seema.
Speaker 1: Can you weigh in and where you think the expectations
Speaker 1: are based on equity pricing right now? Do you view
Speaker 1: that people have baked in all that optimism, that increase
Speaker 1: in that base effect that John is talking about, or
Speaker 1: do you think the equity treators will also be surprised
Speaker 1: by how good it is. I think there is actually
Speaker 1: some surprise yet to come on the upside. And I think,
Speaker 1: you know, if we just even turn our minds back
Speaker 1: to about two or three months ago, there is still
Speaker 1: a general view that some of the cruise liners would
Speaker 1: never get back up on ship. You know, where would
Speaker 1: the demand realistically come from. And what we're hearing more
Speaker 1: and more is that people are just desperate to go
Speaker 1: out and do the stuff that they were not able
Speaker 1: to do so. I think there could be certainly some
Speaker 1: upside surprises to come. Just to have a look at
Speaker 1: the price of flights domestically here in America through the summer,
Speaker 1: to get a view on where things are going. Seema
Speaker 1: good to see a Seema Chanda, Principal Global Investors Chief
Speaker 1: strategist Nathan sheets Page and fixed Income chief economist and
Speaker 1: had a global macroeconomic research Nathan, let's start here a
Speaker 1: conversation which we touched on about ten minutes ago, which
Speaker 1: I don't think we've talked about nearly enough. The previous
Speaker 1: administration when they talked about taxes, they weren't talking about
Speaker 1: the wealthy, although some people down in d C wish
Speaker 1: they had have done. They were talking about supply side issues,
Speaker 1: investment in America, and maybe that was coming, maybe it wasn't.
Speaker 1: I'm not in the position to talk about that enough
Speaker 1: of my opinion, Nathan, do you think we need to
Speaker 1: have that conversation right now? Again? I think at a minimum,
Speaker 1: what we need to do is be aware of the
Speaker 1: supply side, and I think the UH, the case to
Speaker 1: consider tax increases given where our fiscal position is is
Speaker 1: UH is compelling. There's also a case for various kinds
Speaker 1: of regulatory interventions. But as we do that, we also
Speaker 1: need to think about how business is going to respond
Speaker 1: and the implications of that for the business environment. And
Speaker 1: I very much here kind of a demand side perspective
Speaker 1: of the economy articulated frequently, and demand is critical, but
Speaker 1: in order for the demand and to be mad, we
Speaker 1: also need the supply side to be strong. And balancing
Speaker 1: those considerations I think is critical and I think would
Speaker 1: be helpful in our debates they have more of that
Speaker 1: kind of supply side perspective at the end of the day,
Speaker 1: affirms corporations or not the enemy. They've got to be
Speaker 1: part of the solution if we want to have the
Speaker 1: job creation and the growth that we all desire. Nathan, Unfortunately,
Speaker 1: that's not been part of the conversation on one side
Speaker 1: of the political for a long long time. And Algreaby
Speaker 1: that started with the former president back Obama, when he
Speaker 1: turned around to the business community and said, you didn't
Speaker 1: build this, so let's talk about that a little bit more.
Speaker 1: I want to understand what you saw as an outcome
Speaker 1: of the corporate tax cut from several years back, and
Speaker 1: whether it's simple as simple as reverse engineering that and
Speaker 1: saying this is what happened, will happen if you, Hi, Kick,
Speaker 1: can you help me understand that particular situation just a
Speaker 1: little bit better. The corporate text cut was a powerful
Speaker 1: experiment that I think was cut short. Through two thousand
Speaker 1: and eighteen, we were maybe starting to see a few
Speaker 1: hints of strengthening in investment and maybe some increases in
Speaker 1: corporate sentiment. But then President Trump came with the trade
Speaker 1: war and just quashed uh those uh, those early games,
Speaker 1: and so we never we never really found out. So
Speaker 1: in the event, we didn't get the investment that they
Speaker 1: were arguing. But it's not clear if they had had
Speaker 1: a different policy mix. More broadly, whether we might have
Speaker 1: where whether we might have seen that I I I
Speaker 1: think it is Uh. It was a huge missopportunity where
Speaker 1: President Trump implemented half of policy and then just basically
Speaker 1: killed it with the trade wars. Nathan, can you elaborate
Speaker 1: a little bit more, because at first, Blush, it is
Speaker 1: counter in two for the trade war to lead to
Speaker 1: less development at home, you would think that it would
Speaker 1: lead to more That was the goal, given the fact
Speaker 1: that it would become more expensive to do business overseas.
Speaker 1: Why did it have the opposite effect. I think we
Speaker 1: saught on a daily basis through that period in the
Speaker 1: equity market, it was a source of uncertainty and h
Speaker 1: many firms in the US economy, the reality is are
Speaker 1: dependent on imported intermediate goods, and especially the firms that
Speaker 1: are likely to lead the way an investment, and they
Speaker 1: don't know what they're going to have to pay for
Speaker 1: for the products they use in production. H It's very
Speaker 1: difficult for them to make business decisions, and they certainly
Speaker 1: don't want to talk about expanding the scale of production
Speaker 1: UH in that in that environment. So it's a systemic
Speaker 1: source of uncertainty and particularly particularly hits UH input prices hard.
Speaker 1: I mean kind of the bottom line is, as many
Speaker 1: were arguing the trade war, I'm sure it had some
Speaker 1: adverse effects on the Chinese economy, but it also had
Speaker 1: some important adverse effects on the US economy. Just going forward,
Speaker 1: there's a question about the costs of rejiggering some of
Speaker 1: the supply chains, Nathan, and this has to do not
Speaker 1: only with trade policy, but just in general of some
Speaker 1: of the fragilities that have been exposed in just in
Speaker 1: time shipping and packaging in the wake of the pandemic,
Speaker 1: How will that factor into economic growth into inflation, given
Speaker 1: the fact that it will be retracing some of the
Speaker 1: growth in globalization than the cheaper goods that we saw
Speaker 1: resulting from that over the past couple of decades. I
Speaker 1: think that one of the messages of the last five years,
Speaker 1: both the trade war and the pandemic, is that many
Speaker 1: firms have concluded that the war world is a very
Speaker 1: risky place and it behooves them to have more diversified
Speaker 1: supply chains. Some of that might mean bringing at home,
Speaker 1: but some of that may mean diversifying it out of
Speaker 1: out of China and UH. In addition, they need supply
Speaker 1: chains that are going to be more robust to a
Speaker 1: whole range of shocks, and that's likely to mean higher
Speaker 1: inventory levels UH for firms going forward. Now. I think
Speaker 1: the implication of that is that inventories they have been
Speaker 1: so small in recent years, with this just in time
Speaker 1: inventory management, inventories are likely to be larger than they
Speaker 1: have been, and they are likely to become like in
Speaker 1: the seventies and eighties, maybe not to that extent, a
Speaker 1: similar qualitatively UH more of a driver of business cycle
Speaker 1: dynamics interesting in recent years. Nithan, it's fascinating. I had
Speaker 1: that conversation with PepsiCo the SAFA a number of months back,
Speaker 1: and that's gonna be a rioting, compounding thing to watch.
Speaker 1: Nathan Shake, it's gonna catch up Paging fixed Income, chief
Speaker 1: economist and head of Global matro economic Research. This is
Speaker 1: the Bloomberg Surveillance Podcast. Thanks for listening. Join us live
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Speaker 1: the terminal. I'm Tom Keene and this is Bloomberg