WEBVTT - Compliance With OPEC Quotas is Striking, Yergin Says 0:00:00.120 --> 0:00:02.920 Brought you by Bank of America Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.840 local communities, economies and a sustainable future. That's the power 0:00:08.080 --> 0:00:12.360 of global connections. Mary Lynch, Pierce Fenner, and Smith Incorporated 0:00:12.760 --> 0:00:27.400 member s I p C. Welcome to the Bloomberg Surveillance Podcast. 0:00:27.840 --> 0:00:31.520 I'm Tom Keene with David Gura. Daily we bring you 0:00:31.560 --> 0:00:36.600 insight from the best in economics, finance, investment, and international relations. 0:00:37.000 --> 0:00:41.600 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and 0:00:41.680 --> 0:00:49.640 of course on the Bloomberg. We begin with an Urgen, 0:00:49.720 --> 0:00:51.920 Vice Chairman h S. Market, author of the prize and 0:00:52.000 --> 0:00:54.000 the Quest, and he joins us here in New York 0:00:54.000 --> 0:00:55.720 on bloom Big Surveillance. And Dan, let me start with 0:00:55.720 --> 0:00:58.760 that news we got yesterday about Saudi Arabia telling OPE 0:00:58.800 --> 0:01:01.440 could produced production last by the most in eight years, 0:01:01.960 --> 0:01:03.520 more than it had pledged to do. Give us the 0:01:03.760 --> 0:01:06.520 significance of that and why were they able to cut 0:01:06.560 --> 0:01:09.080 more than they forecast that they'd be able to. What's 0:01:09.080 --> 0:01:12.200 going on is a very high degree of compliance within OPEC. 0:01:12.560 --> 0:01:15.920 People have always been skeptical with good reason of OPEC cuts, 0:01:16.000 --> 0:01:17.880 and two thousand and eight when they cut, they only 0:01:17.880 --> 0:01:20.520 cut about sixty percent, and now it looks like they've 0:01:20.560 --> 0:01:23.160 cut over. Saudi Arabia has taken the lead, and I 0:01:23.240 --> 0:01:25.920 think Saudi Arabia is the most important member by far, 0:01:26.280 --> 0:01:29.960 and they want this, uh this, this and this new 0:01:30.120 --> 0:01:32.679 type of agreement between OPEC and non OPEC to be 0:01:32.720 --> 0:01:34.880 a success. And we can see the impact in the 0:01:34.920 --> 0:01:37.080 marketplace more. And this is just one we want to 0:01:37.080 --> 0:01:39.560 break a headline here crossing the Bloomberg, Etna and Humana 0:01:39.600 --> 0:01:42.640 are ending their merger pack that had been called into 0:01:42.720 --> 0:01:44.800 question by the federal government and it's not going to 0:01:44.880 --> 0:01:48.280 pay one billion dollar fee. Having spoken Mark Bertolini, the 0:01:48.520 --> 0:01:50.440 CEO of in a couple of weeks ago, it sounded 0:01:50.440 --> 0:01:52.320 like they were weighing whether or not to go forward. Indeed, 0:01:52.440 --> 0:01:54.480 and no human I have decided not to go forward 0:01:54.760 --> 0:01:57.200 with their merger pack. Now back to Dan, you're get 0:01:57.240 --> 0:02:00.320 how surprising was this news about Saudi Arabie said, The 0:02:00.600 --> 0:02:03.040 importance can't be understated. How surprising was the news that 0:02:03.080 --> 0:02:05.600 they had cut so much. I don't think it was 0:02:06.120 --> 0:02:09.600 surprising uh so much because you saw that the new 0:02:09.800 --> 0:02:13.320 relatively new Saudi patrollingum minister called alf Fala, that he 0:02:13.400 --> 0:02:16.840 really was taking the lead in making this work, and 0:02:16.919 --> 0:02:19.280 I think that the cuts are demonstration and a message 0:02:19.280 --> 0:02:21.520 to everybody else. And just before they made a deal 0:02:21.600 --> 0:02:23.919 last November, they said, if there's not a deal, we're 0:02:23.919 --> 0:02:25.840 going to produce as much as we can. So the 0:02:25.840 --> 0:02:27.440 other side of it is that there is a deal 0:02:27.480 --> 0:02:30.079 and if it's holding with other people, including the Russians 0:02:30.120 --> 0:02:32.120 by the way, who are cutting back, which there was 0:02:32.160 --> 0:02:35.000 skepticism about. Uh, they want to do their part to 0:02:35.040 --> 0:02:38.720 make this work. We're gonna have the Minister at our 0:02:38.760 --> 0:02:41.160 conference in Houston in a couple of weeks and I 0:02:41.160 --> 0:02:43.760 think he's going to give a strong message about wanting 0:02:43.800 --> 0:02:46.000 to see some stability in the oil market. When you 0:02:46.040 --> 0:02:48.720 survey when you look at the parties to that agreement, 0:02:48.720 --> 0:02:51.680 both OPEC and NON who's having the biggest trouble keeping 0:02:51.720 --> 0:02:54.360 up the end of the bargain? Uh, Well, there's certain 0:02:54.360 --> 0:02:57.440 countries that are out of it. Libya and Nigeria were 0:02:57.480 --> 0:03:00.840 given a free pass. I think the al of the cults, 0:03:00.919 --> 0:03:04.080 the most determined people are there, Saudi Arabia and the 0:03:04.080 --> 0:03:06.320 other Gulf countries. They're the ones who really stand out. 0:03:06.720 --> 0:03:09.800 People were looking very carefully at the Russians have been 0:03:09.840 --> 0:03:12.440 cutting they still have more to cut. And the Iranians. 0:03:12.440 --> 0:03:14.480 It was a very unusual deal because they sort of 0:03:14.840 --> 0:03:18.359 there was a kind of a deal or everybody could 0:03:18.360 --> 0:03:20.480 claim a victory. The Iranians could have a higher quota, 0:03:20.800 --> 0:03:23.800 except the others field they can't reach that quota. A 0:03:23.880 --> 0:03:26.600 couple of nights ago, there was a small matter of 0:03:26.639 --> 0:03:30.120 the Ninth District Court in San Francisco, and I, like 0:03:30.240 --> 0:03:33.239 everybody else, was riveted with a phone call on television 0:03:33.520 --> 0:03:36.880 of the appeals court going to the process and David Gura. 0:03:37.040 --> 0:03:40.160 The bad news was. I was watching MSNBC and they 0:03:40.240 --> 0:03:43.880 kept playing in the upper right corner the President meeting 0:03:43.920 --> 0:03:47.200 with muckety MUCKs within the oil business, and he walked 0:03:47.200 --> 0:03:50.360 around the table shaking hands. And I swear every time 0:03:50.400 --> 0:03:53.360 he walked around the table and shook Dan Jurgen's hand, 0:03:53.440 --> 0:03:56.000 he was there. You handed him a copy of Commanding Heights. 0:03:57.880 --> 0:04:00.240 I only you love that book so much time that 0:04:00.280 --> 0:04:02.840 you imagined that you saw it happened. I only wish 0:04:02.880 --> 0:04:05.360 that were the case. But it is a very uh. 0:04:05.480 --> 0:04:08.200 That was the media of the Presidential Strategic and Policy community. 0:04:09.040 --> 0:04:11.200 Um I learned that. I mean, there are a couple 0:04:11.240 --> 0:04:13.560 of things that really jumped out. One was just this 0:04:13.680 --> 0:04:18.480 whole question of regulation, not just is there too much regulation, 0:04:18.520 --> 0:04:22.320 but contradictory regulation from too many different agencies. And the 0:04:22.360 --> 0:04:26.200 other was a really big focus on infrastructure. Within this 0:04:26.560 --> 0:04:29.919 is if you had had handed the president your iconic 0:04:29.920 --> 0:04:33.800 book Commanding Heights, what in it should he learn? Well, 0:04:33.880 --> 0:04:37.000 I think that these things go in cycles. The role 0:04:37.080 --> 0:04:40.480 of the frontier between governments and markets is shifting and 0:04:40.560 --> 0:04:43.440 continually shifts, and I think we're seeing that now and 0:04:43.480 --> 0:04:46.000 I think kind of right now around the world there's 0:04:46.320 --> 0:04:48.520 kind of confusion about kind of what are the new 0:04:48.600 --> 0:04:51.719 rules of globalization. But your book is the arch non 0:04:51.880 --> 0:04:55.599 zero sum book. Your book is one primal scream about 0:04:55.680 --> 0:05:00.640 anti mercantilism, about a value to cooperation and ord nation. 0:05:00.960 --> 0:05:04.880 Do you see any likelihood of that within this administration? Well, 0:05:04.920 --> 0:05:08.599 I think that if with some of the people, I 0:05:08.640 --> 0:05:11.440 think that there's still the you know, the US. We 0:05:11.520 --> 0:05:13.720 have forty million jobs, over forty million jobs in the 0:05:13.760 --> 0:05:16.280 US that the result of foreign trade, and I think 0:05:16.320 --> 0:05:18.240 that number has kind of been left out of the debate. 0:05:18.520 --> 0:05:21.080 What have you heard from the administration about energy policy 0:05:21.440 --> 0:05:23.440 at this point? How inco it is it? Do we 0:05:23.480 --> 0:05:25.000 have a sense of what it's going to be. Well, 0:05:25.040 --> 0:05:27.240 I think it's gonna be uh not. First of all, 0:05:27.279 --> 0:05:30.039 it's going to be not more regulation. And secondly, I 0:05:30.040 --> 0:05:33.040 think it's going to be trying to solve this bottleneck 0:05:33.080 --> 0:05:36.400 about infrastructure where it takes seven years and several billion 0:05:36.400 --> 0:05:39.680 dollars not to approve a pipeline. Things have to be 0:05:39.680 --> 0:05:42.000 done in reasonable times, and there has to be reasonable 0:05:42.040 --> 0:05:45.520 times in terms of challenges to it. But there's a 0:05:45.560 --> 0:05:48.960 mismatch between where our new supplies are and our infrastructure, 0:05:49.200 --> 0:05:51.719 and we've got to get that fixed. How catalytic is 0:05:51.760 --> 0:05:54.039 that Keystone exhale? In other words, if if Donald Trump 0:05:54.040 --> 0:05:56.200 pushes it through, if we get it built, are we 0:05:56.200 --> 0:05:57.640 going to see more like it? What's it going to 0:05:57.760 --> 0:06:00.000 lead to? Well, that was a very particular case because 0:06:00.000 --> 0:06:02.920 it needed State Department approval to just cross the border. 0:06:03.440 --> 0:06:07.400 And I think it will be a message trans Canada. 0:06:07.440 --> 0:06:09.680 The pipeline company has to decide that it wants to 0:06:09.880 --> 0:06:12.440 go ahead and build it. To some degree, we've seen 0:06:12.680 --> 0:06:16.360 a shift in uh where new supplies coming from it. 0:06:16.400 --> 0:06:18.800 There's a lot of new Canadian supplies coming from I 0:06:18.839 --> 0:06:20.640 think it would be a big message because you know, 0:06:20.960 --> 0:06:23.600 pipeline approval. It seems to be as exciting as watching 0:06:23.680 --> 0:06:29.320 paint dry. But then now that became really a potemic. Well, 0:06:29.360 --> 0:06:32.839 these pipelines that are in the news, will they change 0:06:32.880 --> 0:06:37.080 the price of oil? Uh? If you build yes, I 0:06:37.080 --> 0:06:40.320 mean I think if you if you have more flexible supply, uh, 0:06:40.360 --> 0:06:42.560 and if you can bring more supply to markets, then 0:06:42.680 --> 0:06:45.279 that thing called supply and demand will work. It's talked 0:06:45.279 --> 0:06:48.440 a lot about how rex dealers and skills add accent 0:06:48.480 --> 0:06:51.040 moble would be applicable to the State Department. Let's take 0:06:51.040 --> 0:06:52.680 another step back and just look at sort of the 0:06:52.680 --> 0:06:54.320 degree to which the Secretary of State has to deal 0:06:54.360 --> 0:06:57.240 with oil and energy issues. How how how big, how 0:06:57.240 --> 0:06:59.120 big a portion of the plate does that occupy? Well, 0:06:59.120 --> 0:07:02.520 there is an energy aurow in this State Department that 0:07:02.600 --> 0:07:06.200 was set up a few years ago, and so energy 0:07:06.480 --> 0:07:10.200 is one of the geopolitical issues that the President the 0:07:10.240 --> 0:07:12.840 Secretary of State will deal with. But I think that 0:07:13.240 --> 0:07:15.520 it's going to be a relatively small part, and I 0:07:15.560 --> 0:07:18.440 think that Mr Tillerson is going to focus on the 0:07:18.600 --> 0:07:21.120 you know, the big complicated questions are out there. He's 0:07:21.120 --> 0:07:24.000 a very experienced person in the global economy. He knows 0:07:24.000 --> 0:07:27.600 a lot of countries and UH, and he's very measured 0:07:27.600 --> 0:07:29.720 in terms of his decision making. Help us with the 0:07:29.720 --> 0:07:32.480 interplay here between the dollar, which is slightly weaker this morning, 0:07:32.480 --> 0:07:34.560 and the price of oil. But what's the what's the 0:07:34.600 --> 0:07:38.119 correlation there? Well, there isn't always a correlation, but often 0:07:38.160 --> 0:07:41.520 there's a correlation in which a stronger dollar means oil 0:07:41.520 --> 0:07:44.720 prices are down and vice versa. But of course there 0:07:44.720 --> 0:07:46.600 are a lot of other factors that go into it, 0:07:47.000 --> 0:07:49.280 and the predictions about what the dollar is going to 0:07:49.400 --> 0:07:52.440 do is one of the UH factors. In the discussion 0:07:52.480 --> 0:07:55.760 about this border adjustment tax, we started out talking about 0:07:55.760 --> 0:07:59.320 Saudi Arabia OPEC and UH and the deal, the agreement. UH. 0:07:59.400 --> 0:08:01.320 Let's mean, why back at the ranch. What's happening here 0:08:01.360 --> 0:08:03.400 in the US? When you look at the energy landscape 0:08:03.920 --> 0:08:07.440 right now, it's perman mania. The Permian basin is the 0:08:07.480 --> 0:08:10.080 place to be. That's where people are spending money. And 0:08:10.120 --> 0:08:13.000 we've seen that US production has bottomed out and it's 0:08:13.040 --> 0:08:15.840 going to start increasing, and it's an industry that's a 0:08:15.840 --> 0:08:18.640 lot more efficient than it was a couple of years ago. 0:08:18.680 --> 0:08:21.640 At I H S market we were we just did 0:08:21.640 --> 0:08:24.120 this analysis and see if you spend a dollar today, 0:08:24.200 --> 0:08:26.280 you're gonna get about two and a half times as 0:08:26.360 --> 0:08:28.560 much oil for that dollar as you would have in 0:08:30.200 --> 0:08:33.679 I have the clearest recollection too many years ago you're 0:08:33.720 --> 0:08:37.480 talking about forty dollar oil and basically being left off 0:08:37.600 --> 0:08:40.920 the show. You were more than right. Okay, the fifty 0:08:40.920 --> 0:08:44.079 plus a minus ten bucks. Who's counting? What is the 0:08:44.240 --> 0:08:49.240 Urgan five year out call the barrel? You know, don't 0:08:49.280 --> 0:08:51.720 have a single number. I think this year we're probably 0:08:51.760 --> 0:08:54.440 in a fifty to sixty dollar range. I think at 0:08:54.520 --> 0:08:56.880 the end of the decade we'll see price We should 0:08:56.920 --> 0:09:00.520 probably see prices, uh, you know, higher than they are today, 0:09:00.520 --> 0:09:02.840 because you're gonna need it in order to get the 0:09:02.920 --> 0:09:05.760 kind of long, mid term and long term investment that 0:09:05.880 --> 0:09:08.679 isn't happening right now around the world. I mentioned you're 0:09:08.720 --> 0:09:10.480 gonna hear from the minister at that conference in Houston. 0:09:10.480 --> 0:09:13.040 Who else you're looking forward to hearing from? When when 0:09:13.080 --> 0:09:15.920 you look at who's talking to whom and where where 0:09:15.960 --> 0:09:18.440 the conversation is at, Well, we're gonna we'll we'll have 0:09:18.760 --> 0:09:22.520 the Russian minister will be there. Uh. The we're hoping 0:09:22.559 --> 0:09:24.680 we'll have the new people from the administration and we'll 0:09:24.679 --> 0:09:27.760 have a lot of the uh CEOs from the major 0:09:28.040 --> 0:09:30.880 companies there. So I think it's you know, altogether, we're 0:09:30.880 --> 0:09:33.640 gonna have three hundred speakers, so it's gonna be a 0:09:33.760 --> 0:09:37.560 very rich conference in terms of content. Will have both 0:09:37.600 --> 0:09:39.439 the Secretary General of OPEC and the head of the 0:09:39.480 --> 0:09:43.320 International Energy Agency together and so uh And I think 0:09:43.320 --> 0:09:46.400 of what a tension does that create on stage? Well, 0:09:46.520 --> 0:09:48.840 it's you know that used to be budding heads, but 0:09:48.880 --> 0:09:52.400 now it's like a dialogue between the two of them. Uh. 0:09:52.440 --> 0:09:54.640 I think the other thing, there's a big question about 0:09:54.679 --> 0:09:57.840 what's happening with mobility. Dan, You're gonna thank you so much. 0:09:57.840 --> 0:10:00.760 And again, folks, some more modern work I mentioned commanding Eyes. 0:10:00.880 --> 0:10:16.200 Look at the quest It is outstanding. David Gura and 0:10:16.240 --> 0:10:18.640 Tom Keene in New York. This is Bloomberg Surveillance on Bloombergerdy. 0:10:18.640 --> 0:10:20.760 I'm looking at the latest issue of Foreign Affairs magazine, 0:10:20.760 --> 0:10:23.800 the March April issue. Trump Time is the headline. Donald 0:10:24.040 --> 0:10:27.200 Trump picture there surveying his domain and others looking at 0:10:27.200 --> 0:10:29.600 the world. We see Vladimir putting their stride a horse. 0:10:29.880 --> 0:10:32.440 A number of great pieces in this issue, including one 0:10:32.480 --> 0:10:35.040 by Peter Fever with whom we spoke yesterday of Duke University. 0:10:35.320 --> 0:10:37.000 A great conversation. You can check it out on our 0:10:37.000 --> 0:10:39.480 podcast as well. The editor of Foreign Affairs, Gideon Roses 0:10:39.520 --> 0:10:41.280 with us now, and let's pick up with what Chris 0:10:41.360 --> 0:10:44.000 Kirkin was just talking about their the resignation of Michael 0:10:44.000 --> 0:10:47.800 Flynn's national security advisor. How much of Donald Trump's foreign 0:10:47.800 --> 0:10:51.880 policy was a Flynn foreign policy? Well, nobody knows, uh. 0:10:51.920 --> 0:10:55.199 And the biggest question that people in my area are 0:10:55.200 --> 0:10:58.199 wondering now is, okay, if Pence was out of the loop, 0:10:58.480 --> 0:11:01.079 was the president out of the loop as well or not? 0:11:01.280 --> 0:11:04.160 And nobody knows. And we will just have to see 0:11:04.320 --> 0:11:05.920 where do we go from here. There were all of 0:11:05.960 --> 0:11:09.520 these allegations that General Flynt had spoken with the ambassador 0:11:09.559 --> 0:11:12.320 from Russia to the United States during this interregnum between 0:11:12.360 --> 0:11:15.120 the election and when Donald Trump was sworn in. Will 0:11:15.160 --> 0:11:16.920 there be an investigation we have any sense of where 0:11:16.920 --> 0:11:18.920 things go from here? Well, there is going to be investgation. 0:11:18.960 --> 0:11:22.280 There already are investigations about contacts between the Trump campaign 0:11:22.360 --> 0:11:27.960 and Trump Operation and Russia. Um. Look, basically, there's this 0:11:28.160 --> 0:11:32.600 nagging possibility that keep that can't be denied of something 0:11:32.640 --> 0:11:36.040 truly nefarious, but nobody can really believe that there actually 0:11:36.080 --> 0:11:40.600 is anything nefarious going on, and it so so people 0:11:40.600 --> 0:11:45.280 are puzzled. Right, There's been this positive relationship with Russia 0:11:45.360 --> 0:11:48.520 that the Trump campaign has been steadfast about the only 0:11:48.640 --> 0:11:52.880 thing in fact, that they've been really constantly consistent about. Uh, 0:11:52.920 --> 0:11:56.080 And no one can quite figure out why. And so 0:11:56.240 --> 0:11:58.720 you can't quite No one can believe the notion that 0:11:58.760 --> 0:12:01.480 there's some weird behind this conspiracy, but no one can 0:12:01.520 --> 0:12:04.360 fully dismiss it on the basis of the evidence so far. Either. 0:12:04.480 --> 0:12:06.480 I mentioned we were talking with Peter Fever yesterday about 0:12:06.480 --> 0:12:10.440 the National Security Council staff and the reported disarray within. 0:12:11.200 --> 0:12:13.320 What does this mean for that? Fold this into that 0:12:13.360 --> 0:12:15.559 you've got You've got Michael Flynn out now, does that 0:12:15.960 --> 0:12:18.240 stand to complicate things further or is this an opportunity 0:12:18.320 --> 0:12:21.000 for the NSC and its staff to reset. Well. Uh. 0:12:21.040 --> 0:12:24.080 The NSC is basically the president's personal foreign policy and 0:12:24.160 --> 0:12:27.880 national security staff, so the president gets whatever the president wants. 0:12:28.320 --> 0:12:31.360 It'll be fascinating to see who the replacement for Flynn 0:12:31.400 --> 0:12:34.160 will be. One thing that's already interesting is they promoted 0:12:34.320 --> 0:12:36.920 Kellogg to the number one spot, the acting spot, rather 0:12:37.000 --> 0:12:41.160 than the number two. Technically, Katie McFarland, Uh, that would 0:12:41.200 --> 0:12:43.199 suggest that they don't have a whole lot of confidence 0:12:43.360 --> 0:12:46.920 in her necessarily, But we don't know, and um the 0:12:47.760 --> 0:12:50.320 we you know. Look, the best way I can talk 0:12:50.360 --> 0:12:54.480 about the difficulty in analyzing this administration is to look 0:12:54.480 --> 0:12:58.880 at the number two at State. So Rec Tillerson impressive guy, 0:12:58.920 --> 0:13:01.800 but somebody who's never had much foreign policy experience doesn't 0:13:01.840 --> 0:13:05.720 know the building and so forth. So there's been everybody 0:13:05.720 --> 0:13:07.520 has said, well, that's why he's going to get a 0:13:07.559 --> 0:13:11.200 deputy who actually is a farm policy professional. But they've 0:13:11.280 --> 0:13:15.120 kept floating names people like Richard Hass, people like Elliott Abram's, 0:13:15.200 --> 0:13:19.079 people like John Bolton, and the names all get shot down. 0:13:19.160 --> 0:13:21.520 So they still haven't filled that post. But the names 0:13:21.559 --> 0:13:25.760 themselves range across the farm policy spectrum, from realists to 0:13:26.240 --> 0:13:29.120 neo conservatives to other things people you would never actually 0:13:29.160 --> 0:13:31.760 think of as being sent up by the same people 0:13:31.920 --> 0:13:35.360 for uh, for suggestions. So no one really knows what's 0:13:35.360 --> 0:13:38.480 going on or who they'll actually pick away from General Flynn. 0:13:38.559 --> 0:13:40.240 And we'll all be buried in this in the next 0:13:40.280 --> 0:13:44.800 couple of days. You had cell phone national security over 0:13:44.920 --> 0:13:49.440 dessert at Mara Lago. I was stunned that they did 0:13:49.480 --> 0:13:54.880 the photos of the nuclear bag, the atomic bag. How 0:13:54.920 --> 0:13:58.960 to prose like you respond to that nobody who's a 0:13:58.960 --> 0:14:02.559 foreign policy profession and all that I know is anything 0:14:02.600 --> 0:14:07.720 other than just flabbergasted by the last month. They're they're 0:14:07.720 --> 0:14:09.839 they're trying to be like a tech company and fail 0:14:09.960 --> 0:14:13.320 faster because the pace at which this is playing out 0:14:13.800 --> 0:14:17.680 is so uh rapid uh that that nobody knows where 0:14:17.679 --> 0:14:20.040 it's gonna go. The visibility, you know, the five day 0:14:20.080 --> 0:14:23.800 forecast is three days. I can't fathom the vice president 0:14:24.040 --> 0:14:28.600 doing anything but being stunned at the juvenility of some 0:14:28.680 --> 0:14:31.400 of these actions. Um. The problem is that you know 0:14:31.400 --> 0:14:34.400 what was it? That was it George Bush who GARYT. Trudeau, 0:14:34.560 --> 0:14:37.880 George Bush father that Garret Judo said had his manhood 0:14:37.880 --> 0:14:39.680 and the blind trust. A lot of the people of 0:14:39.760 --> 0:14:44.200 this administration, uh unfortunately, seemed to have their manhood or 0:14:44.240 --> 0:14:47.320 femalehood in a in a blind trust because the boss 0:14:47.400 --> 0:14:49.160 is doing something and when the boss says that you 0:14:49.200 --> 0:14:52.800 have to go and do whatever the boss says, just 0:14:52.840 --> 0:14:55.000 too short to the Guindeon Rose, thank you so much? 0:14:55.440 --> 0:14:57.360 What a half hour if a dan you're going to 0:14:57.400 --> 0:15:01.200 Gideon Rose together. I mean, David, is this right? This 0:15:01.240 --> 0:15:04.120 is incredible, by the way it is with the tweets, 0:15:04.120 --> 0:15:08.200 with the little birds tweeting around Foreign Affairs magazine, folks 0:15:08.360 --> 0:15:10.720 check it out, is superb. It's the price of a 0:15:10.800 --> 0:15:12.960 fancy Martini. Geon Rosen was going to go to the 0:15:13.000 --> 0:15:17.400 cheap Martini. But a subscription, a print subscription, is something 0:15:17.480 --> 0:15:20.960 John Tucker looks forward to every month. I don't know 0:15:21.000 --> 0:15:25.160 these days we could use the fancy Martini times Trump times, 0:15:25.600 --> 0:15:40.520 Trump time rather Okay, we like a little tension here. 0:15:41.040 --> 0:15:45.640 Robert Sinch nailing the strong Sterling call and certainly calling 0:15:45.720 --> 0:15:50.920 for Sterling stability, stability. Agreeing with him. Shahab Jollinus at 0:15:51.840 --> 0:15:58.240 Credit sweets really looking for moderate moderation within Sterling, and Shahab, 0:15:58.280 --> 0:16:01.840 we've got other houses looking for really dramatically weak Sterling. 0:16:02.280 --> 0:16:06.480 George servelis at Deutsche Bank looking under one ten HSBC's 0:16:06.520 --> 0:16:10.320 at long term one ten call. What is the distinctive 0:16:10.440 --> 0:16:15.520 feature between your call of Sterling stability versus those that 0:16:15.640 --> 0:16:18.880 have a much gloomier outlook. Well, I guess it also 0:16:18.920 --> 0:16:22.400 depends on what time horizon we look at this on. 0:16:22.520 --> 0:16:25.080 In the sense that uh, you know, over the next 0:16:25.200 --> 0:16:28.320 year or so, it's unclear to us what type of 0:16:28.360 --> 0:16:32.480 new political news is going to materialize that dramatically moves 0:16:32.480 --> 0:16:35.480 Sterling relative to the news we've had in the past year. 0:16:35.960 --> 0:16:39.520 And I think if we see in that time period 0:16:39.880 --> 0:16:43.520 obvious signs that is going to be huge disruption in 0:16:43.640 --> 0:16:45.600 terms of the talks between the EU and the UK, 0:16:46.000 --> 0:16:48.800 then I'd be prepared to look again at my forecast. 0:16:49.120 --> 0:16:52.360 But in the absence of that, there's not really a 0:16:52.400 --> 0:16:55.320 strong catalyst for a dramatic fall at this point in time. 0:16:55.560 --> 0:16:57.360 Better in mind, this currency has already had a very 0:16:57.400 --> 0:17:00.880 substantial fall in the past year um and kind tend 0:17:00.920 --> 0:17:04.200 not to move in straight lines on a permanent basis 0:17:04.240 --> 0:17:07.160 without fresh information how much it is going to change 0:17:07.160 --> 0:17:09.520 here when Article fifty is triggered, when this all begins. 0:17:09.520 --> 0:17:11.399 In other words, there's a lot that's priced in, but 0:17:11.400 --> 0:17:14.280 there is still a great, a huge unknown they're living 0:17:14.400 --> 0:17:17.280 on the horizon. Well, certainly an Article fifty, you know, 0:17:17.359 --> 0:17:19.480 has been discussed now for a long time and as 0:17:19.480 --> 0:17:22.000 timing as well. And I think the other very important 0:17:22.119 --> 0:17:25.120 dimension here is that for some time the market wasn't 0:17:25.160 --> 0:17:28.960 sure whether we'd see hard brexit or soft Brexit, hard 0:17:28.960 --> 0:17:31.879 Brexit being the idea that you have a more disruptive, 0:17:31.920 --> 0:17:34.760 potentially break in trade links. But what's been chriced in 0:17:34.760 --> 0:17:37.840 now is effectively that is heart Brexit. Nobody is really 0:17:37.880 --> 0:17:40.440 discussing anymore the idea of a of a soft Brexit, 0:17:40.920 --> 0:17:43.600 so that's already going a long way towards some of 0:17:43.600 --> 0:17:46.399 the worst scenarios that people had for the pound if 0:17:46.400 --> 0:17:49.520 you go back to un let's say six months ago, um, 0:17:49.680 --> 0:17:51.760 which really means that going forward we have to ask 0:17:51.760 --> 0:17:54.040 ourselves a new question, are you going to see a 0:17:54.040 --> 0:17:57.919 disruptive Brexit or a more benign version of hard Brexit. 0:17:58.160 --> 0:18:02.400 I think disruptive would require very obvious signs of stresses 0:18:02.680 --> 0:18:06.080 um in the negotiations between the rest of the EU 0:18:06.119 --> 0:18:08.120 and the UK UM And as I said, I think 0:18:08.160 --> 0:18:11.280 that will take time to materialize, not least because we 0:18:11.359 --> 0:18:14.880 don't even know what position the EU will take, given 0:18:14.880 --> 0:18:16.480 that many believe that you have to get through the 0:18:16.520 --> 0:18:18.800 French and German elections this year before there's even a 0:18:18.880 --> 0:18:22.000 very clear perspective on that. So that's many many months 0:18:22.000 --> 0:18:24.520 ahead from our perspectives. The bigger driver here now is 0:18:24.560 --> 0:18:26.359 a politics is at Central Bank. I look at the 0:18:26.359 --> 0:18:28.960 Swiss National Bank and we wonder about the potential for 0:18:29.040 --> 0:18:31.360 more intervention. Same thing with the Bank of Japan. I mean, 0:18:32.160 --> 0:18:34.240 is politics trumping everything at this point? I think I 0:18:34.240 --> 0:18:37.359 think that's right. I think politics is now ascendant. UM. 0:18:37.520 --> 0:18:41.840 And really, uh what the Trump election is obviously one 0:18:41.880 --> 0:18:44.800 factor behind that, um, in fact, probably the key factor. 0:18:45.480 --> 0:18:48.919 For example, let's look at the Swiss frank. You mentioned 0:18:48.920 --> 0:18:52.040 that the Swiss National Bank has had an intervention strategy 0:18:52.080 --> 0:18:54.680 on the currency for some period of time, um, even 0:18:54.760 --> 0:18:59.400 after the floor went UM. Now, if the US decides 0:18:59.440 --> 0:19:03.120 to press on the issue of currency manipulation, um, not 0:19:03.200 --> 0:19:05.919 just on China, but on other countries as well. Are 0:19:05.960 --> 0:19:10.159 the trading regions that puts Switzerland in a potentially vulnerable place, 0:19:10.600 --> 0:19:13.320 And I think it makes the market have to consider whether, 0:19:13.760 --> 0:19:16.400 for example, the Swiss National Bank would feel its politically 0:19:16.400 --> 0:19:19.880 expedient to continue with the current strategy. UM. So that's 0:19:19.920 --> 0:19:23.040 one of the areas we need to consider. How will 0:19:23.359 --> 0:19:26.800 politics come through into central bank policy decisions. Another way 0:19:26.840 --> 0:19:29.280 to think about this as well, UM, if for example, 0:19:29.320 --> 0:19:32.439 the US pushes through with border adjust to taxation on 0:19:32.480 --> 0:19:36.040 the fiscal front, and that leads to strong dollar rally. 0:19:36.280 --> 0:19:38.399 Will there be political pressure, for example, in the Federal 0:19:38.400 --> 0:19:41.760 Reserve not to high grates in that type of environment 0:19:42.680 --> 0:19:47.520 as a function of having to acknowledge the unusual physical 0:19:47.600 --> 0:19:49.760 reasons that the dollar is rallying. These are all new 0:19:49.800 --> 0:19:52.159 things for the market to digest and not easy to 0:19:52.160 --> 0:19:54.320 do at this point. Where are we in the digestion 0:19:54.440 --> 0:19:57.040 of US policy towards Mexico and how that's playing out 0:19:57.040 --> 0:19:59.639 in in the Mexican currency. We've, as you said, had 0:19:59.680 --> 0:20:02.200 a long relation about article fifties since since back in 0:20:02.280 --> 0:20:06.080 June UM we've seen this sort of the potential for 0:20:06.160 --> 0:20:08.680 a wall or new policies play out in Mexico every 0:20:08.680 --> 0:20:11.320 sometimes as well. Is that priced in there when you 0:20:11.359 --> 0:20:14.040 look at at the value of the Mexican currency. Well, 0:20:14.040 --> 0:20:17.200 certainly the Mexican policy felt so substantially last year. It's 0:20:17.200 --> 0:20:20.159 a bit like the pound discussion, um, that it became 0:20:20.240 --> 0:20:23.639 harder for new news to take it even even lower, 0:20:23.760 --> 0:20:25.480 or at least, let's just put it another way, the 0:20:25.560 --> 0:20:27.560 absence of new news was enough reason for it to 0:20:27.560 --> 0:20:31.120 go higher, especially as interest rates in Mexico or relatively 0:20:31.200 --> 0:20:33.600 high as well. So it's not easy to just sit 0:20:33.640 --> 0:20:36.359 there with a short Mexican past of position. Um, I 0:20:36.400 --> 0:20:38.560 think really for the currency to start to fall again, 0:20:38.920 --> 0:20:41.960 you do need to see bad news come through on 0:20:42.000 --> 0:20:46.640 the NAFTA renegotiation front. Now, what we saw yesterday, for example, 0:20:46.680 --> 0:20:50.960 when Canadian Prime Minister Trudeau visited the US was a 0:20:51.000 --> 0:20:53.679 more benign outcome for Canada at least um, and that 0:20:53.720 --> 0:20:55.840 would have raised hopes that maybe in Mexico will get 0:20:55.920 --> 0:20:58.040 will catch a break as well. So I think while 0:20:58.080 --> 0:21:01.879 that feeling persists, the Mexican petsons should hold up quite well. 0:21:01.920 --> 0:21:06.760 We've been getting great currency pair trades off of the 0:21:06.800 --> 0:21:10.040 simple question where's the opportunity right now? We're all buried 0:21:10.040 --> 0:21:12.000 in the politics. I get that you just give us 0:21:12.000 --> 0:21:15.359 a great review. Where's the single trade to make ALFA 0:21:15.440 --> 0:21:18.960 this morning? Well this morning, you know, we we still 0:21:19.000 --> 0:21:22.320