WEBVTT - Bloomberg Surveillance TV: August 28, 2024

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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<v Speaker 2>with Lisa Bromwitz and Amrie Hordern. Join us each day

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<v Speaker 2>for insight from the best in markets, economics, and geopolitics

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<v Speaker 2>from our global headquarters in New York City. We are

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<v Speaker 2>live on Bloomberg Television weekday mornings from six to nine

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<v Speaker 2>am Eastern. Subscribe to the podcast on Apple, Spotify or

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<v Speaker 2>anywhere else you listen, and as always on the Bloomberg

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<v Speaker 2>Terminal and the Bloomberg Business App. Angelo Zeno of CFRRA

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<v Speaker 2>still bullish on Nvidia out of this afternoon's earnings results.

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<v Speaker 2>He's looking ahead at the company's launch of its advanced

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<v Speaker 2>black Wild chips thanks to the promise of greater market share.

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<v Speaker 2>Angelo joins us now for more. Angelo, welcome back to

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<v Speaker 2>the program. A question I think we've got to lead

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<v Speaker 2>with is a question that you've been addressing in your

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<v Speaker 2>note as well. When will the data center CAPEX actually

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<v Speaker 2>let up to see some selfness in the year ahead.

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<v Speaker 1>Yeah, I mean, I don't know if you start to

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<v Speaker 1>see softness, but I think you definitely see some sharp

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<v Speaker 1>acceleration in terms of the you know, the data center

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<v Speaker 1>CAPEC spend. I mean we're looking at about you know,

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<v Speaker 1>thirty five to forty percent growth here in calendar twenty

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<v Speaker 1>twenty four from kind of you know, the big five

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<v Speaker 1>spenders out there, and we know who they are in

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<v Speaker 1>terms of the high paper scalers, the Big four plus Oracle,

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<v Speaker 1>the names we kind of look at. And then as

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<v Speaker 1>you kind of go into calendar twenty five, initially we're

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<v Speaker 1>kind of you know, pegging more of a deceleration towards

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<v Speaker 1>about fifteen to twenty percent growth, still very good growth.

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<v Speaker 1>And then I think the question is all going to be,

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<v Speaker 1>you know, what are we looking at as we kind

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<v Speaker 1>of go into twenty six and twenty seven, right and

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<v Speaker 1>you know, right now our placeholder is about five to

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<v Speaker 1>ten percent CAPEX growth as we kind of look in

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<v Speaker 1>some of those out years into twenty six and twenty seven.

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<v Speaker 1>But that said, we do see potential upside to those expectations,

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<v Speaker 1>more of a bias to the upside than the downside.

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<v Speaker 1>But that's how we're looking at it. It's not necessarily

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<v Speaker 1>a let up in terms of CAPEC spend. It's more

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<v Speaker 1>you know, sharp deceleration from likely unsustainable growth trends that

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<v Speaker 1>we're seeing and you're seeing it right now and in

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<v Speaker 1>Video's numbers, right, I mean, the last two quarters they

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<v Speaker 1>saw their data center business grow north of four hundred percent.

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<v Speaker 1>That's clearly not not sustainable. We're looking at, you know,

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<v Speaker 1>close to one hundred and forty percent growth here in

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<v Speaker 1>the July quarter, and that will continue to decelerate also

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<v Speaker 1>over the next couple of woks.

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<v Speaker 2>So we're talking about the size of the pie. The

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<v Speaker 2>pie will continue to get bigger, just not the same rate.

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<v Speaker 2>Can we talk about the slice of the pie? Is

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<v Speaker 2>there any real upside to overall wallets share and is

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<v Speaker 2>there a threat coming from anywhere? How big is that

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<v Speaker 2>mot around this company?

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<v Speaker 1>Yeah, so, you know, I think that's an interesting question.

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<v Speaker 1>So as far as the video is concerned, I think

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<v Speaker 1>a lot of you know, people out there kind of

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<v Speaker 1>look at the competitive pressures out there as far as

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<v Speaker 1>GPUs are concerned. And you got the likes of you know,

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<v Speaker 1>the A and Diesel Little World, which you know, we

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<v Speaker 1>love what they're doing. We like the recent acquisition they

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<v Speaker 1>kind of made. They are kind of you know, definitely

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<v Speaker 1>kind of you know, kind of filling up kind of

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<v Speaker 1>what they need in terms of better compete with in

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<v Speaker 1>Video on the GPU side of things in a in

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<v Speaker 1>a growing market. So you know, that's great from a

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<v Speaker 1>competitive standpoint, But as you kind of look more broadly

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<v Speaker 1>for in Video on kind of you know, the data

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<v Speaker 1>center wallet share, as they kind of kind of roll

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<v Speaker 1>out some of these new offerings with Blackwell, with a

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<v Speaker 1>new kind of spectrum x Ethernet offering out there, this

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<v Speaker 1>new kind of Blackwell offering is really intended to be

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<v Speaker 1>more of kind of this platform offering rather than kind

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<v Speaker 1>of just a GPU offering. So what we mean by

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<v Speaker 1>that is not only the GPU, but the CPU as well.

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<v Speaker 1>We're going to be more arm based in nature. We

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<v Speaker 1>think as you kind of see these next gen data

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<v Speaker 1>centers really take off, and that's important because we haven't

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<v Speaker 1>seen arm based CPUs out there find any success in

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<v Speaker 1>the market. When you kind of just look at you know,

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<v Speaker 1>Intel's recent guidance out there, they're clearly not seeing the

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<v Speaker 1>orders on their end. We think you're going to see

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<v Speaker 1>something different over the next couple of orders from in

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<v Speaker 1>Vidia specifically kind of as as they turn more into

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<v Speaker 1>this platform based offering, and that will kind of give

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<v Speaker 1>them a next kind of leg up in terms of

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<v Speaker 1>their revenue potential. Here we think over the next twelve

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<v Speaker 1>to eighteen.

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<v Speaker 3>Months, pairing the ideas that you just talked about, Hyperscaler

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<v Speaker 3>is the bigger, biggest investors in Nvidia. How long until

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<v Speaker 3>Nvidia is almost a competitor to their biggest customers.

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<v Speaker 1>Yeah, it's interesting because to an extent they are. I mean,

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<v Speaker 1>they've got a big investment out there in a company

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<v Speaker 1>called core Weave right and where they're kind of you know,

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<v Speaker 1>they've got a big stake in there, and they're shipping

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<v Speaker 1>a ton of GPUs out there as kind of this

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<v Speaker 1>GP or AI as a service type offering for that company.

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<v Speaker 1>In Nvidia definitely has the potential to kind of get

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<v Speaker 1>more on the cloud oriented side of things. Obviously they

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<v Speaker 1>sell their own kind of you know, full suite kind

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<v Speaker 1>of systems out there, and you know, over time, Yeah,

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<v Speaker 1>I mean, I think there's there's definitely some concern probably

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<v Speaker 1>out there from some of these cloud players out there,

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<v Speaker 1>especially with what Innvidia has done on the software side

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<v Speaker 1>of things, where you can essentially, if you're an enterprise customer,

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<v Speaker 1>go directly with in video and kind of buy those

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<v Speaker 1>total systems out the outright. But that said, it's so

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<v Speaker 1>capital intensive in nature, whereas it's really we think is

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<v Speaker 1>going to continue to sit with these big cloud companies,

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<v Speaker 1>and I don't necessarily think kind of in Nvidia wants

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<v Speaker 1>to kind of get to that next level where they're

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<v Speaker 1>directly competing with some of these cloud companies, even though

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<v Speaker 1>to some extent, you know, you can kind of see

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<v Speaker 1>that taking.

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<v Speaker 2>Voice Angela, this was awesome. Got to do it again

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<v Speaker 2>soon and follow up after the results later on Angelo

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<v Speaker 2>Zino there of cfl ray. So here's the latest. US

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<v Speaker 2>National Security Advisor Jake Sullivan and his Chinese counterpart kicking

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<v Speaker 2>off a second day of talk, set to discuss a

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<v Speaker 2>range of issues, including foreign policy and trade. Bloomberg reporting

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<v Speaker 2>that Sullivan will aim to make clear he won't speak

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<v Speaker 2>for the next US administration. John Liberview raise your group

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<v Speaker 2>looking ahead to the next election, and writes in the

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<v Speaker 2>following Harris would maintain the status quo with regard to

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<v Speaker 2>Taiwan and would prioritize keeping the US out of regional conflicts.

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<v Speaker 2>John jois from all John. In some ways that's been

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<v Speaker 2>the approach of this administration as well, and in many

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<v Speaker 2>ways it hasn't helped. If that's the approach. Do you

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<v Speaker 2>ignite mare could send and perhaps not less.

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<v Speaker 4>I think the goal for both the Harris and the

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<v Speaker 4>Biden administration has to have been to keep guardrails around

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<v Speaker 4>what's obviously a declining competitive relationship. And nothing that Sullivan

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<v Speaker 4>says when he's in China, and nothing that Harris or

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<v Speaker 4>her team say in the next couple of months is

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<v Speaker 4>going to change any of that. The fact of the

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<v Speaker 4>matter is that Washington views Beijing as a rising threat

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<v Speaker 4>and they're willing to take actions and steps in order

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<v Speaker 4>to contain that threat. But what they don't want is

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<v Speaker 4>to get involved in another war or another actual hot conflict.

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<v Speaker 4>And that's what this visit is all about. It's about

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<v Speaker 4>keeping channels of communication open, it's about maintaining warm relations

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<v Speaker 4>And despite what they're saying, I do think this is

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<v Speaker 4>about signaling that there'd be continuity in a set in

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<v Speaker 4>a Harris administration between what the Biden team has been doing,

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<v Speaker 4>which sets up a contrast with what Trump is trying

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<v Speaker 4>to do, which is a much more aggressive approach to China.

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<v Speaker 2>So let's talk about tariffs. That's what it ultimately comes

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<v Speaker 2>down to. John tariffs, Tariffs in the early part of

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<v Speaker 2>the Trump administration were about a lack of reciprocity. You're

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<v Speaker 2>putting tariffs on us, We'll put tariffs on you. In fact,

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<v Speaker 2>we'll go further unless you do X. Then it became

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<v Speaker 2>about national security much more so under this administration. We

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<v Speaker 2>don't want to salu this because we don't want you

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<v Speaker 2>doing that. When it comes to leverage, John, and this

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<v Speaker 2>is what I'm struggling with, the lack of clear evidence

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<v Speaker 2>that we're able to find any real lever to gain

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<v Speaker 2>leverage over the Chinese to influence their foreign policy. What

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<v Speaker 2>can the West do to influence the Chinese to change

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<v Speaker 2>their view about how foreign policy should be conducted.

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<v Speaker 4>I think the big I mean, the big thing you're

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<v Speaker 4>getting out here is Taiwan, and the Chinese absolutely have

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<v Speaker 4>been resolute that Taiwan is actually a part of China

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<v Speaker 4>and that someday we'll be reunited with mainland China. And

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<v Speaker 4>that's the single biggest flashpoint and the single biggest red

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<v Speaker 4>line for the Chinese that the Americans. They do not

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<v Speaker 4>want the Americans to cross. And I think that's kind

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<v Speaker 4>of hanging out in the background of this entire discussion.

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<v Speaker 4>One thing you didn't mention when you're talking about tariffs,

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<v Speaker 4>is jobs in the US, because that's really what I

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<v Speaker 4>think the tariff regime is about. It's about decoupling from China,

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<v Speaker 4>particularly in a second Trump administration, trying to bring jobs

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<v Speaker 4>back to the US. And right now that's a bipartisan

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<v Speaker 4>thing with the Biden administration making massive investments in terms

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<v Speaker 4>of subsidizing green energy in order to bring a construction

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<v Speaker 4>boom back to the US to create jobs. So that

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<v Speaker 4>threat of Taiwan is out there that the Chinese have

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<v Speaker 4>been very clear the US cannot cross that red line,

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<v Speaker 4>and the Americans are now saying, you know, our goal

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<v Speaker 4>here is actually to protect ourselves, but also to bring

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<v Speaker 4>jobs back.

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<v Speaker 2>To the US.

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<v Speaker 3>John, you talked about continuity from the last administration to

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<v Speaker 3>the new one, whichever it would be.

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<v Speaker 2>Do we have a.

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<v Speaker 3>Sense of what Kamala Harris's policies would be.

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<v Speaker 4>Not really. She hasn't really laid out a specific China policy,

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<v Speaker 4>and actually she hasn't really laid out a lot of

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<v Speaker 4>specifics on any policy. At the convention, she did make

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<v Speaker 4>a point to talk about a strong national defense, but

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<v Speaker 4>we don't really know what that means. I mean, the

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<v Speaker 4>US has massive fiscal challenges that's probably going to determine

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<v Speaker 4>the path of its national defense and the size of

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<v Speaker 4>its military over the foreseeable future. Harris has said she

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<v Speaker 4>wants to be strong here, but that could mean anything.

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<v Speaker 4>And one of the questions for her, one of the

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<v Speaker 4>big challenges she's going to face, is what happens when

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<v Speaker 4>there's a provocation, What happens when the Chinese try to

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<v Speaker 4>stop the Philippines from resupplying the second Thomas schoul for example.

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<v Speaker 4>During her administration, how strongly does she confront them? And

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<v Speaker 4>we just don't have a sense of that from her.

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<v Speaker 4>Some of her personnel are going to be left over

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<v Speaker 4>or brought along from her vice presidency. Most of the

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<v Speaker 4>Biden people will probably cycle out. But it's really difficult

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<v Speaker 4>to infer exactly what she will do when that three

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<v Speaker 4>am phone call comes.

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<v Speaker 3>How much is that framing some of the conversations that

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<v Speaker 3>you're having with clients, both corporate and other governments.

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<v Speaker 4>I think the big question about what Harris is going

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<v Speaker 4>to do is on the mind of every single person

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<v Speaker 4>that we talk to. I think on domestic policy, it's

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<v Speaker 4>a lot easier to predict. I mean, you know, she's

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<v Speaker 4>going to inherit a Biden platform that looks like most

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<v Speaker 4>other kind of democratic platforms, which won't be that different

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<v Speaker 4>because it will require Congress. But on foreign policy, you know,

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<v Speaker 4>presumably she continues what she's doing with the Biden administration

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<v Speaker 4>is doing with Ukraine. Presumably they continue this strategy of

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<v Speaker 4>engagement with China. But how what the specifics does that

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<v Speaker 4>look like? Who are the people making the decisions? These

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<v Speaker 4>are all big questions that our clients are asking us.

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<v Speaker 2>John, as a journalist, we can sit here all day

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<v Speaker 2>and complain about the lack of access. That will be

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<v Speaker 2>a little bit of access. There will be a sit

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<v Speaker 2>down conversation together with her running mate. The complaints will

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<v Speaker 2>continue regardless, But ultimately I look at the results and

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<v Speaker 2>whatever you think about it, the strategic campic you wou'd say,

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<v Speaker 2>the lack of access, the lack of clear policies, it's

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<v Speaker 2>working based on the polls. Now, John, you and I

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<v Speaker 2>have been talking for a while. We all have about

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<v Speaker 2>a sub called Double heights as. How deep is that

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<v Speaker 2>poll of Double heights as And how well is this administration,

0:11:10.000 --> 0:11:12.840
<v Speaker 2>or rather this campaign, how well if they done at

0:11:12.920 --> 0:11:14.199
<v Speaker 2>tamping into that reservoir.

0:11:15.640 --> 0:11:18.360
<v Speaker 4>Yeah, they're doing a great job consolidating support among the

0:11:18.480 --> 0:11:22.160
<v Speaker 4>Democratic leaning independents who didn't like Joe Biden. And you

0:11:22.200 --> 0:11:24.680
<v Speaker 4>see this in Harris's approval rating, and you see this

0:11:24.720 --> 0:11:27.000
<v Speaker 4>in her poll numbers, where a lot of it looks

0:11:27.040 --> 0:11:29.439
<v Speaker 4>like over the last few weeks, a lot of voters

0:11:29.440 --> 0:11:32.200
<v Speaker 4>have come back home, both to the Trump campaign and

0:11:32.360 --> 0:11:35.360
<v Speaker 4>the Harris campaign, as both of their numbers of support

0:11:35.400 --> 0:11:38.200
<v Speaker 4>have risen in most polls. But Harris is buy a

0:11:38.240 --> 0:11:41.320
<v Speaker 4>lot more. So that double hater group is probably going

0:11:41.360 --> 0:11:43.360
<v Speaker 4>to be a lot less relevant in this cycle than

0:11:43.360 --> 0:11:46.760
<v Speaker 4>it was in either twenty sixteen, when Trump and Clinton

0:11:46.800 --> 0:11:50.600
<v Speaker 4>were the least like candidates ever or twenty twenty when

0:11:50.679 --> 0:11:54.600
<v Speaker 4>Trump was so deeply unpopular. So I think the double

0:11:54.640 --> 0:11:56.560
<v Speaker 4>haters are less relevant here, and Harris is doing a

0:11:56.640 --> 0:12:01.560
<v Speaker 4>very good job of presenting herself as kind of the normal, reliable,

0:12:02.000 --> 0:12:04.480
<v Speaker 4>predictable option relative to Donald Trump.

0:12:04.600 --> 0:12:07.199
<v Speaker 2>Making it less relevant though, makes it a bigger issue

0:12:07.440 --> 0:12:10.240
<v Speaker 2>for the Trump campaign and John As you've noticed, there

0:12:10.240 --> 0:12:13.079
<v Speaker 2>has been a sailing. The former president has suffered from

0:12:13.080 --> 0:12:15.960
<v Speaker 2>a sailing of support. If that's the case, what's his

0:12:16.040 --> 0:12:20.080
<v Speaker 2>strategy and how does his strategy differ to say Kamala Harris's.

0:12:21.120 --> 0:12:23.959
<v Speaker 4>His strategy is to do what he's done the last

0:12:24.840 --> 0:12:26.960
<v Speaker 4>in twenty sixteen, which is he pull out kind of

0:12:27.000 --> 0:12:30.120
<v Speaker 4>an inside straight in the electoral college and win barely

0:12:30.240 --> 0:12:31.760
<v Speaker 4>enough votes to get him there. So he needs to

0:12:31.760 --> 0:12:35.480
<v Speaker 4>win some combination of probably Pennsylvania and Georgia. Now North Carolina.

0:12:35.679 --> 0:12:38.400
<v Speaker 4>North Carolina is looking a little bit more competitive, and

0:12:38.480 --> 0:12:41.120
<v Speaker 4>you know he's going after young black voters, He's going

0:12:41.120 --> 0:12:44.320
<v Speaker 4>after young Hispanic voters. He's going after the disconnected kind

0:12:44.360 --> 0:12:48.240
<v Speaker 4>of voters who were supporting RFK, people who aren't regular voters.

0:12:48.440 --> 0:12:50.720
<v Speaker 4>It's a high risk strategy, but that's what he's got

0:12:50.760 --> 0:12:52.840
<v Speaker 4>because he is not your typical politician.

0:12:53.000 --> 0:12:55.480
<v Speaker 2>John Laber of you is great, John, I appreciate it,

0:12:55.520 --> 0:13:06.880
<v Speaker 2>Thank you, sir. So here's the latest oil slipping once

0:13:06.920 --> 0:13:09.640
<v Speaker 2>again ahead of key US inventory's data. This coming is

0:13:09.640 --> 0:13:12.760
<v Speaker 2>both Goldman and Morgan Stanley count their twenty five crude outlook.

0:13:13.160 --> 0:13:17.400
<v Speaker 2>Dan Strivan of Goldman Sachs revising his forecast to seventy

0:13:17.520 --> 0:13:21.600
<v Speaker 2>seven a barrel. Writing this, we still assume that OPEC

0:13:21.640 --> 0:13:23.840
<v Speaker 2>will raise production in Q four as the market is

0:13:23.880 --> 0:13:27.880
<v Speaker 2>potentially shifting from an equilibrium where OPEC supports spot balances

0:13:27.920 --> 0:13:31.320
<v Speaker 2>and reduces volatility to a more long run equilibrium focused

0:13:31.320 --> 0:13:35.520
<v Speaker 2>on strategically disciplining non opex supply. Don John just now

0:13:35.559 --> 0:13:37.920
<v Speaker 2>for more good morning, sir, right. Want to start with

0:13:37.920 --> 0:13:40.000
<v Speaker 2>that last line. We talked about it yesterday as well.

0:13:40.120 --> 0:13:43.880
<v Speaker 2>When you say disciplining non OPEC supply, are you talking

0:13:44.040 --> 0:13:47.040
<v Speaker 2>just about shale or everything else? Who are you talking about?

0:13:47.440 --> 0:13:50.360
<v Speaker 4>Mostly US shild because the US shil is the short cycle,

0:13:50.440 --> 0:13:53.959
<v Speaker 4>the short term producer that responds within a year or

0:13:54.000 --> 0:13:57.600
<v Speaker 4>so to price changes. Supply elsewhere in the world is

0:13:57.600 --> 0:14:00.240
<v Speaker 4>mostly long cycle where you're also price celested with it

0:14:00.320 --> 0:14:03.560
<v Speaker 4>takes typically typically many years. Taking a step back, I

0:14:03.559 --> 0:14:05.920
<v Speaker 4>think over the last two years, OPEK has really been

0:14:05.960 --> 0:14:09.559
<v Speaker 4>quite effective at balancing the market by adjusting supply and

0:14:09.840 --> 0:14:12.600
<v Speaker 4>to keep prices in a fairly narrow range by historical

0:14:13.040 --> 0:14:17.080
<v Speaker 4>crude standards. If OPEK goes ahead with raising production, and

0:14:17.120 --> 0:14:19.440
<v Speaker 4>it's very much a close call, we may learn more

0:14:19.440 --> 0:14:22.000
<v Speaker 4>in coming days. We may potentially shift to a new

0:14:22.040 --> 0:14:26.040
<v Speaker 4>equilibrium with somewhat more volatility, where the new floor under

0:14:26.080 --> 0:14:30.440
<v Speaker 4>old prices becomes the break even price of US shale producer.

0:14:30.520 --> 0:14:32.280
<v Speaker 2>Let's go back to the experience of the last decade

0:14:32.280 --> 0:14:34.120
<v Speaker 2>the middle of the last decade, there was a real

0:14:34.160 --> 0:14:38.840
<v Speaker 2>effort from the SAIS to discipline and almost punish shale producers.

0:14:39.040 --> 0:14:41.800
<v Speaker 2>Arguably SHLLE producers came out of that more disciplined and

0:14:41.920 --> 0:14:45.320
<v Speaker 2>much stronger. What's different about this time compared to them?

0:14:46.040 --> 0:14:48.600
<v Speaker 4>So I think, as you point out, US producers have

0:14:48.720 --> 0:14:52.320
<v Speaker 4>very strong balance sheets. Now the reinvestment ratio is significantly lower.

0:14:52.360 --> 0:14:56.240
<v Speaker 4>About fifty percent of free cash flows are reinvested in

0:14:56.640 --> 0:14:59.880
<v Speaker 4>new projects. And so I think that that means that

0:15:00.160 --> 0:15:07.000
<v Speaker 4>to engineer, given slowdown in US shale growth, you arguably

0:15:07.600 --> 0:15:11.240
<v Speaker 4>need a bigger drop in prices because those big US

0:15:11.320 --> 0:15:15.680
<v Speaker 4>public producers their production plans, they're fairly, fairly sticky, and

0:15:15.720 --> 0:15:17.800
<v Speaker 4>they're very strong balance sheets, And so to us that

0:15:17.960 --> 0:15:22.120
<v Speaker 4>means that very sharp drop in prices is not that likely.

0:15:22.360 --> 0:15:26.120
<v Speaker 4>It's more likely going to be a gradual shift shift lower.

0:15:26.280 --> 0:15:28.680
<v Speaker 3>Some people would argue the just structurally, what you see

0:15:29.040 --> 0:15:31.320
<v Speaker 3>right now is you haven't seen that increased production by

0:15:31.400 --> 0:15:35.080
<v Speaker 3>OPEC plus and what you've seen is actually inventory is

0:15:35.120 --> 0:15:38.600
<v Speaker 3>getting taken down at eight out of US past nine weeks,

0:15:38.600 --> 0:15:41.440
<v Speaker 3>as according to some industry data. I'm just wondering at

0:15:41.480 --> 0:15:45.280
<v Speaker 3>what point you see this as kind of feeding on itself,

0:15:45.400 --> 0:15:49.160
<v Speaker 3>especially with lower rates that might sustain the recovery. How

0:15:49.240 --> 0:15:51.640
<v Speaker 3>much of a counterpoint do you really take to this?

0:15:52.280 --> 0:15:55.280
<v Speaker 4>Absolutely, So we only have a modest and gentle decline

0:15:55.320 --> 0:15:57.400
<v Speaker 4>in old prices next year from brands sort of in

0:15:57.440 --> 0:16:00.480
<v Speaker 4>the high seventies now to seventy four dollars bearyled by

0:16:00.480 --> 0:16:04.200
<v Speaker 4>the end of next year, despite a moderate but meaningful

0:16:04.200 --> 0:16:06.480
<v Speaker 4>surplus we have in our bounds next year. Why is

0:16:06.480 --> 0:16:09.640
<v Speaker 4>that only slightly lower prices despite the surplus to assume

0:16:10.000 --> 0:16:12.680
<v Speaker 4>the main reason is that we do think that oil

0:16:12.720 --> 0:16:16.080
<v Speaker 4>currently is slightly undervalued, meaning that prices are a touch

0:16:16.160 --> 0:16:19.680
<v Speaker 4>low relative to the level of inventories. And also, if

0:16:19.720 --> 0:16:23.480
<v Speaker 4>you do get these fat cuts, you should get some

0:16:23.760 --> 0:16:27.400
<v Speaker 4>upward pressure on valuations and prices because basically the opportunity

0:16:27.400 --> 0:16:31.080
<v Speaker 4>cost of holding oil is lower when interest rates come down.

0:16:31.200 --> 0:16:34.040
<v Speaker 3>So I apologize in advance for this, but your predecessor,

0:16:34.080 --> 0:16:37.120
<v Speaker 3>Jeff Curry, who now is at Carlisle, came out yesterday

0:16:37.120 --> 0:16:39.400
<v Speaker 3>and he said there's going to be a huge spike

0:16:39.480 --> 0:16:41.960
<v Speaker 3>in crude prices because of lower rates and because of

0:16:42.000 --> 0:16:44.240
<v Speaker 3>this sort of supercycle that you see on the on

0:16:44.360 --> 0:16:47.440
<v Speaker 3>the heels of the investment in some of the infrastructure

0:16:47.440 --> 0:16:50.440
<v Speaker 3>plays that we've seen globally. Why do you so vastly

0:16:50.480 --> 0:16:51.120
<v Speaker 3>disagree with that?

0:16:51.680 --> 0:16:53.040
<v Speaker 4>First of all, I would like to, you know, thank

0:16:53.120 --> 0:16:56.360
<v Speaker 4>Jeff for everything we and our team learn learned from him.

0:16:56.440 --> 0:16:58.760
<v Speaker 4>It's very much building on the shoulders of a giant.

0:16:58.880 --> 0:17:01.520
<v Speaker 4>And I agree with Jeff that wasitioning is very low,

0:17:01.680 --> 0:17:04.000
<v Speaker 4>is very light at the moment. And I also agree

0:17:04.040 --> 0:17:07.280
<v Speaker 4>that oil prices currently look somewhat low relative to fair value,

0:17:07.280 --> 0:17:10.800
<v Speaker 4>and that's precisely the reason why despite the meaningful six

0:17:10.920 --> 0:17:13.639
<v Speaker 4>hundred KVD surplus in twenty twenty five, we have a

0:17:13.680 --> 0:17:17.240
<v Speaker 4>base case of only slightly slightly declining all prices.

0:17:17.359 --> 0:17:19.800
<v Speaker 2>Seventy seven is the average for twenty twenty five? Correct?

0:17:19.800 --> 0:17:20.159
<v Speaker 4>Correct?

0:17:20.240 --> 0:17:22.800
<v Speaker 2>How much of that is about Chinese demount softening and

0:17:22.920 --> 0:17:23.920
<v Speaker 2>maybe not pouncing back.

0:17:24.640 --> 0:17:26.679
<v Speaker 4>I think that the big surprise this year on the

0:17:26.680 --> 0:17:28.760
<v Speaker 4>de Man side has been softness in China. The Man

0:17:28.800 --> 0:17:31.479
<v Speaker 4>growth actually it's the Man outside of China is surprising

0:17:31.520 --> 0:17:34.359
<v Speaker 4>to the upside in the US, in Europe, in India,

0:17:35.480 --> 0:17:38.000
<v Speaker 4>but I think the slowdown in China, the Man growth,

0:17:38.040 --> 0:17:41.560
<v Speaker 4>which is I think mostly structural, is an important factor

0:17:41.600 --> 0:17:44.640
<v Speaker 4>for all markets in coming years. To put this in context,

0:17:45.440 --> 0:17:48.880
<v Speaker 4>in the five years before COVID, China was growing it's

0:17:48.960 --> 0:17:53.440
<v Speaker 4>demand of oil by almost six hundred kbd every year.

0:17:53.640 --> 0:17:55.840
<v Speaker 4>In the first half of this year, annual oil the

0:17:55.880 --> 0:17:57.919
<v Speaker 4>man growth from China was only two hundred KVD, so

0:17:58.119 --> 0:18:01.360
<v Speaker 4>basically only one third. Some of it is a macrostory.

0:18:01.840 --> 0:18:05.520
<v Speaker 4>GDP is structurally growing at a slower pace, but some

0:18:05.600 --> 0:18:08.040
<v Speaker 4>of the factors are oil specific and more micro fuel

0:18:08.080 --> 0:18:12.720
<v Speaker 4>switching into EVS, fuel switching out of diesel into liquefied

0:18:12.800 --> 0:18:15.480
<v Speaker 4>natural gas, which is now cheaper as well. And we

0:18:15.480 --> 0:18:18.000
<v Speaker 4>think that some of those fuel switching factors are are

0:18:18.040 --> 0:18:18.800
<v Speaker 4>more structured, and.

0:18:18.760 --> 0:18:20.880
<v Speaker 2>We're saying that in other commodities as well. We're start

0:18:20.920 --> 0:18:23.840
<v Speaker 2>to see that inside irono versus COMPA two in China.

0:18:24.359 --> 0:18:27.600
<v Speaker 4>So I think that the sort of two thousands China

0:18:27.680 --> 0:18:31.480
<v Speaker 4>driven commodity supercycle was a supercycle where very rapid growth

0:18:31.520 --> 0:18:35.040
<v Speaker 4>in China GDP and especially the property sectors sort of

0:18:35.040 --> 0:18:37.280
<v Speaker 4>lifted demand and prices for all commodities. I think we're

0:18:37.320 --> 0:18:40.640
<v Speaker 4>going to enter an era with greater divergences in terms

0:18:40.680 --> 0:18:43.000
<v Speaker 4>of the demand trends across commodities, with I think a

0:18:43.000 --> 0:18:45.840
<v Speaker 4>pretty solid long run demand out look for copper. It's

0:18:45.880 --> 0:18:49.080
<v Speaker 4>the green green metal of the future gold because I

0:18:49.080 --> 0:18:51.919
<v Speaker 4>think Chinese including Central Bank, are looking for for new

0:18:52.080 --> 0:18:54.600
<v Speaker 4>new assets in a more uncertain world. But then on

0:18:54.680 --> 0:18:58.440
<v Speaker 4>the other end of the spectrum iron ore ferrous metals,

0:18:58.440 --> 0:19:00.840
<v Speaker 4>where I think the demand out look looks league because

0:19:00.840 --> 0:19:04.359
<v Speaker 4>of a structural slin down grind down in in demand

0:19:04.400 --> 0:19:05.120
<v Speaker 4>in the property section.

0:19:05.200 --> 0:19:06.840
<v Speaker 2>This was an absolute clinic and we've got to do

0:19:06.840 --> 0:19:08.720
<v Speaker 2>it again soon. Thank you sir. It's going to see

0:19:08.720 --> 0:19:11.760
<v Speaker 2>you downstriving there of Goldman sax on the commodity market,

0:19:11.760 --> 0:19:15.399
<v Speaker 2>Lisa starting on crude and finishing on everything else. This

0:19:15.600 --> 0:19:20.119
<v Speaker 2>is the Bloomberg Surveillance podcast, bringing you the best in markets, economics,

0:19:20.160 --> 0:19:23.120
<v Speaker 2>angiot politics. You can watch the show live on Bloomberg

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