1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:22,000 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App. 4 00:00:22,360 --> 00:00:25,680 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:27,200 Speaker 1: us live on YouTube. 6 00:00:27,600 --> 00:00:31,600 Speaker 2: Zayad Wood is Chief Emerging market Economists for Bloomberg Economics. 7 00:00:31,640 --> 00:00:36,640 Speaker 2: Think about an em mission like what analog does for 8 00:00:36,680 --> 00:00:40,080 Speaker 2: the United States. In his essay, over the last twenty 9 00:00:40,080 --> 00:00:43,800 Speaker 2: four hours on one hundred and sixty dollars, oil went 10 00:00:44,000 --> 00:00:48,400 Speaker 2: around the world. Say, let's do first principles. First, the 11 00:00:48,479 --> 00:00:52,960 Speaker 2: Strait of Malacca twenty nine percent of seaborn trade Urmus 12 00:00:53,080 --> 00:00:58,040 Speaker 2: Shockingly almost as much twenty six percent of seaborn trade. 13 00:00:58,200 --> 00:01:02,120 Speaker 2: The sue Us Canal where t Laurarance was barely is there. 14 00:01:02,400 --> 00:01:06,240 Speaker 2: How large is the Strait of Hormus? Do we understand 15 00:01:06,720 --> 00:01:09,559 Speaker 2: the substantial trade that goes through there? In oil? 16 00:01:11,880 --> 00:01:15,200 Speaker 3: It is large, and it's larges its concentrated. If you 17 00:01:15,280 --> 00:01:19,000 Speaker 3: think about it, what it transports. It transports aill in 18 00:01:19,080 --> 00:01:22,240 Speaker 3: gas and energy from the Middle East to the rest 19 00:01:22,280 --> 00:01:23,959 Speaker 3: of the world, and the rest of the world sends 20 00:01:24,080 --> 00:01:26,520 Speaker 3: almost everything else of the Middle East needs through that strait, 21 00:01:27,000 --> 00:01:28,680 Speaker 3: So it is a lot of trade that goes there 22 00:01:28,720 --> 00:01:31,480 Speaker 3: and is concentrated in a crucial commodity that is ail 23 00:01:31,520 --> 00:01:34,200 Speaker 3: in gas. And the other thing with the strait of hormones, 24 00:01:34,240 --> 00:01:37,040 Speaker 3: which is different than sus Canalis, not just the size, 25 00:01:37,360 --> 00:01:40,040 Speaker 3: this is not alternative. So most of the oil that's 26 00:01:40,040 --> 00:01:43,720 Speaker 3: going from Saudi Arabia, from Iraq, from the UAE goes 27 00:01:43,760 --> 00:01:47,120 Speaker 3: through Hormus. All the energy that goes from Kuwait, Bahrain 28 00:01:47,400 --> 00:01:51,040 Speaker 3: and Katar goes through Hormus. It's a big shock, twenty 29 00:01:51,040 --> 00:01:54,200 Speaker 3: percent of global oil supplies. I can't think of a 30 00:01:54,320 --> 00:01:56,640 Speaker 3: larger oil shock in recent history. If this is not 31 00:01:56,720 --> 00:01:58,720 Speaker 3: the largest, then it's one of the largest for sure. 32 00:01:58,920 --> 00:02:02,520 Speaker 2: Explain that dyne of a searge to one twenty as 33 00:02:02,600 --> 00:02:06,040 Speaker 2: Bruce Kasmn just models, or to your shock of one 34 00:02:06,200 --> 00:02:09,880 Speaker 2: sixty out there and then a quick retreat. How does 35 00:02:09,880 --> 00:02:11,240 Speaker 2: that dynamic work out? 36 00:02:12,919 --> 00:02:16,480 Speaker 3: So let's start from first principles. Right, we have a 37 00:02:16,560 --> 00:02:19,560 Speaker 3: shortage of supply, we lose twenty percent of global supply. 38 00:02:19,639 --> 00:02:22,760 Speaker 3: The question is then what happens to prices. So even 39 00:02:22,800 --> 00:02:26,000 Speaker 3: before the war began, we looked at recent episodes of 40 00:02:26,200 --> 00:02:29,560 Speaker 3: supply outages. We looked at the academic studies and the 41 00:02:29,560 --> 00:02:33,560 Speaker 3: typical multiplier that we got was somewhere between say three 42 00:02:33,600 --> 00:02:36,560 Speaker 3: and five. So we use four for our multiplier. You 43 00:02:36,639 --> 00:02:39,600 Speaker 3: use twenty percent of supplies, you get a multiplier of four. 44 00:02:39,840 --> 00:02:42,680 Speaker 3: That's an eighty percent increase in prices from a pre 45 00:02:42,720 --> 00:02:45,200 Speaker 3: war price of around sixty dollars per barrel. That takes 46 00:02:45,200 --> 00:02:47,320 Speaker 3: you two hundred and eight dollars per barrel. So that 47 00:02:47,440 --> 00:02:50,440 Speaker 3: is our first thing, and this is where we are now. 48 00:02:50,520 --> 00:02:52,680 Speaker 3: There is a lot of intensity in the war that 49 00:02:52,800 --> 00:02:55,320 Speaker 3: is closing the straight of formless. But it's no longer 50 00:02:55,320 --> 00:02:58,440 Speaker 3: a question about intensity. It's now a question about duration. 51 00:02:58,760 --> 00:03:01,080 Speaker 3: It's no longer about you know, are we going to 52 00:03:01,080 --> 00:03:03,680 Speaker 3: get negative number of ships going through homeless It is zero. 53 00:03:03,800 --> 00:03:05,800 Speaker 3: Now that's not going to happen. It's a question of 54 00:03:05,840 --> 00:03:08,400 Speaker 3: how long will Hormess be shot. And that's what our 55 00:03:08,520 --> 00:03:12,079 Speaker 3: latest piece was about. It's about modeling duration. What happens 56 00:03:12,120 --> 00:03:14,519 Speaker 3: if Hormus is shut for one month, for two months 57 00:03:14,639 --> 00:03:15,960 Speaker 3: or three months. 58 00:03:15,639 --> 00:03:18,160 Speaker 4: And what was your worst case scenario there in all 59 00:03:18,160 --> 00:03:18,880 Speaker 4: of that modeling. 60 00:03:20,000 --> 00:03:22,320 Speaker 3: Well, obviously it's shut for three months, so you get 61 00:03:22,320 --> 00:03:24,080 Speaker 3: a higher price. So you get a price of around 62 00:03:24,080 --> 00:03:27,040 Speaker 3: one hundred and sixty four dollars per barrel. Now you 63 00:03:27,120 --> 00:03:30,280 Speaker 3: might think with a huge, you know, one of the 64 00:03:30,360 --> 00:03:33,440 Speaker 3: largest energy supply shocks, you might think you might get 65 00:03:33,720 --> 00:03:36,240 Speaker 3: a higher price as a result of this, But the 66 00:03:36,280 --> 00:03:39,440 Speaker 3: model takes into account of other things. Because economies adapt, 67 00:03:39,480 --> 00:03:42,600 Speaker 3: they don't stay static. So with higher oil prices, people 68 00:03:42,640 --> 00:03:46,480 Speaker 3: consume less energy and demand comes down. With higher oil prices, 69 00:03:47,480 --> 00:03:53,000 Speaker 3: producing more oil and other energy becomes profitable to supply increases, 70 00:03:53,480 --> 00:03:57,000 Speaker 3: Inventory starts drowing down, people start taking more risk use 71 00:03:57,040 --> 00:03:59,320 Speaker 3: in that shipping route. And even if you go outside 72 00:03:59,360 --> 00:04:01,960 Speaker 3: the model such hot old price, the war may end 73 00:04:02,280 --> 00:04:04,080 Speaker 3: and the waterway may reopen. 74 00:04:04,400 --> 00:04:05,000 Speaker 5: Doctor David. 75 00:04:05,040 --> 00:04:07,680 Speaker 2: A personal question here, and we say good morning to 76 00:04:07,800 --> 00:04:11,320 Speaker 2: all of our reporters. Our economists are teams in the 77 00:04:11,360 --> 00:04:14,880 Speaker 2: Greater Middle East, Ethan Browner in Tel Aviv and Jumana 78 00:04:14,920 --> 00:04:19,920 Speaker 2: in Dubai with Zayoud. What is the conversation a family 79 00:04:20,040 --> 00:04:23,839 Speaker 2: and friends in Dubai right now? Is it one big 80 00:04:23,920 --> 00:04:28,000 Speaker 2: exit this weekend? What is the mood and the ground 81 00:04:28,040 --> 00:04:30,919 Speaker 2: Not so much bloomberg people, but just in general in 82 00:04:31,000 --> 00:04:35,479 Speaker 2: Dubai about getting through the weekend, getting the April. 83 00:04:36,520 --> 00:04:39,120 Speaker 3: So I was in Dubai last week. I came from 84 00:04:39,200 --> 00:04:43,160 Speaker 3: Dubai to London actually on Monday, on a pre plan 85 00:04:43,279 --> 00:04:46,120 Speaker 3: trip before the war. What it felt like in Dubai. 86 00:04:46,160 --> 00:04:50,119 Speaker 3: It felt the headlines felt worse than real life for sure, 87 00:04:50,440 --> 00:04:52,680 Speaker 3: so it felt better than headlines, but it had that 88 00:04:52,760 --> 00:04:56,160 Speaker 3: COVID feel to it, where you didn't feel an imminent 89 00:04:56,279 --> 00:04:59,080 Speaker 3: threat to physical safety, but you didn't know that there 90 00:04:59,120 --> 00:05:03,040 Speaker 3: was an extern danger out there. Things work quieter, and 91 00:05:03,080 --> 00:05:05,600 Speaker 3: at some point because people were moving less, people were 92 00:05:05,640 --> 00:05:08,360 Speaker 3: working from home. At some point the airport was shot. 93 00:05:09,040 --> 00:05:11,640 Speaker 3: That had the COVID feel to it. It didn't feel 94 00:05:11,640 --> 00:05:14,720 Speaker 3: as dangerous as I think back. Now i'm outside, I 95 00:05:14,839 --> 00:05:16,680 Speaker 3: see the headlines and it feels like it's a bit 96 00:05:16,680 --> 00:05:18,679 Speaker 3: more dangerous. But when I was there, it didn't feel 97 00:05:18,680 --> 00:05:19,320 Speaker 3: so threatening. 98 00:05:19,920 --> 00:05:23,200 Speaker 2: So thank you so much. Saying with us with Bloomberg 99 00:05:23,240 --> 00:05:27,120 Speaker 2: Economics out of London and of course always out of Dubai. 100 00:05:29,120 --> 00:05:33,280 Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this. 101 00:05:40,520 --> 00:05:44,120 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 102 00:05:44,200 --> 00:05:47,320 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 103 00:05:47,440 --> 00:05:51,080 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app or 104 00:05:51,240 --> 00:05:52,719 Speaker 1: watch US live on YouTube. 105 00:05:53,040 --> 00:05:56,200 Speaker 2: Leslie vin Ja Murray. She's with the Chicago Council of 106 00:05:56,279 --> 00:06:02,880 Speaker 2: Global Affairs, of Wesleyan, of LS and of Columbia. Doctor 107 00:06:02,960 --> 00:06:08,279 Speaker 2: ven Jam Murray is definitive on conflict, Leslie. It's a war, 108 00:06:08,560 --> 00:06:10,120 Speaker 2: not a conflict, isn't it. 109 00:06:11,400 --> 00:06:13,160 Speaker 6: Yes, I think it's safe to say it's a war. 110 00:06:14,040 --> 00:06:16,359 Speaker 6: You know, we could double down on definitions, but I 111 00:06:16,360 --> 00:06:19,120 Speaker 6: think anybody looking at the Middle East is looking at 112 00:06:19,160 --> 00:06:21,680 Speaker 6: not only a war, but a widening war and an 113 00:06:21,680 --> 00:06:24,279 Speaker 6: asymmetric war if you look at what Iran is doing 114 00:06:24,320 --> 00:06:28,039 Speaker 6: and the Persian Gulf and the Strait of Hormuz. Not 115 00:06:28,120 --> 00:06:31,560 Speaker 6: a war that I think President Trump well self admittedly, 116 00:06:31,800 --> 00:06:34,560 Speaker 6: you know, according to today's news, hadn't planned for the 117 00:06:34,600 --> 00:06:39,080 Speaker 6: possibility that Iran might close the Strait of Hormuz. It's 118 00:06:39,160 --> 00:06:41,679 Speaker 6: it's kind of it's sort of difficult to even. 119 00:06:41,520 --> 00:06:42,080 Speaker 5: Say the words. 120 00:06:42,120 --> 00:06:45,440 Speaker 6: Does it seem such an obvious thing even to people 121 00:06:45,480 --> 00:06:48,839 Speaker 6: just reading the papers that it was always stability. 122 00:06:48,360 --> 00:06:51,360 Speaker 2: Into the press conference in eighteen minutes, the news conference 123 00:06:51,400 --> 00:06:54,680 Speaker 2: at the Pentagon, the Secretary of Defense, a chairman of 124 00:06:54,720 --> 00:06:59,040 Speaker 2: the Joint Chiefs of Staff. How alone is America? Where 125 00:06:59,080 --> 00:07:04,840 Speaker 2: are our l eyes. Besides the Charles de Gaulle steaming East. 126 00:07:04,880 --> 00:07:10,080 Speaker 6: Look, America's you know, European allies are lending their bases 127 00:07:10,160 --> 00:07:17,320 Speaker 6: for defensive purposes. America's non treaty allies in the in 128 00:07:17,360 --> 00:07:22,640 Speaker 6: the Gulf are being hit and are under attack. The 129 00:07:22,800 --> 00:07:26,520 Speaker 6: new Iatolas has said that he will go after American 130 00:07:26,600 --> 00:07:32,000 Speaker 6: interests in the region. So America's allies and partners were 131 00:07:32,040 --> 00:07:35,880 Speaker 6: not asked to come along until after the strikes began. 132 00:07:36,000 --> 00:07:40,040 Speaker 6: There was no real process of building a consensus or 133 00:07:40,080 --> 00:07:44,040 Speaker 6: making the case for war, laying out what might lie ahead, 134 00:07:44,560 --> 00:07:47,560 Speaker 6: and so now they're scrambling. I think the latest in Europe, 135 00:07:47,600 --> 00:07:52,760 Speaker 6: of course, is a deep frustration, probably behind closed doors, 136 00:07:52,840 --> 00:07:56,520 Speaker 6: anger that the US is effectively, you know, lifting sanctions 137 00:07:56,560 --> 00:07:58,760 Speaker 6: on Russia's oil exports. 138 00:07:58,800 --> 00:08:01,520 Speaker 2: Well we heard that from the leadership in Germany. 139 00:08:01,680 --> 00:08:03,160 Speaker 7: Well exactly, exactly. 140 00:08:04,040 --> 00:08:06,600 Speaker 4: Yeah, I'm so great to bring that up, Leslie. Yeah, 141 00:08:07,600 --> 00:08:09,680 Speaker 4: because I wanted to talk about what all of this 142 00:08:09,800 --> 00:08:12,960 Speaker 4: means for Putin and for Russia. We heard yesterday that 143 00:08:13,040 --> 00:08:17,760 Speaker 4: Russia has been giving Tehran some intelligence. And now, of course, 144 00:08:17,920 --> 00:08:21,840 Speaker 4: you know these sanctions, people countries can buy sanctioned Russian 145 00:08:21,840 --> 00:08:25,120 Speaker 4: crew that's already at Sea. What is this doing for 146 00:08:25,480 --> 00:08:30,240 Speaker 4: Putin's empire. Well, in the short term, it's certainly helping him. 147 00:08:30,640 --> 00:08:34,240 Speaker 4: I mean indirectly and directly, directly with the sale of oil, 148 00:08:34,640 --> 00:08:40,880 Speaker 4: for sure, but indirectly in that America has its focus elsewhere. 149 00:08:42,320 --> 00:08:45,000 Speaker 4: That's not only helping Russia, that's also helping China. You know, 150 00:08:45,040 --> 00:08:47,600 Speaker 4: this isn't this is an old story, not a news story. 151 00:08:47,679 --> 00:08:52,280 Speaker 6: When America has its eyes off the prize, China benefits 152 00:08:52,320 --> 00:08:55,840 Speaker 6: from the disruption, from America's distraction from seeing the West 153 00:08:55,920 --> 00:08:59,920 Speaker 6: at odds with itself, if not torn apart Russia also, 154 00:09:00,000 --> 00:09:04,720 Speaker 6: so I think for America's European allies, which quite frankly 155 00:09:04,760 --> 00:09:09,040 Speaker 6: have gotten very little bandwidth or playtime in this war, 156 00:09:10,200 --> 00:09:13,760 Speaker 6: this is a terrible turning up the tide. They will 157 00:09:13,800 --> 00:09:16,920 Speaker 6: be impacted much more by gas than by the US, 158 00:09:17,000 --> 00:09:20,560 Speaker 6: as we know a gas prices, but it really is 159 00:09:20,720 --> 00:09:22,920 Speaker 6: it's coming out of time when they're squeezed at home, 160 00:09:23,120 --> 00:09:26,199 Speaker 6: when you know, the war with Ukraine continues. So we're 161 00:09:26,240 --> 00:09:28,240 Speaker 6: not even talking about the war in Ukraine right now, 162 00:09:28,240 --> 00:09:30,520 Speaker 6: We're only talking about the Middle East. 163 00:09:30,920 --> 00:09:34,600 Speaker 2: The rising sun across Lake Michigan, leslie Ven Jamine in Chicago. 164 00:09:34,640 --> 00:09:38,160 Speaker 2: We will continue, whether we welcome all of you fifteen 165 00:09:38,160 --> 00:09:40,920 Speaker 2: minutes from a press conference of the Pentagon. Of course 166 00:09:40,960 --> 00:09:43,680 Speaker 2: Michael Barro will be along with the news, including this 167 00:09:43,760 --> 00:09:48,120 Speaker 2: horrific clash crash I should say, of a flying tanker 168 00:09:48,160 --> 00:09:52,640 Speaker 2: for the Air Force Alexis CHRISTOPHERUS with Leslievingerburry. 169 00:09:53,440 --> 00:09:57,559 Speaker 4: Thank you, Leslie. Now we're shifting the talk about this 170 00:09:57,640 --> 00:10:01,960 Speaker 4: war from intensity to duration. What are you going to 171 00:10:01,960 --> 00:10:05,120 Speaker 4: be listening for during this press conference that we're awaiting 172 00:10:05,120 --> 00:10:07,240 Speaker 4: here at the top of the hour from the Defense Secretary. 173 00:10:08,040 --> 00:10:10,000 Speaker 6: I have some sort of plan for what to do 174 00:10:10,040 --> 00:10:13,600 Speaker 6: about the build up and the Persian Gulf, of how 175 00:10:13,640 --> 00:10:17,520 Speaker 6: to manage the global political economy, whether they're going to 176 00:10:17,720 --> 00:10:21,280 Speaker 6: seriously consider escorting ships through the Strait of Hormues, and 177 00:10:21,360 --> 00:10:25,040 Speaker 6: what conditions would need to be met in order for 178 00:10:25,080 --> 00:10:28,720 Speaker 6: that to be safe. I think you know, more importantly, 179 00:10:28,760 --> 00:10:31,920 Speaker 6: what is the plan for ending the war under what conditions? 180 00:10:33,000 --> 00:10:36,280 Speaker 6: And what we really need to straight talk on the 181 00:10:36,840 --> 00:10:39,600 Speaker 6: reality that even when the United States ends the war, 182 00:10:39,640 --> 00:10:44,320 Speaker 6: the war won't be ended, and so what will the 183 00:10:44,480 --> 00:10:48,319 Speaker 6: plan be for the period when America is no longer 184 00:10:48,520 --> 00:10:53,480 Speaker 6: directly striking but Iran is certainly likely to continue the war. 185 00:10:54,960 --> 00:10:59,480 Speaker 6: What conditions might Iran ask from the United States and 186 00:10:59,520 --> 00:11:04,160 Speaker 6: from Israel in order to help stabilize the global political 187 00:11:04,160 --> 00:11:08,800 Speaker 6: economy and flows of ships through that strait, and what 188 00:11:08,840 --> 00:11:10,920 Speaker 6: would the US be willing to give. 189 00:11:11,080 --> 00:11:12,320 Speaker 7: I don't think we're going to hear. 190 00:11:12,320 --> 00:11:14,520 Speaker 6: Very much about that last point, but it is clearly 191 00:11:14,559 --> 00:11:15,840 Speaker 6: what needs to be discussed. 192 00:11:16,280 --> 00:11:18,680 Speaker 4: President Trump seems to be digging in his heels. He's 193 00:11:18,679 --> 00:11:20,679 Speaker 4: not a man who likes to lose or to admit 194 00:11:20,679 --> 00:11:23,320 Speaker 4: that he's losing. So I'm wondering what an exit ramp 195 00:11:23,440 --> 00:11:26,200 Speaker 4: might even look like, because we know many lawmakers are 196 00:11:26,200 --> 00:11:29,600 Speaker 4: now calling for an exit to this war, especially in 197 00:11:29,640 --> 00:11:34,560 Speaker 4: the year with midterm elections, What might that even look like? Leslie. 198 00:11:35,720 --> 00:11:38,679 Speaker 6: I think with President Trump, it's, you know, he's going 199 00:11:38,720 --> 00:11:40,520 Speaker 6: to be in a quandary. This is not a president 200 00:11:40,559 --> 00:11:43,080 Speaker 6: that will be in any way, shape or form please 201 00:11:43,200 --> 00:11:48,160 Speaker 6: to see rising oil prices and perpetual instability. If there 202 00:11:48,200 --> 00:11:52,120 Speaker 6: isn't some sort of negotiation, I think them more likely 203 00:11:52,160 --> 00:11:56,079 Speaker 6: that he will declare, you know, a success in depleting 204 00:11:56,120 --> 00:12:03,160 Speaker 6: and diminishing Iran's ability to project power externally and signal 205 00:12:03,200 --> 00:12:07,160 Speaker 6: that he's going to end strikes, but maybe not you know, 206 00:12:07,320 --> 00:12:10,840 Speaker 6: very hard to predict what will happen. I doubt that 207 00:12:10,880 --> 00:12:14,360 Speaker 6: he will get into this question of Iran's ongoing leverage. 208 00:12:15,160 --> 00:12:17,160 Speaker 7: Even after that moment, Leslie. 209 00:12:16,880 --> 00:12:18,800 Speaker 2: You and I were inflicted with the eight hundred and 210 00:12:18,880 --> 00:12:22,320 Speaker 2: fifty pages of Henry Kissinger. You had to read Diplomacy 211 00:12:22,960 --> 00:12:25,680 Speaker 2: just to show up with the course. Venjaminy did better 212 00:12:25,720 --> 00:12:27,559 Speaker 2: than me in class, Alexis, I don't know if you 213 00:12:27,720 --> 00:12:31,520 Speaker 2: do that. At the back end of that book, Secretary 214 00:12:31,559 --> 00:12:36,040 Speaker 2: Kissinger talks about the new World Order reconsidered. What does 215 00:12:36,080 --> 00:12:41,240 Speaker 2: the new world order look like when this war ends? 216 00:12:42,600 --> 00:12:45,680 Speaker 6: You know, at the moment, we're not moving into another order. 217 00:12:45,800 --> 00:12:49,880 Speaker 6: We've clearly abandoned. The United States has abandoned many of 218 00:12:49,920 --> 00:12:54,280 Speaker 6: the norms and the laws for you know, how we govern. 219 00:12:54,360 --> 00:12:58,080 Speaker 6: It's certainly abandoned the principle that you work very closely 220 00:12:58,160 --> 00:13:02,720 Speaker 6: with a certain set of pre agreed We are much 221 00:13:02,760 --> 00:13:06,560 Speaker 6: more into might makes right, into a heavy transactionalism. But 222 00:13:06,679 --> 00:13:08,800 Speaker 6: I think the real concern is that we're moving into 223 00:13:08,800 --> 00:13:13,360 Speaker 6: a period where there isn't an alternative order, where alliances 224 00:13:13,400 --> 00:13:15,480 Speaker 6: aren't going to be permanent. You're not going to know 225 00:13:15,600 --> 00:13:18,959 Speaker 6: exactly who your friend or who your enemy is where 226 00:13:19,000 --> 00:13:23,440 Speaker 6: deals are done with a variety of partners, some more 227 00:13:23,559 --> 00:13:28,839 Speaker 6: seemly and less unseemly than others. So unfortunately we are 228 00:13:28,880 --> 00:13:32,240 Speaker 6: not seeing our leaders map out an alternative version. We 229 00:13:32,320 --> 00:13:35,560 Speaker 6: know that Mark Karney has talked about middle powers. I 230 00:13:35,760 --> 00:13:38,920 Speaker 6: was just in India at the Razina Dialogue, where you know, 231 00:13:39,000 --> 00:13:42,960 Speaker 6: India is talking about, as it has been, multiple alignments 232 00:13:43,000 --> 00:13:47,839 Speaker 6: in order to protect its strategic autonomy and enable it 233 00:13:47,880 --> 00:13:49,680 Speaker 6: to do what it wishes to do, which is to 234 00:13:49,720 --> 00:13:54,600 Speaker 6: focus on development and poverty alleviation. I think many countries 235 00:13:54,600 --> 00:13:58,719 Speaker 6: across Europe are going to be adopting a similar, similar strategy. 236 00:13:58,760 --> 00:14:03,720 Speaker 6: How do you I develop multiple alignments with other Middle 237 00:14:03,880 --> 00:14:07,360 Speaker 6: powers on the economic front. I think on the strategic 238 00:14:07,440 --> 00:14:10,040 Speaker 6: consecurity front, the West is still going to try to 239 00:14:10,160 --> 00:14:14,480 Speaker 6: lean into itself, but when the US behaves like this, 240 00:14:15,600 --> 00:14:19,600 Speaker 6: that makes it very much harder for its Western allies 241 00:14:19,880 --> 00:14:20,520 Speaker 6: to go along. 242 00:14:20,760 --> 00:14:23,320 Speaker 2: Doctor Vinja, Mary, thank you so much in Chicago with 243 00:14:23,440 --> 00:14:29,120 Speaker 2: the Chicago Council on Global Affairs. Stay with us. More 244 00:14:29,240 --> 00:14:32,120 Speaker 2: from Bloomberg Surveillance coming up after this. 245 00:14:39,400 --> 00:14:42,960 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live 246 00:14:43,040 --> 00:14:46,200 Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on 247 00:14:46,280 --> 00:14:49,920 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 248 00:14:50,080 --> 00:14:51,560 Speaker 1: watch us live on YouTube. 249 00:14:51,760 --> 00:14:58,040 Speaker 2: Michael Durremberger's deeply experienced in multi syllable titles and phrases 250 00:14:58,880 --> 00:15:07,440 Speaker 2: that we're invented three security structures, Ago, securitized, securitization and that, 251 00:15:07,560 --> 00:15:11,360 Speaker 2: and he joins us this morning Michael uh in Nierrenburger's 252 00:15:11,600 --> 00:15:16,120 Speaker 2: chief executive officer, chairman and president of Rhythm Capital over 253 00:15:16,200 --> 00:15:21,920 Speaker 2: cocktail conversation, how do you respond to OMG private credit? 254 00:15:22,080 --> 00:15:23,000 Speaker 2: It's a disaster. 255 00:15:23,360 --> 00:15:27,440 Speaker 5: How do you respond to this? I, you know, listen, 256 00:15:27,480 --> 00:15:30,000 Speaker 5: there's going to be pockets of private credit that are 257 00:15:30,120 --> 00:15:33,920 Speaker 5: that are going to you know, right now. Obviously in 258 00:15:33,960 --> 00:15:37,000 Speaker 5: the news private credit is negative. I don't think all 259 00:15:37,040 --> 00:15:40,200 Speaker 5: private credit is negative, to be totally honest. I think 260 00:15:40,200 --> 00:15:43,760 Speaker 5: there's been some obviously there's been some headlines with some 261 00:15:43,800 --> 00:15:48,000 Speaker 5: of the other larger asset managers that have put up gates, 262 00:15:48,160 --> 00:15:49,880 Speaker 5: and I think a lot of that has to do 263 00:15:50,000 --> 00:15:53,520 Speaker 5: with what we what we've seen the distribution of private 264 00:15:53,560 --> 00:15:58,280 Speaker 5: credit into retail and when you take products that may 265 00:15:58,320 --> 00:16:02,880 Speaker 5: not be one hundred percent suited for retail and retail 266 00:16:02,920 --> 00:16:05,840 Speaker 5: wants their money out because equity markets have turned over 267 00:16:06,040 --> 00:16:09,560 Speaker 5: and folks are looking for liquidity. It creates a little 268 00:16:09,600 --> 00:16:11,080 Speaker 5: bit of what what we'll call it is a so 269 00:16:11,200 --> 00:16:12,080 Speaker 5: called run on the bank. 270 00:16:12,160 --> 00:16:15,280 Speaker 2: Michael, you have a resume here that you know, like 271 00:16:15,520 --> 00:16:18,080 Speaker 2: literally he could have written the screenplay for Margin Call. 272 00:16:18,440 --> 00:16:23,760 Speaker 8: I mean, you have so much experience here institutionally. What 273 00:16:24,000 --> 00:16:27,880 Speaker 8: was your response when you first heard about private credit 274 00:16:27,920 --> 00:16:32,280 Speaker 8: for that matter of private equity and retail accounts? 275 00:16:32,320 --> 00:16:35,040 Speaker 5: You know, it's first of all, when you look at 276 00:16:35,040 --> 00:16:38,280 Speaker 5: our franchise, we don't have we don't really have private 277 00:16:38,280 --> 00:16:41,200 Speaker 5: credit going into retail at this point. And I think 278 00:16:41,240 --> 00:16:43,040 Speaker 5: where you're going to see and you've heard it from 279 00:16:43,040 --> 00:16:45,920 Speaker 5: some of the larger banks UH such as JP Morgan, 280 00:16:45,920 --> 00:16:49,360 Speaker 5: where folks are going to reevaluate the distribution of private 281 00:16:49,360 --> 00:16:50,960 Speaker 5: credit into the retail. 282 00:16:51,120 --> 00:16:54,640 Speaker 2: From you von steinas this morning my art. 283 00:16:54,480 --> 00:16:57,360 Speaker 5: Our view, and when you when you look at the 284 00:16:57,360 --> 00:17:00,920 Speaker 5: private credit markets, take take for example, to take for 285 00:17:00,960 --> 00:17:04,360 Speaker 5: example Sculptor, we have a large multistrat fund where there's 286 00:17:04,400 --> 00:17:06,879 Speaker 5: a fair amount of credit in there. It's liquid credit, 287 00:17:06,920 --> 00:17:09,840 Speaker 5: it's marked, it's marked. When you take some of the 288 00:17:09,880 --> 00:17:12,560 Speaker 5: private credit that goes into retail, and it's not liquid 289 00:17:12,880 --> 00:17:15,159 Speaker 5: private credit, and folks want their money out there not 290 00:17:15,200 --> 00:17:16,600 Speaker 5: going to be able to get their money out and 291 00:17:16,640 --> 00:17:18,960 Speaker 5: that that's what you're seeing now in the marketplace. You're 292 00:17:18,960 --> 00:17:21,159 Speaker 5: seeing folks put up the gates. I looked at the 293 00:17:21,200 --> 00:17:24,040 Speaker 5: market reaction yesterday, and you looked at the treasury market, 294 00:17:24,119 --> 00:17:26,359 Speaker 5: which you know, the front end of the treasury market 295 00:17:26,400 --> 00:17:29,720 Speaker 5: really sold off pretty dramatically, and it seemed to me 296 00:17:29,840 --> 00:17:33,560 Speaker 5: that it was really a liquidation event that you're seeing 297 00:17:33,560 --> 00:17:36,000 Speaker 5: with a lot of a lot of folks in the marketplace. 298 00:17:36,080 --> 00:17:39,240 Speaker 5: But when I look at private credit, you know, it's 299 00:17:39,520 --> 00:17:42,040 Speaker 5: a huge market. You know, we don't look at these 300 00:17:42,119 --> 00:17:45,520 Speaker 5: large club deals to be quite frank, you know, we 301 00:17:45,800 --> 00:17:48,440 Speaker 5: look at our prestline business where we do direct lending there. 302 00:17:48,520 --> 00:17:51,760 Speaker 5: So you know, I think private credit it has a 303 00:17:51,800 --> 00:17:54,639 Speaker 5: bad it's getting a bad name right now. Not all 304 00:17:54,680 --> 00:17:56,040 Speaker 5: private credits band is whatever. 305 00:17:56,080 --> 00:17:59,280 Speaker 2: There's some jargon liquidation event. That's when the kid goes 306 00:17:59,320 --> 00:18:00,000 Speaker 2: on spring Bright. 307 00:18:00,880 --> 00:18:05,320 Speaker 4: Just so you know, very Michael, you say servicing is 308 00:18:05,359 --> 00:18:09,560 Speaker 4: the key differentiator. Why do they have such a huge advantage. 309 00:18:09,280 --> 00:18:12,360 Speaker 5: Because you could you could affect an outcome, take take 310 00:18:12,400 --> 00:18:15,960 Speaker 5: a homeowner, take a mortgage. If you go out and 311 00:18:15,960 --> 00:18:18,000 Speaker 5: you take out a mortgage. You know, one of the 312 00:18:18,000 --> 00:18:19,919 Speaker 5: things we do at our company, we own one of 313 00:18:19,920 --> 00:18:22,960 Speaker 5: the largest mortgage servicers in the US, were the fourth largest, 314 00:18:23,160 --> 00:18:25,280 Speaker 5: including all the large banks we work with it. 315 00:18:25,440 --> 00:18:26,159 Speaker 3: I did not know that. 316 00:18:26,280 --> 00:18:29,200 Speaker 5: Yeah, we have a you know, for example, eight hundred 317 00:18:29,200 --> 00:18:31,880 Speaker 5: and fifty billion dollars and mortgage servicing rights. We touch 318 00:18:31,960 --> 00:18:35,040 Speaker 5: four million consumers. So what happens a mortgage or has 319 00:18:35,080 --> 00:18:38,160 Speaker 5: an issue, we work with that consumer. You figure out 320 00:18:38,160 --> 00:18:40,760 Speaker 5: a modification or some kind of plan to keep them paying. 321 00:18:41,040 --> 00:18:43,480 Speaker 5: That's a huge advantage versus somebody that's going to go 322 00:18:43,520 --> 00:18:46,800 Speaker 5: out into the public markets buy an asset, let someone 323 00:18:46,800 --> 00:18:48,080 Speaker 5: else control the service thing. 324 00:18:48,160 --> 00:18:50,520 Speaker 4: So you say you have options when you're in servicing. 325 00:18:50,280 --> 00:18:52,640 Speaker 5: Yeah, and you could affect an outcome and you could 326 00:18:52,640 --> 00:18:55,520 Speaker 5: work with a homeowner, which I think is extremely important. 327 00:18:55,760 --> 00:18:57,720 Speaker 5: And we've seen that over the years and that's one 328 00:18:57,720 --> 00:18:59,480 Speaker 5: of the one of the ways that we actually built 329 00:19:00,000 --> 00:19:01,320 Speaker 5: built our business. 330 00:19:01,359 --> 00:19:03,240 Speaker 4: Just I got to ask you about mortgage rates then, 331 00:19:03,280 --> 00:19:06,439 Speaker 4: I mean, because we're starting to tick higher. Spring buying 332 00:19:06,480 --> 00:19:09,679 Speaker 4: season has begun, even though the weather doesn't feel like 333 00:19:09,680 --> 00:19:12,240 Speaker 4: it in New York City, What is this really going 334 00:19:12,320 --> 00:19:13,800 Speaker 4: to be a downer for the housing market. This was 335 00:19:13,800 --> 00:19:16,040 Speaker 4: supposed to be the year things bounced back and possibly 336 00:19:16,080 --> 00:19:17,480 Speaker 4: swing to being a buyer's market. 337 00:19:17,560 --> 00:19:20,679 Speaker 5: Dare I say, yeah, you know, I looked at mortgage 338 00:19:20,720 --> 00:19:23,480 Speaker 5: rates this morning, mortgage rates today or in and around 339 00:19:23,480 --> 00:19:25,480 Speaker 5: where we close the end of the year. If you 340 00:19:25,520 --> 00:19:27,320 Speaker 5: look at the treasury market, the ten year has been 341 00:19:27,359 --> 00:19:29,240 Speaker 5: in a range of give it a take a low 342 00:19:29,320 --> 00:19:31,480 Speaker 5: force to kind of four and a quarter. Where we 343 00:19:31,520 --> 00:19:35,240 Speaker 5: sit right now. I think mortgage rates will continue that 344 00:19:35,359 --> 00:19:37,560 Speaker 5: the administration is doing all they can to bring mortgage 345 00:19:37,600 --> 00:19:40,560 Speaker 5: rates lower. Whether they're able to achieve that or not. 346 00:19:40,760 --> 00:19:43,879 Speaker 5: I don't think you can control such a large market, 347 00:19:43,960 --> 00:19:45,960 Speaker 5: but I think, you know, we're going to sit here. 348 00:19:45,960 --> 00:19:48,520 Speaker 5: I think the housing market is okay. You look at 349 00:19:48,520 --> 00:19:52,119 Speaker 5: our data around the consumer right you know it's actually 350 00:19:52,720 --> 00:19:54,720 Speaker 5: in pretty good The consumers in pretty good shape. 351 00:19:54,800 --> 00:19:57,239 Speaker 2: One more question, with great respect and great honor, we're 352 00:19:57,240 --> 00:19:58,919 Speaker 2: going to go to Breaking News and then to Michael 353 00:19:58,920 --> 00:20:04,560 Speaker 2: Barr here, folks, micro leader. When all over the zeitgeist 354 00:20:04,640 --> 00:20:08,160 Speaker 2: right now, everybody's playing clips of mister Irons and margin Call. 355 00:20:08,720 --> 00:20:12,080 Speaker 2: When a grizzled pro like you sees those clips, or 356 00:20:12,119 --> 00:20:15,520 Speaker 2: when you first saw margin call, is that even remotely 357 00:20:16,080 --> 00:20:17,879 Speaker 2: real or was it just Hollywood? 358 00:20:18,480 --> 00:20:21,480 Speaker 5: Now listen, margin call. You know, we've seen it during 359 00:20:21,480 --> 00:20:24,240 Speaker 5: twenty twenty, the COVID period. Then we've saw it during 360 00:20:24,280 --> 00:20:26,720 Speaker 5: the Great Financial Crisis. I think the difference today is 361 00:20:26,720 --> 00:20:31,440 Speaker 5: folks that have experienced, like ourselves, understand how to one 362 00:20:31,520 --> 00:20:33,959 Speaker 5: navigate the navigate the system, but also work with your 363 00:20:34,040 --> 00:20:36,840 Speaker 5: large lenders around getting rid of margin calls on the 364 00:20:36,840 --> 00:20:37,960 Speaker 5: assets that you financed. 365 00:20:37,960 --> 00:20:41,160 Speaker 2: Where's your shadow right now? Where's your mystery shadow within 366 00:20:41,200 --> 00:20:42,680 Speaker 2: the depth system right now? 367 00:20:43,720 --> 00:20:47,040 Speaker 5: I'm concerned a little bit about liquidity. I do think 368 00:20:47,080 --> 00:20:48,879 Speaker 5: when you look at some of the you know, some 369 00:20:48,920 --> 00:20:51,080 Speaker 5: of the folks out there, you sorry, Like I brought 370 00:20:51,119 --> 00:20:53,119 Speaker 5: up yesterday's price action in the front end of the 371 00:20:53,119 --> 00:20:55,400 Speaker 5: treasury market. Yeah, should to your treasury be at three 372 00:20:55,440 --> 00:20:57,840 Speaker 5: and three quarters when we when we saw we got 373 00:20:58,600 --> 00:21:03,040 Speaker 5: employment report before. I don't. I don't think so. I 374 00:21:03,080 --> 00:21:05,920 Speaker 5: do think that, you know, the the market's taken out 375 00:21:05,960 --> 00:21:08,800 Speaker 5: any not any chance, but the market's taken out that 376 00:21:08,840 --> 00:21:10,560 Speaker 5: the Fed is not going to cut rates this year. 377 00:21:11,080 --> 00:21:13,280 Speaker 5: I don't agree with that. I think Goldman came out 378 00:21:13,320 --> 00:21:15,600 Speaker 5: as well and said that you know, they're still calling 379 00:21:15,680 --> 00:21:17,560 Speaker 5: from one or two rate cuts I look at the 380 00:21:17,680 --> 00:21:19,439 Speaker 5: I look at forward rates. I do think we're going 381 00:21:19,520 --> 00:21:22,280 Speaker 5: to see rates come come down, particularly in the front end. 382 00:21:22,280 --> 00:21:24,480 Speaker 5: I think the back end is troubled, right because we 383 00:21:24,560 --> 00:21:26,679 Speaker 5: got to fund this war, we got you know, we 384 00:21:26,760 --> 00:21:29,160 Speaker 5: have this massive deficit which we still have to issue 385 00:21:29,160 --> 00:21:31,520 Speaker 5: a lot of debt. So I think long rates, you know, 386 00:21:31,560 --> 00:21:32,639 Speaker 5: could be a little bit challenged. 387 00:21:32,640 --> 00:21:34,879 Speaker 2: Here we're in a four ninety eighty nine right now, 388 00:21:34,880 --> 00:21:38,040 Speaker 2: in a thirty year bond. Michael Darrenburg, don't be a stranger. 389 00:21:38,160 --> 00:21:40,680 Speaker 2: Love having you, and thank you so much. Rhythm Capital 390 00:21:42,400 --> 00:21:46,600 Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this. 391 00:21:53,840 --> 00:21:57,440 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live 392 00:21:57,480 --> 00:22:00,639 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 393 00:22:00,720 --> 00:22:04,399 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 394 00:22:04,560 --> 00:22:06,040 Speaker 1: watch us live on YouTube. 395 00:22:06,200 --> 00:22:10,440 Speaker 2: This is the perfect guest to frame out why equals 396 00:22:10,480 --> 00:22:15,040 Speaker 2: C plus I plus G plus NX. Kathleen bus Johnsion 397 00:22:15,160 --> 00:22:19,320 Speaker 2: nails it each and every day as chief economist at Nationwide, 398 00:22:19,320 --> 00:22:22,640 Speaker 2: and we're thrilled that she could join us today. All 399 00:22:22,680 --> 00:22:26,240 Speaker 2: the secondary stuff, the noise at the back end of March. 400 00:22:26,880 --> 00:22:29,679 Speaker 2: Kathy where we try to frame out our guestimate of 401 00:22:29,800 --> 00:22:34,679 Speaker 2: where we are. What does the noise tell you about 402 00:22:34,720 --> 00:22:39,720 Speaker 2: getting the GDP back to tuish or two point xish? 403 00:22:39,840 --> 00:22:40,760 Speaker 5: Can we get there? 404 00:22:42,040 --> 00:22:42,159 Speaker 3: Well? 405 00:22:42,200 --> 00:22:42,920 Speaker 7: Good morning time. 406 00:22:43,680 --> 00:22:46,560 Speaker 9: Well, I would argue that we were there ahead of 407 00:22:46,560 --> 00:22:51,199 Speaker 9: the Aridian conflict, having an impact on energy prices in 408 00:22:51,200 --> 00:22:55,280 Speaker 9: that filtering through and being a negative shock to economic activity, 409 00:22:55,280 --> 00:22:59,040 Speaker 9: at least temporarily. So when I look at the revised 410 00:22:59,640 --> 00:23:02,760 Speaker 9: data the GDP for fourth quarter, if you look at 411 00:23:02,800 --> 00:23:06,639 Speaker 9: the core GDP number, it was you know, two percent, 412 00:23:06,800 --> 00:23:09,280 Speaker 9: and I think you know about two percent, and we 413 00:23:09,359 --> 00:23:12,120 Speaker 9: are on pace even for the first quarter to see 414 00:23:12,400 --> 00:23:13,880 Speaker 9: real GDP growth. 415 00:23:13,640 --> 00:23:15,040 Speaker 7: Overall three percent. 416 00:23:15,080 --> 00:23:17,359 Speaker 9: And if we look at that core two percent, right, So, 417 00:23:19,160 --> 00:23:22,040 Speaker 9: but but things change a lot with the conflict, and 418 00:23:22,080 --> 00:23:24,840 Speaker 9: that you know, looking to second quarter, we just marked. 419 00:23:24,600 --> 00:23:28,000 Speaker 7: Down our growth estimate. There we are below one percent. 420 00:23:29,080 --> 00:23:32,879 Speaker 2: You're below one percent with this war. Wow, that's the 421 00:23:32,880 --> 00:23:33,679 Speaker 2: first I've heard that. 422 00:23:33,840 --> 00:23:36,840 Speaker 4: Yeah, that's that's and I wonder, I mean again, we 423 00:23:36,840 --> 00:23:39,040 Speaker 4: were talking with our previous guest about you know, the 424 00:23:39,119 --> 00:23:43,640 Speaker 4: shock and oil being transitory, and this hit to GDP 425 00:23:43,800 --> 00:23:47,040 Speaker 4: maybe transitory, but I'm wondering what it would do enough 426 00:23:47,119 --> 00:23:52,119 Speaker 4: damage to possibly push the economy into a moderate recession 427 00:23:52,240 --> 00:23:53,080 Speaker 4: in the short term. 428 00:23:54,920 --> 00:23:57,800 Speaker 7: Well, we don't have that inner profile right now. That's 429 00:23:57,680 --> 00:23:58,439 Speaker 7: that's in our. 430 00:23:58,320 --> 00:24:02,520 Speaker 9: Base case, and I do think it's a temporary shock, 431 00:24:02,760 --> 00:24:06,000 Speaker 9: assuming right that this conflict doesn't go on for months. 432 00:24:06,119 --> 00:24:08,560 Speaker 7: You know that it's rather weeks, as we all talk about. 433 00:24:09,359 --> 00:24:13,200 Speaker 9: So when we model that growth in the second quarter 434 00:24:13,280 --> 00:24:16,439 Speaker 9: we thought would be around two percent, we've taken a 435 00:24:16,440 --> 00:24:17,480 Speaker 9: full percentage. 436 00:24:17,119 --> 00:24:19,200 Speaker 7: Point off, so we're zero point ninety be exact. 437 00:24:19,240 --> 00:24:22,680 Speaker 9: But you know the point is in the second half 438 00:24:22,720 --> 00:24:24,919 Speaker 9: of the year, we think growth will rebound. But that 439 00:24:25,080 --> 00:24:29,919 Speaker 9: assumes oil supplies, energy supplies, commodity supplies are up and 440 00:24:29,960 --> 00:24:30,600 Speaker 9: running again. 441 00:24:30,680 --> 00:24:32,320 Speaker 7: And that's what we have to watch. 442 00:24:32,520 --> 00:24:36,960 Speaker 2: Have you interpolated off a barrel of oil where a 443 00:24:37,040 --> 00:24:39,560 Speaker 2: gallon of gas is going I believe it's a three 444 00:24:39,520 --> 00:24:43,440 Speaker 2: sixty two off triple A let it, But Kathy bus johnsick. 445 00:24:44,520 --> 00:24:47,680 Speaker 2: There's modeling being done. Analog and our team are modeling 446 00:24:47,720 --> 00:24:50,600 Speaker 2: out one twenty ish barrel and if it's a longer 447 00:24:50,680 --> 00:24:53,040 Speaker 2: duration out to one sixty and then it gives way. 448 00:24:53,080 --> 00:24:56,520 Speaker 2: They're very optimistic that it'll come back down, But can 449 00:24:56,560 --> 00:24:58,920 Speaker 2: you get out over four dollars a gallon. 450 00:25:01,240 --> 00:25:01,639 Speaker 7: If we. 451 00:25:03,240 --> 00:25:05,920 Speaker 9: Have oil prices go up to one hundred and twenty 452 00:25:06,160 --> 00:25:09,040 Speaker 9: or more than I think, yes, you can get to 453 00:25:09,080 --> 00:25:12,480 Speaker 9: four dollars a gallon. What we're working for with in 454 00:25:12,480 --> 00:25:14,880 Speaker 9: our base case is that we get to around three 455 00:25:14,960 --> 00:25:17,520 Speaker 9: seventy five a gallon, and that would be the peak 456 00:25:17,600 --> 00:25:20,159 Speaker 9: right now in the second quarter. But yeah, certainly, I 457 00:25:20,200 --> 00:25:23,840 Speaker 9: mean the size of the move and oil prices and 458 00:25:23,920 --> 00:25:25,520 Speaker 9: also the duration is. 459 00:25:25,480 --> 00:25:27,800 Speaker 7: Really key, and just everything so fluid. 460 00:25:27,880 --> 00:25:31,960 Speaker 2: Right now, we go to John Tucker, Surveillance Petroleum Correspondent, 461 00:25:32,240 --> 00:25:35,199 Speaker 2: John thirty two gallons in the hommer age two at 462 00:25:35,280 --> 00:25:38,440 Speaker 2: Kathy's three dollars seventy five cents is one hundred and 463 00:25:38,480 --> 00:25:39,520 Speaker 2: twenty dollars fill up. 464 00:25:39,680 --> 00:25:41,240 Speaker 5: And that's one hundred and twenty dollars. 465 00:25:41,320 --> 00:25:43,800 Speaker 3: I'm not going to spend buying other stuff. 466 00:25:44,240 --> 00:25:48,359 Speaker 4: So because you're on you're on Tuition Island, on Tuition Island, 467 00:25:48,600 --> 00:25:51,960 Speaker 4: and things are getting rough on Tuition Island and no reason. 468 00:25:51,960 --> 00:25:54,760 Speaker 5: It's like when I go now, even though it's not empty, 469 00:25:54,840 --> 00:25:55,600 Speaker 5: I still feel love. 470 00:25:55,720 --> 00:25:59,000 Speaker 2: So I'm hoarding. You're hoarding, okay, Alexis Christopher is to 471 00:25:59,040 --> 00:26:00,840 Speaker 2: finish up with Miss Johnson. 472 00:26:01,000 --> 00:26:03,200 Speaker 4: Also, I just want to share with you all what's 473 00:26:03,240 --> 00:26:06,800 Speaker 4: coming over the bloomberg right now. European countries including France 474 00:26:07,000 --> 00:26:10,119 Speaker 4: and Italy have now open talks with Tehran trying to 475 00:26:10,160 --> 00:26:13,840 Speaker 4: negotiate a deal to guarantee safe passage for their ships 476 00:26:14,119 --> 00:26:17,760 Speaker 4: through the Strait of Hormuz. I'm wondering how much this 477 00:26:18,119 --> 00:26:22,560 Speaker 4: rise in oil and every day stuff we use, like 478 00:26:22,680 --> 00:26:25,120 Speaker 4: going to the gas pump is going to pull back 479 00:26:25,160 --> 00:26:28,560 Speaker 4: the consumer in this environment, because we know that the 480 00:26:28,600 --> 00:26:31,879 Speaker 4: consumer has really been a pillar of economic strength for 481 00:26:32,000 --> 00:26:32,600 Speaker 4: years now. 482 00:26:34,440 --> 00:26:34,640 Speaker 7: Yeah. 483 00:26:34,720 --> 00:26:37,280 Speaker 9: No, absolutely, it's a tax on the consumer, right, it's 484 00:26:37,280 --> 00:26:41,320 Speaker 9: hots on the economy. It doesn't necessarily become a long 485 00:26:41,400 --> 00:26:45,480 Speaker 9: lasting inflationary impact unless it persists and it gets embedded 486 00:26:45,480 --> 00:26:46,800 Speaker 9: in inflation expectations. 487 00:26:46,840 --> 00:26:49,040 Speaker 7: But I think certainly the first. 488 00:26:48,840 --> 00:26:52,680 Speaker 9: Round impact its attacks and it's going to just as 489 00:26:52,680 --> 00:26:56,200 Speaker 9: we discussed, you know, Dell was joking, it pulls away 490 00:26:56,840 --> 00:27:00,240 Speaker 9: for the available discretionary spending on other items, and that's 491 00:27:00,280 --> 00:27:03,399 Speaker 9: why you get to hit to economic growth for the 492 00:27:03,480 --> 00:27:07,000 Speaker 9: period where we see this elevated gasoline prices, and the 493 00:27:07,000 --> 00:27:09,960 Speaker 9: longer that persists, the longer the hit. I would also add, 494 00:27:10,000 --> 00:27:13,440 Speaker 9: there's business and consumer confidence that we also model It's 495 00:27:13,480 --> 00:27:16,800 Speaker 9: not just the direct impact of higher energy prices, but 496 00:27:16,880 --> 00:27:20,480 Speaker 9: how does that affect confidence and business leaders? Right now, 497 00:27:20,600 --> 00:27:23,359 Speaker 9: Uncertainty is still very high, so they start to pull back. 498 00:27:23,880 --> 00:27:26,640 Speaker 2: Kathy, Thank you so much, Kathleen Bus John Sick chief 499 00:27:26,640 --> 00:27:28,160 Speaker 2: economists nationwide. 500 00:27:28,200 --> 00:27:28,400 Speaker 3: There. 501 00:27:28,680 --> 00:27:33,480 Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, 502 00:27:33,600 --> 00:27:37,880 Speaker 1: and anywhere else you get your podcasts. 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