Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.
Speaker 1: We bring you insight from the best in economics, finance, investment,
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Speaker 1: speak at George Bowie. Shall we well. Funcer Security has
Speaker 1: had a fixed income research George, Great to see you,
Speaker 1: Good morning. Trying to work out what's going on here
Speaker 1: in global markets, trade risk diminishing, but a tip to say,
Speaker 1: three months ago global growth bottom and gout. To what
Speaker 1: degree is the latter exclusive from the former. I'm trying
Speaker 1: to get my head around that. Many other people out
Speaker 1: as well. Now. I think what we're seeing, at least
Speaker 1: in the fixed income markets, it's it's a little bit
Speaker 1: closer to sort of what you'd consider more of a
Speaker 1: normal market in the sense that I've seen a pretty
Speaker 1: material adjustment across the yield curve. Yield curve was was
Speaker 1: was was was inverted earlier this year, we've seen that
Speaker 1: steeping out as ten ure yields and longer dated yields
Speaker 1: have moved up, while the feed is cut rates and
Speaker 1: a positively sloped upward sloping yield curve is a very
Speaker 1: good indicator, UH, certainly for future economic growth. It takes
Speaker 1: this sting, if you will, out of things like tail risks. UH.
Speaker 1: There's still some concerns obviously about trade, but trade seems
Speaker 1: to be moving in the right direction, and the data
Speaker 1: is getting a little bit better. The date is really better.
Speaker 1: For those brave enough to go into long duration, long
Speaker 1: ago and far away, they're up solid double digits, if
Speaker 1: not more. What do you do now, or into yurine planning?
Speaker 1: If you've got that big double digit gain in a ten,
Speaker 1: twenty or even longer bet, whether it's munis or others,
Speaker 1: what do you do? I think you move away away
Speaker 1: from what we would call it sort of a duration bet,
Speaker 1: so long long maturity bonds, and then you focus more
Speaker 1: on bonds or our companies that are more cyclically exposed.
Speaker 1: That if you're if you're willing to bet that there's
Speaker 1: an economic soft landing, which we think is underway, then
Speaker 1: parts of the bond market like high yield should do okay.
Speaker 1: These are companies with a little bit more leverage, but
Speaker 1: with higher yielding UH securities, higher yielding opportunities, A blended
Speaker 1: portfolio is gonna have a yield of roughly about five
Speaker 1: point six five five point seven five with not a
Speaker 1: lot of duration. There's been a shift in sentiment over
Speaker 1: the past couple of weeks from inflation will never pick
Speaker 1: up again to we're seeing the beginnings of reflation and
Speaker 1: inflation is underpriced in the market. Do you agree with
Speaker 1: that sentiment shift? I think as we kind of move,
Speaker 1: I think people are looking forward to the beginning of
Speaker 1: next year and the data is getting a little bit better.
Speaker 1: The economic data is better, and there is a little
Speaker 1: bit of an upward lift on the inflationary front. But
Speaker 1: in addition to that, the technicalities of how inflation is
Speaker 1: calculated is likely to deliver a lift early next year
Speaker 1: as the linked effects of last year start to roll
Speaker 1: off the numbers. This is all very technical, not wildly exciting,
Speaker 1: but it will show optically that the headline inflation numbers
Speaker 1: are gonna start to rise as we get into the
Speaker 1: beginning of next year, and you're starting to see that
Speaker 1: getting priced in now in some of the securities. What
Speaker 1: do I do if I'm a saver, I got a
Speaker 1: pot of money. It's not a lot of money, but
Speaker 1: I got a pot of money, and I just don't
Speaker 1: want to be in equities. So you buy dominion, you know,
Speaker 1: you buys a couple of utilities from the old days,
Speaker 1: Florida power and light, and then you buy coupon. What
Speaker 1: do you buy right now? So you know, I think
Speaker 1: what you I think? You have to calibrate your return
Speaker 1: expectations of fixed income. That's well's far ago talk John
Speaker 1: for lower yields, lower yields, and how much expecting more
Speaker 1: than a full like a three percent full yield is optimistic. Uh,
Speaker 1: And it's challenging if you're a saver anywhere in the world.
Speaker 1: Anywhere in the world, it is very difficult to generate
Speaker 1: significant coupon income. So if you're you know, a mom
Speaker 1: and pop saver out there, an investment grade relatively low
Speaker 1: risk portfolio is in this sort of three percent kind
Speaker 1: of range. If you want to take a little bit
Speaker 1: more risk and you go into high yield you know,
Speaker 1: now we're talking five and three quarters percent type of yields.
Speaker 1: Beyond that, you're now going into the depths of emerging markets.
Speaker 1: You're going overseas, you're going into corners of the market.
Speaker 1: We're gonna pick up a significant amount of risks. So
Speaker 1: I think a three percent kind of yield, maybe a
Speaker 1: little bit higher depending on how you blend your portfolio.
Speaker 1: It's about the best you can hope for. And I
Speaker 1: think you have to be realistic about your fixed income portfolio.
Speaker 1: It's an anchor. It it's an anchor to your overall portfolio.
Speaker 1: But it's but but the but the yield on it
Speaker 1: is gonna be gonna be relatively low. Is the best
Speaker 1: that you can hope for in the world of fixed
Speaker 1: income that's gonna be tough gun at into for many
Speaker 1: if you out there on now. It's just a final
Speaker 1: question on the regional boss. You mentioned emerging markets. Many
Speaker 1: people thinking about that high bite a trade to the
Speaker 1: trade story. I want to buy the foreign assets Europe.
Speaker 1: Even though fixed income has araut it really hard on
Speaker 1: the last couple of years, I'm thinking more about emerging markets.
Speaker 1: What's your advice to those people? So on the emerging
Speaker 1: markets front, I think you have to tread cautiously, especially
Speaker 1: as it relates to fixed income. You've mentioned a few earlier,
Speaker 1: and I think you're gonna talk about it later in
Speaker 1: the show. You know, there's a variety of meaningful geopolitical
Speaker 1: issues around the world, which maybe makes emerging markets look
Speaker 1: optically cheap, but they're cheap for a reason. You have
Speaker 1: a lot of political unrest in different parts of the market.
Speaker 1: The thing we would look for is um you know,
Speaker 1: if the dollars is getting stronger, that sometimes kind of
Speaker 1: can weigh a little bit on on EM. We'd sort
Speaker 1: of take an up and quality type of trade for
Speaker 1: for e M that's gonna have a yield sort of
Speaker 1: roughly equivalent to high yields, so you can use it
Speaker 1: as a diversification, but not a real sort of material
Speaker 1: yield pickups. So we would use em as a more selective,
Speaker 1: selective type of of of allocation for fixed income portfolio.
Speaker 1: Juge BORI, thank you big week I had for you.
Speaker 1: We appreciate your time this morning. George Boy Then West
Speaker 1: Founca Securities had a fixed income research right now in
Speaker 1: Hong Kong, providing great leadership to Bloomberg Television and to
Speaker 1: Bloomberg Newsy Von Man joins us as well. Von this
Speaker 1: weekend was different. Quickly here describe why this weekend was
Speaker 1: so different for the chief executive Carry Lamb. Well, Tom,
Speaker 1: this the protest right now have reached another level here
Speaker 1: after the death of a student last week. This man
Speaker 1: was a twenty two year old student, the university student
Speaker 1: who fell off a car park near during a demonstration
Speaker 1: where police used tear gas disperse a crowd, and that
Speaker 1: is what sparked the violence over the weekend and what
Speaker 1: has really transpired here this evening riot police right now
Speaker 1: are still in the streets territory wide trying to stop
Speaker 1: these protesters, but we haven't seen any kind of site
Speaker 1: at this point. And and more violence here this morning.
Speaker 1: Those two incidents of of a man that was set
Speaker 1: on fire by a protester after there were some verbal clashes,
Speaker 1: and of course that police officer that shot a protester
Speaker 1: at point blanks this morning. Yvonne on the ground there
Speaker 1: is this is the mood different have you Can you
Speaker 1: actually feel the shift? Yeah, I mean we have felt
Speaker 1: the shift. And there was a while the last couple
Speaker 1: of weeks where things were stimmering down a little bit,
Speaker 1: and now we've reached another type of fever pitch, I
Speaker 1: would say, because the death of the student is what
Speaker 1: really sparked more people on the streets over the weekend.
Speaker 1: We had already ninety arrest on Saturday and Sunday. Dozens
Speaker 1: injured already. Today, school was canceled for some universities and
Speaker 1: some secondary schools, and a hundred and seventy flights were canceled.
Speaker 1: So we're kind of back into this more violent type
Speaker 1: of wave that we've seen, uh, and the crowds have
Speaker 1: really it hasn't just been one area now, it's it's
Speaker 1: the Central Business business district where we saw traffic was disrupted.
Speaker 1: Police refined tear gas near Central Landmark, one of the
Speaker 1: close to the business district here where many people are
Speaker 1: going to work. They had to hide and take covers
Speaker 1: in the luxury malls here as they were pure gas
Speaker 1: and washing washing their eyes with water. And that was
Speaker 1: something that we hadn't seen in some time. And so
Speaker 1: you feel it and you certainly feel it, especially with
Speaker 1: the closures around the retail malls, the banks, and of
Speaker 1: course the vandalism that we've seen all across the city.
Speaker 1: How explosive was President Ji Jim Ping's explanation that he
Speaker 1: would like to see a patriot ruling Hong Kong regardless
Speaker 1: of people. Better get used to Ceo lamb, right. I
Speaker 1: mean that was another China just digging their heels saying
Speaker 1: that they're not going to give in to any of
Speaker 1: these demands. But the police, Hong Kong Police spoke mean
Speaker 1: today during a press conference did say that they that
Speaker 1: he believes that there is no chance at this point
Speaker 1: of the p l a W will be deployed in
Speaker 1: the city. So they're still sticking by police, Hong Kong
Speaker 1: Police at the moment and defending their actions, especially with
Speaker 1: this morning with that shooting. But it is once again
Speaker 1: carry Lamb talking today saying that these actions from the
Speaker 1: writers that she called them go far beyond just demands
Speaker 1: right now. Now they're treating citizens, as she says, as enemies.
Speaker 1: So you know, she's still calling for a doctor the violence,
Speaker 1: but we haven't seen any of that yet. Even man,
Speaker 1: thank you so much. On the Monday evening of Hong
Speaker 1: Kong with us here in the studio in place to say,
Speaker 1: is Sarah Manic moving global equity seat I oh, good
Speaker 1: morning to Sarah. Morning. Within the equity market at all
Speaker 1: time high, there is this rotation that many people are
Speaker 1: focused on two cyclicals from defensives to value from growth.
Speaker 1: Your thoughts on what is underpinning that move and where
Speaker 1: it's heading in the months to come so a couple
Speaker 1: of things on value which we think can lead for
Speaker 1: the next couple of quarters. So, first of all, this
Speaker 1: rally and value the encyclicals that we've seen has been
Speaker 1: about the strongest that's happened since late two thousand and sixteen,
Speaker 1: which is when the election occurred. And also it's been
Speaker 1: less fits and starts and more sustainable, so we do
Speaker 1: think it has legs. Basically, what we've seen is the
Speaker 1: economy is less bad than we thought, Earnings came in
Speaker 1: better than expected. We're seeing some progress on tariffs, but
Speaker 1: definitely that's in kind of fits and starts itself. All
Speaker 1: that should lead to value continuing to be the leader
Speaker 1: in the market for a quarter or two, but after
Speaker 1: that earnings growth load of mid single digits next year,
Speaker 1: we probably will go back to this quality growth kind
Speaker 1: of environment less bad. Sounds like the conditions to generate
Speaker 1: a squeeze, not a sustainable rally, not a sustainable rotation.
Speaker 1: Is that essentially what you're communicates into clients. Yeah, I'm
Speaker 1: seeing more of a reversion to the mean. Value has
Speaker 1: been undervalued for a while, and we think it will
Speaker 1: go back to the mean. But then after that, not
Speaker 1: traded a premium because what you need in place or
Speaker 1: value to really work is strong earnings growth and a
Speaker 1: stronger economy, which we're not going to see that going forward.
Speaker 1: Earlier this morning, Tom came made a really good point
Speaker 1: that five stocks account for of the S and P
Speaker 1: five hundred. Those stocks are tech. What will drive tech
Speaker 1: further up at this point? I think that's going to
Speaker 1: be challenging the old world of where investors. You know,
Speaker 1: what we saw this narrow market for most of this
Speaker 1: cycle of the past decade was investors were willing to
Speaker 1: pay pretty high premiums for these high structural growth companies.
Speaker 1: We think it's going to be more of a garp
Speaker 1: environment growth a reasonable price. People won't pay these premiums
Speaker 1: for these tech comes. So does that mean that another
Speaker 1: sector will get leadership here or that we'll just sort
Speaker 1: of uh, not see very much by way of gains here.
Speaker 1: We think that other sectors will get leadership like quality
Speaker 1: growth with more defensive characteristics that are less dependent on
Speaker 1: the economy. But people are going to be careful about
Speaker 1: how much they pay for that growth. So you can
Speaker 1: see pockets of healthcare where pipelines are strong payments, companies
Speaker 1: with a good tail win on global payments areas such
Speaker 1: as that. The the acclaim of nouvene over decades is
Speaker 1: you knew what you owned. That was the whole nouvene racket.
Speaker 1: Way back. Instead of buying a mutual fun you bought
Speaker 1: a fixed portfolio of bonds and it was a great
Speaker 1: and beautiful thing, particularly when priced down yield up. Now
Speaker 1: you're in the equity area of it. But I'm fascinated
Speaker 1: how Nouvine is structured to protect people when we finally normalize,
Speaker 1: there's a belief out there somewhere in the future will
Speaker 1: get somewhat higher rates. Somewhere in the future, we may
Speaker 1: actually get a correction. Heaven forbid a bear market. How
Speaker 1: does Nuvine protect against that like you did a zillion
Speaker 1: years ago. Well, we think of Nuvine today. It's a
Speaker 1: lot different than it used to be. It's a trillion
Speaker 1: dollar asset manager, multi asset class firm, offerings across publics
Speaker 1: and private so we can provide any kind of solution
Speaker 1: for investors. The equity business is a three billion assets
Speaker 1: center management business, deep specialist movement doing it for sixty
Speaker 1: five years. And domestic equities, so you very deep history
Speaker 1: and investing that we think that you're part of t
Speaker 1: I a Kreft. I mean you were there before, but
Speaker 1: now you're part of TI a Creft, right, that's right.
Speaker 1: T I acquired Nuvine. Yeah, they acquired Okay, what's your
Speaker 1: ex real assumption? I mean, you know, we're just the
Speaker 1: four of us. Nobody's listening. But what you know, what's
Speaker 1: your actual assumption you're working with right now with all
Speaker 1: the heritage of Nwvine's bond view. I mean, you know,
Speaker 1: I'm on the equity side, so no, but I still
Speaker 1: got to have an actual assumption. What is it? I
Speaker 1: mean I don't personally have one. I don't think that's
Speaker 1: my area of expertise. And what we're thinking about right
Speaker 1: now with the equity business, what we're thinking about is
Speaker 1: how do we position our client portfolios around the world
Speaker 1: so that we can offer them diversification. Make sure that
Speaker 1: you know, we're able to UM diversify, not have large
Speaker 1: factor bets, so that we can own quality companies UM
Speaker 1: you know, around the world, and make sure they are
Speaker 1: a client portfolios are diversified within equities. So let's talk
Speaker 1: about that regional diversification. At the moment, many people are
Speaker 1: thinking about going GEP brought from outside the United States
Speaker 1: into places like Europe, into emerging markets, what your advice
Speaker 1: for them at the moment. So with this value rebound
Speaker 1: that we've seeing, we actually think it's positive for Europe,
Speaker 1: which has been a huge la rate over the past decade,
Speaker 1: so your tends to be more cyclical. We actually think
Speaker 1: that Germany may be starting to stabilize this brexit may
Speaker 1: make some progress, So Europe in general, we're a little
Speaker 1: bit more positive on emerging markets. We like those a lot,
Speaker 1: particularly Brazil, which is a little bit out of the
Speaker 1: trade cross hairs. Nice reform story in place, and China
Speaker 1: if tariffs can continue to make progress, we think that
Speaker 1: China should continue to rebound. From here, let's start with Europe.
Speaker 1: If I go in at the index level and end
Speaker 1: up owning a load of financials, do I want them?
Speaker 1: Donnot want them? We kind of generally like financials from here.
Speaker 1: We think that they can continue to do well as
Speaker 1: a ten year creeps up. European financials we think could
Speaker 1: look reasonably attractive if Europe does start to stabilize the
Speaker 1: European financials, European industrials could be a nice sector that
Speaker 1: it's nice sectors to own going forward. I'm trying to
Speaker 1: understand how you price geopolitical risk, and I'm thinking of
Speaker 1: Hong Kong uh the Hang Sang Index losing almost three
Speaker 1: percent on the heels of the violence that we saw
Speaker 1: overnight in the region. How do you view that in
Speaker 1: terms of specific momentary risk versus larger systemic issues. I mean,
Speaker 1: geo political risk has been an issue around the world
Speaker 1: for a long time, ranging from Brexit to the protests
Speaker 1: in Hong Kong. Typically, what we've seen is it remains
Speaker 1: somewhat localized and has not become a global problem like
Speaker 1: it has in the past. So for us, it's been
Speaker 1: making sure that you avoid that local area while these
Speaker 1: very hard to predict events are taking place. So not
Speaker 1: buying the dip, not buying the dip Right now, I
Speaker 1: want to give you a massive shout out. Maybe it's
Speaker 1: because you're in Chicago with Morning Star leaning over your shoulder,
Speaker 1: but the way on your website you display your funds
Speaker 1: track record as an act of God, I just wish
Speaker 1: everybody did this, where you just say look, this is
Speaker 1: year to date. That's what people want to know. And
Speaker 1: it's great that the new ven e s G Large
Speaker 1: cap value fund. You know it's three beeps under SPX,
Speaker 1: but it's not bad at all this year. We'll take it.
Speaker 1: How do you respond to so many people in funds
Speaker 1: through well intentioned reasons, that are enjoying single digit returns
Speaker 1: this year? They're looking at the cross heres of the
Speaker 1: year end and they're going, wait a minute, what am
Speaker 1: I doing? Yeah? I mean I think you know the
Speaker 1: job of the active managers to lead by performance. So
Speaker 1: you know two goals here. One is you want to
Speaker 1: make sure that you can beat your benchmark and also
Speaker 1: that you can't perform relative to your peers that you
Speaker 1: can justify the fees that you're charging. So I mean,
Speaker 1: I think you know, if you have funds that are struggling,
Speaker 1: you need to be looking closely at them and figuring out,
Speaker 1: you know, what we need to do better, because if
Speaker 1: you're going to be an active manager with the infiltration
Speaker 1: of passive, you need to make sure that you cannot
Speaker 1: beat your benchmark and deserve the fee that you're you're charging. Sarah,
Speaker 1: thank you, it's great to say this morning. We're gonna
Speaker 1: have to get you back. I know you've got to
Speaker 1: run out of the studio for another employment some michalled
Speaker 1: bloom Black TV. I think Sarah Manic has to go
Speaker 1: to She's gonna run out of one studio to another
Speaker 1: because she has to leave a little bit early. Sarah,
Speaker 1: thank you. John. Let's get right to it with our guests,
Speaker 1: because this is like a road show. You got your
Speaker 1: rubber Chicken, and you're all set up here right now
Speaker 1: for your road show for the Saudi Arabian Oil Company.
Speaker 1: Doing it with the Ritz with Steven Short. Who's gonna
Speaker 1: stand up and tell them what oil is gonna be
Speaker 1: from the Short Report with the most insanely hyper detailed
Speaker 1: view of American hydrocarbon Stephen Short, and we're through. Design's
Speaker 1: been way too long, Stephen, good morning. Can you tell
Speaker 1: a ram Co that they need to settle on fifty
Speaker 1: dollar oil or sixty dollar oil? Which way is that
Speaker 1: gonna cut? I think at this point, Tom, with what
Speaker 1: we're seeing in the market, with regard to economic growth
Speaker 1: demand to k going out into the future, that lower
Speaker 1: for longer would certainly be the mantra. I think even
Speaker 1: at that sixty dollar range, I think that is clearly
Speaker 1: excuse me, a a realistic range. But for all intents
Speaker 1: and purposes. It is well below what a ramco is
Speaker 1: planning on and what it's trying to sell its investors on.
Speaker 1: So I think that there's a good degree of hopium
Speaker 1: that um that Saudi Aramco is hoping the market is
Speaker 1: smoking on on this idea that will see higher prices.
Speaker 1: Is that the New York giants here this weekend hope? Yeah,
Speaker 1: you're going to rub that in a little bit. Lincoln
Speaker 1: one point five trillion dollar valuation potentially would yield a
Speaker 1: five dividend yield based on an initial seventy five billion
Speaker 1: dollar dividend. Stephen doesn't get it done versus the all
Speaker 1: majors in Europe in the United States five uh five percent.
Speaker 1: I think I'm highly skeptical on a percentage and on
Speaker 1: the assumptions going into that that percentage, we're we're dealing
Speaker 1: with the market that's undergoing a tectonic shift with regard
Speaker 1: to the future prospects of growth. We'll see. What's so
Speaker 1: important here is you are the king of calculating the
Speaker 1: flows the first second derivative of all these barrels. Do
Speaker 1: we have any clue what Saudi Aramco has? Do we
Speaker 1: have any understanding of the underlying assets or their Shorky
Speaker 1: and derivatives. Yes, no, not that we can we can
Speaker 1: tell UH ascortaining with any sort of significant confidence. It's
Speaker 1: almost similar akin to the economic numbers that we get
Speaker 1: out of China. You just have to kind of go
Speaker 1: along and trust the process and hope the oil is there.
Speaker 1: We certainly have have a mechanism UH in the market
Speaker 1: of a balancing act and looking at the spread markets.
Speaker 1: But but certainly I think there is a degree of skepticism.
Speaker 1: But that said, Tom, I think this is a demand
Speaker 1: size sized market rather than supply side. We just had
Speaker 1: the Iranians just announced the fifty billion barrel discovery of
Speaker 1: new oil. And when we consider that this market demand
Speaker 1: decay or demand peaking within the next twenty years. Really,
Speaker 1: you know, the question is how long can demand last
Speaker 1: rather that how much supply is still in the ground? Yeah,
Speaker 1: demand peaking in the next twenty years. One of the
Speaker 1: potential details in the six hundred page Hairsale prospectus that
Speaker 1: was released on Saturday, giving more insight into Aramco's financials,
Speaker 1: which is unusual. It was reversal in course for them
Speaker 1: having denied that in the past as being a possibility
Speaker 1: also though, revealing a sharp drop in profit related to
Speaker 1: the attacks on its facilities in September. How big of
Speaker 1: a concern was that for you? Uh? Well, certainly, I
Speaker 1: think that it is with with with any of that region.
Speaker 1: When you have a one one source that is your
Speaker 1: primary source of income, whether it is for Iraq or
Speaker 1: in Saudi Arabia and so forth, when you see that
Speaker 1: kind of vulnerability in the supply chain. Uh. In the
Speaker 1: process spects of the the younger generation of people around
Speaker 1: the world and their view on fossil fuels, it's not positive. Uh.
Speaker 1: And so my my biggest concern going forward and spend
Speaker 1: my biggest concern because I always thought it was kind
Speaker 1: of odd and worrisome that people were looking at the
Speaker 1: demise of oil as as a as a weapon, as
Speaker 1: a as a price weapon, and they were looking at
Speaker 1: as some kind of with some kind of glee. And
Speaker 1: my concern and this will I am confident, well it
Speaker 1: is bearing out and will only escalate in the years
Speaker 1: to come, is when these economies that have been late
Speaker 1: to the game to diversify in Saudi Arabia with the
Speaker 1: serampical I I p O. Let's face it, there are
Speaker 1: ten years too late with this, I p O. And
Speaker 1: they are not going to get the valuations and the
Speaker 1: long term benefits UH to diversify. So I think it's
Speaker 1: going to lead to an extreme level of of geopolitical
Speaker 1: unrust unlike we've we've ever seen in any of our lifetimes.
Speaker 1: Steven a wife and the politics. Just for a moment,
Speaker 1: I just want to focus on how the stock will behave,
Speaker 1: how will perform the traits of the company relative to
Speaker 1: its peers in the oil market. There was a great
Speaker 1: article over the weekend and Barons about the royalty agreement
Speaker 1: with the Kingdom. The royalty agreement with the Kingdom is
Speaker 1: highly progressive, and I just wondered to what degree that
Speaker 1: will make it more or less sensitive to the oil
Speaker 1: price just in terms of the equity performance. Yeah, I
Speaker 1: think that that And and I don't want to you know,
Speaker 1: I mean, I I appreciate you want to stay away
Speaker 1: from the geopolitics, but but certainly we're with that special
Speaker 1: arrangement between between the House and its relationship with with
Speaker 1: with the state company, and now you want to open
Speaker 1: this up to outside investors. UH. It clearly is going
Speaker 1: to be a sticking point and and quite Frankly, I
Speaker 1: don't have any sort of crystal ball and and this
Speaker 1: is why I'm staying away, uh from from this issue
Speaker 1: at this point, that there are just too many known
Speaker 1: unknowns uh I and I. This is getting a lot
Speaker 1: of height because it is a monumental decision given given
Speaker 1: the c grissy of of the Saudi government. But when
Speaker 1: we look at Western oil companies, western oil companies, the
Speaker 1: likes of BP and Shell, they don't even call themselves
Speaker 1: oil companies anymore. That they are natural gas, their power,
Speaker 1: their energy companies. And I think Saudi is using this
Speaker 1: as a potential way to rebrand themselves as well. But
Speaker 1: when you throw in, uh that that special relationship with
Speaker 1: with the House and and and and what what they're
Speaker 1: going to get, I think there's going to be a
Speaker 1: lot of well or you know, known unknowns as to
Speaker 1: the impact of their of MBS desire to diversify the
Speaker 1: kingdom away from its mainstay of oil output. Yeah, I
Speaker 1: think it's I think it's really markable that you're saying
Speaker 1: if they're ten years too late with this, I p O.
Speaker 1: I do want to just go back to the point
Speaker 1: made in that perspective that global oil demand may peak
Speaker 1: within the next twenty years. They were citing a forecast
Speaker 1: from industry consultant I h S Market. I'm wondering, Uh,
Speaker 1: when do you think that we will see peak oil demand?
Speaker 1: I think it's Lisa. I think it's gonna be sooner
Speaker 1: rather than later. I think long term forecasting was invented
Speaker 1: to make astrology look respectable. So what I I believe
Speaker 1: my eyeballs and and my eyeballs are telling me every
Speaker 1: time that I see a Tesla or a Prius or
Speaker 1: BMW now doubling the amount of evs it's going to
Speaker 1: make two going to deliver it to the market, and
Speaker 1: the decisions by Volvo and so forth. Uh, that is
Speaker 1: oil demand that is lost. It is never coming back.
Speaker 1: I myself, I'm an oil guy. I own an electric
Speaker 1: hybrid SUV my children. I don't envision ever owning a
Speaker 1: gasoline only car. So with regard to demand, Okay, it
Speaker 1: happens sooner rather than later. Stuff. We're gonna use five
Speaker 1: as a potential jumping off point when we peak. I
Speaker 1: think it happens well before that. Steven Shark, thank you
Speaker 1: so much, really appreciate it. We protect the copyright of
Speaker 1: all our guests and particularly Mr Shark, this is a
Speaker 1: joy to have on right now, A lot for a
Speaker 1: thun who was with the Economic Cycle Research Institute. This
Speaker 1: is a venerable approach to thinking about our economy back
Speaker 1: into the thirties. And a gentleman by the name of
Speaker 1: Jeffrey Moore, which centers around E c R I economic
Speaker 1: cycles and that and also the structural changes of the
Speaker 1: American economy. I want to start with an open, open
Speaker 1: conversation as you join us from London today, you and
Speaker 1: I are at Clarridgees. We're having our usual afternoon tay
Speaker 1: and we're having a tay and someone from the United
Speaker 1: Kings turns to you and says, why is the US
Speaker 1: so dominant in technology? What is technology done to your
Speaker 1: cycle research that many, including Jeffrey Moore, didn't have to
Speaker 1: worry about. Well, it's uh, you know, these are disruptors,
Speaker 1: the various innovations, uh, and so it's certainly changing the
Speaker 1: contours of the cycle, the amplitudes of the cycle. Um
Speaker 1: here and there, but um as long as we and
Speaker 1: and by the way, when we do cycle research, we're
Speaker 1: not talking about the last decade or the last couple
Speaker 1: of decades. We're talking about the last couple of centuries
Speaker 1: during which there's been a lot of technological change, you know, um,
Speaker 1: you know these mentions of both all of these things.
Speaker 1: And so what you find is that as you have
Speaker 1: large new innovations, disruptive innovations, UM, they can change the
Speaker 1: contours of the cycle. They can um eventually lead to
Speaker 1: hopefully some productivity growth, some boost and productivity growth. UM.
Speaker 1: But as long as you are in a free market
Speaker 1: oriented economy, you also are going to be contending with
Speaker 1: the business cycle itself. And that we've seen that time
Speaker 1: and time again. We've tried to find the the circumstances
Speaker 1: under which, um, the free market cycle is not expressed,
Speaker 1: and it's fairly limited, I mean, certainly nothing that we're
Speaker 1: dealing with at the moment. So I know your research
Speaker 1: called out that the current global industrial slowdown that we're
Speaker 1: experiencing right now actually began before the trade war began
Speaker 1: in early Is that also just suggest that maybe it
Speaker 1: can start turning before we get any kind of movement
Speaker 1: on the trade deal. Yeah, absolutely it does. UM. So
Speaker 1: I think when when turning points happen, uh, and and
Speaker 1: they usually catch people off guard. UM. The natural instinct
Speaker 1: is to look around and and and look for what's
Speaker 1: salient and maybe connect the dots and say, you know,
Speaker 1: this made that happen. And and certainly the trade war,
Speaker 1: the real onset of the hard trade war developments, uh
Speaker 1: seemed to coincide with the global industrial slowdown that we've
Speaker 1: been experiencing. But actually, as you say that, the industrial
Speaker 1: slowdown began quite a bit earlier. And now everybody is,
Speaker 1: you know, hanging on bated breath, what's the next development
Speaker 1: in the in the trade war to you know, tomorrow
Speaker 1: the President is going to be speaking in New York.
Speaker 1: Is he going to give anything away in terms of
Speaker 1: what the next development is. Everybody's waiting to hear that.
Speaker 1: But meantime, the cycle itself is moving along, and our
Speaker 1: work is showing that the forward looking data the leading
Speaker 1: indicators of global industrial growth, not actual global industrial growth,
Speaker 1: but the leading indicators have have um started to move up.
Speaker 1: And so we are more oriented, we're once more ready
Speaker 1: to see an upturn in global industrial with or without
Speaker 1: the trade war end keep him for another three blocks,
Speaker 1: crisis over. I mean, if if the industrial cycle globally
Speaker 1: is going to see a stabilization, maybe beginnings of a
Speaker 1: turn up. We have to have China driving there, don't
Speaker 1: we What's going on in China? Yeah, it's interesting. What's
Speaker 1: what here? So the US, by the way, the manufacturing
Speaker 1: cycle is still decelerating. Um. Europe, I think is where
Speaker 1: everything is actually started in terms of the global industrial upturn.
Speaker 1: They seem in many ways even just becoming less bad
Speaker 1: to have kind of kicked this off. And you're right, UM,
Speaker 1: in China, UM are leading indicators of global and excuse me,
Speaker 1: of Chinese industrial production growth UM have begun to improve.
Speaker 1: I know that the p m I is the official
Speaker 1: p m I or the Jason p m I are
Speaker 1: giving conflicting signals at the moment. Uh, but our leading
Speaker 1: indicator of Chinese industrial growth is moving to the upside.
Speaker 1: They are participating. I think other kind of ex Asia,
Speaker 1: extra Japan economies are already starting to participate as well.
Speaker 1: Last and very quickly here and I want to come
Speaker 1: back and continuing this. Buried in your report is a
Speaker 1: trench in four or five paragraphs where you are adamant
Speaker 1: manufacturing is not flat on its back. What's the vector
Speaker 1: on US manufacturing right now? Uh? Well, we we are,
Speaker 1: we are at the end of the line. I'm afraid
Speaker 1: in terms of the global manufacturing cycles, we went in
Speaker 1: to the downturn later than the rest of the world,
Speaker 1: and we do not have any clear signs of an
Speaker 1: upturn there yet. And and in US manufacturing, and we
Speaker 1: are seeing some bottoming in our in our would hopefully
Speaker 1: we don't know that it's bottoming, but perhaps bottoming in
Speaker 1: the US manufacturing indicators. The problem, the fly in the
Speaker 1: ointment in the United's dates is the employment cycle, the
Speaker 1: job cycle that is still cycling down. And I think
Speaker 1: it's still happening in manufacturing. It gets a little difficult
Speaker 1: to read with the GM strike um, but it's it's there,
Speaker 1: and that's worrisome. This has been wonderful lot from Thank
Speaker 1: you so much to tell about this with the Economic
Speaker 1: Cycle Research Institute UH from London today. Thanks for listening
Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews
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