1 00:00:05,080 --> 00:00:08,440 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along 2 00:00:08,480 --> 00:00:12,320 Speaker 1: with Jonathan Farrell and Lisa Abramowitz. Join us each day 3 00:00:12,320 --> 00:00:16,800 Speaker 1: for insight from the best and economics, geopolitics, finance and investment. 4 00:00:17,239 --> 00:00:22,000 Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 5 00:00:22,239 --> 00:00:26,560 Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com, 6 00:00:26,600 --> 00:00:30,720 Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. Edward Heiman 7 00:00:30,800 --> 00:00:34,000 Speaker 1: joins us today. He is vice chairman at evercoreps ISSI 8 00:00:34,080 --> 00:00:37,559 Speaker 1: were thrilled that he will have an extended conversation with us, 9 00:00:37,560 --> 00:00:40,360 Speaker 1: and yes, we'll get to the China call here in 10 00:00:40,440 --> 00:00:43,160 Speaker 1: a bit. Edheiman, thank you so much for your generous 11 00:00:43,200 --> 00:00:48,760 Speaker 1: time this morning. You say inflation is slowing significantly. David 12 00:00:48,880 --> 00:00:52,239 Speaker 1: Rosenberg you knew him at Mary Lynch says inflation is 13 00:00:52,240 --> 00:00:56,480 Speaker 1: slowing significantly. It's on the good side. Do you see 14 00:00:56,600 --> 00:01:02,400 Speaker 1: service sector inflation slowing? Yes? I do. So. There's a 15 00:01:02,560 --> 00:01:05,479 Speaker 1: Thomas It's great to be on your program. It's it's 16 00:01:05,480 --> 00:01:08,240 Speaker 1: a trip program released in John. I tell you guys, 17 00:01:08,240 --> 00:01:14,520 Speaker 1: it's just wonderful. But there's a PMI for services and 18 00:01:14,560 --> 00:01:18,080 Speaker 1: it's dropped twenty points from seventy five to fifty five. 19 00:01:19,040 --> 00:01:23,080 Speaker 1: And there are plenty of services that I think are slowing, 20 00:01:23,560 --> 00:01:29,280 Speaker 1: particularly the financial services area, insurance, etc. But that's the key, 21 00:01:29,600 --> 00:01:34,160 Speaker 1: is to get the measure that PAL watches to slow down. 22 00:01:35,360 --> 00:01:39,679 Speaker 1: One of the big services is rents, and I'm convinced 23 00:01:39,720 --> 00:01:43,200 Speaker 1: they're going to slow dramatically and maybe even go negative. 24 00:01:43,240 --> 00:01:47,840 Speaker 1: For the shelter CPI. There are half a dozen measures 25 00:01:47,880 --> 00:01:53,000 Speaker 1: of rents, surveys of rents, and they've all slowed significantly, 26 00:01:53,880 --> 00:01:57,320 Speaker 1: if not declined, over the past nine months, and they 27 00:01:57,400 --> 00:02:02,320 Speaker 1: leave the shelter CPI by about eight months. So I'm 28 00:02:02,360 --> 00:02:05,440 Speaker 1: a couple of months late now on this showing up, 29 00:02:05,760 --> 00:02:10,679 Speaker 1: but I think the shelter is gonna slow. And then 30 00:02:11,240 --> 00:02:15,639 Speaker 1: before if you ask it, wagers are gonna slow. If 31 00:02:16,040 --> 00:02:19,919 Speaker 1: if Mackenzie is laying off people, what can you say, Well, 32 00:02:19,919 --> 00:02:22,079 Speaker 1: can we make news here today as ever core SI 33 00:02:22,240 --> 00:02:27,200 Speaker 1: laying off people, I mean you know they may lay 34 00:02:27,240 --> 00:02:30,160 Speaker 1: off me. If inflation does this slowly, that's uh, well, 35 00:02:30,520 --> 00:02:33,040 Speaker 1: we've heard this in C. J. Lawrence and Julian Emmanuel 36 00:02:33,120 --> 00:02:35,720 Speaker 1: be very careful here with a tough guy and Iyman 37 00:02:36,000 --> 00:02:38,000 Speaker 1: and I want to cut to the chase, which is 38 00:02:38,000 --> 00:02:41,000 Speaker 1: the heritage is what you've done since C. J. Lawrence. 39 00:02:41,000 --> 00:02:43,320 Speaker 1: I mean it goes back to Wayne Angel. It's about 40 00:02:43,400 --> 00:02:47,359 Speaker 1: monitoring M two. Is you know M two is in disrepute. 41 00:02:47,680 --> 00:02:50,960 Speaker 1: Let's say over the last decade, why are you following 42 00:02:51,160 --> 00:02:54,600 Speaker 1: M two and it's collapse so carefully in your research? 43 00:02:54,720 --> 00:02:59,600 Speaker 1: Note So, I've met Milton Friedman when I was twenty 44 00:02:59,600 --> 00:03:06,920 Speaker 1: three years old, and in the seventies he was became 45 00:03:06,960 --> 00:03:10,280 Speaker 1: a rock star, and every time you had about of 46 00:03:10,320 --> 00:03:15,360 Speaker 1: inflation money growth accelerated ten to fifteen percent, and so 47 00:03:15,400 --> 00:03:18,960 Speaker 1: it was an easy connection in that regard. Then getting 48 00:03:18,960 --> 00:03:23,400 Speaker 1: to today, bank deposits, which are eighty five percent of 49 00:03:23,480 --> 00:03:26,600 Speaker 1: the mice supply, are a practical way to track it 50 00:03:26,840 --> 00:03:32,360 Speaker 1: every week, and they have declined significantly. They're down about 51 00:03:32,360 --> 00:03:35,680 Speaker 1: two percent now and they've declined one hundred billion in 52 00:03:35,720 --> 00:03:40,600 Speaker 1: the past two weeks. This is going back to the 53 00:03:40,680 --> 00:03:45,280 Speaker 1: nineteen thirties to have a situation like this. Now, we 54 00:03:45,400 --> 00:03:49,520 Speaker 1: found over a decade that the mice supply might not 55 00:03:49,640 --> 00:03:53,040 Speaker 1: have much of an impact if it's in a normal range, 56 00:03:53,120 --> 00:03:56,520 Speaker 1: say five to ten percent. I think Margaret Thatcher found 57 00:03:56,560 --> 00:04:00,000 Speaker 1: that out when she was trying to gear Monterrey Paul, 58 00:04:00,000 --> 00:04:03,120 Speaker 1: I'll see with Freeman off of swings and the money supply. 59 00:04:03,560 --> 00:04:07,800 Speaker 1: But last year the money supply increased almost thirty percent. 60 00:04:08,960 --> 00:04:12,960 Speaker 1: The year before that, government outlays increased fifty percent, and 61 00:04:13,000 --> 00:04:17,720 Speaker 1: the Fed monetized it. And now MP two last week 62 00:04:17,839 --> 00:04:23,600 Speaker 1: was minus three percent, which is a ominous or significant climb, 63 00:04:24,360 --> 00:04:30,440 Speaker 1: and it leads by one and two years. So you 64 00:04:30,480 --> 00:04:35,839 Speaker 1: can't see it on the program you have this this morning, 65 00:04:35,960 --> 00:04:38,200 Speaker 1: but it's it's coming, and I think it shows up 66 00:04:38,240 --> 00:04:42,280 Speaker 1: in some of the slowdown of inflation readings we're seeing now, 67 00:04:42,360 --> 00:04:46,640 Speaker 1: like container freight rates, well, natural game. This really speaks 68 00:04:46,680 --> 00:04:49,839 Speaker 1: to long and variable lags. Ed this discussion around the 69 00:04:49,920 --> 00:04:52,720 Speaker 1: tightening and the removal of accommodation and how long it's 70 00:04:52,760 --> 00:04:54,520 Speaker 1: going to take before we start seeing it the data, 71 00:04:54,600 --> 00:04:56,920 Speaker 1: and as you say, you and many others have been 72 00:04:56,960 --> 00:04:58,719 Speaker 1: surprised that we are not seeing it more and that 73 00:04:58,720 --> 00:05:01,720 Speaker 1: you're even seeing a re excel leration in certain inflationary 74 00:05:01,720 --> 00:05:05,960 Speaker 1: reads in specific segments of the economy. What does long 75 00:05:06,040 --> 00:05:08,320 Speaker 1: and variable lags look like in twenty twenty three, in 76 00:05:08,400 --> 00:05:11,880 Speaker 1: an era of so many cross currents of different trends 77 00:05:13,160 --> 00:05:17,240 Speaker 1: one in two years, That's that was the standard. We 78 00:05:17,480 --> 00:05:21,400 Speaker 1: do a lot of standard for Milton Friedman, We've done 79 00:05:21,960 --> 00:05:26,960 Speaker 1: a lot of econometric work on global short rates. They 80 00:05:27,040 --> 00:05:29,600 Speaker 1: lead by one in two years, and if you'll hang 81 00:05:29,640 --> 00:05:34,320 Speaker 1: on for a second. In nineteen twenty three, nineteen twenty three, 82 00:05:35,240 --> 00:05:38,200 Speaker 1: John Maynard Kane sort of paper that said the mine 83 00:05:38,200 --> 00:05:45,200 Speaker 1: supply leads by sixteen months. So I've not been I've 84 00:05:45,200 --> 00:05:47,600 Speaker 1: been surprised, but i haven't been fighting the idea of 85 00:05:47,600 --> 00:05:51,120 Speaker 1: the economy is strong now because a year ago FED 86 00:05:51,200 --> 00:05:58,839 Speaker 1: funds were zero zero, QWE was in place, and the 87 00:05:58,960 --> 00:06:02,760 Speaker 1: mince supply was around Yeah, you know, those are all 88 00:06:02,880 --> 00:06:06,479 Speaker 1: out totally different, and so that will show up more 89 00:06:06,560 --> 00:06:08,680 Speaker 1: towards the end of this year and on end of 90 00:06:08,720 --> 00:06:11,160 Speaker 1: twenty twenty four. I think until we see the long 91 00:06:11,200 --> 00:06:14,000 Speaker 1: and variable lags actually play out. People are talking about 92 00:06:14,000 --> 00:06:16,920 Speaker 1: a no landing scenario that we possibly could avoid any 93 00:06:17,000 --> 00:06:19,839 Speaker 1: kind of recession or downturn or even a significant slowdown 94 00:06:19,880 --> 00:06:23,240 Speaker 1: and end up reaccelerating into a new bull market. Do 95 00:06:23,320 --> 00:06:26,280 Speaker 1: you push back against that and say, look, in a year, 96 00:06:26,400 --> 00:06:28,680 Speaker 1: two years, we're going to see some sort of downturn. 97 00:06:28,720 --> 00:06:31,760 Speaker 1: And the longer that you have faith in this no 98 00:06:32,040 --> 00:06:36,960 Speaker 1: landing scenario, the more potentially fraught. It could be on 99 00:06:37,040 --> 00:06:41,120 Speaker 1: the no landing card. I mentioned long and variable lags, 100 00:06:41,720 --> 00:06:46,960 Speaker 1: and they're pretty painful. Reinhart Rogue a piece in early 101 00:06:47,600 --> 00:06:51,560 Speaker 1: two thousand and nine criticizing people that had moved to 102 00:06:51,640 --> 00:06:55,760 Speaker 1: the view that we would have no recession, that the 103 00:06:55,960 --> 00:07:00,839 Speaker 1: housing weakness would be contained and it's different time became 104 00:07:00,960 --> 00:07:04,880 Speaker 1: very popular, and that's what's going to happen. That's what's 105 00:07:04,920 --> 00:07:09,880 Speaker 1: happening now and will continue to happen. But I think, 106 00:07:10,040 --> 00:07:14,080 Speaker 1: judging by it, will end up creating a re section 107 00:07:14,240 --> 00:07:17,560 Speaker 1: for the end of this year or into twenty four. 108 00:07:18,080 --> 00:07:21,000 Speaker 1: But it's going to be pretty painful. And the no 109 00:07:21,200 --> 00:07:23,800 Speaker 1: landing story, I think he's looking at things right now, 110 00:07:24,680 --> 00:07:29,000 Speaker 1: right now doing great well, you know with that hymen folks, 111 00:07:29,000 --> 00:07:31,040 Speaker 1: and we welcome all of you on radio and television 112 00:07:31,160 --> 00:07:33,360 Speaker 1: generous to be with us for this half hour. I 113 00:07:33,400 --> 00:07:36,080 Speaker 1: do want to point out that there's a full econometric 114 00:07:36,600 --> 00:07:39,320 Speaker 1: display in his research note, including in our square to 115 00:07:39,440 --> 00:07:42,000 Speaker 1: sixty eight percent on what short rates are going to 116 00:07:42,040 --> 00:07:44,520 Speaker 1: be doing. But to get out front, folks, we protect 117 00:07:44,520 --> 00:07:47,520 Speaker 1: the copyright of all of our guests. Go to evercres 118 00:07:47,520 --> 00:07:50,040 Speaker 1: Is side to get the ed Hyman Jack Rippi and 119 00:07:50,040 --> 00:07:53,720 Speaker 1: the rest of them. Religion if you will, and Hyman, 120 00:07:53,800 --> 00:07:56,560 Speaker 1: I want you to speak to those younger. They didn't 121 00:07:56,600 --> 00:07:59,120 Speaker 1: read you at C. J. Lawrence. They barely know your 122 00:07:59,160 --> 00:08:03,800 Speaker 1: research note over core Issi. They've never faced this rate structure, 123 00:08:03,880 --> 00:08:07,679 Speaker 1: this return to a real rate. There's a whole feeling 124 00:08:07,840 --> 00:08:12,280 Speaker 1: life can't go on. Explain how life goes on if 125 00:08:12,320 --> 00:08:17,480 Speaker 1: we come back to a legitimate interest rate regime. It 126 00:08:17,520 --> 00:08:20,400 Speaker 1: seems to me, Tom that we're already getting into an 127 00:08:20,480 --> 00:08:24,560 Speaker 1: environment where life goes on because the economy is doing 128 00:08:24,840 --> 00:08:28,800 Speaker 1: so well right now. I know their lags involved, but 129 00:08:28,920 --> 00:08:32,880 Speaker 1: the stock market, you know, is pretty contemporaneous, and they 130 00:08:32,920 --> 00:08:37,360 Speaker 1: know that rates are high, and so I think we're 131 00:08:37,440 --> 00:08:42,240 Speaker 1: getting there. But it's a learning process. The FIT, I think, 132 00:08:42,320 --> 00:08:47,360 Speaker 1: is doing a pretty good job of communicating what their 133 00:08:47,520 --> 00:08:51,040 Speaker 1: plans are. If I was them, I would pause and 134 00:08:51,160 --> 00:08:54,640 Speaker 1: see what they've gotten done so far, and then is 135 00:08:54,679 --> 00:08:57,280 Speaker 1: that they need to keep going They can. It turns 136 00:08:57,280 --> 00:09:01,719 Speaker 1: out they should continue to pause or cut race, and 137 00:09:01,760 --> 00:09:04,480 Speaker 1: they can do through that. I would pause, given how 138 00:09:04,520 --> 00:09:07,520 Speaker 1: much water's under the bridge, and iiman as we speak 139 00:09:07,520 --> 00:09:09,640 Speaker 1: to you, it is images of the President of the 140 00:09:09,720 --> 00:09:13,120 Speaker 1: United States meeting with a Bucharest nine. Of course, this 141 00:09:13,280 --> 00:09:16,680 Speaker 1: historic moment for Eastern Europe after the President's trip to 142 00:09:17,000 --> 00:09:20,400 Speaker 1: Ukraine him and I say this with immense respect, and 143 00:09:20,480 --> 00:09:24,040 Speaker 1: you remember the politics that we've all faced. How do 144 00:09:24,120 --> 00:09:28,760 Speaker 1: you overlay the politics of the nation into what has 145 00:09:28,760 --> 00:09:32,880 Speaker 1: been a multiple decade Himan optimism. How do you take 146 00:09:32,880 --> 00:09:36,640 Speaker 1: the challenges of the time of Jimmy Carter, fold them 147 00:09:36,640 --> 00:09:39,920 Speaker 1: over to the time of Joe Biden and overlay them 148 00:09:40,040 --> 00:09:44,640 Speaker 1: on a belief in the American economy. That's too much 149 00:09:44,920 --> 00:09:49,880 Speaker 1: for this morning, But you know, I have a deep 150 00:09:49,920 --> 00:09:57,680 Speaker 1: respect for democracy, and I'm a conservative, but I see 151 00:09:58,559 --> 00:10:01,680 Speaker 1: a benefit in the back and forth that we have 152 00:10:02,040 --> 00:10:05,760 Speaker 1: going on right now. I think it's too extreme, but 153 00:10:06,679 --> 00:10:10,480 Speaker 1: it plays a role in our system, and so at 154 00:10:10,520 --> 00:10:14,720 Speaker 1: the moment, I don't see it being a terrible impediment. 155 00:10:16,040 --> 00:10:19,480 Speaker 1: Pal is doing what he's doing. I don't know if 156 00:10:19,480 --> 00:10:23,760 Speaker 1: you have seen it, but the federal outlays are scheduled 157 00:10:23,800 --> 00:10:27,760 Speaker 1: to decline about five percent this year in twenty twenty three. 158 00:10:28,600 --> 00:10:34,800 Speaker 1: Now that's they went up twenty twenty nine. Does not 159 00:10:34,880 --> 00:10:39,680 Speaker 1: celebrate too too much, but it is a crazy world. 160 00:10:40,920 --> 00:10:43,480 Speaker 1: The parts that I find most troubling and I'm sure 161 00:10:43,520 --> 00:10:48,120 Speaker 1: you do too. Is the war situation and also the 162 00:10:48,160 --> 00:10:54,199 Speaker 1: situation in China, which I'm constructive on, but they definitely 163 00:10:55,440 --> 00:10:58,600 Speaker 1: they have a more problematic situation politically than we do. 164 00:10:58,720 --> 00:11:01,040 Speaker 1: Did you stop traffic here the last time you're on 165 00:11:01,720 --> 00:11:05,480 Speaker 1: with an optimism on the China reopening, I believe you'd 166 00:11:05,480 --> 00:11:08,760 Speaker 1: have adjusted real GDP. Where's your number right now on 167 00:11:08,840 --> 00:11:12,920 Speaker 1: a China reopening? Is it still near six percent? We 168 00:11:13,000 --> 00:11:14,559 Speaker 1: have six at the end of the end of the year. 169 00:11:15,520 --> 00:11:20,079 Speaker 1: It's a complicated situation, actually a little more complicated than 170 00:11:20,120 --> 00:11:22,920 Speaker 1: I expected, but we still think it's going to be 171 00:11:23,400 --> 00:11:29,840 Speaker 1: very strong. They're opening up, and I've learned either the 172 00:11:29,880 --> 00:11:32,480 Speaker 1: hardware the easy way. That makes a very big difference. 173 00:11:33,480 --> 00:11:37,079 Speaker 1: When we had the pandemic collapse and China did. I 174 00:11:37,160 --> 00:11:40,560 Speaker 1: learned from China because their GDP was minus fifty and 175 00:11:40,640 --> 00:11:44,080 Speaker 1: so I was estimating minus fifty for the US, which 176 00:11:44,160 --> 00:11:48,600 Speaker 1: wasn't too far off. And then we had a big 177 00:11:48,640 --> 00:11:54,920 Speaker 1: rebound and GDP was something like thirty and that same 178 00:11:55,559 --> 00:11:57,760 Speaker 1: China and in the US, and so they have that 179 00:11:57,880 --> 00:12:02,000 Speaker 1: dynamic coming on now they reopened and it seems to 180 00:12:02,040 --> 00:12:06,760 Speaker 1: be pretty successful. They've gotten through the pandemic and a 181 00:12:06,920 --> 00:12:09,800 Speaker 1: very big percentage of people, very big percentage of people 182 00:12:09,840 --> 00:12:14,080 Speaker 1: have had the virus, and so that they have a 183 00:12:14,280 --> 00:12:21,720 Speaker 1: current immunity going on. Plus stimulus YEA working through the system. Well, 184 00:12:22,640 --> 00:12:24,559 Speaker 1: how much will that actually trickle into the rest of 185 00:12:24,559 --> 00:12:27,640 Speaker 1: the global economy given the increasing isolation of China, both 186 00:12:27,679 --> 00:12:32,199 Speaker 1: deliberately for a more focus on nationalism versus also an 187 00:12:32,200 --> 00:12:35,360 Speaker 1: isolation with respect to the fissures that we hear right 188 00:12:35,400 --> 00:12:39,960 Speaker 1: now with China in Russia, Lisa, I think they'll I 189 00:12:40,000 --> 00:12:45,240 Speaker 1: think they'll export, you know, once they get the factories going. 190 00:12:46,040 --> 00:12:50,560 Speaker 1: I think they'll be an increased source of exports. Just 191 00:12:50,760 --> 00:12:59,079 Speaker 1: recently they became the biggest exporter of vehicles, and so 192 00:12:59,160 --> 00:13:00,520 Speaker 1: I think they'll do that. And I think they're going 193 00:13:00,600 --> 00:13:05,840 Speaker 1: to push up commodity prices like copper, but then come 194 00:13:05,880 --> 00:13:10,160 Speaker 1: in and push down finished good prices. I will say 195 00:13:10,160 --> 00:13:14,880 Speaker 1: that I'm watching most closely the price of oil and 196 00:13:15,080 --> 00:13:19,680 Speaker 1: that is my north star as to how China is 197 00:13:19,679 --> 00:13:25,360 Speaker 1: progressing right now, and all prices which I look at 198 00:13:25,760 --> 00:13:31,800 Speaker 1: Bloomberg frankly, all of the dime they're pretty quiet right now, 199 00:13:31,880 --> 00:13:37,160 Speaker 1: around seventy five dollars for West Texas, and so that 200 00:13:37,200 --> 00:13:43,120 Speaker 1: tells me that China hasn't gotten ripping ahead yet. I 201 00:13:43,440 --> 00:13:46,040 Speaker 1: think that's coming. All prices will go up. This is 202 00:13:46,040 --> 00:13:48,040 Speaker 1: incredibly important because a lot of people have come on 203 00:13:48,080 --> 00:13:51,360 Speaker 1: this program at and said that the oil is incredibly 204 00:13:51,440 --> 00:13:53,920 Speaker 1: muddied in terms of the price signal, given the fact 205 00:13:53,960 --> 00:13:56,320 Speaker 1: that people are changing to renewables, given the fact that 206 00:13:56,400 --> 00:14:00,240 Speaker 1: China has increased domestic production of wind of soul, of 207 00:14:00,280 --> 00:14:03,600 Speaker 1: even using coal, or exporting or importing some of the 208 00:14:03,800 --> 00:14:06,680 Speaker 1: materials from Australia. Are you saying that that's not true 209 00:14:06,800 --> 00:14:10,400 Speaker 1: that oil is the cleanest read on what's happening with China. 210 00:14:10,520 --> 00:14:13,120 Speaker 1: I think that's a fair point. I think it's an 211 00:14:13,160 --> 00:14:18,080 Speaker 1: excellent point. And on the price of oil, it's just 212 00:14:18,120 --> 00:14:22,280 Speaker 1: to pick one commodity price. If things like what you're 213 00:14:22,320 --> 00:14:27,360 Speaker 1: mentioning are true for a number of commodity prices, it 214 00:14:27,480 --> 00:14:31,280 Speaker 1: could feed into my wrong view that inflation is going 215 00:14:31,320 --> 00:14:34,920 Speaker 1: to be less than what people expect. Not to mention 216 00:14:34,960 --> 00:14:37,840 Speaker 1: the fact that the money supply is contracted, but I 217 00:14:37,880 --> 00:14:43,160 Speaker 1: think some of these technological advances that you mentioned, could 218 00:14:43,600 --> 00:14:46,920 Speaker 1: you know, put dour pressure on some commodities. Now a 219 00:14:47,240 --> 00:14:50,320 Speaker 1: money like copper is right in the middle of the 220 00:14:50,480 --> 00:14:56,280 Speaker 1: technology advances. You need to copper wires to make the 221 00:14:56,320 --> 00:15:00,760 Speaker 1: technologies work. But some other commodities, I mean watching natural 222 00:15:00,800 --> 00:15:04,280 Speaker 1: gas and you can see making new lows, both in 223 00:15:04,320 --> 00:15:07,880 Speaker 1: Europe and in the US, and you can see when 224 00:15:07,880 --> 00:15:14,200 Speaker 1: that happens. It really helps economic activity on a current basis, right, 225 00:15:14,320 --> 00:15:18,600 Speaker 1: particularly Europe. But I think it's also working a little 226 00:15:18,600 --> 00:15:22,440 Speaker 1: bit here. I mean, I understand that you know, once 227 00:15:22,480 --> 00:15:25,520 Speaker 1: a week, maybe once a quarter, you read Julian Emmanuel's 228 00:15:25,520 --> 00:15:29,800 Speaker 1: work at evercore is SI. But let's dovetail the stock market, 229 00:15:29,800 --> 00:15:35,600 Speaker 1: the equity market, and ownership of American equities into your economics. 230 00:15:36,000 --> 00:15:38,240 Speaker 1: With all of this said, are we at a point 231 00:15:38,280 --> 00:15:41,520 Speaker 1: of nineteen seventy five or maybe the great bull market 232 00:15:41,520 --> 00:15:45,480 Speaker 1: of nineteen eighty two, where corporations like they did then, 233 00:15:45,960 --> 00:15:52,560 Speaker 1: will adapt and adjust and prosper well. First, we have 234 00:15:52,600 --> 00:15:59,680 Speaker 1: an open office architecture. I learned this from Michael Bloomberg. 235 00:16:02,800 --> 00:16:07,480 Speaker 1: This is when you were on Park Avenue, and so 236 00:16:07,560 --> 00:16:10,760 Speaker 1: we have. And so I am cursed with the fact 237 00:16:10,760 --> 00:16:14,080 Speaker 1: that Julian sits right next to me, So I have 238 00:16:14,120 --> 00:16:15,800 Speaker 1: to put one up with the guy all the time. 239 00:16:16,680 --> 00:16:19,040 Speaker 1: But he is he is terrific and thinks the world 240 00:16:19,200 --> 00:16:25,600 Speaker 1: of all three of you. But on the current picture, 241 00:16:26,960 --> 00:16:31,960 Speaker 1: my view is that inflation is the key. The FED 242 00:16:32,280 --> 00:16:37,720 Speaker 1: is going to keep tightening until either the economy slows 243 00:16:38,640 --> 00:16:45,440 Speaker 1: or inflation slows significantly. And I think the inflation is 244 00:16:45,440 --> 00:16:48,560 Speaker 1: slowing more than the FED things. And a year ago, 245 00:16:48,640 --> 00:16:55,800 Speaker 1: if I may say, I was pretty agitated that transitory 246 00:16:56,160 --> 00:17:00,840 Speaker 1: was the wrong idea. Inflation was going up everywhere, every 247 00:17:00,840 --> 00:17:02,960 Speaker 1: place I looked at was going up, and the FED 248 00:17:03,080 --> 00:17:07,280 Speaker 1: kept saying transitory and they kept rate to zero. And 249 00:17:07,440 --> 00:17:12,360 Speaker 1: now I see inflation coming down in most places. Unfortunately, 250 00:17:13,359 --> 00:17:16,399 Speaker 1: it's not coming down in the most visible places that 251 00:17:16,520 --> 00:17:20,280 Speaker 1: the FED looks at, like the consumer Price Index or 252 00:17:20,400 --> 00:17:24,400 Speaker 1: the PC. But as a student of this, I see 253 00:17:24,400 --> 00:17:27,800 Speaker 1: it coming down in so many places underneath the surface, 254 00:17:29,359 --> 00:17:32,360 Speaker 1: in the real world, if you will, and I think 255 00:17:32,400 --> 00:17:35,760 Speaker 1: inflation is going to keep coming down, I think it 256 00:17:35,760 --> 00:17:39,560 Speaker 1: could undershoot the FIDS target two. Ed Hyman, thank you 257 00:17:39,600 --> 00:17:41,520 Speaker 1: so much for this half hour. Generous of you to 258 00:17:41,560 --> 00:17:53,040 Speaker 1: be with us. Edward Hyman is ever court I side. 259 00:17:54,960 --> 00:17:57,439 Speaker 1: Let's talk about how stale these FED minutes A So 260 00:17:57,520 --> 00:18:00,160 Speaker 1: that FED meeting was at the start of February. Since then, 261 00:18:00,560 --> 00:18:03,600 Speaker 1: when chem and Pou said the disinflationary process has started. 262 00:18:03,680 --> 00:18:07,159 Speaker 1: We've had payrolls at five hundred and seventeen thousand, unemployment 263 00:18:07,160 --> 00:18:09,800 Speaker 1: at three point four percent, big jump in the ICEM 264 00:18:09,920 --> 00:18:12,399 Speaker 1: Service s Index for the month of January. CPI not 265 00:18:12,480 --> 00:18:15,320 Speaker 1: dropping as quickly as people hoped for. PPI delivering an 266 00:18:15,359 --> 00:18:18,719 Speaker 1: upside surprise retail sales with a three hand tool. And 267 00:18:18,760 --> 00:18:20,600 Speaker 1: then we've got a first look at February with a 268 00:18:20,680 --> 00:18:24,080 Speaker 1: PMI yesterday improven as well. Jeff you joins us right 269 00:18:24,119 --> 00:18:26,000 Speaker 1: now of Bmy Melon and Jeff, I guess I'm going 270 00:18:26,040 --> 00:18:28,120 Speaker 1: to lead with a question I've already answered, just how 271 00:18:28,119 --> 00:18:31,399 Speaker 1: stared at these minutes they applied sale not just in 272 00:18:31,480 --> 00:18:34,080 Speaker 1: domestic sense, but in the international sense as well. Look 273 00:18:34,080 --> 00:18:37,800 Speaker 1: at what's going on globally. Your services m I wrong 274 00:18:37,840 --> 00:18:40,879 Speaker 1: in the UK, in the Eurozone went forth for Jeremy 275 00:18:40,960 --> 00:18:43,280 Speaker 1: Hunt deer chancefer that. So are we going to look 276 00:18:43,280 --> 00:18:46,080 Speaker 1: at fistal similars in our Europe? And that's one trade 277 00:18:46,080 --> 00:18:48,760 Speaker 1: side which the US is it's supposed to what'sover in China. 278 00:18:49,000 --> 00:18:51,240 Speaker 1: So now not just a mestic side. Are strong for 279 00:18:51,280 --> 00:18:53,960 Speaker 1: the US economy, You're looking at an external lift as well. 280 00:18:54,359 --> 00:18:56,320 Speaker 1: So going back to the point made earlier, so higher 281 00:18:56,400 --> 00:18:58,399 Speaker 1: rates the price of the great wi have to be 282 00:18:58,440 --> 00:19:00,720 Speaker 1: a price. Why isn't it something to sell rate? And 283 00:19:00,840 --> 00:19:02,800 Speaker 1: Jeff you I look at this in your student of 284 00:19:02,920 --> 00:19:07,560 Speaker 1: history and this as well OMG rates. Higher inflation, if 285 00:19:07,600 --> 00:19:13,119 Speaker 1: not higher, at least inflation or disinflation sustain. And the 286 00:19:13,280 --> 00:19:16,800 Speaker 1: basic simplistic thought is the world will come to an 287 00:19:16,920 --> 00:19:19,080 Speaker 1: end as we know it. There will not be revenues, 288 00:19:19,080 --> 00:19:21,840 Speaker 1: there will not be earnings. Life won't go on, And 289 00:19:21,960 --> 00:19:25,040 Speaker 1: yet history says the complete opposite. How do we come 290 00:19:25,160 --> 00:19:28,679 Speaker 1: people down that life will go on? Well, well, I 291 00:19:28,720 --> 00:19:30,600 Speaker 1: think they're going to need to look at the margins. 292 00:19:30,640 --> 00:19:32,399 Speaker 1: They're going to have to look at earnings. So maybe 293 00:19:32,520 --> 00:19:35,080 Speaker 1: a couple of weeks ago the spot by Dob Losses 294 00:19:35,119 --> 00:19:38,520 Speaker 1: and the tech sector thists talk about a margin recession 295 00:19:38,760 --> 00:19:40,440 Speaker 1: a bit more so on the top line. But again 296 00:19:40,520 --> 00:19:42,399 Speaker 1: let's just look at what under line demanders. Look at 297 00:19:42,400 --> 00:19:44,919 Speaker 1: the at receipts in the UK and Europe, they are rising. 298 00:19:45,119 --> 00:19:48,760 Speaker 1: People are spending on the continent normally where people are savers, 299 00:19:48,880 --> 00:19:50,840 Speaker 1: they are starting to spend a Seeing that energy bills 300 00:19:50,840 --> 00:19:53,640 Speaker 1: starting to come down, they saved for very high energy 301 00:19:53,680 --> 00:19:56,080 Speaker 1: bills in an oil above a hundred, but now it's 302 00:19:56,119 --> 00:19:58,040 Speaker 1: not come to that, so maybe they can use in 303 00:19:58,080 --> 00:20:00,679 Speaker 1: their purse springs again. So let's look at earnings upside 304 00:20:00,680 --> 00:20:03,679 Speaker 1: surprises that will probably calm people down. Jeff. If you 305 00:20:03,720 --> 00:20:05,359 Speaker 1: take the j unfair of view of the world and 306 00:20:05,440 --> 00:20:07,720 Speaker 1: you create your ear a head outlook on March thirty first, 307 00:20:08,000 --> 00:20:10,399 Speaker 1: how would you reshape it right now? Based on what 308 00:20:10,440 --> 00:20:12,240 Speaker 1: people were going into the year of feeling that there 309 00:20:12,280 --> 00:20:14,800 Speaker 1: could be some sort of softness the first half, then 310 00:20:14,920 --> 00:20:16,679 Speaker 1: a real strength in the back half. Now people have 311 00:20:16,680 --> 00:20:20,080 Speaker 1: adjusted to real weakness in the first real strength in 312 00:20:20,119 --> 00:20:22,280 Speaker 1: the first half, and weakness in the second half. Where 313 00:20:22,320 --> 00:20:26,359 Speaker 1: do you land? So I would still land on no recession, 314 00:20:26,520 --> 00:20:28,159 Speaker 1: and we were skepticaled that there was going to be 315 00:20:28,160 --> 00:20:30,359 Speaker 1: a chance of a heavy recession in the first place, 316 00:20:30,359 --> 00:20:33,640 Speaker 1: and certainly at a higher level for longer. It's probably 317 00:20:33,680 --> 00:20:36,080 Speaker 1: not in the camp of Oh, let's think about above 318 00:20:36,200 --> 00:20:39,639 Speaker 1: six percent or something wild along those lines. Is trend 319 00:20:39,680 --> 00:20:42,480 Speaker 1: growth in the US or globally higher than where we 320 00:20:42,480 --> 00:20:44,720 Speaker 1: were fifteen to twenty years ago. Absolutely not. So no 321 00:20:44,800 --> 00:20:46,760 Speaker 1: gravity will come to play a role at some point, 322 00:20:46,800 --> 00:20:48,720 Speaker 1: but we have to land in a place where it's 323 00:20:49,280 --> 00:20:52,560 Speaker 1: real rates or longer and asset allocation we'll have to 324 00:20:52,600 --> 00:20:55,520 Speaker 1: follow when I'm following right now. Also cash on the sidelines, 325 00:20:55,640 --> 00:20:57,560 Speaker 1: money has to be put at work. Where is it 326 00:20:57,600 --> 00:20:59,240 Speaker 1: going to go? I still don't think it's going to 327 00:20:59,280 --> 00:21:01,560 Speaker 1: be in the dollar, because most people own that already. 328 00:21:01,640 --> 00:21:04,280 Speaker 1: Will Jeff, let's put it all together. I said the Barclays. 329 00:21:04,280 --> 00:21:07,200 Speaker 1: It's said the higher yield, higher rates at a price 330 00:21:07,240 --> 00:21:08,800 Speaker 1: to pay for better growth. And you said, why is 331 00:21:08,840 --> 00:21:11,480 Speaker 1: that a price? That's something we should celebrate any you 332 00:21:11,560 --> 00:21:14,920 Speaker 1: celebrate it. Well if you have an Europe for example, 333 00:21:14,960 --> 00:21:17,359 Speaker 1: if you look at pace like Switzerland right, which has 334 00:21:17,400 --> 00:21:20,399 Speaker 1: struggled with unlow rates for a long time, and we 335 00:21:20,400 --> 00:21:22,520 Speaker 1: discussed this a couple of months ago, you know, suddenly 336 00:21:22,560 --> 00:21:25,680 Speaker 1: the financial services industry there will be able to offer 337 00:21:25,760 --> 00:21:27,959 Speaker 1: yields and to actually keep money on shore as well. 338 00:21:28,000 --> 00:21:30,480 Speaker 1: So this is going to change the flow dynamic whereby 339 00:21:30,520 --> 00:21:34,359 Speaker 1: everyone blindly chasing yield, sometimes not of the dubious credit quality. 340 00:21:34,400 --> 00:21:36,960 Speaker 1: I might add, you can now look for the better 341 00:21:37,080 --> 00:21:40,760 Speaker 1: gems out there, stay onshore in particularly savings heavy's economies, 342 00:21:40,840 --> 00:21:44,080 Speaker 1: and then domestic productivity, because higher yield means there are 343 00:21:44,119 --> 00:21:47,399 Speaker 1: rather higher returns domestically to generate that as well. So 344 00:21:47,440 --> 00:21:49,760 Speaker 1: I would see this as a good thing, but as allocation, 345 00:21:49,960 --> 00:21:51,720 Speaker 1: they need to just go with an you play book. 346 00:21:51,800 --> 00:21:55,359 Speaker 1: I'm a simple man. Does that mean by banks? Well, 347 00:21:55,400 --> 00:21:58,760 Speaker 1: if we look at our high folcus flows financials both 348 00:21:58,800 --> 00:22:03,000 Speaker 1: in emerging markets and developed markets, financials the most sold 349 00:22:03,040 --> 00:22:06,000 Speaker 1: sector globally, full stop, right, And that's what's telling me 350 00:22:06,080 --> 00:22:08,960 Speaker 1: is we have high front end yields, high funding costs, 351 00:22:09,000 --> 00:22:12,479 Speaker 1: but there's no loan demand out there. That's the missing link, right, 352 00:22:12,960 --> 00:22:14,960 Speaker 1: go back to Tom Leis to talk about the velocity 353 00:22:14,960 --> 00:22:17,439 Speaker 1: of money that has not picked up because people are 354 00:22:17,440 --> 00:22:20,800 Speaker 1: still scared. But if we see a consumer demand and 355 00:22:20,960 --> 00:22:23,960 Speaker 1: further analyte industrial demand out there, then banks can start 356 00:22:24,000 --> 00:22:26,040 Speaker 1: to lend. There will be a margin, but that is 357 00:22:26,080 --> 00:22:27,920 Speaker 1: where the opportunity is going to be given the amount 358 00:22:27,920 --> 00:22:30,280 Speaker 1: of setting we've seen. Hey, Jeff, this was fun. As always. 359 00:22:30,280 --> 00:22:32,280 Speaker 1: It's going to hatch up, Jeff. You there a senior 360 00:22:32,280 --> 00:22:40,240 Speaker 1: amount strategist over at bmy melon driving forward right now 361 00:22:40,240 --> 00:22:42,399 Speaker 1: and this is a joy. Emrida send all of these 362 00:22:42,440 --> 00:22:44,680 Speaker 1: strategists fools take a different view. And what I love 363 00:22:44,680 --> 00:22:48,000 Speaker 1: about Amrita send half of maybe Jeff Curry and as 364 00:22:48,040 --> 00:22:51,280 Speaker 1: microeconomics at Chicago. She really looks at the dynamics of 365 00:22:51,440 --> 00:22:54,000 Speaker 1: supply and demand. Co founder and head of research in 366 00:22:54,240 --> 00:22:57,920 Speaker 1: Energy Aspects in London and reader as simple as I can, 367 00:22:58,000 --> 00:23:01,040 Speaker 1: and I don't need a central theorem lesson, but what's 368 00:23:01,040 --> 00:23:04,479 Speaker 1: a correlation of your world right now to the stack 369 00:23:04,560 --> 00:23:09,960 Speaker 1: in bond upset we're living, how does crude correlate? Great question, Tom, 370 00:23:10,000 --> 00:23:12,600 Speaker 1: and as always, thank you for having me. Always a pleasure. 371 00:23:13,240 --> 00:23:15,119 Speaker 1: I mean, look, I think part of the problem is 372 00:23:15,320 --> 00:23:19,359 Speaker 1: crude oil specific fundamentals are not particularly strong. We've built 373 00:23:19,359 --> 00:23:23,120 Speaker 1: a ton of infantries, We've had bad weather, we've obviously 374 00:23:23,160 --> 00:23:26,080 Speaker 1: had we do have right now a lot of refinery maintenance. 375 00:23:26,080 --> 00:23:29,359 Speaker 1: And that's why right now crude is pretty much at 376 00:23:29,359 --> 00:23:32,320 Speaker 1: the mercy off exactly like you're saying, the bonds and 377 00:23:32,359 --> 00:23:35,440 Speaker 1: the equity markets, and this is why the six sessions 378 00:23:35,440 --> 00:23:37,720 Speaker 1: we've seen that's been trending lower. And this is something 379 00:23:37,800 --> 00:23:40,679 Speaker 1: we call for just recently as well, that crude is 380 00:23:40,720 --> 00:23:43,480 Speaker 1: probably going to be at the mercy off macro headlines 381 00:23:43,520 --> 00:23:46,080 Speaker 1: and by the way, now even good news is bad news. 382 00:23:46,160 --> 00:23:48,400 Speaker 1: You would think, oh, strong labor market in the US 383 00:23:48,600 --> 00:23:51,960 Speaker 1: is actually really bullish for gasoline demand. But guess what, No, 384 00:23:51,960 --> 00:23:54,360 Speaker 1: now the fears that means effects going to raise interest rates? 385 00:23:54,400 --> 00:23:57,160 Speaker 1: What does it mean for the future of the US economy. 386 00:23:57,240 --> 00:24:01,480 Speaker 1: So it is very, very problematic for crude until fundamentals 387 00:24:01,480 --> 00:24:04,000 Speaker 1: pick up. Well, when the fundamentals pick up, we do 388 00:24:04,119 --> 00:24:06,960 Speaker 1: have China reopening. What is your ex excess on the 389 00:24:07,119 --> 00:24:10,240 Speaker 1: China reopening? Are you waiting for May or are you 390 00:24:10,280 --> 00:24:14,959 Speaker 1: waiting for May of twenty twenty four. No, I'd say 391 00:24:15,000 --> 00:24:17,000 Speaker 1: May of this year. We've got a million barrels per 392 00:24:17,040 --> 00:24:19,760 Speaker 1: day baked into our numbers of Chinese demand growth. I 393 00:24:19,760 --> 00:24:22,119 Speaker 1: think the problem, of course, is that China again just 394 00:24:22,200 --> 00:24:24,720 Speaker 1: coming out of the lunar New York holidays, that it 395 00:24:24,800 --> 00:24:27,600 Speaker 1: too has maintenance. Look, we are hearing right now of 396 00:24:27,640 --> 00:24:30,760 Speaker 1: potentially very low Chinese product exports coming out in March. 397 00:24:30,800 --> 00:24:33,719 Speaker 1: We need to confirm that it's still very early stages. 398 00:24:33,760 --> 00:24:35,680 Speaker 1: Will be the very first sign that he has domestic 399 00:24:35,680 --> 00:24:38,600 Speaker 1: demand is strong. It will take a little bit of 400 00:24:38,640 --> 00:24:41,360 Speaker 1: time for this to percolate through. I would say right 401 00:24:41,400 --> 00:24:44,439 Speaker 1: now the oil price is actually focusing and factoring in 402 00:24:44,480 --> 00:24:47,399 Speaker 1: a Western recession, and it really hasn't factored in the 403 00:24:47,480 --> 00:24:49,920 Speaker 1: China reopening. Well, how much. Does this really factor in 404 00:24:49,960 --> 00:24:52,800 Speaker 1: the fact that any kind of China increase in usage 405 00:24:52,800 --> 00:24:55,240 Speaker 1: will be funneled into some of the renewables, into a 406 00:24:55,280 --> 00:24:57,760 Speaker 1: lot of domestic production, whether it's wind or solar. This 407 00:24:57,800 --> 00:24:59,600 Speaker 1: is what we were talking about with at Morris. That 408 00:25:00,119 --> 00:25:04,240 Speaker 1: kind of substitution for whatever reason, is diminishing the demand 409 00:25:04,440 --> 00:25:10,320 Speaker 1: even in a stronger economic profile. Absolutely the case of 410 00:25:10,359 --> 00:25:14,600 Speaker 1: the longer term right but right now we've got more 411 00:25:14,640 --> 00:25:17,399 Speaker 1: than a billion people who have been locked up for 412 00:25:17,440 --> 00:25:19,320 Speaker 1: three years, and we are already seeing it in the 413 00:25:19,400 --> 00:25:23,200 Speaker 1: jet fuel numbers. Just China's reopening a loan can lead 414 00:25:23,240 --> 00:25:25,600 Speaker 1: to four hundred thousand barrels per day of additional jet 415 00:25:25,640 --> 00:25:28,440 Speaker 1: fuel demand. There is no renewables to replace that, right 416 00:25:28,600 --> 00:25:30,679 Speaker 1: so there is an enormous amount of bent up demand. 417 00:25:30,680 --> 00:25:32,320 Speaker 1: We've seen this in the West, and I don't want 418 00:25:32,320 --> 00:25:35,440 Speaker 1: to complicate the story. The renewable story is absolutely there 419 00:25:35,440 --> 00:25:38,200 Speaker 1: for the long term. Ev sales in China are skyrocketing. 420 00:25:38,200 --> 00:25:40,440 Speaker 1: We have that in the numbers, but that doesn't take 421 00:25:40,440 --> 00:25:43,280 Speaker 1: away from the fact that gasoline and jet which is 422 00:25:43,280 --> 00:25:46,360 Speaker 1: basically used for mobility, we are already seeing very very 423 00:25:46,400 --> 00:25:49,360 Speaker 1: strong demand. People are going to fly and you are 424 00:25:49,400 --> 00:25:51,560 Speaker 1: going to see some very strong demand numbers out of 425 00:25:51,600 --> 00:25:53,760 Speaker 1: the region. So good news, bad news, it doesn't really 426 00:25:53,760 --> 00:25:55,840 Speaker 1: matter what it is. But the macro has been an 427 00:25:55,880 --> 00:25:57,919 Speaker 1: oil prices lower. That seems to be sort of the 428 00:25:57,960 --> 00:26:00,919 Speaker 1: trend regardless. What's going to shift that you get prices 429 00:26:00,960 --> 00:26:05,560 Speaker 1: above a hundred dollars a barrel like you expect, I 430 00:26:05,600 --> 00:26:08,520 Speaker 1: think it we have to wait really towards kind of 431 00:26:08,720 --> 00:26:11,200 Speaker 1: second quarter, end of second quarter and into the second 432 00:26:11,200 --> 00:26:14,520 Speaker 1: half of the year, and for me, the fundamentals really 433 00:26:14,560 --> 00:26:16,640 Speaker 1: have to tighten up. The stocks we've built will need 434 00:26:16,680 --> 00:26:19,640 Speaker 1: to be drawn down, which we are expecting counter seasonally 435 00:26:19,680 --> 00:26:22,240 Speaker 1: from the second quarter of this year, not before that, 436 00:26:22,280 --> 00:26:24,399 Speaker 1: I think right now. And we've got a big gathering 437 00:26:24,440 --> 00:26:26,320 Speaker 1: in London next week all the traders and you know, 438 00:26:26,359 --> 00:26:29,359 Speaker 1: producers and consumers are coming in for a week. I 439 00:26:29,400 --> 00:26:31,320 Speaker 1: think you're going to get a lot of kind of 440 00:26:31,320 --> 00:26:33,879 Speaker 1: talk around this as well. So i'd say after that, 441 00:26:33,920 --> 00:26:36,359 Speaker 1: like you were really into Q two Armada, we really, 442 00:26:36,400 --> 00:26:38,520 Speaker 1: the three of us, really look forward to seeing you 443 00:26:38,600 --> 00:26:41,560 Speaker 1: there on an all Hydrocarbon week for Bloomberg. Our nice 444 00:26:41,640 --> 00:26:47,000 Speaker 1: surveillance around the list. Is it it is done? Deal? Yeah? Absolutely? 445 00:26:47,640 --> 00:26:49,840 Speaker 1: You know you can't get a drink at the Oil 446 00:26:49,920 --> 00:26:52,480 Speaker 1: week in London, unless it has an umbrella in it, 447 00:26:52,520 --> 00:26:55,000 Speaker 1: it's just the same as comper week or whatever it's code. 448 00:26:55,000 --> 00:26:57,840 Speaker 1: It's like copper week, but they're spread out alame week. 449 00:26:58,240 --> 00:27:00,440 Speaker 1: You're gonna get to this quote from Morgan Stanley morning. 450 00:27:00,920 --> 00:27:04,560 Speaker 1: So they cut their forecasts for crude for four q 451 00:27:04,920 --> 00:27:07,600 Speaker 1: and twenty twenty four, so about ninety five dollars a 452 00:27:07,640 --> 00:27:10,240 Speaker 1: barrel from one ten And this was the quote amirator 453 00:27:10,359 --> 00:27:13,920 Speaker 1: from them. The new estimates reflect stronger demand but also 454 00:27:14,080 --> 00:27:17,600 Speaker 1: higher Russian supply. Now there might be some people who 455 00:27:17,640 --> 00:27:20,000 Speaker 1: aren't in this commodity market who would turn around and say, well, 456 00:27:20,080 --> 00:27:23,080 Speaker 1: Russian supply, why is that affected the market? What is 457 00:27:23,119 --> 00:27:28,040 Speaker 1: that all about? Look, we've also raised our Russia supply 458 00:27:28,160 --> 00:27:30,879 Speaker 1: numbers because Russia is being able to place more barrels 459 00:27:30,920 --> 00:27:34,439 Speaker 1: than we had initially expected. Again par four kind of 460 00:27:34,480 --> 00:27:38,879 Speaker 1: doing forecasts in an extremely uncertain world. That's absolutely fine. However, 461 00:27:39,080 --> 00:27:41,879 Speaker 1: I go back to Chinese demand growing by a million 462 00:27:41,920 --> 00:27:44,399 Speaker 1: barrels per day an SPR. We do not have a 463 00:27:44,440 --> 00:27:47,280 Speaker 1: million barrels per day of SPR hitting the market. That's 464 00:27:47,280 --> 00:27:49,880 Speaker 1: a two million barrels per day swing. So even if 465 00:27:49,920 --> 00:27:53,040 Speaker 1: we assume Russian production is flatier on her. I we 466 00:27:53,119 --> 00:27:55,520 Speaker 1: don't lose any Russian production. We will lose somebody. Just 467 00:27:55,560 --> 00:27:58,359 Speaker 1: assume we don't. It is still a much tighter market 468 00:27:58,400 --> 00:28:00,720 Speaker 1: just from China and spr a loan. That's the crude call. 469 00:28:00,800 --> 00:28:03,119 Speaker 1: I just got a message from a Bloomberg subscriber and 470 00:28:03,200 --> 00:28:06,200 Speaker 1: it just says, forget w Ti Nardi. Just wow. Yeah, 471 00:28:06,240 --> 00:28:08,200 Speaker 1: can we talk about natural gas just briefly, I'm RACI. 472 00:28:08,280 --> 00:28:12,440 Speaker 1: What's behind that move? Weather? I mean, like you said 473 00:28:12,440 --> 00:28:15,920 Speaker 1: you needed a meteorogis in terms of we need weather forecasters. 474 00:28:15,960 --> 00:28:17,960 Speaker 1: But look, Europe got very lucky, and of course in 475 00:28:18,000 --> 00:28:20,600 Speaker 1: the US as well. Just how warm it's been Jan Feb. 476 00:28:20,640 --> 00:28:23,480 Speaker 1: And even our March forecasts have again raised just the 477 00:28:23,520 --> 00:28:25,800 Speaker 1: amount of natural gas we are backing out as a result. 478 00:28:26,000 --> 00:28:27,879 Speaker 1: We think natural gas prices will have to fall to 479 00:28:27,960 --> 00:28:30,720 Speaker 1: about a dollar seventy five before you're actually kicking shot 480 00:28:30,720 --> 00:28:33,480 Speaker 1: into the quest. So still a little bit more to go. 481 00:28:34,320 --> 00:28:37,199 Speaker 1: But yeah, it has just been brutally warm. What a 482 00:28:37,320 --> 00:28:40,360 Speaker 1: change a natural gas falling below two for the first 483 00:28:40,360 --> 00:28:43,040 Speaker 1: time since twenty twenty, and I'm ratus looking for a 484 00:28:43,040 --> 00:28:45,760 Speaker 1: further move lower and rata. This was great thank you. 485 00:28:45,800 --> 00:28:59,080 Speaker 1: I'm going to send their energy aspects. Thank you for Americans. 486 00:28:59,160 --> 00:29:03,200 Speaker 1: This is important because Alancia now is our new renaissance. 487 00:29:03,320 --> 00:29:06,840 Speaker 1: It's Stilantis and the leadership there is Carlos Tavarrus and 488 00:29:06,840 --> 00:29:10,280 Speaker 1: as John Farroll grew up rooting for ac Milan and 489 00:29:10,360 --> 00:29:15,480 Speaker 1: owning a Lancia Alanci Delka, this is the design and 490 00:29:15,720 --> 00:29:19,640 Speaker 1: character that makes a pulse. Coach. Carlos Tavarus joins us 491 00:29:19,640 --> 00:29:22,920 Speaker 1: now chief executive officer. It's Stilantis, and thank you so 492 00:29:23,000 --> 00:29:26,000 Speaker 1: much to inviting us at BIRIN for the Formula one. 493 00:29:26,120 --> 00:29:29,320 Speaker 1: We really really appreciate it. I got to drive the 494 00:29:29,360 --> 00:29:32,600 Speaker 1: forward conversation off of earnings and the good news of 495 00:29:32,640 --> 00:29:36,480 Speaker 1: your company today, which is you're looking for a warm spot. 496 00:29:36,520 --> 00:29:40,080 Speaker 1: In two twenty six you had a joint agreement with 497 00:29:40,160 --> 00:29:43,480 Speaker 1: the Swiss. They're moving on to Audie Fine. And the 498 00:29:43,560 --> 00:29:46,880 Speaker 1: great mystery in Formula one is what Carlos Tavarus is 499 00:29:46,920 --> 00:29:49,640 Speaker 1: going to do to get into the new age of 500 00:29:49,720 --> 00:29:53,480 Speaker 1: Formula one? Can you advance that story this morning? Sir? 501 00:29:53,840 --> 00:29:55,680 Speaker 1: What have you learned in the cast last couple of 502 00:29:55,760 --> 00:30:01,320 Speaker 1: weeks what your ALFA Romeo team will do well? First 503 00:30:01,320 --> 00:30:03,360 Speaker 1: of all, I would like to remind you that we 504 00:30:03,400 --> 00:30:07,400 Speaker 1: have fourteen brands. Of course, all from MEO is very 505 00:30:07,440 --> 00:30:13,120 Speaker 1: warm to our hearts, fantastic brand, equity, fantastic history. As 506 00:30:13,160 --> 00:30:16,040 Speaker 1: you know, our more sports programs are focused on the 507 00:30:16,120 --> 00:30:19,360 Speaker 1: twenty four hours off Loma right now with a hybrid 508 00:30:19,400 --> 00:30:23,000 Speaker 1: technology and the Pussua brand, and also on the single 509 00:30:23,040 --> 00:30:27,760 Speaker 1: seater electric races with the d S automobile and Mazzati 510 00:30:28,520 --> 00:30:33,080 Speaker 1: is now a contender of the World EV single seaters 511 00:30:33,560 --> 00:30:36,400 Speaker 1: and that's where we are putting the focus. Fromeo will 512 00:30:36,440 --> 00:30:40,760 Speaker 1: come later. FROMO will have a certainly a more sports 513 00:30:40,800 --> 00:30:42,800 Speaker 1: program at one point in time, and we still have 514 00:30:42,920 --> 00:30:46,320 Speaker 1: time to discuss this as we are still in from 515 00:30:46,320 --> 00:30:49,520 Speaker 1: the one for for some time. And then we will 516 00:30:49,560 --> 00:30:52,280 Speaker 1: invade the program or all from me. But it's too 517 00:30:52,320 --> 00:30:55,320 Speaker 1: soon to unveil that and apologize for that. Okay, well 518 00:30:55,360 --> 00:30:57,920 Speaker 1: we can do it later in the interview. Carlos help 519 00:30:58,000 --> 00:31:01,800 Speaker 1: us here with how you bring the romance in your 520 00:31:01,880 --> 00:31:05,360 Speaker 1: success of the since twenty fourteen. How do you bring 521 00:31:05,400 --> 00:31:08,640 Speaker 1: that over the EV. How do you bring Alpha Romeo 522 00:31:08,880 --> 00:31:14,480 Speaker 1: and all you've done there over to electric vehicles. Well 523 00:31:14,480 --> 00:31:18,840 Speaker 1: that's very simple, actually, you just have to drive the cars. 524 00:31:20,200 --> 00:31:24,520 Speaker 1: If you drive the cars, if you experience the takeoff 525 00:31:24,560 --> 00:31:29,160 Speaker 1: acceleration of an EV, if you experience the smooth ride 526 00:31:29,240 --> 00:31:33,800 Speaker 1: and the improvement on the noise and vibration, if you 527 00:31:33,960 --> 00:31:37,120 Speaker 1: experience the very low height of the center of gravity. 528 00:31:37,760 --> 00:31:40,880 Speaker 1: To put it simply, an IV car is a better car. 529 00:31:41,960 --> 00:31:44,720 Speaker 1: So it's a better car. You can easily bring it 530 00:31:44,760 --> 00:31:48,520 Speaker 1: to Alfromeal with the extended technology to ensure that the 531 00:31:48,600 --> 00:31:52,120 Speaker 1: customer drive is even more exciting and pleasant. This is 532 00:31:52,160 --> 00:31:57,080 Speaker 1: exactly what we are doing, is extended sportiness for the 533 00:31:57,120 --> 00:32:02,200 Speaker 1: Alfromeal brand, with better acceleration, with better drive, with a 534 00:32:02,280 --> 00:32:05,040 Speaker 1: suicer right. And by the way, this is exactly what 535 00:32:05,080 --> 00:32:09,080 Speaker 1: we do with the muscle American cars. With Dodge, we 536 00:32:09,120 --> 00:32:13,400 Speaker 1: bring more muscle, we bring more burnouts and more donnets 537 00:32:13,760 --> 00:32:16,720 Speaker 1: with the actually just about a car, right, Lisa, What's 538 00:32:16,720 --> 00:32:19,080 Speaker 1: so good about this is you can drive down Central 539 00:32:19,080 --> 00:32:22,840 Speaker 1: Park West and second gear and an EV Alpha and 540 00:32:22,920 --> 00:32:27,160 Speaker 1: the noise you can make with that it'll be just killer. Ye. Well, 541 00:32:27,240 --> 00:32:30,160 Speaker 1: I'm not an expert in the fake noises that you 542 00:32:30,160 --> 00:32:32,560 Speaker 1: can create in your silent evs, but I do want 543 00:32:32,600 --> 00:32:34,400 Speaker 1: to talk about the RAM and Dodge brands because we're 544 00:32:34,440 --> 00:32:37,400 Speaker 1: talking about the US, and we're talking a lot, just 545 00:32:37,680 --> 00:32:41,080 Speaker 1: generally about margin pressure, and yet you recorded some of 546 00:32:41,120 --> 00:32:45,120 Speaker 1: your biggest margins ever with the sale of these types 547 00:32:45,120 --> 00:32:47,360 Speaker 1: of vehicles in the US, and I'm wondering how long 548 00:32:47,400 --> 00:32:50,160 Speaker 1: that can last, given that they're starting to be some 549 00:32:50,280 --> 00:32:55,000 Speaker 1: pricing pressure on the margins. You are right to ask 550 00:32:55,280 --> 00:32:58,200 Speaker 1: that question. In fact, first of all, we should just 551 00:32:58,360 --> 00:33:01,920 Speaker 1: recognize that the employees of talent is starting in North America. 552 00:33:01,920 --> 00:33:05,320 Speaker 1: I've done a stellar job in twenty twenty two basing 553 00:33:05,360 --> 00:33:08,680 Speaker 1: all the external headwinds that they had to face. Now 554 00:33:08,720 --> 00:33:12,040 Speaker 1: to your question, in the near future, it's going to 555 00:33:12,080 --> 00:33:16,160 Speaker 1: be an exciting period where everybody is going to try 556 00:33:16,200 --> 00:33:20,920 Speaker 1: to hold on to a significant pricing power despite the 557 00:33:21,000 --> 00:33:24,840 Speaker 1: rebalancing between supply and demand, which is of course ongoing 558 00:33:24,920 --> 00:33:29,000 Speaker 1: and already there. So that's rebalancing on supply and demand 559 00:33:29,040 --> 00:33:31,880 Speaker 1: will put pressure on the pricing. But on the other side, 560 00:33:32,320 --> 00:33:35,440 Speaker 1: because of the interest rates, we see some cooling in 561 00:33:35,480 --> 00:33:38,840 Speaker 1: the economy that you will bring more cost reduction on 562 00:33:38,920 --> 00:33:43,120 Speaker 1: some of the raw materials, eventually starting with steel, which 563 00:33:43,160 --> 00:33:45,240 Speaker 1: means from one side, pricing power is going to be 564 00:33:45,320 --> 00:33:48,280 Speaker 1: under pressure. But you have the technology, you have the 565 00:33:48,320 --> 00:33:50,800 Speaker 1: appeal of the products you have, the new models that 566 00:33:50,840 --> 00:33:53,160 Speaker 1: are coming in and from the other side, you need 567 00:33:53,200 --> 00:33:56,680 Speaker 1: to run fast in reducing the cost at a faster 568 00:33:56,840 --> 00:34:00,400 Speaker 1: pace than the erosion of pricing power going to be 569 00:34:00,440 --> 00:34:02,760 Speaker 1: the name of the game for the next year, and 570 00:34:03,160 --> 00:34:05,040 Speaker 1: we are in the race. We are in that race, 571 00:34:05,080 --> 00:34:07,920 Speaker 1: and I think that we'll see within one year who 572 00:34:08,000 --> 00:34:09,520 Speaker 1: is going to be the winner of that race. But 573 00:34:09,840 --> 00:34:12,520 Speaker 1: that's exactly how things and fault in front of us 574 00:34:12,600 --> 00:34:15,200 Speaker 1: for the next quarters account asses that main job counts. 575 00:34:17,440 --> 00:34:21,080 Speaker 1: At this stage, the picture is about how do you 576 00:34:21,120 --> 00:34:26,439 Speaker 1: absolve the cost of electrification. You see, you can see 577 00:34:26,440 --> 00:34:30,759 Speaker 1: in many places of the world that the customer has 578 00:34:30,800 --> 00:34:33,879 Speaker 1: not yet totally recognized that evs are a better car. 579 00:34:34,600 --> 00:34:38,600 Speaker 1: And we see that when they are subsidies to erase 580 00:34:39,000 --> 00:34:43,839 Speaker 1: the cost of electrification, then the customers buy evs. As 581 00:34:43,840 --> 00:34:46,960 Speaker 1: soon as you remove the subsidies, and you have this 582 00:34:47,080 --> 00:34:50,280 Speaker 1: example in Germany, you have this example in Italy, then 583 00:34:50,320 --> 00:34:54,399 Speaker 1: the consumers stop buying evs because they are not affordable enough. 584 00:34:55,239 --> 00:34:57,520 Speaker 1: So the challenge for the industry in the next three 585 00:34:57,560 --> 00:35:02,040 Speaker 1: to four years is to absolve the additional cost of electrification, 586 00:35:02,120 --> 00:35:05,680 Speaker 1: to protect affordability and make sure that middle classes can 587 00:35:05,719 --> 00:35:09,719 Speaker 1: buy pure revs at an affordable price, which means that 588 00:35:09,760 --> 00:35:12,719 Speaker 1: the transformation of the industry is just starting. In fact, 589 00:35:12,760 --> 00:35:16,600 Speaker 1: we are live now transforming our company in a way 590 00:35:16,640 --> 00:35:20,680 Speaker 1: that needs to be reasonably be deep because new technologies 591 00:35:20,760 --> 00:35:26,759 Speaker 1: are in software platforms, many electric components, autonomous vehicles. All 592 00:35:26,800 --> 00:35:29,279 Speaker 1: of this costs a lot of money. And at the 593 00:35:29,320 --> 00:35:33,280 Speaker 1: same time you need to bring affordability to the middle classes, 594 00:35:33,320 --> 00:35:36,320 Speaker 1: which means that if we do not do our homeworks 595 00:35:36,400 --> 00:35:40,520 Speaker 1: in terms of productivity, then in that case you will 596 00:35:40,560 --> 00:35:43,160 Speaker 1: not be able to compete because some of the new 597 00:35:43,360 --> 00:35:46,520 Speaker 1: entrants will show you that your cost competitiveness will not 598 00:35:46,560 --> 00:35:49,200 Speaker 1: be enough. So do we need to make sure that 599 00:35:49,239 --> 00:35:53,120 Speaker 1: we protect our companies by doing more cost competitive views. 600 00:35:53,160 --> 00:35:55,239 Speaker 1: I would say, of course yes. I would like to 601 00:35:55,239 --> 00:35:57,560 Speaker 1: remind you that stendent is as a break even point, 602 00:35:58,000 --> 00:36:01,160 Speaker 1: which is the benchmark of the industry. As our break 603 00:36:01,200 --> 00:36:04,560 Speaker 1: even point is at forty percent of revenues. Forty get 604 00:36:04,600 --> 00:36:06,160 Speaker 1: taken down the clock a little bit longer with a 605 00:36:06,239 --> 00:36:07,920 Speaker 1: very long winded answer, So I can I ask it 606 00:36:07,960 --> 00:36:10,960 Speaker 1: again with forty seconds left? Does that mean job cuts? 607 00:36:12,400 --> 00:36:15,719 Speaker 1: It means that we are not excluding anything from the 608 00:36:15,840 --> 00:36:19,879 Speaker 1: task of absorbing the cost of electrification. Okay, Carlos, thanks 609 00:36:19,920 --> 00:36:24,960 Speaker 1: for a time today. I just want to enjoyed that conversations. 610 00:36:24,960 --> 00:36:28,799 Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and 611 00:36:28,920 --> 00:36:33,239 Speaker 1: anywhere else you get your podcasts. Listen live every weekday, 612 00:36:33,400 --> 00:36:36,880 Speaker 1: starting at seven am Easter. I'm Bloomberg dot Com, the 613 00:36:37,000 --> 00:36:41,560 Speaker 1: iHeartRadio app tune In, and the Bloomberg Business app. You 614 00:36:41,560 --> 00:36:45,640 Speaker 1: can watch us live. I'm Bloomberg Television and always I'm 615 00:36:45,640 --> 00:36:49,640 Speaker 1: the Bloomberg Terminal. Thanks for listening. I'm Tom Keane and 616 00:36:49,760 --> 00:37:01,880 Speaker 1: this is Bloomberg. You go me to