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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com,

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Speaker 1: and of course, on the Bloomberg terminal. He is Director

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Speaker 1: of White House National Economic Council, which means he is

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Speaker 1: mum during the political season, and we are knee deep

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Speaker 1: in the political season now to the mid terms. Brian

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Speaker 1: Deast joins us from the White House this morning. Brian,

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Speaker 1: to me, the singular note which does wrap around your

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Speaker 1: remit is a gentle lady from Hawaii has exited the

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Speaker 1: Democratic Party, and Ms Gabbard was really something about the

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Speaker 1: cowardly wokeness of the elitist Democratic Party. Your boss is

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Speaker 1: the most middle class representative boss of his generation. Joe

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Speaker 1: Biden breathe scramton, what's gonna be the reset on Democratic

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Speaker 1: Party economic policy for the middle class coming out of

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Speaker 1: this election? Well, look, I think you're seeing in real time,

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Speaker 1: as you said, Joe Biden ran for presidents based on

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Speaker 1: an economic theory that we needed to build this economy,

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Speaker 1: in this economic recovery, as he says, in very practical terms,

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Speaker 1: from the bottom up and the middle out, not from

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Speaker 1: the top down. And you're seeing that in practice. If

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Speaker 1: you look just for example of what's happening in American

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Speaker 1: manufacturing across this country, nearly seven hundred thousand manufacturing jobs created,

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Speaker 1: and you're seeing company after company make investments that they're

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Speaker 1: making a bet, a long term bet to make capital

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Speaker 1: investments in America. Today, just today, we're gonna announce almost

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Speaker 1: three billion dollars in grants to battery battery manufacturers. I

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Speaker 1: was in Cleveland last week. You're seeing this explosion of

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Speaker 1: interest in making the United States the place where we

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Speaker 1: build and and and and innovate, and that's that's going

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Speaker 1: to pay benefits for the long term. You were just

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Speaker 1: in Cleveland to see Cleveland Yankees. Admit it, Brian, I

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Speaker 1: want to go. I want to go to the topic

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Speaker 1: of the moment was just a strategic political reserve. We

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Speaker 1: all get the politics of it, and that you took

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Speaker 1: hydro carbon one on one at Middlebury years ago. Can

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Speaker 1: you explain to me what the democratic politics is of

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Speaker 1: refilling the strategic petroleum reserve down the road. You got it.

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Speaker 1: I do have to clarify that I'm a Red Sox fan.

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Speaker 1: It's important. It's important to me to get that very important.

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Speaker 1: Um So, Look, the President's gonna announce two things today.

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Speaker 1: The first is additional fifteen million barrels four December out

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Speaker 1: of the spr That makes good on the commitment that

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Speaker 1: he made several months ago to release a hundred and

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Speaker 1: eighty million barrels and provide that stability to the market.

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Speaker 1: He's making good on that commitment with a fifteen million

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Speaker 1: paril release today. But second, he's announcing on a plan

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Speaker 1: and a policy to refill the Strategic Patrolling Reserve when

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Speaker 1: the price of oil falls to about seventy dollars of barrel.

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Speaker 1: That makes sense for two reasons. One, protecting taxpayers, we

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Speaker 1: sold oil out of the sprow at a higher price

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Speaker 1: and around of barrel. Repurchasing at seventy dollars of barrel

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Speaker 1: means we can actually strengthen the asset. We can get

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Speaker 1: more oil back into that national reserve. And second, it

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Speaker 1: provides some certainty to the industry because we we we

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Speaker 1: will have the authority to both purchase when the price

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Speaker 1: comes down to seventy and also enter into contracts to

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Speaker 1: purchase at around seventy dollars in the future. But one

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Speaker 1: thing that's very difficult is that we're not talking about

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Speaker 1: the present and what releasing more from the Strategic Petroleum

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Speaker 1: Reserve will actually do to bring down prices not only

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Speaker 1: of gasoline, but diesel, of the refined goods that we need.

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Speaker 1: How much are you thinking about additional measures to try

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Speaker 1: to shore up both the stores of diesel as well

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Speaker 1: as lower prices. Are you talking about banning exports, for example,

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Speaker 1: to Europe. Well, first, let's look at where we are.

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Speaker 1: We have since the beginning of the summer scene, gas

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Speaker 1: prices come down about they're about down about a dollar

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Speaker 1: and fifteen cents a gallon at the pump. We see

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Speaker 1: natural gas prices come off from a high of almost

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Speaker 1: nine dollars two under six dollars in trading today. So

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Speaker 1: we've seen a real reduction and energy prices, and that's

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Speaker 1: consistent with and and and and driven by the policies

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Speaker 1: that this administration and that the President have directed. At

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Speaker 1: the same time, we continue to be very focused on

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Speaker 1: making more progress seeing that price come down further, and

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Speaker 1: the announcements today I think are going to help on

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Speaker 1: that front, also addressing places where we have but but okay,

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Speaker 1: that has come down, it hasn't come back that much.

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Speaker 1: But diesel has not come down, and that affects the

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Speaker 1: price of everything. And perhaps people don't see it and

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Speaker 1: breathe that the way they view gasoline prices. But this

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Speaker 1: is affecting very much the heating costs as well as

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Speaker 1: a shipping costs and has raised questions about banning exports

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Speaker 1: at a time when Europe is flat on its back

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Speaker 1: as well. What's your view, absolute, We're very concerned about

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Speaker 1: inventory levels for refined product diesel in particular, particularly across

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Speaker 1: the East coast of the United States, and we are

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Speaker 1: operating right now at unacceptably low inventory levels. Inventory levels

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Speaker 1: for diesel that, for example, our fifty lower than their

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Speaker 1: five year historical average. So this is a conversation that

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Speaker 1: we have had with the industry consistently, and we've been

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Speaker 1: very clear we need to see more progress in building

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Speaker 1: those inventories. The federal government has some tools in that respect.

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Speaker 1: We have a Northeast Home Heating Oil Reserve, which is

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Speaker 1: diesel UH and we have looked very carefully at being

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Speaker 1: prepared to deploy as and when necessary in that context.

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Speaker 1: But ultimately, what we need to see is the industry

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Speaker 1: build those inventory levels so that we don't put ourselves

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Speaker 1: in a situation. To your question about exports, the President

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Speaker 1: has been very clear and what can need to be

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Speaker 1: clear at this moment when we have uncertainty and uncertainty

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Speaker 1: for American consumers, we have to keep all options on

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Speaker 1: the table. That's what we're doing real quickly. What's going

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Speaker 1: to be the trigger point to understand whether it is

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Speaker 1: time to look at exports. Well, look, I'm not going

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Speaker 1: to explicitly make a decision before the president's or articulated

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Speaker 1: decision before the President has made it. But the President

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Speaker 1: is going to continue to do what he has done

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Speaker 1: over the course of the last several months, which is

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Speaker 1: assessed the market, understand where we are, and understand the

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Speaker 1: tools that we have in the impact that they'll have. Today,

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Speaker 1: he's announcing a release from the spro but also importantly

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Speaker 1: this repurchased plan, which is something that industry analysts and

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Speaker 1: others have been calling for for some time. We think

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Speaker 1: that this will make some difference. We're gonna keep at it,

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Speaker 1: keep a close eye on these things with an understanding

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Speaker 1: that we have these tools on the table, and we'll

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Speaker 1: deploy them when it's in America's interests. Brand's Director of

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Speaker 1: the White House National Economic Council, Thank you. This is

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Speaker 1: a joy because when you go to Boulder, Colorado, you

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Speaker 1: know that the Zoomies are down to Colorado Springs and

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Speaker 1: they're the real deal. Out of the United States Air

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Speaker 1: Force Academy, an actual pilot running an airline, the chief

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Speaker 1: executive officer with United, the pilot Scott Kirby, joins us

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Speaker 1: this morning. Scott, I got eighteen questions from viewers that

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Speaker 1: have everything to do with the United Lounge, This, that,

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Speaker 1: and the other thing. I want to talk about the

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Speaker 1: ratio of business class to economy fairs. I follow one

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Speaker 1: United fair and it's six dollars for every dollar of economy.

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Speaker 1: I've never seen it. Where is business class in three years?

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Speaker 1: So uh, thanks for thanks for the intro. By the way,

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Speaker 1: that's a unique one and I like it. But business travel,

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Speaker 1: business class is demand is really really strong. It's really

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Speaker 1: really strong an economy, but it's even stronger at the

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Speaker 1: premium cabinet. United has more premium seats than than any

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Speaker 1: other airline in the country, and one long haul business

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Speaker 1: demand has has mostly come all the way back to

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Speaker 1: Europe at least, I mean it's even stronger than it

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Speaker 1: is Bestically, it's harder to calls with someone in Europe.

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Speaker 1: But the other trend I think that's huge is there's

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Speaker 1: more premium leisure demand, and really that is enabled by

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Speaker 1: hybrid work. Hybrid work makes everything in the potential holiday weekend,

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Speaker 1: and there's there's people that go to Europe and they'll

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Speaker 1: work for one or two weeks in Europe, and they

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Speaker 1: work during the day, they go out late at night

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Speaker 1: with the French ship the Spaniards. By the way, that's

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Speaker 1: the only way I could possibly go hang out with

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Speaker 1: Spaniards by state on East Coast time. And this I

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Speaker 1: think it's a permanent step level increase in demand both

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Speaker 1: weekend travel but also for premium demands. To the volatility,

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Speaker 1: the signal nature of your total return of stock is

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Speaker 1: a new persistency of cash flow from business class enough

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Speaker 1: to give you a more persistent cash flow on your

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Speaker 1: financial statement. Well, look, I think we'll still have alatility,

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Speaker 1: will still be iffected by the economy or short term

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Speaker 1: in the fuel prices, so it won't eliminate um cyclicality,

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Speaker 1: but What it does is more important, which I think

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Speaker 1: it raises the level, so the lowest period of revenu

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Speaker 1: you will be higher than it was before, and the

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Speaker 1: highest period will be even higher. Um. It doesn't take

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Speaker 1: out the cyclicality, but it it does raise the bar

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Speaker 1: across the board. It's just a new, permanently higher level

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Speaker 1: of demand. But to that point, Scott, we've spent the

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Speaker 1: better part of the last three hours talking about whether

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Speaker 1: or not we're seeing a softening in demand, which is

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Speaker 1: what policymakers are trying to engineer to bring inflation down.

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Speaker 1: Inflation which in some sectors of the economy means people

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Speaker 1: are just spending less in certain areas. It does not

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Speaker 1: seem that it has hit air travel yet. Do you

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Speaker 1: expect that the demand deterioration is going to come and

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Speaker 1: will that ultimately mean you don't have the pricing power

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Speaker 1: to keep fairs high? Well, I think the slowing economy

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Speaker 1: and or a recession are going to be a headwind.

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Speaker 1: Already are a headwind demand. But there's three trends in aviation.

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Speaker 1: I think more they're currently more than fully off setting.

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Speaker 1: I think we'll continue one. We're still in the COVID

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Speaker 1: recovery phase Japan just opened last week. No matter what

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Speaker 1: you think, business travel isn't ultimately get to it is

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Speaker 1: going to go almost certainly going higher from here. So

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Speaker 1: we're still in COVID recovery unlike most industries. The second

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Speaker 1: one is this hybrid work making every weekend to holiday trend.

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Speaker 1: Like we third September was the third highest RAS a

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Speaker 1: month in the history of United Airline. That is an

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Speaker 1: off peak month. What happened during September, and we saw

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Speaker 1: it even earlier. We were seeing in October. By the way,

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Speaker 1: it's gonna better than September, so it's gonna bove to

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Speaker 1: Fourth place is people are now able to work remotely

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Speaker 1: for one or two days, so they can instead of

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Speaker 1: being tethered to their desk at the office, they can

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Speaker 1: leave Wednesday or Thursday, go somewhere remotely for one or

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Speaker 1: two days. We're taking extra trips. That's a trend that's

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Speaker 1: not appreciated by the market yet it's unique to aviation.

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Speaker 1: It's offsetting those economic headwinds. It's a tailwind that's that's offsetting.

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Speaker 1: And Scott, we call that doing a John Pharaoh. And

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Speaker 1: why don't you continue Kayley with Mr Kara, Well, that's

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Speaker 1: on on the demand side, Scott, but there also is

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Speaker 1: the fact that you are still constrained on the supply side.

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Speaker 1: Capacity is still more limited and the part of that

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Speaker 1: has to do with the labor equation. Can you just

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Speaker 1: give us your best estimate as to whether or not

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Speaker 1: you're ultimately going to be able to expand capacity or again,

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Speaker 1: or is this a structural labor issue in the air

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Speaker 1: economy which is going to stick around? So, first of

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Speaker 1: you're an airline investor. Would have been the third and

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Speaker 1: maybe perhaps the most important trend that um, well, there's

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Speaker 1: a really strong demand environment. Supply is going to be

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Speaker 1: constrained for years to come by artificial factors. Now it's

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Speaker 1: less of a constraint for United because we're at the

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Speaker 1: high end. We're you know, we're at the top of

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Speaker 1: the funnel, top of the pyramid for people wanting to

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Speaker 1: be by it. But there's not enough pilots in the industry.

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Speaker 1: That's not the only constraint. Bowing and Airbus are way

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Speaker 1: behind and the supply changer way behind on their ability

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Speaker 1: from airpoint air traffic control saturation. There's airports in Europe

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Speaker 1: and other places that are full. These are like four

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Speaker 1: or five year probably if you start fixing today multi

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Speaker 1: year problems to Scott when you're in New York next

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Speaker 1: time landing at Newark and hopefully landing at JFK with

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Speaker 1: that battle, I want to talk about the landing gates

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Speaker 1: and all that. But Mary Schlangenstein, who's our airport reporter,

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Speaker 1: as if you don't ask Scott about Boeing seven thirties

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Speaker 1: seven eight over to UH seven and they're gonna add

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Speaker 1: twelve more seats and they're gonna take this wing and

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Speaker 1: added on Scott, this is not confidence building with the

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Speaker 1: redo of the seventh the Boeing Max, I mean, it's

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Speaker 1: not confident building. Do you have confidence that you guys

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Speaker 1: in the f a A can get together to get

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Speaker 1: that plane up in the air. Yeah, well, I think

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Speaker 1: you're talking about the Max tent and Hi, Mary, um

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Speaker 1: good to hear from you virtually. But here's what I

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Speaker 1: think about the Max ten. First for United if somehow

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Speaker 1: the Eric Mack ten seven don't get certified at the

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Speaker 1: current standards, but our plan is we're gonna convert some

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Speaker 1: of those Max tens into Max eights and nine and

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Speaker 1: our large airplane we're gonna order more and that's gonna

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Speaker 1: be our larger plane, and Bowel compensates for that. So

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Speaker 1: for United you know, it's not really a big deal

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Speaker 1: um financially, but it's the right safety outcome. This is

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Speaker 1: the most point you know, having it's just a different

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Speaker 1: length of airplane. It's the same airplane in a different link,

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Speaker 1: and you never want to make two different cockpits or

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Speaker 1: procedures for the exact same airplane. That detracts from safety.

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Speaker 1: So I think because it's the right safety outcome, we

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Speaker 1: will get to the right answer where the Max seven

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Speaker 1: and ten will get certified like the Max eight and

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Speaker 1: the Maximum. I think the more important point is a

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Speaker 1: bigger one for the country. For the United States of

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Speaker 1: American bowing is our largest exporter, high tech exports, manufacturing jobs,

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Speaker 1: high paying jobs. And the question is about our airlines

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Speaker 1: around the world gonna buy Max tens or are they

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Speaker 1: gonna buy Airbus A three? And the real question is

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Speaker 1: is the right safety answer? Are these planes gonna get

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Speaker 1: produced in Seattle? Are they gonna get built in Europe

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Speaker 1: and a China? I want both Boeing and Airbus to

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Speaker 1: do well for healthy competition, but at the right end,

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Speaker 1: Scott we're out of time. We need to see you

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Speaker 1: when you're in New York. In New York next time.

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Speaker 1: Scott Kirby with United Airlines, after a very strong earnings

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Speaker 1: report to say, at least we want to reset and

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Speaker 1: get a sense of what this election is gonna look like.

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Speaker 1: We have three weeks. Mohammed Unas has been tracking this

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Speaker 1: all from Gallup. He is the editor in chief there. Mohammed,

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Speaker 1: what are you looking for in terms of turnout, in

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Speaker 1: terms of excitement around an election where we really have

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Speaker 1: seen the odds shift pretty dramatically whipsaw over the past

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Speaker 1: few weeks. The number one issue voters have in mind

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Speaker 1: when they vote, and we know this from generations, is

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Speaker 1: the economy. UM. We also see that in our data

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Speaker 1: of Americans now mentioned the economy or some sort of

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Speaker 1: reference to inflation as the number one problem, most important

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Speaker 1: problem facing the country. UM. So that is going to

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Speaker 1: be front and center more than anything. In terms of turnout.

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Speaker 1: We've certainly seen higher than average turnout last week checked.

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Speaker 1: We're actually in the field checking that now, but it

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Speaker 1: was in as high as we saw with the fervor

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Speaker 1: we saw two years ago. UM. The social issues that

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Speaker 1: should lead to be critical in some of these contests,

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Speaker 1: but overwhelmingly, the economy is going to be central on

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Speaker 1: people's minds as they go to vote. I've got Mohammed

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Speaker 1: a hundred and fifty nine million, which is a ginormous

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Speaker 1: number for the two thousand twenty election. I don't have

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Speaker 1: the mid term statistic of two thousand eighteen. What do

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Speaker 1: you people see on the turnout of America for this election?

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Speaker 1: It's still too early to tell. We don't and there's

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Speaker 1: we don't know, and I don't think anybody really knows.

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Speaker 1: For a series of reasons, we certainly ask Americans are

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Speaker 1: you planning to vote? Are you more excited to vote

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Speaker 1: this time than in previous elections? That metric is tracking

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Speaker 1: higher than average, but certainly not as high as we

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Speaker 1: saw two years ago. It's about ten points lower than that.

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Speaker 1: We're actually asking that again this month. But as we

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Speaker 1: get closer to the elect action um there are a

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Speaker 1: lot of factors that play into making this one really

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Speaker 1: hard to guests turn out. First of all, people's voting

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Speaker 1: habits have changed. Second of all, people's attitudes about voter

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Speaker 1: laws have changed. People want to really open the doors

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Speaker 1: to make it easier for people to vote. Most American

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Speaker 1: support voter i D for example, to have people vote,

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Speaker 1: but they also support a series of other measures that

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Speaker 1: make it easier for people to vote. So in addition,

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Speaker 1: in addition to excitement to vote, there are also structural

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Speaker 1: changes to the way we vote in America that are

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Speaker 1: going to continue to roll out for these next several elections. Well, Mohammed,

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Speaker 1: when we talk about excitement to vote, there were a

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Speaker 1: number of social issues that the thought was would be

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Speaker 1: a galvanizing force in these elections, one of them being

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Speaker 1: abortion rights. Is that taking shape doesn't have as much

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Speaker 1: firepower as initially thought several months ago when Rovie Wade

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Speaker 1: was overturned. We certainly have seen an uptick in people

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Speaker 1: saying that it's important for them as a voter to

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Speaker 1: vote for someone who shares their view on abortion. Now

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Speaker 1: it's about fifty of Americans hold that view, and that

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Speaker 1: is a relative high compared to before. However, it's only

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Speaker 1: really about a ten or eleven point jump from before

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Speaker 1: the Roe v. Wade overturned decision was leaked out, So

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Speaker 1: it hasn't exploded, but it certainly has risen in terms

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Speaker 1: of being an important issue. One of the things we

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Speaker 1: were talking about in the break, is everybody voting is

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Speaker 1: thinking about inflation because we're all impacted by it. Not

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Speaker 1: everybody voting is voting somewhere where abortion is really on

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Speaker 1: the ballot. Mom, and I want to go to the

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Speaker 1: heritage of Gala back to the thirties, you guys basically

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Speaker 1: invented the industry and you have a monitor and a

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Speaker 1: body of knowledge about say that evening when LBJ stepped aside,

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Speaker 1: what did presidents do the evening or the day after

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Speaker 1: a mid term election? Well, most incumbents usually don't do

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Speaker 1: great in a midterm allow action. It's always an uphill

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Speaker 1: battle no matter who the president is. So President Biden

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Speaker 1: is not facing an easy route. However, these social issues

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Speaker 1: and some of these other factors may play a role

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Speaker 1: in really helping the Democrats, um, you know, not Ferris poorly.

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Speaker 1: The other thing we're not talking about, which is more

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Speaker 1: important than any of this, is the is the jurisdictions

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Speaker 1: and how districts are managed throughout the United States and

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Speaker 1: and what seats are really at stake between Republicans and Democrats.

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Speaker 1: And Democrats are really facing a huge challenge just in

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Speaker 1: terms of the seats that are up for grabs, Momma,

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Speaker 1: thank you so much for Mohammed and a definitive as

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Speaker 1: editor in chief, and go up joining us now. Dennis

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Speaker 1: Gartman surviving two thousand twenty two. Dennis, your opinion on

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Speaker 1: the street, tell us where you are right now, and

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Speaker 1: how ugly two thousand and two has been. Two thousand

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Speaker 1: two has been demonstrably ugly. It's been very ugly. It's

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Speaker 1: been unbelievably ugly. It's going to get uglier, I'm afraid. Nonetheless,

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Speaker 1: we've had a good bounce. Bounces are required in bear markets.

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Speaker 1: I think it's been a bear market since actually since

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Speaker 1: January fIF of this year, and I continue to think

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Speaker 1: it's going to remain a bear market. The Fed has

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Speaker 1: been has told us it's going to reduce the size

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Speaker 1: of its balance sheet. I think that's the most important

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Speaker 1: prospect or aspect of the markets to to understand. They

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Speaker 1: expanded their balance sheet from nine billion dollars to nine

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Speaker 1: trillion dollars over the course of the last decade and

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Speaker 1: a half, and now they said they're going to reduce

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Speaker 1: the size of the balance sheet by billion dollars a month,

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Speaker 1: probably taking it back to four or five trillion dollars.

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Speaker 1: Over the course of the next several years, we've gone

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Speaker 1: from having an expansionary, wonderful, bullish phenomenon to a I

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Speaker 1: think a contractionary, bearish phenomenon. And I think you have

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Speaker 1: to remain bearish. Let's bring that over to corporations and

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Speaker 1: do go grammed doubt and coddle you. And I remember

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Speaker 1: the vogue. It was like spacks Paul, every single specialty

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Speaker 1: chemical company was rolled up. It was like a roll

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Speaker 1: up is the word that was invented Dennis Gartment. Are

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Speaker 1: we gonna have a zombie roll up where the nonprofitables

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Speaker 1: that have had a free lunch for a decade get

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Speaker 1: rolled up into something new and different. I think they

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Speaker 1: get rolled down into into bankruptcy rather than something new

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Speaker 1: and in different. I think bankruptcy is is there is

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Speaker 1: their future. I'm afraid that nonprofitable industries, businesses have to

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Speaker 1: be allowed to to to to to go into the

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Speaker 1: atmosphere and disappear. We've kept them alive. You've used the

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Speaker 1: term zombie. I think that's a good term. It's been

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Speaker 1: a term that's been banned about for a long period

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Speaker 1: of time, and I think that the zombies will actually

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Speaker 1: end up being dead, not not kept alive. Let us

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Speaker 1: hope that capitalism and in its in its freest and

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Speaker 1: best circumstances prevails Dennis, as it relates to this Federal Reserve,

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Speaker 1: it feels like that, you know, kind of the backbone

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Speaker 1: to your bearish call is the Federal Reserve. Yes, do

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Speaker 1: you have a sense of when they feel like they

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Speaker 1: will have done their job and maybe they can back

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Speaker 1: off and if if nothing else to see if these

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Speaker 1: interest rate increases do in fact, I didn't do inflation.

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Speaker 1: If I've learned anything in the nearly fifty years that

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Speaker 1: they've been involved in the markets is that when once

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Speaker 1: the Fed begins to change its policies, it moves rates

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Speaker 1: farther and lasts longer than anybody ever wants to anticipate.

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Speaker 1: When they when they ease monetary policy, they take rate

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Speaker 1: slower than anybody believes for a longer period of time.

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Speaker 1: When they tighten, they take rates higher for a longer

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Speaker 1: period of time than anybody wants to anticipate. I think

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Speaker 1: it's going to be at least until late in maybe

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Speaker 1: four before the long awaited pivot occurs. So it's just

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Speaker 1: historically that's what they've done. I believe that the FED

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Speaker 1: is a historical precedent setting and precedent following circumstance, and

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Speaker 1: I think it will be a long time before the

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Speaker 1: pivot is available to anybody who wants to think that

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Speaker 1: the pivot is likely. So what's the investor to do?

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Speaker 1: I just think about my portfolio. Year to date, my

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Speaker 1: stocks are down mid twenties, my bonds are down mid teams.

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Speaker 1: I've got that barrel of oil in my apartment, so

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Speaker 1: I'm in good shape there. But what else do I

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Speaker 1: do here? If i'm you know, I'm not gonna have

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Speaker 1: any FED help until maybe a year from now. I

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Speaker 1: think two year notes at four and a half percent

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Speaker 1: are probably a good place to hide. I consider that

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Speaker 1: to be cash, for lack of a better term. I

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Speaker 1: think that's a great place to go for the next

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Speaker 1: year or so. It's safe, you'll get paid, you'll learn

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Speaker 1: four and a half percent, and it's not a bad return.

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Speaker 1: So I think cash is the great is the best

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Speaker 1: place to be. That's what I've done into my own

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Speaker 1: In my own account, I've gone to a rather substantive

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Speaker 1: amount of two year notes, and I'm continuing to buy more.

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Speaker 1: If we get to five pers now, which I doubt

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Speaker 1: that we shall. I'll buy even more. Let's go back

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Speaker 1: to early Gartman. Okay, I'm talking early Gartman. I'm looking

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Speaker 1: at red wheat, Dennis, and I'm sorry, there's echoes here

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Speaker 1: of food inflation. And yet I look at the majors

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Speaker 1: and I'm like, yeah, they're sort of elevated. But U

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Speaker 1: N in Rome is saying, maybe we really don't have

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Speaker 1: food inflation. This is where you started. Red wheat is

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Speaker 1: flashing red. What do you see with the food inflation

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Speaker 1: of the nation in the world. I think grain prices

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Speaker 1: want to go a great good deal higher, especially hard

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Speaker 1: red winter wheat and soft red winter wheat. Soft sad

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Speaker 1: winter wheat has has been to thirteen dollars a bushel.

431
00:23:19,760 --> 00:23:21,720
Speaker 1: It's fallen back to about nine dollars a bushel. I

432
00:23:21,760 --> 00:23:24,080
Speaker 1: think it goes to thirteen dollars a bushel again or higher,

433
00:23:24,440 --> 00:23:26,240
Speaker 1: given the fact of trying to get the wheat crop

434
00:23:26,280 --> 00:23:29,960
Speaker 1: planted as they call drilled. Thus far this year has

435
00:23:30,000 --> 00:23:33,800
Speaker 1: been difficult. It's good, it's been dry weather and it's

436
00:23:33,800 --> 00:23:36,439
Speaker 1: going to remain dry. So the crop itself looks like

437
00:23:36,440 --> 00:23:39,760
Speaker 1: it's behind schedule. Planting is moving quickly because you can

438
00:23:39,800 --> 00:23:41,800
Speaker 1: get you can plant quickly in to dry ground. But

439
00:23:41,840 --> 00:23:44,680
Speaker 1: we need rain. We need snow this winter. We need

440
00:23:44,760 --> 00:23:47,240
Speaker 1: reasonably decent temperatures through the winter to get somewhere we

441
00:23:47,359 --> 00:23:49,719
Speaker 1: cropped through, and I'm afraid we shan't. We're not going

442
00:23:49,760 --> 00:23:53,639
Speaker 1: to get that. So the Middle West agriculture is normal weather,

443
00:23:53,800 --> 00:23:57,679
Speaker 1: kind of drought stuff, not high prices based on what

444
00:23:57,760 --> 00:24:01,359
Speaker 1: a gallon of gas or diesel fuel costs. That's a

445
00:24:01,359 --> 00:24:03,040
Speaker 1: good and that's that's that's a good way to look

446
00:24:03,080 --> 00:24:04,639
Speaker 1: at it. But I think that over the course of the

447
00:24:04,600 --> 00:24:07,040
Speaker 1: the next six months a year, wheat prices go a

448
00:24:07,080 --> 00:24:09,359
Speaker 1: lot higher. I'm very bullish on wheat. I'm not that

449
00:24:09,400 --> 00:24:11,359
Speaker 1: bullish on corn, and I'm not bullish at all on

450
00:24:11,400 --> 00:24:14,000
Speaker 1: the soybean market. But I'm very bullish on weeding. We

451
00:24:14,040 --> 00:24:16,000
Speaker 1: forget that wheat is the most important crop in the world.

452
00:24:16,080 --> 00:24:18,600
Speaker 1: It's still the largest employer in the world is the

453
00:24:18,640 --> 00:24:21,159
Speaker 1: production of wheat around the world. Dennis Gartment, thank you

454
00:24:21,200 --> 00:24:24,159
Speaker 1: so much. The Gartment letter greatly greatly appreciate stuff there.

455
00:24:35,800 --> 00:24:38,080
Speaker 1: Don Witty Bohogana it joins us now. She's had of

456
00:24:38,080 --> 00:24:41,880
Speaker 1: a multi asset strategy at Columbia thread Needle and on Witty,

457
00:24:41,920 --> 00:24:45,240
Speaker 1: what will be the ballast going forward if we don't

458
00:24:45,280 --> 00:24:49,359
Speaker 1: get some stability in rates in the near term. Thanks

459
00:24:49,359 --> 00:24:52,120
Speaker 1: for having me, Lisa. Yeah, I think sixty forty has

460
00:24:52,119 --> 00:24:55,719
Speaker 1: been a bus this year for sure, um, But I

461
00:24:55,760 --> 00:25:00,199
Speaker 1: think a lot of the conversation around these days is

462
00:25:00,280 --> 00:25:03,320
Speaker 1: has been about fed watching and you all nailed it

463
00:25:03,359 --> 00:25:07,120
Speaker 1: when you talked about real yields, So really yields stability

464
00:25:07,320 --> 00:25:10,440
Speaker 1: is going to be the ballast. But I keep coming

465
00:25:10,440 --> 00:25:13,360
Speaker 1: back to what does stabilize really yields? And for that

466
00:25:13,440 --> 00:25:16,520
Speaker 1: we keep going back to inflation data, and we just

467
00:25:16,560 --> 00:25:20,520
Speaker 1: haven't seen any signs of peak in that. There are

468
00:25:20,640 --> 00:25:23,280
Speaker 1: hints that are forwardly looking metrics. If you look at

469
00:25:23,280 --> 00:25:26,840
Speaker 1: sort of inflation expectations as measured in the bond market,

470
00:25:27,960 --> 00:25:30,800
Speaker 1: those have come down quite sharply, but they're not at

471
00:25:30,880 --> 00:25:33,880
Speaker 1: levels where one can say we can declare victory. Now,

472
00:25:33,960 --> 00:25:36,520
Speaker 1: what's so important here is the heritage of Columbia, threadneed

473
00:25:36,520 --> 00:25:39,080
Speaker 1: of Columbia, thread needle in the England and England and

474
00:25:39,119 --> 00:25:41,080
Speaker 1: your roll up of BEMO and the idea of that

475
00:25:41,119 --> 00:25:43,960
Speaker 1: Ted Trust get your leaders is from Scotti Stevens. It's

476
00:25:43,960 --> 00:25:48,840
Speaker 1: the Boston heritage of mutual funds. Lisa mentions the debacle

477
00:25:49,080 --> 00:25:55,560
Speaker 1: of sixty Do you invest now assuming sixties forties stability

478
00:25:55,800 --> 00:25:59,639
Speaker 1: forward or do you have to invest with a different

479
00:25:59,720 --> 00:26:03,440
Speaker 1: cut relation. I think I'll break that down Tom into

480
00:26:03,480 --> 00:26:08,600
Speaker 1: two parts. So if I look at all my strategic

481
00:26:08,680 --> 00:26:13,000
Speaker 1: forecast for the medium term, they are better than iver

482
00:26:13,119 --> 00:26:16,119
Speaker 1: seen in ten years. Ten years ago, when we were

483
00:26:16,119 --> 00:26:19,359
Speaker 1: looking at what fixed income might return for us, we

484
00:26:19,440 --> 00:26:23,119
Speaker 1: were looking at zero yields on the safer bonds and

485
00:26:23,280 --> 00:26:26,320
Speaker 1: two or three on the riskier part of the tenure.

486
00:26:26,920 --> 00:26:31,240
Speaker 1: Now we're looking at tenure at four percent, and you

487
00:26:31,320 --> 00:26:33,600
Speaker 1: don't even have to take a whole lot of risks

488
00:26:33,640 --> 00:26:37,680
Speaker 1: to go up to short duration. I g and get

489
00:26:37,720 --> 00:26:42,560
Speaker 1: five six in a very safe, sort of risk free

490
00:26:43,320 --> 00:26:48,160
Speaker 1: equity bond portfolio. And similarly, I don't think equities are cheap.

491
00:26:48,720 --> 00:26:53,720
Speaker 1: Equities are probably fairly valued given the amount of uncertainty

492
00:26:53,760 --> 00:26:56,359
Speaker 1: we have. But again, if you look at the medium

493
00:26:56,440 --> 00:27:01,720
Speaker 1: term projections, they're looking here is everybody's been blown up

494
00:27:01,720 --> 00:27:05,960
Speaker 1: in this unique pandemic induced bear market. Are we going

495
00:27:06,040 --> 00:27:10,280
Speaker 1: on to something new or do wevisit the giant pioneer

496
00:27:10,359 --> 00:27:14,119
Speaker 1: Phil Kay and a way to invest that we knew

497
00:27:14,480 --> 00:27:19,080
Speaker 1: decades ago? I think we won't know whether we're going

498
00:27:19,119 --> 00:27:23,280
Speaker 1: to something new until after the fact. So these structural changes,

499
00:27:23,320 --> 00:27:30,280
Speaker 1: it sounds like that carrying carry on place. So we

500
00:27:30,400 --> 00:27:33,159
Speaker 1: do I think that's a very important question, Tom, We

501
00:27:33,280 --> 00:27:37,280
Speaker 1: do grapple with is this a new structural regime for inflation?

502
00:27:37,800 --> 00:27:42,679
Speaker 1: To your question, does inflation stay around three? And we

503
00:27:42,720 --> 00:27:46,639
Speaker 1: don't know that. So you could have theories that deglobalization

504
00:27:47,160 --> 00:27:50,399
Speaker 1: and whatnot is going to keep inflation high forever. But

505
00:27:51,080 --> 00:27:54,879
Speaker 1: for the moment, I haven't seen enough evidence that there's

506
00:27:54,920 --> 00:27:58,160
Speaker 1: been any sort of break in the way things function. Yes,

507
00:27:58,200 --> 00:28:01,600
Speaker 1: we're going through a painful period in the markets. I'm

508
00:28:01,680 --> 00:28:04,600
Speaker 1: living it every day. But I think if we have

509
00:28:04,680 --> 00:28:08,520
Speaker 1: a medium term perspective, then you stay with stay the course,

510
00:28:08,840 --> 00:28:11,919
Speaker 1: stay the strategic allocation that you have in mind, and

511
00:28:12,000 --> 00:28:16,040
Speaker 1: do not panic when that sixty is already down. Okay,

512
00:28:16,040 --> 00:28:18,680
Speaker 1: So you're looking out over the medium term. In the

513
00:28:18,720 --> 00:28:21,640
Speaker 1: more near term, though, I'm wondering how you're viewing political risk,

514
00:28:21,680 --> 00:28:23,800
Speaker 1: because we've seen what happened in the UK what is

515
00:28:23,840 --> 00:28:26,359
Speaker 1: still ongoing in the UK. Frankly, the questions list for

516
00:28:26,440 --> 00:28:29,000
Speaker 1: us has been getting as Prime Minister in Parliament this

517
00:28:29,040 --> 00:28:31,000
Speaker 1: morning and we're just three weeks out from the mid

518
00:28:31,119 --> 00:28:33,680
Speaker 1: terms here in the US. I mean, is it time

519
00:28:33,720 --> 00:28:36,840
Speaker 1: to be thinking more about domestic political risk rather than

520
00:28:36,880 --> 00:28:39,960
Speaker 1: broader global monetary policy and geopolitics as we've been talking

521
00:28:40,000 --> 00:28:43,160
Speaker 1: about for this entire year thus far. Absolutely clearly that's

522
00:28:43,160 --> 00:28:45,600
Speaker 1: an excellent question. So no one's been talking about the

523
00:28:45,600 --> 00:28:49,320
Speaker 1: political risk here in the US. UM. You saw how

524
00:28:49,600 --> 00:28:52,000
Speaker 1: the l d I market, the bond market reacted in

525
00:28:52,200 --> 00:28:55,400
Speaker 1: UK when the market did not like the fiscal plan

526
00:28:55,520 --> 00:28:59,360
Speaker 1: that came out of that administration. Here, I think all

527
00:28:59,480 --> 00:29:01,840
Speaker 1: the day that I'm looking at all the opinion polls

528
00:29:01,840 --> 00:29:04,080
Speaker 1: I'm looking at right now is saying that we're likely

529
00:29:04,160 --> 00:29:07,920
Speaker 1: to have a divided government UM for the next two years.

530
00:29:08,400 --> 00:29:11,000
Speaker 1: So I think the market can live with that. But

531
00:29:11,920 --> 00:29:15,200
Speaker 1: if we see a sweep in one direction, and at

532
00:29:15,240 --> 00:29:19,000
Speaker 1: that point, at this point it means sweeping the democratic direction,

533
00:29:19,480 --> 00:29:23,400
Speaker 1: what sort of fiscal policies come through and how does

534
00:29:23,440 --> 00:29:25,640
Speaker 1: the market react to that is a key risk at

535
00:29:25,680 --> 00:29:27,600
Speaker 1: this point. And Witty, thank you so much for being

536
00:29:27,600 --> 00:29:30,200
Speaker 1: with us. And Witty ba Juguna, thank you so much

537
00:29:30,320 --> 00:29:34,200
Speaker 1: of Columbia. Threadneed off. This is the Bloomberg Surveillance Podcast.

538
00:29:34,440 --> 00:29:37,800
Speaker 1: Thanks for listening. Join us live weekdays from seven to

539
00:29:37,880 --> 00:29:41,960
Speaker 1: ten am Eastern on Bloomberg Radio and on Bloomberg Television

540
00:29:42,320 --> 00:29:46,320
Speaker 1: each day from six to nine am for insight from

541
00:29:46,320 --> 00:29:50,920
Speaker 1: the best in economics, finance, investment, and international relations. And

542
00:29:51,000 --> 00:29:56,120
Speaker 1: subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg

543
00:29:56,200 --> 00:29:59,760
Speaker 1: dot com, and of course, on the terminal. I'm Tom Keen.

544
00:30:00,120 --> 00:30:01,840
Speaker 1: This is Bloomer