WEBVTT - Bloomberg Surveillance TV: December 30, 2024 0:00:02.400 --> 0:00:08.560 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and a Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:35.840 Bloomberg Terminal and the Bloomberg Business App. 0:00:36.440 --> 0:00:38.720 Your point the camera now to our first guest, Cameron 0:00:38.800 --> 0:00:41.080 Dawson over a new Edge Wealth, joining us right now 0:00:41.080 --> 0:00:41.520 to talk. 0:00:41.360 --> 0:00:42.800 A little bit more a welded. 0:00:42.840 --> 0:00:45.120 That lopsidedness that we saw at the start of twenty 0:00:45.240 --> 0:00:48.000 twenty four is going to be lopsidedness at the start 0:00:48.000 --> 0:00:49.080 of twenty twenty five. 0:00:49.400 --> 0:00:52.239 I think the most important point about breadth is that 0:00:52.320 --> 0:00:53.240 it actually has. 0:00:53.159 --> 0:00:54.440 Been supported by earnings. 0:00:54.440 --> 0:00:57.480 The reason why the market has been narrow, it's because 0:00:57.600 --> 0:01:00.800 earnings growth has been narrow so it's not just valuation alone, 0:01:00.840 --> 0:01:03.120 and we've seen that in the last four months. If 0:01:03.120 --> 0:01:05.399 you look at the mag seven their earnings estimates have 0:01:05.440 --> 0:01:08.840 actually been revised higher by about fifteen percent, but if 0:01:08.840 --> 0:01:11.040 you look at the equal weight index, their earnings have 0:01:11.120 --> 0:01:15.080 been revised lower by about five percent. So that's spread 0:01:15.200 --> 0:01:18.560 in earnings revisions and earning strength is really what has 0:01:18.600 --> 0:01:20.920 been driving the fact that this market is led by 0:01:20.959 --> 0:01:23.600 such a few short names. The question is, if you 0:01:23.600 --> 0:01:26.440 look at estimates in twenty twenty five, they have the 0:01:26.600 --> 0:01:30.440 everything else starting to really participate in earnings. But that's 0:01:30.480 --> 0:01:32.920 a pretty high bar and pretty much has show these 0:01:32.959 --> 0:01:34.160 stories we get into next. 0:01:34.080 --> 0:01:36.680 Year, how much if we do get a broadening of 0:01:36.720 --> 0:01:39.520 the earnings picture, how much of that is dependent on 0:01:39.600 --> 0:01:43.520 economic conditions and for that matter, policy conditions coming out 0:01:43.520 --> 0:01:44.080 of Washington. 0:01:44.319 --> 0:01:47.600 It is rather peculiar that we've seen this economic growth 0:01:47.680 --> 0:01:51.000 environment where we've had consistent upside surprises to growth. 0:01:51.240 --> 0:01:53.440 We've had growth be above. 0:01:53.200 --> 0:01:57.040 Trend, and yet it has not materialized to the everything 0:01:57.080 --> 0:02:00.600 else earnings, meaning that you've had this strong GDP environment, 0:02:00.720 --> 0:02:03.760 but the average stock has continued to struggle. Part of 0:02:03.800 --> 0:02:06.160 that is just an overhang from the pandemic. You had 0:02:06.160 --> 0:02:09.880 some over earning that happened, margins got overextended, and that 0:02:10.040 --> 0:02:12.840 was coming back in But what you have now is 0:02:12.880 --> 0:02:16.799 this expectation that you'll have a huge reacceleration in those 0:02:16.840 --> 0:02:19.480 four ninety three names. We're not sure if you get 0:02:19.480 --> 0:02:22.880 that in a potentially decelerating nominal growth environment. 0:02:23.440 --> 0:02:26.040 You know, it's a little earlier that Romayne had mentioned 0:02:26.080 --> 0:02:28.079 the bond market. You're seeing that bid come back into 0:02:28.120 --> 0:02:29.519 the bond market in the last. 0:02:29.200 --> 0:02:30.000 Week of the year. 0:02:30.320 --> 0:02:34.040 However, just last week we're at four sixty one again 0:02:34.320 --> 0:02:36.960 on the ten year. At what point does that start 0:02:36.960 --> 0:02:38.919 to get in the way of this equity market rally 0:02:39.040 --> 0:02:40.880 or is it already getting in the way. 0:02:41.160 --> 0:02:44.119 The thing that's been most surprising in twenty twenty four 0:02:44.280 --> 0:02:47.160 is how much we've been able to see multiple expansion 0:02:47.360 --> 0:02:49.360 despite having rising bond yields. 0:02:49.600 --> 0:02:51.760 If you look forward, multiples. 0:02:51.240 --> 0:02:53.280 For the S and P five hundred are up about 0:02:53.320 --> 0:02:56.120 seventeen percent over the course of the year, and that's 0:02:56.120 --> 0:02:58.880 with a bond market that has seen this constant pressure 0:02:58.919 --> 0:03:01.880 and rising yields. So at a certain point is a 0:03:02.000 --> 0:03:05.640 twenty two point three times forward multiple consistent with a 0:03:05.720 --> 0:03:09.000 bond yield at four point six percent. We always have 0:03:09.040 --> 0:03:12.200 to remember that valuations are a very poor timing tool, 0:03:12.440 --> 0:03:14.960 but we're getting to a point where equity risk premiums 0:03:15.000 --> 0:03:19.280 are incredibly narrow, incredibly tight, so as equity investors, you're 0:03:19.280 --> 0:03:21.799 not necessarily getting well compensated for. 0:03:21.760 --> 0:03:22.560 The added risk. 0:03:22.880 --> 0:03:25.400 But even if you believe, if you believe that the 0:03:25.440 --> 0:03:28.200 reason yields are higher is because of strong economic data, 0:03:28.440 --> 0:03:32.079 then does that mean that any vulnerable economic data could 0:03:32.080 --> 0:03:35.160 set the market a little Haywire, I think. 0:03:34.960 --> 0:03:36.880 That is a really good point, is that if you're 0:03:36.920 --> 0:03:41.160 looking at things like credit spreads being ultra tight, valuations 0:03:41.200 --> 0:03:44.480 being so high, it's not contemplating any kind of growth 0:03:44.520 --> 0:03:47.560 slow down. So if you were an environment where you're 0:03:47.600 --> 0:03:51.480 seeing growth estimates get cut versus getting raised, that would 0:03:51.520 --> 0:03:53.400 be a challenge to valuations. 0:03:53.440 --> 0:03:54.960 We think the most important. 0:03:54.560 --> 0:03:57.720 Charts over the last two years is GDP estimates for 0:03:57.760 --> 0:04:00.360 twenty three and twenty four. It has been a constant 0:04:00.520 --> 0:04:03.200 climb upwards. And if that starts to go in the 0:04:03.240 --> 0:04:06.360 other direction, meaning we're talking about GDP estimate scene to 0:04:06.400 --> 0:04:09.640 being revised lower, that's a very different market mood. 0:04:10.160 --> 0:04:13.280 I'm curious though, too, when we talk about the expectations 0:04:13.280 --> 0:04:15.600 for economic growth, and we've seen what the market expects, 0:04:15.640 --> 0:04:18.480 what economists expects, so you've even seen what the FED expects. 0:04:18.680 --> 0:04:21.560 It's healthy. It may not be you know, Gangbusters, but 0:04:21.600 --> 0:04:23.760 it seems like a healthy enough foundation. So why are 0:04:23.760 --> 0:04:26.120 people why is there still some trepidation in the market, 0:04:26.279 --> 0:04:29.360 particularly when it comes to like I said, midcaps, small caps, 0:04:29.480 --> 0:04:31.400 the types of companies that would benefit from a stable 0:04:31.440 --> 0:04:32.280 economic environment. 0:04:32.520 --> 0:04:33.440 Well, I think first on. 0:04:33.400 --> 0:04:36.760 The economic growth expectations is that recession risk has been 0:04:36.760 --> 0:04:39.880 effectively completely priced out of the market as. 0:04:39.720 --> 0:04:40.600 We forgot about recession. 0:04:40.600 --> 0:04:43.760 P does that happen, But also it's been priced out 0:04:43.760 --> 0:04:44.279 of the psyche. 0:04:44.320 --> 0:04:46.599 If you go back to Palace comments from a couple 0:04:46.600 --> 0:04:49.599 of weeks ago, he talked about how great the economy 0:04:49.760 --> 0:04:52.520 was and how optimistic he was about future growth. So 0:04:52.760 --> 0:04:55.560 if there's lue, believe me, Well, it does make us 0:04:55.600 --> 0:04:58.200 a little bit nervous if we're not considering any kind 0:04:58.200 --> 0:05:01.640 of downside risk, mostly as we're starting to see some 0:05:01.960 --> 0:05:05.000 signs of things like continuing claims last week, continue to 0:05:05.120 --> 0:05:08.159 march higher. When it comes to small caps in mid caps, 0:05:08.200 --> 0:05:11.400 we have to acknowledge that it really is about the 0:05:11.480 --> 0:05:14.560 balance sheets. It's about interest rates being so high, and 0:05:14.600 --> 0:05:16.960 that there was this notion of sour five until twenty 0:05:17.000 --> 0:05:19.960 twenty five because POWE is going to bail you out, We're. 0:05:19.839 --> 0:05:21.159 Going to get interest rate cuts. 0:05:21.520 --> 0:05:24.000 If those don't come, then we have that balance sheet 0:05:24.040 --> 0:05:24.920 interest cost pressure. 0:05:24.920 --> 0:05:25.440 That remains. 0:05:25.480 --> 0:05:27.640 So in the realm of stocks in if I say 0:05:27.640 --> 0:05:30.240 the word value to you, what does that even mean 0:05:30.480 --> 0:05:33.320 right now? Is there value to be found in this market? 0:05:33.680 --> 0:05:37.120 Value isn't necessarily dirt cheap at this point, but we 0:05:37.200 --> 0:05:41.000 do know that the relative performance has been so abysmal 0:05:41.160 --> 0:05:44.839 that it's likely primed for some kind of snapback. Jeff 0:05:44.839 --> 0:05:47.839 de Graff pointed out this morning that the value relative 0:05:47.839 --> 0:05:51.880 performance has been in about six percentiles, so very very depressed. 0:05:52.080 --> 0:05:55.240 The question is does that start to rotate in the 0:05:55.320 --> 0:05:58.120 other direction that is sustainable, And that's where it comes 0:05:58.160 --> 0:06:00.920 back to earnings, meaning that you can see a snapback 0:06:01.000 --> 0:06:04.159 in value simply because it's underloved and under owned. But 0:06:04.440 --> 0:06:07.680 is that snapback lasting more than let's say, two weeks. 0:06:08.000 --> 0:06:09.839 And that really is when it comes down to the 0:06:09.880 --> 0:06:12.359 earnings line, because those have to deliver for it to 0:06:12.360 --> 0:06:14.200 be more than just a flash in the pan, you know. 0:06:14.240 --> 0:06:16.560 Speaking of value, a lot of investors have been trying 0:06:16.600 --> 0:06:19.320 to rotate out of those high flyers, those big tech 0:06:19.360 --> 0:06:22.760 stocks out of Nvidia, for example, and take on some 0:06:23.440 --> 0:06:27.040 not Nvidia. You have seen some of that pullback here 0:06:27.040 --> 0:06:28.800 and there. But you know, if you think about the 0:06:28.839 --> 0:06:31.400 way that people are rotating, there is not a consensus. 0:06:31.440 --> 0:06:33.760 You've seen that small cap trade, you've seen some value, 0:06:34.080 --> 0:06:36.400 you've seen some rotation into different. 0:06:36.120 --> 0:06:38.640 Sectors as well. How do you play it? 0:06:38.760 --> 0:06:42.560 What is the most sustainable rotation at this point. 0:06:42.240 --> 0:06:45.320 We think it's the steady hand of quality that remains 0:06:45.360 --> 0:06:48.520 still very very important. Over the last four months or so, 0:06:48.680 --> 0:06:51.920 you've seen a big surge in low quality, high beta, 0:06:52.080 --> 0:06:55.560 high momentum kinds of names, and so we do think 0:06:55.640 --> 0:06:58.480 that the best way to be able to take advantage 0:06:58.520 --> 0:07:00.800 of these rotations is to content you to focus on 0:07:00.880 --> 0:07:04.240 things like high free cash flow, good return on investing capital, 0:07:04.279 --> 0:07:07.120 good balance sheets. They're getting left in the dust a 0:07:07.200 --> 0:07:09.560 little bit recently, but we do think over the long 0:07:09.640 --> 0:07:11.080 term that quality is the way to go. 0:07:11.200 --> 0:07:13.960 It's people pulling out there at EQS screens on their 0:07:14.000 --> 0:07:17.240 Bloomberg terminal and running those terminal charts. Hey, listen, do 0:07:17.280 --> 0:07:19.360 you want to go back to something you'd said earlier 0:07:19.400 --> 0:07:23.760 about GDP growth Because so many investors are looking here 0:07:23.840 --> 0:07:26.800 at the way the Trump administration will tackle, of course, the. 0:07:26.760 --> 0:07:28.080 Reorganization of the government. 0:07:28.120 --> 0:07:30.200 Now we're talking about doge more and more on this program, 0:07:30.280 --> 0:07:31.480 aren't we, And. 0:07:31.600 --> 0:07:34.400 Do you believe that that could. 0:07:34.160 --> 0:07:36.280 Cut into growth if we don't see the same type 0:07:36.280 --> 0:07:38.080 of fiscal stimulus that we've seen in the last couple 0:07:38.120 --> 0:07:38.480 of years. 0:07:38.720 --> 0:07:41.000 I think it's a really important point, which is that 0:07:41.040 --> 0:07:45.000 fiscal has been a big contribution to overall GDP growth, 0:07:45.200 --> 0:07:49.160 and so if you start pursuing something that looks like austerity, 0:07:49.560 --> 0:07:51.960 it might be beneficial in the long run if we 0:07:52.000 --> 0:07:55.280 want to talk about budget deficits and balance budgets, But 0:07:55.480 --> 0:07:58.200 in the short run, there is pain that you have 0:07:58.280 --> 0:07:59.440 to have for that gain. 0:07:59.600 --> 0:08:02.360 So it could be that if we actually. 0:08:01.960 --> 0:08:04.480 Are able and that's a big if to rain in 0:08:04.520 --> 0:08:07.400 some of the spending and do some reorganization of government, 0:08:07.680 --> 0:08:10.600 that that could detract from overall GDP growth. 0:08:10.640 --> 0:08:12.360 We saw that the last. 0:08:12.040 --> 0:08:14.880 Time we went through a balanced budget kind of outlook 0:08:15.280 --> 0:08:17.720 post squestration, it was a drag on growth. 0:08:17.760 --> 0:08:19.520 So it is an important watch point. 0:08:19.640 --> 0:08:21.240 Yeah, And it's a good point too, because I think 0:08:21.240 --> 0:08:22.920 a lot of people kind of forget just how much 0:08:23.000 --> 0:08:25.520 government spending contributes to the growth of the economy. And 0:08:25.560 --> 0:08:28.080 it gets to this idea as well about the kind 0:08:28.080 --> 0:08:30.560 of bifurcation. How you have kind of a higher end 0:08:30.640 --> 0:08:33.079 consumer if you will higher income people I just say 0:08:33.080 --> 0:08:34.920 that appear to be doing well. You have people in 0:08:34.960 --> 0:08:37.560 the middle and the lower end that at least anecdotally 0:08:37.679 --> 0:08:39.000 still seem to be struggling. 0:08:39.000 --> 0:08:40.000 And there was some interesting. 0:08:39.760 --> 0:08:42.040 Data that we just got out today about credit card 0:08:42.120 --> 0:08:45.960 delinquencies arising, particularly amongst lower income folks. 0:08:46.640 --> 0:08:49.439 It is still very present that we have this ca 0:08:49.559 --> 0:08:53.000 shaped economy. And if you think about the lower income consumer, 0:08:53.120 --> 0:08:55.959 they're sensitive to things like interest rates, they're far more 0:08:56.000 --> 0:09:00.400 sensitive to inflation, and they're more sensitive to the job market. 0:09:00.520 --> 0:09:03.400 So the fact that you're seeing hiring start to slow down, 0:09:03.720 --> 0:09:07.040 that likely is what is creeping into those issues that 0:09:07.080 --> 0:09:09.559 we're seeing with the delinquencies for the for the low 0:09:09.600 --> 0:09:12.760 income consumer. Then if you shift to the high income consumer, 0:09:13.160 --> 0:09:16.000 that's where we think the equity market is really important 0:09:16.160 --> 0:09:18.920 because that's been one of the things. Loose financial conditions, 0:09:19.240 --> 0:09:22.840 high interest rates, yet really strong stock prices, strong housing 0:09:22.920 --> 0:09:25.880 prices has led to the high income consumer being so 0:09:26.040 --> 0:09:29.040 resilient and good to remember, the top twenty percent of 0:09:29.080 --> 0:09:32.719 consumers make up forty percent of overall consumption, so they 0:09:32.760 --> 0:09:33.959 outpunch their weight. 0:09:34.360 --> 0:09:35.920 And so if you start to see. 0:09:35.720 --> 0:09:38.360 Equity market weakness, and that's an if, but if you 0:09:38.400 --> 0:09:40.360 start to see it, that could be one thing that 0:09:40.360 --> 0:09:42.959 could cause that high income consumer to begun to pull back. 0:09:43.120 --> 0:09:44.960 I should just point out I did my economic part 0:09:44.960 --> 0:09:45.800 this holiday season. 0:09:45.800 --> 0:09:47.080 I haven't seen I haven't seen. 0:09:46.960 --> 0:09:48.839 My credit card statement yet, but I'm sure it will 0:09:48.840 --> 0:09:49.880 make me weep when I get it. 0:09:49.960 --> 0:09:51.960 Yeah, I'm not excited to see it's the holiday seasons 0:09:52.000 --> 0:09:54.720 are always tough, you know. The credit card delinquencies are 0:09:54.720 --> 0:09:56.360 a great point. The other reason to look at them 0:09:56.440 --> 0:09:58.800 is because weeks away we have earning season starting once 0:09:58.840 --> 0:10:02.240 again and it's just starting to see credit card delinquencies rise. 0:10:02.679 --> 0:10:04.680 Do you start to worry about the banks again or 0:10:04.720 --> 0:10:06.599 do you shrug it off because the yields curve is 0:10:06.640 --> 0:10:08.160 steeper and rates are staying hi. 0:10:08.760 --> 0:10:10.320 Yeah, it's a really good question. 0:10:10.440 --> 0:10:12.880 Is that there's also this notion that the banks are 0:10:12.880 --> 0:10:16.000 going to see the benefit of a big IPO and 0:10:16.160 --> 0:10:17.040 M and a cycle. 0:10:17.360 --> 0:10:19.040 That could be a bit of a hope. 0:10:19.040 --> 0:10:22.720 We are seeing good performance out of recently iPod stocks, 0:10:22.760 --> 0:10:25.560 at least over the last couple of months, So maybe 0:10:25.559 --> 0:10:28.559 that's something that can defrost the ice that has been 0:10:28.640 --> 0:10:30.920 present for the last two years within that part of 0:10:30.960 --> 0:10:33.480 the market. But I think it is an interesting point, 0:10:33.520 --> 0:10:36.480 which is that markets have effectively priced out some of 0:10:36.480 --> 0:10:39.040 this credit risk, saying that the economy is strong, so 0:10:39.080 --> 0:10:41.720 we don't need as much compensation for credit risk. But 0:10:41.800 --> 0:10:44.640 you're starting to see some pockets of weakness, and if 0:10:44.760 --> 0:10:48.680 rates remain high, we can't forget that. You have a 0:10:48.679 --> 0:10:51.600 big refinancing cycle that starts in twenty five and into 0:10:51.640 --> 0:10:54.520 twenty six, and maybe that starts to pinch some. 0:10:54.520 --> 0:10:55.400 Of these borrowers. 0:10:55.760 --> 0:10:57.200 All right, Camera, I'm going to have to leave it. 0:10:57.200 --> 0:10:57.440 There. 0:10:57.600 --> 0:10:59.480 No better way to close out the year than a 0:10:59.520 --> 0:11:03.120 conversation with Camera and Dawson to see Iisle over at 0:11:03.200 --> 0:11:15.160 New Edge. Patrick joins us right now to talk a 0:11:15.200 --> 0:11:18.120 little bit more about his outlook for energy prices, and 0:11:18.160 --> 0:11:20.240 it's kind of a big contrast to what we saw 0:11:20.280 --> 0:11:22.640 at the start of twenty twenty four when we had 0:11:22.800 --> 0:11:25.400 that ten to fifteen percent rally and everybody was talking 0:11:25.400 --> 0:11:28.400 about oil at one hundred bucks and beyond. And we've 0:11:28.400 --> 0:11:30.440 come a long way since then, just not in the 0:11:30.480 --> 0:11:32.360 right direction. Well, not in the right direction if you're 0:11:32.360 --> 0:11:33.120 an oil producer. 0:11:34.200 --> 0:11:36.079 Yeah, that's right. I think the bulls have been chased 0:11:36.080 --> 0:11:38.439 away at least for now, and under the President Trump's 0:11:38.760 --> 0:11:40.920 mantro drill, baby drill, I think it may be another 0:11:41.000 --> 0:11:43.520 challenging year, at least for oil. Keep in mind OPEX 0:11:43.600 --> 0:11:46.800 production cuts, keeping about five million barrels a day of 0:11:46.840 --> 0:11:50.120 spare capacity offline. That's where some of the downside risks 0:11:50.120 --> 0:11:52.959 potentially comes. Now. I don't necessarily believe that OPEC is 0:11:53.000 --> 0:11:55.400 going to open this bigot back up in April. That's 0:11:55.440 --> 0:11:58.320 what they've delayed their restoration to for now. But I 0:11:58.320 --> 0:12:01.160 think it's going to be another challenging year for the upstream, 0:12:01.200 --> 0:12:03.880 whereas you still are going to see your seasonal swings 0:12:03.920 --> 0:12:06.960 when it comes to the midstream, the refiners. Maybe good 0:12:06.960 --> 0:12:09.480 news though for pipeline operators who may be able to 0:12:09.520 --> 0:12:13.160 expand a little bit more readily available. And then the 0:12:13.160 --> 0:12:15.400 retail sector. I think the CE store level is going 0:12:15.400 --> 0:12:18.520 to experience another good year. But for oil, you know, 0:12:18.760 --> 0:12:20.760 there aren't a whole lot of upside risks now. I 0:12:20.800 --> 0:12:23.800 think there's more downside potential than upside for twenty twenty five. 0:12:24.080 --> 0:12:26.120 Just staying on oil for one second, particularly on the 0:12:26.160 --> 0:12:27.960 production side, because I know there was a lot of 0:12:28.000 --> 0:12:32.040 optimism about the Trump administration coming in, particularly given the 0:12:32.040 --> 0:12:34.480 policies we saw the first time around. But there is 0:12:34.520 --> 0:12:36.920 an issue of capacity right now and whether there is 0:12:37.080 --> 0:12:40.520 anything to drill baby drill into that we haven't already 0:12:40.600 --> 0:12:42.200 drilled baby drilled already into. 0:12:43.600 --> 0:12:46.679 Yeah, I mean exactly right. The Permian has been maturing. Now. 0:12:46.720 --> 0:12:51.559 There's been talk about potentially reopening the Arctic Wildlife Refuge, 0:12:51.559 --> 0:12:53.520 so you know that's something there as well. But I 0:12:53.520 --> 0:12:56.200 don't look for oil companies to go into rural Alaska 0:12:56.240 --> 0:12:58.559 and to be really excited about potentially drilling there. I 0:12:58.600 --> 0:13:01.840 think there's a lot of challenges with that. And keep 0:13:01.840 --> 0:13:04.560 in mind getting that oil online could take potentially years, 0:13:04.559 --> 0:13:07.600 if not longer than that. So the Permian is slowing down, 0:13:07.640 --> 0:13:10.920 so there are potentially some upside there, but keep in mind, 0:13:10.920 --> 0:13:14.880 ope spare capacity. Guyana as well seeing a huge increase 0:13:14.880 --> 0:13:17.600 in capacity. Think one of the wild cards in terms 0:13:17.640 --> 0:13:19.920 of risk. Keep in mind is that candidate sends US 0:13:19.920 --> 0:13:23.400 over four million barrels of Canadian heavy oil every day 0:13:23.640 --> 0:13:25.920 through a couple of different pipelines, and of course president 0:13:26.000 --> 0:13:29.280 like Trump's promise on tariffs. I think that I'd like 0:13:29.320 --> 0:13:31.960 to fall that hunder as talk, but you never really know. 0:13:32.200 --> 0:13:36.040 And again, President Trump's kind of against the status quo 0:13:36.600 --> 0:13:38.680 at least on some of these issues that do pose 0:13:38.720 --> 0:13:40.920 a potential upside risk for oil in the year ahead. 0:13:41.480 --> 0:13:43.840 I want to go to your outlook for twenty twenty five, 0:13:43.920 --> 0:13:47.040 but first, can you just reflect back on the year 0:13:47.120 --> 0:13:52.160 that was in oil WQI basically flat for twenty twenty four. 0:13:52.640 --> 0:13:57.199 What was really driving that? I guess lack of movement. 0:13:58.600 --> 0:14:00.679 Well, you know, on the supply side, Dopek had been 0:14:00.720 --> 0:14:02.880 taking barrels out of the market. There wasn't a whole 0:14:02.920 --> 0:14:05.000 lot to get excited. On the demand side of things, 0:14:05.080 --> 0:14:08.000 China's economy has been incredibly weak. Not only that, but 0:14:08.000 --> 0:14:11.160 they've been pushing evs much harder. And keep in mind 0:14:11.200 --> 0:14:14.160 that their gasoline demand may have already peaked now moving forward, 0:14:14.160 --> 0:14:18.720 and so Chinese demand is a huge headwind for this market. 0:14:19.160 --> 0:14:20.920 And it comes as there's a lot of supply that 0:14:20.960 --> 0:14:24.000 remains offline. In the US's back at producing record amounts 0:14:24.040 --> 0:14:26.680 of crudal ourselves at about thirteen point six million barrels 0:14:26.720 --> 0:14:28.760 a day. So I think a lot of this story 0:14:28.840 --> 0:14:32.040 is really focused on the China economy that really has 0:14:32.040 --> 0:14:34.080 struggled for much of this year. Now there's a promise 0:14:34.080 --> 0:14:37.840 of stimulus moving forward, but there's simply too many spare 0:14:37.880 --> 0:14:40.520 barrels sitting offline here for the market to really see 0:14:40.600 --> 0:14:42.560 much of a run up. Now. I think we could 0:14:42.560 --> 0:14:45.080 see a bit of a spring surge that may be 0:14:45.320 --> 0:14:48.360 tied more to refined products, but we'll have to keep 0:14:48.400 --> 0:14:49.920 an eye on the US economy. I mean, there's a 0:14:49.960 --> 0:14:52.600 lot of potential possibilities that could slow our economy down, 0:14:52.640 --> 0:14:55.600 which in turn could also slow down global oil consumption. 0:14:56.200 --> 0:14:58.880 How do you think about inflation for twenty twenty five, 0:14:58.960 --> 0:15:02.560 because at least the Federal Reserve, the FOMC members did 0:15:02.720 --> 0:15:05.600 up their inflation projections. How do you kind of take 0:15:05.880 --> 0:15:09.479 inflation into your forecast well. 0:15:09.600 --> 0:15:10.320 As you indicate. 0:15:10.360 --> 0:15:12.040 I mean a year ago, we were sitting here talking 0:15:12.040 --> 0:15:15.080 about waiting for the Fed to cut interest rates rather aggressively, 0:15:15.120 --> 0:15:17.040 and now they've really toned that down, and now there's 0:15:17.080 --> 0:15:19.920 more caution in their statements, and that could post a 0:15:20.000 --> 0:15:23.200 negative for oil as well. I don't think oil or 0:15:23.360 --> 0:15:26.720 energy is going to be inflationary in twenty twenty five, 0:15:26.800 --> 0:15:30.600 but it's obviously a risk factor. If the FED slows 0:15:30.680 --> 0:15:34.080 down its interest rate cuts, there could be ramifications for 0:15:34.120 --> 0:15:36.480 the dollar, and of course a dollar right now has 0:15:36.480 --> 0:15:39.040 been fairly strong. So keep in mind that oil is 0:15:39.080 --> 0:15:41.400 globally traded in dollars. That could even have an impact 0:15:41.400 --> 0:15:43.680 on the price of oil and certainly something we'll be watching. 0:15:43.720 --> 0:15:44.600 In your head. 0:15:44.800 --> 0:15:46.480 I am curious that Patrick could maybe if you can 0:15:46.520 --> 0:15:49.240 circle this back to the consumer. There was obviously a 0:15:49.240 --> 0:15:51.880 lot of talk during this election cycle about gas prices, 0:15:51.880 --> 0:15:54.280 despite the fact that at least as of today, gas 0:15:54.280 --> 0:15:56.680 prices at the pumper about forty percent lower than where 0:15:56.680 --> 0:15:58.600 they were I think about a year ago or so. 0:15:59.200 --> 0:16:01.440 It gets to the question here as to whether we 0:16:01.520 --> 0:16:03.840 see prices at the pump at the retail level kind 0:16:03.840 --> 0:16:06.400 of remain where they are, maybe even go lower, or 0:16:06.440 --> 0:16:08.640 are there some forces out there where maybe we should 0:16:08.640 --> 0:16:10.760 prepare our sales for higher prices ahead. 0:16:11.800 --> 0:16:13.520 Well, I think for consumers it's going to be a 0:16:13.560 --> 0:16:17.080 third year straight of decline so ever since twenty twenty two, 0:16:17.160 --> 0:16:20.200 the yearly national average again in twenty twenty five likely 0:16:20.240 --> 0:16:23.200 to trend lower. Now, consumers shouldn't mistake that for flat 0:16:23.280 --> 0:16:25.560 gas prices through the year, because we will see gas 0:16:25.600 --> 0:16:27.560 prices start to go up as we get closer to 0:16:27.600 --> 0:16:30.120 warmer weather. By the way, according to gas Pity data, 0:16:30.160 --> 0:16:32.440 this morning one of those rare moments where the national 0:16:32.480 --> 0:16:35.480 average has slipped below the three dollars a gallon mark. 0:16:35.600 --> 0:16:37.720 I do think that will be temporary, and in the 0:16:37.760 --> 0:16:40.600 spring we will see that surge. Prices will probably run 0:16:40.720 --> 0:16:43.520 up twenty five to fifty cents a gallon, and they 0:16:43.560 --> 0:16:46.320 could get closer to the mid and upper three dollars mark. 0:16:46.480 --> 0:16:48.240 But that's going to stop short of what we saw 0:16:48.320 --> 0:16:50.320 last year when the national average peaked at about three 0:16:50.440 --> 0:16:53.280 sixty seven a gallon. So it's good news for consumers. 0:16:53.280 --> 0:16:56.280 They probably won't be shelling out as much in twenty 0:16:56.320 --> 0:16:59.440 twenty five. But keep in mind President Trump's promise to 0:16:59.480 --> 0:17:02.680 cut energy prices in half. That's a big difference talking 0:17:02.680 --> 0:17:05.639 about prices at three dollars versus his promise of cutting 0:17:05.640 --> 0:17:08.119 them in half, which would represent a price below two dollars. 0:17:08.480 --> 0:17:10.919 Yeah, something we haven't really seen on a sustained basis, 0:17:11.080 --> 0:17:14.480 probably since I was in diapers. Patrick, I am curious 0:17:14.760 --> 0:17:19.280 about this idea of an export economy for our energy. 0:17:19.320 --> 0:17:22.160 We've obviously seen the US over the last few years 0:17:22.200 --> 0:17:25.520 become energy independent, and of course now has a relatively 0:17:25.560 --> 0:17:30.199 thriving export business. How much can that expand based on 0:17:30.240 --> 0:17:33.040 our own demands here locally and how much is going 0:17:33.080 --> 0:17:34.920 to be left over to ship out and sell to 0:17:34.960 --> 0:17:36.880 other folks overseas well. 0:17:36.880 --> 0:17:38.720 I mean, you look at US exports, A lot of 0:17:38.760 --> 0:17:41.399 that is lighter, sweeter crude oil, and really the bigger 0:17:41.440 --> 0:17:44.920 boom is LNG, and that's what certainly could expand under 0:17:44.920 --> 0:17:47.640 President Trump, the exports of LNG. I mean, he's already 0:17:48.200 --> 0:17:51.040 threatening Europe that if they don't buy additional US energy 0:17:51.080 --> 0:17:53.160 that there's going to be ramifications. And I do think 0:17:53.160 --> 0:17:54.120 there's room to grow. 0:17:54.520 --> 0:17:54.639 Well. 0:17:54.800 --> 0:17:57.320 Natural gas prices have been blossoming here in the last 0:17:57.359 --> 0:17:59.840 couple of months on the promise of potential more exports. 0:17:59.880 --> 0:18:02.760 Now natural gas now above the three dollars mark, so 0:18:02.800 --> 0:18:04.719 I think there is room to grow. The US is 0:18:04.760 --> 0:18:07.960 the world's largest any energy producer, and I think we'll 0:18:08.000 --> 0:18:10.119 probably see that continue to grow in the years ahead, 0:18:10.200 --> 0:18:15.040 especially as Russia continues it's war in Ukraine and Europe 0:18:15.119 --> 0:18:17.080