00:00:02 Speaker 1: Bloomberg Audio Studios. 00:00:04 Speaker 2: Podcasts. Radio. 00:00:06 Speaker 3: News. 00:00:12 Speaker 1: This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. 00:00:27 Speaker 4: David Katz, CIO and Matrix Asset Advisor. It's really good to speak to you. The S & P 500 did really well, up by 2.6% in August. September is usually a much more difficult month. What's your view, especially as oil markets and the continued rise in oil prices sort of challenges the view for equity markets in the U.S.? Can we still see a strong September? 00:00:52 Speaker 5: We've had a great nine months. The market has been on a moonshot, yet there's been a lot of negative news. Oil prices staying up here for a sustained period, problematic. You're seeing yields across the globe and especially in the U.S. moving higher. The market's ignored a lot of that. We think we probably have entered a trading range with maybe 5 percent on the upside, 5 to 8 percent on the downside. Ultimately, we think the market goes higher, but expect a lot of volatility in the short term and possibly a pullback if the news flow doesn't start to get better on oil or Iran. 00:01:24 Speaker 6: David, you talk about taking a longer view in terms of investing and not getting caught up in daily price swings. Given that we're in an age of prediction markets, crypto, gambling, betting, how do investors build this muscle of resilience in the market? 00:01:40 Speaker 5: You've got to have that mindset. 90% of the people lose in the gambling markets, but people like to do it. People play crypto. A lot of people, most investors in crypto, have lost money if you weren't there early. So you've just got to change your mindset. Know that the stock market is not there for speculation, but for long-term wealth accumulation. If you have that mindset, you can buy things for the longer term. And if you can buy things for the longer term, there are a lot of really good businesses that are selling at 15, 16 times earnings. Don't get caught up in the craziness of the day. 00:02:09 Speaker 4: OK, what are you looking to buy if there are dips? And yeah, I come from a country that is famous for enjoying a flutter. 00:02:18 Speaker 5: I.e. 00:02:18 Speaker 4: A bet or a gamble in the UK. What are you thinking about in terms of when you look, if there are some stocks that sell off, what sectors are you looking at to pick up now? 00:02:29 Speaker 5: So we're up nicely for the year, but the stocks that we're going to recommend today have nearly not done anything for the year. So groups that have really pulled back. Utilities started the year hot. Of late, they've had a very bad So August. So right now they're pretty much flat for the year. Companies like an AEP or NextEra Energy are going to be long term energy winners because of the AI build out. But of late, they've gone down because of higher interest rates and because there's been some pushback on the data center. So we like an area like that. Consumer discretionary like a Home Depot or a Lowe's. Really good businesses. At some point, the housing market's going to turn around. Right now, you're not paying for any of that upside. 00:03:09 Speaker 6: A lot of companies have had earnings and raised outlooks, like earnings beats and raised outlooks, that have been met with sell-offs. Can you talk to me a little bit about the industries that are particularly susceptible to that action, or even if that's possible to determine? 00:03:23 Speaker 5: Well, you can determine it. So semiconductors had their best second quarter ever because the business was good, but the stocks went up 100% to 200%. Right now, they're reporting really good earnings, but people are worried about two years out, three years out. So when you get to 50 to 100 times earnings, you've got too much positives built in, and you can have some sort of a pullback, even if the news is very good. We do think there are certain companies that are part of the AI buildup that have sold off that are now opportunities. A company like Generac, which makes power backups for these companies, had a great run, gave about two-thirds of that run back, sells at about 20 times earnings, 18 times earnings, now has great prospects. So you could step into things like that. We still are wary about some of these semiconductor companies that went up to 100 times earnings and today are back at 50 times earnings. They're still pretty expensive. 00:04:11 Speaker 6: What makes you wary about those companies? 00:04:14 Speaker 5: Valuation matters, and you can't keep increasing your earnings by 100% a year. And when your margins are four times or five times higher than they are historically, at some point, supply and demand is going to catch up. So we just wouldn't think that those companies are going to grow to the stars. A company like Qualcomm. 00:04:31 Speaker 2: which. 00:04:31 Speaker 5: Makes semiconductor components for cell phones, anything communication-wise, had a great run, gave it all back. Right now it's at about 13 or 14 times earnings. If you have a 9- to 12-month time horizon, there are going to be some very good things happening. Short-term, not so much. You've got to look out longer-term, take advantage of the sell-off. 00:04:51 Speaker 4: Dell reporting sales and earnings after the market today. AI servers are very important for them as well. I wonder if you've got a specific expectation around them. And if not, just talk to me about AI. I mean, it used to be that it would take years for an American movie to get into the cinema in London. Now, sentiment... crosses that Atlantic instantly. And the anti-AI data center build-out is something we've seen in the UK, in Europe, but it's also something here in the US that seems to be bubbling up as we get to the midterms. Does that change anything when you think about AI and data center build-out in the US? 00:05:29 Speaker 5: If you use AI, you see how powerful it is. It's not going to be put back into the bottle. There's going to be massive build-out, massive usage. They're going to have to figure out where to put those data centers. A lot of the companies are now coming up with ways to cap costs for consumers. So there's going to be pushback, but they're going to figure it out. So we would buy the companies that are going to be beneficiaries, like Egeneric, into this pushback. And again, the reason that the AEP and the Nextera are down is because people think those sales are going to slow. But ultimately, energy usage is going to be up significantly. So look beyond this short-term pushback that's going to go into the election. Ultimately, we're going to have to figure out where to put these data centers and And the companies like the Googles and the Amazons and the Microsofts are capping the electrical costs for the regular consumer. So they're going to pay for that. They're going to figure out water. So this is going to be a long-term trend that's going to take hold. This is just a bump along the road. 00:06:25 Speaker 6: Making a slight pivot here with our last guest, we spoke about active management versus passive investment. You talked to me a little bit about how you see that difference as it pertains to obviously equities investment, but in light of the fixed income bond markets, we're seeing the historic yields we're seeing. 00:06:43 Speaker 5: So in terms of active versus passive, uh, Passive is a really good way to invest longer term if you're not that focused on the markets and you don't have any expertise with that. If you buy the S & P 500, we think you're generally going to do well over time. If you've got a particular niche and you can add value in that area, we think actives can be a good thing to do. Generally, you've just had a great 10-year period for the stock market returns with 12% or 13%. When returns slow down, active managers can generally earn their keep a little bit better. One area that we think that active is very good and will be very good in the next three to five years on the dividend side, buying companies that are paying a 3% dividend yield that are growing, they're not going to shoot the lights out. But all of a sudden, when the S & P starts returning lower mid-single-digit returns, having a good dividend and growth is going to. 00:07:33 Speaker 2: Be a good thing. 00:07:34 Speaker 4: Okay, really interesting. Thank you so much for being with us. Lovely to speak to you. David Katz is CIO at Matrix Asset Advisors. 00:07:45 Speaker 7: Stay with us. More from Bloomberg Surveillance coming up after this. 00:07:56 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. 00:08:09 Speaker 4: Bond markets this morning with major moves higher as global bond sell-off yields the highest level in about 2008. And Who better to discuss than our next guest who joins us in the radio studio this morning? This is David Booth, of course, a pioneer in the investing space. We are so delighted to have you on Bloomberg Radio. 00:08:34 Speaker 2: Well, it's very exciting to be here. When you get to be my age, that's what they call you, a pioneer. 00:08:41 Speaker 4: Well, I can't think of anything better. And, of course, we want your view on what is happening in bond markets. Why are yields moving? Is this a longer-term trend? How do you see it? 00:08:54 Speaker 2: Well, we think it's very difficult to predict long-term trends. We come from the viewpoint that you want to have a long-term investment philosophy and pay attention to what's going on and look at the movement the last, you know, few weeks really and say, well, how does that impact my long-term plan? And generally, there aren't that many times that you have to make adjustments based on that, but you ought to pay attention. 00:09:26 Speaker 4: Yeah. David Booth, of course, founder and chairman of Dimensional Fund Advisors and one of the pioneers of index investing. So, the question that flows from the kind of introduction around the bond markets is what that means for stocks now. What is your view given the run-up, given the amazing strength that we've seen in US stocks, 2.5% plus gain for the S & P 500 just in August, you know, the nine months of strong performance, does that continue? How do you see the run in stocks? 00:09:57 Speaker 2: Well, I think, uh, here in, uh, over the long haul, stocks are really, uh, hardened to beat. And it's also based on all the evidence, it's difficult for, uh, people to time short-term movements in the market. And I think based on all the evidence that even the pros can't seem to be able to time short-term movements, I think, uh, Stick with your long-term plan and check your personal situation. Have things changed at home? Do you have a new job or win the lottery? Those are the kind of things that you want to focus on in terms of making changes. 00:10:34 Speaker 6: I have a bit of a behavioral economics question to ask you. When you think about staying calm, at what point does it represent discipline and at what point does it represent stubbornness in the face of new information? 00:10:47 Speaker 2: Well, one of the keys is you always want to be flexible and adaptive and pay attention to what's going on. And that's how you deal with uncertainty. And it ties in with, instead of trying to predict markets, you want to plan for markets. So you come up with your best idea. You can call it a forecast or whatever, but. 00:11:09 Speaker 2: You've got to come up with a solution. Then you pay attention to what's going on and make the best choices you can. And if you make the best choices you can, then you'll be more likely to be able to stay calm. That's the whole idea. Sorry, in life as well as investing. This is not just investing. 00:11:32 Speaker 4: No, I love that, the life advice. I'm going to ask you one of the simplest questions And one of the first Bloomberg questions that I learned coming here, which is what do you do with. 00:11:43 Speaker 9: $ 100, 000? 00:11:44 Speaker 4: Bring it down to the basics for our listeners. What would you do now? I mean, there's AI. There's so much uncertainty. There's all that's happening in the oil markets, the bond markets. What would you do with $ 100, 000? Let's say your personal circumstances at the kitchen table look pretty good this year. 00:11:58 Speaker 2: Well, it depends. At my age, it's different than somebody that's just coming out of school. I think for people, let's start with people coming out of school. you pretty much need to be pretty heavily invested just in the stock market. And I would buy the whole market. There are a lot of market index funds or market portfolios out there that you can buy very inexpensively, very tax efficient. And just, you know, the key to it, of course, is saving. It's not the investing side when you're starting out. It's being able to save enough money now you have a hundred thousand but then uh uh keep up with a regular savings program now at my age i've gone through different cycles here where i am now is that i'm really eventually what's going to happen with with my money is it's going to go into non-profits and charities so i'm basically i'm kind of saying if i were an endowment fund how would i invest so i'm I'm not 100% equities, but I still have a big chunk in equities, even though I'm an old person. For a lot of people my age, they're using the money for retirement. I can't imagine myself retiring. 00:13:18 Speaker 4: We are joined by David Booth, who's in our radio studio. Absolute delight to have you with us, of course. As the pioneer of index investing joins us to talk about the markets and a new book, Stay Calm. Tell me, why did you write the book? What's it about? And why should our listeners go out and buy it? 00:13:36 Speaker 2: Well, you know, what I see out there now is a lot of anxiety and fear. in all parts of life right now. And then when it feeds into investing, it bleeds kind of into pessimism. So I thought a book coming out, presenting an optimistic view of stock and bond markets for the long haul is really needed. Hopefully, if the more people understand about, the better they understand about how markets actually work, the better decisions they'll make. And if they make good decisions, then they're more likely to relax and stay calm. 00:14:16 Speaker 4: The full title of the book, Judy, stay calm, learn to embrace uncertainty in investing and life. 00:14:22 Speaker 6: I mean, the idea of uncertainty being this place of possibility, I think is such a great message that I think more people need to hear and One question I had about really uncertainty is really just looking at the fact that we really live in an information driven economy, right? Information is such a high premium, either if it's through prediction markets, which is like trying to front run that information, or even just being able to pull up information on AI or Google. My question for you is really around how people should direct their pursuit of information in light of embracing uncertainty. What kinds of knowledge should we be pursuing? 00:15:07 Speaker 2: Well, as we point out, first off, uncertainty is not restricted just to investing. It's life in general. And we start off with the idea that uncertainty creates opportunity in your personal life. You know, you could have advanced if there were no uncertainty. It's the uncertainty that created the opportunity. for you to progress. And the same thing really applies in investing. It's the, if there were no uncertainty in investing, then everything would be riskless and all investments would have the riskless rate of return. So it's uncertainty creates the opportunity and it's about managing uncertainty then rather than trying to totally eliminate it. So in life and figuring out the long-term planning, it's how to how to manage that uncertainty, you know, how much risk to take. You can't predict the stock market or the bond market for sure, but you can decide how much risk you want to take. 00:16:07 Speaker 4: Yeah, absolutely. It's sort of about, well, it reminds me of some of the conversations that I think are being had in the US, also in the UK, which is where I'm normally based. This idea of whether you've got an internal locus of control, whether you feel that your actions make a difference. I think this is a really positive message around that, isn't it? David, you're going to stay with us throughout the next few minutes. David Booth is Dimensional Fund Advisor's founder and chairman. He's written a new book about uncertainty and is also here to talk to us a little bit more about money that he is donating. Bloomberg's higher education reporter, Janet Lauren, will be joining us in the next segment. Just give us a fragment of how much you're talking about and where you're channeling that money briefly. 00:16:51 Speaker 2: For me? Philanthropy, you mean? 00:16:54 Speaker 4: Yeah. 00:16:55 Speaker 2: Well, there are two major themes for my philanthropy. One is the University of Chicago, and the other is the University of Kansas. 00:17:04 Speaker 4: Absolutely. 00:17:04 Speaker 2: Those were... I don't know how I got. 00:17:08 Speaker 2: Position I'm in, but a lot of it is having good training at those two institutions. 00:17:13 Speaker 4: Bloomberg Surveillance, me, Caroline Hepke and Judy LeGroux standing in for Tom Kean and Paul Sweeney, who frankly, Judy, are missing out because David Booth is with us today, founder and chairman of Dimensional Fund Advisors, also the author of a new book, Stay Calm. It's a guide to long-term investing and a philosophy for living. We were talking about you know, life lessons in the break there. I think that's really important. We're also joined in the studio by Bloomberg Higher Education reporter, Janet Lauren, who's also going to help us talk through your philanthropy and your philosophy around philanthropy, what you're trying to do for young people now. I mean, why did you write the book and what do you hope message is going to deliver for a new generation of investors now? 00:18:01 Speaker 2: Well, hopefully people feel more optimistic about investing in stocks and bonds over the long haul, public markets, and feel more confident they can have a good long-term investment experience. So that's It's really also for people like my parents who never invested in public markets because they thought of themselves as outsiders. They thought that insiders made all the money and would just take advantage of them. And so that's kind of been one of the fascinating effects of all this academic research is it looks like the pros have a difficult time beating the market. And you can buy the market. very inexpensively now, a lot of different places, market index funds, market portfolios like we do, whatever. So there's no, being an outsider, in other words, you'll seem to do about as well as the insiders. That's a major breakthrough. That is. 00:19:01 Speaker 4: I want to ask you, as an outsider, I'm normally based in London, coming here to the US, it's a more serious question. Are you concerned about the strength of US institutions? I mean, we're looking at more activist treasury. There have been lots of questions about the Fed and pressures, political pressures on the Fed. What's your view on the strength of US institutions right now? 00:19:23 Speaker 2: Well, I think they're incredibly strong. I think the, as reflected, you know, the market's been up quite a bit the last, few years, really since the pandemic hit in March of 2020, pretty much the last six years has been really great for the market. And it's also, I don't know, something like seven quarters in a row we've had, you know, gains and earnings. I mean, it's, you know, I think a lot of people have a frustration maybe with the government or maybe any number of things causing stress. But there's not much evidence that people's stress is correlated with stock and bond returns. I mean, you look at, here again, we have 100 years of data, stock and bond returns, starting with the Great Depression, going through World War II, the pandemic, the high inflation period, the Great Recession. Throughout all of that, stocks have done about 10% a year and bonds about 4% or 5%. So markets behave the way we hope they would. So what I hope people get from that is, you know, you can trust by investing in stock and bond returns, you can trust you're going to get a fair pricing. You have a fair chance. Now, there's no guarantees, and, you know, markets do go up and down. But if you look at the last 100 years, or I'll give you another story. My parents, who never invested because they thought, They were outsiders. When they passed away in 1985, I opened their safety deposit box and inside was $ 15, 000 in cash. I mean, these are people that, that was a huge part of what they had. 00:21:17 Speaker 4: Yeah. 00:21:18 Speaker 2: And had, so why write the book? It's for people like that. Had they known earlier on that markets kind of work in your favor, the markets are working for you rather than you having to outguess the market. Just relax, stay calm. Say, put half your money in the market, half in something like a money market fund or whatever. Over the long haul, you're probably going to be okay. 00:21:42 Speaker 4: Janet Law, your question. 00:21:43 Speaker 8: Well, we're going to talk a little bit about college sports. And there's a stadium with your name on it at the University of Kansas. Can you tell me about your first job there and what you're doing with the stadium now? 00:21:56 Speaker 2: Well, I had a couple of jobs early on. My first. 00:22:01 Speaker 2: I was in Boy Scouts, and back in those days, it's hard to believe now, but Boy Scouts, they ask you to usher people to their seats. That was back in the good old days, I guess. So I got a job ushering people who were probably then the age that I am now and helping them find their seats. Then a couple of times I sold popcorn. And back in those days, you would go up and down the steps selling popcorn. And people would be yelling at you, get out of the way, get out of the way. So that was a very intimate experience with the football stadium. 00:22:38 Speaker 8: And tell me about your $ 300 million commitment, one of the largest in college athletics, period, to change the stadium. Why do this? 00:22:46 Speaker 2: Well, college sports is incredibly important in big state schools like Kansas or whatever. You know, I did go to the University of Chicago as well, and sports were downplayed and it was great. Both situations are terrific. But sports is really important to Kansas and basketball has been sensational my whole lifetime. The football team had fallen on kind of some tough times. They had one of the worst records over a 10-year period and they needed to have something to get them jump-started. So they came up with the idea of a new football stadium, the old stadium. It was built just after World War I. And so it's hard to go out and raise money when your team is doing so poorly. But that's my hometown as well as where I went to school. And so I wanted to make a big gift and help them get the program back in shape. 00:23:52 Speaker 8: And what do you think of all these changes in college sports, paying players, schools are looking to find new revenue sources to pay players. It's a whole different game. What do you think of it? 00:24:03 Speaker 2: Well, as a fan, I wish it didn't happen. As an economist, I go, hey, these kids, a lot of them, this is their chance to make some pretty good money. And afterwards, because very few of them go pro. So I'm sympathetic to the players. I think eventually markets being markets, eventually, uh, there'll be a kind of an equilibrium, uh, that comes out and all of this, my guess is it'll be different than we, the configuration we have now, there'll probably be maybe a super league of, of, of rich schools that are spent a ton of money on sports. And that might be one conference. And then there'll be maybe some other layers, uh, Because schools are going to have to live within their means. 00:24:54 Speaker 8: And you're hoping that Kansas will be in that rich league because of your donation? 00:24:57 Speaker 2: You know, I don't know. I'll be happy either way. I don't think. For me, I can go out and wave the flag and cheer. When I was at the University of Chicago, they hadn't had a football team in 34 years. 00:25:11 Speaker 4: Well, they're going to get a very big helping hand with the donation. David, thank you so much for joining us. We've run out of time. David Booth, who is chairman of Dimensional Fund Advisors, really appreciate you coming on Bloomberg Surveillance. 00:25:26 Speaker 7: Stay with us. More from Bloomberg Surveillance coming up after this. 00:25:38 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. 00:25:51 Speaker 4: Right, let's bring in our guest, Jordan Jackson, who's global. a market strategist at JPMorgan Asset Management. Great to have you in the studio. So, John was just mentioning oil prices. How concerned are you about the latest strikes in terms of the Strait of Hormuz? Where does it leave oil markets and the pressure on inflation? What do you think about this ongoing conflict? 00:26:12 Speaker 3: You know, I think ultimately what this means is $ 80 to $ 90 oil is the new $ 60. And I think we need to be comfortable with that level, at least over the near term. Now, there was a lot of worry, particularly when this conflict first flared up. that that sort of inventory level where we're going to start to see more higher upward pressure on oil prices was expected to be reached sometime around the July-August timeframe. We've now pushed that back, particularly to the end of the year, potentially. And if this is ultimately what it appears to be a stalemate, I think we just got to get comfortable with higher oil prices and maybe not higher long-term inflation break-even, but higher inflation volatility. And I think we're seeing some of that being priced into bond yields. 00:26:57 Speaker 6: Jordan, when I saw 80 to 90 barrel of oil being the new 60, my brain almost exploded. I'm so curious as to what you believe the long-term impact of this inflation would be on the way that the Fed battles it. 00:27:16 Speaker 2: Well, so it's interesting. 00:27:17 Speaker 3: I think the 80 to 90, the new 60 narrative is a near term. So let's call it through the end of the year. But I do think actually over the longer term, oil prices are probably going to be lower. And the reason being is obviously you have less cooperation across OPEC and OPEC Plus. Members leaving, big producers over the last few years. And if their focus is to gain market share, they're just going to be bringing more barrels onto the market over the longer term. And I think that's going to push oil prices down. However, I still do think that this translates to higher oil volatility and higher inflation volatility. There's been a lot of folks trying to assign what's moving bond yields. Yes, it's Fed repricing. But while long-wind inflation break-evens haven't moved all that much, the sensitivity to bond yields on those break-evens has increased. And so even minor moves like I think will be exacerbated at the long end, just given technical factors. 00:28:14 Speaker 6: Wow, that duration is just going to go a little mad. 00:28:17 Speaker 4: Yeah, OK. Well, and we haven't even kind of added in the Venezuela part to the oil story as well, the USA. But we'll think more about the Fed in terms of the next moves. I mean, why are markets pricing in a hike as firmly as they are when Walsh gave himself plenty of room to punt until January in terms of waiting for the outcome of the various panel's that he's convened. So, you know, why are markets at the point that they're at now? 00:28:45 Speaker 3: You're exactly right. He brought himself time with these task force. I also think the Fed is in a bit of a bit of a quagmire. 00:28:52 Speaker 5: Right. 00:28:52 Speaker 3: There's no real right decision right now. I don't want to be a Fed governor. If you hike rates, it's a jab to the administration. If you cut rates, you're surrendering to the administration. If you stay on hold, you now are starting to threaten your credibility and you show hesitation. So I think there's no great decision right now. I actually appreciate Warsh buying himself a little bit of time to see how the to see how inflation and labor markets evolve. I think what's also interesting is one of the things that jumped out to me in his comments in Jackson Hole is. was being committed to discipline, not a decision. And my read is discipline is a bit more of a sort of hiking cycle, right? We've got to do more to really combat the inflation narrative. 00:29:39 Speaker 2: One $ 25. 00:29:40 Speaker 3: Basis point hike isn't going to do much of anything. It's certainly not going to impact oil prices, and it's not going to impact the demand side of the story either. So I think the best course of action for the Fed right now is to stay on hold, and that remains our base case. 00:29:54 Speaker 6: How does that relationship really get complicated or lack thereof or not get complicated with upcoming midterms, right? So we're kind of on this collision course, right, with like we're coming off a really strong earnings season. We've got the September sort of rate hike being priced in and midterms. Walk me through how you see these two, all these elements, these three elements really coming together in the near term. 00:30:15 Speaker 2: Yeah. 00:30:16 Speaker 3: You know, one, on the political side of things, it kind of gets back to my earlier point that any move that the Fed does or doesn't do is going to be viewed politically. And so from that lens, I think the Fed is best sort of staying patient here, seeing how the data evolves. What was also interesting was Powell, sorry, I'm so used to talking about Powell for years. What Warsh highlighted was kind of moving away from this idea of a wage inflation and not really being important in terms of wage inflation feeding into the overall narrative. So even if we get a strong job print in the next couple of days, weeks, I don't think that this changes his narrative because he doesn't think that's going to feed through into broader inflationary pressures. Altogether, obviously, you have AI, the spending boom, the earnings boom as well. None of that really seems to me to be rate-driven either. So as you paint sort of this broader picture, whether it be earnings, whether it be resilient growth, whether it be a non-inflationary labor market, just buy yourself some time. 00:31:23 Speaker 2: Stay on hold. 00:31:23 Speaker 3: And I think he's done that with these task force through January. 00:31:26 Speaker 4: Yeah, I mean, coming from Europe, where growth is like 1%, if we're lucky, maybe a little bit above. And in the US, the strength of the US economy, how negative can you really be? How much strength can the sell America as it's called trade be in the equity market in September? Historically, it's a tough month. But do you really think that that happens this year? 00:31:46 Speaker 3: I think so, just because it's an election year, right? So markets don't like uncertainty. We're going into the November midterms and, you know, September tends to be seasonally a bit of a tough month. So, you know, I anticipate perhaps some sideways markets. You know, markets don't really like what the equity markets don't like what the bond markets are telling us right now. I tend to think of equity investors as optimists, bond investors as realists. So the debt issues, all these types of dynamics are worrying bond investors. But, you know, again, the resilience that we've seen in the U.S. economy, we've shouldered a number of different supply side shocks. There's two narratives. You've got the AI CapEx boom. You've got upper income households that are continuing to spend. Both of those dynamics are very much powering the U.S. economy. And we don't see any of those kind of structural things changing. 00:32:38 Speaker 4: Yeah. Jordan, thank you so much for your time. Jordan Jackson is global market strategist at J.P. Morgan Asset Management with me, Caroline Hefka and Judy LeGueux here on Bloomberg Surveillance. 00:32:49 Speaker 7: Stay with us. More from Bloomberg Surveillance coming up after this. 00:33:00 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. 00:33:06 Speaker 6: Eastern. 00:33:07 Speaker 1: Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. 00:33:13 Speaker 4: Let's also talk about the oil markets, though. I think there are three things going on out there. There's obviously the war in the Middle East. Hormuz hostilities have really picked up. A couple of big oil tankers, super tankers being attacked. They had their transponders switched off. You then also have the Russia-Ukraine war, which is important when it comes to provisions. This, as Russia's economy minister, was at the G20 event and met with US officials. And then you have the US, of course, and Venezuela. Leslie Palti-Guzman is founder of Energy Vista and joins us now. And who better to talk to us about what the outlook for the oil markets is? Is this just an intractable issue? Are we just going to hover around, you know, an uncertain picture out of the Middle East around reasonably high oil prices for the foreseeable future? Have markets priced that in? 00:34:06 Speaker 10: Yeah, so I think we are heading into a new phase in the oil and gas market and potentially a reconfiguration of trade flows and supply routes. And so if we're zooming out about the immediacy of what's happening with the threat of Hormuz, for instance, And if I look at the global LNG market, we see already emerging new winners and not just US LNG, which is going to be a potential big winner, but generally speaking, yes, the Western Hemisphere, but also a new geography of LNG security with potentially new suppliers in Africa or growing suppliers in Africa, in Asia and elsewhere. So we really see, I think, a new remapping of trade flows. 00:34:52 Speaker 4: But that's kind of long term, isn't it? Versus what's happening now. 00:34:55 Speaker 10: So if we take the timeframe of energy projects, you know, about five years, let's say, but it had already started before that and some are going to pick up. So I think there is a new momentum behind projects that had been forgotten or fallen off radar. 00:35:11 Speaker 6: When you look at the unpredictability of what's going on between the U.S. and Iran with respect to the Strait of Hormuz, what is the most striking effect of that unpredictability as you see it? 00:35:24 Speaker 10: So for countries that really depend on the transit via the strait to export any of their petroleum cargoes, basically it came to a halt or there is so much unpredictability that the investors may become hesitant to pour more money into those projects or for buyers to rely on those molecules. And so we see a kind of vindication of what I call the multi-energy hedging strategy for buyer, where they are going to try to diversify at all costs, supply routes, pricing, contract, producers, and so on. 00:36:03 Speaker 9: And so for producers that, you. 00:36:06 Speaker 10: Know, like Qatar, for example, doesn't have any other much alternative than its big mega tankers to evacuate its liquefied natural gas. Not really any pipelines. 00:36:19 Speaker 9: So they are... Basically, their economy is bleeding right now. 00:36:22 Speaker 10: I'm not going to cry because Qatar has a wealth sovereign fund of $ 600 billion. But for the past five months, they have really not been able to export much of their LNG at all. 00:36:37 Speaker 4: You talk about US LNG also being increasingly important. 00:36:41 Speaker 5: I mean. 00:36:42 Speaker 4: Actually, it's Russia that is trying to increase its LNG exports and China also hugely important. And those energy exports underpin their relationship between China and Russia. And so surely that is also very important, even though the U.S. wants some dominance and wants others to buy LNG. There's surely pushback there. 00:37:03 Speaker 9: Yeah, absolutely. I mean, you could really see like two competing. 00:37:07 Speaker 10: Zones emerging where, you know, Russia, China are one landmass area where you have a lot of pipelines, notably pipelines of natural gas. But China is also getting pipeline gas from Central Asia, securing a lot of supply. And we've seen that with the current Iran crisis. energy crisis, China has been doing pretty well. They had already put in place a strategy of sovereignty in a way, autonomy, with their own energy production at home and also securing gas and oil supply. And then on the other side, you see the Western Hemisphere also emerging as a big where we're going to see increasingly synergies. 00:37:50 Speaker 9: You know, we're talking at. 00:37:51 Speaker 10: The beginning about Venezuela, but it's also, you know, Canada potentially, you know, the whole North America zone, Alaska, and other countries in Central America and South America. 00:38:04 Speaker 6: That was my next question about Canada. So you noted that Canada is really emerging as a significant LNG exporter. What would you say is the biggest impact of this on the LNG market globally? 00:38:15 Speaker 4: Yeah. 00:38:16 Speaker 10: So, you know, for years we've been talking about the potential of Canada LNG exports, and it took a lot of delay because of economic and geopolitical reasons. There was no momentum much behind the project. Now, Canada could emerge by the end of the decade, or actually at the beginning of next decade, as a very significant exporter with maybe 45 million tons of LNG. And we know that Canada doesn't have any issues with any strait. There is no Malacca Strait. There is no Panama Canal. There is no Suez Canal. There is no Strait of Hormuz. So that's very attractive to Asian buyers. And the West Coast of Canada is facing, you know, it's a short distance to those Asian economies. 00:39:05 Speaker 4: Do you think, I mean, going back to the kind of oil question, do you think that the Strait of Hormuz will end up with some kind of a tariff tax fee regime, whatever you want to call it. I mean, Oman and Iran had those discussions about it and came to an agreement. But it's obviously also about the US and the war. Do you think that's inevitable now? Would you say that much? 00:39:26 Speaker 10: I think right now we still have two opposites. views on what will be the status of the Strait of Hormuz. On one hand, Iran is still trying to impose its maximalist view, where it wants both the control of the Strait and some kind of revenues. And on the other side, the international community and the U.S. who wants an open and free Strait of Hormuz. And for now, you know, I don't, it's still the question who would blink first. 00:40:00 Speaker 9: And for now, it's hard to tell. 00:40:02 Speaker 4: Okay. A final question on hedging then. Does that get more important? Does that get more expensive for countries importing? 00:40:10 Speaker 9: Absolutely. 00:40:10 Speaker 10: I mean, so countries that could not import directly from exporters via the Strait of Hormuz had to find compensating molecules, oil and gas, or alter their energy mix at home. If you have an emergency situation, we'll see how it's happening in Europe for this winter, for example, but some countries may have to resort to emergency spots LNG cargo that are always more expensive when it's last minute and depending on the volatility on the market. Insurance, you know, shipping, I think has, you know, all the insurance companies are on the war zone. 00:40:50 Speaker 9: There will be more scrutiny. 00:40:53 Speaker 10: Also in the future contracts, there will be more close and attention to what can go wrong because honestly, many energy companies had not anticipated the closure of the Strait of Hormuz and that it would last that long. 00:41:07 Speaker 4: Yeah, but it continues. Absolutely. Thank you so much, Leslie, for being with us. Really good to speak to you. Leslie Palti-Guzman is founder at Energy Vistas. 00:41:16 Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify and anywhere else you get your podcasts. 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