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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Lisa A.

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Speaker 2: Bromoids, along with Tom Keen and Jonathan Ferrow, join us

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Speaker 2: each day for insight from the best in economics, geopolitics,

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Speaker 2: finance and investment.

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Speaker 1: Subscribe to Bloomberg Surveillance.

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Speaker 2: On demand on Apple, Spotify and anywhere you get your podcasts,

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Speaker 2: and always on Bloomberg dot Com, the Bloomberg Terminal, and

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Speaker 2: the Bloomberg Business app.

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Speaker 3: This morning, Mike McKay Drumrow, fantastic guests the random type

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Speaker 3: with us to talk about Fed policy.

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Speaker 4: Yes, and thank you very much, John, because we are

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Speaker 4: pleased to welcome Neil Kashkari, the President of the Federal

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Speaker 4: Reserve Bank of Minneapolis, to the table today. Thank you

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Speaker 4: for coming in making the trip all the way to

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Speaker 4: New York only for us. I'm sure nothing else There

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Speaker 4: would be nothing else this morning, and except for Bloomberg Surveillance.

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Speaker 4: You're kind of known as the guy who is the

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Speaker 4: most hawkish. I don't want to characterize you exactly now,

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Speaker 4: given how things have changed over the last couple of months,

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Speaker 4: but you have left open the possibility of doing more.

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Speaker 4: How much more would you think the economy might need?

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Speaker 4: Are we talking about just that one leftover move from

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Speaker 4: the dot plot in September, or if you have to

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Speaker 4: start raising again, do you have to go farther.

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Speaker 5: Probably.

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Speaker 6: Well, first of all, it's great to see you, Thanks

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Speaker 6: for having me. People are looking for certainty, and I

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Speaker 6: wish I could give that certainty provided there's been so much,

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Speaker 6: so much it's unusual about the reopening of the economy

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Speaker 6: and the dynamics that led to the high inflation, and

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Speaker 6: how long it has taken, and the dynamics as the

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Speaker 6: disinflation process has taken hold.

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Speaker 7: I wish I knew.

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Speaker 6: We have to let the inflation data guide US, the

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Speaker 6: labor market data guide US, just to point out the obvious.

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Speaker 7: Our forecasts have not been great over the past couple of.

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Speaker 6: Years, and so we just need to We're all committed.

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Speaker 6: Everybody on the FORMC has committed that two percent is

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Speaker 6: our inflation target. We have to get inflation back down

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Speaker 6: to two percent over a reasonable period of time. Ultimately,

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Speaker 6: the economy will tell us how much is needed to

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Speaker 6: get there, And I just don't know.

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Speaker 4: Well, at what point do you think you would believe

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Speaker 4: you have tightened enough or not tightened enough? What is

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Speaker 4: it that you're looking for.

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Speaker 6: Well, I'll give you some good news is that core

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Speaker 6: PC on a three month basis is running about two

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Speaker 6: point five percent, and it's lower than the six month data.

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Speaker 6: It's lower than the one year data. So that suggests

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Speaker 6: that the disinflation is real. If we continue to see

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Speaker 6: inflation numbers of that range two point five percent or

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Speaker 6: lower on a go forward basis, that would tell me, Okay,

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Speaker 6: we are now on a path back to two percent inflation.

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Speaker 6: But three months data is still only three months data,

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Speaker 6: and if we see that start to tick back up again,

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Speaker 6: that would tell me our job is not yet done.

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Speaker 4: Tick back up means what? In other words, we get

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Speaker 4: another couple of CPI reports in a PCE report before

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Speaker 4: your next meeting, a couple of tents higher. The chairman

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Speaker 4: and others say it's going to be lumpy or does

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Speaker 4: it have to be a significant move? In other words,

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Speaker 4: what are you thinking about for December?

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Speaker 6: Well, I think we could look at, as the chairman

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Speaker 6: always says, we look at all of the data. So

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Speaker 6: what surprises Over the past few months, We've been surprised

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Speaker 6: by how strong American consumers have been.

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Speaker 7: Consumer spending is held up.

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Speaker 6: Remarkably well, we've been surprised by GDP growth. When activity

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Speaker 6: continues to run this hot, that makes me question is

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Speaker 6: policy as tight as we assume that it currently is.

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Speaker 6: So if you saw inflation tick back up and you

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Speaker 6: saw continued very strong economic activity on the real side

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Speaker 6: of the economy, that would tell me, okay, we might

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Speaker 6: need to do more. So it's hard for me to

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Speaker 6: say this one data point needs to be here. I

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Speaker 6: would be looking at the suite of data.

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Speaker 3: Did we outsource doing more to financial markets? In the

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Speaker 3: arts week? Have we outsourced doing more to financial markets?

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Speaker 6: You know, this is a very complicated question on what

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Speaker 6: has been driving the long end of the Yeld curve.

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Speaker 6: Some people point to term premium, and I always joke

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Speaker 6: the term premium is the economist version of dark matter.

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Speaker 6: It's the residual of all the stuff we can't explain.

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Speaker 6: It's not that our models are wrong, it's the dark

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Speaker 6: matter is out there.

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Speaker 7: So that's the term premium.

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Speaker 6: And some people say, well, that's driven by fiscal If

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Speaker 6: it was fiscal driving the term premium, I would.

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Speaker 7: Have expected to see a week dollar.

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Speaker 6: Usually when investors are worried about a country's fiscal position,

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Speaker 6: their currency weekends our currency has been quite strong. It

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Speaker 6: makes me wonder is it really fiscal driving the term premium.

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Speaker 6: Another possibility is the path of policy over the next

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Speaker 6: few years. That could explain both the stronger dollar and

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Speaker 6: the weaker stock market going into the last meeting. Another

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Speaker 6: one is that maybe the neutral rate is higher, or

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Speaker 6: maybe it's a combination of all three of these.

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Speaker 7: And so these are things that we're spending a.

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Speaker 6: Lot of time trying to understand what the markets are doing.

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Speaker 6: But just speaking for myself, I'm not comfortable saying which

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Speaker 6: of those three it is, because which of those three

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Speaker 6: it is determines what it means for policy. If it

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Speaker 6: is the term premium, then it is doing some work

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Speaker 6: for the FED. But if it's the neutral rate, or

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Speaker 6: if it's the forward guidance of the path of policy,

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Speaker 6: then we would actually have to follow through to preserve

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Speaker 6: those rates.

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Speaker 3: So how did this line end up in the statement?

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Speaker 3: And I'll share it with that audience. The kind of

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Speaker 3: financial and credit conditions for households and businesses are likely

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Speaker 3: to wound economic activity, hiring, an inflation. Where's that coming from?

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Speaker 7: Oh, that's been there for a long time.

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Speaker 6: I mean, that's been in there since the Silicon Valley

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Speaker 6: bank episode and the banking stresses leading to some tightening

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Speaker 6: of credit conditions across the economy. So I think that

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Speaker 6: that's right. I, for one, don't say that that means

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Speaker 6: the recent moves in the old curve.

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Speaker 3: How fluid is that assessment? Can that change from month

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Speaker 3: to month, meeting to mating, because some of those comments

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Speaker 3: around that has inspired quite a move in this market

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Speaker 3: over the last week.

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Speaker 6: Well, you know, one of the things about the statements,

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Speaker 6: we always have to be careful about putting things into

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Speaker 6: the statement because they tend to be long lived and

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Speaker 6: it's hard to pull them out of the statement because

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Speaker 6: as soon as you take something out, then all of

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Speaker 6: a sudden, people say, oh my gosh, they're declaring that

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Speaker 6: all the banking stresses are over, as an example, and so,

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Speaker 6: you know, I would look at all of the range

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Speaker 6: of commentary that you get, look at what the chairman says,

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Speaker 6: look at his press conference to get a read of

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Speaker 6: the thought of the committee.

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Speaker 2: You said that people want certainty that you can't give

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Speaker 2: it to them, and I understand that, but people don't

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Speaker 2: just want certainty, they also want some sort of guiding philosophy.

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Speaker 2: Do you think that Fed Shir Powell has outlined some

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Speaker 2: sort of guiding philosophy and where the bar is to

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Speaker 2: cut rates and where the bar is to raise them further.

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Speaker 6: Well, I think he's articulated very clearly that we're committed

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Speaker 6: to getting back to two percent inflation.

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Speaker 7: Right.

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Speaker 6: There's been some chatter amongst economists that maybe we should

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Speaker 6: raise the inflation target. I think he's done a great

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Speaker 6: job saying that is not on the table. We're not

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Speaker 6: going to do that. We're going to get inflation back

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Speaker 6: to two percent, and we're going to let the data

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Speaker 6: guide us. We've moved very aggressively. We've made a lot

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Speaker 6: of progress on inflation. We're not done yet, meaning inflation

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Speaker 6: is not back to our target, and if we need

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Speaker 6: to do more, we will.

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Speaker 2: There seem to be a feeling in markets that the

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Speaker 2: bar to cut rates has been lowered over the past

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Speaker 2: week or two weeks. Suddenly not only are we reaching

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Speaker 2: a pause and have we seen a peek in the

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Speaker 2: FED funds rate, but that also the Fed will cut

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Speaker 2: next year, maybe surgically. Neil Dada is talking about that

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Speaker 2: and he's coming up next. Do you want to push

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Speaker 2: back against that? Do you think that the bar to

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Speaker 2: cut is still just as high as it was.

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Speaker 6: I have no idea where market participants are getting that.

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Speaker 6: There's no discussion amongst me and any of my colleagues

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Speaker 6: about when we're going to start preparing to cut rates.

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Speaker 7: The only thing that's been.

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Speaker 6: Talked about at all is that at some point, when

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Speaker 6: inflation is well on its way back down, if we

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Speaker 6: didn't back off a little bit, then real rates would

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Speaker 6: be getting tighter and tighter and tighter.

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Speaker 7: And that's real, but that's math.

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Speaker 2: But is there enough weakness currently in the market in

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Speaker 2: the economy, I should say to give you that sense

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Speaker 2: at this point, look at the.

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Speaker 6: Last GDP print. I mean, does anybody look at that

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Speaker 6: and think, oh, my gosh. The economy we for the

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Speaker 6: last twelve months GDP has been very strong. The labor

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Speaker 6: market continues to be quite robust. Yes, the unemployment rate

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Speaker 6: is ticked up to three point nine percent, but we've

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Speaker 6: also seen a huge surge of labor supply, which is

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Speaker 6: really positive come online. So I'm looking at this, I'm

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Speaker 6: seeing consumers that are strong. My air by the way,

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Speaker 6: my airplane that I came here on was one hundred

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Speaker 6: percent full yesterday.

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Speaker 7: It's going to be one hundred percent full.

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Speaker 6: Today, I'm not seeing a lot of evidence that the

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Speaker 6: economy is weaken.

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Speaker 4: Well, whether you go higher or not, you are on

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Speaker 4: board for longer. And so you must have modeled out

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Speaker 4: some idea of how long you would need to leave

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Speaker 4: rates unchanged before you could get down to a level

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Speaker 4: low enough that you could take your foot off the

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Speaker 4: break a little bit. How long do you think you'll

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Speaker 4: be at five point five into twenty twenty four.

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Speaker 6: Well, I think it's going to depend if we continue

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Speaker 6: to see inflation prints similar to the ones we've seen

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Speaker 6: the last few months, you know, and we end up

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Speaker 6: with a year of a year at two point five

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Speaker 6: percent core inflation and it continues to trend down, that

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Speaker 6: constellation would give me evidence to say, hey, we ought

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Speaker 6: to look at should we start backing off just so

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Speaker 6: the real policy isn't getting tighter and tighter and tighter,

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Speaker 6: because we're clearly on our way back down to two percent.

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Speaker 6: But again, I don't want to just point to one

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Speaker 6: data series. We will be looking at the suite of

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Speaker 6: data to try to get a read of where the

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Speaker 6: economy is headed.

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Speaker 4: Well, not just data. You talk to businesses in your district,

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Speaker 4: all the time, What are they telling you now about

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Speaker 4: their view of growth and hiring and pricing going forward.

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Speaker 7: It's moderating.

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Speaker 6: So the labor market is still tight in my district,

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Speaker 6: people especially in the Dakotas, really have a hard time

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Speaker 6: finding workers. But in Minnesota, it's still a tight labor market,

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Speaker 6: but it's not as tight as it was six months ago.

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Speaker 7: It's not as tight as it was a year ago.

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Speaker 6: So that kind of maps to the national data that

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Speaker 6: we're seeing of a gently cooling labor market but one

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Speaker 6: that's still very very warm. Same thing with economic activity.

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Speaker 6: Depending on the sector, they're saying, Hey, we feel pretty

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Speaker 6: good about things. We're a little cautious about the future. Obviously,

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Speaker 6: they watch the news, they read the news. There's a

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Speaker 6: lot of economic anxiety that is reported on that people,

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Speaker 6: you know, factor.

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Speaker 7: That into their own thinking and their own business planning.

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Speaker 6: So I think the outlooks are still optimistic, but it's

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Speaker 6: cautious optimists.

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Speaker 4: Well are they still raising prices or think they need to?

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Speaker 6: So it's funny there Still they still buy and large

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Speaker 6: have some pricing power more than they had before pandemic,

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Speaker 6: but not as much pricing power as they had six

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Speaker 6: months or a year ago.

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Speaker 3: Can we finish on housic sure in the space of

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Speaker 3: three years, we've had record low interest rates in the

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Speaker 3: highest rates in several decades. Is this housing market broken?

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Speaker 7: Well?

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Speaker 6: I think since the pandemic, we have structurally underbuilt the

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Speaker 6: number of units that we need to meet our growing population.

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Speaker 7: And that's the factor.

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Speaker 6: And that's really about regulation at the local level that

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Speaker 6: are creating barriers to more supply coming in. The raid

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Speaker 6: environment will settle out over time, but structurally we have

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Speaker 6: to actually bring a lot more supply online to meet America.

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Speaker 3: At the time, but it could be like twenty thirty years.

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Speaker 3: I think this is the issue here. The legacy of

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Speaker 3: this FMC could well be a generation of people look

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Speaker 3: down to the housing market. Why do you say that

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Speaker 3: there could be a generation of people with two three

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Speaker 3: percent mortgages that never sound their home.

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Speaker 7: Yeah, I don't know. People end up needing to move.

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Speaker 7: It's funny when people.

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Speaker 6: Don't tell their home because they're locked into a low mortgage.

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Speaker 6: That's less supply, but that's also one less buyer. Most

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Speaker 6: people who buy homes are leaving another home, and so

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Speaker 6: that affects both the supply side and the and the demand.

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Speaker 3: Side of That's why I set a generation look down

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Speaker 3: because I'm renting and count by, so I'm not sounding anything,

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Speaker 3: and that's the generation. I'm talking about that generation specifically,

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Speaker 3: you concern that could be the legacy at the FORMC.

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Speaker 7: Now.

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Speaker 6: I think the legacy of this FMC is that we've

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Speaker 6: dealt with the pandemic very aggressively. Then we were surprised

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Speaker 6: by very high inflation, but then we move very aggressively

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Speaker 6: to bring the inflation back down.

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Speaker 4: I want to ask you about a story on the

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Speaker 4: Bloomberg terminal today about all the financial CEOs from the

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Speaker 4: US over in Hong Kong sounding very doer and down

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Speaker 4: about the prospects for the economy. They suggest that things

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Speaker 4: are pretty fragile right now, both in the economy and

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Speaker 4: the markets, given everything that's going on around the world

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Speaker 4: and in the shadow banking system as well as theirs.

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Speaker 4: How worried are you.

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Speaker 6: Well, I mean, we're always worried about things that can

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Speaker 6: happen all around the world. We've got teams of people

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Speaker 6: looking at different scenarios around the world. Ultimately, we have

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Speaker 6: to focus on what we can control, you know, geopolitics.

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Speaker 7: When Hamas attacked Israel.

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Speaker 6: The first thing we thought of is what's it going

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Speaker 6: to do to the oil market, what's it going to

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Speaker 6: do to commodity prices. Remarkably, the response so far has

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Speaker 6: been muted. But that's something we're obviously paying close attention to.

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Speaker 6: But the broader geopolitical issues are just so far outside

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Speaker 6: of our bounds of forecasting. You know, we have a

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Speaker 6: hard enough time forecasting inflation trying to forecast where geopolitics

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Speaker 6: is going.

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Speaker 7: We just have to focus what we can control.

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Speaker 3: Oil price is dropped. I mean, that's the crazy thing

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Speaker 3: about the last month.

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Speaker 2: Physically, it doesn't make any sense. And this is the

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Speaker 2: reason why trying to get it right is just impossible.

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Speaker 2: And then trying to get the idea of a FED

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Speaker 2: put and whether they're going to respond. I'm just saying

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Speaker 2: people are talking about that now, so.

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Speaker 3: Yeah, talking about it in the last few hours. Yes,

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Speaker 3: it's on this program. No, always a pleasure, Thank you,

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Speaker 3: Sirving Neil, Cash County, the Minneapolis FED price Alongstide Plympecks,

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Speaker 3: Mi M chab No Tatsa, the head of US economic

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Speaker 3: research at Renaissance Macron. Nil, good morning to you.

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Speaker 8: Good morning.

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Speaker 3: Let's go straight there because my IB was lighting up

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Speaker 3: with messages from you. We're not thinking about tapering. Two

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Speaker 3: months later, we're a long way from neutral cutting a

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Speaker 3: month later. What do you think is going on within

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Speaker 3: the FBC. Where do you think this is going?

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Speaker 9: Well?

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Speaker 8: I think I agree that it doesn't pay much to

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Speaker 8: forecasts right now. It's important just to look at the

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Speaker 8: data as it's coming to you, and so I do

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Speaker 8: sympathize with that. But at the end of the day,

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Speaker 8: I mean, the unemployment rate is up above the fed's

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Speaker 8: forecast for this year, and that's the first time that's

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Speaker 8: happened since March of twenty twenty two. Now you know

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Speaker 8: we're in. When you're in the thick of it, it's

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Speaker 8: hard to know whether that represents the start of something

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Speaker 8: much more onerous or whether it's just the normalization of

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Speaker 8: the labor market. But I think for the FED, I

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Speaker 8: think the doves on the FMC, and remember you know

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Speaker 8: President Kashkari, he tends to lean on the hawkish side

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Speaker 8: of the consensus at the FED. I think for the doves,

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Speaker 8: they have all the ammunition they need to basically put

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Speaker 8: the hawks in a casket. Okay, I mean, I think

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Speaker 8: that's the way I would think about it. I mean,

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Speaker 8: you can point to the pickup in productivity and what

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Speaker 8: that's done to unit labor costs. You can point to

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Speaker 8: what Powell has said, right, I mean, when when central

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Speaker 8: bankers use proceed carefully risk management, that's code for doing nothing.

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Speaker 8: And you know, finally, I mean the employment report was

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Speaker 8: probably understating payroll growth. That's my view. I mean, there's

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Speaker 8: a lot of strike activity and so far, but at

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Speaker 8: the end of the day, average hourly earnings are running

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Speaker 8: just over three percent at an annual rate over the

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Speaker 8: last several months. So I don't think the hawks on

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Speaker 8: the committee frankly, can use the labor markets as a

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Speaker 8: rationale to be hawkish anymore. So that is over and

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Speaker 8: so I think the doves can basically say that the

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Speaker 8: labor markets have been rebalanced. And if they can say

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Speaker 8: that just implicitly, it means that the door is a

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Speaker 8: little bit cracked open for a cut. And you know,

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Speaker 8: the point I'm making to you is, you know J Powell,

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Speaker 8: it wouldn't be the first time he basically, you know,

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Speaker 8: flipped on a dime. I mean, we're a long way

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Speaker 8: from neutral. I mean a few months later he's cutting rates,

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Speaker 8: We're not even thinking about thinking about tapering or hiking,

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Speaker 8: and then we're hiking and tapering basically in the same month.

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Speaker 8: So you know, to me, the fact that they're not

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Speaker 8: talking about it is irrelevant. It's also in their sep

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Speaker 8: for next year. The question is whether.

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Speaker 3: These surgical cuts, what are surgical cuts?

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Speaker 8: Basically a few cuts to stabilize the economy. I mean,

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Speaker 8: I think the issue is is the extent to which

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Speaker 8: cutting quickly translates into rapid economic stable So I mean,

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Speaker 8: for as an example, I mean, let's see what happens

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Speaker 8: with mortgage purchase demand. Over the next couple of weeks.

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Speaker 8: We've seen mortgage rates basically come down to what like

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Speaker 8: seven percent.

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Speaker 1: Okay, I'm trying to wrap my head around this.

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Speaker 2: Six months ago, you were talking about way more economic

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Speaker 2: strength in the US economy than people had expected. Now

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Speaker 2: you're talking about strategic or surgical cuts by the Federal

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Speaker 2: Reserve to stabilize the economy. Are you saying that they

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Speaker 2: are warranted because the economy.

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Speaker 1: No, I don't think that they are.

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Speaker 8: Part of the tention, Lisa, is that my job isn't

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Speaker 8: to tell people what I think the Fed should do.

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Speaker 8: My job is to try to get into their head

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Speaker 8: and figure out what they will do. I mean, if

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Speaker 8: I was there, would I be I would probably be

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Speaker 8: more hawkish than the consensus on the FMC. But I'm

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Speaker 8: not there.

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Speaker 2: Well, but does this mean that you think the consequence

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Speaker 2: of surgical cuts to fortify the economy will be prolonged inflation?

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Speaker 8: Yes?

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Speaker 1: Okay, So then how do you.

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Speaker 2: Sort of arrange around that sort of what is the

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Speaker 2: inflation rate? How do you sort of lean into the

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Speaker 2: rally that we've seen in the bond market and say,

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Speaker 2: wait a second, you guys have gotten ahead of your

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Speaker 2: skis based on the game theory that the FED is

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Speaker 2: playing and the way that they're likely to do Searga.

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Speaker 8: I don't know that the bond market's getting ahead of itself.

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Speaker 8: I think the bond market is sniffing out that the

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Speaker 8: distribution of risks have changed. I don't know what the

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Speaker 8: FED may do next. I mean, that's what I think

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Speaker 8: the bond market is doing, and I think bond market

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Speaker 8: investors are right to do that, because, as I say,

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Speaker 8: you know, you think about it basically three prongs, right,

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Speaker 8: the labor market, inflation, and then financial conditions. If the

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Speaker 8: FED can look at the labor market and say the

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Speaker 8: labor markets are rebalanced. Okay, that's check done. You can't

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Speaker 8: use that anymore as a reason to be hawkish. So,

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Speaker 8: if anything, if the unemployment rate's not going up a

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Speaker 8: little bit, the distribution of risks are that they would

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Speaker 8: cut because the labor markets. And right, if the labor

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Speaker 8: markets are thawing, that's going to give them increased confidence

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Speaker 8: that inflation will thaw and so and then finally, if

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Speaker 8: that's the case, they're not going to be particularly concerned

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Speaker 8: about the easing and financial conditions that you've seen since

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Speaker 8: the last in the last week.

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Speaker 3: Which is what we've been talking about through this morning,

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Speaker 3: whether they are going to tolerate the easing we've seen

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Speaker 3: over the last week. And it feels like perhaps they

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Speaker 3: will help me work with me here. It feels like

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Speaker 3: to me that you believe the world might have changed

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Speaker 3: post pandemic versus pre pandemic. Do you sense that they

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Speaker 3: still believe were still in the same old world pre pandemic?

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Speaker 10: I do.

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Speaker 8: I mean, I mean, if you listen to someone like

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Speaker 8: New York Fed President John Williams, even Chair Powell, I mean,

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Speaker 8: there's not much there's quite a bit of reluctance to

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Speaker 8: just say that, you know, neutral rates are higher.

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Speaker 3: I mean, why do you think that, is, Neil?

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Speaker 8: You know, I don't know. I mean I think that

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Speaker 8: maybe in their minds things haven't changed. I mean all,

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Speaker 8: I mean, you saw Powell talk about this at at

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Speaker 8: the press conference last week. I mean, oh, well, if

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Speaker 8: we get to pick up in potential growth, it's a

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Speaker 8: temporary pick up and potential growth, then we'll go back down.

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Speaker 8: So if you don't think that the world has fundamentally changed,

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Speaker 8: then you're going to be more sort of cognizant of

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Speaker 8: overtightening risk. Right Like, So if the unemployment rate is

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Speaker 8: starting to go up, you may have thought, well, maybe

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Speaker 8: you overdid it, so you might be more willing to

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Speaker 8: cut sooner as a result.

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Speaker 2: So are you more bullish on the US economy but

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Speaker 2: also expect inflation to remain higher and the FED When

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Speaker 2: people look back, this will be considered a policy air

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Speaker 2: that they weren't hawkish enough.

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Speaker 8: Yeah, I mean I think that that would be Yeah,

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Speaker 8: I mean that would be something I could be saying

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Speaker 8: in twenty twenty five.

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Speaker 3: What would you point to if you had this conversation

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Speaker 3: right now? And I would love to get you around

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Speaker 3: the table next time I have a FED official to

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Speaker 3: work through somebody's issues.

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Speaker 8: But what would you it sounds dangerous as.

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Speaker 3: The number one thing that indicates to you that the

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Speaker 3: world has changed, versus pandemic that ultimately they don't believe it.

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Speaker 3: What would you point to, Well.

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Speaker 8: I mean the first is just look at let's look

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Speaker 8: at the obvious. I mean, you've done a lot, and

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Speaker 8: yet the economy is still kind of hanging in there.

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Speaker 8: I would say that things like household formation rates are

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Speaker 8: running twice the rate they did after the Financial crisis.

441
00:19:52,160 --> 00:19:54,840
Speaker 8: I mean, to me, I think it's much easier to

442
00:19:54,840 --> 00:19:57,520
Speaker 8: tell the story about why the post financial crisis period

443
00:19:57,640 --> 00:20:00,680
Speaker 8: was actually the anomaly than not. So I think we're

444
00:20:00,680 --> 00:20:03,800
Speaker 8: actually going back to the old normal more so than

445
00:20:03,800 --> 00:20:07,760
Speaker 8: anything else. Obviously, you think about all those people during

446
00:20:07,760 --> 00:20:10,400
Speaker 8: the financial crisis period or the years after that, we're

447
00:20:10,440 --> 00:20:12,440
Speaker 8: saving up for retirement. A lot of them have now

448
00:20:12,640 --> 00:20:16,000
Speaker 8: since retired and they're now dissaving, which is you know,

449
00:20:16,080 --> 00:20:20,040
Speaker 8: implies higher neutral rates. You think about income inequality, it

450
00:20:20,080 --> 00:20:21,960
Speaker 8: was something that we were talking about all throughout the

451
00:20:22,000 --> 00:20:24,639
Speaker 8: twenty tens. Well, it's coming down now. People at the

452
00:20:24,640 --> 00:20:27,680
Speaker 8: lower end of the wage spectrum. We're seeing more rapid

453
00:20:27,720 --> 00:20:30,040
Speaker 8: growth in their wages. You see more increased sort of

454
00:20:30,200 --> 00:20:33,639
Speaker 8: union activity and unions getting big wins for blue collar workers.

455
00:20:33,680 --> 00:20:35,240
Speaker 8: I mean, these are not things. I mean, and those

456
00:20:35,560 --> 00:20:38,159
Speaker 8: folks have a much higher propensity to spend. And so

457
00:20:39,160 --> 00:20:42,320
Speaker 8: I think it's it's not right in my view to

458
00:20:42,359 --> 00:20:44,760
Speaker 8: say that things haven't changed. But if that's what the

459
00:20:44,760 --> 00:20:47,919
Speaker 8: FED believes, then you have to be recognizing what that

460
00:20:47,960 --> 00:20:50,159
Speaker 8: implies for what they might do later. And so I

461
00:20:50,200 --> 00:20:54,680
Speaker 8: think just because they're not talking about cuts now does

462
00:20:54,720 --> 00:20:57,600
Speaker 8: not mean they won't be talking about cuts in three

463
00:20:57,840 --> 00:21:01,480
Speaker 8: six months. That should be in the realm of possibility,

464
00:21:01,520 --> 00:21:03,399
Speaker 8: and I think the market's Frankly, I'm not willing to

465
00:21:03,400 --> 00:21:04,160
Speaker 8: fight the move yet.

466
00:21:04,200 --> 00:21:07,840
Speaker 3: I mean, okay, no a clinic as always. You know

467
00:21:07,840 --> 00:21:09,280
Speaker 3: you're one of my favors. I think everyone knows that.

468
00:21:09,320 --> 00:21:16,000
Speaker 3: No data, every nice loose Macro, No, thank you joining

469
00:21:16,000 --> 00:21:20,040
Speaker 3: guess now. Katy Kaminski, chief research strategist over Alpha Simplex. Katie,

470
00:21:20,040 --> 00:21:22,359
Speaker 3: it's the number one question for us. Are you still

471
00:21:22,400 --> 00:21:23,280
Speaker 3: short treasuries?

472
00:21:24,240 --> 00:21:25,120
Speaker 11: Yes?

473
00:21:25,320 --> 00:21:25,560
Speaker 5: Why?

474
00:21:26,600 --> 00:21:29,600
Speaker 12: Well, this is because for trend falling, it's not just

475
00:21:29,640 --> 00:21:32,800
Speaker 12: about a couple of days, It's really about persistent trends

476
00:21:32,800 --> 00:21:34,960
Speaker 12: in the market, and I just want to point out,

477
00:21:35,040 --> 00:21:38,280
Speaker 12: and this is something interesting, trend falling signals have been

478
00:21:38,359 --> 00:21:42,160
Speaker 12: net short for nine quarters. This is the first time

479
00:21:42,440 --> 00:21:44,919
Speaker 12: in many decades that this has been the case.

480
00:21:45,520 --> 00:21:47,120
Speaker 11: And so the reason I'm.

481
00:21:46,920 --> 00:21:50,120
Speaker 12: Pausing right now is because we've been saying short, short,

482
00:21:50,160 --> 00:21:53,240
Speaker 12: short all year, and for the first time, it's starting

483
00:21:53,280 --> 00:21:56,000
Speaker 12: to feel like we already got that short come through.

484
00:21:56,720 --> 00:21:59,680
Speaker 11: What's next? What does the market do now?

485
00:21:59,720 --> 00:22:02,679
Speaker 12: Buy are coming in because yields are at interesting levels.

486
00:22:02,720 --> 00:22:06,200
Speaker 12: They're probably thinking, maybe we've finally hit that point.

487
00:22:06,440 --> 00:22:09,280
Speaker 3: Do you think something changed fundamentally to lead to that

488
00:22:09,359 --> 00:22:10,359
Speaker 3: in the last few weeks.

489
00:22:11,960 --> 00:22:13,840
Speaker 12: I do, And then I think that the data has

490
00:22:13,880 --> 00:22:17,000
Speaker 12: come out to support the narrative for investors. But I

491
00:22:17,040 --> 00:22:20,119
Speaker 12: also think a narrative that has made sense to me

492
00:22:20,400 --> 00:22:23,560
Speaker 12: is that investors have woken up to the idea that

493
00:22:24,080 --> 00:22:27,640
Speaker 12: five percent yields at some point there's a buying point

494
00:22:27,880 --> 00:22:30,080
Speaker 12: where you think, well, there's a chance this could actually

495
00:22:30,160 --> 00:22:33,040
Speaker 12: go down. And now you start to see this equilibrium

496
00:22:33,080 --> 00:22:36,480
Speaker 12: occur where you're seeing the disinverted curve, which is something

497
00:22:36,480 --> 00:22:38,360
Speaker 12: we've been looking for since the beginning.

498
00:22:38,080 --> 00:22:38,520
Speaker 5: Of the year.

499
00:22:39,080 --> 00:22:41,800
Speaker 2: So Katie just to put a bow on this, are

500
00:22:41,840 --> 00:22:46,360
Speaker 2: you now not short treasuries and actually starting to see value,

501
00:22:46,440 --> 00:22:48,720
Speaker 2: particularly if yields get up to that five percent level

502
00:22:48,720 --> 00:22:49,280
Speaker 2: in the tenure.

503
00:22:50,480 --> 00:22:53,720
Speaker 12: So we're still short in terms of the overall frequency

504
00:22:53,760 --> 00:22:56,720
Speaker 12: that we see signals, but we are seeing consolidation in

505
00:22:56,760 --> 00:23:00,560
Speaker 12: those signals, so there's a reduction in that particular conviction.

506
00:23:01,200 --> 00:23:03,600
Speaker 11: But what I will say is that I'm seeing more and.

507
00:23:03,600 --> 00:23:07,600
Speaker 12: More positive signals on higher frequency, and so I think

508
00:23:07,680 --> 00:23:09,040
Speaker 12: on the shorter term you're going to.

509
00:23:09,000 --> 00:23:12,879
Speaker 11: See more and more potential buying for treasuries.

510
00:23:13,640 --> 00:23:16,960
Speaker 12: But I do want to remind everyone inflation is still

511
00:23:17,000 --> 00:23:20,240
Speaker 12: an issue. Rates could be higher for longer, so there's

512
00:23:20,280 --> 00:23:21,960
Speaker 12: still really a good chance that we're going to see

513
00:23:21,960 --> 00:23:25,080
Speaker 12: a lot of volatility instead of a new trend per

514
00:23:25,160 --> 00:23:26,359
Speaker 12: se that starts to emerge.

515
00:23:26,440 --> 00:23:30,919
Speaker 2: Yet this raises this question of which particular data points

516
00:23:30,960 --> 00:23:33,520
Speaker 2: are going to be the real action drivers, like what

517
00:23:33,560 --> 00:23:35,359
Speaker 2: we saw over the past ten days. Is it going

518
00:23:35,400 --> 00:23:38,399
Speaker 2: to be basically every inflation read that we get, or

519
00:23:38,440 --> 00:23:40,840
Speaker 2: do you really buy into this idea that it's treasury

520
00:23:40,920 --> 00:23:43,320
Speaker 2: supply that's been dictating a lot of the volumes and

521
00:23:43,320 --> 00:23:45,280
Speaker 2: a lot of the angst that we felt over the

522
00:23:45,320 --> 00:23:45,880
Speaker 2: past month.

523
00:23:47,359 --> 00:23:49,720
Speaker 12: It's really interesting that you bring this up, Lisa, because

524
00:23:49,720 --> 00:23:51,720
Speaker 12: we've been talking about the supply issue.

525
00:23:51,760 --> 00:23:54,159
Speaker 11: I mean, how often do people actually talk about supply.

526
00:23:54,760 --> 00:23:57,239
Speaker 12: They're only talking about it because I think people are

527
00:23:57,280 --> 00:24:00,320
Speaker 12: trying to understand the equilibrium of where people sit and

528
00:24:00,359 --> 00:24:02,919
Speaker 12: what yield should cost, I mean, what should be the

529
00:24:03,040 --> 00:24:03,919
Speaker 12: right yield.

530
00:24:04,040 --> 00:24:05,159
Speaker 11: And I think from our.

531
00:24:05,160 --> 00:24:07,840
Speaker 12: Side on the technical side, what we're looking for is

532
00:24:07,880 --> 00:24:11,679
Speaker 12: potential breakouts so that we're seeing a steeper curve.

533
00:24:11,440 --> 00:24:12,320
Speaker 11: At some point.

534
00:24:12,880 --> 00:24:15,560
Speaker 12: Our view is it's going to depend on really what

535
00:24:15,640 --> 00:24:18,639
Speaker 12: happens with the economic data of whether we end up

536
00:24:18,640 --> 00:24:21,960
Speaker 12: with tighter conditions or if we actually see something very

537
00:24:22,000 --> 00:24:24,720
Speaker 12: extreme where we actually saw higher yields.

538
00:24:24,720 --> 00:24:28,480
Speaker 11: Again, that to me seems very unlikely right now, but I.

539
00:24:28,440 --> 00:24:31,520
Speaker 12: Think it's really a point to start watching every data

540
00:24:31,560 --> 00:24:34,399
Speaker 12: point to see which direction the yield market is going

541
00:24:34,440 --> 00:24:36,440
Speaker 12: to go or which direction the yields go, because it's

542
00:24:36,480 --> 00:24:37,879
Speaker 12: definitely an inflection point than.

543
00:24:37,760 --> 00:24:39,679
Speaker 3: Katie, were going to catch up with Nil Kashgari in

544
00:24:39,680 --> 00:24:41,480
Speaker 3: about twenty minutes time. I think we're all looking forward

545
00:24:41,520 --> 00:24:44,040
Speaker 3: to this conversation. There is this second paragraph in the

546
00:24:44,040 --> 00:24:46,080
Speaker 3: statement that they put out last week on kind of

547
00:24:46,080 --> 00:24:49,160
Speaker 3: financial conditions it reaches follows. I'm sure you're familiar with it.

548
00:24:49,240 --> 00:24:51,840
Speaker 3: Time of financial and credit conditions for households and businesses

549
00:24:51,840 --> 00:24:54,840
Speaker 3: are likely to weigh on economic activity, hiring, and inflation.

550
00:24:55,200 --> 00:24:58,080
Speaker 3: Could you still write that same sentence today? After the

551
00:24:58,119 --> 00:25:00,480
Speaker 3: move we've seen in the last week, what's that on

552
00:25:00,760 --> 00:25:02,560
Speaker 3: the movement we've seen in the last month, for the last

553
00:25:02,600 --> 00:25:03,840
Speaker 3: six months, what do you think it is?

554
00:25:05,119 --> 00:25:05,280
Speaker 7: Well?

555
00:25:05,359 --> 00:25:05,840
Speaker 11: I think the.

556
00:25:05,880 --> 00:25:08,840
Speaker 12: Challenge is that these numbers come in at different frequencies.

557
00:25:08,960 --> 00:25:10,840
Speaker 11: Last week we had a massive.

558
00:25:10,480 --> 00:25:14,040
Speaker 12: Buying but this could also be somewhat of a relief

559
00:25:14,119 --> 00:25:18,080
Speaker 12: rally given how much movement we've seen downward, especially in equities.

560
00:25:18,520 --> 00:25:20,600
Speaker 12: And let's just be honest, like I said, at a

561
00:25:20,720 --> 00:25:24,600
Speaker 12: five percent yield started to get exciting, people said, oh

562
00:25:24,720 --> 00:25:25,920
Speaker 12: I better get in there.

563
00:25:26,200 --> 00:25:28,680
Speaker 11: So I think there's really still This could just be.

564
00:25:28,640 --> 00:25:32,880
Speaker 12: The tip of the beginning of understanding how serious financial.

565
00:25:32,400 --> 00:25:34,960
Speaker 11: Conditions have changed, and.

566
00:25:34,920 --> 00:25:37,760
Speaker 12: If it's enough to actually warrant a point where we

567
00:25:37,840 --> 00:25:41,800
Speaker 12: might actually have cuts at some point earlier than some

568
00:25:41,920 --> 00:25:45,159
Speaker 12: would would have thought, like myself, who's been very pessimistic

569
00:25:45,200 --> 00:25:45,840
Speaker 12: about rate cuts.

570
00:25:45,880 --> 00:25:47,359
Speaker 3: Hey, Ketty, do you have a decent understanding of the

571
00:25:47,359 --> 00:25:48,840
Speaker 3: conditions that would lead to those cuts.

572
00:25:50,200 --> 00:25:52,280
Speaker 12: Well, usually in terms of this, I think we'd have

573
00:25:52,320 --> 00:25:56,920
Speaker 12: to see pretty severe deterioration in financial conditions to see

574
00:25:57,000 --> 00:25:59,720
Speaker 12: rate cuts, given the mandate of the FED and the

575
00:25:59,760 --> 00:26:02,760
Speaker 12: fact that the other factors that are really focused on

576
00:26:03,560 --> 00:26:06,399
Speaker 12: have not come down to their target level. So the

577
00:26:06,440 --> 00:26:09,159
Speaker 12: fact that inflation is sticky, and the fact that we

578
00:26:09,200 --> 00:26:11,960
Speaker 12: have a strong workforce and that we have all of

579
00:26:12,000 --> 00:26:14,040
Speaker 12: these conditions putting us in a good place.

580
00:26:14,160 --> 00:26:16,240
Speaker 11: They have been pretty clear that they're.

581
00:26:16,080 --> 00:26:18,800
Speaker 12: Going to keep us higher for longer until we can

582
00:26:18,840 --> 00:26:21,720
Speaker 12: sort that out. On the other hand, if we had

583
00:26:21,720 --> 00:26:25,840
Speaker 12: some sort of very severe draw down or deterioration and

584
00:26:25,960 --> 00:26:28,560
Speaker 12: credit that was clear, I.

585
00:26:28,480 --> 00:26:29,800
Speaker 11: Think that they would have to act.

586
00:26:29,840 --> 00:26:32,080
Speaker 12: So that to me would be the situation where we

587
00:26:32,080 --> 00:26:34,720
Speaker 12: would see those rate cuts. Is if you saw something

588
00:26:34,760 --> 00:26:37,920
Speaker 12: in the credits markets or something in terms of consumers

589
00:26:37,960 --> 00:26:40,320
Speaker 12: really struggling that would cause them to actually react.

590
00:26:40,480 --> 00:26:42,639
Speaker 2: So the FED put still exists, just at a much

591
00:26:42,720 --> 00:26:45,240
Speaker 2: higher pain point, I would.

592
00:26:45,040 --> 00:26:46,240
Speaker 11: Say probably yes.

593
00:26:46,440 --> 00:26:49,400
Speaker 12: I mean, I think it always exists somewhere, but it's

594
00:26:49,440 --> 00:26:51,840
Speaker 12: definitely moved a lot compared to what we liked in

595
00:26:52,000 --> 00:26:53,119
Speaker 12: twenty nineteen and before.

596
00:26:53,280 --> 00:26:55,760
Speaker 3: Kelly Let's finish what we started. Given the uncertainty you

597
00:26:55,840 --> 00:26:59,040
Speaker 3: now have about your position, why maintain the shot? That's

598
00:26:59,080 --> 00:27:01,120
Speaker 3: what I'm going to walk away from this conversation scratching

599
00:27:01,119 --> 00:27:03,359
Speaker 3: my head about why maintain the short when it can

600
00:27:03,400 --> 00:27:06,679
Speaker 3: be as expensive as it was on weeks last week.

601
00:27:08,080 --> 00:27:09,919
Speaker 11: So this is the point of trend falling.

602
00:27:09,960 --> 00:27:13,960
Speaker 12: Systematic trading is about not double sort of using your

603
00:27:14,000 --> 00:27:16,919
Speaker 12: emotion in the moment. And I think what works with

604
00:27:17,000 --> 00:27:20,280
Speaker 12: trend falling is following the data, and we just need

605
00:27:20,320 --> 00:27:23,880
Speaker 12: more data to know the answer, and over longer periods

606
00:27:23,880 --> 00:27:26,800
Speaker 12: of time, it turns out the market is actually quite

607
00:27:26,800 --> 00:27:29,560
Speaker 12: good at giving us indications of where things are moving,

608
00:27:30,080 --> 00:27:34,200
Speaker 12: and it's particularly short term movements where they disagree. Where

609
00:27:34,480 --> 00:27:37,960
Speaker 12: you want to lean on your own gut, but you shouldn't,

610
00:27:38,240 --> 00:27:41,200
Speaker 12: because that's what systematic trading is really about. It's about

611
00:27:41,240 --> 00:27:44,320
Speaker 12: measuring and falling the markets and allowing the markets to

612
00:27:44,359 --> 00:27:47,400
Speaker 12: tell you what the market where we're going, as opposed

613
00:27:47,440 --> 00:27:49,200
Speaker 12: to sort of my own personal view.

614
00:27:49,320 --> 00:27:51,960
Speaker 3: Unfortunately, Katie, thanks for the clarity on that point. I

615
00:27:52,000 --> 00:28:05,200
Speaker 3: appreciate it. Katie commenced you that of aphasimplex, two major

616
00:28:05,240 --> 00:28:08,680
Speaker 3: political parties remain unpopular in the United States, fifty six

617
00:28:08,760 --> 00:28:12,720
Speaker 3: percent of Americans viewing the Republican Party unfavorably, fifty eight

618
00:28:12,760 --> 00:28:16,680
Speaker 3: percent saying the same thing of the Democratic Party. Mohammed Junis,

619
00:28:16,720 --> 00:28:19,200
Speaker 3: the editor in chief at Gallop, joined us now, Muhammad,

620
00:28:19,280 --> 00:28:21,960
Speaker 3: help us out. I've been rinting through this piece. Neither

621
00:28:22,000 --> 00:28:24,560
Speaker 3: party is well liked. You guys have pointed out that

622
00:28:24,800 --> 00:28:26,760
Speaker 3: the GP has an edge on certain issues. Can we

623
00:28:26,800 --> 00:28:30,760
Speaker 3: just talk about the likability of both parties right now, Muhammed?

624
00:28:30,760 --> 00:28:32,080
Speaker 3: How unusual is this?

625
00:28:33,640 --> 00:28:37,400
Speaker 10: Unfortunately, you know at harkens to your Amtrak conversation earlier.

626
00:28:38,120 --> 00:28:39,880
Speaker 10: We're at a state right now in the United States

627
00:28:39,920 --> 00:28:41,880
Speaker 10: when both parties are really not doing that.

628
00:28:41,800 --> 00:28:43,240
Speaker 5: Great in terms of their favorability.

629
00:28:43,240 --> 00:28:47,120
Speaker 10: It's nothing new, Unfortunately, It's been quite a while since

630
00:28:47,160 --> 00:28:51,080
Speaker 10: Americans had a favorable view of either party in the majority.

631
00:28:51,320 --> 00:28:53,440
Speaker 10: We're also at a time where there's a record high

632
00:28:53,480 --> 00:28:56,520
Speaker 10: of Americans saying that they'd like to see a third

633
00:28:56,560 --> 00:28:58,600
Speaker 10: party in American politics.

634
00:28:58,600 --> 00:29:00,600
Speaker 5: Of course, easy to say I want more.

635
00:29:00,640 --> 00:29:03,920
Speaker 10: It doesn't necessarily mean that that party would exist or

636
00:29:03,960 --> 00:29:07,240
Speaker 10: actually be powerful. But we're also at a time, John

637
00:29:07,280 --> 00:29:10,320
Speaker 10: and Lisa where there's a high of people that identify

638
00:29:10,440 --> 00:29:13,000
Speaker 10: as independents.

639
00:29:12,080 --> 00:29:14,120
Speaker 5: And that is important not.

640
00:29:14,000 --> 00:29:17,080
Speaker 10: Only in the current moment, but also in our analysis

641
00:29:17,120 --> 00:29:20,320
Speaker 10: over generations. What we find is that younger Americans today

642
00:29:20,360 --> 00:29:25,479
Speaker 10: are actually sticking with that independent id much further along

643
00:29:25,600 --> 00:29:30,560
Speaker 10: their lifespan than previous generations young folks. So, certainly America

644
00:29:30,640 --> 00:29:33,640
Speaker 10: is highly dissatisfied with national government.

645
00:29:33,680 --> 00:29:34,760
Speaker 5: We've talked about that a lot.

646
00:29:35,160 --> 00:29:38,760
Speaker 10: They're really, in some ways most dissatisfied with both parties.

647
00:29:39,720 --> 00:29:41,880
Speaker 5: That being said, today is a local election.

648
00:29:42,040 --> 00:29:44,200
Speaker 10: It's really, I know, it's so tempting for us to

649
00:29:44,240 --> 00:29:47,120
Speaker 10: jump to twenty twenty four. Americans line up today to

650
00:29:47,240 --> 00:29:50,120
Speaker 10: vote on local issues, and there's a huge difference in

651
00:29:50,160 --> 00:29:53,840
Speaker 10: the way people perceive local government versus the national government

652
00:29:53,840 --> 00:29:54,840
Speaker 10: here in the United States.

653
00:29:55,040 --> 00:29:56,800
Speaker 3: SOMEHOWMA just explain that a little bit more. What is

654
00:29:56,840 --> 00:29:58,400
Speaker 3: the big difference between the two currently?

655
00:29:59,320 --> 00:30:00,760
Speaker 5: Basically and coetence.

656
00:30:00,880 --> 00:30:04,800
Speaker 10: Americans have very low trust and competence in the national

657
00:30:04,840 --> 00:30:09,920
Speaker 10: government and national institutions. Perceptions of corruption are astronomically high.

658
00:30:10,080 --> 00:30:12,600
Speaker 10: When you come to local government, though, people have a

659
00:30:12,680 --> 00:30:16,320
Speaker 10: much more positive perspective on local government, whether it's the efficacy,

660
00:30:16,560 --> 00:30:19,760
Speaker 10: transparency of local government and corruption, but also how they

661
00:30:19,840 --> 00:30:24,200
Speaker 10: feel about their local governing officials. So Americans light up

662
00:30:24,200 --> 00:30:26,160
Speaker 10: at the ballot box today, they're hearing a lot of

663
00:30:26,200 --> 00:30:28,760
Speaker 10: echo chamber on the national what this means, we're twenty

664
00:30:28,800 --> 00:30:31,600
Speaker 10: twenty four, but really what they're going to be focusing

665
00:30:31,640 --> 00:30:35,560
Speaker 10: on our local issues, and the national conversation.

666
00:30:35,080 --> 00:30:36,840
Speaker 5: Certainly will inform that.

667
00:30:36,840 --> 00:30:41,240
Speaker 10: That's why things like abortion, things that implicate attitudes about

668
00:30:41,240 --> 00:30:44,400
Speaker 10: big and small government, for example, they're on the ballot box.

669
00:30:44,960 --> 00:30:47,600
Speaker 10: They will be discussed. They're going to be they have

670
00:30:47,720 --> 00:30:49,680
Speaker 10: been a focus of the campaign. We know in Ohio

671
00:30:49,760 --> 00:30:53,080
Speaker 10: there's a really big push on abortion. It'll be a

672
00:30:53,120 --> 00:30:55,840
Speaker 10: really important weather vane in terms of whether or not

673
00:30:55,960 --> 00:30:59,200
Speaker 10: Roe v. Wades overturning has sort of faded, The impact

674
00:30:59,280 --> 00:31:00,360
Speaker 10: of that has faded or.

675
00:31:00,720 --> 00:31:01,600
Speaker 5: Is still with us.

676
00:31:01,880 --> 00:31:04,000
Speaker 2: I have to say, as you're talking about local elections

677
00:31:04,000 --> 00:31:07,080
Speaker 2: and how different they are than the nationals, I think, well,

678
00:31:07,120 --> 00:31:10,480
Speaker 2: they're probably not on TikTok, the local elections, they're probably

679
00:31:10,480 --> 00:31:13,440
Speaker 2: not on Facebook. How much is it the social media

680
00:31:13,560 --> 00:31:17,040
Speaker 2: echo chamber that polarizes people and gives them a worse

681
00:31:17,080 --> 00:31:20,480
Speaker 2: and expected view of national politics in a way that

682
00:31:20,600 --> 00:31:23,160
Speaker 2: local politics might be slightly immune.

683
00:31:23,760 --> 00:31:24,720
Speaker 5: I think that's a great point.

684
00:31:24,760 --> 00:31:28,400
Speaker 10: Lisa it's much easier to sort of check the bs

685
00:31:28,440 --> 00:31:31,000
Speaker 10: if you will. On a topic or an issue. When

686
00:31:31,040 --> 00:31:33,600
Speaker 10: it's about where you live, you know that reality. You

687
00:31:33,680 --> 00:31:38,080
Speaker 10: have direct information from people you know where you live.

688
00:31:38,680 --> 00:31:40,800
Speaker 10: You can talk to your neighbors, you can talk to

689
00:31:40,840 --> 00:31:44,720
Speaker 10: your local religious leaders or community leaders. With national politics,

690
00:31:44,760 --> 00:31:47,600
Speaker 10: it's a very different thing. It really tends to have

691
00:31:47,680 --> 00:31:50,720
Speaker 10: now become sort of a war of the propaganda's if

692
00:31:50,720 --> 00:31:54,000
Speaker 10: you owe both parties where truth is very hard to identify,

693
00:31:54,320 --> 00:31:57,320
Speaker 10: but both sides are absolutely out there to religiously convict

694
00:31:57,360 --> 00:32:03,480
Speaker 10: you excuse me, to religiously convert you to their worldview.

695
00:32:03,520 --> 00:32:06,000
Speaker 10: So that's certainly a factor. But look, when it comes

696
00:32:06,000 --> 00:32:08,400
Speaker 10: to twenty twenty four, and it's important for us to keep.

697
00:32:08,320 --> 00:32:09,360
Speaker 5: Our eye on that mark.

698
00:32:10,240 --> 00:32:13,760
Speaker 10: Everything that we've done with regards to national elections really

699
00:32:13,840 --> 00:32:16,320
Speaker 10: comes down to one thing. Americans focus on the economy.

700
00:32:16,360 --> 00:32:18,800
Speaker 10: The economy is king. It's not only king, it's king,

701
00:32:18,880 --> 00:32:21,320
Speaker 10: queen and bishop when it comes to picking a president

702
00:32:21,320 --> 00:32:23,600
Speaker 10: here in the United States. And that's going to be

703
00:32:23,600 --> 00:32:26,640
Speaker 10: a huge factor in where people place their votes.

704
00:32:26,400 --> 00:32:27,600
Speaker 5: In November twenty twenty four.

705
00:32:27,880 --> 00:32:30,800
Speaker 10: But as you all know, we are light years ahead

706
00:32:31,200 --> 00:32:33,200
Speaker 10: from where that is in terms of assessing where the

707
00:32:33,320 --> 00:32:36,040
Speaker 10: economy is going to be then, and that's going to

708
00:32:36,040 --> 00:32:38,800
Speaker 10: be the major factor when it comes to party advantages.

709
00:32:38,960 --> 00:32:43,880
Speaker 10: The Republicans definitely have maintained their historic advantage in terms

710
00:32:43,920 --> 00:32:47,000
Speaker 10: of Americans viewing them as more competent in keeping the

711
00:32:47,040 --> 00:32:51,120
Speaker 10: country prosperous, keeping the economy booming, and keeping the country safe.

712
00:32:51,200 --> 00:32:54,040
Speaker 2: That's said, how much are you looking to Glenn Youngkin today?

713
00:32:54,240 --> 00:32:56,240
Speaker 2: And maybe there is going to be very much local

714
00:32:56,280 --> 00:32:59,480
Speaker 2: issues that are decided, but the local issues have implications

715
00:32:59,520 --> 00:33:04,160
Speaker 2: for their glens might be the Republican con candidate for presidency.

716
00:33:04,320 --> 00:33:05,280
Speaker 1: Do you think that's a stretch.

717
00:33:06,960 --> 00:33:09,040
Speaker 5: I think looking at the polls right now, that is

718
00:33:09,040 --> 00:33:09,520
Speaker 5: a stretch.

719
00:33:09,960 --> 00:33:12,160
Speaker 10: It's hard to argue that President Trump is not the

720
00:33:12,160 --> 00:33:16,560
Speaker 10: front runner of the Republican Party. You know, every poll

721
00:33:16,640 --> 00:33:18,880
Speaker 10: you do, every poll, what we've done. We don't do

722
00:33:18,920 --> 00:33:21,240
Speaker 10: too many political polls anymore, but there are good polls

723
00:33:21,240 --> 00:33:24,760
Speaker 10: out there. It's really hard to see somebody sort of

724
00:33:24,840 --> 00:33:27,720
Speaker 10: astronomically jump ahead of him. Now that being said, we

725
00:33:27,840 --> 00:33:30,480
Speaker 10: haven't had a president in modern time that's facing the

726
00:33:30,560 --> 00:33:32,600
Speaker 10: legal challenges that he's facing, and that's a.

727
00:33:32,600 --> 00:33:36,200
Speaker 5: Whole other sort of curveball that's being thrown here.

728
00:33:36,240 --> 00:33:40,840
Speaker 10: It's not clear exactly what his situation will be come real.

729
00:33:41,000 --> 00:33:43,520
Speaker 10: Kind of rubber meets the road in terms of November

730
00:33:43,520 --> 00:33:46,160
Speaker 10: twenty twenty four. But you know there are still we

731
00:33:46,200 --> 00:33:49,800
Speaker 10: heard from David Axelrod this week about the Democratic side.

732
00:33:50,080 --> 00:33:53,160
Speaker 10: There's still a lot of movement in this race, and

733
00:33:53,360 --> 00:33:57,800
Speaker 10: I wouldn't rule out any surprises or sudden departures on

734
00:33:57,840 --> 00:33:58,680
Speaker 10: either side.

735
00:33:58,560 --> 00:34:00,080
Speaker 3: Up against the clol kid. Just to squeeze it in

736
00:34:00,160 --> 00:34:02,320
Speaker 3: and finished where we started. You do mention in the

737
00:34:02,320 --> 00:34:04,880
Speaker 3: piece of the GP holds advantages on certain issues. Can

738
00:34:04,880 --> 00:34:07,760
Speaker 3: we just bring some life into that, Mohammad? Which issue specifically?

739
00:34:09,040 --> 00:34:12,240
Speaker 10: There are really three issues In specific one is keeping

740
00:34:12,280 --> 00:34:18,160
Speaker 10: the country prosperous. Republicans have a pretty sizable advantage to

741
00:34:18,760 --> 00:34:22,280
Speaker 10: Democrats in terms of perceptions of keeping the country prosperous.

742
00:34:22,320 --> 00:34:25,200
Speaker 10: The other one is keeping the country safe. As you know,

743
00:34:25,280 --> 00:34:29,400
Speaker 10: we're now very focused on too pretty significant conflicts across

744
00:34:29,400 --> 00:34:32,239
Speaker 10: the world. Hopefully that doesn't become a reality for us

745
00:34:32,239 --> 00:34:35,319
Speaker 10: here in the United States, but as Americans focus more

746
00:34:35,400 --> 00:34:39,480
Speaker 10: on security issues, Republicans do have that advantage in our polls.

747
00:34:39,640 --> 00:34:42,560
Speaker 10: The final one is who's most competent to handle the

748
00:34:42,600 --> 00:34:46,360
Speaker 10: most important problem facing the country. And what's fascinating about

749
00:34:46,360 --> 00:34:49,160
Speaker 10: that question is that the most important problem facing the country,

750
00:34:49,200 --> 00:34:51,880
Speaker 10: as I have said on this show many times right now,

751
00:34:52,200 --> 00:34:58,080
Speaker 10: is actually poor leadership and government. So Americans identify the quality,

752
00:34:58,160 --> 00:35:01,719
Speaker 10: the low quality of national le as the most important

753
00:35:01,719 --> 00:35:03,160
Speaker 10: problem facing the country.

754
00:35:03,200 --> 00:35:05,360
Speaker 5: So it's the most of our problem. The economy and

755
00:35:05,480 --> 00:35:06,840
Speaker 5: keeping America.

756
00:35:06,480 --> 00:35:08,960
Speaker 3: Safe fascinates in gright. To catch out Mohammed azoh Wis,

757
00:35:08,960 --> 00:35:11,000
Speaker 3: He's going to say, Mohammed unus of gallop.

758
00:35:15,120 --> 00:35:17,520
Speaker 2: Everyone's been pointing to oil prices. Why have they not

759
00:35:17,640 --> 00:35:20,719
Speaker 2: caught up given that there is a sort of existential

760
00:35:20,880 --> 00:35:23,919
Speaker 2: risk and threat that seems to be escalating every single

761
00:35:24,000 --> 00:35:25,640
Speaker 2: day in the Middle East? Joining us now to help

762
00:35:25,719 --> 00:35:29,560
Speaker 2: us understand what exactly to look for. Nadia Martin Wiggan,

763
00:35:29,640 --> 00:35:31,719
Speaker 2: Director ats fell in Capital, Nadia, I just want to

764
00:35:31,760 --> 00:35:33,719
Speaker 2: start there. What do you make of the fact that

765
00:35:33,760 --> 00:35:36,919
Speaker 2: we're seeing crude traded on the NMEX blow eighty dollars

766
00:35:37,000 --> 00:35:40,440
Speaker 2: a barrel again today despite what's going on in Israel

767
00:35:40,600 --> 00:35:43,240
Speaker 2: and in Gaza.

768
00:35:43,520 --> 00:35:46,600
Speaker 9: Hello, great to be on. I think what we saw

769
00:35:46,760 --> 00:35:50,520
Speaker 9: last week is that Hezbollah and Iran for right now,

770
00:35:50,560 --> 00:35:53,680
Speaker 9: they're on the sidelines, right, They don't actually want to

771
00:35:53,680 --> 00:35:57,200
Speaker 9: show an escalation of the war going on in Gaza

772
00:35:57,280 --> 00:36:00,120
Speaker 9: right now. So that has taken off some of the

773
00:36:00,200 --> 00:36:02,879
Speaker 9: risk premium. For the last ten days, we actually see

774
00:36:03,360 --> 00:36:07,239
Speaker 9: the implied volatility in the options market come down. So

775
00:36:07,400 --> 00:36:09,879
Speaker 9: it's not even something that's happened just today, it's been

776
00:36:09,920 --> 00:36:12,240
Speaker 9: for the last ten days that trend.

777
00:36:12,719 --> 00:36:13,040
Speaker 11: I think.

778
00:36:13,120 --> 00:36:16,520
Speaker 9: In addition, when that premium, that initial shock goes away,

779
00:36:16,560 --> 00:36:20,600
Speaker 9: as we saw was the case with the war in

780
00:36:20,719 --> 00:36:24,640
Speaker 9: Ukraine by Russia, eventually you know, the market starts to

781
00:36:24,719 --> 00:36:28,000
Speaker 9: think about how to work around that. And for example,

782
00:36:28,040 --> 00:36:31,480
Speaker 9: we've seen that freight rates have gone much higher, and

783
00:36:31,560 --> 00:36:33,520
Speaker 9: part of that is when you look at it, it's

784
00:36:33,560 --> 00:36:36,880
Speaker 9: almost like a risk balancing that, Okay, if we can't

785
00:36:36,920 --> 00:36:40,680
Speaker 9: flow through the Suez and we have to go around,

786
00:36:40,840 --> 00:36:45,240
Speaker 9: then let's de risk ourselves if things were to take longer.

787
00:36:45,280 --> 00:36:47,680
Speaker 9: And we see that the freight market has actually priced

788
00:36:47,680 --> 00:36:50,719
Speaker 9: that in as if they have to avoid the Suez,

789
00:36:50,960 --> 00:36:52,960
Speaker 9: which they haven't had to do. So as a result,

790
00:36:53,000 --> 00:36:54,720
Speaker 9: things have come down also.

791
00:36:54,600 --> 00:36:55,320
Speaker 11: In the oil market.

792
00:36:55,440 --> 00:36:57,880
Speaker 1: Okay, so let's take a step back for a second. Nadia.

793
00:36:57,960 --> 00:37:00,279
Speaker 2: If you're looking at freight producers, that already come up

794
00:37:00,280 --> 00:37:04,040
Speaker 2: with alternate roots that avoid the suz Canal to avoid

795
00:37:04,640 --> 00:37:07,520
Speaker 2: potential or the straits of our moves to avoid potential

796
00:37:07,520 --> 00:37:11,560
Speaker 2: blowback from Iran. Does this mean that oil prices are

797
00:37:11,560 --> 00:37:13,880
Speaker 2: actually higher than where they would be at this point

798
00:37:14,280 --> 00:37:17,600
Speaker 2: if there weren't this geopolitical overhang, because it's actually being

799
00:37:17,680 --> 00:37:19,880
Speaker 2: priced into the market in a material way.

800
00:37:21,360 --> 00:37:21,640
Speaker 7: Yeah.

801
00:37:21,719 --> 00:37:24,280
Speaker 9: If we look at what was happening to the market

802
00:37:24,400 --> 00:37:28,439
Speaker 9: in oil before the October seventh attack, we could see

803
00:37:28,480 --> 00:37:30,839
Speaker 9: that prices were coming off right. We had a lot

804
00:37:30,880 --> 00:37:35,760
Speaker 9: of pressure on refinery margins. We had physical creed trading poorly.

805
00:37:36,080 --> 00:37:38,680
Speaker 9: You know, we've had the largest overhang in the West

806
00:37:38,680 --> 00:37:41,480
Speaker 9: African market that we've had in years. We had more

807
00:37:41,480 --> 00:37:44,400
Speaker 9: than twenty twenty five million barrels unsold out of the

808
00:37:44,440 --> 00:37:48,600
Speaker 9: November loading program. So we saw that kind of weakening

809
00:37:48,719 --> 00:37:51,200
Speaker 9: and then this is where the market would like to rebalance.

810
00:37:51,320 --> 00:37:54,200
Speaker 9: We saw the physical premiums come down for those grades,

811
00:37:54,200 --> 00:37:57,759
Speaker 9: but the futures market has remained quite strong, and this

812
00:37:57,800 --> 00:38:00,480
Speaker 9: is where we have to see that kind of reb ballancy.

813
00:38:00,880 --> 00:38:03,239
Speaker 9: When we look at kind of the momentum and what

814
00:38:03,360 --> 00:38:07,040
Speaker 9: is happening to pure speculative traders, you know, the CTAs

815
00:38:07,080 --> 00:38:10,640
Speaker 9: and so forth. That short term momentum has been downwards, right,

816
00:38:10,680 --> 00:38:13,279
Speaker 9: and that is put pressure bringing us down to where

817
00:38:13,280 --> 00:38:15,600
Speaker 9: we are now in WTI, you know, just above the

818
00:38:15,640 --> 00:38:18,279
Speaker 9: two hundred day moving average. If we look at that

819
00:38:18,400 --> 00:38:22,960
Speaker 9: long term momentum, it's still intact for a strong market, right.

820
00:38:23,000 --> 00:38:25,640
Speaker 9: So there are still those longs in the market that

821
00:38:25,680 --> 00:38:29,920
Speaker 9: we've had in since before all of this started. But again,

822
00:38:30,160 --> 00:38:33,880
Speaker 9: the market is preparing in case something were to happen,

823
00:38:33,960 --> 00:38:36,640
Speaker 9: because you know, things had been taking along well in

824
00:38:36,680 --> 00:38:38,520
Speaker 9: the Middle East and we were about to have a

825
00:38:38,560 --> 00:38:42,880
Speaker 9: deal between Saudi Arabia, the US and Israel recognizing Israel,

826
00:38:42,880 --> 00:38:45,880
Speaker 9: which would take off potentially a premium right, and instead

827
00:38:45,920 --> 00:38:47,200
Speaker 9: we've moved in the opposite direction.

828
00:38:47,320 --> 00:38:49,520
Speaker 2: How much is the US becoming the swing producer at

829
00:38:49,560 --> 00:38:51,920
Speaker 2: a time where there is consolidation in the shale patch

830
00:38:51,920 --> 00:38:55,800
Speaker 2: and you are seeing companies try to realize the value

831
00:38:55,960 --> 00:38:58,359
Speaker 2: from their stores, basically pump the oil while it's still

832
00:38:58,440 --> 00:39:00,240
Speaker 2: valued in the world.

833
00:39:01,080 --> 00:39:04,839
Speaker 9: The deal of Exon, for example, buying Pioneer right, that

834
00:39:05,000 --> 00:39:08,160
Speaker 9: really shows that they are focusing on the Permian right.

835
00:39:08,760 --> 00:39:11,920
Speaker 9: And what interestingly Exon announced in their earnings call is

836
00:39:11,920 --> 00:39:15,160
Speaker 9: that they believe that with their equipment and knowledge, they're

837
00:39:15,200 --> 00:39:17,840
Speaker 9: able to bring in a total of one billion barrels

838
00:39:18,080 --> 00:39:21,800
Speaker 9: of oil more out of those same assets that Pioneer

839
00:39:21,840 --> 00:39:24,120
Speaker 9: was able to. So, when we think about the terminal

840
00:39:24,320 --> 00:39:28,560
Speaker 9: regular production rate in the US, that goes from around

841
00:39:28,600 --> 00:39:30,839
Speaker 9: fourteen and a half million barrels per day to maybe

842
00:39:30,880 --> 00:39:33,120
Speaker 9: fifteen and a half million barrels per day, and the

843
00:39:33,200 --> 00:39:35,440
Speaker 9: question is when do we reach that. Right August production

844
00:39:35,560 --> 00:39:38,359
Speaker 9: was thirteen point one million barrels per day. It will

845
00:39:38,400 --> 00:39:41,120
Speaker 9: probably take two years, but of course that depends on

846
00:39:41,160 --> 00:39:44,399
Speaker 9: the short term oil price and the signals short term

847
00:39:44,400 --> 00:39:47,840
Speaker 9: meaning monthly, quarterly, and the signals that that yields to

848
00:39:48,120 --> 00:39:51,600
Speaker 9: shale producers in terms of activity. Right, a weaker oil

849
00:39:51,640 --> 00:39:53,759
Speaker 9: price will slow that down. A strong oil price we'll

850
00:39:53,760 --> 00:39:54,359
Speaker 9: speed that up.

851
00:39:54,760 --> 00:39:57,240
Speaker 2: So right now, given more prices are do you expect

852
00:39:57,400 --> 00:40:00,960
Speaker 2: more consolidation to be expedited currently or do you think

853
00:40:00,960 --> 00:40:03,279
Speaker 2: that people are going to wait until prices go up

854
00:40:03,320 --> 00:40:03,920
Speaker 2: a bit further.

855
00:40:06,360 --> 00:40:11,560
Speaker 9: Well, prices are reasonably strong, right, the whole oil complex

856
00:40:11,920 --> 00:40:15,399
Speaker 9: is in a good situation and making money. So when

857
00:40:15,480 --> 00:40:18,520
Speaker 9: what we saw at the start of October is that

858
00:40:18,560 --> 00:40:22,320
Speaker 9: demand was starting to get hit, right, we had producers

859
00:40:22,640 --> 00:40:24,840
Speaker 9: selling crewed for more than one hundred dollars a barrel,

860
00:40:24,880 --> 00:40:28,800
Speaker 9: and then we saw, for example, companies like India really complaining.

861
00:40:28,840 --> 00:40:32,480
Speaker 9: Part of that is because Russian crudis continued to flow

862
00:40:32,960 --> 00:40:36,560
Speaker 9: and we had price caps breached, right, so you were

863
00:40:36,560 --> 00:40:38,920
Speaker 9: paying more than sixty dollars a barrel, maybe you were

864
00:40:38,960 --> 00:40:41,240
Speaker 9: paying seventy dollars a barrel, and then on average, facing

865
00:40:41,239 --> 00:40:43,920
Speaker 9: more than one hundred dollars a barrel was becoming difficult.

866
00:40:44,000 --> 00:40:47,400
Speaker 9: So I think we've been in a pretty comfortable space,

867
00:40:47,480 --> 00:40:51,480
Speaker 9: you know, in the eighty dollars range for everyone to

868
00:40:51,560 --> 00:40:54,759
Speaker 9: make money, so it makes it ripe for consolidation and

869
00:40:54,880 --> 00:40:58,400
Speaker 9: valuable resources. We don't really need things to move much higher.

870
00:40:58,480 --> 00:41:00,319
Speaker 2: Do you think that all things being a well, this

871
00:41:00,360 --> 00:41:02,360
Speaker 2: is going to be the range for the foreseeable future,

872
00:41:02,480 --> 00:41:04,919
Speaker 2: just because of the pushes and the pulls that seem

873
00:41:05,000 --> 00:41:08,000
Speaker 2: to be working in equilibrium from.

874
00:41:07,840 --> 00:41:11,440
Speaker 9: A technical level, yes, But of course things can suddenly

875
00:41:11,520 --> 00:41:14,480
Speaker 9: change very quickly, both in the Middle East, you know,

876
00:41:15,200 --> 00:41:19,360
Speaker 9: towards the negative towards a positive, so that can really

877
00:41:19,440 --> 00:41:22,360
Speaker 9: shift things. And the number one thing to keep track

878
00:41:22,400 --> 00:41:26,120
Speaker 9: of is that inventories were expected to draw quite steeply

879
00:41:26,160 --> 00:41:29,120
Speaker 9: in the fourth quarter, and so far in October they

880
00:41:29,200 --> 00:41:32,040
Speaker 9: only drew on land around three hundred thousand barrels per day.

881
00:41:32,200 --> 00:41:35,640
Speaker 9: So the market is waiting for evidence that actually we

882
00:41:35,840 --> 00:41:39,640
Speaker 9: have tightness led by these supply cuts and demand isn't waning,

883
00:41:40,280 --> 00:41:43,400
Speaker 9: Whereas you know, on the other hand, if it continues waiting,

884
00:41:43,640 --> 00:41:45,560
Speaker 9: then we could see.

885
00:41:45,280 --> 00:41:46,320
Speaker 11: For the falls and price.

886
00:41:47,239 --> 00:41:49,600
Speaker 2: Nadie Martin Wigan of Spell and Capital, thank you so

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Speaker 2: much for being with us.

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00:41:50,800 --> 00:41:52,320
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