WEBVTT - Surveillance: Kashkari on the Fight Against Inflation 0:00:05.080 --> 0:00:08.280 This is the Bloomberg Surveillance Podcast. I'm Lisa A. 0:00:08.320 --> 0:00:11.640 Bromoids, along with Tom Keen and Jonathan Ferrow, join us 0:00:11.680 --> 0:00:15.280 each day for insight from the best in economics, geopolitics, 0:00:15.320 --> 0:00:16.440 finance and investment. 0:00:16.760 --> 0:00:18.760 Subscribe to Bloomberg Surveillance. 0:00:18.320 --> 0:00:21.840 On demand on Apple, Spotify and anywhere you get your podcasts, 0:00:22.120 --> 0:00:25.200 and always on Bloomberg dot Com, the Bloomberg Terminal, and 0:00:25.200 --> 0:00:26.400 the Bloomberg Business app. 0:00:26.560 --> 0:00:29.840 This morning, Mike McKay Drumrow, fantastic guests the random type 0:00:29.920 --> 0:00:32.400 with us to talk about Fed policy. 0:00:32.520 --> 0:00:35.479 Yes, and thank you very much, John, because we are 0:00:35.880 --> 0:00:39.479 pleased to welcome Neil Kashkari, the President of the Federal 0:00:39.479 --> 0:00:42.640 Reserve Bank of Minneapolis, to the table today. Thank you 0:00:42.680 --> 0:00:44.800 for coming in making the trip all the way to 0:00:44.840 --> 0:00:48.479 New York only for us. I'm sure nothing else There 0:00:48.479 --> 0:00:51.840 would be nothing else this morning, and except for Bloomberg Surveillance. 0:00:52.720 --> 0:00:55.760 You're kind of known as the guy who is the 0:00:55.800 --> 0:00:59.160 most hawkish. I don't want to characterize you exactly now, 0:00:59.400 --> 0:01:01.920 given how things have changed over the last couple of months, 0:01:01.920 --> 0:01:05.480 but you have left open the possibility of doing more. 0:01:06.280 --> 0:01:09.959 How much more would you think the economy might need? 0:01:10.000 --> 0:01:13.240 Are we talking about just that one leftover move from 0:01:13.280 --> 0:01:17.200 the dot plot in September, or if you have to 0:01:17.240 --> 0:01:19.959 start raising again, do you have to go farther. 0:01:20.080 --> 0:01:20.520 Probably. 0:01:20.800 --> 0:01:22.640 Well, first of all, it's great to see you, Thanks 0:01:22.640 --> 0:01:25.480 for having me. People are looking for certainty, and I 0:01:25.520 --> 0:01:29.280 wish I could give that certainty provided there's been so much, 0:01:30.360 --> 0:01:33.000 so much it's unusual about the reopening of the economy 0:01:33.040 --> 0:01:35.520 and the dynamics that led to the high inflation, and 0:01:35.560 --> 0:01:38.120 how long it has taken, and the dynamics as the 0:01:38.160 --> 0:01:40.200 disinflation process has taken hold. 0:01:40.560 --> 0:01:41.800 I wish I knew. 0:01:41.840 --> 0:01:43.880 We have to let the inflation data guide US, the 0:01:43.959 --> 0:01:47.160 labor market data guide US, just to point out the obvious. 0:01:47.160 --> 0:01:49.520 Our forecasts have not been great over the past couple of. 0:01:49.560 --> 0:01:52.120 Years, and so we just need to We're all committed. 0:01:52.360 --> 0:01:55.320 Everybody on the FORMC has committed that two percent is 0:01:55.320 --> 0:01:57.920 our inflation target. We have to get inflation back down 0:01:57.960 --> 0:02:00.960 to two percent over a reasonable period of time. Ultimately, 0:02:01.000 --> 0:02:03.560 the economy will tell us how much is needed to 0:02:03.560 --> 0:02:04.840 get there, And I just don't know. 0:02:05.080 --> 0:02:08.880 Well, at what point do you think you would believe 0:02:08.960 --> 0:02:12.200 you have tightened enough or not tightened enough? What is 0:02:12.240 --> 0:02:13.200 it that you're looking for. 0:02:13.320 --> 0:02:15.800 Well, I'll give you some good news is that core 0:02:15.880 --> 0:02:18.280 PC on a three month basis is running about two 0:02:18.280 --> 0:02:21.400 point five percent, and it's lower than the six month data. 0:02:21.480 --> 0:02:23.880 It's lower than the one year data. So that suggests 0:02:24.000 --> 0:02:27.400 that the disinflation is real. If we continue to see 0:02:28.120 --> 0:02:31.480 inflation numbers of that range two point five percent or 0:02:31.520 --> 0:02:34.520 lower on a go forward basis, that would tell me, Okay, 0:02:34.760 --> 0:02:37.400 we are now on a path back to two percent inflation. 0:02:37.720 --> 0:02:40.200 But three months data is still only three months data, 0:02:40.280 --> 0:02:42.200 and if we see that start to tick back up again, 0:02:42.520 --> 0:02:44.840 that would tell me our job is not yet done. 0:02:45.200 --> 0:02:47.240 Tick back up means what? In other words, we get 0:02:47.280 --> 0:02:50.080 another couple of CPI reports in a PCE report before 0:02:50.120 --> 0:02:53.840 your next meeting, a couple of tents higher. The chairman 0:02:53.880 --> 0:02:57.600 and others say it's going to be lumpy or does 0:02:57.639 --> 0:02:59.640 it have to be a significant move? In other words, 0:03:00.000 --> 0:03:01.280 what are you thinking about for December? 0:03:01.400 --> 0:03:03.040 Well, I think we could look at, as the chairman 0:03:03.040 --> 0:03:04.800 always says, we look at all of the data. So 0:03:04.880 --> 0:03:07.760 what surprises Over the past few months, We've been surprised 0:03:07.760 --> 0:03:09.760 by how strong American consumers have been. 0:03:09.960 --> 0:03:11.240 Consumer spending is held up. 0:03:11.240 --> 0:03:15.880 Remarkably well, we've been surprised by GDP growth. When activity 0:03:16.160 --> 0:03:19.800 continues to run this hot, that makes me question is 0:03:19.880 --> 0:03:22.760 policy as tight as we assume that it currently is. 0:03:23.120 --> 0:03:25.960 So if you saw inflation tick back up and you 0:03:26.040 --> 0:03:29.399 saw continued very strong economic activity on the real side 0:03:29.400 --> 0:03:31.799 of the economy, that would tell me, okay, we might 0:03:31.840 --> 0:03:33.360 need to do more. So it's hard for me to 0:03:33.400 --> 0:03:35.880 say this one data point needs to be here. I 0:03:35.880 --> 0:03:37.440 would be looking at the suite of data. 0:03:37.600 --> 0:03:40.480 Did we outsource doing more to financial markets? In the 0:03:40.600 --> 0:03:43.680 arts week? Have we outsourced doing more to financial markets? 0:03:43.760 --> 0:03:47.520 You know, this is a very complicated question on what 0:03:47.600 --> 0:03:49.560 has been driving the long end of the Yeld curve. 0:03:50.080 --> 0:03:52.600 Some people point to term premium, and I always joke 0:03:52.640 --> 0:03:55.240 the term premium is the economist version of dark matter. 0:03:55.560 --> 0:03:57.800 It's the residual of all the stuff we can't explain. 0:03:58.200 --> 0:04:00.440 It's not that our models are wrong, it's the dark 0:04:00.440 --> 0:04:01.480 matter is out there. 0:04:01.720 --> 0:04:02.840 So that's the term premium. 0:04:02.920 --> 0:04:05.640 And some people say, well, that's driven by fiscal If 0:04:05.640 --> 0:04:07.960 it was fiscal driving the term premium, I would. 0:04:07.800 --> 0:04:09.440 Have expected to see a week dollar. 0:04:09.840 --> 0:04:13.160 Usually when investors are worried about a country's fiscal position, 0:04:13.200 --> 0:04:16.120 their currency weekends our currency has been quite strong. It 0:04:16.160 --> 0:04:19.200 makes me wonder is it really fiscal driving the term premium. 0:04:19.320 --> 0:04:22.360 Another possibility is the path of policy over the next 0:04:22.400 --> 0:04:25.400 few years. That could explain both the stronger dollar and 0:04:25.440 --> 0:04:28.640 the weaker stock market going into the last meeting. Another 0:04:28.680 --> 0:04:30.719 one is that maybe the neutral rate is higher, or 0:04:30.720 --> 0:04:32.760 maybe it's a combination of all three of these. 0:04:32.800 --> 0:04:34.920 And so these are things that we're spending a. 0:04:34.839 --> 0:04:37.359 Lot of time trying to understand what the markets are doing. 0:04:37.520 --> 0:04:41.760 But just speaking for myself, I'm not comfortable saying which 0:04:41.800 --> 0:04:44.280 of those three it is, because which of those three 0:04:44.320 --> 0:04:46.400 it is determines what it means for policy. If it 0:04:46.440 --> 0:04:48.880 is the term premium, then it is doing some work 0:04:48.920 --> 0:04:51.240 for the FED. But if it's the neutral rate, or 0:04:51.279 --> 0:04:54.280 if it's the forward guidance of the path of policy, 0:04:54.520 --> 0:04:56.560 then we would actually have to follow through to preserve 0:04:56.600 --> 0:04:57.159 those rates. 0:04:57.320 --> 0:04:59.040 So how did this line end up in the statement? 0:04:59.200 --> 0:05:00.960 And I'll share it with that audience. The kind of 0:05:00.960 --> 0:05:03.520 financial and credit conditions for households and businesses are likely 0:05:03.560 --> 0:05:07.880 to wound economic activity, hiring, an inflation. Where's that coming from? 0:05:07.880 --> 0:05:09.039 Oh, that's been there for a long time. 0:05:09.080 --> 0:05:10.960 I mean, that's been in there since the Silicon Valley 0:05:11.000 --> 0:05:15.240 bank episode and the banking stresses leading to some tightening 0:05:15.240 --> 0:05:17.280 of credit conditions across the economy. So I think that 0:05:17.279 --> 0:05:20.440 that's right. I, for one, don't say that that means 0:05:20.600 --> 0:05:21.920 the recent moves in the old curve. 0:05:22.000 --> 0:05:25.080 How fluid is that assessment? Can that change from month 0:05:25.120 --> 0:05:27.920 to month, meeting to mating, because some of those comments 0:05:27.960 --> 0:05:30.920 around that has inspired quite a move in this market 0:05:31.120 --> 0:05:31.960 over the last week. 0:05:32.200 --> 0:05:34.760 Well, you know, one of the things about the statements, 0:05:34.960 --> 0:05:37.080 we always have to be careful about putting things into 0:05:37.120 --> 0:05:39.800 the statement because they tend to be long lived and 0:05:39.839 --> 0:05:41.479 it's hard to pull them out of the statement because 0:05:41.480 --> 0:05:43.400 as soon as you take something out, then all of 0:05:43.400 --> 0:05:45.560 a sudden, people say, oh my gosh, they're declaring that 0:05:45.600 --> 0:05:48.120 all the banking stresses are over, as an example, and so, 0:05:49.960 --> 0:05:51.400 you know, I would look at all of the range 0:05:51.400 --> 0:05:53.680 of commentary that you get, look at what the chairman says, 0:05:53.680 --> 0:05:56.160 look at his press conference to get a read of 0:05:56.160 --> 0:05:57.400 the thought of the committee. 0:05:57.640 --> 0:06:00.920 You said that people want certainty that you can't give 0:06:00.920 --> 0:06:03.240 it to them, and I understand that, but people don't 0:06:03.279 --> 0:06:06.159 just want certainty, they also want some sort of guiding philosophy. 0:06:06.680 --> 0:06:08.599 Do you think that Fed Shir Powell has outlined some 0:06:08.600 --> 0:06:11.520 sort of guiding philosophy and where the bar is to 0:06:11.600 --> 0:06:13.960 cut rates and where the bar is to raise them further. 0:06:14.440 --> 0:06:17.600 Well, I think he's articulated very clearly that we're committed 0:06:17.640 --> 0:06:19.039 to getting back to two percent inflation. 0:06:19.120 --> 0:06:19.240 Right. 0:06:19.240 --> 0:06:22.000 There's been some chatter amongst economists that maybe we should 0:06:22.040 --> 0:06:23.720 raise the inflation target. I think he's done a great 0:06:23.800 --> 0:06:25.760 job saying that is not on the table. We're not 0:06:25.800 --> 0:06:27.720 going to do that. We're going to get inflation back 0:06:27.760 --> 0:06:29.839 to two percent, and we're going to let the data 0:06:29.880 --> 0:06:32.400 guide us. We've moved very aggressively. We've made a lot 0:06:32.440 --> 0:06:36.039 of progress on inflation. We're not done yet, meaning inflation 0:06:36.160 --> 0:06:37.840 is not back to our target, and if we need 0:06:37.880 --> 0:06:38.760 to do more, we will. 0:06:38.960 --> 0:06:41.599 There seem to be a feeling in markets that the 0:06:41.839 --> 0:06:45.000 bar to cut rates has been lowered over the past 0:06:45.040 --> 0:06:48.120 week or two weeks. Suddenly not only are we reaching 0:06:48.120 --> 0:06:50.320 a pause and have we seen a peek in the 0:06:50.320 --> 0:06:53.400 FED funds rate, but that also the Fed will cut 0:06:54.000 --> 0:06:56.919 next year, maybe surgically. Neil Dada is talking about that 0:06:56.960 --> 0:06:58.960 and he's coming up next. Do you want to push 0:06:58.960 --> 0:07:01.000 back against that? Do you think that the bar to 0:07:01.040 --> 0:07:03.440 cut is still just as high as it was. 0:07:04.080 --> 0:07:06.720 I have no idea where market participants are getting that. 0:07:06.760 --> 0:07:09.520 There's no discussion amongst me and any of my colleagues 0:07:09.560 --> 0:07:12.160 about when we're going to start preparing to cut rates. 0:07:12.200 --> 0:07:13.080 The only thing that's been. 0:07:12.960 --> 0:07:15.800 Talked about at all is that at some point, when 0:07:15.840 --> 0:07:18.280 inflation is well on its way back down, if we 0:07:18.360 --> 0:07:20.280 didn't back off a little bit, then real rates would 0:07:20.280 --> 0:07:21.760 be getting tighter and tighter and tighter. 0:07:21.800 --> 0:07:23.400 And that's real, but that's math. 0:07:23.520 --> 0:07:26.640 But is there enough weakness currently in the market in 0:07:26.680 --> 0:07:29.480 the economy, I should say to give you that sense 0:07:29.600 --> 0:07:30.920 at this point, look at the. 0:07:30.960 --> 0:07:33.480 Last GDP print. I mean, does anybody look at that 0:07:33.520 --> 0:07:35.720 and think, oh, my gosh. The economy we for the 0:07:35.800 --> 0:07:38.840 last twelve months GDP has been very strong. The labor 0:07:38.880 --> 0:07:41.400 market continues to be quite robust. Yes, the unemployment rate 0:07:41.440 --> 0:07:43.440 is ticked up to three point nine percent, but we've 0:07:43.480 --> 0:07:46.440 also seen a huge surge of labor supply, which is 0:07:46.480 --> 0:07:49.520 really positive come online. So I'm looking at this, I'm 0:07:49.520 --> 0:07:52.440 seeing consumers that are strong. My air by the way, 0:07:52.440 --> 0:07:54.760 my airplane that I came here on was one hundred 0:07:54.760 --> 0:07:55.720 percent full yesterday. 0:07:55.720 --> 0:07:57.120 It's going to be one hundred percent full. 0:07:57.000 --> 0:07:59.160 Today, I'm not seeing a lot of evidence that the 0:07:59.200 --> 0:08:00.120 economy is weaken. 0:08:00.920 --> 0:08:03.480 Well, whether you go higher or not, you are on 0:08:03.520 --> 0:08:07.120 board for longer. And so you must have modeled out 0:08:07.440 --> 0:08:09.880 some idea of how long you would need to leave 0:08:10.000 --> 0:08:14.000 rates unchanged before you could get down to a level 0:08:14.120 --> 0:08:16.840 low enough that you could take your foot off the 0:08:16.920 --> 0:08:20.360 break a little bit. How long do you think you'll 0:08:20.400 --> 0:08:24.640 be at five point five into twenty twenty four. 0:08:24.720 --> 0:08:26.680 Well, I think it's going to depend if we continue 0:08:26.680 --> 0:08:29.360 to see inflation prints similar to the ones we've seen 0:08:29.400 --> 0:08:32.160 the last few months, you know, and we end up 0:08:32.160 --> 0:08:34.120 with a year of a year at two point five 0:08:34.200 --> 0:08:38.280 percent core inflation and it continues to trend down, that 0:08:38.960 --> 0:08:41.760 constellation would give me evidence to say, hey, we ought 0:08:41.800 --> 0:08:44.280 to look at should we start backing off just so 0:08:44.320 --> 0:08:46.720 the real policy isn't getting tighter and tighter and tighter, 0:08:46.840 --> 0:08:49.000 because we're clearly on our way back down to two percent. 0:08:49.080 --> 0:08:51.040 But again, I don't want to just point to one 0:08:51.120 --> 0:08:53.280 data series. We will be looking at the suite of 0:08:53.360 --> 0:08:54.679 data to try to get a read of where the 0:08:54.720 --> 0:08:55.600 economy is headed. 0:08:56.120 --> 0:08:59.760 Well, not just data. You talk to businesses in your district, 0:08:59.800 --> 0:09:01.880 all the time, What are they telling you now about 0:09:01.960 --> 0:09:06.680 their view of growth and hiring and pricing going forward. 0:09:07.080 --> 0:09:08.640 It's moderating. 0:09:08.720 --> 0:09:11.160 So the labor market is still tight in my district, 0:09:11.600 --> 0:09:14.320 people especially in the Dakotas, really have a hard time 0:09:14.360 --> 0:09:18.160 finding workers. But in Minnesota, it's still a tight labor market, 0:09:18.160 --> 0:09:20.000 but it's not as tight as it was six months ago. 0:09:20.080 --> 0:09:21.680 It's not as tight as it was a year ago. 0:09:21.760 --> 0:09:24.080 So that kind of maps to the national data that 0:09:24.080 --> 0:09:27.800 we're seeing of a gently cooling labor market but one 0:09:27.840 --> 0:09:31.440 that's still very very warm. Same thing with economic activity. 0:09:31.480 --> 0:09:34.560 Depending on the sector, they're saying, Hey, we feel pretty 0:09:34.600 --> 0:09:37.600 good about things. We're a little cautious about the future. Obviously, 0:09:37.600 --> 0:09:40.040 they watch the news, they read the news. There's a 0:09:40.040 --> 0:09:44.080 lot of economic anxiety that is reported on that people, 0:09:44.400 --> 0:09:45.440 you know, factor. 0:09:45.080 --> 0:09:47.160 That into their own thinking and their own business planning. 0:09:47.480 --> 0:09:51.320 So I think the outlooks are still optimistic, but it's 0:09:51.320 --> 0:09:52.160 cautious optimists. 0:09:52.160 --> 0:09:54.280 Well are they still raising prices or think they need to? 0:09:54.480 --> 0:09:57.520 So it's funny there Still they still buy and large 0:09:57.559 --> 0:10:00.679 have some pricing power more than they had before pandemic, 0:10:00.920 --> 0:10:03.560 but not as much pricing power as they had six 0:10:03.600 --> 0:10:04.440 months or a year ago. 0:10:04.600 --> 0:10:06.960 Can we finish on housic sure in the space of 0:10:07.000 --> 0:10:09.160 three years, we've had record low interest rates in the 0:10:09.240 --> 0:10:12.680 highest rates in several decades. Is this housing market broken? 0:10:13.440 --> 0:10:13.720 Well? 0:10:13.800 --> 0:10:17.080 I think since the pandemic, we have structurally underbuilt the 0:10:17.160 --> 0:10:20.000 number of units that we need to meet our growing population. 0:10:20.200 --> 0:10:21.400 And that's the factor. 0:10:21.400 --> 0:10:23.960 And that's really about regulation at the local level that 0:10:24.000 --> 0:10:26.800 are creating barriers to more supply coming in. The raid 0:10:26.920 --> 0:10:29.960 environment will settle out over time, but structurally we have 0:10:30.000 --> 0:10:33.040 to actually bring a lot more supply online to meet America. 0:10:32.880 --> 0:10:35.560 At the time, but it could be like twenty thirty years. 0:10:36.040 --> 0:10:37.679 I think this is the issue here. The legacy of 0:10:37.720 --> 0:10:40.520 this FMC could well be a generation of people look 0:10:40.600 --> 0:10:42.360 down to the housing market. Why do you say that 0:10:42.400 --> 0:10:44.679 there could be a generation of people with two three 0:10:44.720 --> 0:10:46.520 percent mortgages that never sound their home. 0:10:47.559 --> 0:10:49.520 Yeah, I don't know. People end up needing to move. 0:10:50.160 --> 0:10:51.520 It's funny when people. 0:10:51.320 --> 0:10:53.960 Don't tell their home because they're locked into a low mortgage. 0:10:54.880 --> 0:10:57.920 That's less supply, but that's also one less buyer. Most 0:10:57.960 --> 0:11:00.480 people who buy homes are leaving another home, and so 0:11:00.800 --> 0:11:04.240 that affects both the supply side and the and the demand. 0:11:03.920 --> 0:11:06.400 Side of That's why I set a generation look down 0:11:06.880 --> 0:11:11.120 because I'm renting and count by, so I'm not sounding anything, 0:11:11.320 --> 0:11:14.520 and that's the generation. I'm talking about that generation specifically, 0:11:14.720 --> 0:11:17.280 you concern that could be the legacy at the FORMC. 0:11:17.960 --> 0:11:18.120 Now. 0:11:18.120 --> 0:11:20.520 I think the legacy of this FMC is that we've 0:11:20.720 --> 0:11:23.560 dealt with the pandemic very aggressively. Then we were surprised 0:11:23.559 --> 0:11:26.240 by very high inflation, but then we move very aggressively 0:11:26.280 --> 0:11:27.600 to bring the inflation back down. 0:11:28.200 --> 0:11:30.719 I want to ask you about a story on the 0:11:30.800 --> 0:11:34.240 Bloomberg terminal today about all the financial CEOs from the 0:11:34.320 --> 0:11:38.440 US over in Hong Kong sounding very doer and down 0:11:38.559 --> 0:11:42.640 about the prospects for the economy. They suggest that things 0:11:42.679 --> 0:11:45.520 are pretty fragile right now, both in the economy and 0:11:45.559 --> 0:11:49.000 the markets, given everything that's going on around the world 0:11:49.520 --> 0:11:51.760 and in the shadow banking system as well as theirs. 0:11:52.080 --> 0:11:53.240 How worried are you. 0:11:53.720 --> 0:11:56.679 Well, I mean, we're always worried about things that can 0:11:56.720 --> 0:11:58.800 happen all around the world. We've got teams of people 0:11:58.840 --> 0:12:01.680 looking at different scenarios around the world. Ultimately, we have 0:12:01.720 --> 0:12:04.880 to focus on what we can control, you know, geopolitics. 0:12:05.800 --> 0:12:07.640 When Hamas attacked Israel. 0:12:07.720 --> 0:12:09.320 The first thing we thought of is what's it going 0:12:09.360 --> 0:12:10.760 to do to the oil market, what's it going to 0:12:10.800 --> 0:12:13.880 do to commodity prices. Remarkably, the response so far has 0:12:13.880 --> 0:12:17.120 been muted. But that's something we're obviously paying close attention to. 0:12:17.200 --> 0:12:20.360 But the broader geopolitical issues are just so far outside 0:12:20.360 --> 0:12:22.560 of our bounds of forecasting. You know, we have a 0:12:22.559 --> 0:12:26.040 hard enough time forecasting inflation trying to forecast where geopolitics 0:12:26.160 --> 0:12:26.480 is going. 0:12:26.880 --> 0:12:28.560 We just have to focus what we can control. 0:12:28.640 --> 0:12:31.160 Oil price is dropped. I mean, that's the crazy thing 0:12:31.200 --> 0:12:31.840 about the last month. 0:12:31.880 --> 0:12:33.480 Physically, it doesn't make any sense. And this is the 0:12:33.520 --> 0:12:35.960 reason why trying to get it right is just impossible. 0:12:36.000 --> 0:12:37.360 And then trying to get the idea of a FED 0:12:37.360 --> 0:12:39.120 put and whether they're going to respond. I'm just saying 0:12:39.160 --> 0:12:40.600 people are talking about that now, so. 0:12:40.800 --> 0:12:42.480 Yeah, talking about it in the last few hours. Yes, 0:12:42.520 --> 0:12:44.840 it's on this program. No, always a pleasure, Thank you, 0:12:44.840 --> 0:12:48.360 Sirving Neil, Cash County, the Minneapolis FED price Alongstide Plympecks, 0:12:48.559 --> 0:13:01.000 Mi M chab No Tatsa, the head of US economic 0:13:01.040 --> 0:13:03.480 research at Renaissance Macron. Nil, good morning to you. 0:13:03.920 --> 0:13:04.400 Good morning. 0:13:04.520 --> 0:13:06.760 Let's go straight there because my IB was lighting up 0:13:06.800 --> 0:13:10.040 with messages from you. We're not thinking about tapering. Two 0:13:10.040 --> 0:13:12.720 months later, we're a long way from neutral cutting a 0:13:12.760 --> 0:13:15.600 month later. What do you think is going on within 0:13:15.640 --> 0:13:17.240 the FBC. Where do you think this is going? 0:13:18.800 --> 0:13:18.959 Well? 0:13:19.040 --> 0:13:23.200 I think I agree that it doesn't pay much to 0:13:23.240 --> 0:13:25.520 forecasts right now. It's important just to look at the 0:13:25.600 --> 0:13:28.240 data as it's coming to you, and so I do 0:13:28.280 --> 0:13:31.120 sympathize with that. But at the end of the day, 0:13:31.160 --> 0:13:34.520 I mean, the unemployment rate is up above the fed's 0:13:35.400 --> 0:13:39.120 forecast for this year, and that's the first time that's 0:13:39.160 --> 0:13:43.080 happened since March of twenty twenty two. Now you know 0:13:43.120 --> 0:13:45.079 we're in. When you're in the thick of it, it's 0:13:45.080 --> 0:13:48.319 hard to know whether that represents the start of something 0:13:49.040 --> 0:13:52.720 much more onerous or whether it's just the normalization of 0:13:53.080 --> 0:13:56.920 the labor market. But I think for the FED, I 0:13:56.960 --> 0:14:00.240 think the doves on the FMC, and remember you know 0:14:00.320 --> 0:14:04.360 President Kashkari, he tends to lean on the hawkish side 0:14:04.480 --> 0:14:07.960 of the consensus at the FED. I think for the doves, 0:14:08.480 --> 0:14:12.920 they have all the ammunition they need to basically put 0:14:12.960 --> 0:14:15.760 the hawks in a casket. Okay, I mean, I think 0:14:15.800 --> 0:14:17.240 that's the way I would think about it. I mean, 0:14:17.280 --> 0:14:20.240 you can point to the pickup in productivity and what 0:14:20.240 --> 0:14:22.920 that's done to unit labor costs. You can point to 0:14:22.960 --> 0:14:26.240 what Powell has said, right, I mean, when when central 0:14:26.280 --> 0:14:32.400 bankers use proceed carefully risk management, that's code for doing nothing. 0:14:32.920 --> 0:14:37.120 And you know, finally, I mean the employment report was 0:14:37.160 --> 0:14:43.160 probably understating payroll growth. That's my view. I mean, there's 0:14:43.160 --> 0:14:44.840 a lot of strike activity and so far, but at 0:14:44.840 --> 0:14:48.600 the end of the day, average hourly earnings are running 0:14:49.040 --> 0:14:51.560 just over three percent at an annual rate over the 0:14:51.640 --> 0:14:54.640 last several months. So I don't think the hawks on 0:14:54.680 --> 0:14:57.280 the committee frankly, can use the labor markets as a 0:14:57.360 --> 0:15:01.920 rationale to be hawkish anymore. So that is over and 0:15:02.000 --> 0:15:04.600 so I think the doves can basically say that the 0:15:04.680 --> 0:15:07.200 labor markets have been rebalanced. And if they can say 0:15:07.240 --> 0:15:10.880 that just implicitly, it means that the door is a 0:15:10.920 --> 0:15:14.920 little bit cracked open for a cut. And you know, 0:15:14.960 --> 0:15:18.040 the point I'm making to you is, you know J Powell, 0:15:18.080 --> 0:15:21.120 it wouldn't be the first time he basically, you know, 0:15:21.200 --> 0:15:23.320 flipped on a dime. I mean, we're a long way 0:15:23.320 --> 0:15:25.720 from neutral. I mean a few months later he's cutting rates, 0:15:25.720 --> 0:15:29.280 We're not even thinking about thinking about tapering or hiking, 0:15:29.320 --> 0:15:32.160 and then we're hiking and tapering basically in the same month. 0:15:32.320 --> 0:15:34.640 So you know, to me, the fact that they're not 0:15:34.680 --> 0:15:38.680 talking about it is irrelevant. It's also in their sep 0:15:38.960 --> 0:15:40.560 for next year. The question is whether. 0:15:40.320 --> 0:15:43.320 These surgical cuts, what are surgical cuts? 0:15:45.640 --> 0:15:50.160 Basically a few cuts to stabilize the economy. I mean, 0:15:50.200 --> 0:15:53.320 I think the issue is is the extent to which 0:15:56.040 --> 0:16:01.080 cutting quickly translates into rapid economic stable So I mean, 0:16:01.160 --> 0:16:04.520 for as an example, I mean, let's see what happens 0:16:04.520 --> 0:16:06.960 with mortgage purchase demand. Over the next couple of weeks. 0:16:07.000 --> 0:16:10.000 We've seen mortgage rates basically come down to what like 0:16:10.080 --> 0:16:10.800 seven percent. 0:16:10.960 --> 0:16:12.840 Okay, I'm trying to wrap my head around this. 0:16:12.880 --> 0:16:15.640 Six months ago, you were talking about way more economic 0:16:15.680 --> 0:16:18.480 strength in the US economy than people had expected. Now 0:16:18.520 --> 0:16:21.560 you're talking about strategic or surgical cuts by the Federal 0:16:21.560 --> 0:16:24.280 Reserve to stabilize the economy. Are you saying that they 0:16:24.280 --> 0:16:26.120 are warranted because the economy. 0:16:25.800 --> 0:16:26.960 No, I don't think that they are. 0:16:27.760 --> 0:16:30.880 Part of the tention, Lisa, is that my job isn't 0:16:30.960 --> 0:16:33.400 to tell people what I think the Fed should do. 0:16:33.680 --> 0:16:35.800 My job is to try to get into their head 0:16:35.840 --> 0:16:38.160 and figure out what they will do. I mean, if 0:16:38.200 --> 0:16:40.240 I was there, would I be I would probably be 0:16:40.280 --> 0:16:43.440 more hawkish than the consensus on the FMC. But I'm 0:16:43.480 --> 0:16:43.840 not there. 0:16:44.120 --> 0:16:46.920 Well, but does this mean that you think the consequence 0:16:46.960 --> 0:16:51.160 of surgical cuts to fortify the economy will be prolonged inflation? 0:16:51.440 --> 0:16:51.720 Yes? 0:16:52.040 --> 0:16:53.200 Okay, So then how do you. 0:16:53.120 --> 0:16:55.360 Sort of arrange around that sort of what is the 0:16:55.400 --> 0:16:58.760 inflation rate? How do you sort of lean into the 0:16:59.560 --> 0:17:01.680 rally that we've seen in the bond market and say, 0:17:01.720 --> 0:17:03.680 wait a second, you guys have gotten ahead of your 0:17:03.720 --> 0:17:06.439 skis based on the game theory that the FED is 0:17:06.440 --> 0:17:08.480 playing and the way that they're likely to do Searga. 0:17:08.880 --> 0:17:10.960 I don't know that the bond market's getting ahead of itself. 0:17:11.000 --> 0:17:13.000 I think the bond market is sniffing out that the 0:17:13.200 --> 0:17:15.520 distribution of risks have changed. I don't know what the 0:17:15.560 --> 0:17:18.040 FED may do next. I mean, that's what I think 0:17:18.080 --> 0:17:20.920 the bond market is doing, and I think bond market 0:17:20.960 --> 0:17:23.399 investors are right to do that, because, as I say, 0:17:23.960 --> 0:17:26.479 you know, you think about it basically three prongs, right, 0:17:26.520 --> 0:17:29.840 the labor market, inflation, and then financial conditions. If the 0:17:29.880 --> 0:17:31.600 FED can look at the labor market and say the 0:17:31.640 --> 0:17:36.280 labor markets are rebalanced. Okay, that's check done. You can't 0:17:36.400 --> 0:17:39.000 use that anymore as a reason to be hawkish. So, 0:17:39.640 --> 0:17:42.560 if anything, if the unemployment rate's not going up a 0:17:42.600 --> 0:17:45.320 little bit, the distribution of risks are that they would 0:17:45.359 --> 0:17:47.520 cut because the labor markets. And right, if the labor 0:17:47.560 --> 0:17:50.879 markets are thawing, that's going to give them increased confidence 0:17:50.920 --> 0:17:56.040 that inflation will thaw and so and then finally, if 0:17:56.040 --> 0:17:59.680 that's the case, they're not going to be particularly concerned 0:17:59.720 --> 0:18:02.560 about the easing and financial conditions that you've seen since 0:18:02.600 --> 0:18:04.320 the last in the last week. 0:18:04.240 --> 0:18:06.240 Which is what we've been talking about through this morning, 0:18:06.240 --> 0:18:08.600 whether they are going to tolerate the easing we've seen 0:18:08.600 --> 0:18:10.239 over the last week. And it feels like perhaps they 0:18:10.280 --> 0:18:12.879 will help me work with me here. It feels like 0:18:12.920 --> 0:18:15.359 to me that you believe the world might have changed 0:18:15.359 --> 0:18:18.959 post pandemic versus pre pandemic. Do you sense that they 0:18:19.000 --> 0:18:21.840 still believe were still in the same old world pre pandemic? 0:18:21.920 --> 0:18:22.200 I do. 0:18:22.240 --> 0:18:24.040 I mean, I mean, if you listen to someone like 0:18:24.080 --> 0:18:27.639 New York Fed President John Williams, even Chair Powell, I mean, 0:18:27.640 --> 0:18:30.160 there's not much there's quite a bit of reluctance to 0:18:30.200 --> 0:18:32.080 just say that, you know, neutral rates are higher. 0:18:32.440 --> 0:18:33.880 I mean, why do you think that, is, Neil? 0:18:35.640 --> 0:18:37.400 You know, I don't know. I mean I think that 0:18:38.040 --> 0:18:41.399 maybe in their minds things haven't changed. I mean all, 0:18:41.560 --> 0:18:43.920 I mean, you saw Powell talk about this at at 0:18:43.920 --> 0:18:45.879 the press conference last week. I mean, oh, well, if 0:18:45.880 --> 0:18:47.560 we get to pick up in potential growth, it's a 0:18:47.560 --> 0:18:49.840 temporary pick up and potential growth, then we'll go back down. 0:18:49.840 --> 0:18:53.680 So if you don't think that the world has fundamentally changed, 0:18:54.080 --> 0:18:57.159 then you're going to be more sort of cognizant of 0:18:57.200 --> 0:18:59.520 overtightening risk. Right Like, So if the unemployment rate is 0:18:59.560 --> 0:19:01.320 starting to go up, you may have thought, well, maybe 0:19:01.320 --> 0:19:03.480 you overdid it, so you might be more willing to 0:19:03.520 --> 0:19:04.639 cut sooner as a result. 0:19:04.800 --> 0:19:06.879 So are you more bullish on the US economy but 0:19:07.000 --> 0:19:10.440 also expect inflation to remain higher and the FED When 0:19:10.440 --> 0:19:12.840 people look back, this will be considered a policy air 0:19:12.920 --> 0:19:14.040 that they weren't hawkish enough. 0:19:15.280 --> 0:19:17.720 Yeah, I mean I think that that would be Yeah, 0:19:17.720 --> 0:19:19.280 I mean that would be something I could be saying 0:19:19.280 --> 0:19:20.160 in twenty twenty five. 0:19:20.280 --> 0:19:22.720 What would you point to if you had this conversation 0:19:22.800 --> 0:19:24.680 right now? And I would love to get you around 0:19:24.680 --> 0:19:26.119 the table next time I have a FED official to 0:19:26.119 --> 0:19:27.320 work through somebody's issues. 0:19:27.359 --> 0:19:29.320 But what would you it sounds dangerous as. 0:19:29.240 --> 0:19:31.639 The number one thing that indicates to you that the 0:19:31.680 --> 0:19:36.560 world has changed, versus pandemic that ultimately they don't believe it. 0:19:36.600 --> 0:19:39.080 What would you point to, Well. 0:19:38.920 --> 0:19:40.520 I mean the first is just look at let's look 0:19:40.560 --> 0:19:43.080 at the obvious. I mean, you've done a lot, and 0:19:43.200 --> 0:19:46.040 yet the economy is still kind of hanging in there. 0:19:46.080 --> 0:19:48.760 I would say that things like household formation rates are 0:19:48.840 --> 0:19:52.120 running twice the rate they did after the Financial crisis. 0:19:52.160 --> 0:19:54.840 I mean, to me, I think it's much easier to 0:19:54.840 --> 0:19:57.520 tell the story about why the post financial crisis period 0:19:57.640 --> 0:20:00.680 was actually the anomaly than not. So I think we're 0:20:00.680 --> 0:20:03.800 actually going back to the old normal more so than 0:20:03.800 --> 0:20:07.760 anything else. Obviously, you think about all those people during 0:20:07.760 --> 0:20:10.400 the financial crisis period or the years after that, we're 0:20:10.440 --> 0:20:12.440 saving up for retirement. A lot of them have now 0:20:12.640 --> 0:20:16.000 since retired and they're now dissaving, which is you know, 0:20:16.080 --> 0:20:20.040 implies higher neutral rates. You think about income inequality, it 0:20:20.080 --> 0:20:21.960 was something that we were talking about all throughout the 0:20:22.000 --> 0:20:24.639 twenty tens. Well, it's coming down now. People at the 0:20:24.640 --> 0:20:27.680 lower end of the wage spectrum. We're seeing more rapid 0:20:27.720 --> 0:20:30.040 growth in their wages. You see more increased sort of 0:20:30.200 --> 0:20:33.639 union activity and unions getting big wins for blue collar workers. 0:20:33.680 --> 0:20:35.240 I mean, these are not things. I mean, and those 0:20:35.560 --> 0:20:38.159 folks have a much higher propensity to spend. And so 0:20:39.160 --> 0:20:42.320 I think it's it's not right in my view to 0:20:42.359 --> 0:20:44.760 say that things haven't changed. But if that's what the 0:20:44.760 --> 0:20:47.919 FED believes, then you have to be recognizing what that 0:20:47.960 --> 0:20:50.159 implies for what they might do later. And so I 0:20:50.200 --> 0:20:54.680 think just because they're not talking about cuts now does 0:20:54.720 --> 0:20:57.600 not mean they won't be talking about cuts in three 0:20:57.840 --> 0:21:01.480 six months. That should be in the realm of possibility, 0:21:01.520 --> 0:21:03.399 and I think the market's Frankly, I'm not willing to 0:21:03.400 --> 0:21:04.160 fight the move yet. 0:21:04.200 --> 0:21:07.840 I mean, okay, no a clinic as always. You know 0:21:07.840 --> 0:21:09.280 you're one of my favors. I think everyone knows that. 0:21:09.320 --> 0:21:16.000 No data, every nice loose Macro, No, thank you joining 0:21:16.000 --> 0:21:20.040 guess now. Katy Kaminski, chief research strategist over Alpha Simplex. Katie, 0:21:20.040 --> 0:21:22.359 it's the number one question for us. Are you still 0:21:22.400 --> 0:21:23.280 short treasuries? 0:21:24.240 --> 0:21:25.120 Yes? 0:21:25.320 --> 0:21:25.560 Why? 0:21:26.600 --> 0:21:29.600 Well, this is because for trend falling, it's not just 0:21:29.640 --> 0:21:32.800 about a couple of days, It's really about persistent trends 0:21:32.800 --> 0:21:34.960 in the market, and I just want to point out, 0:21:35.040 --> 0:21:38.280 and this is something interesting, trend falling signals have been 0:21:38.359 --> 0:21:42.160 net short for nine quarters. This is the first time 0:21:42.440 --> 0:21:44.919 in many decades that this has been the case. 0:21:45.520 --> 0:21:47.120 And so the reason I'm. 0:21:46.920 --> 0:21:50.120 Pausing right now is because we've been saying short, short, 0:21:50.160 --> 0:21:53.240 short all year, and for the first time, it's starting 0:21:53.280 --> 0:21:56.000 to feel like we already got that short come through. 0:21:56.720 --> 0:21:59.680 What's next? What does the market do now? 0:21:59.720 --> 0:22:02.679 Buy are coming in because yields are at interesting levels. 0:22:02.720 --> 0:22:06.200 They're probably thinking, maybe we've finally hit that point. 0:22:06.440 --> 0:22:09.280 Do you think something changed fundamentally to lead to that 0:22:09.359 --> 0:22:10.359 in the last few weeks. 0:22:11.960 --> 0:22:13.840 I do, And then I think that the data has 0:22:13.880 --> 0:22:17.000 come out to support the narrative for investors. But I 0:22:17.040 --> 0:22:20.119 also think a narrative that has made sense to me 0:22:20.400 --> 0:22:23.560 is that investors have woken up to the idea that 0:22:24.080 --> 0:22:27.640 five percent yields at some point there's a buying point 0:22:27.880 --> 0:22:30.080 where you think, well, there's a chance this could actually 0:22:30.160 --> 0:22:33.040 go down. And now you start to see this equilibrium 0:22:33.080 --> 0:22:36.480 occur where you're seeing the disinverted curve, which is something 0:22:36.480 --> 0:22:38.360 we've been looking for since the beginning. 0:22:38.080 --> 0:22:38.520 Of the year. 0:22:39.080 --> 0:22:41.800 So Katie just to put a bow on this, are 0:22:41.840 --> 0:22:46.360 you now not short treasuries and actually starting to see value, 0:22:46.440 --> 0:22:48.720 particularly if yields get up to that five percent level 0:22:48.720 --> 0:22:49.280 in the tenure. 0:22:50.480 --> 0:22:53.720 So we're still short in terms of the overall frequency 0:22:53.760 --> 0:22:56.720 that we see signals, but we are seeing consolidation in 0:22:56.760 --> 0:23:00.560 those signals, so there's a reduction in that particular conviction. 0:23:01.200 --> 0:23:03.600 But what I will say is that I'm seeing more and. 0:23:03.600 --> 0:23:07.600 More positive signals on higher frequency, and so I think 0:23:07.680 --> 0:23:09.040 on the shorter term you're going to. 0:23:09.000 --> 0:23:12.879 See more and more potential buying for treasuries. 0:23:13.640 --> 0:23:16.960 But I do want to remind everyone inflation is still 0:23:17.000 --> 0:23:20.240 an issue. Rates could be higher for longer, so there's 0:23:20.280 --> 0:23:21.960 still really a good chance that we're going to see 0:23:21.960 --> 0:23:25.080 a lot of volatility instead of a new trend per 0:23:25.160 --> 0:23:26.359 se that starts to emerge. 0:23:26.440 --> 0:23:30.919 Yet this raises this question of which particular data points 0:23:30.960 --> 0:23:33.520 are going to be the real action drivers, like what 0:23:33.560 --> 0:23:35.359 we saw over the past ten days. Is it going 0:23:35.400 --> 0:23:38.399 to be basically every inflation read that we get, or 0:23:38.440 --> 0:23:40.840 do you really buy into this idea that it's treasury 0:23:40.920 --> 0:23:43.320 supply that's been dictating a lot of the volumes and 0:23:43.320 --> 0:23:45.280 a lot of the angst that we felt over the 0:23:45.320 --> 0:23:45.880 past month. 0:23:47.359 --> 0:23:49.720 It's really interesting that you bring this up, Lisa, because 0:23:49.720 --> 0:23:51.720 we've been talking about the supply issue. 0:23:51.760 --> 0:23:54.159 I mean, how often do people actually talk about supply. 0:23:54.760 --> 0:23:57.239 They're only talking about it because I think people are 0:23:57.280 --> 0:24:00.320 trying to understand the equilibrium of where people sit and 0:24:00.359 --> 0:24:02.919 what yield should cost, I mean, what should be the 0:24:03.040 --> 0:24:03.919 right yield. 0:24:04.040 --> 0:24:05.159 And I think from our. 0:24:05.160 --> 0:24:07.840 Side on the technical side, what we're looking for is 0:24:07.880 --> 0:24:11.679 potential breakouts so that we're seeing a steeper curve. 0:24:11.440 --> 0:24:12.320 At some point. 0:24:12.880 --> 0:24:15.560 Our view is it's going to depend on really what 0:24:15.640 --> 0:24:18.639 happens with the economic data of whether we end up 0:24:18.640 --> 0:24:21.960 with tighter conditions or if we actually see something very 0:24:22.000 --> 0:24:24.720 extreme where we actually saw higher yields. 0:24:24.720 --> 0:24:28.480 Again, that to me seems very unlikely right now, but I. 0:24:28.440 --> 0:24:31.520 Think it's really a point to start watching every data 0:24:31.560 --> 0:24:34.399 point to see which direction the yield market is going 0:24:34.440 --> 0:24:36.440 to go or which direction the yields go, because it's 0:24:36.480 --> 0:24:37.879 definitely an inflection point than. 0:24:37.760 --> 0:24:39.679 Katie, were going to catch up with Nil Kashgari in 0:24:39.680 --> 0:24:41.480 about twenty minutes time. I think we're all looking forward 0:24:41.520 --> 0:24:44.040 to this conversation. There is this second paragraph in the 0:24:44.040 --> 0:24:46.080 statement that they put out last week on kind of 0:24:46.080 --> 0:24:49.160 financial conditions it reaches follows. I'm sure you're familiar with it. 0:24:49.240 --> 0:24:51.840 Time of financial and credit conditions for households and businesses 0:24:51.840 --> 0:24:54.840 are likely to weigh on economic activity, hiring, and inflation. 0:24:55.200 --> 0:24:58.080 Could you still write that same sentence today? After the 0:24:58.119 --> 0:25:00.480 move we've seen in the last week, what's that on 0:25:00.760 --> 0:25:02.560 the movement we've seen in the last month, for the last 0:25:02.600 --> 0:25:03.840 six months, what do you think it is? 0:25:05.119 --> 0:25:05.280 Well? 0:25:05.359 --> 0:25:05.840 I think the. 0:25:05.880 --> 0:25:08.840 Challenge is that these numbers come in at different frequencies. 0:25:08.960 --> 0:25:10.840 Last week we had a massive. 0:25:10.480 --> 0:25:14.040 Buying but this could also be somewhat of a relief 0:25:14.119 --> 0:25:18.080 rally given how much movement we've seen downward, especially in equities. 0:25:18.520 --> 0:25:20.600 And let's just be honest, like I said, at a 0:25:20.720 --> 0:25:24.600 five percent yield started to get exciting, people said, oh 0:25:24.720 --> 0:25:25.920 I better get in there. 0:25:26.200 --> 0:25:28.680 So I think there's really still This could just be. 0:25:28.640 --> 0:25:32.880 The tip of the beginning of understanding how serious financial. 0:25:32.400 --> 0:25:34.960 Conditions have changed, and. 0:25:34.920 --> 0:25:37.760 If it's enough to actually warrant a point where we 0:25:37.840 --> 0:25:41.800 might actually have cuts at some point earlier than some 0:25:41.920 --> 0:25:45.159 would would have thought, like myself, who's been very pessimistic 0:25:45.200 --> 0:25:45.840 about rate cuts. 0:25:45.880 --> 0:25:47.359 Hey, Ketty, do you have a decent understanding of the 0:25:47.359 --> 0:25:48.840 conditions that would lead to those cuts. 0:25:50.200 --> 0:25:52.280 Well, usually in terms of this, I think we'd have 0:25:52.320 --> 0:25:56.920 to see pretty severe deterioration in financial conditions to see 0:25:57.000 --> 0:25:59.720 rate cuts, given the mandate of the FED and the 0:25:59.760 --> 0:26:02.760 fact that the other factors that are really focused on 0:26:03.560 --> 0:26:06.399 have not come down to their target level. So the 0:26:06.440 --> 0:26:09.159 fact that inflation is sticky, and the fact that we 0:26:09.200 --> 0:26:11.960 have a strong workforce and that we have all of 0:26:12.000 --> 0:26:14.040 these conditions putting us in a good place. 0:26:14.160 --> 0:26:16.240 They have been pretty clear that they're. 0:26:16.080 --> 0:26:18.800 Going to keep us higher for longer until we can 0:26:18.840 --> 0:26:21.720 sort that out. On the other hand, if we had 0:26:21.720 --> 0:26:25.840 some sort of very severe draw down or deterioration and 0:26:25.960 --> 0:26:28.560 credit that was clear, I. 0:26:28.480 --> 0:26:29.800 Think that they would have to act. 0:26:29.840 --> 0:26:32.080 So that to me would be the situation where we 0:26:32.080 --> 0:26:34.720 would see those rate cuts. Is if you saw something 0:26:34.760 --> 0:26:37.920 in the credits markets or something in terms of consumers 0:26:37.960 --> 0:26:40.320 really struggling that would cause them to actually react. 0:26:40.480 --> 0:26:42.639 So the FED put still exists, just at a much 0:26:42.720 --> 0:26:45.240 higher pain point, I would. 0:26:45.040 --> 0:26:46.240 Say probably yes. 0:26:46.440 --> 0:26:49.400 I mean, I think it always exists somewhere, but it's 0:26:49.440 --> 0:26:51.840 definitely moved a lot compared to what we liked in 0:26:52.000 --> 0:26:53.119 twenty nineteen and before. 0:26:53.280 --> 0:26:55.760 Kelly Let's finish what we started. Given the uncertainty you 0:26:55.840 --> 0:26:59.040 now have about your position, why maintain the shot? That's 0:26:59.080 --> 0:27:01.120 what I'm going to walk away from this conversation scratching 0:27:01.119 --> 0:27:03.359 my head about why maintain the short when it can 0:27:03.400 --> 0:27:06.679 be as expensive as it was on weeks last week. 0:27:08.080 --> 0:27:09.919 So this is the point of trend falling. 0:27:09.960 --> 0:27:13.960 Systematic trading is about not double sort of using your 0:27:14.000 --> 0:27:16.919 emotion in the moment. And I think what works with 0:27:17.000 --> 0:27:20.280 trend falling is following the data, and we just need 0:27:20.320 --> 0:27:23.880 more data to know the answer, and over longer periods 0:27:23.880 --> 0:27:26.800 of time, it turns out the market is actually quite 0:27:26.800 --> 0:27:29.560 good at giving us indications of where things are moving, 0:27:30.080 --> 0:27:34.200 and it's particularly short term movements where they disagree. Where 0:27:34.480 --> 0:27:37.960 you want to lean on your own gut, but you shouldn't, 0:27:38.240 --> 0:27:41.200 because that's what systematic trading is really about. It's about 0:27:41.240 --> 0:27:44.320 measuring and falling the markets and allowing the markets to 0:27:44.359 --> 0:27:47.400 tell you what the market where we're going, as opposed 0:27:47.440 --> 0:27:49.200 to sort of my own personal view. 0:27:49.320 --> 0:27:51.960 Unfortunately, Katie, thanks for the clarity on that point. I 0:27:52.000 --> 0:28:05.200 appreciate it. Katie commenced you that of aphasimplex, two major 0:28:05.240 --> 0:28:08.680 political parties remain unpopular in the United States, fifty six 0:28:08.760 --> 0:28:12.720 percent of Americans viewing the Republican Party unfavorably, fifty eight 0:28:12.760 --> 0:28:16.680 percent saying the same thing of the Democratic Party. Mohammed Junis, 0:28:16.720 --> 0:28:19.200 the editor in chief at Gallop, joined us now, Muhammad, 0:28:19.280 --> 0:28:21.960 help us out. I've been rinting through this piece. Neither 0:28:22.000 --> 0:28:24.560 party is well liked. You guys have pointed out that 0:28:24.800 --> 0:28:26.760 the GP has an edge on certain issues. Can we 0:28:26.800 --> 0:28:30.760 just talk about the likability of both parties right now, Muhammed? 0:28:30.760 --> 0:28:32.080 How unusual is this? 0:28:33.640 --> 0:28:37.400 Unfortunately, you know at harkens to your Amtrak conversation earlier. 0:28:38.120 --> 0:28:39.880 We're at a state right now in the United States 0:28:39.920 --> 0:28:41.880 when both parties are really not doing that. 0:28:41.800 --> 0:28:43.240 Great in terms of their favorability. 0:28:43.240 --> 0:28:47.120 It's nothing new, Unfortunately, It's been quite a while since 0:28:47.160 --> 0:28:51.080 Americans had a favorable view of either party in the majority. 0:28:51.320 --> 0:28:53.440 We're also at a time where there's a record high 0:28:53.480 --> 0:28:56.520 of Americans saying that they'd like to see a third 0:28:56.560 --> 0:28:58.600 party in American politics. 0:28:58.600 --> 0:29:00.600 Of course, easy to say I want more. 0:29:00.640 --> 0:29:03.920 It doesn't necessarily mean that that party would exist or 0:29:03.960 --> 0:29:07.240 actually be powerful. But we're also at a time, John 0:29:07.280 --> 0:29:10.320 and Lisa where there's a high of people that identify 0:29:10.440 --> 0:29:13.000 as independents. 0:29:12.080 --> 0:29:14.120 And that is important not. 0:29:14.000 --> 0:29:17.080 Only in the current moment, but also in our analysis 0:29:17.120 --> 0:29:20.320 over generations. What we find is that younger Americans today 0:29:20.360 --> 0:29:25.479 are actually sticking with that independent id much further along 0:29:25.600 --> 0:29:30.560 their lifespan than previous generations young folks. So, certainly America 0:29:30.640 --> 0:29:33.640 is highly dissatisfied with national government. 0:29:33.680 --> 0:29:34.760 We've talked about that a lot. 0:29:35.160 --> 0:29:38.760 They're really, in some ways most dissatisfied with both parties. 0:29:39.720 --> 0:29:41.880 That being said, today is a local election. 0:29:42.040 --> 0:29:44.200 It's really, I know, it's so tempting for us to 0:29:44.240 --> 0:29:47.120 jump to twenty twenty four. Americans line up today to 0:29:47.240 --> 0:29:50.120 vote on local issues, and there's a huge difference in 0:29:50.160 --> 0:29:53.840 the way people perceive local government versus the national government 0:29:53.840 --> 0:29:54.840 here in the United States. 0:29:55.040 --> 0:29:56.800 SOMEHOWMA just explain that a little bit more. What is 0:29:56.840 --> 0:29:58.400 the big difference between the two currently? 0:29:59.320 --> 0:30:00.760 Basically and coetence. 0:30:00.880 --> 0:30:04.800 Americans have very low trust and competence in the national 0:30:04.840 --> 0:30:09.920 government and national institutions. Perceptions of corruption are astronomically high. 0:30:10.080 --> 0:30:12.600 When you come to local government, though, people have a 0:30:12.680 --> 0:30:16.320 much more positive perspective on local government, whether it's the efficacy, 0:30:16.560 --> 0:30:19.760 transparency of local government and corruption, but also how they 0:30:19.840 --> 0:30:24.200 feel about their local governing officials. So Americans light up 0:30:24.200 --> 0:30:26.160 at the ballot box today, they're hearing a lot of 0:30:26.200 --> 0:30:28.760 echo chamber on the national what this means, we're twenty 0:30:28.800 --> 0:30:31.600 twenty four, but really what they're going to be focusing 0:30:31.640 --> 0:30:35.560 on our local issues, and the national conversation. 0:30:35.080 --> 0:30:36.840 Certainly will inform that. 0:30:36.840 --> 0:30:41.240 That's why things like abortion, things that implicate attitudes about 0:30:41.240 --> 0:30:44.400 big and small government, for example, they're on the ballot box. 0:30:44.960 --> 0:30:47.600 They will be discussed. They're going to be they have 0:30:47.720 --> 0:30:49.680 been a focus of the campaign. We know in Ohio 0:30:49.760 --> 0:30:53.080 there's a really big push on abortion. It'll be a 0:30:53.120 --> 0:30:55.840 really important weather vane in terms of whether or not 0:30:55.960 --> 0:30:59.200 Roe v. Wades overturning has sort of faded, The impact 0:30:59.280 --> 0:31:00.360 of that has faded or. 0:31:00.720 --> 0:31:01.600 Is still with us. 0:31:01.880 --> 0:31:04.000 I have to say, as you're talking about local elections 0:31:04.000 --> 0:31:07.080 and how different they are than the nationals, I think, well, 0:31:07.120 --> 0:31:10.480 they're probably not on TikTok, the local elections, they're probably 0:31:10.480 --> 0:31:13.440 not on Facebook. How much is it the social media 0:31:13.560 --> 0:31:17.040 echo chamber that polarizes people and gives them a worse 0:31:17.080 --> 0:31:20.480 and expected view of national politics in a way that 0:31:20.600 --> 0:31:23.160 local politics might be slightly immune. 0:31:23.760 --> 0:31:24.720 I think that's a great point. 0:31:24.760 --> 0:31:28.400 Lisa it's much easier to sort of check the bs 0:31:28.440 --> 0:31:31.000 if you will. On a topic or an issue. When 0:31:31.040 --> 0:31:33.600 it's about where you live, you know that reality. You 0:31:33.680 --> 0:31:38.080 have direct information from people you know where you live. 0:31:38.680 --> 0:31:40.800 You can talk to your neighbors, you can talk to 0:31:40.840 --> 0:31:44.720 your local religious leaders or community leaders. With national politics, 0:31:44.760 --> 0:31:47.600 it's a very different thing. It really tends to have 0:31:47.680 --> 0:31:50.720 now become sort of a war of the propaganda's if 0:31:50.720 --> 0:31:54.000 you owe both parties where truth is very hard to identify, 0:31:54.320 --> 0:31:57.320 but both sides are absolutely out there to religiously convict 0:31:57.360 --> 0:32:03.480 you excuse me, to religiously convert you to their worldview. 0:32:03.520 --> 0:32:06.000 So that's certainly a factor. But look, when it comes 0:32:06.000 --> 0:32:08.400 to twenty twenty four, and it's important for us to keep. 0:32:08.320 --> 0:32:09.360 Our eye on that mark. 0:32:10.240 --> 0:32:13.760 Everything that we've done with regards to national elections really 0:32:13.840 --> 0:32:16.320 comes down to one thing. Americans focus on the economy. 0:32:16.360 --> 0:32:18.800 The economy is king. It's not only king, it's king, 0:32:18.880 --> 0:32:21.320 queen and bishop when it comes to picking a president 0:32:21.320 --> 0:32:23.600 here in the United States. And that's going to be 0:32:23.600 --> 0:32:26.640 a huge factor in where people place their votes. 0:32:26.400 --> 0:32:27.600 In November twenty twenty four. 0:32:27.880 --> 0:32:30.800 But as you all know, we are light years ahead 0:32:31.200 --> 0:32:33.200 from where that is in terms of assessing where the 0:32:33.320 --> 0:32:36.040 economy is going to be then, and that's going to 0:32:36.040 --> 0:32:38.800 be the major factor when it comes to party advantages. 0:32:38.960 --> 0:32:43.880 The Republicans definitely have maintained their historic advantage in terms 0:32:43.920 --> 0:32:47.000 of Americans viewing them as more competent in keeping the 0:32:47.040 --> 0:32:51.120 country prosperous, keeping the economy booming, and keeping the country safe. 0:32:51.200 --> 0:32:54.040 That's said, how much are you looking to Glenn Youngkin today? 0:32:54.240 --> 0:32:56.240 And maybe there is going to be very much local 0:32:56.280 --> 0:32:59.480 issues that are decided, but the local issues have implications 0:32:59.520 --> 0:33:04.160 for their glens might be the Republican con candidate for presidency. 0:33:04.320 --> 0:33:05.280 Do you think that's a stretch. 0:33:06.960 --> 0:33:09.040 I think looking at the polls right now, that is 0:33:09.040 --> 0:33:09.520 a stretch. 0:33:09.960 --> 0:33:12.160 It's hard to argue that President Trump is not the 0:33:12.160 --> 0:33:16.560 front runner of the Republican Party. You know, every poll 0:33:16.640 --> 0:33:18.880 you do, every poll, what we've done. We don't do 0:33:18.920 --> 0:33:21.240 too many political polls anymore, but there are good polls 0:33:21.240 --> 0:33:24.760 out there. It's really hard to see somebody sort of 0:33:24.840 --> 0:33:27.720 astronomically jump ahead of him. Now that being said, we 0:33:27.840 --> 0:33:30.480 haven't had a president in modern time that's facing the 0:33:30.560 --> 0:33:32.600 legal challenges that he's facing, and that's a. 0:33:32.600 --> 0:33:36.200 Whole other sort of curveball that's being thrown here. 0:33:36.240 --> 0:33:40.840 It's not clear exactly what his situation will be come real. 0:33:41.000 --> 0:33:43.520 Kind of rubber meets the road in terms of November 0:33:43.520 --> 0:33:46.160 twenty twenty four. But you know there are still we 0:33:46.200 --> 0:33:49.800 heard from David Axelrod this week about the Democratic side. 0:33:50.080 --> 0:33:53.160 There's still a lot of movement in this race, and 0:33:53.360 --> 0:33:57.800 I wouldn't rule out any surprises or sudden departures on 0:33:57.840 --> 0:33:58.680 either side. 0:33:58.560 --> 0:34:00.080 Up against the clol kid. Just to squeeze it in 0:34:00.160 --> 0:34:02.320 and finished where we started. You do mention in the 0:34:02.320 --> 0:34:04.880 piece of the GP holds advantages on certain issues. Can 0:34:04.880 --> 0:34:07.760 we just bring some life into that, Mohammad? Which issue specifically? 0:34:09.040 --> 0:34:12.240 There are really three issues In specific one is keeping 0:34:12.280 --> 0:34:18.160 the country prosperous. Republicans have a pretty sizable advantage to 0:34:18.760 --> 0:34:22.280 Democrats in terms of perceptions of keeping the country prosperous. 0:34:22.320 --> 0:34:25.200 The other one is keeping the country safe. As you know, 0:34:25.280 --> 0:34:29.400 we're now very focused on too pretty significant conflicts across 0:34:29.400 --> 0:34:32.239 the world. Hopefully that doesn't become a reality for us 0:34:32.239 --> 0:34:35.319 here in the United States, but as Americans focus more 0:34:35.400 --> 0:34:39.480 on security issues, Republicans do have that advantage in our polls. 0:34:39.640 --> 0:34:42.560 The final one is who's most competent to handle the 0:34:42.600 --> 0:34:46.360 most important problem facing the country. And what's fascinating about 0:34:46.360 --> 0:34:49.160 that question is that the most important problem facing the country, 0:34:49.200 --> 0:34:51.880 as I have said on this show many times right now, 0:34:52.200 --> 0:34:58.080 is actually poor leadership and government. So Americans identify the quality, 0:34:58.160 --> 0:35:01.719 the low quality of national le as the most important 0:35:01.719 --> 0:35:03.160 problem facing the country. 0:35:03.200 --> 0:35:05.360 So it's the most of our problem. The economy and 0:35:05.480 --> 0:35:06.840 keeping America. 0:35:06.480 --> 0:35:08.960 Safe fascinates in gright. To catch out Mohammed azoh Wis, 0:35:08.960 --> 0:35:11.000 He's going to say, Mohammed unus of gallop. 0:35:15.120 --> 0:35:17.520 Everyone's been pointing to oil prices. Why have they not 0:35:17.640 --> 0:35:20.719 caught up given that there is a sort of existential 0:35:20.880 --> 0:35:23.919 risk and threat that seems to be escalating every single 0:35:24.000 --> 0:35:25.640 day in the Middle East? Joining us now to help 0:35:25.719 --> 0:35:29.560 us understand what exactly to look for. Nadia Martin Wiggan, 0:35:29.640 --> 0:35:31.719 Director ats fell in Capital, Nadia, I just want to 0:35:31.760 --> 0:35:33.719 start there. What do you make of the fact that 0:35:33.760 --> 0:35:36.919 we're seeing crude traded on the NMEX blow eighty dollars 0:35:37.000 --> 0:35:40.440 a barrel again today despite what's going on in Israel 0:35:40.600 --> 0:35:43.240 and in Gaza. 0:35:43.520 --> 0:35:46.600 Hello, great to be on. I think what we saw 0:35:46.760 --> 0:35:50.520 last week is that Hezbollah and Iran for right now, 0:35:50.560 --> 0:35:53.680 they're on the sidelines, right, They don't actually want to 0:35:53.680 --> 0:35:57.200 show an escalation of the war going on in Gaza 0:35:57.280 --> 0:36:00.120 right now. So that has taken off some of the 0:36:00.200 --> 0:36:02.879 risk premium. For the last ten days, we actually see 0:36:03.360 --> 0:36:07.239 the implied volatility in the options market come down. So 0:36:07.400 --> 0:36:09.879 it's not even something that's happened just today, it's been 0:36:09.920 --> 0:36:12.240 for the last ten days that trend. 0:36:12.719 --> 0:36:13.040 I think. 0:36:13.120 --> 0:36:16.520 In addition, when that premium, that initial shock goes away, 0:36:16.560 --> 0:36:20.600 as we saw was the case with the war in 0:36:20.719 --> 0:36:24.640 Ukraine by Russia, eventually you know, the market starts to 0:36:24.719 --> 0:36:28.000 think about how to work around that. And for example, 0:36:28.040 --> 0:36:31.480 we've seen that freight rates have gone much higher, and 0:36:31.560 --> 0:36:33.520 part of that is when you look at it, it's 0:36:33.560 --> 0:36:36.880 almost like a risk balancing that, Okay, if we can't 0:36:36.920 --> 0:36:40.680 flow through the Suez and we have to go around, 0:36:40.840 --> 0:36:45.240 then let's de risk ourselves if things were to take longer. 0:36:45.280 --> 0:36:47.680 And we see that the freight market has actually priced 0:36:47.680 --> 0:36:50.719 that in as if they have to avoid the Suez, 0:36:50.960 --> 0:36:52.960 which they haven't had to do. So as a result, 0:36:53.000 --> 0:36:54.720 things have come down also. 0:36:54.600 --> 0:36:55.320 In the oil market. 0:36:55.440 --> 0:36:57.880 Okay, so let's take a step back for a second. Nadia. 0:36:57.960 --> 0:37:00.279 If you're looking at freight producers, that already come up 0:37:00.280 --> 0:37:04.040 with alternate roots that avoid the suz Canal to avoid 0:37:04.640 --> 0:37:07.520 potential or the straits of our moves to avoid potential 0:37:07.520 --> 0:37:11.560 blowback from Iran. Does this mean that oil prices are 0:37:11.560 --> 0:37:13.880 actually higher than where they would be at this point 0:37:14.280 --> 0:37:17.600 if there weren't this geopolitical overhang, because it's actually being 0:37:17.680 --> 0:37:19.880 priced into the market in a material way. 0:37:21.360 --> 0:37:21.640 Yeah. 0:37:21.719 --> 0:37:24.280 If we look at what was happening to the market 0:37:24.400 --> 0:37:28.439 in oil before the October seventh attack, we could see 0:37:28.480 --> 0:37:30.839 that prices were coming off right. We had a lot 0:37:30.880 --> 0:37:35.760 of pressure on refinery margins. We had physical creed trading poorly. 0:37:36.080 --> 0:37:38.680 You know, we've had the largest overhang in the West 0:37:38.680 --> 0:37:41.480 African market that we've had in years. We had more 0:37:41.480 --> 0:37:44.400 than twenty twenty five million barrels unsold out of the 0:37:44.440 --> 0:37:48.600 November loading program. So we saw that kind of weakening 0:37:48.719 --> 0:37:51.200 and then this is where the market would like to rebalance. 0:37:51.320 --> 0:37:54.200 We saw the physical premiums come down for those grades, 0:37:54.200 --> 0:37:57.759 but the futures market has remained quite strong, and this 0:37:57.800 --> 0:38:00.480 is where we have to see that kind of reb ballancy. 0:38:00.880 --> 0:38:03.239 When we look at kind of the momentum and what 0:38:03.360 --> 0:38:07.040 is happening to pure speculative traders, you know, the CTAs 0:38:07.080 --> 0:38:10.640 and so forth. That short term momentum has been downwards, right, 0:38:10.680 --> 0:38:13.279 and that is put pressure bringing us down to where 0:38:13.280 --> 0:38:15.600 we are now in WTI, you know, just above the 0:38:15.640 --> 0:38:18.279 two hundred day moving average. If we look at that 0:38:18.400 --> 0:38:22.960 long term momentum, it's still intact for a strong market, right. 0:38:23.000 --> 0:38:25.640 So there are still those longs in the market that 0:38:25.680 --> 0:38:29.920 we've had in since before all of this started. But again, 0:38:30.160 --> 0:38:33.880 the market is preparing in case something were to happen, 0:38:33.960 --> 0:38:36.640 because you know, things had been taking along well in 0:38:36.680 --> 0:38:38.520 the Middle East and we were about to have a 0:38:38.560 --> 0:38:42.880 deal between Saudi Arabia, the US and Israel recognizing Israel, 0:38:42.880 --> 0:38:45.880 which would take off potentially a premium right, and instead 0:38:45.920 --> 0:38:47.200 we've moved in the opposite direction. 0:38:47.320 --> 0:38:49.520 How much is the US becoming the swing producer at 0:38:49.560 --> 0:38:51.920 a time where there is consolidation in the shale patch 0:38:51.920 --> 0:38:55.800 and you are seeing companies try to realize the value 0:38:55.960 --> 0:38:58.359 from their stores, basically pump the oil while it's still 0:38:58.440 --> 0:39:00.240 valued in the world. 0:39:01.080 --> 0:39:04.839 The deal of Exon, for example, buying Pioneer right, that 0:39:05.000 --> 0:39:08.160 really shows that they are focusing on the Permian right. 0:39:08.760 --> 0:39:11.920 And what interestingly Exon announced in their earnings call is 0:39:11.920 --> 0:39:15.160 that they believe that with their equipment and knowledge, they're 0:39:15.200 --> 0:39:17.840 able to bring in a total of one billion barrels 0:39:18.080 --> 0:39:21.800 of oil more out of those same assets that Pioneer 0:39:21.840 --> 0:39:24.120 was able to. So, when we think about the terminal 0:39:24.320 --> 0:39:28.560 regular production rate in the US, that goes from around 0:39:28.600 --> 0:39:30.839 fourteen and a half million barrels per day to maybe 0:39:30.880 --> 0:39:33.120 fifteen and a half million barrels per day, and the 0:39:33.200 --> 0:39:35.440 question is when do we reach that. Right August production 0:39:35.560 --> 0:39:38.359 was thirteen point one million barrels per day. It will 0:39:38.400 --> 0:39:41.120 probably take two years, but of course that depends on 0:39:41.160 --> 0:39:44.399 the short term oil price and the signals short term 0:39:44.400 --> 0:39:47.840 meaning monthly, quarterly, and the signals that that yields to 0:39:48.120 --> 0:39:51.600 shale producers in terms of activity. Right, a weaker oil 0:39:51.640 --> 0:39:53.759 price will slow that down. A strong oil price we'll 0:39:53.760 --> 0:39:54.359 speed that up. 0:39:54.760 --> 0:39:57.240 So right now, given more prices are do you expect 0:39:57.400 --> 0:40:00.960 more consolidation to be expedited currently or do you think 0:40:00.960 --> 0:40:03.279 that people are going to wait until prices go up 0:40:03.320 --> 0:40:03.920 a bit further. 0:40:06.360 --> 0:40:11.560 Well, prices are reasonably strong, right, the whole oil complex 0:40:11.920 --> 0:40:15.399 is in a good situation and making money. So when 0:40:15.480 --> 0:40:18.520 what we saw at the start of October is that 0:40:18.560 --> 0:40:22.320 demand was starting to get hit, right, we had producers 0:40:22.640 --> 0:40:24.840 selling crewed for more than one hundred dollars a barrel, 0:40:24.880 --> 0:40:28.800 and then we saw, for example, companies like India really complaining. 0:40:28.840 --> 0:40:32.480 Part of that is because Russian crudis continued to flow 0:40:32.960 --> 0:40:36.560 and we had price caps breached, right, so you were 0:40:36.560 --> 0:40:38.920 paying more than sixty dollars a barrel, maybe you were 0:40:38.960 --> 0:40:41.240 paying seventy dollars a barrel, and then on average, facing 0:40:41.239 --> 0:40:43.920 more than one hundred dollars a barrel was becoming difficult. 0:40:44.000 --> 0:40:47.400 So I think we've been in a pretty comfortable space, 0:40:47.480 --> 0:40:51.480 you know, in the eighty dollars range for everyone to 0:40:51.560 --> 0:40:54.759 make money, so it makes it ripe for consolidation and 0:40:54.880 --> 0:40:58.400 valuable resources. We don't really need things to move much higher. 0:40:58.480 --> 0:41:00.319 Do you think that all things being a well, this 0:41:00.360 --> 0:41:02.360 is going to be the range for the foreseeable future, 0:41:02.480 --> 0:41:04.919 just because of the pushes and the pulls that seem 0:41:05.000 --> 0:41:08.000 to be working in equilibrium from. 0:41:07.840 --> 0:41:11.440 A technical level, yes, But of course things can suddenly 0:41:11.520 --> 0:41:14.480 change very quickly, both in the Middle East, you know, 0:41:15.200 --> 0:41:19.360 towards the negative towards a positive, so that can really 0:41:19.440 --> 0:41:22.360 shift things. And the number one thing to keep track 0:41:22.400 --> 0:41:26.120 of is that inventories were expected to draw quite steeply 0:41:26.160 --> 0:41:29.120 in the fourth quarter, and so far in October they 0:41:29.200 --> 0:41:32.040 only drew on land around three hundred thousand barrels per day. 0:41:32.200 --> 0:41:35.640 So the market is waiting for evidence that actually we 0:41:35.840 --> 0:41:39.640 have tightness led by these supply cuts and demand isn't waning, 0:41:40.280 --> 0:41:43.400 Whereas you know, on the other hand, if it continues waiting, 0:41:43.640 --> 0:41:45.560 then we could see. 0:41:45.280 --> 0:41:46.320 For the falls and price. 0:41:47.239 --> 0:41:49.600 Nadie Martin Wigan of Spell and Capital, thank you so 0:41:49.680 --> 0:41:50.680 much for being with us. 0:41:50.800 --> 0:41:52.320 Subscribe to the Bloomberg. 0:41:51.880 --> 0:41:55.160 Surveillance podcast on Apple, Spotify, and anywhere else you get 0:41:55.160 --> 0:41:58.680 your podcasts. Listen live every weekday starting at seven am 0:41:58.719 --> 0:42:02.239 Eastern on Blueberk dot com, the iHeartRadio app tune In. 0:42:02.239 --> 0:42:03.760 And the Bloomberg Business app. 0:42:04.040 --> 0:42:07.320 You can watch us live on Bloomberg Television and always 0:42:07.400 --> 0:42:10.839 on the Bloomberg terminal. Thanks for listening. I'm Lisa Abramowitz, 0:42:10.880 --> 0:42:11.920 and this is Bloomberg.