WEBVTT - Bloomberg Surveillance Television: March 15, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.440 Terminal and the Bloomberg Business app. We beginning our Solf story, 0:00:37.560 --> 0:00:40.479 another heart set that expected inflation print pushing gat rate 0:00:40.520 --> 0:00:43.320 cut bets ahead of next week's Fed decision. John Stolfus 0:00:43.320 --> 0:00:45.600 of Oppenheimer still expecting the end of free money to 0:00:45.640 --> 0:00:47.680 come to a close. Quote for those of us who 0:00:47.720 --> 0:00:51.120 began our careers when ten year treasury yields, corporate yields, 0:00:51.120 --> 0:00:54.080 and mortgage rates were at double digit levels, the phrase 0:00:54.200 --> 0:00:56.880 none of me thanks or none for me thanks comes 0:00:56.920 --> 0:00:59.880 readily to mind. Should the Fed cut rates too early? 0:01:00.040 --> 0:01:02.120 In place to say that? John joins us. Now, John, 0:01:02.120 --> 0:01:05.480 we talked about the scentsif snackflation. Do you Smeuth the 0:01:05.560 --> 0:01:06.559 sensive snackflation. 0:01:07.760 --> 0:01:10.480 I think it's a little too early to call that, John. 0:01:10.640 --> 0:01:13.840 I think a couple of hot numbers in terms of 0:01:14.440 --> 0:01:17.720 hotter that expected numbers in terms of inflation in the 0:01:17.760 --> 0:01:21.360 process of a fed fud's pipe cycle that has been 0:01:21.520 --> 0:01:26.800 remarkably sensitive to its effects on the economy just tells 0:01:26.880 --> 0:01:29.759 us this is part of the bumpingness to get coming 0:01:29.800 --> 0:01:33.520 out of where we have been going into a sustainable 0:01:33.560 --> 0:01:38.160 economic recovery at moderate pace with what is the equivalent 0:01:38.200 --> 0:01:40.880 of full employment three to four percent unemployment. 0:01:41.319 --> 0:01:43.679 There is one takeaway though from some of the price action, John, 0:01:44.080 --> 0:01:45.680 and it's that all the hopes and dreams of a 0:01:45.720 --> 0:01:47.920 broadening out in the rally seem to die when we 0:01:48.000 --> 0:01:51.000 have the idea of rate hikes to laid deferred or 0:01:51.040 --> 0:01:53.800 put off indefinitely. Really, that has been the takeaway for 0:01:53.880 --> 0:01:56.280 me is that this week, when people were worried about 0:01:56.440 --> 0:01:59.559 fewer rate cuts or even no rate cuts, you saw 0:01:59.840 --> 0:02:03.000 the equal weight underperformed dramatically the S and P. 0:02:03.080 --> 0:02:03.600 Five hundred. 0:02:03.680 --> 0:02:06.640 Do you take away something about that in terms of 0:02:07.080 --> 0:02:08.600 how vulnerable that trade. 0:02:08.360 --> 0:02:14.040 Is too short a period to take away you know 0:02:14.560 --> 0:02:18.560 and think that this vulnerability does not exist. 0:02:18.639 --> 0:02:22.880 It certainly does exist. But at the same time, we're 0:02:22.919 --> 0:02:25.200 headed in the right direction from what we can tell, 0:02:25.240 --> 0:02:30.440 and you've got just extraordinary times when it comes to innovation, 0:02:31.880 --> 0:02:36.800 the resilience that's seen by business in the latest earning 0:02:36.919 --> 0:02:39.720 season for the S and P five hundred with earnings 0:02:39.800 --> 0:02:46.640 up close just under eight percent, revenue growth about four percent. Sorry, 0:02:47.160 --> 0:02:51.600 and with that, you know, four sectors double digit earnings growth. 0:02:51.639 --> 0:02:55.360 And not all tech things are good. It's just that 0:02:55.400 --> 0:02:57.400 they're not as great as people would like to see. 0:02:57.480 --> 0:02:59.640 We're not there yet. You know, we're in the car. 0:03:00.240 --> 0:03:01.040 Are we there yet? 0:03:01.120 --> 0:03:03.560 Not yet? Okay, So you're waiting for the there to happen. 0:03:03.639 --> 0:03:05.440 You're not waiting for the stiflation to happen. And I 0:03:05.440 --> 0:03:08.480 guess what's the line between the two, Because ultimately, what 0:03:08.520 --> 0:03:11.160 we did see yesterday, our minds have to kind of 0:03:11.200 --> 0:03:13.360 go to the ciflation point, like John was mentioning, given 0:03:13.360 --> 0:03:15.560 the fact that we saw inflation come in hotter than expected, 0:03:15.600 --> 0:03:18.720 retail sales come in lighter than expected. When do we 0:03:18.760 --> 0:03:21.600 start to get some sort of definitive read on which 0:03:21.639 --> 0:03:24.480 it is. Is it the strength or is it the slowdown? 0:03:25.840 --> 0:03:29.520 It probably it probably comes from a combination of both. 0:03:29.600 --> 0:03:32.959 It's the combination of the resilience with the slow and 0:03:33.120 --> 0:03:35.080 because you've got the FED, I mean, in the last 0:03:35.160 --> 0:03:38.600 two years hasn't been on holiday. It's been involved, you know, 0:03:38.720 --> 0:03:42.640 bringing down the rate of inflation. But inflation is an 0:03:42.680 --> 0:03:45.640 insidious thing. The other thing I think that we're waiting 0:03:45.680 --> 0:03:49.000 to see, and it's beginning to happen in food. We've 0:03:49.040 --> 0:03:52.480 seen it in some aspects in clothing, not really yet 0:03:52.520 --> 0:03:56.920 in rents. But is competition competition, you know, when you 0:03:56.960 --> 0:04:01.120 go into inflation. Originally, those who experience height input costs, 0:04:01.760 --> 0:04:04.560 they eat the inflation, don't pass it on. Then once 0:04:04.600 --> 0:04:08.200 everybody knows inflation is weird, its ugly head, they pass 0:04:08.240 --> 0:04:10.440 it on to their customers. And then once the FED 0:04:10.520 --> 0:04:13.240 does what it's supposed to do and begin to have 0:04:13.320 --> 0:04:18.680 some significant success, then suddenly those that originally eat the 0:04:18.760 --> 0:04:21.719 inflation then pass it on, hold on passing it on 0:04:21.880 --> 0:04:23.960 for a bit longer so they can make up for 0:04:24.040 --> 0:04:27.440 the losses at the beginning of the cycle. And then 0:04:27.600 --> 0:04:30.520 somebody says, hey, you know what, I think I can 0:04:30.560 --> 0:04:35.840 sacrifice my unit a price and maybe make it up 0:04:35.839 --> 0:04:38.839 in volume. And that is what we're waiting to see. 0:04:38.920 --> 0:04:41.200 And right now, I think it's a good thing that 0:04:41.240 --> 0:04:45.400 the consumer, based on those consumer set of IT indices, 0:04:45.520 --> 0:04:49.280 shows that they are beginning to think genuinely inflation will 0:04:49.320 --> 0:04:53.839 be here for longer. Indeed, it may be very well, 0:04:53.880 --> 0:04:56.360 but at the same time, the direction of the growth 0:04:56.360 --> 0:04:58.760 of inflation is on the way down, and that's where 0:04:58.800 --> 0:05:02.120 we see the op tunity remains in the equity market. 0:05:02.240 --> 0:05:04.120 So, as Emory pointed out, look out for you mentioned 0:05:04.120 --> 0:05:07.440 a little bit later for consumer inflation expectations, John, I 0:05:07.480 --> 0:05:09.799 want to look ahead to next week a risk factor 0:05:09.839 --> 0:05:11.200 in the near term, and you could talk to me 0:05:11.240 --> 0:05:13.120 about how big a risk this is. Is it that 0:05:13.240 --> 0:05:16.080 median dot in the FED projections comes down from three 0:05:16.120 --> 0:05:18.600 to two. Is that a big deal to you, given 0:05:18.640 --> 0:05:20.800 that this market has gone from seven to three and 0:05:20.839 --> 0:05:22.560 equities are still close to all time heighs. 0:05:24.640 --> 0:05:26.920 I don't think it's a really big deal. I think 0:05:27.160 --> 0:05:29.520 the Feds, it's not just the Fed's hard is in 0:05:29.600 --> 0:05:33.279 the right place, but the general tone of FED speak 0:05:34.040 --> 0:05:36.760 is very much aware of what is going on. It's 0:05:36.839 --> 0:05:39.960 into this idea. Well they won't say it, but it's 0:05:39.960 --> 0:05:42.919 going gently into that good night, you know, in this case, 0:05:43.640 --> 0:05:46.280 in the sense that they are very sensitive to what 0:05:46.520 --> 0:05:50.359 is the essentially the mandate of the FED, which is 0:05:50.400 --> 0:05:53.200 to produce an economy that grows at a sustainable pace 0:05:53.279 --> 0:05:57.560 without horrible inflation, with manageable rates of inflation. And then 0:05:57.600 --> 0:06:01.880 when it comes to employment unemployment as defined by somewhere 0:06:01.880 --> 0:06:04.640 between three and four person unemployment, and it looks like 0:06:04.680 --> 0:06:07.520 they're doing the job. And I don't think Powell and 0:06:07.760 --> 0:06:10.960 his FED wanted to be have a legacy of either 0:06:11.040 --> 0:06:14.799 cutting too soon or staying staying at the high levels 0:06:15.040 --> 0:06:17.479 where we are now relative to where we were before 0:06:18.200 --> 0:06:21.480 for too much long. That said, we continue to think 0:06:21.520 --> 0:06:23.839 it's a second half of the year when we see 0:06:23.680 --> 0:06:27.880 the rate cuts happen. We never expected the five to 0:06:28.000 --> 0:06:30.039 seven that others were. We always thought it would be 0:06:30.160 --> 0:06:33.000 likely one to two, perhaps three, which is what the 0:06:33.000 --> 0:06:35.600 FED had initially intimated towards the end of last year. 0:06:35.680 --> 0:06:37.360 You've been outspoken about that, John, I just want to 0:06:37.400 --> 0:06:39.839 finish out by talking about sectors and what you like 0:06:39.880 --> 0:06:43.000 in the equity market. I know you like cyclicals over defensives. Now, 0:06:43.040 --> 0:06:46.880 traditionally defensives would include things like healthcare. Now healthcare has 0:06:46.920 --> 0:06:50.240 this GLP one element to it which makes it almost offensive. 0:06:50.240 --> 0:06:51.560 It's where a lot of money is going in this 0:06:51.600 --> 0:06:54.920 bull market at the moment, John, what is defensive to you? 0:06:56.160 --> 0:07:02.480 The defensive would be consumer staples, the utes, a significant 0:07:02.480 --> 0:07:08.599 portion of healthcare outside the weight loss drugs, and some 0:07:08.720 --> 0:07:11.920 of the the the offsets that come to that, or 0:07:11.960 --> 0:07:15.520 rather the additional things that come with that related to 0:07:16.240 --> 0:07:19.080 perhaps what can what can be done against the heart 0:07:19.080 --> 0:07:21.480 attacks and things like that with the same drugs. But 0:07:21.800 --> 0:07:23.920 we can't help but think that you want to be 0:07:24.080 --> 0:07:31.200 you want to be in technology, consumer discretionary industrials, financials UH. 0:07:31.360 --> 0:07:35.320 And we're gaining the addigital exposure to materials here. And 0:07:36.600 --> 0:07:39.560 it just looks like people are looking at the world 0:07:39.560 --> 0:07:42.440 and thinking China may be having real problems that it 0:07:42.640 --> 0:07:45.480 still has to address, but the rest of the world 0:07:45.560 --> 0:07:49.600 is in a process of normalization where we're in a better, 0:07:50.000 --> 0:07:53.880 better situation. We're leaving the emergency status of the world 0:07:53.920 --> 0:07:58.520 economy UH and in that process moving towards a more 0:07:58.560 --> 0:08:02.960 stable environment. Now that doesn't mean anything can happen that 0:08:03.000 --> 0:08:06.120 would counter that. Okay, So you have to be diversified, 0:08:06.480 --> 0:08:08.120 and you have to know what you own, why you 0:08:08.160 --> 0:08:11.600 own it, and have light sized expectations you can't get 0:08:11.640 --> 0:08:14.480 too gaga over the market here. You have to be 0:08:14.640 --> 0:08:16.640 you know, that's why our target. We're only one percent 0:08:16.680 --> 0:08:20.280 away from our year end target now. And you know 0:08:20.360 --> 0:08:23.480 we people were asking us through most of the first quarter, 0:08:23.720 --> 0:08:26.080 why don't you raise your target? Well, when we started 0:08:26.080 --> 0:08:30.000 out in December, we showed we were indicating thirteen percent upside. 0:08:30.120 --> 0:08:32.800 We just didn't relox like how fast food we're going 0:08:32.880 --> 0:08:33.200 to move? 0:08:33.360 --> 0:08:36.640 John to that point, are you going to upgrade your forecast? 0:08:37.320 --> 0:08:42.080 Ah, we'll have to see. At Lisa, I'm looking at 0:08:42.120 --> 0:08:44.960 all this stuff you're looking at and John's looking at 0:08:44.720 --> 0:08:48.600 and when I think of it, we've got to give 0:08:48.600 --> 0:08:52.040 a consideration. But I must say, from where we're sitting 0:08:52.040 --> 0:08:55.520 here today, it would seem like the likelihood of being 0:08:55.600 --> 0:08:59.280 forced to raise might be necessary after all these bears 0:08:59.360 --> 0:09:03.520 of suddenly gotten under the bull case. But they're talk 0:09:03.640 --> 0:09:05.480 Some of these guys are talking out of both sides 0:09:05.520 --> 0:09:09.520 of their mouth, you know, stagflation. Other people within their 0:09:09.600 --> 0:09:11.840 groups saying, oh, it's going to go higher. I don't know. 0:09:12.920 --> 0:09:15.680 I try to avoid the noise, to separate the signal 0:09:15.720 --> 0:09:16.280 from the noise. 0:09:16.720 --> 0:09:18.600 H John, appreciate your time. I think there was a 0:09:18.600 --> 0:09:21.440 diplomatic way of dancing around that question and answering yes, 0:09:21.440 --> 0:09:23.600 maybe perhaps at some point in the next couple of days, 0:09:32.840 --> 0:09:35.439 Sarah Hunt of Outpine Saxon words right in this there 0:09:35.480 --> 0:09:38.400 is a tension between the idea that not cutting rates 0:09:38.440 --> 0:09:42.400 means financial conditions will passively tighten if inflation continues to 0:09:42.480 --> 0:09:46.559 wend its way lower, and concerns that when there's enough liquidity, 0:09:46.600 --> 0:09:50.520 the conditions are still too loose. Sarah and place to 0:09:50.559 --> 0:09:52.199 say it joins us. Now, Sarah, what do you think 0:09:52.240 --> 0:09:56.040 of that data? PPI upside surprise, CPI upside surprise. How 0:09:56.040 --> 0:09:57.800 does it change next week's FED mating? 0:09:58.280 --> 0:10:00.120 It's going to be interesting because I agree with the 0:10:00.160 --> 0:10:01.800 guests that you've had on earlier in which you guys 0:10:01.840 --> 0:10:03.640 have been talking about the FED wants to cut right. 0:10:03.679 --> 0:10:06.000 They're looking for an excuse to cut because they don't 0:10:06.000 --> 0:10:08.080 want to get to the point where they're passively tightening 0:10:08.120 --> 0:10:10.800 as opposed to you know, they don't want that to happen. 0:10:11.280 --> 0:10:13.360 But I think that this data was not does not 0:10:13.400 --> 0:10:16.040 give them any help in that the odd I mean, 0:10:16.040 --> 0:10:18.040 they could just sort of ignore it and say, well, yes, 0:10:18.080 --> 0:10:20.360 we're looking at other things. To your point, memory that 0:10:20.440 --> 0:10:22.280 you know, we're going to look for the PC. We're 0:10:22.320 --> 0:10:24.360 not using this, but I think that it makes it 0:10:24.400 --> 0:10:26.440 a little bit tougher for them to do it on 0:10:26.480 --> 0:10:28.160 the timeframe that they were looking at. If this had 0:10:28.200 --> 0:10:29.800 been a more benign number, I think you would have 0:10:29.840 --> 0:10:32.840 seen that may call come back, and I think, I mean, 0:10:32.840 --> 0:10:34.839 I don't think anyone was looking for anything in March, 0:10:35.000 --> 0:10:37.520 so they may just not say a whole lot about it. 0:10:37.559 --> 0:10:37.959 But we'll see. 0:10:38.000 --> 0:10:39.160 I mean, it's going to be interesting to see what 0:10:39.160 --> 0:10:39.439 they say. 0:10:39.440 --> 0:10:42.240 Should jompless claims make them comfortable or should retail sales 0:10:42.240 --> 0:10:46.040 make them uncomfortable? Yes, yes too, yes to both. 0:10:46.040 --> 0:10:47.800 I mean, and that's the problem, right, because we keep 0:10:47.800 --> 0:10:50.680 getting these different pieces. The labor market has stayed stronger. 0:10:50.920 --> 0:10:52.920 You know, in December when they pivoted, one of the 0:10:52.960 --> 0:10:55.600 things that they that char Pal said was we now 0:10:55.640 --> 0:10:58.079 see the risks as being balanced between inflation and a 0:10:58.160 --> 0:11:00.600 labor market, whereas before that everybody like they're going to 0:11:00.600 --> 0:11:02.440 try to kill the labor market. So I think that 0:11:02.520 --> 0:11:05.559 the fact that we are seeing still good labor, they 0:11:05.679 --> 0:11:07.880 really don't want to put the country into a bad 0:11:07.960 --> 0:11:10.160 labor market. They don't want to do that, So that's 0:11:10.160 --> 0:11:12.080 going to be helpful, but it's just the other data 0:11:12.200 --> 0:11:13.120 was just not that great. 0:11:13.640 --> 0:11:17.080 It strikes me in some of my conversations that just hypothetically, 0:11:17.400 --> 0:11:19.560 some people might be very bored with the muddle because 0:11:19.559 --> 0:11:21.640 it's been muddle for quite a while. What does a 0:11:21.640 --> 0:11:23.760 board trader do given the fact that we've got a 0:11:23.760 --> 0:11:25.760 lot of them, Well. 0:11:25.640 --> 0:11:27.560 They probably take out too many leverage bets that come 0:11:27.600 --> 0:11:28.160 back to bite them. 0:11:28.160 --> 0:11:28.480 I don't know. 0:11:28.480 --> 0:11:31.040 I mean, this is the problem of having the non 0:11:31.080 --> 0:11:33.600 directional you were asking earlier on the FX trade, like 0:11:33.600 --> 0:11:36.199 we're looking for someone's looking for a big directional trade. 0:11:36.280 --> 0:11:40.400 We have these little incremental moves where the moves are incremental, 0:11:40.440 --> 0:11:42.480 but the zeitgeist swings from oh my god, we're going 0:11:42.480 --> 0:11:44.840 into recession to oh, the economy is so great, we 0:11:44.840 --> 0:11:46.840 don't have to cut rates. Mean, there's been a lot 0:11:46.840 --> 0:11:49.520 of moving back and forth, but it's the same from 0:11:49.520 --> 0:11:52.360 the same two places, and that does tend to get people. 0:11:52.720 --> 0:11:54.560 You know, you can't quite figure out what's going on. 0:11:54.640 --> 0:11:57.480 If people are not worried about rate cuts being pushed 0:11:57.480 --> 0:11:59.360 out because the economy is good, well that's great for 0:11:59.360 --> 0:12:01.920 the market that they're getting pushed out because. 0:12:01.720 --> 0:12:04.200 Inflation is bad. That's bad for the people are so spoiled. 0:12:04.240 --> 0:12:06.440 The fact that people are bored. We've just had an 0:12:06.440 --> 0:12:08.720 all time high in Japan, haven't seen one since nineteen 0:12:08.760 --> 0:12:11.760 eighty nine. I've had records in Europe. Record state side, 0:12:11.760 --> 0:12:14.400 we've got two huge bull markets taking place, one in 0:12:14.480 --> 0:12:17.800 Ai another in GLP. Once I understand that they want more. 0:12:18.040 --> 0:12:20.480 We always want more. But seriously, some of the levels 0:12:20.480 --> 0:12:22.760 we've here in the last few months have been pretty incredible. 0:12:22.840 --> 0:12:24.720 Yeah, but they haven't been a street shot up. It's 0:12:24.720 --> 0:12:28.600 been basically and it hasn't been with any. 0:12:28.400 --> 0:12:32.440 Convintions feby alone. Yes, we had two if the biggest 0:12:32.679 --> 0:12:35.480 single day market cap gains on single names in the 0:12:35.520 --> 0:12:36.920 history of this stock market. 0:12:36.920 --> 0:12:39.360 But has it been because people are just plowing in 0:12:39.440 --> 0:12:42.400 and just so excited and looking for their upside surprise 0:12:42.480 --> 0:12:45.040 or is it because basically it's just been the story 0:12:45.040 --> 0:12:47.720 that keeps on giving. You've won by not shifting around 0:12:47.760 --> 0:12:50.440 your portfolio at all, which is hard to do. 0:12:50.640 --> 0:12:52.840 That's why they're bored, because they're waiting for the rotation 0:12:52.960 --> 0:12:54.840 that hasn't developed in the way they wish it was. 0:12:55.160 --> 0:12:57.240 I mean, we caught up with Seaburn Mandy Zoo earlier 0:12:57.240 --> 0:12:59.360 this week, and she said they're positioning upside by US, 0:12:59.400 --> 0:13:02.600 upside by some way light on WALP smow caps right 0:13:02.760 --> 0:13:05.520 that board. Because the same things keep winning, should they 0:13:05.559 --> 0:13:08.080 start to get used to the same things winning all 0:13:08.120 --> 0:13:09.960 the time or is that going to change sometime soon? 0:13:10.080 --> 0:13:12.520 Well there's also the issue of you know, the same 0:13:12.520 --> 0:13:14.800 things are winning, but that then echoes a lot of 0:13:14.840 --> 0:13:16.840 other market bubbles and people start worrying about a market 0:13:16.840 --> 0:13:19.000 bubble too, So there's that problem as well. I think 0:13:19.520 --> 0:13:21.880 to the extent that the AI stocks are winning, there 0:13:21.960 --> 0:13:24.839 is a they're really making money. There's actual cash flow there. 0:13:24.880 --> 0:13:27.560 This isn't a group of stocks that is running on 0:13:27.600 --> 0:13:30.080 a promise, right, It's running on some actual results. 0:13:30.280 --> 0:13:31.200 So there's that So I. 0:13:31.200 --> 0:13:33.040 Think that that is say sticky. 0:13:33.320 --> 0:13:34.160 But on the other. 0:13:34.040 --> 0:13:36.439 Side, there is some concern that you're seeing these big 0:13:36.520 --> 0:13:39.080 run ups in things like the glpeople there's but there's 0:13:39.120 --> 0:13:41.439 real money there. But then what happens to the rest 0:13:41.440 --> 0:13:42.640 of the market. And there's a lot of parts of 0:13:42.679 --> 0:13:45.080 the market that haven't been participating. 0:13:44.480 --> 0:13:47.160 Including energy to some degree. And I know that you 0:13:47.200 --> 0:13:49.640 are bullets and energy, and then you pulled back a 0:13:49.679 --> 0:13:52.280 bit we're seeing this rally though that's pretty persistent. We're 0:13:52.280 --> 0:13:54.720 seeing oil prices at the highest levels going back to November, 0:13:54.760 --> 0:13:58.079 and this idea that maybe supply can't keep up finally 0:13:58.120 --> 0:14:00.880 with demand after a pretty strong have you shifted your 0:14:00.960 --> 0:14:02.160 view on a not j well? 0:14:02.280 --> 0:14:04.760 Still to your point also earlier, there is still excess 0:14:04.760 --> 0:14:06.840 supply out there right because they're still being oil held 0:14:06.880 --> 0:14:09.680 off the market. The question is it's moved up, and 0:14:09.720 --> 0:14:11.640 it's moved up in a quiet way, so the stocks 0:14:11.640 --> 0:14:13.800 haven't really caught up, so there's value in that trade 0:14:13.880 --> 0:14:17.520 right now. The question becomes, does this problem that's going 0:14:17.559 --> 0:14:20.400 on with transportation, because it's still a problem. They're still 0:14:20.400 --> 0:14:23.880 seeing that issue going through does that change because if 0:14:23.920 --> 0:14:26.600 it doesn't change, then you can see tighter markets and 0:14:26.640 --> 0:14:28.720 you're seeing them right now. And that move up hasn't 0:14:28.760 --> 0:14:32.080 been a convulsive move up. It's been like that incremental 0:14:32.200 --> 0:14:33.600 you know, it's if it's a spider move up. 0:14:33.680 --> 0:14:36.360 So it's kind of crazy that we're all excited potentially 0:14:36.440 --> 0:14:39.240 about a Breton crude move in the eighties and there 0:14:39.280 --> 0:14:41.960 is literally a hot war in the Middle East and 0:14:42.040 --> 0:14:45.360 you have Husi's still striking vessels. They're the red seat 0:14:45.360 --> 0:14:46.880 in the Gulf of Aden. I mean, how high could 0:14:46.920 --> 0:14:48.120 you see oil prices actually go? 0:14:48.200 --> 0:14:51.080 Though, Well, I think so right now you've seen the 0:14:51.120 --> 0:14:53.720 problem that that's causing, which is higher transportation costs in 0:14:53.800 --> 0:14:57.240 longer transportation times. But it hasn't hit production. It hasn't 0:14:57.280 --> 0:14:59.760 hit something like right now. That's staying within a frame 0:14:59.760 --> 0:15:03.280 work that is not problematic for the fields themselves. It's 0:15:03.280 --> 0:15:05.800 problematic for transportation. If that changes, I think you could 0:15:05.800 --> 0:15:08.320 see bigger moves because then you don't know where you're 0:15:08.560 --> 0:15:10.160 where the supply is going to come from. Right now, 0:15:10.200 --> 0:15:11.680 supply is not so much the issue. 0:15:11.720 --> 0:15:14.120 So we've got these two risk events on the calendar, 0:15:14.200 --> 0:15:16.400 the Federal Reserve in June because that's when this rate 0:15:16.440 --> 0:15:18.680 cut is going to happen. Now most people agree, And 0:15:18.680 --> 0:15:20.960 then you've got this election in November, and people just 0:15:20.960 --> 0:15:22.840 sort of look at it the calendar and say, it's 0:15:22.840 --> 0:15:24.920 out there somewhere. I don't need to think about it 0:15:25.120 --> 0:15:27.800 right now. Do they need to think about it right now? 0:15:28.640 --> 0:15:30.520 I think the difficult thing is that there is such 0:15:30.520 --> 0:15:32.840 a long period of time and that there's this expectation 0:15:32.920 --> 0:15:34.800 that any number of things could happen, and so that 0:15:35.080 --> 0:15:37.120 it's hard for anyone to pin it down, and that 0:15:37.200 --> 0:15:40.160 any changes either on the global stage or other places 0:15:40.160 --> 0:15:42.480 could shift things one way or the other. So deciding 0:15:42.520 --> 0:15:44.600 today what you think the outcome is going to be 0:15:44.600 --> 0:15:47.160 in acting on that is quite difficult, I think. With 0:15:47.240 --> 0:15:49.520 the FED, you know, there is that expectation that we're 0:15:49.560 --> 0:15:52.080 going to get some rate cuts, but as those dialed back, 0:15:52.160 --> 0:15:54.360 it's not the same as saying, you know, we were 0:15:54.400 --> 0:15:56.560 going to be down two hundred basis points right now, 0:15:56.680 --> 0:15:58.280 was going to change everything. And that's okay, and that's 0:15:58.320 --> 0:16:00.280 great for tech stocks and it's great for fall sorts 0:16:00.320 --> 0:16:00.680 of things. 0:16:00.800 --> 0:16:01.480 But on the other. 0:16:01.360 --> 0:16:03.560 Hand, the fact that you're getting interested on cash is 0:16:03.600 --> 0:16:05.880 a good thing too. So where the FED goes ultimately 0:16:05.960 --> 0:16:07.160 is going to be a big deal. And that keeps 0:16:07.160 --> 0:16:09.720 shifting around too. We keep hearing now north of three 0:16:09.760 --> 0:16:11.600 and a half, maybe it's four percent. There's a lot 0:16:11.640 --> 0:16:13.680 of change that's been going on with both of those things. 0:16:13.800 --> 0:16:16.640 So it's hard to say, yes, let's make a plan, 0:16:16.720 --> 0:16:18.440 and let's make a plan on the basis of this 0:16:18.760 --> 0:16:19.600 X going this way. 0:16:19.680 --> 0:16:23.080 Michael Sharper was just talking about how either way, whoever wins, 0:16:23.280 --> 0:16:25.360 there is going to be this emphasis on trying to 0:16:25.800 --> 0:16:30.320 protect the US security, to protect US workers from some 0:16:30.400 --> 0:16:34.040 of the international competition. Does that feature in what you 0:16:34.120 --> 0:16:37.680 decide to buy, what you think might be susceptible to 0:16:37.760 --> 0:16:41.160 national security claims and real kind of interference on that level. 0:16:41.480 --> 0:16:43.720 I think that really shifted from the beginning of the 0:16:43.760 --> 0:16:48.200 pandemic even to now, because the move was for whatever 0:16:48.240 --> 0:16:51.120 reasons you want to call it was either home shoring 0:16:51.200 --> 0:16:54.440 or onshoing or friendshoring, or however you want to whatever 0:16:54.680 --> 0:16:56.920 terminology you want to use, that says, I need to 0:16:56.920 --> 0:16:58.800 make sure that I have a decent line of sight 0:16:58.840 --> 0:17:02.520 into my supply chain where is because we've had transportation 0:17:02.560 --> 0:17:04.920 issues before, we're now seeing this issue in the Red Sea. 0:17:05.160 --> 0:17:07.320 There's all sorts of things on the international stage, and 0:17:07.480 --> 0:17:09.240 or somebody who was an ally could become less of 0:17:09.280 --> 0:17:10.679 an ally and then all of a sudden they're going 0:17:10.720 --> 0:17:12.399 to threaten not to give me the things that I need. 0:17:12.600 --> 0:17:14.600 So I think that that was already happening, and I 0:17:14.640 --> 0:17:17.240 don't think that either side of the aisle right now 0:17:17.480 --> 0:17:19.639 is pushing in the opposite direction. So I think that 0:17:19.720 --> 0:17:21.120 directionally that's going to continue. 0:17:21.200 --> 0:17:22.960 Has it happened because a lot of people say that 0:17:22.960 --> 0:17:24.879 it actually hasn't happened, and the whole near shoring and 0:17:24.920 --> 0:17:27.679 front shoring was sort of a lot of lip service 0:17:27.960 --> 0:17:30.840 that didn't really come to fruition. Do you buy this 0:17:30.920 --> 0:17:33.399 story that were in the process that is going to 0:17:33.400 --> 0:17:36.160 be naturally inflationary, that's going to build in redundant seas, 0:17:36.400 --> 0:17:37.680 that's going to have legs. 0:17:37.880 --> 0:17:40.080 I think that it's not happening for a variety of reasons. 0:17:40.119 --> 0:17:42.879 There's a number of stories about the Chipsack about why 0:17:42.920 --> 0:17:45.720 that money isn't going places, and there's too many regulations 0:17:45.760 --> 0:17:48.639 and restrictions on that. But I think from a standpoint 0:17:48.680 --> 0:17:50.640 of I'm a corporate CEO, I want to make sure 0:17:50.640 --> 0:17:52.199 I know where my things are coming from. Is it 0:17:52.240 --> 0:17:54.080 going to be a chip plant in the US at 0:17:54.080 --> 0:17:56.760 some point? Probably, But in the scheme of things, I'm 0:17:56.800 --> 0:17:58.639 going to be much more attuned to that than I 0:17:58.760 --> 0:18:00.719 was before, regardless who ends up in the way. 0:18:00.760 --> 0:18:02.720 Now, how does the US talk about friendshoring when they 0:18:02.760 --> 0:18:05.160 want to block a deal from a friendly ally? 0:18:06.080 --> 0:18:07.840 That is a difficult question to answer it and I 0:18:07.880 --> 0:18:09.760 did not block back deal, so I cannot answer it. 0:18:11.320 --> 0:18:13.760 How do you prepare for that? It's almost inflexible. It's 0:18:13.800 --> 0:18:16.640 such a good question, Sarah Hunt vampired saxon words. We're 0:18:16.680 --> 0:18:19.800 seeing this repeatedly. We're dressing things up in language that 0:18:19.960 --> 0:18:22.280 might be palatable for our allies, but ultimately, look at 0:18:22.280 --> 0:18:24.399 the action, don't listen to the words. This is the 0:18:24.400 --> 0:18:27.400 difference between former president talks about America. First, starts talking 0:18:27.440 --> 0:18:30.280 about America first, Everyone's like, whoa America? First? What's this 0:18:30.400 --> 0:18:33.240 about tariffs on China? How dare he? And then here 0:18:33.280 --> 0:18:36.400 we are, same policies, same policies, dressed up in very 0:18:36.400 --> 0:18:38.560 different language, but ultimately same thing. 0:18:38.720 --> 0:18:40.879 National Security in the Wall Street Journal editorial view this 0:18:40.960 --> 0:18:44.800 morning calls it self destruction and they say, regardless of 0:18:44.800 --> 0:18:48.240 Trump or Biden, it's going to be a nasty election, 0:18:48.480 --> 0:19:00.520 but there's going to be policy damage because of it. 0:19:00.520 --> 0:19:03.159