WEBVTT - Surveillance: Disciplined Investing With Kelly 0:00:00.120 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.520 Bloomberg dot Com, and of course on the Bloomberg The 0:00:27.600 --> 0:00:31.080 Discipline to maintain discipline the message from David Kelly at 0:00:31.120 --> 0:00:34.640 JP Morgan Asset Management, the chief global strategist he joined us. Now, David, 0:00:34.640 --> 0:00:37.160 build on that. What do you mean by that? Well, 0:00:37.400 --> 0:00:41.280 I think that we were in a recovery, but this 0:00:41.320 --> 0:00:43.560 recovery is about it slow down. I mean the sound 0:00:43.600 --> 0:00:46.680 that you hear outside is screeching breaks because this V 0:00:46.760 --> 0:00:49.000 shaped recovery is going to slow a lot in the 0:00:49.080 --> 0:00:52.519 fourth quarter and and um early next year. I think 0:00:52.520 --> 0:00:55.400 it's important not to just, you know, to pile into 0:00:55.840 --> 0:00:58.040 momentum stocks. We've seen, we've seen, you know, the stock 0:00:58.040 --> 0:00:59.960 marker do wonderfully well this year, but there are parts 0:01:00.000 --> 0:01:02.160 of the the stock markets which are frankly done too well, 0:01:02.360 --> 0:01:04.360 giving the amount of uncertainty out there, and given the 0:01:04.400 --> 0:01:06.679 fact that down the road we are looking at higher 0:01:06.680 --> 0:01:08.800 taxes and higher interest rates. So I think it's very 0:01:08.840 --> 0:01:11.800 important for investors in this stage to be disciplined realized 0:01:12.040 --> 0:01:14.479 that just because we've seen some good economic numbers, because 0:01:14.480 --> 0:01:18.119 the marketers seem to be okay here, you know, don't 0:01:18.160 --> 0:01:20.000 don't take your eye off the bull. Recognize that we've 0:01:20.000 --> 0:01:22.280 still got a long way to go before this pandemic 0:01:22.360 --> 0:01:25.080 is really over. Within it is the idea of what 0:01:25.200 --> 0:01:28.919 the return will be. All the actual assumptions David Kelly 0:01:28.920 --> 0:01:31.480 has been we're supposed to invest for single digit return. 0:01:32.120 --> 0:01:35.000 Nobody believes that that's on these high flyers. Do we 0:01:35.040 --> 0:01:39.120 go back to a single digit world? We have to eventually, 0:01:39.160 --> 0:01:42.440 because in the end, it's about nominal GDP growth and 0:01:42.480 --> 0:01:45.679 what's happened for a long time, actually for decades now, 0:01:45.720 --> 0:01:48.800 as we've seen the value of financial assets um in 0:01:48.840 --> 0:01:53.040 the US rise much faster than overall nominal GDP. But 0:01:53.160 --> 0:01:55.600 ultimately it's about the growth and goods and services produced 0:01:55.600 --> 0:01:59.280 by the U S economy. And so there is gonna 0:01:59.280 --> 0:02:01.640 be some correctional long the way here and there are 0:02:01.760 --> 0:02:03.720 and we are going to see a return to single 0:02:03.760 --> 0:02:06.960 digit returns. And so it's very important for people, you know, 0:02:07.080 --> 0:02:09.320 look at valuations carefully because the things that are most 0:02:09.360 --> 0:02:11.480 overvalued are the things that are going to get hurt 0:02:11.520 --> 0:02:15.240 the worst when there is a more significant correction. Well, David, 0:02:15.320 --> 0:02:17.760 when you talk about how we could see a correction 0:02:17.919 --> 0:02:20.440 in what in tech stocks? Because right now we're seeing 0:02:20.480 --> 0:02:23.520 an ongoing performance at least for today. A return to 0:02:23.560 --> 0:02:27.440 the underperformance in small caps in financials and tech is 0:02:27.480 --> 0:02:31.239 what's recovering. Well, yeah, and and and because this market 0:02:31.320 --> 0:02:33.480 is very momentum driven. I mean, I think this year 0:02:33.520 --> 0:02:37.640 has been so difficult for fundamental analytics. I mean, how 0:02:37.639 --> 0:02:40.240 do you figure out, you know, what these companies are 0:02:40.240 --> 0:02:42.359 really worth and the sort of world we're looking at 0:02:42.400 --> 0:02:45.399 post pandemic. So I think investors are just jumping into 0:02:45.400 --> 0:02:48.640 the momentum trade here. But when we get through this, 0:02:48.680 --> 0:02:51.120 when we have a more normal economy, as that begins 0:02:51.160 --> 0:02:54.280 to shape, you know, shape as we have a sense 0:02:54.320 --> 0:02:57.639 of it. In two, I do think that value stocks 0:02:57.639 --> 0:02:59.960 should do better than growth. Growth is very expensive RealD 0:03:00.000 --> 0:03:02.160 of the value. You know, it's most expensive its means 0:03:02.200 --> 0:03:04.639 since the tech bubble. I also think that international ought 0:03:04.639 --> 0:03:06.560 to do better than the US a very similar story. 0:03:06.560 --> 0:03:09.320 Both em and developed country international are cheaper out in 0:03:09.360 --> 0:03:11.600 the US, So I think you need to think about 0:03:11.600 --> 0:03:14.280 the boring middle of the market here and try not 0:03:14.320 --> 0:03:18.000 to be too enticed or enamored of of high tech 0:03:18.600 --> 0:03:22.720 um large cap megacap growth stalks. David, fold your economics 0:03:22.760 --> 0:03:26.200 in your Castman and Farola. Your economists make very clear 0:03:26.240 --> 0:03:29.440 they have a very cautious view out. Is that conscious 0:03:29.480 --> 0:03:32.120 view folded in the fourth quarter or is that a 0:03:32.200 --> 0:03:35.640 conscious view for next year? It should be in the 0:03:35.680 --> 0:03:38.320 fourth quarter. If we're looking at quarterly GDP, we saw 0:03:38.360 --> 0:03:42.000 a GDP full by two percent in the second quarter. 0:03:42.200 --> 0:03:44.360 We think would rise by as much as thirty percent 0:03:44.800 --> 0:03:47.640 in the third annualize. But then when you rise by 0:03:47.640 --> 0:03:51.080 about three percent annualized in the fourth, so there's a 0:03:51.200 --> 0:03:54.000 very sharp deceleration growth. And you're gonna see that in jobs. 0:03:54.000 --> 0:03:56.200 I mean if you look sequentially, Okay, we saw we 0:03:56.240 --> 0:03:59.640 added one point four million jobs last month. That's good, 0:04:00.440 --> 0:04:03.320 but we think that job growth will now decelerate about 0:04:03.480 --> 0:04:06.280 less than a million per month, which sounds okay, except 0:04:06.320 --> 0:04:09.840 we're still eleven million jobs shorter where we were in February, 0:04:09.960 --> 0:04:12.200 So again a deceleration there. So I think in the 0:04:12.240 --> 0:04:15.200 monthly numbers it's upon us. In the quartine numbers, we're 0:04:15.200 --> 0:04:16.640 gonna have to wait for the fourth quarter to see 0:04:16.680 --> 0:04:19.720 that deceleration. What's the run rate of nominal GDP that 0:04:19.880 --> 0:04:24.960 you then fold into your forecasting of the equity markets. Um, well, 0:04:25.360 --> 0:04:27.039 it's it's hard to talk about a run rate in 0:04:27.080 --> 0:04:30.680 either twenty one when you get but once you get 0:04:30.680 --> 0:04:34.760 into two, we're looking at something in the order of 0:04:34.839 --> 0:04:37.239 four to five percent once we get back to close 0:04:37.279 --> 0:04:39.160 to full employment. But yeah, you're gonna be you know, 0:04:39.240 --> 0:04:42.039 we'll have to bring that unemployment rate rate down for 0:04:42.040 --> 0:04:44.600 for a while here. But you know, we've got another problem, 0:04:44.600 --> 0:04:47.240 which is that we've got a demographic crash going on 0:04:47.360 --> 0:04:49.320 right now, which is also going to take something out 0:04:49.320 --> 0:04:53.240 of GDP growth for this pandemic is Oh, it's what 0:04:53.320 --> 0:04:55.120 you make if. What's happening in Washington at the moment, 0:04:56.560 --> 0:04:58.920 it's all politics. I mean, I think that they I 0:04:59.600 --> 0:05:02.880 was hoping we'd see some sort of new support package, 0:05:03.560 --> 0:05:06.400 a Phase four deal before the conventions, because honestly, there 0:05:06.400 --> 0:05:08.159 are a lot of unemployed people in this country who 0:05:08.200 --> 0:05:10.000 need that. A lot of people are going to suffer 0:05:10.000 --> 0:05:12.320 through this winter. But nobody wants to make a deal 0:05:12.520 --> 0:05:14.599 at this stage, it seems to me before the election. 0:05:14.760 --> 0:05:17.640 So hopefully after the election, however, it goes in that 0:05:17.720 --> 0:05:20.920 lame duct session of Congress, we'll have something to support 0:05:20.920 --> 0:05:23.719 people who just can't get back to work until a 0:05:23.720 --> 0:05:26.360 pandemic is tamed, and hopefully we'll tame the pandemic in 0:05:26.440 --> 0:05:29.920 twenty twenty one. But right now it's just partisan posturing 0:05:30.120 --> 0:05:33.039 because everybody is focused on the election. David, is no 0:05:33.160 --> 0:05:36.480 deal or a very skinny deal priced into the market currently. 0:05:37.600 --> 0:05:39.680 I think it probably is. And remember we're talking about 0:05:39.680 --> 0:05:41.520 eight weeks. I mean we're talking about that there are 0:05:41.880 --> 0:05:44.960 perhaps ten weeks. But once the election is over, I 0:05:44.960 --> 0:05:47.919 think there is a majority probably in Congress for some 0:05:47.960 --> 0:05:50.360 sort of skinny deal because after all, and things like 0:05:50.560 --> 0:05:53.160 state and local government, you can come back in January 0:05:53.240 --> 0:05:54.800 with a new Congress and if you know, if, if, 0:05:55.480 --> 0:05:57.640 depending on how that that shapes, that you could you 0:05:57.640 --> 0:06:00.320 could do something then So you just need to do 0:06:00.400 --> 0:06:02.480 something about the unemployment support. You need to do something 0:06:02.480 --> 0:06:05.479 to try and help these small businesses. But it's you 0:06:05.520 --> 0:06:07.720 don't need to spend a fortune right now, because you 0:06:07.760 --> 0:06:09.960 can always come back next January and do something bigger. 0:06:10.920 --> 0:06:13.039 It's even just a comment on the language that we're 0:06:13.080 --> 0:06:15.640 using at the moment. A skinny deal is now something 0:06:15.680 --> 0:06:19.440 between five hundred and seven hundred billion dollars down in Washington. 0:06:19.880 --> 0:06:23.200 What are your thoughts on that there are no fiscal 0:06:23.200 --> 0:06:25.599 hawks left. There's no monetary hawks left either, and the 0:06:25.600 --> 0:06:28.400 hawks have all left Washington, which is a little worrying. 0:06:28.880 --> 0:06:30.760 We do need to do this right now, but I 0:06:30.800 --> 0:06:34.000 am very concerned that as the economy cover is particularly 0:06:34.120 --> 0:06:37.360 get a good vaccine and it begins to move forward fast. 0:06:37.760 --> 0:06:40.159 Later next year, We've got a lot of government debt, 0:06:40.200 --> 0:06:41.599 and this is going to be a time when we 0:06:41.680 --> 0:06:45.680 need to be really disciplined in terms of policy, just 0:06:45.760 --> 0:06:48.839 to maintain the credibility of you know, of our you 0:06:48.839 --> 0:06:51.800 know of treasury bonds and credibility of the currency. So 0:06:52.200 --> 0:06:54.800 we're going to need to have some discipline down the road. 0:06:55.080 --> 0:06:57.240 But you know, I have no problem with spending money 0:06:57.320 --> 0:06:58.600 right now because there are a lot of people who 0:06:58.640 --> 0:07:01.320 are really in some stress and you're not going to 0:07:01.400 --> 0:07:04.920 create inflation in the middle of a of an economy 0:07:04.960 --> 0:07:08.960 with the almost ten percent unemployment. David Ran to catch 0:07:09.040 --> 0:07:11.280 up as always, stay well, send out records to the team. 0:07:11.320 --> 0:07:18.400 David Kelly there of JP Morgan Asset Management. Let's stagger 0:07:18.480 --> 0:07:22.000 to our guests as we can Omar regular shrub chief Investment. 0:07:25.600 --> 0:07:27.760 You know, I can't, I can't come out after Quinneth 0:07:27.800 --> 0:07:31.360 Peltrow Good Morning on Bloomberg Radio and Bloomberg Television. Thrilled 0:07:31.360 --> 0:07:34.280 you with us under simulcast and Mr Aguilar will give 0:07:34.360 --> 0:07:38.240 us some brilliance right now. What is the character of 0:07:38.280 --> 0:07:41.520 this pullback? You have the advantage of Kathy and Lisianne 0:07:41.560 --> 0:07:44.560 to give you perspective as well. What is the nature 0:07:44.800 --> 0:07:49.280 of the pullback we've seen? Omar Well, good morning Town. 0:07:49.320 --> 0:07:52.480 Definitely is that out of my range of understanding A 0:07:52.480 --> 0:07:55.960 lot of the discussion of reline and celebrities. But I 0:07:56.040 --> 0:07:59.680 can tell you though that um big part of what 0:07:59.720 --> 0:08:02.080 the more it is going through now is something that 0:08:02.200 --> 0:08:05.040 in a way, it shouldn't be coming as a surprise. 0:08:05.160 --> 0:08:08.080 As we come out of this summer and such an 0:08:08.080 --> 0:08:13.040 amazing run in the market, we clearly speculated what would 0:08:13.080 --> 0:08:16.040 could be the fault look like. And if you actually 0:08:16.080 --> 0:08:18.560 see all the sources of uncertainty we had and the 0:08:18.600 --> 0:08:23.000 gap between the market and the economy getting bigger and bigger, 0:08:24.160 --> 0:08:28.120 that all of a sudden created that the environment for 0:08:28.200 --> 0:08:31.240 a you know, a potential volatility and what we're observing 0:08:31.320 --> 0:08:33.000 right here you put it into the context of the 0:08:33.040 --> 0:08:35.720 size of the rally that we have seen since April, 0:08:36.080 --> 0:08:39.400 we're just seeing volatility. The size of the correction, even 0:08:39.400 --> 0:08:43.680 though in the NASDAK has significant, is still, you know, 0:08:43.840 --> 0:08:47.040 very small relative to the size of the bold market 0:08:47.120 --> 0:08:50.240 we saw earlier in the year. Our really serious question, 0:08:50.280 --> 0:08:52.439 and I don't want you to speak for the executives 0:08:52.440 --> 0:08:54.760 A Swab and Mr Schwab as well, you can do 0:08:54.800 --> 0:08:59.880 that firm self. Swab and others in retail electronic brokerage 0:09:00.240 --> 0:09:05.079 have been pinatas about the sizeable retail trading we're seeing. 0:09:05.480 --> 0:09:09.160 Do you buy that idea that there's something ill about 0:09:09.200 --> 0:09:14.160 all that retail trading? Well, you know, the the our 0:09:14.520 --> 0:09:17.960 job a CHUAB is always to guide retail investors to 0:09:18.080 --> 0:09:21.120 find their best way to trade and in many cases 0:09:21.160 --> 0:09:24.120 to find, you know, the opportunities they find in the 0:09:24.160 --> 0:09:26.160 market so that they can use their capital in the 0:09:26.280 --> 0:09:29.599 wise way. Of course, there's a lot of players in 0:09:29.640 --> 0:09:32.200 the market, there's a lot of activity in the market, 0:09:32.280 --> 0:09:34.760 and the size of the retail trading, especially the high 0:09:34.880 --> 0:09:38.920 frequency retail trading, has had an impact in the market, 0:09:38.920 --> 0:09:41.120 no question about it. Now. I think a big part 0:09:41.160 --> 0:09:43.640 of the discussion of what we do at investment management 0:09:43.640 --> 0:09:46.719 part of CHUAB, it also involves, you know, trying to 0:09:46.760 --> 0:09:50.360 guide them in through the behavioral aspects of the market. 0:09:50.400 --> 0:09:52.720 If you actually see a lot of the retail activity 0:09:53.200 --> 0:09:56.199 usually tends to be very short term in age nature, 0:09:56.440 --> 0:09:59.480 and in many cases tends to be fairly related to 0:09:59.520 --> 0:10:02.680 behavior of economics. Um So we do a lot of 0:10:02.720 --> 0:10:04.719 research and we provide a lot of advice to our 0:10:04.760 --> 0:10:07.800 retail clients to try to guide them to understand what 0:10:08.000 --> 0:10:11.840 is really the motivation be find a lot of the trading. 0:10:11.920 --> 0:10:14.000 Is it really more for a short term trade? Is 0:10:14.000 --> 0:10:17.960 it really more consistent with their investment objectives? Well, I am. 0:10:18.120 --> 0:10:20.640 You mentioned two things. They're one on side the volume 0:10:20.679 --> 0:10:23.480 clearly increased over the last six months on the retail side. 0:10:23.720 --> 0:10:25.920 The other on the character of the trading. Can you 0:10:25.960 --> 0:10:27.880 talk a little bit more about that, Whether you've seen 0:10:27.920 --> 0:10:30.760 a shift to more short term than perhaps it was 0:10:30.760 --> 0:10:32.960 twelve months ago, Whether you've seen a shift from just 0:10:33.200 --> 0:10:35.720 the underlying stock to more options activity, which is a 0:10:35.720 --> 0:10:37.920 big discussion in the last week or so. Can you 0:10:37.920 --> 0:10:40.960 give us some color some clarity there. I'm a well, 0:10:41.080 --> 0:10:43.760 you know, the the I think the market environment has 0:10:43.760 --> 0:10:47.880 actually put you know, clients and in generally investors in 0:10:48.000 --> 0:10:50.840 like two camps, and you can actually barely clearly see 0:10:50.920 --> 0:10:54.000 through the activity that we see in the market. On 0:10:54.000 --> 0:10:56.320 one hand, we have what is called in behavioral finance, 0:10:56.360 --> 0:10:59.920 the overconfident crowd, the over confident crowd, that is a 0:11:00.000 --> 0:11:04.600 cognitive bias that basically feels that clearly, short term trading 0:11:04.720 --> 0:11:08.160 it is the place to go, mostly because central banks 0:11:08.200 --> 0:11:10.880 provide that extra liquidity and backstop for the market to 0:11:10.920 --> 0:11:14.200 continue to follow that trade. You can actually see that 0:11:14.320 --> 0:11:17.000 more in options, you can see that more in just 0:11:17.160 --> 0:11:19.080 the momentum trade. You can actually see it. You can 0:11:19.120 --> 0:11:22.760 obviously think about all the different participants that are trading 0:11:22.880 --> 0:11:25.760 on on and off regarding those short term you know 0:11:26.040 --> 0:11:28.760 components on the other hand, and we see that more 0:11:28.800 --> 0:11:31.880 and more often, we actually see more of the other 0:11:31.920 --> 0:11:34.080 side of the trade, which is some of those you 0:11:34.120 --> 0:11:37.400 know investors that tend to be more risk averse were 0:11:37.480 --> 0:11:39.960 loss a version, which is more of an emotional bias 0:11:40.000 --> 0:11:43.160 in behavioral economics, that tend to actually drive more and 0:11:43.320 --> 0:11:45.920 trying to be more safe and try to put more 0:11:46.080 --> 0:11:49.160 cash on the sidelines and looking for protections. So when 0:11:49.200 --> 0:11:52.160 you think about options, it's it's both ways. It basically 0:11:52.200 --> 0:11:54.320 allows for you to put money to work in the 0:11:54.360 --> 0:11:56.800 market to try to put you know, your views, but 0:11:56.880 --> 0:11:59.520 also to try to seek protection. So we actually see, 0:11:59.679 --> 0:12:02.840 you know, basically a bifurcation in terms of the the 0:12:02.880 --> 0:12:06.160 way that activity goes. One is more short term in nature, 0:12:06.200 --> 0:12:08.480 the other one tends to be more long term in nature. 0:12:08.720 --> 0:12:11.080 So does this all balance itself out and keep the 0:12:11.320 --> 0:12:15.280 rotation into cyclicles intact despite the textile off or we're 0:12:15.280 --> 0:12:18.040 gonna be basically be set back and it's not going 0:12:18.080 --> 0:12:20.280 to regain the helm and everything else going to kind 0:12:20.280 --> 0:12:23.679 of limp along for a while. Well, you know, I've 0:12:23.840 --> 0:12:26.960 I've always you know, described this induced the theory of 0:12:27.040 --> 0:12:30.800 economics that basically say, when you look at history of recessions, 0:12:31.400 --> 0:12:35.319 normally the market takes off before the recession is finally completed. 0:12:36.160 --> 0:12:38.280 But in one thing that has been common in all 0:12:38.280 --> 0:12:41.559 the prior recessions is that the source of the recession 0:12:41.679 --> 0:12:45.520 gets resolved before you start seeing the rotation from growth 0:12:45.520 --> 0:12:48.800 to value. Even though the market can continue to go up, 0:12:48.840 --> 0:12:51.840 you actually see the rotation you know, into value from growth, 0:12:51.880 --> 0:12:54.640 and that's very typical and most of the recessions what 0:12:54.760 --> 0:12:57.760 we what is unique about this one is that these 0:12:57.800 --> 0:13:01.160 looks more as a recession that comes for a nashural 0:13:01.360 --> 0:13:05.440 disaster more than an economic you know, driven recession, and 0:13:05.480 --> 0:13:09.360 the reality those and the majority of the natural disaster recessions, 0:13:09.480 --> 0:13:12.520 they are actually solved because the natural acester has gone. 0:13:12.720 --> 0:13:16.439 In this particular one, we have not solved the source 0:13:16.480 --> 0:13:19.640 of the recession. We're still trying to figure it out, 0:13:19.960 --> 0:13:22.800 and therefore it's going to be very hardly to basically 0:13:22.800 --> 0:13:26.400 think about a series of rotation until we actually have 0:13:26.679 --> 0:13:29.640 our kids to the source of that you know, solution 0:13:29.720 --> 0:13:33.120 for the recession source. I'm a time on time, just 0:13:33.120 --> 0:13:35.319 a quick one from May. Clearly there's many people that 0:13:35.400 --> 0:13:37.560 still haven't come back to the office. Have you got 0:13:37.600 --> 0:13:40.880 any basic assumptions of what happens to volume with guys 0:13:40.960 --> 0:13:43.640 like yourself right now once people start going back to 0:13:43.640 --> 0:13:48.559 the office again. Well, it's actually quite interesting, you know, John, 0:13:48.600 --> 0:13:51.560 because what we actually think is that there is a 0:13:51.600 --> 0:13:54.720 significant amount of people that are actually more comfortable trading 0:13:54.760 --> 0:13:56.959 from home, and in fact, a lot of the activity 0:13:57.240 --> 0:14:00.440 in terms of day trading tends to be more often 0:14:00.760 --> 0:14:03.199 or people that are now have more time to actually 0:14:03.200 --> 0:14:06.200 be training at home, so we we don't necessarily anticipate 0:14:06.280 --> 0:14:09.320 to see any significant change in terms of how the 0:14:09.440 --> 0:14:13.720 different um you know, activity within trading will actually happen. 0:14:13.800 --> 0:14:16.319 Of course, it's solid speculation, you know what we think 0:14:16.320 --> 0:14:19.160 about the bigger players people obviously, like on the asset 0:14:19.200 --> 0:14:22.120 management side, you know, we obviously all are working from 0:14:22.160 --> 0:14:24.560 home and therefore for that is not going to make 0:14:24.600 --> 0:14:26.760 any difference in terms of how we operate now in 0:14:26.840 --> 0:14:30.000 terms of retail clients and in terms of others. Clearly, 0:14:30.120 --> 0:14:32.200 you know, the advantage that they have in terms of 0:14:32.240 --> 0:14:36.360 their technology that is provided by different providers is there. 0:14:36.480 --> 0:14:39.120 So it is it is unclear to me that there 0:14:39.120 --> 0:14:41.160 will be a significant change in the volume that we see, 0:14:41.160 --> 0:14:44.520 and we see a significant pick up invalume already. I'm 0:14:44.520 --> 0:14:47.280 not great to catch up as always, I'm Aguila from 0:14:47.280 --> 0:14:55.040 shaf Thank you right now. In oil, we really ignored 0:14:55.080 --> 0:14:56.960 this since it's been my fault, and we to send 0:14:57.400 --> 0:15:01.720 join us with energy aspects, terrific micro economic analysis of 0:15:01.800 --> 0:15:04.880 what's going on in oil, but also the broader picture 0:15:05.000 --> 0:15:08.160 as well. How do you respond, Emriata to the certitude 0:15:08.160 --> 0:15:10.400 of the pundits that this is just a bad and 0:15:10.520 --> 0:15:17.440 weaker global demand a weaker global economy. Do you buy it? Well, Tom, 0:15:17.440 --> 0:15:20.880 I said that we really never were talking about a 0:15:20.920 --> 0:15:24.480 strong global economy, right. I think, if anything, the price 0:15:24.520 --> 0:15:27.320 of oil is finally catching up with fundamentals. We talked 0:15:27.360 --> 0:15:30.520 about it not that long ago. The kintango in the market, 0:15:30.560 --> 0:15:33.520 so the futures prices was telling us that, you know, 0:15:33.680 --> 0:15:36.720 prices in the future will be higher, um. And that 0:15:36.800 --> 0:15:39.720 was already showing the kintango had widened. It was showing 0:15:39.760 --> 0:15:42.840 the physical market was oversupplied when opek had started to 0:15:42.880 --> 0:15:46.000 ease their carts and US production was coming back a 0:15:46.040 --> 0:15:48.680 little bit. Um. But the price isn't move and that 0:15:48.840 --> 0:15:50.760 was to do with the fact that you know, Fed's 0:15:50.840 --> 0:15:53.640 kept the interest rate so low, sas so much money around, 0:15:53.960 --> 0:15:58.440 and the dollar was extremely weak. Finally those factors changed, 0:15:58.440 --> 0:16:01.200 and that's essentially what dragged price as well. This was 0:16:01.280 --> 0:16:04.320 long over you, um. And I think what this should 0:16:04.360 --> 0:16:07.640 help is accelerate some of those inventory drawdowns which we're 0:16:07.640 --> 0:16:10.480 already seen. But it should get better bigger, um. And 0:16:10.520 --> 0:16:13.280 that's the only way we will rebalance this market. Well, Okay, 0:16:13.320 --> 0:16:15.800 I'm gonna draw the ire of some my co hosts, perhaps, 0:16:15.840 --> 0:16:18.239 but trying to come up with a narrative to understand 0:16:18.640 --> 0:16:22.000 whether the moves in the equity market have been consistent 0:16:22.040 --> 0:16:24.480 with what we're seeing in oil. Oil seemed to be 0:16:24.480 --> 0:16:26.800 moving somewhat independently of the stock cell off that we saw, 0:16:26.840 --> 0:16:30.280 the nastac cell off in particular over the past three sessions, 0:16:30.320 --> 0:16:33.680 particularly having to do with OPEC cutting prices and people 0:16:33.800 --> 0:16:37.320 not increasing their orders all that much. Do you find 0:16:37.440 --> 0:16:39.960 the price action in oil, the weak demand in oil 0:16:40.040 --> 0:16:42.560 to be consistent with the large to the large degree 0:16:42.720 --> 0:16:46.680 the recovery and equity prices. I would say that what 0:16:46.800 --> 0:16:49.440 is the problematic thing with oil? Of course right now 0:16:49.520 --> 0:16:53.440 the headwinds really is that demand is recovering, like you'd say, 0:16:53.480 --> 0:16:55.200 I think, and you can see that in the equity market, 0:16:55.200 --> 0:16:57.760 but also whether it be home sales data and just 0:16:57.840 --> 0:17:01.200 generally even you know, broader mac data in China. Are 0:17:01.240 --> 0:17:03.680 the parts of the world recovering for sure, But it's 0:17:03.720 --> 0:17:07.280 transportation that's the weakness, right and unless and until there's 0:17:07.280 --> 0:17:10.160 a vaccine, it is going to be hard to get 0:17:10.280 --> 0:17:13.679 people moving in the same way. Yes, traffic data is 0:17:13.720 --> 0:17:17.560 picking up, but you know, flying check field demands remains 0:17:17.640 --> 0:17:21.320 at record low still and that is the issue over here, 0:17:21.320 --> 0:17:23.480 and that that's why I think it is correct for 0:17:23.600 --> 0:17:27.040 oil to diverge from equity is broadly. But once you 0:17:27.119 --> 0:17:30.240 have run down the infantry, and once you do get 0:17:30.280 --> 0:17:32.320 the demand recovery, which by the way is a good 0:17:32.400 --> 0:17:36.440 year if not too away, then things will probably correl 0:17:36.480 --> 0:17:38.560 it a lot better. This is crucial, this idea that 0:17:38.600 --> 0:17:41.840 perhaps the economy can recover without keep a flying around 0:17:41.840 --> 0:17:44.480 and traveling around to the degree that they did in 0:17:44.480 --> 0:17:47.400 the past. How low could oil prices go in your view, 0:17:48.600 --> 0:17:51.520 I don't think that when you're talking about the recovery 0:17:51.560 --> 0:17:53.480 in the man we're not saying that the recovery is 0:17:53.480 --> 0:17:56.119 going to go take us back to pre COVID levels. Right. 0:17:56.160 --> 0:17:58.680 We should be very clear on that we are recovering. 0:17:58.880 --> 0:18:02.160 But it's just that unlessen unt that last bit, which 0:18:02.200 --> 0:18:04.880 is going to be very all intensive recovers, we're really 0:18:04.880 --> 0:18:07.719 not going to be able to go back to I 0:18:07.760 --> 0:18:10.359 don't think there's much more than a two dollar you know, 0:18:10.640 --> 0:18:13.360 left in the corrections. We it's been very, very violent. 0:18:13.760 --> 0:18:16.560 I think at around thirty five dollars we should find 0:18:16.600 --> 0:18:19.760 the floor. I think us production, the recovery we were 0:18:19.760 --> 0:18:22.760 seeing very gradual. That's going to go back down again 0:18:23.280 --> 0:18:25.199 um and I think as a result of that, you 0:18:25.240 --> 0:18:29.480 will probably start to see more pressure generally um on 0:18:29.480 --> 0:18:32.680 on those supplies, which again helps in the rebalancing. Is 0:18:32.720 --> 0:18:39.040 this pullback advantageous for Saudi Arabia to provide new discipline 0:18:39.119 --> 0:18:42.919 to OPEC plus? I think it's not going to do 0:18:43.000 --> 0:18:46.480 them any harm, especially given they've been trying to get 0:18:46.520 --> 0:18:51.000 compliance up, and to be honest, Iraq and Nigerian compliance 0:18:51.040 --> 0:18:53.560 has been picking up. It's been more of the other 0:18:53.640 --> 0:18:56.320 GCC countries, some of them that their compliance has been 0:18:56.320 --> 0:18:59.240 slipping off late. But yes, I think that's very much 0:18:59.359 --> 0:19:02.160 the focused and while Saldi Arabia would of course light 0:19:02.240 --> 0:19:04.359 pricing to be around forty dollars, they all have very 0:19:04.400 --> 0:19:07.359 high budgetory requirements. I think this does play to their 0:19:07.400 --> 0:19:09.640 advantage in the short term. What do you see next? 0:19:09.800 --> 0:19:12.320 And Lisa's point, I mean on the date calendar here, 0:19:12.359 --> 0:19:16.439 what does oil do next? I think for now it 0:19:16.480 --> 0:19:19.040 has to consolidate, and unfortunately it's going to be pretty 0:19:19.040 --> 0:19:22.680 boring because unless anounder, the billion barrels we built gets 0:19:22.760 --> 0:19:26.399 kind of absorbed, um, it's really not going to get 0:19:26.440 --> 0:19:29.199 exciting and prices can't really move higher. I think the 0:19:29.240 --> 0:19:31.720 next big thing has to really come from the winter 0:19:31.800 --> 0:19:34.159 demand side. So you know, that's what I think a 0:19:34.160 --> 0:19:37.280 lot of people are focusing on because the macro picture 0:19:37.440 --> 0:19:40.400 is gradually improving, right, but that's very gradual that are 0:19:40.480 --> 0:19:43.359 risked around the second wave and second lockdowns around the world. 0:19:43.640 --> 0:19:45.840 So it's really going to be about the winter demand next. 0:19:47.000 --> 0:19:49.200 I'm rata right to catch up with you this morning. 0:19:49.200 --> 0:19:56.480 I'm ready sad ad Energy aspects. Thank you. This is 0:19:56.520 --> 0:19:59.800 a conversation of the day within the selection season with 0:20:00.280 --> 0:20:03.840 question over what the wealthy the haves are doing with 0:20:03.880 --> 0:20:07.240 their money. Providing leadership on this, including his wonderful new 0:20:07.280 --> 0:20:10.720 book is David Rubinstein, of course, of the Carlisle Group 0:20:11.000 --> 0:20:14.600 and his peer to peer conversations. One of them has 0:20:14.640 --> 0:20:17.040 been with Read Hastings. David, I want to cut to 0:20:17.119 --> 0:20:21.440 the chase Mark benny Off of Salesforce, that doubt component 0:20:21.920 --> 0:20:26.680 in a recent conversation with Bloomberg was scathing about the 0:20:27.080 --> 0:20:31.879 lack of philanthropy, the clumsiness of the new rich of California, 0:20:31.960 --> 0:20:35.439 the new rich of technology. Read Hastings seems to be 0:20:35.480 --> 0:20:40.440 providing real leadership. Here is his gift to black universities 0:20:40.800 --> 0:20:43.880 is that enough to be a game changer, to teach 0:20:44.040 --> 0:20:48.360 the younger crew how to give away the millions. Well, 0:20:48.400 --> 0:20:50.680 it was a twenty million dollar gift and it got 0:20:50.680 --> 0:20:53.320 a lot of attention, as it should have gotten. When 0:20:53.320 --> 0:20:55.120 I asked him about it, he said, he's actually made 0:20:55.280 --> 0:20:58.320 very other large gifts. Actually some are larger, but they 0:20:58.359 --> 0:21:00.679 just haven't been publicized. So I think he will have 0:21:00.720 --> 0:21:02.960 an impact. But I think Mark makes a good point. 0:21:03.040 --> 0:21:05.520