WEBVTT - Surveillance: Warther: VIX Needs a Catalyst 0:00:00.320 --> 0:00:04.160 Who you put your trust in matters. Investors have put 0:00:04.200 --> 0:00:07.640 their trust in independent registered investment advisors to the tune 0:00:07.640 --> 0:00:12.240 of four trillion dollars. Why learn more and find your 0:00:12.240 --> 0:00:27.240 independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 0:00:27.280 --> 0:00:31.320 I'm Tom Keane. Always with Michael McKee. Daily we bring 0:00:31.360 --> 0:00:35.280 you insight from the best in economics, finance, investment, and 0:00:35.360 --> 0:00:41.519 international relations. Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, 0:00:41.560 --> 0:00:48.400 and of course on the Bloomberg. It has been a 0:00:48.680 --> 0:00:51.480 quiet on Wall Street this summer. Our single best chart 0:00:51.560 --> 0:00:54.880 is a VIX and I introduce a presidential moving average 0:00:54.880 --> 0:00:58.480 of forty eight months four year moving average on the vins. 0:00:58.520 --> 0:01:01.400 The blue in the background is just simply the VIX 0:01:01.480 --> 0:01:05.120 always volatile, but down we go through that twenty level 0:01:05.240 --> 0:01:07.960 Stewart where there is with us working with Dennis to 0:01:08.000 --> 0:01:10.600 Brusher and Ed Hyman at I S I years ago 0:01:10.680 --> 0:01:13.280 now with b MP Perry bout what does the quiet 0:01:13.440 --> 0:01:18.080 mean to derivative and quantz like you at BP color 0:01:18.360 --> 0:01:20.800 The nature of the quiet that we're in, I would 0:01:20.800 --> 0:01:22.839 say a couple of things, one of which being we've 0:01:22.959 --> 0:01:25.920 entered this period following the FEDS taper tangent rhetoric where 0:01:26.200 --> 0:01:29.600 we have more frequent draw downs. However, in times after 0:01:29.640 --> 0:01:31.680 the drawdowns we go back to this very low level 0:01:31.720 --> 0:01:34.840 of baseball. We've been almost forty days without a one 0:01:34.880 --> 0:01:37.320 percent move in the SMP and for the VIX, it's 0:01:37.319 --> 0:01:40.400 really that short dated realized VALL that drives the index. 0:01:40.560 --> 0:01:42.759 So from that perspective, we're going to need some kind 0:01:42.760 --> 0:01:45.040 of economic catalysts, some kind of political catalyst to drive 0:01:45.040 --> 0:01:47.440 it higher. And um, you know, we actually did this 0:01:47.520 --> 0:01:49.480 very interesting study. So we look back all the way 0:01:49.520 --> 0:01:53.440 to the Truman Dewey election election of Thanking, and in 0:01:53.480 --> 0:01:55.680 this kind of ten weeks ahead, eight weeks ahead of 0:01:55.720 --> 0:01:58.800 the allot happens, realize all tends to be lower in elections, 0:01:58.840 --> 0:02:01.040 so we drive even lower. Guy Johnson jump in here, 0:02:01.080 --> 0:02:04.680 back to Truman and Dewey. Okay Stewart, Yeah, the bowls 0:02:04.760 --> 0:02:07.400 really quiet at the headline level. But you look below 0:02:07.440 --> 0:02:09.799 the surface and there's plenty going on in these markets, 0:02:09.919 --> 0:02:13.480 Plenty of sector rotation, plenty happening. That's where the story is. 0:02:13.680 --> 0:02:16.840 We can forget VIX because the story is actually in 0:02:16.880 --> 0:02:19.360 a sector rotation that is taking us out of utilities 0:02:19.360 --> 0:02:23.440 out of telecoms into the more high beta areas. Indeed, 0:02:23.840 --> 0:02:25.760 the rotation and the financials, which have been a clear 0:02:25.760 --> 0:02:28.320 out perform over the past five days, has been quite strong. 0:02:28.639 --> 0:02:31.720 Energy being better for sale along with miners. I think 0:02:31.760 --> 0:02:35.240 we're really actually seeing on an index level, realized volt 0:02:35.240 --> 0:02:37.359 low because of the fact there's been such strong rotation. 0:02:37.720 --> 0:02:39.400 Now if you look at DIF an AASA classes and 0:02:39.400 --> 0:02:41.839 how they're actually pricing in the probability of a FED hike, 0:02:42.000 --> 0:02:44.000 it seems that equities are actually almost leading the charge. 0:02:44.040 --> 0:02:47.600 Equity risk premium overall has not um widened out to 0:02:47.639 --> 0:02:50.760 a considerable degree, but we have seen very strong rotation, 0:02:51.160 --> 0:02:54.760 and globally we've seen financial financials better bid over the 0:02:54.840 --> 0:02:58.280 last few weeks, including eurostocks financials which have outperformed the 0:02:58.280 --> 0:03:01.560 Eurostocks fifty index considerably in the last few days. Are 0:03:01.560 --> 0:03:04.240 we also saying this this calm in the VIX because 0:03:04.639 --> 0:03:06.440 part of the market believe that we're going to say, 0:03:06.440 --> 0:03:08.760 actually the market going in one direction, and part of 0:03:08.760 --> 0:03:10.120 the market thinks we're going to see it going in 0:03:10.160 --> 0:03:12.720 the other direction. And there's also a kind of canceling 0:03:12.720 --> 0:03:16.760 out process retail versus the pros. Indeed, there there definitely 0:03:16.800 --> 0:03:19.880 is some dispersion amongst sectors. But I think one thing 0:03:20.000 --> 0:03:22.079 when you talk about retail versus the pros that's very 0:03:22.080 --> 0:03:26.919 interesting is the CFTC positioning report. So if you look 0:03:26.919 --> 0:03:29.400 at last Friday's report, which is as of Tuesday, so 0:03:29.480 --> 0:03:32.760 ahead of Jackson Hole, hedge funds leveraged funds were the 0:03:32.800 --> 0:03:36.960 most short they've ever been. Ever. Ever you can say, ever, 0:03:37.120 --> 0:03:39.680 as far as the as far as the data we have, 0:03:40.160 --> 0:03:42.080 how far back to I believe it goes to back 0:03:42.120 --> 0:03:44.600 to two thousand eleven. That's a better headline. David Kotok 0:03:44.640 --> 0:03:48.200 just woke up from his morning. Now, hedge funds wicked short. 0:03:48.440 --> 0:03:51.000 That's what we would say in Boston. That's a banner, folks, 0:03:51.120 --> 0:03:53.760 hedge funds we could short. I love it. Let's go 0:03:53.800 --> 0:03:56.360 to the chart for Kotak. Young Warther has never seen 0:03:56.360 --> 0:03:59.600 this chart before. This is the acclaimed impots and chart. 0:04:00.160 --> 0:04:02.320 If it said everybody had this on their wall thirty 0:04:02.400 --> 0:04:05.360 years ago, young Kotak knew it. Then here we are 0:04:05.400 --> 0:04:08.520 back to the depression, the Guadalcanal rally, and then we 0:04:08.640 --> 0:04:11.520 got the malaise in the seventy or eight two rally 0:04:11.760 --> 0:04:13.400 and help we go the red line on the left 0:04:13.640 --> 0:04:16.800 is the depression, because it's log bring it over. Two 0:04:16.839 --> 0:04:20.120 thou eight was nothing like the depression, David, I mean, 0:04:20.160 --> 0:04:23.000 I'm sorry, that's the long term trend. Do I go 0:04:23.120 --> 0:04:27.920 to cash? Amid Stewart Worther's quiet, I we think, so 0:04:28.120 --> 0:04:33.000 we have a cash reserve? Come on, come on, I'm 0:04:33.000 --> 0:04:36.200 paying you a fee. Well, you're paying me a fee 0:04:36.200 --> 0:04:38.640 on eighty to do something. You want a fee to 0:04:38.680 --> 0:04:42.279 take me to lunch? Let's do it all right? Look, cash, 0:04:42.440 --> 0:04:46.240 I think we have head winds and the liveoar spreads 0:04:46.560 --> 0:04:52.719 triggered this change. Liebor has forecast power over stock markets. Okay, well, 0:04:52.760 --> 0:04:55.120 let's rip up the script here, guy, this is really important. 0:04:55.200 --> 0:04:57.440 What does your take on the lift of live where 0:04:57.520 --> 0:05:00.640 Bob Sine doesn't agree with David Kotak. He thinks just 0:05:00.760 --> 0:05:04.560 basically rule changes in manipulation leading to a higher library, 0:05:04.600 --> 0:05:08.240 which is a guy. Uh, if I was able to 0:05:08.279 --> 0:05:09.960 come up with a decent answers to that one time, 0:05:09.960 --> 0:05:12.279 I must be sitting on a beach somewhere enjoying myself 0:05:12.360 --> 0:05:17.520 because doing yeah, well, she's she's at the aquarium, I think, 0:05:17.680 --> 0:05:20.440 looking at sharks, which I think it's probably a useful 0:05:20.440 --> 0:05:23.200 exercise in itself. UM, let me do. I just want 0:05:23.200 --> 0:05:25.600 to come back to this cash position though, because at 0:05:25.600 --> 0:05:27.960 the beginning of the year, we came into we came 0:05:27.960 --> 0:05:29.880 off our holidays, and we came into the big beginning 0:05:29.920 --> 0:05:33.280 of the year, David, and we we panicked and the 0:05:33.320 --> 0:05:36.440 market just really rolled over aggressively. We're coming back off 0:05:36.440 --> 0:05:39.120 our summer holidays. It's September the one. There's a big 0:05:39.120 --> 0:05:41.400 cash position out there at the moment. How is that 0:05:41.440 --> 0:05:43.520 cash position going to be put to work? If at all? 0:05:44.520 --> 0:05:47.839 There's two issues here. Do you use valuation metrics, which 0:05:47.880 --> 0:05:51.800 are traditional they don't seem to work now, or do 0:05:51.880 --> 0:05:56.280 you use there is no alternative tina. Tina is very 0:05:56.320 --> 0:06:00.400 seductive when you're up against a zero inter a strait, 0:06:00.680 --> 0:06:05.159 it's very seductive. It's also dangerous. We're gonna continue this 0:06:05.200 --> 0:06:07.400 discussion with Stewart. I want you to jump in here 0:06:07.720 --> 0:06:09.920 on the Tina idea. I mean, you're a pro at 0:06:09.920 --> 0:06:12.680 b MP Perry Bak saying you're gonna go to cash. 0:06:13.160 --> 0:06:16.040 A lot of people, by perspectives, can't do that. Can 0:06:16.080 --> 0:06:20.680 you protect yourself with derivative instruments? Yes you can. And 0:06:20.720 --> 0:06:23.080 I think one area where we saw. This is if 0:06:23.120 --> 0:06:25.880 you look at the two last draw down, so August 0:06:26.080 --> 0:06:31.159 versus January February now implied vall levels actually spiked in 0:06:31.160 --> 0:06:33.800 August because people were under hedged. People had not expected. 0:06:34.040 --> 0:06:36.520 So now they're all piling into hedging. And now if 0:06:36.560 --> 0:06:38.920 you look at actually January and February, they did hedge 0:06:39.880 --> 0:06:42.280 fabulous Stewart where they where this would be MP Perry Bark, 0:06:52.360 --> 0:06:56.000 James Trevidas Uh considered it at one point, and the 0:06:56.120 --> 0:06:59.960 vice presidential derby for Secretary Clinton, all those trevitas without 0:07:00.080 --> 0:07:04.119 obvious political ilk joins us now from the Fletcher School, 0:07:04.160 --> 0:07:08.680 Toughs University, Admiral I must digress away from the gent 0:07:09.480 --> 0:07:13.400 to what we witnessed yesterday within diplomacy and within the 0:07:13.400 --> 0:07:17.280 Fletcher School heritage, Robert Hormance and others that have darkened 0:07:17.280 --> 0:07:22.680 the door of Toughs University's international relations effort. A candidate 0:07:22.880 --> 0:07:29.200 going to see a major diplomatic partner, as we observe yesterday, 0:07:29.320 --> 0:07:32.800 what will be the follow on effects for all? I 0:07:32.840 --> 0:07:37.960 don't think there'll be a significant reaction to this tom 0:07:37.960 --> 0:07:40.640 other than it will be an opportunity to kind of 0:07:40.680 --> 0:07:44.440 compare and contrast the tale of two Trump's, one of 0:07:44.480 --> 0:07:47.520 which was the Donald Trump that we saw in Mexico 0:07:47.640 --> 0:07:51.960 City yesterday who read a prepared statement seemed quite congenial 0:07:52.000 --> 0:07:55.160 around the President of Mexico. But that will be contrasted 0:07:55.240 --> 0:07:59.440 throughout this campaign with the images of Donald Trump following 0:07:59.560 --> 0:08:01.760 Mexico and his rapists and so on and so of course, 0:08:01.760 --> 0:08:03.640 so I think it's gonna be very difficult for him 0:08:03.720 --> 0:08:07.040 to spare that circle in terms of serious impact. None 0:08:07.360 --> 0:08:10.560 a G twenty Meetings sneaks up on us. Mr Putin, 0:08:11.040 --> 0:08:16.480 the embargoed Putin will attend. I'm caught unawares help us 0:08:16.560 --> 0:08:21.160 here with who the Vladimir Putin is that potentially will 0:08:21.200 --> 0:08:24.360 meet with the president in China. I think you're going 0:08:24.400 --> 0:08:28.560 to see Vladimir Putin who is closing in on his 0:08:28.720 --> 0:08:31.400 big objective at this point, which is to get out 0:08:31.440 --> 0:08:35.400 from under the sanctions in u that have been imposed 0:08:35.440 --> 0:08:38.240 upon him as a result of Ukraine. His strategy to 0:08:38.280 --> 0:08:42.520 do that is twofold. One is to continue to sword 0:08:42.640 --> 0:08:46.920 rattle at the Europeans and effectively make them nervous. Uh. 0:08:46.920 --> 0:08:49.680 And the other is what's happening in Syria, Tom and Mike. 0:08:49.840 --> 0:08:53.920 It is using Russian power in a way that he 0:08:54.120 --> 0:08:57.800 believes will eventually force the United States to negotiate with 0:08:58.000 --> 0:09:01.760 him in Syria, and that would of his quid pro 0:09:01.960 --> 0:09:04.199 quote for that would be the knock on effect of 0:09:04.360 --> 0:09:07.320 lifting sanctions. So he's playing a complex hand of cards 0:09:07.360 --> 0:09:09.960 and he's pretty good at it. How do we counter that? 0:09:10.880 --> 0:09:13.440 Is the U S strategy working and do we have 0:09:13.559 --> 0:09:16.839 a good feel for what he's trying to do in 0:09:17.040 --> 0:09:20.839 in in a way that enables us to develop accounter strategy. 0:09:21.080 --> 0:09:24.160 I think unfortunately, the best we can say about our 0:09:24.160 --> 0:09:27.480 current position, and it's a fact of the calendar in 0:09:27.480 --> 0:09:31.400 our electoral politics, is that we're trading water. So we're 0:09:31.400 --> 0:09:34.480 not going to see any big initiative or any big strategy. 0:09:34.480 --> 0:09:37.359 I think we're gonna have to wait for the next administration, 0:09:37.440 --> 0:09:40.320 be at Clinton or Trump, who's gonna might view have 0:09:40.520 --> 0:09:44.520 to create a more holistic strategy for dealing with Moscow. 0:09:44.720 --> 0:09:48.400 Until then, don't look for progress in the situation will 0:09:48.440 --> 0:09:51.400 probably remain a bit frozen for the next six months. 0:09:51.640 --> 0:09:55.080 We have basically no idea what Donald Trump would do. 0:09:55.120 --> 0:09:59.120 But Hillary Clinton has a reputation of being more hawkish 0:09:59.200 --> 0:10:03.200 than Yes Barack Obama. What kind of policy towards the 0:10:03.240 --> 0:10:06.319 Soviet towards the Soviet units to tell my age towards Russia. 0:10:06.559 --> 0:10:10.200 Do you think she would have then, um, if she 0:10:10.280 --> 0:10:14.160 comes in as the new administration. Well, first of all, uh, Mike, 0:10:14.240 --> 0:10:16.920 you're not that far off in terms of thinking. Coming 0:10:16.960 --> 0:10:19.520 out in Moscow these days, it does feel a little 0:10:19.559 --> 0:10:23.360 Soviet at times. But I think what you'll see Clinton 0:10:23.400 --> 0:10:26.800 administration do is probably a four point plan, which would 0:10:26.840 --> 0:10:33.400 be reassuring the NATO allies um with additional locational deployments 0:10:33.440 --> 0:10:37.880 into Eastern Europe. Second will be attempting to keep coherence 0:10:38.000 --> 0:10:42.840 in the sanctions regime because they really are biting on Moscow. 0:10:43.559 --> 0:10:47.080 Third would be to up our presence in the cyber world, 0:10:47.080 --> 0:10:50.040 where we're seeing a great deal of Russian activity, So 0:10:50.120 --> 0:10:52.840 they'll be pretty aggressive package of three. And on the 0:10:52.840 --> 0:10:54.720 other side of the coin, I think you will see 0:10:55.160 --> 0:10:58.959 at least an attempt to keep communication open, to build 0:10:59.000 --> 0:11:03.880 a transactional relationship, to cooperate where we can, but confront 0:11:03.920 --> 0:11:07.280 where we bot mikes such ancient He goes back to 0:11:07.320 --> 0:11:11.640 the Soviet Union. Unfortunately, I go back to the romanofs 0:11:12.520 --> 0:11:17.720 Admal How czarist is Mr Putin, He's utterly Zaris. That's 0:11:17.760 --> 0:11:21.520 really a nice historical point. Um. He is a unitary 0:11:21.600 --> 0:11:25.520 decision maker. And in case you missed a tidbit, he 0:11:25.679 --> 0:11:31.000 recently fired Sergey was the number two guy in Russia. 0:11:31.120 --> 0:11:34.280 Just took him out. I mean that's really something only 0:11:34.320 --> 0:11:37.559 his dark could do. Well, Okay, if that's the view, 0:11:37.800 --> 0:11:39.880 and we're sending a lamp you know, by by our 0:11:39.960 --> 0:11:43.400 process of lame duck president of China, is the president 0:11:43.520 --> 0:11:46.440 effective at the G twenty meeting or is this just 0:11:46.520 --> 0:11:50.640 a dashed November and frankly to the European elections beyond. 0:11:51.880 --> 0:11:55.160 It's the latter. If you want another analogy, it's running 0:11:55.160 --> 0:11:57.600 out the clock in basketball. We're not going to see 0:11:58.040 --> 0:12:01.120 a big move. Everybody know it. Well, let's move on. 0:12:01.240 --> 0:12:04.000 Give us an update on populism in Europe right now. 0:12:04.880 --> 0:12:07.120 With then you're gonna be teaching this a Fletcher along 0:12:07.160 --> 0:12:10.800 with your faculty. I mean, the mind blurs. But is 0:12:10.800 --> 0:12:13.880 it a populism like Sanders Trump or is it a 0:12:13.960 --> 0:12:18.640 unique calculus in France, in Italy and elsewhere. I think 0:12:18.800 --> 0:12:22.600 there's a bit of the same populism you see here. 0:12:22.640 --> 0:12:26.599 This uh idea of quote the system is raised unquote 0:12:26.720 --> 0:12:32.079 and also a sense of nationalism. Um, those are consistent 0:12:32.120 --> 0:12:35.640 across the entire European milieu. However, when you get in 0:12:35.760 --> 0:12:39.760 country by country, as is usual in Europe, which clings 0:12:39.920 --> 0:12:43.880 nation by nation to its its precious nationalism, you will 0:12:43.920 --> 0:12:47.040 see different strains of it. I think the most virulent 0:12:47.200 --> 0:12:51.880 tom is in France with the Lippin family, which has 0:12:51.920 --> 0:12:55.480 a long history, but it's really continuing to build momentum, 0:12:55.520 --> 0:12:59.400 and it's not impossible to consider trance of flipping in 0:12:59.480 --> 0:13:02.200 this way. That would be a shocking tournament. I don't 0:13:02.240 --> 0:13:04.720 think that will happen, but it's well at this point. 0:13:04.720 --> 0:13:07.480 The French election is going to be one of the 0:13:07.480 --> 0:13:12.000 more interesting events of two thousand seventeen, given the candidates 0:13:12.240 --> 0:13:17.240 who have already announced. Uh does France end up changing 0:13:17.400 --> 0:13:20.199 foreign policy or does that stay relatively stable while they 0:13:20.240 --> 0:13:24.520 fight things out on a domestic economic basis. I think 0:13:24.559 --> 0:13:27.360 the latter we should remember in Europe as as I know, 0:13:27.440 --> 0:13:31.200 we all know that Chancellor Angela Merka remains the dominant 0:13:31.240 --> 0:13:34.559 figure in that landscape. In Germany, because of its size 0:13:34.559 --> 0:13:38.880 and pro away will continue to dominate from the national perspective. 0:13:39.000 --> 0:13:42.800 So I think what happens in France is important but 0:13:43.000 --> 0:13:46.960 not determinative in terms of correction of Europe. Do you 0:13:47.080 --> 0:13:52.719 teach Hubbins spoke international relations? It toughs? Are you back 0:13:52.800 --> 0:13:56.920 stuck in a Westphalian world? Which is um We are 0:13:57.360 --> 0:14:02.120 shifting our emphasis from the class passic Westphalian world, the 0:14:02.240 --> 0:14:06.520 nation state dominated train that's going to continue for for 0:14:06.840 --> 0:14:10.679 decades uh and perhaps a century or two. But the 0:14:10.679 --> 0:14:14.719 new areas of the rise of biology, cyber the role 0:14:14.840 --> 0:14:18.959 of women, social networks in their connectivity. We're injecting that 0:14:19.040 --> 0:14:22.320 into the curriculum because those lines are blurring over time. 0:14:23.400 --> 0:14:25.320 I mean, I'll go with the idea they're blurring. I 0:14:25.320 --> 0:14:27.200 don't think they're gonna be blurring a G twenty with 0:14:27.280 --> 0:14:32.920 Mr Putin, I mean he seems as Westphalian folks. This 0:14:32.960 --> 0:14:37.040 is we're talking here of Henry Kissinger's arch classic Diplomacy, 0:14:37.120 --> 0:14:40.480 which is a required read. Admiral Stevinus read that Mike, 0:14:40.880 --> 0:14:43.600 he was stuck on a like a p T boat 0:14:44.080 --> 0:14:47.600 in the Persian Gulf. The no no no, I was out. 0:14:47.680 --> 0:14:50.600 I was out fishing like mine. That's where I read it. 0:14:51.560 --> 0:14:54.320 James Trevinas is with us, the aberal Isladin of the 0:14:54.320 --> 0:14:59.080 Fletcher School of Tufts University. UH. I wanted to follow 0:14:59.160 --> 0:15:02.120 up an early a question I had, which was about 0:15:02.200 --> 0:15:08.560 Hillary Clinton's policies. Um, you noted that, UM, A lot 0:15:08.600 --> 0:15:10.880 of what's been going on with with Vladimir Putin is 0:15:10.920 --> 0:15:14.520 his effort to distract and UH people from what went 0:15:14.560 --> 0:15:20.440 on in Ukraine and um uh loosen the sanctions there. 0:15:20.560 --> 0:15:24.480 UM Trump has suggested that he's a friend of Vladimir 0:15:24.520 --> 0:15:28.400 Putin and that and we saw his former campaign manager 0:15:28.680 --> 0:15:31.280 made a lot of money trying to lobby on behalf 0:15:31.320 --> 0:15:35.320 of the pro Russian Ukrainian government that was in place 0:15:35.360 --> 0:15:38.000 there is Do we have any reason to believe that 0:15:38.040 --> 0:15:40.160 there would be some policy of the United States could 0:15:40.520 --> 0:15:44.760 adopt under Trump that would work against our interests and 0:15:45.040 --> 0:15:48.160 the Ukrainians interests? Or is that reading too much into it? 0:15:49.160 --> 0:15:54.840 I think that probably overstates the direction Trump presidency goes, 0:15:55.520 --> 0:15:59.520 because the big muscle movements that drive policy decisions in 0:15:59.560 --> 0:16:02.240 the end on turn on personality that can to turn 0:16:02.320 --> 0:16:06.720 on the big imperatives in the system, and the big 0:16:06.720 --> 0:16:11.280 imperative visa the Russia is the need to reassure our 0:16:11.320 --> 0:16:16.440 European allies that'll be irresistible for either administration to keep 0:16:16.440 --> 0:16:20.160 those links alive, even though we've also heard from candidate 0:16:20.200 --> 0:16:23.640 Trump about pulling out a NATO. I think that's all 0:16:23.840 --> 0:16:27.920 very unlikely. It's a campaign kind of spark interest rhetoric 0:16:28.000 --> 0:16:31.800 type thing. But in the end, there are too many 0:16:31.800 --> 0:16:35.800 systemic forces that will continue to drive that transatlantic connection 0:16:36.280 --> 0:16:38.480 help us out. As we move towards the debates with 0:16:38.560 --> 0:16:41.440 the presidential candidates. I mean, we in the media and 0:16:41.520 --> 0:16:44.840 people on Wall Street tend to focus on the immediate, 0:16:45.000 --> 0:16:47.520 the story that is right in front of us, and 0:16:47.560 --> 0:16:50.320 it's the G twenty in Obama meeting with Putin now. 0:16:50.800 --> 0:16:54.160 But for the next president who takes office January, what's 0:16:54.200 --> 0:16:58.240 the biggest foreign policy challenge they're going to face? I 0:16:58.280 --> 0:17:03.280 would argue it's actually a technological challenge. And we've talked 0:17:03.280 --> 0:17:05.639 about this before. It's the what is happening in the 0:17:05.720 --> 0:17:10.360 cyber world. So that is the rise of very offensive 0:17:10.520 --> 0:17:15.280 capable nations like Russia and China, but also Iran in 0:17:15.359 --> 0:17:20.760 North Korea obtaining weapons that can can flip serious damage 0:17:20.880 --> 0:17:25.440 on our national economy. Um and so as that moves forward, 0:17:25.600 --> 0:17:28.400 I think that will become a foreign policy issue. Back 0:17:28.400 --> 0:17:31.879 to Tom's comments about the blurring of national lines, This 0:17:32.040 --> 0:17:37.680 cyber world is an unbordered, unboundary global comments and weal 0:17:37.760 --> 0:17:39.720 I just did a Google search on the word migrants 0:17:39.840 --> 0:17:42.720 and it is heartbreaking for any and all of any 0:17:42.800 --> 0:17:46.399 political ar persuasion. Ian wish shard at Bloomberg talking about 0:17:46.720 --> 0:17:49.720 three thousand one or sixty seven migrants dead are missing. 0:17:50.520 --> 0:17:53.800 In the first piece of two thousand and sixteen the 0:17:53.920 --> 0:17:59.600 Australian looking at Angelo Miracle isolated, Time magazine talks about 0:18:00.080 --> 0:18:04.240 migrants last hope. What is the dynamic into autumn of 0:18:04.320 --> 0:18:10.080 the international relations of these migrants and these refugees. Unfortunately, 0:18:10.440 --> 0:18:13.200 I don't have good news. As we look at the 0:18:13.280 --> 0:18:16.000 populism that's bubbling in Europe, A great deal of it 0:18:16.119 --> 0:18:19.199 is directed against these migrants. So I think you're going 0:18:19.240 --> 0:18:23.080 to see a series of policy choices that will be 0:18:23.320 --> 0:18:28.439 very unfavorable to these waves of migrants. Hopefully, the brighter 0:18:28.520 --> 0:18:31.280 side of the equation is that a realization of these 0:18:31.320 --> 0:18:35.040 ways and time, these numbers are just staggering millions moving 0:18:35.040 --> 0:18:39.600 around the globe, um that those numbers will drive a 0:18:39.680 --> 0:18:42.399 call for action to go into Syria, which is the 0:18:42.480 --> 0:18:46.600 epicenter of this, and create an imposed solution like we 0:18:46.640 --> 0:18:50.040 did in the Balkans twenty years ago. That breaks down 0:18:50.160 --> 0:18:53.960 this chain of migrants that are flown across the Agama 0:18:54.160 --> 0:18:57.000 and well, thank you so much. Wonderful September kickoff with 0:18:57.000 --> 0:19:00.840 you on international relations. James te Vitas is at Fletcher School, 0:19:01.160 --> 0:19:08.439 Toughs University. Who you put your trust in matters. Investors 0:19:08.440 --> 0:19:11.800 have put their trust in independent registered investment advisors to 0:19:11.840 --> 0:19:16.239 the tune of four trillion dollars. Why they see their 0:19:16.320 --> 0:19:20.199 role is to serve, not sell. That's why Charles Schwab 0:19:20.280 --> 0:19:23.240 is committed to the success of over seven thousand independent 0:19:23.240 --> 0:19:28.119 financial advisors who passionately dedicate themselves to helping people achieve 0:19:28.119 --> 0:19:32.440 their financial goals. Learn more and find your independent advisor 0:19:32.520 --> 0:19:40.919 dot com. We have had an insatial demand to drag 0:19:41.040 --> 0:19:44.520 back onto the show's Stephen Short. There is a wide 0:19:44.560 --> 0:19:51.000 body of listeners questioning oil stability an oil price increase. 0:19:51.240 --> 0:19:54.639 Mr shork is with a short report Philadelphia, Stephen wi 0:19:54.680 --> 0:19:57.800 are oil price is going to go down? Uh, well, 0:19:57.960 --> 0:20:00.840 part of it is a big part of it is lality. Tom. 0:20:01.040 --> 0:20:03.320 We're at the time of the year that the peak 0:20:03.400 --> 0:20:06.199 season for crude oil demand is over, the peak season 0:20:06.320 --> 0:20:10.720 for gasoline demand is over. So with this Libertary weekend. 0:20:10.840 --> 0:20:13.399 We now transition into the fall, and this is the 0:20:13.440 --> 0:20:17.600 maintenance season for refineries, So refinery demand for crude oil 0:20:17.680 --> 0:20:20.480 in the United States and in other key markets in 0:20:20.480 --> 0:20:24.280 the Northern Hemisphere will drop off significantly over the next 0:20:24.280 --> 0:20:27.920 two months. So essentially we came out of this demand 0:20:27.960 --> 0:20:32.000 season with very high inventory levels. That is to say, 0:20:32.280 --> 0:20:35.800 we did not degluct the market. And now we're going 0:20:35.920 --> 0:20:39.520 into the fall turnaround, We're demand here in the United 0:20:39.520 --> 0:20:42.160 States will drop off by one million barrels a day. Okay, 0:20:42.160 --> 0:20:45.639 within this is the idea of a smaller, shorter term 0:20:45.800 --> 0:20:49.479 price decline. Right now at West Texas fort o nine 0:20:49.960 --> 0:20:54.439 barrel I get that. Do you support Edward Morris City 0:20:54.440 --> 0:20:58.080 Group and other optimists that there can be stability out 0:20:58.200 --> 0:21:01.879 one year and two years to a better oil price, 0:21:02.200 --> 0:21:06.640 or do you take your forecast out further right now, 0:21:06.720 --> 0:21:09.679 I'm going out for one year, and certainly I do 0:21:09.880 --> 0:21:12.840 like and I've been a bear enough for two years. Uh, 0:21:13.119 --> 0:21:16.000 we were down below forty dollars just a month ago. 0:21:16.160 --> 0:21:18.120 I think in the near term where you're heading back 0:21:18.160 --> 0:21:22.320 below forty through this turnaround season. Uh, as far as 0:21:22.320 --> 0:21:25.840 the year goes, I don't see stability in the market yet, 0:21:26.119 --> 0:21:29.199 simply because guys, what have we been hearing now for 0:21:29.240 --> 0:21:32.119 the past two years. The market's going to balance, the 0:21:32.160 --> 0:21:35.720 market's going to balance. Well, the market is still not balanced. 0:21:35.880 --> 0:21:38.639 There is still too much crudal out there. There is 0:21:38.720 --> 0:21:43.040 not enough demand chasing that production. And therefore I still 0:21:43.119 --> 0:21:46.640 think we're going to see a considerable amount of volatility 0:21:46.760 --> 0:21:49.080 for at least one year going out. So I don't 0:21:49.080 --> 0:21:52.240 think we're going to see any significant improvement in price 0:21:52.760 --> 0:21:57.640 going through. This is a demand story, though. Is supply 0:21:58.400 --> 0:22:03.120 starting to ratchet back, well, you can make that argument. 0:22:03.320 --> 0:22:07.360 I don't see it. For instance, let's take yesterday's Department 0:22:07.359 --> 0:22:12.400 of Energy weekly update on storage. Well, interestingly enough, over 0:22:12.440 --> 0:22:15.800 the past three weeks, the deal we has issued not one, 0:22:16.200 --> 0:22:20.399 but two mia culpas. The first miacopo happened three weeks 0:22:20.400 --> 0:22:24.080 ago when they admitted what I've been saying all year long, 0:22:24.520 --> 0:22:28.600 that they are over estimating the amount of production declines 0:22:28.920 --> 0:22:32.080 in the United States. I say that with confidence because 0:22:32.080 --> 0:22:34.920 when you looked at the weekly numbers, they simply did 0:22:34.960 --> 0:22:38.480 not jive with the monthly numbers. The monthly numbers from 0:22:38.480 --> 0:22:43.040 the Department of Energy showed considerably slowered the production declines 0:22:43.200 --> 0:22:46.720 in the United States, so three weeks ago. And let 0:22:46.720 --> 0:22:48.960 this be a caveat to anyone who wants to trade 0:22:49.200 --> 0:22:52.400 the nymex oil based on these weekly d o E reports, 0:22:52.600 --> 0:22:54.399 You have to take them with the grain of salt. 0:22:54.720 --> 0:22:57.679 Because the Dale came out three weeks ago with the 0:22:57.720 --> 0:23:01.600 Midia Coppa, they rebounced the product numbers, so lo and behold. 0:23:01.880 --> 0:23:05.080 Production the United States is falling, but not nearly at 0:23:05.080 --> 0:23:07.439 the pace that it was falling or assumed to be 0:23:07.480 --> 0:23:11.119 falling back in June and July. And then yesterday the 0:23:11.240 --> 0:23:16.920 dew We released second musical saying they've been overestimating consumption 0:23:17.119 --> 0:23:21.000 this summer. That not take that in, guys, for the 0:23:21.280 --> 0:23:24.879 entire peak demands season. The deal we was giving us 0:23:25.040 --> 0:23:29.240 false signals. They were overestimating the amount of decline of 0:23:29.280 --> 0:23:32.399 supply in the market, and they were overestimating the amount 0:23:32.400 --> 0:23:36.320 of demand in the market. And yet still oil prices 0:23:36.400 --> 0:23:39.320 have continued to drift the lower. So where are we 0:23:39.440 --> 0:23:42.879 at this point? Well, gasoline demand in the United States, 0:23:43.280 --> 0:23:46.520 intuitively two dollar a gallon of gasoline, you would say 0:23:46.600 --> 0:23:50.359 demand was strong, and your intuition is correct, because we've 0:23:50.400 --> 0:23:53.520 never had demand for gasolene stronger than we had it 0:23:53.600 --> 0:23:57.880 for this summer, so trude oil demand was also at 0:23:57.920 --> 0:24:01.200 a near record high. But even the record height demand 0:24:01.240 --> 0:24:04.600 for gasoline near record height demand for crud all, we 0:24:04.720 --> 0:24:08.480 are still coming out of this summer with a considerable 0:24:08.560 --> 0:24:11.240 amount of oil in the ground. That is to say, 0:24:11.280 --> 0:24:15.000 we did not see any sort of appreciable decline in supply, 0:24:15.720 --> 0:24:18.399 let alone in the middle of peak demand. Stephen, I 0:24:18.440 --> 0:24:24.240 gotta switch assets to natural gas. We gotta storm a 0:24:24.320 --> 0:24:26.960 common as they say, Well, there's two storms, a common 0:24:27.000 --> 0:24:30.600 one that may go into the Gulf and then run 0:24:30.680 --> 0:24:33.240