Speaker 1: Who you put your trust in matters. Investors have put
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Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keane. Always with Michael McKee. Daily we bring
Speaker 1: you insight from the best in economics, finance, investment, and
Speaker 1: international relations. Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com,
Speaker 1: and of course on the Bloomberg. It has been a
Speaker 1: quiet on Wall Street this summer. Our single best chart
Speaker 1: is a VIX and I introduce a presidential moving average
Speaker 1: of forty eight months four year moving average on the vins.
Speaker 1: The blue in the background is just simply the VIX
Speaker 1: always volatile, but down we go through that twenty level
Speaker 1: Stewart where there is with us working with Dennis to
Speaker 1: Brusher and Ed Hyman at I S I years ago
Speaker 1: now with b MP Perry bout what does the quiet
Speaker 1: mean to derivative and quantz like you at BP color
Speaker 1: The nature of the quiet that we're in, I would
Speaker 1: say a couple of things, one of which being we've
Speaker 1: entered this period following the FEDS taper tangent rhetoric where
Speaker 1: we have more frequent draw downs. However, in times after
Speaker 1: the drawdowns we go back to this very low level
Speaker 1: of baseball. We've been almost forty days without a one
Speaker 1: percent move in the SMP and for the VIX, it's
Speaker 1: really that short dated realized VALL that drives the index.
Speaker 1: So from that perspective, we're going to need some kind
Speaker 1: of economic catalysts, some kind of political catalyst to drive
Speaker 1: it higher. And um, you know, we actually did this
Speaker 1: very interesting study. So we look back all the way
Speaker 1: to the Truman Dewey election election of Thanking, and in
Speaker 1: this kind of ten weeks ahead, eight weeks ahead of
Speaker 1: the allot happens, realize all tends to be lower in elections,
Speaker 1: so we drive even lower. Guy Johnson jump in here,
Speaker 1: back to Truman and Dewey. Okay Stewart, Yeah, the bowls
Speaker 1: really quiet at the headline level. But you look below
Speaker 1: the surface and there's plenty going on in these markets,
Speaker 1: Plenty of sector rotation, plenty happening. That's where the story is.
Speaker 1: We can forget VIX because the story is actually in
Speaker 1: a sector rotation that is taking us out of utilities
Speaker 1: out of telecoms into the more high beta areas. Indeed,
Speaker 1: the rotation and the financials, which have been a clear
Speaker 1: out perform over the past five days, has been quite strong.
Speaker 1: Energy being better for sale along with miners. I think
Speaker 1: we're really actually seeing on an index level, realized volt
Speaker 1: low because of the fact there's been such strong rotation.
Speaker 1: Now if you look at DIF an AASA classes and
Speaker 1: how they're actually pricing in the probability of a FED hike,
Speaker 1: it seems that equities are actually almost leading the charge.
Speaker 1: Equity risk premium overall has not um widened out to
Speaker 1: a considerable degree, but we have seen very strong rotation,
Speaker 1: and globally we've seen financial financials better bid over the
Speaker 1: last few weeks, including eurostocks financials which have outperformed the
Speaker 1: Eurostocks fifty index considerably in the last few days. Are
Speaker 1: we also saying this this calm in the VIX because
Speaker 1: part of the market believe that we're going to say,
Speaker 1: actually the market going in one direction, and part of
Speaker 1: the market thinks we're going to see it going in
Speaker 1: the other direction. And there's also a kind of canceling
Speaker 1: out process retail versus the pros. Indeed, there there definitely
Speaker 1: is some dispersion amongst sectors. But I think one thing
Speaker 1: when you talk about retail versus the pros that's very
Speaker 1: interesting is the CFTC positioning report. So if you look
Speaker 1: at last Friday's report, which is as of Tuesday, so
Speaker 1: ahead of Jackson Hole, hedge funds leveraged funds were the
Speaker 1: most short they've ever been. Ever. Ever you can say, ever,
Speaker 1: as far as the as far as the data we have,
Speaker 1: how far back to I believe it goes to back
Speaker 1: to two thousand eleven. That's a better headline. David Kotok
Speaker 1: just woke up from his morning. Now, hedge funds wicked short.
Speaker 1: That's what we would say in Boston. That's a banner, folks,
Speaker 1: hedge funds we could short. I love it. Let's go
Speaker 1: to the chart for Kotak. Young Warther has never seen
Speaker 1: this chart before. This is the acclaimed impots and chart.
Speaker 1: If it said everybody had this on their wall thirty
Speaker 1: years ago, young Kotak knew it. Then here we are
Speaker 1: back to the depression, the Guadalcanal rally, and then we
Speaker 1: got the malaise in the seventy or eight two rally
Speaker 1: and help we go the red line on the left
Speaker 1: is the depression, because it's log bring it over. Two
Speaker 1: thou eight was nothing like the depression, David, I mean,
Speaker 1: I'm sorry, that's the long term trend. Do I go
Speaker 1: to cash? Amid Stewart Worther's quiet, I we think, so
Speaker 1: we have a cash reserve? Come on, come on, I'm
Speaker 1: paying you a fee. Well, you're paying me a fee
Speaker 1: on eighty to do something. You want a fee to
Speaker 1: take me to lunch? Let's do it all right? Look, cash,
Speaker 1: I think we have head winds and the liveoar spreads
Speaker 1: triggered this change. Liebor has forecast power over stock markets. Okay, well,
Speaker 1: let's rip up the script here, guy, this is really important.
Speaker 1: What does your take on the lift of live where
Speaker 1: Bob Sine doesn't agree with David Kotak. He thinks just
Speaker 1: basically rule changes in manipulation leading to a higher library,
Speaker 1: which is a guy. Uh, if I was able to
Speaker 1: come up with a decent answers to that one time,
Speaker 1: I must be sitting on a beach somewhere enjoying myself
Speaker 1: because doing yeah, well, she's she's at the aquarium, I think,
Speaker 1: looking at sharks, which I think it's probably a useful
Speaker 1: exercise in itself. UM, let me do. I just want
Speaker 1: to come back to this cash position though, because at
Speaker 1: the beginning of the year, we came into we came
Speaker 1: off our holidays, and we came into the big beginning
Speaker 1: of the year, David, and we we panicked and the
Speaker 1: market just really rolled over aggressively. We're coming back off
Speaker 1: our summer holidays. It's September the one. There's a big
Speaker 1: cash position out there at the moment. How is that
Speaker 1: cash position going to be put to work? If at all?
Speaker 1: There's two issues here. Do you use valuation metrics, which
Speaker 1: are traditional they don't seem to work now, or do
Speaker 1: you use there is no alternative tina. Tina is very
Speaker 1: seductive when you're up against a zero inter a strait,
Speaker 1: it's very seductive. It's also dangerous. We're gonna continue this
Speaker 1: discussion with Stewart. I want you to jump in here
Speaker 1: on the Tina idea. I mean, you're a pro at
Speaker 1: b MP Perry Bak saying you're gonna go to cash.
Speaker 1: A lot of people, by perspectives, can't do that. Can
Speaker 1: you protect yourself with derivative instruments? Yes you can. And
Speaker 1: I think one area where we saw. This is if
Speaker 1: you look at the two last draw down, so August
Speaker 1: versus January February now implied vall levels actually spiked in
Speaker 1: August because people were under hedged. People had not expected.
Speaker 1: So now they're all piling into hedging. And now if
Speaker 1: you look at actually January and February, they did hedge
Speaker 1: fabulous Stewart where they where this would be MP Perry Bark,
Speaker 1: James Trevidas Uh considered it at one point, and the
Speaker 1: vice presidential derby for Secretary Clinton, all those trevitas without
Speaker 1: obvious political ilk joins us now from the Fletcher School,
Speaker 1: Toughs University, Admiral I must digress away from the gent
Speaker 1: to what we witnessed yesterday within diplomacy and within the
Speaker 1: Fletcher School heritage, Robert Hormance and others that have darkened
Speaker 1: the door of Toughs University's international relations effort. A candidate
Speaker 1: going to see a major diplomatic partner, as we observe yesterday,
Speaker 1: what will be the follow on effects for all? I
Speaker 1: don't think there'll be a significant reaction to this tom
Speaker 1: other than it will be an opportunity to kind of
Speaker 1: compare and contrast the tale of two Trump's, one of
Speaker 1: which was the Donald Trump that we saw in Mexico
Speaker 1: City yesterday who read a prepared statement seemed quite congenial
Speaker 1: around the President of Mexico. But that will be contrasted
Speaker 1: throughout this campaign with the images of Donald Trump following
Speaker 1: Mexico and his rapists and so on and so of course,
Speaker 1: so I think it's gonna be very difficult for him
Speaker 1: to spare that circle in terms of serious impact. None
Speaker 1: a G twenty Meetings sneaks up on us. Mr Putin,
Speaker 1: the embargoed Putin will attend. I'm caught unawares help us
Speaker 1: here with who the Vladimir Putin is that potentially will
Speaker 1: meet with the president in China. I think you're going
Speaker 1: to see Vladimir Putin who is closing in on his
Speaker 1: big objective at this point, which is to get out
Speaker 1: from under the sanctions in u that have been imposed
Speaker 1: upon him as a result of Ukraine. His strategy to
Speaker 1: do that is twofold. One is to continue to sword
Speaker 1: rattle at the Europeans and effectively make them nervous. Uh.
Speaker 1: And the other is what's happening in Syria, Tom and Mike.
Speaker 1: It is using Russian power in a way that he
Speaker 1: believes will eventually force the United States to negotiate with
Speaker 1: him in Syria, and that would of his quid pro
Speaker 1: quote for that would be the knock on effect of
Speaker 1: lifting sanctions. So he's playing a complex hand of cards
Speaker 1: and he's pretty good at it. How do we counter that?
Speaker 1: Is the U S strategy working and do we have
Speaker 1: a good feel for what he's trying to do in
Speaker 1: in in a way that enables us to develop accounter strategy.
Speaker 1: I think unfortunately, the best we can say about our
Speaker 1: current position, and it's a fact of the calendar in
Speaker 1: our electoral politics, is that we're trading water. So we're
Speaker 1: not going to see any big initiative or any big strategy.
Speaker 1: I think we're gonna have to wait for the next administration,
Speaker 1: be at Clinton or Trump, who's gonna might view have
Speaker 1: to create a more holistic strategy for dealing with Moscow.
Speaker 1: Until then, don't look for progress in the situation will
Speaker 1: probably remain a bit frozen for the next six months.
Speaker 1: We have basically no idea what Donald Trump would do.
Speaker 1: But Hillary Clinton has a reputation of being more hawkish
Speaker 1: than Yes Barack Obama. What kind of policy towards the
Speaker 1: Soviet towards the Soviet units to tell my age towards Russia.
Speaker 1: Do you think she would have then, um, if she
Speaker 1: comes in as the new administration. Well, first of all, uh, Mike,
Speaker 1: you're not that far off in terms of thinking. Coming
Speaker 1: out in Moscow these days, it does feel a little
Speaker 1: Soviet at times. But I think what you'll see Clinton
Speaker 1: administration do is probably a four point plan, which would
Speaker 1: be reassuring the NATO allies um with additional locational deployments
Speaker 1: into Eastern Europe. Second will be attempting to keep coherence
Speaker 1: in the sanctions regime because they really are biting on Moscow.
Speaker 1: Third would be to up our presence in the cyber world,
Speaker 1: where we're seeing a great deal of Russian activity, So
Speaker 1: they'll be pretty aggressive package of three. And on the
Speaker 1: other side of the coin, I think you will see
Speaker 1: at least an attempt to keep communication open, to build
Speaker 1: a transactional relationship, to cooperate where we can, but confront
Speaker 1: where we bot mikes such ancient He goes back to
Speaker 1: the Soviet Union. Unfortunately, I go back to the romanofs
Speaker 1: Admal How czarist is Mr Putin, He's utterly Zaris. That's
Speaker 1: really a nice historical point. Um. He is a unitary
Speaker 1: decision maker. And in case you missed a tidbit, he
Speaker 1: recently fired Sergey was the number two guy in Russia.
Speaker 1: Just took him out. I mean that's really something only
Speaker 1: his dark could do. Well, Okay, if that's the view,
Speaker 1: and we're sending a lamp you know, by by our
Speaker 1: process of lame duck president of China, is the president
Speaker 1: effective at the G twenty meeting or is this just
Speaker 1: a dashed November and frankly to the European elections beyond.
Speaker 1: It's the latter. If you want another analogy, it's running
Speaker 1: out the clock in basketball. We're not going to see
Speaker 1: a big move. Everybody know it. Well, let's move on.
Speaker 1: Give us an update on populism in Europe right now.
Speaker 1: With then you're gonna be teaching this a Fletcher along
Speaker 1: with your faculty. I mean, the mind blurs. But is
Speaker 1: it a populism like Sanders Trump or is it a
Speaker 1: unique calculus in France, in Italy and elsewhere. I think
Speaker 1: there's a bit of the same populism you see here.
Speaker 1: This uh idea of quote the system is raised unquote
Speaker 1: and also a sense of nationalism. Um, those are consistent
Speaker 1: across the entire European milieu. However, when you get in
Speaker 1: country by country, as is usual in Europe, which clings
Speaker 1: nation by nation to its its precious nationalism, you will
Speaker 1: see different strains of it. I think the most virulent
Speaker 1: tom is in France with the Lippin family, which has
Speaker 1: a long history, but it's really continuing to build momentum,
Speaker 1: and it's not impossible to consider trance of flipping in
Speaker 1: this way. That would be a shocking tournament. I don't
Speaker 1: think that will happen, but it's well at this point.
Speaker 1: The French election is going to be one of the
Speaker 1: more interesting events of two thousand seventeen, given the candidates
Speaker 1: who have already announced. Uh does France end up changing
Speaker 1: foreign policy or does that stay relatively stable while they
Speaker 1: fight things out on a domestic economic basis. I think
Speaker 1: the latter we should remember in Europe as as I know,
Speaker 1: we all know that Chancellor Angela Merka remains the dominant
Speaker 1: figure in that landscape. In Germany, because of its size
Speaker 1: and pro away will continue to dominate from the national perspective.
Speaker 1: So I think what happens in France is important but
Speaker 1: not determinative in terms of correction of Europe. Do you
Speaker 1: teach Hubbins spoke international relations? It toughs? Are you back
Speaker 1: stuck in a Westphalian world? Which is um We are
Speaker 1: shifting our emphasis from the class passic Westphalian world, the
Speaker 1: nation state dominated train that's going to continue for for
Speaker 1: decades uh and perhaps a century or two. But the
Speaker 1: new areas of the rise of biology, cyber the role
Speaker 1: of women, social networks in their connectivity. We're injecting that
Speaker 1: into the curriculum because those lines are blurring over time.
Speaker 1: I mean, I'll go with the idea they're blurring. I
Speaker 1: don't think they're gonna be blurring a G twenty with
Speaker 1: Mr Putin, I mean he seems as Westphalian folks. This
Speaker 1: is we're talking here of Henry Kissinger's arch classic Diplomacy,
Speaker 1: which is a required read. Admiral Stevinus read that Mike,
Speaker 1: he was stuck on a like a p T boat
Speaker 1: in the Persian Gulf. The no no no, I was out.
Speaker 1: I was out fishing like mine. That's where I read it.
Speaker 1: James Trevinas is with us, the aberal Isladin of the
Speaker 1: Fletcher School of Tufts University. UH. I wanted to follow
Speaker 1: up an early a question I had, which was about
Speaker 1: Hillary Clinton's policies. Um, you noted that, UM, A lot
Speaker 1: of what's been going on with with Vladimir Putin is
Speaker 1: his effort to distract and UH people from what went
Speaker 1: on in Ukraine and um uh loosen the sanctions there.
Speaker 1: UM Trump has suggested that he's a friend of Vladimir
Speaker 1: Putin and that and we saw his former campaign manager
Speaker 1: made a lot of money trying to lobby on behalf
Speaker 1: of the pro Russian Ukrainian government that was in place
Speaker 1: there is Do we have any reason to believe that
Speaker 1: there would be some policy of the United States could
Speaker 1: adopt under Trump that would work against our interests and
Speaker 1: the Ukrainians interests? Or is that reading too much into it?
Speaker 1: I think that probably overstates the direction Trump presidency goes,
Speaker 1: because the big muscle movements that drive policy decisions in
Speaker 1: the end on turn on personality that can to turn
Speaker 1: on the big imperatives in the system, and the big
Speaker 1: imperative visa the Russia is the need to reassure our
Speaker 1: European allies that'll be irresistible for either administration to keep
Speaker 1: those links alive, even though we've also heard from candidate
Speaker 1: Trump about pulling out a NATO. I think that's all
Speaker 1: very unlikely. It's a campaign kind of spark interest rhetoric
Speaker 1: type thing. But in the end, there are too many
Speaker 1: systemic forces that will continue to drive that transatlantic connection
Speaker 1: help us out. As we move towards the debates with
Speaker 1: the presidential candidates. I mean, we in the media and
Speaker 1: people on Wall Street tend to focus on the immediate,
Speaker 1: the story that is right in front of us, and
Speaker 1: it's the G twenty in Obama meeting with Putin now.
Speaker 1: But for the next president who takes office January, what's
Speaker 1: the biggest foreign policy challenge they're going to face? I
Speaker 1: would argue it's actually a technological challenge. And we've talked
Speaker 1: about this before. It's the what is happening in the
Speaker 1: cyber world. So that is the rise of very offensive
Speaker 1: capable nations like Russia and China, but also Iran in
Speaker 1: North Korea obtaining weapons that can can flip serious damage
Speaker 1: on our national economy. Um and so as that moves forward,
Speaker 1: I think that will become a foreign policy issue. Back
Speaker 1: to Tom's comments about the blurring of national lines, This
Speaker 1: cyber world is an unbordered, unboundary global comments and weal
Speaker 1: I just did a Google search on the word migrants
Speaker 1: and it is heartbreaking for any and all of any
Speaker 1: political ar persuasion. Ian wish shard at Bloomberg talking about
Speaker 1: three thousand one or sixty seven migrants dead are missing.
Speaker 1: In the first piece of two thousand and sixteen the
Speaker 1: Australian looking at Angelo Miracle isolated, Time magazine talks about
Speaker 1: migrants last hope. What is the dynamic into autumn of
Speaker 1: the international relations of these migrants and these refugees. Unfortunately,
Speaker 1: I don't have good news. As we look at the
Speaker 1: populism that's bubbling in Europe, A great deal of it
Speaker 1: is directed against these migrants. So I think you're going
Speaker 1: to see a series of policy choices that will be
Speaker 1: very unfavorable to these waves of migrants. Hopefully, the brighter
Speaker 1: side of the equation is that a realization of these
Speaker 1: ways and time, these numbers are just staggering millions moving
Speaker 1: around the globe, um that those numbers will drive a
Speaker 1: call for action to go into Syria, which is the
Speaker 1: epicenter of this, and create an imposed solution like we
Speaker 1: did in the Balkans twenty years ago. That breaks down
Speaker 1: this chain of migrants that are flown across the Agama
Speaker 1: and well, thank you so much. Wonderful September kickoff with
Speaker 1: you on international relations. James te Vitas is at Fletcher School,
Speaker 1: Toughs University. Who you put your trust in matters. Investors
Speaker 1: have put their trust in independent registered investment advisors to
Speaker 1: the tune of four trillion dollars. Why they see their
Speaker 1: role is to serve, not sell. That's why Charles Schwab
Speaker 1: is committed to the success of over seven thousand independent
Speaker 1: financial advisors who passionately dedicate themselves to helping people achieve
Speaker 1: their financial goals. Learn more and find your independent advisor
Speaker 1: dot com. We have had an insatial demand to drag
Speaker 1: back onto the show's Stephen Short. There is a wide
Speaker 1: body of listeners questioning oil stability an oil price increase.
Speaker 1: Mr shork is with a short report Philadelphia, Stephen wi
Speaker 1: are oil price is going to go down? Uh, well,
Speaker 1: part of it is a big part of it is lality. Tom.
Speaker 1: We're at the time of the year that the peak
Speaker 1: season for crude oil demand is over, the peak season
Speaker 1: for gasoline demand is over. So with this Libertary weekend.
Speaker 1: We now transition into the fall, and this is the
Speaker 1: maintenance season for refineries, So refinery demand for crude oil
Speaker 1: in the United States and in other key markets in
Speaker 1: the Northern Hemisphere will drop off significantly over the next
Speaker 1: two months. So essentially we came out of this demand
Speaker 1: season with very high inventory levels. That is to say,
Speaker 1: we did not degluct the market. And now we're going
Speaker 1: into the fall turnaround, We're demand here in the United
Speaker 1: States will drop off by one million barrels a day. Okay,
Speaker 1: within this is the idea of a smaller, shorter term
Speaker 1: price decline. Right now at West Texas fort o nine
Speaker 1: barrel I get that. Do you support Edward Morris City
Speaker 1: Group and other optimists that there can be stability out
Speaker 1: one year and two years to a better oil price,
Speaker 1: or do you take your forecast out further right now,
Speaker 1: I'm going out for one year, and certainly I do
Speaker 1: like and I've been a bear enough for two years. Uh,
Speaker 1: we were down below forty dollars just a month ago.
Speaker 1: I think in the near term where you're heading back
Speaker 1: below forty through this turnaround season. Uh, as far as
Speaker 1: the year goes, I don't see stability in the market yet,
Speaker 1: simply because guys, what have we been hearing now for
Speaker 1: the past two years. The market's going to balance, the
Speaker 1: market's going to balance. Well, the market is still not balanced.
Speaker 1: There is still too much crudal out there. There is
Speaker 1: not enough demand chasing that production. And therefore I still
Speaker 1: think we're going to see a considerable amount of volatility
Speaker 1: for at least one year going out. So I don't
Speaker 1: think we're going to see any significant improvement in price
Speaker 1: going through. This is a demand story, though. Is supply
Speaker 1: starting to ratchet back, well, you can make that argument.
Speaker 1: I don't see it. For instance, let's take yesterday's Department
Speaker 1: of Energy weekly update on storage. Well, interestingly enough, over
Speaker 1: the past three weeks, the deal we has issued not one,
Speaker 1: but two mia culpas. The first miacopo happened three weeks
Speaker 1: ago when they admitted what I've been saying all year long,
Speaker 1: that they are over estimating the amount of production declines
Speaker 1: in the United States. I say that with confidence because
Speaker 1: when you looked at the weekly numbers, they simply did
Speaker 1: not jive with the monthly numbers. The monthly numbers from
Speaker 1: the Department of Energy showed considerably slowered the production declines
Speaker 1: in the United States, so three weeks ago. And let
Speaker 1: this be a caveat to anyone who wants to trade
Speaker 1: the nymex oil based on these weekly d o E reports,
Speaker 1: You have to take them with the grain of salt.
Speaker 1: Because the Dale came out three weeks ago with the
Speaker 1: Midia Coppa, they rebounced the product numbers, so lo and behold.
Speaker 1: Production the United States is falling, but not nearly at
Speaker 1: the pace that it was falling or assumed to be
Speaker 1: falling back in June and July. And then yesterday the
Speaker 1: dew We released second musical saying they've been overestimating consumption
Speaker 1: this summer. That not take that in, guys, for the
Speaker 1: entire peak demands season. The deal we was giving us
Speaker 1: false signals. They were overestimating the amount of decline of
Speaker 1: supply in the market, and they were overestimating the amount
Speaker 1: of demand in the market. And yet still oil prices
Speaker 1: have continued to drift the lower. So where are we
Speaker 1: at this point? Well, gasoline demand in the United States,
Speaker 1: intuitively two dollar a gallon of gasoline, you would say
Speaker 1: demand was strong, and your intuition is correct, because we've
Speaker 1: never had demand for gasolene stronger than we had it
Speaker 1: for this summer, so trude oil demand was also at
Speaker 1: a near record high. But even the record height demand
Speaker 1: for gasoline near record height demand for crud all, we
Speaker 1: are still coming out of this summer with a considerable
Speaker 1: amount of oil in the ground. That is to say,
Speaker 1: we did not see any sort of appreciable decline in supply,
Speaker 1: let alone in the middle of peak demand. Stephen, I
Speaker 1: gotta switch assets to natural gas. We gotta storm a
Speaker 1: common as they say, Well, there's two storms, a common
Speaker 1: one that may go into the Gulf and then run
Speaker 1: up the East coast. Known may just hit the East coast.
Speaker 1: And the implications I've been talking to the communities people
Speaker 1: are obviously, if storm goes into the Gulf and keeps going,
Speaker 1: it runs into the oil and gas wells that are there.
Speaker 1: But along the East coast, it's gonna bring rain, it's
Speaker 1: gonna bring a little cooler temperatures, air conditioners don't run
Speaker 1: as much. That should probably depress the price of natural gas,
Speaker 1: I would imagine, And well, it's exactly. It's certainly keeping
Speaker 1: a lid on the market. Pity, and it just goes
Speaker 1: to share you how really these markets have changed ten
Speaker 1: years ago, right around Hurricane I, even Katrina and so forth.
Speaker 1: Back then, in natural gas, if you saw a cluster
Speaker 1: of thunderstorms form off the coast of the Azores three
Speaker 1: weeks outside of the Gulf of Mexico, natural gas would
Speaker 1: have begun to rally. So if this was ten years ago,
Speaker 1: I could promise you natural gas prices would have rallied
Speaker 1: by at least a dollar by now. But ten years
Speaker 1: ago of the US is gas production came from the
Speaker 1: shallow water Gulf of Mexico. But thanks to my home
Speaker 1: state of Pennsylvania and our neighbor over there in Ohio
Speaker 1: with the Marcellus and the Uticus shale, today the Gulf
Speaker 1: of Mexico contributes less than four percent of gas production.
Speaker 1: So we have now transitioned into a period where a
Speaker 1: hurricane now is potentially a barrish driver as to the
Speaker 1: points you just reference, rather than the bullish driver. So yes,
Speaker 1: if this storm does go and it looks like it's
Speaker 1: going to avoid the oil and s interests in the
Speaker 1: shallow water Gulf of Mexico, veer into the Panhandle, come
Speaker 1: up the east coast, you do have the prospects for
Speaker 1: Kulu weather. You have the prospects to think about this
Speaker 1: of power outages, of high winds knocking down power line.
Speaker 1: So even though there might be demand for natural gas,
Speaker 1: the utility cannot get that natural gas to the market.
Speaker 1: So it is a significant driver right now. But whereas
Speaker 1: ten years ago, as I said, it was a BULLUS driver,
Speaker 1: today is potentially a barrish driver. And hence why this summer, Guys,
Speaker 1: if you're a bull a natural gas, you were pulling
Speaker 1: the hair out of your head because the fundamental the
Speaker 1: weather could not have lined up any more better than
Speaker 1: they have for you. You You would have dialed up this
Speaker 1: weather and prayed you got the weather that we did,
Speaker 1: very hot, humid in the upper parts of the United States.
Speaker 1: And yet natural gas prices are still struggling to get
Speaker 1: the eighteen dollar barrel oil equivalent or to be dollars.
Speaker 1: Will there be a differential between Brent and West Texas intermedia,
Speaker 1: I mean within the natural guest dynamics. Does the US
Speaker 1: dynamics as we go into the winter, does it make
Speaker 1: that spread widen between Brent or West Texas? Or do
Speaker 1: we stay at a two dollar three dollar level. We're
Speaker 1: still looking at an area where I do think that. No,
Speaker 1: I don't think the winter in general will have a
Speaker 1: material impact on the Brent t I spread. Uh, this
Speaker 1: is more of a spread that is driven not necessarily
Speaker 1: by by the weathers or by the season, but more
Speaker 1: about the but the global pace. And as you just
Speaker 1: pointed out prior to coming on about the dismal outlook
Speaker 1: for US economic growth, Yes, there is a uge over
Speaker 1: in supply, but a lot of this because we don't
Speaker 1: have demand. And I've got news for you guys the
Speaker 1: United States. It isn't all great here from from an
Speaker 1: economy standpoint. We are going into now a record year,
Speaker 1: a tenth year where we're going to have sub growth
Speaker 1: in the United States. So there is a supreme lack
Speaker 1: of economic demand. Hence, why not just oil but my
Speaker 1: consumption commodities in general are lower and cannot break out
Speaker 1: of the dulgrums. You mentioned oil prices going into the winter.
Speaker 1: We're in the shoulder season, and what they may do
Speaker 1: in the winter. What about gas prices? We keep reading
Speaker 1: that every month that goes by in two thousands sixteen
Speaker 1: is the warmest month ever. Uh. Does that suggest that
Speaker 1: we are going to use a lot less natural gas
Speaker 1: during the winter? And that the long term prospects for
Speaker 1: that commodity aren't so hot, right they are, Let's say
Speaker 1: they are challenged right now because as they just pointed
Speaker 1: out this right, this weather has been phenomenal. If you
Speaker 1: were a bull, it just doesn't get any better with
Speaker 1: the amount of air conditioning demand. And hence the summer
Speaker 1: rebuild in storage for next winter for for natural gas
Speaker 1: stores is dismal. I mean, we are coming in at
Speaker 1: less than half been normal the build now coming into
Speaker 1: this winter, and yet gas prices cannot rally. So it
Speaker 1: all comes down to mother nature. If we get another
Speaker 1: winter like we saw last winter, that is to say,
Speaker 1: when we did not have a winter, then it's going
Speaker 1: to be a horrendous first six months of the year
Speaker 1: for natural gas. Natural gas prices are right now flirting
Speaker 1: right around two dollars and deck of therm. We got
Speaker 1: down to below two dollars last year. And if we
Speaker 1: get another winter, if if, if right, if we get
Speaker 1: another winter, then clearly we are still headed significantly lower.
Speaker 1: But but I have to point out because people get
Speaker 1: themselves destroyed in natural gas because there's an overwhelming sense
Speaker 1: of complacency. That's said, if we get a winter like
Speaker 1: two winters ago. You to talk about polar vortex gas
Speaker 1: short of gas will rip your face off and more
Speaker 1: worried about the short vortex. Stephen Short, thank you so much,
Speaker 1: always talking for you, that trader talking. I tell you, Mike,
Speaker 1: we get a huge response. Five mis to Short is
Speaker 1: on a lot of people, you know, whether right or wrong.
Speaker 1: I mean, we just like to do the different opinions,
Speaker 1: and we're honor to Edward Morris joined us. I believe
Speaker 1: it was yesterday but with City Group. But there are
Speaker 1: a lot of this, there's a dispersion of opinions. To
Speaker 1: put it politically delicately on oil. Right now, Stephen Short
Speaker 1: with a short report. Again we protect the copyright of
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