WEBVTT - Surveillance: OPEC Is Doomed, Gartman Says 0:00:00.040 --> 0:00:02.640 Who you put your trust in matters. Investors have put 0:00:02.680 --> 0:00:07.040 their trust and independent registered investment advisors to the two 0:00:07.040 --> 0:00:10.680 and four trillion dollars. Why learn more and find your 0:00:10.760 --> 0:00:26.360 independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 0:00:26.760 --> 0:00:30.480 I'm Tom Keene with David Gura. Daily we bring you 0:00:30.520 --> 0:00:35.560 insight from the best in economics, finance, investment, and international relations. 0:00:35.960 --> 0:00:40.559 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and 0:00:40.640 --> 0:00:48.120 of course on the Bloomberg He was trying to get 0:00:48.120 --> 0:00:51.239 the Tiffany's next to the Trump Tower and it was 0:00:51.280 --> 0:00:53.640 a little hard to get there through the security for 0:00:53.840 --> 0:00:57.600 the President elect, so Dennis Gartment decided to darken the door. 0:00:59.200 --> 0:01:02.120 You guys will apparently let anybody on this show nowadays help, yes, 0:01:02.240 --> 0:01:07.520 help the liberals of America with the surprise of the election. 0:01:07.680 --> 0:01:11.479 I would suggest a Virginia, North Carolina guy like you 0:01:11.920 --> 0:01:18.040 really wasn't all that surprised, assist the progressives Listening people 0:01:18.120 --> 0:01:19.920 need to get in an airplane and fly over the 0:01:19.959 --> 0:01:22.000 great fly over part of the United States and just 0:01:22.080 --> 0:01:25.360 go there and go there. It actually is quite civilized. 0:01:25.360 --> 0:01:28.000 You'd be surprised. They are very nice well, it's well 0:01:28.040 --> 0:01:31.479 spoken area tite people living in Peoria who are reasonably 0:01:31.520 --> 0:01:34.360 well read, who are cognizant of what goes on in 0:01:34.360 --> 0:01:37.399 the rest of the country and are different than the coasts. 0:01:37.400 --> 0:01:40.520 But that's that's indeed what happened. So it was not 0:01:40.600 --> 0:01:42.839 all that surprising. Maybe you wrote about this this morning. 0:01:42.959 --> 0:01:47.160 Some of them want a thirty five percent tariff on 0:01:47.319 --> 0:01:52.040 bad elites like you sending jobs abroad and others, including 0:01:52.160 --> 0:01:55.520 leadership of the GOP and the How's go Maybe not? 0:01:55.760 --> 0:01:58.560 Maybe not? Where are the checks and balances to Mr 0:01:58.640 --> 0:02:02.480 Trump's rhetoric excesses. I think Mr Ryan is a check 0:02:02.520 --> 0:02:05.800 in a balance to Mr Trump's rhetorical excesses. If there 0:02:05.880 --> 0:02:08.080 is a problem with Mr Trump, it is that this 0:02:08.160 --> 0:02:10.959 propensity on the part of of of he and others 0:02:10.960 --> 0:02:13.520 around him too to put into effect or talk at 0:02:13.600 --> 0:02:16.160 least about a thirty five percent tariff. What a what 0:02:16.200 --> 0:02:18.760 a silly notion that would be? How detrimental that would 0:02:18.760 --> 0:02:22.200 be to the economy in general. Yes, two small groups 0:02:22.200 --> 0:02:24.360 of people to to the labor unions, it makes sense. 0:02:24.760 --> 0:02:26.280 But you have to remember you put a thirty five 0:02:26.320 --> 0:02:28.880 percent tariff on a television and suddenly you are spending 0:02:28.880 --> 0:02:32.600 thirty percent more to buy that television, and that's the problem. 0:02:32.639 --> 0:02:35.640 Hopefully that shall not happen. Hopefully we do not take 0:02:35.680 --> 0:02:38.080 a chapter out of the middle of the nineteen thirties 0:02:38.120 --> 0:02:42.760 when tariffs, the smooth Holliday tariff, took a medium term 0:02:42.800 --> 0:02:45.520 and rather substantive recession and turn it into a depression. 0:02:45.560 --> 0:02:48.440 Hopefully there are wiser voices around. But on balance, I 0:02:48.480 --> 0:02:51.160 got to tell you there's a greater sense of of 0:02:51.160 --> 0:02:53.760 of optimism out in the great flyover part of the 0:02:53.840 --> 0:02:55.880 United States, and there had been a mere three weeks ago. 0:02:56.000 --> 0:02:59.079 It's demonstrable. How do you judge Donald Trump's willingness to 0:02:59.120 --> 0:03:02.600 be checked and balanced? In this week since the presidential election, 0:03:02.639 --> 0:03:05.320 We've watched his Twitter feed with with great interest, But 0:03:05.360 --> 0:03:07.080 you know, you you wonder if he's that quick to 0:03:07.120 --> 0:03:09.840 respond to what the media is saying, for instance, how 0:03:09.880 --> 0:03:11.680 well he's going to be able to have a conversation 0:03:11.720 --> 0:03:13.840 about smart trade policy that does the great fear, isn't it? 0:03:14.600 --> 0:03:16.640 And and actually I put that in my newslet this morning. 0:03:16.680 --> 0:03:19.400 Won't somebody around him please stop this man from tweeting? 0:03:19.840 --> 0:03:21.880 The problem is, it doesn't appear that anybody's gonna have 0:03:21.880 --> 0:03:24.680 the power to stop him. Please Milannia, stop this man 0:03:24.800 --> 0:03:28.960 from tweeting. I'll jokes aside, though, I mean here here, 0:03:29.240 --> 0:03:31.280 you know he has the potential to do some real damage. 0:03:31.280 --> 0:03:32.880 I mean you must have been watching what he was 0:03:32.880 --> 0:03:35.120 was saying about China, about Taiwan with us. I was 0:03:35.120 --> 0:03:37.680 not as dismayed about what he said about China as 0:03:37.760 --> 0:03:41.360 as other people were and are. I'm far more dismayed 0:03:41.360 --> 0:03:44.400 about the the intention last week, or the decision last 0:03:44.400 --> 0:03:47.360 week to push Carrier to do what they did, to 0:03:47.360 --> 0:03:49.120 to push UTX to do what it had to do, 0:03:49.600 --> 0:03:51.640 and then to talk two or three days later about 0:03:51.640 --> 0:03:55.839 once again putting tariffs into effect. That that is bothersome. 0:03:56.280 --> 0:03:58.080 As long as we can avoid that, and I think 0:03:58.120 --> 0:04:00.000 we shall avoid that. As long as we can avoid that, 0:04:00.040 --> 0:04:02.200 things will be fine. I I talk up Dennis how 0:04:02.240 --> 0:04:04.240 you're one of the few people that actually put your 0:04:04.280 --> 0:04:07.440 tick by tick TA track record out to the public. 0:04:07.520 --> 0:04:11.440 It's been a brutal year for people gaming uh the market. 0:04:11.600 --> 0:04:16.719 Now you enjoy Fortres's diamond three point one standard deviation 0:04:16.839 --> 0:04:20.279 moonshot on a monthly chart. The last time it did 0:04:20.320 --> 0:04:23.279 that was from the Quiet of two thousand five, which 0:04:23.320 --> 0:04:27.800 isn't even comparable. What does Dennis Gartman do if you 0:04:27.920 --> 0:04:30.960 buy and hold the banks and you've gotten this gift, 0:04:31.279 --> 0:04:32.960 do you stay with him? I think you have to. 0:04:33.040 --> 0:04:36.200 I think there's something that is that is tectonic that 0:04:36.240 --> 0:04:38.479 really has occurred to things the banks are going to 0:04:38.560 --> 0:04:41.000 do so much better over the course of the next five, six, 0:04:41.040 --> 0:04:44.159 seven years, and to something I've been arguing about. To 0:04:44.200 --> 0:04:46.600 put it into simplistic terms, I I think that we're 0:04:46.640 --> 0:04:49.080 going to see the trumping for lack of a better term, 0:04:49.360 --> 0:04:51.760 of the Mahoning Valley, the place where Steele was born 0:04:51.800 --> 0:04:54.560 in the United States, compared to Silicon Valley. I think 0:04:54.560 --> 0:04:58.080 it means that if the Trump administration means anything, it 0:04:58.120 --> 0:05:01.400 does in fact mean infrastructure rebuilding and simple things are 0:05:01.440 --> 0:05:03.359 going in down. Okay, but you come on, you invented this. 0:05:03.440 --> 0:05:06.479 Donald Trump took the lesson from you. If it drops 0:05:06.480 --> 0:05:10.559 on my foot, you own that fraend line. Yeah, what 0:05:10.839 --> 0:05:15.160 is taking so long for that to happen? He ain't 0:05:15.200 --> 0:05:18.760 president yet. Okay, it's that simple. He's not president yet 0:05:19.160 --> 0:05:21.880 and it will probably be with the whole concept of 0:05:21.880 --> 0:05:25.039 shovel ready is an utter misnomer. The shovels are ready, 0:05:25.400 --> 0:05:27.599 but it takes a long time. Given the fact that 0:05:27.640 --> 0:05:30.040 all those products or projects have to be done at 0:05:30.040 --> 0:05:33.240 state and local levels. Federal government can try to do something. 0:05:33.480 --> 0:05:36.480 Federal government can set the standard. Federal government can fund 0:05:36.480 --> 0:05:38.360 a bit of it, but that the mass funding has 0:05:38.400 --> 0:05:40.760 to come from the state and from the local, from localities, 0:05:41.000 --> 0:05:42.600 and it takes a long time to get that that 0:05:42.680 --> 0:05:45.800 kind of thing passed through those various legislatures. It will 0:05:45.839 --> 0:05:48.320 take time, but it is time to buy the things 0:05:48.320 --> 0:05:50.000 that if you drop them on the on your foot 0:05:50.279 --> 0:05:52.560 shell hurt. And I have to admit I think that's 0:05:52.560 --> 0:05:56.360 an interesting and simple but a correct mnemonic device. Dennis 0:05:56.360 --> 0:05:58.280 Goverment with us. We thank all the hate mail for 0:05:58.360 --> 0:06:02.159 coming in on guard. He is the pinata of the street. 0:06:02.200 --> 0:06:04.800 Here's here's the hate mail, David Girl from one de 0:06:05.080 --> 0:06:09.080 Cass down in Florida. Don Cass says, I'm short in 0:06:09.160 --> 0:06:12.760 the banks. I don't agree with Dennis. Why how do 0:06:12.760 --> 0:06:14.919 you respond to a guy like Cass who, on a 0:06:15.000 --> 0:06:18.760 trading basis has been short this great bull market and 0:06:18.839 --> 0:06:21.240 now he loads the boat and shorts the banks. Yeah, 0:06:21.240 --> 0:06:23.240 but he's getting his golf games getting so much better. 0:06:24.040 --> 0:06:27.080 He sent me a scorecard. They had three birdies in 0:06:27.080 --> 0:06:29.560 a row. Well done, Douggie, well done, and we said 0:06:29.560 --> 0:06:32.719 good morning to Mr Cass. Seriously, folks, dot Cass very 0:06:32.760 --> 0:06:36.280 cautious to short on the banks after the huge service. David, 0:06:36.760 --> 0:06:38.520 I'm eager to talk to you about oil. Since we 0:06:38.600 --> 0:06:41.840 last spoke, we had this OPEC production cut agreement. How 0:06:41.839 --> 0:06:44.200 optimistic are you that that's going to be uphilm It 0:06:44.240 --> 0:06:46.600 won't be upheld. I mean, if history shows anything, it 0:06:46.680 --> 0:06:49.960 shows you that all OPEC decisions, all OPEC cuts in 0:06:50.000 --> 0:06:53.040 the past have always been overridden. They cheat, it's just 0:06:53.080 --> 0:06:55.560 a fact. Are they cheating right now? Well, the interesting 0:06:55.600 --> 0:06:58.680 thing is they began the cut from an already ramped 0:06:58.760 --> 0:07:02.919 up September October in early November production, So the cut 0:07:03.040 --> 0:07:04.680 is actually going only going to take you back to 0:07:04.800 --> 0:07:08.640 October levels of production. Two, they will cheat, that's just 0:07:08.680 --> 0:07:10.679 a matter of that. That's only a matter of time. 0:07:11.200 --> 0:07:14.960 The the new agreement doesn't go into effect till January one. 0:07:15.240 --> 0:07:17.720 I suspect it by March we will see a a 0:07:17.920 --> 0:07:21.040 rather substantive amount of cheating. And it doesn't even take cheating, 0:07:21.320 --> 0:07:23.280 It takes us. We are going to continue to be 0:07:23.680 --> 0:07:26.680 larger and ever greater producers of crude oil fifty two 0:07:26.720 --> 0:07:29.080 dollars w T I with a four dollar contango to 0:07:29.120 --> 0:07:31.480 the one year gives you fifty six dollars for one 0:07:31.560 --> 0:07:33.760 year crude and they're going to sell We need more, 0:07:33.920 --> 0:07:38.160 jan can we get We need an additive jargon. What 0:07:38.200 --> 0:07:41.160 did you just say to the contango? The contango is 0:07:41.200 --> 0:07:44.440 the carrying charge, it's the cost. It's the tangible of 0:07:44.440 --> 0:07:47.040 a tangible asset. And crude is indeed a tangible asset. 0:07:47.520 --> 0:07:49.920 And and for the one year, it's the one year forward. 0:07:50.000 --> 0:07:52.160 The crude oils trades right now at about two dollars 0:07:52.160 --> 0:07:54.800 and fifty cents premium to spot. That gives you a 0:07:54.840 --> 0:07:58.239 fairly comfortable hedge double arrangement. And I guarantee the banks 0:07:58.280 --> 0:08:02.400 are telling every E n P producer produce hedge, earned 0:08:02.400 --> 0:08:05.000 the carrying charge, and produce crude oil. What did the 0:08:05.280 --> 0:08:07.200 way that that meeting went down tell you about the 0:08:07.240 --> 0:08:09.520 future of this organization? The future of OPEC. I think 0:08:09.520 --> 0:08:12.360 the future of OPEC is doomed for for no other reason. 0:08:12.680 --> 0:08:15.040 The smartest guy in the room at OPEC is the 0:08:16.000 --> 0:08:19.080 Deputy Crown Prince, and he's made it clear he understands 0:08:19.400 --> 0:08:21.960 thirty years from now, crude oil prices will be zero. 0:08:22.000 --> 0:08:24.840 There it will be worthless. Something else will have supplanted 0:08:24.880 --> 0:08:27.400 crude oil. He understands that, and he intends to sell 0:08:27.440 --> 0:08:30.040 his crude before that. Joseph Knight, in another world from 0:08:30.080 --> 0:08:35.200 you of international relations, is adamant about American exceptionalism. Sure, 0:08:35.400 --> 0:08:38.440 I want you to state for US, and it permeates 0:08:38.440 --> 0:08:43.120 your newsletter the DEFEATUS of America. What do they get wrong? 0:08:43.200 --> 0:08:46.120 And particularly where do they get wrong? In capitalism? They 0:08:46.160 --> 0:08:49.600 get everything wrong. They get, for example, the one thing. 0:08:49.640 --> 0:08:51.320 There are certain things in this world that you can 0:08:51.360 --> 0:08:52.800 count on, but you can count on the fact that 0:08:52.840 --> 0:08:56.680 every year drought in rain out, America's farmers are going 0:08:56.720 --> 0:08:59.200 to produce more and better crops every single year than 0:08:59.200 --> 0:09:02.160 they did the year before. Our technology drives that fact. 0:09:02.600 --> 0:09:04.520 We are now producing don't hold me to the number, 0:09:04.840 --> 0:09:07.560 but perhaps four to five times more soybeans on the 0:09:07.559 --> 0:09:09.520 same ancorage than we did a mere thirty years ago. 0:09:09.800 --> 0:09:11.800 We will produce more ten years from now than we 0:09:11.880 --> 0:09:14.840 produce now. We have learned through technology how to drill 0:09:14.920 --> 0:09:18.760 for crude oil so much more efficiently, so much at 0:09:18.840 --> 0:09:22.040 a at a much greater pace, with a greater success ratio. 0:09:22.160 --> 0:09:25.920 They the defeatist miss what we do. We are the 0:09:25.960 --> 0:09:28.600 greatest minds in the country when in the world, when 0:09:28.600 --> 0:09:30.920 it comes to production. We enjoy the morning with Dennis 0:09:30.920 --> 0:09:33.360 Gartman of the Gartman Letter. No, we will not send 0:09:33.400 --> 0:09:36.040 out his letter. We protect the copyright of all of 0:09:36.040 --> 0:09:39.760 our guests and particularly the joy of Dennis Gartman's beliefs. 0:09:39.880 --> 0:09:43.040 In the back of his newsletter, one of his foundation 0:09:43.160 --> 0:09:48.319 beliefs is gold, not in dollar terms, but in yen 0:09:48.960 --> 0:09:53.360 in euro terms. Uh, it's a really ugly chart. It's 0:09:53.559 --> 0:09:58.440 the classic pop bullmarket and then a trumpion rollover to 0:09:58.640 --> 0:10:03.400 eleven seventy two announce. Some gurus would tell me support 0:10:03.600 --> 0:10:09.120 is nine as possible. Are you long or short the 0:10:09.160 --> 0:10:12.680 Golden Beast? I am still long of gold in euro 0:10:12.920 --> 0:10:15.160 terms and in end terms. I have no urge to 0:10:15.240 --> 0:10:17.319 buy any in dollar terms because I'm a bull on 0:10:17.360 --> 0:10:20.720 the US dollar. I'd rather own something in terms of 0:10:20.760 --> 0:10:23.040 a currency that I think is going to devalue in 0:10:23.320 --> 0:10:26.640 relationship relationship to the buck. But do I wish I 0:10:26.679 --> 0:10:28.960 owned any gold at all right now? I wish I 0:10:29.080 --> 0:10:31.640 sold a goodly portion of what I had, which is 0:10:31.640 --> 0:10:34.280 in my retirement fund. Two or three weeks ago. Wait, 0:10:34.320 --> 0:10:39.720 we get inflation from Mr Trump, from the Republicans in Washington, 0:10:40.080 --> 0:10:44.120 we get inflation, gold goes up, right, not necessarily there. 0:10:44.160 --> 0:10:46.199 There have been plenty of times when we've had inflationary 0:10:46.240 --> 0:10:48.720 impulses and gold hasn't gone up. On the other hand, 0:10:48.720 --> 0:10:51.120 there have been periods of deflation in the past when 0:10:51.120 --> 0:10:54.719 gold has gone up. Gold, I think is misunderstood. I 0:10:54.720 --> 0:10:58.440 don't think it's an inflationary harbor any longer. I think 0:10:58.480 --> 0:11:01.760 it's simply a currency relative to other currencies. And having 0:11:01.760 --> 0:11:04.640 started in the business in the early nineteen seventies at 0:11:04.679 --> 0:11:07.280 dear Old n C and being now Bank of America, 0:11:07.840 --> 0:11:11.400 when when when we traded one currency against another, I 0:11:11.440 --> 0:11:14.480 think of gold as simply being another currency, not not 0:11:14.679 --> 0:11:18.520 a harbor of of safety, not a a a place 0:11:18.559 --> 0:11:21.319 of value in an inflation to mentioned the Lira a 0:11:21.360 --> 0:11:23.720 few minutes ago, and you've written about that in your newsletter. 0:11:23.760 --> 0:11:26.360 The moves that we've seen there, what's driving it and 0:11:26.920 --> 0:11:28.360 what do you see is the outlook for that? You 0:11:28.360 --> 0:11:31.600 mean the Turkish leer, Yes, exactly. Well, it's first of all, 0:11:31.640 --> 0:11:33.800 I don't I don't trust the Turkish government under air 0:11:33.840 --> 0:11:35.839 to one for as far as I can throw him. 0:11:36.320 --> 0:11:39.480 Uh and and he's fighting a rear guard action. The 0:11:39.520 --> 0:11:41.520 fact that you had the president of a of a 0:11:41.520 --> 0:11:44.640 country come out and say they need to lower rates 0:11:44.640 --> 0:11:46.720 and the Bank of the Central Bank has, in fact, 0:11:46.880 --> 0:11:49.959 right within minutes raised rates tell you he's got a problem. 0:11:50.000 --> 0:11:53.080 Where's the where's the Turkish leer going probably demonstrably lower, 0:11:53.520 --> 0:11:55.600 if for no other reason that the dollar itself is 0:11:55.640 --> 0:11:58.360 demonstrably strong. Looking at euro dollar right now one of 0:11:58.440 --> 0:12:01.000 seven thirty seven, are you surprised is in light of 0:12:01.000 --> 0:12:02.800 what we saw in Italy that it is where it is? Oh? Yeah, 0:12:02.800 --> 0:12:05.800 I am, I'm surprised. I thought when they it looked 0:12:05.800 --> 0:12:07.200 to me in the middle of the night after the 0:12:07.280 --> 0:12:09.840 votes had been counted, and when I get up every 0:12:09.840 --> 0:12:11.640 morning at one o'clock in the morning to write the letter, 0:12:12.120 --> 0:12:15.040 and we were trading one oh five one oh five, 0:12:15.080 --> 0:12:18.000 oh five had been given, it looked like one oh five, 0:12:18.080 --> 0:12:20.360 the big figure was going to be given. And then 0:12:20.400 --> 0:12:22.839 suddenly there was a defense at one oh five. Next 0:12:22.880 --> 0:12:26.560 thing you knew, everybody who's short, including myself, ran for cover, 0:12:26.640 --> 0:12:28.680 and the next thing, it's trading one oh seven. But 0:12:28.720 --> 0:12:31.000 if you take a big look at the big picture 0:12:31.040 --> 0:12:33.160 over the course of the last year, is that rally 0:12:33.160 --> 0:12:34.760 from one oh five to one oh seven. I think 0:12:34.800 --> 0:12:36.520 we've got a one oh seven eighty bit if I'm 0:12:36.520 --> 0:12:39.440 not mistaken at one time yesterday. Is that is that 0:12:39.520 --> 0:12:42.920 technically important? Now? The the lows are lower, the highs 0:12:42.920 --> 0:12:44.240 are lower, and it still looks to me like a 0:12:44.240 --> 0:12:47.240 bear market when you look ahead here to the the 0:12:47.240 --> 0:12:48.840 e c B meeting this week, what's what are your 0:12:48.880 --> 0:12:51.480 expectations terms of what we'll hear from from Mario dragging? 0:12:51.600 --> 0:12:53.560 I think we'll hear very little. I think that I 0:12:53.600 --> 0:12:56.760 think they'll kick the football into the next year. It's 0:12:56.800 --> 0:12:59.840 Christmas time. Their propensity to take any action whatsoever is 0:13:00.000 --> 0:13:04.360 extremely limited. That will be rhetoric, there will be verbal action, 0:13:04.440 --> 0:13:06.199 but will there be any real action? I think to 0:13:06.440 --> 0:13:08.320 But but again it goes to the back half of 0:13:08.360 --> 0:13:11.640 your newsletter, which is essentially on the exogenous shocks. To 0:13:11.720 --> 0:13:15.800 worry about what's your outside shock? You're worried about what 0:13:15.880 --> 0:13:18.240 am I shot starting with European banking? But what's the 0:13:18.280 --> 0:13:21.280 one that keeps that garment up at night at one am? 0:13:21.600 --> 0:13:25.640 When he writes in granite and chisels out his newsletter, 0:13:26.160 --> 0:13:28.079 the the one thing that keeps me up at night 0:13:28.080 --> 0:13:30.760 of the Chinese and whatever they're up to in the 0:13:30.600 --> 0:13:33.800 in in the South China Sea, that keeps me up 0:13:33.840 --> 0:13:36.760 at night. I'm always worried about what the North Koreans 0:13:36.760 --> 0:13:39.200 are capable of doing at any one time. They are 0:13:39.240 --> 0:13:42.160 more Trumpian than Mr Trump is, and he at least 0:13:42.160 --> 0:13:44.559 only tweets they actually take action at times. I I 0:13:44.920 --> 0:13:48.760 stay awake worrying about that. Um I stay awake about 0:13:49.160 --> 0:13:51.360 I stay awake nowadays worrying about what Mr Trump is 0:13:51.400 --> 0:13:53.360 going to tweet out. That that bothers me a great 0:13:53.400 --> 0:13:56.200 in far more than it probably should. One final question, 0:13:56.240 --> 0:13:59.000 Bill Gross talks about a decade of financial repression. Can 0:13:59.040 --> 0:14:03.520 you say the financial impression for conservative people, retirees, savers, 0:14:03.679 --> 0:14:05.400 can you say it's over? I think it's over. I 0:14:05.400 --> 0:14:09.040 think we're gonna see I think the honestly, I think 0:14:09.040 --> 0:14:11.360 the thirty five year bear market in the bond market, 0:14:11.679 --> 0:14:14.360 uh in in rates, the thirty five year bull market 0:14:14.360 --> 0:14:16.760 in bond prices has ended. I think it ended six 0:14:16.800 --> 0:14:19.040 months ago, and I think rates are going to be 0:14:19.560 --> 0:14:23.000 not dramatically higher, but certainly demonstrably higher. Can we get 0:14:23.120 --> 0:14:25.160 can we get the Fed funds, but right over the 0:14:25.160 --> 0:14:26.560 course of the the next three or four years back to 0:14:26.640 --> 0:14:29.760 three percent. Can we get the ten year bond tenure 0:14:29.800 --> 0:14:32.400 note back to a five percent? Eel sure, I think 0:14:32.400 --> 0:14:35.040 we can do that without doing any damage to the economy. 0:14:35.240 --> 0:14:40.480 Independence bull, what's your forecast for the that will kick 0:14:40.520 --> 0:14:43.600 off at noon? And I think that both teams will 0:14:43.680 --> 0:14:47.040 the in the in the words, in the words of 0:14:47.080 --> 0:14:50.680 my high school phizzed teacher Bobby Knight, the team with 0:14:50.720 --> 0:14:53.680 the most points show win. There you go, a sound 0:14:53.680 --> 0:15:01.520 of forecasts anytime, the surveillance that all we're trying trying 0:15:01.520 --> 0:15:16.920 a hard. Kate Moore joins as chief equity strategist at 0:15:16.960 --> 0:15:20.320 Black Rock. As I said to morning, Kate, let's start 0:15:20.360 --> 0:15:22.920 with with this referendum and and the fallout from it, 0:15:23.000 --> 0:15:25.200 so much as there is one here in US equity markets. 0:15:25.240 --> 0:15:28.160 How how we're market participants, our investors watching what was 0:15:28.200 --> 0:15:29.960 going on in Italy. You know, I think we've been 0:15:30.000 --> 0:15:32.800 talking a lot about how markets have been shrugging off 0:15:32.960 --> 0:15:36.960 recent political changes and wondering, really if that's going to 0:15:37.040 --> 0:15:39.480 extend itself into two thousand seventeen years we get further 0:15:39.520 --> 0:15:42.840 into European elections, you know, there's a sense at one 0:15:42.920 --> 0:15:44.920 level that there's a bit of a narrative change, that 0:15:44.960 --> 0:15:47.560 we're going to have more stimulus, that the people are talking, 0:15:47.880 --> 0:15:50.120 that the government has to answer, And then there's a 0:15:50.160 --> 0:15:52.800 sense on the other side that, you know, this doesn't 0:15:52.800 --> 0:15:56.840 actually change meaningfully the path of the economy, particularly I 0:15:56.880 --> 0:15:59.200 think when it comes to the market reaction to Italy. 0:15:59.360 --> 0:16:01.480 So I don't know, is it fair to say the 0:16:01.520 --> 0:16:07.200 markets have been schizophrenic? What one could? You know? You get, 0:16:07.240 --> 0:16:09.800 you get this no vote at Renzy is staying on here, 0:16:09.800 --> 0:16:11.200 but you said there's there's a lot of work to 0:16:11.240 --> 0:16:13.080 be done here. How optimistic are you that in the 0:16:13.120 --> 0:16:15.720 next twelve eighteen months something is going to is going 0:16:15.760 --> 0:16:17.760 to happen or the politics going to overshadow everything that 0:16:17.800 --> 0:16:20.760 you think. I'm pretty focused on the politics, to be fair, 0:16:20.800 --> 0:16:23.640 I would love to tell you that I'm absolutely optimistic 0:16:24.000 --> 0:16:26.640 that we're going to see a significant acceleration in growth, 0:16:26.680 --> 0:16:28.760 that all of these changes end up being, you know, 0:16:28.800 --> 0:16:33.239 just sort of blips on a longer term positive trajectory. 0:16:33.360 --> 0:16:35.200 But you know, the thing I keep coming back to 0:16:35.360 --> 0:16:39.480 is what this does to business confidence, what this does 0:16:39.600 --> 0:16:43.520 to investment sentiment, you know, and whether or not given 0:16:43.560 --> 0:16:46.560 all of this uncertainty, we actually get an increase in 0:16:46.640 --> 0:16:49.720 spend or let's say, if you're a consumer or household 0:16:49.720 --> 0:16:51.960 and you think about borrowing money. You know, when there's 0:16:52.000 --> 0:16:54.760 so much political uncertainty in the future of Europe is 0:16:54.800 --> 0:16:58.040 in question, do you really look to you know, lever 0:16:58.160 --> 0:17:02.920 yourself up and um, you know, take advantage of this environment. 0:17:02.960 --> 0:17:05.879 I don't know. I was going to ask you to 0:17:05.880 --> 0:17:08.639 answerr rhetorical question. There I go. I would say, waiting 0:17:08.640 --> 0:17:10.800 on the sidelines and be a little bit more cautious 0:17:11.480 --> 0:17:14.240 is prudent at this point. Continue with business as usual, 0:17:14.320 --> 0:17:17.040 but perhaps not accelerate any of your spend or investment. 0:17:17.040 --> 0:17:18.680 From here, I'm gonna ask you if this is all 0:17:18.720 --> 0:17:21.639 part of a continuum. We had the news out of 0:17:21.680 --> 0:17:24.240 friends yesterday another candidate for for president there from the 0:17:24.280 --> 0:17:27.240 socialist center left side of things. Uh. And it strikes 0:17:27.280 --> 0:17:29.600 me that the longer this continuum gets, the more events 0:17:29.640 --> 0:17:32.080 like this probably take upon to take less import than 0:17:32.080 --> 0:17:34.080 they would have in the past. That's right. I wonder 0:17:34.080 --> 0:17:35.760 if we all have a little bit of a political 0:17:35.800 --> 0:17:41.000 news fatigue too, because um, it's been a NonStop array 0:17:41.080 --> 0:17:45.159 of big events and you know, analysis of every politicians speech, 0:17:45.200 --> 0:17:47.240 and we were already in that mode when it came 0:17:47.240 --> 0:17:50.639 to policymakers, particularly on the monetary side. Um and and 0:17:50.680 --> 0:17:53.200 now here we are trying to really discern what every 0:17:53.200 --> 0:17:55.119 politician is trying to try and do, and you know, 0:17:55.320 --> 0:17:58.800 their policy priorities. The one thing I would also note, though, is, 0:17:59.160 --> 0:18:02.440 you know, all of these political changes have huge impacts 0:18:02.440 --> 0:18:05.640 on currencies and sustained impacts on currencies, and that ends 0:18:05.680 --> 0:18:09.600 up helping someone's relative purchasing power or uh, the earnings 0:18:09.600 --> 0:18:13.200 of exporters. I think that may actually help the economy 0:18:13.320 --> 0:18:15.639 in the near term, but it's really too soon to 0:18:15.680 --> 0:18:18.240 say how sustainable that is. So you can hear me, 0:18:18.240 --> 0:18:20.480 I'm a little bit of a skeptic. I'm a little 0:18:20.520 --> 0:18:22.320 bit of skepter, you go. I mentioned those two big 0:18:22.359 --> 0:18:25.320 a monetary policy events, one this week one next is 0:18:25.359 --> 0:18:27.960 that taking on less importance is monetary policy taking on 0:18:28.040 --> 0:18:30.280 less importance, and light of all of the politics that 0:18:30.280 --> 0:18:32.240 we've seen, I was totally unaware that we had some 0:18:32.240 --> 0:18:36.720 monetary policy coming up. Of course that's not of course 0:18:36.800 --> 0:18:39.399 that's not true, But no, I think that actually, you know, 0:18:39.440 --> 0:18:41.320 if you were to ask me between now and kind 0:18:41.359 --> 0:18:43.960 of your end. You know what am I most focused on, 0:18:44.080 --> 0:18:45.919 if any sort of events, it's is actually gonna be 0:18:45.920 --> 0:18:49.680 ECB on Thursday, UM less interested in the FED next 0:18:49.680 --> 0:18:52.600 week unless there was a meaningful shift and all of 0:18:52.600 --> 0:18:54.960 a sudden the decided to step away and not continue 0:18:54.960 --> 0:18:57.560 the path normalization. But I think you know what the 0:18:57.560 --> 0:19:00.720 ECB does in terms of talking about UM bond purchases 0:19:00.720 --> 0:19:02.720 in two thousand seventeen and onwards, whether or not they 0:19:02.760 --> 0:19:05.560 would consider tapering or extending the program. I think that's 0:19:05.600 --> 0:19:09.040 going to have a huge impact and will really move markets. 0:19:10.040 --> 0:19:13.600 And there's a small meeting later this week. Small it'll 0:19:13.640 --> 0:19:16.840 be amazing why. I can't imagine what do you will say? 0:19:16.840 --> 0:19:22.000 It is always eagerly anticipated press conference. Good morning everyone, 0:19:22.119 --> 0:19:24.920 David Gerr and Tom King, Kate more with us Kate 0:19:25.000 --> 0:19:27.680 within within the rotation, You've said the word rotation four 0:19:27.760 --> 0:19:30.359 or five times in the morning here as well. I 0:19:30.359 --> 0:19:34.399 think we needed to define that what is rotation and 0:19:34.440 --> 0:19:37.680 what does it mean for our listeners investment? So what 0:19:37.800 --> 0:19:40.400 I've been talking about rotation. You're right, Tom, totally fair 0:19:40.440 --> 0:19:42.359 to call me out on using that word a dozen 0:19:42.400 --> 0:19:45.119 times this morning, but only one cup of tea in 0:19:46.119 --> 0:19:48.200 what I would what I would say is this this 0:19:48.200 --> 0:19:51.359 this rotation within the equity market happened and started to 0:19:51.400 --> 0:19:55.280 happen before the US election. It was away from some 0:19:55.400 --> 0:19:58.680 of the bond proxy stocks you know, broadly will say 0:19:58.720 --> 0:20:02.560 that's utilities, tell a calm and consumer staples, and towards 0:20:02.560 --> 0:20:07.120 some of the more value and cyclical plays, particularly towards financials, 0:20:07.160 --> 0:20:11.280 I would say, and energy. Uh, that accelerated after the election, 0:20:11.359 --> 0:20:15.080 and you can actually really see a meaningful departure from 0:20:15.160 --> 0:20:18.480 first half performance, second half performance, and then you know, 0:20:18.600 --> 0:20:21.080 super charged in the last month. That's what I'm talking 0:20:21.080 --> 0:20:24.720 about in terms of the rotation and really away from 0:20:24.760 --> 0:20:29.240 you know, investor darlings into sectors people had much lower 0:20:29.280 --> 0:20:31.440 exposure to. So so help me. And maybe this goes 0:20:31.440 --> 0:20:33.680 with a Roper merger that was just announced. I believe 0:20:33.760 --> 0:20:37.560