1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along 2 00:00:09,240 --> 00:00:13,080 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring 3 00:00:13,119 --> 00:00:17,159 Speaker 1: you insight from the best and economics, finance, investment, and 4 00:00:17,280 --> 00:00:23,280 Speaker 1: international relations. Find Bloomberg Surveillance, an Apple podcast, Suncloud, Bloomberg 5 00:00:23,360 --> 00:00:29,000 Speaker 1: dot Com and of course on the Bloomberg termament, The 6 00:00:29,120 --> 00:00:32,160 Speaker 1: Mighty Worlds, the U S Secretary of Labor Secondary worlds. 7 00:00:32,240 --> 00:00:34,519 Speaker 1: This is not the conversation that maybe you were preparing 8 00:00:34,560 --> 00:00:37,599 Speaker 1: for yesterday or I was preparing for overnight. Can we 9 00:00:37,640 --> 00:00:40,040 Speaker 1: just recall what you said earlier this week going into 10 00:00:40,040 --> 00:00:43,720 Speaker 1: this number. Let's listen into that together. We're living in 11 00:00:43,920 --> 00:00:47,040 Speaker 1: very interesting, unique times. This is unlike anything that that 12 00:00:47,159 --> 00:00:49,800 Speaker 1: any White House has ever experienced before, well maybe a 13 00:00:49,840 --> 00:00:52,320 Speaker 1: hundred years ago. Uh So, you know, we're going to 14 00:00:52,360 --> 00:00:54,640 Speaker 1: continue to follow the President as he continues to put 15 00:00:54,680 --> 00:00:57,080 Speaker 1: plans out there to move our economy forward and moving 16 00:00:57,080 --> 00:01:00,720 Speaker 1: people forward. You were preparing us for a soft secondary 17 00:01:00,760 --> 00:01:02,880 Speaker 1: what which we got a Mega one, a fantastic one, 18 00:01:03,440 --> 00:01:06,559 Speaker 1: and sixty seven thousand. It's some interesting details beneath the service. 19 00:01:06,760 --> 00:01:09,399 Speaker 1: Just give me your take first of all, place, well, 20 00:01:09,520 --> 00:01:11,399 Speaker 1: first and foremost, just from the clip to just to 21 00:01:11,560 --> 00:01:13,760 Speaker 1: stay in line here, we are still living in very unique, 22 00:01:13,800 --> 00:01:16,240 Speaker 1: interesting times in the first in a in a in 23 00:01:16,240 --> 00:01:19,200 Speaker 1: a century pandemic. But you know, we look at these reports. 24 00:01:19,680 --> 00:01:22,880 Speaker 1: Let me just touch on this two ways. Number One, 25 00:01:23,120 --> 00:01:24,960 Speaker 1: the report for the month of January was was a 26 00:01:25,040 --> 00:01:28,000 Speaker 1: very good report, a very solid report, UH. And I 27 00:01:28,040 --> 00:01:30,959 Speaker 1: think underlying what it's telling us is that we're in 28 00:01:31,000 --> 00:01:33,880 Speaker 1: a very different position than we were in March, April, May, June. 29 00:01:34,880 --> 00:01:38,360 Speaker 1: We're seeing people in economies and workplaces and workers and 30 00:01:38,360 --> 00:01:42,200 Speaker 1: employers really learning to live with a pandemic and adjust. 31 00:01:42,319 --> 00:01:45,160 Speaker 1: So we are in a different place there. Number one, UH. 32 00:01:45,319 --> 00:01:48,560 Speaker 1: The adjustments, UH, certainly is great to see. Two b 33 00:01:48,760 --> 00:01:51,640 Speaker 1: ls UH is the gold standard when it comes to 34 00:01:51,840 --> 00:01:54,280 Speaker 1: taking in numbers. We all know that in this country, UM. 35 00:01:54,320 --> 00:01:56,720 Speaker 1: And they're very transparent. And when when I saw that 36 00:01:56,800 --> 00:01:58,600 Speaker 1: number today, that was actually more surprising to me a 37 00:01:58,640 --> 00:02:00,640 Speaker 1: little bit than than the month of January. And I 38 00:02:00,680 --> 00:02:03,520 Speaker 1: asked them, you know, how did we revise seven hundred 39 00:02:03,520 --> 00:02:05,960 Speaker 1: plus thousand jobs? And what was explained to me was 40 00:02:06,000 --> 00:02:07,720 Speaker 1: over the last ten years, we've had about the same 41 00:02:07,720 --> 00:02:10,880 Speaker 1: revisions over that same period of time. So we're excited. 42 00:02:10,919 --> 00:02:13,080 Speaker 1: I'm excited today, but you know something, we still have 43 00:02:13,120 --> 00:02:15,640 Speaker 1: work to do. And you know, this celebration can last 44 00:02:15,639 --> 00:02:17,440 Speaker 1: for a little bit, a couple of hours while I 45 00:02:17,440 --> 00:02:19,280 Speaker 1: do these TV hits and then we got to go 46 00:02:19,320 --> 00:02:21,040 Speaker 1: back to work. But let's talk about what we've got 47 00:02:21,040 --> 00:02:23,720 Speaker 1: to work on. The consumer at the moment, Secondary Wolves 48 00:02:23,800 --> 00:02:26,000 Speaker 1: just doesn't fail it. I can go through the data. 49 00:02:26,040 --> 00:02:28,120 Speaker 1: I can talk about where unemployment is, where wages are, 50 00:02:28,919 --> 00:02:32,480 Speaker 1: they feel the seven percent inflation, they feel crude prices 51 00:02:32,480 --> 00:02:36,079 Speaker 1: where they are crude through the nineties, at ninety two. 52 00:02:36,360 --> 00:02:39,760 Speaker 1: You saw consumer sentiment last week decade low. What's the 53 00:02:39,880 --> 00:02:42,440 Speaker 1: disconnect there at the moment for you, Secondary Walsh, And 54 00:02:42,480 --> 00:02:44,640 Speaker 1: how do you in the administration fix that? How you 55 00:02:44,680 --> 00:02:46,880 Speaker 1: say things are and how they look and how people 56 00:02:46,880 --> 00:02:49,160 Speaker 1: fail at the moment. Yeah, I don't know. I don't 57 00:02:49,160 --> 00:02:51,000 Speaker 1: know if it's necessarily disconnect. I think it really is 58 00:02:51,040 --> 00:02:53,400 Speaker 1: about how people people feel at the moment. You know, 59 00:02:53,680 --> 00:02:56,120 Speaker 1: the American people and and and folks in this world 60 00:02:56,120 --> 00:02:57,800 Speaker 1: have gone through a lot in the last two years 61 00:02:58,240 --> 00:03:00,000 Speaker 1: with the pandemic, and I think there's a lot of 62 00:03:00,040 --> 00:03:02,919 Speaker 1: concern about their family, a lot of concern about the virus, 63 00:03:03,000 --> 00:03:05,000 Speaker 1: a lot of concern about if you if you if 64 00:03:05,040 --> 00:03:07,200 Speaker 1: you've been vaccinated the people that are vaccinated. If you're 65 00:03:07,200 --> 00:03:09,359 Speaker 1: not vaccinated, you don't want to get vaccinated. So there's 66 00:03:09,360 --> 00:03:11,080 Speaker 1: a lot of concern there. But all I know is 67 00:03:11,120 --> 00:03:13,679 Speaker 1: that the President laid out a plan the beginning of 68 00:03:13,760 --> 00:03:16,120 Speaker 1: last year to get people back to work. Uh six 69 00:03:16,160 --> 00:03:18,920 Speaker 1: point seven million Americans got back to work. The President 70 00:03:19,000 --> 00:03:22,080 Speaker 1: laid out a plan to deal with inflation a little 71 00:03:22,120 --> 00:03:25,440 Speaker 1: bit into one. We're working on those supply chain issues 72 00:03:25,440 --> 00:03:27,280 Speaker 1: and other things. So we just need to continue to 73 00:03:27,280 --> 00:03:29,560 Speaker 1: our job. I think that you worry about the poll 74 00:03:29,639 --> 00:03:31,799 Speaker 1: numbers later on, but right now, you worry about doing 75 00:03:31,800 --> 00:03:34,520 Speaker 1: a job. And as a former elected official, you know 76 00:03:34,720 --> 00:03:36,480 Speaker 1: obviously you want to see the great numbers and you 77 00:03:36,520 --> 00:03:37,960 Speaker 1: feel good about it. But at the end of the day, 78 00:03:38,080 --> 00:03:39,560 Speaker 1: you still have to do your job. And the President 79 00:03:39,600 --> 00:03:42,040 Speaker 1: is very focused on making sure he does everything for 80 00:03:42,040 --> 00:03:44,960 Speaker 1: the American people, including not just bringing down inflation, but 81 00:03:45,000 --> 00:03:47,880 Speaker 1: also bringing out wages. Let's talk about the inflation side 82 00:03:47,880 --> 00:03:50,160 Speaker 1: of it. Sneake pay can next week for you seven 83 00:03:50,160 --> 00:03:52,960 Speaker 1: point three to meet an estimate, the high seven point six, 84 00:03:53,320 --> 00:03:55,760 Speaker 1: the low seven. Going through some of the estimates, Lloyd's 85 00:03:55,760 --> 00:03:58,520 Speaker 1: Bank at seven point six credit Sweets at seven point four, 86 00:03:58,960 --> 00:04:01,600 Speaker 1: Morgan Stanley at seven and point three. Caught it with 87 00:04:01,600 --> 00:04:03,240 Speaker 1: an in cetera of Morgan Stanley. They're looking for a 88 00:04:03,240 --> 00:04:05,960 Speaker 1: punchy number next week. Secondly, Welsh, what's the message going 89 00:04:05,960 --> 00:04:08,280 Speaker 1: to be from the administration as we just keep seeing 90 00:04:08,440 --> 00:04:13,119 Speaker 1: inflation kick higher? And from where I sit, my job 91 00:04:13,240 --> 00:04:14,920 Speaker 1: is to make sure that we continue to get people 92 00:04:14,960 --> 00:04:17,159 Speaker 1: back to work. Uh. And you know, I had a 93 00:04:17,200 --> 00:04:19,400 Speaker 1: meeting with Secretary Yellen earlier this week. We talked a 94 00:04:19,440 --> 00:04:21,920 Speaker 1: little bit about inflation. We talked about the job market, 95 00:04:22,040 --> 00:04:24,599 Speaker 1: we talked about creating opportunities for people. We talked about 96 00:04:24,800 --> 00:04:26,919 Speaker 1: the infrastructural law that was passed and the investments are 97 00:04:26,920 --> 00:04:28,760 Speaker 1: gonna be made there. So I'm going to continue to 98 00:04:28,800 --> 00:04:31,080 Speaker 1: do my job in in different parts of the administration 99 00:04:31,120 --> 00:04:32,880 Speaker 1: are gonna be working on the inflation side. I'm part 100 00:04:32,880 --> 00:04:34,800 Speaker 1: of that as well with the supply chain. But but 101 00:04:34,880 --> 00:04:36,800 Speaker 1: you know, again, we're taking this day at the time. 102 00:04:37,080 --> 00:04:38,440 Speaker 1: What does that mean when you say we're going to 103 00:04:38,520 --> 00:04:40,839 Speaker 1: help people get back to work, What specifically are you 104 00:04:40,839 --> 00:04:45,000 Speaker 1: and in the administration doing to try and achieve that. Well, certainly, 105 00:04:45,120 --> 00:04:47,440 Speaker 1: we'll work. I'm working with governors and mayors across the country. 106 00:04:47,440 --> 00:04:50,559 Speaker 1: We're making investments in job training programs. We're making looking 107 00:04:50,560 --> 00:04:52,840 Speaker 1: at the way we do job training and workforce development 108 00:04:53,120 --> 00:04:55,320 Speaker 1: in the infrastructural law. We're making sure that we're gonna 109 00:04:55,320 --> 00:04:58,320 Speaker 1: be working on pre apprenticeship programs and apprenticeship programs to 110 00:04:58,360 --> 00:05:00,479 Speaker 1: get more people into the building trades. We're gonna be 111 00:05:00,480 --> 00:05:02,640 Speaker 1: working working on the supply chain. We're working on the 112 00:05:02,680 --> 00:05:04,719 Speaker 1: on the trucking industry to get more people on the 113 00:05:04,760 --> 00:05:07,360 Speaker 1: trucking side of supply chain demands that are happening our 114 00:05:07,360 --> 00:05:10,200 Speaker 1: country now last mile UH. You know, a lot of 115 00:05:10,240 --> 00:05:12,280 Speaker 1: the concerns we have is not just bringing ships in 116 00:05:12,400 --> 00:05:14,840 Speaker 1: off off the coast to to unload them. We also 117 00:05:14,880 --> 00:05:16,680 Speaker 1: need to make them sure that the products that are 118 00:05:16,720 --> 00:05:18,840 Speaker 1: on those ships get to stores, get to warehouses, get 119 00:05:18,880 --> 00:05:22,360 Speaker 1: to main street America. So we're working to increase other jobs. 120 00:05:22,800 --> 00:05:24,960 Speaker 1: We also saw one of the participation rates that we 121 00:05:25,000 --> 00:05:28,320 Speaker 1: saw in UH that's growing as younger people sixteen twenty 122 00:05:28,360 --> 00:05:30,680 Speaker 1: one people getting into the workforce. We need to make 123 00:05:30,680 --> 00:05:33,000 Speaker 1: sure that as those folks get into the workforce that 124 00:05:33,040 --> 00:05:34,800 Speaker 1: we're training and not just for the job today, but 125 00:05:34,839 --> 00:05:36,839 Speaker 1: making sure they have really pathways into the middle class, 126 00:05:36,960 --> 00:05:38,640 Speaker 1: so that that's what I mean by that. The secondly, 127 00:05:38,680 --> 00:05:40,400 Speaker 1: well was just a final question from me, and allow 128 00:05:40,480 --> 00:05:43,360 Speaker 1: me to go here. The Bank of England Governor Mr 129 00:05:43,440 --> 00:05:47,000 Speaker 1: Bailey yesterday faced a lot of backlash from what he 130 00:05:47,080 --> 00:05:50,480 Speaker 1: said about pay rises and workers, and he effectively said 131 00:05:50,480 --> 00:05:53,159 Speaker 1: that the people in the UK shouldn't demand a big 132 00:05:53,200 --> 00:05:56,240 Speaker 1: pay rise this year because it might cause more problems. 133 00:05:56,279 --> 00:05:58,640 Speaker 1: I just wonder, as a union guy yourself, how you'd 134 00:05:58,640 --> 00:06:01,480 Speaker 1: respond to a line like that, what your position would 135 00:06:01,480 --> 00:06:03,880 Speaker 1: be on that debate At the moment, I think any 136 00:06:03,920 --> 00:06:06,480 Speaker 1: time that we see increase increases in wages for people, 137 00:06:06,560 --> 00:06:09,279 Speaker 1: that's a good thing. We saw a thirteen thirty orroughly 138 00:06:09,279 --> 00:06:11,960 Speaker 1: thirteen and fift percent wage increase in hospitality and what 139 00:06:12,080 --> 00:06:13,960 Speaker 1: do we see. We saw more participation of workers in 140 00:06:13,960 --> 00:06:16,680 Speaker 1: that industry. I think it's important to pay workers more, 141 00:06:16,880 --> 00:06:19,360 Speaker 1: it's important to respect our workers, uh and it's important 142 00:06:19,400 --> 00:06:21,880 Speaker 1: to keep our corny moving forward. Money Welsh, the u 143 00:06:21,920 --> 00:06:24,560 Speaker 1: S Secretary of Labor Money, thank you. I know you're 144 00:06:24,560 --> 00:06:26,840 Speaker 1: super busy trying to explain this one to a lot 145 00:06:26,839 --> 00:06:28,920 Speaker 1: of people. After setting us up maybe for seft print, 146 00:06:28,960 --> 00:06:31,280 Speaker 1: we've got a really really good print secondly, Welsh there, 147 00:06:31,560 --> 00:06:39,120 Speaker 1: thank you very much. John. I want you to bring 148 00:06:39,160 --> 00:06:41,400 Speaker 1: in Jeffrey Rosenberg is the markets movie here, but I 149 00:06:41,440 --> 00:06:43,440 Speaker 1: really want to rip up the script John in the 150 00:06:43,480 --> 00:06:45,920 Speaker 1: next thirty minutes of Little McKee here to give us 151 00:06:45,960 --> 00:06:49,920 Speaker 1: further study and the most stunning miss I've ever seen, 152 00:06:49,960 --> 00:06:52,320 Speaker 1: and that sounds perfect. This is a monster upside surprise 153 00:06:52,440 --> 00:06:55,640 Speaker 1: for sixty seven is the number one was the estimate, 154 00:06:55,680 --> 00:06:57,920 Speaker 1: but the range was huge to fifty at the top end, 155 00:06:58,120 --> 00:07:00,920 Speaker 1: negative four k at the bottom, and you just look 156 00:07:01,000 --> 00:07:03,640 Speaker 1: fantastic the two years responding, you'll tie there by nine 157 00:07:03,640 --> 00:07:06,360 Speaker 1: basis points. We approach one thirty on a US two 158 00:07:06,440 --> 00:07:09,120 Speaker 1: year John, Jeff, sure you want to jump in mind, 159 00:07:09,240 --> 00:07:10,640 Speaker 1: I just want to jump in with one number here 160 00:07:10,680 --> 00:07:13,239 Speaker 1: because we didn't even notice this that seven nine thousand 161 00:07:13,280 --> 00:07:18,960 Speaker 1: you're talking about December was revised up from the There's 162 00:07:19,000 --> 00:07:22,720 Speaker 1: a note in here that suggests that the seasonal factors 163 00:07:22,720 --> 00:07:27,000 Speaker 1: have been updated to better distinguish what was COVID and 164 00:07:27,000 --> 00:07:30,560 Speaker 1: what was seasonal. And so it's not just that there 165 00:07:30,600 --> 00:07:32,480 Speaker 1: was a huge game this month. There was a huge 166 00:07:32,480 --> 00:07:35,240 Speaker 1: game last month as well. Let's get to Jeff now 167 00:07:35,320 --> 00:07:38,160 Speaker 1: from blank Rock. Jeff, we've been told to ignore this one. 168 00:07:38,800 --> 00:07:42,360 Speaker 1: We're not ignoring it now, Jeff hy, Well, you can't 169 00:07:42,360 --> 00:07:45,120 Speaker 1: ignore this one. It's got a lot of moving pieces 170 00:07:45,200 --> 00:07:49,080 Speaker 1: as as we're dissecting here real time. You know, I 171 00:07:49,120 --> 00:07:52,000 Speaker 1: think Mike's got it right in terms of the you know, 172 00:07:52,040 --> 00:07:56,600 Speaker 1: the revisions is really important. You don't see the expected 173 00:07:56,600 --> 00:07:59,280 Speaker 1: on macron impact. A lot of that can be due 174 00:07:59,320 --> 00:08:04,000 Speaker 1: to the difficulty of seasonal adjustments. But the other pieces 175 00:08:04,040 --> 00:08:06,560 Speaker 1: of this report are also very strong in terms of 176 00:08:06,600 --> 00:08:11,080 Speaker 1: the wage piece and the labor force participation rates. So 177 00:08:11,240 --> 00:08:13,720 Speaker 1: you know, taken in total, you talked about the market 178 00:08:13,760 --> 00:08:17,360 Speaker 1: reaction and Neil's comment, you know, this really is not 179 00:08:17,640 --> 00:08:20,800 Speaker 1: the kind of little bit of we can look past 180 00:08:20,920 --> 00:08:24,360 Speaker 1: this one, but much more about both what it tells 181 00:08:24,440 --> 00:08:26,680 Speaker 1: us in terms of those revisions as well as what 182 00:08:26,760 --> 00:08:31,120 Speaker 1: it's saying today. This is the labor market really screeching, 183 00:08:31,640 --> 00:08:34,520 Speaker 1: uh screaming, I should say, uh. And that's going to 184 00:08:34,679 --> 00:08:37,520 Speaker 1: continue to keep the pressure on the FED. And that's 185 00:08:37,559 --> 00:08:39,880 Speaker 1: why you're seeing the move in the front end, because 186 00:08:39,920 --> 00:08:44,920 Speaker 1: the market is pricing this acceleration in near term tightening. 187 00:08:45,520 --> 00:08:48,040 Speaker 1: Uh And and I think that will remain the theme 188 00:08:48,120 --> 00:08:50,920 Speaker 1: here for a while. This report does a lot to 189 00:08:51,000 --> 00:08:55,480 Speaker 1: continue to accelerate that theme of upfronting the pace of 190 00:08:55,480 --> 00:08:57,960 Speaker 1: of FED hikes. Maybe you know, I don't know if 191 00:08:57,960 --> 00:09:01,240 Speaker 1: that's necessarily fifty, but it's really about how many, how 192 00:09:01,360 --> 00:09:04,320 Speaker 1: quickly do they get it in uh this year, and 193 00:09:04,360 --> 00:09:08,000 Speaker 1: a very rapid change from you know, expecting a quarterly 194 00:09:08,080 --> 00:09:10,199 Speaker 1: pace to now you know it's going to be every 195 00:09:10,240 --> 00:09:13,160 Speaker 1: meeting to Niel's common about now they need to throw 196 00:09:13,160 --> 00:09:17,000 Speaker 1: in a fifty in there. But definitely here the surprises 197 00:09:17,080 --> 00:09:21,040 Speaker 1: that this is just again telling us how overheated this 198 00:09:21,160 --> 00:09:24,080 Speaker 1: labor market is. Can you put this report together with 199 00:09:24,160 --> 00:09:27,199 Speaker 1: what we heard from the Bank of England European Central Bank, 200 00:09:27,480 --> 00:09:30,360 Speaker 1: the shift that we have seen this week in market 201 00:09:30,600 --> 00:09:33,680 Speaker 1: as globally there is a feeling that the labor market, 202 00:09:33,720 --> 00:09:36,240 Speaker 1: that in general inflation is getting too hot. And have 203 00:09:36,360 --> 00:09:42,040 Speaker 1: you shifted your your investment perspective at all. Well, there's 204 00:09:42,040 --> 00:09:45,880 Speaker 1: still this distinction, you know, between the US, the Bank 205 00:09:45,920 --> 00:09:48,080 Speaker 1: of England and the ECB were heard we heard a 206 00:09:48,080 --> 00:09:52,800 Speaker 1: lot about that yesterday from from Leguard. But but overall, 207 00:09:52,840 --> 00:09:56,559 Speaker 1: in terms of particularly the outlook both for all three, 208 00:09:57,000 --> 00:10:00,200 Speaker 1: you know, the labor market will very much sit at 209 00:10:00,240 --> 00:10:03,280 Speaker 1: the center of that debate. I think for Europe that's still, 210 00:10:03,679 --> 00:10:06,199 Speaker 1: you know, to be seen. I think what you're seeing 211 00:10:06,240 --> 00:10:08,959 Speaker 1: here in today's report for the US as well as 212 00:10:09,000 --> 00:10:11,160 Speaker 1: for the Bank of England is that the strength in 213 00:10:11,200 --> 00:10:14,720 Speaker 1: the labor markets is is really the risk of a 214 00:10:14,840 --> 00:10:19,439 Speaker 1: more persistent inflationary outcome, because that's strong of a labor 215 00:10:19,520 --> 00:10:23,160 Speaker 1: market is about the fears of wage price spiral, and 216 00:10:23,200 --> 00:10:27,640 Speaker 1: so it shifts from the supply side COVID disruption narrative 217 00:10:27,920 --> 00:10:32,679 Speaker 1: to something that's much more difficult for policy makers to 218 00:10:32,720 --> 00:10:34,880 Speaker 1: reign in, which is which is which is a waste 219 00:10:34,920 --> 00:10:39,160 Speaker 1: wage price spiral source of inflation. Jeff Frozenberg the tenuere 220 00:10:39,400 --> 00:10:42,760 Speaker 1: inflation adjusted yield as a measurement of a negative zero 221 00:10:42,840 --> 00:10:45,760 Speaker 1: point five four This on a day where we really 222 00:10:45,800 --> 00:10:49,680 Speaker 1: consider finally a positive rate regime across most, if not all, 223 00:10:50,160 --> 00:10:53,640 Speaker 1: of Europe. I'm going to assume the path from here 224 00:10:54,200 --> 00:10:58,280 Speaker 1: to a flat or positive tenure real yield has non 225 00:10:58,360 --> 00:11:01,719 Speaker 1: linearities in it. What's going to be the impact to 226 00:11:01,840 --> 00:11:06,440 Speaker 1: the overall financial system and to the overall economy is 227 00:11:06,520 --> 00:11:12,240 Speaker 1: that tenure real yield migrates up towards zero. Well, you know, 228 00:11:12,360 --> 00:11:15,160 Speaker 1: it's it's a question in your question is it a 229 00:11:15,760 --> 00:11:20,360 Speaker 1: slow migration or is it a nonlinearity. The FED doesn't 230 00:11:20,400 --> 00:11:24,960 Speaker 1: like nonlinearities because the market doesn't deal well with nonlinearities. 231 00:11:25,000 --> 00:11:28,520 Speaker 1: That's too rapid of a tightening on financial conditions. The 232 00:11:28,559 --> 00:11:31,200 Speaker 1: FED wants to tighten financial conditions, but it doesn't want 233 00:11:31,200 --> 00:11:35,080 Speaker 1: to crash confidence and overtighten. So it's a very tough 234 00:11:35,880 --> 00:11:38,400 Speaker 1: uh path for the Fed to try to take. That's 235 00:11:38,440 --> 00:11:42,120 Speaker 1: the argument against the fifty basis point shock because it 236 00:11:42,200 --> 00:11:45,560 Speaker 1: is a bigger shock. It risks sort of a narrative 237 00:11:45,559 --> 00:11:48,560 Speaker 1: getting away from the FED that that they're way behind 238 00:11:48,600 --> 00:11:51,760 Speaker 1: the curve and that inflation is accelerating out of control, 239 00:11:51,800 --> 00:11:56,680 Speaker 1: whereas in their forecasts and the market consensus forecast is 240 00:11:56,720 --> 00:11:59,600 Speaker 1: that inflation will start to come down. So you don't 241 00:11:59,640 --> 00:12:03,520 Speaker 1: want to over tighten and overshocked the market. Yet the 242 00:12:03,640 --> 00:12:07,480 Speaker 1: path towards real interest rates here globally, and I think 243 00:12:07,480 --> 00:12:11,160 Speaker 1: that's the message for the week is that we're going 244 00:12:11,240 --> 00:12:15,880 Speaker 1: to exit this era of persistent negative real interest rates. 245 00:12:15,920 --> 00:12:21,439 Speaker 1: The challenges can you exit that era without a bigger 246 00:12:21,520 --> 00:12:25,680 Speaker 1: financial tightening, a bigger financial accident. Clearly that's what the 247 00:12:25,840 --> 00:12:28,600 Speaker 1: policymakers are going to be aiming for, and so the 248 00:12:28,600 --> 00:12:30,720 Speaker 1: guidance around that is going to be to try to 249 00:12:31,120 --> 00:12:34,960 Speaker 1: tighten without overtightening. Jeff, just as an investor PM at 250 00:12:34,960 --> 00:12:37,480 Speaker 1: the moment, are you having fun in this market? Is 251 00:12:37,520 --> 00:12:41,240 Speaker 1: this fun or is this brutal? Well, you know, it 252 00:12:41,320 --> 00:12:44,520 Speaker 1: depends on your investment process and and what you have 253 00:12:44,720 --> 00:12:49,320 Speaker 1: for levers. If if if you have a diversified portfolio 254 00:12:49,400 --> 00:12:53,199 Speaker 1: across both directional which is you know, are we are 255 00:12:53,200 --> 00:12:55,360 Speaker 1: we betting on interest it's going up, our interest rates 256 00:12:55,440 --> 00:12:58,760 Speaker 1: going down? That's a very difficult uh set of tools. 257 00:12:58,800 --> 00:13:01,520 Speaker 1: But the other thing that happening here that is quite 258 00:13:01,520 --> 00:13:05,880 Speaker 1: advantageous to a different toolkit, That is a toolkit that 259 00:13:05,960 --> 00:13:11,520 Speaker 1: exploits differences across interest rates, differences in dispersion in both 260 00:13:11,720 --> 00:13:15,560 Speaker 1: micro and macro markets. It's actually starting to become a 261 00:13:15,640 --> 00:13:19,480 Speaker 1: much better environment for those types of strategies. And so 262 00:13:19,720 --> 00:13:22,559 Speaker 1: while it's difficult in terms of kind of direction, will 263 00:13:22,600 --> 00:13:25,240 Speaker 1: markets go up? Will markets go down? As the Fed 264 00:13:25,320 --> 00:13:28,240 Speaker 1: and global central banks pulled back from this era of 265 00:13:28,360 --> 00:13:34,480 Speaker 1: incredible liquidity and policy accommodation, that is compressed differences that 266 00:13:34,559 --> 00:13:38,960 Speaker 1: reduces opportunity, you actually see opportunities arise in the calling 267 00:13:39,040 --> 00:13:42,640 Speaker 1: the cross section and differences across countries and different companies. 268 00:13:42,679 --> 00:13:46,080 Speaker 1: So a little bit of glass half empty, glass half full. There. 269 00:13:46,200 --> 00:13:47,880 Speaker 1: For those of you who think they've been living in 270 00:13:47,920 --> 00:13:49,480 Speaker 1: the real world for the last two months, you haven't 271 00:13:49,520 --> 00:13:52,199 Speaker 1: been a Macron did not happen for sixty seven is 272 00:13:52,240 --> 00:13:56,280 Speaker 1: the number for January? The previous rate five ten at least. 273 00:13:56,280 --> 00:13:58,800 Speaker 1: This stuff is just unbelievable. Just to get your teeth 274 00:13:58,840 --> 00:14:00,680 Speaker 1: into we've been told to pay to do this morning. 275 00:14:00,720 --> 00:14:03,920 Speaker 1: Ignore the payrolls number big on Macron impact and then bang, 276 00:14:04,160 --> 00:14:07,480 Speaker 1: you'd explode in up eight or nine basis points. I'll 277 00:14:07,480 --> 00:14:09,839 Speaker 1: discuss this with Jeffs colleague a little bit later. Rick 278 00:14:09,880 --> 00:14:12,600 Speaker 1: Reader of Black Rock talk to him about how on 279 00:14:12,640 --> 00:14:15,040 Speaker 1: earth he's handling this situation. Just the cash allocation. I 280 00:14:15,040 --> 00:14:16,439 Speaker 1: wonder how large that is at the moment, and a 281 00:14:16,480 --> 00:14:19,080 Speaker 1: stage Ramarosa will join in Mike Collins to PGIM two 282 00:14:19,400 --> 00:14:20,880 Speaker 1: and then later all catch up of the White House. 283 00:14:21,280 --> 00:14:24,080 Speaker 1: I imagine Lisa the interview that secondary Welsh thought he 284 00:14:24,120 --> 00:14:26,480 Speaker 1: was going to do yesterday. It's very different. It's a 285 00:14:26,520 --> 00:14:27,920 Speaker 1: different one than the one he's about to do now. 286 00:14:28,000 --> 00:14:29,680 Speaker 1: I think it was about town with all the differences 287 00:14:29,720 --> 00:14:32,600 Speaker 1: between the household, surf and the other survey and why 288 00:14:32,640 --> 00:14:34,600 Speaker 1: this number was so bad and this is going to 289 00:14:34,640 --> 00:14:36,760 Speaker 1: be a different one. Yeah, it's about an hour. It's 290 00:14:36,760 --> 00:14:38,640 Speaker 1: gonna be one about inflation. It's going to be one 291 00:14:38,720 --> 00:14:42,480 Speaker 1: about a labor market that looks increasingly tight. I keep 292 00:14:42,560 --> 00:14:45,160 Speaker 1: going back to this idea that the European market right 293 00:14:45,200 --> 00:14:47,880 Speaker 1: now is really in shock style from the e CPS 294 00:14:47,880 --> 00:14:51,560 Speaker 1: pivot yesterday. Why has the US market not reacted? It 295 00:14:51,600 --> 00:14:53,960 Speaker 1: looks like the reaction is coming today, Jeff. Do you 296 00:14:54,040 --> 00:14:56,200 Speaker 1: think that there is more to come in terms of 297 00:14:56,200 --> 00:14:59,520 Speaker 1: this recalibration of as what you said is we're moving 298 00:14:59,520 --> 00:15:04,920 Speaker 1: to a new regime or negative real rates are no longer. Yeah. 299 00:15:04,960 --> 00:15:06,720 Speaker 1: I look, I think there's a lot of room to 300 00:15:06,760 --> 00:15:09,760 Speaker 1: go there, and I think there's a big debate growing 301 00:15:09,960 --> 00:15:13,000 Speaker 1: around the pace of how quickly the c B has 302 00:15:13,040 --> 00:15:15,640 Speaker 1: to move. You know, there's still a lot more, as 303 00:15:15,720 --> 00:15:18,720 Speaker 1: Leguard said yesterday, a lot more data dependence. And so 304 00:15:19,120 --> 00:15:23,080 Speaker 1: you saw the first crack in European inflation data, right, 305 00:15:23,160 --> 00:15:25,600 Speaker 1: So that's really what has kind of changed the narrative 306 00:15:25,640 --> 00:15:29,320 Speaker 1: and forced the ECB off of the you know, somewhat 307 00:15:29,360 --> 00:15:32,200 Speaker 1: conditional promises of no rate hikes. They've been kind of 308 00:15:32,320 --> 00:15:35,400 Speaker 1: mugged by the data, mugged by the reality, uh that 309 00:15:35,520 --> 00:15:38,520 Speaker 1: inflation there is is rolling now, they again have a 310 00:15:38,560 --> 00:15:42,880 Speaker 1: different underlying fundamentals between wages than what we're seeing here 311 00:15:42,920 --> 00:15:45,280 Speaker 1: in the US. And that's partly Lisa, I think you saw, 312 00:15:45,560 --> 00:15:48,160 Speaker 1: you know, less of a reaction in the US relative 313 00:15:48,240 --> 00:15:51,160 Speaker 1: to a very strong reaction. But also look again in 314 00:15:51,160 --> 00:15:56,800 Speaker 1: that cross section, where was the biggest reaction. Uh. Jonathan 315 00:15:56,840 --> 00:16:01,880 Speaker 1: mentioned it earlier, the spectacular increases in Italian yields, because 316 00:16:02,040 --> 00:16:06,360 Speaker 1: in the cross section of European Central Bank support, it's compressed, 317 00:16:06,760 --> 00:16:12,720 Speaker 1: it's it's muted the fundamental differences in where yields should 318 00:16:12,760 --> 00:16:16,080 Speaker 1: trade across the European complex. And so as you pull 319 00:16:16,160 --> 00:16:19,240 Speaker 1: back not only on the level of that interest rate support, 320 00:16:19,240 --> 00:16:22,080 Speaker 1: you're gonna see a lot more in the cross section. 321 00:16:22,120 --> 00:16:24,800 Speaker 1: That's going to be a challenge to the ECB. But 322 00:16:24,880 --> 00:16:27,040 Speaker 1: it is very much part of what I think we're 323 00:16:27,040 --> 00:16:30,680 Speaker 1: gonna see re emerge as the CBS forced to pull 324 00:16:30,760 --> 00:16:34,520 Speaker 1: back on this tremendous era of policy accommodation. Jeff Frozen Worg, 325 00:16:34,560 --> 00:16:36,360 Speaker 1: thank you so much. The Black Rock. What a busy 326 00:16:36,400 --> 00:16:46,040 Speaker 1: day you're gonna have at your shop. Tiffany Wilder here 327 00:16:46,080 --> 00:16:50,480 Speaker 1: to translate. Boy, do we need Tiffany Wilding today with Pimco, 328 00:16:50,560 --> 00:16:54,080 Speaker 1: their chief US economists. Tiffany, I'm gonna cut to the 329 00:16:54,160 --> 00:16:57,600 Speaker 1: chase with an open question. I never do this, but 330 00:16:57,800 --> 00:17:00,920 Speaker 1: it's so chaotic. What are you going to write about 331 00:17:00,960 --> 00:17:04,439 Speaker 1: this weekend? Give us a I want to frontload. I 332 00:17:04,480 --> 00:17:08,040 Speaker 1: want to frontload Jerome Schneider. Tell me before you tell 333 00:17:08,119 --> 00:17:11,879 Speaker 1: Jerome Schneider what you're going to write about. Good morning, 334 00:17:11,920 --> 00:17:13,439 Speaker 1: Tom and Paul. I mean, so, first of all, I 335 00:17:13,440 --> 00:17:15,880 Speaker 1: think this the headlines on this report were a little 336 00:17:15,920 --> 00:17:20,680 Speaker 1: bit tough to interpret just because of the revisions. Benchmark 337 00:17:20,720 --> 00:17:23,800 Speaker 1: revisions were incorporated, and they also revised the seasonal factors, 338 00:17:23,800 --> 00:17:26,840 Speaker 1: so that actually contributed um to some of the big 339 00:17:26,880 --> 00:17:29,120 Speaker 1: month over month jumps in in like the labor force 340 00:17:29,160 --> 00:17:33,160 Speaker 1: participation rate, in the EPOP employment to population ratio um 341 00:17:33,160 --> 00:17:36,160 Speaker 1: and some of the big monthly revisions. But I think 342 00:17:36,280 --> 00:17:38,200 Speaker 1: just you have so you have to take a broader look, 343 00:17:38,280 --> 00:17:40,200 Speaker 1: and I think once you do that, what you still 344 00:17:40,280 --> 00:17:43,359 Speaker 1: see is that this was a very solid report on 345 00:17:43,400 --> 00:17:46,280 Speaker 1: a number of fronts. First and foremost, I think is 346 00:17:46,280 --> 00:17:48,959 Speaker 1: on the labor force participation rate. So this has been 347 00:17:48,960 --> 00:17:51,959 Speaker 1: a bit of a conundrum. All year. UM, we like 348 00:17:52,040 --> 00:17:54,920 Speaker 1: many forecasters, had expected, you know, some recovery in the 349 00:17:55,000 --> 00:17:58,240 Speaker 1: labor force participation rate and it just wasn't happening. The 350 00:17:58,359 --> 00:18:02,320 Speaker 1: data today basically change that. I think, change that narrative, 351 00:18:02,359 --> 00:18:04,439 Speaker 1: and it looks like the labor force participation rate is 352 00:18:04,440 --> 00:18:07,720 Speaker 1: actually UM accelerating in quite a big way. And it 353 00:18:07,800 --> 00:18:09,960 Speaker 1: lines up with some of the expirations of the you know, 354 00:18:10,040 --> 00:18:14,440 Speaker 1: government income subsidies, you know, like enhanced unemployment benefits. UH 355 00:18:14,560 --> 00:18:17,680 Speaker 1: that was last September or obviously did the December expiration 356 00:18:17,720 --> 00:18:20,320 Speaker 1: of the child tax credit. So it looks like people 357 00:18:20,320 --> 00:18:24,920 Speaker 1: are coming back and that's ultimately good. Nevertheless, you had UM, 358 00:18:26,040 --> 00:18:28,320 Speaker 1: you had wages that were also very strong. So in 359 00:18:28,400 --> 00:18:31,440 Speaker 1: terms of the Federal Reserve, to me, this argues more 360 00:18:31,640 --> 00:18:35,240 Speaker 1: for UM, you know, a sequential pace of rate hikes 361 00:18:35,600 --> 00:18:39,399 Speaker 1: maybe in the UM you know, March May June of 362 00:18:39,440 --> 00:18:42,960 Speaker 1: this year. Maybe doesn't still yet argue for a fifty 363 00:18:42,960 --> 00:18:44,720 Speaker 1: basis point rate hike in March. I mean, the FETE 364 00:18:44,760 --> 00:18:46,440 Speaker 1: is not going to want to squash out this labor 365 00:18:46,440 --> 00:18:49,239 Speaker 1: force participation gain, but you're gonna want to They are 366 00:18:49,240 --> 00:18:51,040 Speaker 1: going to want to ease off of wages. So I 367 00:18:51,080 --> 00:18:53,960 Speaker 1: think that's really the balance here. Paul from New Jersey 368 00:18:54,000 --> 00:18:56,520 Speaker 1: emails in he says, Tom, do log rhythms. Let's do 369 00:18:56,560 --> 00:19:00,560 Speaker 1: it on a Friday, folks. I did Tiffany a log 370 00:19:00,760 --> 00:19:06,560 Speaker 1: extrapolation of the trend of average hourly earnings before the pandemic, 371 00:19:07,320 --> 00:19:11,159 Speaker 1: and that statistic is roughly three point nine percent up. 372 00:19:11,280 --> 00:19:14,960 Speaker 1: We're not up three point nine percent, We're up five 373 00:19:15,040 --> 00:19:19,200 Speaker 1: point seven percent, a big, big lift induced by all 374 00:19:19,280 --> 00:19:23,800 Speaker 1: this is wage inflation entrenched. Well, if I think you 375 00:19:23,880 --> 00:19:27,920 Speaker 1: also have to keep in mind that UM inflation headline 376 00:19:27,960 --> 00:19:31,479 Speaker 1: CPI inflation is still seven percent. So even though we 377 00:19:31,520 --> 00:19:34,800 Speaker 1: are getting a nice adjustment in wages, wages on a 378 00:19:34,880 --> 00:19:38,760 Speaker 1: real basis are still negative. So people the economy as 379 00:19:38,760 --> 00:19:41,680 Speaker 1: a whole, in aggregate are not fully getting cost of 380 00:19:41,720 --> 00:19:45,960 Speaker 1: living adjustments UM. And I think that's important. Obviously, that's 381 00:19:45,960 --> 00:19:48,800 Speaker 1: important for welfare, but it's also important in this whole 382 00:19:48,840 --> 00:19:52,080 Speaker 1: debate about UM. You know, are we on the precipice 383 00:19:52,160 --> 00:19:55,720 Speaker 1: of a wage price spiral? And really the first kind 384 00:19:55,760 --> 00:19:58,560 Speaker 1: of step in that wage price spiral is that you 385 00:19:58,640 --> 00:20:01,520 Speaker 1: do actually get people that are able to bargain for 386 00:20:01,560 --> 00:20:04,280 Speaker 1: full cost of living adjustments or if not more you know, 387 00:20:04,320 --> 00:20:06,240 Speaker 1: and companies are then able to pass that on to 388 00:20:06,359 --> 00:20:08,760 Speaker 1: consumers again and that sort of starts off the spiral. 389 00:20:09,080 --> 00:20:11,440 Speaker 1: You know, this data obviously we're strong average, I really, 390 00:20:11,480 --> 00:20:14,359 Speaker 1: earnings also obviously strong, but we're still not at that 391 00:20:14,480 --> 00:20:16,360 Speaker 1: level where you are getting a full cost of living 392 00:20:16,359 --> 00:20:18,960 Speaker 1: adjustment and wages UM. You know. So I think as 393 00:20:19,000 --> 00:20:21,760 Speaker 1: I kind of look at the evidence, you know, it 394 00:20:21,880 --> 00:20:23,800 Speaker 1: still seems to me that we're you know, we're not 395 00:20:23,880 --> 00:20:28,000 Speaker 1: on the precipice of that. You know. Nevertheless, though, you know, 396 00:20:28,080 --> 00:20:30,239 Speaker 1: as a result of an underlying strong economy, you are 397 00:20:30,280 --> 00:20:32,920 Speaker 1: getting some some wage pressures and ultimately that's a that's 398 00:20:32,920 --> 00:20:37,240 Speaker 1: a good thing for workers. So, Tiffany, you know, coming 399 00:20:37,280 --> 00:20:38,840 Speaker 1: up at the top of the hour, Jonathan Farer from 400 00:20:38,840 --> 00:20:40,760 Speaker 1: Bloomberg Television is going to sit down with you as 401 00:20:40,800 --> 00:20:44,119 Speaker 1: Secretary of Labor, Marty Walsh, what do you expect the 402 00:20:44,160 --> 00:20:46,640 Speaker 1: Secretary of Labor? How do you think he will put 403 00:20:46,680 --> 00:20:49,640 Speaker 1: these numbers into context? Does do you think we are 404 00:20:49,760 --> 00:20:53,800 Speaker 1: at full employment here in a post pandemic world? Well, 405 00:20:53,840 --> 00:20:56,600 Speaker 1: I mean, I think I think we're certainly getting close 406 00:20:56,640 --> 00:20:59,560 Speaker 1: if we're not there, right, and the reason is because 407 00:21:00,080 --> 00:21:01,840 Speaker 1: UM and full employment. By the way, is a bit 408 00:21:01,880 --> 00:21:04,200 Speaker 1: of a moving target. So that's why you always get, 409 00:21:04,240 --> 00:21:07,240 Speaker 1: you know, wishy wash she answers from economists. It's kind 410 00:21:07,280 --> 00:21:09,800 Speaker 1: of depend on the people and how many come back 411 00:21:09,840 --> 00:21:12,679 Speaker 1: to the labor market. Um. You know, obviously there's been 412 00:21:12,680 --> 00:21:14,760 Speaker 1: a lot of people that retired as a result of 413 00:21:15,080 --> 00:21:18,359 Speaker 1: this pandemic. Many of those retired people were probably you know, 414 00:21:18,400 --> 00:21:21,200 Speaker 1: they could have had underlying health conditions, etcetera. They were 415 00:21:21,240 --> 00:21:23,880 Speaker 1: worried about coming back to work. So we would think, 416 00:21:23,960 --> 00:21:27,520 Speaker 1: as you know, as those health anxieties really start to fade, 417 00:21:27,560 --> 00:21:30,840 Speaker 1: you do get more labor force participation. So although we 418 00:21:30,960 --> 00:21:34,480 Speaker 1: might be you know, very close to maximum employment, now 419 00:21:34,640 --> 00:21:37,000 Speaker 1: with that additional labor supply, it kind of gives you 420 00:21:37,040 --> 00:21:39,080 Speaker 1: a little bit more runway moving forward. So this is 421 00:21:39,080 --> 00:21:41,080 Speaker 1: something that's going to be very important to watch. Was 422 00:21:41,080 --> 00:21:42,840 Speaker 1: that a wish you actually answered, Paul? Should we let 423 00:21:42,840 --> 00:21:45,960 Speaker 1: her go? I gotta go? That's pretty solid solid answer, Okay, 424 00:21:45,960 --> 00:21:49,879 Speaker 1: Tifferty Wilding, thank you for none wishy wash answers. This morning, 425 00:21:49,920 --> 00:22:00,240 Speaker 1: pimco's chief US economists on short notice with oil einty 426 00:22:00,320 --> 00:22:02,920 Speaker 1: three dollars of barrel have a blast joint that Withee 427 00:22:02,920 --> 00:22:05,399 Speaker 1: Bloomberg opinion, but far More has a claim book on 428 00:22:05,480 --> 00:22:09,879 Speaker 1: hydrocarbons the World for Sale have a Are the Saudis 429 00:22:10,040 --> 00:22:13,879 Speaker 1: and the Russians on the same page. I think that 430 00:22:13,920 --> 00:22:16,840 Speaker 1: they are. They think that they're very happy what they 431 00:22:16,840 --> 00:22:19,120 Speaker 1: see at the moment on the market. They are producing 432 00:22:19,119 --> 00:22:22,040 Speaker 1: a lot of oil. The market is about ninety dollars 433 00:22:22,040 --> 00:22:25,040 Speaker 1: heading towards a hundred dollars. They're gonna make a ton 434 00:22:25,119 --> 00:22:27,800 Speaker 1: of money. I don't think that there is much disagreement. 435 00:22:28,040 --> 00:22:30,040 Speaker 1: And there is any disagreement, you could think that the 436 00:22:30,080 --> 00:22:33,639 Speaker 1: Saudi is perhaps um sorry, the Russians perhaps are more 437 00:22:33,680 --> 00:22:35,800 Speaker 1: worried about the response five jail. But at the moment 438 00:22:35,880 --> 00:22:38,560 Speaker 1: Russia is really struggling to increase production. So I don't 439 00:22:38,560 --> 00:22:41,600 Speaker 1: see Russia put in any pressure whatsoever in Saudi Arabia 440 00:22:41,800 --> 00:22:44,720 Speaker 1: to rush more bottles into the market five dollar a 441 00:22:44,800 --> 00:22:48,080 Speaker 1: gall and guess when we get there, soon will be 442 00:22:48,320 --> 00:22:54,600 Speaker 1: something to behold. Can America turn on the supply effort? Yes, 443 00:22:54,960 --> 00:22:57,399 Speaker 1: America is actually drilling a lot, and I think that 444 00:22:57,520 --> 00:23:00,679 Speaker 1: shale may surprise to the upside is the air, but 445 00:23:00,920 --> 00:23:04,400 Speaker 1: potentially it's not gonna be enough because the main problem 446 00:23:04,480 --> 00:23:06,800 Speaker 1: on the oil market, it is not on the second 447 00:23:06,800 --> 00:23:09,919 Speaker 1: half of two. It is now now, it's when we 448 00:23:09,920 --> 00:23:12,080 Speaker 1: are beginning to see the sortage. Now is when we 449 00:23:12,119 --> 00:23:16,400 Speaker 1: are seeing the refiners paying huge premiums over the futures 450 00:23:16,440 --> 00:23:20,280 Speaker 1: market to secure oil on the physical market, the American oil, 451 00:23:20,320 --> 00:23:22,360 Speaker 1: the shale production is going to calm, but it may 452 00:23:22,359 --> 00:23:24,720 Speaker 1: be choo late to stop this rally. There. A lot 453 00:23:24,760 --> 00:23:28,240 Speaker 1: of people say that once the Ukraine Russia conflict gets resolved, 454 00:23:28,320 --> 00:23:31,040 Speaker 1: oil prices will come back down and come back down quickly. 455 00:23:31,119 --> 00:23:34,840 Speaker 1: Do you agree? I think that there is a geopolitical premium, 456 00:23:34,880 --> 00:23:39,040 Speaker 1: and certainly European refiners are buying precautionary other grades non 457 00:23:39,119 --> 00:23:42,520 Speaker 1: Russian oil just in case that there is trouble with 458 00:23:42,640 --> 00:23:45,359 Speaker 1: Russia and Ukraine. But I think that physically the market 459 00:23:45,440 --> 00:23:48,120 Speaker 1: is tied, and while there may be a premium there 460 00:23:48,160 --> 00:23:51,560 Speaker 1: for the for the potential of war in Ukraine, I 461 00:23:51,560 --> 00:23:54,160 Speaker 1: don't think that it's as large as some people saying. 462 00:23:54,400 --> 00:23:58,240 Speaker 1: Can we go down five dollars if everything gets resolved? Sure, 463 00:23:58,520 --> 00:24:00,720 Speaker 1: but that brings out to the high eighties and that's 464 00:24:00,760 --> 00:24:04,000 Speaker 1: not cheap all right? So what's the upside surprise? Where 465 00:24:04,040 --> 00:24:05,920 Speaker 1: is it going to come from? They can push oil 466 00:24:06,119 --> 00:24:10,320 Speaker 1: to the hundred a hundred and five dollars. The surprise 467 00:24:10,359 --> 00:24:12,359 Speaker 1: to the upside for me has been, and you know 468 00:24:12,440 --> 00:24:14,760 Speaker 1: that I have been talking about this for a while. 469 00:24:14,880 --> 00:24:17,800 Speaker 1: Is the financial side is the options market. We have 470 00:24:17,960 --> 00:24:21,840 Speaker 1: huge layers of call options about nine hundred and hundred 471 00:24:21,840 --> 00:24:24,080 Speaker 1: and five and then going all the way to a 472 00:24:24,119 --> 00:24:26,840 Speaker 1: hundred and fifty. We may be on a situation where 473 00:24:27,160 --> 00:24:30,199 Speaker 1: the Greeks of the market gamma. We have seen that 474 00:24:30,240 --> 00:24:32,879 Speaker 1: on the stock market also at other times. But the 475 00:24:33,480 --> 00:24:37,200 Speaker 1: financial flows may take over and those options may use 476 00:24:37,280 --> 00:24:40,760 Speaker 1: poush prices uh well above a hundred dollars. If we 477 00:24:40,840 --> 00:24:44,480 Speaker 1: move significally significantly higher than a hundred dollars, I think 478 00:24:44,480 --> 00:24:46,960 Speaker 1: it's going to be mostly on water street financial flows. 479 00:24:47,480 --> 00:24:50,479 Speaker 1: Just quickly and we can sit on this if you like. Typically, 480 00:24:50,520 --> 00:24:52,560 Speaker 1: when you get up to these levels, especially after the 481 00:24:52,640 --> 00:24:56,000 Speaker 1: last twenty years or so, something break, Something gives white. 482 00:24:56,520 --> 00:24:58,560 Speaker 1: Last time around, it was the Saturdays just in terms 483 00:24:58,560 --> 00:25:00,760 Speaker 1: of market share war that they started at the back end. 484 00:25:01,840 --> 00:25:03,480 Speaker 1: You've talked to me about why that could be different 485 00:25:03,480 --> 00:25:07,239 Speaker 1: this time around because Shell is so less responsive at 486 00:25:07,280 --> 00:25:09,520 Speaker 1: the moment. Have you I just wanted from your perspective then, 487 00:25:09,520 --> 00:25:12,000 Speaker 1: where you're focused, what you would expect to break as 488 00:25:12,040 --> 00:25:14,919 Speaker 1: crew starts to shift out higher. Is it a demand story? 489 00:25:15,280 --> 00:25:17,639 Speaker 1: What would you say it is? I think that the 490 00:25:17,720 --> 00:25:20,120 Speaker 1: White House breaks and makes the phone call by then 491 00:25:20,160 --> 00:25:23,640 Speaker 1: gets into the into the phone with Saudi Arabia Crown 492 00:25:23,680 --> 00:25:26,560 Speaker 1: Prince Muhammad bin Salman, so one that he has refused 493 00:25:26,600 --> 00:25:28,960 Speaker 1: to talk on the phone or mid face to face, 494 00:25:29,400 --> 00:25:31,000 Speaker 1: and he asked for more oil. I think that the 495 00:25:31,000 --> 00:25:33,719 Speaker 1: White House breaks and then we get this healthy response 496 00:25:33,720 --> 00:25:35,240 Speaker 1: and we get more salthy barrol have it? Are you 497 00:25:35,320 --> 00:25:36,760 Speaker 1: saying that at the moment what we're saying in the 498 00:25:36,800 --> 00:25:39,520 Speaker 1: Old Market, Not all of it, but some of it 499 00:25:39,560 --> 00:25:43,360 Speaker 1: is a blinking contest between this White House and react 500 00:25:43,560 --> 00:25:45,520 Speaker 1: the fact that this president does not want to deal 501 00:25:46,000 --> 00:25:49,760 Speaker 1: with the Crown Prince. Absolutely, Biden is refusing to make 502 00:25:49,800 --> 00:25:52,160 Speaker 1: the phone call. The South is one that phone call. 503 00:25:52,280 --> 00:25:55,840 Speaker 1: They want to be the recognition that they think they deserve, 504 00:25:55,920 --> 00:25:58,800 Speaker 1: and the Americans they think that they don't. And I 505 00:25:58,840 --> 00:26:01,840 Speaker 1: think that this is a bit of um, yeah, it's okay, 506 00:26:01,920 --> 00:26:04,760 Speaker 1: chorl we'll see who pooblings, firbs have you? What's the 507 00:26:04,840 --> 00:26:09,200 Speaker 1: power of Mr Putin? Then? Right now? Oh? Mr Puttin 508 00:26:09,400 --> 00:26:12,200 Speaker 1: says a lot of power it just produced eleven million 509 00:26:12,200 --> 00:26:16,399 Speaker 1: barrels a day. So he has a very significant geopolitical 510 00:26:16,600 --> 00:26:20,280 Speaker 1: tool in his oil sports and his gas sports. But 511 00:26:20,359 --> 00:26:22,320 Speaker 1: I don't think that Puttin is going to use that 512 00:26:22,720 --> 00:26:26,240 Speaker 1: political tool, because for him it's more valuable to use 513 00:26:26,400 --> 00:26:29,240 Speaker 1: threatening to use that actually going ahead with the use. 514 00:26:29,560 --> 00:26:32,840 Speaker 1: Have you a blast Bloomberg opinion now having a fantastic 515 00:26:32,920 --> 00:26:35,160 Speaker 1: lucky to have him with us. This is the Bloomberg 516 00:26:35,200 --> 00:26:39,280 Speaker 1: Surveillance Podcast. Thanks for listening. Join us live weekday is 517 00:26:39,359 --> 00:26:42,840 Speaker 1: from seven to ten AMI Eastern. I'm Bloomberg Radio and 518 00:26:43,040 --> 00:26:47,359 Speaker 1: Bloomberg Television each day from six to nine am for 519 00:26:47,560 --> 00:26:52,520 Speaker 1: insight from the best in economics, finance, investment, and international relations. 520 00:26:53,000 --> 00:26:57,640 Speaker 1: And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, 521 00:26:57,800 --> 00:27:01,400 Speaker 1: Bloomberg dot com, and of course on the terminal. I'm 522 00:27:01,440 --> 00:27:04,000 Speaker 1: Tom keene In. This is Bloomer