Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring
Speaker 1: you insight from the best and economics, finance, investment, and
Speaker 1: international relations. Find Bloomberg Surveillance, an Apple podcast, Suncloud, Bloomberg
Speaker 1: dot Com and of course on the Bloomberg termament, The
Speaker 1: Mighty Worlds, the U S Secretary of Labor Secondary worlds.
Speaker 1: This is not the conversation that maybe you were preparing
Speaker 1: for yesterday or I was preparing for overnight. Can we
Speaker 1: just recall what you said earlier this week going into
Speaker 1: this number. Let's listen into that together. We're living in
Speaker 1: very interesting, unique times. This is unlike anything that that
Speaker 1: any White House has ever experienced before, well maybe a
Speaker 1: hundred years ago. Uh So, you know, we're going to
Speaker 1: continue to follow the President as he continues to put
Speaker 1: plans out there to move our economy forward and moving
Speaker 1: people forward. You were preparing us for a soft secondary
Speaker 1: what which we got a Mega one, a fantastic one,
Speaker 1: and sixty seven thousand. It's some interesting details beneath the service.
Speaker 1: Just give me your take first of all, place, well,
Speaker 1: first and foremost, just from the clip to just to
Speaker 1: stay in line here, we are still living in very unique,
Speaker 1: interesting times in the first in a in a in
Speaker 1: a century pandemic. But you know, we look at these reports.
Speaker 1: Let me just touch on this two ways. Number One,
Speaker 1: the report for the month of January was was a
Speaker 1: very good report, a very solid report, UH. And I
Speaker 1: think underlying what it's telling us is that we're in
Speaker 1: a very different position than we were in March, April, May, June.
Speaker 1: We're seeing people in economies and workplaces and workers and
Speaker 1: employers really learning to live with a pandemic and adjust.
Speaker 1: So we are in a different place there. Number one, UH.
Speaker 1: The adjustments, UH, certainly is great to see. Two b
Speaker 1: ls UH is the gold standard when it comes to
Speaker 1: taking in numbers. We all know that in this country, UM.
Speaker 1: And they're very transparent. And when when I saw that
Speaker 1: number today, that was actually more surprising to me a
Speaker 1: little bit than than the month of January. And I
Speaker 1: asked them, you know, how did we revise seven hundred
Speaker 1: plus thousand jobs? And what was explained to me was
Speaker 1: over the last ten years, we've had about the same
Speaker 1: revisions over that same period of time. So we're excited.
Speaker 1: I'm excited today, but you know something, we still have
Speaker 1: work to do. And you know, this celebration can last
Speaker 1: for a little bit, a couple of hours while I
Speaker 1: do these TV hits and then we got to go
Speaker 1: back to work. But let's talk about what we've got
Speaker 1: to work on. The consumer at the moment, Secondary Wolves
Speaker 1: just doesn't fail it. I can go through the data.
Speaker 1: I can talk about where unemployment is, where wages are,
Speaker 1: they feel the seven percent inflation, they feel crude prices
Speaker 1: where they are crude through the nineties, at ninety two.
Speaker 1: You saw consumer sentiment last week decade low. What's the
Speaker 1: disconnect there at the moment for you, Secondary Walsh, And
Speaker 1: how do you in the administration fix that? How you
Speaker 1: say things are and how they look and how people
Speaker 1: fail at the moment. Yeah, I don't know. I don't
Speaker 1: know if it's necessarily disconnect. I think it really is
Speaker 1: about how people people feel at the moment. You know,
Speaker 1: the American people and and and folks in this world
Speaker 1: have gone through a lot in the last two years
Speaker 1: with the pandemic, and I think there's a lot of
Speaker 1: concern about their family, a lot of concern about the virus,
Speaker 1: a lot of concern about if you if you if
Speaker 1: you've been vaccinated the people that are vaccinated. If you're
Speaker 1: not vaccinated, you don't want to get vaccinated. So there's
Speaker 1: a lot of concern there. But all I know is
Speaker 1: that the President laid out a plan the beginning of
Speaker 1: last year to get people back to work. Uh six
Speaker 1: point seven million Americans got back to work. The President
Speaker 1: laid out a plan to deal with inflation a little
Speaker 1: bit into one. We're working on those supply chain issues
Speaker 1: and other things. So we just need to continue to
Speaker 1: our job. I think that you worry about the poll
Speaker 1: numbers later on, but right now, you worry about doing
Speaker 1: a job. And as a former elected official, you know
Speaker 1: obviously you want to see the great numbers and you
Speaker 1: feel good about it. But at the end of the day,
Speaker 1: you still have to do your job. And the President
Speaker 1: is very focused on making sure he does everything for
Speaker 1: the American people, including not just bringing down inflation, but
Speaker 1: also bringing out wages. Let's talk about the inflation side
Speaker 1: of it. Sneake pay can next week for you seven
Speaker 1: point three to meet an estimate, the high seven point six,
Speaker 1: the low seven. Going through some of the estimates, Lloyd's
Speaker 1: Bank at seven point six credit Sweets at seven point four,
Speaker 1: Morgan Stanley at seven and point three. Caught it with
Speaker 1: an in cetera of Morgan Stanley. They're looking for a
Speaker 1: punchy number next week. Secondly, Welsh, what's the message going
Speaker 1: to be from the administration as we just keep seeing
Speaker 1: inflation kick higher? And from where I sit, my job
Speaker 1: is to make sure that we continue to get people
Speaker 1: back to work. Uh. And you know, I had a
Speaker 1: meeting with Secretary Yellen earlier this week. We talked a
Speaker 1: little bit about inflation. We talked about the job market,
Speaker 1: we talked about creating opportunities for people. We talked about
Speaker 1: the infrastructural law that was passed and the investments are
Speaker 1: gonna be made there. So I'm going to continue to
Speaker 1: do my job in in different parts of the administration
Speaker 1: are gonna be working on the inflation side. I'm part
Speaker 1: of that as well with the supply chain. But but
Speaker 1: you know, again, we're taking this day at the time.
Speaker 1: What does that mean when you say we're going to
Speaker 1: help people get back to work, What specifically are you
Speaker 1: and in the administration doing to try and achieve that. Well, certainly,
Speaker 1: we'll work. I'm working with governors and mayors across the country.
Speaker 1: We're making investments in job training programs. We're making looking
Speaker 1: at the way we do job training and workforce development
Speaker 1: in the infrastructural law. We're making sure that we're gonna
Speaker 1: be working on pre apprenticeship programs and apprenticeship programs to
Speaker 1: get more people into the building trades. We're gonna be
Speaker 1: working working on the supply chain. We're working on the
Speaker 1: on the trucking industry to get more people on the
Speaker 1: trucking side of supply chain demands that are happening our
Speaker 1: country now last mile UH. You know, a lot of
Speaker 1: the concerns we have is not just bringing ships in
Speaker 1: off off the coast to to unload them. We also
Speaker 1: need to make them sure that the products that are
Speaker 1: on those ships get to stores, get to warehouses, get
Speaker 1: to main street America. So we're working to increase other jobs.
Speaker 1: We also saw one of the participation rates that we
Speaker 1: saw in UH that's growing as younger people sixteen twenty
Speaker 1: one people getting into the workforce. We need to make
Speaker 1: sure that as those folks get into the workforce that
Speaker 1: we're training and not just for the job today, but
Speaker 1: making sure they have really pathways into the middle class,
Speaker 1: so that that's what I mean by that. The secondly,
Speaker 1: well was just a final question from me, and allow
Speaker 1: me to go here. The Bank of England Governor Mr
Speaker 1: Bailey yesterday faced a lot of backlash from what he
Speaker 1: said about pay rises and workers, and he effectively said
Speaker 1: that the people in the UK shouldn't demand a big
Speaker 1: pay rise this year because it might cause more problems.
Speaker 1: I just wonder, as a union guy yourself, how you'd
Speaker 1: respond to a line like that, what your position would
Speaker 1: be on that debate At the moment, I think any
Speaker 1: time that we see increase increases in wages for people,
Speaker 1: that's a good thing. We saw a thirteen thirty orroughly
Speaker 1: thirteen and fift percent wage increase in hospitality and what
Speaker 1: do we see. We saw more participation of workers in
Speaker 1: that industry. I think it's important to pay workers more,
Speaker 1: it's important to respect our workers, uh and it's important
Speaker 1: to keep our corny moving forward. Money Welsh, the u
Speaker 1: S Secretary of Labor Money, thank you. I know you're
Speaker 1: super busy trying to explain this one to a lot
Speaker 1: of people. After setting us up maybe for seft print,
Speaker 1: we've got a really really good print secondly, Welsh there,
Speaker 1: thank you very much. John. I want you to bring
Speaker 1: in Jeffrey Rosenberg is the markets movie here, but I
Speaker 1: really want to rip up the script John in the
Speaker 1: next thirty minutes of Little McKee here to give us
Speaker 1: further study and the most stunning miss I've ever seen,
Speaker 1: and that sounds perfect. This is a monster upside surprise
Speaker 1: for sixty seven is the number one was the estimate,
Speaker 1: but the range was huge to fifty at the top end,
Speaker 1: negative four k at the bottom, and you just look
Speaker 1: fantastic the two years responding, you'll tie there by nine
Speaker 1: basis points. We approach one thirty on a US two
Speaker 1: year John, Jeff, sure you want to jump in mind,
Speaker 1: I just want to jump in with one number here
Speaker 1: because we didn't even notice this that seven nine thousand
Speaker 1: you're talking about December was revised up from the There's
Speaker 1: a note in here that suggests that the seasonal factors
Speaker 1: have been updated to better distinguish what was COVID and
Speaker 1: what was seasonal. And so it's not just that there
Speaker 1: was a huge game this month. There was a huge
Speaker 1: game last month as well. Let's get to Jeff now
Speaker 1: from blank Rock. Jeff, we've been told to ignore this one.
Speaker 1: We're not ignoring it now, Jeff hy, Well, you can't
Speaker 1: ignore this one. It's got a lot of moving pieces
Speaker 1: as as we're dissecting here real time. You know, I
Speaker 1: think Mike's got it right in terms of the you know,
Speaker 1: the revisions is really important. You don't see the expected
Speaker 1: on macron impact. A lot of that can be due
Speaker 1: to the difficulty of seasonal adjustments. But the other pieces
Speaker 1: of this report are also very strong in terms of
Speaker 1: the wage piece and the labor force participation rates. So
Speaker 1: you know, taken in total, you talked about the market
Speaker 1: reaction and Neil's comment, you know, this really is not
Speaker 1: the kind of little bit of we can look past
Speaker 1: this one, but much more about both what it tells
Speaker 1: us in terms of those revisions as well as what
Speaker 1: it's saying today. This is the labor market really screeching,
Speaker 1: uh screaming, I should say, uh. And that's going to
Speaker 1: continue to keep the pressure on the FED. And that's
Speaker 1: why you're seeing the move in the front end, because
Speaker 1: the market is pricing this acceleration in near term tightening.
Speaker 1: Uh And and I think that will remain the theme
Speaker 1: here for a while. This report does a lot to
Speaker 1: continue to accelerate that theme of upfronting the pace of
Speaker 1: of FED hikes. Maybe you know, I don't know if
Speaker 1: that's necessarily fifty, but it's really about how many, how
Speaker 1: quickly do they get it in uh this year, and
Speaker 1: a very rapid change from you know, expecting a quarterly
Speaker 1: pace to now you know it's going to be every
Speaker 1: meeting to Niel's common about now they need to throw
Speaker 1: in a fifty in there. But definitely here the surprises
Speaker 1: that this is just again telling us how overheated this
Speaker 1: labor market is. Can you put this report together with
Speaker 1: what we heard from the Bank of England European Central Bank,
Speaker 1: the shift that we have seen this week in market
Speaker 1: as globally there is a feeling that the labor market,
Speaker 1: that in general inflation is getting too hot. And have
Speaker 1: you shifted your your investment perspective at all. Well, there's
Speaker 1: still this distinction, you know, between the US, the Bank
Speaker 1: of England and the ECB were heard we heard a
Speaker 1: lot about that yesterday from from Leguard. But but overall,
Speaker 1: in terms of particularly the outlook both for all three,
Speaker 1: you know, the labor market will very much sit at
Speaker 1: the center of that debate. I think for Europe that's still,
Speaker 1: you know, to be seen. I think what you're seeing
Speaker 1: here in today's report for the US as well as
Speaker 1: for the Bank of England is that the strength in
Speaker 1: the labor markets is is really the risk of a
Speaker 1: more persistent inflationary outcome, because that's strong of a labor
Speaker 1: market is about the fears of wage price spiral, and
Speaker 1: so it shifts from the supply side COVID disruption narrative
Speaker 1: to something that's much more difficult for policy makers to
Speaker 1: reign in, which is which is which is a waste
Speaker 1: wage price spiral source of inflation. Jeff Frozenberg the tenuere
Speaker 1: inflation adjusted yield as a measurement of a negative zero
Speaker 1: point five four This on a day where we really
Speaker 1: consider finally a positive rate regime across most, if not all,
Speaker 1: of Europe. I'm going to assume the path from here
Speaker 1: to a flat or positive tenure real yield has non
Speaker 1: linearities in it. What's going to be the impact to
Speaker 1: the overall financial system and to the overall economy is
Speaker 1: that tenure real yield migrates up towards zero. Well, you know,
Speaker 1: it's it's a question in your question is it a
Speaker 1: slow migration or is it a nonlinearity. The FED doesn't
Speaker 1: like nonlinearities because the market doesn't deal well with nonlinearities.
Speaker 1: That's too rapid of a tightening on financial conditions. The
Speaker 1: FED wants to tighten financial conditions, but it doesn't want
Speaker 1: to crash confidence and overtighten. So it's a very tough
Speaker 1: uh path for the Fed to try to take. That's
Speaker 1: the argument against the fifty basis point shock because it
Speaker 1: is a bigger shock. It risks sort of a narrative
Speaker 1: getting away from the FED that that they're way behind
Speaker 1: the curve and that inflation is accelerating out of control,
Speaker 1: whereas in their forecasts and the market consensus forecast is
Speaker 1: that inflation will start to come down. So you don't
Speaker 1: want to over tighten and overshocked the market. Yet the
Speaker 1: path towards real interest rates here globally, and I think
Speaker 1: that's the message for the week is that we're going
Speaker 1: to exit this era of persistent negative real interest rates.
Speaker 1: The challenges can you exit that era without a bigger
Speaker 1: financial tightening, a bigger financial accident. Clearly that's what the
Speaker 1: policymakers are going to be aiming for, and so the
Speaker 1: guidance around that is going to be to try to
Speaker 1: tighten without overtightening. Jeff, just as an investor PM at
Speaker 1: the moment, are you having fun in this market? Is
Speaker 1: this fun or is this brutal? Well, you know, it
Speaker 1: depends on your investment process and and what you have
Speaker 1: for levers. If if if you have a diversified portfolio
Speaker 1: across both directional which is you know, are we are
Speaker 1: we betting on interest it's going up, our interest rates
Speaker 1: going down? That's a very difficult uh set of tools.
Speaker 1: But the other thing that happening here that is quite
Speaker 1: advantageous to a different toolkit, That is a toolkit that
Speaker 1: exploits differences across interest rates, differences in dispersion in both
Speaker 1: micro and macro markets. It's actually starting to become a
Speaker 1: much better environment for those types of strategies. And so
Speaker 1: while it's difficult in terms of kind of direction, will
Speaker 1: markets go up? Will markets go down? As the Fed
Speaker 1: and global central banks pulled back from this era of
Speaker 1: incredible liquidity and policy accommodation, that is compressed differences that
Speaker 1: reduces opportunity, you actually see opportunities arise in the calling
Speaker 1: the cross section and differences across countries and different companies.
Speaker 1: So a little bit of glass half empty, glass half full. There.
Speaker 1: For those of you who think they've been living in
Speaker 1: the real world for the last two months, you haven't
Speaker 1: been a Macron did not happen for sixty seven is
Speaker 1: the number for January? The previous rate five ten at least.
Speaker 1: This stuff is just unbelievable. Just to get your teeth
Speaker 1: into we've been told to pay to do this morning.
Speaker 1: Ignore the payrolls number big on Macron impact and then bang,
Speaker 1: you'd explode in up eight or nine basis points. I'll
Speaker 1: discuss this with Jeffs colleague a little bit later. Rick
Speaker 1: Reader of Black Rock talk to him about how on
Speaker 1: earth he's handling this situation. Just the cash allocation. I
Speaker 1: wonder how large that is at the moment, and a
Speaker 1: stage Ramarosa will join in Mike Collins to PGIM two
Speaker 1: and then later all catch up of the White House.
Speaker 1: I imagine Lisa the interview that secondary Welsh thought he
Speaker 1: was going to do yesterday. It's very different. It's a
Speaker 1: different one than the one he's about to do now.
Speaker 1: I think it was about town with all the differences
Speaker 1: between the household, surf and the other survey and why
Speaker 1: this number was so bad and this is going to
Speaker 1: be a different one. Yeah, it's about an hour. It's
Speaker 1: gonna be one about inflation. It's going to be one
Speaker 1: about a labor market that looks increasingly tight. I keep
Speaker 1: going back to this idea that the European market right
Speaker 1: now is really in shock style from the e CPS
Speaker 1: pivot yesterday. Why has the US market not reacted? It
Speaker 1: looks like the reaction is coming today, Jeff. Do you
Speaker 1: think that there is more to come in terms of
Speaker 1: this recalibration of as what you said is we're moving
Speaker 1: to a new regime or negative real rates are no longer. Yeah.
Speaker 1: I look, I think there's a lot of room to
Speaker 1: go there, and I think there's a big debate growing
Speaker 1: around the pace of how quickly the c B has
Speaker 1: to move. You know, there's still a lot more, as
Speaker 1: Leguard said yesterday, a lot more data dependence. And so
Speaker 1: you saw the first crack in European inflation data, right,
Speaker 1: So that's really what has kind of changed the narrative
Speaker 1: and forced the ECB off of the you know, somewhat
Speaker 1: conditional promises of no rate hikes. They've been kind of
Speaker 1: mugged by the data, mugged by the reality, uh that
Speaker 1: inflation there is is rolling now, they again have a
Speaker 1: different underlying fundamentals between wages than what we're seeing here
Speaker 1: in the US. And that's partly Lisa, I think you saw,
Speaker 1: you know, less of a reaction in the US relative
Speaker 1: to a very strong reaction. But also look again in
Speaker 1: that cross section, where was the biggest reaction. Uh. Jonathan
Speaker 1: mentioned it earlier, the spectacular increases in Italian yields, because
Speaker 1: in the cross section of European Central Bank support, it's compressed,
Speaker 1: it's it's muted the fundamental differences in where yields should
Speaker 1: trade across the European complex. And so as you pull
Speaker 1: back not only on the level of that interest rate support,
Speaker 1: you're gonna see a lot more in the cross section.
Speaker 1: That's going to be a challenge to the ECB. But
Speaker 1: it is very much part of what I think we're
Speaker 1: gonna see re emerge as the CBS forced to pull
Speaker 1: back on this tremendous era of policy accommodation. Jeff Frozen Worg,
Speaker 1: thank you so much. The Black Rock. What a busy
Speaker 1: day you're gonna have at your shop. Tiffany Wilder here
Speaker 1: to translate. Boy, do we need Tiffany Wilding today with Pimco,
Speaker 1: their chief US economists. Tiffany, I'm gonna cut to the
Speaker 1: chase with an open question. I never do this, but
Speaker 1: it's so chaotic. What are you going to write about
Speaker 1: this weekend? Give us a I want to frontload. I
Speaker 1: want to frontload Jerome Schneider. Tell me before you tell
Speaker 1: Jerome Schneider what you're going to write about. Good morning,
Speaker 1: Tom and Paul. I mean, so, first of all, I
Speaker 1: think this the headlines on this report were a little
Speaker 1: bit tough to interpret just because of the revisions. Benchmark
Speaker 1: revisions were incorporated, and they also revised the seasonal factors,
Speaker 1: so that actually contributed um to some of the big
Speaker 1: month over month jumps in in like the labor force
Speaker 1: participation rate, in the EPOP employment to population ratio um
Speaker 1: and some of the big monthly revisions. But I think
Speaker 1: just you have so you have to take a broader look,
Speaker 1: and I think once you do that, what you still
Speaker 1: see is that this was a very solid report on
Speaker 1: a number of fronts. First and foremost, I think is
Speaker 1: on the labor force participation rate. So this has been
Speaker 1: a bit of a conundrum. All year. UM, we like
Speaker 1: many forecasters, had expected, you know, some recovery in the
Speaker 1: labor force participation rate and it just wasn't happening. The
Speaker 1: data today basically change that. I think, change that narrative,
Speaker 1: and it looks like the labor force participation rate is
Speaker 1: actually UM accelerating in quite a big way. And it
Speaker 1: lines up with some of the expirations of the you know,
Speaker 1: government income subsidies, you know, like enhanced unemployment benefits. UH
Speaker 1: that was last September or obviously did the December expiration
Speaker 1: of the child tax credit. So it looks like people
Speaker 1: are coming back and that's ultimately good. Nevertheless, you had UM,
Speaker 1: you had wages that were also very strong. So in
Speaker 1: terms of the Federal Reserve, to me, this argues more
Speaker 1: for UM, you know, a sequential pace of rate hikes
Speaker 1: maybe in the UM you know, March May June of
Speaker 1: this year. Maybe doesn't still yet argue for a fifty
Speaker 1: basis point rate hike in March. I mean, the FETE
Speaker 1: is not going to want to squash out this labor
Speaker 1: force participation gain, but you're gonna want to They are
Speaker 1: going to want to ease off of wages. So I
Speaker 1: think that's really the balance here. Paul from New Jersey
Speaker 1: emails in he says, Tom, do log rhythms. Let's do
Speaker 1: it on a Friday, folks. I did Tiffany a log
Speaker 1: extrapolation of the trend of average hourly earnings before the pandemic,
Speaker 1: and that statistic is roughly three point nine percent up.
Speaker 1: We're not up three point nine percent, We're up five
Speaker 1: point seven percent, a big, big lift induced by all
Speaker 1: this is wage inflation entrenched. Well, if I think you
Speaker 1: also have to keep in mind that UM inflation headline
Speaker 1: CPI inflation is still seven percent. So even though we
Speaker 1: are getting a nice adjustment in wages, wages on a
Speaker 1: real basis are still negative. So people the economy as
Speaker 1: a whole, in aggregate are not fully getting cost of
Speaker 1: living adjustments UM. And I think that's important. Obviously, that's
Speaker 1: important for welfare, but it's also important in this whole
Speaker 1: debate about UM. You know, are we on the precipice
Speaker 1: of a wage price spiral? And really the first kind
Speaker 1: of step in that wage price spiral is that you
Speaker 1: do actually get people that are able to bargain for
Speaker 1: full cost of living adjustments or if not more you know,
Speaker 1: and companies are then able to pass that on to
Speaker 1: consumers again and that sort of starts off the spiral.
Speaker 1: You know, this data obviously we're strong average, I really,
Speaker 1: earnings also obviously strong, but we're still not at that
Speaker 1: level where you are getting a full cost of living
Speaker 1: adjustment and wages UM. You know. So I think as
Speaker 1: I kind of look at the evidence, you know, it
Speaker 1: still seems to me that we're you know, we're not
Speaker 1: on the precipice of that. You know. Nevertheless, though, you know,
Speaker 1: as a result of an underlying strong economy, you are
Speaker 1: getting some some wage pressures and ultimately that's a that's
Speaker 1: a good thing for workers. So, Tiffany, you know, coming
Speaker 1: up at the top of the hour, Jonathan Farer from
Speaker 1: Bloomberg Television is going to sit down with you as
Speaker 1: Secretary of Labor, Marty Walsh, what do you expect the
Speaker 1: Secretary of Labor? How do you think he will put
Speaker 1: these numbers into context? Does do you think we are
Speaker 1: at full employment here in a post pandemic world? Well,
Speaker 1: I mean, I think I think we're certainly getting close
Speaker 1: if we're not there, right, and the reason is because
Speaker 1: UM and full employment. By the way, is a bit
Speaker 1: of a moving target. So that's why you always get,
Speaker 1: you know, wishy wash she answers from economists. It's kind
Speaker 1: of depend on the people and how many come back
Speaker 1: to the labor market. Um. You know, obviously there's been
Speaker 1: a lot of people that retired as a result of
Speaker 1: this pandemic. Many of those retired people were probably you know,
Speaker 1: they could have had underlying health conditions, etcetera. They were
Speaker 1: worried about coming back to work. So we would think,
Speaker 1: as you know, as those health anxieties really start to fade,
Speaker 1: you do get more labor force participation. So although we
Speaker 1: might be you know, very close to maximum employment, now
Speaker 1: with that additional labor supply, it kind of gives you
Speaker 1: a little bit more runway moving forward. So this is
Speaker 1: something that's going to be very important to watch. Was
Speaker 1: that a wish you actually answered, Paul? Should we let
Speaker 1: her go? I gotta go? That's pretty solid solid answer, Okay,
Speaker 1: Tifferty Wilding, thank you for none wishy wash answers. This morning,
Speaker 1: pimco's chief US economists on short notice with oil einty
Speaker 1: three dollars of barrel have a blast joint that Withee
Speaker 1: Bloomberg opinion, but far More has a claim book on
Speaker 1: hydrocarbons the World for Sale have a Are the Saudis
Speaker 1: and the Russians on the same page. I think that
Speaker 1: they are. They think that they're very happy what they
Speaker 1: see at the moment on the market. They are producing
Speaker 1: a lot of oil. The market is about ninety dollars
Speaker 1: heading towards a hundred dollars. They're gonna make a ton
Speaker 1: of money. I don't think that there is much disagreement.
Speaker 1: And there is any disagreement, you could think that the
Speaker 1: Saudi is perhaps um sorry, the Russians perhaps are more
Speaker 1: worried about the response five jail. But at the moment
Speaker 1: Russia is really struggling to increase production. So I don't
Speaker 1: see Russia put in any pressure whatsoever in Saudi Arabia
Speaker 1: to rush more bottles into the market five dollar a
Speaker 1: gall and guess when we get there, soon will be
Speaker 1: something to behold. Can America turn on the supply effort? Yes,
Speaker 1: America is actually drilling a lot, and I think that
Speaker 1: shale may surprise to the upside is the air, but
Speaker 1: potentially it's not gonna be enough because the main problem
Speaker 1: on the oil market, it is not on the second
Speaker 1: half of two. It is now now, it's when we
Speaker 1: are beginning to see the sortage. Now is when we
Speaker 1: are seeing the refiners paying huge premiums over the futures
Speaker 1: market to secure oil on the physical market, the American oil,
Speaker 1: the shale production is going to calm, but it may
Speaker 1: be choo late to stop this rally. There. A lot
Speaker 1: of people say that once the Ukraine Russia conflict gets resolved,
Speaker 1: oil prices will come back down and come back down quickly.
Speaker 1: Do you agree? I think that there is a geopolitical premium,
Speaker 1: and certainly European refiners are buying precautionary other grades non
Speaker 1: Russian oil just in case that there is trouble with
Speaker 1: Russia and Ukraine. But I think that physically the market
Speaker 1: is tied, and while there may be a premium there
Speaker 1: for the for the potential of war in Ukraine, I
Speaker 1: don't think that it's as large as some people saying.
Speaker 1: Can we go down five dollars if everything gets resolved? Sure,
Speaker 1: but that brings out to the high eighties and that's
Speaker 1: not cheap all right? So what's the upside surprise? Where
Speaker 1: is it going to come from? They can push oil
Speaker 1: to the hundred a hundred and five dollars. The surprise
Speaker 1: to the upside for me has been, and you know
Speaker 1: that I have been talking about this for a while.
Speaker 1: Is the financial side is the options market. We have
Speaker 1: huge layers of call options about nine hundred and hundred
Speaker 1: and five and then going all the way to a
Speaker 1: hundred and fifty. We may be on a situation where
Speaker 1: the Greeks of the market gamma. We have seen that
Speaker 1: on the stock market also at other times. But the
Speaker 1: financial flows may take over and those options may use
Speaker 1: poush prices uh well above a hundred dollars. If we
Speaker 1: move significally significantly higher than a hundred dollars, I think
Speaker 1: it's going to be mostly on water street financial flows.
Speaker 1: Just quickly and we can sit on this if you like. Typically,
Speaker 1: when you get up to these levels, especially after the
Speaker 1: last twenty years or so, something break, Something gives white.
Speaker 1: Last time around, it was the Saturdays just in terms
Speaker 1: of market share war that they started at the back end.
Speaker 1: You've talked to me about why that could be different
Speaker 1: this time around because Shell is so less responsive at
Speaker 1: the moment. Have you I just wanted from your perspective then,
Speaker 1: where you're focused, what you would expect to break as
Speaker 1: crew starts to shift out higher. Is it a demand story?
Speaker 1: What would you say it is? I think that the
Speaker 1: White House breaks and makes the phone call by then
Speaker 1: gets into the into the phone with Saudi Arabia Crown
Speaker 1: Prince Muhammad bin Salman, so one that he has refused
Speaker 1: to talk on the phone or mid face to face,
Speaker 1: and he asked for more oil. I think that the
Speaker 1: White House breaks and then we get this healthy response
Speaker 1: and we get more salthy barrol have it? Are you
Speaker 1: saying that at the moment what we're saying in the
Speaker 1: Old Market, Not all of it, but some of it
Speaker 1: is a blinking contest between this White House and react
Speaker 1: the fact that this president does not want to deal
Speaker 1: with the Crown Prince. Absolutely, Biden is refusing to make
Speaker 1: the phone call. The South is one that phone call.
Speaker 1: They want to be the recognition that they think they deserve,
Speaker 1: and the Americans they think that they don't. And I
Speaker 1: think that this is a bit of um, yeah, it's okay,
Speaker 1: chorl we'll see who pooblings, firbs have you? What's the
Speaker 1: power of Mr Putin? Then? Right now? Oh? Mr Puttin
Speaker 1: says a lot of power it just produced eleven million
Speaker 1: barrels a day. So he has a very significant geopolitical
Speaker 1: tool in his oil sports and his gas sports. But
Speaker 1: I don't think that Puttin is going to use that
Speaker 1: political tool, because for him it's more valuable to use
Speaker 1: threatening to use that actually going ahead with the use.
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Speaker 1: Tom keene In. This is Bloomer