1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferroh. Along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,520 Speaker 2: Terminal and the Bloomberg Business App. Andrew Honhorst of City 10 00:00:37,560 --> 00:00:41,920 Speaker 2: pushing his Federate cut forecast to September from July, writing, 11 00:00:41,960 --> 00:00:44,240 Speaker 2: we continue to expect the FED to cut policy rates 12 00:00:44,240 --> 00:00:47,600 Speaker 2: more aggressively than what the market is pricing. Andrew joined 13 00:00:47,640 --> 00:00:49,840 Speaker 2: us now for more, Andrew kamnik Ronick, and let's start 14 00:00:49,840 --> 00:00:51,760 Speaker 2: with the timing. So you push back from June to 15 00:00:51,880 --> 00:00:55,080 Speaker 2: July and now from July to September. What's not going 16 00:00:55,120 --> 00:00:55,480 Speaker 2: your way? 17 00:00:56,040 --> 00:00:58,920 Speaker 3: The labor market data is what just hasn't given the 18 00:00:58,960 --> 00:01:01,720 Speaker 3: FED that clear say that they need to be cutting. 19 00:01:02,040 --> 00:01:04,040 Speaker 3: And I think that's what's difficult here, is that we 20 00:01:04,480 --> 00:01:07,240 Speaker 3: see the signs in various data that they will be 21 00:01:07,319 --> 00:01:08,280 Speaker 3: cutting eventually. 22 00:01:08,520 --> 00:01:10,039 Speaker 4: But when that time is. 23 00:01:10,040 --> 00:01:11,679 Speaker 3: They're actually going to make that first cut, they're going 24 00:01:11,720 --> 00:01:13,520 Speaker 3: to have to see the unemployment rate and move higher. 25 00:01:13,800 --> 00:01:16,360 Speaker 3: It rounded to four point two percent. That's going to 26 00:01:16,440 --> 00:01:17,559 Speaker 3: be enough to keep them on hold. 27 00:01:17,720 --> 00:01:20,520 Speaker 2: So you've lost confidence on the timing, but maintained confidence 28 00:01:20,520 --> 00:01:22,960 Speaker 2: on the degree to which we will get a response 29 00:01:23,000 --> 00:01:25,680 Speaker 2: from them, which will be much more aggressive than the 30 00:01:25,720 --> 00:01:26,560 Speaker 2: market is priced for. 31 00:01:27,040 --> 00:01:28,400 Speaker 5: Why are you maintaining that confidence. 32 00:01:29,080 --> 00:01:29,800 Speaker 4: I think it's not. 33 00:01:29,880 --> 00:01:31,600 Speaker 3: That hard to get there if you look at things 34 00:01:31,600 --> 00:01:33,480 Speaker 3: like the FED Beage Book. Now I know that the 35 00:01:33,520 --> 00:01:34,960 Speaker 3: FED is looking at the hard data. They're going to 36 00:01:35,000 --> 00:01:36,720 Speaker 3: wait until they see that in the hard data. If 37 00:01:36,720 --> 00:01:38,880 Speaker 3: you read the FED page book, it said the economy 38 00:01:38,920 --> 00:01:43,479 Speaker 3: is contracting and employment was unchanged over the intermeeting time period, So. 39 00:01:43,560 --> 00:01:44,720 Speaker 4: We're not hiring people. 40 00:01:45,040 --> 00:01:48,720 Speaker 3: We have an economy that maybe contracting, according to the 41 00:01:48,720 --> 00:01:51,880 Speaker 3: page book at least slowing down significantly, housing sector that's 42 00:01:51,880 --> 00:01:53,680 Speaker 3: in contraction. So I think that there's a lot of 43 00:01:53,720 --> 00:01:56,280 Speaker 3: signs out there that we will see weaker data. 44 00:01:56,600 --> 00:01:58,280 Speaker 4: You have to actually see that in the data, though, 45 00:01:58,280 --> 00:01:59,240 Speaker 4: before the Fed's going to move. 46 00:01:59,320 --> 00:02:01,840 Speaker 6: It feels like test It is so difficult to get 47 00:02:01,840 --> 00:02:03,840 Speaker 6: your head around yesterday the data came out, or on 48 00:02:03,920 --> 00:02:06,240 Speaker 6: Friday the yes, it feels like yesterday, how the DAYA 49 00:02:06,320 --> 00:02:08,400 Speaker 6: came out and it was better than expected. Yay, people 50 00:02:08,480 --> 00:02:10,200 Speaker 6: are looking at this. Not a bad number in this, 51 00:02:10,280 --> 00:02:11,919 Speaker 6: people take more time to look at it. Lots of 52 00:02:11,960 --> 00:02:14,240 Speaker 6: bad numbers in this, in particular the two month revision 53 00:02:14,320 --> 00:02:17,680 Speaker 6: downward of ninety five thousand and the idea that the 54 00:02:18,040 --> 00:02:21,359 Speaker 6: household survey lost over six hundred thousand jobs. There is 55 00:02:21,400 --> 00:02:24,919 Speaker 6: this feeling that the economy, that the labor market is contracting. 56 00:02:25,000 --> 00:02:27,720 Speaker 6: As you said, at what point do you think that 57 00:02:27,800 --> 00:02:30,440 Speaker 6: it's going to be evident enough in the data. Do 58 00:02:30,480 --> 00:02:32,320 Speaker 6: you feel like that's coming soon or do you feel 59 00:02:32,320 --> 00:02:33,680 Speaker 6: like that's been what's been delayed. 60 00:02:34,200 --> 00:02:35,920 Speaker 3: I think that is what's been delayed. I think it 61 00:02:35,960 --> 00:02:38,160 Speaker 3: is coming in the next few months. We know that 62 00:02:38,200 --> 00:02:40,639 Speaker 3: this has been a very uncomfortable labor market where we've 63 00:02:40,639 --> 00:02:42,959 Speaker 3: had a low hiring rate. We're starting to see in 64 00:02:43,000 --> 00:02:44,919 Speaker 3: the weekly data, and that's what I would be watching here, 65 00:02:44,960 --> 00:02:48,760 Speaker 3: continuing jobless claims. These continuing jobless claims are starting to rise, 66 00:02:48,800 --> 00:02:50,480 Speaker 3: So we don't have a big increase. 67 00:02:50,160 --> 00:02:51,200 Speaker 4: In initial jobless claims. 68 00:02:51,240 --> 00:02:53,480 Speaker 3: People are being laid off from their jobs, but when 69 00:02:53,520 --> 00:02:55,680 Speaker 3: people are out of work, they're finding it hard to 70 00:02:55,680 --> 00:02:58,520 Speaker 3: get back into work. That's why the continuing claims are rising. 71 00:02:58,840 --> 00:03:01,399 Speaker 3: That should mean the unemployment rate rises. We saw something 72 00:03:01,480 --> 00:03:04,280 Speaker 3: very similar last summer, and if you remember September, we 73 00:03:04,320 --> 00:03:06,760 Speaker 3: got that fifty basis point cut. So I think we're 74 00:03:06,800 --> 00:03:08,600 Speaker 3: kind of in a similar dynamic to what we saw 75 00:03:08,720 --> 00:03:11,120 Speaker 3: last year, probably a couple months before you get the 76 00:03:11,120 --> 00:03:11,519 Speaker 3: Fed moved. 77 00:03:11,560 --> 00:03:13,520 Speaker 6: It also raises a question of which rate is more 78 00:03:13,560 --> 00:03:16,000 Speaker 6: important to watch. We're talking about the FED funds rate, 79 00:03:16,040 --> 00:03:18,040 Speaker 6: the one rate that the Fed has control over. At 80 00:03:18,040 --> 00:03:20,519 Speaker 6: the same time that there were all question marks over 81 00:03:20,560 --> 00:03:22,880 Speaker 6: ten year, over thirty year treasuries, the auctions that are 82 00:03:22,919 --> 00:03:26,000 Speaker 6: coming up in the remainder of the week on Wednesday 83 00:03:26,000 --> 00:03:29,920 Speaker 6: and Thursday. How much do you think that weaker growth 84 00:03:30,360 --> 00:03:34,320 Speaker 6: infers lower rates substantially on the longer end, which is 85 00:03:34,360 --> 00:03:36,880 Speaker 6: sort of key to stimulating the economy in any kind 86 00:03:36,880 --> 00:03:37,960 Speaker 6: of real way in a downturn. 87 00:03:38,080 --> 00:03:39,800 Speaker 3: Yeah, So that's a new challenge for the FED that 88 00:03:39,920 --> 00:03:42,200 Speaker 3: sometimes when we're getting weaker data. Now we're seeing the 89 00:03:42,240 --> 00:03:44,240 Speaker 3: equity market sell off, and usually you would think that 90 00:03:44,280 --> 00:03:46,360 Speaker 3: would mean the treasury market would rally and yields would 91 00:03:46,360 --> 00:03:49,720 Speaker 3: move lower. But we've had this phenomenon where sometimes the 92 00:03:49,720 --> 00:03:52,000 Speaker 3: treasure market sells off and we actually get higher yields, 93 00:03:52,480 --> 00:03:55,000 Speaker 3: and that's an issue for the Fed because we can 94 00:03:55,040 --> 00:03:57,760 Speaker 3: have lower growth now and higher yields in the long end. 95 00:03:58,160 --> 00:04:01,400 Speaker 3: I mentioned the housing market mortgage rates that have stayed higher. 96 00:04:01,760 --> 00:04:02,760 Speaker 4: You really need to see. 97 00:04:02,600 --> 00:04:04,480 Speaker 3: Those mortgage rates come down, I think, to get the 98 00:04:04,520 --> 00:04:09,320 Speaker 3: housing market expanding again. It is contracting now, and what 99 00:04:09,480 --> 00:04:11,920 Speaker 3: can do that now is the FED cutting rates. So 100 00:04:11,960 --> 00:04:13,600 Speaker 3: it's just another reason that the Fed, I think, is 101 00:04:13,600 --> 00:04:15,720 Speaker 3: going to have to cut. They're not going to look 102 00:04:15,760 --> 00:04:18,000 Speaker 3: at that tenure yield and say we're reacting directly to 103 00:04:18,040 --> 00:04:19,840 Speaker 3: the tenure yield, but indirectly they're going. 104 00:04:19,760 --> 00:04:21,080 Speaker 4: To see it in the data, and that's going to 105 00:04:21,120 --> 00:04:21,520 Speaker 4: leave them. 106 00:04:21,640 --> 00:04:23,599 Speaker 2: Just about on Lisa's questioning, though, they did cut one 107 00:04:23,680 --> 00:04:26,480 Speaker 2: hundred basis points and the long guns sound off. So basically, 108 00:04:26,520 --> 00:04:28,760 Speaker 2: they cut interest rates and mortgage rates went up. And 109 00:04:28,800 --> 00:04:30,679 Speaker 2: as a belief that when they did cut, they weren't 110 00:04:30,720 --> 00:04:34,200 Speaker 2: committed to anchoring inflation expectations, So no surprise this time 111 00:04:34,240 --> 00:04:36,200 Speaker 2: around what they are saying the core of the Federal Reserve. 112 00:04:36,240 --> 00:04:39,200 Speaker 2: Every single speech the chairman over and over again committed 113 00:04:39,200 --> 00:04:41,840 Speaker 2: to anchoring inflation expectations, which rates the question about you, 114 00:04:41,920 --> 00:04:45,560 Speaker 2: Rolti McCall. Can they move fast and decisively to respond 115 00:04:45,600 --> 00:04:48,159 Speaker 2: to a downturn in the economy and at the same 116 00:04:48,240 --> 00:04:51,680 Speaker 2: time cover themselves about anchoring inflation expectations. 117 00:04:51,839 --> 00:04:54,080 Speaker 3: Yeah, it is a big challenge here, and it really 118 00:04:54,080 --> 00:04:56,720 Speaker 3: depends on the measure of inflation expectations that you look 119 00:04:56,760 --> 00:04:59,120 Speaker 3: at how worried you are about those da anchoring. If 120 00:04:59,160 --> 00:05:01,360 Speaker 3: you look at University Michigan survey, for instance, we've had 121 00:05:01,360 --> 00:05:04,360 Speaker 3: a big move higher in the inflation expectations, other surveys 122 00:05:04,440 --> 00:05:06,800 Speaker 3: not so much. I think what they need to do 123 00:05:06,920 --> 00:05:10,520 Speaker 3: is really focus on the fundamentals here, and this focus 124 00:05:10,600 --> 00:05:13,120 Speaker 3: on inflation, I think is fighting. 125 00:05:12,920 --> 00:05:14,680 Speaker 4: The battle of two or three years ago. 126 00:05:15,480 --> 00:05:18,200 Speaker 3: That was a time when the Fed thought that inflation 127 00:05:18,279 --> 00:05:20,279 Speaker 3: was going to be transitory. It turned out to be persistent. 128 00:05:20,560 --> 00:05:23,279 Speaker 3: We have now house prices that are moving down. This 129 00:05:23,400 --> 00:05:27,800 Speaker 3: is not an economy that is just too full of 130 00:05:27,839 --> 00:05:31,440 Speaker 3: demand with supply constraints and you get really high inflation. 131 00:05:31,520 --> 00:05:32,920 Speaker 4: That's what happened a couple of years ago. 132 00:05:33,279 --> 00:05:34,880 Speaker 3: I think this is an economy where we actually have 133 00:05:34,960 --> 00:05:37,120 Speaker 3: demand that's cooling. That means we're not going to get 134 00:05:37,120 --> 00:05:39,440 Speaker 3: a lot of inflationary pressure. That means they can look 135 00:05:39,480 --> 00:05:41,440 Speaker 3: through if we have a one time price level increasing. 136 00:05:41,520 --> 00:05:44,320 Speaker 2: Governor wall is making a similar argument. It's a convincing one. 137 00:05:44,480 --> 00:05:47,000 Speaker 2: How lonely is kelvinor Walla on the FMC, I. 138 00:05:46,960 --> 00:05:49,000 Speaker 3: Think pretty lonely. Look right now, I'd like to give 139 00:05:49,040 --> 00:05:51,240 Speaker 3: him some company. I agree with the point that he's making, 140 00:05:51,320 --> 00:05:53,680 Speaker 3: But again, I think that's why you have to see 141 00:05:53,720 --> 00:05:56,359 Speaker 3: this so clearly in the activity data, which kind of 142 00:05:56,400 --> 00:05:58,720 Speaker 3: means that the Fed is going to wait longer than 143 00:05:58,760 --> 00:06:01,160 Speaker 3: they usually would before they cut because they want this 144 00:06:01,279 --> 00:06:03,960 Speaker 3: really clear signal from the labor market, because they're worried 145 00:06:03,960 --> 00:06:04,599 Speaker 3: about inflation. 146 00:06:04,800 --> 00:06:07,400 Speaker 2: They've talked about September. John Williams and the New York 147 00:06:07,440 --> 00:06:09,719 Speaker 2: Fed has talked about September. I wonder if September is 148 00:06:09,720 --> 00:06:10,800 Speaker 2: still too soon. 149 00:06:11,080 --> 00:06:12,720 Speaker 6: Well, it depends on the data and whether you get 150 00:06:12,760 --> 00:06:15,320 Speaker 6: some sort of reflection there. I mean, Peter Sheer of 151 00:06:15,360 --> 00:06:18,080 Speaker 6: Academy Securities is making the argument that if they really 152 00:06:18,120 --> 00:06:19,800 Speaker 6: wanted to cut, they could have even looked at the 153 00:06:19,800 --> 00:06:21,800 Speaker 6: non farm payrolls report that we got on Friday and 154 00:06:21,839 --> 00:06:24,919 Speaker 6: made an argument to cut right now. To Andrew's point, 155 00:06:25,040 --> 00:06:28,560 Speaker 6: there is a fear that the runaway inflation that they 156 00:06:28,600 --> 00:06:31,880 Speaker 6: failed to stave off immediately is going to be something 157 00:06:31,880 --> 00:06:33,400 Speaker 6: that's repeated, and they don't want to do that. So 158 00:06:33,400 --> 00:06:35,320 Speaker 6: they're going to have to lean into inflation. And Wednesday 159 00:06:35,360 --> 00:06:37,200 Speaker 6: CPI print's going to be really important on that front. 160 00:06:37,240 --> 00:06:40,279 Speaker 2: Things are super finely balanced. If NFP was bat on Friday, 161 00:06:40,320 --> 00:06:41,839 Speaker 2: because the best of the week's thanks, it wasn't great 162 00:06:41,880 --> 00:06:44,039 Speaker 2: at all, Right, NFP was bat on Friday, would be 163 00:06:44,080 --> 00:06:46,679 Speaker 2: having a very different conversation this Monday morning. 164 00:06:46,800 --> 00:06:49,599 Speaker 6: Yeah, and probably President Trump would have more company with 165 00:06:49,680 --> 00:06:52,960 Speaker 6: his one percentage point rate cut, not give fuel to 166 00:06:53,560 --> 00:06:54,960 Speaker 6: otherwise pretty solid economy. 167 00:06:55,040 --> 00:06:56,719 Speaker 2: Andrew, it's going to see you. Thanks for the update, 168 00:06:56,760 --> 00:07:08,680 Speaker 2: Andrew holmeholst there of City. Let's turned back to what 169 00:07:08,800 --> 00:07:11,600 Speaker 2: top story for Wall Street? President Trump saying he expects 170 00:07:11,640 --> 00:07:14,080 Speaker 2: talks between the US and China to go very well 171 00:07:14,200 --> 00:07:16,559 Speaker 2: after his phone call with China sheet just last week. 172 00:07:16,720 --> 00:07:20,040 Speaker 2: Elizabeth Economy of the Hoover Institution joined US Now for more. Elizabeth, 173 00:07:20,080 --> 00:07:21,960 Speaker 2: welcome back to this program. It's always good to hear 174 00:07:21,960 --> 00:07:24,520 Speaker 2: your thoughts on a very sensitive issue. There's a phrase 175 00:07:24,560 --> 00:07:28,280 Speaker 2: that you've used, strategic decoupling. Can we begin with that phrase? 176 00:07:28,520 --> 00:07:31,000 Speaker 2: What does that phrase mean to you? And ultimately, with 177 00:07:31,040 --> 00:07:33,840 Speaker 2: that in mind, what's the purpose of these talks in London. 178 00:07:35,440 --> 00:07:39,160 Speaker 7: So I think strategic decoupling basically refers to the fact 179 00:07:39,160 --> 00:07:43,760 Speaker 7: that both countries have identified the other as their most 180 00:07:43,800 --> 00:07:47,640 Speaker 7: significant long term strategic challenge, and each sees it as 181 00:07:48,760 --> 00:07:52,960 Speaker 7: in its interest to begin to reduce its dependency on 182 00:07:53,000 --> 00:07:55,320 Speaker 7: the other in terms of trade and investment. And this 183 00:07:55,400 --> 00:07:58,040 Speaker 7: is a process that's been underway, certainly from the Chinese 184 00:07:58,080 --> 00:08:00,840 Speaker 7: perspective for a number of years. We've seen with their 185 00:08:00,880 --> 00:08:03,840 Speaker 7: Made in China twenty twenty five program right the effort 186 00:08:03,880 --> 00:08:07,080 Speaker 7: to reduce dependency across ten critical cutting edge areas of 187 00:08:07,120 --> 00:08:11,000 Speaker 7: technology to ensure that Chinese companies dominate not only domestically, 188 00:08:11,040 --> 00:08:12,800 Speaker 7: but also become global champions. 189 00:08:13,200 --> 00:08:14,640 Speaker 8: And I think, beginning with the Biden. 190 00:08:14,400 --> 00:08:17,920 Speaker 7: Administration, the post COVID period sense of the United States 191 00:08:17,960 --> 00:08:21,880 Speaker 7: is too reliant on China for a number of products 192 00:08:21,920 --> 00:08:24,360 Speaker 7: of goods that we need for our human security. 193 00:08:24,440 --> 00:08:27,440 Speaker 8: That was the personal protective equipment, but also. 194 00:08:27,320 --> 00:08:30,640 Speaker 7: As we see today, things like rare earth elements and 195 00:08:30,720 --> 00:08:35,319 Speaker 7: so I think that's the broader sort of strategic context 196 00:08:35,320 --> 00:08:38,360 Speaker 7: for what we see taking place in terms of what 197 00:08:38,400 --> 00:08:41,560 Speaker 7: that means today in terms of these discussions. I think 198 00:08:41,720 --> 00:08:44,600 Speaker 7: the reason that we see the two sides coming together 199 00:08:44,640 --> 00:08:46,760 Speaker 7: at this moment, in the sort of middle or early 200 00:08:46,800 --> 00:08:51,240 Speaker 7: stages of the ninety day pause on the tariffs, is 201 00:08:51,280 --> 00:08:54,720 Speaker 7: that we've seen from the Chinese perspective, the United States 202 00:08:55,200 --> 00:09:00,679 Speaker 7: put export controls on the Quahwei assand chips on computer 203 00:09:00,760 --> 00:09:03,719 Speaker 7: design software, and of course this big move on the 204 00:09:03,800 --> 00:09:07,400 Speaker 7: visa revocations for Chinese students. So they view the United 205 00:09:07,400 --> 00:09:12,960 Speaker 7: States as having not upheld the spirit of the initial 206 00:09:13,000 --> 00:09:18,079 Speaker 7: trade discussions that were held last month. From the US perspective, 207 00:09:18,120 --> 00:09:21,160 Speaker 7: of course, what we're concerned about in the moment is 208 00:09:21,240 --> 00:09:26,640 Speaker 7: the toughening export licenses on rare earth elements that Chinese. 209 00:09:26,679 --> 00:09:29,360 Speaker 7: It was our understanding that the Chinese would lift these 210 00:09:29,440 --> 00:09:35,000 Speaker 7: licensing restrictions after the first set of negotiations. That didn't happen, 211 00:09:35,040 --> 00:09:37,480 Speaker 7: and so that's why both sides are now at the table. 212 00:09:37,760 --> 00:09:39,920 Speaker 2: This certainly feels a lot more complicated than it did 213 00:09:40,200 --> 00:09:42,679 Speaker 2: in the president's first term. In the president's first term, 214 00:09:42,720 --> 00:09:44,800 Speaker 2: a lot of these issues could just be addressed with 215 00:09:44,880 --> 00:09:47,920 Speaker 2: purchase agreements. We've heard them talk about those purchase agreements, 216 00:09:47,960 --> 00:09:49,560 Speaker 2: but I just wandered this time in your mind whether 217 00:09:49,600 --> 00:09:52,400 Speaker 2: you believe these can be addressed, can be pushed to 218 00:09:52,440 --> 00:09:54,920 Speaker 2: one side with just a simple purchase agreement and the 219 00:09:55,000 --> 00:09:57,240 Speaker 2: narrowing of the trade balance, or at least the commitment 220 00:09:57,440 --> 00:09:57,920 Speaker 2: to do that. 221 00:09:59,240 --> 00:10:02,640 Speaker 7: Well, we saw in terms of the President's first deal 222 00:10:02,760 --> 00:10:06,720 Speaker 7: with the UK that you know, in large part, that's 223 00:10:06,720 --> 00:10:09,480 Speaker 7: what it amounted to. I think for China, of course, 224 00:10:09,480 --> 00:10:12,800 Speaker 7: there are other issues tied to economic and national security 225 00:10:12,800 --> 00:10:16,480 Speaker 7: that will continue to be irritance in the relationship. But 226 00:10:16,760 --> 00:10:20,520 Speaker 7: I believe that for the president, for President Trump, that 227 00:10:20,640 --> 00:10:23,840 Speaker 7: significant new purchases by the Chinese would at least go 228 00:10:24,120 --> 00:10:28,760 Speaker 7: some way to addressing his concerns around the bilateral trade deficit, 229 00:10:28,800 --> 00:10:31,400 Speaker 7: which is of course, you know, at least initially what 230 00:10:31,520 --> 00:10:35,720 Speaker 7: impelled a lot of well impelled this global sort of 231 00:10:35,760 --> 00:10:37,079 Speaker 7: set of terrorists. 232 00:10:37,320 --> 00:10:38,440 Speaker 8: So I think that. 233 00:10:38,360 --> 00:10:40,240 Speaker 7: They could make some progress if they were to announce, 234 00:10:40,800 --> 00:10:43,280 Speaker 7: you know, big new purchases, but I think you're right 235 00:10:43,320 --> 00:10:45,959 Speaker 7: that it wouldn't solve what's really at the heart of 236 00:10:46,360 --> 00:10:47,240 Speaker 7: the challenge here. 237 00:10:47,360 --> 00:10:50,160 Speaker 6: And Elizabeth, there's been this discussion around how much incentive 238 00:10:50,240 --> 00:10:53,640 Speaker 6: China really has to make some sort of agreement to 239 00:10:54,200 --> 00:10:56,600 Speaker 6: come to some sort of resolution or have some sort 240 00:10:56,600 --> 00:10:59,319 Speaker 6: of purchase arrangement with the United States, given the fact 241 00:10:59,640 --> 00:11:02,080 Speaker 6: that our president's usin paying seems to be doubling down 242 00:11:02,120 --> 00:11:05,400 Speaker 6: in a pretty significant way and willing for the economy 243 00:11:05,440 --> 00:11:08,760 Speaker 6: to slow as long as there are certain strategic goals 244 00:11:08,760 --> 00:11:10,640 Speaker 6: that are achieved over not necessarily the next. 245 00:11:10,559 --> 00:11:12,000 Speaker 4: Year or two, but ten years. 246 00:11:12,200 --> 00:11:14,959 Speaker 6: How much do you feel like the leverage has shifted, 247 00:11:15,040 --> 00:11:16,760 Speaker 6: that the desires have shifted here. 248 00:11:17,679 --> 00:11:19,240 Speaker 8: Yeah, I think it's a really important point. 249 00:11:19,520 --> 00:11:23,439 Speaker 7: I think the United States miscalculated at the outset when 250 00:11:23,480 --> 00:11:26,880 Speaker 7: it believed that we had so much more economic leverage 251 00:11:26,920 --> 00:11:30,560 Speaker 7: over China, because, as Secretary Bessett said, you know, we 252 00:11:30,640 --> 00:11:33,080 Speaker 7: import five times as much from China as China imports 253 00:11:33,080 --> 00:11:33,920 Speaker 7: from the United States. 254 00:11:33,920 --> 00:11:35,840 Speaker 8: But that ignored I think two things. 255 00:11:35,920 --> 00:11:38,440 Speaker 7: Number one, that China has spent the past eight years 256 00:11:38,600 --> 00:11:42,600 Speaker 7: reducing its economic its trade dependence on the United States. 257 00:11:42,600 --> 00:11:46,920 Speaker 7: You know, since pre COVID levels, the US sorry, the 258 00:11:46,960 --> 00:11:51,640 Speaker 7: share of exports global exports from China to United States 259 00:11:51,679 --> 00:11:56,400 Speaker 7: has reduced from nineteen percent to fourteen percent. And so 260 00:11:56,440 --> 00:11:59,080 Speaker 7: I think That's one important element of it. The second is, 261 00:11:59,240 --> 00:12:02,320 Speaker 7: as you suggest, you know in your discussion earlier, China 262 00:12:02,360 --> 00:12:06,760 Speaker 7: has been routing exports to the United States through third countries, right, 263 00:12:06,800 --> 00:12:10,120 Speaker 7: So it's still seeing, you know, an ability a path 264 00:12:10,200 --> 00:12:12,000 Speaker 7: through to maintain. 265 00:12:11,640 --> 00:12:14,280 Speaker 8: Its exports to the United States. 266 00:12:14,679 --> 00:12:17,640 Speaker 7: And it ignored the fact that we have a greater 267 00:12:18,360 --> 00:12:22,600 Speaker 7: soul source dependency on goods from China than China does 268 00:12:22,640 --> 00:12:25,640 Speaker 7: from US. What that means is that for roughly thirty 269 00:12:25,679 --> 00:12:28,240 Speaker 7: percent of the goods that we import from China, we 270 00:12:28,280 --> 00:12:32,880 Speaker 7: have a seventy percent dependency or more on China. China 271 00:12:32,920 --> 00:12:36,480 Speaker 7: doesn't face that same soul source dependency on a wide 272 00:12:36,559 --> 00:12:40,079 Speaker 7: array of US goods. So I think we miscalculated the outset. 273 00:12:40,200 --> 00:12:43,280 Speaker 7: China has been thinking strategically about how to reduce its 274 00:12:43,320 --> 00:12:46,120 Speaker 7: dependence on the US market, you know, for you know, 275 00:12:46,160 --> 00:12:48,719 Speaker 7: five to eight years really since the first Trump administration, 276 00:12:49,400 --> 00:12:52,360 Speaker 7: and so I think that the leverage has shifted over 277 00:12:52,400 --> 00:12:54,000 Speaker 7: the past five to seven years. 278 00:12:54,040 --> 00:12:54,880 Speaker 5: So that's said Elizabeth. 279 00:12:54,920 --> 00:12:57,400 Speaker 6: Overnight we saw data that showed deflation for a fourth 280 00:12:57,440 --> 00:12:59,719 Speaker 6: straight month in China. You have a price war with 281 00:12:59,800 --> 00:13:03,040 Speaker 6: the d that has gotten the attention of authorities in 282 00:13:03,120 --> 00:13:06,520 Speaker 6: China worried about cannibalization from their own market and this 283 00:13:06,640 --> 00:13:08,600 Speaker 6: idea that there's going to be a race to the 284 00:13:08,600 --> 00:13:12,000 Speaker 6: bottom when it comes to electric vehicles and really sort 285 00:13:12,040 --> 00:13:16,160 Speaker 6: of undermining the perceived quality internationally. How much structurally, though, 286 00:13:16,200 --> 00:13:18,160 Speaker 6: do they have a challenge that forces them to the 287 00:13:18,160 --> 00:13:20,720 Speaker 6: table to ultimately come to some sort of even stopgap 288 00:13:20,760 --> 00:13:23,480 Speaker 6: measure that could last a couple of years with the US. 289 00:13:24,280 --> 00:13:27,160 Speaker 7: I mean, I think China has been facing these challenges 290 00:13:27,200 --> 00:13:29,720 Speaker 7: the ones that you just suggested for a couple of 291 00:13:29,800 --> 00:13:33,719 Speaker 7: years now. This deflation issue is not actually new. The 292 00:13:33,880 --> 00:13:39,800 Speaker 7: sort of incredible competition in many industries just within China 293 00:13:40,320 --> 00:13:43,120 Speaker 7: again is not new. It's part of the process that 294 00:13:43,160 --> 00:13:48,480 Speaker 7: they undergo every time they have this over investment in 295 00:13:48,520 --> 00:13:51,240 Speaker 7: certain industries. We saw it in solar panels and wind turbines, 296 00:13:51,440 --> 00:13:52,600 Speaker 7: now we're seeing in evs. 297 00:13:52,679 --> 00:13:54,960 Speaker 8: We could see it in batteries moving forward. 298 00:13:55,720 --> 00:13:58,400 Speaker 7: I think that's why we see the exports right and 299 00:13:58,440 --> 00:14:01,920 Speaker 7: what China's doing now with the EV is looking not 300 00:14:02,000 --> 00:14:04,080 Speaker 7: just to the United States or to Europe, but they're 301 00:14:04,080 --> 00:14:07,640 Speaker 7: looking to Africa, to Southeast Asia, to Latin America. They 302 00:14:07,640 --> 00:14:10,440 Speaker 7: can export you know, very cheap cars there. They're looking 303 00:14:10,440 --> 00:14:12,800 Speaker 7: to build manufacturing capacity in those countries. 304 00:14:12,840 --> 00:14:14,479 Speaker 8: So China's looking. 305 00:14:14,120 --> 00:14:19,520 Speaker 7: Globally, not simply at the wealthiest market for their goods. 306 00:14:19,600 --> 00:14:21,160 Speaker 7: And I think this is part of a long term 307 00:14:21,200 --> 00:14:24,040 Speaker 7: strategic plan, and I think they're trying to bet that, 308 00:14:24,120 --> 00:14:27,560 Speaker 7: you know, they can endure this short term pain for 309 00:14:27,640 --> 00:14:30,760 Speaker 7: a kind of longer period of you know, strategic and 310 00:14:30,800 --> 00:14:34,120 Speaker 7: economic gain. That being said, they have tried to do 311 00:14:34,200 --> 00:14:36,320 Speaker 7: and take a number of actions over the past year 312 00:14:36,400 --> 00:14:39,920 Speaker 7: to boost consumer confidence. They've had these massive goods trade 313 00:14:39,920 --> 00:14:43,080 Speaker 7: in programs. They've done things in the real estate market 314 00:14:43,160 --> 00:14:47,400 Speaker 7: to encourage people to start buying property again. But overall 315 00:14:47,440 --> 00:14:50,240 Speaker 7: they're not willing to take the steps that are actually necessary, 316 00:14:50,280 --> 00:14:54,040 Speaker 7: which is to move investment right away from you know, 317 00:14:54,600 --> 00:15:01,000 Speaker 7: investment in technology, investment military, into education and health and 318 00:15:01,040 --> 00:15:04,760 Speaker 7: into the pension system, so that people and consumers feel 319 00:15:04,840 --> 00:15:08,040 Speaker 7: confident that they can spend because their other basic needs 320 00:15:08,040 --> 00:15:09,080 Speaker 7: are being taken care of. 321 00:15:09,360 --> 00:15:10,880 Speaker 2: Elizabeth, you are one of the best, and it's going 322 00:15:10,920 --> 00:15:13,000 Speaker 2: to get some time with there this morning. We appreciate it, Elizabeth. 323 00:15:13,000 --> 00:15:26,240 Speaker 2: Economy there of the Hoover Institution, Francisco Blancher playing for 324 00:15:26,280 --> 00:15:28,480 Speaker 2: American Right. In the following the oil market is poised 325 00:15:28,480 --> 00:15:32,000 Speaker 2: to remain oversupplied, and we believe Brent crude may average 326 00:15:32,040 --> 00:15:34,400 Speaker 2: sixty two a barrel for the balance of the year. 327 00:15:34,720 --> 00:15:38,400 Speaker 2: Macro tensions also mean that oil prices could temporarily sink 328 00:15:38,720 --> 00:15:42,840 Speaker 2: to fifty dollars a barrel. Francisco joined us now for more. Francisco, 329 00:15:42,880 --> 00:15:44,440 Speaker 2: good morning, good to see you, Good morning. 330 00:15:44,480 --> 00:15:44,680 Speaker 5: Thanks. 331 00:15:45,120 --> 00:15:46,920 Speaker 2: Start with OPA plus because I think that's been the 332 00:15:46,960 --> 00:15:49,200 Speaker 2: main event for the crude market over the last several months. 333 00:15:49,520 --> 00:15:52,440 Speaker 2: What's policy now and what's the strategy behind it? 334 00:15:53,520 --> 00:15:55,200 Speaker 9: So you could you could make a case that ol 335 00:15:55,240 --> 00:15:58,560 Speaker 9: Perks is trying three things or once right, it's trying 336 00:15:58,720 --> 00:16:00,240 Speaker 9: to increase market share. 337 00:16:00,280 --> 00:16:01,480 Speaker 5: I think it's more of a saliy thing. 338 00:16:02,200 --> 00:16:04,880 Speaker 9: You could argue there's a discipline element to what SUD 339 00:16:05,000 --> 00:16:07,400 Speaker 9: is doing because it's really driven by solid avia. 340 00:16:07,960 --> 00:16:09,600 Speaker 5: And the third bit of it. 341 00:16:08,880 --> 00:16:13,800 Speaker 9: Is well why now, Clearly lower oil prices can help 342 00:16:13,960 --> 00:16:17,560 Speaker 9: upset some of the upset pressure of inflation on USTARTUS. 343 00:16:17,920 --> 00:16:23,560 Speaker 9: So let's say it's a Trump administration pressure to get 344 00:16:23,640 --> 00:16:25,920 Speaker 9: those barrels in. So I think maybe the three of 345 00:16:25,920 --> 00:16:30,200 Speaker 9: them are objectives. But what's important about the strategy is 346 00:16:30,240 --> 00:16:33,480 Speaker 9: that we believe this is not a price warter is 347 00:16:33,520 --> 00:16:36,960 Speaker 9: going to be short and steep. Rather, it's going to 348 00:16:36,960 --> 00:16:39,360 Speaker 9: be a price worter is going to be long and shallow, 349 00:16:39,680 --> 00:16:41,360 Speaker 9: And it's going to be long and shallow for a 350 00:16:41,360 --> 00:16:43,800 Speaker 9: couple different reasons. First, because in twenty twenty four, Saudi 351 00:16:43,880 --> 00:16:47,520 Speaker 9: became a net borrower for a first time, whereas the 352 00:16:47,520 --> 00:16:50,360 Speaker 9: shale patch is actually in pretty rule health from a 353 00:16:50,440 --> 00:16:54,160 Speaker 9: debt perspective, they don't really issue that much that anymore, 354 00:16:54,680 --> 00:16:57,320 Speaker 9: and they can flex their muscle up and down depending 355 00:16:57,360 --> 00:16:58,560 Speaker 9: on where prices are. 356 00:16:59,880 --> 00:17:01,000 Speaker 5: The show pats themselves have. 357 00:17:01,000 --> 00:17:03,360 Speaker 9: Their own issues, right because the higher tariffs are also 358 00:17:03,440 --> 00:17:07,040 Speaker 9: bringing up costs. Remember oil is steel on the ground, 359 00:17:07,160 --> 00:17:09,600 Speaker 9: and steel is fifty more expensive than it was than 360 00:17:09,640 --> 00:17:12,640 Speaker 9: the beginning of the year, So some margins are coming 361 00:17:12,640 --> 00:17:15,840 Speaker 9: in lower oil prices, higher steel costs. We're seeing a 362 00:17:15,840 --> 00:17:17,960 Speaker 9: big drop in the recount and that's exactly what saud 363 00:17:18,000 --> 00:17:20,000 Speaker 9: He's trying to do. They have the lowest market share 364 00:17:20,119 --> 00:17:22,760 Speaker 9: they've had in a very long time, not just against 365 00:17:23,520 --> 00:17:27,040 Speaker 9: non Opic but also even within Opeic Soviet's lost market share. 366 00:17:27,080 --> 00:17:30,960 Speaker 9: They've done this price support already by themselves, were not 367 00:17:31,000 --> 00:17:35,200 Speaker 9: for three plus years, right, having this huge shell response, 368 00:17:35,359 --> 00:17:38,480 Speaker 9: they're done with that they need to get it hasn't 369 00:17:38,480 --> 00:17:42,119 Speaker 9: really worked. Eighty five ninety or oil six million barrels 370 00:17:42,119 --> 00:17:44,360 Speaker 9: a day of exports not working. I mean, you want 371 00:17:44,400 --> 00:17:47,040 Speaker 9: to get maybe lower prices with just more barrels. 372 00:17:47,240 --> 00:17:48,760 Speaker 2: Can we sell on that price for just a little 373 00:17:48,760 --> 00:17:51,280 Speaker 2: bit longer? And they tried this about ten years ago. 374 00:17:51,320 --> 00:17:54,080 Speaker 2: I forget whether it's November fourteen or November fifteenth. You 375 00:17:54,119 --> 00:17:57,720 Speaker 2: remember the text seen fourteen, Okay, Revember twenty fourteen, it's 376 00:17:57,760 --> 00:18:00,560 Speaker 2: there in the memory somewhere. What's different what they did 377 00:18:00,600 --> 00:18:02,400 Speaker 2: then compared to what they're doing now. 378 00:18:02,920 --> 00:18:06,439 Speaker 9: Well, back then, what they were doing, it was a 379 00:18:06,520 --> 00:18:10,760 Speaker 9: much deeper price war, but it ended up lasting organ 380 00:18:10,880 --> 00:18:11,240 Speaker 9: they hoped. 381 00:18:11,400 --> 00:18:12,160 Speaker 5: And part of it is. 382 00:18:12,119 --> 00:18:16,119 Speaker 9: That back then, again, the shale patch was very levered, 383 00:18:16,720 --> 00:18:18,720 Speaker 9: so they had a lot of cash in the bank 384 00:18:18,800 --> 00:18:22,960 Speaker 9: when they started the price war, and it was just 385 00:18:23,000 --> 00:18:25,479 Speaker 9: at the beginning of shale, right. So we still have 386 00:18:25,560 --> 00:18:27,600 Speaker 9: grown rammatically in the last ten years. I mean, the 387 00:18:27,680 --> 00:18:30,280 Speaker 9: US has pretty much added fifty percent plus of the 388 00:18:30,320 --> 00:18:33,960 Speaker 9: incremental oiling as in the world for the last fifteen years, right, 389 00:18:34,040 --> 00:18:37,720 Speaker 9: So I think we are getting towards the end of 390 00:18:37,840 --> 00:18:42,680 Speaker 9: the shale cycle and Tier one acreage is becoming more exhausted, 391 00:18:42,960 --> 00:18:45,199 Speaker 9: and companies are pushing to Tier two acreage, which is 392 00:18:45,240 --> 00:18:46,440 Speaker 9: more expensive. 393 00:18:46,080 --> 00:18:47,520 Speaker 5: And I have this additional costs. 394 00:18:47,920 --> 00:18:51,879 Speaker 9: So I think it's a different moment in time, and 395 00:18:52,080 --> 00:18:54,639 Speaker 9: you know, to be honest, I mean I think, like 396 00:18:54,680 --> 00:18:56,920 Speaker 9: I said, so this supported prices for a long time, 397 00:18:57,080 --> 00:19:00,679 Speaker 9: and they've realized that just keeping them so high only 398 00:19:01,040 --> 00:19:03,360 Speaker 9: means loosing markets shared in the long run. So that's 399 00:19:03,359 --> 00:19:06,360 Speaker 9: what's different. But also their own position is different. They 400 00:19:06,359 --> 00:19:10,760 Speaker 9: want to build out the kingdom and that's very important. 401 00:19:10,800 --> 00:19:12,840 Speaker 6: You talk about the War of Attrition and this idea 402 00:19:12,840 --> 00:19:15,240 Speaker 6: that it's a long drawn out period of time where 403 00:19:15,240 --> 00:19:17,840 Speaker 6: potentially you could see the sixty dollars a barrel at 404 00:19:17,880 --> 00:19:21,240 Speaker 6: sixty dollars a barrel, could you see the shale patch 405 00:19:21,280 --> 00:19:24,399 Speaker 6: become a lot more productive where you see rigs that 406 00:19:24,440 --> 00:19:27,760 Speaker 6: are permanently taken offline, and it really becomes that much 407 00:19:27,800 --> 00:19:30,639 Speaker 6: less profitable because ultimately it is much more expensive to 408 00:19:30,680 --> 00:19:33,639 Speaker 6: drill there than say over in Saudi Arabia. 409 00:19:34,000 --> 00:19:36,520 Speaker 9: I think that's exactly what's going on, right. I mean, 410 00:19:36,520 --> 00:19:39,280 Speaker 9: I think we're going to see slow in production here 411 00:19:39,480 --> 00:19:43,479 Speaker 9: for oil, and in some ways alreally happening. 412 00:19:43,480 --> 00:19:46,200 Speaker 5: If you look at if you look at the rig. 413 00:19:46,119 --> 00:19:48,720 Speaker 9: Count, if you look at marginal coastal production, many companies 414 00:19:48,760 --> 00:19:52,600 Speaker 9: are facing oil in the fifties in maybe as high 415 00:19:52,600 --> 00:19:56,320 Speaker 9: as sixty dollars a barrel, and therefore this price range 416 00:19:56,400 --> 00:19:59,120 Speaker 9: doesn't make things particularly appealing. Now, having settled that these 417 00:19:59,160 --> 00:20:02,159 Speaker 9: companies are cash can they're paying out huge dividends to 418 00:20:02,200 --> 00:20:05,000 Speaker 9: shareholders in a world where interest rates are also high, 419 00:20:05,040 --> 00:20:06,240 Speaker 9: which is a very big difference. 420 00:20:06,359 --> 00:20:07,679 Speaker 5: Back then we had zero rates. 421 00:20:08,200 --> 00:20:12,119 Speaker 9: Today we have five percent rates, and shales not a 422 00:20:12,200 --> 00:20:13,960 Speaker 9: cheap operation when money is not free. 423 00:20:14,119 --> 00:20:16,800 Speaker 6: Yeah, and I'm looking right now. And in twenty twenty three, 424 00:20:17,119 --> 00:20:19,679 Speaker 6: the US oil and gas industry contributed by eight percent 425 00:20:19,680 --> 00:20:22,080 Speaker 6: to the US GDP, So this isn't exactly a small 426 00:20:22,119 --> 00:20:24,080 Speaker 6: part of the overall economy. 427 00:20:23,680 --> 00:20:25,880 Speaker 4: In the United States. I am wondering on a broader scale. 428 00:20:25,960 --> 00:20:28,600 Speaker 6: We haven't even talked about supply on the demand side, 429 00:20:28,680 --> 00:20:31,560 Speaker 6: and whether demand is going to materially drop off to 430 00:20:31,600 --> 00:20:34,199 Speaker 6: sort of add some of these price declines based on 431 00:20:34,280 --> 00:20:36,600 Speaker 6: what we've seen in the price of oil, how much 432 00:20:36,680 --> 00:20:39,520 Speaker 6: is tied to the idea that demand is just declining, 433 00:20:39,600 --> 00:20:41,640 Speaker 6: especially as trade really falls off. 434 00:20:42,680 --> 00:20:44,840 Speaker 9: So demand held up pretty well in the first quarter 435 00:20:45,200 --> 00:20:47,600 Speaker 9: we had readily cold weather. And also remember at first 436 00:20:47,640 --> 00:20:50,680 Speaker 9: quarter there was a lot of pentap consumption because people 437 00:20:50,680 --> 00:20:52,840 Speaker 9: were trying to rush in the imports. Right, So we 438 00:20:52,880 --> 00:20:55,200 Speaker 9: had actually a pickup in global trade in the first quarter. 439 00:20:55,600 --> 00:20:57,560 Speaker 9: We've had a slow down, of course in the last 440 00:20:57,640 --> 00:21:00,760 Speaker 9: couple months. We'll see what the negoiations between the US 441 00:21:00,800 --> 00:21:04,199 Speaker 9: and China, another members and other countries end up looking like. 442 00:21:04,480 --> 00:21:06,320 Speaker 9: But I do think that you know, you raise a 443 00:21:06,359 --> 00:21:09,840 Speaker 9: great point sixty or oil is also going to help 444 00:21:09,880 --> 00:21:11,879 Speaker 9: demand in the medium term, right, I mean, it just 445 00:21:11,960 --> 00:21:16,200 Speaker 9: makes evs less attractive. It makes a lot of energy 446 00:21:16,200 --> 00:21:19,480 Speaker 9: sources less attractive. Remember, oil is the best energy source 447 00:21:19,520 --> 00:21:21,520 Speaker 9: we got for a lot of reasons, right in terms 448 00:21:21,560 --> 00:21:25,240 Speaker 9: of in terms of its energy density, it's flexibility, it's 449 00:21:25,440 --> 00:21:28,880 Speaker 9: how it is a transported story, and oil is cheap 450 00:21:28,920 --> 00:21:31,280 Speaker 9: sixty doors a barrel, I mean, stem bucks and an mbtu. 451 00:21:31,800 --> 00:21:35,480 Speaker 9: Just frankly, think about it, with all the inflation we've 452 00:21:35,480 --> 00:21:38,760 Speaker 9: had for the last ten years, right, So I think 453 00:21:38,800 --> 00:21:42,480 Speaker 9: I think I also will encourage consumption. And ultimately, what 454 00:21:42,600 --> 00:21:44,520 Speaker 9: I think Sally's trying to say, well, we don't want 455 00:21:44,560 --> 00:21:47,240 Speaker 9: to run around with so much spare capacity because it's 456 00:21:47,320 --> 00:21:50,080 Speaker 9: expensive to maintain. And we're also changing the way will 457 00:21:50,080 --> 00:21:53,720 Speaker 9: consume energy domestically, which means our demand locally will go 458 00:21:53,800 --> 00:21:55,240 Speaker 9: down because now we're going to use a lot more 459 00:21:55,280 --> 00:21:57,880 Speaker 9: renewals domestically. So all of that you put it together 460 00:21:57,960 --> 00:21:59,879 Speaker 9: and you say, well, we have to get going, and 461 00:22:00,160 --> 00:22:03,920 Speaker 9: this spur capacity into the market, and that's I think 462 00:22:03,920 --> 00:22:07,879 Speaker 9: that's really the plan. So you get more consumption, you 463 00:22:07,920 --> 00:22:10,800 Speaker 9: get your release, your spare capacity, and maybe oil just 464 00:22:10,800 --> 00:22:11,639 Speaker 9: doesn't do a lot in the. 465 00:22:11,680 --> 00:22:14,280 Speaker 2: Next year, let's finish on something that's gone more expensive. 466 00:22:14,480 --> 00:22:17,960 Speaker 2: Got thirty three twenty my more than twenty six percent 467 00:22:18,040 --> 00:22:20,480 Speaker 2: now for the what's the cove from even the tain. 468 00:22:20,840 --> 00:22:22,840 Speaker 9: So we think it's been a bit of a double 469 00:22:22,880 --> 00:22:24,560 Speaker 9: top in the first half of the year. So we 470 00:22:24,600 --> 00:22:27,120 Speaker 9: think maybe second half we need to see a real 471 00:22:27,160 --> 00:22:30,720 Speaker 9: shock for prices to break away from where we are, 472 00:22:32,119 --> 00:22:34,359 Speaker 9: and we have a four thousand dollars target, which we 473 00:22:34,400 --> 00:22:37,600 Speaker 9: think maybe a twenty twenty six story. But if you 474 00:22:37,600 --> 00:22:39,600 Speaker 9: look at the action in the precious metals, it's really 475 00:22:39,600 --> 00:22:42,679 Speaker 9: coming from other areas. It's coming from platinum, which is 476 00:22:42,720 --> 00:22:44,720 Speaker 9: really where things are starting to move in a bay way. 477 00:22:44,760 --> 00:22:48,159 Speaker 9: We've seen twelve hundred hit this morning, and potentially we're 478 00:22:48,200 --> 00:22:50,520 Speaker 9: going to go higher in platinum. We think platinum will 479 00:22:50,560 --> 00:22:54,119 Speaker 9: trade well ahead of palladium, which is also being dragged along, 480 00:22:54,920 --> 00:22:57,719 Speaker 9: and even silver. Silver is now thirty six and change 481 00:22:57,440 --> 00:23:02,200 Speaker 9: and you know, heading up to forty we believe, right, 482 00:23:02,520 --> 00:23:05,919 Speaker 9: So gold's had a good run. Now we're getting the 483 00:23:05,960 --> 00:23:09,520 Speaker 9: rest of the Prencips medals, and then based on wild 484 00:23:09,560 --> 00:23:12,960 Speaker 9: geo politics and maybe the US budget deference in situation worseness, 485 00:23:13,000 --> 00:23:15,239 Speaker 9: then we'll have an order leg up. But I think 486 00:23:15,320 --> 00:23:17,920 Speaker 9: second half of a year might not be as great. 487 00:23:17,680 --> 00:23:18,920 Speaker 5: As the first of losing for gold. 488 00:23:19,040 --> 00:23:21,719 Speaker 2: Francisco, I appreciate the update. Thank you, sir, Francisco Blanche 489 00:23:21,720 --> 00:23:34,119 Speaker 2: There of Bank of American. Let's focus on this story. 490 00:23:34,160 --> 00:23:37,040 Speaker 2: Claudia Sam of New Century Advisors right in the following 491 00:23:37,160 --> 00:23:39,680 Speaker 2: is early signs emerged. The tariff will drive up prices. 492 00:23:39,720 --> 00:23:43,360 Speaker 2: The FED faces a crucial question. Will tariff induced inflation 493 00:23:43,440 --> 00:23:46,520 Speaker 2: be short lived or will it persist? Claudia Joints is 494 00:23:46,520 --> 00:23:48,959 Speaker 2: now for more. Claudia, welcome back. As always, we can 495 00:23:49,000 --> 00:23:51,240 Speaker 2: spend some time with you talking about the US economy. 496 00:23:51,320 --> 00:23:53,600 Speaker 2: Right now, let's get to that first line, that first 497 00:23:53,640 --> 00:23:57,000 Speaker 2: piece of that sentence as early signs emerged the tariffs 498 00:23:57,000 --> 00:23:59,639 Speaker 2: will drive up prices. What are you focused on right now? 499 00:23:59,720 --> 00:24:01,399 Speaker 2: Where you see that at the moment? 500 00:24:02,960 --> 00:24:05,040 Speaker 1: Right Well, the first place we're going to be looking 501 00:24:05,080 --> 00:24:06,760 Speaker 1: for and we ought to see is more of it 502 00:24:06,800 --> 00:24:09,439 Speaker 1: this week is in the goods prices, and that is 503 00:24:09,480 --> 00:24:12,720 Speaker 1: both on consumer facing prices, and we're also looking in 504 00:24:12,800 --> 00:24:16,160 Speaker 1: the producer prices. I mean, we're we're terrifying intermediate goods 505 00:24:16,160 --> 00:24:19,439 Speaker 1: as well, and that that will eventually have some impact 506 00:24:19,520 --> 00:24:23,000 Speaker 1: on consumer prices. So it's you know, it's looking at 507 00:24:23,040 --> 00:24:26,359 Speaker 1: the data and again, as we said before, the magnitudes 508 00:24:26,640 --> 00:24:29,000 Speaker 1: will matter and how long we see this, you know, 509 00:24:29,080 --> 00:24:30,119 Speaker 1: upseeck in prices. 510 00:24:30,600 --> 00:24:32,720 Speaker 2: So Claudia, that gets to the next question, show a 511 00:24:32,760 --> 00:24:35,679 Speaker 2: lift or will it persist? How instructive is the labor market? 512 00:24:35,920 --> 00:24:37,760 Speaker 2: With that in mind, let me start to think about that. 513 00:24:38,040 --> 00:24:39,920 Speaker 2: How much of a guide can we take from where 514 00:24:39,920 --> 00:24:41,119 Speaker 2: the labor market is count Like? 515 00:24:43,000 --> 00:24:45,560 Speaker 8: Right, well, you know, the labor market is important. It 516 00:24:45,600 --> 00:24:46,239 Speaker 8: is holding up. 517 00:24:46,280 --> 00:24:49,679 Speaker 1: We saw modest signs of cooling, but not a dramatic, 518 00:24:49,880 --> 00:24:52,600 Speaker 1: you know, weakening. When you talk to business as one 519 00:24:52,600 --> 00:24:56,040 Speaker 1: of their first priorities when they think about pricing is 520 00:24:56,080 --> 00:24:58,760 Speaker 1: consumer demands. I mean, it is the case the labor 521 00:24:58,800 --> 00:25:02,760 Speaker 1: market holds up, it may be an opportunity for businesses 522 00:25:02,800 --> 00:25:06,040 Speaker 1: to pass more of these hair costs onto consumers in 523 00:25:06,119 --> 00:25:08,480 Speaker 1: terms of prices. I mean, right now we have a 524 00:25:08,680 --> 00:25:11,960 Speaker 1: cost shock for businesses, and it is an empirical question 525 00:25:12,119 --> 00:25:14,480 Speaker 1: as to where it's going to end up. Is it 526 00:25:14,520 --> 00:25:17,120 Speaker 1: going to end up with consumers saying higher prices? You're 527 00:25:17,160 --> 00:25:20,080 Speaker 1: workers with paychecks, it can be less profits. And we're 528 00:25:20,119 --> 00:25:23,360 Speaker 1: just we are a fond edge of seeing how businesses 529 00:25:23,400 --> 00:25:25,320 Speaker 1: are dealing with that really difficult question. 530 00:25:25,440 --> 00:25:28,200 Speaker 6: And Claudia, there's this lack of clarity around exactly whether 531 00:25:28,240 --> 00:25:30,320 Speaker 6: this is a transitory I hate to use that word, 532 00:25:30,400 --> 00:25:34,560 Speaker 6: or short lived inflationary move, or whether it has longer legs. 533 00:25:34,560 --> 00:25:37,040 Speaker 6: There's also a lack of clarity around the labor market. 534 00:25:37,080 --> 00:25:39,840 Speaker 6: On Friday, we got the jobs report that the headline 535 00:25:39,880 --> 00:25:42,720 Speaker 6: number seem to suggest was still really robust and better 536 00:25:42,760 --> 00:25:46,120 Speaker 6: than expected and upside surprise if you look onto the hood, though, 537 00:25:46,119 --> 00:25:49,040 Speaker 6: there are a number of analysts for raising questions, especially 538 00:25:49,080 --> 00:25:52,240 Speaker 6: with the downward revisions and some of the other modeling 539 00:25:52,400 --> 00:25:54,840 Speaker 6: that points to maybe a weaker outlook. 540 00:25:55,080 --> 00:25:55,520 Speaker 8: Where do you. 541 00:25:55,600 --> 00:25:57,680 Speaker 6: Land on that on this dual side of the mandate, 542 00:25:57,840 --> 00:25:59,240 Speaker 6: when you take a look at the labor side of 543 00:25:59,280 --> 00:26:02,120 Speaker 6: the equation, we. 544 00:26:02,119 --> 00:26:05,639 Speaker 1: Have an economy that's still largely at full employment, so 545 00:26:05,680 --> 00:26:07,960 Speaker 1: a four point two percent on employment rate. We have 546 00:26:08,000 --> 00:26:12,239 Speaker 1: payroll gains, while not stellar, are still solid. It's, you know, 547 00:26:12,320 --> 00:26:15,679 Speaker 1: the question is there are real signs of slowing, and 548 00:26:15,720 --> 00:26:18,840 Speaker 1: we are seeing some modest slowing. It's you know, it's 549 00:26:18,880 --> 00:26:22,360 Speaker 1: not happening rapidly, and that's important. But but the labor market, 550 00:26:22,440 --> 00:26:25,560 Speaker 1: especially in terms of the FED thinking they're close to 551 00:26:25,600 --> 00:26:28,040 Speaker 1: their mandate. I mean, there is a reason why they 552 00:26:28,040 --> 00:26:30,520 Speaker 1: are getting such focus to thinking through what's going to 553 00:26:30,560 --> 00:26:33,880 Speaker 1: happen with inflation over the coming months because largely they're 554 00:26:33,920 --> 00:26:34,920 Speaker 1: in a good place. 555 00:26:34,640 --> 00:26:36,240 Speaker 8: On the labor market side. 556 00:26:36,359 --> 00:26:38,680 Speaker 1: So yet it's and I think it is important to 557 00:26:38,720 --> 00:26:41,200 Speaker 1: understand that while the labor market hasn't resilient and things 558 00:26:41,200 --> 00:26:44,280 Speaker 1: they're looking like mod is flowing, we don't have the 559 00:26:44,320 --> 00:26:46,480 Speaker 1: same strength that we did, say two years ago. We 560 00:26:46,560 --> 00:26:49,520 Speaker 1: have much narrower job gains, Like we're down to a 561 00:26:49,520 --> 00:26:52,320 Speaker 1: few large sectors that are really pulling above their weight 562 00:26:52,400 --> 00:26:54,480 Speaker 1: in terms of job gains. We have an unusually low 563 00:26:54,560 --> 00:26:57,199 Speaker 1: hiring rate, like, we're not set up to really be 564 00:26:57,359 --> 00:26:59,399 Speaker 1: hit hard in terms of the labor market. But for 565 00:26:59,560 --> 00:27:02,440 Speaker 1: right now, things are looking really pretty good. 566 00:27:02,720 --> 00:27:05,120 Speaker 6: Claudia, it sounds like you disagree with Andrew Hollenhorst, who 567 00:27:05,160 --> 00:27:06,879 Speaker 6: came on and said that the FED is fighting the 568 00:27:06,880 --> 00:27:09,119 Speaker 6: wrong battle and that inflation is in a very different 569 00:27:09,119 --> 00:27:12,600 Speaker 6: spot than it was last year or even three years ago, 570 00:27:12,680 --> 00:27:14,880 Speaker 6: when there was a lot more heat in the economy. 571 00:27:15,240 --> 00:27:18,120 Speaker 6: He thinks that there isn't as much of a risk 572 00:27:18,160 --> 00:27:20,360 Speaker 6: on the inflation side and that there is a more 573 00:27:20,400 --> 00:27:24,280 Speaker 6: significant risk on the employment side. I'm just wondering, if 574 00:27:24,359 --> 00:27:27,480 Speaker 6: let's say this Fed to reserve took Donald Trumpetus word 575 00:27:27,800 --> 00:27:31,960 Speaker 6: cut by a percentage point, would that lead to significant 576 00:27:32,520 --> 00:27:36,040 Speaker 6: unwoiring of inflation expectations and the potential for long term 577 00:27:36,119 --> 00:27:38,639 Speaker 6: yields to rise really considerably. 578 00:27:39,359 --> 00:27:41,639 Speaker 1: Well, the FED listening to the President doing what he 579 00:27:41,680 --> 00:27:44,159 Speaker 1: says probably won't do good things for yields in general, 580 00:27:44,200 --> 00:27:46,560 Speaker 1: but just thinking about that, like, could the FED be 581 00:27:46,600 --> 00:27:50,240 Speaker 1: cutting right now? So there is an argument to make, 582 00:27:50,640 --> 00:27:53,400 Speaker 1: but remember the context is so important. Inflation has been 583 00:27:53,440 --> 00:27:56,840 Speaker 1: above the FEDS two percent target for four years, right, 584 00:27:56,880 --> 00:27:59,800 Speaker 1: and even a modest increase in inflation at this point 585 00:27:59,840 --> 00:28:01,040 Speaker 1: is to move us. 586 00:28:01,000 --> 00:28:01,800 Speaker 4: Further from that. 587 00:28:02,000 --> 00:28:04,840 Speaker 1: So I think there are good reasons, and we really 588 00:28:04,840 --> 00:28:08,440 Speaker 1: did get burned by the persistence of the shops. Even 589 00:28:08,440 --> 00:28:10,760 Speaker 1: at this time we have smaller shots inflation, and I 590 00:28:10,840 --> 00:28:14,640 Speaker 1: think that is likely to write call here. The persistence 591 00:28:14,680 --> 00:28:18,480 Speaker 1: of it could does risk embedding that we just aren't 592 00:28:18,520 --> 00:28:21,080 Speaker 1: a two percent inflation economist, and the FED does not 593 00:28:21,240 --> 00:28:23,439 Speaker 1: want that to happen. So I think at this point 594 00:28:24,280 --> 00:28:27,560 Speaker 1: they can bounce these risks and waiting and seeing the 595 00:28:27,800 --> 00:28:30,080 Speaker 1: you know, the surgeon inflation comes back down, which I 596 00:28:30,080 --> 00:28:31,920 Speaker 1: think is you know, the textbook case. I think that's 597 00:28:31,920 --> 00:28:34,040 Speaker 1: the most likely case, but the set is going to 598 00:28:34,119 --> 00:28:35,960 Speaker 1: want to see it in the data, and I think 599 00:28:35,960 --> 00:28:37,600 Speaker 1: that is appropriate at this point. 600 00:28:37,640 --> 00:28:40,440 Speaker 2: We get another rate on Wednesday, again on Thursday, Claudia. 601 00:28:40,560 --> 00:28:42,400 Speaker 2: I appreciate you for you. As always, Claudia, sound there 602 00:28:42,440 --> 00:28:47,080 Speaker 2: of New Century Advisors. 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