WEBVTT - Surveillance: Russia & China with Bremmer 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownowitz Jaily. We bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com, 0:00:23.920 --> 0:00:30.080 and of course on the Bloomberg Terminent. This is a joy, 0:00:30.200 --> 0:00:32.360 not that it t And Bremer, president founder of You 0:00:32.440 --> 0:00:34.600 Raise Your Group. I'm going to read you a single 0:00:34.680 --> 0:00:38.840 sentence from December of this year. If Putin doesn't get 0:00:38.880 --> 0:00:42.920 concessions from the US lead West, he is likely to 0:00:43.120 --> 0:00:45.800 act one of the top risks for Dr Bremer. And 0:00:45.800 --> 0:00:47.720 as you Raise your Group and he joins us here 0:00:48.200 --> 0:00:50.639 this morning, Ian, I want to frame forward with you. 0:00:51.280 --> 0:00:53.840 I want to get without the breaking news that you've 0:00:53.880 --> 0:00:56.920 been on all weekend, the end of the free market. 0:00:57.080 --> 0:01:00.640 One of your books talks about that adjustment from free 0:01:00.640 --> 0:01:04.679 market to some form of new capitalism. What does President 0:01:04.760 --> 0:01:08.840 Putin or whoever's after Putin, What does their free market, 0:01:08.959 --> 0:01:12.480 what does their business structure, what does their command economy 0:01:12.560 --> 0:01:16.040 look like in two or three years? Well, it's not 0:01:16.120 --> 0:01:19.880 our target. I mean we talk about Putin as if 0:01:19.920 --> 0:01:24.160 he's a global pariah. UM. That's of course not true, 0:01:24.280 --> 0:01:27.200 because it's a G zero world. You can't make someone 0:01:27.200 --> 0:01:31.119 a global paria. But he is a pria in terms 0:01:31.160 --> 0:01:34.440 of the advanced industrial economies of the world, the G 0:01:34.680 --> 0:01:37.440 seven as it were. So what does that mean? Well, 0:01:37.560 --> 0:01:41.760 when you have the Chinese government saying that the relationship 0:01:41.880 --> 0:01:45.560 with Russia is like a rock UH, that means that 0:01:45.600 --> 0:01:50.280 you're going to see a far more integration of Russia 0:01:50.880 --> 0:01:55.400 UH into the Chinese economic network, both in terms of 0:01:55.440 --> 0:02:00.000 the technology that supports the military industrial complex for Russia, 0:02:00.000 --> 0:02:04.000 of the financial transactions that allow them to function as 0:02:04.560 --> 0:02:09.000 UM an advanced economy UM, and of course also the 0:02:09.120 --> 0:02:12.560 energy flows and infrastructure that will need to be built, 0:02:12.880 --> 0:02:15.519 not just in terms of oil production and next fort 0:02:15.720 --> 0:02:20.080 also eventually for gas. They'll be moving towards China to 0:02:20.160 --> 0:02:22.720 Russia will also be working with a lot of other 0:02:22.840 --> 0:02:27.400 developing countries around the world, the Gulf States, India, Brazil, 0:02:28.040 --> 0:02:31.200 China is going to be absolutely critical for the Russian 0:02:31.320 --> 0:02:34.640 How do we adapt? How do we move from two 0:02:34.680 --> 0:02:38.000 thousand and eight in Bucharest, NATO, where Gates and Rice 0:02:38.280 --> 0:02:41.920 begged the United States to not sell democracy to the 0:02:41.960 --> 0:02:45.000 Far East of of of Europe. How do we adapt 0:02:45.040 --> 0:02:49.040 to a new regime? Were just maybe possibly we can't 0:02:49.040 --> 0:02:54.400 sell democracy twenty four seven. Yeah, the fact that the 0:02:54.440 --> 0:03:00.440 American model of democracy is seen by China as pasted 0:03:00.600 --> 0:03:03.519 seld and they're going to be the largest economy in 0:03:03.560 --> 0:03:08.560 the world, means that we're in a hybrid system. It's competitive. 0:03:09.240 --> 0:03:12.520 The big question I have here is not about the 0:03:12.560 --> 0:03:16.280 tilt of Russia, because Russia, of course, we've been steadily 0:03:16.320 --> 0:03:21.920 losing for decades now. It's rather whether or not new technologies, 0:03:22.440 --> 0:03:27.880 which are top down the data and surveillance economy, actually 0:03:28.000 --> 0:03:35.640 facilitates authoritarian consolidation and also undermined civil society in ways 0:03:35.680 --> 0:03:39.640 that can't be redressed. Back in two thousand and eight, 0:03:40.200 --> 0:03:44.040 technology was something we thought of as supporting democracy and 0:03:44.200 --> 0:03:48.160 undermining authoritarian states. Think about how it was the Soviet 0:03:48.240 --> 0:03:51.880 Union collapse. Think about the Arab Spring and the Colored revolutions. Well, 0:03:51.880 --> 0:03:54.240 those are all quaint and in the back view mirror 0:03:54.360 --> 0:03:58.200 right now. Instead, technology is what allows the Chinese to 0:03:58.240 --> 0:04:01.720 repress a million leaguers and it doesn't lead to any 0:04:01.800 --> 0:04:05.560 demonstrations on the ground. Why because they can monitor and 0:04:05.640 --> 0:04:08.920 police the behavior of every single citizen. If the Russians 0:04:08.920 --> 0:04:12.320 can do that. If other smaller economies can do that, 0:04:12.320 --> 0:04:15.800 that's a big challenge to American democracy. And a lot 0:04:15.840 --> 0:04:18.520 of people right now are hoping for the bandwidth to 0:04:18.600 --> 0:04:22.080 worry about selling democracy. Right now, people are worried about 0:04:22.120 --> 0:04:25.560 selling wheat. They are worried about selling nickel and aluminum 0:04:25.600 --> 0:04:28.159 and corn and soybean oil. And what we are seeing 0:04:28.240 --> 0:04:30.680 right now is China coming out over the weekend and 0:04:30.720 --> 0:04:36.080 saying that domesticizing food production is an issue of national security. 0:04:36.120 --> 0:04:39.120 We have heard from the US supply chain security is 0:04:39.160 --> 0:04:42.200 a national security issue. How much are we seeing a 0:04:42.240 --> 0:04:48.159 pivot point moving to the mass deglobalization of our economy. Well, 0:04:48.200 --> 0:04:51.120 I mean, I'm glad you brought up grain in particular, 0:04:51.160 --> 0:04:54.479 when you have um, the largest grain producer in the world, 0:04:54.640 --> 0:04:58.640 invading the fifth largest grain producer in the world, one 0:04:58.640 --> 0:05:01.640 would think you're going to have big food problems. And 0:05:01.800 --> 0:05:06.640 certainly coming off the pandemic where extreme poverty after decreasing 0:05:06.720 --> 0:05:10.200 for decades is going up in the next twelve months, 0:05:10.200 --> 0:05:12.680 this is going to be absolutely critical and you're gonna 0:05:12.720 --> 0:05:17.640 see a spike in starvation around the world. Yes, in Afghanistan, 0:05:17.720 --> 0:05:21.080 but also across sub Saharan Africa, and when you have 0:05:21.839 --> 0:05:26.159 pigs in Europe and the United States UH fighting for 0:05:26.279 --> 0:05:31.080 grain supply UH, that will allow wealthy people in the 0:05:31.120 --> 0:05:35.160 world to eat the meat that they want, competing with 0:05:35.680 --> 0:05:38.080 people in poor and the poorest countries in the world 0:05:38.120 --> 0:05:41.719 that can't buy that grain for themselves. You can see 0:05:41.720 --> 0:05:45.239 that the globalization of the world that had been leading 0:05:45.279 --> 0:05:50.720 to an increased global middle class is now unwinding, especially 0:05:50.760 --> 0:05:54.240 on the back of this crisis, which, frankly, I mean 0:05:54.279 --> 0:05:56.720 the the U the Russia Ukraine invasion is going to 0:05:56.800 --> 0:06:01.000 be worse for global poverty in my view. Um, then 0:06:01.800 --> 0:06:04.280 when all is said and done, than the pandemic has 0:06:04.360 --> 0:06:07.560 been and that's a pretty traumatic statement. How will this 0:06:07.720 --> 0:06:12.919 conflict rearrange the economic outlook as we know it? Um, 0:06:12.960 --> 0:06:17.440 it's going to increase inequality because you know, when you 0:06:17.520 --> 0:06:21.080 have massive supply chain challenges and when you have energy 0:06:21.120 --> 0:06:25.960 price spikes, it doesn't affect nearly as much the wealthy 0:06:26.040 --> 0:06:29.520 around the world, who have the ability to move their assets, 0:06:29.600 --> 0:06:32.159 they have the ability to change their lives. Who gets 0:06:32.200 --> 0:06:35.440 really stuffed. The advanced economies can do more even to 0:06:35.520 --> 0:06:38.599 help support their poor and middle income economies, But the 0:06:38.680 --> 0:06:42.640 emerging markets have vastly more debt on their books after 0:06:42.680 --> 0:06:46.880 the last two years of crisis and now don't have 0:06:47.000 --> 0:06:50.400 any more flexibility to help their populations. But this is 0:06:50.480 --> 0:06:54.760 a massive shock um to their imports coming down the pike. Okay, 0:06:54.760 --> 0:06:58.360 not for the major commodity producers who benefit for higher prices. 0:06:58.560 --> 0:07:00.520 But you're up, You're on the other side that trade. 0:07:00.680 --> 0:07:02.720 You're gonna be hurt dramatically coming out of this. And 0:07:02.839 --> 0:07:05.600 Dr Bremer, let's steal something from Freed Cicaria here, and 0:07:05.680 --> 0:07:07.960 let's talk about not the post American world, but the 0:07:07.960 --> 0:07:10.800 post putent world. I read a lot this weekend on 0:07:10.960 --> 0:07:14.560 Mr Putin's inner circle, his defense minister who never served 0:07:14.560 --> 0:07:18.440 as a professional army guy, etcetera. What does the post world? What? 0:07:18.440 --> 0:07:21.240 What does the post putent world look like for Russia? 0:07:22.480 --> 0:07:24.400 But we'd have no idea if it's gonna be in 0:07:24.480 --> 0:07:28.040 twenty years or in twenty days. Uh. It's important to 0:07:28.120 --> 0:07:32.320 recognize that the likelihood of removing Putin from power is 0:07:32.400 --> 0:07:37.040 extremely low until the moment that it happens, and so 0:07:37.240 --> 0:07:40.840 it's not very useful to speculate on when it could happen. 0:07:41.240 --> 0:07:44.600 But it's important to understand that the pressure is there, um. 0:07:44.680 --> 0:07:50.160 And of course that leads to more erratic behavior domestically 0:07:50.720 --> 0:07:53.600 for Putin himself, who in the last week has been 0:07:53.600 --> 0:07:57.120 taking all sorts of measures to create a North Korea 0:07:57.160 --> 0:08:00.400 style police state. That just doesn't work well for a 0:08:00.440 --> 0:08:06.160 country of relatively educated one fifty million digitally literate Russians. Um. 0:08:06.240 --> 0:08:10.200 And you know, it's true that the average Russian believes 0:08:10.240 --> 0:08:13.160 what the Russian state media is putting out um, but 0:08:13.200 --> 0:08:15.880 a lot of urban, younger Russians do not. And the 0:08:15.960 --> 0:08:20.720 ten thousand Russians that have already been arrested um for 0:08:20.880 --> 0:08:24.840 a non violent protests against the war. As the economy 0:08:24.880 --> 0:08:28.440 starts to literally implode in the coming days and you 0:08:28.480 --> 0:08:30.960 don't find goods on shelves and you have to rash 0:08:31.000 --> 0:08:34.080 and people don't get their wages, some of those are 0:08:34.120 --> 0:08:36.880 gonna turn violent, and the Russians are gonna repress it. 0:08:37.200 --> 0:08:40.160 So we have to at least consider that. You know, 0:08:40.200 --> 0:08:42.680 one of the only ways this potentially gets resolved in 0:08:42.679 --> 0:08:45.480 the near term is if you have a dramatic discontinuity 0:08:45.559 --> 0:08:49.360 in Russia itself. And uh, that's that's a very hard 0:08:49.400 --> 0:08:51.920 thing to plan for in a country with five thousand 0:08:52.040 --> 0:09:02.640 nuclear weapons and thank you. Let's look at the equity 0:09:02.679 --> 0:09:05.920 markets now. A briefing with Lori Calvacina, head of US 0:09:05.960 --> 0:09:08.400 equity strategy at RBC Capital Markets. Laura, I want to 0:09:08.440 --> 0:09:10.880 rip up the script here. You have the advantage of 0:09:10.880 --> 0:09:15.520 one h Croft. She is absolutely exquisite on commodities. How 0:09:15.559 --> 0:09:19.400 are you folding the analysis of Halima Croft into your 0:09:19.440 --> 0:09:22.800 equity work? All right, well, thanks for having me as 0:09:22.840 --> 0:09:25.040 always in look, I am very fortunate to be working 0:09:25.040 --> 0:09:27.320 with Helima these days. And you know that, you know 0:09:27.360 --> 0:09:29.560 the drill tom in December, they start trotting out all 0:09:29.559 --> 0:09:31.880 the strategies to do panels and I was fortunate to 0:09:31.920 --> 0:09:34.200 be on a number of these with Halima, and she 0:09:34.320 --> 0:09:36.160 had been warning us that there was going to be 0:09:36.200 --> 0:09:38.959 a problem with Russia and Ukraine to start the year. 0:09:39.040 --> 0:09:41.000 You know, Frankly, I think a lot of market participants 0:09:41.040 --> 0:09:43.880 were not listening to her. And it's not that we 0:09:44.360 --> 0:09:46.880 necessarily grasped how bad this was going to be in 0:09:46.920 --> 0:09:48.760 the moment that we did have an inkling that this 0:09:48.880 --> 0:09:51.600 was coming. So as I've been able to operate through 0:09:51.640 --> 0:09:54.240 this environment, I feel fortunate that you know, I have 0:09:54.320 --> 0:09:57.000 not necessarily been as reactive to the news as some 0:09:57.080 --> 0:09:59.640 other market. How you change I mean we got we 0:09:59.760 --> 0:10:01.959 just short on Tom, Lauria, how many have you change 0:10:02.000 --> 0:10:07.920 your allocation given the outfrontedness you've got with Helma Croft. Well, look, 0:10:07.960 --> 0:10:10.200 we stuck with our energy overweight, even though we were 0:10:10.240 --> 0:10:13.000 getting a little bit nervous frankly on how bullish everybody 0:10:13.000 --> 0:10:15.640 had become. So we did stick with that. That's been fortunate. 0:10:15.679 --> 0:10:17.600 It's been one of the best performing sectors to start 0:10:17.640 --> 0:10:20.719 the year. Um. We've also been talking about how we 0:10:20.800 --> 0:10:23.720 expected the market to sort of pivot back towards growth 0:10:23.720 --> 0:10:25.600 stocks later this year, and one of the reasons for 0:10:25.640 --> 0:10:28.800 that is we thought economic growth expectations, we're going to 0:10:28.880 --> 0:10:30.959 start focusing on a return to trent. We thought that 0:10:30.960 --> 0:10:33.920 would happen in I think this crisis raises the risk 0:10:34.160 --> 0:10:37.960 that we bring that economic projection, that raining and of 0:10:38.000 --> 0:10:41.320 economic expectations in a little bit earlier than anticipated. Secular 0:10:41.360 --> 0:10:43.600 growth stocks tend to do well when the economy is cool, 0:10:44.000 --> 0:10:46.360 so that has helped us sort of stay very steady 0:10:46.360 --> 0:10:48.480 in some of those sector allocations we had to start 0:10:48.480 --> 0:10:52.320 the year. Lauria, is this a bible dip? I don't 0:10:52.320 --> 0:10:54.320 know if you necessarily want to buy it today. And 0:10:54.360 --> 0:10:56.280 the framework we've used is that we view this as 0:10:56.280 --> 0:10:58.559 a growth stare, something that doesn't necessarily push us into 0:10:58.600 --> 0:11:01.079 a recession that makes everyone feel like we're gonna hit one. 0:11:01.240 --> 0:11:03.040 And if you look at growth scare pricing, it can 0:11:03.080 --> 0:11:05.080 take the S and P five hundred down to round thirty. 0:11:05.720 --> 0:11:07.720 In the short term, growth scarce tend to see markets 0:11:07.760 --> 0:11:11.280 fall fourteen pie to trump. We simply haven't done that yet, 0:11:11.360 --> 0:11:13.680 despite how terrible the sentiment has done. Laura, you said 0:11:13.679 --> 0:11:15.400 that it can make everyone feel like we're going to 0:11:15.800 --> 0:11:18.319 into a recession even though we're not, and that's been 0:11:18.360 --> 0:11:20.760 sort of the tipping point of a lot of strategists 0:11:20.760 --> 0:11:23.920 whether this is or isn't a recessionary event. What are 0:11:23.960 --> 0:11:27.040 you looking at it for? The resilience that could potentially 0:11:27.080 --> 0:11:31.520 tip over should the commodity surge continue. So look, I think, 0:11:31.559 --> 0:11:33.440 you know, maybe the silver lining of coming out of 0:11:33.440 --> 0:11:35.480 this hand down and I use that in quotes with 0:11:35.520 --> 0:11:37.880 a bit of irony, but we've all got this arsenal 0:11:37.960 --> 0:11:41.400 of high frequency economic barometers that we've been living and 0:11:41.480 --> 0:11:43.679 breathing for the last couple of years because of COVID, 0:11:43.720 --> 0:11:45.839 and I'm peeping a very close eye on those. Right now. 0:11:45.880 --> 0:11:48.800 We're still seeing improving trends and open table dining, flyne 0:11:49.360 --> 0:11:51.720 return to work is still in the process of recovering 0:11:51.760 --> 0:11:53.360 and has a way to go, but none of these 0:11:53.360 --> 0:11:55.680 are shining any signs of slowing down right now, Lisa. 0:11:55.920 --> 0:11:57.440 So I think we have to keep an eye on 0:11:57.480 --> 0:12:00.120 the resiliency of the consumer in here and what or 0:12:00.120 --> 0:12:03.200 not that holds up. Laurie, this question might sound counterintuitive 0:12:03.520 --> 0:12:06.200 of first approach. I just wonder how nuance this might be. 0:12:06.440 --> 0:12:08.679 Is there a point where crude goes so high that 0:12:08.800 --> 0:12:12.560 energy equity stopped going high with it. I think it's 0:12:12.600 --> 0:12:14.880 it's a point at which the market starts to sense 0:12:14.880 --> 0:12:17.080 out demand destruction. And I don't think there are any 0:12:17.080 --> 0:12:19.760 easy answers to that question in terms of where that 0:12:19.880 --> 0:12:22.760 exact level is. Frankly, we would have thought we would 0:12:22.760 --> 0:12:25.160 have already seen it by now. Um. I think that 0:12:25.240 --> 0:12:28.120 we have to sort of counterbalance the oil price impact 0:12:28.120 --> 0:12:32.040 with the psychological impact of reopening, and many consumers very 0:12:32.080 --> 0:12:34.840 eager to get back to their lives. We're seeing that resilience, 0:12:34.840 --> 0:12:37.599 We're seeing that eagerness to get back to normal dominating 0:12:37.600 --> 0:12:40.120 in the data right now. There will eventually probably be 0:12:40.160 --> 0:12:42.120 a point at which that won't hold up. But all 0:12:42.120 --> 0:12:43.760 I can tell you today John is we haven't hit 0:12:43.800 --> 0:12:46.760 it yet. Laurie, Thank you, Laurie Canvassin or MBC Capital 0:12:46.840 --> 0:12:55.760 Markets wonderful as always, John, what's so important here in 0:12:55.800 --> 0:13:00.480 this anticipated interview is it is eight thousand four miles 0:13:00.640 --> 0:13:03.280 from Midland, Texas to re Odd and that is a 0:13:03.360 --> 0:13:08.000 world a part of global oil economics, in the marginal 0:13:08.160 --> 0:13:12.080 economics of getting the marginal barrel out of the ground 0:13:12.120 --> 0:13:15.760 to be marginally refined. John, we can speak with Paul 0:13:15.800 --> 0:13:18.000 Sanky of sank You Research. We'll catch up with Paul 0:13:18.080 --> 0:13:21.160 Sanky right now. Paul, let's start right here. Often these 0:13:21.200 --> 0:13:24.720 conversations and sometimes it's our fault, sometimes it's the fault 0:13:24.760 --> 0:13:26.760 of the people we speak to. We talk as if 0:13:26.760 --> 0:13:28.960 there is this special tap down in Texas that you 0:13:29.000 --> 0:13:30.679 can just turn, go down there and just turn and 0:13:30.760 --> 0:13:33.400 all of a sudden, crude output is up. Talk to 0:13:33.480 --> 0:13:36.720 us about how difficult that effort is if we even 0:13:36.720 --> 0:13:40.319 tried to well, I mean it's even basic labor. But 0:13:40.400 --> 0:13:42.720 you know, then if you get into engineers and and 0:13:42.800 --> 0:13:46.199 you're just the ability to add capacity as being wildly 0:13:46.240 --> 0:13:50.600 exaggerated here simply because there aren't the people. As Thomas referenced, 0:13:50.880 --> 0:13:52.760 Midland is kind of in the middle of the desert. 0:13:52.840 --> 0:13:54.360 In fact, it is in the middle of the desert, 0:13:54.440 --> 0:13:59.439 and there's tremendous competition from Austin for both labor and 0:13:59.520 --> 0:14:02.480 engineers is and so just in people terms alone, for 0:14:03.400 --> 0:14:06.320 commentators to turn around and say, you know, the USCMP 0:14:06.440 --> 0:14:11.199 industry should add, should add capacity and volume is completely misguided. 0:14:11.240 --> 0:14:13.920 I was in Midland in late December talking to the 0:14:13.920 --> 0:14:18.040 service companies, talking to diamond Back, a major reamp there, 0:14:18.080 --> 0:14:21.240 and the fact is that things are drum tight prior 0:14:21.280 --> 0:14:23.960 to this crisis, and yes they could add on a 0:14:24.040 --> 0:14:26.680 one year view, but there's nothing they can do this week. 0:14:26.920 --> 0:14:30.040 But they are damned if they pump. Environmentalists criticize them, 0:14:30.040 --> 0:14:33.800 and investors punished them, and they're seemingly blamed if they don't. Well, 0:14:33.880 --> 0:14:36.120 what do you make of the relationship between the administration 0:14:36.200 --> 0:14:39.320 and they all patch in America at the moment? I 0:14:39.320 --> 0:14:43.200 mean absolutely appallingly badly managed, because of course, as you know, 0:14:43.320 --> 0:14:46.080 they came in with almost no oil expertise on the 0:14:46.080 --> 0:14:48.640 basis that they would change the energy system. I don't 0:14:48.640 --> 0:14:51.440 know how you can change the energy system without oil expertise. 0:14:51.920 --> 0:14:54.400 And now you're in a situation where you're talking to Venezuela, 0:14:54.480 --> 0:14:57.720 you're talking to Iran, and you're basically pretty much not 0:14:57.840 --> 0:15:00.600 talking to Texas. So it doesn't make any sense to whatsoever. 0:15:01.120 --> 0:15:03.880 How much could they actually though, influence the output in 0:15:04.000 --> 0:15:06.920 Texas quickly, given the fact that there has been a 0:15:07.000 --> 0:15:08.800 lack of investment, given the fact that a lot of 0:15:08.840 --> 0:15:12.280 this has been driven not by Washington but by a 0:15:12.280 --> 0:15:16.120 lot of the shareholders that have looked for fiscal discipline. Well, 0:15:16.200 --> 0:15:19.160 the point that John highlighted from my research yesterday was 0:15:19.200 --> 0:15:23.520 that if they try to aggressively increased capacity now they're 0:15:23.560 --> 0:15:26.640 simply going to compete with each other. And Tom also 0:15:26.720 --> 0:15:28.720 picked up on the point, you're just going to inflate 0:15:28.760 --> 0:15:31.280 things more because all you're gonna do is take the 0:15:31.320 --> 0:15:33.720 guys from the next door rig and put them on 0:15:33.760 --> 0:15:35.880 your own rig. And the list goes on, because it's 0:15:35.880 --> 0:15:39.360 not just about people. It's about steel, it's about cement, 0:15:39.520 --> 0:15:42.840 it's as they would say, cement um. It's even about 0:15:42.880 --> 0:15:45.600 sand actually at a given level. So there's just all 0:15:45.680 --> 0:15:47.680 sorts of tightness down there because we know that we 0:15:47.680 --> 0:15:50.360 were in a commodity squeeze already before all that has happened, 0:15:50.360 --> 0:15:53.360 which is why it's so dramatic. The answer is, you know, 0:15:53.440 --> 0:15:57.640 if you really started to reorganize towards more capacity, you 0:15:57.640 --> 0:15:59.760 would begin to see an impact towards the end of 0:15:59.800 --> 0:16:02.640 this You so, Paul, what could this administration do it 0:16:02.640 --> 0:16:04.560 would you like to see them do in order to 0:16:04.560 --> 0:16:07.920 support more more domestic production as opposed to coin event 0:16:07.960 --> 0:16:10.480 as well, as you point out, well, the grand scheme, 0:16:10.520 --> 0:16:13.200 as you know, is nuclear with a new grid. But 0:16:13.320 --> 0:16:15.440 of course, you know, can we do that? The utilities 0:16:15.480 --> 0:16:18.280 don't really want it. You know, the utilities have a 0:16:18.320 --> 0:16:20.880 lot of vested interests and don't get the criticism they should. 0:16:21.240 --> 0:16:24.120 Nor does Amazon get the criticism it should for you know, 0:16:24.160 --> 0:16:26.760 the amounts of oil that's used to deliver a package 0:16:26.800 --> 0:16:29.320 to everyone in return half of them. You know, all 0:16:29.360 --> 0:16:31.400 of this stuff is not really examined in the grand 0:16:31.400 --> 0:16:34.880 scheme of things. But above all, what the industry wants 0:16:34.960 --> 0:16:37.280 is consistency. So one of the latest things that we're 0:16:37.280 --> 0:16:40.120 seeing is suddenly they're saying we'll reduce the federal federal 0:16:40.200 --> 0:16:44.360 gasoline tax. Totally idiotic, just in terms of environmental friendliness 0:16:44.400 --> 0:16:47.400 and not encouraging efficiency. What they're saying is will take 0:16:47.440 --> 0:16:51.400 off the stupid mandate for ethanol but you know, being 0:16:51.480 --> 0:16:54.680 used again. Just as the industry is moving towards major 0:16:54.720 --> 0:16:58.560 investment in renewable diesel, the administration says, actually, we might 0:16:58.600 --> 0:17:00.840 have to change this because there's a cry. It's a 0:17:00.880 --> 0:17:03.920 crisis management. And that's exactly what you know leads to 0:17:04.160 --> 0:17:07.440 what I call the energy regression. We're in an energy regression. 0:17:07.440 --> 0:17:10.680 We're going backwards. Paul. Let me go to the third rail, 0:17:10.960 --> 0:17:13.399 and it's not the expensive summer camp that was a 0:17:13.400 --> 0:17:15.399 third rail this weekend. Let me go to the third 0:17:15.480 --> 0:17:20.000 rail of the Keystone pipeline. Is it a valid economic 0:17:20.119 --> 0:17:27.960 project and it can it actually enhance United States energy independence? Yes? 0:17:28.119 --> 0:17:31.920 I mean it could and absolutely more Canadian oil is 0:17:31.920 --> 0:17:35.960 an obvious outlet here to to as a long term 0:17:36.040 --> 0:17:40.560 solution because obviously we have such a tremendous ally right 0:17:40.560 --> 0:17:42.800 there with the available oil who by the way of 0:17:42.880 --> 0:17:46.960 doing a tremendous job of Scope one and two ementionance reductions. 0:17:47.000 --> 0:17:51.560 So yes, that shouldn't have been delayed back in ten, 0:17:51.600 --> 0:17:55.280 which was one of the obomber administration first through a 0:17:55.359 --> 0:17:58.399 wrench in the works. Actually, the Biden administration was just 0:17:58.480 --> 0:18:01.600 bad messaging because by then the project was pretty much dead. 0:18:02.200 --> 0:18:04.320 In so far as the Biden administration canceled, it is 0:18:04.359 --> 0:18:07.680 the first, literally the first thing that they did. Um. 0:18:07.760 --> 0:18:10.479 But yeah, you could really easily resuscitate with stuff if 0:18:10.520 --> 0:18:13.679 you could get around the environmental opposition. Environmental opposition is local, 0:18:14.400 --> 0:18:18.639 you know, it's a problem of negotiating very specific issues. 0:18:18.640 --> 0:18:21.280 The latest one has been this Mountain Valley pipeline, which 0:18:21.280 --> 0:18:24.359 would release more US gas from the Marcellist into the 0:18:24.400 --> 0:18:28.639 general U. S economy and to export. And that's nineties six, 0:18:28.680 --> 0:18:31.960 complete with six billion dollars sunk, and a federal geodge 0:18:32.040 --> 0:18:35.119 judge blocked it for crossing the Appalachian Trail. You know, 0:18:35.160 --> 0:18:39.760 stuff like that just makes no sense environmentally. Pasanki gasoline 0:18:39.800 --> 0:18:42.399 triple A unloaded from three six D two I believe 0:18:42.480 --> 0:18:47.119 four oh seven in seven travel days. If you will 0:18:47.160 --> 0:18:50.360 in your head, where is the tip point on triple 0:18:50.400 --> 0:18:54.320 A unladed where it really begins to affect our behavior 0:18:55.359 --> 0:18:59.080 for fifty four fifty nationwide? But then you add sixty 0:18:59.119 --> 0:19:01.560 cents to well, that's the retail price. But then you 0:19:01.560 --> 0:19:03.520 have to add a dollar in New York and a 0:19:03.560 --> 0:19:07.000 dollar in California, you know, in the higher tax states. 0:19:07.040 --> 0:19:08.760 So you're going to get to five fifty. And by 0:19:08.800 --> 0:19:10.760 the way, that's in the post. That's going to happen 0:19:10.840 --> 0:19:14.280 because essentially the gasoline price is trailing the crew price, 0:19:14.280 --> 0:19:16.800 obviously quite quite severely. So what happens when we get 0:19:16.840 --> 0:19:21.840 to five fifty, Well, people change behavior quite radically because 0:19:21.880 --> 0:19:24.320 obviously there's a lot of discretion over how much you 0:19:24.400 --> 0:19:27.600 drive your car, which car you drive, whether you drive 0:19:28.200 --> 0:19:31.600 like a crazy idiot, or you know, very conservatively, whether 0:19:31.600 --> 0:19:33.320 you pump up your tires. We saw all of this 0:19:33.400 --> 0:19:36.120 in O eight on, and you know, there's actually quite 0:19:36.119 --> 0:19:39.399 a significant ability to change behavior. What's interesting now is 0:19:39.440 --> 0:19:43.359 obviously that you have very low unemployment and therefore people 0:19:43.400 --> 0:19:46.119 do need to drive. And so I think the elasticity 0:19:46.200 --> 0:19:49.160 here is going to be pretty sticky, to say the least, 0:19:49.200 --> 0:19:53.080 and I think we'll get to really significant, significantly higher 0:19:53.080 --> 0:19:56.080 gasoline prices are absolutely guaranteed. Well, that's the test, and 0:19:56.080 --> 0:19:57.560 I think this is really interesting for you and I 0:19:57.640 --> 0:19:59.560 to try and talk through work out. It's an open 0:19:59.640 --> 0:20:02.120 question in the treasury market when you would go higher 0:20:02.160 --> 0:20:04.520 aggressively high. We talk about how self limiting a sell 0:20:04.560 --> 0:20:06.440 off would be, because it's nice to bite the U. S. 0:20:06.480 --> 0:20:09.880 Economy and yours come back in. Does the same dynamic 0:20:09.920 --> 0:20:13.000 exists in the commodity market for crude and I'm trying 0:20:13.000 --> 0:20:15.040 to work out what that might mean for say, the 0:20:15.119 --> 0:20:17.879 likes of oxy are more than ninet here today. At 0:20:17.920 --> 0:20:20.160 what point do energy prices go too high for even 0:20:20.240 --> 0:20:24.520 energy equities to continue running with it? Yeah, I mean 0:20:24.520 --> 0:20:27.000 you get into the point of demanded structure. Obviously, oxously 0:20:27.040 --> 0:20:29.320 was an outlier move because we now know that Warren 0:20:29.320 --> 0:20:31.800 Buffett was building a significant stake and seems to want 0:20:31.840 --> 0:20:35.680 to do it entirely in a week so. But generally speaking, 0:20:36.040 --> 0:20:38.639 if the market begins to believe the strip, which is 0:20:38.680 --> 0:20:41.360 now over a hundred all the way down as far 0:20:41.359 --> 0:20:44.719 as the I can see, then these things move higher. 0:20:44.800 --> 0:20:47.440 And it's really the back end of the price curve 0:20:47.520 --> 0:20:51.960 that matters, which is aggressively higher. I think because there's 0:20:52.000 --> 0:20:55.000 a total question mark of what Russia will look like 0:20:55.080 --> 0:20:57.720 in the future. I think there's two things here. Number 0:20:57.800 --> 0:21:00.560 one is that very good news this morning Russia has 0:21:00.600 --> 0:21:02.960 softened its stance, and I think we see the markets 0:21:03.040 --> 0:21:06.679 coming back it given that Russia is softening its stance 0:21:06.720 --> 0:21:10.200 and maybe at the point of admitting defeat here quite possibly. 0:21:10.920 --> 0:21:13.399 That's that's the good news. The bad news is we 0:21:13.520 --> 0:21:18.480 may actually see Russia now permanently out of the market um, 0:21:18.520 --> 0:21:20.800 you know, for multiple years, long enough to make a 0:21:20.800 --> 0:21:23.480 difference to the strip, at which point the future strip 0:21:23.520 --> 0:21:26.159 will be at a hundred. And these things are hugely 0:21:26.240 --> 0:21:31.359 undervalued against that um once you get to on a 0:21:31.400 --> 0:21:36.240 spot basis. Obviously, we worry about demand destruction. And really 0:21:36.320 --> 0:21:39.200 the big question here, and you guys debate it constantly, 0:21:39.320 --> 0:21:41.680 is what will the recession look like? You know, it's 0:21:41.680 --> 0:21:43.240 not a question whether we get a recession, it's like 0:21:43.280 --> 0:21:45.760 what kind of recession are we going to get? Paul 0:21:45.920 --> 0:21:48.160 awesome as always going to catch up with this, Paul 0:21:48.160 --> 0:21:56.520 sand Kick of Sanky Research. It is our great pleasure 0:21:56.520 --> 0:21:59.359 now to introduce a former governor of the Bank of Israel, 0:21:59.440 --> 0:22:02.399 but farm more than that, the Rockefeller Professor at the 0:22:02.520 --> 0:22:06.400 University of Chicago just a few years ago, Jacob Frankel. 0:22:06.720 --> 0:22:08.919 It has been far too long since we've seen you 0:22:09.200 --> 0:22:12.040 working with Mr Diamond at JP Morgan. He comes to 0:22:12.119 --> 0:22:15.600 us today from his tell of you, Professor Frankel let 0:22:15.680 --> 0:22:19.680