1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,880 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:21,240 Speaker 1: on Apple car Play or Android Auto with the Bloomberg 4 00:00:21,320 --> 00:00:24,880 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:25,280 --> 00:00:27,200 Speaker 1: or watch us live on YouTube. 6 00:00:27,800 --> 00:00:30,159 Speaker 2: Sebastian Page joins this. C's a CIO and head of 7 00:00:30,160 --> 00:00:32,720 Speaker 2: Global multi asset investing in te rope Price. Great thing 8 00:00:32,760 --> 00:00:35,760 Speaker 2: about tiro Price down in Baltimore is they do everything 9 00:00:35,880 --> 00:00:39,000 Speaker 2: their stocks, there's bonds, there's commodities, private markets, so they 10 00:00:39,040 --> 00:00:42,920 Speaker 2: see pretty much everything any deal flow acrosses globally, tierro 11 00:00:43,040 --> 00:00:44,400 Speaker 2: Price gets a look at it. So it's a good 12 00:00:44,400 --> 00:00:47,720 Speaker 2: opportunity to get some thoughts there. Sebastian, thanks so much 13 00:00:47,760 --> 00:00:50,120 Speaker 2: for joining us here. You see the geopolitical risk here 14 00:00:50,159 --> 00:00:52,400 Speaker 2: that we've all been dealing with over the last several days. 15 00:00:52,640 --> 00:00:54,840 Speaker 2: I know the smart folks down at t Robe and 16 00:00:55,000 --> 00:00:56,840 Speaker 2: chatting about what to do here. What you guys, how 17 00:00:56,880 --> 00:00:59,520 Speaker 2: do you guys think about positioning? What's the messaging to 18 00:00:59,560 --> 00:01:00,880 Speaker 2: your client these days? 19 00:01:02,960 --> 00:01:06,000 Speaker 3: Well, Paul, as you might expect, our research platform went 20 00:01:06,160 --> 00:01:10,759 Speaker 3: into overdrive over the weekend. I'm catching up on all 21 00:01:10,800 --> 00:01:15,080 Speaker 3: the analyst notes, we have three hundred research analysts. They 22 00:01:15,080 --> 00:01:20,120 Speaker 3: cover every stock in the world that's of a significant size, 23 00:01:20,160 --> 00:01:22,880 Speaker 3: and every sector and every market, and we have asset 24 00:01:22,920 --> 00:01:27,240 Speaker 3: allocators and economists and macro researchers. And I'll say this, 25 00:01:28,240 --> 00:01:31,320 Speaker 3: there is no real base case right now. I know 26 00:01:31,360 --> 00:01:35,039 Speaker 3: it sounds it's probably statistically incorrect to say, but it 27 00:01:35,240 --> 00:01:39,360 Speaker 3: really is a matter of scenarios. Our analysts are debating 28 00:01:39,440 --> 00:01:44,800 Speaker 3: this in terms of a short war or a longer 29 00:01:45,000 --> 00:01:49,400 Speaker 3: or protracted war with certain probabilities. One analyst went as 30 00:01:49,480 --> 00:01:51,760 Speaker 3: high as fifty percent at some point over the weekend 31 00:01:51,760 --> 00:01:55,080 Speaker 3: that we see Brent above one hundred dollars. So it's 32 00:01:55,120 --> 00:01:59,440 Speaker 3: a tension between these two. On the short war scenario. Well, 33 00:01:59,480 --> 00:02:04,000 Speaker 3: you're just apparently Iran reached out. But also a Wall 34 00:02:04,040 --> 00:02:08,240 Speaker 3: Street journal reported that Iran shooting missiles and drones at 35 00:02:08,280 --> 00:02:11,000 Speaker 3: the golf countries and the golf countries defending. They're both 36 00:02:11,120 --> 00:02:15,520 Speaker 3: running out of missiles and drones and defense systems. So 37 00:02:15,520 --> 00:02:18,600 Speaker 3: it's the Wall Street journel described it as a race. 38 00:02:19,080 --> 00:02:20,680 Speaker 3: So what do we do? What do you do, Paul, 39 00:02:20,680 --> 00:02:23,280 Speaker 3: because you have this is something I hate to say, 40 00:02:23,680 --> 00:02:26,240 Speaker 3: which is the range of outcomes is wide because it 41 00:02:26,280 --> 00:02:29,280 Speaker 3: always sounds like an out but right now, really you 42 00:02:29,360 --> 00:02:32,760 Speaker 3: have these I call it a bimodal distribution. I know 43 00:02:32,840 --> 00:02:35,800 Speaker 3: Tom's not here today, wou he would You probably want 44 00:02:35,840 --> 00:02:38,520 Speaker 3: to talk about the bimodal distribution, but we're talking about 45 00:02:38,520 --> 00:02:42,440 Speaker 3: two events and you can't really average them into a 46 00:02:42,840 --> 00:02:46,560 Speaker 3: base case. So you hedge, and our strategy in our 47 00:02:46,600 --> 00:02:50,320 Speaker 3: portfolio has been to be long real asset equities, and 48 00:02:50,360 --> 00:02:55,239 Speaker 3: we've been long relasset equities for a while. Atties in 49 00:02:55,280 --> 00:02:59,960 Speaker 3: your mind, you know, in our case, it's a diversified 50 00:03:00,160 --> 00:03:03,200 Speaker 3: portfolio of stocks. Of course, it includes energy companies, but 51 00:03:03,280 --> 00:03:06,880 Speaker 3: also metals in mining and precious metals which have been 52 00:03:06,880 --> 00:03:10,440 Speaker 3: doing really well, and real estate too. So we define 53 00:03:10,440 --> 00:03:13,440 Speaker 3: this as a strategy or an asset class, and then 54 00:03:13,480 --> 00:03:15,639 Speaker 3: it's in a stock portfolio. Can put a sleeve in 55 00:03:15,680 --> 00:03:18,320 Speaker 3: there like ten percent. One of the risks when you 56 00:03:18,360 --> 00:03:22,760 Speaker 3: get inflation shocks or oil price shocks, Paul, is that 57 00:03:23,680 --> 00:03:27,440 Speaker 3: bonds treasuries don't act as the hedge as well as 58 00:03:27,480 --> 00:03:29,440 Speaker 3: they do when you get a pure growth shock. 59 00:03:30,680 --> 00:03:33,320 Speaker 4: So I'm curious. You know you mentioned real estate is 60 00:03:33,360 --> 00:03:36,680 Speaker 4: one of the real asset equities that you pay attention to. 61 00:03:36,760 --> 00:03:39,240 Speaker 4: Talk to me about what areas of real estate state 62 00:03:39,280 --> 00:03:41,560 Speaker 4: are attractive to you. 63 00:03:42,720 --> 00:03:45,360 Speaker 3: It's a broadly diverse, fled portfolio. Again, I just set 64 00:03:45,360 --> 00:03:47,280 Speaker 3: the range of outcome is wide, and now I'm giving 65 00:03:47,280 --> 00:03:51,000 Speaker 3: you another out, another terminal life to use. It's across 66 00:03:51,040 --> 00:03:54,360 Speaker 3: all real estate markets, so residential and commercial and so on, 67 00:03:54,680 --> 00:03:58,440 Speaker 3: and it's part of a diversified real asset strategy. It 68 00:03:58,520 --> 00:04:03,360 Speaker 3: doesn't move in hand with energy prices, and that's a feature, 69 00:04:03,480 --> 00:04:05,760 Speaker 3: not a bog right, So we like putting all these 70 00:04:05,800 --> 00:04:10,240 Speaker 3: stocks together and have it as a dedicated allocation because 71 00:04:10,440 --> 00:04:13,600 Speaker 3: if you compare this with commodities, for example, with the 72 00:04:13,680 --> 00:04:17,599 Speaker 3: RELASTT equities, you get an equity risk premium over time. 73 00:04:17,760 --> 00:04:20,719 Speaker 3: So even when there's no geopolitical risk, you get pretty 74 00:04:20,720 --> 00:04:24,360 Speaker 3: good equity returns. And then when you do get an 75 00:04:24,400 --> 00:04:29,479 Speaker 3: inflation shock and bonds like treasuries go down together with stocks, 76 00:04:29,800 --> 00:04:33,800 Speaker 3: those stocks actually behave quite well and cannot perform significantly 77 00:04:34,400 --> 00:04:37,920 Speaker 3: in the portfolio. And it just comes down to having 78 00:04:38,040 --> 00:04:39,920 Speaker 3: a range of a range of outcomes. 79 00:04:39,960 --> 00:04:40,159 Speaker 5: Here. 80 00:04:40,600 --> 00:04:43,719 Speaker 3: The barecas is that this could go on for a while. 81 00:04:43,760 --> 00:04:46,839 Speaker 3: Another word I hate to use is unprecedented. But the 82 00:04:46,880 --> 00:04:50,080 Speaker 3: way the golf countries have been engaged and attacked here 83 00:04:50,240 --> 00:04:53,880 Speaker 3: and the way this is going, and President Trump was 84 00:04:53,880 --> 00:04:55,680 Speaker 3: saying it could be four or five weeks, It'll take 85 00:04:55,680 --> 00:04:58,359 Speaker 3: as long as it takes, this could go on. We 86 00:04:58,440 --> 00:05:01,279 Speaker 3: have analysts that have done a study of oil price shocks, 87 00:05:01,400 --> 00:05:05,800 Speaker 3: and they calculated with many years of data that after 88 00:05:05,920 --> 00:05:09,800 Speaker 3: the beginning of the military reaction, on average, oil continues 89 00:05:09,839 --> 00:05:13,440 Speaker 3: to rally to a peak for twenty three days, and 90 00:05:13,480 --> 00:05:17,359 Speaker 3: that the average oil rally is twenty seven percent. Again, 91 00:05:17,440 --> 00:05:21,960 Speaker 3: this is not a really direct comparable to historical military reactions, 92 00:05:22,200 --> 00:05:24,400 Speaker 3: but this just gives you an idea that oil probably 93 00:05:24,440 --> 00:05:25,440 Speaker 3: hasn't peaked yet. 94 00:05:25,839 --> 00:05:29,400 Speaker 4: So I understand that you have diversified portfolio, but how 95 00:05:29,440 --> 00:05:32,560 Speaker 4: exactly do you position yourself for that worst case scenario, 96 00:05:32,640 --> 00:05:36,200 Speaker 4: the bear case scenario. Where do you find a safe haven? 97 00:05:38,320 --> 00:05:41,120 Speaker 3: Yeah, So if you look at how we're positioned right now, 98 00:05:41,480 --> 00:05:45,120 Speaker 3: in for example, our equity portfolio, some of the sectors 99 00:05:45,160 --> 00:05:51,240 Speaker 3: are portfolio managers like our healthcare as well as technology, 100 00:05:51,279 --> 00:05:57,320 Speaker 3: which is interesting, so healthcare more defensive, technology, materials, energy. 101 00:05:57,440 --> 00:05:59,840 Speaker 3: So these are the types of long positions we have 102 00:06:00,200 --> 00:06:04,360 Speaker 3: across our portfolios. When our portfolio managers actually select stocks, 103 00:06:04,520 --> 00:06:06,760 Speaker 3: I look at asset allocation from the top down, but 104 00:06:06,839 --> 00:06:09,680 Speaker 3: I like to see where they're positioned as well. So 105 00:06:09,839 --> 00:06:13,640 Speaker 3: it's kind of a barbelle between tech and the AI theme. 106 00:06:13,720 --> 00:06:16,600 Speaker 3: You don't want to be completely under exposed, and then 107 00:06:16,680 --> 00:06:20,400 Speaker 3: things like energy and material and healthcare. So the combination 108 00:06:20,680 --> 00:06:25,600 Speaker 3: of those two overweights would say, maybe underweight consumer discretionary 109 00:06:25,680 --> 00:06:30,039 Speaker 3: or underweight the core equities that are very expensive but 110 00:06:30,200 --> 00:06:35,440 Speaker 3: not AI exposed or not AI beneficiaries could be AI victims. 111 00:06:35,760 --> 00:06:38,280 Speaker 3: You're goin to underweight that and then you go to 112 00:06:38,400 --> 00:06:41,880 Speaker 3: the wings. It's in a sense it's in large gap. 113 00:06:41,920 --> 00:06:45,599 Speaker 3: It's overweighting growth and overweighting value and then underweighting the core. 114 00:06:45,839 --> 00:06:48,080 Speaker 3: So broadly this gives you an idea of hardwork position 115 00:06:48,520 --> 00:06:52,000 Speaker 3: In terms of multi asset hedging in portfolios, treasury still 116 00:06:52,040 --> 00:06:55,480 Speaker 3: have a role if you expect some growth shock, which 117 00:06:55,560 --> 00:06:57,680 Speaker 3: could come right if you get a spikean ode prices, 118 00:06:57,760 --> 00:07:01,120 Speaker 3: gasing prices go up the consumer, it's like a tax 119 00:07:01,240 --> 00:07:04,479 Speaker 3: for them for the consumer, and then you get a 120 00:07:04,600 --> 00:07:07,960 Speaker 3: drop in growth and earnings come down. So treasuries have 121 00:07:08,000 --> 00:07:10,120 Speaker 3: a role as a hedging it's just not the end 122 00:07:10,160 --> 00:07:13,840 Speaker 3: all be all hedge. Commodities can help gold can help, 123 00:07:13,920 --> 00:07:17,240 Speaker 3: cash can help, and then relasset equities. So we like 124 00:07:17,280 --> 00:07:21,640 Speaker 3: to diverse fire hedges because especially I get I hate 125 00:07:21,680 --> 00:07:23,400 Speaker 3: to say it, but I'll say it twice, the range 126 00:07:23,440 --> 00:07:25,280 Speaker 3: of outcome is pretty wide right now. 127 00:07:25,240 --> 00:07:28,120 Speaker 2: Sebastian, just real quick here thirty seconds. The AI trade 128 00:07:28,120 --> 00:07:30,720 Speaker 2: that was really under pressure before all this geopolitical issues. 129 00:07:30,760 --> 00:07:33,320 Speaker 2: It Whor's tro stand on kind of how to play 130 00:07:33,320 --> 00:07:34,760 Speaker 2: the AI story? These days. 131 00:07:36,480 --> 00:07:40,160 Speaker 3: We're playing it selectively and we see industry being hit 132 00:07:40,280 --> 00:07:44,800 Speaker 3: one by one. We're generally bullish on AI and the 133 00:07:44,880 --> 00:07:50,200 Speaker 3: efficiency it will bring, but it comes down to focusing 134 00:07:50,240 --> 00:07:55,920 Speaker 3: on those that will benefit from AI anticipating disruption, and Paul, 135 00:07:56,000 --> 00:07:58,240 Speaker 3: I'll end my thirty seconds on that. This is why 136 00:07:58,280 --> 00:08:01,200 Speaker 3: we have a three hundred research analysts and I will 137 00:08:01,240 --> 00:08:03,640 Speaker 3: say one of the top five research platforms. Thank you 138 00:08:03,680 --> 00:08:05,040 Speaker 3: for allowing me to give that blug. 139 00:08:05,320 --> 00:08:08,160 Speaker 2: Well, I know they were my client. I took the 140 00:08:08,200 --> 00:08:10,440 Speaker 2: train down to Baltimore many times a year when I 141 00:08:10,480 --> 00:08:13,640 Speaker 2: was on this cell side here, So Sebashily, I mean again, 142 00:08:14,400 --> 00:08:19,360 Speaker 2: uncertain times here, unprecedented times here. You know, do you 143 00:08:19,360 --> 00:08:23,200 Speaker 2: think about US versus non US? Does that change here 144 00:08:23,320 --> 00:08:23,640 Speaker 2: at all? 145 00:08:23,680 --> 00:08:23,840 Speaker 5: Here? 146 00:08:23,880 --> 00:08:25,920 Speaker 2: Given some of the geopolitical risks out there. 147 00:08:27,800 --> 00:08:30,840 Speaker 3: Well, yeah, and I should have mentioned the dollars still 148 00:08:30,840 --> 00:08:34,679 Speaker 3: a hedge generally, and we're kind of seeing it hold 149 00:08:34,760 --> 00:08:38,080 Speaker 3: up here. Do we remain along in our ass location 150 00:08:38,320 --> 00:08:42,960 Speaker 3: portfolio non US equities because you do have a clear 151 00:08:43,040 --> 00:08:48,480 Speaker 3: valuation advantage which typically is not enough, but also catalyst 152 00:08:48,640 --> 00:08:53,040 Speaker 3: for broadening of global growth and you know, more spending 153 00:08:53,040 --> 00:08:57,839 Speaker 3: in Europe and so on. So we remain overweight international equities, 154 00:08:58,000 --> 00:09:04,280 Speaker 3: especially international values, industrials, financials and so on outside the US. 155 00:09:04,480 --> 00:09:07,360 Speaker 3: But longer term, we believe that the US will remain 156 00:09:07,400 --> 00:09:10,160 Speaker 3: a strong engine. So again I'm giving a kind of 157 00:09:11,520 --> 00:09:14,800 Speaker 3: half full, half empty answer, but it's short term, tactical, 158 00:09:14,880 --> 00:09:17,840 Speaker 3: long international, long term, still bullish in the US. 159 00:09:18,160 --> 00:09:20,520 Speaker 4: So on a typical week, I imagine we'd be talking 160 00:09:20,679 --> 00:09:23,480 Speaker 4: a lot more about the FED. I'm curious, you know, 161 00:09:23,520 --> 00:09:25,559 Speaker 4: the economic data is still in the background. How are 162 00:09:25,559 --> 00:09:28,720 Speaker 4: you thinking about the economic environment and how that actually 163 00:09:28,720 --> 00:09:30,040 Speaker 4: influences how you position. 164 00:09:32,160 --> 00:09:35,600 Speaker 3: I think the biggest risk right now is that inflation 165 00:09:35,920 --> 00:09:41,079 Speaker 3: surprises on the upside, and commodities are so unpredictable. As 166 00:09:41,120 --> 00:09:44,880 Speaker 3: asset allocators, we have to be humble, and I like 167 00:09:44,920 --> 00:09:47,760 Speaker 3: to say it is the hardest to predict asset class, 168 00:09:47,760 --> 00:09:50,480 Speaker 3: and we see it here with supply disruptions that can 169 00:09:50,559 --> 00:09:54,840 Speaker 3: be quite unpredictable. So that is a risk because the 170 00:09:54,880 --> 00:09:57,800 Speaker 3: FED wants to cut, and the base case remains that 171 00:09:57,840 --> 00:10:01,360 Speaker 3: the FED will cut and that will be stimulative. But 172 00:10:01,440 --> 00:10:04,600 Speaker 3: if we get an inflation shock, that could make markets 173 00:10:04,679 --> 00:10:05,640 Speaker 3: quite nervous. 174 00:10:06,000 --> 00:10:08,400 Speaker 2: YEP, Sebastian, thank you so much, as always for a 175 00:10:08,440 --> 00:10:10,640 Speaker 2: few minutes of your time. Sebastian Page. He's the CIO 176 00:10:11,040 --> 00:10:14,960 Speaker 2: and head of a global multi asset at t row Price. 177 00:10:16,760 --> 00:10:20,959 Speaker 6: Stay with us. More from Bloomberg Surveillance coming up after this. 178 00:10:28,200 --> 00:10:31,800 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live 179 00:10:31,840 --> 00:10:35,040 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 180 00:10:35,080 --> 00:10:38,760 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 181 00:10:38,920 --> 00:10:40,360 Speaker 1: watch us Live on YouTube. 182 00:10:40,720 --> 00:10:43,760 Speaker 2: So the markets are trying to digest the geopolitical news 183 00:10:43,800 --> 00:10:49,200 Speaker 2: and react in terms of how this effects valuations for stocks, sponds, commodities, 184 00:10:49,240 --> 00:10:52,480 Speaker 2: real assets, including the treasury market as well, particularly on 185 00:10:52,480 --> 00:10:55,000 Speaker 2: the short end of the curve. Debbie Cuttingham is the 186 00:10:55,040 --> 00:10:56,840 Speaker 2: expert on the short end of the curve. She's the 187 00:10:56,880 --> 00:11:01,040 Speaker 2: CIO of Global Liquidity Markets for federator to herb is Debbie, 188 00:11:01,120 --> 00:11:03,200 Speaker 2: what's your view when we kind of go into these 189 00:11:03,640 --> 00:11:06,960 Speaker 2: black Swan type of events here, the level of uncertainty 190 00:11:07,320 --> 00:11:09,120 Speaker 2: in the markets, how do you see that reflected in 191 00:11:09,160 --> 00:11:11,599 Speaker 2: your short term treasury money markets? 192 00:11:12,400 --> 00:11:15,520 Speaker 7: You know, in the US it really generally what we 193 00:11:15,559 --> 00:11:19,360 Speaker 7: see for our Treasury security funds, the funds that are 194 00:11:19,360 --> 00:11:22,520 Speaker 7: only buying US Treasury securities repo backed by US Treasury 195 00:11:22,559 --> 00:11:25,480 Speaker 7: securities is a flight to quality where number one, a 196 00:11:25,480 --> 00:11:27,960 Speaker 7: lot of cash flow comes in and number two, prices 197 00:11:28,000 --> 00:11:30,400 Speaker 7: go up and yield to go down on a flight 198 00:11:30,440 --> 00:11:33,280 Speaker 7: to quality sort of trade. And we haven't seen that 199 00:11:33,360 --> 00:11:35,040 Speaker 7: quite as much. We've seen a little of it, but 200 00:11:35,240 --> 00:11:37,840 Speaker 7: not as much as we generally do. I think to 201 00:11:37,960 --> 00:11:41,680 Speaker 7: some degree it's because of the inflationary concerns that this 202 00:11:41,920 --> 00:11:46,640 Speaker 7: particular black Swan event has, you know, has as far 203 00:11:46,679 --> 00:11:51,439 Speaker 7: as potential implications from a market perspective goes going forward, 204 00:11:51,559 --> 00:11:54,480 Speaker 7: So a little bit less of that than what we're 205 00:11:54,559 --> 00:11:56,800 Speaker 7: used to seeing. But on the other hand, on the 206 00:11:56,800 --> 00:12:00,760 Speaker 7: good side of that equation is the non measury market, 207 00:12:00,880 --> 00:12:03,760 Speaker 7: so you know, commercial pay per CDs, those that are 208 00:12:03,800 --> 00:12:07,400 Speaker 7: not backed by the US government don't seem to be 209 00:12:07,480 --> 00:12:10,760 Speaker 7: seeing a whole lot of spread spread widening, you know, 210 00:12:10,800 --> 00:12:12,920 Speaker 7: maybe a basis point or two, but nothing out of 211 00:12:12,960 --> 00:12:16,000 Speaker 7: the ordinary in the context of market volatility on a 212 00:12:16,080 --> 00:12:21,080 Speaker 7: day to day basis. I will say our London liquidity 213 00:12:21,600 --> 00:12:25,439 Speaker 7: operation seem to have a little tentative nature to them, 214 00:12:25,800 --> 00:12:27,840 Speaker 7: a little less two way flow. 215 00:12:27,960 --> 00:12:30,199 Speaker 5: Than what we're seeing what we've been seeing here in 216 00:12:30,240 --> 00:12:30,720 Speaker 5: the US. 217 00:12:32,120 --> 00:12:33,960 Speaker 4: DeBie, So where do you go? I mean, we've been 218 00:12:34,000 --> 00:12:36,720 Speaker 4: talking so much about uncertainty. I know in your notes 219 00:12:36,760 --> 00:12:39,240 Speaker 4: you talk about the fence future, of course, the economy 220 00:12:39,240 --> 00:12:41,839 Speaker 4: and focused geopolitics. Where do you want to be right 221 00:12:41,880 --> 00:12:43,000 Speaker 4: now in the short term? 222 00:12:43,920 --> 00:12:46,640 Speaker 7: Well, from a short term perspective, we are still very 223 00:12:46,679 --> 00:12:50,160 Speaker 7: comfortable being you know, long duration, long waited average maturity. 224 00:12:51,080 --> 00:12:54,560 Speaker 7: You know, I would have said, probably less than two 225 00:12:54,559 --> 00:12:58,160 Speaker 7: weeks ago, that we certainly think that the fence next 226 00:12:58,200 --> 00:13:00,320 Speaker 7: move is either to stay on hold or to go 227 00:13:00,440 --> 00:13:03,439 Speaker 7: lower with rates by twenty five basis points maybe fifty 228 00:13:03,480 --> 00:13:07,400 Speaker 7: basis points this year. But with this new situation, maybe 229 00:13:07,559 --> 00:13:10,920 Speaker 7: it's day on hold or you could go in either direction, 230 00:13:11,280 --> 00:13:13,760 Speaker 7: maybe twenty five eight basis points high or twenty five 231 00:13:13,800 --> 00:13:17,200 Speaker 7: basis points lower. Growth in the US continues to be 232 00:13:17,360 --> 00:13:21,400 Speaker 7: pretty robust from a retail perspective, and if inflation starts 233 00:13:21,440 --> 00:13:24,080 Speaker 7: to you know, rear at ugly head again, you could 234 00:13:24,200 --> 00:13:26,360 Speaker 7: potentially see a move by the FED that goes in 235 00:13:26,360 --> 00:13:29,200 Speaker 7: the opposite direction. But at this point, the yield curve 236 00:13:29,280 --> 00:13:32,880 Speaker 7: is reflecting enough from a steepness and a value standpoint 237 00:13:32,960 --> 00:13:35,560 Speaker 7: that we're still pretty comfortable being a little bit longer duration. 238 00:13:36,320 --> 00:13:39,040 Speaker 2: What's longer duration for you, Debbie? I mean, is that 239 00:13:39,080 --> 00:13:40,600 Speaker 2: a couple of weeks? I mean, talk to us about 240 00:13:40,600 --> 00:13:42,080 Speaker 2: how you view duration in your market. 241 00:13:42,800 --> 00:13:46,680 Speaker 7: Yes, it is a couple of weeks, depend upon depending 242 00:13:46,720 --> 00:13:48,800 Speaker 7: upon what products we're talking about. If they're talking about 243 00:13:48,840 --> 00:13:52,360 Speaker 7: money market funds, their max duration is sixty day, so 244 00:13:52,480 --> 00:13:55,360 Speaker 7: the difference between five and fifty five is huge. Now 245 00:13:55,360 --> 00:13:57,520 Speaker 7: if you're talking about micro short funds, there you have 246 00:13:57,559 --> 00:13:59,720 Speaker 7: a little bit more leeway. One hundred and eighty days 247 00:13:59,800 --> 00:14:03,040 Speaker 7: is kind of like your average, so we're north of that. 248 00:14:03,080 --> 00:14:04,560 Speaker 5: We're over two hundred days. 249 00:14:04,600 --> 00:14:09,000 Speaker 7: Similarly with our ultrashort type of products, where generally it's 250 00:14:09,040 --> 00:14:11,920 Speaker 7: more like an average one year duration. You know, again, 251 00:14:11,960 --> 00:14:15,160 Speaker 7: a little bit longer, a little bit shorter is a 252 00:14:15,160 --> 00:14:17,680 Speaker 7: couple of weeks to a couple of months. But depending 253 00:14:17,760 --> 00:14:20,400 Speaker 7: upon what is being offered in the marketplace, sometimes it 254 00:14:20,440 --> 00:14:21,600 Speaker 7: really does very much help. 255 00:14:22,480 --> 00:14:24,560 Speaker 4: Debbie, Where do you not want to be right now? 256 00:14:25,800 --> 00:14:27,920 Speaker 7: You know, I think we probably don't want to be 257 00:14:28,200 --> 00:14:30,080 Speaker 7: extending credit at this point. 258 00:14:30,240 --> 00:14:32,200 Speaker 5: So we do a lot of global finance. 259 00:14:32,440 --> 00:14:37,720 Speaker 7: Yes, we finance you know, companies, finance companies banks here 260 00:14:37,720 --> 00:14:40,200 Speaker 7: in the United States, but we do that globally across 261 00:14:40,280 --> 00:14:43,600 Speaker 7: you know, the G seven countries, and ultimately we have 262 00:14:43,800 --> 00:14:48,080 Speaker 7: duration limits on the issuers and on the countries themselves, 263 00:14:48,360 --> 00:14:51,400 Speaker 7: and oftentimes our credit analysts have the leeway to maybe 264 00:14:51,400 --> 00:14:52,200 Speaker 7: extend those. 265 00:14:52,040 --> 00:14:52,800 Speaker 5: Limits a little bit. 266 00:14:52,840 --> 00:14:55,000 Speaker 7: If you know, if the trader see something that they 267 00:14:55,040 --> 00:14:58,840 Speaker 7: find extremely valuable, they'll they'll have a discussion, maybe make 268 00:14:59,280 --> 00:15:03,000 Speaker 7: a few exceptions to those those limits. 269 00:15:03,240 --> 00:15:04,680 Speaker 5: That's not what we're doing right now. 270 00:15:04,760 --> 00:15:07,680 Speaker 7: Right right now, we're holding pat off anything narrowing those 271 00:15:07,720 --> 00:15:08,680 Speaker 7: limits a little bit. 272 00:15:08,720 --> 00:15:12,440 Speaker 2: More, Debbie. Just about a year ago we started, you know, 273 00:15:13,080 --> 00:15:15,360 Speaker 2: dealing with tariffs and what that would mean to the 274 00:15:15,360 --> 00:15:19,000 Speaker 2: global economy. We saw a lot of capital leave the 275 00:15:19,160 --> 00:15:22,640 Speaker 2: US and sell the US and maybe redeploy in other 276 00:15:22,680 --> 00:15:25,520 Speaker 2: parts of the world, most notably in Europe. Did you 277 00:15:25,560 --> 00:15:28,760 Speaker 2: see that in the short term part of the treasury market. 278 00:15:28,840 --> 00:15:31,560 Speaker 2: Did you see money leaving the US, and if so, 279 00:15:31,680 --> 00:15:33,280 Speaker 2: is that as a comeback or how do you think 280 00:15:33,280 --> 00:15:34,760 Speaker 2: about the US versus rest of world? 281 00:15:36,440 --> 00:15:37,520 Speaker 5: We did not see that. 282 00:15:37,560 --> 00:15:41,440 Speaker 7: I mean, if you look at you know, the money 283 00:15:41,440 --> 00:15:43,600 Speaker 7: market industry itself as a you know, kind of a 284 00:15:43,640 --> 00:15:47,800 Speaker 7: measure of that went from seven trillion to eight trillion 285 00:15:48,200 --> 00:15:51,360 Speaker 7: last year, the bulk of which is that is in 286 00:15:51,920 --> 00:15:55,600 Speaker 7: government treasury types of money market funds. 287 00:15:55,640 --> 00:15:56,800 Speaker 5: Having said that. 288 00:15:56,880 --> 00:15:59,560 Speaker 7: Other parts of the world that we operate in, in 289 00:15:59,640 --> 00:16:02,600 Speaker 7: the Europe and market, you know, we crossed a trillion 290 00:16:03,040 --> 00:16:06,840 Speaker 7: from an industry asset standpoint in money market funds. So 291 00:16:07,240 --> 00:16:10,120 Speaker 7: I feel like the flight to quality is still in 292 00:16:10,200 --> 00:16:13,320 Speaker 7: the short end, the front end of the curve. But 293 00:16:14,000 --> 00:16:16,520 Speaker 7: and it's a safe haven for those who are looking 294 00:16:16,640 --> 00:16:19,080 Speaker 7: to kind of, you know, take cover for a little 295 00:16:19,360 --> 00:16:24,280 Speaker 7: bit while other situations lay out, and and and whether 296 00:16:24,320 --> 00:16:28,920 Speaker 7: you're operating in the US and you know, Europe in Asia, 297 00:16:29,200 --> 00:16:33,160 Speaker 7: all of that continues to sort of play through without 298 00:16:33,200 --> 00:16:35,800 Speaker 7: too much effort. I mean, certainly I would think that 299 00:16:35,920 --> 00:16:39,200 Speaker 7: Treasury Secretary Passeman would not be complaining about the finance 300 00:16:39,240 --> 00:16:41,560 Speaker 7: thing that is being received from a US government of 301 00:16:41,640 --> 00:16:42,800 Speaker 7: treasury built perspective. 302 00:16:43,320 --> 00:16:45,000 Speaker 4: Well, there's a lot to keep your eye on right 303 00:16:45,040 --> 00:16:47,240 Speaker 4: now if you are a trader in this market. But 304 00:16:47,360 --> 00:16:51,000 Speaker 4: what is the most underappreciated macro risk that you see 305 00:16:51,040 --> 00:16:51,480 Speaker 4: right now? 306 00:16:53,200 --> 00:16:55,880 Speaker 5: Well, you know, I think it's the unknown. 307 00:16:56,120 --> 00:16:59,240 Speaker 7: Honestly, I guess the you know, the Middle East, and 308 00:16:59,320 --> 00:17:04,680 Speaker 7: I ran a brewing situation, so it was something that 309 00:17:05,200 --> 00:17:07,560 Speaker 7: you wouldn't necessarily consider an unknown. 310 00:17:08,040 --> 00:17:09,240 Speaker 5: But you know, there's other. 311 00:17:09,119 --> 00:17:12,879 Speaker 7: Situations that you know, come about where you're you're just 312 00:17:13,080 --> 00:17:14,680 Speaker 7: blindsided to some degree. 313 00:17:14,920 --> 00:17:18,720 Speaker 5: And so I think making sure you know, you're. 314 00:17:18,400 --> 00:17:22,720 Speaker 7: You're comfortable with the firms, the companies that you're financing, 315 00:17:22,880 --> 00:17:25,959 Speaker 7: you know, from a debt perspective, and you're comfortable with 316 00:17:26,000 --> 00:17:29,840 Speaker 7: that in a positive situation globally, and you're comfortable with 317 00:17:29,880 --> 00:17:34,000 Speaker 7: them in you know, a neutral to negative type of situation. 318 00:17:34,320 --> 00:17:35,960 Speaker 5: I think the other thing we like to try to 319 00:17:36,000 --> 00:17:39,320 Speaker 5: do is finance firms that. 320 00:17:40,359 --> 00:17:45,440 Speaker 7: Are necessary items, whether you're necessary, uh, you know produced 321 00:17:45,480 --> 00:17:50,359 Speaker 7: necessary items are necessary, uh, you know, types of services 322 00:17:50,840 --> 00:17:53,480 Speaker 7: no matter whether the economy is booming or whether the 323 00:17:53,520 --> 00:17:56,639 Speaker 7: economy is pulling back and retracting and people are staying 324 00:17:56,680 --> 00:17:59,920 Speaker 7: home and not buying, and and that's also I think 325 00:18:00,520 --> 00:18:02,520 Speaker 7: a very helpful tactic at this point. 326 00:18:02,920 --> 00:18:05,280 Speaker 2: All right, Debbie, thank you so much. Always appreciate chatting 327 00:18:05,280 --> 00:18:09,360 Speaker 2: with you. Debbie Cunningham, CIO Global Liquidity Markets for Federator 328 00:18:09,440 --> 00:18:11,040 Speaker 2: Hermes won the FED I think once the race from 329 00:18:11,040 --> 00:18:12,520 Speaker 2: short term paper. They just pick up the phone and 330 00:18:12,520 --> 00:18:14,880 Speaker 2: called Pittsburgh, what did that b and see what's going 331 00:18:14,920 --> 00:18:18,160 Speaker 2: on there? So she is one of the absolute leading 332 00:18:18,240 --> 00:18:21,080 Speaker 2: voices on the short term money market business. 333 00:18:22,800 --> 00:18:27,000 Speaker 6: Stay with us. More from Bloomberg Surveillance coming up after this. 334 00:18:34,240 --> 00:18:37,800 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 335 00:18:37,880 --> 00:18:41,040 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 336 00:18:41,119 --> 00:18:44,800 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 337 00:18:44,920 --> 00:18:46,400 Speaker 1: watch us live on YouTube. 338 00:18:46,640 --> 00:18:48,280 Speaker 2: Hey, one job I wouldn't want to have right now, 339 00:18:48,320 --> 00:18:52,920 Speaker 2: So global market strategists with all the headwinds, crosswinds, what's 340 00:18:52,960 --> 00:18:55,960 Speaker 2: going on geopolitics, I don't know what you do. Our 341 00:18:56,000 --> 00:18:58,960 Speaker 2: next guest, she has that job. You're appendent Global market 342 00:18:58,960 --> 00:19:02,200 Speaker 2: Strategies for JP organ Asset Management mirrored the last few 343 00:19:02,280 --> 00:19:06,000 Speaker 2: days kind of just resurrected the geopolitical risk that has 344 00:19:06,040 --> 00:19:09,000 Speaker 2: been a little bit dormant. Yes, we have issues in 345 00:19:09,320 --> 00:19:11,960 Speaker 2: Ukraine and the Middle East and Venezuela and so on 346 00:19:11,960 --> 00:19:13,880 Speaker 2: and so forth. But boy, this came right back into 347 00:19:13,920 --> 00:19:16,119 Speaker 2: the front burner. How are you guys thinking about the 348 00:19:16,160 --> 00:19:21,960 Speaker 2: economic impacts? People are talking about inflation, maybe stagflation. How 349 00:19:21,960 --> 00:19:23,000 Speaker 2: are you guys thinking about it? 350 00:19:23,160 --> 00:19:27,240 Speaker 8: For US, it's more inflationary than stagflationary. From a growth perspective, 351 00:19:27,320 --> 00:19:29,760 Speaker 8: the US has the advantage of being a net exporter 352 00:19:29,840 --> 00:19:32,920 Speaker 8: of energy, and that is an advantage that Europe doesn't have. 353 00:19:32,960 --> 00:19:35,320 Speaker 8: And that's why I think you see some differentiation between 354 00:19:35,320 --> 00:19:37,760 Speaker 8: different global markets, not just the US and Europe, but 355 00:19:37,760 --> 00:19:40,960 Speaker 8: also the US and Asia. So that is one help 356 00:19:41,119 --> 00:19:44,400 Speaker 8: when we think about the overall economic growth landscape. I'd 357 00:19:44,400 --> 00:19:46,159 Speaker 8: also point to the fact that it's coming at a 358 00:19:46,200 --> 00:19:51,000 Speaker 8: time where we also have consumers receiving elevated tax refund checks, 359 00:19:51,280 --> 00:19:53,879 Speaker 8: which does help buffer some of the potential. 360 00:19:53,600 --> 00:19:56,200 Speaker 2: Rise and overall gas prices at the pump, and. 361 00:19:56,240 --> 00:19:59,960 Speaker 8: Right now, oil prices are still relatively well contained, considering 362 00:20:00,000 --> 00:20:01,600 Speaker 8: and what is unfolding in front of our eyes and 363 00:20:01,640 --> 00:20:03,320 Speaker 8: considering some of the challenges in the straight up worm 364 00:20:03,359 --> 00:20:06,640 Speaker 8: moves right now. So given that we may not see 365 00:20:06,840 --> 00:20:09,800 Speaker 8: all that much of an impact of growth, but similarly, 366 00:20:09,840 --> 00:20:12,240 Speaker 8: we may not see a huge impact to inflation. That's 367 00:20:12,280 --> 00:20:14,679 Speaker 8: probably we're going to see the biggest impact overall, But 368 00:20:15,119 --> 00:20:17,080 Speaker 8: overall it's not going to tip the scales. 369 00:20:16,720 --> 00:20:17,840 Speaker 2: To a spike in inflation. 370 00:20:17,920 --> 00:20:20,640 Speaker 8: This is not twenty twenty two. I think that overall, 371 00:20:20,680 --> 00:20:24,199 Speaker 8: the trends underneath the surface are so relatively disinflationary that 372 00:20:24,280 --> 00:20:27,359 Speaker 8: headline number might be disrupted for a small period of time. 373 00:20:27,640 --> 00:20:29,960 Speaker 8: But as it was, we were expecting this year that 374 00:20:30,080 --> 00:20:33,159 Speaker 8: inflation would peak above three percent at the midpoint of 375 00:20:33,160 --> 00:20:36,520 Speaker 8: the year because you still have ongoing tariff challenges, because 376 00:20:36,520 --> 00:20:39,639 Speaker 8: you also have those elevated tax refunds potentially driving up 377 00:20:39,640 --> 00:20:42,200 Speaker 8: demand in their four prices. So it doesn't change our view, 378 00:20:42,240 --> 00:20:44,520 Speaker 8: it reinforces it a little bit and maybe emphasizes some 379 00:20:44,560 --> 00:20:46,439 Speaker 8: of that upside on inflation in the short term. 380 00:20:46,840 --> 00:20:48,960 Speaker 2: So what risk stands out to you the most. 381 00:20:49,000 --> 00:20:50,760 Speaker 4: I mean, we called out a bunch of things, from 382 00:20:50,840 --> 00:20:53,880 Speaker 4: tariffs to we can throw an AI disruption. Of course, 383 00:20:53,920 --> 00:20:57,160 Speaker 4: these geopolitical risks that are ramping up this week. Tell 384 00:20:57,200 --> 00:21:00,760 Speaker 4: me what stands out to you as the biggest potential headwind. 385 00:21:00,480 --> 00:21:02,560 Speaker 8: The biggest head whind right right now to me across 386 00:21:02,560 --> 00:21:05,720 Speaker 8: the board is sentiment because ultimately you're an environment where 387 00:21:05,760 --> 00:21:09,320 Speaker 8: the fundamentals haven't changed that much. Yes, there is this 388 00:21:09,520 --> 00:21:11,760 Speaker 8: war unfolding in the Middle East, but we're not seeing 389 00:21:11,800 --> 00:21:15,720 Speaker 8: that major pass through of higher oil prices become unhinged. 390 00:21:15,960 --> 00:21:19,440 Speaker 8: If we think about AI underneath the surface, the fundamentals 391 00:21:19,480 --> 00:21:23,760 Speaker 8: haven't changed. You're still seeing extraordinary profitability double digits across 392 00:21:23,760 --> 00:21:27,960 Speaker 8: the mag seven hyperscalers, seeing cloud revenue growing thirty seven 393 00:21:28,000 --> 00:21:31,000 Speaker 8: percent year over year. Valuations have actually gotten cheaper because 394 00:21:31,000 --> 00:21:33,199 Speaker 8: of that sell off so far this year, and the 395 00:21:33,240 --> 00:21:36,119 Speaker 8: technology continues to innovate and get more powerful, and the 396 00:21:36,200 --> 00:21:39,400 Speaker 8: narrative there has switched from is AI a bubble and 397 00:21:39,560 --> 00:21:43,720 Speaker 8: therefore are we overestimating AI to actually is AI something 398 00:21:43,720 --> 00:21:47,640 Speaker 8: we're underestimating, and there's this mass displacement. So the sentiment 399 00:21:47,720 --> 00:21:52,520 Speaker 8: risks to me around AI, around geopolitics, around tariffs as well, 400 00:21:52,560 --> 00:21:54,959 Speaker 8: where there's still a lot of uncertainty around how tariffs 401 00:21:54,960 --> 00:21:56,879 Speaker 8: will look, but we know that they're probably going to 402 00:21:56,920 --> 00:21:58,800 Speaker 8: come in perhaps a little bit lighter than they have 403 00:21:58,880 --> 00:22:01,480 Speaker 8: in the past year, but nonetheless they will still be 404 00:22:01,520 --> 00:22:04,440 Speaker 8: a feature of this administration. And then you take think 405 00:22:04,560 --> 00:22:07,439 Speaker 8: of the broader backdrop where you have the easing bias 406 00:22:07,480 --> 00:22:10,440 Speaker 8: from the FED, the easing from the government when we 407 00:22:10,480 --> 00:22:14,520 Speaker 8: think about fiscal and the elevated tax refunds, and the 408 00:22:14,560 --> 00:22:18,840 Speaker 8: overall environment from a cyclical perspective is still generally supportive. 409 00:22:18,840 --> 00:22:20,600 Speaker 8: So I think that's where you're seeing such a big 410 00:22:20,640 --> 00:22:24,399 Speaker 8: tension between the fundamentals which still look okay, relative to 411 00:22:24,440 --> 00:22:26,920 Speaker 8: the sentiment which people are just feeling so much anxiety 412 00:22:26,920 --> 00:22:28,720 Speaker 8: in this market in so many different pillars. 413 00:22:28,960 --> 00:22:30,800 Speaker 2: Before the RN news came up, we were seeing a 414 00:22:30,880 --> 00:22:33,840 Speaker 2: rotation in the marketplace, some growth to maybe value small cap, 415 00:22:33,880 --> 00:22:35,520 Speaker 2: that type of thing. How do you guys think about that. 416 00:22:35,760 --> 00:22:37,600 Speaker 8: We're continuing to see that, and I think part of 417 00:22:37,640 --> 00:22:40,120 Speaker 8: it is a bit of a breather from areas like tech. 418 00:22:40,160 --> 00:22:43,960 Speaker 8: But you're also seeing this rotation WITHINAI from the tech 419 00:22:44,040 --> 00:22:48,040 Speaker 8: innovators to the infrastructure layer, the beneficiaries of the overall 420 00:22:48,080 --> 00:22:50,560 Speaker 8: capital spend. And that's why you're seeing that while tech 421 00:22:50,640 --> 00:22:52,480 Speaker 8: is down about five or six percent year to date, 422 00:22:52,840 --> 00:22:56,720 Speaker 8: five other sectors, not just energy, are up double digits, 423 00:22:56,760 --> 00:23:00,280 Speaker 8: and that includes materials and materials industrials, a lot of 424 00:23:00,280 --> 00:23:01,960 Speaker 8: those AI infrastructure layers. 425 00:23:02,280 --> 00:23:04,119 Speaker 2: MIIR, thanks so much for joining us appreciate PCI you 426 00:23:04,200 --> 00:23:06,399 Speaker 2: sticking around. We had some of the news coming out 427 00:23:06,440 --> 00:23:09,679 Speaker 2: of DC Mirror, Pandem Global Market Strategists, He's got this 428 00:23:09,720 --> 00:23:12,920 Speaker 2: stuff down. JP Morgan Asset Management, Appreciate getting a few 429 00:23:12,920 --> 00:23:14,840 Speaker 2: months of your time here in our studio. 430 00:23:16,359 --> 00:23:20,560 Speaker 6: Stay with us. More from Bloomberg Surveillance coming up after this. 431 00:23:27,800 --> 00:23:31,359 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live 432 00:23:31,440 --> 00:23:34,600 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 433 00:23:34,680 --> 00:23:38,359 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 434 00:23:38,480 --> 00:23:40,000 Speaker 1: watch US live on YouTube. 435 00:23:40,280 --> 00:23:45,159 Speaker 2: Angie Guildet joins US Energy sector leader for KPMG Angie, 436 00:23:45,200 --> 00:23:47,440 Speaker 2: what's your view here, the collective view of here of 437 00:23:47,960 --> 00:23:51,800 Speaker 2: how these energy markets are reacting to this conflict in Erin. 438 00:23:53,320 --> 00:23:57,360 Speaker 9: Well, it's certainly a fluid situation that's changing sometimes hour 439 00:23:57,440 --> 00:24:01,200 Speaker 9: by hour. But I think what the key concern is really, 440 00:24:01,560 --> 00:24:04,000 Speaker 9: as you mentioned, that straight of hormones and how much 441 00:24:04,040 --> 00:24:07,080 Speaker 9: of the how much of the oil supply can get 442 00:24:07,119 --> 00:24:10,600 Speaker 9: through that straight As you said, it's about twenty million 443 00:24:10,640 --> 00:24:15,080 Speaker 9: barrels a day of our products, So that's something to 444 00:24:15,200 --> 00:24:17,080 Speaker 9: really critically watch going forward. 445 00:24:18,080 --> 00:24:20,840 Speaker 4: So how big of a disruption are people expecting this 446 00:24:20,960 --> 00:24:22,600 Speaker 4: could be to global supply. 447 00:24:24,200 --> 00:24:27,480 Speaker 9: Yeah, there's there's two parts that play into this. One 448 00:24:27,600 --> 00:24:31,760 Speaker 9: is what the markets anticipates going to happen in terms 449 00:24:31,800 --> 00:24:34,040 Speaker 9: of if this is a long term or a short 450 00:24:34,119 --> 00:24:37,320 Speaker 9: term conflict, And the second is just the overall supply 451 00:24:37,960 --> 00:24:40,960 Speaker 9: and demand dynamics. We were in a bit of an 452 00:24:41,000 --> 00:24:44,920 Speaker 9: oversupply in the market, so there was some cushion there. 453 00:24:45,359 --> 00:24:50,280 Speaker 9: But I think certainly as this continues to go forward, 454 00:24:50,400 --> 00:24:53,199 Speaker 9: you know, if it's resolved quickly, I think it's going 455 00:24:53,280 --> 00:24:56,520 Speaker 9: to be a short term lived bump in prices. If 456 00:24:56,560 --> 00:25:00,720 Speaker 9: it's something that happens over a longer term p it's 457 00:25:00,720 --> 00:25:02,399 Speaker 9: certainly something that's more. 458 00:25:02,320 --> 00:25:06,679 Speaker 2: Problematic, Angie. President Trump said the US will ensure safe 459 00:25:06,720 --> 00:25:09,840 Speaker 2: passage of oil from the Middle East and that the 460 00:25:09,960 --> 00:25:12,880 Speaker 2: US will offer insurance to help ensure the flow of energy. 461 00:25:14,080 --> 00:25:16,240 Speaker 2: Will that be helpful and if so, to what degree 462 00:25:16,280 --> 00:25:16,640 Speaker 2: do you think? 463 00:25:17,880 --> 00:25:18,040 Speaker 9: Well? 464 00:25:18,080 --> 00:25:18,520 Speaker 2: I think it. 465 00:25:18,520 --> 00:25:21,960 Speaker 9: Really just depends on how much of those tankers can 466 00:25:22,000 --> 00:25:24,680 Speaker 9: get through. If the strait is open and the flows 467 00:25:24,720 --> 00:25:29,399 Speaker 9: can flow pretty easily, then I think, you know, supplies 468 00:25:29,960 --> 00:25:30,920 Speaker 9: less disrupted. 469 00:25:32,520 --> 00:25:35,360 Speaker 4: So what buffers do we have? What are the alternative 470 00:25:35,400 --> 00:25:36,880 Speaker 4: sources here? 471 00:25:37,200 --> 00:25:40,639 Speaker 9: Yeah, that's a great question. There's a little bit of 472 00:25:40,640 --> 00:25:44,560 Speaker 9: a buffer in terms of an East West pipeline that 473 00:25:44,600 --> 00:25:47,119 Speaker 9: the Saudis have that run through the Red Sea, but 474 00:25:47,200 --> 00:25:52,320 Speaker 9: that's only about four million barrels in capacity, so that's 475 00:25:52,359 --> 00:25:56,679 Speaker 9: pretty limited. We do have their strategic reserves. The US 476 00:25:56,800 --> 00:26:01,200 Speaker 9: has roughly twenty to twenty five days of strategic reserves. 477 00:26:01,960 --> 00:26:05,280 Speaker 9: China has been stopped following some of their reserves, so 478 00:26:05,480 --> 00:26:09,200 Speaker 9: there's some buffer there. But in terms of other buffers, 479 00:26:09,240 --> 00:26:11,439 Speaker 9: you know, I've had a lot of questions around the 480 00:26:11,560 --> 00:26:14,960 Speaker 9: US shale industry. We don't really see that as a 481 00:26:15,000 --> 00:26:18,879 Speaker 9: spare capacity at this point. It would need a couple 482 00:26:18,880 --> 00:26:21,720 Speaker 9: of quarters for that to ramp up, and of course 483 00:26:21,760 --> 00:26:24,199 Speaker 9: we would see a Liverpool if that's more of a 484 00:26:24,240 --> 00:26:26,760 Speaker 9: long term issue for US. 485 00:26:26,640 --> 00:26:29,240 Speaker 2: And Angie, what are we hearing from some of the 486 00:26:29,320 --> 00:26:33,360 Speaker 2: US producers? Are they in fact thinking about ramping up 487 00:26:33,560 --> 00:26:36,000 Speaker 2: production here? I mean, boy, with these prices, you would 488 00:26:36,160 --> 00:26:37,920 Speaker 2: love to get more more oil into the market. 489 00:26:37,960 --> 00:26:40,840 Speaker 9: Perhaps, Yeah, you know, it takes more than a couple 490 00:26:40,920 --> 00:26:43,520 Speaker 9: of days to get the production ramped up. You've got 491 00:26:43,560 --> 00:26:47,320 Speaker 9: to contracts in with the drilling companies, They've got to 492 00:26:47,359 --> 00:26:50,200 Speaker 9: get people on board. So at this point. I think 493 00:26:50,240 --> 00:26:53,320 Speaker 9: everyone's more of a wait and see. You don't want 494 00:26:53,320 --> 00:26:55,800 Speaker 9: to ramp up something that if the prices are going 495 00:26:55,840 --> 00:26:58,439 Speaker 9: to be short term lived. We also have had a 496 00:26:58,440 --> 00:27:02,840 Speaker 9: lot of consolidation in the market UH in the industry recently, 497 00:27:02,920 --> 00:27:06,520 Speaker 9: and so the smaller players that maybe typically would have 498 00:27:06,600 --> 00:27:10,760 Speaker 9: rushed in UH and added to productions, those don't exist anymore. 499 00:27:11,440 --> 00:27:14,160 Speaker 9: And it's it's more of the larger players and their 500 00:27:14,280 --> 00:27:20,000 Speaker 9: investors are telling them they want discipline, discipline reserves to shareholders. 501 00:27:20,040 --> 00:27:22,200 Speaker 9: So I think it's more of a wait and see. 502 00:27:22,240 --> 00:27:26,679 Speaker 9: At this point, what we are seeing is companies putting 503 00:27:26,720 --> 00:27:29,280 Speaker 9: hedging in place to try to lock in on some 504 00:27:29,359 --> 00:27:30,080 Speaker 9: of these prices. 505 00:27:30,200 --> 00:27:33,239 Speaker 2: Interesting, how about Opek is have we heard anything from 506 00:27:33,320 --> 00:27:34,800 Speaker 2: Opek or OPEC plus. 507 00:27:35,600 --> 00:27:40,080 Speaker 9: Yeah, Opek, as you know, just said that they would 508 00:27:40,080 --> 00:27:45,000 Speaker 9: release about two hundred thousand barrels of spare capacity UH. 509 00:27:45,040 --> 00:27:47,920 Speaker 9: And so the majority of the spare capacity with OPEC 510 00:27:48,040 --> 00:27:51,159 Speaker 9: sets with with the Saudias and with the u with 511 00:27:51,240 --> 00:27:55,119 Speaker 9: the UAE, so there is some flex there. But again, 512 00:27:55,200 --> 00:27:58,159 Speaker 9: if the straits closed and you can't get that supply 513 00:27:58,320 --> 00:28:02,240 Speaker 9: through and there's limit to capacity in the pipeline, you know, 514 00:28:02,320 --> 00:28:04,400 Speaker 9: it doesn't it doesn't really help that much. 515 00:28:04,960 --> 00:28:07,440 Speaker 4: So all these things considered in the background, we also 516 00:28:07,480 --> 00:28:10,280 Speaker 4: have this higher for longer rate environment. How are you 517 00:28:10,359 --> 00:28:13,680 Speaker 4: thinking about that and potential demand destruction potentially. 518 00:28:15,040 --> 00:28:18,640 Speaker 9: Yeah, we prior to this conflict, we were actually looking 519 00:28:18,760 --> 00:28:22,359 Speaker 9: at a bit of a challenging year from a oil 520 00:28:22,400 --> 00:28:26,240 Speaker 9: producer standpoint, and we had oversupply in the market and 521 00:28:26,320 --> 00:28:28,520 Speaker 9: so it was going to take a while for that 522 00:28:29,440 --> 00:28:32,080 Speaker 9: for that to wind down. So I think at this 523 00:28:32,240 --> 00:28:36,119 Speaker 9: point right now, again, if the conflict is relatively short lived, 524 00:28:37,320 --> 00:28:40,320 Speaker 9: then I would anticipate things would you know, stabilize and 525 00:28:40,360 --> 00:28:43,120 Speaker 9: go back to normal. But if this plays out over 526 00:28:43,200 --> 00:28:47,400 Speaker 9: several months or several quarters, were looking at something entirely different. 527 00:28:47,600 --> 00:28:50,040 Speaker 2: All right, Angie, thank you so much. Appreciate getting your 528 00:28:50,040 --> 00:28:52,840 Speaker 2: thoughts to their Aergie Guilday, energy sector leader for kp 529 00:28:53,360 --> 00:28:55,640 Speaker 2: MG down there in Houston, Texas. 530 00:28:57,280 --> 00:29:01,440 Speaker 6: Stay with us more from Bloomberg Surveillance coming up after this. 531 00:29:08,720 --> 00:29:12,280 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 532 00:29:12,360 --> 00:29:15,520 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 533 00:29:15,600 --> 00:29:19,280 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 534 00:29:19,400 --> 00:29:21,040 Speaker 1: watch us live on YouTube. 535 00:29:21,480 --> 00:29:23,520 Speaker 2: Let's stick with geopolitics. We can do that with our 536 00:29:23,520 --> 00:29:27,520 Speaker 2: next guest, Leanna Fixed, Senior europe fellow on the Council 537 00:29:27,560 --> 00:29:29,880 Speaker 2: of Foreign Relations. Leanna, thank you so much for joining 538 00:29:29,920 --> 00:29:32,920 Speaker 2: us here. I'd love to get your thoughts on maybe 539 00:29:33,080 --> 00:29:36,040 Speaker 2: is there any consensus from our friends in Europe as 540 00:29:36,080 --> 00:29:40,120 Speaker 2: to how they're viewing the operations in Iran? Day four, 541 00:29:40,200 --> 00:29:43,800 Speaker 2: day five into this conflict, they're. 542 00:29:43,640 --> 00:29:47,800 Speaker 10: Actually deeper divisions emerging between Europeans. How they look at that. Well, 543 00:29:47,880 --> 00:29:50,120 Speaker 10: we have on the one side Spain, which is really 544 00:29:50,160 --> 00:29:54,120 Speaker 10: becoming by now the one country. Pedro Sanchez, the Spanish leader, 545 00:29:54,200 --> 00:29:58,400 Speaker 10: the one leader who's criticizing Trump the most, who doesn't 546 00:29:58,440 --> 00:30:01,480 Speaker 10: want to spend three part five percent on defense, who 547 00:30:01,680 --> 00:30:04,800 Speaker 10: denied the use of Spanish basis for that intervention. The 548 00:30:04,800 --> 00:30:07,880 Speaker 10: Brits were also skeptical, but then changed their view. And 549 00:30:07,920 --> 00:30:11,000 Speaker 10: then we have fans in Germany who really just tried 550 00:30:11,040 --> 00:30:14,320 Speaker 10: to say, well, we also didn't like the regime and 551 00:30:14,440 --> 00:30:17,920 Speaker 10: we will not pick a fight with Donald Trump over 552 00:30:18,000 --> 00:30:21,200 Speaker 10: the fate of the Iranian regime. So at the moment, 553 00:30:21,240 --> 00:30:24,000 Speaker 10: the Europeans are very much divided, and from a US side, 554 00:30:24,160 --> 00:30:27,959 Speaker 10: the Europeans do not appear as particularly useful allies in 555 00:30:27,960 --> 00:30:28,400 Speaker 10: this war. 556 00:30:29,480 --> 00:30:32,360 Speaker 4: What are some of the biggest fractures within the EU 557 00:30:32,720 --> 00:30:34,280 Speaker 4: on this issue. 558 00:30:35,000 --> 00:30:38,000 Speaker 10: So there's on the one side the question of international law, right, 559 00:30:38,040 --> 00:30:40,640 Speaker 10: I mean, the European Union and its members always pride 560 00:30:40,640 --> 00:30:43,360 Speaker 10: themselves as being the one who are uphold the rule 561 00:30:43,400 --> 00:30:47,040 Speaker 10: of law, including international law. Then there is the risk 562 00:30:47,080 --> 00:30:52,160 Speaker 10: of escalation. What if that really becomes a broad broader war. 563 00:30:52,280 --> 00:30:54,760 Speaker 10: What if there is a new migration challenge coming from 564 00:30:54,760 --> 00:30:57,520 Speaker 10: the war in Iran, especially for the southern member states 565 00:30:57,640 --> 00:31:01,000 Speaker 10: like Spain, like Greece, like Italy, who had seen a 566 00:31:01,000 --> 00:31:03,800 Speaker 10: lot of bigrets coming from conflict regions in the Middle 567 00:31:03,840 --> 00:31:07,360 Speaker 10: East in the last decade. And then of course there's 568 00:31:07,360 --> 00:31:10,600 Speaker 10: a big question of how to handle Donald Trump. Is 569 00:31:10,640 --> 00:31:13,920 Speaker 10: the White strategy or strategy of engagement or strategy of 570 00:31:13,960 --> 00:31:17,760 Speaker 10: standing up standing up to Donald Trump? And views are 571 00:31:17,800 --> 00:31:22,400 Speaker 10: increasingly changing on that, especially after the crisis of a Greenland. 572 00:31:23,640 --> 00:31:26,200 Speaker 2: So that I guess goes to the broader issue, Leanna 573 00:31:26,320 --> 00:31:30,160 Speaker 2: is just how are the countries in Europe, how are 574 00:31:30,200 --> 00:31:34,160 Speaker 2: they viewing I guess the global world order? Is it 575 00:31:34,200 --> 00:31:37,880 Speaker 2: in fact changing? Is it almost you can't rely on 576 00:31:37,920 --> 00:31:40,479 Speaker 2: the US, or maybe rely on them less than you 577 00:31:40,520 --> 00:31:43,840 Speaker 2: did in the past. It's more go it alone if 578 00:31:43,880 --> 00:31:46,960 Speaker 2: you will. Is that new order? Is that something that's 579 00:31:47,000 --> 00:31:50,200 Speaker 2: being embraced by the European Union and member states? 580 00:31:52,200 --> 00:31:53,960 Speaker 10: Yeah, I mean the nature of the europe Union and 581 00:31:54,000 --> 00:31:57,200 Speaker 10: its member states has been very different from the sort 582 00:31:57,240 --> 00:31:59,040 Speaker 10: of era or the phase that we are living in 583 00:31:59,120 --> 00:32:03,280 Speaker 10: now in global that the opinion was built in cooperational integration, 584 00:32:03,480 --> 00:32:07,320 Speaker 10: working with your allies, dialogue, diplomacy and trade with your 585 00:32:07,360 --> 00:32:10,240 Speaker 10: adversaries too. So the whole idea was very much of 586 00:32:10,280 --> 00:32:14,000 Speaker 10: the European Union in its latest formation was very much 587 00:32:14,040 --> 00:32:16,920 Speaker 10: an idea of the nineties. And now the europinion is changing. 588 00:32:17,480 --> 00:32:19,840 Speaker 10: Now it has to use its free market tools, its 589 00:32:19,880 --> 00:32:24,240 Speaker 10: trade tools to assert itself in a more ball at 590 00:32:24,240 --> 00:32:27,520 Speaker 10: her world. And it's certainly the speech of President marcour 591 00:32:27,600 --> 00:32:33,720 Speaker 10: who talked about the greater nuclear umbrella for his European neighbors, 592 00:32:34,120 --> 00:32:37,200 Speaker 10: has been a very clear step that Europeans are looking 593 00:32:37,320 --> 00:32:42,280 Speaker 10: beyond the United States even and including on nuclear deterrents. 594 00:32:43,640 --> 00:32:47,680 Speaker 4: Are European governments preparing for any potential spillover risks from 595 00:32:48,040 --> 00:32:49,840 Speaker 4: the recent escalations we've been seeing. 596 00:32:51,560 --> 00:32:55,080 Speaker 10: Yeah, So the opinion isn't particularly preparing for migration risks. 597 00:32:55,120 --> 00:32:57,720 Speaker 10: I mean, I think that's that's the greatest concern. But 598 00:32:57,840 --> 00:33:01,720 Speaker 10: also of course for Ivan trying to retaliate in European 599 00:33:01,760 --> 00:33:06,160 Speaker 10: countries by doing sabotage terrorist attacks, whatever networks they using, 600 00:33:06,200 --> 00:33:09,840 Speaker 10: whatever networks they still approxies that they have in Europe, 601 00:33:09,920 --> 00:33:13,600 Speaker 10: that is certainly a concern right now. But most importantly, 602 00:33:13,600 --> 00:33:16,840 Speaker 10: the biggest concern is how long will this war continue 603 00:33:16,880 --> 00:33:20,600 Speaker 10: between the United States and Iran and also how much 604 00:33:20,680 --> 00:33:23,640 Speaker 10: further will it drive up energy prizes at a time 605 00:33:23,840 --> 00:33:28,000 Speaker 10: when Europe's energy prizes were already much higher than energy 606 00:33:28,000 --> 00:33:29,360 Speaker 10: prises in the United States. 607 00:33:30,680 --> 00:33:33,280 Speaker 2: Lean about thirty seconds left here. What is the latest 608 00:33:33,280 --> 00:33:35,560 Speaker 2: thinking from your part of the part of the world 609 00:33:35,560 --> 00:33:37,160 Speaker 2: as it relates to Ukraine. 610 00:33:38,520 --> 00:33:41,880 Speaker 10: Well, the problem with Iran is that it really crowds 611 00:33:41,920 --> 00:33:44,880 Speaker 10: out any bandwidth that there is on Ukraine. That's why 612 00:33:45,040 --> 00:33:48,280 Speaker 10: Pritich mends the Germ Chancellor who was in Washington, DC yesterday, 613 00:33:48,600 --> 00:33:51,920 Speaker 10: really tried to remind on a Trump of that issue, saying, well, look, 614 00:33:52,080 --> 00:33:55,280 Speaker 10: we need to make focus on Ukraine. The problem is 615 00:33:55,320 --> 00:33:58,640 Speaker 10: that Vladimir Putting may look at this war in Iran. Iran, 616 00:33:58,680 --> 00:34:01,360 Speaker 10: who has been supportive of watch US well against Ukraine, 617 00:34:01,400 --> 00:34:04,680 Speaker 10: who Fladimir Putting and perceived. If not an ally, then 618 00:34:04,720 --> 00:34:08,120 Speaker 10: at least a partner he will watch it, will not 619 00:34:08,160 --> 00:34:10,480 Speaker 10: be amused by what is happening against you on and 620 00:34:10,560 --> 00:34:15,200 Speaker 10: that might also decrease the appetite for constructive negotiations on Ukraine, 621 00:34:15,239 --> 00:34:17,000 Speaker 10: if they ever had that appetite. 622 00:34:17,160 --> 00:34:19,959 Speaker 2: All right, Leanna, thank you so much, appreciate getting your views. 623 00:34:20,040 --> 00:34:23,720 Speaker 2: Leanna Fixed, Senior europe Fellow at the Council on Peign Religion. 624 00:34:23,920 --> 00:34:28,680 Speaker 1: This is the Bloomberg Surveillance podcast, available on apples, Spotify, 625 00:34:28,800 --> 00:34:32,600 Speaker 1: and anywhere else you get your podcasts. Listen live each 626 00:34:32,640 --> 00:34:36,440 Speaker 1: weekday seven to ten am Eastern on Bloomberg dot com, 627 00:34:36,600 --> 00:34:40,440 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 628 00:34:40,719 --> 00:34:43,840 Speaker 1: You can also watch us live every weekday on YouTube 629 00:34:44,120 --> 00:34:46,120 Speaker 1: and always on the Bloomberg terminal.