WEBVTT - Bloomberg Surveillance: Tesla's 'Historic' Cybertruck 0:00:05.080 --> 0:00:09.160 This is the Bloomberg Surveillance Podcast. I'm Lisa Abramoids along 0:00:09.200 --> 0:00:12.160 with Tom Keen and Jonathan Ferrell. Join us each day 0:00:12.200 --> 0:00:16.440 for insight from the best in economics, geopolitics, finance and investment. 0:00:16.760 --> 0:00:20.279 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:20.360 --> 0:00:23.840 anywhere you get your podcasts, and always on Bloomberg dot Com, 0:00:23.840 --> 0:00:26.440 the Bloomberg Terminal, and the Bloomberg Business. 0:00:26.120 --> 0:00:29.480 Apple's Catshat with List Young, head of investment strategy at 0:00:29.560 --> 0:00:32.240 so Far, Liz, any reason to believe in good morning, 0:00:32.280 --> 0:00:33.879 It's always great to catch up with you, you know that. 0:00:34.080 --> 0:00:37.120 Any reason to believe that this bond market stock market 0:00:37.159 --> 0:00:39.640 correlation continues in the way it has done over the 0:00:39.680 --> 0:00:44.040 previous month over the next three months, Well. 0:00:43.880 --> 0:00:45.000 It's certainly possible. 0:00:45.000 --> 0:00:46.800 I mean, I think twenty twenty three has shown us 0:00:46.840 --> 0:00:49.760 that anything is possible. So it's certainly possible that the 0:00:49.800 --> 0:00:53.280 correlation remains positive in the sense that we continue to 0:00:53.280 --> 0:00:57.520 see yields come down. Stocks are celebrating that, particularly growth 0:00:57.560 --> 0:01:00.320 year stocks, which I think is a rational move, at 0:01:00.400 --> 0:01:03.840 least initially. So I do think that the correlation could 0:01:03.840 --> 0:01:07.840 stay positive for a little while. What we're looking at here, 0:01:08.000 --> 0:01:11.480 especially into twenty twenty four, is that we've been wanting 0:01:11.760 --> 0:01:13.680 cooling in a lot of this data. We've been wanting 0:01:13.720 --> 0:01:16.399 the cooling and inflation. We've been wanting a labor market 0:01:16.440 --> 0:01:18.520 that gets a little bit more imbalance. So we've seen 0:01:18.720 --> 0:01:21.679 some of that data, things like continuing claims on a 0:01:21.720 --> 0:01:25.360 steady move upwards since September. We know that the manufacturing 0:01:25.400 --> 0:01:28.440 economy is still feeling some pain. We're hearing data out 0:01:28.440 --> 0:01:30.800 of the consumer that they're pulling back on spending a 0:01:30.800 --> 0:01:31.200 little bit. 0:01:31.480 --> 0:01:32.959 So we've wanted this cooling. 0:01:33.319 --> 0:01:36.000 The question into twenty twenty four will be can we 0:01:36.040 --> 0:01:40.000 stop the cooling before the economy tips into contraction and 0:01:40.080 --> 0:01:43.000 makes us all nervous If we start to get data 0:01:43.040 --> 0:01:46.319 that gets too cool too quickly, that's when that correlation 0:01:46.400 --> 0:01:48.520 between stocks and bonds breaks down. Where I think you 0:01:48.600 --> 0:01:52.120 see bonds rally, so you see yields continue to fall 0:01:52.120 --> 0:01:56.400 because people got afraid, but stocks also come down in tandem. 0:01:56.600 --> 0:01:58.440 Liz, you work for so far, and you work on 0:01:58.480 --> 0:02:01.120 the investment wing of it as early on the financial 0:02:01.200 --> 0:02:05.280 technology aspect that caters to usually younger individuals who are 0:02:05.360 --> 0:02:09.040 trying to manage their finances in take out credit. I'm wondering, though, 0:02:09.080 --> 0:02:12.200 what you make from an economic and investment perspective of 0:02:12.320 --> 0:02:15.280 people who are doing more buy now, pay later, who 0:02:15.320 --> 0:02:18.120 are increasing their credit card bills, who are increasing on 0:02:18.160 --> 0:02:19.959 their delinquencies and their defaults. 0:02:22.240 --> 0:02:25.519 It's certainly concerning and it's something that I've been watching 0:02:26.080 --> 0:02:28.760 for the last few months. We've seen delinquencies tick up 0:02:28.840 --> 0:02:32.080 so far in just the subprime auto loan sector, but 0:02:32.160 --> 0:02:34.760 you've seen, as we all know, credit card debt get 0:02:34.800 --> 0:02:38.240 to really high levels. Hasn't broken yet, hasn't been an 0:02:38.280 --> 0:02:41.040 issue yet. But the thing about where we are this 0:02:41.160 --> 0:02:43.520 time of year, we talk a lot about this being 0:02:43.840 --> 0:02:46.440 a positive time of year for the market, and as 0:02:46.440 --> 0:02:49.240 we all know, the Santa Claus Rally a possibility later 0:02:49.320 --> 0:02:52.040 this year, and we've got holiday spending going on, and 0:02:52.080 --> 0:02:55.040 so far the data from holiday spending has been maybe 0:02:55.080 --> 0:02:59.400 a little bit higher than expected. However, what happens in 0:02:59.520 --> 0:03:02.640 January in February is that if consumers were doing that 0:03:02.760 --> 0:03:06.239 holiday spending on credit so things that like buy now, 0:03:06.240 --> 0:03:09.359 pay later or on credit cards, the bill comes due 0:03:09.600 --> 0:03:12.440 in January and February. Now, this happens every year, but 0:03:12.600 --> 0:03:14.560 this year could be a time where we're seeing that 0:03:14.600 --> 0:03:18.520 bill come do and delinquencies tick up because consumers have 0:03:18.600 --> 0:03:22.120 been using buy now, pay later in larger quantities than 0:03:22.160 --> 0:03:23.120 they did last year. 0:03:23.280 --> 0:03:27.040 How does that affect your vestment strategy? I mean, basically, 0:03:27.040 --> 0:03:29.600 are you looking to January and February to see those 0:03:29.600 --> 0:03:32.240 increase in defaults in order to get more bearish and 0:03:32.280 --> 0:03:34.840 say that maybe the bond market could rally more. But 0:03:34.920 --> 0:03:37.240 that's going to be a negative when it comes to equities. 0:03:39.440 --> 0:03:41.600 Well, so, the Bowl case and a lot of the 0:03:41.600 --> 0:03:43.720 optimists have been hanging their hat on the strength of 0:03:43.720 --> 0:03:46.840 the consumer, and the consumer has remained strong. There's obviously 0:03:46.880 --> 0:03:50.480 appetite to spend, there's appetite to travel. We're seeing the 0:03:50.480 --> 0:03:52.960 consumers still get out there and spend their money, both 0:03:53.000 --> 0:03:57.120 in stores and online. But over time, if the labor 0:03:57.160 --> 0:04:00.360 market cools, or if consumers really are feeling the pain 0:04:00.680 --> 0:04:04.400 of inflation and recognizing the idea that inflation has stopped 0:04:04.480 --> 0:04:07.520 growing as quickly, but it hasn't come down. So for 0:04:07.920 --> 0:04:10.840 consumers to really get some relief, you would need some 0:04:10.880 --> 0:04:14.320 deflationary prints and we haven't gotten those yet. So if 0:04:14.360 --> 0:04:16.680 the data does start to suggest that the consumer has 0:04:16.680 --> 0:04:19.200 pulled back or the labor market is cooling to a 0:04:19.240 --> 0:04:21.480 point that's going to cause the consumer to pull back, 0:04:21.800 --> 0:04:24.640 then that is going to be negative for equities, particularly 0:04:24.680 --> 0:04:29.479 from these levels. So watching that on a sector basis, 0:04:29.520 --> 0:04:32.520 though it may not be a wide swath of a 0:04:32.600 --> 0:04:35.839 draw down, right So if yields are falling, tech stocks 0:04:35.880 --> 0:04:38.560 probably still can do okay in that environment. But then 0:04:38.560 --> 0:04:41.520 you see the pain on things like consumer discretionary stocks. 0:04:41.720 --> 0:04:44.039 You see the pain on cyclicals because right now I 0:04:44.040 --> 0:04:45.760 think the market is in this place where we're not 0:04:45.839 --> 0:04:48.279 sure if we're going to have a cyclical expansion or not. 0:04:48.680 --> 0:04:51.560 We haven't confirmed in one direction or another, and we're 0:04:51.600 --> 0:04:52.520 sort of waiting. 0:04:52.240 --> 0:04:54.640 To see super difficult to make cause on this market. 0:04:54.640 --> 0:04:57.160 You mentioned sectors list, so let's finish there. What are 0:04:57.200 --> 0:04:59.560 your favorite sectors gone into year enda beyond? 0:05:01.400 --> 0:05:04.280 Well, Look, as yields fall, I think for the near 0:05:04.400 --> 0:05:07.160 term at least tech stocks still can hold up well. 0:05:07.360 --> 0:05:10.200 This is also a period of time after the last 0:05:10.320 --> 0:05:13.480 hike and before the first cut that stocks. 0:05:13.120 --> 0:05:14.359 Tend to do okay. 0:05:14.440 --> 0:05:17.400 So I don't necessarily see a huge draw down unless 0:05:17.400 --> 0:05:18.760 there's some exogynous shock. 0:05:19.200 --> 0:05:20.920 But going into twenty twenty. 0:05:20.680 --> 0:05:23.720 Four, I think that we need if the bowl case 0:05:23.760 --> 0:05:27.000 comes true, we need some broadening out in the equity market. 0:05:27.320 --> 0:05:29.720 I am still nervous about a draw down. I am 0:05:29.760 --> 0:05:31.680 worried that we're going to get data that cools it 0:05:31.760 --> 0:05:34.760 too much, so I would be cautious in cyclicals, so 0:05:34.800 --> 0:05:37.320 I would still be looking at things like consumer staples. 0:05:37.480 --> 0:05:40.520 I think the utilities trade is okay if you're looking 0:05:40.560 --> 0:05:43.200 for growth, but you don't want that rate sensitivity. I 0:05:43.200 --> 0:05:45.600 think healthcare is a good place to be, and I 0:05:45.640 --> 0:05:48.320 do think that we see a resurgence in energy stocks 0:05:48.600 --> 0:05:50.560 because supply will continue to get cut. 0:05:50.680 --> 0:05:52.920 Interesting final point, let's thank you. It's going to catch 0:05:52.960 --> 0:05:54.680 up with you as always this young there of so 0:05:54.839 --> 0:05:55.960 fine the sequity market. 0:06:00.120 --> 0:06:03.880 Lauren Goodwin joining US now economist, director of portfolio Strategy 0:06:03.880 --> 0:06:08.040 at New York Life Investments, Director of disinflationary Nirvana narratives. 0:06:08.080 --> 0:06:08.599 Do you buy it? 0:06:09.320 --> 0:06:12.080 I don't buy it. I think we're sitting there right now, 0:06:12.160 --> 0:06:15.040 but that it's a stop on the train towards recession. 0:06:15.120 --> 0:06:17.760 And the reason for that twofold really one is the 0:06:17.800 --> 0:06:20.359 long and variable lags of monetary policy. We're sort of 0:06:20.440 --> 0:06:23.360 right on time for an average recession timeline from the 0:06:23.400 --> 0:06:26.680 first FED rate hike. But the other is that if 0:06:26.680 --> 0:06:30.520 we did get a cut in March or May, and 0:06:30.800 --> 0:06:36.040 inflation wasn't falling precipitously, we weren't heading towards recession, then 0:06:36.080 --> 0:06:41.480 I think we'd see financial market conditions ease pretty significantly. 0:06:41.560 --> 0:06:45.360 And chairpal and other FED members have been very insistent 0:06:45.440 --> 0:06:48.440 that they don't want to see that. That's a recipe 0:06:48.480 --> 0:06:52.720 for likely a reacceleration of activity and makes the inflationary 0:06:52.800 --> 0:06:53.760 environment more sticky. 0:06:54.360 --> 0:06:56.320 So when we take a look at where you want 0:06:56.360 --> 0:06:59.520 to play the best returns for sixty forty going back 0:06:59.520 --> 0:07:01.600 to nineteen ninety one, do you lean in or do 0:07:01.640 --> 0:07:03.440 you de lean against it and say someone's got to 0:07:03.480 --> 0:07:04.039 be wrong here. 0:07:04.120 --> 0:07:06.520 Whoever it is, I'm going to move against. 0:07:06.279 --> 0:07:09.560 Wells as much as inc that we've spilt, I'm a 0:07:09.600 --> 0:07:11.600 part of it. As much words we put out there 0:07:11.600 --> 0:07:15.200 about the soft versus hard landing debate, neither side has 0:07:15.240 --> 0:07:18.120 been the winner for investors all year, and I expect 0:07:18.120 --> 0:07:19.680 that to be the case for the first part of 0:07:19.720 --> 0:07:22.240 twenty twenty four as well. What I mean by that 0:07:22.400 --> 0:07:25.040 is the only thing we're really certain about is that 0:07:25.080 --> 0:07:29.440 the market is facing uncertainty, and so landing strongly in 0:07:29.480 --> 0:07:31.520 one camp or the other isn't likely to be the answer. 0:07:31.600 --> 0:07:34.120 It's quality, and I think we're seeing that over the 0:07:34.160 --> 0:07:39.560 course of this year, investors leaning into profitability, to dividend yields, 0:07:39.960 --> 0:07:42.960 and to areas of the market where investors expect that 0:07:43.000 --> 0:07:45.040 no matter what happens in the first half of next year, 0:07:45.080 --> 0:07:46.240 they can build some resilience. 0:07:46.280 --> 0:07:50.280 So went in doubt by Microsoft. Is that basically what 0:07:50.280 --> 0:07:52.640 you're saying. I mean, essentially, that's basically been the market 0:07:52.680 --> 0:07:54.720 narrative so far, or then not the market narrative. This 0:07:54.760 --> 0:07:56.480 is what people are saying, we don't know what's going 0:07:56.560 --> 0:07:59.360 to happen, We'll just buy big tech and sit and wait. 0:07:59.520 --> 0:08:01.160 It's a part of the story. One of the things 0:08:01.200 --> 0:08:03.360 I think will shift over the course of twenty twenty 0:08:03.400 --> 0:08:06.920 four specific to the tech narrative is that the excitement 0:08:06.960 --> 0:08:11.040 around productivity and the new technological developments we're getting from 0:08:11.040 --> 0:08:14.040 the artificial intelligence trend have been centered in the foundational 0:08:14.120 --> 0:08:16.920 layer of tech, not least because that's also where consumers 0:08:16.920 --> 0:08:21.000 spend money. As the consumer experiences the sort of dissonance 0:08:21.040 --> 0:08:24.040 of high price levels that you've covered so well, I 0:08:24.120 --> 0:08:27.200 expect that more of the story around tech will actually 0:08:27.200 --> 0:08:30.080 expand into the digital infrastructure and the application layer that 0:08:30.120 --> 0:08:32.920 get built on top of the foundational layer of tech. 0:08:32.800 --> 0:08:36.160 Which really is sort of a part of the difficulty 0:08:36.280 --> 0:08:38.400 understanding what's going on because there are these sort of 0:08:38.880 --> 0:08:43.200 secular overlays like artificial intelligence, like weight loss drugs that 0:08:43.240 --> 0:08:45.679 are put over a lot of uncertainty and frankly a 0:08:45.720 --> 0:08:49.160 lot of underperformance of other rank and file companies. We saw, 0:08:49.240 --> 0:08:53.160 for example, over the past week, pretty big inflows into 0:08:53.320 --> 0:08:56.559 large cap US stocks. We saw outflows yet again from 0:08:56.600 --> 0:08:58.640 the Russell two thousand. What do you make of that 0:08:58.640 --> 0:09:01.439 that basically small caps are going to be left for 0:09:01.559 --> 0:09:05.240 dead in a sense and continue to underperform dramatically even 0:09:05.440 --> 0:09:07.160 with some sort of settling out. 0:09:07.200 --> 0:09:11.720 In this narrative, small caps as the economy slows, tend 0:09:11.760 --> 0:09:15.640 to underperform because they don't have the overhead, the administrative 0:09:15.640 --> 0:09:18.520 overhead that helps them to digest higher rates, higher cost 0:09:18.600 --> 0:09:21.200 the way that large caps do. So it's not necessarily 0:09:22.080 --> 0:09:24.920 a matter of sector, but one of business model, one 0:09:24.920 --> 0:09:28.280 of truly size. I think there are a couple of exceptions. 0:09:28.320 --> 0:09:31.640 The tech sector is one of them, where profitability can 0:09:31.880 --> 0:09:35.120 exist in mid and small caps as well. But as 0:09:35.160 --> 0:09:37.840 we move through into Q one, I expect that the 0:09:37.880 --> 0:09:42.480 preference for frankly defensive allocation plays large caps is one 0:09:42.520 --> 0:09:45.240 of them defensive sectors. I really like infrastructure equity there. 0:09:45.280 --> 0:09:48.120 I think they're going to continue to gain ground because 0:09:48.120 --> 0:09:50.760 we're going to see more evidence that the data is slowing. 0:09:50.880 --> 0:09:52.559 Isn't the best defense just cash? 0:09:56.400 --> 0:10:00.240 There's there are benefits to cash when you're expecting a 0:10:00.280 --> 0:10:03.280 major fallout in the market. But the one of the 0:10:03.320 --> 0:10:05.760 things that I think is so challenging about cash right 0:10:05.800 --> 0:10:09.640 now is that we see such strong opportunity to harvest 0:10:09.720 --> 0:10:12.480 yield in sectors of the economy that even if we 0:10:12.520 --> 0:10:16.040 see recession, which I expect, and even as spreads widen, 0:10:16.679 --> 0:10:21.040 you can still gain meaningful yield uptick in, for example, 0:10:21.120 --> 0:10:22.680 the high yield bond market. 0:10:23.160 --> 0:10:25.000 Funny that you say that high yield bonds had the 0:10:25.040 --> 0:10:28.360 biggest four week inflow going back to June twenty twenty. 0:10:28.559 --> 0:10:31.320 This according to Bank of America Michael's Hartnett. This to 0:10:31.360 --> 0:10:33.719 me highlights exactly what you're talking about. A lot of 0:10:33.760 --> 0:10:35.840 people are saying, we don't have certainty about where things 0:10:35.840 --> 0:10:36.600 are going, We're. 0:10:36.440 --> 0:10:37.439 Going to pile into cash. 0:10:37.640 --> 0:10:39.839 Seventy five billion dollars going in there in the past week, 0:10:40.240 --> 0:10:43.160 But we're also going to pile into income because we 0:10:43.200 --> 0:10:45.560 know we're going to get something. Are you seeing sort 0:10:45.559 --> 0:10:49.240 of the reversal of the bond stock dynamic over the 0:10:49.240 --> 0:10:53.320 past two decades or really, bonds are your equity drivers 0:10:53.320 --> 0:10:55.640 in some ways your income plays and then you can 0:10:55.679 --> 0:10:58.160 sort of shoot for the moon on the peripheries with 0:10:58.280 --> 0:10:58.920 some equities. 0:11:00.120 --> 0:11:02.360 Yes, that is what we're seeing. But I think what's 0:11:02.400 --> 0:11:06.679 specifically interesting about high yield is that we see investors 0:11:06.880 --> 0:11:10.240 and we're doing the same taking equity like risk in 0:11:10.320 --> 0:11:15.120 high yield because you can harvest a meaningful coupon on 0:11:15.200 --> 0:11:18.360 these bonds while acknowledging that FED programs early in the 0:11:18.360 --> 0:11:22.400 pandemic made the credit quality of this sector much more 0:11:22.440 --> 0:11:25.360 interesting relative to past economic cycles. So even if you 0:11:25.480 --> 0:11:30.760 expect spreads to widen prices to fall as the economy stumbles, 0:11:31.080 --> 0:11:34.040 you can still make up for it with the income 0:11:34.080 --> 0:11:35.880 that you're able to capture from that sector. 0:11:35.880 --> 0:11:37.959 So is that your highest conviction heading into next year? 0:11:38.000 --> 0:11:39.200 Can you give us a sense of kind of how 0:11:39.200 --> 0:11:41.920 you're framing at a time where there isn't a lot 0:11:41.920 --> 0:11:42.400 of conviction. 0:11:42.760 --> 0:11:44.800 Yeah, So I want to be clear that even though 0:11:45.040 --> 0:11:47.599 we have a recessionary call in the first half of 0:11:47.600 --> 0:11:51.040 the year, I don't think that's particularly pessimistic. I think 0:11:51.040 --> 0:11:54.080 that's an optimistic scenario for the economy allows a reset. 0:11:54.760 --> 0:11:57.240 I also think that we're going to see risk assets 0:11:57.280 --> 0:11:59.280 continue to do well for the next couple of months. 0:11:59.760 --> 0:12:03.320 We're doing is taking advantage of this sugar rush while 0:12:03.320 --> 0:12:05.520 we have it to rebalance into themes that we think 0:12:05.559 --> 0:12:08.360 will work particularly well. We've talked about a few of them. 0:12:08.640 --> 0:12:12.440 Defensive sectors are really like infrastructure equity. We like high yield, 0:12:13.120 --> 0:12:15.600 and I do think that there's room to run in 0:12:15.679 --> 0:12:16.520 duration as well. 0:12:16.720 --> 0:12:19.079 Do you think that the cyber truck is attractive? 0:12:20.000 --> 0:12:22.320 I will admit that I just saw it for the 0:12:22.360 --> 0:12:26.000 first time after hearing John say this morning it looks 0:12:26.040 --> 0:12:29.160 like a kindergartener drew it, okay, and I could not disagree. 0:12:29.280 --> 0:12:30.760 Okay, Well, it's weird. 0:12:30.760 --> 0:12:32.120 Have you been hiding under a rock? 0:12:32.200 --> 0:12:33.199 I think it's been out there. 0:12:33.240 --> 0:12:35.200 Lauren Goodwin, thank you so much for being with us. 0:12:35.240 --> 0:12:38.079 Wonderful to see you. Lauren Goodwin of New York Life Investments, 0:12:38.080 --> 0:12:40.120 thank you, and she, of course will say, no, Lisa, 0:12:40.160 --> 0:12:42.600 you've been hunded hiding under a rock because I haven't 0:12:42.640 --> 0:12:45.360 seen what movie? Haven't I seen die Hard? Die Hard, 0:12:45.600 --> 0:12:48.320 which I guess is a bad thing, and that it's. 0:12:48.160 --> 0:12:50.200 A Christmas movie. 0:12:49.440 --> 0:12:53.800 Said, why is this debated? He agrees, Okay, so look 0:12:53.840 --> 0:12:55.760 on this on social media and just put in die 0:12:55.760 --> 0:12:58.880 Hard and you'll see this enormous debate goes on every year. 0:12:59.360 --> 0:12:59.800 It's real. 0:12:59.840 --> 0:13:02.480 It's a real debate because check out social media. I 0:13:02.480 --> 0:13:04.800 will check out social media and I will watch the movie. 0:13:05.280 --> 0:13:07.840 Thank you for being with us at Lauren. 0:13:18.000 --> 0:13:20.800 Nadia, Martin wickensjoin just now the director has fell in 0:13:20.840 --> 0:13:24.760 capital Nadia. Let's start there. This word voluntary. How important 0:13:24.800 --> 0:13:30.040 is that word voluntary? At opek plus, I. 0:13:30.000 --> 0:13:34.000 Think the market finds the word voluntary very problematic because 0:13:34.040 --> 0:13:37.360 it means that the group did not manage to together 0:13:37.440 --> 0:13:40.440 agree that this is what we actually have to do, 0:13:41.280 --> 0:13:43.480 and this is why the oil price has not strengthened 0:13:43.960 --> 0:13:45.679 since it was announced. 0:13:46.320 --> 0:13:48.760 What kind of follow through do you expect off the 0:13:48.800 --> 0:13:50.720 back of the announcement? Then we know what the market 0:13:50.760 --> 0:13:54.439 is preoccupied with, a single word. What are you telling clients? 0:13:55.760 --> 0:13:58.880 Well, then on the margin we then see that there's 0:13:58.920 --> 0:14:03.199 around three hundred thousand barrels per day coming less from UAE, 0:14:03.720 --> 0:14:06.440 coming less from Kuwait, and one hundred thousand barrels per 0:14:06.480 --> 0:14:09.720 day coming less from Saudi Arabia. So that makes Q 0:14:09.800 --> 0:14:12.719 one look slightly better and call it a balanced market, right, 0:14:12.760 --> 0:14:15.320 But it's only a Q one cut and it doesn't 0:14:15.360 --> 0:14:18.400 really change the picture. And again, you know what it 0:14:18.440 --> 0:14:21.280 was different about this so pickplus meeting is that it's 0:14:21.320 --> 0:14:22.760 not a long duration cut. 0:14:22.920 --> 0:14:23.120 Right. 0:14:23.280 --> 0:14:26.520 Last year they made it a long duration and now 0:14:26.560 --> 0:14:30.880 they're only looking at three months forward. The expectation for 0:14:30.960 --> 0:14:33.640 them is of course that we will start to see 0:14:33.880 --> 0:14:37.080 demand pick up and then we will see draws, especially 0:14:37.120 --> 0:14:39.960 into the second half next year. But what we saw 0:14:40.200 --> 0:14:44.840 throughout this quarter is a lack of draws does not 0:14:44.960 --> 0:14:47.600 make the oil price rally, right, and we're going to 0:14:47.640 --> 0:14:49.040 see the same in the first quarter. 0:14:49.080 --> 0:14:52.080 We believe there's a story Nadia on the Bloomberg talking 0:14:52.120 --> 0:14:54.480 about how algorithmic traders are confusing all of this so 0:14:54.480 --> 0:14:56.240 that we can't really get the same kind of signal 0:14:56.600 --> 0:14:58.840 from oil prices because of this. Do you buy that 0:14:58.960 --> 0:15:01.040 or do you think that oil prices are sending a 0:15:01.160 --> 0:15:06.480 very strong signal about growth globally? But also particularly in China. 0:15:06.960 --> 0:15:09.960 Well, I think oil prices are okay. You know, it's 0:15:10.000 --> 0:15:12.440 not a low oil price, it's not a high oil price, 0:15:12.560 --> 0:15:15.080 it's a healthy oil price. I think what we have 0:15:15.160 --> 0:15:17.120 to get our heads around is the fact that China 0:15:17.160 --> 0:15:20.000 has changed as an economy, right, and so we're not 0:15:20.080 --> 0:15:22.560 going to see the levels of GDP growth that we. 0:15:22.400 --> 0:15:23.000 Were used to. 0:15:23.120 --> 0:15:26.640 But probably where we are this year, things will continue 0:15:26.680 --> 0:15:29.160 to go on year over year. Of course, this year 0:15:29.160 --> 0:15:31.840 we saw one point five million barrels per day year 0:15:31.880 --> 0:15:34.880 on year growth in oil demand, and our view will 0:15:34.880 --> 0:15:37.160 see six hundred thousand barrels per day next year. It's 0:15:37.160 --> 0:15:41.160 probably slightly higher than consensus. But it's not only China, 0:15:41.280 --> 0:15:46.240 it's also India. It's also non oecd Asia X, China 0:15:46.240 --> 0:15:49.480 and India that are really driving things. In contrast to 0:15:49.520 --> 0:15:52.040 the US that even though the US economy we're firm 0:15:52.080 --> 0:15:56.400 believers in a soft landing, the problem is the rise 0:15:56.520 --> 0:15:59.480 in fuel efficiency every year in the US and this 0:15:59.560 --> 0:16:02.080 is why the driving season disappointed this year and it's 0:16:02.080 --> 0:16:04.960 probably going to disappoint next year. Add into that tesla 0:16:05.040 --> 0:16:08.760 and EV purchases that is also a headwind on that 0:16:08.840 --> 0:16:09.560 demand growth. 0:16:09.840 --> 0:16:13.480 If that's really a big driver of why prices, as 0:16:13.480 --> 0:16:15.560 you call them, healthy but not as elevated as people 0:16:15.560 --> 0:16:18.520 would exploit it would expect. How much can we see 0:16:18.560 --> 0:16:21.560 prices continue to decline as ev adoption and some of 0:16:21.600 --> 0:16:26.800 the other types of non fossil fuel economies build up. 0:16:28.240 --> 0:16:30.760 I think the main difference there. I mean on the 0:16:30.800 --> 0:16:33.760 demand side, yes, we will see slow demand and you know, 0:16:34.200 --> 0:16:37.360 already for next year demand growth and our view is 0:16:37.680 --> 0:16:39.840 one point four million barrels per day year on year 0:16:39.960 --> 0:16:42.520 for the whole world global demand growth, right, but some 0:16:42.760 --> 0:16:46.040 estimates are already calling for less than one million barrels 0:16:46.040 --> 0:16:49.120 per day, right. I think the other aspect, though, is 0:16:49.160 --> 0:16:51.720 the supply side. Right, is that right now we are 0:16:51.920 --> 0:16:55.680 in this still shale boom and that will continue for 0:16:55.800 --> 0:17:00.160 probably another you know, max two million barrels per day, 0:17:00.200 --> 0:17:02.760 and you know, we'll say peak US production will be 0:17:02.800 --> 0:17:05.400 at fifteen point five million barrels per day. So when 0:17:05.440 --> 0:17:08.400 we think about the balance and prices, we will then 0:17:08.680 --> 0:17:14.600 still have strong oil prices because these long cycle investments 0:17:14.840 --> 0:17:17.280 are not happening at the pace that they have in 0:17:17.320 --> 0:17:22.560 the past given this relatively healthy oil price, So I 0:17:22.600 --> 0:17:26.680 don't see a long term negative a price path for 0:17:26.880 --> 0:17:29.520 oil and I expect actually it to strengthen over the 0:17:29.520 --> 0:17:32.320 coming years. We just have to get through this US 0:17:32.440 --> 0:17:34.040 shale being growth period. 0:17:34.359 --> 0:17:37.920 Nadia, appreciate your view. Nadia martin Wigan there as Feland 0:17:38.119 --> 0:17:45.919 Capital computer hardware maker HP Enterprise joining the RUSS to 0:17:46.080 --> 0:17:49.639 artificial intelligence in earnings announced this week HPA, saying it 0:17:49.720 --> 0:17:53.080 expects softer demand for service and storage, but it's hoping 0:17:53.400 --> 0:17:56.160 it's new AI venture will offset the slowdown. The plan 0:17:56.240 --> 0:18:00.200 including a bigger partnership with chip giant Nvidia and Oni 0:18:00.240 --> 0:18:03.440 and Nery, the CEO of HPE, joining us from Barcelona 0:18:03.480 --> 0:18:05.560 where he's been speaking to customers. An tell you great 0:18:05.600 --> 0:18:07.439 to catch up with you, sir. Let's start with that 0:18:07.520 --> 0:18:10.760 relationship with Nvidio for our audience who aren't familiar with it. 0:18:10.800 --> 0:18:12.919 Can you describe it to us and how beneficially it's 0:18:12.960 --> 0:18:14.240 going to be to both of you. 0:18:15.480 --> 0:18:18.159 Yeah, well, good morning, thanks for having me. As you 0:18:18.200 --> 0:18:21.080 see we are in Barcelona. There's still a show going on. 0:18:21.480 --> 0:18:25.920 We hosted HB Discovered here with more than three thousand customers, 0:18:26.240 --> 0:18:28.800 and thanks again for having the opportunity to talk to you. 0:18:28.960 --> 0:18:32.840 So here a discoverer in Barcelona, we announce an expanded 0:18:32.920 --> 0:18:37.399 partnership with Nvidia. Two weeks ago at the Supercomputer event 0:18:37.440 --> 0:18:41.000 in Denver, we announced a deep solution for what we 0:18:41.119 --> 0:18:46.000 call model developers for generative AI, using our supercomputing capabilities, 0:18:46.359 --> 0:18:50.320 plus our intellectual property in the software space, plus Nvidia 0:18:50.960 --> 0:18:54.520 chipsets and other aspects of what they do to provide 0:18:54.560 --> 0:18:57.960 a massive capability for motor developers to speed up the 0:18:58.000 --> 0:19:02.360 training models. And here on Thursday I announced an extension 0:19:02.359 --> 0:19:05.880 of that partnership for enterprise customers to what we call 0:19:06.040 --> 0:19:09.000 fine tune those models. And that's the right time to 0:19:09.080 --> 0:19:13.520 value using our expertise as well as our services capabilities 0:19:13.560 --> 0:19:16.439 and the software to be able to deploy on premises 0:19:16.520 --> 0:19:17.200 and at the edge. 0:19:17.680 --> 0:19:19.760 So this is a complete solution for what we call 0:19:19.840 --> 0:19:21.360 the AI live cycle. 0:19:21.080 --> 0:19:24.199 From tree to tune into infancy, and customer has a 0:19:24.240 --> 0:19:28.320 massive reception because they want to privately fine tune the 0:19:28.400 --> 0:19:30.920 models with their data in a secure and compliant way. 0:19:31.359 --> 0:19:34.520 It's clear your stock is benefiting from the glow of Nvidia. 0:19:34.960 --> 0:19:36.720 We can see that. I think Raymond James writing that 0:19:36.760 --> 0:19:39.080 you're getting a seat at the AI table. Can you 0:19:39.119 --> 0:19:42.000 talk to us about the pace of adoption of this technology. 0:19:42.280 --> 0:19:44.159 I think many of us. Antonio surprised by some of 0:19:44.200 --> 0:19:47.000 the guidance we had repeatedly from Nvidia that this wasn't 0:19:47.040 --> 0:19:49.520 just a hopeful story about the future, it was real 0:19:49.880 --> 0:19:51.800 and present. Can you talk to us about that. 0:19:52.000 --> 0:19:55.600 Yeah, well, I think there's two importants, right, So the 0:19:55.640 --> 0:19:58.680 story is absolutely real. We see it in the quality 0:19:58.680 --> 0:20:01.840 of the dialogs with customers, which are now. 0:20:01.640 --> 0:20:05.679 Accelerating the mobile training. So you think about this. At 0:20:05.680 --> 0:20:07.880 the beginning of twenty twenty three, we. 0:20:07.880 --> 0:20:10.120 Had less than one hundred million dollars what I call 0:20:10.320 --> 0:20:15.480 accelerator processing units in our server business. At the end 0:20:15.520 --> 0:20:18.040 of twenty twenty three, we grew that business to three 0:20:18.080 --> 0:20:21.320 point six billion overs and nobs, and that was literally 0:20:21.359 --> 0:20:25.080