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 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:22,000 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business app. 4 00:00:22,360 --> 00:00:25,680 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:27,040 Speaker 1: us live on YouTube. 6 00:00:27,400 --> 00:00:31,400 Speaker 2: Katy Gopinath was an academic at Harvard. She was known 7 00:00:31,480 --> 00:00:35,160 Speaker 2: within the racket we all knew that, but found immense 8 00:00:35,320 --> 00:00:39,840 Speaker 2: acclaim As the former deputy Managing Director of the International 9 00:00:40,120 --> 00:00:44,000 Speaker 2: Monetary Fund, she brought an academic gravitas to it that 10 00:00:44,159 --> 00:00:47,919 Speaker 2: was just absolutely wonderful. As they do, they wanted her 11 00:00:47,960 --> 00:00:51,360 Speaker 2: to stay at IMF, she had to return to Harvard. 12 00:00:51,479 --> 00:00:56,000 Speaker 2: Professor Gopinath joins us in this time of international turmoil. 13 00:00:56,680 --> 00:00:59,200 Speaker 2: Geta thank you so much for joining this morning. What 14 00:00:59,280 --> 00:01:02,160 Speaker 2: was it like your first day back at Harvard? You 15 00:01:02,200 --> 00:01:05,560 Speaker 2: go from gorgy Eva in four hundred PhDs telling you 16 00:01:05,680 --> 00:01:07,920 Speaker 2: what to do with the IMF. What was it like 17 00:01:08,000 --> 00:01:11,000 Speaker 2: in front of the kids at Harvard the first day? 18 00:01:12,400 --> 00:01:15,319 Speaker 3: Hi, Tom, Always I always miss speaking to you, so 19 00:01:15,360 --> 00:01:17,720 Speaker 3: it's great to kick off with you know this kind 20 00:01:17,720 --> 00:01:20,160 Speaker 3: of a question that I don't usually get from anybody else. 21 00:01:21,280 --> 00:01:23,720 Speaker 2: What was it like I mean, did you Stanley Fisher 22 00:01:23,760 --> 00:01:28,560 Speaker 2: says that that Samuelson used to throw chuck. What did 23 00:01:28,600 --> 00:01:31,479 Speaker 2: you do with the dumb students after the fancy people 24 00:01:31,520 --> 00:01:32,319 Speaker 2: at the IMF. 25 00:01:34,280 --> 00:01:35,839 Speaker 4: It's actually been going great. 26 00:01:36,080 --> 00:01:39,840 Speaker 3: I am enjoying very much being back at Harvard. And 27 00:01:39,920 --> 00:01:43,399 Speaker 3: it also helps to be able to be able to 28 00:01:43,640 --> 00:01:45,920 Speaker 3: speak a little more freely than one does when you're 29 00:01:45,959 --> 00:01:49,400 Speaker 3: when you're at the IMF. So I'm enjoying this moment 30 00:01:49,400 --> 00:01:52,400 Speaker 3: a lot. And also I love working with the students 31 00:01:52,520 --> 00:01:56,840 Speaker 3: and getting back into research and something I did miss well, that's. 32 00:01:56,720 --> 00:01:59,520 Speaker 2: Where I wanted to go. The research of say Rudy 33 00:01:59,560 --> 00:02:03,840 Speaker 2: Dorn back ages and ages or can roll gooff and others? 34 00:02:04,160 --> 00:02:09,360 Speaker 2: Is there is a cycle to financial upset, a cycle 35 00:02:09,440 --> 00:02:14,320 Speaker 2: to financial contagion with the private credit percolation, and again 36 00:02:14,520 --> 00:02:18,960 Speaker 2: a war is tangible. Are we at another inflection point 37 00:02:19,120 --> 00:02:21,280 Speaker 2: where we see crisis in finance? 38 00:02:22,800 --> 00:02:26,400 Speaker 3: The troubles in a with private credit were actually there 39 00:02:26,480 --> 00:02:32,160 Speaker 3: even without the right current war in Iran, we were 40 00:02:32,200 --> 00:02:36,600 Speaker 3: seeing signs of distress in terms of loan defaults. I mean, 41 00:02:36,680 --> 00:02:40,480 Speaker 3: this has always been an incredibly opaque sector and when 42 00:02:40,600 --> 00:02:43,920 Speaker 3: we worried about where we could see another crisis coming 43 00:02:43,960 --> 00:02:46,760 Speaker 3: around the corner. It was about this huge growth and 44 00:02:46,840 --> 00:02:50,560 Speaker 3: non bank financial institutions that now own over fifty percent 45 00:02:50,680 --> 00:02:53,560 Speaker 3: of the world's assets, and especially in a private credit 46 00:02:53,600 --> 00:02:58,040 Speaker 3: private equity hedge funds which are highly leveraged, and valuations 47 00:02:58,200 --> 00:03:03,359 Speaker 3: that are stretched. So it is a combination that really 48 00:03:03,919 --> 00:03:06,680 Speaker 3: can get you know, things can get pretty tenuous if 49 00:03:07,160 --> 00:03:09,600 Speaker 3: we have major shocks of the kind we're looking at 50 00:03:09,680 --> 00:03:11,960 Speaker 3: right now. And as I said, we've just had the 51 00:03:12,120 --> 00:03:17,200 Speaker 3: biggest oil shock in history. And you know, thankfully our 52 00:03:17,200 --> 00:03:19,760 Speaker 3: economies are not as dependent on oil as it was 53 00:03:19,800 --> 00:03:23,640 Speaker 3: in the nineteen seventies and therefore we could weather more 54 00:03:23,639 --> 00:03:25,200 Speaker 3: of it now than we did back then. 55 00:03:25,720 --> 00:03:28,680 Speaker 4: But this is a huge, major event to the global economy. 56 00:03:29,200 --> 00:03:31,760 Speaker 5: I want to bounce off what you were just saying 57 00:03:31,800 --> 00:03:34,480 Speaker 5: about the war and its effect on the global economy, 58 00:03:34,480 --> 00:03:37,280 Speaker 5: because even a long war, would that have a limited 59 00:03:37,360 --> 00:03:41,480 Speaker 5: consequence for global GDP or will there be longer term 60 00:03:41,560 --> 00:03:42,320 Speaker 5: damage done? 61 00:03:44,440 --> 00:03:49,200 Speaker 3: A lot depends upon how long oil prices stay high. Right, 62 00:03:49,560 --> 00:03:52,440 Speaker 3: it had come down to around eighty five yesterday and 63 00:03:52,640 --> 00:03:55,440 Speaker 3: then shot back up to one hundred and now hovering. 64 00:03:55,120 --> 00:03:56,120 Speaker 4: Around ninety six. 65 00:03:56,600 --> 00:03:59,720 Speaker 3: So you know, coming into twenty twenty six, the assumption 66 00:03:59,880 --> 00:04:02,200 Speaker 3: was that twenty twenty six would be a year when 67 00:04:02,320 --> 00:04:06,320 Speaker 3: oil prices would average sixty five dollars a barrel. I 68 00:04:06,360 --> 00:04:08,640 Speaker 3: think in the best case scenario, we're looking at it 69 00:04:08,720 --> 00:04:12,000 Speaker 3: averaging now seventy five dollars a barrel, which just from 70 00:04:12,040 --> 00:04:14,800 Speaker 3: the oil channel shaves off about zero point one two 71 00:04:14,800 --> 00:04:18,480 Speaker 3: point two percentage point of global growth. But this continues, 72 00:04:18,520 --> 00:04:21,480 Speaker 3: and I don't think this requires you're not talking necessarily 73 00:04:21,520 --> 00:04:23,760 Speaker 3: that everything gets sorted out in a week. 74 00:04:23,800 --> 00:04:24,560 Speaker 4: But if this. 75 00:04:24,600 --> 00:04:27,680 Speaker 3: Continues well past a few weeks, and we're looking at 76 00:04:28,080 --> 00:04:31,880 Speaker 3: now average for the year hitting eighty five, now that's 77 00:04:32,320 --> 00:04:34,880 Speaker 3: beginning to shay off like point three percentage point of 78 00:04:34,920 --> 00:04:36,960 Speaker 3: global growth point four percentage point. 79 00:04:37,160 --> 00:04:39,760 Speaker 4: And global inflation starts. 80 00:04:39,360 --> 00:04:42,480 Speaker 3: Going up by fifty basis points sixty basis points. 81 00:04:42,800 --> 00:04:46,719 Speaker 4: So this needs a solution relatively soon. 82 00:04:47,120 --> 00:04:49,960 Speaker 3: Otherwise we're all looking at countries around the world dealing 83 00:04:50,000 --> 00:04:52,560 Speaker 3: with many countries dealing with statulationary shocks. 84 00:04:52,880 --> 00:04:56,440 Speaker 5: What about emerging economies, They would be vulnerable here to 85 00:04:56,600 --> 00:04:58,480 Speaker 5: persistent high energy prices. 86 00:04:58,600 --> 00:05:04,359 Speaker 3: Right, Emerging markets have, especially the ones of course that 87 00:05:04,440 --> 00:05:08,760 Speaker 3: are importers, I mean other countries who are exporters benefit 88 00:05:08,760 --> 00:05:11,480 Speaker 3: from the higher oil prices. But the ones that are importers, 89 00:05:12,120 --> 00:05:15,640 Speaker 3: and these include you know, India, many of the East 90 00:05:15,680 --> 00:05:16,680 Speaker 3: Asian economies. 91 00:05:16,720 --> 00:05:19,800 Speaker 4: Of course, China also is a big importer of energy, 92 00:05:19,839 --> 00:05:20,280 Speaker 4: though they have. 93 00:05:20,240 --> 00:05:23,400 Speaker 3: Big strategic reserves so they're kind of a little more insulated. 94 00:05:23,760 --> 00:05:27,080 Speaker 3: But yes, so they they tend to be importers. They 95 00:05:27,200 --> 00:05:31,440 Speaker 3: also are much more energy dependent. Their economic output is 96 00:05:31,520 --> 00:05:34,640 Speaker 3: much more energy dependent than the rich nations of the 97 00:05:34,680 --> 00:05:38,080 Speaker 3: world are. And we've also seen the dollar appreciate. So 98 00:05:38,120 --> 00:05:40,680 Speaker 3: it's a combination of oil prices going up and the 99 00:05:40,760 --> 00:05:43,960 Speaker 3: dollar appreciating, and that's leading to really scarcity. I mean, 100 00:05:43,960 --> 00:05:47,640 Speaker 3: we've see rationing in many emerging countries around the world. 101 00:05:47,640 --> 00:05:49,479 Speaker 3: It's not just you can simply pass through very high 102 00:05:49,480 --> 00:05:50,240 Speaker 3: point prices. 103 00:05:50,320 --> 00:05:53,640 Speaker 2: An exceptional day for Bloomberg Surveillance. Edward Morse was with 104 00:05:53,800 --> 00:05:57,279 Speaker 2: us earlier Charles Canter of Newburg or Burman as well 105 00:05:57,360 --> 00:06:01,159 Speaker 2: in our getic openhaz where there's the when we're International 106 00:06:01,480 --> 00:06:06,240 Speaker 2: Monetary Fund Deputy Managing Director, Holding Court at Harvard Economics 107 00:06:06,800 --> 00:06:11,160 Speaker 2: after her sojourn of public service, Gita, I look at 108 00:06:11,200 --> 00:06:14,480 Speaker 2: where we are and my answer is currency is the 109 00:06:14,520 --> 00:06:18,800 Speaker 2: litmus paper of the system. Are there traditional dynamics of 110 00:06:18,920 --> 00:06:22,760 Speaker 2: foreign exchange in play now or is there a new 111 00:06:22,839 --> 00:06:24,480 Speaker 2: regime we have to get used to. 112 00:06:25,600 --> 00:06:29,040 Speaker 3: I think this episode has told us that the traditional 113 00:06:29,240 --> 00:06:33,920 Speaker 3: regime sustains. There have been a lot of questions about 114 00:06:33,960 --> 00:06:37,760 Speaker 3: the dollar's dominance and whether we've seen some sort of 115 00:06:37,800 --> 00:06:41,360 Speaker 3: financial decision making shifts sufficiently in the world that things 116 00:06:41,400 --> 00:06:41,760 Speaker 3: are going. 117 00:06:41,640 --> 00:06:42,480 Speaker 4: To behave differently. 118 00:06:42,600 --> 00:06:45,719 Speaker 3: But what we saw right at the onset of the war, 119 00:06:45,800 --> 00:06:48,279 Speaker 3: when there was a huge spike and uncertainty, was it 120 00:06:48,320 --> 00:06:50,520 Speaker 3: the dollar strength and relates to pretty much all other 121 00:06:50,520 --> 00:06:54,919 Speaker 3: currencies in the world. Capital flows to emerging markets. You 122 00:06:54,920 --> 00:06:58,080 Speaker 3: didn't see a whole scale reversal, but you saw less 123 00:06:58,080 --> 00:07:01,599 Speaker 3: of flows going into emerging markets their currency is depreciated. 124 00:07:02,600 --> 00:07:06,039 Speaker 3: The US stock market held a better than other countries 125 00:07:06,040 --> 00:07:09,480 Speaker 3: also because I mean frankly, US being a bigger net 126 00:07:09,680 --> 00:07:11,920 Speaker 3: energy export and makes it lesser for a slight creation 127 00:07:12,160 --> 00:07:14,320 Speaker 3: shop with the US than for many other countries in 128 00:07:14,360 --> 00:07:14,720 Speaker 3: the world. 129 00:07:14,920 --> 00:07:18,840 Speaker 2: Doctor Gopenet. I think of my great mentor at LC 130 00:07:19,280 --> 00:07:23,280 Speaker 2: Megduan Desai, who we lost recently, the work of Ragharajin 131 00:07:23,360 --> 00:07:27,880 Speaker 2: at Chicago and your work as well, and India is 132 00:07:27,920 --> 00:07:32,120 Speaker 2: a balance and fullcome point between all these global tensions. 133 00:07:32,520 --> 00:07:35,080 Speaker 2: Is there a new India now or is it a 134 00:07:35,120 --> 00:07:40,000 Speaker 2: traditional relationship with India, with China, with Russia and with America. 135 00:07:41,520 --> 00:07:44,240 Speaker 3: I think the word is complicated. It's really complicated at 136 00:07:44,240 --> 00:07:45,080 Speaker 3: this point in time. 137 00:07:45,920 --> 00:07:46,840 Speaker 4: What good news is. 138 00:07:46,760 --> 00:07:52,120 Speaker 3: That India's economy is growing strongly from internal demand and 139 00:07:52,160 --> 00:07:56,080 Speaker 3: from internal sources or that's pushing growth, the build out 140 00:07:56,080 --> 00:08:01,240 Speaker 3: and infrastructure, the digital payment system. There is good growth 141 00:08:01,280 --> 00:08:05,200 Speaker 3: momentum coming from within India. What they had to do, 142 00:08:05,280 --> 00:08:07,680 Speaker 3: which I think is actually positive over the last year, 143 00:08:08,000 --> 00:08:10,280 Speaker 3: is to go out and make more trade deals with 144 00:08:10,320 --> 00:08:13,400 Speaker 3: other countries. They just did that with the European Union, 145 00:08:13,480 --> 00:08:15,560 Speaker 3: but they also they did that previously with the UK. 146 00:08:16,040 --> 00:08:16,880 Speaker 4: I think that's a good thing. 147 00:08:16,920 --> 00:08:19,560 Speaker 3: I think it helps for India to bring its start 148 00:08:19,560 --> 00:08:21,760 Speaker 3: off right down and they're going to have to keep 149 00:08:21,800 --> 00:08:22,160 Speaker 3: this up. 150 00:08:22,200 --> 00:08:23,400 Speaker 4: It's a complicated world. 151 00:08:23,520 --> 00:08:27,920 Speaker 3: It's people are unsure about who their friends are and 152 00:08:28,000 --> 00:08:28,640 Speaker 3: for how long. 153 00:08:29,240 --> 00:08:31,640 Speaker 2: Right now, a second headline coming out of Iran. This 154 00:08:31,680 --> 00:08:35,120 Speaker 2: is from some form of Iran TV. This is published 155 00:08:35,160 --> 00:08:38,520 Speaker 2: on the Bloomberg It's not speculation quote. Iran says it 156 00:08:38,559 --> 00:08:42,160 Speaker 2: began new wave of missile launches on Israel butcher stuff 157 00:08:42,200 --> 00:08:45,079 Speaker 2: against the headline of about twenty years ago, Brentcurd ninety 158 00:08:45,080 --> 00:08:49,160 Speaker 2: eight dollars thirty two cents, Alexis Christopherus with Gidy gopinat 159 00:08:49,280 --> 00:08:49,840 Speaker 2: of Harvard. 160 00:08:50,440 --> 00:08:53,920 Speaker 5: So, you know, what about the beneficiaries or the winners? 161 00:08:53,960 --> 00:08:55,600 Speaker 5: And I guess I hate to use the word winners 162 00:08:55,600 --> 00:08:57,440 Speaker 5: in war because I don't think there any winners in war. 163 00:08:57,520 --> 00:09:01,199 Speaker 5: But when you're talking about large net energy exporters outside 164 00:09:01,320 --> 00:09:05,280 Speaker 5: the Gulf, are they going to be benefiting? And I'm 165 00:09:05,280 --> 00:09:08,880 Speaker 5: thinking Norway, you know, Russia, of course, Canada. 166 00:09:09,880 --> 00:09:14,839 Speaker 3: Yes, certainly, these absolutely, these countries benefit from oil being 167 00:09:15,240 --> 00:09:18,520 Speaker 3: at one hundred dollars a barrel. That's a huge windfall 168 00:09:19,000 --> 00:09:21,240 Speaker 3: that you know, it's very helpful. And I would say 169 00:09:21,280 --> 00:09:24,280 Speaker 3: for Russia right now, this is great because they could 170 00:09:24,320 --> 00:09:28,280 Speaker 3: really use the money that they're getting from their oil sales. 171 00:09:28,320 --> 00:09:30,400 Speaker 3: When oil was at sixty five dollars a barrel, it 172 00:09:30,440 --> 00:09:32,439 Speaker 3: was getting really hard for their economy and you could 173 00:09:32,480 --> 00:09:33,280 Speaker 3: see the strains. 174 00:09:33,559 --> 00:09:35,440 Speaker 4: One hundred dollars a barrel helps them. 175 00:09:35,600 --> 00:09:35,760 Speaker 2: Now. 176 00:09:35,800 --> 00:09:38,439 Speaker 4: That said, if this now morphs into. 177 00:09:38,320 --> 00:09:45,559 Speaker 3: A more broader financial crisis because of growth dropping everywhere, 178 00:09:46,040 --> 00:09:49,680 Speaker 3: inflation going up, we're already it's kind of clear we're 179 00:09:49,679 --> 00:09:54,000 Speaker 3: moving into a much more tighter monetary policies stance everywhere 180 00:09:54,000 --> 00:09:55,760 Speaker 3: in the world relative to what it would have been 181 00:09:55,800 --> 00:10:00,360 Speaker 3: in the absence of this massive oil price shock. You 182 00:10:00,400 --> 00:10:03,400 Speaker 3: know that combination is never good for it, for the 183 00:10:03,400 --> 00:10:05,840 Speaker 3: world as a whole, for pretty much all countries. 184 00:10:06,160 --> 00:10:07,240 Speaker 2: Can I do an audible? 185 00:10:07,400 --> 00:10:07,880 Speaker 5: Please do? 186 00:10:08,040 --> 00:10:10,800 Speaker 2: I'm going to do a terrible time keen audible with 187 00:10:10,880 --> 00:10:14,240 Speaker 2: geta Gopineth. So we're on stage in Marrakesh and there's 188 00:10:14,280 --> 00:10:17,400 Speaker 2: like planes flying over. It's a tent. There's like eight hundred, 189 00:10:17,400 --> 00:10:20,719 Speaker 2: one thousand people in there, and you know, Gita is there. 190 00:10:20,760 --> 00:10:23,600 Speaker 2: I think I can't remember the details. I think substituting 191 00:10:23,640 --> 00:10:26,720 Speaker 2: for the managing director because she had to go see 192 00:10:26,720 --> 00:10:29,200 Speaker 2: the King of Morocco or whatever. In Christine la Guard's 193 00:10:29,200 --> 00:10:31,640 Speaker 2: there and a bunch of other worthies and I never 194 00:10:31,720 --> 00:10:34,640 Speaker 2: got this question into Geita. Gopinez, Oh, we'll do it now. 195 00:10:34,679 --> 00:10:37,680 Speaker 2: So we're going to do it right now. Get to Gopinath. 196 00:10:37,800 --> 00:10:40,199 Speaker 2: You came out of Princeton Holding Court at Harvard, Ken 197 00:10:40,280 --> 00:10:43,600 Speaker 2: Rogoff and BERNANKI did part of your PhD. I want 198 00:10:43,640 --> 00:10:48,199 Speaker 2: you to explain the impact of the Nobel Laureate Claudia 199 00:10:48,280 --> 00:10:52,240 Speaker 2: Golden on economics. You and I never got to talk 200 00:10:52,280 --> 00:10:55,160 Speaker 2: about this. We're going to do it this morning. Tell 201 00:10:55,200 --> 00:10:59,959 Speaker 2: me what Professor Golden did in labor economics in our bay, 202 00:11:00,000 --> 00:11:03,319 Speaker 2: behavior in our society that was so important. 203 00:11:05,600 --> 00:11:09,960 Speaker 3: Claudia, who won the Nobel Prize for her work recently 204 00:11:10,040 --> 00:11:15,280 Speaker 3: and was long overdue, basically told brought us, I'm sorry, 205 00:11:15,559 --> 00:11:20,360 Speaker 3: brought us gender economics, which is to basically point out 206 00:11:20,480 --> 00:11:26,960 Speaker 3: that there are salient differences between how women and men 207 00:11:27,160 --> 00:11:31,560 Speaker 3: participate in the labor force, what they get paid, why 208 00:11:31,600 --> 00:11:37,040 Speaker 3: they get paid differently, the importance of family and child rearing, 209 00:11:37,080 --> 00:11:42,400 Speaker 3: which has an impact on women, and it's hugely important 210 00:11:42,480 --> 00:11:45,400 Speaker 3: because for multiple reasons, besides the fact that we all 211 00:11:45,440 --> 00:11:48,520 Speaker 3: want to live in a society where you get rewarded 212 00:11:48,840 --> 00:11:53,080 Speaker 3: for your skills and talents at a fair level. We're 213 00:11:53,120 --> 00:11:56,680 Speaker 3: in a situation where worldwide fertility rates have come down, 214 00:11:57,600 --> 00:12:02,680 Speaker 3: and you cannot fix that problem without recognizing that it 215 00:12:02,800 --> 00:12:07,400 Speaker 3: is tied to how women engage with the labor force 216 00:12:07,440 --> 00:12:08,200 Speaker 3: and what it takes. 217 00:12:08,200 --> 00:12:12,040 Speaker 4: And if if by having a child, you are. 218 00:12:11,840 --> 00:12:14,559 Speaker 3: Restricted and that impedes you because you get very little 219 00:12:14,559 --> 00:12:17,240 Speaker 3: support from your partner to be able to engage in 220 00:12:17,280 --> 00:12:21,280 Speaker 3: the in work, you know, the incentives to do that 221 00:12:21,440 --> 00:12:26,520 Speaker 3: get dampened, So you know it's her contributions have been 222 00:12:26,559 --> 00:12:28,679 Speaker 3: tremendous and Tom, I think we have to keep in 223 00:12:28,679 --> 00:12:31,160 Speaker 3: mind that for a long time, it was not cool 224 00:12:31,200 --> 00:12:34,320 Speaker 3: to be working on you know, gender issues. When I 225 00:12:34,320 --> 00:12:36,760 Speaker 3: say a long time is when when Claudia was much 226 00:12:36,800 --> 00:12:40,160 Speaker 3: younger at that time, as an economist, you wanted to 227 00:12:40,200 --> 00:12:43,800 Speaker 3: be working on you know, monetary policy, macro policy, those 228 00:12:43,840 --> 00:12:47,960 Speaker 3: were the topics to focus on. So for Claudia to 229 00:12:48,120 --> 00:12:50,120 Speaker 3: go against the wind and say no, I'm actually going 230 00:12:50,200 --> 00:12:54,560 Speaker 3: to work about gender and women in the workplace, that 231 00:12:54,960 --> 00:12:57,320 Speaker 3: was huge, you know, stepping out of line. 232 00:12:57,440 --> 00:12:59,000 Speaker 4: And courderse to her for that. 233 00:12:58,840 --> 00:13:01,079 Speaker 2: One quick questioning and as we got to go or 234 00:13:01,120 --> 00:13:03,079 Speaker 2: they ran in the news. But I have to ask, 235 00:13:03,320 --> 00:13:06,240 Speaker 2: are you letting your students use AI? Is AI a 236 00:13:06,320 --> 00:13:09,760 Speaker 2: constructive tool in the classroom? 237 00:13:10,600 --> 00:13:10,840 Speaker 4: Yes? 238 00:13:11,280 --> 00:13:14,439 Speaker 3: Right now I'm teaching a class to PhD students and 239 00:13:14,720 --> 00:13:17,760 Speaker 3: I think that they should absolutely use AI in a 240 00:13:17,800 --> 00:13:20,320 Speaker 3: particular way. But at the same time, I want to 241 00:13:20,360 --> 00:13:24,000 Speaker 3: make sure that they're also developing their own cognitive skills. 242 00:13:24,040 --> 00:13:25,800 Speaker 3: I think the risk is that we're going to outsource 243 00:13:25,880 --> 00:13:29,760 Speaker 3: everything to a smarter friend and in the end dot 244 00:13:29,840 --> 00:13:30,480 Speaker 3: learn anything. 245 00:13:30,520 --> 00:13:32,880 Speaker 4: So we have to strike the balance right one. 246 00:13:32,800 --> 00:13:35,160 Speaker 2: Hundred percent agree. Thank you so much for that, Professor 247 00:13:35,240 --> 00:13:38,880 Speaker 2: Gopeneth at Harvard University, or Public Service for India and 248 00:13:38,920 --> 00:13:44,760 Speaker 2: America noted at the International Monetary Fund. Stay with us 249 00:13:45,000 --> 00:13:48,199 Speaker 2: more from Bloomberg Surveillance coming up after this. 250 00:13:55,480 --> 00:13:59,040 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live 251 00:13:59,120 --> 00:14:02,280 Speaker 1: weekday afternoon from seven to ten am Eastern Listen on 252 00:14:02,360 --> 00:14:05,760 Speaker 1: Apple Karplay and Android Otto with the Bloomberg Business app, 253 00:14:05,920 --> 00:14:07,800 Speaker 1: or watch us live on YouTube. 254 00:14:08,000 --> 00:14:10,840 Speaker 2: All of the people we speak to on hydrocarbons, including 255 00:14:10,880 --> 00:14:16,120 Speaker 2: Stuart Wallace's building out Bloomberg's hydrocarbon commodity expertise at Bloomberg 256 00:14:16,160 --> 00:14:19,120 Speaker 2: News over the decades. All of this has to do 257 00:14:19,200 --> 00:14:23,200 Speaker 2: with informed, different and nuanced opinion. Francisco Blanche with us 258 00:14:23,240 --> 00:14:25,960 Speaker 2: the other day from Bank of America. Jeff Curry, I 259 00:14:26,000 --> 00:14:30,000 Speaker 2: saw wander into Bloomberg, iconic at Goldman Sachs and all. 260 00:14:30,040 --> 00:14:32,880 Speaker 2: Standing on top of these good people is Edward Moore, 261 00:14:33,040 --> 00:14:36,760 Speaker 2: Senior Advisor at Hartree at the Council on Foreign Relations. 262 00:14:37,000 --> 00:14:40,040 Speaker 2: In his public service to the nation, what is the 263 00:14:40,080 --> 00:14:44,960 Speaker 2: biggest thing doctor Morris, Americans now including the President, get 264 00:14:45,080 --> 00:14:49,320 Speaker 2: wrong about the shores of Iran and their military capability 265 00:14:50,040 --> 00:14:53,520 Speaker 2: to disrupt oil. What's the thing we most get wrong. 266 00:14:53,640 --> 00:14:57,320 Speaker 6: So a couple of things that work together, this decentralized 267 00:14:57,360 --> 00:15:03,200 Speaker 6: decision making, given our billity need to impact internal communications 268 00:15:03,440 --> 00:15:05,800 Speaker 6: within the government. And then there are a couple of 269 00:15:05,800 --> 00:15:09,200 Speaker 6: one hundred small sites along the Iranian coast where people 270 00:15:09,240 --> 00:15:12,520 Speaker 6: have the capacity to interrupt shipping in the golf, whether 271 00:15:12,640 --> 00:15:16,320 Speaker 6: it's through putting mines in or sending off small drones. 272 00:15:16,760 --> 00:15:18,920 Speaker 6: And that really makes the job very difficult. 273 00:15:19,040 --> 00:15:22,360 Speaker 2: When you help build out Yemen's ability to do hybridcarbons, 274 00:15:22,360 --> 00:15:25,960 Speaker 2: you've driven many of those roads. I read yesterday as 275 00:15:26,000 --> 00:15:32,040 Speaker 2: an amateur of three independence class mind sweeper military boats 276 00:15:32,040 --> 00:15:34,720 Speaker 2: and bearn for the US Army and all of it's 277 00:15:34,840 --> 00:15:37,360 Speaker 2: US Navy, I should say, And it all sounds like 278 00:15:37,400 --> 00:15:40,240 Speaker 2: it's going to take days and weeks to get a 279 00:15:40,280 --> 00:15:43,360 Speaker 2: path through the gulf of our moods. Are you looking 280 00:15:43,400 --> 00:15:46,480 Speaker 2: at days and weeks or dare I say months to 281 00:15:46,560 --> 00:15:47,360 Speaker 2: open up the gulf? 282 00:15:47,520 --> 00:15:50,200 Speaker 6: Well, that's the uncertainty, and we don't know whether it's 283 00:15:50,240 --> 00:15:53,120 Speaker 6: days or week, So whether it's months and we don't 284 00:15:53,120 --> 00:15:55,040 Speaker 6: know whether that months will turn into a kind of 285 00:15:55,080 --> 00:15:59,600 Speaker 6: permanent damage because there's a regime in place and it 286 00:16:00,160 --> 00:16:04,160 Speaker 6: look like it's going to roll over overnight. So it 287 00:16:04,200 --> 00:16:06,760 Speaker 6: is a big uncertainty. I say the probabilities are higher 288 00:16:06,760 --> 00:16:09,320 Speaker 6: that it's sooner rather than later. But by sooner, I 289 00:16:09,360 --> 00:16:11,440 Speaker 6: don't mean the end of this month, I mean sometime 290 00:16:11,560 --> 00:16:14,080 Speaker 6: within the next within the next month. 291 00:16:14,880 --> 00:16:17,720 Speaker 5: We know that the IEA is now tapping these reserves, 292 00:16:17,800 --> 00:16:21,360 Speaker 5: right the member countries agreeing yesterday unanimously to do this. 293 00:16:22,000 --> 00:16:23,360 Speaker 5: The US is going to kick in one hundred and 294 00:16:23,400 --> 00:16:25,760 Speaker 5: seventy two million barrels. But you know what, it didn't 295 00:16:25,800 --> 00:16:28,400 Speaker 5: too much for the oil markets and for the price 296 00:16:28,440 --> 00:16:30,920 Speaker 5: of oil. Why is that? Why didn't it appease them? 297 00:16:31,120 --> 00:16:35,800 Speaker 6: Well, look at what's happening there. They're putting maybe four 298 00:16:35,800 --> 00:16:38,680 Speaker 6: million barrels a day into the market for a limited 299 00:16:38,720 --> 00:16:41,760 Speaker 6: number of days, and the world is already seen two 300 00:16:41,840 --> 00:16:47,760 Speaker 6: things happening. One is that the upwards of sixteen eighteen 301 00:16:47,800 --> 00:16:50,400 Speaker 6: million barrels a day that was coming through the straight 302 00:16:50,440 --> 00:16:53,800 Speaker 6: up horm moves is now down to ten, so we're 303 00:16:53,800 --> 00:16:57,840 Speaker 6: not replacing. And the longer the time waits, the less 304 00:16:57,960 --> 00:16:59,960 Speaker 6: important that little drop in the bucket. 305 00:17:00,240 --> 00:17:02,240 Speaker 5: And it's important to mention it's not that we don't 306 00:17:02,280 --> 00:17:04,600 Speaker 5: have the oil. We're still flush with oil. We just 307 00:17:04,640 --> 00:17:07,879 Speaker 5: have nowhere to store the oil. Is that really the problem. 308 00:17:08,400 --> 00:17:11,000 Speaker 6: No, the problem is that we have the oil. We 309 00:17:11,080 --> 00:17:14,159 Speaker 6: have an open market. We allow our oil to be 310 00:17:14,359 --> 00:17:17,760 Speaker 6: exported to whichever country or a party other than those 311 00:17:17,800 --> 00:17:20,760 Speaker 6: sanctions that want it. This is true of gasoline and 312 00:17:20,840 --> 00:17:23,160 Speaker 6: ethane and all of the product line, and it's true 313 00:17:23,200 --> 00:17:28,240 Speaker 6: of crude oil. So if you are in the need 314 00:17:28,280 --> 00:17:29,960 Speaker 6: of crude oil, you're going to go to the US 315 00:17:30,040 --> 00:17:32,080 Speaker 6: to ask for it and bidding up the price. So 316 00:17:32,640 --> 00:17:35,840 Speaker 6: although with the largest exporter of crudent product in the world, 317 00:17:35,880 --> 00:17:39,760 Speaker 6: were the largest producer of that and natural gas, we 318 00:17:39,840 --> 00:17:41,520 Speaker 6: are beholden to the global market. 319 00:17:41,800 --> 00:17:44,840 Speaker 2: Edward Morse with this, folks, Senior advisor, Heartreet Partners. We 320 00:17:44,920 --> 00:17:47,080 Speaker 2: willcome all of you on YouTube and all of our 321 00:17:47,440 --> 00:17:50,920 Speaker 2: other ways to listen to us around the world. Subscribe 322 00:17:50,920 --> 00:17:55,119 Speaker 2: to Bloomberg Podcast. A good conversation here with doctor Morse. Okay, 323 00:17:55,160 --> 00:17:58,440 Speaker 2: my knowledge of this is I rewatched Lawrence of Arabia 324 00:17:58,520 --> 00:18:03,080 Speaker 2: three times, read most of Dan Jurgen's surprise. I think 325 00:18:03,160 --> 00:18:07,000 Speaker 2: most of it Okay, I read Albert Hardi on the 326 00:18:07,040 --> 00:18:10,800 Speaker 2: Arab people, and that what are they thinking in Riod 327 00:18:11,160 --> 00:18:14,720 Speaker 2: right now? The royal family of the Saudis, the royal 328 00:18:14,840 --> 00:18:19,240 Speaker 2: family had cutter, the Zayads, the mock tombs in Dubai. 329 00:18:19,600 --> 00:18:21,840 Speaker 2: What are these royal families thinking? 330 00:18:22,200 --> 00:18:25,080 Speaker 6: I must intrude in this a little bit to note 331 00:18:25,440 --> 00:18:27,439 Speaker 6: that Dan Jurgen and I have been very good friends 332 00:18:27,480 --> 00:18:30,119 Speaker 6: since we were in graduate school, and I had the 333 00:18:30,119 --> 00:18:33,440 Speaker 6: pleasure of reading the original manuscript to give him. People 334 00:18:33,800 --> 00:18:36,679 Speaker 6: that was double the size of the printed version. So 335 00:18:36,720 --> 00:18:37,679 Speaker 6: it took a little bit of ti. 336 00:18:38,560 --> 00:18:41,359 Speaker 2: I mean, we used to John Tucker remembers this ed Mortz. 337 00:18:41,440 --> 00:18:44,879 Speaker 2: We used to walk around with the prize paperback. It 338 00:18:44,960 --> 00:18:46,720 Speaker 2: was like a girl bag. It was just like to 339 00:18:46,800 --> 00:18:49,560 Speaker 2: be cool. You didn't read it. What was it like 340 00:18:49,600 --> 00:18:53,040 Speaker 2: when you first read an absolutely definitive book. 341 00:18:53,359 --> 00:18:56,600 Speaker 6: Well, the history that he did was just truly extraordinary. 342 00:18:56,680 --> 00:18:59,840 Speaker 6: So it became the one place to go if you 343 00:18:59,840 --> 00:19:02,680 Speaker 6: want to understand where Oyl Markers came from and where 344 00:19:02,680 --> 00:19:03,000 Speaker 6: they're going. 345 00:19:03,080 --> 00:19:05,800 Speaker 2: Okay, but folks, in all my travels over there, you 346 00:19:05,800 --> 00:19:07,720 Speaker 2: know you do background reading in that. Thank you to 347 00:19:07,760 --> 00:19:11,159 Speaker 2: the University of Durham and England for definitive work. The 348 00:19:11,200 --> 00:19:15,280 Speaker 2: first Mercedes dealership in Abu Dhabi. There were no roads. 349 00:19:15,480 --> 00:19:18,840 Speaker 2: They're driving the Mercedes around on the sands. The tribal 350 00:19:18,960 --> 00:19:23,960 Speaker 2: structure that Alfred Harani wrote about definitively in one volume 351 00:19:24,320 --> 00:19:29,359 Speaker 2: Ed Morris and how these royal families are responding to Persia. 352 00:19:28,760 --> 00:19:31,960 Speaker 6: Well, they're responding in the longer term in the short run. 353 00:19:32,119 --> 00:19:35,680 Speaker 6: So you know, people had been saying that nobody in 354 00:19:35,720 --> 00:19:38,400 Speaker 6: the Gulf wanted the US to do this. That's absolutely untrue. 355 00:19:38,720 --> 00:19:41,760 Speaker 6: There are significant reports that indicate that members of the 356 00:19:41,840 --> 00:19:45,320 Speaker 6: royal families of a lot of those countries were encouraging 357 00:19:45,400 --> 00:19:48,760 Speaker 6: the US to do what it did. So that's one element. 358 00:19:48,840 --> 00:19:52,000 Speaker 6: They were sitting, you know, quietly and not in front 359 00:19:52,000 --> 00:19:55,879 Speaker 6: of a microphone, but actually encouraging the US to do 360 00:19:55,920 --> 00:19:59,479 Speaker 6: what they were doing. They are different in terms of 361 00:19:59,560 --> 00:20:03,000 Speaker 6: their str ructure. So we've got two big countries, Saudi 362 00:20:03,040 --> 00:20:06,639 Speaker 6: Arabia and the UAE, that either have diversified their economies 363 00:20:06,680 --> 00:20:10,119 Speaker 6: a lot or are in the process of diversifying. And 364 00:20:10,160 --> 00:20:14,399 Speaker 6: the intriguing thing on the Saudi side is that just 365 00:20:14,520 --> 00:20:17,520 Speaker 6: in the month of January they gave signals that they 366 00:20:17,560 --> 00:20:20,600 Speaker 6: were going back and looking at the original twenty thirty plan, 367 00:20:21,040 --> 00:20:24,520 Speaker 6: and they're finding ways to accelerate the diversification of the economy. 368 00:20:24,760 --> 00:20:28,600 Speaker 6: They're doing it by going into critical minerals, mining other 369 00:20:28,640 --> 00:20:32,320 Speaker 6: things at home, going into AI for the world, and 370 00:20:32,400 --> 00:20:34,840 Speaker 6: attracting investment from the private sector in a way they 371 00:20:34,880 --> 00:20:41,440 Speaker 6: never have. So they are happy and unhappy about what's 372 00:20:41,480 --> 00:20:44,760 Speaker 6: happened over the last month, but they're happy to see 373 00:20:45,200 --> 00:20:49,960 Speaker 6: the decapitation of the regime, the reduction in the authority 374 00:20:50,000 --> 00:20:54,160 Speaker 6: and the power of the central government, and they're hopeful 375 00:20:54,280 --> 00:20:56,479 Speaker 6: about change over time, Doctor Moore. 376 00:20:56,520 --> 00:20:57,920 Speaker 5: So I want to go back to something you said 377 00:20:57,960 --> 00:21:01,280 Speaker 5: earlier in the conversation that there could be permanent damage 378 00:21:01,320 --> 00:21:04,560 Speaker 5: to the Strait of Hormuz. We see this unprecedented attack 379 00:21:04,600 --> 00:21:07,840 Speaker 5: on that understruction or the infrastructure of the street. What 380 00:21:07,840 --> 00:21:08,840 Speaker 5: would that look like? 381 00:21:08,960 --> 00:21:09,600 Speaker 2: What would what. 382 00:21:09,520 --> 00:21:11,679 Speaker 5: Would permanent damage to the street look like? 383 00:21:12,000 --> 00:21:15,840 Speaker 6: Well, by permanent, I meant something going forward, where we 384 00:21:15,920 --> 00:21:19,520 Speaker 6: already know that the Iranians have restricted lanes of the 385 00:21:19,560 --> 00:21:24,400 Speaker 6: Gulf were transit. They're allowing a number of sanctioned vessels 386 00:21:24,440 --> 00:21:29,560 Speaker 6: to go through. They've increased their own exports, but given 387 00:21:29,960 --> 00:21:32,639 Speaker 6: the number of weapons they have on the coast, given 388 00:21:33,440 --> 00:21:38,440 Speaker 6: the nature of those weapons to intrude and interrupt transit 389 00:21:38,520 --> 00:21:41,840 Speaker 6: through the Strait, this is a long term threat. It's 390 00:21:41,840 --> 00:21:43,760 Speaker 6: not something that's going to be over even if there's 391 00:21:43,760 --> 00:21:44,399 Speaker 6: a treece. 392 00:21:44,800 --> 00:21:47,000 Speaker 2: Good Morning, ninety to nine. F Aupp in Boston jays 393 00:21:47,080 --> 00:21:50,280 Speaker 2: up there. He's clipping coupons. It's just a municipal bond guy. 394 00:21:50,640 --> 00:21:53,560 Speaker 2: But he sends in a really smart question. Can you 395 00:21:53,680 --> 00:21:57,320 Speaker 2: ask doctor Morris what we're going to do with carg Island. 396 00:21:57,600 --> 00:21:59,720 Speaker 2: This is not it's not like Love Island, but this 397 00:21:59,760 --> 00:22:02,359 Speaker 2: is a little island right off the coast of Iran, 398 00:22:02,440 --> 00:22:05,600 Speaker 2: directly east of Kuwait. Have you been there, Dr Morrison? 399 00:22:06,200 --> 00:22:08,720 Speaker 2: You've been to car guy? Yes, this is great. I 400 00:22:08,720 --> 00:22:12,920 Speaker 2: mean there's not like a four Seasons or a Marriott 401 00:22:12,960 --> 00:22:14,840 Speaker 2: at the end of it, is there? No? 402 00:22:16,040 --> 00:22:19,920 Speaker 6: No, My Iran travels really remarkable. I'll never write a memoir. 403 00:22:20,280 --> 00:22:24,600 Speaker 6: But I was the first American delegation back to Iran 404 00:22:24,680 --> 00:22:28,399 Speaker 6: after the revolution. And when I was there, I had 405 00:22:28,400 --> 00:22:31,439 Speaker 6: a classmate from graduate school who was ahead of intelligence 406 00:22:31,440 --> 00:22:34,959 Speaker 6: in the British Embassy. I had an escorted ride from 407 00:22:35,000 --> 00:22:37,400 Speaker 6: the US embassy where I was staying to the British Embassy. 408 00:22:37,560 --> 00:22:40,560 Speaker 6: I was actually co chair of the US Iranian Bilateral 409 00:22:40,680 --> 00:22:45,240 Speaker 6: Energy Working Group. And when I was with the British 410 00:22:45,280 --> 00:22:49,320 Speaker 6: ambassador and my friend, a car was attacked on the street. 411 00:22:49,800 --> 00:22:52,560 Speaker 6: We had to run out escape and the car was 412 00:22:52,640 --> 00:22:53,040 Speaker 6: rolled over. 413 00:22:53,160 --> 00:22:54,240 Speaker 2: Did you return the fire? 414 00:22:55,800 --> 00:22:58,399 Speaker 6: I just got as anonymous as I could in the crowd. 415 00:22:58,880 --> 00:23:00,120 Speaker 5: I should write a memo. 416 00:23:00,840 --> 00:23:03,760 Speaker 2: Of course. A simplistic idea here is, if we really 417 00:23:03,800 --> 00:23:06,680 Speaker 2: are at war, why aren't we taking out their immense 418 00:23:06,800 --> 00:23:11,400 Speaker 2: undersea pipelines and refinery capacity out of this little island 419 00:23:11,520 --> 00:23:12,360 Speaker 2: east of Kuwait. 420 00:23:12,520 --> 00:23:14,720 Speaker 6: Well, you'll note that the Israelis have attacked some of 421 00:23:14,760 --> 00:23:17,520 Speaker 6: the infrastructure, so that's been a threat that more of 422 00:23:17,520 --> 00:23:20,680 Speaker 6: the infrastructure could be attacked, and we don't know what 423 00:23:20,800 --> 00:23:22,760 Speaker 6: the President's going to do between now, would. 424 00:23:22,560 --> 00:23:24,680 Speaker 2: You recommend to the president that you take out their 425 00:23:24,760 --> 00:23:26,080 Speaker 2: major refinery hub. 426 00:23:26,680 --> 00:23:28,840 Speaker 6: Well, I think there's a lesson to be learned given 427 00:23:28,960 --> 00:23:31,760 Speaker 6: that the Iranians have taken out other hubs and other 428 00:23:32,359 --> 00:23:35,920 Speaker 6: refineries and are now attacking oil field. So you shouldn't 429 00:23:35,960 --> 00:23:38,800 Speaker 6: do that unless you expect the same in return. The 430 00:23:38,840 --> 00:23:42,040 Speaker 6: President hasn't done it, of course, because he's not interested 431 00:23:42,520 --> 00:23:46,359 Speaker 6: in a significantly higher oil price environment. Whether his interest 432 00:23:46,440 --> 00:23:49,480 Speaker 6: is for the midterm elections this year or something more 433 00:23:49,560 --> 00:23:53,000 Speaker 6: durable is another question, but he'd really like to see 434 00:23:53,119 --> 00:23:57,320 Speaker 6: gasoline prices significantly lower. He now can't brag the gasoline 435 00:23:57,320 --> 00:24:01,479 Speaker 6: prices are lower than they were Biden because it's out 436 00:24:01,560 --> 00:24:04,440 Speaker 6: higher than the last year of the Biden administrations. 437 00:24:04,640 --> 00:24:07,840 Speaker 5: They're higher than both of his administrations Trump's administry, and 438 00:24:08,000 --> 00:24:08,320 Speaker 5: they're going. 439 00:24:08,280 --> 00:24:11,440 Speaker 6: To be higher yet because there's a lag effect between 440 00:24:11,520 --> 00:24:14,120 Speaker 6: the fruit price and where the price. 441 00:24:13,960 --> 00:24:16,119 Speaker 2: On Brent crude. Can you get it out to one twenty? 442 00:24:16,640 --> 00:24:18,480 Speaker 6: I think it's easy to get it out to one twenty. 443 00:24:18,520 --> 00:24:21,800 Speaker 6: We're in a world of unbelievable volatility in this market. 444 00:24:22,080 --> 00:24:23,919 Speaker 2: We have seen witness. 445 00:24:23,560 --> 00:24:25,560 Speaker 6: To that in terms of going down and going up. 446 00:24:25,960 --> 00:24:28,800 Speaker 6: Merban is pricing at one one hundred and Jubaio pricing 447 00:24:28,800 --> 00:24:31,399 Speaker 6: at one hundred and seventeen, one hundred and eighteen, and 448 00:24:31,520 --> 00:24:35,159 Speaker 6: that's going to go higher because the longer those crews 449 00:24:35,200 --> 00:24:37,760 Speaker 6: can't get into global market, the higher the price is 450 00:24:37,800 --> 00:24:41,200 Speaker 6: going to be. And I think you can reasonably think 451 00:24:41,359 --> 00:24:45,640 Speaker 6: that on a supply demand basis, unless there's an economic 452 00:24:48,560 --> 00:24:52,320 Speaker 6: repercussion in which demand collapses, we are more likely than 453 00:24:52,320 --> 00:24:53,879 Speaker 6: not to see prices above one hundred. 454 00:24:54,040 --> 00:24:56,560 Speaker 5: Doctor Morris, help us understand how the US was able 455 00:24:56,600 --> 00:25:00,040 Speaker 5: to escort ships through the Red Sea with the Hoothies. 456 00:25:00,119 --> 00:25:02,240 Speaker 5: But they even though Trump has said we're going to 457 00:25:02,280 --> 00:25:03,280 Speaker 5: do it here, We're going to do it here with 458 00:25:03,280 --> 00:25:05,720 Speaker 5: the straight they haven't yet Why. 459 00:25:05,880 --> 00:25:08,800 Speaker 6: The Houthis didn't have the ability to mine the Red Sea. 460 00:25:09,280 --> 00:25:12,359 Speaker 6: The hoo thieves were more limited, and the hou thieves 461 00:25:12,520 --> 00:25:16,240 Speaker 6: were more interested. Remember they're proxy, and they're a proxy 462 00:25:16,280 --> 00:25:21,440 Speaker 6: that has an independent status within within Yemen itself. So 463 00:25:21,640 --> 00:25:23,439 Speaker 6: what have we heard from the Houthis lately? You know, 464 00:25:23,520 --> 00:25:27,120 Speaker 6: they've been unbelievably quiet. The best way to trap them 465 00:25:27,280 --> 00:25:30,119 Speaker 6: is Al Jazeira does a daily report on what the 466 00:25:30,119 --> 00:25:32,720 Speaker 6: Houthis are up to. But so far they've done nothing 467 00:25:32,760 --> 00:25:37,639 Speaker 6: to interrupt the safety line that the Saudis have. The 468 00:25:37,680 --> 00:25:40,679 Speaker 6: Saturdays have the Adblu pipeline that is a seven million 469 00:25:40,720 --> 00:25:45,159 Speaker 6: varladay pipeline now and that includes crude and product that 470 00:25:45,200 --> 00:25:47,240 Speaker 6: could be interrupted, But the Houthis haven't moved on. 471 00:25:47,600 --> 00:25:50,080 Speaker 2: Edward Morris with us, and we continue with doctor Morris. 472 00:25:50,119 --> 00:25:53,080 Speaker 2: Here's spirited conversation with a gentleman who owns the high 473 00:25:53,119 --> 00:25:57,879 Speaker 2: ground on our geopolitics of Hydrocarbons has worked for decades. 474 00:25:57,920 --> 00:26:00,639 Speaker 2: It's City Group at the Council on Foreign Relations and 475 00:26:00,680 --> 00:26:04,760 Speaker 2: now at her Tree Partners. Alexis christopherus with doctor Morris. 476 00:26:05,600 --> 00:26:07,800 Speaker 5: You know, can you just explain for us and connect 477 00:26:07,840 --> 00:26:10,359 Speaker 5: these dots, because I always thought, well, it's going to 478 00:26:10,440 --> 00:26:12,760 Speaker 5: take a little while. There is this trickle down effect. 479 00:26:12,920 --> 00:26:15,359 Speaker 5: If crude oil goes higher, you don't feel it at 480 00:26:15,359 --> 00:26:19,000 Speaker 5: the gas pump instantaneously. Here I feel like prices really 481 00:26:19,040 --> 00:26:21,280 Speaker 5: have gone up overnight. What is that about? 482 00:26:22,200 --> 00:26:26,600 Speaker 6: That's about what the market could see immediately. We are 483 00:26:28,080 --> 00:26:32,399 Speaker 6: in a world in which inventories have been replenished to 484 00:26:32,440 --> 00:26:34,680 Speaker 6: some degree, but they're lower than the five year average, 485 00:26:35,520 --> 00:26:39,480 Speaker 6: in a world where people in the market by when 486 00:26:40,040 --> 00:26:42,679 Speaker 6: they think they might be a crisis. So people are 487 00:26:42,680 --> 00:26:44,640 Speaker 6: filling their cars up more often than they. 488 00:26:44,520 --> 00:26:46,160 Speaker 5: Have supporting going on. 489 00:26:46,800 --> 00:26:50,520 Speaker 6: A little bit of hoarding. But basically it's the two things. 490 00:26:50,560 --> 00:26:53,560 Speaker 6: One it's the price of crude is going up, so 491 00:26:53,640 --> 00:26:56,280 Speaker 6: the cost of all of those products are going up. 492 00:26:56,600 --> 00:26:59,359 Speaker 6: And the other is for technical reasons, they're going to 493 00:26:59,400 --> 00:27:02,720 Speaker 6: go up higher at a faster rate and a higher 494 00:27:02,840 --> 00:27:05,800 Speaker 6: rate percentage wise than the crude. And that has to 495 00:27:05,800 --> 00:27:08,200 Speaker 6: do with the inability to get the right cruit in 496 00:27:08,240 --> 00:27:10,920 Speaker 6: the right place to produce the right product. So we're 497 00:27:10,960 --> 00:27:14,560 Speaker 6: going to see more product inflation today it's only about 498 00:27:14,560 --> 00:27:17,480 Speaker 6: half of the increase so far. And where the food 499 00:27:17,480 --> 00:27:17,800 Speaker 6: has been. 500 00:27:18,080 --> 00:27:21,880 Speaker 2: Tell us about for example Indonesia and subsidies to their 501 00:27:21,920 --> 00:27:25,680 Speaker 2: people on energy, or Egypt in their subsidies to their 502 00:27:25,720 --> 00:27:29,119 Speaker 2: people on energy. All of that is disrupted. How do 503 00:27:29,160 --> 00:27:32,600 Speaker 2: those I mean we have getogeb get to Gobineth with 504 00:27:32,680 --> 00:27:34,879 Speaker 2: us of Harvard here coming up. Is it going to 505 00:27:34,880 --> 00:27:38,760 Speaker 2: be one big cash ask of the IMF because these 506 00:27:38,880 --> 00:27:41,280 Speaker 2: countries can't continue their subsidies. 507 00:27:41,440 --> 00:27:43,399 Speaker 6: It's going to be a bunch of different asks of 508 00:27:43,440 --> 00:27:47,880 Speaker 6: the IMF. And these countries, some of them have more 509 00:27:47,920 --> 00:27:51,359 Speaker 6: protection than you think. So you look at China to 510 00:27:51,400 --> 00:27:55,479 Speaker 6: begin with, China has lost thirty eight percent in practice, 511 00:27:55,520 --> 00:27:58,240 Speaker 6: thirty eight percent of his supply almost forty percent comes 512 00:27:58,280 --> 00:28:02,640 Speaker 6: from the Middle East, and they are really vulnerable to that. Yes, 513 00:28:02,680 --> 00:28:05,399 Speaker 6: they've got the largest stockpile in the world. And what 514 00:28:05,480 --> 00:28:08,919 Speaker 6: have they done. They have banned the export of critical 515 00:28:08,960 --> 00:28:11,320 Speaker 6: products in order to make sure that they have it 516 00:28:11,440 --> 00:28:15,399 Speaker 6: at home. Japan is going to be doing the same thing, Korea, 517 00:28:15,480 --> 00:28:17,760 Speaker 6: the same thing so we're going to be seeing a 518 00:28:17,960 --> 00:28:25,600 Speaker 6: more critical loss of product because of what's happening in China, India, Indonesia. 519 00:28:25,880 --> 00:28:28,600 Speaker 6: Egypt's a different question to a significant degree. 520 00:28:29,000 --> 00:28:29,160 Speaker 2: Iss. 521 00:28:29,960 --> 00:28:34,000 Speaker 6: Egypt's got production of oil, it's got production of net gas, 522 00:28:34,119 --> 00:28:37,280 Speaker 6: It's got LNG coming from the United States, it's got 523 00:28:37,760 --> 00:28:42,000 Speaker 6: gas coming from Israel. So it's yeah, they have price 524 00:28:42,040 --> 00:28:46,160 Speaker 6: controls and their economy is a mess. But I'd say 525 00:28:46,280 --> 00:28:48,760 Speaker 6: the emerging markets of the world are in deep trouble. 526 00:28:48,840 --> 00:28:52,160 Speaker 2: I got twenty seconds. John emails in from New Jersey 527 00:28:52,280 --> 00:28:55,360 Speaker 2: and says ed Morris is seventy nine in holding. 528 00:28:55,840 --> 00:28:56,320 Speaker 4: How do you. 529 00:28:56,320 --> 00:29:00,000 Speaker 2: Greet the morning every morning? You're in fabulous condition, in shape. 530 00:29:00,240 --> 00:29:03,440 Speaker 2: Is it a secret glass of orange juice? What's the 531 00:29:03,640 --> 00:29:06,040 Speaker 2: Edmore's secret to greet the morning? 532 00:29:06,200 --> 00:29:08,640 Speaker 6: And I'm just so excited to see you when i 533 00:29:08,680 --> 00:29:10,520 Speaker 6: wake up that I look good? 534 00:29:10,600 --> 00:29:16,000 Speaker 2: Answer? That does for us, folks, Edward Morris of Heart 535 00:29:16,040 --> 00:29:19,360 Speaker 2: Tree Partners. We protect the copyright of all of our guests, 536 00:29:19,400 --> 00:29:24,480 Speaker 2: get his work, his essays, his thoughts through Heart Tree Partners, 537 00:29:24,480 --> 00:29:27,440 Speaker 2: and of course accounts on foreign relations. As Oh, doctor Morris, 538 00:29:27,480 --> 00:29:31,280 Speaker 2: thank you so much for coming in stay with us. 539 00:29:31,520 --> 00:29:34,760 Speaker 2: More from Bloomberg Surveillance coming up after this. 540 00:29:42,000 --> 00:29:45,600 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live 541 00:29:45,640 --> 00:29:48,800 Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on 542 00:29:48,880 --> 00:29:52,560 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 543 00:29:52,720 --> 00:29:54,200 Speaker 1: watch US live on YouTube. 544 00:29:54,400 --> 00:29:58,360 Speaker 2: Joining us now, Stephen Major definitive out of Hong Kong 545 00:29:58,920 --> 00:30:02,760 Speaker 2: bravery during the past DMIC Global macro Advisor at Tradition. 546 00:30:03,120 --> 00:30:07,000 Speaker 2: Stephen Major, the leakages from full faith in credit where 547 00:30:07,000 --> 00:30:09,880 Speaker 2: you spend most of your time. If you're in the 548 00:30:09,920 --> 00:30:13,680 Speaker 2: full faith in credit government paper, how do you perceive 549 00:30:13,760 --> 00:30:15,600 Speaker 2: the prism of private credit? 550 00:30:17,160 --> 00:30:19,960 Speaker 7: Yeah, and thanks for reminding me about Hong Kong, because 551 00:30:20,000 --> 00:30:23,400 Speaker 7: it is quite spooky how we have the parallels. Now, 552 00:30:23,480 --> 00:30:26,920 Speaker 7: I remember talking to you from quarantine. I think, yes, 553 00:30:27,040 --> 00:30:30,160 Speaker 7: Hong Kong, and now I'm in Dubai and it's got 554 00:30:30,160 --> 00:30:33,320 Speaker 7: that similar kind of surreal feel. It isn't the quarantine. 555 00:30:34,120 --> 00:30:38,480 Speaker 7: It's a different kind of political backdrop we have. How 556 00:30:38,480 --> 00:30:43,160 Speaker 7: can I put it? But it's similarly uncertain. Everyone's waiting 557 00:30:43,200 --> 00:30:44,680 Speaker 7: on the news, everyone's looking at. 558 00:30:44,640 --> 00:30:45,760 Speaker 2: The price now. 559 00:30:45,880 --> 00:30:50,200 Speaker 7: Now the question about private credit. Look, I'm not an 560 00:30:50,240 --> 00:30:52,360 Speaker 7: expert in that area. I'm not going to pretend to be, 561 00:30:52,760 --> 00:30:55,920 Speaker 7: but at some stage what we are seeing has to 562 00:30:55,960 --> 00:31:01,800 Speaker 7: start spilling into public credit, and credit spreads are very tight. 563 00:31:01,880 --> 00:31:04,680 Speaker 7: So I think that for investors who are exposed to 564 00:31:04,720 --> 00:31:08,880 Speaker 7: credit in general, it's about going up in quality, and 565 00:31:09,080 --> 00:31:12,560 Speaker 7: it may be going for more defensive kind of sectors, 566 00:31:12,600 --> 00:31:16,520 Speaker 7: maybe non cyclical or healthcare, whatever it is. So I 567 00:31:16,560 --> 00:31:19,440 Speaker 7: think it's definitely very interesting. I mean, I mean, if 568 00:31:19,480 --> 00:31:22,320 Speaker 7: this war wasn't going on, I guess we would be 569 00:31:22,320 --> 00:31:25,360 Speaker 7: focusing on the private credit stories that are coming through. 570 00:31:25,840 --> 00:31:26,960 Speaker 2: Clearly that is. 571 00:31:26,920 --> 00:31:28,840 Speaker 7: A focus for the FED right now. If the Fed's 572 00:31:28,920 --> 00:31:32,360 Speaker 7: not looking at this, I'd be very surprised. And we're 573 00:31:32,400 --> 00:31:34,640 Speaker 7: also we're talking about Ai. Don't forget because a few 574 00:31:34,640 --> 00:31:35,960 Speaker 7: weeks ago that was the main theme. 575 00:31:36,120 --> 00:31:37,640 Speaker 2: But anyway, you. 576 00:31:37,640 --> 00:31:40,600 Speaker 5: Know, see, I just want to switch gears just for 577 00:31:40,640 --> 00:31:42,480 Speaker 5: a moment and just ask you what things are like 578 00:31:42,520 --> 00:31:45,680 Speaker 5: there in Dubai because we see this unprecedented attack now 579 00:31:46,200 --> 00:31:50,280 Speaker 5: from Iran on some major sites in Dubai. Just what's 580 00:31:50,320 --> 00:31:51,640 Speaker 5: the feeling like there on the ground. 581 00:31:52,560 --> 00:31:55,880 Speaker 7: Yeah, Well, the context will vary from one person to another, 582 00:31:56,040 --> 00:31:58,520 Speaker 7: and you know it's dangerous to overgeneralize. 583 00:31:59,040 --> 00:32:00,840 Speaker 2: I think for family is with children. 584 00:32:01,280 --> 00:32:04,960 Speaker 7: Then the priority is to get them to safety. So 585 00:32:05,520 --> 00:32:08,960 Speaker 7: I think it's a very different context depending on who 586 00:32:09,000 --> 00:32:11,760 Speaker 7: you are and what your situation and setup is. It 587 00:32:11,880 --> 00:32:15,880 Speaker 7: definitely is a bit eerie. I think that some people 588 00:32:15,880 --> 00:32:19,560 Speaker 7: will be more scared than others. For me personally, it 589 00:32:19,600 --> 00:32:22,120 Speaker 7: looks to me like you've got almost a sudden stop 590 00:32:22,440 --> 00:32:26,400 Speaker 7: going on because there's not that much activity, right, So 591 00:32:26,520 --> 00:32:31,520 Speaker 7: you can imagine tourism and real estate construction, all these 592 00:32:31,720 --> 00:32:34,720 Speaker 7: big sectors that they're all going to be feeling it 593 00:32:34,760 --> 00:32:36,720 Speaker 7: a bit. And I guess whenever you have a shock, 594 00:32:37,240 --> 00:32:42,720 Speaker 7: you get precautionary saving, you get people withdrawing from spending, 595 00:32:43,640 --> 00:32:47,040 Speaker 7: you know, uncertainty, and you can graft. Uncertainty, by the way, 596 00:32:47,240 --> 00:32:54,080 Speaker 7: is correlated with the risk of yields going lower in markets, right, So. 597 00:32:56,160 --> 00:32:56,800 Speaker 2: I think that this. 598 00:32:57,320 --> 00:33:00,000 Speaker 7: Is very special. It's very different to anything I've experience. 599 00:33:00,400 --> 00:33:04,560 Speaker 7: But the parallels with COVID and the surrealness I think 600 00:33:04,600 --> 00:33:05,440 Speaker 7: irrelevant here. 601 00:33:06,080 --> 00:33:08,200 Speaker 5: So let's stick with Iran for a moment here, Stephen, 602 00:33:08,240 --> 00:33:11,760 Speaker 5: and you're saying that stagflation is really the risk now, 603 00:33:11,960 --> 00:33:14,440 Speaker 5: and I'm wondering, are we there right now? This this 604 00:33:15,120 --> 00:33:18,880 Speaker 5: environment of stagnant growth, high unemployment, high inflation and what's 605 00:33:18,880 --> 00:33:21,040 Speaker 5: a FED to do with the FED meeting next week? 606 00:33:21,200 --> 00:33:24,240 Speaker 7: Yeah, well, Alexis, first of all, thank you for reading 607 00:33:24,320 --> 00:33:24,800 Speaker 7: the research. 608 00:33:25,000 --> 00:33:28,720 Speaker 2: That's very like you assume that I don't Steam manager 609 00:33:28,760 --> 00:33:31,240 Speaker 2: assumes that I do not read the recalling you out. 610 00:33:31,520 --> 00:33:34,600 Speaker 2: What are you laughing about over there? John Tucker, mister major, 611 00:33:34,720 --> 00:33:38,760 Speaker 2: please answer the question from Alexis Christoffers who read your research. 612 00:33:39,800 --> 00:33:42,480 Speaker 7: I really don't like using the word stagflation. And I 613 00:33:42,520 --> 00:33:45,720 Speaker 7: think the previous guest was right because we reach for 614 00:33:45,760 --> 00:33:49,240 Speaker 7: the nineteen seventies parallels, and it can be very lazy, 615 00:33:49,320 --> 00:33:52,560 Speaker 7: because again, the economy is very different. The US is 616 00:33:52,600 --> 00:33:56,840 Speaker 7: an oil producer, the demographics are very different. You've got 617 00:33:56,920 --> 00:34:00,920 Speaker 7: a much older population, more wealth in a quality which 618 00:34:00,960 --> 00:34:02,880 Speaker 7: is not something you had in the seventies like this, 619 00:34:03,560 --> 00:34:08,400 Speaker 7: and you've also got more debt, which I think is 620 00:34:08,200 --> 00:34:10,440 Speaker 7: a very important backdrop. 621 00:34:10,480 --> 00:34:12,720 Speaker 2: So I think it's a bit lazy. 622 00:34:12,960 --> 00:34:15,319 Speaker 7: I use the word stacklation in the note because I'm 623 00:34:15,400 --> 00:34:18,920 Speaker 7: simply saying that the probability looks more like a coin 624 00:34:19,000 --> 00:34:22,839 Speaker 7: toss fifty to fifty today two or three pictures, two 625 00:34:22,920 --> 00:34:25,640 Speaker 7: or three weeks ago, it was ten percent or less. Right, 626 00:34:26,120 --> 00:34:28,439 Speaker 7: The kind of tail risk scenario and that right now 627 00:34:28,440 --> 00:34:29,920 Speaker 7: it might be a base case. 628 00:34:30,080 --> 00:34:32,120 Speaker 2: Steve, I got to get this in for Global Wall Street. 629 00:34:32,160 --> 00:34:33,880 Speaker 2: If I look at the ten year real yield like 630 00:34:33,880 --> 00:34:36,080 Speaker 2: a one eighty two, one eighty three, wherever you are, 631 00:34:36,680 --> 00:34:39,080 Speaker 2: you have a tip point where the ten year yield 632 00:34:39,120 --> 00:34:43,480 Speaker 2: breaks out of its color and shows an extended higher 633 00:34:43,719 --> 00:34:47,520 Speaker 2: real yield. Is there a level one ninety two where 634 00:34:47,520 --> 00:34:48,319 Speaker 2: you're focused on. 635 00:34:48,640 --> 00:34:52,560 Speaker 7: Well, yeah, that's another very interesting question, because I was 636 00:34:52,600 --> 00:34:55,239 Speaker 7: looking at real yields and break evens in this note 637 00:34:55,239 --> 00:34:56,160 Speaker 7: that I've just written. 638 00:34:56,760 --> 00:34:57,399 Speaker 2: And of course the. 639 00:34:57,360 --> 00:35:00,160 Speaker 7: Big difference I written now at COVID is that you 640 00:35:00,200 --> 00:35:01,120 Speaker 7: have some real yield. 641 00:35:01,880 --> 00:35:02,720 Speaker 2: So we had. 642 00:35:02,760 --> 00:35:07,360 Speaker 7: Negative three hundred in the UK, negative one hundred in 643 00:35:07,400 --> 00:35:10,960 Speaker 7: the US on those ten years bonds negative because we 644 00:35:10,960 --> 00:35:15,160 Speaker 7: had a zero bound rates. So with inflation you force 645 00:35:15,280 --> 00:35:18,840 Speaker 7: a negative real yield. Now today that real yield covers 646 00:35:18,960 --> 00:35:22,720 Speaker 7: the longer run equilibrium rate, whatever that is. So imagine 647 00:35:22,760 --> 00:35:25,799 Speaker 7: that the FEDS equilibrium is one to two percent for 648 00:35:25,880 --> 00:35:28,960 Speaker 7: the real rate. Right then you are getting that for 649 00:35:29,040 --> 00:35:31,960 Speaker 7: ten years. So it seems to me that the tips 650 00:35:32,000 --> 00:35:34,759 Speaker 7: the inflation link bonds might be a very good investment 651 00:35:35,200 --> 00:35:35,480 Speaker 7: in the. 652 00:35:35,480 --> 00:35:36,160 Speaker 2: US at the moment. 653 00:35:36,239 --> 00:35:39,120 Speaker 7: If you haven't got any, you should buy some. There 654 00:35:39,160 --> 00:35:42,600 Speaker 7: could be a good diversification versus cash. I'm not saying 655 00:35:42,640 --> 00:35:45,239 Speaker 7: go all in. It's just that your tips are something 656 00:35:45,239 --> 00:35:47,160 Speaker 7: that you'd want to add to a portfolio. 657 00:35:47,239 --> 00:35:50,160 Speaker 2: Right here, that's just fantasy. You just got a window 658 00:35:50,239 --> 00:35:54,360 Speaker 2: there into the real world. As Stephen Major's Global Macroadvisor 659 00:35:54,400 --> 00:35:57,080 Speaker 2: tradition out of Dubai this morning. Thank you, Stephen Major. 660 00:35:58,840 --> 00:36:03,040 Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this. 661 00:36:10,280 --> 00:36:13,880 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 662 00:36:13,920 --> 00:36:17,080 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 663 00:36:17,160 --> 00:36:20,560 Speaker 1: Apple Karplay and Android Auto with the Bloomberg Business app, 664 00:36:20,760 --> 00:36:22,480 Speaker 1: or watch us live on YouTube. 665 00:36:22,719 --> 00:36:26,520 Speaker 2: Charles Canter, senior portfolio manager at Newberger Berman, and I'm 666 00:36:26,520 --> 00:36:28,359 Speaker 2: going to bring this over to Charles. I don't want 667 00:36:28,400 --> 00:36:30,480 Speaker 2: to talk to you about the produce section and all foods. 668 00:36:30,480 --> 00:36:32,279 Speaker 2: I don't want to talk to you about what you're 669 00:36:32,280 --> 00:36:37,640 Speaker 2: doing in equities, Charles Canter. Folks lived what we read. 670 00:36:37,840 --> 00:36:41,440 Speaker 2: In the early nineties, a book came out called The 671 00:36:41,600 --> 00:36:45,120 Speaker 2: Quest for Value, and you had to read it with 672 00:36:45,239 --> 00:36:48,799 Speaker 2: a pencil. This is Bennett Stewart, and it was called 673 00:36:48,880 --> 00:36:51,400 Speaker 2: stern Stewart, and you were how did you get a 674 00:36:51,480 --> 00:36:54,800 Speaker 2: job at stern Stewart when they were like the biggest, 675 00:36:54,920 --> 00:36:56,440 Speaker 2: the biggest, the fanciest. 676 00:36:57,239 --> 00:36:59,120 Speaker 8: The truth hill the matter is at the time they 677 00:36:59,160 --> 00:37:03,040 Speaker 8: had two African clients, which was two more than they 678 00:37:03,040 --> 00:37:05,240 Speaker 8: had in the rest of the world, and that felt 679 00:37:05,280 --> 00:37:07,399 Speaker 8: like they needed someone with an accent that could talk 680 00:37:07,440 --> 00:37:11,600 Speaker 8: to the local possesses. And then you know, the principles 681 00:37:11,640 --> 00:37:17,200 Speaker 8: around that is fundamentally right. And thankfully the business you know, 682 00:37:17,440 --> 00:37:20,560 Speaker 8: exploded in the US and the rest of the world. 683 00:37:20,640 --> 00:37:23,520 Speaker 2: So then your thoughts on the dynamics of steren Stewart, 684 00:37:23,600 --> 00:37:28,400 Speaker 2: Way did average cost of capital return and invested capital in? 685 00:37:28,440 --> 00:37:31,200 Speaker 2: What the fancy mag seven guys are doing with forty 686 00:37:31,239 --> 00:37:34,960 Speaker 2: billion dollar bond offerings. You're the guy to answer the question. 687 00:37:35,160 --> 00:37:38,719 Speaker 8: You're very kind. Look, those frameworks are fundamental to have 688 00:37:38,880 --> 00:37:42,440 Speaker 8: approached my time investing life. I don't know if it's 689 00:37:42,480 --> 00:37:45,200 Speaker 8: exactly a religion for me, but it certainly helps us 690 00:37:45,640 --> 00:37:50,040 Speaker 8: frame the conversation and the discussions. Look, I think I 691 00:37:50,040 --> 00:37:52,160 Speaker 8: think it's fascinating. I set you today and I think 692 00:37:52,320 --> 00:37:54,960 Speaker 8: most of the Mag seven is down on the year 693 00:37:55,840 --> 00:37:59,480 Speaker 8: the coll I think concern. Amongst many of them, you highlight, 694 00:37:59,520 --> 00:38:02,719 Speaker 8: which is all this capital they spending. Amazon, for example, 695 00:38:03,200 --> 00:38:06,280 Speaker 8: you know, announced two hundred billion dollars of capital spending 696 00:38:06,320 --> 00:38:08,719 Speaker 8: and the stock went down ten percent. I could think 697 00:38:08,760 --> 00:38:11,200 Speaker 8: of no better company on planet Earth. There would be 698 00:38:11,200 --> 00:38:15,440 Speaker 8: better positions to think through capital allocation and investing as 699 00:38:15,440 --> 00:38:19,040 Speaker 8: they build out global infrastructure than Amazon. But the market 700 00:38:19,040 --> 00:38:19,560 Speaker 8: doesn't like it. 701 00:38:19,560 --> 00:38:21,880 Speaker 2: For now, rip up the script, do it. Let's go 702 00:38:21,920 --> 00:38:24,440 Speaker 2: to Whole Foods. We're in section three year. You know 703 00:38:24,680 --> 00:38:27,040 Speaker 2: Amazon better than anybody I know. You were involved in 704 00:38:27,080 --> 00:38:29,920 Speaker 2: the Whole Foods transaction. How has that thing worked out 705 00:38:29,960 --> 00:38:30,600 Speaker 2: for Amazon? 706 00:38:31,800 --> 00:38:35,160 Speaker 8: I mean, the irony of that question is we live 707 00:38:35,200 --> 00:38:38,520 Speaker 8: in a world where everyone's debating how they're going to 708 00:38:38,600 --> 00:38:43,080 Speaker 8: get AIA build out of the market. Okay, this story 709 00:38:43,120 --> 00:38:48,879 Speaker 8: about Amazon and books and intermedia was to crush mainStreet, 710 00:38:48,960 --> 00:38:52,560 Speaker 8: to crush the bricks and mortar, right, and here we 711 00:38:52,640 --> 00:38:58,640 Speaker 8: are fifteen years after that thought, Amazon bought physical stores 712 00:38:58,960 --> 00:39:02,319 Speaker 8: from Whole Foods. And oh, by the way, today in 713 00:39:02,400 --> 00:39:06,520 Speaker 8: North America, twenty percent of all commerce is done online, 714 00:39:06,800 --> 00:39:10,319 Speaker 8: which is to suggest eighty percent is still done you know, 715 00:39:10,400 --> 00:39:13,880 Speaker 8: in the physical landscape. And and it's just a reminds 716 00:39:13,920 --> 00:39:17,799 Speaker 8: us to say, let's be careful about how weak we 717 00:39:17,880 --> 00:39:20,640 Speaker 8: think the barriers are to many of the income A businesses. 718 00:39:20,640 --> 00:39:23,839 Speaker 2: You misunderstood my question. My question is why when I 719 00:39:24,000 --> 00:39:26,839 Speaker 2: ordered from Whole food So they always out of one percent. 720 00:39:26,560 --> 00:39:32,040 Speaker 8: Milky irony around that transaction, if you want to go 721 00:39:32,120 --> 00:39:37,200 Speaker 8: back and litigated, is Whole Foods had no technology. It 722 00:39:37,320 --> 00:39:41,880 Speaker 8: was ante it hadn't integrated a roll up strategy into 723 00:39:42,760 --> 00:39:46,000 Speaker 8: you know, the organic market. Amazon saw that as an 724 00:39:46,040 --> 00:39:50,080 Speaker 8: opportunity and it was known as whole paycheck. The minute 725 00:39:50,360 --> 00:39:54,040 Speaker 8: Amazon bought Whole Foods, no one worried about the price 726 00:39:54,080 --> 00:39:58,360 Speaker 8: of salmon. Here's the irony. The basket at Whole Foods 727 00:39:58,400 --> 00:40:03,800 Speaker 8: today is among the highest priced baskets in North America. 728 00:40:04,000 --> 00:40:07,319 Speaker 8: It's still significantly more expensive than a basket. 729 00:40:07,040 --> 00:40:08,680 Speaker 5: And if you're an Amazon Prime member. 730 00:40:08,719 --> 00:40:11,520 Speaker 8: Even if you're and so it was brilliant from that 731 00:40:11,600 --> 00:40:12,520 Speaker 8: perspective as well. 732 00:40:12,560 --> 00:40:16,840 Speaker 2: See how it's going on there them up it's good stuff, 733 00:40:16,880 --> 00:40:20,920 Speaker 2: and I kept out I didn't mention avocados Axis CHRISTOPHERUSA 734 00:40:21,000 --> 00:40:23,200 Speaker 2: looks Charles Canter of Newburg Vernment. 735 00:40:23,480 --> 00:40:25,120 Speaker 5: I don't want to make it all about Amazon, but 736 00:40:25,120 --> 00:40:26,560 Speaker 5: I do want to ask this because I started my 737 00:40:26,600 --> 00:40:29,880 Speaker 5: own neighborhood. So they invested big and physical stores through 738 00:40:29,880 --> 00:40:32,320 Speaker 5: Whole Food. Is what happened to Amazon Fresh and Amazon 739 00:40:32,320 --> 00:40:34,720 Speaker 5: ghost stores here because they're closing them. 740 00:40:35,280 --> 00:40:37,319 Speaker 8: Not all of the capital is going to work out. 741 00:40:37,520 --> 00:40:40,920 Speaker 8: And so I mean the definition of convenience has changed 742 00:40:40,960 --> 00:40:43,799 Speaker 8: a lot. Today conveniences cannot order my one percent milk 743 00:40:44,000 --> 00:40:46,080 Speaker 8: from my living room. In the old days, could I 744 00:40:46,120 --> 00:40:49,320 Speaker 8: get my one percent milk, you know, within five minutes 745 00:40:49,360 --> 00:40:52,479 Speaker 8: of my you know, of my apartment. Look, I think 746 00:40:52,520 --> 00:40:55,680 Speaker 8: the thing that doesn't get discussed enough, in my opinion, 747 00:40:56,160 --> 00:40:59,920 Speaker 8: is how remarkable these very large companies are. They have 748 00:41:00,160 --> 00:41:04,640 Speaker 8: invested enormous amounts of dollars into both R and D 749 00:41:04,719 --> 00:41:09,320 Speaker 8: and into capital. In twenty twenty six, these seven companies 750 00:41:09,360 --> 00:41:12,880 Speaker 8: are going to outspend the entire healthcare sector on R 751 00:41:12,920 --> 00:41:16,840 Speaker 8: and D by three times. And so that would suggest 752 00:41:16,880 --> 00:41:19,400 Speaker 8: to you that they're building, you know, lots and lots 753 00:41:19,440 --> 00:41:23,880 Speaker 8: of optionality into their businesses and the idea that these 754 00:41:24,080 --> 00:41:28,040 Speaker 8: these businesses are going to win, especially in an environment 755 00:41:28,480 --> 00:41:31,759 Speaker 8: that is as uncertain as it is today, because they 756 00:41:31,800 --> 00:41:35,640 Speaker 8: have so much flexibility to invest to both for the 757 00:41:35,719 --> 00:41:38,280 Speaker 8: future and to deliver from customers. 758 00:41:38,480 --> 00:41:40,920 Speaker 2: Charles Canter with US is we have economic data coming 759 00:41:40,920 --> 00:41:44,240 Speaker 2: out here. Futures deteriorate negative forty eight down futures negative 760 00:41:44,560 --> 00:41:47,160 Speaker 2: for thirty five. The VIS gives some tension twenty four 761 00:41:47,239 --> 00:41:50,000 Speaker 2: level out to twenty five point eighty three up one 762 00:41:50,000 --> 00:41:53,600 Speaker 2: point six to zero points. Claims is showing the glorified 763 00:41:53,680 --> 00:41:57,000 Speaker 2: job market two hundred and thirteen one thousand, pretty much 764 00:41:57,040 --> 00:42:01,279 Speaker 2: stasis there as well as a four whe moving average 765 00:42:01,400 --> 00:42:04,840 Speaker 2: where I see the tension lesson housing and the data 766 00:42:04,880 --> 00:42:10,040 Speaker 2: on imports and exports. This is ancient for January shows 767 00:42:10,239 --> 00:42:14,400 Speaker 2: all sorts of tariff effect. Charles Canter on the tariff 768 00:42:14,719 --> 00:42:19,320 Speaker 2: flow through into revenue and earning dynamics and free cash 769 00:42:19,360 --> 00:42:20,319 Speaker 2: flow dynamics. 770 00:42:20,600 --> 00:42:24,080 Speaker 8: Look, I think, I think, I think many companies absorbed 771 00:42:24,120 --> 00:42:28,680 Speaker 8: a lot of the tariff themselves and passed on you know, 772 00:42:28,880 --> 00:42:33,120 Speaker 8: very little to the customer. And and I think it 773 00:42:33,160 --> 00:42:36,240 Speaker 8: speaks to the quality you know of the management teams 774 00:42:36,920 --> 00:42:39,560 Speaker 8: and the scale and flexibility of their businesses that they 775 00:42:39,560 --> 00:42:43,200 Speaker 8: can do that, no doubt. You know, input costs on 776 00:42:43,280 --> 00:42:45,719 Speaker 8: tariff so high than there would you know otherwise be 777 00:42:45,840 --> 00:42:48,360 Speaker 8: but when you're in a market as competitive as the 778 00:42:48,480 --> 00:42:51,839 Speaker 8: US market, you don't get the full you know, flow 779 00:42:51,880 --> 00:42:54,080 Speaker 8: through effects, and the same is going to be true 780 00:42:54,080 --> 00:42:57,360 Speaker 8: on the energy side, which is is what the market's 781 00:42:57,440 --> 00:42:59,680 Speaker 8: kind of moniacally focused on today. 782 00:43:00,280 --> 00:43:02,520 Speaker 5: What about our upcoming earning season. Do you think we're 783 00:43:02,520 --> 00:43:05,000 Speaker 5: going to hear the word tariff in a lot of 784 00:43:05,040 --> 00:43:06,320 Speaker 5: those earnings calls? 785 00:43:06,920 --> 00:43:07,160 Speaker 2: No. 786 00:43:07,840 --> 00:43:10,120 Speaker 8: I appreciate you bringing up the earning story, because I 787 00:43:10,120 --> 00:43:11,680 Speaker 8: don't think it gets discussed enough. 788 00:43:12,640 --> 00:43:13,160 Speaker 2: Earnings. 789 00:43:13,200 --> 00:43:15,719 Speaker 8: We've just finished the first quarter. That's the only data 790 00:43:15,760 --> 00:43:19,239 Speaker 8: we have for now. Revenues up nine percent, earnings up 791 00:43:19,400 --> 00:43:23,279 Speaker 8: fourteen percent, seventy five percent of all the companies either 792 00:43:23,320 --> 00:43:29,279 Speaker 8: beat or maintained, and it will spread mostly in you know, 793 00:43:29,360 --> 00:43:33,040 Speaker 8: the technology sector, then of course the industrials. This has 794 00:43:33,120 --> 00:43:36,480 Speaker 8: been a kind of an earning renaissance over the last 795 00:43:36,520 --> 00:43:39,439 Speaker 8: five years and it's and it's the strength of those 796 00:43:39,520 --> 00:43:42,480 Speaker 8: earnings and those cash flows that I think, you know, 797 00:43:42,520 --> 00:43:45,600 Speaker 8: should give investors comfort as we as we go through 798 00:43:45,600 --> 00:43:47,520 Speaker 8: the choppiness of war at the margin. 799 00:43:47,640 --> 00:43:50,879 Speaker 2: Can you inquire shares in these hyper scale or big 800 00:43:50,920 --> 00:43:51,879 Speaker 2: tech companies this. 801 00:43:51,880 --> 00:43:56,399 Speaker 8: Morning, Yes, as long as your view is longer than 802 00:43:56,440 --> 00:43:59,399 Speaker 8: a week, a month and a quarter. And I think 803 00:43:59,560 --> 00:44:01,440 Speaker 8: you know, as you think about the war for example, 804 00:44:01,480 --> 00:44:05,440 Speaker 8: I think the war and and and investing have a 805 00:44:05,440 --> 00:44:10,520 Speaker 8: lot of similarities. On the short term, life feels very uncomfortable, 806 00:44:10,800 --> 00:44:15,440 Speaker 8: very uncertain and unpredictable. And you've seen that today and 807 00:44:15,560 --> 00:44:20,320 Speaker 8: over the long term, the best businesses, the best capitalized businesses, 808 00:44:20,360 --> 00:44:24,880 Speaker 8: the best businesses that can allocate capital like the strongest armies, 809 00:44:25,080 --> 00:44:26,359 Speaker 8: will ultimately win out. 810 00:44:27,280 --> 00:44:30,239 Speaker 2: Charles Canter, thank you so much, really really appreciate it. 811 00:44:30,520 --> 00:44:35,360 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 812 00:44:35,480 --> 00:44:39,279 Speaker 1: and anywhere else you get your podcasts. 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