1 00:00:05,160 --> 00:00:08,480 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 2 00:00:08,520 --> 00:00:12,360 Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day 3 00:00:12,400 --> 00:00:16,840 Speaker 1: for insight from the best and economics, geopolitics, finance and investment. 4 00:00:17,280 --> 00:00:22,079 Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 5 00:00:22,320 --> 00:00:26,600 Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com, 6 00:00:26,640 --> 00:00:30,440 Speaker 1: the Bloomberg Terminal and the Bloomberg Business App. By Michael 7 00:00:30,520 --> 00:00:34,400 Speaker 1: joins us right now. He is with JP Morgan Asset Management, 8 00:00:34,440 --> 00:00:38,200 Speaker 1: Global Head of well Equities, bonds, Currencies, Commodities. I don't 9 00:00:38,200 --> 00:00:39,320 Speaker 1: know everything else. 10 00:00:39,640 --> 00:00:40,560 Speaker 2: Let's stick with bonds. 11 00:00:40,600 --> 00:00:41,279 Speaker 3: Let's stay with. 12 00:00:41,280 --> 00:00:46,440 Speaker 1: Bonds for right now. Do you buy across the curve 13 00:00:46,640 --> 00:00:51,120 Speaker 1: right now? Because simplistically it is going to be price up, 14 00:00:51,400 --> 00:00:51,960 Speaker 1: yield down. 15 00:00:52,600 --> 00:00:56,160 Speaker 2: So the product launch of the year isn't chat GPT, 16 00:00:56,560 --> 00:01:00,880 Speaker 2: it's the bond market. It's the repricing of bond just 17 00:01:00,960 --> 00:01:04,520 Speaker 2: across the system. And we are seeing money come in. 18 00:01:04,720 --> 00:01:07,880 Speaker 2: And even though there's a soft landing cap, there's concerns 19 00:01:07,920 --> 00:01:11,600 Speaker 2: about inflation, there's concerns that the Fed could keep rising 20 00:01:11,720 --> 00:01:17,600 Speaker 2: rates indefinitely. Actually, the highs from October almost a year ago, 21 00:01:17,959 --> 00:01:20,679 Speaker 2: have held pretty well in the long end of the 22 00:01:20,760 --> 00:01:24,200 Speaker 2: curve five tens and thirties. So it's not just me 23 00:01:24,280 --> 00:01:27,320 Speaker 2: saying take advantage of the repricing of the bond market. 24 00:01:27,560 --> 00:01:31,680 Speaker 2: We have clients left, right and centered, domestically, foreign countries, 25 00:01:32,120 --> 00:01:36,679 Speaker 2: retail platforms, institutional platforms looking at where to get into 26 00:01:36,680 --> 00:01:38,720 Speaker 2: this bond market, and they are putting money to work. 27 00:01:38,720 --> 00:01:41,440 Speaker 4: Are they chasing income, they chase in total return, worried 28 00:01:41,440 --> 00:01:43,640 Speaker 4: about a slow down, taken on duration. How does the 29 00:01:43,720 --> 00:01:46,279 Speaker 4: nature of that money shift in the last few months, Yes, 30 00:01:47,040 --> 00:01:48,320 Speaker 4: exactly already above. 31 00:01:48,640 --> 00:01:51,760 Speaker 2: They're doing all of those things, and it depends where 32 00:01:51,800 --> 00:01:57,120 Speaker 2: they're coming from. Wealth management platforms are looking at municipal bonds, 33 00:01:57,160 --> 00:01:59,840 Speaker 2: they're looking at corporate debt, they're looking at treasury debt, 34 00:02:00,080 --> 00:02:03,640 Speaker 2: and they're putting ladders of maturities in place. So they're 35 00:02:03,640 --> 00:02:07,000 Speaker 2: buying bonds out to ten years with maturities every six 36 00:02:07,080 --> 00:02:09,639 Speaker 2: to nine months, something like that. So they just want 37 00:02:09,680 --> 00:02:14,560 Speaker 2: to get into the bond market before these yields disappear. Institutions, 38 00:02:14,639 --> 00:02:19,079 Speaker 2: whether they're insurance companies or their pension funds, they're looking 39 00:02:19,080 --> 00:02:22,440 Speaker 2: at their liabilities having deflated, and they're looking to put 40 00:02:22,480 --> 00:02:24,760 Speaker 2: money into the long end of the market, and you 41 00:02:24,840 --> 00:02:27,400 Speaker 2: have a whole host of others that are looking for 42 00:02:27,480 --> 00:02:30,520 Speaker 2: total returns, so you can do pretty much everything in 43 00:02:30,520 --> 00:02:33,079 Speaker 2: the bond market. We haven't seen this since two thousand 44 00:02:33,120 --> 00:02:34,280 Speaker 2: and six, two thousand and seven. 45 00:02:34,360 --> 00:02:36,200 Speaker 4: There's only one sentence I heard in all of that 46 00:02:36,440 --> 00:02:39,560 Speaker 4: before these yields disappear. These yields aren't disappearing. They've been 47 00:02:39,600 --> 00:02:42,440 Speaker 4: quite stubbornly high through some and that's been unexpected for you. 48 00:02:42,520 --> 00:02:44,480 Speaker 4: I know, Bob, relative to your call, what do you 49 00:02:44,480 --> 00:02:45,200 Speaker 4: think is behind that? 50 00:02:46,000 --> 00:02:48,240 Speaker 2: Well? I think there are a couple of things. This 51 00:02:48,800 --> 00:02:52,240 Speaker 2: reminds me a lot of the second half of twenty 52 00:02:52,280 --> 00:02:56,440 Speaker 2: twenty one, when yields were ridiculously low. The Fed was 53 00:02:56,480 --> 00:03:01,280 Speaker 2: talking about transitory, the market bought it. We're looking at 54 00:03:01,280 --> 00:03:04,800 Speaker 2: inflation going up and saying if they leave rates where 55 00:03:04,840 --> 00:03:08,600 Speaker 2: they are, inflation's going to continue to accelerate. Now we're 56 00:03:08,639 --> 00:03:11,720 Speaker 2: looking at rates very high, we're looking at very high 57 00:03:11,800 --> 00:03:15,640 Speaker 2: real yields, We're looking at inflation coming down a lot, 58 00:03:15,880 --> 00:03:19,240 Speaker 2: and the Fed is talking about leaving rates where they 59 00:03:19,280 --> 00:03:23,359 Speaker 2: are indefinitely higher for longer. I want to see the 60 00:03:23,400 --> 00:03:28,280 Speaker 2: summary of economic projections. Tom is it tomorrow? Next Wednesday, 61 00:03:28,320 --> 00:03:32,360 Speaker 2: next Wednesday. Yeah, and the infamous dot plot. They've got 62 00:03:32,440 --> 00:03:35,360 Speaker 2: one hundred basis points of rate cuts priced in for 63 00:03:35,440 --> 00:03:39,760 Speaker 2: next year from the last dot plot, and they've also 64 00:03:39,840 --> 00:03:43,720 Speaker 2: got inflation coming down, So they're acknowledging that if they 65 00:03:43,800 --> 00:03:47,040 Speaker 2: key rates where they are and inflation comes down, then 66 00:03:47,120 --> 00:03:51,440 Speaker 2: policy rates become progressively tighter and the economy may not 67 00:03:51,560 --> 00:03:54,320 Speaker 2: be able to withstand that. I think what's keeping rates 68 00:03:54,320 --> 00:03:57,120 Speaker 2: where they are is the market is believing the FED 69 00:03:57,200 --> 00:03:59,960 Speaker 2: rhetoric and not believing that they may have to cut rate. 70 00:04:00,240 --> 00:04:02,040 Speaker 4: Your previous call of the start of summer was cut 71 00:04:02,120 --> 00:04:05,320 Speaker 4: by September. Clearly they won't be cutting a week tomorrow. 72 00:04:05,600 --> 00:04:07,960 Speaker 4: I want to understand from your perspective, what's going to 73 00:04:07,960 --> 00:04:10,200 Speaker 4: deliver those cuts. And when you're thinking about yields we 74 00:04:10,240 --> 00:04:13,240 Speaker 4: haven't seen since six oh seven. Some people might be 75 00:04:13,280 --> 00:04:16,040 Speaker 4: listening this morning thinking, well, bad things happened after that, 76 00:04:16,440 --> 00:04:18,599 Speaker 4: the bad things happen now. And of course I'm not 77 00:04:18,640 --> 00:04:20,880 Speaker 4: saying on the same scale to the same magnitude of 78 00:04:20,880 --> 00:04:23,240 Speaker 4: what we saw in our way, but are you anticipating 79 00:04:23,320 --> 00:04:23,880 Speaker 4: bad things? 80 00:04:24,360 --> 00:04:27,880 Speaker 2: So at the start of this year we thought something 81 00:04:28,040 --> 00:04:30,760 Speaker 2: like recession by the end of the year. Then we 82 00:04:30,839 --> 00:04:34,560 Speaker 2: had the regional banking crisis, and we thought, well, that's 83 00:04:34,560 --> 00:04:37,960 Speaker 2: going to bring recession forward a few months, so they 84 00:04:38,000 --> 00:04:41,480 Speaker 2: should be cutting by September. And I think what we 85 00:04:41,960 --> 00:04:46,240 Speaker 2: looked at and probably got wrong was the backstop that 86 00:04:46,520 --> 00:04:49,200 Speaker 2: the central banks the FED put in place, the Bank 87 00:04:49,279 --> 00:04:52,599 Speaker 2: Term Funding Program. And we likened it more to bear 88 00:04:52,680 --> 00:04:55,680 Speaker 2: Stearn's ballot. It probably was more like TARP. It just 89 00:04:55,800 --> 00:05:00,440 Speaker 2: created more liquidity, backstopped the entire banking system. These things 90 00:05:00,480 --> 00:05:04,080 Speaker 2: are still hiding in plain sight. The regional banking crisis 91 00:05:04,320 --> 00:05:06,960 Speaker 2: hasn't gone away. I wish you had asked Bill Dudley 92 00:05:06,960 --> 00:05:09,599 Speaker 2: when he was patting himself on the back and the 93 00:05:09,640 --> 00:05:11,480 Speaker 2: FED about no, no, this is all in the rear 94 00:05:11,560 --> 00:05:15,000 Speaker 2: view mirror. Really look at the Bank Term Funding program. 95 00:05:15,040 --> 00:05:20,160 Speaker 2: It's quietly increased in size nine consecutive the last nine 96 00:05:20,200 --> 00:05:23,600 Speaker 2: consecutive weeks. It's at one hundred and eight billion. So 97 00:05:23,720 --> 00:05:26,920 Speaker 2: the regional banks are not working down. They're borrowing and 98 00:05:26,960 --> 00:05:29,520 Speaker 2: that's coming in at five and a half percent. That's 99 00:05:29,680 --> 00:05:34,280 Speaker 2: telling us that they still need cash available to meet 100 00:05:34,320 --> 00:05:37,200 Speaker 2: depositor outflows. So I think there are plenty of things 101 00:05:37,240 --> 00:05:40,520 Speaker 2: out there that are slowing down growth and inflationary pressures 102 00:05:40,520 --> 00:05:44,040 Speaker 2: are coming down for the FED to pause. We've said 103 00:05:44,040 --> 00:05:47,839 Speaker 2: for a long time, you need disinflation and inflation to 104 00:05:47,880 --> 00:05:51,640 Speaker 2: come down to levels they're comfortable with. I think tomorrow 105 00:05:52,320 --> 00:05:55,839 Speaker 2: we're going to get the third consecutive core CPI print 106 00:05:55,920 --> 00:05:59,000 Speaker 2: at point two. That's enough for them to pause. With 107 00:05:59,120 --> 00:06:02,039 Speaker 2: a lot of the other disinflation that we're seeing. I 108 00:06:02,080 --> 00:06:04,560 Speaker 2: think this time for them to cut rates, they're going 109 00:06:04,600 --> 00:06:09,240 Speaker 2: to have to see unemployment go up. So it's possible 110 00:06:09,360 --> 00:06:13,400 Speaker 2: that they may actually tip the economy into recession first 111 00:06:13,680 --> 00:06:16,320 Speaker 2: before they start cutting rates, which would be something new 112 00:06:16,360 --> 00:06:19,279 Speaker 2: for them. It would be positively ECB. 113 00:06:19,120 --> 00:06:22,520 Speaker 5: Like okay, But going forward, then, how does this cohere 114 00:06:22,520 --> 00:06:25,680 Speaker 5: with a three percent yield curve across the board, a 115 00:06:25,720 --> 00:06:28,720 Speaker 5: flat yield curve in the near future by the end 116 00:06:28,760 --> 00:06:31,760 Speaker 5: of this year or even by midyear next year. If 117 00:06:31,760 --> 00:06:34,440 Speaker 5: you have a FED that's being patient, not willing to cut, 118 00:06:34,560 --> 00:06:37,159 Speaker 5: and you have economic data that's coming in hotter than. 119 00:06:37,040 --> 00:06:41,560 Speaker 2: Expected, well, this is the FED that promised us transitory 120 00:06:41,640 --> 00:06:44,240 Speaker 2: and then within a couple months change their mind and 121 00:06:44,279 --> 00:06:47,159 Speaker 2: start hiking rates. We think we're going to see the 122 00:06:47,200 --> 00:06:50,240 Speaker 2: same thing this time. They're going to tell us that 123 00:06:50,800 --> 00:06:53,560 Speaker 2: they're going to keep rates higher for longer until inflation 124 00:06:54,120 --> 00:06:57,880 Speaker 2: is at their target. But the magnitude of the slowdown 125 00:06:57,920 --> 00:07:01,279 Speaker 2: we're seeing across the board tells us that will probably 126 00:07:01,360 --> 00:07:05,400 Speaker 2: still be hitting recession around year end, so they'll be 127 00:07:05,400 --> 00:07:09,440 Speaker 2: cutting rates by then. So I'm still incredibly comfortable that 128 00:07:09,480 --> 00:07:11,560 Speaker 2: we'll see three percent across the curve. 129 00:07:11,680 --> 00:07:14,200 Speaker 4: You think Hyphalonger is just a bad call, or do 130 00:07:14,200 --> 00:07:15,960 Speaker 4: you think they're just misleading us that that's what they 131 00:07:16,000 --> 00:07:17,480 Speaker 4: want to signal currently. 132 00:07:18,120 --> 00:07:21,880 Speaker 2: I think it's what they have to signal because they 133 00:07:21,880 --> 00:07:25,080 Speaker 2: were already wrong once on inflation with the promise of 134 00:07:25,120 --> 00:07:29,680 Speaker 2: transitory they can't be wrong again. They're telling us that 135 00:07:29,680 --> 00:07:35,080 Speaker 2: they're prioritizing inflation overgrowth, and that means, like the ECB, 136 00:07:35,280 --> 00:07:38,040 Speaker 2: you're willing to make the economy a casualty. 137 00:07:38,200 --> 00:07:40,280 Speaker 6: I guess what I'm getting at is do you believe them? 138 00:07:40,600 --> 00:07:41,440 Speaker 2: Do I believe Do you. 139 00:07:41,440 --> 00:07:45,080 Speaker 4: Believe they're prioritizing inflation overgrowth or it's a sign of weakness? 140 00:07:45,080 --> 00:07:45,960 Speaker 6: Do you think the back away? 141 00:07:46,400 --> 00:07:50,760 Speaker 2: Well? I think the consumer is incredibly stretched right now. 142 00:07:51,200 --> 00:07:54,120 Speaker 2: When you look at at the Beige book, you're seeing 143 00:07:54,160 --> 00:07:57,440 Speaker 2: signs of that all over the place. They're talking about 144 00:07:58,120 --> 00:08:01,040 Speaker 2: the last bit of pent up spending on leisure travel. 145 00:08:01,400 --> 00:08:04,840 Speaker 2: They're talking about consumers that are trying to maintain their 146 00:08:04,920 --> 00:08:07,760 Speaker 2: level of spending since their excess savings have run out 147 00:08:07,960 --> 00:08:11,760 Speaker 2: by putting stuff on borrowing, which is a very high 148 00:08:11,760 --> 00:08:14,720 Speaker 2: way to finance yourself. So things are going to slow 149 00:08:14,760 --> 00:08:18,160 Speaker 2: down pretty quickly. We look at news coming out of 150 00:08:18,280 --> 00:08:23,480 Speaker 2: Truest where they're starting to address cost pressures by laying 151 00:08:23,560 --> 00:08:27,640 Speaker 2: people off. So the labor market doesn't look as robust 152 00:08:27,720 --> 00:08:31,800 Speaker 2: as that mid threes unemployment rate. We think that starts 153 00:08:31,840 --> 00:08:34,560 Speaker 2: to go up and it will force the Fed's hand. 154 00:08:34,720 --> 00:08:38,160 Speaker 1: Boy, Michael, JP Morgan, asset management, what I was thinking about, 155 00:08:38,320 --> 00:08:41,200 Speaker 1: and this goes back to you. The acclaimed toughest resume, 156 00:08:41,400 --> 00:08:45,439 Speaker 1: toughest admit in banking, the analyst program of JP Morgan 157 00:08:46,200 --> 00:08:50,160 Speaker 1: is the real yield we're at right now. Began within 158 00:08:50,200 --> 00:08:52,160 Speaker 1: the data that we have in the modern age in 159 00:08:52,200 --> 00:08:56,760 Speaker 1: two thousand and three, and that a huge body of 160 00:08:56,800 --> 00:09:01,640 Speaker 1: our audience has never lived this ray structure and all 161 00:09:01,679 --> 00:09:04,719 Speaker 1: of the follow on to it. What's your council? Does 162 00:09:04,760 --> 00:09:07,600 Speaker 1: someone say, under thirty seven, thirty six, thirty eight years 163 00:09:07,640 --> 00:09:10,880 Speaker 1: old of how to address a whole new world? After all? 164 00:09:11,559 --> 00:09:14,800 Speaker 2: Well, I think you have to understand that markets go 165 00:09:14,880 --> 00:09:18,480 Speaker 2: through cycles. The cycles can be very long. Probably the 166 00:09:18,559 --> 00:09:22,839 Speaker 2: last fifteen twenty years weren't normal. They were the distorted years. 167 00:09:22,880 --> 00:09:26,000 Speaker 2: They were the years that the baby boomers wrecked by 168 00:09:26,080 --> 00:09:30,000 Speaker 2: overleveraging the property market, crashing it and then taking a 169 00:09:30,080 --> 00:09:33,400 Speaker 2: decade to repair. We think we're going back to an 170 00:09:33,520 --> 00:09:37,240 Speaker 2: environment that is more normal, where there is a demand 171 00:09:37,280 --> 00:09:40,400 Speaker 2: for capital, there's a use for capital, it's productive, and 172 00:09:40,440 --> 00:09:43,400 Speaker 2: there will be a cost for capital again, but you 173 00:09:43,440 --> 00:09:45,600 Speaker 2: don't get there all at once. I think a five 174 00:09:45,720 --> 00:09:48,640 Speaker 2: hundred and twenty five basis point rate hike is a 175 00:09:48,679 --> 00:09:51,400 Speaker 2: shock to the system. It will slow things down. We 176 00:09:51,440 --> 00:09:53,920 Speaker 2: think the next move coming out of the Fed will 177 00:09:53,960 --> 00:09:56,240 Speaker 2: be to cut rates. We think you go back to 178 00:09:56,240 --> 00:09:58,400 Speaker 2: two and a half to three percent. Yeah, the next 179 00:09:58,440 --> 00:10:01,000 Speaker 2: tightening cycle, maybe they have to go to six percent 180 00:10:01,360 --> 00:10:04,640 Speaker 2: and you start putting in place the mirror image of 181 00:10:04,760 --> 00:10:08,480 Speaker 2: what we saw in the late eighties and the nineties 182 00:10:08,520 --> 00:10:12,240 Speaker 2: with falling rates. You mean now see rising rates, So 183 00:10:12,679 --> 00:10:15,080 Speaker 2: we have to get them used to. Inflation can be 184 00:10:15,200 --> 00:10:18,280 Speaker 2: real and markets have to price that in, and central 185 00:10:18,320 --> 00:10:20,360 Speaker 2: banks don't always value out. 186 00:10:20,520 --> 00:10:22,840 Speaker 5: There's a lack of clarity in terms of how central 187 00:10:22,840 --> 00:10:25,840 Speaker 5: banks really understand inflation. They say they look at core 188 00:10:26,240 --> 00:10:28,720 Speaker 5: and then headline starts to move sentiment, and then they 189 00:10:28,720 --> 00:10:31,280 Speaker 5: start going after that, how much to higher oil prices? 190 00:10:31,280 --> 00:10:35,000 Speaker 5: Materially higher oil prices play into the risk that the 191 00:10:35,000 --> 00:10:36,600 Speaker 5: FED remains higher for longer. 192 00:10:37,840 --> 00:10:40,720 Speaker 2: There used to be a wonderful chart everyone would dust 193 00:10:40,760 --> 00:10:44,360 Speaker 2: off every time oil prices went up that oil shocks 194 00:10:44,400 --> 00:10:48,480 Speaker 2: create recessions, and it had. It was another one of 195 00:10:48,520 --> 00:10:53,360 Speaker 2: these one hundred percent perfect predictors. And we're getting another 196 00:10:53,520 --> 00:10:57,880 Speaker 2: oil shock at exactly the wrong time, after credit conditions 197 00:10:57,920 --> 00:11:01,760 Speaker 2: have tightened dramatically, after the cost of funding businesses and 198 00:11:01,880 --> 00:11:05,560 Speaker 2: households has gone up a multiple. We're talking about business 199 00:11:05,559 --> 00:11:08,920 Speaker 2: and households having to spend on energy at a time 200 00:11:09,320 --> 00:11:12,120 Speaker 2: when their real incomes are much lower, so they're going 201 00:11:12,160 --> 00:11:14,920 Speaker 2: to have to cut back somewhere else. I think it 202 00:11:15,040 --> 00:11:18,600 Speaker 2: actually is another one of these things that's a warning 203 00:11:18,679 --> 00:11:21,800 Speaker 2: that recession may need more present than the market things. 204 00:11:21,960 --> 00:11:24,200 Speaker 5: When does it count as an oil shock because we 205 00:11:24,240 --> 00:11:26,880 Speaker 5: are seeing prices normalized, They're not necessarily going to the 206 00:11:26,960 --> 00:11:29,880 Speaker 5: highest that we've seen of this particular cycle, but they 207 00:11:29,880 --> 00:11:32,480 Speaker 5: are the highest going back to last year. What's your 208 00:11:32,520 --> 00:11:35,959 Speaker 5: tipping point for when it is prohibitive of growth. 209 00:11:36,559 --> 00:11:40,480 Speaker 2: Well, you have to look at the cost of production 210 00:11:41,080 --> 00:11:43,440 Speaker 2: and the cost of getting a barrel out of the ground. 211 00:11:43,840 --> 00:11:46,760 Speaker 2: And where we are now, and what we're seeing is 212 00:11:46,800 --> 00:11:51,040 Speaker 2: that Opek is telling us maybe demand isn't quite there, 213 00:11:51,320 --> 00:11:55,079 Speaker 2: but they're not willing to live with much lower oil prices. 214 00:11:55,240 --> 00:11:59,800 Speaker 2: They want the volume to replace the demand. It's not there, 215 00:12:00,040 --> 00:12:02,160 Speaker 2: they're going to make it back with pricing, and they're 216 00:12:02,200 --> 00:12:05,079 Speaker 2: going to push prices up. We'll see how high it goes. 217 00:12:05,440 --> 00:12:09,040 Speaker 2: But for me, it's another sort of yellow warning flag 218 00:12:09,080 --> 00:12:11,839 Speaker 2: out there. I don't think it helps the economy at all. 219 00:12:12,120 --> 00:12:16,280 Speaker 2: I think it's another thing that squeezes an already stretched 220 00:12:16,440 --> 00:12:17,800 Speaker 2: consumer bracket. 221 00:12:17,800 --> 00:12:20,800 Speaker 1: The inflation adjusted yield right now, at what level up 222 00:12:20,840 --> 00:12:23,440 Speaker 1: above two percent, does it really begin to impinge on 223 00:12:23,480 --> 00:12:25,480 Speaker 1: the system. 224 00:12:26,520 --> 00:12:31,400 Speaker 2: I think, coming off of several years of infinite free money, 225 00:12:31,760 --> 00:12:36,000 Speaker 2: we're seeing it bite right now. We're seeing it in 226 00:12:36,040 --> 00:12:40,000 Speaker 2: the housing market, We're seeing it in the cost of 227 00:12:40,080 --> 00:12:44,559 Speaker 2: funding credit card purchases. You look at businesses, they front 228 00:12:44,640 --> 00:12:47,439 Speaker 2: end loaded a lot of they're borrowing, but now they're 229 00:12:47,480 --> 00:12:52,000 Speaker 2: going back and they're addressing other cost pressures and they're 230 00:12:52,040 --> 00:12:55,000 Speaker 2: not doing it by just borrowing more and absorbing the 231 00:12:55,040 --> 00:12:58,480 Speaker 2: cost pressures. They're actually starting to cut costs, So I 232 00:12:58,520 --> 00:13:00,880 Speaker 2: think it is now starting to buy. I don't think 233 00:13:01,360 --> 00:13:04,760 Speaker 2: long and variable lags to monetary policy. That law has 234 00:13:04,840 --> 00:13:08,920 Speaker 2: been repealed. I think it still takes time and we're 235 00:13:08,960 --> 00:13:11,320 Speaker 2: still in the early stages of it. I think the 236 00:13:11,360 --> 00:13:13,160 Speaker 2: next twelve months are going to be pretty painful. 237 00:13:13,240 --> 00:13:14,880 Speaker 5: What would you have to say to make you change 238 00:13:14,880 --> 00:13:15,240 Speaker 5: your view. 239 00:13:16,840 --> 00:13:21,680 Speaker 2: I'd have to see a legitimate reacceleration of core inflation, 240 00:13:22,280 --> 00:13:25,520 Speaker 2: and that would tell me that we're in a different regime. 241 00:13:25,600 --> 00:13:29,400 Speaker 2: Maybe the X y Z generation is large enough, they're 242 00:13:29,400 --> 00:13:33,679 Speaker 2: earning enough, they're spending enough that it is driving an 243 00:13:33,679 --> 00:13:37,199 Speaker 2: economy that is going to a new high and central 244 00:13:37,200 --> 00:13:40,319 Speaker 2: banks do have to come in and really dial down 245 00:13:40,760 --> 00:13:44,240 Speaker 2: the desire of the consumer to spend. But right now 246 00:13:44,360 --> 00:13:45,400 Speaker 2: we're not seeing that. 247 00:13:45,480 --> 00:13:47,880 Speaker 6: Are you googling the X y Z generation? Is that 248 00:13:47,920 --> 00:13:48,600 Speaker 6: what you just did? 249 00:13:49,280 --> 00:13:49,480 Speaker 1: Yeah? 250 00:13:50,000 --> 00:13:50,800 Speaker 6: What do you have to say? 251 00:13:51,080 --> 00:13:53,680 Speaker 1: What is the X y Z generation? I've never heard of. 252 00:13:53,679 --> 00:13:54,760 Speaker 7: It, x y Z. 253 00:13:55,200 --> 00:13:59,200 Speaker 5: It's the X the Y one and the Z one. 254 00:13:58,440 --> 00:14:01,960 Speaker 6: Yeah gen x ok, all like combined together. 255 00:14:02,760 --> 00:14:06,320 Speaker 2: Yeah, so think the ninety one verse, the ninety one. 256 00:14:06,440 --> 00:14:09,960 Speaker 2: Verse are now the largest population cohort and they're thirty 257 00:14:09,960 --> 00:14:12,960 Speaker 2: two years old. So that's the one. And if we 258 00:14:13,040 --> 00:14:16,160 Speaker 2: go back to the financial crisis, they were seventeen years 259 00:14:16,160 --> 00:14:18,520 Speaker 2: old and we wondered, how would we get through this 260 00:14:18,679 --> 00:14:22,360 Speaker 2: before they replaced the baby boomer as the dominant consumer. 261 00:14:22,680 --> 00:14:24,680 Speaker 2: Now we're there. That's where we could be wrong. I 262 00:14:24,720 --> 00:14:25,680 Speaker 2: don't think so either. 263 00:14:25,760 --> 00:14:28,280 Speaker 1: The crew that you know after the secondary M album, 264 00:14:28,320 --> 00:14:29,280 Speaker 1: they were never the same. 265 00:14:30,120 --> 00:14:32,680 Speaker 6: Thanks Tom, Thank you, my pleasure. 266 00:14:32,760 --> 00:14:47,040 Speaker 1: Jpmulkin joining us now Doctor Dudley, He writes her Bloomberg opinion, 267 00:14:47,080 --> 00:14:48,680 Speaker 1: of course all of his work at the New York 268 00:14:48,720 --> 00:14:53,280 Speaker 1: Fed in Definitive Market Economics with Bill mccav ed mckelvy 269 00:14:53,360 --> 00:14:56,000 Speaker 1: years ago at Golden Sachs. Bill Dudley, thank you for 270 00:14:56,080 --> 00:15:01,640 Speaker 1: this important essay on the calculus of diminishing turns. How 271 00:15:01,680 --> 00:15:06,120 Speaker 1: efficacious is a lift in capital requirements of our big 272 00:15:06,160 --> 00:15:07,080 Speaker 1: fancy banks. 273 00:15:08,440 --> 00:15:10,360 Speaker 3: I think the question is what problem are you trying 274 00:15:10,400 --> 00:15:12,040 Speaker 3: to solve. Is the problem that we saw in the. 275 00:15:12,080 --> 00:15:15,480 Speaker 8: Spring lack of capital among the big money center banks, 276 00:15:15,840 --> 00:15:18,640 Speaker 8: or is it a problem with supervision, problem with bad accounting, 277 00:15:18,960 --> 00:15:20,600 Speaker 8: problem with bank management. 278 00:15:21,200 --> 00:15:23,080 Speaker 3: I think the problem is not that the big banks 279 00:15:23,080 --> 00:15:23,880 Speaker 3: in enough capital. 280 00:15:23,960 --> 00:15:28,120 Speaker 8: If you remember, money was running towards the big banks 281 00:15:28,520 --> 00:15:31,120 Speaker 8: during the turmoment, we saw and marked not away from 282 00:15:31,120 --> 00:15:31,760 Speaker 8: the big banks. 283 00:15:31,960 --> 00:15:33,640 Speaker 3: None of the bank none of the big banks got 284 00:15:33,680 --> 00:15:36,080 Speaker 3: into any any great difficulty in the United States. 285 00:15:36,200 --> 00:15:38,640 Speaker 8: The problem with raising capital requirements over and over again 286 00:15:38,720 --> 00:15:41,880 Speaker 8: is you're making us banks less competitive, and that's going 287 00:15:41,920 --> 00:15:45,200 Speaker 8: to push activity out into the unregulated non banking sector. 288 00:15:46,000 --> 00:15:48,480 Speaker 3: That the question that that that createses that are you actually. 289 00:15:48,280 --> 00:15:51,000 Speaker 8: Making the financial system safer where you actually make it 290 00:15:51,200 --> 00:15:52,000 Speaker 8: more unstable? 291 00:15:52,640 --> 00:15:58,760 Speaker 1: Should we raise the capital requirements of entrepreneurial upstart banks 292 00:15:59,400 --> 00:16:02,640 Speaker 1: with a rategic gimmick to build growth. 293 00:16:03,840 --> 00:16:06,240 Speaker 8: Well, I think we certainly want to be very close 294 00:16:06,880 --> 00:16:10,440 Speaker 8: close attention to those banks that are using novel business models. 295 00:16:10,600 --> 00:16:13,600 Speaker 8: And I think, as the FIT self admitted that we 296 00:16:13,640 --> 00:16:16,760 Speaker 8: need better supervision. The problems that Silicon Value Bank were 297 00:16:16,840 --> 00:16:20,760 Speaker 8: identified in a relatively timely way, but then the supervisors 298 00:16:20,760 --> 00:16:23,920 Speaker 8: didn't force the banks to make the changes necessary to 299 00:16:23,960 --> 00:16:28,640 Speaker 8: prevent its demise. So I think that better supervision, more 300 00:16:28,640 --> 00:16:34,480 Speaker 8: diverse stress testing, better rules on interest rate risk taking 301 00:16:35,000 --> 00:16:35,840 Speaker 8: could go a. 302 00:16:35,760 --> 00:16:37,520 Speaker 3: Long way to avoid these kind of problems. 303 00:16:37,520 --> 00:16:39,880 Speaker 8: I'm not sure raising the captal requirements of the biggest 304 00:16:39,880 --> 00:16:41,800 Speaker 8: money center banks by fifteen to twenty percent. 305 00:16:41,840 --> 00:16:42,680 Speaker 3: It's the answer here. 306 00:16:42,880 --> 00:16:43,080 Speaker 1: Bill. 307 00:16:43,160 --> 00:16:46,000 Speaker 5: You talk about in your column the importance to recognize 308 00:16:46,040 --> 00:16:49,600 Speaker 5: non banking institutions as competitors and that you really just 309 00:16:49,760 --> 00:16:53,520 Speaker 5: increase their share by restricting the lending capacity of big banks. 310 00:16:54,000 --> 00:16:59,160 Speaker 5: Should regulators be basically going down to lowest common denominator 311 00:16:59,200 --> 00:17:01,720 Speaker 5: of less regulator non banks, or should they put more 312 00:17:01,760 --> 00:17:05,400 Speaker 5: of an eye toward non banks and regulate more closely 313 00:17:05,440 --> 00:17:06,480 Speaker 5: some of those activities. 314 00:17:07,440 --> 00:17:09,560 Speaker 3: I think they should be focusing on what's the best 315 00:17:09,560 --> 00:17:14,120 Speaker 3: solution for the resiliency of the overall financial system banks 316 00:17:14,160 --> 00:17:15,000 Speaker 3: and non banks. 317 00:17:15,359 --> 00:17:18,320 Speaker 8: Obviously, if you increase requirements a lot on banks, you're 318 00:17:18,320 --> 00:17:20,840 Speaker 8: just going to have a bigger non bank regime. 319 00:17:21,160 --> 00:17:22,879 Speaker 3: And the question is does that make it safer or 320 00:17:22,880 --> 00:17:24,160 Speaker 3: does that make it more vulnerable? 321 00:17:24,359 --> 00:17:26,800 Speaker 8: So I think there needs to be balanced here. Also, 322 00:17:26,840 --> 00:17:30,240 Speaker 8: I think that the real question here is what was 323 00:17:30,240 --> 00:17:31,280 Speaker 8: the problem and what's. 324 00:17:31,160 --> 00:17:32,760 Speaker 3: The right solution to solve the soot. 325 00:17:33,080 --> 00:17:35,920 Speaker 8: It's not clear that raising capital requirements on large money 326 00:17:36,000 --> 00:17:38,840 Speaker 8: center banks solves the problems that we saw in March 327 00:17:39,200 --> 00:17:39,560 Speaker 8: this year. 328 00:17:39,880 --> 00:17:42,520 Speaker 5: Can we say that the banking crisis is over to 329 00:17:42,520 --> 00:17:44,760 Speaker 5: the extent that it ever happened, and that going forward 330 00:17:44,800 --> 00:17:46,959 Speaker 5: this is not going to be some sort of bigger 331 00:17:47,000 --> 00:17:51,280 Speaker 5: financial risk that could torpedo the Goldilock scenario, at least 332 00:17:51,480 --> 00:17:52,000 Speaker 5: for the moment. 333 00:17:53,160 --> 00:17:55,560 Speaker 8: You never know, but I think that so far the 334 00:17:55,800 --> 00:17:58,320 Speaker 8: knock going to affect what happened in March are pretty modest. 335 00:17:58,760 --> 00:18:01,720 Speaker 8: I think that's because was concentrated in a few banks. 336 00:18:02,080 --> 00:18:04,800 Speaker 8: It was all happening in plain sight. People knew exactly 337 00:18:04,840 --> 00:18:07,520 Speaker 8: why these banks were getting the difficulty. They could see 338 00:18:07,520 --> 00:18:10,160 Speaker 8: their interest rate risk disclosure, they could see what's happening 339 00:18:10,240 --> 00:18:13,600 Speaker 8: to their capital on a mark to market basis. So 340 00:18:13,640 --> 00:18:16,200 Speaker 8: this is not like the Great Financial Crisis, where everything 341 00:18:16,320 --> 00:18:17,400 Speaker 8: was happening in the shadows. 342 00:18:17,960 --> 00:18:20,240 Speaker 3: People lost confidence in their counterparties. 343 00:18:20,480 --> 00:18:22,760 Speaker 8: So I think, so far, at least, it looks like 344 00:18:22,840 --> 00:18:25,520 Speaker 8: this is a pretty modest knock on effect to the 345 00:18:25,560 --> 00:18:26,280 Speaker 8: new economy. 346 00:18:26,640 --> 00:18:28,399 Speaker 5: So if that's not If that's the case and that 347 00:18:28,520 --> 00:18:32,040 Speaker 5: isn't necessarily a headwind going forward, do you lean into 348 00:18:32,080 --> 00:18:35,280 Speaker 5: this idea that maybe the FED should be done and 349 00:18:35,280 --> 00:18:37,679 Speaker 5: that we are looking at a scenario where they have 350 00:18:38,040 --> 00:18:40,480 Speaker 5: the opportunity to just wait and take a look at 351 00:18:40,520 --> 00:18:42,879 Speaker 5: the data on a longer and longer term basis to 352 00:18:42,920 --> 00:18:43,840 Speaker 5: make any decisions. 353 00:18:45,520 --> 00:18:48,680 Speaker 8: I have no quarrel with the FED waiting to get 354 00:18:48,680 --> 00:18:49,440 Speaker 8: more information. 355 00:18:49,560 --> 00:18:53,040 Speaker 3: I mean, you know, they're pretty confident that Madre policies 356 00:18:53,040 --> 00:18:55,760 Speaker 3: at a restrictive level. If that's the case, it should 357 00:18:55,760 --> 00:18:58,119 Speaker 3: slow the ecomy down. As the economy slows. 358 00:18:58,160 --> 00:18:59,840 Speaker 8: We should have more slack than the way market and 359 00:19:00,160 --> 00:19:02,080 Speaker 8: just puts take away some of the upper pressure on 360 00:19:02,160 --> 00:19:04,600 Speaker 8: wages and bring inflation down. I think the key question 361 00:19:04,680 --> 00:19:07,960 Speaker 8: is how restrictive is manitre Falsy today. It's possible that 362 00:19:08,040 --> 00:19:10,760 Speaker 8: mandre Palsy is not quite as restrictive as the FED thanks, 363 00:19:10,960 --> 00:19:12,919 Speaker 8: and if they find that out over time, then they 364 00:19:12,920 --> 00:19:15,919 Speaker 8: can obviously do more or keep rates higher for longer. 365 00:19:16,400 --> 00:19:18,840 Speaker 4: Bill, I want to finish there. You wrote about this 366 00:19:19,160 --> 00:19:21,320 Speaker 4: earlier in the summer. I don't think it was picked 367 00:19:21,400 --> 00:19:24,040 Speaker 4: up on nearly enough. I've been talking about as much 368 00:19:24,040 --> 00:19:26,360 Speaker 4: as I can. This quote from your column. The redd 369 00:19:26,400 --> 00:19:27,920 Speaker 4: as follows, and I had the quote ready for you. 370 00:19:28,000 --> 00:19:28,240 Speaker 3: Bill. 371 00:19:28,560 --> 00:19:32,040 Speaker 4: There's considerable evidence that lacks have shortened, meaning that the 372 00:19:32,040 --> 00:19:35,199 Speaker 4: economy has already found nearly all of the impact of 373 00:19:35,240 --> 00:19:38,280 Speaker 4: the Fed's actions. Bill, talk to me about that evidence. 374 00:19:38,320 --> 00:19:39,880 Speaker 4: Where do you see that evidence currently? 375 00:19:41,359 --> 00:19:44,120 Speaker 8: I think the most obvious piece of evidence is what's 376 00:19:44,160 --> 00:19:46,320 Speaker 8: happening in the housing sector. The housing sector, you know, 377 00:19:46,359 --> 00:19:48,680 Speaker 8: obviously was hurt a lot by the backup and mortage 378 00:19:48,720 --> 00:19:52,399 Speaker 8: rage from three percent to seven percent, but recently the 379 00:19:52,480 --> 00:19:55,440 Speaker 8: housing market looks like it's bombed out and it isn't 380 00:19:55,560 --> 00:19:56,320 Speaker 8: having any. 381 00:19:56,119 --> 00:19:58,719 Speaker 3: Further weakness because of the rights and rates. 382 00:19:58,880 --> 00:20:01,080 Speaker 8: Another thing is important to know here is Madre Bozi 383 00:20:01,160 --> 00:20:04,200 Speaker 8: works faster than he used to because the FED uses 384 00:20:04,240 --> 00:20:07,200 Speaker 8: for guidance seek guide the market not where it is today, 385 00:20:07,240 --> 00:20:09,840 Speaker 8: but where it's headed. So financial conditions, most of the 386 00:20:09,840 --> 00:20:11,080 Speaker 8: technique and financial conditions that. 387 00:20:11,119 --> 00:20:13,200 Speaker 3: We've seen over the last couple years happened last year, 388 00:20:13,320 --> 00:20:13,960 Speaker 3: not this year. 389 00:20:14,280 --> 00:20:16,280 Speaker 4: I remember Bill, a conference that you and I did 390 00:20:16,320 --> 00:20:19,000 Speaker 4: together together with Muhammad al Aaron in the summer of 391 00:20:19,040 --> 00:20:21,600 Speaker 4: twenty twenty one. I think it was early summer, around 392 00:20:21,720 --> 00:20:24,160 Speaker 4: June time, and you were both talking about how inflation 393 00:20:24,280 --> 00:20:26,359 Speaker 4: may well be sticky than people think. And I remember 394 00:20:26,400 --> 00:20:29,280 Speaker 4: you Bill, throughout the number the maybe rates have to 395 00:20:29,280 --> 00:20:32,480 Speaker 4: go to five percent. Five percent back then sounded absurd 396 00:20:32,760 --> 00:20:35,880 Speaker 4: with through five, with three five, and we've gone right 397 00:20:35,880 --> 00:20:38,000 Speaker 4: the way through five. Bill, what are you thinking about 398 00:20:38,000 --> 00:20:41,560 Speaker 4: now best case on way you think sufficiently restrictive might be. 399 00:20:43,400 --> 00:20:46,080 Speaker 8: I think that it's more likely that they hold rates 400 00:20:46,119 --> 00:20:47,679 Speaker 8: here or maybe one more rate. 401 00:20:47,800 --> 00:20:50,440 Speaker 3: I as opposed to go ever higher. I think where the. 402 00:20:50,359 --> 00:20:52,880 Speaker 8: Market may be a little bit off basis to think 403 00:20:52,920 --> 00:20:54,920 Speaker 8: that the Fed's going to ease a lot in twenty 404 00:20:54,960 --> 00:20:57,280 Speaker 8: twenty four. I think the last mile in terms of 405 00:20:57,280 --> 00:20:59,000 Speaker 8: getting inflation down, I think it's going to turn out 406 00:20:59,000 --> 00:21:01,160 Speaker 8: to be pretty difficult, and so I think that means 407 00:21:01,160 --> 00:21:03,520 Speaker 8: that that's going to take keyp grates higher for longer 408 00:21:03,560 --> 00:21:04,359 Speaker 8: than people think. 409 00:21:04,760 --> 00:21:06,560 Speaker 3: I think that's one of the things that is feeding 410 00:21:06,560 --> 00:21:08,359 Speaker 3: into the bond market. Went by you as a heath. 411 00:21:08,320 --> 00:21:10,360 Speaker 6: Tire, Bill Dudley, Thank you, sir. 412 00:21:10,560 --> 00:21:14,720 Speaker 4: Former New York Fed president and Bloomberg opinion columnists. Some 413 00:21:14,800 --> 00:21:22,560 Speaker 4: fascinating insight there, Greg Barroch of BMP Parabar. He was 414 00:21:22,600 --> 00:21:24,679 Speaker 4: the biggest bear on a street. He was looking for 415 00:21:24,680 --> 00:21:27,200 Speaker 4: thirty four hundred. He's now looking for forty one fifty. 416 00:21:27,480 --> 00:21:29,840 Speaker 4: Here's the quote. The alex for this year was always 417 00:21:29,840 --> 00:21:32,560 Speaker 4: predicated on the idea of seeing a recession in the US. 418 00:21:32,640 --> 00:21:34,800 Speaker 4: I think we've been surprised at the resilience of the 419 00:21:34,880 --> 00:21:38,200 Speaker 4: data here in America, Greg and police to say, join 420 00:21:38,320 --> 00:21:40,919 Speaker 4: us right now thirty four hundred and forty one fifty. 421 00:21:41,280 --> 00:21:43,520 Speaker 4: Let's start there. What do you feel like you got 422 00:21:43,520 --> 00:21:45,520 Speaker 4: wrong and why do you think that's going to persist? 423 00:21:45,760 --> 00:21:48,639 Speaker 9: Yes, I think there's been three drivers of the market 424 00:21:48,720 --> 00:21:51,840 Speaker 9: that have helped this outperformance that we didn't see coming 425 00:21:51,880 --> 00:21:54,320 Speaker 9: this year. One has been the Jenai story, so that's 426 00:21:54,400 --> 00:21:56,320 Speaker 9: much more bottom up story, so it's linked to tech 427 00:21:56,359 --> 00:21:59,080 Speaker 9: and the appetite here to chase those names. I think 428 00:21:59,119 --> 00:22:01,480 Speaker 9: the second one was positioning. We were aware that people 429 00:22:01,480 --> 00:22:03,480 Speaker 9: were under weight coming into this year, but I think 430 00:22:03,480 --> 00:22:05,640 Speaker 9: the extent of the chasing of the market that we've 431 00:22:05,680 --> 00:22:08,360 Speaker 9: seen has surprised us. And the third thing, maybe most 432 00:22:08,400 --> 00:22:10,719 Speaker 9: importantly has just been that the data has been stronger 433 00:22:10,720 --> 00:22:13,320 Speaker 9: than we expected. You know, us, along with many in 434 00:22:13,359 --> 00:22:15,520 Speaker 9: the street, we're looking for a slowdown and looking for 435 00:22:15,600 --> 00:22:18,080 Speaker 9: a recession this year and it just hasn't manifested. And 436 00:22:18,119 --> 00:22:20,639 Speaker 9: really that's a big driver of the unwind of the 437 00:22:20,680 --> 00:22:22,520 Speaker 9: gravity of the bearishness in our core. 438 00:22:22,640 --> 00:22:25,480 Speaker 4: I've reset you're still looking for a negative market based 439 00:22:25,480 --> 00:22:27,520 Speaker 4: on this call at forty one fifty, where are you 440 00:22:27,560 --> 00:22:30,280 Speaker 4: anticipating the weakness comes from given everything you've just told us. 441 00:22:30,880 --> 00:22:33,600 Speaker 9: So I really think it is this manifestation of the 442 00:22:33,640 --> 00:22:36,399 Speaker 9: slowing in the economy. So we know that everyone was 443 00:22:36,440 --> 00:22:39,239 Speaker 9: looking for a slowdown that hasn't manifested as quickly as 444 00:22:39,280 --> 00:22:41,679 Speaker 9: we expected. But that doesn't mean that it's not coming. 445 00:22:41,880 --> 00:22:44,399 Speaker 9: You know, the effect of the massive policy tightening that 446 00:22:44,400 --> 00:22:46,520 Speaker 9: we've had is going to have an effect on the economy. 447 00:22:46,600 --> 00:22:49,119 Speaker 9: It's just taking longer to percolate than people thought, this 448 00:22:49,240 --> 00:22:52,360 Speaker 9: idea of excess savings being run down. We do think 449 00:22:52,359 --> 00:22:54,440 Speaker 9: that the consumer is going to slow. So I think 450 00:22:54,480 --> 00:22:56,640 Speaker 9: many of the reasons that we were cautious on the market, 451 00:22:56,800 --> 00:22:58,960 Speaker 9: we still think a lot of that can manifest. It 452 00:22:59,080 --> 00:23:01,560 Speaker 9: just might manifest us slower pace than we previously expected. 453 00:23:01,600 --> 00:23:04,040 Speaker 1: You've been a complete class act on this reversal. I 454 00:23:04,080 --> 00:23:05,919 Speaker 1: want to talk, I want to dig into it further, 455 00:23:06,040 --> 00:23:08,399 Speaker 1: and that it's been led by seven stocks, it's been 456 00:23:08,480 --> 00:23:11,720 Speaker 1: led by big tech, among others. Ben Laidler, who's been 457 00:23:11,800 --> 00:23:14,320 Speaker 1: dead on a huge bull says they will reaffirm and 458 00:23:14,359 --> 00:23:19,000 Speaker 1: stay strong with your new optimism, your new neutrality, and 459 00:23:19,080 --> 00:23:20,800 Speaker 1: dare I say you're going to announce today that you're 460 00:23:20,840 --> 00:23:23,720 Speaker 1: going to five thousand SPX. Are you going to do 461 00:23:23,760 --> 00:23:25,639 Speaker 1: it with tech as a growth leader? 462 00:23:26,000 --> 00:23:29,280 Speaker 9: It's controlled pessimism at this point, I think. I think 463 00:23:29,320 --> 00:23:33,240 Speaker 9: in terms of market leadership, it's hard to get away 464 00:23:33,280 --> 00:23:33,800 Speaker 9: from tech. 465 00:23:34,600 --> 00:23:36,600 Speaker 6: Know, there is this structural growth story. 466 00:23:36,680 --> 00:23:39,199 Speaker 9: So if we're in an economy that is slowing or 467 00:23:39,200 --> 00:23:42,040 Speaker 9: be a more gradual pace than we anticipated, then the 468 00:23:42,040 --> 00:23:44,360 Speaker 9: structural growth stories of those that are going to outperform. 469 00:23:44,480 --> 00:23:46,359 Speaker 9: The issue with tech is how far it is valued 470 00:23:46,400 --> 00:23:48,600 Speaker 9: this year. So I think the story going forwards in 471 00:23:48,640 --> 00:23:51,199 Speaker 9: tech is going to be about being more selective. So 472 00:23:51,240 --> 00:23:54,439 Speaker 9: we see certain subsectors in tech, things like semis that 473 00:23:54,520 --> 00:23:57,879 Speaker 9: have valued massively this year that maybe might pass the 474 00:23:57,920 --> 00:24:00,080 Speaker 9: bats in a little bit over to maybe software some 475 00:24:00,119 --> 00:24:01,280 Speaker 9: of the tech infrastructure names. 476 00:24:01,560 --> 00:24:04,280 Speaker 5: So I'm wondering about the concepts behind your bare case 477 00:24:04,280 --> 00:24:07,600 Speaker 5: and your ballcase. They follow kind of traditional economics where 478 00:24:07,600 --> 00:24:09,680 Speaker 5: bad news is bad news and good news is good news, 479 00:24:09,800 --> 00:24:12,040 Speaker 5: the bad news being a hard landing thirty four hundred, 480 00:24:12,240 --> 00:24:15,680 Speaker 5: the good news being a reacceleration forty six hundred. Why 481 00:24:15,760 --> 00:24:19,960 Speaker 5: don't you think that a reacceleration would actually prompt more 482 00:24:20,119 --> 00:24:23,960 Speaker 5: aggressive FED action that could torpedo the market? In other words, 483 00:24:24,000 --> 00:24:25,840 Speaker 5: the sort of good news is bad news and bad 484 00:24:25,840 --> 00:24:27,560 Speaker 5: news is good news. I know that Tom's loving this, 485 00:24:28,000 --> 00:24:29,920 Speaker 5: but you know, how much does that kind of come 486 00:24:29,960 --> 00:24:30,480 Speaker 5: into play? 487 00:24:30,840 --> 00:24:30,879 Speaker 3: No. 488 00:24:30,960 --> 00:24:32,400 Speaker 9: I think this is a really good question because when 489 00:24:32,400 --> 00:24:35,560 Speaker 9: we look at the correlation between equities and bonds, that 490 00:24:35,640 --> 00:24:37,439 Speaker 9: gives us a bit of a window into that question. 491 00:24:37,520 --> 00:24:40,440 Speaker 9: So you can look at bond ETF something like TLT 492 00:24:40,600 --> 00:24:42,880 Speaker 9: so long the term treasuries, and you see the correlation 493 00:24:42,920 --> 00:24:45,400 Speaker 9: between equities and bonds really broke down in someone when 494 00:24:45,400 --> 00:24:47,679 Speaker 9: the equity market rallied, and we've had to pick up 495 00:24:47,720 --> 00:24:49,960 Speaker 9: again in that correlation, which kind of points to me 496 00:24:50,040 --> 00:24:54,000 Speaker 9: this idea that equity valuations are again looking stretched relative 497 00:24:54,119 --> 00:24:56,439 Speaker 9: to rates, and that does raise the risk that if 498 00:24:56,440 --> 00:24:59,080 Speaker 9: you get a hotter print, particularly in say this week's CPI, 499 00:24:59,480 --> 00:25:01,800 Speaker 9: the higher rate could be a headwind for equities. So 500 00:25:01,840 --> 00:25:03,800 Speaker 9: I think equities are stuck between a little bit of 501 00:25:03,800 --> 00:25:06,719 Speaker 9: a rock and a hard pace in an economic acceleration. 502 00:25:07,000 --> 00:25:10,280 Speaker 9: If it's too hot, starts to bring rates higher, and 503 00:25:10,320 --> 00:25:13,600 Speaker 9: that can again compress P MULTIPLESE. But a slowdown is 504 00:25:13,640 --> 00:25:15,919 Speaker 9: really the bad case. I think our ball case is 505 00:25:16,800 --> 00:25:19,560 Speaker 9: pretty asymmetric. We're not looking for that much upside. We 506 00:25:19,600 --> 00:25:22,480 Speaker 9: think that upside would be driven more by value stocks 507 00:25:22,640 --> 00:25:25,840 Speaker 9: and CycL cause if we have data surprising to the upside, 508 00:25:25,920 --> 00:25:27,480 Speaker 9: I don't really think that's going to help the names 509 00:25:27,480 --> 00:25:29,400 Speaker 9: that have outperformed this year and driven the valley so far. 510 00:25:29,520 --> 00:25:31,280 Speaker 5: So do you believe in goldilocks or do you think 511 00:25:31,280 --> 00:25:33,080 Speaker 5: that this is people just sort of wish for thinking 512 00:25:33,240 --> 00:25:36,960 Speaker 5: and picking a point along a progression towards something else 513 00:25:37,480 --> 00:25:38,560 Speaker 5: and saying to stay there. 514 00:25:38,880 --> 00:25:40,800 Speaker 9: I think it's very difficult just to stay in this 515 00:25:40,880 --> 00:25:43,800 Speaker 9: benign goldilocks environment. I think one of the things that 516 00:25:43,800 --> 00:25:45,520 Speaker 9: we got a little bit wrong this year was just 517 00:25:45,680 --> 00:25:48,680 Speaker 9: underestimating this kind of piece in the middle. We had 518 00:25:49,040 --> 00:25:50,679 Speaker 9: an issue with the data last year that it was 519 00:25:50,720 --> 00:25:52,919 Speaker 9: way too hot, and our viewers that data was going 520 00:25:53,000 --> 00:25:54,680 Speaker 9: to cool and become too cold and take us into 521 00:25:54,680 --> 00:25:57,040 Speaker 9: a recession. But ultimately, if you go from too hot 522 00:25:57,080 --> 00:25:59,720 Speaker 9: to too cold, you go through a piece in the 523 00:25:59,720 --> 00:26:02,240 Speaker 9: middle where things feel just about right, and that's where 524 00:26:02,240 --> 00:26:03,800 Speaker 9: we feel we are. So we don't think the data 525 00:26:03,840 --> 00:26:05,840 Speaker 9: is going to plateau here, and we don't think we're 526 00:26:05,840 --> 00:26:08,320 Speaker 9: going to stay in this goldilocks environment forever. This kind 527 00:26:08,359 --> 00:26:10,159 Speaker 9: of controlled descent that we've had in the data, we 528 00:26:10,160 --> 00:26:12,640 Speaker 9: think is going to continue to deteriorate and we'll morph 529 00:26:12,720 --> 00:26:13,679 Speaker 9: into a shallow recession. 530 00:26:13,720 --> 00:26:17,440 Speaker 1: Stat theme has been corporations will adjust how linked based 531 00:26:17,440 --> 00:26:19,840 Speaker 1: on what you've been through the last eighteen months? How 532 00:26:19,880 --> 00:26:24,679 Speaker 1: linked is economic analysis with the securities analysis of the market. 533 00:26:24,960 --> 00:26:28,480 Speaker 9: I think that, you know, equity markets are always vary 534 00:26:28,560 --> 00:26:32,040 Speaker 9: linked to the macro, but there are these secular drivers 535 00:26:32,080 --> 00:26:34,080 Speaker 9: that sit alongside that. When we go and look at 536 00:26:34,080 --> 00:26:36,280 Speaker 9: any of the large crashes or bear markets over the 537 00:26:36,320 --> 00:26:39,119 Speaker 9: last hundred years in equity markets that are all accompanied 538 00:26:39,119 --> 00:26:41,720 Speaker 9: with a swift economic decline. But that doesn't mean that 539 00:26:41,720 --> 00:26:44,560 Speaker 9: we can't have these secular themes, things like Jenai that 540 00:26:44,720 --> 00:26:47,439 Speaker 9: drive some dislocation. So I think part of it is 541 00:26:47,440 --> 00:26:49,639 Speaker 9: the magnitude. You know, when you're in a more benign 542 00:26:49,720 --> 00:26:53,400 Speaker 9: economic environment, the economy is not necessarily the primary driver 543 00:26:53,480 --> 00:26:55,600 Speaker 9: for the market. If we do get to a situation 544 00:26:55,640 --> 00:26:57,160 Speaker 9: around the turn of the year where we start seeing 545 00:26:57,160 --> 00:27:01,600 Speaker 9: negative perierroll prints, then I think people's attention will divert 546 00:27:01,800 --> 00:27:06,439 Speaker 9: and people's ability to buy into blue sky thinking becomes 547 00:27:06,520 --> 00:27:07,360 Speaker 9: much more challenged. 548 00:27:07,520 --> 00:27:08,679 Speaker 6: You were allowed to talk about Apple. 549 00:27:10,000 --> 00:27:11,080 Speaker 9: We can talk about it loosely. 550 00:27:11,119 --> 00:27:13,439 Speaker 6: Obviously, I don't let me loosen it up. Let me 551 00:27:13,480 --> 00:27:14,000 Speaker 6: loosen it up. 552 00:27:14,000 --> 00:27:19,560 Speaker 4: As follows, dollars stronger China perhaps developing different tastes nationalism 553 00:27:20,119 --> 00:27:23,200 Speaker 4: shape in perhaps some patriotism at home away from foreign 554 00:27:23,280 --> 00:27:27,040 Speaker 4: luxury items. A multinational is in trouble here with exposure 555 00:27:27,080 --> 00:27:27,480 Speaker 4: to China. 556 00:27:27,880 --> 00:27:29,720 Speaker 9: So I think how I can answer that is think 557 00:27:29,720 --> 00:27:32,760 Speaker 9: about some of the general themes that we think about 558 00:27:32,760 --> 00:27:35,119 Speaker 9: in terms of tech. Those stocks are going to be 559 00:27:35,200 --> 00:27:37,720 Speaker 9: incredibly resilient in a down term. Why because they have 560 00:27:38,480 --> 00:27:40,560 Speaker 9: great free cash flow and amazing balance sheets. 561 00:27:40,720 --> 00:27:41,960 Speaker 6: But that also doesn't. 562 00:27:41,680 --> 00:27:44,719 Speaker 9: Mean that they are immune from a consumer slowdown. So 563 00:27:44,760 --> 00:27:47,000 Speaker 9: one of the things that we think will manifest over 564 00:27:47,000 --> 00:27:49,639 Speaker 9: the next six months is that this tightening of rates 565 00:27:49,840 --> 00:27:53,800 Speaker 9: will affect the consumer. Now, the consumer is obviously consumer 566 00:27:53,800 --> 00:27:55,520 Speaker 9: discretionary is for first pat corps, but there are a 567 00:27:55,560 --> 00:27:58,360 Speaker 9: lot of tech stocks that do face the consumer. Ultimately, 568 00:27:58,400 --> 00:28:00,960 Speaker 9: Apple sells goods and services to the consumer. So will 569 00:28:00,960 --> 00:28:04,480 Speaker 9: they be entirely immune from a cyclical slowdown? That's the question. 570 00:28:04,560 --> 00:28:07,960 Speaker 1: It's like one more thing, except you know it's encore 571 00:28:08,280 --> 00:28:11,040 Speaker 1: shows when you're BNP paried by yourself. 572 00:28:11,119 --> 00:28:13,160 Speaker 4: You say that that wasn't a great song as well? 573 00:28:13,480 --> 00:28:15,359 Speaker 4: I think so that was a song, wasn't it. So 574 00:28:15,440 --> 00:28:19,560 Speaker 4: it's like nineties club music. Yeah, all right, Greg, thank you. 575 00:28:19,640 --> 00:28:19,840 Speaker 3: Greg. 576 00:28:19,880 --> 00:28:35,159 Speaker 1: Bare to help us with Brent at ninety and on 577 00:28:35,720 --> 00:28:38,680 Speaker 1: the reality of Saudi Arabia and one hundred dollars oil 578 00:28:39,040 --> 00:28:42,360 Speaker 1: is Francisco Blanche. He's had a global Commodities and Derivative 579 00:28:42,400 --> 00:28:46,720 Speaker 1: research at Bank of America Global Research. Francisco, you nailed oil. 580 00:28:46,880 --> 00:28:50,240 Speaker 1: You got your ninety ninety one Brent as well. The 581 00:28:50,280 --> 00:28:53,760 Speaker 1: trajectory seems to be to all one hundred and very 582 00:28:53,800 --> 00:28:58,200 Speaker 1: clearly that's what Saudi wants is a domestic reality. They 583 00:28:58,200 --> 00:29:02,640 Speaker 1: have budget requirements, fiscal requirements domestically. Are we going to 584 00:29:02,640 --> 00:29:07,680 Speaker 1: see one hundred dollars barrel because Saudi wants it? 585 00:29:07,680 --> 00:29:08,440 Speaker 10: It's possible. 586 00:29:08,480 --> 00:29:11,320 Speaker 11: Tom, I would say there's three things that have been 587 00:29:11,320 --> 00:29:14,239 Speaker 11: moving oil prices over the course of the last three 588 00:29:14,320 --> 00:29:14,920 Speaker 11: four months. 589 00:29:15,440 --> 00:29:17,840 Speaker 10: Supply, supply and supply. 590 00:29:18,280 --> 00:29:21,920 Speaker 11: We've had Saudi Arabia cutting production for as you know, 591 00:29:22,160 --> 00:29:25,440 Speaker 11: close to a year now, and they started cutting in 592 00:29:25,480 --> 00:29:29,040 Speaker 11: September of twenty twenty two at around ninety five dollars 593 00:29:29,080 --> 00:29:31,880 Speaker 11: a barrel on brands, So clearly they want to have 594 00:29:31,960 --> 00:29:36,440 Speaker 11: higher prices. They're trying to push the market there. What's 595 00:29:36,640 --> 00:29:39,040 Speaker 11: new in the past few months is that Russia has 596 00:29:39,080 --> 00:29:43,080 Speaker 11: finally started to align itself with Saudi Arabia and started 597 00:29:43,080 --> 00:29:48,080 Speaker 11: to take production out the Russians after maximizing volume over 598 00:29:48,360 --> 00:29:52,440 Speaker 11: price over value for much of the past four months, 599 00:29:52,520 --> 00:29:57,280 Speaker 11: they've started to focus on price over volume, and that's 600 00:29:57,280 --> 00:29:59,560 Speaker 11: a new development in Russia, I would say, in the 601 00:29:59,640 --> 00:30:01,719 Speaker 11: last few months. And then also we've had a lot 602 00:30:01,760 --> 00:30:06,240 Speaker 11: of refining issues tom We've we've seen products pretty great, 603 00:30:06,240 --> 00:30:08,600 Speaker 11: diesel being the old market higher. 604 00:30:09,440 --> 00:30:11,720 Speaker 10: So those are the things main supply drivers. 605 00:30:11,920 --> 00:30:13,920 Speaker 1: One of the great things in Kapin's book is the 606 00:30:13,960 --> 00:30:16,560 Speaker 1: new linkage, not like nineteen eighty six, but the new 607 00:30:16,600 --> 00:30:21,280 Speaker 1: linkage between Saudi Arabia and China. Can China live with 608 00:30:21,360 --> 00:30:22,960 Speaker 1: one hundred dollars barrel oil? 609 00:30:25,200 --> 00:30:25,320 Speaker 2: Well? 610 00:30:25,320 --> 00:30:27,440 Speaker 11: I think that the soldies have always been very cautious 611 00:30:27,480 --> 00:30:33,239 Speaker 11: about avoiding demand destruction episodes, and certainly I think they 612 00:30:33,280 --> 00:30:36,320 Speaker 11: will become cautious again if prices break through one hundred 613 00:30:36,320 --> 00:30:40,200 Speaker 11: dollars a barrel, because as we saw last year with gas, 614 00:30:40,240 --> 00:30:42,440 Speaker 11: with natural gas, if prices do get out of whack, 615 00:30:42,960 --> 00:30:44,560 Speaker 11: you can lose all the demand. 616 00:30:44,320 --> 00:30:46,840 Speaker 10: European natural gas demand from industry. 617 00:30:46,800 --> 00:30:49,840 Speaker 11: You remember is lowered today than it was at this 618 00:30:49,960 --> 00:30:53,040 Speaker 11: time last year, with a ninety percent declining prices, So 619 00:30:53,080 --> 00:30:54,560 Speaker 11: you have to be careful what you wish for. If 620 00:30:54,560 --> 00:30:57,480 Speaker 11: prices will up too fast, you kind up hurting consumption 621 00:30:57,680 --> 00:31:01,080 Speaker 11: and China today, as you know, the world's largest oil 622 00:31:01,120 --> 00:31:05,760 Speaker 11: importer by a mile, and UH is facing a pretty 623 00:31:05,800 --> 00:31:09,840 Speaker 11: weak economic outlook ahead because of the real estate challenges 624 00:31:09,960 --> 00:31:12,560 Speaker 11: and the trade war with the US, and of course 625 00:31:12,600 --> 00:31:15,920 Speaker 11: the tech sector also being down. So I think I 626 00:31:15,920 --> 00:31:19,280 Speaker 11: think China has melted in a great economic position to 627 00:31:19,280 --> 00:31:22,120 Speaker 11: begin with. So I think I think OPEC plus will 628 00:31:22,120 --> 00:31:23,720 Speaker 11: be careful of as prices rise. 629 00:31:24,000 --> 00:31:26,000 Speaker 4: Before we dried into the demand side, let's sit on 630 00:31:26,040 --> 00:31:28,160 Speaker 4: supply just a little bit longer. Francisco, you mentioned a 631 00:31:28,240 --> 00:31:32,920 Speaker 4: shift in Russia away from volume surprise, what's underpinning that 632 00:31:32,960 --> 00:31:35,000 Speaker 4: shift is that well understood before we make a call 633 00:31:35,040 --> 00:31:36,960 Speaker 4: about how durable that pivot will be. 634 00:31:39,600 --> 00:31:44,000 Speaker 11: In my mind, the UH the pivot comes after a 635 00:31:44,080 --> 00:31:47,680 Speaker 11: very successful program set up by the US Treasury to 636 00:31:47,720 --> 00:31:51,040 Speaker 11: put a price cap on on Russian oil. Remember the 637 00:31:51,080 --> 00:31:55,680 Speaker 11: price cap Essentially I encouraged Russia to export high volumes 638 00:31:55,840 --> 00:32:01,160 Speaker 11: at low prices, which were then resold real across the 639 00:32:01,920 --> 00:32:06,080 Speaker 11: across mainly India and other China and other clients. But 640 00:32:06,520 --> 00:32:08,720 Speaker 11: more recently, I think the Russians have figured out that 641 00:32:08,840 --> 00:32:12,360 Speaker 11: the rule is too weak, that the Russian tax authorities 642 00:32:12,640 --> 00:32:15,560 Speaker 11: haven't been able to really raise enough revenue, and the 643 00:32:15,560 --> 00:32:18,360 Speaker 11: macroeconomy in Russia has really deteriorated. And of course we've 644 00:32:18,360 --> 00:32:21,520 Speaker 11: seen that with tensions building up within the military and 645 00:32:21,520 --> 00:32:23,720 Speaker 11: the paramilitary or the course of the past few months. 646 00:32:23,880 --> 00:32:26,520 Speaker 11: So I think the conclusion that I believe the Kremlin 647 00:32:26,600 --> 00:32:29,360 Speaker 11: is probably arriving to is that they need more money, 648 00:32:29,360 --> 00:32:32,400 Speaker 11: and therefore the way to do that is the way 649 00:32:32,400 --> 00:32:36,880 Speaker 11: to maximize revenue for the Russian tax authorities has been 650 00:32:36,920 --> 00:32:40,320 Speaker 11: to pressure volumes lower and allow prices to rise. And 651 00:32:40,360 --> 00:32:43,320 Speaker 11: the price of neuroscrew oil, which was creating around fifty 652 00:32:43,280 --> 00:32:46,360 Speaker 11: dollars bureau, is now approaching eighty bucks, well above the 653 00:32:47,400 --> 00:32:51,160 Speaker 11: price cap set out by the US and the European Union, and. 654 00:32:51,240 --> 00:32:54,520 Speaker 4: A screen right now bent crewd through ninety one. So fransis, 655 00:32:54,680 --> 00:32:56,880 Speaker 4: let's talk about demand. The build on the question, Tom asked, 656 00:32:56,880 --> 00:32:59,320 Speaker 4: it's an important one. Have we seen any sign of 657 00:32:59,360 --> 00:33:03,360 Speaker 4: the tear race in demand from China? Even with the 658 00:33:03,360 --> 00:33:04,600 Speaker 4: economic weightness. 659 00:33:07,000 --> 00:33:11,640 Speaker 11: Well, the August numbers were phenomenal in terms of import increases. 660 00:33:11,720 --> 00:33:14,240 Speaker 11: We saw China importing twelve and a half million barrels 661 00:33:14,280 --> 00:33:16,200 Speaker 11: a day on average throughout the month. 662 00:33:16,480 --> 00:33:18,400 Speaker 10: Granted imports in July. 663 00:33:18,280 --> 00:33:21,880 Speaker 11: We're kind of weak, but we hear from China and 664 00:33:21,880 --> 00:33:26,520 Speaker 11: I was in Singapore last week and at meeting all 665 00:33:26,600 --> 00:33:30,480 Speaker 11: the various energy traders. The main message is that Chinese 666 00:33:30,520 --> 00:33:32,800 Speaker 11: demand is pretty healthy, and to be honest, you see 667 00:33:32,840 --> 00:33:35,000 Speaker 11: it in the data. You look at a number of 668 00:33:35,040 --> 00:33:39,480 Speaker 11: air flights, you look at air passenger traffic. Demand is 669 00:33:39,480 --> 00:33:44,040 Speaker 11: still pretty healthy. What's been weak is industry related consumption, 670 00:33:44,280 --> 00:33:49,400 Speaker 11: so think about gas, oil, diesel and the petrochemical complex. 671 00:33:49,520 --> 00:33:52,520 Speaker 11: That's been weak. But I think overall, Chinese demand is 672 00:33:52,760 --> 00:33:56,440 Speaker 11: in a better place. I think even though the real 673 00:33:56,520 --> 00:34:00,040 Speaker 11: estate sector is not doing well, you still have a 674 00:34:00,080 --> 00:34:04,840 Speaker 11: strong services sector comeback after COVID and that's supporting oil 675 00:34:04,880 --> 00:34:08,040 Speaker 11: prices in China and creud runs as well. We've seen 676 00:34:08,200 --> 00:34:11,279 Speaker 11: refineries running over crude oil in China over the course 677 00:34:11,280 --> 00:34:14,360 Speaker 11: of the past few months. So I think Chinese demand 678 00:34:14,400 --> 00:34:17,800 Speaker 11: for oil continues to lead frankly the world most of 679 00:34:17,840 --> 00:34:19,960 Speaker 11: the demand growth this year and probably next year. Will 680 00:34:19,960 --> 00:34:22,160 Speaker 11: still come from Asia, and China will be the bigger 681 00:34:22,160 --> 00:34:22,520 Speaker 11: part of that. 682 00:34:22,719 --> 00:34:24,799 Speaker 5: This goes against the narrative, which is the China's falling 683 00:34:24,840 --> 00:34:26,799 Speaker 5: off the cliff, not do ending anything, and that this 684 00:34:26,880 --> 00:34:29,400 Speaker 5: is entirely driven, that the increase in prices in oil 685 00:34:29,640 --> 00:34:31,920 Speaker 5: is entirely driven by what Saudi Arabia is doing and 686 00:34:31,920 --> 00:34:35,319 Speaker 5: maybe at the margins, what Russia is doing. If we 687 00:34:35,400 --> 00:34:38,359 Speaker 5: don't have that narrative, what would stop oil prices from 688 00:34:38,400 --> 00:34:43,840 Speaker 5: going higher, especially if demand continues strong from China. 689 00:34:43,960 --> 00:34:47,799 Speaker 11: Well, I mean I think I think China overall, like 690 00:34:47,840 --> 00:34:49,640 Speaker 11: I said, it's coming back from COVID. If you look 691 00:34:49,640 --> 00:34:53,399 Speaker 11: at international flights, they're still down fifty percent. Now, there's 692 00:34:53,440 --> 00:34:55,400 Speaker 11: been all of tension between the US and China over 693 00:34:55,400 --> 00:34:58,160 Speaker 11: of course of the last few years, right, and for instance, 694 00:34:58,239 --> 00:35:00,840 Speaker 11: flights to the US remain very very surprised. 695 00:35:01,239 --> 00:35:03,040 Speaker 10: But that's going to have to pick up. And we're 696 00:35:03,080 --> 00:35:03,640 Speaker 10: also going to. 697 00:35:03,560 --> 00:35:06,080 Speaker 11: See a meaningful increase in China flights to Europe over 698 00:35:06,080 --> 00:35:09,919 Speaker 11: the course of the next few quarters. So in my mind, 699 00:35:09,960 --> 00:35:12,719 Speaker 11: I think the Chinese demand story from a service perspective 700 00:35:12,840 --> 00:35:15,520 Speaker 11: is okay. I mean GDP in China is not negative. 701 00:35:15,560 --> 00:35:17,799 Speaker 11: I mean it's weak, but week means four percent, four 702 00:35:17,800 --> 00:35:18,520 Speaker 11: and a half percent. 703 00:35:18,760 --> 00:35:20,120 Speaker 10: That still still. 704 00:35:19,960 --> 00:35:23,480 Speaker 11: Allows for growth in in you know, kind of the 705 00:35:23,560 --> 00:35:25,880 Speaker 11: same things with it after in the West when we 706 00:35:25,920 --> 00:35:28,640 Speaker 11: came out of COVID restaurants, going to the. 707 00:35:28,600 --> 00:35:30,880 Speaker 10: Movies, traveling around. 708 00:35:30,920 --> 00:35:33,719 Speaker 11: I mean the China and the Chinese consumers are doing that, 709 00:35:33,840 --> 00:35:36,680 Speaker 11: and that's supportive of the oil market. And then of 710 00:35:36,680 --> 00:35:39,480 Speaker 11: course to your point, I mean the cartelments and OPEQ 711 00:35:39,840 --> 00:35:43,640 Speaker 11: have elevated prices, have brought inventories on a dowar trajectory, 712 00:35:44,320 --> 00:35:46,960 Speaker 11: and we expect that to continue. So so again we 713 00:35:47,239 --> 00:35:49,640 Speaker 11: are targeting ninety ors bur one brand for next year. 714 00:35:50,200 --> 00:35:51,480 Speaker 10: That's current. 715 00:35:51,760 --> 00:35:54,080 Speaker 11: The current market right now is at eighty six for 716 00:35:54,560 --> 00:35:57,160 Speaker 11: calendar twenty twenty four. So there is a little bit 717 00:35:57,160 --> 00:35:59,560 Speaker 11: of upside in our view from current prices. But I 718 00:35:59,560 --> 00:36:02,760 Speaker 11: think I think if you push too hard, the risk 719 00:36:02,880 --> 00:36:07,279 Speaker 11: is that inflation comes back, and then the narrative that 720 00:36:07,320 --> 00:36:11,000 Speaker 11: we're going to have peak rates with no recession goes 721 00:36:11,040 --> 00:36:12,759 Speaker 11: out the window in my mind, right, So I think 722 00:36:12,760 --> 00:36:15,880 Speaker 11: OPAK has to be considered also about the effects on 723 00:36:15,880 --> 00:36:19,000 Speaker 11: the macromarkets for great rates and the outbook for our 724 00:36:19,040 --> 00:36:21,279 Speaker 11: potential recession in the US and. 725 00:36:21,320 --> 00:36:23,760 Speaker 6: Russelle Francisco always a clinic. 726 00:36:23,840 --> 00:36:28,440 Speaker 4: Thank you, Sir Francisco, Blanche Bank for America. 727 00:36:30,200 --> 00:36:33,040 Speaker 1: This is a joy to do this in remembrance of 728 00:36:33,080 --> 00:36:37,160 Speaker 1: how people stepped up big time in early twenty twenty. 729 00:36:37,200 --> 00:36:41,120 Speaker 1: I have the clearest memory of our first interview on COVID. 730 00:36:41,200 --> 00:36:44,800 Speaker 1: It was with an acclaimed radiologist from Mount Sinai in 731 00:36:44,880 --> 00:36:48,959 Speaker 1: New York who brought into our studios x rays from 732 00:36:49,040 --> 00:36:54,240 Speaker 1: China showing the outside lung damage that COVID could rot. JOHNS. 733 00:36:54,239 --> 00:36:55,800 Speaker 10: Hopkins helped us. 734 00:36:55,760 --> 00:36:58,319 Speaker 1: So much on this and joining us now in the 735 00:36:58,360 --> 00:37:02,200 Speaker 1: booster uproar back the hun Saudi to say she's associate 736 00:37:02,280 --> 00:37:08,040 Speaker 1: Professor of Emergency Medicine, barely describes global parchments to study 737 00:37:08,200 --> 00:37:12,160 Speaker 1: the academics of Professor and Saudi BACTI. Great to see 738 00:37:12,200 --> 00:37:16,000 Speaker 1: you again under always COVID difficulties, to say the least. 739 00:37:16,560 --> 00:37:19,600 Speaker 1: When we were kids, it was routine to get a 740 00:37:19,640 --> 00:37:26,440 Speaker 1: booster shot. Is an mRNA booster shot any different, any 741 00:37:26,480 --> 00:37:31,880 Speaker 1: more dangerous, any more at risk than a tetanus booster 742 00:37:32,000 --> 00:37:33,480 Speaker 1: shot of my childhood? 743 00:37:34,920 --> 00:37:39,160 Speaker 12: Absolutely not. The current new vaccines, I'm not technical. Boosters 744 00:37:39,160 --> 00:37:43,280 Speaker 12: are updated vaccines that are targeted to the current viruses 745 00:37:43,280 --> 00:37:45,960 Speaker 12: that are circulating, but they're equally safe. 746 00:37:46,040 --> 00:37:47,920 Speaker 7: These vaccines have full approval. 747 00:37:48,320 --> 00:37:51,560 Speaker 12: I have gone through all the scientific rigmarole to ensure 748 00:37:51,600 --> 00:37:56,240 Speaker 12: that they're safe and effective for the population BECTI. 749 00:37:56,400 --> 00:37:59,919 Speaker 1: I look at the science here and it seems in order. 750 00:38:00,680 --> 00:38:05,000 Speaker 1: I'm basically appalled at the government response, the messaging from 751 00:38:05,080 --> 00:38:09,680 Speaker 1: the White House to get behind the science community. What 752 00:38:09,719 --> 00:38:12,160 Speaker 1: do you need from the President, What do you need 753 00:38:12,280 --> 00:38:16,759 Speaker 1: from the administration to build confidence in this booster program? 754 00:38:17,880 --> 00:38:20,640 Speaker 12: So I think we clear messaging, this is full approval 755 00:38:20,760 --> 00:38:21,319 Speaker 12: number one. 756 00:38:21,760 --> 00:38:22,840 Speaker 7: Two, we need to hear. 757 00:38:22,719 --> 00:38:26,320 Speaker 12: From the CDC today. They will be deciding who should 758 00:38:26,360 --> 00:38:28,920 Speaker 12: get the booster, who do they recommend, but also the 759 00:38:29,120 --> 00:38:31,239 Speaker 12: reasons for those recommendations. 760 00:38:31,760 --> 00:38:32,640 Speaker 7: Why is that the. 761 00:38:32,640 --> 00:38:36,640 Speaker 12: Current recommendation and what are they trying to do by 762 00:38:36,640 --> 00:38:39,160 Speaker 12: making this recommendation. Are they trying to prioritize those at 763 00:38:39,239 --> 00:38:42,960 Speaker 12: highest risks or are they genuinely saying that the vaccine 764 00:38:43,000 --> 00:38:43,600 Speaker 12: is only. 765 00:38:43,400 --> 00:38:45,360 Speaker 7: Recommended that those people it will benefit. 766 00:38:45,440 --> 00:38:50,880 Speaker 12: So mean clear communication, clear logistical reasons as to their recommendations. 767 00:38:51,160 --> 00:38:52,200 Speaker 7: And the third is. 768 00:38:52,160 --> 00:38:54,760 Speaker 12: We need to make sure our supplies chains are saw strong, 769 00:38:55,080 --> 00:38:56,799 Speaker 12: so we need to make sure this vaccine comes out 770 00:38:56,880 --> 00:38:59,239 Speaker 12: later on this week, that folks know where to go, 771 00:38:59,480 --> 00:39:02,920 Speaker 12: that folks can access the vaccine quickly and effectively. 772 00:39:03,520 --> 00:39:07,000 Speaker 5: How much did the administration and policymakers really set themselves 773 00:39:07,040 --> 00:39:10,320 Speaker 5: back by trying to clamp down on the message so hard. 774 00:39:10,400 --> 00:39:12,840 Speaker 5: Initially there was just a court ruling saying that the 775 00:39:12,880 --> 00:39:17,560 Speaker 5: administration did overreach in trying to strip away any anti 776 00:39:17,640 --> 00:39:21,040 Speaker 5: vaccine messaging. How do you view that in light of 777 00:39:21,040 --> 00:39:22,719 Speaker 5: what you're trying to put forward right now? 778 00:39:23,960 --> 00:39:28,359 Speaker 12: So we view that because it has this paternalistic attitude 779 00:39:28,440 --> 00:39:33,520 Speaker 12: to help, right, but we are all informed parttakers. 780 00:39:32,719 --> 00:39:34,440 Speaker 7: Of our own lives, our own health. 781 00:39:34,560 --> 00:39:38,120 Speaker 12: We have access to information, some good, some bad, some here, 782 00:39:38,360 --> 00:39:42,920 Speaker 12: some elsewhere, And so by having communication that is more robust, 783 00:39:43,040 --> 00:39:47,280 Speaker 12: that's less black and white, that allows for effective dialogue 784 00:39:47,400 --> 00:39:51,000 Speaker 12: that allows individuals to buy into the whole. You know, 785 00:39:51,280 --> 00:39:55,359 Speaker 12: the interventions, the vaccines, the therapeutics, the masking, and so 786 00:39:55,480 --> 00:39:58,040 Speaker 12: what we need is to ensure that there's dialogue, that 787 00:39:58,160 --> 00:40:02,600 Speaker 12: there is debate, that that deep has a scientific foundation. 788 00:40:02,920 --> 00:40:05,120 Speaker 5: There's also been a lot of discussion about side effects 789 00:40:05,120 --> 00:40:08,840 Speaker 5: for the vaccines, in addition to how much they actually 790 00:40:08,880 --> 00:40:11,400 Speaker 5: prevent you from getting more sick. If you're going to 791 00:40:11,480 --> 00:40:14,040 Speaker 5: still get sick and you've already had it and you're 792 00:40:14,040 --> 00:40:16,000 Speaker 5: not going to die. You know, there's this sort of feeling, 793 00:40:16,000 --> 00:40:19,440 Speaker 5: what's the point of increasing the potential risk if on 794 00:40:19,480 --> 00:40:21,720 Speaker 5: the downside, you could just spend another day in bed. 795 00:40:21,880 --> 00:40:22,719 Speaker 5: What's your view on that? 796 00:40:23,640 --> 00:40:26,000 Speaker 12: Absolutely, So, first of all, the FDA would not approve 797 00:40:26,040 --> 00:40:29,319 Speaker 12: a vaccine where the likelihood of you being sick is 798 00:40:29,360 --> 00:40:32,440 Speaker 12: greater than the illness itself, right, That is just not 799 00:40:32,480 --> 00:40:33,080 Speaker 12: going to happen. 800 00:40:33,440 --> 00:40:35,680 Speaker 7: So the side effects of the vaccine do exist, but 801 00:40:35,719 --> 00:40:38,680 Speaker 7: they're over reported, partly due to the media. The over 802 00:40:38,800 --> 00:40:41,840 Speaker 7: report rare events that can be dangerous. 803 00:40:42,880 --> 00:40:45,480 Speaker 12: As far as the illness from COVID nineteen, it affects 804 00:40:45,520 --> 00:40:48,680 Speaker 12: different people differently, So if you have multiple covidbidities, you 805 00:40:48,719 --> 00:40:52,400 Speaker 12: have existing lung conditions, you may in fact require hospitalization. 806 00:40:52,880 --> 00:40:56,320 Speaker 7: Hospitalizations went up by eight point seven percent, so it's. 807 00:40:56,320 --> 00:40:59,560 Speaker 12: Not as if the disease is a benign common cold 808 00:40:59,600 --> 00:41:01,600 Speaker 12: where you're just going to spend extra day in bed. 809 00:41:02,080 --> 00:41:04,200 Speaker 12: I had the pleasure of treating several patients over the 810 00:41:04,200 --> 00:41:08,440 Speaker 12: weekend at Johns Hopkins Hospital emergency department, and the majority 811 00:41:08,440 --> 00:41:11,880 Speaker 12: of my patients went home, but some patients did require admission. 812 00:41:12,239 --> 00:41:14,280 Speaker 7: A lot of patients reported that they were. 813 00:41:14,120 --> 00:41:18,239 Speaker 12: Fatigued, exhausted, couldn't go to work, couldn't manage to activities 814 00:41:18,239 --> 00:41:20,640 Speaker 12: of daily living, couldn't look after their dependence. 815 00:41:20,760 --> 00:41:22,000 Speaker 7: So if you're responsible for. 816 00:41:21,960 --> 00:41:25,920 Speaker 12: A family, the children, elderly parents, or you need to 817 00:41:25,960 --> 00:41:27,640 Speaker 12: go to work, then get vaccinated. 818 00:41:27,800 --> 00:41:28,920 Speaker 7: The chance of you doing. 819 00:41:28,719 --> 00:41:29,479 Speaker 6: That is much greater. 820 00:41:29,560 --> 00:41:30,719 Speaker 5: How is this different from the flu? 821 00:41:32,560 --> 00:41:33,520 Speaker 7: Not significantly. 822 00:41:34,040 --> 00:41:39,360 Speaker 12: The flu has the same constellation of symptoms fevers, chills, cold, congestion. 823 00:41:40,000 --> 00:41:42,680 Speaker 12: COVID will present the same as well rspee and that 824 00:41:42,800 --> 00:41:43,719 Speaker 12: is the challenge here. 825 00:41:44,320 --> 00:41:46,280 Speaker 7: COVID alys will. 826 00:41:46,200 --> 00:41:50,040 Speaker 12: Likely be underreported because some people may assume that they 827 00:41:50,120 --> 00:41:52,960 Speaker 12: just have the flu, and that's okay as long as 828 00:41:53,000 --> 00:41:54,480 Speaker 12: you're staying at home and isolating. 829 00:41:54,960 --> 00:41:58,680 Speaker 1: Doctor ANSARTI, what is the science of masks? I don't 830 00:41:58,719 --> 00:42:01,799 Speaker 1: want the politics, I don't want the mumbo jumbo. I 831 00:42:01,920 --> 00:42:06,360 Speaker 1: can't stand the full disclosure. But what is the science 832 00:42:06,760 --> 00:42:10,439 Speaker 1: of masks in this COVID of twenty twenty four. 833 00:42:11,719 --> 00:42:14,480 Speaker 12: The science of mass is when mass of warm, they 834 00:42:14,480 --> 00:42:18,480 Speaker 12: are effective at preventing onward transmission. A lot of the 835 00:42:18,520 --> 00:42:22,440 Speaker 12: literature that you're seeing right now misinterprets the data and 836 00:42:22,480 --> 00:42:23,760 Speaker 12: how the data is collected. 837 00:42:24,200 --> 00:42:25,359 Speaker 7: A lot of the data. 838 00:42:25,160 --> 00:42:29,080 Speaker 12: Is in non COVID eras in individuals who are not 839 00:42:29,280 --> 00:42:32,520 Speaker 12: customed to wearing masks. But the data from COVID during 840 00:42:32,800 --> 00:42:36,120 Speaker 12: masking and healthcare facilities showed that there was very little 841 00:42:36,640 --> 00:42:41,160 Speaker 12: healthcare worker to healthcare transmission when healthcare workers were wearing masks, 842 00:42:41,640 --> 00:42:44,040 Speaker 12: even if they were COVID at positive at a time. 843 00:42:44,440 --> 00:42:47,760 Speaker 7: So the science shows that masking works. I also hate masks. 844 00:42:47,880 --> 00:42:50,359 Speaker 12: My patients feel better when they see my face, they 845 00:42:50,360 --> 00:42:52,759 Speaker 12: see my smile and be able to reassure them during 846 00:42:52,800 --> 00:42:56,680 Speaker 12: their illness. So I currently I am choosing who I mask 847 00:42:56,800 --> 00:42:59,279 Speaker 12: and who I don't mask with if someone does not 848 00:42:59,400 --> 00:43:02,960 Speaker 12: have opper respiratory illness or flu light symptoms or is 849 00:43:02,960 --> 00:43:06,720 Speaker 12: the immune compromise. I'm currently right now, this is today. 850 00:43:07,120 --> 00:43:09,960 Speaker 12: I'm not masking. In the future, it may change that 851 00:43:10,000 --> 00:43:12,520 Speaker 12: if COVID nineteen cases continue to increase. 852 00:43:12,680 --> 00:43:14,560 Speaker 6: We want to see you smiling without a mouse, don't 853 00:43:14,600 --> 00:43:16,680 Speaker 6: to thank you, don't about to do. On Sunday, then. 854 00:43:17,000 --> 00:43:20,840 Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and 855 00:43:20,960 --> 00:43:25,200 Speaker 1: anywhere else you get your podcasts. Listen live every weekday 856 00:43:25,440 --> 00:43:28,920 Speaker 1: starting at seven am Eastern I'm Bloomberg dot com, the 857 00:43:29,040 --> 00:43:33,560 Speaker 1: iHeartRadio app tune In, and the Bloomberg Business App. You 858 00:43:33,640 --> 00:43:37,680 Speaker 1: can watch us live on Bloomberg Television and always I'm 859 00:43:37,680 --> 00:43:41,680 Speaker 1: the Bloomberg Terminal. Thanks for listening. I'm Tom Keen, and 860 00:43:41,800 --> 00:43:43,360 Speaker 1: this is Bloomberg