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Stocks Rise Before Trump Speech · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge. You,
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Speaker 1: along with my co host Lisa Brahma Waits, each day
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Speaker 1: we bring you the most noteworthy and useful interviews for
0:10
Speaker 1: you and your money. Whether at the grocery store or
0:12
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
0:15
Speaker 1: Podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. This week we get J. Powell,
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Speaker 1: the Chair of the Federal Reserve, speaking on Wednesday and
0:25
Speaker 1: Thursday testifying I should say, but that comes after today's
0:29
Speaker 1: speech by President Trump at the Economic Club of New York, which,
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Speaker 1: according to our own Michael McKee may dictate what J.
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Speaker 1: Powell will talk about. Here to join us, to give
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Speaker 1: us some insight from the dept market perspective is our
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Speaker 1: own Ira Jersey. He is chief US interestrate strategist for
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Speaker 1: Bloomberg Intelligence. So, Ira, how do you think J. Powell
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Speaker 1: could potentially respond to something that President Trump says today? Hey, well,
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Speaker 1: I guess it depends on what he says. I suppose
0:58
Speaker 1: if it's talking about trade aid um, you know, won't
1:01
Speaker 1: be much different than what Chair Powell said before, which
1:04
Speaker 1: is you know that trade is is something that they
1:07
Speaker 1: look at for what's going to be the direction of
1:09
Speaker 1: the economy and and therefore what they have to do
1:12
Speaker 1: as far as monetary policy goes. UM. If you know
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Speaker 1: he talks about if if President Trump talks about, you know,
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Speaker 1: reducing the Fed's independence and you know, and and basically
1:22
Speaker 1: reiterating some of his his tweets, then you know, I
1:24
Speaker 1: think Chair Powell will want to reiterating again something that
1:27
Speaker 1: he said at almost every press conference during his tenure,
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Speaker 1: and that's that you know, the FED is is independent
1:33
Speaker 1: and that the FED will do what it needs to do.
1:35
Speaker 1: That Congress gave them the the authority to conduct monetary
1:38
Speaker 1: policy as the Committee sees fit and um, and they're
1:41
Speaker 1: not political. Um. You know, obviously what he hears, I
1:45
Speaker 1: think is going to give him some odditatave. But he
1:47
Speaker 1: has to say those types of non political you know,
1:50
Speaker 1: we're non political organization and say things like that. So
1:53
Speaker 1: I at LEASA and I had this morning. We're talking
1:55
Speaker 1: about that Bank of America, a fund manager, a survey
1:58
Speaker 1: that came out and it's a you know, surprising I
2:01
Speaker 1: think to me at least quite optimistic in terms of
2:04
Speaker 1: the view of the markets in the economy. Do you
2:06
Speaker 1: think the FED views the world that way or they
2:10
Speaker 1: have maybe a higher level of caution. I think that
2:13
Speaker 1: they tend to be a little bit more risk averse.
2:15
Speaker 1: I think that's been one of the features of the
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Speaker 1: Federal Reserve since the end of the h since the
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Speaker 1: financial crisis. Really it's that, you know, let's use caution first,
2:24
Speaker 1: because we don't have a lot of ammunition. We're not
2:27
Speaker 1: we don't want to have to do some more extraordinary
2:30
Speaker 1: measures in terms of monetary policy easing. So let's make
2:34
Speaker 1: sure that the economy is on stable footing before we
2:37
Speaker 1: um before we hike interest rates meaningfully. So so I
2:39
Speaker 1: think at this environment, yeah, I agree with that kind
2:42
Speaker 1: of sentiment you just mentioned, Paul, is that I think
2:44
Speaker 1: the FED is a little bit more skeptical than maybe
2:47
Speaker 1: um that maybe some market participants are at the moment.
2:50
Speaker 1: And I think what's going on with a lot of
2:52
Speaker 1: market participants is it's not that things are particularly good,
2:54
Speaker 1: it's that things aren't as bad as a feared. And
2:57
Speaker 1: I think that that's kind of the environment where you
2:59
Speaker 1: can have equities, you know, at or near highs, and
3:02
Speaker 1: and interest rates, you know, creeping a little bit higher.
3:04
Speaker 1: How much is this Europe actually doing a little bit
3:06
Speaker 1: better than it had been, Oh, quite a lot, I think.
3:10
Speaker 1: I think at least that that's a very good point,
3:12
Speaker 1: because you know, Europe, Europe has really kind of been,
3:15
Speaker 1: um uh been a big big issue I think for
3:18
Speaker 1: developed markets in in in general, and the fact that
3:22
Speaker 1: that they're basically exporting a lot of deflation and disinflationary
3:25
Speaker 1: kind of impulses to the rest of the world has
3:28
Speaker 1: been an issue. So the fact that you might have
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Speaker 1: some stabilization and some of their their survey measures, their
3:33
Speaker 1: manufacturing seems to be lower. You're now getting some fiscal
3:35
Speaker 1: policy out of France, for example, that might actually help
3:39
Speaker 1: their economy a little bit. So when you get this incrementally,
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Speaker 1: you know, kind of good news on the economic front,
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Speaker 1: that's going to lift yields, you know, you know, you know,
3:46
Speaker 1: look at German tenure yields. They're still negative and there's
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Speaker 1: still you know, negative twenty five basis points, but they're
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Speaker 1: significantly off their loads of negative seventy basis points, right,
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Speaker 1: So that's a that's a pretty subsential move. I mean,
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Speaker 1: that's as big a move in uh in German and yields,
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Speaker 1: as you've seen in US yields over the past couple
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Speaker 1: of weeks. I want to talk about a a research
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Speaker 1: note you put out this morning. I thought it was
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Speaker 1: pretty interesting. It talks about treasury auctions and actually how
4:10
Speaker 1: they occur. My understanding when I was back on the
4:12
Speaker 1: street was the dealers, treasury dealers on the street bought
4:17
Speaker 1: the US bonds and notes when they came out at auction.
4:20
Speaker 1: Has that changed or how has that changed? Yeah? So,
4:23
Speaker 1: so prior to the crisis, you know, dealers bought a
4:26
Speaker 1: bulk of of debt and then wound up reselling it
4:29
Speaker 1: to UH to other investors. So you know, dealers didn't
4:32
Speaker 1: necessarily hold a lot of their debt. They just wind
4:34
Speaker 1: up having to buy it auction. So since the crisis,
4:37
Speaker 1: that shifted quite a lot. And actually, investment funds tend
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Speaker 1: to participate in treasury auctions much more than they used to.
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Speaker 1: In fact, you know, if we're just looking at tenure
4:46
Speaker 1: treasuries for example, investment funds take between fifty and six
4:50
Speaker 1: of most treasure of most ten year treasury auctions. These days,
4:53
Speaker 1: dealers take the next most which is only about and
4:56
Speaker 1: then um and and then direct bidder so these people
5:00
Speaker 1: who uh so foreigners say, uh, they only take about
5:04
Speaker 1: ten percent. So so there's this idea I think in
5:08
Speaker 1: the world that even though um uh, even though foreign
5:12
Speaker 1: holders of treasuries are still very large and about treasury
5:17
Speaker 1: debt right now is held by them, um, really auctions
5:20
Speaker 1: are being driven more by domestic investment funds. So these
5:24
Speaker 1: are you know, pension funds, annuities, uh, mutual funds and
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Speaker 1: and the like. So it's really, you know, domestic investors
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Speaker 1: really have a lot of um demand for for U
5:34
Speaker 1: S treasuries. Um. Just going back to the Bank of
5:36
Speaker 1: America Marylynch Fund Managers Survey, another notable sort of shift
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Speaker 1: that we saw was the expectation for yield curve steepening.
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Speaker 1: And right now I'm looking at the gap between tenure
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Speaker 1: and two year treasury yields reaching the highest since to
5:50
Speaker 1: lie nearly towards the highs of the year, just in
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Speaker 1: about thirty seconds here, Ira, do you expect this to
5:56
Speaker 1: continue or do you think that the consensus has gotten
5:58
Speaker 1: ahead of itself. Well, I think we's only eight basis
6:00
Speaker 1: points was the high of the year back in June,
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Speaker 1: and I think you break that and and we'll keep
6:04
Speaker 1: on steepening a little bit. That's not that far of
6:07
Speaker 1: a call, right, yeah, exactually yeah exactly so. UM, but
6:11
Speaker 1: if you if you break above that, then I do
6:12
Speaker 1: think you can reach thirty five and kind of new
6:14
Speaker 1: new highs. I think the reason for this is just
6:17
Speaker 1: the idea that, um, that the economy is not as
6:20
Speaker 1: bad as it was, and the Federal Reserve is not
6:22
Speaker 1: going to be hiking monetary policy anytime soon, so you're
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Speaker 1: able to see the yield curve. Stepen just a little
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Speaker 1: bit more from here our Jersey, Thank you so much.
6:31
Speaker 1: Ira is the chief US interest rate strategist for Bloomberg Intelligence.
6:34
Speaker 1: Joining us on the phone. In a little bit more
6:51
Speaker 1: than an hour, President Trump taking the podium at the
6:54
Speaker 1: Economic Club of New York, expected to talk about the
6:57
Speaker 1: US economy and how well it's doing. He'll also potentially
7:00
Speaker 1: answer questions about China trade. Then tomorrow J Powell testifying,
7:06
Speaker 1: we'll be taking that live. You can listen to it.
7:09
Speaker 1: But all of this uh coming at a tenuous time,
7:12
Speaker 1: a lot of uncertainty about whether the economy is about
7:16
Speaker 1: to take off or whether perhaps people are over their
7:19
Speaker 1: skis joining us now, Kevin Cummings. He is economist at
7:22
Speaker 1: net West Markets Securities, So, Kevin Cummins, I'd love to
7:26
Speaker 1: get your perspective on this sentiment shift that we've seen,
7:28
Speaker 1: which is somewhat dramatic now people being much more bullish
7:32
Speaker 1: rather than bearish. What data have we gotten to actually
7:36
Speaker 1: edify that view. Yeah, well, there's certainly good morning first off,
7:40
Speaker 1: but there's certainly optimism growing over a reduction and uncertainty
7:45
Speaker 1: should the U. S. And China sign some sort of
7:48
Speaker 1: phase one trade agreement. UM. In our own view here
7:53
Speaker 1: in UTS markets were a little bit reluctant to kind
7:56
Speaker 1: of uh think that everything's going to turn out all
7:59
Speaker 1: of positive in two thousand and twenty if there is
8:02
Speaker 1: some sort of agreement reached UM, which seems that it's
8:06
Speaker 1: things seem to be moving in that direction, and perhaps
8:09
Speaker 1: you know, the market could potentially be UM if if
8:14
Speaker 1: Trump this afternoon uh does talk a little bit more
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Speaker 1: hawk is shot on the outlook there, then UM markets
8:23
Speaker 1: potentially could disappoint here. But UM, you know, as far
8:26
Speaker 1: as UM the overall economy, I think you know the
8:30
Speaker 1: data themselves that have been better obviously was the employment
8:34
Speaker 1: report at the start of the month. Um, you know,
8:37
Speaker 1: the thousand jobs that were announced. There's nothing to necessarily
8:41
Speaker 1: write home about, but there were some positive signs of
8:44
Speaker 1: the trend is rising at a better pace than what
8:49
Speaker 1: was initially anticipated because it was a big upward revision
8:52
Speaker 1: to the prior months, and some of the other data
8:54
Speaker 1: within the report were fairly positive. So, Kevin, are you
8:57
Speaker 1: of the opinion that it's really really just talking about
9:01
Speaker 1: the consumer here in this economy? We know the consumer economy,
9:04
Speaker 1: but it seems like the other thirty percent is is
9:07
Speaker 1: pretty weak, maybe even manufacturing recession. Is the consumer strong
9:11
Speaker 1: enough to keep this economy growing? Yeah, I mean, consumers
9:14
Speaker 1: spending certainly has been driving the growth in the economy lately.
9:17
Speaker 1: UM and as you mentioned, manufacturing, which is pretty much
9:20
Speaker 1: at the epicenter of the UH the trade war. Obviously,
9:23
Speaker 1: we've seen business investment and exports slow down as well,
9:26
Speaker 1: so it's not only confined to the manufacturing sector. But
9:29
Speaker 1: you know, the consumer, as you mentioned, correctly, UH is
9:33
Speaker 1: definitely leading the charge with growth. But I think it's
9:36
Speaker 1: pretty obvious that the economy is in a slowing phase.
9:40
Speaker 1: And you know, at the start of the year where
9:41
Speaker 1: a three percent and the last couple of quarters we've
9:43
Speaker 1: been around two percent UM, which seems like a reasonable
9:46
Speaker 1: estimate for the fourth quarter as well. We don't have
9:49
Speaker 1: too much data that go directly into adding up g
9:52
Speaker 1: DP just yet, but later this week we will get
9:54
Speaker 1: retail sales, which, um, you know, allow us to get
9:59
Speaker 1: some sense of least UH spending heading into the all
10:02
Speaker 1: important holiday shopping season. A lot of people, including President Trump,
10:07
Speaker 1: seemed to be increasingly conflating the performance of equity markets
10:11
Speaker 1: with the US economy. Uh. And I guess you know,
10:14
Speaker 1: even if we do have a slowing US economy, can
10:18
Speaker 1: that support new record highs on the SMP. Yeah. Well,
10:24
Speaker 1: I mean it's a little bit out of my purview,
10:26
Speaker 1: and I'm not necessarily an equity strategy, but I do
10:29
Speaker 1: think that the equity market is a good, um at
10:34
Speaker 1: least um indicator of how things are currently UM. So
10:40
Speaker 1: it's more of a coincident indicator. There's very little economic
10:44
Speaker 1: data that actually do that good of a forward looking
10:48
Speaker 1: gauge about growth, But I do think the equity market
10:51
Speaker 1: obviously is a very important one. So I definitely don't
10:54
Speaker 1: want to dismiss the positive tone in the equity market, uh,
11:01
Speaker 1: with regard to you know, the future growth in the
11:03
Speaker 1: US economy. UM, but I do think that some of
11:07
Speaker 1: the earlier strength we've seen in the consumer is probably exaggerated.
11:11
Speaker 1: And and uh, you know, even just last week, the
11:15
Speaker 1: your guys measure the Bloomberg Consumer Comfort and the index
11:19
Speaker 1: fell to a seven month low. So you know, it
11:21
Speaker 1: is only one week's worth of data, but I do
11:24
Speaker 1: think we're at UM. You know, we are starting to
11:28
Speaker 1: see a downshift in in consumer spending, which kind of
11:32
Speaker 1: is aligns with the slowdown that we've seen in peril growth.
11:36
Speaker 1: Now at the top, we did mention that the employment
11:39
Speaker 1: report was very strong, UM, and all the upward visions
11:43
Speaker 1: to earlier months were positive. But I do think we're
11:45
Speaker 1: starting to see some cracks in the consumer um. Not
11:48
Speaker 1: only consumer comfort index with the Bloomberg number coming down,
11:52
Speaker 1: but auto sales for October fell over three and a
11:54
Speaker 1: half percent or just about three and a half percent UM,
11:57
Speaker 1: which is likely to hold back over all retail sales
11:59
Speaker 1: on for day. UM. You know, these data are clearly
12:03
Speaker 1: aren't weak enough for the FED to reconsider any recent
12:06
Speaker 1: signal on rates, But in our view, the data don't
12:09
Speaker 1: necessarily support the high degree of confidence that the Fed
12:12
Speaker 1: um and what Powell is likely to emphasize tomorrow. UM
12:16
Speaker 1: with regard to the consumer and the outlook, Kevin Hell,
12:20
Speaker 1: what's your view of the European economy. Some people are
12:22
Speaker 1: suggesting that perhaps it's kind of bottoming out. Do you
12:26
Speaker 1: share that you? Um, Well, the data there with regard
12:30
Speaker 1: to like the purchasing managers surveys have been um, definitely
12:35
Speaker 1: less weak than they were. I mean, they were collapsing
12:37
Speaker 1: for a while, and they at least showed signs of
12:39
Speaker 1: stability there. Um. And obviously economies like Germany is is
12:46
Speaker 1: really getting bearing a lot of the bront from the
12:49
Speaker 1: China trade war, so you know, they are much more
12:51
Speaker 1: open and exposed to global situations than the US uh
12:56
Speaker 1: is directly, so you know, I focus more on the US,
13:00
Speaker 1: but we've we've seen less weakness. I think they're relative
13:04
Speaker 1: to the earlier really significant downward aumentum that we saw earlier.
13:08
Speaker 1: Kevin Cummins, thank you so much for being with us.
13:10
Speaker 1: Kevin Cummins, economist with nat West Markets Securities. Today is
13:31
Speaker 1: a big day for the Walt Disney Company. They launched
13:34
Speaker 1: Disney Plus, their streaming service that is slated to go
13:37
Speaker 1: head to head with Netflix. Stock US up one point
13:40
Speaker 1: five percent today to walk us through kind of what
13:43
Speaker 1: it means for the company. We welcome Githa Rungan often
13:45
Speaker 1: she is senior media annalys for Bloomberg Intelligence, joining us
13:48
Speaker 1: on the phone. So, Keith, this is a big day
13:51
Speaker 1: for Disney. Tell us kind of what their strategy is
13:55
Speaker 1: here with Disney Plus. Yeah. So absolutely, Paulso there's been
13:59
Speaker 1: a lot of excitement and anticipation building up for this service,
14:02
Speaker 1: which will really be the core of Disney's uh director
14:06
Speaker 1: consumer strategy. Um. So, they've been really building for this
14:10
Speaker 1: service for many many years now, acquiring the technology and
14:14
Speaker 1: then really making that transformative acquisition with Fox just to
14:18
Speaker 1: get that extensive catalog of content. But really this is uh,
14:23
Speaker 1: you know, this is going to be the core of
14:25
Speaker 1: the company I think for for for the foreseeable future.
14:28
Speaker 1: Management has staked especially Bob Iger, has kind of staked
14:31
Speaker 1: his legacy on this on on the success of this product.
14:34
Speaker 1: So it is a make or break attempt by Disney
14:36
Speaker 1: to reposition the company for growth. I love how it's
14:40
Speaker 1: being assessed right now. The rollout, yes, there were technical
14:43
Speaker 1: glitches and crashes for some users, but social media people
14:47
Speaker 1: seem to like it. Uh, you know how do we
14:49
Speaker 1: decide whether this was successful or not. So I think
14:52
Speaker 1: first day launch issues are typical in streaming. I mean,
14:56
Speaker 1: they did expect this. They had a test pilot whi
15:00
Speaker 1: uh they carried out in the Netherlands a few weeks ago. Um.
15:03
Speaker 1: Disney management said last week at the earnings called that
15:06
Speaker 1: that pilot actually was pretty successful. The glitches are scattered.
15:11
Speaker 1: I think it resolves itself in the course of the
15:13
Speaker 1: next few hours or by the end of the day. Um.
15:15
Speaker 1: They did actually put a tweet out just a few
15:17
Speaker 1: minutes ago saying that consumer demand has exceeded expectations. Uh.
15:22
Speaker 1: And so at that point, yeah, absolutely positive. And um,
15:27
Speaker 1: come on, do we expect anything other than that. This
15:29
Speaker 1: is from Disney, right were they're gonna put a tweet
15:31
Speaker 1: up being like, guys, guys, where are you? I don't
15:34
Speaker 1: know why you're not signing up faster? I mean, there
15:37
Speaker 1: were some Um, so there were some reports yesterday which
15:39
Speaker 1: just just to kind of give you a sense of
15:41
Speaker 1: the demand out there. So there were some reports suggesting
15:44
Speaker 1: that they were almost more than two million pre orders.
15:47
Speaker 1: But really, I mean, I think Disney's secret weapon here
15:49
Speaker 1: will be it's it's marketing advantage. Right. They have millions
15:52
Speaker 1: and millions of touch points across the company, spanning their channels,
15:55
Speaker 1: their parks, their cruises, their their hotels, retail stores, so
15:58
Speaker 1: that that's an area that they're really going to have
16:00
Speaker 1: significant advantage. So Keita talked to us about the financials here,
16:03
Speaker 1: the economics of this business. It's not a cheap business.
16:05
Speaker 1: We see the you know, Netflix spending a good jillion
16:08
Speaker 1: dollars every year on programming. What's how's Disney they do it? Yeah,
16:11
Speaker 1: it's it's really the same story for Disney as well. Um.
16:14
Speaker 1: The only I guess the main difference there is they
16:17
Speaker 1: own a lot of their library content. So at launch
16:20
Speaker 1: they have five hundred films, seven thousand, five hundred uh
16:23
Speaker 1: episodes TV episodes. They own all of that. Of course,
16:27
Speaker 1: it's still going to cost them because they are putting
16:29
Speaker 1: originals on their service as well. So they at launch
16:32
Speaker 1: they have ten originals. By the fifth year, they're going
16:35
Speaker 1: to have almost sixty of those originals, and just with
16:38
Speaker 1: the cost of the originals, uh, as well as the
16:41
Speaker 1: last licensing revenue, they're gonna lose probably anywhere from about
16:44
Speaker 1: two to two and a half billion over the next
16:47
Speaker 1: few years. In each of the next few years, So
16:50
Speaker 1: the service is not going to be profitable till at
16:52
Speaker 1: least fourth. Do you have cable, I do? Yeah, what
16:58
Speaker 1: what what would it take for you to cut the cord?
17:00
Speaker 1: So so I think the thing that's really keeping me
17:03
Speaker 1: glued to to cable right now, like everybody else, is sports.
17:06
Speaker 1: Um you know your um, well I have lots of them.
17:13
Speaker 1: Um yeah, but but you know, just just sports in general.
17:18
Speaker 1: And I think that's what's keeping people really glued to
17:21
Speaker 1: to to to their bundle right now. This this Disney
17:26
Speaker 1: plus thing. One could argue that maybe Disney and all
17:29
Speaker 1: these other folks are are late to the game. Um.
17:32
Speaker 1: I mean there's a lot of competition in the streaming business.
17:35
Speaker 1: Talked to us about the competitive landscape. Yeah, I think that,
17:38
Speaker 1: you know, most people are really kind of expecting more
17:41
Speaker 1: of this two horse race between Netflix and Disney. Um.
17:44
Speaker 1: We do have some of the other services as well.
17:47
Speaker 1: You know, CBS, for instance, has the all access in
17:49
Speaker 1: the showtime service. But I think a lot of those
17:51
Speaker 1: are are going to really see tremendous competitive pressure. I
17:54
Speaker 1: think when all is said and done, over the next
17:56
Speaker 1: three to four years, we're really going to see Netflix, Um,
17:59
Speaker 1: kind of consolidate its position, and Disney with its three
18:02
Speaker 1: services at Disney plus, Hulu and UM and ESPN plus
18:06
Speaker 1: have at least over well over a hundred million subscribers
18:10
Speaker 1: in the United States. Get the wrong enough and thank
18:13
Speaker 1: you so much. Well. The first major cold snap for
18:31
Speaker 1: the Northeast is coming this week. That usually gets the
18:33
Speaker 1: attention of energy traders to get a sense of what's
18:35
Speaker 1: going on in the global energy markets. We welcome our
18:37
Speaker 1: good friends Stephen Short uh Short Group President Stephen, thanks
18:41
Speaker 1: so much for joining us so give us a sense
18:42
Speaker 1: of just kind of what we're seeing in the natural
18:44
Speaker 1: gas and maybe even other energy spaces as we get
18:47
Speaker 1: this cold blast of air coming across the U S. Well.
18:50
Speaker 1: Absolutely in the natural gas market, which we are we
18:53
Speaker 1: are and continue to be in a structural long term
18:55
Speaker 1: bear market. We've had a significant rally over the last
18:59
Speaker 1: two weeks. This was created by in the oversold condition.
19:04
Speaker 1: That is to say, speculators on Wall Street had greatly
19:07
Speaker 1: oversold this market when we UH judge their risk ratio
19:10
Speaker 1: relative to the CFTC data. So you juxtapose that oversouled
19:15
Speaker 1: condition with the first major blast of cold air, and
19:19
Speaker 1: that was quickly priced into the futures markets. So we've
19:22
Speaker 1: had a significant rally in the gas market leading up
19:25
Speaker 1: into the close of last week. We just got the
19:29
Speaker 1: new CFTC data out on this past Friday. The bears
19:33
Speaker 1: have been squeezed out of the market. The risk ratio
19:36
Speaker 1: is lower, so this the the bullish short squeeze in
19:40
Speaker 1: the market is now over. So you take that short
19:43
Speaker 1: squeeze out of the market. And yes, we're getting hit
19:46
Speaker 1: with the cold right now, but keep in mind these
19:49
Speaker 1: are futures markets, so we're looking at, okay, what is
19:52
Speaker 1: the next shoot a drop. And although we're seeing very
19:55
Speaker 1: cold or about to see very cold attempts in some
19:58
Speaker 1: key gas fuel market areas over the next week, the
20:02
Speaker 1: forecast beyond one week out is much more moderate. So
20:06
Speaker 1: we had a significant sell off or a correction, that
20:09
Speaker 1: is to say, in the oil markets to start off
20:11
Speaker 1: this week. Got it. And so in other words, it
20:14
Speaker 1: sounds like unless there's another cold spat uh, you think
20:17
Speaker 1: that probably things are going to go down or flat
20:20
Speaker 1: from here for that gas, absolutely, Lisa, I think we're
20:24
Speaker 1: sending up to the same scenario we saw last winter.
20:27
Speaker 1: Last winter when you you got some cold in in
20:30
Speaker 1: the forecast you got some cold winter, we saw a
20:32
Speaker 1: twenty cent rally in the market. You take that cold
20:35
Speaker 1: out of the market, then we saw correction and we
20:38
Speaker 1: yow yowed all of last winter. And it wasn't until
20:42
Speaker 1: we got into the spring of last UH last year
20:46
Speaker 1: when the floor from underneath the market fell out and
20:48
Speaker 1: natural gas prices crashed. We're now going into the peak
20:52
Speaker 1: demand season, So yes, this is going to be a
20:53
Speaker 1: market that lives and dies with the weather forecast. All right,
20:56
Speaker 1: So that's natural gas. Let's turn to crude, and I've
21:00
Speaker 1: been seeing a number of stories about how shale producers
21:04
Speaker 1: are planning to reduce their spending next year UH, planning
21:07
Speaker 1: a cut production. Further, we're hearing some about even the
21:11
Speaker 1: deep water drillers planning to potentially do the same. Do
21:14
Speaker 1: you think that this will change the dynamic with respect
21:18
Speaker 1: to what people had been talking about the oversupply within crude. Yeah. Absolutely.
21:24
Speaker 1: I think the market is is far too focused on demand.
21:28
Speaker 1: That is to say about the ongoing offgoing talks with
21:32
Speaker 1: China and the tariffs. No one's really the narrative really
21:36
Speaker 1: hasn't been on to supply, and I think that will
21:38
Speaker 1: change in the new year. Lisa. As we go in
21:41
Speaker 1: and we look at for instance, uh rid counts, red
21:44
Speaker 1: counts are now at two plus year lows. But the
21:48
Speaker 1: problem there is we're much more efficient, We're better at
21:51
Speaker 1: producing with less, so we're still getting oil onto the market.
21:55
Speaker 1: The biggest, biggest concern for this market in twenties twenty
21:59
Speaker 1: is the in some odd forty billion dollars of debts
22:03
Speaker 1: that is now coming due in the oil patch. Remember
22:07
Speaker 1: oil prices crashed at the end of Wall Street allowed
22:12
Speaker 1: the shell patch to kick the can down the road
22:15
Speaker 1: five years out with increased in the revolvers and their
22:18
Speaker 1: credit lines. Wall Street is no longer willing to do that.
22:22
Speaker 1: Wall Street wants to see the money. So you've got
22:25
Speaker 1: a hundred and forty billion dollars there and about coming
22:28
Speaker 1: do over the next two years twenty twenty throw two.
22:32
Speaker 1: So you're about to see, or we are on the
22:34
Speaker 1: customer see a major contraction in the industry. That is
22:38
Speaker 1: to say, you're going to see a lot of small
22:41
Speaker 1: producers with a lot of debt on their books about
22:43
Speaker 1: to be gobbled up. And there's are only going to
22:46
Speaker 1: be producers with good acreage are gonna be gobbled up
22:48
Speaker 1: with the big guys with clean balance sheets. So we've
22:51
Speaker 1: got a little energy I p O deal coming down
22:55
Speaker 1: the pike, Saudi Aramco. So how does the market the
22:59
Speaker 1: energy markets, do you think? How did they perceive Saudi Aramco? Uh?
23:04
Speaker 1: You know what, Saudia ramcoes ten years too late with
23:07
Speaker 1: this I p O. You have every major Western oil company,
23:12
Speaker 1: they're not even oil companies. They've rebranded themselves their natural
23:16
Speaker 1: gas companies, their power companies, their energy companies. They've taken
23:20
Speaker 1: the word oil out because clearly out to the future
23:23
Speaker 1: growth of oil the demand decay is there. The most
23:27
Speaker 1: optimistic UH forecast but by another researcher says demand decay
23:33
Speaker 1: or demand um what will peak in and and then
23:37
Speaker 1: what will will get to be pulled back? I'm not
23:40
Speaker 1: as optimistic. I think the genie is out of the bottle.
23:43
Speaker 1: So with regard to that two trillion dollar valuation for
23:47
Speaker 1: for the small piece of that pie, A Ramco is
23:50
Speaker 1: willing or the the Saudis are willing to give up,
23:52
Speaker 1: I'm not. I'm not hopeful. I'm that given about the
23:55
Speaker 1: whole structural change in the market away from an oil
23:59
Speaker 1: based a ectomy to at least a natural gas based
24:03
Speaker 1: economy in some other alternative fuel if certain presidential candidates
24:07
Speaker 1: have their way twelve months Hence, all right, Stephen, just
24:11
Speaker 1: we are looking ahead right now, looking at crew traded
24:14
Speaker 1: on the IMAX fifty six dollars and sixty seven dollars,
24:19
Speaker 1: sixty fifty six dollars, seventies cents. I'm just wondering what
24:23
Speaker 1: you think it's going to be next year, what's the
24:24
Speaker 1: peak and the right right now, I think we're in
24:28
Speaker 1: that area where oil peaking in that low sixty two
24:32
Speaker 1: mid six dollar range. Once once we roll into the
24:35
Speaker 1: spring and we get ready for next summer, we demand
24:38
Speaker 1: peaks in We're we're we're pretty much I think in
24:40
Speaker 1: that range. And this is non mix w T. I.
24:42
Speaker 1: We're talking about right now where oil is fifty fifty
24:46
Speaker 1: six dollars a barrel. For the industry to remain healthy,
24:50
Speaker 1: oil cannot go any lower than where we are right now.
24:53
Speaker 1: So in a healthy oil economy or market, we're looking
24:58
Speaker 1: at oil in that mid fifty to mid sixty dollar range.
25:01
Speaker 1: Through of course, if we see anything any pullback below
25:05
Speaker 1: that mid fifty to low fifty dollar range, that is
25:07
Speaker 1: a telltale of severe economic contraction. It's something to keep
25:11
Speaker 1: an eye on. But I'm not that concerned with regard
25:15
Speaker 1: to the quote unquote the R word, the recession word.
25:18
Speaker 1: I don't think we're headed there. So I think oil
25:21
Speaker 1: in that in the market area, in the area where
25:23
Speaker 1: we are now in the NOMEX mid to low fifties,
25:27
Speaker 1: but not much higher than than the high sixties, going
25:30
Speaker 1: volts are relatively stable markets when we look in the aggregate.
25:34
Speaker 1: Stephen Short of the Short group, thank you so much
25:37
Speaker 1: for being with us. Thanks for listening to the Bloomberg
25:40
Speaker 1: PENL podcast. You can subscribe and listen to interviews at
25:43
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney.
25:47
Speaker 1: I'm on Twitter at pt Sweeney and Lisa bramwo It's
25:49
Speaker 1: I'm on Twitter at Lisa bramw wits one before the podcast,
25:53
Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio