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Markets, ETFs, and Commodities · Bloomberg Intelligence

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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and
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Speaker 1: at Bloomberg dot com Slash podcast. Geopolitics certainly moving markets
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Speaker 1: today and pretty much every day this week as well.
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Speaker 1: But let's step back take a look at some of
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Speaker 1: these fundamentals. Because we do have inflation, we do have
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Speaker 1: rising interest rates, we do have a slowing economy. Howard
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Speaker 1: risk assets to perform in that environment. Let's check in
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Speaker 1: with Mark yesco CEO, CEE, IO and founder of Morgan
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Speaker 1: Creep Capital Management, located in some third rate hamlet called
0:46
Speaker 1: Chapel Hill, North Carolina. I mean, I guess you couldn't
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Speaker 1: find any office space in Mark. Paul's a duke guy
0:52
Speaker 1: in Durham, North Carolina. But we'll check in with Mark anyway, Mark,
0:56
Speaker 1: what are you telling your clients here as a kind
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Speaker 1: raise all some of these you know, these bricks in
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Speaker 1: this wall of worry here. Now it's a great, great
1:06
Speaker 1: point and uh, you know, congrats to the boys at
1:09
Speaker 1: the University of New Jersey at Durham down the road.
1:12
Speaker 1: Very good. Um, but look, we we are cautious in
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Speaker 1: the current environment. You know, we were living in a
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Speaker 1: world of financial repression. As to me is the biggest problem.
1:24
Speaker 1: Savers are just being punished with these low interest rates.
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Speaker 1: And although the Feds making noises about raising I actually
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Speaker 1: don't think they can. So that'll cause that'll take one
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Speaker 1: of the stressors away when they finally do what I'll
1:37
Speaker 1: call the Powell pivot and he finally admits that he
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Speaker 1: really can't raise rates. You mentioned that economic growth is
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Speaker 1: slowing very dramatically. We're just gonna see negative growth in
1:47
Speaker 1: Europe in the first quarter, could possibly see little zero
1:52
Speaker 1: growth in the US. And then corporate profits are rolling over.
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Speaker 1: Earnings estimates are being slashed. So we feel that you
1:59
Speaker 1: should be head with a capital duh. And hedge funds
2:02
Speaker 1: are are likely to have a much better year this
2:05
Speaker 1: year than they did last year. We still do like
2:07
Speaker 1: one area, which is oil. We think energy is an
2:12
Speaker 1: interesting place to be. Things like MLPs good place to hide.
2:16
Speaker 1: They're just very very cheap because even if everybody wants
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Speaker 1: an e V. It will take a thirty years to
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Speaker 1: everyone to have an EV, so it's going to take
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Speaker 1: a while before oil is not necessary. That what's true,
2:29
Speaker 1: that's that's the only thing that you know, some of
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Speaker 1: us have range anxiety, right, we like to travel long distances. Um.
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Speaker 1: But but then I think the last thing we're telling
2:37
Speaker 1: people is, uh, don't really stress too much about the
2:43
Speaker 1: noise of geopolitics, really focus on the signal, and um,
2:48
Speaker 1: you know, we think there's lower risk of some big event.
2:52
Speaker 1: And then I think many in the DC area would
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Speaker 1: have us believe, but um, you know, we're we're we're cautious,
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Speaker 1: but but not completely out of markets. So why do
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Speaker 1: you think we've seen such an outperformance of you know,
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Speaker 1: we were just graphing oil. Um, since the pandemic against
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Speaker 1: the producers and the underlying commodity has done so much better.
3:17
Speaker 1: It's great, great, great point. And I think that the challenges,
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Speaker 1: particularly in the US, we had a lot of producers
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Speaker 1: that were over levered and a whole bunch of them
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Speaker 1: went out of business. So that clearly impacts the indices
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Speaker 1: that that you know, the broad baskets of those producers.
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Speaker 1: There are some individual companies you know my favorite Diamondback Energy.
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Speaker 1: I would say Fang has outperformed Fang, Facebook, Amazon, Netflix,
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Speaker 1: Google over the past year. Again this year, we think
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Speaker 1: it all out performed for a while. Uh. And then
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Speaker 1: there's a other company like ovent Iv and Marathon Oxy
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Speaker 1: which has done really really well, outperformed oil. But you're right,
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Speaker 1: the basket has underperformed because there's just a lot of
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Speaker 1: companies that uh. And this across all industries. You know,
4:03
Speaker 1: we we extended credit to not so credit worthy businesses. Um.
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Speaker 1: I say we, I mean the economy, and some of
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Speaker 1: those went out of business I guess in in the
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Speaker 1: lockdowns after the pandemic, and it's it's really been tough.
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Speaker 1: And I think that's one of the reasons oil prices
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Speaker 1: surged so much, is so much supply came offline. So
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Speaker 1: Mark in the fixed income space, do you guys see
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Speaker 1: opportunities there? Again, we have a federal reserve that is
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Speaker 1: clearly signaled a rising interest rates and if you look
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Speaker 1: at the w I r P functional on the Bloomberg terminal,
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Speaker 1: could be as many seven hikes two. How do you
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Speaker 1: think about that as a rates to fixed income opportunities? Yeah,
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Speaker 1: I'm gonna take the under. I'm gonna take the way
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Speaker 1: under on that. I don't think there'll be anywhere close
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Speaker 1: to seven. I don't even think there'll be, you know,
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Speaker 1: three or four. I think they probably will try to
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Speaker 1: hike here in March. I think they'll probably whimp out
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Speaker 1: and not do fifty basis points. Um. You know, the
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Speaker 1: challenges have been behind the curve since two thousand. Uh,
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Speaker 1: for a hundred and something years, the average short term
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Speaker 1: rate roughly equal nominal GDP growth. And you know that
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Speaker 1: hasn't been true for eight years. And I think they
5:23
Speaker 1: should get back to a normal functioning interest rate environment. Uh,
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Speaker 1: because that's what capitalism is predicated on. That you know,
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Speaker 1: you can put your capital at work and get and
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Speaker 1: get paid for it. Think about being in Europe or Japan,
5:37
Speaker 1: you have to pay banks to keep your money. At
5:40
Speaker 1: least here you get zero point five. That's why we
5:44
Speaker 1: actually came up with this thing csh new E t
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Speaker 1: F that takes advantage of spack arbitrage to give people
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Speaker 1: something you know, we think low single digits on their
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Speaker 1: their savings. Because we think traditional bonds, high yield bonds
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Speaker 1: are very high. Taking credit risk, you're taking duration risk.
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Speaker 1: Both of which look kind of dicey in this market.
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Speaker 1: So having at least something on your your savings leaving
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Speaker 1: makes a lot of sense. All right, Mark, thank you
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Speaker 1: so much. We appreciate checking in with you. Mark. Yesco
6:17
Speaker 1: uh He is with CEO, c I O and founder
6:20
Speaker 1: Morgan Creek Capital Management based in Chapel Hill, North Carolina,
6:24
Speaker 1: which is actually a very very beautiful community there, despite
6:28
Speaker 1: the University of North Carolina. And you want to see
6:31
Speaker 1: such a great school and they have such a great
6:33
Speaker 1: basketball history. Yeah, just not quite as great as their
6:36
Speaker 1: friends down route fifteen five oh one at the Duke University.
6:40
Speaker 1: But yeah, we all respect the u n C. Chapel
6:43
Speaker 1: Hill there. You're good, good hoops and we love playing
6:46
Speaker 1: against them. We have our E t S. She wants
6:51
Speaker 1: to talk ETFs, dying to talk ETFs. I was gonna say,
6:54
Speaker 1: Maestro mice Straw maybe has taken there's already an et
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Speaker 1: US are here E t F S arena in the
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Speaker 1: house right now. And we were talking about an e
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Speaker 1: t F fund earlier, weren't we U E s H
7:10
Speaker 1: hre we talking about E s H earlier? Which is
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Speaker 1: um no, I think those are the sp futures. No,
7:18
Speaker 1: it was it was some e t F fund that
7:22
Speaker 1: somehow dealt with SPACs in a way to that's leverage
7:27
Speaker 1: on leverage there, Katie, What do you got for us?
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Speaker 1: We can talk about spack ets, we can talk about
7:33
Speaker 1: fix income et s because it doesn't sound exciting, but
7:35
Speaker 1: there have been a ton of really interesting launches when
7:39
Speaker 1: it comes to fix income e t s this week.
7:41
Speaker 1: I mean, just today you had State Street and Blackstone
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Speaker 1: launch and e t F that will be half high yield,
7:48
Speaker 1: half clos and they're trying to really appeal to the
7:51
Speaker 1: retail crowd there, which caught my eye. You also have
7:54
Speaker 1: a bunch of black black Rock alumni debuting UH seven
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Speaker 1: junk on et just today, and then earlier this week
8:02
Speaker 1: you also had a CDs e t F debut. So
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Speaker 1: it's been a really fascinating week for just bond ETFs
8:09
Speaker 1: in general. Speaking of leverage on leverage, Yeah, who buys
8:14
Speaker 1: ETFs these days? Is it retail? Is it institutional? Is
8:16
Speaker 1: it hedge funds? These things? It's a really interesting mix
8:20
Speaker 1: of both. I mean, institutional and professional traders love et
8:24
Speaker 1: s because the liquidity there is so much greater than
8:27
Speaker 1: you would get in buying any sort of individual bond.
8:29
Speaker 1: So they use them often as liquidity sleeves, but you
8:32
Speaker 1: also have a very sleeve liquidity sleeve. I do too.
8:38
Speaker 1: I try to put that in stories whenever I can.
8:40
Speaker 1: But I mean they do appeal appeal to retail because
8:43
Speaker 1: some of the products, or some of the asset classes
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Speaker 1: you can get exposure to through an e t F.
8:47
Speaker 1: I mean, if you're a retail trader, you're never gonna
8:49
Speaker 1: be buying, you know, Russian debt, You're never going to
8:53
Speaker 1: be buying oil futures, those types of asset classes that
8:56
Speaker 1: you really can't get exposure to, but now you can
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Speaker 1: through an e t F. You invite it on any
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Speaker 1: sort of brokerage platform. So it's Tony from UBS ever
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Speaker 1: calls me and pitches an e t F to me,
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Speaker 1: that might be the end of our Oh no, are
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Speaker 1: you not in E t F. I don't know, Yeah,
9:12
Speaker 1: I guess I can. I mean that the low fees,
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Speaker 1: I guess they're targeted, which is pretty cool. I don't know,
9:18
Speaker 1: it just feels a little I'd love to see s
9:21
Speaker 1: h C s mark Yusco. Right, yes, exactly exactly. So
9:27
Speaker 1: we were talking to mark Yusco about and by the way,
9:30
Speaker 1: you know how I found that I couldn't remember what
9:32
Speaker 1: I had typed in, and I just typed an h
9:34
Speaker 1: I S t go and it shows you the history
9:37
Speaker 1: of all the commands that you've typed down the Bloombergs.
9:39
Speaker 1: You can scroll back. That is a very cool in itself.
9:43
Speaker 1: That is a good another function. You know, I was
9:46
Speaker 1: reading about this fund and I was so mad that
9:48
Speaker 1: I didn't write about it because it's really interesting. Basically that, um,
9:53
Speaker 1: it feels like he's pitching this e t F A
9:54
Speaker 1: is you can use it almost as a money market fund,
9:56
Speaker 1: like just store your cash here. You're probably going to
9:59
Speaker 1: get a few basis above treasury is not very exciting,
10:03
Speaker 1: but you know it should work all right. So the
10:07
Speaker 1: new issue market for e t f s, where are
10:10
Speaker 1: we kind of over the last twelve months? Is it
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Speaker 1: accelerating and we kind of peaked on fire? They say, yeah, no,
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Speaker 1: you saw a record number of e t f s
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Speaker 1: launched last year, which is interesting to me because they've
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Speaker 1: all been mostly active and thematic. But if you look
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Speaker 1: at where the money is going, it's all too pretty
10:28
Speaker 1: vanilla funds. It's all SMP five hundred index tracking funds.
10:32
Speaker 1: So you're seeing this huge surge in issue once. But
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Speaker 1: I mean those new funds are attracting very little of
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Speaker 1: the actual money that's flowing into the e t F market,
10:40
Speaker 1: which is largely just dominated by Vanguard and black Rock UM.
10:44
Speaker 1: And Vanguard has been the boss of e t s
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Speaker 1: really since their inceptions. Right, they own, they own this market.
10:51
Speaker 1: They well, okay, this is the storyline that you have
10:54
Speaker 1: to watch very closely. Black or Vanguard's share of the
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Speaker 1: e t F market has grown every since go year,
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Speaker 1: for twenty years straight. Black Rock is still your incumbent.
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Speaker 1: I think they control about thirty four percent of all
11:06
Speaker 1: U S E t F assets, Vanguards at twenty nine
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Speaker 1: per cent. So that flippening it's going to happen one day,
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Speaker 1: maybe it's not this year. But I also just think
11:15
Speaker 1: because of you know, the uh, the legend of Jack
11:19
Speaker 1: Bogel and to me, e t F s fits so
11:21
Speaker 1: well with that passive investing legend. But of course they
11:25
Speaker 1: probably have active investing e t f s there as well.
11:28
Speaker 1: They do, and Vanguard will be quick to tell you
11:30
Speaker 1: that they do have active ETFs. But if you look
11:32
Speaker 1: at their AD two product and they just have a
11:34
Speaker 1: D two products, which is also mind blowing. It's mostly passive.
11:38
Speaker 1: That's where all the money is. And I SPACE E
11:40
Speaker 1: t F gets all the Bloomberg News written stuff on
11:44
Speaker 1: E t F and E t F. E t F
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Speaker 1: go is a great et F and b I E
11:48
Speaker 1: t F s to get the research there. Alright, let's
11:54
Speaker 1: talk global oil Brent crude nine cents. We were on
12:00
Speaker 1: I guess we still are on a one watch. I'm
12:01
Speaker 1: hearing some hundred dollar numbers coming out of Wall Street.
12:04
Speaker 1: But when we want to talk oil or commodities, pork bellies, crypto,
12:08
Speaker 1: we go to Mike McLane. He's from Bloomberg Intelligence Commodities. Uh.
12:12
Speaker 1: Analysts there. Uh, Mike, you're in a Bloomberg Interactive broker studio.
12:17
Speaker 1: He's here, folks. Usually he's down in Miami Beach kicking
12:19
Speaker 1: back at the pool with a cocktail with an umbrella
12:22
Speaker 1: in it. But he is here in New York working
12:24
Speaker 1: this week. Mike, what do you make a crude oil? Here?
12:26
Speaker 1: Are we gonna see that one handle? I think it's
12:29
Speaker 1: part of the process that it did in two thousand
12:31
Speaker 1: and eight. Elevator escalator up, elevator down. So right now
12:35
Speaker 1: we're in that upstage today is not so great, but
12:37
Speaker 1: it's factoring a pretty significant armed conflict between you know,
12:40
Speaker 1: with in Europe with a large exporter of crudel and
12:44
Speaker 1: a large exporter of grains. To me, that's otherwise. Once
12:47
Speaker 1: we get through this period, it happens, are not crudel
12:50
Speaker 1: is going back to fifty and that is are below
12:53
Speaker 1: and because two and two thousand and eight it's peaked
12:56
Speaker 1: at one and then dropped the forty um the next
12:59
Speaker 1: year and then what happened was that we went up
13:01
Speaker 1: to a hundred for till two thousand eleven. Then the
13:03
Speaker 1: whole U. S. Shelle Revolution happened. Oil sands in Canada.
13:06
Speaker 1: That's happening again now. The differences Matt loves is the
13:09
Speaker 1: evs are really kicking in. That's it's and our consumption
13:12
Speaker 1: in North America peaked in two thousand eighteen, and so
13:15
Speaker 1: it's starting to head lower. So also the key thing
13:18
Speaker 1: is war. Okay, war keeps it elevated and the shorter term,
13:21
Speaker 1: but the big picture is higher prices bringing more supply,
13:24
Speaker 1: and it's worse this time. So here's what that part
13:27
Speaker 1: at that part, I don't we don't see happening yet,
13:29
Speaker 1: right We don't see the shale guys recounts pulling more
13:33
Speaker 1: oil out of the ground. We don't see Texas pulling
13:35
Speaker 1: the trigger. They just don't seem to be downey at
13:37
Speaker 1: Why why lagging? So what are we doing right now?
13:40
Speaker 1: We're the reciprocal negative negative prices. We're going to do
13:43
Speaker 1: the exact opposite within the next year. Might be three
13:46
Speaker 1: months high prices. Now back to the more enduring trends.
13:49
Speaker 1: So let's give you this fact. Crude picked at one
13:52
Speaker 1: in July m July two thou eight. I think we're
13:55
Speaker 1: catch up to p P. I'd be two hundred dollars.
13:57
Speaker 1: So that's a bear market that's bouncing with an range.
14:00
Speaker 1: So yes, it's a lot of fear, but this is
14:02
Speaker 1: just the facts of the market. If you can, you
14:04
Speaker 1: can create more of it. We use less of it.
14:06
Speaker 1: And you know, I came from a corn mail background.
14:08
Speaker 1: Twelve percent of our gasoline is from ethanol, which I
14:11
Speaker 1: know you love. I'm against that. Well, I'm not against
14:14
Speaker 1: it if you don't care about your motor, you know,
14:17
Speaker 1: but it's not good. I don't want to put that
14:19
Speaker 1: in my I will drive the extra mile to get
14:22
Speaker 1: pure gasoline. Really, I don't want, Yes, you do. I
14:28
Speaker 1: don't care, do I you don't care? I don't care?
14:30
Speaker 1: All right? So alright, So, but supply and demand here
14:35
Speaker 1: OPEC has remained pretty disciplined. Is that something you expect
14:40
Speaker 1: to continue it does? Does OPEC really have that much
14:43
Speaker 1: spare capacity? Well, one of the things we've been hearing
14:45
Speaker 1: from the guests we bring on is okay, Saudi does,
14:48
Speaker 1: and you can see it with OPEC GO. It's a
14:50
Speaker 1: really cool chart for spare capacity. Um. But the guests
14:54
Speaker 1: that we have on lately have been doubtful that other
14:57
Speaker 1: countries really have that much spare capacity. And actually you
15:00
Speaker 1: don't see anything on OPEC GO besides Saudi Arabia and
15:04
Speaker 1: the UAE. Don't underestimate how prices bring on supply and commodities.
15:09
Speaker 1: I learned what I used to have hair. It's just exactly,
15:12
Speaker 1: it's just so entertaining the hair because I remember how
15:15
Speaker 1: we were gonna have peak oil ten years ago, what
15:16
Speaker 1: really peaked consumption in North America, So that will come.
15:20
Speaker 1: The discipline is impressive. Iran could come back and look
15:22
Speaker 1: at Venezuela. They have as much oils crude at some
15:24
Speaker 1: point that comes back in higher prices, bringing that on.
15:26
Speaker 1: But I think what's happening now is more than macro.
15:28
Speaker 1: I think we're beginning part of the great reversion of
15:31
Speaker 1: this massive period of economic fiscal, monetary stimulus. And so
15:36
Speaker 1: if if we don't have the war, we face the
15:37
Speaker 1: fet If we do have the war, we have other
15:40
Speaker 1: issues of potential recession. But you know, the unique thing
15:43
Speaker 1: that's really been happening lately, I was impressed with how
15:46
Speaker 1: bitcoin has been a leading indicat If you come in
15:48
Speaker 1: the morning like today, bitcoin was heavy the stock markets. Yeah,
15:51
Speaker 1: you see, you watch the ticker and then you have
15:53
Speaker 1: those days when stock markets down and Bitcoin starts taking
15:55
Speaker 1: up the stock market files. It's amazing how this crypto
15:58
Speaker 1: has become the leading in the lead the indicator markets.
16:01
Speaker 1: But in a big picture, I think that's what comes
16:02
Speaker 1: out ahead. So I published a piece recently. As we know,
16:06
Speaker 1: lack of supply decline to supply increasing adoptions not not
16:10
Speaker 1: part of multiples portfolios. Bitcoin and you look at crude
16:12
Speaker 1: oil we're using lesson. You mentioned ethano I driven electric
16:15
Speaker 1: and I've had it for eight years now. It's great electric.
16:19
Speaker 1: You know what, if any beach, I'll drive it all
16:21
Speaker 1: the way. It's I lawed you wait, a Shaddy Vault
16:25
Speaker 1: or a bolt A Vault, so they don't make them anymore,
16:27
Speaker 1: but it's a hybrid. Yeah, So basically I love that
16:30
Speaker 1: car exactly. Um I test drove that when they first
16:32
Speaker 1: came out. So my thing is, as I've been telling
16:35
Speaker 1: Paul and anyone who listened, I love the idea of
16:38
Speaker 1: electric cars. I love the acceleration of electric cars. I
16:42
Speaker 1: missed the vibrations and the sound of an internal combustion
16:45
Speaker 1: engine and shifting gears obviously as well. I love a
16:50
Speaker 1: good hybrid, so I loved the Chevy Vault when that
16:53
Speaker 1: came out, and I don't know why they don't make
16:55
Speaker 1: it anymore. I love the BMW now has um An
17:00
Speaker 1: X five that has an in line six, so fantastic
17:04
Speaker 1: power plant. That's the power plant that made them famous,
17:07
Speaker 1: and a huge like thirty kilowatt battery. So you can
17:12
Speaker 1: drive miles without a motor, but when you need it,
17:16
Speaker 1: you kick it on. It's your enthusiasm is to me,
17:20
Speaker 1: that's profound because that's where it's going, and it's happening
17:22
Speaker 1: more in the wealthier companies. But I heard last year
17:25
Speaker 1: in China of new auto sales were e vs. Now.
17:29
Speaker 1: You mentioned hybrids. My mine gets ninety miles for the
17:31
Speaker 1: getting per Gillan and my brother's a mechanics. Is a
17:33
Speaker 1: cool thing about these is they the engine doesn't work,
17:36
Speaker 1: card they last forever because we use electric for stop
17:39
Speaker 1: and go and the engine only works for the long
17:40
Speaker 1: distances it works. It's a good system. I wish they
17:42
Speaker 1: would make cars where you could easily swap out the
17:45
Speaker 1: batteries because my concern is I buy one now or
17:47
Speaker 1: the thirty kilowatt battery, and in ten years from now
17:49
Speaker 1: there's a five kilowatt battery and the same size. Mike McLoone,
17:54
Speaker 1: thank you so much. We appreciate it. We didn't get
17:55
Speaker 1: to talk pork bellies. We got tripped up by cryptos
17:58
Speaker 1: and concentrated orange. You will do or bellies next time,
18:01
Speaker 1: I guarantee it. This Federal Reserve is looking clearly at
18:09
Speaker 1: some of the economic data coming up, and we want
18:11
Speaker 1: to check in with Michael McKee covers all things economics
18:13
Speaker 1: for us. Here, Michael, as you think about this Federal Reserve,
18:18
Speaker 1: we're talking about hiking rates. W I r P is
18:22
Speaker 1: saying seven rate hikes this year. What do you think
18:26
Speaker 1: the federal reserve is really looking at in terms of data.
18:29
Speaker 1: Can I also say the word function looks better than
18:31
Speaker 1: ever you. I know we're on radio you can't see it,
18:35
Speaker 1: but it's so improved to the old word functions. So
18:40
Speaker 1: I highly recommend people check it out. The thing that's
18:42
Speaker 1: interesting is that we consider one rate hike to be
18:45
Speaker 1: twenty five basis points. That always is that just the
18:47
Speaker 1: standard rate hike measurement. Well, it became that under Alan
18:51
Speaker 1: Greenspan the years before they used to announce what was
18:55
Speaker 1: going on, they would raise it by all kinds of numbers,
18:58
Speaker 1: fifteen or ten or thirty five five, whatever they thought
19:01
Speaker 1: was necessary, particularly in the Vulcar years when they were
19:03
Speaker 1: doing UH monetary aggregates as a guide, so they were
19:07
Speaker 1: trying to figure out how much money they'd be creating.
19:10
Speaker 1: But um, at this point the Fed is UH looking
19:14
Speaker 1: at to answer your question, inflation and unemployment. Unemployment, they
19:19
Speaker 1: noted in the Minutes yesterday had pretty much gotten to
19:22
Speaker 1: where they wanted it to be. It's inflation they're worried about.
19:25
Speaker 1: So the Fed is at this point planning on moving
19:30
Speaker 1: in March. By the way, has employment changed that much
19:33
Speaker 1: or did they just start to get worried enough about
19:34
Speaker 1: inflation that they felt like it was changed a huge amount.
19:39
Speaker 1: I mean, it's it's already down basically to almost where
19:43
Speaker 1: it was before the pandemic. We were at three point
19:47
Speaker 1: five three point six, and now we're at three, while
19:50
Speaker 1: we're at four, but we were at three point nine.
19:52
Speaker 1: As more people come back, so pretty much at full employment,
19:56
Speaker 1: we're not going to get the same statistics that we
19:58
Speaker 1: got before the pandemic because people have not come back
20:02
Speaker 1: into the labor force. So that great resignation starts. Yeah,
20:05
Speaker 1: well we're all working, so I don't I don't see
20:07
Speaker 1: any of it's not in this room. But but you're right, man,
20:11
Speaker 1: it's basis points become the standard. And now they don't
20:14
Speaker 1: even do it by basis points. They're doing it by
20:18
Speaker 1: range of now and then it will be fifty. And
20:24
Speaker 1: what the market is doing, and this is your w I. R. P.
20:27
Speaker 1: Lesson is looking at what the effective Fed funds rate
20:30
Speaker 1: is likely to be, which is right now around seven
20:33
Speaker 1: basis points. So if you look at the next move
20:36
Speaker 1: and you see that the implied rate is thirty two
20:38
Speaker 1: basis points, then that's a twenty five basis point move.
20:41
Speaker 1: So uh, it's it's a little complicated, but once you
20:44
Speaker 1: get used to it. YouTube you know, in terms of
20:48
Speaker 1: that um uh measured policy behavior and the transparency that
20:58
Speaker 1: the FED wants to I mean, are we gonna stick
21:00
Speaker 1: with that throughout the pal FED? Will we ever get
21:02
Speaker 1: back to them saying, you know what, let's have an
21:04
Speaker 1: emergency meeting and you know what, we'll raise my fifty
21:06
Speaker 1: basis points now or forty five. Well, they've had emergency meetings.
21:10
Speaker 1: They had an emergency meeting, but they can only do
21:12
Speaker 1: an emergency meeting to cut right, Because the could do
21:15
Speaker 1: an emergency meeting to raise if they felt it was necessary.
21:19
Speaker 1: It's it's hard to do because I'm doubtful you're legally
21:24
Speaker 1: they can do it, but you're right, it's it would
21:27
Speaker 1: be a shock to markets. Uh. And it was pretty
21:29
Speaker 1: obvious when we hit the pandemic and markets seized up
21:33
Speaker 1: and weren't working that they had to cut rate. So
21:35
Speaker 1: the meeting, the emergency meeting they held was not a
21:39
Speaker 1: bad thing. But do you know who was saying this yesterday?
21:41
Speaker 1: Actually I was struggling to remember because I'm getting it
21:46
Speaker 1: was Daniel D. Martino booth Um, And to be fair,
21:49
Speaker 1: her book was titled fed Up, so you can tell
21:52
Speaker 1: where she's coming from. But she was saying yesterday, you
21:55
Speaker 1: know this isn't cool because the FED is so careful
21:58
Speaker 1: when it comes to markets, right, they want to spoot
22:00
Speaker 1: the markets, but they don't care about the common man
22:04
Speaker 1: paying five dollars at the pump. If they wanted to
22:07
Speaker 1: tackle inflation right now, she was she was saying, and
22:10
Speaker 1: Paul made a great counter argument that it's really about
22:13
Speaker 1: the supply chain. If they wanted to fight inflation, they
22:15
Speaker 1: would just have an emergency meeting and raise fifty basis
22:18
Speaker 1: points now and maybe six eight months from now. That
22:22
Speaker 1: would slow start to slow business activity. Policy working with
22:26
Speaker 1: a lag, so it's not really going to help. I mean,
22:29
Speaker 1: we were surprised by retail sales yesterday and how good
22:32
Speaker 1: they were, and we've been surprised by how strong consumer
22:36
Speaker 1: credit has been. People want to spend money. Well, retail
22:39
Speaker 1: sales disappointed the last two reports. Think about how bad
22:42
Speaker 1: it was in December, and that was Christmas, but that
22:45
Speaker 1: was because October was better, So I mean we pulled
22:48
Speaker 1: it forward. That's you're just basically outlining that why it's
22:52
Speaker 1: so hard for anyone to do monetary policy these days,
22:55
Speaker 1: especially when you're working with a blunt instrument like one
22:58
Speaker 1: interest rate. Well, and of Paul's point, if you're if
23:01
Speaker 1: it's supply constraints that are causing inflation, you know, if
23:06
Speaker 1: if I'm paying so much more for my GMC yukon
23:10
Speaker 1: a T four because they just can't make enough, it
23:13
Speaker 1: doesn't matter if the FED raises rates. Does the FEDS
23:18
Speaker 1: going to raise rates on March sixteenth and on March seventeenth.
23:21
Speaker 1: We aren't going to suddenly have a big supply of
23:23
Speaker 1: semi conductors that all of a sudden show up. So
23:26
Speaker 1: the car problem is going to continue. And that's the issue,
23:30
Speaker 1: is we bought I mean, we've had several separate issues
23:33
Speaker 1: that get rolled into one. The semiconductor's issue was a
23:37
Speaker 1: result of a number of factory problems, and then the
23:41
Speaker 1: car issues, uh flowed from that. But then we have
23:45
Speaker 1: other supply chain issues where we ordered so many goods
23:49
Speaker 1: that they couldn't keep up with the shipping of the mall.
23:52
Speaker 1: And that's slowly beginning to rationalize, but we're not there yet. Yeah,
23:57
Speaker 1: we just had the lead class go on from Bloomberg
23:59
Speaker 1: Intelligence covers all the ocean shipping companies, the railroads, the
24:02
Speaker 1: truck and companies. He sees it all, and he says
24:05
Speaker 1: he consisted going to stretch into next year. You know,
24:07
Speaker 1: he kind of thought it might be at mid event
24:09
Speaker 1: where we get some meaningful improvement in supply chain. But
24:12
Speaker 1: now he's pushing that out even further. So that written
24:16
Speaker 1: the Rails. I have took a great Canadian Pacific investor
24:20
Speaker 1: trip through the Canadian Rockies. It was awesome and three
24:23
Speaker 1: day trip, a lot of fun. You know, I bets
24:25
Speaker 1: written the rails? What Greg Jarrett? Yeah, I'm sure he
24:29
Speaker 1: hasn't hold as a whole bolt, you know out in
24:32
Speaker 1: the West. Thanks for listening to the Bloomberg Markets podcast.
24:35
Speaker 1: You can subscribe and listen to introduce Apple Podcasts or
24:39
Speaker 1: whatever podcast platform you prefer. But I'm Matt Miller. I'm
24:42
Speaker 1: on Twitter and Matt Miller talking about on False Swinney.
24:46
Speaker 1: I'm on Twitter at pt Sweeney before the podcast. You
24:49
Speaker 1: can always catch us worldwide at Bloomberg Radio.