This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along with Jonathan Farrow and Lisa Abramowitz. Join us each day for insight from the best and economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal and the Bloomberg Business App. By Michael joins us right now. He is with JP Morgan Asset Management, Global Head of well Equities, bonds, Currencies, Commodities. I don't know everything else.

This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along with Jonathan Farrow and Lisa Abramowitz. Join us each day for insight from the best and economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal and the Bloomberg Business App. By Michael joins us right now. He is with JP Morgan Asset Management, Global Head of well Equities, bonds, Currencies, Commodities. I don't know everything else.

Let's stick with bonds.

Let's stick with bonds.

Let's stay with.

Let's stay with.

Bonds for right now. Do you buy across the curve right now? Because simplistically it is going to be price up, yield down.

Bonds for right now. Do you buy across the curve right now? Because simplistically it is going to be price up, yield down.

So the product launch of the year isn't chat GPT, it's the bond market. It's the repricing of bond just across the system. And we are seeing money come in. And even though there's a soft landing cap, there's concerns about inflation, there's concerns that the Fed could keep rising rates indefinitely. Actually, the highs from October almost a year ago, have held pretty well in the long end of the curve five tens and thirties. So it's not just me saying take advantage of the repricing of the bond market. We have clients left, right and centered, domestically, foreign countries, retail platforms, institutional platforms looking at where to get into this bond market, and they are putting money to work.

So the product launch of the year isn't chat GPT, it's the bond market. It's the repricing of bond just across the system. And we are seeing money come in. And even though there's a soft landing cap, there's concerns about inflation, there's concerns that the Fed could keep rising rates indefinitely. Actually, the highs from October almost a year ago, have held pretty well in the long end of the curve five tens and thirties. So it's not just me saying take advantage of the repricing of the bond market. We have clients left, right and centered, domestically, foreign countries, retail platforms, institutional platforms looking at where to get into this bond market, and they are putting money to work.

Are they chasing income, they chase in total return, worried about a slow down, taken on duration. How does the nature of that money shift in the last few months, Yes, exactly already above.

Are they chasing income, they chase in total return, worried about a slow down, taken on duration. How does the nature of that money shift in the last few months, Yes, exactly already above.

They're doing all of those things, and it depends where they're coming from. Wealth management platforms are looking at municipal bonds, they're looking at corporate debt, they're looking at treasury debt, and they're putting ladders of maturities in place. So they're buying bonds out to ten years with maturities every six to nine months, something like that. So they just want to get into the bond market before these yields disappear. Institutions, whether they're insurance companies or their pension funds, they're looking at their liabilities having deflated, and they're looking to put money into the long end of the market, and you have a whole host of others that are looking for total returns, so you can do pretty much everything in the bond market. We haven't seen this since two thousand and six, two thousand and seven.

They're doing all of those things, and it depends where they're coming from. Wealth management platforms are looking at municipal bonds, they're looking at corporate debt, they're looking at treasury debt, and they're putting ladders of maturities in place. So they're buying bonds out to ten years with maturities every six to nine months, something like that. So they just want to get into the bond market before these yields disappear. Institutions, whether they're insurance companies or their pension funds, they're looking at their liabilities having deflated, and they're looking to put money into the long end of the market, and you have a whole host of others that are looking for total returns, so you can do pretty much everything in the bond market. We haven't seen this since two thousand and six, two thousand and seven.

There's only one sentence I heard in all of that before these yields disappear. These yields aren't disappearing. They've been quite stubbornly high through some and that's been unexpected for you. I know, Bob, relative to your call, what do you think is behind that?

There's only one sentence I heard in all of that before these yields disappear. These yields aren't disappearing. They've been quite stubbornly high through some and that's been unexpected for you. I know, Bob, relative to your call, what do you think is behind that?

Well? I think there are a couple of things. This reminds me a lot of the second half of twenty twenty one, when yields were ridiculously low. The Fed was talking about transitory, the market bought it. We're looking at inflation going up and saying if they leave rates where they are, inflation's going to continue to accelerate. Now we're looking at rates very high, we're looking at very high real yields, We're looking at inflation coming down a lot, and the Fed is talking about leaving rates where they are indefinitely higher for longer. I want to see the summary of economic projections. Tom is it tomorrow? Next Wednesday, next Wednesday. Yeah, and the infamous dot plot. They've got one hundred basis points of rate cuts priced in for next year from the last dot plot, and they've also got inflation coming down, So they're acknowledging that if they key rates where they are and inflation comes down, then policy rates become progressively tighter and the economy may not be able to withstand that. I think what's keeping rates where they are is the market is believing the FED rhetoric and not believing that they may have to cut rate.

Well? I think there are a couple of things. This reminds me a lot of the second half of twenty twenty one, when yields were ridiculously low. The Fed was talking about transitory, the market bought it. We're looking at inflation going up and saying if they leave rates where they are, inflation's going to continue to accelerate. Now we're looking at rates very high, we're looking at very high real yields, We're looking at inflation coming down a lot, and the Fed is talking about leaving rates where they are indefinitely higher for longer. I want to see the summary of economic projections. Tom is it tomorrow? Next Wednesday, next Wednesday. Yeah, and the infamous dot plot. They've got one hundred basis points of rate cuts priced in for next year from the last dot plot, and they've also got inflation coming down, So they're acknowledging that if they key rates where they are and inflation comes down, then policy rates become progressively tighter and the economy may not be able to withstand that. I think what's keeping rates where they are is the market is believing the FED rhetoric and not believing that they may have to cut rate.

Your previous call of the start of summer was cut by September. Clearly they won't be cutting a week tomorrow. I want to understand from your perspective, what's going to deliver those cuts. And when you're thinking about yields we haven't seen since six oh seven. Some people might be listening this morning thinking, well, bad things happened after that, the bad things happen now. And of course I'm not saying on the same scale to the same magnitude of what we saw in our way, but are you anticipating bad things?

Your previous call of the start of summer was cut by September. Clearly they won't be cutting a week tomorrow. I want to understand from your perspective, what's going to deliver those cuts. And when you're thinking about yields we haven't seen since six oh seven. Some people might be listening this morning thinking, well, bad things happened after that, the bad things happen now. And of course I'm not saying on the same scale to the same magnitude of what we saw in our way, but are you anticipating bad things?

So at the start of this year we thought something like recession by the end of the year. Then we had the regional banking crisis, and we thought, well, that's going to bring recession forward a few months, so they should be cutting by September. And I think what we looked at and probably got wrong was the backstop that the central banks the FED put in place, the Bank Term Funding Program. And we likened it more to bear Stearn's ballot. It probably was more like TARP. It just created more liquidity, backstopped the entire banking system. These things are still hiding in plain sight. The regional banking crisis hasn't gone away. I wish you had asked Bill Dudley when he was patting himself on the back and the FED about no, no, this is all in the rear view mirror. Really look at the Bank Term Funding program. It's quietly increased in size nine consecutive the last nine consecutive weeks. It's at one hundred and eight billion. So the regional banks are not working down. They're borrowing and that's coming in at five and a half percent. That's telling us that they still need cash available to meet depositor outflows. So I think there are plenty of things out there that are slowing down growth and inflationary pressures are coming down for the FED to pause. We've said for a long time, you need disinflation and inflation to come down to levels they're comfortable with. I think tomorrow we're going to get the third consecutive core CPI print at point two. That's enough for them to pause. With a lot of the other disinflation that we're seeing. I think this time for them to cut rates, they're going to have to see unemployment go up. So it's possible that they may actually tip the economy into recession first before they start cutting rates, which would be something new for them. It would be positively ECB.

So at the start of this year we thought something like recession by the end of the year. Then we had the regional banking crisis, and we thought, well, that's going to bring recession forward a few months, so they should be cutting by September. And I think what we looked at and probably got wrong was the backstop that the central banks the FED put in place, the Bank Term Funding Program. And we likened it more to bear Stearn's ballot. It probably was more like TARP. It just created more liquidity, backstopped the entire banking system. These things are still hiding in plain sight. The regional banking crisis hasn't gone away. I wish you had asked Bill Dudley when he was patting himself on the back and the FED about no, no, this is all in the rear view mirror. Really look at the Bank Term Funding program. It's quietly increased in size nine consecutive the last nine consecutive weeks. It's at one hundred and eight billion. So the regional banks are not working down. They're borrowing and that's coming in at five and a half percent. That's telling us that they still need cash available to meet depositor outflows. So I think there are plenty of things out there that are slowing down growth and inflationary pressures are coming down for the FED to pause. We've said for a long time, you need disinflation and inflation to come down to levels they're comfortable with. I think tomorrow we're going to get the third consecutive core CPI print at point two. That's enough for them to pause. With a lot of the other disinflation that we're seeing. I think this time for them to cut rates, they're going to have to see unemployment go up. So it's possible that they may actually tip the economy into recession first before they start cutting rates, which would be something new for them. It would be positively ECB.

Like okay, But going forward, then, how does this cohere with a three percent yield curve across the board, a flat yield curve in the near future by the end of this year or even by midyear next year. If you have a FED that's being patient, not willing to cut, and you have economic data that's coming in hotter than.

Like okay, But going forward, then, how does this cohere with a three percent yield curve across the board, a flat yield curve in the near future by the end of this year or even by midyear next year. If you have a FED that's being patient, not willing to cut, and you have economic data that's coming in hotter than.

Expected, well, this is the FED that promised us transitory and then within a couple months change their mind and start hiking rates. We think we're going to see the same thing this time. They're going to tell us that they're going to keep rates higher for longer until inflation is at their target. But the magnitude of the slowdown we're seeing across the board tells us that will probably still be hitting recession around year end, so they'll be cutting rates by then. So I'm still incredibly comfortable that we'll see three percent across the curve.

Expected, well, this is the FED that promised us transitory and then within a couple months change their mind and start hiking rates. We think we're going to see the same thing this time. They're going to tell us that they're going to keep rates higher for longer until inflation is at their target. But the magnitude of the slowdown we're seeing across the board tells us that will probably still be hitting recession around year end, so they'll be cutting rates by then. So I'm still incredibly comfortable that we'll see three percent across the curve.

You think Hyphalonger is just a bad call, or do you think they're just misleading us that that's what they want to signal currently.

You think Hyphalonger is just a bad call, or do you think they're just misleading us that that's what they want to signal currently.

I think it's what they have to signal because they were already wrong once on inflation with the promise of transitory they can't be wrong again. They're telling us that they're prioritizing inflation overgrowth, and that means, like the ECB, you're willing to make the economy a casualty.

I think it's what they have to signal because they were already wrong once on inflation with the promise of transitory they can't be wrong again. They're telling us that they're prioritizing inflation overgrowth, and that means, like the ECB, you're willing to make the economy a casualty.

I guess what I'm getting at is do you believe them?

I guess what I'm getting at is do you believe them?

Do I believe Do you.

Do I believe Do you.

Believe they're prioritizing inflation overgrowth or it's a sign of weakness?

Believe they're prioritizing inflation overgrowth or it's a sign of weakness?

Do you think the back away?

Do you think the back away?

Well? I think the consumer is incredibly stretched right now. When you look at at the Beige book, you're seeing signs of that all over the place. They're talking about the last bit of pent up spending on leisure travel. They're talking about consumers that are trying to maintain their level of spending since their excess savings have run out by putting stuff on borrowing, which is a very high way to finance yourself. So things are going to slow down pretty quickly. We look at news coming out of Truest where they're starting to address cost pressures by laying people off. So the labor market doesn't look as robust as that mid threes unemployment rate. We think that starts to go up and it will force the Fed's hand.

Well? I think the consumer is incredibly stretched right now. When you look at at the Beige book, you're seeing signs of that all over the place. They're talking about the last bit of pent up spending on leisure travel. They're talking about consumers that are trying to maintain their level of spending since their excess savings have run out by putting stuff on borrowing, which is a very high way to finance yourself. So things are going to slow down pretty quickly. We look at news coming out of Truest where they're starting to address cost pressures by laying people off. So the labor market doesn't look as robust as that mid threes unemployment rate. We think that starts to go up and it will force the Fed's hand.

Boy, Michael, JP Morgan, asset management, what I was thinking about, and this goes back to you. The acclaimed toughest resume, toughest admit in banking, the analyst program of JP Morgan is the real yield we're at right now. Began within the data that we have in the modern age in two thousand and three, and that a huge body of our audience has never lived this ray structure and all of the follow on to it. What's your council? Does someone say, under thirty seven, thirty six, thirty eight years old of how to address a whole new world? After all?

Boy, Michael, JP Morgan, asset management, what I was thinking about, and this goes back to you. The acclaimed toughest resume, toughest admit in banking, the analyst program of JP Morgan is the real yield we're at right now. Began within the data that we have in the modern age in two thousand and three, and that a huge body of our audience has never lived this ray structure and all of the follow on to it. What's your council? Does someone say, under thirty seven, thirty six, thirty eight years old of how to address a whole new world? After all?

Well, I think you have to understand that markets go through cycles. The cycles can be very long. Probably the last fifteen twenty years weren't normal. They were the distorted years. They were the years that the baby boomers wrecked by overleveraging the property market, crashing it and then taking a decade to repair. We think we're going back to an environment that is more normal, where there is a demand for capital, there's a use for capital, it's productive, and there will be a cost for capital again, but you don't get there all at once. I think a five hundred and twenty five basis point rate hike is a shock to the system. It will slow things down. We think the next move coming out of the Fed will be to cut rates. We think you go back to two and a half to three percent. Yeah, the next tightening cycle, maybe they have to go to six percent and you start putting in place the mirror image of what we saw in the late eighties and the nineties with falling rates. You mean now see rising rates, So we have to get them used to. Inflation can be real and markets have to price that in, and central banks don't always value out.

Well, I think you have to understand that markets go through cycles. The cycles can be very long. Probably the last fifteen twenty years weren't normal. They were the distorted years. They were the years that the baby boomers wrecked by overleveraging the property market, crashing it and then taking a decade to repair. We think we're going back to an environment that is more normal, where there is a demand for capital, there's a use for capital, it's productive, and there will be a cost for capital again, but you don't get there all at once. I think a five hundred and twenty five basis point rate hike is a shock to the system. It will slow things down. We think the next move coming out of the Fed will be to cut rates. We think you go back to two and a half to three percent. Yeah, the next tightening cycle, maybe they have to go to six percent and you start putting in place the mirror image of what we saw in the late eighties and the nineties with falling rates. You mean now see rising rates, So we have to get them used to. Inflation can be real and markets have to price that in, and central banks don't always value out.

There's a lack of clarity in terms of how central banks really understand inflation. They say they look at core and then headline starts to move sentiment, and then they start going after that, how much to higher oil prices? Materially higher oil prices play into the risk that the FED remains higher for longer.

There's a lack of clarity in terms of how central banks really understand inflation. They say they look at core and then headline starts to move sentiment, and then they start going after that, how much to higher oil prices? Materially higher oil prices play into the risk that the FED remains higher for longer.

There used to be a wonderful chart everyone would dust off every time oil prices went up that oil shocks create recessions, and it had. It was another one of these one hundred percent perfect predictors. And we're getting another oil shock at exactly the wrong time, after credit conditions have tightened dramatically, after the cost of funding businesses and households has gone up a multiple. We're talking about business and households having to spend on energy at a time when their real incomes are much lower, so they're going to have to cut back somewhere else. I think it actually is another one of these things that's a warning that recession may need more present than the market things.

There used to be a wonderful chart everyone would dust off every time oil prices went up that oil shocks create recessions, and it had. It was another one of these one hundred percent perfect predictors. And we're getting another oil shock at exactly the wrong time, after credit conditions have tightened dramatically, after the cost of funding businesses and households has gone up a multiple. We're talking about business and households having to spend on energy at a time when their real incomes are much lower, so they're going to have to cut back somewhere else. I think it actually is another one of these things that's a warning that recession may need more present than the market things.

When does it count as an oil shock because we are seeing prices normalized, They're not necessarily going to the highest that we've seen of this particular cycle, but they are the highest going back to last year. What's your tipping point for when it is prohibitive of growth.

When does it count as an oil shock because we are seeing prices normalized, They're not necessarily going to the highest that we've seen of this particular cycle, but they are the highest going back to last year. What's your tipping point for when it is prohibitive of growth.

Well, you have to look at the cost of production and the cost of getting a barrel out of the ground. And where we are now, and what we're seeing is that Opek is telling us maybe demand isn't quite there, but they're not willing to live with much lower oil prices. They want the volume to replace the demand. It's not there, they're going to make it back with pricing, and they're going to push prices up. We'll see how high it goes. But for me, it's another sort of yellow warning flag out there. I don't think it helps the economy at all. I think it's another thing that squeezes an already stretched consumer bracket.

Well, you have to look at the cost of production and the cost of getting a barrel out of the ground. And where we are now, and what we're seeing is that Opek is telling us maybe demand isn't quite there, but they're not willing to live with much lower oil prices. They want the volume to replace the demand. It's not there, they're going to make it back with pricing, and they're going to push prices up. We'll see how high it goes. But for me, it's another sort of yellow warning flag out there. I don't think it helps the economy at all. I think it's another thing that squeezes an already stretched consumer bracket.

The inflation adjusted yield right now, at what level up above two percent, does it really begin to impinge on the system.

The inflation adjusted yield right now, at what level up above two percent, does it really begin to impinge on the system.

I think, coming off of several years of infinite free money, we're seeing it bite right now. We're seeing it in the housing market, We're seeing it in the cost of funding credit card purchases. You look at businesses, they front end loaded a lot of they're borrowing, but now they're going back and they're addressing other cost pressures and they're not doing it by just borrowing more and absorbing the cost pressures. They're actually starting to cut costs, So I think it is now starting to buy. I don't think long and variable lags to monetary policy. That law has been repealed. I think it still takes time and we're still in the early stages of it. I think the next twelve months are going to be pretty painful.

I think, coming off of several years of infinite free money, we're seeing it bite right now. We're seeing it in the housing market, We're seeing it in the cost of funding credit card purchases. You look at businesses, they front end loaded a lot of they're borrowing, but now they're going back and they're addressing other cost pressures and they're not doing it by just borrowing more and absorbing the cost pressures. They're actually starting to cut costs, So I think it is now starting to buy. I don't think long and variable lags to monetary policy. That law has been repealed. I think it still takes time and we're still in the early stages of it. I think the next twelve months are going to be pretty painful.

What would you have to say to make you change your view.

What would you have to say to make you change your view.

I'd have to see a legitimate reacceleration of core inflation, and that would tell me that we're in a different regime. Maybe the X y Z generation is large enough, they're earning enough, they're spending enough that it is driving an economy that is going to a new high and central banks do have to come in and really dial down the desire of the consumer to spend. But right now we're not seeing that.

I'd have to see a legitimate reacceleration of core inflation, and that would tell me that we're in a different regime. Maybe the X y Z generation is large enough, they're earning enough, they're spending enough that it is driving an economy that is going to a new high and central banks do have to come in and really dial down the desire of the consumer to spend. But right now we're not seeing that.

Are you googling the X y Z generation? Is that what you just did?

Are you googling the X y Z generation? Is that what you just did?

Yeah?

Yeah?

What do you have to say?

What do you have to say?

What is the X y Z generation? I've never heard of.

What is the X y Z generation? I've never heard of.

It, x y Z.

It, x y Z.

It's the X the Y one and the Z one.

It's the X the Y one and the Z one.

Yeah gen x ok, all like combined together.

Yeah gen x ok, all like combined together.

Yeah, so think the ninety one verse, the ninety one. Verse are now the largest population cohort and they're thirty two years old. So that's the one. And if we go back to the financial crisis, they were seventeen years old and we wondered, how would we get through this before they replaced the baby boomer as the dominant consumer. Now we're there. That's where we could be wrong. I don't think so either.

Yeah, so think the ninety one verse, the ninety one. Verse are now the largest population cohort and they're thirty two years old. So that's the one. And if we go back to the financial crisis, they were seventeen years old and we wondered, how would we get through this before they replaced the baby boomer as the dominant consumer. Now we're there. That's where we could be wrong. I don't think so either.

The crew that you know after the secondary M album, they were never the same.

The crew that you know after the secondary M album, they were never the same.

Thanks Tom, Thank you, my pleasure.

Thanks Tom, Thank you, my pleasure.

Jpmulkin joining us now Doctor Dudley, He writes her Bloomberg opinion, of course all of his work at the New York Fed in Definitive Market Economics with Bill mccav ed mckelvy years ago at Golden Sachs. Bill Dudley, thank you for this important essay on the calculus of diminishing turns. How efficacious is a lift in capital requirements of our big fancy banks.

Jpmulkin joining us now Doctor Dudley, He writes her Bloomberg opinion, of course all of his work at the New York Fed in Definitive Market Economics with Bill mccav ed mckelvy years ago at Golden Sachs. Bill Dudley, thank you for this important essay on the calculus of diminishing turns. How efficacious is a lift in capital requirements of our big fancy banks.

I think the question is what problem are you trying to solve. Is the problem that we saw in the.

I think the question is what problem are you trying to solve. Is the problem that we saw in the.

Spring lack of capital among the big money center banks, or is it a problem with supervision, problem with bad accounting, problem with bank management.

Spring lack of capital among the big money center banks, or is it a problem with supervision, problem with bad accounting, problem with bank management.

I think the problem is not that the big banks in enough capital.

I think the problem is not that the big banks in enough capital.

If you remember, money was running towards the big banks during the turmoment, we saw and marked not away from the big banks.

If you remember, money was running towards the big banks during the turmoment, we saw and marked not away from the big banks.

None of the bank none of the big banks got into any any great difficulty in the United States.

None of the bank none of the big banks got into any any great difficulty in the United States.

The problem with raising capital requirements over and over again is you're making us banks less competitive, and that's going to push activity out into the unregulated non banking sector.

The problem with raising capital requirements over and over again is you're making us banks less competitive, and that's going to push activity out into the unregulated non banking sector.

That the question that that that createses that are you actually.

That the question that that that createses that are you actually.

Making the financial system safer where you actually make it more unstable?

Making the financial system safer where you actually make it more unstable?

Should we raise the capital requirements of entrepreneurial upstart banks with a rategic gimmick to build growth.

Should we raise the capital requirements of entrepreneurial upstart banks with a rategic gimmick to build growth.

Well, I think we certainly want to be very close close attention to those banks that are using novel business models. And I think, as the FIT self admitted that we need better supervision. The problems that Silicon Value Bank were identified in a relatively timely way, but then the supervisors didn't force the banks to make the changes necessary to prevent its demise. So I think that better supervision, more diverse stress testing, better rules on interest rate risk taking could go a.

Well, I think we certainly want to be very close close attention to those banks that are using novel business models. And I think, as the FIT self admitted that we need better supervision. The problems that Silicon Value Bank were identified in a relatively timely way, but then the supervisors didn't force the banks to make the changes necessary to prevent its demise. So I think that better supervision, more diverse stress testing, better rules on interest rate risk taking could go a.

Long way to avoid these kind of problems.

Long way to avoid these kind of problems.

I'm not sure raising the captal requirements of the biggest money center banks by fifteen to twenty percent.

I'm not sure raising the captal requirements of the biggest money center banks by fifteen to twenty percent.

It's the answer here.

It's the answer here.

Bill.

Bill.

You talk about in your column the importance to recognize non banking institutions as competitors and that you really just increase their share by restricting the lending capacity of big banks. Should regulators be basically going down to lowest common denominator of less regulator non banks, or should they put more of an eye toward non banks and regulate more closely some of those activities.

You talk about in your column the importance to recognize non banking institutions as competitors and that you really just increase their share by restricting the lending capacity of big banks. Should regulators be basically going down to lowest common denominator of less regulator non banks, or should they put more of an eye toward non banks and regulate more closely some of those activities.

I think they should be focusing on what's the best solution for the resiliency of the overall financial system banks and non banks.

I think they should be focusing on what's the best solution for the resiliency of the overall financial system banks and non banks.

Obviously, if you increase requirements a lot on banks, you're just going to have a bigger non bank regime.

Obviously, if you increase requirements a lot on banks, you're just going to have a bigger non bank regime.

And the question is does that make it safer or does that make it more vulnerable?

And the question is does that make it safer or does that make it more vulnerable?

So I think there needs to be balanced here. Also, I think that the real question here is what was the problem and what's.

So I think there needs to be balanced here. Also, I think that the real question here is what was the problem and what's.

The right solution to solve the soot.

The right solution to solve the soot.

It's not clear that raising capital requirements on large money center banks solves the problems that we saw in March this year.

It's not clear that raising capital requirements on large money center banks solves the problems that we saw in March this year.

Can we say that the banking crisis is over to the extent that it ever happened, and that going forward this is not going to be some sort of bigger financial risk that could torpedo the Goldilock scenario, at least for the moment.

Can we say that the banking crisis is over to the extent that it ever happened, and that going forward this is not going to be some sort of bigger financial risk that could torpedo the Goldilock scenario, at least for the moment.

You never know, but I think that so far the knock going to affect what happened in March are pretty modest. I think that's because was concentrated in a few banks. It was all happening in plain sight. People knew exactly why these banks were getting the difficulty. They could see their interest rate risk disclosure, they could see what's happening to their capital on a mark to market basis. So this is not like the Great Financial Crisis, where everything was happening in the shadows.

You never know, but I think that so far the knock going to affect what happened in March are pretty modest. I think that's because was concentrated in a few banks. It was all happening in plain sight. People knew exactly why these banks were getting the difficulty. They could see their interest rate risk disclosure, they could see what's happening to their capital on a mark to market basis. So this is not like the Great Financial Crisis, where everything was happening in the shadows.

People lost confidence in their counterparties.

People lost confidence in their counterparties.

So I think, so far, at least, it looks like this is a pretty modest knock on effect to the new economy.

So I think, so far, at least, it looks like this is a pretty modest knock on effect to the new economy.

So if that's not If that's the case and that isn't necessarily a headwind going forward, do you lean into this idea that maybe the FED should be done and that we are looking at a scenario where they have the opportunity to just wait and take a look at the data on a longer and longer term basis to make any decisions.

So if that's not If that's the case and that isn't necessarily a headwind going forward, do you lean into this idea that maybe the FED should be done and that we are looking at a scenario where they have the opportunity to just wait and take a look at the data on a longer and longer term basis to make any decisions.

I have no quarrel with the FED waiting to get more information.

I have no quarrel with the FED waiting to get more information.

I mean, you know, they're pretty confident that Madre policies at a restrictive level. If that's the case, it should slow the ecomy down. As the economy slows.

I mean, you know, they're pretty confident that Madre policies at a restrictive level. If that's the case, it should slow the ecomy down. As the economy slows.

We should have more slack than the way market and just puts take away some of the upper pressure on wages and bring inflation down. I think the key question is how restrictive is manitre Falsy today. It's possible that mandre Palsy is not quite as restrictive as the FED thanks, and if they find that out over time, then they can obviously do more or keep rates higher for longer.

We should have more slack than the way market and just puts take away some of the upper pressure on wages and bring inflation down. I think the key question is how restrictive is manitre Falsy today. It's possible that mandre Palsy is not quite as restrictive as the FED thanks, and if they find that out over time, then they can obviously do more or keep rates higher for longer.

Bill, I want to finish there. You wrote about this earlier in the summer. I don't think it was picked up on nearly enough. I've been talking about as much as I can. This quote from your column. The redd as follows, and I had the quote ready for you.

Bill, I want to finish there. You wrote about this earlier in the summer. I don't think it was picked up on nearly enough. I've been talking about as much as I can. This quote from your column. The redd as follows, and I had the quote ready for you.

Bill.

Bill.

There's considerable evidence that lacks have shortened, meaning that the economy has already found nearly all of the impact of the Fed's actions. Bill, talk to me about that evidence. Where do you see that evidence currently?

There's considerable evidence that lacks have shortened, meaning that the economy has already found nearly all of the impact of the Fed's actions. Bill, talk to me about that evidence. Where do you see that evidence currently?

I think the most obvious piece of evidence is what's happening in the housing sector. The housing sector, you know, obviously was hurt a lot by the backup and mortage rage from three percent to seven percent, but recently the housing market looks like it's bombed out and it isn't having any.

I think the most obvious piece of evidence is what's happening in the housing sector. The housing sector, you know, obviously was hurt a lot by the backup and mortage rage from three percent to seven percent, but recently the housing market looks like it's bombed out and it isn't having any.

Further weakness because of the rights and rates.

Further weakness because of the rights and rates.

Another thing is important to know here is Madre Bozi works faster than he used to because the FED uses for guidance seek guide the market not where it is today, but where it's headed. So financial conditions, most of the technique and financial conditions that.

Another thing is important to know here is Madre Bozi works faster than he used to because the FED uses for guidance seek guide the market not where it is today, but where it's headed. So financial conditions, most of the technique and financial conditions that.

We've seen over the last couple years happened last year, not this year.

We've seen over the last couple years happened last year, not this year.

I remember Bill, a conference that you and I did together together with Muhammad al Aaron in the summer of twenty twenty one. I think it was early summer, around June time, and you were both talking about how inflation may well be sticky than people think. And I remember you Bill, throughout the number the maybe rates have to go to five percent. Five percent back then sounded absurd with through five, with three five, and we've gone right the way through five. Bill, what are you thinking about now best case on way you think sufficiently restrictive might be.

I remember Bill, a conference that you and I did together together with Muhammad al Aaron in the summer of twenty twenty one. I think it was early summer, around June time, and you were both talking about how inflation may well be sticky than people think. And I remember you Bill, throughout the number the maybe rates have to go to five percent. Five percent back then sounded absurd with through five, with three five, and we've gone right the way through five. Bill, what are you thinking about now best case on way you think sufficiently restrictive might be.

I think that it's more likely that they hold rates here or maybe one more rate.

I think that it's more likely that they hold rates here or maybe one more rate.

I as opposed to go ever higher. I think where the.

I as opposed to go ever higher. I think where the.

Market may be a little bit off basis to think that the Fed's going to ease a lot in twenty twenty four. I think the last mile in terms of getting inflation down, I think it's going to turn out to be pretty difficult, and so I think that means that that's going to take keyp grates higher for longer than people think.

Market may be a little bit off basis to think that the Fed's going to ease a lot in twenty twenty four. I think the last mile in terms of getting inflation down, I think it's going to turn out to be pretty difficult, and so I think that means that that's going to take keyp grates higher for longer than people think.

I think that's one of the things that is feeding into the bond market. Went by you as a heath.

I think that's one of the things that is feeding into the bond market. Went by you as a heath.

Tire, Bill Dudley, Thank you, sir.

Tire, Bill Dudley, Thank you, sir.

Former New York Fed president and Bloomberg opinion columnists. Some fascinating insight there, Greg Barroch of BMP Parabar. He was the biggest bear on a street. He was looking for thirty four hundred. He's now looking for forty one fifty. Here's the quote. The alex for this year was always predicated on the idea of seeing a recession in the US. I think we've been surprised at the resilience of the data here in America, Greg and police to say, join us right now thirty four hundred and forty one fifty. Let's start there. What do you feel like you got wrong and why do you think that's going to persist?

Former New York Fed president and Bloomberg opinion columnists. Some fascinating insight there, Greg Barroch of BMP Parabar. He was the biggest bear on a street. He was looking for thirty four hundred. He's now looking for forty one fifty. Here's the quote. The alex for this year was always predicated on the idea of seeing a recession in the US. I think we've been surprised at the resilience of the data here in America, Greg and police to say, join us right now thirty four hundred and forty one fifty. Let's start there. What do you feel like you got wrong and why do you think that's going to persist?

Yes, I think there's been three drivers of the market that have helped this outperformance that we didn't see coming this year. One has been the Jenai story, so that's much more bottom up story, so it's linked to tech and the appetite here to chase those names. I think the second one was positioning. We were aware that people were under weight coming into this year, but I think the extent of the chasing of the market that we've seen has surprised us. And the third thing, maybe most importantly has just been that the data has been stronger than we expected. You know, us, along with many in the street, we're looking for a slowdown and looking for a recession this year and it just hasn't manifested. And really that's a big driver of the unwind of the gravity of the bearishness in our core.

Yes, I think there's been three drivers of the market that have helped this outperformance that we didn't see coming this year. One has been the Jenai story, so that's much more bottom up story, so it's linked to tech and the appetite here to chase those names. I think the second one was positioning. We were aware that people were under weight coming into this year, but I think the extent of the chasing of the market that we've seen has surprised us. And the third thing, maybe most importantly has just been that the data has been stronger than we expected. You know, us, along with many in the street, we're looking for a slowdown and looking for a recession this year and it just hasn't manifested. And really that's a big driver of the unwind of the gravity of the bearishness in our core.

I've reset you're still looking for a negative market based on this call at forty one fifty, where are you anticipating the weakness comes from given everything you've just told us.

I've reset you're still looking for a negative market based on this call at forty one fifty, where are you anticipating the weakness comes from given everything you've just told us.

So I really think it is this manifestation of the slowing in the economy. So we know that everyone was looking for a slowdown that hasn't manifested as quickly as we expected. But that doesn't mean that it's not coming. You know, the effect of the massive policy tightening that we've had is going to have an effect on the economy. It's just taking longer to percolate than people thought, this idea of excess savings being run down. We do think that the consumer is going to slow. So I think many of the reasons that we were cautious on the market, we still think a lot of that can manifest. It just might manifest us slower pace than we previously expected.

So I really think it is this manifestation of the slowing in the economy. So we know that everyone was looking for a slowdown that hasn't manifested as quickly as we expected. But that doesn't mean that it's not coming. You know, the effect of the massive policy tightening that we've had is going to have an effect on the economy. It's just taking longer to percolate than people thought, this idea of excess savings being run down. We do think that the consumer is going to slow. So I think many of the reasons that we were cautious on the market, we still think a lot of that can manifest. It just might manifest us slower pace than we previously expected.

You've been a complete class act on this reversal. I want to talk, I want to dig into it further, and that it's been led by seven stocks, it's been led by big tech, among others. Ben Laidler, who's been dead on a huge bull says they will reaffirm and stay strong with your new optimism, your new neutrality, and dare I say you're going to announce today that you're going to five thousand SPX. Are you going to do it with tech as a growth leader?

You've been a complete class act on this reversal. I want to talk, I want to dig into it further, and that it's been led by seven stocks, it's been led by big tech, among others. Ben Laidler, who's been dead on a huge bull says they will reaffirm and stay strong with your new optimism, your new neutrality, and dare I say you're going to announce today that you're going to five thousand SPX. Are you going to do it with tech as a growth leader?

It's controlled pessimism at this point, I think. I think in terms of market leadership, it's hard to get away from tech.

It's controlled pessimism at this point, I think. I think in terms of market leadership, it's hard to get away from tech.

Know, there is this structural growth story.

Know, there is this structural growth story.

So if we're in an economy that is slowing or be a more gradual pace than we anticipated, then the structural growth stories of those that are going to outperform. The issue with tech is how far it is valued this year. So I think the story going forwards in tech is going to be about being more selective. So we see certain subsectors in tech, things like semis that have valued massively this year that maybe might pass the bats in a little bit over to maybe software some of the tech infrastructure names.

So if we're in an economy that is slowing or be a more gradual pace than we anticipated, then the structural growth stories of those that are going to outperform. The issue with tech is how far it is valued this year. So I think the story going forwards in tech is going to be about being more selective. So we see certain subsectors in tech, things like semis that have valued massively this year that maybe might pass the bats in a little bit over to maybe software some of the tech infrastructure names.

So I'm wondering about the concepts behind your bare case and your ballcase. They follow kind of traditional economics where bad news is bad news and good news is good news, the bad news being a hard landing thirty four hundred, the good news being a reacceleration forty six hundred. Why don't you think that a reacceleration would actually prompt more aggressive FED action that could torpedo the market? In other words, the sort of good news is bad news and bad news is good news. I know that Tom's loving this, but you know, how much does that kind of come into play?

So I'm wondering about the concepts behind your bare case and your ballcase. They follow kind of traditional economics where bad news is bad news and good news is good news, the bad news being a hard landing thirty four hundred, the good news being a reacceleration forty six hundred. Why don't you think that a reacceleration would actually prompt more aggressive FED action that could torpedo the market? In other words, the sort of good news is bad news and bad news is good news. I know that Tom's loving this, but you know, how much does that kind of come into play?

No.

No.

I think this is a really good question because when we look at the correlation between equities and bonds, that gives us a bit of a window into that question. So you can look at bond ETF something like TLT so long the term treasuries, and you see the correlation between equities and bonds really broke down in someone when the equity market rallied, and we've had to pick up again in that correlation, which kind of points to me this idea that equity valuations are again looking stretched relative to rates, and that does raise the risk that if you get a hotter print, particularly in say this week's CPI, the higher rate could be a headwind for equities. So I think equities are stuck between a little bit of a rock and a hard pace in an economic acceleration. If it's too hot, starts to bring rates higher, and that can again compress P MULTIPLESE. But a slowdown is really the bad case. I think our ball case is pretty asymmetric. We're not looking for that much upside. We think that upside would be driven more by value stocks and CycL cause if we have data surprising to the upside, I don't really think that's going to help the names that have outperformed this year and driven the valley so far.

I think this is a really good question because when we look at the correlation between equities and bonds, that gives us a bit of a window into that question. So you can look at bond ETF something like TLT so long the term treasuries, and you see the correlation between equities and bonds really broke down in someone when the equity market rallied, and we've had to pick up again in that correlation, which kind of points to me this idea that equity valuations are again looking stretched relative to rates, and that does raise the risk that if you get a hotter print, particularly in say this week's CPI, the higher rate could be a headwind for equities. So I think equities are stuck between a little bit of a rock and a hard pace in an economic acceleration. If it's too hot, starts to bring rates higher, and that can again compress P MULTIPLESE. But a slowdown is really the bad case. I think our ball case is pretty asymmetric. We're not looking for that much upside. We think that upside would be driven more by value stocks and CycL cause if we have data surprising to the upside, I don't really think that's going to help the names that have outperformed this year and driven the valley so far.

So do you believe in goldilocks or do you think that this is people just sort of wish for thinking and picking a point along a progression towards something else and saying to stay there.

So do you believe in goldilocks or do you think that this is people just sort of wish for thinking and picking a point along a progression towards something else and saying to stay there.

I think it's very difficult just to stay in this benign goldilocks environment. I think one of the things that we got a little bit wrong this year was just underestimating this kind of piece in the middle. We had an issue with the data last year that it was way too hot, and our viewers that data was going to cool and become too cold and take us into a recession. But ultimately, if you go from too hot to too cold, you go through a piece in the middle where things feel just about right, and that's where we feel we are. So we don't think the data is going to plateau here, and we don't think we're going to stay in this goldilocks environment forever. This kind of controlled descent that we've had in the data, we think is going to continue to deteriorate and we'll morph into a shallow recession.

I think it's very difficult just to stay in this benign goldilocks environment. I think one of the things that we got a little bit wrong this year was just underestimating this kind of piece in the middle. We had an issue with the data last year that it was way too hot, and our viewers that data was going to cool and become too cold and take us into a recession. But ultimately, if you go from too hot to too cold, you go through a piece in the middle where things feel just about right, and that's where we feel we are. So we don't think the data is going to plateau here, and we don't think we're going to stay in this goldilocks environment forever. This kind of controlled descent that we've had in the data, we think is going to continue to deteriorate and we'll morph into a shallow recession.

Stat theme has been corporations will adjust how linked based on what you've been through the last eighteen months? How linked is economic analysis with the securities analysis of the market.

Stat theme has been corporations will adjust how linked based on what you've been through the last eighteen months? How linked is economic analysis with the securities analysis of the market.

I think that, you know, equity markets are always vary linked to the macro, but there are these secular drivers that sit alongside that. When we go and look at any of the large crashes or bear markets over the last hundred years in equity markets that are all accompanied with a swift economic decline. But that doesn't mean that we can't have these secular themes, things like Jenai that drive some dislocation. So I think part of it is the magnitude. You know, when you're in a more benign economic environment, the economy is not necessarily the primary driver for the market. If we do get to a situation around the turn of the year where we start seeing negative perierroll prints, then I think people's attention will divert and people's ability to buy into blue sky thinking becomes much more challenged.

I think that, you know, equity markets are always vary linked to the macro, but there are these secular drivers that sit alongside that. When we go and look at any of the large crashes or bear markets over the last hundred years in equity markets that are all accompanied with a swift economic decline. But that doesn't mean that we can't have these secular themes, things like Jenai that drive some dislocation. So I think part of it is the magnitude. You know, when you're in a more benign economic environment, the economy is not necessarily the primary driver for the market. If we do get to a situation around the turn of the year where we start seeing negative perierroll prints, then I think people's attention will divert and people's ability to buy into blue sky thinking becomes much more challenged.

You were allowed to talk about Apple.

You were allowed to talk about Apple.

We can talk about it loosely.

We can talk about it loosely.

Obviously, I don't let me loosen it up. Let me loosen it up.

Obviously, I don't let me loosen it up. Let me loosen it up.

As follows, dollars stronger China perhaps developing different tastes nationalism shape in perhaps some patriotism at home away from foreign luxury items. A multinational is in trouble here with exposure to China.

As follows, dollars stronger China perhaps developing different tastes nationalism shape in perhaps some patriotism at home away from foreign luxury items. A multinational is in trouble here with exposure to China.

So I think how I can answer that is think about some of the general themes that we think about in terms of tech. Those stocks are going to be incredibly resilient in a down term. Why because they have great free cash flow and amazing balance sheets.

So I think how I can answer that is think about some of the general themes that we think about in terms of tech. Those stocks are going to be incredibly resilient in a down term. Why because they have great free cash flow and amazing balance sheets.

But that also doesn't.

But that also doesn't.

Mean that they are immune from a consumer slowdown. So one of the things that we think will manifest over the next six months is that this tightening of rates will affect the consumer. Now, the consumer is obviously consumer discretionary is for first pat corps, but there are a lot of tech stocks that do face the consumer. Ultimately, Apple sells goods and services to the consumer. So will they be entirely immune from a cyclical slowdown? That's the question.

Mean that they are immune from a consumer slowdown. So one of the things that we think will manifest over the next six months is that this tightening of rates will affect the consumer. Now, the consumer is obviously consumer discretionary is for first pat corps, but there are a lot of tech stocks that do face the consumer. Ultimately, Apple sells goods and services to the consumer. So will they be entirely immune from a cyclical slowdown? That's the question.

It's like one more thing, except you know it's encore shows when you're BNP paried by yourself.

It's like one more thing, except you know it's encore shows when you're BNP paried by yourself.

You say that that wasn't a great song as well? I think so that was a song, wasn't it. So it's like nineties club music. Yeah, all right, Greg, thank you.

You say that that wasn't a great song as well? I think so that was a song, wasn't it. So it's like nineties club music. Yeah, all right, Greg, thank you.

Greg.

Greg.

Bare to help us with Brent at ninety and on the reality of Saudi Arabia and one hundred dollars oil is Francisco Blanche. He's had a global Commodities and Derivative research at Bank of America Global Research. Francisco, you nailed oil. You got your ninety ninety one Brent as well. The trajectory seems to be to all one hundred and very clearly that's what Saudi wants is a domestic reality. They have budget requirements, fiscal requirements domestically. Are we going to see one hundred dollars barrel because Saudi wants it?

Bare to help us with Brent at ninety and on the reality of Saudi Arabia and one hundred dollars oil is Francisco Blanche. He's had a global Commodities and Derivative research at Bank of America Global Research. Francisco, you nailed oil. You got your ninety ninety one Brent as well. The trajectory seems to be to all one hundred and very clearly that's what Saudi wants is a domestic reality. They have budget requirements, fiscal requirements domestically. Are we going to see one hundred dollars barrel because Saudi wants it?

It's possible.

It's possible.

Tom, I would say there's three things that have been moving oil prices over the course of the last three four months.

Tom, I would say there's three things that have been moving oil prices over the course of the last three four months.

Supply, supply and supply.

Supply, supply and supply.

We've had Saudi Arabia cutting production for as you know, close to a year now, and they started cutting in September of twenty twenty two at around ninety five dollars a barrel on brands, So clearly they want to have higher prices. They're trying to push the market there. What's new in the past few months is that Russia has finally started to align itself with Saudi Arabia and started to take production out the Russians after maximizing volume over price over value for much of the past four months, they've started to focus on price over volume, and that's a new development in Russia, I would say, in the last few months. And then also we've had a lot of refining issues tom We've we've seen products pretty great, diesel being the old market higher.

We've had Saudi Arabia cutting production for as you know, close to a year now, and they started cutting in September of twenty twenty two at around ninety five dollars a barrel on brands, So clearly they want to have higher prices. They're trying to push the market there. What's new in the past few months is that Russia has finally started to align itself with Saudi Arabia and started to take production out the Russians after maximizing volume over price over value for much of the past four months, they've started to focus on price over volume, and that's a new development in Russia, I would say, in the last few months. And then also we've had a lot of refining issues tom We've we've seen products pretty great, diesel being the old market higher.

So those are the things main supply drivers.

So those are the things main supply drivers.

One of the great things in Kapin's book is the new linkage, not like nineteen eighty six, but the new linkage between Saudi Arabia and China. Can China live with one hundred dollars barrel oil?

One of the great things in Kapin's book is the new linkage, not like nineteen eighty six, but the new linkage between Saudi Arabia and China. Can China live with one hundred dollars barrel oil?

Well?

Well?

I think that the soldies have always been very cautious about avoiding demand destruction episodes, and certainly I think they will become cautious again if prices break through one hundred dollars a barrel, because as we saw last year with gas, with natural gas, if prices do get out of whack, you can lose all the demand.

I think that the soldies have always been very cautious about avoiding demand destruction episodes, and certainly I think they will become cautious again if prices break through one hundred dollars a barrel, because as we saw last year with gas, with natural gas, if prices do get out of whack, you can lose all the demand.

European natural gas demand from industry.

European natural gas demand from industry.

You remember is lowered today than it was at this time last year, with a ninety percent declining prices, So you have to be careful what you wish for. If prices will up too fast, you kind up hurting consumption and China today, as you know, the world's largest oil importer by a mile, and UH is facing a pretty weak economic outlook ahead because of the real estate challenges and the trade war with the US, and of course the tech sector also being down. So I think I think China has melted in a great economic position to begin with. So I think I think OPEC plus will be careful of as prices rise.

You remember is lowered today than it was at this time last year, with a ninety percent declining prices, So you have to be careful what you wish for. If prices will up too fast, you kind up hurting consumption and China today, as you know, the world's largest oil importer by a mile, and UH is facing a pretty weak economic outlook ahead because of the real estate challenges and the trade war with the US, and of course the tech sector also being down. So I think I think China has melted in a great economic position to begin with. So I think I think OPEC plus will be careful of as prices rise.

Before we dried into the demand side, let's sit on supply just a little bit longer. Francisco, you mentioned a shift in Russia away from volume surprise, what's underpinning that shift is that well understood before we make a call about how durable that pivot will be.

Before we dried into the demand side, let's sit on supply just a little bit longer. Francisco, you mentioned a shift in Russia away from volume surprise, what's underpinning that shift is that well understood before we make a call about how durable that pivot will be.

In my mind, the UH the pivot comes after a very successful program set up by the US Treasury to put a price cap on on Russian oil. Remember the price cap Essentially I encouraged Russia to export high volumes at low prices, which were then resold real across the across mainly India and other China and other clients. But more recently, I think the Russians have figured out that the rule is too weak, that the Russian tax authorities haven't been able to really raise enough revenue, and the macroeconomy in Russia has really deteriorated. And of course we've seen that with tensions building up within the military and the paramilitary or the course of the past few months. So I think the conclusion that I believe the Kremlin is probably arriving to is that they need more money, and therefore the way to do that is the way to maximize revenue for the Russian tax authorities has been to pressure volumes lower and allow prices to rise. And the price of neuroscrew oil, which was creating around fifty dollars bureau, is now approaching eighty bucks, well above the price cap set out by the US and the European Union, and.

In my mind, the UH the pivot comes after a very successful program set up by the US Treasury to put a price cap on on Russian oil. Remember the price cap Essentially I encouraged Russia to export high volumes at low prices, which were then resold real across the across mainly India and other China and other clients. But more recently, I think the Russians have figured out that the rule is too weak, that the Russian tax authorities haven't been able to really raise enough revenue, and the macroeconomy in Russia has really deteriorated. And of course we've seen that with tensions building up within the military and the paramilitary or the course of the past few months. So I think the conclusion that I believe the Kremlin is probably arriving to is that they need more money, and therefore the way to do that is the way to maximize revenue for the Russian tax authorities has been to pressure volumes lower and allow prices to rise. And the price of neuroscrew oil, which was creating around fifty dollars bureau, is now approaching eighty bucks, well above the price cap set out by the US and the European Union, and.

A screen right now bent crewd through ninety one. So fransis, let's talk about demand. The build on the question, Tom asked, it's an important one. Have we seen any sign of the tear race in demand from China? Even with the economic weightness.

A screen right now bent crewd through ninety one. So fransis, let's talk about demand. The build on the question, Tom asked, it's an important one. Have we seen any sign of the tear race in demand from China? Even with the economic weightness.

Well, the August numbers were phenomenal in terms of import increases. We saw China importing twelve and a half million barrels a day on average throughout the month.

Well, the August numbers were phenomenal in terms of import increases. We saw China importing twelve and a half million barrels a day on average throughout the month.

Granted imports in July.

Granted imports in July.

We're kind of weak, but we hear from China and I was in Singapore last week and at meeting all the various energy traders. The main message is that Chinese demand is pretty healthy, and to be honest, you see it in the data. You look at a number of air flights, you look at air passenger traffic. Demand is still pretty healthy. What's been weak is industry related consumption, so think about gas, oil, diesel and the petrochemical complex. That's been weak. But I think overall, Chinese demand is in a better place. I think even though the real estate sector is not doing well, you still have a strong services sector comeback after COVID and that's supporting oil prices in China and creud runs as well. We've seen refineries running over crude oil in China over the course of the past few months. So I think Chinese demand for oil continues to lead frankly the world most of the demand growth this year and probably next year. Will still come from Asia, and China will be the bigger part of that.

We're kind of weak, but we hear from China and I was in Singapore last week and at meeting all the various energy traders. The main message is that Chinese demand is pretty healthy, and to be honest, you see it in the data. You look at a number of air flights, you look at air passenger traffic. Demand is still pretty healthy. What's been weak is industry related consumption, so think about gas, oil, diesel and the petrochemical complex. That's been weak. But I think overall, Chinese demand is in a better place. I think even though the real estate sector is not doing well, you still have a strong services sector comeback after COVID and that's supporting oil prices in China and creud runs as well. We've seen refineries running over crude oil in China over the course of the past few months. So I think Chinese demand for oil continues to lead frankly the world most of the demand growth this year and probably next year. Will still come from Asia, and China will be the bigger part of that.

This goes against the narrative, which is the China's falling off the cliff, not do ending anything, and that this is entirely driven, that the increase in prices in oil is entirely driven by what Saudi Arabia is doing and maybe at the margins, what Russia is doing. If we don't have that narrative, what would stop oil prices from going higher, especially if demand continues strong from China.

This goes against the narrative, which is the China's falling off the cliff, not do ending anything, and that this is entirely driven, that the increase in prices in oil is entirely driven by what Saudi Arabia is doing and maybe at the margins, what Russia is doing. If we don't have that narrative, what would stop oil prices from going higher, especially if demand continues strong from China.

Well, I mean I think I think China overall, like I said, it's coming back from COVID. If you look at international flights, they're still down fifty percent. Now, there's been all of tension between the US and China over of course of the last few years, right, and for instance, flights to the US remain very very surprised.

Well, I mean I think I think China overall, like I said, it's coming back from COVID. If you look at international flights, they're still down fifty percent. Now, there's been all of tension between the US and China over of course of the last few years, right, and for instance, flights to the US remain very very surprised.

But that's going to have to pick up. And we're also going to.

But that's going to have to pick up. And we're also going to.

See a meaningful increase in China flights to Europe over the course of the next few quarters. So in my mind, I think the Chinese demand story from a service perspective is okay. I mean GDP in China is not negative. I mean it's weak, but week means four percent, four and a half percent.

See a meaningful increase in China flights to Europe over the course of the next few quarters. So in my mind, I think the Chinese demand story from a service perspective is okay. I mean GDP in China is not negative. I mean it's weak, but week means four percent, four and a half percent.

That still still.

That still still.

Allows for growth in in you know, kind of the same things with it after in the West when we came out of COVID restaurants, going to the.

Allows for growth in in you know, kind of the same things with it after in the West when we came out of COVID restaurants, going to the.

Movies, traveling around.

Movies, traveling around.

I mean the China and the Chinese consumers are doing that, and that's supportive of the oil market. And then of course to your point, I mean the cartelments and OPEQ have elevated prices, have brought inventories on a dowar trajectory, and we expect that to continue. So so again we are targeting ninety ors bur one brand for next year.

I mean the China and the Chinese consumers are doing that, and that's supportive of the oil market. And then of course to your point, I mean the cartelments and OPEQ have elevated prices, have brought inventories on a dowar trajectory, and we expect that to continue. So so again we are targeting ninety ors bur one brand for next year.

That's current.

That's current.

The current market right now is at eighty six for calendar twenty twenty four. So there is a little bit of upside in our view from current prices. But I think I think if you push too hard, the risk is that inflation comes back, and then the narrative that we're going to have peak rates with no recession goes out the window in my mind, right, So I think OPAK has to be considered also about the effects on the macromarkets for great rates and the outbook for our potential recession in the US and.

The current market right now is at eighty six for calendar twenty twenty four. So there is a little bit of upside in our view from current prices. But I think I think if you push too hard, the risk is that inflation comes back, and then the narrative that we're going to have peak rates with no recession goes out the window in my mind, right, So I think OPAK has to be considered also about the effects on the macromarkets for great rates and the outbook for our potential recession in the US and.

Russelle Francisco always a clinic.

Russelle Francisco always a clinic.

Thank you, Sir Francisco, Blanche Bank for America.

Thank you, Sir Francisco, Blanche Bank for America.

This is a joy to do this in remembrance of how people stepped up big time in early twenty twenty. I have the clearest memory of our first interview on COVID. It was with an acclaimed radiologist from Mount Sinai in New York who brought into our studios x rays from China showing the outside lung damage that COVID could rot. JOHNS.

This is a joy to do this in remembrance of how people stepped up big time in early twenty twenty. I have the clearest memory of our first interview on COVID. It was with an acclaimed radiologist from Mount Sinai in New York who brought into our studios x rays from China showing the outside lung damage that COVID could rot. JOHNS.

Hopkins helped us.

Hopkins helped us.

So much on this and joining us now in the booster uproar back the hun Saudi to say she's associate Professor of Emergency Medicine, barely describes global parchments to study the academics of Professor and Saudi BACTI. Great to see you again under always COVID difficulties, to say the least. When we were kids, it was routine to get a booster shot. Is an mRNA booster shot any different, any more dangerous, any more at risk than a tetanus booster shot of my childhood?

So much on this and joining us now in the booster uproar back the hun Saudi to say she's associate Professor of Emergency Medicine, barely describes global parchments to study the academics of Professor and Saudi BACTI. Great to see you again under always COVID difficulties, to say the least. When we were kids, it was routine to get a booster shot. Is an mRNA booster shot any different, any more dangerous, any more at risk than a tetanus booster shot of my childhood?

Absolutely not. The current new vaccines, I'm not technical. Boosters are updated vaccines that are targeted to the current viruses that are circulating, but they're equally safe.

Absolutely not. The current new vaccines, I'm not technical. Boosters are updated vaccines that are targeted to the current viruses that are circulating, but they're equally safe.

These vaccines have full approval.

These vaccines have full approval.

I have gone through all the scientific rigmarole to ensure that they're safe and effective for the population BECTI.

I have gone through all the scientific rigmarole to ensure that they're safe and effective for the population BECTI.

I look at the science here and it seems in order. I'm basically appalled at the government response, the messaging from the White House to get behind the science community. What do you need from the President, What do you need from the administration to build confidence in this booster program?

I look at the science here and it seems in order. I'm basically appalled at the government response, the messaging from the White House to get behind the science community. What do you need from the President, What do you need from the administration to build confidence in this booster program?

So I think we clear messaging, this is full approval number one.

So I think we clear messaging, this is full approval number one.

Two, we need to hear.

Two, we need to hear.

From the CDC today. They will be deciding who should get the booster, who do they recommend, but also the reasons for those recommendations.

From the CDC today. They will be deciding who should get the booster, who do they recommend, but also the reasons for those recommendations.

Why is that the.

Why is that the.

Current recommendation and what are they trying to do by making this recommendation. Are they trying to prioritize those at highest risks or are they genuinely saying that the vaccine is only.