This Correction Is Not a Surprise, Emanuel Says

forty five million dollars since two thousand and three. And the belief is that when Steven Starker and Scott Cavalk founded the firm, they wanted to really, you know, create a spirit of giving, a culture of giving. And we have this day once a year where the firm donates all its commissions to charity designated by the clients and our celebrity guest traders again Mike Bloomberg and luminaries from sports and so on. So John Farroll, I gotta get

through the month. Charity is one of the donors. Congratulations on a on a massive effort, Junio, and good luck today. Thank you. Let's talk about the equity markets. Dollars strongth is that good or bad for stocks? It's good and and people misinterpret it. Um. You know, there's this this

thing that we call in recency bias. So we saw the stock market rise consistently in seventeen alongside a week or dollar, and there's this sort of mental dislocation that investors have right now that they don't really fully buy into the fact that stocks can rise with a strong dollar. In fact, the strong dollar is going to increase the fled the FEDS flexibility and put a lid on inflation. So let's think about the big sector. Where we got the leadership from in the in the equity market over

the last year or so. It came from tech. Tech is a growth story. It's also a very international story. And the weaker dollars certainly helped down tech over the last year. Is it not a headwind for the big sector that's led most of this run so far over the last year. It is, There's no question about it. And that's that's why it's actually neutral for for US

at b T I g UM. But it isn't an unequivocal negative because the flip side of that story is that with the stronger dollar, yields on the long end seemed to be very tame. The fact that treasury volatility is near its all time lows. Imagine if the VIX were back to nine or ten, that's the equivalent of where treasury volatility is right now. That's a positive for high multiple technology. So it's your basic argument that this will keep financial conditions looser than that otherwise would be

because the FED won't have to go that quickly. Yes, it's it's gonna be one of those ones where the FED gets more leeway to react to incoming data in a manner as we heard from Powell earlier today, that the markets will be able to anticipate. What did you think of the space from Sham and Poal today, The idea that people overstate the Fed's influence on global financial conditions. I think some people might take issue with that. I

think that was a bit of modesty. The fact is is that the FED has always been a critical player in the evolution of financial conditions when you look at how the world recovered in two thousand and nine. But also the flip side is that history shows that recessions start because the FED tightens too much. Well, but how far away from too much? I mean, acting is an economist, You're gonna tell me we're way way way away from

too much. Well, we are. And and to the Fed's credit, this cycle began with core pc, you know, closer to one and a half, then you know, having to react to core PC trading to one nine or two where we are now. So we've already started building in the preconditions for the recovery and growth to continue. Real rates are still pretty much negative. This is a still this is an accommodative Federal reserve. Still how much longer? Full? Uh?

You tell me when the ECB is going to start hiking and and I'll tell you when the Fed can get less accommodative. Um it is. It's a global picture, um And and there are still players out there that are creating the conditions for monetary accommodation. So for the year end story, Julian, has anything changed for you guys, Because I saw a note come across my desk yesterday that had a three handle for the SMP five hundred you're looking for three thousand. We are, and and that's

been our base case the entire year. But when we looked at the view was that we were going to get a lot more volatility than we've gotten in twenty seventeen. So by those rights, the correction that we've had for

the last several months is not a surprise. And in fact, what we're doing by this correction, what we're doing by sort of the negativity surrounding things like a stronger dollar and obsession with inflation and so on, is creating the conditions for the wall of worry that stocks always climb and that got destroyed in January for higher prices. In the second what is the distinctive? We gotta go, darn it? Have a charity day, morow Tom. There's a clock on

your screen, a clock. It's my first day. What can I say? Julia, Emmanuel, thank you so much? Into all at bt I G. Does Greenfield show up at this thing? Oh? Absolutely, Rich is a presence at bt I G. Rich Greenfield, bt I G with Walter and a guy named Emmanuel is a great team b T I G. Charity Day. Who do right now? Folks? We're Sril de Jacques or so with us with clear view energy partners. Jacques, you have a telling note. Forget about I ran forget about

the dollar. Forget about all this other bologna. You lead with Venezuela. Start with our listeners, coast to coast. Do we really care about Venezuelan oil? Why is that? Well, oil is such a global market that you really need

to follow where the supply is coming from. And Venezuela has historically been one of the larger supplies of oil in the world, and and that started to change, and we've seen a significant reduction in overall supply from Venezuela and that's causing a major impact on the market right now. Are we ready for a pullback in Iranian crude as well?

Iran is definitely a different situation because because there actually hasn't been any volumes of oil taken off the market from Iran, and we don't know if there will be a lot of new information will come out when the President talks later today, and what you should be watching for is the level of European cooperation in what the

U S announces. So with the United States announces that they won't extend the waiver on oil sanctions, what will that ultimately mean for you, Jack, Well, just by itself, that doesn't really mean much. We're going to need to know a lot more of the details as to who else is going to be involved in which past the President is going down in terms of of sanctioning um Iran,

because there definitely could be a lot of different outcomes. Now. Initially, if you look back a few years um, there was over a million barrels per day of Iran supply that came off the market, and that is not We're not in the same game as that as we were a few years ago. Well, I know Jenn wants to continue this, but I want to be rooting cutting because this is so critical this afternoon. Can the President cut off Iranian oil? Because he probably wants to say that, but can he

really do that? Uh No? I mean Iran exports over two million barrels per day of oil to Asia and that that supply is unlikely to change. There's about six thousand barrels per day that goes to Europe and that could potentially change, but not right away. That's something that could be later in the year, next year, or even not at all. And so that's what we need to

figure out from what the President says today. What's your base case today, Jack, I think that the European Union is unlikely to cooperate with what the President is coming out with. So I think you're going to see the us UM allow the waiver to lapse on May twelve. But initially that's not going to cause any sort of

supply disruption. So what can the president do ultimately that pleases both allies in the Middle East, the likes of Israel and Sally Arabia that would like the President to pull out of this deal, and at the same time appease European allies that wanted him to stay in. Is there any middle ground, Jack, That's that's a great question, and I think, um, we're going to have to get our policy. Analyst Kevin booked on to go through the um complex maze of outcomes that could take place here.

But from my perspective, looking at supply demand, I do not expect any supply to come off the market this year from iron Well, that's a really important point, and I guess we can sort of take that point and draw out our thoughts on what we think is going

to happen ultimately with the deal. Jack, looking at oil prices right now through seventy on w t I yesterday, a move that we hadn't seen in many, many years, And I'm just looking at the situation the all market and trying to work out is this a supply disruption story with a geopolitical risk premium injected back into the market, or are we under appreciating the demand side to this

rally over the last year. That's a great question, and there's definitely the opponents of all of those that are involved in the market um with the OPEC supply cut. I think the way I'd like to think about this is if Venezuela was producing at its normal quota level, the oil market would be balanced, supply equals demand, and I think oil price would probably be twenty dollars lower. But because we've seen such a massive amount of oil from Venezuela leave the market, that is what's causing the

major problem and the spike and oil. This is just fascinating. You're telling me we'd be a you know, not to take it to a dollar, but we'd be at fifty it's fifty five or fifty eight dollar West Texas Intermediate X Venezuela exactly. This is a significant amount of oil. They've taken more oil off the market than Saudi Arabia has So this is a big number, and then you have to say, when is this actually going to get any better? All the data flow coming out of Venezuela

continually gets worse. So do you model eight eight five dollar oil? Can you even twenty four months back to a hundred dollars a barrel? No? I don't think we will get up that high. And so the way you have to think about it is there's a significant amount of oil that's voluntarily being taken off the market, and as prices drift up, a lot of that oil is likely to start to move back onto the market and then flipping over to the demand side of the equation.

As oil prices rise, we do see a sensitivity and the demand starts to go down. So there's there's a natural balancing that occurs. Jack, I want to spend a little bit of time talking about the politics of OPEC at the moment and begin with the question on Saudi Arabia. If the Saudis could pick an oil price right now, what would it be. Well, that's a good question. Um, you know the numbers that have been thrown out in the media or somewhere in the neighborhood of eighty dollars

a barrel. The I m F has put out a number of thaying that their budget is balanced a dollars a barrel, So I think that's the direction they want to go. Um. The way I think about it is that they want to keep oil prices relatively high for the Saudia, Ramco I p O. That is probably going to take place in about a year from now from media reports I've heard. So that's the direction they're moving towards.

Felt that into the politics of OPEC at the moment, because as far as I understand, the Iranians are quite sensitive about the oil price getting too high on what that could mean for for demand. Jack and the Saudi's on their own pushing for a higher role price and can they take the rest of OPEC with them. Well, if you think about where the oil is actually coming off the market, h Saudi Arabia, Venezuela, Russia, Mexico, that comprises the bulk of the oil that's actually been removed

from the market. So Um, I think the other people are mostly along for the ride and had made minor adjustments. So I don't think you could see a big boom and supply coming out of different parts of OPEC. I just triangulated John the extrapolation of oil to a hundred dollars of barrel. And you know, it's a real rough thing. I'm not going to put it out across to or

from Bloomer Radio, but it's autumn of two thousand. If the trend continues autumn of two th November of two thousand nineteen, is is where you get too hundred dollars barrel? When you say they take the oil off the market, what do they do with it? Oh, they just lower their production levels, so just not making it. So you have to question. There's always the question is how much

of this could come back on and how fast? In general thinking is that Saudi Arabia is the one that has the spare capacity that could put put a significant amount of oil back onto the market, you know, upwards of half a million to a million barrels per day. The other players are fairly small. Do you one final question, do you have a dollar barrel amount where Saudi pulls a trigger on that? I mean there's got to be

a point where they throw in the proverbial towel. No. I think they look at it as um In case of emergency. So if if we did see some sort of massive drop and supply somewhere else, then they could put some of their oil back on the market. But as we mentioned before, I think the key thing for them is to keep oil prices high for the around co I p O brilliant Juckers, So thank you so much, clear View Energy of Partners with us A let us beginner. This is a important conversation because it goes to the

mid term elections and where we go from here. We've been talking a lot on the around announcement today, John Hudeck with US with Brookings Institution working in governance but also working and how we do our elections. John, if you were to have a cup of coffee with one of our global audience today, how would you describe the mid term election process in America? The midterm election process

in America is extremely complicated. It's multi tiered in the sense there are multiple different uh times and places that people will vote. I think most people across the world are actually shocked at how often Americans end up voting. But it also is determinative of what the next two years of Washington politics and policy will be like. So it's tremendously important. Is it normal that whoever the president is, the other party does better in a mid term. Yeah.

Since the nineteen fifties, that rule has been true in every mid term except two of them, around the time that Republicans were working to impeach President Clinton. Uh, and in two thousand two, just um, you know, fourteen months after the September eleventh terrorist attacks. But otherwise, the out party, the party that it does not hold the White House, picks up seats in mid terms. How is the out party doing this time around? Right now? There's really two

stories to tell. In the in the House the U S House, UH, the Democrats are looking good. That every indicator and every UH sort of signal and UH data bit that political scientists look at show good things for Democrats. Republicans are retiring. There are a lot of Republicans who are holding seats in districts that Hillary Clinton one enthusiasm is on their side. The general a generic ballot numbers on their side, and so it looks good in the House.

The Senate is a different story because the numbers are more difficult for Democrats in the Senate because there are a lot of UH seats held held in states that Donald Trump did quite well and held by Democrats and states donald Trump did quite well, and so they're on the defensive in the Senate. John, you explore this concept

of nominating the embarrassing versus nominating the electable. Walk me through that concept and perhaps to find what is embarrassing well embarrassing inen is the type of ended it who we're seeing right now in West Virginia. A candidate who's injecting racial slurs into his rhetoric. Who is um a convicted felon responsible for the deaths of twenty nine miners in UM an accident UH in West Virginia which the

company cut corners around UM. That is not the type of individual who most people would want to see running for the United States Senate or sitting in the United States Senate. And we have a variety of different uh hues of that kind of embarrassing and Republicans have fallen victim to these types of candidates before, and it's a real problem. Part of your study of governance, John, who Deck with his folks with Brookings and were the real focus on governance is I believe about money as well?

Is everybody got money up to the eyeballs this time around, or is one of the parties are selected races running on fumes, or they just don't have the million dollars you need. Well, the parties are well funded um, depending on which campaign accounts you're looking at. In some places, Democrats are doing quite well. In other places, Republicans are doing quite well. Candidates are raising money um exceptional levels.

In fact, we have UH an unprecedented number of Democrats running for congressional seats in this midterm election, and an unprecedented number of those as a percentage, are raising significant sums of money. And while UH, money doesn't always determine the outcome, that is, it's not always true that the person who raises more money wins. You do need some

level of funding to be legitimate. You're not going to be if you're running against someone who has five million dollars in the bank and you raised five thousand dollars, Yeah, you're probably not going to win that race. But but money is being raised hand over fist in American elections this time, John, let's talk about the message on the campaign trail. The lazy sort of one oh one kind of approach to Trump journalism is to look at whatever he does or whatever he's about to do and say,

this is about playing to the base. Um, we see that with Iran at two pm today, this is about playing to the base. Does the base really care about the j c pl A. Uh No, they really don't. Um. What the base cares about, oftentimes is what the President tells them they should care about. Because for a lot of them, that's not a criticism of those voters. For a lot of those voters, they truly believe that the direction the President has led them so far has been

a good one. And while they don't care, like you said about the j c p o A, they do care about America winning, America, cutting better deals, America positioning itself better in the global setting than it has in the past. And what the President is conveyed to those voters is that the Iran deal is bad for them and something different will be better. What will you look for tonight at ten p m. Well, I think all

eyes are on West Virginia. UM. West Virginia has an opportunity tonight to end this Senate race and deliver that race to the incumbent democrat. If West Virginia voters UM nominate blanket shift. It will be a disaster for the party. It will be a missed opportunity for the party UM to really challenge a vulnerable Democrat, and it will be I think a signal to other Republican voters in the country that there are consequences for voting for just bad,

outrageous candidates. John, Thank you so much. John Hudak withings here on the midterm elections. Kevin Surley, I know, is hugely, hugely focused on that as well. This is a joy and it is a joy because as we talked to people like and Richards of M ANDG and London, or Sally Crawcheck, where there was steam work at Sanford Bernstein years ago in securities analysis, it is one thing to speak on employment and diversity with someone with first order

academic chops. Barbara why is out of the prestigious combine of the South Carolina University University of Carolina Electrical Engineering. You were double e back there and one day you wandered into essentials of physics one p H Y S two eleven and you how lonely were you? How many women were in physics one at South Carolina a few

years back, so not very many. But what I'll say is I grew up in the Carolinas, in a tiny little dirt road town near Myrtle Beach, and I had five brothers and young as of eight kids, two sisters. Uh So, I entered into Carolina with a lot of courage and strength just surviving dinner with all those I don't like, the Brussels Strouds. Good I'll lead them good bye.

Exactly so, uh So, I would say my my parents, neither of whom graduated from high school, yet they had instilled in us that education was the path to empowerment. Is the loneliness you know as a woman at South Carolina double E the same as the loneliness today in engineering, I would suggest there's not much change. Even with all the efforts. We got a long way to go where women are inclusive in stem So, I would say, if you look at women and underrepresented minorities in engineering today,

we haven't made a ton of progress. And this is why the diversity and inclusion initiative work that Intel is driving is so paramount to really move in the needle. And what I will say is our CEO, Brian Krezana, he announced a three dred million dollar initiative to really drive critical progress in this area. UM, and since that launch of the initiative, we've reduced our market availability gap by a yet let me tell you, I'm excited to

tell you all about it. So, uh, you mentioned this in terms of representations, So we know women roughly represent about of the workforce today, but not all those women, to your great point, are entering into STEM careers. So Intel's goal and the metric is around the market that is available with women in STEM careers as well as

African Americans, Hispanics and Native Americans. And we desire to be at that market availability metric are higher and willing as we increase our initiatives and investments earlier in K through twelve in college. As that market availability number increases, we want to increase with that. Now, Barbara, you're here, uh, not only just to speak with us, but also to attend Bloomberg's Equality Summit and Diversity in the Workplace. What do you want people to take away from your presentation?

So two things I would highlight, uh for you about this diversity inclusion work. And I know we're in New York and this is UH Congress Roman Shirley Chisman World, and she said boldness is required, and you need the same level of boldness in doing this kind of work. I believe as the first person that decided to eat oysters, you need just that level of courage to do diversity and inclusion work and drive the progress that you need.

The second thing that I think is important that Intel has gotten right is this work is a performance metric that is measured by what has done and as a part of our employee bonus structure, I think far too often people uh set goals, but they aren't held accountable to those goals. So what we're trying to drive inside of the Intel culture is no different than what I would be doing if I was on an engineering project

for Intel with the deadline. We set goals, we try and achieve those goals, we hit them, and then we set bigger goals. As someone who's a veteran of Silicon Valley, you've often heard about goals that Silicon Valley company set. But and when you take a look at those people who are actually running the companies, does it make you feel that it is really an uphill battle. Yeah. I can't really speak to the other companies, but what I can tell you about Intel is this has been a

very serious commitment for us. Is very much integrated into all of the systems and our leadership processes. We have strong commitment from our senior leaders, are middle managers, and my employees. They hold me accountable. But I want to get down to the nitty gritty here. We think New Jersey Institute of Technology, which has been a huge support

of our STEM report here at Bloomberg Surveillance. How do you get a woman in fifth grade or first grade, or eighth grade or whatever to sustain the social pressure of getting through math. You go through LP calculus, you're doing well, and then you get into Calculus one itself Carolina, how do we handle that social negativity upon women? It's tangible. Yeah,

I'm gonna live an example of that. So I would say the key things if I had to extract out what was so important for me to start at the University of South Carolina, attend uh an electrical and engineering program, pursue a Masters in Business administration, and now I'm currently working on a PhD. The key things that are important there is good question. First, females and unrepresented minorities need access and exposure. So the quota, get him in the classroom.

Then you also need sponsorship as well as role models, because it's difficult for you to be what you can't see. And this is the role that my siblings played so critically important with in my life because I could look at an older brother who's major in chemistry and say, hey, I can do that as well. Can you come back? Okay, we're run out of time. We've got to have you back as well. You'd love to come that we look forward to. Can you bring a slide roll? Next up?

You're too young to Intel Corps, said Chief Diversity Inclusion Officer Vice President Human Resources, attending Bloomberg's Equality Summit and Diversity in the Workplace. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast, you can always catch us worldwide. I'm Bloomberg Radio.