, point economist and strategist. And a big takeover for big oil. Shale giant Pioneer Natural Resources being taken over by exxon in a 60 billion tied up. Im alix steel with my cohost guy johnson, welcome to Bloomberg Markets. This is a way to end the week. Guy we always talk about the payroll number being an important number, it just proved how important it can be. Is the number bigger for you for payrolls or exxon and pioneer . Alix this is a humongous deal with big implications for dcm policy, but we will get to that. Guy it could bp per, and that is the question we should be asking. Are we at peak rates . Todays number, alix, pushes back on that idea. Bond prices pushing lower and equities down sharply that was an incredible number and the revisions, the breadth, everything about this that convinces us this is a solid number. I wonder what this market would look like if we got a solid cpi print next week as well . Alix the wage number came back a little bit matt evans is the only one who nailed this number. He was like if you add up manufacturing, adp, and claims, put the numbers together, you get an analysis and got this number. Maybe that works . Guy but people are pushing back a little more firmly maybe today on the adp print and questioning the value it has. You laid it out pretty well at the top what landing . This is an economy that feels like it is going from strength to strength to strength, but yields continue to climb. In europe, we dont have the benefit of the strong labor market. Lets talk about where we go from here. Are we seeing a landing in the u. S. Economy . Mike mckee joins us and anita nichola joins us from new york. What landing . We have a good chance of a soft landing, and data is changing things for the fed. If we look at higher for longer and the prints today, we can see what is priced into the swaps today. Its a really big difference. Also, the other side of this is financial conditions. They have been moving at a very fast pace and numerous fed officials have been talking that this has been doing the feds job. Stocks and bonds have been selling off, and at goldman sachs, it was the tightest in a year. That adds another piece to the pie and even though today their reaction is very negative, some of it, is coming down. There are a lot of catalysts that can help us with funding. Alix you heard mary daly talk about that yesterday. Mike, if this was my only question, my question would be dude, where is my landing . So where is my landing . Guy that is why we dont know how to set up the question. [laughter] michael after the show, when we can speak and not get the fcc involved, i will tell you what my question would have been. Landing . I dont know. Im struggling to come up with a good metaphor for what we saw today. Job creation was so strong, particularly in the service industries, yet average Hourly Earnings started to slow down or continued to slow down, especially for service industries, up only 1. 7 . No real wage pressure coming from this enormous jobs number. Thats good news for the fed. I expect what will really be important is the cpi now. If cpi comes in as forecast, about half the level as it was on a month by month basis the prior month, we will see the fed maybe stay on hold because they dont have to fight inflation and they can have this Strong Economy. Mary daly yesterday told bloomberg, essentially, the markets have already priced in a move for the fed. I am not as sure as some people are that this will lead to a Market Reaction or fed reaction, rather, and force them to raise rates. Guy lets put the rate rise to one side and talk about the higher for a longer bit, though. This is an economy that doesnt in any way, shape or form feel like it needs rate cuts right now. Isnt that where the debate should be . Yes, maybe we get 25 in november, maybe we dont, but this is not an economy that is slowing down sufficiently. Banks cannot justify any kind of a rate cut. Michael on a historic basis you would be absolutely right, but this is not the economy or the Monetary Policy we have seen in the past. It is hard to figure all out. If you were just looking at the Economic Data at this point, you would be saying, the fed might have to do something because the economy is running very hot. But with inflation coming down, that story doesnt really hang together. Then you throw in the idea of real rates as inflation falls getting even tighter, and therefore, the fed may be does want to bring rates down because they want to keep the same amount of pressure on the economy, but do not want it to get tighter than it is. It will be hard to figure this out and im glad i dont trade fed funds futures. Alix put those two together. If we get a hot cpi print next week and a 10 year that feels reluctant to get to 5 , but it kind of wants to, then the market backs off, do we get there next week if there is a hot cpi . Denitsa good types of Economic News have been very bad for markets, and we have seen some of those reactions be very sharp. How far can we go . That is a question that has been here for a while. People are saying, we can go much higher than this. But today, in the last few days, we saw some of the losses really retracting, yields falling earlier in the week. Will we see the same increase in yields . Maybe risk assets wont be as reactive as they were in the last few weeks after that big shock in yields. Alix the u. S. Guy the u. S. Economy is clearly strong right now, if you judge it by the labor market. In europe, it feels like a different picture. The u. K. And european economy is struggling look at what is happening in germany. You can apply this to the dollar, but rates as well our rate, your problem. Our dollar, your problem. The rest of the world is looking at this with this mouth on the floor, wondering what is coming next. Alix the narrative is that the u. S. Economy is superstrong and yields are higher, and that is ok, we can make peace with that. Then you get this jobs number, so it gets confusing on that. Denitsa, you just moved here and are residing in the u. K. Are our rates everybody elses problem . Denitsa they are our problem, for sure, and you can see the reaction of every small Economic Data print tricking down to other rates as well. We are seeing a big disparity between what banks are doing at the moment and different paths over there, but the data prince year prints here are important for everyone and things are changing a lot in terms of what we are seeing for rates this year. Last year, we were pricing in nearly 100 basis points, and that has fallen so sharply. Ebix is on a difference for everyone. That makes a ton of difference for everyone. Guy todays number is such a big blow out number, you have to look back to the rate at which we are changing and how are we going to change. Mary daly talked about the fact that there are maybe 25 basis points of hikes effectively that have been done by the market, but is the fed comfortable with what we are seeing here . At what point, do we see more fed speak coming out trying to slow things down . Will there be an effort to slow things down at the moment . Its probably comfortable now, but when does the fed become uncomfortable . Michael if you see wages start to rise significantly, yes, the fed would become more uncomfortable. Guy what about the yield story . With what is happening in the bond market, when would the fed become uncomfortable . Michael thats a tough question to answer. At this point, the markets are catching up to where the fed is. If you go beyond that and get 5 into tens, for example, the fed might be uncomfortable with that. But the fed is just saying, they are doing what we wanted them to do six to eight months ago and they are finally catching up. Wesee attendances the we see a tentativeness to breach the 5 level. Going back to the cpi report next week with wage growth slowing, there does not have to be a big rise in the market from here if they are fairly price. Alix where we came to yesterday was disorderly, and it feels like we are not still there yet. Many thanks to our guests. Up next, more insight to the question of the day dude, where is my landing . Rebecca patterson, former bridgewater chief investment strategist, joins us next. This is bloomberg. Good night hey corporate types. Would you stop calling each other rock stars . Youre a rock star. You are a rock star. No more calling coworkers rock stars. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. This is very unusual, but there is a reason why this is so unusual, and thats because the characterization of the economy has changed in my mind. What we see here, jon, is a massive reaction to not rates going higher that was last year. This year is about high rates staying there for longer. That is a fundamental change of how you think about the yield curve, and that is what we see playing out in the markets. Alix that was Bloomberg Opinion columnist all mohamed elerian. That brings us to the question of the day what landing . Joining us now is rebecca patterson, to former chief investment strategist at bridgewater. That is our starting point, but as the economy going to land . Rebecca i think we will see a mild recession going into mid, maybe first half of next year. And the fed has been trying to get the market to believe for a year, and now they believe it, that they will have to hold rates higher for longer. This will feed through to the economy, consumers and businesses. I think there is also a super important feedback loop that you touched on on the previous segment. I am jealous, because i wanted to use that line our bonds, your problem. They are so interconnected today, they are feeding through to other countries getting hit a lot harder to higher Interest Rates. Their economies slow further. Germany is in a recession, europe probably going into a recession, and when their Interest Rates are high, their central bank cannot bail them out. That will likely make us avoid a soft landing next year. That is not a super High Conviction view, but that is my base case. Guy its tough to have a High Conviction on anything at the moment, isnt it, rebecca . If you are looking at the move weve got currently underway and how much longer it has to go, are we had a point where the markets are in line with the fed in terms of the 10 year yield . Are we going beyond where the fed is . How much higher can yields rise from here . Rebecca i believe if you look at the fed funds futures, what the market is discounting for shortterm rates in the next couple of years, we are probably close to what seems right, in my opinion. Now we have to focus more on the consumer in the labor market. And the labor market. If we have better data next week, inflation coming out if that is softer, people might say ok, we are good, take a deep breath. If the cpi print is in line or slightly higher, that will keep the nervousness going. What we have seen with the 10 year and bonds in general, a big part of the recent rise in yields is the risk premium, the term premium, which is a bit distressing because that is a lot of factors. It could be worries about our fiscal situation, the dysfunctional government i do not know if they go away anytime soon. Bond yields can stay up here and maybe not rise a lot more but a breakthrough 5 for the 10 year is not far away. Anyone who says oh, we are going to see 5 big deal. The problem is if it is disorderly. If it is a fast move that is unsettling for other markets. Alix we discussed cost of capital permanently higher for reasons that do not have to do with the business cycle, but inflation. Rebecca i love torsten, so i take anything he says seriously. I think we settle higher on inflation and Interest Rates. The question is, how much higher, and how does that feed through to not just our economy but also the Global Economy . I cant imagine the fed will let the inflation settle much about its target because that worries about credibility. When it reviews its policy, we are in a whole different conversation. Guy so what do you do right now . You look at Asset Classes and have to eager out where you need to allocate money. Am i safe to dip my toe in the water and by duration at this point . Has the fed moved through sufficiently into equities and are we seeing cracks in the bond market . What do you see in front of you in terms of what is priced correctly and what isnt . Rebecca when you can get 5 on cash effectively, having dry powder there to me makes a lot of sense because the coming 6, 12 months will be pretty uncertain. I would like to have some dry powder. In the equity market, we had a nice run for cyclical stocks going through july for a recent period. I prefer having more defensive sectors in my portfolio, things like health care. Defense is also interesting right now. We are focusing on the budget and what we can cut, but that is one area with bipartisan agreement, no cuts are coming. The government money, regardless of the cycle, will keep going into the space not just in the u. S. , but globally. As far as the bonds question, i would be tiptoeing in. We could break five or get a little above five, but the risk of loss in my mind is smaller than the risk of gain if we are taking a sixmonth to twelvemonth view. If we have a slowdown in the economy, it is likely that longerterm bonds will find a ceiling and the yields will start coming down. Even if they dont come a lot, you will still be gaining from that. Alix so does that mean that a 6040 portfolio is toast . How would you be allocating from that perspective. Rebecca i dont think its toast. I think a lot of investors out there are saying you need to rethink it and have a bigger allocation to all these returns. Having some bonds in your portfolio still makes sense. The relationships it is not the correlation. Bonds and stocks sold off together last year. It is not the correlation you want to focus on, but the causation. What caused bond yields to rise last year and do you think that will happen over the coming years . Maybe in the shortterm, but in the next two to three years, i dont think bond yields will keep going straight up. They might settle at slightly higher levels, but if they settle, you will be making money off bonds. Alix thats a good point, the why and how as it relates to how you beat the stock market. Rebecca patterson, we love seeing you. Thank you for coming in. Former chief investment strategist at bridgewater associates. Tesla is cutting prices again, trying to juice up the demand for evs. We will break it all down, next. This is bloomberg. when the day that lies ahead of me seems impossible to face a lovely day lovely day lovely day lovely day a bank that knows your business grows your business. Bmo. An everchanging landscape comes with challenges. From our vantage point, we see opportunities. As a topten real estate manager, we harness the power of a 360 perspective, delivering local insights and global expertise across public and private equity and debt. Our experienced team and vast network uncover compelling opportunities giving our clients an exclusive advantage. Principal asset management. Actively invested. Alix it is 23 past 7 00 on the west coast as we cover the top tech stories from the bay area and beyond. Silicon valley starts its morning. Joining us now is Bloomberg Technology cohost caroline hyde. Tesla is cutting prices again . Caroline again. Rinse and repeating. In this fight versus inflation and against a consumer that we are concerned about slowing down purchases, elon musk shows he is not worried about taking profitability down to keep sales being buoyed. They have had to slow down production in the Third Quarter, only pumping out 435,000 cars, and they have managed to dull down the price and are now seeing 1250 knocked off of the cheaper cars, 2250 on some of the more expensive ones. Guy i wondering if this is concurrent with the increase in the cost of financing . Caroline musk is not afraid to go out there and say, if you keep hiking up rates, this will be a Significant Impact on corporate america. Maybe that is him signaling that he does not have to keep taking down the price point. We see a competitor in china in that she was in can terms of cars they are producing who is neck and neck in terms of cars they are producing. He has to show, i can beat you when it comes to the amount i produce and the amount of profit i am able to siphon off of it. It is also interesting, because elon musk will come out and say the way i prop up Going Forward is when i get your Software Upgrades out. I can charge you more for that. Alix on first blush, ooh, it is a demand problem, but he can do it. He can undercut the competitors. He can also change the price on monday and raise prices. But the idea that i make these cars cheaper and deliver them, therefore, this is the new model. Caroline and such an incremental manner. It feels like only a couple of days ago, he cut down the price point on the new extended range model y. He does it on a daily whim, as you say. Guy so any people are talking to me now about the fact that ai will announce dynamic pricing, and you wonder if this is effectively dynamic pricing. Demand comes up, we raise the price i wonder how dynamic this model could get . Caroline i now frustrated it could get people who just got the car. Youve got to see how it impacts some of the loyal followings he is convinced to purchase. Alix and i want to add, what does it do to the autoworkers . Look at the strike. This is a great example of fighting for pay. Caroline he doesnt have that problem. Guy for now. We will see if they get a good deal. Maybe that changes. They are changing in london as well. If the guy before me in london get the cheaper beer than me, i will be annoyed as well. jennifer the reason why golo customers have such long term success is because we focus on real foods in the right balance so you get the results you want. When i tell people how easy it was for me to lose weight on golo, they dont believe me. They dont believe i can eat real food and lose this much weight. The release supplement makes losing weight easy. Release sets you up for successful weight loss because it supports your blood sugar levels between meals so you arent hungry or fatigued. After i started taking release, the weight just started falling off. Since starting golo and taking release, ive gone from a size 12 to a 4. Before golo, i was hungry all the time and constantly thinking about food. After taking release, that stopped. With release, i didnt feel that hunger that comes with dieting. Which made the golo plan really easy to stick to. Since starting golo and release, i have dropped seven pant sizes and ive kept it off. Golo is real, our customers are real, and our Success Stories are real. Why not give it a try . Alix youre about an hour into the u. S. Trading session. The selloff in stocks is not as bad as i would have thought. Abigail is checking the moves. It has been a pretty tough week. Abigail i would agree with you. The selloff is not as bad as i would have thought, but take a look at this week. The real selloff was on tuesday. Had that happened on the close of would have been the worst day since march 7. He was todays decline on the hot jobs report, coming off of the lows. Would a must be surprising to me if maybe we finish in the green. I know that is out there, but it does not feel as though there is a ton of conviction. But this is the fifth down week in a row. If this loss holds. Down 1 , the longest weekly losing streak going back to may 2022. That hot jobs, the piece of it, the ecodata, yields going higher on the week as investors contend with the deal that higher for longer, if you take a look at whats happening on the week, the two year yield not doing all that much. Already about 5 . Take a look at the 10 year and 30 year. Not long ago that 30 year was back above 5 . This twoyear polling the rest of the curve higher as the curve we deepens. Some saying that is a sure sign of a recession ahead. It takes liquidity out of the system. So, netsuite do have stocks down for a fit week in a row. As for one of the worst sectors on the week, funny enough, in an inverse way it is related to yields. Crew down 9. 4 . Some are going long crude as a way to go short bonds. Now we have crude coming off of those lows. Nonetheless, a bad week. You can see the s p 500 energy index, along with some of the individual movers down. Most sectors are down this week, including real estate and dividends look less attractive. I opened this chart for the first time in maybe three weeks. I was a little bit surprised, because we do have a breakdown on our hands. The family and tell you there was a reversal of last years bear market. In this uptrend. This convergence makes it varies. Buyers are getting less excited. We are now below the bottom of this trendline. The rsi is continuing to go down. This suggests we may see more selling ahead. I can make the case easily for 4000, an equal and opposite move of the congestion we had this summer. I think the biggest piece is the fed and the idea they are going to have to hike in november. Alix bank of america talking about how you want to be selling the rallies on the highend in particular. Abigail doolittle. Lets get a deeper dive into that payrolls block number. Julie sue is acting labor secretary. She joined bloomberg tv last hour highlighting the strength of the labor market and the shifting balance of power when it comes to labor unions. Jul we arei seeing a resurgence ine working people demanding their fair share, saying enough of the disparities between what frontline workers make and what ceos make. Alix we are now joined by Sophia Drossos point72 economist and strategist. She upgraded her forecast yesterday to 4 when it comes to what we just saw. Thank you for joining. Sophia it is great to be here. Alix our question of the day is, what landing . As you upgrade your thirdquarter forecast, what landing . Sophia we have not seen much of a landing yet. There has been a lot of dynamism in the u. S. Economy, spurred on, i think, by continued reopening effects. Just think we see a little bit of that in the data, in the sense that we are seeing jean hospitality continuing to lead the job gains. It was a lot of dynamism. Real incomes are higher as inflation falls. Consumers have more spending power. They have been taking advantage of that. The Third Quarter in particular saw a lot of oneoff effects. We talk a little bit about the concerts in the movies that helped bolster consumption in the Third Quarter. So, those are factors i think have letters to the point we are now. Guy so what happens next . Wait to see you, by the way and thank you for joining us. What does the Fourth Quarter look like of that really solid Third Quarter . Sophia the growth we have seen in the Third Quarter is going to be hard to sustain. We are looking at 4 gdp annualized in the Third Quarter. A lot of that is because of consumption. Consumption is running at double its trend pace in the Third Quarter. As you might imagine it is hard for consumers to keep up that pace. We look for a giveback in the Fourth Quarter. The economy is going to hit a little bit of a speedbump, but we think there is enough for momentum that we will get to the other side without a recession. Alix does that mean we are at the yields for the fed . Are we at peak yields for the bond market . Sophia the way we look at it, inflation is starting to make a lot more downward progress. I think another important aspect from the jobs report today is that we are seeing wages moderates, and we are also seeing supply come back into the labor market. The Unemployment Rate held at 3. 8 . You are seeing some better balance in some of the wages and price metrics. Our sense is that this will keep the fed on the sidelines. Policy is quite restrictive already and the bond market is doing a little bit of the work for the fed. So it will give the fed an opportunity to stay on the sidelines and see how things develop. Because once you start getting to 1 growth, which we project in the Fourth Quarter, your install speed and any kind of unexpected risk and Unexpected Development can push you lower. There are some heightened risks to slimming growth. Guy from the feds perspective where is too far for the bond market . It feels like the bond market has caught up to the fed and there is a danger now that the bond market rose further than the fed. And that will the fed about what is happening in the Fourth Quarter and the potential for hitting stall speed. When do we worry that the bond market is doing too much . Sophia i think we are starting to get some sense that at least for some fomc members we are at that point already. So the comments yesterday from San Francisco fed president mary daly were quite interesting, talking about how we have seen tighter financial conditions amplified amplify the feds policy. I look back on it and think the fed raised rates in july, and since then they have not raised shortterm rates. Since the end of july we have seen long and yields rise 100 basis points. That is a significant amount of tightening. The fed has the luxury to wait and see how things develop. There is no urgency for them. Alix one of the results of todays block number is pushing out cuts in 2024. We have already priced out too. That is going with what the dot plot was saying. What do you think . Sophia i think that is fair, because we are coming in with a stronger growth momentum than many people anticipated. If your starting point is stronger you probably have to reduce the probability of expected rate cuts over the horizon. But we also need to see the trajectory for inflation. And what we have continued to see is downward trend in cpi. That is much more in line with the feds target of price stability. A lot depends not just on growth but inflation, and we have to wait for more pieces of the puzzle to come in. Guy the degree of uncertainty at the moment must be enormous if you are an economist, trying to figure out is happening here very difficult. The speed of the move has been fast. There are other factors we have to throw in as well. We have strikes. We have uncertainty in washington, d. C. But what is going to be happening with the government. How easy is it to get a handle on what is happening and make an accurate call on what that Fourth Quarter numbers going to look like, given this uncertainty . If you were to do a fan chart for your calls in the Fourth Quarter how why do you think it would be . Sophia that fan chart probably has more of a downward skew as far as i see it. I think part of that is the potential for a Government Shutdown when the current funding runs out on november 17 is the friday before thanksgiving. Congress sometimes has a hard time motivating and doing things around the holidays. An extended shutdown i think could be a Downside Risk for the economy. Not just through activity, but also through sentiment. It reinforces this concern about dysfunction on capitol hill. There are Downside Risks and we need to be aware of them. As an economist kind of keep a scorecard, you watch the data as they come in, and you try to think about what todays situation means for tomorrow and the next day. Alix thats what people are talking about, that youre going to hire to have a higher for longer yield. When you take a look at the market in the market moves, stronger dollar, dollar yen, you are looking at a mixed equity market, what makes the least sense to you right now . Sophia that is a difficult question. What makes the least sense . I think the markets are contending with this idea that the fed is going to be higher for longer. While the fed told us higher for longer in the past, they were not so specific on what they meant. In july higher for longer meant they could fill they could still cut Interest Rates in 2024. At the september meeting higher for longer meant higher for longer on a 5 handle. I think these are some of the things creating bond market volatility and raising some uncertainty about how the passthrough from higher rates will be to the real economy. Guy in terms of kind of what comes next, do you think the focus should be on the United States or elsewhere . The Global Economy is inter the Global Economy is interlinked. In europe the Economic Outlook does not look as rosy as it does in the United States. The labor market suddenly does not look as strong. Yet europe is being impacted by the higher rates we are seeing in the United States. How are you thinking about the global feedback loop . If europe has these higher rates and slows down dramatically how does that work back into the u. S. Economy . Sophia there are feedback loops throughout financial markets. What has been interesting to me is the backup in the United States has been mirrored in global economies. As you say, perhaps the outlook in europe does not justify the rise in Interest Rates we are saying. But they are getting dragged along by the u. S. Same thing for emerging markets. Central banks are already on interest ratecutting cycles, and the move we have seen in u. S. Rates has been spilling over there and pushing up expectations for higher rates. What we are seeing is that the financial conditions in the u. S. , the it through higher Interest Rates or stronger dollar, starting to impact other economies. If it is persistent it could be a factor that slows global growth. Alix this is offered guy to say it is guide to say he is right. Sophia drossos of point72, definitely come back. Lets get excited. A huge deal in big oil. Exxon is in talks to buy Pioneer Natural Resources. We are going to get the details with paul sankey. He has always got opinions. This is bloomberg. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Alix this is Bloomberg Markets. Coming up, megans wiberg, joins uber to be at 1 00 p. M. New york time. This is bloomberg. Time now for etf friday. We have been focused on bond markets. Have the 30 year yield surging, and that sends etf investors into a frenzy trying to trade this new rate environment. A fund that tracks bonds on the long end of the curve has seen volumes surge. No surprise on my end. Guy the tlt has been born for years. This is the most boring product out there, for good reason. This is like the epicenter of the action, and it is amazing. The amount of money that has been pulled out of this thing is eyewatering. Alix exactly. You have to wonder if this helps pickup volatility as well. Here is one area im looking at when it comes to volatility. Oil. Had a huge drop for barely a lot of reason on a headline level for oil over the last couple of days. Then we get possible news today that exxon could be buying Pioneer National resources. The largest take copper largest takeover for exxon in years. Joining us now is paul sankey, Sankey Research lead analyst. Always good to see. This is what i think the first time i see this headline. In 2010 exxon buys exd of energy. Xto energy. It has been labeled, this is how you dont do m a. You get this deal. Are we at peak permian . Paul it is a risk. The old question, when conocophillips bought burlington the day before the alltime high in Natural Gas Prices it was, the question was why didnt you wait until march . If winter comes in warm we could be looking at Lower Oil Prices in march. The driver of the deal is clearly that the ceo of pioneer is retiring, and therefore they put offers up. Oil went to 95 and now it is at 85. There is the problem. We assume for that reason that it is an allstop deal for exxon. Guy so this is just an exit strategy . Paul yup. Alix good answer. Guy fairly straightforward. If that is the case, what is the danger that exxon is going to overpay . What would overpaying look like do you think in this kind of market . Paul normally we would say we take wall street journal stories to the bank. We assume that Due Diligence meeting the deal will happen. We dont have any details. I said it is for sure a stock deal. We dont know that for sure. There is a number of major uncertainties here. The story actually hedges itself by saying this might not happen. We know that with Scott Sheffield retiring there is a good chance it will. What does it mean for the sector . It might be negative for a couple of stocks. But broadly speaking we are not seeing deals here up huge premiums. If it is an ev deal this is only a 7 premium to a stock price that has been under a lot of pressure. It has been part of a pressure that has been depressing oil investors. You are not getting the blowout of exxon has lost its mind. Alix if you look and say the xop versus pioneer, pioneer has underperformed. Basically the super cool, awesome stuff in the permian has been drilled, so productivity goes down, and you have to drill longer lateral. We are at three miles in order to get oil out. That comes with risk. Is this a sign that permian has . Has peaked . Paul it depends on your oil price assumption. The permian is zero dollars if oil is 20. The permian peaking is very real. This has been the growth for oil supply in the last decade, so it is hugely important when it rolls. The oil recount suggested well. The other thing that is important is you are consolidating the sector. Look at the refining sector. You consolidated it and ended up short u. S. Refining capacity. Eventually youre going to stop the model, which is you grow, then you sell it to exxon. Is that plays out you have a highly consolidated sector and higher returns. That is what happened with refining over the last decade. I think that is what happened what will happen with big emp. They will drive very high returns. Guy why is oil down so much over the last week and will continue to fall . Paul we always think of saudi cuts as bearish. So they can crank the oil price up. But why are they cutting . We want saudi at max with strong demand. For saudi to be cutting into weak demand is bearish. They took a market worse where fundamental he saw a pretty direct response in u. S. Gasoline consumption, which fell seasonally. In the gasoline market just collapsed. As a result essentially you are going to shut down refining, which is going to be bad news for the saudis. My view on the cut was that it might work for six months, but it might cause you a problem in mid2024 in the market is weak and you have to decide whether you are going to cut more or crank up and go for oil market share. Alix can you make money right now investing in oil stocks . Paul you can on the short side. Alix fair enough. Paul you have some stocks hitting 52we close, which is normally a bad sign. I think the market will stay lively just because of the tightness globally into winter. You are seeing natural gas acting well. We think that is longterm. There are things we love longterm. When his u. S. Refining, but the other are these great longterm stories. The consolidated remnant that is the exxons and chevrons i think will do well over the next decade. If you want to make money now i will be on the short side. But we are looking for a time to view this sector as undervalued by the market because of the importance of oil to the Global Economy. I think that will remain the case for the next 10 years. Guy that was quite the answer. I will go away and watch that back and figure out all of the little bits and pieces i need to take away from that. There is definitely some positives in there. If you think more broadly about what is happening here are we setting ourselves up for a fight between the market and salaries . How low do we go before the saudis react again . Is the market prepared to go toetotoe with the saudis here . If they do what does that look like . Paul the first thing is, the administration, despite the rhetoric about the green agenda, clearly one lawyer want to Lower Oil Prices. They are fighting for Lower Oil Prices. What did they do lasted . It downloaded one million barrels, basically sold it direct to china, which build inventory, but whatever. This year they cannot do the spr. It would be dangerous at this point. What they are doing is turning a blind eye to venezuela, or encouraging a democratic process in venezuela. You have your raining oil coming out, which is upsetting to the saudis. And you are turning a blind eye to russia. The administration has basically looked away at all of the incremental supply. All of that is taking saudi market share. I think the saudis are between a rock and a hard place here. I think they might end up having to go for market share and crash the market. I really do. Guy wow. That will be something to watch. That would certainly have an impact on all of the other data as well. Great to catch up. Paul sankey of Sankey Research. This is bloomberg. Fresh, warm hot dogs when im not selling hot dogs, i invest in a fund that advances innovations like robotics. Fresh, warm hot dogs, straight out of my torso one for you, one for you. Oh, youre a messy one. Cool, right . So cool. Anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq100 innovations. Hot dogs fresh, warm hot dogs before investing carefully read and consider Fund Investment objectives, risks, charges, expenses and more in prospectus at invesco. Com. Guy a quick look at the price action. European stocks bouncing around all over the place since the close. Into the close, out of the payrolls. On the week we are lower. In terms of todays price action, reasonably resilient, you could argue. Eurodollar is down, but it has been down more this week. Similar story with what has been happening with guilt as well. Gilts as well. In some ways a much more muted reaction to the payroll number. This is bloomberg. Guy friday, the sixth of october. Stocks are higher. Not convincingly higher, but they are higher. Even the blowout payroll number i find that surprising. This is a very Strong Economy in the United States, which should move to higher yields, which should be bad for stocks. Yes, we are down on the week. Maybe that is what we should be talking about. That is the picture. The close starts right now. The countdown is on in europe. This is Bloomberg Markets european close, with guy johnson and alix steel