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Speaker 1: Stein, Jacobson joins us. Next Steen is the c I

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Speaker 1: O IT Saxo Banking Joints from our studios in Singapore.

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Speaker 1: I don't know where to begin. Stan. First of all,

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Speaker 1: thanks for being with us. Is it the Fed? Is

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Speaker 1: it what's going on in China? I mean, talk to

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Speaker 1: me about what's top of mind for you as you

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Speaker 1: survey markets this morning. It is that I've been doing

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Speaker 1: this job for thirty years. I've never seen a bigger

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Speaker 1: gap between what the market is looking into in terms

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Speaker 1: of twenty three and what the Fed and the policy

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Speaker 1: maker wants to communicate. I think the meeting yesterday was

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Speaker 1: a very very clear signal how the market continues to

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Speaker 1: fade whatever the Fed is doing. It was a very

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Speaker 1: focus on his own statement by Fat and the market

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Speaker 1: is saying, listen, it's not going to work. We're going

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Speaker 1: to have inflation down to two and a half percent

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Speaker 1: by the end of next year. Your terminal rate is

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Speaker 1: too high, and there's a recession coming. I don't understand that.

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Speaker 1: I am a person who likes to be leaving facts.

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Speaker 1: Facts Right now is that we have full employed moment,

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Speaker 1: we have the run rate for Federal Reserve Q four

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Speaker 1: and now cast in in the case of Atlanta FED

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Speaker 1: and New York FED running and north of three percent,

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Speaker 1: we have the easier financial condition tonight than we had

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Speaker 1: went for it started to increase in increment of seventy

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Speaker 1: five basis points. So I think we are more at

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Speaker 1: risk of seeing sort of what we saw in the

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Speaker 1: nineteen seventies, that inflation, of course comes down year over

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Speaker 1: year from baseline and then ultimately pick up again. And

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Speaker 1: while we talk, I don't need to tell the Americans,

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Speaker 1: but gasoline prices is about to go up. As this is,

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Speaker 1: GIC reserve is being depleted in the US. The energy

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Speaker 1: at large in Europe and globally has not been solved

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Speaker 1: for and as you say, China is coming online in

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Speaker 1: full force again, meaning that the competition for energy for

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Speaker 1: commodit dias is coming back into the realm, which means

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Speaker 1: that everything being equal, we should have higher prices for

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Speaker 1: that six months and nine month forward. Steem. It's the

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Speaker 1: time of year that sex they also puts out at

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Speaker 1: three outrageous predictions. And maybe we can get to some

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Speaker 1: of the is in a moment. But your suggestion that

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Speaker 1: inflation and growth might run very hot into the first

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Speaker 1: two quarters of next year, perhaps not so outrageous based

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Speaker 1: on what you're saying. Why is that, Well, I think

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Speaker 1: it's outrageous because the magatine to think the opposite is

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Speaker 1: are going to happen. But but you know, there's an

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Speaker 1: all rule of farm in economics that the flaw of

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Speaker 1: inflation twee month forward is the wage tragger. The wage

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Speaker 1: tragger right now is at a level of six to

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Speaker 1: seven percent in most cases in the US and five

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Speaker 1: to six in Europe. So I think it's going to

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Speaker 1: be very difficult to see a numbers south of five percent. Uh,

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Speaker 1: And I think it is not outrageous. I agree. I

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Speaker 1: mean the world is deglobalizing. The two biggest powers in

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Speaker 1: the world are looking to be self sufficient. Self sufficiency

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Speaker 1: means that you are prioritizing strategy over the marginal cost

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Speaker 1: of production. And as such, I think we live in

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Speaker 1: inflationary times. That's going to make structurally very different stories

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Speaker 1: in terms of forecasting, but also in terms of what

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Speaker 1: policymakers needs to do, which to my mind meets they

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Speaker 1: need to be more aggressive than than the present are

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Speaker 1: or structural changes that really limit the FED ability to

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Speaker 1: get controlled in a way that the FED was once

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Speaker 1: able to do, so that the tighter monetary policy may

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Speaker 1: not solve this problem alone. No, I agree, but but

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Speaker 1: you have to remember, and people often put to me

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Speaker 1: that you know, FED cannot control inflation in terms of

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Speaker 1: the the supply lines. They can indirectly, because if we

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Speaker 1: go back to an environment or two and a half

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Speaker 1: percent and then a steering rate of two pc, we

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Speaker 1: again going back to the concept where you know the

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Speaker 1: price of money, price of money, the margin price of

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Speaker 1: money is so cheap that anything really has an infinite return.

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Speaker 1: By keeping the marginal cost of capital relatively high. Let's

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Speaker 1: use the term of rate of five arguments say, then

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Speaker 1: the threshold for investment in the future will be five,

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Speaker 1: which means the project that will be started will be

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Speaker 1: based on having a productivity component to it, where in

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Speaker 1: the past that leads, to my mind, a lot of

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Speaker 1: the project was built on the ability to have chief

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Speaker 1: funding and then you know, theoretically a lot of eyeballs

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Speaker 1: and potential clients coming on board. That changed from a

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Speaker 1: society where we are focused on getting traction in terms

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Speaker 1: of numbers relative to society focused on productivity. It's not

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Speaker 1: only a very healthy sign but also a byproduct of

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Speaker 1: exactly the federal reserve policy at large. So where are

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Speaker 1: you putting money to work? In three? Is there anything

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Speaker 1: in the equity space or you're you're hitting for a

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Speaker 1: more safety No. I like the goody space. But I like,

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Speaker 1: as you indirectly can tell from this conversation, I like

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Speaker 1: the real economy. In the US. Nine of all assets

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Speaker 1: that trades are in the intengible, so I p basically

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Speaker 1: only ten percent sits in the in the real economy.

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Speaker 1: I really like the real economy. The real economy is energy,

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Speaker 1: is commodities, is defense spending, It's logistics, it's cybersecurity, which

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Speaker 1: is a real issue these dates, both for corporate a

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Speaker 1: government level, and ultimately, of course on on the largergy

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Speaker 1: ticket side. Bio Bio remains a very very strong voice.

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Speaker 1: You seem to be a little positive here on the

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Speaker 1: China reopening, and I'm wondering in the face of what

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Speaker 1: we're talking about with the spike and COVID infections. I mean,

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Speaker 1: there's a potential for a huge stumbling block here. Does

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Speaker 1: that hold you back? Does it give you pause at all? No,

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Speaker 1: Because I think in terms of I have no predictability

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Speaker 1: to Number one, let me stress that. But but but

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Speaker 1: the the death rate on this is very low. I

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Speaker 1: come from a country Denmark, which was the first one

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Speaker 1: to open. We have literally no fallout from having a

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Speaker 1: totally open society. China have a different different terms of

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Speaker 1: vaccination and the like. But the dead told and this

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Speaker 1: is going to be limited. This is a flu like condition. Yes.

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Speaker 1: Could it sort of activate another lockdown by by local

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Speaker 1: officials in China? Yes, can do it on a on

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Speaker 1: a national stage. No, because simply China has now decided

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Speaker 1: that part of the solution for them to get back

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Speaker 1: into the to the growth path is by keeping the

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Speaker 1: doors open independently off that you can see these potential

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Speaker 1: hurdle uh in terms of health policy, Stein very quickly

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Speaker 1: outrageous predictions. Gold at three thousand, Japan picking the end

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Speaker 1: two hundred of the dollar, the UK trying to get

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Speaker 1: back into the EU thirty seconds. What's your track record

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Speaker 1: like with these? Last year we got two right, We

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Speaker 1: got the face plant of Facebook talking about how Facebook

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Speaker 1: was going to have difficulties managing their business, and we

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Speaker 1: had the rain check on fossil energy. So if two

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Speaker 1: out of two out of tennis at the run rate,

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Speaker 1: then at least one of the ones you just mentioned

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Speaker 1: should come through next year. You're not doing bad. I

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Speaker 1: guess it's a tough job, though. I think we can

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Speaker 1: agree on that. Stein, always a pleasure. Thanks for coming

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Speaker 1: into the studio and Singapore. Stein Jacobson is the c

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Speaker 1: i O at Saxe Bank. During us here on Daybreak

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Speaker 1: Asia