1 00:00:09,000 --> 00:00:12,640 Speaker 1: Hello, and welcome to another edition of the Odd Lots Podcast. 2 00:00:12,680 --> 00:00:17,479 Speaker 1: I'm Joe Wisenthal and I'm Tracy Halloway. So, Tracy, markets 3 00:00:17,480 --> 00:00:21,079 Speaker 1: have been pretty wild since the election. Um, all kinds 4 00:00:21,079 --> 00:00:24,600 Speaker 1: of stuff happening that people have hadn't predicted, U S 5 00:00:24,560 --> 00:00:28,680 Speaker 1: stocks rallying, interest rates way up. It's a pretty exciting 6 00:00:28,720 --> 00:00:30,840 Speaker 1: time to sort of be covering what's going on in 7 00:00:30,920 --> 00:00:33,200 Speaker 1: financial markets. Do you remember just a few weeks ago 8 00:00:33,240 --> 00:00:35,680 Speaker 1: people were still talking about Donald Trump is the ultimate 9 00:00:35,680 --> 00:00:38,159 Speaker 1: tail risk and how the market was going to collapse 10 00:00:38,240 --> 00:00:42,400 Speaker 1: if he won, and then it turned itself around almost immediately. 11 00:00:42,880 --> 00:00:45,360 Speaker 1: The light of the election was crazy because we saw 12 00:00:45,479 --> 00:00:48,640 Speaker 1: futures plunge like five percent, and then by the time 13 00:00:50,159 --> 00:00:54,040 Speaker 1: markets opened, uh, most of those future losses had been raised, 14 00:00:54,280 --> 00:00:56,480 Speaker 1: and U S docks have just been off to the races. 15 00:00:56,760 --> 00:00:59,400 Speaker 1: And of course the real big market story has been 16 00:01:00,040 --> 00:01:02,840 Speaker 1: the rise in US interest rates, because it seemed like 17 00:01:02,920 --> 00:01:06,800 Speaker 1: interest rates we're just gonna grind lower perpetually. And now 18 00:01:06,920 --> 00:01:09,840 Speaker 1: on say, US tenure yields were at our highest since 19 00:01:09,880 --> 00:01:13,160 Speaker 1: the middle of last year. Yeah, it seems like, well, 20 00:01:13,200 --> 00:01:15,160 Speaker 1: I think we've had a couple of stories about how 21 00:01:15,640 --> 00:01:18,440 Speaker 1: the investment outlook has essentially been turned on its head. Right. 22 00:01:18,600 --> 00:01:21,840 Speaker 1: We had years of low interest rates, low inflation expectations, 23 00:01:22,080 --> 00:01:25,440 Speaker 1: lots of correlation, everything moving together, and that has totally 24 00:01:25,480 --> 00:01:27,959 Speaker 1: flipped just in the past two weeks or so. And 25 00:01:28,120 --> 00:01:31,839 Speaker 1: so obviously the huge question now is was this two 26 00:01:31,880 --> 00:01:34,839 Speaker 1: weeks just a blip, Is it maybe a longer blip 27 00:01:35,080 --> 00:01:38,000 Speaker 1: or are we seeing some sort of big regime change 28 00:01:38,000 --> 00:01:41,680 Speaker 1: where market correlations and the trends of growth and inflation 29 00:01:41,760 --> 00:01:44,679 Speaker 1: correlations are going to be different going forward, the end 30 00:01:44,760 --> 00:01:47,240 Speaker 1: of the big bull run in bonds which people have 31 00:01:47,280 --> 00:01:49,840 Speaker 1: been worrying about for decades. So this is the huge question. 32 00:01:49,960 --> 00:01:54,000 Speaker 1: So today we're gonna talk about what's going on right 33 00:01:54,040 --> 00:01:57,400 Speaker 1: now in financial markets. It's sort of a break from 34 00:01:57,400 --> 00:01:59,840 Speaker 1: our usual fair because usually we talk about something so 35 00:02:00,120 --> 00:02:04,160 Speaker 1: of off the news and something thing. Yeah, that's not 36 00:02:04,280 --> 00:02:07,320 Speaker 1: as timely per se. But today we're gonna go super 37 00:02:07,360 --> 00:02:09,840 Speaker 1: timely and talk about some of the interesting stuff that's 38 00:02:09,880 --> 00:02:12,560 Speaker 1: happening right now. And we have a great guest in 39 00:02:12,600 --> 00:02:16,400 Speaker 1: the studio is Mark Hudmore. He uh is a FX 40 00:02:16,400 --> 00:02:20,880 Speaker 1: analyst Bloomberg fect strategist for He works for Bloomberg is 41 00:02:20,919 --> 00:02:23,520 Speaker 1: usually based in Singapore, but we have him here in 42 00:02:23,600 --> 00:02:26,800 Speaker 1: New York, which is a real treat. Mark. Thanks for 43 00:02:26,880 --> 00:02:30,760 Speaker 1: joining us. Hi, Yeah, thank you Mark. Before we start 44 00:02:30,800 --> 00:02:33,400 Speaker 1: talking about it, what do you do, because you know 45 00:02:33,200 --> 00:02:34,880 Speaker 1: you used to be an f X trader, tell us 46 00:02:34,880 --> 00:02:36,919 Speaker 1: who you are. Yeah. I mainly just have great fun 47 00:02:37,000 --> 00:02:40,200 Speaker 1: actually commenting on markets. But my job is a macro 48 00:02:40,280 --> 00:02:43,720 Speaker 1: strategist for Bloomberg. Macro strategist from Bloomberg, So I tend 49 00:02:43,760 --> 00:02:46,120 Speaker 1: to try to tie in the various different areas and 50 00:02:46,160 --> 00:02:48,800 Speaker 1: look in things in a slightly different way. Um, and 51 00:02:49,080 --> 00:02:51,079 Speaker 1: you know, a mixture of that world between a trader 52 00:02:51,080 --> 00:02:53,560 Speaker 1: who's very practical and an economist who's very kind of 53 00:02:53,600 --> 00:02:56,520 Speaker 1: model based. I like my spreadsheets, but it's trying to 54 00:02:56,639 --> 00:02:59,160 Speaker 1: provide some practicality with the spreadsheets and kind of see 55 00:02:59,160 --> 00:03:01,480 Speaker 1: what people in the market camp. That does sound pretty fun. 56 00:03:01,600 --> 00:03:05,160 Speaker 1: It is great fun. So let's get right into it. Uh, 57 00:03:05,280 --> 00:03:09,320 Speaker 1: November turned out to be the worst month we have 58 00:03:09,440 --> 00:03:14,280 Speaker 1: this at the Bloomberg. Barkley's Aggregate Bond Index, also known 59 00:03:14,320 --> 00:03:17,600 Speaker 1: as the Aggres, are the most famous bond index there is. 60 00:03:17,680 --> 00:03:21,399 Speaker 1: The worst month in the history of the index was November. 61 00:03:21,440 --> 00:03:24,919 Speaker 1: It's been on this the three decade ball market everyone's 62 00:03:24,960 --> 00:03:29,280 Speaker 1: wondering is it coming to an end? Is this regime change? 63 00:03:29,680 --> 00:03:31,600 Speaker 1: How do you see the world right now? Well, I 64 00:03:31,639 --> 00:03:33,680 Speaker 1: think that the important thing to remember is we might 65 00:03:33,720 --> 00:03:36,320 Speaker 1: be come into the end of the massive bullmarket and bonds. 66 00:03:36,360 --> 00:03:38,760 Speaker 1: As you said, it's been a three decade bull market. 67 00:03:39,000 --> 00:03:40,560 Speaker 1: That doesn't necessarily mean it has to turn into a 68 00:03:40,600 --> 00:03:42,720 Speaker 1: massive bear market. Now. We could be in this the 69 00:03:42,760 --> 00:03:45,800 Speaker 1: consolidation phase. It's not like bonds could continue to go 70 00:03:45,920 --> 00:03:48,080 Speaker 1: much further. We already had negative yields around a lot 71 00:03:48,080 --> 00:03:51,000 Speaker 1: of the world, negative really yields. So you know, the 72 00:03:51,000 --> 00:03:53,520 Speaker 1: big issue now is are we really reversing too in 73 00:03:53,520 --> 00:03:57,680 Speaker 1: a significant way or we just stopped appreciating bones the 74 00:03:57,720 --> 00:03:59,840 Speaker 1: Well we've touched on this in a previous episode. But 75 00:03:59,840 --> 00:04:03,000 Speaker 1: the thing that amazed me the most is how Trump's 76 00:04:03,040 --> 00:04:07,240 Speaker 1: win has pushed up inflation expectations and it's kind of like, 77 00:04:07,280 --> 00:04:10,160 Speaker 1: well that that was all we needed to do for 78 00:04:10,240 --> 00:04:13,360 Speaker 1: the past like six years since the financial crisis was 79 00:04:13,440 --> 00:04:17,720 Speaker 1: promised some fiscal stimulus. That amazes me, like, why is 80 00:04:17,720 --> 00:04:20,240 Speaker 1: it turned around so quickly? There's so much wrong with 81 00:04:20,279 --> 00:04:22,920 Speaker 1: this When the market reaction, the market perception, in fact, 82 00:04:22,920 --> 00:04:25,280 Speaker 1: the market narratives got a bit confused. I think. So 83 00:04:25,320 --> 00:04:28,599 Speaker 1: First of all, inflation was already picking up before the election. 84 00:04:28,600 --> 00:04:31,279 Speaker 1: There was clear signs of it in wages, input prices. 85 00:04:31,279 --> 00:04:33,159 Speaker 1: We saw it in China, we saw globally around input 86 00:04:33,200 --> 00:04:37,200 Speaker 1: prices and commodities were going up. So commodities rose up 87 00:04:37,279 --> 00:04:40,480 Speaker 1: until November tenth, that's the day after the election. Three 88 00:04:40,480 --> 00:04:43,400 Speaker 1: weeks copper is only up three percent SCE then, so 89 00:04:43,720 --> 00:04:46,200 Speaker 1: you know, really the election has been only a marginal 90 00:04:46,240 --> 00:04:48,920 Speaker 1: part of this fiscal spending. You know, whether Trump does 91 00:04:48,960 --> 00:04:52,720 Speaker 1: five billion or one trillion in the next decade, it's irrelevant. 92 00:04:52,800 --> 00:04:55,560 Speaker 1: China has done over a trillion this year alone, So 93 00:04:55,640 --> 00:04:57,760 Speaker 1: I mean, it's just such a like a small amount 94 00:04:57,880 --> 00:05:00,680 Speaker 1: of like input in terms of infrastructure spending and commodities. 95 00:05:00,880 --> 00:05:02,760 Speaker 1: This is not the real driver. Yes, it's the gloss. 96 00:05:02,760 --> 00:05:06,719 Speaker 1: It provides another little kind of momentum, another boost for sentiment, 97 00:05:06,720 --> 00:05:09,440 Speaker 1: which is great, But there's really a real background, kind 98 00:05:09,440 --> 00:05:11,599 Speaker 1: of structural story that's happening in the global economy and 99 00:05:11,600 --> 00:05:13,560 Speaker 1: that's caused the pickup. I think. So this is sort 100 00:05:13,600 --> 00:05:16,800 Speaker 1: of a classic moment then in markets, where you have 101 00:05:16,960 --> 00:05:20,520 Speaker 1: this trend that's been going on for a while, higher prices, 102 00:05:20,600 --> 00:05:25,080 Speaker 1: higher commodity prices rebound in China. Wages in the US 103 00:05:25,120 --> 00:05:27,840 Speaker 1: have been picking up for a while. Then you get 104 00:05:27,880 --> 00:05:31,160 Speaker 1: this event and suddenly people tell a story about it. Yeah, 105 00:05:31,200 --> 00:05:32,919 Speaker 1: I think the main thing is is it's a risk 106 00:05:32,960 --> 00:05:35,159 Speaker 1: event out of the way. It's behind us now. And 107 00:05:35,200 --> 00:05:37,680 Speaker 1: you know before the election we had fund managers had 108 00:05:37,680 --> 00:05:40,120 Speaker 1: the highest level of cash they've had joint highest in 109 00:05:40,200 --> 00:05:42,719 Speaker 1: percentage terms, highest nomenal terms. They've got to put that 110 00:05:42,720 --> 00:05:45,920 Speaker 1: money to work, especially before the end of the year. Absolutely, 111 00:05:46,160 --> 00:05:47,800 Speaker 1: you know, they can't have a balance sheet where they 112 00:05:47,839 --> 00:05:49,520 Speaker 1: you know, markets are roaring and they've got it all 113 00:05:49,560 --> 00:05:51,400 Speaker 1: in cash, and you know investors don't get very happy 114 00:05:51,440 --> 00:05:54,039 Speaker 1: with that, so they've got to allocate it. What's important 115 00:05:54,040 --> 00:05:55,679 Speaker 1: here is that, you know, markets tend to be dominated 116 00:05:55,680 --> 00:05:57,480 Speaker 1: by narratives. I love this kind of idea that we 117 00:05:57,480 --> 00:05:59,839 Speaker 1: react to a GDP figure, which is about a quarter 118 00:06:00,080 --> 00:06:01,560 Speaker 1: that is in the past, and we suddenly go, oh 119 00:06:01,600 --> 00:06:03,640 Speaker 1: my god, GDP, you know a couple of months ago 120 00:06:03,720 --> 00:06:06,040 Speaker 1: was higher and lower. Let's trade everything based on that. 121 00:06:06,040 --> 00:06:08,280 Speaker 1: That's history. But that's because you can spin a narrative 122 00:06:08,279 --> 00:06:10,760 Speaker 1: around GDP and in reality, you know, markets are driven 123 00:06:10,760 --> 00:06:13,120 Speaker 1: by narratives. Is no point you knowing about an item 124 00:06:13,160 --> 00:06:14,880 Speaker 1: of data if no one else knows about it, because 125 00:06:14,880 --> 00:06:16,160 Speaker 1: no one else is going to trade it. It's no 126 00:06:16,240 --> 00:06:18,680 Speaker 1: point going the world's brilliant and everyone else thinks it's rubbish. 127 00:06:18,680 --> 00:06:20,880 Speaker 1: They're going to trade like it's rubbish. What's happened here 128 00:06:20,920 --> 00:06:24,479 Speaker 1: is Trump's let the markets provide a narrative to what's 129 00:06:24,520 --> 00:06:27,120 Speaker 1: really already happening, which is a pickup cyclically in the 130 00:06:27,120 --> 00:06:29,560 Speaker 1: global economy. Well, let's let's go through. What are some 131 00:06:29,600 --> 00:06:32,400 Speaker 1: of the signs of the cyclical pickup in the global economy. 132 00:06:32,440 --> 00:06:35,719 Speaker 1: You mentioned China, commodity prices are rising, we meant, we 133 00:06:35,880 --> 00:06:38,400 Speaker 1: talked about wage growth in the US. What else do 134 00:06:38,440 --> 00:06:39,720 Speaker 1: you see out there? I mean, I think one of 135 00:06:39,760 --> 00:06:42,719 Speaker 1: the most important things is we're actually seeing manufacturing data 136 00:06:42,800 --> 00:06:45,960 Speaker 1: substantially pick up. So manufacturing data in October was the 137 00:06:46,000 --> 00:06:48,039 Speaker 1: highest more than two years. In November it's ticked up 138 00:06:48,040 --> 00:06:49,760 Speaker 1: again slightly. So we're you know, we're at a really 139 00:06:49,839 --> 00:06:52,800 Speaker 1: high level. And the important thing is it's it's broad based. 140 00:06:53,000 --> 00:06:54,839 Speaker 1: Sometimes you kind of see pickups in one place but 141 00:06:54,880 --> 00:06:56,960 Speaker 1: not in the other. The seven largest economies in the world, 142 00:06:56,960 --> 00:06:59,840 Speaker 1: all above two trillion dollars, are alsoing a major pickup 143 00:06:59,839 --> 00:07:03,320 Speaker 1: in manufacturing, so we're seeing in all the most prominent economies. 144 00:07:03,520 --> 00:07:05,680 Speaker 1: We're also seeing banks are starting to do better. Third 145 00:07:05,720 --> 00:07:08,760 Speaker 1: quarter results were good after like a really really long slump. 146 00:07:08,760 --> 00:07:10,880 Speaker 1: It's been a terrible period for banks for a long 147 00:07:10,920 --> 00:07:13,640 Speaker 1: period of time. Suddenly trading revenues are picking up m 148 00:07:13,680 --> 00:07:16,680 Speaker 1: and a dealmaking is picking up. So you know, we've 149 00:07:16,720 --> 00:07:20,000 Speaker 1: got the financial sector doing well, manufacturing sector doing well, 150 00:07:20,280 --> 00:07:22,720 Speaker 1: and there's there's been a level of pessimism out there 151 00:07:22,760 --> 00:07:25,400 Speaker 1: for a long period of time, and you know, if 152 00:07:25,400 --> 00:07:27,240 Speaker 1: we can just change that narrative, that means people will 153 00:07:27,240 --> 00:07:29,360 Speaker 1: start investing again, they'll stop being so scared, and we 154 00:07:29,480 --> 00:07:32,160 Speaker 1: get an extra boost to the economy. So I'm still 155 00:07:32,200 --> 00:07:35,240 Speaker 1: stuck in the pessimistic narrative, I guess. But tell us, 156 00:07:35,520 --> 00:07:39,480 Speaker 1: why are you scared? That's a good question. What is 157 00:07:39,480 --> 00:07:41,720 Speaker 1: your word? I think because I'm a sort of cynical 158 00:07:41,800 --> 00:07:45,960 Speaker 1: person by nature that I just tend to buy into 159 00:07:46,000 --> 00:07:50,120 Speaker 1: the downside more easily than the upside. So like, for instance, 160 00:07:50,160 --> 00:07:53,680 Speaker 1: like a worry for me, I guess, I guess if 161 00:07:53,720 --> 00:07:56,720 Speaker 1: inflation comes back too strongly and then it really starts 162 00:07:56,720 --> 00:07:58,840 Speaker 1: to knock the bond market and what impact that would 163 00:07:58,880 --> 00:08:01,120 Speaker 1: have on the rest of the market. And then China, Like, yes, 164 00:08:01,240 --> 00:08:04,800 Speaker 1: China has had a very very large stimulus, but what 165 00:08:04,960 --> 00:08:08,800 Speaker 1: if it actually doesn't pay off for that much longer. 166 00:08:09,200 --> 00:08:11,200 Speaker 1: Those would be two major tail risks that I would 167 00:08:11,200 --> 00:08:13,160 Speaker 1: think about. I think they're probably the best two ones 168 00:08:13,200 --> 00:08:16,160 Speaker 1: to address. And for the most important ones. Um. You know, 169 00:08:16,280 --> 00:08:19,280 Speaker 1: like inflation, if it really takes off, will be a 170 00:08:19,320 --> 00:08:22,520 Speaker 1: big issue, Okay, Um, you know, because suddenly we're gonna 171 00:08:22,520 --> 00:08:25,160 Speaker 1: have to hike rates very aggressively, and because the massive 172 00:08:25,160 --> 00:08:27,240 Speaker 1: debt piles and the massive leverage out there, that's going 173 00:08:27,280 --> 00:08:30,480 Speaker 1: to cause problems. I'm in the camp and I'm not 174 00:08:30,520 --> 00:08:32,360 Speaker 1: in the majority camp that you know what, we might 175 00:08:32,360 --> 00:08:34,000 Speaker 1: see a tickep and we're going to see a clear 176 00:08:34,000 --> 00:08:36,960 Speaker 1: ticket inflation. We've seed already, but it's inflation rising from 177 00:08:37,000 --> 00:08:39,360 Speaker 1: like way below target. So this is the good kind 178 00:08:39,400 --> 00:08:41,800 Speaker 1: of inflation pick up at the moment. Now, if it overshoots, 179 00:08:42,120 --> 00:08:44,000 Speaker 1: that's not too bad. Of overshoots a little bit, doesn't 180 00:08:44,000 --> 00:08:47,000 Speaker 1: overshoot massively. I personally think the structural things happening in 181 00:08:47,040 --> 00:08:49,840 Speaker 1: terms of technology, um, and that's you're seeing that in 182 00:08:49,920 --> 00:08:52,840 Speaker 1: terms of commodity prices were extracting oil much more efficient 183 00:08:52,880 --> 00:08:55,880 Speaker 1: all the time, metals more efficiently, producing food much more efficiently. 184 00:08:55,920 --> 00:08:58,160 Speaker 1: These are important things for inflation. But we're also seeing 185 00:08:58,200 --> 00:09:00,360 Speaker 1: demographics and the wealthy part of the world. You know, 186 00:09:00,559 --> 00:09:02,840 Speaker 1: a lot less of the world are earning and more 187 00:09:02,880 --> 00:09:05,920 Speaker 1: of them are retirees. They're older, they're spending down their savings, 188 00:09:06,160 --> 00:09:08,439 Speaker 1: and that has a different impact on inflation as well. 189 00:09:08,480 --> 00:09:11,400 Speaker 1: So these things mean that I don't see inflation running 190 00:09:11,400 --> 00:09:12,720 Speaker 1: away of the top side, but it is a risk. 191 00:09:12,720 --> 00:09:15,360 Speaker 1: It's something to watch out. However, even if that ends 192 00:09:15,360 --> 00:09:17,680 Speaker 1: out being that ends up being a big problem, we're 193 00:09:17,679 --> 00:09:19,640 Speaker 1: far away from it yet. Because we're rising from such 194 00:09:19,679 --> 00:09:21,880 Speaker 1: low levels. You've got some time to react, You've got 195 00:09:21,880 --> 00:09:24,040 Speaker 1: some time to play the positive story first. Now the 196 00:09:24,040 --> 00:09:26,400 Speaker 1: other one is China. Now I have to say, as 197 00:09:26,400 --> 00:09:28,640 Speaker 1: someone who's based on Asia, I do feel the China 198 00:09:28,720 --> 00:09:31,160 Speaker 1: perspective on this side of the world is completely misguided. 199 00:09:31,200 --> 00:09:34,200 Speaker 1: There seems to be some bias against it, I think, 200 00:09:34,280 --> 00:09:37,440 Speaker 1: in bias against China. I know it does seem shocking, 201 00:09:37,440 --> 00:09:39,679 Speaker 1: doesn't it. Um. I think one of the things that 202 00:09:40,480 --> 00:09:42,199 Speaker 1: I'm not sure how best to a process. First, I 203 00:09:42,200 --> 00:09:44,280 Speaker 1: guess one of the most important things is people try 204 00:09:44,320 --> 00:09:47,360 Speaker 1: to apply an economic model that works for the US 205 00:09:47,679 --> 00:09:50,240 Speaker 1: and it doesn't apply to the Chinese economy. And what 206 00:09:50,280 --> 00:09:53,319 Speaker 1: I mean by that is they can instantly allocate resources. 207 00:09:53,440 --> 00:09:55,199 Speaker 1: I saw a great story earlier this year saying that 208 00:09:55,280 --> 00:09:57,680 Speaker 1: China might have as much as one trillion dollars in 209 00:09:57,760 --> 00:10:00,199 Speaker 1: bad debt. Well, you know what if they know that 210 00:10:00,240 --> 00:10:03,280 Speaker 1: they have one trillion dollars a bad debt tomorrow, China 211 00:10:03,640 --> 00:10:06,760 Speaker 1: over three trillion reserves, one trillion bad debt, set up 212 00:10:06,760 --> 00:10:08,280 Speaker 1: a bad bank, take all the debt. They can do 213 00:10:08,320 --> 00:10:10,199 Speaker 1: it instant overnight. They don't need to seek approval from 214 00:10:10,200 --> 00:10:12,480 Speaker 1: Congress or Parliament or anything like that. They control the 215 00:10:12,480 --> 00:10:14,719 Speaker 1: major companies. Right, We've just bought all the bad debt 216 00:10:14,720 --> 00:10:16,600 Speaker 1: in the country. We now don't have a single bad loan. 217 00:10:16,840 --> 00:10:19,680 Speaker 1: Oh and we've still got the largest pile of cash 218 00:10:19,720 --> 00:10:23,280 Speaker 1: reserves left over. So you know, their problem at the 219 00:10:23,320 --> 00:10:25,280 Speaker 1: moment is they actually don't know how big the bad 220 00:10:25,320 --> 00:10:27,200 Speaker 1: debt problem is. It might might be way bigger than 221 00:10:27,200 --> 00:10:29,079 Speaker 1: one trillion. But what I'm saying is the analysis is 222 00:10:29,120 --> 00:10:31,120 Speaker 1: all wrong. In the US, we'd have to take time 223 00:10:31,160 --> 00:10:33,240 Speaker 1: to approve that. Also, the government in the US, I 224 00:10:33,240 --> 00:10:36,000 Speaker 1: wouldn't get approved these days, and it wouldn't get approved, 225 00:10:36,000 --> 00:10:38,400 Speaker 1: and the US governments are still bankrupt. I mean, everyone 226 00:10:38,480 --> 00:10:40,600 Speaker 1: focuses on the problem in China, right, So what I 227 00:10:40,600 --> 00:10:42,640 Speaker 1: mean by that is that the corporates, you know, we 228 00:10:42,640 --> 00:10:44,840 Speaker 1: can you know, we we have our own currency here, 229 00:10:44,880 --> 00:10:46,480 Speaker 1: we can print out, we can print up our own 230 00:10:46,679 --> 00:10:48,559 Speaker 1: This is the same argument that you could make for 231 00:10:48,800 --> 00:10:50,880 Speaker 1: like the argument you're making for China applies to some 232 00:10:50,960 --> 00:10:53,199 Speaker 1: extent to the US, Like, yes, you'd have to approve it, 233 00:10:53,360 --> 00:10:57,439 Speaker 1: but we could do it, so US can still reserve. Well, 234 00:10:57,520 --> 00:10:59,280 Speaker 1: U s could do it by printing money and hoping 235 00:10:59,320 --> 00:11:00,520 Speaker 1: the rest of the world will up on letting them 236 00:11:00,520 --> 00:11:03,680 Speaker 1: print money out of infinitem, but they already earned massive deficit. 237 00:11:03,840 --> 00:11:05,959 Speaker 1: It doesn't apply in China doesn't even need to print money. 238 00:11:06,160 --> 00:11:08,800 Speaker 1: It owns well, it owns all the US debt. I 239 00:11:08,800 --> 00:11:10,800 Speaker 1: mean it can basically go Okay, actually know what, We're 240 00:11:10,800 --> 00:11:13,560 Speaker 1: going to sell three trillion dollars of US debt tomorrow, right, 241 00:11:13,600 --> 00:11:16,440 Speaker 1: I mean, China has three trillion dollars in reserves, right, 242 00:11:16,520 --> 00:11:18,200 Speaker 1: completely dwarfs in health in the world. So the Chinese 243 00:11:18,240 --> 00:11:21,480 Speaker 1: government is the wealthiest government in the world. Savings rates 244 00:11:21,520 --> 00:11:24,839 Speaker 1: from consumers in China are very high. The highest end 245 00:11:24,920 --> 00:11:26,760 Speaker 1: of a wealthy part of the world, like can completely 246 00:11:26,840 --> 00:11:29,800 Speaker 1: dwarf anything we've got in the US, UK, Europe, etcetera. 247 00:11:30,000 --> 00:11:31,960 Speaker 1: So you've got the consumer is wealthy, then you got 248 00:11:32,040 --> 00:11:35,320 Speaker 1: the banks. So the reserve ratio requirement for banks in 249 00:11:35,400 --> 00:11:37,840 Speaker 1: China is eight. Now, just to put that in context 250 00:11:38,160 --> 00:11:39,760 Speaker 1: for the U S banks going into the crisis, we 251 00:11:39,800 --> 00:11:42,600 Speaker 1: don't actually have an official reserve ratio acquirement, but effectively 252 00:11:42,600 --> 00:11:44,920 Speaker 1: it was zero percent going into the crisis. And yet 253 00:11:44,920 --> 00:11:46,480 Speaker 1: everyone's like, it's going to be like two and eight 254 00:11:46,520 --> 00:11:48,760 Speaker 1: in China but way worse. No. No, the banks there 255 00:11:48,960 --> 00:11:52,079 Speaker 1: have large amounts of savings by law, and also it's 256 00:11:52,080 --> 00:11:55,360 Speaker 1: backed by massive amounts of actually real currency deposits from 257 00:11:55,840 --> 00:11:58,600 Speaker 1: Chinese consumers, so they've got real cash there behind that. 258 00:11:58,880 --> 00:12:01,880 Speaker 1: Now they do have a really really big depth problem, 259 00:12:01,920 --> 00:12:03,720 Speaker 1: and it maybe even worse than we think. The shadow 260 00:12:03,760 --> 00:12:05,920 Speaker 1: banking things massive. But I think that the whole world's 261 00:12:05,920 --> 00:12:08,800 Speaker 1: focused on this corporate depth problem without kind of going, oh, 262 00:12:08,880 --> 00:12:12,040 Speaker 1: but consumers are actually the individuals are actually very well off, 263 00:12:12,160 --> 00:12:15,400 Speaker 1: the government's really well off, and the banking sectors got 264 00:12:15,440 --> 00:12:18,160 Speaker 1: a lot of assets to go against it's very large liabilities. 265 00:12:18,880 --> 00:12:21,840 Speaker 1: So one part of the problems we focus on, you know, 266 00:12:22,040 --> 00:12:23,760 Speaker 1: just one part of the balance sheet rather in the 267 00:12:23,760 --> 00:12:25,400 Speaker 1: full band sheet. And the other thing is I think, 268 00:12:25,600 --> 00:12:28,360 Speaker 1: you know, we're we're underestimating how quickly they can react 269 00:12:28,360 --> 00:12:32,080 Speaker 1: and do stuff. So finally, I should say, everyone's focusing 270 00:12:32,080 --> 00:12:33,880 Speaker 1: on the problem is getting bigger and bigger, and it is. 271 00:12:33,920 --> 00:12:35,880 Speaker 1: You know, they boost a stimulus this year, so earlier 272 00:12:35,880 --> 00:12:37,400 Speaker 1: this year they basically said, you know what, we're actually 273 00:12:37,440 --> 00:12:40,520 Speaker 1: gonna reprioritize growth of a reform you know, leave reform 274 00:12:40,600 --> 00:12:42,760 Speaker 1: bit later. And everyone's going, oh my god, the shadow 275 00:12:42,760 --> 00:12:44,599 Speaker 1: banking problem is gonna get even worse. It's going to 276 00:12:44,679 --> 00:12:46,559 Speaker 1: be like, you know, it's already the biggest thing in 277 00:12:46,559 --> 00:12:49,000 Speaker 1: the world. It's gonna you know, blow up. It probably will, 278 00:12:49,160 --> 00:12:51,160 Speaker 1: but it could blow up in five years time. It's 279 00:12:51,160 --> 00:12:53,000 Speaker 1: not the story right now. The fact is the story 280 00:12:53,040 --> 00:12:55,160 Speaker 1: right now is they've gone we're focusing on growth, So 281 00:12:55,200 --> 00:12:57,200 Speaker 1: that means growth is re accelerating in China, and that 282 00:12:57,280 --> 00:12:59,800 Speaker 1: is quite clear from all the data. As a trader, like, 283 00:12:59,840 --> 00:13:02,600 Speaker 1: I'm curious on that note, how do you balance the 284 00:13:02,679 --> 00:13:05,360 Speaker 1: long term outlook with the short term outlook? Like do 285 00:13:05,360 --> 00:13:08,480 Speaker 1: you literally just say, well, it's a problem years down 286 00:13:08,520 --> 00:13:10,640 Speaker 1: the road for the next month, I'm just trading over 287 00:13:10,679 --> 00:13:14,120 Speaker 1: a short term horizon. And so what's what's the important 288 00:13:14,160 --> 00:13:16,880 Speaker 1: timeline or time frame for you? I guess that's a 289 00:13:16,880 --> 00:13:18,840 Speaker 1: great question. It really depends on your mandate and what 290 00:13:18,880 --> 00:13:20,880 Speaker 1: your product area is and what you're mandate is from. 291 00:13:20,920 --> 00:13:23,160 Speaker 1: You know, the money you're managing um, and you know, 292 00:13:23,160 --> 00:13:26,160 Speaker 1: there's the full gamut of like ranges. There are some 293 00:13:26,160 --> 00:13:27,920 Speaker 1: people you know, might be investing in very short term 294 00:13:27,920 --> 00:13:29,600 Speaker 1: and none of these issues even matter because they're not 295 00:13:29,600 --> 00:13:32,600 Speaker 1: doing economic analysis. They're trading short term momentum. And then 296 00:13:32,600 --> 00:13:34,720 Speaker 1: there's you know, people who've got luck up periods and 297 00:13:34,760 --> 00:13:36,680 Speaker 1: do you know, set up China funds because they believe 298 00:13:36,679 --> 00:13:39,560 Speaker 1: that's the story of the next few years. Generally, though, 299 00:13:40,000 --> 00:13:42,360 Speaker 1: none of these major issues are going to probably come 300 00:13:42,400 --> 00:13:44,600 Speaker 1: to a head. I would say they're more likely a 301 00:13:44,640 --> 00:13:47,240 Speaker 1: five year horizon rather than even a two year horizon, 302 00:13:47,400 --> 00:13:49,160 Speaker 1: So no one should be wearing too much about them 303 00:13:49,240 --> 00:13:52,160 Speaker 1: right now. You're here at Bloomberg, but you talk to 304 00:13:52,240 --> 00:13:56,080 Speaker 1: traders all the time. What are the narratives? You know, 305 00:13:56,160 --> 00:13:59,200 Speaker 1: you have a very sort of distinct take on the 306 00:13:59,240 --> 00:14:03,559 Speaker 1: global dynamic cycle. Right now, things are good China, you say, 307 00:14:03,640 --> 00:14:06,040 Speaker 1: obviously people are way too pessimistic. You have a very 308 00:14:06,120 --> 00:14:08,640 Speaker 1: much more optimistic take. Where do you see the biggest 309 00:14:08,679 --> 00:14:11,480 Speaker 1: gaps between sort of what you see in the world 310 00:14:11,640 --> 00:14:13,920 Speaker 1: and what traders see in the world. What are the 311 00:14:14,040 --> 00:14:17,080 Speaker 1: narratives that they're like most clinging to. I think probably 312 00:14:17,160 --> 00:14:19,840 Speaker 1: the one I think the largest gap is definitely China. 313 00:14:20,440 --> 00:14:21,760 Speaker 1: And I think that's I said where I think our 314 00:14:21,800 --> 00:14:25,840 Speaker 1: analysis is very poor, especially over here in the US. 315 00:14:26,200 --> 00:14:28,200 Speaker 1: I find a lot of people do very high level analysis, 316 00:14:28,240 --> 00:14:29,960 Speaker 1: but they've never been to China and they don't understand 317 00:14:30,080 --> 00:14:33,640 Speaker 1: the mentality how it works. People there, they're very It's 318 00:14:33,720 --> 00:14:36,360 Speaker 1: very capitalist country. By nature. People are key to make money. 319 00:14:36,400 --> 00:14:38,160 Speaker 1: They work hard to make money, and that helps the 320 00:14:38,160 --> 00:14:42,000 Speaker 1: system take and survive. Um. Probably another narrative actually again 321 00:14:42,200 --> 00:14:44,640 Speaker 1: is I think it's changing. Over the last few years, 322 00:14:44,800 --> 00:14:46,680 Speaker 1: there's been a little bit of a story that US 323 00:14:46,760 --> 00:14:48,720 Speaker 1: is the one pillar of growth in a slow growing 324 00:14:49,440 --> 00:14:52,240 Speaker 1: turned world, the powerhouse US consumers, which is which is 325 00:14:52,240 --> 00:14:54,360 Speaker 1: actually rush. Well, the US consumer is still very important, 326 00:14:54,360 --> 00:14:57,120 Speaker 1: but the US economy has been on the slower than 327 00:14:57,160 --> 00:14:58,800 Speaker 1: average even in the developed market world. I'm not even 328 00:14:58,800 --> 00:15:02,200 Speaker 1: talking about emerging markets. Right. You know, UK grew faster 329 00:15:02,280 --> 00:15:05,200 Speaker 1: than the US this year. You know, quite clearly despite Brexit, 330 00:15:05,320 --> 00:15:08,480 Speaker 1: ukiting growth will be higher. Oh, we were talking about 331 00:15:08,520 --> 00:15:10,840 Speaker 1: that the other day. I really I want to know 332 00:15:11,040 --> 00:15:14,560 Speaker 1: why the supposed Brexit impact hasn't shown up in the 333 00:15:14,600 --> 00:15:16,920 Speaker 1: economic data yet. And you had some really good thoughts 334 00:15:16,920 --> 00:15:19,600 Speaker 1: on that. Yeah, I mean, okay, well, I will admit 335 00:15:19,640 --> 00:15:21,840 Speaker 1: that while I've got a few ideas, it's even surprised 336 00:15:21,840 --> 00:15:24,320 Speaker 1: me and I've been optimistic about the Brexit reaction, but 337 00:15:24,400 --> 00:15:27,000 Speaker 1: it's been, you know, incredibly strong. So I think what's 338 00:15:27,000 --> 00:15:29,200 Speaker 1: important to notice the UK economy is doing very well 339 00:15:29,240 --> 00:15:31,160 Speaker 1: going to the Brexit vote, but then there was some 340 00:15:31,240 --> 00:15:34,240 Speaker 1: money held back in kind of nervousness, uncertainty and lack 341 00:15:34,280 --> 00:15:37,200 Speaker 1: of investment. After we got the Brexit vote, some of 342 00:15:37,200 --> 00:15:39,280 Speaker 1: that money kind of came in and people started, you know, 343 00:15:39,520 --> 00:15:41,320 Speaker 1: getting back to life again after it wasn't the end 344 00:15:41,360 --> 00:15:43,160 Speaker 1: of the world in the first week or two. Now 345 00:15:43,200 --> 00:15:45,760 Speaker 1: it's really stepped up now. One of the explanations that 346 00:15:45,760 --> 00:15:47,720 Speaker 1: we're discussing other day is the point that you know, 347 00:15:47,840 --> 00:15:50,480 Speaker 1: companies are going you know what, I don't know how 348 00:15:50,520 --> 00:15:53,800 Speaker 1: long my window is of operating normally, and therefore they're 349 00:15:53,840 --> 00:15:57,000 Speaker 1: really accelerating production. You know, their step of investment to 350 00:15:57,040 --> 00:15:59,040 Speaker 1: get as much done now you know they might they 351 00:15:59,120 --> 00:16:01,320 Speaker 1: might have trade barriers and some of their imports or 352 00:16:01,360 --> 00:16:03,320 Speaker 1: exports in in a couple of years time, so let's 353 00:16:03,320 --> 00:16:06,200 Speaker 1: get as much profit in next They're already stepping on activity. 354 00:16:06,600 --> 00:16:09,880 Speaker 1: You are skeptical that you know, we've been talking about 355 00:16:09,880 --> 00:16:12,480 Speaker 1: this post Trump market and as you said earlier on 356 00:16:12,520 --> 00:16:15,720 Speaker 1: the show, you think people are overstating the significance of 357 00:16:15,760 --> 00:16:18,320 Speaker 1: the election and Trump on markets. And that's fine. That 358 00:16:18,440 --> 00:16:21,840 Speaker 1: being said, there's clearly, just on a global scale, a 359 00:16:21,880 --> 00:16:26,160 Speaker 1: lot of interest in political developments this year obviously votes 360 00:16:26,200 --> 00:16:29,920 Speaker 1: in Japan, the bregsit vote, Um, we have votes coming 361 00:16:30,000 --> 00:16:32,320 Speaker 1: up in Europe later this year and then all through 362 00:16:32,400 --> 00:16:35,520 Speaker 1: the next rest of next year. How how do you 363 00:16:35,560 --> 00:16:38,280 Speaker 1: think about political risk, especially you know, if you're used 364 00:16:38,280 --> 00:16:40,400 Speaker 1: to sort of analyzing things and sort of more of 365 00:16:40,440 --> 00:16:44,400 Speaker 1: an economic framework. Should we just ignore? Is it all noise? Like? 366 00:16:45,200 --> 00:16:46,920 Speaker 1: How do you think about it? In general? It's a 367 00:16:46,920 --> 00:16:50,400 Speaker 1: really hard one. I mean, I think it is valid 368 00:16:50,440 --> 00:16:53,320 Speaker 1: that politics are becoming a bigger input in your whole 369 00:16:53,320 --> 00:16:56,480 Speaker 1: decision prices, the problem is is that it's a very 370 00:16:56,520 --> 00:16:58,240 Speaker 1: hard one to pin down and quantify. And when you 371 00:16:58,320 --> 00:17:00,280 Speaker 1: go on like a data nerd like myself, I want 372 00:17:00,320 --> 00:17:01,640 Speaker 1: to have a number on it, and I find it 373 00:17:01,680 --> 00:17:04,000 Speaker 1: hard to put that number in. The other thing that's 374 00:17:04,040 --> 00:17:07,280 Speaker 1: hard is it tends to be a slow moving situation, 375 00:17:07,760 --> 00:17:09,320 Speaker 1: you know, and then you get sudden shocks like the 376 00:17:09,359 --> 00:17:12,080 Speaker 1: Brexit Italy situation is going to take a long time 377 00:17:12,080 --> 00:17:13,840 Speaker 1: to play out. I mean, it's clearly going to remain 378 00:17:13,880 --> 00:17:16,119 Speaker 1: a focal point for risk in the Eurozone. And like 379 00:17:16,200 --> 00:17:18,760 Speaker 1: unlike Greece, you can't just like silo it or isolated 380 00:17:18,960 --> 00:17:20,639 Speaker 1: its debt markets one of the biggest in the world. 381 00:17:20,800 --> 00:17:24,040 Speaker 1: It's like the fourth biggest sovereign I think that's market 382 00:17:24,040 --> 00:17:26,399 Speaker 1: in the world. Yeah, I was like US, Japan and 383 00:17:26,480 --> 00:17:28,159 Speaker 1: Germany and Italy. I think it's like those are the 384 00:17:28,160 --> 00:17:30,520 Speaker 1: four biggest, or US, Japan and UK Italy. I mean 385 00:17:30,560 --> 00:17:32,320 Speaker 1: it's really big. It is I think fourth biggest in 386 00:17:32,320 --> 00:17:34,199 Speaker 1: the world. That makes that makes sense. And you know 387 00:17:34,320 --> 00:17:36,679 Speaker 1: It's banks are clearly in a complete mess, and you 388 00:17:36,720 --> 00:17:39,800 Speaker 1: know it's political situation will not be resolved one way 389 00:17:39,840 --> 00:17:42,399 Speaker 1: or the other in the coming months. Okay, um, you 390 00:17:42,440 --> 00:17:44,080 Speaker 1: know that the whole process takes a long time to 391 00:17:44,080 --> 00:17:45,840 Speaker 1: play it, and I think people will start getting worried 392 00:17:45,880 --> 00:17:47,439 Speaker 1: about these events and they factored them in, and then 393 00:17:47,440 --> 00:17:49,320 Speaker 1: they go, oh, why did I factor that in? You 394 00:17:49,359 --> 00:17:51,280 Speaker 1: know what, we don't have a resolution yet, and it 395 00:17:51,320 --> 00:17:53,800 Speaker 1: plays on and then suddenly one day, when you weren't 396 00:17:53,800 --> 00:17:56,159 Speaker 1: expecting it, you actually suddenly realized the real impact. So 397 00:17:56,200 --> 00:17:59,040 Speaker 1: I think this political factors into your investment decision are 398 00:17:59,119 --> 00:18:01,679 Speaker 1: very hard. Yeah, but this gets back to your earlier point, like, 399 00:18:01,720 --> 00:18:04,560 Speaker 1: to some extent, you can't fight against the narrative. Right. 400 00:18:04,600 --> 00:18:06,840 Speaker 1: If the entire market is focused on this is going 401 00:18:06,880 --> 00:18:09,840 Speaker 1: to be bad for Italy or for Austria or for 402 00:18:09,880 --> 00:18:14,159 Speaker 1: the Eurozone or whatever, it's difficult to fight that right. 403 00:18:14,400 --> 00:18:16,959 Speaker 1: And actually it's funny, you know, before I joined Bloomberg 404 00:18:16,960 --> 00:18:18,880 Speaker 1: a couple of years ago, I actually gave some talks 405 00:18:18,920 --> 00:18:21,720 Speaker 1: to it. If you confidence about the idea that narrative 406 00:18:21,920 --> 00:18:24,520 Speaker 1: really really dominates market so much that your job is 407 00:18:24,560 --> 00:18:26,719 Speaker 1: to work out when a narrative is invalid and not 408 00:18:26,840 --> 00:18:29,280 Speaker 1: fight it as a trader, but to be ready when 409 00:18:29,359 --> 00:18:31,800 Speaker 1: it turns. So it's not like this narratives wrong, this 410 00:18:31,880 --> 00:18:34,080 Speaker 1: narratives wrong, I'm going to play the other side. It's like, 411 00:18:34,160 --> 00:18:36,000 Speaker 1: as soon as you start seeing a glimmer of hope 412 00:18:36,119 --> 00:18:38,240 Speaker 1: that it's changing, you can get on the new trend 413 00:18:38,400 --> 00:18:40,320 Speaker 1: very quickly, rather than trying to cling to the old 414 00:18:40,320 --> 00:18:42,879 Speaker 1: trend that's now invalid. So what I think is in 415 00:18:42,960 --> 00:18:44,840 Speaker 1: this case is that you're right, you can't fight the 416 00:18:44,880 --> 00:18:47,120 Speaker 1: worry about Italy. But you know what, it's most likely 417 00:18:47,119 --> 00:18:49,720 Speaker 1: by middle of this week that people will start going, 418 00:18:49,760 --> 00:18:51,520 Speaker 1: you know what, we don't have resolution on this yet. 419 00:18:51,520 --> 00:18:53,040 Speaker 1: We don't know what's going to happen, and it's gonna 420 00:18:53,040 --> 00:18:54,920 Speaker 1: take time to play out why am I keeping on 421 00:18:54,960 --> 00:18:57,159 Speaker 1: my money in my cash? You know, it's almost like 422 00:18:57,200 --> 00:19:00,640 Speaker 1: gauging the zeitgeist's kind of more important than act figuring 423 00:19:00,640 --> 00:19:03,919 Speaker 1: out what the data Isn't this isn't this? Uh? The 424 00:19:04,000 --> 00:19:07,600 Speaker 1: Keynesian beauty contest is all about, right, it's not about 425 00:19:07,640 --> 00:19:11,879 Speaker 1: identifying who the most beautiful person is, but trying to 426 00:19:11,960 --> 00:19:16,040 Speaker 1: guess who other people are is going to uh guess 427 00:19:16,080 --> 00:19:18,199 Speaker 1: is who the most beautiful are and all that. But 428 00:19:18,240 --> 00:19:20,720 Speaker 1: of course everyone is aware of the game. But what 429 00:19:20,720 --> 00:19:23,520 Speaker 1: what you're speaking to sort of shows why like smart 430 00:19:23,560 --> 00:19:26,280 Speaker 1: people can be very bad traders, right, Like by like 431 00:19:26,359 --> 00:19:29,000 Speaker 1: people who are like, sort of, it's easy to overthink 432 00:19:29,040 --> 00:19:30,919 Speaker 1: it or think that everybody is wrong, but it's right, 433 00:19:30,960 --> 00:19:33,479 Speaker 1: not about being wrong or right. Absolutely, I mean you're 434 00:19:33,520 --> 00:19:35,600 Speaker 1: spot on and that I think. You know, trading success 435 00:19:35,640 --> 00:19:40,120 Speaker 1: doesn't come down to necessarily be the best analyst of data. However, 436 00:19:40,440 --> 00:19:42,600 Speaker 1: I do think it's very important timelest data because you 437 00:19:42,600 --> 00:19:44,560 Speaker 1: can be ahead of when the trend changes. Because what 438 00:19:44,680 --> 00:19:46,679 Speaker 1: happens is the really bad trade is the people who 439 00:19:46,720 --> 00:19:49,000 Speaker 1: cling to a trend way beyond when it's valid, because 440 00:19:49,280 --> 00:19:51,480 Speaker 1: you know, they've just been hearing their friends say things 441 00:19:51,480 --> 00:19:53,240 Speaker 1: and they keep on righting this trend. Well, a good 442 00:19:53,240 --> 00:19:56,200 Speaker 1: example goes back to what we were talking about earlier 443 00:19:56,560 --> 00:19:59,600 Speaker 1: with sort of inflation. And I can't say how many 444 00:19:59,640 --> 00:20:02,919 Speaker 1: times this summer or in the even recent months you 445 00:20:03,000 --> 00:20:04,960 Speaker 1: just heard people say, oh, there's no wage growth and 446 00:20:04,960 --> 00:20:07,720 Speaker 1: no inflation, and you're just like, look look at the data. 447 00:20:07,840 --> 00:20:09,959 Speaker 1: It's there. You can see these numbers are going up 448 00:20:09,960 --> 00:20:12,879 Speaker 1: into the right. But this meme got so entrenched that 449 00:20:12,960 --> 00:20:16,240 Speaker 1: there's no inflation anymore that then people got totally taken 450 00:20:16,280 --> 00:20:18,960 Speaker 1: by surprise. It's actually hilarious you've mentioned that exact example 451 00:20:18,960 --> 00:20:21,840 Speaker 1: because I was out with the trader only earlier this week, 452 00:20:22,119 --> 00:20:24,120 Speaker 1: and he was like, We're never gonna get wage inflation 453 00:20:24,720 --> 00:20:26,879 Speaker 1: in the US. And I'm like, you just bring up 454 00:20:26,880 --> 00:20:28,920 Speaker 1: the Bloomberg app on your phone and say, look at 455 00:20:28,920 --> 00:20:31,000 Speaker 1: this number exactly like that. That's the one that we've 456 00:20:31,000 --> 00:20:33,280 Speaker 1: already had. You know. It's the the input prices and 457 00:20:33,320 --> 00:20:35,440 Speaker 1: commodity prices that are new. But we had some wage 458 00:20:35,440 --> 00:20:38,719 Speaker 1: inflation already, not terar away wage inflation, but solid numbers. 459 00:20:38,920 --> 00:20:41,000 Speaker 1: All right. So one of the next big themes you 460 00:20:41,160 --> 00:20:44,399 Speaker 1: you're got the China thing we have, we know about 461 00:20:44,440 --> 00:20:48,200 Speaker 1: political risk, we know that inflation seems to be building, 462 00:20:48,280 --> 00:20:51,600 Speaker 1: though not sort of like hyper inflation or anything like that. 463 00:20:51,880 --> 00:20:54,159 Speaker 1: What are some sort of medium term stories that you're 464 00:20:54,200 --> 00:20:56,679 Speaker 1: interested in. Well, I think the dollar is you know, 465 00:20:56,760 --> 00:20:58,440 Speaker 1: a real hot topic at the moment because you know, 466 00:20:58,480 --> 00:21:00,640 Speaker 1: in the Bloomberg dollar indexes of the high level since 467 00:21:00,760 --> 00:21:04,280 Speaker 1: you know, we've been recording it, um and it's incredibly strong, 468 00:21:04,320 --> 00:21:05,919 Speaker 1: and you know, people are getting very excited of that 469 00:21:06,040 --> 00:21:08,080 Speaker 1: against the narrative of like Trump's going to make the 470 00:21:08,080 --> 00:21:11,520 Speaker 1: dollar strong, It's going to make it great again, um, 471 00:21:11,560 --> 00:21:14,200 Speaker 1: you know, and everyone's looking at that as one of 472 00:21:14,240 --> 00:21:16,000 Speaker 1: the top trades for next year. And you know, at 473 00:21:16,000 --> 00:21:17,840 Speaker 1: that time of year, a bank starts sending out their 474 00:21:17,840 --> 00:21:20,639 Speaker 1: recommendations for the greatest time of the year, ten trades, 475 00:21:20,720 --> 00:21:24,040 Speaker 1: ten trades for exactly And what's great is they keep 476 00:21:24,040 --> 00:21:25,840 Speaker 1: on publishing them earlier and earlier, which means none of 477 00:21:25,840 --> 00:21:27,760 Speaker 1: them are valid by the time we get to tausen 478 00:21:27,800 --> 00:21:30,160 Speaker 1: the seventeen. It's normally like a little pool. How many 479 00:21:30,160 --> 00:21:32,679 Speaker 1: of them will be stopped out by January one? Um. 480 00:21:32,720 --> 00:21:34,199 Speaker 1: But I think a lot of people seem to very 481 00:21:34,240 --> 00:21:36,320 Speaker 1: much believe. It's actually funny. You know, you're talking to 482 00:21:36,359 --> 00:21:38,000 Speaker 1: a lot of people in the market this week, and 483 00:21:38,040 --> 00:21:40,280 Speaker 1: I guess probably my main takeaway, And you know, something 484 00:21:40,320 --> 00:21:43,480 Speaker 1: I've been thinking about writing about is that everyone believes 485 00:21:43,520 --> 00:21:45,480 Speaker 1: the dollar is going to have an amazing year next year. 486 00:21:45,880 --> 00:21:47,760 Speaker 1: You know what, I'm not sure how much further it 487 00:21:47,800 --> 00:21:49,840 Speaker 1: can go. Like I understand being optimistic on the dollar 488 00:21:49,880 --> 00:21:52,119 Speaker 1: at the moment because some of the current narrative has 489 00:21:52,119 --> 00:21:54,240 Speaker 1: more time to play out, but ultimately it's gonna be 490 00:21:54,240 --> 00:21:57,479 Speaker 1: self correcting. Right. A strong dollar is a disinflationary impulse, 491 00:21:57,480 --> 00:21:59,439 Speaker 1: and if it rises too fast then we start we 492 00:21:59,440 --> 00:22:01,400 Speaker 1: don't get the flation that everyone's betting on for these 493 00:22:01,440 --> 00:22:04,440 Speaker 1: rate hikes, and there's also several other issues coming into 494 00:22:04,440 --> 00:22:06,920 Speaker 1: it in terms of Trump's policies. If he is really 495 00:22:06,920 --> 00:22:10,000 Speaker 1: going to boost investment inflation, then that means all the 496 00:22:10,080 --> 00:22:13,879 Speaker 1: domestic sectors the economy, whether it's businesses, banks, consumers, government, 497 00:22:13,880 --> 00:22:16,399 Speaker 1: et cetera, will be spending more, which is can actually 498 00:22:16,440 --> 00:22:18,560 Speaker 1: increase the current account deficit for the U S which 499 00:22:18,600 --> 00:22:21,320 Speaker 1: is the longer term dollar negative. So basically what I'm 500 00:22:21,359 --> 00:22:23,200 Speaker 1: saying is all the themes were playing there for dollar 501 00:22:23,280 --> 00:22:26,320 Speaker 1: strength all or ultimately self correcting. It's at what level 502 00:22:26,359 --> 00:22:28,760 Speaker 1: of self correcting, right? I personally think that, you know, 503 00:22:29,200 --> 00:22:31,199 Speaker 1: the dollar uptrend might have another couple of months to go, 504 00:22:31,320 --> 00:22:33,360 Speaker 1: but I think it's maybe the big trade in next 505 00:22:33,400 --> 00:22:35,000 Speaker 1: year is at some point in the first quarter going 506 00:22:35,359 --> 00:22:37,520 Speaker 1: you fight the dollar. It would be fun to watch, 507 00:22:37,840 --> 00:22:40,960 Speaker 1: except not against the end. Not against the end that 508 00:22:41,000 --> 00:22:44,680 Speaker 1: will never change. I mean, is it that's talk about 509 00:22:44,680 --> 00:22:48,160 Speaker 1: a meme that's entrenched and maybe just some facts that entrenched. 510 00:22:48,320 --> 00:22:50,080 Speaker 1: Let's end there. What's what do you see in the 511 00:22:50,080 --> 00:22:52,199 Speaker 1: future of Japan? Well, that is this is that like 512 00:22:52,240 --> 00:22:56,560 Speaker 1: the one sort of like grinding bond bull market is 513 00:22:56,560 --> 00:22:59,080 Speaker 1: just never gonna end. There's just sort of and no growth, 514 00:22:59,200 --> 00:23:02,320 Speaker 1: no inflation, and no yields anything. Well, you know that 515 00:23:02,440 --> 00:23:04,800 Speaker 1: they're coming to an end game. When I say that 516 00:23:04,800 --> 00:23:06,600 Speaker 1: they're coming to an end game, I don't think we're 517 00:23:06,600 --> 00:23:07,960 Speaker 1: gonna see it in the next year, in the same 518 00:23:07,960 --> 00:23:09,720 Speaker 1: way that I say that China's got problems, but you 519 00:23:09,720 --> 00:23:11,560 Speaker 1: know they're building. It could be five years away. This 520 00:23:11,720 --> 00:23:13,600 Speaker 1: coming to the end game could take five ten years 521 00:23:13,600 --> 00:23:15,800 Speaker 1: to play out. But what they've done now in recent 522 00:23:15,840 --> 00:23:17,960 Speaker 1: policy is very interesting, it's very innovative, and it may 523 00:23:18,000 --> 00:23:21,600 Speaker 1: actually help get inflation, et cetera. But how do they 524 00:23:21,640 --> 00:23:24,280 Speaker 1: extricate themselves from this problem? I mean putting a yield 525 00:23:24,280 --> 00:23:28,359 Speaker 1: target in when they've got the world's largest bond market, um, 526 00:23:28,400 --> 00:23:32,639 Speaker 1: you know, high GDP exactly. You know they can't afford 527 00:23:32,680 --> 00:23:34,480 Speaker 1: for rates to rise, and they you know, they're gonna 528 00:23:34,480 --> 00:23:37,040 Speaker 1: have real problems if the end starts running away, getting 529 00:23:37,040 --> 00:23:39,440 Speaker 1: out of control, because if they are genuinely gonna copy 530 00:23:39,520 --> 00:23:41,680 Speaker 1: yields at zero percent in the tenure, when the rest 531 00:23:41,720 --> 00:23:44,320 Speaker 1: of the world's yields are picking up, then that's going 532 00:23:44,400 --> 00:23:46,720 Speaker 1: to kill the end. And they might love that at first, 533 00:23:46,960 --> 00:23:48,560 Speaker 1: but at what point did they start panicking and do 534 00:23:48,600 --> 00:23:51,600 Speaker 1: they control that they can't suddenly, let's say the end 535 00:23:51,600 --> 00:23:55,000 Speaker 1: starts following, if they suddenly try to hike rates to 536 00:23:55,040 --> 00:23:59,280 Speaker 1: control it, then they're screwed. Mark dMar fantastic talk. Deal 537 00:23:59,560 --> 00:24:01,320 Speaker 1: is a great now just to get your take, but 538 00:24:01,359 --> 00:24:04,000 Speaker 1: also some of your insights, like how traders see the world, 539 00:24:04,040 --> 00:24:07,000 Speaker 1: because I think people often missed that. I really appreciate 540 00:24:07,080 --> 00:24:20,879 Speaker 1: you coming up. Thank you very much, Thanks Tracy. I 541 00:24:20,920 --> 00:24:24,520 Speaker 1: liked how we sort of talked about something very current 542 00:24:24,600 --> 00:24:26,560 Speaker 1: and relevant in this one. I sort of took a 543 00:24:26,640 --> 00:24:30,160 Speaker 1: break from our normal as opposed to our normal odd 544 00:24:30,200 --> 00:24:33,960 Speaker 1: topic exactly as opposed to the whole premise of the 545 00:24:34,119 --> 00:24:36,639 Speaker 1: entire podcast that was not an odd lot. Yeah, I 546 00:24:37,320 --> 00:24:39,960 Speaker 1: think I had like a self realization, which is that 547 00:24:40,400 --> 00:24:43,080 Speaker 1: because I was asked, why do I always see the downside? 548 00:24:43,119 --> 00:24:46,000 Speaker 1: And I think just journalism by its nature is looking 549 00:24:46,040 --> 00:24:49,880 Speaker 1: at things over a long term horizon, especially financial journalism, 550 00:24:49,880 --> 00:24:52,520 Speaker 1: which people maybe don't seem to realize, Like you never 551 00:24:52,600 --> 00:24:55,720 Speaker 1: want to be the person who said everything's fine in 552 00:24:55,760 --> 00:24:59,600 Speaker 1: the US housing market in two thousand six, right, Well, 553 00:24:59,680 --> 00:25:01,720 Speaker 1: you know, I think that's exactly right. And I also 554 00:25:01,800 --> 00:25:03,959 Speaker 1: think that I have it's sort of I have this 555 00:25:04,040 --> 00:25:08,119 Speaker 1: theory that real life I don't. I don't know if 556 00:25:08,119 --> 00:25:10,119 Speaker 1: I want to go this far, but like most things 557 00:25:10,200 --> 00:25:12,320 Speaker 1: are kind of good. We wake up in the morning, 558 00:25:12,960 --> 00:25:16,120 Speaker 1: usually the world they're usually the world works. We get 559 00:25:16,160 --> 00:25:18,640 Speaker 1: to work without getting hit by a car. Most times 560 00:25:19,160 --> 00:25:22,440 Speaker 1: we go to our jobs, we leave. And so it's 561 00:25:22,480 --> 00:25:27,159 Speaker 1: like news is fundamentally like we only talk about something 562 00:25:27,640 --> 00:25:29,960 Speaker 1: when it's a break from the ordinary, and so there's 563 00:25:30,000 --> 00:25:33,600 Speaker 1: an inherent negative bias to news because the ordinary is 564 00:25:33,680 --> 00:25:36,320 Speaker 1: for things to just sort of work out and go 565 00:25:36,480 --> 00:25:38,719 Speaker 1: as planned. And so I think that, like, you know, 566 00:25:38,960 --> 00:25:42,760 Speaker 1: it's not really news if it's working right. So what 567 00:25:42,760 --> 00:25:47,080 Speaker 1: should we do if we're trying to provide news for traders? Well, 568 00:25:47,080 --> 00:25:50,320 Speaker 1: I think, like what what this idea? That? Like, still 569 00:25:50,359 --> 00:25:53,000 Speaker 1: we can, whether they're good or bad, identify the memes 570 00:25:53,520 --> 00:25:56,520 Speaker 1: and figure out where there's a gap between some new 571 00:25:56,560 --> 00:26:00,680 Speaker 1: emerging story as some new emerging theme and what people 572 00:26:00,800 --> 00:26:04,720 Speaker 1: think and continue to try to exploit an arbitrar's that 573 00:26:04,880 --> 00:26:09,439 Speaker 1: gap as a to use traitor. Go that was that 574 00:26:09,520 --> 00:26:12,120 Speaker 1: was good? YEA, thank you? All right? Shall we call 575 00:26:12,160 --> 00:26:14,720 Speaker 1: it first? Do it? Okay? This was another edition of 576 00:26:14,760 --> 00:26:17,200 Speaker 1: the Odd Thoughts podcast. You can follow me on Twitter 577 00:26:17,280 --> 00:26:20,480 Speaker 1: at Tracy Halloway and you can follow me on Twitter 578 00:26:20,600 --> 00:26:23,359 Speaker 1: at the Star Wart and Tracy. Where could people follow Mark? 579 00:26:23,800 --> 00:26:26,919 Speaker 1: You can follow Mark on the Bloomberg Terminal where he 580 00:26:26,960 --> 00:26:30,280 Speaker 1: writes an almost daily column called macro View, and it 581 00:26:30,440 --> 00:26:32,680 Speaker 1: is very very good. It's really great. You should check 582 00:26:32,680 --> 00:26:33,919 Speaker 1: it out. Thanks for listening.