WEBVTT - Bloomberg Surveillance TV: September 24, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.199 Terminal and the Bloomberg Business app. We begin this out 0:00:37.200 --> 0:00:39.760 with stocks coming off the fortieth record high close of 0:00:39.800 --> 0:00:42.560 the year so far, as optimism builds around ray cuts 0:00:42.600 --> 0:00:45.520 in the US and stimulus measures in China. Emily Rowland 0:00:45.560 --> 0:00:47.879 of John Hancock saying, while the risk on environment is 0:00:47.960 --> 0:00:50.720 tempting to leverage up into we would be mindful here 0:00:50.800 --> 0:00:52.520 that a lot of good news is being priced into 0:00:52.560 --> 0:00:53.400 riskier assets. 0:00:53.600 --> 0:00:54.760 Emily joins us for more. 0:00:54.960 --> 0:00:58.120 Emily, more good news, more good news, overnight stimulus measures 0:00:58.120 --> 0:01:00.400 out of China. Is there a reason to buy this 0:01:00.440 --> 0:01:01.280 morning based on that? 0:01:02.280 --> 0:01:04.320 I mean, look one of the biggest risk to being 0:01:04.440 --> 0:01:08.480 underweight China and underweight emerging markets, is that policymakers can 0:01:08.560 --> 0:01:11.040 come through with these big packages. I don't know if 0:01:11.040 --> 0:01:13.559 I'd necessarily call it a bazuka, and it likely needs 0:01:13.600 --> 0:01:16.120 to be followed up by more on the fiscal side. 0:01:16.560 --> 0:01:20.280 But this is creating this risk on rotation or prompting 0:01:20.280 --> 0:01:21.320 it to continue. 0:01:21.600 --> 0:01:23.000 You know, as we see these big moves. 0:01:23.040 --> 0:01:24.800 I think you guys have been making some great points 0:01:24.840 --> 0:01:27.120 this morning about is this actually going to get the 0:01:27.200 --> 0:01:30.360 Chinese consumer off the sidelines. That remains to be seen, 0:01:30.959 --> 0:01:33.640 but certainly this is adding to the momentum and the 0:01:33.680 --> 0:01:36.800 sentiment that's permeating markets right now, which is that everything's 0:01:36.840 --> 0:01:37.399 pretty great. 0:01:37.480 --> 0:01:39.240 Well when you look at the US versus the rest 0:01:39.240 --> 0:01:41.039 of the world, does it change the story for you? 0:01:41.360 --> 0:01:41.920 Is it enough? 0:01:42.840 --> 0:01:43.800 You know, John, it doesn't. 0:01:43.840 --> 0:01:46.039 And it's really amazing to wake up in the morning 0:01:46.040 --> 0:01:48.480 and you see this terrible data out of Germany from 0:01:48.480 --> 0:01:52.720 the IFO to manufacturing. I mean German manufacturing PMI is 0:01:52.720 --> 0:01:56.400 at forty right now, that is in recessionary territory. And meanwhile, 0:01:56.480 --> 0:01:58.120 you know, you look at the DATS and it's up 0:01:58.160 --> 0:01:58.840 one percent. 0:01:59.320 --> 0:02:00.520 So I think Mark it's. 0:02:00.320 --> 0:02:03.840 Globally or really reacting to the FED pivot the fifty 0:02:03.880 --> 0:02:06.640 basis point cut stimulus out of China. 0:02:06.720 --> 0:02:09.200 Again. We want to be fully invested here. 0:02:09.280 --> 0:02:11.560 But we want to be mindful of going over our 0:02:11.600 --> 0:02:14.360 skis and taking risk in a market where you know, 0:02:14.440 --> 0:02:16.840 I know, you've been shaming everybody for saying price for 0:02:16.960 --> 0:02:20.320 perfection all morning, but it is really in the price 0:02:20.360 --> 0:02:22.520 with the S and P five hundred reaching new all 0:02:22.560 --> 0:02:26.200 time highs every day. Underneath the surface, we would suggest 0:02:26.360 --> 0:02:29.359 just being mindful of taking too much risk. 0:02:29.480 --> 0:02:33.000 It's not shaming, Emily. We think that it's a valid phrase. 0:02:33.080 --> 0:02:35.200 It sticks in our minds, which is the reason why 0:02:35.440 --> 0:02:38.079 both John and myself write it down when people. 0:02:37.919 --> 0:02:39.000 Say it, which is frequently. 0:02:39.280 --> 0:02:41.920 I am curious about how difficult it is to remain 0:02:42.080 --> 0:02:45.000 cautious at a time where you see so much risk 0:02:45.080 --> 0:02:47.640 on appetite and a fed that seems to be behind 0:02:47.880 --> 0:02:48.280 part of it. 0:02:48.320 --> 0:02:50.800 At least it's rich, really tough. 0:02:50.880 --> 0:02:53.520 I mean, I think again, we are fully invested, we're 0:02:53.800 --> 0:02:56.320 you know, we're buying high quality stocks and bonds. 0:02:56.320 --> 0:02:58.720 But I think the trickiest time in any. 0:02:58.560 --> 0:03:01.520 Economic cycle to be bare is at the very beginning 0:03:01.560 --> 0:03:02.640 and the very end of it. 0:03:03.080 --> 0:03:05.320 And I think that's what's happening now. 0:03:05.400 --> 0:03:07.720 You know, we think about it like the music's getting 0:03:07.760 --> 0:03:10.680 turned up at the end of every cycle. The music 0:03:10.720 --> 0:03:14.239 gets turned up as inflation comes down the challenges. 0:03:14.280 --> 0:03:16.200 It gets really, really loud. 0:03:15.960 --> 0:03:18.760 Until you start to see initial jobless claims picking up 0:03:18.800 --> 0:03:22.400 and high yield bond spreads widen, and then things change quickly. 0:03:22.440 --> 0:03:24.000 They go quiet, very fast. 0:03:24.160 --> 0:03:26.400 Right now, initial claims are sitting in a low two 0:03:26.480 --> 0:03:29.840 hundred thousand range. High yield bond spreads are three hundred 0:03:29.840 --> 0:03:32.919 and two basis points. They actually dip below three hundred 0:03:32.919 --> 0:03:35.600 basis points after the Feds move last week. So the 0:03:35.720 --> 0:03:38.440 music is still playing. You want to be invested. You 0:03:38.520 --> 0:03:42.360 could see markets continue to see momentum here. Again, it's 0:03:42.640 --> 0:03:44.960 just about making sure bonds are still playing a role 0:03:44.960 --> 0:03:48.600 in your portfolio and leaning into higher quality stocks and 0:03:48.640 --> 0:03:52.480 finding quality at a reasonable price in order to you know, again, 0:03:52.560 --> 0:03:54.760 stay invested and be involved. 0:03:54.760 --> 0:03:56.400 If we do see this market melt. 0:03:56.320 --> 0:03:57.960 Up, let's talk about the bond market. 0:03:58.160 --> 0:04:00.960 But Spoke Investment just put out this to the ten 0:04:01.040 --> 0:04:04.240 year yield is up every day since the Fed cut rates, 0:04:04.520 --> 0:04:08.200 rising fifteen basis points in that period. How do you 0:04:08.280 --> 0:04:11.119 have conviction in the long end of the yield curve 0:04:11.160 --> 0:04:14.560 at a time where this market seems to be suggesting, hinting, 0:04:14.720 --> 0:04:17.159 flirting on the edges with this idea. 0:04:17.480 --> 0:04:19.239 The potentially the more. 0:04:19.200 --> 0:04:21.760 That the Fed cuts now, the more that inflation could 0:04:21.800 --> 0:04:23.200 be stickier even pick up later. 0:04:24.320 --> 0:04:27.000 Yeah, I don't think it's surprising to see this backup 0:04:27.040 --> 0:04:29.120 in the ten year yield. You know, certainly the FED 0:04:29.200 --> 0:04:32.920 supporting the economy with a larger cut is bullish. 0:04:33.160 --> 0:04:35.480 It's risk on. It's another part of the risk on 0:04:35.760 --> 0:04:36.800 puzzle here, you know. 0:04:36.839 --> 0:04:40.080 I think the biggest risk is not necessarily inflation picking up, 0:04:40.080 --> 0:04:40.960 that could be part. 0:04:40.839 --> 0:04:42.760 Of it, but more of a melt up in. 0:04:42.800 --> 0:04:46.440 Markets, which could create more leverage in the financial system. 0:04:46.480 --> 0:04:50.320 If you continue to see again equity markets surging, you 0:04:50.360 --> 0:04:53.400 see that, you know, momentum stocks, bitcoin, you know, low 0:04:53.480 --> 0:04:58.360 quality companies, all kind of participating in this rally. Eventually, 0:04:58.400 --> 0:05:01.320 we do think that an economic contraction plays out. It 0:05:01.360 --> 0:05:03.520 may take some time here, but when you lean into 0:05:03.560 --> 0:05:05.600 higher quality bonds you know. 0:05:05.560 --> 0:05:08.240 That are paying over four percent in yield, you can 0:05:08.279 --> 0:05:09.359 get paid to wait. 0:05:10.240 --> 0:05:12.640 I don't think that the bond market is fully sniffing 0:05:12.680 --> 0:05:16.560 out this inflationary environment. That's likely to see some type 0:05:16.560 --> 0:05:19.960 of contraction, some type of increase in the unemployment rate, 0:05:19.960 --> 0:05:22.240 and it could happen so quickly. I talked to so 0:05:22.320 --> 0:05:26.080 many investors that are waiting to take advantage of higher bondyards. 0:05:26.120 --> 0:05:28.839 They're sitting in money market accounts, and we just ransom 0:05:28.920 --> 0:05:32.080 data that suggests that investors sit in cash for way 0:05:32.120 --> 0:05:35.240 too long. In fact, they sit there until bondyiards are 0:05:35.279 --> 0:05:38.279 already at basement levels, and then they move out on 0:05:38.320 --> 0:05:41.599 the curve and embrace core bonds. We don't want to 0:05:41.600 --> 0:05:43.719 wait too long in order to do that. I think 0:05:43.720 --> 0:05:47.160 getting cash on the sidelines, getting it invested in a 0:05:47.720 --> 0:05:50.680 high quality part of the bond market in the intermediate 0:05:50.680 --> 0:05:51.640 part of the curve makes a. 0:05:51.640 --> 0:05:52.560 Lot of sense right now. 0:05:52.600 --> 0:05:54.520 The normalization of the yield curve will give them a 0:05:54.560 --> 0:05:56.520 little bit of a nuch. Do you think the difference 0:05:56.520 --> 0:05:58.560 between the two and the ten year at twenty basis 0:05:58.560 --> 0:05:59.960 points makes a difference? 0:06:00.400 --> 0:06:02.080 Does that difference need to be launcher than that. 0:06:03.000 --> 0:06:05.240 I don't think anybody is paying much attention to the 0:06:05.279 --> 0:06:08.320 bond market right now in general, given the risk on 0:06:08.520 --> 0:06:09.680 environment that we're seeing. 0:06:09.720 --> 0:06:11.240 But I do think it's enough. 0:06:11.000 --> 0:06:15.040 To start to lean into two higher yielding bonds here again, 0:06:15.080 --> 0:06:17.839 we could continue to see some more volatility and rates. 0:06:17.880 --> 0:06:20.000 By the way, the FED just cut amidst an environment 0:06:20.040 --> 0:06:22.920 where the economic data we're pretty good. You look at 0:06:22.920 --> 0:06:26.760 things like retail sales, industrial production, regional FED surveys. So 0:06:27.080 --> 0:06:29.200 I think we could continue to see some chop and 0:06:29.320 --> 0:06:32.280 yields as the data are still suggesting that we're chugging 0:06:32.320 --> 0:06:33.160 along right now. 0:06:33.400 --> 0:06:35.279 The US economy is doing okay. 0:06:35.720 --> 0:06:38.279 It reminds me a little bit of my son's grades 0:06:38.360 --> 0:06:41.360 right now, like they're okay, but they're not great. 0:06:41.480 --> 0:06:43.359 He's still on the football team kind of thing, you 0:06:43.400 --> 0:06:43.800 know what I. 0:06:43.760 --> 0:06:46.240 Mean, Like we're doing all right, and so I think 0:06:46.279 --> 0:06:48.520 you might have to wait for duration to kick in 0:06:48.560 --> 0:06:51.360 as a tailwind. But again, that income is there as 0:06:51.400 --> 0:06:52.560 you kind of embrace. 0:06:52.279 --> 0:06:54.080 That patience as he watched it this morning. 0:06:55.200 --> 0:06:57.520 I really hope not. I hope he's in math class. 0:06:59.040 --> 0:07:00.840 Only just a funal one me. I'm not going to 0:07:00.920 --> 0:07:02.480 name who this is. I'm just going to share a 0:07:02.560 --> 0:07:05.200 quote with you. This was from earlier this year. We're 0:07:05.279 --> 0:07:09.840 price for perfection of easier policy, continued disinflationary forces, and 0:07:09.920 --> 0:07:12.800 resilient growth versus a bankdrop of US growth continuing to 0:07:12.800 --> 0:07:13.800 beat expectations. 0:07:13.960 --> 0:07:15.720 I won't name in shame anyone. 0:07:15.560 --> 0:07:17.480 Because I think that reflected how a lot of people 0:07:17.520 --> 0:07:19.320 found at the start of the year, and it's the 0:07:19.400 --> 0:07:24.120 last line there, continuing to beat expectations. Do you think 0:07:24.240 --> 0:07:27.040 we can continue to do that in the US labor 0:07:27.080 --> 0:07:28.800 market in the months to come, because it feels like 0:07:28.840 --> 0:07:30.800 that holds the key to a lot of calls. 0:07:31.920 --> 0:07:33.640 The labor market is a tough one. 0:07:33.680 --> 0:07:36.239 I'm going to punt on that just because you guys 0:07:36.240 --> 0:07:38.880 mentioned before the revisions are so critical, so I think 0:07:38.880 --> 0:07:40.920 we need to take those headline numbers with a grain 0:07:41.000 --> 0:07:44.120 of salt, focus on the revisions. But I think you 0:07:44.160 --> 0:07:46.320 know there's a lot of expectations going into this. What 0:07:46.400 --> 0:07:49.640 I'll say is that valuations are never a catalyst for 0:07:49.760 --> 0:07:52.680 a shift in market leadership. You've got to see something 0:07:52.680 --> 0:07:55.400 else change. You have to see the earnings backrop change. 0:07:55.440 --> 0:07:57.920 You have to see the macro regime seeing a shift. 0:07:58.000 --> 0:08:00.920 And by the way, there's more great news. Analysts are 0:08:00.920 --> 0:08:04.520 penciling it four percent year over year earnings growth next 0:08:04.600 --> 0:08:06.200 quarter for the S and P five hundred. 0:08:06.280 --> 0:08:09.080 The bar is really low. It gets much higher from there. 0:08:09.120 --> 0:08:12.320 So in terms of beating expectations, from a fundamental standpoint. 0:08:12.360 --> 0:08:14.160 Yeah, I think we can do it. The bars, well, 0:08:14.280 --> 0:08:15.600 let's enjoy it while we can. 0:08:15.800 --> 0:08:18.720 The bar is Low Young Rowland, Emily Run of John Hancock. 0:08:19.120 --> 0:08:30.239 Thank you appreciate it. So here's the late, says Chinese 0:08:30.280 --> 0:08:33.080 Central Bank, convening a stimulus package, sending stocks to their 0:08:33.080 --> 0:08:35.880 best day in China since twenty twenty. The plan including 0:08:35.880 --> 0:08:38.040 a cut to short term interest rates and a reduction 0:08:38.080 --> 0:08:42.040 of reserve requirements for banks officials. They're also studying sending 0:08:42.160 --> 0:08:45.080 up a market stabilization fund ahead of the move. Comic 0:08:45.160 --> 0:08:48.560 Chartravedi of Goldman Sachs, writing, our China economics team have 0:08:48.679 --> 0:08:51.480 just revised down their twenty four GDP growth forecast to 0:08:51.559 --> 0:08:54.640 four point seven percent from four point nine. As such, 0:08:54.679 --> 0:08:58.320 we expect the Chinese currency to underperform. Come actually joined 0:08:58.400 --> 0:09:00.800 us now from London for more And actually you wrote 0:09:00.800 --> 0:09:03.319 that before this stimulus package, and I have to ask you, 0:09:03.640 --> 0:09:04.920 is this enough to change your mind? 0:09:07.200 --> 0:09:10.199 Look, I think you know, the stimulus is certainly more 0:09:10.240 --> 0:09:12.520 than we expected just a few days ago. So I 0:09:12.559 --> 0:09:14.920 think that's fair and I think that matters. But it 0:09:15.040 --> 0:09:17.760 seems to me more aimed at putting a floor under 0:09:17.800 --> 0:09:22.320 the equity market rather than necessarily buoying the currency. And 0:09:22.400 --> 0:09:24.199 so yes, of course we've had a little bit of 0:09:24.240 --> 0:09:26.600 a currency strength today. We've had more of it in 0:09:26.640 --> 0:09:28.160 the last you know, I would say, you know, a 0:09:28.240 --> 0:09:30.200 month and a half, although I think that has more 0:09:30.240 --> 0:09:33.920 to do with dollar weakness than China specific strength. So 0:09:34.000 --> 0:09:36.240 I think you know, the jury is out. I think 0:09:36.360 --> 0:09:39.760 you know, it's not surprising to see stocks react positively 0:09:39.880 --> 0:09:43.280 to the announcements that you've seen. I still don't think 0:09:43.360 --> 0:09:46.240 a stronger currency is the best way to express a 0:09:46.320 --> 0:09:48.200 view on the developments that have occurred overnight. 0:09:48.520 --> 0:09:50.839 So there is this question about whether the FED is 0:09:50.880 --> 0:09:54.120 opening the door to some sort of stimulus and further 0:09:54.200 --> 0:09:57.040 easing around the world, and whether it creates a relative 0:09:57.120 --> 0:09:58.680 I don't want to say race to the bottom, but 0:09:58.760 --> 0:10:01.239 it gives us a bit of a back drop that could. 0:10:01.000 --> 0:10:04.080 Limit how much dollar weakness there could be. Is that 0:10:04.160 --> 0:10:05.120 kind of your view of things. 0:10:06.920 --> 0:10:09.199 I think that's very much in line with our thinking, right. 0:10:09.280 --> 0:10:11.440 It's the FED is a big deal. The fact that 0:10:11.440 --> 0:10:14.320 they're cutting rates, and they're cutting rates against a backdrop 0:10:14.440 --> 0:10:17.800 that is not recessionary. They're cutting rates to get ahead 0:10:17.840 --> 0:10:21.480 of the curve and support and secure that soft landing. 0:10:21.520 --> 0:10:25.200 That really does allow em central banks and global central 0:10:25.240 --> 0:10:27.880 banks really across the world to join in that easing train. 0:10:28.120 --> 0:10:30.480 You know, easing is coming soon to a central bank 0:10:30.520 --> 0:10:33.840 close to you, and that is going to ultimately limit 0:10:33.920 --> 0:10:37.000 the extent of dollar weakness that you see. What is 0:10:37.000 --> 0:10:39.360 also going to limit it is that ultimately we expect 0:10:39.360 --> 0:10:42.160 the US economy to continue to expand, to continue to 0:10:42.160 --> 0:10:45.520 grow on solid with solid momentum. And actually some of 0:10:45.559 --> 0:10:50.120 the activity data in Europe in China are not that strong. 0:10:50.240 --> 0:10:53.200 China stimulus is very different from the US is stimulus. 0:10:53.240 --> 0:10:56.400 The US cuts came to secure the soft landing. The 0:10:56.520 --> 0:10:59.640 China announcements came in response to some really poor set 0:10:59.640 --> 0:11:01.160 of data. So I think we'd have to see how 0:11:01.240 --> 0:11:03.920 much traction they have, how much the economy is supported. 0:11:04.320 --> 0:11:06.600 But I still don't think we are in a zone 0:11:06.600 --> 0:11:09.320 where you should be arguing for aggressive dollar depreciation. 0:11:09.440 --> 0:11:10.240 That's not our view. 0:11:10.520 --> 0:11:12.400 I have to say, Kamashia, you were listening to a 0:11:12.440 --> 0:11:16.000 nineteen sixty soundtrack when you're writing this piece. Is the 0:11:16.040 --> 0:11:19.120 first cut, the deepest, and slow down. You move too fast, 0:11:19.200 --> 0:11:22.520 Kat Stevens and of course Simon and Garfokl. I am 0:11:22.600 --> 0:11:25.000 wondering when you say is the first cut the deepest, 0:11:25.000 --> 0:11:27.280 which set me off on a sort of humming sphere 0:11:27.640 --> 0:11:29.880 this morning. I do wonder do you think that that 0:11:30.080 --> 0:11:32.720 is the case or is your sort of the dollar 0:11:32.760 --> 0:11:35.520 can't get that much more weak predicated on the idea 0:11:35.520 --> 0:11:38.560 that you could see ongoing fifty basis point rate cuts 0:11:38.800 --> 0:11:40.200 at least in the next six months. 0:11:41.760 --> 0:11:43.800 We've put a lot of effort into our titles. I'm 0:11:43.800 --> 0:11:48.120 glad you enjoyed those, But you know, I think, yes, 0:11:48.200 --> 0:11:50.280 I think that you know we're coming, I think to 0:11:50.320 --> 0:11:53.000 the limits of how much the dollar can weaken just 0:11:53.080 --> 0:11:55.200 by the FED easing. A lot of easing is now 0:11:55.240 --> 0:11:57.600 in the price in the FED cuve. I think you 0:11:57.640 --> 0:11:59.920 know the baton is going to be passed to other 0:12:00.120 --> 0:12:03.080 central banks, to the economic developments across the rest of 0:12:03.080 --> 0:12:05.600 the world. Ultimately, look, I think if we are in 0:12:05.640 --> 0:12:08.080 a world where you know, global growth is okay, the 0:12:08.120 --> 0:12:11.640 FED is cutting aggressively, and equity markets hold up, that's 0:12:11.679 --> 0:12:15.480 a generally dollar weakening environment. But we've always maintained that 0:12:15.559 --> 0:12:19.040 the dollars high valuation is ultimately a feature of the 0:12:19.040 --> 0:12:21.360 strong growth in the US and the real returns you 0:12:21.400 --> 0:12:22.480 get in US assets. 0:12:22.600 --> 0:12:23.480 We don't think that. 0:12:23.360 --> 0:12:26.000 Picture is going to change anytime soon, and therefore we 0:12:26.000 --> 0:12:29.679 think the dollars high valuation will erode only very gradually. 0:12:29.920 --> 0:12:32.120 You say, a key event risk is the election, obviously 0:12:32.120 --> 0:12:34.719 for Asian currencies, which are the most vulnerable potentially to 0:12:34.760 --> 0:12:36.560 Trump tariffs. 0:12:37.320 --> 0:12:37.840 Yeah, I think. 0:12:38.000 --> 0:12:40.520 Look, I think if we have a set of tariffs, 0:12:40.520 --> 0:12:43.280 if we have you know, trade disruptions, that's never good 0:12:43.320 --> 0:12:46.839 for any emerging market or any market really which is 0:12:46.880 --> 0:12:49.400 plugged into the global trading cycle. And a lot of ems, 0:12:49.440 --> 0:12:53.000 you know, have that exposure to global trade. You know, 0:12:53.080 --> 0:12:55.160 I think, you know, if I think of open economies 0:12:55.280 --> 0:12:58.480 like the Korean Wan, but even sort of neighboring economies 0:12:58.559 --> 0:13:01.040 like the Mexican pace, So I think, you know, those 0:13:01.080 --> 0:13:03.679 are the kinds of currencies that could be affected. 0:13:04.440 --> 0:13:04.640 You know. 0:13:04.760 --> 0:13:07.800 China is another one where you know, there's lots of 0:13:07.880 --> 0:13:10.760 you know, talk of tariffs, and we saw those implemented 0:13:10.760 --> 0:13:13.560 in twenty eighteen and twenty nineteen and there was an impact. 0:13:13.800 --> 0:13:15.679 So I think it's the it's the I would say 0:13:15.720 --> 0:13:18.520 open economies of Asia that are more plugged into the 0:13:18.520 --> 0:13:19.760 global trade cycle. 0:13:20.120 --> 0:13:21.000 But then also. 0:13:20.760 --> 0:13:23.920 Perhaps you know Mexico is one which always features on 0:13:23.920 --> 0:13:25.959 the top of the list, is given its exposure to 0:13:26.679 --> 0:13:27.280 US trade. 0:13:27.480 --> 0:13:29.360 We'll talk more about that next time. A clinic from you, 0:13:29.440 --> 0:13:32.360 as always, Commactionatraverdi of Government sanks there. On the latest 0:13:32.360 --> 0:13:43.240 side of China, Let's get to a big story in 0:13:43.240 --> 0:13:45.120 the last few days in this country, the rise of 0:13:45.200 --> 0:13:50.240 artificial intelligence fueling energy amount across the nation's power grid constellations, 0:13:50.240 --> 0:13:53.200 striking a deal with Microsoft to restart the three Mile 0:13:53.280 --> 0:13:57.680 Island nuclear power plant by twenty twenty eight. Former BPCO 0:13:57.840 --> 0:14:00.280 and co founder Beyond met Zero Lord John Branch just 0:14:00.400 --> 0:14:03.600 now Beyond net Zero is responsible for General Atlantic's climate 0:14:03.640 --> 0:14:06.320 growth equity strategy. And it's fantastic to see you've said, 0:14:06.320 --> 0:14:08.480 thanks for being care good to be here. It's amazing 0:14:08.480 --> 0:14:11.240 what's happening in this country. To see a nuclear plant 0:14:11.320 --> 0:14:15.280 be reactivated, restarted, supply energy to a tech firm. How 0:14:15.320 --> 0:14:17.640 big is the scramble for energy in this country. 0:14:18.120 --> 0:14:22.120 It's very big for electricity to power data centers, which 0:14:22.120 --> 0:14:25.400 are being built globally at a rate of one a day, 0:14:26.240 --> 0:14:29.400 and they're very big ones. It's very fast, you know, 0:14:29.520 --> 0:14:33.440 so very big data center nowadays probably can absorb one 0:14:33.520 --> 0:14:38.000 nuclear core, you know, six six to eight hundred megawats. 0:14:38.920 --> 0:14:42.320 So it's better to restart and reuse a nuclear power 0:14:42.360 --> 0:14:44.640 station than build a new one where we're going to 0:14:44.680 --> 0:14:48.280 have to build some new ones until there's a reaction, 0:14:49.000 --> 0:14:51.960 And the reaction is how do you actually reduce the 0:14:51.960 --> 0:14:56.200 power consumption of AI. I think the answer lies in 0:14:56.480 --> 0:14:58.760 the fact that there are two different things going on here. 0:14:58.880 --> 0:15:02.360 One is training, which takes a lot of power, I 0:15:02.440 --> 0:15:05.400 know that from some of our companies, very expensive. And 0:15:05.440 --> 0:15:08.560 then inference, which is what you do to use it 0:15:08.600 --> 0:15:12.400 takes much less power. So people are working on different chips, 0:15:12.480 --> 0:15:16.000 different data centers, and so one day this will probably 0:15:16.000 --> 0:15:18.840 flatten out a bit, but right now it's a lot. 0:15:18.760 --> 0:15:19.400 A big picture. 0:15:19.400 --> 0:15:21.160 Do you think it undermines some of the climate goals 0:15:21.200 --> 0:15:22.120 we have in this country? 0:15:22.560 --> 0:15:25.400 Not necessarily. You know, first of all, we have to 0:15:25.400 --> 0:15:29.040 think about not just this country but the world, and 0:15:29.280 --> 0:15:31.840 so it's a contribution to this country. There will be 0:15:31.880 --> 0:15:34.200 ways of offsetting it, and there are ways of getting 0:15:34.760 --> 0:15:39.360 renewable energy. Part two data centers, So it's a mix 0:15:39.480 --> 0:15:41.560 of things. There's no one solution to this. 0:15:41.760 --> 0:15:42.040 John. 0:15:42.040 --> 0:15:43.640 This is the reason why I was excited to talk 0:15:43.640 --> 0:15:45.360 to you. More than anything. I was looking for some 0:15:45.360 --> 0:15:48.080 optimism because usually when we talk about climate change, you 0:15:48.160 --> 0:15:50.720 hear gloom and doom and sort of existential angst. 0:15:51.040 --> 0:15:52.520 You said that nearly eighty percent. 0:15:52.280 --> 0:15:55.080 Of the technologies that we need to reach net zero 0:15:55.120 --> 0:15:57.240 by twenty fifty are already developed. 0:15:57.520 --> 0:15:59.359 The issue is just capital investment. 0:16:00.000 --> 0:16:04.840 Explain well, cabin investment and cost. Cost and capital investment 0:16:04.880 --> 0:16:07.080 go hand in hand. The more you do of something, 0:16:07.440 --> 0:16:10.200 the cheaper it becomes. So you've got to get started, 0:16:11.000 --> 0:16:13.240 and you've got to figure out how to get some 0:16:13.480 --> 0:16:19.720 form of incentive to get early technologies applied. I'm I 0:16:19.840 --> 0:16:23.720 remain very optimistic. I do think our biggest problem is 0:16:24.120 --> 0:16:28.840 we've spent probably a quarter century discussing the problem and 0:16:28.920 --> 0:16:31.760 doing little about it and actually arguing whether there's a 0:16:31.800 --> 0:16:34.920 problem at all. So we've got about a quarter of 0:16:34.920 --> 0:16:38.320 a century of time to make up. So we've got 0:16:38.320 --> 0:16:41.560 a speed up, which means we need much more money 0:16:42.000 --> 0:16:45.800 going into growing the things that we know that will work, 0:16:46.520 --> 0:16:49.800 and that requires us to have the right incentives in place, 0:16:50.080 --> 0:16:51.720 such as a price for carbon. 0:16:52.000 --> 0:16:55.240 Okay, what are the right things that could work? 0:16:55.360 --> 0:16:58.480 Because we know that just telling people, you know, be 0:16:58.480 --> 0:17:01.840 better about throwing out fewer items, or you know, don't 0:17:01.880 --> 0:17:04.480 use plastic bottles, or some of these sort of lifestyle 0:17:04.560 --> 0:17:05.719 changes are not working. 0:17:05.960 --> 0:17:07.240 They are not resting with people. 0:17:07.320 --> 0:17:09.840 In fact, they are actually causing people to reject it. 0:17:10.080 --> 0:17:11.679 So what are the things that are actually working? 0:17:12.000 --> 0:17:14.680 So the very big thing, which which has to work, 0:17:14.800 --> 0:17:17.960 is not quite working yet is how do you how 0:17:18.000 --> 0:17:21.040 do you take carbon out of hydrocarbons? Because we're going 0:17:21.040 --> 0:17:24.920 to use hydrocarbons for a long time and so capturing 0:17:24.920 --> 0:17:28.720 carbon dioxide and storing it away in different ways, not 0:17:28.880 --> 0:17:31.720 just the old ways that people are thinking and look 0:17:31.800 --> 0:17:34.879 like big refineries, but there are more sophisticated ways I 0:17:34.880 --> 0:17:37.600 think being developed. That's the very big thing to crack. 0:17:37.680 --> 0:17:40.480 The second thing to crack is how do you actually 0:17:40.640 --> 0:17:45.720 use energy? And part of that is energy efficiency, part 0:17:45.720 --> 0:17:48.080 of it's the secular economy. You know what you do 0:17:48.119 --> 0:17:49.879 with old tires for example. 0:17:50.480 --> 0:17:51.960 You know, on a very. 0:17:51.800 --> 0:17:56.320 Big scale, it's doing big things, and then finally it's 0:17:56.800 --> 0:17:59.240 creating new energy. I was in India just a few 0:17:59.320 --> 0:18:03.080 days ago where I was seeing a huge rollout of 0:18:03.840 --> 0:18:07.760 you know, solar plants and wind plants up to five 0:18:07.840 --> 0:18:11.480 hundred gigawa a huge amount will be in place in 0:18:11.560 --> 0:18:16.080 twenty years time, and it's moving today, moving today, John. 0:18:15.840 --> 0:18:17.600 Do you think policy intervention works? 0:18:18.280 --> 0:18:22.439 It has to work. Energy is the whole energy scene 0:18:22.960 --> 0:18:26.880 experience is founded on good policy. You know, there's nothing 0:18:26.960 --> 0:18:31.160 natural about it. So the government has to both inspire 0:18:31.200 --> 0:18:37.240 and avoid the use of energy. So taxes are important, 0:18:37.720 --> 0:18:40.600 but the key is getting them stable and keeping them 0:18:40.640 --> 0:18:41.800 in place all time. 0:18:42.359 --> 0:18:43.800 In the end, it's you. 0:18:43.760 --> 0:18:46.640 Know, if we'd stop people putting carbon in the atmosphere, 0:18:46.840 --> 0:18:49.040 we have to charge them for doing it. And one 0:18:49.040 --> 0:18:54.440 way or another, the IRA or this stuff about carbon 0:18:54.760 --> 0:18:58.679