WEBVTT - Inflation Implications 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.160 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:47.400 the Bloomberg Terminal, and the Bloomberg Business App. Now, James 0:00:47.479 --> 0:00:51.160 Lord joins it, global Head of fx EM Strategy at 0:00:51.320 --> 0:00:54.240 Morgan Stanley. James, you got to rewrite to get the 0:00:54.360 --> 0:00:57.560 June thirtieth. You're going to do a midyear review. Where 0:00:57.640 --> 0:01:01.360 is the big figure play in four in exchange? If 0:01:01.400 --> 0:01:05.679 it's a blurb, if it's complex, there's macro this, macro that. 0:01:06.400 --> 0:01:09.920 Where is a place where I can actually speculate and 0:01:09.959 --> 0:01:11.759 make money on a currency pair? 0:01:14.040 --> 0:01:15.800 Hey, Tom, thanks very much for having me back on 0:01:15.800 --> 0:01:18.319 the show. I mean, our currency forecasts generally see a 0:01:18.319 --> 0:01:21.560 bit of dollar strength coming through, but probably the biggest 0:01:21.560 --> 0:01:24.240 movers that you would that you that were forecasting are 0:01:24.760 --> 0:01:27.959 things like being short Euro versus long commodity currencies and 0:01:28.000 --> 0:01:30.480 long risk currencies. I mean, the overall dollar environment that 0:01:30.480 --> 0:01:33.160 we're expecting to see is one of modest strength, but 0:01:33.400 --> 0:01:35.520 you kind of get a really split dollar where the 0:01:35.560 --> 0:01:38.120 dollars kind of outperforming versus some of the low yielders, 0:01:38.120 --> 0:01:41.560 so things like Swiss frank and European the euro, but 0:01:41.760 --> 0:01:44.840 really underperforming against some some of the risk currencies like 0:01:44.880 --> 0:01:48.600 Aussie dollar, South African rand, Turkish lira. I mean, these 0:01:48.680 --> 0:01:51.040 these kind of currencies are more risky ones, high yelders 0:01:51.120 --> 0:01:53.280 is where we expect to see the bigger moves. 0:01:53.360 --> 0:01:55.640 I mean, Paul, I know you were like, you know, 0:01:55.720 --> 0:01:59.760 you look at the vector of euro Chilean pace. Sure 0:02:00.040 --> 0:02:02.920 what you can do on the bloombern now e r Colp. 0:02:03.040 --> 0:02:04.840 I mean, James Lord has got a two on his 0:02:04.920 --> 0:02:07.240 left arm and the answer is you've had a nice 0:02:07.360 --> 0:02:09.600 move strong Chillon pace. 0:02:09.639 --> 0:02:11.520 So who didn't have that a beginning of the year. 0:02:11.760 --> 0:02:14.880 So let's James, let's just talk about the en that's 0:02:14.919 --> 0:02:15.480 been in the news. 0:02:15.480 --> 0:02:15.600 Here. 0:02:15.600 --> 0:02:17.840 We're pushing up close to one fifty six year one 0:02:17.960 --> 0:02:21.200 fifty five spots seventy three. What's going on with the end? 0:02:21.200 --> 0:02:22.400 How do you think this is going to play out? 0:02:22.400 --> 0:02:24.000 What's the Bank of Japan going to be doing here? 0:02:25.600 --> 0:02:28.200 Yeah, I mean we think dolly n's really driven by 0:02:28.360 --> 0:02:31.920 US rates. I mean clearly, clearly what happens with the 0:02:31.960 --> 0:02:35.240 BOJ is important. But if you if you look at 0:02:35.280 --> 0:02:38.840 it sort of statistically, like most of the majority of 0:02:38.880 --> 0:02:41.120 the move in dolly N is explained by by how 0:02:41.440 --> 0:02:44.079 by how the dollar rates behave And it's yeah, partly 0:02:44.160 --> 0:02:46.200 just simply because of the fact that they're clearly much 0:02:46.200 --> 0:02:49.600 more volatile at such a higher level of yield, and 0:02:49.880 --> 0:02:52.320 we're forecasting US rates to come down. I mean, Matt 0:02:52.320 --> 0:02:55.280 hornback net Dinger and team have you US tenure back 0:02:55.280 --> 0:02:57.040 down at four point one percent at the end of 0:02:57.040 --> 0:03:00.400 the year on the back of three rate cuts from FED, 0:03:00.639 --> 0:03:03.360 and that should support a lower dollar en. So I mean, 0:03:03.400 --> 0:03:06.480 it's difficult to buy it just because of the negative carry, 0:03:06.520 --> 0:03:08.680 But we see dollar en going back down to around 0:03:08.720 --> 0:03:10.520 one forty by the end of the year, which is 0:03:10.880 --> 0:03:12.519 it's a little bit, a little bit more than what 0:03:13.000 --> 0:03:15.239 the forwards are suggesting, but it's not it's not really 0:03:15.280 --> 0:03:18.200 a great trade considering that the carry you have to pay. 0:03:18.560 --> 0:03:21.639 So given your your interest rate outlook for the US 0:03:21.639 --> 0:03:24.960 Federal Reserve, I mean, I just can't think of a 0:03:25.000 --> 0:03:26.720 dollar bare case. I haven't been able to think of 0:03:26.720 --> 0:03:30.839 one for a long time exactly. So I mean, does 0:03:30.880 --> 0:03:32.919 a dollar maybe drift a little bit lower just on 0:03:32.960 --> 0:03:34.280 this rate environment? 0:03:35.800 --> 0:03:37.560 Yeah, I mean so if you if you take our 0:03:37.640 --> 0:03:40.960 US rate forecast just all else being equal, then and 0:03:41.000 --> 0:03:43.360 then it should suggest that the dollar comes down, comes 0:03:43.400 --> 0:03:45.560 down a bit. But the problem of that is that 0:03:45.600 --> 0:03:48.480 when we look at the yield differentials of the dollar 0:03:48.560 --> 0:03:50.760 versus on to say, on a d X y basis, 0:03:50.760 --> 0:03:53.880 that we're expecting to see bund yields fall by even 0:03:53.920 --> 0:03:56.119 more than what we're expecting to see treasure yields fall. 0:03:56.240 --> 0:03:58.600 So you know, if the US inflation comes down, it 0:03:58.640 --> 0:04:00.880 gives the Fed a bit more space to then you're 0:04:00.920 --> 0:04:04.040 going to see markets pricing even bigger easing cycles from 0:04:04.120 --> 0:04:05.720 from the rest of the world. And you know, we 0:04:05.720 --> 0:04:08.000 think the ECB is part of that. So actually yield 0:04:08.040 --> 0:04:12.080 differentials will move we think in the dollar's favor. We 0:04:12.160 --> 0:04:15.120 still have US growth outperforming the rest of the world. 0:04:15.680 --> 0:04:18.240 US stocks doing very well, there's a lot to like 0:04:18.279 --> 0:04:19.400 about the US dollar. 0:04:19.440 --> 0:04:21.800 I mean, and your latest report. I mean, they've got 0:04:21.880 --> 0:04:24.719 enough people in this room now side it's like the 0:04:24.760 --> 0:04:27.520 sideline of the New York Giants. You know, it's like amazing. 0:04:27.880 --> 0:04:29.520 I mean, all of a sudden, you haven't talked to 0:04:29.560 --> 0:04:32.159 Amy Gower in like ten years. All of a sudden 0:04:32.160 --> 0:04:34.840 you're talking to one of your commodity strategies. What are 0:04:34.880 --> 0:04:37.640 people like Amy Gower telling you? How are they assisting 0:04:37.720 --> 0:04:41.960 you in speculation and investment forward at the commodity world? 0:04:42.160 --> 0:04:43.800 How do you bounce off that right now? 0:04:43.920 --> 0:04:47.679 James Lord, Yeah, well, Amy's been very bullish on copper. 0:04:47.720 --> 0:04:50.640 She's she's had a great call on that, and you 0:04:50.640 --> 0:04:54.239 know it's clearly it's clearly helping. You know, your reference 0:04:54.360 --> 0:04:56.520 to your chilly that would have been a great trade. 0:04:56.600 --> 0:04:58.080 We think that is still a great trade. 0:04:58.880 --> 0:04:59.359 I mean it's not. 0:04:59.480 --> 0:05:02.599 I would say prices are not feeding through completely into 0:05:02.760 --> 0:05:06.799 intercurrency markets these days, partly because this is a large 0:05:06.839 --> 0:05:09.480 part of this is a supply story. You've had my 0:05:09.640 --> 0:05:11.760 enclosure is a lot of difficulty getting copper out of 0:05:11.800 --> 0:05:14.720 the ground, and that's really boosted the price, but it 0:05:15.200 --> 0:05:19.600 doesn't have the same impact on metal on currencies that 0:05:19.640 --> 0:05:22.200 really depend on the revenue of that because the volumes 0:05:22.200 --> 0:05:25.159 are going down, and it's not necessarily an indicator of 0:05:25.160 --> 0:05:27.440 global growth if the price is going up because of 0:05:27.480 --> 0:05:31.240 supply reasons. So generally you see that across all commodities. Actually, 0:05:31.240 --> 0:05:34.760 if the price is if the price is changing of supply, 0:05:35.240 --> 0:05:38.520 it doesn't have the same impact on modity currencies as 0:05:38.560 --> 0:05:39.679 you would typically expect. 0:05:39.720 --> 0:05:42.440 But the es this is important. The heritage of Morgan 0:05:42.520 --> 0:05:46.200 Stanley and commodities goes back to Rushier Charman. Now at 0:05:46.279 --> 0:05:50.840 Rockefeller is Morgan Stanley saying there's a legit commodity cycle 0:05:50.960 --> 0:05:53.360 now or is a set of one offs that put 0:05:53.440 --> 0:05:54.599 orange juice to the moon. 0:05:56.920 --> 0:06:00.480 I mean we like metals. I mean copper and other 0:06:00.520 --> 0:06:02.719 industrial metals are part of it. Gold prices as well. 0:06:02.760 --> 0:06:06.880 I mean we do see some more upside in those names. 0:06:07.120 --> 0:06:09.640 Not a ton in in energy and oil, but I 0:06:09.640 --> 0:06:11.680 mean I think it's more interesting to look at it 0:06:11.720 --> 0:06:14.840 on the metal space, given given the energy transition and 0:06:15.000 --> 0:06:17.599 and and and and some some of the supply constraints 0:06:17.640 --> 0:06:20.120 that you're seeing there, and some of some of that 0:06:20.120 --> 0:06:22.320 feeds through into gold in terms of how how the 0:06:22.320 --> 0:06:25.360 fiscal is evolving in the US. It's always concerns about that. 0:06:26.160 --> 0:06:28.200 And if if the dollar goes down then tip then 0:06:28.240 --> 0:06:32.280 typically you would see some some gold price. If US 0:06:32.360 --> 0:06:34.480 rates come down, then typically you would see gold prices 0:06:34.520 --> 0:06:36.760 being supported. So I wouldn't say it's like across the 0:06:36.760 --> 0:06:39.400 board in commodities, but yeah, a little bit more selective 0:06:39.400 --> 0:06:40.600 and biased towards. 0:06:40.400 --> 0:06:42.000 Metals, James. 0:06:42.120 --> 0:06:44.560 In the emerging markets here. We just had Damian sasaar 0:06:44.640 --> 0:06:47.240 On from Bloomberg Intelligence giving us his thoughts here. Yeah, 0:06:47.480 --> 0:06:50.640 where do you see the opportunities here, James, We're I mean, 0:06:50.680 --> 0:06:52.560 there's just so much, so many cross currents here. 0:06:54.160 --> 0:06:56.600 Yeah, I mean we we we like we like Turkish lera, right, 0:06:56.600 --> 0:06:58.919 I mean in this time zone, we we think we 0:06:58.960 --> 0:07:02.320 think Turkeyshilerea is is a good story. I mean, it's 0:07:02.680 --> 0:07:06.359 it's difficult to having been through many cycles of the 0:07:06.360 --> 0:07:08.840 Turkish leyer over the past ten years, no cycles are 0:07:08.839 --> 0:07:12.080 typically being bearished. It's quite hard to sort of push 0:07:12.120 --> 0:07:15.400 along Turkish layer review with a lot of conviction. But 0:07:15.440 --> 0:07:17.880 we do see that, you know, we do believe that 0:07:17.920 --> 0:07:20.120 the changes that are ongoing in that country in terms 0:07:20.160 --> 0:07:23.480 of policy are going to be sustained for for some time, 0:07:23.640 --> 0:07:26.920 so we think Turkish leaber will outperform the forwards. You 0:07:26.920 --> 0:07:29.480 can pick up some carry. We think that's an improving story. 0:07:30.720 --> 0:07:32.400 We've got to leave it just because of the time. 0:07:32.520 --> 0:07:35.440 James Lord, thank you so much greatly. I appreciate it. 0:07:35.440 --> 0:07:38.240 With Morgan Stanley this morning driving all of their foreign exchange, 0:07:48.360 --> 0:07:51.640 I've really been anticipating this conversation. Joining us out from 0:07:51.640 --> 0:07:55.679 Wells Fargo with a really really bright William and Mary 0:07:55.760 --> 0:08:00.920 take on asset allocation strategies. Tracy McMillian, she could join us. 0:08:00.920 --> 0:08:04.040 Good morning, Winston Salem, North Carolina. 0:08:03.680 --> 0:08:04.200 Writing town. 0:08:04.520 --> 0:08:07.520 Tracy. You know, I look at your research note and 0:08:07.520 --> 0:08:12.560 it's just completely dead on about almost the numbness I 0:08:12.600 --> 0:08:17.000 felt this weekend about this great bull market color the 0:08:17.400 --> 0:08:21.880 exuberance for a stock market that you see at Wells Fargo. 0:08:24.440 --> 0:08:28.280 Yes, thanks for having me on this morning, Tom. I agree. 0:08:28.400 --> 0:08:31.119 We've seen a lot of exuberance in the market since 0:08:31.240 --> 0:08:36.119 last October, and a lot of that has been fueled 0:08:36.240 --> 0:08:41.720 by better earnings. We saw an earnings recession turn to 0:08:42.120 --> 0:08:46.520 in earnings recovery, and so that's fueled some of that exuberants. 0:08:46.679 --> 0:08:49.480 But there's also just a lot of momentum in this 0:08:49.640 --> 0:08:55.080 market right now, and that also is fueling turn that 0:08:55.080 --> 0:08:55.680 we're seeing. 0:08:56.559 --> 0:08:58.600 I mean, what's really important to me is like the 0:08:58.600 --> 0:09:00.640 cab driver taken the tour, but they get off the 0:09:00.679 --> 0:09:03.520 plane and when you know, they get off the plane, Paul, 0:09:03.559 --> 0:09:05.520 they've got to go to Wake Forest. Yeah, you know, 0:09:05.679 --> 0:09:09.240 is the cab driver or the uber driver in your burg? 0:09:10.000 --> 0:09:12.200 Are they talking about the stock market? 0:09:14.280 --> 0:09:18.439 Probably so, and that's very reminiscent of the late nineteen nineties, 0:09:18.600 --> 0:09:19.040 isn't it. 0:09:20.080 --> 0:09:20.280 So. 0:09:21.040 --> 0:09:24.760 The difference though, is that this time we are seeing 0:09:25.080 --> 0:09:29.800 these rises in the market supported by higher earnings and 0:09:30.480 --> 0:09:34.520 a lot of a lot of policy has contributed to 0:09:34.720 --> 0:09:38.480 these higher stock market prices this time. So there's some 0:09:38.640 --> 0:09:45.040 fundamental justification behind some of the rises that we've seen. However, 0:09:45.080 --> 0:09:47.800 there are pockets of the market that are probably getting 0:09:47.840 --> 0:09:51.600 a little overpriced. You know, communication services has done really 0:09:51.640 --> 0:09:55.440 well this year, information technology has done really well. Those 0:09:55.440 --> 0:09:59.840 are areas where we'd be trimming and putting that pat 0:10:00.240 --> 0:10:04.160 into short term fixed income and just waiting for a. 0:10:04.120 --> 0:10:06.960 Better operation, for that big correction to come in, Paul. 0:10:07.120 --> 0:10:09.559 Just to be clear, wells Fargo's got to publish twenty 0:10:09.640 --> 0:10:13.440 twenty five of SPX fifty seven hundred. These are not 0:10:14.000 --> 0:10:16.480 they're in the game. Wells Fargo is saying you got 0:10:16.520 --> 0:10:17.240 to participate. 0:10:17.600 --> 0:10:19.679 So, Tracy, if we do want to go into some 0:10:19.760 --> 0:10:21.960 fixed income lock and some yield here, do I stick 0:10:21.960 --> 0:10:24.560 with the treasury market and I get a four point 0:10:24.640 --> 0:10:26.960 eight percent for a two year treasury? Or do I 0:10:27.320 --> 0:10:29.160 maybe take some credit risk? How are you guys thinking 0:10:29.200 --> 0:10:29.600 about that? 0:10:31.040 --> 0:10:35.240 Yeah, so we're saying that in the shorter term or 0:10:35.280 --> 0:10:39.520 that or that cash, we would be holding short term 0:10:39.559 --> 0:10:42.920 fixed income, and the treasury market's a good place to 0:10:43.000 --> 0:10:46.600 do that with very little interest rate or very low 0:10:46.640 --> 0:10:49.400 credit risk, very little interest rate risk as well. 0:10:50.040 --> 0:10:50.920 And then we. 0:10:50.880 --> 0:10:56.160 Would supplement that with high grade corporate credit, and we 0:10:56.960 --> 0:11:01.720 would be more concerned about investing in high yield fixed 0:11:01.720 --> 0:11:04.959 income at this point, especially since spreads have come in 0:11:05.080 --> 0:11:09.080 so much. We just don't see the risk reward value 0:11:09.240 --> 0:11:13.480 there that we do in corporate credits that are our 0:11:13.600 --> 0:11:14.600 higher quality. 0:11:15.400 --> 0:11:17.600 So, Tracy, back to the equity side here, I see 0:11:17.640 --> 0:11:20.600 a lot of spending coming out of Washington, DC, for 0:11:20.800 --> 0:11:24.400 better or worse in the Investment Reduction Act and so 0:11:24.440 --> 0:11:27.600 on and so forth. The CHIPS Act does that does 0:11:27.640 --> 0:11:31.040 that translate into maybe how I should invest it. I 0:11:31.080 --> 0:11:33.400 look at some of the industries that might do well there, 0:11:33.440 --> 0:11:34.960 and so how are you guys thinking about it? 0:11:36.120 --> 0:11:36.440 Sure? 0:11:36.559 --> 0:11:43.480 Yes, absolutely, we're looking at corporation, our corporations sectors that 0:11:43.520 --> 0:11:47.679 would benefit from both the Chips Act and from the 0:11:47.679 --> 0:11:51.080 Infrastructure Act. So we like companies that are in the 0:11:51.120 --> 0:11:56.600 material space, the industrial space, energy space, and we also 0:11:56.760 --> 0:12:00.840 like healthcare. Not as much of a beneficiary of those 0:12:00.960 --> 0:12:05.440 apps as the others, but also an area of the 0:12:05.440 --> 0:12:07.160 market where we see some value. 0:12:07.920 --> 0:12:10.520 What does Jay Brison say then about international I mean, 0:12:10.559 --> 0:12:13.520 bring it over to asset allocation. I've known wells far 0:12:13.679 --> 0:12:16.679 going to be hugely US centric. Has that changed? 0:12:18.600 --> 0:12:22.480 That really has not changed. We still have a longer 0:12:22.600 --> 0:12:27.559 term overweight to US relative to the global market capitalization, 0:12:28.160 --> 0:12:30.800 and right now we also have a shorter term were 0:12:30.960 --> 0:12:34.720 tactical positioning where we're overweight US as well. And again 0:12:35.120 --> 0:12:39.120 that's that quality theme upon quality US large caps over 0:12:39.240 --> 0:12:43.280 small caps and develop markets over emerging markets. 0:12:43.320 --> 0:12:47.600 One final question, I mean, if we go out one year, 0:12:47.840 --> 0:12:50.600 you're going to stagger into May June of twenty twenty five. 0:12:50.600 --> 0:12:54.079 I can't believe I'm saying that does sixty forty work 0:12:54.360 --> 0:12:57.600 Tracy mcmillion, Yes. 0:12:57.640 --> 0:13:01.199 Sixty forty works out a year. In fact, we do 0:13:01.280 --> 0:13:04.280 see higher equity markets, as you pointed out in twenty 0:13:04.400 --> 0:13:08.520 twenty five, and we also think that if these higher rates, 0:13:08.760 --> 0:13:13.480 bonds are offering very attractive opportunities for investors. So we 0:13:13.559 --> 0:13:17.280 do see sixty forty working for relations starting to be 0:13:17.920 --> 0:13:21.040 less positive than they've been over the past couple of years, 0:13:21.400 --> 0:13:24.200 and that will have a diversification impact as well. 0:13:24.600 --> 0:13:33.079 Tracy McMillian, thank you so much. With well spargo George Saravellas, 0:13:33.120 --> 0:13:38.240 he's Deutsche Bank writing brilliant, brilliant notes. I just can't 0:13:38.280 --> 0:13:42.320 say enough about what he writes on foreign exchange as well, 0:13:42.640 --> 0:13:45.840 and we're going to bring in George Sarah Wilson. We'll 0:13:46.240 --> 0:13:50.160 we'll do the Bloomberg Business Flash after that. George, I 0:13:50.240 --> 0:13:53.720 look at the theme into the Summer and to me, 0:13:53.800 --> 0:13:58.520 it's a jumble. What is your coherent theme into the summer? 0:14:00.320 --> 0:14:03.280 Good to hear your voice, Tom, good morning. So our 0:14:03.360 --> 0:14:08.640 theme is low vall. Persisting in an environment of low 0:14:08.760 --> 0:14:14.320 volatility carry tends to do quite well, so in effects 0:14:14.360 --> 0:14:17.120 you should see more of the same. But I think 0:14:17.160 --> 0:14:20.480 a crucial point is the dollar is a high yielding currency, 0:14:20.720 --> 0:14:22.840 and if you think about the start of the year, 0:14:23.320 --> 0:14:26.440 so many people made the argument that if equities go up, 0:14:26.760 --> 0:14:30.240 the dollar should weaken, and the dollar strong despite equities 0:14:30.240 --> 0:14:32.760 at record highs, and that's because it's part of the 0:14:32.800 --> 0:14:35.960 carry trade. So we're positive on the dollar and we're 0:14:35.960 --> 0:14:37.320 positive on carry as well. 0:14:37.760 --> 0:14:42.760 Are the correlations in place across equities, bounds, currencies and 0:14:42.840 --> 0:14:46.480 commodities in the moon shot and commodities so much? Are 0:14:46.520 --> 0:14:51.480 those correlations normal right now into the summer? George saravellis. 0:14:52.480 --> 0:14:54.840 Well, I would say that' very different from last year. 0:14:55.040 --> 0:14:57.440 And this is something we've been writing about for a 0:14:57.480 --> 0:15:00.280 while because if you look at the last few years, 0:15:00.880 --> 0:15:05.240 the world was dominated by this negative supply shop, so 0:15:05.560 --> 0:15:09.200 you had low growth, high inflation. That was bad for 0:15:09.280 --> 0:15:13.120 equities and it was bad for bonds as well. But 0:15:13.240 --> 0:15:15.240 now we're in a more normal world, so to speak, 0:15:15.920 --> 0:15:19.000 and it's all about demand. Do you have demand holding 0:15:19.000 --> 0:15:22.320 in and therefore you can have yields still high, which 0:15:22.360 --> 0:15:25.320 you do, but equity strong as well because the demand 0:15:25.320 --> 0:15:28.440 side of the economy is proving very resilient to these 0:15:28.520 --> 0:15:30.920 high levels of central bank rates. So I would say 0:15:30.920 --> 0:15:33.640 the correlation has gone back to being a bit more 0:15:33.680 --> 0:15:36.440 normal after being a lot more abnormal over the last 0:15:36.480 --> 0:15:37.240 few years. 0:15:37.800 --> 0:15:40.800 So George, give us your thoughts, your perspective here with 0:15:40.840 --> 0:15:43.560 a little bit of hindsight, what's happening with the Japanese end, 0:15:43.600 --> 0:15:45.720 what has happened over the last several weeks, and kind 0:15:45.760 --> 0:15:46.560 of what's your view here. 0:15:48.120 --> 0:15:51.040 It's probably the most interesting currency in develop markets at 0:15:51.040 --> 0:15:54.240 the moment. I think what's happening is simple that the 0:15:54.280 --> 0:15:58.960 Bank of Japan is just too slow. It's very duvish, 0:15:59.160 --> 0:16:01.800 which means if you look at real rates in Japan 0:16:02.040 --> 0:16:05.680 their minus two percent. So everyone else, even the Swiss, 0:16:06.520 --> 0:16:09.320 have positive rates with a one handle or above, and 0:16:09.520 --> 0:16:12.960 Japan still stands out. So even though policy is normalizing, 0:16:13.280 --> 0:16:16.680 it's normalizing from such a low base that it doesn't 0:16:16.760 --> 0:16:21.320 do anything to materially erode that carry disadvantage which the 0:16:21.400 --> 0:16:21.960 yen has. 0:16:22.600 --> 0:16:24.720 So we think as long as the Bank of Japan 0:16:24.800 --> 0:16:29.240 goes very slow, which they are, the yen will stay weak. 0:16:29.680 --> 0:16:32.280 And they're going slow because they still don't believe inflation 0:16:32.360 --> 0:16:32.960 is at two. 0:16:32.760 --> 0:16:36.440 Percent, right exactly. So if we think about the US dollar, 0:16:36.520 --> 0:16:40.120 then in that context, I mean, is there any reason 0:16:40.480 --> 0:16:44.560 to think this dollar will not remain strong here versus 0:16:44.640 --> 0:16:46.480 pretty much everything else else out there. 0:16:47.480 --> 0:16:49.680 Well, I think there are two ways you can get 0:16:49.680 --> 0:16:52.080 a week dollar. The one is if you believe in 0:16:52.080 --> 0:16:55.920 a US recession and therefore a sharp fed cutting cycle, 0:16:56.480 --> 0:16:59.800 which many people did six months ago. But we have 0:17:00.120 --> 0:17:04.320 believed in that scenario for a while. So from my perspective, 0:17:04.600 --> 0:17:07.920 even if you get effect cutting cycle, it's not going 0:17:07.960 --> 0:17:08.479 to be steeped. 0:17:08.640 --> 0:17:10.320 The dollar is still going to be a high yielder. 0:17:11.160 --> 0:17:13.919 So that's one scenario to get a week dollar. The 0:17:13.960 --> 0:17:16.000 other one is if you get a week dollar policy 0:17:16.920 --> 0:17:18.000 after the US election. 0:17:18.680 --> 0:17:21.000 And what I mean by that is not. 0:17:20.880 --> 0:17:25.119 Just statements on the dollar, but outright policy to restrict capital. 0:17:24.760 --> 0:17:27.200 Inflows for example foreigners. 0:17:27.560 --> 0:17:29.800 We don't think that's going to happen either, instead of 0:17:29.920 --> 0:17:32.160 think we're going to get restrictive trade policy. 0:17:32.920 --> 0:17:35.720 So we're in the dollar stronger for longer. 0:17:35.760 --> 0:17:39.960 Camp George, fold your expertise on foreign exchange into gold 0:17:40.000 --> 0:17:42.000 to the moon, and I'm going to state it is 0:17:42.040 --> 0:17:46.000 a basic idea at the margins central banks are buying gold. 0:17:46.440 --> 0:17:50.720 If they're buying gold, are they owning less dollars? Give 0:17:50.800 --> 0:17:51.960 us a paragraph on that. 0:17:53.640 --> 0:17:56.679 So many people, I think, look at the relationship between 0:17:56.960 --> 0:18:00.240 gold and the dollar and say, well, gold is going 0:18:00.359 --> 0:18:03.600 up because there's flight from the dollar. People are worried 0:18:03.600 --> 0:18:09.720 about US fiscal sustainability, and therefore we should more generally. 0:18:09.400 --> 0:18:11.520 Be worried about the dollar. I don't think that's the 0:18:11.560 --> 0:18:14.320 case at all. If you look at what's going on this. 0:18:14.280 --> 0:18:16.840 Year, there's two things that are doing very well, gold 0:18:16.920 --> 0:18:19.800 and the dollar at the same time. So there's someone 0:18:20.280 --> 0:18:23.240 in the market there that likes both the dollar and gold, 0:18:23.400 --> 0:18:28.240 and I would argue this is the outcome of essentially 0:18:28.320 --> 0:18:31.960 decoupling in deglobalization, where if you look at China, for example, 0:18:32.160 --> 0:18:35.000 this is very public data. You have accumulation of gold 0:18:35.040 --> 0:18:39.000 reserves on the official sector side, but on the private 0:18:39.040 --> 0:18:41.679 sector side, the private sector wants to go into dollars, 0:18:41.880 --> 0:18:45.399 so you have capital flight from China away from the 0:18:45.400 --> 0:18:47.840 local currency, which is why the UN is so weak, 0:18:48.080 --> 0:18:50.800 and it's going both dollars and gold at the same time. 0:18:51.160 --> 0:18:53.320 What's your euro call, please? I mean, we've got some 0:18:53.400 --> 0:18:56.840 people talking you're a weakness to parody. Where are you 0:18:56.920 --> 0:18:57.119 on that? 0:18:58.880 --> 0:19:01.880 So we have the URO effectively doing a range that's 0:19:01.960 --> 0:19:03.200 quite similar to last year. 0:19:03.920 --> 0:19:04.920 So if you think about. 0:19:04.760 --> 0:19:07.920 Last year it was around one of five to one thirteen. 0:19:08.240 --> 0:19:10.480 I'd say the risks to that range the biased lower, 0:19:11.160 --> 0:19:13.600 but basically one to one ten for me is a 0:19:13.920 --> 0:19:15.760 range that's quite realistic for this year. 0:19:16.119 --> 0:19:18.119 All right, Tom and I are thinking about coming over 0:19:18.160 --> 0:19:21.120 to London. We've got the suite book at the NED here. 0:19:21.640 --> 0:19:24.840 How concerned should we be about this? The British pound here? 0:19:24.840 --> 0:19:25.600 What's you call there? 0:19:27.240 --> 0:19:28.480 I wouldn't be that concerned. 0:19:28.560 --> 0:19:31.120 The pound tends to follow the dollar in general, so 0:19:31.240 --> 0:19:33.920 if the dollars from against the euro, it's very likely 0:19:34.000 --> 0:19:36.840 it stays cheap against it stays expensive against the. 0:19:36.760 --> 0:19:37.440 Pound as well. 0:19:37.840 --> 0:19:40.359 You have to, though, think about one thing, which is 0:19:40.359 --> 0:19:43.640 the UK election coming up. It shouldn't lead to any 0:19:43.680 --> 0:19:48.280 major change in policy unless you get a tail supprise outcome, 0:19:48.320 --> 0:19:52.320 and I stress this is a tail outcome of potentially 0:19:52.760 --> 0:19:55.840 the second party, because everyone expects Labor to be the first. 0:19:56.000 --> 0:19:59.160 If the second party that wins is the Liberal Democrats 0:19:59.200 --> 0:20:02.040 as opposed to the concern relatives again distant but not 0:20:02.160 --> 0:20:05.879 a non zero probability, then you could have the market 0:20:05.920 --> 0:20:09.040 thinking of a much more pro European stance that could 0:20:09.080 --> 0:20:12.000 help the pound. So it's a tail scenario, but it's 0:20:12.040 --> 0:20:14.359 the first time where it's imported to tail rather than 0:20:14.359 --> 0:20:15.240 a negative one. 0:20:15.359 --> 0:20:17.920 Georg Serave Ellos, thank you so much. With Deuigia bank 0:20:18.000 --> 0:20:30.280 here you j look at the front pages. She was 0:20:30.320 --> 0:20:33.240 looking at him through halftime at the NIXT yesterday. Lisa 0:20:33.280 --> 0:20:34.119 matayl what do you have? 0:20:34.320 --> 0:20:36.640 All right, we're starting with the sports kind of center 0:20:36.720 --> 0:20:39.119 thing since we were talking about the next one. Not okay, 0:20:39.600 --> 0:20:42.400 Axios is actually reporting Amazon nearing a deal that would 0:20:42.400 --> 0:20:45.439 make its streaming service Prime one of the partners of 0:20:45.640 --> 0:20:47.679 the NBA, one of three partners of the NBA. So 0:20:47.680 --> 0:20:51.200 it's going to add a misk of regular season playoff games, Suprime. 0:20:51.359 --> 0:20:54.479 I mean Amazon has been pushing though this streaming. You know, 0:20:54.560 --> 0:20:57.320 the NFL's Thursday Night Football. They extended a deal with 0:20:57.359 --> 0:21:00.800 the WNBA for two more seasons. NASCAR is coming. 0:21:00.560 --> 0:21:03.120 To I'm so glad you brought this up because Paul 0:21:03.119 --> 0:21:05.600 I thought of you this weekend. It's not going to 0:21:05.640 --> 0:21:08.680 be like a gradual thing. The streamers are just going. 0:21:08.640 --> 0:21:12.520 To say now when when these deals come up for renewal, Tom, 0:21:12.640 --> 0:21:16.200 I think the expectation is on all sides that these 0:21:16.240 --> 0:21:18.840 big tech companies to streamers will be there Thursday night. 0:21:18.920 --> 0:21:20.679 Yankee games for the past couple of seasons have been 0:21:20.680 --> 0:21:22.439 on there, and you know the old Yankee fans up 0:21:22.480 --> 0:21:25.720 in the Bronx, they're calling up sports talk radio saying, 0:21:25.760 --> 0:21:26.760