WEBVTT - Surveillance: Market Sell-Off with Weinberg 0:00:00.080 --> 0:00:13.800 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jaily. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.840 Bloomberg dot Com, and of course on the Bloomberg Carl 0:00:27.840 --> 0:00:32.120 Weinberg joins us now to reframe the growth debate this morning. Carl, 0:00:33.240 --> 0:00:36.280 do you do you take the entire high frequency economics 0:00:36.360 --> 0:00:39.360 view and ratchett it down? Where are you now for 0:00:39.479 --> 0:00:42.959 global growth? In US growth? Well? US growth, We think 0:00:42.960 --> 0:00:45.880 the U. S economy is doing well enough and domestic 0:00:45.920 --> 0:00:48.920 demand to outweigh the slow down in world trade, the 0:00:48.960 --> 0:00:52.280 contraction of world trade that we're actually seeing some numbers. Well, 0:00:52.320 --> 0:00:54.840 we're talking about world trade being down about half a 0:00:54.880 --> 0:00:58.400 percent year over year world global exports and that's only 0:00:58.440 --> 0:01:00.960 happened five times before in the last fifty years. So 0:01:01.000 --> 0:01:04.520 it's a notable event. US GDP growth around two point 0:01:04.560 --> 0:01:07.959 to two point three percent, largely driven by domestic demand 0:01:08.000 --> 0:01:11.399 with exports being weak. Europe dead flat right now, but 0:01:11.480 --> 0:01:14.080 on the decelerating what's your global number? I was stunned 0:01:14.080 --> 0:01:16.600 to Davos how people are some of them are framing 0:01:16.680 --> 0:01:21.760 under three percent global real economic growth, folks, that is unusual, 0:01:21.840 --> 0:01:24.400 to say the least. Yeah, the the I m F 0:01:24.520 --> 0:01:27.120 has I think two point nine, and that's a big markdown, 0:01:27.240 --> 0:01:29.160 but they have a boom going right back up in 0:01:29.240 --> 0:01:33.520 the next forecast period in right back up to three 0:01:33.560 --> 0:01:35.600 point three three point four percent, which is still a 0:01:35.640 --> 0:01:39.160 low number, but not as terrifying as two point nine. 0:01:39.440 --> 0:01:41.480 And of course what I say is when I every 0:01:41.520 --> 0:01:43.440 time I read an I m F forecast for an 0:01:43.440 --> 0:01:45.959 economic recovery, I say to myself, you know, on a 0:01:46.000 --> 0:01:48.520 basis of what you know, what's going to drive the 0:01:48.560 --> 0:01:51.280 world economy back? And it's not going to be monetary policy, 0:01:51.280 --> 0:01:53.320 it's not going to be fiscal policy, So I guess 0:01:53.320 --> 0:01:55.480 it's just going to be animal spirits. And of course 0:01:55.560 --> 0:01:58.600 missing from Davos was any explanation at all for the 0:01:58.640 --> 0:02:01.840 decline in world trade. None. So if you can't tell 0:02:01.880 --> 0:02:04.000 me why it's happening, and I can't tell you why 0:02:04.040 --> 0:02:06.040 it's happening, how can you tell me that it's over? 0:02:06.280 --> 0:02:08.840 So I'm on the gloomy side tom for the world. Well, 0:02:08.880 --> 0:02:11.240 let's talk about how frati the recovery actually has. Then, 0:02:11.320 --> 0:02:13.280 column whether something like what we see at the moment. 0:02:13.280 --> 0:02:16.880 Plank in China can really knock us off course. Well, 0:02:16.919 --> 0:02:18.880 if it turns into a big thing, it could knock 0:02:18.960 --> 0:02:21.480 us off course. But when I listened to to Lisa 0:02:21.560 --> 0:02:23.400 run down her argument, I have to say to her, 0:02:23.440 --> 0:02:25.440 you know, you know, I don't know you. I don't 0:02:25.440 --> 0:02:28.680 know anything about this disease. Nobody does. Nobody knows the 0:02:28.720 --> 0:02:30.800 extent to it, nobody knows how far it's going to go. 0:02:31.120 --> 0:02:34.560 So we can't happen if it got to be really serious. 0:02:34.639 --> 0:02:36.840 All right, Or let's look at the changes in uh 0:02:36.919 --> 0:02:39.919 and that the government has introduced. Okay, so they've extended 0:02:40.000 --> 0:02:43.400 the holiday period now to February second, so they've shut 0:02:43.440 --> 0:02:46.360 down the friday after a ten day holiday break where 0:02:46.480 --> 0:02:48.560 very few people were going to come back to work anyhow, 0:02:48.600 --> 0:02:50.680 and where a lot of firms weren't going to reopen anyhow, 0:02:50.800 --> 0:02:52.880 and then a weekend, so we really don't have a 0:02:52.960 --> 0:02:55.440 big dent to production. And of course, what we've learned 0:02:55.440 --> 0:02:57.640 in the past is when we have disasters and things 0:02:57.680 --> 0:03:00.639 like this, not only does the economy snap back quickly 0:03:00.639 --> 0:03:03.400 in the subsequent quarters, but the loss of output is 0:03:03.480 --> 0:03:05.800 less than you expect because a lot of the economy 0:03:06.080 --> 0:03:09.600 continues to to to act, to be active even though 0:03:09.680 --> 0:03:12.560 people are at work. We make utilities, we buy food, 0:03:12.720 --> 0:03:14.800 you know, the trains still run, and so forth. In 0:03:14.800 --> 0:03:16.760 this case, the trains may not run, but the point 0:03:16.840 --> 0:03:19.320 being that the hit may be smaller than the market 0:03:19.400 --> 0:03:22.840 is currently pricing in. I say maybe, because maybe tomorrow 0:03:22.840 --> 0:03:25.080 will have some serious medicine that says, this is the 0:03:25.120 --> 0:03:29.119 scariest thing since what were you talking about before tom 0:03:29.120 --> 0:03:35.000 flu epidemic. Maybe we'll get something, but for the moment, 0:03:35.040 --> 0:03:36.920 we just don't know the extent of it. So I 0:03:37.040 --> 0:03:39.680 like Lisa's hypothesis that says that people were ready to 0:03:39.680 --> 0:03:42.800 take profits anyhow this catalyzes it. But I can't make 0:03:42.840 --> 0:03:45.160 myself jump into the camp that says this is the 0:03:45.240 --> 0:03:47.680 end of world trade. Now China gets locked down for 0:03:47.720 --> 0:03:50.240 a month, that's a different story. That's a big hit 0:03:50.280 --> 0:03:52.720 to the to anyone's sitting around this table saying this 0:03:52.800 --> 0:03:54.240 is the end of world trade. I think you, folks, 0:03:54.280 --> 0:03:56.240 is going the right thing. No one around this table 0:03:56.400 --> 0:03:58.240 is going to pretend to be a doctor over the 0:03:58.240 --> 0:04:00.520 next several months or for however long this place out. 0:04:00.760 --> 0:04:03.640 What you focus on is the potential disruption to cities 0:04:03.680 --> 0:04:06.680 and the measures that the Chinese will take to stop 0:04:06.720 --> 0:04:08.800 this epidemic from spreading, and what we see so far 0:04:09.120 --> 0:04:12.760 a major cities effectively shutting down, banning travel. We see 0:04:12.760 --> 0:04:15.240 holidays being extended, and she pointed out quite rightly, it's 0:04:15.240 --> 0:04:18.240 the traditional time of the year. Whether that happens anywhere, 0:04:18.240 --> 0:04:20.479 it might just go on for a little bit longer. 0:04:20.839 --> 0:04:23.800 Walk us through our audience what they should be focused 0:04:23.800 --> 0:04:27.000 on in the coming weeks. Not pretending to be a doctor, 0:04:27.279 --> 0:04:29.080 but looking at the economics of all of this. So 0:04:29.160 --> 0:04:31.120 let's be an economy. So Wuhan is a city of 0:04:31.200 --> 0:04:33.960 eleven million people. It's bigger than New York. It's bigger 0:04:33.960 --> 0:04:36.359 than London, it's bigger than Paris, it's bigger than pretty 0:04:36.440 --> 0:04:38.880 much any other city except for others in China. But 0:04:39.000 --> 0:04:41.679 in a country of one point for a billion people, 0:04:42.040 --> 0:04:45.840 all right, it is a piece of a much larger puzzle, right, 0:04:45.960 --> 0:04:48.200 Shanghai is a bigger deal. But they're not shutting down, 0:04:48.240 --> 0:04:51.120 although there are sporadic reports of some companies are not 0:04:51.279 --> 0:04:54.279 coming back to work. So with Wuhan by itself in Hubei, 0:04:54.360 --> 0:04:57.200 which is sixty million people, roughly the population of France, 0:04:57.400 --> 0:05:00.120 still within a one point four billion person econ me, 0:05:00.440 --> 0:05:02.960 it will make a dent. But will it derail the 0:05:03.000 --> 0:05:06.040 economy and throw it into a recession. I don't think so. 0:05:06.360 --> 0:05:09.880 In two thousand three, the stars outbreak caused the estimated 0:05:10.120 --> 0:05:13.960 decline in the GDP of China about one percent in 0:05:14.000 --> 0:05:16.719 the one quarter. In one quarter, one percent to cline 0:05:16.720 --> 0:05:18.880 in GDP, and then it got back the next quarter. 0:05:18.880 --> 0:05:20.760 If you look at the four quarters from the fourth 0:05:20.800 --> 0:05:23.440 quarter of two thousand into the third quarter of two 0:05:23.440 --> 0:05:27.120 thousand and three, there's no discernible deviation of the pattern 0:05:27.160 --> 0:05:30.119 of GDP from what the season will suggest. To be clear, 0:05:30.279 --> 0:05:33.280 eight hundred people died. More than that, it was much 0:05:33.320 --> 0:05:36.560 more virulent than what we are currently experiencing. Of course, 0:05:36.600 --> 0:05:38.800 we don't know how this is going to involve. If 0:05:38.839 --> 0:05:41.440 it transpires in the same way, do you think that 0:05:41.480 --> 0:05:44.960 it could materially throw the global economic recovery? Of course, 0:05:45.240 --> 0:05:47.440 I'll just be you know, very crass about it. Eight 0:05:47.560 --> 0:05:49.960 hundred deaths, all right, is not going to throw the 0:05:50.000 --> 0:05:52.680 world economy off course, all right. It's it's a tragedy 0:05:52.720 --> 0:05:55.240 for the people involved. But at the end of the day, 0:05:55.240 --> 0:05:57.000 and I'm not a doctor, I don't play one onto 0:05:57.080 --> 0:06:00.880 v but you look like it's not how many people die, 0:06:00.880 --> 0:06:03.480 it's the measures the Chinese take to stop people from 0:06:03.560 --> 0:06:08.200 dying and shutting down Wuhan is an exceptional and it 0:06:08.240 --> 0:06:11.800 sounds brutal in the economist perspective. That's what the focus is, 0:06:12.000 --> 0:06:15.400 right and my focus is that Juhan is a big city, 0:06:15.440 --> 0:06:17.920 but in the scope of all of China and all 0:06:17.960 --> 0:06:20.200 of the world, I don't think it's enough to throw 0:06:20.200 --> 0:06:22.920 the train off the track. Carl Ainberg, thank you so much. 0:06:23.000 --> 0:06:25.919 With high frequency economics, and you know, Drew Armstrong was 0:06:25.960 --> 0:06:39.359 just brilliant this morning. With Max Neeson as well. We 0:06:39.440 --> 0:06:44.239 have trying to bring you perspective on the virus in Wuhan. 0:06:44.320 --> 0:06:47.520 We've had some wonderful comments from China. China this morning 0:06:47.720 --> 0:06:51.080 for a news standpoint really shut down with the holidays 0:06:51.120 --> 0:06:55.240 and all that. So we've gone global Withdrew Armstrong and 0:06:55.320 --> 0:06:58.560 Macneeson and right now from Geneva, Switzerland are single best 0:06:58.600 --> 0:07:03.239 World health organization. Expert Tom Millier joins us UH this morning. 0:07:03.240 --> 0:07:05.680 What are they doing at the World Health Organization today? 0:07:05.680 --> 0:07:09.600 Not only in Geneva, Tom, it's spread out across their world. 0:07:09.680 --> 0:07:16.080 What's there to do list in the Geneva Afternoon. Well, Um, 0:07:16.160 --> 0:07:18.360 the head of the w h OH right now is 0:07:18.360 --> 0:07:22.880 actually in China and Wuhan at ground zero, UH, meeting 0:07:22.920 --> 0:07:27.000 with people and uh, I mean showing that she's Uh. 0:07:27.280 --> 0:07:30.120 This is the top of the agenda right now. The 0:07:30.200 --> 0:07:34.120 biggest thing is collecting data to be able to map 0:07:34.120 --> 0:07:37.520 out the spread of the epidemic. What they really need 0:07:37.720 --> 0:07:40.880 is data not just on when the cases were reported, 0:07:41.280 --> 0:07:44.440 but data on when the symptoms, the onset of the 0:07:44.480 --> 0:07:49.160 symptoms started. Uh. And they need more complete data because 0:07:49.560 --> 0:07:53.240 any change in the number of reported cases or the 0:07:53.320 --> 0:07:56.800 number of deaths change changes the mortality. Right, do we 0:07:56.920 --> 0:08:00.560 know do we know the virology of the virus? My experiences, 0:08:00.600 --> 0:08:03.040 the mutate et cetera. And it's really hard to actually 0:08:03.080 --> 0:08:05.760 know what you're talking about. Do we have a handle 0:08:05.800 --> 0:08:11.080 on what the actual virus is? Not exactly there. That's 0:08:11.120 --> 0:08:13.400 what they're still trying to do because I in order 0:08:13.440 --> 0:08:15.640 to make any sort of treatment for the virus, they 0:08:15.680 --> 0:08:19.880 need to understand it more better. Thomas, there's also a 0:08:20.000 --> 0:08:23.640 question about the reaction in China. One of the most 0:08:23.640 --> 0:08:27.240 alarming reports that really got up markets in jitters was 0:08:27.280 --> 0:08:31.360 this idea that China doesn't have enough equipment. Isn't necessarily 0:08:31.440 --> 0:08:35.560 separating out patients with the coronavirus from other patients in 0:08:35.640 --> 0:08:39.600 hospitals just because they don't have the space. How effective 0:08:39.720 --> 0:08:43.520 has the containment process been in China, you know, regardless 0:08:43.880 --> 0:08:48.400 of the quarantine that's keeping an entire city in their homes. Yeah. Well, 0:08:48.400 --> 0:08:50.880 there's a lot of criticism about the policy because it 0:08:50.960 --> 0:08:53.360 could be that it just is too late. Uh. And 0:08:53.440 --> 0:08:58.280 I mean it's such a draconian policy, uh, keeping fifty 0:08:58.320 --> 0:09:03.480 million people in the in their places, uh, that it's 0:09:03.640 --> 0:09:05.760 raising a lot of issue. I mean, there's a lot 0:09:05.840 --> 0:09:12.240 of issues there. Um. So far they well China is 0:09:12.600 --> 0:09:17.920 trying to actually build new hospitals as we speak in Wuhan, uh. 0:09:17.920 --> 0:09:20.440 And so it's really a game of catch up, and 0:09:20.440 --> 0:09:25.000 and they don't have the facilities that they that they 0:09:25.080 --> 0:09:28.400 ideally would have at the moment. Thomas, you know better 0:09:28.400 --> 0:09:30.959 than we do about the w h O. And there 0:09:31.040 --> 0:09:33.800 is some criticism of the World Health Organization at the 0:09:33.840 --> 0:09:37.040 moment and their reluctance to declare what we're seeing playing 0:09:37.040 --> 0:09:38.760 out at China and worldwide at the moment as a 0:09:38.760 --> 0:09:42.760 public health emergency of international concern. Thomas whole are they're 0:09:42.800 --> 0:09:45.480 holding off one and two? What would happen if they 0:09:45.520 --> 0:09:50.280 do make that declaration this week? Well, it's they've said 0:09:50.320 --> 0:09:55.120 that they might decide. I mean, when they delayed making 0:09:55.160 --> 0:09:57.760 the decision, they said that they'd probably meet again within 0:09:57.800 --> 0:10:00.360 the next ten days. The thing is, it's a really 0:10:00.440 --> 0:10:04.560 political process. The w h O deal better with the 0:10:04.600 --> 0:10:08.360 scientific side of things, And what they're scared of is 0:10:08.480 --> 0:10:14.280 that countries, if they declare it UH an international public 0:10:14.520 --> 0:10:19.840 health emergency, that some countries might enact barriers to travel 0:10:20.080 --> 0:10:25.600 and trade that are more stringent than necessary. Right now, 0:10:25.600 --> 0:10:29.840 I'm wondering about the efficacy of other countries response to 0:10:29.920 --> 0:10:32.680 this virus. In other words, is there any evidence that 0:10:32.760 --> 0:10:35.160 the spread of it to a number of different nations 0:10:35.200 --> 0:10:39.880 around the world is actually causing inter country spreading person 0:10:39.920 --> 0:10:43.679 to person, not within China, but say in Vietnam or 0:10:43.760 --> 0:10:48.400 so in Korea. Yeah, so far, the evidence is really limited. 0:10:49.160 --> 0:10:53.760 Of of of the thirty some cases that have been UH, 0:10:54.000 --> 0:10:59.280 the thirty UH cases reported abroad, almost all of those 0:10:59.559 --> 0:11:03.880 were actually people who had been in Wuhan, and so 0:11:03.880 --> 0:11:06.800 so far there really isn't evidence that it's really going 0:11:06.880 --> 0:11:10.240 person to person outside of China, Tom, Thank you so much. 0:11:10.280 --> 0:11:13.800 Tom Aline with Bloomberg News in Geneva, Switzerland, with his 0:11:13.960 --> 0:11:28.079 true focus on the world health organization right now joining 0:11:28.160 --> 0:11:31.600 us with Society General Kitchus joins us on these strong 0:11:31.679 --> 0:11:35.480 correlations of the market. Kit, I'm observing that how correlated 0:11:35.600 --> 0:11:42.440 is this move off a Chinese disease, Chinese virus? It 0:11:42.480 --> 0:11:44.640 feels pretty correlated. It felt this morning as if it 0:11:44.720 --> 0:11:49.320 was just a single story stalks down. Um. Yeah, say 0:11:49.360 --> 0:11:53.319 favoring currency is strong, anything trade China sensitive or oil sensitive? 0:11:53.840 --> 0:11:56.240 Um week equities moving in the same way. Well, we'll 0:11:56.280 --> 0:11:59.120 see what happens when your equity market really gets going 0:11:59.360 --> 0:12:01.640 in Casha this afternoon. But it feels as if it's 0:12:01.679 --> 0:12:04.839 a knee joke reaction that's not correcting at the moment. 0:12:05.000 --> 0:12:07.600 Within that the bond market, where we're back to October. 0:12:07.679 --> 0:12:09.440 Lowe's John you'll know better than me on this in 0:12:09.520 --> 0:12:13.400 terms of spread dynamics as well. Is there an opportunity 0:12:13.480 --> 0:12:16.520 in bonds because you've made if you believe in low 0:12:16.559 --> 0:12:19.439 interest rates, you've made so much of a year's move 0:12:19.679 --> 0:12:22.880 in a matter of days and weeks. I mean, how 0:12:22.920 --> 0:12:27.760 do you adjust tactically to the celebration of a year's move. 0:12:30.760 --> 0:12:33.360 You you remain bullish, but you don't go and invest 0:12:33.440 --> 0:12:36.520 your entire life savings right in them. Right, there's get Look, 0:12:36.520 --> 0:12:37.719 I think we'll get ten your note. You are to 0:12:37.760 --> 0:12:40.520 back down to UM certainly the other side of one 0:12:40.520 --> 0:12:42.439 and a half percent at some point at the back 0:12:42.520 --> 0:12:45.400 end of this year. But um, you know, then if 0:12:45.480 --> 0:12:47.319 you think that we're going to move from you know, 0:12:47.360 --> 0:12:48.839 it's from I don't know, you know, one on a 0:12:48.920 --> 0:12:52.000 quarter to one and three quarters instead of one and 0:12:52.040 --> 0:12:55.000 three quarters to two, then then you know we've got 0:12:55.000 --> 0:12:58.000 another leg down. But we've done half to move and 0:12:58.240 --> 0:13:00.160 that's probably the way to think about it. But but 0:13:00.360 --> 0:13:04.240 it will take evidence in the United States that um, 0:13:04.520 --> 0:13:07.520 that the economy is is feeling this. Otherwise, you know, 0:13:07.559 --> 0:13:09.720 we're going to see money continue to go looking for 0:13:10.080 --> 0:13:12.320 certainly lower rates, lower yields in the sort of in 0:13:12.440 --> 0:13:14.760 some of some of the markets in the Far East, 0:13:15.880 --> 0:13:18.360 because growth is going to be definitely impacted. We can 0:13:18.640 --> 0:13:20.679 speculate how much this might affect the US, but the 0:13:20.760 --> 0:13:23.440 Chinese economy is going to it's going to feel this 0:13:23.600 --> 0:13:27.480 for a while. And I think it also probably puts 0:13:27.520 --> 0:13:29.920 paid to hopes of some people that you might get 0:13:30.160 --> 0:13:33.079 German government tending yields back in the positive territory or 0:13:33.080 --> 0:13:35.240 anything like that, that we're going to be stuck in 0:13:35.360 --> 0:13:38.200 negative territory for months. Let's talk about it, kid, because 0:13:38.240 --> 0:13:41.560 this is important. The recovery that we have seen very young, 0:13:42.440 --> 0:13:44.839 very fragile, and we see it in the EFO out 0:13:44.880 --> 0:13:48.080 of Germany today. German business confidence really not terrific. Just 0:13:48.160 --> 0:13:50.320 how fragile is that recovery in Europe and is it 0:13:50.360 --> 0:13:53.200 vulnerable to be knocked off course? But what you see 0:13:53.200 --> 0:13:57.240 playing gat in China right now? Kid? Yeah, yes, I mean, 0:13:57.320 --> 0:14:00.400 you know, again at the bare minimum, and we're going 0:14:00.440 --> 0:14:02.400 to lose a certain amount of time. You know, it 0:14:02.440 --> 0:14:04.319 could be a short period of time and then things 0:14:04.400 --> 0:14:07.040 get more respect to normal and the Chinese are more 0:14:07.120 --> 0:14:10.240 likely to ease monetary policy, more likely East fiscal policy 0:14:10.280 --> 0:14:15.640 on the back of this over time. But um, the 0:14:15.720 --> 0:14:19.360 momentum was just trying to shift back towards Germany, getting 0:14:19.360 --> 0:14:22.600 away from the hits from trade, from Chinese weakness, from 0:14:22.640 --> 0:14:26.200 from the auto downturn, and from the from the diesel 0:14:26.240 --> 0:14:29.080 scandal and all of those things. Was trying to feed 0:14:29.120 --> 0:14:31.720 themselves through the system. It's just going to take longer 0:14:31.760 --> 0:14:33.200 to get out of that now, and I think that's 0:14:33.680 --> 0:14:36.440 um that that puts a dampener on on everything. KIT. 0:14:36.720 --> 0:14:40.320 It's also this whole transpiring of the coronavirus and its 0:14:40.320 --> 0:14:42.960 spread is putting a damper on the whole weaker dollar story. 0:14:42.960 --> 0:14:45.680 And we're seeing the dollar the strongest since December ninth, 0:14:46.280 --> 0:14:50.160 three straight days of strengthening emerging market currencies having a 0:14:50.160 --> 0:14:53.760 bigger three day decline since November. How much does this 0:14:53.840 --> 0:14:58.720 potentially torpedo the consensus bet heading into the emerging market 0:14:58.720 --> 0:15:05.080 currencies would finally would perform in a significant way this year. UM. 0:15:06.000 --> 0:15:08.760 We we've been nervous about the outlook for emerging market 0:15:08.760 --> 0:15:12.880 currencies this year because we've got a a federatively gloomy 0:15:12.960 --> 0:15:14.760 view about how the year is going to progress for 0:15:14.800 --> 0:15:17.880 the U S economy. Emerging markets to get money really 0:15:17.880 --> 0:15:20.760 flowing into them need a combination of of of yields 0:15:20.800 --> 0:15:24.760 seeking so low rate environment plus a kind of the 0:15:24.840 --> 0:15:27.880 US economy that does okay, it grows something like a 0:15:27.920 --> 0:15:31.760 consensus at one point eight percent this year. UM. This 0:15:32.360 --> 0:15:34.120 this sort of ups the anti on the USPS and 0:15:34.120 --> 0:15:36.560 otherwise emerging markets are going to have a really rough time. 0:15:36.760 --> 0:15:39.320 If the U. S economy looks as if it's growing 0:15:39.320 --> 0:15:42.320 significantly more slowly than that as well, as you know, 0:15:42.720 --> 0:15:45.360 that'll offset any of this kind of flow in. So 0:15:45.960 --> 0:15:48.000 I think I mean, to me, the jury was out 0:15:48.040 --> 0:15:50.080 in the sense of the market was taking an optimistic 0:15:50.160 --> 0:15:52.960 view of the global economic outlook this and that was 0:15:53.000 --> 0:15:54.840 feeding into a bit of relief free m But I 0:15:54.840 --> 0:15:57.400 think that's in trouble now. Kids who are boom bust 0:15:57.480 --> 0:15:59.600 debate at doubles that we are in John and I 0:15:59.640 --> 0:16:02.400 of course drive us forward in the coming days and 0:16:02.560 --> 0:16:05.680 weeks here as well into what we see this morning, 0:16:05.720 --> 0:16:08.080 a two or three percent equity correction yields or they 0:16:08.080 --> 0:16:11.440 are two yearield one point four four seven zero. Can 0:16:11.480 --> 0:16:15.040 you hedge now? Is it is it efficacious to sit 0:16:15.080 --> 0:16:19.960 around a pro room and actually structure hedges where you 0:16:20.040 --> 0:16:23.560 either take in a premium or you pay out for 0:16:23.600 --> 0:16:29.040 the cost of doing the hedge. Um. Yes, it seems 0:16:29.080 --> 0:16:31.680 to me wise to take to take some hedges at 0:16:31.680 --> 0:16:35.040 this point because risk assets might be correcting today, but 0:16:35.040 --> 0:16:38.800 they're still pretty pretty expensive. Um. And you know, and 0:16:38.840 --> 0:16:40.920 in a sense, I mean the part that the high 0:16:40.960 --> 0:16:44.120 correlations mean that you know, the kind of that the 0:16:44.160 --> 0:16:46.960 hedge is become almost simpler in the sense that someone's 0:16:47.000 --> 0:16:49.480 gonna show me what clever hedging looks like in this environment. 0:16:49.760 --> 0:16:51.400 But I would certainly want to have bonds in my 0:16:51.440 --> 0:16:53.600 portfolio for this, for this risk, for the same job 0:16:53.800 --> 0:16:56.640 to one government debton interest rate exposure. UM, I wouldn't 0:16:56.640 --> 0:16:59.080 want a currency portfolio that had no Japanese yeen in it, 0:16:59.280 --> 0:17:01.880 even if I've been very frustrated for the whole of 0:17:01.960 --> 0:17:04.640 January so far, you know, I would want to continue 0:17:04.640 --> 0:17:07.919 to have those things because um. And at the end 0:17:07.960 --> 0:17:10.040 of the day, though, you know, the reason that we've 0:17:10.119 --> 0:17:12.880 kind of feel as if the cycle is less less 0:17:12.920 --> 0:17:15.240 significant is that the answer to everything is to ease 0:17:15.280 --> 0:17:18.159 monetary policy even further, and that gets equacy market to 0:17:18.200 --> 0:17:21.280 stabilize spreads. The stabilize gets defaults and heart of the 0:17:21.359 --> 0:17:24.159 manager at really low rate, and so we stretched the 0:17:24.160 --> 0:17:26.800 cycle out, and so the danger then comes back into 0:17:27.000 --> 0:17:31.199 the danger in those valuations directly and indirectly. John, that 0:17:31.359 --> 0:17:34.439 was the theme we heard. It is just so easy 0:17:34.480 --> 0:17:37.240 to cut rates, you know, it's it to be Trumpian, 0:17:37.720 --> 0:17:39.720 and to cut it gets harder when you start to 0:17:39.800 --> 0:17:42.399 run out of space, that's for sure. And the ECP 0:17:42.560 --> 0:17:44.840 has run out of space. Let's talk about Italy, shall 0:17:44.920 --> 0:17:48.720 we kit ten year Italian bond yields down eighteen basis 0:17:48.760 --> 0:17:57.600 points and the Euro doing nothing? Why? Um, what the Euro? 0:17:58.000 --> 0:18:00.199 Once upon a time, Once upon the same we had 0:18:00.240 --> 0:18:03.399 models where we put BTP bunts breads into into the 0:18:03.560 --> 0:18:05.840 Euro and so it would have it high. I don't 0:18:05.880 --> 0:18:08.000 think that that works when the heart of the Euro 0:18:09.280 --> 0:18:11.680 is that it's much more trade sensitive in the United States, 0:18:11.760 --> 0:18:14.239 much more. It's more China sensitive the United States. So 0:18:14.320 --> 0:18:17.120 it's bad news here. So we're we're weighing these two 0:18:17.160 --> 0:18:19.600 things against each other. Of you know, a piece of 0:18:19.640 --> 0:18:21.960 news from the Far East that definitely is euro dollar 0:18:22.000 --> 0:18:24.960 negative against piece of domestic news in Italy that that 0:18:25.320 --> 0:18:27.240 at least in terms of the bond market reaction is 0:18:27.280 --> 0:18:29.919 Euro positive. And look at the thirteen basis point falling 0:18:29.960 --> 0:18:32.520 Greek yields, by the way, as they have a rerating. 0:18:32.640 --> 0:18:35.720 So um, and those two outweigh each other. So you 0:18:35.720 --> 0:18:40.240 you you trade, you trade European politics at the momentum 0:18:40.320 --> 0:18:43.000 in the bond market. Um. And that's that's where that's 0:18:43.000 --> 0:18:45.320 where you do. In the I think in the currency market, 0:18:45.359 --> 0:18:47.679 you are short the Euro against again or short the 0:18:47.680 --> 0:18:50.359 Euro against the Swiss Frank but not you don't you 0:18:50.400 --> 0:18:53.040 don't know, you don't buy it. I'm fred kid, you 0:18:53.160 --> 0:18:55.480 thank you so much, greatly appreciate it. With society in general. 0:19:04.280 --> 0:19:05.680 Why don't you bring it? You know, do you want 0:19:05.680 --> 0:19:07.200 to get football out of the way first thing? We 0:19:07.200 --> 0:19:09.320 should probably do that first in work. I imagine that's 0:19:09.320 --> 0:19:12.720 what he's fired up about. In Shepherds Pantheon macro Economics, 0:19:12.720 --> 0:19:16.360 founder of Chief Economist, also of Newcastle. I can tell 0:19:16.440 --> 0:19:19.320 you bre exclusive on this program couple of months back 0:19:19.400 --> 0:19:22.439 that Ian gave up his season ticket to his beloved 0:19:22.480 --> 0:19:25.000 Newcastle United, and the latest news coming out of the 0:19:25.000 --> 0:19:28.640 Wall Street Journal over the weekend that the Saudis are 0:19:28.680 --> 0:19:34.040 interested in buying his beloved Newcastle United. First reaction in 0:19:34.119 --> 0:19:37.399 Shepherds and Please, my first direction is out of the 0:19:37.440 --> 0:19:39.879 frying kind into the fire. Really, you know, we're gonna 0:19:40.000 --> 0:19:45.040 potentially exchange one terrible owner for another which is backed 0:19:45.040 --> 0:19:47.520 by a man of shall we say, questionable character. So 0:19:47.560 --> 0:19:50.679 I'm not thrilled, you know, thrilled. There's a character to this, folks. 0:19:50.720 --> 0:19:55.600 For American audience, Newcastle, it's it's fun to watch. I 0:19:55.600 --> 0:19:57.800 don't know what I'm talking not east of the country. 0:19:58.000 --> 0:20:00.520 Why are they different. Saint James's part is just this 0:20:00.600 --> 0:20:04.040 phenomenal stadium with this incredible fans, like a Wrigley Field thing. 0:20:04.080 --> 0:20:06.640 But Ncass United have been a yo yo club over 0:20:06.640 --> 0:20:08.360 the last ten years or so, and I'm sure em 0:20:08.400 --> 0:20:10.400 would echo that they dropped down a leave they come 0:20:10.400 --> 0:20:13.240 back up. But the fans have always filled out the 0:20:13.280 --> 0:20:18.520 stadium no matter what. In the nineties, almost won the 0:20:18.600 --> 0:20:20.439 league a couple of times, I think second place in 0:20:20.440 --> 0:20:22.919 a premiership in the late nineties e and but until 0:20:22.960 --> 0:20:26.880 this year, as you say, something changed, people like yourself said, 0:20:26.880 --> 0:20:30.600 we've had enough about people didn't renew the season tickets. 0:20:30.600 --> 0:20:33.879 They've just had enough of this appalling ownership. So everyone 0:20:33.920 --> 0:20:36.359 has been rooting for a chain. Just just if you'd 0:20:36.359 --> 0:20:38.760 given us a list of potential owners, you know I 0:20:38.960 --> 0:20:40.840 have been some probably wouldn't have been top of the list. 0:20:41.160 --> 0:20:42.919 It definitely wouldn't have been top of the list. I 0:20:42.960 --> 0:20:45.639 do have to wonder on a daylight today, I'm sure 0:20:45.760 --> 0:20:48.560 that that football is getting you excited, but I also 0:20:48.600 --> 0:20:51.040 think I'm looking right now at the NASDAC and it's 0:20:51.040 --> 0:20:54.000 poised for its biggest daily decline if it continues nearly 0:20:54.000 --> 0:20:56.560 down two percent of the year, and we were talking 0:20:56.560 --> 0:21:00.160 about a one percent decline on Friday. Our economic it's 0:21:00.200 --> 0:21:03.119 interesting you more than football today or do you feel 0:21:03.160 --> 0:21:05.480 like today the sort of scare that's going on with 0:21:05.520 --> 0:21:09.160 the coronavirus doesn't affect the economics complex to the degree 0:21:09.320 --> 0:21:12.399 that people seem to be implying by the price action. Yeah, 0:21:12.440 --> 0:21:15.640 I mean this to me is a combination of a 0:21:15.720 --> 0:21:17.880 fear based sell off and also an excuse to take 0:21:17.920 --> 0:21:20.399 profits after the run that we've had in the markets 0:21:20.400 --> 0:21:22.760 over the last few months. So you know, if the 0:21:22.800 --> 0:21:24.440 market had been flat for the last three months, I 0:21:24.440 --> 0:21:26.560 suspect the sell off will be rather smaller on the 0:21:26.560 --> 0:21:28.600 back of the virus story. But you know, we've had 0:21:28.600 --> 0:21:30.960 a big run up, so this is an opportunity to 0:21:30.960 --> 0:21:34.640 to take come at, detect and profits and and regroup. 0:21:35.119 --> 0:21:37.920