1 00:00:05,120 --> 00:00:08,440 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 2 00:00:08,480 --> 00:00:12,000 Speaker 1: with Jonathan Farrell and Lisa A. Bramowitz. Join us each 3 00:00:12,080 --> 00:00:16,160 Speaker 1: day for insight from the best and economics, geopolitics, financing 4 00:00:16,160 --> 00:00:20,680 Speaker 1: and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 5 00:00:20,920 --> 00:00:25,480 Speaker 1: Spotify and anywhere you get your podcasts, and always I'm 6 00:00:25,480 --> 00:00:29,800 Speaker 1: Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. 7 00:00:30,840 --> 00:00:34,640 Speaker 1: Joining us now from our offices in London, John Ferrell, John, 8 00:00:34,720 --> 00:00:37,760 Speaker 1: your accent has changed this week. It's worse than normal. 9 00:00:38,560 --> 00:00:40,720 Speaker 1: Just to be Claire. I am funded in dollars Tom 10 00:00:40,800 --> 00:00:42,480 Speaker 1: for the tenth time, and that's where I pay taxes 11 00:00:42,479 --> 00:00:43,800 Speaker 1: as well. I want to clear that up. And for 12 00:00:43,840 --> 00:00:46,120 Speaker 1: the second point, I'll mate Tom the chancel. I was 13 00:00:46,120 --> 00:00:48,240 Speaker 1: only here to warm up the seat for Peter Roppenheimer, 14 00:00:48,440 --> 00:00:52,760 Speaker 1: a common Sacks, the chief Glove Electritly strategist. Peter knows 15 00:00:52,840 --> 00:00:55,240 Speaker 1: that anyway, Petty, you're a popular man this year. And 16 00:00:55,280 --> 00:00:58,560 Speaker 1: good afternoon to year slash, good morning. I guess European equities, 17 00:00:58,600 --> 00:01:01,160 Speaker 1: that's what it's all about. It's front season. When you 18 00:01:01,200 --> 00:01:04,360 Speaker 1: go around doing these conferences, do they buy the hype 19 00:01:04,560 --> 00:01:06,319 Speaker 1: in Europe after hearing it for the tenth time in 20 00:01:06,319 --> 00:01:10,080 Speaker 1: the last ten years. Very slowly, people are warming up 21 00:01:10,080 --> 00:01:12,080 Speaker 1: to it and it's been a long time coming. I 22 00:01:12,120 --> 00:01:18,240 Speaker 1: know that. But performance attracts investors, and we've seen, you know, 23 00:01:18,360 --> 00:01:22,240 Speaker 1: thirty percent rebound in the European market since October, at 24 00:01:22,280 --> 00:01:25,959 Speaker 1: least in dollar terms, and that is starting to energize 25 00:01:25,959 --> 00:01:28,840 Speaker 1: a bit of interest in the region, and it reflects 26 00:01:28,840 --> 00:01:32,399 Speaker 1: the big shift we've seen towards value again, something we 27 00:01:32,400 --> 00:01:34,920 Speaker 1: haven't seen now for more than a decade. So clearly 28 00:01:34,959 --> 00:01:38,399 Speaker 1: we've priced that recession. We've priced in stagnation stagnation, and 29 00:01:38,440 --> 00:01:40,720 Speaker 1: investors are focused on the difference between the two. I 30 00:01:40,800 --> 00:01:42,280 Speaker 1: get all that, but now we need to talk about 31 00:01:42,280 --> 00:01:45,399 Speaker 1: the difference between stagnation and real recovery and expansion. And 32 00:01:45,400 --> 00:01:47,360 Speaker 1: that's been a theme for us this week. When do 33 00:01:47,440 --> 00:01:49,080 Speaker 1: we start to focus on the fact that there is 34 00:01:49,120 --> 00:01:51,200 Speaker 1: no growth in Europe is just an absence of a 35 00:01:51,200 --> 00:01:53,480 Speaker 1: recession and what we've seen so far is a bit 36 00:01:53,480 --> 00:01:56,360 Speaker 1: of a squeeze and relief rally and perhaps nothing else. Well, 37 00:01:56,400 --> 00:01:58,320 Speaker 1: I think we need to put it in context here. 38 00:01:58,360 --> 00:02:01,800 Speaker 1: We think that the loloibal economy is in a relatively 39 00:02:01,880 --> 00:02:05,320 Speaker 1: good shape, and we expect to see a soft landing 40 00:02:05,360 --> 00:02:07,280 Speaker 1: in the US, but we also now expect to see 41 00:02:07,280 --> 00:02:10,240 Speaker 1: a relatively soft landing in Europe. The falls and gas 42 00:02:10,280 --> 00:02:12,720 Speaker 1: prices have helped to pick up in China as well. 43 00:02:13,280 --> 00:02:15,799 Speaker 1: But the absence of recession, as you say, doesn't mean 44 00:02:15,800 --> 00:02:18,640 Speaker 1: we're yet into a strong recovery cycle. And I think 45 00:02:19,240 --> 00:02:22,080 Speaker 1: the rebound that we've seen in risk assets in the 46 00:02:22,120 --> 00:02:26,280 Speaker 1: last couple of months is overstating the potential from here. 47 00:02:26,400 --> 00:02:29,079 Speaker 1: At the index level, We've got flat returns in the 48 00:02:29,200 --> 00:02:32,280 Speaker 1: US this year, slightly positive returns in Europe, so we 49 00:02:32,360 --> 00:02:34,640 Speaker 1: prefer Europe. We think most of the action is going 50 00:02:34,639 --> 00:02:37,440 Speaker 1: to be below the surface of the index. Let's talk 51 00:02:37,440 --> 00:02:40,680 Speaker 1: about those opportunities banks have ripped in Europe. They're up 52 00:02:40,680 --> 00:02:43,280 Speaker 1: about fifty from the July lows. I picked out a 53 00:02:43,280 --> 00:02:44,880 Speaker 1: minor because I know you like some of those names 54 00:02:44,880 --> 00:02:48,400 Speaker 1: as well, Rio since October's up something like these are 55 00:02:48,600 --> 00:02:51,120 Speaker 1: huge monster moves. And credit to you, guys, because you've 56 00:02:51,120 --> 00:02:53,000 Speaker 1: got on board this bank's trade in Europe at a 57 00:02:53,000 --> 00:02:54,799 Speaker 1: time where I was sitting there thinking, you've got to 58 00:02:54,800 --> 00:02:56,519 Speaker 1: be kidding me. We're gonna get great hikes from the 59 00:02:56,560 --> 00:02:58,120 Speaker 1: E c B. It's going to crush the economy and 60 00:02:58,120 --> 00:03:00,519 Speaker 1: peripheral spreads are gonna blow out all over again. Why 61 00:03:00,560 --> 00:03:02,880 Speaker 1: has that trade worked and why do you think it 62 00:03:02,880 --> 00:03:05,960 Speaker 1: will continue to work? Well? I think there are three things. 63 00:03:06,200 --> 00:03:09,200 Speaker 1: First of all, the recession that people feared six months 64 00:03:09,240 --> 00:03:12,639 Speaker 1: ago is not happening. There was a point where the 65 00:03:12,680 --> 00:03:14,800 Speaker 1: market was pricing in quite a big downturn in the 66 00:03:14,800 --> 00:03:20,400 Speaker 1: European economy. The expectations there are adjusting pretty quickly. We 67 00:03:20,440 --> 00:03:24,080 Speaker 1: actually have points six percent GDP growth across the Eurozone 68 00:03:24,160 --> 00:03:26,959 Speaker 1: this this year, so the economy is growing, not shrinking. 69 00:03:27,040 --> 00:03:29,800 Speaker 1: That helps a lot. Second, of all, the rise and 70 00:03:29,840 --> 00:03:33,600 Speaker 1: interest rates we're seeing is material given where we've been 71 00:03:33,800 --> 00:03:36,880 Speaker 1: where they came from. Remember, you know, just a year 72 00:03:36,920 --> 00:03:40,600 Speaker 1: and a half ago, all government debt in the world 73 00:03:40,640 --> 00:03:44,680 Speaker 1: had a negative yield. Now that doesn't exist. European rates 74 00:03:44,680 --> 00:03:47,920 Speaker 1: were negative, now they're positive. The leverage to that in 75 00:03:48,000 --> 00:03:50,880 Speaker 1: terms of net interest margins is the real game changer. 76 00:03:51,520 --> 00:03:55,280 Speaker 1: And bear in mind that corporate balance sheets are reasonably healthy, 77 00:03:55,360 --> 00:03:59,040 Speaker 1: so low losses and the risk of the big downturn 78 00:03:59,200 --> 00:04:02,880 Speaker 1: hitting bang is just evaporating. And the third, factories they 79 00:04:02,880 --> 00:04:05,680 Speaker 1: were just really cheap and they remain pretty cheap. They're 80 00:04:05,720 --> 00:04:09,000 Speaker 1: cheaper now when you look at the multiple relative to 81 00:04:09,040 --> 00:04:11,640 Speaker 1: the market than they were even during the sovereign debt 82 00:04:11,640 --> 00:04:14,240 Speaker 1: crist We started this conversation by you talking about how 83 00:04:14,320 --> 00:04:17,120 Speaker 1: challenge the index level is. We've talked about that a 84 00:04:17,120 --> 00:04:19,960 Speaker 1: lot in Europe. The absence of tech in Europe as 85 00:04:20,000 --> 00:04:21,960 Speaker 1: a big waiting in the overall index was seen as 86 00:04:21,960 --> 00:04:24,400 Speaker 1: a weakness for a long long time. Is that a 87 00:04:24,440 --> 00:04:26,520 Speaker 1: strength this year? Because I'm looking at the year to 88 00:04:26,560 --> 00:04:28,560 Speaker 1: day performance of some of these tech names, Leasa, We're 89 00:04:28,600 --> 00:04:30,520 Speaker 1: just going through them, those tech names in the US, 90 00:04:30,839 --> 00:04:34,000 Speaker 1: despite everyone's saying it's game over, they're flying here today. 91 00:04:34,160 --> 00:04:36,520 Speaker 1: Is the absence of big tech in the index in 92 00:04:36,600 --> 00:04:40,760 Speaker 1: Europe a weakness or strength? Structurally, it's a weakness because 93 00:04:40,920 --> 00:04:43,400 Speaker 1: there is going to be more growth in the tech sector. 94 00:04:43,440 --> 00:04:47,120 Speaker 1: It's going to remain the most important driver of growth 95 00:04:47,160 --> 00:04:51,920 Speaker 1: I think for the next decade. The constituents are likely 96 00:04:52,000 --> 00:04:55,720 Speaker 1: to change over time. That's always been true of technology 97 00:04:55,760 --> 00:04:59,000 Speaker 1: in the past. You'll get new innovations which will generate 98 00:04:59,160 --> 00:05:02,159 Speaker 1: higher return and so I think it is a problem 99 00:05:02,200 --> 00:05:05,240 Speaker 1: in a way that Europe doesn't have many big tech names. 100 00:05:05,880 --> 00:05:09,400 Speaker 1: But of course the recent rally we've seen in tech 101 00:05:09,560 --> 00:05:13,280 Speaker 1: is partly because of this rally again in bond yields, 102 00:05:13,320 --> 00:05:17,880 Speaker 1: interest rates coming down because of fears of inflation moderating, 103 00:05:18,360 --> 00:05:21,280 Speaker 1: and that's helped the longer duration parts of the market. 104 00:05:21,839 --> 00:05:25,000 Speaker 1: I think really the whole concept of being in growth 105 00:05:25,080 --> 00:05:29,479 Speaker 1: or value, which is really driving the markets over last decade, 106 00:05:29,600 --> 00:05:32,440 Speaker 1: is not really the story anymore. I think you need 107 00:05:32,480 --> 00:05:36,239 Speaker 1: to have a much more eclectic mix, including deep value 108 00:05:36,279 --> 00:05:39,920 Speaker 1: areas like commodities and banks, but also companies that can 109 00:05:39,960 --> 00:05:42,680 Speaker 1: sustain stable margins and earnings, and some of that will 110 00:05:42,720 --> 00:05:45,520 Speaker 1: be in the tech sector as well. Europe does have 111 00:05:45,640 --> 00:05:49,000 Speaker 1: many of these, maybe not specifically in technology, but our 112 00:05:49,080 --> 00:05:51,480 Speaker 1: group of what we call the Granolas, the ten really, 113 00:05:51,520 --> 00:05:54,839 Speaker 1: which you've talked about before, super size companies in Europe, 114 00:05:54,839 --> 00:06:01,600 Speaker 1: which mainly in areas like consumer staples, luxury, healthcare, and 115 00:06:01,680 --> 00:06:06,240 Speaker 1: some technology. These companies are about a quarter of the index, 116 00:06:06,279 --> 00:06:09,800 Speaker 1: and they're still growing because they're generating stable margins and 117 00:06:09,920 --> 00:06:11,840 Speaker 1: very strong cash flews, and I think they will continue 118 00:06:11,839 --> 00:06:13,960 Speaker 1: to do well. I've got time for one more. It's 119 00:06:14,000 --> 00:06:17,120 Speaker 1: interesting to me that the market always seems to dictate 120 00:06:17,160 --> 00:06:20,839 Speaker 1: the stories we talk about. Price shapes sentiment. You know that, 121 00:06:21,200 --> 00:06:23,680 Speaker 1: and the headlines often come about from where the market 122 00:06:23,760 --> 00:06:26,200 Speaker 1: is on any given week. And clearly we've rallied year 123 00:06:26,240 --> 00:06:28,400 Speaker 1: today in Europe, and clearly we've rallied over the last 124 00:06:28,400 --> 00:06:30,400 Speaker 1: couple of months, and clearly we've priced out of recession. 125 00:06:30,400 --> 00:06:32,680 Speaker 1: And clearly off the back of that, the conversation and 126 00:06:32,720 --> 00:06:35,560 Speaker 1: the tone of the conversation has changed. Being here in 127 00:06:35,600 --> 00:06:38,400 Speaker 1: London this week, you can't escape the fact there is 128 00:06:38,400 --> 00:06:41,839 Speaker 1: still a war in Europe, and for many reasons, based 129 00:06:41,839 --> 00:06:44,040 Speaker 1: on what's happened over the last month or so, there 130 00:06:44,040 --> 00:06:45,880 Speaker 1: are reasons to sit here and say that war has 131 00:06:45,920 --> 00:06:49,520 Speaker 1: the real potential of escalating again. I understand we've escaped 132 00:06:49,560 --> 00:06:51,560 Speaker 1: what could have been a much much more brutal winter 133 00:06:51,960 --> 00:06:54,720 Speaker 1: on the continent. I'm just wandering this down and I'm 134 00:06:54,720 --> 00:06:56,599 Speaker 1: going to have this conversation with and read a center 135 00:06:56,600 --> 00:06:59,359 Speaker 1: of Energy Aspects in about forty minutes. How long before 136 00:06:59,360 --> 00:07:01,440 Speaker 1: we start worry think about next winter in Europe and 137 00:07:01,480 --> 00:07:04,120 Speaker 1: what is actually happening in Ukraine. I think you make 138 00:07:04,160 --> 00:07:07,520 Speaker 1: a very good point. Part of the optimism that we've 139 00:07:07,560 --> 00:07:10,080 Speaker 1: been seeing priced in is based on the collapse and 140 00:07:10,120 --> 00:07:13,920 Speaker 1: gas prices. That reflects really two things a very mild winter, 141 00:07:14,200 --> 00:07:17,040 Speaker 1: which we can't assume we'll be repeated next year, and 142 00:07:17,080 --> 00:07:21,680 Speaker 1: also a very weak Chinese economy that allowed and enabled 143 00:07:21,720 --> 00:07:26,480 Speaker 1: European governments to to to find other sources of gas supplies. 144 00:07:26,560 --> 00:07:30,840 Speaker 1: And as China recovers and Europe needs to re stock 145 00:07:31,240 --> 00:07:34,760 Speaker 1: its gas supplies are probably higher prices, that issue will 146 00:07:34,800 --> 00:07:37,240 Speaker 1: come back. And that's a game where we're slightly more 147 00:07:37,280 --> 00:07:41,080 Speaker 1: tempered in our optimism about the pace of the recovery 148 00:07:41,080 --> 00:07:42,920 Speaker 1: at the index level over the course of this year, 149 00:07:43,080 --> 00:07:45,680 Speaker 1: not just in Europe but across extras overall. Peter, this 150 00:07:45,800 --> 00:07:47,720 Speaker 1: was great. We're gonna make it up to Manchester this 151 00:07:47,800 --> 00:07:51,200 Speaker 1: evening to watch Arsenal mad cities that happening, But you're 152 00:07:51,240 --> 00:07:53,400 Speaker 1: going to t t Case trying to make it happen 153 00:07:53,440 --> 00:08:06,280 Speaker 1: for us. When she speaks the fixed thing come world 154 00:08:06,360 --> 00:08:09,800 Speaker 1: just simply stops. It is the heritage of society general. 155 00:08:10,200 --> 00:08:13,480 Speaker 1: They own the high ground of French math and derivative science. 156 00:08:13,800 --> 00:08:17,600 Speaker 1: Sobrato ra Jappa joins us this morning. Sobrata help me. 157 00:08:17,680 --> 00:08:21,120 Speaker 1: Let's go sack gen derivatives right now, which is calculus, 158 00:08:21,160 --> 00:08:24,640 Speaker 1: which is rates of change. What's the rate of change? 159 00:08:24,720 --> 00:08:29,120 Speaker 1: Story in the bonds space this January as we see 160 00:08:29,120 --> 00:08:33,680 Speaker 1: a bull equity market, so the biggest rate of change 161 00:08:33,800 --> 00:08:35,520 Speaker 1: was at the end of the year. Coming into this year, 162 00:08:36,040 --> 00:08:39,680 Speaker 1: we haven't really seen bonds move meaningfully higher or lower 163 00:08:40,240 --> 00:08:43,040 Speaker 1: from around the three and a half percent level in 164 00:08:43,120 --> 00:08:45,800 Speaker 1: tenure yields. So for the most part, we seem to 165 00:08:45,800 --> 00:08:48,760 Speaker 1: be kind of stuck here. Um. You know, part of 166 00:08:48,800 --> 00:08:53,800 Speaker 1: the reason is because fundamentally bonds look rich relative to fundamentals, 167 00:08:54,160 --> 00:08:57,080 Speaker 1: and then you have a story where there's just a 168 00:08:57,200 --> 00:09:00,960 Speaker 1: tremendous amount of demand for bonds. You get the auction 169 00:09:01,120 --> 00:09:04,840 Speaker 1: stats for this week, we saw a very very strong demand, uh, 170 00:09:04,880 --> 00:09:07,640 Speaker 1: you know, from bonds from a variety of investors. So 171 00:09:07,679 --> 00:09:10,440 Speaker 1: the cash that's in the sidelines is being put to 172 00:09:10,480 --> 00:09:13,640 Speaker 1: work in the bond market. I totally agree, and we've 173 00:09:13,640 --> 00:09:17,280 Speaker 1: spent a lot of time this week folks on issuance ideas. 174 00:09:17,960 --> 00:09:20,520 Speaker 1: If there's a shortage of bonds, that's what Sir John 175 00:09:20,520 --> 00:09:24,240 Speaker 1: Templeton would have said years ago, what happens to yield 176 00:09:24,280 --> 00:09:28,360 Speaker 1: over the space of this year. I don't think that 177 00:09:28,400 --> 00:09:30,240 Speaker 1: there's a shortage of bonds. There's going to be a 178 00:09:30,280 --> 00:09:33,800 Speaker 1: decent amount of issuance coming from you know, corporate, corporate 179 00:09:33,840 --> 00:09:37,160 Speaker 1: bond world. We're seeing a lot of issuance in treasuries. 180 00:09:37,520 --> 00:09:42,320 Speaker 1: If anything, our called going into the spring time frame 181 00:09:42,800 --> 00:09:45,880 Speaker 1: was that the treasury will increase it's it's coopon issuance 182 00:09:45,920 --> 00:09:49,240 Speaker 1: sizes because deficits are continuing stress. I mean that, of course, 183 00:09:49,280 --> 00:09:51,200 Speaker 1: we'll have to wait and see because of the of 184 00:09:51,280 --> 00:09:54,160 Speaker 1: the dead ceiling, but broadly speaking, I think that's a 185 00:09:54,240 --> 00:09:57,280 Speaker 1: there's a there's a decent amount of supply coming into bonds, 186 00:09:57,640 --> 00:09:59,840 Speaker 1: not just in the in the US and the corporate bond, 187 00:10:00,120 --> 00:10:03,280 Speaker 1: but also in Europe in the first first quarter. So 188 00:10:03,320 --> 00:10:07,480 Speaker 1: there's a lot of bonds that out there to be bought. Uh. 189 00:10:07,520 --> 00:10:10,040 Speaker 1: And that's why we were expecting perhaps a modest you know, 190 00:10:10,160 --> 00:10:12,920 Speaker 1: modestly higher yields for the market to be able to 191 00:10:12,960 --> 00:10:15,600 Speaker 1: take down the additional supply. But that's not the case. 192 00:10:15,679 --> 00:10:17,680 Speaker 1: It's just tremendous amount of demand and people are willing 193 00:10:17,679 --> 00:10:20,240 Speaker 1: to lop up bonds tenny years around three and a 194 00:10:20,280 --> 00:10:23,360 Speaker 1: half percent about her how long all this last? This rally, 195 00:10:23,400 --> 00:10:28,240 Speaker 1: this optimism that you see preventing every asset class. You know, 196 00:10:28,360 --> 00:10:32,080 Speaker 1: the data for the most part has been mixed, but 197 00:10:32,080 --> 00:10:34,679 Speaker 1: but on the positive side, you look at the data 198 00:10:34,720 --> 00:10:38,240 Speaker 1: from from yesterday that we got for the fourth quarter GDP, 199 00:10:38,720 --> 00:10:41,440 Speaker 1: there's a decent amount of momentum going into into the 200 00:10:41,480 --> 00:10:44,720 Speaker 1: fourth quarter, um, you know, and you're looking at an 201 00:10:44,720 --> 00:10:48,360 Speaker 1: employment picture that's still extraordinarily strong, even though you're getting 202 00:10:48,360 --> 00:10:52,120 Speaker 1: a lot of news about layoffs in the tech sector. Uh. 203 00:10:52,160 --> 00:10:54,559 Speaker 1: You know, look at initial jobless claims yesterday, it was 204 00:10:54,720 --> 00:10:57,000 Speaker 1: very very low. That it tends to be very good 205 00:10:57,360 --> 00:11:01,079 Speaker 1: leading indicator of the jobs market. So this sort of environment, 206 00:11:01,240 --> 00:11:04,840 Speaker 1: the market is actually, in my view, underpricing the risk 207 00:11:04,840 --> 00:11:07,320 Speaker 1: of heights for this year. We're looking at perhaps two 208 00:11:07,360 --> 00:11:09,920 Speaker 1: heights being priced in for the first half of the year, 209 00:11:10,240 --> 00:11:12,199 Speaker 1: and then it cut being priced in as early as 210 00:11:12,280 --> 00:11:15,880 Speaker 1: July or September of this year, which you know, that 211 00:11:15,960 --> 00:11:18,400 Speaker 1: sort of trajectory doesn't make any sense in an environment 212 00:11:18,640 --> 00:11:21,880 Speaker 1: where inflation is expected to remain high and sticky. I mean, 213 00:11:21,920 --> 00:11:24,360 Speaker 1: look at what happened in Japan. I mean, we saw 214 00:11:24,600 --> 00:11:27,120 Speaker 1: you know, an outside sprint, uh, you know, relative to 215 00:11:27,160 --> 00:11:31,280 Speaker 1: consensus on on on inflation. So there's always a possibility that, 216 00:11:31,320 --> 00:11:34,680 Speaker 1: you know, we do get those sort of volatile inflation prints, 217 00:11:34,679 --> 00:11:36,800 Speaker 1: and the market has to respond and the Fed has 218 00:11:36,800 --> 00:11:39,160 Speaker 1: to respond in like as well, So what's the read 219 00:11:39,200 --> 00:11:41,480 Speaker 1: through to market? So what kind of disruption and will 220 00:11:41,520 --> 00:11:44,000 Speaker 1: there be if the Fed surprises to the upside, perhaps 221 00:11:44,000 --> 00:11:46,680 Speaker 1: on a fifty basis point rate hike next week, but 222 00:11:46,800 --> 00:11:48,920 Speaker 1: does indicate that they're going to go further than a 223 00:11:48,960 --> 00:11:53,080 Speaker 1: lot of people are currently pricing in. How disruptive is it? 224 00:11:53,080 --> 00:11:55,520 Speaker 1: It will be destructive. That's why I think that they are. 225 00:11:55,720 --> 00:12:00,120 Speaker 1: The Fed typically tends to stick with the market pricing. 226 00:12:00,480 --> 00:12:03,040 Speaker 1: If the market is not fully priced, they'll find ways 227 00:12:03,120 --> 00:12:05,800 Speaker 1: to communicate the fact that they're going to be delivering 228 00:12:05,800 --> 00:12:07,599 Speaker 1: more than what the markets pricing in and then the 229 00:12:07,640 --> 00:12:11,600 Speaker 1: market will adjust. Um. But broadly speaking, I think that 230 00:12:11,960 --> 00:12:14,360 Speaker 1: you know, twenty five basis point a hike, uh and 231 00:12:14,559 --> 00:12:16,960 Speaker 1: at next week's meeting makes sense, and then you know 232 00:12:17,200 --> 00:12:21,560 Speaker 1: another twenty five basis points in subsequent meetings. But I 233 00:12:21,600 --> 00:12:25,600 Speaker 1: just don't see them stopping or pausing anytime. So, like 234 00:12:25,600 --> 00:12:29,520 Speaker 1: the Bank of Canada suggested they will at this week's meeting. 235 00:12:30,000 --> 00:12:32,040 Speaker 1: So then how does the dollar play into this because 236 00:12:32,040 --> 00:12:34,320 Speaker 1: that might be actually a very different story than what 237 00:12:34,360 --> 00:12:37,160 Speaker 1: people are pricing in there. Yeah, I mean I think 238 00:12:37,200 --> 00:12:40,840 Speaker 1: the dollars come off. It's it's very lofty levels. Um. 239 00:12:40,880 --> 00:12:44,920 Speaker 1: Broadly speaking, you're looking at the dollar versus say, the euro. 240 00:12:45,600 --> 00:12:48,000 Speaker 1: H you look at the ECB. The CBS poised to 241 00:12:48,559 --> 00:12:51,720 Speaker 1: high rates for the remainder of the year. Our economists 242 00:12:51,720 --> 00:12:55,720 Speaker 1: are expecting that the ECB will raise its its deposit 243 00:12:55,840 --> 00:12:59,720 Speaker 1: rates up to three point seven five. The markets underpricing 244 00:12:59,720 --> 00:13:02,720 Speaker 1: that level as well. So broadly speaking, at least versus 245 00:13:02,840 --> 00:13:05,080 Speaker 1: the the Euro, I think that the dollar could come 246 00:13:05,120 --> 00:13:08,120 Speaker 1: under a little bit of pressure. The Bank of Japan 247 00:13:08,160 --> 00:13:10,520 Speaker 1: as well is starting to adjust. It's it's it's y 248 00:13:10,559 --> 00:13:14,680 Speaker 1: c C. So I think that you know, dollars definitely pete. 249 00:13:15,080 --> 00:13:17,679 Speaker 1: I don't see a precipitous decline, but but a gradual 250 00:13:17,760 --> 00:13:21,160 Speaker 1: decline as other central banks catch up on the policy front. 251 00:13:21,360 --> 00:13:23,800 Speaker 1: So Brata, thank you so much, Sobrata Rajapa with us, 252 00:13:23,840 --> 00:13:31,400 Speaker 1: with society in general. This is a joy because it 253 00:13:31,480 --> 00:13:33,200 Speaker 1: is the heritage of what Neil saw Us did at 254 00:13:33,240 --> 00:13:36,800 Speaker 1: Credit Sweeze. He is Ray Ferris, their chief economists joining us, 255 00:13:36,840 --> 00:13:38,760 Speaker 1: and he and I are on the same page that 256 00:13:38,920 --> 00:13:44,160 Speaker 1: everybody inflation adjusts. And Mr Harrison, I go, maybe not 257 00:13:44,920 --> 00:13:50,240 Speaker 1: nominal GDP matters. What does the global credit suits outlook 258 00:13:50,679 --> 00:13:56,360 Speaker 1: on the dynamic of nominal GDP with disinflation in place. Well, 259 00:13:56,360 --> 00:14:00,240 Speaker 1: that's absolutely right. The key thing I think for corporate profitabity, 260 00:14:00,240 --> 00:14:05,200 Speaker 1: the outlook for earnings is really nominal money and nominal 261 00:14:05,280 --> 00:14:09,319 Speaker 1: GDP growth. After a boom in two thousand and late 262 00:14:09,320 --> 00:14:12,760 Speaker 1: two thousand, early two THOWO is now slowing a lot. 263 00:14:12,800 --> 00:14:16,720 Speaker 1: That's the disinflation process. So what that means is that 264 00:14:17,160 --> 00:14:19,800 Speaker 1: at the top line, revenue growth is going to come down. 265 00:14:19,960 --> 00:14:23,880 Speaker 1: We're already seeing that there's a good link between nominal 266 00:14:23,920 --> 00:14:27,760 Speaker 1: GDP growth, swings and margins. Margins are going to come 267 00:14:27,760 --> 00:14:33,000 Speaker 1: down and we're seeing that. And although we think that 268 00:14:33,040 --> 00:14:37,040 Speaker 1: there will be consumption growth in two thousand three, that 269 00:14:37,080 --> 00:14:40,560 Speaker 1: consumption growth, especially in the good sector, is going to 270 00:14:40,640 --> 00:14:46,440 Speaker 1: be very very weak. So slowing revenues, squeezed margins, and 271 00:14:46,560 --> 00:14:48,840 Speaker 1: not a whole lot of volume growth. Sitting in that 272 00:14:49,000 --> 00:14:51,520 Speaker 1: chair this week have been a number of people modeling 273 00:14:51,560 --> 00:14:54,920 Speaker 1: out some form of reaction function, trajectory, whatever you wanna 274 00:14:55,000 --> 00:14:58,200 Speaker 1: call it, down to a level of disinflation that I 275 00:14:58,240 --> 00:15:04,080 Speaker 1: think with shocker listeners, shocker viewers, some even modeling under 276 00:15:04,160 --> 00:15:07,200 Speaker 1: three percent is an inflation picture for the United States. 277 00:15:07,680 --> 00:15:12,280 Speaker 1: Are central bankers prepared to have their minds change when 278 00:15:12,280 --> 00:15:15,280 Speaker 1: the facts change. Oh, the Fed's already moving. I mean 279 00:15:15,280 --> 00:15:18,520 Speaker 1: you can see that the FED that this shift from 280 00:15:18,600 --> 00:15:22,960 Speaker 1: fifties to five. And I suppose recently the comments out 281 00:15:23,000 --> 00:15:28,960 Speaker 1: of UM Leo branderd suggests that the FED is beginning 282 00:15:28,960 --> 00:15:31,000 Speaker 1: to kind of adjust to the fact that the economy 283 00:15:31,080 --> 00:15:33,920 Speaker 1: is weakened and that it views itself as being in 284 00:15:33,960 --> 00:15:37,600 Speaker 1: restrictive territory and at some point it's gonna pause. That's 285 00:15:37,600 --> 00:15:40,880 Speaker 1: the right thing to do. UM. What they're not ready 286 00:15:40,920 --> 00:15:44,080 Speaker 1: to do because of the level of inflation. It might 287 00:15:44,160 --> 00:15:47,120 Speaker 1: just identify this, I think nicely. There's the month on 288 00:15:47,160 --> 00:15:49,800 Speaker 1: month stuff, which looks pretty good, but then there's the 289 00:15:49,840 --> 00:15:51,840 Speaker 1: fact that what the public cares about is the year 290 00:15:51,880 --> 00:15:54,160 Speaker 1: on year numbers, and those things are still high. So 291 00:15:54,200 --> 00:15:56,720 Speaker 1: the FED is going to have something of an asymmetric 292 00:15:57,400 --> 00:16:00,880 Speaker 1: biased toward hawkishness until it can get those year on 293 00:16:00,960 --> 00:16:03,280 Speaker 1: year numbers down safe territory and I think that's below 294 00:16:03,320 --> 00:16:05,440 Speaker 1: three percent. So you mentioned Leo Brainard. Let's go there. 295 00:16:05,920 --> 00:16:08,920 Speaker 1: Some people, including city groups Andrew hollin Horst, saying that 296 00:16:09,000 --> 00:16:11,720 Speaker 1: if she does take the job with the White House, 297 00:16:11,960 --> 00:16:14,400 Speaker 1: this could actually increase the hawkish tilt of the Federal 298 00:16:14,400 --> 00:16:17,720 Speaker 1: Reserve that she was actually more of a moderating voice, saying, 299 00:16:17,840 --> 00:16:19,680 Speaker 1: maybe the risks are a little bit more balanced. Do 300 00:16:19,680 --> 00:16:25,400 Speaker 1: you agree, Well, maybe, or you know, I think there's 301 00:16:25,400 --> 00:16:29,320 Speaker 1: probably some extent to which she's also been a trial balloon, 302 00:16:30,120 --> 00:16:33,360 Speaker 1: you know. And this FED seems to me, in their 303 00:16:33,400 --> 00:16:37,880 Speaker 1: communication strategy, to have been much more coordinated, um and 304 00:16:37,880 --> 00:16:42,800 Speaker 1: and sort of game planned than say Feds of three 305 00:16:42,840 --> 00:16:44,440 Speaker 1: or four or five years ago, when it was really 306 00:16:44,480 --> 00:16:46,440 Speaker 1: just a talking shop in public. When it comes to 307 00:16:46,440 --> 00:16:50,360 Speaker 1: the actual economic data. How much of people overlooking the 308 00:16:50,440 --> 00:16:54,520 Speaker 1: Chinese coming online, the fact that China ended zero COVID 309 00:16:54,680 --> 00:16:56,200 Speaker 1: and we're going to get some sort of boost with 310 00:16:56,240 --> 00:17:00,440 Speaker 1: the consumer spending that perhaps could also juice and for 311 00:17:00,640 --> 00:17:03,720 Speaker 1: commodities and for other goods exactly. We just wrote about this, 312 00:17:04,000 --> 00:17:06,160 Speaker 1: and we think that at the global level, the impact 313 00:17:06,200 --> 00:17:08,160 Speaker 1: this year is going to be pretty modest, at about 314 00:17:08,240 --> 00:17:11,239 Speaker 1: zero point two percent of global GDP. Most of that 315 00:17:11,359 --> 00:17:14,520 Speaker 1: is going to be focused outside of China. Most of 316 00:17:14,560 --> 00:17:18,080 Speaker 1: that's going to be focused in Asia countries like Thailand 317 00:17:18,200 --> 00:17:20,760 Speaker 1: and Singapore. The Philippines are gonna benefit as the Chinese 318 00:17:20,800 --> 00:17:25,000 Speaker 1: begin to travel abroad again. UM. In Europe, maybe a 319 00:17:25,040 --> 00:17:28,440 Speaker 1: small boost one and a half, sorry, zero point one 320 00:17:28,520 --> 00:17:32,080 Speaker 1: to zero the United States, very small. The key thing 321 00:17:32,200 --> 00:17:35,080 Speaker 1: is going to be the impact on energy prices, and 322 00:17:35,359 --> 00:17:37,800 Speaker 1: this is one of the reasons why the FED at 323 00:17:37,840 --> 00:17:40,600 Speaker 1: this stage, even with a succession a pretty good month 324 00:17:40,640 --> 00:17:45,600 Speaker 1: on months, can't take for granted victory. If for whatever reason, 325 00:17:46,080 --> 00:17:48,199 Speaker 1: the Chinese managed to drive up boil price as well 326 00:17:48,200 --> 00:17:50,560 Speaker 1: above a hundred dollars a barrowable headline, inflation is going 327 00:17:50,600 --> 00:17:52,639 Speaker 1: to return to being something of a problem. But you're not. 328 00:17:52,680 --> 00:17:54,879 Speaker 1: You're under playing your knowledge base here. You own the 329 00:17:54,920 --> 00:17:57,640 Speaker 1: Pacific room for credits suites for years and years and years. 330 00:17:57,640 --> 00:18:00,720 Speaker 1: Nobody's hit raffles barre like you about on line is 331 00:18:00,880 --> 00:18:05,359 Speaker 1: the bottom line is you're suggesting Brent crude with Pacific 332 00:18:05,480 --> 00:18:09,160 Speaker 1: rim oil demand coming back, are you suggesting it could 333 00:18:09,200 --> 00:18:12,560 Speaker 1: pop above a hundred and find new levels up at one? 334 00:18:12,680 --> 00:18:15,040 Speaker 1: That's not our forecast set. Our forecast set is, you know, 335 00:18:15,160 --> 00:18:17,600 Speaker 1: kind of around ninety where about where we are right now. 336 00:18:17,800 --> 00:18:20,640 Speaker 1: What I'm saying is that it's been very, very difficult 337 00:18:20,680 --> 00:18:23,880 Speaker 1: to predict. We have to recognize that the energy markets 338 00:18:23,960 --> 00:18:26,719 Speaker 1: are very tight. You know, we're not getting as much 339 00:18:26,760 --> 00:18:29,000 Speaker 1: of a response out of the United States in the 340 00:18:29,000 --> 00:18:32,600 Speaker 1: shale patch, OPEC is sort of back in control. So 341 00:18:32,800 --> 00:18:34,680 Speaker 1: you know is if I were the Fed, I'm sitting 342 00:18:34,720 --> 00:18:38,720 Speaker 1: there is there a chance that for despite all my forecasting, 343 00:18:38,960 --> 00:18:41,480 Speaker 1: that oil surprises to the top side and that really 344 00:18:41,600 --> 00:18:44,639 Speaker 1: damages my inflation outlook, Yeah, there's a chance. So I 345 00:18:44,640 --> 00:18:46,959 Speaker 1: can't take that risk. Again with your history of the 346 00:18:46,960 --> 00:18:50,200 Speaker 1: Pacific RIM, do you just model out yield curve control 347 00:18:50,280 --> 00:18:52,800 Speaker 1: goes away and we get yen stronger, back to where 348 00:18:52,840 --> 00:18:55,720 Speaker 1: we knew it. I think that's right, but only after 349 00:18:56,119 --> 00:18:57,919 Speaker 1: the new governor comes in. It was going to till 350 00:18:57,920 --> 00:19:00,399 Speaker 1: the So we need to get the new governor in 351 00:19:00,440 --> 00:19:03,200 Speaker 1: April and then we need a policy review, and then 352 00:19:03,280 --> 00:19:06,199 Speaker 1: probably in June will take away your curve control. But 353 00:19:06,720 --> 00:19:08,639 Speaker 1: note that JAB the b o J has a new 354 00:19:08,680 --> 00:19:13,600 Speaker 1: facility that allows it to lend banks against j g 355 00:19:13,760 --> 00:19:18,040 Speaker 1: B s at sub market yields. So it's created a 356 00:19:18,040 --> 00:19:21,840 Speaker 1: facility that will allow it to manage the process of TENUA. 357 00:19:22,080 --> 00:19:24,960 Speaker 1: It's almost like sterile it's almost like sterilized currency moves. 358 00:19:24,960 --> 00:19:27,399 Speaker 1: They set up a sidecar move correct, almost like a 359 00:19:27,440 --> 00:19:30,639 Speaker 1: sterilized yield curt control. So they it's the one place 360 00:19:30,680 --> 00:19:34,480 Speaker 1: that wants inflation. You know, so externally the I M 361 00:19:34,560 --> 00:19:38,360 Speaker 1: F may be excited about Japanese inflation, wells with the Japanese, 362 00:19:38,359 --> 00:19:41,800 Speaker 1: except in the opposite direction they want it. Great, Farris, 363 00:19:41,800 --> 00:19:54,720 Speaker 1: thank you so much. With Curtis Sez, we are going 364 00:19:54,760 --> 00:19:57,960 Speaker 1: to stop right now. We can do this. With Richard Hass, 365 00:19:58,359 --> 00:20:00,200 Speaker 1: it was my book of the summer, book of the year. 366 00:20:00,240 --> 00:20:03,520 Speaker 1: I can't remember right now, but his book on how 367 00:20:03,640 --> 00:20:07,200 Speaker 1: to figure out the New Western Civilization one oh one 368 00:20:07,600 --> 00:20:10,879 Speaker 1: the world was so important. And he comes back with 369 00:20:10,960 --> 00:20:16,399 Speaker 1: the jewel. It is the Bill of Obligations, but far more, Lisa, 370 00:20:16,560 --> 00:20:21,480 Speaker 1: this goes back and this is corny but unbelievably tangible. 371 00:20:21,600 --> 00:20:28,320 Speaker 1: Right now, a Scout is trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful. 372 00:20:28,359 --> 00:20:32,960 Speaker 1: I memorize this once, thrifty, brave, clean, and Reverend Richard 373 00:20:33,000 --> 00:20:38,000 Speaker 1: Hass takes us back to another time and primarily screams 374 00:20:38,080 --> 00:20:43,600 Speaker 1: for some civility within our fractured American society. Congratulation on 375 00:20:43,680 --> 00:20:46,600 Speaker 1: the ten habits of good citizens. Thank you, sir, it's 376 00:20:46,640 --> 00:20:49,800 Speaker 1: so interesting you quote the Scouts oath. The Scouts are 377 00:20:49,840 --> 00:20:52,560 Speaker 1: one of the very few organizations in America. Girl, Scouts 378 00:20:52,560 --> 00:20:55,359 Speaker 1: and boy Scouts that actually teach civics, they actually are 379 00:20:55,400 --> 00:20:58,359 Speaker 1: invested in the fabric of the society. It changed me. 380 00:20:58,520 --> 00:21:00,720 Speaker 1: It is that the whole legal scout thing long time 381 00:21:00,760 --> 00:21:04,520 Speaker 1: ago and and all that. How did we get here? 382 00:21:04,640 --> 00:21:07,840 Speaker 1: How did our society get to where you had to 383 00:21:07,840 --> 00:21:12,919 Speaker 1: write a piercing a hundred and fifty pages on America? 384 00:21:13,000 --> 00:21:16,080 Speaker 1: Get your act together? A couple of reasons. One is 385 00:21:16,119 --> 00:21:18,960 Speaker 1: we don't teach our story. The fact that we don't 386 00:21:19,040 --> 00:21:22,320 Speaker 1: uh teach Civics in many schools. If we do teach it, 387 00:21:22,320 --> 00:21:24,840 Speaker 1: it's an adequate. You can graduate from virtually any college 388 00:21:24,920 --> 00:21:28,080 Speaker 1: or university nowt toime. And if you navigate your course 389 00:21:28,119 --> 00:21:31,960 Speaker 1: distribution right, you'll never study physics civics. You won't understand 390 00:21:32,000 --> 00:21:35,080 Speaker 1: the fact the basis physics for that. I sorry about that. 391 00:21:35,480 --> 00:21:38,159 Speaker 1: Uh So there's that. I think media and social media 392 00:21:38,520 --> 00:21:41,320 Speaker 1: has contributed to it. Increasingly people go into their own 393 00:21:41,320 --> 00:21:44,160 Speaker 1: ecosystem or ecosystem, whichever you want to call it. They 394 00:21:44,160 --> 00:21:47,080 Speaker 1: go for things to confirm their biases. Social media is 395 00:21:47,160 --> 00:21:49,360 Speaker 1: much more about social than news, but this is increasing 396 00:21:49,440 --> 00:21:53,040 Speaker 1: where people get not their information but their misinformation. I 397 00:21:53,080 --> 00:21:56,520 Speaker 1: think there's I think people have also become more skeptical 398 00:21:56,560 --> 00:21:59,320 Speaker 1: of government. You know, things you talk about on this show, 399 00:21:59,359 --> 00:22:01,560 Speaker 1: the failure to manage the economy, well, things like the 400 00:22:01,600 --> 00:22:04,879 Speaker 1: wars in Iraq and Afghanistan. It's created a sense of 401 00:22:05,040 --> 00:22:07,520 Speaker 1: populism in this country for any number of reasons. There's 402 00:22:07,560 --> 00:22:10,479 Speaker 1: been backsliding here. And by the way, it's not unique here. 403 00:22:10,520 --> 00:22:12,320 Speaker 1: We see it in Brazil, we see it in Mexico, 404 00:22:12,359 --> 00:22:14,520 Speaker 1: we see it in parts of Europe. I think democracies 405 00:22:14,560 --> 00:22:16,800 Speaker 1: are under pressure. We just never thought it would happen 406 00:22:16,840 --> 00:22:19,960 Speaker 1: here where the world's oldest democracy. Where the where the case? 407 00:22:20,119 --> 00:22:23,640 Speaker 1: Jeff Sex screamed about this out of Columbia ten years ago, 408 00:22:23,720 --> 00:22:27,040 Speaker 1: even twelve fifteen years ago, talking about the fractured American 409 00:22:27,160 --> 00:22:31,760 Speaker 1: education system. What's the best practice model out there worldwide 410 00:22:32,320 --> 00:22:35,480 Speaker 1: that we can learn from to begin at the margin 411 00:22:35,680 --> 00:22:40,840 Speaker 1: to improve our social education process. We have some good examples. Yeah, 412 00:22:40,840 --> 00:22:43,040 Speaker 1: we still have the best higher education in the country, 413 00:22:43,080 --> 00:22:45,120 Speaker 1: in the world. I would say the problem is, again 414 00:22:45,160 --> 00:22:50,080 Speaker 1: we don't require certain things. We offer the model. I 415 00:22:50,080 --> 00:22:52,439 Speaker 1: would not put that at the at the pin at 416 00:22:52,440 --> 00:22:54,720 Speaker 1: the pinnacle. But now the people line up around the 417 00:22:54,720 --> 00:22:57,320 Speaker 1: world to go to American universities. The problem as universities 418 00:22:57,400 --> 00:23:01,400 Speaker 1: let people off their campus without requiring to do certain things. Finland, 419 00:23:01,400 --> 00:23:04,200 Speaker 1: for example, has just recently started an experiment for high 420 00:23:04,200 --> 00:23:07,080 Speaker 1: school kids. You want to go through elementary school, high school, 421 00:23:07,080 --> 00:23:09,920 Speaker 1: you have to become what's called literate and information. They 422 00:23:09,960 --> 00:23:15,160 Speaker 1: teach you how to navigate, Uh, this this world of information, misinformation? 423 00:23:15,160 --> 00:23:18,560 Speaker 1: What's the fact? What's what's what's something else? What's an opinion? Days? 424 00:23:18,640 --> 00:23:20,720 Speaker 1: By the way past that interesting enough, One state in 425 00:23:20,760 --> 00:23:23,399 Speaker 1: the fifty states has that rule, that law. New Jersey 426 00:23:23,680 --> 00:23:26,160 Speaker 1: just passed it the other week. Every New Jersey high 427 00:23:26,160 --> 00:23:29,840 Speaker 1: school graduate is going to have experienced information literacy. Well, 428 00:23:29,920 --> 00:23:32,399 Speaker 1: you wrote this book. There is more than one page, 429 00:23:32,440 --> 00:23:35,680 Speaker 1: but you hated us this card which had the ethos 430 00:23:35,760 --> 00:23:38,760 Speaker 1: that you are trying to And how much is this 431 00:23:38,960 --> 00:23:41,399 Speaker 1: really an indictment of the moment that we're in in 432 00:23:41,520 --> 00:23:45,200 Speaker 1: terms of people's attention span, ability to focus? In other words, 433 00:23:45,480 --> 00:23:48,040 Speaker 1: do you see any progress in the places that you're 434 00:23:48,080 --> 00:23:52,560 Speaker 1: basically saying for civics that could actually salvage what you're 435 00:23:52,560 --> 00:23:55,959 Speaker 1: hoping for? I see, I see the potential for progress 436 00:23:56,160 --> 00:23:59,040 Speaker 1: almost every group I speak to, And in some ways 437 00:23:59,040 --> 00:24:01,200 Speaker 1: the reason I wrote this book. People know there's something wrong. 438 00:24:01,680 --> 00:24:05,200 Speaker 1: Americans get it. Look at the polls there. They've lost 439 00:24:05,280 --> 00:24:08,560 Speaker 1: confidence in the future. People know there's something There's a 440 00:24:08,600 --> 00:24:12,640 Speaker 1: lot of interested in teaching civics. People know that something's 441 00:24:12,640 --> 00:24:16,639 Speaker 1: going seriously wrong in Washington, that they're alienated from the government. 442 00:24:16,680 --> 00:24:19,560 Speaker 1: So I think the potential for reformers there. The question 443 00:24:19,680 --> 00:24:22,879 Speaker 1: is whether we can get sufficient involvement. The fact in 444 00:24:22,880 --> 00:24:25,679 Speaker 1: the recent midterm elections, given all the stakes, less than 445 00:24:25,720 --> 00:24:29,240 Speaker 1: half the eligible voters voted. That's something wrong. We've got it. 446 00:24:29,280 --> 00:24:31,720 Speaker 1: We've got to get people more informed and more involved. 447 00:24:31,840 --> 00:24:35,200 Speaker 1: How does this really dovetail. It's the US positioned internationally 448 00:24:35,240 --> 00:24:37,800 Speaker 1: as someone who has been in the diplomatic world for 449 00:24:37,840 --> 00:24:40,520 Speaker 1: your entire career, and considering the fact that the rest 450 00:24:40,520 --> 00:24:43,040 Speaker 1: of the world sees the dysfunction in Washington and reacts 451 00:24:43,080 --> 00:24:46,320 Speaker 1: to it. The Chinese like nothing more than to show 452 00:24:46,320 --> 00:24:48,760 Speaker 1: pictures of things like January six on their television and 453 00:24:48,840 --> 00:24:52,120 Speaker 1: go see the quote unquote democracy is the same as anarchy, 454 00:24:52,320 --> 00:24:55,160 Speaker 1: so that the authoritarians love it makes it very hard 455 00:24:55,200 --> 00:24:57,160 Speaker 1: for us to say, emulate us, but we don't look 456 00:24:57,240 --> 00:24:59,399 Speaker 1: very good. More important, in some ways, it makes it 457 00:24:59,480 --> 00:25:02,120 Speaker 1: very hard for our allies to trust us. They see 458 00:25:02,119 --> 00:25:05,440 Speaker 1: the discontinuities that have come into a into American politics. 459 00:25:05,440 --> 00:25:08,439 Speaker 1: They no longer have the assumptions of reliability, and I 460 00:25:08,480 --> 00:25:10,720 Speaker 1: think our foes for the same reason, I'm much more 461 00:25:10,760 --> 00:25:12,679 Speaker 1: willing to challenge us because they're not sure we're going 462 00:25:12,760 --> 00:25:15,760 Speaker 1: to be there. On radio, on television, Richard hass with 463 00:25:15,880 --> 00:25:19,200 Speaker 1: us as we celebrate his new book, The Bill of Obligations. 464 00:25:19,240 --> 00:25:21,560 Speaker 1: Can't say enough about it, A hundred and fifty pages 465 00:25:21,600 --> 00:25:25,680 Speaker 1: here and now we're gonna migrate to Richard hass oscar 466 00:25:26,240 --> 00:25:30,520 Speaker 1: analyst expert on movies there. I was watching I call 467 00:25:30,560 --> 00:25:33,760 Speaker 1: it The Banshees, the Irish movie that's up now for 468 00:25:34,119 --> 00:25:37,320 Speaker 1: and I thought of you. They're looking across the harbor 469 00:25:37,440 --> 00:25:40,320 Speaker 1: at the war going on in Ireland you lived. Did 470 00:25:40,400 --> 00:25:43,439 Speaker 1: you see that movie and wanted to bring back about 471 00:25:43,440 --> 00:25:47,200 Speaker 1: the Irish tension that is and will always still be there. 472 00:25:47,880 --> 00:25:50,400 Speaker 1: I did not say it. You have to see it. Yeah, yeah, 473 00:25:50,440 --> 00:25:52,600 Speaker 1: but I'm kind of I've been kind of busy, Tom. 474 00:25:53,560 --> 00:25:55,439 Speaker 1: But but two things. One is that a lot of 475 00:25:55,440 --> 00:25:58,000 Speaker 1: those issues, not so much the Ireland English, but the 476 00:25:58,080 --> 00:26:01,040 Speaker 1: problems in Northern Ireland breaks it. One of the many 477 00:26:01,119 --> 00:26:06,640 Speaker 1: consequences of bregsit it has reintroduced friction into Northern Ireland. 478 00:26:06,920 --> 00:26:10,240 Speaker 1: Northern Ireland went through two terrible decades, three terrible tacks 479 00:26:10,280 --> 00:26:13,159 Speaker 1: of the Troubles. I don't think now it's inconceivable that 480 00:26:13,200 --> 00:26:16,240 Speaker 1: could we could see some sort of reintroduction. Clearly we're 481 00:26:16,240 --> 00:26:19,840 Speaker 1: seeing greater friction uh there. And by the way, it's 482 00:26:19,840 --> 00:26:22,000 Speaker 1: given what we're talking about this morning, it's a warning 483 00:26:22,040 --> 00:26:24,360 Speaker 1: for this country. I'm not worried about a new civil war. 484 00:26:24,720 --> 00:26:27,640 Speaker 1: I am worried about an American version of the Troubles 485 00:26:27,880 --> 00:26:31,480 Speaker 1: where we have politically inspired violence around the country. It 486 00:26:31,600 --> 00:26:34,080 Speaker 1: is not inconceivable. No one should think the January six 487 00:26:34,240 --> 00:26:36,359 Speaker 1: is a one off, like you've got a big business 488 00:26:36,400 --> 00:26:40,600 Speaker 1: audience on this show. Businesses besides thinking about E. S, 489 00:26:40,680 --> 00:26:43,639 Speaker 1: G and D e I, businesses ought to be thinking 490 00:26:43,720 --> 00:26:46,520 Speaker 1: what can they do to promote American democracy? They have 491 00:26:46,600 --> 00:26:49,160 Speaker 1: an enormous stake in the rule of law. Just real quick, 492 00:26:49,160 --> 00:26:51,000 Speaker 1: care before we let you go. You were talking about 493 00:26:51,080 --> 00:26:53,440 Speaker 1: social media, the involvement there. There is a push to 494 00:26:53,640 --> 00:26:57,240 Speaker 1: band TikTok in part because of the Chinese ownership. Do 495 00:26:57,280 --> 00:27:01,360 Speaker 1: you think that restricting social media is the answer. It's 496 00:27:01,359 --> 00:27:03,040 Speaker 1: part of the answer where we have to restrict We 497 00:27:03,080 --> 00:27:05,800 Speaker 1: have to regulate what are the responsibilities of the carriers? 498 00:27:05,800 --> 00:27:08,240 Speaker 1: Are they publishers? Are they simply pipelines? I think that. 499 00:27:08,640 --> 00:27:10,840 Speaker 1: But more important is probably to make the people who 500 00:27:10,920 --> 00:27:13,960 Speaker 1: go to social media more discerning what how do how 501 00:27:13,960 --> 00:27:16,800 Speaker 1: do we make them understand the limits of social media? Again, 502 00:27:17,040 --> 00:27:20,160 Speaker 1: I want people to be citizens, to be critical consumers 503 00:27:20,200 --> 00:27:23,840 Speaker 1: of information. Reagan called Ronald Reagan called for patriotism, but 504 00:27:23,960 --> 00:27:27,080 Speaker 1: first he called for informed patriotism. What we need to 505 00:27:27,080 --> 00:27:29,560 Speaker 1: do is make sure we are critical consumers of this 506 00:27:29,680 --> 00:27:32,520 Speaker 1: information suit that we're all living in. Richard Oas, thank 507 00:27:32,560 --> 00:27:34,840 Speaker 1: you so much in congratulations. And I don't like to 508 00:27:34,880 --> 00:27:37,199 Speaker 1: cover the covers like a refluence sweater thing with the 509 00:27:37,240 --> 00:27:40,160 Speaker 1: American flag on it, torn away. And what I would 510 00:27:40,160 --> 00:27:45,600 Speaker 1: really emphasize to our international audience, the Bill of Obligations 511 00:27:45,880 --> 00:27:49,560 Speaker 1: is not just in American book. It is an international 512 00:27:49,600 --> 00:27:54,159 Speaker 1: book about learning the civics that we all know. And 513 00:27:54,480 --> 00:27:56,719 Speaker 1: I love that Glaus is your democracy is more than 514 00:27:56,800 --> 00:28:01,199 Speaker 1: procedures and laws and ethical ideal Lisa. That sums it up. 515 00:28:01,600 --> 00:28:05,439 Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and 516 00:28:05,600 --> 00:28:09,760 Speaker 1: anywhere else you get your podcasts. Listen live every weekday, 517 00:28:10,040 --> 00:28:13,560 Speaker 1: starting at seven am Eastern. I'm Bloomberg dot com, the 518 00:28:13,640 --> 00:28:17,600 Speaker 1: I Heart Radio app tune In, and the Bloomberg Business app. 519 00:28:18,119 --> 00:28:21,760 Speaker 1: You can watch us live. I'm Bloomberg Television and always 520 00:28:22,119 --> 00:28:26,119 Speaker 1: on the Bloomberg Terminal. Thanks for listening. I'm Tom Keane, 521 00:28:26,200 --> 00:28:27,960 Speaker 1: and this is Bloomberg