Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com,
Speaker 1: and of course on the Bloomberg terminal. This is a joy.
Speaker 1: And as we all migrate over the river and through
Speaker 1: the woods, it is important to understand the Blinder of
Speaker 1: Princeton will grace the door of grandchildren. We speak to
Speaker 1: him before he celebrates Thanksgiving. He's the former vice chairman
Speaker 1: of the Fetain of course, always and forever with his
Speaker 1: Princeton University. Alan Blinder, your book is wildly accessible to
Speaker 1: review folks. There is Milton Friedman and Anna Schwartz a
Speaker 1: thousand pages, maybe eight under pages, as Alan Meltzer three
Speaker 1: thousand pages. This is, whatever your politics, the readable book
Speaker 1: of four hundred pages on a monetary and fiscal history
Speaker 1: of the United States. Allen, how did you keep the
Speaker 1: book so short? What did you have to do to
Speaker 1: keep it under five hundred pages? It's a it's a
Speaker 1: very it's a very fair question. I think what you
Speaker 1: have to do is be the editor in chief. Uh,
Speaker 1: I do not have every detail that you could imagine
Speaker 1: if you read look at Alan Meltzer's book, you can
Speaker 1: almost go f O MC meeting by f MC meeting
Speaker 1: and see what everybody said. Uh Sadin I was gonna say, sadly,
Speaker 1: I don't think it's sadly. You don't find that here,
Speaker 1: but you do find the basic storyline of what was
Speaker 1: going on with monetary policy and fiscal policy by the way,
Speaker 1: and what were the big issues of the day, and
Speaker 1: how were they resolved? Then sort of where we think
Speaker 1: we have answers, Well, those good decisions are bad decisions
Speaker 1: to me. The singular distinction right now is your chapter
Speaker 1: four team, where you say, all together, now, it was
Speaker 1: unthinkable for Alan Greenspan to comment on the dollar, and
Speaker 1: with the various crises, the once in a lifetime crisis
Speaker 1: we've enjoyed, we now have a FED in bed with
Speaker 1: the Treasury talking about the dollar and frankly social policy
Speaker 1: as well. Where do we go from our present altogether? Now? Well,
Speaker 1: I think in time this is not happening right away,
Speaker 1: but in time you're gonna see more of a separation
Speaker 1: between the Fed and the Treasury in that sense back
Speaker 1: towards the traditional UH system in the at least in
Speaker 1: the United States. Not around the world, by the way,
Speaker 1: but in the UH in the United States, the pandemic
Speaker 1: crisis just insisted that the Treasury and the FED um
Speaker 1: you know, snuggle up together. Well that's a that's a
Speaker 1: bad metaphor, work towards the same goals and then not
Speaker 1: have any distance showing between the two of them. There
Speaker 1: were a liquidity facilities that the FED created, lending facilities
Speaker 1: that the FED created, back stoff by the Treasury. That
Speaker 1: kind of cooperation was dictated by the circumstances. Hopefully, we
Speaker 1: all think we're going to get back to normal. Well
Speaker 1: back to normal was Vice Chairman Blinder speaking, and white
Speaker 1: smoke came out of the chimney in advance to let
Speaker 1: people know what was going to be said. Is there
Speaker 1: too much FED speak today? Allen? I don't think so.
Speaker 1: I mean, an elusive but reasonable goal, but it's elusive
Speaker 1: is to get the FED speaking with one voice. That's
Speaker 1: not so easy when they are nineteen members on the
Speaker 1: f O m C. But it's not been too bad.
Speaker 1: I mean, there are other committees around the world that
Speaker 1: are speaking with many more conflicting voices than the f
Speaker 1: O m c UH does. But you know my view.
Speaker 1: People have often criticized the tendency to speak too much,
Speaker 1: in my view as if you've confused people by speaking
Speaker 1: too much, say more so they're not confused anymore. And
Speaker 1: by the way, without without any advice for me, J.
Speaker 1: Powell does that when he sees that the markets and
Speaker 1: other people are getting it wrong, he speaks up again
Speaker 1: to help them get it right. And I'm blind to
Speaker 1: you're talking to finance wannabes at Princeton, and that's a
Speaker 1: wonderful and and and good thing. As you mentioned, Chairman
Speaker 1: Paul and others including Vice Chairman Brainerd try to speak
Speaker 1: in a safe manner, getting out to an ex post
Speaker 1: reality where they can react. The financial media, and frankly
Speaker 1: much of Wall Street is now in a parlor game
Speaker 1: of futures, trying to find not only the path up
Speaker 1: to a terminal rate, but then to game a pivot
Speaker 1: to a more accommodative stance. You and I have never
Speaker 1: seen this. How do we extricate ourselves from this silliness? Well,
Speaker 1: I think you the federal extricate itself uh from by
Speaker 1: its actions at its words. Remember the jackson Hole speech
Speaker 1: of Chair Powell. The whole purpose of that was to
Speaker 1: shake out of the markets heads the notion that this
Speaker 1: would be a quick peek and they fed funds rate
Speaker 1: and then it was not coming down right away. I
Speaker 1: mean he said very he made it very clear that
Speaker 1: that was not going to happen. And we don't think
Speaker 1: that's going to happen either. We're not going to get
Speaker 1: rid of the constant, incessant drumbeat of disparate chatter about
Speaker 1: the Fed coming out of market people. You know, that's
Speaker 1: their constitutional right, uh so to speak, and they will
Speaker 1: say what they say. But the clever people will keep
Speaker 1: their eye on the ball and uh and filtered through
Speaker 1: a lot of that noise and pay attention to what's
Speaker 1: really coming out of the fence mouth, and that mainly
Speaker 1: means the FED chairman's mouth. All Blinder, one final question
Speaker 1: on your majesty of forty fifty sixty years of FED policy.
Speaker 1: There's the unknown unknown is out there, like Dr al
Speaker 1: Arion would speak of, and one of the great unknowns,
Speaker 1: thinking of the Laureate Paul Romer, is the effective technology
Speaker 1: on Alan Blinder's economy, do we actually really know what
Speaker 1: technology is doing to us right now, we most definitively don't.
Speaker 1: One of the things, you know, economists aren't that great
Speaker 1: at forecasting, period, But one of the things we really
Speaker 1: cannot forecast, and it's not just us, nobody can forecast
Speaker 1: to your question, is the sort of changes in the
Speaker 1: long run trend of productivity. These things happen now and then,
Speaker 1: not every year, not every two years, but they do happen,
Speaker 1: and they almost always hit us by surprise, and in
Speaker 1: some cases, even looking back over years or decades, we
Speaker 1: don't still don't understand quite what in the world happened.
Speaker 1: You know, the acceleration of productivity. I think we understand
Speaker 1: that that to do with companies learning how to use
Speaker 1: all those computers that are hanging around. But the nineteen
Speaker 1: seventy three plus slowdown we still don't understand. Here we
Speaker 1: are in the year two and you know, productivity girls
Speaker 1: just slow down, and we don't know why. I will
Speaker 1: not mince words, folks checking it at under five in
Speaker 1: the pages. A Monetary and Fiscal History of United States
Speaker 1: from a time of John F. Kennedy is without question
Speaker 1: the most readable FED history I've seen. Of course, Sir
Speaker 1: Alan Blinder of Princeton University, Allen, thank you so much
Speaker 1: for joining us before dinner with said grandchildren right now.
Speaker 1: One of the other stories out there is the ping
Speaker 1: pong ball known as oil. Jeffrey Curry provides leadership at
Speaker 1: Goldman Sect, and I can only think of the great
Speaker 1: Adam Saminsky at Deutsche Bank years ago. Here's a guy
Speaker 1: who actually goes into the Excel spreadsheets of figuring out
Speaker 1: supply and demand. Jeff Curry, what do your Golden Sex
Speaker 1: Excel spreadsheets say about oil price next year based off
Speaker 1: the mystery of global demand? Well, we're definitely bullish come
Speaker 1: next spring, but what happens between now and next spring,
Speaker 1: that path is highly uncertain. You have China COVID cases surging,
Speaker 1: so you're getting forced lockdowns that were not planned um,
Speaker 1: which is impacting demand up to about one point two
Speaker 1: million barrels per day. Coincidentally the same size as the
Speaker 1: OPEC cuts, So you know, I think that's important development.
Speaker 1: First time ever OPAC ever cut in anticipation of a
Speaker 1: demand loss. And then you have the G seven price cap,
Speaker 1: which just they keep rolling the dial and it gets
Speaker 1: milder and milder every day. You know. I mean it's
Speaker 1: you know, least enforceable through shipping insurance. And then you
Speaker 1: also have the cap coming out six five seventy, well
Speaker 1: about the sixty that really put the clamp on them.
Speaker 1: Let's go back to your Chicago microeconomics. What is the
Speaker 1: elasticity or responsiveness of demand of China wakes up and
Speaker 1: moves forward and comes out of COVID. How rapidly will
Speaker 1: that demand pick up when and if well? I mean
Speaker 1: that's why you know, we're sticking to our guns of
Speaker 1: a hundred and fifteen dollar price target for next year,
Speaker 1: because when they do come out, um, they're gonna put
Speaker 1: a p a lot of pressure not only on oil
Speaker 1: but the entire commodity complex um. And you can think
Speaker 1: about you know two is really being at an environment
Speaker 1: in which the second largest economy in the world, the
Speaker 1: largest commodity consumer in the world, was hibernating. So I
Speaker 1: think you're absolutely spot on. It's a game changer. Now.
Speaker 1: Their base case is that, hey, they're making the preparations
Speaker 1: today to reopen into Q But when do we learn
Speaker 1: in Hong Kong and Taiwan is that eventually it spirals
Speaker 1: out of control. The cases you know, go up too
Speaker 1: quickly and then you get a forced reopening, and I
Speaker 1: think a lot of fear of that happening right now.
Speaker 1: One of the great realities is you're pull an all
Speaker 1: night or at the University of Chicago Curry teaching micro
Speaker 1: in Chicago years ago, you do that at Bevis. Lisa
Speaker 1: Bran was very familiar with the retro diner in Chicago.
Speaker 1: So the last from Chicago greets her colleague. All right,
Speaker 1: no need to just sort of relive those moments ahead
Speaker 1: of Thanksgiving, Jeff. I am wondering, though, when you talk
Speaker 1: about the supply to demand dynamic and demand picking up
Speaker 1: with China on the supply side, how much of Russia's
Speaker 1: oil has actually been taken off the market, given the
Speaker 1: refineries in India and the exports over to Europe. I mean,
Speaker 1: it's relatively small and somewhere in that. You know, three
Speaker 1: to four hundred thousand barrels per day. You know our expectations.
Speaker 1: It grows modestly as the sanctions began to take place
Speaker 1: and you have frictions and other issues involved. Um, but
Speaker 1: you know, it's nowhere near as large as what people anticipated.
Speaker 1: But the offset on that is the investment across the
Speaker 1: space is far less than what people anticipated. Look at
Speaker 1: drilling in the US, expectations of US shale have been
Speaker 1: ratcheting down, decline rates in non opeq x US beginning
Speaker 1: to set, and so the supply problem of the underinvestment thesis,
Speaker 1: what we call the revenge of the old economy, is
Speaker 1: actually much stronger than we thought six months a year ago.
Speaker 1: And again, it's not just an oil story, it's everything
Speaker 1: in the commodity space. This is really important, Jeff, because
Speaker 1: a lot of people think that we've already seen the
Speaker 1: supply shock. We've already seen so many barrels taken off
Speaker 1: the market because of the sanctions on Russia. What you're
Speaker 1: saying is that's not true, that we have yet to
Speaker 1: see the true supply constraints that have come from a
Speaker 1: lack of investment in the shale patch, a lack of
Speaker 1: investment by oil majors around the world, and now potentially
Speaker 1: some sort of disruption with Russia if they don't comply
Speaker 1: with the price caps being opposed by G seven allies.
Speaker 1: Is that your idea, when will it kick in the
Speaker 1: supply constraints that you predict. This is not a you know,
Speaker 1: a tactical trading view. I mean two years ago in October,
Speaker 1: we called for a commodity supercycle and we still stand
Speaker 1: by that view. And a commodity supercycle is not an
Speaker 1: upward trend in prices. It's spike after spike after spike,
Speaker 1: and this is gonna go on and on until we
Speaker 1: have adequate investment to be able to grow supply. You
Speaker 1: need to grow um hydrocarbons, and until you have enough
Speaker 1: of green energy to be able to meet global demand.
Speaker 1: Right now, one of global energy still comes from hydrocarbons.
Speaker 1: You can't go to zero there and expect the other
Speaker 1: to carry you. It's got to be an energy transition,
Speaker 1: and we need that investment. And then to do the
Speaker 1: green investment, you need the medals. You need to copper,
Speaker 1: the alley, the nickel, lithium, cobalt, silver, You need all
Speaker 1: of those minerals to be able to invest in the
Speaker 1: green capex to be able to solve the long run decarbonization.
Speaker 1: So this is not a near term tactical view. We
Speaker 1: just came off the back of one of the spikes
Speaker 1: that was well underway before before the events in Russia,
Speaker 1: and we'll probably see another spike in three as China
Speaker 1: begins to to reopen. But in terms of solving this problem,
Speaker 1: it requires large scale capital investment and the tuns of
Speaker 1: trillions of dollars. And we're not even close backt we
Speaker 1: haven't even scratched the surface yet. But by the way,
Speaker 1: the one point I want to say is this cycle
Speaker 1: is no different than the ones that we saw in
Speaker 1: the seventies and two thousands. It's the same kind of
Speaker 1: commodity supercycle UM. And what I actually I want to
Speaker 1: make a point. What preceded the seventies, the nifty fifty
Speaker 1: new economy, What preceded the two thousands, it was the
Speaker 1: dot combo. What preceded this one the Feng boom. That's
Speaker 1: what we call the revenge of the old economy. New
Speaker 1: economy takes all the capital from the old economy, starts
Speaker 1: into the investment It needs to grow the supply base UM,
Speaker 1: which then shifts you into this supercycle environment. On the
Speaker 1: flip side, what do you say is the revenge of
Speaker 1: the supplied demand dynamic that when you hit a hundred
Speaker 1: hundred and twenty five dollars in barrel on w T I,
Speaker 1: demand instruction really comes into play. And we learned that
Speaker 1: over the past couple of months. How much does that
Speaker 1: cap where oil prices could go. Well, it depends on
Speaker 1: where the dollar is trading. Um. You know, obviously in
Speaker 1: a really strong dollar environment, you know that the prices
Speaker 1: that in many countries around the world experience were all
Speaker 1: time highs. While in the US in a real term,
Speaker 1: the all time high and somewhere around a hundred and
Speaker 1: ninety back in two thousand and eight, um, and we
Speaker 1: reached a hundred and thirty it wasn't even close. But
Speaker 1: for Europe, Pound, sterling, Japanese, yeah, and many of these
Speaker 1: other currencies around the world, they experienced all time high prices,
Speaker 1: so um, you know they to answer that question, you
Speaker 1: end up having asked where is the doll or trading now?
Speaker 1: I think the key view here in three is, you know,
Speaker 1: you've seen a big run up in the dollar. As
Speaker 1: we see growth start to materialize in China and other
Speaker 1: parts of the world, we would expect the dollar to
Speaker 1: be going to taper off and then you could open
Speaker 1: it up more for dollar denominated commodities. But the big
Speaker 1: event in two was not the fundamental side of the commodities,
Speaker 1: but it was the dollar. Jeff, I want to jump
Speaker 1: to the Chinese wall here and I want to go
Speaker 1: from Jeffrey Curry out to Neil Meta. You've got is
Speaker 1: any other firm has a cell side looking at individual companies?
Speaker 1: How do you link your world in these constraints that
Speaker 1: lead to a higher Brent crude barrel over to their world,
Speaker 1: which is single stock selection like his call, stunning call
Speaker 1: on x on mobile um. You know when you look
Speaker 1: at the UH way the equity has been training. They've
Speaker 1: been looking through this yes in the commodity price because
Speaker 1: they're beginning to see that long term story. And by
Speaker 1: the way, x on versus Microsoft exemplifies this revenge of
Speaker 1: the old economy story. You know, Tom, you've been doing
Speaker 1: as long as I have. How many times have you
Speaker 1: seen Microsoft the largest company in the world, and how
Speaker 1: many times have you seen x on the largest company? Right?
Speaker 1: You go back to two thousand Microsoft on top x
Speaker 1: on nowhere you found and then you you didn't invest
Speaker 1: in oil and then you had that supercycle two ten
Speaker 1: XN on top Microsoft on the bottle reverse. I've got
Speaker 1: eight other questions, but we don't have time for Jeffrey Curry,
Speaker 1: Thank you so much. With Goldman Sachs there let's dive
Speaker 1: into it right now. And what we do is, you
Speaker 1: don't kill two birds with one stone. We killed two
Speaker 1: turkeys with one stone, giving you the Thanksgiving angle. We
Speaker 1: do that with Troy Gayski, chief market strategist FS Investments,
Speaker 1: with a ton of experience of Global Wall Street in
Speaker 1: New York Wall Street. Troy, before we get to your
Speaker 1: sixty comments, I want to talk to you about the
Speaker 1: state of hedge funds. Given the stunning year we've had.
Speaker 1: How is eight twenty two and twenty doing. How are
Speaker 1: they in this year? Yeah, so it depends on the strategy, Tom.
Speaker 1: I mean, it's actually been a very good year for
Speaker 1: multi strategy solutions, whether they're daily forty act or whether
Speaker 1: they're the classic QP structures. UM. There's been big dispersion
Speaker 1: across markets, particularly look at rates versus currency, or you
Speaker 1: look at trade opportunities like shorting mortgages versus treasuries. So
Speaker 1: that's been a very attractive place to be. UM. Systematic
Speaker 1: trend followers have also had a very strong year. Uh,
Speaker 1: there's been huge trends as you know, whether it's the
Speaker 1: dollar or commodities or rates movie higher UM and and
Speaker 1: the strategies that struggled the most of course, wo been
Speaker 1: the growth oriented long short equity strategies that you know,
Speaker 1: got a little too over their skis in terms of
Speaker 1: growth and go go growth and perhaps got a little
Speaker 1: too involved in privates and elevated valuation. So you know,
Speaker 1: in general, we think, you know, liquid multi strategy solutions
Speaker 1: continue to make sense. Uh, you know, and if you're
Speaker 1: going for income, you can look at things like f
Speaker 1: s c O, which we recently listed, which has income
Speaker 1: plus appreciation potential that trades out a discount to nav um.
Speaker 1: So a lot lots to do in the hedge fund space,
Speaker 1: lots to do in the alternative space. And when you
Speaker 1: look at sixty in the heart of your note, we've
Speaker 1: had a lot of different conversations of bond price up,
Speaker 1: yield down. Is the big shock next year that's six
Speaker 1: comes back with a vengeance. Yeah, So coming back with
Speaker 1: the vengeance to be a very strong term. I think
Speaker 1: one of our major themes, you know, our major theme
Speaker 1: for this year has been protect capital, don't be a hero,
Speaker 1: be in the Northwest squad in the fishing frontier right
Speaker 1: except lower risk, and either get a total return from
Speaker 1: income or through multi strategy solutions as we moved through
Speaker 1: the cycle. Uh, the next theme over the next several
Speaker 1: years will be you know, cash flow is king in
Speaker 1: that you don't need price appreciation to make a reasonable
Speaker 1: return as long as you don't have a horrific recession
Speaker 1: where default rates skyrocket. Your law suggested, yield on cash
Speaker 1: flow should be pretty attractive. So that doesn't mean it's
Speaker 1: time to dramatically ramp up risk or or rotate back
Speaker 1: aggressively in this sixty. What it means is, if you're
Speaker 1: going to accept risk in your portfolio and be in
Speaker 1: that northeast quadrant, make sure you're doing it in strategies
Speaker 1: that have ample income and that can provide a buffer
Speaker 1: and also give you positive convexity if next year it
Speaker 1: turns out better than we think it will. So where
Speaker 1: does bitcoin fit in considering that you were bullish on
Speaker 1: the asset class not so long ago. Yeah, well, look
Speaker 1: so again, Lisa, we talked about this and many times. Right,
Speaker 1: bitcoin is the most cyplical asset on the planet. It
Speaker 1: goes through meteoric bowl markets like it did in UM. Eventually,
Speaker 1: as demand exhaust itself, UH supplies in elastic to price. Right.
Speaker 1: So whether bitcoins at a million dollars or a dollar
Speaker 1: come out a day. And that's the reason you have
Speaker 1: these huge cycles. So there's really two approaches to owning crypto,
Speaker 1: and when we talk about crypto bitcoin specifically, either have
Speaker 1: a tiny allocation your overall asset mix, ride the higher
Speaker 1: highs and higher lows, or trade the cycle. But clearly,
Speaker 1: as the Fed continues to tighten monetary policy, um any
Speaker 1: directionally long asset is going to have a much more
Speaker 1: challenging environment than if one hold on a second Troy
Speaker 1: because what you're saying right now challenges the sort of
Speaker 1: existential angs that you hear across the board of people
Speaker 1: saying Bitcoin's done is all a Ponzi scheme, forget about it,
Speaker 1: And we've heard that for the likes even if deal
Speaker 1: cush Cary of the Federal Reserve. How much are you
Speaker 1: pushing back against that, saying this is here to stay?
Speaker 1: And are you among those tracking when there could be
Speaker 1: a good entry point not necessarily bailing with all get out? Yeah?
Speaker 1: Look looks so, I mean it's same as it ever was. Right, Like,
Speaker 1: bitcoin has incredible cycles. Uh, you know, medior gains, whether
Speaker 1: it's sixty four x or thirty two x or eight
Speaker 1: x in the last cycle and then draw downs, but
Speaker 1: it always survives because of the strength of the network UM.
Speaker 1: So we certainly think bitcoin will be around for the
Speaker 1: long haul. But it's very very volatile UM and you know,
Speaker 1: most of what's gone on here recently, it's just bad
Speaker 1: actors in space. It really doesn't speak to the negativity
Speaker 1: or or negatively reflect on bitcoin itself. It more reflects
Speaker 1: negatively on some of the actors that were attracted to
Speaker 1: the asset class, which is incredibly unfortunate and and just
Speaker 1: calls for the fact that we need more regulation without
Speaker 1: a doubt. Try to ask you thank you so much
Speaker 1: with FS investments, Jennifer McKellen, she's just wonderful. She's ad
Speaker 1: a wonderful shop. Capital Economics think of them like x CIOs.
Speaker 1: Xios came out of Media Day one Jim and Michael Rocking,
Speaker 1: and same with Capital Economics Day one they published and
Speaker 1: everybody took him seriously as they should. Jennifer, you are
Speaker 1: readjusting in the next year you bring down the so
Speaker 1: called terminal rate. You're ratcheting down your interest rate. Guests
Speaker 1: in the March of next year discussed that YEES for
Speaker 1: the UK. We we've just reduced our forecast. We had
Speaker 1: a relatively high peak and a five percent and that
Speaker 1: was partly following the mini budget the fiscal stimulus that
Speaker 1: we saw coming at that time. We've just revised that
Speaker 1: peek down to four and a half percent next year,
Speaker 1: partly partly because of that fiscal stimulus not coming and
Speaker 1: in fact turning to tightening orbit will be it a
Speaker 1: bit later on. Partly also because we're seeing some signs
Speaker 1: that perhaps the labor market isn't quite as tight as
Speaker 1: it was. There are some signs in surveys of wage
Speaker 1: negotiations of a bit of a let up, so we're
Speaker 1: not quite as worried about the inflation. Can you take
Speaker 1: it over globally? Can you look at a mis guest
Speaker 1: here of a higher terminal rate will be off the
Speaker 1: mark next year? Yeah, Well, we thought for a long
Speaker 1: time that the US terminal rate will be a bit
Speaker 1: lower than priced into markets. We have a terminal rate
Speaker 1: of for four seven, five to five. And there I
Speaker 1: think in the U S we' seeing much clearer evidence
Speaker 1: of crisis precious easing up and that the UK seems
Speaker 1: to be following suits a little bit in that regard,
Speaker 1: so labor market is not as tight as it was.
Speaker 1: There is science in then some of the PP elements
Speaker 1: that US consumer price inflation is going to come down further.
Speaker 1: So so we're pretty confident that the peak isn't too
Speaker 1: far off in the US, despite the fact that officials
Speaker 1: still founding hawk ish. Jennifer, I gotta say, I gotta,
Speaker 1: I gotta kind of bother Tom here because he's raising
Speaker 1: questions about what we're cooking and that we might cook eagle,
Speaker 1: which is an endangered species. And then, uh, you know,
Speaker 1: catching me off guard. So I will catch you off
Speaker 1: guard and say, at this point, is the better than
Speaker 1: bad news in Europe, very bad news for what the
Speaker 1: ECB has to do for ECB officials to come out
Speaker 1: and hike more than people previously expected in the phase
Speaker 1: of perhaps better stronger economic output. Yeah, I mean, I
Speaker 1: draw limited encouragement from from the recent European data. Industrial
Speaker 1: production has been a bit more zillion retail sales to
Speaker 1: some of that temporary factors. There are some statistical quirks
Speaker 1: in the Irish data that have been driving up Eurozone
Speaker 1: industrial production. And also I think there's simply a lag
Speaker 1: before Remember the ECB has not been hiking rates for long.
Speaker 1: There's going to be a lag before the effects of
Speaker 1: the tightening of financial conditions start to come through. Also,
Speaker 1: the surveys that the p M eyes we've had this
Speaker 1: morning offered a little bit of relief, a slight uptick,
Speaker 1: but they're still pointing to falls in Eurozone GDP, so
Speaker 1: I think we are still heading into a recession. There's
Speaker 1: less evidence in the Eurozone of a let up in
Speaker 1: price pressures, so I think the ECB is going to
Speaker 1: need to continue hiking. So it is generally a bitty,
Speaker 1: pretty bad picture from the Eurozone's perspective. Let's be optimistic
Speaker 1: for a second. Let's say China reopen, supply chains are normalized.
Speaker 1: How much of a boon does that give to Europe
Speaker 1: with both potentially lower supply chain pressures and higher economic activity. Yeah,
Speaker 1: that's a good point. I'm not sure it does give
Speaker 1: a massive boost. Although during China's lockdowns it's made huge
Speaker 1: efforts to keep to keep ports open to keep industrial
Speaker 1: production going, so the implications for global supply chains haven't
Speaker 1: been as large as you might expect. Of Course, with
Speaker 1: virus numbers still picking up in China, I think eight
Speaker 1: city is now affected. It is looking as bad as
Speaker 1: as the first wave um of the virus. So it
Speaker 1: seems very unlikely really now that we're going to see
Speaker 1: the reopening that people were hoping for just a couple
Speaker 1: of weeks ago. I look at Jennifer just very quickly.
Speaker 1: Here the turmoil is centered on a stunning headline, one
Speaker 1: of the great headlines of Bloomberg this year. The governor
Speaker 1: of the Bank of England modeling a two year recession.
Speaker 1: How does he extricate himself from that? Does he amend
Speaker 1: that in the next year? Um, well, yeah, it's it's
Speaker 1: yes if the data start to look persistently better. But
Speaker 1: I think on on the UK front, to retail sales,
Speaker 1: although they've rose a little bit in the in the
Speaker 1: latest data, they've not reverse the previous falls and I
Speaker 1: think there's more, there's more to come. So I think
Speaker 1: probably Andrew Bailey is right to expect a fairly deep
Speaker 1: recession in the UK. We're expecting about a two percent
Speaker 1: Peter trough fall, which would be which would be quite weak.
Speaker 1: But of course if the data continue to surprise on
Speaker 1: the outside, then he can calibrate that and it would
Speaker 1: be well received. Optimism. We need on a Wednesday. Thank
Speaker 1: you Jennifer McQueen so much at Capital Economics. This is
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Speaker 1: Tom Keen and this is Bloomer