WEBVTT - China Reopens Borders, Freight Innovations, Markets 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.560 with essential market moving news. Find a Bloomberg Markets podcast 0:00:15.560 --> 0:00:18.439 on Apple podcast or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.520 at bloemberg dot com slash podcast. Kathy End whistles with 0:00:22.560 --> 0:00:25.040 us moment Stanley, Managing Director, Cathy, it is always a 0:00:25.160 --> 0:00:28.000 joy to speak to you. And in these holiday thin 0:00:28.120 --> 0:00:31.000 trading sorts of days, why are we seeing stocks under 0:00:31.040 --> 0:00:33.040 pressure on a moment that we start to talk about 0:00:33.080 --> 0:00:35.839 China reopening. I think that there's a lot going on, 0:00:36.000 --> 0:00:39.600 and I think there's a lot of hangover from the inflation. 0:00:39.720 --> 0:00:44.000 Interest rates um, you know, continue to to creep up. Uh. 0:00:44.000 --> 0:00:47.000 And also I would also say that we're not taking 0:00:47.040 --> 0:00:50.159 into account which is the big point, company earnings. The 0:00:50.200 --> 0:00:52.760 earnings are going to be a real issue going into 0:00:52.800 --> 0:00:55.080 the first quarter and that hasn't been priced in the 0:00:55.120 --> 0:00:57.680 market yet. So we've priced in what the feed is done, 0:00:57.720 --> 0:00:59.320 but we have in price in with the corporations have 0:00:59.400 --> 0:01:02.240 done yet and asked China's opening, and that's you know, 0:01:02.320 --> 0:01:04.280 somewhat of a big deal, but it's not big enough 0:01:04.319 --> 0:01:07.000 to move the market the way everyone's hoping it would. Kathy, 0:01:07.000 --> 0:01:09.800 I'm just reading your note this morning, boy, your Parrish, 0:01:10.040 --> 0:01:11.920 I mean, I love your note here. Fire was the 0:01:11.920 --> 0:01:15.840 FED and raising rates ice is a resulting downward earnings revisions, 0:01:15.959 --> 0:01:17.840 um and that gets you too. Maybe you know the 0:01:17.880 --> 0:01:21.560 SMP can dip down to three thousand and just just 0:01:21.600 --> 0:01:23.960 so you know, folks, the SMPS at und right here, 0:01:24.000 --> 0:01:26.120 So that's a big move. So, Kathy, what do you 0:01:26.160 --> 0:01:29.840 think they're earnings risk really is in the smpis looking forward? 0:01:29.840 --> 0:01:32.640 What is the downside in your mind? Well, the downside 0:01:32.680 --> 0:01:34.800 is that that the companies have been kicking the can. 0:01:35.400 --> 0:01:37.960 We were expecting them to come out with more realistic 0:01:38.400 --> 0:01:41.560 forward earnings last quarter and they didn't. So now that 0:01:41.600 --> 0:01:43.680 means it's going to come out this coming up quarter. 0:01:44.240 --> 0:01:47.360 And what what that means is we've got higher interest rates, 0:01:47.400 --> 0:01:50.080 so companies have to pay more to borrow. We have 0:01:50.400 --> 0:01:53.960 consumers who might be a little bit more concerned about spending, 0:01:54.080 --> 0:01:58.320 so that's also going to hit the bottom line of corporations. 0:01:58.720 --> 0:02:00.720 And the final thing is it's the cost of good 0:02:00.760 --> 0:02:03.360 sold it's it's going up and somebody's going to have 0:02:03.400 --> 0:02:06.040 to take that into account. It doesn't look like the 0:02:06.040 --> 0:02:08.280 consumers are going to be buying into it, which means 0:02:08.280 --> 0:02:10.920 the corporations have to start to take part of the 0:02:11.000 --> 0:02:13.280 hit along with maybe raising some of the prices. I mean, 0:02:13.360 --> 0:02:16.600 let's talk about inflation, because the end of last week 0:02:16.960 --> 0:02:19.080 was the readings that looked like inflation was going in 0:02:19.080 --> 0:02:21.000 the direction of travel that people wanted to see. Yes, 0:02:21.040 --> 0:02:23.840 we wanted to go faster, stronger, but we are starting 0:02:23.880 --> 0:02:26.920 to see a cooling in inflation. How optimistic argue that 0:02:26.919 --> 0:02:30.120 that remains the direction of travel from a consumer perspective. 0:02:31.320 --> 0:02:34.520 I actually am optimistic that the inflation is going to 0:02:34.600 --> 0:02:37.720 cool um definitely by you know, second half of the year, 0:02:38.320 --> 0:02:41.799 and that will help somewhat. But the problem is it's 0:02:41.840 --> 0:02:44.880 going to be hitting the consumers now and they are 0:02:44.919 --> 0:02:47.040 running out of all of the extra money that they 0:02:47.040 --> 0:02:50.359 had to spend. They're putting things on credit cards. It's 0:02:50.400 --> 0:02:53.400 going to become a real problem next quarter, quarter after 0:02:53.919 --> 0:02:56.320 and from that standpoint, even though inflation will be cooling, 0:02:56.360 --> 0:02:58.720 it's still going to take the consumer a little bit 0:02:59.080 --> 0:03:01.520 of a time to you know, step back in and 0:03:01.560 --> 0:03:05.800 start buying again, Kathy, tough year four. Stocks were all 0:03:05.840 --> 0:03:09.040 aware of that, but it was an unprecedented tough year 0:03:09.160 --> 0:03:11.280 for bonds here. I'm looking at the two year though 0:03:11.680 --> 0:03:15.040 four point three four point three six should be buying 0:03:15.040 --> 0:03:19.960 some bonds here. Absolutely, we we like bonds over stocks 0:03:20.000 --> 0:03:23.839 for for sure. And I will say when you look 0:03:23.880 --> 0:03:27.560 at the return of bonds this past year with corporate bonds, 0:03:27.600 --> 0:03:31.240 meaty bonds, I mean double digit losses in in bonds 0:03:31.360 --> 0:03:33.360 is you know, It's been unheard of for quite a 0:03:33.360 --> 0:03:35.960 long time, so it is a good buying opportunity. We 0:03:36.000 --> 0:03:39.960 started talking about buying bonds midyear and it's been paying off. 0:03:40.000 --> 0:03:42.800 And I think going into tree as well. Where else 0:03:42.840 --> 0:03:46.640 can you get these nice, you know, returns and without 0:03:46.680 --> 0:03:49.480 the volatility. I think we're past the volatility and the bonds, 0:03:49.480 --> 0:03:52.040 so you'll get the return without the volatility and just 0:03:52.040 --> 0:03:55.119 clip your coupons for the time being, Kathy, I want 0:03:55.120 --> 0:03:57.920 to ask you, let's go gloss off full, what are 0:03:57.920 --> 0:04:00.480 the upside risks toward of this as a great piece 0:04:00.480 --> 0:04:03.120 out by Tom Onnic from an economic perspective, thinking about 0:04:03.200 --> 0:04:04.720 where some of the upside the things that we're not 0:04:04.760 --> 0:04:07.720 planning on on the might look more positive. I mean, 0:04:07.720 --> 0:04:09.560 in some ways, maybe in the long term, this China 0:04:09.600 --> 0:04:13.000 reopening will be that where are you ensuring that you 0:04:13.200 --> 0:04:15.320 don't lose the upside as well as protecting yourself to 0:04:15.320 --> 0:04:18.800 the downside? Um? Absolutely, I think we have to. You know, 0:04:18.880 --> 0:04:21.200 we have short term and long term views, right so 0:04:21.520 --> 0:04:23.880 short term it looks a little bit more negative. Long 0:04:24.000 --> 0:04:26.800 term is always a more positive view. We want our 0:04:26.839 --> 0:04:29.040 clients to be invested for the long term, but we 0:04:29.080 --> 0:04:31.200 also don't want to start jumping in before we think 0:04:31.240 --> 0:04:33.920 it's too soon. A stock market has always been a 0:04:34.000 --> 0:04:36.839 leading indicator of where the economy is going, and it 0:04:36.880 --> 0:04:39.360 will be one of the first things to come back 0:04:39.560 --> 0:04:43.560 quickly and fiercely before the economy turns. So what we 0:04:43.680 --> 0:04:46.159 don't want to happen is people to lose sight of 0:04:46.200 --> 0:04:49.080 that and wait until everything is picture perfect before they 0:04:49.120 --> 0:04:51.359 start investing in the market. Again. That's why we like 0:04:51.480 --> 0:04:53.680 dollar cost averaging in these types of markets. That's why 0:04:53.680 --> 0:04:56.960 we like also taking advantage of dips and buying the dips, 0:04:57.400 --> 0:04:59.200 because if you're a long term investor and you've got 0:04:59.240 --> 0:05:01.000 a long term view, then you do want to buy 0:05:01.000 --> 0:05:04.240 at these lower prices today. How about high yield. You know, 0:05:04.240 --> 0:05:06.119 I don't mind taking a little risk out there, Kathy, 0:05:06.320 --> 0:05:08.839 but in the face of recession, would be unwise to 0:05:08.880 --> 0:05:11.760 search for yield in the high yield market. Now you're 0:05:11.760 --> 0:05:15.400 talking to a girl who worked in the corporate bonds 0:05:15.839 --> 0:05:18.880 so um. You know, I did see quite a bit 0:05:18.920 --> 0:05:22.719 of high yield UM companies go into default in bankruptcies, 0:05:23.160 --> 0:05:25.880 so it is a possibility no corporates here. You always 0:05:25.920 --> 0:05:28.960 have that issue. So for right now, I'm I'm keeping 0:05:28.960 --> 0:05:33.400 my clients away from the riskier, higher yielding UM bonds 0:05:33.440 --> 0:05:37.440 and sticking with the more investment grade. Alright, good stuff. 0:05:37.480 --> 0:05:41.159 We really appreciate that getting a good outlook for these markets. 0:05:41.279 --> 0:05:47.479 Kathy and twist On Morgan Stanley, managing director. Ready to 0:05:47.480 --> 0:05:49.480 say on the show today is Robert Felt is the 0:05:49.520 --> 0:05:51.799 founder and c of n Ride. Now and Ride developed 0:05:51.960 --> 0:05:55.159 self driving and electric trucks and of course the software 0:05:55.160 --> 0:05:58.720 systems that help them to use to monitor deliveries. And Robert, 0:05:58.720 --> 0:06:00.560 it's fascinating to have some time with you today. We 0:06:00.640 --> 0:06:04.720 thank you, of course founded the business in Stockholm. Talk 0:06:04.760 --> 0:06:06.600 to us about what you've seen and the customers that 0:06:06.640 --> 0:06:08.600 you start to talk to, the Coca colas, the Little, 0:06:08.720 --> 0:06:11.880 the A b inbevs. The Mulla musks. How are these 0:06:11.880 --> 0:06:16.440 companies looking at supply chain bottlenecks in the future. First 0:06:16.480 --> 0:06:19.000 of all, thank you for having me. I think it's 0:06:19.000 --> 0:06:22.520 a fascinating point in the overall economy right now because 0:06:22.600 --> 0:06:25.120 what from our perspective, what we are seeing is that 0:06:25.320 --> 0:06:28.320 we don't really see that slow down happening right now. 0:06:28.560 --> 0:06:31.880 A few of our customers, of course are seeing taking 0:06:31.880 --> 0:06:35.120 a longer time to make decision, But overall, for the 0:06:35.160 --> 0:06:37.960 transition here to electric and an autonomous I think there 0:06:38.080 --> 0:06:42.479 is a clear engagement there and I think that overall 0:06:42.520 --> 0:06:45.280 the consumer it will a little bit of downturn of 0:06:45.360 --> 0:06:48.559 the economy is not really starting to hit yet, and 0:06:48.640 --> 0:06:50.720 that's what we are at least saying. So people are 0:06:50.720 --> 0:06:53.480 still doing business, and I think that a little bit 0:06:53.520 --> 0:06:56.120 of some sectoris we are a little bit less, But 0:06:56.200 --> 0:06:59.360 overall I think it's uh, we're not in a recession yet. 0:07:00.040 --> 0:07:02.839 We might be in next year, but overall it's still 0:07:03.160 --> 0:07:06.200 a lot of people doing business. Robert, I know your 0:07:06.200 --> 0:07:09.559 company recently raised five million dollars in equity in debt. 0:07:09.880 --> 0:07:13.080 What do you what are the use of proceeds there now? 0:07:13.200 --> 0:07:16.040 But for us it's about scaling and more and more 0:07:16.160 --> 0:07:20.360 installing more capacity for doing a transport together with our customers. 0:07:20.760 --> 0:07:23.800 So we are deploying a lot of electric and autonomous 0:07:23.920 --> 0:07:27.400 transport vehicles as well as transport and the charging infrastructure 0:07:27.480 --> 0:07:32.440 to support it. You are currently of course prevalent across Europe, Sweden, Germany, 0:07:32.480 --> 0:07:35.960 the Benelucks and indeed in the United States. What all, China, 0:07:36.200 --> 0:07:38.240 What all of that five million dollars that you now 0:07:38.280 --> 0:07:40.320 get to put to work? Is it about global expansion? 0:07:40.360 --> 0:07:42.600 Is it about alleviating some of those pressure points we've 0:07:42.760 --> 0:07:47.160 grown to know and to hate. I think it's something 0:07:47.200 --> 0:07:50.120 of a very interesting overall is that the supply chain 0:07:50.240 --> 0:07:53.840 for electric trucks as well as chargers and the whole 0:07:53.880 --> 0:07:58.720 infrastructure for all the constant electric and autonomous transport is 0:07:58.760 --> 0:08:02.520 still to be actually created. So I think that China 0:08:02.600 --> 0:08:05.440 has a key point in being the supplier there. I mean, 0:08:05.520 --> 0:08:08.040 they come to we are in a very weird position 0:08:08.400 --> 0:08:11.880 from historically, but China, and my view, is actually leader 0:08:12.040 --> 0:08:14.840 in a lot of the electric both batteries as well, 0:08:14.880 --> 0:08:18.520 it's a lot of engines and also the maturity ecosystem 0:08:18.560 --> 0:08:22.000 when it comes to electrification. So for us it's China 0:08:22.080 --> 0:08:25.000 is an extremely important part of that supply. I think 0:08:25.040 --> 0:08:28.200 that the Western hemisphere needs to focus for it clearly 0:08:28.240 --> 0:08:31.200 to sort of say, catch up to the maturity of 0:08:31.240 --> 0:08:35.360 the Chinese ecosystem when it comes to electrification and optimization. Robert, 0:08:35.360 --> 0:08:37.600 give us a sense of, you know, how much road 0:08:37.679 --> 0:08:40.880 freight on a global basis contributes to uh, you know, 0:08:40.880 --> 0:08:43.920 Global CEO two and kind of it feels like it's 0:08:43.960 --> 0:08:46.280 a big contributor and it really is right for some 0:08:46.640 --> 0:08:52.120 innovation one. I mean globally, it's that between seven to 0:08:52.200 --> 0:08:54.880 eight percent of global City two emissions come for heavy 0:08:55.080 --> 0:08:58.320 road freight transport. And we are still in the same 0:08:58.360 --> 0:09:01.040 ecosystem that was created more than a hundred years ago 0:09:01.120 --> 0:09:05.439 now and I think that we're digital, electric and autonomous technology. 0:09:05.679 --> 0:09:10.080 We have the potential to actually rewrite that. And it's 0:09:10.080 --> 0:09:13.080 not about the size of the battery. It's not about 0:09:13.120 --> 0:09:16.360 creating a better truck. It's about creating a new infrastructure 0:09:16.400 --> 0:09:20.200 for transport. And if you do, we see that between 0:09:20.240 --> 0:09:25.560 four of electric should be electric driven by the business 0:09:25.559 --> 0:09:28.480 case today, Robert, I'm gonna ask a sensitive question, but 0:09:28.559 --> 0:09:31.280 of course you're based well, you're helping found this business 0:09:31.280 --> 0:09:34.560 in Sweden and Germany in the Benelux countries that care 0:09:34.800 --> 0:09:37.920 an awful lot about climate change and the like. But 0:09:37.960 --> 0:09:41.400 the US has been known to be somewhat behind Europe 0:09:41.440 --> 0:09:44.680 in many ways, and of late many have felt particularly 0:09:44.679 --> 0:09:47.760 in the supply chain headaches, particularly in the energy crisis. Look, 0:09:48.000 --> 0:09:49.439 just put that to one side. At the moment, we 0:09:49.480 --> 0:09:51.120 need to drill, baby, drill. We need to ensure that 0:09:51.120 --> 0:09:54.880 we've got energy security rather than this transition. How much 0:09:54.920 --> 0:09:56.880 has that help or hindered your business as we felt 0:09:56.920 --> 0:10:01.400 that effect at all. I I'm actually a little bit 0:10:01.920 --> 0:10:05.040 opposite to you than what you're stating in there. I 0:10:05.080 --> 0:10:07.760 think that this will happen first in the US due 0:10:07.760 --> 0:10:09.880 to the fact that it is driven by the business case. 0:10:10.400 --> 0:10:12.800 I mean, what we see from customers of the customers 0:10:12.800 --> 0:10:16.079 in the US is that electrification is the best business case. 0:10:16.480 --> 0:10:19.719 If there is something that I I love with the 0:10:19.800 --> 0:10:21.920 US market, as if there is a business case, it 0:10:21.960 --> 0:10:25.960 will happen. I think that the European market are still 0:10:26.080 --> 0:10:30.400 struggling to change and make that change happen. But from 0:10:30.600 --> 0:10:35.000 our perspective, we're seeing a clear engagement and back to 0:10:35.160 --> 0:10:39.120 energy security. The electric grid is more reliable than the 0:10:39.160 --> 0:10:42.560 prices of oil, and even if we have some fluctuations, 0:10:43.000 --> 0:10:46.400 and especially in Europe right now, it's actually a way 0:10:46.440 --> 0:10:50.360 of mitigating the dependencies of oil. And I think that 0:10:50.559 --> 0:10:54.200 if you have both those, it's better solution and it's 0:10:54.200 --> 0:10:58.920 a cheaper solution. This transition will go very quickly. So Robert, 0:10:58.960 --> 0:11:00.679 I think I get the whole EV thing. I just 0:11:00.800 --> 0:11:03.400 drove my first e V for Dee fifty truck. Was 0:11:03.520 --> 0:11:05.720 very cool, but I'm not so sure about this whole 0:11:05.760 --> 0:11:12.280 automation thing. Explain your approach now. I actually I share 0:11:12.280 --> 0:11:14.560 your view there as well. I think that we have 0:11:14.720 --> 0:11:19.440 been chasing literally flying goats over the last ten years 0:11:19.679 --> 0:11:23.880 in the automotive industry, and I think that Google and 0:11:23.920 --> 0:11:28.080 Weymoux has been pioneering the whole industry, and I think 0:11:28.120 --> 0:11:30.640 that they've done and set the standard that's going to 0:11:30.679 --> 0:11:33.240 be the standard, but it's going to take a long 0:11:33.400 --> 0:11:37.240 time before it's actually bean we can actually deploy it 0:11:37.280 --> 0:11:40.720 on rail roads. And that approach, that's our pure silicon 0:11:40.840 --> 0:11:44.560 value approach, has been a challenge since the start because 0:11:44.600 --> 0:11:48.040 it requires literally us to chase our own tail for 0:11:48.160 --> 0:11:50.959 the whole industry. When we started the company, we took 0:11:50.960 --> 0:11:53.800 a different approach, and our ambition since the start has 0:11:53.840 --> 0:11:57.320 been to do bit by bit, find the right applications 0:11:57.360 --> 0:12:01.520 and find the right business cases to scale autonomous because 0:12:01.559 --> 0:12:03.480 if you look at a lot of other industries and 0:12:03.520 --> 0:12:07.679 a lot of other applications, for instance in factories and warehouses, 0:12:07.760 --> 0:12:11.720 we've been doing autonomous electric transport for more than thirty 0:12:11.800 --> 0:12:15.640 years now, and that's we'd take a different approach. So 0:12:15.679 --> 0:12:19.319 I think that the technology why the industry has been 0:12:19.760 --> 0:12:22.400 pushing it, but I think when it comes to actually 0:12:22.480 --> 0:12:26.400 finding use cases and real applications to it, it actually 0:12:26.440 --> 0:12:29.760 has lacked a bit. And I think that's hopefully what 0:12:29.800 --> 0:12:32.800 we add to the equation. All right, Robert, great stuff. 0:12:32.840 --> 0:12:34.880 Really appreciate you taking a few minutes bring us up 0:12:34.920 --> 0:12:36.560 to speed on what you guys are doing over at 0:12:36.559 --> 0:12:39.120 and right Robert falk and Wright, a founder and CEO. 0:12:42.920 --> 0:12:44.920 It used to say that Coustin brushed gears with us 0:12:44.960 --> 0:12:48.240 Iron g chief economist. Long time since I've spoken to you, 0:12:48.280 --> 0:12:50.000 so it is such a joy. I think you're out 0:12:50.000 --> 0:12:53.440 there in Frankfurt in between this holiday time talk to 0:12:53.520 --> 0:12:55.880 us about what China means for you from a global 0:12:55.920 --> 0:13:00.720 economic perspective. This reopening story, well, it means lot. It 0:13:00.800 --> 0:13:04.520 means supply chain frictions in the very short run, because 0:13:04.559 --> 0:13:06.880 we have lifted restrictions right now, but it means we're 0:13:06.880 --> 0:13:09.920 going to see many, many sick cases, many sicknesses, and 0:13:09.960 --> 0:13:12.560 that will probably mean that people simply cannot show up 0:13:12.559 --> 0:13:14.959 in the factories. But in the medium term, and that 0:13:15.040 --> 0:13:18.360 we talked probably end of Q one two three, this 0:13:18.480 --> 0:13:22.040 clearly means that supply chain friction should go away much 0:13:22.080 --> 0:13:25.640 paster than we initially thought because China is really giving 0:13:25.720 --> 0:13:28.199 up on on zero covit and that is good news 0:13:28.240 --> 0:13:30.600 for the global economy. As we are, you know, we 0:13:30.679 --> 0:13:34.680 are looking into a recession in Europe in two thousand 0:13:34.720 --> 0:13:37.600 twenty three, we even look into a recession in the US. 0:13:37.920 --> 0:13:42.079 If China would now really start to recover starting second 0:13:42.160 --> 0:13:45.679 quarter two twenty three, this could help the global economy 0:13:45.760 --> 0:13:49.040 a lot. So Carston talked to us from the European 0:13:49.160 --> 0:13:51.280 perspective what this means, because that you know, such a 0:13:51.320 --> 0:13:56.240 big trading partner with the European Union and China, where 0:13:56.240 --> 0:13:58.800 where you know the first for some impacts on the 0:13:58.840 --> 0:14:03.840 European economy. From yeah, I think in the in the 0:14:04.000 --> 0:14:07.120 very part term, um, I think that even lifting all 0:14:07.160 --> 0:14:10.719 the restrictions means that there will be more supply chain frictions. 0:14:10.760 --> 0:14:16.280 So I'm really looking into European industry and probably having 0:14:16.559 --> 0:14:19.440 more supply chain frictions over the winter. And the winter 0:14:19.640 --> 0:14:22.760 is already going to be a tough economic one in Europe. 0:14:23.400 --> 0:14:25.320 But then when we get out of the winter, when 0:14:25.720 --> 0:14:29.360 when when China is then somehow settling into this new 0:14:29.760 --> 0:14:34.080 post euro covered reality. Um, this would clearly benefit the 0:14:34.560 --> 0:14:38.680 European industry, the European companies that are so dependent on 0:14:39.040 --> 0:14:42.600 input goods from from China. And showing some sort of statistics, 0:14:43.160 --> 0:14:46.400 I think in Germany more than fifty percent of the 0:14:46.440 --> 0:14:49.880 manufacturing sectors say that they are one way or the 0:14:49.920 --> 0:14:54.240 other depending on China. So clearly Germany but also Europe 0:14:54.280 --> 0:14:58.360 needs a growing Chinese economy. May he live in interesting 0:14:58.440 --> 0:15:01.400 times is the Chinese proverb actually that you quote at 0:15:01.400 --> 0:15:03.440 the top of your note. And boy have we lived 0:15:03.480 --> 0:15:06.000 in interesting times in the last few years, but also 0:15:06.040 --> 0:15:09.120 in two and it's been not just a story of China, 0:15:09.200 --> 0:15:13.200 not just a story of global disruption, but notably one 0:15:13.280 --> 0:15:16.360 of Russia, Ukraine, of the impact on energy markets and 0:15:16.400 --> 0:15:19.240 the impact of the devastation that's reaked upon Europe in particular, 0:15:19.240 --> 0:15:21.360 and I'm interested at this moment as to whether you 0:15:21.440 --> 0:15:25.320 see with the warmest snap the weather slightly more temperate 0:15:25.360 --> 0:15:27.360 in Europe than we were expecting. There has been an 0:15:27.360 --> 0:15:30.120 easing off of concerns around energy supply chains there, but 0:15:30.160 --> 0:15:32.680 talk to us longer term about how will your comfort 0:15:32.760 --> 0:15:37.800 levels look for Europe as an economy with respect to energy. 0:15:37.840 --> 0:15:40.240 I found out that actually it is not a proverb, 0:15:40.280 --> 0:15:43.560 but it is a curse to start with. But we're 0:15:43.560 --> 0:15:46.920 looking at at Europe and I think the picture changes 0:15:47.000 --> 0:15:49.760 by the week. Just one or two weeks ago we 0:15:49.760 --> 0:15:53.880 were saying this was actually a cold winter spell hitting 0:15:53.920 --> 0:15:57.640 the entire region, or we saw happening as well. I 0:15:57.680 --> 0:16:01.920 think a week ago consumption gap consumption in Europe was 0:16:01.960 --> 0:16:05.800 clearly above historical averages. Again, so now it's turning around 0:16:05.840 --> 0:16:08.080 and we we we saw a temperature ship by almost 0:16:08.080 --> 0:16:11.880 twenty degrees, going from minus ten sellers to plus ten sellingers. 0:16:12.080 --> 0:16:16.359 So this would clearly help the reduction in gas consumption. 0:16:16.560 --> 0:16:19.280 And I think in any case shows us that there 0:16:19.320 --> 0:16:23.160 will not be an energy supply issue through this winter. 0:16:23.360 --> 0:16:26.800 What we still have is an energy price crisis in Europe. 0:16:27.160 --> 0:16:30.240 Um and it will. It will determine how severe this 0:16:30.320 --> 0:16:33.000 winter recession will be. So it currently looks, I think 0:16:33.040 --> 0:16:35.320 a bit more positive, so that this recession is going 0:16:35.360 --> 0:16:37.800 to be a mild recession. But what is even more 0:16:37.840 --> 0:16:41.360 important in my view, especially for Europe, is what's going 0:16:41.400 --> 0:16:44.080 to happen in the second half of two thousand twenty three. 0:16:44.440 --> 0:16:47.720 Here we have many forecasters saying that Europe would return 0:16:47.800 --> 0:16:51.160 to pre growth or pre pre crisis growth levels. And 0:16:51.200 --> 0:16:53.680 I'm a bit more cautious because I think we are 0:16:53.720 --> 0:16:57.600 still living in a period of high energy prices, We're 0:16:57.600 --> 0:17:00.960 still living in a period of structural change to global trade. 0:17:01.320 --> 0:17:03.520 So I'm a bit more concerned that the year of 0:17:03.600 --> 0:17:08.320 will really experience a more subdued recovery in the second 0:17:08.320 --> 0:17:10.879 half of twenty three and also in two thousand twenty 0:17:10.880 --> 0:17:14.560 four the many currently expects. Carson, we recently had the 0:17:14.560 --> 0:17:17.480 Bank of Japan of all banks, kind of throwing the 0:17:17.600 --> 0:17:20.560 talent signal that it was opened higher rates and to 0:17:20.640 --> 0:17:23.359 fight inflation. So you know, along with the Bank of England, 0:17:23.400 --> 0:17:24.880 the e c B, and of course the US feder 0:17:24.960 --> 0:17:27.120 Reserve Bank. What do you think the next move is 0:17:27.320 --> 0:17:30.680 for this federal Reserve Bank? Given what we know now 0:17:30.720 --> 0:17:33.720 about economic conditions and now maybe another little data point 0:17:33.800 --> 0:17:38.120 with China reopening. You know, you wouldn't argue that if 0:17:38.400 --> 0:17:41.240 if the Bank of Japan, of all the central banks 0:17:41.280 --> 0:17:44.400 start to become really concerned about inflation, I think there 0:17:44.440 --> 0:17:46.480 has to be a serious issue. And that's standime was 0:17:46.520 --> 0:17:49.479 the big story of two thousand twenty two. UM. I 0:17:49.520 --> 0:17:52.800 think that the Bank of Japan is also likely to 0:17:53.080 --> 0:17:57.320 join this UM, this group of western central banks UM 0:17:57.359 --> 0:18:00.320 with hiking interest rates. UM. So the only quite with 0:18:00.440 --> 0:18:03.000 the Bank of Japan now starts what we see, what 0:18:03.160 --> 0:18:07.000 we see other central banks, particularly the FED, really making 0:18:07.000 --> 0:18:10.600 a pause or even stopping the hiking cycle already in 0:18:10.480 --> 0:18:13.440 the first quarter, we think they will. We think the 0:18:13.480 --> 0:18:17.199 Fed is gone a step in Q one. We I 0:18:17.240 --> 0:18:19.600 think it's become a bit more doubtful about the ECB 0:18:19.680 --> 0:18:22.159 because the e c B has been talking very harkishly 0:18:22.640 --> 0:18:25.359 UM since the last meeting. Is over the last couple 0:18:25.359 --> 0:18:28.159 of days, it looks very likely if the ECB is 0:18:28.520 --> 0:18:31.400 going further than the fact that we will see more 0:18:31.520 --> 0:18:35.320 rate hikes coming in Europe even when the FEDS stops. 0:18:35.640 --> 0:18:37.840 I think interested and the big story for the second 0:18:37.880 --> 0:18:41.280 half two thousand twenty three will be whether central banks 0:18:41.320 --> 0:18:45.280 will actually dare cutting rates again or whether we will 0:18:45.359 --> 0:18:48.520 really stay at a higher level for longer. I mean, 0:18:48.720 --> 0:18:50.840 it's worth saying that, of course the US has manages 0:18:51.000 --> 0:18:53.840 get its rates up a little slightly greater paced higher 0:18:53.920 --> 0:18:56.040 levels all told us as easy b already. But is 0:18:56.080 --> 0:18:58.720 that why do the Federal Reserve have the bandwidth to 0:18:58.720 --> 0:19:00.959 slow down in the first quarter that inflation is going 0:19:00.960 --> 0:19:02.919 in the direction it wants to. Is it more that's 0:19:02.960 --> 0:19:05.679 now seeing a bond market that doesn't have the bias 0:19:05.720 --> 0:19:07.600 that it was used to. Particularly we start to see 0:19:07.960 --> 0:19:11.560 borrowing costs in Japan actually maybe even look attractive to 0:19:11.560 --> 0:19:16.280 the Japanese by themselves, I think. Um. In terms of 0:19:16.280 --> 0:19:18.480 that said, what what's going to happen is that inflation 0:19:18.560 --> 0:19:21.280 is going to come down faster than the FAT itself 0:19:21.320 --> 0:19:24.080 probably expects um. And that has to do with the 0:19:24.080 --> 0:19:27.080 real estate market, has to do also with the entire 0:19:27.119 --> 0:19:30.679 inflation basket. So if the real estate market in the 0:19:30.760 --> 0:19:33.639 US that really starts to correct, and we see first 0:19:33.680 --> 0:19:37.320 the data points and you know suggesting that this is happening, 0:19:37.600 --> 0:19:40.320 headline inflation will come down very quickly. And this is 0:19:40.359 --> 0:19:44.440 then the big reason to pass. Turning back to to Japan, 0:19:45.119 --> 0:19:48.320 here we do have an economy that that could benefit 0:19:48.440 --> 0:19:50.959 from the opening up of China. Here we have an 0:19:51.000 --> 0:19:55.480 economy that is not suffering, as for example, the European 0:19:55.560 --> 0:20:00.600 economy from higher commodity and energy prices um. This is 0:20:00.600 --> 0:20:04.120 an economy in which fiscal policy has done the tough work, 0:20:04.200 --> 0:20:07.160 I think for for almost two decades UM. So therefore 0:20:07.520 --> 0:20:10.760 it is likely that we will see the first policy 0:20:10.880 --> 0:20:14.480 rate high in Japan coming up. So, Carson, I have 0:20:14.600 --> 0:20:17.720 the Paul Sweeney Personal Inflation Index, otherwise known as a 0:20:17.800 --> 0:20:20.440 daily national average gasoline price, and it's down the three 0:20:20.440 --> 0:20:23.320 dollars and ten cents per gallon here, down from the 0:20:23.359 --> 0:20:26.720 peak of five dollars UM. So here in the US 0:20:26.800 --> 0:20:29.840 at least inflation is in fact it has peaked, it 0:20:29.920 --> 0:20:32.639 is coming down. You can look across a several different 0:20:32.640 --> 0:20:34.600 metrics give us a sense of how it is in Europe. 0:20:34.800 --> 0:20:38.960 Do you expect it to be more more sticky in Europe? Yeah. 0:20:39.000 --> 0:20:42.000 If I look at Carson Justice personal inflation in next, 0:20:42.000 --> 0:20:45.920 which is sons partaty more than only gasoline prices UM, 0:20:46.240 --> 0:20:49.560 I think we are somewhere close to the peak. And 0:20:50.160 --> 0:20:52.560 in in the first quarter of twenty three, we will 0:20:52.600 --> 0:20:56.080 see that Eurozone headline inflation will start to come down 0:20:56.520 --> 0:20:59.720 as energy prices are somewhat lower. As it is also 0:21:00.080 --> 0:21:03.200 you know, getting harder for companies to really pass through 0:21:03.680 --> 0:21:06.920 the higher production costs to two consumers, so we'll see 0:21:06.920 --> 0:21:11.280 a gradual retreatment by by inflamation. But still this means 0:21:11.320 --> 0:21:14.440 that I think on average inflation in the Eurozone will 0:21:14.480 --> 0:21:17.679 will come in at between six or seven percent in 0:21:17.760 --> 0:21:20.240 two thousand twenty three. That is a lot and awesome. 0:21:20.320 --> 0:21:25.000 Means that there is an enormous, enormous pressure on purchasing 0:21:25.040 --> 0:21:29.480 power or the loss in purchasing power of European citizens. Alright, 0:21:29.480 --> 0:21:33.000 good stuff. We really appreciate getting your perspective there, Carston Razinski. 0:21:33.320 --> 0:21:39.120