WEBVTT - China, Insurance and Hawaii, Walmart, and Banking 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:05.280 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moving news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 0:00:17.360 --> 0:00:20.520 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:21.239 --> 0:00:23.160 Our next guest, I guess I got to call him 0:00:23.160 --> 0:00:25.799 like my favorite economists, but that's not saying a whole 0:00:25.800 --> 0:00:28.480 lot quite frankly, but he is good and we're glad 0:00:28.520 --> 0:00:31.560 we got a few minutes of his time. You know, 0:00:31.640 --> 0:00:34.880 Carl Ricadona, he's BNP Perry bott and now I trained 0:00:34.960 --> 0:00:37.440 him up here at Bloomberg Intelligence for many years. But 0:00:37.479 --> 0:00:40.080 he's pretty solid. Carl, What are you looking at today? 0:00:40.360 --> 0:00:43.040 You know, we just heard from the good folks Dana 0:00:43.280 --> 0:00:46.120 Peterson at the Leading Economic Indicator of the Conference Board. 0:00:46.440 --> 0:00:48.680 They still have a recession call out there, how about 0:00:48.680 --> 0:00:50.120 you guys at ben P Perry Bow. 0:00:51.640 --> 0:00:54.200 Well, Paul, I should back that up. You taught me 0:00:54.240 --> 0:00:57.959 everything I know. Of course, thanks for that. 0:00:58.200 --> 0:00:59.000 I'll start with that. 0:00:59.680 --> 0:01:02.760 But in terms of the recession view, you know, we 0:01:02.800 --> 0:01:08.440 still see some pretty ominous factors looming on the horizon. 0:01:09.000 --> 0:01:13.240 You've been talking about the resumption of student debt payments. Now, 0:01:13.720 --> 0:01:15.680 you know, there may be some legal room here that 0:01:16.200 --> 0:01:19.440 you know, you have a twelve month grace period, you know, 0:01:19.520 --> 0:01:22.240 to start and whatnot. But if we just look at 0:01:22.280 --> 0:01:25.160 the you know, the view from sixty thousand feet, the 0:01:25.200 --> 0:01:28.200 price tag on that is about one hundred billion dollars annualized. 0:01:28.720 --> 0:01:32.479 So look back to Q one when everything went haywire 0:01:33.040 --> 0:01:35.360 with the cost of living adjustment and Social Security that 0:01:35.440 --> 0:01:37.760 was also about one hundred billion dollar price tag. So 0:01:37.959 --> 0:01:40.400 I'm sure they're not equal, but when you look from 0:01:40.440 --> 0:01:42.840 a you know, when you're squint from a distance, there 0:01:42.880 --> 0:01:46.400 are you know, similar sizes, and so all of the 0:01:46.400 --> 0:01:50.120 things that went up in Q one, discretionary spending and whatnot, 0:01:50.360 --> 0:01:54.200 we could see kind of a similar fallout in the 0:01:54.280 --> 0:01:55.160 Q four period. 0:01:55.200 --> 0:01:57.960 But on top of that, you have, you know, a 0:01:58.080 --> 0:01:59.080 very divided. 0:01:58.720 --> 0:02:01.480 Government that has to pass twelve appropriation bills by the 0:02:01.560 --> 0:02:04.000 end of this month, by the end of September. Rather 0:02:05.000 --> 0:02:07.680 you know, that seems very unlikely, so there's a risk 0:02:07.720 --> 0:02:10.840 of a government shut down. Then the excess saving story 0:02:10.880 --> 0:02:13.520 we've been focusing on this. San Francisco FED wrote on 0:02:13.560 --> 0:02:17.519 this recently. Those savings are rapidly being eroded. You see 0:02:17.520 --> 0:02:21.200 that in the retail earnings you discussed in the earlier segment, 0:02:21.280 --> 0:02:25.160 where Target is noticing that, you know, price sensitivity of 0:02:25.160 --> 0:02:28.040 consumers in Walmart sees a lot of the higher end 0:02:28.040 --> 0:02:32.880 consumers walking into Walmart to go after those bargain prices 0:02:32.880 --> 0:02:35.720 and whatnot. So you kind of see that playing out, 0:02:36.440 --> 0:02:39.160 you know. So there's a bit of a perfect storm 0:02:39.160 --> 0:02:41.200 I think coming about in Q four, which still makes 0:02:41.240 --> 0:02:45.680 me worried about elevated recession risk in Q four and 0:02:45.760 --> 0:02:47.799 into the kind of first part of next year. 0:02:48.080 --> 0:02:50.160 How do you swear that away when a lot of 0:02:50.200 --> 0:02:52.760 this data still is pretty resilient if you're looking at 0:02:52.760 --> 0:02:56.120 retail sales even the Atlanta Feds GDP now for the 0:02:56.120 --> 0:02:59.959 current quarter up around five percent, and when you're seeing 0:03:00.200 --> 0:03:03.200 talking about Walmart coming in and better than expected outlook 0:03:03.280 --> 0:03:06.480 on the consumer. As far as you talked about student loans, 0:03:06.480 --> 0:03:08.680 I mean, is what's the main catalyst here to really 0:03:08.800 --> 0:03:12.160 weigh on consumers when we're looking at the difference between 0:03:12.200 --> 0:03:15.720 spending when you're talking about obviously goods versus services. 0:03:17.040 --> 0:03:20.520 Well, I think the GDP tracker in the you know, 0:03:20.720 --> 0:03:23.520 the early part of the quarter can often go for 0:03:24.160 --> 0:03:26.880 you know, a real loop, and I think that's what 0:03:26.919 --> 0:03:29.519 we're going what we're seeing at the moment. I highly 0:03:29.600 --> 0:03:32.760 doubt we're growing at five percent in the current quarter 0:03:32.800 --> 0:03:36.440 an inflation adjusted terms. So you know, I value the 0:03:36.480 --> 0:03:38.320 Atlanta Fed GDP now tracker. 0:03:38.440 --> 0:03:40.720 It can be volatile follow it, but. 0:03:40.960 --> 0:03:41.480 It does move. 0:03:41.520 --> 0:03:43.200 It does move over the course of the quarter. That's 0:03:43.200 --> 0:03:46.000 not unusual, and so I do think we'll see some 0:03:46.120 --> 0:03:48.760 moderation in that in that indicator over the course of 0:03:48.800 --> 0:03:51.400 the quarter. That being said, there is a theme of 0:03:51.480 --> 0:03:54.880 resilience here, whether it's the labor market or consumer activity 0:03:54.880 --> 0:03:57.920 and whatnot. But you know, you always have to be 0:03:57.920 --> 0:04:01.840 looking forward, and you're hearing those anecdotes of price sensitivity 0:04:01.840 --> 0:04:04.960 from consumers. So the real test will be, you know, 0:04:05.040 --> 0:04:07.280 if this can hold out over the course of the quarter, 0:04:07.880 --> 0:04:10.520 or if July just happened to be a good month 0:04:10.600 --> 0:04:13.360 for retail, whether you know, whether it was driving people 0:04:13.400 --> 0:04:16.720 into shopping malls or Amazon Prime Day or a lot 0:04:16.720 --> 0:04:19.760 of these factors maybe just one off developments. When we 0:04:19.839 --> 0:04:22.440 kind of step back and look at the macro fundamentals, 0:04:23.000 --> 0:04:25.680 the broader GDP trends, So not the quarter on quarter 0:04:25.800 --> 0:04:28.680 change that we see in the GDP now forecast, but 0:04:28.800 --> 0:04:31.200 rather the year and year rate of change is slowing. 0:04:32.000 --> 0:04:36.719 What does disturb me is GDI. So gross domestic income, 0:04:36.760 --> 0:04:40.760 which in a perfect world should track in lockstep with 0:04:40.880 --> 0:04:42.960 the GDP. But you know, the guy who taught me 0:04:43.000 --> 0:04:46.200 everything I know, Paul Sweeney, you know, don't live in 0:04:46.240 --> 0:04:49.400 a perfect world. And the gd I numbers look pretty bad. 0:04:49.440 --> 0:04:51.719 So gross domestic ink, well, first of all, profits are 0:04:51.760 --> 0:04:55.039 slowing and gross domestic income looks pretty lousy. We'll see 0:04:55.040 --> 0:04:56.720 the next print on that when we get the second 0:04:56.720 --> 0:05:00.919 print for Q two GDP. But GDI is a disturbing trends, 0:05:00.920 --> 0:05:03.719 So there's there's definitely fodder for both sides of the 0:05:03.760 --> 0:05:08.039 debate here, and I'm not convinced of the reacceleration narrative 0:05:08.440 --> 0:05:08.840 just yet. 0:05:09.520 --> 0:05:11.800 We've certainly seen Carl over the last I don't know, 0:05:11.800 --> 0:05:15.080 a couple of weeks, some really disappointing economic news come 0:05:15.120 --> 0:05:17.440 out of China. How do you kind of think about 0:05:17.440 --> 0:05:19.800 that as as you think about the impact of the 0:05:19.960 --> 0:05:21.440 US economy. 0:05:22.920 --> 0:05:25.880 Well, I you know that China's obviously a very important 0:05:25.880 --> 0:05:30.880 trading partner, and global commodity prices are very sensitive to 0:05:31.040 --> 0:05:34.720 the health of the Chinese economy, and those commodity prices 0:05:35.000 --> 0:05:38.320 impact the US inflation outlooks. So you know, we're definitely 0:05:38.360 --> 0:05:42.599 watching the situation very closely and trying to understand what's happening, 0:05:42.920 --> 0:05:45.719 you know, in the kind of immediate reopening after COVID 0:05:45.800 --> 0:05:48.440 and then you know, where things settle there, there seem 0:05:48.480 --> 0:05:50.880 to be some key differences. So, you know, in Europe 0:05:50.920 --> 0:05:53.920 and the US, we saw a lot of pent up savings, 0:05:54.400 --> 0:05:56.760 in pent up demand that really led to the you know, 0:05:56.800 --> 0:06:00.440 kind of revenge spending and house price appreciation and and 0:06:00.880 --> 0:06:02.520 you know demand for you know, for a lot of 0:06:02.600 --> 0:06:06.120 consumer spending categories. It looks very different in China, and 0:06:06.120 --> 0:06:08.920 we're you know, we're seeing that play out that the 0:06:09.240 --> 0:06:12.279 reopening of the second largest economy in the world looks 0:06:12.360 --> 0:06:14.880 very different than, you know, than what we've seen in 0:06:15.120 --> 0:06:18.120 the US and Europe, and we're seeing that pass through 0:06:18.160 --> 0:06:20.920 to supply chains, and this is feeding into an inflation 0:06:21.080 --> 0:06:25.720 narrative of of deceleration. But our view has been at 0:06:25.760 --> 0:06:28.440 BNP for quite a while that the last mile is 0:06:28.480 --> 0:06:31.160 going to be where, you know, where the real toughness 0:06:31.680 --> 0:06:34.159 comes out and the real stickiness of the inflation data 0:06:34.279 --> 0:06:36.280 is apparent, and that's going to mean that this FED 0:06:36.400 --> 0:06:39.920 can't you know, we'll have a course correction on the 0:06:39.920 --> 0:06:43.359 the immaculate disinflation narrative, and the FED is going to 0:06:43.440 --> 0:06:47.400 have to remain vigilant in its inflation fight to get 0:06:47.480 --> 0:06:49.160 us all the way back to two percent. It's easy 0:06:49.200 --> 0:06:52.480 to get from nine percent down to six, but from 0:06:52.520 --> 0:06:55.080 six to four is harder. And getting from four to 0:06:55.160 --> 0:06:58.880 two is where will really take some softening of labor 0:06:58.880 --> 0:07:01.600 conditions and some of the categories that have been sticky 0:07:02.320 --> 0:07:03.719 to to really move lower. 0:07:03.800 --> 0:07:05.800 All right, you brought up the FED. We do have 0:07:05.920 --> 0:07:09.039 Jackson Hole next week. How do you view this and 0:07:09.240 --> 0:07:11.520 what this could potentially mean for their signaling ahead of 0:07:11.520 --> 0:07:13.200 that September twentieth decision. 0:07:15.720 --> 0:07:18.200 I don't think they're going to signal much for the 0:07:18.240 --> 0:07:20.680 September decision. Of course, they'll be asked in the you know, 0:07:20.720 --> 0:07:24.600 the press conferences and media exchanges and whatnot what they're thinking, 0:07:24.640 --> 0:07:25.960 and I think they'll give us the you know, the 0:07:26.000 --> 0:07:28.920 generic FED answers of well, there's more data to be seen, 0:07:29.000 --> 0:07:31.360 so we don't want to cast a judgment so we. 0:07:32.040 --> 0:07:35.560 Did get the employment Costs Index CPI PPI and then 0:07:35.600 --> 0:07:38.080 PCE since the last decision. So it feels like those 0:07:38.120 --> 0:07:41.160 FED minutes we got yesterday might be a bit backward looking, right. 0:07:42.480 --> 0:07:46.440 That is spot on analysis because people are focusing on 0:07:46.480 --> 0:07:49.360 some of the hawkish language that was in the minutes 0:07:49.920 --> 0:07:52.400 where they said they're still upside risk to inflation and 0:07:52.440 --> 0:07:55.000 therefore we may need to do more. We have to 0:07:55.080 --> 0:07:58.000 remember they wrote those words, and then we got a 0:07:58.080 --> 0:08:03.960 cooler CPI report, cooler ECI report, a still hot but 0:08:04.080 --> 0:08:07.360 cooling trend in the labor data, right, so that dates 0:08:07.520 --> 0:08:10.080 some of that language. And I think the more important 0:08:10.080 --> 0:08:12.320 takeaway from the minutes was that they're looking at this 0:08:12.400 --> 0:08:14.920 in a very two sided fashion now, is they assess 0:08:15.000 --> 0:08:17.560 risks for the outlook doing too much but also doing 0:08:17.560 --> 0:08:20.000 too little, Whereas before they were always kind of worried 0:08:20.000 --> 0:08:22.360 they were behind the curve and we're just focused on 0:08:22.440 --> 0:08:26.160 catching up. So this is a different, more thoughtful, more 0:08:26.240 --> 0:08:30.680 data sensitive FED going forward. You know, I think this 0:08:30.960 --> 0:08:33.640 may mean that they're on hold, and in fact, they 0:08:33.640 --> 0:08:36.360 may have been at the peak rate of the cycle 0:08:36.400 --> 0:08:39.240 at the July meeting and they're done now, even though 0:08:39.280 --> 0:08:41.680 they don't want to say mission bump right, all. 0:08:41.640 --> 0:08:43.600 Right, Carl, thanks so much for joining us. Always always 0:08:43.640 --> 0:08:46.320 appreciate getting your perspective. Your analysis called wreck Don one 0:08:46.320 --> 0:08:48.520 of the best. He's a chief US economists at b 0:08:48.880 --> 0:08:50.320 n P. Parrybottle. 0:08:51.600 --> 0:08:52.800 You're listening to the team. 0:08:53.160 --> 0:08:57.359 Ken's a live program Bloomberg Markets weekdays at ten am Eastern. 0:08:57.120 --> 0:08:59.840 On Bloomberg dot Com, the iHeartRadio app. 0:09:00.040 --> 0:09:03.000 Blomberg Business at or listen on demand wherever you get 0:09:03.040 --> 0:09:04.480 your podcasts. 0:09:06.080 --> 0:09:08.640 Here a Bloomberg. We love talking about central bank activity. 0:09:08.720 --> 0:09:11.160 We're all over that stuff. Today we're going to focus 0:09:11.200 --> 0:09:13.800 a little bit on the Bank of Japan, and we 0:09:13.880 --> 0:09:16.520 have a great guest to help us do that, Regina Schlagger, 0:09:16.640 --> 0:09:21.400 director of Central Bank Policy Research at SGH Macroadvisor. She 0:09:21.480 --> 0:09:24.360 joined us live here in our Bloomberg Interactive Broker Studio. 0:09:24.920 --> 0:09:27.080 I have to admit, Regina, of all the central banks 0:09:27.080 --> 0:09:31.880 and probably least comfortable or knowledge about what they are doing, 0:09:31.920 --> 0:09:33.760 so just give us a sense of what the boj 0:09:33.880 --> 0:09:35.600 has been up to really over the last several years 0:09:35.600 --> 0:09:37.400 and kind of what you expect them to do going forward. 0:09:37.880 --> 0:09:40.200 Sure, Thanks Paul, thanks for having me, and nice to 0:09:40.200 --> 0:09:43.840 see you both this morning. So the Bank of Japan 0:09:43.960 --> 0:09:47.600 has been somewhat of a laggered in terms of central 0:09:47.600 --> 0:09:52.640 bank policy tightening over a recent recent couple of years, 0:09:53.679 --> 0:09:57.120 and so markets are quite focused on the timing of 0:09:57.600 --> 0:10:02.200 their transition to Titan pol see, particularly with respect to 0:10:02.640 --> 0:10:05.560 transitioning out of what they have had in place now 0:10:05.600 --> 0:10:12.200 for many years yield yield curve targeting, which is them 0:10:12.240 --> 0:10:16.559 targeting the ten year yield, and so they have recently 0:10:16.960 --> 0:10:21.719 shifted toward more flexible arrangement or regime with respect to 0:10:21.800 --> 0:10:26.280 yield curve targeting, which markets are obviously taking as a 0:10:26.840 --> 0:10:29.480 signal that they are on the move if you like, 0:10:30.280 --> 0:10:34.840 and soon to be thinking about higher interest rates at 0:10:34.880 --> 0:10:39.280 some point. Markets intensely focused on the timing of that 0:10:39.640 --> 0:10:43.800 and taking every signal they can from the economy to 0:10:43.840 --> 0:10:46.360 try to gauge when they're likely to move. 0:10:46.640 --> 0:10:49.280 And very different like you're seeing. If you juxtapose that 0:10:49.320 --> 0:10:52.160 against the Federal Reserve and other global central banks that 0:10:52.240 --> 0:10:55.120 clearly have been on this aggressive tightening cycle for over 0:10:55.160 --> 0:10:57.840 a year now, how do you think that impacts the 0:10:57.840 --> 0:11:01.040 global economy? Because Japan is the third larger economy behind 0:11:01.040 --> 0:11:02.760 the United States and China. 0:11:03.000 --> 0:11:07.920 Absolutely and as you rightly infer there's a huge yield 0:11:08.080 --> 0:11:11.240 differential now between the US and Japan, and so one 0:11:11.280 --> 0:11:13.280 of the things that we've become aware of is that 0:11:14.120 --> 0:11:17.480 officials officials in Japan are you know, waiting for the 0:11:17.480 --> 0:11:19.800 FED to be done, if you like, with respect to 0:11:19.840 --> 0:11:23.360 their tightening cycle, so that they can start to think 0:11:23.360 --> 0:11:26.640 about how they will move on their own rates and 0:11:27.160 --> 0:11:31.560 narrow that differential. They have a currency right now which 0:11:31.600 --> 0:11:36.040 is at levels that they're not entirely comfortable with, right, 0:11:36.120 --> 0:11:39.920 so the end breaching one right, right, So this is 0:11:39.960 --> 0:11:42.200 a this is a policy driver for them in the 0:11:42.240 --> 0:11:46.120 sense that they have now i think admitted that it's 0:11:46.120 --> 0:11:49.040 a big factor in how they're thinking about how to 0:11:49.080 --> 0:11:53.160 transition smoothly out of this ultra easy policy that they've 0:11:53.160 --> 0:11:56.199 had now for a very long time. And I think 0:11:56.240 --> 0:11:59.840 that you know, really that rate differential is not going 0:11:59.840 --> 0:12:00.600 to narrow. 0:12:01.960 --> 0:12:04.840 Until they actually moved to move on rates. 0:12:05.280 --> 0:12:07.600 So the yen bridging it's now around one for six 0:12:07.720 --> 0:12:10.960 against the dollar. How much does that stoke expectations that 0:12:11.000 --> 0:12:13.079 it could prompt the Bank of Japan to have more 0:12:13.320 --> 0:12:14.559 intervention from here. 0:12:14.920 --> 0:12:17.280 Right, So that right now there is a lot of 0:12:17.640 --> 0:12:20.280 speculation that they could come in in fact overnight. I 0:12:20.360 --> 0:12:25.040 was even reading about expectations that they could come well, well, 0:12:25.600 --> 0:12:30.360 Japan is asleep essentially and do some stealth intervention. There 0:12:30.400 --> 0:12:33.240 is a lot of focus on when and how they'll 0:12:33.280 --> 0:12:36.280 intervene and at what level. I think from a broader 0:12:36.320 --> 0:12:41.400 perspective that whatever that intervention, whenever that intervention is and 0:12:41.440 --> 0:12:45.160 at what level, it's not necessarily as important as what 0:12:45.200 --> 0:12:46.880 they do on the monetary policy side. 0:12:46.920 --> 0:12:49.000 And so the impact on the market. 0:12:49.040 --> 0:12:54.600 I think of any intervention BOJ official sorry ministry finance 0:12:54.640 --> 0:12:59.959 officials execute is not It has a more transient effect 0:13:00.520 --> 0:13:04.600 I think on markets. Then does the speculation about what 0:13:04.640 --> 0:13:05.800 they'll do with interest rates. 0:13:05.800 --> 0:13:08.360 And when we've had a change in leadership of the 0:13:08.400 --> 0:13:10.800 Bank of Japan, just talk to us about that, what 0:13:11.160 --> 0:13:12.800 that means and going forward. 0:13:12.920 --> 0:13:15.199 Yeah, I think this is a really interesting element. 0:13:15.400 --> 0:13:18.720 I mean, we're always at pains to try and discern 0:13:18.840 --> 0:13:23.160 these differences in personality when there's a change in leadership 0:13:23.200 --> 0:13:26.160 at a central bank. In particular, I think that the 0:13:26.200 --> 0:13:31.480 exit of the former Central Bank of Japan governor Couroda, 0:13:34.080 --> 0:13:36.959 you know, ushered in this succession. 0:13:37.880 --> 0:13:40.559 Of a new governor that comes. 0:13:40.280 --> 0:13:42.800 From a school of thought or an academic background where 0:13:42.800 --> 0:13:45.840 he relies more heavily on forward guidance. That's more the 0:13:45.880 --> 0:13:50.360 Bananki Dragi school of thought. And so I think that 0:13:50.600 --> 0:13:53.120 one of the elements that's really obvious to me through 0:13:53.120 --> 0:13:56.480 this transition of the leadership is the extent to which 0:13:56.800 --> 0:14:00.679 he has been starting to impart that forward garden. I 0:14:00.720 --> 0:14:05.080 think that he's going to rely quite heavily on signaling Rhetorically, 0:14:05.120 --> 0:14:07.000 the bank has held quite firm to. 0:14:08.559 --> 0:14:09.640 This ultra easy. 0:14:09.400 --> 0:14:12.880 Policy, but you can detect little nuances in the way 0:14:12.920 --> 0:14:16.200 he's shifting the language so that markets are understanding that 0:14:16.240 --> 0:14:17.679 the bank is on the move. 0:14:17.840 --> 0:14:20.160 And also will have another update when it comes to 0:14:20.240 --> 0:14:22.920 consumer praises. And if you looked at the latest data 0:14:22.920 --> 0:14:26.040 from the prior month, it did advance at a faster clip. 0:14:26.080 --> 0:14:28.760 How do you view the direction of where those prices 0:14:28.760 --> 0:14:29.720 could be headed from here? 0:14:30.000 --> 0:14:30.200 Right? 0:14:30.240 --> 0:14:33.280 So this is a really another really interesting element because 0:14:33.760 --> 0:14:37.280 the headline rate is expected to show. 0:14:37.080 --> 0:14:41.120 That prices fell in this report. 0:14:41.920 --> 0:14:45.080 That would be consistent with the boj's own forecasts. 0:14:46.120 --> 0:14:48.320 They expect in fiscal. 0:14:48.040 --> 0:14:52.920 Year that inflation will have risen, but in the next 0:14:52.960 --> 0:14:57.480 fiscal year they anticipate that inflation will slow to under 0:14:57.480 --> 0:15:00.240 the two percent objectives. 0:14:59.640 --> 0:15:02.040 So they the same. What is this two percent number? 0:15:02.080 --> 0:15:03.520 Everybody's got a two percent invation? 0:15:03.840 --> 0:15:05.160 Yeah, the magic two percent. 0:15:05.400 --> 0:15:07.840 I never heard it from New Zealand in the nineteen eighties. 0:15:08.560 --> 0:15:08.800 Yeah. 0:15:08.840 --> 0:15:09.600 And then Bernaki, I. 0:15:09.600 --> 0:15:12.560 Think Japan's on the two inflation watch as well. 0:15:12.560 --> 0:15:13.240 They're on the watch. 0:15:13.520 --> 0:15:15.800 So I'm looking at the ego function on the Bloomberg 0:15:15.880 --> 0:15:18.240 terminal and putting it in there for Japan. I guess 0:15:18.280 --> 0:15:21.920 the forecast is for CPI. I guess the headline year 0:15:22.040 --> 0:15:25.080 veer three point three percent, right, so getting there but 0:15:25.160 --> 0:15:27.600 not there, getting there but not there first time, by 0:15:27.600 --> 0:15:28.560 the way I've ever pulled up. 0:15:30.560 --> 0:15:30.680 Thing. 0:15:30.920 --> 0:15:33.240 Okay, and also on an on the line basis, I 0:15:33.280 --> 0:15:36.320 think that that that's the important number. You know, with 0:15:37.400 --> 0:15:39.840 X energy, they're very focused on what the core writ 0:15:40.000 --> 0:15:40.400 is doing. 0:15:40.640 --> 0:15:41.080 Okay. 0:15:41.640 --> 0:15:44.080 I have to get your thoughts on when it comes 0:15:44.120 --> 0:15:46.880 to this discussion. GP Morgan actually had a recent note 0:15:46.960 --> 0:15:51.880 about China's Japanification risks, So seeing similar concerns that Japan 0:15:51.920 --> 0:15:54.080 did in the early nineteen nineties kind of set the 0:15:54.120 --> 0:15:56.400 scene for us about how that worked and what that 0:15:56.400 --> 0:15:57.800 could mean potentially for China. 0:15:58.240 --> 0:16:01.560 Well, obviously there is so much concern about China at 0:16:01.560 --> 0:16:04.800 the moment. It's it's you know, it's it's seeping into 0:16:04.880 --> 0:16:05.840 market psychology. 0:16:05.880 --> 0:16:07.200 I think with respect. 0:16:06.840 --> 0:16:13.520 To how it potentially impacts US federal reserves, future outlook 0:16:13.560 --> 0:16:17.760 and other economies, it's it's impacting the extent to which 0:16:17.800 --> 0:16:20.480 weeks we think that central banks might be done in 0:16:20.520 --> 0:16:24.360 their own respective titaning campaigns. But in terms of the Japan, 0:16:24.880 --> 0:16:27.280 you know, in terms of China becoming Japan, I think 0:16:27.320 --> 0:16:34.040 where some way off assessing that that is the decidedly 0:16:34.120 --> 0:16:35.240 the outlook for China. 0:16:35.520 --> 0:16:37.480 Having said that, you know, there are. 0:16:37.360 --> 0:16:41.200 Real concerns there, and I think that China experts more 0:16:41.360 --> 0:16:43.960 more a depth than I have voiced them for many years. 0:16:45.000 --> 0:16:46.520 You know, when I started in the business back in 0:16:46.600 --> 0:16:49.720 the mid eighties, Japan was the bomb. If you were 0:16:49.720 --> 0:16:52.080 a US investment banker, you had to get a tour 0:16:52.120 --> 0:16:55.960 of duty in Tokyo. But that's not the case any 0:16:56.160 --> 0:16:59.520 for like ever for a long time. Give us suchest overview. 0:16:59.640 --> 0:17:02.080 What's the how do you think or how do comds 0:17:02.080 --> 0:17:04.200 think that japan economy will be over the next five 0:17:04.280 --> 0:17:04.880 or ten years. 0:17:05.119 --> 0:17:09.239 Yeah, it's an interesting point. I like you Paul, you know, 0:17:09.640 --> 0:17:11.439 was in Japan around that time, and it was a 0:17:11.480 --> 0:17:13.119 global superpower, no doubt. 0:17:13.960 --> 0:17:17.320 And since it's been in. 0:17:17.040 --> 0:17:20.520 The doldrums obviously, I think that as they emerged from 0:17:20.720 --> 0:17:24.320 from what has been you know, twenty five year slump, 0:17:25.440 --> 0:17:29.280 the economy is probably not likely to see those heady 0:17:29.359 --> 0:17:31.840 days again to the extent that they did in the 0:17:31.880 --> 0:17:36.440 in the eighties and early nineties. That said, I think, 0:17:36.560 --> 0:17:39.960 you know, the Japanese officials have very long memories and 0:17:39.960 --> 0:17:43.680 they'll be very very cautious and careful about moving too 0:17:43.720 --> 0:17:47.400 quickly to curb any kind of ambulance in the economy 0:17:48.880 --> 0:17:52.520 for fear that they might be reverting back to inflation. 0:17:52.600 --> 0:17:53.080 That's under too. 0:17:53.440 --> 0:17:56.200 I mean, again, as you investment banker, there was Asia, 0:17:56.840 --> 0:17:59.560 then there was non Japan Asian, so basically it was 0:18:00.440 --> 0:18:03.280 and everything else. Right now it's China and everything else. 0:18:03.280 --> 0:18:05.200 So it's just how times have changed. For Ginis Schlager, 0:18:05.440 --> 0:18:07.840 thanks so much for joining us, giving us a view 0:18:07.880 --> 0:18:09.119 of that part of the world. 0:18:09.400 --> 0:18:13.040 You're listening to the tape Cansur live program Bloomberg Markets 0:18:13.080 --> 0:18:16.480 weekdays at ten am Eastern on Bloomberg Radio, the tune 0:18:16.520 --> 0:18:18.000 in app Bloomberg dot Com. 0:18:18.040 --> 0:18:19.480 And the Bloomberg Business App. 0:18:19.520 --> 0:18:22.320 You can also listen live on Amazon Alexa from our 0:18:22.359 --> 0:18:26.760 flagship New York station. Just say Alexa play Bloomberg eleven thirty. 0:18:28.840 --> 0:18:31.760 So we've got one of the leading reinsurance companies here 0:18:31.800 --> 0:18:36.199 in our Bloomberg Interactor Broker studio. Juan Adrade, CEO of Everes. 0:18:36.280 --> 0:18:40.600 The based worlds Bermuda scam. But that's how these guys 0:18:40.720 --> 0:18:44.840 do it. One, he's here in our Bloomberg Interactor Broker Studio. One. 0:18:45.080 --> 0:18:47.359 Thanks for coming in, appreciate it. Thanks, talk to us 0:18:47.359 --> 0:18:51.320 about the reinsurance business. What's driving your business these days? 0:18:51.320 --> 0:18:53.440 I'm looking at your stock. It's a fifteen billion dollar 0:18:53.480 --> 0:18:57.280 market cap company. You've got one eg is a ticker 0:18:57.480 --> 0:18:59.840 up about seven percent year to eight thirty percent over 0:18:59.840 --> 0:19:02.439 the last twelve months. What are the key drivers of 0:19:02.520 --> 0:19:03.120 your business? 0:19:03.400 --> 0:19:05.960 Yeah, no, it's a fascinating question. I mean, if you 0:19:06.000 --> 0:19:08.320 think about the confluence of events that we've all lived 0:19:08.320 --> 0:19:11.040 through over the last few years, whether it's the pandemic, 0:19:11.160 --> 0:19:15.159 the supply chain issues, inflation, climate change, all of that 0:19:15.280 --> 0:19:18.520 is driving demand. And again, as you said, we basically 0:19:18.760 --> 0:19:21.600 ensure insurance companies. So when you think about what's driving 0:19:21.920 --> 0:19:24.840 our business right now. It's the fact that these insurance 0:19:24.880 --> 0:19:28.560 companies are looking for protection for earnings volatility essentially, and 0:19:28.600 --> 0:19:30.160 so that increases the demand for our. 0:19:30.080 --> 0:19:33.760 Product, and there's been a price correction in the insurance industry. 0:19:33.840 --> 0:19:37.440 Why there's been a significant price correction, You're absolutely right, 0:19:37.680 --> 0:19:40.240 and it's really down to a supply and demand imbalance. 0:19:41.000 --> 0:19:42.959 The bottom line is, with all the storms and all 0:19:43.000 --> 0:19:47.000 the activity that we've seen since twenty seventeen, reinsurance companies 0:19:47.040 --> 0:19:50.840 have deployed less capital into the market, so that's constrained supply. 0:19:51.359 --> 0:19:53.439 The other thing that's happened on the supply side is 0:19:53.440 --> 0:19:56.760 a lot of third party allocators, pension funds, sovereign wealth 0:19:56.760 --> 0:19:59.479 funds that used to put money into our sector have 0:19:59.520 --> 0:20:02.959 also out and so that's created a supply crunch, if 0:20:02.960 --> 0:20:05.200 you will, in the industry. But at the same time, 0:20:05.240 --> 0:20:08.920 because of inflation, climate change, all of these other things, 0:20:08.960 --> 0:20:12.280 there's more demand. So there's basically a gap of roughly 0:20:12.280 --> 0:20:15.600 one hundred billion dollars between supply and demand, and that's 0:20:15.600 --> 0:20:19.040 what's created the price correction that really started at the 0:20:19.040 --> 0:20:21.200 beginning of this year in a pretty significant way. 0:20:21.440 --> 0:20:25.120 Hey, on, when you bump into a climate change denier. 0:20:26.240 --> 0:20:27.880 What do you say to that person? I always say, 0:20:27.920 --> 0:20:29.359 like somebody when I bump into them, I say, go 0:20:29.440 --> 0:20:31.679 talk to an insurance company. They'll tell you if it's 0:20:31.720 --> 0:20:32.040 real or not. 0:20:32.160 --> 0:20:34.879 What do you say, Well, I think that's good advice, 0:20:34.920 --> 0:20:36.399