Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day, we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. Let's get over to
Speaker 1: Megan Horneman. What an amazing day for me to come
Speaker 1: back here to these markets, Megan, and after these, you know,
Speaker 1: two big central bank decisions, what do you make of
Speaker 1: inflation right now? I mean, um, my first thought after
Speaker 1: reading that pal hike fifty basis points instead a couple
Speaker 1: more could be on the way, is it must be
Speaker 1: doing something to stop inflation already. Yeah, I mean, I
Speaker 1: think the biggest thing is the next couple of months
Speaker 1: will get a little bit of a better indication on
Speaker 1: it has inflation peaked and are we going to start
Speaker 1: rolling over and getting to some more I wouldn't say
Speaker 1: normal levels, but at least a little bit better than
Speaker 1: what we've seen over the past year. That's the biggest
Speaker 1: concern I think right now from an inflation story, and
Speaker 1: we just don't know that we'll get this this stuff
Speaker 1: over the next couple of months. Next week is a
Speaker 1: big week, we get both cp I and p p I,
Speaker 1: and then we'll look again in UM in June to
Speaker 1: see how that works out. And Megan, I'm still trying
Speaker 1: to make sense of the past twenty four hours or so.
Speaker 1: Obviously that enormous rally that we saw across risk assets
Speaker 1: during the FED presser yesterday. Now to see this really
Speaker 1: amazing give back. UM, I'd love to hear your perspective
Speaker 1: on whether you know markets misread what Pal was saying
Speaker 1: and we're seeing a rethink today, or how do you
Speaker 1: explain this hiccup. I think all of the the uncertainty
Speaker 1: that is kind of filtering into the market today was
Speaker 1: here yesterday. I just think what Pal did was he
Speaker 1: delivered a pretty good press conference, satisfying both both ends
Speaker 1: of the spectrum. So made it very clear that we
Speaker 1: were going to hike fifty basis points and it's on
Speaker 1: the table for the next few meetings. And he was
Speaker 1: pretty aggressive on on the inflation situation, but at the
Speaker 1: same time also said that there's not any discussion of
Speaker 1: seventy five basis point rate hikes, so it was kind
Speaker 1: of right down the middle. You know, they're pretty good
Speaker 1: at doing that. But today when you came in, you
Speaker 1: really got three different things driving the market today. First
Speaker 1: of all, this was discussed what happened with the Bank
Speaker 1: of England, and they're pretty I guess you could say
Speaker 1: pessimistic or realistic outlook on what inflation will look like
Speaker 1: this year in the UK and their economic situation that
Speaker 1: spooked markets. We got some dismal economic data here in
Speaker 1: the US as well, even though it was backward looking
Speaker 1: in part of the first quarter, it's not pretty to
Speaker 1: see some of those productivity numbers. And then lastly, don't
Speaker 1: forget that this morning we also finally broke through that
Speaker 1: psychological three percent level on the tenure and that's something
Speaker 1: that I think the market was looking for. So that's
Speaker 1: going to take some of the the wind out of that.
Speaker 1: You know, that optimism yesterday that we had in the
Speaker 1: big rebound that we had in specifically some of those
Speaker 1: growth and technology type of names. So this little bit
Speaker 1: of capitulation, I mean, when um, you know a central
Speaker 1: banker is honest with markets, is that, you know, peak pessimism.
Speaker 1: I think there is I would say peak pessimism, or
Speaker 1: at least some parts of the market that are pricing
Speaker 1: in the most pessimistic situation. It's rare a central bank
Speaker 1: or forecasting contraction, right or a recession. Yeah, it is,
Speaker 1: it is rare. And um, you know we didn't get
Speaker 1: that yesterday. There still is the chance that he can
Speaker 1: orchestrate a soft landing, although he didn't make it very
Speaker 1: clear it will be difficult to do that. He also
Speaker 1: pointed out a lot of the positive aspects of the
Speaker 1: U S economy that he thinks can withstand some of
Speaker 1: this monetary tightening. But keep in mind, the Federal Reserve
Speaker 1: and central banks around the world can only do so
Speaker 1: much with inflations out of there's certain parts of it
Speaker 1: that are out of their control, whether it's the war
Speaker 1: between Russian and Ukraine as well as the supply change disruptions.
Speaker 1: They really can't fix that issue, and that has been
Speaker 1: some of the contributory factors to inflay stion this year.
Speaker 1: And Megan, I mean, pal seemed to pretty definitively take
Speaker 1: a seventy five basis point hike off the table. But
Speaker 1: if we think about, you know, the past few months
Speaker 1: of the dot plot of fed communication. Uh, you could
Speaker 1: make an argument that they've had to chase inflation here,
Speaker 1: and I'd love to hear your thoughts on whether we
Speaker 1: could see that seventy five basis point hike come back
Speaker 1: on the table. I think I think it's too early
Speaker 1: to say that. I would I would say that the
Speaker 1: probability is low for seventy five basis point heights because
Speaker 1: keep in mind, not only are they going to raise
Speaker 1: fifty basis points, which I think they'll do in the
Speaker 1: next couple of meetings at a minimum, but that reduction
Speaker 1: in the balance sheet is also pretty intense as well.
Speaker 1: So I think seventy five basis points is a little
Speaker 1: bit of a stretch now, especially since most of the
Speaker 1: forecasts are expecting that inflation will have either already peaked
Speaker 1: or peak in the next couple of months. So how
Speaker 1: does this make I mean, you're now chief investment officer
Speaker 1: at verdant Um Capital Advisors on the investment committee, obviously there,
Speaker 1: I guess leading discussions. How difficult does this make your job? With?
Speaker 1: You know, inflation is transitory, Okay, it's not transitory. They're
Speaker 1: gonna hike twice five times, They're gonna like fifty basis
Speaker 1: points seventy five base points like constantly moving. So there's
Speaker 1: two different sizes that from from the fixed income perspective,
Speaker 1: regardless of whether or not, you know, coming into this
Speaker 1: year inflation was transitory or not transitory, we were very
Speaker 1: defensive with fixed income and we still are. That meant
Speaker 1: we reduced a lot of our credit exposure, if not
Speaker 1: all of it, So we reduced investment investment grade credit.
Speaker 1: We don't own any direct investment grade credit right now.
Speaker 1: That's taken a big brunt of this rise in interest rates.
Speaker 1: We've been very short duration, so we're not completely abandoning
Speaker 1: fixed income, but we've been very defensive with the fixed
Speaker 1: income sector and UM. The other area that it's impacted
Speaker 1: the most has been in specifically your US large cap
Speaker 1: growth UM. That has definitely been hit because we're having
Speaker 1: this reset of multiples and multiple the the reset of
Speaker 1: the lack of multiple expansion going forward because of higher
Speaker 1: interest rates and higher inflation. So we have instead started
Speaker 1: to look at some of these opportunities that have been
Speaker 1: given to us this year to look at some of
Speaker 1: the small and MidCap area of the market. Those areas
Speaker 1: have been beaten up the most and pricing in a
Speaker 1: lot of that pessimism. Megan, thanks so much for joining us.
Speaker 1: Megan Horneman there she is the chief investment officer over
Speaker 1: at Verdant's Capital Advisors. Let's bring in right now. I
Speaker 1: guess Jonathan Maxwell. He is the CEO and co founder
Speaker 1: of Sustainable Development Capital. After years moving infrastructure around and
Speaker 1: investment banks on the street, he founded this firm in
Speaker 1: two thousand seven. And I think really no better time
Speaker 1: to talk to you, Jonathan than now about what you
Speaker 1: do in terms of your energy in for structure deals,
Speaker 1: but also um the current financial situation, especially considering comments
Speaker 1: from Andy Bailey. I mean, what do you make of
Speaker 1: a pound at one three? How does that affect the
Speaker 1: business that you do? Yeah, so thank you for having
Speaker 1: me back on. And what an amazing set of numbers
Speaker 1: we've just heard of global markets, and I think it
Speaker 1: helps to look at the current market environment A is
Speaker 1: so dominated by competition for natural resources, and that's one
Speaker 1: of the key themes that's really driven the political gyrations recently.
Speaker 1: So you know, you've got huge competition for natural gas
Speaker 1: and for for other resources. Of the world's energy system
Speaker 1: relies on all gas and Callum and I think that
Speaker 1: emanating out of the Ukraine crisis, we've now seen massive
Speaker 1: increases in energy prices which are having the worldwide reple effects.
Speaker 1: The were itself having serious political implications for people, but
Speaker 1: the economic implications globally affecting hundreds of millions and billions,
Speaker 1: So fundamentally, I think the question that we need to
Speaker 1: look behind all of these numbers is where is the increase,
Speaker 1: whereas the pressure coming from and the pain point is
Speaker 1: really around the energy market as one of the key areas,
Speaker 1: And what are the solutions to those problems? You know,
Speaker 1: is it producing more supply or is it even looking
Speaker 1: at alternative solutions? Well, I saw I saw Bailey talking
Speaker 1: to reporters today and saying that the biggest driver is
Speaker 1: this real income shock which is coming from the change
Speaker 1: in the terms of trade, coming particularly from energy prices.
Speaker 1: So I guess you know, the question is then, what
Speaker 1: what can be done, what should have been done previously,
Speaker 1: and what are you working on to do now? Right,
Speaker 1: we'll go back to the point that I made of
Speaker 1: the world's energy system is all gas and coal. But
Speaker 1: the extraordinary factor, the extraordinary thing about this is that
Speaker 1: so much it is wasted thermal energy generation using oil,
Speaker 1: gas and coal involves enormous losses of energy primary energy
Speaker 1: between the point of through the points of generation, transmission,
Speaker 1: and distribution. And the United States it's extreme. Up to
Speaker 1: seventy of energy can be lost through thermal losses by
Speaker 1: burning fossil fuels through to the transmission and distribution losses
Speaker 1: even before it gets to buildings like this, and then
Speaker 1: more energy can get lost when it gets to the
Speaker 1: point of view. So we're in immense loss of energy.
Speaker 1: Both in the United States and in Europe. It's about
Speaker 1: the same two thirds energy lost from the point of
Speaker 1: generation to the end use. So the burning question literally
Speaker 1: is how do we replace fossil fuels natural gas in particular,
Speaker 1: and speaking from a European context coming from Russia, actually
Speaker 1: the question that needs to be asked at the same
Speaker 1: time is how can we stop losing wasting so much energy?
Speaker 1: And for every dollar we invest in new supply and
Speaker 1: every plan I've seen coming out of the US governmental
Speaker 1: or even the Diamond proposal today is about supply, new gas,
Speaker 1: new news, new hydrogen, union, newables. It's great, it's going
Speaker 1: to take five fifteen years. The only solution that is
Speaker 1: going to work in the next six twelve to thirty
Speaker 1: six months is attacking that problem reducing energy waste? Well,
Speaker 1: that's what I wanted to ask. Obviously, you know, when
Speaker 1: it comes to producing new energy supply, possibly drilling more.
Speaker 1: Like you said, that's on a long time frame, but
Speaker 1: for the immediate future, that twelve month time frame, a
Speaker 1: little bit beyond. I mean, what is the focus? Are
Speaker 1: people asking that question? How do we know recoup some
Speaker 1: of the energy that we're wasting or you know, do
Speaker 1: you think that the focus is too much on these
Speaker 1: immediate solutions? I think the world sorry, these medium term solutions, Well,
Speaker 1: I think you know, I think the focus for the
Speaker 1: first point of the focus has been how big this
Speaker 1: problem is. You know, this is a huge, massive challenge
Speaker 1: to try and replace these sorts of fuels. Now, of course,
Speaker 1: the first one is to switch to alternative sources like
Speaker 1: the United States, you know, made the other countries in
Speaker 1: the Middle East for fuel supply. But there are solutions,
Speaker 1: but all of those solutions that are going to increase
Speaker 1: volumes of supply are going to take years, decades. Yes, absolutely,
Speaker 1: the question now everybody understands how big the problem is,
Speaker 1: what are the solutions for the next six twelve thirty
Speaker 1: six months, and that's what we're investing in. And there
Speaker 1: is no solution at the kind of scale and pace
Speaker 1: needed other than decentralizing energy, building energy on site or
Speaker 1: close to where it's needed, by investing in energy demand
Speaker 1: reduction projects, not by asking people to wear a wooly
Speaker 1: squat sweater and turned down their demostatic but by changing
Speaker 1: the loss of energy use in the seventy of the world,
Speaker 1: energy that's used in buildings, industry and transport, so much
Speaker 1: of it is wasted because inefficient infrastructure. Solution was one
Speaker 1: that I had, you know, high hopes for this water well,
Speaker 1: you know, I think go back to what I've said,
Speaker 1: and it's a very serious point there. You know, there's
Speaker 1: so much of what you hear about energy efficiencies like
Speaker 1: it's from the ninety in seventies, like there should be
Speaker 1: some sort of sacrifice. People should use less drive, less
Speaker 1: heat their homes, less seventy of energies used in buildings,
Speaker 1: industry and transport. That's where the real problem is, and
Speaker 1: the solutions lie there. Make them more efficient, generate energy
Speaker 1: where they needed, and invest in infrastructure that reduces energy demand.
Speaker 1: But it's got to be doubly hard, Jonathan, when you
Speaker 1: see this kind of not only the gyrations and currency markets,
Speaker 1: but also just you know, the massive inflation in other commodities.
Speaker 1: In order to get those electric cars on the road,
Speaker 1: or to get you know, some more efficient hydrogen trucking solution,
Speaker 1: you've got to build them first, and you've got you've
Speaker 1: got to have the chips. I mean, the whole supply
Speaker 1: chain has to make this so much more difficult. So
Speaker 1: let's start on the demand side. Replacing lights with LEDs,
Speaker 1: replacing heating ventilation, air conditioning equipment, introducing better software, building
Speaker 1: management systems and controls. These are all technologies and applications
Speaker 1: that are low cost, abundant in supply, and able to
Speaker 1: be introduced incredibly quickly in days, months, certainly within the
Speaker 1: next year on the demand side. On the supply side,
Speaker 1: locally produced local generating sets, turbines, engines, solar and storage assets.
Speaker 1: On the supply side can at least be installed on
Speaker 1: site much quicker, with much slower so much less of
Speaker 1: problematic planning applications and long term supply chain is using
Speaker 1: letter learn resource consumption. And the last point I make
Speaker 1: is a national as well as corporate issue. By using
Speaker 1: less energy for the same economic output, it improves performance.
Speaker 1: Go back to what I said at the beginning. If
Speaker 1: we're wasting most of the energy at the world, no
Speaker 1: wonder we're unproductive. By cutting energy demand, you cut costs,
Speaker 1: improved productivity. It's better business, it's better for the country,
Speaker 1: and it's also the largest source of greenhouse gas emissions reductions.
Speaker 1: And Jonathan, we have about twenties seconds left with you,
Speaker 1: but I'm curious in this environment, where are you seeing
Speaker 1: the most opportunity for your firm for Sustainable Development Capital whatever.
Speaker 1: The last few years, we've invested two billion dollars in
Speaker 1: investment opportunities associated with exactly what I'm saying. So these
Speaker 1: are not just nice ideas, they are highly profitable. And
Speaker 1: we've gotten an investment vehicle listed on the London Stock Exchange.
Speaker 1: We've got private investment vehicles, so that's where we're seeing
Speaker 1: the opportunities. Jonathan. Great to have you, and thanks so
Speaker 1: much for joining us. Jonathan Maxwell there, he is the
Speaker 1: co founder and the CEO of Sustainable Development Capital, helping
Speaker 1: firms make these changes that we talk about so much,
Speaker 1: especially lately. Great to have you with us, Jonathan Maxwell.
Speaker 1: Let's get over right now to Dave Rainy joining us
Speaker 1: to talk about these insane markets. UM. He is a
Speaker 1: portfolio manager at Hennessy Focus Fund. And Dave, you know,
Speaker 1: we can't really keep up with the moves down today. UM,
Speaker 1: it felt kind of like this on the upside yesterday.
Speaker 1: What do you do in moments of incredible volatility like this, Well,
Speaker 1: you understand that it's going to happen over a lifetime
Speaker 1: of investing. Um. The markets obviously very concerned today about
Speaker 1: the level and the rate of change in short term
Speaker 1: interest rates and also what the FED is going to
Speaker 1: do on the long end of the curve and when
Speaker 1: it's going to start there. So I was a little
Speaker 1: surprised that the market rallied the way it did after
Speaker 1: Chairman Pale said there wasn't a seventy five basis point
Speaker 1: increase in the offering. And I'm honestly, I'm not surprised
Speaker 1: to see markets reverse the way they have this morning.
Speaker 1: And Dave's something I've been thinking about a lot is
Speaker 1: financial conditions, because we've heard Pal repeatedly stressed that financial conditions,
Speaker 1: a tightening of those conditions, that is the mechanism through
Speaker 1: which monetary policy actually touches the real economy. And something
Speaker 1: I was thinking about watching markets just take off yesterday
Speaker 1: was that this is only going to further ease financial conditions.
Speaker 1: And if we end up in a situation like that
Speaker 1: where the feed is hiking, but you know, stocks are rallying,
Speaker 1: risk is rallying, financial conditions are easing. I mean, does
Speaker 1: the Fed have to be even more hawkish than they
Speaker 1: might have been otherwise? Well, it depends how far behind
Speaker 1: the curve the fet is. I think it's easy to
Speaker 1: make an argument today that the set is easily twelve
Speaker 1: months behind the snugging or the tightening curve. UM. FED
Speaker 1: funds should be much higher today. A matter of fact,
Speaker 1: I think the recently confirmed vice chair the FED said
Speaker 1: a couple of weeks ago that she didn't think that
Speaker 1: we would really get to a point around neutrality until
Speaker 1: the end of this year. So whether whether it's the
Speaker 1: FED funds rate still well below UM the neutral rate
Speaker 1: that set talks about it, you know, around two and
Speaker 1: a half percent UH, and or the fact that the
Speaker 1: Fed really hasn't begun to unwind their their nine fillion
Speaker 1: dollar balance sheet on the long end of the curve. Um,
Speaker 1: the risk here is that the FED has to overcreate
Speaker 1: because it's taken so long to start moving rates up.
Speaker 1: And so this is I think over the last few
Speaker 1: weeks you've seen a number of cell side firms UM
Speaker 1: increase their talk about the risk of an inflation, of
Speaker 1: of a recession over the next eighteen to two years.
Speaker 1: Why because we have an unemployment rate that's already fully recovered,
Speaker 1: and so typically the FED starts sugging or raising rates
Speaker 1: when the unemployment rate is you know, four to five
Speaker 1: to six, not at three and a half. And so
Speaker 1: this is the difficulty of a soft landing in here
Speaker 1: at this time. Well, you know what a lot of
Speaker 1: people have been worried about, Dave, is that the FED
Speaker 1: um essentially causes a recession here and then has to
Speaker 1: turn tail and go back. You know, you talked about,
Speaker 1: for example, the nine trillion dollar balance sheet. I remember
Speaker 1: when it was only four trillion and it seemed eye
Speaker 1: popping at that point, and they were gonna reduce it
Speaker 1: and they got, you know, half a trillion down and
Speaker 1: all of a sudden had to triple it. So you
Speaker 1: know what does that mean? Well, um, I think the
Speaker 1: term that people are talking about is a growth recession.
Speaker 1: Um not necessarily a hard recession or a severe recession,
Speaker 1: but a growth recession. And so you know, the FEDS
Speaker 1: comments UM over the last few weeks have been we'd
Speaker 1: have FED think that we can engineer what we need
Speaker 1: to do, which is bringing down UM inflation, you know,
Speaker 1: which is running somewhere between six and eight and a
Speaker 1: half percent, however you want to measure it, and we
Speaker 1: need to bring it down to the two or three
Speaker 1: percent level um. HM. The the the risk in here
Speaker 1: is that having waited so long, they're gonna have to
Speaker 1: bring FED funds up much higher and push spending down,
Speaker 1: consumer spending down, and unemployment up. The question is whether
Speaker 1: or not they can do it just enough to begran
Speaker 1: the to break the back of inflation UM and yet
Speaker 1: still have a pretty good unemployment or employment environment. We
Speaker 1: have an excellent employment environment today. The problem is is
Speaker 1: that wage gains aren't keeping up with inflation, and inflation
Speaker 1: is the biggest macro risk to the economy and the
Speaker 1: market today. So I'm I'm not surprised by the market's
Speaker 1: reaction today. After yesterday, we're still going to have an
Speaker 1: additional hundred, probably hundred and fifty basis points of rate
Speaker 1: increases between now and the end of the year on
Speaker 1: top of what the FED did, and there will probably
Speaker 1: be more next year. Um. But German OWL once again
Speaker 1: reiterated the fact that the economy is strong. Employment growth
Speaker 1: is obviously very good, wage growth is strong on a
Speaker 1: phenomenal basis, and there's their their their lots of job openings. Stave, thanks,
Speaker 1: you know, Dave, thanks so much for joining supporttionally. That's
Speaker 1: all we have time for. But I think really uh
Speaker 1: interesting points and insightful knowledge from Dave Rainey, their portfolio
Speaker 1: manager over at Hennessy Focus Fun talking to us about, um,
Speaker 1: the FED and the gyrations that we're seeing as a
Speaker 1: result of well, the FED and the Bank of England
Speaker 1: and the ECB. In markets today, let's get over to
Speaker 1: Vince Signarella joining us right now to talk about what's
Speaker 1: going on in currencies and and markets. These are global
Speaker 1: macro strategist at Bloomberg News. Um. But Vince, I you know,
Speaker 1: I emphasized the the f X because you traded it
Speaker 1: for so long on the street, and um, the dollar
Speaker 1: strength that we're seeing right now is really quite remarkable.
Speaker 1: One of five is it against the pound? One? Uh? Sorry,
Speaker 1: one of five against the euro against the pound. Is
Speaker 1: this gonna stick? Well? You know what I will tell
Speaker 1: you is if you look at the dollar and you
Speaker 1: look at equities, you see this in firset relationship. So
Speaker 1: for the dollar to continue to rally, we're going to
Speaker 1: need to see the equity markets continue to sell off.
Speaker 1: And I think that's actually more the question. Um you
Speaker 1: know that the dollars is reacting to this sell off
Speaker 1: in equities um and and poised to be sort of
Speaker 1: the the asset to go to in a risk of
Speaker 1: in a risk off environment, given what's going on in
Speaker 1: Ukraine and what the FETE is doing, etcetera. So it
Speaker 1: does appear that it will it will last for a
Speaker 1: little bit longer as we as we take into account
Speaker 1: what the FETE is doing. But you know, interest rates
Speaker 1: alone aren't what's aren't just what moves the the FX market.
Speaker 1: You're looking at the proximity of what's going on in
Speaker 1: Eastern Europe to Europe, and I think that's what's also
Speaker 1: weighing on European currencies and that's helping a dollar out
Speaker 1: quite a bit. And then I am dying to get
Speaker 1: your thoughts on the pound, because what a move in
Speaker 1: sterling it's down to its lowest in two years versus
Speaker 1: the dollar looks like off two percent that pair. Uh.
Speaker 1: That's of course after the Bank of England issued the
Speaker 1: most gloomy outlook of any major central bank this year.
Speaker 1: How unusual is it to see the currency fall after
Speaker 1: its central bank actually hikes rates. Well, you know, that's
Speaker 1: actually a really good question. It's the expectation, obviously, is
Speaker 1: currencies rise when the central bank's raising rates. But in
Speaker 1: the case of the UK, um, because they do import
Speaker 1: a great deal of product um. When there is inflation globally, um,
Speaker 1: it's it's the wrong kind of inflation. It's the wrong
Speaker 1: kind of inflation for every country really, but for the
Speaker 1: UK it seems to weigh a bit more um. And
Speaker 1: so this this type of phenomenon, when you see the
Speaker 1: UK raising rates, um, it doesn't actually help the currency.
Speaker 1: During that time when Sauros was attacking the pound, the
Speaker 1: central bank raised rates uh three basis points an attempt
Speaker 1: just just a day before the pound devalued in an
Speaker 1: attempt to stabilize it and the pound went l It
Speaker 1: was just seen as a as a feeble attempt to
Speaker 1: try to rescue the currency, and when the markets see
Speaker 1: that and think that the banks are reacting, uh in
Speaker 1: only a way to try to salvage a bad situation.
Speaker 1: They generally try to push them as hard as they
Speaker 1: can to see how bad a situation they can make
Speaker 1: for the central banking And that's what's going on now,
Speaker 1: I think. Yeah, And of course it's all relative, right,
Speaker 1: with all of these central banks being pretty gloomy. Powell
Speaker 1: also acknowledging that his moves are going to cause pain. Um,
Speaker 1: and we've heard, you know, worse from other Federal Reserve,
Speaker 1: from other f o MC voters. How how mobile I wonder,
Speaker 1: especially since you bring up sore is global capital now?
Speaker 1: Is it more mobile now than it was then? Oh? Yeah, absolutely,
Speaker 1: I mean, um, you know, the whole advent of the
Speaker 1: electronic trading platform situation created almost instant mobility for particularly
Speaker 1: the currency markets, especially the currency concerts um where you know,
Speaker 1: back in the in the Sorrow Stays, most of the
Speaker 1: transactions were done by voice brokers. I actually was one
Speaker 1: at that time, and there were there were probably five
Speaker 1: people like me who could actually count, and so that
Speaker 1: actually slowed down the number of transactions you could do.
Speaker 1: Now that it's all electronic and computers are doing it
Speaker 1: for everyone. You know. The speed of the moves are
Speaker 1: just incredible. We saw it just the other day with
Speaker 1: its supposedly a trade or at Citybank London with a
Speaker 1: fat finger, you know, crushed the equity markets in Europe.
Speaker 1: I mean, that's how quickly and how fast money moved
Speaker 1: now because of the electronic trading systems and Vince. Obviously,
Speaker 1: we've heard so much about the strong dollar in the
Speaker 1: past couple of weeks, the Bloomberg Dollar Index I think
Speaker 1: it was last week or the week before, rising to
Speaker 1: its highest level since. Wrapped that into all of the
Speaker 1: high profile warnings we've gotten about a recession coming in
Speaker 1: the next I don't know, year to two years. What
Speaker 1: would that mean for the dollar If there is a
Speaker 1: recession state side, well, one of the one of the issues,
Speaker 1: and it's not just for the dollar, it's going to
Speaker 1: be for the a lot of the world especially. I
Speaker 1: think this is going to impact emerging market currencies even
Speaker 1: more than the dollars. If you have that situation where
Speaker 1: inflation does not ease, it doesn't appear to be at
Speaker 1: the moment, and you have recessions, It's not going to
Speaker 1: be just the US. It's going to be a global
Speaker 1: recession and then you have this sort of stay inflation
Speaker 1: feel two global markets. Um, in the past when that happened,
Speaker 1: you had a similar situation what's going on in the
Speaker 1: UK in the seventies. The dollar was under a great
Speaker 1: deal of pressure because of that situation. If it if
Speaker 1: it's a if it's a regional thing, which is just
Speaker 1: really in the US, then that's what would happen. A
Speaker 1: dollar would roll over. But I'm guessing that this is
Speaker 1: going to be more of a global event, and so
Speaker 1: the currencies that are going to suffer the most are
Speaker 1: going to be the exporter of currencies and the emergy
Speaker 1: market currencies. So the US once again is going to
Speaker 1: be the cleanest dirty shirt pretty much. Yeah, it's the
Speaker 1: you know, it's it's one of those things where you just,
Speaker 1: you know, when people say what people have been buying
Speaker 1: stocks for the last fifteen years and saying where else
Speaker 1: you're gonna go in the currency market, That's that's kind
Speaker 1: of the situation. Unless some one area steps up, uh,
Speaker 1: and it could be China if they turn things around. Um,
Speaker 1: there's really no other place to hide. Vince, thanks so
Speaker 1: much for joining us. Vince Signarella. There is the global
Speaker 1: macro strategists for Bloomberg News. Thanks for listening to the
Speaker 1: Bloomberg Markets podcast. You can subscribe and listen to interviews
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Speaker 1: Matt Miller. I'm on Twitter at Matt Miller three. On
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