1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,240 --> 00:00:13,200 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 3 00:00:13,320 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,840 Speaker 1: Find Bloomberg Surveillance, an Apple podcast, SoundCloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:31,000 Speaker 1: and of course on the Bloomberg Terminal. John, I've never 6 00:00:31,040 --> 00:00:33,880 Speaker 1: seen a point, even the crisis of oh seven oh eight, 7 00:00:34,080 --> 00:00:37,040 Speaker 1: where there's so many t decisions out there that we're 8 00:00:37,080 --> 00:00:39,880 Speaker 1: all going to make off of a natural disaster. Let's 9 00:00:39,880 --> 00:00:42,920 Speaker 1: start right there with Mohammed al Arian, quaits college president 10 00:00:42,920 --> 00:00:45,519 Speaker 1: and Bloomberg opinion columnist in place to say, joins us 11 00:00:45,880 --> 00:00:48,800 Speaker 1: right now, Mohammed two way risk? Do you think we're 12 00:00:48,800 --> 00:00:51,400 Speaker 1: appreciating the two way risk a little bit more we 13 00:00:51,479 --> 00:00:55,240 Speaker 1: are in the marketplace? I think the FED as yet 14 00:00:55,720 --> 00:01:00,639 Speaker 1: hasn't It is absolutely convinced that there's just one outcome, 15 00:01:01,080 --> 00:01:06,839 Speaker 1: so it's baseline is having a very high probability of materializing, 16 00:01:07,040 --> 00:01:09,720 Speaker 1: whereas the marketplace is starting to think more in terms 17 00:01:09,800 --> 00:01:14,640 Speaker 1: of a distribution of outcome that's tilted towards a horder 18 00:01:14,720 --> 00:01:17,800 Speaker 1: economy than what the FED expects. Do you think Mohammad 19 00:01:17,840 --> 00:01:20,080 Speaker 1: has an era of judgment, or just the factor of 20 00:01:20,080 --> 00:01:22,400 Speaker 1: the seat you're sitting in. If your market participant, you 21 00:01:22,440 --> 00:01:24,600 Speaker 1: have to recalibrate day to day the balance of risk. 22 00:01:24,640 --> 00:01:26,880 Speaker 1: If your policymaker, you just like is a focused on 23 00:01:26,920 --> 00:01:31,679 Speaker 1: the destination. Now that's new, John. Remember we used to 24 00:01:31,720 --> 00:01:35,440 Speaker 1: be forecast based, which would allow you to cause correct 25 00:01:35,920 --> 00:01:39,399 Speaker 1: as you saw information come in. Now the FED on 26 00:01:39,480 --> 00:01:42,880 Speaker 1: this new monetary framework has become outcome based. And when 27 00:01:42,880 --> 00:01:46,319 Speaker 1: you are outcome based, you don't cause correct as you 28 00:01:46,400 --> 00:01:49,520 Speaker 1: go along. You wait for the outcome. And what the 29 00:01:49,560 --> 00:01:52,400 Speaker 1: market is realizing now is that there's a downside to 30 00:01:52,520 --> 00:01:56,240 Speaker 1: being outcome based when there are structural changes going on. 31 00:01:56,680 --> 00:02:01,120 Speaker 1: The big message of the huge data miss, be it 32 00:02:01,240 --> 00:02:05,200 Speaker 1: on Friday or yesterday, is that when the are structural 33 00:02:05,320 --> 00:02:09,040 Speaker 1: changes going on in an economy, it becomes very difficult 34 00:02:09,040 --> 00:02:13,359 Speaker 1: for economists to foecus with any degree of accuracy. Mohammad, 35 00:02:13,360 --> 00:02:16,800 Speaker 1: I want to go to the mathematical hierarchy, the architecture 36 00:02:16,880 --> 00:02:18,520 Speaker 1: that we have right now, and we do this in 37 00:02:18,600 --> 00:02:21,880 Speaker 1: honor of your Queen's College and the mathematical bridge that 38 00:02:21,960 --> 00:02:25,639 Speaker 1: I know you've walked across the mathematical bridge right now 39 00:02:25,680 --> 00:02:28,440 Speaker 1: to two thousand twenty three. It's not in any of 40 00:02:28,440 --> 00:02:31,680 Speaker 1: the textbooks, is it. So then what do we use? 41 00:02:33,800 --> 00:02:37,240 Speaker 1: So we have to have an open mindset and a 42 00:02:37,320 --> 00:02:40,640 Speaker 1: lot of humility. We have to recognize that we have 43 00:02:40,880 --> 00:02:43,480 Speaker 1: to think in terms of a range of scenarios and 44 00:02:43,560 --> 00:02:47,760 Speaker 1: not get become hostage to a single baseline. And we 45 00:02:47,840 --> 00:02:50,240 Speaker 1: have to be able to make to cause correct. You know, 46 00:02:50,520 --> 00:02:53,560 Speaker 1: this is the lesson of the past when you have 47 00:02:53,600 --> 00:02:57,160 Speaker 1: take structural changes. And what's so important, your Dr Larian 48 00:02:57,280 --> 00:03:00,000 Speaker 1: is the idea that we have a set of outcomes. 49 00:03:00,320 --> 00:03:03,360 Speaker 1: The gloom crew, which you're not part of, pounces on 50 00:03:03,440 --> 00:03:06,560 Speaker 1: this every day with the great negativity. Do you have 51 00:03:06,639 --> 00:03:11,440 Speaker 1: a confidence that corporate officers can adapt and adjust to 52 00:03:11,680 --> 00:03:16,040 Speaker 1: some form of set of positive outcomes. Yeah, the ones 53 00:03:16,200 --> 00:03:20,239 Speaker 1: I speak to are very open to the possibility that 54 00:03:20,320 --> 00:03:24,400 Speaker 1: there are more outcomes out there than they've faced in 55 00:03:24,440 --> 00:03:27,440 Speaker 1: the past. So what you hear over and over again 56 00:03:27,520 --> 00:03:31,040 Speaker 1: is this notion of resilience, this notion of optionality, being 57 00:03:31,040 --> 00:03:34,239 Speaker 1: able to change your mind, this notion of agility, being 58 00:03:34,280 --> 00:03:37,080 Speaker 1: able to move quickly when you have clarity, But that 59 00:03:37,320 --> 00:03:40,600 Speaker 1: they are much more data dependent than policymakers have become 60 00:03:40,920 --> 00:03:45,080 Speaker 1: policymakers now are focused on a destination with a degree 61 00:03:45,120 --> 00:03:49,320 Speaker 1: of conviction Tom that isn't match with foundation and evidence, 62 00:03:49,640 --> 00:03:52,920 Speaker 1: and that's really unusual in our recent economic history. And John, 63 00:03:52,960 --> 00:03:55,280 Speaker 1: you saw this yesterday with City Group where they talked 64 00:03:55,280 --> 00:03:58,000 Speaker 1: about the resilience of the United Kingdom economy and ma 65 00:03:58,040 --> 00:04:01,320 Speaker 1: homm chief said, they've been had hostage policymakers. This Federal 66 00:04:01,320 --> 00:04:05,080 Speaker 1: Reserve is how hostage by its own framework. How do 67 00:04:05,120 --> 00:04:08,640 Speaker 1: you think that being howed hostage right now? So the 68 00:04:08,720 --> 00:04:12,280 Speaker 1: framework was the product of a certain world, and that 69 00:04:12,440 --> 00:04:16,240 Speaker 1: was the world pre pandemic. It was a world of 70 00:04:16,360 --> 00:04:21,680 Speaker 1: deficient aggregate demand that had persisted for a while. That 71 00:04:21,800 --> 00:04:26,599 Speaker 1: was the world the FED was formulating its framework force. 72 00:04:27,200 --> 00:04:29,479 Speaker 1: And I have a lot of sympathy that that framework 73 00:04:29,560 --> 00:04:32,320 Speaker 1: made sense for that world. In a world like that 74 00:04:33,000 --> 00:04:36,960 Speaker 1: where the supply side is relatively stable structurally, where you 75 00:04:36,960 --> 00:04:40,320 Speaker 1: have a persistent deficiency of aggregate demand, you go to 76 00:04:40,440 --> 00:04:43,479 Speaker 1: average inflation targeting and you keep on signaling to the 77 00:04:43,520 --> 00:04:47,000 Speaker 1: market over and over again that your outcome based. That 78 00:04:47,200 --> 00:04:49,120 Speaker 1: is not the world we live in today. It is 79 00:04:49,360 --> 00:04:51,640 Speaker 1: very hard for anybody to argue that we have a 80 00:04:51,680 --> 00:04:54,799 Speaker 1: deficiency of aggregate demand. We don't neither on the public sector, 81 00:04:54,960 --> 00:04:57,880 Speaker 1: on the private sector, and on the on the supply side. 82 00:04:57,880 --> 00:05:01,640 Speaker 1: There are fundamental structural changes going on in the world 83 00:05:01,680 --> 00:05:05,440 Speaker 1: like that. You need optionality, You need to be able 84 00:05:05,480 --> 00:05:08,560 Speaker 1: to change your mind. You cannot be pinned in a 85 00:05:08,560 --> 00:05:12,559 Speaker 1: corner that says I will make up my mind after 86 00:05:12,640 --> 00:05:15,760 Speaker 1: I see many months of data, because by that time, 87 00:05:16,120 --> 00:05:19,640 Speaker 1: if you're wrong, playing catch shop is really problematic. And 88 00:05:19,680 --> 00:05:21,960 Speaker 1: what you're seeing is the market is actually being much 89 00:05:22,000 --> 00:05:26,800 Speaker 1: more measured in how it's looking at risk, while the 90 00:05:26,960 --> 00:05:30,480 Speaker 1: FED is pinned in a corner holding onto its conviction 91 00:05:31,080 --> 00:05:34,320 Speaker 1: even though there isn't even though the evidence increasingly says 92 00:05:34,600 --> 00:05:37,520 Speaker 1: be open on it. Through a little bit more humility, 93 00:05:37,600 --> 00:05:39,720 Speaker 1: I'm Gonula asked this question advice check Clarida. How do 94 00:05:39,839 --> 00:05:41,880 Speaker 1: you know if you're wrong? What do you think would 95 00:05:41,880 --> 00:05:45,279 Speaker 1: sell them if they're wrong? So he answered that question 96 00:05:45,279 --> 00:05:46,920 Speaker 1: to you. He said, by the end of the year 97 00:05:47,040 --> 00:05:50,760 Speaker 1: or the beginning of next year, we will know. And 98 00:05:50,800 --> 00:05:54,080 Speaker 1: that's why they are not quote thinking about thinking. So 99 00:05:54,200 --> 00:05:56,479 Speaker 1: think how many stages you have you have to go 100 00:05:56,560 --> 00:05:59,680 Speaker 1: from thinking about thinking to thinking. Then you've got to 101 00:05:59,680 --> 00:06:03,400 Speaker 1: start explaining how are you gonna taper? Then you're gonna 102 00:06:03,560 --> 00:06:06,279 Speaker 1: start tapering. And remember they had no good answer to 103 00:06:06,320 --> 00:06:08,760 Speaker 1: Mike mckie's question about what if you buy a hundred 104 00:06:08,800 --> 00:06:11,320 Speaker 1: and ten million billion a month? What if you buy 105 00:06:11,320 --> 00:06:13,640 Speaker 1: a hundred billion a month? Right? So, so they are 106 00:06:13,839 --> 00:06:17,080 Speaker 1: very far away because they are in this outcome based 107 00:06:17,080 --> 00:06:19,919 Speaker 1: a quote. So, and that's what the marketplace realizes is 108 00:06:19,960 --> 00:06:23,080 Speaker 1: by the time the Fed figures out did they make 109 00:06:23,120 --> 00:06:28,320 Speaker 1: the right call on transitory inflation? If they are wrong, 110 00:06:28,760 --> 00:06:33,040 Speaker 1: the adjustment process itself could end up sending the economy. 111 00:06:33,680 --> 00:06:34,920 Speaker 1: Let me just jump in because I think this is 112 00:06:34,960 --> 00:06:38,120 Speaker 1: really important. When Mike McKie asked this question, does a 113 00:06:38,160 --> 00:06:40,320 Speaker 1: hundred and twenty billion get it done? A hundred and 114 00:06:40,320 --> 00:06:42,520 Speaker 1: ten a hundred billion? The pushback from the likes of 115 00:06:42,560 --> 00:06:45,440 Speaker 1: Neil cash Gari, it's a it's the same. This is 116 00:06:45,440 --> 00:06:47,680 Speaker 1: the labor market, it's week and we need to support it. 117 00:06:47,960 --> 00:06:50,680 Speaker 1: What I think they're failing to communicate right now is 118 00:06:50,680 --> 00:06:53,680 Speaker 1: how billions upon billions of dollars of MBS purchases actually 119 00:06:53,760 --> 00:06:56,600 Speaker 1: help them achieve that goal. Do you think the asset 120 00:06:56,600 --> 00:06:59,560 Speaker 1: purchase program is helping them achieve that goal? Especially when 121 00:06:59,600 --> 00:07:01,719 Speaker 1: we spent the last several weeks talking about a supply 122 00:07:01,760 --> 00:07:06,400 Speaker 1: side problem. It's not helping them because they can't deal 123 00:07:06,400 --> 00:07:09,480 Speaker 1: with the supply side of the economy. They can't lift 124 00:07:10,000 --> 00:07:14,239 Speaker 1: supply bottlenecks by flooding us with liquidity. They cannot improve 125 00:07:14,320 --> 00:07:17,480 Speaker 1: the functioning of the labor market. They cannot open schools 126 00:07:17,480 --> 00:07:20,600 Speaker 1: with liquidity. They cannot improve childcare with liquidity. They cannot 127 00:07:20,680 --> 00:07:25,160 Speaker 1: have a better matching of skills to demand with liquidity. 128 00:07:25,200 --> 00:07:28,120 Speaker 1: And that's the problem. Um, we should spend more time 129 00:07:28,160 --> 00:07:30,280 Speaker 1: looking at what the Bank of Canada did with the 130 00:07:30,320 --> 00:07:32,360 Speaker 1: Bank of England did and say why is it that 131 00:07:32,440 --> 00:07:36,360 Speaker 1: they feel confident they can taper a little bit, whereas 132 00:07:36,400 --> 00:07:40,480 Speaker 1: the fact is really afraid. Oh, Mohammed, this is like 133 00:07:40,480 --> 00:07:43,320 Speaker 1: a three hour conversation or control rooms deciding if we 134 00:07:43,400 --> 00:07:46,040 Speaker 1: want to go there right now, have another biscuit baked 135 00:07:46,040 --> 00:07:50,200 Speaker 1: in fourteen Mohammed, I want this is really really important, folks, 136 00:07:50,200 --> 00:07:52,320 Speaker 1: what we're talking about here. And I'm gonna go back 137 00:07:52,440 --> 00:07:55,160 Speaker 1: Dr Larry into your essay of five years ago on 138 00:07:55,240 --> 00:07:57,880 Speaker 1: the delusion of liquidity. Let us speak now, and I'm 139 00:07:57,880 --> 00:08:00,440 Speaker 1: not putting this in the year words the Delusian ab 140 00:08:00,440 --> 00:08:04,840 Speaker 1: outcome based we're trying to rationalize an ex post structure, 141 00:08:05,240 --> 00:08:07,960 Speaker 1: as you say, and I'll really lean on Canada here. 142 00:08:08,480 --> 00:08:11,640 Speaker 1: They've had the courage to get away from an ex 143 00:08:11,720 --> 00:08:16,000 Speaker 1: post structure. What is the mechanism the United States does 144 00:08:16,520 --> 00:08:20,480 Speaker 1: or uses the Federal Reserve to drag themselves away from 145 00:08:20,480 --> 00:08:26,280 Speaker 1: a deeply expost reality. I hope a robust internal discussion 146 00:08:27,120 --> 00:08:31,040 Speaker 1: can be deducted in a in a safe zone that 147 00:08:31,160 --> 00:08:36,800 Speaker 1: looks at the evidence and doesn't get dogmatic in terms 148 00:08:36,800 --> 00:08:38,920 Speaker 1: of if we change our framework at this state, we 149 00:08:39,080 --> 00:08:42,280 Speaker 1: lose credibility. That's going to be absolutely critical. They have 150 00:08:42,440 --> 00:08:45,680 Speaker 1: to be open minded given the structural changes going on 151 00:08:45,720 --> 00:08:47,760 Speaker 1: in the economy. Tak, do you not think that the 152 00:08:47,800 --> 00:08:50,920 Speaker 1: stakes are higher for the Federal Reserve? They are just 153 00:08:51,000 --> 00:08:53,440 Speaker 1: because of dollar, just because of dollar. Talking about typering 154 00:08:53,440 --> 00:08:55,079 Speaker 1: at the Federal Reserve? Can you imagine the impact we 155 00:08:55,080 --> 00:08:57,480 Speaker 1: would have had at your thoughts out on that. This 156 00:08:57,520 --> 00:08:59,959 Speaker 1: is so important John, as you bring up I mean, Mohammed, 157 00:09:00,160 --> 00:09:04,760 Speaker 1: what is the outcome of a Canada like taper by 158 00:09:04,880 --> 00:09:09,199 Speaker 1: your own power? Well, that's what scares them because they 159 00:09:09,280 --> 00:09:13,959 Speaker 1: remember not just May June, but they also remember the 160 00:09:14,080 --> 00:09:16,640 Speaker 1: massive U turn they had to do in January of 161 00:09:17,160 --> 00:09:20,680 Speaker 1: nine when the marketplace didn't like the message. They're back 162 00:09:20,720 --> 00:09:24,360 Speaker 1: to the Bank of Japan fifteen or eighteen years ago. 163 00:09:24,720 --> 00:09:28,640 Speaker 1: That's how tid they are, and and and tom. The 164 00:09:28,960 --> 00:09:32,520 Speaker 1: question that the marketplace asks is what if we're wrong? 165 00:09:32,720 --> 00:09:36,800 Speaker 1: What's the recoverability of the mistake? How we coverable is 166 00:09:36,840 --> 00:09:40,160 Speaker 1: a mistake? That is what people in the marketplace ask. So, 167 00:09:40,160 --> 00:09:43,160 Speaker 1: so if you think in that world, whereas there's lots 168 00:09:43,160 --> 00:09:46,160 Speaker 1: of uncertainty, I may end up making a mistake. So 169 00:09:46,200 --> 00:09:48,959 Speaker 1: instead of insisting that I'm gonna be white, let me 170 00:09:49,000 --> 00:09:51,400 Speaker 1: ask the question, if I make a mistake, what mistake 171 00:09:51,400 --> 00:09:53,480 Speaker 1: would I abou to make? I think you would end 172 00:09:53,559 --> 00:09:55,840 Speaker 1: up with a different outcome than where the FED is today. 173 00:09:56,000 --> 00:09:57,720 Speaker 1: So I see me right. The build unly paced early 174 00:09:57,760 --> 00:09:59,840 Speaker 1: this week Mohammed on where the FED funds right could go. 175 00:10:00,559 --> 00:10:02,679 Speaker 1: I've really struggled with it. Many others did too, This 176 00:10:02,720 --> 00:10:04,760 Speaker 1: idea that we could tolerate a fat funds right with 177 00:10:04,800 --> 00:10:06,800 Speaker 1: a full hand, Dole, what did you make that pace? 178 00:10:08,160 --> 00:10:11,360 Speaker 1: So he's talking purely in terms of policy, and the 179 00:10:11,440 --> 00:10:15,319 Speaker 1: economy can tolerate higher rates, And I'm not advocating higher rates, 180 00:10:15,360 --> 00:10:18,319 Speaker 1: by the way, I'm advocating a taper of the que program. 181 00:10:18,320 --> 00:10:21,160 Speaker 1: I just want to be straight. Um. The problem drawn 182 00:10:21,200 --> 00:10:23,840 Speaker 1: as you saw it yesterday. You know, we've focused on 183 00:10:23,920 --> 00:10:25,880 Speaker 1: the fact that equity is sold off, but you know 184 00:10:25,920 --> 00:10:30,280 Speaker 1: what bonds sold off, bitcoins sold off, goal sold off. 185 00:10:30,720 --> 00:10:34,120 Speaker 1: And what you see is the reverse of what we've 186 00:10:34,160 --> 00:10:37,319 Speaker 1: seen earlier, which is when there's some doubt about the 187 00:10:37,360 --> 00:10:41,440 Speaker 1: liquidity paradigm which has supported all asset classes, they so 188 00:10:41,559 --> 00:10:46,040 Speaker 1: called everything rally, when some doubts surface, and very small 189 00:10:46,080 --> 00:10:49,800 Speaker 1: doubts have surfaced so far, nothing major market sell off 190 00:10:49,840 --> 00:10:52,760 Speaker 1: across the board. There is nowhere to hide, and that's 191 00:10:52,760 --> 00:10:54,840 Speaker 1: what the FED is afraid of. That you have a 192 00:10:54,880 --> 00:10:57,800 Speaker 1: marketplace where there is nowhere to hide, and when there's 193 00:10:57,840 --> 00:11:02,400 Speaker 1: nowhere to hide, people start doing um city things. So 194 00:11:02,600 --> 00:11:04,960 Speaker 1: that's what the FET is afraid of. It doesn't want 195 00:11:05,920 --> 00:11:09,880 Speaker 1: unsettling financial volatility to contaminate the economy. The problem is, 196 00:11:10,320 --> 00:11:13,559 Speaker 1: if it ends up being wrong, you will have at 197 00:11:13,559 --> 00:11:16,880 Speaker 1: the same time policy slamming the brakes on and the 198 00:11:16,960 --> 00:11:19,720 Speaker 1: marketplace tightening as well, and that's how you end up 199 00:11:19,720 --> 00:11:22,679 Speaker 1: in a recession. That's why it's better to be somewhat 200 00:11:22,720 --> 00:11:25,319 Speaker 1: preemptive then to wait till the last thing. I don't 201 00:11:25,360 --> 00:11:28,000 Speaker 1: think there will be, but certainly I would argue they 202 00:11:28,000 --> 00:11:30,240 Speaker 1: need to be mahamma just to found a question. Then 203 00:11:30,640 --> 00:11:32,559 Speaker 1: how would you be positioned ahead of what you think 204 00:11:32,559 --> 00:11:36,360 Speaker 1: could be a messy summer? It is really hard because 205 00:11:36,400 --> 00:11:40,280 Speaker 1: you're being You're being challenged both on return generation and 206 00:11:40,400 --> 00:11:44,520 Speaker 1: risk mitigation at the same time. So sophisticated investors will 207 00:11:44,559 --> 00:11:47,760 Speaker 1: look at tail hedges and that's why the Vicks moved away. 208 00:11:47,760 --> 00:11:51,000 Speaker 1: It moved yesterday, um, But for the average investor it's 209 00:11:51,040 --> 00:11:53,480 Speaker 1: hard now. The average investor, in fact, all of us 210 00:11:53,520 --> 00:11:56,120 Speaker 1: are hoping that the fet is right, because if the 211 00:11:56,120 --> 00:12:00,199 Speaker 1: feed is right on its huge transitory inflation call, then 212 00:12:00,200 --> 00:12:04,559 Speaker 1: we can have a smooth transition both economic policy as 213 00:12:04,600 --> 00:12:08,000 Speaker 1: well as a smooth market adjustment. But it's a huge 214 00:12:08,080 --> 00:12:10,199 Speaker 1: gamble at this point. Mom and I want to go 215 00:12:10,240 --> 00:12:13,280 Speaker 1: to Cambridge Economics and unfortunately have very little time, not 216 00:12:13,400 --> 00:12:16,560 Speaker 1: from Thomas melt there so the lawyer Angus Deaton. But 217 00:12:16,640 --> 00:12:18,960 Speaker 1: I want to go back to the idea of Nikki Keldor, 218 00:12:19,080 --> 00:12:21,719 Speaker 1: who believes in a public solution. Are we going to 219 00:12:21,800 --> 00:12:25,959 Speaker 1: get a public solution here or have we overreached so 220 00:12:26,080 --> 00:12:29,319 Speaker 1: so the public solution comes to make the FED more 221 00:12:29,440 --> 00:12:32,520 Speaker 1: comfortable about its ability to taper by being better on 222 00:12:32,600 --> 00:12:36,439 Speaker 1: potential supervision and regulation. One of the things that is 223 00:12:36,480 --> 00:12:39,760 Speaker 1: not spoken about is that risk has migrated and moved 224 00:12:40,000 --> 00:12:42,800 Speaker 1: from the banks to the non banks, but the supervisor 225 00:12:42,800 --> 00:12:46,320 Speaker 1: and regulatory system is seriously lagging this. And I suspect 226 00:12:46,360 --> 00:12:49,600 Speaker 1: if the FED had more confidence in the supervision and 227 00:12:49,640 --> 00:12:52,440 Speaker 1: regulation of non banks, it would feel more comfortable on 228 00:12:52,480 --> 00:12:55,280 Speaker 1: the monetary policy side. Mohammed, this was way too serious. 229 00:12:55,280 --> 00:12:59,440 Speaker 1: We didn't even get to talk about your meds, succeeds, success, 230 00:12:59,559 --> 00:13:01,439 Speaker 1: want to be I don't want him, I don't I 231 00:13:01,440 --> 00:13:03,800 Speaker 1: don't want Tom to jinx them. So please, let's not 232 00:13:03,840 --> 00:13:06,160 Speaker 1: talk about my mets. We are all quietly watching this. 233 00:13:06,240 --> 00:13:08,599 Speaker 1: We've seen this movie before. We get hope for we 234 00:13:08,640 --> 00:13:13,120 Speaker 1: get grabbed in and then we get dumped. Right. Is 235 00:13:13,160 --> 00:13:19,000 Speaker 1: it seven games now, John? And we're not commenting on 236 00:13:19,080 --> 00:13:21,319 Speaker 1: either the seven game win next week or first place 237 00:13:21,440 --> 00:13:23,760 Speaker 1: A Mohammed, It's gonna catch up. It's great to catch up. 238 00:13:23,800 --> 00:13:25,960 Speaker 1: It's really good to see a mohammed erin their Queens 239 00:13:25,960 --> 00:13:36,600 Speaker 1: College president and Bloomberg opinion columnists always generous. Dennis Gartman 240 00:13:36,679 --> 00:13:39,520 Speaker 1: joins us, now retired editor of The Gartman Letter, with 241 00:13:39,559 --> 00:13:42,200 Speaker 1: the University of Akron and domind fund as well done. 242 00:13:42,200 --> 00:13:43,640 Speaker 1: It's I got eight ways to go, But I've got 243 00:13:43,760 --> 00:13:46,360 Speaker 1: to start with the market reaction. Here. You and I 244 00:13:46,440 --> 00:13:49,520 Speaker 1: know this is not a correction, it's not a bear market. 245 00:13:49,600 --> 00:13:52,720 Speaker 1: It's a little bit of what the French call agitasia. 246 00:13:53,040 --> 00:13:56,960 Speaker 1: What do you do when you get this cacophany of events. 247 00:13:57,840 --> 00:13:59,760 Speaker 1: I think you have to be very careful. I've really 248 00:13:59,760 --> 00:14:02,680 Speaker 1: not like stocks for the last two months especially, I 249 00:14:02,679 --> 00:14:05,040 Speaker 1: have not liked high tech. I've I like the things 250 00:14:05,040 --> 00:14:07,200 Speaker 1: I've made it some somewhat famous. I like the things 251 00:14:07,200 --> 00:14:08,760 Speaker 1: that if you drop them on your foot will hurt. 252 00:14:08,760 --> 00:14:15,360 Speaker 1: I'd like copper steel, tin, aluminum, automobiles, tires, that sort 253 00:14:15,360 --> 00:14:18,200 Speaker 1: of thing, railroads, those sorts of very simple things. But 254 00:14:18,240 --> 00:14:20,680 Speaker 1: I've been very ambivalent. Actually, I've been very barish about 255 00:14:20,680 --> 00:14:23,160 Speaker 1: the stock market generally. And I think that we're going 256 00:14:23,200 --> 00:14:25,120 Speaker 1: to have a bounce today. You can't take the dow 257 00:14:25,240 --> 00:14:28,360 Speaker 1: down what points in the course of three days and 258 00:14:28,440 --> 00:14:31,200 Speaker 1: not have some return, some bounce from the lows. But 259 00:14:31,280 --> 00:14:34,360 Speaker 1: what bothers me, or what we should watch for, is 260 00:14:34,360 --> 00:14:36,840 Speaker 1: how the volume comes in. The volume came in yesterday 261 00:14:37,120 --> 00:14:39,680 Speaker 1: on the downside, very hard. If we have a bounce 262 00:14:39,720 --> 00:14:42,160 Speaker 1: today and the volume is less, the volume is limited, 263 00:14:42,200 --> 00:14:45,240 Speaker 1: and I think it shall be, that'll be a deletarious circumstance, 264 00:14:45,280 --> 00:14:47,080 Speaker 1: So be very I still think you have to be 265 00:14:47,160 --> 00:14:49,080 Speaker 1: very careful. I think that the Dow can go down 266 00:14:49,440 --> 00:14:52,520 Speaker 1: another several thousand points from you that's so much called, 267 00:14:52,640 --> 00:14:54,760 Speaker 1: and still be within the confines of the long term 268 00:14:55,080 --> 00:14:57,360 Speaker 1: multi year secular bowl market. But you could fall off 269 00:14:57,440 --> 00:15:00,120 Speaker 1: quite some distance in the next month or two. Us 270 00:15:00,160 --> 00:15:03,040 Speaker 1: You and I have argued over this beverage of our choice, 271 00:15:03,160 --> 00:15:05,800 Speaker 1: and that is the study of volume. I don't believe 272 00:15:05,800 --> 00:15:09,400 Speaker 1: in it. You do. Is the volume study today the 273 00:15:09,480 --> 00:15:12,080 Speaker 1: same it was what was when you and I were 274 00:15:12,080 --> 00:15:14,760 Speaker 1: holding the standard and pours blodder in her hand, trying 275 00:15:14,760 --> 00:15:18,080 Speaker 1: to figure out what to buy next. I think it does, Honestly. 276 00:15:18,080 --> 00:15:20,480 Speaker 1: I still believe that good markets go up on strong 277 00:15:20,560 --> 00:15:23,680 Speaker 1: volume and fall on weak volume, and weak markets go 278 00:15:23,840 --> 00:15:26,600 Speaker 1: up on lesser volume and down on strong volume. And 279 00:15:26,600 --> 00:15:28,120 Speaker 1: that's what we've seen in the course of the past 280 00:15:28,160 --> 00:15:30,760 Speaker 1: several months, is that the rallies have been on very 281 00:15:30,840 --> 00:15:33,640 Speaker 1: light volume, the declines have been on very steep volume. 282 00:15:33,680 --> 00:15:35,760 Speaker 1: And I think that that was the precursor to this weakness. 283 00:15:35,800 --> 00:15:38,120 Speaker 1: We'll see if if my thesis holds, will see if 284 00:15:38,160 --> 00:15:40,640 Speaker 1: your thesis holds. But I think right now watching the 285 00:15:40,760 --> 00:15:44,040 Speaker 1: volume is a very important circumstance to pay attention to. 286 00:15:44,160 --> 00:15:46,400 Speaker 1: And I think it's barish at this point. And Dennis, 287 00:15:46,400 --> 00:15:48,400 Speaker 1: some people trying to work out how they protect themselves 288 00:15:48,400 --> 00:15:50,840 Speaker 1: because quite clearly, if the risk is inflation that you 289 00:15:50,840 --> 00:15:53,640 Speaker 1: don't protect yourself with treasury bonds because you know too 290 00:15:53,760 --> 00:15:56,160 Speaker 1: high yesterday too, what do you do? Do you raise 291 00:15:56,240 --> 00:15:58,840 Speaker 1: some cash, keep some dry Piet when you pull back 292 00:15:58,840 --> 00:16:01,840 Speaker 1: a deep risk, what is the actually look like? Dennis Well, 293 00:16:01,880 --> 00:16:03,880 Speaker 1: as the chairman of the University of Akron's endowment, I 294 00:16:03,880 --> 00:16:07,200 Speaker 1: actually pushed hard and we we moved in February to 295 00:16:07,280 --> 00:16:10,320 Speaker 1: reduce our exposure to the equities market by three percent, 296 00:16:10,400 --> 00:16:13,480 Speaker 1: which in in endowment land, that's a material change. When 297 00:16:13,480 --> 00:16:15,400 Speaker 1: you reduce anything by one or two or three percent, 298 00:16:15,440 --> 00:16:17,840 Speaker 1: you've made a material change. And we actually took a 299 00:16:17,880 --> 00:16:21,320 Speaker 1: position in gold to hedge out inflation risk. That's proved 300 00:16:21,320 --> 00:16:23,800 Speaker 1: to be wise. I've been very lucky thus far from 301 00:16:23,840 --> 00:16:25,600 Speaker 1: given the fact that we've made that change. In very 302 00:16:25,680 --> 00:16:28,680 Speaker 1: late February, the rustle's down about four or five percent 303 00:16:28,720 --> 00:16:30,840 Speaker 1: from that level and golds up five or six percent. 304 00:16:31,160 --> 00:16:33,680 Speaker 1: Call it good luck, call it fortune, call it maybe 305 00:16:34,240 --> 00:16:36,760 Speaker 1: a wise trade. But I think reducing exposure to the 306 00:16:36,760 --> 00:16:40,120 Speaker 1: equities market, raising a little cash, buying a little gold, 307 00:16:40,640 --> 00:16:43,920 Speaker 1: buying tips probably is not a bad idea, and buying 308 00:16:44,080 --> 00:16:47,040 Speaker 1: monthly dividend paying e t f s that that are 309 00:16:47,080 --> 00:16:49,360 Speaker 1: well covered, and I think that's that's the way to go. 310 00:16:49,480 --> 00:16:51,400 Speaker 1: Raising cash is not a bad thing at this point. 311 00:16:51,680 --> 00:16:54,280 Speaker 1: Let's talk about gold, because that's a really really interesting point. 312 00:16:54,680 --> 00:16:57,360 Speaker 1: When you moved, as you describe it, that has been 313 00:16:57,360 --> 00:16:59,040 Speaker 1: a good play. Over the last couple of weeks. We've 314 00:16:59,080 --> 00:17:01,840 Speaker 1: had to move off the month slows. It hasn't worked 315 00:17:01,840 --> 00:17:04,800 Speaker 1: all year, though, even though inflation is dominated the conversation. 316 00:17:05,040 --> 00:17:07,680 Speaker 1: Yesterday another example, it was down about one percent, even 317 00:17:07,680 --> 00:17:10,040 Speaker 1: though the key theme was inflation. What's been going on 318 00:17:10,160 --> 00:17:12,399 Speaker 1: do you think, Dennis, just in terms of relationship between 319 00:17:12,640 --> 00:17:16,720 Speaker 1: inflation and gold, I think millennials at the balance like 320 00:17:16,800 --> 00:17:19,720 Speaker 1: to like to speculate, or like to take positions with 321 00:17:19,800 --> 00:17:23,240 Speaker 1: their with their stimulus checks uh in in bitcoin and 322 00:17:23,240 --> 00:17:24,840 Speaker 1: in ethereum and the rest of them. And I think 323 00:17:24,880 --> 00:17:26,800 Speaker 1: that that's been a drain at the margin at the 324 00:17:27,080 --> 00:17:30,080 Speaker 1: all price of all the commodities, all price of all stocks, 325 00:17:30,119 --> 00:17:32,240 Speaker 1: all price of all bonds is actually made at the margin. 326 00:17:32,280 --> 00:17:34,919 Speaker 1: When the last two percent of the buyers become sellers. 327 00:17:34,960 --> 00:17:37,120 Speaker 1: When the last two percent of the sellers become buyers, 328 00:17:37,440 --> 00:17:40,040 Speaker 1: that's when price changes. And I think we've seen some 329 00:17:40,200 --> 00:17:43,160 Speaker 1: movement on the part of an investors into bitcoin, into 330 00:17:43,200 --> 00:17:46,960 Speaker 1: the cryptocurrencies, and away from gold. However, I'll think that 331 00:17:47,000 --> 00:17:50,080 Speaker 1: the several thousand years history of gold will will will 332 00:17:50,119 --> 00:17:53,800 Speaker 1: trump the five year or six years, seven year history 333 00:17:53,840 --> 00:17:56,760 Speaker 1: of the cryptocurrencies. But I think that's cryptoes that have 334 00:17:56,800 --> 00:17:59,600 Speaker 1: been the pressure point very quickly. Or Dennis, it's ninety 335 00:17:59,640 --> 00:18:01,800 Speaker 1: six dollars at four dollars a gale and for you 336 00:18:01,880 --> 00:18:04,240 Speaker 1: to fill up the Bentley, you know, ninety liters. It's 337 00:18:04,240 --> 00:18:06,879 Speaker 1: a twenty four galon tank. Tell you're living in the 338 00:18:06,920 --> 00:18:11,240 Speaker 1: heart of this no gasolene thing. Is it all over again? 339 00:18:11,960 --> 00:18:14,040 Speaker 1: It feels like it it has that that looked to it. 340 00:18:14,119 --> 00:18:16,200 Speaker 1: There are the lines at some of the service stations 341 00:18:16,240 --> 00:18:20,000 Speaker 1: around here in Southeast Virginia, especially on Tuesday, we're very long, 342 00:18:20,160 --> 00:18:23,439 Speaker 1: very very surprising. It's you can find gasoline in the 343 00:18:23,480 --> 00:18:25,520 Speaker 1: morning when the tanker trucks come in, but by noon 344 00:18:25,560 --> 00:18:27,960 Speaker 1: they're they're running out of running out of gas. And 345 00:18:28,000 --> 00:18:30,600 Speaker 1: it does have that feel of the nineteen seventies when 346 00:18:30,640 --> 00:18:33,119 Speaker 1: the odds and even license plate numbers were allowed to 347 00:18:33,119 --> 00:18:37,680 Speaker 1: go and buy gasoline. It's a this will resolve itself. Obviously, 348 00:18:37,720 --> 00:18:40,560 Speaker 1: the colonial pipeline said that they're gonna be back online 349 00:18:40,640 --> 00:18:43,400 Speaker 1: or camera back online last night. It's the last mile. 350 00:18:43,480 --> 00:18:46,680 Speaker 1: It's difficult. By the weekend we'll be it should be resolved. 351 00:18:46,840 --> 00:18:48,880 Speaker 1: I'm so sorry as the typo there, Dennis, I gotta 352 00:18:48,880 --> 00:18:51,879 Speaker 1: get this corrected. Dennis Carbon thinks so much wonderful to 353 00:18:51,960 --> 00:18:59,920 Speaker 1: see you. This is a really really important interview. And 354 00:19:00,040 --> 00:19:03,760 Speaker 1: let me put it in context. James Sweeney literally staked 355 00:19:03,800 --> 00:19:07,160 Speaker 1: his career three or four years ago by saying, Europe, 356 00:19:07,280 --> 00:19:10,160 Speaker 1: get over it. There's not going to be deflation, there's 357 00:19:10,160 --> 00:19:14,040 Speaker 1: not going to be disinflation. You're wrong, wrong, wrong. The 358 00:19:14,080 --> 00:19:16,920 Speaker 1: credit sweet chief Economists joins us. Right now is the 359 00:19:17,040 --> 00:19:22,560 Speaker 1: tables have been turned towards worry of rising inflation. James Sweeney, 360 00:19:22,600 --> 00:19:26,680 Speaker 1: should we fear a redux of the nineteen sixties? M 361 00:19:26,880 --> 00:19:30,320 Speaker 1: hm um no. I think we should be open minded 362 00:19:30,359 --> 00:19:32,359 Speaker 1: to that risk. But I think what we're really talking 363 00:19:32,400 --> 00:19:36,200 Speaker 1: about here on the upside is you know, core inflation 364 00:19:36,400 --> 00:19:40,280 Speaker 1: running for a year something like that. Um that that's 365 00:19:40,760 --> 00:19:43,120 Speaker 1: not our forecast. It's a little bit higher than our forecast. 366 00:19:43,200 --> 00:19:46,760 Speaker 1: But I think the evidence is mounting that that kind 367 00:19:46,760 --> 00:19:50,639 Speaker 1: of outcome could happen. If that happens, that's not the 368 00:19:50,720 --> 00:19:53,240 Speaker 1: end of the world. That's kind of maybe it's nineteen 369 00:19:53,280 --> 00:19:56,680 Speaker 1: sixty six to nineteen sixty seven, sixty eight before inflation 370 00:19:56,800 --> 00:19:58,399 Speaker 1: really got out of hand at the end of the 371 00:19:58,440 --> 00:20:01,639 Speaker 1: sixties and into the eighteen seventies. But the FED is 372 00:20:01,680 --> 00:20:04,720 Speaker 1: going to handle that in a different way than they 373 00:20:04,760 --> 00:20:08,879 Speaker 1: than they did in eighteen sixties. And um, you know, 374 00:20:09,080 --> 00:20:10,960 Speaker 1: it's it's it's not the end of the world, but 375 00:20:11,160 --> 00:20:13,879 Speaker 1: it is a big change for financial markets and thinking 376 00:20:13,880 --> 00:20:16,960 Speaker 1: about what happens to monetary policy. Uh, if we get 377 00:20:17,000 --> 00:20:19,680 Speaker 1: that outcome is really important for for us at christ. 378 00:20:19,760 --> 00:20:23,320 Speaker 1: How do you expected inflation expectation consumer inflation expectations to 379 00:20:23,400 --> 00:20:26,200 Speaker 1: shape up, James, given the experience that they're having right 380 00:20:26,240 --> 00:20:29,439 Speaker 1: now in this country. You know, I don't really know 381 00:20:29,520 --> 00:20:33,000 Speaker 1: what consumer inflation expectations are. Um, you know, these are 382 00:20:33,119 --> 00:20:36,720 Speaker 1: these are strange surveys. Most people I know don't have 383 00:20:36,760 --> 00:20:40,040 Speaker 1: a clear sense of of what they're answering when they 384 00:20:40,080 --> 00:20:43,760 Speaker 1: When they answer that question, usually those surveys people are saying, 385 00:20:43,840 --> 00:20:46,760 Speaker 1: what's happened to gasoline prices? Um, But you know, the 386 00:20:46,840 --> 00:20:49,560 Speaker 1: question is are the surveys stable? Like in my view 387 00:20:50,280 --> 00:20:53,639 Speaker 1: that when inflation expectations increase and it leads to inflation, 388 00:20:54,200 --> 00:20:56,199 Speaker 1: what that really means is not that a bunch of 389 00:20:56,200 --> 00:20:59,040 Speaker 1: surveys jumps. It means that people have started buying more 390 00:20:59,280 --> 00:21:01,879 Speaker 1: stuff because they think the stuff is going to be 391 00:21:01,960 --> 00:21:05,120 Speaker 1: more expensive in the future. So to me, the expectation 392 00:21:05,280 --> 00:21:08,520 Speaker 1: has to be embedded in the demand behavior to actually 393 00:21:08,600 --> 00:21:13,440 Speaker 1: get a problematic inflation spiral. And you know the risk 394 00:21:13,520 --> 00:21:17,200 Speaker 1: of that is rising. But um, but we're not there 395 00:21:17,280 --> 00:21:19,159 Speaker 1: right now. We're in a we're in a data fog 396 00:21:19,640 --> 00:21:24,080 Speaker 1: period where we're reopening and there's vaccinations and there's base effects. 397 00:21:24,160 --> 00:21:27,480 Speaker 1: You know that there's and there's supply chain issues. So 398 00:21:27,720 --> 00:21:29,960 Speaker 1: you know the risk of it is rising, but we 399 00:21:29,960 --> 00:21:32,640 Speaker 1: should be a little careful about jump into extreme conclusions. 400 00:21:32,760 --> 00:21:34,440 Speaker 1: That's the point I'm trying to get to hit James, 401 00:21:34,480 --> 00:21:37,000 Speaker 1: because we can have this real need, deep intelligent conversation. 402 00:21:37,080 --> 00:21:38,720 Speaker 1: You can run me through all the different paths in 403 00:21:38,720 --> 00:21:42,360 Speaker 1: this inflation basket. They're driving inflation higher. It's the experience 404 00:21:42,359 --> 00:21:45,119 Speaker 1: of everyday people with prices that will really set the 405 00:21:45,160 --> 00:21:47,520 Speaker 1: tone here. And I'm trying to understand how you will 406 00:21:47,560 --> 00:21:51,119 Speaker 1: gauge when you will know that those expectations for higher 407 00:21:51,119 --> 00:21:53,879 Speaker 1: prices become embedded in prices and become higher prices and 408 00:21:53,920 --> 00:21:58,120 Speaker 1: this becomes a virtuous cycle. Well, there's two there's two things. 409 00:21:58,160 --> 00:22:00,679 Speaker 1: I mean, one is I want to see the demand acceleration. 410 00:22:00,920 --> 00:22:04,840 Speaker 1: So right now, it's gonna be really hard for retail 411 00:22:04,920 --> 00:22:08,760 Speaker 1: sales to continue to accelerate. I mean, maybe tomorrow will 412 00:22:08,800 --> 00:22:13,000 Speaker 1: be up, but in level terms, are probably near a 413 00:22:13,040 --> 00:22:16,160 Speaker 1: longer term peak in retail sales because we've just had 414 00:22:16,200 --> 00:22:19,480 Speaker 1: so much income. But on the services side, which is 415 00:22:19,520 --> 00:22:22,560 Speaker 1: two thirds of inflation, it's a little different because we 416 00:22:22,600 --> 00:22:25,120 Speaker 1: all want to rush out of our houses and consume 417 00:22:25,200 --> 00:22:29,639 Speaker 1: in person services, recreational services. Those are labor intensive businesses. 418 00:22:29,680 --> 00:22:31,680 Speaker 1: They're gonna have to hire a lot of people. What's 419 00:22:31,680 --> 00:22:34,160 Speaker 1: gonna happen to So so we're gonna be looking at demand, 420 00:22:34,480 --> 00:22:36,480 Speaker 1: but we're also going to be looking at how much 421 00:22:36,520 --> 00:22:39,359 Speaker 1: wage pressure are we seeing? And I think it's gonna 422 00:22:39,400 --> 00:22:43,320 Speaker 1: take a little while before we have good information on wages. 423 00:22:43,359 --> 00:22:45,919 Speaker 1: I mean, our average hourly earnings are not good information 424 00:22:46,080 --> 00:22:50,399 Speaker 1: on but the anecdotes are definitely mounting that that this 425 00:22:50,560 --> 00:22:52,960 Speaker 1: that this process is at least in its early stage. 426 00:22:52,960 --> 00:22:54,600 Speaker 1: You guys are writing my script. That's right where I 427 00:22:54,640 --> 00:22:57,320 Speaker 1: wanted to go. James Sweeney, what's joyous about your notes? 428 00:22:57,359 --> 00:23:00,679 Speaker 1: As you've got microeconomics in them and you really emphasize 429 00:23:00,720 --> 00:23:05,320 Speaker 1: this time around that's supply demand in inventories really matter. 430 00:23:05,760 --> 00:23:09,520 Speaker 1: But with that, how do you digest the McDonald's headline 431 00:23:09,760 --> 00:23:12,040 Speaker 1: we saw an hour ago, John, help me here, all 432 00:23:12,040 --> 00:23:14,000 Speaker 1: of a sudden we got one, two, three, four, five 433 00:23:14,080 --> 00:23:18,720 Speaker 1: companies going up to ten thousand X employees clearly near 434 00:23:18,760 --> 00:23:23,440 Speaker 1: fifteen dollars. How does that filter into supply and demand? Well, 435 00:23:23,480 --> 00:23:26,320 Speaker 1: I mean that's that's your margin issue. Actually, that's true, 436 00:23:26,400 --> 00:23:28,639 Speaker 1: that's your wage issue. This is a labor market supply 437 00:23:28,640 --> 00:23:30,639 Speaker 1: and demand issue. When you're when you're talking about that, 438 00:23:30,760 --> 00:23:34,000 Speaker 1: so you know the question is you know, first, Okay, 439 00:23:34,000 --> 00:23:37,400 Speaker 1: so McDonald's just facing a little bit of trouble hiring workers. 440 00:23:37,400 --> 00:23:40,240 Speaker 1: They need to raise wages. That's fine, we understand. So 441 00:23:40,400 --> 00:23:42,240 Speaker 1: that eats into their margins Are they going to raise 442 00:23:42,240 --> 00:23:45,000 Speaker 1: prices on their food as a result. They might not, 443 00:23:45,119 --> 00:23:48,200 Speaker 1: They might just eat the margin increase. We we don't know, 444 00:23:48,640 --> 00:23:51,000 Speaker 1: but I think it's it's you know, this is again 445 00:23:51,480 --> 00:23:54,879 Speaker 1: just another symptom. I mean, the commodity pricing creasy even 446 00:23:55,280 --> 00:23:58,439 Speaker 1: is a symptom. There are symptoms all over the place. 447 00:23:58,760 --> 00:24:01,520 Speaker 1: But we need, you know, the nerds in the data 448 00:24:01,840 --> 00:24:06,199 Speaker 1: need to see sufficient breadth across these, both inflation and 449 00:24:06,320 --> 00:24:09,280 Speaker 1: price and disease to you know, to to to be 450 00:24:09,320 --> 00:24:12,280 Speaker 1: confident that we're going to actually have a real issue 451 00:24:12,359 --> 00:24:15,800 Speaker 1: that is unlike anything in the past, in the past 452 00:24:15,840 --> 00:24:18,800 Speaker 1: thirty years. For now, you know, you're looking at inflation 453 00:24:18,880 --> 00:24:22,359 Speaker 1: overshooting right now from base effects, potentially coming a little 454 00:24:22,400 --> 00:24:25,040 Speaker 1: bit lower after that. But is it gonna settle back 455 00:24:25,080 --> 00:24:27,520 Speaker 1: down and kind of tune and a half percent or lower, 456 00:24:27,880 --> 00:24:29,640 Speaker 1: or is it going to be kind of three three 457 00:24:29,640 --> 00:24:33,840 Speaker 1: percent higher? And again from a market perspective, that's absolutely 458 00:24:33,840 --> 00:24:36,520 Speaker 1: critical from the Fed's perspective. In either way, they're gonna 459 00:24:36,520 --> 00:24:40,520 Speaker 1: say it's temporary, but that's not you know, who cares temporary. 460 00:24:40,560 --> 00:24:43,080 Speaker 1: What we care about is when are they gonna hike? 461 00:24:43,720 --> 00:24:46,480 Speaker 1: Is this going to change the tapering schedule? Housing market 462 00:24:46,480 --> 00:24:49,000 Speaker 1: going to react. Is this the regime shift that we 463 00:24:49,000 --> 00:24:51,560 Speaker 1: can't even get inflation up there? Because not long ago, 464 00:24:51,720 --> 00:24:53,960 Speaker 1: as you know, a lot of people thought you couldn't. 465 00:24:54,320 --> 00:24:58,120 Speaker 1: James James tweety very quickly here the Brethren and Zurich 466 00:24:58,200 --> 00:25:00,560 Speaker 1: email in and say, would you please ask the question 467 00:25:00,560 --> 00:25:04,600 Speaker 1: about the German tenure James Sweeney, what is the symbolism 468 00:25:04,600 --> 00:25:08,720 Speaker 1: when Germany tenuere goes positive? His Swiss twenty year diad 469 00:25:08,800 --> 00:25:12,560 Speaker 1: ages ago? Well, I mean, you know, European yields are 470 00:25:12,600 --> 00:25:14,560 Speaker 1: are are rising, and there's a little bit of an 471 00:25:14,560 --> 00:25:17,800 Speaker 1: expectation now that that European growth a few months out 472 00:25:18,080 --> 00:25:21,160 Speaker 1: could actually start accelerating relative to the US because we've 473 00:25:21,200 --> 00:25:24,720 Speaker 1: had our massive stimulus push um in the spring, and 474 00:25:24,760 --> 00:25:27,320 Speaker 1: it turns out they're actually vaccinating at a reasonable pace 475 00:25:27,359 --> 00:25:31,040 Speaker 1: now across across Europe, so rates arising. But you know, 476 00:25:31,359 --> 00:25:34,119 Speaker 1: going back to the inflation part, it's hard to see 477 00:25:34,200 --> 00:25:37,040 Speaker 1: much of that inflation in Europe. Historically, when you get 478 00:25:37,040 --> 00:25:39,639 Speaker 1: a proper inflation wave going way back, they tend to 479 00:25:39,640 --> 00:25:43,080 Speaker 1: be pretty correlated across major economies. But but right now, 480 00:25:43,480 --> 00:25:45,359 Speaker 1: you know, the inflation outlook in Europe is going to 481 00:25:45,400 --> 00:25:47,600 Speaker 1: have a little base effect just like the US. But 482 00:25:47,680 --> 00:25:51,000 Speaker 1: the big pictures is you're still looking at sluggish inflation 483 00:25:51,040 --> 00:25:54,240 Speaker 1: well below two percent for the foreseeable future in the Eurozone. 484 00:25:54,520 --> 00:25:57,280 Speaker 1: James Small, as always, we spent nothing less. Gen Sweeny, 485 00:25:58,080 --> 00:26:07,520 Speaker 1: Chief Economist. Right now, Julie Norman is with us with 486 00:26:07,600 --> 00:26:11,400 Speaker 1: the University College London. She is a political science professor 487 00:26:11,760 --> 00:26:14,280 Speaker 1: and she is so competent. She has a set of 488 00:26:14,280 --> 00:26:17,679 Speaker 1: wheelhouses and one of them is the levant and the 489 00:26:17,800 --> 00:26:21,760 Speaker 1: challenges of Israel with all the various Arab nations of 490 00:26:21,800 --> 00:26:25,440 Speaker 1: the region. Dr Norman, good morning, we have nine, we 491 00:26:25,480 --> 00:26:28,600 Speaker 1: have nineteen sixty seven. Can you say that two thousand 492 00:26:28,680 --> 00:26:35,320 Speaker 1: twenty one alludes to those periods of conflict? Well, good morning, Tom. Obviously, 493 00:26:35,359 --> 00:26:37,919 Speaker 1: what we're seeing now is the highest level of violence 494 00:26:37,920 --> 00:26:40,280 Speaker 1: and escalation that we've seen in a number of years. 495 00:26:40,760 --> 00:26:43,720 Speaker 1: With that said, it mirrors very much the Gods of 496 00:26:43,760 --> 00:26:46,800 Speaker 1: Wars that we saw in pretty recent memory two thousand 497 00:26:46,960 --> 00:26:52,439 Speaker 1: two nine, when we again saw this kind of perfect 498 00:26:52,480 --> 00:26:56,760 Speaker 1: storm of events coming together that quickly escalated into rockets 499 00:26:56,760 --> 00:26:59,399 Speaker 1: coming into Israel and air strikes going back to Gaza, 500 00:26:59,560 --> 00:27:03,119 Speaker 1: and unfortunately, with that, of course, the civilian casualty rates 501 00:27:03,359 --> 00:27:06,680 Speaker 1: going up very quickly, already over sixty today. I want 502 00:27:06,680 --> 00:27:08,080 Speaker 1: to get up the map, but I don't want to 503 00:27:08,080 --> 00:27:11,000 Speaker 1: look at the racket trajectory. We can study that, We'll 504 00:27:11,040 --> 00:27:14,280 Speaker 1: have experts tell us about that. But Professor Norman, I'm 505 00:27:14,359 --> 00:27:18,359 Speaker 1: fascinated by the distance of Gaza to the Old City 506 00:27:18,359 --> 00:27:20,720 Speaker 1: and to the Mosque under question, one of the great 507 00:27:20,760 --> 00:27:24,840 Speaker 1: sites of Islam. What is the distance for the people 508 00:27:24,920 --> 00:27:28,159 Speaker 1: of Gaza to what they venerate in the Old City 509 00:27:28,160 --> 00:27:32,480 Speaker 1: of Jerusalem mo time. I think it's so important to 510 00:27:32,560 --> 00:27:36,520 Speaker 1: underscore here is that Jerusalem and the Oxomasque in particular 511 00:27:36,680 --> 00:27:40,600 Speaker 1: are very important to Palestinians and definitely the Palestinian Muslims, 512 00:27:40,640 --> 00:27:43,760 Speaker 1: no matter where they're located in their region. And indeed 513 00:27:43,760 --> 00:27:47,359 Speaker 1: Hamasked was very savvy over these last few weeks in 514 00:27:47,800 --> 00:27:50,480 Speaker 1: linking much of their politics and campaigns to what was 515 00:27:50,520 --> 00:27:53,720 Speaker 1: going on in Jerusalem, and linking the Palestinian cause as 516 00:27:53,760 --> 00:27:57,200 Speaker 1: always what was happening in Jerusalem. In terms of physical distance, 517 00:27:57,280 --> 00:28:00,240 Speaker 1: it's not too far either, but due to the way 518 00:28:00,240 --> 00:28:02,480 Speaker 1: the restrictions are set up right now in Israel Palestine, 519 00:28:02,680 --> 00:28:04,320 Speaker 1: people from God that have not been able to go 520 00:28:04,400 --> 00:28:08,160 Speaker 1: to Jerusalem Forum for years now. But still very much 521 00:28:08,440 --> 00:28:11,680 Speaker 1: resonance in terms of what it means the people shocking. 522 00:28:11,760 --> 00:28:15,480 Speaker 1: It's shocking, Dr Norman, the fragility of democracy in Israel. 523 00:28:15,680 --> 00:28:18,159 Speaker 1: I've been told by some reports and the Times in 524 00:28:18,240 --> 00:28:22,480 Speaker 1: the Washington Post of the election transfer being within minutes 525 00:28:23,119 --> 00:28:26,280 Speaker 1: literally before this war came out. How do you link 526 00:28:26,400 --> 00:28:30,560 Speaker 1: the Net and Yahoo transfer power if you will, to 527 00:28:30,640 --> 00:28:34,520 Speaker 1: this conflict. Are they truly linked or are they separate 528 00:28:34,680 --> 00:28:40,800 Speaker 1: and unimaginably close issues. Well, everything is aligning in a 529 00:28:40,880 --> 00:28:43,520 Speaker 1: certain way right now. I think the tinder box that 530 00:28:43,560 --> 00:28:46,800 Speaker 1: has erupted, so to speak, in these last few weeks, 531 00:28:47,080 --> 00:28:49,080 Speaker 1: was due to a number of causes. But we have 532 00:28:49,280 --> 00:28:53,120 Speaker 1: seen is the leadership crisis on both sides feeding into it, 533 00:28:53,520 --> 00:28:56,520 Speaker 1: and we see politicians on both sides definitely exploiting the 534 00:28:56,560 --> 00:28:59,800 Speaker 1: moment for Net and Yahoo. Of course, right now, coming 535 00:28:59,800 --> 00:29:01,920 Speaker 1: out of this fourth attempt to try and form a 536 00:29:01,960 --> 00:29:04,840 Speaker 1: government unable to do so, he is now trying to 537 00:29:04,880 --> 00:29:07,800 Speaker 1: frame his response to this as showing why he should 538 00:29:07,800 --> 00:29:10,920 Speaker 1: stay in power. His opponents and critics are of course 539 00:29:10,920 --> 00:29:13,040 Speaker 1: saying this is the reason why it's time for him 540 00:29:13,040 --> 00:29:15,960 Speaker 1: to step aside. And on the Palestinian side, we again 541 00:29:16,000 --> 00:29:19,120 Speaker 1: see a lot of jockeying between the Palestinian authority and 542 00:29:19,200 --> 00:29:22,200 Speaker 1: ham ask for who can be the voice for Palestinians 543 00:29:22,200 --> 00:29:26,440 Speaker 1: and for resistance. Julie brief us on the new Hammas 544 00:29:26,480 --> 00:29:30,280 Speaker 1: they have evolved over the years. Americans have a memory 545 00:29:30,320 --> 00:29:33,880 Speaker 1: of a most difficult Beirut. There's fought and the rest. 546 00:29:34,200 --> 00:29:37,480 Speaker 1: Give us a tone of the new Hamas even as 547 00:29:37,960 --> 00:29:44,520 Speaker 1: Israel announces they have assassinated selected leaders. Yes, so Hamas 548 00:29:44,800 --> 00:29:48,120 Speaker 1: has held control of the Goddess Stripped for the last 549 00:29:48,240 --> 00:29:51,640 Speaker 1: fifteen years. That was after they were successful in the 550 00:29:51,920 --> 00:29:55,400 Speaker 1: two thousands fifth legislative elections in Palestine. That was a 551 00:29:55,480 --> 00:29:58,800 Speaker 1: real shift for him As in a kind of quasi normalization, 552 00:29:58,920 --> 00:30:02,920 Speaker 1: for being solely a resistance militant group to being a 553 00:30:02,920 --> 00:30:06,040 Speaker 1: political group as well. Now they kind of operate with 554 00:30:06,080 --> 00:30:09,360 Speaker 1: both of those wings, the political group UM governing in 555 00:30:09,400 --> 00:30:13,160 Speaker 1: a way in Gaza, whereas their militant wing carrying out 556 00:30:13,240 --> 00:30:17,320 Speaker 1: these rocket attacks primarily. UM still in some ways have 557 00:30:17,520 --> 00:30:20,240 Speaker 1: popular support in terms of being a voice of resistance 558 00:30:20,280 --> 00:30:22,920 Speaker 1: in terms of their social services, but a lot of 559 00:30:22,960 --> 00:30:25,959 Speaker 1: disillusionment in Palestine also with him As because of their 560 00:30:26,040 --> 00:30:29,400 Speaker 1: lack of ability to govern properly. Julie Norman. Thank you 561 00:30:29,440 --> 00:30:32,440 Speaker 1: so much there on the conflict that we see in 562 00:30:32,480 --> 00:30:36,120 Speaker 1: Gaza and many people saying it edges towards or She 563 00:30:36,240 --> 00:30:39,800 Speaker 1: is with the University of College of London. This is 564 00:30:39,840 --> 00:30:43,840 Speaker 1: the Bloomberg Surveillance Podcast. Thanks for listening. Join us live 565 00:30:43,960 --> 00:30:47,760 Speaker 1: weekdays from seven to ten am Eastern on Bloomberg Radio 566 00:30:47,960 --> 00:30:51,600 Speaker 1: and on Bloomberg Television each day from six to nine 567 00:30:51,640 --> 00:30:56,040 Speaker 1: am for insight from the best in economics, finance, investment, 568 00:30:56,200 --> 00:31:00,840 Speaker 1: and international relations. And subscribe to the surveyor this podcast 569 00:31:01,120 --> 00:31:04,760 Speaker 1: on Apple podcast, SoundCloud, Bloomberg dot com and of course 570 00:31:05,080 --> 00:31:09,360 Speaker 1: on the terminal. I'm Tom keene In. This is Bloomberg 571 00:31:16,680 --> 00:31:16,720 Speaker 1: m