WEBVTT - Surveillance: Global Economic Data Will Hold Up, Hooper Says 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Lee. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:32.360 Bloomberg dot Com, and of course on the Bloomberg Francie 0:00:32.440 --> 0:00:35.440 Laquad Queen Victoria Street and she is with David folks 0:00:35.520 --> 0:00:40.120 Landa as well. Francying just an extraordinary research piece from DFL. 0:00:40.200 --> 0:00:44.280 This really harkens back to his thoughtful pieces decades ago. 0:00:44.320 --> 0:00:45.839 And I'd like to go to a piece of this 0:00:46.040 --> 0:00:48.120 right now for Francy, for you to bring up the 0:00:48.159 --> 0:00:52.960 conversation with DFL negative interest rates and they have a 0:00:53.040 --> 0:00:56.760 punishment to them, the aggressive implementation of a new regulatory 0:00:56.840 --> 0:01:00.080 regime and the failure to create a unified homemark. It 0:01:00.200 --> 0:01:05.080 are this rating bank profitability. Needless to say, since the 0:01:05.080 --> 0:01:08.839 introduction of negative interest rates, EU banks have lost two 0:01:08.880 --> 0:01:12.280 fifths of their market value, while US banks have gained 0:01:12.319 --> 0:01:15.440 the same amount. It is inappropriate for DFL to speak 0:01:15.840 --> 0:01:19.560 of transactions of German banks, but Francine certainly he can 0:01:19.600 --> 0:01:23.399 speak to a larger bank banking system. Right now, how 0:01:23.400 --> 0:01:28.640 do we clear this mess David, I'll tell me what 0:01:28.800 --> 0:01:32.440 first needs to understand that there in modern economies, the 0:01:32.760 --> 0:01:35.880 intermedia is financial intermedia is are key to making it work. 0:01:36.400 --> 0:01:39.400 They're not just there to take the positis and make loans, 0:01:39.440 --> 0:01:41.960 but they allocate credit. And they's just key if if 0:01:42.000 --> 0:01:44.680 banks don't if banks are sick, economies don't do well. 0:01:44.720 --> 0:01:46.920 That's sort of a fundamental proposition. And once you see that, 0:01:47.000 --> 0:01:49.720 then you get worried because then you see the European 0:01:49.720 --> 0:01:52.640 banking system compared to the US, is in dire straits. 0:01:53.320 --> 0:01:56.440 In all the normal metrics of return on assets, return 0:01:56.560 --> 0:02:00.920 on tangible equity, uh that interest margins, European banks are 0:02:01.040 --> 0:02:04.520 pale shadow compared to the Americans, and so it's very 0:02:04.600 --> 0:02:08.800 very difficult for them to making money, to organically raise capital, 0:02:09.240 --> 0:02:12.639 organically deal with non performing loans. And there's a history 0:02:12.639 --> 0:02:14.560 to this, of course, and sen sense. The Americans were 0:02:14.560 --> 0:02:17.120 restructured early after the crisis. In Europe didn't do that, 0:02:17.520 --> 0:02:19.320 so we had we had a lot of legacy issues 0:02:19.360 --> 0:02:22.079 in the banking system. But this is a serious problem 0:02:22.200 --> 0:02:25.720 and and and it affects fundamental verbles like productivity. As 0:02:25.720 --> 0:02:28.720 I said before, if you have to make loans when 0:02:28.760 --> 0:02:31.360 you capital constraint, you stay with you stay with with 0:02:31.440 --> 0:02:33.359 the with the borrowers where you already have your money. 0:02:33.400 --> 0:02:34.720 You don't take it from him and give it to 0:02:34.760 --> 0:02:36.640 new borrowers, because then you've got it write down the 0:02:36.639 --> 0:02:39.120 old money. So and that requires capital. So you have 0:02:39.160 --> 0:02:42.240 all kinds of of inflexibilities in the system that developed 0:02:42.280 --> 0:02:45.400 when you were When you were are not profitable, so 0:02:45.440 --> 0:02:48.840 profitability is important. What kind of banking system does Europe 0:02:48.840 --> 0:02:53.200 actually need? It's pretty straightforward what has to be done. 0:02:53.520 --> 0:02:57.240 We need to have a unified banking system. The only 0:02:57.360 --> 0:03:00.440 one percent of household loans come from across border. Now 0:03:00.440 --> 0:03:03.040 imagine if we talk about single markets for twenty four 0:03:03.040 --> 0:03:06.280 hours a day. Yet the borrowers in Italy don't borrow 0:03:06.320 --> 0:03:10.040 from German banks. In German banks don't lend to Spanish borrowers, 0:03:10.680 --> 0:03:12.400 not because they don't onto it, because there's just so 0:03:12.480 --> 0:03:15.120 many hindrances going across borders. So the completion of the 0:03:15.160 --> 0:03:18.480 banking union and of the capital markets union is the 0:03:18.520 --> 0:03:19.960 first thing that has to go done. And this is 0:03:19.960 --> 0:03:23.560 where I keep criticizing the European authorities that it's so 0:03:23.639 --> 0:03:25.480 easy to do these things. I want to do these 0:03:25.480 --> 0:03:28.680 things with monetary policy. But that's a very blunt tool 0:03:29.040 --> 0:03:31.359 to steer an economy when when you're failing to do 0:03:31.840 --> 0:03:35.240 the more elementary but also the hardest stuff, namely the 0:03:35.280 --> 0:03:39.440 completion of the single market. D David focused lend does 0:03:39.480 --> 0:03:57.520 thriank you so much? For our US audience, particularly a 0:03:57.680 --> 0:04:00.760 US drive time audience, There's no I think that's going 0:04:00.840 --> 0:04:04.200 to make you turn the channel like another discussion of Brexit. 0:04:04.760 --> 0:04:06.320 But we can do that, and we can make it 0:04:06.400 --> 0:04:11.760 charming and lovely. Always with Anna Edwards, Chief Brexit corresponded. 0:04:12.040 --> 0:04:17.080 Anna helped the US audience here with an absolutely original phrase, 0:04:17.800 --> 0:04:23.520 an indicative vote. What is an indicative vote? Well, good 0:04:23.520 --> 0:04:25.520 morning to you, Tom and Jonathan. We're all on a 0:04:25.640 --> 0:04:27.520 on a big learning cave when it comes to Brexit. 0:04:27.560 --> 0:04:30.760 Another part at the twist and turning Brexit process for 0:04:30.839 --> 0:04:34.080 you this morning. Indicative votes. So basically the way this goes. 0:04:34.800 --> 0:04:37.760 MP spend today coming up with options that they see 0:04:37.800 --> 0:04:40.320 for a way forward on Brexit. They suggest those to 0:04:40.440 --> 0:04:42.680 the Speaker of the House. Do you remember him, John Burgo, 0:04:42.800 --> 0:04:45.560 the one who shouts order, order a lot. He comes 0:04:45.600 --> 0:04:47.280 up with this list. The list goes on a piece 0:04:47.279 --> 0:04:50.440 of paper and then they all rank which options they 0:04:50.480 --> 0:04:53.040 would tolerate, which ones they would like, which ones they 0:04:53.040 --> 0:04:56.239 could hold their nose and vote for. And then after 0:04:56.279 --> 0:05:00.080 that process next Monday, the top few get debated and 0:05:00.080 --> 0:05:03.760 and Parliament craft some sort of preference out of all 0:05:03.760 --> 0:05:06.320 of that. Oh, that's wonderful, except that reads like that 0:05:06.520 --> 0:05:10.280 required summer reading, seventh grade Lord of the Flies. I mean, 0:05:10.320 --> 0:05:14.840 this is not, you know, required democracy as well. It's 0:05:15.000 --> 0:05:19.880 unusual who controls this process or does it turn into 0:05:20.440 --> 0:05:25.640 something completely original for the home of constitutional law. It 0:05:25.720 --> 0:05:27.919 does seem as if a lot of what we're seeing 0:05:27.920 --> 0:05:34.520 in this Brexit process is being i mean being crafted creatively, 0:05:34.600 --> 0:05:37.640 shall we put it up to now? What we've seen 0:05:37.640 --> 0:05:40.839 a lot is the government bringing motions and members of 0:05:40.839 --> 0:05:43.600 the opposition tabling amendments to that, and that's been the 0:05:43.600 --> 0:05:45.480 process we've been going through. But this is something new. 0:05:45.520 --> 0:05:48.680 This is something different. The government is called this something 0:05:48.760 --> 0:05:52.600 dangerous with an unpredictable precedent because it does certainly open 0:05:52.720 --> 0:05:55.799 up the floodgates for other activity like this in the future. 0:05:56.080 --> 0:05:59.159 It upends the balance between the democratic institutions. Is the 0:05:59.200 --> 0:06:02.480 government's ache on this? Those who put this forward though, 0:06:02.480 --> 0:06:04.240 and I have to point out this is a cross bench, 0:06:04.360 --> 0:06:07.080 across party group of MPs who put this plan forward. 0:06:07.360 --> 0:06:09.880 They see this as really trying to answer the question 0:06:09.920 --> 0:06:12.440 as too okay, we know what Parliament doesn't want, but 0:06:12.520 --> 0:06:15.159 what does Parliament really want? What can parliament get behind 0:06:15.279 --> 0:06:17.240 important to note though, this doesn't mean that this is 0:06:17.279 --> 0:06:20.599 what will come to part. Parliament will express its wishes 0:06:20.720 --> 0:06:23.440 this way, but the Executive does not have to listen 0:06:23.440 --> 0:06:25.679 to this. Theresa May and her team have been saying 0:06:26.240 --> 0:06:29.320 we can't pre commit to implement a plan that we 0:06:29.320 --> 0:06:31.240 don't know what that is. That would not be responsible. 0:06:31.360 --> 0:06:33.840 So Anna, I'm wondering whether they actually all of this 0:06:33.920 --> 0:06:37.000 mess plays into the Prime minister strategy that she gets 0:06:37.000 --> 0:06:39.800 the hardcore Brexiteers to start thinking that it's either her 0:06:39.880 --> 0:06:42.600 plan or they're not going to get anything they want. 0:06:42.839 --> 0:06:45.880 That is exactly the subject of the most recent modcast. 0:06:45.920 --> 0:06:48.279 If you've not heard of this, Jonathan and Tom, this 0:06:48.360 --> 0:06:50.400 is the Jacob Reese Marko, I'm sure you have heard of, 0:06:50.440 --> 0:06:51.919 the leader of the e r G, the sort of 0:06:51.960 --> 0:06:55.520 breakaway part of the Conservative Party, far on the right side, 0:06:55.520 --> 0:06:58.400 the brexiteer side at the Conservative Party. He does a 0:06:58.400 --> 0:07:01.960 podcast called modcast he releases this morning, and it makes 0:07:01.960 --> 0:07:04.440 that point. But the choice, there's a continuum of choices, 0:07:04.640 --> 0:07:06.599 and May's deal, he says, he is better than no 0:07:06.800 --> 0:07:09.320 deal at all. He said it before and last night 0:07:09.360 --> 0:07:11.600 he said he would be tempted to hold his nose 0:07:11.680 --> 0:07:14.360 and vote for the reason May's deal if this was 0:07:14.400 --> 0:07:16.680 the best chance of getting any kind of Brexit. And 0:07:16.720 --> 0:07:19.760 so what's interesting about indicative votes is that they could 0:07:19.880 --> 0:07:22.040 paint a picture of the way forward, or they could 0:07:22.080 --> 0:07:24.040 just be used to whip the E r G and 0:07:24.120 --> 0:07:27.440 other holdouts into supporting Thereason May's deal. In the end, Okay, 0:07:27.480 --> 0:07:30.560 I'm lost and thank you so much, greatly appreciate it, 0:07:30.600 --> 0:07:33.240 and can't say enough about her work on the green 0:07:33.280 --> 0:07:49.080 at Westminster. She has been absolutely extraordinary. What Jack far 0:07:49.200 --> 0:07:51.679 and I love to do is to fold like six 0:07:51.720 --> 0:07:55.080 of the Zeitgey stories at the moment into one lovely story. 0:07:55.720 --> 0:07:58.600 And John, we can do that with Jennifer Bailey, vice 0:07:58.640 --> 0:08:02.960 president of Apple PA yesterday who got up and introduced 0:08:03.200 --> 0:08:08.840 the Goldman Sachs Apple Titanium credit card, and there in 0:08:08.920 --> 0:08:12.760 front of thousands of Apple fans, you know, the Apple idiots, 0:08:13.160 --> 0:08:16.680 was the Titan card and across it. It's a Jeffrey 0:08:16.720 --> 0:08:18.480 Curry not let me get away with that. Did you 0:08:18.520 --> 0:08:20.840 just call the Apple fans the Apple idiots? You know, 0:08:20.920 --> 0:08:23.320 the fan boys, the fan boys, they're all into it. 0:08:23.560 --> 0:08:26.880 And there was David Solomon there, and there's the titanium 0:08:26.920 --> 0:08:31.760 Apple card and it says across a commodity guru Jeffrey Curry, 0:08:31.840 --> 0:08:34.000 Jeff carries with us. But Jeff Curry can always say 0:08:34.000 --> 0:08:37.840 that you've got an Apple if X I do. But but, 0:08:37.920 --> 0:08:42.080 Jeffrey Curry, titanium and credit. What is titanium used for? 0:08:43.320 --> 0:08:46.640 I prefer the precious medals over these rare earth metals, 0:08:46.640 --> 0:08:53.440 but platum but not titanium unfortunately. But it's but but 0:08:53.480 --> 0:08:55.840 they're like they're different from gold. I get that. What 0:08:55.920 --> 0:08:58.960 did you do with palladium and platinum um? They go 0:08:59.040 --> 0:09:03.400 into autocats and because of the VW problem um the 0:09:03.480 --> 0:09:06.640 demand for diesel cars collapse and the platinum goes into those. 0:09:06.720 --> 0:09:10.480 And then at the platinum price went down and we 0:09:10.600 --> 0:09:13.200 buy more gasoline cars in lieu of the diesel cars 0:09:13.200 --> 0:09:17.920 and palladium. And so as of yesterday, are you're covering titanium? 0:09:17.960 --> 0:09:21.880 Not yet? Not yet? So, Jeff the question used to 0:09:21.920 --> 0:09:24.880 be what's going on with China just OSCA commodity strategists. 0:09:24.920 --> 0:09:27.440 Now it's which commodity do I look at to understand 0:09:27.440 --> 0:09:29.839 what he's going on with China? Woke me through a 0:09:29.920 --> 0:09:34.080 Jeff Well. In general, the policy in China has become 0:09:34.160 --> 0:09:36.600 much more selective, Like if you look at their how 0:09:36.640 --> 0:09:39.480 they stimulated housing this time around, they went in city 0:09:39.480 --> 0:09:42.839 by city, credit worthy by credit worthy, and so you 0:09:42.960 --> 0:09:46.400 end up with these very idiosyncratic stories. Now, in terms 0:09:46.400 --> 0:09:48.679 of thinking about the current environment, the one thing we've 0:09:48.760 --> 0:09:52.560 learned is they won't step aside and let the economy collapse, 0:09:52.880 --> 0:09:55.360 nor are they going to turbot charge it. So really 0:09:55.360 --> 0:09:57.840 what it does it creates a relatively benign outlook, like 0:09:57.880 --> 0:10:01.160 our outlook for steel demand in China this year's flat 0:10:01.160 --> 0:10:05.160 ere overyear. I think that's really the core outlook going forward. 0:10:05.280 --> 0:10:08.439 But that reluctance not to step aside has that also 0:10:08.559 --> 0:10:11.600 made it more difficult over time to boost the economy 0:10:11.600 --> 0:10:15.120 when they need to know when two thousand and fifteen 0:10:15.120 --> 0:10:17.920 and sixteen they did it in the large scale, and 0:10:17.960 --> 0:10:20.560 they did it again back in was it twelve and thirteen? 0:10:20.600 --> 0:10:22.880 It looks different this time though, Jeff, They've been trying 0:10:22.920 --> 0:10:24.880 to stimulate the economy, for one, and there are very 0:10:24.920 --> 0:10:28.439 little signs of it actually stimulated the economy. Well, I mean, 0:10:28.480 --> 0:10:30.400 if you got rid of the tail risk, you know, 0:10:30.480 --> 0:10:34.040 you look at you know, the the underlying um economic 0:10:34.040 --> 0:10:35.679 growth is somewhere in that five and a half to 0:10:35.760 --> 0:10:39.120 six percent growth range, and they've taken down their targets. 0:10:39.160 --> 0:10:43.560 Does dr copper work anymore? Really important question about you know, 0:10:43.600 --> 0:10:46.480 what do you follow for China? I mean, the regression 0:10:46.520 --> 0:10:49.040 from two thousand and ten is not pretty No, it's not. 0:10:49.240 --> 0:10:52.000 But but if you look at um what copper was 0:10:52.040 --> 0:10:55.400 primarily used to create that electrical grid system in China, 0:10:55.880 --> 0:10:59.120 and infrastructure projects are slower right now. As a result, 0:10:59.160 --> 0:11:02.160 demand is slower for copper and other base metals right now. 0:11:02.240 --> 0:11:07.439 Do you have a good handle on various industrial demands? 0:11:08.679 --> 0:11:10.559 I mean, I mean we run into in oil all 0:11:10.559 --> 0:11:14.240 the time, supply, supply, supply. Nobody really wants to measure demand. 0:11:14.760 --> 0:11:19.040 Is it truly measurable? Well, you get an implied demand 0:11:19.040 --> 0:11:20.559 that I think it's pretty close to it, and it's 0:11:20.559 --> 0:11:23.640 consistent with the underlying economic data. But I think the 0:11:23.720 --> 0:11:28.000 key here is durable demand, whether if it's houses, autos, 0:11:28.040 --> 0:11:31.280 in the developed markets or infrastructure in China is a 0:11:31.320 --> 0:11:33.480 lot lower today than it was five ten years ago, 0:11:33.520 --> 0:11:36.199 and that's primary reason why copper and the rest of 0:11:36.240 --> 0:11:38.640 the metals complex is lower. So Tom's brought up an 0:11:38.640 --> 0:11:42.080 interesting point about DR copper. If DR copper along has 0:11:42.120 --> 0:11:44.199 a PhD, and I cannot believe what the inversion of 0:11:44.240 --> 0:11:45.880 the yield curve is used to tell me, or is 0:11:45.880 --> 0:11:48.400 telling me? Now, what is the signal that I get 0:11:48.440 --> 0:11:52.520 from price? Where do I get signal from price anymore? Well, 0:11:52.920 --> 0:11:55.559 if you look at the prices across the complex, they're 0:11:55.600 --> 0:11:58.400 sitting pretty much on their equilibrium values. We got coppers 0:11:58.400 --> 0:12:02.000 a little bit stronger UM, but more broadly UM. Most 0:12:02.080 --> 0:12:03.800 of these prices are telling you it's kind of a 0:12:03.840 --> 0:12:06.920 mid lean type story, consistent with the underlying fundamentals. And 0:12:06.960 --> 0:12:09.240 one of my great charts I put this out years ago. 0:12:09.280 --> 0:12:12.920 It's the old c R y c RB indexes, ancient 0:12:12.960 --> 0:12:16.040 stuff folks, back to the fifties, and I adjust for 0:12:16.120 --> 0:12:20.160 inflation and the answer is cop blended commodity prices now, 0:12:20.280 --> 0:12:23.680 Jeff Curry, are back to where they were in on 0:12:23.760 --> 0:12:27.600 an inflation adjusted basis. We haven't broken that cycle, other 0:12:27.679 --> 0:12:30.880 than the one off commodity boom. What's the house call 0:12:31.520 --> 0:12:36.280 at Goldman Sex, I'm breaking this deflationary cycle. Well, if 0:12:36.559 --> 0:12:39.800 you take the non energy, which a CRB is primarily composed, 0:12:40.400 --> 0:12:45.600 it's bacing. That's that lack of Chinese demand for capex commodities. 0:12:45.960 --> 0:12:48.720 The op x commodities like oil looks a lot better. 0:12:48.880 --> 0:12:52.079 So it offsets that chart and makes it slightly tilt 0:12:52.240 --> 0:12:55.360 up as opposed to tilting down. What's your calling oil 0:12:55.440 --> 0:12:58.240 right now? Have you revisited that seventies seventy five? The 0:12:58.240 --> 0:13:00.360 market is really tight today. You know, we got million 0:13:00.400 --> 0:13:04.240 barrel per day deficit forward curves in backgradation, so it's 0:13:04.240 --> 0:13:07.000 a rock solid story right now. However, you got a 0:13:07.000 --> 0:13:10.640 relatively barry story going into because of the pipe capacity, 0:13:10.679 --> 0:13:12.880 and as a result, we think this markets can remain back. 0:13:13.000 --> 0:13:16.640 This is on w T I s Brent, I was 0:13:16.679 --> 0:13:18.920 gonna send us a big job from what we are now. 0:13:19.280 --> 0:13:22.240 That's still eight dollars. That's a big move. Well, from 0:13:22.240 --> 0:13:24.400 fifty to seventy five, I was thinking that that was 0:13:24.440 --> 0:13:28.480 a little bit, but from sixty whatever. Jef, last time 0:13:28.480 --> 0:13:30.160 you were with us, we talked about gold, and I 0:13:30.200 --> 0:13:33.400 think a fourteen hundred dollar price target on gold. Are 0:13:33.400 --> 0:13:35.760 you still there is how we're still looking for? Definitely? Um, 0:13:35.800 --> 0:13:37.880 you know most of the evidence coming in on central 0:13:37.880 --> 0:13:41.640 bank buying is there. Um. The Chinese bought in both 0:13:41.640 --> 0:13:45.200 December as well as January ten tons Um, you have 0:13:45.280 --> 0:13:47.920 a dovish fed Um. You know the flying the white 0:13:48.000 --> 0:13:49.800 mate right now is really what's going on with the 0:13:49.920 --> 0:13:53.520 US dollar. But you take the the underlying fundamental picture 0:13:53.559 --> 0:13:55.440 and you get a stronger e M, which looks to 0:13:55.440 --> 0:13:58.199 be the case ex China. Um, that's the tail wind 0:13:58.240 --> 0:14:00.400 that you need to push gold up to fourteen we 0:14:00.520 --> 0:14:02.480 viewed as a grain higher as opposed to is the 0:14:02.520 --> 0:14:04.480 house view still for a week a dollar from here? 0:14:04.520 --> 0:14:07.920 And what undepends that? Jeff? Yeah, I mean it's you know, 0:14:07.960 --> 0:14:10.120 the situation in Europe is probably about as bad as 0:14:10.280 --> 0:14:12.559 is it's going to get at this point right now. Um. 0:14:12.600 --> 0:14:15.120 And if you look at the dollar against the e 0:14:15.280 --> 0:14:17.800 M x China, it's it's it's much weaker than what 0:14:17.840 --> 0:14:20.240 it was last year. Jeff created John Ferre and I 0:14:20.280 --> 0:14:23.960 need to be in Vienna April eighteen or seventeen. In 0:14:24.000 --> 0:14:25.920 April eighteen, do we need to be there for the 0:14:25.960 --> 0:14:28.200 OPEC meetings? I mean, do we need to be there 0:14:28.200 --> 0:14:30.960 for all the excitement of OPEC now. I think I 0:14:31.280 --> 0:14:33.960 think the big question with OPEC right now is the 0:14:33.960 --> 0:14:36.400 exit strategy and when they're gonna start talking about it, 0:14:36.520 --> 0:14:40.360 our rexit strategy. From Vienna Aprilt Tomas just trying to 0:14:40.440 --> 0:14:46.560 arrange a vacation. I don't think it's going to be 0:14:46.640 --> 0:14:51.760 that exciting this April. This is this last time. Jeff 0:14:51.840 --> 0:14:53.040 is great to catch up with you. Now you've got 0:14:53.080 --> 0:14:55.880 to run to TV. So thank you very much, Thank you. 0:14:56.560 --> 0:14:59.160 Come back when you can say, Vienna looks lovely in April, 0:15:01.840 --> 0:15:05.320 just for a night, just for a night. Jeff went 0:15:05.400 --> 0:15:07.840 once in I was six, just killing us. So when Jeff, 0:15:08.760 --> 0:15:12.760 when Jeff goes to Vienna after that getting started, just 0:15:12.800 --> 0:15:30.760 emailed in and said, you'll be lucky. You'll see Vienna Virginia. 0:15:31.480 --> 0:15:36.000 Christina Huper here with Investco, their chief global market strategist, 0:15:36.040 --> 0:15:39.720 to help us reset this morning. Let's look back first, 0:15:39.920 --> 0:15:44.520 how did you reset on December of last year. Well, 0:15:44.520 --> 0:15:48.400 we recognized at that point that the FED may actually 0:15:49.240 --> 0:15:53.760 be feeling more flexible and maybe beginning to pivot um. 0:15:53.760 --> 0:15:57.240 But having said that, it really wasn't confirmed for a while, 0:15:58.000 --> 0:16:01.840 and so I don't think that man any adjusted portfolios 0:16:01.880 --> 0:16:04.800 because of that slight indicate. But on the south side, 0:16:04.800 --> 0:16:10.720 they're report December rather December, they're doing it for three 0:16:10.760 --> 0:16:13.360 weeks of December. You gotta rip that up, throat and 0:16:13.440 --> 0:16:17.280 waste basket. What's your new twenty page report when you 0:16:17.320 --> 0:16:20.560 speak to invest Goo shareholders. Well, clearly it's a much 0:16:20.600 --> 0:16:24.280 more accommodative environment for risk assets because of the FED pivot. 0:16:24.400 --> 0:16:28.560 But the caveat is if economic data holds up, because 0:16:28.600 --> 0:16:31.920 that's really the concern because this pivot was so abrupt, 0:16:32.120 --> 0:16:35.840 was so dramatic. What it does is raise very significant 0:16:35.840 --> 0:16:38.600 concerns about the state of the global economy. So we're 0:16:38.640 --> 0:16:41.920 gonna need to follow the data closely before we really 0:16:42.000 --> 0:16:46.680 have a solid picture of what is to come this year. Um, 0:16:46.720 --> 0:16:50.440 my expectation is that we will see the global economic 0:16:50.520 --> 0:16:54.960 data hold up, that China stimulus, for example, will power 0:16:55.120 --> 0:16:57.840 the Chinese economy and enable them to hit that six 0:16:57.880 --> 0:16:59.880 to hit six and a half percent target? Is that 0:17:00.240 --> 0:17:02.520 very easily? That is my call. Your call is a 0:17:02.560 --> 0:17:05.840 six percent plus China GDP. That is correct. That is 0:17:05.960 --> 0:17:08.280 lonely Joe, Well, that's China is called as well and 0:17:08.359 --> 0:17:11.280 typically what China's call is is what growth will be 0:17:13.560 --> 0:17:15.800 as lonely as you'd expect. I think that the thing 0:17:15.840 --> 0:17:18.119 that I find really hard to reconcile right now is 0:17:18.160 --> 0:17:21.240 why the rates market would begin kind again pricing get 0:17:21.240 --> 0:17:23.760 a rate cut at the same time that risky parts 0:17:23.760 --> 0:17:27.080 of credit continue to rally. A question I asked this morning, 0:17:27.200 --> 0:17:29.240 is an environment where the FED needs to cut is 0:17:29.240 --> 0:17:32.919 not typically an environment where risk performs well. So I 0:17:32.920 --> 0:17:36.159 think something's got to give. Either the rate cut doesn't happen, 0:17:36.880 --> 0:17:40.560 or the credit market needs to adjust and adjust quickly. 0:17:41.320 --> 0:17:43.320 Which one is it? Christina? From what you're saying, you 0:17:43.359 --> 0:17:46.080 just don't think the right cut happens. I don't expect 0:17:46.160 --> 0:17:48.960 a rate cut to happen. I know that the probability 0:17:49.040 --> 0:17:51.480 is going up if we look at FED funds futures, 0:17:51.520 --> 0:17:55.880 but we have seen a decoupling between expectations and FED policy, 0:17:56.200 --> 0:17:59.040 so I wouldn't be surprised if that continues. I just 0:17:59.160 --> 0:18:02.800 believe that the economic data will hold up fairly well. 0:18:02.880 --> 0:18:05.200 I'm not telling you we're going to see very strong 0:18:05.280 --> 0:18:07.760 global growth, but it's not going to be as bad 0:18:07.800 --> 0:18:11.080 as many expect. As the treasury market the coupled from 0:18:11.080 --> 0:18:15.080 the domestic growth story. Uh, it has to a certain extent. 0:18:15.200 --> 0:18:18.040 But I think that that is to be expected given 0:18:18.119 --> 0:18:22.000 just the abrupt change that the FED made that set 0:18:22.000 --> 0:18:25.280 off all kinds of alarm bells and has made many 0:18:25.359 --> 0:18:28.280 investors wonder what's going on. So we have to wait 0:18:28.320 --> 0:18:31.399 for the data to appear to really confirm views. So 0:18:31.440 --> 0:18:33.399 when does that actually come? Because there was an immense 0:18:33.400 --> 0:18:35.919 amount of faith that China would be able to stabilize 0:18:35.920 --> 0:18:38.600 the situation, that we would see it stabilized as the 0:18:38.640 --> 0:18:40.680 year progresses. Are you seeing any of that in the 0:18:40.760 --> 0:18:45.000 data at the moment, not particularly, although it's not terrible. 0:18:45.160 --> 0:18:47.880 I think what we're likely to see is improvement as 0:18:47.920 --> 0:18:50.360 we move through the spring into the summer. What gives 0:18:50.400 --> 0:18:54.040 you the confidence because I have a lot of confidence 0:18:54.080 --> 0:18:56.480 that the Chinese government, when they want something to happen, 0:18:56.520 --> 0:18:59.360 they make it happen. Um. They have a lot of 0:18:59.480 --> 0:19:03.960 stimulus that they're throwing at this fiscal, monetary administrative and 0:19:04.040 --> 0:19:07.280 I believe it will ultimately result in grow. I want 0:19:07.280 --> 0:19:09.240 to point out that within what we saw the last 0:19:09.320 --> 0:19:11.480 number of days, John, that we heard the same thing 0:19:11.520 --> 0:19:15.560 in a different way from Dr Shepherdson Pantheon. Absolutely that 0:19:16.600 --> 0:19:19.399 within the I mean, I'm sorry, I'm looking at the 0:19:19.400 --> 0:19:22.560 Bloomberg screen and it's not giving me Christina Hooper's story 0:19:22.920 --> 0:19:28.080 right now, but she's looking out to a restorative process. 0:19:28.160 --> 0:19:30.720 I'm catching up with Wackin Fouls of PIMCO a little 0:19:30.720 --> 0:19:34.560 bit later, and their cyclical outlook came out a couple 0:19:34.600 --> 0:19:38.240 of days ago, flatlining at the new neutral. And ultimately 0:19:38.240 --> 0:19:40.200 their take is what I think many people's take is 0:19:40.240 --> 0:19:42.840 now that the swing factor in the global economy is 0:19:42.880 --> 0:19:44.760 China and what happens with China later this year. They 0:19:44.800 --> 0:19:47.280 also share that faith that we will have a little 0:19:47.320 --> 0:19:49.520 bit of stability there, we will have a bottoming out 0:19:49.520 --> 0:19:53.080 process that begins as the year progresses. Christina, some people 0:19:53.119 --> 0:19:55.399 don't buy into that. How do you convince them when 0:19:55.440 --> 0:19:58.280 you speak to clients. Well, one argument is to just 0:19:58.359 --> 0:20:01.639 point to the US China trade war. It behooves China 0:20:01.720 --> 0:20:05.879 to stimulate its economy so that it can last through 0:20:06.359 --> 0:20:09.480 the U S China trade wars until the US capitulates. 0:20:09.680 --> 0:20:13.199 That is an incredibly powerful incentive to throw stimulus at 0:20:13.200 --> 0:20:15.199 the economy right now. So if I believe that, the 0:20:15.200 --> 0:20:18.240 next question is how to express that in financial markets? 0:20:18.680 --> 0:20:21.520 If I believe that China is going to stabilize, then 0:20:21.520 --> 0:20:23.520 I'm looking at the markets right now, I'm thinking, well, actually, 0:20:23.560 --> 0:20:26.680 European equities have already having a decent year. Chinese equities 0:20:26.680 --> 0:20:29.200 are already having a different decent year. Likewise, with credit 0:20:29.240 --> 0:20:31.760 markets have fixed income in Asia, in Europe? Where do 0:20:31.840 --> 0:20:35.040 I get value? Where should I push that view through 0:20:35.640 --> 0:20:38.080 that China is going to stabilize and things will be okay? 0:20:38.400 --> 0:20:40.760 Is it on the short side and rates? Is it 0:20:40.880 --> 0:20:43.600 long in equity somewhere? What should I be doing? I 0:20:43.640 --> 0:20:47.440 see opportunities and equities, and we have a significant amount 0:20:47.480 --> 0:20:50.200 of altility, so there's an opportunity to buy on the dips, 0:20:50.240 --> 0:20:53.240 both in the US and emerging markets equities. Although I 0:20:53.359 --> 0:20:56.960 focus on Asia, E m interesting. Christina Hooper grets to 0:20:57.000 --> 0:21:00.119 catch up with you, Investco Chief Global Markets, trying just 0:21:00.200 --> 0:21:02.920 on a really interesting morning til an interesting wickip price 0:21:02.960 --> 0:21:06.120 action to well, the interesting Waka price action. But what's 0:21:06.200 --> 0:21:09.359 interesting about it is where we are and where the 0:21:09.400 --> 0:21:11.439 mood is. I mean, right now, John, if we created 0:21:11.480 --> 0:21:15.919 a dot plot today and with the market perception of it, 0:21:15.920 --> 0:21:19.560 it would be an original dot plot. It would would 0:21:20.359 --> 0:21:22.920 Let's be clear about that. I mean the market could 0:21:23.040 --> 0:21:26.560 could have its ound dot right now on the FMC 0:21:26.720 --> 0:21:28.879 del plant, you know what I mean. The Christina, they 0:21:28.920 --> 0:21:30.680 don't move. I know you've got to get up and leave, 0:21:30.720 --> 0:21:33.159 but but Christina, I think this is critical. And then 0:21:33.240 --> 0:21:35.399 I went back and looked at two years of dots, 0:21:35.720 --> 0:21:38.560 which you could do on the Bloomberg, and the slopes 0:21:38.840 --> 0:21:43.280 have all changed. I mean, the view out for the 0:21:43.320 --> 0:21:46.680 fancy people at the FED is radically different than it 0:21:46.720 --> 0:21:49.920 was two years ago, right, absolutely, But I think that 0:21:50.160 --> 0:21:52.359 has a lot to do with the fact that this 0:21:52.400 --> 0:21:56.040 is a policy prescription essentially created in a vacuum by 0:21:56.119 --> 0:21:58.919 each individual member of the f o MC, So it 0:21:58.960 --> 0:22:02.000 doesn't reflect group think and the kind of consensus that 0:22:02.080 --> 0:22:05.320 goes along with Actually, but our listeners don't have a 0:22:05.400 --> 0:22:09.280 luxury of group think in consensus. They're just scared stuff 0:22:09.320 --> 0:22:13.080 and they missed the rebound January February and Cell, what 0:22:13.160 --> 0:22:16.720 are you doing to allocate right now for those that 0:22:17.080 --> 0:22:21.600 didn't enjoy up eleven. Well, we're encouraging them to take 0:22:21.600 --> 0:22:25.080 a long term view, which means that right now central 0:22:25.080 --> 0:22:28.960