1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,600 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:21,959 Speaker 1: at Bloomberg dot com slash podcast. Let's move on and 7 00:00:22,000 --> 00:00:24,760 Speaker 1: get into what this really means from a Central banks perspective, 8 00:00:24,760 --> 00:00:27,240 Speaker 1: from a bond market perspective. You know, I woke this 9 00:00:27,280 --> 00:00:28,880 Speaker 1: morning and I have to when I saw this new 10 00:00:28,920 --> 00:00:30,520 Speaker 1: is I have to admen. I did not have the 11 00:00:30,560 --> 00:00:33,559 Speaker 1: b O J tightening on my two BINGO card. But 12 00:00:33,840 --> 00:00:35,680 Speaker 1: here we are. So I said, we need to talk 13 00:00:35,720 --> 00:00:37,760 Speaker 1: to some smart people here. So we rounded up a couple. 14 00:00:37,960 --> 00:00:40,720 Speaker 1: We have plenty to choose from here at Bloomberg. Kathleen Hayes, 15 00:00:41,080 --> 00:00:44,519 Speaker 1: Bloomberg television correspondent, joins us Ira Jersey h interest rate 16 00:00:44,560 --> 00:00:48,400 Speaker 1: strategist for Bloomberg Intelligence, also on the phone, and Kathleen's 17 00:00:48,400 --> 00:00:51,199 Speaker 1: here on our Bloomberg Interactive Broker studio. So, Kathleen, I 18 00:00:51,320 --> 00:00:54,040 Speaker 1: came in here. I'm listening to the energy John Farrow 19 00:00:54,080 --> 00:00:56,600 Speaker 1: and Tom keene have about the b o J. I'm like, 20 00:00:57,240 --> 00:00:59,000 Speaker 1: I don't know. Can you tell me why this is important? 21 00:00:59,440 --> 00:01:01,680 Speaker 1: Why this is important? Oh? My god. First of all, 22 00:01:01,760 --> 00:01:05,400 Speaker 1: big surprised. I was sitting on the sixth floor in 23 00:01:05,440 --> 00:01:07,680 Speaker 1: front of our camera up there, getting ready to react 24 00:01:07,680 --> 00:01:10,720 Speaker 1: to this with our team in in Tokyo and Asia, 25 00:01:11,200 --> 00:01:14,840 Speaker 1: and when I saw they had like come across widening 26 00:01:14,959 --> 00:01:19,240 Speaker 1: yield curve control, I was shocked. Everyone was shocked. All 27 00:01:19,280 --> 00:01:21,880 Speaker 1: the signals coming out of the Bank of Japan, including 28 00:01:21,920 --> 00:01:25,800 Speaker 1: Governor Kuroda, repeatedly was no, we're not ready, and the 29 00:01:25,880 --> 00:01:29,480 Speaker 1: expectation has been not ready to uh start making this 30 00:01:29,520 --> 00:01:32,560 Speaker 1: move with inflation rising. UH. Kroda kept saying, well, we 31 00:01:32,600 --> 00:01:34,640 Speaker 1: don't know if it's sustainable. You know what, there might 32 00:01:34,680 --> 00:01:37,200 Speaker 1: be a global recession bring down prices. That's gonna We're 33 00:01:37,200 --> 00:01:41,119 Speaker 1: gonna we need the stimulus uh. And then UH, we're 34 00:01:41,120 --> 00:01:43,560 Speaker 1: getting a new governor. The new governor is going to 35 00:01:43,640 --> 00:01:46,559 Speaker 1: be in place UH in April. And at that point 36 00:01:46,640 --> 00:01:49,040 Speaker 1: that's been the expectation when it would start. But the 37 00:01:49,040 --> 00:01:52,600 Speaker 1: BOJ has been insisting even when the shift away from 38 00:01:52,760 --> 00:01:56,720 Speaker 1: extraordinary stimulus started, it would be gradual. And so when 39 00:01:56,800 --> 00:01:58,760 Speaker 1: Kroda had his press conference last night. One of the 40 00:01:58,760 --> 00:02:01,920 Speaker 1: things he stressed was we haven't changed our forward guidance. 41 00:02:02,640 --> 00:02:05,600 Speaker 1: I'm still concerned that inflation may not be sustainable. Wayes 42 00:02:05,640 --> 00:02:09,000 Speaker 1: have to rise. The spring negotiations start off to the 43 00:02:09,000 --> 00:02:12,919 Speaker 1: first year, probably in late February early March. Uh that um, 44 00:02:12,960 --> 00:02:16,000 Speaker 1: it was what financial stability keeping. And there's a big 45 00:02:16,000 --> 00:02:19,240 Speaker 1: concern about the weekend right that that's been something that 46 00:02:19,560 --> 00:02:22,680 Speaker 1: very unpopular with the public. So this is a step. 47 00:02:22,720 --> 00:02:25,480 Speaker 1: But it's one thing to say it's not clear that 48 00:02:25,520 --> 00:02:28,959 Speaker 1: the regime shift has fully begun, but at the door 49 00:02:29,160 --> 00:02:31,000 Speaker 1: is definitely wide open. It's clear that's where the b 50 00:02:31,080 --> 00:02:32,960 Speaker 1: o J is going now. Well, I think what's so 51 00:02:32,960 --> 00:02:36,120 Speaker 1: significant about this particular move is that and a lot 52 00:02:36,160 --> 00:02:38,360 Speaker 1: of people don't really read about the Japanese economy, but 53 00:02:38,400 --> 00:02:41,399 Speaker 1: deflation has been an issue for the Japanese economy for 54 00:02:41,440 --> 00:02:44,880 Speaker 1: what decades. Well, they got out often after they signed 55 00:02:44,880 --> 00:02:47,520 Speaker 1: the accord in that set up all this extraordinary easing, 56 00:02:47,520 --> 00:02:50,280 Speaker 1: but yes, they they still had inflation has not gotten 57 00:02:50,320 --> 00:02:53,359 Speaker 1: to two percent and stayed there right exactly. And I 58 00:02:53,440 --> 00:02:56,079 Speaker 1: think what's crucial here is that, I mean, so many 59 00:02:56,080 --> 00:02:58,240 Speaker 1: people would call this right. They said that the market 60 00:02:58,280 --> 00:03:00,799 Speaker 1: was going to break at some point up point, which 61 00:03:00,800 --> 00:03:02,400 Speaker 1: is why you're seeing a lot of the likes of BBS, 62 00:03:02,400 --> 00:03:05,639 Speaker 1: blue Bag, etcetera. I really cash out on shorting these 63 00:03:05,720 --> 00:03:07,960 Speaker 1: j g B s. But I have to ask why 64 00:03:08,000 --> 00:03:10,160 Speaker 1: so soon? Because that was the surprise here. It was 65 00:03:10,160 --> 00:03:13,320 Speaker 1: going to be this eventuality by so soon? Why so soon? 66 00:03:14,080 --> 00:03:16,840 Speaker 1: But financial stability? Perhaps he was a bit concerned about 67 00:03:16,880 --> 00:03:19,400 Speaker 1: having to defend the yen so aggressively. Member in the 68 00:03:19,760 --> 00:03:22,000 Speaker 1: just a couple of months ago, the yen they with 69 00:03:22,120 --> 00:03:24,560 Speaker 1: the extraordinary bomb purchases. And that's one thing they also 70 00:03:24,639 --> 00:03:27,960 Speaker 1: did in the last meeting was increased the amount of 71 00:03:29,200 --> 00:03:32,359 Speaker 1: the money for intervening, for buying the bonds, etcetera, to 72 00:03:32,520 --> 00:03:35,200 Speaker 1: nine trillion from seven point three trillion. It might be 73 00:03:35,320 --> 00:03:39,960 Speaker 1: one of our guests overnight said politics that high inflation 74 00:03:40,200 --> 00:03:43,120 Speaker 1: is so unpopular in Japan. Uh Krona gave a speech 75 00:03:43,120 --> 00:03:45,800 Speaker 1: a couple of months to Parliament a couple of months 76 00:03:45,800 --> 00:03:48,600 Speaker 1: ago where he said, well he knows that the Japanese 77 00:03:48,640 --> 00:03:52,040 Speaker 1: people can understand inflation. He got so much pushback that 78 00:03:52,080 --> 00:03:55,400 Speaker 1: made people very angry. Kishida, the new prime minister, relatively 79 00:03:55,400 --> 00:03:59,080 Speaker 1: new prime minister. His approval ratings are have been crushed. 80 00:03:59,520 --> 00:04:01,360 Speaker 1: This made be a sense I need I need to 81 00:04:01,400 --> 00:04:03,960 Speaker 1: show that yes, we we know what's going on, this 82 00:04:04,000 --> 00:04:06,720 Speaker 1: is where we're heading and let people know. Now all right, 83 00:04:06,760 --> 00:04:09,280 Speaker 1: want to bring you in here. What is your reaction 84 00:04:09,320 --> 00:04:11,160 Speaker 1: to what we saw out of the bank in Japan. 85 00:04:11,200 --> 00:04:13,880 Speaker 1: How do you think the US feder Reserve will react? 86 00:04:14,400 --> 00:04:16,720 Speaker 1: What was your take? Well, I don't think the Fed 87 00:04:16,839 --> 00:04:19,240 Speaker 1: is going to react directly to this, but I do 88 00:04:19,320 --> 00:04:21,400 Speaker 1: think that it surprised everyone. I think a lot of 89 00:04:21,400 --> 00:04:24,640 Speaker 1: people thought that if if the b o J was 90 00:04:24,640 --> 00:04:27,800 Speaker 1: going to increase the band for its yield curve control, 91 00:04:27,839 --> 00:04:30,080 Speaker 1: that it would come you know, much later next year. 92 00:04:30,160 --> 00:04:33,039 Speaker 1: So so so I'm not surprised given the news. What 93 00:04:33,279 --> 00:04:36,600 Speaker 1: how the the US markets reacting. I think what what's 94 00:04:36,640 --> 00:04:39,520 Speaker 1: going to be fascinating is whether or not the you 95 00:04:39,520 --> 00:04:42,520 Speaker 1: know J is actually going to deliver on what the 96 00:04:43,480 --> 00:04:45,640 Speaker 1: what what the market is currently pricing in terms of 97 00:04:45,680 --> 00:04:48,320 Speaker 1: interest rate moves, because there's a large part of the 98 00:04:48,360 --> 00:04:51,160 Speaker 1: market and I've even had conversations this morning with UH 99 00:04:51,480 --> 00:04:54,240 Speaker 1: with investors who think that the UH the b o 100 00:04:54,360 --> 00:04:57,120 Speaker 1: J is not going to ever move interest rates off 101 00:04:57,160 --> 00:05:00,520 Speaker 1: of the negative ten basis point level where the are now, 102 00:05:00,880 --> 00:05:04,160 Speaker 1: but the market continues to price for um, you know, 103 00:05:04,160 --> 00:05:06,719 Speaker 1: for for for the b o J to potentially increase 104 00:05:06,760 --> 00:05:08,640 Speaker 1: interest rates a little bit in the middle of next year. 105 00:05:08,720 --> 00:05:10,800 Speaker 1: So so I think this is kind of a almost 106 00:05:10,800 --> 00:05:14,320 Speaker 1: a necessary step in order to pave the way for 107 00:05:14,480 --> 00:05:17,280 Speaker 1: potential interest rate hikes in the future. Um, you know, 108 00:05:17,560 --> 00:05:21,120 Speaker 1: how many and how aggressive the b o J can be, 109 00:05:21,279 --> 00:05:23,800 Speaker 1: I think will be very much determined, like Kathleen said, 110 00:05:23,800 --> 00:05:26,960 Speaker 1: about what the economic landscape ends up ends up being there. 111 00:05:26,960 --> 00:05:29,320 Speaker 1: But but generally speaking, you know, it is part and 112 00:05:29,320 --> 00:05:33,360 Speaker 1: parcel of this global policy tightening that you've seen, um 113 00:05:33,440 --> 00:05:35,080 Speaker 1: out of just about every central bank in the world, 114 00:05:35,120 --> 00:05:38,680 Speaker 1: even even those who you know traditionally have been majorly dubbish. 115 00:05:39,680 --> 00:05:41,360 Speaker 1: So just Kathleen, that's kind of right ones to go. 116 00:05:41,680 --> 00:05:46,520 Speaker 1: It feels very coordinated to men, like the central banks 117 00:05:46,520 --> 00:05:50,400 Speaker 1: around the world raising rates. Is this typically how it happens? Well, 118 00:05:50,440 --> 00:05:52,479 Speaker 1: I'm not sure it was coordinated now they do. We 119 00:05:52,560 --> 00:05:56,160 Speaker 1: know that they communicate with each other frequently. I will 120 00:05:56,200 --> 00:06:00,360 Speaker 1: say this that very recently my sources to the b 121 00:06:00,520 --> 00:06:04,599 Speaker 1: o J, we're indicating that nothing was going to change yet, 122 00:06:04,680 --> 00:06:08,880 Speaker 1: as recently as late last week when I spoke to somebody, So, uh, 123 00:06:09,320 --> 00:06:12,480 Speaker 1: it's still a mystery to me too. Why now why 124 00:06:12,560 --> 00:06:15,280 Speaker 1: this meeting? And another thing, the b o J has 125 00:06:15,320 --> 00:06:17,520 Speaker 1: eight meetings a year. Four of them have a monetary 126 00:06:17,520 --> 00:06:20,279 Speaker 1: policy report thoughts when they usually make any kind of 127 00:06:20,279 --> 00:06:23,320 Speaker 1: shift in policy. This was not one of them. Again, 128 00:06:23,600 --> 00:06:27,640 Speaker 1: why now, why the movie do they communicate with the public, 129 00:06:27,720 --> 00:06:29,520 Speaker 1: with the markets like the Fed? Does it seems like 130 00:06:29,680 --> 00:06:32,040 Speaker 1: we're here from Fed presidents every other day? Well, they 131 00:06:32,080 --> 00:06:35,680 Speaker 1: test Governor Rod testifies Parliament all the time. The board 132 00:06:35,680 --> 00:06:38,440 Speaker 1: members are are testifying more than they used to. But 133 00:06:38,560 --> 00:06:40,200 Speaker 1: one of the big clues that something was going to 134 00:06:40,320 --> 00:06:43,240 Speaker 1: happen was really broken first about four or five weeks 135 00:06:43,240 --> 00:06:45,760 Speaker 1: ago by our team in Tokyo that a source said 136 00:06:45,800 --> 00:06:49,159 Speaker 1: that that change having having a look at the policy review, 137 00:06:49,920 --> 00:06:52,359 Speaker 1: that was the policy accord that was set back in 138 00:06:53,200 --> 00:06:56,080 Speaker 1: that established all that the aggressive easy and that established 139 00:06:56,120 --> 00:06:59,560 Speaker 1: the groundwork for moving your Their inflation target was one 140 00:06:59,600 --> 00:07:03,039 Speaker 1: percent to two sen that's when yield curve control in 141 00:07:03,440 --> 00:07:05,000 Speaker 1: that they were going to be looking at that after 142 00:07:05,040 --> 00:07:07,440 Speaker 1: the first year. Kyoto News, one of the big Japanese 143 00:07:07,600 --> 00:07:10,480 Speaker 1: news outlets, over the weekend another report saying this was 144 00:07:10,520 --> 00:07:13,800 Speaker 1: going to happen so it has been telegraphed, and the 145 00:07:14,480 --> 00:07:16,560 Speaker 1: b o J does telegraph things with the press. I 146 00:07:16,560 --> 00:07:19,560 Speaker 1: think the surprising part is the fact that they decided 147 00:07:19,560 --> 00:07:22,080 Speaker 1: why to wide and yield career control. They doubled it right, 148 00:07:22,320 --> 00:07:24,200 Speaker 1: and I think Roda is probably telling us the truth 149 00:07:24,200 --> 00:07:27,280 Speaker 1: that to a certain extent, they needed um, they needed 150 00:07:27,280 --> 00:07:30,840 Speaker 1: more ability to defend the end when they need to 151 00:07:30,840 --> 00:07:34,800 Speaker 1: to make sure that the bond market doesn't get too 152 00:07:34,800 --> 00:07:36,840 Speaker 1: far out of whack. They've got more. They've got more 153 00:07:36,840 --> 00:07:38,840 Speaker 1: flexibility on that now too, they don't have to be 154 00:07:38,880 --> 00:07:41,600 Speaker 1: so aggressively trying to hold it, you know, below point. 155 00:07:42,880 --> 00:07:45,440 Speaker 1: So still a little bit of mystery why now again, 156 00:07:45,520 --> 00:07:48,040 Speaker 1: possibly the politics of this, and they need maybe to 157 00:07:48,040 --> 00:07:50,840 Speaker 1: show the Japanese people we're moving that direction. Boyd. News 158 00:07:50,880 --> 00:07:53,040 Speaker 1: coming out of Japan hot and heavy today. It is 159 00:07:53,080 --> 00:07:55,680 Speaker 1: the topic Bank of Japan getting letting the rates go 160 00:07:55,800 --> 00:07:57,960 Speaker 1: a little bit higher, and that is certainly a change 161 00:07:57,960 --> 00:08:00,720 Speaker 1: from what we've seen from Japan over the Lai. Well, 162 00:08:00,760 --> 00:08:03,280 Speaker 1: I don't know, at least a decade, maybe two. I 163 00:08:03,320 --> 00:08:05,080 Speaker 1: need to get some context here, and we do that 164 00:08:05,120 --> 00:08:08,880 Speaker 1: with Kathleen Hayes. She's a Bloomberg television anchor six to 165 00:08:08,960 --> 00:08:14,560 Speaker 1: twelve pm Eastern time doing all that, tune into absolutely 166 00:08:14,600 --> 00:08:17,600 Speaker 1: gotta follow Asia over Jersey. He covers all things interest 167 00:08:17,640 --> 00:08:19,960 Speaker 1: rates for Bloomberg Intelligence. So, Kathy, I just want to 168 00:08:20,000 --> 00:08:22,720 Speaker 1: start with you again, just I know, you know pre pandemic. 169 00:08:22,720 --> 00:08:25,440 Speaker 1: You're going over to Japan on a regular basis. Just 170 00:08:25,440 --> 00:08:28,080 Speaker 1: give us a sense of how is the economy today 171 00:08:28,280 --> 00:08:32,120 Speaker 1: in Japan. Well, the economy is I would say I 172 00:08:32,120 --> 00:08:35,360 Speaker 1: would sort of characterize it as medium. Uh. They've they've 173 00:08:35,400 --> 00:08:37,920 Speaker 1: come out of COVID pretty well over the past year, 174 00:08:38,800 --> 00:08:43,640 Speaker 1: but there's still concerns about where the economy is going next. 175 00:08:44,280 --> 00:08:47,319 Speaker 1: Capital investment surprisingly has been looking a bit better. People 176 00:08:47,360 --> 00:08:50,000 Speaker 1: were b o J was concerned about that. I think 177 00:08:50,000 --> 00:08:52,920 Speaker 1: their retail sales have been sort of mixed. Uh. The 178 00:08:53,440 --> 00:08:56,560 Speaker 1: inflation rate has been moving higher, and that's the key 179 00:08:56,640 --> 00:09:00,480 Speaker 1: here because their target is two percent. They've had well 180 00:09:00,720 --> 00:09:03,560 Speaker 1: number one. They did when the when the bo J started. 181 00:09:03,720 --> 00:09:09,319 Speaker 1: It's very aggressive policy back in I should say they 182 00:09:09,360 --> 00:09:12,000 Speaker 1: did get the Japanese economy out of deflation with the 183 00:09:12,000 --> 00:09:14,440 Speaker 1: help of some energy prices, but that that was that 184 00:09:14,520 --> 00:09:16,720 Speaker 1: was the big accomplishment at the beginning. But they've been 185 00:09:16,720 --> 00:09:19,199 Speaker 1: I'm unable to get much above one percent or get 186 00:09:19,240 --> 00:09:21,320 Speaker 1: to two percent and keep it there. And now, because 187 00:09:21,360 --> 00:09:24,280 Speaker 1: of higher energy prices, et cetera, up they've been able 188 00:09:24,320 --> 00:09:27,640 Speaker 1: to get it up to what the core rate their 189 00:09:27,840 --> 00:09:31,520 Speaker 1: their headline minus fresh food prices is up to three 190 00:09:31,559 --> 00:09:33,520 Speaker 1: point six percent year over year, the headlines up to 191 00:09:33,520 --> 00:09:36,199 Speaker 1: three point seven. There's a concern whether or not they 192 00:09:36,200 --> 00:09:38,840 Speaker 1: can keep it there. There's a concern about the FED 193 00:09:38,960 --> 00:09:42,040 Speaker 1: hiking rates so aggressively and pushing towards recession to get 194 00:09:42,040 --> 00:09:45,840 Speaker 1: down this this inflation problem that exists here because a 195 00:09:45,880 --> 00:09:50,080 Speaker 1: recession in the US bad news for Japan's economy, very 196 00:09:50,120 --> 00:09:53,160 Speaker 1: export oriented. So I'd say it's a mixed view, and 197 00:09:53,360 --> 00:09:55,760 Speaker 1: that's why there's UH. That's why to a certain extent, 198 00:09:55,800 --> 00:09:59,360 Speaker 1: Governor Quota's UH decision to widen the yield curve COULT 199 00:09:59,400 --> 00:10:03,080 Speaker 1: band to point five percent on either side of zero UH. 200 00:10:03,320 --> 00:10:07,440 Speaker 1: As he said, today's move is not a rate hike. 201 00:10:07,559 --> 00:10:10,920 Speaker 1: He's this is not meant to start an exit. That's 202 00:10:10,920 --> 00:10:13,800 Speaker 1: what he's saying now. And we'll have to see what 203 00:10:13,880 --> 00:10:17,920 Speaker 1: happens next. What does future policy then look like when 204 00:10:17,920 --> 00:10:22,600 Speaker 1: it comes to UM some of these kind of expansion 205 00:10:22,640 --> 00:10:24,480 Speaker 1: of the bands. Because I believe I saw a chart. 206 00:10:24,480 --> 00:10:26,360 Speaker 1: I want to say Jim Bianco has been circulating it, 207 00:10:26,400 --> 00:10:29,040 Speaker 1: but this is the third time they've increased that ban um. 208 00:10:29,040 --> 00:10:32,480 Speaker 1: But it's taken years to do that. What would the 209 00:10:32,520 --> 00:10:35,719 Speaker 1: next potential increase look like? I think that's a very 210 00:10:35,720 --> 00:10:39,360 Speaker 1: good question. I suspect it's we're not There's another meeting 211 00:10:39,360 --> 00:10:42,000 Speaker 1: in January. That's a meeting with a monetary policy report. 212 00:10:42,000 --> 00:10:44,000 Speaker 1: As I said, that's usually they make choose in policy. 213 00:10:44,360 --> 00:10:46,200 Speaker 1: Send you over there in January. Oh, you better believe 214 00:10:46,240 --> 00:10:48,280 Speaker 1: that I'll be over there right out there. You know, 215 00:10:48,320 --> 00:10:52,080 Speaker 1: we're out of the first year. Uh. But I think 216 00:10:52,120 --> 00:10:55,160 Speaker 1: now the question is what we're going to hear more 217 00:10:55,880 --> 00:10:59,480 Speaker 1: from the government. Are they going to announce a policy review? 218 00:10:59,640 --> 00:11:04,480 Speaker 1: Are they by February? I believe we should know who, 219 00:11:05,040 --> 00:11:08,520 Speaker 1: uh the next governor is going to be, certainly by March, 220 00:11:09,040 --> 00:11:11,080 Speaker 1: but because they'd like to do that early. Governor Quota 221 00:11:11,080 --> 00:11:14,360 Speaker 1: steps down on April eight. Can they do anything more? 222 00:11:14,559 --> 00:11:18,000 Speaker 1: Do they need to do anything more between now and 223 00:11:18,120 --> 00:11:21,320 Speaker 1: the next meeting when the governor next government will take over? 224 00:11:21,440 --> 00:11:24,520 Speaker 1: So you know, I'm looking at the U S. Treasury market. 225 00:11:24,520 --> 00:11:26,880 Speaker 1: I got a couple of basis points into two year 226 00:11:27,120 --> 00:11:29,240 Speaker 1: maybe eight basis points in the tenure. Are you surprised 227 00:11:29,240 --> 00:11:33,320 Speaker 1: for not seeing more action in the U S. Treasury market? Not? No, 228 00:11:33,360 --> 00:11:35,880 Speaker 1: not not really. I think a big reason for this 229 00:11:35,960 --> 00:11:39,160 Speaker 1: is one that just a correlation between global rates generally, 230 00:11:39,200 --> 00:11:42,439 Speaker 1: because so you've seen developed market interest rates sell off 231 00:11:42,760 --> 00:11:46,199 Speaker 1: just about in every jurisdiction after the after the b 232 00:11:46,320 --> 00:11:48,640 Speaker 1: O J news. I think the other thing is for 233 00:11:48,640 --> 00:11:51,800 Speaker 1: for the US is that the consensus has been very 234 00:11:51,800 --> 00:11:54,920 Speaker 1: crowded trade, which is yield curve flatteners, so more in 235 00:11:55,040 --> 00:11:57,880 Speaker 1: version of the yield curve. As the economy slows, people 236 00:11:57,880 --> 00:11:59,760 Speaker 1: think that the Fed is going to keep interest rate 237 00:11:59,760 --> 00:12:02,319 Speaker 1: throughoutively high and then and then long term interest rates 238 00:12:02,400 --> 00:12:04,880 Speaker 1: will have to come down significantly. So I think when 239 00:12:04,880 --> 00:12:06,920 Speaker 1: you get news like you did out of Japan, you 240 00:12:07,000 --> 00:12:10,360 Speaker 1: have people that are just unwinding positions, particularly given the 241 00:12:10,440 --> 00:12:12,920 Speaker 1: calendar effect here, right, So people just want to get 242 00:12:12,920 --> 00:12:15,840 Speaker 1: out of whatever risk they have before your end, especially 243 00:12:15,880 --> 00:12:18,800 Speaker 1: if they had very good years visa be their index 244 00:12:18,920 --> 00:12:21,520 Speaker 1: or or their peers um. So, so I think people 245 00:12:21,520 --> 00:12:24,840 Speaker 1: are just taking some um. People are just taking some 246 00:12:24,920 --> 00:12:27,200 Speaker 1: chips off the table here. I think that's the probably 247 00:12:27,240 --> 00:12:29,680 Speaker 1: the big reason why you're seeing this this pretty big 248 00:12:30,040 --> 00:12:32,120 Speaker 1: steepening in the curve over the last couple of days. 249 00:12:33,160 --> 00:12:36,160 Speaker 1: I wrote, when we're talking about the contagion effect or 250 00:12:36,200 --> 00:12:39,000 Speaker 1: the ripple effect here of Japan, it does seem like 251 00:12:39,000 --> 00:12:43,160 Speaker 1: it's a fairly muted reaction today. But I think there 252 00:12:43,280 --> 00:12:45,880 Speaker 1: was this expectation going in the eventually the market is 253 00:12:45,880 --> 00:12:48,400 Speaker 1: going to break in in some regard. Do you think 254 00:12:48,400 --> 00:12:52,360 Speaker 1: that what happened overnight in Japan, well's to some extent 255 00:12:52,480 --> 00:12:56,200 Speaker 1: priced in explaining the needed reaction. Well, yeah, we did here. 256 00:12:56,240 --> 00:12:58,440 Speaker 1: You know, there were people who were I think hearing 257 00:12:58,480 --> 00:13:00,800 Speaker 1: rumblings that it might happen yesterday. That's one reason why 258 00:13:00,840 --> 00:13:03,280 Speaker 1: you saw a similar reaction yesterday. So when you look 259 00:13:03,280 --> 00:13:05,360 Speaker 1: at the two day move, it's really non trivial. Right, 260 00:13:05,360 --> 00:13:07,920 Speaker 1: So you look at the UM the two day move 261 00:13:08,000 --> 00:13:11,600 Speaker 1: and in tenure treasuries, and you are talking about UM, 262 00:13:11,760 --> 00:13:14,680 Speaker 1: you know, a twenty basis point selloff in in two 263 00:13:14,720 --> 00:13:17,199 Speaker 1: your in ten ure yields UM not quite as much 264 00:13:17,200 --> 00:13:18,640 Speaker 1: in the front end. And again I think a big 265 00:13:18,679 --> 00:13:21,480 Speaker 1: part of that is this UM kind of unwinding positionings 266 00:13:21,480 --> 00:13:24,400 Speaker 1: and people getting somewhat somewhat flatter than than they had been. 267 00:13:24,920 --> 00:13:27,440 Speaker 1: I think the risk going forward, is this kind of 268 00:13:27,920 --> 00:13:29,679 Speaker 1: is going to be communication out of the b O 269 00:13:29,800 --> 00:13:31,719 Speaker 1: J right, So so there is the chance for more 270 00:13:31,800 --> 00:13:34,760 Speaker 1: volatility being driven out of the next actions at the 271 00:13:34,760 --> 00:13:38,160 Speaker 1: Bank of Japan takes because if you know, Governor Kuroda's 272 00:13:38,240 --> 00:13:40,160 Speaker 1: term is ending soon, you're going to get a new 273 00:13:40,200 --> 00:13:43,440 Speaker 1: governor in there. Will that governor actually decide to hike 274 00:13:43,440 --> 00:13:46,360 Speaker 1: interest rates or won't they will? Will they get rid 275 00:13:46,400 --> 00:13:49,320 Speaker 1: of the band altogether and kind of end yield curve 276 00:13:49,360 --> 00:13:52,280 Speaker 1: control instead of just you know, continuing to increase the 277 00:13:52,320 --> 00:13:56,080 Speaker 1: band um. And you know, even though even though Governor 278 00:13:56,160 --> 00:13:58,280 Speaker 1: Krota has said, you know, this is not an interest 279 00:13:58,360 --> 00:14:00,120 Speaker 1: rate hike, it is an interest rate hype because the 280 00:14:00,160 --> 00:14:03,000 Speaker 1: fact is that you you did see long term so 281 00:14:03,120 --> 00:14:07,280 Speaker 1: thirty year um Japanese government bonds went from very low 282 00:14:07,360 --> 00:14:09,720 Speaker 1: levels to one and a half percent doesn't sound very high, 283 00:14:09,800 --> 00:14:11,600 Speaker 1: you know, visa v the US, right, which has more 284 00:14:11,640 --> 00:14:15,040 Speaker 1: than twice that yield, and it's in our long end. 285 00:14:15,280 --> 00:14:18,839 Speaker 1: But nonetheless, you you had this very serious deepening of 286 00:14:18,880 --> 00:14:21,880 Speaker 1: the yield curve in part because people thought that natural 287 00:14:21,920 --> 00:14:24,480 Speaker 1: interest rates in Japan should be much higher than they were. 288 00:14:24,800 --> 00:14:26,440 Speaker 1: You know, you still don't have the same type of 289 00:14:26,480 --> 00:14:30,240 Speaker 1: inflationary problems in Japan that you have in in Western 290 00:14:30,320 --> 00:14:33,400 Speaker 1: Europe or the United States. But nonetheless, their inflation is 291 00:14:33,400 --> 00:14:36,400 Speaker 1: now positive, right, whereas it had been hovering near zero, 292 00:14:36,560 --> 00:14:39,120 Speaker 1: you know, and generally negative for for a long period 293 00:14:39,120 --> 00:14:41,480 Speaker 1: of time. So so I think the fact that that 294 00:14:41,560 --> 00:14:43,920 Speaker 1: there's an acknowledgement now by markets that hey, we do 295 00:14:44,000 --> 00:14:46,600 Speaker 1: have some inflation. Maybe we don't need policy to be 296 00:14:46,680 --> 00:14:49,880 Speaker 1: as easy as it has been so um. So I 297 00:14:50,080 --> 00:14:52,840 Speaker 1: think the bo j's actions are um, you know, have 298 00:14:52,920 --> 00:14:56,320 Speaker 1: the potential for creating more volatility and other developed market 299 00:14:56,720 --> 00:15:00,960 Speaker 1: developed market rates um markets Uh, over the next couple 300 00:15:01,000 --> 00:15:04,760 Speaker 1: of months, Kathleen. We have some strength in the end today, 301 00:15:04,960 --> 00:15:08,240 Speaker 1: but boy, it had been weak. What's the Bank of Japan? 302 00:15:08,480 --> 00:15:10,920 Speaker 1: How does it really feel about its currency? What does 303 00:15:10,920 --> 00:15:12,280 Speaker 1: it want it to be? How does it because it 304 00:15:12,320 --> 00:15:17,440 Speaker 1: seemed to become so weak? Okay, not so weak? Uh? 305 00:15:17,520 --> 00:15:21,000 Speaker 1: And again it is it's a source of it's a 306 00:15:21,040 --> 00:15:26,160 Speaker 1: source of discontent, uh in Japan. Uh. You know, the 307 00:15:27,080 --> 00:15:28,880 Speaker 1: it's for so long we worried about the end getting 308 00:15:28,880 --> 00:15:31,800 Speaker 1: too strong, right, you know, the ultimate carry trade currency. 309 00:15:31,840 --> 00:15:34,080 Speaker 1: Everybody wants to use it. You don't have always control 310 00:15:34,120 --> 00:15:37,440 Speaker 1: it completely. By the central Bank. But this, this ultra weakness, 311 00:15:37,440 --> 00:15:40,160 Speaker 1: has been a problem. And when Governor Crota said at 312 00:15:40,160 --> 00:15:43,360 Speaker 1: the press conference, put your attention on foreign exchange, on 313 00:15:43,960 --> 00:15:47,760 Speaker 1: financial markets, I think that's another signal that this truly 314 00:15:47,960 --> 00:15:52,880 Speaker 1: is his concern. And uh. Again, the this ever raises 315 00:15:52,880 --> 00:15:55,280 Speaker 1: the question of how quickly they'll get rid of youka control. 316 00:15:55,320 --> 00:15:57,400 Speaker 1: This is going to take time. But one of the 317 00:15:57,480 --> 00:16:01,240 Speaker 1: lead contenders, Roshi Nakaso, who was made a deputy governor 318 00:16:01,240 --> 00:16:03,600 Speaker 1: of the b o J back when Crota made was 319 00:16:03,640 --> 00:16:06,680 Speaker 1: made governor, is looked at somebody who may be in 320 00:16:06,760 --> 00:16:10,040 Speaker 1: favor now because he will be more on the side 321 00:16:10,080 --> 00:16:14,320 Speaker 1: of let's move away from this extraordinary stimulus, let's normalize this. 322 00:16:14,400 --> 00:16:16,480 Speaker 1: This Uh, all these bonds were buying. You know, the 323 00:16:16,480 --> 00:16:18,800 Speaker 1: government owns excuse me, the b o J owns more 324 00:16:18,840 --> 00:16:21,760 Speaker 1: than half of all the outstanding jgbs now and that 325 00:16:21,840 --> 00:16:23,840 Speaker 1: has been a concern, has been complained about. They haven't 326 00:16:23,840 --> 00:16:26,360 Speaker 1: seemed to respond to it. But this, this is definitely 327 00:16:26,400 --> 00:16:28,200 Speaker 1: a time of change for the BUJ. Will it be quick? 328 00:16:28,200 --> 00:16:30,320 Speaker 1: We'll see, Okay, hey, I were real quick. I'm looking 329 00:16:30,360 --> 00:16:32,720 Speaker 1: at the crowds in Buenos Aires, A hundred thousand people 330 00:16:32,800 --> 00:16:36,840 Speaker 1: celebrating Argentina. Pretty good World Cup? Huh, yeah, it was. 331 00:16:37,120 --> 00:16:39,640 Speaker 1: You know, the on field action was very exciting this 332 00:16:39,680 --> 00:16:41,440 Speaker 1: World Cup. It was some of the It was probably 333 00:16:41,480 --> 00:16:45,760 Speaker 1: the best World Cup of my lifetime. Quick frankly everever 334 00:16:46,240 --> 00:16:49,120 Speaker 1: who didn't want MESSI you know, I was rooting for 335 00:16:49,120 --> 00:16:52,400 Speaker 1: France and completely it was wrong. Um, but I did 336 00:16:52,400 --> 00:16:55,600 Speaker 1: think Bob played really well. Just saying, continue, you get 337 00:16:55,600 --> 00:16:57,160 Speaker 1: a hat trick in the World Cup. Finally you gotta 338 00:16:57,160 --> 00:17:00,680 Speaker 1: be you can't be unhappy, right amen? Yeah? And how 339 00:17:00,680 --> 00:17:02,240 Speaker 1: big is it going to be in four years from now? 340 00:17:02,320 --> 00:17:05,000 Speaker 1: I wrote in North America? Yeah, I think that it's 341 00:17:05,040 --> 00:17:07,240 Speaker 1: It really will expand the game here in the US. 342 00:17:07,280 --> 00:17:09,560 Speaker 1: I think just this final, I can't tell you how 343 00:17:09,560 --> 00:17:11,879 Speaker 1: many people hit me up on you know, all the 344 00:17:11,920 --> 00:17:15,160 Speaker 1: text I was getting about you know that, Hey, this game, 345 00:17:15,280 --> 00:17:18,240 Speaker 1: this one game did more for soccer than US soccer 346 00:17:18,280 --> 00:17:20,280 Speaker 1: has done in the last four years. So I think 347 00:17:20,320 --> 00:17:22,639 Speaker 1: once all that action comes here to the US, I 348 00:17:22,640 --> 00:17:24,640 Speaker 1: think it will just propel the sport even more. Alright, 349 00:17:24,640 --> 00:17:28,040 Speaker 1: great stuff Iver in Jersey. Bloomberg interest rate strategist Kathleen 350 00:17:28,080 --> 00:17:30,160 Speaker 1: Hayes joining us in study here. She has a Bloomberg 351 00:17:30,160 --> 00:17:37,000 Speaker 1: Television correspondent really appreciate getting her perspective. President Biden just 352 00:17:37,080 --> 00:17:40,800 Speaker 1: recently hosted a sum in Washington, U S Africa Leader Summit. 353 00:17:40,920 --> 00:17:42,520 Speaker 1: A lot of topics discussed. One of them is that 354 00:17:42,600 --> 00:17:45,080 Speaker 1: African governments have made it clear that they wished to 355 00:17:45,119 --> 00:17:49,520 Speaker 1: be active participants in the clean energy revolution. And next 356 00:17:49,560 --> 00:17:52,800 Speaker 1: guest argues that the United States should support the continent's 357 00:17:52,840 --> 00:17:56,360 Speaker 1: efforts just beyond rhetoric. Ros Whittaker joins us the president 358 00:17:56,400 --> 00:17:58,920 Speaker 1: and CEO of the Whittaker Group. She was the first 359 00:17:58,920 --> 00:18:02,600 Speaker 1: ever Assistant US Representative for Africa. That was a position 360 00:18:02,680 --> 00:18:04,679 Speaker 1: established by President Clinton back in the day. Rol, So 361 00:18:04,680 --> 00:18:07,359 Speaker 1: thanks so much for joining us here. UM talk to 362 00:18:07,480 --> 00:18:12,800 Speaker 1: us about Africa clean energy, their ability and willingness to 363 00:18:12,840 --> 00:18:16,359 Speaker 1: participate in what appears to be for the most part 364 00:18:16,359 --> 00:18:20,639 Speaker 1: of you know, a global trend here towards cleaner energy. Yes, well, 365 00:18:20,680 --> 00:18:24,760 Speaker 1: thank you so much. Well, the African countries UM largely 366 00:18:25,119 --> 00:18:31,479 Speaker 1: have a consensus around their feature entitled the Africa We 367 00:18:31,520 --> 00:18:36,480 Speaker 1: Want and that's a decarbonized future. And the conversation has 368 00:18:36,480 --> 00:18:40,080 Speaker 1: been very interesting with the US because what the African 369 00:18:40,280 --> 00:18:44,320 Speaker 1: countries are largely saying, and it's summarized in an African 370 00:18:44,359 --> 00:18:50,360 Speaker 1: proverb is that, UM, don't be the last person at 371 00:18:50,359 --> 00:18:53,320 Speaker 1: the bar, because you may get stuck paying the bills. 372 00:18:53,960 --> 00:18:57,200 Speaker 1: And that's largely how they feel. And so I think 373 00:18:57,280 --> 00:19:00,520 Speaker 1: that with the summit this week, there was a lot 374 00:19:00,560 --> 00:19:04,800 Speaker 1: of good feelings about President Biden's commitment. UM. He made 375 00:19:04,800 --> 00:19:08,280 Speaker 1: a commitment to include Africa as a part of this 376 00:19:08,480 --> 00:19:13,560 Speaker 1: eleven billion dollar climate change funding. He's thinking from Congress, 377 00:19:13,560 --> 00:19:17,600 Speaker 1: but the operative word is speaking from Congress. Will President 378 00:19:17,680 --> 00:19:22,520 Speaker 1: Biden be able to deliver on that commitment, We don't know. Um. 379 00:19:22,600 --> 00:19:26,399 Speaker 1: The Africans were very pleased about the US commitment and 380 00:19:26,480 --> 00:19:30,040 Speaker 1: COPS twenty seven where the US committed to the Loss 381 00:19:30,080 --> 00:19:33,960 Speaker 1: and Damage funds very happy about that. But the African 382 00:19:34,000 --> 00:19:38,640 Speaker 1: government is also recognized that climate change is costing up 383 00:19:38,680 --> 00:19:43,400 Speaker 1: to fit taken off about fift cent of their GDP 384 00:19:43,720 --> 00:19:47,399 Speaker 1: every year, and it is and they are in a crisis. 385 00:19:47,920 --> 00:19:52,199 Speaker 1: And they believe that the Western world that really has 386 00:19:52,240 --> 00:19:57,040 Speaker 1: this boom and productivity and industrialization based on you know, smokes, 387 00:19:57,160 --> 00:20:01,560 Speaker 1: that kind of development models, UH, that they should not 388 00:20:01,680 --> 00:20:04,919 Speaker 1: be paying the full price. And I agree, we have 389 00:20:05,040 --> 00:20:08,800 Speaker 1: an obligation. This is a transnational issue, and so I 390 00:20:08,840 --> 00:20:12,200 Speaker 1: think the summit was largely good. I believe we saw 391 00:20:12,320 --> 00:20:18,080 Speaker 1: President Biden at his strength where he's building these global alliances. Uh, 392 00:20:18,119 --> 00:20:23,520 Speaker 1: he is an internationalist. He is revitalizing these partnerships around 393 00:20:23,520 --> 00:20:27,240 Speaker 1: the world. So it's a good thing. So Rosa, where 394 00:20:27,440 --> 00:20:29,399 Speaker 1: is Congress on this? Do we have a feel what 395 00:20:29,480 --> 00:20:32,600 Speaker 1: kind of support there may be in Congress? Well, I 396 00:20:33,320 --> 00:20:36,520 Speaker 1: think that we don't know what's going to happen with 397 00:20:36,560 --> 00:20:39,520 Speaker 1: the Republicans controlling the health I think there's a lot 398 00:20:39,560 --> 00:20:42,880 Speaker 1: of work to do, and I hope that the African countries, 399 00:20:43,080 --> 00:20:47,040 Speaker 1: like many other countries that have received US commitments, will 400 00:20:47,080 --> 00:20:50,159 Speaker 1: not walk away disappointed on this. You know, it's really 401 00:20:50,520 --> 00:20:54,480 Speaker 1: really I see the best way forward in my view, 402 00:20:55,040 --> 00:21:00,119 Speaker 1: it's not to depend exclusively on the US government. We 403 00:21:00,240 --> 00:21:03,320 Speaker 1: have to incentivize the private sector to come in and 404 00:21:03,359 --> 00:21:07,439 Speaker 1: that's why I've called for um taxes centers by the 405 00:21:07,560 --> 00:21:12,120 Speaker 1: US government to US companies to invest in africa String future. 406 00:21:12,600 --> 00:21:17,840 Speaker 1: What it's needed. We need patient, well priced private capital 407 00:21:18,240 --> 00:21:23,639 Speaker 1: to support a de carbonite one century Africa productivity revolution. 408 00:21:23,760 --> 00:21:27,359 Speaker 1: And it's in our interest, you know. It was reported recently, 409 00:21:27,920 --> 00:21:32,560 Speaker 1: for example, a solar farm in Cloudy Germany needs to 410 00:21:32,640 --> 00:21:36,560 Speaker 1: earn only a seven percent return on investment to get funded, 411 00:21:37,359 --> 00:21:43,480 Speaker 1: whereas a similar project in sunny, very sunny Egypt requires 412 00:21:43,520 --> 00:21:47,280 Speaker 1: a twenty eight percent return on investment to get funding. 413 00:21:47,760 --> 00:21:52,280 Speaker 1: There is a need for urgent, well placed private capital 414 00:21:52,359 --> 00:21:57,080 Speaker 1: to do this, and I just believe that private sector 415 00:21:57,119 --> 00:22:00,320 Speaker 1: and sentence open up our tax code. It can be 416 00:22:00,400 --> 00:22:05,160 Speaker 1: done in a budget neutral way. Um for a private 417 00:22:05,200 --> 00:22:09,480 Speaker 1: sector too to come in and invest in this ROSA 418 00:22:09,560 --> 00:22:11,920 Speaker 1: talk to us a little bit about the geopolitics at 419 00:22:11,960 --> 00:22:14,320 Speaker 1: play here. When I think Africa, I'm starting to think 420 00:22:14,359 --> 00:22:17,880 Speaker 1: a lot about the Belton Road project coming out of 421 00:22:18,040 --> 00:22:22,120 Speaker 1: China as well. Connect some of those dots for us. Well, 422 00:22:22,160 --> 00:22:25,119 Speaker 1: I can tell you we are so far behind China 423 00:22:25,240 --> 00:22:27,240 Speaker 1: that we would have to do far more than the 424 00:22:27,320 --> 00:22:31,439 Speaker 1: summit to catch up. Okay, so US Africa trade and 425 00:22:31,520 --> 00:22:38,000 Speaker 1: services with Africa has increased to about eighty three billion 426 00:22:38,040 --> 00:22:43,480 Speaker 1: dollars last year, up by sixteen percent since the since 427 00:22:43,560 --> 00:22:48,520 Speaker 1: the pandemic, but Africa. China's trade with Africa is over 428 00:22:48,600 --> 00:22:52,520 Speaker 1: two hundred fifty four billion dollars and it's growing by 429 00:22:52,760 --> 00:22:59,359 Speaker 1: thirty five percent a year. Uh. Right now, China controls 430 00:22:59,440 --> 00:23:04,399 Speaker 1: the majority party of the infrastructure project in Africa, So 431 00:23:04,520 --> 00:23:09,120 Speaker 1: they are controlling a lot of the strategic minerals that 432 00:23:09,200 --> 00:23:13,240 Speaker 1: we even need. If we're talking about, for example, America 433 00:23:13,480 --> 00:23:19,000 Speaker 1: leading the green future, America leading in electrical vehicles, no 434 00:23:19,080 --> 00:23:21,960 Speaker 1: one has figured out how you're gonna have massive production 435 00:23:22,000 --> 00:23:26,000 Speaker 1: of electrical vehicles without co books. Most of that call 436 00:23:26,080 --> 00:23:29,480 Speaker 1: books in the world is in Africa, sevent of it 437 00:23:29,600 --> 00:23:34,600 Speaker 1: in one country, the Democratic Republic of Congo. China is 438 00:23:34,640 --> 00:23:38,960 Speaker 1: now processing sixty of that. So how can we talk 439 00:23:39,040 --> 00:23:43,800 Speaker 1: about having a green future leading an electrical vehicles when 440 00:23:43,920 --> 00:23:49,080 Speaker 1: China is controlling a lot of the strategic minerals required 441 00:23:49,200 --> 00:23:53,160 Speaker 1: for that green future that's in Africa. So I think 442 00:23:53,200 --> 00:23:55,720 Speaker 1: that we're late in the game and we have to 443 00:23:56,080 --> 00:24:01,119 Speaker 1: get Americans. We have to build great awareness about Africa's 444 00:24:01,320 --> 00:24:05,600 Speaker 1: strategic importance to the world. Rose, I wonder if we 445 00:24:05,600 --> 00:24:07,840 Speaker 1: can just if you can just give us a quick 446 00:24:07,920 --> 00:24:12,840 Speaker 1: kind of reviewer assessment of how Africa did during the pandemic. How, 447 00:24:12,880 --> 00:24:16,200 Speaker 1: how how is it broadly defined the continent doing well? 448 00:24:16,280 --> 00:24:19,760 Speaker 1: What Africa did is it surprised the world because it 449 00:24:19,840 --> 00:24:25,440 Speaker 1: put in a lot of mitigation lockdown. It did fairly 450 00:24:25,560 --> 00:24:28,840 Speaker 1: well in terms of the parts of the pandemic it 451 00:24:28,920 --> 00:24:33,280 Speaker 1: could control. UM, we did not see people dying in 452 00:24:33,320 --> 00:24:38,960 Speaker 1: the numbers that were projected. However, economically, UM, Africa has 453 00:24:39,080 --> 00:24:43,959 Speaker 1: really suffered. It is it had a downward trajectory in 454 00:24:44,080 --> 00:24:49,600 Speaker 1: terms of its economic growth levels. Uh. It created more people, 455 00:24:49,840 --> 00:24:53,159 Speaker 1: hundreds of millions of new people that were impoverished on 456 00:24:53,320 --> 00:24:56,960 Speaker 1: top of the poverty that we all ready saw. UM 457 00:24:57,200 --> 00:25:01,960 Speaker 1: and UM we're seeing a massive food and security crisis 458 00:25:02,520 --> 00:25:05,520 Speaker 1: as a result of poll. But and now with kraiz Okay, 459 00:25:06,000 --> 00:25:09,320 Speaker 1: Rosa really appreciate getting that overview. Rosa Whittaker, President CEO 460 00:25:09,320 --> 00:25:12,040 Speaker 1: of the Whittaker Group, getting us an overview of Africa 461 00:25:12,200 --> 00:25:15,640 Speaker 1: and the need to develop trade with Africa, catching up 462 00:25:15,640 --> 00:25:20,200 Speaker 1: with China. All right, Nathan Hagar, good stuff. Where you 463 00:25:20,200 --> 00:25:21,880 Speaker 1: appreciate that as always want to get right to our 464 00:25:21,920 --> 00:25:24,919 Speaker 1: next guest, uh Nick Hike Jr. He's the CEO of 465 00:25:25,240 --> 00:25:29,560 Speaker 1: Swatch Group based in Switzerland. He's joining us via zoom. 466 00:25:29,680 --> 00:25:32,199 Speaker 1: Uh Nick, thanks so much for joining us here. You know, 467 00:25:32,400 --> 00:25:34,320 Speaker 1: I'd love to get it just an overview of the 468 00:25:34,359 --> 00:25:36,919 Speaker 1: watch business. I'm not really a jewelry guy, but I 469 00:25:36,960 --> 00:25:40,359 Speaker 1: really enjoy my Omega watch. I've had it for many 470 00:25:40,440 --> 00:25:42,800 Speaker 1: years now. It's great, great watch. I love it. Just 471 00:25:42,840 --> 00:25:45,679 Speaker 1: give us an overview of how the watch businesses on 472 00:25:45,680 --> 00:25:47,920 Speaker 1: a global scale. Cod we just came through a pandemic 473 00:25:47,960 --> 00:25:50,360 Speaker 1: and lots of different parts of the world reacted differently. 474 00:25:50,480 --> 00:25:52,920 Speaker 1: I'm just wondering how the luxury watch market is doing. 475 00:25:54,240 --> 00:25:57,800 Speaker 1: Hello first of all to everybody, and the congratulation you're 476 00:25:57,840 --> 00:26:01,480 Speaker 1: a man with a good taste. You know, that's right. Congratulation. 477 00:26:02,520 --> 00:26:06,600 Speaker 1: You know, worldwide we see a really strong, strong situation 478 00:26:06,760 --> 00:26:12,119 Speaker 1: for watches, especially Swiss made watches and mechanical watches. Was 479 00:26:12,240 --> 00:26:15,200 Speaker 1: also court watches, and we see it everywhere. Of course, 480 00:26:15,640 --> 00:26:18,800 Speaker 1: you still have countries like China where you have shops 481 00:26:18,840 --> 00:26:21,520 Speaker 1: that are closed because of COVID. But I would say 482 00:26:21,800 --> 00:26:26,680 Speaker 1: the COVID situation where everybody had to stay at home emotions, 483 00:26:26,680 --> 00:26:29,000 Speaker 1: you could not show, you could not meet people, you 484 00:26:29,040 --> 00:26:31,520 Speaker 1: could not talk with other people. You could only make 485 00:26:31,520 --> 00:26:35,520 Speaker 1: it a via zoom, you make your home offices. This 486 00:26:35,680 --> 00:26:42,280 Speaker 1: has favored now everybody who doesn't want to sit at 487 00:26:42,280 --> 00:26:45,600 Speaker 1: home and wants to live again and to breathe again. 488 00:26:46,240 --> 00:26:50,600 Speaker 1: This is fantastic for the watch mark because watches a 489 00:26:50,720 --> 00:26:54,000 Speaker 1: first of all emotional products. You go and look at 490 00:26:54,000 --> 00:26:57,040 Speaker 1: them you want to make a joy for yourself, but 491 00:26:57,119 --> 00:26:59,119 Speaker 1: you want to buy it as a gift to somebody else. 492 00:26:59,359 --> 00:27:02,480 Speaker 1: And here we see that whatever segment you take, the 493 00:27:02,600 --> 00:27:04,800 Speaker 1: entry segment, like with the moon swatch, what we are 494 00:27:04,840 --> 00:27:08,720 Speaker 1: talking about also certainly later on to the luxury ones. 495 00:27:09,280 --> 00:27:12,240 Speaker 1: It's really booming everywhere in the world and especially in 496 00:27:12,280 --> 00:27:17,720 Speaker 1: the US well. Speaking of that booming dynamic, a lot 497 00:27:17,720 --> 00:27:19,960 Speaker 1: of people are using a lot of these luxury products, 498 00:27:19,960 --> 00:27:24,000 Speaker 1: and watches specifically, I would argue handbags as well as 499 00:27:24,080 --> 00:27:26,919 Speaker 1: kind of the investment. Is sure when the rest of 500 00:27:26,920 --> 00:27:29,680 Speaker 1: the market seem to be completely tanking, there is no 501 00:27:29,760 --> 00:27:32,440 Speaker 1: alternative has really worked quite well for the luxury market. 502 00:27:32,480 --> 00:27:36,080 Speaker 1: Do you think that's going to sustain Yeah, but you 503 00:27:36,119 --> 00:27:40,040 Speaker 1: think only money and investment. For most of the people, 504 00:27:40,440 --> 00:27:43,280 Speaker 1: it's an emotional investment. It's something you get when you 505 00:27:43,600 --> 00:27:46,919 Speaker 1: get married or when you have a birthday. So of 506 00:27:46,960 --> 00:27:52,000 Speaker 1: course these are products that that have value, that are 507 00:27:52,040 --> 00:27:56,080 Speaker 1: not a commodity that's another consumer electronics product that in 508 00:27:56,119 --> 00:27:59,040 Speaker 1: one year you have to change because of the software change. 509 00:27:59,520 --> 00:28:04,480 Speaker 1: Watches have always been of great value long term, long time, 510 00:28:04,560 --> 00:28:08,080 Speaker 1: but not only because they keep a value money wise, 511 00:28:08,320 --> 00:28:11,280 Speaker 1: They keep first of all an emotional value, and that's 512 00:28:11,280 --> 00:28:14,280 Speaker 1: why you have so many collectors. I talked with many 513 00:28:14,359 --> 00:28:18,040 Speaker 1: young people. They want to own watches because they love it, 514 00:28:18,119 --> 00:28:20,160 Speaker 1: they know the history about it. Are the ones who 515 00:28:20,200 --> 00:28:22,680 Speaker 1: don't know the history of the watches and the brands 516 00:28:23,080 --> 00:28:26,080 Speaker 1: they want to own one. If at the same time 517 00:28:26,800 --> 00:28:31,520 Speaker 1: you have add its value and it increases over time, 518 00:28:31,720 --> 00:28:34,919 Speaker 1: it's even better. But that's not the first motivation to 519 00:28:35,000 --> 00:28:38,880 Speaker 1: buy Swiss made watches. Nick, you mentioned the Moon Swatch. 520 00:28:39,000 --> 00:28:42,160 Speaker 1: I know that's a collaboration between Swatch and Omega, which 521 00:28:42,160 --> 00:28:44,240 Speaker 1: is a brand. You don't talk to us about the 522 00:28:44,280 --> 00:28:49,680 Speaker 1: Moon Swatch. Yeah, you know, typically the Moon Swatch. It's 523 00:28:49,720 --> 00:28:52,120 Speaker 1: an idea that started. First of all, I have a 524 00:28:52,120 --> 00:28:56,560 Speaker 1: Pirates flagon in front of my office hanging out to 525 00:28:56,560 --> 00:28:58,560 Speaker 1: to say, hey, you have to be a little bit 526 00:28:58,640 --> 00:29:02,200 Speaker 1: more provocative. Swatch has always been has a message of 527 00:29:02,280 --> 00:29:06,440 Speaker 1: joy of life and positive provocation. And in the beginning 528 00:29:06,480 --> 00:29:08,840 Speaker 1: of twenty one, I was sitting in my office and 529 00:29:08,880 --> 00:29:12,440 Speaker 1: I said, my god, we have to stop two to 530 00:29:12,600 --> 00:29:17,040 Speaker 1: be without joy of life and without positive provocation. What 531 00:29:17,160 --> 00:29:19,480 Speaker 1: could we do? And then of course came the idea 532 00:29:19,560 --> 00:29:22,840 Speaker 1: was the new material of bios ramy. Why should we 533 00:29:22,920 --> 00:29:27,160 Speaker 1: not offer the people in the world. There's a craze 534 00:29:27,200 --> 00:29:30,800 Speaker 1: about luxury, why should we not make an exclusive product 535 00:29:31,040 --> 00:29:33,960 Speaker 1: and I can that is watch who works with an 536 00:29:33,960 --> 00:29:37,560 Speaker 1: I can that's Omega and bring to the people the 537 00:29:37,640 --> 00:29:42,400 Speaker 1: story of the speed Master in a quality product and 538 00:29:43,240 --> 00:29:46,120 Speaker 1: let it launch in our own stores. Let's not make 539 00:29:46,120 --> 00:29:49,880 Speaker 1: e coomerce, and let's give the people a social and 540 00:29:49,920 --> 00:29:53,400 Speaker 1: cultural components in what they are doing. And that's how 541 00:29:53,440 --> 00:29:55,600 Speaker 1: the whole thing has been born. And then we kept 542 00:29:55,600 --> 00:29:59,960 Speaker 1: its secret. Thanks to our strong industrial base we produce 543 00:30:00,200 --> 00:30:03,840 Speaker 1: everything here in Switzerland, we could keep it totally secret, 544 00:30:04,280 --> 00:30:06,880 Speaker 1: and we wanted to keep it secret because we were 545 00:30:06,920 --> 00:30:11,040 Speaker 1: convinced this will be spectacular. It's something people were waiting for. 546 00:30:11,240 --> 00:30:13,960 Speaker 1: They could not imagine that this is happening, but it happened, 547 00:30:14,720 --> 00:30:20,200 Speaker 1: and of course nine months after, it's still booming, queuing 548 00:30:20,560 --> 00:30:24,080 Speaker 1: everywhere in the world. It's not a limited edition, and 549 00:30:24,200 --> 00:30:27,800 Speaker 1: it has proven that you can make an exclusive product 550 00:30:27,840 --> 00:30:35,120 Speaker 1: without excluding people, creating accessibility. But nevertheless, the product is rare, 551 00:30:35,640 --> 00:30:40,719 Speaker 1: it's not limited and there's no e commerce and it works. 552 00:30:40,800 --> 00:30:43,760 Speaker 1: And by the way, Bloomberg has reported that we could 553 00:30:43,840 --> 00:30:47,120 Speaker 1: perhaps make and sell half a million of these pieces 554 00:30:47,160 --> 00:30:49,320 Speaker 1: but it's the double that we have already done, and 555 00:30:49,360 --> 00:30:54,560 Speaker 1: our capacities are really difficult to increase further. It doesn't stop, 556 00:30:54,760 --> 00:30:58,680 Speaker 1: and it shows how much hunger is out there for 557 00:30:59,120 --> 00:31:04,160 Speaker 1: a desirable emotional product that is only costing too under 558 00:31:04,200 --> 00:31:09,480 Speaker 1: six SS. Well, one of the issues or criticisms that 559 00:31:09,520 --> 00:31:12,680 Speaker 1: your company has faced is simply the rollout of the 560 00:31:12,720 --> 00:31:16,160 Speaker 1: Moon's Watch, specifically basically saying the short supply was a 561 00:31:16,160 --> 00:31:19,640 Speaker 1: major issue. They're only available at brick and mortar spots, 562 00:31:19,680 --> 00:31:22,840 Speaker 1: and there was a promise of online sales as well 563 00:31:22,840 --> 00:31:25,920 Speaker 1: that never really materialized. Do you regret how that went? 564 00:31:26,040 --> 00:31:30,160 Speaker 1: Is it influencing your strategy on future product rollouts? You 565 00:31:30,200 --> 00:31:33,440 Speaker 1: are wrongly informed. We never communicated we do e commerce. 566 00:31:33,680 --> 00:31:36,360 Speaker 1: This was an assumption in the market. They said, this 567 00:31:36,440 --> 00:31:38,480 Speaker 1: is a mass product. They cannot be that it is 568 00:31:38,520 --> 00:31:42,280 Speaker 1: not e commerce. From the moment we first talked about 569 00:31:42,320 --> 00:31:46,040 Speaker 1: it to the launch there were only nine days and 570 00:31:46,120 --> 00:31:48,280 Speaker 1: we never talked about e commerce. The people had these 571 00:31:48,320 --> 00:31:54,000 Speaker 1: expectations and we said, no, it's only through a selective 572 00:31:54,520 --> 00:31:58,520 Speaker 1: number of our own stores, and you can buy one 573 00:31:58,720 --> 00:32:01,840 Speaker 1: product why time when you come to visit the store, 574 00:32:02,440 --> 00:32:04,160 Speaker 1: and then when you come a second time you can 575 00:32:04,200 --> 00:32:07,720 Speaker 1: buy another one. And it was clearly communicated. And it's 576 00:32:07,760 --> 00:32:12,200 Speaker 1: not the shortage that we created. The demand created the shortage. 577 00:32:12,280 --> 00:32:14,240 Speaker 1: There is a huge demand. You can go out there 578 00:32:14,280 --> 00:32:17,920 Speaker 1: and see what is happening. This is an industrially fine 579 00:32:18,000 --> 00:32:22,200 Speaker 1: product where everything has to develope from scratch. It's innovative 580 00:32:22,240 --> 00:32:25,400 Speaker 1: new material, and we do it in our factories with 581 00:32:25,560 --> 00:32:29,200 Speaker 1: our workers, the hands, the dials, everything has to be done. 582 00:32:29,240 --> 00:32:32,480 Speaker 1: It's not suppliers somewhere in China, in Vietnam where you 583 00:32:32,520 --> 00:32:35,600 Speaker 1: can order something, you have to do it, so you 584 00:32:35,680 --> 00:32:38,440 Speaker 1: cannot just press the button and say okay, I want 585 00:32:38,480 --> 00:32:41,600 Speaker 1: to do a new mobile phone and then I produce 586 00:32:41,720 --> 00:32:44,560 Speaker 1: it with I don't know how many suppliers. This is 587 00:32:44,640 --> 00:32:48,680 Speaker 1: done here in Switzerland and the consequences. We didn't want 588 00:32:48,720 --> 00:32:51,960 Speaker 1: it that the people just can order it in e commerce. 589 00:32:52,200 --> 00:32:54,840 Speaker 1: Why should you Why should you be comfortable at home 590 00:32:55,200 --> 00:32:58,480 Speaker 1: and say, yes, I have the right when I ordered hamburger, 591 00:32:58,560 --> 00:33:00,960 Speaker 1: I order it. Okay, it's not a burger. It is 592 00:33:01,000 --> 00:33:03,600 Speaker 1: a fine product. If you want it, you have to 593 00:33:03,640 --> 00:33:06,240 Speaker 1: move and then you meet other people, you discuss with them. 594 00:33:06,520 --> 00:33:10,000 Speaker 1: Everybody knows what he's waiting for, and the people play 595 00:33:10,080 --> 00:33:13,040 Speaker 1: the game and they like it. They come back and 596 00:33:13,280 --> 00:33:15,400 Speaker 1: when you talk with most of the people, the ones 597 00:33:15,440 --> 00:33:19,240 Speaker 1: that have not yet angry, but the ones who are 598 00:33:19,280 --> 00:33:22,960 Speaker 1: coming all the time back, they have also a joyful 599 00:33:23,000 --> 00:33:26,080 Speaker 1: approach because they meet again people and it's a common 600 00:33:26,120 --> 00:33:29,840 Speaker 1: experience that they have. It's something different than e commerce. 601 00:33:29,880 --> 00:33:33,080 Speaker 1: And you see what is important. We didn't do this 602 00:33:33,160 --> 00:33:35,840 Speaker 1: product to make in the shortest period of time the 603 00:33:35,920 --> 00:33:40,560 Speaker 1: maximum amount of money. It was not this. We wanted 604 00:33:40,600 --> 00:33:44,360 Speaker 1: to create an entry possibility for younger people in the 605 00:33:44,400 --> 00:33:48,840 Speaker 1: world to get interested into watches and don't feel excluded 606 00:33:49,400 --> 00:33:52,120 Speaker 1: in getting access only on Swiss made watches that are 607 00:33:52,160 --> 00:33:55,960 Speaker 1: costing six thousand, seven thousand, ten thousand dollars. That's what 608 00:33:56,040 --> 00:33:58,560 Speaker 1: we wanted to do, and we wanted to bring them 609 00:33:58,760 --> 00:34:01,680 Speaker 1: to the stores and it works. Hey, Nick, you know 610 00:34:01,720 --> 00:34:04,600 Speaker 1: I went doing research for this discussion. You know, I 611 00:34:04,640 --> 00:34:07,680 Speaker 1: was surprised to see how many brands that the Swatch 612 00:34:07,760 --> 00:34:11,040 Speaker 1: company actually owns. So I'm wondering about M and A. 613 00:34:11,480 --> 00:34:14,120 Speaker 1: How do you think about acquiring new brands? I mean, 614 00:34:14,120 --> 00:34:17,600 Speaker 1: it's such a strong market for luxury items luxury watches. 615 00:34:18,080 --> 00:34:22,120 Speaker 1: Is Swatch looking to make acquisitions and grow via acquisitions? 616 00:34:23,040 --> 00:34:25,799 Speaker 1: We are not investors in uh, you know, you can 617 00:34:25,920 --> 00:34:30,240 Speaker 1: ask this question some I don't know, some funds probably 618 00:34:30,960 --> 00:34:35,560 Speaker 1: or whoever wants to invest money. I'm an industrialist. I 619 00:34:35,719 --> 00:34:38,120 Speaker 1: invest money in our factories and in new products. We 620 00:34:38,160 --> 00:34:41,600 Speaker 1: have enough brands we have from Burge, from Harry Winston 621 00:34:41,640 --> 00:34:45,120 Speaker 1: to Bruge, Blanc, Omega, Loan, Genes, Watch. We have all 622 00:34:45,160 --> 00:34:48,160 Speaker 1: the brands we need and we won't We don't need 623 00:34:48,200 --> 00:34:50,759 Speaker 1: other ones. But what we need is to invest in 624 00:34:50,840 --> 00:34:53,080 Speaker 1: our brands, in the innovation of the brands, and mood 625 00:34:53,080 --> 00:34:56,520 Speaker 1: Swatch is the best example. This was disruptive. This creates 626 00:34:56,520 --> 00:35:00,479 Speaker 1: new opportunities for everybody in the whole industry. And that's 627 00:35:00,480 --> 00:35:03,040 Speaker 1: what we're going to do. To go and look what 628 00:35:03,160 --> 00:35:06,960 Speaker 1: could we buy? No, we don't need to buy anything. Yes, 629 00:35:07,120 --> 00:35:09,880 Speaker 1: we invest in our factories here in Switzerland and not 630 00:35:10,000 --> 00:35:12,719 Speaker 1: somewhere else in the world, and in our workers and 631 00:35:12,840 --> 00:35:16,360 Speaker 1: in our research and development. And that's what we are doing. 632 00:35:17,200 --> 00:35:19,719 Speaker 1: There's no lead, nick. I just want to also get 633 00:35:19,719 --> 00:35:21,080 Speaker 1: it when I when I talk to anybody in the 634 00:35:21,120 --> 00:35:23,520 Speaker 1: luxury business, I need to get the call on China 635 00:35:23,520 --> 00:35:26,680 Speaker 1: because China is such a big part of demand for 636 00:35:26,800 --> 00:35:30,120 Speaker 1: luxury products across the board and of course with the pandemic, 637 00:35:30,160 --> 00:35:33,560 Speaker 1: it's virtually shut down. How are you guys thinking about 638 00:35:34,200 --> 00:35:38,839 Speaker 1: China as as a market for your products going forward. Yeah, 639 00:35:38,840 --> 00:35:42,320 Speaker 1: it's wonderful because the Chinese people are very cultivated people, 640 00:35:42,840 --> 00:35:47,560 Speaker 1: and they know about the value and the difference between 641 00:35:47,600 --> 00:35:53,840 Speaker 1: a commodity or a consumer electronics product and define product 642 00:35:54,400 --> 00:35:58,560 Speaker 1: that is coming from an authentic brand, and they love 643 00:35:58,680 --> 00:36:02,560 Speaker 1: to know that. And it's doing the products themselves and 644 00:36:02,600 --> 00:36:05,640 Speaker 1: they're not producing somewhere else in the world that they 645 00:36:05,640 --> 00:36:10,279 Speaker 1: have ownership. And they like storytelling. Because China has a 646 00:36:10,360 --> 00:36:13,920 Speaker 1: history of several thousand years, they have invented many things. 647 00:36:13,960 --> 00:36:18,240 Speaker 1: So the Chinese consumer is totally open for authentic brands 648 00:36:18,320 --> 00:36:21,040 Speaker 1: that can tell them a story and are really delivering 649 00:36:21,320 --> 00:36:25,719 Speaker 1: the product was their own know how. And that's why 650 00:36:25,760 --> 00:36:28,840 Speaker 1: the potential is huge, not only in the luxury is 651 00:36:28,880 --> 00:36:33,400 Speaker 1: also in the entry level. It is this consumer, Henry, 652 00:36:33,560 --> 00:36:36,879 Speaker 1: he wants to know, I said, I read the study 653 00:36:38,080 --> 00:36:43,719 Speaker 1: of the Chinese consumer knows what a mechanical watches. They're fascinated, 654 00:36:44,239 --> 00:36:46,640 Speaker 1: all right, Well, hopefully they can get in the US. 655 00:36:46,680 --> 00:36:49,920 Speaker 1: In the US of the consumer knows what a mechanical 656 00:36:49,960 --> 00:36:53,560 Speaker 1: watches because see, yeah, I know It's interesting to have 657 00:36:53,560 --> 00:36:55,759 Speaker 1: to see how that plays out as a reopening of China, 658 00:36:55,760 --> 00:36:58,840 Speaker 1: hopefully a big move for your company. Nick Hyake Jr. 659 00:36:58,920 --> 00:37:01,040 Speaker 1: He's the CEO of swa watch group, joining us via 660 00:37:01,120 --> 00:37:04,359 Speaker 1: zoom uh from Switzerland. We appreciate getting the update on 661 00:37:04,480 --> 00:37:08,640 Speaker 1: the luxury watch business, which has seen some incredible demand 662 00:37:08,680 --> 00:37:14,840 Speaker 1: through the pandemic. Just amazing. Okay, let's talk a little 663 00:37:14,840 --> 00:37:18,640 Speaker 1: macro here round table. Joining us on a Bloomberg in 664 00:37:18,640 --> 00:37:22,360 Speaker 1: our Actor Broker studios, Dr Quincy Crosby. She's chief global 665 00:37:22,400 --> 00:37:27,080 Speaker 1: strategist for LPL Financial, her offices in charlottees' Ville, Virginia. 666 00:37:27,080 --> 00:37:29,200 Speaker 1: I don't know how she worked out that scam. That's 667 00:37:29,200 --> 00:37:31,840 Speaker 1: a great town down there. She joins us here in 668 00:37:31,840 --> 00:37:33,759 Speaker 1: our studio. Plus Ben Emmon's had a fixed income for 669 00:37:34,480 --> 00:37:38,520 Speaker 1: New Edge Wealth. He joins his via zoom um. So 670 00:37:39,719 --> 00:37:42,799 Speaker 1: you know, Quincy, when he we woke up this morning 671 00:37:42,840 --> 00:37:44,360 Speaker 1: and he saw that the federal that the Bank of 672 00:37:44,440 --> 00:37:47,560 Speaker 1: Japan is raising rates. Boy, we haven't seen that in 673 00:37:47,600 --> 00:37:51,399 Speaker 1: a long time. As you know, as a macro global strategists, 674 00:37:51,400 --> 00:37:53,520 Speaker 1: what did that mean to you? Well, you know, I 675 00:37:53,560 --> 00:38:00,520 Speaker 1: mean the expectations were that when left office, which was 676 00:38:00,600 --> 00:38:03,680 Speaker 1: expected that that we would start to see a shift 677 00:38:04,120 --> 00:38:06,799 Speaker 1: in yell curve control. That's what that's what they did. 678 00:38:06,800 --> 00:38:12,359 Speaker 1: That came in in UH September, and the expectations were 679 00:38:12,560 --> 00:38:17,279 Speaker 1: that that that would help actually help induce inflation, which 680 00:38:17,320 --> 00:38:21,160 Speaker 1: as you know, is something that Japan is needed over many, 681 00:38:21,200 --> 00:38:24,239 Speaker 1: many years. So it was a surprise they that they 682 00:38:24,280 --> 00:38:28,359 Speaker 1: did it overnight, but but not a shock. So how 683 00:38:28,360 --> 00:38:30,280 Speaker 1: do because it was a surprise but not a shock. 684 00:38:30,680 --> 00:38:34,200 Speaker 1: And also just think about it. They've had to take 685 00:38:34,239 --> 00:38:38,520 Speaker 1: care of of underpinning the yen as it started to 686 00:38:39,160 --> 00:38:42,160 Speaker 1: collapse a number of times visa VI the US dollar. 687 00:38:42,440 --> 00:38:45,600 Speaker 1: As the dollar strengthened with an aggressive fet it meant 688 00:38:45,640 --> 00:38:48,399 Speaker 1: that they had to sell treasuries in order to do that. 689 00:38:49,120 --> 00:38:52,040 Speaker 1: It cost them a lot of money. This was and 690 00:38:52,200 --> 00:38:54,680 Speaker 1: on top of that, the most important things. Inflation is 691 00:38:54,719 --> 00:38:58,799 Speaker 1: actually up now it's above three not not great, but 692 00:38:58,920 --> 00:39:02,680 Speaker 1: it's above where they needed to be. So they've got 693 00:39:02,680 --> 00:39:05,200 Speaker 1: to work on wages. They've got to get that up. 694 00:39:05,239 --> 00:39:08,440 Speaker 1: Wages and is an issue for them. They want higher 695 00:39:08,440 --> 00:39:12,320 Speaker 1: wages that they're working on that with companies. But again 696 00:39:12,600 --> 00:39:16,440 Speaker 1: this was needed. The yeld curve control kept a very 697 00:39:16,480 --> 00:39:21,120 Speaker 1: tight band. They needed to just be more flexible, and 698 00:39:21,160 --> 00:39:25,840 Speaker 1: that's what they have. Ben hop on in here and 699 00:39:25,880 --> 00:39:29,480 Speaker 1: give us your take on this shock but not shock 700 00:39:29,880 --> 00:39:33,759 Speaker 1: kind of decision overnight. Yeah, Cudy, I think it was 701 00:39:33,800 --> 00:39:36,680 Speaker 1: a shock for let's say specific markets right like so 702 00:39:36,960 --> 00:39:38,680 Speaker 1: it was going as to talk about the end had 703 00:39:38,719 --> 00:39:41,239 Speaker 1: a put substantial move, you know, three and a half 704 00:39:41,440 --> 00:39:45,120 Speaker 1: percent rally. The end volatility just jumped and you see 705 00:39:45,160 --> 00:39:49,399 Speaker 1: the explosions, same thing in interstave volatility in Japan. Yes, 706 00:39:49,440 --> 00:39:52,840 Speaker 1: you're underneath your shock. But when it comes to the surprise, 707 00:39:52,960 --> 00:39:55,799 Speaker 1: I think what people didn't expect that CRUDA would make this. 708 00:39:56,239 --> 00:39:58,840 Speaker 1: I would think in someone of a savvy move ahead 709 00:39:58,880 --> 00:40:02,520 Speaker 1: of the his his office when he leaves right in April. 710 00:40:03,120 --> 00:40:05,359 Speaker 1: I think what he really did here is to kind 711 00:40:05,360 --> 00:40:07,879 Speaker 1: of listen to the government and say, you do want 712 00:40:07,880 --> 00:40:10,240 Speaker 1: to move to a different rate regime. I'm just opening 713 00:40:10,280 --> 00:40:12,960 Speaker 1: the door here for you to allow you to change 714 00:40:13,000 --> 00:40:16,520 Speaker 1: this in the future. Yet I'm still keeping legacy here 715 00:40:16,560 --> 00:40:19,239 Speaker 1: because what they did do as well and announcing this 716 00:40:20,080 --> 00:40:23,840 Speaker 1: in the statement overnight, is that they actually increase quantity leasing. 717 00:40:24,120 --> 00:40:26,040 Speaker 1: But another that's sort of I think it was like 718 00:40:26,120 --> 00:40:29,160 Speaker 1: nine trillion yend or so So there's a bit of 719 00:40:29,200 --> 00:40:31,440 Speaker 1: a bit of both sides of the story here, right, 720 00:40:31,760 --> 00:40:35,200 Speaker 1: Kruda is listening to the government then cs inflation time 721 00:40:35,239 --> 00:40:38,240 Speaker 1: and meeting a goal. We can allow for more flexibility 722 00:40:38,920 --> 00:40:41,600 Speaker 1: or for the tenure to move around to zero, you know, 723 00:40:41,719 --> 00:40:43,879 Speaker 1: up and down fifty base points, but we do keep 724 00:40:43,880 --> 00:40:47,200 Speaker 1: it quantec vision really large. Right, So so I think 725 00:40:47,239 --> 00:40:50,120 Speaker 1: the market gott and said, Okay, this means just a 726 00:40:50,200 --> 00:40:53,399 Speaker 1: very simple message. The end entertain here that have been 727 00:40:53,440 --> 00:40:56,799 Speaker 1: really closely linked since August and twenty sixteen. That's now 728 00:40:56,840 --> 00:40:59,600 Speaker 1: the coupling. That's just simply means that Japanese will have 729 00:41:00,160 --> 00:41:02,800 Speaker 1: less demand for treasuries as the end strength is and 730 00:41:02,880 --> 00:41:05,720 Speaker 1: they look for a more normalized interest rate environment in Japan. 731 00:41:07,640 --> 00:41:10,719 Speaker 1: So Quincy, given that backdrop, we've now got the Bank 732 00:41:10,760 --> 00:41:13,640 Speaker 1: of Japan joining most other central banks around the world 733 00:41:13,680 --> 00:41:15,279 Speaker 1: and kind of throwing in the hat saying all right, 734 00:41:15,760 --> 00:41:19,719 Speaker 1: I gotta let rates rise to fight inflation. One could 735 00:41:19,800 --> 00:41:22,520 Speaker 1: argue that's bullish for stocks here, that maybe we got 736 00:41:22,640 --> 00:41:23,759 Speaker 1: light at the end of the tunnel. How do you 737 00:41:23,760 --> 00:41:26,960 Speaker 1: think about stocks? Well, I mean, we just go back 738 00:41:27,000 --> 00:41:31,120 Speaker 1: to Japan for one minute. It's also hurting going to 739 00:41:31,200 --> 00:41:34,560 Speaker 1: hurt their exports, because suddenly that becomes more expensive as 740 00:41:34,600 --> 00:41:37,919 Speaker 1: the end goes up. But take a look at the banks. Uh, 741 00:41:38,239 --> 00:41:42,720 Speaker 1: they're enjoying a recovery with net and the rest margin 742 00:41:42,800 --> 00:41:46,920 Speaker 1: in Japan. But overall, I mean, what what LPL is 743 00:41:47,000 --> 00:41:51,920 Speaker 1: looking for is the process of going through the first 744 00:41:51,920 --> 00:41:56,480 Speaker 1: and second quarter, the Fed we believe will continue to 745 00:41:56,600 --> 00:42:00,160 Speaker 1: raise rates albeit perhaps ago from fifty basis points to 746 00:42:00,320 --> 00:42:04,560 Speaker 1: twenty and twenty five, and then um, you know, looking 747 00:42:04,600 --> 00:42:08,359 Speaker 1: for another sell off that perhaps then kills the bear 748 00:42:08,480 --> 00:42:12,680 Speaker 1: market and brings the valuations down to a compelling level 749 00:42:13,080 --> 00:42:16,760 Speaker 1: where not just traders, this has been a trader's market 750 00:42:16,800 --> 00:42:20,880 Speaker 1: for so long, but where investors start coming in and saying, look, 751 00:42:21,400 --> 00:42:25,480 Speaker 1: the valuations are attractive, they're compelling. The economy is going 752 00:42:25,480 --> 00:42:28,920 Speaker 1: to start to ease, particularly if you if you believe 753 00:42:28,960 --> 00:42:31,840 Speaker 1: the Fed funds futures market and the Fed UH cuts 754 00:42:31,920 --> 00:42:36,320 Speaker 1: rates and sometime in three or even early you start 755 00:42:36,360 --> 00:42:40,719 Speaker 1: to move out of this period in which, uh, you know, 756 00:42:40,800 --> 00:42:43,640 Speaker 1: you've you've got a difficult market, You're worried about earnings, 757 00:42:43,640 --> 00:42:47,239 Speaker 1: you're worrying about margin compression, and how about this, Uh, 758 00:42:47,480 --> 00:42:53,120 Speaker 1: the the fixed income market becomes attractive, albeit now with 759 00:42:53,239 --> 00:42:57,640 Speaker 1: some concerns about volatility that we just have UH introduced 760 00:42:57,640 --> 00:43:01,200 Speaker 1: because of the Japan's move, But nonetheless US UH fixed 761 00:43:01,239 --> 00:43:06,200 Speaker 1: income treasuries have become UH as equal as the equity 762 00:43:06,239 --> 00:43:11,280 Speaker 1: market in terms of UH long term investors. Well, QUIZI. 763 00:43:11,320 --> 00:43:13,040 Speaker 1: It brings me to the fact that now that we 764 00:43:13,120 --> 00:43:16,120 Speaker 1: are actually seeing some real yield in in in the market, 765 00:43:16,360 --> 00:43:18,360 Speaker 1: which I think is getting to the point that you 766 00:43:18,360 --> 00:43:21,160 Speaker 1: were just making. Do you then start to see, even 767 00:43:21,160 --> 00:43:23,959 Speaker 1: in the face of a hawkers federal reserve, a bull 768 00:43:24,000 --> 00:43:29,319 Speaker 1: case for treasuries forming that might actually suppress yields. Yes, 769 00:43:29,560 --> 00:43:33,000 Speaker 1: I mean, obviously if you start to see even now 770 00:43:33,160 --> 00:43:36,560 Speaker 1: now before Christmas, before the holiday season, let's put at 771 00:43:36,560 --> 00:43:38,920 Speaker 1: the end of the year, you start to see the 772 00:43:39,080 --> 00:43:44,799 Speaker 1: rebalancing of of huge portfolios, pension portfolios, they start to 773 00:43:44,800 --> 00:43:47,000 Speaker 1: do a rebalancing, and that I think is going to 774 00:43:47,040 --> 00:43:51,400 Speaker 1: bring in more money into the treasury market, which would 775 00:43:51,440 --> 00:43:56,719 Speaker 1: actually help the government by by bringing yields down. Hey, Ben, 776 00:43:56,880 --> 00:44:01,040 Speaker 1: so for it next year, do you have a recession 777 00:44:01,200 --> 00:44:04,360 Speaker 1: in your forecast? There? And I so kind of the 778 00:44:04,440 --> 00:44:08,799 Speaker 1: depths and lengthen and we think it's going to be 779 00:44:08,840 --> 00:44:13,000 Speaker 1: a mild downturn ball um So maybe too. Quincy's point, like, 780 00:44:13,600 --> 00:44:16,200 Speaker 1: you do have a fellow reserve that's slowing down rate 781 00:44:16,280 --> 00:44:19,200 Speaker 1: heights and will end up at a restrictive level that 782 00:44:19,239 --> 00:44:21,239 Speaker 1: they will keep in place where it takes away a 783 00:44:21,280 --> 00:44:24,120 Speaker 1: lot of yourncertainty about interest rates. Right, So you're getting 784 00:44:24,520 --> 00:44:28,120 Speaker 1: in that sense of flow, natural flow from pensions from 785 00:44:28,120 --> 00:44:30,759 Speaker 1: other investors into interest rates, and that should at least 786 00:44:30,800 --> 00:44:33,640 Speaker 1: keep borrowing costs controlled. And at the same time, I 787 00:44:33,680 --> 00:44:37,160 Speaker 1: think that's the other story China reopening. I think we'll 788 00:44:37,200 --> 00:44:39,080 Speaker 1: play a big role next year. We talked about it 789 00:44:39,200 --> 00:44:42,160 Speaker 1: the last show. I think that will be potentially actually 790 00:44:42,160 --> 00:44:45,839 Speaker 1: a counterway to all the say really recession fear that's 791 00:44:45,880 --> 00:44:48,759 Speaker 1: out there, because it should lead to more global activity 792 00:44:48,840 --> 00:44:52,920 Speaker 1: potentially um and then Lassie, it is also about that inflation, 793 00:44:53,560 --> 00:44:56,600 Speaker 1: you know, with restrictive rates, is a really different inflation 794 00:44:56,640 --> 00:44:58,920 Speaker 1: next year than it is this year. Every we should 795 00:44:58,960 --> 00:45:01,680 Speaker 1: see lower inflation next year. That should lead to better 796 00:45:02,200 --> 00:45:05,680 Speaker 1: you know, real income. So we think it's a milder downturn. 797 00:45:06,040 --> 00:45:08,680 Speaker 1: But you cannot escape to Quincy's points, there is an 798 00:45:08,680 --> 00:45:12,000 Speaker 1: earning secession that seems to be more likely, that may 799 00:45:12,040 --> 00:45:14,600 Speaker 1: be a more severe one than the actual recession. The 800 00:45:14,600 --> 00:45:17,759 Speaker 1: economic procession. Well, Ben, when we're not talking when we're 801 00:45:17,800 --> 00:45:21,400 Speaker 1: talking about kind of a more severe recession, there seems 802 00:45:21,400 --> 00:45:23,799 Speaker 1: to be this thought and the market that, well, don't 803 00:45:23,840 --> 00:45:25,960 Speaker 1: worry because the Fed is going to cut rights as 804 00:45:25,960 --> 00:45:28,200 Speaker 1: soon as we get there. Something at the Federal Reserve 805 00:45:28,239 --> 00:45:32,520 Speaker 1: has vehemently denied. Why do you think that they're denying 806 00:45:32,560 --> 00:45:35,960 Speaker 1: that when Sherman Powell has actively said that, look, the 807 00:45:36,080 --> 00:45:39,680 Speaker 1: risk of overdoing it is actually less than the market 808 00:45:39,680 --> 00:45:43,080 Speaker 1: would perceive because they have that ability to cut rates. 809 00:45:43,120 --> 00:45:47,239 Speaker 1: What do you think, Yeah, I think that conundrum that 810 00:45:47,320 --> 00:45:50,920 Speaker 1: you described creaty party again into the Quincey says you 811 00:45:50,960 --> 00:45:53,919 Speaker 1: have a lot of flows coming into into fixed income now, 812 00:45:54,280 --> 00:45:57,200 Speaker 1: so to an extent that gets influenced by the view 813 00:45:57,320 --> 00:46:01,040 Speaker 1: of one, yes, the fact will not rates, you know, 814 00:46:01,280 --> 00:46:04,000 Speaker 1: and at a high rate for for a long time. Right, 815 00:46:04,000 --> 00:46:06,080 Speaker 1: they do this for a number of months and then 816 00:46:06,360 --> 00:46:09,680 Speaker 1: have to shift. There's a view that as goods inflation 817 00:46:09,760 --> 00:46:12,479 Speaker 1: is now really declining, it's just a matter of time 818 00:46:12,480 --> 00:46:16,399 Speaker 1: and services inflation will decline fast to therefore inflation comes 819 00:46:16,440 --> 00:46:18,719 Speaker 1: up much quicker, and the fact we'll have to move 820 00:46:18,760 --> 00:46:21,080 Speaker 1: on rates and then last ye, it's about that idea 821 00:46:21,120 --> 00:46:23,520 Speaker 1: of fact, it may not be such a severe recession 822 00:46:23,640 --> 00:46:26,920 Speaker 1: or earning succession, so you know, you don't really need 823 00:46:26,960 --> 00:46:29,239 Speaker 1: the fellows have to say that tight, right, it could 824 00:46:29,239 --> 00:46:32,239 Speaker 1: actually uh, first course, and I think the fact wants 825 00:46:32,280 --> 00:46:35,280 Speaker 1: to be really careful here about this on the seventies 826 00:46:35,280 --> 00:46:38,120 Speaker 1: experience in particular, if you have a too hot economy, 827 00:46:38,440 --> 00:46:40,560 Speaker 1: are you east too soon? You're gonna have to come 828 00:46:40,560 --> 00:46:43,359 Speaker 1: back with major radararchs, right, that's the problem. All right, good, 829 00:46:43,360 --> 00:46:45,600 Speaker 1: great stuff. Really appreciate that. Ben Emmon's head of fixed 830 00:46:45,600 --> 00:46:48,120 Speaker 1: Income for New Edge Wealth joining us to be a 831 00:46:48,239 --> 00:46:51,080 Speaker 1: zoom and Dr Quincy Crosby and Chief Global Strategies for 832 00:46:51,200 --> 00:46:55,320 Speaker 1: LPL Financial, joining us here in our Bloomberg Interactive Broker studio. 833 00:47:00,160 --> 00:47:01,759 Speaker 1: One of my first jobs on Wall Street way back 834 00:47:01,760 --> 00:47:04,839 Speaker 1: in the day was a research assistant covering railroads and 835 00:47:04,920 --> 00:47:07,719 Speaker 1: trucks for Jim Voyko and Tony Hatch, a couple of 836 00:47:07,719 --> 00:47:11,280 Speaker 1: the legends of research in that business. So I've followed 837 00:47:11,280 --> 00:47:14,279 Speaker 1: it with uh, you know ever since, railroads, trucks, the 838 00:47:14,280 --> 00:47:16,279 Speaker 1: big ships, all that kind of good stuff. Unfortunately, for 839 00:47:16,280 --> 00:47:18,959 Speaker 1: Bloomberg Intelligence, we have one of the best on Wall 840 00:47:18,960 --> 00:47:21,400 Speaker 1: Street covering the stuff, Lee class Cow. He's a sector 841 00:47:21,440 --> 00:47:24,359 Speaker 1: heads senior analyst covers all that freight, transportation, logistics, all 842 00:47:24,360 --> 00:47:28,000 Speaker 1: that stuff for Bloomberg Intelligence and and Lee Boy. I mean, 843 00:47:28,680 --> 00:47:31,280 Speaker 1: your industries are really important for the U. S and 844 00:47:31,280 --> 00:47:33,600 Speaker 1: and global economy, but never more so they've been in 845 00:47:34,000 --> 00:47:36,000 Speaker 1: It just feels like been at the top of conversation 846 00:47:36,080 --> 00:47:38,440 Speaker 1: for so many people. We talk about bottlenecks and supply 847 00:47:38,600 --> 00:47:41,239 Speaker 1: chains and and all that kind of stuff. Here, just 848 00:47:41,239 --> 00:47:43,399 Speaker 1: give us now we're here in December, give us kind 849 00:47:43,400 --> 00:47:47,080 Speaker 1: of a review of two. How did the you know, 850 00:47:47,120 --> 00:47:49,960 Speaker 1: the logistics business kind of work? How did it perform 851 00:47:49,960 --> 00:47:52,319 Speaker 1: in two? And then more importantly, what's the at look 852 00:47:52,360 --> 00:47:54,960 Speaker 1: for next year? Hey, Paul, thanks for having me. I mean, 853 00:47:55,000 --> 00:47:58,800 Speaker 1: I really think it's it's really depends on what sector 854 00:47:58,840 --> 00:48:02,640 Speaker 1: you're looking at with within the market, and just generally 855 00:48:02,640 --> 00:48:05,759 Speaker 1: speaking of the first half wasn't it was pretty good 856 00:48:05,880 --> 00:48:08,440 Speaker 1: for a lot of sectors, and then the second half 857 00:48:08,760 --> 00:48:12,680 Speaker 1: got a lot worse. Uh, and that that that weakness 858 00:48:12,760 --> 00:48:16,520 Speaker 1: is flowing through three. You know, we saw a trucking 859 00:48:17,560 --> 00:48:21,480 Speaker 1: rates come down considerably. Um, you know the spot market 860 00:48:21,600 --> 00:48:24,040 Speaker 1: where uh, you know, we get to see a weekly 861 00:48:24,160 --> 00:48:27,040 Speaker 1: rates and weekly supply and demand on ammics, you know, 862 00:48:27,120 --> 00:48:30,280 Speaker 1: they change considerably from you know, when they peaked earlier 863 00:48:30,320 --> 00:48:34,360 Speaker 1: in the year. You know, they're down around year of 864 00:48:34,400 --> 00:48:37,280 Speaker 1: a year um and were We don't expect that market 865 00:48:37,320 --> 00:48:40,200 Speaker 1: to really probably bottom until like the second quarter, so 866 00:48:40,280 --> 00:48:43,080 Speaker 1: we expect spot rates and then the truckload market to 867 00:48:43,120 --> 00:48:45,640 Speaker 1: continue to decline, and that's going to have you know, 868 00:48:45,680 --> 00:48:48,759 Speaker 1: a ripple effect amongst a lot of different modes within 869 00:48:48,840 --> 00:48:52,319 Speaker 1: North America. You know, because the cheaper that trucking is, 870 00:48:52,680 --> 00:48:55,759 Speaker 1: um you know, the less competitive intermodal is, which is 871 00:48:55,800 --> 00:48:58,120 Speaker 1: what railroads move. You know when you see those container 872 00:48:58,200 --> 00:49:02,319 Speaker 1: boxes on a on a train, um and that and 873 00:49:02,360 --> 00:49:05,000 Speaker 1: that is you know, is hoping to be an area 874 00:49:05,040 --> 00:49:07,960 Speaker 1: of growth for the rails and which have struggled with service, 875 00:49:08,000 --> 00:49:11,480 Speaker 1: which has also limited their ability to attract freight onto 876 00:49:11,480 --> 00:49:14,880 Speaker 1: their networks. Well what does that that mean from a 877 00:49:14,960 --> 00:49:18,359 Speaker 1: more labor perspective, because not too long ago there were 878 00:49:18,440 --> 00:49:22,360 Speaker 1: trucking strikes in Canada and that's billed over into the US. 879 00:49:22,440 --> 00:49:26,120 Speaker 1: There are railroad strikes that of course have been calmed 880 00:49:26,160 --> 00:49:28,400 Speaker 1: now but certainly did affect a lot of the supply 881 00:49:28,440 --> 00:49:32,080 Speaker 1: chain issues. Are we worried at all about the possibility 882 00:49:32,120 --> 00:49:37,319 Speaker 1: of the labor situation getting worse in Uh. You know, 883 00:49:37,360 --> 00:49:40,000 Speaker 1: the good news is that, you know, we we luckily 884 00:49:40,160 --> 00:49:44,440 Speaker 1: inverted a rail strike last month when the federal government 885 00:49:44,480 --> 00:49:48,160 Speaker 1: stepped in. Um, you know, there seems to be you know, 886 00:49:48,280 --> 00:49:52,760 Speaker 1: some disagreement amongst the labor unions and management companies about 887 00:49:52,800 --> 00:49:55,200 Speaker 1: sick days. Um. You know, my guess is that it 888 00:49:55,239 --> 00:49:57,759 Speaker 1: is probably going to be more negotiated at a local level, 889 00:49:57,760 --> 00:50:01,080 Speaker 1: which has historically been U and the rails kind of 890 00:50:01,160 --> 00:50:05,640 Speaker 1: understand um, that their relationship with labor is shifted in 891 00:50:05,680 --> 00:50:07,880 Speaker 1: a way. You know, a lot of them have adopted 892 00:50:07,920 --> 00:50:11,160 Speaker 1: precisions scheduling railroading, which is for the most part six 893 00:50:11,200 --> 00:50:14,120 Speaker 1: sigma for railroads. It's really about operating lean and sweating, 894 00:50:14,200 --> 00:50:17,520 Speaker 1: sweating air assets. Um, they're gonna have to operate with 895 00:50:17,600 --> 00:50:20,680 Speaker 1: a little more cushion. Um. You know, we attended to 896 00:50:21,200 --> 00:50:23,720 Speaker 1: southerns Analyst Day a couple of weeks ago down in Atlanta, 897 00:50:24,200 --> 00:50:27,040 Speaker 1: and you know, they were actually highlighting that the fact 898 00:50:27,080 --> 00:50:30,439 Speaker 1: that you know that they're they're willing to have more 899 00:50:30,520 --> 00:50:34,520 Speaker 1: people on hand versus you know, overly firing or furloughing 900 00:50:34,600 --> 00:50:37,040 Speaker 1: I should say people. You know when volumes come down, 901 00:50:37,080 --> 00:50:40,120 Speaker 1: because during this last cycle, you know, when volumes dried 902 00:50:40,239 --> 00:50:43,239 Speaker 1: up in the first quarter of um, you know, and 903 00:50:43,239 --> 00:50:45,720 Speaker 1: then all of a sudden they snapped back. They already 904 00:50:45,719 --> 00:50:47,960 Speaker 1: furloughed a lot of people, and they realized once they 905 00:50:48,000 --> 00:50:49,799 Speaker 1: were calling those workers back that a lot of them 906 00:50:49,800 --> 00:50:52,160 Speaker 1: didn't want to come back, either, you know, to work 907 00:50:52,239 --> 00:50:54,640 Speaker 1: because of the pandemic, or didn't want to come back 908 00:50:54,640 --> 00:50:58,520 Speaker 1: to working on a railroad because they were better opportunities 909 00:50:58,880 --> 00:51:01,920 Speaker 1: closer to home, you know, and working on a railroad, 910 00:51:02,040 --> 00:51:04,719 Speaker 1: you know, it is a difficult job at outdoors. You're 911 00:51:04,800 --> 00:51:07,600 Speaker 1: dealing with the elements. Uh. And you know a lot 912 00:51:07,640 --> 00:51:10,200 Speaker 1: of times, you know, you're you're not necessarily home every night, 913 00:51:10,239 --> 00:51:13,239 Speaker 1: so you know, you miss some family activities. So you know, 914 00:51:13,320 --> 00:51:18,280 Speaker 1: it's it's a tougher work balance than a transportation analyst 915 00:51:18,920 --> 00:51:23,359 Speaker 1: sot Lee. Um, the the supply chain, Are we back 916 00:51:23,400 --> 00:51:26,520 Speaker 1: to quote unquote normal or normal ish? And give us 917 00:51:26,520 --> 00:51:27,759 Speaker 1: a sense of kind of where we are when you 918 00:51:28,120 --> 00:51:29,799 Speaker 1: when you look at the rails and the trucks and 919 00:51:29,800 --> 00:51:31,799 Speaker 1: all that kind of stuff. Yeah, Well, well, since this 920 00:51:31,920 --> 00:51:34,400 Speaker 1: is radio, I'll let everyone know I'm doing air quotes 921 00:51:34,440 --> 00:51:37,480 Speaker 1: when I say normal, So you know, I think we 922 00:51:37,520 --> 00:51:40,120 Speaker 1: are getting back to normal. Um. But you know, it 923 00:51:40,239 --> 00:51:42,919 Speaker 1: is becoming a new normal. You know, the ports we're 924 00:51:42,920 --> 00:51:45,520 Speaker 1: seeing in l a long beach to backups which were 925 00:51:45,560 --> 00:51:48,399 Speaker 1: over you know, hundred and nine. I think that's when 926 00:51:48,400 --> 00:51:51,520 Speaker 1: they peaked. Um. You know, they're down by low single 927 00:51:51,560 --> 00:51:55,600 Speaker 1: digits right now. UM. You know you're seeing the throughput improved. 928 00:51:55,680 --> 00:51:58,839 Speaker 1: The problem still remain. The warehouses are very full right 929 00:51:58,880 --> 00:52:02,600 Speaker 1: now because people aren't necessarily buying stuff and a lot 930 00:52:02,680 --> 00:52:06,400 Speaker 1: of retails might have overordered stuff. Um, and so there's 931 00:52:06,400 --> 00:52:09,399 Speaker 1: not a place for new freight to come. So there's 932 00:52:09,400 --> 00:52:12,560 Speaker 1: still that bottle of that kind of like inland within 933 00:52:12,600 --> 00:52:16,440 Speaker 1: the supply chain that'll slowly work its way out. And 934 00:52:16,480 --> 00:52:19,600 Speaker 1: there's also still you know, labor issues across the supply chain. 935 00:52:19,680 --> 00:52:22,640 Speaker 1: You know. Um, while we're not necessarily talking about like 936 00:52:22,760 --> 00:52:25,840 Speaker 1: driver shortages, um, but you know, it's still tough to 937 00:52:25,880 --> 00:52:31,680 Speaker 1: get certain types of employers and certain types of markets. UM. 938 00:52:31,760 --> 00:52:33,960 Speaker 1: You know the ones that the companies that are going 939 00:52:33,960 --> 00:52:37,520 Speaker 1: to probably be best uh to to deal with this 940 00:52:37,640 --> 00:52:40,800 Speaker 1: are being very creative. You know, you have trucking companies 941 00:52:40,840 --> 00:52:43,560 Speaker 1: like XPO and Warner they have driving schools which you 942 00:52:43,560 --> 00:52:46,760 Speaker 1: know helps them get new drivers into their system. UM. 943 00:52:46,800 --> 00:52:49,160 Speaker 1: You know, there's things of that nature. They you know, 944 00:52:49,400 --> 00:52:53,480 Speaker 1: we recently went to a facility at XPO, you know, 945 00:52:53,560 --> 00:52:55,960 Speaker 1: and they have a program in place where you know, 946 00:52:56,000 --> 00:52:59,040 Speaker 1: a dock worker can become a trailer technician, and that 947 00:52:59,080 --> 00:53:02,600 Speaker 1: trailer technician going to become you know, a diesel mechanic, um, 948 00:53:02,719 --> 00:53:05,440 Speaker 1: you know. And that progression is you know, not just 949 00:53:05,600 --> 00:53:08,200 Speaker 1: changing of jobs, but it's you know, a higher paying job. 950 00:53:08,280 --> 00:53:11,160 Speaker 1: So it's like kind of a career path for folks. 951 00:53:11,200 --> 00:53:14,520 Speaker 1: And and so you know, I think companies are investing 952 00:53:14,520 --> 00:53:17,799 Speaker 1: more in their employees, you know, to have them, um 953 00:53:18,040 --> 00:53:21,000 Speaker 1: stay stay longer as opposed to turn over, and turnover 954 00:53:21,040 --> 00:53:24,600 Speaker 1: in transportation tends to be typically high just because of 955 00:53:24,640 --> 00:53:28,640 Speaker 1: the nature of the work that we discussed earlier. Well, UM, 956 00:53:28,640 --> 00:53:31,000 Speaker 1: in our last thirty seconds lead, I have to ask 957 00:53:31,040 --> 00:53:35,439 Speaker 1: you about the relationship between a lot of the countries here, 958 00:53:35,480 --> 00:53:38,960 Speaker 1: so Canada, Mexico, as we talk about the outlook for 959 00:53:39,160 --> 00:53:44,200 Speaker 1: rail specifically between UM the next year for those three countries, 960 00:53:44,400 --> 00:53:46,319 Speaker 1: comply on the spot thirty seconds what do we have 961 00:53:46,320 --> 00:53:49,360 Speaker 1: to watch for? Actually, I'm gonna say one thing, you know, 962 00:53:49,400 --> 00:53:51,200 Speaker 1: the most exciting thing next year, and it has to 963 00:53:51,239 --> 00:53:53,239 Speaker 1: do with all those countries that you mentioned is the 964 00:53:53,360 --> 00:53:56,360 Speaker 1: merger of Ken Pacific in Kansas City, southern UH. That 965 00:53:56,360 --> 00:53:59,560 Speaker 1: should be get the STB approval probably UH in the 966 00:53:59,600 --> 00:54:01,960 Speaker 1: next couple months here, and that's going to create the 967 00:54:02,080 --> 00:54:04,120 Speaker 1: first UH. I guess we can call it an apt 968 00:54:04,160 --> 00:54:05,839 Speaker 1: to still a network. I don't know what we're calling 969 00:54:05,840 --> 00:54:09,400 Speaker 1: it nowadays, but you know, it's really connecting the market 970 00:54:09,680 --> 00:54:12,720 Speaker 1: those three markets. It's probably going to increase competition amongst 971 00:54:12,719 --> 00:54:14,400 Speaker 1: its other class one here. So I think that's going 972 00:54:14,440 --> 00:54:16,640 Speaker 1: to be the most interesting to see how that plays 973 00:54:16,640 --> 00:54:20,040 Speaker 1: out in the execution of integrating those two rails. All right, 974 00:54:20,080 --> 00:54:23,160 Speaker 1: good stuff, Lee, classical US sector head and senior analyste 975 00:54:23,160 --> 00:54:26,719 Speaker 1: covers rails, trucks, logistics, all that kind of stuff. And 976 00:54:26,760 --> 00:54:30,440 Speaker 1: it's obviously the backbone of the U. S economy in 977 00:54:30,440 --> 00:54:32,719 Speaker 1: so many ways, touches a lot of different parts of 978 00:54:32,719 --> 00:54:35,439 Speaker 1: the economy. That's why economists really track some of those 979 00:54:36,000 --> 00:54:39,160 Speaker 1: metrics and data coming out of those transportation companies because 980 00:54:39,160 --> 00:54:41,799 Speaker 1: they really give a reflection of goods and services that 981 00:54:41,800 --> 00:54:48,400 Speaker 1: are being transported across the country. Thanks for listening to 982 00:54:48,440 --> 00:54:51,960 Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to 983 00:54:52,000 --> 00:54:56,160 Speaker 1: interviews with Apple podcasts or whatever. Podcast platform you prefer. 984 00:54:56,560 --> 00:54:59,760 Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller nineteen 985 00:54:59,800 --> 00:55:02,400 Speaker 1: se twenty three and on Faull Sweeney. I'm on Twitter 986 00:55:02,440 --> 00:55:05,319 Speaker 1: at pt Sweeney. Before the podcast, you can always catch 987 00:55:05,360 --> 00:55:06,920 Speaker 1: us worldwide at Bloomberg Radio