WEBVTT - Market Outlook And Supply Chain Constraints 0:00:00.840 --> 0:00:06.600 Welcome to the Bloomberg Markets Podcast. Every business day, we 0:00:06.720 --> 0:00:10.920 bring you interviews from CEOs, market pros, from Bloomberg experts, 0:00:11.280 --> 0:00:16.759 along with Essential market, the Bloomberg Markets Podcast podcast or 0:00:16.840 --> 0:00:19.480 wherever you listen to podcasts and that Bloomberg dot Com 0:00:19.640 --> 0:00:23.200 slash podcast. Investments contain risk and may lose value. Consult 0:00:23.239 --> 0:00:27.080 your investment professional before investing. Let's bring on our Jersey 0:00:27.120 --> 0:00:32.559 chief US interest rate strategist for Bloomberg Intelligence IRA, give 0:00:32.680 --> 0:00:36.159 us the latest on what your Federal Reserve plans to 0:00:36.200 --> 0:00:39.840 do over the next let's call it six to twelve months. Hey, yeah, 0:00:39.920 --> 0:00:44.040 there's uh, the opinions are all over the place. My 0:00:44.240 --> 0:00:46.519 view is that the Fed is going to go a 0:00:46.560 --> 0:00:49.559 little bit slower than the market is currently pricing, but 0:00:49.680 --> 0:00:54.120 also start balance sheet runoff pretty early. So um so 0:00:54.200 --> 0:00:56.160 I think that they might announce in May, might even 0:00:56.160 --> 0:00:59.360 start in May with their balance sheet reduction because they 0:00:59.440 --> 0:01:02.800 really they bought so much and I was actually just 0:01:02.840 --> 0:01:05.520 looking at some of my spreadsheets this morning, you're fallen 0:01:05.959 --> 0:01:08.600 and that they probably bought about a trillion dollars too 0:01:08.680 --> 0:01:11.399 much in terms of their asset buying over the last year, 0:01:11.440 --> 0:01:13.560 so they have to get rid of that before they 0:01:13.560 --> 0:01:16.839 could really tighten monetary policy very effectively in my view, 0:01:17.840 --> 0:01:21.400 just hanging out at home going through my spreadsheets. You know, 0:01:21.800 --> 0:01:25.160 that's the life of a chief fixed income strategist. Um. 0:01:25.840 --> 0:01:28.280 You know. I read a great piece today. I think 0:01:28.280 --> 0:01:32.199 it was Cormack Mullen talking about maybe it's too soon 0:01:32.280 --> 0:01:35.280 to call the end of the bond bull market. And 0:01:35.360 --> 0:01:39.240 one of the interesting things that he says is, um, 0:01:39.280 --> 0:01:43.080 there are already a substantial amount of rate hikes priced 0:01:43.160 --> 0:01:47.319 in two treasuries today. If that's the case and the 0:01:47.360 --> 0:01:51.360 Fed delivers less than the market expects, um, you know, 0:01:52.080 --> 0:01:55.000 that's that's that's bullish for treasuries. What is priced in? 0:01:55.600 --> 0:01:57.640 And how do and how do you read what's priced 0:01:57.680 --> 0:02:00.760 in for for someone who doesn't know? Yeah, so the 0:02:00.760 --> 0:02:03.080 easiest way we actually have a very uh you know, 0:02:03.120 --> 0:02:05.680 simple function on the Bloomberg terminal called w I r 0:02:05.760 --> 0:02:09.200 P or WARP some people call it um And if 0:02:09.240 --> 0:02:11.640 you if you use that, you can see kind of 0:02:11.680 --> 0:02:15.120 over the next year how much the markets pricing seven 0:02:15.320 --> 0:02:18.240 rate more or left. Yeah, so seven rate hikes uh 0:02:18.360 --> 0:02:21.959 by by this time next year, Yeah, exactly. So that's 0:02:22.480 --> 0:02:24.840 that's where I think that the market maybe is getting 0:02:24.840 --> 0:02:26.440 a little bit too far ahead of itself. We actually 0:02:26.440 --> 0:02:30.359 put out a note yesterday suggesting that something more realistic 0:02:30.400 --> 0:02:33.799 would be maybe five hikes along with runoff, because I 0:02:33.840 --> 0:02:37.160 do think that the Federal Reserve does think about um 0:02:37.320 --> 0:02:40.639 the runoff as replacing a hike or two right that 0:02:40.880 --> 0:02:42.920 they don't know exactly, you know what the what the 0:02:42.960 --> 0:02:45.600 metric is is it, you know, five billion dollars a 0:02:45.639 --> 0:02:48.560 runoff equals equals another hike or something like that. That 0:02:48.400 --> 0:02:51.440 that's a little bit more of guests work. But importantly, 0:02:51.520 --> 0:02:53.760 and and to your point that we are pricing in 0:02:54.520 --> 0:02:58.160 more interest rate hikes. The difference between looking at that 0:02:58.280 --> 0:03:00.600 long term trend that you mentioned, Matt. You know, yes, 0:03:00.680 --> 0:03:04.000 interest rates have been going down basically from present they 0:03:04.560 --> 0:03:07.440 the long term bond bull market goes down. But if 0:03:07.480 --> 0:03:10.800 you're an an asset manager trying to outperform an index 0:03:10.880 --> 0:03:13.720 or you're trying to determine, um, you know, what your 0:03:13.720 --> 0:03:16.000 total return is going to be over the next twelve 0:03:16.080 --> 0:03:18.720 months of holding an asset, you don't have to think 0:03:18.720 --> 0:03:22.440 about that long term you know, kind of two generation trend. Well, 0:03:22.480 --> 0:03:24.920 you worry about as the cycle and keep in mind 0:03:24.960 --> 0:03:28.359 ten year treasury yields are right now at two percent 0:03:28.560 --> 0:03:30.359 a hundred and fifty basis points one and a half 0:03:30.360 --> 0:03:32.520 percent higher than where they were a year ago or 0:03:32.680 --> 0:03:34.120 after that, after I should say, at the beginning of 0:03:35.240 --> 0:03:38.840 one So so you know, that is a pretty substantial 0:03:38.880 --> 0:03:42.240 move and and interest rates of you've lost money if 0:03:42.240 --> 0:03:46.320 you held the Treasury index right the Bloomberg Treasury indexes 0:03:46.360 --> 0:03:49.600 down UM you know, five percent since the beginning of 0:03:49.680 --> 0:03:51.600 last year, actually even a little bit more than that. 0:03:51.960 --> 0:03:54.560 So that's a non trivial loss in a you know, 0:03:54.600 --> 0:03:57.560 in a bond portfolio, which is supposed to be you know, 0:03:57.760 --> 0:04:01.120 your ballast compared to the rest of your financial assets. 0:04:03.600 --> 0:04:06.520 Is the Federal Reserve gonna hike fifty basis points in March? 0:04:07.680 --> 0:04:10.480 I don't think so, UM. I think that they'll they'll 0:04:10.480 --> 0:04:13.080 go twenty five. I think it's much more likely that 0:04:13.400 --> 0:04:15.560 they go every meeting this year and do go seven 0:04:15.600 --> 0:04:19.520 times as opposed to UM as opposed to hike initially 0:04:19.600 --> 0:04:22.680 with a fifty basis point move. UM, it is possible 0:04:22.760 --> 0:04:25.279 if inflation doesn't roll over the way that a lot 0:04:25.320 --> 0:04:28.800 of u UM market participants and economists think that it 0:04:28.839 --> 0:04:31.280 will UM that that maybe they'll do a hike a 0:04:31.279 --> 0:04:33.640 fifty base point hike sometime later in the cycle. But 0:04:33.640 --> 0:04:35.400 I just don't think that they'll start with you you think, 0:04:35.440 --> 0:04:38.159 I mean, I'm guessing you think inflation is gonna roll over, 0:04:38.200 --> 0:04:41.000 our growth is going to slow down, because otherwise, well 0:04:41.040 --> 0:04:43.560 I wouldn't have fed do fifty basis points hike at 0:04:43.600 --> 0:04:46.039 every meeting and then not just let the balance sheet 0:04:46.080 --> 0:04:48.599 run off, but actually sell assets. You know, if we 0:04:48.720 --> 0:04:51.200 if we're stuck at seven and a half percent, people 0:04:51.200 --> 0:04:53.760 are freaking out. Yeah. Yeah, So so we won't be 0:04:53.800 --> 0:04:55.200 stuck at seven and a half percent, I mean, just 0:04:55.279 --> 0:04:58.760 base effects alone. If you're looking at year over year inflation, UM, 0:04:58.839 --> 0:05:01.800 inflation will be low or for four or five months 0:05:01.800 --> 0:05:03.719 from now. The question is how much lower, right will 0:05:03.760 --> 0:05:07.160 we will we be trending from eight percent, which you 0:05:07.200 --> 0:05:08.800 know we could get seen a percent prince is not 0:05:08.839 --> 0:05:12.120 out of the question, especially with what oil has done recently, UM. 0:05:12.160 --> 0:05:14.000 But but if we get an eight percent print, the 0:05:14.080 --> 0:05:16.560 question is will we be at at four percent or 0:05:16.600 --> 0:05:18.720 five percent at the end of the year, right, So, 0:05:18.720 --> 0:05:21.520 so how is that glidepath going to go? Which would 0:05:21.560 --> 0:05:23.760 be harsh by the way, that's four or five percent 0:05:23.800 --> 0:05:26.800 at the end of the year on a six percent 0:05:26.920 --> 0:05:31.240 number from the year before, right, Yeah, But at the 0:05:31.240 --> 0:05:33.120 same time, keep in mind we were at one and 0:05:33.160 --> 0:05:35.839 a half percent inflation for a decade, right, So that 0:05:35.960 --> 0:05:38.400 was good in a way. That was good. Remember what 0:05:38.440 --> 0:05:42.680 Reagan said about inflation. Yeah sure, but and yes, this 0:05:42.760 --> 0:05:45.480 is this is the question that it has to be 0:05:45.520 --> 0:05:48.520 answered before we know what that end game is, right, Like, 0:05:48.720 --> 0:05:51.880 is seven hikes going to be? What what it takes. Look, 0:05:52.200 --> 0:05:54.000 the bond market right now is telling you there's gonna 0:05:54.000 --> 0:05:56.440 be a recession next year. Let me say that again. 0:05:56.600 --> 0:05:58.479 The bond market is telling you there's gonna be a 0:05:58.480 --> 0:06:02.000 recession next Well, that's not fun. Curves are flat um. 0:06:02.120 --> 0:06:04.680 And and this is where this is where this you know, 0:06:04.720 --> 0:06:07.159 the FED making a policy mistake, Like the markets already 0:06:07.160 --> 0:06:09.440 priced with the Fed to make a policy mistake. So 0:06:09.520 --> 0:06:11.359 what we're already priced for two s tends to be 0:06:11.400 --> 0:06:14.480 basically at zero UM at this time next year, which 0:06:14.520 --> 0:06:17.440 is very consistent with the market thinking the Fed is 0:06:17.480 --> 0:06:19.360 gonna be done and we're gonna have a recession. I'm 0:06:19.360 --> 0:06:22.640 looking for when, I can't find when. But Reagan said 0:06:22.680 --> 0:06:27.240 that inflation is as violent as a mugger, as frightening, 0:06:27.360 --> 0:06:29.760 as an arm dropper and as deadly as a hit man. 0:06:30.320 --> 0:06:33.280 All Right, Ira Jersey gif us industrate strategist for Bloomberg 0:06:33.320 --> 0:06:41.080 Intelligence bond market calling forward recession. If you're talking about 0:06:41.080 --> 0:06:44.839 Ira Jersey in the last segment you mentioned w I 0:06:45.200 --> 0:06:47.800 R P Worp. Put that into the Bloomberg and it 0:06:47.839 --> 0:06:52.480 shows you that the markets pricing in seven rate increases 0:06:52.600 --> 0:06:55.440 by the end of the year. What's the fixed income 0:06:55.440 --> 0:06:58.039 manager to do in that kind of environment, Well, let's 0:06:58.080 --> 0:07:01.320 check in with Kevin Nicholson, Global Fixed Income co ce IO, 0:07:01.960 --> 0:07:05.279 cohead of the Investment Committee at river Front Investment Group, 0:07:05.360 --> 0:07:09.160 located in Lovely Richmond, Virginia, home of the University of 0:07:09.360 --> 0:07:12.960 Richmond Spiders. Kevin, thanks so much for joining us here. 0:07:13.560 --> 0:07:17.320 Given that interest rate backdrop, how are you guys positioning 0:07:17.480 --> 0:07:22.360 your portfolios? Thanks for having me, Paul, And we continue 0:07:22.680 --> 0:07:25.880 to position our portfolios in such a way that we're 0:07:25.920 --> 0:07:29.520 moving further and further up the curve, so to speak. 0:07:29.600 --> 0:07:32.239 So we're buying on the short end of the curve 0:07:32.320 --> 0:07:35.320 because as we're seeing the curve flattened, it doesn't really 0:07:35.360 --> 0:07:38.560 make sense to take on that duration risk in your portfolio. 0:07:39.080 --> 0:07:43.080 Um and so what we have constantly been doing is 0:07:43.400 --> 0:07:45.920 we've looked for some spread, getting some a little bit 0:07:46.000 --> 0:07:48.400 of additional spread on the front end of the curve, 0:07:48.480 --> 0:07:53.040 and buying short term corporates and some high ye opportunistically. UM. 0:07:53.160 --> 0:07:55.240 But one of the things that we have not been 0:07:55.360 --> 0:07:59.800 doing is going you know, beyond about five years out 0:07:59.840 --> 0:08:01.800 on the curve, because we really don't need to at 0:08:01.840 --> 0:08:05.720 this point. But overall, because we run balanced portfolios, we 0:08:06.280 --> 0:08:11.280 have been underweight fixing become pretty substantially relative to our 0:08:11.320 --> 0:08:15.640 benchmarks in those balance portfolios. And we've seen, um, a 0:08:15.680 --> 0:08:19.880 Bank America survey yesterday shows us that credit investors were 0:08:20.720 --> 0:08:24.600 in kind of sell everything mode. Goldman Sachs was recommending, um, 0:08:24.720 --> 0:08:27.080 you reduce your exposure to credit and go to cash. 0:08:28.440 --> 0:08:32.480 Is this the end you think of the bond bull 0:08:32.559 --> 0:08:35.000 market that we've seen since the early eighties or is 0:08:35.080 --> 0:08:37.520 this a mini bear market as some I've been describing it. 0:08:39.040 --> 0:08:42.319 I would say it's probably a mini bear market in 0:08:42.440 --> 0:08:44.599 the sense that I think that you know, by the 0:08:44.720 --> 0:08:46.079 end of the year, we'll see it two and a 0:08:46.120 --> 0:08:49.319 half on the ten uere But I don't think that 0:08:49.480 --> 0:08:54.040 we're going to retrace what we have seen occur over 0:08:54.120 --> 0:08:57.720 the last you know, twenty years. You know, I've been 0:08:57.760 --> 0:09:00.120 in the business thirty years, and I think that when 0:09:00.160 --> 0:09:03.880 I started, the tenure was right about a seven thirty 0:09:04.000 --> 0:09:07.000 four seven thirty five. Um. And do I think that 0:09:07.040 --> 0:09:09.800 we're going to retrace all of that? Absolutely not, um I. 0:09:10.320 --> 0:09:12.760 But I do think that we're gonna go higher. We 0:09:12.840 --> 0:09:14.880 are probably like I said, see you know, two and 0:09:14.920 --> 0:09:18.559 a half on fight year end, Kevin, I think the 0:09:18.679 --> 0:09:21.800 consensus on the street is that inflation will kind of 0:09:22.000 --> 0:09:25.040 peak I don't know in the next several months and 0:09:25.080 --> 0:09:28.520 then moderate remainder of the year. Are are you in 0:09:28.559 --> 0:09:32.400 that camp? If not, why I had been in night camp. 0:09:32.520 --> 0:09:35.559 You know, my thoughts were that inflation was going to 0:09:35.720 --> 0:09:37.800 peep in the first half of this year and then 0:09:37.880 --> 0:09:41.360 moderate to around between two and a half and three uh. 0:09:41.679 --> 0:09:44.880 Thus far I would say that we have been wrong 0:09:45.200 --> 0:09:49.760 on that front. And you know, I think that it 0:09:49.880 --> 0:09:52.160 might be consensus that it's going to peak. But right 0:09:52.240 --> 0:09:54.960 now it's a hope and a prayer because as you've seen, 0:09:55.160 --> 0:09:57.199 you know, headline inflation coming out of seven and a 0:09:57.200 --> 0:10:00.600 half cent. We saw a p p I the this morning. 0:10:01.000 --> 0:10:05.800 Um that was really high. And so there's inflation everywhere. UM. 0:10:05.880 --> 0:10:08.800 But the one thing that is all that we believe 0:10:08.880 --> 0:10:14.960 in is that high prices will solve the high prices problem. 0:10:15.320 --> 0:10:18.240 And so as prices continue to go up, I think that, 0:10:18.360 --> 0:10:20.439 you know, we're going to kill some of the demand 0:10:20.520 --> 0:10:23.760 out there, and so that may help mitigate the inflation 0:10:23.920 --> 0:10:27.640 risks that we're seeing. So hopefully by you know, Midsummer, 0:10:27.760 --> 0:10:31.960 we will start to make inflation teach here all right, Kevin, 0:10:31.960 --> 0:10:35.080 thanks so much for joining us. Kevin Nicholson. They're Global 0:10:35.400 --> 0:10:38.439 fixed Income Co. C I O and Co. Had to 0:10:38.520 --> 0:10:41.760 invest the investment committee as well at Riverfront Investment Group. 0:10:41.840 --> 0:10:48.040 Talking to us about the fixed income markets. Looking at 0:10:48.120 --> 0:10:50.280 the yield curve here, I got the ten year treasury 0:10:50.360 --> 0:10:53.040 up five basis points two point zero four percent, to 0:10:53.600 --> 0:10:56.600 thirty year up six basis points two point three five 0:10:57.600 --> 0:11:00.560 on the thirty years, So rates moving higher. Let's get 0:11:00.600 --> 0:11:03.679 in angle on how you might play the fixed income 0:11:03.720 --> 0:11:07.880 markets given that this feder Reserve has been very clear 0:11:08.000 --> 0:11:10.000 that it will be raising rates. We check in with 0:11:10.080 --> 0:11:13.679 Hugh Robert's head of analytics for quant Insights. Hugh, thanks 0:11:13.679 --> 0:11:16.640 so much for joining us here. What is your bond 0:11:16.720 --> 0:11:21.400 market outlook for Hi, thank you very much for having 0:11:21.480 --> 0:11:25.000 me at the moment, we have our models, we rely 0:11:25.160 --> 0:11:28.479 on macro input to give a kind of quantitative perspective 0:11:29.400 --> 0:11:32.240 on all asset classes, and looking at the US fixed 0:11:32.240 --> 0:11:35.280 income at the moment, then the moving yields has slightly 0:11:35.360 --> 0:11:39.360 got ahead of itself on our metrics UM and anecdotally 0:11:39.400 --> 0:11:42.280 adding into that, I think you know one one story 0:11:42.360 --> 0:11:44.600 that might just play Internet if you start looking at 0:11:44.640 --> 0:11:47.400 just how much the flattening of the yield curve has 0:11:47.480 --> 0:11:50.199 happened in coupon space, and then looking at the shape 0:11:50.200 --> 0:11:53.400 of the yellow donor strip, you see the deferred contracts 0:11:53.520 --> 0:11:57.680 actually starting to speculator about rate cuts. So while at 0:11:57.720 --> 0:12:00.240 the moment markets are talking about the said high team 0:12:00.280 --> 0:12:03.720 this year and next, the market is actually already moving 0:12:03.760 --> 0:12:05.960 on to the next narrative, which is, at what point 0:12:06.520 --> 0:12:09.679 do they fear a proper kind of mistake and a 0:12:09.800 --> 0:12:15.719 reversal in the policy stance and easing once again? You 0:12:15.800 --> 0:12:17.960 know how far away from that are we? I mean 0:12:18.000 --> 0:12:21.760 it's difficult, of course, the forecast UM into the future, 0:12:22.040 --> 0:12:24.880 the further away you get. And and for now we're 0:12:24.960 --> 0:12:27.360 looking at a seven and a half percent inflation print. 0:12:27.480 --> 0:12:30.400 We had pp I come out higher than expected today, 0:12:31.040 --> 0:12:35.679 UM and there's no sign that we're UM in a 0:12:35.760 --> 0:12:39.559 recession other than the you know, implications of a flattening 0:12:39.640 --> 0:12:43.079 yield curve. Yeah, well, some of the men if you 0:12:43.120 --> 0:12:47.040 look at somebody like that Lena said GDP, now that 0:12:47.160 --> 0:12:50.400 had a sharp move earlier. Most of the models that 0:12:50.480 --> 0:12:52.240 are kind of more forward looking, that are kind of 0:12:52.320 --> 0:12:57.640 more credit impulsey type of nature or financial conditions indicators 0:12:58.200 --> 0:13:01.000 do suggest that the story from the the flattening of 0:13:01.080 --> 0:13:03.880 the yield curve is true, that the big fiscal stimulus 0:13:04.000 --> 0:13:06.839 we saw last year UM is going to fall off. 0:13:06.880 --> 0:13:09.199 We'll get a kind of cliff edge effect there. So 0:13:09.360 --> 0:13:10.880 I think there are quite a few of the more 0:13:11.000 --> 0:13:15.200 forward indicators that do suggest the data could be struggling 0:13:15.240 --> 0:13:17.920 in the near term. The consumer confidence data yesterday not 0:13:18.080 --> 0:13:22.440 make pretty reading UM, but yes, that the whole inflation 0:13:22.520 --> 0:13:26.520 debate is absolutely front and center. And I don't think 0:13:26.559 --> 0:13:29.920 team transitory has completely thrown in the town. There's a 0:13:30.800 --> 0:13:34.400 large residual of the market who are still in team transitory. 0:13:34.840 --> 0:13:38.440 It's just that they defined transitory in quarters rather than 0:13:38.480 --> 0:13:40.280 in months. And you know, they think that we need 0:13:40.320 --> 0:13:43.240 to wait till probably the middle part of this year 0:13:43.320 --> 0:13:46.040 before you start to see things roll back over again. 0:13:46.800 --> 0:13:49.199 You does a flattening of the yield curve suggests a 0:13:49.240 --> 0:13:52.720 recession to you? I think you have to be very 0:13:52.800 --> 0:13:55.640 very careful the because you have to rephrase that question. 0:13:55.720 --> 0:13:58.280 To my mind, an inversion of the yield curve, Yes, 0:13:58.880 --> 0:14:03.839 it is consistent with with recessionary conditions. It does depend 0:14:03.880 --> 0:14:06.240 on whether you're looking at two s, tens, fives, thirties, 0:14:06.920 --> 0:14:09.280 whether you look at guvees or swaps or O I 0:14:09.559 --> 0:14:12.400 s um. There are little nuances you can take on 0:14:12.559 --> 0:14:15.839 that front. But the inversion of the curve does have 0:14:16.080 --> 0:14:20.760 a good back record of being consistent with recessionary conditions. 0:14:20.800 --> 0:14:23.760 For sure, a flattening of itself. But when the curve 0:14:23.800 --> 0:14:27.800 stays positive, no, that won't stop the market speculating about it, 0:14:27.800 --> 0:14:30.320 because obviously it's about the journey to the end game. 0:14:30.920 --> 0:14:33.280 But you really have got to wait until you see 0:14:33.360 --> 0:14:36.920 curves go negative before you can really start kind of 0:14:37.040 --> 0:14:40.600 increasing your your forecast for recession in a material way. Well, 0:14:40.640 --> 0:14:42.800 but we're still close, right What are we looking at 0:14:42.840 --> 0:14:45.480 a forty basis point spread between twos and tens right now? 0:14:45.560 --> 0:14:48.240 And the Fed hasn't even begun its rate high cycle. 0:14:48.360 --> 0:14:52.040 If you look at rate high cycles over the past decades. 0:14:52.800 --> 0:14:58.640 Um the curve always flattens more in a in a 0:14:58.880 --> 0:15:01.040 in a rate high cycle. So if we're going to 0:15:01.160 --> 0:15:05.560 see any more flattening, inversion is next. Yeah, no, I agree, 0:15:05.600 --> 0:15:07.880 but we have got that Fordy Lips cushion and it 0:15:07.920 --> 0:15:10.320 will take time to get there. That's my my point really, 0:15:10.400 --> 0:15:14.120 just on the reality of inversion versus the flattening when 0:15:14.200 --> 0:15:17.560 you're in a positive, upward sloping gheel curve. And then 0:15:17.600 --> 0:15:20.320 I guess the other point to throw into the mix 0:15:20.440 --> 0:15:23.400 really is just the degree to which financial conditions have 0:15:23.720 --> 0:15:26.680 heightened already. I mean, the moving real rate is phenomenal, 0:15:27.240 --> 0:15:30.480 The repricing of the front end of the yield curve, 0:15:30.560 --> 0:15:32.840 you know, the two year notes or do euro dollar strike, 0:15:32.880 --> 0:15:36.520 whichever metric you want to use. The widening in credit spreads, 0:15:36.520 --> 0:15:38.520 you know, the widening in credit spreads is a tough one. 0:15:38.560 --> 0:15:40.320 If you look on a one year chart, it looks 0:15:40.360 --> 0:15:43.360 pretty done, dramatic. You look on a tenure history and 0:15:44.080 --> 0:15:47.240 really it's just a blip. But we have seen a 0:15:48.280 --> 0:15:52.440 sharp tightening of financial conditions, and that the others slightly cliched, 0:15:52.440 --> 0:15:54.640 but I think it is a truism. The other thing 0:15:54.720 --> 0:15:58.000 to throw into the mix is that it's less about levels, 0:15:58.320 --> 0:16:00.840 it's also about the speed of the journey. So you know, 0:16:01.040 --> 0:16:03.640 if we have a sharp flattening of the yel curve 0:16:03.720 --> 0:16:05.880 that happens in two weeks, yes, the FED they're going 0:16:05.960 --> 0:16:08.160 to sit up and take notice. But it happens over 0:16:08.320 --> 0:16:11.360 a prolong period lesser. So many of the things you 0:16:11.520 --> 0:16:14.640 just said reminded me of the Jean clautriche ECB. Is 0:16:15.680 --> 0:16:18.640 the likelihood of a turnaround, of a of an about 0:16:18.760 --> 0:16:23.760 face after a little bit of tightening higher for the 0:16:23.840 --> 0:16:27.600 E c B than it is for the FED. Um, well, 0:16:27.640 --> 0:16:31.160 that's a good question. Um. The difficulty this one, of course, 0:16:31.280 --> 0:16:34.400 that we haven't in a lot of people's recent lifetime 0:16:34.840 --> 0:16:38.040 seen inflation like this. Now, this is a complete game changer, 0:16:38.160 --> 0:16:40.920 having these levels of price pressures. And I think you 0:16:40.960 --> 0:16:43.840 know the way the markets have thought about, at least 0:16:43.840 --> 0:16:45.920 in an equity markets, you know, this kind of concept 0:16:46.000 --> 0:16:49.200 of restriking the said put for US equities at a 0:16:49.240 --> 0:16:52.400 lower level makes complete sense. We have to reprice given 0:16:52.480 --> 0:16:56.160 these conditions that we're seeing on the inflationary front in 0:16:56.360 --> 0:16:58.840 terms of FED versity c B. I mean I think 0:16:59.200 --> 0:17:05.159 most market participants will always view the CPS laguard that 0:17:05.320 --> 0:17:08.080 they are so petrified of the euro as being strong 0:17:08.200 --> 0:17:10.520 and and titling them that they will always go second. 0:17:10.720 --> 0:17:12.240 All right, Hugh, thanks so much for joining us. You 0:17:12.400 --> 0:17:15.760 Robert's head of analytics at Quad Insights, giving us his 0:17:15.840 --> 0:17:21.800 thoughts on interest rates. Well, Matt and I, we've been 0:17:21.840 --> 0:17:25.760 focusing on the supply chain challenges. It is a global 0:17:25.880 --> 0:17:28.800 issue for businesses really across the board, and you hear 0:17:28.880 --> 0:17:31.640 these quarterly earnings calls. Companies are calling it out left 0:17:31.680 --> 0:17:33.600 and right. Let's ga get a sense of what it 0:17:33.760 --> 0:17:38.280 means in the critical food business. Andre Menezez, co founder 0:17:38.400 --> 0:17:42.359 and CEO of Next Gen Foods and Tindle, joins us. Andrea, 0:17:42.400 --> 0:17:44.840 thanks so much for taking the time. First, just tell 0:17:44.920 --> 0:17:47.359 us what Next Gen Foods and Tindle do. What are 0:17:47.359 --> 0:17:50.320 you guys up to, Hi, Paul him, It's a pleasure 0:17:50.359 --> 0:17:53.119 to be here with you right now and talking to you. So. 0:17:53.359 --> 0:17:55.880 Next Thing Foods is the company behind Kingdo, our plant 0:17:55.920 --> 0:17:59.040 based chicken brand, and uh it's a company that let's 0:17:59.080 --> 0:18:01.159 stablished in seeing the poor and in less than a 0:18:01.280 --> 0:18:04.560 year we are already in Singapore, Hong Kong, Dubai Amsterdam 0:18:05.040 --> 0:18:07.760 and coming to the US right now. So where do 0:18:07.840 --> 0:18:10.800 you sell this stuff? I've noticed walking around Trader Joe's 0:18:10.880 --> 0:18:14.840 that there seems to be um plant based or you know, 0:18:16.200 --> 0:18:21.919 vegan versions of pretty much everything from cheese to meat balls. Um. 0:18:22.080 --> 0:18:26.240 What what are your sales points? Well, we actually have 0:18:26.320 --> 0:18:29.479 a slightly different strategy. We start with chefs. We call 0:18:29.520 --> 0:18:32.880 it gastronomy first, and we start with the most trendy 0:18:33.000 --> 0:18:35.840 restaurants and chefs because we do believe that they play 0:18:35.880 --> 0:18:38.919 a role in um showing consumers that plant basted foods 0:18:39.000 --> 0:18:43.200 can be really believer that great food experience that we 0:18:43.320 --> 0:18:46.680 usually have at nice restaurants and behave at the highest 0:18:46.760 --> 0:18:49.320 level of astronomy. What do you see out there? Unfortunately 0:18:49.359 --> 0:18:51.840 today are mostly only nuggets and tenders, which are nothing 0:18:51.920 --> 0:18:55.000 wrong with that, but we do believe that we can 0:18:55.040 --> 0:18:57.639 do better and we can really have a product that 0:18:58.080 --> 0:19:02.399 caters to the highest level of food experience. So is 0:19:02.440 --> 0:19:04.760 that a give us a sense of kind of kind 0:19:04.760 --> 0:19:07.280 of like is it restaurants and what types of restaurants 0:19:07.400 --> 0:19:13.320 are you selling into? So, yes, it is restaurants. Around 0:19:13.359 --> 0:19:16.040 the world, we have restaurants serving tindle in many different 0:19:16.080 --> 0:19:19.639 shapes and formats. As for the preparation of the chefs, UM, 0:19:19.760 --> 0:19:22.960 it's extremely versatile. Therefore they can really prepare as they prefer. 0:19:23.520 --> 0:19:26.159 And UM, the profile of restaurants that we have right 0:19:26.200 --> 0:19:28.280 now would range from you know, find Dyning, Mission and 0:19:28.320 --> 0:19:32.560 Stars all the way to casual neighborhood UM restaurants with 0:19:32.960 --> 0:19:35.720 their you know, their own chefs creations in house, and 0:19:35.800 --> 0:19:39.159 then maybe multiple units like five, ten up to forty units. 0:19:39.200 --> 0:19:41.159 That's what we have been seeing around the world right now. 0:19:41.760 --> 0:19:45.879 The Gray Dog is a restaurant here, orchard grocer exactly. UM, 0:19:46.160 --> 0:19:49.600 what just what I needed in hell A, Miami's Little Brazil. 0:19:49.720 --> 0:19:52.600 So we we have some of these restaurants here. What 0:19:52.720 --> 0:19:54.680 kind of growth are you looking at? What kind of 0:19:54.760 --> 0:19:59.520 growth are you forecasting? Um? We are all about creating 0:19:59.800 --> 0:20:02.040 the most meaningful impact in the food system we can. 0:20:02.320 --> 0:20:05.520 And I mean I came from the from the poetry industry, 0:20:05.640 --> 0:20:07.840 and while the meat industry has served as well in 0:20:07.880 --> 0:20:11.160 the last two that gets to really provide protein to humanity. 0:20:11.160 --> 0:20:14.359 We believe that there's a better technology to produce what 0:20:14.520 --> 0:20:17.080 we like, which is basically ingredient. Uh, and we do 0:20:17.160 --> 0:20:19.440 it without the birds. So our ambition is to take 0:20:19.480 --> 0:20:22.480 a relevant share out of the birds on the chicken 0:20:22.520 --> 0:20:27.200 industry and provide consumers for more sustainable, equally delicious and 0:20:27.520 --> 0:20:30.240 as nutritional as or even better than than than chicken. 0:20:30.320 --> 0:20:32.600 That's our goal. I gotta say, have you seen uh 0:20:33.400 --> 0:20:37.159 the film Baraca? Paul No I ask I always ask this, 0:20:37.359 --> 0:20:39.200 and you you never go and watch it. Have you 0:20:39.280 --> 0:20:46.080 seen this film? Andre Baraca documentary? There's no um, there's 0:20:46.080 --> 0:20:49.639 no dialogue. Um. They just have a three part series 0:20:49.680 --> 0:20:52.800 where they show um city life production. I think of 0:20:52.880 --> 0:20:57.080 cigarettes and then uh poultry factory and it just makes 0:20:57.119 --> 0:20:59.440 you never want to eat chicken again when you look 0:20:59.480 --> 0:21:01.439 at and I missed this, when you look at how 0:21:01.720 --> 0:21:07.119 factory um farms Uh, I guess raise although it seems 0:21:07.119 --> 0:21:11.720 like the wrong word and produced chicken. It's just horrible. 0:21:12.280 --> 0:21:16.040 But of course it tastes so good, you know, Andre, 0:21:16.280 --> 0:21:20.760 how do you replicate the delicious nous of a chick 0:21:20.880 --> 0:21:26.160 fil a with m plant based proteins? Now, you're absolutely right, 0:21:26.480 --> 0:21:30.000 um in the I haven't watched the movie, but I will. UM. 0:21:30.200 --> 0:21:31.760 What I can tell is that I have worked for 0:21:32.000 --> 0:21:34.960 over seven years in the poetry industry, and I think 0:21:35.000 --> 0:21:39.160 what happens is that we um as consumers, as meat lovers, um, 0:21:39.480 --> 0:21:42.280 we like the ingredient. I think that, as you said, 0:21:42.320 --> 0:21:44.679 it's so delicious, right, and you know it's nutricious, as 0:21:44.720 --> 0:21:47.520 delicious as fibers versas tile. Chicken is the only global 0:21:48.160 --> 0:21:52.200 animal protein, truly global and really local everywhere. So we 0:21:52.280 --> 0:21:54.920 recognize that from a consumer perspective. But as you said, 0:21:55.680 --> 0:21:58.200 I also don't know anyone who went to a poetry factory, 0:21:58.240 --> 0:22:01.120 including you know, all of us who came from the industry, 0:22:01.480 --> 0:22:03.359 who goes to a pulture factory and get out of 0:22:03.440 --> 0:22:07.000 the saying that they're craving chicken or any animal after 0:22:07.119 --> 0:22:09.280