WEBVTT - Surveillance: BOE Bond-Buying with Blanchflower 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferroll and Lisa Abramowitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.800 --> 0:00:23.560 To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot 0:00:23.560 --> 0:00:30.440 Com and of course on the Bloomberg terminal. We've got 0:00:30.440 --> 0:00:32.600 to go to the Dartmouth Bubble to speak to David 0:00:32.640 --> 0:00:35.560 blanche Flower, of course, professor of economics at Dartmouth That 0:00:35.760 --> 0:00:38.159 college is experience at the Bank of England and a 0:00:38.280 --> 0:00:42.000 student and a doubter of a fully employed United Kingdom 0:00:42.000 --> 0:00:46.280 of fully employed America as well. There he was David 0:00:46.280 --> 0:00:50.240 blanche Flower, John Major at seventy nine years old, coming 0:00:50.280 --> 0:00:53.080 down the aisle at Westminster Abbey for the Queen's funeral. 0:00:53.560 --> 0:00:56.760 And I've always adored the straight talking Norman Lamott, now 0:00:56.840 --> 0:01:02.600 eighty years old. In nineteen two, I will editorialize they 0:01:02.640 --> 0:01:07.920 did not hide. Where is Liz Trust No idea. We 0:01:07.959 --> 0:01:09.800 have no idea where Liz Trust is, We have no 0:01:09.880 --> 0:01:13.120 idea where the chancellor is. Tory MPs are hiding and 0:01:13.200 --> 0:01:15.880 every news organization is trying to get ministers to come 0:01:15.920 --> 0:01:19.120 on and talk about the chaos that's raining. So the 0:01:19.160 --> 0:01:22.160 fact that they're hiding is a really a really bad thing. 0:01:22.160 --> 0:01:24.080 And today is a big anniversary, So are not just 0:01:24.160 --> 0:01:28.200 nineties seventy two. September ninety seventy six was when Dennis 0:01:28.240 --> 0:01:31.399 Healy went to Heathrow Airport and the markets collapsed so 0:01:31.480 --> 0:01:34.160 much he had to come back to Downing Strea go 0:01:34.319 --> 0:01:35.680 to the i m F, and the i m F 0:01:35.880 --> 0:01:39.679 as intervened in the last twenty four hours saying, you know, 0:01:39.720 --> 0:01:43.039 you've got to reverse these policies. So we're seeing chaos 0:01:43.080 --> 0:01:46.080 in the markets, but the numbers of us warn I 0:01:46.120 --> 0:01:48.559 wrote a whole series of problems that this was coming 0:01:49.200 --> 0:01:52.080 a month ago, saying, you know, the problem is the 0:01:52.160 --> 0:01:56.280 markets will actually prevent amateurs doing stupid things. They haven't 0:01:56.280 --> 0:01:59.680 prevented it. But now we're having to see these organizations 0:01:59.800 --> 0:02:01.760 in of be in the Bank of England. But we 0:02:02.080 --> 0:02:05.720 are now in chaos. Danny. The students at Dartmouth that 0:02:05.840 --> 0:02:08.160 want to get a quality see with you are forced 0:02:08.200 --> 0:02:11.560 to gunpoint to read the appendix of the Green Book 0:02:11.560 --> 0:02:15.080 of the I m F. Their Financial Stability Book explained 0:02:15.120 --> 0:02:19.040 for our radio and television audience worldwide what the Bank 0:02:19.120 --> 0:02:24.359 of England does to study financial stability, including the stunning 0:02:24.400 --> 0:02:28.320 headline an hour ago that they're worried about collateral calls 0:02:28.360 --> 0:02:34.000 and the guilt market. Explain that mechanism at thread Needle Street. Well, 0:02:34.040 --> 0:02:37.160 I mean it's it's in a sense the story that 0:02:37.280 --> 0:02:41.560 I know. The book was thrown out last week. Um, well, 0:02:41.680 --> 0:02:43.960 so what we saw was a statement by the Governor 0:02:44.000 --> 0:02:46.560 of the Bank of England, who does not say I'm sorry, 0:02:46.560 --> 0:02:49.880 I have to take this take it away. That's okay, 0:02:49.880 --> 0:02:53.400 that was just a prime minister. Don't worry about it. Probably, Yeah, 0:02:53.400 --> 0:02:57.119 I've had so many funcles the state of the statement 0:02:57.160 --> 0:03:00.000 of the government of the Bank of England which caused 0:03:00.080 --> 0:03:04.160 markets to crash. Again, the MPC doesn't he doesn't set 0:03:04.200 --> 0:03:07.120 monetary policy. The Bank of England actually in the MPC 0:03:07.200 --> 0:03:10.000 actually does. So what we saw today, I mean it's 0:03:10.000 --> 0:03:12.280 in a sense I can't answer your question, top because 0:03:12.320 --> 0:03:15.959 today what we saw was a monetary intervention that presumably 0:03:16.000 --> 0:03:19.400 the Montary Policy Committee should have done. But the statement says, 0:03:19.520 --> 0:03:21.799 this was not a meeting of the MPC, this was 0:03:21.880 --> 0:03:25.800 financial policy meeting. I really don't understand. I mean, in 0:03:25.800 --> 0:03:28.919 a sense, the book says the job of this. I 0:03:28.919 --> 0:03:31.640 mean I remember going to the to the MPC and 0:03:31.639 --> 0:03:34.120 I was told monetary policy is meant to be boring, 0:03:34.480 --> 0:03:37.400 Monty policy is meant to calm nerves. In some sense, 0:03:37.760 --> 0:03:41.960 the intervention today was about that. It was about trying 0:03:42.000 --> 0:03:44.800 to calm nerves at the top end of the in 0:03:45.240 --> 0:03:48.360 the long term yield market. But but I mean, we 0:03:48.360 --> 0:03:50.720 we we saw that. They've also said that, I don't 0:03:50.720 --> 0:03:52.880 know quite how the FBC said it, that the Bank 0:03:52.880 --> 0:03:56.040 of Being is not going to do quantitative tightening this week. 0:03:56.120 --> 0:04:00.520 So the answer is the book says calm nerves, be stable, 0:04:00.680 --> 0:04:03.680 and it says the same thing to the to the Treasury. 0:04:03.720 --> 0:04:06.200 But none of that has happened. So I'm afraid the 0:04:06.200 --> 0:04:08.400 answer to your question is what that All of that 0:04:08.480 --> 0:04:11.920 was probably true a week ago, but today we're seeing, 0:04:12.080 --> 0:04:15.640 you know, the economics of pandemonium. If the economics of pandemonium, 0:04:15.720 --> 0:04:17.840 I like that. Danny, if you were on the Bank 0:04:17.839 --> 0:04:22.560 of England committee right now, what would you up to do? Well? 0:04:22.600 --> 0:04:24.920 You asked me a question last week and he said 0:04:24.960 --> 0:04:27.440 to me, would you ever vote for a rape wise? 0:04:27.960 --> 0:04:30.200 And I sort of said, well, of course, But last 0:04:30.200 --> 0:04:32.320 week I thought that wasn't the right through that. I 0:04:32.400 --> 0:04:35.520 actually think that I would have banged on the Governor's 0:04:35.560 --> 0:04:37.760 door today and I would have said, we have to 0:04:37.760 --> 0:04:40.960 have a Monetary Policy Committee meeting and basically we probably 0:04:40.960 --> 0:04:43.280 have to raise rates. We have to raise rates by 0:04:43.279 --> 0:04:47.200 a hundred basebook. We have to stabilize the economy. Somebody, 0:04:47.320 --> 0:04:50.160 somehow has to step in there and be the adults 0:04:50.160 --> 0:04:52.599 in the room. So I think that the Bank has 0:04:52.640 --> 0:04:54.640 to you know, this is going to cause all kinds 0:04:54.680 --> 0:04:58.159 of crisis, but somebody somewhere has to calm nerves. So 0:04:58.279 --> 0:05:00.920 I would literally be calling a meeting the NPC. Why 0:05:01.040 --> 0:05:03.480 we haven't when I have no idea? Right, so these 0:05:03.520 --> 0:05:06.479 decisions are made today? How come? I mean in a 0:05:06.520 --> 0:05:08.960 sense of suspicion. If I was on the NPC, I 0:05:09.000 --> 0:05:12.000 would have had the suspicion that the statement issued by 0:05:12.000 --> 0:05:14.400 the Governor of the Bank of Being on Monday was 0:05:14.440 --> 0:05:17.240 written by the Treasury. That would have been that would 0:05:17.240 --> 0:05:19.839 have been a major issue to me. So what we've 0:05:19.839 --> 0:05:23.200 been seeing is that the Chancellor's been meeted twice a 0:05:23.240 --> 0:05:25.720 week with the Governor. So the whole structure that Tom 0:05:25.720 --> 0:05:28.760 talked about is under threat. If you're an MPC member, 0:05:28.800 --> 0:05:30.400 you say well, I want to sit here and talk 0:05:30.440 --> 0:05:33.360 about this. You could certainly persuade me to vote for 0:05:33.360 --> 0:05:35.880 a hundred basis point rise. But you know, Lisa asked 0:05:35.880 --> 0:05:37.840 me last week, whatever I said, I said, of course 0:05:37.839 --> 0:05:39.840 they went. But it's you know, a week's a long 0:05:39.920 --> 0:05:42.920 time in the economics of pandemonia. Yes, certainly, in this 0:05:43.160 --> 0:05:45.280 very moment we just have about a minute. But your 0:05:45.320 --> 0:05:49.400 perspective going forward of the potential for some sort of 0:05:49.400 --> 0:05:52.360 politicization of this Bank of England at a time when 0:05:52.400 --> 0:05:54.640 if they were to raise by a hundred basis points 0:05:54.920 --> 0:05:58.440 it could really torpedo household balance sheets with mortgages that 0:05:58.480 --> 0:06:02.760 are tied to that rate. Well, absolutely, And I think 0:06:02.800 --> 0:06:05.040 in a sense the big story was over the last 0:06:05.080 --> 0:06:08.520 two days we've seen all the all the mortgage lenders 0:06:08.560 --> 0:06:11.280 in the UK basically backing off. We've taken out their 0:06:11.320 --> 0:06:14.600 products in the markets because they can't price mortgages because 0:06:14.600 --> 0:06:17.440 of the chaos. So if you're in a position where you, 0:06:17.560 --> 0:06:22.240 as a chancellor have actually ended up closing markets, I 0:06:22.240 --> 0:06:25.000 don't know, somehow or Mother Carmy has to come, but 0:06:25.040 --> 0:06:27.320 there is going to be and the rising house price 0:06:27.360 --> 0:06:29.000 at the rising interest rate is going to kill the 0:06:29.000 --> 0:06:32.200 housing market off. The UK was probably already in recession. 0:06:32.480 --> 0:06:36.880 It's been driven into recession by this utterly incompetent set 0:06:36.920 --> 0:06:39.200 of moves by the chances. And I don't know what 0:06:39.279 --> 0:06:41.720 he can do. I'm not sure I know anything that 0:06:41.760 --> 0:06:44.360 I do. It's not clear to me. You mean, if 0:06:44.360 --> 0:06:46.200 he resigned, what are they going to do? I don't 0:06:46.200 --> 0:06:48.360 know what. Danny, we didn't have you on to talk 0:06:48.400 --> 0:06:50.160 about the Bank of England. How are you going to 0:06:50.240 --> 0:06:52.400 do down in Florida with a hurricane? Are you gonna 0:06:52.440 --> 0:06:56.400 lose all your great fishing spots. My house is sitting 0:06:56.440 --> 0:06:58.600 on Santa Bell and I just heard as you came 0:06:58.640 --> 0:07:01.400 on here the hurricane has moved and it's heading right 0:07:01.440 --> 0:07:05.560 at my house. So that's not good. Yeah, it does 0:07:05.600 --> 0:07:07.960 not look good. It's head right at us. We've heard 0:07:07.960 --> 0:07:14.200 from David the islands had mandate, we've evacuation. We this 0:07:14.280 --> 0:07:16.160 is not good for us. We have heard this from 0:07:16.240 --> 0:07:19.480 David Kotok and others as well in Florida. David Blanche Feloire, 0:07:19.600 --> 0:07:21.800 hope that you do well in Florida, and thank you 0:07:22.160 --> 0:07:29.800 always for perspective from Dartmouth at College as well. We 0:07:30.200 --> 0:07:33.360 get very lucky here with Katrina Dudley. She was privilebly 0:07:33.480 --> 0:07:37.280 scheduled to talk about Tottenham Spurs, but said we will 0:07:37.320 --> 0:07:41.360 talk to her about her true expertise and something I'm 0:07:41.400 --> 0:07:44.320 as dumb as would John Farrell saved me here with 0:07:44.400 --> 0:07:49.760 Katrina Dudley Franklin Mutual on the nuances of the guilt market. 0:07:49.960 --> 0:07:53.440 I I just John, I'm I just I'm clueless. Well, 0:07:53.440 --> 0:07:55.520 we can start here at Katrina. Fantastic to have you 0:07:55.520 --> 0:07:59.280 with us. Katrina Danty there a Franklin Mutual advices Katrina 0:07:59.320 --> 0:08:02.280 walk us through the unique character, the unique profile of 0:08:02.360 --> 0:08:05.480 the guilt market and the required need of this same 0:08:05.560 --> 0:08:07.560 Bank of England to respond to what you think he 0:08:07.600 --> 0:08:10.200 needs to respond to. Look, I'm not sure that they 0:08:10.280 --> 0:08:13.200 actually need to respond to anything here. I mean, they're 0:08:13.240 --> 0:08:15.800 trying to stabilize a market. But I grew up in 0:08:15.840 --> 0:08:18.880 an environment where we were told that markets were efficient 0:08:19.000 --> 0:08:21.800 and so I understand it's only temporary, but I'm not 0:08:21.920 --> 0:08:24.920 sure that the the BOE is doing the right thing. 0:08:25.560 --> 0:08:27.840 People are now talking about whether or not this pushes 0:08:27.880 --> 0:08:30.480 off another rate decision, But let's go back and think 0:08:30.520 --> 0:08:33.480 about what happened last week when the BOE made that 0:08:33.679 --> 0:08:37.559 rate decision. There wasn't even consensus within the governors um. 0:08:37.600 --> 0:08:39.960 You had five of them for fifty, but you actually 0:08:40.000 --> 0:08:42.680 had three for seventy five and then one lonely person 0:08:42.720 --> 0:08:45.560 at twenty five. So even within the Bank of England 0:08:45.559 --> 0:08:47.640 there's not a lot of consensus, and I'm kind of 0:08:47.720 --> 0:08:52.520 curious whether or not that lack of consensus also is 0:08:52.640 --> 0:08:55.760 part of the issue why this statement is for temporary 0:08:56.200 --> 0:08:58.520 intervention and it really doesn't seem to have a lot 0:08:58.559 --> 0:09:00.560 of support becauld you know, you said you don't know 0:09:00.559 --> 0:09:02.960 that this was necessary, And we've heard from a host 0:09:02.960 --> 0:09:08.040 of US policymakers that say they do not see disorderly markets. Volatility, yes, 0:09:08.280 --> 0:09:12.040 disorderly no, what is that distinction when you look around 0:09:12.080 --> 0:09:15.640 the world. To understand disorderly policy maker makers need to 0:09:15.640 --> 0:09:21.400 step in versus a logical response to policy. Volatility just 0:09:21.520 --> 0:09:24.000 is caused by movements in price. So you know, the 0:09:24.000 --> 0:09:26.319 price goes up, the price goes down, and the price 0:09:26.440 --> 0:09:28.960 is always responding to news. So we've had a lot 0:09:29.080 --> 0:09:31.120 of news. We've had a lot of news out of 0:09:31.240 --> 0:09:33.840 various central banks, not just the b o E. So 0:09:33.920 --> 0:09:37.720 that's causing the volatility. When we have disorderly markets, you're 0:09:37.760 --> 0:09:41.960 talking about bias strikes in particular, so no one coming 0:09:42.040 --> 0:09:44.400 in and I don't think you've heard any of that 0:09:44.520 --> 0:09:47.240 out of the English markets. I think what you're seeing 0:09:47.600 --> 0:09:50.600 is people are going in and acting rationally. And when 0:09:50.640 --> 0:09:53.840 people are acting rationally, I don't think you need to 0:09:53.920 --> 0:09:56.800 have the Central Bank come in and intervene. And my 0:09:56.960 --> 0:09:59.760 fear is that through this intervention, I think that the 0:10:00.040 --> 0:10:02.920 him this kind of quantitative conundrum because we don't really 0:10:03.000 --> 0:10:06.240 know what they're trying to do here. No, no, we 0:10:06.280 --> 0:10:08.680 have to we have a surveillance correction, folks. It's not 0:10:08.800 --> 0:10:11.840 quantitative conundrum, John, help me here? What is it? We're 0:10:11.840 --> 0:10:17.720 calling it quantitative confusion to the confusion. The Chancellor will 0:10:17.760 --> 0:10:20.680 meet today with collective Wall Street. I wish Sir John 0:10:20.720 --> 0:10:24.240 Templeton was there, of course, with the Franklin Temperlin funds. 0:10:24.440 --> 0:10:28.400 That was many years ago. What should Wall Street listen 0:10:28.520 --> 0:10:33.280 to from a chancellor beleaguered? I think what you're looking 0:10:33.320 --> 0:10:36.400 for is long term intentions. That's what we want. That's 0:10:36.400 --> 0:10:38.959 what we've A week a month. Oh no, gosh, the 0:10:39.000 --> 0:10:40.880 long term and a week a month is not what 0:10:40.960 --> 0:10:43.280 we're talking about. We're talking about we'd like to understand 0:10:43.280 --> 0:10:45.880 what's going to happen over the course of the next year. UM. 0:10:45.920 --> 0:10:48.360 And that's where the FED dot plots have been very 0:10:48.400 --> 0:10:53.240 instrumental in giving stability. You don't necessarily need to agree 0:10:53.480 --> 0:10:55.880 with what the central Bank is doing, but if you 0:10:56.040 --> 0:10:59.520 understand the direction of travel as an investor, you can 0:10:59.559 --> 0:11:02.600 position in yourself and you can do the right things 0:11:03.040 --> 0:11:05.280 knowing where we're heading. And I think that that's what 0:11:05.360 --> 0:11:07.720 people are looking for UM and I think that you 0:11:07.720 --> 0:11:10.319 can distinguish that from the BOE, where we're not quite 0:11:10.320 --> 0:11:13.319 sure where they're going. Exante datas ends and order to 0:11:13.440 --> 0:11:15.280 join us. About an hour ago, we just tweeted out 0:11:15.280 --> 0:11:19.000 the solution to one problem creates another problem. They've stepped 0:11:19.040 --> 0:11:21.839 into the bond market and Sterling is weaker, Katrina by 0:11:22.000 --> 0:11:24.960 one point seven percent of one of five fifty three. 0:11:25.000 --> 0:11:26.800 Do you think by addressing the one problem in the 0:11:26.800 --> 0:11:29.640 guilt market they consider it one? Do you think they're 0:11:29.679 --> 0:11:32.880 creating another problem in the FX market? Look, I think 0:11:32.880 --> 0:11:35.080 you're you're you're seeing that weakness in the in the 0:11:35.120 --> 0:11:37.640 guilt market. I think there's two aspects here. First of all, 0:11:37.679 --> 0:11:39.760 people are thinking that the rate decision in the b 0:11:39.920 --> 0:11:41.760 o E. You know that they actually meet. You know 0:11:41.800 --> 0:11:44.400 they're going to delay that given what they're talking about. 0:11:44.600 --> 0:11:46.440 The second thing I think is we were talking about 0:11:46.440 --> 0:11:50.920 you need to understand the importance of controlling inflation in 0:11:50.960 --> 0:11:53.839 the UK because a lot of the UK debt is 0:11:53.880 --> 0:11:57.439 inflation linked and that's something that's very different to any 0:11:57.440 --> 0:11:59.520 other market around the world. So the b O E 0:11:59.760 --> 0:12:03.439 re Lean needs to keep a hawkish eye on inflation 0:12:03.520 --> 0:12:06.560 and controlling inflation. And it's not just in order to 0:12:06.600 --> 0:12:10.520 generate price stability, it's actually also to control their debt costs. 0:12:10.679 --> 0:12:13.160 Well said, fantastic to have you with Uskatraine. Thank you 0:12:14.120 --> 0:12:29.360 that Franklin Mutchell advices right now. Joining is Allen at Ruskin. 0:12:29.440 --> 0:12:31.680 This is an honor owning the court at Royal Bank 0:12:31.679 --> 0:12:35.679 of Scotland for decades in chief international strategist for David 0:12:35.679 --> 0:12:38.960 folkos LANDAU at Deutsche Bank. Ellen. What I love about 0:12:39.000 --> 0:12:40.760 you is you going to write a research note and 0:12:40.840 --> 0:12:43.600 six hours later you were wrong. You said in your 0:12:43.640 --> 0:12:47.600 research note yesterday afternoon that you thought, well, let the 0:12:47.760 --> 0:12:51.040 f X panic pass and then act. They didn't read 0:12:51.120 --> 0:12:54.400 your note. What where would we be now if the 0:12:54.440 --> 0:12:59.240 Bank of England hadn't acted this morning? Well, I think 0:12:59.240 --> 0:13:02.120 we'd probably be a better place, Tom. I'm I'm I'm 0:13:02.120 --> 0:13:04.680 pretty critical with the you know about the actions that 0:13:04.720 --> 0:13:08.480 we've just seen here. Most obviously this is negative for 0:13:08.520 --> 0:13:11.760 sterling to the extent that the Bank of England is 0:13:11.880 --> 0:13:16.920 effectively adding more liquidity into the system. They are lowering 0:13:16.960 --> 0:13:20.840 nominal rates. If anything, they are lifting up price expectations, 0:13:20.920 --> 0:13:23.800 which means real rates are getting a double whammy, as 0:13:23.840 --> 0:13:27.199 it were, and the pounders under additional pressure, which then 0:13:27.240 --> 0:13:31.480 puts them under additional pressure. Um. And you know, maybe 0:13:31.559 --> 0:13:35.200 they would like to see a situation where um, you know, 0:13:35.280 --> 0:13:39.319 they could see heels coming down in general, but if anything, 0:13:39.360 --> 0:13:41.560 this place is more pressure on them at the front 0:13:41.679 --> 0:13:45.080 end of the curve. November three, next sketch of mating Alan, 0:13:45.360 --> 0:13:49.959 how big is that height going to be? Um? Well, 0:13:49.960 --> 0:13:52.840 when I last looked, and there was before this latest actions, 0:13:52.840 --> 0:13:55.440 a hundred and fifty basis points is effectively priced in, 0:13:55.880 --> 0:13:58.640 so the market is rarely pushing them into a corner 0:13:58.679 --> 0:14:02.360 to do something. You and without them acting in that 0:14:02.400 --> 0:14:06.520 way effectively the pounds going to go down further, so um, 0:14:06.559 --> 0:14:10.440 you know it. It remains to be seen how much 0:14:10.720 --> 0:14:14.520 will be needed on the day itself. There's obviously a 0:14:14.559 --> 0:14:16.640 lot of water that's going to flow under this bridge 0:14:17.040 --> 0:14:20.360 before then, but I would suggest that you know, at 0:14:20.400 --> 0:14:22.480 least a hundred basis points is going to be needed 0:14:22.520 --> 0:14:25.000 at that point. And can they do anything about what's 0:14:25.040 --> 0:14:29.400 happening with pounds sterling? The forces worldwide right now are 0:14:29.440 --> 0:14:33.960 incredibly powerful, the FED hiking cycle, the dollar dominance off 0:14:34.000 --> 0:14:36.040 the back of it. Can they actually do anything to 0:14:36.080 --> 0:14:39.960 fight this? Mean, it's a great point, John, I mean, 0:14:40.080 --> 0:14:41.760 you know, it's a question of how much should they 0:14:41.800 --> 0:14:44.240 fight this? You know, one of the big problems the 0:14:44.360 --> 0:14:48.160 UK has is that it's balance of payments is in 0:14:48.800 --> 0:14:52.560 a seriously negative condition as far as the pounds concerned. 0:14:53.120 --> 0:14:55.600 The current account is one, you know, the deficit is 0:14:55.600 --> 0:14:58.680 one of the largest out there. The narrow basic balance 0:14:58.800 --> 0:15:00.680 you know, when I last looked in terms of the 0:15:00.760 --> 0:15:03.840 last twelve months was amongst the worst. Really of forty 0:15:03.880 --> 0:15:07.520 five countries are attract so the financing needs are huge, 0:15:08.120 --> 0:15:11.200 and I think the issue is just, you know, what 0:15:11.400 --> 0:15:15.520 is the appropriate policy next to stem the tide as 0:15:15.520 --> 0:15:17.960 it were? And I think the Bank of England has 0:15:17.960 --> 0:15:20.560 been back to some extent into a corner by unorthodox 0:15:20.640 --> 0:15:23.480 fiscal policies as well. But Ellen, I guess another way 0:15:23.520 --> 0:15:25.840 of asking the same question is how much is this 0:15:25.920 --> 0:15:28.800 a dollar story and not really a pound story, not 0:15:29.000 --> 0:15:32.640 really a euro story, not really again story. Yeah, I 0:15:32.640 --> 0:15:34.920 think you know, obviously you can one to focus on 0:15:35.240 --> 0:15:39.000 euro sterling probably as the metric that tells you just 0:15:39.360 --> 0:15:42.240 how much of this is a sterling story, and by 0:15:42.280 --> 0:15:44.720 that account you say, well, this, you know, this shouldn't 0:15:45.360 --> 0:15:49.120 really count as any sort of crisis per se. If 0:15:49.160 --> 0:15:51.440 you look at the sterling on a trade weighted basis, 0:15:51.480 --> 0:15:54.160 on a real effective basis, it's not all that week, 0:15:54.520 --> 0:15:57.640 So you know, don't respond in a sense. So, you know, 0:15:57.680 --> 0:15:59.280 I have a little bit of sympathy for the idea 0:15:59.360 --> 0:16:03.200 that the dollar and the Israeli the dominant story behind 0:16:03.400 --> 0:16:05.640 a lot of what's going on here. When is a 0:16:05.680 --> 0:16:09.040 strong dollar in and of itself allan create havoc for 0:16:09.040 --> 0:16:11.520 the rest of the world economy that rebounds back to 0:16:11.560 --> 0:16:14.120 the US, At what point do we see I don't 0:16:14.120 --> 0:16:16.480 want to say a global recession, but something that looks 0:16:16.560 --> 0:16:20.560 like that because of the strong dollar. Yeah, I mean, 0:16:20.600 --> 0:16:23.400 I think, you know, so far the disruptions are being 0:16:23.480 --> 0:16:25.840 quite limited, but both in terms of what we're seeing 0:16:25.840 --> 0:16:29.400 globally and the sort of feedback loops back to you know, 0:16:29.560 --> 0:16:34.760 US risk appetite metrics. So, you know, I think some 0:16:34.800 --> 0:16:38.080 people would say markets a little bit broken because the 0:16:38.200 --> 0:16:40.720 Japanese are having to intervene. You know. I think you 0:16:40.720 --> 0:16:43.200 could say there's a yend story there, and there's a 0:16:43.280 --> 0:16:48.040 B O J divergent story that's dominant. Um the UK 0:16:48.320 --> 0:16:51.440 balance of payment stories unique so so far, I think 0:16:51.480 --> 0:16:54.840 we shouldn't you cry wolf too loudly. I don't think 0:16:54.840 --> 0:16:58.360 that's warranted. Alan, who's next to blink, The ECB s 0:16:58.400 --> 0:17:01.720 Holsman is talking up an other seventy five basis point hike. 0:17:01.800 --> 0:17:03.880 He spoke to our colleague, a good friend of this 0:17:03.920 --> 0:17:07.679 program area today earlier this morning, a good friend of 0:17:07.680 --> 0:17:10.000 ours talk. I'm not sure whether she's a good friend 0:17:10.040 --> 0:17:13.320 of yours, a good friend of ours. Alan, who's next 0:17:13.359 --> 0:17:17.400 to blink? Well, look, I think everyone is seen as 0:17:17.520 --> 0:17:22.639 tightening substantially in terms of the G ten world for 0:17:22.760 --> 0:17:25.600 this year at least. I think the blinking is probably 0:17:25.640 --> 0:17:29.960 going to start in three when the US fed cycle 0:17:30.240 --> 0:17:33.000 you know, essentially comes to an end. At that point 0:17:33.040 --> 0:17:35.280 in time, you presume the global economy but will be 0:17:35.280 --> 0:17:39.960 in worse shape in general, growth nationally for most economies 0:17:40.000 --> 0:17:43.400 will be you know, that much more in a much 0:17:43.440 --> 0:17:46.080 more serious downturn. And that point, I think there's going 0:17:46.119 --> 0:17:48.359 to be this real challenge where growth is very weak 0:17:48.560 --> 0:17:51.560 and inflation is still at much higher levels and targets 0:17:51.600 --> 0:17:54.960 suggest is warranted or desired, And at that point, I 0:17:55.000 --> 0:17:58.000 think policy is going to get into you know, a 0:17:58.160 --> 0:18:01.960 much more much more tangled and much we'll confuse with 0:18:02.000 --> 0:18:05.320 the state. And I'm Ruskin at Deutsche Bank. Thank you, Alan, 0:18:05.400 --> 0:18:06.919 You just one of the best described to catch out 0:18:06.960 --> 0:18:13.560 what he said as a white right now with a 0:18:13.600 --> 0:18:17.200 real view, real worldview, I should say. Sarah Maleck joins 0:18:17.280 --> 0:18:21.320 US chief investment officer in Novine. Sarah, do you do 0:18:21.359 --> 0:18:26.399 you ignore this within conventional institutional money? How do you 0:18:26.560 --> 0:18:30.879 sift in the tumult of the last three days. I 0:18:30.920 --> 0:18:34.240 think as long as the dollar and eals continue to 0:18:34.320 --> 0:18:37.440 move upward, investors need to brace themselves for more pain. Now, 0:18:37.480 --> 0:18:39.719 there's a few things on the horizon that might at 0:18:39.760 --> 0:18:43.199 least give us some stability here, and that's earnings and 0:18:43.320 --> 0:18:47.160 some cracks that we're seeing in inflation, and also watching technicals. Unfortunately, 0:18:47.320 --> 0:18:49.600 we seem to be breaking through the juvenleles, which means 0:18:49.600 --> 0:18:52.960 we probably hit thirty four the S and P five hundred. 0:18:53.080 --> 0:18:56.080 But earnings we're seeing in sensus start to decline a bit, 0:18:56.320 --> 0:18:59.800 and earnings generally don't crack until p M I going 0:18:59.840 --> 0:19:02.399 to contractionary territory. So I think actually Q three earnings 0:19:02.400 --> 0:19:05.240 could be okay, give investors a bit of a short 0:19:05.359 --> 0:19:08.479 term sigh of relief. And then also inflation still remains 0:19:08.560 --> 0:19:10.840 very hot, but we are seeing some moderation in rents, 0:19:10.880 --> 0:19:13.359 which is a big piece of core inflation, so you 0:19:13.440 --> 0:19:15.840 might at least start to see a plateau and inflation, 0:19:15.880 --> 0:19:17.720 which I think again at this point that could be 0:19:17.800 --> 0:19:20.520 a positive for investors short term bounce, but against some 0:19:20.640 --> 0:19:22.800 stabilization for the markets would be a good thing. So 0:19:22.960 --> 0:19:25.080 the pushback we get against the earning spas is that 0:19:25.119 --> 0:19:27.080 we live in a nominal world and nominal growth that's 0:19:27.080 --> 0:19:29.600 been phenomenal because inflation is so high, and how can 0:19:29.640 --> 0:19:32.119 you push back against earnings in that environment? So you 0:19:32.200 --> 0:19:34.880 kind if you get focused on the margins on costs, 0:19:35.560 --> 0:19:38.879 what a marches look like going into your end. I 0:19:38.920 --> 0:19:41.520 agree margins are a real issue for for earnings because 0:19:41.560 --> 0:19:44.040 they're basically at peak levels, and with the costs inputs 0:19:44.040 --> 0:19:46.879 coming in, only those companies with pricing power will be 0:19:46.880 --> 0:19:49.960 able to maintain or expand margins. Also, that dollars ahead 0:19:49.960 --> 0:19:52.040 win for earnings, and some of these signs of demand 0:19:52.040 --> 0:19:54.240 destructure are eventually going to hit earnings. The question is 0:19:54.280 --> 0:19:56.960 what's the timing of that. Likely not the third order, 0:19:57.119 --> 0:19:59.439 but it is to come. Similar to the employment market, 0:19:59.440 --> 0:20:03.520 when does that crack? Probably sometime early three and that's 0:20:03.520 --> 0:20:05.639 when you hit your recession. So I don't think we 0:20:05.640 --> 0:20:07.480 can just hang on to the positive earners of the 0:20:07.520 --> 0:20:09.639 third quarter, but given where the market is right now 0:20:09.680 --> 0:20:11.480 in terms of valuations, that it might at least just 0:20:11.720 --> 0:20:13.919 help us stabilize because they should come in all right 0:20:13.960 --> 0:20:17.200 for this quarter. So as an investor, when do a 0:20:17.320 --> 0:20:21.119 market directions market momentum, when does that overcome some of 0:20:21.119 --> 0:20:25.719 these fundamental considerations like margins and earnings, and how quickly 0:20:25.880 --> 0:20:28.800 this bleeds out into the economy. I think when you 0:20:28.800 --> 0:20:31.520 get into these periods of extreme stress like we're seeing now, 0:20:31.520 --> 0:20:34.160 it's somewhat of an unwind given what's going on outside 0:20:34.160 --> 0:20:37.080 of the US and also the continued pain from higher yields, 0:20:37.080 --> 0:20:39.640 which makes equities let us less attractive. We do turn 0:20:39.720 --> 0:20:42.520 somewhat to tecticles to see can the market hold some 0:20:42.600 --> 0:20:45.320 of its lows and moving averages. The issue, of course, 0:20:45.359 --> 0:20:47.160 is that it's not really holding those and I think 0:20:47.200 --> 0:20:50.560 until we can technically get to a stable, more stable level, 0:20:50.760 --> 0:20:52.800 markets are going to just keep declining due to these 0:20:53.200 --> 0:20:57.159 higher yields, higher inflation numbers, and fears over you know, 0:20:57.160 --> 0:20:58.639 when is the next you to drop? Is it going 0:20:58.680 --> 0:21:00.119 to be in the UK, Is it going to be 0:21:00.440 --> 0:21:02.359 in Russian Ukraine? As some of these areas that just 0:21:02.440 --> 0:21:06.000 keep piling onto the negative narrative happening sounds like people 0:21:06.240 --> 0:21:07.960 are hiding under their beds with a whole lot of 0:21:07.960 --> 0:21:10.760 cash just sort of sitting there waiting for it to pass. 0:21:10.960 --> 0:21:12.600 Are you is that what's going on? Or is there 0:21:12.640 --> 0:21:15.040 something else that you're kind of figuring out how to 0:21:15.119 --> 0:21:18.199 play in here? I mean, I get the reason, you know, 0:21:18.280 --> 0:21:21.040