WEBVTT - Bloomberg Surveillance TV: April 16, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.200 Terminal and the Bloomberg Business app. Mohammed's with us around 0:00:37.240 --> 0:00:39.239 the table. Mhammeed caa mornet here. Good morning, John, it's 0:00:39.240 --> 0:00:40.280 going to see I won't ask you if you can 0:00:40.320 --> 0:00:42.279 get an auto loan from Bank for America. I will 0:00:42.320 --> 0:00:44.400 talk to you about what we've been writing about, though extensively, 0:00:44.440 --> 0:00:46.120 and I think the rest of the street is catching on. 0:00:46.479 --> 0:00:47.960 I think the rest of the media is catching on 0:00:48.040 --> 0:00:50.280 as well. The amount of times we've all read articles 0:00:50.320 --> 0:00:53.680 over the last few days talking about US exceptionalism. This 0:00:53.720 --> 0:00:55.880 is something you've been touching on. What are the sources 0:00:55.920 --> 0:00:57.960 of it, Muhammad? And how durable do you think they are? 0:00:58.400 --> 0:01:00.560 I think you have two sets of sources that speak 0:01:00.560 --> 0:01:03.880 to us exceptionalism. One is the inherent attributes of the US. 0:01:04.240 --> 0:01:08.480 It is more flexible, it is benefiting from the higher 0:01:08.560 --> 0:01:11.920 labor force participation, it is more entrepreneurial. And then there's 0:01:11.959 --> 0:01:15.040 a second element, which is policy. It's been running a 0:01:15.200 --> 0:01:18.880 very very loose fiscal policy. We're running deficits of seven 0:01:18.880 --> 0:01:23.280 percent when unemployment is under four percent. That is unthinkable, 0:01:23.400 --> 0:01:26.840 but it's happening. But also importantly, the US is investing 0:01:26.840 --> 0:01:30.279 in the drivers of tomorrow's growth and it's way ahead 0:01:30.280 --> 0:01:31.800 of other countries in that. And I think if you 0:01:31.800 --> 0:01:36.280 put all that together, you get this incredible engine that 0:01:36.360 --> 0:01:37.360 drives exceptionalism. 0:01:37.440 --> 0:01:40.240 How sustainable to youth in the second element is policy. 0:01:41.000 --> 0:01:44.880 So I think it is more sustainable than people realize, 0:01:44.920 --> 0:01:47.560 but there is a limit to it. Look, this can 0:01:47.600 --> 0:01:49.960 be derailed by one of two things. Oil at one 0:01:50.040 --> 0:01:54.559 ten or a FED that's too tight. Those are these 0:01:54.600 --> 0:01:57.320 two things. And if they come together, which is a 0:01:57.360 --> 0:02:00.720 possibility the geopoliticist gets worse, then you could do ail 0:02:00.960 --> 0:02:01.520 US growth. 0:02:01.920 --> 0:02:04.480 You wrote about this just in terms of the pressures 0:02:04.640 --> 0:02:06.280 of what's going on with the Middle East and the 0:02:06.280 --> 0:02:09.680 potential increasing commodity prices on the heels of that. One 0:02:09.760 --> 0:02:11.639 kind of theme we've heard is that Europe will be 0:02:11.720 --> 0:02:14.840 hit much harder than the US. You're saying, maybe so, 0:02:15.400 --> 0:02:17.480 but it doesn't mean that the US is immune. Can 0:02:17.520 --> 0:02:18.079 you elaborate? 0:02:18.400 --> 0:02:18.480 So? 0:02:18.560 --> 0:02:21.960 I think the US dominates in relative space. It dominates 0:02:21.960 --> 0:02:25.920 almost regardless of what the global scenario is. But in 0:02:26.080 --> 0:02:30.160 absolute space, the US has dominated so far, and for 0:02:30.240 --> 0:02:33.160 the US to continue to dominate, we need to avoid 0:02:33.440 --> 0:02:36.919 really high energy prices, and we need to avoid another 0:02:36.919 --> 0:02:40.320 policy mistake, so it will dominate in relative space for 0:02:40.360 --> 0:02:41.200 a very long time. 0:02:41.639 --> 0:02:44.160 This goes to the question that ECB board members were 0:02:44.160 --> 0:02:46.240 talking about, which is that they might not be able 0:02:46.280 --> 0:02:49.960 to cut rates because of geopolitics. Do you think that 0:02:50.040 --> 0:02:53.000 this sort of one two punch is looking more likely 0:02:53.200 --> 0:02:55.160 for the Federal Reserve as well, that they will keep 0:02:55.280 --> 0:02:58.880 rates higher for longer in response to higher commodity prices, 0:02:59.240 --> 0:03:02.000 even at a time of a potential shock that could 0:03:02.040 --> 0:03:02.920 curtail growth. 0:03:03.000 --> 0:03:05.000 So, Lisa, this is a great question because I think 0:03:05.120 --> 0:03:08.200 most people, not everybody, most people on your show have 0:03:08.280 --> 0:03:10.960 now agreed that the last mile of inflation is going 0:03:11.000 --> 0:03:14.560 to be complicated, that inflation's most sticky. Where there's massive 0:03:14.600 --> 0:03:18.160 disagreement is what the FED should do and what the 0:03:18.200 --> 0:03:21.880 FED will do. Right, there's massive disagreement that those who 0:03:21.880 --> 0:03:24.640 think the FED should hike. You had the UBS today 0:03:25.080 --> 0:03:29.000 showing six percent that those who think like me, the 0:03:29.040 --> 0:03:32.840 FED should maintain its course and cut twice this year 0:03:32.960 --> 0:03:35.240 by twenty five basis points. Now, why are we all 0:03:35.280 --> 0:03:39.080 over the place. It's because we disagree on what our 0:03:39.160 --> 0:03:42.200 star is. We disagree on what the white inflation target is, 0:03:42.600 --> 0:03:45.040 and therefore we disagree on how the FED can best 0:03:45.080 --> 0:03:48.280 meet as dual mandate. So this is where it's going 0:03:48.320 --> 0:03:51.640 to play out over the next year. In order to 0:03:51.640 --> 0:03:54.360 predict the FED. If you think that we remain data dependent, 0:03:55.040 --> 0:03:58.560 which they are today because they got so embarrassed by 0:03:58.560 --> 0:04:02.400 what happened twenty twenty one, then the FED will not cut. If, however, 0:04:02.640 --> 0:04:06.240 like me, hope that they will go from excessive data 0:04:06.280 --> 0:04:09.720 dependency to also having a macro framework in their head 0:04:09.840 --> 0:04:12.280 and looking forward, then they would cut. And that's what 0:04:12.280 --> 0:04:15.760 we're going to see play out in the next few months. 0:04:15.800 --> 0:04:18.120 But if they are data dependent and you see inflation, 0:04:18.279 --> 0:04:21.240 we had hot retail sales yesterday, and they do, and 0:04:21.279 --> 0:04:24.359 they do start to get more concerned about inflation. Is 0:04:24.400 --> 0:04:27.440 it not just they're not going to cut like the ubs? Note, 0:04:27.480 --> 0:04:28.400 do you think they could hike? 0:04:29.240 --> 0:04:32.159 Look inflation. If inflation gets much worse, they could hike. 0:04:32.360 --> 0:04:35.360 But I think if they do hike, we're going to 0:04:35.440 --> 0:04:37.680 have a regional banking crisis. We're going to have all 0:04:37.760 --> 0:04:41.919 sorts of damage in the marketplace. And I think that 0:04:42.040 --> 0:04:43.800 is at the back of the head. So I think 0:04:43.800 --> 0:04:47.560 the likelihood of them hiking is low. Is it zero? 0:04:47.680 --> 0:04:47.760 No? 0:04:48.200 --> 0:04:48.640 They could. 0:04:48.760 --> 0:04:51.200 What's the difference between them hiking twenty five basis points 0:04:51.200 --> 0:04:52.479 and just hold them for the rest of the year. 0:04:53.040 --> 0:04:55.000 How big is twenty five basis points? 0:04:55.520 --> 0:04:57.679 The minute that hack twenty five basis points, they open 0:04:57.960 --> 0:05:02.320 the way to hiking more. That's the difference we're going 0:05:02.360 --> 0:05:05.520 to see today. Chair Pal is going to try, I think, 0:05:05.560 --> 0:05:08.679 to do exactly what he did earlier, which is maintained 0:05:08.760 --> 0:05:12.560 maximum optionality. On the one hand, I think he's going 0:05:12.600 --> 0:05:15.719 to basically say the inflation story has not fundamentally changed, 0:05:15.720 --> 0:05:18.039 and he's going to probably use the word fundamentally. On 0:05:18.080 --> 0:05:20.760 the other hand, he's going to say, well, we need 0:05:20.800 --> 0:05:23.200 more evidence to know what we're doing, and he's going 0:05:23.240 --> 0:05:25.520 to keep his options open, and that's what he's going 0:05:25.520 --> 0:05:26.480 to keep doing for a while. 0:05:26.520 --> 0:05:28.039 Is it too early to move away from bumps in 0:05:28.040 --> 0:05:29.800 the road? Three bumps in the road. 0:05:30.440 --> 0:05:33.719 I would have moved away a long time ago, but 0:05:35.560 --> 0:05:37.320 then probably will maintain the bumps in the road. 0:05:38.600 --> 0:05:41.159 You talk about all the disagreements, and I'm still sitting 0:05:41.240 --> 0:05:45.599 here thinking about what fe Williams, New York Fetcher william 0:05:45.680 --> 0:05:47.919 said when he said, you know, we're not really thinking 0:05:47.920 --> 0:05:49.800 about the target. We're just kind of playing it by 0:05:49.880 --> 0:05:50.960 year and taking the data. 0:05:51.400 --> 0:05:53.200 And you talked about how the biggest debate. 0:05:53.120 --> 0:05:56.000 Among you and your colleagues really is where is the endpoint? 0:05:56.040 --> 0:05:58.839 It basically is the destination is the biggest issue. What 0:05:58.960 --> 0:06:02.279 gives you confidence in your goal of the destination that 0:06:02.360 --> 0:06:04.600 makes you think that they should just sort of adopt 0:06:04.680 --> 0:06:07.200 some kind of belief and go with it rather than 0:06:07.279 --> 0:06:09.760 just kind of live in the marass that we're living 0:06:09.839 --> 0:06:11.200 in of just complete confusion. 0:06:11.520 --> 0:06:14.240 So confidence, I don't have, hope I have Okay, I 0:06:14.279 --> 0:06:16.400 mean there's a definitely confidence and hope. You know, they 0:06:16.440 --> 0:06:19.560 do have a deal mandate. They do understand how exceptional 0:06:19.680 --> 0:06:24.080 US economic performance has been. That proud of it, it's incredible. 0:06:24.080 --> 0:06:26.560 I mean, you opened up with how depressing it is 0:06:27.120 --> 0:06:29.680 that we've had two days of massive losses. If I 0:06:29.720 --> 0:06:32.760 had come here in December and said to you all 0:06:33.200 --> 0:06:36.720 the market is going to reprice fed cuts from seven 0:06:37.240 --> 0:06:39.840 to under two and the S and P would be 0:06:39.920 --> 0:06:42.240 up six percent in a prop what would you have 0:06:42.240 --> 0:06:45.800 said to me, you're nuts. Were still up six percent 0:06:46.080 --> 0:06:48.680 on the SNP, right, we were up ten percent in 0:06:48.680 --> 0:06:51.839 the first quarter. So to go back to your question, 0:06:51.920 --> 0:06:54.760 I don't have confidence. I have hope. That's what I have. 0:06:54.839 --> 0:06:57.640 Hope that they'll understand that they need to get away 0:06:57.640 --> 0:07:01.360 from this excessive data dependence. They need to look forward, 0:07:01.720 --> 0:07:02.159 and they. 0:07:02.040 --> 0:07:02.800 Need to have a view. 0:07:03.240 --> 0:07:06.360 You know, they're being pressed hard on tell us what 0:07:06.400 --> 0:07:09.040 you view with and at some point they're gonna have 0:07:09.080 --> 0:07:13.040 to live on that now. You know. President Williams has said, 0:07:13.120 --> 0:07:15.040 you know, think about the target. You're going to hear 0:07:15.120 --> 0:07:17.920 this term longer term. Come in every time to talk 0:07:17.960 --> 0:07:21.960 about the inflation target. Yes, it's our longer term inflation target, yeah, right, 0:07:22.440 --> 0:07:24.760 or medium term inflation target. And that's the way they're 0:07:24.760 --> 0:07:26.000 going to do it. They're not going to come out 0:07:26.000 --> 0:07:28.400 with some massive statement. They're just going to start offer 0:07:28.440 --> 0:07:30.720 skating what exactly is meant by a target? 0:07:30.840 --> 0:07:32.680 Can you imagine if Chairman Pound came out this afternoon 0:07:32.720 --> 0:07:35.040 he said I don't have confidence, I have hope. Can 0:07:35.080 --> 0:07:37.160 you imagine how that would go down with financial markets? 0:07:37.160 --> 0:07:39.480 You know what people would clap, They would say, finally, 0:07:39.520 --> 0:07:40.880 you're telling us of. 0:07:40.920 --> 0:07:43.480 Days type stuff. You know, I don't have confidence, I 0:07:43.480 --> 0:07:54.480 have hope. I'm really close to say that, Johning us. 0:07:54.520 --> 0:07:57.520 Now around the table, it's David Hart, the CEO of PGM. 0:07:57.600 --> 0:07:59.800 David Camonicsy, sir, good morning, it's supposed to be with you. 0:08:00.000 --> 0:08:01.480 Thank you very much for being with us. I want 0:08:01.480 --> 0:08:03.240 to pick up on Shinati's comments at the end that 0:08:03.400 --> 0:08:06.000 the prospective money coming out of money market funds and 0:08:06.120 --> 0:08:08.400 Mike writing gas sway, are you beginning to see that 0:08:08.400 --> 0:08:09.040 trend develop? 0:08:09.440 --> 0:08:10.880 You know, Jath, we are seeing that. 0:08:11.280 --> 0:08:13.480 We've seen that really for the last six months, but 0:08:13.520 --> 0:08:16.080 it's been in small, small pieces. But I do think 0:08:16.080 --> 0:08:18.400 it's beginning to pick up pick up steam. 0:08:18.840 --> 0:08:21.240 And some of the reasons are obvious. You know. 0:08:21.320 --> 0:08:25.120 Certainly, I'm at a higher level of interest rates relative 0:08:25.120 --> 0:08:27.240 to money market funds, and as we begin to see 0:08:27.560 --> 0:08:30.880 rates peak and then decline duration begins to look a 0:08:30.880 --> 0:08:33.400 little bit more more attractive. But there are two other 0:08:33.440 --> 0:08:35.840 things that are going on which are at least as important. 0:08:36.240 --> 0:08:39.199 One is that the big pension funds with higher rates 0:08:39.200 --> 0:08:42.560 are actually better funded and so they actually are using 0:08:42.600 --> 0:08:45.040 this as a chance to de risk, and that means 0:08:45.080 --> 0:08:47.360 for them they are moving money into fixed income. 0:08:47.720 --> 0:08:48.720 And the second is. 0:08:48.640 --> 0:08:53.200 That you know, we have the continued demographic trends going on, 0:08:53.240 --> 0:08:55.280 not just in this country but around the world, and 0:08:55.440 --> 0:08:59.240 retirees need income. So we are in the process now 0:08:59.280 --> 0:09:04.000 of this huge shift from accumulation products to decumulation and 0:09:04.040 --> 0:09:07.200 income products, and those need fixed income. So if you 0:09:07.280 --> 0:09:09.680 take the kind of short term shift, you add to 0:09:09.720 --> 0:09:13.080 them two structural shifts. We think over the next three years, 0:09:13.120 --> 0:09:15.160 we really are going to see bonds are back. 0:09:15.360 --> 0:09:17.000 This sounds like a new regiame. And I'm going to 0:09:17.040 --> 0:09:19.080 give you obtain a bit of a shouts out because 0:09:19.120 --> 0:09:21.720 you're a modest man. My Cullings, Greg paid is rubbitt 0:09:21.720 --> 0:09:25.800 SIP just absolutely phenomenal pre pandemic really defining that bond 0:09:25.840 --> 0:09:28.640 market regime of yester year. Can you talk to me 0:09:28.679 --> 0:09:31.200 about how different this regime is going to be compared 0:09:31.240 --> 0:09:31.520 to that. 0:09:31.480 --> 0:09:34.200 We think it will be different, and you're right, they 0:09:34.280 --> 0:09:36.319 were right on the lower for longer, for quite a 0:09:36.360 --> 0:09:39.200 long time in that, and then more recently our call 0:09:39.280 --> 0:09:41.640 has actually been that we're going to be higher. So 0:09:42.000 --> 0:09:44.640 if you go back six months, we were very early 0:09:44.760 --> 0:09:48.440 to the hey, we're looking at kind of two cuts 0:09:48.120 --> 0:09:51.520 for twenty four when the market was pricing in seven, 0:09:52.160 --> 0:09:56.120 and we held with that view, and the market's. 0:09:55.800 --> 0:09:57.720 Kind of come back to us at this point. 0:09:57.800 --> 0:10:02.000 So we pride ourselves on taking I think, considered non 0:10:02.120 --> 0:10:05.559 consensus views that are long term in nature rather than 0:10:05.640 --> 0:10:08.560 simply trading views. And I think that we've made a 0:10:08.679 --> 0:10:11.840 very good job on those. And I will say that 0:10:11.880 --> 0:10:14.320 in order to do that, you need a culture that 0:10:14.400 --> 0:10:19.040 supports people to take those non consensus views even during 0:10:19.080 --> 0:10:19.760 times when. 0:10:19.600 --> 0:10:20.640 They don't look so ripe. 0:10:20.800 --> 0:10:23.360 And many organizations have a hard time doing that, and 0:10:23.559 --> 0:10:25.000 we're proud of our culture to do it. 0:10:25.320 --> 0:10:27.360 To rip up the script just quickly, because I have 0:10:27.480 --> 0:10:29.760 got Tom Keene's shadow over me and all of these 0:10:29.760 --> 0:10:32.800 banking earnings that come out, with compensation expenses coming up, 0:10:32.840 --> 0:10:36.000 is it getting harder to recruit and keep that kind 0:10:36.000 --> 0:10:36.440 of talent? 0:10:37.640 --> 0:10:38.560 No question, It is. 0:10:38.640 --> 0:10:42.640 I mean, if you look just over the last twenty years, 0:10:42.720 --> 0:10:45.840 you would say that many of the functions and things 0:10:45.840 --> 0:10:48.319 that used to be done in the investment banks are 0:10:48.360 --> 0:10:50.200 now being done on the buy side. I mean, I 0:10:50.240 --> 0:10:52.439 have more than one hundred and thirty credit analysts. 0:10:52.480 --> 0:10:55.040 You would never have seen that before. 0:10:55.400 --> 0:10:58.079 All of that would have been done by Golden Sachs 0:10:58.080 --> 0:11:01.000 and Morgan Stanley and we would have bought research from them. 0:11:01.440 --> 0:11:03.320 So the actual value. 0:11:02.960 --> 0:11:07.280 Chain continues to move from the cell side to the buyside. 0:11:07.400 --> 0:11:09.920 And that's a trend that I don't think is going 0:11:09.960 --> 0:11:12.160 to change, and that of course puts a lot of 0:11:12.200 --> 0:11:15.160 pressure on those of us on the buy side because 0:11:15.200 --> 0:11:19.560 we do need to move our compensation levels up in 0:11:19.600 --> 0:11:22.240 step with that. So the war for talent is very 0:11:22.280 --> 0:11:24.320 real and very practical. 0:11:23.840 --> 0:11:24.640 For us day to day. 0:11:24.760 --> 0:11:27.400 So artificial intelligence, how do you use that? And I'm 0:11:27.440 --> 0:11:29.200 really I'm diverging here. I was going to talk about 0:11:29.200 --> 0:11:31.320 bos being back, but this is fascinating. 0:11:30.920 --> 0:11:32.559 Today talking about Greg paid his bonus. 0:11:32.559 --> 0:11:34.880 Okay, well you can go there next and talk about 0:11:34.880 --> 0:11:37.839 the winebar. But I am curious about this idea of 0:11:38.040 --> 0:11:40.959 how you make things more efficient to reduce costs while 0:11:41.040 --> 0:11:45.120 continuing to prioritize this talent. I mean, how do you 0:11:45.160 --> 0:11:46.720 see that playing out or do you think that some 0:11:46.760 --> 0:11:49.880 of the gains of productivity are overstated and that it 0:11:49.920 --> 0:11:52.160 really just comes down to talent and people who can 0:11:52.160 --> 0:11:53.000 do the job best. 0:11:53.840 --> 0:11:56.040 So I think that we are in the midst of 0:11:56.080 --> 0:11:59.680 a game changer on technology in asset management. Over the 0:11:59.760 --> 0:12:04.160 last decade, technology has mostly been about can we automate things? 0:12:04.160 --> 0:12:06.640 Can we get more efficient at things? And so it 0:12:06.679 --> 0:12:10.240 has been a bit of a cost play. That's not 0:12:10.280 --> 0:12:13.959 where the game is today. Technology now is allowing us 0:12:14.000 --> 0:12:16.719 to move data to the cloud and then to do 0:12:16.800 --> 0:12:19.800 things with artificial intelligence that we never could do before, 0:12:20.280 --> 0:12:23.559 and so it now is actually being used by our investors, 0:12:23.559 --> 0:12:26.600 it's actually being used by the frontline to make decisions. 0:12:27.080 --> 0:12:29.840 That's a very different use of technology that it was before, 0:12:29.840 --> 0:12:32.040 and I think that's very exciting. But it means that 0:12:32.080 --> 0:12:34.440 we are needing to significantly up our game on the 0:12:34.520 --> 0:12:37.720 use of technology and making sure that we're employing some 0:12:37.840 --> 0:12:42.240 of these latest uses of it in our actual investment process, 0:12:42.280 --> 0:12:45.160 as well as trying to get more efficient in some 0:12:45.240 --> 0:12:48.439 of the back office functions. But that's different for the industry. 0:12:48.160 --> 0:12:50.439 So you're saying it's making you more efficient, but not 0:12:50.480 --> 0:12:52.800 that it means you need a leaner team. 0:12:53.240 --> 0:12:55.840 It means that the quality of jobs that we have 0:12:55.960 --> 0:12:58.600 will actually be better because we will take a bunch 0:12:58.640 --> 0:13:01.400 of things that are kind of fairly wrote and we'll 0:13:01.440 --> 0:13:04.600 be able to do that much more efficiently with technology. 0:13:04.920 --> 0:13:07.679 And then we will be able to augment our portfolio 0:13:07.800 --> 0:13:12.280 managers with technology so that they're actually making better investment decisions. 0:13:12.280 --> 0:13:14.360 And that's what they want to focus on anyway. So 0:13:14.440 --> 0:13:17.360 the more I can focus them on the higher value topics, 0:13:18.040 --> 0:13:21.360 the better and happier they are through the use of technology. 0:13:21.520 --> 0:13:24.320 When you look at AI and inflation, well let's come 0:13:24.360 --> 0:13:24.880 back to the US. 0:13:25.040 --> 0:13:25.959 We're coming back to. 0:13:26.880 --> 0:13:29.439 Sorry, that's my view, isn't it an outlook for the 0:13:29.840 --> 0:13:33.000 economy is weak inflation? But is that the rest of 0:13:33.040 --> 0:13:35.560 the economy or also as well in the United States 0:13:35.559 --> 0:13:37.199 where we see continuosly hot day. 0:13:37.360 --> 0:13:40.280 So the big story that I think doesn't really get 0:13:40.320 --> 0:13:43.840 reported enough is that the world has never been, at 0:13:43.920 --> 0:13:46.400 least in the last couple of years, more divergent in 0:13:46.440 --> 0:13:50.559 their views of growth. So spending time in Europe, I 0:13:50.600 --> 0:13:53.199 would say, actually, the UK is in a technical recession 0:13:53.240 --> 0:13:53.640 right now. 0:13:53.840 --> 0:13:54.720 You spend time in. 0:13:54.640 --> 0:13:57.520 Germany, boy, growth is really hard to come by, and 0:13:57.520 --> 0:14:01.520 it's not looking so terrific and continues to be a worry, 0:14:01.520 --> 0:14:03.280 but it's come down a lot and is related to 0:14:03.360 --> 0:14:06.640 mostly to energy prices. You move to the US and 0:14:06.720 --> 0:14:09.720 actually growth is higher than most people thought. Their labor 0:14:09.760 --> 0:14:14.800 market is in excellent shape, and growth appears and productivity 0:14:14.800 --> 0:14:16.320 appears to be better. 0:14:16.320 --> 0:14:18.000 Inflation is higher and rates are higher. 0:14:18.920 --> 0:14:22.760 I just spent last week in Japan, and you know, 0:14:22.920 --> 0:14:27.840 it's fascinating. After literally thirty years of trying to get 0:14:27.880 --> 0:14:31.760 inflation to go again, it's a beautiful spring week. The 0:14:31.840 --> 0:14:34.040 cherry blossoms were out, and there is a spring in 0:14:34.040 --> 0:14:38.240 the Japanese stout. They finally have inflation coming back, They 0:14:38.320 --> 0:14:40.960 have productivity and members that look better, They have some growth, 0:14:41.480 --> 0:14:43.960 and so the stock market is an all time high 0:14:44.000 --> 0:14:46.160 and you feel an optimism in Japan. 0:14:46.600 --> 0:14:48.160 We saw the numbers come out of China. 0:14:48.600 --> 0:14:53.000 So China continues to push on manufacturing in order to get. 0:14:52.920 --> 0:14:53.840 Their economy going. 0:14:54.520 --> 0:14:56.760 I think all of us wish that they had the 0:14:56.880 --> 0:15:01.240 tools to get domestic personal consumption going, because that's really 0:15:01.320 --> 0:15:02.640 the rebalancing that they need. 0:15:02.680 --> 0:15:03.440 In their economy. 0:15:03.880 --> 0:15:05.880 The way they're going right now is just going to 0:15:06.080 --> 0:15:09.920 flood the world with cheaper manufacturing goods, which is, you know, 0:15:09.960 --> 0:15:12.920 maybe going to export deflation back to kind. 0:15:12.760 --> 0:15:13.600 Of five years ago. 0:15:14.120 --> 0:15:16.880 But it's not the balancing that we would hope. And 0:15:16.920 --> 0:15:20.320 I think that if they could get their domestic consumption going, 0:15:20.360 --> 0:15:22.400 it would be good for the Chinese people, good for 0:15:22.440 --> 0:15:24.240 the Chinese economy, and better. 0:15:24.000 --> 0:15:24.960 For the world economy. 0:15:25.240 --> 0:15:27.120 So the reason we come to weakflation to come to 0:15:27.160 --> 0:15:30.280 your question is that the world is very different. But 0:15:30.360 --> 0:15:32.760 when you put all of that together, growth is going 0:15:32.800 --> 0:15:35.960 too slow from what it has been, and we are 0:15:36.080 --> 0:15:39.360 going to have higher inflation we believe for longer and 0:15:39.480 --> 0:15:41.840 higher rates, and that's where you get the weak flation 0:15:41.880 --> 0:15:44.400 piece of it. And it's very different from stagflation, where 0:15:44.560 --> 0:15:46.920 obviously the labor market is in bad shape. We think 0:15:46.960 --> 0:15:48.360 the labor market is pretty strong. 0:15:48.560 --> 0:15:50.760 There's a ton to impact that. I want to unpack 0:15:50.800 --> 0:15:52.560 the China piece of it just a little bit, focus 0:15:52.680 --> 0:15:55.400 on that. That growth model at the moment is controversial. 0:15:55.720 --> 0:15:57.920 It's getting old of the wrong kind of attention from 0:15:58.120 --> 0:16:01.240 policymakers worldwide, particularly here in the United States, and there 0:16:01.320 --> 0:16:04.400 is talk of maybe even more policies going against China 0:16:04.400 --> 0:16:06.520 from the United States. Secretary Evan's been talking about that 0:16:06.520 --> 0:16:08.400 over the last week. Does that make it harder for 0:16:08.440 --> 0:16:10.760 you to run a global business? Is it more difficult 0:16:10.800 --> 0:16:11.640 now than it used to be? 0:16:12.280 --> 0:16:13.440 Yes, it certainly is. 0:16:13.480 --> 0:16:15.480 And I think many of us are headed down to 0:16:15.520 --> 0:16:17.320 the IMF meetings this week, and I think that one 0:16:17.360 --> 0:16:20.280 of the big topics is going to be what are 0:16:20.360 --> 0:16:23.800 the impacts of the new Chinese economy and what will 0:16:23.880 --> 0:16:25.560 the US administration. 0:16:25.160 --> 0:16:26.880 Do in response to that. 0:16:27.360 --> 0:16:30.960 I will say, having spent a week in Japan, that 0:16:31.000 --> 0:16:34.280 the country that is the number one beneficiary of the 0:16:34.720 --> 0:16:38.320 tension between the US and China is Japan. When I 0:16:38.400 --> 0:16:41.880 was there, there were three companies launching new chip manufacturing 0:16:41.960 --> 0:16:45.040 centers there, There was companies that wanted to invest more 0:16:45.080 --> 0:16:48.040 in Japan. And so Japan has actually taken on a 0:16:48.160 --> 0:16:51.600 role in Europe, in Asia and in a Pan Asia 0:16:51.720 --> 0:16:54.640 trade book that they didn't have before. And the other 0:16:54.680 --> 0:16:58.080 thing that's happened is that the security alliances have come together, 0:16:58.240 --> 0:17:00.000 I think faster than any of us would have thought. 0:17:00.560 --> 0:17:01.600 When I spend time with. 0:17:01.600 --> 0:17:05.720 Folks in both the diplomatic and security world. There the 0:17:05.800 --> 0:17:09.639 coming together of Japan, of South Korea, now of the 0:17:09.640 --> 0:17:13.040 Philippines and Australia is creating a stronger. 0:17:12.720 --> 0:17:13.879 Alliance than we had before. 0:17:14.200 --> 0:17:18.440 And so you know, these kinds of reverse powerful impacts 0:17:18.440 --> 0:17:20.760 that we have are hard to predict, but they do 0:17:20.880 --> 0:17:22.359 change those supply changes quite a lot. 0:17:22.400 --> 0:17:25.199 You've mentioned Japan a few times. He visited that it 0:17:25.240 --> 0:17:26.800 was not the business. Then what are you up to 0:17:26.880 --> 0:17:27.280 in Japan? 0:17:27.800 --> 0:17:30.200 So we are one of the largest foreign asset managers 0:17:30.680 --> 0:17:36.680 in Japan. We absolutely believe that it's a critical country. Obviously, 0:17:36.720 --> 0:17:39.040 if you just look at where is the money around 0:17:39.080 --> 0:17:41.800 the world, Japan remains one of the wealthiest and highest 0:17:41.840 --> 0:17:45.040 savings places, so there's a lot of money to manage. 0:17:45.040 --> 0:17:46.119 It's that money coming home. 0:17:46.680 --> 0:17:49.359 So the money is coming home to some extent, but 0:17:49.400 --> 0:17:52.000 also foreign money, as I mentioned, is going in both 0:17:52.080 --> 0:17:56.720 portfolio flows and FDI, which again is a fairly new storage. 0:17:57.200 --> 0:18:10.520 It's a massive change. Apollos Torston slock with this to say, 0:18:10.840 --> 0:18:13.800 the strong tail wind from easy financial conditions continues to 0:18:13.800 --> 0:18:17.400 boost inflation and growth, including consumer spending. In March, given 0:18:17.440 --> 0:18:20.080 the ongoing re acceleration in the economy, the FED will 0:18:20.160 --> 0:18:23.639 not cut interest rates in twenty twenty four, Apollos Torston 0:18:23.640 --> 0:18:25.520 slock Is with this around of table, Torston, it's been 0:18:25.560 --> 0:18:27.720 quite a cool and I imagine you're feeling better about 0:18:27.760 --> 0:18:29.800 that called over the last week or so well. 0:18:29.840 --> 0:18:32.160 I think that what is happening is that when they're 0:18:32.160 --> 0:18:34.800 fit pivoted, after having said for two years rates are 0:18:34.800 --> 0:18:37.439 going up, up, up, now they're actually saying rates are 0:18:37.480 --> 0:18:39.240 going down. And they're still saying rates are going down 0:18:39.680 --> 0:18:42.359 when that change came at the November one FMC meeting. 0:18:42.440 --> 0:18:45.679 Since then, there's some peers up ten trillion dollars. In 0:18:45.720 --> 0:18:49.159 other words, to tailwind to wealth in the household sector, 0:18:49.160 --> 0:18:51.840 the tailwind to wealth for corporates, and therefore the tilwind 0:18:51.840 --> 0:18:54.600