1 00:00:00,080 --> 00:00:02,639 Speaker 1: Let's get to our guests. It is commal three Kumar 2 00:00:02,759 --> 00:00:07,040 Speaker 1: president at three Khmar Global Strategies three. It's almost never. 3 00:00:07,200 --> 00:00:10,160 Speaker 1: In fact, it is never that you see a sitting 4 00:00:10,160 --> 00:00:12,719 Speaker 1: president in Brazil lose. So this is quite a big 5 00:00:12,720 --> 00:00:15,200 Speaker 1: deal and it's a huge victory for the left with 6 00:00:15,320 --> 00:00:17,960 Speaker 1: Lula getting back in. What do you think it means 7 00:00:18,000 --> 00:00:22,800 Speaker 1: for the economy going forward? Um? I think Brian I 8 00:00:22,840 --> 00:00:27,400 Speaker 1: was quite a sanguine about either candidate winning because both 9 00:00:27,440 --> 00:00:29,880 Speaker 1: Snaro in the last few years has been good for 10 00:00:29,960 --> 00:00:35,440 Speaker 1: business and Lula during his two terms was unexpectedly positive 11 00:00:35,479 --> 00:00:38,800 Speaker 1: for private business. They thought that as a Worker's Party leader, 12 00:00:39,800 --> 00:00:44,760 Speaker 1: he would lead to more of socialist policies and that 13 00:00:44,800 --> 00:00:48,159 Speaker 1: you the economy would go down instead. It was a 14 00:00:48,200 --> 00:00:52,320 Speaker 1: golden period for the Brazilian economy during the Lula presidency 15 00:00:52,400 --> 00:00:55,280 Speaker 1: for two terms. Keep in mind that it was only 16 00:00:55,720 --> 00:01:00,440 Speaker 1: during his successor Dilma russof who was hand chosen by him, 17 00:01:00,480 --> 00:01:05,160 Speaker 1: by the way, that everything went downhill. So I here 18 00:01:05,240 --> 00:01:08,760 Speaker 1: is the real crux. It doesn't matter who wins, but 19 00:01:08,920 --> 00:01:12,520 Speaker 1: the loser has to accept his defeat. And a question 20 00:01:12,560 --> 00:01:16,280 Speaker 1: now is is Bolsonaro going to accept it? Is military 21 00:01:16,360 --> 00:01:18,959 Speaker 1: going to accept it, and do we have a peaceful 22 00:01:19,000 --> 00:01:22,240 Speaker 1: transfer of power? That to me is much more important 23 00:01:22,240 --> 00:01:25,280 Speaker 1: than which candidate wins. And I'm very happy with the 24 00:01:25,319 --> 00:01:27,480 Speaker 1: Lula victory, just as I would have been with the 25 00:01:27,520 --> 00:01:33,440 Speaker 1: Boldsonaro victory. Absolutely, And you know that that's smarks smacks 26 00:01:33,480 --> 00:01:36,800 Speaker 1: of some other country as well, where perhaps other getting 27 00:01:36,840 --> 00:01:39,360 Speaker 1: presidents don't like to accept the verdict of the people. 28 00:01:39,400 --> 00:01:41,240 Speaker 1: But in this case it would be getting to the 29 00:01:41,240 --> 00:01:44,920 Speaker 1: old Quentin Hogs saying of if democracy change anything, they 30 00:01:45,000 --> 00:01:49,920 Speaker 1: abolish it. Does it have market implications? Though it may 31 00:01:50,000 --> 00:01:54,000 Speaker 1: have market implications tomorrow rich in the sense that markets 32 00:01:54,040 --> 00:01:57,920 Speaker 1: I think had a marginal preference for Boldsonaro over Lula, 33 00:01:58,600 --> 00:02:03,040 Speaker 1: so you may see Monday perhaps Tuesday. Uh, the developments 34 00:02:03,240 --> 00:02:06,520 Speaker 1: lead to a drop in the market value. But if 35 00:02:06,560 --> 00:02:10,720 Speaker 1: you give three months or six months, and when again, 36 00:02:10,800 --> 00:02:12,920 Speaker 1: when Lula takes off is at the beginning of the 37 00:02:13,000 --> 00:02:17,079 Speaker 1: new year, assuming the transfer is smooth, things are going 38 00:02:17,120 --> 00:02:19,960 Speaker 1: to be much better off after all. Okay, so it 39 00:02:20,000 --> 00:02:22,519 Speaker 1: hasn't been much of the big macros stories, So let's 40 00:02:22,520 --> 00:02:24,399 Speaker 1: get to that. We got the FED meeting this week 41 00:02:24,440 --> 00:02:26,040 Speaker 1: in the b o E, so it's going to be 42 00:02:26,120 --> 00:02:29,639 Speaker 1: pretty interesting week. The latest data doesn't seem to be 43 00:02:30,040 --> 00:02:35,600 Speaker 1: showing that inflation is cooperating. Inflation is not cooperating at all, Brian. 44 00:02:35,720 --> 00:02:40,240 Speaker 1: And you see that core inflation is at forty year highs, 45 00:02:40,480 --> 00:02:44,799 Speaker 1: and the Federal Reserve's favorite price measure, the PC deflator 46 00:02:44,960 --> 00:02:49,360 Speaker 1: core is also accelerated in the most recent months in 47 00:02:49,400 --> 00:02:52,400 Speaker 1: the data released a few days ago. So there is 48 00:02:52,440 --> 00:02:55,000 Speaker 1: no reason to pivot. The only reason to pivot is 49 00:02:55,040 --> 00:02:57,880 Speaker 1: because they want to help the stock market all they 50 00:02:57,880 --> 00:03:01,280 Speaker 1: are worried about a systemic failure. Sure it, give us, 51 00:03:01,600 --> 00:03:04,639 Speaker 1: you know, a sense of this market or should I 52 00:03:04,639 --> 00:03:09,520 Speaker 1: say market participants almost trying to force the Federal Reserve 53 00:03:09,600 --> 00:03:11,400 Speaker 1: to pivot. Give us your sense, because I think you 54 00:03:11,480 --> 00:03:17,359 Speaker 1: just wrote a paper essentially saying pivot. Just lose that thought, right, 55 00:03:17,639 --> 00:03:21,120 Speaker 1: That's what I put out this Saturday race, And I 56 00:03:21,160 --> 00:03:24,040 Speaker 1: believe that it would be wrong to pivot at this stage. 57 00:03:24,639 --> 00:03:27,160 Speaker 1: The story about a pivot started out with the Wall 58 00:03:27,200 --> 00:03:31,080 Speaker 1: Street Journal article about nine days ago suggesting a few 59 00:03:31,120 --> 00:03:36,600 Speaker 1: members of the Federal Reserve were actively looking to either 60 00:03:36,960 --> 00:03:40,000 Speaker 1: slow down the rate of increase in the interest rate 61 00:03:40,680 --> 00:03:43,840 Speaker 1: or even to end it in early twenty twenty three. 62 00:03:44,320 --> 00:03:47,640 Speaker 1: But here is the problem. Inflation rate has not come 63 00:03:47,720 --> 00:03:51,680 Speaker 1: down the code, inflation rate has accelerated, some measures are 64 00:03:51,720 --> 00:03:55,600 Speaker 1: at their forty year high. What is the basis for 65 00:03:56,080 --> 00:04:00,280 Speaker 1: pivoting when the Chairman has said repeatedly that he is 66 00:04:00,760 --> 00:04:05,560 Speaker 1: using inflation to be his principal objective. The problem I 67 00:04:05,680 --> 00:04:08,880 Speaker 1: see is that they are worried about a systemic failure. 68 00:04:09,080 --> 00:04:12,440 Speaker 1: They look at what happened in London with the pension funds. 69 00:04:12,840 --> 00:04:15,560 Speaker 1: They're afraid there might be a repeat of that, and 70 00:04:15,640 --> 00:04:18,159 Speaker 1: they simply don't want to go ahead with it. My 71 00:04:18,279 --> 00:04:21,760 Speaker 1: answer is, yes, it may happen. The problem is they 72 00:04:21,760 --> 00:04:26,800 Speaker 1: were so wrong in forecasting inflation in one again and 73 00:04:26,839 --> 00:04:30,799 Speaker 1: again calling it transitory, and at the same time boosting 74 00:04:30,839 --> 00:04:34,400 Speaker 1: the balance sheet, keeping the interest rate near zero. That 75 00:04:34,640 --> 00:04:37,240 Speaker 1: is what has increased the risk. It is not what 76 00:04:37,279 --> 00:04:40,400 Speaker 1: they're doing right now. But let's talk about how much 77 00:04:40,480 --> 00:04:44,520 Speaker 1: damage is being done, because it seems the US economy 78 00:04:44,640 --> 00:04:47,360 Speaker 1: is pretty resilient, the labor market is hanging in, their 79 00:04:47,360 --> 00:04:50,280 Speaker 1: growth is not falling off a table. Inflation is bad 80 00:04:50,400 --> 00:04:53,680 Speaker 1: if it causes harm. If it doesn't cause harm, is 81 00:04:53,720 --> 00:04:57,880 Speaker 1: it so bad? That's a great question, Brian. But let 82 00:04:57,880 --> 00:05:00,760 Speaker 1: me put it to you this way. Inflation is causing 83 00:05:00,800 --> 00:05:03,960 Speaker 1: a lot of harm. May not be for equity holders, 84 00:05:04,360 --> 00:05:07,200 Speaker 1: may not even be for bond holders. But if you 85 00:05:07,240 --> 00:05:11,920 Speaker 1: are a wage earner, your wages are increasing significantly slower 86 00:05:12,120 --> 00:05:17,000 Speaker 1: than overall inflation. And some components, especially for people who 87 00:05:17,080 --> 00:05:20,960 Speaker 1: are low and middle income, the food at home category, 88 00:05:21,080 --> 00:05:25,280 Speaker 1: the rent category, which are much more important than other factors, 89 00:05:25,440 --> 00:05:29,479 Speaker 1: they have increased more than the overall index. So is 90 00:05:29,520 --> 00:05:33,200 Speaker 1: inflation causing a lot of harm. Yes. The reason why 91 00:05:33,279 --> 00:05:36,120 Speaker 1: you see the Democrats are on are on the defensive 92 00:05:36,279 --> 00:05:41,040 Speaker 1: before the November eight term elections is that inflation matters. 93 00:05:41,640 --> 00:05:44,479 Speaker 1: And it used to be that said that inflation is 94 00:05:44,520 --> 00:05:48,760 Speaker 1: something only wealthy people worry about. Not really, it actually 95 00:05:48,800 --> 00:05:52,440 Speaker 1: affects the poor. And that is what you're seeing reflected 96 00:05:52,480 --> 00:05:56,000 Speaker 1: in political terms. Brian. Yeah, it might be why we 97 00:05:56,040 --> 00:06:00,080 Speaker 1: saw Lula get elected. Rish absolutely gives a sense of 98 00:06:00,200 --> 00:06:05,040 Speaker 1: you know, uh, this final sales to domestic private entities 99 00:06:05,120 --> 00:06:07,520 Speaker 1: going down here as well, that's what you've been looking at. 100 00:06:07,600 --> 00:06:10,440 Speaker 1: And this is coming from the Bureau of Economic Analysis here. 101 00:06:10,760 --> 00:06:13,880 Speaker 1: You know, this is something where we had It's not 102 00:06:14,000 --> 00:06:16,200 Speaker 1: I'm gonna quote here, it's but it is not what 103 00:06:16,520 --> 00:06:19,279 Speaker 1: Jerrem Powell meant in recent press Conspan he admitted there 104 00:06:19,320 --> 00:06:23,160 Speaker 1: would be some pain as the FED titaned. Uh. He 105 00:06:23,240 --> 00:06:26,839 Speaker 1: did say, though at his press conferences, I think twice, 106 00:06:27,200 --> 00:06:30,640 Speaker 1: at least twice in his press conferences, that there will 107 00:06:30,680 --> 00:06:34,160 Speaker 1: be pain in terms of the FED tightening and the 108 00:06:34,200 --> 00:06:37,359 Speaker 1: impact that has felt on the economy. The pain he 109 00:06:37,720 --> 00:06:41,920 Speaker 1: talked about was probably more oriented towards higher unemployment rate, 110 00:06:41,960 --> 00:06:45,320 Speaker 1: which hasn't happened yet, but it is starting to happen. 111 00:06:45,480 --> 00:06:49,279 Speaker 1: Rich in terms of a private spending by companies and 112 00:06:49,360 --> 00:06:53,320 Speaker 1: private spending by households, that's the number you're referring to, 113 00:06:53,560 --> 00:06:56,520 Speaker 1: which slowed down to a crawl in the latest number, 114 00:06:57,080 --> 00:07:00,520 Speaker 1: latest figures which were published for the third quarter. Now, 115 00:07:00,640 --> 00:07:03,680 Speaker 1: the issue is when you have done that and the 116 00:07:03,680 --> 00:07:07,640 Speaker 1: the part is slowing down, they should not be surprised. 117 00:07:07,680 --> 00:07:10,240 Speaker 1: After all, that's what higher and higher interest rates are 118 00:07:10,280 --> 00:07:14,360 Speaker 1: going to do, and that's the way, by destroying demand 119 00:07:14,600 --> 00:07:17,920 Speaker 1: is how they're going to bring down the inflation rate. Now, 120 00:07:18,040 --> 00:07:20,440 Speaker 1: if on the middle they switch over and say, hey, 121 00:07:20,520 --> 00:07:23,040 Speaker 1: we did too much, we're not going to worry about 122 00:07:23,080 --> 00:07:26,400 Speaker 1: inflation anymore, he's going to repeat the errors of the 123 00:07:26,480 --> 00:07:31,440 Speaker 1: nineteen seventies which perpetuated inflation. Alright, final question, is at 124 00:07:31,440 --> 00:07:34,840 Speaker 1: the end of the pro growth reform period in China. 125 00:07:36,920 --> 00:07:39,520 Speaker 1: I think it is at least for the next year 126 00:07:39,560 --> 00:07:43,960 Speaker 1: to two years. Brian I would say yes, it is 127 00:07:44,040 --> 00:07:47,240 Speaker 1: much more a consolidation of political power by the president 128 00:07:47,800 --> 00:07:53,400 Speaker 1: rather than support the private markets. Alright, Comal Shrie come 129 00:07:53,440 --> 00:07:56,680 Speaker 1: out that joining is just going through the Federal Reserve. 130 00:07:56,800 --> 00:07:58,680 Speaker 1: What happens the next and of course commercially come out 131 00:07:58,760 --> 00:08:02,000 Speaker 1: is President come out both strategies and getting his take 132 00:08:02,640 --> 00:08:04,200 Speaker 1: on the markets and more.