Speaker 1: Let's get to our guests. It is commal three Kumar
Speaker 1: president at three Khmar Global Strategies three. It's almost never.
Speaker 1: In fact, it is never that you see a sitting
Speaker 1: president in Brazil lose. So this is quite a big
Speaker 1: deal and it's a huge victory for the left with
Speaker 1: Lula getting back in. What do you think it means
Speaker 1: for the economy going forward? Um? I think Brian I
Speaker 1: was quite a sanguine about either candidate winning because both
Speaker 1: Snaro in the last few years has been good for
Speaker 1: business and Lula during his two terms was unexpectedly positive
Speaker 1: for private business. They thought that as a Worker's Party leader,
Speaker 1: he would lead to more of socialist policies and that
Speaker 1: you the economy would go down instead. It was a
Speaker 1: golden period for the Brazilian economy during the Lula presidency
Speaker 1: for two terms. Keep in mind that it was only
Speaker 1: during his successor Dilma russof who was hand chosen by him,
Speaker 1: by the way, that everything went downhill. So I here
Speaker 1: is the real crux. It doesn't matter who wins, but
Speaker 1: the loser has to accept his defeat. And a question
Speaker 1: now is is Bolsonaro going to accept it? Is military
Speaker 1: going to accept it, and do we have a peaceful
Speaker 1: transfer of power? That to me is much more important
Speaker 1: than which candidate wins. And I'm very happy with the
Speaker 1: Lula victory, just as I would have been with the
Speaker 1: Boldsonaro victory. Absolutely, And you know that that's smarks smacks
Speaker 1: of some other country as well, where perhaps other getting
Speaker 1: presidents don't like to accept the verdict of the people.
Speaker 1: But in this case it would be getting to the
Speaker 1: old Quentin Hogs saying of if democracy change anything, they
Speaker 1: abolish it. Does it have market implications? Though it may
Speaker 1: have market implications tomorrow rich in the sense that markets
Speaker 1: I think had a marginal preference for Boldsonaro over Lula,
Speaker 1: so you may see Monday perhaps Tuesday. Uh, the developments
Speaker 1: lead to a drop in the market value. But if
Speaker 1: you give three months or six months, and when again,
Speaker 1: when Lula takes off is at the beginning of the
Speaker 1: new year, assuming the transfer is smooth, things are going
Speaker 1: to be much better off after all. Okay, so it
Speaker 1: hasn't been much of the big macros stories, So let's
Speaker 1: get to that. We got the FED meeting this week
Speaker 1: in the b o E, so it's going to be
Speaker 1: pretty interesting week. The latest data doesn't seem to be
Speaker 1: showing that inflation is cooperating. Inflation is not cooperating at all, Brian.
Speaker 1: And you see that core inflation is at forty year highs,
Speaker 1: and the Federal Reserve's favorite price measure, the PC deflator
Speaker 1: core is also accelerated in the most recent months in
Speaker 1: the data released a few days ago. So there is
Speaker 1: no reason to pivot. The only reason to pivot is
Speaker 1: because they want to help the stock market all they
Speaker 1: are worried about a systemic failure. Sure it, give us,
Speaker 1: you know, a sense of this market or should I
Speaker 1: say market participants almost trying to force the Federal Reserve
Speaker 1: to pivot. Give us your sense, because I think you
Speaker 1: just wrote a paper essentially saying pivot. Just lose that thought, right,
Speaker 1: That's what I put out this Saturday race, And I
Speaker 1: believe that it would be wrong to pivot at this stage.
Speaker 1: The story about a pivot started out with the Wall
Speaker 1: Street Journal article about nine days ago suggesting a few
Speaker 1: members of the Federal Reserve were actively looking to either
Speaker 1: slow down the rate of increase in the interest rate
Speaker 1: or even to end it in early twenty twenty three.
Speaker 1: But here is the problem. Inflation rate has not come
Speaker 1: down the code, inflation rate has accelerated, some measures are
Speaker 1: at their forty year high. What is the basis for
Speaker 1: pivoting when the Chairman has said repeatedly that he is
Speaker 1: using inflation to be his principal objective. The problem I
Speaker 1: see is that they are worried about a systemic failure.
Speaker 1: They look at what happened in London with the pension funds.
Speaker 1: They're afraid there might be a repeat of that, and
Speaker 1: they simply don't want to go ahead with it. My
Speaker 1: answer is, yes, it may happen. The problem is they
Speaker 1: were so wrong in forecasting inflation in one again and
Speaker 1: again calling it transitory, and at the same time boosting
Speaker 1: the balance sheet, keeping the interest rate near zero. That
Speaker 1: is what has increased the risk. It is not what
Speaker 1: they're doing right now. But let's talk about how much
Speaker 1: damage is being done, because it seems the US economy
Speaker 1: is pretty resilient, the labor market is hanging in, their
Speaker 1: growth is not falling off a table. Inflation is bad
Speaker 1: if it causes harm. If it doesn't cause harm, is
Speaker 1: it so bad? That's a great question, Brian. But let
Speaker 1: me put it to you this way. Inflation is causing
Speaker 1: a lot of harm. May not be for equity holders,
Speaker 1: may not even be for bond holders. But if you
Speaker 1: are a wage earner, your wages are increasing significantly slower
Speaker 1: than overall inflation. And some components, especially for people who
Speaker 1: are low and middle income, the food at home category,
Speaker 1: the rent category, which are much more important than other factors,
Speaker 1: they have increased more than the overall index. So is
Speaker 1: inflation causing a lot of harm. Yes. The reason why
Speaker 1: you see the Democrats are on are on the defensive
Speaker 1: before the November eight term elections is that inflation matters.
Speaker 1: And it used to be that said that inflation is
Speaker 1: something only wealthy people worry about. Not really, it actually
Speaker 1: affects the poor. And that is what you're seeing reflected
Speaker 1: in political terms. Brian. Yeah, it might be why we
Speaker 1: saw Lula get elected. Rish absolutely gives a sense of
Speaker 1: you know, uh, this final sales to domestic private entities
Speaker 1: going down here as well, that's what you've been looking at.
Speaker 1: And this is coming from the Bureau of Economic Analysis here.
Speaker 1: You know, this is something where we had It's not
Speaker 1: I'm gonna quote here, it's but it is not what
Speaker 1: Jerrem Powell meant in recent press Conspan he admitted there
Speaker 1: would be some pain as the FED titaned. Uh. He
Speaker 1: did say, though at his press conferences, I think twice,
Speaker 1: at least twice in his press conferences, that there will
Speaker 1: be pain in terms of the FED tightening and the
Speaker 1: impact that has felt on the economy. The pain he
Speaker 1: talked about was probably more oriented towards higher unemployment rate,
Speaker 1: which hasn't happened yet, but it is starting to happen.
Speaker 1: Rich in terms of a private spending by companies and
Speaker 1: private spending by households, that's the number you're referring to,
Speaker 1: which slowed down to a crawl in the latest number,
Speaker 1: latest figures which were published for the third quarter. Now,
Speaker 1: the issue is when you have done that and the
Speaker 1: the part is slowing down, they should not be surprised.
Speaker 1: After all, that's what higher and higher interest rates are
Speaker 1: going to do, and that's the way, by destroying demand
Speaker 1: is how they're going to bring down the inflation rate. Now,
Speaker 1: if on the middle they switch over and say, hey,
Speaker 1: we did too much, we're not going to worry about
Speaker 1: inflation anymore, he's going to repeat the errors of the
Speaker 1: nineteen seventies which perpetuated inflation. Alright, final question, is at
Speaker 1: the end of the pro growth reform period in China.
Speaker 1: I think it is at least for the next year
Speaker 1: to two years. Brian I would say yes, it is
Speaker 1: much more a consolidation of political power by the president
Speaker 1: rather than support the private markets. Alright, Comal Shrie come
Speaker 1: out that joining is just going through the Federal Reserve.
Speaker 1: What happens the next and of course commercially come out
Speaker 1: is President come out both strategies and getting his take
Speaker 1: on the markets and more.