1 00:00:10,840 --> 00:00:14,600 Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast. 2 00:00:14,680 --> 00:00:18,439 Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, it has 3 00:00:18,560 --> 00:00:23,640 Speaker 1: been a week. Right. I am so tired. I got 4 00:00:23,640 --> 00:00:26,320 Speaker 1: about two hours sleep last night, and there's just been 5 00:00:26,440 --> 00:00:28,680 Speaker 1: so much that happened. We were both at Milkin in 6 00:00:28,760 --> 00:00:32,440 Speaker 1: Los Angeles, and for anyone who's ever been at Milkin 7 00:00:32,840 --> 00:00:36,760 Speaker 1: or any large conference for that matter, it is just 8 00:00:36,840 --> 00:00:41,519 Speaker 1: a whirlwind of meetings and discussions, and we also recorded 9 00:00:41,520 --> 00:00:45,839 Speaker 1: a couple episodes. And meanwhile, against that entire background, the 10 00:00:45,840 --> 00:00:49,560 Speaker 1: news is actually happening. The Fed raised rates by fifty 11 00:00:49,560 --> 00:00:54,560 Speaker 1: basis points and the markets crashed. They did not have 12 00:00:54,920 --> 00:00:57,160 Speaker 1: they weren't. They had some rough days, that's for sure. 13 00:00:57,640 --> 00:01:00,800 Speaker 1: Crash okay, crap okay. The market went down and then 14 00:01:01,360 --> 00:01:05,720 Speaker 1: the market had some really rough days, and particularly tech growth, 15 00:01:05,800 --> 00:01:08,959 Speaker 1: that kind of stuff, it's just continues to get absolutely killed. 16 00:01:09,600 --> 00:01:12,679 Speaker 1: We also had a jobs report. We're recording this what 17 00:01:12,920 --> 00:01:16,080 Speaker 1: is speaking of being really tired and out of it six, 18 00:01:16,680 --> 00:01:20,360 Speaker 1: recording recording this base six. We also got a jobs 19 00:01:20,360 --> 00:01:23,720 Speaker 1: report today which seemed decent. There is a lot going 20 00:01:23,760 --> 00:01:26,080 Speaker 1: on right now. And yeah, like we were at this conference, 21 00:01:26,080 --> 00:01:27,560 Speaker 1: I kind of feel like I missed a lot of it. 22 00:01:27,600 --> 00:01:29,320 Speaker 1: I almost wish I was just behind my computer the 23 00:01:29,360 --> 00:01:33,840 Speaker 1: whole time. Yeah, that's a very Joe thing to say. Uh. Well, 24 00:01:33,959 --> 00:01:35,520 Speaker 1: one thing that was interesting to me, so I was 25 00:01:35,560 --> 00:01:38,840 Speaker 1: actually at a like a credit market panel right when 26 00:01:38,920 --> 00:01:41,679 Speaker 1: the Fed raised rates, and I got my phone out 27 00:01:41,720 --> 00:01:44,880 Speaker 1: and I started videoing the audience because I I thought like, 28 00:01:45,080 --> 00:01:49,480 Speaker 1: maybe the headline would come out, right, something would change 29 00:01:49,520 --> 00:01:52,800 Speaker 1: in the room. Absolutely nothing happened. I mean, the fifty 30 00:01:52,840 --> 00:01:57,400 Speaker 1: basis point increase was well telegraphed. But the really interesting 31 00:01:57,440 --> 00:01:59,760 Speaker 1: thing was we didn't even really get much of an 32 00:01:59,760 --> 00:02:03,160 Speaker 1: iediate reaction in the market. It wasn't until the next 33 00:02:03,240 --> 00:02:07,200 Speaker 1: day on Thursday that everything started happening. Market stored on Wednesday, 34 00:02:07,400 --> 00:02:09,160 Speaker 1: I think the NAZAC was up like three percent, and 35 00:02:09,160 --> 00:02:11,280 Speaker 1: I was like, oh, coaches, clear they took seventy five 36 00:02:11,320 --> 00:02:15,600 Speaker 1: bases points off the table, maybe policies, some signs of 37 00:02:15,880 --> 00:02:19,600 Speaker 1: inflation turning a corner, and then the markets tanked. We 38 00:02:19,639 --> 00:02:24,480 Speaker 1: have two great guests this time, excellent commenters both. I 39 00:02:24,520 --> 00:02:26,760 Speaker 1: want to welcome to the show. Luke Cowa. He is 40 00:02:26,800 --> 00:02:30,799 Speaker 1: an allocation strategist at UBS Asset Management, as well as 41 00:02:30,840 --> 00:02:34,919 Speaker 1: Neil Dutta, head of economics at Renaissance Macro Research, and 42 00:02:35,160 --> 00:02:37,880 Speaker 1: I think it's Neil's first time on the show, which 43 00:02:37,919 --> 00:02:40,320 Speaker 1: is amazing because if we've known Neil Neil for years 44 00:02:40,360 --> 00:02:43,840 Speaker 1: and I've been big, big fans of his work. So, um, 45 00:02:44,000 --> 00:02:46,200 Speaker 1: thank you both for coming on the show. Neil, that's right, 46 00:02:46,240 --> 00:02:48,320 Speaker 1: you haven't been on odd Lots before, is that correct? 47 00:02:49,680 --> 00:02:51,800 Speaker 1: I haven't, Joe, what took you so long? I know, 48 00:02:51,960 --> 00:02:56,120 Speaker 1: I know it really it's a shameful but big week 49 00:02:56,280 --> 00:02:58,079 Speaker 1: and you're one of the names we needed to call, 50 00:02:58,240 --> 00:03:01,160 Speaker 1: so hopefully that makes up for it. But let's start 51 00:03:01,200 --> 00:03:04,480 Speaker 1: with you, like, what's going on? What's your read of everything? 52 00:03:05,520 --> 00:03:11,880 Speaker 1: Put it in two. I think the the economy is fine, um, 53 00:03:12,000 --> 00:03:14,840 Speaker 1: you know, I think obviously if you look at just 54 00:03:15,280 --> 00:03:20,000 Speaker 1: the total hours worked so far this year, um, it's 55 00:03:20,080 --> 00:03:23,200 Speaker 1: running around three to three and a half percent, so 56 00:03:23,320 --> 00:03:27,880 Speaker 1: aggregate hours worked, So if you assume underlying productivity growth 57 00:03:27,880 --> 00:03:32,280 Speaker 1: of you know, conservatively around one percent, I think underlying 58 00:03:32,320 --> 00:03:34,920 Speaker 1: economic growth is around four to four and a half. 59 00:03:35,200 --> 00:03:41,040 Speaker 1: So I'm not particularly worried about the economy. But clearly, um, 60 00:03:41,080 --> 00:03:43,720 Speaker 1: there's an adjustment that's happening with respect to the interest 61 00:03:43,800 --> 00:03:46,960 Speaker 1: rate outlook that's been going on really all a year, 62 00:03:47,840 --> 00:03:52,280 Speaker 1: and I think that's having some predictable consequences on equity markets. 63 00:03:52,480 --> 00:03:55,560 Speaker 1: I don't know what happened. One day, I mean, the 64 00:03:55,640 --> 00:03:58,040 Speaker 1: feed signaling something in the market rips, and then the 65 00:03:58,080 --> 00:04:01,360 Speaker 1: next day the market tanks. I mean, it's it's it's 66 00:04:01,400 --> 00:04:05,240 Speaker 1: a very bizarre sort of situation. But were generally speaking, 67 00:04:05,600 --> 00:04:07,640 Speaker 1: what I can tell you, and what I've learned throughout 68 00:04:07,720 --> 00:04:11,400 Speaker 1: the years, is that, um, you know, the economy is 69 00:04:11,440 --> 00:04:14,000 Speaker 1: a much slower moving entity than the financial markets, and 70 00:04:14,080 --> 00:04:18,400 Speaker 1: ultimately good economic news can help can help turn the 71 00:04:18,440 --> 00:04:21,000 Speaker 1: financial markets, and UM, you know, my sense is that 72 00:04:21,960 --> 00:04:25,000 Speaker 1: whatever so off we have seen, um and tightening the 73 00:04:25,040 --> 00:04:30,080 Speaker 1: financial conditions we've seen isn't going to have a significant 74 00:04:30,080 --> 00:04:32,480 Speaker 1: impact on the economy. I mean in the sense that 75 00:04:32,800 --> 00:04:36,000 Speaker 1: relative to what's baked into the consensus. Remember, the consensus 76 00:04:36,000 --> 00:04:39,480 Speaker 1: expects a slowdown this year. That's what's priced in. If 77 00:04:39,520 --> 00:04:42,080 Speaker 1: you look at the blue chip consensus, it's at two 78 00:04:42,080 --> 00:04:44,320 Speaker 1: point three for this year, the Feds at to eight. 79 00:04:44,880 --> 00:04:47,680 Speaker 1: So you're gonna see some slow and when when the 80 00:04:47,760 --> 00:04:50,080 Speaker 1: economy slows, there'll be some days where the news comes 81 00:04:50,080 --> 00:04:53,520 Speaker 1: in good and some days when it's not UM and uh. 82 00:04:53,560 --> 00:04:55,720 Speaker 1: And you know, in my mind the data hasn't really 83 00:04:56,080 --> 00:04:59,760 Speaker 1: deviated from from that UM, you know, trajectory really one 84 00:04:59,800 --> 00:05:01,680 Speaker 1: where or the other UM. And it's good to put 85 00:05:01,680 --> 00:05:03,560 Speaker 1: a gun to my head and say, you know what, 86 00:05:03,640 --> 00:05:05,080 Speaker 1: do you think growth is going to come in stronger 87 00:05:05,120 --> 00:05:08,400 Speaker 1: than one that consensus is for QO. My guests would 88 00:05:08,400 --> 00:05:11,600 Speaker 1: be probably yes. So there's a lot to unpack there. 89 00:05:11,920 --> 00:05:14,559 Speaker 1: And before we do, why don't we bring in Luke? 90 00:05:14,640 --> 00:05:17,159 Speaker 1: And I guess two questions for Luke? But one do 91 00:05:17,240 --> 00:05:20,799 Speaker 1: you share Neil's assessment of the economy that he just described? 92 00:05:20,839 --> 00:05:24,960 Speaker 1: And then two, what do you think happened between Wednesday 93 00:05:25,040 --> 00:05:27,479 Speaker 1: and Thursday? What was the trigger? Because it feels like 94 00:05:27,520 --> 00:05:30,839 Speaker 1: that's what everyone's trying to figure out at the moment. So, 95 00:05:31,279 --> 00:05:33,080 Speaker 1: you know, a couple of tough ones. First off, as 96 00:05:33,200 --> 00:05:36,000 Speaker 1: a default, I I think Neil is a great person 97 00:05:36,040 --> 00:05:39,000 Speaker 1: to defer to on the US, on the US economic 98 00:05:39,120 --> 00:05:42,320 Speaker 1: outlook in particular. And now comes the ship you set 99 00:05:42,360 --> 00:05:44,400 Speaker 1: him up all right now, Now now you're gonna show no. 100 00:05:45,360 --> 00:05:49,200 Speaker 1: I I completely agree. All of the data, basically, all 101 00:05:49,200 --> 00:05:51,680 Speaker 1: the data we've got recently on the US confirms the 102 00:05:51,760 --> 00:05:57,000 Speaker 1: idea that the US is decelerating, but to a level 103 00:05:57,040 --> 00:06:00,880 Speaker 1: that's still consistent with nominal growth that's far superior than 104 00:06:00,920 --> 00:06:03,080 Speaker 1: what we got last cycle. The problem is that just 105 00:06:03,120 --> 00:06:05,560 Speaker 1: like that simply doesn't matter right now, that simply is 106 00:06:05,600 --> 00:06:09,560 Speaker 1: not the the proximate uh mover of resentment of risk 107 00:06:09,560 --> 00:06:12,599 Speaker 1: appetite right now. And what's even more concerning is it's 108 00:06:12,839 --> 00:06:16,080 Speaker 1: very difficult to tell what actually is. So I know 109 00:06:16,200 --> 00:06:19,040 Speaker 1: one phrase that you know, Tracy loves to use, as 110 00:06:19,080 --> 00:06:22,640 Speaker 1: you know, flows before pros, just this idea that you know, 111 00:06:22,880 --> 00:06:26,360 Speaker 1: money moving even from you know, potentially you know, unsophisticated 112 00:06:26,360 --> 00:06:30,599 Speaker 1: investors can run over the more sophisticated crowd. Right now, 113 00:06:30,920 --> 00:06:33,760 Speaker 1: the flows are the pros. So it's it's more of 114 00:06:33,800 --> 00:06:37,240 Speaker 1: the story for me about flows before pros. But pr 115 00:06:37,320 --> 00:06:41,080 Speaker 1: O s E. There's no story we can use that 116 00:06:41,160 --> 00:06:45,960 Speaker 1: is going to adequately explain why risk appetite changed on 117 00:06:46,040 --> 00:06:50,239 Speaker 1: such a dime between Wednesday afternoon and uh and Thursday morning. 118 00:06:50,279 --> 00:06:52,279 Speaker 1: There's there's nothing that does it. So what we have 119 00:06:52,400 --> 00:06:54,480 Speaker 1: to do, as I said, allocators, we have to take 120 00:06:54,520 --> 00:06:56,839 Speaker 1: a step back and say, well, you know, there's there's 121 00:06:56,880 --> 00:06:59,719 Speaker 1: really three big risks we see on the table one 122 00:06:59,800 --> 00:07:01,680 Speaker 1: is kind of fed tightening, which is going to be 123 00:07:02,080 --> 00:07:04,599 Speaker 1: you know, possibly if it's if it's too much, it's 124 00:07:04,640 --> 00:07:07,640 Speaker 1: bad for growth, bad for risk assets. If it's too little, 125 00:07:07,680 --> 00:07:10,679 Speaker 1: it's probably just you know, bad for risk assets, financial 126 00:07:10,720 --> 00:07:14,760 Speaker 1: assets generally. Uh, there's the Russia's invasion, which is just 127 00:07:15,160 --> 00:07:19,600 Speaker 1: creating kind of persistent supply issues and threatening to exacerbate 128 00:07:19,680 --> 00:07:22,360 Speaker 1: kind of some of the negative supply commodity price issues 129 00:07:22,400 --> 00:07:25,400 Speaker 1: we've seen way on forward consumption. And then there's China, 130 00:07:25,440 --> 00:07:28,239 Speaker 1: which is both the you know, a supply and demand issue. 131 00:07:28,280 --> 00:07:30,679 Speaker 1: And I think that's one thing that did spook people 132 00:07:30,720 --> 00:07:34,160 Speaker 1: a little when the when the Chinese you want depreciate 133 00:07:34,200 --> 00:07:36,680 Speaker 1: it a bit there because it's like, okay, well, if 134 00:07:36,760 --> 00:07:39,360 Speaker 1: China's supposedly you know, everyone thinking is about to go 135 00:07:39,400 --> 00:07:43,720 Speaker 1: on this decent credit old school stimulus, but smaller binge 136 00:07:44,440 --> 00:07:47,440 Speaker 1: as as the public health situation improves or if they're 137 00:07:47,480 --> 00:07:51,040 Speaker 1: kind of more durably moving to a consumption driven model. 138 00:07:51,240 --> 00:07:54,440 Speaker 1: Well that doesn't comport with it with a lower currency 139 00:07:54,480 --> 00:07:57,600 Speaker 1: at all. Uh. The lower currency comports with the trying 140 00:07:57,600 --> 00:08:00,120 Speaker 1: to be the the demand sinkhole for the rest the 141 00:08:00,200 --> 00:08:02,400 Speaker 1: world and stop all of that up. So that's you know, 142 00:08:02,480 --> 00:08:05,520 Speaker 1: that's something that's concerning. All three of those risks are 143 00:08:05,520 --> 00:08:07,640 Speaker 1: still there. And what we have to do when markets 144 00:08:07,640 --> 00:08:11,480 Speaker 1: are this volatile are demand a higher merchin of safety. 145 00:08:11,520 --> 00:08:14,400 Speaker 1: But take a step back, increase our time frames a 146 00:08:14,440 --> 00:08:17,120 Speaker 1: little bit and think about what are we pretty confident 147 00:08:17,240 --> 00:08:19,440 Speaker 1: is going to be working in a year from now 148 00:08:19,520 --> 00:08:23,480 Speaker 1: because rates volatility is so high, macroeconomic uncertainty is so 149 00:08:23,560 --> 00:08:26,120 Speaker 1: high that trying to really nail that one in three 150 00:08:26,160 --> 00:08:29,320 Speaker 1: month call seems like, you know, not something we should 151 00:08:29,360 --> 00:08:31,760 Speaker 1: be devoting as much of our energy and our risk 152 00:08:31,760 --> 00:08:34,720 Speaker 1: capital to. Right now, I want to zoom out for 153 00:08:34,720 --> 00:08:36,640 Speaker 1: a second, and I want to start this question with Luke, 154 00:08:36,679 --> 00:08:39,439 Speaker 1: and then I want to get Neil answer. But I 155 00:08:39,480 --> 00:08:42,120 Speaker 1: want to zoom out because yes, we don't know what 156 00:08:42,240 --> 00:08:44,720 Speaker 1: happens day to day. It's hard to tell a story. 157 00:08:45,080 --> 00:08:48,120 Speaker 1: But if we zoom out a little bit, obviously these 158 00:08:48,200 --> 00:08:52,960 Speaker 1: incredible tech boom that we've seen, or the growth stock boom, 159 00:08:53,440 --> 00:08:56,000 Speaker 1: it's clearly I think it's safe to say like come 160 00:08:56,000 --> 00:08:59,200 Speaker 1: to an end. I mean, it's a credible contraction. Hundreds 161 00:08:59,200 --> 00:09:02,600 Speaker 1: of billions of tech wealth lost for a lot of 162 00:09:02,600 --> 00:09:05,160 Speaker 1: people like this is something they've never seen before. We've 163 00:09:05,280 --> 00:09:09,800 Speaker 1: arguably had like a twelve year tech bull market, tech 164 00:09:10,000 --> 00:09:12,520 Speaker 1: bull market and growth, Like what if the big story 165 00:09:12,679 --> 00:09:16,960 Speaker 1: about this rotation and the turn? So I think the 166 00:09:16,960 --> 00:09:18,880 Speaker 1: big story does have a lot to do with the 167 00:09:19,559 --> 00:09:22,439 Speaker 1: with the macro environment, ak that the moving rates and 168 00:09:22,480 --> 00:09:25,400 Speaker 1: the moving rates volatility. I think that's something just on 169 00:09:25,480 --> 00:09:29,080 Speaker 1: a on a correlation basis, if you kind of plug 170 00:09:29,120 --> 00:09:32,120 Speaker 1: in what you think should be moving stylistically based on 171 00:09:32,200 --> 00:09:34,200 Speaker 1: what rates are doing that you know rates are to 172 00:09:34,240 --> 00:09:38,040 Speaker 1: a certain extent driving the bus before before you go, 173 00:09:38,400 --> 00:09:41,000 Speaker 1: just real, just real quickly. For people who don't understand it, 174 00:09:41,040 --> 00:09:43,480 Speaker 1: we talk about this link a lot. It's like rates 175 00:09:43,520 --> 00:09:47,280 Speaker 1: are going up, so you sell Facebook or you sell arc. 176 00:09:47,600 --> 00:09:50,640 Speaker 1: It's not intuitive. Can you just walk through for listeners 177 00:09:50,960 --> 00:09:53,600 Speaker 1: in a sort of brief form, like why there's this 178 00:09:53,720 --> 00:09:57,840 Speaker 1: connection between rates or rates volatility and the sort of 179 00:09:57,880 --> 00:10:01,320 Speaker 1: like violence of the tech market sell off totally? So 180 00:10:01,360 --> 00:10:04,520 Speaker 1: I think there's some some competing explanations. I'll go with 181 00:10:04,600 --> 00:10:06,600 Speaker 1: my my preferred and it has less to do with 182 00:10:06,640 --> 00:10:09,400 Speaker 1: like the has less to do with the along duration 183 00:10:09,440 --> 00:10:12,520 Speaker 1: discounting stuff. This is this is more about I think 184 00:10:12,720 --> 00:10:16,880 Speaker 1: generally speaking, rising rates are a function of an environment 185 00:10:16,960 --> 00:10:20,760 Speaker 1: in which nominal growth outcomes are you know, expected to 186 00:10:20,760 --> 00:10:23,319 Speaker 1: be improving and are you know, fairly firm. You can 187 00:10:23,360 --> 00:10:25,760 Speaker 1: you know, equival about that now, given how much of 188 00:10:25,800 --> 00:10:29,640 Speaker 1: it is is related to kind of negative supply shocks potentially. 189 00:10:30,160 --> 00:10:33,760 Speaker 1: But that that's a kind of brief shorthand for why 190 00:10:33,800 --> 00:10:36,880 Speaker 1: should rates rise. Rates should rise because things are good, 191 00:10:36,920 --> 00:10:39,800 Speaker 1: and things are good enough for central banks to remove stimulus, 192 00:10:40,160 --> 00:10:42,559 Speaker 1: and you know, that's a generally speaking, you know, an 193 00:10:42,559 --> 00:10:47,200 Speaker 1: okay environment for growth. If growth, if economic activity is 194 00:10:47,240 --> 00:10:51,000 Speaker 1: doing well, then you don't need to focus on kind 195 00:10:51,040 --> 00:10:55,000 Speaker 1: of the things that might be revolutionary or innovative or 196 00:10:55,080 --> 00:10:58,400 Speaker 1: be you know, turned from a who knows what it 197 00:10:58,480 --> 00:11:01,920 Speaker 1: was into a verb like gold. Uh, ten to fifteen 198 00:11:01,960 --> 00:11:04,640 Speaker 1: years from now, you can focus on Okay, I know 199 00:11:04,800 --> 00:11:08,200 Speaker 1: that energy companies are able to produce x oil with 200 00:11:08,559 --> 00:11:11,480 Speaker 1: X margin and they won't be producing more than that, 201 00:11:11,559 --> 00:11:14,400 Speaker 1: so prices are going to stay within X range and 202 00:11:14,480 --> 00:11:16,800 Speaker 1: that looks very good for me right now, and we 203 00:11:16,880 --> 00:11:20,000 Speaker 1: prefer that to speculating on something that might or might 204 00:11:20,040 --> 00:11:23,040 Speaker 1: not be good ten years from now. So that's that's 205 00:11:23,160 --> 00:11:26,400 Speaker 1: my preferred explanation of how rates kind of effects the 206 00:11:26,600 --> 00:11:30,600 Speaker 1: the growth versus value argument or spectrum there. So that's 207 00:11:30,880 --> 00:11:33,719 Speaker 1: that's that's the headline story there. But I also think 208 00:11:33,760 --> 00:11:36,839 Speaker 1: there's there's a broader issue both related to growth, but 209 00:11:36,880 --> 00:11:39,160 Speaker 1: also related to the idea that the kind of the 210 00:11:39,800 --> 00:11:43,640 Speaker 1: there's a bit of growth convergence to be expected as 211 00:11:43,679 --> 00:11:45,240 Speaker 1: you as you come out of COVID. And I think 212 00:11:45,240 --> 00:11:47,959 Speaker 1: this is something that you know, you've covered a lot 213 00:11:48,080 --> 00:11:52,160 Speaker 1: Joe in that just the kind of the pandemic premium 214 00:11:52,240 --> 00:11:54,880 Speaker 1: both in multiples is is kind of come back, but 215 00:11:54,920 --> 00:11:57,400 Speaker 1: it's coming back in earnings as well. And when you 216 00:11:57,480 --> 00:12:00,680 Speaker 1: have more and more tech companies talk about kind of 217 00:12:00,720 --> 00:12:04,440 Speaker 1: you know, right sizing staffing levels or things like that, 218 00:12:04,440 --> 00:12:08,640 Speaker 1: that to me translates into environment in which growth companies 219 00:12:08,640 --> 00:12:12,320 Speaker 1: are no longer prioritizing growth. They're turning on some other tap, 220 00:12:12,760 --> 00:12:14,520 Speaker 1: but it isn't growth. So it's a bit of a 221 00:12:14,559 --> 00:12:18,440 Speaker 1: stylistic change that the group itself is is undergoing right now. 222 00:12:18,720 --> 00:12:21,400 Speaker 1: And you know, when when they're style drift within a cohort, 223 00:12:21,440 --> 00:12:24,000 Speaker 1: that might get investors to question whether the you know, 224 00:12:24,040 --> 00:12:26,000 Speaker 1: whether the thesis they've applied to the group is is 225 00:12:26,040 --> 00:12:28,240 Speaker 1: still valued valid, And that's you know, something we see 226 00:12:28,280 --> 00:12:30,400 Speaker 1: as an ongoing process right now. I mean, Neil, I 227 00:12:30,400 --> 00:12:32,400 Speaker 1: mean I'm curious your take on that. I mean, You've 228 00:12:32,400 --> 00:12:35,320 Speaker 1: been talking about the reopening a lot. I've had a 229 00:12:35,360 --> 00:12:38,800 Speaker 1: million ibs with you where you point out that like 230 00:12:39,080 --> 00:12:44,080 Speaker 1: Peloton is going down and Planet Fitness, the actual jim 231 00:12:44,600 --> 00:12:47,320 Speaker 1: or people go and work out in person, has been surging. 232 00:12:47,679 --> 00:12:49,559 Speaker 1: I'm curious sort of your take on the same question 233 00:12:49,559 --> 00:12:51,480 Speaker 1: of this sort of like bigger shift that we've seen 234 00:12:51,520 --> 00:12:55,880 Speaker 1: in markets really since I guess November. Well, I think, 235 00:12:55,920 --> 00:12:57,480 Speaker 1: I mean, I think a lot of this just comes 236 00:12:57,520 --> 00:13:00,400 Speaker 1: down to the policy response, right, I mean, the policy 237 00:13:00,440 --> 00:13:06,360 Speaker 1: response following the financial crisis period was not particularly robust. 238 00:13:07,360 --> 00:13:10,839 Speaker 1: I think you could say, and as a result, Um, 239 00:13:10,880 --> 00:13:14,280 Speaker 1: you had a very very um you know, not weak, 240 00:13:14,360 --> 00:13:17,719 Speaker 1: but just not particularly strong phenominal growth environment. I think 241 00:13:17,720 --> 00:13:20,800 Speaker 1: we were basically hovering around four four and a half 242 00:13:20,840 --> 00:13:23,680 Speaker 1: percent for years. UM. So that kind of kind of 243 00:13:23,760 --> 00:13:26,679 Speaker 1: churned the wheels of a very steady recovery. UM so 244 00:13:26,720 --> 00:13:30,240 Speaker 1: things are always getting better, but we never really had 245 00:13:30,320 --> 00:13:34,240 Speaker 1: that that v shape recovery. And and so as a result, 246 00:13:34,280 --> 00:13:36,360 Speaker 1: I mean, in that kind of environment, growth is not 247 00:13:36,440 --> 00:13:39,520 Speaker 1: widespread and so you have, you know, performance in the 248 00:13:39,559 --> 00:13:42,880 Speaker 1: market's kind of narrow to a you know, specific group 249 00:13:42,920 --> 00:13:45,040 Speaker 1: of companies that can you know, drive growth in that 250 00:13:45,120 --> 00:13:49,480 Speaker 1: kind of an environment. By contrast, I think in this period, 251 00:13:49,720 --> 00:13:52,360 Speaker 1: we had a very robust response. Um. I think, you know, 252 00:13:52,400 --> 00:13:55,520 Speaker 1: through a myriad of sort of fiscal support programs. I mean, 253 00:13:56,240 --> 00:13:59,480 Speaker 1: the government was basically able to deliver you know, a 254 00:13:59,559 --> 00:14:03,319 Speaker 1: hirement mum wage to people without actually doing it legislatively. 255 00:14:03,559 --> 00:14:06,840 Speaker 1: And you know, the Fed basically put both of its 256 00:14:06,880 --> 00:14:10,760 Speaker 1: feet planted firmly on the accelerator. And so you know, 257 00:14:10,800 --> 00:14:14,440 Speaker 1: I think that's been one reason why, um, you've had 258 00:14:14,480 --> 00:14:18,360 Speaker 1: such a strong uh nominal growth backdrop, and so growth 259 00:14:18,440 --> 00:14:20,800 Speaker 1: is more widespread and so as a result, it's not 260 00:14:20,840 --> 00:14:25,320 Speaker 1: going to narrow to a handful of mega cap tech names. Obviously, 261 00:14:25,480 --> 00:14:28,960 Speaker 1: the pandemic is important, as you mentioned. I mean I 262 00:14:29,560 --> 00:14:33,000 Speaker 1: sort of pose that question to our clients as well 263 00:14:33,040 --> 00:14:34,840 Speaker 1: as like, what if what we're seeing is really just 264 00:14:35,000 --> 00:14:38,760 Speaker 1: the last gasp of the of the pandemic unwined? You know, 265 00:14:38,840 --> 00:14:40,400 Speaker 1: I mean, I think it's more to it than that. 266 00:14:40,600 --> 00:14:43,480 Speaker 1: But you know, I mean remember back in I mean 267 00:14:43,520 --> 00:14:46,440 Speaker 1: people were making the argument like the stock markets are 268 00:14:46,480 --> 00:14:49,400 Speaker 1: just whistling past the graveyard, and in reality, I think 269 00:14:49,400 --> 00:14:52,640 Speaker 1: the stock markets were actually following up a script that 270 00:14:52,680 --> 00:14:54,200 Speaker 1: made a lot of sense. I mean, if you look 271 00:14:54,240 --> 00:14:57,960 Speaker 1: at online retail sales, they were very strong. Guess what 272 00:14:58,120 --> 00:15:02,040 Speaker 1: those companies did really well and a twenty and by contrast, 273 00:15:02,360 --> 00:15:05,720 Speaker 1: brick and mortar retailer didn't do particularly well. Restaurants didn't 274 00:15:05,720 --> 00:15:07,920 Speaker 1: do particularly well, and and they were punished. So it 275 00:15:07,960 --> 00:15:10,920 Speaker 1: wasn't like the market was just you know, you know, 276 00:15:10,960 --> 00:15:14,320 Speaker 1: turning a blind out all these things. I mean, the market, frankly, 277 00:15:14,360 --> 00:15:17,720 Speaker 1: I think was evolving the way you'd expect. And you know, now, um, 278 00:15:18,480 --> 00:15:21,240 Speaker 1: a lot of that's working in reverse, right, and that 279 00:15:21,760 --> 00:15:24,400 Speaker 1: it's probably better for the economy, but it's it's not 280 00:15:24,480 --> 00:15:27,440 Speaker 1: necessarily the best thing for some of these, uh, some 281 00:15:27,560 --> 00:15:29,040 Speaker 1: of these trades that had been put on over the 282 00:15:29,080 --> 00:15:33,400 Speaker 1: last number of years. You mentioned financial conditions at the 283 00:15:33,440 --> 00:15:36,440 Speaker 1: start of this conversation, and this is something that a 284 00:15:36,480 --> 00:15:38,440 Speaker 1: lot of people are talking about as well, this idea 285 00:15:38,600 --> 00:15:41,760 Speaker 1: that the Fed has explicitly said that it wants to 286 00:15:41,880 --> 00:15:46,640 Speaker 1: tighten financial conditions. And one part of tightening financial conditions, 287 00:15:46,720 --> 00:15:49,800 Speaker 1: or one component of financial conditions, one of the things 288 00:15:49,840 --> 00:15:53,040 Speaker 1: that hadn't moved that much or tightened that much was 289 00:15:53,160 --> 00:15:56,600 Speaker 1: stock so I guess my question is how how is 290 00:15:56,640 --> 00:15:59,800 Speaker 1: the FED thinking about stocks at the moment, or how 291 00:15:59,840 --> 00:16:02,560 Speaker 1: do you think the FED is thinking about stocks? I 292 00:16:02,600 --> 00:16:05,480 Speaker 1: think they're probably encouraged to some degree that the multiple 293 00:16:05,520 --> 00:16:07,400 Speaker 1: has come in quite a bit. I mean, obviously the 294 00:16:07,440 --> 00:16:11,640 Speaker 1: earnings backdrop is quite strong still UM, and I believe 295 00:16:11,680 --> 00:16:15,800 Speaker 1: projected earnings have continued to go up UM. And so 296 00:16:15,960 --> 00:16:18,080 Speaker 1: you know, I think they're they're probably looking at the 297 00:16:18,080 --> 00:16:21,160 Speaker 1: sell off inequities as as a good thing. Obviously, if 298 00:16:22,080 --> 00:16:25,280 Speaker 1: if demand is running really hot and financial conditions ease more, 299 00:16:25,520 --> 00:16:27,560 Speaker 1: that means that demand is going to get even stronger, 300 00:16:27,600 --> 00:16:32,360 Speaker 1: which means that their inflation outlook will deteriorate in their mind, right, So, UM, 301 00:16:32,360 --> 00:16:34,800 Speaker 1: I think they welcome some tightening and financial conditions. And 302 00:16:34,840 --> 00:16:37,640 Speaker 1: as I mentioned, I mean, the financial conditions tightening that 303 00:16:37,680 --> 00:16:41,560 Speaker 1: we've seen so far is not enough in my view 304 00:16:41,720 --> 00:16:45,800 Speaker 1: to really UM send the unemployment rate meaningfully higher. I mean, 305 00:16:46,200 --> 00:16:49,240 Speaker 1: you know, we can talk about the folks over at 306 00:16:49,400 --> 00:16:54,280 Speaker 1: Cameo laying off some tech workers, UM, but you know, 307 00:16:54,360 --> 00:16:57,280 Speaker 1: I just don't see it as as a as enough 308 00:16:57,320 --> 00:17:00,800 Speaker 1: to really um weigh on the unemployment rate. At at best, 309 00:17:00,840 --> 00:17:04,320 Speaker 1: the unemployment probably flattens out in response to this tightening 310 00:17:04,359 --> 00:17:07,440 Speaker 1: of financial conditions over over the over the back half 311 00:17:07,480 --> 00:17:10,800 Speaker 1: of the year. But you know, I think in my mind, 312 00:17:10,840 --> 00:17:15,800 Speaker 1: I mean, the FED welcomes the tightening UM, and and 313 00:17:15,880 --> 00:17:19,000 Speaker 1: given the kind of inflationary environment that we're in, UM, 314 00:17:19,040 --> 00:17:22,240 Speaker 1: this sort of idea that there's this you know, put 315 00:17:22,320 --> 00:17:25,160 Speaker 1: out there that the FED will have your back. I mean, 316 00:17:25,200 --> 00:17:27,399 Speaker 1: the strike price on that put is a lot lower 317 00:17:27,440 --> 00:17:29,560 Speaker 1: than it used to be. UM. And that's again it 318 00:17:29,600 --> 00:17:32,760 Speaker 1: goes back to this idea that UM, you know, in 319 00:17:32,880 --> 00:17:36,679 Speaker 1: previous episodes when the equity markets were were faltering, the 320 00:17:36,720 --> 00:17:40,800 Speaker 1: growth outlook was faltering quite substantially as well. I don't 321 00:17:40,800 --> 00:17:44,080 Speaker 1: think that that's as compelling this time around, and in 322 00:17:44,119 --> 00:17:47,800 Speaker 1: an environment where inflation is still high. UM, I think 323 00:17:47,880 --> 00:17:50,440 Speaker 1: it's really a no brainer. As Powell mentioned this week, 324 00:17:50,480 --> 00:17:53,679 Speaker 1: their goals aren't intention right. So Luke, I want to 325 00:17:53,680 --> 00:17:55,919 Speaker 1: bring you in on this point because I mean, to me, 326 00:17:56,400 --> 00:17:59,040 Speaker 1: the FED never explicitly said that we want the stock 327 00:17:59,080 --> 00:18:03,160 Speaker 1: market to go down, I mean, for obvious for obvious reasons, 328 00:18:03,280 --> 00:18:06,520 Speaker 1: but they said financial conditions need to come down. The 329 00:18:06,560 --> 00:18:09,920 Speaker 1: only thing in the financial conditions induseaes as I mentioned 330 00:18:09,960 --> 00:18:13,760 Speaker 1: that had been staying up was stocks? Why did it 331 00:18:13,800 --> 00:18:17,280 Speaker 1: take so long for the market to sort of accept 332 00:18:17,720 --> 00:18:21,000 Speaker 1: this message, because it it did feel like Neil just 333 00:18:21,040 --> 00:18:24,560 Speaker 1: put it as a bit of a no brainer. Yeah. 334 00:18:24,119 --> 00:18:26,920 Speaker 1: I find it interesting in that, you know, stocks were 335 00:18:27,680 --> 00:18:31,040 Speaker 1: you can argue they still might be, but since more 336 00:18:31,160 --> 00:18:33,639 Speaker 1: or less early February or late January, stocks have been 337 00:18:33,720 --> 00:18:35,800 Speaker 1: kind of stuck in a boring range. You've just been 338 00:18:35,800 --> 00:18:38,000 Speaker 1: going from the you know, the bottom to the top 339 00:18:38,080 --> 00:18:41,040 Speaker 1: of that range. I think it was more about the 340 00:18:41,080 --> 00:18:43,760 Speaker 1: inertia with that. I also think it had to do with, 341 00:18:44,520 --> 00:18:47,080 Speaker 1: you know, despite all all of this, and despite a 342 00:18:47,280 --> 00:18:50,960 Speaker 1: you know, pretty big rerating early in the year, earnings 343 00:18:50,960 --> 00:18:53,600 Speaker 1: have been coming in, You're quite quite fine at the 344 00:18:54,280 --> 00:18:56,640 Speaker 1: guidance outlook might be getting a little a little more 345 00:18:56,680 --> 00:18:59,480 Speaker 1: dowurd in part because the strengthening of the US dollar. 346 00:18:59,520 --> 00:19:02,720 Speaker 1: There's your financial conditions right there um, as well as 347 00:19:02,920 --> 00:19:05,320 Speaker 1: you know, headwinds related to to China and Ukraine. But 348 00:19:05,359 --> 00:19:06,919 Speaker 1: I think I think it was a lot of you know, 349 00:19:07,040 --> 00:19:09,880 Speaker 1: complacity about the about the range we're in. But our 350 00:19:10,000 --> 00:19:12,680 Speaker 1: view was that as we were getting to you know, 351 00:19:13,160 --> 00:19:16,600 Speaker 1: around those levels around top of range, that you know, 352 00:19:16,640 --> 00:19:19,960 Speaker 1: those those are good places to be selling stocks. What 353 00:19:20,119 --> 00:19:22,000 Speaker 1: became more challenging is like when we get to the 354 00:19:22,000 --> 00:19:25,080 Speaker 1: bottom of this range as we had lately, like does 355 00:19:25,119 --> 00:19:28,520 Speaker 1: it still make sense to be underweight stocks? And the 356 00:19:28,600 --> 00:19:32,120 Speaker 1: view there is that, you know, although we've had multiple compression, 357 00:19:32,119 --> 00:19:33,960 Speaker 1: a lot of it, we've had multiple compression at the 358 00:19:33,960 --> 00:19:37,439 Speaker 1: index level essentially to pre COVID levels, we also have 359 00:19:37,520 --> 00:19:39,960 Speaker 1: rates more than a hundred basis points higher. So your 360 00:19:40,080 --> 00:19:44,280 Speaker 1: your layman's equity risk premia would suggest that you're still 361 00:19:44,320 --> 00:19:47,600 Speaker 1: not being compensated enough for the risk that either the 362 00:19:47,600 --> 00:19:52,119 Speaker 1: FED over tightens, that China is a persistently larger drag 363 00:19:52,160 --> 00:19:55,240 Speaker 1: on the global growth outlook for longer, or that's kind 364 00:19:55,240 --> 00:20:04,240 Speaker 1: of supply constraints So Twain, it's Twine Twain who's adorable. Um, yes, 365 00:20:04,359 --> 00:20:08,520 Speaker 1: you can hear how adorable he is. Uh but yeah so, 366 00:20:08,720 --> 00:20:10,720 Speaker 1: or or you have essentially you know, Russia, your grain 367 00:20:10,920 --> 00:20:14,920 Speaker 1: exacerbating supply constraints there. So you know, our view, though 368 00:20:14,920 --> 00:20:18,480 Speaker 1: has been even at the start of April, say when 369 00:20:18,520 --> 00:20:21,000 Speaker 1: you had you know, stocks doing pretty well, even then 370 00:20:21,040 --> 00:20:24,080 Speaker 1: you still had dollar at you know, highs of the year, 371 00:20:24,119 --> 00:20:27,199 Speaker 1: tenure yields at highs of the year, mortgage rates rising. 372 00:20:27,480 --> 00:20:29,880 Speaker 1: The kind of tightening that's going to show up more 373 00:20:29,920 --> 00:20:33,520 Speaker 1: in the forward outlook is going to come much more 374 00:20:33,600 --> 00:20:37,040 Speaker 1: from what's happened, uh, you know in mortgage rates and 375 00:20:37,320 --> 00:20:39,439 Speaker 1: the kind of knock on effects to housing than it 376 00:20:39,480 --> 00:20:42,560 Speaker 1: will from the SMP five hundred going from fort hundred 377 00:20:42,720 --> 00:20:46,600 Speaker 1: to forty two hundred. So in terms of the FED tightening, 378 00:20:46,640 --> 00:20:49,000 Speaker 1: the type of financial conditions that matter in a way 379 00:20:49,040 --> 00:20:52,360 Speaker 1: that kind of influences the forward growth outlook, A lot 380 00:20:52,400 --> 00:20:54,399 Speaker 1: of that, you know, we'd are he was in place 381 00:20:54,560 --> 00:20:57,400 Speaker 1: even before kind of stocks woke up to the idea 382 00:20:57,520 --> 00:21:00,080 Speaker 1: that you know, can't sustain these kind of mall the 383 00:21:00,119 --> 00:21:02,440 Speaker 1: polls at at these kind of rates. With the growth 384 00:21:02,440 --> 00:21:05,560 Speaker 1: outlooked at you still positive, but slowly you know, on 385 00:21:05,640 --> 00:21:07,560 Speaker 1: the mortgage rate back up. I mean, I think it's 386 00:21:07,600 --> 00:21:11,720 Speaker 1: worth pointing out that this is a highly unusual housing market, 387 00:21:11,760 --> 00:21:14,240 Speaker 1: and I think Luke would obviously agree with that. Certainly 388 00:21:14,280 --> 00:21:17,600 Speaker 1: Twin agrees with it, um. But what what what I 389 00:21:17,640 --> 00:21:24,399 Speaker 1: will say, UM, is that when as economists business economists, 390 00:21:24,400 --> 00:21:27,639 Speaker 1: when we talk about housing, we're really talking about three things, right. 391 00:21:27,680 --> 00:21:32,120 Speaker 1: I mean, it's residential investment that's what is booked into 392 00:21:32,160 --> 00:21:38,080 Speaker 1: GDP and Residential investment is really three things. It's sales, 393 00:21:38,320 --> 00:21:41,760 Speaker 1: which is broker commissions, and then it's construction and housing 394 00:21:41,760 --> 00:21:44,640 Speaker 1: renovation spending. Those are the three things that go into 395 00:21:44,760 --> 00:21:48,960 Speaker 1: residential investment, and the broker commission piece of it, or 396 00:21:49,000 --> 00:21:51,520 Speaker 1: the sales piece of it, that's only a fifth okay. 397 00:21:51,560 --> 00:21:55,919 Speaker 1: The rest of it is renovations and construction. So what 398 00:21:56,040 --> 00:21:58,320 Speaker 1: I think it's important for viewers to know is that 399 00:21:58,400 --> 00:22:02,440 Speaker 1: even though rates are backing up, residential investment, the likelihood 400 00:22:02,520 --> 00:22:05,679 Speaker 1: is is that it's still growing. It's still contributing to GDP. 401 00:22:05,880 --> 00:22:08,199 Speaker 1: If you look at the gap between housing starts and 402 00:22:08,240 --> 00:22:13,679 Speaker 1: building completions, there's still a yawning gap. That means mechanically 403 00:22:13,800 --> 00:22:17,159 Speaker 1: that units under construction will continue going up. Okay, And 404 00:22:17,200 --> 00:22:19,720 Speaker 1: as as units can under construction keep going up, that 405 00:22:19,760 --> 00:22:22,480 Speaker 1: means construction spending will keep going up, which means that 406 00:22:22,520 --> 00:22:25,399 Speaker 1: residential investment will keep going up. And to the extent 407 00:22:25,440 --> 00:22:27,719 Speaker 1: that rates have backed up, and that's creating some spatial 408 00:22:27,800 --> 00:22:30,560 Speaker 1: luck and effects. You know, you can make a pretty 409 00:22:30,560 --> 00:22:33,840 Speaker 1: compelling argument that that, you know, people that wanted to move, 410 00:22:34,200 --> 00:22:36,840 Speaker 1: maybe they spend more money on their existing home. Um. 411 00:22:36,960 --> 00:22:39,639 Speaker 1: I mean, I certainly think that's consists of a lot 412 00:22:39,680 --> 00:22:42,159 Speaker 1: of the anecdotal stuff that I'm seeing here in my 413 00:22:42,280 --> 00:22:44,600 Speaker 1: neck of the woods. But you know, look, I mean, 414 00:22:45,080 --> 00:22:47,800 Speaker 1: I get why Luke is so concerned. He's a potential 415 00:22:47,840 --> 00:22:51,359 Speaker 1: first time buyer. That's not everyone. For for most people, 416 00:22:51,560 --> 00:22:56,320 Speaker 1: your real cost of shelter is collapsing because your mortgage 417 00:22:56,359 --> 00:22:58,600 Speaker 1: rates are fixed and everything, and your mortgage, your your 418 00:22:58,600 --> 00:23:01,680 Speaker 1: mortgage monthlies are fixed. Um. You know, we know that 419 00:23:01,720 --> 00:23:06,720 Speaker 1: adjustable rate mortgages are not nearly as substantial in terms 420 00:23:06,720 --> 00:23:08,920 Speaker 1: of a share of dead outstanding as they were back 421 00:23:08,920 --> 00:23:12,439 Speaker 1: in the uh oh four oh five period. You know, 422 00:23:12,480 --> 00:23:15,080 Speaker 1: so your real cost of shelters declining for most people. 423 00:23:15,240 --> 00:23:17,320 Speaker 1: So it's not you know, as I said, I mean, yeah, 424 00:23:17,320 --> 00:23:19,959 Speaker 1: the rates back up. Yes, that's an unambiguous negative, but 425 00:23:21,400 --> 00:23:23,679 Speaker 1: I would be a little bit careful about extrapolating how 426 00:23:23,760 --> 00:23:26,760 Speaker 1: much that's gonna do to to overall residential investment, which 427 00:23:26,760 --> 00:23:30,040 Speaker 1: will still be in my mind to sending in real terms. Yeah, hey, 428 00:23:30,040 --> 00:23:32,879 Speaker 1: I'll definitely agree with you know, someone was asking me 429 00:23:32,880 --> 00:23:35,119 Speaker 1: because I've been I've been pretty optimistic about the economy, 430 00:23:35,160 --> 00:23:37,119 Speaker 1: but it's hard to get a little more pessimistic, and 431 00:23:37,160 --> 00:23:38,960 Speaker 1: they're asking me why and I said, you know, I'm 432 00:23:39,080 --> 00:23:41,960 Speaker 1: essentially the modal millennial. I thought I was convinced that 433 00:23:42,440 --> 00:23:44,880 Speaker 1: this cycle was going to be the one where I 434 00:23:44,920 --> 00:23:47,600 Speaker 1: got into home ownership, and you know, now I'm no 435 00:23:47,640 --> 00:23:50,720 Speaker 1: longer convinced, and you know, extrapolate that across the economy now, 436 00:23:50,720 --> 00:23:54,720 Speaker 1: I'm now I'm a little less less optimistic. So I I, 437 00:23:54,880 --> 00:23:56,840 Speaker 1: you know, I do agree that this could be certainly 438 00:23:56,880 --> 00:23:59,760 Speaker 1: a case of me over extrapolating my my personal circumstances, 439 00:23:59,800 --> 00:24:03,000 Speaker 1: and definitely agree Neil's been kind of quite rightly being 440 00:24:03,000 --> 00:24:04,959 Speaker 1: in the drum that there's a lot of pent up 441 00:24:05,000 --> 00:24:09,080 Speaker 1: production coming coming to housing in particular. But you know, uh, 442 00:24:09,119 --> 00:24:12,240 Speaker 1: the counter factual of you know, rates having not done 443 00:24:12,280 --> 00:24:14,480 Speaker 1: what they've done due to the kind of the FED 444 00:24:14,560 --> 00:24:18,280 Speaker 1: signaling a quick and expeditious move higher in rates as 445 00:24:18,359 --> 00:24:21,560 Speaker 1: it would have been a definitely a brighter environment both 446 00:24:21,600 --> 00:24:25,600 Speaker 1: for home prices and for for first time potentially activity 447 00:24:25,960 --> 00:24:28,600 Speaker 1: going forward on both ends. So again I think it's 448 00:24:28,720 --> 00:24:31,320 Speaker 1: you know that the counter factual is seems also clear. 449 00:24:46,880 --> 00:24:50,200 Speaker 1: Can I ask about one area where another area where 450 00:24:50,240 --> 00:24:53,159 Speaker 1: I think you guys disagree a little bit and correct 451 00:24:53,160 --> 00:24:55,600 Speaker 1: me if I'm wrong, But I think Luke at this 452 00:24:55,680 --> 00:24:58,280 Speaker 1: point in time is more barish on what's going on 453 00:24:58,359 --> 00:25:01,560 Speaker 1: with China and the Chinese economy. The Neil is Um, 454 00:25:01,680 --> 00:25:05,720 Speaker 1: could you maybe explain your, I guess, your respective thinking 455 00:25:06,119 --> 00:25:08,879 Speaker 1: around what's going on in China. We've seen, you know, 456 00:25:09,000 --> 00:25:12,280 Speaker 1: parts of the country basically shut down because of COVID 457 00:25:12,400 --> 00:25:16,000 Speaker 1: zero policies. We've seen some supply chain issues and things 458 00:25:16,040 --> 00:25:18,800 Speaker 1: like that, and there seem to be varying opinions about 459 00:25:18,840 --> 00:25:22,359 Speaker 1: how much that actually matters for the global economy, how 460 00:25:22,440 --> 00:25:24,760 Speaker 1: much of those troubles are going to be exported to 461 00:25:24,840 --> 00:25:26,680 Speaker 1: the rest of the world. So why don't we start 462 00:25:26,720 --> 00:25:32,320 Speaker 1: with with Neil? Sure? Tracy, Well, I'm not I don't 463 00:25:32,359 --> 00:25:35,520 Speaker 1: consider myself an expert on China. UM. I try to 464 00:25:35,520 --> 00:25:40,080 Speaker 1: stick to my knitting. But what I will tell you is, UM, 465 00:25:40,119 --> 00:25:43,040 Speaker 1: it's hard for me to see conditions in China getting 466 00:25:43,080 --> 00:25:46,520 Speaker 1: substantially worse than they are right now. And so for me, 467 00:25:46,720 --> 00:25:51,560 Speaker 1: it's about what the blowback is to the US economy. UM. 468 00:25:51,680 --> 00:25:55,240 Speaker 1: And so you know, my sense is that the situation 469 00:25:55,240 --> 00:25:57,600 Speaker 1: in China can't possibly get any worse than it is 470 00:25:57,720 --> 00:26:01,000 Speaker 1: right now. UM. And you know my senses that it 471 00:26:01,040 --> 00:26:03,520 Speaker 1: gets somewhat better from here. UM, and that'll be a 472 00:26:03,600 --> 00:26:06,880 Speaker 1: tail end I think for UH for global demand and 473 00:26:06,920 --> 00:26:10,679 Speaker 1: will help loosen supply chains. So that's sort of how 474 00:26:10,680 --> 00:26:13,360 Speaker 1: I'm thinking about it. Luke, Yeah, I think, I think. 475 00:26:13,480 --> 00:26:17,560 Speaker 1: I think my main difference is that just there's a 476 00:26:17,880 --> 00:26:21,880 Speaker 1: somewhat at a degree of caution warranted. And it's kind 477 00:26:21,920 --> 00:26:25,000 Speaker 1: of almost similar to the inflation story. When inflation surprises 478 00:26:25,040 --> 00:26:28,320 Speaker 1: to the upside for so long, so long, so long, UH, 479 00:26:28,320 --> 00:26:31,080 Speaker 1: and forecasts are are slow to adjust, then the burden 480 00:26:31,080 --> 00:26:32,720 Speaker 1: of proof is is higher. On the other side, the 481 00:26:32,720 --> 00:26:36,240 Speaker 1: burden of proofer thinking inflation has come down UH should 482 00:26:36,240 --> 00:26:38,359 Speaker 1: be higher because you've been kind of beating over the 483 00:26:38,359 --> 00:26:40,760 Speaker 1: head with the mistakes of the past. I think that's 484 00:26:40,920 --> 00:26:44,200 Speaker 1: very much the case right now from a global macro perspective. 485 00:26:44,200 --> 00:26:47,440 Speaker 1: In terms of in terms of looking at China, I think, uh, 486 00:26:47,480 --> 00:26:50,280 Speaker 1: you know, pretty much everyone could point to five or 487 00:26:50,640 --> 00:26:54,000 Speaker 1: six forward looking catalysts that would have inspired a lot 488 00:26:54,000 --> 00:26:56,760 Speaker 1: of optimism on China over the past you know, five 489 00:26:56,880 --> 00:26:59,520 Speaker 1: or five or six months, and it's been the kind 490 00:26:59,520 --> 00:27:01,639 Speaker 1: of the story of Lucy pulling the football away from 491 00:27:01,720 --> 00:27:07,159 Speaker 1: Charlie Brown each time, whether it's the underperformance so large 492 00:27:07,240 --> 00:27:09,800 Speaker 1: that you know, forward performance should be good. Hey, you've 493 00:27:09,840 --> 00:27:12,880 Speaker 1: got the China's Party Congress coming up in November, you're 494 00:27:12,880 --> 00:27:15,280 Speaker 1: probably going to get kind of firming of growth and 495 00:27:15,640 --> 00:27:17,840 Speaker 1: the stock market ahead of that. Or hey, coming out 496 00:27:17,880 --> 00:27:21,360 Speaker 1: of the Beijing Olympics, you should really see this kind 497 00:27:21,400 --> 00:27:23,800 Speaker 1: of you know, this end of blue guy policy, this 498 00:27:23,920 --> 00:27:26,840 Speaker 1: pick up in industrial production in a way that kind 499 00:27:26,880 --> 00:27:29,800 Speaker 1: of supports and uh and underpins the real estate market. 500 00:27:30,280 --> 00:27:32,760 Speaker 1: A lot of these things can still happen, but I 501 00:27:32,800 --> 00:27:35,240 Speaker 1: think that the thing is when China has kind of 502 00:27:35,280 --> 00:27:38,359 Speaker 1: consistently disappointed on the macro side, and a lot of 503 00:27:38,400 --> 00:27:40,919 Speaker 1: cases through through no fault of its own, but in 504 00:27:40,960 --> 00:27:45,359 Speaker 1: a lot of cases through policy responses that global investors 505 00:27:45,359 --> 00:27:48,480 Speaker 1: do not have a lot of visibility into. Then I think, 506 00:27:48,680 --> 00:27:52,480 Speaker 1: you know, the threshold then for saying, hey, China's decisively 507 00:27:52,560 --> 00:27:54,960 Speaker 1: turned around should be higher. It is something that you 508 00:27:54,960 --> 00:27:57,679 Speaker 1: should approach with a little more caution, even if you know. 509 00:27:58,200 --> 00:28:00,520 Speaker 1: I would tend to agree with Neil that you know, 510 00:28:00,600 --> 00:28:03,080 Speaker 1: the six months, twelve months or things better or worse? 511 00:28:03,440 --> 00:28:07,040 Speaker 1: Probably better, But how bad can things get in you know, 512 00:28:07,280 --> 00:28:09,480 Speaker 1: two to three weeks in China. I think we've seen 513 00:28:09,480 --> 00:28:11,879 Speaker 1: in the volatility in the and that market, things can 514 00:28:11,920 --> 00:28:15,120 Speaker 1: move quite abruptly to the downside, so you know, it's 515 00:28:15,240 --> 00:28:17,199 Speaker 1: I think it's a case of why not be a 516 00:28:17,240 --> 00:28:21,040 Speaker 1: little a little late to the China upside surprise party, right? 517 00:28:21,080 --> 00:28:23,399 Speaker 1: I mean I would just point out though, that I 518 00:28:23,440 --> 00:28:27,359 Speaker 1: think it is worth pointing out that outside of China, 519 00:28:28,080 --> 00:28:31,320 Speaker 1: emerging Asia looks quite good. I mean, if you look 520 00:28:31,359 --> 00:28:33,280 Speaker 1: at UM you know, for example, the p m I 521 00:28:33,400 --> 00:28:35,919 Speaker 1: data outside of China looks pretty healthy. If you look 522 00:28:35,960 --> 00:28:39,040 Speaker 1: at mobility data outside of China, it's been up into 523 00:28:39,080 --> 00:28:42,000 Speaker 1: the right, so factories and the rest of Asia are open. 524 00:28:42,160 --> 00:28:45,400 Speaker 1: A lot of final assemblies already leaked out of China, 525 00:28:45,440 --> 00:28:47,240 Speaker 1: which could be one of the reasons why the supply 526 00:28:47,320 --> 00:28:51,920 Speaker 1: chain effects of this haven't been as onerous frankly, I mean, 527 00:28:52,040 --> 00:28:54,640 Speaker 1: at least on the US economy. I mean, the the 528 00:28:54,760 --> 00:28:57,440 Speaker 1: impact of the delta variants spreading all over Asia was 529 00:28:57,480 --> 00:29:01,440 Speaker 1: a lot worse on for for US. UM, you know, 530 00:29:01,520 --> 00:29:05,720 Speaker 1: producers delivering goods to consumers here than what we've seen lately. 531 00:29:05,920 --> 00:29:08,080 Speaker 1: So um, you know, I think if the US, I 532 00:29:08,120 --> 00:29:10,160 Speaker 1: mean the way for me. I remember, guys, I'm trying 533 00:29:10,200 --> 00:29:13,200 Speaker 1: to bring it back to the US because that's my right, 534 00:29:13,840 --> 00:29:16,000 Speaker 1: that's I'm trying to stick to my knitting year, and 535 00:29:17,720 --> 00:29:22,360 Speaker 1: my sense is that China will re accelerate. I mean, 536 00:29:22,360 --> 00:29:25,040 Speaker 1: whether that happens in one month, two months, six months, 537 00:29:25,040 --> 00:29:29,000 Speaker 1: it's going to happen. We know that Europe is frankly 538 00:29:29,040 --> 00:29:32,600 Speaker 1: a lot more connected to China than than the US is. 539 00:29:32,680 --> 00:29:35,400 Speaker 1: I mean, the Europe is a very large, open economy 540 00:29:35,480 --> 00:29:37,440 Speaker 1: that does a lot of trade with China. So if 541 00:29:37,520 --> 00:29:40,960 Speaker 1: China is improving, it stands to reason that Europe will 542 00:29:41,000 --> 00:29:46,000 Speaker 1: as well. Um, I think that's a story. But that 543 00:29:46,480 --> 00:29:51,640 Speaker 1: remember that dramatically, dramatically undercuts this idea that the US 544 00:29:51,720 --> 00:29:54,520 Speaker 1: isn't going to go into recession in twelve to eighteen months. 545 00:29:55,440 --> 00:29:57,400 Speaker 1: You want to call for a recession in the US 546 00:29:57,440 --> 00:29:59,960 Speaker 1: at a time when China and Europe may be accelerated, 547 00:30:00,720 --> 00:30:05,160 Speaker 1: That to me is ridiculous, Okay, And so um, we're 548 00:30:05,200 --> 00:30:08,560 Speaker 1: obviously not going into recession this year, and so I 549 00:30:08,600 --> 00:30:10,160 Speaker 1: think that's something to keep in the back of your 550 00:30:10,160 --> 00:30:12,040 Speaker 1: mind and that maybe you know, I mean, this is 551 00:30:12,080 --> 00:30:13,560 Speaker 1: this is why again it goes back to what we've 552 00:30:13,560 --> 00:30:15,760 Speaker 1: talked about earlier to start the program, right, is that 553 00:30:15,800 --> 00:30:19,920 Speaker 1: it's a very bizarre period for financial markets. I mean, 554 00:30:20,040 --> 00:30:23,680 Speaker 1: the moment the bond market basically priced the recession probability 555 00:30:23,720 --> 00:30:26,959 Speaker 1: out is the very moment the stock market started pricing 556 00:30:26,960 --> 00:30:31,880 Speaker 1: one in. Well, actually, so I want to actually talk 557 00:30:31,920 --> 00:30:36,160 Speaker 1: about US assets again and start with Luke, because obviously 558 00:30:36,160 --> 00:30:38,600 Speaker 1: a lot of people are looking at their portfolios. Maybe 559 00:30:38,600 --> 00:30:41,320 Speaker 1: they're looking at their floral one case, maybe they're looking 560 00:30:41,400 --> 00:30:45,160 Speaker 1: particular at their target date retirement funds, and they're obviously 561 00:30:45,200 --> 00:30:48,440 Speaker 1: sitting on a lot of losses so far here today. 562 00:30:48,720 --> 00:30:51,560 Speaker 1: And what's when, you know, we talk about financial markets 563 00:30:51,600 --> 00:30:55,680 Speaker 1: being weird, Woods New is not just that stocks are 564 00:30:55,720 --> 00:30:59,240 Speaker 1: down because stocks sometimes fall, It's that the bond portion 565 00:30:59,320 --> 00:31:02,320 Speaker 1: of people's port folios it's also down. What for what 566 00:31:02,640 --> 00:31:05,440 Speaker 1: used to across the last several years performed as this 567 00:31:05,600 --> 00:31:09,560 Speaker 1: nice hedge stocks go down bonds go up is not working? 568 00:31:09,640 --> 00:31:13,200 Speaker 1: It stocks down and bonds down because of the rate increases. 569 00:31:13,640 --> 00:31:16,200 Speaker 1: What does that do, Luke? How does that change the 570 00:31:16,200 --> 00:31:20,760 Speaker 1: thinking of portfolio management? When the sort of these asset 571 00:31:20,800 --> 00:31:23,760 Speaker 1: allocation models that worked extremely well one part goes down 572 00:31:23,760 --> 00:31:26,160 Speaker 1: while the other part goes up are no longer working. 573 00:31:28,320 --> 00:31:30,880 Speaker 1: First off, if you're in an environment where more things 574 00:31:30,920 --> 00:31:34,000 Speaker 1: aren't working, it's you know, it's gross down it's not 575 00:31:34,160 --> 00:31:38,480 Speaker 1: being it's you know, not taking large tilts in in 576 00:31:38,520 --> 00:31:41,240 Speaker 1: anyone direction. It's kind of it gets back to a 577 00:31:41,360 --> 00:31:46,160 Speaker 1: uh more of a risk control and prioritizing relative value environment. 578 00:31:46,600 --> 00:31:50,000 Speaker 1: That's that's step one. Step two, though, is expanding the 579 00:31:50,080 --> 00:31:53,640 Speaker 1: kind of the range of possibilities. And one reason obviously 580 00:31:53,720 --> 00:31:57,000 Speaker 1: why bonds have been doing so poorly is because commodity 581 00:31:57,040 --> 00:32:00,200 Speaker 1: prices have been doing so well. So are the is 582 00:32:00,240 --> 00:32:02,920 Speaker 1: that both as a kind of a defensive ballast in 583 00:32:03,000 --> 00:32:05,760 Speaker 1: portfolios as well as kind of the you know, the 584 00:32:05,760 --> 00:32:10,240 Speaker 1: the structural growth opportunities, particularly in in the industrial metal 585 00:32:10,280 --> 00:32:13,800 Speaker 1: space that you know, commodities are still a good place 586 00:32:13,840 --> 00:32:16,240 Speaker 1: to be right now with kind of questions about demand. 587 00:32:16,280 --> 00:32:19,959 Speaker 1: It's not necessarily something aggressively adding to at that at 588 00:32:19,960 --> 00:32:22,960 Speaker 1: the moment, but kind of on a on a forward 589 00:32:22,960 --> 00:32:25,640 Speaker 1: looking basis, you know, think of it this way. It's 590 00:32:25,680 --> 00:32:30,000 Speaker 1: almost it's almost incompatible to think inflation is going to 591 00:32:30,080 --> 00:32:33,920 Speaker 1: normalize all the way to two percent and that we're 592 00:32:33,920 --> 00:32:38,680 Speaker 1: going to have the necessary investments in developing commodities and 593 00:32:38,760 --> 00:32:42,160 Speaker 1: in using them to support the green revolution that we're 594 00:32:42,200 --> 00:32:45,080 Speaker 1: able to get you know, some semblance of energy independence. 595 00:32:45,080 --> 00:32:49,239 Speaker 1: Those two things seem barely incompatible. Uh so in in 596 00:32:49,280 --> 00:32:52,080 Speaker 1: that kind of environment that that augurs for more of 597 00:32:52,120 --> 00:32:56,080 Speaker 1: a structural increase in allocation into commodities, which have been 598 00:32:56,160 --> 00:32:59,520 Speaker 1: a very unloved asset class for for such a long 599 00:32:59,560 --> 00:33:02,920 Speaker 1: period of time. So that's something that's helped offset the 600 00:33:03,280 --> 00:33:07,760 Speaker 1: you know, the correlation. The correlation go to one environment 601 00:33:07,840 --> 00:33:24,760 Speaker 1: that we we bound ourselves in. Well, Neil, I mean 602 00:33:25,360 --> 00:33:29,560 Speaker 1: obviously you know we're talking about mortgages earlier, but where 603 00:33:29,600 --> 00:33:32,040 Speaker 1: can rates go? Can they keep going higher? I mean, 604 00:33:32,280 --> 00:33:35,560 Speaker 1: we particularly at the long end, you know, you know, 605 00:33:35,720 --> 00:33:40,160 Speaker 1: I think so, um why, I think we're in a 606 00:33:40,200 --> 00:33:44,120 Speaker 1: strong nominal growth environment and um, you know, look, I 607 00:33:44,160 --> 00:33:46,560 Speaker 1: mean if you think about where rates were the last time, 608 00:33:46,560 --> 00:33:50,920 Speaker 1: I mean, the FED ended at two point three seven 609 00:33:51,000 --> 00:33:52,480 Speaker 1: right too, I think it was a twitter quarter or 610 00:33:52,520 --> 00:33:54,080 Speaker 1: two and a half that's where the funds rate was, 611 00:33:54,160 --> 00:33:55,440 Speaker 1: and we were in a four and a half percent 612 00:33:55,480 --> 00:34:00,440 Speaker 1: nominal growth environment at the end of and of FED 613 00:34:00,640 --> 00:34:04,360 Speaker 1: promises to well not promises, but they're guiding for something 614 00:34:04,400 --> 00:34:06,720 Speaker 1: like that this year and will probably be I mean, 615 00:34:06,880 --> 00:34:08,800 Speaker 1: you know, let's say inflations around three to three and 616 00:34:08,800 --> 00:34:13,960 Speaker 1: a half percent. I think real growth will be around three, 617 00:34:14,280 --> 00:34:17,040 Speaker 1: right that maybe a little bit more. Um, so you're 618 00:34:17,040 --> 00:34:19,920 Speaker 1: talking about something north of a six percent nominal growth environment. 619 00:34:20,360 --> 00:34:23,480 Speaker 1: So if you're gonna ask me, do I think equilibrium 620 00:34:23,480 --> 00:34:26,440 Speaker 1: funds rate is higher? Yes? I do. Remember it wasn't 621 00:34:26,440 --> 00:34:28,839 Speaker 1: that long ago where the feed thought when they first 622 00:34:28,880 --> 00:34:31,160 Speaker 1: started doing this, you know, the SEP, the Summary of 623 00:34:31,200 --> 00:34:35,520 Speaker 1: Economic Projections, they thought that they thought equalibrium funds rate 624 00:34:35,600 --> 00:34:38,480 Speaker 1: was four in a quarter, four in a quarter. With 625 00:34:38,600 --> 00:34:40,839 Speaker 1: debt service ratio is a lot worse than they are now, 626 00:34:41,680 --> 00:34:45,000 Speaker 1: with UM, Labor markets a lot more sluggish than they 627 00:34:45,000 --> 00:34:49,799 Speaker 1: are now, with business investment a lot weaker than it 628 00:34:49,920 --> 00:34:52,000 Speaker 1: was than it is now. Oh and by the way, 629 00:34:52,080 --> 00:34:56,880 Speaker 1: households are sitting on UM you know, an excess savings pile. Uh, 630 00:34:56,920 --> 00:35:00,759 Speaker 1: you know, over two trillion dollars and US hitting the 631 00:35:00,800 --> 00:35:05,880 Speaker 1: most favorable demographic patch that we've seen in our careers. 632 00:35:06,440 --> 00:35:08,160 Speaker 1: So yes, if you're gonna ask me, do I think 633 00:35:08,239 --> 00:35:10,680 Speaker 1: equilibrium rates are higher? The terminal funds rate is highed? 634 00:35:10,760 --> 00:35:13,600 Speaker 1: Yes I do. And that makes me crazy. Um, you know, 635 00:35:14,080 --> 00:35:16,480 Speaker 1: so so be it. But you know, I mean, I 636 00:35:16,520 --> 00:35:19,799 Speaker 1: think in the near term there's probably some opportunity for 637 00:35:19,880 --> 00:35:22,960 Speaker 1: fixed income, right, I mean, you know, it's it's one 638 00:35:23,000 --> 00:35:24,560 Speaker 1: of these funny things that you've seen, right, It's like 639 00:35:24,560 --> 00:35:29,600 Speaker 1: it's not risk parity, it's risk parody. Um. But you know, 640 00:35:29,640 --> 00:35:31,120 Speaker 1: but I I do think, I mean, look, there's I 641 00:35:31,160 --> 00:35:33,319 Speaker 1: don't think there's much more the markets can price in 642 00:35:33,400 --> 00:35:37,800 Speaker 1: for the FED right now. UM. And I think that 643 00:35:37,920 --> 00:35:41,960 Speaker 1: probably you know helps um, you know the soft landing, 644 00:35:42,080 --> 00:35:44,960 Speaker 1: the softish landing case that that the FED wants to 645 00:35:45,000 --> 00:35:50,360 Speaker 1: tell um. But I think whatever pause we see, um, 646 00:35:50,400 --> 00:35:55,160 Speaker 1: you know after they get to neutral is um. You 647 00:35:55,160 --> 00:35:56,920 Speaker 1: know the next move after that is going to be 648 00:35:57,080 --> 00:36:01,239 Speaker 1: additional hikes. So to like to piggyback somewhat on a 649 00:36:01,320 --> 00:36:04,080 Speaker 1: Neil set what Neil saying, and you know, for right now, 650 00:36:04,200 --> 00:36:06,640 Speaker 1: right in our stances that you know better to be 651 00:36:06,800 --> 00:36:09,440 Speaker 1: neutral the long end, just by virtue of you know, 652 00:36:09,480 --> 00:36:11,400 Speaker 1: how much has been priced in already. But one thing 653 00:36:11,440 --> 00:36:14,360 Speaker 1: that's clearly different this cycle versus the last one is 654 00:36:14,400 --> 00:36:18,120 Speaker 1: that the global nature of central bank tightening and what 655 00:36:18,200 --> 00:36:20,880 Speaker 1: that's doing to global term PREMIU. So you know, starting 656 00:36:20,880 --> 00:36:23,840 Speaker 1: in you have the you know B O J really 657 00:36:24,000 --> 00:36:26,880 Speaker 1: cranking up, que, you have the E C B B 658 00:36:27,000 --> 00:36:29,040 Speaker 1: O E joining not too long really cranking it up. 659 00:36:29,680 --> 00:36:33,480 Speaker 1: After that this cycle that's essentially all going in reverse. 660 00:36:33,560 --> 00:36:35,480 Speaker 1: And even in the face of a uh, you know, 661 00:36:35,640 --> 00:36:38,680 Speaker 1: a pretty big shock to you know, potentially real incomes 662 00:36:38,719 --> 00:36:41,279 Speaker 1: and growth, the e c B is is telegraphing a 663 00:36:41,320 --> 00:36:44,160 Speaker 1: move out of negative interest rate policy. This is this 664 00:36:44,200 --> 00:36:47,239 Speaker 1: is something that is you know, clearly a clearly going 665 00:36:47,280 --> 00:36:49,719 Speaker 1: to push global term framing a higher and and has 666 00:36:49,760 --> 00:36:53,200 Speaker 1: the lots If you go back to Leo Brainard's speech 667 00:36:53,200 --> 00:36:56,239 Speaker 1: about quantitative tightening in early April that a lot of 668 00:36:56,239 --> 00:36:58,680 Speaker 1: people were focusing on, is you know, this is something 669 00:36:58,719 --> 00:37:01,960 Speaker 1: that's going to drive you know, global bond markets. Well, 670 00:37:02,000 --> 00:37:05,160 Speaker 1: boons have underperformed since that period of time. We're we're 671 00:37:05,200 --> 00:37:08,080 Speaker 1: in an environment where the fact that the e c 672 00:37:08,160 --> 00:37:11,400 Speaker 1: B is is kind of uh signaling what it's signaling, 673 00:37:11,400 --> 00:37:14,080 Speaker 1: and it seems that every day there's a kind of 674 00:37:14,080 --> 00:37:16,320 Speaker 1: pulling forward of of some kind of e c B 675 00:37:16,480 --> 00:37:20,920 Speaker 1: related tightening messaging. That's what's driving still the busts and 676 00:37:21,000 --> 00:37:23,840 Speaker 1: global bonds. So if you if you look at lately 677 00:37:23,840 --> 00:37:26,920 Speaker 1: and one thing that honestly I found a little bit 678 00:37:26,960 --> 00:37:30,320 Speaker 1: confusing in the aftermath of the FED is that US 679 00:37:30,400 --> 00:37:34,080 Speaker 1: bond volatility, implied volatility hasn't really calmed down too much, 680 00:37:34,400 --> 00:37:37,279 Speaker 1: and it might be that US bond volatility can't calm 681 00:37:37,360 --> 00:37:41,279 Speaker 1: down because of what's happening across the pond. I have 682 00:37:41,680 --> 00:37:44,480 Speaker 1: what is perhaps a dumb question, but can everyone tighten 683 00:37:44,840 --> 00:37:47,160 Speaker 1: at once? I mean, I know everyone can technically tighten 684 00:37:47,239 --> 00:37:49,720 Speaker 1: at once, but does it have the same impact? Because 685 00:37:49,920 --> 00:37:52,400 Speaker 1: back when we were easing many many years ago, we 686 00:37:52,480 --> 00:37:56,040 Speaker 1: used to talk about competitive qui and sort of competitive 687 00:37:56,080 --> 00:37:58,680 Speaker 1: devaluations and things like that. So does it have the 688 00:37:58,680 --> 00:38:01,319 Speaker 1: same impact if everyone is doing this at the same time. 689 00:38:03,200 --> 00:38:08,640 Speaker 1: I would argue that because like last time, you had 690 00:38:08,800 --> 00:38:11,600 Speaker 1: a much more focused impact on the US, because essentially, 691 00:38:11,600 --> 00:38:14,160 Speaker 1: you know, the the US was the only one tightening 692 00:38:14,560 --> 00:38:17,040 Speaker 1: dollar up, and then you have dollar up also kind 693 00:38:17,080 --> 00:38:20,320 Speaker 1: of exports tighter credit conditions to the rest of the world. 694 00:38:20,640 --> 00:38:22,799 Speaker 1: So we we have everyone going this time, but the 695 00:38:22,800 --> 00:38:25,360 Speaker 1: dollar is still with a lot of strength, and largely 696 00:38:25,560 --> 00:38:27,960 Speaker 1: it's still like very good growth differentials and the kind 697 00:38:27,960 --> 00:38:32,640 Speaker 1: of possibility of more left tail economic risks in Europe 698 00:38:32,640 --> 00:38:35,880 Speaker 1: and China that's still you know, exists to varying degrees. 699 00:38:36,200 --> 00:38:38,799 Speaker 1: But you know, I would think conceptually, in theory, an 700 00:38:38,880 --> 00:38:44,560 Speaker 1: environment where everyone's tightening is on net kind of is 701 00:38:44,680 --> 00:38:48,200 Speaker 1: less tight than than the than the counter factuals that 702 00:38:48,280 --> 00:38:52,040 Speaker 1: it's actually easier to go if it's synchronized rather than 703 00:38:52,120 --> 00:38:57,359 Speaker 1: if it's kind of one country and particularly US centric. Yeah, 704 00:38:57,400 --> 00:38:58,759 Speaker 1: I mean, the one thing I would just say, I 705 00:38:58,760 --> 00:39:00,319 Speaker 1: I would tend to agree, I guess. The one thing 706 00:39:00,320 --> 00:39:02,239 Speaker 1: I would add to that is, you know, when you 707 00:39:02,239 --> 00:39:05,759 Speaker 1: look at the dollar performance, um, you know right now 708 00:39:06,080 --> 00:39:10,200 Speaker 1: versus you know, let's say back when when you know, 709 00:39:10,400 --> 00:39:13,880 Speaker 1: the like Stan Fisher was making speeches about what the 710 00:39:13,920 --> 00:39:17,239 Speaker 1: dollar impact is on GDP growth and inflation. Um. You know, 711 00:39:17,280 --> 00:39:20,600 Speaker 1: what's interesting now is just I guess, is the differentiation 712 00:39:20,640 --> 00:39:22,239 Speaker 1: that I'm seeing in some of the in some of 713 00:39:22,239 --> 00:39:25,839 Speaker 1: the dollars performance. I mean, obviously, the dollar back then 714 00:39:25,960 --> 00:39:29,400 Speaker 1: was like rattying against pretty much everything in um, you know, 715 00:39:29,480 --> 00:39:32,560 Speaker 1: and and here it feels like it's more like d 716 00:39:32,760 --> 00:39:35,399 Speaker 1: M related. I mean, so, so it's obviously the dollar 717 00:39:35,480 --> 00:39:37,680 Speaker 1: is very strong against the euro, it's very strong against 718 00:39:37,719 --> 00:39:39,520 Speaker 1: the end. But if you look at some of the 719 00:39:39,560 --> 00:39:42,919 Speaker 1: emerging market commodity currencies, I mean, to Luke's point about 720 00:39:42,920 --> 00:39:45,520 Speaker 1: how all commodities have done, those currencies are actually hanging 721 00:39:45,560 --> 00:39:48,640 Speaker 1: in there, you know, UM, and that's been something that's 722 00:39:48,640 --> 00:39:52,480 Speaker 1: been a bit different, um than what we've seen you know, 723 00:39:52,560 --> 00:39:54,960 Speaker 1: saw before. So I just think that that's interesting. But 724 00:39:55,000 --> 00:39:57,120 Speaker 1: generally speaking, yes, I think it's much easier on the 725 00:39:57,120 --> 00:40:00,239 Speaker 1: FED if everyone's also hiking. I know, we have, uh, 726 00:40:00,920 --> 00:40:03,680 Speaker 1: just a few more minutes here. You know, again, people 727 00:40:03,680 --> 00:40:06,520 Speaker 1: are looking at their portfolios. Obviously we've talked about it 728 00:40:06,600 --> 00:40:11,919 Speaker 1: a ton, tech and growth getting clauvered, etcetera. Luke when 729 00:40:12,160 --> 00:40:14,320 Speaker 1: and you know you're talking about okay in this environment, 730 00:40:14,520 --> 00:40:17,920 Speaker 1: maybe the answer is commodities exposure. It's sort of like 731 00:40:17,960 --> 00:40:21,600 Speaker 1: the one thing that's breaking the all correlations go to one. 732 00:40:22,400 --> 00:40:23,959 Speaker 1: But you know, when I look at some of these 733 00:40:24,320 --> 00:40:26,520 Speaker 1: tech names and SPAC names and all this stuff, I 734 00:40:26,560 --> 00:40:29,480 Speaker 1: just see like a complete like in some cases it's 735 00:40:29,480 --> 00:40:32,080 Speaker 1: a much bigger massacre than probably people are ever imagining. 736 00:40:32,080 --> 00:40:35,759 Speaker 1: And people stocks down in many cases for brands that 737 00:40:35,840 --> 00:40:39,439 Speaker 1: people know, what would be the conditions in which one 738 00:40:39,480 --> 00:40:42,880 Speaker 1: would start looking back to this area that's gotten hit 739 00:40:42,960 --> 00:40:45,360 Speaker 1: so hard. What would be the sort of either macro 740 00:40:45,440 --> 00:40:49,839 Speaker 1: conditions or flows uh that you look for to say like, okay, 741 00:40:49,880 --> 00:40:54,120 Speaker 1: maybe this has been enough and start start looking for opportunities. 742 00:40:55,560 --> 00:40:58,400 Speaker 1: So the and the difficulty and so doing just as 743 00:40:58,440 --> 00:41:00,680 Speaker 1: as a starting point is the fact, you know, if 744 00:41:00,680 --> 00:41:02,800 Speaker 1: you go from a you know, a hundred P to 745 00:41:02,920 --> 00:41:07,600 Speaker 1: a fift P, well not not exactly. So that's that's 746 00:41:07,640 --> 00:41:10,040 Speaker 1: that's a bit of a challenge here. What would what 747 00:41:10,080 --> 00:41:12,800 Speaker 1: would kind of warrant it is a is a larger 748 00:41:12,880 --> 00:41:17,840 Speaker 1: pricing of recession risk, certainly so right now in terms 749 00:41:17,920 --> 00:41:21,040 Speaker 1: of like if you look at what's the you know, 750 00:41:21,160 --> 00:41:24,040 Speaker 1: what's the the hump in the in the euro dollar 751 00:41:24,120 --> 00:41:26,799 Speaker 1: curve or anything, it's it's not it's not material. It 752 00:41:26,840 --> 00:41:31,000 Speaker 1: doesn't suggest you know, traders ascribing a lot of odds 753 00:41:31,040 --> 00:41:35,359 Speaker 1: to a material cutting cycle from the FED after this 754 00:41:35,560 --> 00:41:38,520 Speaker 1: kind of quick series of hikes. If that were to 755 00:41:38,560 --> 00:41:42,120 Speaker 1: grow larger at the same time as you get at 756 00:41:42,120 --> 00:41:44,200 Speaker 1: the same time as you get kind of more visible 757 00:41:44,239 --> 00:41:48,800 Speaker 1: slowing in UH in the US and the global economy 758 00:41:48,800 --> 00:41:50,960 Speaker 1: as well, you know, that would be that would certainly 759 00:41:51,040 --> 00:41:54,640 Speaker 1: be something goods demand clearly coming off the boil, and 760 00:41:54,680 --> 00:41:57,400 Speaker 1: it to be to be fair goods demand, you know, 761 00:41:57,480 --> 00:42:00,479 Speaker 1: in in terms of PC basis like hasn't really done 762 00:42:00,560 --> 00:42:03,759 Speaker 1: too much for for about for about a year now. 763 00:42:03,920 --> 00:42:06,960 Speaker 1: You know, that's something that you know should be should 764 00:42:07,000 --> 00:42:09,640 Speaker 1: that side of the you know, economy slow more. That's 765 00:42:09,680 --> 00:42:13,000 Speaker 1: something that's going to I would suggest, probably prompt investor 766 00:42:13,000 --> 00:42:15,920 Speaker 1: attention to turn back more to two growth names. But 767 00:42:15,960 --> 00:42:19,040 Speaker 1: it's I think the fact that it hasn't happened yet 768 00:42:19,600 --> 00:42:22,120 Speaker 1: is one of the one of the signals along with 769 00:42:22,160 --> 00:42:24,440 Speaker 1: the euro dollar curve, that you know, there's not a 770 00:42:24,520 --> 00:42:27,719 Speaker 1: lot of recession risk being priced right now, and that's 771 00:42:28,400 --> 00:42:30,960 Speaker 1: that's something that's odd to think about, as uh as 772 00:42:30,960 --> 00:42:34,439 Speaker 1: stocks being as volatile as they are, but I think 773 00:42:34,480 --> 00:42:37,879 Speaker 1: that's something to hang your hat right on on right now. 774 00:42:37,920 --> 00:42:43,000 Speaker 1: In terms of looking at the forward outbook New Yeah, 775 00:42:43,040 --> 00:42:44,759 Speaker 1: thanks Tracy Well, I would just I mean, look the 776 00:42:45,000 --> 00:42:49,200 Speaker 1: the equity markets, UM, the setup really does look very 777 00:42:49,280 --> 00:42:53,760 Speaker 1: much like a late cycle type of dynamic. Now, obviously 778 00:42:53,800 --> 00:42:56,160 Speaker 1: there can be multiple sort of market cycles within a 779 00:42:56,200 --> 00:42:59,040 Speaker 1: broader economic one, UM, but if you look, I mean, 780 00:42:59,040 --> 00:43:03,440 Speaker 1: for example, defense defenses are outperforming cyclicals. We've seen utility 781 00:43:03,480 --> 00:43:08,000 Speaker 1: stocks better bid, staples better bid. Um, We've seen you know, 782 00:43:08,040 --> 00:43:11,160 Speaker 1: significant sell offs and discretionary I would just say that 783 00:43:11,200 --> 00:43:14,239 Speaker 1: there's only so long that the markets can price in 784 00:43:14,239 --> 00:43:17,759 Speaker 1: a late cycle dynamic and then not actually have it 785 00:43:17,920 --> 00:43:20,520 Speaker 1: happened in the economy. So if you're thinking about something 786 00:43:20,560 --> 00:43:24,719 Speaker 1: like strategic asset allocation. My view would basically be to 787 00:43:24,960 --> 00:43:28,319 Speaker 1: use rallies and defensive positions as opportunities to add to 788 00:43:28,320 --> 00:43:30,719 Speaker 1: cyclical ones, because I do think that's probably the next 789 00:43:30,800 --> 00:43:34,319 Speaker 1: leg of the market cycle. Um So, that that's sort 790 00:43:34,320 --> 00:43:36,680 Speaker 1: of that's sort of how I'm thinking about it. When 791 00:43:36,680 --> 00:43:40,879 Speaker 1: I when I look at the broader economy, um as 792 00:43:40,880 --> 00:43:43,160 Speaker 1: I say, I mean bringing it back to to the 793 00:43:43,239 --> 00:43:47,040 Speaker 1: U S economy, there's really you know, my concern dial 794 00:43:47,160 --> 00:43:51,399 Speaker 1: is not particularly um high. I mean, it's it's sort 795 00:43:51,400 --> 00:43:53,839 Speaker 1: of interesting to see like sell side analysts tripping over 796 00:43:53,880 --> 00:43:56,760 Speaker 1: themselves to see who can pencil in the highest recession 797 00:43:56,760 --> 00:43:59,239 Speaker 1: probabilities over the next two years. But you know, in 798 00:43:59,239 --> 00:44:01,440 Speaker 1: my mind, it's really no harder than it normally is. 799 00:44:01,480 --> 00:44:03,920 Speaker 1: I mean, what would actually decline if you were to 800 00:44:03,960 --> 00:44:08,120 Speaker 1: have a recession like housing is we're talking about how 801 00:44:08,120 --> 00:44:09,920 Speaker 1: we don't have enough cars and we don't have enough homes. 802 00:44:11,520 --> 00:44:15,840 Speaker 1: Um So, what goes down commercial real estate that's already 803 00:44:15,880 --> 00:44:18,000 Speaker 1: as low as it could possibly be relative to g 804 00:44:18,120 --> 00:44:20,719 Speaker 1: D P um So, I mean it could be I 805 00:44:20,719 --> 00:44:22,680 Speaker 1: guess you could make the argument of durable goods. But 806 00:44:22,719 --> 00:44:26,320 Speaker 1: even there, you know, things like motor vehicle sales have basically, 807 00:44:26,760 --> 00:44:29,120 Speaker 1: you know, as a share of of consumption, they've they've 808 00:44:29,160 --> 00:44:31,880 Speaker 1: already kind of reverted to trends. So you know, I 809 00:44:31,960 --> 00:44:33,279 Speaker 1: just don't really see it. I mean, what are we 810 00:44:33,320 --> 00:44:37,000 Speaker 1: gonna talk about the great, the great household furnishing recession 811 00:44:37,040 --> 00:44:40,880 Speaker 1: of It's just it just doesn't it doesn't make a 812 00:44:40,880 --> 00:44:43,480 Speaker 1: lot of sense to me. Um. And that's why I say, 813 00:44:43,719 --> 00:44:47,480 Speaker 1: if if you're if you're in, if you're asset allocating here, um, 814 00:44:47,520 --> 00:44:49,719 Speaker 1: I think we're at a point now where it's probably 815 00:44:50,440 --> 00:44:52,279 Speaker 1: it's it to me it makes sense to pick up 816 00:44:52,320 --> 00:44:55,080 Speaker 1: some of these, uh, these cyclical names that have been 817 00:44:55,160 --> 00:44:58,239 Speaker 1: quite beaten down. And as I say, I mean, this 818 00:44:58,320 --> 00:45:00,560 Speaker 1: is something that Luke pointed to early here. But if 819 00:45:00,600 --> 00:45:03,480 Speaker 1: you think about the markets, it's been three things, right, 820 00:45:03,520 --> 00:45:06,239 Speaker 1: It's been the FED, It's been Russia, Ukraine, so the 821 00:45:06,280 --> 00:45:09,960 Speaker 1: situation in Eastern Europe, it's been China. Okay, So like 822 00:45:10,080 --> 00:45:12,359 Speaker 1: take each of those in turn the Fed. The FED, 823 00:45:12,440 --> 00:45:14,400 Speaker 1: in my mind, is going to be less a source 824 00:45:14,440 --> 00:45:17,000 Speaker 1: of instability for the financial markets over the remainder of 825 00:45:17,040 --> 00:45:19,960 Speaker 1: the year. I mean, Powell has basically given us forward 826 00:45:19,960 --> 00:45:22,440 Speaker 1: guidance for the first time in a while, right, I 827 00:45:22,440 --> 00:45:25,520 Speaker 1: mean basically fifty basis point moves, followed by there's a 828 00:45:25,560 --> 00:45:27,719 Speaker 1: little bit more certainty in the FED outlook than there 829 00:45:27,760 --> 00:45:31,640 Speaker 1: has been. And uh, you know, we talked about China. Um. 830 00:45:31,680 --> 00:45:34,399 Speaker 1: I think I even got Luke to acknowledge that China 831 00:45:34,440 --> 00:45:37,759 Speaker 1: will look better in the next twelve to twelve months. 832 00:45:37,800 --> 00:45:41,120 Speaker 1: But if China is looking better in the next twelve months, um, 833 00:45:41,640 --> 00:45:45,759 Speaker 1: than Europe will too. Right. So those three areas that 834 00:45:45,800 --> 00:45:48,120 Speaker 1: have been beating down the markets and creating this sort 835 00:45:48,120 --> 00:45:51,960 Speaker 1: of instability and volatility that we've seen, I think that's 836 00:45:52,000 --> 00:45:53,799 Speaker 1: likely to abate. So that's why I say, if I 837 00:45:53,800 --> 00:45:56,600 Speaker 1: had to make a market call, that would be it. Well, 838 00:45:56,800 --> 00:45:59,560 Speaker 1: you guys are great. Just could go on a lot further, 839 00:45:59,600 --> 00:46:02,080 Speaker 1: but we got to leave it there. Neil and Luke 840 00:46:02,440 --> 00:46:05,080 Speaker 1: so much appreciate you coming on odd loads to help 841 00:46:05,120 --> 00:46:07,359 Speaker 1: us understand what's been I mean, we say it's been 842 00:46:07,360 --> 00:46:10,720 Speaker 1: a busy week, but really in extraordinary year so far overall. 843 00:46:10,800 --> 00:46:13,920 Speaker 1: So thank you for coming on and helping us make 844 00:46:14,000 --> 00:46:16,840 Speaker 1: sense of the world. We're we're gonna stay on and 845 00:46:16,920 --> 00:46:20,040 Speaker 1: keep thicker. And yeah, just please record it then send 846 00:46:20,120 --> 00:46:23,520 Speaker 1: us the audio. Thanks so much. Guys, that was really fun. 847 00:46:24,440 --> 00:46:40,960 Speaker 1: Thank you. You know what, that conversation made me think 848 00:46:40,960 --> 00:46:43,200 Speaker 1: this is gonna be a meta point that we could 849 00:46:43,200 --> 00:46:47,120 Speaker 1: get to the substance. The best sort of discussions are 850 00:46:47,239 --> 00:46:50,759 Speaker 1: between guests who agree on a lot and share a 851 00:46:50,760 --> 00:46:54,120 Speaker 1: lot of the same premises, but disagree on a few 852 00:46:54,239 --> 00:46:56,080 Speaker 1: key things, like you have to sort of like share 853 00:46:56,080 --> 00:46:58,560 Speaker 1: a common like assumption about how the world works. Those 854 00:46:58,560 --> 00:47:01,000 Speaker 1: are the best conversations, right, But because otherwise it's often 855 00:47:01,040 --> 00:47:03,200 Speaker 1: two people talking past each other exactly right, and that 856 00:47:03,280 --> 00:47:05,160 Speaker 1: was not they were not talking past each other. Well, 857 00:47:05,160 --> 00:47:07,640 Speaker 1: I gotta say, I can't believe we hadn't had neal 858 00:47:07,719 --> 00:47:11,520 Speaker 1: on before. But he's great obviously, and Luke. Every time 859 00:47:11,520 --> 00:47:14,920 Speaker 1: we have Lucan, I'm so proud because Luke used to 860 00:47:14,920 --> 00:47:17,759 Speaker 1: be our colleague and I just love actually, you know, 861 00:47:17,840 --> 00:47:20,360 Speaker 1: he used to write for our team, and I love 862 00:47:20,480 --> 00:47:22,800 Speaker 1: the fact that he's now a guest on all thoughts 863 00:47:23,120 --> 00:47:28,359 Speaker 1: talking so knowledgeably about Macro Yeah, a little tier, yeah, 864 00:47:29,920 --> 00:47:33,440 Speaker 1: thinking about Luke's trajectory. But yeah, no, I thought that 865 00:47:33,560 --> 00:47:36,320 Speaker 1: was really helpful. I mean, so many like interesting points. 866 00:47:36,360 --> 00:47:39,719 Speaker 1: I mean, you know, it's Luke brought this up that 867 00:47:39,760 --> 00:47:41,960 Speaker 1: I hadn't really thought of. But you know, it's interesting 868 00:47:42,000 --> 00:47:44,839 Speaker 1: for all of the double dip or not double dip, 869 00:47:44,880 --> 00:47:48,560 Speaker 1: but like soft landing, hard landing fears like actually so far, 870 00:47:48,640 --> 00:47:51,920 Speaker 1: like the classical recession signals. And they talked about the 871 00:47:52,320 --> 00:47:55,400 Speaker 1: euro dollar curve, like the market is not really pricing 872 00:47:55,400 --> 00:47:58,839 Speaker 1: one in yet, right, it seems like stocks have overreacted 873 00:47:58,840 --> 00:48:02,040 Speaker 1: compared to fixed income. But the other thing, I mean, 874 00:48:02,080 --> 00:48:05,840 Speaker 1: the other thing I keep thinking is just how I 875 00:48:05,880 --> 00:48:08,520 Speaker 1: don't want to say obvious, but yes, obvious is the word. 876 00:48:08,600 --> 00:48:11,120 Speaker 1: How obvious it was that there would be a correction 877 00:48:11,160 --> 00:48:15,240 Speaker 1: in stocks at one point because I mean, the Fed 878 00:48:15,640 --> 00:48:17,920 Speaker 1: we spoke about this. The FED hasn't explicitly said it 879 00:48:17,960 --> 00:48:20,040 Speaker 1: wants stocks to go down, but it talked about tightening 880 00:48:20,080 --> 00:48:23,120 Speaker 1: financial conditions. And then you know, for years we're talking 881 00:48:23,200 --> 00:48:26,480 Speaker 1: about valuations were frothy, that this was something that was 882 00:48:26,480 --> 00:48:29,880 Speaker 1: going to start reverting once interest rates start hiking, and 883 00:48:29,920 --> 00:48:33,439 Speaker 1: then lo and behold they did, right, Like I think, 884 00:48:33,440 --> 00:48:36,920 Speaker 1: the surprising thing it's never easy in real time to 885 00:48:36,920 --> 00:48:38,680 Speaker 1: make trade, so it's never like, oh it out here 886 00:48:38,719 --> 00:48:41,399 Speaker 1: comes an easy trade. But I would say the sort 887 00:48:41,400 --> 00:48:43,759 Speaker 1: of surprising thing is if you look at this sort 888 00:48:43,760 --> 00:48:48,080 Speaker 1: of narrative of what happened this year. It's kind of straightforward. 889 00:48:48,160 --> 00:48:52,319 Speaker 1: Inflation picked up and the Fed said, Okay, now we're 890 00:48:52,320 --> 00:48:55,480 Speaker 1: going to go in a hiking cycle. Oh and ps. 891 00:48:55,560 --> 00:48:58,640 Speaker 1: The way that we control inflation just through financial conditions 892 00:48:59,000 --> 00:49:00,719 Speaker 1: and we're going to like it's a part of those 893 00:49:00,760 --> 00:49:03,480 Speaker 1: and the stocks are like a key part of financial conditions. 894 00:49:04,600 --> 00:49:06,880 Speaker 1: It was it was the obvious trade. Just teleport me 895 00:49:06,960 --> 00:49:10,600 Speaker 1: back to November or January when Defense started pivoting, and 896 00:49:10,640 --> 00:49:12,680 Speaker 1: I could have been I could have been a genius. Yeah, 897 00:49:12,840 --> 00:49:15,839 Speaker 1: I guess it's like the timing aspect is the most 898 00:49:15,920 --> 00:49:18,960 Speaker 1: mysterious of all of this. And why you know why 899 00:49:19,080 --> 00:49:23,600 Speaker 1: we saw a rally on Wednesday after the hike actually happened, 900 00:49:23,680 --> 00:49:26,680 Speaker 1: and it wasn't until Thursday that stocks started dropping off. 901 00:49:26,719 --> 00:49:30,399 Speaker 1: That's the only thing that remains something of a head scratcher. Yeah, 902 00:49:30,400 --> 00:49:33,960 Speaker 1: the week was super weird, thats for sure. Yeah, it was, um, 903 00:49:33,960 --> 00:49:35,879 Speaker 1: shall we leave it there, Let's leave it there, let's 904 00:49:35,920 --> 00:49:38,399 Speaker 1: go take a break and you know, let's head into 905 00:49:38,400 --> 00:49:41,440 Speaker 1: the weekend. All right. This has been another episode of 906 00:49:41,480 --> 00:49:44,040 Speaker 1: the All Thoughts podcast. I'm Tracy Alloway. You can follow 907 00:49:44,080 --> 00:49:47,279 Speaker 1: me on Twitter at Tracy Alloway and I'm Joe Wisn't all. 908 00:49:47,400 --> 00:49:50,200 Speaker 1: You can follow me on Twitter at the Stalwart. Follow 909 00:49:50,239 --> 00:49:53,719 Speaker 1: our guests Luke Kawa He's at l j Kala. Neil 910 00:49:53,800 --> 00:49:57,840 Speaker 1: Donna isn't technically on Twitter, but I think he often 911 00:49:58,239 --> 00:50:02,120 Speaker 1: contributes to the handle of his Renaissance Macro and they're 912 00:50:02,160 --> 00:50:06,600 Speaker 1: at ren mack l C. Follow our producer Carmen Rodriguez 913 00:50:06,719 --> 00:50:09,320 Speaker 1: at Carmen armand follow at the Bloomberg Head of podcast 914 00:50:09,400 --> 00:50:13,080 Speaker 1: francesco Leedy at Francisco Today. And check out all of 915 00:50:13,120 --> 00:50:17,600 Speaker 1: our podcast Bloomberg onto the handle at podcasts. Thanks for listening.