WEBVTT - Jon Turek on the Macro Outlook for 2022 0:00:10.720 --> 0:00:15.080 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:15.120 --> 0:00:19.720 I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, it's been 0:00:19.880 --> 0:00:22.159 a long time since we've done like a sort of 0:00:22.200 --> 0:00:24.080 like I don't know if it's been too long, it's been. 0:00:24.120 --> 0:00:25.520 It feels like it's been a while since we've done 0:00:25.520 --> 0:00:29.319 like a pure sort of macro episode. We've obviously, we 0:00:29.320 --> 0:00:31.360 obviously do a lot of micro that's been one of 0:00:31.360 --> 0:00:34.760 the fun things about but I think it's a it's 0:00:34.800 --> 0:00:37.800 time to switch back to the macro. I was gonna 0:00:37.840 --> 0:00:41.600 say we've been distracted by the micro in attempting to 0:00:41.920 --> 0:00:45.879 put together a better picture of the macro in all fairness, 0:00:45.960 --> 0:00:48.560 but yes, you're right, it's been a while since we 0:00:48.640 --> 0:00:53.480 talked about the general outlook for the economy and for markets, 0:00:54.160 --> 0:00:58.400 and of course we are looking ahead to two and 0:00:58.480 --> 0:01:01.120 there are a lot of things going on and a 0:01:01.120 --> 0:01:04.600 lot of things that people are concerned about. So obviously 0:01:04.640 --> 0:01:09.360 we have inflation worries, and then we have a slowdown 0:01:09.440 --> 0:01:11.959 in China as well, and then we have of course 0:01:12.720 --> 0:01:15.039 the fed's reaction function, and there's still a lot of 0:01:15.080 --> 0:01:18.160 questions over what exactly it's going to prioritize going into 0:01:18.240 --> 0:01:21.560 next year. Yeah, exactly right. And you know, I think 0:01:21.560 --> 0:01:24.720 the other thing about this environment and this court kind 0:01:24.720 --> 0:01:28.479 of applied, it's like nobody has any familiarity with this 0:01:28.560 --> 0:01:32.160 type of economic environment. I mean, it's pretty new. So, yes, 0:01:32.520 --> 0:01:37.520 we've seen periods of elevated inflation before, for sure, but 0:01:37.920 --> 0:01:40.720 by and large, this is not like the nine sixties 0:01:40.800 --> 0:01:44.760 or sies. It's different conditions. Employment is growing extremely fast, 0:01:44.959 --> 0:01:47.400 we had a pandemic, were still in a pandemic, and 0:01:47.440 --> 0:01:51.480 so that is totally new. The policy responses that we've 0:01:51.520 --> 0:01:53.960 seen are new. So I think kind of what makes 0:01:54.000 --> 0:01:56.760 this interesting is just like, yeah, everyone could like sort 0:01:56.800 --> 0:01:59.960 of reach for analogies, but there's no real experts who 0:02:00.080 --> 0:02:02.240 could say, you know, this is the playbook or anything. 0:02:02.280 --> 0:02:06.920 It's everyone is on some level doing a non charted territory. Yeah, 0:02:07.000 --> 0:02:10.560 it's a very unusual business cycle. And we've talked about 0:02:10.600 --> 0:02:14.320 this before, but we basically squeezed in like an accelerated 0:02:14.360 --> 0:02:17.200 business cycle right after the pandemic. We have a very short, 0:02:17.360 --> 0:02:22.520 sharp recession, and then the recovery started almost immediately, largely 0:02:22.560 --> 0:02:26.160 thanks to the stimulus efforts from various governments. But of 0:02:26.200 --> 0:02:29.520 course the question is what does the cycle look like? 0:02:29.720 --> 0:02:33.160 Does it behave like other cycles. I've already seen lots 0:02:33.200 --> 0:02:36.400 of people talking about how we're late cycle. All the 0:02:36.480 --> 0:02:39.280 signs point to a late cycle, and it's like, well, 0:02:39.760 --> 0:02:42.480 it's been what two years since this started, Like that 0:02:42.520 --> 0:02:46.040 would be a pretty fast cycle. Yeah. And then I 0:02:46.040 --> 0:02:48.639 guess the other sort of like medium ish to long 0:02:48.760 --> 0:02:52.639 term question is does something change meaning flee And I'm 0:02:52.680 --> 0:02:56.640 thinking about, say an inflation And you know, obviously prior 0:02:56.680 --> 0:02:59.639 to this we had you know, great moderation or disinflation 0:02:59.800 --> 0:03:03.320 or FED could never hit two percent. Now we have, uh, 0:03:03.360 --> 0:03:07.320 you know, over six percent inflation. But is this mean revert? 0:03:07.440 --> 0:03:09.200 Does it just go back to the old way or 0:03:09.480 --> 0:03:12.520 do we enter into some sort of new regime where 0:03:12.560 --> 0:03:17.040 inflation is persistently above and there's much more inflation volatility. 0:03:17.320 --> 0:03:20.160 Sort of These are all like kind of difficult questions 0:03:20.200 --> 0:03:21.920 to know right now, but the big ones that people 0:03:21.960 --> 0:03:25.720 will be asking over the next year and beyond. Yes, indeed, 0:03:26.040 --> 0:03:29.000 so I'm very excited to have is our guest today, 0:03:29.440 --> 0:03:32.040 perfect guest for a macro conversation. He's been on odd 0:03:32.040 --> 0:03:35.200 lots before, at least a couple of times, and in 0:03:35.320 --> 0:03:38.400 terms of sort of macro thinkers. I think one of 0:03:38.440 --> 0:03:41.520 the clearest and most useful guests that we speak to, 0:03:42.120 --> 0:03:44.920 UH please to welcome back on the show. John Turk. 0:03:45.280 --> 0:03:48.280 He's the author of the Chief Convexity blog and the 0:03:48.320 --> 0:03:51.800 founder of j ST Advisors. I think maybe this is 0:03:51.800 --> 0:03:55.240 his third time on the show, but someone who always 0:03:55.320 --> 0:03:58.600 get a lot of insight reading his stuff and having 0:03:58.680 --> 0:04:01.000 him on the show. John, thank you for coming back 0:04:01.000 --> 0:04:03.320 on Other loves. Hey, guys, thank you so much for 0:04:03.320 --> 0:04:06.560 having me. We're going to talk about two. But what 0:04:06.840 --> 0:04:11.280 for you was the sort of big surprise of one? Like, 0:04:11.320 --> 0:04:13.400 what was your what was your lesson? What was your 0:04:13.440 --> 0:04:16.640 takeaway from what we saw this? You know, I think 0:04:16.680 --> 0:04:18.680 that one of the things that you know, really kind 0:04:18.720 --> 0:04:21.600 of changed. And this is pretty obvious, you know, ex 0:04:21.640 --> 0:04:25.919 post is kind of the stickiness we've seen in inflation 0:04:25.960 --> 0:04:28.840 this year. You know, going back to before the year, 0:04:28.880 --> 0:04:32.400 there was kind of this obvious forward looking effect that 0:04:32.440 --> 0:04:35.720 inflation would be higher given the supply bottle next and 0:04:35.800 --> 0:04:40.040 also given the base effects from the pandemic, negative oil prices, etcetera. 0:04:40.480 --> 0:04:44.200 The kind of seeing the stickiness and broadening out of inflation, 0:04:45.160 --> 0:04:48.240 and we really haven't seen that in you know, almost 0:04:48.279 --> 0:04:51.159 twenty years. I mean, there's this famous joke for the 0:04:51.279 --> 0:04:53.719 US that really the only thing that goes up in 0:04:53.839 --> 0:04:57.200 price is education and healthcare, and that's that's not been 0:04:57.279 --> 0:04:59.520 the case this year. And I think especially as this 0:04:59.640 --> 0:05:02.400 relates to FED policy, is we kind of entered this 0:05:02.480 --> 0:05:05.200 year with this thinking of like, okay, was the FED 0:05:05.279 --> 0:05:08.680 reaction function, especially that had it changed post Jackson hole 0:05:09.680 --> 0:05:12.760 and they introduced this idea of flexible average inflation targeting, 0:05:13.200 --> 0:05:15.440 is would it be would that be the best position 0:05:15.520 --> 0:05:19.000 to look through and for the FED to basically avoid 0:05:19.000 --> 0:05:23.080 ECB moment where they were you know, kind of hawkishly 0:05:23.120 --> 0:05:27.280 reacting to spot inflation that was not telling a demand story. 0:05:27.320 --> 0:05:30.080 But now I think, you know, what's becoming clearer is 0:05:30.120 --> 0:05:32.120 that while there are supply bott elects and there are 0:05:32.560 --> 0:05:36.320 kind of supply fragilities that have weighed on spot inflation, 0:05:36.360 --> 0:05:39.560 there's clear that there's also excess to mend and that 0:05:39.600 --> 0:05:42.400 the FED has kind of had to had you know, 0:05:42.480 --> 0:05:46.040 this broader shift that's really started, you know, since June 0:05:46.240 --> 0:05:49.400 poem C, but it's kind of really been enhanced post 0:05:49.760 --> 0:05:53.840 Powell reappointment that you know, fate may still be the 0:05:53.839 --> 0:05:56.960 policy playbook, but it kind of has to adjust to 0:05:57.360 --> 0:06:01.080 the force that fiscal policy was at the lower bound 0:06:01.120 --> 0:06:03.360 and you know, kind of change the nature of where 0:06:03.440 --> 0:06:07.680 nominal GDP is now and probably for the next twelve months. 0:06:08.360 --> 0:06:10.800 So how much of a role do you think demand 0:06:11.040 --> 0:06:14.000 actually played in the price pressures that we're seeing now? 0:06:14.040 --> 0:06:17.400 And I realized it's sort of tough to disaggregate supply 0:06:17.560 --> 0:06:20.359 versus demand in all of this. But maybe give us 0:06:20.400 --> 0:06:22.400 a little bit more color on on how you're thinking 0:06:22.440 --> 0:06:25.960 of it. Yeah, you know, I think that what's looking 0:06:26.000 --> 0:06:30.000 at specially retail sales on things like two years stacks 0:06:30.480 --> 0:06:34.880 and seeing that, like how above trend nominal consumption is. 0:06:35.200 --> 0:06:40.520 I think it's I think it's amplified the supply fragility. 0:06:40.560 --> 0:06:43.040 So it's kind of created a perfect storm for prices. 0:06:43.440 --> 0:06:45.839 And you know, I don't think that it's only a 0:06:46.040 --> 0:06:48.960 demand issue, but you know, it's clear that you know, 0:06:49.000 --> 0:06:53.960 we had a recession where household income in aggregate went up, 0:06:54.520 --> 0:06:57.800 which is obviously most peculiar. You know, the thing that's 0:06:57.800 --> 0:07:01.320 worth thinking about going into next year, especially as inflation 0:07:01.400 --> 0:07:03.720 will peak in Q one, it will come down in 0:07:03.839 --> 0:07:05.680 Q two. The question is, you know, what is the 0:07:05.760 --> 0:07:08.120 run rate. You know, what is the handoff that the 0:07:08.160 --> 0:07:10.600 economy is dealing with. Well, you know, looking back at 0:07:11.440 --> 0:07:14.080 the beginning of one, you know, you can argue the 0:07:14.080 --> 0:07:16.560 transfer payments and things of that nature made a big 0:07:16.600 --> 0:07:19.440 difference in wage replacement or even for some you know, 0:07:19.480 --> 0:07:23.640 income quartels, you know, wage enhancement effectively. But you know, 0:07:23.760 --> 0:07:28.120 now looking into the economy into especially at the lower 0:07:28.240 --> 0:07:31.000 end of the income distribution, you know, wage growth is 0:07:31.160 --> 0:07:34.720 pretty robust, so you know, there is kind of this 0:07:35.040 --> 0:07:37.400 there's not this just big drop off because we're a 0:07:37.520 --> 0:07:39.760 year out from when there was a lot of retail sales. 0:07:40.200 --> 0:07:42.520 You know, wage growth is broadening out in the economy 0:07:42.880 --> 0:07:44.800 and as really strong as we kind of had this 0:07:44.920 --> 0:07:48.120 reset of wages through the Amazon Walmart effect at the 0:07:48.120 --> 0:07:51.200 lower end, that it's hard to have this you know, 0:07:51.640 --> 0:07:55.360 big deceleration in demand that will you know, broaden outer 0:07:55.560 --> 0:07:58.400 help inflation come back to the said supercent target in 0:07:58.440 --> 0:08:00.920 an environment where wage growth is really strong. And I 0:08:00.920 --> 0:08:04.240 think that's also kind of the point miss about this year, right, 0:08:04.360 --> 0:08:08.720 is there are the supply side fragilities, especially in that 0:08:08.960 --> 0:08:12.600 you know we're enhanced through in Southeast Asia through Delta 0:08:12.680 --> 0:08:16.400 when we had Malaysian shutdowns and that affective semiconductor fobs 0:08:16.400 --> 0:08:20.200 and etcetera. But you know, income growth pretty much at 0:08:20.240 --> 0:08:23.040 least especially on the wage side across the Western world, 0:08:23.080 --> 0:08:25.840 has been really strong this year, and there's no real 0:08:25.920 --> 0:08:28.960 signs that, you know, this labor tightness is going to 0:08:28.960 --> 0:08:31.920 give away. We may get more labor surprised, participation rates 0:08:31.960 --> 0:08:35.560 may go higher, but labor is pretty tight right now, 0:08:35.640 --> 0:08:38.600 so wage growth should continue. And I think that kind 0:08:38.640 --> 0:08:41.679 of you know, makes that handoff in terms of like, 0:08:41.720 --> 0:08:44.040 you know, things coming back from mean reverting to normal 0:08:44.080 --> 0:08:47.640 next year kind of tricky. I think this is a 0:08:47.679 --> 0:08:50.280 really interesting point. I'm glad you brought this up. Like 0:08:50.320 --> 0:08:53.280 this idea, it's like, okay, sure, the transfer payments are 0:08:53.280 --> 0:08:55.559 gonna come down, there's going to be at least some 0:08:56.080 --> 0:08:59.840 relative fiscal tightening or the fiscal impulse won't be what 0:08:59.880 --> 0:09:02.760 it is. But there is also this thing you know 0:09:02.840 --> 0:09:06.880 called like endogenous way uh indogenous demand growth or they're 0:09:06.920 --> 0:09:10.160 not everything is just about transfers, and in an environment 0:09:10.200 --> 0:09:12.120 at which there's a lot of momentum, particularly at the 0:09:12.160 --> 0:09:15.640 low end, that has to be a plus. One question 0:09:15.720 --> 0:09:19.280 though on this idea of like demand, because in addition 0:09:19.400 --> 0:09:22.440 to a high level of income growth and a high 0:09:22.520 --> 0:09:27.040 level of aggregate demand, we've also seen this shift that 0:09:27.080 --> 0:09:29.120 a lot of people are talking about, including many of 0:09:29.120 --> 0:09:33.640 our past guests, of goods consumption for services consumption that 0:09:33.760 --> 0:09:37.200 hasn't normalized. Some of us said that more than the 0:09:37.240 --> 0:09:41.480 actual demand itself, is what's contributing to sort of persistent 0:09:41.480 --> 0:09:46.800 bottlenecks or maybe persistent inflation. If that normalizes, if like, okay, 0:09:46.840 --> 0:09:48.640 we get you know, it seems like, you know, I 0:09:48.679 --> 0:09:50.960 don't know what's gonna happen with the virus. But if 0:09:51.000 --> 0:09:54.960 that normalizes, can we get some further downward pressure on 0:09:55.080 --> 0:10:00.600 inflation even with demand remaining quite robust? You know? I 0:10:00.640 --> 0:10:03.320 think you probably will, you know. And I think that 0:10:03.720 --> 0:10:06.240 the broader point that I want to make is that, 0:10:06.320 --> 0:10:08.960 you know, inflation will come down. The question now is 0:10:09.000 --> 0:10:11.640 what is the run rate and getting that run rate 0:10:11.679 --> 0:10:16.240 back to two you know, it's seemingly getting a little harder, 0:10:16.360 --> 0:10:19.040 especially for next year. And I think within this good 0:10:19.160 --> 0:10:23.680 services you know, composition, is that there is goods pressure 0:10:23.760 --> 0:10:25.960 that is going to come down as you know, the 0:10:25.960 --> 0:10:29.560 economy does hand off back to more service oriented, Especially 0:10:29.600 --> 0:10:32.640 the US economy has always been but there's also this 0:10:32.760 --> 0:10:34.960 element that goods are not going to go back to 0:10:35.720 --> 0:10:38.200 where they were in the tents, where you saw many 0:10:38.280 --> 0:10:41.679 years of goods prices actually printing deflation and goods prices 0:10:41.679 --> 0:10:45.160 were falling year year to year. And you know, given 0:10:45.679 --> 0:10:49.719 this level of nominal demand being a little more sticky, 0:10:50.040 --> 0:10:52.680 I think it's hard to kind of see that even 0:10:52.720 --> 0:10:55.400 as you know, we get into next year and it's like, well, 0:10:55.440 --> 0:10:58.120 everyone bought a washing machine or everybody bought a car. 0:10:58.600 --> 0:11:00.559 I think, you know, that argument does hold weight. The 0:11:00.640 --> 0:11:03.360 question is doesn't get you all the way down and 0:11:03.400 --> 0:11:05.240 doesn't get you all the way down in some senses 0:11:05.280 --> 0:11:08.600 to print start printing negative prints and durable goods, and 0:11:08.679 --> 0:11:10.720 that I think is just it's just a harder back 0:11:10.840 --> 0:11:14.719 to have given the level of demand that we're continuing 0:11:14.760 --> 0:11:16.920 to see. And I think, you know, that's that's kind 0:11:16.920 --> 0:11:20.720 of like the broader macro point of this to me is, 0:11:21.320 --> 0:11:23.559 you know, and especially I think this is especially relevant 0:11:23.640 --> 0:11:26.480 with the tenure at one forty and the market like 0:11:26.640 --> 0:11:29.560 very skeptical of forward looking growth. Is we're in the 0:11:29.559 --> 0:11:34.160 midst of this public sector to private sector handoff and 0:11:34.200 --> 0:11:37.440 everyone kind of doubting it. So you know, I think 0:11:37.480 --> 0:11:41.079 that that that story is actually more alive than the 0:11:41.200 --> 0:11:44.040 market is given credit for it. Just real quickly though, 0:11:44.080 --> 0:11:45.880 do what does it need to come all the way down? 0:11:46.040 --> 0:11:48.640 Like what are the stakes of getting back down to 0:11:50.480 --> 0:11:54.480 versus maybe still being over the fence target? Yeah? Yeah, 0:11:54.600 --> 0:11:57.160 so you know, I think like the question for me 0:11:57.320 --> 0:12:00.960 next year on inflation run rate is it below three 0:12:01.000 --> 0:12:03.720 or much above three? Because I think that you know, 0:12:03.760 --> 0:12:06.200 if we if we start getting to you know, if 0:12:06.240 --> 0:12:09.720 you do like simple math and you start going through, okay, 0:12:09.760 --> 0:12:11.760 what is Q two inflation going to start looking like? 0:12:12.040 --> 0:12:15.040 And let's say we assume that month over month prints 0:12:15.120 --> 0:12:17.440 go back to point ones and point two and point 0:12:17.520 --> 0:12:21.080 twos are actually pretty high relative to the last ten years. 0:12:21.160 --> 0:12:23.160 We've become kind of immune to that as we've seen 0:12:23.200 --> 0:12:25.880 point sevens and point nine. But if you start getting 0:12:25.920 --> 0:12:28.520 point to month over month, Prince, you're still going to 0:12:28.640 --> 0:12:32.280 get back to an inflation number around two and a 0:12:32.280 --> 0:12:35.360 half by the end of the summer next year. And 0:12:35.400 --> 0:12:39.240 I think that number, while it's still high relative to 0:12:39.280 --> 0:12:42.079 the FENS target and in terms of their moderate overshooting, 0:12:42.120 --> 0:12:44.960 I think that would be a nudge high. I do 0:12:45.120 --> 0:12:48.080 think that that gives the Fed enough room to say 0:12:48.080 --> 0:12:52.800 that listen, inflation is high, we're hiking, but there's marginal 0:12:52.920 --> 0:12:55.840 risk of us hiking too much that we're going to 0:12:56.520 --> 0:12:59.280 crush this thing, which I think really is the risk now, right. 0:12:59.360 --> 0:13:02.600 The risk now is that inflation comes down in Q two, 0:13:02.640 --> 0:13:04.640 but it comes down to four percent, it comes down 0:13:04.720 --> 0:13:08.400 to three and a half four percent, and in that world, 0:13:08.800 --> 0:13:12.800 does the FEDS say that is not tolerable to us? 0:13:12.840 --> 0:13:16.800 That could meaning belief meaningfully affect inflation expectations and we 0:13:16.880 --> 0:13:19.400 have to act more aggressively than we have, you know, 0:13:19.440 --> 0:13:21.600 in the last few cycles. And I think that's kind 0:13:21.600 --> 0:13:23.840 of what the market is weighing now, right, is there's 0:13:23.880 --> 0:13:26.240 this residual risk premium that the FED is going to 0:13:26.360 --> 0:13:29.560 have to almost hit the kabbash or kind of smash 0:13:29.679 --> 0:13:32.800 this thing, because you know, spot inflation is going to 0:13:32.840 --> 0:13:35.560 start leading to a d anchoring of inflation expectations or 0:13:35.600 --> 0:13:38.560 at a level that they don't see as tolerable. So 0:13:38.600 --> 0:13:41.080 I think that's really the big question of next year, 0:13:41.280 --> 0:13:44.240 and we'll probably find out, you know, late Q two, 0:13:44.440 --> 0:13:46.079 which is why for me, June f O m C 0:13:46.320 --> 0:14:04.840 is the one that is circled. So I wanted to 0:14:04.880 --> 0:14:09.400 go back to what you said about the tenure yield 0:14:09.720 --> 0:14:14.040 so currently sitting at one point four or five percent 0:14:14.240 --> 0:14:17.160 or they're about And one of the big mysteries of 0:14:17.440 --> 0:14:21.920 this entire year has been why bond yields are so low, 0:14:22.320 --> 0:14:26.400 even in the face of the FED ostensibly beginning to 0:14:26.440 --> 0:14:30.640 taper it's balance sheet and maybe getting more worried about inflation. 0:14:30.800 --> 0:14:33.640 And I've seen all sorts of explanations for it. One 0:14:33.680 --> 0:14:36.640 of our guests, Joseph Wayne, was talking about the idea 0:14:36.760 --> 0:14:40.160 that banks are just buying lots more treasuries than they 0:14:40.280 --> 0:14:43.160 used to and that kind of puts a floor or 0:14:43.240 --> 0:14:45.720 maybe I should say a ceiling on yields because you 0:14:45.800 --> 0:14:49.280 always have that huge chunk of demand they're waiting in 0:14:49.280 --> 0:14:52.800 the wings. And I've also seen other people talk about it. 0:14:52.960 --> 0:14:55.720 It's sort of what you were saying, this idea of 0:14:55.760 --> 0:15:00.760 investors not really buying the public to private hand off, 0:15:01.000 --> 0:15:03.880 thinking that the FED is inducing some sort of policy 0:15:04.040 --> 0:15:07.080 error and it's going to have to backtrack at some point. 0:15:07.280 --> 0:15:10.760 So how are you thinking about the bond market at 0:15:10.760 --> 0:15:14.760 the moment and what the tenure is actually telling us? Yeah, 0:15:14.880 --> 0:15:18.080 you know, I think it's especially one of the more 0:15:18.080 --> 0:15:21.840 prevalent questions right now, as we're gonna end the year 0:15:22.040 --> 0:15:25.520 probably with you know, between the eleven and twelve present 0:15:25.640 --> 0:15:29.080 nominal GDP growth, and you know that all the tenure 0:15:29.160 --> 0:15:32.840 does is rally, and we're entering pro FED hiking cycle 0:15:33.000 --> 0:15:36.200 and it's still rallies. And I actually think it does 0:15:36.960 --> 0:15:40.560 make more sense than it would appear on the face, 0:15:40.600 --> 0:15:43.840 you know. I think looking at things like five year 0:15:43.880 --> 0:15:46.200 five year o I s, which the FED and you know, 0:15:46.240 --> 0:15:48.880 market participants kind of look at as as an estimate 0:15:48.960 --> 0:15:51.160 of you know, where the FED will get to in 0:15:51.280 --> 0:15:54.200 terms of the hiking cycle or destination, which equates to 0:15:54.320 --> 0:15:57.040 around the tenure was treasury yield. I think there is 0:15:57.120 --> 0:15:59.880 this element, and we're just talking about this of this 0:16:00.160 --> 0:16:04.480 residual risk premium that inflation got too high and the 0:16:04.520 --> 0:16:07.800 FED is going to have to react asymmetrically to it 0:16:07.920 --> 0:16:10.640 next year. And that is why I think we've kind 0:16:10.680 --> 0:16:13.280 of had not only this this front loading of the 0:16:13.360 --> 0:16:17.760 hiking cycle, but also this relentless flattening as the market 0:16:17.760 --> 0:16:21.200 has had to weigh the probability that if the FED 0:16:21.320 --> 0:16:24.720 has to go let's say faster than quarterly next year, 0:16:25.080 --> 0:16:27.120 or has to go at a pace that's more than 0:16:27.680 --> 0:16:31.280 basis points of meeting, then the chances of the FED 0:16:31.720 --> 0:16:34.600 overdoing it go up. And we also know that we're 0:16:34.600 --> 0:16:36.880 still in a very low our star world. So if 0:16:36.880 --> 0:16:39.320 the chances to FED overdo it, the chances that the 0:16:39.520 --> 0:16:42.760 forward looking bond market is like okay, that raises the 0:16:42.760 --> 0:16:44.920 odds that we're actually going to end up back at zero. 0:16:45.400 --> 0:16:48.360 So you're in this interesting paradox where the bond market 0:16:48.400 --> 0:16:52.000 is weighing hikes but also weighing what kind of hikes 0:16:52.080 --> 0:16:55.280 we get, and the fatter that residual risk premium is 0:16:55.400 --> 0:16:59.280 that the hikes we get are destructive or too much 0:16:59.320 --> 0:17:03.000 given the level spot inflation or the worry about inflation expectations, 0:17:03.040 --> 0:17:06.360 that actually paradoxically raises the chances that the FED will 0:17:06.400 --> 0:17:08.760 be back at zero. Because we're in this low R 0:17:08.840 --> 0:17:10.760 star world and the assumption is that the Fed over 0:17:10.800 --> 0:17:12.520 does it, that means the next move is to cut, 0:17:12.760 --> 0:17:14.679 and if they cut, that means they go to zero. 0:17:15.560 --> 0:17:18.080 I think that's kind of the calculation that the bond 0:17:18.080 --> 0:17:20.640 market is making right now, and which is why I think, 0:17:20.680 --> 0:17:22.960 you know, we're in this interesting time where you know, 0:17:23.080 --> 0:17:26.280 people like me have this you know, pretty positive view 0:17:26.320 --> 0:17:29.040 about nominal GDP growth next year, and then we look 0:17:29.080 --> 0:17:31.800 at the tenures like, well, that's not confirming it. And 0:17:31.840 --> 0:17:34.040 I think the reason that's not the trade yet is 0:17:34.080 --> 0:17:36.680 the market kind of has to get through this this 0:17:36.840 --> 0:17:40.080 period of what is the peak of inflation and what 0:17:40.240 --> 0:17:42.399 is the inflation run rate? And those are both questions 0:17:42.400 --> 0:17:44.159 we don't have the answer to yet, and I think 0:17:44.240 --> 0:17:46.800 until we do, the market is not going to feel 0:17:46.800 --> 0:17:52.000 comfortable taking these quote unquote destination trades higher, especially neal. 0:17:52.840 --> 0:17:57.680 Is the possibility of a highly aggressive hiking cycle. Something 0:17:57.760 --> 0:17:59.640 which we haven't seen in a long time. Is death 0:17:59.680 --> 0:18:01.760 showing up in risky assets anywhere? Is the showing up 0:18:01.800 --> 0:18:04.679 at the stock market? You know? I think that you know, 0:18:04.720 --> 0:18:08.600 we have had a little bit of multiple compression this year, 0:18:08.640 --> 0:18:11.560 I mean, especially looking at you know what forward earnings 0:18:11.560 --> 0:18:13.800 are projected to do. I think there has been some. 0:18:14.240 --> 0:18:17.080 But you know, a question I get a lot is well, 0:18:17.160 --> 0:18:20.840 the bond market is flattening a lot, so shouldn't stocks care? 0:18:21.320 --> 0:18:24.200 And you can make an argument that five thirties may 0:18:24.280 --> 0:18:27.200 actually be inverted that you know, this time next year. 0:18:27.240 --> 0:18:30.600 And while that's always at least in two tens, that's 0:18:30.600 --> 0:18:34.199 always traditionally a harbingeer of recession. And you know, I 0:18:34.240 --> 0:18:37.560 think that actually that there should be this this d 0:18:37.760 --> 0:18:40.879 link between kind of the slope of the yield curve 0:18:41.600 --> 0:18:45.000 and kind of equity market risk premium. When I think that, 0:18:45.119 --> 0:18:48.920 you know, from a distribution perspective, the bond market has 0:18:48.960 --> 0:18:51.040 to weigh the risk, especially in things like five or 0:18:51.040 --> 0:18:54.200 five year or ten year US treasury yields, is the 0:18:54.200 --> 0:18:56.760 bond market has to weigh the risk of you know, 0:18:57.200 --> 0:19:01.560 kind of the whole trajectory of a policy where it's like, okay, well, 0:19:01.560 --> 0:19:03.879 what's the percent chance they go too much with the 0:19:03.920 --> 0:19:06.439 percent chance that in three or four years they have 0:19:06.560 --> 0:19:09.119 to take it back, and thinking about that kind of 0:19:09.359 --> 0:19:13.719 the whole scope visa VI the equity market, which is like, well, 0:19:14.320 --> 0:19:17.000 next year, earnings growth is still going to be really good. 0:19:17.080 --> 0:19:21.040 Even if the FED goes four times three earnings they 0:19:21.080 --> 0:19:23.400 may have to come down a little. And I think 0:19:23.440 --> 0:19:26.600 that's what we've seen in forward pees coming down actually 0:19:26.680 --> 0:19:28.920 or at least not really moving all year, even though 0:19:29.040 --> 0:19:31.600 earnings growth and earnings estimates they need to be picked up, 0:19:31.880 --> 0:19:34.199 because I think there is that element, but the equity 0:19:34.200 --> 0:19:36.160 market is not going to be like, oh, in four 0:19:36.240 --> 0:19:38.080 or five years, the FED, you know, may have to 0:19:38.119 --> 0:19:40.160 go back to zero. You know, I think in terms 0:19:40.200 --> 0:19:44.320 of time prisons, they're really operating on different ones. And 0:19:44.359 --> 0:19:47.960 the bond market is you know, leaning into its symmetry, 0:19:47.960 --> 0:19:50.159 and the equity market is leaning into its own. And 0:19:50.200 --> 0:19:53.199 I don't think necessarily, you know, they have to be 0:19:53.280 --> 0:19:54.960 saying the same thing. In fact, I think it would 0:19:54.960 --> 0:19:58.040 be odd of the work just on the idea of 0:19:58.040 --> 0:20:00.680 whether or not a great hiking so I goal would 0:20:00.720 --> 0:20:03.159 be bad for risk assets or what impact it would have. 0:20:03.320 --> 0:20:06.639 Can you talk a little bit about emerging markets, because 0:20:06.680 --> 0:20:09.119 of course, you know, if the FED is raising rates, 0:20:09.359 --> 0:20:12.360 then theoretically the dollars should go up. That's bad for 0:20:12.560 --> 0:20:15.840 people that have a lot of dollar denominated debt or 0:20:15.880 --> 0:20:19.640 you know, historically it has been bad for many developing economies. 0:20:19.680 --> 0:20:24.240 So how do you see that unfolding? And I gotta say, 0:20:24.320 --> 0:20:27.840 like the dollar index already has been pretty strong going 0:20:27.920 --> 0:20:31.399 into the end of this year. Yeah, you know, I 0:20:31.440 --> 0:20:33.760 think it's a it's a really interesting one. And I 0:20:33.800 --> 0:20:37.480 think that for e M. The question for the FED 0:20:37.560 --> 0:20:41.040 next year is not if they're hiking, but what they're 0:20:41.160 --> 0:20:45.520 hiking at relative to market pricing, and I think, you know, 0:20:45.600 --> 0:20:47.840 e M has had this tricky few months and you 0:20:47.840 --> 0:20:52.080 could really argue since the summer, partly because we've had 0:20:52.119 --> 0:20:58.360 to continuously add hikes, especially into the implied and it's 0:20:58.440 --> 0:21:01.640 kind of always still those added hikes have come with 0:21:01.680 --> 0:21:05.960 the the asymmetry that the next pricing is towards a 0:21:06.040 --> 0:21:08.960 hike and not towards less. Right, we've kind of entered 0:21:09.119 --> 0:21:12.400 since June fom C market pricing for next year went 0:21:12.440 --> 0:21:15.520 from zero to one with the asymmetry of a B too. 0:21:15.560 --> 0:21:19.040 It went from two to three with almost the asymmetry 0:21:19.040 --> 0:21:20.679 of being four. And I think that's kind of what 0:21:20.760 --> 0:21:23.560 the dollar has leaned into, right, The dollar has leaned 0:21:23.600 --> 0:21:26.680 into Okay, they're hiking, and it's more likely that they 0:21:27.040 --> 0:21:29.960 hike more than less. And now I think we're entering 0:21:30.000 --> 0:21:32.320 this like kind of interesting period. I think is especially 0:21:32.320 --> 0:21:37.040 relevant for emerging markets where I'm not convinced the next 0:21:37.280 --> 0:21:41.720 hype is actually dollar positive, where the the ray change 0:21:41.760 --> 0:21:44.040 from zero to one, one to two, two to three 0:21:44.040 --> 0:21:47.040 have all been dollar positive, and we've seen this pretty 0:21:47.080 --> 0:21:50.480 significant dollar rally, especially since Q three. But I think 0:21:50.520 --> 0:21:52.879 what's interesting now is if you get to if the 0:21:52.920 --> 0:21:55.720 market goes from three to four. There are a few 0:21:56.280 --> 0:22:01.000 interesting externalities. One I think that lessens the odds that 0:22:01.200 --> 0:22:03.840 the FED is operating by themselves, and this I think 0:22:03.920 --> 0:22:06.440 especially matters for emerging markets because it kind of goes 0:22:06.440 --> 0:22:09.879 through the dollar channel. Is if the fourth hike in 0:22:09.920 --> 0:22:13.440 the market price for the FED happens, I think that 0:22:13.600 --> 0:22:16.399 raises the chances that the e c B, the r 0:22:16.480 --> 0:22:18.800 b A, the ricks Bank, central banks that have been, 0:22:19.280 --> 0:22:23.960 you know, kind of more into this not necessarily transitory message, 0:22:24.000 --> 0:22:26.000 but next year is too soon, even if they've given 0:22:26.080 --> 0:22:30.720 up on transitory, I think that hike makes it much 0:22:30.760 --> 0:22:35.040 more likely that central banks like the ECB go hold 0:22:35.080 --> 0:22:37.960 on a second. Maybe two should be live in terms 0:22:37.960 --> 0:22:40.240 of rate hikes. The other thing that I think is 0:22:40.280 --> 0:22:43.800 really interesting is if we went to four, that means 0:22:44.320 --> 0:22:46.399 to go to quarterly paces, the FED would have to 0:22:46.440 --> 0:22:48.920 go in March, but also that they would be hiking 0:22:48.920 --> 0:22:52.240 in the same meeting that they're basically ending HUEY. And 0:22:52.280 --> 0:22:55.800 now there's no necessary preconditioned to the FED having to 0:22:55.800 --> 0:22:58.600 have a gap between the end of KUEI and rate hikes. 0:22:58.640 --> 0:23:00.960 We only know that the FED can heke while they're 0:23:00.960 --> 0:23:03.600 buying bonds, but I think in terms of a message 0:23:03.680 --> 0:23:06.960 or signal of intent, that would be a pretty big 0:23:06.960 --> 0:23:09.520 one where the FED would say there's no gap in 0:23:09.560 --> 0:23:12.040 between the end of keewee and raid hikes, and that 0:23:12.080 --> 0:23:16.520 would also, I think make it much more likely that 0:23:16.680 --> 0:23:19.800 central banks like BCB, like the r B A kind 0:23:19.800 --> 0:23:24.120 of have their moment of yet we're also live this year. 0:23:24.880 --> 0:23:27.159 And then that kind of speaks to something that I 0:23:27.160 --> 0:23:31.040 think is very different this cycle than last, which is 0:23:31.440 --> 0:23:36.440 in this period was very FED dominant, very US growth dominant, 0:23:36.680 --> 0:23:39.359 but kind of looking into next year, you could be 0:23:39.400 --> 0:23:43.600 in this much more coordinated policy growth dynamic, which I 0:23:43.640 --> 0:23:46.240 don't think will have the same dollar spill over. Now. 0:23:46.600 --> 0:23:51.520 If we went to four next year, then the chances 0:23:51.680 --> 0:23:55.240 of five I think actually become this maybe the same 0:23:55.359 --> 0:23:58.440 or even less than the chances of three, because five 0:23:58.480 --> 0:24:01.119 would be the FED saying, okay, we're off, We're not 0:24:01.200 --> 0:24:03.840 on a quarterly pace. Something really bad happened and we 0:24:03.880 --> 0:24:06.359 have to we have to address it right away. So 0:24:06.400 --> 0:24:08.320 I think in terms of the dollar, I don't know 0:24:08.480 --> 0:24:12.439 that it's obvious cell but I do think there are 0:24:12.440 --> 0:24:16.640 elements that are actually you know, topping, and I think 0:24:16.680 --> 0:24:19.360 from an e M perspective, you know, going into next year, 0:24:19.359 --> 0:24:21.959 I think the setup is fairly binary, as it usually 0:24:22.000 --> 0:24:25.119 is in the m UM, where you know, you could 0:24:25.200 --> 0:24:28.960 have a bed that's kind of priced for what it's 0:24:28.960 --> 0:24:31.400 going to do. Right, it's for the first time we're 0:24:31.400 --> 0:24:35.159 not kind of incrementally adding hikes into the implies for 0:24:35.240 --> 0:24:38.000 next year at the same time that terms of trade 0:24:38.000 --> 0:24:41.160 and e M are off the charts. On the other hand, 0:24:41.200 --> 0:24:43.720 you could have an EM where the Fed says, oh, 0:24:43.760 --> 0:24:45.560 by the way, we really have to stop this thing 0:24:45.600 --> 0:24:48.880 because inflation is too high, and that's at the same 0:24:48.920 --> 0:24:51.720 time that you have political development such as Brazilian elections 0:24:51.720 --> 0:24:55.359 in October, etcetera, and you have a further mess. But 0:24:55.480 --> 0:24:58.920 I do think EM is going into next year actually 0:24:58.960 --> 0:25:02.320 with some bet are buffers. Then people I think give 0:25:02.359 --> 0:25:06.359 it credit for given that because US demand is so strong, 0:25:06.520 --> 0:25:09.840 because the Chinese currency has been so strong this year, 0:25:10.200 --> 0:25:12.720 terms of trade are really strong, and current accounts have 0:25:12.880 --> 0:25:15.280 kind of sayed sticky to the surplus side. I mean, 0:25:15.560 --> 0:25:17.439 we've had this year, We've had South Africa have a 0:25:17.440 --> 0:25:20.080 current account circus, which is kind of unheard of. And 0:25:20.119 --> 0:25:22.800 it's not to say that that will last. It won't 0:25:23.280 --> 0:25:25.159 but the question is, you know, the same thing with 0:25:25.320 --> 0:25:27.640 US inflation is kind of what does it come back 0:25:27.680 --> 0:25:31.879 to for e M. The interesting thing for next year is, 0:25:32.160 --> 0:25:34.520 you know, all these guys have pretty much have hyped 0:25:34.560 --> 0:25:38.320 a lot in terms of trade, are really strong. If 0:25:38.320 --> 0:25:41.040 the FED is not doesn't have to say, oh, you know, 0:25:41.200 --> 0:25:43.360 inflation got to how we have to do something drastic, 0:25:43.920 --> 0:25:47.320 then this setup is actually pretty strong, especially as you 0:25:47.320 --> 0:25:50.320 know Chinese growth starts to you know, bottom around here. 0:25:51.240 --> 0:25:55.080 That was that was very interesting and useful framework. I 0:25:55.119 --> 0:25:56.879 want to can you just say a little bit more 0:25:56.920 --> 0:25:59.720 about China? I mean, Tracy has been obviously covering it 0:25:59.720 --> 0:26:02.240 a lot, the slowdown in China, and yet we have 0:26:02.359 --> 0:26:05.159 seen the Chinese u N even during a period of 0:26:05.160 --> 0:26:08.960 dollar strength. I think the un has been even stronger. 0:26:09.600 --> 0:26:12.680 What is the dynamic there you expect a re acceleration, 0:26:12.800 --> 0:26:16.520 what explains that und strength? And how are you thinking 0:26:16.560 --> 0:26:21.120 about China and its contribution to growth and uh sort 0:26:21.160 --> 0:26:25.359 of demand in Yeah, you know, I think China has 0:26:25.400 --> 0:26:29.880 been probably outside of the FED and inflation, I think 0:26:29.920 --> 0:26:33.159 one of the more interesting drivers this year where you know, 0:26:33.200 --> 0:26:37.320 we've clearly had this policy goal or crackdown on both 0:26:37.359 --> 0:26:40.879 the tech and property sectors that you know, obviously made 0:26:41.440 --> 0:26:45.360 Chinese assets underperform. But at the same time we've had 0:26:45.359 --> 0:26:48.679 this massive out performance of the Chinese currency. And this 0:26:48.760 --> 0:26:51.399 is also this performance has happened in the context of 0:26:51.560 --> 0:26:55.960 Chinese growth, you know, kind of decelerating faster than it 0:26:56.080 --> 0:26:58.720 has pretty much anywhere in the West. And I think, 0:26:58.760 --> 0:27:01.840 you know something that I I've definitely you know, talked 0:27:01.840 --> 0:27:05.040 about with Tracy is this China has had this interesting 0:27:05.160 --> 0:27:08.680 policy posture this year where they came into this year 0:27:09.720 --> 0:27:12.439 with two things. One, they wanted to get the credit 0:27:12.440 --> 0:27:16.200 impulse lowered because they thought, okay, you know, we did 0:27:16.200 --> 0:27:19.679 a lot in we got demand back, global economy strong. 0:27:20.000 --> 0:27:23.800 They have politically become more sensitive to no kind of 0:27:23.800 --> 0:27:25.920 new credit in the economy, especially as it relates to 0:27:25.960 --> 0:27:28.960 the property sector, etcetera. So I think that there's been 0:27:28.960 --> 0:27:34.040 this this impetus to bring being credit lowered and then 0:27:34.080 --> 0:27:39.440 that traditionally ways on domestic growth, which it did this time. 0:27:39.840 --> 0:27:42.600 I think the difference that happened this time and why 0:27:42.760 --> 0:27:45.840 China wasn't this you know, kind of disaster for the 0:27:45.880 --> 0:27:48.240 global economy, as it really did have a pretty big 0:27:48.240 --> 0:27:51.800 deceleration and it's credit impulse is that China was able 0:27:51.920 --> 0:27:57.119 to not fully but replace a lot of domestic demand 0:27:57.160 --> 0:28:00.520 that they usually got through marginal credit increased via the 0:28:00.560 --> 0:28:03.359 current account. And this is something that didn't happen the 0:28:03.440 --> 0:28:07.199 last two times that China has had these pretty stark 0:28:07.359 --> 0:28:10.840 credit decelerations that we saw post eleven which ended up 0:28:10.840 --> 0:28:13.719 in you know, kind of a commodity bus, and we 0:28:13.760 --> 0:28:21.000 didn't see you know, which followed China. Stimulus is China 0:28:21.119 --> 0:28:26.560 because of how strong US and European demand was, specially US. 0:28:26.920 --> 0:28:29.800 China was running a current account surplus three percent this year, 0:28:30.600 --> 0:28:34.199 and this is in contrast to it basically drawing its 0:28:34.240 --> 0:28:38.880 current account to zero in and I think that China 0:28:39.000 --> 0:28:42.840 was basically made the calculation that they could import the 0:28:42.880 --> 0:28:45.640 demand that they were off setting by being tied on credit. 0:28:46.080 --> 0:28:49.000 It seemingly was a bet that worked. I mean, it's 0:28:49.000 --> 0:28:50.840 hard to say that, you know, China has had this 0:28:50.960 --> 0:28:54.560 robust growth theory it didn't, especially in a relative sense. 0:28:54.880 --> 0:28:58.680 But China was not this massive drag on global growth 0:28:58.760 --> 0:29:03.160 this year, even though have you know, much weaker credit impulse. 0:29:03.360 --> 0:29:06.600 I think partly because it was able to import that 0:29:06.840 --> 0:29:09.400 you know, lost demand, and I think that's what kind 0:29:09.400 --> 0:29:12.000 of you know, they kind of set this up as 0:29:12.160 --> 0:29:14.920 China wanted two things from this year. One is, they 0:29:14.960 --> 0:29:17.560 wanted to offset some of the inflationary pressure that the 0:29:17.600 --> 0:29:20.160 rest of the world was feeling. One way to do 0:29:20.200 --> 0:29:22.840 that is to have a stronger currency. And then the 0:29:22.880 --> 0:29:26.200 other thing is that they wanted to have this tightening 0:29:26.600 --> 0:29:29.080 either on the credit side, and won't really speak to 0:29:29.120 --> 0:29:31.520 the tech side as not an expert on it, is 0:29:31.800 --> 0:29:37.160 they wanted to really tighten credit post big credit acceleration 0:29:37.200 --> 0:29:40.640 they had then, especially as the property sector is extremely 0:29:40.680 --> 0:29:45.280 vulnerable right now, they wanted to replace that demand through 0:29:45.360 --> 0:29:48.800 the West, which is not too dissimilar to what the 0:29:48.840 --> 0:29:53.320 West effectively did post GFC. Right the post GFC, the 0:29:53.400 --> 0:29:58.000 West basically lad not purposefully and probably not as purposefully 0:29:58.000 --> 0:30:00.680 as China did this time. Is the s went into 0:30:00.680 --> 0:30:04.320 austerity and China stimulated, and kind of the way out 0:30:04.520 --> 0:30:07.760 was that, you know, Chinese demand carried the way, and 0:30:08.040 --> 0:30:12.280 this time it's China made the i think calculation that 0:30:12.400 --> 0:30:14.160 they were going to let the West leave, they were 0:30:14.160 --> 0:30:17.600 going to import that excess demand and that would let them, 0:30:17.600 --> 0:30:20.800 you know, achieve some policy tightening that they wanted to 0:30:20.800 --> 0:30:24.840 do anyway without a big marginal cost of growth. This 0:30:25.120 --> 0:30:27.840 leads very well into the next question I wanted to 0:30:27.880 --> 0:30:32.720 ask you, which is about the policy response going into two, 0:30:32.840 --> 0:30:35.160 because I think there is I mean, there is this 0:30:35.320 --> 0:30:39.080 history that when things go awry in the global economy, 0:30:39.200 --> 0:30:43.400 China will start easing and effectively save everyone. And that 0:30:43.640 --> 0:30:46.400 might not be the case this time around, given what 0:30:46.440 --> 0:30:49.240 you just laid out. But on the other hand, we 0:30:49.320 --> 0:30:53.680 are seeing China start to push back a little bit 0:30:53.720 --> 0:30:57.520 against the u N and also show some signs of easing. 0:30:57.640 --> 0:31:02.120 So it just cut the reserve vironment ratio, it's talked 0:31:02.120 --> 0:31:04.960 a little bit about rolling back some of the property curves. 0:31:05.320 --> 0:31:08.480 How should we be thinking about that policy response going 0:31:08.480 --> 0:31:12.240 into I think this is really one of the more 0:31:12.280 --> 0:31:15.400 important questions. I think I kind of come at it 0:31:15.480 --> 0:31:20.160 with a China is not going to go full easing. 0:31:20.360 --> 0:31:22.880 I either is not going to be well, there's a 0:31:22.960 --> 0:31:25.320 National Party Congress, so we go pedal to the metal, 0:31:25.640 --> 0:31:28.880 you know. I don't really think that will be China's 0:31:28.960 --> 0:31:31.640 policy posture. I think what we are seeing though, is 0:31:31.920 --> 0:31:35.400 and this became extremely evident when we had three separate 0:31:35.720 --> 0:31:40.520 macro economic stabilizer events in China that I think China 0:31:40.640 --> 0:31:43.160 is putting a floor in terms of where they're going 0:31:43.160 --> 0:31:45.840 to let growth go. And I think this became really 0:31:45.880 --> 0:31:49.560 not worthy over the past two weeks when three things happened. One, 0:31:49.640 --> 0:31:53.240 as you noted, China basically said, okay, you want it's 0:31:53.240 --> 0:31:55.719 gone a lot and we're comfortable with a strong huan policy, 0:31:55.800 --> 0:31:59.160 especially as we're in this broader context of dual circulation 0:31:59.160 --> 0:32:02.800 and wanting to increase message demand, but it's gone too strong, 0:32:02.920 --> 0:32:06.840 and they hyped forex reserve ratio from seven to nine percent. 0:32:07.280 --> 0:32:10.360 Then we also saw from the Stitate Council in the 0:32:10.360 --> 0:32:14.680 Peelborough that there is more of a fiscal backstop that 0:32:14.720 --> 0:32:17.400 will probably kick in next year. And then on the 0:32:17.440 --> 0:32:20.480 monetary side, we saw that they're going to cut the 0:32:20.520 --> 0:32:23.720 triple R rate again. And have you know, at least 0:32:23.760 --> 0:32:26.400 in the market been a little more aggressive on the 0:32:26.440 --> 0:32:30.400 liquidity side. So I think we've had these three theory 0:32:30.440 --> 0:32:33.680 independent macro stabilizers that have all kind of happened at 0:32:33.680 --> 0:32:36.160 once that I kind of think give you the message 0:32:36.200 --> 0:32:38.840 that listen, China is not going to go into next 0:32:38.920 --> 0:32:42.400 year and start doing massive fiscal or massive infrastructure or 0:32:42.480 --> 0:32:45.640 massive monetary stimulus through rate cuts. You know, I wouldn't 0:32:45.640 --> 0:32:48.280 even be surprised if you know, the loan prime rate 0:32:48.360 --> 0:32:51.320 or you know, kind of China's now default policy rate 0:32:51.520 --> 0:32:55.000 doesn't actually move down at all. But I think China 0:32:55.200 --> 0:32:59.280 is going through the process of kind of narrowing the 0:32:59.320 --> 0:33:03.040 confidence into both their growth range. And I think we've 0:33:03.080 --> 0:33:06.960 reached the point now where growth has gotten too low 0:33:07.040 --> 0:33:09.600 that they wanted to pretty much pick up. And I 0:33:09.640 --> 0:33:12.120 think what you will see in you know, the next 0:33:12.160 --> 0:33:15.360 two quarters is the credit impulse will pick up, and 0:33:15.560 --> 0:33:18.120 China wants that, but they don't want it, you know, 0:33:18.240 --> 0:33:22.080 necessarily going bananas. So I think that's kind of what's 0:33:22.160 --> 0:33:24.840 different this time is that China is not going to 0:33:24.880 --> 0:33:29.600 be this big marginal impulse to global growth. But I 0:33:29.640 --> 0:33:32.880 think China, especially as we've seen over the last two quarters, 0:33:33.240 --> 0:33:35.720 is the fear of China being this big drag on 0:33:35.760 --> 0:33:38.680 global growth I think we'll receive going into the first 0:33:38.720 --> 0:33:57.920 half next year. Oh no, bring it back a little 0:33:57.920 --> 0:34:00.719 bit to the United States, and you know, one of 0:34:00.760 --> 0:34:05.200 the you know, thinking about this possibility of multiple hikes 0:34:05.240 --> 0:34:08.040 and maybe four and you know, maybe at some point 0:34:08.040 --> 0:34:10.200 of things where to go get a little too wild, 0:34:10.440 --> 0:34:13.560 maybe five. And obviously that's nobody. That doesn't seem like 0:34:13.640 --> 0:34:16.279 that's anyone space case. But I'm thinking about you know, 0:34:16.320 --> 0:34:18.919 of course, at the end, near the end of twenty 0:34:19.160 --> 0:34:24.240 and the FED unveiled its new framework flexible average inflation targeting, 0:34:24.840 --> 0:34:28.120 And in addition to this sort of new framework change, 0:34:28.239 --> 0:34:31.640 we heard share Powell talk about things like inclusive growth 0:34:31.800 --> 0:34:35.680 and a true commitment to sort of maximum employment in 0:34:35.719 --> 0:34:38.520 a way that seemed different. Do you think, you know, 0:34:38.560 --> 0:34:41.920 if you think about how the market and investors are 0:34:42.080 --> 0:34:45.840 anticipating Fed action next year and beyond, would you say 0:34:45.840 --> 0:34:49.200 that it's a reflection of essentially the FED having met 0:34:49.239 --> 0:34:52.279 its goals and the FED having delivered on its commitments. 0:34:52.800 --> 0:34:55.960 Or is there a belief that actually, in the end 0:34:56.000 --> 0:34:58.640 it will be the same old Fed and that for 0:34:58.680 --> 0:35:01.640 all of the talk of a new rainwork and uh 0:35:01.920 --> 0:35:04.840 perhaps a slightly greater weight on the employment side of 0:35:04.840 --> 0:35:08.160 the mandate, that in the end the FED is going 0:35:08.200 --> 0:35:11.600 to sort of be the Fed it's always been. No, 0:35:11.680 --> 0:35:13.520 It's it's a good question, and I think, you know, 0:35:13.680 --> 0:35:15.960 on the surface, I think a lot of people would 0:35:15.960 --> 0:35:19.240 say that it's you know, kind of same old Fed, 0:35:19.680 --> 0:35:23.279 But I I don't think so. And the reason I 0:35:23.320 --> 0:35:26.200 don't think so is you know, I think that part 0:35:26.239 --> 0:35:31.000 of what's made this recalibration FED pricing very uncomfortable is 0:35:31.320 --> 0:35:35.520 we were thinking about in the first half of that 0:35:35.719 --> 0:35:37.799 the first FED rate hike was going to come in, 0:35:39.320 --> 0:35:44.160 and we've basically gone from no hikes until two three 0:35:44.280 --> 0:35:47.920 hikes in two in a very short period of time, right, 0:35:48.120 --> 0:35:50.399 And I think that that has kind of come with 0:35:50.680 --> 0:35:54.719 the broader perception that this is a FED that flinches, 0:35:54.880 --> 0:35:57.959 this is it's you know, the fate is kind of dead, 0:35:58.680 --> 0:36:02.040 and you know, I think going into next year, there 0:36:02.160 --> 0:36:06.000 is a possibility that fate does die, but it's it's 0:36:06.040 --> 0:36:09.040 a possibility the fate dies with in kind of what 0:36:09.080 --> 0:36:12.440 the FED told you in their monetary policy statement, which 0:36:12.520 --> 0:36:16.200 is that the goal of fate is to be reactive, right, 0:36:16.280 --> 0:36:19.120 It's not to be pre emptive. However, there was one 0:36:19.239 --> 0:36:21.480 thing that the FED said they would be pre emptive on, 0:36:22.160 --> 0:36:24.440 even in within the context of faith, and that was 0:36:24.520 --> 0:36:28.560 inflation expectations. And inflation expectations as we've known this year 0:36:28.640 --> 0:36:32.600 is kind of this messy concept. But I think what's 0:36:32.640 --> 0:36:34.719 easier to say, and you could read the Jeremy Read 0:36:34.760 --> 0:36:36.839 paper and different papers have come out on this year. 0:36:36.880 --> 0:36:39.319 That's kind of show how messy it is to kind 0:36:39.360 --> 0:36:41.759 of manage. And we know that CLARAA looks at things 0:36:41.800 --> 0:36:45.200 like c I E. The Fed's common inflation expectations indicator. 0:36:45.640 --> 0:36:49.680 Is that the FED could decide that spot inflation so 0:36:49.760 --> 0:36:53.600 above target for so long has a risk of the 0:36:53.640 --> 0:36:56.600 anchoring that it could require a faster pace, and that 0:36:56.640 --> 0:37:01.040 would actually be consistent with their monetary policy strategy. And 0:37:01.080 --> 0:37:02.800 I think, you know, going into next year, more of 0:37:02.840 --> 0:37:05.799 a base case world, right where the FED kind of 0:37:05.840 --> 0:37:09.600 hikes three times. It ends quie in March at least. 0:37:09.600 --> 0:37:11.680 Looking if you assume the first hike is going to 0:37:11.719 --> 0:37:14.239 be in June, well, what's going to be the case. 0:37:14.280 --> 0:37:17.120 In June? You're probably gonna have a sub four percent unemployment, right, 0:37:17.560 --> 0:37:20.879 You're going to have prime age EPOP that's probably going 0:37:20.920 --> 0:37:24.799 to be back at pre COVID levels. And I think 0:37:24.840 --> 0:37:27.960 there is this implicit bias from the FED, and it 0:37:28.040 --> 0:37:31.640 may not come across in a higher you start or 0:37:31.719 --> 0:37:34.400 higher natural rate of unemployment. Is that the natural rate 0:37:34.400 --> 0:37:38.400 of unemployment probably did rise post COVID, and it may 0:37:38.440 --> 0:37:41.080 have not risen drastically, but I think the FED is 0:37:41.080 --> 0:37:42.799 going to be less comfortable with the idea that you 0:37:42.800 --> 0:37:44.920 can get back to three and a half percent unemployment 0:37:45.239 --> 0:37:49.560 and then have no marginal inflationary cost, especially at this 0:37:49.640 --> 0:37:53.000 point in time when inflation is in the sixtes. So 0:37:53.719 --> 0:37:56.480 you know, I think going into next year, there is 0:37:56.520 --> 0:37:58.600 this idea that it's like kind of all over the 0:37:58.600 --> 0:38:02.160 same old FED. Whatever the data comes in is that is. 0:38:02.200 --> 0:38:05.279 And I do agree that the FED is now less 0:38:05.320 --> 0:38:09.560 preemptive in terms of policy being the dominant variable, not 0:38:09.719 --> 0:38:12.440 the data. The data now is definitely the valiant and variable, 0:38:12.719 --> 0:38:15.120 and that was kind of the FED shift post June. 0:38:15.560 --> 0:38:18.120 But I think you know, looking into June and you 0:38:18.200 --> 0:38:21.200 look at the Fate checklist, you know something that claritists 0:38:21.200 --> 0:38:24.000 gave a speech on in August UM that really called 0:38:24.040 --> 0:38:27.759 people by surprise is well, I'm he said, I'm looking 0:38:27.760 --> 0:38:29.399 at the Faith checklist and I could see it being 0:38:29.440 --> 0:38:33.239 hit by the end of And I think it's reasonable 0:38:33.280 --> 0:38:35.439 to say, since you know, the labor market progress we've 0:38:35.440 --> 0:38:38.399 had since August and the continued price pressure we've had, 0:38:38.400 --> 0:38:41.440 that that has just been moved forward six months, and 0:38:41.480 --> 0:38:43.919 it's I think it's pretty consistent to say that Fate 0:38:43.920 --> 0:38:47.160 will actually be hit in June of next year, and 0:38:47.200 --> 0:38:50.799 the FED won't be you know, kind of same old 0:38:50.800 --> 0:38:52.680 fetting it in terms of, Okay, how do we come 0:38:52.760 --> 0:38:55.359 up with reasons to hype when we're really only scared 0:38:55.360 --> 0:38:58.680 about inflation. I do think inflation is the dominant variable 0:38:58.680 --> 0:39:01.520 and kind of this recalibration policy. But I think it's 0:39:01.560 --> 0:39:04.560 this recalibration of policy also happened in the context of 0:39:04.560 --> 0:39:06.920 a labor market that is healing much faster than it 0:39:06.960 --> 0:39:10.120 has in past cycles. So before we go, John, you know, 0:39:10.160 --> 0:39:12.799 I wanted to get your take obviously, just sort of 0:39:13.040 --> 0:39:16.080 risky assets, and we talked about them a little bit 0:39:16.120 --> 0:39:19.319 before about whether there's any evidence of them pricing in 0:39:19.760 --> 0:39:22.960 an aggressive hiking cycle like maybe the bond market is. 0:39:23.280 --> 0:39:26.600 But by and large, it's been an incredible year. I mean, 0:39:26.719 --> 0:39:28.600 and I think there's sort of two things that stand 0:39:28.600 --> 0:39:30.839 out for me. Is like, one is, you know, at 0:39:30.880 --> 0:39:34.239 least in the US, but also I think elsewhere headline 0:39:34.719 --> 0:39:37.960 stock induscries have just an insanely well smp up something 0:39:37.960 --> 0:39:41.120 it'll you know, something like just like an incredible year. 0:39:41.400 --> 0:39:45.240 On the other hand, we have seen this pretty intense 0:39:45.280 --> 0:39:47.560 sell off in what was really hot earlier in the 0:39:47.600 --> 0:39:52.000 year a lot of the growth the stuff textu meme stuff, etcetera. 0:39:52.640 --> 0:39:55.000 I'm just sort of like curious, like, you know, how 0:39:55.080 --> 0:39:56.680 you're thinking about this. I don't know if you wann't 0:39:56.680 --> 0:39:59.040 like have a call on sort of like the SMP 0:39:59.200 --> 0:40:03.239 or think about that. But within the macro context, how 0:40:03.280 --> 0:40:06.000 does all of this play into the part of the 0:40:06.040 --> 0:40:09.399 market that sort of most people observe most directly, which 0:40:09.480 --> 0:40:13.040 is the stock market. Yeah, you know, I think it's 0:40:13.080 --> 0:40:15.799 it's interesting going into next year. I think that there's 0:40:15.880 --> 0:40:18.840 kind of this like broader narrative that we've been alluding 0:40:18.880 --> 0:40:21.560 to that you know, the economy is not really going 0:40:21.600 --> 0:40:25.360 to be able to deal with this public deprivate sector handoff. 0:40:25.440 --> 0:40:27.520 The FED is going to be a big, you know, 0:40:27.560 --> 0:40:30.200 impediment to the market. And you know, something I do 0:40:30.320 --> 0:40:32.600 think is true is that you know, the quote unquote 0:40:32.600 --> 0:40:35.320 FED foot has been restruck lower. Yeah, you know, and 0:40:35.520 --> 0:40:38.360 and in terms of like distribution of where like multiples 0:40:38.400 --> 0:40:41.200 can go. Given that, I do think it is significant. 0:40:41.560 --> 0:40:44.919 But you know, I think more broadly is I think 0:40:44.960 --> 0:40:50.320 the market is actually readjusting now to the possibility that 0:40:50.680 --> 0:40:53.439 the FED may have to be more drastic next year 0:40:53.800 --> 0:40:57.120 than especially originally intended to, but also in terms of like, 0:40:57.320 --> 0:40:59.120 you know, the last ten to twenty years of what 0:40:59.200 --> 0:41:02.080 it has done, and I think like that's become like 0:41:02.320 --> 0:41:06.359 really obvious, and things like you know that really you know, 0:41:06.760 --> 0:41:10.360 techie stuff and arc and those type of things where 0:41:10.400 --> 0:41:13.640 you know they just cannot handle a hawk is shed. 0:41:13.840 --> 0:41:15.280 But I think, you know, in terms of the market 0:41:15.280 --> 0:41:17.920 at large and in terms of the SMP, I think 0:41:17.960 --> 0:41:21.799 we're getting to actually closer to an equilibrium point. And 0:41:21.800 --> 0:41:24.879 I think a lot of people I think I I mean, 0:41:25.280 --> 0:41:27.359 I think going into next year, we're getting to the 0:41:27.400 --> 0:41:32.640 point now where a lot more hikes next year versus 0:41:32.719 --> 0:41:36.080 you know, too fewer hikes next year. It's actually getting 0:41:36.120 --> 0:41:38.160 pretty close in the odds. I mean, I think given 0:41:38.200 --> 0:41:42.399 where spot inflation is, there is this bias too kind 0:41:42.400 --> 0:41:44.719 of assumed that you know, the asymmetry is into more 0:41:44.960 --> 0:41:47.479 and the asymmetry was into more hikes for a long time. 0:41:47.880 --> 0:41:49.920 But I think the interesting thing now is we're getting 0:41:49.960 --> 0:41:53.839 close to a pretty nice de Delibrium point where you know, 0:41:54.040 --> 0:41:57.400 inflation maybe four, but it also maybe two and a half. 0:41:57.920 --> 0:42:01.720 And I think like the odds are kind of close, 0:42:01.800 --> 0:42:03.840 and I really think you should be on the side 0:42:03.840 --> 0:42:06.200 of two and a half given what base effects will 0:42:06.200 --> 0:42:09.040 do starting Q two next year. And when you get 0:42:09.080 --> 0:42:10.719 into that two and a half world, that's still a 0:42:10.760 --> 0:42:13.800 world where the feed is hiking because inflation is above target, 0:42:13.840 --> 0:42:15.960 and in terms of the fake checklist, it's all hit. 0:42:16.400 --> 0:42:18.600 But it's not a world where the FED is kind of, 0:42:18.640 --> 0:42:20.480 you know, hitting the brakes on the cycle. And I 0:42:20.480 --> 0:42:21.840 think as long as the feed is not hitting the 0:42:21.880 --> 0:42:25.120 brakes on the cycle, market and the economy can deal 0:42:25.200 --> 0:42:28.160 with with higher interest rates. Now can it deal with 0:42:29.080 --> 0:42:31.080 you know, in two years or three years, when the 0:42:31.080 --> 0:42:33.680 FED gets back to an assemblance of neutral. But I 0:42:33.719 --> 0:42:36.080 have a different view. Yes, but I think you know, 0:42:36.080 --> 0:42:38.799 in terms of next year, and you told me, you 0:42:38.840 --> 0:42:41.880 know that the unemployment rate is three and a half, 0:42:41.960 --> 0:42:45.000 inflation is two and a half to seventy five, and 0:42:45.040 --> 0:42:46.800 the FED is at eighty seven and a half basis 0:42:46.840 --> 0:42:50.600 points on FED funds. My guesses stocks did Okay, I'm 0:42:50.680 --> 0:42:53.560 not saying that you know, it's another twenty percent year, 0:42:54.000 --> 0:42:56.919 But in that kind of backdrop, I think I'd rather 0:42:57.040 --> 0:43:03.719 over twelve months. I'd rather be imbed. John Turk, thank 0:43:03.760 --> 0:43:06.239 you so much for coming out odd lots always a 0:43:06.280 --> 0:43:09.000 pleasure and I always I always learned a ton of 0:43:09.160 --> 0:43:12.800 have a have a happy New Year, and well looking 0:43:12.840 --> 0:43:15.120 forward to revisiting. Maybe we'll get you on a summer 0:43:15.160 --> 0:43:19.360 of to do the halfway mark sounds good. Thank you 0:43:19.440 --> 0:43:20.960 so much for having me. Yeah, I mean I think 0:43:21.000 --> 0:43:23.400 you know, summer is the big one. We kind of 0:43:23.400 --> 0:43:26.839 know what the inflation in game is. Thanks so much, Sean, 0:43:26.880 --> 0:43:38.680 all right, take care of John. Thank you. You know what, 0:43:38.680 --> 0:43:41.279 I love talking to John for many reasons, but one 0:43:41.320 --> 0:43:44.879 thing that really stands out to me is just his clarity. Yeah. 0:43:45.360 --> 0:43:47.360 The thing I really like about John is that he 0:43:47.440 --> 0:43:52.520 kind of looks at everything on a probability distribution basis, 0:43:52.560 --> 0:43:56.080 So he's always trying to weigh tale risks on either side, 0:43:56.120 --> 0:43:58.480 whereas I feel like other people are going, you know, 0:43:58.520 --> 0:44:01.759 they're usually just focusing on one thing, like runaway inflation 0:44:02.200 --> 0:44:05.600 and not necessarily looking at the other side of that 0:44:05.680 --> 0:44:09.279 probability distribution. But I thought, for instance, what John was 0:44:09.320 --> 0:44:14.520 saying about these sort of asymmetric risks to the inflation outlook, 0:44:14.600 --> 0:44:17.080 the idea that like, on the one hand, maybe we 0:44:17.160 --> 0:44:19.640 have four and a half percent inflation, on the other hand, 0:44:19.680 --> 0:44:22.600 maybe we get down to two and a half percent, Like, 0:44:22.760 --> 0:44:24.960 this is something that I've been thinking about with the 0:44:25.400 --> 0:44:29.719 piece I did on Whack inflation, and it seems like, yes, 0:44:29.840 --> 0:44:33.479 everyone's worried about inflation right now, but really what's going 0:44:33.520 --> 0:44:39.480 on is it's not necessarily relentless price increases, its volatility 0:44:39.800 --> 0:44:44.239 in those prices and the difficulty of actually predicting where 0:44:44.280 --> 0:44:47.440 they're going to go given all these different factors around 0:44:47.680 --> 0:44:53.440 supply and what's going on. Well now with the omicron variant. Yeah, absolutely, 0:44:54.560 --> 0:44:58.200 the way he talked about distribution very useful, and specifically 0:44:58.360 --> 0:45:01.440 I thought this idea, it's like, okay, like all years 0:45:01.440 --> 0:45:03.759 so we've had this big dollar rally, and I thought 0:45:03.760 --> 0:45:06.120 that was really helpful hearing him explain that, but all 0:45:06.200 --> 0:45:08.520 year we've had this sort of relentless like maybe they'll 0:45:08.600 --> 0:45:10.440 hype a little bit more, maybe go from zero to one, 0:45:10.560 --> 0:45:13.280 maybe we go from one to two. And this idea 0:45:13.360 --> 0:45:17.840 that once you get to around four possible hikes in two, 0:45:18.080 --> 0:45:21.239 once like that becomes closer to say the market's base 0:45:21.320 --> 0:45:24.640 case or a possibility, then we really start to uh, 0:45:24.680 --> 0:45:27.120 it shifts in both directions. So we've had all this 0:45:27.160 --> 0:45:30.480 sort of like upward biased to the possibility range. We 0:45:30.560 --> 0:45:33.120 might still have that, but not much more, and then 0:45:33.160 --> 0:45:36.399 you start thinking about maybe three, you know, once you're 0:45:36.440 --> 0:45:39.600 once you're at four, maybe three is more likely than five. 0:45:40.200 --> 0:45:43.600 And hearing him explain why and that was really useful. 0:45:43.600 --> 0:45:47.680 And I think also he offers probably the clearest, in 0:45:47.719 --> 0:45:50.680 my opinion, the sort of the clearest explanation for why 0:45:50.680 --> 0:45:53.239 in a year where there's been so much anxiety about inflation, 0:45:53.480 --> 0:45:55.920 we've really just seemed like nothing going on at the 0:45:56.400 --> 0:45:59.239 long end of the yield curve. Yeah. Absolutely, And I 0:45:59.280 --> 0:46:03.240 thought his point about inflation expectations was also very good 0:46:03.280 --> 0:46:06.520 because despite all the handwringing that we're seeing, you know, 0:46:07.040 --> 0:46:12.320 consumer demand has been relatively strong. Most people are saying 0:46:12.360 --> 0:46:15.480 that it's not a good time to buy things at 0:46:15.480 --> 0:46:18.600 the moment, which kind of suggests that they expect prices 0:46:18.760 --> 0:46:22.520 to come down, right. Yes, I don't know about you, though. 0:46:22.560 --> 0:46:27.000 I have like five washing machines in my basement that 0:46:27.040 --> 0:46:29.239 I've been buying on expectations that I'll be able to 0:46:29.280 --> 0:46:33.160 flip them for flip them for more later. So yeah, 0:46:33.200 --> 0:46:37.080 I'm definitely. Uh, I've definitely been hoarding consumer durable goods 0:46:37.120 --> 0:46:40.400 as as investments. You're you're not doing that, Tracy you know. 0:46:40.440 --> 0:46:42.319 The sad thing is I can't even tell if you're 0:46:42.360 --> 0:46:45.759 joking or not. I am joking. You might actually have 0:46:45.920 --> 0:46:49.280 five washing machines. I do not have five washing machines. 0:46:49.360 --> 0:46:51.400 I do have a washing machine, though, which I feel 0:46:51.440 --> 0:46:54.440 extremely privileged to have in New York City. I've never 0:46:54.480 --> 0:46:59.520 had one in my apartment before. Yeah, that is very convenient. 0:47:00.040 --> 0:47:01.920 So we leave it there before we start doing like 0:47:02.000 --> 0:47:05.319 washing machine product reviews. Yeah, although we could do that too, 0:47:05.320 --> 0:47:08.640 but yes, let's leave it. Let's leave it. Wait, actually, wait, 0:47:08.680 --> 0:47:10.279 can I see one thing? Wait? Wait, can I see 0:47:10.280 --> 0:47:14.200 one thing? Yeah, of course, I speaking of washing machines. 0:47:14.320 --> 0:47:17.960 I had the most problem, which is that a I 0:47:18.000 --> 0:47:20.440 have like some smart washing machine, so I couldn't use 0:47:20.480 --> 0:47:22.759 it for a couple of weeks due to like a 0:47:22.800 --> 0:47:26.360 software glitch. So that's a modern problem, but that'd be 0:47:27.000 --> 0:47:29.640 I couldn't get a repair person for the washing machine 0:47:29.800 --> 0:47:32.560 for like over two weeks because, of course, you know, 0:47:32.880 --> 0:47:36.239 labor market tightness and service market types and everything. So 0:47:36.320 --> 0:47:38.920 I do think by the story of my washing machine 0:47:39.400 --> 0:47:44.480 is a sort of like quintessential micro economy story. Maybe 0:47:44.480 --> 0:47:47.080 you need to write that up as an add thoughts post. 0:47:47.920 --> 0:47:49.640 That's a good idea. I will do that this week. 0:47:49.960 --> 0:47:51.640 All right, let's leave it there. All right, we are 0:47:51.719 --> 0:47:55.120 actually leaving it there. This has been another episode of 0:47:55.160 --> 0:47:57.960 the ad Thoughts podcast. I'm Tracy Alloway. You can follow 0:47:58.000 --> 0:48:01.359 me on Twitter at Tracy Alloway and I'm Joe wisn't Thal. 0:48:01.480 --> 0:48:04.520 You can follow me on Twitter at the Stalwart. Follow 0:48:04.560 --> 0:48:06.680 our guest John Turrek. He's the author of the Chief 0:48:06.760 --> 0:48:10.960 Convexity blog. His hand on Twitter is at j Turrek eighteen. 0:48:11.480 --> 0:48:15.760 Follow our producer Laura Carlson at Laura M. Carlson. Follow 0:48:15.800 --> 0:48:19.200 the Bloomberg head of podcast, Francesco Leavi at Francesco Today, 0:48:19.520 --> 0:48:22.359 and check out all of our podcasts at Bloomberg unto 0:48:22.400 --> 0:48:25.120 the handle at podcasts. Thanks for listening.