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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com

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Speaker 1: and of course on the Bloomberg terminal. Well, we tried

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Speaker 1: to do in Bloomberg Surveillance. Through all of this in economics, finance,

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Speaker 1: and investment in these unsettling times is peaked speak to

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Speaker 1: people who are authoritative on military thinking of the generals,

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Speaker 1: the admirals we've spoken to, and now on the nuclear

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Speaker 1: debate and of course all of that having to to

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Speaker 1: fears of Chernobyl and the other nuclear plants across Ukraine.

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Speaker 1: Ernest Monnez is our gentleman. He is the former US

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Speaker 1: Energy Secretary, but hugely associated with his decades of work

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Speaker 1: at the Massachusetts Institute of Technology. We're thrilled the Dr

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Speaker 1: Monis could join us this morning. I want to cut

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Speaker 1: to the chase. How far out of line is Mr

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Speaker 1: putin with the Geneva comic conventions going back to the

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Speaker 1: nineteenth century Prisoner of Wars and all that, but with

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Speaker 1: the Geneva and Hague conventions that dealt directly with weaponry.

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Speaker 1: How out of line is Mr Putin? Well, Putin's statements

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Speaker 1: about threatening the use of nuclear weapons are in fact

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Speaker 1: way out of line, as you say, Tom, Uh and uh,

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Speaker 1: actually quite quite reckless. Uh. It is interesting that, uh,

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Speaker 1: some of the Kremlin spokesman have been trying to dial

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Speaker 1: that back to what is the stated Russian policy. But

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Speaker 1: clearly there's a lot of ambiguity, a lot of uncertainty

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Speaker 1: as to what the Russian military would like to do.

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Speaker 1: Uh if they are in fact bogged down in Ukraine,

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Speaker 1: as they clearly are in various parts of the country.

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Speaker 1: So uh, it's a it's a real setback in terms

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Speaker 1: of this uh nuclear saber rattling. Uh. And let's just

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Speaker 1: hope that they are not planning to use a a

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Speaker 1: tactical nuclear weapon in Ukraine. Take us away from our

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Speaker 1: amateur Hollywood stereotypes of the guy with a little black

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Speaker 1: bag walking near President Biden and we all look at

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Speaker 1: it and know he's in charge of our nuclear capabilities.

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Speaker 1: Does Mr Putin have a guy walking around behind him

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Speaker 1: with a little black bag with a red button on it. Well,

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Speaker 1: that's that's called the football right. Uh. Yeah. The fact

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Speaker 1: is that UH putin UH, just like the U. S

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Speaker 1: President has the sole authority UH to to launch nuclear weapons. UH.

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Speaker 1: In the past, when our presidents in the United States

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Speaker 1: have had some um emotional distress, UH, there have been

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Speaker 1: attempts by others in the administration to UH dampen that authority.

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Speaker 1: But the reality is, UH, we have sol authority, and we,

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Speaker 1: by the way, feel very strongly that this soul authority

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Speaker 1: should be really curtailed except in the most urgent situation

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Speaker 1: where you have no time for for consultation. Ernest. Given

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Speaker 1: the situation that we have and the imminent threat that

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Speaker 1: a lot of people feel from Russia, how important is

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Speaker 1: it for the world's remove Russia really from the oil equation?

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Speaker 1: In other words, what do you think the US ought

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Speaker 1: to be doing to allow Germany to become independent from

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Speaker 1: Russian gas? Well, oil and gas are a little bit different, Lisa.

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Speaker 1: In terms of oil, the Russians are clearly having trouble

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Speaker 1: now getting buyers um. Uh. Even so, even though we

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Speaker 1: are not sanctioning, there is a kind of a customer

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Speaker 1: sanction going on, and that is affecting the ability of

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Speaker 1: Russia to get oil onto the market. Uh. They are

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Speaker 1: taking a big, big discount thirty dollars a barrel, for example,

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Speaker 1: on on their oil. But to be honest, I think

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Speaker 1: in the longer run, UH. And I don't mean years,

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Speaker 1: I mean a month or so. I think the oil

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Speaker 1: markets will basically recover in terms of supply side. Again

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Speaker 1: in Russia will take a big discount. Now, gas is

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Speaker 1: very different. Um. With gas you don't have the same

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Speaker 1: kind of global market. UH. With cargoes easy to move

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Speaker 1: around to different places. Uh. You have in this case

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Speaker 1: of Europe obviously a lot of pipeline gas which goes

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Speaker 1: from A to B and that's it. Uh. And now,

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Speaker 1: of course, with the the unrest, and even before the unrest, UH,

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Speaker 1: the the that is the invasion of Ukraine by by Russia.

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Speaker 1: Gas prices in Europe and in Asia we're going awfully high.

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Speaker 1: To give you a scale. In the United States, we're

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Speaker 1: still talking about say four dollars five dollars, which is

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Speaker 1: high for US. But in Europe they hit fifty sixty

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Speaker 1: dollars per million B to you extraordinary. I spoke with

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Speaker 1: a friend in the UK recently who said his gas

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Speaker 1: bill for heating has gone up by a factor of four,

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Speaker 1: and it's been a big concern I know for policymakers

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Speaker 1: across the continent. I want to go back to what

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Speaker 1: you were saying, where you think that the demand and

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Speaker 1: the supply frankly will come back online when it comes

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Speaker 1: to crude not gas. Do you think supply will recover

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Speaker 1: within about a month? What goes into that? Is this

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Speaker 1: the idea that sanctions will be lifted. Is it that

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Speaker 1: the US can increase production, Is it reliance on OPEC

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Speaker 1: plus Well, I think it's a little bit of all

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Speaker 1: of that. But but a major part in my calculation

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Speaker 1: is that I think with the very very large discounts Frankly,

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Speaker 1: Russia will begin to find customers taking that that oil

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Speaker 1: kind of will increase. It's it's imports. India is very

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Speaker 1: interested in in a big discount, etcetera. In addition, I

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Speaker 1: think we are making some headway, uh in terms of

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Speaker 1: re establishing our relationship with the Saudis and the m rates.

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Speaker 1: They may push OPEC to slightly at least somewhat more

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Speaker 1: increase the pace. And of course, in the United States,

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Speaker 1: I think that the president meeting with oil and gas

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Speaker 1: company heads and with the heads of major financial institutions

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Speaker 1: is very important because you know, the financial institutions have

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Speaker 1: been pressuring the oil and gas producers to focus more

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Speaker 1: on returning cash to their investors rather than expanding supply. Well,

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Speaker 1: right now we have a supply emergency of in a

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Speaker 1: certain sense, and I think it's time to uh to

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Speaker 1: do a little jawboning, if you like, and to uh

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Speaker 1: and have the financial and oil and gas executives come

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Speaker 1: together uh and recognize we do need some increase in

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Speaker 1: in in supply. Ernest. Do you think the Jennifer Granholm

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Speaker 1: is doing a good job as your replacement for many

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Speaker 1: years ago. Yeah, Well, she's I think emphasized quite correctly

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Speaker 1: UH and very strongly that we now need to start

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Speaker 1: looking together at the climate UH and the energy security imperatives.

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Speaker 1: And I think expanding that conversation out of the silos

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Speaker 1: where someone to talk about climate, some about security, some

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Speaker 1: about geopolitics, some about infrastructure. We need to have some

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Speaker 1: about of course environmental justice, social equity very important when

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Speaker 1: energy prices are going up, UH. And what we need

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Speaker 1: is a coherent discussion across all of those areas UH.

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Speaker 1: And they are in many ways inergistic when you go

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Speaker 1: to low carbon UH electricity supply for example. That helps

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Speaker 1: energy security. On the other hand, it's a bumpy road,

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Speaker 1: and you know, we're gonna have to have some trade

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Speaker 1: offs as we optimize all of our objectives. Her money,

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Speaker 1: I want to go back to our stereotypes. You mentioned silos,

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Speaker 1: and that reminds me of and doctor Strange love. We

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Speaker 1: all have frameworks of nuclear power. Maybe it's the tragedy

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Speaker 1: of Japan, maybe it's something else. If Mr Putin has

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Speaker 1: narrow short term smaller nuclear weapons, what do they actually

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Speaker 1: do well? First of all, um, uh, the so called

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Speaker 1: tactical nuclear weapons, we should not think of them as

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Speaker 1: really small. We might be talking say five kilotons of

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Speaker 1: explosive yield as a metric or a standard. Uh. Hiroshima

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Speaker 1: was fifteen, but Oklahoma City a chemical explosion was two tons,

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Speaker 1: So we're talking five kilotons. If that would dropped in

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Speaker 1: a city, UH, it would do enormous damage and kill

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Speaker 1: a lot of people. UH. So the question is would

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Speaker 1: the Russians follow a doctrine which is debated about whether

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Speaker 1: a small ish nuclear weapon dropped in a place that

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Speaker 1: did not do too much damage relative to say a city, UH,

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Speaker 1: would that lead to de escalation of a conflict or escalation.

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Speaker 1: We think that the circumstances are would would determine that

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Speaker 1: in ways that are very difficult to calculate. So our

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Speaker 1: our concern is that if this were to happen, UM,

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Speaker 1: the situation could be got out of control through miscalculation,

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Speaker 1: through blunder and misunderstanding bad data, UH, very very quickly,

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Speaker 1: leading to a much larger nuclear conflagration obviously, very very

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Speaker 1: bad for everybody, very bad for for for and stibilization clearly.

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Speaker 1: So it's very important in our view that UH that

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Speaker 1: nuclear weapons continue to be unused and to be focused

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Speaker 1: fundamentally on on the deterrence value UH in terms of

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Speaker 1: not being the victim of a nuclear attack. And it's

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Speaker 1: thoughtful stuff, deeply thoughtful stuff this morning, Thank you. And

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Speaker 1: it's Monsta, the former US Energy secretary. He's been dead

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Speaker 1: on about rising inflation and our need to adapt and

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Speaker 1: adjust and be a new short essay which says simply,

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Speaker 1: let's go. The only way is to slow things down

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Speaker 1: with perspective on this. Nora Abani Robini Macro associates way

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Speaker 1: too long, Uh. Nora on the course the boombos dot

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Speaker 1: Com co CEO associated for years with giving us wisdom

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Speaker 1: norill do you buy the idea that the only action

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Speaker 1: that will bring down in inflation is to dampen economic

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Speaker 1: growth and increase unemployment. Yeah, I have that same view.

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Speaker 1: I mean, inflation right now is at the level we're

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Speaker 1: not seen in decades break evens as suggested, the inflation

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Speaker 1: expectation are also rising. There at the beginning of a

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Speaker 1: race wide sparrel and and the other thing that happens

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Speaker 1: is that, on top of everything else, a tighter monetary

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Speaker 1: policy would slow down economic growth. But now we're facing

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Speaker 1: with a negative supply shock is coming from the Rasian

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Speaker 1: invasion of Ukraine that increases commodity prices, also slows down

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Speaker 1: road through global supply chain, so that tradeoff becomes even

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Speaker 1: worse before you put monetary policy into the picture because

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Speaker 1: it staclationary shock. It's a negative supply shop implies lower

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Speaker 1: growth and higher inflation, everything else equal. And then then

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Speaker 1: if you're doing them, if you don't in terms of

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Speaker 1: monetary policy to care about inflation and anchor inflation expectation,

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Speaker 1: have to type the sooner and or. But that implies

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Speaker 1: that the growth slow down, if maybe even a growth recession,

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Speaker 1: it is more severe and things that you care about growth,

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Speaker 1: and then you normalize too slowly, you're the risk of

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Speaker 1: the anchory inflation expectations, so that policy tradeoff becomes even

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Speaker 1: more severe. You wrote an article recently that I thought

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Speaker 1: was really insightful. Basically, it's the new stagflation policy proof.

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Speaker 1: Where does policy fit in to the next year two

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Speaker 1: years when a lot of people say recession is nearly

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Speaker 1: inevitable as we try to come out of this period. Well, again,

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Speaker 1: you have wide range of sets of policies. Your monetary policy,

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Speaker 1: r fiscal policy. You have sanctioned policy, you have regulatory policy.

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Speaker 1: You could introduce price wage controls or indexation of wages

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Speaker 1: to prices like we did in the seventies. The trouble

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Speaker 1: is that you have a bunch of policy tools, but

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Speaker 1: you have also a bunch of very contradictory goals. Your

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Speaker 1: goals are to have price stability and push down inflation

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Speaker 1: is mouth significantly higher. But you also have a mandate

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Speaker 1: about maximum employment that goes against right now, given an

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Speaker 1: enable to suppy shock against that target, you want to

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Speaker 1: keep interest rates low, long term rates. That's actually a

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Speaker 1: formal mandate of the Fed, and of course higher rates

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Speaker 1: that are tighten financial condition, and then you want sanctions

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Speaker 1: to punish Russia and that are other people from doing

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Speaker 1: mistaken things. So all these things imply that reaching an

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Speaker 1: optimal policy equilitiment is very hard because suppose that you

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Speaker 1: want to have more sanctions and you want to have

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Speaker 1: you know, more physical stimulus, sanctions to punish Russia and

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Speaker 1: stimulus to try to support the economic activity. Both sanctions

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Speaker 1: and the physical stimulus increase demand and increasing inflationary pressure

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Speaker 1: at the time where monetary policy is trying to instead

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Speaker 1: achieve lower inflation. So there's almost a contradiction between the

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Speaker 1: various policies. So what do you see neural as a

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Speaker 1: like the outcome of this as we do get this

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Speaker 1: argument of whether soft landing is possible, Um, I think

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Speaker 1: it's gonna be very very hard for the FED to

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Speaker 1: achieve a soft landing. Historically you have to tighten more

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Speaker 1: than otherwise when inflation is this high. I think that

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Speaker 1: the dot plot of the FED is not released. Giving

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Speaker 1: the FED funds that they run one point at the

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Speaker 1: end of the year where core PC is going to

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Speaker 1: be more like three too, means that monetary past is

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Speaker 1: not gonna be tight enough. And then you have two choices.

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Speaker 1: Either you're really tight and monetary policy because you're still

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Speaker 1: behind the curved bullet, right, you need to policy rate

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Speaker 1: the three percent by the end of this year, which

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Speaker 1: case you cause a recession or you wimp out because

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Speaker 1: you're worried about growth and you're worth about the debt

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Speaker 1: trap private and public. That is so I then when

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Speaker 1: you raise rates, then you destroy the debt markets. And

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Speaker 1: whether you wimpot because of worries about growth or about

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Speaker 1: debt markets that are connected and therefore you end up

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Speaker 1: not doing as much and the answering inflation expectations. So

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Speaker 1: you have to choose within session or the on putting

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Speaker 1: infreshion expectation. You cannot have a snor real quickly. Here.

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Speaker 1: I love to end this with you because it's always

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Speaker 1: so constructive. You and I were in a bar once

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Speaker 1: at Davos and we were talking about four standard deviation

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Speaker 1: moves as being a shock. German inflation is seven plus

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Speaker 1: standard deviations. Italy reporting tomorrow looks like it's six plus

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Speaker 1: standard deviation move over the long term disinflationary trend of Italy.

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Speaker 1: What does the society do with that? Well, as you

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Speaker 1: point out, you're already very standard deviation away semi black

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Speaker 1: swan events on things like inflation, not just in US

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Speaker 1: but also in Europe. Of course, we've had also these

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Speaker 1: major geopolitical shop is the war, and it's just the

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Speaker 1: symptom of a much broader geopolitical depression. I think the

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Speaker 1: next few years, China and its effective allies Russia, Iran,

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Speaker 1: North Korea going to challenge the US and the West.

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Speaker 1: So I think that they war in Ukraine is only

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Speaker 1: the first salvo of this Cold war two point oh.

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Speaker 1: I mean, the question is not whether it's going to

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Speaker 1: be in Cold War or whether eventually war within the

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Speaker 1: West and China and so on. So we had in

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Speaker 1: a very difficult situation where extreme things are happening, and

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Speaker 1: like you know, on the eve of World War One,

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Speaker 1: financial market about market did not pricing at all that

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Speaker 1: is covered of a major war, and then stuff happened.

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Speaker 1: So not only we have major events that are radically different,

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Speaker 1: like a quantum leap, but we don't have the policy

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Speaker 1: nor I'll tell you what we're gonna do here. We're

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Speaker 1: gonna continue on radio. We're gonna bring this conversation over

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Speaker 1: to myself and past suite, and Dr Rubini will do

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Speaker 1: that here and a bit. Let's get to at Megan

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Speaker 1: Green joint his Global Chief Economist COAL Institute would work

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Speaker 1: at Harvard Kennedy School as well. Megan, I want to

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Speaker 1: go to your wheelhouse, which is a transatlantic dynamic. You

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Speaker 1: and I studied theories and textbooks. Those theories don't work anymore,

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Speaker 1: given uncertainty and the algebra Boll this the epsilon on

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Speaker 1: the right hand side of the equation. Given all this uncertainty,

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Speaker 1: what's a new central bank transatlantic theory? Yeah, I mean

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Speaker 1: we're looking at massive policy monetary policy divergence between the

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Speaker 1: Fed and the ECB UM, and that's gonna be difficult

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Speaker 1: to sustain. I mean, the EU inflation print is is

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Speaker 1: pretty shocking, and headline inflation you're and you're just under

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Speaker 1: ten percent. Of course, you've got to strip out a

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Speaker 1: bunch of commodity and energy costs to see what's underlying.

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Speaker 1: But the e c B is committed to winding down.

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Speaker 1: It's it's on purchasing program first before it starts higging

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Speaker 1: rates um. So it won't manage to get rates up

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Speaker 1: until the end of this year at best. In the US. Meanwhile,

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Speaker 1: economists are kind of trying to out hawk one another

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Speaker 1: with a number of rate hikes they can call for

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Speaker 1: for the US, And so the US is going much

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Speaker 1: more aggressively than the e c B is. Um. We

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Speaker 1: know in general, rold that that monetary policy divergence is

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Speaker 1: impossible to maintain over a period of time. So if

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Speaker 1: the feed is hiking aggressively, uh, you know, either it's

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Speaker 1: going to have to back off or other major central

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Speaker 1: banks are going to have to catch up. And insofar

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Speaker 1: as inflication way higher than the ECB wants it to be,

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Speaker 1: I think the CB is going to become much more

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Speaker 1: hawkish now as well. Let's go on Mundel on you

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Speaker 1: this morning. You know you studied your Robert Mundel the

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Speaker 1: degree of Columbia. I mean, currency is the release valve here?

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Speaker 1: Does that hold given these unique onset of uncertainties. I

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Speaker 1: think it does hold. I mean, if the FETE is

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Speaker 1: hiking much more aggressively than other major central banks, I

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Speaker 1: think the dollar will appreciate um and that could cause

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Speaker 1: diservances across emerging markets, of course, because all of these

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Speaker 1: dollar bonds are going to be more expensive to service trade,

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Speaker 1: which has been invoiced in US dollars will become much

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Speaker 1: more expensive, so that's bad for imp orders. Um there

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Speaker 1: is talk off the back of the conflict between Russian

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Speaker 1: and Ukraine of the dollar system shifting. I don't buy

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Speaker 1: it for starters, and even if it were to you,

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Speaker 1: it's going to take years and years. So I think

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Speaker 1: we can expect the dollar to appreciate and that could

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Speaker 1: be problematic for other parts of the world, particularly emerging market. So, Megan,

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Speaker 1: you have to weigh in on the big question of

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Speaker 1: the day, the does the yield curve matter or does

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Speaker 1: the yield curve not matter? We have a lot of

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Speaker 1: people coming out, including the FED, saying you're looking at

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Speaker 1: the wrong thing, and other people saying the time that

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Speaker 1: you say this time is different is the time you

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Speaker 1: end up with egg on your face. Where do you stand.

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Speaker 1: I don't really think it matters that much for starters.

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Speaker 1: The two tends, you know, inverted for twenty three seconds,

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Speaker 1: which is not long enough to really provide signal. Now,

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Speaker 1: the yield curve inversion is way more effective than any economists,

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Speaker 1: including me, in terms of calling recessions. So there is that,

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Speaker 1: but the sample size isn't huge. I think we need

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Speaker 1: to look at the shorter end of the yield curve

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Speaker 1: um in order to get more of a signal. And

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Speaker 1: don't forget the U. S. Government has been borrowing a

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Speaker 1: ton to pay for things like the pandemic response, and

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Speaker 1: so that will push the short end up without making

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Speaker 1: any commentary on expectations about growth. And the FED is

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Speaker 1: has wound up its bond buying program, and so you

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Speaker 1: know that that could push the short the long end down.

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Speaker 1: And so you know, I think these are bigger factors

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Speaker 1: than the idea that investors expect a recession to come.

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Speaker 1: That being said, it's going to be really difficult for

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Speaker 1: the FED to high rates aggressively, which the FED itself

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Speaker 1: expects to then have no perceptible impact on unemployment. And

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Speaker 1: we know from the some rule that if unemployment goes

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Speaker 1: a weighted average of unemployment goes up, UH, then it's

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Speaker 1: it's a much better predictor of recessions and the yield

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Speaker 1: curve is and I think we'll see that happen. So

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Speaker 1: I'm not so worried about the yield curve, but I

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Speaker 1: do think there are other signals um that could be

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Speaker 1: coming down the pike. Because the FED hikes aggressively. That

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Speaker 1: suggests we will be pitched and making it. Are you

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Speaker 1: already seeing signs that the consumer is losing appetite to

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Speaker 1: absorb price increases to a place where you start to

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Speaker 1: wonder about how much momentum is there in frankly household

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Speaker 1: balance sheets. Absolutely, you know, this income squeeze from higher

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Speaker 1: energy costs is real, on top of you know, elevated

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Speaker 1: inflation already, I think everybody is feeling it in the US,

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Speaker 1: um it's perceptible, and so that is weighing on spending.

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Speaker 1: On top of that. We know that stimulus payments um

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Speaker 1: provided a cushion for many households, but low income households

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Speaker 1: in particular have probably just about burned through that entire

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Speaker 1: cushion by the end of this month, and so they're

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Speaker 1: facing this double whammy of no more cushion and much

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Speaker 1: higher prices. And of course they have the highest marginal

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Speaker 1: propensity to consume, so they're spending the biggest proportion of

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Speaker 1: their income anyhow um and so that will lay on

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Speaker 1: consumption too, And of course consumption is the biggest driver

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Speaker 1: growth in the US, like every other developed economy. So

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Speaker 1: we were always expecting a slowdown this year energy price

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Speaker 1: because we're already expected to be elevated even before the

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Speaker 1: rush of Ukraine crisis. This is it's just worse than

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Speaker 1: we had expected, but a slowdown was inevitable. The question

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Speaker 1: is does the Fed hikes so aggressively now that a

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Speaker 1: recession hits, rather than just to slow down when we

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Speaker 1: were growing we above potential coming into this year, there's

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Speaker 1: a lot of room to slow down. What you said

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Speaker 1: moments ago, though, I think the answer to that question

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Speaker 1: is buried in it. You mentioned the sam rule, So

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Speaker 1: let's talk about that. Unemployments already sub for We've got

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Speaker 1: people thinking it can go lower on Friday, given the

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Speaker 1: starting point of this tight news cycle, and given what

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Speaker 1: unemployment is right now. Bill Duntley, the former New York

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Speaker 1: Fed president, came out earlier this week. It essentially said

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Speaker 1: a hard landing is all but inevitable. Would you go

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Speaker 1: with that? Yeah? Like I said, I think the Fed's

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Speaker 1: forecast that it will get that many rate hikes off

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Speaker 1: and there won't be much, and it will affect infletion,

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Speaker 1: but it won't affect unemployment much and it won't affect

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Speaker 1: growth much just doesn't add up. I mean, I do

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Speaker 1: think that unemployment will probably rise as the FED hikes,

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Speaker 1: and so I do think that's a brill indicator in

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Speaker 1: a better recession than coming. Mecan Green, thank you of

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Speaker 1: the Crawl Institute, Thank you very much. Eleven day winning

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Speaker 1: streak on Apple, what a run, the longest winning streak

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Speaker 1: since two thousand and three. Sacha joins us now chief

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Speaker 1: Strategists of Principal Global Investors SEEMA. Can then we just

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Speaker 1: start there, what do you make of this rallying big tech,

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Speaker 1: uber tech in the face of what's happening in the

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Speaker 1: bond market. Well, I look, I think a little bit

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Speaker 1: is frond of that short covering, but I think that

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Speaker 1: there is still that fundamental story. So let's say you

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Speaker 1: were are worried about the growth outlook, and you think

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Speaker 1: that potentially, although there is some uppard movement in bonds,

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Speaker 1: probably still a little bit further to go, it's probably

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Speaker 1: near its top. Then that structural story of sort of

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Speaker 1: a strong balance sheet supposed to cash flow does play

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Speaker 1: pretty well for megacat Tech. So from our perspective, you know,

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Speaker 1: although we've done down our risk in yours ecuties, our

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Speaker 1: preference is still on that megac text space. Because of

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Speaker 1: that fundamental story Seema John Maggie the arch textbook of

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Speaker 1: the nineteen forties, where we came up with the language

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Speaker 1: of trend, intermediate trend, long term trend, whatever trend you

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Speaker 1: want to use. Are we in a bear market and

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Speaker 1: this is an intermediate bull trend within a bear market?

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Speaker 1: I think it's it's quite the bare market. But I

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Speaker 1: would say that the risk, you know, what is the

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Speaker 1: upside for equities from here? I don't think it's that much.

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Speaker 1: Maybe for the SPI can eke out not the five

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Speaker 1: tempercent games, but the downside risks are so great at

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Speaker 1: the moment. Not only is of course the geo political

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Speaker 1: crisis going on, which can shift at any moment. I

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Speaker 1: think it's very difficult to predict that how that's going

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Speaker 1: to go. But then you have the FED hikes which

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Speaker 1: are moving very very sharp before and you have very

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Speaker 1: high inflation, which means that consumers are going to start

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Speaker 1: feeling a bit of a struggle, if not already. Um

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Speaker 1: So for us, it's the time to daral down risk,

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Speaker 1: even if it's not necessarily a bear market. The risks

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Speaker 1: are just too great at the moment, So just to

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Speaker 1: go a little bit existential What does it mean to

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Speaker 1: be risky at a time when cash is a depreciating asset?

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Speaker 1: And this is why I was talking about Apple or

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Speaker 1: some of these have in stocks being stacked, equity considered risk.

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Speaker 1: How much do you buy into that kind of argument?

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Speaker 1: I think there's a lot in that. You know, at

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Speaker 1: the moment you look at cash and well, you know

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Speaker 1: inflation is going to eat most of that away very quickly.

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Speaker 1: So we're still looking for those inflation hedges within that

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Speaker 1: risk matrix UM. And there are parts and segments such

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Speaker 1: as maybacaptech which do look relatively safe. Of course, there

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Speaker 1: are a lot of challenges are if you continue to

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Speaker 1: see moving one wheels up higher. But I think from

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00:25:34,600 --> 00:25:36,919
Speaker 1: our perspective that inflation hedge where you're going to go

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00:25:37,040 --> 00:25:40,159
Speaker 1: it's still the commodity space UM. But you do have

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00:25:40,280 --> 00:25:42,600
Speaker 1: to thinking up in that way of that relative trade

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00:25:43,119 --> 00:25:46,280
Speaker 1: UM and where else is it beyond cash? Because inflation

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00:25:46,320 --> 00:25:50,320
Speaker 1: doesn't look good for that is the date in my diary,

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00:25:50,359 --> 00:25:53,120
Speaker 1: Seema JP Morgan earnings. The attention is going to switch

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00:25:53,160 --> 00:25:56,040
Speaker 1: pretty quickly. Is the outlook getting better for earnings or

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00:25:56,080 --> 00:25:59,560
Speaker 1: is it getting worse? I think for the time being,

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00:25:59,560 --> 00:26:01,560
Speaker 1: I think you want um, I think we have to

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00:26:01,600 --> 00:26:05,000
Speaker 1: avoid getting too negative back you one. The economic data

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00:26:05,080 --> 00:26:08,000
Speaker 1: numbers is still pretty robust. I do think that as

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Speaker 1: you get into the second half of the year that

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00:26:10,200 --> 00:26:13,200
Speaker 1: you start to see some of that slowdown coming through. UM.

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00:26:13,280 --> 00:26:15,920
Speaker 1: So you know, we're gonna be looking out cause for margins.

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00:26:15,920 --> 00:26:18,359
Speaker 1: You know, where are the pressure points coming through. But

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00:26:18,520 --> 00:26:20,240
Speaker 1: I do think that Q one could still be a

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00:26:20,280 --> 00:26:23,320
Speaker 1: relatively robust number. It's when you get into the second

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00:26:23,359 --> 00:26:25,560
Speaker 1: half that some of those concerns start to come to

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Speaker 1: the surface. Sema. Thank you San of Principal Club and investors.

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00:26:29,240 --> 00:26:31,760
Speaker 1: Looking ahead to wear next season. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Thanks for listening. Join us live weekdays from

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Speaker 1: Tom Keene and this is Bloomer