1 00:00:00,080 --> 00:00:03,360 Speaker 1: Let's get to Richard Harris of Ports Shelter Investment Management. 2 00:00:03,440 --> 00:00:05,400 Speaker 1: Richard is the CEO, and he's with us for the 3 00:00:05,440 --> 00:00:09,039 Speaker 1: half hour, always a pleasure, and today he joins from Washington, 4 00:00:09,119 --> 00:00:12,840 Speaker 1: d C. Richard, So much of the conversation has been 5 00:00:12,880 --> 00:00:16,120 Speaker 1: around inflation and the aggression that central banks need to 6 00:00:16,239 --> 00:00:19,520 Speaker 1: kind of put in place to get inflation under control. 7 00:00:19,880 --> 00:00:22,760 Speaker 1: But I'm wondering whether we're at the point where we're 8 00:00:22,760 --> 00:00:24,919 Speaker 1: seeing kind of peak inflation. Is it too soon to 9 00:00:24,960 --> 00:00:28,600 Speaker 1: make that call? Yes, way too soon. I think. You know, 10 00:00:28,640 --> 00:00:32,159 Speaker 1: inflation is really long burn. And it was instant hearing 11 00:00:32,159 --> 00:00:34,360 Speaker 1: Governor Well a moment ago saying, oh, we've just seen 12 00:00:34,400 --> 00:00:37,120 Speaker 1: the numbers. You know. It's it's not been hard to 13 00:00:37,200 --> 00:00:40,120 Speaker 1: predict that inflation is going to move on. What with 14 00:00:40,320 --> 00:00:44,839 Speaker 1: que what with the kind of coronavirus pressures, all of 15 00:00:44,880 --> 00:00:49,800 Speaker 1: these things really have highlighted what's been happening. We've gone 16 00:00:49,800 --> 00:00:51,680 Speaker 1: through the stage where we've had a lot of supply 17 00:00:51,800 --> 00:00:54,840 Speaker 1: side inflation. I suspect that we're now going to start 18 00:00:54,920 --> 00:00:59,160 Speaker 1: going through the demand side of of it um And 19 00:00:59,200 --> 00:01:01,600 Speaker 1: in addition to the out with the labor force looking 20 00:01:01,720 --> 00:01:04,520 Speaker 1: to want more income, I mean the instant thing is, 21 00:01:04,600 --> 00:01:06,920 Speaker 1: you know, I'm normally in Hong Kong, sitting in Washington, 22 00:01:07,000 --> 00:01:12,240 Speaker 1: d C. Feels very expensive. And it's not just the currency. 23 00:01:12,880 --> 00:01:14,880 Speaker 1: It's also the fact that prices have gone up a lot. 24 00:01:15,200 --> 00:01:17,680 Speaker 1: I think this is this is a snowball that's going 25 00:01:17,720 --> 00:01:23,000 Speaker 1: to keep on rolling compared to Hong Kong, Richard expensive Washington. Anyway, 26 00:01:23,080 --> 00:01:25,640 Speaker 1: we'll come to that later. How can we possibly have 27 00:01:25,720 --> 00:01:27,760 Speaker 1: a recession when we've got a labor market which is 28 00:01:27,800 --> 00:01:32,319 Speaker 1: so tight, Well, it is tight at the moment, but 29 00:01:32,520 --> 00:01:35,040 Speaker 1: I wonder if you know, along with the inflation, we're 30 00:01:35,040 --> 00:01:38,880 Speaker 1: also getting this recession narrative coming in UM. And I'm 31 00:01:38,880 --> 00:01:41,520 Speaker 1: a little bit concerned about the fact that there are 32 00:01:41,600 --> 00:01:45,120 Speaker 1: hiring signs everywhere. But the issue is we've had this, 33 00:01:45,240 --> 00:01:47,640 Speaker 1: this this problem with people not really going back to work, 34 00:01:47,680 --> 00:01:49,720 Speaker 1: not really wanting to go back to their old jobs. 35 00:01:50,000 --> 00:01:52,200 Speaker 1: But I wonder if as we get recession, we're also 36 00:01:52,200 --> 00:01:55,559 Speaker 1: going to get an increase in unemployment UM and that's 37 00:01:55,680 --> 00:01:59,320 Speaker 1: also going to hit the labor market quite substantially. But 38 00:01:59,400 --> 00:02:01,600 Speaker 1: you know, the thing is with as you know from 39 00:02:01,640 --> 00:02:04,640 Speaker 1: the UK back in the bad old days of the 40 00:02:04,760 --> 00:02:08,000 Speaker 1: seventies and eighties, it's not necessarily the mass of the 41 00:02:08,040 --> 00:02:14,120 Speaker 1: population that demands inflationery rises. It's uh, it's organized labor um. 42 00:02:14,200 --> 00:02:16,919 Speaker 1: It's professionals like me, the kind of people that ask 43 00:02:16,960 --> 00:02:19,119 Speaker 1: for it, and we will continue to ask for pay 44 00:02:19,240 --> 00:02:23,160 Speaker 1: rises because prices are continued to go up. Unfortunately, as 45 00:02:23,200 --> 00:02:25,600 Speaker 1: recession comes on, we're going to get parts of society 46 00:02:25,680 --> 00:02:28,359 Speaker 1: that's as you say, that's not going to be able 47 00:02:28,400 --> 00:02:31,359 Speaker 1: to demand pay rises. But those parts of society that 48 00:02:31,440 --> 00:02:34,040 Speaker 1: can will do that, and they'll do it as as 49 00:02:34,120 --> 00:02:36,360 Speaker 1: much as they possibly can. So you alluded a moment 50 00:02:36,360 --> 00:02:39,960 Speaker 1: ago to a stronger dollar and how that's impacting your 51 00:02:40,040 --> 00:02:42,639 Speaker 1: visit to d C. Give me your sense of how 52 00:02:42,680 --> 00:02:46,800 Speaker 1: sustainable dollar strength is. Well, you know, we're in a 53 00:02:46,800 --> 00:02:50,480 Speaker 1: trend of the moment obviously with US interest rates looking 54 00:02:50,480 --> 00:02:52,880 Speaker 1: at going up. I mean, can you imagine if we've 55 00:02:52,919 --> 00:02:56,600 Speaker 1: been talking five months ago about seventy five basis points 56 00:02:56,600 --> 00:02:59,520 Speaker 1: being good news? Um, you know, So I think I 57 00:02:59,560 --> 00:03:01,960 Speaker 1: think that ball is going to continue. Where in the 58 00:03:01,960 --> 00:03:04,720 Speaker 1: middle of a trend where the dollar is king, you know, 59 00:03:04,760 --> 00:03:07,680 Speaker 1: we're seeing euro must a party. We've seen this huge 60 00:03:07,760 --> 00:03:10,600 Speaker 1: fall in the Japanese yend um, and I think that 61 00:03:10,639 --> 00:03:13,640 Speaker 1: momentum is going to continue for quite a while until 62 00:03:13,800 --> 00:03:18,520 Speaker 1: the balances change. Richard. Now, we've got loads of conflicting 63 00:03:18,919 --> 00:03:23,520 Speaker 1: economic signals economic indicators in the the US, but I 64 00:03:23,560 --> 00:03:26,320 Speaker 1: just want to highlight one thing that we've seen happen 65 00:03:26,960 --> 00:03:31,440 Speaker 1: since March of We've seen M one money supply go 66 00:03:31,639 --> 00:03:35,520 Speaker 1: up from four around about what four trillion US dollars 67 00:03:35,680 --> 00:03:38,840 Speaker 1: to now twenty point six trillion dollars. That's a four 68 00:03:38,880 --> 00:03:44,480 Speaker 1: hundred and fifteen percent increase. Isn't that deeply concerning to you? Yes? 69 00:03:44,520 --> 00:03:47,440 Speaker 1: And I think it all fits into the inflation story. 70 00:03:47,520 --> 00:03:50,480 Speaker 1: You know, we we we've seen a lot of money 71 00:03:50,520 --> 00:03:53,200 Speaker 1: being created, not only over the last year or two, 72 00:03:53,280 --> 00:03:56,240 Speaker 1: but over the last decade um. And this takes a 73 00:03:56,240 --> 00:03:57,960 Speaker 1: little while to come through, you know, people take a 74 00:03:58,000 --> 00:04:01,640 Speaker 1: little while to spend it. Um. So now, sitting in 75 00:04:01,640 --> 00:04:04,760 Speaker 1: in Washington, d C. As a tourist, you can see 76 00:04:04,960 --> 00:04:09,480 Speaker 1: the economy looks pretty buoyant and it's bubbling along quite nicely. 77 00:04:09,560 --> 00:04:13,240 Speaker 1: And as he said earlier, people are looking for labor 78 00:04:13,520 --> 00:04:16,440 Speaker 1: all over the place. But you can't help thinking that 79 00:04:16,480 --> 00:04:20,640 Speaker 1: this sudden increase in prices is concerning. Interest rates are 80 00:04:20,680 --> 00:04:22,640 Speaker 1: going to have to go up. And also if you 81 00:04:22,720 --> 00:04:25,760 Speaker 1: do have inflation going up without any real control, we 82 00:04:25,800 --> 00:04:28,560 Speaker 1: are likely to slip into recession as a result. So 83 00:04:28,920 --> 00:04:30,560 Speaker 1: I think there are a lot of figures that may 84 00:04:30,560 --> 00:04:33,040 Speaker 1: be conflicting at the moment, but to my mind, they 85 00:04:33,080 --> 00:04:35,479 Speaker 1: will generally pointing towards the same thing, which is a 86 00:04:35,520 --> 00:04:39,520 Speaker 1: recession maybe twelve months time. Okay, So maybe that's the 87 00:04:39,600 --> 00:04:42,800 Speaker 1: situation that the US is in. Let's talk about China now, 88 00:04:42,839 --> 00:04:46,479 Speaker 1: because we're getting the major economic indicators of the month 89 00:04:46,520 --> 00:04:50,360 Speaker 1: of June at ten am local time. How what's your 90 00:04:50,360 --> 00:04:54,520 Speaker 1: sense of how well the Chinese economy is performing right now? Well, 91 00:04:54,560 --> 00:04:57,320 Speaker 1: obviously with the lockdown, and I mean it's difficult to imagine, 92 00:04:57,360 --> 00:05:00,200 Speaker 1: you know when you're overseas that the Chinese of had 93 00:05:00,360 --> 00:05:04,240 Speaker 1: extremely severe lockdowns over the last quarter. Um, you're talking 94 00:05:04,279 --> 00:05:06,000 Speaker 1: about people not really being able to go out of 95 00:05:06,000 --> 00:05:11,080 Speaker 1: their houses. That has to impact economic growth. Now in China, 96 00:05:11,160 --> 00:05:13,159 Speaker 1: of course, they have various ways of doing it. You know, 97 00:05:13,200 --> 00:05:15,960 Speaker 1: people live in the factory, that that kind of thing. Um. 98 00:05:16,080 --> 00:05:19,200 Speaker 1: And we've also seen exports do extremely well at this 99 00:05:19,240 --> 00:05:21,520 Speaker 1: time as the rest of the world is recovered and 100 00:05:21,520 --> 00:05:24,599 Speaker 1: there's been a lot of revenge spending. So the economy 101 00:05:24,839 --> 00:05:28,880 Speaker 1: probably is buoyed up quite a bit by these export figures, 102 00:05:28,880 --> 00:05:32,360 Speaker 1: but I think domestically it's going to be quite grim. 103 00:05:32,400 --> 00:05:35,200 Speaker 1: You know, this quarter. If you look at the same 104 00:05:35,279 --> 00:05:39,320 Speaker 1: quarter in the early part of in the US, in Europe, 105 00:05:39,320 --> 00:05:41,000 Speaker 1: in the UK, you were looking at something like a 106 00:05:41,040 --> 00:05:44,040 Speaker 1: fall of a third thirty three percent in g d 107 00:05:44,160 --> 00:05:46,960 Speaker 1: P now and that recovered very sharply and by almost 108 00:05:47,040 --> 00:05:48,600 Speaker 1: the same amount. But I think we have to look 109 00:05:48,640 --> 00:05:52,039 Speaker 1: at these figures as being going to be nasty, brutish, 110 00:05:52,440 --> 00:05:55,440 Speaker 1: but probably quite short because we will see a rebound 111 00:05:55,680 --> 00:05:58,960 Speaker 1: as China comes out of its COVID restrictions. Richard really 112 00:05:59,000 --> 00:06:03,839 Speaker 1: doing market wise, well, I've actually been trimming a little bit, 113 00:06:03,880 --> 00:06:06,400 Speaker 1: you know, I am looking at the recession story, but 114 00:06:06,760 --> 00:06:09,200 Speaker 1: I am cognizant that it's not going to happen all 115 00:06:09,240 --> 00:06:12,880 Speaker 1: at once. You know, we've seen some slightly bullish comments 116 00:06:12,880 --> 00:06:15,279 Speaker 1: actually out of the Bank chairman over the last twenty 117 00:06:15,279 --> 00:06:18,080 Speaker 1: four hours, so you know, these things don't go down 118 00:06:18,160 --> 00:06:20,720 Speaker 1: all in a straight line. But I have been lightening 119 00:06:20,720 --> 00:06:24,400 Speaker 1: my equity holdings. Um, I've got quite a lot in dollars. 120 00:06:25,160 --> 00:06:28,240 Speaker 1: I'm slightly concerned about commodities, of course, and and they've 121 00:06:28,279 --> 00:06:31,760 Speaker 1: come off too but I think equities are probably if 122 00:06:31,760 --> 00:06:34,680 Speaker 1: you have the right stocks, it is an active managers market, 123 00:06:35,240 --> 00:06:36,960 Speaker 1: they will be the right place to be. You know, 124 00:06:37,000 --> 00:06:40,040 Speaker 1: we'll see this j curve as they get hurt by inflation, 125 00:06:40,080 --> 00:06:44,039 Speaker 1: but also recovery as they increase prices in line with inflation. 126 00:06:44,560 --> 00:06:48,000 Speaker 1: So if you had to short an industry or let's 127 00:06:48,000 --> 00:06:51,560 Speaker 1: say an entire market right now, what would that look like. Well, 128 00:06:51,600 --> 00:06:53,360 Speaker 1: I think you probably want to short the whole world 129 00:06:53,400 --> 00:06:55,560 Speaker 1: at the moment, you know things are going to go down. 130 00:06:55,839 --> 00:06:58,120 Speaker 1: But we can't do that. We're investors, you know, We're 131 00:06:58,120 --> 00:07:01,160 Speaker 1: supposed to be invested in something. It um. So it's 132 00:07:01,160 --> 00:07:03,880 Speaker 1: okay for for traders and hedge funds that can play 133 00:07:03,920 --> 00:07:06,599 Speaker 1: around the margin, but for people who really need to 134 00:07:06,640 --> 00:07:09,440 Speaker 1: be invested, who really need to be long, you've got 135 00:07:09,440 --> 00:07:11,520 Speaker 1: to be there. You've just got to be very careful 136 00:07:11,520 --> 00:07:16,120 Speaker 1: about making sure you're in as robust assets as possible 137 00:07:16,760 --> 00:07:21,200 Speaker 1: in an inflationary and a recessionary environment. Richard, thank you 138 00:07:21,240 --> 00:07:23,880 Speaker 1: so much for joining us. Richard Harris the chief executive 139 00:07:23,880 --> 00:07:26,880 Speaker 1: at ports Shelter Investment Management, normally in Hong Kong, but 140 00:07:27,000 --> 00:07:30,160 Speaker 1: he is at the moment in Washington, DC. Getting his 141 00:07:30,200 --> 00:07:32,040 Speaker 1: take on the macro picture in the US in particular, 142 00:07:32,080 --> 00:07:34,800 Speaker 1: and a quick word on his investment philosophy as well.