WEBVTT - Surveillance: Currencies Increasingly Politicized, Stretch Says 0:00:00.080 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.400 Bloomberg dot Com, and of course on the Bloomberg. Let's 0:00:33.400 --> 0:00:35.960 get you back up to speed with that ECB rate decision. 0:00:36.000 --> 0:00:38.960 Shall we rates unchanged? But they've always was always this 0:00:39.080 --> 0:00:42.240 suspicion that maybe they tweaked forward guidance, and they have done. 0:00:42.400 --> 0:00:44.400 The forward guidange used to be the e C B 0:00:44.560 --> 0:00:46.960 c S rates as a present level for as long 0:00:47.240 --> 0:00:49.680 as needed, or at least through the end of the 0:00:49.720 --> 0:00:52.920 new guidance essentially is that rates at present or lower 0:00:53.000 --> 0:00:55.600 levels for as long as needed. So that's an extension 0:00:55.720 --> 0:00:59.400 and strengthening of forward guidance. So that story wants story 0:00:59.480 --> 0:01:03.320 two on rates. If they introduce a lower interest rates. 0:01:03.560 --> 0:01:06.440 They've ordered a review of options, including a tiered system 0:01:06.600 --> 0:01:08.840 for rates, so that would offset some of the paying 0:01:08.840 --> 0:01:11.680 for the financials. Good news sort of financials, good news 0:01:11.680 --> 0:01:13.720 for the bank. So you're a weaker down by a tenth. 0:01:14.000 --> 0:01:17.440 Banks up on the stocks, fifty euro stocks fifty up 0:01:17.440 --> 0:01:20.360 by a little more than two percent, So that's forward guidance, 0:01:20.440 --> 0:01:24.280 that's rates. Let's talk about asset purchases. ECB staff also 0:01:24.720 --> 0:01:29.440 examining options for potential new asset buying, so under consideration, 0:01:29.880 --> 0:01:32.919 a review of options on rates included in a tiered 0:01:32.959 --> 0:01:37.440 system for rates and options for potential new asset buying 0:01:37.560 --> 0:01:42.280 as well. So qui under consideration, tearing under consideration, and 0:01:42.360 --> 0:01:45.000 it looks like this could all come Lisa Bravits as 0:01:45.000 --> 0:01:47.520 soon as September. This is exactly what the market was 0:01:47.560 --> 0:01:50.000 expecting though, right, I mean, honestly, this is this is 0:01:50.040 --> 0:01:53.920 pretty much Uh. They figured the ECB would being trying 0:01:53.960 --> 0:01:57.400 to assemble some sort of package to really hit the 0:01:57.400 --> 0:02:00.160 Eurozone and try to ignite some growth. This how it 0:02:00.160 --> 0:02:02.560 confirms that. Yeah. I think it's really encouraging though to 0:02:02.560 --> 0:02:04.880 see the bank stocks up by two point nine percent 0:02:04.920 --> 0:02:07.440 in Europe. Less focused on the euro for me at least, 0:02:07.480 --> 0:02:10.160 just looking at the financials and the equities responding positively 0:02:10.720 --> 0:02:13.639 to this decision. Basically, the the idea, the implication here 0:02:13.720 --> 0:02:16.440 being that that the ECB understands the pain that would 0:02:16.440 --> 0:02:18.880 be inflicted on the banks if it didn't do some 0:02:18.960 --> 0:02:23.240 sort of alleviation of the steep discount rate given the 0:02:23.280 --> 0:02:25.840 fact that they would have to pay zero point five 0:02:26.000 --> 0:02:29.360 percent on their deposits held overnight if they did lower 0:02:29.440 --> 0:02:31.639 rates without tearing, the idea that they wouldn't have to 0:02:31.680 --> 0:02:34.320 pay all of that is giving some confidence to European 0:02:34.320 --> 0:02:36.440 banks at least. I would also say my other interpretation 0:02:36.480 --> 0:02:38.800 of this decision as well, I don't think they've held 0:02:38.840 --> 0:02:42.000 off until September because they get the staff forecast. I 0:02:42.040 --> 0:02:45.040 think they've hold off. They're holding off until September because 0:02:45.040 --> 0:02:47.080 they haven't really agreed on the parameters for a new 0:02:47.080 --> 0:02:50.080 asset purchase program. Is pretty clear that they're still examining 0:02:50.080 --> 0:02:52.640 options for that. That headline has come across the Bloomberg 0:02:52.919 --> 0:02:55.799 also pretty clear over the last few months since President 0:02:55.880 --> 0:02:59.480 drag first head up the idea of tearing if rates 0:02:59.520 --> 0:03:02.320 went eve and lower, it looks like they're still reviewing 0:03:02.360 --> 0:03:04.360 that too. So I think the reasons to hold off 0:03:04.440 --> 0:03:08.239 until September are not about forecast. It's about actually coming 0:03:08.280 --> 0:03:10.560 to an agreement about the parameters for new bond buying 0:03:10.880 --> 0:03:13.400 and whether you introduced hearing and coming out with a 0:03:13.520 --> 0:03:16.880 full guns of blazing package to say here's what we 0:03:17.000 --> 0:03:20.359 got and shark and are let's get this started. I 0:03:20.400 --> 0:03:22.400 mean really, and it's not just going to be one 0:03:22.440 --> 0:03:24.760 little blip of a move and then sort of trickle 0:03:24.840 --> 0:03:26.919 out the rest. Let's bring in Semas Shash now were 0:03:26.960 --> 0:03:29.519 principal global investors chief strategies seem a great timing with 0:03:29.600 --> 0:03:32.520 us on the program. Your interpretation of the decision in 0:03:32.560 --> 0:03:35.760 the last ten minutes, Yeah, not too dissimil to what 0:03:35.800 --> 0:03:37.920 you've said. I mean, I think maybe what happened this 0:03:37.960 --> 0:03:41.280 morning was given the very weak iPhone number and then 0:03:41.320 --> 0:03:44.160 also the week here nights from yesterday, but that perhaps 0:03:44.200 --> 0:03:48.200 the market had raised slightly their expectations for every cup today. 0:03:48.240 --> 0:03:50.800 But in truth this has really met expectations. I think 0:03:50.800 --> 0:03:52.520 they have done some pretty good staff in terms of 0:03:52.520 --> 0:03:54.800 an auncual tearing as you said that it's very important 0:03:54.840 --> 0:03:58.280 for banks because up till now you've had easily policy 0:03:58.280 --> 0:04:00.560 which is really been undermined by generally to rate not 0:04:00.640 --> 0:04:04.080 really helping banks. So that's certainly positive and with potential 0:04:04.120 --> 0:04:05.800 for que You know, I don't think anyone was really 0:04:05.800 --> 0:04:08.360 expecting an announcement today, but the fact is that they 0:04:08.400 --> 0:04:11.160 are layering the laying the groundwork or something to be 0:04:11.240 --> 0:04:14.640 done at least some more details in September. It may 0:04:14.680 --> 0:04:17.599 be that it's really left for Christine regards to actually 0:04:17.640 --> 0:04:19.640 bring it into force, and really the market just wants 0:04:19.640 --> 0:04:21.800 to know that, and I think from here on there's 0:04:22.080 --> 0:04:24.760 a lot of focus on what are they likely to buy? 0:04:24.880 --> 0:04:27.440 And we know from previous times that the corporate bond 0:04:27.440 --> 0:04:30.240 purchase program was the most effective, and that is what 0:04:30.279 --> 0:04:32.279 the market is frexing on, so seeming let's focus on 0:04:32.320 --> 0:04:34.320 that just for a moment. As we know and pointed 0:04:34.320 --> 0:04:37.800 out by Mergy investments of the high grade market in 0:04:37.920 --> 0:04:41.280 the European credit market right now of financials, do you 0:04:41.320 --> 0:04:43.960 think there's a possibility that the ECB could start buying 0:04:44.000 --> 0:04:46.200 the debt of the companies that they also have to regulate. 0:04:48.400 --> 0:04:50.160 I think that may well be a step too far 0:04:50.200 --> 0:04:52.839 at this stage. I think there's so many umt of 0:04:52.960 --> 0:04:56.920 various constraints constructions that they are under that that may 0:04:56.960 --> 0:04:59.520 have to be a step further. And you may only 0:04:59.560 --> 0:05:02.599 see that once the market or the economy continues to weaken. 0:05:02.640 --> 0:05:05.880 You don't feel like aner deposit is really helping banks. 0:05:05.920 --> 0:05:08.239 So I think that's that's further step in the same 0:05:08.279 --> 0:05:11.240 way that you know, we hear all the circulations. Are 0:05:11.360 --> 0:05:13.520 the ECB ever been to buy equities. I think you 0:05:13.600 --> 0:05:16.160 need to your really drastic deterioration in the economy before 0:05:16.200 --> 0:05:18.880 they go down that road. So let's say the ECB 0:05:19.279 --> 0:05:22.120 does come through with what the market is currently expecting, 0:05:22.360 --> 0:05:26.200 a rate cut, tearing and some sort of format for 0:05:26.320 --> 0:05:29.760 what further asset purchases would look for, look like, will 0:05:29.760 --> 0:05:32.760 that work? Will that? Will that actually jumps out the 0:05:32.760 --> 0:05:37.400 European economy? Well, you know, I think that's a key 0:05:37.480 --> 0:05:40.520 question because what we have here is you have Montro policy. 0:05:40.560 --> 0:05:43.159 Really it's at the walls of its effectiveness, so you 0:05:43.160 --> 0:05:45.640 can only move the das so much. A lot of 0:05:45.640 --> 0:05:47.880 it's going to be via the communication and simply you know, 0:05:48.000 --> 0:05:50.240 if they were to just do a rate cut and 0:05:50.279 --> 0:05:53.040 maybe tearing, that's simply not enough. It definitely needs the 0:05:53.200 --> 0:05:55.080 quite I think for me, when I look at as 0:05:55.160 --> 0:05:58.200 the classes, the key beneficiary assuming all of that comes in, 0:05:58.360 --> 0:06:00.320 is going to be the credit side. Um And it's 0:06:00.320 --> 0:06:03.360 not a fundamental it's simply a technical move and that's 0:06:03.360 --> 0:06:06.960 what the markets happened. But that from the fundamentals, I 0:06:07.000 --> 0:06:10.720 am very gubious this is going to really push Europe 0:06:10.800 --> 0:06:13.320 out of the kind of stagnation that we are seeing 0:06:13.480 --> 0:06:15.120 in just the next year. Yes, s, I think you've 0:06:15.160 --> 0:06:18.120 touched on something really important, just a supply story. Are 0:06:18.120 --> 0:06:20.200 you going to buy the supply story? If they buy 0:06:20.240 --> 0:06:22.520 more corporate debt will be less corporate debt for other 0:06:22.520 --> 0:06:24.800 people to buy yours a going lower that may well 0:06:24.839 --> 0:06:28.240 apply to credit on the sovereigns. What fascinates me is 0:06:28.240 --> 0:06:31.440 whether you buy the effectiveness story, because ultimately that would 0:06:31.440 --> 0:06:34.200 mean you sell ten year buns because you believe the 0:06:34.200 --> 0:06:37.960 ECB policy will work. Are you essentially saying seeing on 0:06:38.000 --> 0:06:41.320 the sovereign side, don't expect higher bund yields on longer 0:06:41.360 --> 0:06:45.120 maturities anytime soon. No, I don't think this can be 0:06:45.480 --> 0:06:47.320 any meetings or thing on on buns. I mean, I 0:06:47.360 --> 0:06:49.000 think you know there's keeping of you know, you simply 0:06:49.040 --> 0:06:52.720 cannot cite the technicals, so they may well I think, 0:06:53.279 --> 0:06:56.120 you know, especially if he comes in and be surprising marketing, 0:06:56.160 --> 0:06:58.240 you could see your slightly down the bund deal. But 0:06:58.320 --> 0:07:01.599 they have to be close to best law. Um. You know, 0:07:01.640 --> 0:07:03.600 we all know that the peripheral yields are the ones 0:07:03.640 --> 0:07:06.120 are gonna be the key beneficiaries for any ECG move 0:07:06.640 --> 0:07:09.840 and the boon side the kind of France, they may 0:07:09.880 --> 0:07:11.680 not be the key beneficiaries that I fee that we 0:07:11.720 --> 0:07:14.920 could see some movement from Italy from Spain still, but 0:07:14.960 --> 0:07:17.200 there's you said Germany. It could be a different question, 0:07:17.600 --> 0:07:19.679 seem I. Do you agree with Larry Fink of Black 0:07:19.800 --> 0:07:25.040 Rock that the ECB should buy equities? You know, I 0:07:25.080 --> 0:07:27.080 think that there is certainly case, but I think there's 0:07:27.080 --> 0:07:28.880 a very big difference between Europe and the U S 0:07:28.920 --> 0:07:31.920 And the key thing is this in the US, whereas 0:07:31.920 --> 0:07:35.680 a lot of retail investors are in equity, in Europe, 0:07:35.680 --> 0:07:37.480 it is simply not the case because they have a 0:07:38.000 --> 0:07:41.120 smaller holding of equities related to the US. So if 0:07:41.160 --> 0:07:44.160 the ECB buy equities, it actually has less of an 0:07:44.160 --> 0:07:46.680 impact on the underlying economy than it would do in 0:07:46.680 --> 0:07:49.400 the US. There is less of a reason. The ECB 0:07:49.480 --> 0:07:53.800 is also under major constraints politically, illegally, um So I 0:07:53.960 --> 0:07:56.080 think that that is actually the last step in the 0:07:56.160 --> 0:08:00.320 Roadman Ta right now down three basis points, fresh record 0:08:00.120 --> 0:08:02.040 low on a ten year maturity in the bond market, 0:08:02.040 --> 0:08:06.520 you'll yield negative forty one basis points. Lisa Ramots yields 0:08:06.520 --> 0:08:09.640 grinding even lower on the continent. Well, and this really 0:08:09.720 --> 0:08:13.160 raises a question Seema about the efficacy as we were 0:08:13.200 --> 0:08:16.160 just talking about, because if you look at market expectations, 0:08:16.640 --> 0:08:19.080 it is that the ECB will be ineffective. I mean, 0:08:19.080 --> 0:08:21.360 you're seeing the yield curve shrink, given the fact that 0:08:21.400 --> 0:08:24.040 you're seeing that ten year boon yield dropped to all 0:08:24.080 --> 0:08:26.080 time record lows if you look at five year, five 0:08:26.120 --> 0:08:29.320 year forward break even raids. I'm just wondering, you know, 0:08:29.440 --> 0:08:33.480 will this effectively hurt the recovery of the euro Zone 0:08:33.520 --> 0:08:38.199 of the ECB doubles down and add stimulus here. I mean, 0:08:38.360 --> 0:08:40.080 I don't know if it would necessarily hurt, but I 0:08:40.200 --> 0:08:42.560 think that maybe, you know, maybe we're am looking at 0:08:42.559 --> 0:08:45.920 the wrong wrong indicator, which is the key stimulus is 0:08:45.920 --> 0:08:48.640 going to come in through the Euro and I think 0:08:48.679 --> 0:08:51.120 maybe that's what they're trying to move here. Um, you know, 0:08:51.200 --> 0:08:54.440 so far this is it's on expectation to you. Wait, 0:08:54.520 --> 0:08:56.800 this is important, hold on a second. So in other words, 0:08:56.800 --> 0:09:01.360 currency wars, yeah, and you know, I mean let's say, 0:09:01.480 --> 0:09:03.640 let's say, for example, that Jegy had done stoping today 0:09:03.679 --> 0:09:06.160 is something pretty aggressive in terms of rate cuts. We 0:09:06.240 --> 0:09:08.839 know that there would be some kind of response from 0:09:08.840 --> 0:09:11.920 the Use administration. Now today we haven't got that, and 0:09:11.960 --> 0:09:13.320 I think they're gonna be keeping an eye on what 0:09:13.400 --> 0:09:16.240 the FED does next week and that may actually load 0:09:16.320 --> 0:09:18.360 someder ground rates of what they do in September. But 0:09:18.440 --> 0:09:20.080 I do think that the currency side, when you get 0:09:20.120 --> 0:09:22.440 to a point where montropology is losing inspectiveness, and it 0:09:22.480 --> 0:09:26.120 certainly is that it's walls in many countries, then you're 0:09:26.160 --> 0:09:28.959 only route to hit the economy is via the currency. 0:09:29.000 --> 0:09:31.040 And as you said that in RT current I seem 0:09:31.040 --> 0:09:33.080 a greater to catcher with you, Michelle the Principal Global 0:09:33.160 --> 0:09:45.560 Investors Chief strategist. I think my focus at the moment 0:09:45.640 --> 0:09:48.120 leads to the prospect of lobal rates in Europe. My 0:09:48.200 --> 0:09:50.960 first question how will the bank's tolerates it? And to 0:09:51.000 --> 0:09:54.079 see the financials on the euro stocks fifty up by 0:09:54.120 --> 0:09:57.920 a round about two point four four percent, I think 0:09:57.920 --> 0:10:00.760 it is encouraging on the idea that they also implement 0:10:00.880 --> 0:10:05.400 tearing if they drop rates in September. That's someone encouraging. Yeah. 0:10:05.440 --> 0:10:08.640 It basically is an expectation that the ECB recognizes the 0:10:08.679 --> 0:10:10.600 pain that they would be inflicting on the banks that 0:10:10.640 --> 0:10:14.720 they already have, and that they would lighten the cost 0:10:14.880 --> 0:10:17.760 that they wouldn't have to necessarily pay banks UH the 0:10:17.880 --> 0:10:20.680 full negative zero point five repay their zero point five 0:10:20.720 --> 0:10:24.480 pc deposit rate for all of their assets. So we'll see, 0:10:24.600 --> 0:10:26.800 let's bring a Jeremy stretch show. We see IBC header 0:10:26.840 --> 0:10:30.360 G ten FX strategy. Jeremy really thoughts ahead of that 0:10:30.400 --> 0:10:34.640 news conference in twenty eight minutes time, Well, obviously the 0:10:34.640 --> 0:10:37.319 the headlines have you've just been discussing, and I think 0:10:37.320 --> 0:10:40.160 in a sense it looks increasingly likely that to drive 0:10:40.240 --> 0:10:42.880 you we use his penultimate meeting to effectively through the 0:10:42.960 --> 0:10:46.480 kitchen sincat. This will be underlying backdrop in order to 0:10:46.520 --> 0:10:49.600 facilitate as better as best a condition as possible to 0:10:49.640 --> 0:10:54.240 hand over to his successor after his last meeting October UM. 0:10:54.280 --> 0:10:57.760 So I think you're right to laud the prospect of 0:10:57.800 --> 0:11:00.880 tearing because I think that was one particular concern in 0:11:00.920 --> 0:11:04.280 relation to the negative deposit rates spectrum, because the ECB 0:11:04.360 --> 0:11:06.959 has been the only of the negative yielding center banks 0:11:07.000 --> 0:11:11.000 to avoid that scenario thus far. Um. But it seems 0:11:11.000 --> 0:11:12.640 to be the case that you know ten basis point 0:11:12.679 --> 0:11:15.040 is very much baked in four September. The question is 0:11:15.080 --> 0:11:19.040 will draw you allow the market to discuss or consider 0:11:19.160 --> 0:11:21.520 more than that, and of course if he does, then 0:11:21.559 --> 0:11:24.760 that will be a catalyst for the Euro to continue 0:11:24.760 --> 0:11:27.840 to retreat, and of course that will be interesting. Uh. 0:11:27.840 --> 0:11:29.560 And I will be keeping my eye on Mr Trump's 0:11:29.559 --> 0:11:31.760 Twitter feed to just to see if he has an 0:11:31.760 --> 0:11:34.040 early early response to this. Well, Jeremy, I want to 0:11:34.040 --> 0:11:36.160 pick up on that because Sima Chaw was just on 0:11:36.280 --> 0:11:39.800 a principal global investors since she was saying, Uh, this 0:11:40.160 --> 0:11:43.840 essentially is a bid to weaken the euro, because we 0:11:43.840 --> 0:11:46.280 were talking about the potential efficacy and if you look 0:11:46.600 --> 0:11:50.200 at German markets right now, European markets, it isn't a 0:11:50.200 --> 0:11:55.240 material boost inflation expectations, yield curve flatter, Uh, Inflation rates 0:11:55.360 --> 0:11:59.320 over the next ten years not materially higher. I'm just wondering, 0:11:59.559 --> 0:12:02.640 do you think that this is just a reignition of 0:12:02.720 --> 0:12:06.680 currency warriors. Well, of course Mr Dragon will be asked 0:12:06.679 --> 0:12:08.720 about the currency today, and as ever, he will always 0:12:08.720 --> 0:12:10.680 back that back and say that the ECP has no 0:12:10.800 --> 0:12:14.400 specific intention on the currency. But of course implicit to 0:12:14.559 --> 0:12:19.080 their inflation assumptions are the influence of imported prices and 0:12:19.120 --> 0:12:21.000 of course if you are going to cheapen up the Euro, 0:12:21.080 --> 0:12:23.560 then you would get higher imported prices and find some 0:12:23.640 --> 0:12:26.840 stimulus on the inflation side. So in a sense, it's 0:12:26.840 --> 0:12:30.960 it's sort of an implied process, but it does raise 0:12:31.040 --> 0:12:35.600 the risk of adding to already a relatively feeble atmosphere 0:12:35.600 --> 0:12:38.720 in terms of the currency world, because of course these 0:12:39.040 --> 0:12:43.240 tensions in terms of currency levels are becoming much more politicized, 0:12:43.280 --> 0:12:46.000 and I think that is something that markets will remain 0:12:46.080 --> 0:12:48.640 very mindful of, even if as a as a say 0:12:48.720 --> 0:12:51.480 Mr Dragon will push back against any explicit commitment on 0:12:51.720 --> 0:12:54.240 currency values. Jeremy, we're a week less than a week 0:12:54.360 --> 0:12:56.679 away from what we could get a right cut from 0:12:56.679 --> 0:12:58.960 the fellow Reserve. I just wonder if we've had enough 0:12:59.000 --> 0:13:00.760 today from the e C and we don't know what 0:13:00.800 --> 0:13:02.560 comes in the news conference, but just so far, if 0:13:02.559 --> 0:13:04.800 you can make a judgment that would be welcome, Whether 0:13:04.800 --> 0:13:08.360 we've had enough from the ECB so far to insulate 0:13:08.360 --> 0:13:11.640 the euro from strength. If the Federal Reserve comes out 0:13:11.679 --> 0:13:17.080 swinging next week, well, it's it's it is interesting to 0:13:17.559 --> 0:13:19.360 know to sort of think about the sort of the 0:13:19.440 --> 0:13:23.080 juxtaposition between the interplay of central banks, and I think 0:13:23.080 --> 0:13:24.800 that was one of the reasons why it made sense 0:13:24.840 --> 0:13:26.880 for the c B two to row back from policy 0:13:26.920 --> 0:13:29.440 action now and to wait and to see what the 0:13:29.480 --> 0:13:31.200 federal Reserve we're going to do now. Of course, the 0:13:31.240 --> 0:13:33.080 U c B would also argue they need to consider 0:13:33.160 --> 0:13:36.840 these other package of majures to go with the negative 0:13:36.880 --> 0:13:39.520 rate story. Um, I think we've we've obviously seen the 0:13:39.559 --> 0:13:42.280 market which has has been anticipating and assuming that there 0:13:42.320 --> 0:13:46.120 would bear and coming from the Eurozone, alongside the macro 0:13:46.200 --> 0:13:48.880 weakness of that has been keeping the euro on the defensive. 0:13:49.440 --> 0:13:51.680 I guess the question is how how low can we go? 0:13:51.760 --> 0:13:53.880 And I think if we do see a print in 0:13:53.920 --> 0:13:55.880 the upper one tens at this point, I think it 0:13:55.920 --> 0:13:58.640 may well be the case of just sort of looking 0:13:58.640 --> 0:14:00.760 to lighten some of those eurosual positions, and we may 0:14:00.800 --> 0:14:02.679 well see a little bit of a constructed by US 0:14:02.720 --> 0:14:05.480 coming back in which might just ease the burden a 0:14:05.600 --> 0:14:08.560 little bit for Mr Powell next week. So, Jeremy, I 0:14:08.640 --> 0:14:12.679 want to sort of discuss the consequences of a potential 0:14:12.679 --> 0:14:15.800 currency war race to the bottom in terms of what 0:14:15.840 --> 0:14:18.680 you do as an investor. Wouldn't you just double down 0:14:18.679 --> 0:14:21.680 on emerging markets and the riskiest currencies could develop markets 0:14:21.720 --> 0:14:23.840 are all racing to try to make their currencies as 0:14:23.880 --> 0:14:28.560 weak as possible. Well in the world where there is 0:14:28.560 --> 0:14:31.520 this perception of trying to cheapen currency and or by 0:14:31.640 --> 0:14:35.440 virtue of monitor policy stimulus, then of course then carry 0:14:35.560 --> 0:14:38.080 is potentially king. So you're you are coming back to 0:14:38.520 --> 0:14:41.760 looking at those high ulding markets. And I was discussing 0:14:42.160 --> 0:14:44.960 Turkey with with your colleagues on television a little bit 0:14:44.960 --> 0:14:47.400 earlier in the context of even with the more aggressive 0:14:47.480 --> 0:14:49.720 rate cuts that we've seen from these center bank today, 0:14:50.000 --> 0:14:53.800 you've still got a very substantial real yield level compared 0:14:53.840 --> 0:14:55.880 to elsewhere. So I think there is going to be 0:14:55.880 --> 0:14:59.240 a case for investors to continue to look in general 0:14:59.400 --> 0:15:02.640 for opportunities in high uning markets. But I think it 0:15:02.760 --> 0:15:04.400 is very much the case that you need to be 0:15:04.840 --> 0:15:07.640 wary of some of the specific idiocy and cracking issues 0:15:07.640 --> 0:15:10.360 and some of those nations. But ultimately, in a world 0:15:10.440 --> 0:15:13.720 where the developed markets or the developed currencies are seemingly 0:15:13.760 --> 0:15:18.960 under obvious pressure and or external downside this, then investors 0:15:18.960 --> 0:15:21.720 may well continue to look for those high uling alternatives 0:15:21.760 --> 0:15:23.560 as well. So Jeremy, I don't know if you read it, 0:15:23.600 --> 0:15:26.480 but there was a story yesterday by my colleague Craig 0:15:26.520 --> 0:15:30.040 torres about a professional worrying unit in the New York 0:15:30.080 --> 0:15:32.920 Federal Reserve, a woman who has a unit whose job 0:15:32.920 --> 0:15:35.080 it is just to think, what is the Federal Reserve 0:15:35.160 --> 0:15:39.320 doing wrong? What could potentially go bust in financial markets? 0:15:39.520 --> 0:15:41.800 And I would guess that she may be tearing her 0:15:41.840 --> 0:15:45.480 hair out as she listens to this conversation, thinking, Wow, 0:15:45.560 --> 0:15:48.760 people are being encouraged to lever up, double down on 0:15:48.920 --> 0:15:55.080 carry trades. What's the potential consequence of that longer term? Well, 0:15:55.080 --> 0:15:58.200 of course, we are an environment where the assumption is 0:15:58.240 --> 0:16:01.880 that inflation is relatively benign or if not dead, and 0:16:01.960 --> 0:16:05.080 so if there were to be some degree of consequence 0:16:05.080 --> 0:16:08.320 of an inflation respector coming back into the marketplace, then 0:16:08.680 --> 0:16:12.600 clearly that would create enormous degrees of instability. And of course, 0:16:13.080 --> 0:16:15.440 as we as we well know, when you're looking at 0:16:16.000 --> 0:16:18.840 your markets or less liquid markets than of course there 0:16:18.920 --> 0:16:22.000 is that liquidity risk, and that of course is one 0:16:22.000 --> 0:16:24.960 of the one of the sort of the legacies of 0:16:24.520 --> 0:16:27.000 the post crisis well over ten years ago when we 0:16:27.120 --> 0:16:29.960 had those difficulties in terms of liquidity. So it is 0:16:30.200 --> 0:16:32.320 you know, it is this sort of fear or perception 0:16:32.360 --> 0:16:35.680 of revisiting some of the some of the mistakes of 0:16:35.720 --> 0:16:38.560 the past, which I guess will be causing some consternation 0:16:38.600 --> 0:16:41.040 for those that are played too to worry about what 0:16:41.080 --> 0:16:43.880 could go wrong. Jeremy. We're very much in an easing 0:16:43.920 --> 0:16:48.000 cycle now, Australia cutting rates, South Africa cutting rates, South 0:16:48.080 --> 0:16:51.920 Korea cutting rates, Indonesia cutting rates. The ECB team one up, 0:16:51.960 --> 0:16:55.560 the Federal Reserve next week, slipping under the radar, and 0:16:55.600 --> 0:16:59.360 no one's really talking about it. The Bank of Japan, Jeremy, 0:16:59.520 --> 0:17:02.480 you expect think anything from the bo J anytime soon. 0:17:04.280 --> 0:17:05.960 That's a very good question. In a sense, they have 0:17:06.080 --> 0:17:08.680 You're You're absolutely right. They have been sort of left 0:17:08.720 --> 0:17:10.600 out of the sort of the market discussion for some 0:17:10.760 --> 0:17:13.720 considerable time. Um. And we are in an environment where 0:17:13.760 --> 0:17:15.880 the sort of the macro story remains under a little 0:17:15.880 --> 0:17:18.520 bit of threat. And obviously there's there's this ongoing issue 0:17:18.560 --> 0:17:22.080 regarding the consumption tax hike that's coming through and how 0:17:22.080 --> 0:17:24.720 that will impact on the on the consumer side. UM. 0:17:24.760 --> 0:17:26.240 So I think it is going to be a case 0:17:26.320 --> 0:17:29.840 that markets will be watching out for, perhaps the the 0:17:29.840 --> 0:17:33.760 Bank of Japan looking to continue to extend its own 0:17:33.840 --> 0:17:36.520 balance sheets. So in a sense, it has been the 0:17:36.520 --> 0:17:39.600 one central banket. It's been off the radar screen. I 0:17:39.640 --> 0:17:42.879 think invariably markets have become accustomed to the Bank of 0:17:42.920 --> 0:17:46.680 Japan always consistently arguing that we'll get to its inflation 0:17:46.720 --> 0:17:49.840 target over the over the rainbow, almost as we speak, 0:17:49.840 --> 0:17:52.400 but never actually achieving it. And I think still that's 0:17:52.480 --> 0:17:54.560 the presumption, and so the the Bank of Japan will 0:17:54.600 --> 0:17:58.280 continue to remain exceptionally easy. But I think it's it's 0:17:58.320 --> 0:18:00.320 not the sort of the pre eminent story in terms 0:18:00.320 --> 0:18:02.879 of the global central bank cycle. As we as we 0:18:02.960 --> 0:18:04.800 turn to speak, Jeremy Gright to catch you with you, 0:18:04.880 --> 0:18:19.240 Jeremy stretch that c I PC head of Strategy. Well, 0:18:19.280 --> 0:18:23.399 Saturday Night Live has become an institution. Since nineteen seventy five, 0:18:23.480 --> 0:18:26.600 Louren Michaels has brought SNL into our living rooms each 0:18:26.720 --> 0:18:30.160 Saturday night. David Rubinstein, Carlisle Group, co founder and host 0:18:30.200 --> 0:18:33.760 of Peer to Peer Conversations, sat down with Mr Michaels. 0:18:34.200 --> 0:18:35.960 Take a listen to what they had to say. So 0:18:36.040 --> 0:18:39.160 from seventy five the late seventies or early eighties, how 0:18:39.160 --> 0:18:41.560 has humor changed or the people who laughed at the 0:18:41.600 --> 0:18:43.800 same kind of things or certain things you can make 0:18:43.800 --> 0:18:46.520 fun of now you couldn't or vice versa. There's almost 0:18:46.520 --> 0:18:48.600 nothing we did in the seventies that I could do now. 0:18:49.240 --> 0:18:51.760 Gilda Rodner would not be able to play Rose Amazona 0:18:51.800 --> 0:18:55.399 down and John Belushi would not be able to play Japanese. Uh. 0:18:55.800 --> 0:18:58.120 Garret Morris Julry News for the heart of hearing would 0:18:58.119 --> 0:19:01.320 have been making fun of a handicap. So it's it's 0:19:01.400 --> 0:19:05.639 just all values change. And then I always said that 0:19:05.880 --> 0:19:10.800 between the movie Arthur and the movie Arthur to alcoholism 0:19:10.920 --> 0:19:14.520 became a disease and no one wanted to laugh at 0:19:14.560 --> 0:19:18.520 drunks anymore, whereas for two years they had left the drunk. 0:19:19.359 --> 0:19:24.680 That's David Rubinstein speaking with SNLS Lauren Michael's David Rubinstein, 0:19:24.760 --> 0:19:28.120 Carloud Group, co founder and host of Peer to Peer Conversations. 0:19:28.600 --> 0:19:32.320 You can hear that tonight on Bloomberg Radio at five pm. David, 0:19:32.320 --> 0:19:35.920 thanks so much for joining us. Just a fascinating discussion 0:19:35.960 --> 0:19:38.520 I'm sure you had uh with Lauren. Could you just 0:19:38.560 --> 0:19:42.919 give us a key takeaways that you had from your conversation? Well, 0:19:43.000 --> 0:19:46.520 Lauren is somebody who has I've been running this show 0:19:46.560 --> 0:19:49.840 more or last for forty years. Um he started and 0:19:49.920 --> 0:19:51.920 for five years he ran it, and then he took 0:19:51.960 --> 0:19:55.000 five years five years off to do some producing of 0:19:55.080 --> 0:19:57.959 movies in Hollywood and so forth, and other TV shows, 0:19:58.160 --> 0:19:59.720 and then he came back. So he's been running it 0:19:59.800 --> 0:20:02.320 for forty years. Think about how many people have been 0:20:02.359 --> 0:20:05.000 at the top of their profession for forty years. But 0:20:05.119 --> 0:20:08.119 this show has sustained itself because he's been able to 0:20:08.160 --> 0:20:10.840 figure out what makes people laugh and to evolve that. 0:20:10.920 --> 0:20:13.160 As he said, it's different than it was years ago. 0:20:13.520 --> 0:20:16.399 But he's a very smart person, very much has his 0:20:16.560 --> 0:20:18.800 finger on the pulse of what's funny and what is 0:20:18.800 --> 0:20:21.679 not funny. And obviously his political humor recently has got 0:20:21.720 --> 0:20:24.920 an enormous amount of attention talking about the enormous amount 0:20:24.920 --> 0:20:27.480 of tension around political humor and the things that you 0:20:27.480 --> 0:20:29.760 could say in the seventies versus not today, by the way, 0:20:29.800 --> 0:20:34.720 that was hysterical. I'm wondering how their approach to political 0:20:34.760 --> 0:20:36.920 news has shifted. I mean, other things that they can 0:20:36.960 --> 0:20:39.119 do now or can't do now, that they used to 0:20:39.160 --> 0:20:42.040 be able to do. There. I think that they are 0:20:42.080 --> 0:20:46.000