WEBVTT - Foreign Exchange and Equities in Trump's First Week 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.120 us live on YouTube. 0:00:27.200 --> 0:00:30.080 There's always in a given week. Two three, four Research 0:00:30.160 --> 0:00:32.800 reports a stick out. A couple of days ago, George 0:00:32.840 --> 0:00:35.880 Savelli has put out an absolute jewel Deutsche Bank and 0:00:36.120 --> 0:00:42.239 information bursting stereotypes on all that's going on on tariff's 0:00:42.320 --> 0:00:46.280 international dynamics, economics and of course you know the whole 0:00:46.320 --> 0:00:49.160 debate here that we have. He joins us now from 0:00:49.200 --> 0:00:51.639 Deutsche Bank. George, thank you so much for being with us. 0:00:52.000 --> 0:00:55.960 Figure two. No one knows this, including the President of 0:00:56.000 --> 0:00:59.360 the United States. If you take out our addiction to 0:00:59.440 --> 0:01:05.520 Canadian oil and gas, we run a trade surplus with Canada. 0:01:08.720 --> 0:01:11.679 Yes, the US does if you exclude energy. 0:01:11.880 --> 0:01:16.280 And I think one of the challenges in thinking through 0:01:16.360 --> 0:01:21.760 about tariff risks is the economic impact. And if you 0:01:21.840 --> 0:01:25.040 compare the economic impact of tariffs on Canada VERSUS, for example, 0:01:25.120 --> 0:01:29.040 China on the US, it would be far larger because 0:01:29.080 --> 0:01:31.200 Canada has a bigger capacity to retaliate. 0:01:31.360 --> 0:01:35.560 There's a reliance on energy that creates inflation. So the 0:01:35.680 --> 0:01:37.520 market is questioning. 0:01:37.160 --> 0:01:40.959 How much President Trump will go ahead with the tariff 0:01:41.000 --> 0:01:42.280 is threatening on Canada. 0:01:42.040 --> 0:01:44.360 As soon as February first, does the X and it's 0:01:44.360 --> 0:01:45.480 going to be a learning process. 0:01:45.680 --> 0:01:49.640 Does the xxis matter? Is it timing important like they 0:01:49.680 --> 0:01:52.440 want to try and set out or is all in 0:01:52.560 --> 0:01:56.440 one big one or that? Does that matter to George Caravellas. 0:01:57.480 --> 0:02:00.880 I think, well, what matters to me is what impacts 0:02:00.880 --> 0:02:03.360 the market. And if you look at the price action 0:02:03.520 --> 0:02:05.320 this week in the market, what. 0:02:05.360 --> 0:02:08.280 Was interesting and it's something we had warned about. The 0:02:08.320 --> 0:02:11.640 previous week. The market was expecting an immediate tariff announcement. 0:02:12.480 --> 0:02:14.640 You could see it in the risk premium that was 0:02:14.680 --> 0:02:17.440 priced in to the volatility space. You could see the 0:02:17.440 --> 0:02:21.399 inflation break evens. And therefore, when tariffs were not announced 0:02:21.400 --> 0:02:25.840 on the first day of President Trump's new administration, you 0:02:26.000 --> 0:02:30.000 have seen the market squeeze in terms of the doll longs. 0:02:30.760 --> 0:02:34.680 Now we're entering next week with almost the opposite dynamic. 0:02:35.040 --> 0:02:38.320 The market has completely taken out the risk premium of 0:02:38.440 --> 0:02:42.160 potentially mediate tariffs, especially with regard to Canada, and that 0:02:42.160 --> 0:02:43.080 would be a big shock. 0:02:44.160 --> 0:02:47.680 I mean, I figure nine, Paul, this brilliant research report. Folks, 0:02:47.680 --> 0:02:49.920 we protect the copyright of our guests. You're not going 0:02:49.960 --> 0:02:52.120 to get it from me her poud go to Deutsche 0:02:52.160 --> 0:02:56.000 Bank to get the Sarah Ellis research. The US imports 0:02:56.120 --> 0:02:59.960 more oil from Canada than all other countries come. 0:03:00.080 --> 0:03:01.160 But I did not know that. 0:03:01.440 --> 0:03:03.960 I mean, well that's what you get from Crevel Ceabellos, 0:03:04.240 --> 0:03:07.960 so Georgia in your market. In the currency market, how 0:03:08.000 --> 0:03:10.680 have traders been positioning themselves for a world where there 0:03:10.760 --> 0:03:13.880 may be higher trade tariffs, you. 0:03:13.840 --> 0:03:16.240 Know, not just Canon Mexico, but kind of across the board. 0:03:18.160 --> 0:03:20.680 So this is really the key question for the market 0:03:20.800 --> 0:03:23.000 and the big driver this year so far. It's what 0:03:23.320 --> 0:03:25.840 I would call the tariff risk premium. How much of 0:03:25.880 --> 0:03:30.240 that risk premium is priced into the market and traders 0:03:30.440 --> 0:03:34.920 have been positioned for some probability of tariffs going ahead. 0:03:35.360 --> 0:03:38.720 I think what we saw this week was just how 0:03:38.760 --> 0:03:42.600 aggressively people were expecting immediate tariffs, and that is why 0:03:42.600 --> 0:03:45.800 we're seeing some irreversal recent trends. But if you're looking 0:03:45.800 --> 0:03:48.920 at the cumulative amount of tariffs that are priced in, 0:03:49.480 --> 0:03:52.880 especially after the retracements, we've seen this week, you're actually 0:03:52.920 --> 0:03:55.760 not seeing that much. I would say the market is 0:03:55.800 --> 0:03:58.160 that the very lower end, if. 0:03:58.000 --> 0:04:00.880 Not below the lower end of what is a reasonable 0:04:00.960 --> 0:04:02.400 range of tariffs going forward. 0:04:02.720 --> 0:04:05.040 And that's really the reason why we still see the 0:04:05.160 --> 0:04:09.720 risks askewed towards more in terms of dollar strength, because 0:04:09.800 --> 0:04:12.840 the market at the moment, I think is underpricing the 0:04:12.920 --> 0:04:15.280 full extent of tariffs that could materialize. 0:04:15.320 --> 0:04:18.880 In this hour Accrassination on your Friday and YouTube again, 0:04:18.960 --> 0:04:22.520 Subscribe to Bloomberg podcast building each and every day, including 0:04:22.600 --> 0:04:25.960 the weekends. A lot of podcasts watching during the weekends. 0:04:26.000 --> 0:04:28.640 George Sarah ellis with As we continue, he is with 0:04:29.880 --> 0:04:32.760 Deutsche Bain. Coming up, Sarah Hunt. We'll talk equities with. 0:04:32.720 --> 0:04:36.760 Her pot George, is there any reasonable bear case for 0:04:36.800 --> 0:04:39.160 the US dollar? I just don't see it out there, 0:04:39.200 --> 0:04:40.599 and I haven't for the longest time. 0:04:43.000 --> 0:04:44.719 You mean a reasonable case for the dollar to. 0:04:44.680 --> 0:04:46.520 A weekend or just yes and yeah, just kind of 0:04:46.520 --> 0:04:47.960 a bearish case for the US dollar. 0:04:49.440 --> 0:04:53.040 So I can give you a historical example. 0:04:53.160 --> 0:04:57.560 When President Trump started his first administration, the market was 0:04:57.560 --> 0:05:00.600 also expecting dollar strength, and you saw two things happening. 0:05:01.320 --> 0:05:05.440 You saw any progress on fiscal and tax reform stall 0:05:05.560 --> 0:05:07.640 for nine months as the administration was. 0:05:07.560 --> 0:05:10.680 Trying through peal Obamacare, and you saw a big upswing 0:05:10.720 --> 0:05:11.560 in global growth. 0:05:11.920 --> 0:05:13.839 I think if you saw a repetition of that, the 0:05:13.920 --> 0:05:16.920 dollar would most certainly weaken. But what we're seeing this 0:05:17.000 --> 0:05:21.560 time is the administration picking up pace. The immediate focus is. 0:05:21.440 --> 0:05:26.040 On tax cuts, it is on trade, and the global. 0:05:25.720 --> 0:05:29.040 Environment looks a lot more challenging, so we I can 0:05:29.080 --> 0:05:31.479 always build a varish case for the dollar, but from 0:05:31.520 --> 0:05:34.200 my perspective, I think the hurdle is much higher than 0:05:34.240 --> 0:05:35.600 what it was in twenty nineteen. 0:05:35.680 --> 0:05:37.600 The news flow is extraordinary Jersey. They got to do 0:05:37.640 --> 0:05:42.640 an audible here just in the last twelve hours, eighteen hours. 0:05:43.200 --> 0:05:47.080 The president is reverted in Fed speak, and I think 0:05:47.120 --> 0:05:50.920 indirectly in currency speak to what we knew Donald Trump 0:05:50.960 --> 0:05:53.720 to be, which is he likes lower interest rates. I mean, 0:05:53.720 --> 0:05:56.600 he's a real estate guy, which real estate guy Paul 0:05:56.680 --> 0:06:00.760 doesn't like lower interest rates. Introduce him to me sometime, George. 0:06:00.760 --> 0:06:05.039 The president wants lower interest rates from Chairman Powell. I 0:06:05.120 --> 0:06:09.279 believe he stated at Davos he is going to lower interstrates. 0:06:09.440 --> 0:06:12.840 Let's just begin with that. With your Cambridge economics, can 0:06:12.880 --> 0:06:16.320 a government leader force interst rates lower? 0:06:19.240 --> 0:06:23.680 If the FED is independent and this institutional independence is maintained, 0:06:24.760 --> 0:06:28.840 then the answer is no. The transmission would work via 0:06:28.839 --> 0:06:31.200 FED appointments. But then if you're looking at the FED 0:06:31.240 --> 0:06:34.760 appointment process, which requires Center confirmation, and also the number 0:06:34.760 --> 0:06:37.800 of FED governors that are up for reappointment. 0:06:37.440 --> 0:06:38.320 There's not that many. 0:06:39.080 --> 0:06:41.200 But what I would say, going back to the question 0:06:41.520 --> 0:06:45.359 around the bare case for the dollar, the single biggest 0:06:45.440 --> 0:06:49.400 risk would be a compromise of FED independence. We certainly 0:06:49.480 --> 0:06:52.480 don't see that from our perspective, because I think the 0:06:52.520 --> 0:06:55.239 administration is well aware that if that was to happen, 0:06:55.440 --> 0:06:57.120 it would lead to all sorts of other. 0:06:57.000 --> 0:07:00.720 Bad things happening. For example, heels going up rather. 0:07:00.520 --> 0:07:02.680 Than down right in the back end exactly. 0:07:03.839 --> 0:07:06.560 But I think it's for that reason that the commentary 0:07:06.600 --> 0:07:11.560 is likely to remain rather than genuinely impacting and government 0:07:11.600 --> 0:07:12.520 what we saw last. 0:07:12.320 --> 0:07:15.960 Time, and Governor Lusetti will straighten that out. One final question, 0:07:16.040 --> 0:07:20.800 George Saravellos, the president wants a week dollar. He's been 0:07:20.880 --> 0:07:24.840 that way since before he was president as well. How 0:07:24.920 --> 0:07:29.080 far are we from the tension of the Plaza accord 0:07:29.120 --> 0:07:32.400 where there was a primal scream for a week dollar. 0:07:33.880 --> 0:07:37.080 So you raise a very interesting question, Tom, because by 0:07:37.120 --> 0:07:39.880 this time in the first administration, we already had the 0:07:39.920 --> 0:07:43.320 Secretary Treasury nominee Unusin talking down the dollar, we had 0:07:43.400 --> 0:07:46.840 tweets from President Trump talking down the dollar. And this 0:07:47.000 --> 0:07:49.880 time what I'm seeing is something very different. I'm seeing 0:07:49.920 --> 0:07:53.400 Scott Besson in the testimony in the Senate testimony hearing 0:07:53.880 --> 0:07:56.680 talk about the importance of the dollar as a reserve currency. 0:07:57.280 --> 0:07:59.640 I'm not seeing Trump talk about the dollar all that 0:07:59.760 --> 0:08:01.800 much at all. In fact, I think he hasn't even 0:08:01.840 --> 0:08:05.840 mentioned anything since the Bloomberg interview he gave way for 0:08:06.000 --> 0:08:08.960 the election. I think the reason behind that is the 0:08:09.000 --> 0:08:13.240 administration is realizing a strong dollar helps keep US inflation down, 0:08:13.840 --> 0:08:16.160 and therefore, from that perspective, it is one of the 0:08:16.200 --> 0:08:18.320 few things that I think is different from the first 0:08:18.360 --> 0:08:21.960 administration that they're actually less keen on a week dollar 0:08:22.200 --> 0:08:23.800 to help US inflation come down. 0:08:23.880 --> 0:08:26.840 Gotta un Jorge Servell's congratulations for the research piece of 0:08:26.840 --> 0:08:30.800 the week, just absolutely outstanding. Mister Serrave ellis at Deutsche Bank. 0:08:36.080 --> 0:08:39.680 You're listening to the Bloomberg Surveillance podcast catch us Live 0:08:39.720 --> 0:08:42.880 weekday afternoons from seven to ten am Eastern. Listen on 0:08:43.000 --> 0:08:46.640 Applecarplay and Android Otto with the Bloomberg Business app, or 0:08:46.800 --> 0:08:48.280 watch US live on YouTube. 0:08:48.360 --> 0:08:52.000 Sir Hunt joins US now and the equity markets. Are 0:08:52.080 --> 0:08:56.800 you surprised at the day after day bid of the market. 0:08:57.320 --> 0:09:00.000 I'm not really because what we're looking at right now. 0:08:59.840 --> 0:09:02.360 Is again all the optimism and people are putting the 0:09:02.360 --> 0:09:04.959 pessimism or the things that might go wrong aside. 0:09:04.559 --> 0:09:07.720 Because of earnings or Washington, so Washington. 0:09:07.880 --> 0:09:10.640 But earnings have helped, right, So earnings also a lot 0:09:10.960 --> 0:09:12.520 banks that banks. 0:09:12.200 --> 0:09:14.520 Needed to come in with good numbers. They did. If 0:09:14.559 --> 0:09:15.840 we can see earnings come in good. 0:09:15.840 --> 0:09:18.839 That's going to go well, because it seems like twenty 0:09:18.880 --> 0:09:21.520 twenty five, if this market's going to move higher after 0:09:21.559 --> 0:09:24.280 two years of twenty percent plus returns and a FED, 0:09:24.320 --> 0:09:26.720 that's probably not going to be that active in twenty 0:09:26.760 --> 0:09:29.800 twenty five in terms of lowering rates. Earnings really have 0:09:29.880 --> 0:09:33.040 to drive the story here. Are you confident in a eleven, 0:09:33.080 --> 0:09:35.240 twelve thirteen percent growth in SMP earnings? 0:09:36.360 --> 0:09:38.520 It depends a lot. Again, Now, what's going to happen 0:09:38.600 --> 0:09:39.280 with technology? 0:09:39.360 --> 0:09:39.520 Right? 0:09:39.559 --> 0:09:41.440 You can look at the energy sector and go okay, 0:09:41.480 --> 0:09:43.439 oil prices are higher. That's going to help earnings for 0:09:43.480 --> 0:09:45.440 the SMP as a whole, where last year it was 0:09:45.480 --> 0:09:48.200 it was a detriment. There are going to be areas 0:09:48.240 --> 0:09:50.360 where you need to see that growth coming through because 0:09:50.360 --> 0:09:52.560 the multiple where the multiple is, it's hard to see 0:09:52.600 --> 0:09:54.920 multiple expansion. You need to see the earnings grow into 0:09:54.960 --> 0:09:56.960 that so that you can see that market move higher. 0:09:57.400 --> 0:09:59.840 One of the sectors that has been, if I guess 0:10:00.200 --> 0:10:04.120 Trump trade kind of sectors financials. The expectation that the 0:10:04.160 --> 0:10:07.680 regulatory environment's going to ease if nothing else that would 0:10:07.679 --> 0:10:10.160 be beneficial. Do you ascribe to that? Have you guys 0:10:10.160 --> 0:10:12.640 stepped up your exposure to financials? 0:10:13.280 --> 0:10:15.520 I wouldn't say that we've necessarily stepped it up because 0:10:15.559 --> 0:10:18.880 we had representation there and basically a lot more in 0:10:18.920 --> 0:10:20.640 the larger banks, because I think there may be some 0:10:20.720 --> 0:10:22.600 issues with the regional banks. But I think that just 0:10:22.600 --> 0:10:24.000 the fact that you may see an M and a 0:10:24.040 --> 0:10:26.920 boom after you've got a change at the FTC might 0:10:27.000 --> 0:10:28.880 help on the financial sector because you have a lot 0:10:28.880 --> 0:10:31.840 of smaller banks. I think that what the market is 0:10:31.840 --> 0:10:34.559 looking for is a change in the tone, both from 0:10:34.600 --> 0:10:37.920 a regulatory standpoint and from an M and a standpoint. 0:10:37.960 --> 0:10:40.960 I guess with this new administration there's been I think 0:10:41.120 --> 0:10:44.840 a palpable sense of economic optimism. I'm not sure it's 0:10:44.880 --> 0:10:47.160 animal spirits is the right word, but people feel like 0:10:47.600 --> 0:10:50.200 this is an administration, a government that is pro business, 0:10:50.240 --> 0:10:53.760 pro growth. If that's in fact a sense, is this 0:10:54.040 --> 0:10:57.160 maybe a time for smaller caps mid caps to actually 0:10:57.200 --> 0:10:57.679 do well? 0:10:57.880 --> 0:10:59.640 I think it absolutely is, and I think that, I 0:10:59.640 --> 0:11:00.960 mean that's it's going to depend a on on what 0:11:01.000 --> 0:11:03.320 happens to the rest of the underlying economic data, because 0:11:03.320 --> 0:11:05.520 for small caps to do well, you need to see 0:11:05.559 --> 0:11:07.800 a good economy. The fact that the FED is likely 0:11:07.840 --> 0:11:09.600 to be backing off a bit here is tougher for 0:11:09.640 --> 0:11:11.640 small caps because higher rates are tougher for them as 0:11:11.640 --> 0:11:13.920 a group. But I think that that could be If 0:11:13.920 --> 0:11:15.240 the US does do well. 0:11:15.160 --> 0:11:16.480 Small and min should do well as well. 0:11:16.520 --> 0:11:20.960 Not once, but twice this weekend, I got grilled on 0:11:21.160 --> 0:11:24.320 international stocks, and I, you know, I went back and 0:11:24.320 --> 0:11:27.400 looked at my Sarah Hunt notes and the basic idea 0:11:27.720 --> 0:11:30.960 is they're completely correlated to week dollar. Am I right 0:11:31.000 --> 0:11:31.240 on that? 0:11:32.000 --> 0:11:34.480 I think it is much bigger driver than what's going 0:11:34.520 --> 0:11:36.360 on for them economically, and one of the reasons that 0:11:36.400 --> 0:11:39.000 you would think they should be less strong is because 0:11:39.000 --> 0:11:41.760 what's going on in Europe is not fantastic economically, But 0:11:41.800 --> 0:11:44.440 there definitely is a currency trade off there, and I 0:11:44.440 --> 0:11:46.120 think that it's sort of like when the US when 0:11:46.200 --> 0:11:48.800 interest rates go higher, the tech group goes lower when 0:11:48.800 --> 0:11:49.760 the dollar gets weaker. 0:11:50.000 --> 0:11:53.199 Yeah, how do you digest? And I don't wanted to 0:11:53.240 --> 0:11:56.360 talk about Apple specifically unless you want to, But there's 0:11:56.440 --> 0:12:00.560 like rumors ONNG somebody's this, or that there's a shortfall. 0:12:01.040 --> 0:12:05.080 There are these research geeks measuring things on whatever product. 0:12:05.440 --> 0:12:07.920 Do you lean over the desk and listen to those people, 0:12:08.040 --> 0:12:11.760 read those people or is it just tangential noise. 0:12:12.200 --> 0:12:13.680 I think it has to be part of what you're 0:12:13.679 --> 0:12:16.239 looking at altogether, because you don't want to be surprised 0:12:16.280 --> 0:12:18.200 by some sort of a shortfall, but the market doesn't 0:12:18.200 --> 0:12:21.000 seem to be enormously surprised. I think it really depends 0:12:21.000 --> 0:12:22.440 on what else is going on underneath. 0:12:22.440 --> 0:12:23.000 For something like. 0:12:22.960 --> 0:12:26.439 Apple, specifically, that service revenue and that recurring revenue is 0:12:26.480 --> 0:12:28.960 a bigger part of what people look at in the story. 0:12:29.000 --> 0:12:30.280 The hardware is still important. 0:12:30.520 --> 0:12:33.319 So if there's a shortfall and it's not continuous, that's 0:12:33.360 --> 0:12:34.319 probably not as big a deal. 0:12:34.440 --> 0:12:36.760 We're talking apple. Can I be rude, Paul? Are you're 0:12:36.800 --> 0:12:39.000 going to load the boat on an apple? There's a pullback. 0:12:39.800 --> 0:12:41.600 I'm definitely going to make sure that if I was 0:12:41.840 --> 0:12:44.720 underweight or not participating and I like the story, I 0:12:44.720 --> 0:12:45.680 would be adding to it. 0:12:45.720 --> 0:12:49.040 Here. We had a participation already, so I mean. 0:12:49.080 --> 0:12:50.600 She owns Yeah, that's fine. 0:12:50.640 --> 0:12:53.880 That's that's Baron's talk. That's the way Mario Gabelli talks. 0:12:53.960 --> 0:12:54.760 Nothing wrong with that. 0:12:55.280 --> 0:12:57.280 We mentioned the FED before, probably a little bit more 0:12:57.360 --> 0:13:00.320 quiescent this year than maybe we initially thought think the 0:13:00.320 --> 0:13:01.240 FED will do this year. 0:13:02.440 --> 0:13:03.880 There's going to be that's going to depend on a 0:13:03.920 --> 0:13:05.959 lot of different factoris. But right now I think the 0:13:06.000 --> 0:13:09.160 impetus is to do nothing. It's just sort of wait 0:13:09.240 --> 0:13:11.520 and pause. We'll see what happens next week. But I 0:13:11.559 --> 0:13:13.839 think that you're going to need to see data on 0:13:13.880 --> 0:13:16.960 the inflation side come in reasonably good for the FED 0:13:17.000 --> 0:13:18.800 to be able to cut more just because things are 0:13:18.800 --> 0:13:21.120 going well enough that it seems contradictory to say, we're 0:13:21.160 --> 0:13:23.079 raising our inflation out and we're cutting. 0:13:22.840 --> 0:13:28.000 Rates, But aren't these rates nominal or real quote unquote normal. 0:13:28.800 --> 0:13:31.640 We have this great conversation with Greg Peters of p JAP. 0:13:32.440 --> 0:13:34.600 I mean, a lot of the younger people are going, 0:13:34.760 --> 0:13:36.600 oh gee, it's so weird. 0:13:37.040 --> 0:13:37.920 Is it. 0:13:37.920 --> 0:13:39.920 It's not so weird on the back end, on the 0:13:40.080 --> 0:13:41.920 long end, but on the short end that seems a 0:13:41.960 --> 0:13:44.680 little high relative to other things. So that could be 0:13:44.720 --> 0:13:47.080 the argument of saying I can bring the short end 0:13:47.120 --> 0:13:48.960 down a little bit because we want to see that 0:13:49.040 --> 0:13:51.440 steep ree yield curve and that more normalized yield curve. 0:13:51.559 --> 0:13:54.920 But yes, after a decade of zero, go back and look, 0:13:55.160 --> 0:13:57.120 rates at five percent are almost. 0:13:56.760 --> 0:13:59.360 In a low relative to history, especially on the long end. 0:14:00.040 --> 0:14:03.240 Tearing up Paul Out on YouTube today. On live chat, 0:14:03.800 --> 0:14:07.800 he used the word quis like when you're court sighted 0:14:07.960 --> 0:14:11.160 duke and the first quarter doesn't go well. Now do 0:14:11.160 --> 0:14:13.839 you look there, and who's the freshman start calem. 0:14:13.760 --> 0:14:17.160 H Cooper flag Connor, Yeah, Cooper Cooper, Cooper Flagg. 0:14:17.360 --> 0:14:18.760 So do you go Cooper you're quiet? 0:14:18.920 --> 0:14:21.160 Yeah, that's not gonna happen. I'd get thrown out of 0:14:21.160 --> 0:14:21.560 my seats. 0:14:21.640 --> 0:14:23.520 Quies, what's happened to me? 0:14:24.400 --> 0:14:27.680 You know, Lisa, he's ruined yep to others to it, Sarah, 0:14:27.680 --> 0:14:29.760 thank you so much, Sarah Han on short notice today 0:14:29.760 --> 0:14:34.400 in the equity markets, as we really readjust without buying Saxon. 0:14:34.680 --> 0:14:38.600 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:14:38.640 --> 0:14:41.680 starting at seven am Eastern on Apple Corplay and Android 0:14:41.680 --> 0:14:44.720 Auto with the Bloomberg Business App. You can also listen 0:14:44.800 --> 0:14:48.040 live on Amazon Alexa from our flagship New York station, 0:14:48.600 --> 0:14:51.600 Just say Alexa Play Bloomberg eleven thirty. 0:14:51.680 --> 0:14:57.760 Calem Anderson for years was definitive in international economics. You 0:14:57.800 --> 0:15:00.760 get upset, you throw out a twelve page wonder Oh damn, 0:15:00.800 --> 0:15:03.080 I gotta read this. He was that good. 0:15:03.080 --> 0:15:04.800 He's teemed up. 0:15:04.680 --> 0:15:10.080 With Thomas Harr of the Denmark Central Bank to write 0:15:10.120 --> 0:15:16.160 a lovely, short focused treatise on your fear of inflation. 0:15:16.800 --> 0:15:20.040 Doctor Hart joins us right now, chief Economists, head of 0:15:20.080 --> 0:15:25.160 all of economics for the Central Bank of Denmark's National Bank. 0:15:25.720 --> 0:15:30.880 Is this nineteen sixties inflation? Is this the inflation that 0:15:31.000 --> 0:15:35.000 our parents or some of us older lived, Doctor Herr. 0:15:36.040 --> 0:15:38.920 Well, thanks a lotor for being on the show, Tom, 0:15:38.960 --> 0:15:41.680 and no, I don't think it is. So. I think 0:15:41.760 --> 0:15:43.760 what happened, and that's what we talk a lot about 0:15:43.800 --> 0:15:47.560 at length in the book, is there was some extraordinary shock, 0:15:47.640 --> 0:15:51.280 and there was extraordinary you can say, fiscal and monetary policy. 0:15:51.320 --> 0:15:54.800 A lot of differences between the different regions we describe 0:15:54.840 --> 0:15:58.440 both the US, Europe and Asia. But that happened. 0:15:58.640 --> 0:15:59.840 But what was the key. 0:15:59.720 --> 0:16:03.920 Difference between compared to the sixties and seventies was, for example, 0:16:03.920 --> 0:16:06.840 that inflacing expectations did not rise to the same extent, 0:16:07.280 --> 0:16:09.440 and therefore that was one of the key reasons why 0:16:09.520 --> 0:16:13.720 inflacing back down. Clearly there are a lot of uncertainties 0:16:13.720 --> 0:16:14.920 out there have to talk about that. 0:16:15.600 --> 0:16:18.800 The heart of the matter, in the fear of every 0:16:18.920 --> 0:16:23.120 sentence of Jerome Powers press conference, is the fear of 0:16:23.280 --> 0:16:28.400 central banks unanchored. Are we threatened that we could be 0:16:28.560 --> 0:16:31.280 unanchored in these tumultuous times? 0:16:33.040 --> 0:16:35.480 I think, I mean all central banks are monitoring this 0:16:35.760 --> 0:16:38.480 extremely closely and clearly. When you look at the last 0:16:38.520 --> 0:16:40.920 and that's what the book is about. The twenty twenty one, 0:16:41.040 --> 0:16:44.840 twenty two bursts of inflation. We did see on the 0:16:44.880 --> 0:16:47.600 short term inplaced expectations that they write somewhat, but the 0:16:47.680 --> 0:16:52.040 longer term still was so you can say surprisingly or 0:16:52.240 --> 0:16:56.560 at least noteworthy, resilient. But we are monitoring this extremely 0:16:56.560 --> 0:16:59.320 closely to see whether there are any signs of dangers, 0:16:59.480 --> 0:17:02.080 but so far they are not in my view, And 0:17:02.200 --> 0:17:03.800 that's also what we talk about in the book. 0:17:05.000 --> 0:17:05.359 To us. 0:17:05.480 --> 0:17:08.760 The discussion these days, just in the last a week 0:17:08.840 --> 0:17:13.280 or so here in the US, it has been about tariffs. Tariffs, teriffs. 0:17:13.880 --> 0:17:18.000 From your perspective, what is their impact on inflation? How 0:17:18.040 --> 0:17:19.359 do you think about that relationship? 0:17:20.160 --> 0:17:22.080 Now? I think there is a difference between whether you 0:17:22.080 --> 0:17:24.040 look at it from a US perspective or whether you 0:17:24.080 --> 0:17:26.120 look at it from a world perspective. But because one 0:17:26.160 --> 0:17:28.119 of the point we're actually making in the book is 0:17:28.160 --> 0:17:30.720 that inflation is to a very large extent of global phenomena. 0:17:31.280 --> 0:17:33.359 But I would say, and that's always the danger of 0:17:33.400 --> 0:17:35.600 saying this time is different. But I think if you 0:17:35.600 --> 0:17:38.360 look at the tariffs issue, I think it's very difficult 0:17:38.400 --> 0:17:40.680 to not see it as at least short term somewhat 0:17:40.680 --> 0:17:43.560 inflationary for the US, and by that way also some 0:17:43.600 --> 0:17:45.879 of the other things which could come out of the 0:17:45.880 --> 0:17:48.399 new administration. But I would say in terms of for 0:17:48.440 --> 0:17:50.600 the rest of the world, I would say less so, 0:17:51.160 --> 0:17:53.640 because what it could be, you can say, a negative 0:17:53.680 --> 0:17:56.680 supply shop for the US in terms of tariffs, will 0:17:56.760 --> 0:18:00.520 be a negative demand shop for europe nation, and therefore 0:18:00.560 --> 0:18:03.040 I would say the spillo of that in terms of 0:18:03.080 --> 0:18:05.760 the information area, it's very very uncertain. Of course, also 0:18:05.920 --> 0:18:08.960 depends on what happens to the dollar, but I would 0:18:09.000 --> 0:18:11.280 think that it would be more limited in terms of 0:18:11.400 --> 0:18:13.480 the global spilows from that. That would be so in 0:18:13.480 --> 0:18:14.440 twenty one twenty. 0:18:14.160 --> 0:18:17.000 Two, Thomas Hard, I would be remiss if I didn't 0:18:17.000 --> 0:18:23.280 pull an audible here for American commuters those on YouTube nationwide. 0:18:24.040 --> 0:18:27.720 The Bank of Denmark rights heard on all the research 0:18:27.840 --> 0:18:31.040 capabilities of Greenland, and I don't want to get into 0:18:31.080 --> 0:18:34.160 a debate about who's going to end up with Greenland here, 0:18:34.280 --> 0:18:37.359 but I do want to ask simply, what's the number 0:18:37.400 --> 0:18:41.520 one thing in the Danish Central Banks research on Greenland 0:18:41.880 --> 0:18:45.080 that you would like to convey to our American audience. 0:18:46.680 --> 0:18:49.320 I mean, we do some ananosis on Greenland. We will 0:18:49.359 --> 0:18:52.520 actually quite quite soon come out with a new analysis 0:18:52.560 --> 0:18:55.800 on Greenland and that you can look out for. I 0:18:55.840 --> 0:18:57.520 think it would be out in a couple of months, 0:18:57.800 --> 0:19:01.720 just published from the Central Banks, purely on the economic 0:19:01.840 --> 0:19:04.920 out roup for Greenland. We're updating this on a quite 0:19:04.960 --> 0:19:07.560 regular basis and that will come out as I said 0:19:07.560 --> 0:19:08.520 in a couple months. 0:19:08.280 --> 0:19:10.560 Time, we'll have to have you back on for that. 0:19:11.000 --> 0:19:15.640 I think maybe Paul Spring and Copenhagen, Thomas Hart, thank 0:19:15.680 --> 0:19:19.919 you so much. Congratulations on your book with Callum Anderson 0:19:19.960 --> 0:19:23.280 the inflation Researchers. We greatly appreciate it. Today, doctor Herr 0:19:23.760 --> 0:19:27.000 is with the Denmark Central Bank. 0:19:32.960 --> 0:19:36.880 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:19:36.920 --> 0:19:39.920 starting at seven am Eastern on Apple, Corplay and Android 0:19:39.920 --> 0:19:42.920 Auto with the Bloomberg Business app. You can also watch 0:19:43.000 --> 0:19:45.960 us live every weekday on YouTube and always on the 0:19:46.000 --> 0:19:47.080 Bloomberg terminal. 0:19:47.520 --> 0:19:49.440 The daily look at the front page is the Lisa 0:19:49.480 --> 0:19:53.000 Matteo Moment and now the Yak Report. What are you 0:19:53.080 --> 0:19:53.960 talking about? 0:19:54.240 --> 0:19:58.879 Okay, Kashmir right, the hottest thing, very expensive, beautiful, feels 0:19:58.960 --> 0:20:03.160 nice and soft for a birthday, yes, but forget about 0:20:03.200 --> 0:20:05.399 it because there's a new luxury material that you have 0:20:05.520 --> 0:20:08.760 to be interested in. It's from the Yak Yes, you 0:20:08.800 --> 0:20:09.480 were talking about it. 0:20:09.520 --> 0:20:10.239 What the heck is then? 0:20:10.400 --> 0:20:10.520 Right? 0:20:10.600 --> 0:20:10.760 Right? 0:20:10.800 --> 0:20:13.640 It's for men. Oh, okay, it's a cattle. They known 0:20:13.680 --> 0:20:14.480 for loud grunting. 0:20:14.560 --> 0:20:14.679 Right. 0:20:14.720 --> 0:20:17.520