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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside

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Speaker 1: my co host Matt Miller. Every business day we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast

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Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. I want to switch

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Speaker 1: the conversation though, over to uh, fixed income kind of

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Speaker 1: currencies economists sort of thing. I'm sure pretty has chopping

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Speaker 1: at the bit to talk about the Bank of Japan,

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Speaker 1: because if anybody cares about the Bank of Japan, it

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Speaker 1: is pretty good. It's important, I know, very important. Huge.

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Speaker 1: Jennifer Lee Joins, a senior economist managing director over at

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Speaker 1: BEMO Capital Markets, and Jennifer, Um, you know, I I

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Speaker 1: sort of realized the importance this morning when Valerie Title

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Speaker 1: in London said, look, the b o J is the

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Speaker 1: only anchor among major central banks holding rates lower, like

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Speaker 1: they're the only ones with nerve or ZERP right now,

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Speaker 1: and uh, if they let that go, it's like off

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Speaker 1: to the races, do you agree? Um, they've already started

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Speaker 1: letting it go in some ways, but you know, just

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Speaker 1: a little bit. And and yes, in many ways it

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Speaker 1: is going to be off to the racist um. You know,

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Speaker 1: I remember a time when you know, it was like

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Speaker 1: snooze fest over at the Bigger Japan because they were

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Speaker 1: doing nothing forever. And finally, you know, back in December

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Speaker 1: they let the creating range around the tenure ye old

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Speaker 1: wide in a bit um. But now it looks like

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Speaker 1: with this new and I actually don't not very familiar

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Speaker 1: with this new potential incoming governor, but it sounds like he's,

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Speaker 1: you know, his comments this morning sounds like it's going

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Speaker 1: to be you know, business as usual at the Big

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Speaker 1: Japan when he takes over. So that's probably why we

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Speaker 1: saw some some some gift back, I guess in the ends,

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Speaker 1: in the end this morning. So so far it sounds

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Speaker 1: like that it might be again just you know, keep

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Speaker 1: going on with very easy monetary policy, so we don't

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Speaker 1: have to worry Jeff yet, Oh, Jen, talk to us

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Speaker 1: a little bit about the actionable differences in that policy.

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Speaker 1: What does going from dovish to hawkish actually look like

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Speaker 1: for the b o J that's kind of been stuck

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Speaker 1: for what ten twelve years minimum? Yes, for well, I've

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Speaker 1: been exaggerating to say, well forever um but being going

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Speaker 1: from you know, some super dubbish to slightly less subbish

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Speaker 1: again by letting that training range widen a little bit

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Speaker 1: last month, but you know, going I guess officially hawkish

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Speaker 1: would be actually raising their interest rates, which you know,

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Speaker 1: I think possibly might happen in April. I actually thought

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Speaker 1: was something that's gonna happen in a at the last meeting,

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Speaker 1: but you know, it may in March. It's it's still

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Speaker 1: you know, it's gonna be the end of their their

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Speaker 1: fiscal years, so there's always walking this's going on in

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Speaker 1: financial market. So I don't know what they want a

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Speaker 1: chance doing anything, But of course if the governor or

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Speaker 1: Corona wants to go off with a bang, and that's

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Speaker 1: the way to do it. So I think April is

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Speaker 1: probably a more likely time to start tweaking it. But

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Speaker 1: I guess if they don't make any actual like giving

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Speaker 1: any changes in their actions, just changing the conversation or

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Speaker 1: making their tone of their discussions a bit more hawkish

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Speaker 1: will also do the job a little bit as well.

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Speaker 1: Fascinating stuff, yeah, sure, But to me the question is

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Speaker 1: still for the b O J are we still viewing

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Speaker 1: this as kind of its own I mean, as Matt said, like,

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Speaker 1: is this kind of its own thing that doesn't necessarily

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Speaker 1: apply to the rest of the world At a time

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Speaker 1: when the ECB and the BOW remains uber hawkish and

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Speaker 1: arguably the FED as well, does the B O J

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Speaker 1: matter when the bigger central banks have kind of decided

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Speaker 1: the path that, especially for investors who are focused on

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Speaker 1: the US, or for investors who are focused on Canada,

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Speaker 1: or even investors focused on does it really matter that much?

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Speaker 1: I still you know, I I have a bove leaned

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Speaker 1: toward yes, and it still matters because it's still heard

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Speaker 1: of the G seven, it's still part of the G tenth,

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Speaker 1: So it does have a bearing, even though again you know,

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Speaker 1: as we all know, they've they've been doing nothing and

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Speaker 1: while everyone was has been uh husband has been tightening.

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Speaker 1: And now it looks like it's it's kind of interesting case.

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Speaker 1: Now we've got the FED potentially coming to the end

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Speaker 1: of the eating eating cycle to my boys to men

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Speaker 1: there um, and the end of course, you know, make

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Speaker 1: a candle, looks like they are going to be on

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Speaker 1: hold for for some time um. And then of course

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Speaker 1: the e c B is going the other direction, and

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Speaker 1: the big of England is sort of you know, still tightening.

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Speaker 1: So you know, the Big Japan is almost going to

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Speaker 1: go in to wake or break this uh this this

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Speaker 1: this tipe breaker in many ways. But again still it's

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Speaker 1: just it broadens the overall picture of you know the

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Speaker 1: fact that central banks are still in some sort of

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Speaker 1: a tightening mode, even the Big Japan, and not as

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Speaker 1: tight as it once was, but still you know, inching

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Speaker 1: a little bit more towards that towards that line. By

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Speaker 1: the way, um Ed Harrison from Bloomberg in Washington, d C.

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Speaker 1: Writes that some trader on Tuesday build up an eighteen

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Speaker 1: million dollar position on six percent FED funds rate by September.

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Speaker 1: Um it's obviously a big or a deeply out of

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Speaker 1: the money, uh position, But people are guarding against that possibility.

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Speaker 1: What are the chances that we get up over five

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Speaker 1: and a quarter over five and a half per Oh wow?

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Speaker 1: So you know, I'm gonna be very humble and say,

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Speaker 1: you know, we we've you know, over the past couple

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Speaker 1: of years, we've been nudging our fed pigs right higher,

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Speaker 1: and uh, you know, now we're looking for the final

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Speaker 1: move to be in May I mean, obviously anything as possible.

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Speaker 1: But at this point, and we've already seen the peak

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Speaker 1: in inflation, we're starting to see it coming down. Maybe

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Speaker 1: not as as as steadily and as as much as

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Speaker 1: the SET is still wanting to but you know, we've

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Speaker 1: already moved down to the twenty five dayses point r

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Speaker 1: right moves. It would have to do be something pretty dramatic,

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Speaker 1: um pre substantial, well you know what I mean, possibly,

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Speaker 1: if you can gonna do see that, yes, but I

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Speaker 1: I don't think that's going to be the case. I

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Speaker 1: think that might be a bit of an l a liar.

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Speaker 1: On Tuesday, as pretty points out, c p I is

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Speaker 1: coming in, we're expecting six what have it's seven? Oh again,

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Speaker 1: it's gonna you know, it's gonna take more than a month.

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Speaker 1: It's gonna have to take more. And then plus we've

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Speaker 1: got these new seasonals, right, so I think it's gonna

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Speaker 1: take more of them up. Just like when we saw

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Speaker 1: inflation decline in UH over the summer, and everyone jumped

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Speaker 1: on the fact that the potential for the set to

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Speaker 1: start turning. You know, they said they needed more than

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Speaker 1: one month, and you know, now they've had more than

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Speaker 1: the month just like if you go to the other direction,

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Speaker 1: if you see a big jump in CPI, you're gonna

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Speaker 1: need more than just one month of a big jump

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Speaker 1: in CPI for the set to change its tune. All right, Ennifer,

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Speaker 1: thanks so much for joining us. Pleasure as always talked

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Speaker 1: to you. Grateful for your insight. Jennifer Lee Uh there

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Speaker 1: over from BEMO, where she is a senior economist and

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Speaker 1: Managing Director BMO Capital Markets, Bank of Montreal. I am

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Speaker 1: psyched to get over to Anika Gupta right now. She

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Speaker 1: covers equities and commodities as director of Macroeconomic Research for

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Speaker 1: Wisdom Tree and Uh On a day when Anika, we

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Speaker 1: got a couple of I think pretty interesting calls. Um.

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Speaker 1: Michael Hartnett over at ba A says, as soon as

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Speaker 1: the SMP gets forty five, says Cell Cell, Cell, don't

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Speaker 1: believe this rally. Meanwhile, Deutsche Bank says the SMP is

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Speaker 1: gonna go to forty five by the end of the

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Speaker 1: year if there was a recession, and if there's a

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Speaker 1: soft landing, we're looking at five thousand. What do you think, well, Um,

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Speaker 1: I agree with the former, Matt. You know we've been

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Speaker 1: plotting the SMP versus the FED balance sheet. Take away

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Speaker 1: the the the tightening that we've seen on the balance

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Speaker 1: sheet and repurchase agreements, and it it is a clear

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Speaker 1: cell signal at this point in time, and I think

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Speaker 1: that's what's being reflected by the market. Um. You know,

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Speaker 1: we've had this um speculative frenzy in the first first

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Speaker 1: month of this year, and you know, we kept warning

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Speaker 1: our clients that look, come that pivotal week where we

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Speaker 1: have these central bank meetings, you are going to see

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Speaker 1: that you know, that that renewed concern actually being echoed

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Speaker 1: in the markets. And we've we've rightly seen that happened. UM.

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Speaker 1: I think what what remains for us as a key

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Speaker 1: focus is that, you know, the employment data still remains

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Speaker 1: very strong. And as long as that is the case, UM,

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Speaker 1: you know, the US is the U S economy is

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Speaker 1: essentially trying to trying to show us that you know,

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Speaker 1: it's it is pointing to economic resilience and if that is,

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Speaker 1: if that is going to continue, then the Fed will

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Speaker 1: need to continue keeping rates in restricted territory. So UM,

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Speaker 1: I think that's what's a key on our minds at

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Speaker 1: this point in time. And obviously retail sales is going

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Speaker 1: to be the big swing factor because you know, we

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Speaker 1: are seeing one of your source of strength coming in

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Speaker 1: from autos. We've you know, where we can see vehicles

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Speaker 1: sales have rebounded um versus the December figure, so you

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Speaker 1: know that. I think that's going to be really interesting

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Speaker 1: to watch out for. Hey, Matt, I'm looking at her

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Speaker 1: bio here. She got a bachelor's in math from St.

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Speaker 1: Stephen College in New Delhi. And I think my dad

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Speaker 1: went to school as well. Oh, that's amazing that we

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Speaker 1: have the same last name, we have the same sort

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Speaker 1: of connection to this college. So unlikely that you're related.

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Speaker 1: I don't think we're related. But and then she got

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Speaker 1: she got the masters in mathematics or maths as they say,

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Speaker 1: from a small known college in England called Oxford. All right,

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Speaker 1: so it's clearly she knows her stuff. Let's talk about

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Speaker 1: the pricing of it all, because I really, I mean, look,

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Speaker 1: you got your bachelor's and masters and math, so explain

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Speaker 1: the math here when it comes to what we're looking

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Speaker 1: at for the commodity market, you're looking at rent crewed

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Speaker 1: an eighty five handle at the moment. But I'm concerned

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Speaker 1: about how you quantify this Chinese reopening, which seems to

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Speaker 1: be the real tailwind for commodities right now. You're absolutely right.

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Speaker 1: I think the way we were looking at commodities, we

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Speaker 1: try to split up the commodities within their four subsectors.

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Speaker 1: And I think from the Chinese reopening theme coming up,

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Speaker 1: you know, taking into effect, we believe energy stands to

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Speaker 1: benefit more than the industrial metal space. And the reason

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Speaker 1: for that is UM. You know, there's a clear distinction

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Speaker 1: that China is is UH like as a message that

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Speaker 1: they're sending out in terms of how they plan to

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Speaker 1: prop up the property sector. It isn't a full scale

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Speaker 1: UH initiative to just prop up the entire property sector.

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Speaker 1: They are distinguishing between UH you know, developers that that

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Speaker 1: have a better buffer buffer of UH and a better

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Speaker 1: quality of assets compared to the other, so that they're

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Speaker 1: clearly distinguishing one from the other. So I think we're

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Speaker 1: going to have a moderate rebound in the property sector.

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Speaker 1: I think they're trying. What China is also trying to do,

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Speaker 1: is they're trying to boost their energy sector as well,

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Speaker 1: because they want they want they don't want to find

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Speaker 1: themselves as vulnerable as you have found themselves in two

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Speaker 1: so I think these two sectors are going to get

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Speaker 1: uh you know, are going to be helped and aided

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Speaker 1: by the Chinese government or into which we we do

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Speaker 1: believe that UM energy stands to benefit as a subsector

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Speaker 1: within commodities a lot more than the industrial metal space.

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Speaker 1: Where we believe industrial metals are really going to get

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Speaker 1: their boost from is from uh you know, the energy

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Speaker 1: transition that is in full swing at this Garrent junc show.

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Speaker 1: By the way, UM I was talking earlier about this

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Speaker 1: commodity story that Bloomberg put out overnight, a trader traffic EURL,

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Speaker 1: a British trading group, has discovered that more than five

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Speaker 1: hundred million dollars worth of uh nicol it's paid for,

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Speaker 1: actually five seventy seven million dollars is fake as a

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Speaker 1: result of well it alleges as a result of a

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Speaker 1: fraud from an Indian company. This coming right after a

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Speaker 1: Donni UM, what do you think about this rapid turn

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Speaker 1: in UM the fortunes of you know, the Indian reputation,

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Speaker 1: because before the Hindenburg report, like every every week we

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Speaker 1: were saying news stories about how India was the new

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Speaker 1: place to invest and it was gonna overtake China and

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Speaker 1: population growth and it has a much better demographic. And

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Speaker 1: it was even Matt Winkler, our editor in chief emeritus, wrote,

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Speaker 1: you know, a love letter to India. So what are

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Speaker 1: we to make of this rapid turn of events. Well,

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Speaker 1: I think it is a sign of caution for the

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Speaker 1: Indian economy because clearly, you know, they were the most

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Speaker 1: resilient economy in two and surprised you know, the vast

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Speaker 1: majority of investors. But I think what we do need

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Speaker 1: to keep in mind is they've been through so many

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Speaker 1: headwinds over the past few years. You know, be at

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Speaker 1: the COVID pandemic um that that's carred the economy quite

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Speaker 1: a lot. We've also had the denomination um, you know,

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Speaker 1: the change and the currency that that caused quite a

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Speaker 1: bit of an overhaul within the economy. UM. And I

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Speaker 1: think what we do need to keep in mind is

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Speaker 1: those very tailors that you did mention they do still exist.

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Speaker 1: But clearly what Hindburg is trying to site, is trying

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Speaker 1: to bring out is you know there is there is clearly, um,

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Speaker 1: you know, something going on within the Adani group that

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Speaker 1: investors should be aware of. UM. But I don't think

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Speaker 1: it will be real India's growth story. But because I

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Speaker 1: think obviously with China being locked down, that was a

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Speaker 1: very important tailwind for India that they that they actually

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Speaker 1: benefited from, you know, be it Apple moving its supply chain,

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Speaker 1: um uh you know, the I G sector benefiting a

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Speaker 1: lot more from uh, from from from the US, which

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Speaker 1: which did quite well. So I think those have been

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Speaker 1: important tail winds for the Indian economy. And obviously they

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Speaker 1: have one of the most favorable demographics in the world,

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Speaker 1: and this comes a bit time when you know, you

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Speaker 1: have aging demographics globally, can't fight demographics. Can if they've

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Speaker 1: got if they've got this huge new generation is bigger

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Speaker 1: than the old generation, that's just got to turn out well, absolutely,

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Speaker 1: and they have this strong consumption uh you know, that

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Speaker 1: is helping drive demand and I think that's really important.

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Speaker 1: And even if you just reflect on the recent budget

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Speaker 1: that is being launched, I think that was another tailwind

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Speaker 1: where you know, the government is trying to be a

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Speaker 1: bit more disciplined in terms of keeping uh you know,

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Speaker 1: the deficit of the entage to the GDP in line.

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Speaker 1: They're also benefiting from much higher tax collection, so that's

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Speaker 1: really benefiting uh, you know, government capex. So I think

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Speaker 1: from that point of view, you know, those state table

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Speaker 1: wins are still going to aid the economy. But I

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Speaker 1: think from a sentiment perspective, we are going to see

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Speaker 1: a bit of a blip, you know, towards Indian equities

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Speaker 1: until we see that does settle. We'll see if that happens, Anika.

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Speaker 1: We have to kind of harp on the Indians on

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Speaker 1: the show right now. I recently educated Matt Miller on Bollywood,

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Speaker 1: a very brief education, and I showed him the wedding

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Speaker 1: photos uh Kr Advani and said, Molota, have you seen him?

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Speaker 1: I did? I did that? They have. They put out

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Speaker 1: a video overnight as well, which I'll show you in

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Speaker 1: the break. It is stunning. What did you make of Ana? Well?

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Speaker 1: I I just barely glanced on the picture. I think

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Speaker 1: the couple looked lovely. Um. Indian weddings are known to

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Speaker 1: be extravagant, long affairs that the West are not very

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Speaker 1: used to. Um So I think, yeah, I wouldn't. I

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Speaker 1: wouldn't spend too much of my time on it. But

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Speaker 1: you know that's another sign of how what how do

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Speaker 1: you have to in some senses right, I mean the

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Speaker 1: gold purchasing power there and the will to buy gold

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Speaker 1: actually drives markets. It does, it definitely does. Um. Yeah,

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Speaker 1: and it's it's obviously, you know, Indians identified with a

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Speaker 1: source of like obviously being a physical asset, a big

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Speaker 1: sign of wealth, and you know it has been increasing

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Speaker 1: over the past year. It really has. Also, for what

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Speaker 1: it's worth, Matt has been saying for like a year

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Speaker 1: now that he's going to affreciate my wedding one day,

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Speaker 1: which she has some experience an incredible efficient. I've done

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Speaker 1: it a few times. Yeah, so, but I'm not sure

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Speaker 1: if I could. The Indian weddings tend to last longer

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Speaker 1: than I think I could. Party, right, it's exactly to

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Speaker 1: be too much for you. I can help. I'll do

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Speaker 1: one or two days of it, you know, and then

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Speaker 1: the elephants will carry me out. Get it together. You

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Speaker 1: gotta you gotta push through it. I just want to

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Speaker 1: get Hannah, the Hannah painted on me that too. That's

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Speaker 1: gonna last piece. A week, that's gonna last you. I'm

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Speaker 1: ready for a week. He's ready for like I could

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Speaker 1: use I could use a week actually, And Nica thanks

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Speaker 1: so much for joining us there. She's director of macroeconomic research.

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Speaker 1: Equities and commodities over wisdom treat a little bit of

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Speaker 1: a turnaround here if John says the Dow Jones Industrial

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Speaker 1: Average rising as the SMP is unchanged, so maybe we

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Speaker 1: will get a little bit of a rally into the

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Speaker 1: end of the day today. Still, it's gonna take a

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Speaker 1: lot to bring the nastact back. Yeah, it really is.

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Speaker 1: You're seeing the down about five tons of one percent

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Speaker 1: yield higher. I wonder if there's a relationship. It doesn't

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Speaker 1: really look like there is, but um yeah, tech underperforming today,

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Speaker 1: all right. One of the important pieces of news we got,

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Speaker 1: I think for the market this morning was on China's

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Speaker 1: consumer inflation accelerating last month as the company reopened and

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Speaker 1: the lunar New Year holiday spur demand. But the games

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Speaker 1: were pretty small. In fact, the c p I, the

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Speaker 1: Chinese Consumer Price Index, was up two point one percent,

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Speaker 1: which you know, for for China is not a huge jump,

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Speaker 1: and the p p I actually um drops zero point

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Speaker 1: eight percent. Let's bring in a China expert right now

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Speaker 1: to help us figure out what's going on with this

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Speaker 1: reopening and what kind of effect it's really gonna have.

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Speaker 1: Hans Doubt joins us. He is the CEO of the

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Speaker 1: Madison Mitchell Group and uh sorry, Mitchell Madison Group, and

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Speaker 1: he joins us from Jackson, Wyoming. It's a place I

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Speaker 1: always love to be, Hans. I'm always so jealous when

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Speaker 1: I say that, but um, thank thanks for joining us.

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Speaker 1: Give us your take on the Chinese situation. We're starting

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Speaker 1: to get more and more data points coming out to

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Speaker 1: help well, hopefully to help answer the question is the

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Speaker 1: reopening gonna be good for you know, an engine of

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Speaker 1: global growth. But I'm not sure if we're really getting

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Speaker 1: the answer yet. Yeah, it's it's always a hard picture there, right,

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Speaker 1: because you can't always trust the data. But I think

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Speaker 1: overall it's a positive story. Right. We talked a lot

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Speaker 1: about China, uh and and it's always been really concerning

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Speaker 1: supply chain, and nobody, you know, everybody expected that this

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Speaker 1: this COVID spreading COVID you know, so quickly in China,

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Speaker 1: especially around the lunar New Year, would would be a

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Speaker 1: major catastrophe. And it wasn't right, it really wasn't. It

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Speaker 1: just simply inspected the whole country and then now they're

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Speaker 1: going back to work. And if you you want to

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Speaker 1: think about it, this way if they really kind of

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Speaker 1: you know, flattened the curve on the back of the

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Speaker 1: whole world, right, which is sort of what they did,

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Speaker 1: and you have to admit that it was a success. Right.

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Speaker 1: So I think China is going back to work. China

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Speaker 1: capacity in dost the capacity is going up just as

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Speaker 1: the Western demand is going down a bit. And you're right,

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Speaker 1: you see this in the pp I a little bit already,

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Speaker 1: and I think it's going to be a very positive

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Speaker 1: effect on inflation, at least as far as treatable goods

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Speaker 1: DOT concerned. Right, that's that's you will see this everywhere,

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Speaker 1: and I think that's overall a good thing. Um. On

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Speaker 1: the other side, you have the political implications, right, So

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Speaker 1: I was you know, you have the Chinese balloon, You

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Speaker 1: got Biden giving his speech. There's a lot of you know,

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Speaker 1: sort of negative sentiment towards China and the desire to continue,

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Speaker 1: you know, the great decoupling. And even worse than that,

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Speaker 1: you had Biden saying nobody would want to be she

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Speaker 1: right now he's facing a ton of problems. I thought

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Speaker 1: it was almost insulting, um, And it seems like the

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Speaker 1: Chinese took it that way as well. Yeah, but this

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Speaker 1: is all nice and fine. But at the same time,

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Speaker 1: we had a record trade between the US and China

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Speaker 1: last year, right, So you guys had this really nice

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Speaker 1: headline a couple of days ago saying globalization finds a way.

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Speaker 1: And I think that's true, right, It's not so much

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Speaker 1: about you know, beating up China. Of course, you know,

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Speaker 1: the US has to do it on the critical goods obviously,

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Speaker 1: on military things and stuff like that. And I think

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Speaker 1: as we're disassembling the balloon, finding more you know, American

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Speaker 1: and Sony parts in there, it's going to be very interesting.

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Speaker 1: But I think the bottom line is that corporation simply

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Speaker 1: have to diversify globally. The globe is bigger than just China.

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Speaker 1: But can we agree that there's something we're not all

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Speaker 1: of us are not being told about the balloon. I mean,

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Speaker 1: it just does not add up if it's really some

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Speaker 1: big spy balloon. I cannot buy any of the million

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Speaker 1: different reasons I've been given for why they didn't shoot

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Speaker 1: it down right when it entered you know, US airspace

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Speaker 1: over Montana. I mean, you live out there. There are

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Speaker 1: not a lot of people around, so they wanted to

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Speaker 1: shoot it down yes, they should have. But so I

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Speaker 1: don't think that we're getting the full story on that.

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Speaker 1: I'm not saying there's some big conspiracies, deep state theory,

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Speaker 1: but something we're not being told. Maybe I don't know why,

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Speaker 1: but um, it just strikes me as an odd time

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Speaker 1: to be then insulting to the Chinese leader when we

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Speaker 1: had a US Air Force general saying, prepare for war.

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Speaker 1: It's gonna happen. By even if we are trading a lot,

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Speaker 1: we could get into a pretty serious military scuffle with

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Speaker 1: a big army. Absolutely, yeah, gotta be careful. Well, all right,

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Speaker 1: we'll walk us through. Then back to China. The COVID

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Speaker 1: story of it all. Do we just not factor it

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Speaker 1: in anymore? I think I think COVID is over. I think,

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Speaker 1: like I said, I think China's done really the right thing.

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Speaker 1: And when I was dealing with after effects of COVID globally, right,

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Speaker 1: I mean, if if you actually think kind of becoming

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Speaker 1: a little bit boring, right, if you maybe shifting you're

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Speaker 1: a little bit here. So another news piece of news

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Speaker 1: which I thought was really interesting last year, last last

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Speaker 1: week was around employment. Right, we had employment, unemployment rates

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Speaker 1: very low, and people got really skittish about this, right,

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Speaker 1: I think that is not really an area of concern

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Speaker 1: because I think what you really have seen is not

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Speaker 1: incremental demand from employers because they actually firing. You see

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Speaker 1: a reduction in in vacancies obviously, but what you're seeing

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Speaker 1: now is workers finally taking jobs because they're running out

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Speaker 1: of savings. They have rising consumer prices that more it

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Speaker 1: is smart and more expensive. So I think in this

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Speaker 1: really crazy post COVID environment, you're seeing a lot of

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Speaker 1: things that normally don't make sense, and I think this

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Speaker 1: is actually a sign of economic weakness. So I think

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Speaker 1: the global story is China will produce, the US and

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Speaker 1: the West will slow down, and things are going to

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Speaker 1: go to normal. I think the issues how quickly and

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Speaker 1: with what rates? So so what effects do you expect

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Speaker 1: all that to have on asset prices? I mean, especially

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Speaker 1: like commodities, right, because it's one of the first places

427
00:22:43,240 --> 00:22:47,920
Speaker 1: we look when we heard China was reopening. Yeah, I think,

428
00:22:47,960 --> 00:22:50,840
Speaker 1: look China, China obviously is a net exporter, right, so

429
00:22:50,880 --> 00:22:55,240
Speaker 1: of course you're going to have some impact on commodity prices.

430
00:22:55,440 --> 00:22:57,840
Speaker 1: Uh in the short term might be it might be

431
00:22:57,880 --> 00:23:00,520
Speaker 1: you know, going up, But I and you have to

432
00:23:00,520 --> 00:23:05,080
Speaker 1: remember the end product demand will be down and this

433
00:23:05,160 --> 00:23:08,080
Speaker 1: stuff is made in China with a combination of labor, capital,

434
00:23:08,080 --> 00:23:10,639
Speaker 1: and raw materials. Right, So this is just one component.

435
00:23:11,040 --> 00:23:14,720
Speaker 1: I don't think inflation in tradable goods is going to

436
00:23:14,720 --> 00:23:18,800
Speaker 1: be a massive problem. What about the thirty seconds? If

437
00:23:18,840 --> 00:23:22,440
Speaker 1: you can the relationship between China and say Russia, the

438
00:23:22,480 --> 00:23:24,720
Speaker 1: relationship between China and India, is there going to be

439
00:23:24,800 --> 00:23:29,439
Speaker 1: a read through into the States? I mean you have

440
00:23:29,560 --> 00:23:33,399
Speaker 1: to The Russia relationship is obvious, right, you have you

441
00:23:33,440 --> 00:23:35,920
Speaker 1: have Russia and China. Is the match made in heaven

442
00:23:36,000 --> 00:23:38,520
Speaker 1: because of energy, right, So that's that was always going

443
00:23:38,560 --> 00:23:41,440
Speaker 1: to happen, and it's just a question of getting it there.

444
00:23:41,480 --> 00:23:45,280
Speaker 1: With North Stream too gone, however, was you know, eliminated?

445
00:23:45,640 --> 00:23:48,560
Speaker 1: That makes sense, right. I think India's is a slightly

446
00:23:48,560 --> 00:23:52,119
Speaker 1: different story. But I think um at the end of

447
00:23:52,160 --> 00:23:54,080
Speaker 1: the day, you have to look at trade flows. Right,

448
00:23:54,200 --> 00:23:58,240
Speaker 1: China in the US are mutually so dependent that it's

449
00:23:58,280 --> 00:24:01,680
Speaker 1: it's not a good comparison to you know, the Cold

450
00:24:01,680 --> 00:24:05,240
Speaker 1: War era between Russia United States. We were so dependently

451
00:24:05,320 --> 00:24:08,879
Speaker 1: to other portrayed and I think that the Chinese recognized that.

452
00:24:08,920 --> 00:24:11,480
Speaker 1: So there's gonna be a lot of noise, but I

453
00:24:11,520 --> 00:24:16,400
Speaker 1: think I would be fairly positive that UM, the economic

454
00:24:16,480 --> 00:24:19,639
Speaker 1: reality would drive good policy. Al Right, Hans, thanks so

455
00:24:19,720 --> 00:24:22,040
Speaker 1: much for joining us. Hans Dowt there. He is the

456
00:24:22,080 --> 00:24:26,040
Speaker 1: CEO of Mitchell Madison Group, China expert. We go to

457
00:24:26,640 --> 00:24:29,200
Speaker 1: UM whenever there are open questions here, and you can

458
00:24:29,200 --> 00:24:31,679
Speaker 1: be sure that for a lot of people in this market,

459
00:24:31,920 --> 00:24:34,000
Speaker 1: there are a lot of open questions. Even with the

460
00:24:34,000 --> 00:24:37,520
Speaker 1: new data inflation CPI coming out in China at two

461
00:24:37,520 --> 00:24:40,720
Speaker 1: point one percent last month. UM, so a little bit tepid,

462
00:24:40,920 --> 00:24:45,239
Speaker 1: but nonetheless UH growth in prices rather than declines as

463
00:24:45,280 --> 00:24:52,040
Speaker 1: they reopened. And that's the ETS was interesting to me.

464
00:24:52,119 --> 00:24:53,879
Speaker 1: For me, I think my favorite et F fun factors

465
00:24:53,920 --> 00:24:55,720
Speaker 1: that you can actually use e t F as a

466
00:24:55,800 --> 00:24:58,399
Speaker 1: shorting vehicle. UM. I guess a little wonky, but it's

467
00:24:58,480 --> 00:25:01,440
Speaker 1: interesting to me. UM, let's bring in someone who is

468
00:25:02,000 --> 00:25:04,520
Speaker 1: a true expert on e t F. S Uh has

469
00:25:04,680 --> 00:25:07,640
Speaker 1: far more knowledge on the subject than Matt and I combined,

470
00:25:07,800 --> 00:25:10,760
Speaker 1: probably a Ward Boards et F portfolio manager over at

471
00:25:10,800 --> 00:25:12,920
Speaker 1: Angel Oak. He's going to talk to us a little

472
00:25:12,920 --> 00:25:17,280
Speaker 1: bit about probably everything, but we're indulge the nerdiness here.

473
00:25:17,960 --> 00:25:21,720
Speaker 1: Shorting through e t f s. Is that a thing? Oh, yeah,

474
00:25:21,800 --> 00:25:24,240
Speaker 1: that's the thing. That's one of the great things about

475
00:25:24,359 --> 00:25:27,560
Speaker 1: the e t F market is it's a way for

476
00:25:28,320 --> 00:25:30,639
Speaker 1: you know, markets where it can sometimes be difficult to

477
00:25:30,760 --> 00:25:35,439
Speaker 1: short things like corporate bonds or high yield corporate bonds.

478
00:25:35,680 --> 00:25:39,119
Speaker 1: If you want to get underweight or short exposure, you

479
00:25:39,200 --> 00:25:42,359
Speaker 1: can utilize the e t F market to UH to

480
00:25:42,520 --> 00:25:44,720
Speaker 1: do that. And that actually, you know, it's a nice

481
00:25:44,800 --> 00:25:47,119
Speaker 1: way to kind of create liquidity in the e t

482
00:25:47,280 --> 00:25:50,680
Speaker 1: F market. And there's also options markets that are growing

483
00:25:50,840 --> 00:25:54,680
Speaker 1: rapidly around large liquid UH e t f s that

484
00:25:54,760 --> 00:25:57,000
Speaker 1: are out there. I also love that you can, you know,

485
00:25:57,080 --> 00:26:01,000
Speaker 1: build your own index is now um you can invest

486
00:26:01,080 --> 00:26:03,560
Speaker 1: in active e t f s and you can just

487
00:26:03,840 --> 00:26:06,879
Speaker 1: complete you can put together a complete strategy with e

488
00:26:07,000 --> 00:26:10,720
Speaker 1: t s. There are some limitations, right, especially in certain

489
00:26:11,400 --> 00:26:15,119
Speaker 1: vehicles like a four oh one K for example. Are

490
00:26:15,440 --> 00:26:20,399
Speaker 1: those are those sort of barriers falling away? Yeah? The

491
00:26:20,560 --> 00:26:24,120
Speaker 1: last call it even two years has been really interesting,

492
00:26:24,200 --> 00:26:26,879
Speaker 1: particularly in the fixed income market right along the lines

493
00:26:26,960 --> 00:26:30,600
Speaker 1: of what you're you're talking about. So historically, if you

494
00:26:30,680 --> 00:26:34,159
Speaker 1: wanted exposure to the fixed income market via e t

495
00:26:34,440 --> 00:26:39,359
Speaker 1: f s, you were buying either treasury bonds or corporate bonds.

496
00:26:40,119 --> 00:26:43,560
Speaker 1: And as active ETFs have grown and the difference between

497
00:26:43,640 --> 00:26:46,320
Speaker 1: active and passive e t f s. Passive you're just

498
00:26:46,359 --> 00:26:49,679
Speaker 1: gonna track a very simple index, so you need very

499
00:26:49,840 --> 00:26:54,440
Speaker 1: liquid securities underlying those those uh, those passive e t s.

500
00:26:54,840 --> 00:26:57,040
Speaker 1: With an active index or with an active e t F,

501
00:26:57,320 --> 00:27:00,040
Speaker 1: you're gonna look to try and achieve an outcome. So

502
00:27:00,119 --> 00:27:03,000
Speaker 1: maybe you're trying to get total return, maybe you're trying

503
00:27:03,040 --> 00:27:06,680
Speaker 1: to get a very high beta exposure to the fixed

504
00:27:06,720 --> 00:27:09,400
Speaker 1: income market. Maybe you're looking for something very stable that's

505
00:27:09,440 --> 00:27:11,320
Speaker 1: not going to move. It gives you a lot more

506
00:27:11,400 --> 00:27:14,840
Speaker 1: flexibility though, to be able to select different securities. You're

507
00:27:14,840 --> 00:27:17,800
Speaker 1: not forced to change when an index changes, and so

508
00:27:18,160 --> 00:27:20,000
Speaker 1: one of the things we're really excited about what that

509
00:27:20,119 --> 00:27:23,479
Speaker 1: allows in the E t F market. You know, as

510
00:27:23,520 --> 00:27:26,480
Speaker 1: I highlighted, historically you've only been able to get exposure

511
00:27:26,560 --> 00:27:29,920
Speaker 1: to credit through corporates, and now you can get exposure

512
00:27:29,960 --> 00:27:35,840
Speaker 1: to mortgage backed securities, commercial mortgage backed securities, clos All

513
00:27:35,920 --> 00:27:38,560
Speaker 1: these things that have been concentrated in the mutual fund

514
00:27:38,600 --> 00:27:42,040
Speaker 1: space where only mutual fund investors could could get access

515
00:27:42,119 --> 00:27:45,399
Speaker 1: are now quickly entering the E t F marketplace. Okay,

516
00:27:45,440 --> 00:27:48,639
Speaker 1: so let's bring it to UH next week, making a

517
00:27:48,680 --> 00:27:50,680
Speaker 1: little bit more short term here. Matt mentioned at the

518
00:27:50,760 --> 00:27:54,560
Speaker 1: top of the segment thematic e t s specifically, it

519
00:27:54,680 --> 00:27:57,080
Speaker 1: feels like the no brainer to play this market is

520
00:27:57,119 --> 00:27:58,600
Speaker 1: while you look at the Federal Reserve and you kind

521
00:27:58,600 --> 00:28:00,959
Speaker 1: of gamble what they're going to do next, what are

522
00:28:01,040 --> 00:28:04,200
Speaker 1: we looking at the Mattock ets as perhaps reemerging as

523
00:28:04,680 --> 00:28:09,840
Speaker 1: things like China, Russia, even Europe become a larger part

524
00:28:09,920 --> 00:28:14,000
Speaker 1: of the trading conversation. So we tend to focus right

525
00:28:14,520 --> 00:28:18,480
Speaker 1: exactly with what was highlighted around the Federal Reserve. We're

526
00:28:18,560 --> 00:28:21,520
Speaker 1: we're a bond focused manager and for us, you know,

527
00:28:21,680 --> 00:28:24,920
Speaker 1: the our kind of UH credents going into two thousand

528
00:28:25,000 --> 00:28:27,800
Speaker 1: twenty three is that bonds are the new equity, and

529
00:28:28,000 --> 00:28:31,200
Speaker 1: so UH you look at the Federal reserve policy, we

530
00:28:31,320 --> 00:28:34,159
Speaker 1: think we're getting towards peak policy at the Federal Reserve.

531
00:28:34,840 --> 00:28:38,720
Speaker 1: Um later this year you could even see a light recession,

532
00:28:39,320 --> 00:28:41,480
Speaker 1: and this is going to create what we think is

533
00:28:41,480 --> 00:28:44,280
Speaker 1: a tremendous opportunity in the fixed income marketplace. And we

534
00:28:44,400 --> 00:28:47,959
Speaker 1: think investors were already seeing this are starting to reduce

535
00:28:48,080 --> 00:28:51,280
Speaker 1: their equity allocations and actually think about adding fixed income

536
00:28:51,360 --> 00:28:55,240
Speaker 1: given the the yield effectively in the marketplace. You know,

537
00:28:55,520 --> 00:28:59,440
Speaker 1: particularly if that recessionary scenario plays out, you could see

538
00:28:59,520 --> 00:29:02,239
Speaker 1: that hit corporate rings and that would suggest this might

539
00:29:02,280 --> 00:29:04,840
Speaker 1: be a mooted year, particularly given the strong returns that

540
00:29:04,880 --> 00:29:06,640
Speaker 1: we've seen in the beginning of the year in the

541
00:29:06,680 --> 00:29:10,600
Speaker 1: equity marketplace on a go forward basis, without you know,

542
00:29:10,760 --> 00:29:13,720
Speaker 1: the growth and earnings and in the rally we've already

543
00:29:13,760 --> 00:29:16,760
Speaker 1: seen in equities, you know, fixed income could look like

544
00:29:17,040 --> 00:29:20,800
Speaker 1: a great place. That's particularly true in our market where

545
00:29:20,840 --> 00:29:24,120
Speaker 1: we tend to focus, which is credit. Where in the

546
00:29:24,200 --> 00:29:26,400
Speaker 1: fixed income space, Like, what kind of maturities are we

547
00:29:26,440 --> 00:29:28,560
Speaker 1: talking about here? We had a guest on yesterday who

548
00:29:29,400 --> 00:29:30,640
Speaker 1: was saying a lot of what you were saying as well,

549
00:29:30,640 --> 00:29:32,840
Speaker 1: but he said, look, we gotta go out in maturity.

550
00:29:32,880 --> 00:29:34,440
Speaker 1: You gotta go to the thirty year to the fifty

551
00:29:34,520 --> 00:29:38,080
Speaker 1: year because that's the safest play way to play the FED.

552
00:29:38,520 --> 00:29:40,360
Speaker 1: What kind of what kind of duration? What kind of

553
00:29:40,400 --> 00:29:43,160
Speaker 1: maturity are we looking at? I gotta I gotta tell you,

554
00:29:43,240 --> 00:29:44,880
Speaker 1: I don't know who it was, but I'm on the

555
00:29:44,920 --> 00:29:47,000
Speaker 1: opposite end of the spectrum. I think you can get

556
00:29:47,560 --> 00:29:51,680
Speaker 1: six and a half percent yields in UH in structured

557
00:29:51,880 --> 00:29:55,400
Speaker 1: investment grade rated securities that are one year and in

558
00:29:56,520 --> 00:29:59,200
Speaker 1: versus going out the curve to the thirty year UH,

559
00:29:59,560 --> 00:30:02,680
Speaker 1: where you're getting less yield and taking significantly greater risks.

560
00:30:02,760 --> 00:30:05,280
Speaker 1: So we think in the near term you want to

561
00:30:05,920 --> 00:30:10,400
Speaker 1: have those you know, safe, high quality, short duration securities,

562
00:30:10,440 --> 00:30:14,840
Speaker 1: get that high yield, and then over time, perhaps later

563
00:30:14,920 --> 00:30:17,240
Speaker 1: in the year, as spreads widen out with with that

564
00:30:17,720 --> 00:30:21,080
Speaker 1: potential recession um, that's when you might get a little

565
00:30:21,120 --> 00:30:23,320
Speaker 1: bit longer data and you know, buy stuff. Call it

566
00:30:23,440 --> 00:30:26,080
Speaker 1: further out the curve and further down the credit quality spectrum.

567
00:30:26,880 --> 00:30:28,800
Speaker 1: What are you seeing in the in the flows right

568
00:30:28,880 --> 00:30:31,800
Speaker 1: now and and how do you use the flows to

569
00:30:31,920 --> 00:30:36,480
Speaker 1: inform your views? Yeah, so last year was clearly a

570
00:30:36,720 --> 00:30:40,120
Speaker 1: very challenged year from a flow standpoint in the fixed

571
00:30:40,160 --> 00:30:43,200
Speaker 1: income marketplace, and on one hand, as an asset manager,

572
00:30:43,320 --> 00:30:46,040
Speaker 1: that's not as fun as the alternative. On the other hand,

573
00:30:46,080 --> 00:30:49,280
Speaker 1: it's what's creating this amazing opportunity that we're we're seeing

574
00:30:49,400 --> 00:30:51,960
Speaker 1: this year, and so far this year we have started

575
00:30:52,000 --> 00:30:54,280
Speaker 1: to see floats turn around aggressively. I think it's a

576
00:30:54,360 --> 00:30:58,600
Speaker 1: lot of the investors who were tax harvest tax harvesting

577
00:30:58,720 --> 00:31:01,479
Speaker 1: last year, uh um, and also just kind of had

578
00:31:01,600 --> 00:31:03,719
Speaker 1: moved to cash given the yields in cash were at

579
00:31:03,800 --> 00:31:06,240
Speaker 1: levels they hadn't seen in a long time. But they're

580
00:31:06,280 --> 00:31:09,920
Speaker 1: starting to put that money to work now. There After

581
00:31:10,000 --> 00:31:11,800
Speaker 1: you kind of look at what the demand is going

582
00:31:11,840 --> 00:31:13,640
Speaker 1: to be. We look at what the supply is in

583
00:31:13,720 --> 00:31:15,760
Speaker 1: the market, and there's not a lot of supply coming

584
00:31:15,800 --> 00:31:19,360
Speaker 1: from fixed income market, which you know, again informs our

585
00:31:19,400 --> 00:31:21,560
Speaker 1: bullish view that if you have a lot of demand

586
00:31:21,680 --> 00:31:23,920
Speaker 1: for bonds and there aren't a lot of bonds being

587
00:31:23,960 --> 00:31:26,400
Speaker 1: produced out there, you know, the price has to go up.

588
00:31:28,520 --> 00:31:32,160
Speaker 1: I am confused then about when you're talking about the yield.

589
00:31:33,680 --> 00:31:35,800
Speaker 1: Isn't this been kind of a dynamic for a couple

590
00:31:35,840 --> 00:31:37,800
Speaker 1: of months now. I'm just wondering, like, what's new here?

591
00:31:37,880 --> 00:31:41,320
Speaker 1: Why are people more convinced that perhaps the bond market

592
00:31:42,160 --> 00:31:47,120
Speaker 1: is deserving of a bull case. I think the point

593
00:31:47,240 --> 00:31:50,360
Speaker 1: you you brought up, which are flows flows having turned around,

594
00:31:50,560 --> 00:31:53,840
Speaker 1: I think is a positive catalyst. I also think some

595
00:31:54,000 --> 00:31:56,360
Speaker 1: of the CPI that we've numbers that we've seen in

596
00:31:56,400 --> 00:31:59,400
Speaker 1: the last call it month or two as that kind

597
00:31:59,440 --> 00:32:02,600
Speaker 1: of flows into the marketplace and starts to see interest

598
00:32:02,680 --> 00:32:07,400
Speaker 1: rate volatility declimb. All those things, you know, effectively inform

599
00:32:07,560 --> 00:32:11,600
Speaker 1: or drive this kind of both spread tightening in particular

600
00:32:11,680 --> 00:32:14,680
Speaker 1: and at least the stabilization in yields, if not a

601
00:32:17,000 --> 00:32:20,000
Speaker 1: a lower yield number itself. But you also got to

602
00:32:20,080 --> 00:32:22,560
Speaker 1: remember that you're getting a nice coupon now, a six

603
00:32:22,640 --> 00:32:25,440
Speaker 1: and a half percent, seven percent coupon with the potential

604
00:32:25,520 --> 00:32:28,360
Speaker 1: for price appreciation. That's where you get into this call

605
00:32:28,440 --> 00:32:32,560
Speaker 1: at seven, eight, nine, even ten total return potential. You know.

606
00:32:32,680 --> 00:32:35,520
Speaker 1: That's that's why we view as bonds as the news stocks.

607
00:32:36,360 --> 00:32:39,280
Speaker 1: That's interesting, you know. I will say that I saw

608
00:32:39,320 --> 00:32:42,480
Speaker 1: a great piece today by Ed Harrison from Bloomberg pointing

609
00:32:42,520 --> 00:32:46,680
Speaker 1: out that one of the most unnoticed monetary policy transmission

610
00:32:46,760 --> 00:32:51,240
Speaker 1: channels is the interest income channel. So that that coupon

611
00:32:51,720 --> 00:32:55,840
Speaker 1: is um maybe less helpful than the Fed wants it

612
00:32:55,880 --> 00:32:57,800
Speaker 1: to be right now, which leads you down a whole

613
00:32:58,160 --> 00:33:00,640
Speaker 1: uh well, leads you down a big rabbit hole, and

614
00:33:00,880 --> 00:33:04,480
Speaker 1: I recommend the macrobu column. Um alright, Ward, Boards, thank

615
00:33:04,520 --> 00:33:06,480
Speaker 1: you very much for joining us. Pleasure having on. Hope

616
00:33:06,480 --> 00:33:09,040
Speaker 1: you can get you back on again soon. Ward is

617
00:33:09,120 --> 00:33:11,200
Speaker 1: the et F portfolio manager as well as a head

618
00:33:11,240 --> 00:33:17,560
Speaker 1: of distribution in public strategies over at Angel Oak. I've

619
00:33:17,560 --> 00:33:21,120
Speaker 1: been waiting all day long to get to this story.

620
00:33:21,240 --> 00:33:23,680
Speaker 1: I know you mentioned it like every commercial break. Well,

621
00:33:23,800 --> 00:33:28,800
Speaker 1: it is to me absolutely fascinating the sheer scale of theft.

622
00:33:28,960 --> 00:33:32,400
Speaker 1: Until this point, my all time favorite theft was the

623
00:33:32,960 --> 00:33:36,960
Speaker 1: Great maple Syrup heist of like two twelve. Do you

624
00:33:37,000 --> 00:33:40,000
Speaker 1: remember one Canada has like maple syrup is a big

625
00:33:40,080 --> 00:33:43,200
Speaker 1: deal for Canada obviously, and they have these huge, like

626
00:33:44,800 --> 00:33:48,880
Speaker 1: government run depots that store all the extra maple syrup,

627
00:33:49,040 --> 00:33:52,239
Speaker 1: just like we have Fort Knox for gold. And at

628
00:33:52,320 --> 00:33:55,479
Speaker 1: one point, I can't remember all the details, but at

629
00:33:55,520 --> 00:33:57,040
Speaker 1: one point they looked in one of the barrels and

630
00:33:57,120 --> 00:33:59,520
Speaker 1: found it was just water. And then they realized somebody

631
00:33:59,560 --> 00:34:03,960
Speaker 1: had still and like millions of dollars worth of maple syrup.

632
00:34:04,520 --> 00:34:07,400
Speaker 1: But that was like twenty million bucks or the maple syrup.

633
00:34:07,520 --> 00:34:10,960
Speaker 1: This is five hundred and seventies seven million dollars worth

634
00:34:11,000 --> 00:34:14,399
Speaker 1: of nickel. Okay, yes, quite not quite the same. Let's

635
00:34:14,440 --> 00:34:17,000
Speaker 1: get out to Jack farshe's one of the reporters on

636
00:34:17,080 --> 00:34:21,080
Speaker 1: this story, which Jack, I just you know, there are

637
00:34:21,080 --> 00:34:23,440
Speaker 1: a few stories that I just read straight top to

638
00:34:23,560 --> 00:34:26,200
Speaker 1: bottom um and then want more. This is one of

639
00:34:26,280 --> 00:34:29,720
Speaker 1: those stories. So traffic Eurra Group is the big trading

640
00:34:29,800 --> 00:34:33,640
Speaker 1: outfit where based in London that realized, um, it was

641
00:34:33,719 --> 00:34:36,840
Speaker 1: buying all this nickel and was getting I guess rocks

642
00:34:40,360 --> 00:34:42,520
Speaker 1: that head office in Geneva. They're one of the world's

643
00:34:42,520 --> 00:34:46,800
Speaker 1: biggest trading companies. Uh. Probably not the company that you

644
00:34:46,800 --> 00:34:49,000
Speaker 1: would expect to be to be caught out in this

645
00:34:49,160 --> 00:34:51,840
Speaker 1: kind of in this kind of situation. Uh. You know,

646
00:34:51,920 --> 00:34:54,680
Speaker 1: if you if you think of the the global commodity

647
00:34:54,719 --> 00:34:57,480
Speaker 1: trading industry, they are one of the blue chips. They are,

648
00:34:57,680 --> 00:35:00,279
Speaker 1: you know, the Microsoft or Apple of the of the

649
00:35:00,280 --> 00:35:03,920
Speaker 1: commodity trading industry. And yet here they are and you know,

650
00:35:04,000 --> 00:35:07,640
Speaker 1: according to our reporting and and indeed what they've what

651
00:35:07,760 --> 00:35:10,680
Speaker 1: they've said now and confirmed on the record. Uh. They

652
00:35:10,800 --> 00:35:15,040
Speaker 1: started opening containers as they started arriving at ports. First

653
00:35:15,239 --> 00:35:17,280
Speaker 1: the first one in Rotterdam a few days before Christmas

654
00:35:18,120 --> 00:35:20,800
Speaker 1: last year. They opened this container that was supposed to

655
00:35:20,800 --> 00:35:24,080
Speaker 1: contain nickel that they supposedly owned, and what they found

656
00:35:24,120 --> 00:35:27,920
Speaker 1: in it was essentially not much. I think there were

657
00:35:27,960 --> 00:35:30,240
Speaker 1: some things like crude steel in some of these containers

658
00:35:30,880 --> 00:35:33,040
Speaker 1: and other things that are worth you know, a tiny,

659
00:35:33,120 --> 00:35:35,680
Speaker 1: tiny fraction of what of what nickel is worth. Uh,

660
00:35:35,880 --> 00:35:37,600
Speaker 1: And when they add up, I mean they're still they're

661
00:35:37,600 --> 00:35:41,000
Speaker 1: still apparently I think probably hundreds of these containers sitting

662
00:35:41,040 --> 00:35:43,400
Speaker 1: on container ships going around the world at the moment.

663
00:35:43,960 --> 00:35:45,560
Speaker 1: But if they add up all of the containers that

664
00:35:45,640 --> 00:35:48,400
Speaker 1: they have that as uh, that that that they bought

665
00:35:48,840 --> 00:35:51,360
Speaker 1: from a from a group of a group of companies

666
00:35:51,400 --> 00:35:55,080
Speaker 1: connected to a particular individual, um, they say that's worth

667
00:35:55,120 --> 00:35:57,680
Speaker 1: five seven million dollars and they've they've taken that as

668
00:35:57,719 --> 00:36:01,560
Speaker 1: a loss already. So so talk us through first of all,

669
00:36:01,800 --> 00:36:04,239
Speaker 1: how this nickel gets transported around the world. How big

670
00:36:04,320 --> 00:36:07,759
Speaker 1: are these containers? Are we talking like twenty ft fort containers?

671
00:36:08,160 --> 00:36:10,520
Speaker 1: What do they weigh? Did they just fill them up

672
00:36:10,560 --> 00:36:14,160
Speaker 1: with nickel? Is it like shoveled in or what are

673
00:36:14,200 --> 00:36:15,920
Speaker 1: we What are we really talking about here? Because I

674
00:36:16,000 --> 00:36:19,200
Speaker 1: just think it's fair, it's standards, its standard shipping container.

675
00:36:19,239 --> 00:36:22,160
Speaker 1: There's a lot of a lot of industrial metals get

676
00:36:22,239 --> 00:36:25,640
Speaker 1: shipped on in containers. You know, if you think about

677
00:36:25,680 --> 00:36:27,520
Speaker 1: things like iron ore and coal, they tend to be

678
00:36:27,560 --> 00:36:29,480
Speaker 1: shipped in bulk. So you have a whole ship that

679
00:36:29,680 --> 00:36:33,640
Speaker 1: is full of coal or of iron ore, but things

680
00:36:33,760 --> 00:36:40,040
Speaker 1: like refined in copper, nickel, aluminium, even copper ores. That

681
00:36:40,120 --> 00:36:44,120
Speaker 1: kind of thing usually shipped in containers alongside everything else

682
00:36:44,200 --> 00:36:47,280
Speaker 1: that gets shipped in containers, you know, the cars, the whatever.

683
00:36:47,360 --> 00:36:49,480
Speaker 1: If you're moving house, you're container full of your stuff

684
00:36:49,520 --> 00:36:51,000
Speaker 1: moving from one country to another. All the rest of

685
00:36:51,040 --> 00:36:56,880
Speaker 1: it is on a container ship with you want to

686
00:36:56,880 --> 00:37:01,560
Speaker 1: contains on a container ship with with the with the

687
00:37:01,640 --> 00:37:05,759
Speaker 1: nickel and the copper, uh, and you can probably put

688
00:37:05,760 --> 00:37:08,000
Speaker 1: about twenty five tons of copper give or of nickel

689
00:37:08,160 --> 00:37:11,360
Speaker 1: rather or copper for that matter, in a single container.

690
00:37:11,440 --> 00:37:14,960
Speaker 1: And so there will be a few dozen containers containing

691
00:37:15,320 --> 00:37:17,879
Speaker 1: nickel that is owned by Trafficura, say in this case,

692
00:37:18,520 --> 00:37:21,160
Speaker 1: on a container ship going from one part to another. UM.

693
00:37:21,680 --> 00:37:24,279
Speaker 1: The key really to the whole, this whole story and

694
00:37:24,360 --> 00:37:27,040
Speaker 1: why this happens time and time again in commodity trading

695
00:37:27,440 --> 00:37:31,600
Speaker 1: is the reliance of the industry on physical documents. So,

696
00:37:33,080 --> 00:37:37,000
Speaker 1: just to be clear, was there actually nickel there or

697
00:37:37,160 --> 00:37:42,360
Speaker 1: was this a complete like fraud. It's a good question.

698
00:37:42,440 --> 00:37:45,640
Speaker 1: We don't know all the details yet of what exactly happened.

699
00:37:45,719 --> 00:37:48,799
Speaker 1: Traffic Oura has said UH that they think they were

700
00:37:48,800 --> 00:37:52,200
Speaker 1: the victim of a systematic fraud, UM, and that involved

701
00:37:52,239 --> 00:37:56,399
Speaker 1: misrepresentation and the presentation of a variety of false documentation. UM.

702
00:37:57,160 --> 00:37:59,640
Speaker 1: There are various ways in which this kind of thing

703
00:38:00,040 --> 00:38:03,600
Speaker 1: can happen and has happened in the past. One is,

704
00:38:03,760 --> 00:38:06,319
Speaker 1: you know, at some point there is some real nickel, uh,

705
00:38:06,520 --> 00:38:10,399
Speaker 1: and then at some point somebody produces some some fake

706
00:38:10,480 --> 00:38:12,560
Speaker 1: documentation saying that the real nickel is still in this

707
00:38:12,640 --> 00:38:16,120
Speaker 1: container when actually it no longer is, or or that

708
00:38:16,239 --> 00:38:18,239
Speaker 1: it hasn't been sold when actually it has. That kind

709
00:38:18,280 --> 00:38:20,680
Speaker 1: of thing. So somewhere in the chain, maybe there was

710
00:38:20,760 --> 00:38:22,600
Speaker 1: some nickel at some point, but by the time that

711
00:38:22,680 --> 00:38:25,200
Speaker 1: trafficer opened the container, it wasn't there anymore. Season maybe

712
00:38:25,239 --> 00:38:29,720
Speaker 1: it's been taken so could it could have been stolen,

713
00:38:29,920 --> 00:38:32,120
Speaker 1: Maybe it was never there. I guess we don't know.

714
00:38:32,440 --> 00:38:35,279
Speaker 1: We're not to the bottom of this yet, Jack traffic Er,

715
00:38:35,400 --> 00:38:38,800
Speaker 1: I guess pressing legal action against um I. When I

716
00:38:38,880 --> 00:38:42,279
Speaker 1: saw India, I immediately thought of Donnie, as I'm sure

717
00:38:42,360 --> 00:38:45,840
Speaker 1: many other people did. But it's not. It's there pursuing

718
00:38:45,920 --> 00:38:50,600
Speaker 1: legal action against Pratique Gupta and no relation to Critty.

719
00:38:50,719 --> 00:38:52,680
Speaker 1: By the way, I want to point out right now, UM,

720
00:38:53,320 --> 00:38:57,759
Speaker 1: but what does pratique Gupta say, and how I mean

721
00:38:58,160 --> 00:39:01,440
Speaker 1: even if you know, if if you take Trafficer at

722
00:39:01,480 --> 00:39:03,520
Speaker 1: his word, this guy must be a big deal to

723
00:39:03,680 --> 00:39:06,760
Speaker 1: even sell five hundred seventy seven billion dollars million dollars

724
00:39:06,800 --> 00:39:10,839
Speaker 1: of fake nickel. Well that's a very good point. Um.

725
00:39:10,960 --> 00:39:13,280
Speaker 1: So Prettee up to we have been trying to contact

726
00:39:13,360 --> 00:39:18,719
Speaker 1: him and his companies. We haven't had any response so far. Um.

727
00:39:19,640 --> 00:39:24,319
Speaker 1: Obviously they're defending themselves in legal action or they they

728
00:39:24,360 --> 00:39:27,080
Speaker 1: will be scrambling to defend themselves in legal action against

729
00:39:27,120 --> 00:39:29,480
Speaker 1: traffic or which trafficker has been launching around the world

730
00:39:29,480 --> 00:39:32,200
Speaker 1: in the last few days. Um. But it's a good

731
00:39:32,239 --> 00:39:35,239
Speaker 1: point that Trafficer had this huge exposure to them. Uh.

732
00:39:35,719 --> 00:39:39,120
Speaker 1: They're not that huge trading company. They're relatively well known

733
00:39:39,400 --> 00:39:43,880
Speaker 1: in the world of people who trade uh metals like nickel,

734
00:39:44,280 --> 00:39:49,000
Speaker 1: but it's not a vast group of companies. Um. Uh.

735
00:39:49,320 --> 00:39:51,480
Speaker 1: You know, Prettee up to there was a company called

736
00:39:51,520 --> 00:39:53,840
Speaker 1: Tushtev International, which was an Indian company that's now an

737
00:39:53,840 --> 00:39:58,359
Speaker 1: insolvency that he was running and was partially owned by

738
00:39:58,800 --> 00:40:01,759
Speaker 1: him and other members of his family. It's maximum which

739
00:40:01,840 --> 00:40:03,799
Speaker 1: was more than a decade ago. It was worth about

740
00:40:03,800 --> 00:40:06,040
Speaker 1: two d and fifty million dollars and since then is

741
00:40:06,080 --> 00:40:08,520
Speaker 1: worth you know, only a few million dollars which is

742
00:40:08,560 --> 00:40:12,040
Speaker 1: listed on in India. Um. So it is quite striking

743
00:40:12,080 --> 00:40:14,640
Speaker 1: that Trafficura managed to end up with an exposure of

744
00:40:14,880 --> 00:40:17,799
Speaker 1: five seven million dollars to to these guys. I think

745
00:40:17,840 --> 00:40:21,640
Speaker 1: that you know, the point that I would make is uh,

746
00:40:21,719 --> 00:40:23,760
Speaker 1: and I guess the reason why a company like Trafficura

747
00:40:23,800 --> 00:40:26,279
Speaker 1: could end up being caught out by this kind of thing. Uh.

748
00:40:26,719 --> 00:40:29,279
Speaker 1: This was metal that Trafficura thought it had bought. So

749
00:40:29,360 --> 00:40:32,960
Speaker 1: it wasn't like they had a credit exposure to these companies.

750
00:40:33,640 --> 00:40:35,400
Speaker 1: They thought they bought some metal and they thought what

751
00:40:35,440 --> 00:40:37,080
Speaker 1: they owned it. It was only when they discovered that

752
00:40:37,200 --> 00:40:39,840
Speaker 1: they didn't own what they thought they owned but they

753
00:40:40,000 --> 00:40:42,680
Speaker 1: that they realized they had a big exposure. So actually

754
00:40:43,440 --> 00:40:45,640
Speaker 1: their assumption was that they didn't have much of an

755
00:40:45,680 --> 00:40:47,880
Speaker 1: exposure at all because they owned some metal, they had

756
00:40:48,000 --> 00:40:51,279
Speaker 1: title of documentation to this all of these parcels of

757
00:40:51,320 --> 00:40:54,239
Speaker 1: metal fitting in ships around the world, which wasn't there.

758
00:40:55,280 --> 00:40:57,960
Speaker 1: It wasn't which in fact, Jack, thanks so much for

759
00:40:58,080 --> 00:41:00,520
Speaker 1: joining us. It's a great story. Jack. Here she wrote

760
00:41:00,560 --> 00:41:03,359
Speaker 1: this story with Archie Hunter highly recommend checking it out

761
00:41:03,680 --> 00:41:07,200
Speaker 1: on the Bloomberg terminal. Traffickerro faces five seventy seven million

762
00:41:07,280 --> 00:41:15,640
Speaker 1: dollar loss after finding nickel fraud. Thanks for listening to

763
00:41:15,640 --> 00:41:19,160
Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to

764
00:41:19,239 --> 00:41:23,359
Speaker 1: interviews with Apple Podcasts or whatever podcast platform you prefer.

765
00:41:23,800 --> 00:41:28,319
Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller. Pen

766
00:41:28,400 --> 00:41:30,959
Speaker 1: On Fall Sweeney I'm on Twitter at pt Sweeney. Before

767
00:41:31,000 --> 00:41:33,840
Speaker 1: the podcast. You can always catch us worldwide at Bloomberg

768
00:41:33,920 --> 00:41:34,160
Speaker 1: Radio