1 00:00:00,120 --> 00:00:02,920 Speaker 1: George Bubberas joins US head of research at K two 2 00:00:03,320 --> 00:00:06,320 Speaker 1: Asset Management. So I don't really want to ask you about, 3 00:00:06,400 --> 00:00:09,600 Speaker 1: you know, Jamie Diamond versus Layle Brainerd, because it's not 4 00:00:09,640 --> 00:00:13,160 Speaker 1: really a choice between the two. But I do think 5 00:00:13,200 --> 00:00:16,480 Speaker 1: that it's interesting that Brainerd, who is a big voice, 6 00:00:16,480 --> 00:00:19,600 Speaker 1: she's the vice chair at the FED, UH indicates that 7 00:00:19,640 --> 00:00:23,000 Speaker 1: the FED is maybe starting to exhibit some concerns here 8 00:00:23,680 --> 00:00:26,360 Speaker 1: that the long and variable lag is about to bite 9 00:00:26,400 --> 00:00:29,360 Speaker 1: them in the posterior um. Now that might be a 10 00:00:29,360 --> 00:00:33,600 Speaker 1: little bit glib, but I think they do want to 11 00:00:33,640 --> 00:00:38,160 Speaker 1: avoid two mistakes two years batting a thousand Your thoughts 12 00:00:38,159 --> 00:00:42,159 Speaker 1: on that, Yeah, yeah, I broadly agree with that, that 13 00:00:42,200 --> 00:00:45,680 Speaker 1: whole statement, the narrative. Of course, central bankers and policy 14 00:00:45,720 --> 00:00:50,120 Speaker 1: makers don't deliver bad policy and deliver policy air for 15 00:00:50,159 --> 00:00:53,760 Speaker 1: that matter. But um, they're looking at from the FED 16 00:00:53,880 --> 00:00:57,840 Speaker 1: perspective since the world I've used term last year pivot 17 00:00:57,960 --> 00:01:00,360 Speaker 1: from the pivot of November last year too. Now they 18 00:01:00,400 --> 00:01:03,400 Speaker 1: have been consistent. They have delivered demand destruction in a 19 00:01:03,480 --> 00:01:08,039 Speaker 1: very strong, robust economy in North America. We've had the 20 00:01:08,080 --> 00:01:11,440 Speaker 1: equity market risk assets price accordingly for three quarters on 21 00:01:11,480 --> 00:01:14,400 Speaker 1: the back of it. If they maintain this hawk ish 22 00:01:14,560 --> 00:01:17,880 Speaker 1: narrative just a little bit longer, it was still work 23 00:01:17,920 --> 00:01:20,000 Speaker 1: in their favor to deal with. What they're all trying 24 00:01:20,000 --> 00:01:22,680 Speaker 1: to do is core inflation, headline will fall, it's a 25 00:01:22,760 --> 00:01:26,520 Speaker 1: base effect, etcetera. We're all concerned about those unit prices 26 00:01:26,640 --> 00:01:30,040 Speaker 1: that corporates are going to absorb, and we can't see 27 00:01:30,040 --> 00:01:31,880 Speaker 1: it getting too two it for anytime soon, and there's 28 00:01:32,000 --> 00:01:35,039 Speaker 1: potential lack of confidence there Therefore a little bit more 29 00:01:35,040 --> 00:01:37,360 Speaker 1: hawk ish. Go for a four and a half in 30 00:01:37,400 --> 00:01:41,120 Speaker 1: the in an implied futures rate for seventy five, and 31 00:01:41,120 --> 00:01:43,280 Speaker 1: then at the last minute pivot and go to four 32 00:01:43,319 --> 00:01:45,800 Speaker 1: and a quarter four, whatever it may be. But it's 33 00:01:45,840 --> 00:01:48,680 Speaker 1: in their interest to maintain this hawks start because I've 34 00:01:48,680 --> 00:01:53,680 Speaker 1: done some of the damage demand destruction well to date. George, 35 00:01:53,680 --> 00:01:57,360 Speaker 1: what are you seeing already that has resulted from these 36 00:01:57,400 --> 00:01:59,160 Speaker 1: interest rate heights? What do you see on the ground 37 00:01:59,200 --> 00:02:03,000 Speaker 1: economically speaking? And he is surprised that the job market 38 00:02:03,200 --> 00:02:05,680 Speaker 1: and employment market is held up as strongly as it has. 39 00:02:07,760 --> 00:02:09,920 Speaker 1: Not too surprised in the US job market given the 40 00:02:09,960 --> 00:02:12,679 Speaker 1: robust nature that economy. But we have to take a 41 00:02:12,720 --> 00:02:15,320 Speaker 1: step back in first principles, there is recession in the 42 00:02:15,320 --> 00:02:19,079 Speaker 1: globe and parts and there's and and core Europe is 43 00:02:19,120 --> 00:02:21,560 Speaker 1: dealing with a lot of issues. Japan's coming out of 44 00:02:21,560 --> 00:02:24,960 Speaker 1: a recession, putting aside technical definitions for that matter as 45 00:02:24,960 --> 00:02:28,080 Speaker 1: a disclaimer, and they're slow down in parts of the 46 00:02:28,160 --> 00:02:31,480 Speaker 1: North American economy. Finally, but that labor market strength is 47 00:02:31,520 --> 00:02:35,400 Speaker 1: a function of the overwhelming stimulus that has never been 48 00:02:35,400 --> 00:02:38,760 Speaker 1: seen before from two years ago that it's just unwinding 49 00:02:38,800 --> 00:02:41,840 Speaker 1: from earlier this year. So in the back of that, again, 50 00:02:42,400 --> 00:02:45,560 Speaker 1: it's in the fens interest to maintain the demand destruction 51 00:02:45,639 --> 00:02:48,880 Speaker 1: narrative that they're doing. It's continue a little bit longer. 52 00:02:49,160 --> 00:02:52,800 Speaker 1: There are concerns out there. It reinforces that the business 53 00:02:52,800 --> 00:02:55,799 Speaker 1: circle is not dead, and there is a big desynchronization 54 00:02:55,840 --> 00:02:59,079 Speaker 1: of activity by continent and economies and the emerging market 55 00:02:59,200 --> 00:03:01,640 Speaker 1: and the develop and there's very cheap valuations where you 56 00:03:01,639 --> 00:03:03,840 Speaker 1: want to look for them. But when your head again, 57 00:03:04,600 --> 00:03:06,840 Speaker 1: when you're heading in one direction, George, when you're heading 58 00:03:06,880 --> 00:03:10,320 Speaker 1: in one direction and you pause and then you see that, okay, 59 00:03:10,360 --> 00:03:11,760 Speaker 1: we still need to do a little more, and then 60 00:03:11,760 --> 00:03:14,920 Speaker 1: you continue in that direction that seems consistent. If you 61 00:03:14,960 --> 00:03:17,440 Speaker 1: go too far, you throw a million people out of work, 62 00:03:17,480 --> 00:03:20,079 Speaker 1: and then you have to actually reverse if you find 63 00:03:20,120 --> 00:03:22,639 Speaker 1: out you went too far and start cutting, then you 64 00:03:22,720 --> 00:03:25,919 Speaker 1: got egg on your face. Of course you got egg 65 00:03:25,919 --> 00:03:27,959 Speaker 1: on your face. And the White House clearly does not 66 00:03:28,040 --> 00:03:32,079 Speaker 1: like that narrative and just lay out unfortunately, demand destruction 67 00:03:32,120 --> 00:03:35,440 Speaker 1: and creating selecting economy. It could paying for the household, 68 00:03:35,640 --> 00:03:38,640 Speaker 1: paying for the corporate, paying every level, and that is true, 69 00:03:38,680 --> 00:03:40,080 Speaker 1: and there's no way going about it. But they have 70 00:03:40,120 --> 00:03:42,880 Speaker 1: to deal with inflation first and foremost. That's a bigger concern. 71 00:03:43,440 --> 00:03:46,480 Speaker 1: So what at the moment, George, are you seeing out there? 72 00:03:46,520 --> 00:03:49,840 Speaker 1: You know, with this these geopolitical tensions on top of that, 73 00:03:49,880 --> 00:03:54,880 Speaker 1: of course this Federal Reserve and other global monetary tightening 74 00:03:55,080 --> 00:03:57,200 Speaker 1: tightening a sequence going on here as well in the 75 00:03:57,280 --> 00:04:01,360 Speaker 1: Party conference in China just coming up as well. Is 76 00:04:01,400 --> 00:04:05,800 Speaker 1: it really about the wealth preservation now? So it's about 77 00:04:05,920 --> 00:04:09,240 Speaker 1: both preservation. And most people have done on the portfolios 78 00:04:09,280 --> 00:04:12,400 Speaker 1: and there's something in their portfolio notwithstanding what bonds had 79 00:04:12,440 --> 00:04:14,960 Speaker 1: done you to date, and risk assets. Some parts of 80 00:04:14,960 --> 00:04:17,840 Speaker 1: the portfolio performed well and not listed the e v 81 00:04:18,040 --> 00:04:20,840 Speaker 1: C some rates with low gearing and those c t 82 00:04:21,000 --> 00:04:23,480 Speaker 1: A s. It's a year of the CTGA, but everyone 83 00:04:23,640 --> 00:04:27,240 Speaker 1: has some divertifications to reinforce, so we're not reacting to 84 00:04:27,240 --> 00:04:31,480 Speaker 1: today's gen political events or anything else about adjusting portfolios. 85 00:04:31,480 --> 00:04:35,000 Speaker 1: Having said all of that, which is a lot, evaluations 86 00:04:35,200 --> 00:04:37,920 Speaker 1: are very compelling in different parts of the world, and 87 00:04:38,000 --> 00:04:40,760 Speaker 1: emerging markets have been more compelling. But once we get 88 00:04:40,800 --> 00:04:43,440 Speaker 1: to see FED funds rate increasing the decreasing rate, we 89 00:04:43,560 --> 00:04:46,000 Speaker 1: get some certainty that the US dollar strength won't be 90 00:04:46,000 --> 00:04:48,440 Speaker 1: at the same level. Therefore, that would be a good 91 00:04:48,440 --> 00:04:51,679 Speaker 1: signal to get into some emerging markets. Geopolitical was always 92 00:04:51,760 --> 00:04:53,640 Speaker 1: very difficult to deal with. We all got it wrong 93 00:04:53,680 --> 00:04:56,120 Speaker 1: on the fund side with the invasion of the Ukraine. 94 00:04:56,279 --> 00:04:58,480 Speaker 1: We didn't know where to get our information from, and 95 00:04:58,480 --> 00:05:01,560 Speaker 1: that will always be a cetosis event, so to speak. 96 00:05:01,600 --> 00:05:03,880 Speaker 1: So that's always going to be concerning us, and very 97 00:05:03,920 --> 00:05:07,360 Speaker 1: quickly with China Party Congress five year Plan or their 98 00:05:07,640 --> 00:05:09,400 Speaker 1: or their bureacrats will be in place for the next 99 00:05:09,400 --> 00:05:13,800 Speaker 1: five years. Everyone gets promoted juniors intermediate senior people. Therefore, 100 00:05:13,800 --> 00:05:16,400 Speaker 1: whatever policy they decided to do, they'll have a more 101 00:05:16,520 --> 00:05:19,320 Speaker 1: enthusiastic bureaucratic team to do it. To the p BOC 102 00:05:19,440 --> 00:05:21,960 Speaker 1: can talk with fiscal policy and hopefully they can allow 103 00:05:22,000 --> 00:05:24,640 Speaker 1: some intra travel on the second largest economy, which in 104 00:05:24,680 --> 00:05:27,880 Speaker 1: itself will help global growth. I'll spend a little time 105 00:05:27,920 --> 00:05:29,919 Speaker 1: in the media review on an op ed piece in 106 00:05:30,000 --> 00:05:33,159 Speaker 1: the South Sida Morning Post and the headline is the 107 00:05:33,240 --> 00:05:36,440 Speaker 1: leaders at the Party Congress should extend a friendly hand 108 00:05:36,520 --> 00:05:40,440 Speaker 1: to capitalists. And it's an interesting comment because it goes 109 00:05:40,440 --> 00:05:43,760 Speaker 1: to the regulation, it goes to the COVID zero. The 110 00:05:43,839 --> 00:05:46,680 Speaker 1: question is do you think that he and it's all 111 00:05:46,720 --> 00:05:50,560 Speaker 1: decided by him that do you think he will do it? 112 00:05:50,680 --> 00:05:55,039 Speaker 1: And if he does, which you buy China? Uh? Yeah, 113 00:05:55,120 --> 00:05:56,760 Speaker 1: we don't know if he will do it, but early 114 00:05:56,880 --> 00:05:58,839 Speaker 1: science that he will do it because I need to 115 00:05:58,920 --> 00:06:03,000 Speaker 1: mend that bridge with businesses in China. Given what they've done, 116 00:06:03,000 --> 00:06:06,040 Speaker 1: they've just destroyed the sentiment that they probably won't believe 117 00:06:06,400 --> 00:06:09,160 Speaker 1: or take some time and stimulus measures to assist that. 118 00:06:09,240 --> 00:06:11,240 Speaker 1: But there needs a big bridge, as you say, and 119 00:06:11,320 --> 00:06:13,839 Speaker 1: if that bridge happens, you'd have to buy China given 120 00:06:13,880 --> 00:06:18,320 Speaker 1: the valuations are very compelling. It nine times. Yeah. The 121 00:06:18,360 --> 00:06:25,480 Speaker 1: thing is that he being she co you know. The 122 00:06:25,600 --> 00:06:29,480 Speaker 1: thing about it is there's it seems that the authorities 123 00:06:29,520 --> 00:06:32,919 Speaker 1: there in China don't really well care that much for 124 00:06:33,760 --> 00:06:36,760 Speaker 1: the markets in many ways, and it does seem as though, 125 00:06:36,800 --> 00:06:38,880 Speaker 1: you know, you can have a new set of regulations 126 00:06:38,880 --> 00:06:41,920 Speaker 1: just pop up at any stage, so you are really 127 00:06:41,920 --> 00:06:46,480 Speaker 1: an uncharted waters without a doubt. And when such uncharted 128 00:06:46,480 --> 00:06:48,640 Speaker 1: waters and that the damage has been done with their 129 00:06:48,680 --> 00:06:52,000 Speaker 1: policies from March twenty one, and that's why our funds 130 00:06:52,040 --> 00:06:54,880 Speaker 1: have even Asian funds ex Japan had the last waiting 131 00:06:55,200 --> 00:06:58,800 Speaker 1: to China for twenty three years UM, so we're looking 132 00:06:58,880 --> 00:07:00,880 Speaker 1: actively for it. They need to do something. They do 133 00:07:01,000 --> 00:07:04,039 Speaker 1: need a former capitalism to assist in the biggest housing 134 00:07:04,279 --> 00:07:07,080 Speaker 1: property bubble on the planet. They need a bad bank solution. 135 00:07:07,200 --> 00:07:09,520 Speaker 1: They do need capital market reform. Hong Kong is a 136 00:07:09,560 --> 00:07:13,040 Speaker 1: missed opportunity. There's so many things that there's missteps, but 137 00:07:13,240 --> 00:07:16,320 Speaker 1: let's just assume it. Here's a starting point to rejig it. 138 00:07:16,400 --> 00:07:18,680 Speaker 1: But they need to re engage with capitalism in some 139 00:07:18,840 --> 00:07:22,320 Speaker 1: form and their own business people in the mainland because 140 00:07:22,360 --> 00:07:24,880 Speaker 1: it would be a lot of sentiment destruction that they 141 00:07:24,880 --> 00:07:26,960 Speaker 1: won't believe what's going to come through, so it will 142 00:07:27,000 --> 00:07:31,000 Speaker 1: take time. That's the same here, yeah, okay, here here 143 00:07:31,080 --> 00:07:35,040 Speaker 1: Bubura's for party Advisor too, she's in ping Um. So 144 00:07:35,160 --> 00:07:38,480 Speaker 1: final question, probably because I mentioned Jamie Diamond, perhaps we 145 00:07:38,520 --> 00:07:40,880 Speaker 1: should just spend a moment on that. He's not predicting 146 00:07:40,920 --> 00:07:43,360 Speaker 1: twenty but he says he could see it, could you 147 00:07:43,400 --> 00:07:48,760 Speaker 1: see it? It's possible, but improbable. Disclaimer We have JP 148 00:07:48,880 --> 00:07:51,280 Speaker 1: Morgan and the port Fairlio but like US Financial the mcquarie, 149 00:07:51,320 --> 00:07:52,840 Speaker 1: so I had to get that in as a disclaimer. 150 00:07:53,360 --> 00:07:56,320 Speaker 1: Um Jamie's comments are always colorful and get the attention 151 00:07:56,320 --> 00:07:59,960 Speaker 1: and get the debate. But yeah, again it's it's possible, 152 00:08:00,000 --> 00:08:04,120 Speaker 1: but we believe improbable. Thank you so much, George. As ever, 153 00:08:04,280 --> 00:08:08,160 Speaker 1: George barberis there ahead of recent Key to Asset Management 154 00:08:08,200 --> 00:08:10,360 Speaker 1: getting his take on the markets.