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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm term Keene

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Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. We

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Speaker 1: begin with the top story. According to a person briefed

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Speaker 1: on trade talks, US and Chinese negotiators are working on

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Speaker 1: multiple memorandums of understanding that would form the basis of

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Speaker 1: a final trade deal, covering areas including agriculture and non

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Speaker 1: tariff barriers, services, technology transfer, and intellectual property as well.

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Speaker 1: Jo winting us on the phone to discuss is Carl Weinberg,

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Speaker 1: High Frequency Economics Chief Economists. So, Karl, walk me through

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Speaker 1: where you think we can make a breakthrough and what

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Speaker 1: the sticking points might be as well. Yeah, Hi, good morning, Jonathan. Well,

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Speaker 1: you know these trade talks right now, the idea is

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Speaker 1: to postpone or to avert an increase in teriff rates.

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Speaker 1: And I think that we will get that, but not

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Speaker 1: necessarily because we get a deal, but simply because we're

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Speaker 1: moving closer to a deal. On the Chinese side, we

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Speaker 1: have the national People's Congress on March five, and beginning

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Speaker 1: in the next few days, all of China's leaders are

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Speaker 1: going to be focused on preparing for that congress. So

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Speaker 1: probably get something in the form of a memorandum or

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Speaker 1: an outline of an agreement, or something that's sufficient to

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Speaker 1: postpone the increase of tariffs that might happen on March

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Speaker 1: one in the absence of progress. But I don't think

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Speaker 1: we're going to get final deals anytime in the foreseeable future.

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Speaker 1: The question I here asked again and again increasingly over

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Speaker 1: the last week or so, is who is next? Europe?

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Speaker 1: Is Europe next? Is that the next target for negotiations

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Speaker 1: between the United States and trade partners. Well, we're watching

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Speaker 1: what the what the administration has to say about cars,

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Speaker 1: and cars seem to be the next bone of contention.

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Speaker 1: It's a particularly delicate topic with respect to Europe. We

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Speaker 1: have all of the main European Let me say that

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Speaker 1: probably German automakers are very heavily invested in the United States,

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Speaker 1: moving parts and bits and kids into it and out

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Speaker 1: of it. We'll see what the declaration is about whether

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Speaker 1: these enterprises are a threat to national security. If they are,

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Speaker 1: the Europeans that promised to respond quite vigorously to any

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Speaker 1: US trade action, So that could very well be the

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Speaker 1: next front. Karl Weinberg with US, so high Frequency Economics,

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Speaker 1: and we're thrilled these with US because he, before pretty

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Speaker 1: much anyone else, actually wrote a China note. I remember that, Carl,

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Speaker 1: when High Frequency Economics came out with a China focus note.

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Speaker 1: You looked at their behavior for years, What is there

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Speaker 1: incentive to do anything? But weighed out two thousand and

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Speaker 1: twenty in the election. Well, I think Tom, you hit

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Speaker 1: the nail on the head. I think that the Chinese

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Speaker 1: view of trade relations, or the Chinese view of relations

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Speaker 1: with the United States, is extremely long term. President g

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Speaker 1: will be president of China long after President Trumps president

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Speaker 1: of the United States. And I think they view the

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Speaker 1: current administration as overtly hostile. I don't think we have

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Speaker 1: to think very hard to understand why that's the case.

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Speaker 1: And I think that they are hoping that the next

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Speaker 1: administration will be a little bit less hostile towards them,

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Speaker 1: so they'll drag their heels. But they also under no

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Speaker 1: circumstances will give up their long term industrial development plan.

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Speaker 1: The contentious made in China and their business practices are

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Speaker 1: their business practices, and even though they may be modified

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Speaker 1: slightly to deal with intellectual property or to deal with

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Speaker 1: um transfer of technology. Uh, they're not going to make

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Speaker 1: big changes in those simply at the request of a

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Speaker 1: foreign government. Would it be a mistate to believe that

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Speaker 1: whoever the next president is, whenever the next president comes along,

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Speaker 1: that there will be a change of approach towards China,

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Speaker 1: Cow Because what I see in Washington, d C. Right

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Speaker 1: now is it bipartisan approach to the problems in the

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Speaker 1: world Second Larncht economy. Well, you see it bipartisan within

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Speaker 1: the United States, But what you don't see is a

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Speaker 1: multinational approach. I think that there are um I won't

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Speaker 1: choose right or wrong in this conversation, but I'll say

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Speaker 1: there are disagreements about how economic policy and business conditions

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Speaker 1: should be conducted between the United States and China, and

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Speaker 1: some of them may be legitimate, But to the extent

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Speaker 1: that the United States wants to improve those conditions, history

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Speaker 1: shows that a better course of action is to move

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Speaker 1: in unison with our economic allies rather than to go

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Speaker 1: it alone. And right now, this administration is very much

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Speaker 1: an isolationist administration. I'm hoping that this was a diversion

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Speaker 1: from the recent historical trend of the United States to

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Speaker 1: be more global. What does it do to your calculations

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Speaker 1: of g DPM the basic idea of Carlos. You do

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Speaker 1: a lot of international relations, international economics, but you and

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Speaker 1: Jim O'Sullivan will it down to what is the economy

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Speaker 1: going to do? How does all this talk fold into

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Speaker 1: your call on the American economy? Yeah, Well, for the

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Speaker 1: American economy right now, the impact on trade is marginal.

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Speaker 1: There are clearly some sectors that are affected, uh profoundly

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Speaker 1: by this. If you're a Soybee informer, you're very unhappy

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Speaker 1: right now. If you're in a technology industry that's dependent

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Speaker 1: upon equipment coming from China that's now tariff, you care

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Speaker 1: about this. If you're in the steel sector, you care

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Speaker 1: about this. But overall, we've got a very very large

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Speaker 1: US economy and the amount of goods and services that

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Speaker 1: are affected by this trade war so far are not significant.

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Speaker 1: Having said that, China's imports from the United States plummeted

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Speaker 1: in the fourth quarter of last year, so we're looking

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Speaker 1: at a thirty something per cent average drop in imports

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Speaker 1: of China from the United States according to their data

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Speaker 1: um in the fourth quarter, and that is you know,

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Speaker 1: it's a it's visible, but it's not significant to the

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Speaker 1: overall growth trajectory of the economy. Kel just one final

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Speaker 1: question from myself. The Chinese are looking to stabilize their

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Speaker 1: their economy. They have been doing this for much of

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Speaker 1: the last twelve months. The easy measures don't seem to

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Speaker 1: be stabilizing the economy though. I'm wondering whether the transmission

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Speaker 1: mechanism is blocked up somehow. Why is it blocked up,

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Speaker 1: and is it going to hamper their effects, their ability

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Speaker 1: to really stabilize the situation. You know, John, you and

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Speaker 1: I have to sit down and look at the data.

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Speaker 1: But it looks to me as if GDP has been

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Speaker 1: growing around six and three quarter percent for the last

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Speaker 1: four years, and industrial production has been around eight percent

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Speaker 1: seven eight percent, And while the trend has been very,

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Speaker 1: very gradually downward, right, the economy is running very stable.

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Speaker 1: On their numbers are a lot more stable than ours. Now.

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Speaker 1: Some people will say that that's artificial, but the numbers

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Speaker 1: that we look at tell us that while there may

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Speaker 1: be a slow, gradual decline in the growth rate of

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Speaker 1: China's economy a quartered a quarter. There's not much of

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Speaker 1: the world decline in trade or an economic growth that

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Speaker 1: you can blame on an incremental slowdown in China growth

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Speaker 1: there is slower than they want to see, but absolutely

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Speaker 1: still doing three times faster growth than we are. So, Carl,

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Speaker 1: what is the manufacturing pm I doing sub fifty? Well,

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Speaker 1: you know, John, you and I also have disagreed about

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Speaker 1: the p m I. I think the p m I

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Speaker 1: is an interesting statistic, but it's the industrial production number

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Speaker 1: that tells you the story. The p m I wants

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Speaker 1: you to believe when it's below fifty that industrial production

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Speaker 1: has declined year over year, And quite frankly, if you

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Speaker 1: look at the data, you're hard pressed to find any

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Speaker 1: declines in China's GDP. Ever, so, in my view, using

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Speaker 1: a p m I in an emerging market economy analytical mistake.

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Speaker 1: Carol Weinber, thank you so much. I freaking see economics

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Speaker 1: right now, John Farrow and I trying to figure out

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Speaker 1: with the editor in chief how to fix the microphone stand.

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Speaker 1: It's for him. This is when you're when you're high saluting.

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Speaker 1: Let it go. We can what can let it go?

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Speaker 1: It's broken. Can you get the duct tape, the one

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Speaker 1: the Rangers and broke the studios again, the New York

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Speaker 1: Rangers duct tape. We've had this studio for a couple

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Speaker 1: of months and you've broken it already. Company. This is

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Speaker 1: because print gets a budget and we don't. The rescue

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Speaker 1: as well, joining us down, John Michel Tweede, what an

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Speaker 1: introduction to thank you? I like to do that with

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Speaker 1: a really important essay on the broader state of the

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Speaker 1: Anglo Saxon experiment. You hear me talk about this Anglo

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Speaker 1: Saxon economics and corporate theology in that But John Michael Tweede,

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Speaker 1: of course, and so he can only do takes much

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Speaker 1: much further. The feeling at the end of your essay

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Speaker 1: is we're a critical point that clearly centers around Brexit,

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Speaker 1: clearly centers around in the US election. What are the

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Speaker 1: things you're watching which give you confidence that the Anglo

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Speaker 1: sphere as you call it, can be maintained into the future.

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Speaker 1: Just to give a little background, first, the article makes

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Speaker 1: the argument that, and it's a very big picture article

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Speaker 1: when it makes it makes it makes the argument that

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Speaker 1: for the past thirty forty years, certainly since Thees. The

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Speaker 1: mood music of the world was set by a combination

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Speaker 1: of America and Britain, and obviously with America much bigger.

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Speaker 1: Britain's economy is currently smaller than California's. But since the nineties,

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Speaker 1: especially since Reagan and Thatcher, and then with Bush and Blair,

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Speaker 1: Blair and Clinton, Cameron and Obama, all these different people,

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Speaker 1: they basically spread a tune of globalization, liberalization, freedom, and

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Speaker 1: around the rest of the world. Most people, even if

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Speaker 1: they didn't like pontificating anglos and you've never met one,

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Speaker 1: they even people didn't like it, they generally accepted that

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Speaker 1: that was the way the world was going to go.

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Speaker 1: And obviously had problems. You have the problems of Iraq,

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Speaker 1: you had the problems with the credit crunch, But it

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Speaker 1: really in two thousands and sixteen, with Brexit and then

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Speaker 1: with the Trump election that that alliance has come into

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Speaker 1: trouble and it's it's going basically in the wrong direction.

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Speaker 1: Brexit is chaos, and Trump is singing something which is

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Speaker 1: exactly the opposite. He doesn't wander around the world talking

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Speaker 1: about freedom. He doesn't do the things that you would

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Speaker 1: expect an American president to do, and so the dominant

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Speaker 1: message has stopped, and to some extent it's been taken

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Speaker 1: over by China. I think the Europeans hope that people

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Speaker 1: like Macron would fill that void, but he doesn't seem to.

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Speaker 1: And I think this does make a difference to the

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Speaker 1: future of the world. So even if you don't like

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Speaker 1: pontificating Englishman, and there maybe many people even in the

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Speaker 1: studio who reached that conclusion where actually it's better to

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Speaker 1: have us than what you think. Right now, you can't

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Speaker 1: get into the glass dome with the interactive broker studio

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Speaker 1: a palace before I asked you what it's replaced with.

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Speaker 1: I think we have to decide whether this is just

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Speaker 1: a moment in time or whether it is an inflection point.

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Speaker 1: What do you think it is that that is the debate.

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Speaker 1: I mean, I fear that it's an inflection point because

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Speaker 1: these things um, you have a momentum. Victor Hugo has

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Speaker 1: a very good line about nothing can stop an idea

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Speaker 1: whose time has come, and that's how it felt in

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Speaker 1: the eighties, nineties, and the first century, the first first

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Speaker 1: decade of the century. Now it's at a certain point

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Speaker 1: when momentum loses, other ideas begin to come in. You've

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Speaker 1: already got the Chinese pushing the idea of the Beijing Consensus.

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Speaker 1: You don't really see Europe pushing anything particularly new. That

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Speaker 1: the main, the main argument for it being able to

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Speaker 1: come back is a mixture between two things. One, politics

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Speaker 1: can change. You know, Britain could just about mudel its

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Speaker 1: way through to a slightly orderly breaks it will perhaps

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Speaker 1: even remain. And on the other hand, you could have

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Speaker 1: Trump himself could get into trouble, and you know there

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Speaker 1: are other options. Europe can't get his act together. Seemingly,

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Speaker 1: does China have the willingness, never mind the ability, to

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Speaker 1: take a leadership role on the global stage. I think

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Speaker 1: you can see you see the sort of things which

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Speaker 1: she did at Davos um when she Shan did again

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Speaker 1: this year. You know, they are becoming slightly more overt

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Speaker 1: in that way, or at least saying this is an

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Speaker 1: alternative way of thinking about the world. And the point

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Speaker 1: it placed where these things often really matter is the

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Speaker 1: emerging world, and there it's definitely true, you know, emerging

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Speaker 1: world governments quite like what China says. You know, what's

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Speaker 1: better than saying that in order to have a successful

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Speaker 1: economy you just need to be slightly more authoritarian. Government

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Speaker 1: strangely tend to quite like that. What I think, though,

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Speaker 1: is that on the whole, that there are still some

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Speaker 1: the amosphere still got some big strengths. Most of the

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Speaker 1: world's big companies, eight of the biggest term American, you've got,

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Speaker 1: and you've also got the basic fact that the people

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Speaker 1: of the world, I think, do not necessarily think that

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Speaker 1: more authoritarian. And the discipline of all this, taking a

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Speaker 1: back to Kissinger's diplomacy and a lot of the experience

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Speaker 1: of the United Kingdom, is the cliche what the world

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Speaker 1: needs as a good war. We've had a huge time

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Speaker 1: of peace within the Western world where we can get

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Speaker 1: distracted into other ideas besides the discipline of institutions, and

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Speaker 1: we've lost that. You could argue that the biggest another

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Speaker 1: big thing that has happened over the past six or

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Speaker 1: nine months, is that the general fraction between especially between

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Speaker 1: America and China, and that that could also be an

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Speaker 1: inflection point, but I do think it doesn't. It does

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Speaker 1: tied back a bit to the idea that the dominant

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Speaker 1: mood music, the presumption of the world, I think for

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Speaker 1: the past forty years was in general most countries, even

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Speaker 1: if they didn't like it. I thought the world was

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Speaker 1: going to move slightly more towards the direction that America

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Speaker 1: and Britain were singing. And I think it's very this

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Speaker 1: obviously being English, like the useless Mr Farrow, we we

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Speaker 1: we we tend to exaggerate our our our own importance,

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Speaker 1: as you often point out. But in this particular case,

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Speaker 1: I think it mattered that there wasn't just one country

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Speaker 1: saying this, because it made the made the message broader.

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Speaker 1: Britain brought many things about global media right board room,

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Speaker 1: in the room, in the European Union, other things that

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Speaker 1: made a difference. Do you'll make with white that I

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Speaker 1: must read today? And we need a desperate guest to

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Speaker 1: talk about desperate markets, and we do that now with

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Speaker 1: Dennis Gartman, local Pinada. Of course Mr Gartman has our respect,

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Speaker 1: and then he publishes his trades in detail in the

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Speaker 1: back of his acclaimed newsletter Red Worldwide. Dennis, the only

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Speaker 1: reason I wanted you on today is because you lead

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Speaker 1: with the fact there are more sixty five year olds

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Speaker 1: than the rest of the world combined. I mean, it's

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Speaker 1: the United Nations, and it's a serious thing that we're

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Speaker 1: an aging global population. And to bring this over to investment, Dennis,

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Speaker 1: the percentage of us nowhere near able to retire. It's

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Speaker 1: off the proverbial chart, isn't. Oh, it's really quite sad

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Speaker 1: when you look at the amount of money that the

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Speaker 1: average American has, I think it's somewhere in the neighborhood

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Speaker 1: of less than fifteen hundred dollars in his retirement account.

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Speaker 1: It's it's something, uh, really shockingly low. The ability for

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Speaker 1: the average American consumer to meet even the slightest emergency

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Speaker 1: need in cash is is shockingly low. So we've really

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Speaker 1: done a very very bad job individually trying to say

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Speaker 1: for retirement. And it's only I'm afraid going to get worse.

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Speaker 1: With the whip saw are round trip move early December,

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Speaker 1: we've now piqued that here in the middle of February.

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Speaker 1: For long term investors, what do you do now with

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Speaker 1: cash for quote long term unquote? Do you go into

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Speaker 1: the equity markets? It's still nobody's gonna like to hear

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Speaker 1: what I have to say. But it's still a bowl market,

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Speaker 1: isn't it. It's still moving from the lower left to

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Speaker 1: the upper right. The violence of the downward swinging in September, October,

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Speaker 1: November until December twenty six last year was awe inspiring.

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Speaker 1: The rally that we've had since December has also been

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Speaker 1: on sparing. The answer your question is what do you

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Speaker 1: do now. If you have not done anything, you have

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Speaker 1: to put something into the equities market. If you've done something,

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Speaker 1: you probably want to sit and wait. After after the

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Speaker 1: rally that we've had since December twenties, you probably don't

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Speaker 1: want to buy today's rally. You probably want to wait

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Speaker 1: for a couple of weeks or so. But if you're

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Speaker 1: outlooked this for the next ten years, you have to

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Speaker 1: be a buyer. There's no question if you're If you're

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Speaker 1: outlooking for the next six weeks, you probably want to

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Speaker 1: stand on the sideline. We protect the copyright of our

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Speaker 1: research guests, and of course we do that with Dennis Garban,

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Speaker 1: who writes us every morning at two am with ink

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Speaker 1: and quill in the back. Dennis, there's no mention of

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Speaker 1: equities on the short term. Gartman trades all the criticism

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Speaker 1: and a claim that you get you don't have anything

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Speaker 1: on equities, Why uh for? For actually I like to

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Speaker 1: stay clear of the sec They get upset with me

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Speaker 1: sometimes when I write about specific equities, so I don't

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Speaker 1: put them into Yeah, there's nothing to hear about Dennis

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Speaker 1: car in the stock market. Why is that? Well? Actually,

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Speaker 1: if you read the newsletter, and if you read a

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Speaker 1: section on the equities market, I explained that I am

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Speaker 1: long of a local bank here, I am long of

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Speaker 1: f c X, I am long of of gold and

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Speaker 1: silver equities. So I am actually long, and but I

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Speaker 1: haven't put it out as as an original, as an

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Speaker 1: official recommendation, as I like to call it. Nonetheless, if

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Speaker 1: you read the newsletter, you'll find out that I have

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Speaker 1: been and continue to be rather long of the of

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Speaker 1: the stock market in various in various manners. Jeff Curry

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Speaker 1: at Goldman Sachs boldly three months ago climbed on the

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Speaker 1: Gartman gold band wagon Goldman Sacks. I believe working in

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Speaker 1: dollars review with this the idea you you do this

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Speaker 1: in euros and yen, and am I right? Denisit within

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Speaker 1: all the tribulations this has actually worked out. Oh, it's

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Speaker 1: worked out dramatically. So if you take a look at

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Speaker 1: if you go back to November, just abjectly. Pick a

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Speaker 1: day in November golds up dramatically from that period of time,

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Speaker 1: and if you look at that same period of time,

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Speaker 1: the euro has gone essentially side ways or even slightly down.

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Speaker 1: So if you have funded a position in gold using euros,

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Speaker 1: you're you've actually increased the amount of return that you've

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Speaker 1: gotten from gold marginally, but you have increased should I

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Speaker 1: saw you, You've actually decreased the volatility on a daily

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Speaker 1: basis materially. And it isn't that the essence of great

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Speaker 1: trading to get the same return with a decrease in volatility.

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Speaker 1: And that's exactly what's happened there. This is why we

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Speaker 1: love to have Dennis garbmen. Now we get in a

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Speaker 1: research report in from someone acclaimed and Gartment can give

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Speaker 1: us some mediate analysis. The wonderful George Seravellos at Deutsche

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Speaker 1: Bank is always interesting reading, and he comes out moments

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Speaker 1: ago Dennis Gartment and reaffirms euro and says, this is

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Speaker 1: a fed that will blink in. The interest rate difference

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Speaker 1: between the United States and Europe will narrow. Do you agree?

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Speaker 1: I think the spread between the United States and Europe

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Speaker 1: will continue to widen. Our economy is stronger than is

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Speaker 1: their's ten year yields in Europe, are are in Germany,

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Speaker 1: for example, are still negative takor yields here in the

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Speaker 1: United States or two point six three, that's probably gonna

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Speaker 1: continue to widen. It's been widening for years. Many people

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Speaker 1: have called for it to narrow for years, and they

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Speaker 1: have been They have been decidedly wrong for years. The

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Speaker 1: trend is clearly for that interest rate spread to move

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Speaker 1: in the United States favor and for the United States

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Speaker 1: dollar to the beneficiary that move. So so can you

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Speaker 1: go stable dollar or strong dollar? I think on balance,

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Speaker 1: if you're if you're only looking at the U. S.

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Speaker 1: Dollar versus the Euro, probably going to see the dollar

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Speaker 1: get stronger. You're probably going to see the euro get weaker.

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Speaker 1: If you're talking about the dollar versus Canada, Australia or

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Speaker 1: New Zealand, maybe that's a different story entirely. But most

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Speaker 1: people when they speak about the dollar speak about the

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Speaker 1: dollar versus euro, and the dollar is likely to get stronger.

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Speaker 1: Now we Dennis one final idea here. I just look

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Speaker 1: at the soy being chart and we're off the bottom.

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Speaker 1: I know that, And we kid Dennis about red wheat

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Speaker 1: and winter wheating all the rest. Dennis, You are, more

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Speaker 1: than anyone we speak to, are hardwired to the fields

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Speaker 1: of the American Midwest. How tough is it out there

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Speaker 1: right now? For the people you know in the Midwest.

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Speaker 1: It's very tough. It's been four years of steadily declining

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Speaker 1: or or stable low prices. Bankers are very reticent this

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Speaker 1: year to extend credit to to farmers to put the

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Speaker 1: crop in the ground. If there's one thing to be

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Speaker 1: concerned about in the United States, it's that it's precisely

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Speaker 1: that we are going to plant the smallest amount of

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Speaker 1: wheat in a hundred and ten years, and it probably

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Speaker 1: is even going to be smaller than the original usd

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Speaker 1: A projections something because the banks will not extend credit.

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Speaker 1: It really is tough out there, no question about it, Dennis.

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Speaker 1: One final question March nine. There's these two schools in

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Speaker 1: North Carolina that you know they bounce off North North

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Speaker 1: Carolina State. Does Duke have any chance March nine against

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Speaker 1: the dynamic crew from Chapel Hill after what happened last night,

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Speaker 1: and and and the injury to to the best player

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Speaker 1: in the country this year is Zion Williamson. No, Duke

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Speaker 1: does not have a chance. I hate to say that

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Speaker 1: I dislike both teams. I'm an MP States fan through

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Speaker 1: and through. I was hoping that the game, As I

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Speaker 1: told my wife last night, I hope this game goes

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Speaker 1: to seven overtimes and then ends in the tie, because

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Speaker 1: I didn't want either team to win. But Williamson Ducas

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Speaker 1: is really a demonstrably lesser team than they were. No questions.

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Speaker 1: Dennis Gartman, thank you so much for a wide ranging

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Speaker 1: discussion this morning. We've had this big move in the market.

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Speaker 1: The question is is on many investors mind is how

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Speaker 1: much is left? So to get a professional opinion, let's

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Speaker 1: bring in Lori Calvacina. Lori is the head of US

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Speaker 1: Equity strategy at RBC. Lorie, thanks so much for joining us. So,

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Speaker 1: given this huge reversal that we've seen in the equity

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Speaker 1: markets from December through to year to day nineteen, what

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Speaker 1: is your view of the equity markets? Is there any

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Speaker 1: room left here? So? I think there's a little bit

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Speaker 1: of room. I don't think there's a ton of room. Um.

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Speaker 1: You know, we've came into the our price target on

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Speaker 1: the SMP is. We think the PE on a trailing

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Speaker 1: basis can expand to about seventeen times. That's not heroic.

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Speaker 1: I mean that gives you about five six percent upside

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Speaker 1: from here. I think, you know, it's it's going to

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Speaker 1: be a bit slower as the year progresses than what

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Speaker 1: we saw in January. I think it'll be more of

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Speaker 1: a grind. We might take a few steps back before

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Speaker 1: we go forward. But I do think there is room. Um,

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Speaker 1: you know, I I would say the story in the

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Speaker 1: market is probably not that exciting right now. But when

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Speaker 1: we look at positioning, when we look at valuations, things

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Speaker 1: look fine. Um. Some of the problems we have had

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Speaker 1: last year have gone away, and earnings, you know, I know,

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Speaker 1: we probably have the potential for some further downward revisions. Um,

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Speaker 1: but we do think the market can rally through that.

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Speaker 1: We think a lot of that was already discounted at

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Speaker 1: the December Was there anything in the FED minutes yesterday?

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Speaker 1: The calls you do maybe change your opinion? No? And

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Speaker 1: you know, actually, what what I like about what I've

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Speaker 1: been hearing from the FED recently. I remember, I'm not

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Speaker 1: an economist, I'm an equity market person, So I'm not

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Speaker 1: going to get into the debate about whether or not

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Speaker 1: the FED should be listening. But but I've been hearing

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Speaker 1: a lot about that debate, and I can tell you

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Speaker 1: as an equity person, I think that monetary policy was

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Speaker 1: one of the top concerns that investors had coming into

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Speaker 1: the year. So equity investors hearing that is listening to

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Speaker 1: their concerns, I think actually permits those multiples to expand

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Speaker 1: and removes one of the big problems on the sentiment side.

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Speaker 1: That you have a deck that is absolutely brilliant, the

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Speaker 1: RBC Hedge Fund Handbook, And let's get some definitions here.

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Speaker 1: What's a what's a hedge fund hot dog? So that

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Speaker 1: the hedge fund hot dogs are what we call the

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Speaker 1: most crowded stocks and hedge funds. And the way we

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Speaker 1: define it is we look at the SMP five hundred

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Speaker 1: stocks and we look at the total total dollar value

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Speaker 1: UM that's owned by hedge funds. And so a lot

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Speaker 1: of the names that you see at the top of

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Speaker 1: the list, um, you know, frankly the top five or so,

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Speaker 1: I think it wouldn't surprise anybody. Um you get you

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Speaker 1: get some more surprises when you work your name farther

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Speaker 1: down on the list. Like I t services to cut

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Speaker 1: to the chase of our sophisticated audience. Aren't these guys

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Speaker 1: just momentum trades? I mean, isn't the hotdogs just it's

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Speaker 1: going up, let's climb on board, you know, to some extent.

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Speaker 1: But if you actually you know, I think that's what

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Speaker 1: people may think. But if you actually look at the

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Speaker 1: performance of these stocks last year, they had a great

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Speaker 1: first half relative to the SMP, but they pretty much

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Speaker 1: underperformed throughout the second half of the year. They bottomed,

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Speaker 1: you know, sort of midway through November and then started

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Speaker 1: to rally again, but sort of the underperformance of hedge

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Speaker 1: funds favorite stocks, which are frankly, you know, large cap

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Speaker 1: growth investors on the mutual fund side also invest pretty

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Speaker 1: heavily in a lot of those names. That was really

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Speaker 1: one of the massive headwinds and challenges that we saw

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Speaker 1: in the second half. So, Laurie, I'm looking at the

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Speaker 1: bloomber terminal here. In the year to date, the Russell

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Speaker 1: two thousand is up seventeen percent versus the SMP up

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Speaker 1: eleven percent. What is your view year to date? What

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Speaker 1: is your view on kind of small caps versus the

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Speaker 1: larger brilliant Yeah, so, you know, we've been neutral and

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Speaker 1: the way we came into the years, we said, look,

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Speaker 1: it's too late to go underweight, and we look at it.

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Speaker 1: You know, we have these drivers of market performance that

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Speaker 1: we track, and frankly, when we look at those, they're

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Speaker 1: pretty split between small and large. But the one that

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Speaker 1: still argues in favor of small cap is valuation. Now

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Speaker 1: we've seen multiples rebound a little bit in both small

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Speaker 1: and large, but when we compare the two, small caps

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Speaker 1: still look cheap relative to large caps on a forward

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Speaker 1: pe basis. And in fact, the gap that we see

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Speaker 1: on that valuation is similar to what we saw in

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Speaker 1: the middle of right before you had the big Trump

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Speaker 1: rally in small So we think you don't want to

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Speaker 1: you know, we we've said if the right catalyst comes along,

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Speaker 1: small caps should do well. I think that catalyst we've

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Speaker 1: seen is just, uh, the underlying strength of the domestic economy.

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Speaker 1: We've really not seen a big breakdown. Now, there are

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Speaker 1: some problems on small caps, so earning's quality is lower. Um,

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Speaker 1: you have an increase in variable rate debt, which a

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Speaker 1: lot of investors are wary of recently. So you know,

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Speaker 1: I think the risk kind of counterbalance the rewards. But

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Speaker 1: I think bottom line is you don't want to be

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Speaker 1: underweight here. Very cool. Thank you so much with our

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Speaker 1: BC Capital Market, so I will do this again. Thanks

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Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen

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Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform

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Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast.

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Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio