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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa Brownowitz Jaily. We bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com,

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Speaker 1: and of course on the Bloomberg terminal. As far as

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Speaker 1: I'm concerned, this is the domestic In the Finance Interview

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Speaker 1: of the day, George Saravellos has been brilliant feeding in

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Speaker 1: all of David folkers Landau's research at Deutsche Bank into

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Speaker 1: foreign exchange research, and this morning an absolutely brilliant tour

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Speaker 1: to force paragraph from Sarah Bellois. Let's go to it

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Speaker 1: right now. And you know this, folks, the real wage

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Speaker 1: it ain't happening. Real wages at negative two percent are

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Speaker 1: the weakest since two thousand and eight. This is very

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Speaker 1: different from the inflationary environment of the nineteen seventies when

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Speaker 1: real rages were growing sharply. This is leading to a

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Speaker 1: very different message. The consumer is defferring as opposed to

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Speaker 1: accelerating consumption like in the nineties seventies. We're gonna try

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Speaker 1: Mr Sarah Ellis now as we wait for the Secretary

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Speaker 1: of State, George, you're more important than Anthony Blincoln. But

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Speaker 1: let's try this as we can. You take a starkly

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Speaker 1: different view on what inflation will do to our economies.

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Speaker 1: Where will we be in April or may? Thank you Tom.

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Speaker 1: I think if you look back through various commentary, UM,

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Speaker 1: we constantly try to find parallels. Is this two thousand

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Speaker 1: and eight, is this een? And I think the reality

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Speaker 1: is this is twenty two and it's just very, very

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Speaker 1: different to anything we've seen before. And part of that

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Speaker 1: is the inflation picture you allude to, and what you're

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Speaker 1: seeing in the US now is pretty remarkable. US real

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Speaker 1: disposable income is below its pre COVID trend, so everyone

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Speaker 1: is very focused these excess savings. But in terms of

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Speaker 1: future expectations for income, UM, they're going down. You have

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Speaker 1: a story of supply that is frankly terrible. The labor

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Speaker 1: market is shrinking for the first time since World War Two,

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Speaker 1: and you exclude durable goods, you haven't had capex. So

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Speaker 1: I take issue with this idea that it's all about

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Speaker 1: strong demand, booming demand. That's why the Fed's hiking. The

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Speaker 1: FED shore will have to hike but there's also bad

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Speaker 1: things happening in the background. And I guess the last

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Speaker 1: point to make is if you look at the starting

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Speaker 1: point of inflation, we're talking about a totally different environment

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Speaker 1: to the last thirty years. The last few hiking cycles

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Speaker 1: have always started with inflation at or below target UM.

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Speaker 1: So this idea that somehow the FED can maintain easy

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Speaker 1: financial conditions, keep things nice and smooth. That was the

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Speaker 1: policy objective in the last hiking cycles because inflation wasn't

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Speaker 1: as high. And again this is a very different environment

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Speaker 1: and a very very unique one, so to speak. Well,

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Speaker 1: during to that point, there is an idea embedded in

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Speaker 1: your words where they're FED has to tighten policy in

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Speaker 1: order to keep the economy from slowing down more because

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Speaker 1: of this restrictive inflation that you talk about from the

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Speaker 1: negative real wages. Can you talk about how they might

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Speaker 1: try to orchestrate a soft landing or whether you think

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Speaker 1: it's too late. Well, this is really the big question.

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Speaker 1: Can the soft landing be orchestrated? And I think that's

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Speaker 1: precisely the worry of two. It's going to be the

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Speaker 1: stage of the cycle we're in. Will we be able

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Speaker 1: to stay mid cycle or are we going into a

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Speaker 1: more late cycle environment. Um, I think that the jury

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Speaker 1: is still out, but what we can say for sure,

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Speaker 1: it's just going to be much more challenging than last year,

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Speaker 1: where if you look at real yields, you know they

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Speaker 1: made record lows back in October November. So this is

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Speaker 1: a very fresh story. I guess the last point to

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Speaker 1: make is if you look at the fixed income market, yes,

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Speaker 1: we have to reprice more for the FED in the

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Speaker 1: near term to bring inflation down, but more medium the

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Speaker 1: rate market has for six nine months been giving you

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Speaker 1: this message that neutral rates trend growth has issues, and

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Speaker 1: I think if this continues, what you will see as

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Speaker 1: an aggressively flattening curve. Potentially the curve can invert because

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Speaker 1: essentially the FED has to hike rate. The purpose of

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Speaker 1: hiking those rates is to bring long forwards down, it's

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Speaker 1: to bring inflation expectations down, and at the end of

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Speaker 1: the day, that's actually positive for the long end of

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Speaker 1: the fixed income market. So, George, give us a sense

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Speaker 1: of what you would say to people who point the

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Speaker 1: labor market and say it's incredibly tight and sure, maybe

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Speaker 1: real wages are negative, but they're going to go up

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Speaker 1: because you're going to see a rolling over in the inflation,

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Speaker 1: and you're going to see wages continue to accelerate, as

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Speaker 1: we've seen in some of the earnings reports that have

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Speaker 1: come out so far. What would you respond to that?

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Speaker 1: So I very much agree with the phrase that the

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Speaker 1: labor market is tight. I very much disagree with the

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Speaker 1: phrase that the labor market it is strong. The labor

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Speaker 1: market would have been strong if U S employment had

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Speaker 1: recovered back to where it was a pre COVID trend.

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Speaker 1: The Australian labor market is strong, the Canadian labor market

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Speaker 1: is strong. The U S market is weak. And that's

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Speaker 1: exactly what is creating this wage pressure. You don't have

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Speaker 1: enough work is coming back in. It's shrinking at the

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Speaker 1: fastest pace in many, many decades, and I think that's

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Speaker 1: precisely what's going to create the issue for the FED.

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Speaker 1: Wages maybe going up, but it's it's essentially for bad reasons,

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Speaker 1: and it ultimately means the speed limb of the economy

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Speaker 1: is slower than what's assumed. If you're joining us on

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Speaker 1: Bloomberg Radio and Bloomberg Television, George sarave ellis where us

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Speaker 1: with Deutsche Bank an important conversation and the state of

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Speaker 1: our economics, financial investment, John Farrell, Lisa Bramwerts, and I,

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Speaker 1: oh wait the press conference of the Secretary of State

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Speaker 1: in Geneva after we heard from Mr Lavrov earlier George Saravellis,

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Speaker 1: I want to go on Peter Hooper and you right now.

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Speaker 1: My criticism is a static analysis that's out there right now.

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Speaker 1: You and your team are wonderfully dynamic. Which part of

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Speaker 1: the dynamic continuum of the I S l M structure

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Speaker 1: matters right now? I think for the market at the moment,

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Speaker 1: it's really all about the speed of this expected inflation

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Speaker 1: slow down. If you look at the current inflation COREPC

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Speaker 1: around four percent, it's expected to go down onto a

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Speaker 1: two handle. So any deceleration that's not as fast as

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Speaker 1: that will create pressure on the FED UM. The key

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Speaker 1: question really is how that interacts into into a slowing

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Speaker 1: economy um and again that has the potential to impact

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Speaker 1: all asset classes, equity markets of course the dollar. But

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Speaker 1: the big question for this year for me is really

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Speaker 1: are we mid cycle or are we late cycle? And

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Speaker 1: I worry we are in late cite in the late

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Speaker 1: cycle situation, the end is near sounds like Bramo everything does.

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Speaker 1: I'm loving this. I honestly kind s. It's fascinating and

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Speaker 1: I have to say that it makes a lot of

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Speaker 1: sense and it goes against a narrative that we've heard continually.

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Speaker 1: So thank you. I appreciate it. Utsche Bank, Mike in

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Speaker 1: Laser ram it's happy this morning, I George, thank you,

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Speaker 1: just wonderful right now with an extremely sharp note. And

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Speaker 1: there's always at Wells Fargo putting the timeline on that.

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Speaker 1: Their senior economist Sarah House joins us, Sarah, I want

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Speaker 1: to go to the certitude of March. Let's take it

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Speaker 1: from one J Caesar, beware the rate hikes of March.

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Speaker 1: Are we going to see in the literature this weekend?

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Speaker 1: Are we going to see in the work of economists

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Speaker 1: next week a beginning of an adjustment to what's going

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Speaker 1: to occur in March? I think we've already seen it

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Speaker 1: move that way, so both in terms of market pricing,

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Speaker 1: but also I think a lot of economists calls, and

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Speaker 1: I think that will be the big theme of next

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Speaker 1: week SPED meeting, is what they're doing to just signal

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Speaker 1: not just the timing of liftoff. But I think increasingly

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Speaker 1: we're going to see more attention, and I think really

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Speaker 1: a lot of word parsing in terms of what the

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Speaker 1: pace looks like. So is it going to be roughly

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Speaker 1: that twenty five basis points per quarter pace like we

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Speaker 1: saw last cycle, or could we actually see something a

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Speaker 1: little bit more aggressive, whether that's back to back meetings

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Speaker 1: or potentially, as there's been some rumblings, even a fifty

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Speaker 1: basis point move coming out of the Gate question I've

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Speaker 1: asked a couple of times this week. Let me rephrase

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Speaker 1: it to you. It's simple, why can't they come out

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Speaker 1: and say we're in a pandemic, we have massive uncertainty,

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Speaker 1: including the diplomatic events in Geneva. We're gonna go twenty

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Speaker 1: five beeps and then sit? Why can't they say that?

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Speaker 1: So I think when you step back and you look

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Speaker 1: at the overall state of the economy, so even as

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Speaker 1: we're in a pandemic, we're still seeing an extraordinarily strong picture.

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Speaker 1: So labor markets are are quite solid right now. So

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Speaker 1: of course unemployment already below four percent, and I think

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Speaker 1: when we look at where policy is, it still actually accommodative.

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Speaker 1: And it's hard to sit when you have seven percent

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Speaker 1: CPI numbers. It's it's hard for the Fed to to

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Speaker 1: stand idly by the optics on that don't look good.

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Speaker 1: The optics on that don't look good. The reality of

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Speaker 1: it is actually incredibly nuances George Saravellos of Deutsche BEG

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Speaker 1: because Thomas Mentioning earlier talked about in his note this morning,

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Speaker 1: this idea that the inflation that we're seeing could be

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Speaker 1: contractionary in its own right, that if the Fed doesn't act,

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Speaker 1: that actually the economy was slow much more than people

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Speaker 1: are certainly expecting. Later on, how much are you seeing

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Speaker 1: people not spend because they are concerned about how high

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Speaker 1: prices have gone? So I think we've certainly seen that

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Speaker 1: and some of the buying plans for some big ticket purchases.

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Speaker 1: So if you look at the Michigan survey, you've seen

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Speaker 1: the buying plans for homes, autos, large household durables and

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Speaker 1: absolutely cratered. And when you dig into the reasons for that,

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Speaker 1: it's it's not so much households being worried about their

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Speaker 1: home finances. It's just a sheer uh, It's just a

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Speaker 1: sheer price. And so I think we are seeing this

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Speaker 1: inflation cannibalize some of those sales, and I think it

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Speaker 1: is one of the factors that's leading us to expect

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Speaker 1: a much more trend like pace of of consumer spending

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Speaker 1: this year, which is going to offer some relief on

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Speaker 1: on the inflation picture, but it's going to be more

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Speaker 1: towards the back half of the year. And even then,

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Speaker 1: I think we're still looking at an environment of inflation

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Speaker 1: well above where the FED wants it to be. And

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Speaker 1: meanwhile the nature of this inflation is becoming more politically perilous,

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Speaker 1: with the lowest income or workers who originally enjoyed the

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Speaker 1: biggest wage gains starting to see there's fall behind on

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Speaker 1: a percentage basis are relative to the highest earners you're

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Speaker 1: seeing So, for example, bank employees with massive gains in

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Speaker 1: their salaries, how much does this change the narrative in

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Speaker 1: a significant way and push the FED to move faster?

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Speaker 1: Because right now we are back in a scenario where

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Speaker 1: the top brackets are are benefiting the most, right so

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Speaker 1: I think this is this is an important element. So

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Speaker 1: we focused a lot on the labor market being broader

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Speaker 1: and more inclusive over the last cycle, but I think

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Speaker 1: when we look at the current environment and the current

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Speaker 1: state of inflation. So grocery store prices rising the most

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Speaker 1: in thirteen years, same as energy housing costs when you

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Speaker 1: factor in those those utilities also up, you know, by

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Speaker 1: the most we've seen since the early nights nineties. This

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Speaker 1: disproportionately affects through lower income households, and so I think

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Speaker 1: there there is something to be said for the FED

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Speaker 1: tackling this and inflation, making sure that it doesn't become

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Speaker 1: an entrenched try to half to tighten policy even further

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Speaker 1: down the road that actually has disproportionate benefits to lower

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Speaker 1: income households that don't have as much room to to

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Speaker 1: hedge around the entire prices. They don't have the savings

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Speaker 1: to dip in to the same extent as as higher

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Speaker 1: income households as as well. Okay, let's go back to

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Speaker 1: the great John Sylvia who developed Wells Fargo and you

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Speaker 1: people have continued it forward. Sarah House, what are real

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Speaker 1: wages doing? I don't mean so much the real wage,

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Speaker 1: but what does the real paycheck do? Here? The inflation

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Speaker 1: adjusted paycheck, right, so in terms of real average early earning,

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Speaker 1: so we've seen them turn deeply negative over over the

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Speaker 1: past year. Now, I think we'll see some improvement in

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Speaker 1: that dynamic as as the year moves forward. So we're

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Speaker 1: expecting stronger wage growth as we do see the labor

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Speaker 1: market continuing to tighten and businesses have come around to

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Speaker 1: the fact that if they want to attract and retain workers,

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Speaker 1: they have to pay up. That was a lesson that

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Speaker 1: was hard to learn the past. The past could go

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Speaker 1: away from hourly wages. You sound like an economist. Go

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Speaker 1: to somebody that's a house. Somebody's making one forty, the

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Speaker 1: other person is making one twenty or ninety or one

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Speaker 1: eighty whatever, but bundled all in there doing a tax

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Speaker 1: form of one fifty or two hundred thousand. That's not

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Speaker 1: an average aly wage. But they're getting closed by inflation.

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Speaker 1: Are they going to be able to keep up that

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Speaker 1: upper middle class household that everyone aspires to. Are they

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Speaker 1: going to be able to keep up in the next

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Speaker 1: twenty four months. I don't see it. I think the

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Speaker 1: pictures actually going to look better when we talk about

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Speaker 1: some of these stronger wage gains, not just in those

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Speaker 1: lower income, high contact service sectors like leisure in hospitality

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Speaker 1: that we've seen, as we do see wage pressures filter

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Speaker 1: up into too higher pain brackets as well, and then

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Speaker 1: the fact that we are expecting inflation to receive over

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Speaker 1: the course of that year, so that balance is going

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Speaker 1: to get a little bit better. And I think when

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Speaker 1: we talk about overall household income, we have to remember

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Speaker 1: that we're also adding a lot of jobs this year,

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Speaker 1: and so that's going to help in terms of that

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Speaker 1: aggregate wage and salary income. That's going to help offset

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Speaker 1: some of this. These inflationary pressures that that household are

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Speaker 1: seen as we see more people step back into the

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Speaker 1: labor market and you go back to more to income

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Speaker 1: household Sarah before we let you go. The feed is

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Speaker 1: increasingly moving to a data dependency, as they keep saying,

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Speaker 1: and there's a lot of people in the market seem

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Speaker 1: to believe. The question is which data? So what is

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Speaker 1: the most important data that you're watching in the weeks

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Speaker 1: and months to come. I think your term it boils

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Speaker 1: down to inflation. So we are under the assumption that

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Speaker 1: employment is going to hit near pocket here in January

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Speaker 1: and February with amicron staffing apps and absences, difficulty staffing

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Speaker 1: up and bringing on new workers. But I think it

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Speaker 1: really comes down to how quickly or whether at all,

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Speaker 1: we do see those inflation pressures begin to recede. So

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Speaker 1: we expect inflation on your rear basis to talk out

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Speaker 1: here in the first quarter. But on a monthly basis,

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Speaker 1: we're still gonna be seen some pretty strong games here

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Speaker 1: in the near term. And so I think it's a

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Speaker 1: matter of of how much some of those monthly games

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Speaker 1: come down. If we're still seeing you know, three times

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Speaker 1: four times of we're sent monthly increases, I think that's

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Speaker 1: still going to keep the pressure very much on the

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Speaker 1: feed into um signal that they are are closely trying,

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Speaker 1: closely tracking inflation and trying to rein that in before

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Speaker 1: it becomes to entrenched. So the House of Los Franco, Sarah,

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Speaker 1: thank you. Now your level joins us right now, senior

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Speaker 1: US equity strategists at an optimistic you. Yes, Now you

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Speaker 1: frame what you have changed in the first twenty one

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Speaker 1: days of January. How have you amended and adjusted the

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Speaker 1: U B S view? You know, we haven't changed our

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Speaker 1: view much. Clearly, the market has had a choppy start

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Speaker 1: to the year, but it does feel like most of

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Speaker 1: the selling might be behind as we're approaching some clean

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Speaker 1: technical support level on the SMP and that would suggest

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Speaker 1: that the market is near over soul territory. So we

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Speaker 1: are looking forward for this narrative to change and some

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Speaker 1: stability in the market going forward. I think that UM

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Speaker 1: investors have become somewhat spoiled in the last couple of years,

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Speaker 1: have not seen any sort of pullback to this magnetude.

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Speaker 1: Usually you see a couple of these five percent pullbacks.

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Speaker 1: So we're starting to see that market approach out oversells

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Speaker 1: territory and really opportunity to start thinking about buying those deeps.

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Speaker 1: And now that you've heard these phrases in the past,

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Speaker 1: don't catch a falling knife. Remember covering the European debt crisis,

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Speaker 1: a decadeed guy I was told, don't be your hand

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Speaker 1: in a food blender. When it feels uncomfortable, that's when

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Speaker 1: you should buy. How uncomfortable is it now? You said,

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Speaker 1: buy the dip on the s and pay. Would you

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Speaker 1: buy the tip on this last one? We have been

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Speaker 1: somewhat usual on tech for some time. We do think

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Speaker 1: that tech will continue to pray some pressure from rising

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Speaker 1: interest rate and uh, those valuation needs to come in

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Speaker 1: a little bit more. There are areas of tacto that

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Speaker 1: we do like, and we'll use the opportunity that's happening

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Speaker 1: that this sort of indiscriminate selling to build opportunity position

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Speaker 1: over the long term, particularly in areas like artificial intelligence,

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Speaker 1: big data, cybersecurity. So there's some opportunity here to build

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Speaker 1: position and high quality names was sustainable business models. Do

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Speaker 1: you think that the market's got in ahead of itself

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Speaker 1: with fat expectations? Oh, we we do. We do think so.

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Speaker 1: In terms of our base case is that we expect

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Speaker 1: three great heights this year started in March, followed by

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Speaker 1: June and September. We're looking for a balance sheet role

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Speaker 1: run off to start later this year. I mean, what's

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Speaker 1: driving our view is that we continue to believe that

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Speaker 1: inflation will meaningfully moderate as the year progress. We're looking

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Speaker 1: for our to two percent by the end of the year,

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Speaker 1: and we think that will alleviate some of the pressure

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Speaker 1: on the feed to be more aggressive. Uh and it

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Speaker 1: needs to bring back a modnteler policy to neutral. The

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Speaker 1: reason why I ask is because you expect or you

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Speaker 1: call for your your your firm calls for three rate

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Speaker 1: hikes this year versus the four that are baked into

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Speaker 1: market expectations, and I wonder at what point you start

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Speaker 1: to see tech becoming a buyo. We're just talking about

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Speaker 1: how you're not there yet. It's neutral, but what is

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Speaker 1: the tipping point for you to say, Okay, now is

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Speaker 1: the time to really go overweight and to go all in.

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Speaker 1: I think you know what you need to see is

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Speaker 1: one while we're watching the earnest season very closely, and

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Speaker 1: so you know, if the tech companies can put up

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Speaker 1: good numbers, which traditionally they have been able to do.

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Speaker 1: So I think if you've got another you know, five

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Speaker 1: or so pulled back here in tech, it becomes a

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Speaker 1: little bit more attractive. But right now we are really

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Speaker 1: focused on taking advantage of value. We think the value

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Speaker 1: continued to be well positioned, particularly as rates move higher.

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Speaker 1: Financials well so looking at energy given that the continue

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Speaker 1: upward pressure that we have seen on all prices, and

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Speaker 1: we think that prices were stabilized at a higher level,

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Speaker 1: and so we think that energy is also some of

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Speaker 1: the best opportunities right now in the market. Nadia, I

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Speaker 1: am and this is my own bias, folks. Full disclosure,

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Speaker 1: I'm absolutely fascinated at the comparison of Microsoft using spare

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Speaker 1: change to go after activision versus the travails of Netflix.

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Speaker 1: I don't want to do individual stock here, but what's

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Speaker 1: the value of profit right now? What is the value

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Speaker 1: of free cash flow right now? You know, having good

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Speaker 1: profit growth and also having a strong balance sheet and

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Speaker 1: free cash flow can be a very powerful currency in

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Speaker 1: this market. As you're seeing valuation pull in and some

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Speaker 1: of these tech companies, it is providing opportunities for pick

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Speaker 1: up and m and A, which is already playing out

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Speaker 1: early in the year. And so we do think that

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Speaker 1: that is very valuable. A lot of these tech companies

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Speaker 1: large colganies of flashbord cash, and we wouldn't be surprised

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Speaker 1: to see even more m andy app activity later this year.

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Speaker 1: And nowda, how does the international story stack up now

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Speaker 1: versus the US. I've heard so many people throw around

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Speaker 1: names like Japan. Maybe take a look at China as

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Speaker 1: they start at as how did they stack up against

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Speaker 1: the US at the moment? Yeah, we we we we do.

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Speaker 1: We do have a preference to the US. I mean

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Speaker 1: in terms of looking overseas like your your zone looks interesting, Um, China,

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Speaker 1: We're still mutual on China, but the market has re

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Speaker 1: rated down work quite a bit. Over the last year,

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Speaker 1: and there might be some opportunities there in incoming weeks

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Speaker 1: around around China, but right now we are utual on China,

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Speaker 1: not your level of us, Nadia, thank you. Our goal

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Speaker 1: is to bring you experts, people with zero bs about

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Speaker 1: the things at the moment, and we've hit a home

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Speaker 1: run out of the park here over the Massachusetts Turnpike

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Speaker 1: with Tina Ford, head of Global Political Strategy at Avon

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Speaker 1: Hurst where their academics at Colombia and far more her

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Speaker 1: ability to trapes across the Atlantic like no one I know.

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Speaker 1: Tina thrilled to have you on at this historic moment.

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Speaker 1: Secretary B. Lincoln's family is steeped in Eastern Europe, steeped

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Speaker 1: in this fractious relationship between Russia and the West. I

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Speaker 1: featured that John Meersheimer real politic moments ago, the idea

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Speaker 1: that NATO is overreached. How does the President of the

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Speaker 1: United States react to Mr Putin's belief that we have overreached?

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Speaker 1: President needs to hold the line and Secretary B. Lincoln, um,

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Speaker 1: as you said, with his family history in Eastern Europe,

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Speaker 1: just like Angela Merkel, the former German Chancellor, knows that

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Speaker 1: you cannot show weakness to Vladimir Putin. Blurring the red

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Speaker 1: lines dividing the West in NATO is part of what's

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Speaker 1: happening here. How do we show strength away from sanctions?

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Speaker 1: What are the avenues we have east of Kiev. Well,

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Speaker 1: whilst we've all been busy with COVID fighting, COVID and

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Speaker 1: and everything else, Russia has been able to make significant

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Speaker 1: inroads in destabilizing UM. It's a former UM, former satellite

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Speaker 1: states Lithuania for example, UM Belarus with the with the

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Speaker 1: protests and the support that's come from Moscow, also support

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Speaker 1: from from Moscow to to some current EU member states. UM.

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Speaker 1: That is why To those who ask you know why now,

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Speaker 1: I would say, We've got US midterms in November, as

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Speaker 1: as as all Americans now, we've got a new government

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Speaker 1: in Germany. We have the UK focused on its own trouble.

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Speaker 1: So if there was ever a time to test the

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Speaker 1: resolve of Europe and the United States when it comes

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Speaker 1: to enforcing borders and and other measures, now is that time.

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Speaker 1: I think the question that you know, to refer back

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Speaker 1: to what you're saying, is whether the sanctions that have

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Speaker 1: been suggested, these massive sanctions, the sanctions from Hell are

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Speaker 1: going to be enough to deter putin who might be thinking, Um,

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Speaker 1: that we won't be willing to do the big stuff

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Speaker 1: like take you know, sanction Russia against Swift for example.

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Speaker 1: You know, there may be other lessons so that we

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Speaker 1: can take from some of these meetings, in particular the

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Speaker 1: relationship between the United States and the European Union. Is

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Speaker 1: it significant that Anthony Blinken went first to meet with

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Speaker 1: all Off Schultz and that he really emphasized everything that

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Speaker 1: he said, We will work with our allies. We have

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Speaker 1: decided on a plan. This is ours. Is that notable

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Speaker 1: and frankly a notable departure from the previous administration and

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Speaker 1: enough to create a strong coalition. Well, you're right that

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Speaker 1: it's um, you know, making more of an effort, more

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Speaker 1: of an effort coming from Washington than usual. But I

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Speaker 1: can tell you that when those US Russia bilateral meetings

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Speaker 1: were announced in for Geneva, the Europeans were very concerned

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Speaker 1: about decisions being taken about Europe without Europe in the room.

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Speaker 1: Since then, Tony Blncoln has been at pains to emphasize

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Speaker 1: the importance. But you know, speaking to you from from

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Speaker 1: here in London, Um, there is a lot plenty of

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Speaker 1: reason to be concerned that the failure of this diplomatic

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Speaker 1: initiative is going to lead to a serious gas price

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Speaker 1: crunch in Europe, or a gas supply crunch rather and

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Speaker 1: a price hike. And of course Ukraine is also important

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Speaker 1: as an agricultural producer, so we feel the effects here

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Speaker 1: in a way that is perhaps more real politique for

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Speaker 1: the United States, Tina. If you are advising big multinational

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Speaker 1: companies about how to prepare for some sort of escalation here,

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Speaker 1: what would you say, what mindset should they get in

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Speaker 1: as they prepare for either sanctions or even some military altercation. Well,

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Speaker 1: I do advise multinational companies and institutional investors. That's exactly

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00:24:03,320 --> 00:24:06,280
Speaker 1: what I what I do as the chief global political strategist.

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Speaker 1: And one of the things that I have emphasized in

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00:24:09,200 --> 00:24:12,560
Speaker 1: my methodology is that we cannot treat these types of

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00:24:12,640 --> 00:24:17,600
Speaker 1: events as tail risks. Um. Nobody needs a geopolitical analysts

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00:24:17,600 --> 00:24:20,159
Speaker 1: who cries wolf all the time, and so as a

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00:24:20,200 --> 00:24:24,040
Speaker 1: longstanding Russia watched her. You know, I'm saying now, Um,

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00:24:24,080 --> 00:24:28,600
Speaker 1: that this conflict is entering very serious territory. You need

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00:24:28,640 --> 00:24:33,359
Speaker 1: to stress test against Um. You know, waking up to

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00:24:33,400 --> 00:24:37,840
Speaker 1: a headline that says Russia has crossed the border into Ukraine. Now,

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00:24:37,920 --> 00:24:42,000
Speaker 1: in addition to that, there are some, perhaps less destabilizing

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00:24:42,040 --> 00:24:46,399
Speaker 1: but still concerning possibilities, for example, a de facto or

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00:24:46,400 --> 00:24:50,080
Speaker 1: a soft annexation of parts of Ukrainian territory. And let's

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00:24:50,080 --> 00:24:54,320
Speaker 1: remember we've got troops, Russian troops now stationed in Belarus

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Speaker 1: in addition to those amassed on the border with Ukraine. Tina,

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00:24:58,400 --> 00:25:00,440
Speaker 1: Peter the Great, I know you know this, or for

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00:25:00,440 --> 00:25:03,160
Speaker 1: forty two years, I should say, reigned for forty two years.

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Speaker 1: Mr Putin is catching up very quickly. Let's look at

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Speaker 1: Putin the Great in the heart of the matter, which

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Speaker 1: is the Russian people have always project itself to the waters.

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Speaker 1: They need a navy. It's been that way forever and

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Speaker 1: ever explained to us Mr Putin's feelings of Ukraine is

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Speaker 1: an avenue to Crimea is an avenue to the Black Sea.

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Speaker 1: And how the U. S. Navy and NATO should respond, Well,

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Speaker 1: you know, I love what you're saying. I lived in St.

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00:25:33,480 --> 00:25:37,159
Speaker 1: Petersburg for for a time in uh you know, a

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00:25:37,200 --> 00:25:41,040
Speaker 1: million years ago in my student days. Um it was

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00:25:41,480 --> 00:25:44,520
Speaker 1: um frozen. So for you know, half the year and

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00:25:44,560 --> 00:25:47,520
Speaker 1: so didn't have direct access to the water. U The

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00:25:47,600 --> 00:25:50,800
Speaker 1: Russian Empire, of course, came before the Soviet Union. Having

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00:25:50,960 --> 00:25:54,159
Speaker 1: those um, those channels has has always been important. Putin

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Speaker 1: does see himself very much in in one of Russia's

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Speaker 1: great leaders, um, alongside the Czars. He's written extensively about this. UM.

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Speaker 1: But if we take what's happened in Kazakhstan, for example,

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Speaker 1: in context, Putin's dream of having a kind of safe

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00:26:15,200 --> 00:26:19,760
Speaker 1: pro Russian buffer states all along the border is starting

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00:26:19,800 --> 00:26:23,760
Speaker 1: to crack. Um. The Mersheimer quote that you put up,

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Speaker 1: you know, interested me very much, of course. Um, you know,

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Speaker 1: one of the most important professors of international affairs and

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00:26:29,280 --> 00:26:32,680
Speaker 1: leaders on this. What mir Scheimer says that perhaps NATO

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00:26:32,720 --> 00:26:35,200
Speaker 1: has overreached is echoed by a lot of the investors

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Speaker 1: I talked to. Why are we doing this? Why are we,

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00:26:37,680 --> 00:26:40,840
Speaker 1: you know, poking the bear. Here's where we bring in

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00:26:41,000 --> 00:26:45,680
Speaker 1: US diplomatic history. Um that says the United States can't

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Speaker 1: allow any regional hegemons. And that's where what happens in

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Speaker 1: Ukraine is watched very closely in China and by Taiwan,

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Speaker 1: right because both China have a big thing in common

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Speaker 1: and that is wanting to to to be the regional

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Speaker 1: head and months without risking US or Western military blowback.

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00:27:04,160 --> 00:27:07,120
Speaker 1: And of course that worries all of the smaller countries

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Speaker 1: around them. So will the US be able to maintain

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Speaker 1: its global position. That's what's at stake right now in Ukraine,

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00:27:14,400 --> 00:27:17,320
Speaker 1: and that's what Secretary Li Lincoln is going to be

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00:27:17,440 --> 00:27:21,040
Speaker 1: trying to um to project Tina. Thank you. I think

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00:27:21,040 --> 00:27:23,760
Speaker 1: that final point is so so important. Tina foldom that

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Speaker 1: of Aimon huss This is the Bloomberg Surveillance Podcast. Thanks

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00:27:28,000 --> 00:27:31,280
Speaker 1: for listening. Join us live weekdays from seven to ten

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00:27:31,359 --> 00:27:35,840
Speaker 1: am Eastern on Bloomberg Radio and on Bloomberg Television each

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00:27:35,920 --> 00:27:39,679
Speaker 1: day from six to nine am for insight from the

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00:27:39,680 --> 00:27:44,920
Speaker 1: best in economics, finance, investment, and international relations. And subscribe

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00:27:44,920 --> 00:27:49,880
Speaker 1: to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com,

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00:27:49,960 --> 00:27:53,200
Speaker 1: and of course on the terminal. I'm Tom Keene and

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Speaker 1: this is Bloomberg. You do