1 00:00:00,120 --> 00:00:02,200 Speaker 1: Let's bring in Peter Cheer, he has head of macro 2 00:00:02,320 --> 00:00:06,800 Speaker 1: Strategy at Academy Securities to take a look at today's 3 00:00:06,880 --> 00:00:10,440 Speaker 1: volatility and markets a lot. Peter has focused on some 4 00:00:10,480 --> 00:00:14,520 Speaker 1: of the geopolitical risk that maybe markets had become a 5 00:00:14,560 --> 00:00:18,560 Speaker 1: little complacent on. Would you say that's a fair statement. Yeah, 6 00:00:18,560 --> 00:00:20,200 Speaker 1: I think it's a very fair statement. One of the 7 00:00:20,280 --> 00:00:23,120 Speaker 1: meat things about Academy Securities is we have seventeen retired 8 00:00:23,160 --> 00:00:26,439 Speaker 1: generals and admirals who serve as our geopolitical intelligence group. 9 00:00:26,720 --> 00:00:29,960 Speaker 1: We started analyzing this situation the minute occurred, and I 10 00:00:30,000 --> 00:00:33,240 Speaker 1: think this situation is no matter what happened, this is 11 00:00:33,240 --> 00:00:35,760 Speaker 1: probably going to be an impetus to give Ukraine more 12 00:00:35,840 --> 00:00:39,280 Speaker 1: weapons and better weapons. So, no matter how this all happened, 13 00:00:39,720 --> 00:00:41,080 Speaker 1: I think that that's going to play out. And what 14 00:00:41,200 --> 00:00:43,400 Speaker 1: hasn't been mentioned enough is this all happened in a 15 00:00:43,520 --> 00:00:46,760 Speaker 1: day where Ukraine is potentially without of the country is 16 00:00:46,800 --> 00:00:49,919 Speaker 1: without power, that we're devastating attacks. So I think we're 17 00:00:49,920 --> 00:00:52,440 Speaker 1: going to see an escalation from our side. I think 18 00:00:52,440 --> 00:00:55,600 Speaker 1: now this gets worse before better. Regardless of Article five 19 00:00:55,680 --> 00:00:58,600 Speaker 1: or not, this is just gonna be an escalation with 20 00:00:59,240 --> 00:01:02,720 Speaker 1: what's going on. It's rather reminiscent of the Gulf of 21 00:01:02,800 --> 00:01:07,080 Speaker 1: Tonkin incident. Yes, and I think you know, we all 22 00:01:07,080 --> 00:01:09,360 Speaker 1: talked about escalation. You wonder how do you get to 23 00:01:09,400 --> 00:01:11,880 Speaker 1: some endpoint? And I think this is what happens. We'll 24 00:01:11,880 --> 00:01:14,200 Speaker 1: do something now all of a sudden. Imagine we give 25 00:01:14,280 --> 00:01:16,800 Speaker 1: Ukraine enough long range of missiles, they do something that 26 00:01:16,840 --> 00:01:19,240 Speaker 1: hits Russian territory. So I think this gets very dangerous 27 00:01:19,319 --> 00:01:21,679 Speaker 1: right now. So the knee jerk in terms of market 28 00:01:21,720 --> 00:01:25,440 Speaker 1: reaction sell risk. I mean, we saw popping crude oil prices, 29 00:01:25,480 --> 00:01:28,440 Speaker 1: but that trade didn't seem to be durable. Is what 30 00:01:28,480 --> 00:01:31,280 Speaker 1: you're saying is that we have to reconsider that and 31 00:01:31,280 --> 00:01:33,400 Speaker 1: and maybe we're going to be dealing with one factor, 32 00:01:33,440 --> 00:01:37,319 Speaker 1: which would be higher energy prices going forward. Yeah, I 33 00:01:37,360 --> 00:01:39,240 Speaker 1: went home convincing my clients to be a little bit 34 00:01:39,240 --> 00:01:41,760 Speaker 1: short on risk. We've been very bullish. We thought the 35 00:01:41,800 --> 00:01:44,120 Speaker 1: deflation trade was going to come through. That's been working out, 36 00:01:44,920 --> 00:01:47,240 Speaker 1: and I think the market got fixated on an article 37 00:01:47,319 --> 00:01:49,480 Speaker 1: five what this all meant. And I think the reality 38 00:01:49,600 --> 00:01:52,320 Speaker 1: is take a step back. There is no way that 39 00:01:52,440 --> 00:01:54,920 Speaker 1: Ukraine doesn't demand more weapons after this, and I think 40 00:01:54,920 --> 00:01:57,000 Speaker 1: it all likely that they get better weapons that is 41 00:01:57,000 --> 00:01:59,400 Speaker 1: going to escalate. And you saw Russia statements right there 42 00:01:59,400 --> 00:02:00,800 Speaker 1: denying they had an anything to do with this, but 43 00:02:00,840 --> 00:02:03,200 Speaker 1: they're saying, we're trying to escalate. So the moment we 44 00:02:03,240 --> 00:02:05,520 Speaker 1: do that, I think we're re entering a world of 45 00:02:05,520 --> 00:02:08,919 Speaker 1: geopolitical tensions where you just got comfortable that Putin maybe 46 00:02:08,960 --> 00:02:11,480 Speaker 1: was taking it easy, that g seemed to be pushing 47 00:02:11,480 --> 00:02:14,280 Speaker 1: Pudin towards peace, that maybe after the elections we wanted it. 48 00:02:14,639 --> 00:02:18,440 Speaker 1: I think this is a step backwards. Okay, well, let's 49 00:02:18,480 --> 00:02:20,480 Speaker 1: people have a look at what your generals may be 50 00:02:20,560 --> 00:02:22,760 Speaker 1: telling you about, you know, the loss of care Son 51 00:02:23,520 --> 00:02:26,880 Speaker 1: by the Russians, how I mean inst of all going 52 00:02:26,960 --> 00:02:30,680 Speaker 1: that badly in their view. Yes, I think the war 53 00:02:30,800 --> 00:02:33,280 Speaker 1: is going very badly in the view of our generals. 54 00:02:33,560 --> 00:02:37,160 Speaker 1: They keep making mistake after mistake. Our current base cases 55 00:02:37,240 --> 00:02:39,280 Speaker 1: what we think will happen is and this is gonna 56 00:02:39,280 --> 00:02:41,040 Speaker 1: be a little bit hard to do over radio, but 57 00:02:41,240 --> 00:02:43,760 Speaker 1: Russia needs to go east to west, and all the 58 00:02:43,840 --> 00:02:46,320 Speaker 1: rivers in the Ukraine run north south, so they need 59 00:02:46,360 --> 00:02:49,760 Speaker 1: those rivers to freeze to make a proper attack going forward. 60 00:02:49,960 --> 00:02:52,959 Speaker 1: Because Ukraine, especially with all the recent weaponry that we 61 00:02:53,040 --> 00:02:55,799 Speaker 1: give them, the high mars, etcetera. We can stop them 62 00:02:55,800 --> 00:02:59,520 Speaker 1: from crossing bridges. So Russian needs things to freeze before 63 00:02:59,520 --> 00:03:02,079 Speaker 1: they make one more launched. It's been going very badly. 64 00:03:02,120 --> 00:03:05,760 Speaker 1: They keep losing and their tactics seem awful. So if 65 00:03:05,840 --> 00:03:09,400 Speaker 1: markets have it right then, and or maybe they don't 66 00:03:09,400 --> 00:03:11,520 Speaker 1: and we need to see some kind of readjustment. Does 67 00:03:11,560 --> 00:03:14,919 Speaker 1: that necessarily mean stronger dollar, lower yields, and and a 68 00:03:15,000 --> 00:03:19,840 Speaker 1: FED that's in a much more tight situation. I think 69 00:03:19,840 --> 00:03:22,080 Speaker 1: it means lower yields, but I don't think it puts 70 00:03:22,120 --> 00:03:25,000 Speaker 1: the FED dealing with inflation. Right. If we see oil 71 00:03:25,080 --> 00:03:27,760 Speaker 1: prices go up because of a renewed focus on the war, 72 00:03:28,560 --> 00:03:30,720 Speaker 1: I don't think the FED reacts to that right. Traditionally 73 00:03:30,760 --> 00:03:34,120 Speaker 1: the FED actually eases into war. So I don't think 74 00:03:34,440 --> 00:03:38,880 Speaker 1: higher oil prices trigger FED inflation response. They figure they 75 00:03:38,920 --> 00:03:41,240 Speaker 1: trigger more a FED. Hey, we have to see where 76 00:03:41,240 --> 00:03:43,000 Speaker 1: this is all headed, one way or the other. I 77 00:03:43,000 --> 00:03:45,320 Speaker 1: think this escalates the end game, whether it's a good 78 00:03:45,360 --> 00:03:48,000 Speaker 1: or bad endgame, whether maybe everyone finally pushes people to 79 00:03:48,000 --> 00:03:49,760 Speaker 1: the table, so there could be a good result, but 80 00:03:49,760 --> 00:03:52,240 Speaker 1: I think right now worse and then let's see how 81 00:03:52,240 --> 00:03:56,120 Speaker 1: the people respond. I'm going to keep on talking about this, 82 00:03:56,280 --> 00:03:58,840 Speaker 1: but at the end of the day, it's the way 83 00:03:58,880 --> 00:04:01,440 Speaker 1: to conclude. This may well have to be some kind 84 00:04:01,440 --> 00:04:05,840 Speaker 1: of face saving for Vladimir Putin. Yes, I think in 85 00:04:05,880 --> 00:04:08,040 Speaker 1: the end what we want to avoid is where he 86 00:04:08,120 --> 00:04:10,880 Speaker 1: feels that he has to I hate to say the term, 87 00:04:10,880 --> 00:04:13,400 Speaker 1: but go nuclear. We don't want him to see feel 88 00:04:13,480 --> 00:04:16,240 Speaker 1: so panicked that he loses, and I think some negotiation 89 00:04:16,320 --> 00:04:19,159 Speaker 1: has to occur where Ukraine maybe has to give up something, 90 00:04:19,160 --> 00:04:21,160 Speaker 1: which I think Zelensky is going to be very reluctant 91 00:04:21,160 --> 00:04:23,360 Speaker 1: to do, but maybe just has to get to old listen, 92 00:04:23,400 --> 00:04:26,360 Speaker 1: we cannot keep supporting you in this way, give up 93 00:04:26,480 --> 00:04:30,200 Speaker 1: something so Putent can go home peacefully. And it's really 94 00:04:30,200 --> 00:04:33,359 Speaker 1: crucial right now as Ukraine's facing a as we mentioned earlier, 95 00:04:34,040 --> 00:04:38,440 Speaker 1: huge electrical power shortages, which as you face winner, that's 96 00:04:38,440 --> 00:04:40,880 Speaker 1: not something we can do. But as the sanctions ramp up, 97 00:04:40,920 --> 00:04:42,839 Speaker 1: I think there's a lot of evidence that it's going 98 00:04:42,880 --> 00:04:45,599 Speaker 1: to hurt us the West collectively more than it hurts Russia. 99 00:04:45,839 --> 00:04:47,920 Speaker 1: So maybe we want to avoid those sanctions as well. 100 00:04:48,000 --> 00:04:51,039 Speaker 1: So peace seems the best outcome. And maybe this is that, 101 00:04:51,240 --> 00:04:53,320 Speaker 1: you know, one step backwards before we get the two 102 00:04:53,360 --> 00:04:55,800 Speaker 1: steps forward much more in the way of headwind I'm 103 00:04:55,839 --> 00:04:58,839 Speaker 1: imagining for Europe's economy. Play that out for me, What 104 00:04:58,880 --> 00:05:03,000 Speaker 1: does that look like? Yeah, I think Europe. It felt 105 00:05:03,040 --> 00:05:04,919 Speaker 1: like Europe was just turning the corner right. More and 106 00:05:04,920 --> 00:05:07,400 Speaker 1: more analysts, including myself, were saying, Okay, maybe they've done 107 00:05:07,520 --> 00:05:09,839 Speaker 1: enough to make it through this winter. Maybe we're okay, 108 00:05:10,600 --> 00:05:12,839 Speaker 1: And now that feels off the table, right. If there's 109 00:05:12,880 --> 00:05:15,599 Speaker 1: this friction, it's problematic. And the other thing, which I 110 00:05:15,600 --> 00:05:18,159 Speaker 1: haven't mentioned, comes up often when you talk, especially with 111 00:05:18,160 --> 00:05:22,200 Speaker 1: our geopolitical history, is the force migration that's gone on 112 00:05:22,400 --> 00:05:25,800 Speaker 1: in Europe is unseen since World War Two, and at 113 00:05:25,839 --> 00:05:27,640 Speaker 1: times it's probably even worse than World War Two. Right, 114 00:05:27,640 --> 00:05:30,719 Speaker 1: we've displaced five to eight million Ukrainians into Western Europe. 115 00:05:30,720 --> 00:05:33,200 Speaker 1: The longer this war goes on, the harder it's going 116 00:05:33,200 --> 00:05:35,440 Speaker 1: to be for them to return. The more destruction that 117 00:05:35,480 --> 00:05:38,800 Speaker 1: goes on to their old property, their apartments, harder for 118 00:05:38,839 --> 00:05:40,880 Speaker 1: them to return. So that's yet another reason I think 119 00:05:40,880 --> 00:05:43,120 Speaker 1: we need to sit down and get some sort of 120 00:05:43,200 --> 00:05:45,640 Speaker 1: truce that maybe gets put in just enough that we 121 00:05:45,680 --> 00:05:47,640 Speaker 1: can get out of this. But let's move away from 122 00:05:47,640 --> 00:05:49,680 Speaker 1: the missile strike and and just talk about what it's 123 00:05:49,680 --> 00:05:51,840 Speaker 1: going on in terms of how you see the global 124 00:05:51,880 --> 00:05:54,839 Speaker 1: economy panning out, how you see inflation at the moment, 125 00:05:54,880 --> 00:05:58,359 Speaker 1: and whether it's peaked or not. I think inflations peaked. 126 00:05:58,400 --> 00:06:00,800 Speaker 1: I think it's rolling over very quickly. And some of 127 00:06:00,760 --> 00:06:02,840 Speaker 1: it's obvious, right the higher interest rates. I think the 128 00:06:02,920 --> 00:06:05,279 Speaker 1: US economy was more leveraged to raise than people expected. 129 00:06:05,279 --> 00:06:07,760 Speaker 1: You're seeing it in housing, you're seeing it in autos. 130 00:06:08,920 --> 00:06:11,400 Speaker 1: I think the job's number we might have to come back, 131 00:06:11,480 --> 00:06:14,159 Speaker 1: because that's the one remaining issue. The other part, to 132 00:06:14,200 --> 00:06:16,800 Speaker 1: me has been the wealth effect, the complete wealth destruction 133 00:06:16,839 --> 00:06:19,600 Speaker 1: that's gone on, and where I'm really focused. I think 134 00:06:19,600 --> 00:06:22,880 Speaker 1: it's very different. This time. It was very concentrated wealth creation, 135 00:06:23,120 --> 00:06:25,880 Speaker 1: and it was the disruptive companies. It was the crypto companies, 136 00:06:26,200 --> 00:06:28,719 Speaker 1: and I see it as threefold. One the companies themselves, 137 00:06:28,880 --> 00:06:30,719 Speaker 1: so they were able to raise money, and they spent 138 00:06:30,800 --> 00:06:33,880 Speaker 1: that money aggressively, their employees, their stock options were worth 139 00:06:33,880 --> 00:06:36,120 Speaker 1: a lot of money. They were spending that money. And 140 00:06:36,160 --> 00:06:38,760 Speaker 1: then just the casual investor is working very well. All 141 00:06:38,839 --> 00:06:40,560 Speaker 1: that's gone down. So I think that's gonna be a 142 00:06:40,600 --> 00:06:43,120 Speaker 1: huge drag in the economy. I think it's gonna infect technology, 143 00:06:43,400 --> 00:06:46,280 Speaker 1: it's gonna affect semis, etcetera. But one pushback I get 144 00:06:46,320 --> 00:06:49,359 Speaker 1: to my view that inflation is really topped out is 145 00:06:49,360 --> 00:06:52,080 Speaker 1: people are looking at jobs, and I see two things 146 00:06:52,120 --> 00:06:55,560 Speaker 1: about that. One is, traditionally jobs are very lagging indicator, 147 00:06:55,800 --> 00:06:57,560 Speaker 1: and I think it's gonna be more liking this time 148 00:06:57,560 --> 00:07:00,359 Speaker 1: than we've ever seen before, partly because HR people have 149 00:07:00,400 --> 00:07:02,080 Speaker 1: spent the last year and a half trying to hire 150 00:07:02,279 --> 00:07:04,359 Speaker 1: and have been unable to hire. They are not going 151 00:07:04,400 --> 00:07:06,120 Speaker 1: to allow people to get fired. They're going to figure 152 00:07:06,120 --> 00:07:08,840 Speaker 1: out other ways to cut costs before firing. So jobs 153 00:07:08,920 --> 00:07:10,600 Speaker 1: is going to be the last lay to drop, and 154 00:07:10,640 --> 00:07:12,640 Speaker 1: I think that starts happening. And when you look at 155 00:07:12,640 --> 00:07:17,000 Speaker 1: some of the discommunities between household versus establishment versus birth 156 00:07:17,040 --> 00:07:21,640 Speaker 1: death models, I think we're prepared actually to see a big, 157 00:07:21,680 --> 00:07:24,800 Speaker 1: shockingly not good number in this next job's report. So 158 00:07:24,840 --> 00:07:27,560 Speaker 1: that's why I think inflations rolled over. I think it's problematic. 159 00:07:27,840 --> 00:07:30,040 Speaker 1: I think markets can be happy briefly that we go 160 00:07:30,120 --> 00:07:32,720 Speaker 1: through a soft landing type scenario, but I think soon 161 00:07:32,720 --> 00:07:35,320 Speaker 1: we're gonna start pricing in a hard landing. Hard landing, 162 00:07:35,320 --> 00:07:38,360 Speaker 1: and what about earnings disappointments. Are we going to see 163 00:07:38,360 --> 00:07:41,640 Speaker 1: a lot in the way of that. Yes, I think 164 00:07:41,680 --> 00:07:44,640 Speaker 1: we're already struggling. One thing, You look at some of 165 00:07:44,640 --> 00:07:46,400 Speaker 1: the companies that are laying off people, and they're laying 166 00:07:46,440 --> 00:07:48,560 Speaker 1: off people at what seems like an awkward time. Right, 167 00:07:48,560 --> 00:07:50,760 Speaker 1: We're usually coming into one of the most robust business 168 00:07:50,760 --> 00:07:52,960 Speaker 1: seasons in the US and you get companies that are 169 00:07:53,000 --> 00:07:56,480 Speaker 1: involved in that area letting people go. I think the 170 00:07:56,600 --> 00:07:59,960 Speaker 1: f X volatially is problematic, but more importantly, everywhere I look, 171 00:08:00,120 --> 00:08:03,920 Speaker 1: people are having sales. Right, it's off this off that 172 00:08:04,200 --> 00:08:07,040 Speaker 1: I think retail is still struggling. The service industry has 173 00:08:07,080 --> 00:08:08,800 Speaker 1: done very well. But what I can't tell with the 174 00:08:08,800 --> 00:08:11,760 Speaker 1: service industry whether this is a one time effect coming 175 00:08:11,840 --> 00:08:14,760 Speaker 1: to the US holiday season and it dissipates after year 176 00:08:14,840 --> 00:08:17,000 Speaker 1: end or it doesn't. I lean towards that this is 177 00:08:17,040 --> 00:08:19,560 Speaker 1: going to dissipate. So I see the economy rolling over, 178 00:08:20,160 --> 00:08:23,320 Speaker 1: higher rates playing a price, and this wealth effect, this 179 00:08:23,600 --> 00:08:27,920 Speaker 1: pure wealth destruction we've seen in disruptive companies and crypto 180 00:08:28,160 --> 00:08:31,720 Speaker 1: having a much bigger effect than people realize. I've got 181 00:08:31,760 --> 00:08:35,520 Speaker 1: to ask you this question, how far is now uh 182 00:08:36,840 --> 00:08:39,120 Speaker 1: crypto being Well, let's just put in another way, how 183 00:08:39,160 --> 00:08:42,239 Speaker 1: badly damage is crypto being as a consequence of the 184 00:08:42,480 --> 00:08:45,640 Speaker 1: f t X debuclet. So I think it has a 185 00:08:45,640 --> 00:08:47,560 Speaker 1: lot more way to go down. It's I would not 186 00:08:47,640 --> 00:08:51,000 Speaker 1: touch bitcoin until it's well below ten thousand. Clearly we're 187 00:08:51,000 --> 00:08:53,320 Speaker 1: getting little bounces. But you know, I talk a lot 188 00:08:53,360 --> 00:08:55,840 Speaker 1: about there's two ways to lose money. One is you 189 00:08:55,880 --> 00:08:58,520 Speaker 1: buy an asset that goes down in price, and that's 190 00:08:58,640 --> 00:09:00,559 Speaker 1: we all do that, right, It's been in possible year 191 00:09:00,600 --> 00:09:03,040 Speaker 1: this in many respects with you about bond stocks. It 192 00:09:03,080 --> 00:09:05,600 Speaker 1: didn't matter, it was easy to lose money. One problem 193 00:09:05,600 --> 00:09:07,640 Speaker 1: with losing money on some of these crypto investments is 194 00:09:07,679 --> 00:09:09,360 Speaker 1: you don't even really have a good floor. You don't 195 00:09:09,400 --> 00:09:11,599 Speaker 1: understand what it could be, as we saw, say with 196 00:09:11,640 --> 00:09:15,080 Speaker 1: the FTT token. The other way you lose money is 197 00:09:15,160 --> 00:09:17,520 Speaker 1: you give your money to someone to hold and they 198 00:09:17,520 --> 00:09:19,800 Speaker 1: don't return it to you or can't return it to you. 199 00:09:20,120 --> 00:09:22,280 Speaker 1: And that's what just went on with ft X by 200 00:09:22,320 --> 00:09:24,680 Speaker 1: the looks of it, right So, and it happened earlier 201 00:09:24,679 --> 00:09:27,360 Speaker 1: this year with Celsius, and that to me is really 202 00:09:27,400 --> 00:09:29,960 Speaker 1: hard because with enough due diligence, you feel you could 203 00:09:30,000 --> 00:09:32,240 Speaker 1: ultimately trust someone that you give your money to and 204 00:09:32,320 --> 00:09:36,040 Speaker 1: until that gets resolved, I don't see institutional investors coming 205 00:09:36,040 --> 00:09:38,400 Speaker 1: to this market. In fact, I see people fleeing this 206 00:09:38,480 --> 00:09:41,000 Speaker 1: market because you can't even trust if you get your 207 00:09:41,000 --> 00:09:44,320 Speaker 1: decision to buy crypto right, that you get your returns back, 208 00:09:44,400 --> 00:09:47,360 Speaker 1: and that's a big issue. Peter, thank you so much 209 00:09:47,360 --> 00:09:49,920 Speaker 1: for joining. Is always a pleasure, never a chue. Peter Cheer, 210 00:09:50,000 --> 00:09:53,280 Speaker 1: the head of macro strategy Academy Security, is getting his 211 00:09:53,320 --> 00:09:55,040 Speaker 1: take on the markets and more.