WEBVTT - Peter Tchir on the Markets (Radio) 0:00:00.120 --> 0:00:02.200 Let's bring in Peter Cheer, he has head of macro 0:00:02.320 --> 0:00:06.800 Strategy at Academy Securities to take a look at today's 0:00:06.880 --> 0:00:10.440 volatility and markets a lot. Peter has focused on some 0:00:10.480 --> 0:00:14.520 of the geopolitical risk that maybe markets had become a 0:00:14.560 --> 0:00:18.560 little complacent on. Would you say that's a fair statement. Yeah, 0:00:18.560 --> 0:00:20.200 I think it's a very fair statement. One of the 0:00:20.280 --> 0:00:23.120 meat things about Academy Securities is we have seventeen retired 0:00:23.160 --> 0:00:26.439 generals and admirals who serve as our geopolitical intelligence group. 0:00:26.720 --> 0:00:29.960 We started analyzing this situation the minute occurred, and I 0:00:30.000 --> 0:00:33.240 think this situation is no matter what happened, this is 0:00:33.240 --> 0:00:35.760 probably going to be an impetus to give Ukraine more 0:00:35.840 --> 0:00:39.280 weapons and better weapons. So, no matter how this all happened, 0:00:39.720 --> 0:00:41.080 I think that that's going to play out. And what 0:00:41.200 --> 0:00:43.400 hasn't been mentioned enough is this all happened in a 0:00:43.520 --> 0:00:46.760 day where Ukraine is potentially without of the country is 0:00:46.800 --> 0:00:49.919 without power, that we're devastating attacks. So I think we're 0:00:49.920 --> 0:00:52.440 going to see an escalation from our side. I think 0:00:52.440 --> 0:00:55.600 now this gets worse before better. Regardless of Article five 0:00:55.680 --> 0:00:58.600 or not, this is just gonna be an escalation with 0:00:59.240 --> 0:01:02.720 what's going on. It's rather reminiscent of the Gulf of 0:01:02.800 --> 0:01:07.080 Tonkin incident. Yes, and I think you know, we all 0:01:07.080 --> 0:01:09.360 talked about escalation. You wonder how do you get to 0:01:09.400 --> 0:01:11.880 some endpoint? And I think this is what happens. We'll 0:01:11.880 --> 0:01:14.200 do something now all of a sudden. Imagine we give 0:01:14.280 --> 0:01:16.800 Ukraine enough long range of missiles, they do something that 0:01:16.840 --> 0:01:19.240 hits Russian territory. So I think this gets very dangerous 0:01:19.319 --> 0:01:21.679 right now. So the knee jerk in terms of market 0:01:21.720 --> 0:01:25.440 reaction sell risk. I mean, we saw popping crude oil prices, 0:01:25.480 --> 0:01:28.440 but that trade didn't seem to be durable. Is what 0:01:28.480 --> 0:01:31.280 you're saying is that we have to reconsider that and 0:01:31.280 --> 0:01:33.400 and maybe we're going to be dealing with one factor, 0:01:33.440 --> 0:01:37.319 which would be higher energy prices going forward. Yeah, I 0:01:37.360 --> 0:01:39.240 went home convincing my clients to be a little bit 0:01:39.240 --> 0:01:41.760 short on risk. We've been very bullish. We thought the 0:01:41.800 --> 0:01:44.120 deflation trade was going to come through. That's been working out, 0:01:44.920 --> 0:01:47.240 and I think the market got fixated on an article 0:01:47.319 --> 0:01:49.480 five what this all meant. And I think the reality 0:01:49.600 --> 0:01:52.320 is take a step back. There is no way that 0:01:52.440 --> 0:01:54.920 Ukraine doesn't demand more weapons after this, and I think 0:01:54.920 --> 0:01:57.000 it all likely that they get better weapons that is 0:01:57.000 --> 0:01:59.400 going to escalate. And you saw Russia statements right there 0:01:59.400 --> 0:02:00.800 denying they had an anything to do with this, but 0:02:00.840 --> 0:02:03.200 they're saying, we're trying to escalate. So the moment we 0:02:03.240 --> 0:02:05.520 do that, I think we're re entering a world of 0:02:05.520 --> 0:02:08.919 geopolitical tensions where you just got comfortable that Putin maybe 0:02:08.960 --> 0:02:11.480 was taking it easy, that g seemed to be pushing 0:02:11.480 --> 0:02:14.280 Pudin towards peace, that maybe after the elections we wanted it. 0:02:14.639 --> 0:02:18.440 I think this is a step backwards. Okay, well, let's 0:02:18.480 --> 0:02:20.480 people have a look at what your generals may be 0:02:20.560 --> 0:02:22.760 telling you about, you know, the loss of care Son 0:02:23.520 --> 0:02:26.880 by the Russians, how I mean inst of all going 0:02:26.960 --> 0:02:30.680 that badly in their view. Yes, I think the war 0:02:30.800 --> 0:02:33.280 is going very badly in the view of our generals. 0:02:33.560 --> 0:02:37.160 They keep making mistake after mistake. Our current base cases 0:02:37.240 --> 0:02:39.280 what we think will happen is and this is gonna 0:02:39.280 --> 0:02:41.040 be a little bit hard to do over radio, but 0:02:41.240 --> 0:02:43.760 Russia needs to go east to west, and all the 0:02:43.840 --> 0:02:46.320 rivers in the Ukraine run north south, so they need 0:02:46.360 --> 0:02:49.760 those rivers to freeze to make a proper attack going forward. 0:02:49.960 --> 0:02:52.959 Because Ukraine, especially with all the recent weaponry that we 0:02:53.040 --> 0:02:55.799 give them, the high mars, etcetera. We can stop them 0:02:55.800 --> 0:02:59.520 from crossing bridges. So Russian needs things to freeze before 0:02:59.520 --> 0:03:02.079 they make one more launched. It's been going very badly. 0:03:02.120 --> 0:03:05.760 They keep losing and their tactics seem awful. So if 0:03:05.840 --> 0:03:09.400 markets have it right then, and or maybe they don't 0:03:09.400 --> 0:03:11.520 and we need to see some kind of readjustment. Does 0:03:11.560 --> 0:03:14.919 that necessarily mean stronger dollar, lower yields, and and a 0:03:15.000 --> 0:03:19.840 FED that's in a much more tight situation. I think 0:03:19.840 --> 0:03:22.080 it means lower yields, but I don't think it puts 0:03:22.120 --> 0:03:25.000 the FED dealing with inflation. Right. If we see oil 0:03:25.080 --> 0:03:27.760 prices go up because of a renewed focus on the war, 0:03:28.560 --> 0:03:30.720 I don't think the FED reacts to that right. Traditionally 0:03:30.760 --> 0:03:34.120 the FED actually eases into war. So I don't think 0:03:34.440 --> 0:03:38.880 higher oil prices trigger FED inflation response. They figure they 0:03:38.920 --> 0:03:41.240 trigger more a FED. Hey, we have to see where 0:03:41.240 --> 0:03:43.000 this is all headed, one way or the other. I 0:03:43.000 --> 0:03:45.320 think this escalates the end game, whether it's a good 0:03:45.360 --> 0:03:48.000 or bad endgame, whether maybe everyone finally pushes people to 0:03:48.000 --> 0:03:49.760 the table, so there could be a good result, but 0:03:49.760 --> 0:03:52.240 I think right now worse and then let's see how 0:03:52.240 --> 0:03:56.120 the people respond. I'm going to keep on talking about this, 0:03:56.280 --> 0:03:58.840 but at the end of the day, it's the way 0:03:58.880 --> 0:04:01.440 to conclude. This may well have to be some kind 0:04:01.440 --> 0:04:05.840 of face saving for Vladimir Putin. Yes, I think in 0:04:05.880 --> 0:04:08.040 the end what we want to avoid is where he 0:04:08.120 --> 0:04:10.880 feels that he has to I hate to say the term, 0:04:10.880 --> 0:04:13.400 but go nuclear. We don't want him to see feel 0:04:13.480 --> 0:04:16.240 so panicked that he loses, and I think some negotiation 0:04:16.320 --> 0:04:19.159 has to occur where Ukraine maybe has to give up something, 0:04:19.160 --> 0:04:21.160 which I think Zelensky is going to be very reluctant 0:04:21.160 --> 0:04:23.360 to do, but maybe just has to get to old listen, 0:04:23.400 --> 0:04:26.360 we cannot keep supporting you in this way, give up 0:04:26.480 --> 0:04:30.200 something so Putent can go home peacefully. And it's really 0:04:30.200 --> 0:04:33.359 crucial right now as Ukraine's facing a as we mentioned earlier, 0:04:34.040 --> 0:04:38.440 huge electrical power shortages, which as you face winner, that's 0:04:38.440 --> 0:04:40.880 not something we can do. But as the sanctions ramp up, 0:04:40.920 --> 0:04:42.839 I think there's a lot of evidence that it's going 0:04:42.880 --> 0:04:45.599 to hurt us the West collectively more than it hurts Russia. 0:04:45.839 --> 0:04:47.920 So maybe we want to avoid those sanctions as well. 0:04:48.000 --> 0:04:51.039 So peace seems the best outcome. And maybe this is that, 0:04:51.240 --> 0:04:53.320 you know, one step backwards before we get the two 0:04:53.360 --> 0:04:55.800 steps forward much more in the way of headwind I'm 0:04:55.839 --> 0:04:58.839 imagining for Europe's economy. Play that out for me, What 0:04:58.880 --> 0:05:03.000 does that look like? Yeah, I think Europe. It felt 0:05:03.040 --> 0:05:04.919 like Europe was just turning the corner right. More and 0:05:04.920 --> 0:05:07.400 more analysts, including myself, were saying, Okay, maybe they've done 0:05:07.520 --> 0:05:09.839 enough to make it through this winter. Maybe we're okay, 0:05:10.600 --> 0:05:12.839 And now that feels off the table, right. If there's 0:05:12.880 --> 0:05:15.599 this friction, it's problematic. And the other thing, which I 0:05:15.600 --> 0:05:18.159 haven't mentioned, comes up often when you talk, especially with 0:05:18.160 --> 0:05:22.200 our geopolitical history, is the force migration that's gone on 0:05:22.400 --> 0:05:25.800 in Europe is unseen since World War Two, and at 0:05:25.839 --> 0:05:27.640 times it's probably even worse than World War Two. Right, 0:05:27.640 --> 0:05:30.719 we've displaced five to eight million Ukrainians into Western Europe. 0:05:30.720 --> 0:05:33.200 The longer this war goes on, the harder it's going 0:05:33.200 --> 0:05:35.440 to be for them to return. The more destruction that 0:05:35.480 --> 0:05:38.800 goes on to their old property, their apartments, harder for 0:05:38.839 --> 0:05:40.880 them to return. So that's yet another reason I think 0:05:40.880 --> 0:05:43.120 we need to sit down and get some sort of 0:05:43.200 --> 0:05:45.640 truce that maybe gets put in just enough that we 0:05:45.680 --> 0:05:47.640 can get out of this. But let's move away from 0:05:47.640 --> 0:05:49.680 the missile strike and and just talk about what it's 0:05:49.680 --> 0:05:51.840 going on in terms of how you see the global 0:05:51.880 --> 0:05:54.839 economy panning out, how you see inflation at the moment, 0:05:54.880 --> 0:05:58.359 and whether it's peaked or not. I think inflations peaked. 0:05:58.400 --> 0:06:00.800 I think it's rolling over very quickly. And some of 0:06:00.760 --> 0:06:02.840 it's obvious, right the higher interest rates. I think the 0:06:02.920 --> 0:06:05.279 US economy was more leveraged to raise than people expected. 0:06:05.279 --> 0:06:07.760 You're seeing it in housing, you're seeing it in autos. 0:06:08.920 --> 0:06:11.400 I think the job's number we might have to come back, 0:06:11.480 --> 0:06:14.159 because that's the one remaining issue. The other part, to 0:06:14.200 --> 0:06:16.800 me has been the wealth effect, the complete wealth destruction 0:06:16.839 --> 0:06:19.600 that's gone on, and where I'm really focused. I think 0:06:19.600 --> 0:06:22.880 it's very different. This time. It was very concentrated wealth creation, 0:06:23.120 --> 0:06:25.880 and it was the disruptive companies. It was the crypto companies, 0:06:26.200 --> 0:06:28.719 and I see it as threefold. One the companies themselves, 0:06:28.880 --> 0:06:30.719 so they were able to raise money, and they spent 0:06:30.800 --> 0:06:33.880 that money aggressively, their employees, their stock options were worth 0:06:33.880 --> 0:06:36.120 a lot of money. They were spending that money. And 0:06:36.160 --> 0:06:38.760 then just the casual investor is working very well. All 0:06:38.839 --> 0:06:40.560 that's gone down. So I think that's gonna be a 0:06:40.600 --> 0:06:43.120 huge drag in the economy. I think it's gonna infect technology, 0:06:43.400 --> 0:06:46.280 it's gonna affect semis, etcetera. But one pushback I get 0:06:46.320 --> 0:06:49.359 to my view that inflation is really topped out is 0:06:49.360 --> 0:06:52.080 people are looking at jobs, and I see two things 0:06:52.120 --> 0:06:55.560 about that. One is, traditionally jobs are very lagging indicator, 0:06:55.800 --> 0:06:57.560 and I think it's gonna be more liking this time 0:06:57.560 --> 0:07:00.359 than we've ever seen before, partly because HR people have 0:07:00.400 --> 0:07:02.080 spent the last year and a half trying to hire 0:07:02.279 --> 0:07:04.359 and have been unable to hire. They are not going 0:07:04.400 --> 0:07:06.120 to allow people to get fired. They're going to figure 0:07:06.120 --> 0:07:08.840 out other ways to cut costs before firing. So jobs 0:07:08.920 --> 0:07:10.600 is going to be the last lay to drop, and 0:07:10.640 --> 0:07:12.640 I think that starts happening. And when you look at 0:07:12.640 --> 0:07:17.000 some of the discommunities between household versus establishment versus birth 0:07:17.040 --> 0:07:21.640 death models, I think we're prepared actually to see a big, 0:07:21.680 --> 0:07:24.800 shockingly not good number in this next job's report. So 0:07:24.840 --> 0:07:27.560 that's why I think inflations rolled over. I think it's problematic. 0:07:27.840 --> 0:07:30.040 I think markets can be happy briefly that we go 0:07:30.120 --> 0:07:32.720 through a soft landing type scenario, but I think soon 0:07:32.720 --> 0:07:35.320 we're gonna start pricing in a hard landing. Hard landing, 0:07:35.320 --> 0:07:38.360 and what about earnings disappointments. Are we going to see 0:07:38.360 --> 0:07:41.640 a lot in the way of that. Yes, I think 0:07:41.680 --> 0:07:44.640 we're already struggling. One thing, You look at some of 0:07:44.640 --> 0:07:46.400 the companies that are laying off people, and they're laying 0:07:46.440 --> 0:07:48.560 off people at what seems like an awkward time. Right, 0:07:48.560 --> 0:07:50.760 We're usually coming into one of the most robust business 0:07:50.760 --> 0:07:52.960 seasons in the US and you get companies that are 0:07:53.000 --> 0:07:56.480 involved in that area letting people go. I think the 0:07:56.600 --> 0:07:59.960 f X volatially is problematic, but more importantly, everywhere I look, 0:08:00.120 --> 0:08:03.920 people are having sales. Right, it's off this off that 0:08:04.200 --> 0:08:07.040 I think retail is still struggling. The service industry has 0:08:07.080 --> 0:08:08.800 done very well. But what I can't tell with the 0:08:08.800 --> 0:08:11.760 service industry whether this is a one time effect coming 0:08:11.840 --> 0:08:14.760 to the US holiday season and it dissipates after year 0:08:14.840 --> 0:08:17.000 end or it doesn't. I lean towards that this is 0:08:17.040 --> 0:08:19.560 going to dissipate. So I see the economy rolling over, 0:08:20.160 --> 0:08:23.320 higher rates playing a price, and this wealth effect, this 0:08:23.600 --> 0:08:27.920 pure wealth destruction we've seen in disruptive companies and crypto 0:08:28.160 --> 0:08:31.720 having a much bigger effect than people realize. I've got 0:08:31.760 --> 0:08:35.520 to ask you this question, how far is now uh 0:08:36.840 --> 0:08:39.120 crypto being Well, let's just put in another way, how 0:08:39.160 --> 0:08:42.239 badly damage is crypto being as a consequence of the 0:08:42.480 --> 0:08:45.640 f t X debuclet. So I think it has a 0:08:45.640 --> 0:08:47.560 lot more way to go down. It's I would not 0:08:47.640 --> 0:08:51.000 touch bitcoin until it's well below ten thousand. Clearly we're 0:08:51.000 --> 0:08:53.320 getting little bounces. But you know, I talk a lot 0:08:53.360 --> 0:08:55.840 about there's two ways to lose money. One is you 0:08:55.880 --> 0:08:58.520 buy an asset that goes down in price, and that's 0:08:58.640 --> 0:09:00.559 we all do that, right, It's been in possible year 0:09:00.600 --> 0:09:03.040 this in many respects with you about bond stocks. It 0:09:03.080 --> 0:09:05.600 didn't matter, it was easy to lose money. One problem 0:09:05.600 --> 0:09:07.640 with losing money on some of these crypto investments is 0:09:07.679 --> 0:09:09.360 you don't even really have a good floor. You don't 0:09:09.400 --> 0:09:11.599 understand what it could be, as we saw, say with 0:09:11.640 --> 0:09:15.080 the FTT token. The other way you lose money is 0:09:15.160 --> 0:09:17.520 you give your money to someone to hold and they 0:09:17.520 --> 0:09:19.800 don't return it to you or can't return it to you. 0:09:20.120 --> 0:09:22.280 And that's what just went on with ft X by 0:09:22.320 --> 0:09:24.680 the looks of it, right So, and it happened earlier 0:09:24.679 --> 0:09:27.360 this year with Celsius, and that to me is really 0:09:27.400 --> 0:09:29.960 hard because with enough due diligence, you feel you could 0:09:30.000 --> 0:09:32.240 ultimately trust someone that you give your money to and 0:09:32.320 --> 0:09:36.040 until that gets resolved, I don't see institutional investors coming 0:09:36.040 --> 0:09:38.400 to this market. In fact, I see people fleeing this 0:09:38.480 --> 0:09:41.000 market because you can't even trust if you get your 0:09:41.000 --> 0:09:44.320 decision to buy crypto right, that you get your returns back, 0:09:44.400 --> 0:09:47.360 and that's a big issue. Peter, thank you so much 0:09:47.360 --> 0:09:49.920 for joining. Is always a pleasure, never a chue. Peter Cheer, 0:09:50.000 --> 0:09:53.280 the head of macro strategy Academy Security, is getting his 0:09:53.320 --> 0:09:55.040 take on the markets and more.