WEBVTT - Surveillance: Kettner: Bullish tech 0:00:05.160 --> 0:00:08.480 This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:08.520 --> 0:00:12.360 with Jonathan Farrow and Lisa Abramowitz. Join us each day 0:00:12.400 --> 0:00:16.840 for insight from the best an economics, geopolitics, finance and investment. 0:00:17.280 --> 0:00:22.119 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:22.320 --> 0:00:26.600 anywhere you get your podcasts, and always on Bloomberg dot Com, 0:00:26.640 --> 0:00:29.840 the Bloomberg Terminal, and the Bloomberg Business App. 0:00:30.120 --> 0:00:33.080 Joining us now is someone that makes you lean forward. 0:00:33.120 --> 0:00:35.920 It is a multi asset strategy, but mostly his senior 0:00:36.000 --> 0:00:39.239 vice president courage to stay in the market at the 0:00:39.320 --> 0:00:43.360 Hong Kong and Shanghai Banking Corporation, Max Kapner darkets the 0:00:43.400 --> 0:00:44.880 London door today. 0:00:44.920 --> 0:00:46.879 What is your new outlook? What is the. 0:00:46.920 --> 0:00:49.640 Nuance of the last few weeks as you look forward 0:00:49.680 --> 0:00:50.960 into twenty twenty four? 0:00:51.240 --> 0:00:51.400 Yeah? 0:00:51.479 --> 0:00:53.640 Thanks, Some of the news is you've gus we'll talk 0:00:53.720 --> 0:00:56.680 about already right as oil prices, energy prices, perhaps that 0:00:56.840 --> 0:00:59.960 changes a little bit of the narrative, right paps Inflation 0:01:00.120 --> 0:01:02.440 does pick up a bit more in the US right 0:01:02.840 --> 0:01:06.399 towards Q four, So that's not particularly great news for 0:01:06.440 --> 0:01:09.720 a Goldilock scenario. I think the nuances is also going 0:01:09.720 --> 0:01:13.440 into Q four, what can destroy that goldilocks picture? Because 0:01:13.480 --> 0:01:15.800 we're all talking about all these horrible things, right, like, 0:01:16.440 --> 0:01:19.399 you know, things like student loan repayments and are we 0:01:19.520 --> 0:01:22.360 hitting you know, are we hitting recession and all these things, 0:01:22.600 --> 0:01:24.080 and then we look at high yield spreads and they 0:01:24.200 --> 0:01:27.600 just going towards three fifty and yeah, it's for everyone, right, great, 0:01:28.040 --> 0:01:30.480 So I think the nuances are sort of trying to 0:01:30.520 --> 0:01:33.720 find out when is what what could potentially break all this? 0:01:33.959 --> 0:01:34.080 Right? 0:01:34.120 --> 0:01:37.080 What could potentially break that that sort of goldilocks? 0:01:37.080 --> 0:01:40.200 And it's ninety five dollar crude. It's you don't think 0:01:40.200 --> 0:01:40.880 that a breakfast. 0:01:41.360 --> 0:01:43.840 I don't think it's one nuance. I think it's one 0:01:43.880 --> 0:01:46.560 of those where to be fair, if I was the fair, 0:01:46.600 --> 0:01:48.240 if I was the SEBIA or the Bank of England, 0:01:48.440 --> 0:01:51.800 which you know, lucky for everyone that I'm not, but 0:01:51.920 --> 0:01:54.160 you know, if I were, I'd be basically saying, well, 0:01:54.320 --> 0:01:55.520 what should I do about that? 0:01:55.600 --> 0:01:55.720 Right? 0:01:55.760 --> 0:01:57.120 What can I do about I mean, I'm not an 0:01:57.120 --> 0:01:59.360 oil producer, so I can't really do anything, and I 0:01:59.360 --> 0:02:02.320 can sort of use it as saying, look, this is 0:02:02.440 --> 0:02:06.000 just energy prices. It's something transitory. It will be going 0:02:06.040 --> 0:02:08.160 away out of the calculation. When a couple of months, 0:02:08.200 --> 0:02:10.880 don't worry, right all the other rests, you know, excluding 0:02:10.880 --> 0:02:15.400 fifteen components from our preferred inflation baskets, then everything looks fine. 0:02:15.639 --> 0:02:18.040 So I think that's the worry that I have, right 0:02:18.080 --> 0:02:21.840 that if we start looking at these inflation baskets that 0:02:21.880 --> 0:02:24.519 sort of exclude everything that we need for the everyday life, 0:02:24.720 --> 0:02:27.120 that they is starting to pack up again. And to 0:02:27.160 --> 0:02:30.200 be fair, if you look at things like super core inflation, right, 0:02:30.639 --> 0:02:33.760 the action components, the broad based nature of it hasn't 0:02:33.840 --> 0:02:37.520 really dramatically changed over the last twelve eighteen months, So 0:02:37.560 --> 0:02:40.760 that is perhaps something towards Q four where perhaps inflation 0:02:40.919 --> 0:02:44.160 does pick up beyond just energy prices, not a new 0:02:44.200 --> 0:02:48.880 inflation wave, but basically an interruption from that. Okay, inflation 0:02:48.919 --> 0:02:51.560 has gone down in one straight line now to actually 0:02:51.600 --> 0:02:54.960 now we're getting sort of this bumpy bumpy road ahead, 0:02:55.000 --> 0:02:57.440 right an inflation Well, we've got to play those turning 0:02:57.480 --> 0:02:57.920 points in it. 0:02:58.000 --> 0:02:58.240 Max. 0:02:58.280 --> 0:03:00.400 The question everyone wants us to ask. Still in a 0:03:00.440 --> 0:03:02.880 window where you think equities can do well, oh yeah, 0:03:02.880 --> 0:03:05.200 one hundred percent, until when how big is that win? 0:03:05.800 --> 0:03:09.400 Look to be perfectly honest, if we think about it, 0:03:09.400 --> 0:03:11.959 and I know it sounds stupid, but imagine if yields 0:03:11.960 --> 0:03:14.120 go up, imagine the tenure goes to four and a half. 0:03:14.160 --> 0:03:16.400 What's the reality of the reality is it's probably going 0:03:16.480 --> 0:03:19.360 to do it because growth is better, right, and because 0:03:19.400 --> 0:03:24.440 once again growth expectations actually turn out to be too pessimistic. Right. 0:03:24.480 --> 0:03:27.320 If you look at Q four US growth expectations, it's 0:03:27.320 --> 0:03:29.480 sort of the Q one next year is also close 0:03:29.560 --> 0:03:32.000 to zero, so the bar to be just relatively low. 0:03:32.200 --> 0:03:34.640 So if you get yields moving higher, that's probably in 0:03:34.680 --> 0:03:37.440 response to growth doing better, So you buy equities. If 0:03:37.480 --> 0:03:40.440 yields go down, right, then probably rates of all goes down, 0:03:40.520 --> 0:03:43.600 and then you buy the nastak so to be fair, Yeah, great, 0:03:43.680 --> 0:03:44.640 I'll just buy equities. 0:03:44.640 --> 0:03:46.560 Can big tech still lead though? And we've seen a 0:03:46.600 --> 0:03:49.880 recent kind of weakening in the tech profile and an 0:03:49.920 --> 0:03:52.640 underperformance there. Some people are saying this is the beginning 0:03:52.680 --> 0:03:54.680 of the end of the tech trade? Are you on 0:03:54.720 --> 0:03:55.080 that train? 0:03:55.880 --> 0:03:59.040 Well, we've heard that for I think sixteen years, fifteen years, 0:03:59.240 --> 0:04:00.960 so you know, it's been a lot of beginnings of 0:04:01.040 --> 0:04:04.120 the end. Now, look, I don't know, I want to 0:04:04.160 --> 0:04:05.680 be too cynical for it, but. 0:04:05.800 --> 0:04:07.760 Last year was pretty brutal for the text, right, just 0:04:07.840 --> 0:04:08.280 be clear. 0:04:08.480 --> 0:04:12.520 So, but to be perfect, you're honest, I think TEX 0:04:12.640 --> 0:04:14.200 still has a bit of a room to go. In 0:04:14.240 --> 0:04:16.360 the next couple of weeks. There is probably a window 0:04:16.360 --> 0:04:19.120 around Q four where I'd been moving more towards really 0:04:19.160 --> 0:04:21.880 the value side of things, right, tactically, right, if we 0:04:21.920 --> 0:04:25.080 get that bump and inflation, particularly in the US, even higher, 0:04:25.480 --> 0:04:27.720 you know, you want to probably prefer then for a 0:04:27.760 --> 0:04:30.840 couple of months, things like bands energy over tech. But 0:04:30.880 --> 0:04:33.520 for now, I think energy still has or text still 0:04:33.520 --> 0:04:34.080 has a way to go. 0:04:34.200 --> 0:04:36.960 You mentioned all of the dark clouds, including people repaying 0:04:36.960 --> 0:04:40.920 their debts, and also this question around a government shutdown, 0:04:40.920 --> 0:04:44.200 which seems like an increasing inevitability in the US amid 0:04:44.240 --> 0:04:47.280 this backdrop of strikes. In a question of just general 0:04:48.200 --> 0:04:52.080 just discsatisfaction, which of those kinds of things do you 0:04:52.160 --> 0:04:55.280 care most about could actually have the most impact on 0:04:55.320 --> 0:04:55.760 your call. 0:04:56.279 --> 0:04:58.840 Look, I think the government shot down not really right, 0:04:58.880 --> 0:05:01.200 because we kind of got used to every other quarter. 0:05:01.560 --> 0:05:04.480 So from an equity perspective, you know, I know it 0:05:04.560 --> 0:05:06.760 sounds depressing, but if for hous right, it was a 0:05:06.760 --> 0:05:09.880 shock twelve years ago, it's not particularly a shock anymore. 0:05:09.960 --> 0:05:10.039 Right. 0:05:10.160 --> 0:05:14.240 So from an equity perspective, from a risk acid perspective, 0:05:14.320 --> 0:05:17.599 that's not the main worry. The student loan repayments also 0:05:17.680 --> 0:05:19.760 not particularly worried about it, because you can also make 0:05:19.760 --> 0:05:22.960 a positive spin out of right. Right. You can also say, look, actually, 0:05:23.080 --> 0:05:26.480 from the end of July up until now, repayments have 0:05:26.640 --> 0:05:31.000 shot higher because actually economic agents I eat, normal people 0:05:31.080 --> 0:05:34.840 like us, they're acting completely rationally, right, They're seeing that, Okay, 0:05:34.880 --> 0:05:37.440 this is starting to kick in. So instead of starting 0:05:37.480 --> 0:05:40.640 to or having to start to actually pay interest on 0:05:40.680 --> 0:05:42.840 it again, I'm going to repay it early and guess what, 0:05:42.880 --> 0:05:45.040 I have the money, so let me repay as much 0:05:45.080 --> 0:05:47.159 as I can. So actually, you can also make a 0:05:47.160 --> 0:05:49.600 positive spin out of it, right and say, look, people 0:05:49.640 --> 0:05:51.960 apparently still have the money to do that, right, They 0:05:52.000 --> 0:05:56.080 still have sufficient money to do these pretty chunky repayments early. 0:05:56.400 --> 0:05:59.920 So all of that doesn't really really keep me that much. 0:06:00.120 --> 0:06:02.840 Quick questionaire, can you figme out SPX five thousand? I 0:06:02.920 --> 0:06:04.760 gotta make some news today. I got to justify the 0:06:04.800 --> 0:06:07.640 trip to London. Can you give me five thousand SPX? 0:06:08.040 --> 0:06:10.240 I think you know, if we think about next year, 0:06:10.480 --> 0:06:12.280 to be fair, it's not an awful lot of weight, right, 0:06:12.360 --> 0:06:19.520 it's twelve twelve percent awaight, Right, but if we're still 0:06:19.520 --> 0:06:23.000 in a fairly high ish inflation environment, right, and earnings 0:06:23.000 --> 0:06:24.880 growth is still relatively fine. Yeah. 0:06:24.960 --> 0:06:27.080 When Old Quinn's all longer today, he's doing something with 0:06:27.120 --> 0:06:29.240 the United Nations. I'm not sure what it is. Nold 0:06:29.279 --> 0:06:32.359 Quinn listens to Max Katner. HSBC is a prism to 0:06:32.440 --> 0:06:33.360 Asia like. 0:06:33.560 --> 0:06:34.120 No one else. 0:06:34.160 --> 0:06:37.640 I personally witnessed it across that little Hong Kong trolley 0:06:38.120 --> 0:06:41.839 in Asia. How do you link China trauma, in particularly 0:06:41.839 --> 0:06:44.919 domestic trauma into all the toxic. 0:06:44.520 --> 0:06:46.320 Brew of gloom in the West. 0:06:46.640 --> 0:06:49.920 How do you link Hong Kong and Shanghai over to 0:06:50.000 --> 0:06:51.080 London in New York. 0:06:51.480 --> 0:06:54.920 Look, I think what's what's very clear with regards to 0:06:54.960 --> 0:06:59.240 Europe and with regards to China and now a little 0:06:59.240 --> 0:07:01.680 bit less in the US is like you've said, there's 0:07:01.760 --> 0:07:04.160 all this doom and gloom, right, there's all these expectations 0:07:04.160 --> 0:07:06.159 around doom and gloom. I don't think you guys have 0:07:06.240 --> 0:07:09.000 had any guests on probably for weeks who are saying, look, 0:07:09.080 --> 0:07:11.800 you know what, twenty twenty three has been better than expected. 0:07:11.880 --> 0:07:13.800 We were a bitter wrong right on Europe and in 0:07:13.800 --> 0:07:16.520 the US. But guess what, twenty twenty four is going 0:07:16.600 --> 0:07:19.920 to be even better? Right, So I can't I just 0:07:20.120 --> 0:07:22.960 genuinely cannot see how we're gonna get, you know, start 0:07:23.000 --> 0:07:25.160 to think about twenty twenty four, how we're actually going 0:07:25.240 --> 0:07:27.600 to see twenty twenty four. It looks where people say, look, 0:07:27.600 --> 0:07:30.280 you know what, China's going to do great, Europe's gonna 0:07:30.280 --> 0:07:32.880 be even better, and US is going to shoot the lighter. 0:07:33.240 --> 0:07:35.560 I just cannot see anyone doing that. 0:07:36.080 --> 0:07:37.440 So do you want to take the other side of that? 0:07:38.320 --> 0:07:41.080 I want to take that side, yeah, because knowing the 0:07:41.120 --> 0:07:43.040 thing is right, So you're giving us a twenty four 0:07:43.040 --> 0:07:46.080 call right now? No, Look, the one thing that I 0:07:46.120 --> 0:07:49.200 am not asked at all about and for months is 0:07:49.440 --> 0:07:52.840 what could actually go right? What can guy right actually 0:07:53.200 --> 0:07:56.200 in the next six twelve months three? What's actually one 0:07:56.280 --> 0:07:58.560 thing where we could be saying, hey, you know what, 0:07:59.120 --> 0:08:04.680 maybe I'm asking So the answer, the answer to me is, 0:08:04.680 --> 0:08:07.640 as long as we still have these really low growth expectations, 0:08:07.720 --> 0:08:09.160 you have a low bar to be and you keep 0:08:09.240 --> 0:08:11.520 rolling goldilocks and goldilocks and goldilocks, and. 0:08:11.600 --> 0:08:15.520 It's great goldilocks forever into twenty four yeah, okay. 0:08:15.240 --> 0:08:17.280 I think it is a lonely car. I mean, we're 0:08:18.800 --> 0:08:19.960 but it's a really I'm. 0:08:21.680 --> 0:08:27.200 Wrong, cool charter to you bank, Max Curtener, HSBC. There's 0:08:27.200 --> 0:08:28.360 a couple others out there. 0:08:28.600 --> 0:08:30.360 You know, Max has been right. I think we should 0:08:30.400 --> 0:08:33.160 put that out there first. You've been right all year. 0:08:33.200 --> 0:08:33.440 Max. 0:08:33.440 --> 0:08:35.880 We'll see about twenty twenty four. That's quite cool. Max 0:08:35.920 --> 0:08:49.280 Kenada of HSBC. Joining us now is Ed j R. Denny, 0:08:49.440 --> 0:08:52.040 President of the Danny Research Ed wonderful to have you 0:08:52.080 --> 0:08:53.840 with us on the show We call it with Max 0:08:53.920 --> 0:08:57.400 Kettener of HSBC in the previous hour, and he said 0:08:57.400 --> 0:08:59.520 we need to focus on what could go right in 0:08:59.600 --> 0:09:01.720 twenty two twenty four? Are you more focused on what 0:09:01.760 --> 0:09:03.480 could go right or what could go wrong? 0:09:05.040 --> 0:09:09.960 My view of twenty twenty four is that that could 0:09:10.000 --> 0:09:13.240 be a better year than certainly twenty twenty two was, 0:09:13.600 --> 0:09:15.959 or even twenty twenty three. Not that twenty twenty three 0:09:16.040 --> 0:09:18.760 is turning out to be a very bad year. As 0:09:18.760 --> 0:09:20.520 we know, the third quarter is turning out to be 0:09:21.160 --> 0:09:24.720 remarkably strong. So all in all, I think that we'll 0:09:24.720 --> 0:09:29.000 get through a lot of these challenges and twenty twenty 0:09:29.040 --> 0:09:31.400 four should be a better year for earnings with the 0:09:31.440 --> 0:09:32.880 market doing better too. 0:09:34.679 --> 0:09:36.680 Danny, you and real Franko for have been way out 0:09:36.679 --> 0:09:39.280 front of this on the October rally, and we've talked 0:09:39.320 --> 0:09:41.920 about a second leg of a bullmarkt As John mentions, 0:09:41.960 --> 0:09:47.240 mister Cuttner of HSBC shares your enthusiasm. The arch pullback 0:09:47.280 --> 0:09:51.240 of this is the great moderation over? Is the great 0:09:51.360 --> 0:09:55.280 moderation over? And does that mean you can't make money 0:09:55.320 --> 0:09:56.640 in stocks? 0:09:57.840 --> 0:10:04.559 Well, I've been really debating in my commentaries about whether 0:10:05.080 --> 0:10:07.760 it's going to be the Great Inflation of the nineteen 0:10:07.840 --> 0:10:10.880 seventies or it might very well turn out to be 0:10:11.040 --> 0:10:16.319 the Roaring twenty twenties. And I've been inclined to believe 0:10:16.400 --> 0:10:19.920 that on a longer term basis, we will see that 0:10:19.960 --> 0:10:24.640 the twenty twenties will be a period of tremendous progress 0:10:24.640 --> 0:10:28.720 and productivity. And I was making that point before the pandemic, 0:10:28.720 --> 0:10:32.200 and the pandemic sort of gotten the way because it 0:10:32.280 --> 0:10:35.640 really messed up the productivity story big time as people 0:10:35.720 --> 0:10:38.040 quit left and right. But I think we're making a comeback. 0:10:38.080 --> 0:10:42.520 I think productivity bottom actually in twenty and twenty fifteen 0:10:43.200 --> 0:10:45.120 in terms of its growth rate, it was only zero 0:10:45.160 --> 0:10:48.960 point five percent on a twenty quarter trailing basis. I 0:10:48.960 --> 0:10:50.720 think it's going up to four percent by the end 0:10:50.760 --> 0:10:54.560 of the decade, which sounds delusional, sounds for our fetched, 0:10:54.559 --> 0:10:57.280 I'll admit, but those are the kind of peaks we've 0:10:57.280 --> 0:11:01.120 had in previous growth cycles in productivity, and I think 0:11:01.160 --> 0:11:01.920 that's where we're heading. 0:11:03.559 --> 0:11:07.040 Does a real rate, and some would say a higher 0:11:07.200 --> 0:11:11.199 real rate and an inflation adjusted rate, does that impinge 0:11:11.400 --> 0:11:12.679 on your enthusiasm? 0:11:13.640 --> 0:11:15.800 Not really. I think we're going back to normal. 0:11:16.200 --> 0:11:20.880 The new abnormal was the period between the Great Financial 0:11:20.920 --> 0:11:24.760 Crisis and the Great Virus Crisis, and back then interest 0:11:24.800 --> 0:11:28.160 rates were at record lows. I think we're going back 0:11:28.200 --> 0:11:31.520 to the environment just prior to the Great Financial Crisis, 0:11:31.960 --> 0:11:34.400 where the tip shield was around two percent for the 0:11:34.480 --> 0:11:37.640 ten uere and the inflation premium was around two to 0:11:37.640 --> 0:11:39.760 two and a half percent. So four to four and 0:11:39.800 --> 0:11:42.000 a half percent is kind of where the bond yield 0:11:42.000 --> 0:11:45.600 should be in a return to the old normal, and 0:11:45.640 --> 0:11:48.200 I think that's what we're doing. I think the economy 0:11:48.240 --> 0:11:51.760 and the stock market have already demonstrated that they can 0:11:51.760 --> 0:11:55.160 both live with these kind of levels of interest rates. 0:11:56.160 --> 0:11:57.680 So you and Max Kettner seemed to be on the 0:11:57.679 --> 0:12:00.360 same page, and Max came on the show early and said, 0:12:00.400 --> 0:12:02.120 you guys all worry too much. No one asks me 0:12:02.160 --> 0:12:04.040 what can go right, how good things can be, and 0:12:04.120 --> 0:12:06.600 as they should be asking. But it is my job 0:12:06.679 --> 0:12:07.199 to worry. 0:12:07.559 --> 0:12:09.040 That is true what I do. 0:12:09.120 --> 0:12:12.319 So I'm curious, from your vantage point, where does oil 0:12:12.360 --> 0:12:14.720 fit into this at a time where it's risen thirty 0:12:14.800 --> 0:12:15.959 percent since June. 0:12:17.000 --> 0:12:20.360 Yeah, well, I didn't expect it. I don't think anybody 0:12:20.400 --> 0:12:24.000 really expected it. I think the widespread perception was, oh, yeah, yeah, 0:12:24.040 --> 0:12:26.000 the Saudi's are going to cut production, and the Russians 0:12:26.000 --> 0:12:29.200 of cut production. But China's week, Europe's week, the US 0:12:29.240 --> 0:12:32.280 is sort of muddling along. And that means that oil 0:12:32.400 --> 0:12:34.800 prices aren't going to go up as the Saudis would like. 0:12:34.840 --> 0:12:36.320 But they've been right so far. 0:12:36.960 --> 0:12:39.360 And so that's a new variable that I've had to 0:12:39.360 --> 0:12:43.040 incorporate into my thinking. And so just recently the past 0:12:43.080 --> 0:12:47.439 few days, I just to demonstrate that I am realistic 0:12:47.440 --> 0:12:49.560 and I'm looking at the world. 0:12:49.400 --> 0:12:51.040 As it is, not as I'd like it to be. 0:12:51.720 --> 0:12:56.080 I did raise my outlook for a recession risk from 0:12:56.080 --> 0:12:59.640 fifteen percent to twenty five percent and unfortunately there is 0:12:59.679 --> 0:13:02.080 a certain the sense of dejav all over again. We 0:13:02.160 --> 0:13:06.920 had two oil spikes back in the nineteen seventies. So far, 0:13:07.000 --> 0:13:09.280 the first oil spike we had last year hasn't caused 0:13:09.320 --> 0:13:12.000 a recession and hasn't been anywhere near but we had 0:13:12.040 --> 0:13:13.800 back in the seventies, and I don't think this one's 0:13:13.840 --> 0:13:14.280 going to be. 0:13:15.760 --> 0:13:17.040 A major oil spike either. 0:13:17.120 --> 0:13:21.120 I think we are going to find that the demand 0:13:21.160 --> 0:13:25.520 responds pretty quickly to these price hikes and it slows 0:13:25.559 --> 0:13:29.120 down and oil prices come back down, not dramatically, but 0:13:29.160 --> 0:13:30.320 at least they stop going up. 0:13:31.600 --> 0:13:34.480 What's the break point in terms of when prices of 0:13:34.520 --> 0:13:37.559 oil really do create a serious headwind and increase the 0:13:37.640 --> 0:13:38.400 chance of recession. 0:13:39.120 --> 0:13:42.640 Well, I think they're already starting to impact demand. You know, 0:13:42.679 --> 0:13:46.880 it's clearly getting a tremendous amount of visibility in the press, 0:13:46.880 --> 0:13:49.800 and of course, the price of gasoline is the most 0:13:49.880 --> 0:13:53.880 visible price of them all. We all go driving around 0:13:54.080 --> 0:13:56.800 filling up our tanks, and everybody's seeing that the price 0:13:56.840 --> 0:13:58.960 of oil gasoline is going up dramatically. 0:13:59.000 --> 0:14:01.480 So I think we're at the point where. 0:14:01.240 --> 0:14:05.200 It doesn't cause a recession, but it causes some demand destruction. 0:14:05.360 --> 0:14:09.440 For gasoline and for other energy products, and that being 0:14:09.480 --> 0:14:12.040 the case, that could bring the price back down. I 0:14:12.080 --> 0:14:14.679 don't think it's going to cause a recession, but I think, 0:14:14.920 --> 0:14:17.599 you know, if we sustainably, if we see at the 0:14:17.640 --> 0:14:20.280 price of oil staates sustainably at one hundred, one hundred 0:14:20.320 --> 0:14:23.120 and ten dollars a barrel, in the price of gasoline 0:14:23.280 --> 0:14:26.880 four and a half to five dollars a gallon, I 0:14:26.920 --> 0:14:31.480 think that could certainly risk a much greater slowdown on 0:14:31.520 --> 0:14:33.800 the economy than I've been thinking. 0:14:35.360 --> 0:14:37.840 Certainly going to case some paine at Danny, thank you 0:14:37.640 --> 0:14:38.440 if any race. 0:14:43.080 --> 0:14:46.360 She is Jane Foley of Robbo Bank, and the heritage 0:14:46.400 --> 0:14:50.280 of Robbo Bank is commodities in the foreign exchange, and 0:14:50.360 --> 0:14:52.680 Jane Foley, I want to look out three years and 0:14:52.760 --> 0:14:56.480 five years to the climate change effect, Sugar to the moon, 0:14:56.920 --> 0:14:59.600 cocoa to the moon, a few other things, even cattles 0:15:00.080 --> 0:15:02.600 up and up here as well. How is the Rabobank 0:15:02.640 --> 0:15:06.520 world going to change with climate change and what appear 0:15:06.600 --> 0:15:08.480 to be surging commodity prices. 0:15:08.760 --> 0:15:10.600 It's going to be tough now. Of course, in the 0:15:10.600 --> 0:15:13.440 short term, we don't necessarily have surging food prices because 0:15:13.480 --> 0:15:15.320 prices were high last year there was lots of planting. 0:15:15.360 --> 0:15:17.360 But I think we can all agree that over the 0:15:17.440 --> 0:15:21.600 longer term, you have climate issues. You have issues that 0:15:21.680 --> 0:15:26.640 could create inflationary surprises in the form of food prices 0:15:26.680 --> 0:15:27.920 over the next few years. And it was at the 0:15:27.920 --> 0:15:30.240 supply so, I mean, look what's happened in the Panama Canal. 0:15:30.320 --> 0:15:33.440 You know, shortages of water, restrictions on shipping that can 0:15:33.480 --> 0:15:35.640 go through impacts to the supply chain. So we know 0:15:35.760 --> 0:15:39.760 that climate change can bring us inflationary shucks. We know 0:15:39.840 --> 0:15:41.800 that it can have a detrimental impact on growth. We 0:15:41.840 --> 0:15:44.080 know that it could potentially make interest rates higher. So 0:15:44.200 --> 0:15:47.520 the environment that that suggests is not particularly. 0:15:47.360 --> 0:15:50.000 This is critical, and that all the focus in the 0:15:50.040 --> 0:15:53.600 financial media is how to make a speculative return on euro, 0:15:53.720 --> 0:15:56.040 yen or whatever. And there's a whole other world out 0:15:56.040 --> 0:15:58.680 there of hedging commodity transactions. 0:15:58.680 --> 0:16:02.840 Okay, so interesting question chain for you. Climate can lead 0:16:02.840 --> 0:16:06.120 to inflationary outcomes. Can the policy changes to address climate 0:16:06.200 --> 0:16:09.440 change also lead to inflationary outcomes? Is this lose lose 0:16:09.480 --> 0:16:10.320 on the front. 0:16:10.160 --> 0:16:12.480 You know, I think this is a really really interesting 0:16:12.560 --> 0:16:15.440 question because we have so many elections next year. So 0:16:15.840 --> 0:16:18.400 next year I saw a statistic recently that said countries 0:16:18.440 --> 0:16:20.760 with a collective population of four billions, that's over half 0:16:20.800 --> 0:16:23.440 the world's population go to the polls next year. So 0:16:23.480 --> 0:16:25.920 we've got the US, we've got the EU, we've got India, 0:16:25.920 --> 0:16:29.920 we've got Russia, we've got Mexico and various other countries. Now, 0:16:30.280 --> 0:16:32.440 amongst those issues that people are going to be talking 0:16:32.440 --> 0:16:34.920 about is of course the impact of climate change, but 0:16:34.960 --> 0:16:39.000 also the green transition. And what we've been seen is people, 0:16:39.080 --> 0:16:41.560 because of the cost of living, because of the energy crisis, 0:16:41.600 --> 0:16:45.680 because of you know, the impact of inflation, are losing 0:16:45.760 --> 0:16:49.560 patients with the politician that the push towards the green transition. 0:16:49.560 --> 0:16:52.080 And we're really seeing this in Europe. Support for so 0:16:52.240 --> 0:16:54.920 the Germany's Green Party really gone down, support for the 0:16:54.960 --> 0:16:57.760 far right really gone out. And this is fairly uniform 0:16:57.840 --> 0:17:00.160 because people are saying, we can't afford to lose our 0:17:00.280 --> 0:17:03.400 jobs because of the green transition, because in Germany, for instance, 0:17:03.520 --> 0:17:06.720 lots of jobs in the supply chain for car manufacturers 0:17:06.720 --> 0:17:08.880 will go and people are saying, you know, we can't 0:17:08.920 --> 0:17:11.560 afford to buy these electric cars. We cannot afford necessarily 0:17:11.600 --> 0:17:14.840 the green transition, and that's a real problem. 0:17:15.160 --> 0:17:17.239 How do you price that into a foreign exchange car. 0:17:17.320 --> 0:17:19.080 I mean, and had to be too base here, but 0:17:19.119 --> 0:17:22.120 there's really a question of who's doing the best job 0:17:22.640 --> 0:17:26.800 in counteracting some of the inflationary forces in this swirling 0:17:26.960 --> 0:17:29.720 brew of uncertainty of how you're going to deal with this. 0:17:29.880 --> 0:17:31.880 I mean, this is what we're dealing with the UAW 0:17:31.960 --> 0:17:32.720 and the US. 0:17:32.920 --> 0:17:33.560 In some respects. 0:17:33.560 --> 0:17:35.320 I think the answer is quite easy, because when you 0:17:35.320 --> 0:17:36.800 are really confused, when you don't know what's going on, 0:17:36.800 --> 0:17:38.919 people tend to buy the dollar. It is that you 0:17:38.920 --> 0:17:40.960 know that the safe haven. And I think for an 0:17:41.000 --> 0:17:43.159 awful lot of these political challenges, they're going to be 0:17:43.160 --> 0:17:44.959 felt on both sides of the Atlantic. But I think 0:17:45.000 --> 0:17:47.880 it's a Euro that will feel the impact of these 0:17:47.880 --> 0:17:51.560 political crisis a lot more relative to the dollar, because 0:17:51.560 --> 0:17:53.560 the dollar, of course is the currency of the global 0:17:53.600 --> 0:17:56.320 payment system, and people need dollars in terms of crisis, 0:17:56.480 --> 0:17:59.840 and therefore the dollar in a way gets protected even 0:18:00.040 --> 0:18:01.880 its own fundamentals look a little bit questionable. 0:18:01.920 --> 0:18:03.679 And we've seen this dollar strength and it really has 0:18:03.760 --> 0:18:05.719 upended a lot of people who thought that the ECB 0:18:05.800 --> 0:18:07.760 would do way more and that the Euro would gain 0:18:08.080 --> 0:18:10.880 against the dollar, possibly even being in a better situation 0:18:10.960 --> 0:18:13.400 next year than the US. How much do you think 0:18:13.440 --> 0:18:16.040 the dollar has to run here if you do see 0:18:16.080 --> 0:18:19.560 this uncertainty pushing people toward the world's currency and you 0:18:19.600 --> 0:18:22.520 also see a stronger than expected outcome in the economy. 0:18:22.520 --> 0:18:25.040 There, yeah, well you have it. You have this much 0:18:25.080 --> 0:18:28.800 more resilience in the US economy. You have Germany in recession. 0:18:28.840 --> 0:18:31.000 You have the ECB bringing down its grawthfuecasts for the 0:18:31.000 --> 0:18:35.080 Eurozone last week, and in fact they still look optimistic 0:18:35.080 --> 0:18:37.600 compared with our forecast for next year. So you have 0:18:37.680 --> 0:18:40.080 all of these issues. You've got the e elections in June. 0:18:40.440 --> 0:18:42.879 You're going to have to see concessions made towards the 0:18:42.880 --> 0:18:45.320 far right. And when I say the far right, there 0:18:45.359 --> 0:18:47.240 is a little bit of a difference here because many 0:18:47.240 --> 0:18:49.520 of these what we would say far right in Europe. 0:18:49.560 --> 0:18:51.680 Yes they might be anti immigration, yes they may be 0:18:51.760 --> 0:18:55.119 really nationalistic when it comes to cultural concerns, but actually 0:18:55.200 --> 0:18:58.400 they have often little left wing tendencies in their fiscal policy. 0:18:58.520 --> 0:19:00.720 So then you get concerns about the debt out. You've 0:19:00.720 --> 0:19:05.080 got German, sorry, Italy and Spain's debt rising already through 0:19:05.119 --> 0:19:07.840 some of the parameters that the EU would prefer. Does 0:19:07.840 --> 0:19:09.760 that mean there's going to be a debt crisis? Well no, 0:19:10.320 --> 0:19:11.879 But does it mean to say that people are going 0:19:11.920 --> 0:19:15.800 to start wondering about the debt and being concerned about 0:19:15.840 --> 0:19:16.200 that debt? 0:19:16.440 --> 0:19:16.960 Well yes. 0:19:17.320 --> 0:19:20.399