1
00:00:05,120 --> 00:00:09,200
Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along

2
00:00:09,200 --> 00:00:12,720
Speaker 1: with Jonathan Ferrill and Lisa A. Brownowitz jay Leie, we

3
00:00:12,840 --> 00:00:16,759
Speaker 1: bring you insight from the best an economics, finance, investment

4
00:00:17,079 --> 00:00:22,400
Speaker 1: and international relations. Find Bloomberg Surveillance and Apple Podcast SoundCloud,

5
00:00:22,800 --> 00:00:26,280
Speaker 1: Bloomberg dot Com and of course on the Bloomberg terminal.

6
00:00:28,720 --> 00:00:32,480
Speaker 1: Joining us now Andrew Griffith, the UK Finances Financial Secretary

7
00:00:32,640 --> 00:00:36,080
Speaker 1: to the Treasury and the City Minister. Andrew fantastically catch

8
00:00:36,159 --> 00:00:38,880
Speaker 1: up with you, sir. We understand the Chancellor and the

9
00:00:38,920 --> 00:00:40,720
Speaker 1: Prime Minister is meeting with the o b R today

10
00:00:41,159 --> 00:00:43,440
Speaker 1: the Bank of Engle's guilt market operation and in the

11
00:00:43,440 --> 00:00:46,000
Speaker 1: middle of October. Should those forecasts from the o b

12
00:00:46,159 --> 00:00:50,120
Speaker 1: R be published before then? Well, the key thing to

13
00:00:50,240 --> 00:00:53,960
Speaker 1: take away is that the Government, the o b R

14
00:00:54,120 --> 00:00:56,760
Speaker 1: and the Bank of England are all working coorp in

15
00:00:56,760 --> 00:01:00,840
Speaker 1: a coordinated fashion, each doing their respective job. So the

16
00:01:00,880 --> 00:01:04,720
Speaker 1: Banks doing its job on monetary policy and market conduct,

17
00:01:05,280 --> 00:01:08,640
Speaker 1: the o b R its job on forecasts and bringing

18
00:01:08,680 --> 00:01:12,240
Speaker 1: forward though the forecasts when they're ready to be able

19
00:01:12,240 --> 00:01:15,679
Speaker 1: to wrap in the recently announced Government Growth Plan. And

20
00:01:15,680 --> 00:01:18,560
Speaker 1: then of course the Government Growth Plan which has features

21
00:01:18,600 --> 00:01:22,560
Speaker 1: about energy, protecting households and businesses, how we're going to

22
00:01:22,600 --> 00:01:27,160
Speaker 1: go forward on energy security, building clean energy going forward,

23
00:01:27,880 --> 00:01:31,040
Speaker 1: and also a lot of supply side measures in the UK.

24
00:01:31,319 --> 00:01:34,080
Speaker 1: It's a very growth orientated plan. So what you've seen

25
00:01:34,120 --> 00:01:36,640
Speaker 1: over the last week is each of those players do

26
00:01:36,720 --> 00:01:39,400
Speaker 1: their job. It's good that the Chancellor and the Prime

27
00:01:39,440 --> 00:01:41,720
Speaker 1: Minister are joined up with the o b R. I

28
00:01:41,720 --> 00:01:45,240
Speaker 1: think that meeting finishes shortly. But you've seen a lot

29
00:01:45,280 --> 00:01:49,440
Speaker 1: of coordinated activity over the last coordinated action at all.

30
00:01:49,640 --> 00:01:52,040
Speaker 1: I've seen a mess. So you come out last week

31
00:01:52,080 --> 00:01:54,440
Speaker 1: with a mini budget, the Bank having the follow up

32
00:01:54,480 --> 00:01:57,480
Speaker 1: with unprecedented intervention in the guilt market, and the o

33
00:01:57,600 --> 00:01:59,760
Speaker 1: b R. Now you visit the o b R and

34
00:01:59,800 --> 00:02:02,560
Speaker 1: look for some forecasts after the fact. Why weren't these

35
00:02:02,600 --> 00:02:07,320
Speaker 1: forecasts published alongside this many budget last week? Because the

36
00:02:07,360 --> 00:02:09,760
Speaker 1: growth plans got lots of components to it. There was

37
00:02:09,800 --> 00:02:13,720
Speaker 1: an imperative to act this time last week. It's tomorrow,

38
00:02:13,880 --> 00:02:16,440
Speaker 1: you know, this is the quarter end. It's tomorrow that

39
00:02:16,639 --> 00:02:19,360
Speaker 1: energy prices would have gone up across the United Kingdom,

40
00:02:20,120 --> 00:02:23,799
Speaker 1: real uncertainty for businesses and households, so it was right

41
00:02:23,840 --> 00:02:26,240
Speaker 1: to do that. Then there's a lot of detail in

42
00:02:26,360 --> 00:02:28,799
Speaker 1: terms of how the UK government wants to see growth

43
00:02:28,840 --> 00:02:31,840
Speaker 1: going forward, and that wouldn't have been available to the

44
00:02:31,880 --> 00:02:34,920
Speaker 1: O b R to factor into their forecast. Indeed, some

45
00:02:35,000 --> 00:02:38,280
Speaker 1: of that we're still waiting to announce over the coming weeks,

46
00:02:38,320 --> 00:02:42,240
Speaker 1: plans for infrastructure, to the housing market, for childcare, some

47
00:02:42,280 --> 00:02:45,200
Speaker 1: of the deep seated challenges that probably all of our

48
00:02:45,240 --> 00:02:48,280
Speaker 1: major economies have with growth. So you know, look, it's

49
00:02:48,280 --> 00:02:50,760
Speaker 1: been a it's been a busy week, but each of

50
00:02:50,800 --> 00:02:54,080
Speaker 1: those players are doing their job in a coordinated fashion.

51
00:02:54,440 --> 00:02:58,360
Speaker 1: How concerned are you about the increase in borrowing class

52
00:02:58,400 --> 00:03:01,000
Speaker 1: with some people citing it's and in a half percent

53
00:03:01,120 --> 00:03:03,880
Speaker 1: mortgage cost at a time when the Bank of England

54
00:03:04,040 --> 00:03:07,160
Speaker 1: is being tasked with offsetting a proposal that has not

55
00:03:07,240 --> 00:03:10,799
Speaker 1: been put out there, but the market is responding. Yeah. Look,

56
00:03:10,840 --> 00:03:14,040
Speaker 1: of course, of course rising rates are a concern. We've

57
00:03:14,080 --> 00:03:17,240
Speaker 1: seen that obviously, you know, going into last week, I

58
00:03:17,240 --> 00:03:19,920
Speaker 1: think you've seen more tightening in the US that's now

59
00:03:20,919 --> 00:03:24,200
Speaker 1: happened in the UK as well. We've seen figures out

60
00:03:24,240 --> 00:03:27,639
Speaker 1: of Europe as well today indicating that they've got exactly

61
00:03:27,680 --> 00:03:31,359
Speaker 1: the same sort of issues around inflation. What the Energy

62
00:03:31,400 --> 00:03:34,960
Speaker 1: package measures do is actually reduced the headline rates of inflation,

63
00:03:35,520 --> 00:03:37,640
Speaker 1: and that's something that's going the other way to the

64
00:03:37,640 --> 00:03:41,520
Speaker 1: tread birrel seeing. But Andrew, there is this discussion about

65
00:03:41,600 --> 00:03:44,800
Speaker 1: not releasing the o BR report earlier than the November

66
00:03:44,840 --> 00:03:47,720
Speaker 1: twenty three deadline at a time when the markets moving,

67
00:03:47,840 --> 00:03:50,760
Speaker 1: it's having real term effects. Now, why not just release

68
00:03:50,840 --> 00:03:55,040
Speaker 1: it earlier to give people a sense of what's going on. Yeah, well, Lisa, look,

69
00:03:55,040 --> 00:03:57,560
Speaker 1: I was a finance director for eleven years. You know

70
00:03:57,760 --> 00:04:00,680
Speaker 1: my board wanted me to release my figure as early

71
00:04:00,720 --> 00:04:04,160
Speaker 1: as I could, but they also wanted them to be credible,

72
00:04:04,360 --> 00:04:06,960
Speaker 1: to take the time to reflect all the information in

73
00:04:07,000 --> 00:04:10,800
Speaker 1: a very fast moving world that's available, so everyone to

74
00:04:10,880 --> 00:04:12,440
Speaker 1: have their own view on that. I think you just

75
00:04:12,480 --> 00:04:15,480
Speaker 1: have to recognize there is a balance between speed and

76
00:04:15,560 --> 00:04:19,480
Speaker 1: velocity and being able to wrap in information. Some of

77
00:04:19,480 --> 00:04:22,080
Speaker 1: that information, as I say, will be coming forward. The

78
00:04:22,080 --> 00:04:25,520
Speaker 1: growth plan itself is a forty page document and some

79
00:04:25,640 --> 00:04:28,880
Speaker 1: of that detail will still be released over the coming weeks.

80
00:04:28,920 --> 00:04:30,520
Speaker 1: And it's not for you to decide how long the

81
00:04:30,560 --> 00:04:33,400
Speaker 1: o b R nates is it. Let's get real about this.

82
00:04:33,839 --> 00:04:37,479
Speaker 1: We're reporting now that you haven't sought to accelerate the

83
00:04:37,480 --> 00:04:41,320
Speaker 1: watchdogs ECO forecast at all, that's our latest report. According

84
00:04:41,360 --> 00:04:44,200
Speaker 1: to officials familiar with the comments after the o BR

85
00:04:44,240 --> 00:04:48,840
Speaker 1: Treasury meeting, why haven't you asked them to accelerate it. Well,

86
00:04:48,880 --> 00:04:51,719
Speaker 1: I've just talked about how there's a lot of different detail.

87
00:04:51,960 --> 00:04:54,359
Speaker 1: How familiar are with all of the growth plan? People

88
00:04:54,400 --> 00:04:57,360
Speaker 1: have heard some of the headline measures. They've been widely rewarded,

89
00:04:57,960 --> 00:05:01,159
Speaker 1: perhaps less so about the plan for interest structure, the

90
00:05:01,160 --> 00:05:04,960
Speaker 1: plan for immigration housing. You know, these elements really important

91
00:05:05,000 --> 00:05:07,479
Speaker 1: elements of the growth Plan. That is how we're going

92
00:05:07,520 --> 00:05:11,160
Speaker 1: to finance the fiscal announcements that were made last Friday.

93
00:05:11,360 --> 00:05:13,080
Speaker 1: So I think you've just got to look at it

94
00:05:13,120 --> 00:05:16,040
Speaker 1: as a package. When the Chancellor asked the bar to

95
00:05:16,200 --> 00:05:19,719
Speaker 1: report on the twenty three November, it was in contemplation

96
00:05:20,240 --> 00:05:22,360
Speaker 1: of being able to take into account the whole of

97
00:05:22,360 --> 00:05:25,080
Speaker 1: that package. You in the media, BR tell you what,

98
00:05:26,760 --> 00:05:29,320
Speaker 1: have you asked the o b R to bring forward

99
00:05:29,360 --> 00:05:31,919
Speaker 1: those forecasts as soon as possible or have you told

100
00:05:31,960 --> 00:05:35,919
Speaker 1: them that you want them at the end of November. Well,

101
00:05:36,000 --> 00:05:38,599
Speaker 1: the chance that will read out on on his meeting

102
00:05:38,640 --> 00:05:41,760
Speaker 1: in due course, but in the meantime, you know, don't

103
00:05:41,800 --> 00:05:44,560
Speaker 1: don't lose sight of the fact that the fundamentals here

104
00:05:45,120 --> 00:05:49,479
Speaker 1: were strong coming in We started this with some of

105
00:05:49,520 --> 00:05:52,599
Speaker 1: the lowest rates of the lowest jet debt to GDP

106
00:05:52,760 --> 00:05:56,279
Speaker 1: and the G seven. The economy is still growing or

107
00:05:56,320 --> 00:06:00,000
Speaker 1: bit we acknowledge that. Andrews time Keenan New York comes

108
00:06:00,040 --> 00:06:03,160
Speaker 1: sorry about you. As we speak. The Bloomberg Financial Conditions

109
00:06:03,200 --> 00:06:07,279
Speaker 1: Index for the United Kingdom is a negative four standard deviations.

110
00:06:07,600 --> 00:06:10,880
Speaker 1: You have seen a seven standard deviation move and the

111
00:06:10,920 --> 00:06:15,680
Speaker 1: blended guilt price move. You have a derivative disaster. You

112
00:06:15,680 --> 00:06:19,400
Speaker 1: are the city minister. What are the regulators gonna do

113
00:06:19,800 --> 00:06:23,960
Speaker 1: finally to amend the derivative shell game that caused the

114
00:06:24,000 --> 00:06:27,960
Speaker 1: Bank of England to bail out the marketing industry of

115
00:06:28,240 --> 00:06:32,480
Speaker 1: l d I. Yeah, and you'll be aware Tom about

116
00:06:32,520 --> 00:06:35,680
Speaker 1: the independence of the regulators. So one of the things

117
00:06:35,720 --> 00:06:39,080
Speaker 1: that you learn a city minister is the regulators have

118
00:06:39,200 --> 00:06:42,120
Speaker 1: their job to do. What my time did? They feel

119
00:06:43,000 --> 00:06:46,240
Speaker 1: that we have the most competitive environment in which to

120
00:06:46,360 --> 00:06:49,200
Speaker 1: do business. Okay, you have a competitive environment that on

121
00:06:49,240 --> 00:06:53,200
Speaker 1: a seventh standard deviation move, blew up. Fine, what does

122
00:06:53,200 --> 00:06:57,039
Speaker 1: the United Kingdom do off of the scandals of of

123
00:06:57,360 --> 00:06:59,920
Speaker 1: two thousand seven and two thousand and eight to five

124
00:07:00,000 --> 00:07:05,159
Speaker 1: only control the natural greed of the derivative business. You're

125
00:07:05,200 --> 00:07:08,279
Speaker 1: at the heart of this, is City Minister, how do

126
00:07:08,360 --> 00:07:15,080
Speaker 1: we finally get our every eight year derivative blow up fixed? Well,

127
00:07:15,120 --> 00:07:17,480
Speaker 1: the Bank of England is taking the actions that they

128
00:07:17,520 --> 00:07:20,320
Speaker 1: need to in the market right now. In the long term,

129
00:07:20,360 --> 00:07:22,400
Speaker 1: of course, we look at the getting the right the

130
00:07:22,520 --> 00:07:26,840
Speaker 1: right regulatory structure and that's a shared objective of ourselves

131
00:07:27,040 --> 00:07:30,360
Speaker 1: and the bank and the prudential regulators. So you know,

132
00:07:30,480 --> 00:07:34,320
Speaker 1: of course one will always look at wherever there are

133
00:07:34,360 --> 00:07:37,800
Speaker 1: there are the points in the regulatory structure that there

134
00:07:37,840 --> 00:07:39,920
Speaker 1: needs to be looked at, but that's not but that's

135
00:07:39,960 --> 00:07:43,560
Speaker 1: not the focus for today. The Bank's made its its

136
00:07:43,680 --> 00:07:46,920
Speaker 1: judgment and it's into the markets and the thing the

137
00:07:46,960 --> 00:07:49,960
Speaker 1: thing to your to your point earlier, Tom in terms

138
00:07:50,000 --> 00:07:54,560
Speaker 1: of the politics, is that we need to communicate how

139
00:07:54,600 --> 00:07:56,800
Speaker 1: this country is going to grow. That's what's going to

140
00:07:56,880 --> 00:08:00,520
Speaker 1: give people the confidence to invest, the confidence to hold

141
00:08:00,520 --> 00:08:05,800
Speaker 1: the currency, and the ability for us as government to

142
00:08:06,160 --> 00:08:09,320
Speaker 1: find the high quality in all of the instruction that

143
00:08:09,360 --> 00:08:12,760
Speaker 1: we need to Mr Ferrell's questions earlier, what do you

144
00:08:12,840 --> 00:08:16,640
Speaker 1: need to do on this Friday evening to give confidence

145
00:08:16,920 --> 00:08:22,000
Speaker 1: Monday that the different experts are advising the Trust government

146
00:08:22,480 --> 00:08:29,040
Speaker 1: of the outcomes of their Reaganomics like policy. Well, I

147
00:08:29,040 --> 00:08:32,560
Speaker 1: wouldn't accept that characterization. What what you need to know

148
00:08:32,679 --> 00:08:34,880
Speaker 1: and the markets need to understand, is that we are

149
00:08:34,920 --> 00:08:38,600
Speaker 1: working absolutely in lockstep. You've seen a number of coordinated

150
00:08:38,640 --> 00:08:41,880
Speaker 1: announcements from both the Government and the Governor of the

151
00:08:41,880 --> 00:08:44,240
Speaker 1: Bank of England over the course of this week. I

152
00:08:44,320 --> 00:08:48,600
Speaker 1: spend my time meeting investors, talking to regulators, talking to

153
00:08:48,679 --> 00:08:53,560
Speaker 1: the fancial markets. But these are volatile times um and

154
00:08:53,640 --> 00:08:57,560
Speaker 1: we're seeing that in every market, sometimes a different different

155
00:08:57,600 --> 00:09:00,120
Speaker 1: speeds and pace, but it's a macro trend that is

156
00:09:00,160 --> 00:09:03,480
Speaker 1: seeing and some of the things that we are asked

157
00:09:03,480 --> 00:09:07,400
Speaker 1: to do is to bring forward supply side reforms to

158
00:09:07,520 --> 00:09:11,720
Speaker 1: improve the UK's energy security situation because the aberrant here

159
00:09:12,120 --> 00:09:14,280
Speaker 1: is the strength of the US economy and the strength

160
00:09:14,320 --> 00:09:17,480
Speaker 1: of the US dollar as a function of your greater

161
00:09:17,640 --> 00:09:22,600
Speaker 1: energy overnight. It's I just want to make this clear, John,

162
00:09:22,679 --> 00:09:25,240
Speaker 1: I believe the Minister just told us it's our fault.

163
00:09:25,280 --> 00:09:27,680
Speaker 1: The UK is blown up. I think that's what I heard.

164
00:09:27,920 --> 00:09:29,800
Speaker 1: We don't have time and that's not that's not that

165
00:09:29,960 --> 00:09:31,880
Speaker 1: is not what you heard. What you heard, is that

166
00:09:32,679 --> 00:09:35,559
Speaker 1: we've got a job to do to try and improve

167
00:09:35,600 --> 00:09:39,880
Speaker 1: our energy security. And if anyone thinks that this isn't

168
00:09:39,960 --> 00:09:44,920
Speaker 1: ultimately a macro issue that flows in part from Pugeon's

169
00:09:44,920 --> 00:09:52,120
Speaker 1: invasion of Ukraine, this is bloomberg. What we do know

170
00:09:52,360 --> 00:09:54,440
Speaker 1: is from the moment it was known that Jane Foley,

171
00:09:54,440 --> 00:09:57,480
Speaker 1: a rubber bank would speak with US pounders weaken from

172
00:09:57,559 --> 00:10:00,920
Speaker 1: one twelve to a one ten handle as well. Jane Foley,

173
00:10:00,960 --> 00:10:03,400
Speaker 1: I rarely do this, but I've got to get exceptionally

174
00:10:03,520 --> 00:10:06,520
Speaker 1: narrow here right down in the g I P function

175
00:10:06,559 --> 00:10:09,920
Speaker 1: and some of the technicals and Sterling give us your

176
00:10:10,000 --> 00:10:14,760
Speaker 1: key support and key resistance levels for cable, Well we

177
00:10:14,840 --> 00:10:17,760
Speaker 1: see huge ranges right now, so that's really difficult to

178
00:10:17,760 --> 00:10:20,640
Speaker 1: do what we are targeting one oh four. Certainly cable

179
00:10:21,000 --> 00:10:24,160
Speaker 1: remains really very vulnerable because you've got to ask the question, well,

180
00:10:24,160 --> 00:10:26,240
Speaker 1: what happens when the Bank of England takes away this

181
00:10:26,320 --> 00:10:29,400
Speaker 1: extraordinary support of the guilt market. You know, the cracks

182
00:10:29,440 --> 00:10:32,120
Speaker 1: of the problem is still there, which is what is

183
00:10:32,160 --> 00:10:34,280
Speaker 1: this government going to do in terms of it's its

184
00:10:34,280 --> 00:10:37,480
Speaker 1: fiscal policies. Now it's one thing during the pandemic to

185
00:10:37,480 --> 00:10:38,880
Speaker 1: to wish you more debt when you have the Bank

186
00:10:38,920 --> 00:10:41,960
Speaker 1: of England hoovering up some of that depth through quantity

187
00:10:42,000 --> 00:10:44,160
Speaker 1: of easing. But to try and do that when the

188
00:10:44,200 --> 00:10:48,320
Speaker 1: Central Bank has reversed course, it's clearly very difficult to

189
00:10:48,360 --> 00:10:50,880
Speaker 1: do a Now the Central Bank again is going through

190
00:10:50,920 --> 00:10:54,440
Speaker 1: its quantity of visa program. That is a credibility issue.

191
00:10:54,520 --> 00:10:57,200
Speaker 1: Is is it supporting that the government's discal stands. Jane

192
00:10:57,200 --> 00:11:00,920
Speaker 1: explained to us the efficacy of foreign ex ange analysis

193
00:11:01,080 --> 00:11:04,640
Speaker 1: right now, when I look at fancy ratio and financial

194
00:11:04,640 --> 00:11:08,839
Speaker 1: conditions indexes and fixed income spreads that are grim, does

195
00:11:08,920 --> 00:11:12,800
Speaker 1: foreign exchange really tell me what's going on? I think

196
00:11:12,840 --> 00:11:15,280
Speaker 1: it does. I think Sterling has been saying all year

197
00:11:15,360 --> 00:11:18,440
Speaker 1: that UK fundamentals are grim. Sterling has been a poor

198
00:11:18,480 --> 00:11:21,080
Speaker 1: performer all year. The Bank of England has been failing

199
00:11:21,400 --> 00:11:23,800
Speaker 1: to turn Sterling around with interest rate hikes and that's

200
00:11:23,800 --> 00:11:26,760
Speaker 1: certainly been the case since the spring um. And that

201
00:11:26,920 --> 00:11:30,080
Speaker 1: tells you that investors don't like what they see, and

202
00:11:30,120 --> 00:11:33,120
Speaker 1: they don't like what they see even more because of it,

203
00:11:33,280 --> 00:11:35,880
Speaker 1: because of the budget last week. And you know, even

204
00:11:35,960 --> 00:11:38,880
Speaker 1: if even if you know some of those measures were

205
00:11:38,960 --> 00:11:41,000
Speaker 1: to be at reverse, and there's no sign at all

206
00:11:41,040 --> 00:11:43,480
Speaker 1: that the government wants to do that. There is still

207
00:11:43,679 --> 00:11:47,079
Speaker 1: being a dirty stain now on the credibility perhaps of

208
00:11:47,120 --> 00:11:50,280
Speaker 1: the Bank of England, but certainly the credibility of dis government.

209
00:11:50,360 --> 00:11:52,880
Speaker 1: And and you know the government's talking about the necessity

210
00:11:52,920 --> 00:11:56,040
Speaker 1: of this budget because it wanted to improve growth. Well actually,

211
00:11:56,120 --> 00:11:58,240
Speaker 1: you know, for many, many people, a lot of those

212
00:11:58,280 --> 00:12:01,080
Speaker 1: subsidies on the energy price it's going to be taken

213
00:12:01,120 --> 00:12:03,560
Speaker 1: away in the form of higher mortgage payments. Anyway, people

214
00:12:03,559 --> 00:12:05,800
Speaker 1: are going to be poor as a consequence of this,

215
00:12:05,880 --> 00:12:08,440
Speaker 1: and also maybe because of the way guilts look in

216
00:12:08,440 --> 00:12:12,120
Speaker 1: their pension portfolios. So no wonder We've got the latest

217
00:12:12,120 --> 00:12:15,120
Speaker 1: opinion polls saying that Labor has got a thirty three

218
00:12:15,440 --> 00:12:18,079
Speaker 1: point lead over the Tories at this point. The United

219
00:12:18,160 --> 00:12:21,520
Speaker 1: Kingdom has unique circumstances some ways but others not so much.

220
00:12:21,559 --> 00:12:24,079
Speaker 1: And we are seeing fiscal spending around the euroregion to

221
00:12:24,160 --> 00:12:26,520
Speaker 1: try to grapple with what is going to be a

222
00:12:26,600 --> 00:12:29,600
Speaker 1: difficult winter. How much does this just accelerate the dollar

223
00:12:29,720 --> 00:12:32,760
Speaker 1: dominance at a time when the US faces a different picture.

224
00:12:33,120 --> 00:12:36,160
Speaker 1: Isn't necessarily engaged in the same kind of fiscal band

225
00:12:36,160 --> 00:12:39,280
Speaker 1: aid for a problem that has a longer lasting kind

226
00:12:39,280 --> 00:12:43,199
Speaker 1: of timeframe. I think it does accelerate the outlook of

227
00:12:43,240 --> 00:12:45,240
Speaker 1: the dollar. Mean, like you said, the market was already

228
00:12:45,600 --> 00:12:48,599
Speaker 1: worried about global growth, it was already worried about UK fundamentals,

229
00:12:48,600 --> 00:12:50,280
Speaker 1: which of course is why the time in all this

230
00:12:50,320 --> 00:12:53,160
Speaker 1: BUDGECT was so particularly so bad, the chance of failing

231
00:12:53,200 --> 00:12:56,679
Speaker 1: to read those market conditions. But it does accelerate the

232
00:12:56,880 --> 00:12:59,360
Speaker 1: the the movement into say favor for the dollar. But

233
00:12:59,600 --> 00:13:01,440
Speaker 1: you know, would really like just to state that I

234
00:13:01,480 --> 00:13:06,040
Speaker 1: don't think that US fundamentals operate on the on the

235
00:13:06,040 --> 00:13:08,640
Speaker 1: dollar in the same way that fundamentals of say that

236
00:13:08,760 --> 00:13:12,600
Speaker 1: the UK operate on on sterling. And this is because

237
00:13:12,640 --> 00:13:15,120
Speaker 1: the dollar has his own set of fundamentals. It is

238
00:13:15,120 --> 00:13:18,960
Speaker 1: a huge invoicing currency. It is a massive reserve currency

239
00:13:19,000 --> 00:13:22,120
Speaker 1: because it's a huge invoicing currency. And the long the

240
00:13:22,160 --> 00:13:24,520
Speaker 1: short of it, the simplicity of it is that when

241
00:13:24,559 --> 00:13:28,400
Speaker 1: there is crisis, when there is uncertainty, people just need dollars.

242
00:13:28,600 --> 00:13:31,160
Speaker 1: They need it to cover their liabilities, to pay their invoices,

243
00:13:31,320 --> 00:13:34,800
Speaker 1: perhaps to cover their dollar debt liabilities, depending on where

244
00:13:34,800 --> 00:13:37,680
Speaker 1: you are. So the dollar operates to his own set

245
00:13:37,720 --> 00:13:40,880
Speaker 1: of fundamentals, which are pretty quite distinct from the fundamentals

246
00:13:40,960 --> 00:13:43,960
Speaker 1: of the of the US and Jane Foley, Jane just

247
00:13:43,960 --> 00:13:46,760
Speaker 1: wantedfull to catch up with you in London and then

248
00:13:46,800 --> 00:13:48,679
Speaker 1: back here in New York as well. Jane Foley, thank

249
00:13:48,720 --> 00:14:02,760
Speaker 1: you Rather Bank for John, Lisa and I and all

250
00:14:02,800 --> 00:14:05,079
Speaker 1: of our team. We are going to continue to monitor

251
00:14:05,160 --> 00:14:09,599
Speaker 1: this through the weekend as well, and it is across equities, bonds, currencies,

252
00:14:10,160 --> 00:14:14,240
Speaker 1: and hydrocarbons. Given a war in Ukraine. Expert on this

253
00:14:14,320 --> 00:14:18,120
Speaker 1: is Regina Mayor, Global Head of Energy at KPMG, which

254
00:14:18,200 --> 00:14:22,600
Speaker 1: barely describes the nexus of our military experience with the

255
00:14:22,680 --> 00:14:26,240
Speaker 1: study of hydrocarbons at Rice University. Regina, thank you so

256
00:14:26,320 --> 00:14:30,320
Speaker 1: much for joining today. What are you watching in the

257
00:14:30,360 --> 00:14:34,240
Speaker 1: oil and gas market when you begin your day? What

258
00:14:34,440 --> 00:14:37,040
Speaker 1: is the thing we need to focus on right now?

259
00:14:39,000 --> 00:14:41,560
Speaker 1: So when I'm thinking about what's happening in Europe, because

260
00:14:41,600 --> 00:14:43,600
Speaker 1: that's where there's a lot of attention these days, I

261
00:14:43,640 --> 00:14:46,960
Speaker 1: am looking at three things at every daytime. That is,

262
00:14:47,000 --> 00:14:50,480
Speaker 1: what is the natural gas stocks supply look like, what

263
00:14:50,600 --> 00:14:54,080
Speaker 1: are the spotting forward natural gas prices in Europe? And

264
00:14:54,120 --> 00:14:56,520
Speaker 1: what do we think the weather projections will be? Both

265
00:14:56,600 --> 00:15:01,240
Speaker 1: but today, tomorrow and the coming winter the near term.

266
00:15:01,080 --> 00:15:05,040
Speaker 1: I'm near term optimistic because European gas docks are at

267
00:15:05,120 --> 00:15:08,600
Speaker 1: nine of normal for this time. They were at fifty

268
00:15:08,680 --> 00:15:10,440
Speaker 1: percent over the summer, so I think the EU has

269
00:15:10,480 --> 00:15:13,920
Speaker 1: done a great job of rebuilding that stock. Short term

270
00:15:13,960 --> 00:15:16,880
Speaker 1: prices are down fifty percent from their highs over the summer,

271
00:15:17,120 --> 00:15:19,720
Speaker 1: though there's still two higher than they were at this

272
00:15:19,760 --> 00:15:22,720
Speaker 1: time last year, but they have by the summer, and

273
00:15:22,760 --> 00:15:25,680
Speaker 1: I think we're hoping that the weather stays more in

274
00:15:25,720 --> 00:15:28,760
Speaker 1: our favor. So near term optimism, But those are some

275
00:15:28,760 --> 00:15:31,520
Speaker 1: of the things I look at near term. What about

276
00:15:31,600 --> 00:15:35,600
Speaker 1: longer term? Yeah, well, longer term, there's so much volatility.

277
00:15:35,600 --> 00:15:38,120
Speaker 1: If you just look at this week alone, Lisa Cradle

278
00:15:38,240 --> 00:15:42,640
Speaker 1: price jumped around eight up and down, and so I

279
00:15:42,640 --> 00:15:44,600
Speaker 1: think the market has a lot of jitters. We saw

280
00:15:44,640 --> 00:15:48,680
Speaker 1: some downward price pressure with recessionary concerns UH and the

281
00:15:48,720 --> 00:15:52,640
Speaker 1: strengthening of the dollar, but then we worried about demand

282
00:15:52,920 --> 00:15:55,240
Speaker 1: because the market got jittery with the what's happened with

283
00:15:55,280 --> 00:15:57,520
Speaker 1: the North String pipelines, even though that actually does not

284
00:15:57,600 --> 00:16:01,240
Speaker 1: affect near term European gas, like is this pipeline for

285
00:16:01,320 --> 00:16:04,080
Speaker 1: not serving Europe? But the EU has done a great

286
00:16:04,160 --> 00:16:07,400
Speaker 1: job of reducing its short term dependence on Russian gas,

287
00:16:07,520 --> 00:16:10,400
Speaker 1: and so I think that the added threats will create

288
00:16:10,560 --> 00:16:15,000
Speaker 1: upward price pressure. It will continue that, but the recessionary fears,

289
00:16:15,040 --> 00:16:17,240
Speaker 1: the rampant inflation that you all have been talking about,

290
00:16:17,560 --> 00:16:20,120
Speaker 1: that breeds a downward price pressure that keeps US more

291
00:16:20,120 --> 00:16:23,760
Speaker 1: in balanced. The analysts are are pegging average group price

292
00:16:23,800 --> 00:16:26,400
Speaker 1: for to be in the seventies, which I don't think

293
00:16:26,440 --> 00:16:29,720
Speaker 1: I would have expected that just three months ago. Well,

294
00:16:29,840 --> 00:16:32,400
Speaker 1: sticking on the energy story in Europe, but we heard

295
00:16:32,400 --> 00:16:35,840
Speaker 1: from Enery Herdering, our correspondent in Washington, d C. About

296
00:16:36,120 --> 00:16:39,520
Speaker 1: how they're increasing calls from Europe for the US to

297
00:16:39,640 --> 00:16:43,080
Speaker 1: lower its natural gas prices as exports to Europe to

298
00:16:43,160 --> 00:16:46,640
Speaker 1: give them some assistance through the winter. Do you see

299
00:16:46,680 --> 00:16:49,520
Speaker 1: that as a realistic outcome that the US is willing

300
00:16:49,520 --> 00:16:53,320
Speaker 1: to provide marginal demand and somehow cap prices in some manner.

301
00:16:54,680 --> 00:16:56,600
Speaker 1: I didn't think that most interesting. And that the paper

302
00:16:56,680 --> 00:17:00,160
Speaker 1: that the EU is issued about creating an lergy transaction

303
00:17:00,280 --> 00:17:05,080
Speaker 1: based benchmark. Uh, you know, the markets are very transparent,

304
00:17:05,400 --> 00:17:07,879
Speaker 1: and you know high departments have been trading in the

305
00:17:07,880 --> 00:17:12,280
Speaker 1: ways that they've been trading for almost decades, right, So

306
00:17:12,440 --> 00:17:15,520
Speaker 1: I don't know how successful that will ultimately be given

307
00:17:15,560 --> 00:17:18,520
Speaker 1: all this volatility that we've been talking about. I do

308
00:17:18,640 --> 00:17:22,160
Speaker 1: think though, the governments are really interested in having more

309
00:17:22,240 --> 00:17:26,800
Speaker 1: unified policies to protect their electorate and to secure energy

310
00:17:26,840 --> 00:17:33,600
Speaker 1: supplies for the coming winter month Regina the Netherlands. Inflation

311
00:17:34,119 --> 00:17:36,320
Speaker 1: in the hydrocarbon part of that, I believe is a

312
00:17:36,400 --> 00:17:40,720
Speaker 1: hundred and fourteen percent, just unimaginable numbers. What are the

313
00:17:40,840 --> 00:17:46,199
Speaker 1: ramifications if we get ninety days of sevent inflation in

314
00:17:46,240 --> 00:17:50,200
Speaker 1: the Netherlands. Well, I'm not an economist, Tom, but I

315
00:17:50,240 --> 00:17:53,440
Speaker 1: mean I think it's you're seeing major price escalation. I'm

316
00:17:53,440 --> 00:17:56,520
Speaker 1: talking to a lot of senior executives that run manufacturing

317
00:17:56,520 --> 00:18:00,520
Speaker 1: companies all across Europe, and their energy costs are through

318
00:18:00,560 --> 00:18:03,600
Speaker 1: the roof, and that cost then has to get translated

319
00:18:03,640 --> 00:18:07,600
Speaker 1: back down into goods and services that go to consumers,

320
00:18:07,800 --> 00:18:09,760
Speaker 1: and that I think is what's driving some of these

321
00:18:10,400 --> 00:18:14,280
Speaker 1: these crazy inflationary numbers that we're seeing. And until we

322
00:18:14,359 --> 00:18:17,680
Speaker 1: can drive that overall energy cost down, you know, they're

323
00:18:17,680 --> 00:18:20,720
Speaker 1: making short term decisions to cut manufacturing runs as a

324
00:18:20,800 --> 00:18:23,680
Speaker 1: demand management response. But I think will continue to see

325
00:18:23,800 --> 00:18:26,480
Speaker 1: a lot of upward pressure on price given these higher

326
00:18:26,560 --> 00:18:29,719
Speaker 1: energy costs. Regina, thank you and thanks for making it

327
00:18:29,720 --> 00:18:32,000
Speaker 1: this morning to join us. We appreciate it. Regina Mada

328
00:18:32,240 --> 00:18:39,600
Speaker 1: of KPMG holding on as the expertise of the chief

329
00:18:39,640 --> 00:18:43,120
Speaker 1: investment strategist at LUTH, Jim Paulson recalibrates in the fourth

330
00:18:43,160 --> 00:18:46,040
Speaker 1: quarter with us this morning. What's the value of cash

331
00:18:46,119 --> 00:18:51,960
Speaker 1: right now? Mr Paulson? I, UM, it's nice to see

332
00:18:52,000 --> 00:18:55,399
Speaker 1: cash tom at least giving a positive yield of some merit,

333
00:18:55,520 --> 00:18:57,600
Speaker 1: but I don't think it's the right asset to be

334
00:18:57,720 --> 00:19:01,480
Speaker 1: in right now. UM. I think they are pretty unsustainable

335
00:19:01,520 --> 00:19:05,040
Speaker 1: at the moment um, and it's all tied to police

336
00:19:05,080 --> 00:19:10,879
Speaker 1: officials raising rates. Um. In this country, the tenure yield

337
00:19:10,960 --> 00:19:14,720
Speaker 1: is going straight north, while commodity prices are collapsing, while

338
00:19:14,760 --> 00:19:18,000
Speaker 1: inflation surprise index is falling, while while the I S

339
00:19:18,119 --> 00:19:22,000
Speaker 1: M S price surveys from service and manufacturers are are

340
00:19:22,119 --> 00:19:25,680
Speaker 1: falling out of bed, while inflation expectations in the bond

341
00:19:25,720 --> 00:19:30,159
Speaker 1: market break even rates are collapsing. Um. The dollar is

342
00:19:31,119 --> 00:19:34,200
Speaker 1: simply out of control and the upside is a reflection

343
00:19:34,280 --> 00:19:37,439
Speaker 1: of yields, and I think you know, something's got to change.

344
00:19:37,480 --> 00:19:42,520
Speaker 1: It's gotten too extreme and probably what changes is rates

345
00:19:42,560 --> 00:19:45,239
Speaker 1: stopped going up soon? And if that's the case, I

346
00:19:45,280 --> 00:19:48,240
Speaker 1: think the stock market is gonna have a good rip yet.

347
00:19:48,520 --> 00:19:50,720
Speaker 1: Um And I don't think you'll be pleased by putting

348
00:19:50,720 --> 00:19:53,880
Speaker 1: too much in cash, but having some in cash. It's

349
00:19:54,000 --> 00:19:57,960
Speaker 1: nice to have a bond market that's yielding something, in

350
00:19:57,600 --> 00:20:01,439
Speaker 1: a cash market that shielding something. It's certainly gives Asset

351
00:20:01,520 --> 00:20:06,760
Speaker 1: allocators are just people, individuals and opportunity to diversify some

352
00:20:06,840 --> 00:20:10,200
Speaker 1: risks that they haven't had for quite some time. What's

353
00:20:10,200 --> 00:20:12,080
Speaker 1: that coon option? You've got the gym on a rip?

354
00:20:12,480 --> 00:20:14,280
Speaker 1: What are you playing? What are you sitting? What's the

355
00:20:14,280 --> 00:20:18,160
Speaker 1: pocket of the knocket you want to be present in? Well?

356
00:20:18,320 --> 00:20:20,960
Speaker 1: I I think I look at this like coming out

357
00:20:20,960 --> 00:20:24,560
Speaker 1: of a recession, uh, Jonathan, I I would. I would

358
00:20:24,560 --> 00:20:27,520
Speaker 1: look at early cycle stocks. And my favorite sector is

359
00:20:27,560 --> 00:20:30,560
Speaker 1: the consumer discretionary sector. I think it's the one sector

360
00:20:30,600 --> 00:20:35,560
Speaker 1: that's been most harmed by inflation. It destroys UH not

361
00:20:35,680 --> 00:20:40,040
Speaker 1: only their operations by squeezing their margins of the companies,

362
00:20:40,040 --> 00:20:43,080
Speaker 1: but it destroys the confidence of their customer base, and

363
00:20:43,160 --> 00:20:45,960
Speaker 1: so as inflation rolls over, I think those stocks come

364
00:20:46,320 --> 00:20:50,520
Speaker 1: back to life. I'd also, you know, look at growth stocks,

365
00:20:50,600 --> 00:20:54,560
Speaker 1: particularly small cap growth. I my favorite tilt would be

366
00:20:54,600 --> 00:20:57,119
Speaker 1: towards small caps, which by the way, have held up

367
00:20:57,160 --> 00:21:00,000
Speaker 1: remarkably well in this last draft in the stock market

368
00:21:00,119 --> 00:21:05,160
Speaker 1: here uh since August, and I think that I would

369
00:21:05,240 --> 00:21:08,800
Speaker 1: I would have some exposure there. I also think that

370
00:21:08,840 --> 00:21:14,080
Speaker 1: there's cycles beyond the UH consumer discretionary that probably play,

371
00:21:14,359 --> 00:21:17,560
Speaker 1: like industrials and and so forth. And I also think

372
00:21:17,560 --> 00:21:19,159
Speaker 1: there could be a play on the dollar. Yet, I

373
00:21:19,480 --> 00:21:21,119
Speaker 1: just think the dollar is too high, has got to

374
00:21:21,160 --> 00:21:23,600
Speaker 1: come down. And I don't know if i'd have a

375
00:21:23,640 --> 00:21:26,359
Speaker 1: broad based international bet right now, but I would maybe

376
00:21:26,359 --> 00:21:29,239
Speaker 1: in the emerging markets excluding China, so Jim right now

377
00:21:29,359 --> 00:21:36,119
Speaker 1: Nike shares down premarket trading and screaming pie Uh. No,

378
00:21:36,280 --> 00:21:39,560
Speaker 1: I don't have any particular preference to Nike. Uh, Lisa.

379
00:21:41,200 --> 00:21:42,640
Speaker 1: I mean, I'm not mean to put you on the spot.

380
00:21:42,640 --> 00:21:44,720
Speaker 1: I know that you're you're viewing this from a more big,

381
00:21:44,920 --> 00:21:47,680
Speaker 1: big picture sense. But I guess that the point that

382
00:21:47,720 --> 00:21:48,879
Speaker 1: I was trying to make is what's the risk to

383
00:21:48,920 --> 00:21:51,000
Speaker 1: the downside as you wait for the FED to blank.

384
00:21:51,040 --> 00:21:53,000
Speaker 1: When the FED saying we're not going to blink and

385
00:21:53,160 --> 00:21:55,359
Speaker 1: no things are not breaking, it looks like actually financial

386
00:21:55,400 --> 00:22:00,200
Speaker 1: stabilities holding in just fine in the US. I we're

387
00:22:00,200 --> 00:22:03,240
Speaker 1: getting really close to a blink and and probably a force.

388
00:22:03,320 --> 00:22:06,119
Speaker 1: It could be that we get a you know, a

389
00:22:06,200 --> 00:22:08,520
Speaker 1: really weak economic report. It could be that we get

390
00:22:08,560 --> 00:22:13,160
Speaker 1: a really good inflation report, probably more likely as something breaks.

391
00:22:13,680 --> 00:22:16,520
Speaker 1: And you guys are bringing up things this morning that

392
00:22:16,560 --> 00:22:20,080
Speaker 1: are starting to show some cracks in the foundation. And

393
00:22:20,200 --> 00:22:22,880
Speaker 1: right now, if something breaks in the US and it's

394
00:22:22,920 --> 00:22:26,439
Speaker 1: a systemic problem, there's more downside risk in the stock market.

395
00:22:26,800 --> 00:22:30,600
Speaker 1: But I think that the private balance sheets of the

396
00:22:30,720 --> 00:22:34,960
Speaker 1: United States, both households and corporations, are very solid, and

397
00:22:35,000 --> 00:22:38,919
Speaker 1: they're very liquid, and the banking industry squeaky clean in

398
00:22:38,960 --> 00:22:42,480
Speaker 1: this country, and the chance of a systemic balance sheet

399
00:22:42,520 --> 00:22:46,480
Speaker 1: break here, I think are low. So I think something breaks,

400
00:22:46,600 --> 00:22:49,760
Speaker 1: but if it's not systemic, it will cause a pause

401
00:22:49,800 --> 00:22:52,200
Speaker 1: in the tightening cycle across the globe, and that could

402
00:22:52,240 --> 00:22:56,679
Speaker 1: be a really big positive here for the stock market.

403
00:22:56,200 --> 00:22:57,960
Speaker 1: One point, you can you can you make that fun

404
00:22:58,000 --> 00:22:59,600
Speaker 1: a point and then I'll come back. You just type

405
00:22:59,600 --> 00:23:04,439
Speaker 1: of states you got a stage that, okay, I I

406
00:23:04,480 --> 00:23:06,439
Speaker 1: just want to make a one point that you know,

407
00:23:06,840 --> 00:23:12,080
Speaker 1: Powell seems bent on, you know, channelings inner inner Voker

408
00:23:12,160 --> 00:23:16,600
Speaker 1: moment and the entire Voker moment that actually occurred in

409
00:23:17,880 --> 00:23:21,000
Speaker 1: one there when Paul Voker took the funds rate from

410
00:23:21,080 --> 00:23:23,760
Speaker 1: nine and a half percent in August I think to

411
00:23:24,680 --> 00:23:29,640
Speaker 1: by December UM. The stock market after that two fell

412
00:23:29,680 --> 00:23:32,959
Speaker 1: by a total of seven And I think it's important

413
00:23:32,960 --> 00:23:36,680
Speaker 1: to recognize we're already down twenty in this country already.

414
00:23:36,760 --> 00:23:39,679
Speaker 1: So even if we're having a Powell moment, you know,

415
00:23:40,000 --> 00:23:44,200
Speaker 1: it's interesting Volker had a Voker moment after fifteen years

416
00:23:44,200 --> 00:23:47,560
Speaker 1: of runaway inflation in this country. The pole fed is

417
00:23:47,640 --> 00:23:51,240
Speaker 1: wanting to do a Vocer moment after fifteen months of

418
00:23:51,320 --> 00:23:54,199
Speaker 1: high inflation. I don't think the two are comparable and

419
00:23:54,240 --> 00:23:57,480
Speaker 1: don't need the same approach. Jim will continue this conversation

420
00:23:57,480 --> 00:23:59,760
Speaker 1: at the time, so we appreciate you thoughts and kind

421
00:23:59,760 --> 00:24:03,000
Speaker 1: of instructive. The hope is that imposting that the Luthal Creek.

422
00:24:03,680 --> 00:24:07,400
Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join

423
00:24:07,560 --> 00:24:10,879
Speaker 1: us live weekdays from seven to ten am Eastern on

424
00:24:11,000 --> 00:24:15,240
Speaker 1: Bloomberg Radio and on Bloomberg Television each day from six

425
00:24:15,320 --> 00:24:20,200
Speaker 1: to nine am for insight from the best in economics, finance, investment,

426
00:24:20,359 --> 00:24:25,359
Speaker 1: and international Relations and subscribe to the Surveillance podcast on

427
00:24:25,440 --> 00:24:29,240
Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on

428
00:24:29,359 --> 00:24:33,520
Speaker 1: the terminal. I'm Tom Keene, and this is Bloomberg