WEBVTT - Surveillance: Crypto Contagion with Tchir 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownowitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.799 Find Bloomberg Surveillance on Apple, podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:29.760 and of course on the Bloomberg terminal. Why have we 0:00:29.840 --> 0:00:32.440 not seen more fallout, especially in such a jderary market, Peter. 0:00:32.479 --> 0:00:34.519 She has been writing a lot about that head of 0:00:34.520 --> 0:00:37.120 macro strategy at Academy Securities, and we're so glad you're 0:00:37.120 --> 0:00:39.680 actually in studio with us, which is fabulous. It is 0:00:39.720 --> 0:00:42.440 wonderful to have you on this pre Thanksgiving week, Peter. 0:00:42.560 --> 0:00:46.000 How much are you seeing, uh, some sort of I 0:00:46.000 --> 0:00:48.240 don't know, whales, and how much you're seeing something where 0:00:48.240 --> 0:00:52.200 it's a realistic pricing action of institutions having fully adopted 0:00:52.760 --> 0:00:54.960 a crypto asset, even if it does lose favor to 0:00:55.000 --> 0:00:56.960 some degree. I think we have one more big leg 0:00:56.960 --> 0:00:58.360 down in crypto. I think we're going to see some 0:00:58.440 --> 0:01:00.440 selling off in bitcoin. I think of the things that 0:01:00.520 --> 0:01:03.080 supported it recently are the fact that there are a 0:01:03.080 --> 0:01:05.280 lot of whales who have invested interest in keeping it 0:01:05.360 --> 0:01:08.080 higher and there's all this talk about bitcoin maximalist, right, 0:01:08.080 --> 0:01:10.800 so there is a theory that okay, ft T the 0:01:10.880 --> 0:01:12.800 tokens that was where a lot of the trouble was 0:01:13.040 --> 0:01:15.600 maybe bitcoins, the quote unquote safe part of crypto. I 0:01:15.600 --> 0:01:17.680 think that narrative is going to get hurt a little bit. 0:01:18.120 --> 0:01:19.600 Um and all the stuff that's been going on with 0:01:19.640 --> 0:01:23.160 a great scale trust so GBTC has been feeding into 0:01:23.160 --> 0:01:25.000 that a little bit. So people I believe have been 0:01:25.040 --> 0:01:26.840 selling that to buy bitcoin. I think that's going to 0:01:26.880 --> 0:01:28.640 turn out to be a mistake as well. Why isn't 0:01:28.680 --> 0:01:31.000 this a broader market story? How can this be so 0:01:31.040 --> 0:01:34.440 contained given that this story really grew up in the 0:01:34.560 --> 0:01:39.000 era of free money. So I think earlier this year 0:01:39.160 --> 0:01:40.960 it's a great question, but I think earlier this year 0:01:41.640 --> 0:01:43.760 they were kind of tied together because you had a 0:01:43.800 --> 0:01:46.440 lot of people who are invested in crypto, they're invested 0:01:46.480 --> 0:01:49.600 in disruptive stocks. They all were doing it on margins, 0:01:49.640 --> 0:01:52.040 so every time one sneeze it would, you know, drag 0:01:52.160 --> 0:01:54.480 down everything else that got shaken out a little bit. 0:01:54.520 --> 0:01:56.960 So we're better off right now. I think the next 0:01:57.040 --> 0:01:58.920 leg of this is going to be, Wow, what happens 0:01:58.960 --> 0:02:00.520 to the economy. You start looking at the amount of 0:02:00.560 --> 0:02:03.560 money that was being spent by even FTX on advertising 0:02:03.920 --> 0:02:06.000 crypto as a whole. Right, I think this is going 0:02:06.040 --> 0:02:07.880 to feed into the economy. I think the wealth effect 0:02:07.960 --> 0:02:11.320 is real. Right this time we've lost three trillion dollars 0:02:11.360 --> 0:02:13.480 down to just under a trillion, Right, there's been huge 0:02:13.520 --> 0:02:15.359 wealth effects. I think this is going to bleed into 0:02:15.320 --> 0:02:17.400 the economy. Generally, that's gonna be bad. I think it's 0:02:17.400 --> 0:02:19.640 going to turn out to be good for energy usage though, Peter, 0:02:19.720 --> 0:02:22.600 thanks so much for coming in. You have an August firm, 0:02:23.120 --> 0:02:27.360 hugely conservative Academy and security as a former Adimals and 0:02:27.800 --> 0:02:30.040 the like as well. They hang on every bit of 0:02:30.040 --> 0:02:35.480 when Sheer publishes on rates risk and Taylor Swift, how 0:02:35.600 --> 0:02:38.400 that sell? You know, we got to do some clickbait too, 0:02:38.400 --> 0:02:40.839 even in our bid, because well, why do we sell 0:02:40.919 --> 0:02:44.120 bitcoin to a conservative shop like Academy. These people are 0:02:44.160 --> 0:02:47.720 gonna say it's unregulated, it can't be regulated, it's foreign. 0:02:47.919 --> 0:02:50.959 How do you sell bitcoin is a legit thing to 0:02:51.080 --> 0:02:54.040 a bunch of conservative people Academy. So unfortunately I've been 0:02:54.000 --> 0:02:55.720 fairly negative on it. But I think we're having these 0:02:55.720 --> 0:02:57.720 conversations where do we step in, When does it get 0:02:57.760 --> 0:02:59.920 interesting for our firm to explore it. It's really gonna 0:03:00.120 --> 0:03:02.600 down to regulation. Do the regulators come out and create 0:03:02.600 --> 0:03:05.000 an environment that you can feel comfortable with? Right and 0:03:05.080 --> 0:03:07.079 right now? It's just not there. One of my big 0:03:07.120 --> 0:03:09.360 takeaways has been for the last year, you talk something 0:03:09.440 --> 0:03:13.960 as simple as where something domiciled? And where are you 0:03:14.040 --> 0:03:15.800 and I are in the same page on this? Ali 0:03:15.840 --> 0:03:18.720 Baba is hanging out the Cayman Islands trying to play 0:03:18.760 --> 0:03:22.080 by a different rule book. I'm gonna defend Gary Gunsler 0:03:22.160 --> 0:03:27.040 here right now? What does he regulate? Where's the domicile? 0:03:27.760 --> 0:03:29.799 I think that's really the key issue, right You've got 0:03:29.800 --> 0:03:31.320 to have some sort of domicile here. And the big 0:03:31.360 --> 0:03:32.960 question I think a lot of people are talking about, 0:03:32.960 --> 0:03:35.880 even whether it's these gray sale trust is where is 0:03:35.920 --> 0:03:39.120 the bitcoins? We talk about spotty tfs blah blah blah. Right, 0:03:39.160 --> 0:03:41.720 It's like, how do you confirm on a daily basis 0:03:41.760 --> 0:03:43.920 that what you think you hold in the crypto world 0:03:44.160 --> 0:03:48.600 is legitimately there without maybe publishing it and exposing yourself 0:03:48.640 --> 0:03:50.720 to thefter hacking. So I think that's really the key 0:03:50.840 --> 0:03:53.200 is most other assets you understand whether you own it, 0:03:53.240 --> 0:03:55.200 whether it's an equity, whether it's gold, you can pretty 0:03:55.200 --> 0:03:57.880 easily prove it. That's been the hard part with crypto. 0:03:57.920 --> 0:03:59.280 I think that's what's going to have to get to 0:03:59.280 --> 0:04:02.160 the heart of regulation is how do we verify this? 0:04:02.240 --> 0:04:04.480 How do we get comfortable that we are auditing something 0:04:04.760 --> 0:04:08.440 and regulating something that's actually there. Neil Kashkari has been 0:04:08.440 --> 0:04:11.040 talking about how this is just a ponzi scheme. He 0:04:11.040 --> 0:04:13.520 doesn't really think that there's any they're they're here, and 0:04:13.560 --> 0:04:17.320 he's been very vocal about that on Twitter and in lecturers. 0:04:17.440 --> 0:04:22.080 How much is the banking industry leveraged to the bitcoin 0:04:22.200 --> 0:04:24.640 and and and frankly to the crypto story, not necessarily 0:04:24.960 --> 0:04:28.440 by borrowing money to invest in crypto, but in building 0:04:28.520 --> 0:04:31.640 up teams of people designed to trade it, designed to 0:04:31.680 --> 0:04:33.760 invest in I don't think the banks have really put 0:04:33.800 --> 0:04:35.600 that much effort into it. I think they're building out, 0:04:35.600 --> 0:04:37.800 but it's a small part of their business. The other 0:04:37.839 --> 0:04:39.559 part of this I do think people made a mistake 0:04:39.640 --> 0:04:42.360 is every time some bank announced they were doing something 0:04:42.360 --> 0:04:45.040 on crypto, everyone right, oh, this is great, they're adopting. 0:04:45.040 --> 0:04:46.880 If they're adopting, no, no, banks are very smart right. 0:04:46.920 --> 0:04:48.320 If there's a bit offered to be made, if there's 0:04:48.320 --> 0:04:50.760 some trading revenue be made, they're going to get involved. 0:04:50.760 --> 0:04:53.040 That's not a commitment to it. So I think banks 0:04:53.040 --> 0:04:54.919 can pull back if this doesn't work out. And to me, 0:04:55.160 --> 0:04:57.840 bitcoin is always about adoption, the rate of adoption. When 0:04:57.880 --> 0:04:59.560 you want to get bullish on it, you see adoption 0:04:59.600 --> 0:05:01.960 coming up. I just don't see it going up anytime soon. 0:05:02.000 --> 0:05:03.600 In fact, I see it dropping is more and more 0:05:03.640 --> 0:05:05.800 people question why they want to be in this space. 0:05:05.960 --> 0:05:08.200 What's your call for two thousand three, Let's get out 0:05:08.200 --> 0:05:11.880 in front of your year ahead report? Uh, Taylor swift 0:05:11.880 --> 0:05:14.239 into it? I'm not sure about that. I think crypto 0:05:14.720 --> 0:05:18.040 going down will be subten thousand on bitcoin calling subten 0:05:18.040 --> 0:05:21.159 thou definitely. I think that actually potentially happens even this year. 0:05:21.440 --> 0:05:23.599 I like rates, though, I think yields are actually probably 0:05:23.600 --> 0:05:25.920 the easiest trade. I want to be long yields right now. 0:05:26.200 --> 0:05:28.240 I think treasuries are going to rally. I think the 0:05:28.279 --> 0:05:31.400 economy is rolling over, the data is rolling over, and 0:05:31.440 --> 0:05:33.640 as Hockey says, the Fed wants to talk, the markets 0:05:33.680 --> 0:05:35.240 are starting not to listen to it. So I love 0:05:35.440 --> 0:05:37.400 owning bonds here well, but we were talking to Carl 0:05:37.440 --> 0:05:41.239 Weinberg earlier and he says, quantitative tightening. What about quantitative tightening? 0:05:41.640 --> 0:05:43.480 So to me, quantitative tightening is a little bit the 0:05:43.520 --> 0:05:46.760 opposite of quantitative easing, in fact, almost exact opposite, and 0:05:46.800 --> 0:05:49.840 I find quantitative easing easier to explain. It's like if 0:05:49.920 --> 0:05:51.680 you have these Newton cradle right where you drop this 0:05:51.680 --> 0:05:53.600 one ball and stuff shoots out at the end. So 0:05:53.760 --> 0:05:56.679 that's what happened. It shoots out and where it really 0:05:56.720 --> 0:05:59.400 exposed itself at the riskiest end of the spectrum, right, 0:05:59.440 --> 0:06:01.760 So everything the person winds up having to make a choice. 0:06:02.080 --> 0:06:04.920 I have to either buy longer duration assets, riskier assets, 0:06:04.960 --> 0:06:07.240 less liquid assets, and it really comes out at the 0:06:07.240 --> 0:06:08.840 far end. That's why I think crypto did so well, 0:06:08.880 --> 0:06:10.960 all these disruptive stocks. So when it comes back in, 0:06:11.000 --> 0:06:12.920 it's not going to express itself in yields. It's going 0:06:12.960 --> 0:06:14.960 to be in the riskiest assets. I think stocks can 0:06:15.000 --> 0:06:17.320 still lag from here and it's not going to express 0:06:17.320 --> 0:06:19.680 itself regardless of what we're doing on the quantitative tightening 0:06:19.680 --> 0:06:25.000 and the bond markets up yield down. Stocks don't play no, 0:06:25.160 --> 0:06:27.000 I think not. I think maybe we get a little 0:06:27.040 --> 0:06:30.919 surge in stocks um after we get through this cryptodebacco 0:06:31.000 --> 0:06:33.320 where people get back to comfortable. Oh, lower yields is 0:06:33.360 --> 0:06:35.080 good for stocks, then I think the reality is gonna 0:06:35.080 --> 0:06:37.000 be no, No, yields are going lower because the economy 0:06:37.000 --> 0:06:39.360 has rolled over. We've done too much. We have these problems, 0:06:39.640 --> 0:06:42.479 and quantitative tightening I think is more impactful on equities 0:06:42.520 --> 0:06:44.880 and risk assets than spawns. I mean, never more came 0:06:44.920 --> 0:06:47.360 out Taylor Swift with Jack getting off in the National. 0:06:47.440 --> 0:06:50.280 I mean what they did Peter during the pandemic. She 0:06:50.440 --> 0:06:53.320 just said I'm not I'm not laying low for the pandemic. 0:06:53.720 --> 0:06:55.960 And they just created and creating created. Look at the 0:06:55.960 --> 0:06:58.800 payoff now, it's been phenomenal. I think one question that's 0:06:58.800 --> 0:07:01.040 been coming up directly to our businesses what does this 0:07:01.120 --> 0:07:03.120 do for EM and A activity. Right, We've already had 0:07:03.560 --> 0:07:05.919 DC that doesn't like M and A activity, And now 0:07:05.920 --> 0:07:07.960 all of a sudden you've got Live Nation these companies, 0:07:08.000 --> 0:07:10.480 you know, getting reported on. I think it's going to 0:07:10.560 --> 0:07:13.480 be interesting and I think that's gonna be a headwind 0:07:13.560 --> 0:07:15.680 for M and A next year. We're really prepared to 0:07:15.680 --> 0:07:18.280 talk about Taylor Swift. Is that really what we're doing here. 0:07:18.680 --> 0:07:22.160 I wasn't that prepared, but I figured out the influence 0:07:22.160 --> 0:07:25.080 of the national on What she did here acoustically was stunning. 0:07:25.360 --> 0:07:28.080 I mean, I mean anthonas my hero, but you know, 0:07:28.320 --> 0:07:30.200 I'm not an expert in Taylor Swift. I will say 0:07:30.200 --> 0:07:32.920 that the controversy over some of the ticket sales is 0:07:32.960 --> 0:07:35.360 going to be something that song alicit off fairs. Moment 0:07:35.440 --> 0:07:41.880 I heard it, boom, Taylor Swift. Oh, I'm not actually share. 0:07:42.040 --> 0:07:50.320 Thank you so much with Academy Securities right now. And 0:07:50.400 --> 0:07:52.600 if you're taking notes on the equity market, get out 0:07:52.640 --> 0:07:55.440 the pad, get out the paper, because Katie Kaminski, she 0:07:55.600 --> 0:07:59.800 researched strategist that Alpha simplex is a turtle. She is 0:07:59.840 --> 0:08:05.360 a turtle trader from way back, which is trend matters. Katie. 0:08:05.600 --> 0:08:09.320 Everybody would kill for your performance this year. Still up, 0:08:10.800 --> 0:08:16.280 what is the trend forward or our trends breaking? Now? Yeah, 0:08:16.280 --> 0:08:18.720 it's tom. It's been a phenomenal year for trend in 0:08:18.800 --> 0:08:21.640 a year where things are very uncertain. Um. What we 0:08:21.800 --> 0:08:24.080 have noticed though, is that we're going through an inflection 0:08:24.160 --> 0:08:27.080 point right now like we saw earlier this summer. We're 0:08:27.080 --> 0:08:30.480 starting to see that shorter term signals and longer term 0:08:30.520 --> 0:08:33.160 signals are kind of at odds UM, and so I 0:08:33.240 --> 0:08:35.160 think we, just like the rest of the market, are 0:08:35.240 --> 0:08:38.760 looking for a pivot to the next big trend. Uh 0:08:38.920 --> 0:08:41.240 so far um, You're looking at a day like today, 0:08:41.280 --> 0:08:43.679 the dollar is coming back a little bit, that may 0:08:43.720 --> 0:08:46.600 not be over UM, and of course short bond signals 0:08:46.600 --> 0:08:49.160 are still there in the data. Well, Katie, can you 0:08:49.240 --> 0:08:51.439 elaborate on that, this sort of pivot point that you 0:08:51.520 --> 0:08:54.080 see in terms of short term and longer term signals? 0:08:54.559 --> 0:08:57.080 What is that pivoting us too? Right, We've come from 0:08:57.120 --> 0:08:59.480 an era where bonds have been all over the place, 0:08:59.559 --> 0:09:02.839 but we rally. Recently we saw stocks being rally both 0:09:02.880 --> 0:09:06.000 stocks and bonds rallying. What's the new pivot? What's that 0:09:06.160 --> 0:09:10.560 new reality? Well, the thing is we've really the challenge 0:09:10.559 --> 0:09:12.640 has been that we've had a mixed signal, so there's 0:09:12.720 --> 0:09:15.920 no clear signal net at this point. And that's where 0:09:15.960 --> 0:09:18.400 I say we're definitely at an inflection point. But if 0:09:18.440 --> 0:09:20.319 I had to look a little closer at what has 0:09:20.440 --> 0:09:24.000 changed the most, optimism has come into signals at a 0:09:24.120 --> 0:09:27.240 level that is consistent with what we've seen recently. So 0:09:27.280 --> 0:09:30.319 you've seen more positive signals and equities, especially around the 0:09:30.360 --> 0:09:34.719 CPI print. You're also seeing a little bit more reversion 0:09:35.360 --> 0:09:38.120 out of the dollar trade, but that's still there. So 0:09:38.240 --> 0:09:40.680 that's why I kind of said it's a balance between 0:09:40.800 --> 0:09:43.280 what do we see shorter term and longer term, and 0:09:43.320 --> 0:09:46.240 the longer term signals are still definitely saying that there's 0:09:46.280 --> 0:09:49.800 some things to worry about ahead, especially the curve, the 0:09:49.880 --> 0:09:53.199 yield curve being inverted recently. Katy, you've nailed it with 0:09:53.360 --> 0:09:56.440 bonds in particular. You went short bonds, which has been 0:09:56.600 --> 0:09:58.800 the widowmaker for so many years, and this was one 0:09:58.840 --> 0:10:01.199 of the areas where absolutely knocked it out of the 0:10:01.240 --> 0:10:04.840 park with nearly forty percent returns so far this year. 0:10:05.679 --> 0:10:08.040 How much do you buy this conviction that we're feeling 0:10:08.080 --> 0:10:10.280 in Wall Street that that's going to be the biggest 0:10:10.320 --> 0:10:12.920 area of out performance by ten year, by thirty year 0:10:13.000 --> 0:10:15.240 treasuries and you're gonna just do really well next year. 0:10:16.320 --> 0:10:19.079 So we did some research this year on bonds. It 0:10:19.200 --> 0:10:21.679 was called the short of shorting bonds. And one of 0:10:21.720 --> 0:10:23.640 the things that we need to think about if we're 0:10:23.679 --> 0:10:27.319 moving into a much more focused on rising rates and 0:10:27.440 --> 0:10:30.719 higher rates environment, is that bonds are not going to 0:10:30.840 --> 0:10:33.720 behave under inflationary pressures like they did in the past, 0:10:34.040 --> 0:10:36.120 and this year was just the first data point to 0:10:36.160 --> 0:10:38.439 show us that that's the case. And I think what 0:10:38.559 --> 0:10:40.559 has been the most fascinating to me is how we 0:10:40.640 --> 0:10:43.840 avoid thinking about long bias and so many of us 0:10:43.920 --> 0:10:46.800 are so dependent on being long bonds. We forgot what 0:10:46.920 --> 0:10:49.600 it's like to actually think about how do you deal 0:10:49.679 --> 0:10:51.880 with actually shorting bonds and how do you deal with 0:10:52.360 --> 0:10:55.679 bonds and valuation versus inflation? And I think that is 0:10:55.720 --> 0:10:57.920 going to be the key question for all investors in 0:10:57.960 --> 0:11:01.040 the next few years. What's great a trend following, folks? 0:11:01.080 --> 0:11:04.120 And this is rumored folks, Liverpool maybe up for sale 0:11:04.160 --> 0:11:07.960 John Henry, owner the Red Sox arch Turtle trader. Rumor 0:11:08.080 --> 0:11:11.319 has it Henry may sell Liverpool to Kaminski. We'll have 0:11:11.440 --> 0:11:13.560 to see on that is well. We get a lot 0:11:13.640 --> 0:11:16.120 of emails Katie when you're when you're on with us. 0:11:16.200 --> 0:11:21.440 Are moving averages helpful to trend followers? Yes, I mean 0:11:21.520 --> 0:11:23.800 I think the way we think about it, moving averages 0:11:23.920 --> 0:11:26.920 give you one way to measure the strength of a trend. 0:11:27.520 --> 0:11:30.080 These days, we use a wide range of different methods. 0:11:30.200 --> 0:11:32.880 Some of it is based on machine learning, some of 0:11:32.920 --> 0:11:36.079 it is based on different types of breakout signals. But 0:11:36.200 --> 0:11:39.679 the point is in environments where the world is very uncertain, 0:11:40.080 --> 0:11:42.360 you have to turn to what the market is doing 0:11:42.760 --> 0:11:45.240 as opposed to what it should do, because frankly, a 0:11:45.320 --> 0:11:47.680 few people actually know what it should do these days, 0:11:47.800 --> 0:11:51.520 because it's so volatile and unclear what the future is 0:11:51.520 --> 0:11:56.079 actually going to hold under this inflationary environment. Katie, thank 0:11:56.120 --> 0:11:59.679 you so much. Katie Kaminski, arguably the number one performance 0:11:59.720 --> 0:12:13.320 of Rayance Girls this year at alphason Plus. Right now, 0:12:13.440 --> 0:12:15.599 we're going to turn to some of the focus on 0:12:15.880 --> 0:12:18.640 the year ahead. One of the biggest consensus calls go 0:12:18.880 --> 0:12:21.240 along bonds. David Riley, chief of US was strategist at 0:12:21.240 --> 0:12:23.880 Blue Bay Asset Management. Here to weigh in, is this 0:12:23.960 --> 0:12:25.839 year number one as well? Ten year, thirty year, The 0:12:25.920 --> 0:12:29.640 longer the better. M Yeah. I do think it's going 0:12:29.720 --> 0:12:33.959 to be a year when duration actually pays off and 0:12:34.120 --> 0:12:36.800 it will make sense to be long duration. I'm actually 0:12:36.840 --> 0:12:40.240 more inclined to go in terms of the Treasury curve 0:12:40.280 --> 0:12:45.120 towards the five year point, and that's because I do 0:12:45.320 --> 0:12:48.320 think that it's more likely than not that the US 0:12:48.360 --> 0:12:52.160 economy goes into recession. I think we'll probably could therefore 0:12:52.280 --> 0:12:57.600 get some balls deepening in the curve. Normally you'd express 0:12:57.640 --> 0:13:00.360 that at the very short end, but we don't really 0:13:00.480 --> 0:13:03.000 know how far and how fast inflation we fall, and 0:13:03.080 --> 0:13:06.240 therefore we don't really know at what point does the 0:13:06.360 --> 0:13:09.600 FED start considering ray cards. I think the five year 0:13:10.040 --> 0:13:13.199 is probably quite a good sort of sweet spot, and 0:13:13.400 --> 0:13:16.400 with that would also be buying some high grade credit 0:13:16.480 --> 0:13:19.640 at this level as well. See he likes the five 0:13:19.720 --> 0:13:25.200 year action, That's what he was just saying right there. Well, 0:13:25.240 --> 0:13:27.600 thank you, dud. I do wonder, though, at what point 0:13:27.640 --> 0:13:29.880 you're looking at a return to the old normal, right 0:13:29.920 --> 0:13:32.000 at this idea that we're going back to an inflation 0:13:32.080 --> 0:13:35.080 that's sub two percent or even two and other people 0:13:35.160 --> 0:13:38.000 pushing back, where do you say to them, Look, we're 0:13:38.040 --> 0:13:40.199 not going to have a high inflation regime for a 0:13:40.360 --> 0:13:42.840 very long time, and bonds will be able to reassert 0:13:42.920 --> 0:13:46.680 themselves in a way that we're used to. M Well, 0:13:46.800 --> 0:13:49.480 because I do think that we are at all very 0:13:49.559 --> 0:13:52.719 close to the peak in inflation. And yeah, I think 0:13:52.760 --> 0:13:55.319 it's right to highlight just how much uncertainty we do 0:13:55.520 --> 0:13:58.920 have in terms of how far and how fast inflation 0:13:58.960 --> 0:14:01.280 falls and that's obviously very critical for the fair and 0:14:01.440 --> 0:14:05.400 other central banks, and therefore for the outlook for the 0:14:05.480 --> 0:14:07.920 BOB market. But I don't see a sort of self 0:14:08.040 --> 0:14:12.959 fulfilling or self perpetuating ways price spiral. And if you 0:14:13.040 --> 0:14:15.160 think we're going into recession, as I think we are 0:14:15.280 --> 0:14:18.640 going into not only a European but also US and 0:14:19.120 --> 0:14:22.840 global recession, UM, that's very negative and all sorts of 0:14:22.920 --> 0:14:25.160 ways and and and Saturday people are going to be 0:14:25.240 --> 0:14:27.480 losing their jobs on the back about that. But we 0:14:27.600 --> 0:14:31.520 know from experience that does bring inflation down. Inflation is 0:14:31.600 --> 0:14:33.920 going to be coming down, it's just about the pace 0:14:34.000 --> 0:14:37.760 and the magnitude of that through next year. David tell 0:14:37.840 --> 0:14:40.720 me about the value of cash here, if we're quote 0:14:40.800 --> 0:14:44.440 unquote going into a recession, is cash good or is 0:14:44.520 --> 0:14:50.320 cash trash? UM? I do think that as we go 0:14:50.480 --> 0:14:53.680 into recession, I think what is going to be of 0:14:53.800 --> 0:14:58.240 particular value is to have liquidity within portfolios. That some 0:14:58.360 --> 0:15:02.520 of that's going to come from having holdings of UM cash. 0:15:02.880 --> 0:15:06.600 But I also think it means a bias towards UM 0:15:07.600 --> 0:15:12.080 credit call fixed income, which is now giving you a yield. 0:15:12.120 --> 0:15:14.160 I mean, one of the key differences. There's a lot 0:15:14.200 --> 0:15:16.120 of differences. But one of the key differences going into 0:15:16.840 --> 0:15:20.600 three compared to when we went into two, when we 0:15:20.640 --> 0:15:23.320 went into this year, is that we're actually starting with 0:15:23.800 --> 0:15:28.080 much higher levels of yield and that's giving you an 0:15:28.160 --> 0:15:32.400 inconcussion which you otherwise wouldn't you know, didn't have at 0:15:32.440 --> 0:15:35.880 the start of two. So you have some liquidity, have 0:15:36.080 --> 0:15:38.840 some cash. I think a bias towards the more liquid securities, 0:15:39.160 --> 0:15:40.800 but I don't think it's an inviting I think that 0:15:40.920 --> 0:15:42.920 our opportunities out there for you to deploy cash. I 0:15:42.920 --> 0:15:45.800 wouldn't be holding too much care. David. We need you 0:15:45.880 --> 0:15:47.720 to get back to England around I know that's what 0:15:47.840 --> 0:15:50.920 you're really focused on. Here. We thank you for coming on. 0:15:51.080 --> 0:15:54.000 We've got people outside. There's a ticketing snare for at 0:15:54.040 --> 0:15:58.360 the stadium. I players down worldwide. But also in minute 0:15:58.440 --> 0:16:03.400 three with McGuire and answering David, somebody talks about a 0:16:03.680 --> 0:16:08.520 Stone banker of a penalty. Can I mean Phararell's not here, David, 0:16:08.680 --> 0:16:14.560 save us? What does stone barker me? You've called me 0:16:14.640 --> 0:16:18.120 out there, Tom. I'm not sure what actually means, but 0:16:18.240 --> 0:16:22.640 it sounds like it's a nailed on um penalty that 0:16:22.760 --> 0:16:25.240 has been conceded and by the way you described it, 0:16:25.720 --> 0:16:28.080 um it sounds that may have been conceded by England, 0:16:28.120 --> 0:16:32.000 which would rather be in keeping with the start that 0:16:32.080 --> 0:16:34.720 England often make two World Cup tournaments, a lot of 0:16:34.760 --> 0:16:37.400 the build up and then some disappointment when the game 0:16:37.440 --> 0:16:40.320 gets underway. Let's hope I'm wrong and let's hope it's 0:16:40.360 --> 0:16:43.520 different this time around. David Riley with piercing analysis. They're 0:16:43.640 --> 0:16:47.040 in for John Farrell as well, David Riley, Blue Bay 0:16:47.040 --> 0:16:53.840 Asset managic. Right now, we're going to stop the show. 0:16:54.200 --> 0:16:57.360 And we made a decision here at least fifteen years 0:16:57.400 --> 0:17:00.440 ago to say, yes, we do economics, financing and investment, 0:17:00.960 --> 0:17:04.200 but far more we do international relations, not knowing the 0:17:04.280 --> 0:17:07.720 world would be turned upside down as we have seen 0:17:08.200 --> 0:17:12.040 in the recent decades. Providing leadership worldwide on that has 0:17:12.119 --> 0:17:15.960 been Richard hass He's President of the Council on Foreign Relations. 0:17:16.280 --> 0:17:18.960 Full disclosure, I'm a member. When I pay my dues, 0:17:19.160 --> 0:17:21.720 I think I'm behind my dudes. Richard Hospul, Well, we'll 0:17:21.800 --> 0:17:25.119 go there another time. He is the bitcoin that payment 0:17:25.200 --> 0:17:29.960 was the bitcoin worked out. Richard hass is retiring, pulling 0:17:30.000 --> 0:17:35.280 away from truly his Counsel and Foreign Relations Richard has 0:17:35.400 --> 0:17:37.080 thank you so much for joining us so much to 0:17:37.119 --> 0:17:40.840 talk about today. Where must the Council on Foreign Relations 0:17:40.920 --> 0:17:47.399 go to lead as fractious international diplomacy. Well, Tom freshwell, 0:17:47.440 --> 0:17:50.040 I'm not retiring from anything. I'm departing the Council after 0:17:50.160 --> 0:17:53.880 twenty years, but I'm gonna stay active in the public conversation, 0:17:54.400 --> 0:17:57.000 both about this country's role in the world as well 0:17:57.080 --> 0:18:00.520 as about the future of American democracy. But I think 0:18:00.560 --> 0:18:03.240 it's healthy for institutions despite what's going on in Disney. 0:18:03.640 --> 0:18:05.879 I think it's kind of healthy for institutions every now 0:18:05.920 --> 0:18:09.080 and then to have a change in uh in leadership. 0:18:09.080 --> 0:18:11.280 I think for the Council, it's simply to continue to 0:18:11.359 --> 0:18:14.359 be a resource on a wide range of challenges, whether 0:18:14.440 --> 0:18:18.439 it's the revival of geopolitics or global issues. We are 0:18:18.480 --> 0:18:22.840 we're just finishing up a the COP twenty seven meeting 0:18:22.920 --> 0:18:26.399 in Charmel Shake, and quite honestly, I think it's almost 0:18:26.440 --> 0:18:29.480 a complete and utter, utter failure. And I also think 0:18:30.000 --> 0:18:32.760 increasingly we need to look at the relationship between America 0:18:32.840 --> 0:18:36.680 internally and America externally and whether we're ever gonna be 0:18:36.920 --> 0:18:40.119 positioned to again lead the world because this world is 0:18:40.200 --> 0:18:42.680 not going to organize itself to meet the challenges it 0:18:42.760 --> 0:18:48.040 faces without an involved and effective United States. So I 0:18:48.119 --> 0:18:50.440 think the the inbox in this field is as full 0:18:50.520 --> 0:18:53.240 as it's ever been. I agree that strongly in folks, 0:18:53.280 --> 0:18:56.000 A brief here, two hundred forty pages is Richard Hass. 0:18:56.320 --> 0:18:59.840 The bill of obligations is he, and we go in 0:19:00.040 --> 0:19:03.640 search of the will of America to move forward. Richard Hass, 0:19:03.800 --> 0:19:07.520 the new administration, the new Congress, the new presidency two 0:19:07.640 --> 0:19:10.440 years out, do they have the will to find their 0:19:10.480 --> 0:19:14.320 bill of obligations? I don't see a lot of it. Tom, 0:19:14.359 --> 0:19:17.000 I'll be honest, you know, I don't think we're off 0:19:17.040 --> 0:19:20.440 to a great start. The new Republican House of Representatives 0:19:20.480 --> 0:19:24.920 seems much more interested in politics than policy, and investigations 0:19:25.000 --> 0:19:29.000 than legislation. I think for the next two years it's 0:19:29.040 --> 0:19:32.200 going to be extraordinarily difficult for the Biden administration to 0:19:32.320 --> 0:19:36.040 get legislation passed really about anything. I think you're going 0:19:36.080 --> 0:19:39.920 to see there for an emphasis on foreign policy, where 0:19:40.000 --> 0:19:43.920 presidents traditionally have more discretion than they do on things domestic, 0:19:44.280 --> 0:19:48.800 and probably a greater emphasis on regulation on executive action 0:19:49.240 --> 0:19:53.119 again to essentially find ways to do things without requiring 0:19:53.600 --> 0:19:57.359 Congress to to join in this fractius global order. How 0:19:57.440 --> 0:19:59.960 confident are you that the US remain close to Europe, 0:20:00.359 --> 0:20:03.240 at least as close to Europe as they have traditionally 0:20:03.400 --> 0:20:06.960 basis of the recent fissures not only with respect to 0:20:07.080 --> 0:20:09.520 exactly how to deal with the energy crisis, but also 0:20:09.600 --> 0:20:13.560 with tech investments and some of the the the bills 0:20:13.600 --> 0:20:15.560 that Congress has passed so far that really focused in 0:20:15.560 --> 0:20:18.240 the US to good question is I think it's a 0:20:18.280 --> 0:20:22.040 mixed record. On one hand, if this administration, the Biden administration, 0:20:22.160 --> 0:20:24.760 stands for anything and it's a it's an alliance first 0:20:24.800 --> 0:20:27.879 foreign policy, and I think the entire management of the 0:20:28.040 --> 0:20:31.720 Ukraine crisis, the Russian crisis has been has been pretty good. 0:20:32.119 --> 0:20:34.960 You also see your growth in trans Atlantic trade, whether 0:20:35.000 --> 0:20:39.040 it because of energy or a d emphasis on trading 0:20:39.080 --> 0:20:42.239 with adversaries or re emphasis on trading with with UH 0:20:42.640 --> 0:20:45.480 with friends. Where I'm worried about over the long term 0:20:45.760 --> 0:20:48.159 is not so much Russia as it is China, and 0:20:48.280 --> 0:20:51.080