Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com,
Speaker 1: and of course on the Bloomberg terminal. Right now, there
Speaker 1: can be always a moment that comes along when you
Speaker 1: say it's the essay of the summer. Boy, it's awful
Speaker 1: early to say it's essay this summer. But David focus
Speaker 1: land Out his team is Deutsche Bank, with the leadership
Speaker 1: of Peter Hooper, the whole whole head of economic research,
Speaker 1: have generated eighteen thought provoking must read pages for Global
Speaker 1: Wall Street. We're honored that Dr Hooper could join us
Speaker 1: this morning. Peter, you say it is the end of neoliberalism,
Speaker 1: we have a risk of going back to ray can
Speaker 1: voke or how close are we to going back to
Speaker 1: a time of shockingly high inflation. Um, We've obviously seen
Speaker 1: a huge shift in both monetary and fiscal policy that's
Speaker 1: given us a lot more stimulus to the economy than
Speaker 1: ever anyone would have imagined. A couple of years ago. Uh,
Speaker 1: the chances are getting back to the high inflation sixties
Speaker 1: and seventies have have taken a leap forward. Is still
Speaker 1: not the most likely outcome, but certainly the risk of
Speaker 1: risen have risen tremendously thanks to uh GDP in in
Speaker 1: fiscal stimulus in the last year and a half. Who
Speaker 1: would have imagined seeing something like that Peter's This increasingly
Speaker 1: becomes a game of faith because people are dismissing current
Speaker 1: data as simply transitory. How do you convince clients who say, look,
Speaker 1: it has been this way for twenty thirty years, where
Speaker 1: we've seen inflation come down progressively in a steady fashion.
Speaker 1: If you look over time, what do you say to
Speaker 1: them to convince them at this time is different? Uh?
Speaker 1: And at least so you're right, the market is remarkably
Speaker 1: calm about in the face of the storm coming. Um.
Speaker 1: I think you have to live through a surgeon inflation
Speaker 1: that's going to be reversed for a while, and then
Speaker 1: you have to look ahead to the possibility of an
Speaker 1: economy that's can be operating at well above potential. I mean, yes,
Speaker 1: we've been expecting. Uh. We had a big surprise in
Speaker 1: in April. UH people have had revised their expectations and
Speaker 1: now the numbers were likely to get for may not
Speaker 1: looking anywhere are scary, and there are reasons to expect
Speaker 1: things to to slow down the near term. But if
Speaker 1: if we get this increase in household saving uh in
Speaker 1: excess of ten percent of GDP that's been salted away
Speaker 1: here not spend so far, if that begins to come
Speaker 1: on stream as households are normalizing, they're spending as pent
Speaker 1: up demand of being released. Uh, we're gonna see this
Speaker 1: economy pushing well into overheated state. And the problem is
Speaker 1: that the FED has told us they're going to be
Speaker 1: uh late in removing the punch bowl if you will, um,
Speaker 1: I mean the They want to see the economy overheat
Speaker 1: before they start raising rates. There's gonna be a recognition lag,
Speaker 1: and there's gonna be a long response lag of the
Speaker 1: economy to Fed tending. So the chances of things getting
Speaker 1: out of hand down the road certainly have increased. Hold
Speaker 1: on a second, Peter, are you saying out of hand?
Speaker 1: And this is a distinction from other people who say that, yes,
Speaker 1: we may see above trend inflation, but we're not going
Speaker 1: to go back to the nine seventies. Are you saying
Speaker 1: that we could go back to nine seventies style inflation.
Speaker 1: There's certainly a risk there. Um. You know, our our
Speaker 1: our numbers say that there is a chance, in fact,
Speaker 1: an uncompanably high chance. That you see the output gap
Speaker 1: for the US, the amount by which GDP exceeds potential
Speaker 1: moving up above to the highway scene for the last
Speaker 1: three or four decades has been around two percent, and
Speaker 1: inflation hasn't gotten out of control. UH. In the sixties
Speaker 1: it got went up to five and a half six percent.
Speaker 1: We could be there if as much as a third
Speaker 1: of this UH savings that's been accumulated unusually large saving
Speaker 1: has been accumulated over the last year and a half,
Speaker 1: it's been out over the next year or two. UH here,
Speaker 1: that would be a massive push to GDP. Peter the
Speaker 1: Bank of England chief economist Andy hal Dane, writing in
Speaker 1: The Statesman yesterday, saying this is the most dangerous moment
Speaker 1: for monetary policy since inflation targeting began in two He's saying,
Speaker 1: you know, you can't look anywhere and find something as
Speaker 1: price isn't rising. Is this overheating? UH? Is this overheating?
Speaker 1: Intention shared in the UK and the e c B
Speaker 1: as much as it is in the US. Well, I
Speaker 1: think so so Europe's in a different situation. Uh. Certainly
Speaker 1: that the labor market going in was not as tight
Speaker 1: as in the US. Uh. And Uh, we have not
Speaker 1: seen the kind of shift in fiscal and monetary policy
Speaker 1: regime that the US has had. The ECB has not
Speaker 1: said they're gonna be reactive as opposed to preemptive if
Speaker 1: inflation we saw inflation picture in Europe the way we
Speaker 1: are anticipating in the US, I think the e c
Speaker 1: B would respond quite differently. Uh. And Uh. Well, we
Speaker 1: have had the m G e P, the UH, the
Speaker 1: the recovery recovery program, et cetera. Spending in in in
Speaker 1: Europe coming up that's not anywhere near as large as
Speaker 1: what the US is has untapped. So yes, I think
Speaker 1: there is concerned about near term supply disruptions and and
Speaker 1: we are seeing some impressive increases in inflation in Germany. Um,
Speaker 1: But the sense that the risk is anywhere near as
Speaker 1: large in Europe, it's just not there. Dr Ooper underpinning this,
Speaker 1: and I say this with great respect to Steve Roach,
Speaker 1: you know him from Morgan Stanley and now Yale University
Speaker 1: years ago. Is the underpinning of your work at the
Speaker 1: I m F and also the work of Duly folkus
Speaker 1: landau Garber, which has always watched the flows, watch the money.
Speaker 1: Many of you folks will know Martin Wolfen is wonderful
Speaker 1: work at the FT on this as well. If we
Speaker 1: get the time bomb in your eighteen page report, what
Speaker 1: does it do to the flows of capital in the world? Well, now,
Speaker 1: the time bomb is another way of describing the FED
Speaker 1: being late to late to the party, Okay, late in
Speaker 1: terms of taking the punch fell away because we've got
Speaker 1: in behind the curve. We're gonna need to act aggressively.
Speaker 1: That means rates go up sharply. That's very disruptive to
Speaker 1: financial markets. It's very disruptive to many emerging market countries
Speaker 1: with huge amounts of debt that are gonna be very
Speaker 1: sensitive to a sharp rice in US rates. That I
Speaker 1: mean that that that that's the concern down road. It's
Speaker 1: a risk. It's not not in my way of thinking
Speaker 1: the most likely scenario yet, but it's certainly something we
Speaker 1: need to have our have our attended UH tuned into
Speaker 1: your X access in this report to be clear, folks,
Speaker 1: is not getting out to Q three or Q four
Speaker 1: and the rest of the game of market economics and
Speaker 1: the financial media. The Deutsche Bank view begins to frame
Speaker 1: out two thousand twenty four. What is the efforts we
Speaker 1: can do before two thousand twenty four to ameliorate the
Speaker 1: time bound? Well, I think the I mean the FED
Speaker 1: has have gotten into this um inflation averaging framework R.
Speaker 1: This was this was exactly what they needed to do
Speaker 1: to deal with the world where they were struggling to
Speaker 1: get inflation up to two percent and get inflation expectations
Speaker 1: UH to a more desirable sustainable level. Inflation expectations are back.
Speaker 1: I think the FED is going to need to recognize
Speaker 1: begin to recognize this risk certainly over the next year UH,
Speaker 1: and begin to begin to edge toward a sooner tightening
Speaker 1: than it is currently. Well, Peter, let's started at Jackson Hall.
Speaker 1: I don't know if you're gonna be there with David,
Speaker 1: but we'd be thrilled to speak to you. Our Michael
Speaker 1: McKee I know, will be reporting there. Let's go to
Speaker 1: the time bomb of Jackson Hall. Is the time bomb
Speaker 1: of Jackson Hole for the markets for our radio and
Speaker 1: TV listeners and viewers. Is it a change back to
Speaker 1: the theories and regimes pre pandemic? Can the FED do
Speaker 1: that leading the rest of the central banks? I think
Speaker 1: I think the central focus of Jackson Hole will probably
Speaker 1: be is the FED going to give us a clear
Speaker 1: signal that they're beginning to unwind the talk about unwinding
Speaker 1: their balance sheet? Uh, We're still We're still at ways
Speaker 1: away from the FED recognizing seriously, Uh, this this risk
Speaker 1: and I mean they have ways to go to get
Speaker 1: to that point. And Peter, this is a lot of
Speaker 1: people are looking for the talking about tapering or talking
Speaker 1: about talking about tapering as being the key moment for
Speaker 1: Jackson All. There's also a question, though, going toe as
Speaker 1: you did, does the FED have the tools to control
Speaker 1: the control inflation in the way that they have in
Speaker 1: the past. And then I think is sort of underpinning
Speaker 1: your call. Are you saying that the FED does not
Speaker 1: have those same tools given how much money has been
Speaker 1: pumped into the system. The it certainly has the tools
Speaker 1: to deal with inflation. It doesn't have the tools to
Speaker 1: deal with a with a in a soft landing sense,
Speaker 1: if you will, It's very difficult if you're going to
Speaker 1: be behind the curve to deal with an inflation problems,
Speaker 1: building some momentum that's getting into expectations and moving beyond
Speaker 1: the GIRED levels without being very disruptive. The FETE has
Speaker 1: never been able to deal with a rising inflation problem
Speaker 1: bring it back without causing a recession. And if they're
Speaker 1: behind the curve when they start this process, it could
Speaker 1: be a major regnition. Dr Hoopers, thank you so much
Speaker 1: for this first conversation and it's important research for thrilled
Speaker 1: that Peter Hooper of Deutsche Bank could join us today.
Speaker 1: Right now, Katrina Dudley joins us with Franklin and this
Speaker 1: is really special. She's got a real ample career on
Speaker 1: the cell side and securities research UH and a portfolio manager,
Speaker 1: particularly in your with Franklin Mutual. Katrina, good morning to you.
Speaker 1: How much of a value is Europe right now? Look,
Speaker 1: Europe has always been a quintessential value market. You just
Speaker 1: look at the construct of the market. It's heavy and financials,
Speaker 1: it's heavy in energy and their two sectors that are
Speaker 1: trading and very very cheap multiples um. But the good
Speaker 1: news about Europe is actually the construct of the market
Speaker 1: is changing. We've now got a rising luxury sector, which
Speaker 1: is the equivalent of the technology sector over here in
Speaker 1: the United States, and that sector is actually growing. I
Speaker 1: gotta stop, but come on, are you telling me Louis
Speaker 1: Howton is equivalent to Apple or Amazon? Um? I think
Speaker 1: Louis Baton is actually even better than an Amazon because
Speaker 1: it's it's it's brand something here. I'd agree with you exactly,
Speaker 1: but you can't. You can't replace some of their products.
Speaker 1: You can't get some of their handbags at the moment,
Speaker 1: and if you've tried to ordering some of their jewelry,
Speaker 1: it's out of least Keen Mrs Keane would agree. And
Speaker 1: literally this is if you manage a bit, I'm going
Speaker 1: to walk off the set. He will have, you know,
Speaker 1: nightmares from dinner conversations of your Meanwhile, we're as talking
Speaker 1: about the e c V policy and tandem with e
Speaker 1: c V stocks, and really the underlying question here is
Speaker 1: is there an exit strategy that could be done with grace?
Speaker 1: In other words, can you buy European stocks for a
Speaker 1: longer period of time with faith that the ECB can
Speaker 1: extract themselves easily and gracefully. Well, I think it's interesting
Speaker 1: because you were talking about grace Kelly before and high
Speaker 1: heels backwards about half the price. UM. If I take
Speaker 1: a look at the exit out of this, the ECB
Speaker 1: is watching the FED. Um. The European markets are actually
Speaker 1: behind the US in terms of our recovery out of
Speaker 1: or actually recovery from the COVID virus, because the vaccine
Speaker 1: rollout was slower, um. And so I think they're really
Speaker 1: looking at the markets. They're looking at the FED action,
Speaker 1: and I think that the e c B will be
Speaker 1: slower to act this time. UM. Just to have a
Speaker 1: look what happened back in May where you saw kind
Speaker 1: of Italian deels blow out and it was kind of
Speaker 1: this mini tape the tantrum, And I think they're really
Speaker 1: watching to see what happens because it's not just about
Speaker 1: what the bit the e c B is saying, it's
Speaker 1: the implications of that on various markets, for example, in
Speaker 1: this case in Italy. All right, well let's talk a
Speaker 1: little bit a little bit about Italy, and I guess
Speaker 1: the reaction that at least a lot of us on
Speaker 1: this side of the Atlantic look to when we try
Speaker 1: to sort of divine what the ECB is going to
Speaker 1: do and how it's going to be received. How are
Speaker 1: investors in Italy right now, the investors in Italian debt
Speaker 1: right now? Uh, preparing for whatever it is the ECB
Speaker 1: may or may not do. If I take a look,
Speaker 1: what we're looking at in Italy is support for the
Speaker 1: new government. I think actually, where you know, I've talked
Speaker 1: about Italian politics as as I say, as messy as
Speaker 1: a bowl of spaghetti. But I think it's actually, at
Speaker 1: this time it's probably the best outlook for Italy we've
Speaker 1: had in a long time. And I think the EB
Speaker 1: is aware of that. They need to be accommodated. I mean, continued,
Speaker 1: anytime for one more question. We gotta get you back here.
Speaker 1: This has been fascinating. What kind of a victory lap
Speaker 1: is Mario Dragging going to take at G seven? I mean,
Speaker 1: he's on top of the world right now, right, I
Speaker 1: don't think he's going to take a victory lad. I
Speaker 1: think he's a humble person and I think that he
Speaker 1: is quietly doing what's white Wait wait, wait, wait wait,
Speaker 1: I'm sorry, Contrada, Mario Dragging is a humble person. Really.
Speaker 1: I think what he's doing and the role he's taking
Speaker 1: in Italy is doing something that you want all with
Speaker 1: politicians to do which is acting in the best interests
Speaker 1: of the country, and I think that's what he is doing.
Speaker 1: I don't mean to interrupt it. We gotta go. But
Speaker 1: in your research on luxury to find value for Franklin
Speaker 1: Mutual series, don't you find the Gucci store below the
Speaker 1: seven the Steps, the Spanish Steps. The Spanish Stairs in
Speaker 1: Rome is the most dangerous store in Europe. I haven't
Speaker 1: been there because of the travel band, but I am
Speaker 1: very excited about the fact that Boris Johnson is now
Speaker 1: meeting with Joe Biden and we may be able to
Speaker 1: travel back to London and hopefully back to Spain so
Speaker 1: that we could go there in person. There well, I
Speaker 1: expect we do a road trip and we demand a
Speaker 1: surveillance remote with you from the Spanish Stairs in Rome. Here,
Speaker 1: Katrina Dudley, thank you so much on Franklin right now
Speaker 1: widely anticipated. Jeffrey You joins us B and YML and
Speaker 1: their senior strategist, Jeffrey You the zeitgeist right now. The
Speaker 1: certitude is it's been one big short squeeze. Everyone was
Speaker 1: betting on lower bond prices in higher yields and the
Speaker 1: trade is swung with acceleration the other way, do you
Speaker 1: buy it? That is just a short squeeze, um mad
Speaker 1: And perhaps I'm heading into the summer months and people
Speaker 1: just don't want to take too much risk on in
Speaker 1: either direction now. But given the experience over the past
Speaker 1: few years, you know, by definition, you know, risk on
Speaker 1: means um actually having equities not as risk off. Well,
Speaker 1: do you need to take that? That's okay, Jeff, Jeff,
Speaker 1: you know what that is. That's Jeffrey, you gome stuck today. Yeah,
Speaker 1: that's going on, jefflicit. We're looking at a bond market
Speaker 1: and a lot of people are saying that it's an
Speaker 1: endorsement of the Fed's view that inflationary impulses are going
Speaker 1: to be short lived and we're going to end up
Speaker 1: in the same slow inflation kind of environment that we've
Speaker 1: been in for the past several decades. Do you agree?
Speaker 1: Is that the message from Bonnes Well again, the message
Speaker 1: from bonds is and they want to know, you know
Speaker 1: which type of inflation is that theft actually targeting. Let's
Speaker 1: put it this way. We've actually had two straight months
Speaker 1: of soft jobs, soft wage growth now in Germany in Euros,
Speaker 1: BOE saying a wage growth wage settlement is not that strong.
Speaker 1: The most hawkish region in the world right now, Central Europe,
Speaker 1: Poland warning jobs are wage growth is not accelerating at
Speaker 1: the same pace as before the pandemic, So is inflation
Speaker 1: really hush? But then again, should we be targeting this
Speaker 1: or is the market taking about that the short term
Speaker 1: supply constraints, they're going to be permanent and this is
Speaker 1: going to challenge the bond market and challenge the Fed
Speaker 1: as well. Jeff, how many queues should we be taking
Speaker 1: right now from the commodities market? I mean, we still
Speaker 1: see our oil brent crews still camped out around our
Speaker 1: seventy two bucks. You have a lot of the base
Speaker 1: medals are either are at or sort of near their
Speaker 1: record highs that they set back in April. And may
Speaker 1: hear how much concern should be baked into reading those
Speaker 1: prices right now? I think the market is very concerned.
Speaker 1: But if you look at what the policymakers are doing,
Speaker 1: especially in China, what was the biggest marginal price for
Speaker 1: commodity prices globally China? And China is saying commodity prices
Speaker 1: are too high, that they are blaming too much liquidity.
Speaker 1: They are blaming speculation as well, some of the domestically driven.
Speaker 1: Granted we saw the monetary aggregates overnight. But on the
Speaker 1: other hand, they are blaming global central banks as well.
Speaker 1: So they're saying, look fed or reserve ECB, you're printing
Speaker 1: too much money and we have to deal with the
Speaker 1: consequences here. So China can use price controls as much
Speaker 1: as they can, but the rest of the world less.
Speaker 1: So hence we should be concerned at the combination of
Speaker 1: tightening by China and globally to contain these prices. I
Speaker 1: I look at where we are, Jeffrey you, and I'm
Speaker 1: going to suggest that our radio and TV listeners their
Speaker 1: heads are spinning over all the different opinions, all the theory,
Speaker 1: the Ekano babble that's out there as well, And to me,
Speaker 1: it comes down to the time continuum, the X axis.
Speaker 1: Deutsche Bank looking out past two thousand twenty three with
Speaker 1: their time bomb of inflation, and others looking wicked short term.
Speaker 1: That's a Boston phrase. If you're with b and Y
Speaker 1: Mel and Jeff you, you've got to have a full
Speaker 1: understanding of the phrase wicked. What's the X axis look like?
Speaker 1: For Jeff you? What does your continuum look like from
Speaker 1: now out, one year out, two years, at three years.
Speaker 1: I'm looking at the next six months. Actually, I'm looking
Speaker 1: at what the ECB will signal in September, not today,
Speaker 1: but September. Talking about tapering. If you're looking at Eastern Europe,
Speaker 1: you know they are signaling advancement already a full rate
Speaker 1: cycle being priced in over the next eighteen months or so.
Speaker 1: You're seeing some of that within Scandinavia, Australia, New Zealand,
Speaker 1: like all the list goes on and on. So I
Speaker 1: don't think we should be blase and just go b
Speaker 1: O J like oh, five year inflation expectations are are wherever.
Speaker 1: It's much more about the short term and within the
Speaker 1: next three months we need to see whether these supply
Speaker 1: issues are indeed short term. But if they are going
Speaker 1: to be persistent, then central banks probably will have to
Speaker 1: move and that's going to introduce volatility into the market. So, Jeff,
Speaker 1: what would you be doing right now? So right now again,
Speaker 1: reading the tea leaves in terms of central banks probably
Speaker 1: where in a holding pattern they're heading into August and September.
Speaker 1: Look at the event risk, so you want to be
Speaker 1: light on risk but then start to factor in upside
Speaker 1: surprises for vol and for inflation. Got Jackson Hole coming
Speaker 1: up where there's more communication. ECB September meeting is going
Speaker 1: to be crucial. German elections is are going to be
Speaker 1: a new era for europe reflation as well. The UK taper,
Speaker 1: the furlough scheme coming off, and the bo WE will
Speaker 1: decide where they want to move towards a new regime.
Speaker 1: So I think all of this can actually happen in
Speaker 1: the next three months, So for those waiting for another
Speaker 1: year or so, I think that's going to be too late.
Speaker 1: So risk light heading into summer, but you want to
Speaker 1: have some risk on in either direction heading into August
Speaker 1: and September. Any any confidence in the trade of being
Speaker 1: short government banced, so that is still going to be
Speaker 1: highly contingent, you know, on what the FEDS would So
Speaker 1: for the short term, volatility is going to pick up,
Speaker 1: so you want to own fixed income volatility that price wise,
Speaker 1: they're going to keep the range in place because that
Speaker 1: kind of tightening and financial conditions through lower prices and
Speaker 1: higher yields. That's going to be a step too far
Speaker 1: a central bank of the time being. But you want
Speaker 1: to own a fixed in combab di Jeff for you,
Speaker 1: thank you so much with bn y mel and greatly
Speaker 1: greatly appreciate that. Joining us right now. Sebastian Galley Woria
Speaker 1: coming to us today from Scenic looks a Sebastian, good morning,
Speaker 1: Good morning. What is Luxembourg like? I think you know
Speaker 1: seriously across this nation of America for most of our
Speaker 1: good listeners, including me, I have trouble finding it on
Speaker 1: a map. But but, but seriously, what what does Luxembourg
Speaker 1: look like on a beautiful summer morning. It's beautiful, it's sunny,
Speaker 1: it doesn't mean a lot also um and there are
Speaker 1: cows around, and it's a huge financial center, which is
Speaker 1: a bit unusual, like a small country between Belgium, France,
Speaker 1: uh and in Germany. They speak a dialect which is
Speaker 1: a mixture of all three and they speak French and
Speaker 1: German as well as English. So quite a few people
Speaker 1: coming from the UK here. Is there a dominant language?
Speaker 1: Is French the dominant language? No, it's what they call
Speaker 1: Luxemburg Ley show duxin Bourgeois, which is a local language
Speaker 1: which is a dialect slash language see folks that you
Speaker 1: can learn on surveillance. It's mapping it right now. And yeah, boy,
Speaker 1: I've been all around it. I just haven't been to
Speaker 1: I've been all around semestion. Gilly has been all around
Speaker 1: our economics, financial investment, semeestion. What is the thrust of
Speaker 1: your note after you see the kind of inflation levels
Speaker 1: we speak of in America. Yeah, it's it's a very
Speaker 1: interesting phenomenon because of the reaction the equity markets relatively
Speaker 1: positive for somewhere nonsense futures of two zero five exactly.
Speaker 1: And what what do you have is inflation rising one
Speaker 1: because the bottlenecks number two because people companies find it
Speaker 1: easy to pause through inflation. Why because inflation becomes unstable.
Speaker 1: Once inflation starts to rise, it has a certain tenity
Speaker 1: to rise even more so people think they can pass
Speaker 1: it through. We're gonna get negative economic data because of
Speaker 1: this in the following month. And then wage expectations have
Speaker 1: reset higher because people are much more optimistic. They have
Speaker 1: suffered for decades of low, low wages and suddenly there's
Speaker 1: a reset which is happening that feeds also into a
Speaker 1: higher inflation. So the question, of course is whether this
Speaker 1: is transitory or not. And the answer is and make
Speaker 1: sure that a lot of it is transit OI and
Speaker 1: some of it is permanent, which expectations have risen. This
Speaker 1: is a new America and that's a different one. Record
Speaker 1: high moments ago in the standard forced you can retire. Yeah, exactly,
Speaker 1: I've had enough, all right, Sebashian. You know, we we're
Speaker 1: hearing from the ECB today. We and we we have
Speaker 1: a pretty consistent message from the Federal Reserve UH that
Speaker 1: they are going to continue to support UH this economic environment.
Speaker 1: But there's a lot of folks I think starting to
Speaker 1: say enough is enough, It's time to pull back. Here,
Speaker 1: the world's reopening. Enough has been done here, we can
Speaker 1: pull back. What do you think about that, Well, it's
Speaker 1: if you imagine it. You're in the race and that
Speaker 1: we've just basically started accelerating. The last thing you want
Speaker 1: to do is shoot yourself in the foot. So you
Speaker 1: want to continue accelerating as much as you can, but
Speaker 1: there is a maximum amount of explorations you can reach
Speaker 1: other once you get exhausted, and that's a fine balance
Speaker 1: between shooting yourself in the foot and going too fast
Speaker 1: that the FED has to maintain. And as you can
Speaker 1: fee with the reaction and yelling in US territory thing
Speaker 1: interest rates have to go higher. We already are being
Speaker 1: prepared for the phenomenon that interest rates eventually will go higher.
Speaker 1: So the Fed agrees with you, but it is talking
Speaker 1: to the US Treasury. Sebastian the sigooy over. That's luxembourgsh
Speaker 1: the way I said that to sigooy over to your
Speaker 1: wonderful note on China, I love what you say about
Speaker 1: clear and reliable signals of goodwill, and part of that
Speaker 1: is a stronger and men be scene in China against
Speaker 1: weaker dollar. Are you actually looking for a de escalation
Speaker 1: of the tensions of China and the United States. Yes,
Speaker 1: I I think that the comment which has been made
Speaker 1: by the first talk of trade talks between the United
Speaker 1: States and UH in China has been to dismiss them
Speaker 1: and to say this doesn't matter. But it's very important
Speaker 1: because in the process of the escalation is one of
Speaker 1: the last up to two months. It's a very long process.
Speaker 1: Why because you have to lead the opinion. The opinion
Speaker 1: in the United States has been led against China and
Speaker 1: China also against you US, and to change that process
Speaker 1: is very difficult as slow. UH, the context, the language
Speaker 1: has to change, means that the process which is started
Speaker 1: now should continue. And then if therefore, the question is
Speaker 1: not what's going to happen the next two months, which
Speaker 1: is more positive news, but what happens afterwards? Uh, do
Speaker 1: you get a credible deal? Do the Chinese let their
Speaker 1: currency appreciate? Do you really deescalate? In a more fundamental basis,
Speaker 1: They remain adversaries from a strategic point of view, but
Speaker 1: they decide to some extent that engaging as the Europeans
Speaker 1: are doing with the Chinese, the Americans are willing to
Speaker 1: do with with China. And that is of course very
Speaker 1: beneficial for both US equities and Chinese equities. All right,
Speaker 1: specially with that backdrop, where do you see the greatest
Speaker 1: opportunity as you think about your global macro outlook here,
Speaker 1: given the various stages or the uneven stages of reopenings
Speaker 1: and vaccine rates and that so on, were you doing
Speaker 1: your most work now destruction? So what you can imagine
Speaker 1: is the world not of this year, not of the
Speaker 1: next here, but in the following year, will be one
Speaker 1: of moderate growth in develop economies, whether it's in the
Speaker 1: United States or your particularly so in Europe. Less so
Speaker 1: in the United States and disruptions, new technologies that change
Speaker 1: fundamentally how we operate will allow companies to become more
Speaker 1: cost efficient, demand to be better reached, and that process
Speaker 1: has already started. These stocks tend to be expensive, and
Speaker 1: the author are that they kind of are going to
Speaker 1: get much much more expensive. So the process of creativity
Speaker 1: is going to be rewarded evermore in the in the
Speaker 1: following decades. And this is the beginning of the time
Speaker 1: when you want to be focused on these kind of
Speaker 1: positions within the cosmic nature of your strategy and the
Speaker 1: Sebastian we love your research notes, but does it distill
Speaker 1: down to your long in the stock market than in
Speaker 1: this great bull market you can still own equities for
Speaker 1: an enthusiasm of total return. You can so our value
Speaker 1: on the U S stock markets. You want to be
Speaker 1: a long value and cyclicals rather than growth. So we're
Speaker 1: quite Britain on growth, particularly for next year, because we
Speaker 1: think that as if at times will go through the
Speaker 1: eye of the needle, what will happen once it goes
Speaker 1: out there through the eye of the needle? If he's
Speaker 1: going to rebound an incredibly rate. Why because they are
Speaker 1: the companies which will generate the changes of tomorrow, not
Speaker 1: only the company which sharing here, but the companies which
Speaker 1: all here in the next last to ten years. So
Speaker 1: that's a huge opportunity to step into growth. So growth
Speaker 1: should stay expensive irrespective of the fact that it should
Speaker 1: go through significant crashing. So for now we'd like the
Speaker 1: JP Morgan, for example, more than Apple um. But it
Speaker 1: doesn't mean that Apple has a long term strategy. If
Speaker 1: you can hold your portfolio for five a tenure is
Speaker 1: just not an awesome position. Very good, Sebastion Gali, thank
Speaker 1: you so much. With an already from Luxembourg. This is
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