WEBVTT - Xi-Macron Meeting, Asia Snaps Gains 0:00:02.520 --> 0:00:07.000 Bloomberg Audio Studios, podcasts, radio news. 0:00:11.960 --> 0:00:14.720 Welcome to the day Break Gasia podcast. I'm Doug Prisner. 0:00:15.080 --> 0:00:18.560 We begin in China where French President Emmanuel Macron met 0:00:18.600 --> 0:00:21.959 earlier with Chinese President Chi Jinping. Now this meeting took 0:00:22.000 --> 0:00:26.360 place as Paris is trying to rebalance its economic ties 0:00:26.400 --> 0:00:30.360 with Beijing. Here is Bloomberg China correspondent minmin Low. 0:00:30.520 --> 0:00:33.440 Just judging from the tone coming out of these state 0:00:33.479 --> 0:00:36.400 media commentaries so far, it's been heavily covered in China 0:00:36.720 --> 0:00:41.360 presidency calling the meeting candid and constructive and fruitful. There 0:00:41.360 --> 0:00:45.959 has been a range of cooperative agreements signed covering areas 0:00:46.040 --> 0:00:51.400 like natural resources, like agriculture, food, education, investments. I think 0:00:51.440 --> 0:00:55.000 the key focus for Macron is really to deepen trade 0:00:55.000 --> 0:00:57.880 and investment ties, where he called for more Chinese investment, 0:00:57.920 --> 0:01:01.040 saying that needs to be a clearer framework framework to 0:01:01.080 --> 0:01:05.760 attract Chinese investments. He also warned against supply chain disruption, 0:01:05.880 --> 0:01:10.680 and that was likely a reference to China's disruption of 0:01:10.760 --> 0:01:14.080 the rare of access for European countries, although some of 0:01:14.080 --> 0:01:17.760 those restrictions had been lifted, but it spooked many European 0:01:17.800 --> 0:01:22.479 partners about over reliance on China. He also urged China 0:01:22.600 --> 0:01:26.959 to extend its domestic consumption, saying that the one of 0:01:27.000 --> 0:01:29.600 the worst ways to deal with the trading balance is 0:01:29.640 --> 0:01:31.480 to start a trade war. And I think a key 0:01:31.480 --> 0:01:34.280 focus for him is to correct the trading balance, given 0:01:34.319 --> 0:01:37.880 that Franz still has about fifteen billion dollars in goods 0:01:37.920 --> 0:01:40.199 trade deficit in twenty twenty four. 0:01:40.319 --> 0:01:44.039 That was Bloomberg China correspondent min Min Low. Now today 0:01:44.040 --> 0:01:47.280 across the Asia Pacific equity markets are somewhat mixed. A 0:01:47.360 --> 0:01:50.800 key question looming is on FED policy, not just the 0:01:50.880 --> 0:01:53.680 high probability of a rate cut next week, but the 0:01:53.680 --> 0:01:56.520 Fed's outlook for next year. And that's where we begin 0:01:56.600 --> 0:02:01.280 our conversation with Charu Chanaana Chief Investment just at Saxo. 0:02:01.480 --> 0:02:05.240 She spoke with Bloomberg TV host April Hong and Paul Allen. 0:02:05.480 --> 0:02:08.480 Talk to us about why you saying maybe next year 0:02:08.600 --> 0:02:12.320 will be even better for risk and Asia in particular. 0:02:12.880 --> 0:02:13.359 Absolutely. 0:02:13.400 --> 0:02:16.519 Okay, so let's take the broader picture. First, it does 0:02:16.600 --> 0:02:19.560 seem like we're getting that rate cut from the Fed, 0:02:19.880 --> 0:02:23.880 and then going into next year if at all, you know, 0:02:23.919 --> 0:02:27.359 the probability seems to be getting higher for and hast 0:02:27.520 --> 0:02:30.480 led fed and that does mean that we could get 0:02:30.560 --> 0:02:33.360 some more rate cuts going into next year. I mean, 0:02:33.400 --> 0:02:35.760 of course, the market's already looking at three rate cuts 0:02:35.800 --> 0:02:38.320 for next year. I've seen predictions of about one hundred 0:02:38.320 --> 0:02:40.600 basis points of rate cuts as well. It's about three 0:02:40.680 --> 0:02:43.400 to four rate cuts next day looks very very likely. 0:02:44.320 --> 0:02:47.240 And on top of that, of course, the tech volatility 0:02:47.280 --> 0:02:50.200 has gone out, but that has not really kind of 0:02:50.560 --> 0:02:52.960 questioned the kind of k pix that has been going 0:02:53.000 --> 0:02:56.600 on in this AI theme. Right, if that continues, especially 0:02:56.639 --> 0:02:59.960 from the big hyperscalers that do have the ability to 0:03:00.120 --> 0:03:03.119 in some ways fund it as well, I do think, 0:03:03.160 --> 0:03:07.200 of course the dispersion would continue and the broadening of 0:03:07.240 --> 0:03:09.960 the AI team would continue in the US. But overall, 0:03:10.440 --> 0:03:14.160 both of these macro dynamics are extremely positive for Asia 0:03:14.360 --> 0:03:18.800 because if we do get that continued AIKPEX, the hardware 0:03:18.919 --> 0:03:22.240 backbone off that AI cycle really rests in Asia, and 0:03:22.320 --> 0:03:26.040 we've seen that theme play out in Taiwan and Korea. 0:03:26.120 --> 0:03:28.600 I think it could spread out to some of the other. 0:03:28.560 --> 0:03:31.320 Names as well, beyond the big names that have already 0:03:31.520 --> 0:03:35.160 rallied quite strongly this year. Japan has been a huge 0:03:35.400 --> 0:03:38.440 participation in Asia, and as I think with the volatility 0:03:38.480 --> 0:03:41.360 in tech, as investors look to kind of shift away 0:03:41.360 --> 0:03:44.280 from hype to the real fundamentals, I think the real 0:03:44.360 --> 0:03:48.280 fundamentals are in Asia. When the US hyperscalers continue to 0:03:48.360 --> 0:03:53.600 spend with really little insights into where they monetize it, 0:03:53.720 --> 0:03:57.520 I think that spending continues to benefit Asia who do 0:03:57.640 --> 0:04:00.320 continue to get strong order books on the back of 0:04:00.400 --> 0:04:02.640 that spending. And then you club that with FED rate 0:04:02.720 --> 0:04:07.080 cuts a softer dollar. Potentially all of those are very positive. 0:04:06.960 --> 0:04:09.280 For ratio on the FED rate cuts you say three 0:04:09.360 --> 0:04:12.920 or four n year. How much does that matter whether 0:04:12.960 --> 0:04:15.320 we see this first half or second half? And to 0:04:15.320 --> 0:04:20.039 what extent is it realistic to expect very dubbish fed 0:04:20.200 --> 0:04:25.279 under potentially a fair chair hazard. Yes, given he's one man, 0:04:25.520 --> 0:04:27.000 there are other people on the board. 0:04:26.800 --> 0:04:29.360 Right exactly, and I think we will start to get 0:04:29.360 --> 0:04:31.840 a reflection of that within this month as well as 0:04:31.880 --> 0:04:34.560 to how divided the FED boat is getting. We've already 0:04:34.560 --> 0:04:38.040 got some meetings we've seen that division play out, but 0:04:38.080 --> 0:04:41.600 certainly I think this December meeting is even more important 0:04:41.640 --> 0:04:44.120 because we still have a kind of a data blackout. 0:04:44.160 --> 0:04:47.120 Even though the government shutdown is over, we haven't had 0:04:47.160 --> 0:04:50.400 the most recent data for the FED to really judge where. 0:04:50.160 --> 0:04:50.880 Things are going. 0:04:51.480 --> 0:04:55.239 We've had obviously some political influence playing a part as well, 0:04:55.279 --> 0:04:59.000 So the division is certainly getting much more starker within 0:04:59.040 --> 0:05:01.200 the FED, and that will be a theme going into 0:05:01.279 --> 0:05:03.920 next year as well. But I think within the first 0:05:03.920 --> 0:05:06.560 half of the year, even if we do not substantially 0:05:06.560 --> 0:05:09.119 get those rate cuts, certainly depending on where the labor 0:05:09.120 --> 0:05:12.600 market is going, I think there is a chance that 0:05:12.640 --> 0:05:15.040 we might get another one at the end of the 0:05:15.240 --> 0:05:18.240 first quarter if the trend in the labor market sustains 0:05:18.240 --> 0:05:22.000 to point towards more weakness. But I think the market 0:05:22.040 --> 0:05:26.280 obviously reacts a little bit faster than the actual rate 0:05:26.360 --> 0:05:29.920 cut itself, so I think that potential expectations of rate 0:05:30.000 --> 0:05:32.839 cuts would also continue to support the markets. 0:05:33.960 --> 0:05:37.159 Charie, do you see dollar weakness becoming a major theme 0:05:37.200 --> 0:05:41.160 in twenty twenty six as we see divergence between major 0:05:41.200 --> 0:05:44.280 central banks, particularly the FED, And how's that informing your 0:05:44.279 --> 0:05:45.839 investment strategy? 0:05:47.760 --> 0:05:50.039 It certainly seems like I mean, we've obviously seen a 0:05:50.040 --> 0:05:52.960 lot of the dollar weakness this year as well, but 0:05:53.080 --> 0:05:55.039 going into next year, I think it will be a 0:05:55.200 --> 0:05:59.080 dual story of both yes, the FED rate cuts, but 0:05:59.200 --> 0:06:02.240 also with those federates cuts, I think the fiscal situation 0:06:02.480 --> 0:06:05.120 in the US will also continue to play a big part. 0:06:05.440 --> 0:06:09.000 I think we might see, you know, this pivot towards 0:06:09.040 --> 0:06:12.960 a much more fiscal spending, which could raise concerns for 0:06:13.040 --> 0:06:17.400 the long end in the US, and that obviously again 0:06:17.520 --> 0:06:21.760 points towards you know, the weaker dollar. We've seen global 0:06:21.880 --> 0:06:26.000 central banks trying to obviously diversify their reserves as well 0:06:26.040 --> 0:06:28.320 move away from the US dollar. So it does not 0:06:28.600 --> 0:06:31.840 still spell the end of the US dollar to me, 0:06:32.000 --> 0:06:34.080 because we know that you know, eighty eight percent of 0:06:34.240 --> 0:06:37.719 FX transactions one side is still the US dollar even 0:06:37.760 --> 0:06:39.840 within trade. I mean, of course we've got a little 0:06:39.880 --> 0:06:43.719 bit more relevance for the Chinese renmen we in this region, 0:06:43.880 --> 0:06:47.400 but I think globally again, US dollar continues to dominate 0:06:47.480 --> 0:06:50.599 in a very significant manner, which is very difficult to 0:06:50.720 --> 0:06:55.200 overtake by any other, you know, single currency, or even 0:06:55.240 --> 0:06:56.640 for by goal for that matter. 0:06:56.880 --> 0:06:59.200 So I think the dominance really stays. 0:06:59.279 --> 0:07:03.080 But at the margin, these fiscal concerns also continue to 0:07:03.120 --> 0:07:05.280 be a negative for the US all the next year. 0:07:05.360 --> 0:07:07.920 In addition to of course the FED rate cuts. 0:07:09.000 --> 0:07:11.040 Well, I know you say that while we're waiting on 0:07:11.080 --> 0:07:14.120 these right cuts, while we're potentially waiting out and AI 0:07:14.360 --> 0:07:17.160 polls as well, you like to look for assets that 0:07:17.640 --> 0:07:20.240 pay you well during times of waiting. So can you 0:07:20.240 --> 0:07:21.679 give us some ideas in that regard? 0:07:23.520 --> 0:07:27.000 Absolutely, I think with the yields you know going down 0:07:27.040 --> 0:07:29.120 as well, especially on the short end, I think it 0:07:29.200 --> 0:07:33.120 is really important for investors who have parked cash, you know, 0:07:33.200 --> 0:07:37.280 I think to understand that one your heels are going down. 0:07:37.320 --> 0:07:39.880 Plus two, I think we're also still in an environment 0:07:39.920 --> 0:07:43.040 of sticky inflation, so that also continues to erode the 0:07:43.080 --> 0:07:46.160 purchasing power for cash. So I think obviously it is 0:07:46.240 --> 0:07:48.800 very important to understand where you can get some of 0:07:48.840 --> 0:07:52.400 those better yields if you are an income seeking investor particularly, 0:07:53.120 --> 0:07:55.960 and in that case, I think it is next year 0:07:56.040 --> 0:07:57.920 could be a story where we see a lot of 0:07:57.960 --> 0:08:02.480 these dividend plays, you know, like reads for example, you 0:08:02.520 --> 0:08:05.000 know an income other income plays very much and focus 0:08:05.320 --> 0:08:08.200 given of course, because of the volatility in EA, you 0:08:08.240 --> 0:08:11.160 want a little bit of a defensive balance in your portfolios. 0:08:11.240 --> 0:08:14.640 Because of high concentration of techniques even in indices, you 0:08:14.720 --> 0:08:17.600 want to balance your portfolios with something more defensive, but 0:08:17.680 --> 0:08:20.480 also because you know, there are income seeking investors who 0:08:20.560 --> 0:08:22.679 want to continue to generate steady income. 0:08:22.680 --> 0:08:26.960 Also just quickly if you can. 0:08:27.200 --> 0:08:30.880 When it comes to currencies, what are you saying China 0:08:31.000 --> 0:08:34.520 is thinking about guiding the vermintya because it seems to 0:08:34.559 --> 0:08:37.199 make sense that it would be stronger. And then how 0:08:37.240 --> 0:08:39.880 does that square with what India is thinking when it 0:08:39.880 --> 0:08:40.920 comes to the currency. 0:08:41.280 --> 0:08:44.920 Yes, two very divergent parts there. Avivial certainly, I think. 0:08:45.320 --> 0:08:48.320 So when we talk about China all year, we've seen 0:08:48.400 --> 0:08:52.000 that intent from China that they do not mind a 0:08:52.120 --> 0:08:55.160 stronger Chinese you man now right, it is a signal 0:08:55.240 --> 0:08:57.480 for them of a stronger economy as well. 0:08:58.320 --> 0:08:59.400 And given that. 0:08:59.320 --> 0:09:01.160 You know, they do want to kind of, you know, 0:09:01.240 --> 0:09:07.280 be structurally stronger, strategically independent from the global economy, I 0:09:07.320 --> 0:09:09.680 think it was very important for them to continue to 0:09:09.720 --> 0:09:13.520 show that strength. But of course the pace of appreciation 0:09:13.760 --> 0:09:17.680 in the Chinese yuan has I think obviously given I 0:09:17.679 --> 0:09:20.199 mean we got that signal yesterday that that's not something 0:09:20.240 --> 0:09:23.160 they're comfortable with. So my sense is here that they 0:09:23.320 --> 0:09:26.240 might slow down the pace of appreciation, but they're not going. 0:09:26.240 --> 0:09:28.560 To potentially reverse it at this point. 0:09:29.120 --> 0:09:32.200 Whereas when you talk about India, obviously it has been 0:09:32.320 --> 0:09:35.200 you know, the Indian rupee has been extremely weak, and 0:09:35.240 --> 0:09:40.679 that also comes from I would say a policy stance 0:09:40.880 --> 0:09:43.640 or an intent to kind of be a bigger player 0:09:43.640 --> 0:09:47.160 in the global export or the global trade arena. I 0:09:47.160 --> 0:09:50.080 think the weaker rupee could help them there, and that 0:09:50.200 --> 0:09:53.000 might be the intention behind it. But again I would 0:09:53.080 --> 0:09:55.920 say that they might slow down the pace of the 0:09:56.000 --> 0:09:58.680 fall of the rupee, but I don't potentially see them 0:09:58.760 --> 0:09:59.920 reversing that trend. 0:10:00.160 --> 0:10:03.600 Okay, talking about trend reversals, the yen obviously this year 0:10:03.640 --> 0:10:05.160 has been coming under a lot of pressure. 0:10:05.640 --> 0:10:07.320 What is twenty twenty six it is going to look like? 0:10:07.360 --> 0:10:09.840 I think part of the outrageous predictions that ZA actually 0:10:09.840 --> 0:10:11.880 has is yes, whate hundred to the dollar. 0:10:12.520 --> 0:10:15.479 Yes, but just to put it right now in outrageous 0:10:15.480 --> 0:10:18.319 predictions are not our baseline predictions. 0:10:18.400 --> 0:10:19.719 It's just something fun we. 0:10:19.840 --> 0:10:23.160 Like to do to obviously, you know, encourage some level 0:10:23.200 --> 0:10:26.320 of debate. But also I think there is a clear 0:10:26.360 --> 0:10:29.240 intent to try to look at some of the blind 0:10:29.280 --> 0:10:31.880 spots in your portfolios. You know, certainly this is not 0:10:31.960 --> 0:10:33.640 our BAUS case, and it's not like we are telling 0:10:33.640 --> 0:10:35.640 our clients that you should premire for a dollar yen 0:10:35.760 --> 0:10:38.960 going two hundred. But what we've come up with, like 0:10:39.000 --> 0:10:41.440 as a set of ten predictions, which talk about the 0:10:41.600 --> 0:10:43.760 risks that investors might have ignored. So we take the 0:10:43.840 --> 0:10:45.959 trends that are on ready in place, and we take 0:10:46.000 --> 0:10:48.199 them one or two steps further to really. 0:10:48.360 --> 0:10:49.400 Spark that thinking. 0:10:49.440 --> 0:10:51.439 You know, what if I'm exposed to this kind of 0:10:51.480 --> 0:10:53.480 a risk in my portfolio, or what if I'm missing 0:10:53.559 --> 0:10:53.960 this kind. 0:10:53.840 --> 0:10:55.559 Of an opportunity in my portfolio. 0:10:55.800 --> 0:10:58.080 So, talking particularly about dollar yen, that is not a 0:10:58.120 --> 0:11:00.120 trend reversal. For sure, that has been a t and 0:11:00.160 --> 0:11:02.360 that's ongoing for some time. Right, we're still very close 0:11:02.400 --> 0:11:06.000 to these record low levels, despite the fact that we 0:11:06.080 --> 0:11:09.240 are expecting now the market is expecting now the boj 0:11:09.400 --> 0:11:12.959 to high crates later this month, and that goes to 0:11:13.000 --> 0:11:14.880 say a lot of things. One of course, that the 0:11:15.400 --> 0:11:19.240 interest rate differential for Japanese bonds, which are obviously the 0:11:19.280 --> 0:11:22.480 yields are rising but still so low that the interest 0:11:22.520 --> 0:11:24.920 rate differential to the rest of the world are quite high, 0:11:24.960 --> 0:11:27.640 and I think that continues to pressure the end. But 0:11:27.720 --> 0:11:30.480 also the fiscal situation again very much what we talked 0:11:30.520 --> 0:11:33.400 about for the US as well. Now we do have 0:11:33.880 --> 0:11:37.000 an intent to be you know, fiscally more accommodative, even 0:11:37.000 --> 0:11:40.839 more accommodative, i should say, in Japan, and that kind 0:11:40.920 --> 0:11:43.280 of raises, you know, some concerns when you have two 0:11:43.320 --> 0:11:47.680 thirty percent of you know, GDP debt, So I think 0:11:47.679 --> 0:11:50.480 that kind of does raise some concerns. Again, it's not 0:11:50.520 --> 0:11:52.760 something that will immediately come to them, because a lot 0:11:52.760 --> 0:11:55.120 of debt is held by the BOJ itself in Japan, 0:11:55.240 --> 0:11:58.480 but I think it's something that continues to concern investors. 0:11:59.040 --> 0:12:02.199 And of course the carry trade itself remains quite attractive still. 0:12:02.760 --> 0:12:05.360 But things really start to turn if we see FED 0:12:05.400 --> 0:12:09.720 cutting aggressively next. Yeah, I don't think the buj's small 0:12:09.840 --> 0:12:13.280 steps of rate hikes could really reverse the situation rapidly. 0:12:13.320 --> 0:12:15.840 But if the FED really triggers like those hundred basis 0:12:15.840 --> 0:12:18.360 points of rate cut and a very dabbash policy, we 0:12:18.400 --> 0:12:20.880 could see dollar yet moving lower in that. 0:12:20.880 --> 0:12:25.000 That's Charu Chanana, chief investment strategist at Saxo, speaking with 0:12:25.000 --> 0:12:28.160 Bloomberg TV host April Hong and Paul Allen here on 0:12:28.200 --> 0:12:40.120 the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast. 0:12:40.200 --> 0:12:43.959 I'm Doug Chrisner. Today, a bipartisan group of US senators 0:12:44.040 --> 0:12:47.320 introduced a bill to block in Video from selling its 0:12:47.559 --> 0:12:50.200 h two hundred and Blackwell chips to China. 0:12:50.720 --> 0:12:50.840 Now. 0:12:50.880 --> 0:12:54.959 The bill intends to codify existing US restrictions on exports 0:12:54.960 --> 0:12:58.200 of advanced semiconductors to the Chinese market. It will also 0:12:58.440 --> 0:13:02.479 halt export lice, instance, for sales of chips to adversaries 0:13:02.480 --> 0:13:05.600 for at least thirty months. Here is Gene Monster. He 0:13:05.679 --> 0:13:09.240 is co founder and managing partner of Deepwater Asset Management. 0:13:09.440 --> 0:13:12.720 If we don't sell those self some form of chips 0:13:12.720 --> 0:13:14.719 to China, they'll just go and create their own and 0:13:15.400 --> 0:13:17.920 we can benefit in the near term of having them 0:13:18.080 --> 0:13:20.559 dependent on our platform. If you think of like Nvidia, 0:13:20.600 --> 0:13:21.440 for example, it's. 0:13:21.320 --> 0:13:22.079 Not just the chip. 0:13:22.559 --> 0:13:26.400 They have a Kuda development platform, and so getting their 0:13:26.440 --> 0:13:29.880 developers based on that does give the US some form 0:13:29.920 --> 0:13:32.320 of leverage in terms of how the technology rolls out 0:13:32.520 --> 0:13:33.680 in the years to come. 0:13:33.760 --> 0:13:36.600 Today's shares in Nvidia were a little changed in the 0:13:36.720 --> 0:13:40.040 US session. Overall, the equity market state side struggle to 0:13:40.120 --> 0:13:43.000 gain any traction in front of next week's FED decision. 0:13:43.480 --> 0:13:45.960 Let's take a closer look with James Thorn. He is 0:13:46.040 --> 0:13:50.040 chief market strategist at Wellington Altist Private Wealth. He joins 0:13:50.120 --> 0:13:53.439 us from Toronto. Jim, thanks for being here. I think 0:13:53.480 --> 0:13:56.120 it's fair to say that markets right now are largely 0:13:56.200 --> 0:13:59.079 betting on the FED cutting interest rates next week by 0:13:59.160 --> 0:14:02.360 twenty five bay points. But it's fair to point out 0:14:02.360 --> 0:14:06.800 that policymakers have rarely been so divided if we focus 0:14:06.840 --> 0:14:09.720 on the weakness in the labor market. Are you expecting 0:14:09.720 --> 0:14:10.200 a cut? 0:14:10.640 --> 0:14:15.080 Yes, I am. I think the larger question is, you 0:14:15.120 --> 0:14:18.640 know what is what economists would say is what's the 0:14:18.800 --> 0:14:22.320 terminal rate or where does the FED stop cutting? Is 0:14:22.320 --> 0:14:24.160 it going to be a two seventy five? Is it 0:14:24.200 --> 0:14:27.040 going to be a three twenty five? But one thing 0:14:27.080 --> 0:14:29.360 we know as investors is that you know in twenty 0:14:29.480 --> 0:14:32.680 twenty six liquidity is coming into the market, which should 0:14:32.680 --> 0:14:33.960 be good for risk assets. 0:14:34.840 --> 0:14:37.160 So as we know, some members of the FED have 0:14:37.320 --> 0:14:40.960 highlighted the risk of sticky inflation. On Wednesday. Just the 0:14:41.040 --> 0:14:44.200 other day, we learned from the ISM that prices of 0:14:44.280 --> 0:14:47.840 services and materials on an annual basis are holding in 0:14:47.880 --> 0:14:50.920 at around three percent, and some of the other inflation 0:14:51.040 --> 0:14:54.600 readings that we have seen recently show inflation still above 0:14:54.600 --> 0:14:57.040 the fed's two percent target. I'm wondering if that's a 0:14:57.040 --> 0:14:57.640 concern for. 0:14:57.640 --> 0:15:03.960 You, you know, because I look at first, I recognize 0:15:03.960 --> 0:15:07.040 that shelter is one of the driving components of CPI 0:15:07.360 --> 0:15:10.760 and PCE, and we know that's lagged. And if we 0:15:10.840 --> 0:15:15.520 put market based indicators into both of those variables, there 0:15:15.600 --> 0:15:20.160 is no inflation problem. And then you know, service inflation 0:15:20.240 --> 0:15:22.280 has always been sticky since I've been in the business 0:15:22.360 --> 0:15:25.360 for thirty years, so you know, you know, what the 0:15:25.360 --> 0:15:28.000 FED can do in terms of its monetary policy is 0:15:28.680 --> 0:15:32.920 really affect the business the interst rate sensitive sectors of 0:15:32.960 --> 0:15:38.600 the economy, and I agree with Secretary Present that, you know, 0:15:38.880 --> 0:15:41.480 the interesst rate sensitive sector and the economy is in 0:15:41.480 --> 0:15:44.240 a recession, specifically housing, and so they need to. 0:15:44.200 --> 0:15:47.760 Cut There's also been some debate as to whether or 0:15:47.840 --> 0:15:51.320 not lower interest rates can have a meaningful impact on 0:15:51.440 --> 0:15:54.400 improving the labor market. Maybe we need to consider some 0:15:54.440 --> 0:15:58.840 of the other forces that have contributed to a restructuring 0:15:59.040 --> 0:16:02.360 and I'm thinking of AI in particular. Perhaps the labor 0:16:02.360 --> 0:16:04.840 market is not as sensitive to changes in rate policy 0:16:04.880 --> 0:16:05.680 as it once was. 0:16:06.840 --> 0:16:11.000 That's a fair point, and you know, in these recoveries 0:16:11.080 --> 0:16:19.240 where you know, technology recovery driven recoveries, labor lags. And 0:16:19.320 --> 0:16:24.760 I think there is some conversations or some indication coming 0:16:24.800 --> 0:16:28.760 under the FED that they indicate that the real risk 0:16:28.880 --> 0:16:32.040 is in the labor market and we need to give 0:16:32.120 --> 0:16:36.200 support to the interest rate sensitive sector and wait to 0:16:36.280 --> 0:16:40.880 see if President Trump's supply side policies kick in and 0:16:40.920 --> 0:16:44.400 all that investment that is supposedly coming in because of terrorists, 0:16:44.880 --> 0:16:49.160 and if that happens. The interesting thing about it is 0:16:49.160 --> 0:16:50.800 that we're not going to go back to you know, 0:16:50.880 --> 0:16:55.560 secular stagnation and deflation. And the FED can be right 0:16:55.640 --> 0:17:00.400 in basically saying that the neutral rate is somewhere around 0:17:00.400 --> 0:17:04.120 two seventy five to three percent. But if they tightened 0:17:04.160 --> 0:17:09.040 too much, as and they contracted the balance sheet too much, 0:17:09.119 --> 0:17:12.520 as happened after the Second World War, you could get 0:17:12.600 --> 0:17:18.480 a real gross scare in debt and deflation really come back. 0:17:18.880 --> 0:17:22.280 And once you get those expectations going the other way, 0:17:22.400 --> 0:17:25.479 it's really hard to put the genie back in the bottle. 0:17:25.920 --> 0:17:28.040 So I'm speaking to you from Toronto. Maybe we can 0:17:28.080 --> 0:17:31.000 talk a little bit about the trade relationship between the 0:17:31.080 --> 0:17:34.920 US and Canada. Today, President Trump signaled the US could 0:17:34.960 --> 0:17:40.520 withdraw entirely from the us MCA and renegotiate large parts 0:17:40.560 --> 0:17:43.680 of that trade accord with both Canada and Mexico sometime 0:17:43.760 --> 0:17:46.520 next year. Jim, I'm wondering from your point of view, 0:17:47.000 --> 0:17:49.440 does the USMCA need to be restructured. 0:17:50.160 --> 0:17:54.720 Yeah, it has to be restructured, yes, And you know, 0:17:54.840 --> 0:17:58.440 let's be honest the you know, and this is how 0:17:58.440 --> 0:18:02.760 I frame it is that, you know, irrespective of President Trump, 0:18:02.800 --> 0:18:05.719 because interest payments on debt in the United States are 0:18:05.760 --> 0:18:10.200 greater than military expenditures, we have to or the Americans 0:18:10.280 --> 0:18:17.119 have to adjust. So let's realize that and figure out 0:18:17.160 --> 0:18:19.440 what we're going to do. And so when you think 0:18:19.480 --> 0:18:22.800 about it, what Canada has to do is they have 0:18:22.920 --> 0:18:28.040 to basically start exporting their one you know, competitive advantage, right, 0:18:28.119 --> 0:18:32.480 which is natural resources. And so those areas of the 0:18:32.600 --> 0:18:38.720 economy that were protected under the USMCA, for example, autos. Really, 0:18:39.040 --> 0:18:41.880 you know, we have to be honest with ourselves and 0:18:41.920 --> 0:18:46.440 to say that Canada doesn't really have a competitive advantage there, right, 0:18:46.480 --> 0:18:49.120 I mean in Ontario where I live in Toronto, right 0:18:49.200 --> 0:18:53.000 with Premier Doug Ford, I'm sorry, you know, electricity prices 0:18:53.040 --> 0:18:56.720 in Ontario are too high. So you know, Canada has 0:18:57.280 --> 0:19:01.840 needs to do the structural adjustment, just like the United States. 0:19:01.880 --> 0:19:05.040 So I think we have to be honest and see 0:19:05.080 --> 0:19:08.960 how is Canada in the United States going to create 0:19:09.000 --> 0:19:11.879 a relationship where they both can be stronger. And I 0:19:11.920 --> 0:19:15.960 really think that Prime Minister Carney and President Trump in 0:19:16.040 --> 0:19:19.640 his cabinet understand that. So to me, it's not as 0:19:19.840 --> 0:19:21.920 as scary as some people would bring up. 0:19:22.280 --> 0:19:25.359 You mentioned natural resources, and in Canada, I think of 0:19:25.400 --> 0:19:28.560 the energy complex being a big part of that story. 0:19:29.119 --> 0:19:31.600 So when we consider the hunger that we have now 0:19:31.640 --> 0:19:34.480 for power, in particular to drive some of these AI 0:19:34.640 --> 0:19:38.320 data centers, this seems to represent a big opportunity for Canada. 0:19:38.480 --> 0:19:41.560 The question is whether there will be cooperation. 0:19:42.600 --> 0:19:44.800 Yes, and I think the only thing that needs has 0:19:44.880 --> 0:19:50.160 to happen is it takes time. Right Canada has you know, 0:19:50.880 --> 0:19:53.280 I lived in the States for twenty five years. Canada 0:19:53.560 --> 0:19:58.040 has neglected its core competency, which is now to resources. 0:19:58.080 --> 0:20:00.440 So you just don't open a mine, just don't build 0:20:00.440 --> 0:20:04.560 a pipeline, You just don't build a nuclear reactor. You know, Doug, 0:20:04.880 --> 0:20:07.600 Back in the fifties and sixties, Canada was a world 0:20:07.720 --> 0:20:11.879 leader in nuclear power. And nuclear technology. So it just 0:20:11.960 --> 0:20:15.200 takes time. And yes, so and I agree with Prime 0:20:15.200 --> 0:20:17.720 Minister Carneia on this. You know, pipelines are boring because 0:20:17.800 --> 0:20:22.040 really what Canada needs to do is stop exporting its 0:20:22.119 --> 0:20:26.840 natural resources and start processing it and using those natural 0:20:26.880 --> 0:20:31.800 resources to create a diversified economy, which would mean AI 0:20:32.119 --> 0:20:35.880 and I think that's the next step. So we need time. 0:20:36.280 --> 0:20:38.440 But at the same point in time, Look, I mean 0:20:39.040 --> 0:20:43.760 and Canada and the United States, it's we're family. We fight, 0:20:44.680 --> 0:20:48.000 but at the same point in time, we will grow 0:20:48.400 --> 0:20:53.080 together in this new environment. And Canada can really help 0:20:53.760 --> 0:20:59.520 by bringing resources and critical materials and energy and natural 0:20:59.600 --> 0:21:06.160 resource to the forefront. So I am very constructive on 0:21:06.160 --> 0:21:09.800 what's going forward. And you know, as Prime Minister Carney 0:21:09.840 --> 0:21:12.880 said it, the Council and Foreign Relations we have to adjust. 0:21:13.000 --> 0:21:15.879 We're dealing with the reckoning and so but that takes time. 0:21:16.119 --> 0:21:18.879 But you know, if you understand that there's lots of 0:21:18.880 --> 0:21:21.760 opportunities all over the place to take advantage of that. 0:21:21.960 --> 0:21:24.679 What about the processing of rare earth minerals. This is 0:21:24.680 --> 0:21:28.120 an industry that China really dominates. And can you imagine 0:21:28.160 --> 0:21:32.000 a world where Canada steps up and begins developing a 0:21:32.040 --> 0:21:36.479 more robust infrastructure for processing rare earths. 0:21:38.640 --> 0:21:43.040 Yes, when you think about the problem that Canadians have 0:21:43.119 --> 0:21:46.760 had in the past, it's been that they do not 0:21:47.000 --> 0:21:51.199 want to process natural resources because of the pollution. And 0:21:51.280 --> 0:21:54.240 I really think that Canada really needs to have an 0:21:54.240 --> 0:21:58.439 honest conversation with themselves. You know, let's talk about the 0:21:58.480 --> 0:22:04.520 tanker ban on the on the west coast of uh Canada. 0:22:04.800 --> 0:22:08.080 Yet you know, tankers flow freely on the east coast. 0:22:08.280 --> 0:22:11.359 Think about all the pipelines that we've had. So I 0:22:11.400 --> 0:22:14.199 think what's happened is we've had a decade of what 0:22:14.280 --> 0:22:18.800 I would call virtue ce doing that has really cost 0:22:18.960 --> 0:22:22.600 Canada standard of living. And so we're in the early 0:22:22.800 --> 0:22:25.760 phases of shifting. And what I would say to you 0:22:25.880 --> 0:22:29.800 is is Mark Kearney is a very smart man. He 0:22:30.119 --> 0:22:32.919 is a you know, a world class central banker. But 0:22:33.000 --> 0:22:36.159 don't forget he you know, cut his teeth in the 0:22:36.160 --> 0:22:39.919