WEBVTT - Surveillance: Stock Volatility with Calvasina 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg's Surveillance Podcast. I'm Tom Keane along 0:00:09.200 --> 0:00:12.720 with Jonathan Ferrell and Lisa A. Brawmowitz Jay Lee. We 0:00:12.840 --> 0:00:16.759 bring you insight from the best and economics, finance, investment, 0:00:17.079 --> 0:00:22.400 and international relations. Find Bloomberg Surveillance on Apple podcast, SoundCloud, 0:00:22.800 --> 0:00:26.240 Bloomberg dot Com, and of course on the Bloomberg terminal. 0:00:28.400 --> 0:00:30.440 Let's get the way it starts it in a very 0:00:30.520 --> 0:00:32.600 very good way. We can do that with Lori Cavassin 0:00:32.640 --> 0:00:35.280 at the head of US equity strategy at RBC Capital Markets. 0:00:35.360 --> 0:00:36.960 Laura saw your likes nowe and I think it's an 0:00:37.000 --> 0:00:40.280 important one to address. Can you establish a major bottom 0:00:40.280 --> 0:00:45.280 before we've seen the big EPs forecast cuts? The truth 0:00:45.320 --> 0:00:47.159 of the matter, John you is and I keep getting that. 0:00:47.280 --> 0:00:49.680 I keep I keep getting that question from clients. And 0:00:49.720 --> 0:00:52.080 it's not only that you can get the market bottom 0:00:52.080 --> 0:00:54.080 while earnings estimates are coming down, but if you go 0:00:54.120 --> 0:00:56.960 back and you look at major periods of stress like 0:00:57.120 --> 0:01:02.040 the tech bubble, like like only sixteen industrial recession, that 0:01:02.160 --> 0:01:03.920 is often the case that the stock market puts on 0:01:04.000 --> 0:01:07.520 the bottom several months while before you actually flip back 0:01:07.520 --> 0:01:11.399 into positive revision territory. So I'm not sitting here telling 0:01:11.400 --> 0:01:14.480 you that reducing earnings estimates further isn't going to be 0:01:14.520 --> 0:01:16.240 a headwind for the market. I think that it is, 0:01:16.560 --> 0:01:18.680 But in my mind it's something that causes us to 0:01:18.720 --> 0:01:21.880 merely retest the June lows, maybe check another swing low 0:01:21.920 --> 0:01:23.679 at them. But I think we probably did put the 0:01:23.720 --> 0:01:27.040 low for the cycle in place in June. Were sentiment 0:01:27.160 --> 0:01:31.600 this morning. So someone asked me this question last week 0:01:31.640 --> 0:01:33.640 and I said, you know, percent of the people I 0:01:33.680 --> 0:01:36.160 talked to are still barish, about fifteen per cent or bullish. 0:01:36.200 --> 0:01:38.679 It did feel like, you know, maybe over the last 0:01:38.720 --> 0:01:42.000 couple of weeks that bullish cohort grew from about five 0:01:42.040 --> 0:01:44.959 to fifteen percent. But if you look at the CFTC 0:01:45.160 --> 0:01:48.080 data and just want to get the quantitative read, I 0:01:48.120 --> 0:01:51.600 think that sentiment and NAZDAC has become euphoric again. Futures 0:01:51.640 --> 0:01:53.800 positioning is getting close to the highs that we've seen 0:01:53.840 --> 0:01:55.760 in recent years. But if you look at something like 0:01:55.840 --> 0:01:59.160 small cap, the DAL futures, or even SMP futures, we 0:01:59.200 --> 0:02:02.120 are still very much in the early days of recovering 0:02:02.160 --> 0:02:04.760 off of an extreme low in the case of small cap, 0:02:04.800 --> 0:02:07.120 in the Dow off of new lows that were below 0:02:07.160 --> 0:02:10.720 PAN or below a great financial crisis lows. So I 0:02:10.760 --> 0:02:12.320 think it's a bit of a mix. I think there 0:02:12.360 --> 0:02:14.760 are some pockets of euphoria, but I do think overall 0:02:14.800 --> 0:02:18.040 positioning has still been pretty depressed, and sentiment reflects that 0:02:18.280 --> 0:02:20.360 Lorie was going to drive small caps higher at a 0:02:20.400 --> 0:02:22.840 time when you see consumer sentiment falling off a cliff 0:02:22.840 --> 0:02:26.720 and consumer spending, while still resilient, showing signs of weakening 0:02:26.720 --> 0:02:30.120 pretty much across the board. So I think the issue 0:02:30.120 --> 0:02:32.880 with small caps is that they have very clearly banked 0:02:32.880 --> 0:02:35.480 in a recession at this point in time, We've gone 0:02:35.480 --> 0:02:37.600 through a bunch of the numbers. UM. What we have 0:02:37.680 --> 0:02:39.600 seen essentially is that if you look at small caps 0:02:39.639 --> 0:02:42.280 against jobless claims, they're already baking in a pretty big 0:02:42.320 --> 0:02:44.839 spike from here. Even with the recent move that we've 0:02:44.840 --> 0:02:47.880 seen up in small cap recently, small caps are also 0:02:47.960 --> 0:02:50.639 baking in a trough like move, a plunge really in 0:02:50.720 --> 0:02:53.560 I S N manufacturing that hasn't happened yet, it's probably coming. 0:02:53.800 --> 0:02:56.240 It is baked into the small cap stocks UM. But 0:02:56.320 --> 0:02:59.400 I think the other issue that we see is that historically, 0:02:59.720 --> 0:03:02.919 long term investors know that recessions are usually good buying 0:03:02.919 --> 0:03:05.639 opportunities for small cap. They sniff out the pain early on, 0:03:05.840 --> 0:03:08.360 they sniff out the recovery early on, and at the 0:03:08.440 --> 0:03:10.240 end of the day, small cap is really, I think 0:03:10.280 --> 0:03:12.640 the one part of the market that has clearly baked 0:03:12.639 --> 0:03:16.079 in an economic downturn. Glauria, over my break, I was 0:03:16.160 --> 0:03:19.120 thinking a lot about the talk about re shoring or 0:03:19.200 --> 0:03:23.079 on shoring a lot of manufacturing from China from Asia 0:03:23.200 --> 0:03:25.960 in response to some of the supply chain disruptions. Is 0:03:26.000 --> 0:03:29.040 this more talk than action? Are you actually seeing this 0:03:29.160 --> 0:03:32.359 on the ground with small caps? So I don't think 0:03:32.360 --> 0:03:34.480 we're seeing it in a massive way yet, but I 0:03:34.520 --> 0:03:37.400 will tell you Lisa and my recent travels with investors, 0:03:37.480 --> 0:03:40.760 that issue is something that small cap portfolio managers are 0:03:40.840 --> 0:03:43.720 highly engaged on and highly focused on, particularly when it 0:03:43.760 --> 0:03:46.400 comes to the industrial sector. And there is a view 0:03:46.400 --> 0:03:49.200 out there from professional money manners who specialize in this space. 0:03:49.400 --> 0:03:51.120 But that will ultimately be a good thing for the 0:03:51.120 --> 0:03:54.400 small cap industrial stocks. It may ultimately be challenging for 0:03:54.520 --> 0:03:57.000 margins for the bigger cap companies um, but there is 0:03:57.040 --> 0:03:58.360 a view that this is something that's going to be 0:03:58.400 --> 0:04:00.280 a tail one for the small cap space and hasn't 0:04:00.280 --> 0:04:02.320 really played out yet. Laurie, I've got you at forty 0:04:02.320 --> 0:04:04.880 two hundred year end on the SMP five hundred. I've 0:04:04.880 --> 0:04:08.080 got the market on Friday at the close at what 0:04:08.200 --> 0:04:11.720 now what you tell clients? So look, I think that 0:04:11.800 --> 0:04:14.480 the argument that valuations are too high right now, I 0:04:14.480 --> 0:04:16.840 think that's kind of a thin argument for saying we 0:04:16.960 --> 0:04:18.760 got to peek out right now. I do think it's 0:04:18.760 --> 0:04:21.560 a concerning data point. It reigns in my enthusiasm through 0:04:21.560 --> 0:04:23.400 the end of the year. We're close to twenty times 0:04:23.400 --> 0:04:26.440 my numbers for next year and this year. Um, But 0:04:26.520 --> 0:04:28.839 I do think that you know, these are year in targets, John, 0:04:28.839 --> 0:04:30.280 We're trying to guess where the market is going to 0:04:30.360 --> 0:04:33.440 be on December thirty one, not high it's gonna achieve 0:04:33.480 --> 0:04:35.880 this year. So I do think that we're setting up 0:04:35.880 --> 0:04:38.960 for further volatility in the very short term, especially if 0:04:38.960 --> 0:04:40.839 we get favorable messages at the end of the week 0:04:40.839 --> 0:04:42.760 from Powell. I could see this thing going just a 0:04:42.839 --> 0:04:45.599 little bit longer, just based on how low and extreme 0:04:45.640 --> 0:04:48.040 the positioning has been. But I do think if we're 0:04:48.040 --> 0:04:49.839 being intellectually honest, we have to set up for some 0:04:49.920 --> 0:04:52.359 choppiness and volatility through the end of the year. Laurie 0:04:52.400 --> 0:04:56.520 awesome as always, Laurie Cavastin and that of obvious capital markets. 0:05:01.000 --> 0:05:03.560 Right now we get a voice on China. Ian Shepherdson 0:05:03.640 --> 0:05:06.080 joined us. We could talk fifteen things with the chief 0:05:06.080 --> 0:05:10.479 economists at Pantheon Macroeconomics, but the duration of his Chinese 0:05:10.560 --> 0:05:16.000 slowdown is jaw dropping. Ian Shepherdson models out twenty four months. 0:05:16.040 --> 0:05:19.239 It's three and five percent, make it four percent China 0:05:19.360 --> 0:05:21.760 g d P. What does that do I into the 0:05:21.880 --> 0:05:27.880 labor mandate that Beijing needs and hairs. Yeah, it's a problem. 0:05:28.040 --> 0:05:30.440 We just cut our China forecast. We just don't see 0:05:30.440 --> 0:05:34.120 any bottom yet to the real estate disaster. Prices falling, 0:05:34.200 --> 0:05:37.720 volumes falling, no sign of affix coming through. And it's 0:05:37.720 --> 0:05:39.479 a huge trunk of the economy. It's been a big 0:05:39.480 --> 0:05:42.600 engine of growth for the last couple of decades and 0:05:42.680 --> 0:05:44.640 it has not found a flaw yet. So it's gonna 0:05:44.680 --> 0:05:47.200 put real pressure on the labor market, real pressure on 0:05:47.240 --> 0:05:48.960 the authorities, and I think the bottom line is that 0:05:49.000 --> 0:05:51.960 they will have to be some substantial policy action from 0:05:51.960 --> 0:05:55.800 the center from beating because the local authorities who effectively 0:05:55.880 --> 0:05:58.000 right now are being tasked with dealing with this mess 0:05:58.080 --> 0:06:00.880 just don't have the resources. So this entral government, which 0:06:00.920 --> 0:06:03.440 is resisting eventually it's going to have to fold, is 0:06:03.480 --> 0:06:04.720 going to have to step in with a lot of 0:06:04.760 --> 0:06:07.200 public money and try and try and put a floor 0:06:07.240 --> 0:06:09.360 under the under the problem, because if they don't, they're 0:06:09.360 --> 0:06:11.920 going to find an economy that is way, way weaker 0:06:11.960 --> 0:06:14.400 than they want for a very extended period. And that's 0:06:14.400 --> 0:06:16.120 a threat. That's a real threat to them, and a 0:06:16.160 --> 0:06:18.800 threat to the global economy as well, because obviously China 0:06:18.839 --> 0:06:21.400 is such a big part of global growth, especially through 0:06:21.400 --> 0:06:25.840 the manufacturing sector. In the ambiguities of inflation Ian Shepherdson, 0:06:26.400 --> 0:06:32.359 do they export disinflation and deflation, thus making some of 0:06:32.360 --> 0:06:38.479 the inflation fear cause of the West maybe overrut Yeah, 0:06:38.800 --> 0:06:42.159 the margin I mean, you know, Chinese inflation PPI inflation, 0:06:42.160 --> 0:06:44.400 which passes through into Europe and into the US, you know, 0:06:44.560 --> 0:06:47.560 is really rolling over, no question about that. But I 0:06:47.560 --> 0:06:49.520 think it's important to appreciate that the bulk of the 0:06:49.560 --> 0:06:52.760 inflation shock in the US especially, but but also in Europe, 0:06:53.320 --> 0:06:56.440 apart from energy in the core, has been through margin 0:06:56.520 --> 0:07:01.320 expansion in the retail services, say too so that's not 0:07:01.440 --> 0:07:03.840 really China contingent. That's really been more a story of 0:07:04.080 --> 0:07:07.599 booming consumer spending against constraint supply. But you know, right now, 0:07:07.880 --> 0:07:10.960 central banks everywhere we'll take anything they can get, and 0:07:11.040 --> 0:07:13.440 if you know, the slow down inflation in China gives 0:07:13.440 --> 0:07:15.480 them a little bit of room from over that, that's great, 0:07:15.880 --> 0:07:17.800 but it's not going to be the heart of the 0:07:17.880 --> 0:07:20.280 of the disinflation story in the US over the next year. 0:07:20.440 --> 0:07:23.559 And of course Europe is still struggling with the energy 0:07:23.560 --> 0:07:26.280 inflation shock, which is much bigger and it's likely to 0:07:26.280 --> 0:07:28.200 have been much more persistent. So we've still got some 0:07:28.240 --> 0:07:30.760 really big problems. Let's talk about u K s Whaler 0:07:31.160 --> 0:07:33.080 and I don't own the rights to that one. And 0:07:33.360 --> 0:07:35.240 how bad are things going to get in the UK 0:07:35.640 --> 0:07:40.200 and across Europe for that matter too. Well, Europe's in 0:07:40.280 --> 0:07:42.640 recession now already. I mean that that's that's pretty obvious. 0:07:42.640 --> 0:07:44.920 Now we see that lasting for a while, there's easy 0:07:44.960 --> 0:07:48.120 be still gonna hike because you know, the German influence 0:07:48.120 --> 0:07:50.160 on the anti inflation story is very intense. So we're 0:07:50.160 --> 0:07:51.880 going to get at fifty bids at the next meeting. 0:07:52.360 --> 0:07:54.680 UK is different. I mean, I think there's a reasonable 0:07:54.720 --> 0:07:58.400 chance of inflation. Sorry, recession can be averted, but only 0:07:58.600 --> 0:08:01.120 if the new Prime minis to who presumably will be 0:08:01.240 --> 0:08:04.120 Liz trust in two weeks time, takes some more drastic 0:08:04.160 --> 0:08:06.720 action to bail out households from the energy price shock. 0:08:07.160 --> 0:08:10.320 So now that isn't a promise right now, it's a forecast, 0:08:10.480 --> 0:08:12.320 and you know it could be wrong. They might not 0:08:12.440 --> 0:08:14.560 do it, which would be crazy given the pressure the 0:08:14.640 --> 0:08:17.080 households are under, and that probably would mean the UK 0:08:17.120 --> 0:08:19.240 would end up been recession lated this year. But right 0:08:19.280 --> 0:08:21.960 now I kind of think the politics pointing towards doing 0:08:22.000 --> 0:08:25.800 something more aggressive, effectively handing households more money and with 0:08:25.840 --> 0:08:29.040 a bit of look that will allow the consumer sector 0:08:29.080 --> 0:08:31.360 to just take over through the second half of the 0:08:31.760 --> 0:08:34.320 preventory session, but it's going to be a close run thing. 0:08:34.360 --> 0:08:36.480 And of course the bankming I still gonna be raising right, 0:08:36.559 --> 0:08:39.199 so there's a real squeeze going on there which is 0:08:39.280 --> 0:08:43.120 unlikely to abate anytime soon. So just avoiding recession, that's 0:08:43.160 --> 0:08:45.360 not the same as the forecast of everything being okay. 0:08:45.800 --> 0:08:47.480 It isn't and it isn't going to be okay for 0:08:47.520 --> 0:08:50.959 the foreseeable future in the UK because you know, even 0:08:51.000 --> 0:08:53.719 if the energy price thing goes away, you've still got 0:08:53.760 --> 0:08:57.000 the lingering catastrophe that is Brexit, dragging the whole economy 0:08:57.000 --> 0:09:00.520 down essentially for the foreseeable future. And it's a looking 0:09:00.520 --> 0:09:02.720 across Europe. Just how love is the bar in Europe? 0:09:02.720 --> 0:09:08.360 Can they afford recession? Well, they've got one now. It's 0:09:08.640 --> 0:09:10.680 it's probably not going to be very deep or very long, 0:09:10.800 --> 0:09:12.880 though that does depend to some extent on what happens 0:09:12.880 --> 0:09:16.920 to energy prices. But but they're in in recession already, 0:09:17.480 --> 0:09:20.760 h and you know, a turnaround probably will come at 0:09:20.760 --> 0:09:22.960 some point next year, but we've got to get through 0:09:23.000 --> 0:09:26.000 the worst of it first. So things are a real mess. 0:09:26.040 --> 0:09:29.280 There's no growth momentum anywhere in Europe. The only place 0:09:29.280 --> 0:09:32.120 where I can see any growth momentum coming through before 0:09:32.120 --> 0:09:33.720 the end of the year is probably in the US, 0:09:33.760 --> 0:09:35.600 and even there it's going to be patchy because the 0:09:35.640 --> 0:09:39.920 housing markets are catastrophe. Manufacturing is under pressure from the 0:09:39.960 --> 0:09:43.080 business is being nervous about energy prices. But it's nowhere 0:09:43.120 --> 0:09:45.560 near as bad as it is in Europe. And I 0:09:45.559 --> 0:09:48.160 think that the US is going to avoid recession quite comfortably, 0:09:48.280 --> 0:09:50.439 which of course is why markets are getting nervous because 0:09:50.480 --> 0:09:52.600 and I'm thinking, well, you know, the US isn't going 0:09:52.679 --> 0:09:55.400 to move into recession and the FED is not yet 0:09:55.400 --> 0:09:57.839 talking Davis Lee, so we've seen this upper pressure on 0:09:57.920 --> 0:10:01.760 heels again. You're making me sound rosy. I'm thinking about this. 0:10:01.840 --> 0:10:05.600 Housing is a catastrophe. Nothing is positive in Europe. At 0:10:05.640 --> 0:10:08.719 what point has this been priced in already and at 0:10:08.760 --> 0:10:12.520 what point is this something that requires a much broader 0:10:12.800 --> 0:10:19.360 and more drastic repricing of risk acids across the board. Well, 0:10:19.400 --> 0:10:20.760 that's a good question. I think a lot of this 0:10:20.840 --> 0:10:22.560 is is priceding. I mean, if you if you're not 0:10:22.600 --> 0:10:25.640 expecting a recession in Europe now, you probably haven't been 0:10:25.640 --> 0:10:27.679 paying attention. So I think that that story is pretty 0:10:27.679 --> 0:10:30.559 well understood. Now. The question is what do we get 0:10:30.559 --> 0:10:32.760 out of it? I mean, the problem, the fundamental problem 0:10:32.840 --> 0:10:35.079 for Europe is that the rising energy prices has made 0:10:35.200 --> 0:10:38.079 everyone in Europe poorer. There's no way to avoid that. 0:10:38.200 --> 0:10:42.160 You know, cutting interest rates or pushing money into people's 0:10:42.160 --> 0:10:45.319 pockets to fiscal policy is just delaying the inevitable and 0:10:45.440 --> 0:10:48.040 hiding the truth, which is that an energy price shock 0:10:48.520 --> 0:10:52.800 in an energy consuming region makes everyone poorer and makes 0:10:52.840 --> 0:10:55.439 the economy weaker and hits corporate earnings, and there's just 0:10:55.640 --> 0:10:57.719 no way to avoid this. You can work through it, 0:10:58.040 --> 0:11:00.040 you can ameliorate some of the worst impacts of that, 0:11:00.160 --> 0:11:02.480 but you can't get away from the fundamental fact that 0:11:02.520 --> 0:11:05.120 if you're an energy user and energy prices go up, 0:11:05.440 --> 0:11:09.040 your poor. And this is much worse, incontinently than it 0:11:09.120 --> 0:11:11.880 is in the UK, and it's it's it's much less 0:11:11.880 --> 0:11:13.560 bad in the US, and it gas prices are are 0:11:13.640 --> 0:11:15.920 falling very sharply, but Europe at the front and center 0:11:15.960 --> 0:11:18.400 of this because of Ukraine and because of their energy 0:11:18.440 --> 0:11:20.240 policy over the last twenty years, and they're going to 0:11:20.280 --> 0:11:21.800 be paying for it for a long time, and so 0:11:22.440 --> 0:11:25.439 risk assets in this environment, you know, it's it's very 0:11:25.760 --> 0:11:28.439 it's very difficult, and it's probably not going to be 0:11:28.520 --> 0:11:31.199 a very quick turnaround. And we talk about the United 0:11:31.200 --> 0:11:33.040 States and how it's in a better situation. A lot 0:11:33.080 --> 0:11:34.600 of the notes that I've been reading, I've been talking 0:11:34.640 --> 0:11:37.840 about the inventory glot that a lot of analysts are 0:11:37.880 --> 0:11:42.000 expecting a company is including big retailers that have ordered 0:11:42.040 --> 0:11:44.440 too much stuff and that this will be disinflationary heading 0:11:44.440 --> 0:11:47.840 into your end. How much will this be a disinflationary force. 0:11:47.920 --> 0:11:50.120 How much will this take some of the pressure off 0:11:50.160 --> 0:11:54.800 the FED? Yeah, this is the thing I'm watching more 0:11:54.840 --> 0:11:57.400 closely than pretty much anything else, because when we had 0:11:57.440 --> 0:11:59.960 the inventory shortages last year, what we saw was a giant, 0:12:00.000 --> 0:12:03.400 gantic widening of retailers margins because effectively, people were bidding 0:12:03.480 --> 0:12:06.960 for whatever imagery they could find, especially in the vehicle market, 0:12:07.000 --> 0:12:10.320 where retail dealers margins tripled. I mean that that's an 0:12:10.320 --> 0:12:14.920 official number of retailed auto dealers margins tripled across last year. 0:12:15.160 --> 0:12:17.880 Now that leads them at a ridiculously overextended level. So 0:12:18.000 --> 0:12:20.320 now the auto production is rising because the chips are 0:12:20.320 --> 0:12:22.880 available again, and now that we've had all this retail 0:12:22.920 --> 0:12:25.480 imagery arriving on boats over the last six months or so, 0:12:25.920 --> 0:12:27.880 we are in a position now where that that that 0:12:28.160 --> 0:12:31.440 enormous margin expansion should reverse and it could easily take 0:12:31.559 --> 0:12:35.160 two or three, even four percentage points off of core 0:12:35.200 --> 0:12:37.960 inflation over the course of the next twelve months. Now, 0:12:38.160 --> 0:12:39.960 it kind of surprises me that the FED isn't talking 0:12:40.000 --> 0:12:41.560 about this. I'm sure they know it's going to happen, 0:12:41.640 --> 0:12:44.640 but but this margin expansion and contraction story, to me, 0:12:44.800 --> 0:12:47.040 has been the big driver of inflation on the upside 0:12:47.320 --> 0:12:50.000 and will be the big driver inflation on the down side. 0:12:50.040 --> 0:12:52.160 Of course, the problem is, you know, for for an 0:12:52.240 --> 0:12:56.080 investor in in in the consumer sphere, you're looking at 0:12:56.160 --> 0:12:59.920 retailers Target, Walmart, we've heard all about them facing a 0:13:00.320 --> 0:13:03.880 margin squeeze. Are really quite substantial proportions over the course 0:13:03.920 --> 0:13:06.240 of the next year. But you know, again this from 0:13:06.240 --> 0:13:08.440 the FATS perspective, this is this is good news because 0:13:08.480 --> 0:13:11.640 this is what we need to renormalize inflation to get 0:13:11.720 --> 0:13:14.760 margins back to something that's recognizably normal. It's a long 0:13:14.840 --> 0:13:18.960 way off, but the return of inventory and the excessive 0:13:19.000 --> 0:13:21.800 inventory is what's going to bring about that margin compression 0:13:22.000 --> 0:13:24.000 and drive inflation down a long way. Can we talk 0:13:24.000 --> 0:13:26.880 about some almost good news if any football games ended 0:13:26.920 --> 0:13:29.800 in the fifty four minute Karen trip here putting you 0:13:29.960 --> 0:13:33.079 up against Manchester City and what a beautiful thing that 0:13:33.160 --> 0:13:37.520 almost was. Yeah, that's all we get. That's a beautiful 0:13:37.559 --> 0:13:39.360 thing for when he scored, it was right in front 0:13:39.360 --> 0:13:42.960 of me, even the stadium. Yesterday's the best date since 0:13:43.000 --> 0:13:47.520 James is for a long time. You happier? Yeah, yes, yeah, 0:13:47.640 --> 0:13:50.320 he is. I mean this is a very mott to you. Too, 0:13:50.400 --> 0:13:53.079 because I'm going to be in the surveillance now. But 0:13:53.360 --> 0:13:57.640 advisors signed this game today Liverpool and the other Manchester. 0:13:57.840 --> 0:14:00.440 Is this like a huge deal or Tom? They lost 0:14:00.480 --> 0:14:02.920 the first two games of the season Manchester United, and 0:14:02.920 --> 0:14:04.439 they're going against one of the best teams in a 0:14:04.480 --> 0:14:08.079 premiership against Liverpool a little bit later. I imagine they're 0:14:08.080 --> 0:14:12.560 gonna get crushed based on recent performance. Does the coach 0:14:12.679 --> 0:14:15.439 go in, Oh, it's a little bit too early for 0:14:15.520 --> 0:14:20.120 that song, not necessarily bit early, but yeah, bit early. 0:14:20.200 --> 0:14:21.880 But if it carries on then yeah, it's a mess 0:14:22.080 --> 0:14:34.880 and awesome to catch up in Cheperdson, Newcastle supporter joining 0:14:34.960 --> 0:14:37.880 us now. It has been far, far too long. Peter 0:14:38.000 --> 0:14:41.880 Truber's professor of International Relations and LS and of course 0:14:41.920 --> 0:14:44.400 with Chatham House and of course an affinity to the 0:14:44.520 --> 0:14:47.720 University of Texas as well. Professor, thank you, thank you 0:14:47.880 --> 0:14:51.280 so much for joining us. What happens after six months 0:14:51.440 --> 0:14:55.440 in a war? What happens now to the two forces 0:14:55.600 --> 0:14:59.640 of this war in Ukraine? Tom, I first want to 0:14:59.680 --> 0:15:02.320 just go on record saying I'm an old time Mets fan, 0:15:03.040 --> 0:15:06.520 so she exactly what you had to say there, Um, 0:15:08.440 --> 0:15:12.280 you know, I mean, it's pretty damn clear that this 0:15:12.480 --> 0:15:15.960 war is going to continue going on. It's a it's 0:15:15.960 --> 0:15:18.160 a long slog. I think the thing that caught my 0:15:18.320 --> 0:15:22.120 attention over the weekend, actually I guess it was announced 0:15:22.200 --> 0:15:25.600 on Friday, was that Biden was going to send another 0:15:25.880 --> 0:15:29.040 seven hundred and seventy five million in military aid to 0:15:30.760 --> 0:15:33.240 two Kiev. And I think the timing of this is 0:15:33.800 --> 0:15:37.920 is no accident. It's it's it's both symbolic and and 0:15:38.120 --> 0:15:44.320 it serves a practical strategic purpose. Um Symbolically, Wednesday is 0:15:44.480 --> 0:15:48.920 Ukrainian Independence Day, and also, you know, as you're suggesting, 0:15:49.120 --> 0:15:53.000 is coincidentally the six month mark in a war that 0:15:53.160 --> 0:15:55.840 I think most analysts I thought it was going to 0:15:55.920 --> 0:15:58.960 be a romp for Moscow, and so I think in 0:15:59.040 --> 0:16:01.960 a way this is, you know, the administration is trying 0:16:02.000 --> 0:16:08.280 to underscore its commitment to Ukraine's security and acknowledge really 0:16:08.480 --> 0:16:12.120 Kiev's tenacity in the face of long odds. But I 0:16:12.160 --> 0:16:14.600 want to pick up something that John began with at 0:16:14.640 --> 0:16:18.160 the start of this segment, which is recession, because I 0:16:18.280 --> 0:16:22.600 think the administration's announcement also comes at a time when 0:16:22.720 --> 0:16:29.120 European financial and political support for the Ukrainian case. I 0:16:29.160 --> 0:16:32.680 would say it's flagging. I mean, European military commitments have 0:16:32.880 --> 0:16:36.600 not increased since um April. Arguably they are on a 0:16:36.720 --> 0:16:41.680 downward trend, and European support for the war is not 0:16:41.840 --> 0:16:45.440 as stout as it was in the spring. And partly 0:16:45.520 --> 0:16:49.320 this is because of concerns about inflation, the price of food, 0:16:49.400 --> 0:16:51.320 the price of gas that you were talking about in 0:16:51.360 --> 0:16:55.720 the last segment, but also fears of recession, which are 0:16:55.960 --> 0:16:59.280 you know, fairly widespread in Europe at this point, Peter 0:16:59.560 --> 0:17:02.680 how To, is the bombing of in Moscow that killed 0:17:02.720 --> 0:17:06.359 Daria Dugina changed the conversation? There was a lot of 0:17:06.400 --> 0:17:10.120 speculation over the weekend that this could harden the nationalist 0:17:10.240 --> 0:17:14.320 sentiment and harden it against both Ukraine and the United States. 0:17:14.720 --> 0:17:17.640 What's your view on how it sort of changes the narrative, 0:17:19.040 --> 0:17:23.879 you know, I mean speculation about the the attackers and 0:17:24.440 --> 0:17:29.000 and how Putin is going to respond is rife right 0:17:29.040 --> 0:17:32.280 now on Twitter. I'm sure you're following it. I Mean, 0:17:32.359 --> 0:17:35.920 one thing I think that's pretty clear already from the 0:17:36.520 --> 0:17:40.679 the attack is that Putin's regime looks a little weaker 0:17:40.880 --> 0:17:44.560 today than it did before the attack. I mean, whether 0:17:44.640 --> 0:17:48.119 it was the result of a Ukrainian strike. I doubt it, 0:17:48.240 --> 0:17:52.200 but that's out there of course, or rivalry within the Kremlin, 0:17:52.760 --> 0:17:57.480 or domestic resistance to Putin's nationalism. The fact is the 0:17:57.560 --> 0:18:01.800 attackers succeeded um and uh. And this is gonna fuel 0:18:01.920 --> 0:18:07.040 doubts about Putin's ability to guarantee security for those aligned 0:18:07.080 --> 0:18:10.720 with him. He'll look for some way to strike out, 0:18:11.040 --> 0:18:16.040 you know, perhaps against Kiev. He has plenty of reasons 0:18:16.119 --> 0:18:20.280 for doing that this week though, as a interrupt independence 0:18:20.400 --> 0:18:22.960 day there, but I think this perhaps adds some fuel 0:18:23.000 --> 0:18:24.920 to that fire. On the flip side, Peter, there is 0:18:24.960 --> 0:18:28.200 this discussion, and we heard about President Biden having discussions 0:18:28.240 --> 0:18:31.119 with a number of the Western allies about reinstating the 0:18:31.200 --> 0:18:34.639 Iranian nuclear deal, and that's gaining steam and giving some 0:18:34.800 --> 0:18:37.719 support and the reason why perhaps the oil prices are 0:18:37.760 --> 0:18:39.760 dipping just to touch at least that's what the narrative. 0:18:39.800 --> 0:18:43.600 It will tell you how much can that actually replace Russia? 0:18:43.680 --> 0:18:47.080 Does that further isolate Russia as a pipeline for Europe 0:18:47.320 --> 0:18:51.639 going forward? I mean, first of all, I don't think 0:18:51.680 --> 0:18:54.080 there's going to be an agreement anytime soon. Maybe I 0:18:54.280 --> 0:18:57.679 end up eating those words, but he's got a lot 0:18:57.720 --> 0:19:02.080 of people to play Kate inside inside the region, and 0:19:02.200 --> 0:19:05.920 it's just hard for me to see from a political standpoint, 0:19:06.640 --> 0:19:10.879 domestic political standpoint, Biden pushing for this before the mid 0:19:11.040 --> 0:19:14.520 term elections. After the mid term elections, Yeah, you know, 0:19:14.880 --> 0:19:17.680 then I can see them moving on it. That's not 0:19:17.800 --> 0:19:20.800 to say there's a lot of interest and push inside 0:19:20.840 --> 0:19:24.800 the administration to make this happen. Partly for the reasons 0:19:24.880 --> 0:19:29.240 that you suggest alternative sources of energy, but I think 0:19:29.720 --> 0:19:33.639 also because they think it was a mistake fundamentally to 0:19:33.880 --> 0:19:37.080 undo the agreement that was struck during the Obama years 0:19:37.320 --> 0:19:39.240 to pay it. Just awesome to catch out with you 0:19:39.359 --> 0:19:42.200 said this morning, thank you pity tributes that on the 0:19:42.280 --> 0:19:49.080 latest in Europe you cry in Russia and beyond. He 0:19:49.160 --> 0:19:51.239 had a big final song the Champions League twenty nine 0:19:51.240 --> 0:19:54.439 s Yeah, I was remember that case. You know, as 0:19:54.480 --> 0:19:56.399 we get prepared for today, we have to remember there 0:19:56.480 --> 0:19:59.320 was a point where Menu defeated Tottenham. Was one of 0:19:59.320 --> 0:20:03.680 the worst to I called him Sunday April, I think 0:20:03.760 --> 0:20:07.040 of eighteen or nineteen. I don't remember any Sanchez was 0:20:07.160 --> 0:20:09.640 just just killed. Us don't remember any of this. We're 0:20:09.680 --> 0:20:11.760 gonna beat Chelsea, but we couldn't beat Chelsea. Okay, we're 0:20:11.760 --> 0:20:14.240 talking about sting, but ultimately we're actually looking forward to 0:20:14.240 --> 0:20:16.560 a bigger game time at three pm astant time, did 0:20:16.600 --> 0:20:18.880 the juring Rochester will be watching in England? He joins 0:20:18.960 --> 0:20:22.280 us now with a sharp research note from numerous internationals. 0:20:22.359 --> 0:20:26.080 This is required listening for Global Wall Street. Jordan's I 0:20:26.200 --> 0:20:29.480 want to know the why right now? The partial differential 0:20:30.160 --> 0:20:33.480 is the euro weaker or is this just dollar flight? 0:20:33.960 --> 0:20:37.879 Is witnessed by strong Swiss Frank as well. But I 0:20:37.960 --> 0:20:40.320 think what Jane Folly was saying before that we came on, 0:20:40.720 --> 0:20:43.800 it has been been resurprising. How Yeah, Euros three party, 0:20:43.920 --> 0:20:46.440 but it has been mostly a dollar story. Euro hasn't 0:20:46.520 --> 0:20:48.600 underperformed as much as I think it should. I think 0:20:48.680 --> 0:20:53.560 the FX market is totally mispricing the situation Europe. I mean, 0:20:53.680 --> 0:20:55.800 credit markets are doing a better job at pricing and 0:20:55.840 --> 0:20:59.200 the riskless seeing credit spreads widen, but in European equities 0:20:59.480 --> 0:21:01.320 they essent. You say it's going to be a mild 0:21:01.400 --> 0:21:05.639 slow down towards average growth in Europe, where every single 0:21:05.760 --> 0:21:08.879 day we're seeing violet hills. In term of the energy 0:21:08.920 --> 0:21:12.280