1 00:00:00,080 --> 00:00:02,760 Speaker 1: Let's get to Peter Cheer, head of macro strategy at 2 00:00:02,759 --> 00:00:07,560 Speaker 1: Academy Securities. So Peter earnings and economic data effectively a 3 00:00:07,560 --> 00:00:11,080 Speaker 1: pretty strong check on an aggressive FED today. There's a 4 00:00:11,119 --> 00:00:13,960 Speaker 1: long way of saying something, but I want to try 5 00:00:13,960 --> 00:00:16,000 Speaker 1: to do it in a short way, and it's this, 6 00:00:16,320 --> 00:00:19,480 Speaker 1: the Fed went too far with its old mindset soft 7 00:00:19,520 --> 00:00:22,160 Speaker 1: on inflation to now looking like it will go too 8 00:00:22,160 --> 00:00:25,560 Speaker 1: far with its new mindset tough on inflation. The market 9 00:00:25,760 --> 00:00:28,880 Speaker 1: was having none of it on both accounts. Yeah, I 10 00:00:28,920 --> 00:00:30,840 Speaker 1: think that's a fair way to look at it. I 11 00:00:30,840 --> 00:00:33,400 Speaker 1: think they were behind the curve. We probably should have 12 00:00:33,960 --> 00:00:36,599 Speaker 1: stopped QUEI last summer. We probably should have started rate 13 00:00:36,640 --> 00:00:39,800 Speaker 1: hikes sooner. Having said that, I think we've been a 14 00:00:39,840 --> 00:00:41,879 Speaker 1: little bit aggressive. There's a lot of weakness showing up 15 00:00:41,880 --> 00:00:45,600 Speaker 1: in the economy, whether it's the inventory build, consumer credit 16 00:00:45,840 --> 00:00:49,680 Speaker 1: piling up, delinquencies ticking up. There's just a lot that 17 00:00:49,720 --> 00:00:52,640 Speaker 1: concerns me. And we've done so far, so fast on 18 00:00:52,680 --> 00:00:54,760 Speaker 1: these rate hikes. We're not getting it time to play 19 00:00:54,760 --> 00:00:57,520 Speaker 1: out and see what the repercussions are. And I continue 20 00:00:57,520 --> 00:01:00,800 Speaker 1: to believe that as bad as inflation is, job losses 21 00:01:00,800 --> 00:01:03,680 Speaker 1: in a recession are far worse. Well, let's face it, Peter. 22 00:01:03,840 --> 00:01:07,120 Speaker 1: I mean, ultimately, this is supply side inflation, not demand, 23 00:01:07,200 --> 00:01:09,759 Speaker 1: and you know this is uncharted in that regard. And 24 00:01:09,800 --> 00:01:13,280 Speaker 1: as we completely you know, throw all the eggs into 25 00:01:13,280 --> 00:01:16,280 Speaker 1: one basket, I eat monetary policy and higher interest rates. 26 00:01:16,319 --> 00:01:20,920 Speaker 1: Are we in danger of things getting horribly wrong? Yes? 27 00:01:20,959 --> 00:01:23,920 Speaker 1: I completely think so. Um. You know, we just today, 28 00:01:23,959 --> 00:01:26,720 Speaker 1: as you mentioned earlier, we had a surprise that oil 29 00:01:26,720 --> 00:01:30,440 Speaker 1: inventory is picked up, right, so demand for oil is decreasing. 30 00:01:30,600 --> 00:01:32,680 Speaker 1: And I don't think that's just for the consumers. I 31 00:01:32,720 --> 00:01:36,039 Speaker 1: think that's industry slowing down. As we've had this inventory build, 32 00:01:36,080 --> 00:01:39,039 Speaker 1: you're gonna have left need to create new products. So 33 00:01:39,160 --> 00:01:41,440 Speaker 1: I think we should be giving this time and seeing 34 00:01:41,480 --> 00:01:43,280 Speaker 1: whether the economy is I don't want to say the 35 00:01:43,319 --> 00:01:45,720 Speaker 1: word rolling over, but certainly slowing of its own accord. 36 00:01:46,240 --> 00:01:49,240 Speaker 1: And by hiking on top of that, we're just pushing 37 00:01:49,240 --> 00:01:52,120 Speaker 1: things too far, and that to me is very dangerous. Yeah. 38 00:01:52,120 --> 00:01:54,160 Speaker 1: And the defense of that is that if you look 39 00:01:54,160 --> 00:01:56,880 Speaker 1: at the lag effect of rate hikes, people say it's 40 00:01:57,080 --> 00:01:59,520 Speaker 1: something like three to nine months, right, it means that 41 00:01:59,640 --> 00:02:03,200 Speaker 1: we've only felt the impact of one basis point hike, 42 00:02:03,720 --> 00:02:07,120 Speaker 1: and the FED has done two basis points, so there 43 00:02:07,120 --> 00:02:11,000 Speaker 1: are going to be residual effects for some time to come, right, 44 00:02:11,120 --> 00:02:14,160 Speaker 1: And you just said supply chains are starting to open up. 45 00:02:14,200 --> 00:02:18,440 Speaker 1: Your hearing stories about semiconductor shipment shipments coming through, you're 46 00:02:18,480 --> 00:02:21,560 Speaker 1: seeing that easing of supply chains all of a sudden 47 00:02:21,720 --> 00:02:24,360 Speaker 1: when you look at whether it's ball to dryer, other 48 00:02:24,400 --> 00:02:27,120 Speaker 1: measures of shipping costs, those are going down. So you 49 00:02:27,240 --> 00:02:30,760 Speaker 1: might be easing some of these supply chains, which should 50 00:02:30,760 --> 00:02:33,680 Speaker 1: be deflationary in its own right, as you're kind of 51 00:02:34,360 --> 00:02:36,640 Speaker 1: messing up with the demand side. So that to me 52 00:02:36,720 --> 00:02:39,000 Speaker 1: is a real problem. And I think this economy is 53 00:02:39,080 --> 00:02:42,760 Speaker 1: kind of on accellerance, so everything happens faster than we're 54 00:02:42,840 --> 00:02:44,959 Speaker 1: used to, and that is why I'm so concerned that 55 00:02:45,000 --> 00:02:48,400 Speaker 1: we're going to see a slowdown of fairly decent proportion 56 00:02:48,760 --> 00:02:51,120 Speaker 1: coming into Q two and three. Three. Well, of course, 57 00:02:51,160 --> 00:02:53,840 Speaker 1: one of the corollaries of that invasion has been uh 58 00:02:53,880 --> 00:02:57,160 Speaker 1: that we've seen NATO now perhaps have some more meaning, 59 00:02:57,560 --> 00:02:59,920 Speaker 1: but perhaps the other meaning is that we have grid 60 00:03:00,280 --> 00:03:04,160 Speaker 1: and perhaps inexorably moving towards a more bifurcated world. What's 61 00:03:04,160 --> 00:03:06,320 Speaker 1: your thoughts, So, what are your thoughts on that? And 62 00:03:06,360 --> 00:03:08,560 Speaker 1: what I'd like to add to that is if you 63 00:03:08,680 --> 00:03:11,840 Speaker 1: see that Nancy Pelosi visit, does that also push China 64 00:03:11,919 --> 00:03:15,239 Speaker 1: further into the Russian camp? Yes. I think we're in 65 00:03:15,280 --> 00:03:18,040 Speaker 1: a unique position to talk about this. That Academy Securities. 66 00:03:18,160 --> 00:03:20,800 Speaker 1: I work with seventeen retired generals and admirals whose service 67 00:03:20,840 --> 00:03:23,680 Speaker 1: are Geopolitical Intelligence Group. So we've been very focused on 68 00:03:23,720 --> 00:03:26,480 Speaker 1: what's been going on with Russia and with China. And 69 00:03:26,720 --> 00:03:30,079 Speaker 1: starting three years ago, we saw this strategic competition really 70 00:03:30,080 --> 00:03:32,680 Speaker 1: starting with China that was under the Trump administration, and 71 00:03:32,720 --> 00:03:34,839 Speaker 1: we see them kind of pulling away from the US 72 00:03:34,920 --> 00:03:37,720 Speaker 1: becoming more inward looking. I think Russia fell into that 73 00:03:37,760 --> 00:03:39,920 Speaker 1: as well. So that was really the first time we've 74 00:03:39,920 --> 00:03:43,200 Speaker 1: had this bad actor behaving badly. And what we continue 75 00:03:43,200 --> 00:03:46,600 Speaker 1: to see is almost this alignment of autocratic nations where 76 00:03:46,880 --> 00:03:49,200 Speaker 1: China is raising their hand and saying we want come 77 00:03:49,200 --> 00:03:50,880 Speaker 1: out of these we don't care what you do to 78 00:03:50,960 --> 00:03:53,200 Speaker 1: your people, we don't care about your politics, and we 79 00:03:53,240 --> 00:03:54,840 Speaker 1: will pay money and we're gonna be your customer for 80 00:03:54,920 --> 00:03:58,520 Speaker 1: years to come. And the US when we triggered uh, 81 00:03:58,680 --> 00:04:01,640 Speaker 1: you know, basically with held Rush's access to their own 82 00:04:01,680 --> 00:04:05,000 Speaker 1: dollar holdings, that's been another message that China uses with 83 00:04:05,040 --> 00:04:07,240 Speaker 1: these countries. So I think we're seeing this realignment where 84 00:04:07,640 --> 00:04:11,240 Speaker 1: the commodity rich, autocratic nations are aligning with China. We're 85 00:04:11,360 --> 00:04:13,600 Speaker 1: getting NATO stronger, and I think what we really need 86 00:04:13,600 --> 00:04:16,720 Speaker 1: to see from at least the US perspective is stronger 87 00:04:16,760 --> 00:04:19,320 Speaker 1: relationships with Mexico and South America. So I think that's 88 00:04:19,320 --> 00:04:22,040 Speaker 1: how the world is shaping up. It's interesting. I think 89 00:04:22,520 --> 00:04:25,000 Speaker 1: we all believe that at one time putent hope to 90 00:04:25,080 --> 00:04:28,240 Speaker 1: fracture NATO. If anything, it's coalesced. But we really are 91 00:04:28,320 --> 00:04:31,080 Speaker 1: seeing this realignment of seeing that with China. Yeah, up 92 00:04:31,080 --> 00:04:35,039 Speaker 1: against China, however, and the short term, China is set 93 00:04:35,080 --> 00:04:38,640 Speaker 1: to begin an effective blockadive Taiwan with its live fire 94 00:04:38,680 --> 00:04:42,440 Speaker 1: exercises that's happening from today. Uh. That could have a 95 00:04:42,440 --> 00:04:45,720 Speaker 1: big effect on supply chains. Uh. If we thought it 96 00:04:45,760 --> 00:04:49,240 Speaker 1: was troubled before, it may be more troubled now. But 97 00:04:49,279 --> 00:04:51,480 Speaker 1: do you say that inventory levels have been built up 98 00:04:51,520 --> 00:04:54,240 Speaker 1: so much? I wonder whether or not that matters as much. 99 00:04:55,320 --> 00:04:57,680 Speaker 1: I don't know that it matters immediately. So I saw 100 00:04:57,720 --> 00:05:00,200 Speaker 1: a lot of articles claiming success for this visit, and 101 00:05:00,200 --> 00:05:01,600 Speaker 1: I think in many ways it was good that it 102 00:05:01,680 --> 00:05:04,799 Speaker 1: showed that we respect Taiwana, that we care about Taiwan. 103 00:05:05,120 --> 00:05:07,520 Speaker 1: At the same time, I think we're a little bit shortsighted. 104 00:05:07,560 --> 00:05:10,039 Speaker 1: We've got to be very cautious of what China or 105 00:05:10,040 --> 00:05:13,160 Speaker 1: how China chooses to, you know, fight back. We never 106 00:05:13,160 --> 00:05:14,800 Speaker 1: thought they were going to do a military thing. We 107 00:05:14,839 --> 00:05:17,440 Speaker 1: did not think that they were going to try and 108 00:05:17,520 --> 00:05:20,680 Speaker 1: interfere with her flights. But we cannot say safely that 109 00:05:20,760 --> 00:05:23,440 Speaker 1: China has done with whatever retaliation they want, and it 110 00:05:23,520 --> 00:05:26,120 Speaker 1: might be much more on the economic side. And maybe 111 00:05:26,120 --> 00:05:29,640 Speaker 1: this ring fencing of Taiwan, if that becomes anything more 112 00:05:29,640 --> 00:05:33,320 Speaker 1: than temporary, becomes problematic and that sets us back on Unfortunately, 113 00:05:33,320 --> 00:05:36,680 Speaker 1: this inflation course and supply chain issues, well we'll tell me, 114 00:05:36,720 --> 00:05:39,360 Speaker 1: you know, from a macro perspective, you know, how is 115 00:05:39,400 --> 00:05:42,560 Speaker 1: this likely to play out? You know, And that's perhaps 116 00:05:42,680 --> 00:05:45,960 Speaker 1: it's Perry above what's going on right now with the 117 00:05:46,000 --> 00:05:50,839 Speaker 1: supply chain rejigging, a commodity price increases in supply side inflation. 118 00:05:51,880 --> 00:05:53,680 Speaker 1: So one thing we've been talking to clients for about 119 00:05:53,720 --> 00:05:57,279 Speaker 1: three to six months is shifting your supply chains away 120 00:05:57,279 --> 00:06:01,119 Speaker 1: from Southeast Asia, and whether it's Mexico, whether South America, 121 00:06:01,200 --> 00:06:02,839 Speaker 1: and I think this is going to further play into 122 00:06:02,880 --> 00:06:04,960 Speaker 1: that where people were thinking, Okay, even if I don't 123 00:06:04,960 --> 00:06:07,520 Speaker 1: want my supply chain to be based out of China, 124 00:06:07,839 --> 00:06:11,400 Speaker 1: maybe it's Thailand, maybe it's Vietnam, maybe it's Cambodia. I 125 00:06:11,440 --> 00:06:15,200 Speaker 1: think there's a real concern about China's potential to interfere. 126 00:06:15,560 --> 00:06:18,960 Speaker 1: They're growing naval power, they're growing willing to project that power. 127 00:06:19,240 --> 00:06:20,840 Speaker 1: So I think that's gonna be the shift, and that's 128 00:06:20,839 --> 00:06:22,480 Speaker 1: gonna be one of the big beneficiaries from this is 129 00:06:22,480 --> 00:06:26,080 Speaker 1: gonna be South America. I think these reshifting supply chains 130 00:06:26,080 --> 00:06:28,760 Speaker 1: are inflationary over the short term. Over the long term, 131 00:06:28,800 --> 00:06:30,840 Speaker 1: you have a safer supply chain, and I think that's 132 00:06:30,920 --> 00:06:32,760 Speaker 1: very good and healthy for company. Okay, so how do 133 00:06:32,800 --> 00:06:35,719 Speaker 1: you put that into your pick of the day. So 134 00:06:35,839 --> 00:06:39,440 Speaker 1: I like emerging market stocks, I'm back to liking commodities 135 00:06:39,960 --> 00:06:43,520 Speaker 1: um particular materials. If the US get some traction on 136 00:06:43,560 --> 00:06:46,400 Speaker 1: these bills to help build out pot sustainable energy and 137 00:06:46,400 --> 00:06:50,000 Speaker 1: traditional energy infrastructure, Yeah, that's deflationary three five years down 138 00:06:50,000 --> 00:06:51,919 Speaker 1: the road, but near term, you're going to create a 139 00:06:51,920 --> 00:06:56,320 Speaker 1: lot of demand for concrete, steal anything e v so, lithium, cobalt. 140 00:06:56,400 --> 00:06:58,120 Speaker 1: I think those are going to bounce again, so I 141 00:06:58,160 --> 00:07:00,960 Speaker 1: like a lot of good picks there, Peter, thanks very much, 142 00:07:01,000 --> 00:07:04,720 Speaker 1: Peter cheer At of macro Strategy at Academy Securities.