WEBVTT - Surveillance: Soft Landing with Slok 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.039 with Jonathan Farrell and Lisa A. Brawnowitz. Daily we bring 0:00:13.080 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.239 --> 0:00:23.320 international relations. Find Bloomberg Surveillance on Apple Podcast, SoundCloud, Bloomberg 0:00:23.360 --> 0:00:29.600 dot Com, and of course on the Bloomberg terminal. John 0:00:29.640 --> 0:00:31.640 Farrell and I are committed to a global stance as 0:00:31.680 --> 0:00:34.519 we go to the World Cup and now representing Denmark 0:00:34.520 --> 0:00:37.159 who is in the World Cup. Torson Slock joins us. 0:00:37.280 --> 0:00:40.159 He's chief economist at Apollo Global Management. Far more than 0:00:40.200 --> 0:00:43.240 that his leadership in economics with Peter Hooper at Deutsche 0:00:43.240 --> 0:00:46.400 Bank over the years and going over to the dark side. 0:00:46.400 --> 0:00:49.960 What what was it change like going Deutsche Bank to Apollo? 0:00:50.400 --> 0:00:56.120 I mean expect on a given Monday when you walked 0:00:56.120 --> 0:00:58.960 in the door to Apollo from a major bank with 0:00:59.120 --> 0:01:02.600 your majors sess there, what was that like? Well, my 0:01:02.680 --> 0:01:04.880 job is to watch the economic data and watch financial 0:01:04.920 --> 0:01:07.920 markets and with that backroup, that's really the same thing 0:01:07.920 --> 0:01:11.399 I do. Well talk about inflation, unemployment and the things 0:01:11.400 --> 0:01:14.000 that you guys talk about. What's going on? Things getting better? 0:01:14.040 --> 0:01:15.720 Are they getting worse. Are the central banks going to 0:01:15.760 --> 0:01:19.360 react differently? The job in is really very similar, very good. 0:01:19.440 --> 0:01:22.080 How how important is the next inflation data after the 0:01:22.120 --> 0:01:25.200 festivities we saw yesterday? I think it's very important because 0:01:25.200 --> 0:01:26.800 what I think is the key issue at the moment 0:01:27.000 --> 0:01:30.480 is the sequencing of hitting the fits dual mandate. So 0:01:30.560 --> 0:01:33.679 what that means that is, yesterday we've got confirmation that 0:01:33.720 --> 0:01:36.240 we have seen now inflation come down from the peak 0:01:36.280 --> 0:01:40.000 in June without an increase in the unemployment rate. That's 0:01:40.000 --> 0:01:42.400 of course telling you that we might actually have a 0:01:42.480 --> 0:01:45.000 scenario where we could have a soft landing because we 0:01:45.040 --> 0:01:47.440 are now seeing inflation begin to come down. Admittedly seven 0:01:47.480 --> 0:01:49.760 point seven is still very elevated, but at least it's 0:01:49.800 --> 0:01:53.360 coming down without the fear increasing the infloma rate because 0:01:53.400 --> 0:01:55.720 the fits dual mandate and Jaypal has been very clear 0:01:55.760 --> 0:01:58.120 about this, we need to see a softening the labor market, 0:01:58.160 --> 0:02:00.680 and we have really not seen any meaning softening. So 0:02:00.720 --> 0:02:03.600 the sequencing happens to be in the right way for markets. 0:02:03.640 --> 0:02:06.800 Name first, inflation is coming down without even seeing an 0:02:06.800 --> 0:02:09.200 increase in the plan. Let's explore that further. So we 0:02:09.240 --> 0:02:11.600 may have seen peak inflation year over a year where's 0:02:11.639 --> 0:02:15.120 the bottom out at next year. So obviously there's a 0:02:15.200 --> 0:02:17.400 very long road. If you compare with what happened in 0:02:17.440 --> 0:02:19.880 the mid nineteen seventies, it took two years in nineteen 0:02:19.880 --> 0:02:22.440 seventy four to get inflation back from the peak to 0:02:22.800 --> 0:02:25.560 where it was before. So if it also takes two years, 0:02:25.600 --> 0:02:27.800 then of course we still have very long road ahead 0:02:27.800 --> 0:02:29.480 of us, and that of course could be associated with 0:02:29.520 --> 0:02:32.000 all kinds of sharks, including of course not only do 0:02:32.040 --> 0:02:34.760 your political sharks, but also to commodity prices and other 0:02:34.800 --> 0:02:37.360 parts of the CPI conplat This is hard to predictive, course, 0:02:37.360 --> 0:02:39.400 but it is. There's something about the nature, the characteristic 0:02:39.440 --> 0:02:42.200 of this inflation story that means it will be difficult 0:02:42.240 --> 0:02:44.079 to go back to the low inflation of the previous 0:02:44.200 --> 0:02:46.360 right game. So there's a number of arguments why you 0:02:46.400 --> 0:02:49.520 could have inflation potentially higher in the long run. First 0:02:49.520 --> 0:02:52.480 of all, you have, of course demographics and immigration that 0:02:52.480 --> 0:02:55.079 looks quite different now you had very little immigration during 0:02:55.080 --> 0:02:58.000 the pandemic, and also the demographics also suggesting that we 0:02:58.000 --> 0:03:00.720 could have a more permanent upward push on inflation. You 0:03:00.800 --> 0:03:05.120 also have that deglobalization that if there is less globalization 0:03:05.240 --> 0:03:07.480 in the future. That's also going to imply that this 0:03:07.520 --> 0:03:10.400 stuff that we buy and to installs and that we 0:03:10.440 --> 0:03:13.560 purchase will of course be more expensive. And finally, technology 0:03:13.760 --> 0:03:16.680 might not be contributing with as much productivity growth as 0:03:16.720 --> 0:03:18.560 it has not historically. So that is all arguing for 0:03:18.680 --> 0:03:21.080 that might be some structural pressures, but it is important 0:03:21.080 --> 0:03:22.960 that the reason why inflation is high at the moment 0:03:23.080 --> 0:03:25.679 it is probably also very importantly for cychnical reasons. So yes, 0:03:25.880 --> 0:03:27.400 as you're saying, John, we need to get down with 0:03:27.440 --> 0:03:30.000 inflation towards two. But it is certainly a long road 0:03:30.000 --> 0:03:33.720 we have ahead of us. Do you aggregate your economic 0:03:33.840 --> 0:03:37.720 analysis or as you mentioned technology, are we now a 0:03:37.840 --> 0:03:42.680 polarized America, a polarized Denmark, a polarized world of the 0:03:42.760 --> 0:03:46.200 technology haves and the technology have not. Well, the main 0:03:46.240 --> 0:03:48.320 implication of that, of course is what an impact has 0:03:48.320 --> 0:03:50.800 on inflation. So of course, one very important debate is 0:03:50.800 --> 0:03:53.400 when you invest, for example, in renewable energy, that's of 0:03:53.440 --> 0:03:56.840 course very big debate about is that inflation area disinflasionary 0:03:56.920 --> 0:04:02.360 because all investment, all capic spending, should be disinflationary. So 0:04:02.440 --> 0:04:05.120 in that sense, there's some very important differences across the 0:04:05.160 --> 0:04:07.680 Atlanting Ocean. In terms of what is the investment outlook 0:04:07.880 --> 0:04:12.240 for the US relative to Euros. Capital deepening dominic customer 0:04:12.320 --> 0:04:14.880 missour has been very good. And let's the idea that 0:04:14.920 --> 0:04:17.760 there's some things going on post pandemic, supply side, demand 0:04:17.800 --> 0:04:20.800 side and all that. But are we seeing a capital 0:04:20.880 --> 0:04:25.320 deepening that we're I would say it's invisible almost right now. Well, 0:04:25.320 --> 0:04:27.560 at least we're seeing very significant capital deepening in the 0:04:27.640 --> 0:04:30.440 interes transition, and that's of course very important because that's 0:04:30.480 --> 0:04:32.799 ultimately the goal with that is to lower energy prices, 0:04:33.000 --> 0:04:35.960 which also really should be disinflationary for inflation. But it's 0:04:36.000 --> 0:04:38.080 true that this is certainly a very important team also 0:04:38.160 --> 0:04:40.880 for the long run outlook for inflation. But I still 0:04:40.880 --> 0:04:43.159 say that in the near term the inflation outlook is 0:04:43.160 --> 0:04:46.360 mainly driven by the cyclical drivers of inflation, naming the 0:04:46.520 --> 0:04:49.159 risk that the US economy is overheating. And that's of 0:04:49.160 --> 0:04:51.080 course the whole reason why they fed is raising rates 0:04:51.080 --> 0:04:52.840 and except to try to cool things down, and they 0:04:52.839 --> 0:04:55.400 haven't really been very successful at cooling things down. They 0:04:55.400 --> 0:04:57.360 have cooled down the good sector or the interest rate 0:04:57.360 --> 0:05:00.400 sensitive components of GDP, but that's only about GDP, the 0:05:00.440 --> 0:05:05.760 service sector, airlines, packed hotels, restaurants, concerts, spawning events, It's 0:05:05.760 --> 0:05:08.919 all packed everywhere. The Shouter conversation a big pace of 0:05:08.960 --> 0:05:11.599 this as well. You mentioned the sequencing. Can you compare 0:05:11.640 --> 0:05:15.240 and contrast the sequencing you're talking about in America and 0:05:15.279 --> 0:05:18.000 what you're saying to what you're also seeing developing Europe 0:05:18.120 --> 0:05:20.920 because we both sent a different story there. Yeah, very 0:05:21.080 --> 0:05:23.480 that's very important because in Europe you're actually seeing inflasion 0:05:23.520 --> 0:05:26.200 is still going up, but economic activity is starting to 0:05:26.520 --> 0:05:29.159 slow down. In fact, if you look at your Bloomberg 0:05:29.240 --> 0:05:32.200 screency it will see, of course contentious expects that both 0:05:32.200 --> 0:05:34.640 Europe and German in particular will be in a recession 0:05:35.160 --> 0:05:37.920 next year. So the conclusion is, of course that if 0:05:37.960 --> 0:05:39.880 you have a very different situation in Europe where it's 0:05:39.880 --> 0:05:41.719 just going to take a little bit longer before you 0:05:41.760 --> 0:05:44.039 begin to see inflation come down, then it becomes a 0:05:44.040 --> 0:05:46.760 debate about, well, is it the case that inflation is 0:05:46.760 --> 0:05:49.120 going to stay higher for longer in the US or 0:05:49.160 --> 0:05:51.880 in the U Area and stacks flation in Europe base case. Now, 0:05:52.320 --> 0:05:55.200 at least today it looks like Europe is facing a 0:05:55.240 --> 0:05:58.800 lot more head winds than the US, because Europe unfortunately 0:05:58.839 --> 0:06:01.039 is facing inflasion that's a higher levels. There are some 0:06:01.160 --> 0:06:03.560 very important issues about that. The composition of inflation in 0:06:03.560 --> 0:06:06.040 Europe consists more of energy, about two thirds of inflation 0:06:06.040 --> 0:06:08.520 in Europe's energy and only a third in the US. 0:06:08.560 --> 0:06:10.200 So if energy prices once we get to the other 0:06:10.240 --> 0:06:12.840 side of February two thousand twenty three, once we get 0:06:12.880 --> 0:06:16.120 to US out of Russia's invasion of Ukraine, the twelve 0:06:16.200 --> 0:06:18.680 month window will begin to no longer take into account 0:06:18.680 --> 0:06:20.720 the big spike that we had an enterprise effects can 0:06:21.000 --> 0:06:23.400 That's exactly when you begin to see European inflation potentially 0:06:23.400 --> 0:06:25.640 coming down a lot harder. So that's why the rate 0:06:25.680 --> 0:06:27.640 space as of a lot of debate of course about 0:06:28.000 --> 0:06:31.159 bonds attractive at these levels if European inflation is potentially 0:06:31.200 --> 0:06:33.479 coming down very very quickly once we get into the 0:06:33.480 --> 0:06:36.599 second quarter of next year. So are you, in summary 0:06:36.839 --> 0:06:40.640 an optimistic tone for Apollo management? Are you telling them 0:06:40.680 --> 0:06:44.400 that transactions can be a benefit now? Are you telling 0:06:44.440 --> 0:06:47.760 them to build cash, to use cash, to keep cash. 0:06:47.800 --> 0:06:49.719 Whether the way I look at it is that in 0:06:49.839 --> 0:06:52.560 March of two thousand twenty the window of opportunity in 0:06:52.640 --> 0:06:55.680 my view was only open for about two weeks, the 0:06:55.720 --> 0:06:57.600 window of opportunity were doing things. At the moment, it 0:06:57.640 --> 0:07:00.240 is probably more like two years, maybe even three. In 0:07:00.279 --> 0:07:02.440 other words, there's a lot of distress. How you markets, 0:07:02.480 --> 0:07:04.720 I sent shut down? Capital Markets, I sent you to 0:07:04.760 --> 0:07:07.240 shut down. And that's where private equa in private capital, 0:07:07.279 --> 0:07:10.040 of course is playing a very very important role as stabilizer, 0:07:10.400 --> 0:07:13.280 stepping in and doing things. Where's the paint? It's the 0:07:13.320 --> 0:07:15.920 question we've been asking around this table and the price 0:07:15.920 --> 0:07:17.600 that we're gonna pay for and to basis points of 0:07:17.680 --> 0:07:20.160 tiening in eight months, is it really just the move 0:07:20.320 --> 0:07:23.600 on SMPT, moving on ASTAC. Well, unless you know the 0:07:23.640 --> 0:07:25.920 debate about all his long and variable lacks. I mean, 0:07:25.960 --> 0:07:27.840 it's still not clear to me personally what the exactly 0:07:27.880 --> 0:07:29.760 that means. But at this point you still say, okay, well, 0:07:29.800 --> 0:07:32.840 where are these long and variable legs? We are now well, 0:07:32.960 --> 0:07:34.240 depending on how you look at it, but we're at 0:07:34.280 --> 0:07:36.920 least six nine months into these long and variable lects 0:07:36.960 --> 0:07:39.600 and we really really haven't seen much impact yet. So 0:07:39.760 --> 0:07:42.840 absolutely the pain he really here is that if inflation 0:07:42.840 --> 0:07:45.080 does not come down, the FED will have to go 0:07:45.360 --> 0:07:48.160 and potentially go a lot more. Do you follow Denmark football? Oh? 0:07:48.200 --> 0:07:50.480 Absolutely I have. I should have warned my red shirt. 0:07:50.680 --> 0:07:53.400 It's a great story. I mean, this guy, Christian Ericson 0:07:53.600 --> 0:07:58.520 had a heart attack. He's come back and Denmark has 0:07:58.520 --> 0:08:01.119 whipped France a number of times and one of maybe 0:08:01.160 --> 0:08:04.520 the most exciting pairing. Such a classy player, and he's 0:08:04.560 --> 0:08:06.800 one of the best players on team, and he plays 0:08:06.840 --> 0:08:09.360 so well today. I love him. He's great. I mean, 0:08:09.360 --> 0:08:12.480 it's just, folks, this is really something. This guy John 0:08:12.560 --> 0:08:15.720 and I'm not exaggerating. He literally almost died on the field, 0:08:15.800 --> 0:08:18.679 not at all, that's not an exaggeration. Came very close, 0:08:18.760 --> 0:08:20.240 and it's great to see him back on the field. 0:08:20.320 --> 0:08:22.840 And they're in the bracket with France, who they've already 0:08:22.840 --> 0:08:25.280 shown they can beat. I mean, it's just that's the 0:08:25.320 --> 0:08:28.960 one game teach you've got on this. I'm working. I'm working, folks. 0:08:29.000 --> 0:08:31.680 I've got my cliff notes out. I've been discussing just 0:08:31.720 --> 0:08:33.560 how much things are going to shut down in Europe 0:08:33.679 --> 0:08:36.240 on a trading flows and how much market volume is 0:08:36.240 --> 0:08:39.360 going to roll over going into Christmas. Well, Denmark is 0:08:39.360 --> 0:08:42.160 being friends on a Saturday. There's a Thanksgiving Saturday and 0:08:42.160 --> 0:08:43.920 Williamsburg watching with all my buddies. Is that what you're 0:08:43.920 --> 0:08:48.560 gonna do. It's a special bar for Denmark. We're going 0:08:48.600 --> 0:08:53.920 to get serveret toss and this was awesome. Thank you, 0:08:53.960 --> 0:09:05.760 sir Torsten Slock. They have a polite management. Let's go 0:09:05.840 --> 0:09:09.800 back to December eighteen. One of the greatest calls in 0:09:09.880 --> 0:09:13.640 equity market strategy the modern times Benjamin Laidler of HSBC 0:09:14.280 --> 0:09:17.160 to shut up the bottoms in. He absolutely nailed it 0:09:17.400 --> 0:09:20.200 with E Toro Today and their global market strategists. He 0:09:20.240 --> 0:09:23.640 has published this morning the bottom is in, then, Laidler, 0:09:23.880 --> 0:09:28.000 is this like Christmas Eve of two thousand eighteen. Yeah, 0:09:28.000 --> 0:09:30.600 it is. I do think the bottoms in um for 0:09:30.600 --> 0:09:32.960 a lot of reasons. I think earning to hang in there. 0:09:33.120 --> 0:09:36.120 I think that sentiments very poor, evaluations are low. We've 0:09:36.120 --> 0:09:40.000 got wild cards like China improving, and now crucially the 0:09:40.040 --> 0:09:42.640 inflations fever is sort of beginning to break and that's 0:09:42.640 --> 0:09:45.440 giving some visibility on the top of the cycle. That's 0:09:45.480 --> 0:09:48.320 not enough to get us off on the next boat market, 0:09:48.400 --> 0:09:51.600 but it's absolutely enough to tell us that the bottom 0:09:51.679 --> 0:09:55.199 is in. So I think that's a similarity. With the 0:09:55.280 --> 0:09:57.880 difference is that then it was a v shaped recovery. 0:09:58.200 --> 0:09:59.679 This I think it's going to be more like a you. 0:10:00.400 --> 0:10:03.920 But this is absolutely the necessary first step. And you know, 0:10:04.000 --> 0:10:06.120 we learned a lot of things yesterday. One of them 0:10:06.200 --> 0:10:08.280 was you've got to be in it to win it, um, 0:10:08.480 --> 0:10:12.720 So I do think investors need to be in this market. Ben, 0:10:12.760 --> 0:10:17.160 What is the character or the human behavior of those 0:10:17.280 --> 0:10:20.439 loaded in cash? There's a lot of cash out there 0:10:20.520 --> 0:10:24.720 right now. I have prospectives portfolios of five percent four percent, 0:10:24.920 --> 0:10:28.000 who are in seven percent cash, et cetera. How all 0:10:28.160 --> 0:10:31.960 cash respond? Yeah, tough to criticize that. I mean, there's 0:10:32.000 --> 0:10:35.640 been a historic year for the failure of diversification. You know, 0:10:35.720 --> 0:10:39.760 basically nothing's worked apart from cash. So I'm sympathetic. But 0:10:40.240 --> 0:10:42.560 we're going into the end of the year. Historically the 0:10:42.559 --> 0:10:45.120 best seasonality of the year. You can pour cold water 0:10:45.240 --> 0:10:47.199 on that, you know many times, but like, don't think 0:10:47.240 --> 0:10:50.079 you can this year, after such a historically bad year 0:10:50.120 --> 0:10:52.920 across all asset classes, there was so much cash on 0:10:52.960 --> 0:10:57.560 the sidelines and looking forward to a less bad three 0:10:58.400 --> 0:11:01.959 I think those are the ingredients for Christmas continuing to 0:11:02.000 --> 0:11:04.440 come early. And then there were some curious moves yesterday 0:11:04.480 --> 0:11:06.720 as well. A lot of people picking on say a 0:11:06.760 --> 0:11:09.640 company called Carvana, which operates an online platform for bank 0:11:09.760 --> 0:11:12.840 used cars running more than on a CPI print, the 0:11:12.840 --> 0:11:15.679 show to use car prices absolutely plunging. So Ben, can 0:11:15.720 --> 0:11:17.800 you help me understand the moves that I should get 0:11:17.840 --> 0:11:19.920 on the train with and the ones I should avoid. Yeah, 0:11:20.120 --> 0:11:23.840 I think that's a reflection of evaluation relief, blower bond yields, 0:11:24.280 --> 0:11:27.320 and just you know, to my just how aggressively underweight 0:11:27.920 --> 0:11:29.720 a lot of people are. So you know, when you 0:11:29.760 --> 0:11:31.280 get the biggest bank to your back, where do you 0:11:31.280 --> 0:11:33.320 get the most leaveries of stuff that collapse the most? 0:11:33.559 --> 0:11:36.199 Were evaluations are being under the most pressure. That's why 0:11:36.200 --> 0:11:38.520 you saw some relief from yesterday. That doesn't mean you 0:11:38.520 --> 0:11:41.040 should chase it. I still think, you know, this is 0:11:41.080 --> 0:11:42.800 a market where you want to be invested, but you 0:11:42.800 --> 0:11:45.480 want to be reasonably defensive. It's gonna be two steps forward, 0:11:45.520 --> 0:11:47.240 one step back. I mean, we may have seen the 0:11:47.280 --> 0:11:49.240 peak for inflation, but I do think it's going to 0:11:49.280 --> 0:11:51.640 be a it's going to be a bump pieces on 0:11:51.720 --> 0:11:55.360 march down. Um, so you know, staying those defensives and 0:11:55.480 --> 0:11:58.560 as we get some more validation that inflation just continues 0:11:58.600 --> 0:12:01.160 to come down and we get to the top of 0:12:01.160 --> 0:12:03.520 that red cycle and begin to look to sort of 0:12:03.520 --> 0:12:05.920 cuts later in twenty three, you just keep adding risk, 0:12:06.000 --> 0:12:09.160 and risk is probably bigger tech in traditional rate dentatives 0:12:09.280 --> 0:12:12.960 like like real estate. I'm not convinced by um the 0:12:13.040 --> 0:12:15.000 sort of disruptive tech names you know at this point, 0:12:15.000 --> 0:12:17.160 even though that's what led the rally yesterday. Let's talk 0:12:17.200 --> 0:12:19.120 about leadership. You touched on it. You're calling the Santa 0:12:19.200 --> 0:12:21.719 rally two weeks before Thanksgiving, Christmas has come early. Let's 0:12:21.760 --> 0:12:23.800 build on that the tech names that you do want 0:12:23.840 --> 0:12:25.920 to own then, and where you're starting to be encouraged 0:12:25.960 --> 0:12:27.440 by some of the work that's being done by the 0:12:27.480 --> 0:12:30.360 c suite. We've seen cuts at places like Meta. We 0:12:30.400 --> 0:12:32.559 saw a report from the Journal yesterday that Amazon was 0:12:32.559 --> 0:12:34.640 getting in on the cuss cunning act as well. Where 0:12:34.640 --> 0:12:35.960 do you want to be? Where do you want to avoid? 0:12:36.559 --> 0:12:37.880 So I think it's a bit of a barber as 0:12:37.920 --> 0:12:40.680 I say, right now, those traditionals are value names. I 0:12:40.720 --> 0:12:43.240 think they continue to the continue to do well right 0:12:43.320 --> 0:12:45.400 both on the defensive and sort of healthcare names, but 0:12:45.520 --> 0:12:48.360 also some of these sort of depressed um some of 0:12:48.400 --> 0:12:51.600 these depressed banks but I think looking forward, I think 0:12:51.600 --> 0:12:53.319 next year is gonna be very different to this year. 0:12:53.360 --> 0:12:57.120 This year was all about um, massive evaluation, de ratings 0:12:57.120 --> 0:12:59.319 and earning holding reasonably firm. I think next year is 0:12:59.320 --> 0:13:01.280 the opposite. I think onlying is gonna come under more 0:13:01.280 --> 0:13:03.520 pressure and you're gonna get some and you're gonna get 0:13:03.520 --> 0:13:06.400 some evaluation relief. I think that's a much better environment 0:13:06.760 --> 0:13:09.920 for for big tech with these dominant market shows, these 0:13:09.920 --> 0:13:12.640 big margins. He's strong cash for portress balance sheet and 0:13:12.640 --> 0:13:14.800 evaluations that will already come down a long way. So 0:13:14.960 --> 0:13:17.240 Ben find a question. Then you're calling for ray cuts 0:13:17.360 --> 0:13:20.520 in twenty three, what's behind that call? Right cuts in 0:13:20.559 --> 0:13:22.360 the end of twenty three, I think just think markets 0:13:22.400 --> 0:13:24.720 are going to start discounting that you know, reasonably early. 0:13:25.360 --> 0:13:28.559 I think every inflation lead indicated, there's not a single 0:13:28.600 --> 0:13:31.680 inflation lead indicator. There's not meaningful office hides at this 0:13:31.760 --> 0:13:35.800 point across housing, labor markets, car prices, inflation expectation to 0:13:35.800 --> 0:13:38.240 community prices. I think that's going to continue to move 0:13:38.720 --> 0:13:41.800 in our direction through through three. That's gonna take a 0:13:41.840 --> 0:13:45.080 lot of the pressure off the bread um, and we 0:13:45.120 --> 0:13:47.760 may get that. I think the question is do we 0:13:47.800 --> 0:13:50.199 get how quickly do we get those rate cuts. I 0:13:50.240 --> 0:13:52.960 think we're looking for an extended pause as long as 0:13:53.040 --> 0:13:55.000 inflation numbers keep drifting down. I think the market is 0:13:55.040 --> 0:13:57.960 going to start discounting cuts later in three reasonly early. 0:13:58.160 --> 0:14:00.480 A better week for Ben later of et Ben. Thank 0:14:00.520 --> 0:14:08.160 you sir as always, this is a joy and we 0:14:08.200 --> 0:14:10.920 did not set ourselves up with a massive market move 0:14:11.520 --> 0:14:14.280 to have in the studios. Also, Lignos Global had of 0:14:14.280 --> 0:14:17.800 Foreign Exchange Strategy at the Royal Bank of Canada RBC. 0:14:18.120 --> 0:14:21.400 She attends from Europe, where she is definitive and the 0:14:21.440 --> 0:14:25.200 linkage of ECB dynamics with the foreign exchange market. Let's 0:14:25.240 --> 0:14:27.840 start right there, because I've been I've had a real 0:14:27.880 --> 0:14:31.160 dearth of euro analysis. What is your call and euro 0:14:31.680 --> 0:14:34.760 given the last twenty four hours play, so it's a 0:14:34.800 --> 0:14:37.640 really interesting moment and actually slightly painful for me because 0:14:37.680 --> 0:14:39.600 I went long You're a dollar a couple of weeks ago, 0:14:39.720 --> 0:14:42.960 got stopped on a little move lower and now pretty 0:14:43.000 --> 0:14:47.400 neutral and watching this rally. But I think yesterday's cp 0:14:47.520 --> 0:14:50.240 I actually gave a lot of people a green light 0:14:50.280 --> 0:14:52.440 to do something they wanted to do already. For me, 0:14:52.520 --> 0:14:55.160 what was striking was listening to our head of spot 0:14:55.160 --> 0:14:56.760 in Europe and a head of spot in North America 0:14:56.840 --> 0:14:58.960 ahead of the number, talking about what they were going 0:14:59.000 --> 0:15:01.280 to do. I've got to say, the difference in opinion 0:15:01.320 --> 0:15:04.680 between Europe and the US is incredible. Shaped it. People 0:15:04.720 --> 0:15:08.120 in Europe really think we're near the end, right, and 0:15:08.160 --> 0:15:10.640 they've been waiting to play that, and this CPI was 0:15:10.680 --> 0:15:12.800 kind of hanging over them. I think even if we'd 0:15:12.800 --> 0:15:15.120 had an inline number, we would have seen people selling 0:15:15.200 --> 0:15:17.120 US d Is that because the news has been better 0:15:17.160 --> 0:15:20.480 in Europe relative to expectations? What is it not at all? 0:15:20.520 --> 0:15:23.080 I think people are just so itching to see the 0:15:23.200 --> 0:15:25.800 end of this fed hiking cycle. And maybe there's just 0:15:25.920 --> 0:15:28.760 more doom and gloom. Maybe there's just more pessimism about 0:15:28.760 --> 0:15:30.200 the state of the U. S economy than I think 0:15:30.240 --> 0:15:32.320 you feel here right here in New York City. But 0:15:32.400 --> 0:15:34.840 it's the difference in opinion between Europe and the US 0:15:34.880 --> 0:15:37.200 at the moment I think is the biggest I've ever seen. 0:15:37.240 --> 0:15:40.480 You mentioned earlier you were stopped out, which is jargoning 0:15:40.560 --> 0:15:42.720 for some people. You set up a trade, you believe 0:15:42.760 --> 0:15:46.160 in stronger euro it comes back you have to you're 0:15:46.240 --> 0:15:49.680 forced out of your trade essentially, and you're on the sidelines. 0:15:50.000 --> 0:15:52.880 How much of the market is on the sidelines for 0:15:52.920 --> 0:15:56.280 this week dollar moment exactly? I think there'll be a 0:15:56.320 --> 0:15:58.840 lot of people in that position, and heading into your end, 0:15:59.120 --> 0:16:02.000 people who have had an incredibly strong performance on the 0:16:02.040 --> 0:16:05.480 back of being long dollars are now scrambling thinking okay, 0:16:05.520 --> 0:16:07.160 do I take it off? I had a lot of 0:16:07.160 --> 0:16:09.400 conviction in this trade. A lot of people I spoke 0:16:09.480 --> 0:16:11.520 to earlier in the week were convinced we go higher 0:16:11.560 --> 0:16:14.160 in three and I think there's a lot of fomo 0:16:14.240 --> 0:16:16.400 in the market right now, people whether in the equity 0:16:16.440 --> 0:16:20.600 market on trying to get how does formal express itself 0:16:20.600 --> 0:16:23.320 in for an exchange? I think our viewers and listeners like, really, 0:16:23.800 --> 0:16:27.560 what our lunch is longer in London when that happens, 0:16:27.680 --> 0:16:30.000 you know, more than anything, it's the fact that effects 0:16:30.120 --> 0:16:32.560 is so liquid, you can put on big positions quickly, 0:16:32.880 --> 0:16:34.640 and I think it might be an easier way for 0:16:34.640 --> 0:16:37.440 a lot of people to reposition their portfolios. Hence we've 0:16:37.440 --> 0:16:39.840 seen this interesting when you did that at Clarages a 0:16:39.840 --> 0:16:42.720 couple of years ago, you were lunch of Clarages, you 0:16:42.840 --> 0:16:46.280 put on a sterling trade. How would you reset this morning. So, look, 0:16:46.320 --> 0:16:48.720 the trade I've been looking at, which I actually really like, 0:16:49.000 --> 0:16:52.480 is across long euro sterling, so buying the euros selling 0:16:52.480 --> 0:16:54.800 the pound. Not because I'm from the UK and just 0:16:55.000 --> 0:16:58.200 very gloomy about our prospects, but I think you've kind 0:16:58.200 --> 0:16:59.960 of got to strip the dollar out of the equation. 0:17:00.000 --> 0:17:02.600 And at the moment we still have another CPI print 0:17:02.640 --> 0:17:05.160 before the December FOMC. We had a bit of a 0:17:05.160 --> 0:17:08.280 head fake earlier this year August September cp I. So 0:17:08.960 --> 0:17:10.800 I've got to be honest, it's a great move if 0:17:10.840 --> 0:17:12.640 you caught it, and had I been in two weeks ago, 0:17:12.680 --> 0:17:15.320 I would be writing it now today. I think it's 0:17:15.320 --> 0:17:17.439 a little harder to buy euro dollar at these levels. 0:17:17.520 --> 0:17:19.400 I like longer a stuff. So is there a positioning 0:17:19.440 --> 0:17:22.000 stories that fundamentals on the euro side? He said, it 0:17:22.040 --> 0:17:24.120 wasn't just pessimism on the sterling side. What is it? 0:17:24.400 --> 0:17:26.840 So what I find really interesting is all the investors 0:17:26.840 --> 0:17:29.040 I speak to, nobody is actually positive on the Euro. 0:17:29.359 --> 0:17:31.480 People might be bullish euro dollar kers, they're barish on 0:17:31.520 --> 0:17:33.880 the US dollar, but nobody is positive on the urine. 0:17:33.920 --> 0:17:36.160 It's not that I think cyclically Europe is looking great 0:17:36.160 --> 0:17:38.639 a lot of people worry about three and the winter 0:17:38.680 --> 0:17:40.800 there how we're going to get through with gas inventories. 0:17:41.359 --> 0:17:44.359 What I think is really interesting is European investors potentially 0:17:44.400 --> 0:17:47.040 repatriating money back home. And if we start to see 0:17:47.040 --> 0:17:48.840 that in size, you could get a lot of euro 0:17:48.880 --> 0:17:51.800 buying from that domestic shift in assets. Where's the e 0:17:51.920 --> 0:17:54.200 M trade right now? Where's the opportunity for a number 0:17:54.240 --> 0:17:56.879 of big figures profit in the e M. Well, you 0:17:56.960 --> 0:17:59.080 touched on crewed earlier, Tom, and I think we're seeing 0:17:59.160 --> 0:18:02.720 some really interesting mops and commodity markets and the wait, wait, wait, 0:18:02.760 --> 0:18:05.920 wait stop. What she's saying there, folks, is she has 0:18:05.920 --> 0:18:09.000 Heleima Croft to help her out here. Link Elsa and 0:18:09.080 --> 0:18:13.119 Helma together and the Helenma Croft oil trade. What do 0:18:13.160 --> 0:18:16.560 you do in foreign exchange? Exactly? So we really like 0:18:16.680 --> 0:18:18.920 the Mexican pace. I have liked it all year. Still 0:18:18.960 --> 0:18:21.320 think that has a bit further to run. Brazil's tricky 0:18:21.359 --> 0:18:24.400 at the moment, given the finance minister from the World Cup. 0:18:24.440 --> 0:18:26.640 I mean, Brazil's are real uncertainty in the World Cup, 0:18:26.840 --> 0:18:29.679 John Roll, Let's do the World Cup right now. The 0:18:29.800 --> 0:18:32.840 heartbeat of foreign exchange worldwide. City of London. What on 0:18:32.880 --> 0:18:35.679 earth is going to happen to volumes in London in 0:18:35.720 --> 0:18:39.119 a couple of weeks off the cliff, you know, heading 0:18:39.119 --> 0:18:43.600 into Christmas it always gets a little bit quieter. Imagine 0:18:43.600 --> 0:18:45.840 how much worse it's going to get. Well, we'll have 0:18:45.920 --> 0:18:50.120 to wait and see. T K Nuts Dollar Mexico twenty 0:18:50.200 --> 0:18:52.840 I remember when it was a parameter for American politics 0:18:53.200 --> 0:18:55.960 nineteen point four three. How many big figures can you 0:18:56.000 --> 0:18:59.440 make your strong Mexico? Well, I think what's interesting about 0:18:59.480 --> 0:19:01.919 Mexico is really the carry that you pick up, and 0:19:01.920 --> 0:19:03.720 I think that's why a lot of people have bought it. 0:19:03.880 --> 0:19:05.560 It's not so much the spot move, but it's the 0:19:05.600 --> 0:19:09.000 fact that you get that very mustive really guild, particularly 0:19:09.040 --> 0:19:11.680 if we're now pricing in lower yields for the US. 0:19:12.119 --> 0:19:14.080 I know you've been traveling, but we'd be thrilled to 0:19:14.080 --> 0:19:19.880