1 00:00:00,040 --> 00:00:02,640 Speaker 1: Who you put your trust in matters. Investors have put 2 00:00:02,680 --> 00:00:07,000 Speaker 1: their trust and independent registered investment advisors to the two 3 00:00:07,000 --> 00:00:10,680 Speaker 1: and four trillion dollars. Why learn more and find your 4 00:00:10,760 --> 00:00:26,360 Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:26,760 --> 00:00:30,480 Speaker 1: I'm Tom Keene with David Gura. Daily we bring you 6 00:00:30,520 --> 00:00:35,560 Speaker 1: insight from the best in economics, finance, investment, and international relations. 7 00:00:35,960 --> 00:00:40,559 Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and 8 00:00:40,640 --> 00:00:47,440 Speaker 1: of course on the Bloomberg. You want to bring in 9 00:00:47,440 --> 00:00:49,000 Speaker 1: Dirk Mater Now he is, as I said, head of 10 00:00:49,040 --> 00:00:51,760 Speaker 1: Epic Strategy of hs BC. Give us the backdrop here 11 00:00:51,760 --> 00:00:54,280 Speaker 1: to this BIOE decision. First of all, again the BOE 12 00:00:54,560 --> 00:00:57,120 Speaker 1: leaving that key interest rate unchanged. We've seen that some 13 00:00:57,200 --> 00:01:00,240 Speaker 1: strengthening in sterling here over the last a few weeks. Yeah, 14 00:01:00,280 --> 00:01:03,120 Speaker 1: we have, and uh, in part, I guess it has 15 00:01:03,160 --> 00:01:05,640 Speaker 1: been an echo of that that shift in the b 16 00:01:05,760 --> 00:01:08,160 Speaker 1: O We you know, post Brexit voter it was meant 17 00:01:08,160 --> 00:01:10,560 Speaker 1: to be run for the hills um and then we 18 00:01:10,600 --> 00:01:13,640 Speaker 1: suddenly saw the data coming through better than expected and 19 00:01:13,640 --> 00:01:16,360 Speaker 1: and the language changed at the last couple of meetings. 20 00:01:16,360 --> 00:01:18,960 Speaker 1: So as you say, we arrived at today's meeting, expecting 21 00:01:19,200 --> 00:01:22,039 Speaker 1: absolutely what we got, which is to say nothing at all. 22 00:01:22,200 --> 00:01:24,080 Speaker 1: I'm not to be honest, I'm not really sure it 23 00:01:24,080 --> 00:01:26,200 Speaker 1: matters that much for sterling generally what the bank thing 24 00:01:26,360 --> 00:01:29,080 Speaker 1: is doing, and the sterling is a political currency is 25 00:01:29,160 --> 00:01:31,440 Speaker 1: It's not a interest rate story. It's not a fed 26 00:01:31,480 --> 00:01:33,640 Speaker 1: and the doll and these kind of bits and pieces. 27 00:01:33,640 --> 00:01:36,760 Speaker 1: Sterling is a political story. I think it completely disregards today. 28 00:01:37,280 --> 00:01:39,760 Speaker 1: The market cares more about what what Mr Hammond has 29 00:01:39,760 --> 00:01:44,000 Speaker 1: to say, perhaps about fiscal policy potentially, though you know, 30 00:01:44,040 --> 00:01:46,559 Speaker 1: we had the autumn statement and he, I guess he 31 00:01:46,560 --> 00:01:48,000 Speaker 1: he kind of put a bit of a wet blanket 32 00:01:48,040 --> 00:01:50,600 Speaker 1: on the idea that, you know, this this new Prime 33 00:01:50,640 --> 00:01:53,480 Speaker 1: ministership would deliver fiscal easing. He all he really said 34 00:01:53,520 --> 00:01:55,960 Speaker 1: is we're not going to tighten quite so aggressively. So 35 00:01:56,080 --> 00:01:58,760 Speaker 1: I mean that could have been a very sterling positive angle, 36 00:01:58,800 --> 00:02:01,120 Speaker 1: as we're seeing in the US the idea of a 37 00:02:01,160 --> 00:02:04,040 Speaker 1: fiscal surge is very currency positive. But in the UK 38 00:02:04,440 --> 00:02:05,920 Speaker 1: they just don't have the money to do it. Maybe 39 00:02:05,960 --> 00:02:07,760 Speaker 1: the US doesn't but they're gonna do it anyway. But 40 00:02:07,800 --> 00:02:09,680 Speaker 1: in the UK they've decided they don't have enough money 41 00:02:09,720 --> 00:02:11,919 Speaker 1: to do it, so, you know, fiscal policy pretty neutral 42 00:02:11,960 --> 00:02:13,520 Speaker 1: over there. Let's talk a bit about what we saw 43 00:02:13,600 --> 00:02:15,920 Speaker 1: yesterday from from the Federal Reserve. Going into the meeting. 44 00:02:15,919 --> 00:02:17,960 Speaker 1: I think you thought there'd be indications on the dot 45 00:02:18,000 --> 00:02:21,000 Speaker 1: plot of two rate rises in two thousand seventeen, as 46 00:02:21,040 --> 00:02:24,040 Speaker 1: many economists did. How surprised were you by the change 47 00:02:24,040 --> 00:02:27,240 Speaker 1: to the dots? Yeah? Generally surprised. Um, you know, it's 48 00:02:27,280 --> 00:02:30,000 Speaker 1: a what's interesting today? And you started by saying in 49 00:02:30,040 --> 00:02:31,720 Speaker 1: the US raise race start. I don't think oh did 50 00:02:31,760 --> 00:02:33,680 Speaker 1: they because it was like what that wasn't what we 51 00:02:33,680 --> 00:02:35,440 Speaker 1: were talking about yesterday. We were talking about the dots 52 00:02:35,440 --> 00:02:38,080 Speaker 1: all day U. So yeah, that was that was a surprise. 53 00:02:38,160 --> 00:02:40,680 Speaker 1: And look they when you do a revision like that, 54 00:02:40,760 --> 00:02:43,080 Speaker 1: you know the market impact is going to have. And 55 00:02:43,200 --> 00:02:46,399 Speaker 1: that's what they played to. It's triangulation. Thursday, We're gonna 56 00:02:46,440 --> 00:02:49,079 Speaker 1: do that here in a moment, David, time for a 57 00:02:49,120 --> 00:02:54,160 Speaker 1: pro conversation. What the pros do, folks when something moves 58 00:02:54,280 --> 00:02:57,160 Speaker 1: is they try to triangulate. It's no different than you know, 59 00:02:57,240 --> 00:02:59,360 Speaker 1: you're in boy Scouts or Girl Scouts and you're out 60 00:02:59,360 --> 00:03:01,000 Speaker 1: in the field with a compass and you go, why 61 00:03:01,000 --> 00:03:03,880 Speaker 1: am I doing this. You know, John Tucker, where you're 62 00:03:03,880 --> 00:03:08,320 Speaker 1: did you do this is before GPS? You know that? 63 00:03:08,480 --> 00:03:10,360 Speaker 1: You know I was out in the bow of the Nina, 64 00:03:10,480 --> 00:03:12,280 Speaker 1: the pint of the sander where one of those so 65 00:03:12,360 --> 00:03:15,120 Speaker 1: darmy er. Here's what I did. When we get Carney's moved. 66 00:03:15,280 --> 00:03:19,239 Speaker 1: I look at sterling sterling dollar, I look at euro 67 00:03:19,400 --> 00:03:23,760 Speaker 1: dollar and I look at euro sterling and they're not correlated. 68 00:03:24,240 --> 00:03:27,960 Speaker 1: They scream week euro. Why am I going to get 69 00:03:28,000 --> 00:03:31,160 Speaker 1: a one oh three print on euro dollar off of 70 00:03:31,200 --> 00:03:34,160 Speaker 1: what Carney says? You're getting the one oh three on 71 00:03:34,200 --> 00:03:36,360 Speaker 1: euro dollar off the fact that we've just broken that 72 00:03:36,400 --> 00:03:39,320 Speaker 1: support level. I really think this is a stop lost 73 00:03:39,320 --> 00:03:42,760 Speaker 1: story rather than a reaction it's getting and a yeah 74 00:03:42,960 --> 00:03:44,440 Speaker 1: on the usual. I mean to be honest, I just 75 00:03:44,480 --> 00:03:45,800 Speaker 1: think this is like when you go to your doctor 76 00:03:45,840 --> 00:03:47,400 Speaker 1: and he hasn't a clue what's wrong, so he says 77 00:03:47,400 --> 00:03:50,520 Speaker 1: a stress related, when astrologist says it's positioning related. It's 78 00:03:50,520 --> 00:03:52,480 Speaker 1: pretty much the equivalent. Where is the stress going to 79 00:03:52,560 --> 00:03:56,000 Speaker 1: be within those three currency pairs? How does our audience 80 00:03:56,480 --> 00:04:01,400 Speaker 1: monitor or heaven forbid, David even spaculate on what's going 81 00:04:01,440 --> 00:04:06,320 Speaker 1: to happen between sterling, euro dollar in eurosterling. I think 82 00:04:06,360 --> 00:04:08,360 Speaker 1: that price action we've seen this morning on euro dollar 83 00:04:08,480 --> 00:04:11,400 Speaker 1: that will be the dominant element of that triangle. Um 84 00:04:11,440 --> 00:04:13,480 Speaker 1: So what it points to is for now people are 85 00:04:13,480 --> 00:04:15,720 Speaker 1: going to be exploring the downside and euro dollar they're 86 00:04:15,720 --> 00:04:18,880 Speaker 1: gonna be looking for some downside less so on euro sterling. 87 00:04:18,880 --> 00:04:20,719 Speaker 1: I mean you're you're acting right? Is that that that triangle? 88 00:04:21,040 --> 00:04:23,320 Speaker 1: Normally it's kind of a nice relationship and Sterling is 89 00:04:23,400 --> 00:04:25,839 Speaker 1: kind of the middle guy on your conversation exactly. But 90 00:04:25,960 --> 00:04:29,200 Speaker 1: now at that break of of the March low, it 91 00:04:29,240 --> 00:04:32,080 Speaker 1: opens up an entirely new conversation on euro dollar. David 92 00:04:32,080 --> 00:04:36,080 Speaker 1: Garrow one of one oh four thirteen interday Low weakness 93 00:04:36,400 --> 00:04:39,880 Speaker 1: one oh four zero five on euro dollar getting some 94 00:04:39,880 --> 00:04:41,960 Speaker 1: headlines now with the economic outlook that it companied that 95 00:04:42,000 --> 00:04:45,320 Speaker 1: statement from the Bank of England near term global outlook improved. 96 00:04:45,400 --> 00:04:48,760 Speaker 1: Risks have elevated here this this remains the story will 97 00:04:48,760 --> 00:04:51,240 Speaker 1: be the story you're going into two thousand seventeen. Yeah, 98 00:04:51,240 --> 00:04:54,200 Speaker 1: I mean risks elevated. I love when a center bank 99 00:04:54,200 --> 00:04:57,400 Speaker 1: tells us uncertainties high. I mean uncertainties always high. When 100 00:04:57,400 --> 00:04:59,880 Speaker 1: have you ever had a certain outlook? So, but this 101 00:05:00,080 --> 00:05:02,560 Speaker 1: is what they're coping with. But what's interesting is they're 102 00:05:02,560 --> 00:05:05,400 Speaker 1: putting a positive spin on the global outlook, whereas what 103 00:05:05,480 --> 00:05:07,599 Speaker 1: I would argue, we don't know what the global outlook is. 104 00:05:07,600 --> 00:05:09,240 Speaker 1: We don't know what Trump's gonna give us, we don't 105 00:05:09,240 --> 00:05:12,160 Speaker 1: know what the China response might be to a protectionist angle. 106 00:05:12,440 --> 00:05:14,720 Speaker 1: There's a lot of moving parts out there, and so 107 00:05:14,880 --> 00:05:16,919 Speaker 1: I still think the Bank of England, if although they 108 00:05:16,960 --> 00:05:19,280 Speaker 1: won't say it, maybe overtly, they're still kind of thinking 109 00:05:19,279 --> 00:05:21,159 Speaker 1: we might need to ease again in twenty seventeen, I 110 00:05:21,160 --> 00:05:23,000 Speaker 1: still think that's the direction of travel. There a line 111 00:05:23,000 --> 00:05:24,479 Speaker 1: from your most recent note you said that the FED 112 00:05:24,520 --> 00:05:26,960 Speaker 1: is a cyclical driver here in the US dollar is 113 00:05:27,000 --> 00:05:29,960 Speaker 1: more preoccupied with political drivers for now. Explain that a 114 00:05:30,000 --> 00:05:33,120 Speaker 1: little bit. Yeah, So, if you think in terms of 115 00:05:33,160 --> 00:05:34,880 Speaker 1: tradition how you approach the dollar, used to just just always 116 00:05:34,880 --> 00:05:36,640 Speaker 1: look at the FED data, depend and FED so that 117 00:05:36,680 --> 00:05:40,240 Speaker 1: was all about the economic cycle. The US election changed 118 00:05:40,279 --> 00:05:42,640 Speaker 1: the dollar into a political beast because suddenly we came 119 00:05:42,680 --> 00:05:45,200 Speaker 1: fixated on the politics of US, and I think yesterday's 120 00:05:45,240 --> 00:05:49,120 Speaker 1: moved by the FED really reflected an acknowledgement that that 121 00:05:49,240 --> 00:05:52,839 Speaker 1: the U s economic outlook is, if not partly, but 122 00:05:53,240 --> 00:05:55,640 Speaker 1: I would say quite dominantly a political story now, and 123 00:05:55,680 --> 00:05:57,680 Speaker 1: they have to take account of that in their forecasting, 124 00:05:58,000 --> 00:06:00,200 Speaker 1: and they've done it to an extent in the It's 125 00:06:00,240 --> 00:06:02,400 Speaker 1: not so much in GDP. They hardly revised GDP. It 126 00:06:02,480 --> 00:06:05,960 Speaker 1: doesn't doesn't suggest their factoring in a big fiscal steaments. 127 00:06:05,960 --> 00:06:08,000 Speaker 1: Imagine when if we do get a fiscal stiaminus, they 128 00:06:08,000 --> 00:06:09,880 Speaker 1: have to revise their GDP forecast again, they have to 129 00:06:09,920 --> 00:06:12,000 Speaker 1: revise their doults again, you know. So we're only they're 130 00:06:12,040 --> 00:06:14,479 Speaker 1: only beginning that process. But the financial markets as ever 131 00:06:14,880 --> 00:06:17,560 Speaker 1: ahead of the central Bank anticipating that process, and that's 132 00:06:17,560 --> 00:06:19,080 Speaker 1: why we've had a strong dollar. That doesn't make the 133 00:06:19,120 --> 00:06:21,159 Speaker 1: dollar an outlier. Right when you look at currency Perris, 134 00:06:21,320 --> 00:06:24,120 Speaker 1: it seems like politics is what's driving most absolutely, I mean, 135 00:06:24,400 --> 00:06:26,159 Speaker 1: and well, I guess we got used to it in 136 00:06:26,200 --> 00:06:28,279 Speaker 1: emerging markets for a long time. We got used to 137 00:06:28,279 --> 00:06:30,840 Speaker 1: it in Sterling post the Brexit vote. But now the 138 00:06:30,920 --> 00:06:34,719 Speaker 1: dollars coming around give us some levels of where not 139 00:06:35,000 --> 00:06:39,400 Speaker 1: that we unravel or we find instability. But in the 140 00:06:39,600 --> 00:06:44,839 Speaker 1: HSBC grind every day, what's the trip point on dollar? Yet, 141 00:06:45,120 --> 00:06:49,120 Speaker 1: what's the trip point on euro? What's the trip point 142 00:06:49,480 --> 00:06:53,599 Speaker 1: on Malaysian ring something obscure, like I mean even Mexican 143 00:06:53,640 --> 00:06:56,599 Speaker 1: pay so weekends out here. Yeah, I think um on 144 00:06:56,680 --> 00:06:59,040 Speaker 1: Doliana doesn't feel quite so scary, doesn't because we've we've 145 00:06:59,040 --> 00:07:01,080 Speaker 1: been up, let's around the twenty five and this kind 146 00:07:01,080 --> 00:07:03,800 Speaker 1: of number before, so we've got so you're comfortable going 147 00:07:03,800 --> 00:07:08,239 Speaker 1: to two week Yet I think it's it's conceivable without 148 00:07:08,240 --> 00:07:10,720 Speaker 1: it being destabilizing, which I think is your your your question. 149 00:07:10,760 --> 00:07:13,960 Speaker 1: But the first Secretary Treasury Monution's gonna have a strong 150 00:07:14,040 --> 00:07:17,920 Speaker 1: dollar policy. Where's the trip point on this house of cards? 151 00:07:18,240 --> 00:07:20,720 Speaker 1: I think the trip point comes for the Fed, not 152 00:07:20,800 --> 00:07:24,840 Speaker 1: for the Treasury. You know, we've seen let's say Bullpark 153 00:07:24,840 --> 00:07:26,480 Speaker 1: at ten percent moves and moving them. But let's say 154 00:07:26,480 --> 00:07:29,800 Speaker 1: Bullpark ten ten percent move on the FEDS reckoning that 155 00:07:29,920 --> 00:07:33,760 Speaker 1: somewhere between sixty basis points of tightening. So I think 156 00:07:33,800 --> 00:07:36,600 Speaker 1: that the pain point is already coming through, like they 157 00:07:36,760 --> 00:07:39,520 Speaker 1: already coming through. But you're a dollar. Obviously, people are 158 00:07:39,520 --> 00:07:42,120 Speaker 1: going to talk about parody as being the weird level 159 00:07:42,160 --> 00:07:44,280 Speaker 1: that we need to be cognizant of. I don't think 160 00:07:44,280 --> 00:07:46,200 Speaker 1: we'll get there, to be honest, even with the momentum 161 00:07:46,200 --> 00:07:48,440 Speaker 1: this morning. But that's going to be the conversation. I mean, 162 00:07:48,640 --> 00:07:51,640 Speaker 1: David grew very quickly here. I don't want to monopolize, 163 00:07:51,640 --> 00:07:55,040 Speaker 1: but we got off the election, and the worst case 164 00:07:55,160 --> 00:07:59,080 Speaker 1: this is worst case, folks, humor me. Six percent move 165 00:07:59,160 --> 00:08:03,080 Speaker 1: in the Bloomberg Dollar index, which is good math, but 166 00:08:03,120 --> 00:08:05,000 Speaker 1: it's a six percent move. It's not a ten percent, 167 00:08:05,040 --> 00:08:07,480 Speaker 1: right move. Yet, we haven't talked about oil yet. This morning, 168 00:08:07,520 --> 00:08:11,240 Speaker 1: I'm seeing a brent here barrel. That upward momentum still there. 169 00:08:11,320 --> 00:08:13,960 Speaker 1: To what extent is that driving currencies right now? Energy 170 00:08:14,400 --> 00:08:17,560 Speaker 1: It's been a big story for ruble, for example, Canadian dollar. 171 00:08:17,560 --> 00:08:19,040 Speaker 1: I mean you have to pick and choose. I mean, 172 00:08:19,360 --> 00:08:21,920 Speaker 1: posts US election. As of yesterday, at least before the FED, 173 00:08:22,240 --> 00:08:24,760 Speaker 1: the ruble was the best performing currency in the world. 174 00:08:25,400 --> 00:08:27,840 Speaker 1: That's oil um or maybe it's a little bit of 175 00:08:27,920 --> 00:08:32,320 Speaker 1: Trump like putin the um, you know, but Canadian dollar 176 00:08:32,400 --> 00:08:34,640 Speaker 1: was the third best. So it's it's definitely a big 177 00:08:34,679 --> 00:08:36,680 Speaker 1: part of the story. Of course, we've had the good news. 178 00:08:36,679 --> 00:08:39,080 Speaker 1: Now they're gonna cut production. Now you have to see 179 00:08:39,200 --> 00:08:40,960 Speaker 1: do they match what they've said they're going to do 180 00:08:41,000 --> 00:08:43,080 Speaker 1: with what they actually do, you know, And so I 181 00:08:43,080 --> 00:08:45,360 Speaker 1: have to have to follow that. But certainly good news 182 00:08:45,360 --> 00:08:47,800 Speaker 1: for now and good news for those currencies go. I've 183 00:08:47,800 --> 00:08:52,400 Speaker 1: been talking about a theme of overcome by events, and 184 00:08:52,440 --> 00:08:54,880 Speaker 1: I'm bringing this up with great respect for the President 185 00:08:54,960 --> 00:08:59,520 Speaker 1: elect because in a time of certitude and a methodology 186 00:08:59,559 --> 00:09:05,360 Speaker 1: of certainitude, sometime parachuting in we are overcome by events. 187 00:09:05,360 --> 00:09:08,800 Speaker 1: Der Mayor in London outside the South Hotel? Hotel is 188 00:09:08,840 --> 00:09:11,840 Speaker 1: that wonderful statue of a worthy of the Crimean War 189 00:09:12,840 --> 00:09:17,040 Speaker 1: where they were overcome by events? What's the event you're 190 00:09:17,080 --> 00:09:21,400 Speaker 1: watching now within the financial system? I mean we can know, oh, 191 00:09:21,440 --> 00:09:26,120 Speaker 1: Italian banks, or we can go President elect Trump Bologny. 192 00:09:26,559 --> 00:09:29,640 Speaker 1: What's the thing that you want to observe into two 193 00:09:29,679 --> 00:09:34,840 Speaker 1: thousand seventeen and monitor. Well, I wouldn't say Bologne, because 194 00:09:34,840 --> 00:09:36,480 Speaker 1: I do actually think the thing we're gonna have to 195 00:09:36,520 --> 00:09:39,360 Speaker 1: work out as Trump. I mean, we're still still struggling 196 00:09:39,360 --> 00:09:42,040 Speaker 1: with that constantly. The market at the moment is assuming 197 00:09:42,040 --> 00:09:43,560 Speaker 1: we get all the nice bits, we don't get any 198 00:09:43,600 --> 00:09:45,440 Speaker 1: of the ugly bits. And I think that's a huge 199 00:09:45,520 --> 00:09:48,400 Speaker 1: leap of faith that's been taken. Um. So you know, 200 00:09:48,440 --> 00:09:50,320 Speaker 1: we look, we should have a little bit more cloudy 201 00:09:50,360 --> 00:09:52,760 Speaker 1: and of Q one, But do you know, I really 202 00:09:52,800 --> 00:09:56,959 Speaker 1: hate forecasting. Currency forecasters don't like forecasting generally. When it's 203 00:09:57,000 --> 00:09:58,760 Speaker 1: just economics you gotta worry about. But when you've got 204 00:09:58,760 --> 00:10:00,800 Speaker 1: to try and work out what's going non in politics, 205 00:10:00,840 --> 00:10:03,160 Speaker 1: it becomes a whole lot messier. And that's but that's 206 00:10:03,160 --> 00:10:06,440 Speaker 1: happening across the board now and currency, So Bologna or not, 207 00:10:06,679 --> 00:10:08,280 Speaker 1: I think we do come back to just trying to 208 00:10:08,320 --> 00:10:10,120 Speaker 1: figure Trump out and see what we're going to get 209 00:10:10,160 --> 00:10:13,120 Speaker 1: in terms of actual policy, not promises. Comparing that in mind, 210 00:10:13,120 --> 00:10:15,960 Speaker 1: I imagine you're watching their redmen be very closely. Yeah, 211 00:10:16,000 --> 00:10:18,520 Speaker 1: I mean, look, this strong dollar complicates things. You know, 212 00:10:18,520 --> 00:10:21,000 Speaker 1: it does complicate things for the Chinese authorities. They I 213 00:10:21,000 --> 00:10:22,920 Speaker 1: think they would prefer that the dollar were not this strong. 214 00:10:23,559 --> 00:10:26,040 Speaker 1: We saw overnight, you know, the fixing pushing higher again 215 00:10:26,040 --> 00:10:29,240 Speaker 1: on dollar m and b um. And you're coming to January, 216 00:10:29,240 --> 00:10:32,760 Speaker 1: and January is this seasonal part of the year where 217 00:10:32,760 --> 00:10:35,000 Speaker 1: you have the biggest pressure on the balance of payments 218 00:10:35,000 --> 00:10:38,400 Speaker 1: in China. There's Chinese demand for foreign currency tends to 219 00:10:38,400 --> 00:10:41,440 Speaker 1: be peaking around this time, and the and the current account, 220 00:10:41,520 --> 00:10:44,440 Speaker 1: the trade side tends to deterierate. So this is awkward 221 00:10:44,480 --> 00:10:46,679 Speaker 1: timing and you just raise that flag. Do we do 222 00:10:46,760 --> 00:10:49,520 Speaker 1: we start next year as we started this one, worried 223 00:10:49,520 --> 00:10:52,160 Speaker 1: about worried about currencies and worried about em currencies. What 224 00:10:52,240 --> 00:10:54,880 Speaker 1: does the US What the US policymakers want to see 225 00:10:54,920 --> 00:10:58,320 Speaker 1: the Chinese currency doing at this point in terms of weakness, 226 00:10:59,320 --> 00:11:01,959 Speaker 1: If they're prisible, they I think they should suggest that 227 00:11:02,000 --> 00:11:04,920 Speaker 1: they don't see it do very much because the reman 228 00:11:05,000 --> 00:11:07,960 Speaker 1: bey is is a vital anchor in terms of a 229 00:11:07,960 --> 00:11:10,240 Speaker 1: stable remby is a vital anker in terms of just 230 00:11:10,280 --> 00:11:14,559 Speaker 1: global financial markets. If if that currency d anchors, then 231 00:11:14,640 --> 00:11:18,200 Speaker 1: then you've got a whole other whirlwind of issues to 232 00:11:18,320 --> 00:11:20,680 Speaker 1: cope with. So if they're sensible, I think they'd prefer 233 00:11:20,800 --> 00:11:23,320 Speaker 1: to see a stable I think obviously, if you're going 234 00:11:23,400 --> 00:11:26,440 Speaker 1: to call China currency manipulator going down that path of trade, 235 00:11:26,520 --> 00:11:29,080 Speaker 1: you know, wars, etcetera, then you want to see your 236 00:11:29,120 --> 00:11:30,520 Speaker 1: reman be strengthened. But I mean, at the end of 237 00:11:30,520 --> 00:11:31,880 Speaker 1: the day, the dollar is the one of the strengthening 238 00:11:32,120 --> 00:11:34,960 Speaker 1: reman bees not doing very much. So that's that's the 239 00:11:34,960 --> 00:11:36,880 Speaker 1: conundrum for them. I guess at the moment, ahead of 240 00:11:36,920 --> 00:11:39,360 Speaker 1: the meeting yesterday, the FED meeting yesterday, we we speculated 241 00:11:39,880 --> 00:11:41,800 Speaker 1: on the degree to which Danny Yellen would comment on 242 00:11:41,800 --> 00:11:44,600 Speaker 1: the possibility of a big fiscal stimulus of tax reform. 243 00:11:44,840 --> 00:11:46,600 Speaker 1: What did you make of what she did say yesterday. 244 00:11:46,640 --> 00:11:50,520 Speaker 1: She wasn't completely silent on the matter. She did address 245 00:11:50,559 --> 00:11:52,560 Speaker 1: the fact that some members of the committee were concerned 246 00:11:52,600 --> 00:11:55,000 Speaker 1: about it. What does that tell you about the thinking 247 00:11:55,040 --> 00:11:57,280 Speaker 1: of policy makers at the federal's roof right now? Yeah, 248 00:11:57,679 --> 00:12:01,840 Speaker 1: I honestly thought that was interesting because they have had 249 00:12:01,880 --> 00:12:03,720 Speaker 1: at least the option at the Fed to say, we're 250 00:12:03,760 --> 00:12:06,240 Speaker 1: going to be reactive in the context of fiscal policy. 251 00:12:06,240 --> 00:12:08,240 Speaker 1: We don't know what we're going to get, so let's 252 00:12:08,240 --> 00:12:09,959 Speaker 1: see what we get and then we can adjust. We're 253 00:12:09,960 --> 00:12:11,760 Speaker 1: not in a rush to hike anyway, so we can 254 00:12:11,800 --> 00:12:13,960 Speaker 1: afford to be patient. But as you say, what she 255 00:12:14,040 --> 00:12:18,319 Speaker 1: introduced yesterday was just this concept that we have to anticipate, 256 00:12:18,720 --> 00:12:21,760 Speaker 1: you know, what the impact might be of politics. You know, 257 00:12:21,800 --> 00:12:24,320 Speaker 1: the currency market, the bond market has said, look, politics 258 00:12:24,400 --> 00:12:27,080 Speaker 1: is the driver here, and now the Fed yesterday is 259 00:12:27,160 --> 00:12:29,400 Speaker 1: just taking the first few steps down that road. So 260 00:12:29,400 --> 00:12:32,360 Speaker 1: it was a significant departure and one they didn't need 261 00:12:32,400 --> 00:12:33,920 Speaker 1: to do, so they've chosen to do it. So I 262 00:12:33,920 --> 00:12:37,079 Speaker 1: think that, as I say, significant. What are the lessons 263 00:12:37,120 --> 00:12:39,360 Speaker 1: you've learned here in the wake of what we've seen 264 00:12:39,400 --> 00:12:41,640 Speaker 1: that with the U S election, obviously the Brexit photo 265 00:12:41,640 --> 00:12:43,520 Speaker 1: as well, and then the Italian referendum, we saw so 266 00:12:43,600 --> 00:12:47,800 Speaker 1: little market reaction, at least comparatively. What does that tell 267 00:12:47,840 --> 00:12:49,760 Speaker 1: you as we head to the next elections in France 268 00:12:49,800 --> 00:12:52,640 Speaker 1: and the Netherlands across Europe. Well, one takeaway is the 269 00:12:52,640 --> 00:12:56,440 Speaker 1: the euro it's just so bored with European politics, you know, 270 00:12:56,520 --> 00:13:00,880 Speaker 1: it's um. We We've just had so much stuff to digest. 271 00:13:01,040 --> 00:13:03,440 Speaker 1: I think that the the sensitivity. In fact, I think 272 00:13:03,440 --> 00:13:07,360 Speaker 1: we're just completely desensitized to political turmoil. Um And so 273 00:13:07,400 --> 00:13:09,320 Speaker 1: we had this kind of sell the rumor by the 274 00:13:09,320 --> 00:13:11,400 Speaker 1: fact in euro And I think we're going to get 275 00:13:11,440 --> 00:13:13,160 Speaker 1: to the Dutch elections in March, we're gonna get to 276 00:13:13,200 --> 00:13:15,200 Speaker 1: the French election, You're gonna get the general elections, and 277 00:13:15,240 --> 00:13:17,840 Speaker 1: we'll talk about and we'll spend endless hours negotiating it. 278 00:13:17,840 --> 00:13:19,760 Speaker 1: But I suspect at the end of the day, yours 279 00:13:19,800 --> 00:13:22,760 Speaker 1: not breaking up the political discount, however big it is 280 00:13:22,800 --> 00:13:24,440 Speaker 1: that's in the currency, it's going to disappear. It will 281 00:13:24,480 --> 00:13:26,320 Speaker 1: be done by the end of next year. Critically with 282 00:13:26,360 --> 00:13:29,200 Speaker 1: the one of four five breaking down a euro down 283 00:13:29,200 --> 00:13:32,440 Speaker 1: to a two thousand three weakness. Is it a different 284 00:13:32,559 --> 00:13:36,679 Speaker 1: debate at a point nine five euro, I would suggest 285 00:13:36,679 --> 00:13:39,320 Speaker 1: it is. I mean the dialogue changes. Yeah, it does. 286 00:13:39,920 --> 00:13:43,319 Speaker 1: And you know, the if we were worrying about European 287 00:13:43,360 --> 00:13:45,360 Speaker 1: political risk, when you had a little bit of breathing 288 00:13:45,440 --> 00:13:48,760 Speaker 1: space above parity, then you can kind of say, okay, fine, 289 00:13:48,800 --> 00:13:50,200 Speaker 1: we can we can see a few big figures lower 290 00:13:50,200 --> 00:13:52,760 Speaker 1: it doesn't really matter. But if political risk in Europe 291 00:13:52,840 --> 00:13:54,800 Speaker 1: is the thing that drives us to parody or drags 292 00:13:54,840 --> 00:13:57,200 Speaker 1: us to parody, then it becomes much more of an issue, 293 00:13:57,280 --> 00:14:00,559 Speaker 1: just just from a market psychology perspective, congrat relations to 294 00:14:00,760 --> 00:14:03,640 Speaker 1: mayor and making all of us lean forward with a 295 00:14:03,720 --> 00:14:08,880 Speaker 1: one ten call on Sterling out in the distance. But nevertheless, 296 00:14:08,920 --> 00:14:24,440 Speaker 1: he maintains that even with what we've seen, you can 297 00:14:24,440 --> 00:14:26,920 Speaker 1: it's a funny quirk of this incoming administration that so 298 00:14:27,000 --> 00:14:29,640 Speaker 1: much of a spectacle is rested on Trump Tower, just 299 00:14:29,680 --> 00:14:31,760 Speaker 1: a few blocks from here, and there's a camera trained 300 00:14:31,760 --> 00:14:34,680 Speaker 1: on the elevators therein and last week we saw one 301 00:14:34,720 --> 00:14:37,760 Speaker 1: Admiral James strid Us at Trump Tower meeting with the 302 00:14:37,760 --> 00:14:39,720 Speaker 1: President elect He is now at the dean of the 303 00:14:39,720 --> 00:14:42,440 Speaker 1: Fletcher School of Law and Diplomacy at Tufts University reportedly 304 00:14:42,680 --> 00:14:44,960 Speaker 1: was in the running to become a Secretary of State. 305 00:14:44,960 --> 00:14:46,720 Speaker 1: And it's great to have you on the show, as always, 306 00:14:46,760 --> 00:14:49,360 Speaker 1: admirals to read us. Great to be with you, guys. 307 00:14:49,360 --> 00:14:52,080 Speaker 1: How's it going today? Great? Give us a sense here. 308 00:14:52,680 --> 00:14:54,320 Speaker 1: I'll let you let you decide what you want to 309 00:14:54,320 --> 00:14:56,080 Speaker 1: share from that meeting. But I imagine that one of 310 00:14:56,120 --> 00:14:58,760 Speaker 1: the things you guys discussed you in the president elect 311 00:14:58,880 --> 00:15:03,240 Speaker 1: is what he is looking for in a Secretary of State? 312 00:15:03,240 --> 00:15:05,080 Speaker 1: What are the parameters he's looking for? Who does he 313 00:15:05,120 --> 00:15:06,960 Speaker 1: want to have in that job? What kind of person? 314 00:15:07,720 --> 00:15:11,200 Speaker 1: I think he's looking for someone with a global perspective, 315 00:15:11,320 --> 00:15:15,720 Speaker 1: who has experience on a world stage, as someone who 316 00:15:15,840 --> 00:15:20,560 Speaker 1: has a broad circle of friends and colleagues in the world, 317 00:15:20,680 --> 00:15:24,240 Speaker 1: and someone with whom he has a strong personal chemistry. 318 00:15:24,560 --> 00:15:26,920 Speaker 1: When when you look at Rex Taylorson, the former now 319 00:15:26,960 --> 00:15:29,480 Speaker 1: former ex Nonmobile executive, whom he's picked for that job, 320 00:15:29,960 --> 00:15:32,640 Speaker 1: give us a sense of how he meets those those bars. 321 00:15:32,920 --> 00:15:34,520 Speaker 1: I don't know if you've met him before, but what 322 00:15:34,520 --> 00:15:37,080 Speaker 1: do you make of the pick? I have met him 323 00:15:37,240 --> 00:15:40,160 Speaker 1: and I think he meets those bars quite well. He 324 00:15:40,240 --> 00:15:45,400 Speaker 1: has uh an enormous global set of connections. He's run 325 00:15:45,440 --> 00:15:52,400 Speaker 1: a huge, complex organization. He's someone that is instantly likable. Uh. 326 00:15:52,520 --> 00:15:55,800 Speaker 1: There's very little to criticize. The only thing that I 327 00:15:55,840 --> 00:15:58,600 Speaker 1: think is out there, and it's a legitimate concern given 328 00:15:58,640 --> 00:16:01,080 Speaker 1: the way the wind is owing at the moment, is 329 00:16:01,160 --> 00:16:05,520 Speaker 1: his evidently extraordinarily close relationship with Vladimir Putin. I think 330 00:16:05,560 --> 00:16:08,320 Speaker 1: that's going to be a subject of considerable scrutiny on 331 00:16:08,400 --> 00:16:11,080 Speaker 1: the hill. I'll probably watch football or soccer on Sky 332 00:16:11,160 --> 00:16:14,560 Speaker 1: TV as well. David Gurrow. Very quickly, twentieth century Fox 333 00:16:14,600 --> 00:16:18,240 Speaker 1: formalizes UH their purchase of Sky TV. The rest of 334 00:16:18,280 --> 00:16:21,960 Speaker 1: Sky TV. The value is eleven point seven billion. That's 335 00:16:21,960 --> 00:16:24,640 Speaker 1: a calculation, but it gets you out to a twelve 336 00:16:24,640 --> 00:16:29,200 Speaker 1: billion sterling transaction. That gets me up to I don't 337 00:16:29,200 --> 00:16:31,640 Speaker 1: know what that is. I'm doing the math quickly. I'm 338 00:16:31,680 --> 00:16:35,080 Speaker 1: gonna say it's a fourteen billion dollar transactions. Track here 339 00:16:35,120 --> 00:16:37,440 Speaker 1: owner of about thirty nine percent of that That company 340 00:16:37,440 --> 00:16:40,200 Speaker 1: already something that he's that he's wanted to to acquire 341 00:16:40,720 --> 00:16:42,720 Speaker 1: anmial strad as you mentioned that Russia connection, and we 342 00:16:42,960 --> 00:16:45,120 Speaker 1: look forward to to these hearings, to to hearing more 343 00:16:45,160 --> 00:16:47,240 Speaker 1: about that. What does it tell you and what did 344 00:16:47,240 --> 00:16:49,000 Speaker 1: your meeting with Donald Trump tell you about the degree 345 00:16:49,000 --> 00:16:52,400 Speaker 1: to which Russia foreign policy toward and involving Russia is 346 00:16:52,400 --> 00:16:55,080 Speaker 1: going to be a priority for this administration. Well, I 347 00:16:55,120 --> 00:16:57,240 Speaker 1: think it's got to be a priority for a couple 348 00:16:57,240 --> 00:17:00,600 Speaker 1: of reasons. First of all, we have three enormous contations 349 00:17:00,800 --> 00:17:05,440 Speaker 1: in progress with Russia. One is Putin's support for Vladimir 350 00:17:05,640 --> 00:17:09,520 Speaker 1: a correction, his support for Assad in Syria. Uh, someone 351 00:17:09,560 --> 00:17:12,280 Speaker 1: who's just butchering the city of Aleppo only the most 352 00:17:12,320 --> 00:17:15,640 Speaker 1: recent of his war crimes. Secondly, the annexation of Crime, 353 00:17:15,840 --> 00:17:19,439 Speaker 1: and thirdly, and most obviously, the cyber hack into the 354 00:17:19,520 --> 00:17:23,560 Speaker 1: U S electoral process. So Russia really de facto is 355 00:17:23,600 --> 00:17:25,840 Speaker 1: at the top of the agenda as we go into 356 00:17:25,920 --> 00:17:28,880 Speaker 1: this new administration. Ed. Well, I've I've read a couple 357 00:17:28,920 --> 00:17:33,280 Speaker 1: of articles on the uproar over the number of generals 358 00:17:33,400 --> 00:17:37,440 Speaker 1: within the new cabinet. We need a Stevidia's dissertation. Now, 359 00:17:37,720 --> 00:17:40,520 Speaker 1: is there a difference between a Marine general and an 360 00:17:40,640 --> 00:17:43,760 Speaker 1: army general or a Navy admiral? Are they all the 361 00:17:43,800 --> 00:17:47,919 Speaker 1: same rank? Etcetera? Um? All the ones. We're talking about 362 00:17:47,960 --> 00:17:52,840 Speaker 1: our four star admirals or generals. Uh. The difference between 363 00:17:52,920 --> 00:17:56,600 Speaker 1: them is in the specialty within the armed forces. So 364 00:17:56,640 --> 00:18:02,680 Speaker 1: the Army four star general command soldiers on battlefields on land. 365 00:18:03,080 --> 00:18:06,120 Speaker 1: The marine is kind of amphibious. He can be out 366 00:18:06,160 --> 00:18:08,359 Speaker 1: at sea with his marines, or he can take his 367 00:18:08,480 --> 00:18:12,600 Speaker 1: marines ashore. Also four star officer, a Navy admiral is 368 00:18:12,640 --> 00:18:17,520 Speaker 1: in command of naval at sea forces, aircraft, terriers, cruisers, 369 00:18:17,880 --> 00:18:20,680 Speaker 1: and can also command that amphibious force as it closes 370 00:18:20,760 --> 00:18:23,360 Speaker 1: on the beach. Are they going to bring to Mr 371 00:18:23,480 --> 00:18:28,280 Speaker 1: Trump a humility about certitude? He is a guy who's 372 00:18:28,440 --> 00:18:31,000 Speaker 1: certain of what he's doing. Are they going to bring 373 00:18:31,520 --> 00:18:36,760 Speaker 1: the humility of their military experience? I think they will, Tom. 374 00:18:36,800 --> 00:18:39,320 Speaker 1: What they will bring is an appreciation of the fog 375 00:18:39,359 --> 00:18:42,119 Speaker 1: of war, which can be extended to the fog of 376 00:18:42,200 --> 00:18:46,679 Speaker 1: foreign relations. It's hard. This is complicated stuff, and to 377 00:18:46,760 --> 00:18:49,240 Speaker 1: think you're gonna just cut through it like another through 378 00:18:49,320 --> 00:18:52,320 Speaker 1: butter is a mistake. Moments ago, Richard Greenfield, one of 379 00:18:52,320 --> 00:18:56,800 Speaker 1: the class acts of security analysts analysis at bt I 380 00:18:56,880 --> 00:19:01,800 Speaker 1: G on viacom, we mentioned TV David, why bring this up? 381 00:19:01,920 --> 00:19:05,800 Speaker 1: Viacom may never be great again? Reducing price target, but 382 00:19:06,040 --> 00:19:11,840 Speaker 1: expectations are simply too low. This is classic Rich Greenfield. 383 00:19:11,880 --> 00:19:15,359 Speaker 1: Our upgrade of Viacom to buy on June six was 384 00:19:15,440 --> 00:19:18,600 Speaker 1: undoubtedly a mistake, as it was driven by our conviction 385 00:19:18,640 --> 00:19:23,480 Speaker 1: that Viacom and CBS would merge, so they adjust, but 386 00:19:23,560 --> 00:19:26,600 Speaker 1: they do maintain their by wrating just because it's been 387 00:19:26,640 --> 00:19:31,000 Speaker 1: beat to death. There's not enough of that. A guy 388 00:19:31,040 --> 00:19:34,000 Speaker 1: like Greenfield is really just out front. Dennis Garment does 389 00:19:34,040 --> 00:19:36,120 Speaker 1: the same thing. He talks about the disasters as much 390 00:19:36,160 --> 00:19:40,040 Speaker 1: as the successes. We'd expect that from Adimals Trevitas as well, 391 00:19:40,119 --> 00:19:44,400 Speaker 1: joining US James Travitis at Fletcher School, Tough University, UM 392 00:19:44,480 --> 00:19:48,199 Speaker 1: Admiral I'm sure there's a point is a young Navy 393 00:19:48,240 --> 00:19:51,760 Speaker 1: type amidshipman. I don't know what the right phrases. Where 394 00:19:51,960 --> 00:19:54,600 Speaker 1: there's somebody who's certain that they're certain, that they're certain, 395 00:19:55,240 --> 00:19:58,480 Speaker 1: and they're sat down by a chief petty officer, says 396 00:19:58,520 --> 00:20:04,800 Speaker 1: young lad out of Annapolis. This the certitude emanating from 397 00:20:04,840 --> 00:20:08,080 Speaker 1: the Trump transition team is remarkable. Everybody is certain that 398 00:20:08,160 --> 00:20:10,920 Speaker 1: there's certain. How do you deal with that? How within 399 00:20:11,040 --> 00:20:15,240 Speaker 1: government are we going to deal with the ebbing away 400 00:20:15,280 --> 00:20:19,000 Speaker 1: from certitude? To war, a more towards a more measured 401 00:20:19,080 --> 00:20:23,120 Speaker 1: and balanced approach. Well, first of all the world will 402 00:20:23,200 --> 00:20:26,639 Speaker 1: accomplish that in its own way, and they'll be enormous 403 00:20:26,720 --> 00:20:30,679 Speaker 1: vectors that push in on UH people's ideas of what 404 00:20:30,880 --> 00:20:32,719 Speaker 1: exactly ought to happen, and that will come like a 405 00:20:32,760 --> 00:20:36,200 Speaker 1: freight train at this administration on January twentieth, starting with 406 00:20:36,760 --> 00:20:40,720 Speaker 1: North Korea, cyber Russia, a number of other things in 407 00:20:40,760 --> 00:20:44,840 Speaker 1: the foreign policy sphere alone. Secondly, Tom, you bring in 408 00:20:45,200 --> 00:20:48,040 Speaker 1: people who can be that chief Petty Officer, Tom Keane. 409 00:20:48,119 --> 00:20:51,359 Speaker 1: You know someone who's been around, who has experienced, and 410 00:20:51,440 --> 00:20:53,320 Speaker 1: you listen to him, and so I am encouraged when 411 00:20:53,320 --> 00:20:56,680 Speaker 1: I see pics like General Jim Maddis, General John Kelly, 412 00:20:56,720 --> 00:20:59,200 Speaker 1: both of whom I know extremely well, and who who 413 00:20:59,240 --> 00:21:03,160 Speaker 1: will be that that Dutch uncle to whoever. They will 414 00:21:03,200 --> 00:21:06,399 Speaker 1: back down to nobody, and they seek They neither have 415 00:21:06,520 --> 00:21:09,960 Speaker 1: fear nor do they seek favor within This is a 416 00:21:10,040 --> 00:21:14,720 Speaker 1: military phrase, overcome by events, isn't it? And you're the 417 00:21:14,800 --> 00:21:18,840 Speaker 1: pro we're the amateurs. We read our military history. There's 418 00:21:18,880 --> 00:21:21,640 Speaker 1: O B E. If you were sitting with the President 419 00:21:21,680 --> 00:21:24,240 Speaker 1: elect right now, what is the O B E? You 420 00:21:24,240 --> 00:21:28,800 Speaker 1: would lecture him on, I'd probably start with Syria, which 421 00:21:28,840 --> 00:21:33,320 Speaker 1: has been overcome by tragic events, and at this point 422 00:21:33,920 --> 00:21:36,600 Speaker 1: we're not gonna be able to put Humpty Dumpty back 423 00:21:36,640 --> 00:21:39,560 Speaker 1: together again in Syria. We're gonna have to I think 424 00:21:39,600 --> 00:21:43,159 Speaker 1: partition Syria, and that means probably cutting a deal with 425 00:21:43,200 --> 00:21:47,159 Speaker 1: the Russians, uh, taking ices out. I think that's firmly 426 00:21:47,200 --> 00:21:49,720 Speaker 1: what has to occur that will give a base to 427 00:21:49,800 --> 00:21:52,480 Speaker 1: a more moderate Syria out in the west and the north. 428 00:21:52,760 --> 00:21:54,400 Speaker 1: But the idea that we're gonna be able to put 429 00:21:54,400 --> 00:21:59,199 Speaker 1: Syria back together as a coherent say, that's overcome by events. 430 00:21:58,520 --> 00:22:01,439 Speaker 1: As I hear your praise General Madis and General Kelly, 431 00:22:01,440 --> 00:22:03,280 Speaker 1: and I think back to a conversation we had, I 432 00:22:03,280 --> 00:22:06,240 Speaker 1: think before the before those picks were named, certainly, in 433 00:22:06,280 --> 00:22:09,280 Speaker 1: which you you expressed some concern here about changing the 434 00:22:10,119 --> 00:22:11,600 Speaker 1: law that says that somebody has to be out of 435 00:22:11,600 --> 00:22:14,200 Speaker 1: a uniform for seven years before taking a position like 436 00:22:14,240 --> 00:22:17,000 Speaker 1: the ones they are in fact taking. Have you come 437 00:22:17,000 --> 00:22:20,520 Speaker 1: around to the idea, what what what concern remains about 438 00:22:20,560 --> 00:22:23,240 Speaker 1: doing what Donald Trump here has proposed doing. I still 439 00:22:23,280 --> 00:22:26,439 Speaker 1: have that concern in the broad scheme of things. In 440 00:22:26,440 --> 00:22:29,400 Speaker 1: other words, I don't think for the Department of Defense, 441 00:22:29,440 --> 00:22:31,800 Speaker 1: not for the other cabinet jobs, but for the Department 442 00:22:31,800 --> 00:22:34,920 Speaker 1: of Defense. It's generally not a good idea to put 443 00:22:34,920 --> 00:22:38,320 Speaker 1: a recently retired military in there, because you dilute the 444 00:22:38,400 --> 00:22:42,280 Speaker 1: idea of civilian control of the military. However, I think 445 00:22:42,400 --> 00:22:45,560 Speaker 1: General Jim Madis is an exception to that rule. A 446 00:22:45,880 --> 00:22:48,600 Speaker 1: because he is who he is. He's very firm, he's 447 00:22:48,680 --> 00:22:51,639 Speaker 1: very smart, he's very uh. He will stand in the 448 00:22:51,680 --> 00:22:53,760 Speaker 1: wind that blows in that job, and I think there'll 449 00:22:53,760 --> 00:22:57,320 Speaker 1: be a lot of wind blowing. And then secondly, because 450 00:22:57,320 --> 00:23:00,960 Speaker 1: I think President Trump needs somebody like him and experienced 451 00:23:00,960 --> 00:23:03,600 Speaker 1: hand that as Tom was saying, kind of that chief 452 00:23:03,600 --> 00:23:06,000 Speaker 1: petty officer who can say, hey, we really got to 453 00:23:06,000 --> 00:23:09,199 Speaker 1: do it this way, Mr President. For those two reasons, 454 00:23:09,240 --> 00:23:12,159 Speaker 1: I support Jim Mattis as a one time exception in 455 00:23:12,200 --> 00:23:17,000 Speaker 1: the blur Admiral I saw today some think tank etcetera. 456 00:23:17,240 --> 00:23:22,080 Speaker 1: Taking aerial shots of coral atolls? Is that the right 457 00:23:22,119 --> 00:23:25,720 Speaker 1: word in the South China Sea and gaming that there's 458 00:23:25,760 --> 00:23:29,159 Speaker 1: military and I'm sorry, Damal and had the blush of 459 00:23:29,280 --> 00:23:33,639 Speaker 1: Cuba of fifty years ago to it. How do we 460 00:23:33,800 --> 00:23:39,520 Speaker 1: approach our intelligence within the South China sea. And how 461 00:23:39,560 --> 00:23:44,560 Speaker 1: does the good Navy show the flag in a constructive way. Well, first, 462 00:23:44,560 --> 00:23:47,520 Speaker 1: in terms of intelligence, tom As you're well aware, a 463 00:23:47,560 --> 00:23:50,280 Speaker 1: great deal is now collected from satellites and we can 464 00:23:50,320 --> 00:23:55,280 Speaker 1: position those so we can position satellite in a geosynchronious orbit, 465 00:23:55,320 --> 00:23:58,880 Speaker 1: which means it just parks over one point on the Earth. Secondly, 466 00:23:58,920 --> 00:24:02,959 Speaker 1: we can use unmanned vehicles UM air air unmanned vehicles 467 00:24:03,000 --> 00:24:07,240 Speaker 1: and undersea unmanned vehicles. Uh. Those can be very surreptuous 468 00:24:07,280 --> 00:24:10,159 Speaker 1: and they can operate from the decks of our ships. 469 00:24:10,160 --> 00:24:12,040 Speaker 1: And that's really the third thing we can do is 470 00:24:12,119 --> 00:24:16,600 Speaker 1: move our ships through that region collecting electronic intelligence. So 471 00:24:16,640 --> 00:24:19,399 Speaker 1: we have a great deal of capability. We need to 472 00:24:19,400 --> 00:24:22,320 Speaker 1: show the flag because here's the key point, tom, these 473 00:24:22,359 --> 00:24:25,600 Speaker 1: are international waters. This is the high Seas, and we 474 00:24:25,720 --> 00:24:28,639 Speaker 1: cannot seed that to China and simply let them treat 475 00:24:28,720 --> 00:24:31,920 Speaker 1: the South China see as though we're their own personal lake. 476 00:24:32,119 --> 00:24:34,200 Speaker 1: It is not. I think of all the times we've 477 00:24:34,200 --> 00:24:36,800 Speaker 1: spoken with you and you've cautioned about the risks of 478 00:24:36,800 --> 00:24:39,520 Speaker 1: cybersecurity going forward, here the risks of big hacks, and 479 00:24:40,240 --> 00:24:42,159 Speaker 1: we certainly read the report in New York Times. A 480 00:24:42,200 --> 00:24:44,240 Speaker 1: couple of days ago detailing how the d n C 481 00:24:44,520 --> 00:24:47,520 Speaker 1: was was hacked by Russia, according to the New York 482 00:24:47,560 --> 00:24:49,880 Speaker 1: Times and the documents that they've seen there. I wonder 483 00:24:49,880 --> 00:24:51,960 Speaker 1: if from your conversations with the President, like you think 484 00:24:52,000 --> 00:24:55,879 Speaker 1: he's taking that seriously enough. He doesn't seem to be 485 00:24:55,920 --> 00:24:59,040 Speaker 1: backing to move by some lawmakers to investigate this fully. 486 00:24:59,040 --> 00:25:00,920 Speaker 1: And what does that say to you about his willingness 487 00:25:00,960 --> 00:25:02,600 Speaker 1: to see this is the great threat that it is. 488 00:25:03,200 --> 00:25:06,879 Speaker 1: I think these are two separate strands of a of 489 00:25:06,920 --> 00:25:10,800 Speaker 1: a combination that comes together so on cyber security. I 490 00:25:10,840 --> 00:25:14,000 Speaker 1: think he is taking it very seriously, broadly speaking, not 491 00:25:14,080 --> 00:25:18,120 Speaker 1: attaching a national label to it, but looking at China, 492 00:25:18,240 --> 00:25:24,199 Speaker 1: North Korea, Iran, Russia, hackers, cyber crime, that basket, I 493 00:25:24,200 --> 00:25:27,080 Speaker 1: think he's taking very seriously. UM. I think he's making 494 00:25:27,080 --> 00:25:30,000 Speaker 1: a mistake to walk away from an investigation of the 495 00:25:30,080 --> 00:25:33,879 Speaker 1: Russian piece of this, because it's so so much a 496 00:25:33,960 --> 00:25:38,520 Speaker 1: dagger pointed at the heart of American democracy. And I 497 00:25:38,560 --> 00:25:42,439 Speaker 1: think ultimately there will be a several investigations, certainly a 498 00:25:42,480 --> 00:25:45,560 Speaker 1: congressional one, UM, and I think the executive branch would 499 00:25:45,560 --> 00:25:49,520 Speaker 1: do well to participate in that and follow it wherever 500 00:25:49,560 --> 00:25:52,800 Speaker 1: the facts lead us, I should Uh, I mean I 501 00:25:52,520 --> 00:25:57,399 Speaker 1: I it was an astaging story, I thought, and like you, 502 00:25:57,520 --> 00:26:00,080 Speaker 1: I I think the Congress is going to can to 503 00:26:00,080 --> 00:26:03,360 Speaker 1: need to take it more and more seriously. Here, Uh're 504 00:26:03,480 --> 00:26:05,520 Speaker 1: going forward here? What what's your advice to rex Dealers 505 00:26:05,520 --> 00:26:07,920 Speaker 1: and somebody who is not accustomed to dealing with government 506 00:26:07,920 --> 00:26:09,520 Speaker 1: in the way that he will be dealing accustomed to 507 00:26:09,520 --> 00:26:11,680 Speaker 1: all the bureaucracy he's going to have to navigate here. 508 00:26:12,119 --> 00:26:13,800 Speaker 1: What's the piece of advice you'd give him as he 509 00:26:13,880 --> 00:26:17,879 Speaker 1: as he potentially enters that. Well, let's let's remember the 510 00:26:18,720 --> 00:26:22,640 Speaker 1: exn is a big bureaucracy and he's navigated it quite successfully, 511 00:26:22,680 --> 00:26:25,919 Speaker 1: So I suspect he'll he'll easily adapt himself to the 512 00:26:25,960 --> 00:26:28,720 Speaker 1: culture of the State Department. But my advice to him 513 00:26:28,720 --> 00:26:33,640 Speaker 1: would be to get the most professional, experienced, career diplomat 514 00:26:34,000 --> 00:26:36,920 Speaker 1: he possibly can, someone who's been an ambassador at least 515 00:26:36,920 --> 00:26:41,680 Speaker 1: three times, and make him the deputy, someone like Bill Burns, 516 00:26:41,760 --> 00:26:45,479 Speaker 1: Ambassador Bill Burns, Ambassador Nick Burns. Uh, there are a 517 00:26:45,520 --> 00:26:49,480 Speaker 1: group of real old hands at the State Department, because 518 00:26:49,480 --> 00:26:52,800 Speaker 1: what he will need advice on is how to use 519 00:26:52,920 --> 00:26:57,720 Speaker 1: this new bureaucracy that he's inherited um effectively around the world. 520 00:26:57,760 --> 00:26:59,760 Speaker 1: He'll need someone from the inside to do that. He 521 00:26:59,760 --> 00:27:03,040 Speaker 1: didn't mentioned John Bolton. There h John Bolton I think 522 00:27:03,080 --> 00:27:06,840 Speaker 1: has experienced, but he hasn't been a three time career 523 00:27:06,880 --> 00:27:09,639 Speaker 1: foreign service kind of person. But he has been an 524 00:27:09,680 --> 00:27:12,800 Speaker 1: ambassador and that's a plus. Are you teaching this semester? 525 00:27:12,840 --> 00:27:18,280 Speaker 1: Are you taking the Navy sabbatically? Tom? I always teach, 526 00:27:18,480 --> 00:27:21,360 Speaker 1: and Uh I try to particularly focus in on leadership, 527 00:27:21,400 --> 00:27:23,879 Speaker 1: teaching us. What's your number one message here? Given what 528 00:27:23,920 --> 00:27:28,320 Speaker 1: we're witnessing in New York. I think that great leaders 529 00:27:28,400 --> 00:27:31,160 Speaker 1: in the twenty one century have to do three things. 530 00:27:31,240 --> 00:27:34,480 Speaker 1: They have to be innovators. That's what distinguishes a leader 531 00:27:34,520 --> 00:27:37,879 Speaker 1: from a follower innovation. Secondly, they have to be great 532 00:27:37,920 --> 00:27:42,040 Speaker 1: communicators and understand how to use all the elements of communication. 533 00:27:42,119 --> 00:27:45,640 Speaker 1: And number three, and most importantly, they have to be collaborators. 534 00:27:45,640 --> 00:27:47,760 Speaker 1: They have to build teams, they have to work with 535 00:27:47,840 --> 00:27:52,000 Speaker 1: allies and partners. It's that third piece that I'm particularly 536 00:27:52,000 --> 00:27:54,919 Speaker 1: hoping we'll see the administration season ed will have a 537 00:27:55,000 --> 00:27:59,040 Speaker 1: huge holiday Sison. Mr Vitas of Tufts University has given 538 00:27:59,119 --> 00:28:01,840 Speaker 1: us terrific for active Maybe we'll see him outside the 539 00:28:01,880 --> 00:28:06,760 Speaker 1: Trump Tower, David Garl Remote. You can go over there 540 00:28:06,800 --> 00:28:11,920 Speaker 1: and remote with camp Travides Cam. I like that very good. 541 00:28:20,200 --> 00:28:23,600 Speaker 1: Who you put your trust in matters. Investors have put 542 00:28:23,640 --> 00:28:27,520 Speaker 1: their trust in independent registered investment advisors to the two 543 00:28:27,520 --> 00:28:30,639 Speaker 1: and of four trillion dollars. Why they see their roles 544 00:28:30,680 --> 00:28:34,320 Speaker 1: to serve, not sell. That's why Charles Schwab is committed 545 00:28:34,560 --> 00:28:39,480 Speaker 1: to the success over seven thousand independent financial advisors who 546 00:28:39,560 --> 00:28:45,040 Speaker 1: passionately dedicate themselves to helping people achieve their financial goals. 547 00:28:45,400 --> 00:28:56,120 Speaker 1: Learn more and find your independent advisor dot com. We 548 00:28:56,200 --> 00:28:59,640 Speaker 1: spoke with Peter Whoper of Deutsche Bank. Two big figures 549 00:28:59,680 --> 00:29:02,720 Speaker 1: on year ago. That's how much things have moved an 550 00:29:02,840 --> 00:29:05,800 Speaker 1: x number of days, so we need a readjustment. Alan 551 00:29:05,880 --> 00:29:09,320 Speaker 1: Ruskin joins us for Mr Hooper's shop over at Deutsche Bank. 552 00:29:09,720 --> 00:29:12,760 Speaker 1: Alan dr Hooper brought up and he's in the economic 553 00:29:12,800 --> 00:29:17,240 Speaker 1: area Macrow econom is hugely esteemed, widely considered on many 554 00:29:17,280 --> 00:29:21,800 Speaker 1: shortlists for fed UH service. If you will, Alan Ruskin, 555 00:29:22,000 --> 00:29:25,680 Speaker 1: he brought up Dominique Constant, who's worried about financial instability. 556 00:29:26,080 --> 00:29:29,440 Speaker 1: And the problem is both Peter Hooper and Dominique Constant 557 00:29:29,880 --> 00:29:32,480 Speaker 1: turned to you and they go Okay, Alan, Now what 558 00:29:32,760 --> 00:29:36,880 Speaker 1: in foreign exchange help us this morning with this? Alan Ruskin? 559 00:29:36,960 --> 00:29:38,480 Speaker 1: I mean you're a one oh five, we get a 560 00:29:38,520 --> 00:29:40,920 Speaker 1: one oh three print. I mean we're back on the 561 00:29:40,960 --> 00:29:44,680 Speaker 1: parody watch, aren't we. We're definitely in the parody watch. Tom. 562 00:29:45,120 --> 00:29:48,520 Speaker 1: I think the important thing to consider when you look 563 00:29:48,560 --> 00:29:51,840 Speaker 1: at the euro dollar and also the dollar index in 564 00:29:51,920 --> 00:29:54,160 Speaker 1: general and a broadest sense, is that we are training 565 00:29:54,160 --> 00:29:57,640 Speaker 1: a very wide range for a while, and you know, 566 00:29:57,640 --> 00:29:59,880 Speaker 1: we're seeing one oh five to one fifteen is the 567 00:30:00,040 --> 00:30:03,160 Speaker 1: you're a dollar range of a pretty much eighteen months 568 00:30:03,240 --> 00:30:05,880 Speaker 1: or so, and so you know, breaking that level is 569 00:30:05,920 --> 00:30:08,920 Speaker 1: a big deal, but it's not all that strong in 570 00:30:08,960 --> 00:30:12,200 Speaker 1: relation to where we were eighteen months ago. I'll go 571 00:30:12,280 --> 00:30:14,440 Speaker 1: with that. And a lot of people have said that 572 00:30:14,520 --> 00:30:17,200 Speaker 1: the danger here is, you know, and you can only 573 00:30:17,280 --> 00:30:20,240 Speaker 1: learn this, folks by enjoying losing money. Is only Ellen 574 00:30:20,320 --> 00:30:24,080 Speaker 1: Ruskin and I have done is you begin to extrapolate, 575 00:30:24,320 --> 00:30:29,000 Speaker 1: and that gets you into trouble. Are you extrapolating this morning? Well? 576 00:30:29,040 --> 00:30:32,280 Speaker 1: I think what you're seeing is a pretty strong trending market. 577 00:30:32,320 --> 00:30:36,080 Speaker 1: So if you mean by extrapolation trending, then yes, I 578 00:30:36,120 --> 00:30:39,200 Speaker 1: would be, you know, thinking that we could go quite 579 00:30:39,240 --> 00:30:41,800 Speaker 1: a bit further. Typically when you have arrangers of say, 580 00:30:41,840 --> 00:30:44,320 Speaker 1: for example, you're a dollar one or five to one fifteen, 581 00:30:44,440 --> 00:30:48,240 Speaker 1: when you break that, if that range is particularly well established, 582 00:30:48,480 --> 00:30:52,080 Speaker 1: you'll move back down by another say ten big figures really, 583 00:30:52,120 --> 00:30:55,880 Speaker 1: so that brings it to focus cents. And that's our 584 00:30:55,920 --> 00:30:58,120 Speaker 1: your end forecast for two thousand and seventeen, which is 585 00:30:58,120 --> 00:31:00,240 Speaker 1: coming up rather quickly. Now, okay, we've made some news 586 00:31:00,280 --> 00:31:02,360 Speaker 1: this morning. That's good, very quick. I know David wants 587 00:31:02,360 --> 00:31:05,000 Speaker 1: to jump in. Is this a real rate us versus 588 00:31:05,040 --> 00:31:08,600 Speaker 1: them analysis? Or to capital flows kick in to get 589 00:31:08,600 --> 00:31:11,680 Speaker 1: you two weaker euro point nine five? Well, look, you've 590 00:31:11,680 --> 00:31:14,800 Speaker 1: got a big diversion story, you know, diversions with a 591 00:31:14,840 --> 00:31:17,600 Speaker 1: capital d occurring. If you look at US interest rates 592 00:31:17,600 --> 00:31:20,760 Speaker 1: in relation to pretty much all the G ten, you're 593 00:31:20,800 --> 00:31:24,760 Speaker 1: spiraling out on a nominal basis and to real real 594 00:31:24,840 --> 00:31:27,840 Speaker 1: basis as well. But it particularly normal interest rates spread 595 00:31:27,840 --> 00:31:33,480 Speaker 1: basis to um if not multis then multi decade higher. 596 00:31:33,560 --> 00:31:35,720 Speaker 1: So you've got a huge move on the go here 597 00:31:35,760 --> 00:31:38,920 Speaker 1: from a rate spread standpoint, that's driving this. When you 598 00:31:38,920 --> 00:31:41,280 Speaker 1: look at this move in the ear, what can you 599 00:31:41,320 --> 00:31:43,240 Speaker 1: attribute it to the Fed principal? In other ways, what 600 00:31:43,280 --> 00:31:45,480 Speaker 1: accounts for the breakout that we've seen. Yeah, I think 601 00:31:45,480 --> 00:31:47,560 Speaker 1: it's primarily the FED, but I think you have to 602 00:31:47,600 --> 00:31:51,200 Speaker 1: also consider that the euro side is not terribly attractive either, 603 00:31:51,360 --> 00:31:53,440 Speaker 1: So you know, the market is looking at the on 604 00:31:53,480 --> 00:31:56,640 Speaker 1: the euro side saying, okay, so we maybe got some 605 00:31:56,720 --> 00:31:59,200 Speaker 1: sort of ECB elongated taper, but we're not going to 606 00:31:59,280 --> 00:32:01,120 Speaker 1: hear from them for a long time now that we've 607 00:32:01,320 --> 00:32:04,720 Speaker 1: got December's ECB meeting out the way, and in the meantime, 608 00:32:04,760 --> 00:32:07,560 Speaker 1: you've probably got you know, four major elections at least 609 00:32:07,560 --> 00:32:10,080 Speaker 1: three major elections coming up in Europe with all the 610 00:32:10,080 --> 00:32:13,120 Speaker 1: political and certainties that that entails. So, you know, nothing 611 00:32:13,240 --> 00:32:15,640 Speaker 1: terribly constructive on the euro side as well. How much 612 00:32:15,640 --> 00:32:18,560 Speaker 1: our economic fundamentals reflected in what we're seeing right now? 613 00:32:18,560 --> 00:32:20,680 Speaker 1: I think of industrial production out yesterday in the US 614 00:32:20,760 --> 00:32:22,880 Speaker 1: and and in Europe as well. Are we seeing that 615 00:32:22,960 --> 00:32:25,840 Speaker 1: reflected in the prose of view right now? Well, I 616 00:32:25,840 --> 00:32:29,000 Speaker 1: think we're still trading really the promise of Donald Trump 617 00:32:29,080 --> 00:32:31,640 Speaker 1: as much as the realities in terms of the economic data. 618 00:32:31,800 --> 00:32:33,600 Speaker 1: I mean, the economic data that you're seeing in terms 619 00:32:33,600 --> 00:32:36,240 Speaker 1: of acceleration, A lot of that is really sentiment data. 620 00:32:36,320 --> 00:32:39,080 Speaker 1: You've seen the fully fed today, for example, of the 621 00:32:39,160 --> 00:32:42,800 Speaker 1: six month outlook is extremely constructive. Um, you know, that's 622 00:32:42,920 --> 00:32:46,240 Speaker 1: that's a sentiment indicator, the consumer confidence data, that's that's 623 00:32:46,320 --> 00:32:51,800 Speaker 1: sentiment numbers. Really. But in general, probably before the Trump phenomena, 624 00:32:51,880 --> 00:32:55,080 Speaker 1: you were seeing some acceleration from a low point in 625 00:32:55,160 --> 00:32:57,479 Speaker 1: growth around the middle of this year, and you know 626 00:32:57,520 --> 00:33:00,120 Speaker 1: into the third quarter you're seeing some acceleration. And I 627 00:33:00,160 --> 00:33:03,200 Speaker 1: think related to the idea that financial conditions, which are 628 00:33:03,240 --> 00:33:07,640 Speaker 1: tightened very early in the year, we're no longer tightening, 629 00:33:07,720 --> 00:33:10,520 Speaker 1: and therefore we're being more helpful for the US economy, 630 00:33:10,680 --> 00:33:13,360 Speaker 1: help us with Sterling. When we look at that is Brexit. 631 00:33:13,440 --> 00:33:15,960 Speaker 1: Is the whole Brexit process now fully priced in? Do 632 00:33:16,000 --> 00:33:19,440 Speaker 1: you think No? I don't think so. I think you know, 633 00:33:19,480 --> 00:33:22,880 Speaker 1: what we've seen is the UK economy has been pretty resilient. 634 00:33:23,240 --> 00:33:27,080 Speaker 1: If the UK economy does see some meaningful downtown in 635 00:33:27,120 --> 00:33:30,040 Speaker 1: the first half of next year, then um, you know, 636 00:33:30,040 --> 00:33:32,400 Speaker 1: all bets off again. You know again, I think sterling 637 00:33:32,400 --> 00:33:34,840 Speaker 1: will weekend. I think what's interesting on the Sterling side 638 00:33:34,920 --> 00:33:37,240 Speaker 1: is it's not just a Brexit story. If you actually 639 00:33:37,280 --> 00:33:39,760 Speaker 1: look again at the interest rate spread side. Um, I 640 00:33:39,760 --> 00:33:43,560 Speaker 1: think people don't realize, but Fed funds is not traded 641 00:33:43,640 --> 00:33:46,959 Speaker 1: above the UK base rates by more than a hundred 642 00:33:46,960 --> 00:33:51,760 Speaker 1: basis points for the better part of thirty plus years. 643 00:33:51,840 --> 00:33:54,720 Speaker 1: So we are moving into terrain on a rate spread 644 00:33:54,720 --> 00:33:56,840 Speaker 1: basis that we haven't seen on a really a multi 645 00:33:56,880 --> 00:34:00,640 Speaker 1: decade basis. When you look ahead to two and seventeen, 646 00:34:00,720 --> 00:34:03,800 Speaker 1: is the focus here on the euro? Principal are you? 647 00:34:03,880 --> 00:34:05,680 Speaker 1: Are you looking at Redmond? What are the court of 648 00:34:05,720 --> 00:34:08,279 Speaker 1: the what are the currency apearance that you're most most 649 00:34:08,280 --> 00:34:11,320 Speaker 1: closely watching here as we had it to two seventeen. Well, 650 00:34:11,680 --> 00:34:14,360 Speaker 1: you know, I'm I'm looking at pretty much everything really 651 00:34:14,480 --> 00:34:17,080 Speaker 1: right now. I think we're focusing obviously on the Euro 652 00:34:17,520 --> 00:34:20,640 Speaker 1: and the end they have been the principal vehicles that 653 00:34:21,200 --> 00:34:24,400 Speaker 1: people have been expressing their long dollar view on UM. 654 00:34:24,440 --> 00:34:28,560 Speaker 1: But I think from a risk perspective, we're clearly looking 655 00:34:28,600 --> 00:34:31,680 Speaker 1: at dollar China in particular and seeing how that trade 656 00:34:31,760 --> 00:34:34,719 Speaker 1: and whether it becomes disruptive. But that I noticed Philippine 657 00:34:34,719 --> 00:34:37,359 Speaker 1: Paso today printing fifty, which is sort of like down 658 00:34:37,360 --> 00:34:40,200 Speaker 1: ten thousand folks for Philippine Peel. And I don't mean 659 00:34:40,200 --> 00:34:43,240 Speaker 1: that in a snarky way. It's like a huge, huge deal. 660 00:34:43,960 --> 00:34:48,600 Speaker 1: Can our listeners monitor what we're doing by looking at 661 00:34:48,640 --> 00:34:51,800 Speaker 1: the e M dynamics or should we really just focus 662 00:34:51,880 --> 00:34:55,520 Speaker 1: on euro in Yen. Definitely look at them. Dynamics and 663 00:34:55,719 --> 00:34:58,319 Speaker 1: e M dynamics are quite complex because you know, you've 664 00:34:58,320 --> 00:35:01,040 Speaker 1: got the stronger dollars story in general, we've got FED tightening, 665 00:35:01,080 --> 00:35:04,160 Speaker 1: you've got US long term interest rates backing up. None 666 00:35:04,160 --> 00:35:06,520 Speaker 1: of that's very good for EM. E M is normally 667 00:35:06,600 --> 00:35:09,640 Speaker 1: high beata, so normally trades badly in that environment. But 668 00:35:09,840 --> 00:35:14,160 Speaker 1: against that, you have the prospect of US fiscal easing, 669 00:35:14,560 --> 00:35:17,840 Speaker 1: you have the possibilities of stronger US growth, you have 670 00:35:17,960 --> 00:35:21,160 Speaker 1: got some acceleration in global growth. So it's actually I 671 00:35:21,160 --> 00:35:23,360 Speaker 1: think providing some protection from the e M side. I 672 00:35:23,360 --> 00:35:25,080 Speaker 1: want to come back and talk about this Ellen, but 673 00:35:25,239 --> 00:35:27,440 Speaker 1: very very simply, here is this a weekend where you 674 00:35:27,520 --> 00:35:31,319 Speaker 1: blow up your Excel spreadsheet? Did you do? Is this 675 00:35:31,400 --> 00:35:33,879 Speaker 1: sort of like a tipping point into the new year? 676 00:35:35,200 --> 00:35:37,600 Speaker 1: Not quite? I think, you know, I think you know, 677 00:35:37,640 --> 00:35:39,880 Speaker 1: we could. It's to some extent, one could see some 678 00:35:39,960 --> 00:35:43,040 Speaker 1: of this happening. It's come a little bit quicker than anticipated, 679 00:35:43,120 --> 00:35:46,359 Speaker 1: so you know, maybe we're bringing forward events I think, 680 00:35:46,440 --> 00:35:48,399 Speaker 1: rather than its sort of really blowing up the screen 681 00:35:48,560 --> 00:35:50,840 Speaker 1: like that idea. But we are strong with Ellen, Ruskin 682 00:35:50,920 --> 00:35:54,680 Speaker 1: and Deutsche Bank with decades of experience with synthesizing foreign 683 00:35:54,680 --> 00:35:58,359 Speaker 1: exchange dynamics into any and all else. It's going on 684 00:35:59,400 --> 00:36:03,040 Speaker 1: right now to the dynamic that we're seeing. You just said, 685 00:36:03,160 --> 00:36:08,160 Speaker 1: we're pulling forward movements anticipated six months, a year, even 686 00:36:08,160 --> 00:36:10,799 Speaker 1: eighteen months out. Is that what the Fed is doing? 687 00:36:11,160 --> 00:36:13,600 Speaker 1: Is there trying to get out front and pull forward 688 00:36:13,640 --> 00:36:16,960 Speaker 1: the discussion? I don't think so. I think if you 689 00:36:17,160 --> 00:36:19,759 Speaker 1: judge what Janet Yellen was saying, I think she was 690 00:36:19,800 --> 00:36:23,920 Speaker 1: being very cautious and suggesting that the shift in the dots, 691 00:36:24,040 --> 00:36:29,200 Speaker 1: for example, was tiny. But unfortunately these pesky little dots 692 00:36:29,239 --> 00:36:33,000 Speaker 1: really even small movements, really mean quite a lot. So, um, 693 00:36:33,040 --> 00:36:36,080 Speaker 1: you know, I think it's the market that's jumping ahead 694 00:36:36,200 --> 00:36:39,279 Speaker 1: and taking uh you know, small tiplets from the feed 695 00:36:39,400 --> 00:36:42,040 Speaker 1: and and and really running with it. When you look 696 00:36:42,080 --> 00:36:45,360 Speaker 1: at the potential for protectionists and more protectionism here in 697 00:36:45,520 --> 00:36:47,080 Speaker 1: the US, what are the currency piers that's going to 698 00:36:47,120 --> 00:36:49,319 Speaker 1: affect the most? In other words, if if we see 699 00:36:49,960 --> 00:36:53,200 Speaker 1: stronger shall we call it trade policy, if we see 700 00:36:53,239 --> 00:36:56,120 Speaker 1: new tariffs, what's that going to affect? Well, I think 701 00:36:56,640 --> 00:36:59,760 Speaker 1: you're going to see a different impact on developed market 702 00:36:59,760 --> 00:37:02,839 Speaker 1: current incies and G four currencies in particular relative to 703 00:37:03,040 --> 00:37:07,560 Speaker 1: the emerging markets world and commodity currencies. In the initial instance, 704 00:37:07,640 --> 00:37:10,600 Speaker 1: I think if the market really smells that protectionism is real, 705 00:37:11,120 --> 00:37:13,279 Speaker 1: then I think they're going to see a reshuffling in 706 00:37:13,320 --> 00:37:16,279 Speaker 1: terms of fat expectations, which is actually, you know, going 707 00:37:16,320 --> 00:37:20,359 Speaker 1: to be negative for the dollar versus the G four currencies, 708 00:37:20,400 --> 00:37:24,680 Speaker 1: But protectionism and you know, it's impact on trade and 709 00:37:24,680 --> 00:37:28,160 Speaker 1: commodity prices, etcetera, will be seen as negative for the 710 00:37:28,160 --> 00:37:30,040 Speaker 1: emerging market currencies as well. So I think you're going 711 00:37:30,080 --> 00:37:32,879 Speaker 1: to get this dichotomy really between you know, what's going 712 00:37:32,920 --> 00:37:35,680 Speaker 1: on where the G four currencies, for example, the euro 713 00:37:35,719 --> 00:37:38,840 Speaker 1: in particularly yen why actually do fine in that environment, 714 00:37:39,480 --> 00:37:43,120 Speaker 1: but um, you're going to see the E M currencies suffer. 715 00:37:43,280 --> 00:37:44,960 Speaker 1: How cop doesn't Do you think that the FED is 716 00:37:45,000 --> 00:37:46,920 Speaker 1: of that happening? A We struck yesterday the degree to 717 00:37:46,960 --> 00:37:49,360 Speaker 1: which Jena Yellen mentioned the fact that some of her 718 00:37:49,440 --> 00:37:51,040 Speaker 1: colleagues were aware of the fact that there is this 719 00:37:51,040 --> 00:37:54,400 Speaker 1: ongoing conversation about new economic stimulus or tax reform, but 720 00:37:54,600 --> 00:37:57,279 Speaker 1: the argument about protectionism about what that could mean for 721 00:37:57,280 --> 00:38:01,360 Speaker 1: the economy didn't seem to come up. Yeah, you know, 722 00:38:01,360 --> 00:38:04,040 Speaker 1: I think, you know, it's a discussion that no one 723 00:38:04,160 --> 00:38:08,399 Speaker 1: really wants to vocalize on too much. Again, it's being 724 00:38:08,520 --> 00:38:11,400 Speaker 1: very preemptive, you know. I was saying earlier that the 725 00:38:11,480 --> 00:38:15,440 Speaker 1: markets trading the promise of fiscal stimulus to some extent. 726 00:38:15,719 --> 00:38:18,200 Speaker 1: You know, this is also conjecture in terms of where 727 00:38:18,239 --> 00:38:21,360 Speaker 1: trade policy goes. And I think there's a perception that ultimately, 728 00:38:21,600 --> 00:38:24,359 Speaker 1: you know, we will have a fairly rational outcome to this, 729 00:38:24,400 --> 00:38:29,520 Speaker 1: and that um somewhat free trade will still prevail. It's Thursday, 730 00:38:29,960 --> 00:38:35,239 Speaker 1: Monday seems ages ago out. On Monday I framed a 731 00:38:35,320 --> 00:38:39,240 Speaker 1: Deutsche Bank optimism on the economy. Your colleague Peter Hooper 732 00:38:39,360 --> 00:38:44,719 Speaker 1: adamant that we see a better reflation and higher yields 733 00:38:45,239 --> 00:38:47,600 Speaker 1: from where we are now, which on Monday was a 734 00:38:47,680 --> 00:38:51,560 Speaker 1: two fifty. I believe right now we're up seven basis 735 00:38:51,600 --> 00:38:54,720 Speaker 1: points at one point to sixty, up ten basis points 736 00:38:54,719 --> 00:38:58,840 Speaker 1: this morning. If there's three vectors, one is higher yields, 737 00:38:58,880 --> 00:39:02,239 Speaker 1: one is stability from this new jump condition, and one 738 00:39:02,280 --> 00:39:05,160 Speaker 1: as we migrate back to a lower yield environment. Can 739 00:39:05,200 --> 00:39:08,480 Speaker 1: you dovetail with Peter Hooper's optimism or do you take 740 00:39:08,520 --> 00:39:11,920 Speaker 1: a more nuanced, a different tack than Dr Hooper. Now 741 00:39:11,960 --> 00:39:15,440 Speaker 1: I would run with the optimistic view to some extent, 742 00:39:15,600 --> 00:39:18,759 Speaker 1: So I think that there are a few different elements. One, 743 00:39:18,800 --> 00:39:21,920 Speaker 1: in the short term, I think you're really seeing the 744 00:39:21,960 --> 00:39:27,000 Speaker 1: market taking of you that animal spirits. The more constructive 745 00:39:27,080 --> 00:39:29,520 Speaker 1: views that you're seeing in terms of sentiment and confidence 746 00:39:29,560 --> 00:39:34,000 Speaker 1: will prevail as far as the short term economic outlooks concerned. 747 00:39:34,360 --> 00:39:36,680 Speaker 1: And then they are kind of projecting forward from that 748 00:39:36,760 --> 00:39:38,920 Speaker 1: and saying okay, and then we're going to get a stimulus, 749 00:39:39,239 --> 00:39:41,800 Speaker 1: and that probably hits towards the end of two thousand 750 00:39:41,760 --> 00:39:45,279 Speaker 1: and seventeen and and into two thousand and eighteen, and 751 00:39:45,320 --> 00:39:48,759 Speaker 1: that stimulus really becomes part of the growth story. So 752 00:39:49,280 --> 00:39:52,359 Speaker 1: that's a growth story. We normalize, everybody mints money off 753 00:39:52,400 --> 00:39:56,560 Speaker 1: Ellen Ruskin's picks, Then what does cheer yelling do? As 754 00:39:56,680 --> 00:39:59,239 Speaker 1: was one of the questions yesterday in the press conference, 755 00:39:59,719 --> 00:40:03,799 Speaker 1: with the balance sheet, she more than anyone, will have 756 00:40:03,840 --> 00:40:08,200 Speaker 1: the luxury of reducing the balance sheet. Do you guys, 757 00:40:08,320 --> 00:40:10,919 Speaker 1: when you all get together, do you believe she will 758 00:40:11,000 --> 00:40:15,120 Speaker 1: affect a balance sheet reduction? I think it's going to 759 00:40:15,200 --> 00:40:18,759 Speaker 1: be extremely difficult Tom in this environment where bond heels 760 00:40:18,760 --> 00:40:21,600 Speaker 1: are backing up. The last thing this market needs really is, 761 00:40:21,960 --> 00:40:25,840 Speaker 1: you know, a backup in heels that relates to a 762 00:40:25,880 --> 00:40:28,640 Speaker 1: balance sheet adjustment. So I think she put it perfectly 763 00:40:28,640 --> 00:40:30,960 Speaker 1: in a sense that she said, they look, they want 764 00:40:31,000 --> 00:40:34,640 Speaker 1: to normalize rates to and let that be the lead 765 00:40:34,760 --> 00:40:37,799 Speaker 1: element in terms of policy tightening rather than the balance sheet, 766 00:40:37,920 --> 00:40:41,000 Speaker 1: because at some point in time they might actually have 767 00:40:41,080 --> 00:40:43,200 Speaker 1: to cut rates, and it's a whole lot better cutting 768 00:40:43,239 --> 00:40:46,759 Speaker 1: interest rates if you have a downturn and somehow expanding 769 00:40:46,880 --> 00:40:49,680 Speaker 1: or re expanding the balance sheet. I'm gonna ask you 770 00:40:49,719 --> 00:40:51,560 Speaker 1: just close here by asking about little more about about 771 00:40:51,640 --> 00:40:54,200 Speaker 1: China and what you expect there in terms of the 772 00:40:54,400 --> 00:40:57,160 Speaker 1: currency in the new year. Uh And and maybe if 773 00:40:57,200 --> 00:40:58,920 Speaker 1: if you think the IMF is having any regrets here 774 00:40:58,920 --> 00:41:01,560 Speaker 1: about including it in that in special basket in light 775 00:41:01,600 --> 00:41:02,960 Speaker 1: of what we've seen with the currency here in these 776 00:41:03,000 --> 00:41:05,799 Speaker 1: last few months. Yeah, I think you know, we've had 777 00:41:05,800 --> 00:41:09,360 Speaker 1: a forecast for a while now of dollar China reaching 778 00:41:09,480 --> 00:41:13,520 Speaker 1: seven point four at the end of two thousand and seventeen. 779 00:41:13,600 --> 00:41:17,120 Speaker 1: That still seems reasonable. It's based on the idea that 780 00:41:17,440 --> 00:41:19,560 Speaker 1: the dollar will be stronger. It's based on the idea 781 00:41:19,640 --> 00:41:23,920 Speaker 1: that the Chinese currency remains very sensitive to US interest rates. 782 00:41:23,920 --> 00:41:28,239 Speaker 1: That's something that's sometimes underestimated, and it works with the 783 00:41:28,360 --> 00:41:34,200 Speaker 1: idea that China still is the resources effectively to martial 784 00:41:34,600 --> 00:41:39,880 Speaker 1: a fairly subdued depreciation rather than an acceleration resources. I 785 00:41:39,880 --> 00:41:42,560 Speaker 1: asked this question earlier today, what is the quality of 786 00:41:42,600 --> 00:41:46,560 Speaker 1: reserves When the media spouts reserve statistics, are those accurate 787 00:41:46,680 --> 00:41:51,240 Speaker 1: numbers or is a general statement there is the reserve 788 00:41:51,360 --> 00:41:55,640 Speaker 1: bucket smaller country to country. Yeah, I think in terms 789 00:41:55,640 --> 00:41:59,800 Speaker 1: of China's the market certainly has speculated that the China's 790 00:42:00,000 --> 00:42:03,600 Speaker 1: ward book is fairly large, so that net reserves are 791 00:42:03,600 --> 00:42:07,239 Speaker 1: actually maybe smaller than the headline number. Um. You know, 792 00:42:07,320 --> 00:42:10,399 Speaker 1: that's as I said, is you know, just a speculation 793 00:42:10,480 --> 00:42:14,120 Speaker 1: that's out there in the marketplace. It's it's a very 794 00:42:14,160 --> 00:42:17,640 Speaker 1: common view, mind you. Um, so let's see. Um, you know, 795 00:42:18,000 --> 00:42:21,719 Speaker 1: I think there's a view that if China's reserves go 796 00:42:21,920 --> 00:42:26,600 Speaker 1: down by anything approaching say a hundred billion a month, again, 797 00:42:27,080 --> 00:42:29,480 Speaker 1: then we've got some problems here that it just shows 798 00:42:29,520 --> 00:42:33,600 Speaker 1: that there's a very significant capital outflow acceleration. Very valuable, 799 00:42:33,640 --> 00:42:35,640 Speaker 1: Alan Ruskin, thank you so much. With deutche Bank a 800 00:42:35,719 --> 00:42:46,920 Speaker 1: great updated Thanks for listening to the Bloomberg Surveillance podcast. 801 00:42:47,239 --> 00:42:52,360 Speaker 1: Subscribe and listen to interviews on iTunes, SoundCloud, or whichever 802 00:42:52,520 --> 00:42:56,919 Speaker 1: podcast platform you prefer. I'm out on Twitter at Tom Keene. 803 00:42:57,000 --> 00:43:00,799 Speaker 1: David Gura is at David Gura. 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