WEBVTT - Surveillance: The EU Needs A Weaker Euro, Rosenberg Says 0:00:00.080 --> 0:00:12.960 Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.720 Bloomberg dot Com, and of course, on the Bloomberg See 0:00:33.720 --> 0:00:36.519 your top story. It is ECB decision Day. In the 0:00:36.560 --> 0:00:40.040 next hour, Presidents Drag and the ECB set to announce 0:00:40.080 --> 0:00:43.320 cuts the growth and inflation forecast. Investors waiting to see 0:00:43.600 --> 0:00:47.280 what policy options the Governing Council reaches for. Here in 0:00:47.320 --> 0:00:50.520 New York to discuss is David Rosenberg, Gluskin Chef, chief 0:00:50.520 --> 0:00:54.080 economist and strategist. Good morning to David. The first job 0:00:54.400 --> 0:00:57.400 of President dr KEI today is to do one well. 0:00:57.440 --> 0:00:59.800 The question is going to be, um, whether he's going 0:00:59.840 --> 0:01:04.520 to be incremental and wait till the April ECB meeting 0:01:05.040 --> 0:01:07.280 UH truly sound more forceful, or whether he will do 0:01:07.319 --> 0:01:10.000 it today. Um. There's no question that there will be 0:01:10.040 --> 0:01:12.560 some sort of shift in the rates guidance, uh, in 0:01:12.720 --> 0:01:15.520 terms of you know, well known leave rates on hold, 0:01:16.080 --> 0:01:19.080 you know right now it's through the summer. I expect 0:01:19.080 --> 0:01:20.760 that he's going to say that rates will be on 0:01:20.800 --> 0:01:24.120 hold through the end of UH the year UH. And 0:01:24.240 --> 0:01:26.399 the question is really going to be, um, what he 0:01:26.400 --> 0:01:29.640 says about the t l TROP program to help both 0:01:29.640 --> 0:01:32.600 the belieguered banks, especially in Italy. And so the question 0:01:32.640 --> 0:01:34.360 is really going to be not whether he's going to 0:01:34.440 --> 0:01:36.960 be dovish every central banks to any more dovish right now, 0:01:37.000 --> 0:01:39.080 but the question is going to be is he gonna 0:01:39.080 --> 0:01:42.000 wait till April to be more forceful or is he 0:01:42.000 --> 0:01:44.479 going to choose to be more incremental. So we're gonna 0:01:44.480 --> 0:01:46.360 hear a lot about tel trips. I imagined in the 0:01:46.360 --> 0:01:49.760 next couple of hour they targeted long term refinancing operations. 0:01:49.800 --> 0:01:52.640 This to me doesn't sound too stimulative. This seems to 0:01:52.640 --> 0:01:56.440 be about preventing a credit crunch from materializing more than 0:01:56.480 --> 0:02:00.360 stimulating the Eurozone economy. Absolutely. I mean, this would be 0:02:00.400 --> 0:02:04.640 just a pure and simple insurance policy against back stopping 0:02:04.920 --> 0:02:07.320 the banking system. I think the other issue is going 0:02:07.360 --> 0:02:09.280 to be what and this is really what's going to 0:02:09.360 --> 0:02:13.520 be critical, because certainly what the Eurozone could also use 0:02:13.600 --> 0:02:18.519 from a stimulus standpoint, considering how weak the manufacturing sector 0:02:18.560 --> 0:02:22.440 has been everywhere and especially even in Germany, UM is 0:02:22.480 --> 0:02:25.120 that they need a weaker euro, they need to shift 0:02:25.160 --> 0:02:27.960 their rates guidance. You see, this is what's happened, is 0:02:28.000 --> 0:02:31.240 that the Fed has already taken out whatever rate hikes 0:02:31.240 --> 0:02:33.800 were priced in several months ago. I think that the 0:02:33.840 --> 0:02:37.000 ECB has to change its rates guidance that um that 0:02:37.080 --> 0:02:40.200 there are really no increases coming for the resueable future, 0:02:40.240 --> 0:02:41.800 and not even put a time stamp on it like 0:02:41.840 --> 0:02:45.239 they've already done. The present rate guidance is to redundant, 0:02:45.360 --> 0:02:48.079 isn't it, David Well, I think that what you want 0:02:48.080 --> 0:02:51.600 to start doing is is reinforced the notion that you 0:02:51.639 --> 0:02:53.640 know that the next move could actually even be an 0:02:53.639 --> 0:02:57.359 ease uh. Interesting, And so I think that I think 0:02:57.360 --> 0:02:59.760 that that's something that we have to consider. You've got 0:02:59.760 --> 0:03:01.440 to say, draw bank here. There's no doubt they're going 0:03:01.480 --> 0:03:04.680 to cut their growth forecast, and not just a growth forecast. 0:03:04.720 --> 0:03:07.400 Remember it's a central bank of the inflation mandate, uh. 0:03:07.400 --> 0:03:09.960 And they're going to cut the inflation forecast before they've 0:03:10.000 --> 0:03:13.040 even reached their target. That actually says to me, as 0:03:13.360 --> 0:03:15.520 you know, as bizarre as it might sound, looking at 0:03:15.560 --> 0:03:19.160 how stimulative ECB policy is that when the benchmarket against 0:03:19.200 --> 0:03:21.520 where we are in the cycle, the level of the 0:03:21.560 --> 0:03:25.160 up book gap and disinflationary pressures that that perhaps the 0:03:25.160 --> 0:03:28.600 easing cycle there shouldn't be ending as quickly as it did. 0:03:28.639 --> 0:03:31.040 I mean, remember they ended quantitative easing at the end 0:03:31.040 --> 0:03:32.720 of last year. Look, it may have been just a 0:03:32.720 --> 0:03:34.760 little bit too premature, David. Some people have said the 0:03:34.920 --> 0:03:37.280 ECB and the Government Council over the last few quarters 0:03:37.280 --> 0:03:40.720 has been incredibly complacent. We heard through the back half 0:03:40.720 --> 0:03:43.120 of last year that the slowdown would be temporary, that 0:03:43.160 --> 0:03:45.840 it would fade, that things would bottom out. The slowdown 0:03:45.840 --> 0:03:50.600 bled into quite clearly. There are some signs in services 0:03:50.840 --> 0:03:54.000 and the labor market that things are stabilizing. Is there 0:03:54.000 --> 0:03:57.480 a chance that the ECB focuses on that today and 0:03:57.560 --> 0:04:00.600 actually sees a reason to be patient and not do 0:04:00.680 --> 0:04:04.400 anything just yet. I think that would be a big mistake. UH, 0:04:04.440 --> 0:04:07.240 And even people who are focusing on the service sector 0:04:07.320 --> 0:04:10.200 p MHIG data in the United States, UH, services are 0:04:10.240 --> 0:04:13.160 inherently sticky. They're not nearly a cyclical as the goods 0:04:13.160 --> 0:04:18.279 producing sector is manufacturing globally and including Europe, is in 0:04:18.440 --> 0:04:22.760 various stages of disarray. UH. Services ultimately, and you talk 0:04:22.800 --> 0:04:28.320 about the labor market, everything ultimately, services the goods producing sector. Uh, 0:04:28.360 --> 0:04:30.480 and it's extremely weak. And I think that's what we 0:04:30.480 --> 0:04:32.320 be focused on right now. And I said before, let's 0:04:32.360 --> 0:04:34.880 leave the economy aside. Uh. The truth is always in 0:04:34.880 --> 0:04:38.640 the price. If you're cutting your inflation targets, your inflation forecast, 0:04:38.720 --> 0:04:43.679 and if inflation is below your objectives, uh, the price 0:04:43.760 --> 0:04:46.560 numbers are telling you about the state of domestic demand. 0:04:46.960 --> 0:04:49.480 And so right there, I think that deserves a shift, 0:04:50.000 --> 0:04:51.800 a big shift in the tone by the central banks. 0:04:51.880 --> 0:04:54.960 David Rosenberg, No one but you owns the slicing and 0:04:55.040 --> 0:04:58.640 dicing of inflation. You've absolutely killed it, maybe along with 0:04:58.680 --> 0:05:01.560 Gary Shilling on a low interest rate regime, a low 0:05:01.720 --> 0:05:05.720 inflation regime is well, what do you say to the 0:05:05.720 --> 0:05:09.640 inflation optimus, not the inflation eastas, but people that say 0:05:09.680 --> 0:05:11.840 we'll get a bid to price? Can we do that 0:05:12.200 --> 0:05:14.520 in an age of oversupply? Well, look, we we just 0:05:14.600 --> 0:05:17.600 got the most up to date anecdotal information on one 0:05:17.640 --> 0:05:21.400 inflation looks like in the US, what's it looking yesterday's basebook? Well, look, 0:05:21.440 --> 0:05:25.159 we are seeing some cost pressures, uh, partly from the tariffs, 0:05:25.640 --> 0:05:28.680 partly from labor in the terms of tight labor markets. 0:05:28.680 --> 0:05:30.279 Of course, that's a lagging indicator. What are the base 0:05:30.320 --> 0:05:33.680 book tellers yesterday that companies increasingly are having trouble passing 0:05:33.720 --> 0:05:36.880 on their cost increases in the final prices. That tells 0:05:36.880 --> 0:05:39.880 me that there's a concern about inflation. It's more on 0:05:39.960 --> 0:05:42.240 costs and it is on final prices. That tells me 0:05:42.320 --> 0:05:44.600 that we're going to have margin pressure. Maybe that's more 0:05:44.600 --> 0:05:46.839 of a problem for the stock market than it is 0:05:47.480 --> 0:05:50.560 for anything else. But look big picture. Um, you know, 0:05:50.640 --> 0:05:53.200 we we did have a modest inflation cycle this time. 0:05:53.240 --> 0:05:56.320 Core inflation bottomed at point six percent. It peaked at 0:05:56.360 --> 0:05:59.480 two point four percent. I don't think most people realize 0:05:59.520 --> 0:06:02.039 that this was the lowest peak and core inflation in 0:06:02.040 --> 0:06:05.080 the United States in the post World War two experience. 0:06:05.120 --> 0:06:09.320 And that includes the UH, the the the Clever Family 0:06:09.360 --> 0:06:11.520 of the nineteen fifties. We've never seen cor inflation peak 0:06:11.560 --> 0:06:15.120 at such a low level despite everything we threw at it. Like, 0:06:15.160 --> 0:06:18.159 I'm still surprised people are talking about inflation. Uh. We 0:06:18.279 --> 0:06:21.280 threw two rounds of huge fiscal stimulus at the situation 0:06:21.920 --> 0:06:25.120 zero percent interest rates for the better part of seven 0:06:25.200 --> 0:06:28.359 or eight years, relentless quantitative easings, and and that the 0:06:28.360 --> 0:06:30.919 peak and cor inflation was two point four. You know 0:06:30.960 --> 0:06:33.680 there's no inflation for New York Islanders tickets. I mean 0:06:33.720 --> 0:06:36.560 you and I could go see Canadians Islanders March fourteen 0:06:37.080 --> 0:06:39.960 for half the price. We'd see it at the Forum 0:06:40.080 --> 0:06:42.640 or the Madison Square Guard. Well that's half the price 0:06:42.760 --> 0:06:44.760 to you. But I'm playing it in Canadian dollars. So 0:06:44.760 --> 0:06:48.600 you've got attack from me. Okay, Well, what's gonna happen there? 0:06:48.640 --> 0:06:52.520 Unless you're treating? Can you know why I'm treating? Can 0:06:52.560 --> 0:06:54.520 we do that? John? I don't know if we can. 0:06:54.800 --> 0:06:56.839 Maybe if we take you it's called a mercy mission, 0:06:56.880 --> 0:06:59.040 that would be a great place for you. That would 0:06:59.040 --> 0:07:00.720 be a great place for you to see a first 0:07:00.720 --> 0:07:03.400 hockey game. Seriously, Yeah, it's a it's a dump of 0:07:03.400 --> 0:07:10.000 an arena. They've redone it like the old expense it 0:07:10.080 --> 0:07:11.760 Reddo will pick it up, red O, Keeper of the 0:07:11.920 --> 0:07:14.320 m X David give us an update at the time 0:07:14.320 --> 0:07:16.760 we've got left with you on the chaos politically in 0:07:16.840 --> 0:07:20.640 your Canada. Well, look, I would say that it's a 0:07:20.680 --> 0:07:24.600 little overblown. Um and uh uh. You know the situation 0:07:24.640 --> 0:07:27.760 with Lavlin from something that happened a decade ago, and 0:07:27.880 --> 0:07:30.800 you know the extent to which the Prime Minister in 0:07:30.840 --> 0:07:34.160 his office, you know, pressure the Attorney general. I mean 0:07:34.160 --> 0:07:37.320 this is actually in many respects um part for the course, 0:07:37.360 --> 0:07:42.440 as far as UH Government Canada is concerned, it was basically, um, 0:07:42.480 --> 0:07:44.400 you know, the Attorney General claiming that there was a 0:07:44.400 --> 0:07:47.240 lot of undue pressure on so on and so forth. UM. 0:07:48.000 --> 0:07:49.880 I just think that the problem is more of that 0:07:50.040 --> 0:07:52.400 the Prime minister, that Prime Minister Trudeau you know, came 0:07:52.440 --> 0:07:56.120 in um with a really squeaky clean image and um 0:07:56.200 --> 0:07:59.120 and portrayed that on it and and you know, and 0:07:59.160 --> 0:08:01.880 so look you go back to Stephen Harper. His big 0:08:01.920 --> 0:08:03.640 scandal was was, if you remember, it was the Mike 0:08:03.720 --> 0:08:05.520 Duffy affair, which was a bit of a joke. You 0:08:05.520 --> 0:08:06.880 know when you take a look at the US and 0:08:06.880 --> 0:08:10.480 the stuff happening, um, you know in Washington, what's happening 0:08:10.480 --> 0:08:13.520 in Ottawa now is actually pales in comparison. But you know, 0:08:13.520 --> 0:08:16.400 when you benchmarket once again against you know, UM, a 0:08:16.440 --> 0:08:18.560 squeaky clean image and all of a sudden, there's a 0:08:18.600 --> 0:08:20.120 chink in the armor and next thing you know, it's 0:08:20.160 --> 0:08:22.760 making front page news. But it's it's it's it's I 0:08:22.760 --> 0:08:26.280 would say, overblown. You're montro Canadians fans, somehow you get 0:08:26.280 --> 0:08:29.640 the Ottawa Senators worst in the world into it. David Rosenberg, 0:08:30.000 --> 0:08:33.120 thank you so much, greatly appreciated this morning with Guskin 0:08:33.240 --> 0:08:35.719 chef important comments there is we go to what I 0:08:35.760 --> 0:08:37.559 thought it would be a joke, John, and all of 0:08:37.640 --> 0:08:39.720 a sudden the ECB meeting is like the real deal 0:08:54.679 --> 0:08:57.880 right now. William Lee with his Billy of Milk and Institute, 0:08:57.920 --> 0:09:00.559 with his tour duty at the International Monitor Very Fund 0:09:00.920 --> 0:09:03.200 and was City Group. Of course, we can only speak 0:09:03.240 --> 0:09:06.480 about a record trade deficit back of solid ten even 0:09:06.520 --> 0:09:09.560 eleven years, Billy, I want to talk about the terroriffs 0:09:09.559 --> 0:09:11.520 in the short time we've got with you this morning. 0:09:11.920 --> 0:09:16.080 Can we just eliminate the terroiffs? Can China pull back tariffs? 0:09:16.120 --> 0:09:19.960 Can we pull back tariffs and basically start all over. 0:09:20.800 --> 0:09:23.640 We have to because China desperately needs to boost its 0:09:23.679 --> 0:09:25.559 economy and the only way they're going to be able 0:09:25.559 --> 0:09:27.280 to do that is to restore trade to where it 0:09:27.320 --> 0:09:29.960 was before, because their experiment of trying to do fiscal 0:09:29.960 --> 0:09:32.120 policy right now may or may not work because they've 0:09:32.120 --> 0:09:34.319 never done fiscal policy without a lot of critic growth. 0:09:34.600 --> 0:09:37.960 So tariffs have to go down as far as we're concerned, Uh, 0:09:38.000 --> 0:09:41.160 the farmers are suffering, and I think Trump's political base 0:09:41.280 --> 0:09:45.080 is one where the farmers and manufacturers have to reassured 0:09:45.200 --> 0:09:47.199 that job growth is there. I asked this of our covins, 0:09:47.280 --> 0:09:48.720 A really let me ask it of you. Do you 0:09:48.760 --> 0:09:52.360 see any indication in Washington that Mr Trump and his 0:09:52.559 --> 0:09:57.320 political team will listen to Mr Lightheiser, Mr Cudlow and 0:09:57.360 --> 0:10:00.000 the rest. Well, He's gonna listen in a very careful 0:10:00.080 --> 0:10:02.840 sort of way, because look at the sequence of negotiations 0:10:02.840 --> 0:10:05.600 he's done. He's allowed the farmers to get their deals. 0:10:05.679 --> 0:10:08.360 He's allowed the manufacturers to have their deals with some 0:10:08.400 --> 0:10:11.080 of the terrorists protecting them. But as far as intellectual 0:10:11.080 --> 0:10:14.360 property protection and and and and other more nasty parts 0:10:14.360 --> 0:10:16.800 of the trade discussion, he's letting that go. He's letting 0:10:16.800 --> 0:10:19.600 that slide. Why is that because that benefits Silicon Valley 0:10:19.600 --> 0:10:21.040 and let's face it, he's not going to get the 0:10:21.080 --> 0:10:23.960 California electoral votes. So as far as helping his basis 0:10:24.040 --> 0:10:26.800 concern Trump, President Trump has done exactly the right thing 0:10:26.840 --> 0:10:30.000 in terms of sequencing what's important for them and allowing 0:10:30.040 --> 0:10:33.680 the rest of the deal to to gather momentum later on. 0:10:33.880 --> 0:10:36.360 But this really concerns me. I think the administration has 0:10:36.400 --> 0:10:38.439 done a terrific job of getting the Chinese to come 0:10:38.480 --> 0:10:41.959 to the table. We're so close to getting some real concessions. 0:10:42.040 --> 0:10:46.040 Wouldn't be be a massive wasted opportunity to focus on 0:10:46.080 --> 0:10:49.400 the trade balance and not address these bigger issues. Boy, Johnny, 0:10:49.440 --> 0:10:51.160 I can't agree with you more. And and you know, 0:10:51.200 --> 0:10:54.480 all this discussion about whahwih that's just the opening rounds 0:10:54.480 --> 0:10:57.800 in the war of intellectual property protection, because let's face it, 0:10:58.080 --> 0:11:01.599 no one has faith in corporate governance in China. CTE 0:11:01.640 --> 0:11:04.800 is a great example of of of having a company 0:11:04.880 --> 0:11:08.280 pay fines, put in uh changes, in structural changes in 0:11:08.320 --> 0:11:10.760 the board, and we don't believe them. What's gonna happen 0:11:10.760 --> 0:11:13.120 with Yahwei? Especially in the world of five G where 0:11:13.440 --> 0:11:17.319 everything is equipment related and and and the the probability 0:11:17.320 --> 0:11:20.720 of their sticking and spying material into those equipment in 0:11:20.720 --> 0:11:22.880 the Europe and every place else, even here in rural 0:11:23.080 --> 0:11:26.440 US is very, very high. And those are the issues 0:11:26.440 --> 0:11:28.840 that need to be discussed. And Lightheiser is saying that 0:11:28.880 --> 0:11:32.560 maybe enforcement mechanism comes along with more frequent discussions, Well, 0:11:32.640 --> 0:11:34.680 good luck on that. But I think many people find 0:11:34.720 --> 0:11:38.080 this absolutely infuriating, the idea that Huawei is suing the 0:11:38.160 --> 0:11:41.640 US government for barring its equipment from certain networks. If 0:11:41.679 --> 0:11:44.040 the US had the same ability to do the same 0:11:44.080 --> 0:11:46.360 in China, can you imagine how many US companies would 0:11:46.360 --> 0:11:49.320 be lining up suing the Chinese government to get access 0:11:49.320 --> 0:11:53.840 into China. Try getting it, Try getting a judicial reward 0:11:53.880 --> 0:11:57.000 in China for US company. But but you're absolutely right there. 0:11:57.000 --> 0:11:58.640 But this whole, as I said, this is just the 0:11:58.640 --> 0:12:00.839 opening rounds of that screw miss that we're gonna see 0:12:00.920 --> 0:12:03.040 for years and years on how it is that we 0:12:03.040 --> 0:12:06.440 can protect intellectual property and security at the same time 0:12:06.600 --> 0:12:09.520 lower the cost and and and let's not forget Yahwei 0:12:09.559 --> 0:12:12.600 and Ztes. Supply chain is intimately linked to the US 0:12:12.640 --> 0:12:15.400 because when we shut off our suppliers to to those companies, 0:12:15.440 --> 0:12:18.360 they almost went bankrupt. It's a John's insight that we're 0:12:18.480 --> 0:12:21.520 close to some kind of deal. From where you sit, Bill, 0:12:21.720 --> 0:12:24.360 is that true? Are we close to some kind of 0:12:24.400 --> 0:12:28.640 deal or are we gonna do another Hannoy? That's the key, Tom, 0:12:28.679 --> 0:12:32.199 I'm ask I think he can very well walk away 0:12:32.280 --> 0:12:35.520 right now because he's gonna show he's gotta solid he's 0:12:35.559 --> 0:12:37.520 gotta have a solid political base, and he's got to 0:12:37.520 --> 0:12:39.520 show that he's tough and he's willing to walk away 0:12:39.520 --> 0:12:41.800 from a bad deal. What happens when he walks away? 0:12:42.080 --> 0:12:45.280 The markets are gonna collapse. I think everyone has priced 0:12:45.320 --> 0:12:47.440 in some kind of a deal that that if he 0:12:47.480 --> 0:12:49.640 were to actually walk away, I think he's better have 0:12:49.760 --> 0:12:52.559 some plan be in mind to be able to restot markets, 0:12:52.559 --> 0:12:55.680 because otherwise I think we could have a massive crash 0:12:55.679 --> 0:12:58.800 in the all the global equity markets and and other markets. 0:12:59.200 --> 0:13:00.679 I just think that way I thinks are lined up 0:13:00.760 --> 0:13:03.640 to go full circle. To Bill's earlier comments, you hear 0:13:03.679 --> 0:13:06.120 more and more about the American farmer. It looks like 0:13:06.160 --> 0:13:08.800 a deal that's going to be centered around the trade balance, 0:13:08.840 --> 0:13:11.360 perhaps the purchase of more agricultural goods. And to your 0:13:11.400 --> 0:13:13.640 great point, Bill, it's going to be very very difficult 0:13:13.679 --> 0:13:15.440 if you want a quick deal, it's going to be 0:13:15.520 --> 0:13:17.760 very very difficult to get the stuff that really matters, 0:13:17.760 --> 0:13:22.440 the structural issues technology transfer, I p theft. What happens 0:13:23.000 --> 0:13:25.719 with Trade Representative Lighthiser if he doesn't get the deal 0:13:25.760 --> 0:13:27.079 that he wants. I assume that there's going to be 0:13:27.160 --> 0:13:30.320 some people that walks away. Well, unless Trump starts to 0:13:30.400 --> 0:13:33.439 wave the flag of we have put in place of 0:13:33.559 --> 0:13:36.880 mechanism for enforcement, and that is yet to be done. 0:13:36.920 --> 0:13:39.120 I think if he starts waving that around, Lighthouser will 0:13:39.120 --> 0:13:41.599 stay to try to make that work. Billy, thank you 0:13:41.679 --> 0:13:58.120 so much. Thanks Institute today on our international economics joining 0:13:58.160 --> 0:14:02.760 us on the phone. Jeffrey's international chief financial economist is 0:14:02.840 --> 0:14:04.640 joining us right now. Great to have you with us, 0:14:04.600 --> 0:14:10.600 Sir David. David walked me through your first tape. Please. Well, 0:14:10.640 --> 0:14:12.600 I mean, the surprise to us is that they unveiled 0:14:12.640 --> 0:14:16.600 the series of measures today. We were expecting something either 0:14:16.640 --> 0:14:20.240 in April or June. Obviously we knew that the ECB 0:14:20.480 --> 0:14:23.600 was going to be dubbish, but we expected the announcement 0:14:23.600 --> 0:14:26.520 of the package the announced today to actually have been 0:14:26.520 --> 0:14:28.880 delayed to a future meets at meeting, but the good 0:14:28.880 --> 0:14:30.800 thing is it's it's all wrapped in together, and as 0:14:30.840 --> 0:14:32.640 you were saying a moment ago, it does rather tie 0:14:32.680 --> 0:14:36.840 the hand of marrow drags. It's quite clear they're trying 0:14:36.840 --> 0:14:41.560 to engineer um a much stronger Eurozone economy going forward. 0:14:41.600 --> 0:14:45.520 In particular, obviously the Ford guidance on rates has been 0:14:45.560 --> 0:14:47.880 moved back that they're going to keep rates at these 0:14:47.920 --> 0:14:50.360 levels until at least through the end of this year, 0:14:50.880 --> 0:14:53.760 from the end of the Studdler previously. Secondly, they're obviously 0:14:53.800 --> 0:14:56.920 introducing these under tel throws for two years, which is 0:14:57.000 --> 0:15:00.320 targeted to lending to numberlancal corporations as the households, but 0:15:00.360 --> 0:15:02.880 in particular as well. These are at variable rates, so 0:15:02.960 --> 0:15:05.160 they're giving a clear here that they do expect over 0:15:05.200 --> 0:15:07.280 the next two years or so rates to start rising. 0:15:07.360 --> 0:15:10.480 But David, this is important. You were Jefferies, a wonderful 0:15:10.520 --> 0:15:13.760 and international firm. You were Dressner Kleinwood before, so you 0:15:13.880 --> 0:15:18.400 understand continental banking and continental central banking. Can they be 0:15:18.600 --> 0:15:22.680 optimistically preemptive? Is there any history that they can get 0:15:22.680 --> 0:15:27.600 out front of a slowdown in Europe? I observe no 0:15:28.040 --> 0:15:31.640 history where they've been able to do that. You're quite right, 0:15:31.680 --> 0:15:34.240 some in the sense they had over the years tending 0:15:34.280 --> 0:15:37.400 to lack developments. But I think in terms of the 0:15:37.440 --> 0:15:40.920 slowdown that we saw in the latter stages of last year, 0:15:40.960 --> 0:15:44.080 in particular whose reign met much led by the slowdown 0:15:44.080 --> 0:15:47.320 that we saw more generally in trade, also trade within 0:15:47.360 --> 0:15:51.720 the Aurozona itself, UM and also particular issues like autos 0:15:51.760 --> 0:15:55.040 in Germany and the weakness more generally consumer durable spending. 0:15:55.200 --> 0:15:58.080 If you look as other evidence of domestic demand, though 0:15:58.320 --> 0:16:02.640 they've actually been picking up reasonably uh strongly, and employment 0:16:02.680 --> 0:16:04.680 to games up in the fourth quarter of last year. 0:16:04.760 --> 0:16:08.640 Wage inflation continues picking up. Wage inflation around the arizonas 0:16:08.680 --> 0:16:12.960 picked up early decisively, and even bank lending has picked 0:16:13.040 --> 0:16:17.240 up pretty decisively in most countries. Of the exceptional course 0:16:17.240 --> 0:16:21.320 of Italy and Spain, and the Teltro's were very much targets. 0:16:21.400 --> 0:16:24.520 I think that those two are sort of countries particularly 0:16:24.560 --> 0:16:27.640 trying to foster greater loone growth going forward. So now 0:16:27.880 --> 0:16:31.240 the interesting thing I've also add is the incoming ECB 0:16:31.440 --> 0:16:35.360 Chief economists as of as of mays ear Fini Lane 0:16:35.920 --> 0:16:39.240 currently the Central Bank Governor of Ireland, and he's very 0:16:39.320 --> 0:16:44.000 much focused on imbalances, macrovidential policies, um and income. In 0:16:44.040 --> 0:16:47.160 this environment, he there will be much more focused on 0:16:47.400 --> 0:16:49.600 actually heading off in balances in a world where the 0:16:49.600 --> 0:16:52.680 ECB is still anchoring rates very much at the floor 0:16:52.960 --> 0:16:55.320 and trying to get bank lending growth going in all 0:16:55.320 --> 0:16:57.600 these other countries, You've got a situation at the moment 0:16:57.640 --> 0:17:00.480 where bank lending growth in Belgium to another tactrical rations 0:17:00.760 --> 0:17:03.120 is growing at almost ten percent year on year UM. 0:17:03.160 --> 0:17:05.280 It's also very strong in Germany, it's pretty strong in 0:17:05.440 --> 0:17:09.240 France UM. And you know ECB will be aware of 0:17:09.280 --> 0:17:12.440 these imbalances they start developing. David, you mentioned the successor 0:17:12.480 --> 0:17:14.879 to Peter Pratt as the chief economist of the ECB. 0:17:15.040 --> 0:17:17.840 Let's talk about the successor of the president. The president 0:17:17.920 --> 0:17:20.239 dragon just tie the hands of his successor a little bit, 0:17:20.280 --> 0:17:24.080 at least for the first few quarters. Yeah, you're absolutely right. 0:17:24.080 --> 0:17:26.840 I mean, he's he's he's I mean, but what they 0:17:26.840 --> 0:17:30.880 would argue is that their their guidance can change. So 0:17:31.000 --> 0:17:33.400 if we go through into the middle of this year, 0:17:33.560 --> 0:17:37.320 stay June, and you know, indicators are now pointing better 0:17:37.480 --> 0:17:40.600 and core inflation sees the picking up some traction, the 0:17:40.640 --> 0:17:44.200 guidance from the ECB can change. Obviously, these telt rows 0:17:44.240 --> 0:17:46.480 are going to be in play now until March of 0:17:46.560 --> 0:17:49.919 two thousand twenty three UM. Because you know, but in 0:17:49.960 --> 0:17:52.600 that period obviously between now and the end of two 0:17:52.600 --> 0:17:56.360 thousand and twelve, as two thousand trade two, they can 0:17:56.359 --> 0:17:59.800 opport raise interest rates UM. And you know rates could 0:18:00.000 --> 0:18:02.560 It's funny stifferently over the next two years anyway, But 0:18:02.800 --> 0:18:05.040 at the moment they're still in this environment where they 0:18:05.080 --> 0:18:08.760 just want the anchor expectations, get bank lending, going help 0:18:08.800 --> 0:18:12.040 out Italian banks, in Spanish banks to some degree, um, 0:18:12.160 --> 0:18:14.320 and achieve a state lusty in the way for the 0:18:14.359 --> 0:18:17.199 europe generally. Ask you this because you're the Jeffrey, so 0:18:17.240 --> 0:18:18.959 I think you're not going to be jeopardized by your 0:18:19.000 --> 0:18:24.360 General Council. Isn't all of this hinged unclearing commercial banking 0:18:24.600 --> 0:18:28.040 in Europe? And do you see any indication David on 0:18:28.760 --> 0:18:32.560 that ECB and other regulators actually wanted once and for 0:18:32.680 --> 0:18:38.560 all clear out troubled EU banking. Well, they certainly do, 0:18:38.800 --> 0:18:42.520 and obviously and the regulate the national level and the 0:18:42.600 --> 0:18:45.960 supernational level. They're trying to achieve that, um. But it's 0:18:46.040 --> 0:18:48.440 very to work in progress and they're they're working through 0:18:48.480 --> 0:18:52.359 all the issues in you know, every country has different issues. UM. 0:18:52.520 --> 0:18:54.719 The banking sector in general in the Eurozone, as you know, 0:18:54.920 --> 0:18:58.919 is is very large, it's very fragmented. Um. There's very 0:18:58.920 --> 0:19:01.680 different banking models that exists across country. So you've got 0:19:01.760 --> 0:19:05.480 very different um sort of profit margins um for the 0:19:05.520 --> 0:19:09.600 same bank operating in different regions of the Aurozone. Obviously 0:19:09.600 --> 0:19:11.760 they're trying to move it to you know, a one, 0:19:12.040 --> 0:19:14.400 one stop banking sector as you have in the US 0:19:14.480 --> 0:19:16.000 in a sense and we have here in the UK. 0:19:16.920 --> 0:19:19.280 But they're starting out from where they are and it's 0:19:19.400 --> 0:19:22.439 it's only work in progress, and obviously none performing loans 0:19:22.480 --> 0:19:26.120 remain an issue in some countries. Very large bounce sheets 0:19:26.400 --> 0:19:29.399 um still remain in others. Some of these banks all 0:19:29.480 --> 0:19:31.240 very large. Let's sleeve it there, David, and thank you 0:19:31.320 --> 0:19:49.240 so much. With Jeffreys, appreciate that. Actually, last wing and 0:19:49.280 --> 0:19:51.240 I are going to digress right now. We've been watching 0:19:51.240 --> 0:19:54.080 Europe blow up, and maybe we'll fold that into our discussion. 0:19:54.640 --> 0:19:58.200 But right now, the woman who gives us more mail 0:19:58.640 --> 0:20:03.240 and technical analys than anyone breathing, and that would be Louise. 0:20:04.080 --> 0:20:08.280 She is definitive and the courage to look at long 0:20:08.480 --> 0:20:11.440 term charts. Louise, I want to look back after this 0:20:11.480 --> 0:20:17.600 historic moment known as December January, in February, in November, 0:20:17.640 --> 0:20:21.240 what did your long term charts say about all that 0:20:21.359 --> 0:20:26.320 volatility coming Well, we had been cautious for several months 0:20:26.320 --> 0:20:31.280 before the December dropped. So the longer term monthly momentum 0:20:31.320 --> 0:20:35.399 went negative in October, so that was a warning among 0:20:35.400 --> 0:20:41.080 other indicators that suggested things weren't quite ready to continue 0:20:41.160 --> 0:20:44.840 to move up. Okay, and then you enjoyed Did you 0:20:44.880 --> 0:20:49.960 load the boat December? I mean you didn't know. We didn't. 0:20:50.000 --> 0:20:53.720 I'm sorry to say, but um, we we prefer to 0:20:53.800 --> 0:20:57.280 wait and see what the longer term indicators tell us. 0:20:57.280 --> 0:20:59.320 And to be honest with you, they're still on a sell, 0:21:00.040 --> 0:21:03.600 believe it or not. And now the daily momentum has 0:21:03.680 --> 0:21:06.760 moved into a cell. So that allowed us to at 0:21:06.840 --> 0:21:09.120 least suggest here that we're going to have some kind 0:21:09.160 --> 0:21:12.160 of a pullback. We did a schematic of a big 0:21:12.359 --> 0:21:14.879 w sort of similar to what happened in the fall 0:21:14.920 --> 0:21:17.920 of last year. Um, if we were to come down, 0:21:18.080 --> 0:21:22.640 maybe seven up and down, you'd have a consolidation that 0:21:22.680 --> 0:21:27.040 would give you a configuration that then might support new 0:21:27.119 --> 0:21:29.919 highs if in fact the market is going to choose 0:21:29.960 --> 0:21:33.399 to do that. But if we don't hold with a 0:21:33.440 --> 0:21:36.720 seven percent pullback, then we may be looking at something 0:21:36.720 --> 0:21:39.480 a little more severe. I think it's a very selective 0:21:39.600 --> 0:21:44.080 market out there, and a lot of the advancing statistics 0:21:44.359 --> 0:21:47.399 UM would be the same stocks going higher and higher 0:21:47.400 --> 0:21:49.240 I mean, look at his eye links that just keeps 0:21:49.240 --> 0:21:50.800 going up and up and up, and yet you have 0:21:50.880 --> 0:21:53.560