1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,400 Speaker 2: with Lisa Bromwitz and a Marie Hordern. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:35,840 Speaker 2: Bloomberg Terminal and the Bloomberg Business App. 10 00:00:36,440 --> 00:00:39,880 Speaker 1: Peter's share of Academy Securities coming back with us, saying, 11 00:00:40,040 --> 00:00:42,360 Speaker 1: bottom line, the FED cuts by twenty five at the 12 00:00:42,400 --> 00:00:45,760 Speaker 1: next meeting. It should be a neutral to mildly hawkish 13 00:00:45,800 --> 00:00:49,279 Speaker 1: twenty five basis points as the underlying data away from 14 00:00:49,280 --> 00:00:52,480 Speaker 1: the unemployment rate based on back to back bad months 15 00:00:52,520 --> 00:00:55,680 Speaker 1: in the household survey, is likely to be deemed the outlier. 16 00:00:55,760 --> 00:00:58,280 Speaker 1: Peter joins us. Now, Peter, thank you so much for 17 00:00:58,360 --> 00:01:00,920 Speaker 1: being back with us. Want to get a sense of 18 00:01:00,920 --> 00:01:04,200 Speaker 1: what you make of yesterday's price action. I know reading 19 00:01:04,200 --> 00:01:06,240 Speaker 1: the tea leaves of the market can be a fool's errand, 20 00:01:06,319 --> 00:01:09,120 Speaker 1: but it seemed odd that the initial reaction was to 21 00:01:09,120 --> 00:01:13,000 Speaker 1: buybonds great auction and then something changed. 22 00:01:13,240 --> 00:01:15,480 Speaker 3: No, I think everyone really has these animal spirits. I 23 00:01:15,480 --> 00:01:17,720 Speaker 3: think everyone's trying to look through this and say, there 24 00:01:17,800 --> 00:01:19,880 Speaker 3: is a real chance that Trump cuts a lot of 25 00:01:19,920 --> 00:01:22,880 Speaker 3: red tape, that he reduces regulation, that he promotes business. 26 00:01:23,160 --> 00:01:25,040 Speaker 3: I think you're seeing stimulus from the rest of the world. 27 00:01:25,160 --> 00:01:26,520 Speaker 3: I think at some point we might get worried that 28 00:01:26,560 --> 00:01:28,320 Speaker 3: the rest of the world's going to slow down enough 29 00:01:28,360 --> 00:01:29,280 Speaker 3: that it drags. 30 00:01:28,959 --> 00:01:29,560 Speaker 4: The US down. 31 00:01:29,680 --> 00:01:31,560 Speaker 3: But for now, I think it's just that excitement that 32 00:01:31,880 --> 00:01:34,040 Speaker 3: kind of all this not in my backyard gets thrown 33 00:01:34,080 --> 00:01:37,840 Speaker 3: away and we actually see progress. We see investment done, 34 00:01:37,840 --> 00:01:40,600 Speaker 3: we see buildouts here, and I think that's real. And 35 00:01:40,640 --> 00:01:42,840 Speaker 3: that's what's outweighing even the moving yields. 36 00:01:42,880 --> 00:01:45,280 Speaker 1: Well, it might be outweighing the yield and the move 37 00:01:45,319 --> 00:01:48,560 Speaker 1: it yields, but what is behind that yield, that move 38 00:01:48,640 --> 00:01:51,080 Speaker 1: and yields Given the fact that basically we're counting on 39 00:01:51,120 --> 00:01:53,960 Speaker 1: a federal reserve to cut rates by twenty five basis 40 00:01:53,960 --> 00:01:56,400 Speaker 1: points next week, and you got central branks around the 41 00:01:56,400 --> 00:01:59,520 Speaker 1: world so that are chopping away as quickly as they can. 42 00:02:00,160 --> 00:02:02,120 Speaker 3: Are not going to see a much lower inflation picture 43 00:02:02,120 --> 00:02:04,880 Speaker 3: in the US. Partly companies are front running some you know, 44 00:02:05,000 --> 00:02:07,600 Speaker 3: tariffere so there's been buying on that. And if we 45 00:02:07,640 --> 00:02:09,320 Speaker 3: are going to build things in the US, which I 46 00:02:09,320 --> 00:02:11,160 Speaker 3: think there's going to be a push quite frankly, it's 47 00:02:11,160 --> 00:02:12,520 Speaker 3: going to be more expensive to do it here then 48 00:02:12,520 --> 00:02:14,760 Speaker 3: it would be elsewhere. Otherwise we've probably been doing it 49 00:02:14,800 --> 00:02:16,520 Speaker 3: here already, so I think there's going to be some 50 00:02:16,520 --> 00:02:18,400 Speaker 3: cost associated with that. There's going to be a build 51 00:02:18,400 --> 00:02:20,960 Speaker 3: out and logistics. You know, we're going to need infrastructure 52 00:02:20,960 --> 00:02:22,080 Speaker 3: to do all that. So I think it's going to 53 00:02:22,200 --> 00:02:24,200 Speaker 3: kind of keep inflation a little bit high. You're seeing 54 00:02:24,200 --> 00:02:26,600 Speaker 3: the data centers go all those things. I would say 55 00:02:26,680 --> 00:02:28,639 Speaker 3: on the equity markets, I see some froth. I'm a 56 00:02:28,680 --> 00:02:30,200 Speaker 3: little bit nervous, but I think, as we talked about 57 00:02:30,200 --> 00:02:32,760 Speaker 3: earlier in the week, it's really hard to short anything 58 00:02:32,760 --> 00:02:35,240 Speaker 3: in December, right, the seasonal you know, factors are in 59 00:02:35,280 --> 00:02:37,440 Speaker 3: your adjustment. And let's also not forget the amount of 60 00:02:37,440 --> 00:02:39,160 Speaker 3: money that's been made in crypto in the last few 61 00:02:39,160 --> 00:02:42,840 Speaker 3: months is certainly helping spur Christmas shopping or holiday shopping. 62 00:02:42,880 --> 00:02:46,079 Speaker 3: It's doing everything so well. Bitcoin kind of keeps going 63 00:02:46,120 --> 00:02:48,280 Speaker 3: up and everyone's excited. I just think that feeds to 64 00:02:48,360 --> 00:02:50,520 Speaker 3: that overall, we have to buy more of this stuff. 65 00:02:50,560 --> 00:02:50,680 Speaker 1: Yea. 66 00:02:50,680 --> 00:02:52,280 Speaker 5: I wonder with the housing market in Miami looks like 67 00:02:52,360 --> 00:02:54,840 Speaker 5: right now, with after that bitcoin surge, getting back to 68 00:02:54,880 --> 00:02:56,040 Speaker 5: the central banks of it all. 69 00:02:56,040 --> 00:02:57,480 Speaker 4: Though on the way up on. 70 00:02:57,440 --> 00:03:00,000 Speaker 5: The hiking cycle, there is this fear of diverging from 71 00:03:00,080 --> 00:03:02,120 Speaker 5: the FED because you want your currency to stay strong 72 00:03:02,200 --> 00:03:05,040 Speaker 5: enough that you could continue to fight inflation. The opposite 73 00:03:05,080 --> 00:03:07,760 Speaker 5: is happening now, and you have concerns from different countries 74 00:03:07,800 --> 00:03:10,000 Speaker 5: about the weakness and their growth. Do you think that 75 00:03:10,080 --> 00:03:12,880 Speaker 5: this is going to be a divergent cutting cycle that 76 00:03:12,880 --> 00:03:14,800 Speaker 5: you're going to see other central banks that want to 77 00:03:14,800 --> 00:03:16,680 Speaker 5: get out in front of the FED and have bigger 78 00:03:16,680 --> 00:03:18,520 Speaker 5: cuts to them. And frankly would welcome a FED that 79 00:03:18,560 --> 00:03:20,720 Speaker 5: maybe goes on pause in twenty twenty five. 80 00:03:20,880 --> 00:03:21,640 Speaker 4: Yeah, I think. 81 00:03:21,520 --> 00:03:23,360 Speaker 3: They want to do that. I think they need to 82 00:03:23,360 --> 00:03:25,079 Speaker 3: do that again. In Europe is kind of a mess 83 00:03:25,120 --> 00:03:27,000 Speaker 3: right now. In that Germany, which had been the juggernaut 84 00:03:27,000 --> 00:03:29,720 Speaker 3: and real the anchor and support of everything, they themselves 85 00:03:29,720 --> 00:03:31,400 Speaker 3: are struggling right now. So that's going to leave the 86 00:03:31,440 --> 00:03:34,240 Speaker 3: ECB job very difficult. And I've always thought that a 87 00:03:34,240 --> 00:03:36,680 Speaker 3: big chunk of the tariffs, if any actually get put on, 88 00:03:36,840 --> 00:03:38,880 Speaker 3: will be absorbed by a much stronger dollar, and I 89 00:03:38,880 --> 00:03:41,200 Speaker 3: think that's what we're seeing right This dollar strength will 90 00:03:41,240 --> 00:03:43,440 Speaker 3: offset any of the terrorf prices, and that will keep 91 00:03:43,480 --> 00:03:45,600 Speaker 3: you know, that pressure lower than it would be otherwise. 92 00:03:45,640 --> 00:03:47,720 Speaker 5: You also said something moments ago, though, you said that 93 00:03:47,760 --> 00:03:50,440 Speaker 5: the animal spirits are dependent on everyone believe in weak 94 00:03:50,480 --> 00:03:53,520 Speaker 5: growth elsewhere won't affect the US. At what point does 95 00:03:53,560 --> 00:03:54,280 Speaker 5: that change? 96 00:03:54,760 --> 00:03:54,960 Speaker 4: You know? 97 00:03:55,120 --> 00:03:57,160 Speaker 3: Certainly probably not this month because everyone's kind of very 98 00:03:57,160 --> 00:03:59,120 Speaker 3: focused on the holiday season coming up. But I think 99 00:03:59,160 --> 00:04:01,160 Speaker 3: as you start looking at annual in February, okay, like 100 00:04:01,240 --> 00:04:03,760 Speaker 3: how long can we continue? And again today I think 101 00:04:03,760 --> 00:04:05,080 Speaker 3: I saw a headline from you that I think is 102 00:04:05,120 --> 00:04:06,960 Speaker 3: going to be a bigger theme again next year is 103 00:04:07,120 --> 00:04:11,160 Speaker 3: byd is Now I think outpacing Volkswagen in Brazil. And 104 00:04:11,320 --> 00:04:13,400 Speaker 3: my view has all long been that China is trying 105 00:04:13,400 --> 00:04:15,320 Speaker 3: to buy time to make sure they can sell their 106 00:04:15,360 --> 00:04:17,720 Speaker 3: brands globally. So I think we get all excited about 107 00:04:17,720 --> 00:04:19,600 Speaker 3: this growth and all the stimulus, and I think in 108 00:04:19,640 --> 00:04:21,560 Speaker 3: the end we have to be much more prepared for 109 00:04:21,640 --> 00:04:24,799 Speaker 3: China trying to sell their brands globally, particularly into emerging 110 00:04:24,800 --> 00:04:26,040 Speaker 3: markets and more and more Europe. 111 00:04:26,040 --> 00:04:28,040 Speaker 4: I think the European weakness plays. 112 00:04:27,680 --> 00:04:30,680 Speaker 6: To China, right because if the walls go up on everyone, 113 00:04:30,760 --> 00:04:33,480 Speaker 6: China's going to have to find a place to dump 114 00:04:33,520 --> 00:04:37,599 Speaker 6: their exports. When it comes to this idea of potentially 115 00:04:38,080 --> 00:04:40,719 Speaker 6: where animal spirits are trying to maybe wane, do you 116 00:04:40,760 --> 00:04:43,560 Speaker 6: want to look elsewhere places like China, places like Europe. 117 00:04:43,720 --> 00:04:43,920 Speaker 4: Yeah. 118 00:04:43,960 --> 00:04:46,240 Speaker 3: I actually think the Chinese stock markets someone interesting. It's 119 00:04:46,240 --> 00:04:49,440 Speaker 3: sold off after Trump one, but I think something that's 120 00:04:49,440 --> 00:04:51,119 Speaker 3: going to be a mistake because a I do believe 121 00:04:51,120 --> 00:04:53,080 Speaker 3: that they really have to continue with the stimulus. They 122 00:04:53,080 --> 00:04:54,720 Speaker 3: have to get their things going, and they're going to 123 00:04:54,760 --> 00:04:56,520 Speaker 3: do everything that they can to help their brands and 124 00:04:56,560 --> 00:04:58,080 Speaker 3: therefore their stocks. I don't think it's going to be 125 00:04:58,120 --> 00:05:00,000 Speaker 3: great for global growth. I think there was an opportunity 126 00:05:00,040 --> 00:05:02,680 Speaker 3: in Chinese stocks as a trade, not as an investment, 127 00:05:02,960 --> 00:05:04,920 Speaker 3: So I like that. I think around here a commercial 128 00:05:04,920 --> 00:05:05,680 Speaker 3: real estate that's. 129 00:05:05,560 --> 00:05:06,960 Speaker 4: Become kind of more and more of a theme. 130 00:05:07,000 --> 00:05:09,680 Speaker 3: I think, you know, work from home is winding down. 131 00:05:09,760 --> 00:05:11,880 Speaker 3: I think you know, the dog or whatever it's called, 132 00:05:12,000 --> 00:05:14,560 Speaker 3: is one thing. The dog is very convinced that and 133 00:05:14,560 --> 00:05:17,360 Speaker 3: I think rightfully, so that all federal employees are still 134 00:05:17,400 --> 00:05:19,440 Speaker 3: working from home will be pushed into office. So I 135 00:05:19,480 --> 00:05:21,880 Speaker 3: think you can see a resurgence in that and yields 136 00:05:21,880 --> 00:05:23,440 Speaker 3: while they go higher. Maybe you get to four to 137 00:05:23,440 --> 00:05:25,400 Speaker 3: fifty on tens with potential spike to five. 138 00:05:25,600 --> 00:05:26,440 Speaker 4: You don't go below four. 139 00:05:26,520 --> 00:05:28,159 Speaker 3: I think a lot of commercial real estate can do 140 00:05:28,200 --> 00:05:29,560 Speaker 3: well in that environment if you're. 141 00:05:29,400 --> 00:05:32,120 Speaker 6: A traveler and not a settler. In terms of the 142 00:05:32,200 --> 00:05:35,360 Speaker 6: China stock market, how concern is if you that Congressman Wald, 143 00:05:35,440 --> 00:05:39,960 Speaker 6: Senator Rubio, potential embassador Jamison Greer have all called for 144 00:05:40,080 --> 00:05:42,640 Speaker 6: decoupling of China and the United States. 145 00:05:42,720 --> 00:05:45,240 Speaker 3: You know, I think we should be somewhat concerned. Then, 146 00:05:45,320 --> 00:05:47,320 Speaker 3: on the other hand, Trump supposing invites you to come 147 00:05:47,360 --> 00:05:49,800 Speaker 3: to the inauguration. So again, I think everything with Trump 148 00:05:49,880 --> 00:05:50,960 Speaker 3: is a little bit of a game and a lot 149 00:05:50,960 --> 00:05:53,880 Speaker 3: of negotiations back and forth. I think it's in China's 150 00:05:53,920 --> 00:05:56,440 Speaker 3: interest to remain as coupled as possible. I think long 151 00:05:56,480 --> 00:05:58,800 Speaker 3: term we'd probably be better decoupling, but I think we'll 152 00:05:58,839 --> 00:06:01,159 Speaker 3: get sucked into doing short term trades that actually favored 153 00:06:01,240 --> 00:06:02,800 Speaker 3: China over us in the long term. 154 00:06:03,040 --> 00:06:04,560 Speaker 5: Can you get into that more because you have a 155 00:06:04,560 --> 00:06:06,920 Speaker 5: really fascinating view that you've been writing about for some time, 156 00:06:07,200 --> 00:06:09,240 Speaker 5: that Trump could go for what looks like a win 157 00:06:09,320 --> 00:06:12,960 Speaker 5: with China but actually gives China an advantage in the US. 158 00:06:13,279 --> 00:06:15,400 Speaker 3: So we see all the problems that Chinese economies having 159 00:06:15,480 --> 00:06:17,520 Speaker 3: right and US companies do not want to invest in 160 00:06:17,520 --> 00:06:19,520 Speaker 3: their US companies are kind of running their factories at 161 00:06:19,520 --> 00:06:21,840 Speaker 3: a minimum there. So China the only way they're ever 162 00:06:21,880 --> 00:06:23,600 Speaker 3: going to grow is by selling their products. 163 00:06:23,680 --> 00:06:25,120 Speaker 4: They need to buy time to do that, right. 164 00:06:25,120 --> 00:06:27,400 Speaker 3: They're struggling right now, and I think they will come 165 00:06:27,440 --> 00:06:29,440 Speaker 3: up with some deal that looks attractive to us and say, oh, 166 00:06:29,480 --> 00:06:32,400 Speaker 3: this is perfect, this solves our issues, and then three 167 00:06:32,400 --> 00:06:34,200 Speaker 3: to five years down the road will regret it because 168 00:06:34,200 --> 00:06:36,479 Speaker 3: it'll give in China time to continue to build up 169 00:06:36,480 --> 00:06:38,880 Speaker 3: their manufacturing, to build up their chip industry, which I 170 00:06:38,920 --> 00:06:40,680 Speaker 3: think we should be really concerned with. I think when 171 00:06:40,680 --> 00:06:43,360 Speaker 3: we talk about it from a geopolitical front, it's their chips, 172 00:06:43,440 --> 00:06:46,039 Speaker 3: it's their AI focus that we need to be worried about. 173 00:06:46,320 --> 00:06:48,040 Speaker 3: And I don't like any deal that kind of buys 174 00:06:48,080 --> 00:06:50,360 Speaker 3: them time, takes some pressure off of that and lets 175 00:06:50,400 --> 00:06:52,440 Speaker 3: them grow. And that's, to me, is the risk because 176 00:06:52,440 --> 00:06:54,880 Speaker 3: they've got that longer term arise than we necessarily do. 177 00:06:55,000 --> 00:06:56,640 Speaker 4: Can we talk about timeline for this? What does a 178 00:06:56,640 --> 00:06:57,800 Speaker 4: longer term horizon look like? 179 00:06:57,920 --> 00:07:00,080 Speaker 3: You know, I think they can think in terms of decades, 180 00:07:00,120 --> 00:07:02,400 Speaker 3: But to me and something like AI and chips, this 181 00:07:02,480 --> 00:07:04,080 Speaker 3: is a three to five year thing where they're trying 182 00:07:04,120 --> 00:07:05,080 Speaker 3: to play catch up. 183 00:07:05,360 --> 00:07:06,520 Speaker 4: They're aggressively doing it. 184 00:07:06,520 --> 00:07:08,280 Speaker 3: They don't have access to ASML or some of the 185 00:07:08,360 --> 00:07:11,000 Speaker 3: high technology. But two things are going on. One, they're 186 00:07:11,040 --> 00:07:13,480 Speaker 3: able to make smaller chips than we would have thought possible. 187 00:07:13,680 --> 00:07:16,480 Speaker 3: They make them very inefficiently, using old machines to make those, 188 00:07:16,480 --> 00:07:18,840 Speaker 3: but they are getting those. And then the bigger advances 189 00:07:18,840 --> 00:07:20,360 Speaker 3: that we're starting to see in the chip industry are 190 00:07:20,360 --> 00:07:22,720 Speaker 3: coming from packaging and how these chips are layered in 191 00:07:22,760 --> 00:07:25,760 Speaker 3: the semiconductors, and that technology is actually much easier. So 192 00:07:25,920 --> 00:07:27,800 Speaker 3: China might be able to actually get some pretty good 193 00:07:27,800 --> 00:07:29,040 Speaker 3: advancements even. 194 00:07:28,880 --> 00:07:30,040 Speaker 4: While we're trying to restrict it. 195 00:07:30,200 --> 00:07:31,680 Speaker 3: And on top of that, we're seeing how easy it 196 00:07:31,760 --> 00:07:32,960 Speaker 3: is to get around restrictions. 197 00:07:33,360 --> 00:07:34,800 Speaker 4: Anyways, Well, and that's. 198 00:07:34,640 --> 00:07:36,440 Speaker 1: Actually what I wanted to ask you. What do you 199 00:07:36,480 --> 00:07:39,360 Speaker 1: make of Nvidia expanding its staff in China at a 200 00:07:39,400 --> 00:07:43,080 Speaker 1: time where there are supposedly these restrictions, and they're trying 201 00:07:43,120 --> 00:07:45,720 Speaker 1: to find ways to maintain their presence and their business 202 00:07:45,760 --> 00:07:46,320 Speaker 1: in the region. 203 00:07:46,600 --> 00:07:48,400 Speaker 3: And I think that's going to be a really difficult thing, 204 00:07:48,400 --> 00:07:50,640 Speaker 3: and I do think companies like that will unfortunately face 205 00:07:50,640 --> 00:07:53,560 Speaker 3: some pressure from this administration. I think, no matter what 206 00:07:53,600 --> 00:07:55,560 Speaker 3: Trump would like to do from a business side, I'm 207 00:07:55,560 --> 00:07:58,440 Speaker 3: a complete believer that some high level of national security 208 00:07:58,920 --> 00:08:02,000 Speaker 3: has this very high on their agenda. It's bipartisan and 209 00:08:02,240 --> 00:08:04,000 Speaker 3: no matter what you might think, once you kind of 210 00:08:04,000 --> 00:08:06,320 Speaker 3: really get read in on what's going on, what the 211 00:08:06,360 --> 00:08:08,160 Speaker 3: fears are, I think there will be a lot of 212 00:08:08,280 --> 00:08:12,119 Speaker 3: pushback to you know, keeping chips and technology out of China. 213 00:08:12,320 --> 00:08:14,880 Speaker 3: You know, you look at some of these the volt typhoon, 214 00:08:15,280 --> 00:08:17,640 Speaker 3: all these hacks have been done to impact our infrastructure. 215 00:08:17,680 --> 00:08:18,800 Speaker 4: Potentially, this is. 216 00:08:18,720 --> 00:08:20,800 Speaker 3: A real issue, and I think there that's going to 217 00:08:20,800 --> 00:08:22,640 Speaker 3: be a struggle for all the companies trying to figure 218 00:08:22,680 --> 00:08:24,800 Speaker 3: out what can be sold into China because it has 219 00:08:24,840 --> 00:08:27,000 Speaker 3: to be and quite frankly, I've heard about eighty percent 220 00:08:27,000 --> 00:08:28,520 Speaker 3: of the chips we sell into China come back into 221 00:08:28,520 --> 00:08:29,960 Speaker 3: the US in various products. 222 00:08:30,000 --> 00:08:32,280 Speaker 4: So it's not an easy answer. But this is strict. 223 00:08:32,360 --> 00:08:34,080 Speaker 3: I think we talked about the other day China or 224 00:08:34,480 --> 00:08:36,320 Speaker 3: zav starting to try and restrict some of the dual 225 00:08:36,400 --> 00:08:37,839 Speaker 3: use chips that have been making their way into the 226 00:08:37,920 --> 00:08:40,240 Speaker 3: Ukrainian drones. This is going to be messy and I 227 00:08:40,280 --> 00:08:41,440 Speaker 3: don't see any way around that. 228 00:08:41,800 --> 00:08:44,000 Speaker 1: Peter Shaer, wonderful to talk to you as always. Thank 229 00:08:44,040 --> 00:08:45,840 Speaker 1: you so much for being with us, Peter share of 230 00:08:45,920 --> 00:08:59,600 Speaker 1: Academy Securities. Here's the latest, President Elect Donald Trump naming 231 00:08:59,679 --> 00:09:04,520 Speaker 1: and Ferguson's incoming FTC chair to replace Lena Kahan the Moon, 232 00:09:04,640 --> 00:09:09,320 Speaker 1: raising expectations for mergers and acquisitions under Trump's second administration. 233 00:09:09,440 --> 00:09:13,280 Speaker 1: The news coming just as grocery store chain Alberton's backed 234 00:09:13,280 --> 00:09:15,400 Speaker 1: out of a merger agreement with Kroger after it was 235 00:09:15,400 --> 00:09:18,640 Speaker 1: blocked by a federal judge, as well as following up 236 00:09:18,679 --> 00:09:21,120 Speaker 1: with a number of vicious back and forth in the 237 00:09:21,240 --> 00:09:24,160 Speaker 1: legal space. Frank Akila, Sullivant, and Cromwell joins us now, 238 00:09:24,160 --> 00:09:27,160 Speaker 1: who focuses on mergers and acquisitions. Frank, we heard that 239 00:09:27,520 --> 00:09:31,360 Speaker 1: incredible bullishness from Paul Taubin. How much is that what 240 00:09:31,400 --> 00:09:34,160 Speaker 1: you're hearing from pretty much every single one of your 241 00:09:34,160 --> 00:09:35,000 Speaker 1: clients right now? 242 00:09:35,640 --> 00:09:38,120 Speaker 7: Well, I think, first of all, we are definitely hearing 243 00:09:38,160 --> 00:09:43,320 Speaker 7: it from the investment banking community, and you know, Paul 244 00:09:43,520 --> 00:09:46,640 Speaker 7: has somebody I've worked with for a long time, and 245 00:09:46,720 --> 00:09:49,920 Speaker 7: he certainly knows, you know, what's happening in the markets. 246 00:09:50,160 --> 00:09:55,600 Speaker 7: What we're hearing from clients is that deals they talked 247 00:09:55,600 --> 00:09:59,760 Speaker 7: about eighteen months ago, a year ago, they are now 248 00:09:59,800 --> 00:10:02,360 Speaker 7: to talking about, Okay, now's the time to do it. 249 00:10:02,520 --> 00:10:03,199 Speaker 8: Because one of the. 250 00:10:03,200 --> 00:10:08,480 Speaker 7: Concerns under the current administration is that even if you've 251 00:10:08,480 --> 00:10:11,440 Speaker 7: got approved, because ninety eight percent of the deals go 252 00:10:11,559 --> 00:10:16,760 Speaker 7: through is it was taking six, nine, twelve months for 253 00:10:16,840 --> 00:10:20,200 Speaker 7: deals that had no anti competitive aspects to it. So 254 00:10:20,920 --> 00:10:24,720 Speaker 7: there was a real concern that you'd get tied up 255 00:10:24,720 --> 00:10:27,000 Speaker 7: in the process and it would sort of frees you 256 00:10:27,040 --> 00:10:30,960 Speaker 7: from a strategic financial point of view. So the view 257 00:10:31,040 --> 00:10:34,120 Speaker 7: is that things are going to happen much more quickly. Yes, 258 00:10:34,240 --> 00:10:37,160 Speaker 7: certain deals will get blocked, certain deals will get challenged, 259 00:10:37,240 --> 00:10:38,200 Speaker 7: but it's going to be. 260 00:10:40,000 --> 00:10:41,120 Speaker 8: A distinct minority. 261 00:10:41,320 --> 00:10:44,280 Speaker 1: Is there a clear sight of what will get blocked 262 00:10:44,440 --> 00:10:47,040 Speaker 1: that there is a certain type of transaction that will 263 00:10:47,040 --> 00:10:50,320 Speaker 1: come into focus, whether it's foreign money coming into say 264 00:10:50,559 --> 00:10:53,240 Speaker 1: a steel company, or whether it's say a tech company 265 00:10:53,440 --> 00:10:55,400 Speaker 1: looking to pick up another smaller firm. 266 00:10:55,800 --> 00:10:58,320 Speaker 7: Well, I think we have to remember that even in 267 00:10:58,400 --> 00:11:01,880 Speaker 7: the Ronald Reagan era, which was pretty wide open in 268 00:11:02,000 --> 00:11:06,160 Speaker 7: terms of merger clearance and antitrust generally, you know, there 269 00:11:06,200 --> 00:11:10,920 Speaker 7: were deals blocked. So anti competitive deals have been blocked 270 00:11:10,920 --> 00:11:14,240 Speaker 7: in every single administration, and I'm sure we'll get blocked. 271 00:11:14,240 --> 00:11:17,720 Speaker 8: Now. Which sectors will they look at more closely? 272 00:11:18,080 --> 00:11:23,080 Speaker 7: Certainly tech, you know, healthcare to a certain extent, retail 273 00:11:23,160 --> 00:11:28,240 Speaker 7: things of that you know directly impact the consumer. Those 274 00:11:28,280 --> 00:11:32,640 Speaker 7: things are definitely going to get looked at very closely. 275 00:11:33,080 --> 00:11:35,480 Speaker 6: What do you see the appetitean for foreign companies and 276 00:11:35,559 --> 00:11:39,400 Speaker 6: is it driven by this carrotenstick idea of potential tariffs 277 00:11:39,520 --> 00:11:42,920 Speaker 6: or is it because they want exposure to US exceptionalism. 278 00:11:43,559 --> 00:11:46,080 Speaker 7: I think we were going to going to see a 279 00:11:46,160 --> 00:11:51,080 Speaker 7: lot of inbound M and A from Europe and Asia, 280 00:11:51,120 --> 00:11:57,600 Speaker 7: particularly Japan, even if Harris was elected. The drive is that, 281 00:11:58,040 --> 00:12:04,280 Speaker 7: you know, the US is growing, the markets in both 282 00:12:04,320 --> 00:12:07,480 Speaker 7: Europe and Asia are fairly stagnant. 283 00:12:07,720 --> 00:12:09,480 Speaker 8: So that's first of all. 284 00:12:09,520 --> 00:12:12,920 Speaker 7: The second thing is if you're producing, if you're selling 285 00:12:12,960 --> 00:12:16,000 Speaker 7: in the United States, you want to be producing here 286 00:12:16,240 --> 00:12:21,720 Speaker 7: because the costs and the potential disruption in the supply chain. 287 00:12:22,760 --> 00:12:24,880 Speaker 7: You know, it becomes more difficult, So we would have 288 00:12:24,920 --> 00:12:26,840 Speaker 7: seen it anyway, but it's going to be increased. 289 00:12:27,080 --> 00:12:28,839 Speaker 6: So what would have been your advice for nip On 290 00:12:28,920 --> 00:12:34,040 Speaker 6: Steel wants to overtake US steal manufacturing factories continued to 291 00:12:34,080 --> 00:12:36,280 Speaker 6: be in the United States, but both Biden and Trump 292 00:12:36,400 --> 00:12:38,240 Speaker 6: said that they would block this deal. 293 00:12:39,040 --> 00:12:43,800 Speaker 8: I think that's pure politics. Pennsylvania was the big state 294 00:12:43,800 --> 00:12:45,600 Speaker 8: in play, and that's so. 295 00:12:45,559 --> 00:12:48,000 Speaker 6: Maybe just timing. Don't do it around a huge presidential 296 00:12:48,000 --> 00:12:50,200 Speaker 6: election with the number one swing state in. 297 00:12:50,480 --> 00:12:52,640 Speaker 8: Le Hopefully that still happens, but we'll see. 298 00:12:53,280 --> 00:12:57,320 Speaker 5: I just wonder for companies that are or private equity 299 00:12:57,320 --> 00:13:00,800 Speaker 5: are looking abroad and companies have international soply chains right 300 00:13:00,840 --> 00:13:03,760 Speaker 5: now and they're faced with a potential reality of tariffs 301 00:13:03,840 --> 00:13:07,200 Speaker 5: changing the entire cost of business. Is that putting deals 302 00:13:07,200 --> 00:13:09,400 Speaker 5: on ice right now or things getting a second look 303 00:13:09,480 --> 00:13:12,160 Speaker 5: because of the risks in twenty twenty five, You. 304 00:13:12,120 --> 00:13:16,760 Speaker 7: Know, I think people have been focused on supply chain issues, 305 00:13:16,920 --> 00:13:22,080 Speaker 7: not necessarily because of tariffs, but since the pandemic, and 306 00:13:22,120 --> 00:13:24,720 Speaker 7: that's really when we saw the first disruptions, which a 307 00:13:24,720 --> 00:13:29,000 Speaker 7: lot of it is what led to inflation. So companies 308 00:13:29,360 --> 00:13:33,240 Speaker 7: are very much focused on that. But you know, I 309 00:13:33,240 --> 00:13:36,000 Speaker 7: think it's a driver of transactions as opposed to an 310 00:13:36,040 --> 00:13:37,520 Speaker 7: impediment to transactions. 311 00:13:37,559 --> 00:13:40,200 Speaker 5: One of the other hopes for a driver of transactions 312 00:13:40,400 --> 00:13:42,440 Speaker 5: was just a lower rate environment, and we've got that 313 00:13:42,520 --> 00:13:44,840 Speaker 5: to some extent. But there's a fear right now in 314 00:13:44,880 --> 00:13:46,760 Speaker 5: this market that the FED can only go so far. 315 00:13:46,960 --> 00:13:49,640 Speaker 5: Maybe it's a cut next week and then a pause. 316 00:13:50,320 --> 00:13:52,560 Speaker 5: What does that do to deal activity? 317 00:13:52,679 --> 00:13:57,240 Speaker 7: You know, first of all, interest rates are historically at 318 00:13:57,480 --> 00:14:00,200 Speaker 7: historically low levels. I mean, we think about the last 319 00:14:00,240 --> 00:14:03,640 Speaker 7: couple of years when they're extraordinarily low, but if you 320 00:14:03,720 --> 00:14:07,080 Speaker 7: look at the Japanese economy where they've had close to 321 00:14:07,280 --> 00:14:12,960 Speaker 7: zero interest rates and very stagnant business activity. I think 322 00:14:13,440 --> 00:14:16,679 Speaker 7: if the economy is growing and you can build in 323 00:14:16,720 --> 00:14:19,920 Speaker 7: a four percent interest rate or whatever, you can make 324 00:14:20,160 --> 00:14:24,840 Speaker 7: most transactions work from a financial point of view. And also, 325 00:14:25,240 --> 00:14:29,280 Speaker 7: right now, you have a tremendous amount of cash, whether 326 00:14:29,280 --> 00:14:33,200 Speaker 7: it's private equity group strategic buyers. They have cash on 327 00:14:33,240 --> 00:14:35,760 Speaker 7: their balance sheets, so they don't need to borrow as much. 328 00:14:36,240 --> 00:14:38,360 Speaker 8: So I think that's a driver as well. 329 00:14:38,560 --> 00:14:42,720 Speaker 1: That said, valuations will basically take a hit as a 330 00:14:42,760 --> 00:14:45,920 Speaker 1: result of a rate being higher now than say when 331 00:14:45,960 --> 00:14:48,840 Speaker 1: companies got founded or were bought out by certain private 332 00:14:48,840 --> 00:14:51,400 Speaker 1: equity companies. And arguably this is the reason why we 333 00:14:51,440 --> 00:14:54,360 Speaker 1: haven't seen more exits, why we haven't seen more activity. 334 00:14:54,760 --> 00:14:57,880 Speaker 1: How much will there be a reckoning and valuations even 335 00:14:57,960 --> 00:15:00,920 Speaker 1: if some of these deals get back on the market. 336 00:15:01,640 --> 00:15:07,360 Speaker 7: Well, you know, one question is whether or not companies 337 00:15:07,480 --> 00:15:10,240 Speaker 7: are going to be valued much longer term, So not 338 00:15:10,400 --> 00:15:13,360 Speaker 7: looking at sort of the next twelve months, but really 339 00:15:13,480 --> 00:15:17,480 Speaker 7: you know, two four or five years out, and so 340 00:15:17,800 --> 00:15:20,840 Speaker 7: to the extent that you're doing an acquisition, I think 341 00:15:20,880 --> 00:15:24,800 Speaker 7: you're going to be prepared to look at it much 342 00:15:24,840 --> 00:15:28,560 Speaker 7: longer term. In terms of exits, I know, talking to 343 00:15:29,440 --> 00:15:33,080 Speaker 7: you know, people in the VC and private equity world, 344 00:15:33,280 --> 00:15:35,880 Speaker 7: they've not had a lot of exits the last few years. 345 00:15:36,160 --> 00:15:41,040 Speaker 7: They're looking forward to a number of exits next year. 346 00:15:41,240 --> 00:15:42,520 Speaker 8: And I think they're also. 347 00:15:42,840 --> 00:15:46,160 Speaker 7: Whether it's through sales or IPOs. And I think the 348 00:15:46,200 --> 00:15:48,240 Speaker 7: IPO market's going to be hot as well. That's not 349 00:15:48,240 --> 00:15:49,920 Speaker 7: my area, but I think it's going to be hot. 350 00:15:50,080 --> 00:15:51,800 Speaker 1: Paul Taubman said that it's going to be the fastest 351 00:15:51,800 --> 00:15:53,200 Speaker 1: semina market in ten years. 352 00:15:53,240 --> 00:15:55,880 Speaker 4: Do you agree, yes, Frank Kikuila. 353 00:15:55,520 --> 00:15:57,080 Speaker 1: Thank you so much for being with us. Frank, Gequila, 354 00:15:57,200 --> 00:16:10,040 Speaker 1: Sullivan and cromwellcome joining us now from JP Morgan Private 355 00:16:10,080 --> 00:16:12,440 Speaker 1: Bank is Sam z Pas. He sits here and watches 356 00:16:12,520 --> 00:16:15,000 Speaker 1: all of these headlines crossed. Sam, what's your impression. 357 00:16:15,680 --> 00:16:17,120 Speaker 4: I think you guys have really nailed it. 358 00:16:18,040 --> 00:16:20,560 Speaker 9: All of these central banks, between the FED, the SMB, 359 00:16:21,560 --> 00:16:24,320 Speaker 9: and the ECB now are trying to ensure that inflation 360 00:16:24,400 --> 00:16:27,040 Speaker 9: stabilizes a two percent, but how they're going about it 361 00:16:27,080 --> 00:16:29,520 Speaker 9: is completely different. The FED is thinking about how do 362 00:16:29,560 --> 00:16:32,880 Speaker 9: they inch down towards neutral, keeping policy restrictive enough because 363 00:16:32,880 --> 00:16:34,680 Speaker 9: the economy is in a really good place and they 364 00:16:34,680 --> 00:16:37,240 Speaker 9: don't want inflation to reaccelerate. Or I would argue that 365 00:16:37,240 --> 00:16:39,040 Speaker 9: the SMB and now the ECB, with the drop of 366 00:16:39,080 --> 00:16:42,920 Speaker 9: restrictive in the terminology, is actually just arguing, well, how 367 00:16:42,920 --> 00:16:45,120 Speaker 9: far below neutral might we need to go to ensure 368 00:16:45,160 --> 00:16:48,360 Speaker 9: that inflation stabilizes a two percent? And that divergence between 369 00:16:48,360 --> 00:16:50,440 Speaker 9: what we're seeing with these major European central banks and 370 00:16:50,480 --> 00:16:53,160 Speaker 9: the FED is really what underpins our view and fts 371 00:16:53,200 --> 00:16:55,040 Speaker 9: that the dollar is going to be strong, particularly against 372 00:16:55,080 --> 00:16:56,040 Speaker 9: these types of currencies. 373 00:16:56,320 --> 00:16:58,400 Speaker 5: Does it go far enough because Robin Brooks of the 374 00:16:58,400 --> 00:17:01,800 Speaker 5: Brookings Institute has been arguing that Europe desperately needs a 375 00:17:01,800 --> 00:17:04,160 Speaker 5: weaker euro, that you're not going to get instituted anything 376 00:17:04,200 --> 00:17:07,360 Speaker 5: that Droggy outlined of Europe coming together and spending more. 377 00:17:07,600 --> 00:17:09,520 Speaker 5: The budget stand off in France shows that they have 378 00:17:09,640 --> 00:17:12,160 Speaker 5: very little fiscal room and because of that they should 379 00:17:12,160 --> 00:17:14,080 Speaker 5: be decoupling from the FED at this moment and be 380 00:17:14,160 --> 00:17:16,639 Speaker 5: doing larger cuts. Do you think there's any credence of 381 00:17:16,640 --> 00:17:17,159 Speaker 5: that argument. 382 00:17:17,640 --> 00:17:20,080 Speaker 9: Yeah, I mean whether it's because you know, I don't 383 00:17:20,119 --> 00:17:21,640 Speaker 9: know if a weaker Euro is going to actually spur 384 00:17:21,720 --> 00:17:24,399 Speaker 9: innovation and investment, which is what that Droggi report made. 385 00:17:24,440 --> 00:17:28,399 Speaker 4: But clearly the economic trajectories are very different. 386 00:17:28,800 --> 00:17:31,920 Speaker 9: The FEDS or the US's is arguably tilted to the upside. 387 00:17:31,960 --> 00:17:35,040 Speaker 9: The economy is in a really strong place. European economic 388 00:17:35,119 --> 00:17:38,040 Speaker 9: economic outlook is definitely tilted to the downside when it 389 00:17:38,040 --> 00:17:39,879 Speaker 9: comes to growth. I don't think the Euro is the 390 00:17:39,880 --> 00:17:42,119 Speaker 9: main policy tool there. I think it's interest rates. But 391 00:17:42,160 --> 00:17:44,440 Speaker 9: there's room to lower interest rates, there's room to move 392 00:17:44,480 --> 00:17:47,720 Speaker 9: further into accommodative territory. That's going to be the ECB's priority. 393 00:17:47,800 --> 00:17:49,359 Speaker 9: Hero is the knock on effect and it's going to 394 00:17:49,400 --> 00:17:51,240 Speaker 9: end up in a weaker euro, but really it's going 395 00:17:51,280 --> 00:17:52,639 Speaker 9: to be the rate channel that they focus on. 396 00:17:52,760 --> 00:17:54,920 Speaker 6: We do see the euro dropping after this decision below 397 00:17:55,000 --> 00:17:57,040 Speaker 6: one point h five against the dollar. 398 00:17:57,160 --> 00:17:59,000 Speaker 4: Do you see parody next year? 399 00:17:59,040 --> 00:18:01,280 Speaker 6: Given the fact that it's a weaker growth environment in 400 00:18:01,280 --> 00:18:04,040 Speaker 6: Europe and on top of that they're dealing with a 401 00:18:04,080 --> 00:18:05,800 Speaker 6: Donald Trump administration, we definitely. 402 00:18:05,520 --> 00:18:06,240 Speaker 4: Wouldn't rule it out. 403 00:18:06,280 --> 00:18:08,320 Speaker 9: In the private bank, the lower end of our kind 404 00:18:08,320 --> 00:18:10,560 Speaker 9: of euro range that we're looking at in twenty twenty 405 00:18:10,640 --> 00:18:13,239 Speaker 9: five is one oh two. But you know, as an 406 00:18:13,280 --> 00:18:15,119 Speaker 9: FX strategist, I know the difference between one oh two 407 00:18:15,160 --> 00:18:17,600 Speaker 9: and parody is you know, going to a few days, 408 00:18:17,680 --> 00:18:19,879 Speaker 9: let's say, of trading. So a test of parody is 409 00:18:19,880 --> 00:18:22,080 Speaker 9: definitely something that we're not ruling out, and definitely one 410 00:18:22,080 --> 00:18:23,800 Speaker 9: of our high conviction views that we're talking about with 411 00:18:23,840 --> 00:18:27,800 Speaker 9: our private bank clients is being underweight European assets, favoring 412 00:18:27,840 --> 00:18:30,800 Speaker 9: the dollar, being short euros, funding in euros, all of 413 00:18:30,840 --> 00:18:32,240 Speaker 9: these things that benefit from the same thing. 414 00:18:32,320 --> 00:18:34,760 Speaker 6: Given the political process we're seeing in France and Germany, 415 00:18:34,840 --> 00:18:37,399 Speaker 6: given the fact that they are dealing with a tougher 416 00:18:37,520 --> 00:18:40,200 Speaker 6: environment in terms of potential trade wars in twenty twenty five, 417 00:18:40,520 --> 00:18:42,479 Speaker 6: the ECB is saying they're going to follow data dependent 418 00:18:42,520 --> 00:18:45,679 Speaker 6: meeting by meeting approach. Is that correct or do you 419 00:18:45,720 --> 00:18:49,240 Speaker 6: think Legard she comes out and gives her rhetoric and 420 00:18:49,280 --> 00:18:52,000 Speaker 6: answers questions she's going to tilt war to the dubbish side. 421 00:18:52,080 --> 00:18:53,800 Speaker 9: I think the most interesting thing from the press conference 422 00:18:53,840 --> 00:18:55,880 Speaker 9: that I'm going to be watching is so they've gone 423 00:18:55,880 --> 00:18:57,879 Speaker 9: by twenty five basis points today, but the market is 424 00:18:57,920 --> 00:19:00,440 Speaker 9: still pricing in about a thirty forty percent prob ability 425 00:19:00,440 --> 00:19:03,160 Speaker 9: of a fifty basis point move at some point either 426 00:19:03,200 --> 00:19:06,600 Speaker 9: in January or in March. Whether that there's some nod 427 00:19:06,640 --> 00:19:08,439 Speaker 9: to the fact that that could be on the cards. 428 00:19:08,680 --> 00:19:11,639 Speaker 9: They've so far been fairly let's say, cautious and guiding 429 00:19:11,680 --> 00:19:14,080 Speaker 9: against a fifty basis point move. But I think because 430 00:19:14,080 --> 00:19:15,600 Speaker 9: that market pricing is there, it's going to be really 431 00:19:15,600 --> 00:19:18,240 Speaker 9: important to watch whether they endorse that type of probability 432 00:19:18,880 --> 00:19:21,040 Speaker 9: or possibility. And then that's going to be how I 433 00:19:21,080 --> 00:19:23,119 Speaker 9: take a profess conference to be whether they're moving in 434 00:19:23,160 --> 00:19:24,320 Speaker 9: a more dubbish direction or not. 435 00:19:24,560 --> 00:19:26,960 Speaker 5: Should we be talking about negative rates again like the 436 00:19:27,040 --> 00:19:27,720 Speaker 5: SMB is. 437 00:19:28,720 --> 00:19:30,600 Speaker 4: So I would say that what they said. Just to 438 00:19:30,640 --> 00:19:32,480 Speaker 4: be clear, is that, as you said. 439 00:19:32,440 --> 00:19:34,720 Speaker 9: No one likes them, but they're there and they work, 440 00:19:34,840 --> 00:19:37,840 Speaker 9: particularly for a country that is really using let's say 441 00:19:37,840 --> 00:19:40,840 Speaker 9: the currency as their main tool for monetary policy. I 442 00:19:40,880 --> 00:19:42,560 Speaker 9: don't think that the SMB is going to go back 443 00:19:42,600 --> 00:19:45,719 Speaker 9: into negative rates unless the ECB kind of forces them. 444 00:19:45,800 --> 00:19:46,000 Speaker 4: Right. 445 00:19:46,040 --> 00:19:48,040 Speaker 9: Think about when they went into negative rates last time. 446 00:19:48,119 --> 00:19:50,399 Speaker 9: It's when the ECB went negative. The SMB felt like 447 00:19:50,440 --> 00:19:52,720 Speaker 9: they needed to respond. I think that would take not 448 00:19:52,760 --> 00:19:55,119 Speaker 9: just economic weakness in Europe to get the ECB to 449 00:19:55,240 --> 00:19:57,840 Speaker 9: think about that, but really whether you want to call 450 00:19:57,880 --> 00:20:00,600 Speaker 9: it a crisis or really deep recession if that comes 451 00:20:00,600 --> 00:20:03,080 Speaker 9: to fruition, I have no doubt that that negative rate 452 00:20:03,160 --> 00:20:05,320 Speaker 9: tool option is there in the European Union. 453 00:20:05,320 --> 00:20:06,119 Speaker 8: They've used it before. 454 00:20:06,280 --> 00:20:09,480 Speaker 1: Just to underscore that, the ECB dropped the reference to 455 00:20:09,560 --> 00:20:13,960 Speaker 1: keeping rates restrictive in this latest memorandum, in this latest 456 00:20:14,000 --> 00:20:16,760 Speaker 1: rate decision, How big of a shift is that, just 457 00:20:16,760 --> 00:20:21,359 Speaker 1: to underscore in their rhetoric in their approach what previously 458 00:20:21,400 --> 00:20:24,320 Speaker 1: they've been talking about inflation is really the pre eminent concern. 459 00:20:24,760 --> 00:20:27,239 Speaker 9: I think this is definitely the I mean, I think 460 00:20:27,280 --> 00:20:29,159 Speaker 9: everyone knew that they were going back to neutral the 461 00:20:29,160 --> 00:20:32,680 Speaker 9: market is already pricing some probability they go into accommodative territory. 462 00:20:32,680 --> 00:20:35,840 Speaker 9: But I think this really crystallizes the break between the 463 00:20:35,880 --> 00:20:38,160 Speaker 9: ECV and the FED, and that the FED is still 464 00:20:38,200 --> 00:20:41,480 Speaker 9: talking about keeping rates sufficiently restrictive to ensure that they 465 00:20:41,520 --> 00:20:44,439 Speaker 9: bring inflation down from the high side, where now the 466 00:20:44,440 --> 00:20:47,600 Speaker 9: ECV is officially basically endorsing that they're going to need 467 00:20:47,640 --> 00:20:49,679 Speaker 9: to go not only to neutral, but maybe below, and 468 00:20:49,680 --> 00:20:51,119 Speaker 9: that's how they're going to stabilize inflation. 469 00:20:51,440 --> 00:20:54,840 Speaker 1: With this divergence potentially widening, at what point do we 470 00:20:54,920 --> 00:20:57,359 Speaker 1: have to worry about a strong dollar becoming an actual 471 00:20:57,400 --> 00:20:59,440 Speaker 1: disruptive force in global markets. 472 00:21:00,400 --> 00:21:02,919 Speaker 9: So it tends to be the not just the strength 473 00:21:02,960 --> 00:21:04,840 Speaker 9: of the dollar, but the magnitude of the moves. It's 474 00:21:04,880 --> 00:21:07,639 Speaker 9: when you get really multi standard deviation moves over a 475 00:21:07,680 --> 00:21:09,920 Speaker 9: month or two or three, that you start to see 476 00:21:09,920 --> 00:21:12,360 Speaker 9: other central banks, whether they be in emerging markets or others, 477 00:21:12,359 --> 00:21:15,480 Speaker 9: start to respond, whether they be through outright EFS intervention 478 00:21:16,000 --> 00:21:18,080 Speaker 9: or trying to you know, not cut as much as 479 00:21:18,119 --> 00:21:19,199 Speaker 9: maybe the market is pricing. 480 00:21:19,440 --> 00:21:20,280 Speaker 4: I don't think we're there. 481 00:21:20,359 --> 00:21:21,800 Speaker 9: The dollar is not as strong as it was in 482 00:21:21,800 --> 00:21:24,760 Speaker 9: the second half of twenty twenty two, it's not as 483 00:21:24,800 --> 00:21:28,000 Speaker 9: overvalued either, and I think again the dollars just kind 484 00:21:28,000 --> 00:21:30,480 Speaker 9: of the byproduct of this divergence, and so at least 485 00:21:30,520 --> 00:21:32,439 Speaker 9: at the private bank, we're continuing to lean into it. 486 00:21:32,480 --> 00:21:34,119 Speaker 4: We don't think that this strip is. 487 00:21:34,119 --> 00:21:37,280 Speaker 1: Over samzz If of a JP Morgan Private Bank. 488 00:21:37,160 --> 00:21:37,600 Speaker 4: Thank you ever. 489 00:21:38,160 --> 00:21:41,720 Speaker 2: This is the Bloomberg Seventans podcast, bringing you the best 490 00:21:41,720 --> 00:21:44,800 Speaker 2: in markets, economics, an gie politics. 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