WEBVTT - Surveillance: Expect Easing Mid-2020, Misra Says 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Lee. 0:00:13.960 --> 0:00:17.560 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 --> 0:00:27.560 Bloomberg dot Com, and of course on the Bloomberg unlooking. 0:00:27.640 --> 0:00:29.360 Just a little bit of dollar weakness leaks. So the 0:00:29.440 --> 0:00:32.120 data are in China stabilizing, just a little bit risk out, 0:00:32.159 --> 0:00:35.080 the type picks up. Can this be a sustainable story? 0:00:35.120 --> 0:00:38.680 Gun into I'm watching oil because oil is telling another story. 0:00:38.680 --> 0:00:41.440 You're seeing a little bit of pressure. They're trying to 0:00:41.479 --> 0:00:44.680 get above zero. But hard to say because right now 0:00:44.680 --> 0:00:47.519 this trade deal isn't necessarily firmed up in any way, 0:00:47.520 --> 0:00:49.600 shape or form and is not giving people confidence. But 0:00:49.640 --> 0:00:52.120 for now, it's not just that, it's also the tone 0:00:52.240 --> 0:00:55.040 out of Chinese manufacturing data as well as mother bids 0:00:55.080 --> 0:00:56.920 as well. Bringing ed to know what figures with us 0:00:56.920 --> 0:00:58.520 in the studio. Great to have him with us. Exam 0:00:58.600 --> 0:01:01.920 Tate Data founder and see. Good morning to Jens, Thank you, 0:01:02.000 --> 0:01:05.520 thank you your thoughts on the trade story, the trade truths, 0:01:05.600 --> 0:01:08.240 the Phase one agreement. What are your ton of clients? 0:01:08.400 --> 0:01:12.160 What is it? We have a deal I think even 0:01:12.160 --> 0:01:14.200 though the document has not been signed, I think it's 0:01:14.200 --> 0:01:17.679 going to be very, very difficult after the communication we've 0:01:17.680 --> 0:01:20.119 had from both sides not to get this deal done. 0:01:20.640 --> 0:01:24.520 So that's the direction we're heading, and it's a turning point. 0:01:24.600 --> 0:01:27.160 Like we have some rollback of tariffs. It's not a 0:01:27.280 --> 0:01:31.360 dramatic thing to lower from fifteen to seven and a 0:01:31.400 --> 0:01:34.000 half on on a portion of the tariff stuff, but 0:01:34.040 --> 0:01:36.000 it is a step in the right direction, and I 0:01:36.040 --> 0:01:39.399 think it's important. So I think also just if you 0:01:39.440 --> 0:01:43.080 think about the currency outlook, can China really allow their 0:01:43.080 --> 0:01:45.520 currency to depreciate from here like we had that big 0:01:45.520 --> 0:01:48.720 psychological break of seven a couple of months ago, and 0:01:48.760 --> 0:01:52.560 now we're trading literally at seven zero zero. I don't 0:01:52.560 --> 0:01:55.639 think we can have it trading weaker than than seven 0:01:55.680 --> 0:01:58.240 on in a meaningful way in coming weeks. It's just 0:01:58.280 --> 0:01:59.760 not going to make the deal look good. So I 0:01:59.760 --> 0:02:03.040 think the downside is very capped for the Chinese currency. 0:02:03.040 --> 0:02:05.920 That's very important for e M currencies globally, and it's 0:02:05.920 --> 0:02:08.080 important for the dollar direction globally as well. So maybe 0:02:08.080 --> 0:02:10.880 that fits in and this description what's going on with 0:02:10.880 --> 0:02:13.080 the d H y as well well, with the trade. 0:02:13.240 --> 0:02:15.520 There has to be an opportunity to play it. How 0:02:16.040 --> 0:02:19.720 how do you play a phase one trade deal? I mean, 0:02:20.360 --> 0:02:23.880 we want to clear uncertainty, we want to be more optimistic, 0:02:24.120 --> 0:02:27.800 But then how do you affect that in currency pairs? Okay, 0:02:27.800 --> 0:02:32.720 So I'll answer in two ways. First, like we can 0:02:32.800 --> 0:02:35.320 we have some epirical models where you say, okay, what's 0:02:35.360 --> 0:02:38.200 the new equilibrium based on these Teriffer leaves and that 0:02:38.320 --> 0:02:41.520 gives you six ninety six. So there's a little bit 0:02:41.560 --> 0:02:45.440 of appreciation store there. And then there's the broader global dynamic, 0:02:45.440 --> 0:02:49.320 which is like an e M trending trade that can 0:02:49.400 --> 0:02:51.560 can run much longer than that. John, I like that 0:02:51.600 --> 0:02:55.640 you ask, is this sustainable? I you know, I'm struggling 0:02:55.639 --> 0:02:57.720 with that question, and I'm struggling with the idea that 0:02:57.760 --> 0:03:00.560 the dollar can continue to weaken because yes, we have 0:03:00.720 --> 0:03:03.040 the fact that the December fifteen tariffs aren't going to 0:03:03.080 --> 0:03:06.480 go into effect. But other than that, basically, this phase 0:03:06.520 --> 0:03:09.000 one deal is let's figure it out as we go. 0:03:09.080 --> 0:03:13.760 We'll roll back tariffs perhaps as China complies with different 0:03:14.080 --> 0:03:19.000 different phases. How does this improve confidence among CEOs in 0:03:19.120 --> 0:03:21.320 order to make investment, which is a key issue here, right, 0:03:22.240 --> 0:03:24.960 So I think the CEO question is important that could 0:03:25.040 --> 0:03:27.840 impact the timing when we get a lift to p 0:03:27.960 --> 0:03:29.520 M I S and so forth. But there's a couple 0:03:29.520 --> 0:03:31.000 of things going on at the same time. Right The 0:03:31.320 --> 0:03:34.840 Brexit situation, where we have a removal of tail risk, 0:03:34.960 --> 0:03:36.800 is also going to be helping to lift p M 0:03:36.840 --> 0:03:39.520 I S in Europe, not in this week's numbers, but 0:03:39.880 --> 0:03:43.680 probably in the next batch of two. So I I 0:03:43.720 --> 0:03:47.040 do think in terms of global growth, we got to 0:03:47.400 --> 0:03:51.440 very very low level of growth expectations, actually weaker than 0:03:51.480 --> 0:03:54.080 in the downturn we had in two thousand fifteen sixteen, 0:03:54.760 --> 0:03:58.280 so that the bar we have to beat is extremely low. 0:03:58.320 --> 0:04:00.320 And I think there's a bunch of reason and now 0:04:00.360 --> 0:04:04.120 I think that the momentum is improving. And for the dollar, 0:04:04.800 --> 0:04:07.000 the most important veriable is global growth is much more 0:04:07.000 --> 0:04:09.200 important than what the Fed is doing. So if we 0:04:09.280 --> 0:04:11.640 have that bottom, I feel very strongly that the dollar 0:04:11.920 --> 0:04:14.760 will trade weaker next year. So this is really important. Yends. 0:04:14.800 --> 0:04:16.680 One thing you've done brilliantly over the last couple of 0:04:16.800 --> 0:04:20.360 years is emphasize how little rank differentials tell you about 0:04:20.400 --> 0:04:23.000 the direction of the dollar over the last couple of years. 0:04:23.000 --> 0:04:25.839 So talked to me about global growth and flows, investor 0:04:25.880 --> 0:04:29.080 flows into places like Europe, Asia, the committally unlocks and 0:04:29.120 --> 0:04:31.480 dollar witness in the coming twelve months. Yes, so I think. 0:04:31.560 --> 0:04:33.360 I think one of the things that's really important over 0:04:33.400 --> 0:04:37.839 the last five six weeks is that you as investors 0:04:37.880 --> 0:04:40.240 are starting to put more risk cappital to work in 0:04:40.360 --> 0:04:44.920 international markets. So you as investors were incredibly cautious over 0:04:44.960 --> 0:04:48.560 the summer and actually repatriated investments from abroad back to 0:04:48.640 --> 0:04:51.800 the US, and that has changed. So this goes hand 0:04:51.880 --> 0:04:54.760 in hand with this bottom of global growth expas expectations. 0:04:54.839 --> 0:04:58.560 There's a very strong correlation between what those expectations are 0:04:58.680 --> 0:05:02.000 and what those flows like, and that is key to 0:05:02.120 --> 0:05:04.360 the dollar right. And that's the one of the factors 0:05:04.440 --> 0:05:07.359 that can be separate from the right differentials is if 0:05:07.400 --> 0:05:10.479 the equity flow goes more inter national. So, Tom Kane, 0:05:10.520 --> 0:05:13.680 the key question is for your triple leverage cash fund, Uh, 0:05:13.920 --> 0:05:17.880 is it going to be cash in dollars or hero 0:05:18.200 --> 0:05:21.960 or or pound After your trip to Europe, Yeah, it's 0:05:22.080 --> 0:05:24.120 the high point of the European trip was the interview 0:05:24.160 --> 0:05:28.080 with a gentleman who runs Herod's over how to unload 0:05:28.120 --> 0:05:31.040 the wall at Knight's Bridge. That was the high point. 0:05:31.560 --> 0:05:35.400 Um did you pray tide that one missed? You were? 0:05:35.960 --> 0:05:39.000 You were in the Manola Blonic up on the top floor. 0:05:39.360 --> 0:05:43.200 The key us there. Yen's great, We're gonna get a 0:05:43.240 --> 0:05:46.080 trade deal. We're gonna go week dollar. I still want 0:05:46.120 --> 0:05:47.840 to know how to express it? Do I do it 0:05:47.920 --> 0:05:50.640 through a bundled group of of em? Are there one 0:05:50.720 --> 0:05:53.320 or two? Are they true Pacific? E? M are they 0:05:53.680 --> 0:05:57.240 Eastern Europe? Are they and eleven? What are they? Okay? Yeah? 0:05:57.320 --> 0:06:01.760 So I think initiative expresses was m so dollar max 0:06:01.880 --> 0:06:05.840 is one dolla, Indonesia's one dollar, Taiwan is one. We 0:06:05.960 --> 0:06:08.280 talked about it on the on the TV segment that 0:06:08.640 --> 0:06:11.360 their places where they cannot intervene like them intervened in 0:06:11.400 --> 0:06:14.480 the past. Taiwan could be a really interesting regime shift 0:06:14.520 --> 0:06:16.000 on that front. So those are some of the ones 0:06:16.000 --> 0:06:18.160 I would look at. Good, yes, thank you so much 0:06:19.600 --> 0:06:36.560 today too short of visit, I do a little vamp 0:06:36.640 --> 0:06:39.040 here in the United States of America before John Farroll 0:06:39.080 --> 0:06:41.400 dies in with Lisa and water strategy. We can do 0:06:41.520 --> 0:06:44.440 that with David Kelly, who's the JP Morgan. He's had 0:06:44.480 --> 0:06:46.760 a global strategy for this, that and the other part 0:06:46.800 --> 0:06:49.120 of the of the Great Beast, and he joins us 0:06:49.520 --> 0:06:52.800 this morning. You you did a wonderful degree in Ireland 0:06:52.920 --> 0:06:56.240 and then you enjoyed Lansing at Michigan. If you go 0:06:56.400 --> 0:07:00.840 directly west from Lansing, Michigan, there's Kenosha, wiscons There's a 0:07:00.920 --> 0:07:04.040 company there called snap On Tools, which is as basically 0:07:04.040 --> 0:07:08.040 as you can get sixteen percent total return, sixteen percent 0:07:08.200 --> 0:07:13.120 dividend growth, trading at next to nothing compared to this market. 0:07:13.640 --> 0:07:17.760 Do I buy more snap On Tool Canona, Kenosha, Wisconsin, 0:07:18.160 --> 0:07:20.520 Or do I end up buying some fancy pants tech 0:07:20.640 --> 0:07:24.400 thing out on the West coast, Which I didn't think 0:07:24.400 --> 0:07:25.920 that was a question you're gonna ask me this morning, 0:07:26.040 --> 0:07:31.040 But that's the ar question after this year. I think, 0:07:31.160 --> 0:07:34.240 I think there there's there are large distortions within US, 0:07:34.800 --> 0:07:36.720 within the US market, but we've got to remember that 0:07:37.040 --> 0:07:39.040 as it wasn't so long as you're in the momentum 0:07:39.200 --> 0:07:41.400 up stage. I think there's more and more money going 0:07:41.480 --> 0:07:43.920 into eat sid to pass the strategies, which is actually 0:07:44.000 --> 0:07:47.360 helping momentum stocks. So I wouldn't want to make a 0:07:47.400 --> 0:07:49.320 short term call. No, I think I think, I think 0:07:49.360 --> 0:07:53.280 The bigger point for investors is international is cheap realts 0:07:53.280 --> 0:07:55.120 of the US, and I think that I think you 0:07:55.160 --> 0:07:56.600 know you need, you need to make your money these 0:07:56.640 --> 0:07:58.640 big ascid allocation calls. I wanted to get that out 0:07:58.640 --> 0:08:00.800 of the way, John, other than to say, the Spartans 0:08:00.840 --> 0:08:03.040 of Michigan State have a hockey team this year to 0:08:03.200 --> 0:08:05.160 die for, I feel like that's the only reason you 0:08:05.240 --> 0:08:08.680 brought up that's right question, Spartan hockey. If you're not 0:08:08.800 --> 0:08:11.920 familiar with some of the notes that David Kelly puts out, 0:08:12.000 --> 0:08:14.080 please reach out to him because there's some great lines 0:08:14.120 --> 0:08:16.320 in there. There's an old saying that the reason some 0:08:16.440 --> 0:08:18.480 people bash their heads against the wall is because it 0:08:18.520 --> 0:08:22.080 feels so good when they stop. What do you referring to, David, 0:08:22.120 --> 0:08:24.600 I referring to all the all this progress on trade. 0:08:24.680 --> 0:08:26.680 I mean, if you go back four years ago, we 0:08:26.760 --> 0:08:29.600 didn't have brexit. We did we had an old nafter 0:08:30.000 --> 0:08:32.079 and we didn't have trade war in China. And now 0:08:32.160 --> 0:08:34.199 we've got some We've got a U. S m c 0:08:34.320 --> 0:08:36.040 A which looks like it's going to pass to deal 0:08:36.120 --> 0:08:39.400 with sort of an after one point zero zero zero 0:08:39.559 --> 0:08:43.800 one we've got. I think Brexit will finally be resolved 0:08:43.840 --> 0:08:48.560 in a more comfortable way than people fear um and uh, 0:08:49.040 --> 0:08:50.800 you know, we we have a phase one deal with 0:08:50.920 --> 0:08:53.199 China to move back a few steps on the on 0:08:53.240 --> 0:08:55.160 the road we were on. But in the end, all 0:08:55.200 --> 0:08:58.439 it's doing is, you know, reducing the amount of mutulation 0:08:58.520 --> 0:09:02.160 we were doing to ourselves. It's not really progress in 0:09:02.800 --> 0:09:04.880 the long scheme of things. Let's let's continue with this 0:09:05.040 --> 0:09:07.400 metaphor of banging your head against the wall, uh, and 0:09:07.480 --> 0:09:09.839 then stopping and being really happy that you stopped. The 0:09:09.960 --> 0:09:12.640 question is we're now getting back to can the real 0:09:12.720 --> 0:09:16.079 global economy generate the kind of growth that is baked 0:09:16.160 --> 0:09:19.640 into the valuations and equities and risk assets in and 0:09:19.760 --> 0:09:23.120 right now the consensus seems to be yes, given the 0:09:23.200 --> 0:09:26.000 certainty that we're getting from the trade truth. But do 0:09:26.080 --> 0:09:28.600 you disagree based on this idea that we're not moving 0:09:28.760 --> 0:09:31.199 forward necessarily, we're just not banging our head against the 0:09:31.240 --> 0:09:32.640 wall now? I think no, I think we. I think 0:09:32.679 --> 0:09:34.360 you have to have a different story somewhat on the 0:09:34.400 --> 0:09:37.360 economy and on markets. Uh. It is true that in 0:09:37.679 --> 0:09:40.600 absolute terms valuations are expensive, but if you look at 0:09:40.640 --> 0:09:44.199 it relative to to cash, relative to bonds around the world, 0:09:44.559 --> 0:09:47.079 valuations are cheap, and so long as you buy the 0:09:47.240 --> 0:09:49.120 idea that the global economy is going to grow slowly 0:09:49.160 --> 0:09:51.959 but not generate inflation, you're gonna have these low rates. 0:09:51.960 --> 0:09:54.199 You're gonna have central banks falling over themselves to be easy. 0:09:54.440 --> 0:09:56.280 And that still means that there's nowhere else in the 0:09:56.320 --> 0:09:59.160 money to go. Some money is getting funneled into into 0:09:59.200 --> 0:10:01.600 global equities, so let's put some capital to work. Then 0:10:01.720 --> 0:10:05.839 the regional breakdown gun into Europe, Asia AM. How you 0:10:05.960 --> 0:10:08.760 thinking about that breakdown at the moment, David, I would 0:10:08.920 --> 0:10:15.440 be uh, EM first, probably, UM, Yam Asia first, probably, 0:10:15.480 --> 0:10:20.319 and then uh Europe, Japan, um, you know, second, and 0:10:20.360 --> 0:10:21.920 the third I think that I think one of the 0:10:22.040 --> 0:10:25.120 key things is rising trade tensions hurt the rest of 0:10:25.120 --> 0:10:27.599 the world more than they hurt the US, and that 0:10:27.720 --> 0:10:31.360 they also contribute to higher dollar. Falling trade tensions therefore 0:10:31.400 --> 0:10:34.839 give you a lower dollar and also benefit the big 0:10:34.880 --> 0:10:37.120 trade of the world, which your EM countries. So that's 0:10:37.160 --> 0:10:38.960 where I think you'll see the bands, both in terms 0:10:39.000 --> 0:10:41.560 of lower dollar and better performance from e M stocks. 0:10:41.600 --> 0:10:43.160 That's kind of where I want to be over words, David, 0:10:43.160 --> 0:10:45.600 I'm struggling right now because I'm thinking about what you're saying. 0:10:45.679 --> 0:10:48.920 This idea of low inflation, central bank stimulating risk acids 0:10:49.160 --> 0:10:52.120 outlook relatively cheap. That's been a story for ten years. 0:10:52.480 --> 0:10:54.760 At what point does that run out? At what point 0:10:54.840 --> 0:10:57.480 does this create a real problem. Well, it creates a 0:10:57.520 --> 0:10:59.559 problem if inflation comes back. But there's a there's a 0:10:59.559 --> 0:11:01.319 funny thing going on in the global economy, and that 0:11:01.440 --> 0:11:03.959 is that income is getting less and less equally distributed. 0:11:04.360 --> 0:11:06.719 And the you know, aggregate demand is when people with 0:11:06.880 --> 0:11:08.880 money want to buy stuff. And the problem in in 0:11:08.920 --> 0:11:10.400 the global economy right now as the people who have 0:11:10.440 --> 0:11:12.080 money don't want to buy stuff, and the people want 0:11:12.120 --> 0:11:13.920 to buy stuff don't have money. And so long as 0:11:13.960 --> 0:11:18.079 that that income income inequality grows, you're actually drat. You 0:11:18.120 --> 0:11:20.120 don't have enough aggregate demand to the economy. That's what's 0:11:20.160 --> 0:11:22.679 holding inflation though. So you know, the the irony is 0:11:22.760 --> 0:11:24.839 if you if we ever do fix the problem for 0:11:25.160 --> 0:11:28.320 middle income consumers, for lower income consumers, then we'll have inflation, 0:11:28.440 --> 0:11:33.079 and then that's The new Foreign Affairs Magazine is absolutely exquisite. 0:11:33.080 --> 0:11:35.679 It's the strongest issue they've ever done, including the no 0:11:35.760 --> 0:11:39.679 about Lawyer's jerryzy Mueller's in there on capitalism. How do 0:11:39.760 --> 0:11:45.000 you affect a policy to lift the have nots without 0:11:45.160 --> 0:11:51.559 diminishing the hats. Well, it's it's productivity. You're trying to 0:11:51.840 --> 0:11:54.760 reduce some of the nonproductive things you do. And we've 0:11:55.040 --> 0:11:57.319 got a lot of negative some games going on in 0:11:57.360 --> 0:12:01.280 the world in things like defense, in trade, trade, trade, yeah, 0:12:01.480 --> 0:12:03.000 all these things. So you're try and get rid of 0:12:03.040 --> 0:12:05.840 the things that are hurting you. You introduce more certainty, 0:12:06.040 --> 0:12:08.560 I think what you you also try to reduce currency 0:12:08.600 --> 0:12:10.400 of volatility. I mean, we should get back to a 0:12:10.440 --> 0:12:14.600 situation where the United States, Europe, China are actually talking about, 0:12:14.920 --> 0:12:16.760 you know, exchange rates and trying to make this this 0:12:17.400 --> 0:12:19.760 the less vo also goes right now, everybody's keeping rates low, 0:12:20.760 --> 0:12:23.160 unreasonably low to try and push our currency down, and 0:12:23.240 --> 0:12:26.120 that is I think in the end, just distorting for 0:12:26.160 --> 0:12:28.240 the global economy. Can we do a ten year bet, 0:12:28.559 --> 0:12:29.760 and that's what it is. It's going to be a 0:12:29.800 --> 0:12:31.319 bit of a gamble. Let's do a ten year bet. 0:12:32.120 --> 0:12:34.000 Where a rights going to be at the e C 0:12:34.200 --> 0:12:38.360 Bay in ten years time? Higher or lower? I think 0:12:38.720 --> 0:12:40.920 they could hardly be lower, so they will be higher. 0:12:40.960 --> 0:12:42.679 The question is are they a little bit higher or 0:12:42.760 --> 0:12:44.840 much higher. And that really gets back to the first 0:12:44.920 --> 0:12:47.319 question I'm asking because eventually, you know, think about this 0:12:47.400 --> 0:12:50.000 growth and financial assets. What is the financial asset. Of 0:12:50.040 --> 0:12:51.960 financial asset is a coupon, which says that you can 0:12:52.040 --> 0:12:54.200 buy some part of the goods and services produced by 0:12:54.200 --> 0:12:56.600 the real economy. Now, what we've seen is an explosion 0:12:56.600 --> 0:12:59.680 of the value of financial assets while the global economy 0:12:59.720 --> 0:13:02.760 is kind like a tortoise. Eventually, when people cash in 0:13:02.800 --> 0:13:05.360 those assets, you've got an inflation problem. We don't have 0:13:05.440 --> 0:13:07.880 it right now, but if you're gonna ask me, could 0:13:07.920 --> 0:13:10.240 we have that within the next ten years in Europe, Orange, 0:13:10.280 --> 0:13:11.800 in the United States, yes we could. Well, let's have 0:13:11.840 --> 0:13:15.800 the same question for the Federal Reserve. Then at the 0:13:15.840 --> 0:13:18.720 Fed in the next ten years. I think again, by 0:13:18.800 --> 0:13:20.520 the end of ten years, I think will be higher 0:13:20.559 --> 0:13:22.720 than that, because that is it's still it's it's crazy, 0:13:22.760 --> 0:13:24.880 it's it's a less than the rate of inflation. I mean, 0:13:25.200 --> 0:13:27.839 you know, the whole the whole concept of saving is 0:13:27.920 --> 0:13:30.079 that I don't eat ten apples today because you will 0:13:30.120 --> 0:13:32.160 give me eleven apples in the future. What we're telling 0:13:32.200 --> 0:13:34.920 people today is, you know, don't consume ten apples today 0:13:34.920 --> 0:13:36.839 because we'll give you nine apples in the future. That 0:13:37.040 --> 0:13:39.160 is nuts and it is not sustainable. Just to put 0:13:39.440 --> 0:13:40.959 the reason I asked this is Bank of America have 0:13:41.000 --> 0:13:43.400 come out with a fantastic pace about the last ten years. 0:13:43.480 --> 0:13:46.280 What performed well? What didn't perform well? Which was the 0:13:46.320 --> 0:13:49.560 most activist central bank? Which was the least activist central bank, 0:13:49.840 --> 0:13:52.880 the least active if central bank worldwide over the last 0:13:52.920 --> 0:13:57.480 ten years Japan one right cut, no hikes, and the 0:13:57.559 --> 0:13:59.760 same is probably true for the ten years previous to that. 0:13:59.840 --> 0:14:01.640 As wow that once we get down to these kind 0:14:01.679 --> 0:14:04.280 of levels, we're stuck here. Why is that going to 0:14:04.320 --> 0:14:06.319 be different for Europe, different from the United States of 0:14:06.400 --> 0:14:10.360 the next decade. Well, because, as I said, it is 0:14:10.600 --> 0:14:15.600 it is fostering a boom in financial assets. And eventually, 0:14:15.960 --> 0:14:18.559 if those financial assets end up in the hands of 0:14:18.640 --> 0:14:20.560 people who actually want to spend the money rather than 0:14:20.640 --> 0:14:23.240 save the money, then you have a growth and inflation. 0:14:23.280 --> 0:14:24.960 And the key thing here is inflation. I mean, I 0:14:25.040 --> 0:14:27.240 know the Japanese have been looking for inflation, but if 0:14:27.240 --> 0:14:31.880 they ever distributed income and it's somebody galtarian more egalitarian 0:14:32.280 --> 0:14:34.640 in Japan, but just used to if you get more 0:14:34.680 --> 0:14:38.640 consumers spending going and among lower middle incoln consumers, then 0:14:38.640 --> 0:14:41.280 you could end up inflation, and that's what triggers so 0:14:41.480 --> 0:14:43.480 changes this whole story. You and I know each other 0:14:43.600 --> 0:14:46.240 long agoing far away in Boston when a CD was 0:14:46.360 --> 0:14:50.480 nine or seven percent. It ain't there anymore. Is there 0:14:50.560 --> 0:14:56.480 any evidence of central bank quote unquote reflate? Um? Well, 0:14:56.520 --> 0:14:59.080 they push push up short term rates if if they 0:14:59.200 --> 0:15:00.920 if they want to the home as they run, they 0:15:01.240 --> 0:15:03.280 lose their nerve. I mean, you know, did the Federal 0:15:03.280 --> 0:15:05.400 Reserve really need to ease three times this year? And no, 0:15:06.720 --> 0:15:09.320 but they did it. Um So can they do it? Yes? 0:15:09.400 --> 0:15:11.320 They can push up short term rates and and in 0:15:11.360 --> 0:15:13.120 the end I think that they I think they should 0:15:13.920 --> 0:15:15.600 because I think we should get back to more normal 0:15:15.640 --> 0:15:20.920 monetary polican that will in the end reduce distortions around 0:15:20.920 --> 0:15:22.960 the global economy. But they can do it. I'm not 0:15:23.000 --> 0:15:25.360 saying they're going to next time. David Kelly on where 0:15:25.400 --> 0:15:27.280 the Irish border is, I don't know where it is. 0:15:27.360 --> 0:15:29.960 After the election, maybe we'll talk to him about that. 0:15:29.960 --> 0:15:31.320 I think I think it's I think it's now in 0:15:31.360 --> 0:15:36.240 the Irish seats. David Kelly, thank you so much, as always, 0:15:36.240 --> 0:15:51.320 the GMP. Morgan just thrilled that time. Here. What we 0:15:51.440 --> 0:15:53.560 need now not a clinic on the equity markets. Have 0:15:53.680 --> 0:15:55.400 done that a little bit this morning, but John, I 0:15:55.480 --> 0:15:58.440 think we've really got to dive into full faith and credit. 0:15:58.640 --> 0:16:00.040 We did, and we can do that with pretty a 0:16:00.080 --> 0:16:02.440 misery club ahead of right strategy at t D Security 0:16:02.520 --> 0:16:04.360 is pretty great to have you with the summer program. 0:16:04.560 --> 0:16:06.840 Tom's got a few questions on Repope, but let's start 0:16:06.960 --> 0:16:09.440 this conversation where we picked up at the top of 0:16:09.480 --> 0:16:12.400 the hour ten year rates one eighty four, no big 0:16:12.480 --> 0:16:16.840 shift higher? Why so thanks for having me. I'll always 0:16:17.080 --> 0:16:19.600 good to chat with you all. Um. So you know 0:16:19.760 --> 0:16:22.320 what we heard on Friday in terms of the deal, 0:16:22.480 --> 0:16:26.040 it's phase one. It's agricultural purchases. I mean, does it 0:16:26.160 --> 0:16:30.320 remove entire business uncertainty around tariffs for all of next 0:16:30.400 --> 0:16:34.240 year and and beyond, I would argue not. I think 0:16:34.360 --> 0:16:36.520 just two weeks ago we heard from the President that 0:16:36.600 --> 0:16:39.600 we were going to pose tariffs on Brazil and Argentina. 0:16:40.120 --> 0:16:43.360 You know, the French tariffs are out there our viewers. 0:16:43.600 --> 0:16:46.360 That's all we're gonna get for for US. China is 0:16:46.400 --> 0:16:48.040 going to be phase one. I mean it took them 0:16:48.560 --> 0:16:51.440 like three months after we had the deal in principle 0:16:51.760 --> 0:16:54.560 to actually get this somewhat written down, so to try 0:16:54.600 --> 0:16:56.920 and get Phase two, phase three, which are all much 0:16:57.000 --> 0:17:00.160 more difficult structural issues. Our thought as were not she's 0:17:00.200 --> 0:17:02.960 going to get this until the election. So the global 0:17:03.080 --> 0:17:06.080 growth dynamic, I think you know it did take away. 0:17:06.160 --> 0:17:08.280 I think some of the negative or or the the 0:17:08.359 --> 0:17:10.960 worst case scenario has been removed. I think the escalation 0:17:11.000 --> 0:17:14.120 of tariffs, which we've all nervous, could that happen on Sunday? 0:17:14.520 --> 0:17:16.840 That's been taken off, and therefore I think equity is 0:17:16.880 --> 0:17:19.199 liked it. But for rates to sell off much more 0:17:19.280 --> 0:17:21.879 from here, I think we need clear evidence that business 0:17:21.960 --> 0:17:25.159 uncertainty is going away, that business investment is going to 0:17:25.240 --> 0:17:28.160 pick up, and the consumer remains resilient. I think all 0:17:28.240 --> 0:17:31.440 of those questions are still there. So I would argue 0:17:31.440 --> 0:17:34.879 you near the high end of the rate range if 0:17:34.920 --> 0:17:38.159 that's the case. And is the rates market sending a 0:17:38.359 --> 0:17:41.240 very different signal than the equity market in terms of 0:17:42.080 --> 0:17:45.760 what we can expect with growth. Yes, I think you know, 0:17:45.880 --> 0:17:48.280 to some extent, both rates and equities are telling you 0:17:48.400 --> 0:17:51.320 that the FED is very unlikely to take back the 0:17:51.400 --> 0:17:54.639 insurance cuts. So even if the consumer remains resilient. I 0:17:54.680 --> 0:17:56.320 think what we saw in the dot plot is very 0:17:56.359 --> 0:17:59.280 clear even the Hawks don't really want to take back 0:17:59.400 --> 0:18:02.440 all of the joan cuts. So if that's a positive 0:18:02.520 --> 0:18:04.960 tail wind for equities or or all risk asses, I 0:18:05.000 --> 0:18:07.520 think that's fair and and and that tells you why 0:18:07.640 --> 0:18:09.880 interest rate is probably do you know the tenure doesn't 0:18:09.880 --> 0:18:12.240 go above two percent. Where I think the signals are 0:18:12.280 --> 0:18:15.560 slightly different is the fact that the equity market takes 0:18:15.640 --> 0:18:18.399 the straight deal to say okay, all downside risks behind us, 0:18:18.920 --> 0:18:20.960 and the race market saying you know, not so fast. 0:18:21.520 --> 0:18:25.560 All we've had is one tail risk being removed. We 0:18:25.720 --> 0:18:27.520 still have to deal with them. And look at the 0:18:27.600 --> 0:18:30.080 US one PM. I'm actually very surprised that Treasury is 0:18:30.160 --> 0:18:32.480 this morning. I want to ignore that and just sort 0:18:32.520 --> 0:18:35.399 of go off the China positive data. There's still a 0:18:35.480 --> 0:18:38.159 lot of growth global growth headwinds, I think for the 0:18:38.320 --> 0:18:41.760 US next year again into there's a view that the 0:18:41.800 --> 0:18:43.800 FED is on hold, on hold through the whole of 0:18:43.800 --> 0:18:45.440 the year. I get the sense from you over the 0:18:45.520 --> 0:18:47.000 last couple of months that you don't think they are 0:18:47.040 --> 0:18:48.440 on hold. In fact, you think right to go on 0:18:48.480 --> 0:18:52.200 the other way, lower again, you're still thinking that prayer. 0:18:53.320 --> 0:18:55.480 I still do. I think the FED has told us 0:18:55.520 --> 0:18:57.280 that the bar to cut is higher than it was 0:18:57.359 --> 0:18:59.800 over the last couple of months, so you know that's fair. 0:19:00.560 --> 0:19:04.040 But if the consumer shows any signs of losing momentum, 0:19:04.480 --> 0:19:06.720 and this is where I think the business investment side 0:19:06.840 --> 0:19:09.680 is key, because it's very clear that US business investment 0:19:09.720 --> 0:19:13.320 has slowed pretty dramatically, don't you because of the insert. 0:19:13.359 --> 0:19:16.160 I would argue to an uncertainty shock, and that takes 0:19:16.200 --> 0:19:18.600 a while, and if that doesn't go away, and at 0:19:18.680 --> 0:19:20.440 some point it's going to affect the labor market and 0:19:20.520 --> 0:19:22.600 therefore the consumer. So we expect the fact to actually 0:19:22.640 --> 0:19:25.639 restart easing by the middle of next year. Something we 0:19:25.720 --> 0:19:28.320 try to do on Bloomberg surveillance is speak to grizzled 0:19:28.400 --> 0:19:32.600 pros like Priam of TV Securities about whatever the uproar 0:19:32.680 --> 0:19:35.920 of the moment is. PREA, based on my reading coming 0:19:36.000 --> 0:19:39.159 back among particularly the Gloom crew, the world's gonna end 0:19:39.720 --> 0:19:42.440 like John at eleven am this morning or something that 0:19:42.920 --> 0:19:48.359 we dashed into the Repo liquidity world and today or 0:19:48.480 --> 0:19:51.800 Wednesday you get the video up before the world end, Pria, 0:19:52.480 --> 0:19:55.480 should we have a sweat about the repo market in 0:19:55.600 --> 0:19:59.000 the year end, So this is where you know, I 0:19:59.080 --> 0:20:01.959 am worried about the onomy, But on repot, I actually 0:20:02.040 --> 0:20:05.520 think the FED has understood what's happening and they're using 0:20:05.680 --> 0:20:08.240 all the tools they have, and I think these tools 0:20:08.240 --> 0:20:11.000 are effective. So I'm actually not as worried on the 0:20:11.080 --> 0:20:14.480 repot year end and all strategies or or report people 0:20:14.520 --> 0:20:16.919