Speaker 1: This is Bloomberg business Week Inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Masser and Tim Stenebec from Bloomberg Radio.
Speaker 1: Our next guest currently works with some of the largest
Speaker 1: financial institutions and hedge funds on Wall Street. His team
Speaker 1: reminds us that in the past he's correctly predicted the
Speaker 1: stock market rise under the Trump administration, as well as
Speaker 1: a recent rise in inflation. Julian Brigden is co founder
Speaker 1: and president of Macro Intelligence, two partners here to talk
Speaker 1: about some of the structural factors that are transforming the markets.
Speaker 1: He is here in studio, so nice to have you
Speaker 1: here with us. Welcome, thanks for having me. When you
Speaker 1: think about structural factors, what exactly are you talking about? So,
Speaker 1: I think when we look at things this year, we're
Speaker 1: pretty certain there's a recession comming. There's no question into
Speaker 1: our mind. The question is just how deep a recession
Speaker 1: does it really matter to the value of the equity market,
Speaker 1: not necessarily within the sectors. Yes, I think to be honest,
Speaker 1: what sets the value of us equities is liquidity. It's
Speaker 1: really the FED. I hate to say, it's a sort
Speaker 1: of Wymy Republic esque kind of world where you where's
Speaker 1: Matt Miller. He's listening as you always does. Love Matt,
Speaker 1: that was for you. But anyway, print enough money and
Speaker 1: assets rise in price, right, I think it does don't
Speaker 1: matter what goes on in the economy and how much
Speaker 1: money we print for where you allocate that money. So
Speaker 1: when we look at structural factors, I think potentially so
Speaker 1: is that the assumption and the FED that will be
Speaker 1: cutting rates later on this year, And well, I think
Speaker 1: they will. I think. Look, I'm very much in the
Speaker 1: camp that we're in the higher for longer at least
Speaker 1: that's what they want to be able to do. Right,
Speaker 1: There's really only sort of two ways that you address
Speaker 1: inflation of this sort of magnitude. You do what was
Speaker 1: referred to as deliberate disinflation, which was Volka, you kind
Speaker 1: of kill the economy dead. Or you do what they
Speaker 1: refer to as opportunistic disinflation, which was kind of Greenspan
Speaker 1: in the mid nineties, and you hold rates are much
Speaker 1: longer than people expect, and you kind of hope that
Speaker 1: the economy doesn't die. If it does, sorry, but you
Speaker 1: kind of choke it out slowly, but that could take years, right,
Speaker 1: I mean conceptually, I think the problem that they've got
Speaker 1: and why I suspect they'll end up cutting, is that
Speaker 1: this credit crunch is going to be much deeper potentially
Speaker 1: than they think. I already are working. Watch those banks.
Speaker 1: Watch yeah, watch those banks. And I think one thing
Speaker 1: I was just listening to the previous conversation. I think
Speaker 1: it's very interesting. So the assumption is that the FED
Speaker 1: goes twenty five in May, but right they will have
Speaker 1: the Senior Loan Officers survey going into the meeting, and
Speaker 1: if they do not cut, to me, that's a big
Speaker 1: tell to me. That tells them there's something very bad
Speaker 1: in that survey. And there's some preliminary stuff we've had
Speaker 1: the Dallas fedor if they do not, if they do, sorry,
Speaker 1: if they do not hike, my apologies. So if they
Speaker 1: do not hike, I think that would be a tell
Speaker 1: that that survey is going to be showing material timing.
Speaker 1: But they're getting a lot of evidence. I feel like
Speaker 1: over the past couple of days at least that there's
Speaker 1: some sophename. We had the jobs report, we had the
Speaker 1: Dallas fed exactly as you said, is there becoming a
Speaker 1: little bit more of a case for a pause the
Speaker 1: next I think that they're done to all intensive purposes.
Speaker 1: It's sort of academic whether they're going under twenty five
Speaker 1: or not. Only I mean, I think, I think really
Speaker 1: when we wrote a three part series, yeah, exactly, sure, Yeah,
Speaker 1: who cares because the damage has been done. Yeah. I
Speaker 1: do agree with you that what we hear from banks
Speaker 1: will tell us exactly what's going on and whether or
Speaker 1: not they are just shutting things down or there's no
Speaker 1: interest right in loans and activity, right. And I think
Speaker 1: it's it's not the big boys, it's not JP Morgan,
Speaker 1: It's going to be the smaller names. There was a
Speaker 1: story running around today on one of the other outlets.
Speaker 1: They're interviewed the CEO of a medium sized bank. He said,
Speaker 1: I kind of went into this year thinking I should
Speaker 1: cut my lending fifty percent. Right, I think I need
Speaker 1: to cut it another fifty percent. Wow, that's big. It's
Speaker 1: look this is but we already you have to add
Speaker 1: on this. We were facing an inventory overhang, right because
Speaker 1: we all massively over ordered. Companies have been doing a
Speaker 1: great job at masking over falling volumes by raising prices.
Speaker 1: Procter and Gamble was a classic glass quarter where their
Speaker 1: volumes were down, but their profits were up because they'd
Speaker 1: raise prices sufficiently. And that's great for companies, but the
Speaker 1: real economy runs on volume. Where do we see though
Speaker 1: the start of this recession then, because just on the
Speaker 1: other side here we do have jobs numbers staying pretty good,
Speaker 1: you know GDP pretty good, Like how do we get there?
Speaker 1: So we've well, when you look talk at the jobs market,
Speaker 1: I think the important thing to think about from from
Speaker 1: employment is if you look at the unemployment rate, it
Speaker 1: looks like a mountain range right in Colorado half the time.
Speaker 1: So you get these very sharp peaks, which is so nice.
Speaker 1: Yeah yeah, So you get these very sharp peaks, peaks, drops,
Speaker 1: and then the bottom you get these kind of little valleys.
Speaker 1: But the point is a momentum game. So once you
Speaker 1: start to lose positive momentum and you start to flatten out,
Speaker 1: you can kind of start the stop watch and say,
Speaker 1: the next ticket is up, and most of our momentum
Speaker 1: indicators are beginning to show rising unemployment. I think there's
Speaker 1: one that I watch in the claims data. And with
Speaker 1: the exception nineteen eighty nine, if you take it back
Speaker 1: into the as far back as the sixties, and in
Speaker 1: eighty nine, the FED had already started easing, which clearly
Speaker 1: they're not doing now. Whenever it ticked above the level
Speaker 1: that I indicated, we were either in the recession that quarter,
Speaker 1: which would be now, or one quarter away. So I
Speaker 1: think it's kind of to your point. Whether they go
Speaker 1: another twenty five or they don't go another twenty five,
Speaker 1: who cares. We're basically at that point. I think that
Speaker 1: we're to slowdown is upon us and it will start
Speaker 1: to manifest. I'm going to say it feels it in
Speaker 1: a funny, weird, odd way. Julian. So, what is that
Speaker 1: the market indicator that you watch most closely? You're talking
Speaker 1: about this indicator within the labor market. It's one of them, right,
Speaker 1: I mean another one, a great one is if you
Speaker 1: look at is new orders. Right, So if you look
Speaker 1: at ism manufacturing new orders, Historically, unless the FED comes
Speaker 1: in and punts the cycles of these we eases, once
Speaker 1: you drop below forty seven point two, you're either in
Speaker 1: the recession or pretty close to decision. There's a number
Speaker 1: of things that I think are just out there indicating
Speaker 1: it's kind of here. But could we see a manufacturing
Speaker 1: recession but not a services recession manufacturing? Could we see
Speaker 1: a recession and the job market stop? So you could?
Speaker 1: I mean it's so you'd be kind of looking at
Speaker 1: something like two thousand and two thousand and one. We're
Speaker 1: relatively mild recession where you've got a capex recession, a
Speaker 1: credit cycle, a small rise, and unemployment. The big thing
Speaker 1: that I think that's missing from there is I think
Speaker 1: a we're going to get a tighter credit crunch than
Speaker 1: we got back then. And secondly, it does feel like
Speaker 1: there's going to be another Starting in two thousand, you've
Speaker 1: got a big uptick in the housing market, and the
Speaker 1: housing market is actually very important as a driver of
Speaker 1: the broad economy. And this time we've already done our
Speaker 1: building right. We went in from two thousand I think
Speaker 1: to two thousand and four weeks. I never get the
Speaker 1: housing market because we went from tons of building oversupply
Speaker 1: to let's blow up houses to reduce supply, and then
Speaker 1: all of a sudden, we've got a shortage again. So sorry,
Speaker 1: I don't understand it, but I get it. No, So
Speaker 1: we've since the loads of COVID, we've increased new home
Speaker 1: construction for over forty percent, right because we had to
Speaker 1: accommodate the Great migration. So there's oversupply. Now there's going
Speaker 1: it's starting to come. If you look at homes under
Speaker 1: construction versus actually what's selling, there's going to be a
Speaker 1: lot that's going to hit the market. Commercial real yes
Speaker 1: a big issue as well. I think a look, are
Speaker 1: we going to see more svbs with a sort of
Speaker 1: heart attack and these banks drop? I don't think so.
Speaker 1: I think we're just going to see ongoing decay in
Speaker 1: the system where these smaller banks are going to have
Speaker 1: to recognize losses. We've linked now losses to the equity price,
Speaker 1: and then if the equity price starts to runder, the
Speaker 1: big depositors start to take their cash out again like
Speaker 1: they did with SUBB and so I can see this
Speaker 1: sort of ongoing problem for this sector. Jilian, we just
Speaker 1: have about twenty five thirty seconds, and you do need
Speaker 1: to be quick. You do work with financial institutions, big ones,
Speaker 1: hedge funds. What's the question that they must ask you.
Speaker 1: So the big question I think at the moment is
Speaker 1: the dollar is that what they ask you about. Yes,
Speaker 1: this is this is going to be the big question. Right.
Speaker 1: The dollar has dictated everything we've done for the last decade.
Speaker 1: We've had a rising dollar, sucks money into the US
Speaker 1: equity market, leads to massive outperformance of the US versus
Speaker 1: the rest of the world world. And if the dollars
Speaker 1: starts to falter, which is overdue, it's already done a
Speaker 1: bunch since Smiden. You know, then you're saying a lot
Speaker 1: more it could. I'm watching it very, very close because
Speaker 1: that starts to turn. Then your whole investment horizon and
Speaker 1: direction changes. Super treat next time you're in town, come back,
Speaker 1: we'll do I really appreciate Julian Brigden, co founder, president
Speaker 1: Macro Intelligence, two partners right here in studio. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
Speaker 1: Bloomberg dot com, the Ihard Radio app, and the Bloomberg
Speaker 1: Business App, or watch us live on YouTube. Do you
Speaker 1: want to get to a very important story dueling abortion
Speaker 1: pill rulings. You've probably read about it, heard about it
Speaker 1: happening in both Texas and Washington State, definitely causing confusion
Speaker 1: for the federal government, for doctors, for patients, for everybody
Speaker 1: who follows this story. For really many Americans, a Texas
Speaker 1: ruling overturned FDA approval for the abortion pill mephisto. Don't
Speaker 1: say it Rightstone, mifiobristone. Yes, you said it right. I
Speaker 1: knew that was going to get caught on that mifipristone,
Speaker 1: which could block the pill nationwide. So this could be
Speaker 1: very significant. Metime, You've got a ruling in Washington State
Speaker 1: which sought to protect access to that drug. Yeah, and
Speaker 1: this afternoons and breaking news, the Biden administration seeking an
Speaker 1: emergency hold on that Texas ruling, calling it unprecedented. A
Speaker 1: lot of moving parts, a lot of news here, so
Speaker 1: we want to walk through all of it step by step.
Speaker 1: So here to discuss, We've got Bloomberg News Equality reporter
Speaker 1: Kelsey Butler. She joins us by phone in New York City,
Speaker 1: and we also have here in studio Bloomberg legal analyst
Speaker 1: and host of Bloomberg Law, June Grasso again in our
Speaker 1: Bloomberg Interactive Brokers studio. So Kelsey. For those who are
Speaker 1: not familiar with this pill. Just give us the background,
Speaker 1: what is it, what's it used for, what's the usage? Like, absolutely,
Speaker 1: miffopristown as part of a two drug regiment that is
Speaker 1: pretty much standard medication abortion care in the US. It
Speaker 1: has been available for two decades and as of twenty twenty,
Speaker 1: more than half of all terminations in the US are
Speaker 1: done via pills, and it's generally prescribed along with mesa postal.
Speaker 1: As I said, it's part of that two drug combo,
Speaker 1: and together the two pills have an over ninety five
Speaker 1: percent efficacy rate in safely ending pregnancies with no further
Speaker 1: intervention needed. And as I mentioned, now at this point,
Speaker 1: more than half of all terminations in the US are
Speaker 1: done via pills. So whatever the outcome of these cases is,
Speaker 1: it's going to have huge ramifications across the US. Kelsey,
Speaker 1: are the pills us specifically for abortions with a certain
Speaker 1: term limit at this point or is it certain weeks
Speaker 1: in the pregnancy? Yeah, so these are used in the
Speaker 1: first trimester in order to terminy pregnancies. Of course, curtical
Speaker 1: abortion is still an option for you know, those who
Speaker 1: are later in pregnancy and easier on women. I would
Speaker 1: assume the pills than a surgery. Certainly, it's much easier
Speaker 1: to access it. In the course of the pandemic, it
Speaker 1: has become available via telemedicine and mail, and so in
Speaker 1: certain states, of course, the states where you know full
Speaker 1: abortion bands aren't in effect, peasons are able to get
Speaker 1: it in a much more radically accessible manner than having
Speaker 1: to go to a clinic and have a procedure. June,
Speaker 1: come on in here, because there's a lot of moving
Speaker 1: parts on the legal side of this Texas Washington potential
Speaker 1: Scotus question. Give us the lowdown. So you have two
Speaker 1: conflicting decisions, basically conflicting decisions, although the Washington judges decision
Speaker 1: only effects according to his order the states that actually
Speaker 1: brought the case before him, So that's twelve states that
Speaker 1: brought the case before him, excuse me, seventeen states that
Speaker 1: brought the case for him. So that but the judge
Speaker 1: in Texas has a nationwide injunction. So today the Biden
Speaker 1: administration besides appealing to the Fifth Circuit, which is the
Speaker 1: most conservative circuit in the country, and that's where Texas's
Speaker 1: order will go. So besides appealing, they asked the Washington
Speaker 1: judge to clarify what his ruling would mean if the
Speaker 1: Texas judge is ruling stays in effect, because no one
Speaker 1: really knows. You have two conflicting opinions, which one has precedence,
Speaker 1: and so likely we think you'll end up at the
Speaker 1: Supreme Court. What was the Texas case, the Texas Federal judge?
Speaker 1: What was it based on? So? And by the way,
Speaker 1: this is the first time that we know of that
Speaker 1: a court has overruled the FDA's approval of a drug.
Speaker 1: That's what makes it so unique, right, And he based
Speaker 1: it on several basically, he said, And he's a judge
Speaker 1: with no medical or scientific background. He basically said, you're wrong, FDA,
Speaker 1: and I'm right. And he said things like, for example,
Speaker 1: he said that they were wrong in their process. He
Speaker 1: said that the FDA so In other words, the FDA
Speaker 1: considers pregnancy a medical condition that can sometimes be serious
Speaker 1: and life threatening. The judge called it a natural process
Speaker 1: essential to perpetuating human life. And he said the FDA
Speaker 1: failed to consider the intense psychological trauma and post traumatic
Speaker 1: stress women often experienced from chemical abortion. This is all
Speaker 1: from the plaintiffs, the anti abortion groups papers. He even
Speaker 1: adopted their language he called the fetuses unborn children or
Speaker 1: unborn humans, and he referred to abortion also as an
Speaker 1: effort to create eugenics. It's a very strange and broad opinion.
Speaker 1: This wasn't a judge who wanted to just rule in
Speaker 1: this case. This is a judge who wanted to make waves.
Speaker 1: And he's also a very conservative Christian judge who's you know,
Speaker 1: his advanced rulings against the Biding administration and LGBTQ matters
Speaker 1: and in other matters. So we expected this and really
Speaker 1: quickly if the Texas ruling were to stay, and it
Speaker 1: would ban access to this pilled nationwide, correct, nationwide? Yeah,
Speaker 1: So Kelsey bringing you back in here. If miff A
Speaker 1: press Stone is banned, there's a second part of the
Speaker 1: abortion pill series, misoprostial that you mentioned. Some doctors say
Speaker 1: that dose could be doubled and served the same purpose.
Speaker 1: Is that drug going to potentially be an alternative that
Speaker 1: is viable and can be protected legally. We've got about
Speaker 1: forty five seconds here. Or as been talking to clinics
Speaker 1: for weeks and they have been preparing as we have
Speaker 1: just been discussing. This decision was telegraphed and they know
Speaker 1: that MISA prostial is also MISA prostil only regiments are
Speaker 1: safe and effective and is an alternative should this decision
Speaker 1: from Texas stand. And I just want to say June
Speaker 1: sharing with me earlier in the day, over three hundred
Speaker 1: biotech and pharma industry executives, including Fiser's CEO, signing an
Speaker 1: open letter calling for the reversal of that district of
Speaker 1: that decision by the judge in Texas. Right, what's the likelihood,
Speaker 1: what's the strength of this case in terms of legal terms,
Speaker 1: and just kind about thirty seconds. I don't think it's
Speaker 1: I don't think it's a very strong case. It's not
Speaker 1: based it's based on his own analysis of pregnancy, and
Speaker 1: it's it's really not that the FDA didn't follow some
Speaker 1: process that that too, but it all that also relates
Speaker 1: to his analysis of pregnancy and what the FDA says.
Speaker 1: And so I think that if you know, if the
Speaker 1: Supreme Court is going to follow what it's said before
Speaker 1: and what it's said in the Jobs decision, then this
Speaker 1: would be over rule. But we never know what the
Speaker 1: Supreme Court is going to find. Yes, likely, very likely. Wow,
Speaker 1: you're living in interesting times. Um that of course, is
Speaker 1: June Grosso. She's Bloomberg News Legal and alas host of
Speaker 1: Bloomberg Law Tonight at ten PML. Wall On Radio. Kelsey Butler,
Speaker 1: quality reporter at Bloomberg News, thank you both. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern on Bloomberg Radio,
Speaker 1: the Bloomberg Business app, and YouTube. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station,
Speaker 1: jose Say Alexa playing Bloomberg eleven thirty. A lot of
Speaker 1: things on our mind on this Monday, and that includes
Speaker 1: French President Emanuel and McCallon urging Europe to develop more
Speaker 1: strategic autonomy as a way to avoid the risk of
Speaker 1: turning EU countries into vassals that's his word, in the
Speaker 1: event of a global crisis such as a US China confrontation.
Speaker 1: And this is on the heels at President mccrone's visit
Speaker 1: last week to China. So with a guidance on what
Speaker 1: this means, we are so delighted to have back with us.
Speaker 1: Andy Brown, former editorial director at Bloomberg New Economy. Andy
Speaker 1: spent three decades in Asia as both China editor and
Speaker 1: columnist for The Wall Street Journal. Today, he leads the
Speaker 1: China Hub. He is a partner at Brunswick Group, a
Speaker 1: critical issues advisory from Andy back with us via Zoo
Speaker 1: in New York City. Andy, thank you, thank you. Good
Speaker 1: to have you here with Maddie and myself. What's your
Speaker 1: read on President mccrone's visit and then the comments post
Speaker 1: his visit to China. Well, first of all, it's great
Speaker 1: to be with you, Carol and Maddie. The comments, as
Speaker 1: you say, really are quite extraordinary and have been interpreted
Speaker 1: as inflammatory in fact by China hooks in the US.
Speaker 1: I mean, you've got to remember the context. I mean
Speaker 1: here he is the French President Emmanuel Macron in China,
Speaker 1: saying that Europe should distance itself from the United States
Speaker 1: at a time when the United States is involved in
Speaker 1: intense strategic competition with China, competition over Taiwan, over the
Speaker 1: South China Sea. They're at loggerheads over high technology, over
Speaker 1: human rights, over the situation in Ukraine. And Macron comes
Speaker 1: out and he says, no, we need strategic autonomy. We're
Speaker 1: not going to be followers. And the most explosive of
Speaker 1: His comments was, and we're not going to be dragged
Speaker 1: by the United States into a conflict over Taiwan. And
Speaker 1: you know, this is this is a this is this
Speaker 1: too to politicians like Marco Rubio really is outrageous. So
Speaker 1: he's saying, Okay, here we are the United States defending Europe,
Speaker 1: sending aid, sending arms, military equipment to Ukraine, and you're saying,
Speaker 1: you know you're not going to get in, You're not
Speaker 1: going to support us in Taiwan. Why now for this
Speaker 1: move from Macron? You know, he's he's always sought what
Speaker 1: he calls strategic autonomy somewhere between the United States and China.
Speaker 1: This time he talked about creating a European third superpower.
Speaker 1: But you know, business and economics plays very much into
Speaker 1: this scenario. Macron arrives in China with fifty odd business
Speaker 1: executives in tow representing industries from fashion to to to nuclear,
Speaker 1: and they're all doing great deals. So he's making clear
Speaker 1: the difference between the United States and Europe on this
Speaker 1: and in fact, that sense is quite broadly shared in
Speaker 1: Europe that you know, Europe doesn't want to go in
Speaker 1: for economic decoupling. Ursola Van Delay and the European President
Speaker 1: of the European Commission was quite clear on this point.
Speaker 1: She said, we want de risking from China. We don't
Speaker 1: want decoupling. But certainly Macron sees commercial opportunity in China's reopening.
Speaker 1: And by the way, President Jimping of China, this is
Speaker 1: all music to his igness. Relations with the United States
Speaker 1: are on ice and here's Europe coming along with trade
Speaker 1: offers of trade and technology. It's exactly what he needs
Speaker 1: at this point. Well, and is it similar Andy, I
Speaker 1: know we've talked about this a lot over the years.
Speaker 1: Is it the same for US businesses? We just talked
Speaker 1: about Tesla building a large new battery factory in Shanghai.
Speaker 1: So further digging in deeper when it comes to China specifically,
Speaker 1: I mean US big companies, they're still going to be
Speaker 1: in China doing business or no? Yeah, Well, in some ways,
Speaker 1: Elon Musk is quite exceptional. It's the rare US CEO
Speaker 1: that's going out there now and announcing big business deals
Speaker 1: with China. In fact, we just had a big conference
Speaker 1: in Beijing called the China Development Forum run by the
Speaker 1: Chinese government, the Chinese State Council. Far fewer US corporate
Speaker 1: executives than usual were there. They were rather reluctant to
Speaker 1: turn out. They definitely didn't want to do any media
Speaker 1: and they certainly didn't want to make any announcements of
Speaker 1: investments in China, which might expose them to criticism by
Speaker 1: this newly created House Committee on China, which plans to
Speaker 1: haul US CEOs and other prominent figures connections to China
Speaker 1: in front of the Committee for televised hearings. They're very
Speaker 1: nervous about that. So, yeah, this is advantage Europe versus
Speaker 1: the United States, certainly when it comes to corporate engagement.
Speaker 1: It's it's so interesting because I also have to wonder
Speaker 1: whether when it comes to she Jane Payne, are these
Speaker 1: CEOs concerned about the lack of predictability there. We just
Speaker 1: got through years of COVID zero in China. To what
Speaker 1: extent are people willing and ready to move on from
Speaker 1: that and say, well, this is an opportunity now, so
Speaker 1: let's fly over there with fifty CEOs into Yeah, well,
Speaker 1: the the Joe Biden is highly unlikely to replicate that
Speaker 1: that kind of mission. In fact, the US is working
Speaker 1: in the opposite direction. It wants economic containment of China,
Speaker 1: not economic engagement with China is certainly in the area
Speaker 1: of high tech. That's what the Inflation Reduction Act is
Speaker 1: all about. That's what chips and science. It's all about
Speaker 1: billions of dollars to build supply chains in the United States,
Speaker 1: to bring jobs back from China, and to make the
Speaker 1: United States less reliant on China. So it's all working
Speaker 1: really in quite the opposite direction. But US businesses in
Speaker 1: China are worried about two things. First of all, geopolitics
Speaker 1: and particularly the situation in the Taiwan Strait and the
Speaker 1: possibility of a Chinese invasion. But they're also worried about
Speaker 1: domestic economic policy and whether the Chinese administration really has
Speaker 1: eased up on its extraordinary assaults on the private sector
Speaker 1: that we saw beginning in the middle of two thousand
Speaker 1: and twenty one with the attack on the big tech
Speaker 1: digital platforms Ali Baba, you know, and d D and
Speaker 1: the other and the other tech giants. Well, it just
Speaker 1: is always interesting and I feel like so many different
Speaker 1: things coming at us from so many different angles. Andy,
Speaker 1: thank you. I know, another busy day, so so appreciated.
Speaker 1: Andy Brown, partner at the Brunswick Group, joining us via
Speaker 1: zoom in New York City. I'm a journal yeah, but
Speaker 1: you let me drive. Oh no, no, no no, no, who's home, honey? Please,
Speaker 1: I'll do the riding gravels. Let's I want to drive.
Speaker 1: It's a good question. Drive. This is the drive to
Speaker 1: the clothes commu thing well, Briar Shadawn on Bloomberg Radio.
Speaker 1: All right, everybody just got under just under excuse me,
Speaker 1: eighteen minutes left in today's trading session, the first trading
Speaker 1: session of the week. In a week that we'll get
Speaker 1: big bank earnings later in the week, we get read
Speaker 1: on inflation on Wednesday. There is a lot going on,
Speaker 1: but we've got some light volume, as you have been
Speaker 1: hearing here on Bloomberg. In the meantime, let's get to it.
Speaker 1: Let's get to our drive to the closed guest Rick
Speaker 1: Pat Karen he is with us. He's chief global strategist
Speaker 1: at Pick Karen Family Office. He joins as we zoom
Speaker 1: in Pennsylvania. Good to have you back with Maddie and myself.
Speaker 1: Let's talk about the environment. There's a lot going on,
Speaker 1: first of all, in if you had to describe today's
Speaker 1: market environment and just a couple of words, how would
Speaker 1: you do it. I think, you know, it's it's just
Speaker 1: climbed the surprising wall of worry over the past quarter.
Speaker 1: We're sitting here, you know, still looking through quarter numbers
Speaker 1: and seeing how that positions for next quarter, and just
Speaker 1: a you know, just a little bit shocked of the
Speaker 1: bifurcated nature where you see in Nvidia and Gold working
Speaker 1: at the same time. Shouldn't be happening, but it is.
Speaker 1: And we're also seeing that bifurcation when we look at
Speaker 1: the treasury trade versus the equities trade. Do you think
Speaker 1: those are two completely different stories or do you see
Speaker 1: similarities there? You know, I think no. I just think
Speaker 1: there's a couple of different camps out there. There's the
Speaker 1: camp that we've frankly been in, which is the Fed's
Speaker 1: going to have its foot on the brake at some
Speaker 1: point we get economic slowing off of that in our
Speaker 1: first inflation fight since the seventies. So let's pull out
Speaker 1: a seventies playbook and use shorter duration assets and a
Speaker 1: diverse portfolio of caution versus an increasing crowd of people
Speaker 1: that say, look, the Fed's done, are getting close to
Speaker 1: being done, and it's really going to be back to
Speaker 1: two and twenty one and let's buy you know, in
Speaker 1: the Nasdaq one hundred and some of these Bellweather tech
Speaker 1: stocks that work so well for the past couple of years.
Speaker 1: They both can't go on forever. One's going to crack. Interesting. So,
Speaker 1: you think the bond market, in terms of what it
Speaker 1: has been indicating and seems to be forecasting a recession
Speaker 1: that's maybe deeper than we were all thinking about initially,
Speaker 1: or six months ago or three months ago or one
Speaker 1: month ago. You think the bond market's overdoing It's not
Speaker 1: going to be as bad. No, I'm not sure that
Speaker 1: we've traditionally been on the side that it should be
Speaker 1: a year where we still need to be cautious around
Speaker 1: risk because you know, it's a don't fit. You know,
Speaker 1: the classic, the classic tack for this environment is don't
Speaker 1: fight the Fed. This idea that the Fed's really sort
Speaker 1: of got old data, stale data and some of their
Speaker 1: inflation computations, and they're going to get much easier towards
Speaker 1: the back half of the year, grow liquidity at the market,
Speaker 1: and have a risk rally that's, to me, is a
Speaker 1: more difficult position to understand. So you viewed tech specifically
Speaker 1: as not a risk, right, you think that that's a
Speaker 1: good pick. Well, I think that it's certainly been working lately,
Speaker 1: and these are the franchises in our economy that are
Speaker 1: that are going to survive long term. But it doesn't
Speaker 1: seem to me that the highest PE stocks are the
Speaker 1: ones you want to be buying when interest rates are
Speaker 1: up and you have an eight percent eight percent prime rate,
Speaker 1: And that's sort of the that's the fight that's going
Speaker 1: on right now between you know, buy an Nvidia high
Speaker 1: pe long duration asset and and buy these shorter duration
Speaker 1: protective assets. Wait, so help me out here. So technologies,
Speaker 1: we just talked with our Ian King and our Grana
Speaker 1: on a Semiconductor News today mixed news at that and
Speaker 1: then also the Apple News. You know, every tech name
Speaker 1: obviously not the same day. You know, there's a different
Speaker 1: ways to play technology, So you would you would invest
Speaker 1: and if so where specifically in technology? Well, I think that,
Speaker 1: you know, obviously the tech trade is working right now.
Speaker 1: Our base case is that's probably a bit of a
Speaker 1: head fake. We still think the FED is going to
Speaker 1: be tight. So we're really advocating a more diverse portfolio
Speaker 1: with some lower p lower duration stocks and maybe some
Speaker 1: em and non US stocks rather than just pounding right
Speaker 1: into what worked in twenty and twenty one. Now, the
Speaker 1: first quarter wasn't friendly to that idea, as you know,
Speaker 1: the NAZAC one hundred was up like eighteen percent. But
Speaker 1: we think by the back half of the year, the
Speaker 1: pressure of the FED is going to continue to put
Speaker 1: on the market, will actually make that trade a little
Speaker 1: bit weaker relatively, all right. So if I look at
Speaker 1: emerging markets, the MSCI Emerging Market Index, it's up about
Speaker 1: three percent this year. And if I look real quickly
Speaker 1: at the mx WO, if I look specifically the MSCI
Speaker 1: World Index, it's up about seven percent. So we're an
Speaker 1: emerging markets are you thinking, well, I think that you
Speaker 1: know we we we hire managers, are managers seeing opportunities.
Speaker 1: India has been a strong strong player. You've seen some
Speaker 1: action in Brazil and Asia X China. So the Chinese
Speaker 1: sort of rebound as they reinvest in their economy hasn't
Speaker 1: really got had the legs yet that it would. But
Speaker 1: we also think that based on many of the dynamics
Speaker 1: that out there, you're going to have a little bit
Speaker 1: of a weaker dollar, much like you did in the fall,
Speaker 1: and that should benefit not only the em but broad
Speaker 1: non US as a as a class. I wonder what
Speaker 1: you think too about the dollar story one year from now.
Speaker 1: Do you think that it's going to be up down?
Speaker 1: And to what extent is that tied to what we
Speaker 1: see from the Fed this year? Well, it's it's hard
Speaker 1: for me to see that the dollar isn't at least
Speaker 1: somewhat overvalued at this point. It's head. You know, it
Speaker 1: usually runs on about ten year cycles of strength and weakness.
Speaker 1: We're on about year fourteen right now. You're seeing a
Speaker 1: lot of sort of non dollar conversations amongst important geopolitical
Speaker 1: players like the Chinese, the Indians, the Saudi Arabians, which
Speaker 1: lead me to believe that the dollars next move should
Speaker 1: be weaker and not stronger. So even though the dollars lost,
Speaker 1: if I look at the index Spot Dollar Index, it's
Speaker 1: down almost ten percent from its levels back in kind
Speaker 1: of mid October. You think we can go further on
Speaker 1: this further time downside. I certainly do. I think there's
Speaker 1: a number of factors at play that fundamentally, I mean,
Speaker 1: I'm not in the camp that you know, the dollars
Speaker 1: over and some other currency is going to become a
Speaker 1: world's dominant currency or any anything like that. When I
Speaker 1: think the last ten fifteen years have put us in
Speaker 1: a position where valuations are a little pressed and you
Speaker 1: could see some reversion to the mean and see that
Speaker 1: dollar fall a significant percentage over the next couple of years. Hey, Rick,
Speaker 1: just got about thirty forty seconds left here. You know,
Speaker 1: you do work with family offices or you are a
Speaker 1: family office, So I just wonder, in terms of clients
Speaker 1: and institutions, are they nervous in this environment ready to
Speaker 1: commit new money? What are you seeing generally? You know,
Speaker 1: I think that clients are less nervous by a long
Speaker 1: shop than they were in the two thousand and eight environment.
Speaker 1: And I'm not sure if we've actually put enough fear
Speaker 1: into these markets, as they're still trading it like eighteen
Speaker 1: times forward earnings. So I'm not seeing near the capitulation
Speaker 1: that I've seen in past down market cycles. Our clients
Speaker 1: are and I'm blessed to have a group of clients
Speaker 1: that are long term investors. They think about things strategically
Speaker 1: in the long term, which really is to there economic benefit, right.
Speaker 1: But I haven't seen the fear that I've seen in
Speaker 1: other cycles. Yeah, the vics certainly showing a lot of complacency,
Speaker 1: were easily below twenty nineteen in change, even though we've
Speaker 1: been seeing a move up to some extent over the
Speaker 1: last week or so. Rick, thank you so much, appreciate it.
Speaker 1: Rick Pitcarn. He is Chief Global Strategist over at Pitcarn
Speaker 1: Family Office, joining us via zoom in Pennsylvania. This is Bloomberg.
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