1 00:00:00,120 --> 00:00:02,560 Speaker 1: Let's get to our guest, Max Bunduria is with us. 2 00:00:02,640 --> 00:00:06,280 Speaker 1: Max is founder also the CEO of s GMC Capital. 3 00:00:06,360 --> 00:00:10,119 Speaker 1: He joins us from Singapore. It's all about inflation these days. 4 00:00:10,160 --> 00:00:12,639 Speaker 1: We can debate whether or not it's peaking, Max, but 5 00:00:12,960 --> 00:00:17,520 Speaker 1: the Fed nonetheless seems resolute in its campaign to fight it. 6 00:00:17,600 --> 00:00:19,840 Speaker 1: How much longer do we have to go in this battle? 7 00:00:19,880 --> 00:00:23,000 Speaker 1: Do you have a sense, Well, we do have to 8 00:00:23,000 --> 00:00:25,239 Speaker 1: go a bit longer, because once again they're not in 9 00:00:25,280 --> 00:00:28,360 Speaker 1: a position where they can lose image. Again, clearly, the 10 00:00:28,520 --> 00:00:32,880 Speaker 1: coming on the back of let's say a mistakenly view 11 00:00:32,960 --> 00:00:35,519 Speaker 1: of of last year of this transitory face. So clearly 12 00:00:36,200 --> 00:00:39,479 Speaker 1: they cannot change course. They cannot pivot dovish ly too early. 13 00:00:39,880 --> 00:00:42,960 Speaker 1: So we need to see rates going higher. We'll probably 14 00:00:42,960 --> 00:00:45,080 Speaker 1: get to five and a quarter five and a half roughly, 15 00:00:45,200 --> 00:00:48,160 Speaker 1: that's the levels that we expect. But more importantly, they're 16 00:00:48,159 --> 00:00:50,400 Speaker 1: going to be at that level for longer. So now 17 00:00:50,440 --> 00:00:53,400 Speaker 1: the market things we're gonna start chatting already by all 18 00:00:53,440 --> 00:00:55,680 Speaker 1: the September of next year, we think that is unlikely, 19 00:00:55,760 --> 00:00:58,000 Speaker 1: so rates are likely to remain there for a bit 20 00:00:58,040 --> 00:01:01,200 Speaker 1: longer in order to really bring the man down. Yet, 21 00:01:01,360 --> 00:01:03,800 Speaker 1: equities arising in the US here in the edge of 22 00:01:03,840 --> 00:01:06,600 Speaker 1: Pacific as well. Why is that if there's more rights 23 00:01:06,600 --> 00:01:11,200 Speaker 1: playing to come. Well, first of all, you have to distinguish, 24 00:01:11,200 --> 00:01:13,160 Speaker 1: you think short term and longer term. So short term 25 00:01:13,200 --> 00:01:14,920 Speaker 1: you will get what it is you're going to get 26 00:01:14,920 --> 00:01:17,560 Speaker 1: tactical bounces. And I keep in mind that the midterm 27 00:01:17,600 --> 00:01:21,320 Speaker 1: elections are coming and past the event you could see 28 00:01:21,319 --> 00:01:23,880 Speaker 1: a bit of a relief rally, and you do have 29 00:01:23,959 --> 00:01:27,319 Speaker 1: a number of of names which are looking a little 30 00:01:27,319 --> 00:01:31,120 Speaker 1: bit more attractive from evaluation perspective. So the fact that 31 00:01:31,360 --> 00:01:34,319 Speaker 1: the medium term still looks challenging doesn't mean that we 32 00:01:34,360 --> 00:01:38,160 Speaker 1: cannot get short term bounces, especially based on on tactical 33 00:01:38,240 --> 00:01:41,200 Speaker 1: and technical level, So we do expect that to continue. 34 00:01:41,360 --> 00:01:44,440 Speaker 1: But of course medium term, do you think it's possible, Max, 35 00:01:44,640 --> 00:01:47,240 Speaker 1: that the FED can even get close to engineering a 36 00:01:47,319 --> 00:01:50,360 Speaker 1: soft landing? Ediard Danny, This is kind of surprising to me. 37 00:01:50,560 --> 00:01:52,960 Speaker 1: I mean today, Ed, who is the head of your 38 00:01:53,040 --> 00:01:56,320 Speaker 1: Danny research, was saying he sees his firm sees as 39 00:01:56,320 --> 00:02:01,520 Speaker 1: sixty probability of a soft landing. Is that likely? Uh, 40 00:02:01,680 --> 00:02:04,600 Speaker 1: we think that's a little bit optimistic. So I like 41 00:02:04,720 --> 00:02:07,840 Speaker 1: to be optimistic, but I think six is a little 42 00:02:07,880 --> 00:02:11,160 Speaker 1: bit too high in terms of base case soft landing. 43 00:02:11,280 --> 00:02:14,960 Speaker 1: As time goes by, it's going to become harder and harder, 44 00:02:15,120 --> 00:02:19,440 Speaker 1: especially as long as inflation remains stubbornly high. So I mean, 45 00:02:19,720 --> 00:02:22,839 Speaker 1: Lett's cut it relatively short. I mean, the only way 46 00:02:22,840 --> 00:02:25,120 Speaker 1: for inflation to really come down is for unemployment to 47 00:02:25,160 --> 00:02:28,120 Speaker 1: go up, because inflation is now up because of strong 48 00:02:28,200 --> 00:02:31,280 Speaker 1: consumption and stronger demand, and consumption comes down only when 49 00:02:31,280 --> 00:02:35,080 Speaker 1: you get less job security, and that comes only, unfortunately, 50 00:02:35,200 --> 00:02:37,760 Speaker 1: when unemployment goes up, and that's when we're going to 51 00:02:37,840 --> 00:02:41,520 Speaker 1: be seeing um inflation come down and potentially the pets 52 00:02:41,520 --> 00:02:43,920 Speaker 1: starting to pilot. But for that to happen, you're going 53 00:02:43,960 --> 00:02:47,280 Speaker 1: to have repercustions on the real economy, on the social environment, 54 00:02:47,400 --> 00:02:50,840 Speaker 1: and therefore a soft lending is going to be tough. 55 00:02:50,880 --> 00:02:53,280 Speaker 1: I'm not even seeing a super hard landing, but we're 56 00:02:53,280 --> 00:02:57,000 Speaker 1: somewhere around the medium lending and max. We were discussing 57 00:02:57,040 --> 00:03:01,120 Speaker 1: the environments of fit tightening, rising rights in the net 58 00:03:01,120 --> 00:03:05,600 Speaker 1: context that mentioned the US dollar perhaps weakening just a 59 00:03:05,680 --> 00:03:09,280 Speaker 1: tad at the moment, one four still very strong though 60 00:03:09,280 --> 00:03:13,880 Speaker 1: against the end have we picked yet? Uh? Well, we've 61 00:03:13,960 --> 00:03:16,160 Speaker 1: definitely gone a long way, if you look at the 62 00:03:16,200 --> 00:03:20,400 Speaker 1: dollar appreciation over the last year has been extremely strong. 63 00:03:21,160 --> 00:03:23,760 Speaker 1: The pace of the further appreciation is going to be 64 00:03:23,800 --> 00:03:26,480 Speaker 1: coming down, especially because it's getting closer and closer to 65 00:03:27,360 --> 00:03:30,639 Speaker 1: create with respect to the FAT. But we don't see 66 00:03:30,639 --> 00:03:33,919 Speaker 1: a strong devaluation anytime soon either. So the dollar continues 67 00:03:33,960 --> 00:03:36,560 Speaker 1: to be in strong demand and the overall risk of 68 00:03:36,720 --> 00:03:40,680 Speaker 1: environment will continue to provide a stable environment for a 69 00:03:40,720 --> 00:03:44,360 Speaker 1: dollar demand. Therefore, we're probably close to the peak, but 70 00:03:44,480 --> 00:03:47,120 Speaker 1: don't expect the strong depreciation anytime So, Max, I'd like 71 00:03:47,160 --> 00:03:50,240 Speaker 1: to get your take on the leadership changes in the 72 00:03:50,320 --> 00:03:53,440 Speaker 1: Chinese government at the highest levels. I mean, we know 73 00:03:53,520 --> 00:03:57,000 Speaker 1: that President she is now going to be in powerful 74 00:03:58,200 --> 00:04:00,760 Speaker 1: for all intents and purposes, maybe for the remainder of 75 00:04:00,760 --> 00:04:02,880 Speaker 1: his life. But there's a new premier in place that 76 00:04:02,920 --> 00:04:06,360 Speaker 1: has implications not only for economic policy, but for the 77 00:04:06,360 --> 00:04:08,400 Speaker 1: Central Bank in the way in which it's going to 78 00:04:08,480 --> 00:04:12,560 Speaker 1: be approaching UH managing markets and the currency. And whether 79 00:04:12,640 --> 00:04:14,839 Speaker 1: or not you really buy into this notion that we're 80 00:04:14,880 --> 00:04:17,919 Speaker 1: close now to some type of adjustment in thinking in 81 00:04:18,040 --> 00:04:23,679 Speaker 1: terms of Beijing's approach to COVID zero. While we're close 82 00:04:23,760 --> 00:04:26,840 Speaker 1: to that, it's still unshore but I mean, clearly they've 83 00:04:26,920 --> 00:04:31,560 Speaker 1: taken a very um type approach so far, extremely stranger before. 84 00:04:31,640 --> 00:04:34,599 Speaker 1: The likelihood is more that it's going to be weakening 85 00:04:34,960 --> 00:04:37,719 Speaker 1: and loosening up over the near future rather than the 86 00:04:37,720 --> 00:04:41,280 Speaker 1: other way around. And obviously the global investors have priced 87 00:04:41,279 --> 00:04:43,520 Speaker 1: in and we're prepared for a continuation of the current 88 00:04:43,520 --> 00:04:46,360 Speaker 1: type environment. So any kind of positive news there is 89 00:04:46,400 --> 00:04:49,320 Speaker 1: going to be seen as as a good news and 90 00:04:49,360 --> 00:04:51,760 Speaker 1: good development, and you're going to be seeing anquity rally 91 00:04:52,120 --> 00:04:54,040 Speaker 1: respect to the change. You really have to look at 92 00:04:54,040 --> 00:04:58,159 Speaker 1: the narrative. Even rumors about positive news seem to be 93 00:04:58,200 --> 00:04:59,840 Speaker 1: doing the trick at the moment. Even then, when we 94 00:04:59,880 --> 00:05:03,839 Speaker 1: have Chinese health authorities saying no, they're unswervingly committed to 95 00:05:04,000 --> 00:05:08,600 Speaker 1: zero COVID, but are you positioning ahead of an ultimate reopening. 96 00:05:08,600 --> 00:05:12,400 Speaker 1: It will happen eventually, won't it. Imaginely it will happen, 97 00:05:12,480 --> 00:05:16,000 Speaker 1: So we're all waiting for that. Uh. Clearly you need 98 00:05:16,080 --> 00:05:19,160 Speaker 1: to have some Chinese exporters valuations from a relative an 99 00:05:19,160 --> 00:05:21,760 Speaker 1: absolute level, they're very cheap and you need to have 100 00:05:21,800 --> 00:05:24,200 Speaker 1: some exposure there. Clearly, it comes with a lot of 101 00:05:24,200 --> 00:05:26,080 Speaker 1: the risk, and we have seen the risks play out 102 00:05:26,080 --> 00:05:28,279 Speaker 1: over the last month. Actually we've been seeing lay out 103 00:05:28,279 --> 00:05:30,920 Speaker 1: for the last two years. You have huge headlines, risk, 104 00:05:31,040 --> 00:05:33,600 Speaker 1: big political risks. You really have to long to think 105 00:05:33,640 --> 00:05:37,800 Speaker 1: the long term approach, and this COVID relaxation is going 106 00:05:37,839 --> 00:05:39,920 Speaker 1: to be one of the CANTI lists for a further 107 00:05:39,960 --> 00:05:42,600 Speaker 1: let up. But it's really going to be more in 108 00:05:42,720 --> 00:05:46,839 Speaker 1: terms of when we expect the political environment with respect 109 00:05:46,839 --> 00:05:50,159 Speaker 1: to the market, respect to central banks to basically come 110 00:05:50,200 --> 00:05:53,440 Speaker 1: to an environment where people can start foreseeing the actions 111 00:05:53,600 --> 00:05:56,800 Speaker 1: of of the political environment. How are you putting money 112 00:05:56,800 --> 00:05:58,719 Speaker 1: to work these days in your neck of the woods? 113 00:05:58,760 --> 00:06:01,320 Speaker 1: I mean, is it China that you're focused on? Are 114 00:06:01,360 --> 00:06:03,760 Speaker 1: there are other markets that look appealing? I know we've 115 00:06:03,800 --> 00:06:08,400 Speaker 1: been talking about tremendous gains recently, but are there opportunities 116 00:06:08,440 --> 00:06:13,120 Speaker 1: that we should be paying attention to. The opportunities now 117 00:06:13,120 --> 00:06:15,600 Speaker 1: are in the fixed income space. So as much as 118 00:06:15,680 --> 00:06:18,480 Speaker 1: the short term rates will continue raising because FED is 119 00:06:18,520 --> 00:06:20,359 Speaker 1: going to keep hiking, if you look at the value 120 00:06:20,400 --> 00:06:22,279 Speaker 1: of the curve, the four to five years kind of 121 00:06:22,320 --> 00:06:25,800 Speaker 1: maturity corporate bonds now give you anything around six or 122 00:06:25,800 --> 00:06:28,600 Speaker 1: six and a half percent absolute deals, which is interesting, 123 00:06:28,640 --> 00:06:32,960 Speaker 1: extremely attractive, and the risk of those rates moving much higher, 124 00:06:33,000 --> 00:06:35,720 Speaker 1: we feel is limited because it's gonna impact more on 125 00:06:35,760 --> 00:06:37,680 Speaker 1: the short run and you're not going particularly long if 126 00:06:37,680 --> 00:06:40,760 Speaker 1: you don't take too much duration nor credit risk. So 127 00:06:40,800 --> 00:06:43,280 Speaker 1: we like doing that, and actually you can use part 128 00:06:43,560 --> 00:06:46,120 Speaker 1: of the margin of those fixed income portfolios to have 129 00:06:46,160 --> 00:06:49,200 Speaker 1: an overlay of foot options strategies on in disease like 130 00:06:49,320 --> 00:06:52,479 Speaker 1: Nazdak selling put loaders where you can basically enter the 131 00:06:52,480 --> 00:06:56,320 Speaker 1: index at much better levels very quickly max thirty seconds 132 00:06:56,360 --> 00:07:01,160 Speaker 1: US midterms. Any risks you can see coming out of this, well, 133 00:07:01,200 --> 00:07:04,280 Speaker 1: the risk is that you get either Democrats taking with 134 00:07:04,320 --> 00:07:07,760 Speaker 1: the both or the Republicans taking both, and obviously the 135 00:07:07,839 --> 00:07:10,120 Speaker 1: outcomes on the market is going to be in the 136 00:07:10,280 --> 00:07:12,800 Speaker 1: felt differently, especially respect to clean energy, with respect to 137 00:07:12,920 --> 00:07:17,040 Speaker 1: further fiscal stimulus. Alright, Max Mondori, Founder and CEO at 138 00:07:17,200 --> 00:07:19,480 Speaker 1: s GMC Capital, thanks so much for joining us.