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Speaker 1: I guess this half hour is belt on the chairman

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Speaker 1: or chair of Dalton Investments to discuss the latest on

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Speaker 1: markets and believe it. We just had a supersized rates

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Speaker 1: increase from the Reserve Bank of New Zealand seventy five

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Speaker 1: basis points. But do you have a sense that the

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Speaker 1: FED might be ready to pivot to a slower pace

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Speaker 1: of rate increases? Hello, Paul, it's good to be back on. Yes.

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Speaker 1: I think that the UH indications the FEDS receiving are

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Speaker 1: giving them the room to reduce their industrate hikes to

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Speaker 1: fifty basis points. I don't know whether it will be

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Speaker 1: fifty basis points, but they certainly have room now because

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Speaker 1: it's clear that the higher interest rates have slowed down

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Speaker 1: housing and that there is weakness and other numbers in

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Speaker 1: the economy as well. So I believe the Fed has

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Speaker 1: room to do so. Um. The fact I believe has

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Speaker 1: been extremely consistent in this messaging, which is that the

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Speaker 1: inflation rates now are still too high, well above the

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Speaker 1: two percent target they have, and therefore they need to

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Speaker 1: remain vigilant. And the one thing they look for is

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Speaker 1: this expect expectation of inflation because of the effects wage increases,

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Speaker 1: and the market is currently pressing in something like um

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Speaker 1: um a five percent interest rate going forward, which I

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Speaker 1: think is probably where they'll get to and possibly pause

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Speaker 1: that to see how the economy develops from there. Yes,

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Speaker 1: so there obviously a lag effect as these policy changes

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Speaker 1: work their way through the system. But if we down

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Speaker 1: shifted these smaller size rate increases, does that increase your

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Speaker 1: confidence that perhaps the Fed can stick that soft landing

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Speaker 1: that they're looking for. Let's hope and if they don't,

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Speaker 1: but it's not the end of the world. It's a

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Speaker 1: little bit more pain in the near term. But then

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Speaker 1: typically if you have a harsher downturn, you have a

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Speaker 1: stronger rebound. So either way, I think we're in for

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Speaker 1: a slowdown in the economy and then some sort of

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Speaker 1: a rebound, hopefully if nothing else goes wrong in the world,

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Speaker 1: which it could in terms of the US dollar, then

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Speaker 1: I know this is probably building your case for dollar weakness.

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Speaker 1: You see twenty three years the year things go backwards

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Speaker 1: for the green back, How weak and how fast do

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Speaker 1: you think it could get? The dollar is very strong

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Speaker 1: right now, and I think, particularly against the end when

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Speaker 1: you look at purchasing power parity the end is supposed

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Speaker 1: to tread at something like one eighteenth against the dollar,

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Speaker 1: and it's one forties. So the dollars extremely strong, and

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Speaker 1: it's to be expected given a level of uncertainty in

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Speaker 1: the world, which will continue. The other reason the dollar

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Speaker 1: is strong is because the US market is actually a

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Speaker 1: reasonable place to be invested. The European markets are difficult

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Speaker 1: because of the ongoing uncertainty with Russia and Ukraine, and

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Speaker 1: Asia is slowing down because the largest trading partner all

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Speaker 1: the countries have is China, which is slowing down. So

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Speaker 1: it's not just that the uncertainty in the world is

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Speaker 1: causing dollar strength. Also because the US economy and market

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Speaker 1: markets actually are strong. So perhaps the dollar will weaken,

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Speaker 1: but I don't see a sharp decline anytime soon. The leader,

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Speaker 1: our last guest had a preference for fixed income over equities.

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Speaker 1: But what are you looking for in terms of opportunity

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Speaker 1: in the equities market. We are a equity investor. We

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Speaker 1: don't have a mandate to invest in fixed income specifically,

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Speaker 1: and so while we think that that fixed income is

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Speaker 1: becoming more attractive, it's not an option for us, and

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Speaker 1: most of our mandates. Um that said, we actually believe

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Speaker 1: that the time will come, maybe quite soon, when there

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Speaker 1: will be opportunities in distressed fixed income in the States,

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Speaker 1: and that that may well be broken deals in the

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Speaker 1: private equi sector as well. So we think there is

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Speaker 1: opportunity there already and that there will be more in

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Speaker 1: the coming twelve months or so. Do you believe we've

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Speaker 1: found the floor in equities? And I'm thinking particularly like

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Speaker 1: markets like the NASDAK, which have come off a very

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Speaker 1: very long way, and arguably with perhaps in bubble territory

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Speaker 1: and also long ago. You know, the thing about predicting

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Speaker 1: turnarounds is that it's very difficult, so we try not

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Speaker 1: to do it. We try to avoid doing so, and

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Speaker 1: so we invest one company at a time, and when

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Speaker 1: the option is are there to buy good companies in

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Speaker 1: our destination at bargain prices, we do so. And we

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Speaker 1: find that's the best way to stay out of trouble

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Speaker 1: and preserve the capital entrusted to us by our clients. UM. So,

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Speaker 1: to answer your question, I don't know that we've reached

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Speaker 1: about them. I would hope so. But in fact I

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Speaker 1: don't think the US market is really dirt cheap. Um.

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Speaker 1: It's certainly not as cheap as uh some other markets

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Speaker 1: around the world Japan, for instance. I think it's much

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Speaker 1: cheaper and it has better prospects going forward, I believe.

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Speaker 1: Um how about markets in China, because we did see

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Speaker 1: something of a rebound as we got what seemed to

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Speaker 1: be the first suggestions of a possible and to COVID zero,

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Speaker 1: but that policy really being put to the test. We

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Speaker 1: just had another three new COVID cases for Tuesday. Do

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Speaker 1: you think Chinese equities can withstand what's coming? China is

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Speaker 1: going to be a bumpy right as an emergence emerges

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Speaker 1: out of this COVID lockdown. It's the direction that's good

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Speaker 1: because it means that there will be a free or

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Speaker 1: flow of goods and people and hopefully an improvement to

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Speaker 1: world trade because China is still the factory of the

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Speaker 1: world and lockdowns there in factories is extremely harmful to

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Speaker 1: global trade. UM. As far as opportunities in China, it's

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Speaker 1: been made clear by the government that they want to

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Speaker 1: promote common prosperity and they do not encourage very large,

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Speaker 1: very successful companies like Ali Baba and Financial. So the

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Speaker 1: place to be in China, I believe is the small,

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Speaker 1: midsized companies that are providing services and goods that UM

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Speaker 1: support this common prosperity lifestyle. For Dalton is a very

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Speaker 1: difficult place for us to invest in. We look for

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Speaker 1: companies managed by people entrepreneurs whose interests are aligned with ours,

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Speaker 1: and in China many of the companies are run for

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Speaker 1: the purpose of achieving policy, be it political policy, employment policy,

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Speaker 1: or some sort of social goal. And so far as

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Speaker 1: it's very difficult. Also, the risks tend to be binary.

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Speaker 1: For instance, in the private tutoring space. You know, one

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Speaker 1: day it was a great distance, the next day was gone.

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Speaker 1: So China for us has been an underweight and most

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Speaker 1: recently it's actually a place where we don't invest in

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Speaker 1: any Moore. I'm not saying it's uninvestable, but for us,

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Speaker 1: it doesn't suit the way we we invest. Ye're not

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Speaker 1: at all concerned that you could miss out on what

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Speaker 1: could be the growth story of We have missed out

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Speaker 1: during the growth period in China, but it's more important

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Speaker 1: to us to invest the way we know how and

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Speaker 1: the way we've invested the entire history of our firm. UM.

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Speaker 1: We would have to see a different, different way forward

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Speaker 1: than just investing in the circumstances as they are today. Um,

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Speaker 1: and it might, it might emerge, but right now there's

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Speaker 1: no clear way for us to invest in China very quickly.

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Speaker 1: You like these well run companies with a good story

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Speaker 1: to tell. Tane seconds also give us a couple of

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Speaker 1: investment ideas. Sure. So in Japan, it's a company called

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Speaker 1: Hiney which makes uh gas energy efficient gas heaters, and

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Speaker 1: it's a global company. It's trading at something like six

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Speaker 1: times eating to eat it doish is very cheap. The

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Speaker 1: bulk of its profits comes to repeated business, and that

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Speaker 1: would be a great company to invest all right, The

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Speaker 1: leader on chair of Dalton Investments, thanks for joining us.