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Speaker 1: Hello, and welcome to another episode of the All Thoughts Podcast.

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Speaker 1: I'm Tracy Allaway and I'm Joe. Joe, it feels like

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Speaker 1: there's a lot of uncertainty at the moment. I think,

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Speaker 1: why why? What's uncertain kind of everything at the moment.

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Speaker 1: So obviously you have what's going on with geopolitics and

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Speaker 1: Russia's invasion of Ukraine, and that's obviously a big thing

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Speaker 1: for markets. But even without that, you were sort of

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Speaker 1: at this inflection point where central banks were just beginning

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Speaker 1: to respond to inflation risks, and there's this question of

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Speaker 1: how much of an impact that's actually going to have

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Speaker 1: on risk assets. Yeah, that's exactly right, and I think

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Speaker 1: it's kind of been a confusing couple of leaks in

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Speaker 1: terms of understanding both the plan from central banks and

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Speaker 1: of course primarily we're talking about the FED and the

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Speaker 1: market response to them. Because we did have, uh, the

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Speaker 1: start of a eight hiking cycle basis point, many more

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Speaker 1: hikes expected, We've you know, the immediate market reaction which

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Speaker 1: this rally, and so there's questions which was not necessarily expected,

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Speaker 1: And the question as well, is this the market doesn't

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Speaker 1: think the Fed is going to go that hard? I

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Speaker 1: didn't think the FED isn't gonna need to go that

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Speaker 1: hard or is a market going to be surprised that

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Speaker 1: the FED really is going to do what it says

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Speaker 1: and maybe we're gonna get multiple fifty basic point hikes,

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Speaker 1: lots of confusion the start of the raid high cycle.

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Speaker 1: Isn't that really created any certainty about what's next? No,

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Speaker 1: And we actually had to have Jerome Pale, the FED chair,

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Speaker 1: come back on and just emphasized that they were actually

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Speaker 1: going to hike UM at a potentially significant rate, and

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Speaker 1: then we saw the market reaction. But I mean, even

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Speaker 1: beyond the US, there's been a lot of uncertainty and

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Speaker 1: just looking at China at the moment, we've had, you know,

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Speaker 1: a big sell off in China tech stocks. Yet again

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Speaker 1: at the same time that there was this expectation that

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Speaker 1: they were going to be easing even more, and then

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Speaker 1: we saw them crack down further on the tech space

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Speaker 1: and then they seem to walk part of it back UM.

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Speaker 1: So this is another open question mark over what exactly

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Speaker 1: China's Central Bank is doing here. They seem to be

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Speaker 1: you know, taking two steps forward and then one step

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Speaker 1: back and trying to calibrate everything and it's I feel

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Speaker 1: like it's just confusing the market at the moment. Everything

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Speaker 1: the real estate in China of core is a huge,

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Speaker 1: huge deal energy so much. Yeah, Okay, Well, on that note,

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Speaker 1: on the note of uncertainty, we are going to be

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Speaker 1: bringing on one of our favorite guests. We're going to

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Speaker 1: be speaking with Victor Schwetz about well everything really, what

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Speaker 1: central banks are doing, the situation in Russia, what's going

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Speaker 1: on in China. He's going to try to bring it

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Speaker 1: all together. Victor Schutz is, of course, the head of

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Speaker 1: Global and Asia Pacific Strategy at McQuary Capital. So Victor,

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Speaker 1: thank you so much for coming back on the show.

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Speaker 1: Thank you for having me. I feel like one of

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Speaker 1: the things that happens when we are in times of

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Speaker 1: uncertainty is everyone starts reaching for a historic parallel and

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Speaker 1: then they try to fit that on what's happening now.

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Speaker 1: And there's never a perfect one, but it does feel

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Speaker 1: like the one that's emerged as consensus most recently is

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Speaker 1: the idea of going back to the nineteen seventies era

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Speaker 1: of high inflation, some sort of commodities shock that then

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Speaker 1: feeds into the broader economy. Is that the right way

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Speaker 1: of framing things. As you correctly said, no historical parallel

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Speaker 1: is perfect. If you think of nineteen seventies, we today

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Speaker 1: live in a very different world. Labor market in the

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Speaker 1: structure of labor market is massively different than what it

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Speaker 1: used to be. Our financial leverage, addiction to a surprises

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Speaker 1: is radically different to what it used to be. If

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Speaker 1: you sink up technological innovation, we really live in the

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Speaker 1: world where technologies everything. When people say tech, I basically

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Speaker 1: say what do you mean by tech? Everything is tax

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Speaker 1: these days, whereas ninety in seventies and sixties, we are

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Speaker 1: much more about inventiveness rather than innovation. We have a

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Speaker 1: very different demographics, We have very different income and wealth.

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Speaker 1: Inequalities were closer to nineteen ten nineteen twenties Gilded Age

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Speaker 1: than we are to nineteen seventies. So there is no

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Speaker 1: perfect parallels, UH that we preferred to look at. It

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Speaker 1: is to say there were three big shocks to the system.

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Speaker 1: One was in early nineteen twenties, the other one was

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Speaker 1: between nineteen forty five eight UH, and the third one

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Speaker 1: is is that was clearly nineteen seventies, and what we're

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Speaker 1: going through just another one of those cycles. Each one

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Speaker 1: of those episodes have something to teach us, and so

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Speaker 1: to me just looking at nineteen seventies sort of ignoring

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Speaker 1: the lessons of some of the prior periods. For example,

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Speaker 1: clearly there was a massive spike of inflation around nineteen

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Speaker 1: nineteen nineteen twenty one. That was the end of the

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Speaker 1: Spanish flu or process of Spanish flu as well as

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Speaker 1: the end of the Great War Great War, which is

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Speaker 1: World War One. What you had then is a significant

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Speaker 1: tightening of monitor and fiscal policy occurred, and one that

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Speaker 1: occurred in nineteen twenty two. There was a massive deflation

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Speaker 1: repost cp I was negative more than twenty before it

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Speaker 1: finally stabilized in nineteen twenty three. If you think of

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Speaker 1: nineteen forties again, that was the back end of World

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Speaker 1: War two. We had a significant inflationary spiked early on,

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Speaker 1: but monetary policy remained incredibly loose that they didn't really

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Speaker 1: tighten at all. Uh And what was happening through the

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Speaker 1: back end of nineteen forties, inflation just worked this way

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Speaker 1: out of the system and the only time it picked

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Speaker 1: up again was the nineteen fifty one in the lead

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Speaker 1: up to the Korean War. But then it stabilized for

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Speaker 1: almost two decades after that point. So the question is

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Speaker 1: when you look at all of those periods, what they're

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Speaker 1: telling us is that, you know, premature tightening is not

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Speaker 1: necessarily a good, saying are waiting too long is not

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Speaker 1: necessarily good, saying just using fiscal policy might or might

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Speaker 1: not be the right thing. That every one of those

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Speaker 1: episodes is different. And I think what you need to

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Speaker 1: look at today and say and ask why are central

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Speaker 1: banks tightening? Well, because there is inflation, Okay, why do

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Speaker 1: we have inflation? Why we did not have inflation in

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Speaker 1: December two thousand nineteen before COVID, Why we were not

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Speaker 1: running out of people in December two thousand nineteen, and

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Speaker 1: why we're running out of people today? Well, the answer

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Speaker 1: is it's not the month. The month globally is only

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Speaker 1: slightly higher than it was prior to one set of COVID.

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Speaker 1: I mean, there are some exceptions, uss further advanced on

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Speaker 1: the countries and less, but globally it's not that much higher.

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Speaker 1: So it's not so much demand. What clearly happened is

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Speaker 1: a demand shifted aestimily two goods against services. What we

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Speaker 1: had is a massive disruption of supply chains. What we

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Speaker 1: had as massive shocks to the system. But theoretically all

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Speaker 1: of that prior to Russia's invasion of Ukraine started to normalize.

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Speaker 1: If you think of most supply indicators and the value

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Speaker 1: chain indicators that they really distressed. Maximum stress was about

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Speaker 1: September October one. After that it was all easy back. Um.

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Speaker 1: And so if you think of why titan today, why

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Speaker 1: do we have a problem today, Well, because we're disrupted.

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Speaker 1: We disrupted labor market with disrupted supply chains, we disruptive products,

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Speaker 1: We disrupted everything. And so the result is there as

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Speaker 1: massive shortages suddenly emerging that do you just leave it

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Speaker 1: to work? It? So it's ways through the system. Because

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Speaker 1: what we're seeing today already is that fiscal pulses massively

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Speaker 1: negative global We're taking out amongst G five economies about

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Speaker 1: three trillion dollars. Monetary pulse is becoming negative to we're

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Speaker 1: taking out more and we will take an even more

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Speaker 1: as we go forward. Uh. The result is that leading

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Speaker 1: indicators are already weakening, reflation and cyclicality weakening. The system

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Speaker 1: is already adjusted, and as it continues to adjust. Why

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Speaker 1: why do you want to necessarily quote twenty two time

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Speaker 1: deflationary bust by tightening interface of already declining pressures. Now

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Speaker 1: you could argue, of course, you could argue, of course,

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Speaker 1: lets look Russia Ukraine upended all of this and we

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Speaker 1: suddenly have another shot. Absolutely, but monetary policy is not

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Speaker 1: the best tool to use when you have a supply

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Speaker 1: chain problems or or a geopolitical problem. So it's interesting.

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Speaker 1: So I mean, god, I have like a million questions

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Speaker 1: after that, and that was like a sort of fantastic overview,

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Speaker 1: But I just wanna hone in on something very specific.

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Speaker 1: I'm surprised is there for all of the talk about

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Speaker 1: inflation in the wake or really with an ongoing pandemic,

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Speaker 1: that I hadn't heard more about the inflation in the

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Speaker 1: wake of the Spanish flu, because you think, well, if

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Speaker 1: we're looking for historical analogies of pandemic and subsequent inflation,

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Speaker 1: would be a pretty good place to start. And yet

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Speaker 1: you don't really hear many people go there. Can you

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Speaker 1: just talk to us a little bit more about that

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Speaker 1: inflationary boom? Then? But what was the catalyst for that

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Speaker 1: inflation and how long did it last? And then of

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Speaker 1: course you mentioned the tightening and turn into a bus,

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Speaker 1: but give a little bit more color on what happened then, Yeah, sure,

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Speaker 1: essentially that the think to remember in nineteen thirteen nineteen fourteen,

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Speaker 1: the world was incredibly globalized UM. And in fact, globalization

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Speaker 1: of nineteen fourteen was thought again replicated until nineteen nine. Uh.

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Speaker 1: And so there was a lot of books written back

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Speaker 1: in nineteen of five, nineteen nine, nineteen basically saying there's

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Speaker 1: a lot of job political pressures, but the war is

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Speaker 1: inconceivable because we're so interconnected on a global basis. Plus

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Speaker 1: our weaponryes are so dangerous and so deadly that you

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Speaker 1: just can't have a war. And of course you did.

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Speaker 1: And so one of the things that happened in the

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Speaker 1: wake of global war of World War one is that

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Speaker 1: all the supply and value chains were disrupted, all the

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Speaker 1: things we're seeing today. Through the war, there was a

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Speaker 1: lot of distruction of physical capacity occurring, uh and so

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Speaker 1: and so there were shortages in ability to supply goods

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Speaker 1: UH was very pronounced towards the back end of World

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Speaker 1: War One. The other thing you had, you had a

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Speaker 1: disruption of the labor market. Not as extensive. I mean,

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Speaker 1: Spanish flu was much more deadly, uh, primarily because our

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Speaker 1: medicine and science just progressed so much over the last

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Speaker 1: you know, seventy eighty years. It was much more deadly,

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Speaker 1: but in some ways it was a little bit less

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Speaker 1: disruptive to the labor force because people just moved on

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Speaker 1: with it. Uh uh And but nevertheless, there was a

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Speaker 1: disruption of Spanish flu occurring at the same time, and

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Speaker 1: so there was a very significant spike in inflation rates

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Speaker 1: because of a global disruption, because of destruction of capacity

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Speaker 1: on the global basis, because of the Spanish flu uh.

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Speaker 1: And So what happened is that the Federal Reserve of

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Speaker 1: New York massively raised the discount rates um. And as

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Speaker 1: they raised discount rates and a fiscal policy were brought

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Speaker 1: back into under control, in other deficits were reduced, you

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Speaker 1: ended up with a significant past. Now, this episode was

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Speaker 1: described by Milton Friedman and many others, and the view

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Speaker 1: was that if perhaps Federal Reserve of New York acted

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Speaker 1: earlier rather than waiting for inflation to persist, maybe they

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Speaker 1: wouldn't have had to tighten as much. So there was

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Speaker 1: there is a debate clearly going on what you should

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Speaker 1: have done. But the net outcome was more than twenty

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Speaker 1: deflation uh in twenty two. But nineteen twenties three, it's stabilized,

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Speaker 1: and in fact the climate was slightly inflationary and or

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Speaker 1: slightly decent inflationary all the way to the crash of

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Speaker 1: nineteen um and so and so that's an example. This

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Speaker 1: is the example of the government or the public instrumentalities

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Speaker 1: either waiting too long to add and or acting too

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Speaker 1: much and causing significant economic and a surprise destruction. Now

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Speaker 1: in nineteen forties, on the other hands, remember the interest

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Speaker 1: rates were fixed by then, and so there was no

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Speaker 1: change in real interest rates, no change in the discount rate. Uh,

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Speaker 1: fiscal deficits have come down, but only gradually. The government

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Speaker 1: was prepared to spend money to either construction or restructuring

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Speaker 1: of the industries from wartime to peace time, and so

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Speaker 1: the result was a very strong inflationary spike in night

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Speaker 1: was basically out of the system by the time you

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Speaker 1: get to around nineteen nine, and only spiked again at

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Speaker 1: the onset of Korean law. But then after it basically stabilized.

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Speaker 1: So that's a result basically telling you that we've made

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Speaker 1: a decision back then that we're going to have inflationary

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Speaker 1: spike and we're going to work its way out of

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Speaker 1: the system rather than fight it. Whereas in nineteen twenties

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Speaker 1: decision was made that fiscal policy needs to be brought

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Speaker 1: under control and monitory policy was significantly tightened. Now, if

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Speaker 1: you think of today's experience, what we actually have decided

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Speaker 1: in twenty is that we are we would like to

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Speaker 1: have inflationary spike rather than deflationary bust. Remember when the

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Speaker 1: onset of COVID started, banks were making huge provisions. And

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Speaker 1: the reason that we're making provisions that we're expecting a

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Speaker 1: deflationary bust. But it did not happen. And the reason,

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Speaker 1: of course we know it didn't happen is because fiscal

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Speaker 1: authorities and monitor resource is all step up and propped

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Speaker 1: up demand. That's a cause for all the problems we're

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Speaker 1: experiencing today. So in other words, we propped up the demand,

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Speaker 1: demop shifted the goods against services. Suddenly we have shortages,

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Speaker 1: Suddenly we have inflationary spikes. And so the question now

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Speaker 1: is it's all working its way out of the systems.

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Speaker 1: Logistics is getting better. Certainly prior to Rush it was

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Speaker 1: getting better. Supply times we're getting better. Should we just

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Speaker 1: let it through because we already have economic activities slowing down.

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Speaker 1: Most leading indicators are slowing down. Global money supply is

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Speaker 1: now only growing at three. Global credit is improving somewhat,

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Speaker 1: but on the momentum it was negative for at least

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Speaker 1: the last eight or nine months. And the global credit

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Speaker 1: is only growing at about three. We're already taking out

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Speaker 1: a lot of fiscal stimuli out of the system as well.

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Speaker 1: Should we just let it run off and do very

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Speaker 1: little to sort of to aggravate that situation? Russia Ukraine

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Speaker 1: of course made a massive difference now. Uh and so.

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Speaker 1: But but as I said earlier on um sins like

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Speaker 1: geopolitics or healthcare crisis, is uh, they are their fat tales.

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Speaker 1: They can never be estimated, they can never be predicted. Uh.

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Speaker 1: And and the monetary policy has said is not necessarily

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Speaker 1: the best. Not necessarily it's not the best, though it's

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Speaker 1: not it shouldn't be the tool that actually addresses either

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Speaker 1: of those things. When you look at the yield curve

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Speaker 1: right now, it's clearly pricing in recession. But there is

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Speaker 1: this big debate going on about how much informational value

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Speaker 1: is actually embedded in the yield curve, given you know

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Speaker 1: how much of the treasury market is locked up by

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Speaker 1: the FED or in bank balance sheets and things like

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Speaker 1: that nowadays. But clearly, just looking at the yield curve,

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Speaker 1: you would think that the market sees some sort of

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Speaker 1: policy error on the horizon. You know, rates rise too much, uh,

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Speaker 1: and eventually we end up hitting economic growth in order

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Speaker 1: to bring down inflation. Yes, that's exactly what the yields

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Speaker 1: coasts are telling you. And when people say, look, let's

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Speaker 1: look at the short end or the long end, that's

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Speaker 1: that's that's incorrect. You should always look at the long

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Speaker 1: end because that's where businesses the banks are expressing their

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Speaker 1: views as to the trajectory of growth, as the trajectory

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Speaker 1: of inflation rates, what the equity permeerates they should have

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Speaker 1: in order to finance the balance sheds in order to

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Speaker 1: carry on with their business. And what Clearly, whether you

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Speaker 1: look at two by ten, whether you look at five

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Speaker 1: by five, well, whatever you look at, there is this

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Speaker 1: incredible flattening occurring. In most cases, you only have twenty

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Speaker 1: bibbs left. In some parts of the curve you already inverted.

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Speaker 1: And so it's federal reserve and no central banks can

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Speaker 1: leave you'l curve inverted for any length of time because basically,

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Speaker 1: as you correctly said, what it basically the message it

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Speaker 1: can baste to the marketplace is that credit conditions are

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Speaker 1: going to be too tight. Uh. And therefore interest rates

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Speaker 1: ultimately will have to be at a much lower level,

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Speaker 1: and that impedes economic activity as you as you go forward.

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Speaker 1: So they can't just left it live it unattended, so

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Speaker 1: to speak. And so the market is basically saying policy

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Speaker 1: error is in the making. It will bring down massively

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Speaker 1: economic growth rates. We might end up with recession, we

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Speaker 1: might end up with a sequence of heart attacks potentially,

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Speaker 1: but ultimately the inflation will get out of the system

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Speaker 1: through our substantially reducing the demank. That's what the market

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Speaker 1: is saying. But on the other hand, as you correctly said,

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Speaker 1: informational value of youl curve has significantly eroded. The webb

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Speaker 1: seply compared is to say, you know, private sector, the

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Speaker 1: musician in the in the orchestra pit, uh, and the

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Speaker 1: central banks are conductors in the past that we're happy

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Speaker 1: just to conduct, but now they could often jump in

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Speaker 1: the pit and start playing instruments as well as conducting,

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Speaker 1: and so they do votes. Uh. And so whenever you

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Speaker 1: have central banks starting to land to the main street,

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Speaker 1: or buying collateral that they should never be buying, or

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Speaker 1: breaching rules on state state financing, or having emergency reap

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Speaker 1: A lines just because reaper market is the functioning properly,

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Speaker 1: will just have a massive line out there to make

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Speaker 1: it work properly the way we think it should be working. Uh.

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Speaker 1: And so whenever you have that, now the question is

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Speaker 1: how much informational value do you have when the market

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Speaker 1: is so distorted. And that's part of the reason why

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Speaker 1: I think term premium just disappeared. Even today it's negative,

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Speaker 1: you knows, which normally it should be more like a

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Speaker 1: hundred and fifty hundred and sixty bits. So as a

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Speaker 1: result of term premium being so low, it's easy to invert,

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Speaker 1: but it conveys less information to the marketplace as to

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Speaker 1: what the real economy rather than financial economy, is doing.

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Speaker 1: And the other thing I think it's important to highlight

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Speaker 1: whenever you read I don't know all the all the

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Speaker 1: all the important people, or you know Blanchard or Muhammadalarian

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Speaker 1: or or Summers, they're all focusing on a real economy.

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Speaker 1: It's all about labor markets, it's all about capacity constraints.

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Speaker 1: Very little is discussed about financial economy. It is regarded

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Speaker 1: as somewhat the redistribution mechanism, it is not really a

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Speaker 1: creative of anything. But we know that is not true.

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Speaker 1: And a financial economy is at least five six times

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Speaker 1: larger than the real economy and it has can really

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Speaker 1: crush real economy if it comes to it. So one

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Speaker 1: thing with it is missing, And the discussion is asset

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Speaker 1: prices and the impact of volatility of surprises will have

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Speaker 1: on underlying economic activities. Said, we all talk about wages,

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Speaker 1: we'll talk about wages per hour, we all talk about

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Speaker 1: the capacity constraints ships trended in Los Angeles Harbor, but

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Speaker 1: we're not talking about asset prices. And if we cause

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Speaker 1: significant volatility of a surprises, what does it do to

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Speaker 1: gross what does it do inflation? And the answer it

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Speaker 1: actually crushes acrosses both of them. So I wanna drill

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Speaker 1: into this further. And I should note for listeners were

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Speaker 1: recording this March twenty three, so who knows will happen

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Speaker 1: in the next few days while people hear this, but

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Speaker 1: before people hear this, But I doubt that this volatility

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Speaker 1: will have gone down so much. The counter argument, I

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Speaker 1: guess to what you're saying is that you know, there's

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Speaker 1: so much real demand that's been put in the pocket

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Speaker 1: of um. Uh sort of. I'm thinking back to, say,

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Speaker 1: a conversation that we had with Jeff Curry about what's

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Speaker 1: drives what drives commodity inflation, and the idea of purchasing

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Speaker 1: power being put into lower income households is incredibly powerful.

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Speaker 1: It results in more goods purchases, or results in more

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Speaker 1: commodity intensive demand and so forth. And so the argument

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Speaker 1: that everyone should focus on the real economy is in

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Speaker 1: part driven by the sort of fact that lots of

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Speaker 1: people have lots of real buying power and their buying

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Speaker 1: stuff and that's what's causing the jam at the ports

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Speaker 1: and so forth. And Uh. The counter argument is that, well, yes, uh,

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Speaker 1: rich people control a lot of the world's financial wealth,

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Speaker 1: but not you know, really from a demand perspective, it's

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Speaker 1: not as significant. Talk us through a little bit more.

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Speaker 1: Why you see in this environment, uh, financial asset volatility,

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Speaker 1: which we've particularly seen in the bond market lately, how

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Speaker 1: that feeds through to potential bust, potential recession, potential disinflation. Well,

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Speaker 1: if you sink all and your specific we're thinking of

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Speaker 1: the United States, because other other markets don't have quite

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Speaker 1: the same dynamics. But if you think of the United States,

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Speaker 1: the top ten percent of households control roughly of that assets.

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Speaker 1: Bottom households control absolute and own absolutely nothing on the

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Speaker 1: net basis. UH. And so the whole idea is that

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Speaker 1: the assets side of the balance ship is as our

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Speaker 1: top ten percent of the households they control assets. The

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Speaker 1: liability side of the balance is a bottom fifty, right,

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Speaker 1: and those bottom must be encouraged to consume and to

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Speaker 1: borrow because if they don't, then the value of the

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Speaker 1: top ten percent of the of the households will come down.

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Speaker 1: In other asset values will come down. But what we

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Speaker 1: have seen through the COVID and what we have seen

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Speaker 1: through every one of the episodes over the last twenty

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Speaker 1: or thirty years, UH that the well screenation of the

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Speaker 1: top ten just keeps on accelerating and keeps on accelerating,

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Speaker 1: and that means the top ten percent getting more and

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Speaker 1: more wealthy. That's your wealth inequality argument. And it's like,

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Speaker 1: it's not just top ten percent. You have to remember

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Speaker 1: top one controls about that wealth. So it's even more

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Speaker 1: than just top ten it's more like top one uh

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Speaker 1: and and so as the result is that they're accumulating

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Speaker 1: more and more and more assets. They're accumulating assets at

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Speaker 1: a faster pace that they can consume or at a

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Speaker 1: faster pace that they will get provide for the retirement,

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Speaker 1: for example. And as it continue to create this extra

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Speaker 1: access wells that needs to be deployed somewhere and wayas

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Speaker 1: doesn't get deployed. Well either get deployed in the Ferrari cars,

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Speaker 1: you know, Hampton mentions, you know, Picasso painting and the

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Speaker 1: rest of it. Maybe super jots and things like that,

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Speaker 1: but mostly it gets distributed back to the bottom. To

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Speaker 1: contin you need to encourage them to consume. Now because

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Speaker 1: you're generating more and more wells, interest rates have to

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Speaker 1: be lower and lawer, right, because you're generating more wells

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Speaker 1: than you need, and you need to transfer that well

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Speaker 1: els to the bottom. And the bottom is already barely

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Speaker 1: keeping up with commitments, which means the cost of money

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Speaker 1: has to continue to fall if you were to encourage

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Speaker 1: those bottom fift to continue to consume. And so the

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Speaker 1: problem becomes if the bottom cannot consume, and or if

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Speaker 1: you slow down the well's accumulation at the top of

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Speaker 1: the pyramid, then the cost of money will go up

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Speaker 1: right because you don't have as much access capital to

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Speaker 1: relocate to the bottom. And as it goes up, consumption

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Speaker 1: at the bottom goes down even more. Uh And So

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Speaker 1: the way I look at it, the role and function

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Speaker 1: of Federal Reserve is to be an intermediary between the

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Speaker 1: top one and the bottom six, or call the top

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Speaker 1: ten percent and the bottom six to it, they're the

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Speaker 1: conductor of the orchestra which they have to make sure

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Speaker 1: that the two sides of the balance, all of the

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Speaker 1: assets belong to the top one of ten percent, all

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Speaker 1: of the liabilities belong to the bottom fifty or six,

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Speaker 1: that those two are in unison, that those two are

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Speaker 1: in in in relative harmony. Uh And and that's not

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Speaker 1: an easy task. Now, one way of getting rid of

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Speaker 1: this system is to say, let's just get rid of

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Speaker 1: monetary system as we know it. In other words, we

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Speaker 1: live in the world which is highly financialized, highly leverage.

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Speaker 1: We're all dependent on asset prices. Is a queue for

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Speaker 1: our decisions whether to spend or the safe, whether to

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Speaker 1: invest or to share buy backs, or what sort of

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Speaker 1: see your compensation you're going to do whatever, let's break

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Speaker 1: that system and let's create a different system. Well, it's

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Speaker 1: fair enough, but how do you break it without causing

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Speaker 1: massive latility and massive collapses of esset prices in the meantime?

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Speaker 1: Goues What what people will find if you create too

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Speaker 1: much volatility? You know, for one case, are not going

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Speaker 1: to be worse what you think they are. Pensions are

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Speaker 1: not going to be worse what they think you are.

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Speaker 1: Real estate prices won't be the same as what they're today.

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Speaker 1: So when people are discussing that we should junk this

432
00:26:17,760 --> 00:26:22,199
Speaker 1: monetary system that we have built since nine eighties and

433
00:26:22,320 --> 00:26:26,200
Speaker 1: replace it with another system, I I basically say, good luck.

434
00:26:27,000 --> 00:26:29,520
Speaker 1: I agree we should. We should have done it twenty

435
00:26:29,560 --> 00:26:32,520
Speaker 1: years ago, thirty years ago. Okay, good luck. How are

436
00:26:32,520 --> 00:26:33,960
Speaker 1: you going to do it? How are you going to

437
00:26:34,040 --> 00:26:36,840
Speaker 1: go from point eight to point B? Clearly the answer

438
00:26:36,920 --> 00:26:39,920
Speaker 1: is fiscal policy. That's how you go from point eight

439
00:26:39,920 --> 00:26:44,640
Speaker 1: to point B. But fiscal policy is much more inflationary,

440
00:26:44,880 --> 00:26:48,240
Speaker 1: uh than a monetary policy. Monetary policy is basically disinflation,

441
00:26:49,080 --> 00:26:52,159
Speaker 1: but fiscal policy is inflationary because it takes the money

442
00:26:52,320 --> 00:26:55,199
Speaker 1: from the cloud of finance and puts it down to

443
00:26:55,240 --> 00:26:59,400
Speaker 1: the ground where real people live. Uh, and so as

444
00:26:59,400 --> 00:27:04,640
Speaker 1: you create inflation, um, you're destabilizing your monetary system before

445
00:27:04,880 --> 00:27:08,040
Speaker 1: you actually building a new system. So how do you

446
00:27:08,080 --> 00:27:11,840
Speaker 1: make this transition? And so nobody in my viewer knows

447
00:27:11,840 --> 00:27:14,560
Speaker 1: how to do it. We all sort of understand that

448
00:27:14,640 --> 00:27:18,480
Speaker 1: it has to change over time, but most of the thinking,

449
00:27:18,760 --> 00:27:22,040
Speaker 1: most of the advice is still very very conventional, still

450
00:27:22,119 --> 00:27:27,240
Speaker 1: treating financial markets as an afterthought, still treating as serprises

451
00:27:27,400 --> 00:27:31,480
Speaker 1: as an afterthought. It's all redistribution. If one got well, said,

452
00:27:31,480 --> 00:27:34,479
Speaker 1: the other one got poorer. How you have a transfer wells,

453
00:27:35,320 --> 00:27:39,280
Speaker 1: it's it's not treated as part of the system itself

454
00:27:39,920 --> 00:27:42,399
Speaker 1: and a critical part of the system, given that it

455
00:27:42,640 --> 00:27:47,000
Speaker 1: is five six times larger then the underlying economies are.

456
00:27:47,160 --> 00:27:49,600
Speaker 1: So that's that's that's the answer. In the short term,

457
00:27:49,600 --> 00:27:53,560
Speaker 1: You're absolutely right, you put more people into into poorer

458
00:27:54,000 --> 00:27:57,480
Speaker 1: people's hand. They consume it. That's why you have increased

459
00:27:57,480 --> 00:27:59,960
Speaker 1: in demand. That's absolutely correct. But they forget the other

460
00:28:00,040 --> 00:28:04,240
Speaker 1: side of the bell where belong those sets belong in

461
00:28:04,240 --> 00:28:08,560
Speaker 1: the top one percent of the households. Um I wondered

462
00:28:08,720 --> 00:28:12,399
Speaker 1: if we could shift focused slightly and maybe talk about

463
00:28:12,440 --> 00:28:15,239
Speaker 1: what's been going on in China. Because there have been

464
00:28:15,280 --> 00:28:18,560
Speaker 1: a lot of headlines coming out of that specific market,

465
00:28:18,640 --> 00:28:21,960
Speaker 1: but they've also been overshadowed a little bit by events

466
00:28:22,080 --> 00:28:27,359
Speaker 1: in Europe. So we've seen a big route in China equities,

467
00:28:27,760 --> 00:28:30,760
Speaker 1: tech stocks, and real estate stocks, and then it seemed

468
00:28:30,800 --> 00:28:33,879
Speaker 1: like the authorities came out and seemed to suggest, Okay,

469
00:28:33,920 --> 00:28:36,920
Speaker 1: maybe we went a little bit too far, maybe we're

470
00:28:36,920 --> 00:28:39,960
Speaker 1: going to start rolling back some of these various crackdowns

471
00:28:40,080 --> 00:28:43,960
Speaker 1: that have really hit those two industries. I believe you

472
00:28:44,000 --> 00:28:49,800
Speaker 1: were fairly bullish on Chinese equities. UM, certainly for and

473
00:28:49,800 --> 00:28:52,960
Speaker 1: maybe going into two. But just talk to us about

474
00:28:52,960 --> 00:28:55,560
Speaker 1: how you're thinking about that market at the moment and

475
00:28:55,640 --> 00:28:59,200
Speaker 1: whether or not the Central Bank seems to be um

476
00:28:59,240 --> 00:29:06,760
Speaker 1: correcting its path. Yeah, you're absolutely right going into twenty two. UM.

477
00:29:06,800 --> 00:29:09,680
Speaker 1: I was bullish on Chinese equities for a couple of reasons.

478
00:29:10,160 --> 00:29:13,400
Speaker 1: First of all, remember China is the only major economy

479
00:29:13,480 --> 00:29:16,080
Speaker 1: on the other side of the title everybody is starting.

480
00:29:16,280 --> 00:29:19,720
Speaker 1: China is the only one which is completely contracyclical. Uh,

481
00:29:20,280 --> 00:29:23,760
Speaker 1: China already was contracyclical over the last eighteen months when

482
00:29:23,760 --> 00:29:28,040
Speaker 1: everybody was flushing but was money. China actually was contracted

483
00:29:28,720 --> 00:29:31,320
Speaker 1: and for the next twelve eighteen months. It looks like

484
00:29:31,400 --> 00:29:34,800
Speaker 1: China again will be contracyclical and being on the other

485
00:29:34,840 --> 00:29:38,160
Speaker 1: side of tightening trade has a great deal of value

486
00:29:38,360 --> 00:29:42,719
Speaker 1: for investors. Not only gives you more inflation growth in China,

487
00:29:43,640 --> 00:29:47,360
Speaker 1: but it also assumes at least that a reman be

488
00:29:47,520 --> 00:29:52,040
Speaker 1: probably don't balance ought to be weaker as China liquefies

489
00:29:52,200 --> 00:29:55,400
Speaker 1: and the rest of the world titans. Uh. The other

490
00:29:55,480 --> 00:29:58,720
Speaker 1: argument that I had was all to do with political,

491
00:29:58,760 --> 00:30:03,720
Speaker 1: geopolitical and regular repressures. That whether it's Olympic Games, whether

492
00:30:03,840 --> 00:30:08,280
Speaker 1: it's a party events, all the way through November twenty two,

493
00:30:09,080 --> 00:30:12,640
Speaker 1: that China will try to don't play some of those challenges,

494
00:30:12,680 --> 00:30:15,560
Speaker 1: whether it's political or regulatory. In other words, it's not

495
00:30:15,600 --> 00:30:19,280
Speaker 1: going to be of primary importance. Now, don't get me wrong,

496
00:30:19,600 --> 00:30:23,280
Speaker 1: China will not change its political system, it's political views,

497
00:30:23,400 --> 00:30:27,880
Speaker 1: or its regulatory views. One uh, there will be no change.

498
00:30:28,720 --> 00:30:32,560
Speaker 1: It's irreversible trend. But at least for a period of

499
00:30:32,600 --> 00:30:35,400
Speaker 1: six or twelve months, I felt that the degree of

500
00:30:35,440 --> 00:30:39,520
Speaker 1: pressure that China will be under will diminish. And the

501
00:30:39,560 --> 00:30:42,280
Speaker 1: third reason, of course was China was a horrible performer

502
00:30:43,040 --> 00:30:46,080
Speaker 1: through one and earlier part of twenty two, and I

503
00:30:46,120 --> 00:30:48,880
Speaker 1: was assuming that at least some of that can be

504
00:30:49,480 --> 00:30:52,560
Speaker 1: can be reclaimed. So if you think of it right now,

505
00:30:52,640 --> 00:30:55,800
Speaker 1: it's been a wrong call because China and the performed

506
00:30:55,840 --> 00:30:58,520
Speaker 1: so far, Asia, Japan as well as as well as

507
00:30:58,520 --> 00:31:00,880
Speaker 1: a bergeant market universe by an the eight or nine percent,

508
00:31:01,040 --> 00:31:04,400
Speaker 1: that's say, they got to perform by last year. So

509
00:31:04,560 --> 00:31:06,760
Speaker 1: clearly it was the wrong call. Uh. And there are

510
00:31:06,760 --> 00:31:09,360
Speaker 1: a couple of reasons for that. Reasonable one is what

511
00:31:09,440 --> 00:31:13,600
Speaker 1: you've alluded to. Uh. The Chinese policymakers are really calibrating

512
00:31:14,120 --> 00:31:16,120
Speaker 1: this idea that they're going to do the same thing

513
00:31:16,240 --> 00:31:18,320
Speaker 1: is what they've done the last three times is well

514
00:31:18,360 --> 00:31:22,400
Speaker 1: and truly debt. They don't want to add another ten

515
00:31:22,480 --> 00:31:24,920
Speaker 1: or fifteen trillion dollars of debt, although they don't mind

516
00:31:25,000 --> 00:31:29,320
Speaker 1: a little bit more leveraging. They don't want infrastructure investment

517
00:31:29,360 --> 00:31:33,720
Speaker 1: to be galloping again. They don't want another massive bubble

518
00:31:33,840 --> 00:31:38,200
Speaker 1: in real estate, and so they are trying to calibrate,

519
00:31:38,560 --> 00:31:42,480
Speaker 1: trying to give you enough stimulus in order to achieve

520
00:31:42,600 --> 00:31:48,720
Speaker 1: reduced gross expectations without complicating longer term picture. And so

521
00:31:48,840 --> 00:31:52,520
Speaker 1: the result is you actually have less differentiation. I guess

522
00:31:52,560 --> 00:31:56,560
Speaker 1: between tightening and easing countries. And so this argument that

523
00:31:56,600 --> 00:31:59,560
Speaker 1: you on the other side of the trade so far

524
00:31:59,680 --> 00:32:02,320
Speaker 1: has been as strong as I thought it might be.

525
00:32:03,200 --> 00:32:06,600
Speaker 1: The second area, of course, is politics, your politics, and

526
00:32:06,600 --> 00:32:12,200
Speaker 1: and the and the regulatory drive. UM. To me, China

527
00:32:13,000 --> 00:32:20,760
Speaker 1: has no choice but to support Russia, UH, and and

528
00:32:20,760 --> 00:32:22,640
Speaker 1: and and and the reason for that is very simple.

529
00:32:22,680 --> 00:32:25,640
Speaker 1: It's nothing to do with the economics, it's nothing to

530
00:32:25,680 --> 00:32:29,120
Speaker 1: do with markets, and it's everything to do with the

531
00:32:29,160 --> 00:32:35,040
Speaker 1: fact that Russia, China, some other places like Iran, Central Asia,

532
00:32:35,360 --> 00:32:37,840
Speaker 1: they look at the world in a similar way. In

533
00:32:37,880 --> 00:32:41,719
Speaker 1: other words, their view is the status dominant debut is

534
00:32:41,800 --> 00:32:48,400
Speaker 1: its interests of society and community trump interests of individuals. UH.

535
00:32:48,440 --> 00:32:51,720
Speaker 1: They have their own view what international rules should be,

536
00:32:51,840 --> 00:32:54,840
Speaker 1: whether it's rules or for the trade, including how you

537
00:32:54,920 --> 00:32:59,719
Speaker 1: treat state or enterprises. UM. Absolute sovereignty sort of harping

538
00:32:59,760 --> 00:33:03,160
Speaker 1: back to eighteenth century and part of the nineteenth century

539
00:33:03,840 --> 00:33:06,840
Speaker 1: where there was absolute sovereignty. Nation is entitled to do

540
00:33:06,880 --> 00:33:11,720
Speaker 1: whatever they want within their own borders. So whether it's

541
00:33:11,800 --> 00:33:15,960
Speaker 1: internet and valcanization of internet, whether it's a rule of

542
00:33:16,000 --> 00:33:18,640
Speaker 1: the state, whether it's a rule of state, US as

543
00:33:18,720 --> 00:33:22,320
Speaker 1: private sector a boss Russia China believe that private sector

544
00:33:22,440 --> 00:33:26,320
Speaker 1: is subordinate to the state and should be largely doing

545
00:33:26,480 --> 00:33:29,760
Speaker 1: what the states sink they should be doing. China clearly

546
00:33:29,960 --> 00:33:32,760
Speaker 1: is not Russia. It gives a lot more freedom to

547
00:33:32,880 --> 00:33:36,200
Speaker 1: private sector. It's much more universal. So it's not the same,

548
00:33:36,240 --> 00:33:39,640
Speaker 1: but the basic concepts are the same. And so what

549
00:33:39,680 --> 00:33:45,960
Speaker 1: we're seeing is this massive illiberal Eurasian bloc forming led

550
00:33:46,000 --> 00:33:49,160
Speaker 1: by China, what I called Sinus sphere. But within that

551
00:33:49,280 --> 00:33:53,120
Speaker 1: will be nassault smaller you know, Russian Empire ing the

552
00:33:53,160 --> 00:33:56,800
Speaker 1: empire Central Asia and many other parts. And to me,

553
00:33:56,920 --> 00:34:01,200
Speaker 1: the objective of redefining global rules ready mining global behavior

554
00:34:01,880 --> 00:34:04,480
Speaker 1: to be much more in line with the way countries

555
00:34:04,560 --> 00:34:08,080
Speaker 1: like China think about the world is far more important

556
00:34:08,120 --> 00:34:13,040
Speaker 1: than any particularly given trade relationship or a slight diminution

557
00:34:13,080 --> 00:34:17,560
Speaker 1: of our GDP numbers. So the Russian invasion of Ukraine

558
00:34:17,960 --> 00:34:20,960
Speaker 1: UH did not come at the good time for for China,

559
00:34:21,080 --> 00:34:23,719
Speaker 1: and I'm sure China would rather not have that. But

560
00:34:24,120 --> 00:34:26,560
Speaker 1: at the end of the day, at the end of

561
00:34:26,560 --> 00:34:30,440
Speaker 1: the day, China has to be on on on on.

562
00:34:31,280 --> 00:34:34,359
Speaker 1: They can't be completely neutral in this because as I said,

563
00:34:34,520 --> 00:34:38,000
Speaker 1: they do look at world very similar way. The way

564
00:34:38,080 --> 00:34:41,799
Speaker 1: places like Russia around look look at the world, and

565
00:34:41,880 --> 00:34:45,000
Speaker 1: the same applies to regulatory issues because it goes down

566
00:34:45,080 --> 00:34:49,000
Speaker 1: to the concept of a separation of state enterprises and

567
00:34:49,080 --> 00:34:53,200
Speaker 1: state itself versus private enterprises. What we have seen since

568
00:34:53,239 --> 00:34:57,040
Speaker 1: two thousand and twelve is increasing fusion between the two.

569
00:34:57,080 --> 00:34:59,560
Speaker 1: Prior to two thousand and twelve, you actually have separation,

570
00:35:00,160 --> 00:35:03,520
Speaker 1: and in many ways state enterprises were encouraged to behave

571
00:35:03,560 --> 00:35:06,920
Speaker 1: more like private enterprises. Since two thousand and twelve there

572
00:35:06,960 --> 00:35:09,960
Speaker 1: was a very strong link towards a few fusion of

573
00:35:10,000 --> 00:35:13,480
Speaker 1: the two. So the space separating state and non state

574
00:35:13,560 --> 00:35:17,279
Speaker 1: private public has been diminishing for more than more than

575
00:35:17,320 --> 00:35:20,160
Speaker 1: a decade. And so when people say, hey, we're finishing

576
00:35:20,280 --> 00:35:24,399
Speaker 1: with a regulatory aspect, no we're not. Uh. You can

577
00:35:24,440 --> 00:35:28,000
Speaker 1: ease back a little bit tactically, but the basic strategic

578
00:35:28,080 --> 00:35:32,760
Speaker 1: thrust of lack of separation between the two is something

579
00:35:32,840 --> 00:35:35,759
Speaker 1: that is going to stay with us. UM And I

580
00:35:35,840 --> 00:35:39,239
Speaker 1: was surprised a little bit that actually continued as aggressively

581
00:35:39,280 --> 00:35:42,960
Speaker 1: as it did over the last over the last six months, UM.

582
00:35:43,120 --> 00:35:46,800
Speaker 1: And so so to me, when I look at China, UH,

583
00:35:47,040 --> 00:35:49,640
Speaker 1: people want an investors want to have a bit of

584
00:35:49,840 --> 00:35:54,320
Speaker 1: ray of sunshine and any any any idea or any

585
00:35:54,400 --> 00:35:57,600
Speaker 1: concept that somehow rush in Ukraine might be winding down

586
00:35:57,640 --> 00:36:02,120
Speaker 1: in some form, any view that perhaps regulatory precious will

587
00:36:02,160 --> 00:36:04,719
Speaker 1: get a little bit less, perhaps you're going to get

588
00:36:04,719 --> 00:36:08,120
Speaker 1: a little bit more stimulatory action. As we progressed through

589
00:36:08,120 --> 00:36:10,680
Speaker 1: the balance of the year. Still should be enough which

590
00:36:10,680 --> 00:36:14,600
Speaker 1: I need is equity still off performed EMOJIU marks. But

591
00:36:14,680 --> 00:36:16,600
Speaker 1: as I said in an earlier part of the year,

592
00:36:16,800 --> 00:36:20,440
Speaker 1: that coal was wrong because basic ingredients that I was

593
00:36:20,520 --> 00:36:23,840
Speaker 1: hoping I'm going to play through that didn't quite get that.

594
00:36:31,040 --> 00:36:34,239
Speaker 1: I wanna expand further on this idea as you put

595
00:36:34,239 --> 00:36:37,880
Speaker 1: in a sort of Eurasian illiberal coalition or block. And

596
00:36:37,920 --> 00:36:39,799
Speaker 1: one of the things that's been striking, of course with

597
00:36:39,880 --> 00:36:43,960
Speaker 1: Russia is beyond just the formal sanctions, the degree to

598
00:36:44,080 --> 00:36:48,080
Speaker 1: which US companies are inner European companies as well as

599
00:36:48,160 --> 00:36:50,920
Speaker 1: will have just sort of abandoned Russia, abandoned operations, in

600
00:36:50,960 --> 00:36:54,360
Speaker 1: many cases severed ties with the local unit of the business.

601
00:36:54,760 --> 00:36:57,120
Speaker 1: And I'm curious that you know what is if these

602
00:36:57,120 --> 00:37:00,880
Speaker 1: blocks harden, these relationships hardened, what does that mean for

603
00:37:01,080 --> 00:37:05,040
Speaker 1: the US China economic relationship? And could there be a

604
00:37:05,120 --> 00:37:09,280
Speaker 1: slower version of that same process in play by which

605
00:37:09,520 --> 00:37:11,880
Speaker 1: you know, if there is this separation, if there is

606
00:37:12,200 --> 00:37:14,800
Speaker 1: two internets, if there is this sort of dramatically different

607
00:37:15,320 --> 00:37:18,719
Speaker 1: regulatory environment, there will we see this sort of some

608
00:37:18,760 --> 00:37:21,880
Speaker 1: sort of break with the companies that have trade and

609
00:37:21,920 --> 00:37:25,880
Speaker 1: links in both countries. Yes, you will. I I prefer

610
00:37:25,960 --> 00:37:29,080
Speaker 1: to call it a slow moving train wreck. Uh So

611
00:37:29,320 --> 00:37:32,680
Speaker 1: Russia was an immediate implosion, a very very fast implosion.

612
00:37:33,360 --> 00:37:36,560
Speaker 1: China is not Russia. China is critical to every supply

613
00:37:36,640 --> 00:37:39,640
Speaker 1: and value chain. China as wasn't temper cent of the

614
00:37:39,640 --> 00:37:42,680
Speaker 1: global economy, it's not less a two percent of global economy.

615
00:37:42,920 --> 00:37:45,359
Speaker 1: So the things that could be done to Russia can

616
00:37:45,440 --> 00:37:49,440
Speaker 1: never be done to China because the blowback to the

617
00:37:49,480 --> 00:37:53,200
Speaker 1: Western economies and the Western societies will be just enormous.

618
00:37:53,200 --> 00:37:55,680
Speaker 1: But what you're going to get, I believe as we

619
00:37:55,760 --> 00:38:00,279
Speaker 1: continue forward, as the blocks hottened, sort of the anglist here,

620
00:38:00,360 --> 00:38:04,879
Speaker 1: the U twenty seven, the signus feel Liberal duration block.

621
00:38:05,280 --> 00:38:08,960
Speaker 1: As it haddens, you will find more and more separation.

622
00:38:09,360 --> 00:38:13,120
Speaker 1: It usually starts with the software areas and more high

623
00:38:13,200 --> 00:38:19,319
Speaker 1: tech areas. So for example, transfer knowledge, transfer technology, educational

624
00:38:19,360 --> 00:38:24,760
Speaker 1: institution ability to acquire skills, uh, it progresses onto some

625
00:38:24,960 --> 00:38:29,719
Speaker 1: more humanitarian pockets um, and then it progresses onto sanctions

626
00:38:29,800 --> 00:38:34,920
Speaker 1: against certain individuals, it progresses to inability to access capital

627
00:38:35,600 --> 00:38:39,360
Speaker 1: um and so so to me, that's an inevitable progression.

628
00:38:39,640 --> 00:38:43,479
Speaker 1: Access to capital will be a privilege, not a free

629
00:38:43,520 --> 00:38:46,800
Speaker 1: market opportunity the way it has been over the last

630
00:38:46,800 --> 00:38:50,120
Speaker 1: three to four decades, but then gradual level creeping up

631
00:38:50,280 --> 00:38:54,400
Speaker 1: into other relationships as well as we progress foward. Again,

632
00:38:54,440 --> 00:38:57,640
Speaker 1: I want to highlight that China is not Russia uh

633
00:38:57,680 --> 00:39:02,560
Speaker 1: and and this disconnect or ability to quarantine the country

634
00:39:02,800 --> 00:39:05,279
Speaker 1: of the size and important of China is just not

635
00:39:05,360 --> 00:39:09,520
Speaker 1: on nobody will ever contemplated, but gradually, bit by bit

636
00:39:10,040 --> 00:39:12,200
Speaker 1: over a long period of time, that's going to be

637
00:39:12,239 --> 00:39:15,440
Speaker 1: the answer. And so the question that becomes from an

638
00:39:15,440 --> 00:39:20,560
Speaker 1: asset perspective or investor perspective, is China investable? Is a

639
00:39:20,640 --> 00:39:25,520
Speaker 1: portfolio manageable? Because if we continue on this pass, which

640
00:39:25,640 --> 00:39:30,680
Speaker 1: looks likely we will, then from international investors opportunity to

641
00:39:30,800 --> 00:39:35,160
Speaker 1: invest in China and Chinese equities will become more constrained. Now,

642
00:39:35,200 --> 00:39:39,080
Speaker 1: that doesn't preclude private equity participating in various ventures. It

643
00:39:39,120 --> 00:39:43,279
Speaker 1: doesn't preclude companies investing into some plants, for example. But

644
00:39:44,239 --> 00:39:48,200
Speaker 1: whether your private equity, whether you are company, or whether

645
00:39:48,239 --> 00:39:52,400
Speaker 1: your portfolio manager, you'll be second guessing yourself. You'll be saying,

646
00:39:52,440 --> 00:39:55,520
Speaker 1: should I do this? Well, I wake up on Monday

647
00:39:55,560 --> 00:39:59,360
Speaker 1: morning and finding financial times and done something I shouldn't

648
00:39:59,360 --> 00:40:03,040
Speaker 1: have done. Uh. And and whenever people start the second

649
00:40:03,040 --> 00:40:06,839
Speaker 1: guests themselves, so to speak, they are slower. Uh, they

650
00:40:06,880 --> 00:40:09,480
Speaker 1: will be a little bit less committed. And I think

651
00:40:09,560 --> 00:40:11,120
Speaker 1: that's what you're going to see. You're gonna see a

652
00:40:11,160 --> 00:40:16,319
Speaker 1: little bit less commitment, slower responses, more desired to look

653
00:40:16,360 --> 00:40:19,680
Speaker 1: again and double check yourself whether you, in fact are

654
00:40:19,719 --> 00:40:22,240
Speaker 1: doing the right thing. And it does wouldn't just apply

655
00:40:22,280 --> 00:40:25,200
Speaker 1: to portfolio managers. It will apply to their trustees. It

656
00:40:25,200 --> 00:40:29,719
Speaker 1: will apply to management teams that are running uh those funds. Uh.

657
00:40:30,160 --> 00:40:32,640
Speaker 1: And so I think you're absolutely right. That's that's what

658
00:40:32,920 --> 00:40:36,480
Speaker 1: the final trajector would look like. Doesn't mean that there

659
00:40:36,560 --> 00:40:39,240
Speaker 1: is no capital in China or China will be stopped

660
00:40:39,280 --> 00:40:42,440
Speaker 1: of capital. That's not the case. China has no shortage

661
00:40:42,440 --> 00:40:48,360
Speaker 1: of capital. China needs expertise, um and knowledge rather than capital.

662
00:40:48,600 --> 00:40:52,200
Speaker 1: So it doesn't mean necessarily disaster for China or a

663
00:40:52,360 --> 00:40:55,319
Speaker 1: uration block or sinus sphere block, whatever you call it,

664
00:40:55,320 --> 00:40:57,640
Speaker 1: it doesn't mean that at all. It's just it will

665
00:40:57,680 --> 00:41:01,480
Speaker 1: be functioning by different rules, it will have different systems,

666
00:41:01,960 --> 00:41:05,200
Speaker 1: it will have different rule of the state and private sectors.

667
00:41:05,320 --> 00:41:08,520
Speaker 1: It will just be different. But it doesn't mean necessarily

668
00:41:08,600 --> 00:41:14,800
Speaker 1: a disaster. So, given all this uncertainty that you've laid out,

669
00:41:15,000 --> 00:41:17,680
Speaker 1: what are you actually recommending people buy at the moment?

670
00:41:17,719 --> 00:41:20,680
Speaker 1: Because I feel like we often have these macro conversations

671
00:41:20,840 --> 00:41:23,959
Speaker 1: and you know, it's like, here's a risk, here's another risk.

672
00:41:24,239 --> 00:41:27,200
Speaker 1: Bonds clearly aren't good bet if rates are going to

673
00:41:27,239 --> 00:41:29,920
Speaker 1: go up significantly. But on the other hand, you probably

674
00:41:29,920 --> 00:41:32,200
Speaker 1: don't want to own stocks if you think that rates

675
00:41:32,239 --> 00:41:33,880
Speaker 1: are going to go up and then lead to some

676
00:41:33,920 --> 00:41:37,279
Speaker 1: sort of recession. It feels very very hard to advise

677
00:41:37,320 --> 00:41:40,680
Speaker 1: people on what exactly to buy in the current environment.

678
00:41:41,040 --> 00:41:43,760
Speaker 1: It is it is, and that's one of the problems

679
00:41:43,880 --> 00:41:48,040
Speaker 1: was not having a normal distribution of events people are functioning,

680
00:41:48,080 --> 00:41:52,440
Speaker 1: and corporate finance and investment theory functioning on the normal distribution.

681
00:41:52,480 --> 00:41:56,279
Speaker 1: In other words, you can anticipate, you can predict certain outcomes,

682
00:41:56,400 --> 00:41:59,280
Speaker 1: you can estimate what the impact that those outcomes will be,

683
00:41:59,640 --> 00:42:03,280
Speaker 1: and so it is no longer normal distribution. UH. Those

684
00:42:03,320 --> 00:42:07,840
Speaker 1: events cannot be predicted. Those events cannot be estimated. UH,

685
00:42:07,840 --> 00:42:12,799
Speaker 1: and enhance As a portfolio manager, You're lost. Whatever bet

686
00:42:12,840 --> 00:42:15,120
Speaker 1: you're making, it's just a bet. It's a gamble. It's

687
00:42:15,160 --> 00:42:18,360
Speaker 1: not really an investable proposition. Now you might take a

688
00:42:18,440 --> 00:42:21,480
Speaker 1: view that commodities is a way to go forward, absolutely fine,

689
00:42:22,320 --> 00:42:24,680
Speaker 1: but more likely than not that actually over the longer

690
00:42:24,760 --> 00:42:26,800
Speaker 1: term might turn out to be wrong unless you're in

691
00:42:26,840 --> 00:42:30,600
Speaker 1: the right commodities. People will say, should I go into

692
00:42:31,400 --> 00:42:36,120
Speaker 1: high asset, low return invested capital type company as well? Yes, maybe,

693
00:42:36,160 --> 00:42:39,320
Speaker 1: but it depends what's going to happen, depends what is

694
00:42:39,320 --> 00:42:41,200
Speaker 1: the role of the state going to be, What is

695
00:42:41,239 --> 00:42:43,480
Speaker 1: the roll of fiscal policies are going to be the

696
00:42:43,520 --> 00:42:45,840
Speaker 1: same applies to the bond market. The same way as

697
00:42:45,880 --> 00:42:49,279
Speaker 1: we're worried about inflation, the same inflation could collapse very

698
00:42:49,360 --> 00:42:52,320
Speaker 1: quickly as we go into twenty twenties three. Remember inflation

699
00:42:52,400 --> 00:42:55,400
Speaker 1: is a delta, uh and others. All the prices have

700
00:42:55,520 --> 00:42:59,920
Speaker 1: to be higher in UH. You know March April twenties

701
00:43:00,040 --> 00:43:02,360
Speaker 1: three compared to March April two to give you a

702
00:43:02,360 --> 00:43:05,800
Speaker 1: positive read on inflation. UH. And it is quite possible

703
00:43:05,800 --> 00:43:08,960
Speaker 1: that the markets are right that by twenty twenty four

704
00:43:09,000 --> 00:43:11,440
Speaker 1: you're going to have at least three or four interest

705
00:43:11,560 --> 00:43:16,640
Speaker 1: rate cuts occurring rather than tightening of monetary policy. It

706
00:43:16,760 --> 00:43:20,080
Speaker 1: is also possible that fiscal policy will go back into

707
00:43:20,200 --> 00:43:25,560
Speaker 1: becoming a player after contracting for eighteen months. So all

708
00:43:25,600 --> 00:43:28,239
Speaker 1: of this could change very quickly, and therefore ten year

709
00:43:28,280 --> 00:43:30,680
Speaker 1: bonds could end up back at one one and a

710
00:43:30,760 --> 00:43:34,160
Speaker 1: half percent easily rather than just marching onto two and

711
00:43:34,160 --> 00:43:37,480
Speaker 1: a half three percent. Uh So, to me, in all

712
00:43:37,480 --> 00:43:40,040
Speaker 1: the sea of confusion, and we haven't even talked about

713
00:43:40,200 --> 00:43:43,920
Speaker 1: whether it's a healthcare emergency, so whether it's pandemics, or

714
00:43:43,920 --> 00:43:46,799
Speaker 1: whether it's your political events, we haven't even talked about that.

715
00:43:47,560 --> 00:43:50,560
Speaker 1: So in that sort of sea of confusion, to me,

716
00:43:51,360 --> 00:43:55,400
Speaker 1: just identifying what are the right circular drivers, What is changing,

717
00:43:55,520 --> 00:44:00,080
Speaker 1: what isn't changing, Well, financialization is not changing. Remember, but

718
00:44:00,120 --> 00:44:03,800
Speaker 1: the only reason US has an opportunity to raise money

719
00:44:04,480 --> 00:44:08,640
Speaker 1: or race cost of capital is because the policy rates

720
00:44:08,640 --> 00:44:11,680
Speaker 1: today in the US are below neutral rates. Neutral rates

721
00:44:11,719 --> 00:44:14,640
Speaker 1: in US are roughly around zero in real terms that

722
00:44:14,719 --> 00:44:17,279
Speaker 1: means about two percent and nominal terms. But if you

723
00:44:17,280 --> 00:44:21,240
Speaker 1: think of Eurozone, in Japan, their policy rates are in line,

724
00:44:21,400 --> 00:44:24,279
Speaker 1: if not even higher that their neutral rates, so they

725
00:44:24,320 --> 00:44:28,080
Speaker 1: can't really tighten. Uh, And so US has an opportunity

726
00:44:28,120 --> 00:44:31,080
Speaker 1: to tighten. But as they tighten and get closer to

727
00:44:31,520 --> 00:44:34,240
Speaker 1: our start or a neutral rate, what's going to happen.

728
00:44:34,280 --> 00:44:39,000
Speaker 1: Molatility of enterprise increase. So financialization is unstoppable because as

729
00:44:39,040 --> 00:44:42,080
Speaker 1: soon as molatility of enterprises goes up, central banks have

730
00:44:42,200 --> 00:44:44,719
Speaker 1: to back off. And this idea that we need to

731
00:44:44,800 --> 00:44:48,960
Speaker 1: generate more money and more liquidity than underlying economy is

732
00:44:49,000 --> 00:44:52,960
Speaker 1: required cannot be reversed. So that's a given. The other

733
00:44:53,000 --> 00:44:56,200
Speaker 1: thing is given is technology will continue progressing. Right now,

734
00:44:56,239 --> 00:44:58,359
Speaker 1: we have shortages here and there, but at the end

735
00:44:58,360 --> 00:45:02,520
Speaker 1: of the day, technology will continu your reducing marginal pricing

736
00:45:02,560 --> 00:45:07,399
Speaker 1: power of both capital marginal pricing power products corporates as

737
00:45:07,440 --> 00:45:10,320
Speaker 1: well as as well as labor. That should be that

738
00:45:10,400 --> 00:45:12,920
Speaker 1: should be given. And the third thing that should be

739
00:45:12,960 --> 00:45:17,520
Speaker 1: given is that geopolitical, social and political pressures will continue

740
00:45:17,560 --> 00:45:21,279
Speaker 1: boiling over. It might get much tougher actually as we

741
00:45:21,360 --> 00:45:24,280
Speaker 1: go over the next over the next five to ten years.

742
00:45:24,600 --> 00:45:27,520
Speaker 1: So none of that stuff is actually changing. So if

743
00:45:27,520 --> 00:45:30,439
Speaker 1: it is not changing, what do you want to buy? Well,

744
00:45:30,560 --> 00:45:35,200
Speaker 1: you want to buy commodities that are actually replacing today's

745
00:45:35,239 --> 00:45:38,880
Speaker 1: world and building the new world. That's your copper, your nickel,

746
00:45:39,040 --> 00:45:44,560
Speaker 1: your aluminum, you're lythium, your rearse, your semiconductors. What else

747
00:45:44,560 --> 00:45:46,800
Speaker 1: do you want to do well? Capital goods companies that

748
00:45:46,840 --> 00:45:50,080
Speaker 1: actually will be rebuilding where I was destroyed, plus building

749
00:45:50,120 --> 00:45:52,719
Speaker 1: the new the new era. What else do you want

750
00:45:52,719 --> 00:45:55,520
Speaker 1: to do well? The new startups that will be operating

751
00:45:55,560 --> 00:46:00,600
Speaker 1: new world, whether it's alternative transportation platforms, energy platforms, whether

752
00:46:00,600 --> 00:46:04,160
Speaker 1: it's a fusion of infat tact and by attack all

753
00:46:04,200 --> 00:46:07,400
Speaker 1: of that staff. Plus in addition to that, some software

754
00:46:07,440 --> 00:46:09,759
Speaker 1: and select digital companies. You want to have, not all

755
00:46:09,800 --> 00:46:11,279
Speaker 1: of them, but you want to have some of that.

756
00:46:11,880 --> 00:46:14,520
Speaker 1: You want to look at any company in any sector

757
00:46:14,960 --> 00:46:18,680
Speaker 1: that has not just pricing power, but ability to do

758
00:46:18,800 --> 00:46:21,680
Speaker 1: things differently, whether their products are marketing, the way they

759
00:46:21,760 --> 00:46:25,600
Speaker 1: use technology and therefore their productivity growth rates are faster

760
00:46:25,960 --> 00:46:28,960
Speaker 1: so to meet the in the in the sea of confusion,

761
00:46:29,120 --> 00:46:32,600
Speaker 1: the only thing is certain is that go with a

762
00:46:32,680 --> 00:46:37,480
Speaker 1: circular strengths and go with the productivity drivers. In other words,

763
00:46:37,719 --> 00:46:43,120
Speaker 1: those guys who consistently deliver access our productivity, circular strength,

764
00:46:43,200 --> 00:46:47,680
Speaker 1: productivity drivers. To me, that's an easiest way to sort

765
00:46:47,680 --> 00:46:51,920
Speaker 1: of conceptualize it in the short term. However, Yeah, you're

766
00:46:51,920 --> 00:46:55,520
Speaker 1: absolutely right energy. If you take out energy, global markets

767
00:46:55,520 --> 00:46:58,400
Speaker 1: would not have performed. Uh. And if you were an

768
00:46:58,520 --> 00:47:02,520
Speaker 1: energy you're up to against any index. If you have

769
00:47:02,560 --> 00:47:04,880
Speaker 1: a mix of energy and financials, you would have been

770
00:47:04,920 --> 00:47:08,680
Speaker 1: up at least ten. If you are somebody like Cassi

771
00:47:08,760 --> 00:47:11,560
Speaker 1: would have ARC, which is completely on the opposite side,

772
00:47:11,800 --> 00:47:15,719
Speaker 1: you would have been down twenty five gains the indexes.

773
00:47:16,239 --> 00:47:20,640
Speaker 1: So somewhere in between those extreme outcomes to me is

774
00:47:20,680 --> 00:47:23,759
Speaker 1: the sort of the essence of resilient portfolio. Do you

775
00:47:23,800 --> 00:47:27,600
Speaker 1: really want to pluck more on energy at the current

776
00:47:27,640 --> 00:47:31,600
Speaker 1: prices or do you really want to completely double down

777
00:47:31,640 --> 00:47:35,840
Speaker 1: and triple up so to speak, on on on extreme

778
00:47:35,880 --> 00:47:39,480
Speaker 1: startups or profitable tech companies. Uh. The answer to me,

779
00:47:39,600 --> 00:47:42,160
Speaker 1: both of those answers are wrong because both of them

780
00:47:42,200 --> 00:47:46,200
Speaker 1: will lead to very high crystallized flatility. And somewhere between

781
00:47:46,200 --> 00:47:50,319
Speaker 1: those outcomes I think lies sort of resilient performance. I

782
00:47:50,400 --> 00:47:53,200
Speaker 1: just want to go back real quickly just to this

783
00:47:53,320 --> 00:47:57,560
Speaker 1: idea of as you put it, prior to the invasion

784
00:47:57,600 --> 00:48:01,120
Speaker 1: of your craned are already indicators of normalization and it's

785
00:48:01,120 --> 00:48:04,719
Speaker 1: really not clear how much aggressive easing is needed, especially

786
00:48:05,200 --> 00:48:08,239
Speaker 1: in light of the massive amount of fiscal that's being

787
00:48:08,239 --> 00:48:11,080
Speaker 1: taken out of the system. What is the worry? And

788
00:48:11,160 --> 00:48:14,239
Speaker 1: you know we talked about the deflationary bust after the

789
00:48:14,280 --> 00:48:17,080
Speaker 1: inflation of the Spanish flu. How do you see a

790
00:48:17,120 --> 00:48:22,520
Speaker 1: potential policy mistake playing out right now? Well, the the

791
00:48:22,800 --> 00:48:26,719
Speaker 1: only number sort of to look at Israeli financial conditions.

792
00:48:27,200 --> 00:48:29,880
Speaker 1: Different countries call it different the names. Some call it

793
00:48:29,960 --> 00:48:33,719
Speaker 1: stress conditions, some call it some other names, but essentially

794
00:48:34,040 --> 00:48:36,800
Speaker 1: all of them are the same, all of them taken

795
00:48:36,840 --> 00:48:40,520
Speaker 1: to count. Variety of spreads are like high yield spreads

796
00:48:41,000 --> 00:48:44,879
Speaker 1: and a variety of volatilities in various markets in order

797
00:48:44,920 --> 00:48:49,759
Speaker 1: to define how how easy or tight financial conditions on

798
00:48:50,360 --> 00:48:53,200
Speaker 1: what you have seen so far in the last sort

799
00:48:53,200 --> 00:48:56,840
Speaker 1: of six weeks seven weeks is a fairly dramatic tightening

800
00:48:56,880 --> 00:49:01,120
Speaker 1: occurring in Eurozone as well as in Egic market. But

801
00:49:01,239 --> 00:49:04,080
Speaker 1: in the U s. Typing star far has been less pronounced.

802
00:49:04,440 --> 00:49:07,320
Speaker 1: And the reason for that is that, as I said,

803
00:49:07,440 --> 00:49:10,880
Speaker 1: the our star in the US is above the policy rids.

804
00:49:11,239 --> 00:49:14,279
Speaker 1: So you still stimilitary, you still have the capacity to

805
00:49:14,320 --> 00:49:17,719
Speaker 1: come to come up. The question is half far can

806
00:49:17,800 --> 00:49:20,040
Speaker 1: you come? How close can you come to our star?

807
00:49:20,320 --> 00:49:23,360
Speaker 1: Can you go above our star and actually become contraction?

808
00:49:24,160 --> 00:49:26,399
Speaker 1: To me, the answer is you can't go above that.

809
00:49:26,680 --> 00:49:31,719
Speaker 1: But as you go closing closer, volatility of esset prices increases. Now,

810
00:49:31,880 --> 00:49:35,719
Speaker 1: remember theoretically our star is zero in real, which is

811
00:49:35,760 --> 00:49:39,560
Speaker 1: say two nominal, So there is a room for fifty BIPs,

812
00:49:39,600 --> 00:49:42,200
Speaker 1: maybe another twenty five, maybe a little bit more. But

813
00:49:42,400 --> 00:49:45,239
Speaker 1: as you go up and get closer and closer to

814
00:49:45,280 --> 00:49:50,319
Speaker 1: our star, volatility of enterprises will six potentially significantly increased.

815
00:49:50,800 --> 00:49:55,719
Speaker 1: When that happens, it flows straight through into financial conditions indexes.

816
00:49:56,160 --> 00:49:59,160
Speaker 1: And that's a cute four central banks to pull back,

817
00:49:59,200 --> 00:50:02,520
Speaker 1: they have no true is spot to pull back very quickly.

818
00:50:03,040 --> 00:50:05,680
Speaker 1: Uh and and so I I, as you know, I

819
00:50:05,920 --> 00:50:08,560
Speaker 1: I I tended to believe that twenty two will be

820
00:50:08,600 --> 00:50:12,360
Speaker 1: the year of removal of fiscal and monetary supports. Twenty

821
00:50:12,719 --> 00:50:15,040
Speaker 1: twenty four will be the years of putting it back off,

822
00:50:15,719 --> 00:50:18,200
Speaker 1: uh and and so and so I still maintain that

823
00:50:18,400 --> 00:50:21,839
Speaker 1: that's probably will be the right answer, and the que

824
00:50:22,080 --> 00:50:25,640
Speaker 1: will be financial condition indexes. If you want to look

825
00:50:25,680 --> 00:50:28,120
Speaker 1: at specific areas, of course, you can look at the

826
00:50:28,200 --> 00:50:30,239
Speaker 1: high yiel spreads. You can look at the plumbing of

827
00:50:30,360 --> 00:50:32,879
Speaker 1: the banking system. There are specific indicators you can look

828
00:50:32,920 --> 00:50:35,680
Speaker 1: at it, but all of that is kind of conceptualized

829
00:50:36,320 --> 00:50:40,640
Speaker 1: into financial condition indoors. Now you can also argue that

830
00:50:40,880 --> 00:50:44,200
Speaker 1: we talked about the yield curve, the more it inverts,

831
00:50:44,800 --> 00:50:48,880
Speaker 1: the more federal reserve. We need to consider operation twist,

832
00:50:50,120 --> 00:50:54,120
Speaker 1: or in other words, some degree of yield curve control.

833
00:50:54,719 --> 00:50:57,480
Speaker 1: That's something that might be part of the discussion and

834
00:50:57,520 --> 00:51:00,720
Speaker 1: debate as we go towards the end of twenty two.

835
00:51:01,400 --> 00:51:03,319
Speaker 1: All right, well, Victor, we're gonna have to leave it there,

836
00:51:03,440 --> 00:51:05,640
Speaker 1: but thank you so much for coming back on the show.

837
00:51:06,520 --> 00:51:10,360
Speaker 1: Thank you. I'd really appreciate it. So, Joe, it's always

838
00:51:10,360 --> 00:51:13,600
Speaker 1: great hearing from Victor, and he has this uncanny knack

839
00:51:13,760 --> 00:51:18,440
Speaker 1: of bringing everything together under one sort of giant macro umbrella.

840
00:51:19,000 --> 00:51:22,359
Speaker 1: But I thought what he was saying about the parallel

841
00:51:22,600 --> 00:51:27,200
Speaker 1: to the post Spanish flu era was really interesting. And

842
00:51:27,239 --> 00:51:29,920
Speaker 1: also to get back to this idea of, you know,

843
00:51:30,000 --> 00:51:34,480
Speaker 1: we can have an inflationary spike, but that can easily

844
00:51:34,560 --> 00:51:38,120
Speaker 1: tip over into deflation. This idea of it's not necessarily

845
00:51:38,120 --> 00:51:41,279
Speaker 1: that prices are just going up and up and up

846
00:51:41,400 --> 00:51:45,279
Speaker 1: right now. It's actually that they're really volatile and it's

847
00:51:45,320 --> 00:51:48,799
Speaker 1: hard to measure. And what that means is that it's

848
00:51:48,840 --> 00:51:52,040
Speaker 1: really difficult to get a handle on real demand versus

849
00:51:52,040 --> 00:51:55,799
Speaker 1: sort of fake stockpiling. To Matt, yes, absolutely, and you

850
00:51:55,840 --> 00:51:59,200
Speaker 1: know something that he touched on, and I've been writing

851
00:51:59,200 --> 00:52:02,520
Speaker 1: a little bit about this, and you know, even Powell

852
00:52:03,239 --> 00:52:06,480
Speaker 1: talked about it in his two recent appearances. Whatever you

853
00:52:06,560 --> 00:52:11,239
Speaker 1: say about the two word transitory, transitory, some of the

854
00:52:11,280 --> 00:52:14,399
Speaker 1: current inflation is still likely the result of it, even

855
00:52:14,400 --> 00:52:17,440
Speaker 1: though no one uses that word. And there's been major disruptions,

856
00:52:17,800 --> 00:52:21,880
Speaker 1: and uh, there's the shift in consumption from services to

857
00:52:22,000 --> 00:52:23,759
Speaker 1: goods and all these sort of unusual things, and the

858
00:52:23,800 --> 00:52:26,120
Speaker 1: trillions of dollars that spent which is not going to

859
00:52:26,160 --> 00:52:29,600
Speaker 1: be spent in two there is physical tightening and so

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00:52:29,760 --> 00:52:31,640
Speaker 1: I do you know, no one talks about the user

861
00:52:31,680 --> 00:52:34,200
Speaker 1: of the word transitory, but that is still an element.

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00:52:34,360 --> 00:52:36,560
Speaker 1: And if it's significant, and if we were going to

863
00:52:36,600 --> 00:52:40,360
Speaker 1: see some sort of normalization naturally, plus you add in

864
00:52:40,400 --> 00:52:43,720
Speaker 1: an aggressive hiking cycle, then you get to the scenario

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00:52:43,800 --> 00:52:46,400
Speaker 1: Victor laid out where by three they're talking about eating

866
00:52:46,400 --> 00:52:48,759
Speaker 1: again totally. I mean, this is the other thing that

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00:52:48,800 --> 00:52:51,720
Speaker 1: emerged from the pandemic. We didn't really get a proper

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00:52:51,760 --> 00:52:55,319
Speaker 1: recession after the pandemic because we had all the stimulus,

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00:52:55,920 --> 00:52:58,080
Speaker 1: and then we sort of got shunted into a recovery

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00:52:58,120 --> 00:53:02,319
Speaker 1: that was really supercharged again thanks to that physical stimulus.

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00:53:02,719 --> 00:53:05,359
Speaker 1: And now it feels like we're sort of getting the response.

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00:53:06,000 --> 00:53:08,400
Speaker 1: I know some people say it was too slow coming,

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00:53:08,480 --> 00:53:11,320
Speaker 1: but it actually feels like it could come very quickly,

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00:53:11,520 --> 00:53:14,839
Speaker 1: with pal talking about fifty basis point increases and so

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00:53:14,920 --> 00:53:17,440
Speaker 1: it feels like we could get a whole another cycle

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00:53:17,680 --> 00:53:20,200
Speaker 1: happening very very fast. Yeah, you know, it's interesting. I

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00:53:20,560 --> 00:53:22,960
Speaker 1: had this thought about like this sort of I guess

878
00:53:23,000 --> 00:53:25,799
Speaker 1: it's like the the fun house mirror version of the

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00:53:25,840 --> 00:53:28,439
Speaker 1: downturn and how fast this I'm trying to turn it out?

880
00:53:28,640 --> 00:53:30,640
Speaker 1: And you know what day I felt like that specifically

881
00:53:31,440 --> 00:53:33,719
Speaker 1: is that day, remember like the price of nickel went

882
00:53:33,800 --> 00:53:37,200
Speaker 1: completely to shut down the nickel trading, And the day

883
00:53:37,239 --> 00:53:40,000
Speaker 1: it reminded me of, weirdly was the day that oil

884
00:53:40,040 --> 00:53:44,719
Speaker 1: went negative. Even though it's the exact opposite move it

885
00:53:44,880 --> 00:53:47,560
Speaker 1: one is this huge spike, but both are these days

886
00:53:47,600 --> 00:53:51,440
Speaker 1: that sort of like broke the market, except in opposite directions,

887
00:53:52,080 --> 00:53:54,560
Speaker 1: and so to some extent it did feel like I

888
00:53:54,600 --> 00:53:56,960
Speaker 1: don't know, like, yes, I think what you're what you're

889
00:53:56,960 --> 00:53:59,040
Speaker 1: saying is we'll put like we're just getting this really

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00:53:59,040 --> 00:54:04,400
Speaker 1: extremely torqued version of what we experienced throughout hopefully thanks

891
00:54:04,520 --> 00:54:06,600
Speaker 1: you know that. Hence that, hence the dream of a

892
00:54:06,719 --> 00:54:10,120
Speaker 1: soft landing or just te normal. Yeah, the torque does

893
00:54:10,160 --> 00:54:12,560
Speaker 1: a good word. Isn't it all? Right? Um? Shall we

894
00:54:12,640 --> 00:54:14,640
Speaker 1: leave it there? Let's leave it there? Okay. This has

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00:54:14,680 --> 00:54:18,360
Speaker 1: been another episode of the All Thoughts podcast. I'm Tracy Alloway.

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00:54:18,440 --> 00:54:20,880
Speaker 1: You can follow me on Twitter at Tracy Alloway and

897
00:54:20,920 --> 00:54:23,040
Speaker 1: I'm Joe Why Isn't Thal? You can follow me on

898
00:54:23,080 --> 00:54:26,760
Speaker 1: Twitter at the Stalwarts. Big thanks to our producers Magnus

899
00:54:26,760 --> 00:54:30,000
Speaker 1: Henrickson and Colin Tipton. Followed the Bloomberg head of podcast

900
00:54:30,000 --> 00:54:33,440
Speaker 1: Francesco Levy at Francesco Today and check out all of

901
00:54:33,480 --> 00:54:37,480
Speaker 1: the podcasts at Bloomberg onto the handle add Podcasts. Thanks

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00:54:37,480 --> 00:54:37,960
Speaker 1: for listening.