1 00:00:05,920 --> 00:00:09,189 Speaker 1: Hello, this is Copy Time, a podcast series on Markets 2 00:00:09,199 --> 00:00:12,640 Speaker 1: and Economies from D BS Group Research. I'm Tambe, chief economist. 3 00:00:12,648 --> 00:00:15,340 Speaker 1: Welcoming you to our 143rd episode. 4 00:00:15,970 --> 00:00:20,000 Speaker 1: Today we will dive into the markets lots going on there. 5 00:00:20,290 --> 00:00:23,879 Speaker 1: Our return guest is Mustafa Choudhury, a seasoned global rates 6 00:00:23,889 --> 00:00:28,190 Speaker 1: and Macro analyst. During a three decade career. He has 7 00:00:28,200 --> 00:00:32,159 Speaker 1: held senior positions in Freddie Mac Bear Stearns Deutsche Bank 8 00:00:32,220 --> 00:00:35,259 Speaker 1: where I had the pleasure of interacting with him, Bluecrest 9 00:00:35,270 --> 00:00:37,450 Speaker 1: Voya and most recently Macro hive, 10 00:00:37,819 --> 00:00:40,540 Speaker 1: we had him on copy time, mid last year when 11 00:00:40,549 --> 00:00:45,220 Speaker 1: we discussed at length the US, fiscal and monetary policy outlook. Today, 12 00:00:45,229 --> 00:00:47,360 Speaker 1: we will discuss the US, but then we will widen 13 00:00:47,369 --> 00:00:51,779 Speaker 1: the discussion because Mustafa has very interesting insights on international macro, 14 00:00:51,790 --> 00:00:54,680 Speaker 1: especially pockets of value in em assets, not just with 15 00:00:54,689 --> 00:00:58,580 Speaker 1: short term but also medium term perspective. Mua choi. Welcome 16 00:00:58,590 --> 00:00:59,799 Speaker 1: back to K Kobe Time. 17 00:01:02,049 --> 00:01:05,819 Speaker 2: Thanks. It's nice to be back for the second time. 18 00:01:05,830 --> 00:01:08,179 Speaker 2: Thanks for having me. A few, 19 00:01:08,190 --> 00:01:11,760 Speaker 1: few, few things have happened since you and I last talked. 20 00:01:11,970 --> 00:01:14,949 Speaker 1: Um but one of the things I remember from the 21 00:01:14,959 --> 00:01:18,679 Speaker 1: copy time episode of summer of 2023 Mustafa is you 22 00:01:18,690 --> 00:01:21,720 Speaker 1: had insisted that instead of looking at market based inflation 23 00:01:21,730 --> 00:01:23,870 Speaker 1: expectation markers, which is sort of things that, you know, 24 00:01:23,879 --> 00:01:25,449 Speaker 1: you and I do on a day to day basis, 25 00:01:25,690 --> 00:01:28,019 Speaker 1: they're actually second best. And you asserted that we should 26 00:01:28,029 --> 00:01:31,309 Speaker 1: look at survey based inflation expectation, that's a superior indicator. 27 00:01:31,650 --> 00:01:34,029 Speaker 1: So now we're sitting at the end of 2024. Do 28 00:01:34,040 --> 00:01:35,230 Speaker 1: you still maintain that view? 29 00:01:36,910 --> 00:01:39,730 Speaker 2: Yes. Uh I I do and I think it's a 30 00:01:39,739 --> 00:01:46,089 Speaker 2: fundamental long term issue for economists to address this uh 31 00:01:46,099 --> 00:01:50,860 Speaker 2: me measurement problem in inflation. What really is inflation? Because 32 00:01:50,870 --> 00:01:51,069 Speaker 2: in 33 00:01:52,230 --> 00:01:56,870 Speaker 2: at the end, what matters is the inflation expectations and 34 00:01:56,879 --> 00:02:01,919 Speaker 2: not the observed inflation itself. And we use observed inflation 35 00:02:01,930 --> 00:02:06,959 Speaker 2: sort of as a proxy for uh inflation expectations. But 36 00:02:06,970 --> 00:02:10,918 Speaker 2: inflation expectations could be determined by multiple other things. As 37 00:02:10,929 --> 00:02:14,149 Speaker 2: we have often we cannot distinguish between the two. 38 00:02:14,449 --> 00:02:18,410 Speaker 2: But this last few years in the US was a 39 00:02:18,419 --> 00:02:23,589 Speaker 2: striking reminder that if uh the inflation that the consumers 40 00:02:23,600 --> 00:02:28,419 Speaker 2: feel was quite different from what the data was showing 41 00:02:28,720 --> 00:02:32,209 Speaker 2: and we saw uh the Michigan survey one year ahead, 42 00:02:32,220 --> 00:02:37,649 Speaker 2: inflation persistent at a fairly high level. And while we 43 00:02:37,660 --> 00:02:39,179 Speaker 2: saw the CP I 44 00:02:40,538 --> 00:02:46,360 Speaker 2: pieces of the core P ce although stayed fairly elevated, 45 00:02:46,550 --> 00:02:50,080 Speaker 2: uh uh uh uh would come down quite hard. So 46 00:02:50,490 --> 00:02:53,619 Speaker 2: that sort of effect, you can tell that affecting the 47 00:02:53,630 --> 00:02:57,850 Speaker 2: political outcome in the US in all of the survey results, 48 00:02:57,860 --> 00:03:01,600 Speaker 2: people still feel inflation. And so 49 00:03:04,100 --> 00:03:05,800 Speaker 2: it, I know that it's very hard 50 00:03:06,610 --> 00:03:11,589 Speaker 2: uh for economists to have a clear concrete, they need 51 00:03:11,600 --> 00:03:15,669 Speaker 2: a uh we, as economists need a concrete measurement of 52 00:03:15,809 --> 00:03:19,160 Speaker 2: uh of inflation. So we do have to go through 53 00:03:19,169 --> 00:03:22,770 Speaker 2: this very public approach, but we, we have to still 54 00:03:22,779 --> 00:03:27,070 Speaker 2: figure out if there's few other estimates that reflect how 55 00:03:27,080 --> 00:03:32,029 Speaker 2: people feel inflation. For example, the month before the election 56 00:03:32,038 --> 00:03:34,380 Speaker 2: in uh in September, when the CP I came out 57 00:03:34,699 --> 00:03:38,509 Speaker 2: just the everything was the inflation numbers, the headline numbers 58 00:03:38,520 --> 00:03:41,139 Speaker 2: are good co uh co CP I was good. But 59 00:03:41,149 --> 00:03:44,020 Speaker 2: if you just separated out the egg price inflation, it 60 00:03:44,029 --> 00:03:47,490 Speaker 2: was 20% increase in egg prices. So anyone who are 61 00:03:47,500 --> 00:03:52,300 Speaker 2: walking into a grocery store sees much higher inflation than 62 00:03:52,610 --> 00:03:56,179 Speaker 2: um than the data that CP I data subsequently that 63 00:03:56,190 --> 00:03:57,820 Speaker 2: came up. And so 64 00:03:58,169 --> 00:04:03,470 Speaker 2: that disconnect we need to address as um as uh market, 65 00:04:03,479 --> 00:04:07,759 Speaker 2: market players and as well as economists. Uh I think 66 00:04:07,770 --> 00:04:12,160 Speaker 2: that's happening everywhere else as well that uh the, and the, 67 00:04:12,169 --> 00:04:16,579 Speaker 2: and the this may be becoming even bigger as the 68 00:04:16,790 --> 00:04:21,339 Speaker 2: uh the income and wealth disparity in around the world 69 00:04:21,350 --> 00:04:22,230 Speaker 2: is going up. 70 00:04:22,660 --> 00:04:27,010 Speaker 2: The consumption baskets of the overall aggregate consumption basket could 71 00:04:27,019 --> 00:04:30,109 Speaker 2: be quite diff the one that's used in the measurement 72 00:04:30,119 --> 00:04:34,079 Speaker 2: quite to be quite different from where the different percentile 73 00:04:34,299 --> 00:04:38,779 Speaker 2: uh populations consumption basket is and it's going to be 74 00:04:38,790 --> 00:04:42,279 Speaker 2: more and more different. And therefore the measurement has to 75 00:04:42,290 --> 00:04:48,000 Speaker 2: address that consumption basket difference by different segments of the population. 76 00:04:48,010 --> 00:04:51,480 Speaker 2: So I think it's important it needs to be addressed 77 00:04:51,869 --> 00:04:52,459 Speaker 2: uh 78 00:04:53,649 --> 00:04:58,250 Speaker 2: to be at least making the policy, right, also the 79 00:04:58,260 --> 00:05:04,549 Speaker 2: communication right to uh to the um from the government 80 00:05:04,559 --> 00:05:05,510 Speaker 2: to the people. 81 00:05:07,459 --> 00:05:10,890 Speaker 1: What about the difference between a 12 month measure of 82 00:05:10,899 --> 00:05:13,928 Speaker 1: inflation which you know, you and I would use to 83 00:05:13,940 --> 00:05:17,320 Speaker 1: price bonds, we would use it to talk about in expectation. 84 00:05:17,649 --> 00:05:20,390 Speaker 1: But the average person seems to be thinking in the 85 00:05:20,399 --> 00:05:23,820 Speaker 1: last four years, my egg prices are up 30 40% 86 00:05:23,829 --> 00:05:26,500 Speaker 1: and that's what I care about. Not this artificial 12 87 00:05:26,510 --> 00:05:29,549 Speaker 1: month cookie cutter thing that economists do. So do you 88 00:05:29,559 --> 00:05:31,450 Speaker 1: think there's something going on there as well? 89 00:05:32,480 --> 00:05:37,019 Speaker 2: Huge? And I am trained and Time Series economic that 90 00:05:37,029 --> 00:05:40,320 Speaker 2: turned into a bond portfolio manager. But a few things 91 00:05:40,329 --> 00:05:44,289 Speaker 2: that I I have learned quite well as a time 92 00:05:44,299 --> 00:05:47,579 Speaker 2: to this guy is that all this back history, 12 93 00:05:47,589 --> 00:05:52,510 Speaker 2: month old history really doesn't matter. It's already embedded in 94 00:05:52,519 --> 00:05:57,359 Speaker 2: expectations embedded in all the other relationships. What matters is, 95 00:05:57,369 --> 00:06:00,390 Speaker 2: what's the new information is the just a month of 96 00:06:00,399 --> 00:06:00,820 Speaker 2: a month? 97 00:06:01,440 --> 00:06:03,399 Speaker 2: And if you really want to take a little bit 98 00:06:03,410 --> 00:06:06,459 Speaker 2: of the noise out, maybe uh the number that I 99 00:06:06,470 --> 00:06:10,500 Speaker 2: look at is the annually three month, last three months average. 100 00:06:10,709 --> 00:06:13,179 Speaker 2: I almost never look at the year over year. Only 101 00:06:13,190 --> 00:06:15,419 Speaker 2: reason I look at the year over year is because 102 00:06:15,428 --> 00:06:18,609 Speaker 2: I want to know what Feds putting as an input 103 00:06:18,809 --> 00:06:24,760 Speaker 2: because it's too stale the previous nine months. And so 104 00:06:24,769 --> 00:06:30,500 Speaker 2: that needs to be also uh uh somehow addressed 105 00:06:30,760 --> 00:06:35,149 Speaker 2: because uh year over year is a basically a state 106 00:06:35,160 --> 00:06:37,779 Speaker 2: piece of information in, in my opinion. But it seems 107 00:06:37,790 --> 00:06:41,839 Speaker 2: like because Fed puts that as an input to their 108 00:06:41,850 --> 00:06:42,540 Speaker 2: models 109 00:06:43,350 --> 00:06:47,369 Speaker 2: market then has to be aware of that and discuss that. 110 00:06:47,380 --> 00:06:50,959 Speaker 2: And I, I find myself at a loss. Why do 111 00:06:50,970 --> 00:06:53,970 Speaker 2: I need to know how far inflation has moved since 112 00:06:53,980 --> 00:06:57,399 Speaker 2: the middle of last year or whatever, November last year, 113 00:06:57,410 --> 00:06:59,190 Speaker 2: I need to know what happened in the last two 114 00:06:59,200 --> 00:07:02,640 Speaker 2: or three months. And so yes, that is um that 115 00:07:02,649 --> 00:07:09,089 Speaker 2: is from a pure information content point of view. Uh 116 00:07:09,470 --> 00:07:13,200 Speaker 2: that needs to be also something uh revised and looked 117 00:07:13,209 --> 00:07:16,369 Speaker 2: at more recent data. But there are most you can 118 00:07:16,380 --> 00:07:21,399 Speaker 2: look at you can reduce noise without having to bring 119 00:07:21,410 --> 00:07:25,500 Speaker 2: in so much stale data. If, if the objective is 120 00:07:25,510 --> 00:07:29,410 Speaker 2: to reduce noise in the inflation and all data, you know, 121 00:07:29,420 --> 00:07:31,850 Speaker 2: it just looks like a lot of noise, a lot 122 00:07:31,859 --> 00:07:34,010 Speaker 2: of stale data in the process. 123 00:07:34,799 --> 00:07:36,470 Speaker 2: So yes, I'm totally on that 124 00:07:36,720 --> 00:07:36,769 Speaker 2: account. 125 00:07:37,059 --> 00:07:40,290 Speaker 1: So, so Musa I have a slightly different take on 126 00:07:40,299 --> 00:07:42,399 Speaker 1: this issue and hear me out for a second. So 127 00:07:42,410 --> 00:07:43,829 Speaker 1: I think the three month over three months is a 128 00:07:43,839 --> 00:07:48,160 Speaker 1: very good gauge of inflation momentum. And when we were 129 00:07:48,170 --> 00:07:50,670 Speaker 1: sort of talking about the near term inflation outlook. The 130 00:07:50,679 --> 00:07:54,140 Speaker 1: momentum is, I think a far better useful source of 131 00:07:54,149 --> 00:07:56,859 Speaker 1: information than the stale data. I'm fully with you on that. 132 00:07:57,160 --> 00:07:59,380 Speaker 1: But I think what I was alluding to kind of 133 00:07:59,390 --> 00:08:01,619 Speaker 1: hit me during my trip to the US the week 134 00:08:01,630 --> 00:08:04,500 Speaker 1: before the US elections that when I talked to taxi 135 00:08:04,510 --> 00:08:09,450 Speaker 1: drivers or grocery store clerks, they were talking about ultra 136 00:08:09,459 --> 00:08:12,250 Speaker 1: long memory. They were saying that my grocery bill is 137 00:08:12,260 --> 00:08:15,299 Speaker 1: up 40 percent over the last four years. You and 138 00:08:15,309 --> 00:08:17,450 Speaker 1: I would say, you know, they have gotten wage increases 139 00:08:17,459 --> 00:08:20,380 Speaker 1: since then. So they're really suffering from some degree of 140 00:08:20,390 --> 00:08:24,059 Speaker 1: illusion or they're getting a systemic error in their way 141 00:08:24,070 --> 00:08:25,989 Speaker 1: of looking at the world. But it seems to me 142 00:08:26,000 --> 00:08:27,040 Speaker 1: that long memory 143 00:08:27,429 --> 00:08:30,929 Speaker 1: in this election played a role because the Feds or 144 00:08:30,940 --> 00:08:34,520 Speaker 1: the treasuries or the Biden administration's communication to the public was, 145 00:08:34,580 --> 00:08:38,150 Speaker 1: inflation was high in 2022 and it's come been coming 146 00:08:38,159 --> 00:08:41,900 Speaker 1: down steadily uh to your point that some items have 147 00:08:41,909 --> 00:08:44,799 Speaker 1: been volatile and they've gone up a lot. But generally speaking, 148 00:08:44,809 --> 00:08:46,829 Speaker 1: you know, the goods inflation problem we had in 22 149 00:08:46,840 --> 00:08:50,580 Speaker 1: and it's gone. Commodity prices are well under control, but 150 00:08:50,590 --> 00:08:53,729 Speaker 1: people didn't seem to believe that narrative at all because 151 00:08:53,739 --> 00:08:57,090 Speaker 1: they kept on demonstrating like a super long memory 152 00:08:57,369 --> 00:09:00,059 Speaker 1: that prices are up a lot since 2020. Do you 153 00:09:00,070 --> 00:09:01,710 Speaker 1: have any sympathy with that perspective? 154 00:09:02,760 --> 00:09:04,580 Speaker 2: Yes. And there is this whole 155 00:09:05,450 --> 00:09:08,848 Speaker 2: war between level versus change and it's not, it's an 156 00:09:08,859 --> 00:09:14,978 Speaker 2: a perpetual uh perpetual question in time series Econometrics, not 157 00:09:14,989 --> 00:09:20,549 Speaker 2: just in uh not just in the inflation measurement. Uh 158 00:09:20,900 --> 00:09:26,270 Speaker 2: the level L level we tend to use change or 159 00:09:26,280 --> 00:09:31,630 Speaker 2: percentage change as new information, whether it's a year over 160 00:09:31,640 --> 00:09:34,630 Speaker 2: year or month, over month or three months is 161 00:09:35,520 --> 00:09:36,450 Speaker 2: how much 162 00:09:37,359 --> 00:09:40,329 Speaker 2: new information that you want to have. But 163 00:09:42,000 --> 00:09:46,640 Speaker 2: one of the observations and it was striking uh after 164 00:09:46,650 --> 00:09:53,539 Speaker 2: the GGFC is that level matters as well. Level matters. 165 00:09:53,750 --> 00:09:58,119 Speaker 2: If you have marginal changes, month, over month, year, over year, 166 00:09:58,130 --> 00:10:03,390 Speaker 2: which economists tends to think of, then change is enough 167 00:10:03,400 --> 00:10:05,939 Speaker 2: or percentage change is enough. But if you have a 168 00:10:05,950 --> 00:10:07,820 Speaker 2: large shift 169 00:10:08,880 --> 00:10:15,340 Speaker 2: or like a banking crisis or a COVID um pandemic, 170 00:10:15,349 --> 00:10:18,700 Speaker 2: then you have large shift we had during the pandemic, 171 00:10:18,710 --> 00:10:20,090 Speaker 2: we had large shifts in 172 00:10:21,270 --> 00:10:26,080 Speaker 2: uh participation rate, for example of um actually massive shifts 173 00:10:26,090 --> 00:10:29,939 Speaker 2: in the uh labor force participation rate in the United States. 174 00:10:30,130 --> 00:10:33,569 Speaker 2: So when you have large shifts like that, then level 175 00:10:33,580 --> 00:10:38,968 Speaker 2: starts to matter more and uh you can't just have changes. 176 00:10:39,450 --> 00:10:43,159 Speaker 2: And so you the the models, there are some 177 00:10:44,039 --> 00:10:49,488 Speaker 2: approaches to that uh uh the whole concept. Uh I 178 00:10:49,500 --> 00:10:52,640 Speaker 2: won't go into technicalities of this. The whole concept of 179 00:10:52,650 --> 00:10:55,488 Speaker 2: co integration, et cetera has been developed to incorporate both 180 00:10:55,500 --> 00:11:01,030 Speaker 2: levels and changes into um into this. But there are 181 00:11:01,039 --> 00:11:06,459 Speaker 2: times after big shifts after GFC level started to matter 182 00:11:06,469 --> 00:11:10,830 Speaker 2: a lot and and then start to, then it start 183 00:11:10,840 --> 00:11:12,598 Speaker 2: to matter less eventually. 184 00:11:12,950 --> 00:11:16,130 Speaker 2: Uh Now after the COVID, we have big shifts in 185 00:11:16,140 --> 00:11:19,729 Speaker 2: certain numbers now level will matter for a while, like 186 00:11:19,739 --> 00:11:20,409 Speaker 2: brand 187 00:11:21,179 --> 00:11:24,319 Speaker 2: rents kind of starting to flatten out. But when I 188 00:11:24,330 --> 00:11:27,329 Speaker 2: think of rent, I think of the it's 30 to 35% 189 00:11:27,340 --> 00:11:30,830 Speaker 2: higher than pre COVID level. And so that's the only 190 00:11:30,840 --> 00:11:34,820 Speaker 2: thing that matters to me. So after five years, then 191 00:11:34,830 --> 00:11:37,510 Speaker 2: the month to month changes or three month to month 192 00:11:37,520 --> 00:11:42,489 Speaker 2: change will be matter, will matter. So as policymakers, as 193 00:11:42,500 --> 00:11:46,770 Speaker 2: well as investors, we need to take that into account 194 00:11:46,780 --> 00:11:48,000 Speaker 2: after large shifts, 195 00:11:48,530 --> 00:11:53,590 Speaker 2: take level into account. Now, fed had prior to COVID 196 00:11:53,619 --> 00:11:56,799 Speaker 2: had a project to figure out what the whether they 197 00:11:56,809 --> 00:12:00,679 Speaker 2: should do, do, do price level targeting or, or whether 198 00:12:00,690 --> 00:12:04,599 Speaker 2: they should interest uh target interstate targeting. And in fact, Williams, 199 00:12:04,880 --> 00:12:08,099 Speaker 2: uh when he was at the San Francisco Fed, he 200 00:12:08,109 --> 00:12:10,969 Speaker 2: had a paper on that very detailed paper on that. 201 00:12:11,320 --> 00:12:11,750 Speaker 2: Uh 202 00:12:12,299 --> 00:12:16,479 Speaker 2: and there was some, some uh movement in that direction 203 00:12:16,489 --> 00:12:20,679 Speaker 2: towards this alternative uh targeting, but that would also be 204 00:12:20,690 --> 00:12:23,799 Speaker 2: wrong because not all the time that price level matters 205 00:12:24,299 --> 00:12:28,760 Speaker 2: and and sometimes price level matters, sometimes the rate uh 206 00:12:28,809 --> 00:12:31,409 Speaker 2: the rate of change matters. The important thing for the 207 00:12:31,419 --> 00:12:36,440 Speaker 2: policymakers and investors is to know and know when to 208 00:12:36,450 --> 00:12:39,630 Speaker 2: shift from one to the other. This and I'm going 209 00:12:39,640 --> 00:12:41,228 Speaker 2: back to technical term again, 210 00:12:41,539 --> 00:12:44,739 Speaker 2: this term, this whole concept of integrated process and co 211 00:12:44,820 --> 00:12:50,179 Speaker 2: integration actually addresses some of this problem of incorporating level 212 00:12:50,190 --> 00:12:53,760 Speaker 2: and change in the same model. And maybe that's where 213 00:12:53,770 --> 00:12:56,440 Speaker 2: that's the direction it should go to catch a ball. 214 00:12:57,090 --> 00:13:00,340 Speaker 1: Right? I I fully sort of, you know, that that 215 00:13:00,349 --> 00:13:03,890 Speaker 1: point resonates with me heavily. I I remember the years 216 00:13:03,900 --> 00:13:07,700 Speaker 1: when inflation target was undershot and you could argue that 217 00:13:07,710 --> 00:13:10,909 Speaker 1: the price level, the gap between a 2% inflation R 218 00:13:10,919 --> 00:13:13,859 Speaker 1: and the actual price level was widening. And then the 219 00:13:13,869 --> 00:13:16,140 Speaker 1: argument I remember Ken Roo talking about it. So then 220 00:13:16,309 --> 00:13:18,449 Speaker 1: if you have a transitory shock and you have higher 221 00:13:18,460 --> 00:13:22,579 Speaker 1: than 2% inflation, you should not intervene because the price 222 00:13:22,590 --> 00:13:24,968 Speaker 1: level is beginning to catch up, not necessarily go over 223 00:13:24,979 --> 00:13:25,820 Speaker 1: the 2% line. 224 00:13:26,070 --> 00:13:29,419 Speaker 1: I think that sort of consideration played into the transitory 225 00:13:29,429 --> 00:13:35,059 Speaker 1: camp to not the most useful and helpful outcome. Because 226 00:13:35,070 --> 00:13:36,239 Speaker 1: if you was, you know, if I look at on 227 00:13:36,250 --> 00:13:39,069 Speaker 1: a 10 year I undershot now I should overshoot lo 228 00:13:39,109 --> 00:13:41,140 Speaker 1: a little bit. And I think that that was a 229 00:13:41,150 --> 00:13:43,010 Speaker 1: big problem in 2021 2022. 230 00:13:44,760 --> 00:13:49,890 Speaker 2: That absolutely was uh the uh the I remember going 231 00:13:49,900 --> 00:13:54,260 Speaker 2: to seminars in 2018, 19. Um 232 00:13:55,700 --> 00:13:59,619 Speaker 2: uh that there was this, people started to believe that 233 00:13:59,669 --> 00:14:04,799 Speaker 2: the level uh level matters. And so that's caused them 234 00:14:04,809 --> 00:14:09,840 Speaker 2: to be too slow when the inflation spiked up in 2001. 235 00:14:09,849 --> 00:14:13,840 Speaker 2: Because they were thinking on average, they're still kind of 236 00:14:13,849 --> 00:14:17,409 Speaker 2: two hun 2% or haven't gone too far. About 2%. So, 237 00:14:17,419 --> 00:14:21,570 Speaker 2: waited and waited and waited, work didn't work out very well, uh, 238 00:14:21,580 --> 00:14:24,799 Speaker 2: at that time. And, uh, 239 00:14:26,359 --> 00:14:26,969 Speaker 2: is that 240 00:14:28,239 --> 00:14:32,299 Speaker 2: similarly? I think that I just to, uh, connect what's, 241 00:14:32,309 --> 00:14:35,570 Speaker 2: what's going on now, same thing with the fed now, 242 00:14:35,580 --> 00:14:39,500 Speaker 2: in the other direction, um, with rates, um, 243 00:14:40,369 --> 00:14:44,580 Speaker 2: in the, in the whole, um, high easing cycle. So, 244 00:14:44,590 --> 00:14:47,869 Speaker 2: the hiking is kind of over, there's too slow to hike. 245 00:14:48,369 --> 00:14:55,840 Speaker 2: And that made us take big, take a long time 246 00:14:55,849 --> 00:14:58,960 Speaker 2: to get the um inflation back, 247 00:14:59,859 --> 00:15:05,030 Speaker 2: not even to 2% even. Right now, we're still running 3% 248 00:15:06,030 --> 00:15:10,830 Speaker 2: in core inflation, whether it's in the core P CS annually, 249 00:15:11,750 --> 00:15:16,270 Speaker 2: three months average annually is running at 3.3 right now 250 00:15:16,280 --> 00:15:19,039 Speaker 2: in the most recent data. So we still have way 251 00:15:19,049 --> 00:15:21,119 Speaker 2: about f uh 252 00:15:22,020 --> 00:15:27,890 Speaker 2: uh feds desired level for that. So it's been how 253 00:15:27,900 --> 00:15:31,530 Speaker 2: long it's two years and eight months that uh since 254 00:15:31,539 --> 00:15:34,200 Speaker 2: we first started hiking and we haven't still got an 255 00:15:34,210 --> 00:15:40,700 Speaker 2: inflation anywhere close to the desired level. Uh And so 256 00:15:40,710 --> 00:15:42,599 Speaker 2: there is this, uh 257 00:15:45,309 --> 00:15:49,210 Speaker 2: I think that this uh the, the, the clearly there 258 00:15:49,219 --> 00:15:52,619 Speaker 2: was an error in beginning of the hiking. 259 00:15:53,289 --> 00:15:57,270 Speaker 2: And now once you make an error, then there is 260 00:15:57,280 --> 00:16:01,099 Speaker 2: more errors in the other direction in the beginning of 261 00:16:01,109 --> 00:16:01,669 Speaker 2: the easing. 262 00:16:03,039 --> 00:16:03,650 Speaker 2: And, 263 00:16:05,570 --> 00:16:07,710 Speaker 2: and that's, yeah, go ahead. 264 00:16:08,530 --> 00:16:11,309 Speaker 1: Now just saying that slow to hike, but then very 265 00:16:11,320 --> 00:16:14,109 Speaker 1: quick to cut. And now looking back in September and 266 00:16:14,119 --> 00:16:16,830 Speaker 1: October measures, I mean, the market is saying you guys 267 00:16:16,840 --> 00:16:17,630 Speaker 1: probably overdid it 268 00:16:19,010 --> 00:16:25,169 Speaker 2: is. Uh, absolutely, absolutely. And, um, so there, there are 269 00:16:25,179 --> 00:16:27,309 Speaker 2: a lot of, uh, so there's a one is the 270 00:16:27,320 --> 00:16:31,750 Speaker 2: level versus change confusion in the policy making world. 271 00:16:32,159 --> 00:16:35,700 Speaker 2: Uh I think market is a little better in getting 272 00:16:35,710 --> 00:16:38,979 Speaker 2: this than the FED does. And I don't understand why 273 00:16:39,299 --> 00:16:43,150 Speaker 2: the FED also has some problem in understanding few things 274 00:16:43,159 --> 00:16:46,700 Speaker 2: that has happened in the last 13 years in the 275 00:16:46,710 --> 00:16:51,580 Speaker 2: US uh US economy and the bond market. And uh 276 00:16:51,590 --> 00:16:53,530 Speaker 2: and that's the result of 277 00:16:54,929 --> 00:16:58,669 Speaker 2: extremely long period of zero interest rate 278 00:16:59,309 --> 00:17:07,910 Speaker 2: from 2008, late 2008 to 2015. And it a little 279 00:17:07,920 --> 00:17:10,369 Speaker 2: bit of higher interest rate than zero again. 280 00:17:11,250 --> 00:17:16,930 Speaker 2: And that the the that zero interest period for a 281 00:17:16,939 --> 00:17:18,229 Speaker 2: long time 282 00:17:19,439 --> 00:17:23,688 Speaker 2: cause some structural changes in the system. So you cannot 283 00:17:23,699 --> 00:17:28,589 Speaker 2: dial down, dial up rate and then dial downgrade. Clearly, 284 00:17:28,599 --> 00:17:31,389 Speaker 2: dialing up didn't work very well. In terms of bringing 285 00:17:31,400 --> 00:17:37,060 Speaker 2: inflation down back to desired level, dialing down is also 286 00:17:37,229 --> 00:17:39,420 Speaker 2: going to not work because it's 287 00:17:40,130 --> 00:17:42,640 Speaker 2: change the structure of the economy. I'll tell you a 288 00:17:42,650 --> 00:17:48,010 Speaker 2: few examples on the structure of the economy. Uh obvious 289 00:17:48,020 --> 00:17:50,790 Speaker 2: one that manufacture, if you look at the manufacturing data 290 00:17:50,800 --> 00:17:54,349 Speaker 2: US looks quite slow, slowing. If you look at ISM 291 00:17:54,359 --> 00:17:55,179 Speaker 2: manufacturing 292 00:17:55,699 --> 00:18:00,250 Speaker 2: for below 50 if you look services, it looks like perfect, 293 00:18:00,260 --> 00:18:03,050 Speaker 2: there is nothing going on. There's no sign of recession 294 00:18:03,579 --> 00:18:08,630 Speaker 2: statistically robust for month after month. So there's clearly the 295 00:18:08,640 --> 00:18:14,479 Speaker 2: two sectors have clear dichotomy between the two subparts of 296 00:18:14,489 --> 00:18:19,760 Speaker 2: the economy and manufacturing is a significantly smaller part than services. 297 00:18:20,010 --> 00:18:22,968 Speaker 2: But we still our brain, we're programmed to look at 298 00:18:22,979 --> 00:18:27,389 Speaker 2: manufacturing and think that this is going to um this 299 00:18:27,400 --> 00:18:30,060 Speaker 2: is it, the economy is slowing down but it is not. 300 00:18:30,880 --> 00:18:35,119 Speaker 2: So that one more simple problem that 301 00:18:35,849 --> 00:18:38,790 Speaker 2: I think Fed understands that it's not clear how do 302 00:18:38,800 --> 00:18:41,959 Speaker 2: you look at the aggregate uh because you wouldn't cut 303 00:18:41,969 --> 00:18:43,750 Speaker 2: if you just looked at the services sector of the 304 00:18:43,760 --> 00:18:45,829 Speaker 2: US economy. But the most 305 00:18:46,640 --> 00:18:51,380 Speaker 2: difficult part is this bunch of path to dependencies that 306 00:18:51,390 --> 00:18:54,420 Speaker 2: has been created. It's not the level of the interest 307 00:18:54,430 --> 00:18:59,290 Speaker 2: rates or it's the path that the interest rate has taken. 308 00:18:59,300 --> 00:18:59,979 Speaker 2: And we 309 00:19:01,949 --> 00:19:06,699 Speaker 2: people, the people in the bond world that also spend 310 00:19:06,709 --> 00:19:10,050 Speaker 2: a lot of time on options market and options market 311 00:19:10,060 --> 00:19:14,500 Speaker 2: understand how important part is important. The, the part and 312 00:19:14,510 --> 00:19:18,550 Speaker 2: the part of zero for this loan that may create 313 00:19:18,660 --> 00:19:24,050 Speaker 2: some major structural changes in the economy. First. Um The, 314 00:19:24,060 --> 00:19:27,520 Speaker 2: the the rates that people pay the mortgage rates. 315 00:19:28,989 --> 00:19:29,819 Speaker 2: There are 316 00:19:30,619 --> 00:19:33,229 Speaker 2: people, most homeowners are paying 317 00:19:34,739 --> 00:19:41,879 Speaker 2: like 3 to 3.5% maximum 4% mortgage rate in the US. 318 00:19:42,550 --> 00:19:45,739 Speaker 2: So all these rate hikes by zero from 0 to 319 00:19:45,750 --> 00:19:49,729 Speaker 2: 45 and a quarter did not have any effect of 320 00:19:49,739 --> 00:19:53,050 Speaker 2: majority of the more, uh, homeowners in the United States, 321 00:19:53,530 --> 00:19:57,810 Speaker 2: only people that were affected were the newcomers, the, the 322 00:19:57,819 --> 00:20:01,750 Speaker 2: new home buyers. And so their mortgage rate is a 323 00:20:01,760 --> 00:20:06,209 Speaker 2: little high. So that, that part, I think Fed doesn't 324 00:20:06,219 --> 00:20:07,719 Speaker 2: know how to incorporate that. 325 00:20:08,339 --> 00:20:12,709 Speaker 2: The biggest credit market is untouched by rate hikes. 326 00:20:14,189 --> 00:20:16,409 Speaker 2: So it doesn't slow down anything. 327 00:20:17,390 --> 00:20:22,810 Speaker 2: And second, um, and there are some generational issue that the, 328 00:20:22,819 --> 00:20:26,150 Speaker 2: all the young people are paying higher mortgage rate than 329 00:20:26,160 --> 00:20:29,239 Speaker 2: a little older ones. So there is a th those 330 00:20:29,250 --> 00:20:32,170 Speaker 2: are social issues that eventually will have to be addressed, 331 00:20:32,920 --> 00:20:36,688 Speaker 2: but then corporations as well, corporations turned out to longer 332 00:20:36,699 --> 00:20:41,119 Speaker 2: maturity funding. So they are not affected much. They didn't 333 00:20:41,130 --> 00:20:45,180 Speaker 2: get affected by the rate hikes as well. Um So 334 00:20:45,189 --> 00:20:45,938 Speaker 2: the biggest 335 00:20:47,520 --> 00:20:52,689 Speaker 2: credit component of credit in the United States fairly untouched 336 00:20:52,770 --> 00:20:58,159 Speaker 2: by this whole rate hiking cycle. Uh The uh then 337 00:20:58,170 --> 00:21:01,270 Speaker 2: there is another interesting couple of more interesting things happened 338 00:21:01,280 --> 00:21:06,219 Speaker 2: with this zero rate policy. One is that the mostly 339 00:21:06,229 --> 00:21:09,619 Speaker 2: from QE that we supplied all these reserves to the 340 00:21:09,630 --> 00:21:10,260 Speaker 2: banks 341 00:21:11,689 --> 00:21:15,479 Speaker 2: and the banks took those reserves and when we look 342 00:21:15,489 --> 00:21:18,909 Speaker 2: at econ 10 macro economics 101, you increase reserves and 343 00:21:18,920 --> 00:21:22,140 Speaker 2: the bank's balance sheet goes up and you decrease reserves. 344 00:21:22,150 --> 00:21:23,550 Speaker 2: Balance sheet should shrink. 345 00:21:24,750 --> 00:21:25,969 Speaker 2: In reality, it doesn't 346 00:21:26,680 --> 00:21:30,609 Speaker 2: because banks as they take the reserve, they deploy it 347 00:21:30,619 --> 00:21:33,189 Speaker 2: in their risk assets on the balance sheet and they 348 00:21:33,199 --> 00:21:36,599 Speaker 2: bought treasuries, mortgages, whatever it is and they got the 349 00:21:36,609 --> 00:21:40,849 Speaker 2: deposits higher. So when you start to do QK, 350 00:21:41,900 --> 00:21:44,930 Speaker 2: it can't reduce its balance sheet to reflect the QT 351 00:21:44,939 --> 00:21:50,199 Speaker 2: as the reserves are going away. And so Feds just 352 00:21:50,209 --> 00:21:53,829 Speaker 2: cannot continue QT. So that's why they slowed down QT 353 00:21:53,839 --> 00:21:57,489 Speaker 2: now and eventually they'll have to stop QT fairly soon. 354 00:21:58,050 --> 00:22:03,719 Speaker 2: So that's another thing that the bank assets, bank balance sheets, 355 00:22:04,390 --> 00:22:07,310 Speaker 2: all of that had a ratchet effect that the hike 356 00:22:07,319 --> 00:22:10,109 Speaker 2: didn't affect it that much. In fact, if you look 357 00:22:10,119 --> 00:22:12,959 Speaker 2: at the net interest margins of the banking system, it 358 00:22:12,969 --> 00:22:16,949 Speaker 2: is now higher than the beginning of the hiking cycle. So, 359 00:22:16,959 --> 00:22:20,250 Speaker 2: and the stock prices are the actually bank index. 360 00:22:21,109 --> 00:22:23,680 Speaker 2: If you look at the KBW, the bank index uh 361 00:22:23,689 --> 00:22:27,829 Speaker 2: that doubled since the beginning of the fed hiking cycle. 362 00:22:27,849 --> 00:22:31,979 Speaker 2: So you got another ratchet effect and the third one 363 00:22:32,000 --> 00:22:41,400 Speaker 2: is homeowners balance sheets are like historic uh historic best situation. 364 00:22:41,410 --> 00:22:43,199 Speaker 2: They the last time 365 00:22:43,650 --> 00:22:47,150 Speaker 2: if you like the debt, uh the debt to uh 366 00:22:47,160 --> 00:22:50,739 Speaker 2: the mortgage debt to the ho uh the value of homes, 367 00:22:50,750 --> 00:22:56,170 Speaker 2: real estate ratio, it's now as low as it was 368 00:22:56,180 --> 00:22:59,188 Speaker 2: at this low before 1960. 369 00:23:00,949 --> 00:23:05,189 Speaker 2: So American households, most of them that put own homes 370 00:23:05,349 --> 00:23:10,010 Speaker 2: are like untouchable by monetary policy, feels very rich. 371 00:23:10,810 --> 00:23:14,770 Speaker 2: The and then their cash flows are still affected by 372 00:23:14,780 --> 00:23:20,589 Speaker 2: mortgage rates. Same with the corporations huge wealth effect. That's 373 00:23:20,599 --> 00:23:23,859 Speaker 2: why no matter you raise interest rate by five and 374 00:23:23,869 --> 00:23:29,708 Speaker 2: a quarter percent, you the demand remains fairly robust service sector, 375 00:23:29,719 --> 00:23:34,069 Speaker 2: working out quite well, employment in solid shape. 376 00:23:34,900 --> 00:23:40,280 Speaker 2: So I think that change was not uh fully understood 377 00:23:40,339 --> 00:23:44,069 Speaker 2: this part dependency. And I had myself personally had conversations 378 00:23:44,079 --> 00:23:48,109 Speaker 2: with FED economists that actually made these kinds of analysis 379 00:23:48,530 --> 00:23:52,989 Speaker 2: most of them because traditional economics doesn't cover this part 380 00:23:53,000 --> 00:23:55,389 Speaker 2: dependency part, traditional macroeconomics 381 00:23:55,444 --> 00:23:58,964 Speaker 2: doesn't cover it's more of a finance option pricing kind 382 00:23:58,974 --> 00:24:01,724 Speaker 2: of story. I think R Ra Rajan has a good 383 00:24:01,734 --> 00:24:05,625 Speaker 2: paper on this recently on the bank part of the 384 00:24:05,635 --> 00:24:09,645 Speaker 2: aspect of the park dependency and then few and we 385 00:24:09,655 --> 00:24:12,545 Speaker 2: I'm starting to see few fed working papers on the 386 00:24:12,555 --> 00:24:14,504 Speaker 2: mortgage lock in effect as well. 387 00:24:15,709 --> 00:24:18,250 Speaker 2: But this is kind of late already. Decision window is 388 00:24:18,260 --> 00:24:18,810 Speaker 2: behind 389 00:24:19,869 --> 00:24:22,708 Speaker 2: the banks have this uh at the peak they have 390 00:24:22,719 --> 00:24:28,139 Speaker 2: minus 800 billion losses on their book when the, the, 391 00:24:28,150 --> 00:24:32,209 Speaker 2: when the uh the Silicon Valley Bank was uh going down. 392 00:24:32,949 --> 00:24:38,020 Speaker 2: And uh so you would expect after all these guarantees 393 00:24:38,030 --> 00:24:41,170 Speaker 2: and everything that the banks would unwind some of that 394 00:24:41,300 --> 00:24:44,810 Speaker 2: book of business and reduce that. 395 00:24:45,219 --> 00:24:47,239 Speaker 2: But if you look at the bank balance sheet today, 396 00:24:47,369 --> 00:24:51,339 Speaker 2: banks have done miniscule amount of reduction of the securities 397 00:24:51,349 --> 00:24:54,239 Speaker 2: book on the balance sheet. And the reason that the 398 00:24:54,270 --> 00:24:57,510 Speaker 2: a miniscule amount of unwind of the balance sheet is 399 00:24:57,520 --> 00:25:03,310 Speaker 2: because the Federal Reserve has this multiple guarantee programs. And 400 00:25:03,319 --> 00:25:06,439 Speaker 2: the big one was the uh the, the bank funding, 401 00:25:06,619 --> 00:25:11,439 Speaker 2: uh the program uh that you can uh get loan 402 00:25:11,449 --> 00:25:12,790 Speaker 2: from the Federal Reserve 403 00:25:13,119 --> 00:25:18,419 Speaker 2: uh at bar when you put a underwater mortgage or treasury. 404 00:25:18,719 --> 00:25:21,810 Speaker 2: Um and it's uh as a collateral, 405 00:25:22,520 --> 00:25:23,129 Speaker 2: it's 406 00:25:24,739 --> 00:25:28,689 Speaker 2: the, it's somewhere tap somewhere between 200 billion to 300 407 00:25:28,699 --> 00:25:33,609 Speaker 2: billion lately because some banks do have need funding, but 408 00:25:33,619 --> 00:25:36,780 Speaker 2: it's not a stress for the overall banking system. But 409 00:25:36,790 --> 00:25:40,000 Speaker 2: what it does is that it provides an optionality for 410 00:25:40,010 --> 00:25:42,250 Speaker 2: a regional bank out there or a major bank out 411 00:25:42,260 --> 00:25:42,680 Speaker 2: there 412 00:25:43,030 --> 00:25:45,839 Speaker 2: with this treasury books. Then what if we get into trouble, 413 00:25:45,849 --> 00:25:47,859 Speaker 2: then we can always go to the fed and put 414 00:25:47,869 --> 00:25:50,948 Speaker 2: this as collateral. So if we can do that, then 415 00:25:50,959 --> 00:25:54,650 Speaker 2: duration is not really duration. Uh, so they hang on 416 00:25:54,660 --> 00:25:56,569 Speaker 2: to it. And so if you look at the bank 417 00:25:56,579 --> 00:26:00,339 Speaker 2: balance sheet, now, nothing changed. They still have that, uh, 418 00:26:00,349 --> 00:26:01,649 Speaker 2: that exposure. 419 00:26:01,979 --> 00:26:07,040 Speaker 2: So what would happen going forward? Clearly? They're betting that 420 00:26:07,050 --> 00:26:10,399 Speaker 2: five and a quarter is really high and eventually interest 421 00:26:10,410 --> 00:26:13,959 Speaker 2: rates will decline and low and behold fed, started cutting 422 00:26:14,619 --> 00:26:17,659 Speaker 2: cutting rates that will be out of the woods anyway. 423 00:26:18,140 --> 00:26:22,040 Speaker 2: But the reality is I wouldn't, uh, I, I know 424 00:26:22,050 --> 00:26:25,679 Speaker 2: market enough that I, if I were a bank treasurer 425 00:26:25,689 --> 00:26:28,689 Speaker 2: or bank board, I would not make that bet because 426 00:26:29,010 --> 00:26:32,209 Speaker 2: you don't know which direction interest they goes. I have 427 00:26:32,219 --> 00:26:37,550 Speaker 2: seen 15% mortgage rates in the eighties and, uh, that 428 00:26:37,560 --> 00:26:39,819 Speaker 2: happens and that can happen again. 429 00:26:40,640 --> 00:26:45,300 Speaker 2: Uh, so, uh, that's a mistake. That's a part dependency 430 00:26:45,599 --> 00:26:51,569 Speaker 2: that plus the government guarantee all of that combined and 431 00:26:51,579 --> 00:26:57,619 Speaker 2: created uh a banking system that keeps getting from the 432 00:26:57,630 --> 00:27:01,420 Speaker 2: government keeps getting bigger but 433 00:27:02,270 --> 00:27:06,750 Speaker 2: could have a much bigger systemic risk in the long run. 434 00:27:06,760 --> 00:27:08,810 Speaker 2: But that may be a very long run. But that's 435 00:27:08,979 --> 00:27:14,209 Speaker 2: kind of the distortion for the US economy because 436 00:27:15,560 --> 00:27:20,329 Speaker 2: banks just can take unlimited interest rate risk without any 437 00:27:20,910 --> 00:27:25,010 Speaker 2: and any worries and very different from what's happened in 438 00:27:25,020 --> 00:27:27,969 Speaker 2: the Euro because you're right, you, you have to do 439 00:27:27,979 --> 00:27:28,410 Speaker 2: a stress 440 00:27:28,420 --> 00:27:28,780 Speaker 2: test. 441 00:27:30,390 --> 00:27:33,189 Speaker 1: Mustafa, this reminds me of the series of essays Raghuram 442 00:27:33,219 --> 00:27:36,800 Speaker 1: Rajan wrote about financial dominance. So we have fiscal dominance. 443 00:27:36,810 --> 00:27:38,729 Speaker 1: When you have a lot of debt, the system sort 444 00:27:38,739 --> 00:27:43,199 Speaker 1: of captures the policy setting monetary dominance when you have 445 00:27:43,209 --> 00:27:45,290 Speaker 1: too much of a bloated balance sheet. And now the 446 00:27:45,300 --> 00:27:48,458 Speaker 1: point that you're making that by repeated bailouts, you sort 447 00:27:48,469 --> 00:27:51,189 Speaker 1: of embedded certain bad behaviors in the financial system that 448 00:27:51,199 --> 00:27:53,359 Speaker 1: actually captures your subsequent moves 449 00:27:55,479 --> 00:27:59,409 Speaker 2: in a very big way. And that's probably driving the 450 00:27:59,420 --> 00:28:05,020 Speaker 2: uh increasing bank valuation in the United States is just 451 00:28:05,030 --> 00:28:09,250 Speaker 2: a premium for bad behavior. And the government guaranteeing bad 452 00:28:09,260 --> 00:28:13,419 Speaker 2: behavior is I think explains because if you look at 453 00:28:13,430 --> 00:28:16,879 Speaker 2: the balance sheet size of the banking system, whether the 454 00:28:16,890 --> 00:28:22,929 Speaker 2: assets or the deposits, it hasn't really increased meaningfully in 455 00:28:22,939 --> 00:28:24,050 Speaker 2: the last two years, 456 00:28:24,839 --> 00:28:27,579 Speaker 2: but they put it against the share prices, it's double. 457 00:28:28,239 --> 00:28:32,780 Speaker 2: So that that must be all the bad behavior premium 458 00:28:32,939 --> 00:28:34,619 Speaker 2: that government is handing out 459 00:28:35,619 --> 00:28:39,319 Speaker 1: that's a very, very apt way of putting it. Um, 460 00:28:39,410 --> 00:28:44,660 Speaker 1: let's move away from the financial sector related distortions to 461 00:28:44,670 --> 00:28:47,910 Speaker 1: the core of fed policy making. We've had 75 basis 462 00:28:47,920 --> 00:28:51,319 Speaker 1: points of rate cut in this cycle. It doesn't seem 463 00:28:51,329 --> 00:28:55,520 Speaker 1: quite clear to me where the fed stands with December 464 00:28:55,530 --> 00:28:58,489 Speaker 1: or the subsequent meetings. They're going to have pressure from 465 00:28:58,500 --> 00:29:01,800 Speaker 1: Trump to cut, but the market is seeming to think 466 00:29:01,810 --> 00:29:02,670 Speaker 1: that they will 467 00:29:03,160 --> 00:29:05,869 Speaker 1: stand a little more forthright and not cut as much 468 00:29:05,880 --> 00:29:08,239 Speaker 1: as they had even indicated a couple of months ago. 469 00:29:08,349 --> 00:29:12,060 Speaker 1: So let's entertain a couple of scenarios. Mustafa number one, 470 00:29:12,239 --> 00:29:14,640 Speaker 1: let's say the fed wants to keep Trump happy and 471 00:29:14,650 --> 00:29:16,739 Speaker 1: they keep cutting even though you and I know it's 472 00:29:16,750 --> 00:29:20,709 Speaker 1: not necessary. What will be the outcome from the bond 473 00:29:20,719 --> 00:29:22,619 Speaker 1: vigilante side or from the curve side? 474 00:29:24,900 --> 00:29:27,760 Speaker 2: I think that, um, well, if you look at the 475 00:29:27,770 --> 00:29:31,010 Speaker 2: market pricing right now of, uh, it's now pricing a 476 00:29:31,020 --> 00:29:35,040 Speaker 2: lot fewer cuts than it did even a few weeks ago. 477 00:29:35,050 --> 00:29:38,170 Speaker 2: So the cuts have been taken out, we still have 50% 478 00:29:38,459 --> 00:29:40,050 Speaker 2: chance of a 479 00:29:40,180 --> 00:29:44,099 Speaker 2: December cut still price and maybe one more cut from 480 00:29:44,130 --> 00:29:48,160 Speaker 2: January to sometime between January to September. Probably one more 481 00:29:48,170 --> 00:29:50,890 Speaker 2: cut and that seems like done as far as the 482 00:29:50,900 --> 00:29:54,130 Speaker 2: market is concerned. So the market is not expecting a 483 00:29:54,140 --> 00:30:00,040 Speaker 2: lot of cuts anymore because market kind of realizes the, 484 00:30:01,479 --> 00:30:04,989 Speaker 2: the mistake here in cutting too much. Probably it was 485 00:30:05,000 --> 00:30:10,140 Speaker 2: a mistake already. To, uh, start, um, the 50 with 486 00:30:10,150 --> 00:30:13,260 Speaker 2: the 50 point cut in September and replied 487 00:30:14,050 --> 00:30:19,890 Speaker 2: by just interest rates going higher, we had like 6070 488 00:30:19,900 --> 00:30:21,849 Speaker 2: base point increase in the 10 year rate with the 489 00:30:21,859 --> 00:30:25,670 Speaker 2: mortgage rate up like 70 basis points after the cut 490 00:30:26,130 --> 00:30:29,780 Speaker 2: on in September as a reply to the fed, like, hey, 491 00:30:30,310 --> 00:30:31,930 Speaker 2: we don't agree with you. 492 00:30:32,410 --> 00:30:35,479 Speaker 2: And so, uh, that's the on I I what as, 493 00:30:35,489 --> 00:30:38,469 Speaker 2: as the rates were going up, especially mortgage rates were 494 00:30:38,479 --> 00:30:41,130 Speaker 2: going up. I was looking at it as a, reminds 495 00:30:41,140 --> 00:30:44,989 Speaker 2: me of those days that the, the long end just 496 00:30:45,079 --> 00:30:49,640 Speaker 2: completely gives a different message and refuses to accept the 497 00:30:49,650 --> 00:30:50,739 Speaker 2: Fed's policy. 498 00:30:51,280 --> 00:30:55,020 Speaker 2: Uh I think uh we are back in that Fed got, 499 00:30:55,030 --> 00:30:57,780 Speaker 2: I think misguided a little bit but because it believed 500 00:30:57,790 --> 00:31:02,459 Speaker 2: in historical relationships, two historical relationships don't that don't apply. 501 00:31:02,829 --> 00:31:07,030 Speaker 2: One is the so called sound rule, uh which I 502 00:31:07,040 --> 00:31:11,969 Speaker 2: think is completely, um you know, anything that happened in 503 00:31:11,979 --> 00:31:14,800 Speaker 2: the past doesn't necessarily mean it's gonna a relationship that 504 00:31:14,810 --> 00:31:17,579 Speaker 2: happened in the first place. There is not as many 505 00:31:17,589 --> 00:31:19,699 Speaker 2: observations to call it a rule. 506 00:31:20,140 --> 00:31:23,719 Speaker 2: Uh and then uh start to believing it. And then, 507 00:31:23,729 --> 00:31:24,310 Speaker 2: so 508 00:31:25,000 --> 00:31:29,219 Speaker 2: that was uh that was a mistake using some rule 509 00:31:29,439 --> 00:31:33,680 Speaker 2: or talking about or believing it. Um And the second 510 00:31:33,689 --> 00:31:37,150 Speaker 2: one is uh even worse, the curve was inverted for 511 00:31:37,160 --> 00:31:40,579 Speaker 2: a while. And historically, the U curve is inverted for 512 00:31:40,589 --> 00:31:46,880 Speaker 2: so long, then uh it's preceded by a then uh 513 00:31:46,890 --> 00:31:49,920 Speaker 2: the economy goes into a recession 12 month forward. And 514 00:31:49,930 --> 00:31:52,619 Speaker 2: if you look at geometric analysis, yes, indeed, in the 515 00:31:52,630 --> 00:31:53,640 Speaker 2: past that happened. 516 00:31:54,180 --> 00:31:57,939 Speaker 2: So if you, the U curve was extremely inverted in 517 00:31:57,949 --> 00:32:02,219 Speaker 2: like a hockey stick for two years and still was 518 00:32:02,229 --> 00:32:05,959 Speaker 2: inverted until a few weeks ago. And so the common 519 00:32:05,969 --> 00:32:09,900 Speaker 2: belief would be uh in the past it recession happened 520 00:32:09,910 --> 00:32:11,869 Speaker 2: after that. So recession is coming 521 00:32:12,609 --> 00:32:17,790 Speaker 2: so that those things, historical relationships kind of misguided the 522 00:32:17,800 --> 00:32:22,560 Speaker 2: fed because we had inverted curve for 2.5 years and 523 00:32:22,900 --> 00:32:26,349 Speaker 2: we still have a robust economy so that inversion may 524 00:32:26,359 --> 00:32:29,250 Speaker 2: be not a reflection of the economy, but more of 525 00:32:29,260 --> 00:32:33,709 Speaker 2: a reflection of the technicals in the um in the 526 00:32:33,719 --> 00:32:37,739 Speaker 2: uh marketplace. And I, I won't go into that technical. 527 00:32:37,750 --> 00:32:39,709 Speaker 2: There is a whole technical story that 528 00:32:40,229 --> 00:32:44,119 Speaker 2: uh cause the Yoker to be such hockey stick inverted 529 00:32:44,310 --> 00:32:49,500 Speaker 2: during this cycle than in any other cycle. Uh But 530 00:32:49,510 --> 00:32:53,510 Speaker 2: that's a mistake that they did. But this one vigilante 531 00:32:53,520 --> 00:32:58,530 Speaker 2: is gonna be big, big this time. And just thinking that, 532 00:32:58,540 --> 00:33:03,910 Speaker 2: oh to first term he did um he did all 533 00:33:03,920 --> 00:33:06,099 Speaker 2: these tax cuts and 534 00:33:06,479 --> 00:33:10,160 Speaker 2: uh it wasn't that crazy inflationary. We, of course, uh 535 00:33:10,209 --> 00:33:14,959 Speaker 2: COVID helped out um he could do uh extend this 536 00:33:14,969 --> 00:33:19,689 Speaker 2: tax cut again and do all these uh the commitments 537 00:33:19,699 --> 00:33:25,500 Speaker 2: that he made on his uh campaign uh stocks and 538 00:33:25,510 --> 00:33:29,420 Speaker 2: he delivers all of that. There's a lot of dollars 539 00:33:29,430 --> 00:33:33,359 Speaker 2: that we're talking about in terms of uh deficit. 540 00:33:34,280 --> 00:33:38,300 Speaker 2: Uh If Trump goes through all of those commitments, but 541 00:33:38,310 --> 00:33:42,260 Speaker 2: he doesn't have the same fiscal capacity in this term 542 00:33:42,310 --> 00:33:45,329 Speaker 2: as he had in his first term. So if he 543 00:33:45,339 --> 00:33:48,699 Speaker 2: thinks that he can repeat the, the saying this term 544 00:33:48,709 --> 00:33:52,140 Speaker 2: is gonna be making a major mistake, uh They take 545 00:33:52,150 --> 00:33:54,020 Speaker 2: the tax uh 546 00:33:54,739 --> 00:33:59,079 Speaker 2: the extension of the 2017 tax cut. 547 00:33:59,780 --> 00:34:03,900 Speaker 2: Uh Another extension for another 10 years, its cost is 548 00:34:04,010 --> 00:34:09,719 Speaker 2: the estimate is a $5 trillion additional uh budgetary cost. 549 00:34:10,300 --> 00:34:16,479 Speaker 2: Uh with all the uh fiscal capacity that was already 550 00:34:16,489 --> 00:34:22,149 Speaker 2: expanded by the Biden administration with the Chips Act and 551 00:34:22,159 --> 00:34:25,520 Speaker 2: uh all the other uh expenditures, the 552 00:34:25,969 --> 00:34:29,949 Speaker 2: there's not a lot of uh capacity to just even 553 00:34:29,959 --> 00:34:33,429 Speaker 2: to the extend the tax cut to 10 years. They 554 00:34:33,439 --> 00:34:36,149 Speaker 2: might do a trick like do it only four years 555 00:34:36,159 --> 00:34:38,000 Speaker 2: because Trump is going to be here for four more 556 00:34:38,010 --> 00:34:41,199 Speaker 2: years and then let it uh hand it over to 557 00:34:41,209 --> 00:34:45,189 Speaker 2: the next administration. So then still we're talking about $2 558 00:34:45,199 --> 00:34:48,879 Speaker 2: trillion just that. Then all the little things add up 559 00:34:48,889 --> 00:34:52,689 Speaker 2: a lot, the tips going to be tax free or 560 00:34:53,000 --> 00:34:58,739 Speaker 2: um corporate tax exemption for companies that um the uh 561 00:34:58,750 --> 00:35:02,560 Speaker 2: that bring manufacturing back to the US. Like that's lots 562 00:35:02,570 --> 00:35:04,909 Speaker 2: of tons of stuff add up to a lot, a 563 00:35:04,919 --> 00:35:09,659 Speaker 2: big number this time. Uh The moment they start doing 564 00:35:09,669 --> 00:35:12,060 Speaker 2: some of those, we have a bigger reaction in the 565 00:35:12,070 --> 00:35:16,719 Speaker 2: Yoker just because um the um 566 00:35:17,659 --> 00:35:21,239 Speaker 2: the the the there's no, there's not as much capacity 567 00:35:21,250 --> 00:35:25,120 Speaker 2: as uh as the um that they had of the 568 00:35:25,129 --> 00:35:30,270 Speaker 2: first term. So I think that uh plus the inflation 569 00:35:30,280 --> 00:35:32,649 Speaker 2: is not out of the radar, the housing in the 570 00:35:32,659 --> 00:35:37,840 Speaker 2: US is really, really uh unknown factor. In my opinion, 571 00:35:37,899 --> 00:35:40,679 Speaker 2: if I look at the vacancy rate for apartments 572 00:35:41,330 --> 00:35:43,270 Speaker 2: still extremely low. 573 00:35:44,280 --> 00:35:50,060 Speaker 2: So it's like a little change in the number of 574 00:35:50,070 --> 00:35:53,620 Speaker 2: people looking for apartments could shoot the apartment rentals up 575 00:35:53,629 --> 00:35:56,089 Speaker 2: back up again. But I have a feeling that we're 576 00:35:56,100 --> 00:35:58,689 Speaker 2: not out of the Ws on some of the key 577 00:35:58,699 --> 00:36:04,500 Speaker 2: parts of the inflation, um components of inflation that especially 578 00:36:04,510 --> 00:36:08,510 Speaker 2: I'm worried about housing a lot, the housing affordability still 579 00:36:08,520 --> 00:36:09,699 Speaker 2: at historic low. 580 00:36:11,080 --> 00:36:15,580 Speaker 2: So all of those are are going to be um 581 00:36:15,590 --> 00:36:19,719 Speaker 2: bring back the on vigilante. So we'll get Stener very 582 00:36:19,729 --> 00:36:25,860 Speaker 2: fast in this time. Uh If the fed eases more. 583 00:36:25,870 --> 00:36:28,379 Speaker 2: So they do. I my own bet is that they 584 00:36:28,389 --> 00:36:30,739 Speaker 2: won't ease in December even if it's 585 00:36:31,469 --> 00:36:37,879 Speaker 2: priced 5050 right now. Uh But the vibe from um 586 00:36:38,989 --> 00:36:42,840 Speaker 2: Powell in his last conversation, it didn't feel like there 587 00:36:42,850 --> 00:36:46,409 Speaker 2: is a uh some are saying that Gosbee and a 588 00:36:46,419 --> 00:36:50,520 Speaker 2: few others are saying, oh yeah, you know, December is 589 00:36:50,530 --> 00:36:53,049 Speaker 2: a play, but I don't think December is at play, 590 00:36:54,070 --> 00:36:58,179 Speaker 1: right? And Mustafa that statement from Powell actually preceded the 591 00:36:58,189 --> 00:37:00,540 Speaker 1: PC EU numbers which came out yesterday. We're recording this 592 00:37:00,550 --> 00:37:03,590 Speaker 1: on the 29th of November and those PC numbers were 593 00:37:03,600 --> 00:37:08,500 Speaker 1: also not particularly helpful going into December. So, which part 594 00:37:08,510 --> 00:37:11,419 Speaker 1: of the duration would you touch? Like, not anything beyond 595 00:37:11,429 --> 00:37:13,219 Speaker 1: two years? Is that, is that where you stand? 596 00:37:14,959 --> 00:37:21,419 Speaker 2: Yes, I, um, yes. Uh, I, there is no, I 597 00:37:21,429 --> 00:37:24,840 Speaker 2: wouldn't go beyond two years. I actually, uh, 598 00:37:27,000 --> 00:37:30,580 Speaker 2: myself, I like a little bit short on some of these. Um, 599 00:37:30,590 --> 00:37:37,310 Speaker 2: the so far is like 2026. So far, contracts are 600 00:37:37,320 --> 00:37:39,050 Speaker 2: more uh like 601 00:37:39,850 --> 00:37:49,949 Speaker 2: uh the uh Z five, for example, December 25 that 602 00:37:49,959 --> 00:37:53,479 Speaker 2: sort of area is actually a decent short rather than 603 00:37:53,489 --> 00:37:57,229 Speaker 2: a long because there's still a little bit of uh 604 00:37:57,239 --> 00:38:02,129 Speaker 2: immersion there. And that would go, I think eventually go 605 00:38:02,139 --> 00:38:06,169 Speaker 2: flatter and probably start to pick up some slope. And 606 00:38:06,520 --> 00:38:09,469 Speaker 2: if you look at the nature of the slope movement 607 00:38:10,860 --> 00:38:13,939 Speaker 2: for the last two years, it's basically between three months 608 00:38:13,949 --> 00:38:17,239 Speaker 2: and two year and the 2 to 10 is been 609 00:38:17,250 --> 00:38:22,158 Speaker 2: kind of flat and moved parallel with uh with little 610 00:38:22,169 --> 00:38:25,949 Speaker 2: bit of variation around it. But uh we did 611 00:38:27,090 --> 00:38:30,620 Speaker 2: most recently after the cut, we got the uh slope 612 00:38:30,629 --> 00:38:34,678 Speaker 2: of the 2 to 10 slope come back uh positive, 613 00:38:34,719 --> 00:38:38,859 Speaker 2: somewhat positive. Uh But most of the volatility will be 614 00:38:38,870 --> 00:38:43,169 Speaker 2: in the two year sector, I think uh between one 615 00:38:43,179 --> 00:38:46,889 Speaker 2: year forward, one year is the sweet spot. Uh sweet 616 00:38:46,899 --> 00:38:52,069 Speaker 2: spot volatility is sweet spot short uh in my uh 617 00:38:52,120 --> 00:38:53,149 Speaker 2: in my opinion, 618 00:38:53,610 --> 00:38:57,479 Speaker 2: and um I like that. Uh, I like that myself. That, 619 00:38:57,489 --> 00:39:00,629 Speaker 2: that's where it's going to be mortgage rate is, would 620 00:39:00,639 --> 00:39:05,139 Speaker 2: be fascinating to watch. It's now back at where it was, uh, 621 00:39:06,030 --> 00:39:11,389 Speaker 2: the fed started a fed, everyone expecting Fed to cut 622 00:39:11,399 --> 00:39:13,969 Speaker 2: and mortgage rate came down and every, uh the feds 623 00:39:13,979 --> 00:39:17,679 Speaker 2: congratulating itself that the 1% decline in mortgage rate now 624 00:39:17,689 --> 00:39:21,149 Speaker 2: it's back up to where it was. So, uh mortgage 625 00:39:21,159 --> 00:39:24,149 Speaker 2: rate is going to be uh something to watch because 626 00:39:24,159 --> 00:39:27,610 Speaker 2: that's the most important interest rates in the US. 627 00:39:28,469 --> 00:39:31,968 Speaker 1: So one technical question on the mortgage market. So when 628 00:39:31,979 --> 00:39:36,219 Speaker 1: I bought my house in Washington DC, a long time ago, 629 00:39:36,520 --> 00:39:40,620 Speaker 1: there were three year arms, five year, seven year arms, 630 00:39:40,629 --> 00:39:42,570 Speaker 1: you can sort of lock in there and then it 631 00:39:42,580 --> 00:39:46,770 Speaker 1: becomes variable, all sorts of mortgage products. I now realize 632 00:39:46,780 --> 00:39:49,149 Speaker 1: that those products have disappeared. I mean, you can get 633 00:39:49,159 --> 00:39:51,159 Speaker 1: a 15 year fix for a third year. Why has 634 00:39:51,169 --> 00:39:52,129 Speaker 1: that been the case? 635 00:39:53,580 --> 00:39:55,399 Speaker 2: It disappeared? Because, um, 636 00:39:57,629 --> 00:40:04,560 Speaker 2: historically, if you go back prior to um, early two thousands, 637 00:40:04,850 --> 00:40:08,379 Speaker 2: the 5th, 30 year mortgage was the thing. And I, 638 00:40:08,389 --> 00:40:13,009 Speaker 2: when I bought, I bought home in DC also, uh 639 00:40:13,020 --> 00:40:16,290 Speaker 2: I got a 30 year just classic 30 year mortgage. 640 00:40:16,590 --> 00:40:21,810 Speaker 2: Uh This uh 5171 arm was coming up during the nineties. 641 00:40:22,489 --> 00:40:26,729 Speaker 2: Then it became very popular when, uh, in just, uh 642 00:40:26,739 --> 00:40:30,159 Speaker 2: heading up to the GFC for a couple of reasons. 643 00:40:30,169 --> 00:40:36,070 Speaker 2: The government itself, the Greenspan. Uh I remember actually encourage 644 00:40:36,080 --> 00:40:39,530 Speaker 2: people to take in a testimony in pancreas, take uh 645 00:40:39,540 --> 00:40:46,810 Speaker 2: take arms. Uh And, but most importantly, the, those are 646 00:40:46,820 --> 00:40:51,370 Speaker 2: the products that were secu through, mostly through the private sector, 647 00:40:51,800 --> 00:40:58,350 Speaker 2: uh private sector channels. Um And uh was the especially 648 00:40:58,360 --> 00:41:02,339 Speaker 2: with the lower credit like all day, et cetera. Uh 649 00:41:03,300 --> 00:41:07,239 Speaker 2: And so though those are the ones that were invest, 650 00:41:07,250 --> 00:41:12,520 Speaker 2: the investors were not the traditional M BS investors. And 651 00:41:12,530 --> 00:41:16,569 Speaker 2: so they overpaid and eventually triggered all of these subprime 652 00:41:16,580 --> 00:41:23,279 Speaker 2: prices because there's overproduction uh on the private channel of securitization. 653 00:41:23,649 --> 00:41:27,260 Speaker 2: And so one after the GFC, that private channel was 654 00:41:27,270 --> 00:41:30,719 Speaker 2: pretty much destroyed from the market making point of view 655 00:41:31,100 --> 00:41:36,389 Speaker 2: uh as well as from the um the investor point 656 00:41:36,399 --> 00:41:37,959 Speaker 2: of view, all these foreign 657 00:41:38,830 --> 00:41:45,679 Speaker 2: European little uh I I, the pension fund in Iceland or, 658 00:41:45,939 --> 00:41:48,389 Speaker 2: you know, places like that, they don't uh they are 659 00:41:48,399 --> 00:41:51,889 Speaker 2: all gone in terms of buying those products. So now 660 00:41:51,899 --> 00:41:56,010 Speaker 2: most of the mortgage production and origination is through Freddie 661 00:41:56,020 --> 00:42:00,810 Speaker 2: Mac and Fannie Mae, mostly fully guaranteed. And third year 662 00:42:01,020 --> 00:42:03,689 Speaker 2: is where the production is 663 00:42:04,280 --> 00:42:07,909 Speaker 2: and that sector has died down. And unless the private 664 00:42:07,919 --> 00:42:11,379 Speaker 2: sector securitization comes back up, you won't see that coming 665 00:42:11,389 --> 00:42:11,780 Speaker 2: back up. 666 00:42:12,840 --> 00:42:15,800 Speaker 1: So that house that I bought in 2003 with a 667 00:42:15,810 --> 00:42:18,919 Speaker 1: 723 I don't know if I could have afforded that 668 00:42:18,929 --> 00:42:21,639 Speaker 1: with a 30 year fixed mortgage at that time. So 669 00:42:21,649 --> 00:42:23,388 Speaker 1: I'm glad that it was there at that time. But 670 00:42:23,399 --> 00:42:26,439 Speaker 1: I and I have sympathy for young professionals today who 671 00:42:26,449 --> 00:42:29,750 Speaker 1: basically have to lock into those very high rates. Um Mustafa, 672 00:42:29,760 --> 00:42:32,469 Speaker 1: you have such a rich background on the US economy. 673 00:42:32,479 --> 00:42:34,408 Speaker 1: We can spend a lot more time. But I promised 674 00:42:34,419 --> 00:42:36,689 Speaker 1: our listeners today that we will not just talk about 675 00:42:36,699 --> 00:42:40,709 Speaker 1: the US and we will tap into your perspective on em. 676 00:42:41,330 --> 00:42:45,350 Speaker 1: There is a lot of pressure from the US fiscal side, 677 00:42:45,360 --> 00:42:48,189 Speaker 1: monetary side and we just talked about financial dominance as 678 00:42:48,199 --> 00:42:52,399 Speaker 1: well in the swirl of all these things coming out 679 00:42:52,409 --> 00:42:55,639 Speaker 1: of the US. Where do emerging market economies like China 680 00:42:55,649 --> 00:42:56,469 Speaker 1: and India Stand? 681 00:42:59,649 --> 00:43:04,379 Speaker 2: China is a whole story by itself. And I think 682 00:43:04,389 --> 00:43:05,299 Speaker 2: that um 683 00:43:06,929 --> 00:43:10,260 Speaker 2: the I have a few puzzles. Uh one of them 684 00:43:10,270 --> 00:43:16,610 Speaker 2: is the this whole housing, the housing crisis in uh 685 00:43:16,620 --> 00:43:19,719 Speaker 2: in uh China. And that sector is still in a 686 00:43:19,729 --> 00:43:22,800 Speaker 2: spot almost like a depression level. If you look at 687 00:43:22,810 --> 00:43:25,489 Speaker 2: the construction sector growth for 688 00:43:26,510 --> 00:43:32,919 Speaker 2: month after month negative and that sector unsold homes. Um I, 689 00:43:32,939 --> 00:43:36,699 Speaker 2: I did specifically travel around a little bit in China 690 00:43:36,709 --> 00:43:40,419 Speaker 2: last one year to just see on my own. These 691 00:43:40,429 --> 00:43:45,330 Speaker 2: apartment big apartment complexes sitting there empty just to have 692 00:43:45,340 --> 00:43:49,529 Speaker 2: a good feel for uh how they um how the 693 00:43:49,540 --> 00:43:51,770 Speaker 2: market eventually clears. 694 00:43:52,909 --> 00:43:53,530 Speaker 2: Uh 695 00:43:54,479 --> 00:43:59,669 Speaker 2: So it's a kind of a one story from emerging markets, 696 00:43:59,679 --> 00:44:02,929 Speaker 2: China and I'll come back to the housing one. The 697 00:44:02,939 --> 00:44:06,899 Speaker 2: other story is non China. And that's the big vulnerability. 698 00:44:06,909 --> 00:44:08,899 Speaker 2: There is um 699 00:44:09,620 --> 00:44:12,629 Speaker 2: uncertainty of us monetary policy. 700 00:44:13,510 --> 00:44:17,929 Speaker 2: It's clear monetary and fiscal policy. It's clear to me 701 00:44:18,209 --> 00:44:23,530 Speaker 2: that the US monetary and fiscal policy has become more 702 00:44:23,540 --> 00:44:26,370 Speaker 2: uncertain and more, um 703 00:44:28,290 --> 00:44:33,399 Speaker 2: having a bigger swings in, in those positive 5.5% increase 704 00:44:33,409 --> 00:44:36,870 Speaker 2: in interest rates. And I don't know myself whether there's 705 00:44:36,879 --> 00:44:40,260 Speaker 2: going to be another five coming up and in terms 706 00:44:40,270 --> 00:44:43,158 Speaker 2: of the dollar, uh the volt of dollar, do you 707 00:44:43,169 --> 00:44:46,629 Speaker 2: know we have seen the dollar appreciate like crazy, but 708 00:44:46,639 --> 00:44:50,310 Speaker 2: I there's no guarantee that it won't appreciate another, you know, 709 00:44:50,320 --> 00:44:54,610 Speaker 2: yen goes to, I don't know, 1 71 80 that 710 00:44:54,620 --> 00:44:55,658 Speaker 2: kind of level 711 00:44:56,020 --> 00:44:58,919 Speaker 2: uh or it can go the other way around the 712 00:44:58,929 --> 00:45:01,120 Speaker 2: prob the thing is that the 713 00:45:03,409 --> 00:45:08,820 Speaker 2: emerging markets are becoming more vulnerable to these shifting policy 714 00:45:08,830 --> 00:45:10,590 Speaker 2: changes in the US. 715 00:45:10,939 --> 00:45:14,580 Speaker 2: And I kind of worry that I see some celebration 716 00:45:14,590 --> 00:45:17,040 Speaker 2: in the sense that hey, we got a few countries 717 00:45:17,050 --> 00:45:19,939 Speaker 2: in trouble in the last cycle in the dollar. In Greece, 718 00:45:19,959 --> 00:45:23,360 Speaker 2: a few African countries, you know, Sri Lanka and not 719 00:45:23,370 --> 00:45:27,620 Speaker 2: too many because ASEAN countries have been very protected against 720 00:45:27,629 --> 00:45:35,949 Speaker 2: this dollar fluctuations because of their experience from 20 from 1997. 721 00:45:36,540 --> 00:45:40,159 Speaker 2: And so they have protected themselves somewhat better in the ASEAN, 722 00:45:40,169 --> 00:45:41,799 Speaker 2: but we saw the vulnerability 723 00:45:46,840 --> 00:45:52,489 Speaker 2: and then what happens now if we get a situation 724 00:45:52,500 --> 00:45:58,800 Speaker 2: where bond vigilantes uh really get aggressive and Trump keeps 725 00:45:58,810 --> 00:46:03,500 Speaker 2: spending and tax cut and we get another big increase 726 00:46:03,510 --> 00:46:08,209 Speaker 2: in the dollar, then who will, who is protected for that? 727 00:46:08,379 --> 00:46:10,979 Speaker 2: Which is, if you about, if you looked at it 728 00:46:10,989 --> 00:46:14,989 Speaker 2: about a year or two years ago, today's dollar is 729 00:46:15,000 --> 00:46:16,009 Speaker 2: a tail scenario. 730 00:46:17,790 --> 00:46:23,739 Speaker 2: And so another move 10 15% 20% in dollar could 731 00:46:23,750 --> 00:46:27,830 Speaker 2: be a bigger t scenario. And who is, who is, 732 00:46:27,840 --> 00:46:32,110 Speaker 2: has reserved enough built against that a dollar shift or 733 00:46:32,120 --> 00:46:35,860 Speaker 2: a big fiscal shift in the US? I'm not sure. 734 00:46:36,290 --> 00:46:40,739 Speaker 2: Um And the US runs at risk that most people 735 00:46:40,750 --> 00:46:43,500 Speaker 2: are not thinking about is 736 00:46:44,159 --> 00:46:50,770 Speaker 2: you, the reason US can spend like this uh is 737 00:46:50,780 --> 00:46:55,449 Speaker 2: because they, and when borrow like this is because the 738 00:46:55,889 --> 00:47:00,009 Speaker 2: uh the in interest rates have real interest rates, the 739 00:47:00,020 --> 00:47:04,020 Speaker 2: growth rate hasn't been too far below the real interest rates. 740 00:47:04,300 --> 00:47:07,219 Speaker 2: But if the real interest rates and the growth rate 741 00:47:07,229 --> 00:47:12,459 Speaker 2: gap becomes bigger and bigger, then the, the whole 742 00:47:13,750 --> 00:47:18,669 Speaker 2: the cycle of dollar change and um the interest rate 743 00:47:18,679 --> 00:47:20,729 Speaker 2: change becomes faster. 744 00:47:21,479 --> 00:47:24,169 Speaker 2: There are big increases in interest rate, big changes in 745 00:47:24,179 --> 00:47:26,060 Speaker 2: dollar and have, 746 00:47:27,080 --> 00:47:29,899 Speaker 2: if countries in the emerging markets that are not prepared 747 00:47:29,909 --> 00:47:33,859 Speaker 2: for that big changes, uh could be affected whether they 748 00:47:33,870 --> 00:47:38,219 Speaker 2: have enough reserve buffer, uh because it seems like your 749 00:47:38,229 --> 00:47:40,969 Speaker 2: economy can do perfectly. But you, if you don't have 750 00:47:40,979 --> 00:47:44,859 Speaker 2: enough reserve buffer, then you are in trouble or enough 751 00:47:44,870 --> 00:47:49,590 Speaker 2: other protections like swap lines and et cetera that countries 752 00:47:49,600 --> 00:47:51,500 Speaker 2: have been working on IMF as 753 00:47:51,919 --> 00:47:55,780 Speaker 2: um also promoted some of the swap lines, the regional 754 00:47:55,790 --> 00:47:59,159 Speaker 2: swap lines in Asia, for example, they have worked on 755 00:47:59,560 --> 00:48:02,919 Speaker 2: the countries need to start protecting themselves because their scenario 756 00:48:03,110 --> 00:48:04,979 Speaker 2: in dollar can easily happen 757 00:48:05,969 --> 00:48:09,709 Speaker 2: going. So that's the, the, the the tail risk is 758 00:48:09,719 --> 00:48:16,429 Speaker 2: very high from the next moves in the US policy 759 00:48:16,560 --> 00:48:17,949 Speaker 2: into emerging markets. 760 00:48:19,330 --> 00:48:22,290 Speaker 2: On the positive side, the some of the wars like 761 00:48:22,300 --> 00:48:25,570 Speaker 2: Ukraine war may stop and that would bring some stability 762 00:48:25,580 --> 00:48:28,379 Speaker 2: in the system could be positive as well. 763 00:48:29,110 --> 00:48:32,989 Speaker 2: But in China, I am perplexed because it's I have 764 00:48:33,000 --> 00:48:37,810 Speaker 2: been so deeply involved in the subprime prices in the US. 765 00:48:37,959 --> 00:48:42,850 Speaker 2: I've seen all these park dependencies created as a price 766 00:48:43,070 --> 00:48:48,169 Speaker 2: to pay to stabilize the housing market, stabilize the economy. 767 00:48:48,179 --> 00:48:50,689 Speaker 2: But it had some very long term negative effects 768 00:48:51,429 --> 00:48:57,040 Speaker 2: uh in terms of income, distribution, wealth, distribution age disparity, 769 00:48:58,179 --> 00:49:03,759 Speaker 2: that's um probably not correctable in decades. 770 00:49:04,419 --> 00:49:08,340 Speaker 2: So it's not for China, it's not just like hey 771 00:49:08,770 --> 00:49:13,260 Speaker 2: fund the banks and they would uh they would just 772 00:49:13,270 --> 00:49:15,909 Speaker 2: uh uh pump a lot of money into the homebuilder 773 00:49:15,919 --> 00:49:21,009 Speaker 2: industry and and clear that market very fast through some 774 00:49:21,020 --> 00:49:24,320 Speaker 2: sort of subprime option or something like that. As has happened, 775 00:49:24,330 --> 00:49:27,520 Speaker 2: private equity bought up all the homes in the US, 776 00:49:27,530 --> 00:49:32,810 Speaker 2: cleared that the prime market the that 5 million and 777 00:49:34,090 --> 00:49:38,439 Speaker 2: massive number of homes, private equity bought during a post 778 00:49:38,449 --> 00:49:43,340 Speaker 2: subprime prices to clear the supply demand imbalance in that market, 779 00:49:43,469 --> 00:49:47,409 Speaker 2: the supply demand imbalance very large in China could be 780 00:49:47,419 --> 00:49:50,580 Speaker 2: solved by something like that. But they are hesitant on 781 00:49:50,590 --> 00:49:55,509 Speaker 2: doing that, doing small changes here and there. But letting 782 00:49:55,520 --> 00:49:57,350 Speaker 2: those sectors just 783 00:49:58,189 --> 00:50:01,219 Speaker 2: take time and resolve and there's a huge price to 784 00:50:01,229 --> 00:50:04,209 Speaker 2: pay in terms of effect on the rest of the economy. 785 00:50:04,429 --> 00:50:07,759 Speaker 2: And sometimes I feel that uh all this balance sheet 786 00:50:07,770 --> 00:50:11,649 Speaker 2: recession is going to be much more costly for them. 787 00:50:12,419 --> 00:50:13,040 Speaker 2: Um 788 00:50:13,879 --> 00:50:17,310 Speaker 2: So they may as well solve this very quickly. Other 789 00:50:17,320 --> 00:50:19,620 Speaker 2: side of me says that the solution that I have 790 00:50:19,629 --> 00:50:21,959 Speaker 2: seen and they have only one data point for a 791 00:50:21,969 --> 00:50:26,449 Speaker 2: major housing crisis and solution wasn't actually that great from 792 00:50:26,459 --> 00:50:30,520 Speaker 2: a long term point of view. So that's gotta look 793 00:50:30,530 --> 00:50:33,879 Speaker 2: for a new solution. And so, so I'm kind of 794 00:50:33,889 --> 00:50:36,010 Speaker 2: torn and I feel that they may be looking for 795 00:50:36,020 --> 00:50:39,110 Speaker 2: a new solution, you see some package that throw to 796 00:50:39,350 --> 00:50:42,810 Speaker 2: stabilize the markets and then it doesn't go far enough 797 00:50:43,189 --> 00:50:47,290 Speaker 2: and maybe they're looking for a new solution that's different 798 00:50:47,300 --> 00:50:50,549 Speaker 2: from our solution in the US. So you have to 799 00:50:50,560 --> 00:50:54,819 Speaker 2: be seen in China, but I'm fascinated by um by 800 00:50:54,830 --> 00:50:55,770 Speaker 2: what's happening there. 801 00:50:57,179 --> 00:50:57,449 Speaker 2: So 802 00:50:57,820 --> 00:51:00,659 Speaker 1: on, on, on, on China before we go into India, 803 00:51:00,969 --> 00:51:04,569 Speaker 1: it it seems to me that they certainly don't want 804 00:51:04,580 --> 00:51:06,609 Speaker 1: to follow what Japan did or did not do for 805 00:51:06,620 --> 00:51:08,649 Speaker 1: 20 years with their housing crisis. 806 00:51:09,120 --> 00:51:11,120 Speaker 1: And I think many people tell them just follow what 807 00:51:11,129 --> 00:51:13,069 Speaker 1: the US has done. But to your point, it's not 808 00:51:13,080 --> 00:51:16,029 Speaker 1: like the legacy of those eight years under Obama when 809 00:51:16,040 --> 00:51:18,889 Speaker 1: US had very lackluster growth and there was basically a 810 00:51:18,899 --> 00:51:20,779 Speaker 1: balance sheet recession going on in the US. But the 811 00:51:20,790 --> 00:51:22,949 Speaker 1: stock market was doing well because of QE and so 812 00:51:22,959 --> 00:51:25,350 Speaker 1: on is probably not also something that the Chinese want 813 00:51:25,360 --> 00:51:28,189 Speaker 1: to emulate. I mean, the PB OC is at pains 814 00:51:28,199 --> 00:51:30,138 Speaker 1: when I meet with them that they are doing some 815 00:51:30,149 --> 00:51:35,600 Speaker 1: QE that they're underwriting certain amount of bonds for regional governments, property, 816 00:51:35,610 --> 00:51:36,179 Speaker 1: but very 817 00:51:36,449 --> 00:51:39,030 Speaker 1: on the side. I'm kind of amazed that for a 818 00:51:39,040 --> 00:51:41,919 Speaker 1: country that is sort of communist, they still seem to 819 00:51:41,929 --> 00:51:45,129 Speaker 1: be very fixated on certain private sector principles like moral 820 00:51:45,139 --> 00:51:47,290 Speaker 1: hazard and they definitely don't want that to come back 821 00:51:47,300 --> 00:51:49,060 Speaker 1: the way it has come back in the US. So 822 00:51:49,070 --> 00:51:51,859 Speaker 1: who knows? Maybe they are coming up with a middle point, 823 00:51:51,870 --> 00:51:57,979 Speaker 1: not as stifling as Japan and completely stuck, not overly 824 00:51:57,989 --> 00:52:01,040 Speaker 1: proactive like the US, but I like you are a patient. 825 00:52:01,050 --> 00:52:02,459 Speaker 1: I think that they should get a handle on it 826 00:52:02,479 --> 00:52:03,520 Speaker 1: a little faster. 827 00:52:03,790 --> 00:52:07,459 Speaker 1: OK. And, and India, which is the darling of global 828 00:52:07,469 --> 00:52:10,770 Speaker 1: em investor community. Uh Any view on that. 829 00:52:12,439 --> 00:52:14,709 Speaker 2: I, I think it uh there is uh I, I 830 00:52:14,719 --> 00:52:19,979 Speaker 2: think that there's, if you look at the three markets us, India, 831 00:52:20,320 --> 00:52:23,320 Speaker 2: China and try to figure out where you want to 832 00:52:23,330 --> 00:52:28,679 Speaker 2: be US. Definitely. Um Right now the stock market valuation 833 00:52:28,689 --> 00:52:35,110 Speaker 2: is 230% or something astronomical to GDP. Uh And China 834 00:52:35,120 --> 00:52:39,770 Speaker 2: is like something like tiny. Um 835 00:52:40,399 --> 00:52:44,719 Speaker 2: So I less than 50% or something really low to GDP. 836 00:52:44,729 --> 00:52:48,899 Speaker 2: So the valuation relative to GDP seems like outrageous in 837 00:52:48,909 --> 00:52:51,770 Speaker 2: the US. But I would still stick to the US 838 00:52:51,780 --> 00:52:55,409 Speaker 2: because I'm seeing more of these policies, um 839 00:52:55,919 --> 00:53:00,419 Speaker 2: uh more of this uh expansionary policies ahead of us 840 00:53:00,439 --> 00:53:03,729 Speaker 2: and government guarantees. So it's hard to be out of 841 00:53:03,739 --> 00:53:06,899 Speaker 2: the US. But if you are in a very long term, 842 00:53:06,909 --> 00:53:10,179 Speaker 2: China is not a bad place to be invested. Given 843 00:53:10,189 --> 00:53:17,000 Speaker 2: the valuation is at unbelievably low. Uh But uh India 844 00:53:17,010 --> 00:53:21,139 Speaker 2: is the most unknown to me. This expectation from the 845 00:53:21,149 --> 00:53:24,379 Speaker 2: market is very high 7 8% growth 846 00:53:24,760 --> 00:53:29,638 Speaker 2: to be sustained for decades to come in reality, whether 847 00:53:29,649 --> 00:53:34,000 Speaker 2: they can pull it off or not is um is 848 00:53:34,010 --> 00:53:37,259 Speaker 2: uh I don't, I'm not a big buyer into the 849 00:53:37,270 --> 00:53:41,020 Speaker 2: India story because some of the key fundamentals are not 850 00:53:41,030 --> 00:53:45,320 Speaker 2: there in India that requires that is required for really 851 00:53:45,330 --> 00:53:50,550 Speaker 2: a persistent takeoff. Uh For example, education uh level literacy 852 00:53:50,560 --> 00:53:51,139 Speaker 2: level 853 00:53:51,469 --> 00:53:56,149 Speaker 2: is nowhere close to where China was at this level mortality, 854 00:53:56,159 --> 00:54:00,330 Speaker 2: infant mortality, child stunt and every one of these human 855 00:54:00,699 --> 00:54:05,560 Speaker 2: uh uh quality of life index, it's way behind. And 856 00:54:05,570 --> 00:54:06,448 Speaker 2: how do you 857 00:54:07,229 --> 00:54:12,280 Speaker 2: sustain a persistent 8% growth if your human resources are 858 00:54:12,290 --> 00:54:15,830 Speaker 2: not ready for it? So, so I feel that there 859 00:54:15,840 --> 00:54:19,790 Speaker 2: is a little bit of over investment in China just 860 00:54:19,800 --> 00:54:23,209 Speaker 2: over investment in India just because of the enthusiasm to 861 00:54:23,219 --> 00:54:25,799 Speaker 2: shift out. There's no other place to go out if 862 00:54:25,810 --> 00:54:28,439 Speaker 2: you are getting out of China. Uh So India is 863 00:54:28,449 --> 00:54:32,070 Speaker 2: the place, the few investments in Japan and Korea. But 864 00:54:32,409 --> 00:54:34,120 Speaker 2: India was, but 865 00:54:34,739 --> 00:54:39,899 Speaker 2: you, there is structural problems in India that uh in 866 00:54:39,909 --> 00:54:44,810 Speaker 2: my opinion, it's not sustainable to attract that, that much investment. 867 00:54:44,820 --> 00:54:47,620 Speaker 2: So we're seeing that's coming back down, whether it's a permanently, 868 00:54:47,659 --> 00:54:51,589 Speaker 2: I believe it's a revaluation or, or a temporary reaction 869 00:54:51,600 --> 00:54:53,090 Speaker 2: to um 870 00:54:53,540 --> 00:54:56,320 Speaker 2: to, I don't know all the, I don't know what 871 00:54:56,330 --> 00:54:58,439 Speaker 2: it is said if it is going down a little bit, 872 00:54:58,449 --> 00:55:04,340 Speaker 2: but it's somewhat like 10% down the sun, not anywhere 873 00:55:04,350 --> 00:55:07,620 Speaker 2: close to where it can go. So I'm fairly bearish 874 00:55:07,629 --> 00:55:10,989 Speaker 2: on India. I think that China is great valuation but 875 00:55:11,000 --> 00:55:14,550 Speaker 2: I don't. And then US is the US is like, 876 00:55:16,550 --> 00:55:23,399 Speaker 2: it's outrageous valuation is just 230% of GDP the stock 877 00:55:23,409 --> 00:55:26,659 Speaker 2: market valuation, but it's still going up, you know, every 878 00:55:26,669 --> 00:55:27,489 Speaker 2: day it's going up, 879 00:55:28,469 --> 00:55:29,949 Speaker 1: it is going up. But I think all the way 880 00:55:29,959 --> 00:55:32,879 Speaker 1: to January 20 it's hard to see anything derailing that. 881 00:55:32,889 --> 00:55:34,879 Speaker 1: But after January 20th, we might have a bit of 882 00:55:34,889 --> 00:55:35,449 Speaker 1: a hangover. 883 00:55:36,300 --> 00:55:39,429 Speaker 2: Yeah. So it could be that uh by the rumor, 884 00:55:39,489 --> 00:55:43,500 Speaker 2: Zelda fact kind of uh story, then we might see 885 00:55:43,510 --> 00:55:44,639 Speaker 2: a reversal by that time, 886 00:55:45,280 --> 00:55:48,000 Speaker 1: you know, when you were talking about uh you know, 887 00:55:48,010 --> 00:55:50,689 Speaker 1: there not being that many alternatives beyond India. And you 888 00:55:50,699 --> 00:55:53,179 Speaker 1: mentioned Korea and Japan on the side, I was hoping 889 00:55:53,189 --> 00:55:55,030 Speaker 1: you'd mention Malaysia because I know you spent a lot 890 00:55:55,040 --> 00:55:56,830 Speaker 1: of time in Malaysia and there we have seen a 891 00:55:56,840 --> 00:55:58,899 Speaker 1: big spike in investment in the last couple of years. 892 00:56:00,479 --> 00:56:03,449 Speaker 2: I I that's, uh, puzzles me all. I spend a 893 00:56:03,459 --> 00:56:06,250 Speaker 2: lot of time Malaysia in Malaysia and starting to spend 894 00:56:06,260 --> 00:56:12,029 Speaker 2: elsewhere as well in Vietnam and elsewhere and ASEAN, not 895 00:56:12,040 --> 00:56:17,580 Speaker 2: just Malaysia ASEAN is definitely undervalued in my opinion that 896 00:56:17,590 --> 00:56:22,739 Speaker 2: the and very, and the, if you look at the 897 00:56:23,139 --> 00:56:26,719 Speaker 2: PP on a PPP basis ASEAN is much bigger 898 00:56:27,110 --> 00:56:34,139 Speaker 2: than, than what the reported numbers are. But generally the vibrancy, 899 00:56:34,149 --> 00:56:39,689 Speaker 2: the um the investments like this, all the semiconductor industry 900 00:56:39,699 --> 00:56:44,330 Speaker 2: moving into Malaysia, Vietnam, I was in Da Nang uh 901 00:56:44,340 --> 00:56:47,290 Speaker 2: and Hoi an a couple of months ago and the 902 00:56:47,300 --> 00:56:51,340 Speaker 2: number of resorts that are being built along the South 903 00:56:51,350 --> 00:56:55,639 Speaker 2: China Sea, the you just boggled my mind like. 904 00:56:56,010 --> 00:57:01,149 Speaker 2: So these are I uh why are the stock markets 905 00:57:01,159 --> 00:57:04,839 Speaker 2: there not going higher? I am. What's the biggest puzzle 906 00:57:04,919 --> 00:57:09,379 Speaker 2: puzzle of my life? I would be anytime. Uh and 907 00:57:09,389 --> 00:57:12,659 Speaker 2: I will, I will be in, I, I'm actually invested 908 00:57:12,669 --> 00:57:16,179 Speaker 2: in some of these ASEAN uh part of the market 909 00:57:16,189 --> 00:57:19,250 Speaker 2: in the equity market. But uh why it doesn't go 910 00:57:19,260 --> 00:57:21,030 Speaker 2: up more? And this puzzles me, 911 00:57:21,760 --> 00:57:24,149 Speaker 1: right. And, and this region did have a golden run 912 00:57:24,159 --> 00:57:26,870 Speaker 1: in the nineties uh the the Asian financial crisis sort 913 00:57:26,879 --> 00:57:30,290 Speaker 1: of ruined it. But you would have thought that they 914 00:57:30,689 --> 00:57:33,320 Speaker 1: cleaned up their banking system, their balance sheets through the 915 00:57:33,330 --> 00:57:36,219 Speaker 1: two thousands that this decade over the last decade should 916 00:57:36,229 --> 00:57:38,620 Speaker 1: have been their moment in the sun, but they've really underperformed. 917 00:57:38,909 --> 00:57:41,370 Speaker 1: But most of as you know, we D BS did 918 00:57:41,379 --> 00:57:43,719 Speaker 1: a joint report with Ben in consulting earlier this year 919 00:57:43,729 --> 00:57:46,219 Speaker 1: looking at Southeast Asia over the next decade. We are, 920 00:57:46,229 --> 00:57:48,550 Speaker 1: we are very optimistic. And when we began the report, 921 00:57:48,629 --> 00:57:51,100 Speaker 1: Malaysia was not like at the top of our consideration, 922 00:57:51,379 --> 00:57:55,120 Speaker 1: but as we wrote the report, looking at the tech 923 00:57:55,129 --> 00:57:59,120 Speaker 1: investment flows, looking at domestic travel tourism industry, we've become 924 00:57:59,129 --> 00:58:02,500 Speaker 1: quite constructive on the Malaysia outlook. But you know, I 925 00:58:02,510 --> 00:58:05,760 Speaker 1: think we need to put ASEAN conversation aside for another day. 926 00:58:05,879 --> 00:58:08,560 Speaker 1: You've shared such stuff with the US and, and some 927 00:58:08,570 --> 00:58:11,500 Speaker 1: of the large GM maybe we'll end it right there. 928 00:58:11,580 --> 00:58:13,370 Speaker 1: Uh Most of our Children, I can't thank you enough 929 00:58:13,379 --> 00:58:14,560 Speaker 1: for your time and insights. 930 00:58:15,800 --> 00:58:19,270 Speaker 2: Great time, great to talk to you. It's a real pleasure. 931 00:58:19,290 --> 00:58:21,729 Speaker 2: Always fun to have this conversation. 932 00:58:21,949 --> 00:58:23,860 Speaker 1: Yes. And I think our listeners should know that we, 933 00:58:23,870 --> 00:58:25,899 Speaker 1: you and I have conversations like this all the time 934 00:58:25,909 --> 00:58:27,000 Speaker 1: without the recorder. 935 00:58:27,909 --> 00:58:31,020 Speaker 1: Um Thank you very much to our listeners and viewers 936 00:58:31,030 --> 00:58:33,639 Speaker 1: as well. Uh Copy Time was produced by Ken Delbridge 937 00:58:33,649 --> 00:58:37,360 Speaker 1: at spy studios, Violet Lee and Daisy Sharma provided additional assistance. 938 00:58:37,370 --> 00:58:40,379 Speaker 1: It is for information, not only does not represent any 939 00:58:40,389 --> 00:58:44,459 Speaker 1: trade recommendations, all 143 episodes of the podcast are available 940 00:58:44,469 --> 00:58:48,560 Speaker 1: on Apple and Spotify. You can find our research publications 941 00:58:48,570 --> 00:58:51,560 Speaker 1: by Googling DS Research Library. Have a great day.