YouSaid · the spoken record

Paul Hodges

lines on the record: 173
first: 2024-01-13
most recent: 2024-01-13
sittings or episodes: 1
sources: podcast

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“Oh, you know, people won't like it. I mean, we've lost subscriptions from companies where we said, you know, we don't think that this kind of project is right. Well, you can't say that. We're not putting that on our engineer. Most companies, actually, most individuals are happy to be challenged. But, you know, we're not the people who take your watch and then tell you the time.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Yes, and that is immensely valuable to a very, very large corporation. And you're absolutely right about you and the folks who are at the PH report have a view. And to be honest, that is something that drives me crazy about some research reports is when they say, well, on the one hand, this, on the one hand, that, and they don't have a conclusion, it's like just say nothing. And they wanted to say nothing. They don't have a real point of view, but they just had to write because the report is due Tuesday.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“You give us the logic, we then have to go back and go through your logic, and quite often. That guy said to me, yeah, quite often, you know, we are one of the biggest companies in the world. We do actually know more than you do, and we can see where you're wrong. But unfortunately, he said, which is why we continue to subscribe, sometimes we didn't get it right, and we've spotted something we didn't know.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Well, thank you for the opportunity. We have a website which is new-normal.com, which has got all the background. We do a newsletter if people want, which is free each week. But what you get is essentially a team of people with a lot of experience in energy markets in China, in chemical markets, obviously, and geopolitics, giving you their autos, yep, every quarter we do a deep dive on the auto markets because it's such as largest manufacturing industry in the world. So you need to focus on that and so on. We do sustainability as well because that is becoming important. And we give you our best view of what's happening. And the nicest thing I think that everybody ever said to us was that very large corporate who said, well, we read your report and we get to the end and you give us a conclusion. We love you giving us a conclusion. And we say that's completely wrong. But then because...”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“He's done a much more interesting thing that they've spent 1.7 billion, I think, but in order to learn how to get those manufacturing techniques back into Europe. So they're not interested in the Chinese market anymore. They realize that's gone. What they are interested in, how do we replicate what's happening there in our home market? And so that's why I think they could do very well. It take a while because these things don't happen overnight. But this is a five to 10 year game. It isn't a five to ten minute thing”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“But actually what's happened is that this is a complete shift in 10 years. Ten years ago, Chinese couldn't make cars for dustbins sort of thing. They had to have Western technology. I mean, Chinese companies lasted three years. They had to have the Western technology. They had to have the Western engineers, how to build a factory and so on. Well, now you've got VW paying 1. in order to be able to partner from in the Chinese market, which was a market to own.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“You know, I think Carlos Tavares is on the right. He's Portuguese, Portuguese. So he understands about four countries. He's got his head on his shoulders. I think VW. Got major problems. Yeah, yeah, there's one major, you know, at the end of the day, I think Mary Barr at GM or the forward people and so on. Your namesake, you know, I think they've been over-enthusiastic, but they probably got the resources to come back. But VW have a real issue that they've got a lot of profit in China. And of course, they've lost that market. So, you know, the prestige car for every member of the Communist Party was Avid car. Hardly selling any”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“I see what you mean. And then so China has that edge. You know, give it Charlie Munger passed away last year. He was a big admirer and investor in BYD. What do you think about? That company and their prospects. I mean, do you think BAYD will be number one and ultimately be the winner?”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“The next stage, that's 15% or something of the total market. The next 35% market is not the early adopters now. It's actually the start of the mass market. And the mass market, if I'm a mass market person, I'm worried about will I be able to get the kids to school? Will I get it recharged? If I have to go and see Granny, will I be able to get there? Very practical people. And that's what the US car industry was very good at doing that gasoline and diesel cars. It's completely failed to do that with EVs.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“But simple marketing, you know, you start off with your enthusiasts, their celebrity types and so on. They don't care what it cost is. They're just like driving a Tesla or whatever. Oh, look at that. Hey, that's wow. And then you get the early adopters and the early adopters tend to be people with quite a lot of money. And they like new things and they like talking about them and so on and so forth. So with that bit of the market, that's where EVs have been. But that isn't where you automarking is.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Why are in America, and again, I hate to always bring it back to America, but why in America are companies having so much, so many issues, either constructing electric vehicles at cheaply or selling them cheaply? And I'll get Ford and GM, I believe, have both encountered hiccups where a lot of people would rather run a Tesla than a Chevy Vault.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Guidance, they need to have a signature all over it. So it'd be really desirable and so on. And we can make 50,000 of them and they'd be cheap because it's only an assembly job. The battery you buy. is whatever the battery costs battery costs are coming down so that there isn't going to be a market for EVs in my view that you can make money out of because anybody can do it there's no”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Will it be working and everything else and so on? But if we have battery swapping and we have a common battery, which is kind of where we are moving, they're becoming a commodity, then I don't mind because I simply drive into the service station in the way that I would have done to fill up with gasoline and I swap over. And so I think a company like Neo, which has got enormous, let me send a couple of billion support from local governments and so on in China, none of this is being done by the shareholders or by income. But China has decided that this is an area where it can build exports and so on. So I think the battery swapping and the potential for autonomous driving is actually where the cable will be. In terms of electric vehicles themselves, they're actually very simple. You and I, if we wanted to, you know, we could get the forward guidance audience and we can say, look, guys, we're going to build this fantastic forward.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“I'm with you there. It's up to me for years late and so on. So, you know, whereas the key with a startup is to always promise less than you actually deliver. That's where you build credibility. And he didn't have to do anything. But in answer to your question, that the market is in a transition stage. So I think that what we are moving, and I know that Cruz has made a big problem in San Francisco and so on, but actually the other people are still operating quite nicely. And if you look at what's happening in Europe and so on, I think we will move, we will significant move towards autonomous vehicles in two or three years' time. One of the keys to this is going to be battery swapping. And battery swapping becomes really interesting game changer because at the moment you worry about battery charging. If I have to drive to visit you, is there a charger?”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“I don't think Tesla has a chance, frankly, and I get lots of hate mail, I know. Because Musk promises be never delivered. He's been promising full service driving from...”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I get China. China companies have one structural advantage is that they're used to making electric vehicles for $10,000. And that should be very, very attractive. I know BYD, I think, is the biggest one. And then Tesla. What company are you the most excited about? Who do you think is going to be the ultimate winner in the electric vehicle company? And I'll say, I think a lot of people would answer Tesla or either as number one or number two, but I don't know if that's your answer.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“They don't have a value proposition. If you wanted to buy a 20,000 buck car in the state, you can't do it. And so if you assume everybody can pay 40, 50,000, that's fine. But if they can't, you know, Detroit, we have a problem.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“But I mean, his original strategy laid out in 2007 or something was we'll start off at the high end with the rich punters who have to pay any price at all and then we'll use that to fund the development of the last market car. And so this is where the Chinese have got a real head start because they've actually always started from the position of having a car that sells at 10,000 to twenty thousand bucks. So you have to designis and so on are aware of this when I go on. So they are rushing to catch up here. But you have got a problem in the US market that they got used for three or four years, particularly during the COVID years of pushing up the prices, adding on more costs because they would borrow it very cheap, no matter what. And they left the middle ground.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I'm not a cybertruck fan, but I think he wanted to start Tesla originally, luxury car markets, so that he could have a high grade enough gross margins. So that makes sense. So he hasn't been, but he has been cutting prices aggressively, right? For the model, whatever. I don't know.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Now that is actually quite different. And if you look at Elon Musk, I mean, Musk had the opportunity of a lifetime to come through with his 20 or 25,000 car. If he had that, he'd walk off the lots. He wouldn't have to bother scrolling and so on. But he didn't. Whoever this stupid hundred thousand pound truck. I mean, who wants it?”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“I mean, I think it's pretty clear that you don't need nuclear, but if you have nuclear, I don't see the reason for it. On the other hand, if you then look at the auto market, what you see there is part of this demographic shift, I'm afraid, that we were talking about, in the when we had the baby boomers in their prime, they developed and introduced for the first time this thing called the middle market where you could buy your chevy or whatever and you could put a go faster slide on it instead of paying twenty thousand dollars for it, you pay $25,000 because I've got a go faster stripe or whatever it was. And so prices went up and the average cost of the car went up to $48,000 or whatever. And then, of course, interest rates went up, which meant you're paying $750,000, $800 a month and so on. It's not going very well. And you need to get back to the world where you've got an affordable car.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Don't think there's any evidence for it. I mean, you will inevitably get people who are over-optimistic. The key issue that you need for any kind of project like this at scale is you need some guarantee of what the price is going to be. And so you need a contract for difference or some form like that because the world is uncertain and prices do go up and down and so on. And the problem in the UK has had this problem in the last round that it didn't get the contract for distance right. So nobody came forward to invest. I mean, the Germans are a bit crazy. I mean, you shut down nuclear and you haven't got wind and everything in place and you then open up coal mines. Excuse me about this. I'm not sure you quite know what you're doing here.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Inefficiency, but you've now got to the point where you can roll these out and they are much cheaper. So I mean, if you look at us here in Little Portugal, we had this issue a few years ago that we wanted to import LNG, but we didn't have enough demand. And so we tried to do a deal with France to send the surplus to France. France didn't want to do it because of its nuclear industry and so on. So we were left. We had to do wind, water, and solar. through all the crisis last couple of years our electricity prices haven't gone up”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“I think you translate there's a guy Mark Jacobson, professor at Stanford, and he's done a lot of work in this area and has produced programs for every state in the States and every country in the world, more or less, and shown how that you can move to wind, water and solar as your main supplies. And countries are doing. And I'm not really worried about those. I mean, there's supply chain issues and so on. It's always going to have that. But essentially, they are much cheaper than the alternative and they're much less at risk. So you're not going to be held grantsome on the oil price or whatever by Russia or whatever. So, you know, so they've got all sorts of benefits. And we've always said that these things, yes, they need support to start with because they're starting right at the top of the culps curve and you can't expect if you step the first.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Care hundreds of thousands of Russians are being killed and injured there. I don't care. It's not important to Putin. So if you don't understand that, you don't understand the risk.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Well, I mean, he's being pushed off the headlines by what the terrible things that happen in the Middle East, obviously the system can't seem to have enough reporters to cover all these things. Essentially, the problem is that the Americans, the American government has run out of money. They can't provide, therefore, anti-aircraft cover and everything else that Ukraine needs. It hasn't give it enough to attack. And so what the Russians did was they stockpiled all their rockets and everything else for the end of the year when they knew that the defenses were starting to run out and they're just firing them off day and night and they just hope that there won't be any agreement in Congress and that nobody will actually get around to taking their money from them and giving it to Ukraine and so on and that they will be able in six months time or years time.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Well, very simply, Peter said many times he believes the greatest tragedy of the 20th century was the fall of the Soviet Union. He said many times, repeated it recently, that he wants to restore the Soviet Union. And he said recently that once he's conquered Ukraine, he's going to go into Poland and the Baltics, both of whom are NATO members.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Yes, I With you there. So I don't profess to be a Paul Hodges of the banking system. What you are to the chemical industry and the auto industry. But I'm an aspirational Paul Hodges of the banking industry. I would say I was very worried about that from March into the summer and things were looking worse. But I think there's been a little bit of a turnaround in the banking sector and money stopped flowing out of the banking sector. The Fed is going to cut rates, which will help. I mean, I think that I agree with you that the Federal Reserve's level of interest rates is pretty overrated on many aspects of the economy, but one aspect where rates definitely do matter is the banking industry. So I'm maybe a little bit more optimistic on the banking sector. Geopolitically, it sounds like you have some severe concerns. I guess we could put them in three categories, Russia and Ukraine, Israel and the Middle East, and China and the US. Which are you most...”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“That essentially was, I understand it was Silicon Valley and that essentially was we work and that was essentially bare stones and everything else. And there's a lot of it around. I mean, look what's happening to commercial real estate, you know, or so somebody's got to take the losses on that somewhere.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“The whole issue is can you actually hold to market? So they had assumed that they would be able to hold these things to lock it when in fact interest rates were going up. So that wasn't they couldn't lend their money to people who would pay them enough to cover the losses on their holdings. Classic classic mismatch, right? So the key, and it's like we work. What's the easiest way of going bankrupt? Lend long and borrow short.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“No, not Silicon Valley Bank. That wasn't Silicon Valley Bank. They bought, their defaults were very, very low. They bought treasuries and mortgage-backed securities whose defined values because of rising interest rates, not because they couldn't.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“But I mean, there are warning signs, and up to a certain point, oh, Paul, you can get worried, but this is going, yeah, yeah, yeah, right. But once that's happened, something changes in the, and with Bear Stearns, it was absolutely clear that behaviors changed. Now, Fed ran around doing all sorts of things and so on and so forth, and it was disguised for a while and so on, but it was gone. You know, there is a problem there that banks have lent regional banks, have lent money to people who aren't going to be able to pay it back.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“who were focussed on that and the central banks and a whole range of people and so on. So you really, you could still be surprised, but you understood the background of what was happening. I don't think anybody particularly expected the Berlin Wall to fall in November 89. They could see that something was happening here. And when he happened, it wasn't a surprise, but not many people actually forecasted it. It was one of those situations. But some of the things that are happening today, which are easily forecastable, people haven't noticed the warning signs. I mean, bare stones. Once Bess Earns went in subprime, that was it. You know, there was no coming back. Once Silicon Valley went in this cycle, that's it. There's no coming back from this.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Everything and all these things impact. And what I'd almost say is that the advantage we had, although we didn't realize it in the 60s and 70s and 80s, was that we didn't know that all these things were important. I mean, I was a sales rep for the UK's largest chemical company, second largest company in the world, and I was selling to the paint and resin industry. Well, not a very fancy kind of thing, important learning ground for me out there with real people spending their real money making paint. I had to unilevers and so on. But those people, when I went, I was the ICI rep. And I gave them the ICI view on what was happening with the Kremlin, what was happening with the oil prices, what was happening in US politics, what so on. That was what everybody wanted to know. And the ICI system, because it was the largest company in the UK, we had a whole range of people.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Now, this is, you know, I've lived through the Cold War. I've lived through the Cuban Missile Crisis. I've lived through the major downturns of 73, 4, and so on and so forth. And to be honest, I noted them, but that was his life. This is easily the worst environment I've ever seen.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“No, no. I mean, when I was young and you're, you know, I took the lender wouldn't lend on the house that I bought. My parents had to give their deeds in to support it and so on. I had to borrow from a girlfriend in order to put up my share of the deposit and so on. And interest rates were at 15%. And I went, okay, yeah. So you just do it. And so I'm not normally, you know, I like to understand what the risks are. But for me, the biggest risk was I had nowhere to live. That was pretty important to me. The fact that it all worked out, I had no idea how it all worked out, but it did. So I'm not generally worried, and I haven't been until recently, I got worried about subprime because people weren't listening. So then Subprime happened. So that was thrilled. And we were then, as you know, but fairly bullish about things and so on.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“So part of the reason why I was excited to have you on today is because I believed you were, and indeed you are very attuned to risks much more so than I think your average person in the market today. I've got a question comparing you not to other people, but comparing you to the past in the Paul Hodges. Have you ever in your career been as worried or as risk averse as you are right now?”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“sail through, then yes, then we go back to having more confidence and moving out. But if you don't have, what I'm really saying is if you don't have confidence that you really understand what might happen, which is where I am today, I don't take that risk. It's like, but it's like Warren Buffett, you know, say, yeah, yeah, why aren't you investing in tech? Because they don't understand it. Who do fun but I do not, I know, and maybe I'm exaggerating, maybe I don't understand all these things, but I think that there are massive geopolitical risks out there which aren't taken account of by the markets.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“My base case on rates is that I would be very, very cautious about anything beyond three to six months. I mean, talking to our clients, the most sensible strategy that they're adopting is just laddering. What I'm saying is there are too many uncertainties out there that I, for one, can't process them all. And, you know, so, you know, but what I can see is that I can get my clients can get a reasonable return by not taking very much risk six to nine months out. You just roll that over, roll it over and ladder. And when some of these uncertainties are cleared up, if we get a clear majority in the election, if the war end, if both wars end, if China, if I'm wrong about China and Japan and they all manage to...”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“So, what is your view on, let's say, the five year treasury yield, the 10 year treasury yield? I imagine if we had, if you took rather most people who think that a recession is coming would be inclined to be bullish on duration, that interest rates, you know, longer-term interest rates, not the Fed will decline. You said there's a 20% chance risk, okay, you'll go up. You're in that Jim Bianco camp. But so that means you think there's an 80% chance they decline? Or so what's your base case on rates?”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Disagreeing with you, Jack. I'm saying if you look back in history, if you look back at the 70s and 80s, that didn't happen. The failure, Burns kept his rate slow and so on. That's fine. Yeah, he didn't control the market. What was this thing called the Bond Market Vigilantes And the vigilantes asked their assigns that they started to come back. Once the vigilantes are there, the Boons could say what he liked. Didn't matter. Nobody took any notice. He didn't have to worry about what's the latest fed governor said. He didn't even know who they were. They were irrelevant.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“The Fed can do what it's like at the overnight rate. It has a moment of crisis, it has a role there and so on. The one week and one month, three months and so on. But the question is whether the Fed's actions at the short end, which it clearly does control, whether they impact what's happening at the heart of the matter at the two, five and ten year rate level. And what I'm arguing is the Fed will become irrelevant at that point because lenders will take things in their own hands. I don't care. If I'm a lender and I've got 100 million that I want to lend out to someone, I don't care that Powell has said the rate is going to be 1% or 2% or whatever. I'm only going to lend to people that I trust. So everybody else is going to have to bid up.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Wait a minute. Is the my point is Is the Fed going to be in control at that point? Because if you have a severe recession, then by definition you're going to have lenders refusing to lend to weak players and you're going to have a lot of defaults. And so if I've actually got money to get money under the mattress, I'm not going to lend it to most people. And, you know, and so we can see that. are up in the teens so”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Yeah. What do you think? How low do you think the Fed will go in this cycle? Because if you think if someone were to tell me there will be a severe recession within the next 18 months, I would think that the Fed cuts to 2% or so.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“The strong race of reinflating the speculative dynamic. But if you don't cut rates, you run the risk of actually the whole thing falling apart. So you're really, you know, your margin of error here is not very high. And the thing that has really got a problem is you've got an election, you haven't got consensus between the two main parties of what needs to be done. They're at each other's throats and that's going to get worse. You haven't got consensus within the Republican Party about what they want to do, let alone between the Republicans and the Democrats. And of course, you've got the no-names party coming along, which may or may not upset the cart as well. And then at the same time, you've got these external risks of China, Japan. You've got a war with Ukraine, and you've got a war in the Middle East.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“The issue that you've got is a really complex dynamic now because you've got embedded wage inflation coming through. You've seen that in the wage settlements and so on. So there is a limit to how low inflation can go on a semi-permanent basis. Six months or so doesn't matter. So those are going to come through. That will inevitably leave you with unemployment because people are pricing themselves out of jobs now. And that's just an inevitable factor what's going on. And you've got a very dangerous position in credit. You've got a lot of overleveraged people and at the same time you've got an awful lot of government borrowing. So the Fed's position now, you know, I would have a lot of sympathy with because if you cut rates, you run the risk very”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“Catch up rates in airlines, in cars and so on and so forth. So you've now embedded the whole inflationary process in which the problem of the 70s. This is what Volcker had to tackle, that you allow inflation to get going, you then get the second wave, which comes in a bit later because of all the pay rises. And this is this is what Paul has done. He didn't want to upset anyone so he's ended up. He didn't.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“So, what he's doing is he's reacting, whereas a good fed chairman, if such a thing existed jury's out on that one, but let's say Paul Volcker as an example, a good Fed chairman takes a view of what's going to happen on the next two or three years and how do I therefore want to position myself in order to optimize the position in light of the dual mandate. And so had Powell known what he was doing, he would have said in as the inflationary pressures brewed up, right, we need to raise interest rates, we need to maybe get 2%, maybe 3% and so on, ticket relatively gradually, you just sort of lean into the problems. And then as you see that the supply chain issues were still, they were starting to, before we get to the point where people are starting to have, I mean, look at some of the wage rises that have gone on now.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“How did he get to the parts two and three wrong? Okay, he got transitory wrong, but how did he, what did he get wrong about drastically? So if, you know, T0 is January 2022 and, you know, inflation is soaring high, you raise rates very quickly. You know, you start with 25, you have to 50 and then 75, and then you jack it up as soon as possible. And then once inflation starts going down, then you slow the pace of increases and then you hold it there and then boom, it inflation went from 9% to 3%.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT
“The chemical industry was right, and there was massive inflation. You can't now turn around and say, oh, has he sat there through that and kept saying team transitory, we're not going to do anything about it? Okay, fine. You know, he can't rewrite history, but he might have turned out all right. But he didn't. He changed. He did exactly the wrong thing at the wrong moment. He didn't, you know, with the benefit of chemical industry knowledge, you had to raise rates earlier. You wanted to head off the inflation. He didn't. He blindly said, no, no, our models don't show any inflation. Then he panicked. Then he took them much higher at a moment when the chemical industry was also already telling him, actually, no, inflation is going down again because it was caused by supply chain problems. It was caused by COVID, all those ships piled up in Los Angeles, etc, etc. Very valid reasons for it. And it was too big to say it was transitory. It was going to take a couple of years to work its way through. But he got it completely.”
2024-01-13 · Forward Guidance · Paul Hodges: Overcapacity In Chemical Industry Suggests Demand Is Weakening · IDENTIFIED FROM THE TRANSCRIPT