YouSaid · the spoken record

Roger Hirst

lines on the record: 86
first: 2023-02-02
most recent: 2023-02-02
sittings or episodes: 1
sources: podcast

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“This time, if the Fed's cutting rates, I can't imagine they're going to get a raging equity bull market. They're going to be cutting rates because something has severely gone wrong very, very quickly. So, yeah, I would agree with that.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely. And people don't often like that complexity. They want to simple do this, do that. But I say I don't have a lot of macro certainty about pretty much anything except one area is, and I think maybe you agree, is that if the Federal Reserve cuts in 2023, it will be because of a somewhat severe recession. They are not going to be throwing out breadcrumbs to the bulls because unemployment is at 3.5%, but interest rates are too high. I could be wrong about that, but that's probably my highest conviction view.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“I mean, look, a perfect example of this is beginning of 2020, I came in saying, I think things are slowing down. I actually think that bond yields could actually stay relatively low, which was wrong. But at the same time, I said, however, although I think that we are going into a growth slowdown, which we actually did the first two quarters with negative growth, there was a inverse head and shoulders on the US ten year yield, and I said, this is a big risk, because if 175 breaks, it's going to go to 3.25. Obviously went further. My point being is that I was kind of thinking growth slowing, but here's a big risk. And I pointed this out to people. I didn't say buy some puts on bonds. I said the risk is that bond yields go higher, bonds go lower if this breaks, but not my base case. And that's how I like to frame things, is I'll tell you what my thoughts are, but I'll try and point out that there's a credible argument over here that this is a really bare case scenario for bonds that you have to be absolutely aware of and hedge out.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, absolutely. And a trade often attached just to a narrative. And narratives sometimes are correct, but people shouldn't always be searching for a narrative. They shouldn't be looking for something. The narrative comes to you. And if you're convincing and you love it and you believe it, then go with that. But I like the China reopening, but I don't know if I love it. And now I'm here you talk about Korea. I think I don't love it. And I respect that about you, Roger, that you're not committing to a narrative. And when facts change, you're changing your mind, which I think to be an investor successful investor is necessary.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“I do have a Twitter. Yes, no, no. I would. I can't remember it. It's terrible because I kind of go on it, but I sort of just go on and do it. So yes, I do have Twitter. I don't have many followers just if I'd be so far. I will try and put some stuff on there because what I try and do is I think the most important thing is a framework. A trade idea is valuable to one in 10 people. And I had 25 years of doing this. But a framework is valuable to whether you're a day trader or a long-term investor. If you have a framework and you can put your own time horizon.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Maybe buy some of those calls if you're just worried that the upside gets away from you, those cheap calls. Have your cash ready because I think there will be those buying opportunities down the road because the Fed may well have to tighten more plateau and then go those financial conditions loosened and things picking up again. We've got to tighten and crate the recession that we haven't created so far. And then you pick your poison coming out of recession rather than trying to catch the falling knife going in.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Markets, but I feel that the Phoenix rises from the ashes. We haven't had the ashes yet. You don't tend to get the changing leadership into the low. It tends to happen coming out. And the emerging markets in 2000, they kicked in really in 2001. Korea sold off first 2000 to 2001 and then started rallying out of there once China kicked in WTO. And I think that's what we've got to look for. Keep your powder dry. There's no shame in having cash. At least cash today you might get 5% in a money market fund. Yeah, negative real rate, I get that. But it's something which you can have. And if we do get the recession, I don't know, it's an opportunity cost. If I miss out on the next six months of some great upside, yes. But are you a trader? Are you a day trader? Are you a swing trader? Or are you investor? Are you looking long? If you're looking long term, I'd say have some cash ready.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Quality tech, yes. If bonds don't go into another big, steep decline in yields, which I don't think they will, then there's going to be some great cyclicals out there. There's going to be some good emerging markets. Everyone loves the emerging markets. That's a big consensus at the moment. The big key to make here, difference here, is that in 2000, 2001 really to 2008 with China on board, it was by any emerging market, give them a great acronym and stuff your pockets. And they all went up and everyone poured money to the MSCI emerging markets. Everything went up. Today, I think it's going to be, that market will do well, that one might not. That one looks really exciting. So this is a story about divergent opportunities, far more opportunities in far more pockets, different regions, different segments, different sections. So to me, this will be an environment where there will be some great buying opportunities, but we'll probably have to pick them. And I want to buy some of them.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Be hedged on that downside. But think about where we are today. I can actually get an interest rate. I can get a yield on a funding, you know, a money market account for the first time in a long time. I can actually get a rate of return. Yes, it might be still negative because currently inflation is still high, but I can get that. We've seen bonds sell off. Now, they might not have sold off the whole way they need to, but they've sold off from levels that were ridiculous. It's not that we're at ridiculous low levels now of bonds. It's that we were stupidly high bond prices and stupidly low yields before. That provides opportunity. If we are right that this is becoming, you know, if we see GDP becoming a little bit more cyclical, a bit more volatile in GDP, shorter cycles rather than 10, 11, 12 year cycles, then we're going to have much more opportunity for trading. So it becomes less a convergence on a single trade, which was buy tech by bonds, and much more a good.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I think this is not the one, I don't think this is going to be the big one yet. I do think we're going to see more insolvencies because as we roll into those higher interest rates, higher funding costs for some companies, the zombie companies that have been kept going because you're at zero. I think we'll get those insolvencies. But I also think this is one of those ones where, as I said, it's been sort of a rolling recession so far. And I think what's interesting is that I doubt we're going to get that correlation event that we saw, well, we won't get the correlation event that we saw in 2008 because it was a policy error with Lehman, effectively we now know, that caused the really big correlation event. There's always the debt issues. And most people are still worried that the level of debt is going to cause defaults of a major scale. I think what we get here is, and this is in some ways the exciting thing, is that when we're looking at recessions, we're always thinking doom and gloom, the downside. And yes, that's always right.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“But also the banks that were hedging those asset managers, I had the other side of those hedges who thought they might see those hedges disappear and have a massive hole in their balance sheets. Yes, there is always risk with banks because they are, the other side, a lot of these positions, but ultimately it was with the sort of pension funds and the asset managers running the pension funds where those risks particularly lie today.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“If we get one or two of the sort of bigger institutions or bigger brokers, et cetera, market makers within these markets getting hit, then the liquidity, which is always there when you kind of don't really need it on the way up, but really need it on the way down, it disappears. We could have those. We've not had a real liquidity crisis yet. The last one was obviously COVID, and that was dealt with very, very relatively efficiently in reality. But it's always a concern. And I do think it is very much more within the asset management community because the banks had to let that go. They were forced to get rid of it and they still have charges which if you're GSIB can't be allowed to fail, your GSIB bank, you have these charges. It's a risk. And what happened in the end of last year when the guilt market blew up is it was the asset managers”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Every now and again something, some market dislocation is going to happen, which means that you take one of those players out like we saw with the, it was XIV ETF in 2018 went from whatever value it was to zero. That's a risk as well. So you've got these pockets of risks where at the moment the market makers who are a few big houses, particularly in the US, taking to the side of institutions primarily rather than retail doing these one day or no day to expiry options, they generally are winning, but then there could be one of those market dislocations where you could wipe out.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Price and the best way to not reprice is to make sure no one sells anything to find a price, so you're gate. So that's what a lot of gating feels like it is. Well, if we gate it, we don't have to mark to market 20, 30% below where we currently have it. So let's prevent that. So it kind of goes through, yes, you can ride that out, but there's going to be how long can you do that? And again, we've been used to market sell-off, economies collapse, and then they rebound very, very quickly. But what if we don't have that same down and up function? And then the other element to all this as well, which is you hear more and more about this now with all these very, very short dated options, one same day options expire, one day to expiry, no days to expiry options. Someone takes the other side of those. And most of the time, the person taking the other side is going to win. So sellers of options win, hands down on average all the time. But this is the sort of the risk of the steamroller thing.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think we saw this with a little spat with the Bank of England in that banks were forced to take less risk. They had charges. One of the reasons why we saw a big move in bond yields in 2019 was that a lot of banks were forced to move out of loans into bonds because of regulatory costs. And so that drove demand for bonds and yields went down. So banks have fundamentally changed their model and are less risky east than they were 10, 15 years ago. And what you saw is that shadow banks, i.e. things that looked a bit like banks but worm banks, things that looked a bit like hedge funds but acted more like banks now have taken on a lot of a lot of that risk. So there is a lot of concentration risk in the private equity world and in the asset management world. And I think that with the private equity, what we have seen is the public markets have repriced and the private markets don't want to”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“I could not help but think about private equity and Blackstone. And I think another private equity shop, which now they're real estate shops as well, they do everything, which halted the withdrawals, which is legal. I mean, the client signed on to it. So you can't get your money. You have to wait until the next session. I just heard a lot of people say risk is not within the banking sector. It's moved offshore. It's within the private equity world, the private debt world. What do you think about this? How severe do you think the risks within they are? And how do you compare them to the banking world?”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“It is still tight. We've looked at all these numbers. And yeah, it's going to still take a while for all this to properly feed through into really, truly higher unemployment levels that goes through four, gets to five. And that's when you get your bond yields down and you get the bonds up and you get equities down into a tradable low.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Not got back to normal yet. The fluidity of the market is not there. And there I think that there's been hoarding of jobs. I don't think these are great jobs. It's not, as I say, I don't think this is a strong labour market. It's tight in terms of low unemployment, but I don't think there is this incredible pricing power from the labour that's out there. So this is why I think it's been a difficult one to call. It feels like it should be moving. We're starting to see Challenger job cuts coming through. But none of this is at the sort of pace that's commensurate with we go into recession in the next two months. It's commensurate with the pace where it needs to pick up to go into recession in H two unless we get some massive revisions because the BLS or whatever they're called was so out of whack that they went, oh, we just found a million unemployed that we hadn't got in our numbers. But I think Bob Elliott recently sort of said, yeah, actually.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“The US system is a little bit of a quirk in that global unemployment rates, OECD unemployment rates reach rock bottom levels, I think, last year. Now, the US, in theory, because I think effectively 48 weeks you get paid and then you drop out of the system. So effectively, once everybody who's unemployed has gone beyond the time that they can claim, eventually unemployment could go to zero with the participation rate dropping, i.e. people dropping out of the workforce, which is a quirk more of the US system. In the UK, I could become unemployed and claim benefits for the rest of my life. And I'd still be in those figures. But we haven't seen meaningful optics in European or in global unemployment figures either. So it's not just in the US. And yes, I think there are these distortions. And yes, I think people are not going to sign on, as we call it in the UK, even if it's the same in the US. But with things like immigration or post COVID immigration is...”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“The SPR in the US got wound down to historically relatively historically low levels. There are, again, some supply issues in there, but I think that the oil market can deal with it because it is the most fungible one out there. So oil has done its sort of ringing the bell thing last year. I think that risk is that recession still probably sometime in H2, which we'll see world going down. And that's the thing with all commodities. Longer term, I'm a bull. short-term recession risk nearly always trumps longer-term tailwinds so that if someone told me there's going to be a big recession in h1 i'd be waiting to buy commodities jacob would say oh you can't do that you've got to look at these geopolitical issues like peru and pick your moment which yeah i agree with but if i'm thinking if i had to buy things for 30 years put them away like commodities because of the greenification i would want to probably look for the next recession to get into that rather than”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“But if I haven't lost my job, I don't have my fear. My four hundred one K is to a positive influence on the equity market. So you get a tradable low when you get a recession, but you only get a recession when you get unemployment ticking up and significantly. It's normally halfway through or towards the end of the recession that you get those lows. So no recession. Bonds can't bond yields can't go lower. Recession coming needs to happen sooner rather than later. In terms of oil, again, recession, no recession, but oil is the one that is most adjustable. OPEC cut. And if things start to pick up and oil prices go up, they can open it a little bit more. China should come on because services, particularly airlines, we've seen airline volumes have now got back to pretty much where they were. But I'm not overtly worried about oil. I think that the asymmetric risk is that if”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Was quite shallow, but since nineteen fifty every single recession a major low, and why is that? It's because you lose your job, you have insecurity, you liquidate your portfolio, and that's why you always get liquidation and redemption loans into a recession. Everyone talks about active managers sitting on cash. It's like, yeah, they've been expecting the redemptions that haven't arrived because no one's unemployed. So they've got the 6% of cash maxed out waiting for the redemption so they can pay them in the cash they've got. What you get in recessions, true recessions is you've paid out your six percent and now you're forced into selling because the redemptions and liquidations come through and that's when you get all the gating going on.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“To force recession to make sure you cap inflation. So I feel that the story on bonds is either, can you play one against the other? Can you be long equities and long bonds? Well, I think that it's the case that equities have significant downside if bonds have significant upside because equities right now have seen a multiple compression based on interest rates going higher, but no more than that. They're not really pricing in a true, true recession. So bonds, yeah, I don't see a significant downside in yield unless we get this rapid turnaround in unemployment. And just to point on that, you know, in every single recession, unemployment has gone up two, three, four points. And we've always had a significant tradable low during every single recession. Some of them were quite shallow, I think 1982 was quite shallow, 1990.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“So, yeah, so bonds, I thought that we still have more upside in the two-year because I think that if they go to 5% or 5.25%, we're currently at close to 4% on the two year, but we're at 4.2 a couple of days ago. But if they plateau, eventually what markets do is they eventually look in the rearview mirror and go, oh, we've got to 5% and we plateau. Therefore, we can't still be at 4.2 on the two year. We have to sort of ease back up because if we don't get that sudden recession, I think there's that risk. And even if we do get the recession, how much more downside is there in that two-year yield from 4%? Yeah, it might drop to three and a half unless we get a very, very deep recession. If we get a very, very deep recession, then equities are way, way overpriced. So for me, it feels like bonds at the moment are bonds themselves, I think the JPAL will eventually have to push rates a little bit higher.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Kicking in properly until we get a big, big uptick in those, or big revisions in some of the old numbers on unemployment.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Those potential wings on, oh, it could be reflation, oh, it could actually be coming to the end of the breakout. So no, they're not great trade recommendations where you should rush out and put them on. But what I'm saying here is that these are all plausible. I would love to be able to say with absolute certainty one or the other, I feel that the recession is there. I feel that the pivot that we're seeing in fixed income markets is wrong. I think that we will go up in rates and I think we'll flatline. And the only reason I change that is if we started to see unemployment coming in right here, right now with revisions. And we saw it, you know, we can might see it anecdotally, but 10,000 job losses at Amazon or Google or Apple, that's not changing the dial on the true unemployment picture yet. An initial jobless claims. They're normally a little bit more leading because they're fast twitch. They're not doing it either. So I just can't see that recessionary story.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Reflation trade really goes based on China. I don't think China is going to be the big stimulus opportunity that we all hoped for. And Korea currently is telling me that, yes, it's broken out in absolute terms, but in relative terms it's still struggling. So I'll be looking at those. And then I guess the other thing finally is if you want to hedge, we've had the big callback in the dollar. I think there could be a little bit, maybe a little bit more, but what was interesting is we all thought Jay, Powell, was maybe a little bit more dovish, but everyone else has become a little bit dovish. Maybe another couple of points on the DXY and you've got the 62% retracement from the high. I've been nibbling away at buying some upside because still the big thing here is even if the dollar doesn't make it back to the highs, even if it only retraces 50% of the pullback that we've seen, that's still a tightening of conditions that would see a lot of things roll over. So those are conflicting traits being long silver and being long the dollar, but you kind of want to have.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Got some big issues. There are some big social unrest which could see some of the copper mines coming under duress, one of the bigger output stories there coming under significant duress. And silver is obviously a byproduct of a lot of those things. So there could be tightness short term as well as this potential for a reflation story coming through. But I wouldn't bet the house on it. These are not trades that I would put on myself right here, right now, because I think they're going to work. They are ones where if you believe in reflation, I'd look at silver. If you are nervous but want to play equities, buy some calls because index volatility has come to levels which is attractive in terms of absolute level, even though it might not be cheap relative to what the indices are doing. And then the one thing I'm looking at is I'm looking at career, as I said, to China. If Korea doesn't start out performing pretty soon, then I think we have to maybe be a little bit cautious about how far that...”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Silver looks very interesting here. It's been in a two-year downtrending channel. The top of that channel is currently at 25. Again, I'm not an expert here, but if we can break 25, I think we can squeeze higher. And gold's getting up back towards that 2,000 level as well. So where one goes, the other tends to go. Volatility, again, has come in on both gold and silver. I personally wouldn't be a buyer of silver at twenty-five because it could fail in the bottom of that channel's down at seventeen. So that's not great risk reward. But buying calls for a breakout, I think, is getting quite attractive. Now, if you don't want to pay all that vol, you might want to buy a call spread on silver. But that's reflation trade where there are some other factors coming in. Again, I'm not a commodities expert, but silver, well, let's go copper has some issues improved, something that Jacob's been talking about. He's been long copper because Peru has...”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“To 15 volts, so that's fair value. The FTSE moves on a sort of 9, 10 volt, and it costs 12, 13. So actually the FTSE might not look like the best trade, but the point being here is that if you're long, you can sell out of your stock position, buy a call at a relatively attractive level. And if the market rallies, you're going to participate. You're not going to get all of it, but you participate. If things roll over, you will lose your premium. And buying a call and holding cash is actually a better risk reward than holding the equity and buying a put because puts in equity land are generally 5% put is nearly always on an index more expensive than the five percent call equivalent so buying a five percent out of the money call relative to buying a five percent out of the money put against a stockholding that call looks like slightly better so i think we're getting to those sorts of levels in index volatility which look attractive if you believe in the reflation trade”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, lily livid, liberal type person on this one where I kind of would love to sit on the fence, but I think there are things that we can do. So the first one is, let's say you've been lucky enough to be long over the most recent bounce or you've been playing some of the rebound that we've had. So let's just say that was lucky. And even if you're sitting on cash because you've been out, you felt that there is a recession coming, rather than piling back into the market, what we can do right now is go into the options market because index option volatility has been dropping. For instance, on the FTSE, which is the world's dullest market, so fair enough, it should be, we've got volatility upside volatility at 11%, so 11 vol. Remember the VIX has been 20, 25. The VIX has dropped down below 20 now. And so upside on the S&P, even that is around fifteen vol. Now, to put that in perspective, the S&P moves on a 15 volt and it costs.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“So I think it's one of these things where we all want things to happen right here, right now. I think these things will happen at a glacial pace. But I do feel that Base effects could see us go into a deflationary environment for a short while. We go negative on CPI, which we don't do very often. But I think we'll bounce back to something which is going to motor along at a higher level than we've been used to as our base case for the previous 10 years. And I think that means that cyclical stocks, cyclicality and things like GDP, so more volatility in macro data is going to be with us. And those sort of 10, 12 year gentle, lovely, happy day expansions, which created an inequality increase, I think those are now probably a thing of the past.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Garden recession, then it was supercharged because of this exogenous shock, creating all these externalities have created these exaggerations on almost everything. I think from here we are going to shift towards a more inflationary-based environment, but technology is still there, absolutely, but the whole greenification carbonization stuff, that's a constraint that is going to be with us for decades to come. But even with that, we know that we've been through periods with high commodity prices before we don't necessarily translate in significantly higher CPI. Middle of the two thousands, you had WTI at one hundred fifty dollars, just that for inflation today it was a lot higher. CPI got just above five percent at that absolute peak. In the early twenty tens you had oil at $100 for a long period of time with CPI bumbling along around 2%.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“The world's always going to collapse. I mean, it's. I mean, this is why I do think that they will try, I mean, this is the argument everyone uses, which is the Russell Napy view, and I think it's a fair view, which is that there will be financial repression. We need to inflate things away. But then does that mean real wages are negative? If real wages are negative because you have a higher level of inflation to get rid of these debt levels, then you're not going to get the growth. So you need to kind of do the backhanders. It's a very, very difficult balancing act. I don't think there is a simple solution. I do think we do have a, we will have a severe recession in this adjustment period. But is that adjustment period right here, right now? Or are we still in the throes of the COVID adjustment and all the extremities that that created that are still working through? We were slowing down before COVID. The global economy was slowing down into what was probably going to be a common organization.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Then eventually you'll get that much more ingrained and embedded inflation. But it's how long is your investment horizon? This inflation story is going to play out probably if it's true and it becomes fiscal, it's going to play out over many years because we're trying to put these trades on for the next month or the next two months. And I think that's not the right way to look at it.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“That causes me to have less money in my back pocket. To me, that's inflation. It's not true monetary textbook inflation. Forget that. And that's, I think, where we're at is that we've seen higher prices and those higher prices, whether they're caused by bottlenecks, cause pain, a cost of living crisis. The average Joe is going to squeal and demand those higher wages. But do they have pricing power? Is that labor market strong and tight, or is it just tight, but with weak power in labor? And I think, again, it's a slow burning thing. I don't think labour has a lot of power right here, right now. I think it's still down the road. So without the unionization and without that structural shift, I think it's going to be political will.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Through the fiscal authorities 2020 to 2021. And so if you are empowering the worker, God, I sound like a socialist now, but if you're empowering the average household, that becomes more inflation because that's the spending pattern that they have. It's slow burning though. And I think, again, what we are seeing here is bottlenecks that I think have been the real drivers in higher prices. And I think we've got to be very careful here, which is We've had higher prices. Higher prices can be caused by lots and lots of different things.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Central bank has become the puppets, as it were, of the politicians, more so than we've seen really over the last 40 years. I think that the case here is that what you get is a move towards labor or a move towards the working man or woman, which is itself infationary because it's the median household spending that causes inflation. If rich people get richer, they buy paintings, which doesn't feed through to general commodities. But as we saw with COVID, suddenly you give a backhander to everybody and empty obviously went through the roof, but it's a fiscal handout. That was the inflationary impulse. It wasn't QE. We'd had QE since 2008 to 2020, and it caused asset price inflation, but not true CPI style, household inflation of a lot of goods. But we got that inflation.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Taking more and more debt almost everywhere just to eke out a little bit of GDP. Feels like now we're starting that shift back towards labor and towards fiscal. Now fiscal is generally much more inflationary. I think the US is limited on that right here right now, but our thinking here is that if we are moving towards fiscal and labor, edging that way away from monetary and capital, it's a geopolitical story. And at the same time, if you think globalization is now not so much globalization ends, but globalization becomes more regional. So you get pockets, you get Asia pockets, you get North America with a bit of South America, then it just realigns things. So there are different elements that start coming into play. And so that's really where I think, you know, it's that kind of fiscal element is fiscal starting to become the big policy tool of the future. And if that's the case, then you need to look at the politics more because this is now set by governments rather than by...”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“It feels like geopolitics is geopolitics and macro emerging. And I've always said before, if you try and trade geopolitics, you'll get your ass handed to you. It's almost impossible to trade, particularly trying to find those flashpoints. But the way we look at that is I think it's more politics. So we say geopolitics, but it's more politics, which has a geopolitical or geographical element. But what it really is, is that I think we're moving from a world of capital and monetary towards a world of fiscal and labor. This will be a slow shift, but if we move away, so effectively post-war was labor and it was fiscal, it was supporting post war. Then Thatcher Reagan nineteen eighteen we went on to free markets and became central banks, monetary and capital in the driving seat. Inequalities appeared. We've probably reached, you know, with COVID before COVID, we're probably reaching the end of that because it was taken.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Financial conditions easing has helped those emerging markets pretty much across the board. So I think it's fairly commensurate with that. China hasn't massively, massively outperformed necessarily, bounced off a big technical level. And there's been other things like the dollar in its favor.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“I think that the leaders in China are Chartists. When I say Chartists, they look at Chartists because you can draw a line from the 2000s and basically every load touches this line and it touched that line, I think, in the sell-off last year when they were hitting tech and the property bubble was getting impacted. And then it sort of bounced off there. It's not got ahead of itself relative to any of the other moves. Remember in 2015, 14, 15, it went into sort of bubble-like territory. So it can become excessively speculative. But we have not rebounded a significant rebound relative to where we've come from in a lot of these, particularly technology stocks. So I don't think it's an unfair move. We've been talking about the reopening in China since October. The market bottomed in October, but how much of that was because the dollar peaked in October and reflation and expectations and improvements through better liquidity.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Using the word to China comes in, China buys commodities. They do, but as the rate of change of demand going to be the sort of thing that sustains a super, super, super move in commodities that we got in the early 2000s, I don't think so, but there are going to be certain elements which will do well through all of this.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Will still go in there. And if you look at the credit impulse, it looks like it's rolling over at a lower level than the previous four spikes. So again, it looks like, yes, credit's going up. And remember, obviously, as GDP increases, if you don't put in more and more credit, then your actual credit impulse should start to fall relative to where it was. So 100 billion today is worth less than $100 billion 10 years ago when GDP was smaller. So it looks like they're being a little bit more focused. And the big mantra has been we want to be going towards sustainability. And you can see 2018, there was a peak in urban fixed asset investment. That's when the cycle peaked. It dropped for those two years. That's when Korea, Germany, didn't do so well. We now know retrospectively because of that change in focus from China. Pick up again through COVID. Probably they needed to do something. But it feels like they're focused. But we're Pavlovianly conditioned as terrible way of using.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“So state-owned enterprises, which have got too much debt, look like they're imploding was a classic example where another example where in the property sector, we all thought that's it. It's going to all end horribly right here, right now, because as investors, we want it to happen. That went off, blew up, didn't look good, stepped back, put money and credit went in there. They've been using their credit to shore things up. So I think it's a case of instead of going into that unadulterated pure demand for things that require commodities, they will still demand commodities and coming back into the market, particularly for energy, that's going to have an impact. But what they're doing now is they're saying, look, what we want to do is make sure that we have the property sector needs to rebalance. We tried to see if we could deflate it. We couldn't without it causing bigger problems like Evergrande and others. We've done something in tech, but that was more of a rebalancing sort of socially. I think this credit.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Or is it going to be on supporting a sustainable outlook? And they've gone from growth at any cost to sustainability, when they want all those raw materials is because they want to be leaders in things like green technologies rather than they want to build another city in the middle of nowhere and fill it with people. So I think China is a big story, but I think it could disappoint...”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Watching Korea because career in absolute terms has broken out again to the upside. It looks like a reverse head and shoulders on the Costpi 200. But when I look at career versus the DAX, Korea is actually still kind of at the bottom of that ratio. It's underperforming. It tried to break out, but it hasn't. I think Korea is still saying that this is not a super, super grand opening. This is, as with the US, China has gone for services. They've gone for holidays. They are flying, so there should be demand for oil, but they're not going to build loads of buildings. I think they're going to still focus on not allowing their bubble to get even more out of hand. They want to focus on the consumer. G has been saying, I want to even the playing field. That's why I attack tech. They dial back, he's listened, and this is something that Jacob Shapiro, who's my partner at Lycon on the geopolitical side, has said, you know, he's listened and he has stepped back. But is the focus going to be on the growth?”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“It was starting to go up in twenty nineteen, but it was looking like it was rolling over. And then I had to boost it through COVID because they went back to type. Okay, supply-side policies to grow everything again and we'll export to the US where demand side policies have come in. Now, I think that China will go back to where they were 2018, not where they were 2016. So let's say they had 6% GDP growth. These are not forecasts, just 6% GDP growth growth at any cost versus 6% GDP growth focused on consumer ensuring up the economy have very different implications for global investors. And in 2018, the DAX big exported to emerging markets, the supply chain to China, Korea, the COSP, big, open industrial economy, biggest trade partner China. They struggled through 2018. Whilst a lot of people said, but they put credit in, this is going to be good. It's because the credit was redirected.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“So China is that another of these great conundrums in that the Pavlovian conditioning everybody has is China commodities. China comes in with growth, credit, commodities go up. And yes, that was generally true. But then in 2018, it changed. They went from growth at any cost, which is we build things, we build cities, and we then fill them with people, to, oh, we built too many cities, we've got a bit too much leverage. We now need to direct our credit towards shoring up the property sector, maybe even trying a few explosions in the property sector, controlled explosions to see if we can deflate it without destroying things. And you can see this in that the credit impulse, it rose dramatically in 2009. Then again in the European debt crisis, then again during the commodity industrial profits bust of 2015.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“It'd be worse than that. Let's say they went, oh, we can see inflation coming. So we're going to raise interest rates right now and cause a recession when there was no recession on the horizon. The yield curve was not pricing it in. Nothing was pricing a recession. People won't go, they were really good, the central bankers, weren't they? Because they created a recession to prevent a worse recession. Everyone would just go, they created a recession out of nothing, the git. So they can't win on that front, which is why central bankers and policymakers nearly always have to be reactive rather than proactive. And, you know, is that pivot that we're seeing in the funding market an idea that they will be reactive to a recession that's going to happen now? Or is it that we've been hoping that they would be proactive? And it feels like we price this pivot in February to March. They want them to be proactive. And so far, that pivot just gets pushed out. And now it's gone. It's now really kind of going rates going up. Breaks coming straight back down. It's like this needle in terms of.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT