0:03

Bloomberg Audio Studios, Podcasts,

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Radio News.

0:20

Hello and welcome to another episode of the

0:22

Odd Blots podcast. I'm Tracy Alloway.

0:24

And I'm Joe Wisenthal.

0:26

Joe, did you watch the FOMC

0:28

presser recently?

0:29

No?

0:30

I did not, because we were recording an episode

0:32

of the Odd Lots podcast. Yeah, that happened, So

0:34

I know that you didn't watch it either, unless

0:36

you watch it on video afterwards, in which case

0:38

you are a better journalist than I am.

0:40

I didn't. Just to clear that up. What

0:42

I did was I read a bunch

0:45

of analysis of the FED meeting

0:47

and a bunch of news summaries of

0:49

what happened. And I have to say there

0:51

was one term that I really liked, one

0:53

description. I think it was in the ft and

0:55

they sort of described the FED as a monument

0:58

to stasis.

1:00

I mean that could be a good thing. First of all. By the way,

1:02

plug, there's a really the other thing you can do if you

1:04

miss a pressor on the Bloomberg terminal

1:07

and I forget the code right now, but they

1:09

produce transcripts very fast, and the transcripts

1:11

aren't published of the press conferences

1:13

like they don't appear anywhere, so plug for

1:15

our terminal here. But yes, look, it's

1:17

been a weird year for the FED, right, because

1:20

I mean, inflation continue at

1:22

least through Q one of the year, inflation

1:24

hot to then expect it, all these expectations

1:26

of cuts keep getting priced out. Everyone's

1:29

higher for longer. It's unclear

1:31

whether the sort of simple models that we use,

1:34

like, I mean, I think everyone sort of knows this. Nobody

1:36

really knows how inflation works. But

1:38

did everything seems to be okay, right.

1:40

I think one of the issues that the FED might

1:42

be facing is they put so much emphasis

1:45

on data dependency that

1:47

it kind of means that like every

1:50

monthly reading of CPI can

1:53

generate a completely different response.

1:55

So when CPI comes in stronger than

1:57

expected, everyone starts panicking

2:00

about the lack of rate cuts,

2:02

and maybe even you get a rate

2:05

hike at some point. When it comes in weaker

2:07

than expected, you know, as it was doing

2:09

up until fairly recently, everyone

2:12

gets very excited and we get

2:14

that kind of goldilocks moment inequities.

2:17

There does seem to be like this weird

2:19

tension between I know, they don't use

2:21

like formal forward guidance anymore,

2:23

but in a way the dots sort of serve that purpose

2:26

and sort of imply the FED so called

2:28

reaction function, And so we're supposed

2:30

to sort of take all of these data points, plug

2:32

them into this black box reaction function,

2:35

and then sort of implicitly see what that means

2:37

for policy. But it

2:39

does seem like things move a lot from data point

2:42

to data point, so it becomes very present

2:44

oriented.

2:44

Man. Yes, that's a great way of putting it. And

2:46

then the other thing I would say is, in addition

2:49

to all the complexity around

2:51

what's going on with the US economy, and

2:53

it's kind of phenomenal in many

2:55

ways, that we're still having intellectual

2:58

arguments about what the impact of higher

3:00

interest rates actually is and whether

3:02

or not it actually does anything to bring down

3:04

inflation. But beyond that, the

3:06

other thing that's starting to happen is we

3:08

are seeing international consequences

3:11

and we've been talking about them on the Show of

3:14

the Higher for a longer stance. So the

3:16

dollar has been rising. I think

3:18

the spot dollar index is up almost

3:21

four percent so far this year, and

3:23

then against specific currencies like

3:25

the Japanese yen, it's surged even

3:28

more. And so we are seeing those tensions

3:30

between strength in the US economy,

3:32

you know, ongoing inflationary pressures,

3:35

higher rates for longer, potentially kind

3:38

of meet emerging markets and

3:40

also developed economies in the wider

3:42

world totally.

3:43

You know. We had that interview recently

3:46

with Hugh Hendry. Extremely colorful

3:48

character to say the least. But one of

3:50

the points that I found very interesting was like,

3:52

we're not really used to an

3:54

environment in which it's the US

3:57

that's out, that's lapping everyone else, growing

3:59

much faster than G seven or G ten

4:01

or G whatever. Peers sort

4:04

of powering ahead all this domestic investment,

4:06

and so we get this upward pressure, higher

4:09

rates, higher dollar stress elsewhere.

4:11

It's an interesting environment.

4:13

G whatever is a good term.

4:16

Can coin that, yeah, because I know Ian Brember

4:18

has the G zero, but like I

4:21

don't, I like G whatever.

4:23

The G whatever summit that

4:25

should be a thing.

4:26

Okay, any country can come.

4:29

Okay, But when we want to connect

4:31

the dots between what's happening with

4:33

central banks around the world, between the US

4:36

economy and the FED, and the global

4:39

macro situation, there's

4:41

one person that we like to call in

4:43

particular. So today we are bringing back

4:45

Victor Schwetz. He is, of course a strategist

4:48

over at McCrory, and we

4:50

love talking to him. So Victor, thank you so much

4:52

for coming back on all thoughts.

4:54

Thank you for having me remind.

4:56

Us before we begin, it's

4:59

not just us, right, the data dependency

5:01

of the Fed. They have emphasized

5:04

that a number of times, and to some extent

5:06

it seems like it is coming back to haunt

5:08

them whenever there is a stronger than expected

5:11

inflation print. And then we had payrolls

5:14

since CPI, and payrolls

5:16

came in lower than expected for the first

5:18

time in ages and everyone got really excited

5:21

about that.

5:22

You're absolutely right, Tracy, that what

5:24

essentially we have is a federal reserve is

5:26

a prisoner of policies they start putting

5:29

in a couple of years ago, which is

5:31

essentially being extremely data dependent

5:34

rather than forward looking. There is another

5:36

problem, and that's the dots, one of the most

5:39

destructive instruments from

5:41

Bernaki era. So it's not anything

5:43

to do with j.

5:44

Powell.

5:45

I think if he could, he

5:47

would have good rid of dots today. The

5:49

problem he has is that the volatility

5:51

getting rid of dots probably will

5:53

be greater than the volatility dots themselves

5:56

are creating. So you're trying to denigrate

5:59

it by arguing that

6:01

dots degenerate almost

6:03

immediately as soon as they are published, So he's

6:05

trying to take our attention away from dots.

6:08

But as long as they have published, they are the materials.

6:10

So you've got a data dependency on the one side,

6:13

which is basically dependency on a backward

6:15

looking or at best contemporaneous

6:17

numbers that you have. You also have a lot

6:20

of faulty numbers, whether it is

6:22

how you determine shelter expenses

6:24

or ornery equivalent rent, how

6:27

do you relate secondhand cup

6:29

prices, how do you measure insurance

6:31

policy or financial markets. But there's

6:33

also major problems with Bureau label

6:35

statistics. I mean, I'm glad that they've increased

6:38

or revised hours work last week,

6:40

which basically showed the productivity miracle

6:43

wasn't really there. So you have quite

6:45

a faulty numbers both from Bureau

6:47

of Labor statistics. On a labor market,

6:50

you have mostly backward looking or

6:52

contemporaneous numbers. In terms of inflation,

6:54

and if you become data dependent, you

6:57

starting to create exceptional volatility

7:00

because you basically like a deer

7:03

in a in alarmed in a light. You

7:05

are stuck. You are you cannot move

7:07

to the left, you cannot move to the right. Now,

7:09

what I think jerrem Pal is doing quite

7:11

well is trying to

7:13

introduce some degree of forward guidance.

7:16

So essentially, what he's saying, and what he said

7:19

last week is that if I think of the shelter

7:21

expenses, they're not quite as bad

7:23

as the numbers look. And he's absolutely

7:25

right if he talks about other

7:28

service oriented numbers again,

7:30

whether it's insurance or anything else, he kept emphasizing

7:33

they're not as bad as what they appear,

7:35

BOSS and CPI and PCEE, and

7:38

he's been quite vocal that the labor

7:40

market actually a lot loser

7:42

than what Bureau Labor statistics highlights.

7:45

But the problem is tracy. If

7:47

you are a prisoner of data

7:49

dependency and dots, the chances

7:52

of committing a policy error increases.

7:55

And so one of the questions I struggle with whether

7:57

in fact it matters if at a reserve

7:59

does commit a policy error.

8:01

I feel like we could have a whole episode

8:04

just on the dots, and the problem with this is

8:06

a communication strategy. Maybe

8:09

we will, but anyway, it's interesting you said

8:11

this just I guess it was either today, earlier today,

8:13

or yesterday. Minneapolis

8:15

Fed Neil kesh Curry ended

8:17

his speech the final section of

8:19

his speech shout out to our old colleague

8:22

Lukawa for flagging this. This is

8:24

also a communication challenge for policymakers.

8:26

In my own summary of economic projections,

8:29

except the formal name for the dots submission,

8:31

I have only modestly increased my longer run nominal

8:33

neutral funds rate. Blah blah blah. This step

8:35

does not provide a simple way to communicate

8:37

the policy that the neutral rate might be at least

8:40

temporarily elevated.

8:41

De codet.

8:42

What is the issue as you see

8:44

it with the dots.

8:46

Well, well, there are a couple of

8:48

these shoes, Okay, one of them. Dots work

8:50

very well. If everything is plus,

8:52

it not a problem. Whenever

8:54

you have a high degree volatility ISAAC

8:56

externally or internally driven dots

8:59

really don't tell you anything because it's

9:01

really a personal opinion of several

9:04

governors. Some are voting, some are not

9:06

voting right now, and it's not linked

9:08

to either federal policy. It's not vetted,

9:11

it's not researched. There is nothing in

9:13

it so long as the line

9:15

of sight is relatively stable

9:17

thoughts are absolutely fine. As soon as you get

9:20

the volatility, they are not. And I

9:22

think Philipplow, who was who retired

9:24

as a governor of Reserve Bank of Australia

9:27

late last year put it the best way. He said,

9:30

central banks will never see again inflation

9:33

contained in a narrow range. Now

9:35

what it basically means that this

9:37

idea that you have relatively flatish

9:40

outlaw and you try to manage it on

9:42

a margin, is becoming irrelevant.

9:44

So for example, Federal Reserve at the end of last

9:47

year, on a number of variables, they went past

9:49

their mandate. In fact, they've overachieved

9:52

their amendate. And if you look at what subsequent

9:54

three or four months, suddenly they were ahead of their

9:56

mandate. And that's what Philip Law was highlighting

9:59

that from now on you're going to have a great

10:01

deal of volatility of those numbers. And

10:03

I think the dots by themselves

10:05

magnify that volatility rather

10:08

than creating a gretic sort

10:10

of clarity for market participants.

10:12

So why do you say that a FED

10:15

policy error might not matter? And

10:17

I should caveat this with you know, Joe and

10:19

I spend a lot of time online

10:21

and coing pie some of the you know social

10:23

media discourse. The world

10:26

basically revolves around whether or not the Fed's

10:28

going to make a policy error. And the bias

10:30

is always the FED is doing something

10:32

wrong in one way or another. But why

10:34

do you think it might not matter?

10:36

Well? I usually say to people, Look, we

10:38

had terrific tightening, we had some

10:40

withdrawal of liquidity. Could you explain

10:42

to me how high yield spreads

10:45

only about three percent, which is the lowest. Ever,

10:48

how could you explain to me it's a double b bad

10:50

debt is trading at only two percent

10:52

spreads? How can you explain to me that

10:55

despite a very significant rise in US

10:57

dollar, which both of you have just highlighted,

10:59

the basis swaps are only five

11:01

BIPs. They should be more like fifty BIPs are

11:04

above and so to me, the

11:06

advantage of our era is that,

11:08

first of all, we have too much capital. In

11:10

other words, the idea of scarcity of capital

11:13

that underlines thinks like DCF

11:15

calculation or underlines most

11:17

of the investment decision do not apply when

11:20

you have too much capital. Now it is

11:22

not evenly or fairly distributed

11:24

by any means, But there is plenty

11:26

of capital. And the way you can measure

11:28

it is essentially, what is the value

11:30

of all your financial instruments globally

11:33

against real underlying economies

11:36

and what do you find? Depending how you

11:38

do all balance it commitments, how you do derivatives,

11:41

you could be looking five to ten times larger

11:43

than the underlying economies. So we

11:45

have plenty of capital. What it basically means,

11:48

no matter what Federal Reserve does, it's very

11:50

hard to tighten because that capital just

11:52

keeps circulating looking for diminishing

11:54

returns. The second thing we have, and

11:56

Bloomberg plays a great role in it,

11:59

is that we have instantaneous repricing.

12:01

So anybody, any word in the market, it's instantaneously

12:04

gets repriced. And the third thing we

12:06

have is that central banks are rolling out

12:09

policies and an incredible speed.

12:11

They're not even debating what is the outcome

12:14

of those policies or what are the implications

12:16

of what we're doing. Usually something happens

12:18

on Thursday and Friday, and by Monday

12:21

it's all fixed. And so are

12:23

we going to have new policies for

12:25

private capital or private debt equivalent

12:28

to what we have for Silicon Valley Bank?

12:30

Are we going to have special policies for

12:33

perity trade basis trade from some

12:35

of some of the niches in a high yield market. Of

12:37

course we are so if you have too much capital,

12:40

if you're repricing instantaneously,

12:42

and if central banks are

12:44

willing and prepared to plug the holes

12:47

almost instantaneously, this is

12:49

a world of no risk. In other ways, the

12:51

way I put it, if the risk is everywhere,

12:53

the risk is nowhere, and

12:55

if the risk is nowhere, then you can explain

12:58

speculation. You can explain goal price

13:00

of bitcoin. You can explain why

13:03

high yields will be trading at only

13:05

three percent spreads because there is no risk.

13:08

And the reason central banks are doing it not

13:10

because they're greedy for power anything else.

13:12

There is no shadow, you know, deep

13:15

state or anything like that. The reason

13:17

they're doing it is because of the dangers

13:19

of not doing it. If you sink of dot

13:21

Com, that was only one asset price going

13:23

wrong. If you think of GFC,

13:25

that's really a bigger asset, but only

13:28

one Today. You know, land mines

13:30

are everywhere, and those land mines,

13:32

each one of them, could be bigger than the original

13:35

GFC. And so the result

13:37

is central banks really don't have a choice.

13:40

So even if Federal Reserve does

13:42

commit a policy error, which is possible,

13:45

they can unwind it in split second. The way

13:47

I describe it in my notes is to say, let's

13:49

assume you get up, get in the morning, say oh my

13:51

god, it's going to be a terrible day. By lunchtime,

13:53

I know it's okay. And by evening, let's have a dinner,

13:56

and the whole thing just evaporated. Now

13:58

the key question, however, to ask what

14:00

price do we pay for it? And

14:03

the price we pay for it is a volatility

14:05

of inflation rates. Is this volatility?

14:08

It is volatility of the neutral rates. In

14:10

other words, the way describe it, risk does

14:12

not disappear. It just migrates. So

14:14

if you keep the market plus it, which

14:16

is what we're doing, risks simply

14:18

migrates somewhere else. It migrates into

14:21

politics, it migrates into social sphere,

14:23

it migrates into geopolitics. And

14:25

so we do pay a price. We

14:28

do pay a price for this. But to argue

14:30

that central bank is committing an error furniture

14:32

must be broken is wrong. Even if they

14:34

commit the error, which is possible,

14:37

they can unwind it in thirty seconds.

14:55

I want to get into maybe

14:57

migrate the conversations geopolitics

15:00

and this migration of risks, because you write a

15:02

lot very well on that, but just sort of real

15:04

quickly before we do that. In

15:06

your view, you describe this world of like

15:08

so much capital relative to GDP.

15:11

You know people, you know, they blame q

15:13

E for stuff like this or whatever. Is there

15:15

like an original policy sin?

15:18

And I don't even know if.

15:19

It's a same Paul Walker?

15:20

Okay, explain, So what is this sort of original

15:23

sin that created this world.

15:24

Of a Bundy? Well, if you say of Paul Walker,

15:26

he mostly known of course for squashing

15:29

inflation, but if you go back in time,

15:31

I think his much bigger legacy is

15:33

creating that system of global

15:36

recycling of capital and

15:38

addiction to dead and addiction to

15:40

asset prices prior tonight.

15:43

Well, essentially, what happened. We've deregulated

15:45

the financial sphere. We've deregulated

15:48

the regulating capital flow. The idea

15:51

was that United States will take

15:53

the money from other people and stimulate consumption,

15:55

and those other people will be buying treasury bones,

15:57

for example, in order to get return

16:00

to lower the cost for US consumers,

16:02

but also to reduce their currency

16:05

and make themselves more competitive. Now, Paul

16:07

Walker was expecting that currency eventualist

16:09

will recalibrate this process, but

16:11

they never did because nobody ever

16:14

wanted to have an appreciating currency, and

16:16

so we're stuck in the world of accumulating

16:18

against disparities between savings

16:21

and spending. In other words, US

16:23

and the UK consistently net spender,

16:25

Germany, Netherlands, China career,

16:28

Japan consistently net saber,

16:30

and we've never really rebalanced it

16:32

properly. So one of the side effects of

16:34

that was that it become easier and

16:36

easier to borrow, easy and easier

16:39

to bring future consumption to the present

16:41

to maintain your lifestyle. It became

16:43

easy and easier to multiply credit. Instead

16:45

of having one instrument parasset, we

16:48

can now have five instrument parasets ten

16:50

in each one of those instruments can be leveraged

16:52

yet again and yet again, and so all

16:55

of that created massive amount

16:57

of capital. I mean, if you think of the financial

16:59

stability, or they tried to calculate the

17:01

overall level of financialization, they're

17:03

usually behind time. They only have twenty

17:06

twenty two numbers. But essentially what they

17:08

were showing about five hundred trillion dollars,

17:10

and that's based on the net derivatives

17:13

and not including any of balance IT commitments

17:16

or major ones, and so that's effectively

17:19

was five times global GDP.

17:21

So that's what started. So if you were to ask

17:23

one person or one time when

17:26

that happened, it's really Paul Walker

17:28

who created our debt

17:30

and asset based culture now

17:33

green spent in late eighties, or he

17:35

did. He took Walker's idea and brought

17:37

it to logical conclusion, and that's was

17:39

a green spent put which Bernark and Yellen

17:41

subsequently maintained.

17:44

Yeah, it is interesting. I think I might have written

17:47

a little bit about this in the All Lots newsletter

17:49

or kind of thought out loud about it.

17:52

It feels like we're internalizing

17:54

the idea that the supply of credit

17:56

can expand even as the cost

17:58

of money goes up via benchmark

18:01

rates, which might not necessarily be a new

18:03

dynamic as you just described, but like one

18:05

that was probably underappreciating.

18:07

Intuitive.

18:08

Yeah, unintuitive and underappreciated until

18:10

this very moment in time. I want to ask one

18:13

more thing on the US economy and the FED

18:15

before we maybe broaden out the conversation

18:17

to geopolitics and pressures

18:19

in other parts of the world. But I

18:22

remember one of the things I really liked about

18:24

your framing of the post pandemic period

18:26

was, unlike a lot of other pundits,

18:28

you did not go back to the nineteen seventies

18:31

as your preferred historical analogy.

18:33

You went back to the nineteen eighteen Spanish

18:36

flu, which resulted in

18:38

a big run up in inflation, but then

18:40

a pretty rapid deflationary

18:43

bust. And I'm curious, you

18:45

know, here we are in twenty twenty four. Inflation

18:48

is still relatively strong. We haven't

18:50

seen interest rate cuts at all,

18:52

and as expected maybe back

18:54

in late twenty twenty two, going into twenty

18:57

twenty three, there are a lot of people who predicted we'd

18:59

see cuts and recessions, and I think you might

19:01

have been one of them. But have you been surprised

19:04

by I guess, the stubbornness

19:06

of inflation and the higher for longer

19:09

scenario in the US. And how

19:11

is that stacking up against that nineteen eighteen

19:14

parallel.

19:15

Well, the way I look at it, my argument was,

19:17

there will be no recessions in the US.

19:19

There will be no recession globally, because

19:22

we don't have recession, there is nothing to recover from,

19:24

so don't expect any significant recovery.

19:27

That's why my global growth rates always

19:29

pitched that around two two and a half percent, which

19:32

is at least seventy five basis points less

19:34

than what we used to have with the previous decade,

19:36

and about one hundred basis points less than what

19:38

we used to have in the pause. My view,

19:41

as you correctly said that as you

19:43

have sort of misilocation of demanded

19:45

supply curves, as we have destabilization

19:48

of demanded supply curves, gradually winds

19:50

down, inflation should come out. No

19:52

need for recession, no need for unemployment,

19:55

but there is a price we pay, and the price we pay,

19:57

there will be no recovery, and there will

20:00

more or less a circular stagnation argument.

20:02

Globally, some countries will grow a little

20:04

bit faster than others, and that will be primarily

20:07

driven by primary deficits, because

20:09

overall deficits don't matter. Primary deficits

20:12

doue and the US happened to

20:14

have the highest deficits. US is

20:16

now running about three three and a half percent of GDP

20:19

primary deficits. Europe is less

20:21

than one. Japan is less than two.

20:23

So if you have a higher primary deficits,

20:25

you push up your neutral rates higher compared

20:28

to for example, European Monetary Union

20:30

or Japan. Now, this inflationary

20:33

trend in the global is still continuing.

20:35

Now. If you sink of G five CPI.

20:38

For example, when we were here last

20:40

time in sort of late twenty two early twenty

20:42

three, the number was five percent. In

20:45

March it was two point four. Now two point

20:47

four. It's only twenty thirty BIPs higher

20:49

than it was over the previous twenty five

20:51

years. But the leadership changed.

20:54

If you sing up the second half of twenty three,

20:57

this inflation in the US was extremely

20:59

strong, but inflation in Europe,

21:01

UK and Japan actually was climbing,

21:03

not down. What you saw over the

21:05

last four months is it inflation

21:07

start breaking in the UK, start breaking

21:10

at Eurozone, start breaking in Japan. This

21:12

inflation got stronger in China

21:15

as we progress, but in the US it's stuck

21:17

and actually gone up a bit. Now

21:19

the question is whether that's something unique

21:21

to United States a weather. In fact,

21:24

in the second half of twenty four, we're going to

21:26

relieve what we had in the second half

21:28

of twenty three and the United States

21:30

will join the rest of the world in a

21:32

disinflationary trend. That's my base

21:34

case. Now what underpins it

21:37

is neutral rates and productivity. Now,

21:40

my view is that neutral rate has not

21:42

changed. Neutral rate is a long term

21:44

process. That's why almost all

21:47

models are still showing that neutral rates in

21:49

the US are fifty to one hundred basis points

21:51

real, which means policy rates should be closer

21:53

to three, not five and a half on that basis.

21:56

But in a short term you can have a spike

21:59

in those neutrals rates. Now I do

22:01

sing neutral rate spike, despite the fact

22:03

that models don't show it. I think it did spike.

22:06

Now the question is whether it's already coming off

22:08

or whether somehow we can keep neutral

22:10

rate at a much higher level. One of the key

22:13

elements there is productivity. Now,

22:15

I'm not a buyer that there will be any productivity

22:17

improvements. In other words, labor

22:20

productivity or multi factor productivity

22:22

is not going to recover for at least ten years,

22:24

possibly even twenty years. Now, if you

22:26

take a view that productivity is not going to drive

22:28

it, then either you have to have much

22:30

higher primary deficits continuing,

22:33

or you have to have some other form of shocks

22:36

in the system in order to drive

22:38

it up. So if I'm correct that neutral

22:40

rates have not changed and it's still

22:42

fifty to one hundred bases points real, then

22:45

it must be coming off. As it comes off,

22:47

deflator comes off normenal GDP

22:50

drops from In the US, it's already down from

22:52

twelve percent to five point four. As

22:54

it starts dropping towards four percent. You

22:56

can't keep policy rates at five and a half

22:59

unless so you want to have a recession. That's

23:01

the only reason to have it. So I'm

23:03

still in the same camp, except as desynchronized

23:06

or going back to the Reserve Bank of Australia.

23:08

It's violent how it moves. Also,

23:11

on more point, in the US, inflation is

23:13

really in pockets. In twenty

23:15

two or twenty one, even in early

23:17

twenty three it was all over the place. Right

23:19

now is just in pockets. So

23:21

all you need to do is to bring those pockets

23:24

down to a low level.

23:26

I mean, we could also just talk for an hour

23:29

about why it don't take twenty years before

23:31

we see a productivity boom, but let's

23:33

talk a little geopolitics. So this idea

23:35

risk has been taken out of the financial

23:38

system and it migrates

23:40

elsewhere. Maybe the politics, maybe the geopolitics

23:42

were obviously in a moment, and

23:44

you can just see it by all the trips people in the

23:46

administration take to trips to China,

23:49

where there was a significant amount of anxiety

23:51

about China geopolitically,

23:53

military to military communication, cooling

23:56

the temperature, coupled with industrial

23:59

anxiety. Are they going to own the EV

24:01

market for the entire world, et cetera. Draw

24:04

that line for us, maybe start

24:06

there, Draw that line for us between

24:08

the sort of taking out of financial

24:11

risk and that migration and how that fits

24:13

into the China phasis.

24:14

Sure. Well, one of the things

24:16

I disagreed with almost everyone

24:18

over the last two or three years. Remember the view

24:21

was that China is running out of people and

24:23

so China will be exporting inflation. Now,

24:26

my argument all along was China

24:28

cannot export inflation. Their major export

24:30

of disinflation, and the reason for

24:32

that is very simple. China, just

24:35

like Japan's seventies eighties, has

24:37

a very high national saving rates. I RUNIC

24:39

at about forty five percent, just

24:41

like Japan and seventies eighties. Could have put

24:43

policies in place to consume it, but they

24:46

didn't, neither have China. And

24:48

so the result is they must invest at least

24:50

forty two to forty three percent of GDP sink

24:53

of the numbers. That's an equivalent of nine

24:55

to ten trillion dollars invested

24:57

every year. It's double of GDP of

24:59

Japan invested every single

25:02

year. Now, if you invest in that

25:04

sort of money, it doesn't really matter what you

25:06

invest in. You create massive

25:08

over capacities. And if you go into

25:10

niches sayings like what Chi

25:12

shipping calls productive forces,

25:15

seeings like electric vehicles, robotics,

25:17

automation, solar industry, if

25:20

you go onto smaller niches, you almost

25:22

automatically create three times global

25:24

demand, if not more. Now, at that

25:27

point they have very limited choices.

25:30

Either they change their pivot,

25:32

their policies, dramatically send

25:35

checks to people instead of building another factory.

25:37

You know, raise social safety.

25:40

Now, raise universal basic

25:42

income. They already have universal basic income

25:44

in China. Just raise it and equalize

25:46

it across across the country. So you either

25:48

do that, But if you're not willing to do that,

25:50

which they're not, then the only

25:52

way you can do it is except that

25:54

you lost the capital and close

25:57

the factories and we will discover China

25:59

potentially much smaller country than

26:01

what we thought it was, or the other alternative

26:04

dump that access capacity onto

26:06

other countries. But given the amounts

26:08

of money involved, there is not

26:11

much you can dumb on Kazakhstan that there is

26:13

only UK, European

26:15

Monetary Union or EU, United

26:17

States, Japan. There's very few places

26:20

that can take that sort of capacity. And

26:22

so what's happening those countries are putting up

26:25

barriers now. The reason they're putting

26:27

up barriers is that China also

26:29

wants to change the world. They want to redesign

26:32

everything, whether it's human rights information,

26:34

whether it's the role of state versus individual,

26:36

whether it's the role of state subsidies, trade

26:39

rules. They want to change everything. So if

26:41

China did not try to change the world,

26:44

I think the extent to which the barriers would

26:46

have come up would not have been as

26:48

aggressive. But now China has

26:50

a catch twenty two barriers will

26:52

come up, which means it's harder to sell

26:55

that access capacity. You don't want to

26:57

recognize the loss of the capital, and

27:00

what you're trying to do is to go on a charm offensive.

27:02

That's why a Chinese president is in

27:05

Europe right now. From a US

27:07

perspective, what US is trying to do

27:10

is gradually grind China out

27:12

of the Western system, but without

27:14

dislocating refrigerator prices

27:16

or without dislocating things

27:18

that housewives are using. And the way

27:21

you do it is starting from the top, starting

27:23

from the high tag, and just keep moving and slowly

27:25

grinding them out, slowly retarding

27:28

their gross rates at least relative to what you

27:30

can do, but without triggering

27:33

a real conflict. So to me, that's

27:35

a cold war. You're walking at tritrop

27:37

between degrading as much as you can

27:40

your opponent without triggering

27:42

something really nasty. And I think,

27:44

so far, to be fair, whether it's Jenet

27:46

Yellen, whether it's Blinking, whether it's

27:49

Sullivan, I think they've done pretty good job of

27:51

actually achieving that balance.

27:54

Whether that can be maintained, however,

27:56

depends extent to which Chinese economy

27:59

and society perform to some extent, I

28:01

mean, it also depends what happens in the US, of course,

28:03

but if you just look at China, it

28:05

depends on that because remember normenal GDP

28:07

in China already fallen from ten

28:09

percent to four now.

28:12

In other words, as you create more disinflation

28:14

as you saw in Japan. It is really norminal

28:16

GDP that tells you the extent of

28:18

the pressure. Now, if economy

28:20

and society a geared towards a double

28:23

digit normal GDP, if

28:25

you can't raise it, inevitably pressure

28:28

starts rising. And so the question is

28:30

extent to which the pressure rises. What

28:32

is China's response, both in terms

28:35

of in terms of geopolitics,

28:37

in terms of politics, but also in terms of

28:39

economic policies, and how are you going to change

28:41

them?

28:41

Well, this is kind of what I don't get,

28:43

and this came up in the episode we did with Hugh Henry

28:46

recently as well, where he was talking

28:48

about the old traditional Chinese

28:50

export model for reasons that

28:52

you just laid out as well, just isn't

28:54

going to work anymore, because you know, Europe

28:57

is not going to accept a flood

28:59

of cheap electric vehicles coming in from

29:01

China. And so I guess I'm a little bit

29:03

confused exactly what China

29:06

is planning here, because the resistance

29:08

from the rest of the world seems so glaringly

29:11

obvious. When China first started

29:14

talking about building up, you

29:16

know, technological independence

29:18

in things like semiconductors or

29:20

strategically important technologies.

29:23

I was under the impression that, like some of

29:25

the idea there was to sell it into

29:28

the domestic population so that

29:30

you don't have to worry about the US suddenly

29:33

cutting you off from important

29:35

chips. You would have your own supply and

29:37

then you could do with it what you will. But as

29:40

you've laid out, like boosting

29:42

domestic consumption doesn't actually seem to be a

29:45

priority right now, they still seem to be very

29:47

focused on exports. So I

29:49

guess I just don't get it, because to me, the

29:51

problem with that strategy seems so obvious.

29:55

One of the ways I describe it

29:58

is a way I look at cheshipping and the well

30:00

look at Chinese leadership right now. It's

30:02

sort of a mixture very stern, paternalistic

30:05

attitude. You know, being

30:07

soft is bad, suffering

30:09

is good. That's one side of it. The other

30:11

side of it is very classical economics

30:13

and Marxist economics. They effectively

30:16

harping back to the day of Quinsy, David

30:18

Ricardo, Adam Smith, cal

30:20

Marx and those people were not thinking

30:22

of prices, that were thinking of value.

30:25

Now, since late nineteenth century economy

30:27

is abundant value. So we only look at

30:29

the prices. So if you're a billionaire, you must have add

30:32

value because price is telling us you have Classical

30:34

economy says no, this guy just captured

30:36

somebody else's value. He didn't create

30:38

value. And so if you take that

30:41

mindset, who is creating value? Who

30:43

is destroying value? If you ask

30:45

David Ricarda does he think financial

30:47

markets or capital markets value creative?

30:50

The answer would have be no. The best thing

30:52

you can argue, they're relocated, but they don't don't create

30:55

it. Who is creating value? And

30:57

so for Ricardo or Adam Smith,

30:59

or even before that, the argument people

31:01

who produce stuff, whether it

31:03

was agriculture early on, whether it's manufacturing,

31:06

whether it's technology, and so the emphasis

31:08

seemed to be much more In supply,

31:11

the emphasis seemed to be much more production.

31:13

The emphasis is to start

31:15

to strengthen as Chi Chi Pink calls it

31:17

productive forces, which is a classic Marxist

31:20

argument productive versus unproductive.

31:23

Strengthen them, put obstacle

31:25

in front of people who you don't regard as productive,

31:28

and they're incredibly suspicious of capital

31:30

markets and finance.

31:32

So the disorderly expansion

31:35

that's right, what.

31:36

Carl Marx used to call fictitious capital,

31:38

capital that multiplies for its own sake

31:40

without doing anything good to anybody

31:42

else. And so if you take that mindset,

31:44

then that is not the mindset of Western economists.

31:47

But if you take that mindset, the sort of

31:49

stern, paternalistic attitude and

31:51

the emphasis of what he described productive forces,

31:54

you understand why they're reluctant to

31:56

actually do anything about it. Now.

31:58

Eventually, as I said early on, the precious

32:01

has to rise and they will

32:03

have to pivot. And we saw this COVID in

32:05

late October early November twenty

32:07

twenty two, that he

32:09

can pivot very very quickly. That's

32:11

why there was a disorderly opening after

32:14

COVID. And so there is a possibility

32:16

that there will be that moment when

32:18

you actually will have the change.

32:20

But the longer he waits,

32:23

the worst it gets. And the reason is very simple. China

32:25

is not Japan. Japan had an open capital account

32:28

and fluctuating currency and convertible currency.

32:30

So when Japan run into the wall, they just collapse

32:32

overnight. China has close

32:35

capital account, currency is not convertible,

32:37

central bank is not independent, actually

32:39

lost all the power pretty much commercial

32:41

banks are not commercial and private sector is not really

32:44

private. So when you're operating behind

32:46

the wall garden, you can't have Minski

32:48

moments. You can't just hit the wall and collapse.

32:51

But what you can do you can basically

32:53

add increasing headwinds as

32:55

you keep going. So if Japan operated

32:58

Chinese system in nineteen ninety, they

33:00

didn't have to go down. They could have survived until

33:02

ninety six or ninety seven. But the

33:05

longer you go with that, the worse

33:07

it gets, and so they need to recalibrate.

33:09

So recalibration, which is needed. Change

33:12

your policy settings quite dramatically.

33:15

Number two, change your geopolitical

33:17

stance quite dramatically. In a sense,

33:19

stop trying to rebuild the world and

33:21

change the world and change domestic

33:24

politics. In other words, give a little

33:26

bit of freedom for people, both businesses

33:29

and consumers and households. If

33:31

there is is pivot change, you

33:34

still have to pay a price. Because one of the things

33:36

I highlight is capital stock. IMF

33:39

calculates it. And if you think

33:41

of two thousand and four, China had capital

33:43

stock of I forgot like four trillion

33:45

dollars. India had one in

33:47

twenty twenty eight, they will have one hundred

33:49

and five trillion dollars. US

33:52

for example, will have seventy seventy five India

33:54

will only have six. So China absorbed

33:56

over one hundred trillion dollars of depreciated

33:59

capital in a couple of decades. When

34:01

you absorb so much capital, which is entire

34:04

world GDP, when you absorb so much

34:06

capital so quickly, inevitably,

34:08

you have an indigestion period. So

34:11

that indigestion period will be with you even

34:13

if you make a policy pivot today.

34:15

But what will happen if they do that? Risk

34:18

premia will improve because China

34:20

is the only market in the world, and the only

34:22

acid in the world where risk premier

34:25

over the last several years have gone up almost

34:27

everywhere risk premier actually

34:30

for.

34:46

I want to push on two specific

34:49

things you said. So one is you

34:51

talked about Chinese dumping, and I sort of understand

34:54

conceptually the idea of dumping in

34:56

a commodity like steel or

34:59

they're you know, produce bonds you can't use it all

35:01

at home, or maybe even like solar or something

35:03

like that. But a lot of the Chinese

35:05

exports success seems to

35:07

be in making high quality non

35:09

commodities that are just very competitive

35:12

for cost reasons and in some arguably quality

35:15

reasons. One example would be

35:17

people saying that the shell me phone now has a

35:19

better camera, say than the iPhone. So that's

35:22

one thing. And then the other thing is you say you credit

35:24

yelling and blink in for

35:27

maintaining something reasonably. Well, this

35:29

attempt to degrade China, but not

35:31

necessarily provoke something

35:33

stronger. What have they actually done substantively?

35:36

Because I see the trips, and I see the talk and

35:38

the anxiety and the you know, the ft columns

35:40

about jumping and all that stuff, but I don't

35:42

really understand or can't quite internalize

35:45

what substantively they have accomplished.

35:48

Well, what do you need to avoid is very

35:50

dramatic moves. Okay, So in

35:53

other words, the last thing you want is

35:55

to stop slapping terraffs on very

35:58

primitive products. But I remember mostly

36:01

actually does law great stuff. People

36:03

focused on cameras, etc. But a lot

36:05

of China is basic chemicals, it's

36:07

toys, It's that sort of stuff. So try

36:10

to avoid displacing that

36:12

trade as much as possible. Try

36:14

to focus on the areas that

36:16

are important for you strategically, And

36:19

that's what Trump started to do but very chaotically,

36:21

and what Biden administration have done very systematically

36:24

over the last four years now, except

36:27

that China trade will get rerouted. Now,

36:29

the fact that suddenly Mexico and Vietnam

36:32

became major partners of the United States

36:34

have very little to do with capacity of those countries

36:36

to actually produce it. It's a lot of Chinese

36:38

trade gets rerouted through those places,

36:41

and accept that because you're getting some of

36:43

the benefit of that, including

36:45

sometimes better quality law prices

36:47

that consumers and businesses in the United

36:49

States can benefit from. At the same

36:51

time, what you're trying to do is re

36:54

establish as much contact as you

36:56

possibly can, because as

36:58

Defense Secretary was saying back in Singapore

37:01

when Chinese refused to talk to him eighteen

37:03

months ago, he said, with the Soviets, we never

37:05

agreed on anything, but we talked. And

37:08

the same is here. You need to maintain

37:10

the lines of conversation so that

37:12

you know how far you can go, where

37:14

you cannot go, how far you can push,

37:17

how high you can bring it back. So

37:19

what you try to avoid is a chaos. What you

37:21

try to avoid just slapping stuff all

37:23

over the place, trying to avoid pushing

37:25

China too far and at the same

37:27

time gradually, as I said, degrading

37:30

it. Now there is a possibility, and

37:32

it is a small possibility right now, but

37:34

there is a possibility that something horrible

37:37

is going to happen, either in Russia Ukraine,

37:39

or something horrible might happen across down One

37:42

Straits, and the whole thing will start escalating

37:44

beyond what you're trying to do. And

37:47

at that point we could potentially

37:49

see zeroing out even of

37:51

Chinese and Hong Kong assets. You can even

37:53

see US Department of Treasury arguing

37:56

that they don't recognize, for example,

37:58

the currency in Hong Kong dollar. Extreme

38:00

you can have a very extreme outcomes which

38:03

I think are not likely so

38:05

long as there is no as I

38:08

said, disasters occurring along the way.

38:11

So we just have a few minutes left, and I want

38:13

to go back to what you said earlier,

38:15

where you were talking about the idea of financial

38:17

risks migrating into

38:20

I guess, the real world, into the

38:22

political sphere in one way or another. And

38:25

you are actually the only Cell side analyst

38:27

I know of who has mentioned

38:29

the Columbia protests specifically. We're

38:31

here in New York. Columbia is not that far from

38:34

us. Talk to us a little bit

38:36

about how that kind of political

38:38

discontent plays

38:40

out in your world, in the world

38:43

of you know, investment and macro

38:45

and things like that. Why is that on your radar?

38:48

Well, Usually when you have generational

38:50

replacement and everything

38:53

is fine, like economies are fine, finance

38:55

is fine, technology is fine, there is

38:57

no displacement politically or geopolitic,

39:00

then one generation just slips into

39:02

another almost unnoticed. That's

39:05

what happened to Baby Boomers and X generation.

39:07

But whenever you have.

39:08

An X generation, we never were.

39:11

We slipped out before we were even in

39:14

are you no, No, I'm

39:16

eighty, I'm X.

39:18

I go. But but whenever you have

39:20

whenever you have a major

39:23

technological financial disruption,

39:25

what happens is that you have or

39:27

whenever circumstances change massively

39:30

for the better for the worst, one

39:32

generation cannot slip into another generation.

39:35

That's what happened to Baby Boomers. Compared

39:37

to a silent and GI

39:39

generation. The Baby Boomers could not relate

39:42

to their parents or to their grandparents.

39:44

They had verdically different views

39:47

what they wanted to do, and so the younger

39:49

generation anybody born sort of after

39:51

sort of early eighties onwards have

39:53

a very different view of the world.

39:56

And the reason they have very different view of the world because

39:58

they did not experience a world where

40:00

jobs were plentiful, where you've

40:02

gone to college, you automatically had a

40:04

good job. They found that

40:07

the jobs degrade, They found

40:09

the professional lives degrede They

40:11

found that technology gives you many tools,

40:13

but it also degrades both your pricing

40:16

power and marginal pricing power. They

40:18

found that politics become disoriented

40:21

as that occurs. They found that

40:23

democratic policies cannot solve the problem

40:26

extreme polarization. So they're

40:28

in the mixture of technological, financial,

40:30

and political revolution. And when

40:33

you have that change, that generation

40:35

sinks very differently, and eventually

40:38

they become a very large cohort. And

40:40

when they become a large cohort, they demanded

40:42

change. Now, what Baby Boomas were

40:44

asking for is not what this

40:46

generation is asking for, But they're asking

40:49

for change. And my view the change

40:51

all the surveys that come out, the

40:53

change they're asking is very much

40:55

community based, is very much

40:58

community of equals, is very

41:00

much governments supported. In other words,

41:02

harping to their grand grandparents

41:05

who lived in nineteen forties and nineteen

41:08

fifties rather than to their parents

41:10

and grandparents. And so usually

41:13

it starts with those types of demonstration.

41:15

Doesn't really matter what the excuses, whether

41:17

it's the civil rights, whether it's a Cold War,

41:19

whether it's Vietnam War, whether it's

41:21

inequalities, whatever, that is something

41:24

triggers it. But then as they get big

41:26

and bigger part of the population, they

41:29

really drive the policy. So today late

41:31

millenniums in Z already almost fifty

41:34

percent of the population, but they are only about

41:36

thirty nine percent of the adults. They

41:38

only twenty five percent of the voters.

41:40

In the US.

41:41

Mathematically, by twenty eight twenty

41:43

nine, there will be majority of adults,

41:46

and by earlier to mid twenty thirties there

41:48

will be absolute majority of both

41:50

voting and the adults. And so

41:52

the question is what type of

41:54

policies, economic policies, political,

41:57

social policies would they demand.

42:00

People must want it freedom, free

42:02

enterprise, personal responsibility.

42:04

You give me the rope and I can hang myself with

42:06

it, or I can succeed this guy's

42:08

asking for something else, And so

42:11

how would all of those policies

42:13

change? And I'm thinking they're going to bring us back

42:15

to nineteen fifties, that

42:17

probably will be a more likely outcome

42:20

rather than sort of nineteen nineties two thousands.

42:22

I like how conceptually we've sort of come full

42:24

circle because we're back to I guess demographic

42:28

changes driving potentially higher

42:30

deficits over the long term, fueling

42:32

US exceptionalism in some ways.

42:34

Maybe, Yeah, let's take it. Victor Schwetz,

42:37

thank you so much for coming back on odd Lots.

42:39

Thank you. I appreciate it.

42:40

That was great.

42:41

As always,

42:55

Joe.

42:56

I feel like any mention of generations

42:58

always leads to over the cutoff

43:01

points.

43:02

Well, I may have said, I don't know if I've ever said

43:04

on air, So I'll just say that I have a very simple

43:06

test for the dividing

43:08

line between X and millennial

43:10

because some people say seventy nine or eighty one or.

43:12

Yeah i've heard nineteen eighty and above.

43:14

Yeah I've heard that too. But I think there's a very simple

43:16

test to do it, which is, did you have Facebook in

43:19

college? Because that gets you in that ballpark

43:21

automatically, yeah, but also

43:24

that's generationally transformative.

43:26

Social media is like clearly

43:28

a dividing line. I did not have

43:30

Facebook when I was in college. I got my first

43:32

account I don't know, like twenty two. It was after

43:34

I graduated by a couple of years. You apparently

43:37

did, so I'm X your millennial. That

43:39

makes a lot of sense, Thank you. I think

43:42

it's a test and apparently, I guess it's probably

43:44

rolled out to people in Harvard earlier. The

43:47

implication is that people at

43:49

Harvard became millennial before the rest of everyone

43:51

else.

43:51

Well, yeah, I was at LSE and I think we

43:53

were one of the first, yeah, so international universities

43:56

to get it. I have to say part of me kind

43:58

of misses the college era of Facebook,

44:00

where like we just spent an inordinate amount

44:03

of time like poking each other. I don't know

44:05

if you remember that. Anyway, back to Macro,

44:07

there's so much to pull out of that conversation. It's

44:09

always great talking to Victor. I guess

44:12

one of the things that strikes me is,

44:14

you know, he highlighted the

44:17

I guess unexpectedly loose

44:19

financial conditions, and to me, it

44:22

does feel like that is a key part of what's

44:24

happening in markets right now, and it kind

44:26

of goes back to that point I was making earlier,

44:28

where I don't think anyone expected the cost

44:30

of money to go up so much viz.

44:33

Benchmark rates and the FED rate

44:35

hikes, while the supply of credit

44:38

continues to expand. And that, to

44:40

me is sort of like the key to a lot of what's

44:42

going on in asset prices. Why we haven't

44:44

seen that huge default cycle that

44:46

people were predicting, Why we haven't necessarily

44:49

seen as many layoffs as a lot of people

44:51

were predicting, and things like that.

44:53

Yeah, totally Like we can easily point

44:55

to a few different categories, like

44:57

aspects of real estate and which. Sure, No,

45:00

it's totally true that it's sort of a puzzle,

45:02

and I don't think anyone is a great answer for

45:05

why. You know, people talk about refinancing

45:08

and everyone has a third year fixed. Maybe that has

45:10

something to do with it. Still, it's

45:12

not entirely intuitive why that hasn't had

45:14

a larger compressing effect on

45:16

asset prices. You know, there's so much to pull

45:18

out of that conversation and every conversation

45:21

with Victor. Like I said, we could have talked for

45:23

like an hour on the problem

45:25

with the dots, and maybe we should do that, because it does

45:27

seem like that's getting more attention to sort of

45:29

being handcuffed by the dots perhaps you

45:32

know, obviously, and we'll do more China episodes.

45:34

But is it really possible? And I

45:36

guess I have my doubts. But what do I know, like to

45:38

degrade China's cutting edge capacity

45:40

in such a way that doesn't provoke actual geopolitical

45:44

conflict something more mild, big

45:46

questions there?

45:47

Dots seem so innocuous to me. It's

45:49

so it's it's funny, Well what we're

45:52

talking about them? As last?

45:53

Wait?

45:53

Can I give it confession? And I always do my confessions

45:56

at the end because I hope that no

45:58

one's listening. I

46:00

always turn off turn off laws

46:02

right here. I always forget whether

46:04

the dots are what the individual

46:07

FOMC member thinks should

46:09

be the optimal path

46:11

of monetary policy going forward versus

46:14

what that FMC member thinks the

46:16

policy will be going forward.

46:19

And I like, I know there's a right

46:21

intern one, but I always forget which is which.

46:23

Oh I hate stuff like this because it makes

46:25

me It's one of those things like you just talk

46:27

about kind of naturally without thinking about

46:29

what you're actually looking at. But I think it might

46:31

be what they think appropriate monetary

46:33

policy should be.

46:35

No, you're right, I just as I was saying, I also

46:37

pulled up the Bloomberg dots explainer

46:39

anyway.

46:40

Which I mean also you would expect

46:42

it to be that, right, Yeah, right, well, I mean yeah,

46:45

bring back the boe fan charts. That's

46:47

what I say. Let go of the

46:49

dots and let's just do a range of

46:51

probabilities for interest rates and we can

46:53

have either fan charts or those hair charts,

46:56

the hairy charts, the MEDUSA charts, which I

46:58

love, or.

46:59

Just go back to the old days where they don't

47:01

even tell you what rate that they sent and

47:04

the market has to figure it out because of the overnight

47:06

rate. That would probably be fine too. I don't think

47:08

we need all this communication. I appreciate it.

47:10

I like the speeches. They're interesting, but we

47:12

don't even we went for years without that.

47:14

It would be very interesting, to Victor's

47:17

point about sort of real time repricing,

47:19

to see what a system like that would

47:22

would mean for financial markets right now,

47:24

maybe it would be better. Let's all slow down.

47:26

I think it's possible.

47:27

All right, shall we leave it there?

47:28

Let's leave it there.

47:29

This has been another episode of the All Thoughts

47:31

podcast. I'm Tracy Alloway. You can follow

47:33

me at Tracy Alloway and.

47:35

I'm Joe Wisenthal. You can follow me at

47:37

the Stalwart, follow our producers Carman

47:39

Rodriguez at Kerman Ermann Dash, Ol Bennett

47:42

at Dashbot and Kilbrooks at Kilbrooks.

47:44

Thank you to our producer Moses ONEm. For

47:46

more odd Lags content, go to Bloomberg dot com

47:49

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47:51

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47:53

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47:58

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48:00

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48:03

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48:05

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48:07

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48:12

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48:22

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