When you look at the credit market in China bond markets in China. Are they attractive. Yes they are. And China continues to
struggle with the zero Covid policy and the constant shut. So it's going to take a lot off of GDP. And because of that we
think that GDP will come in somewhere around 3 percent. You look at the 10 year trying to government bond it's yielding about 2.8
percent. That looks to be pretty good value to us. I think for us one of the bigger discussions we're having is what is Euro
Covid policy mean for recession and inflation. And unfortunately it means stagflation. It means that you're taking out a large
area of consumption but you're still going to have the supply bottlenecks. That's not necessarily good for the rest of the
economy. And one of us was trying to invest more. I know. Yeah. This is somewhere where Bob and I actually agree. You know I
think that you know from a Chinese bond perspective I think Chinese bonds do offer value particularly in a global context
stopped. That said I think the big question mark for China right now is what they're going to do with respect to their currency.
You know I believe that their currency is likely going to continue to weaken in a zero carbon policy where growth really
is handicapped. And as a result of that I think that that likely means that it's going to really harbor poorly for the rest of
the world. Remember you know historically it's been difficult for emerging market assets to do well in environments where
China growth is very weak and particularly if China continues to weaken its currency or allow for its currency to gradually
weaken. It also means that you won't likely see emerging market strength outside of China. What that ultimately means is that
it's pretty poor for global growth. I think people have been expecting market. Investors have been expecting that you would
likely see some type of recovery in China particularly this year and in the back half of this year. I don't think that we're
going to get it which makes in my mind tiny China Chinese risk assets pretty on investable right now. This is where I'm going
to disagree with everything. We're back on track. We're looking at the rest of the emerging markets emerging
market debt. And we think that could be the surprise of the second half of the year. Well upside surprise for the bond
market lately. And if you look at the developed markets central banks really when you look at the ECB just starting to raise
rates the Fed early on and the Bank of Japan starting in the emerging markets since the start of 20 21 30 central banks have
raised rates a hundred and seventy times for a total of 15000 basis points. So those markets have anticipated inflation.
They've priced it in. There are high real yields there. People are afraid to go in because of inflation because of the strong
dollar. We think there's an opportunity there. You put together a basket of Brazil South Africa and Mexico. You've got a seven
and a quarter percent yield. All you need this for the dollar to remain stable and not keep going up all you need Aaron. All you
need is the dollar remains stable to Bob took it. Actually the ECB. What about Europe. Yeah well I just want to go back to
Netflix really briefly. I mean Bob earlier you were saying you can get an 8 percent yield out of high yield. So why would you
get a 7 percent yield out of emerging market assets if it's a lower quality asset with more ethics risk on it. I think that in
order to be bullish emerging market assets you need to fall. Do you need one to see a stabilization in global growth. And
probably even much more importantly you need to see inflation stabilize in emerging markets. Unless and until you see
you know inflation stabilizing you're going to continue to see those central banks chasing and trying to get in control of
inflation. And that just means that you know likely you're still going to see higher rates in emerging markets. So I think it's
too early right now to call for a buy in emerging market assets in emerging market bonds. With respect to Europe you know I
think that Europe is really challenged right now and that's largely as a result of the fact that they have much higher
reliance on energy and gas from from Russia than the rest of the world and particularly versus the U.S.. And so I think that
you're going to see a real impairment to European corporates in the second half of the year because of higher energy costs. And
I also think that you're going to see a forced curtailment of industrial energy usage which means that corporate profitability
in Europe is going to be quite weak. I do think that you know based on some of the PMI data that we got over the last 48 hours
out of Europe that we're likely in a recession in the third quarter in Europe at the start of a recession and you'll likely
see that recession conditions ensue over the next few quarters. I think that Europe is a real weak spot in terms of the global
growth trajectory. So some rebuttal. Yeah. DAX emerging. Well I knew you were I knew yours. I think there are three sovereigns
who aren't going to be really happy that they just got compared to below investment grade U.S. corporate. So let's put that to
the side. Europe. Yeah I hear. I agree with her and they've got a real problem. It looks like inflation is going to remain
structurally high. The ECB is going to do what they can to slow down consumption.
Ultimately we like sovereign debt there. But but we like Germany. We're not necessarily sold on Italy. So we're sticking
in the sovereign side. We think there's some normalization in policy to come from the
ECB but they're not going to get anywhere near as high as in rates as as the Federal Reserve. So Aaron to put you on the spot
what's the worst problem for Europe right now. The collapse of the government.
Italy or the problem the ECB faces and particularly Russian natural gas.
I think energy is by far the number one problem that Europe is facing right now. You know frankly for Italy specifically
certainly the collapse of the government is a challenge. But I think that a much larger looming risk out there is the
curtailment in what's going to be in supply in you know into Europe for natural gas.
And what that ultimately is going to mean for demand destruction.
That's necessary to come from it. What does that say to you as a bond investor in Europe. Well it says a couple of things. It
tells us to be careful on corporate Europe because the input costs pressures aren't going to go away anytime soon.
It tells us that the ECB can only raise rates so high maybe one and a half one and three quarters percent. That's about it. And
it means that you're going to want that flight to quality. So as I said German government that is the place for us to be there.
So last question here Aaron. You heard Bob say providing we have a stable dollar. What do you expect the dollar to do from here
on out. Will it continue to strengthen against other currencies.
Unfortunately I think we're still in a period of dollar exceptionalism which means that because of the somewhat relative
better growth trajectory of the US versus Europe because of the less reliance on Russia as a source of natural gas and energy
and because of the defensive properties of the dollar I do think that the dollar is likely to remain quite robust over the next
couple of quarters. And so I think that the dollar is likely going to continue to strengthen your view there on that one Bob.
No. The dollar has peaked. And even there I was talking about you know the downside to the US economy. The dollar's gone as
far as it can. It's really stretch versus all currencies.