Case it would seem that it was before it was identified. The Fed is terrified the markets. Well I think what is actually
happening at the moment is that the market is actually repricing.
What quantitative repricing. They are constantly repricing. I think what they've what they've done is certainly the last time
I was here a month ago we were talking about this idea that the equity market might be about to push the economy into recession.
Our view now is that they've actually done it. And so now what we are actually focusing on is the dislocations
between different markets or equities where we had thought that there was going to be a bounce last time which did happen didn't
go as far as we thought. We think there's gonna be another bounce happening now. But you definitely want to be selling into
this now. Mohammad interesting to see what's happening with treasuries
right. They rebounded and today giving up all your gains. I mean it is too early to call the end of that you know bond route.
Yes I think we've been I mean I've been rolling on that on that call. I thought that the you know we've been trying to call the
top in bond yields for for quite some time. What concerns me. And again this feeds back into this idea of what's happening in
Japan with the yield curve control as well. Is this idea that there could be a deflation cliff that is going to be facing us
on the other side of all of these rate hikes. And there is this sort of scenario where you know oil in 2023 or late 2023 folds.
And all of the things that are positive for inflation at the moment actually turn into big negatives. So we still think that
you know at the moment you probably want to be buying tactically into the bond market and looking for opportunities whenever the
bond yields look a bit too extreme. But I'm not going to make a view on the bond market now which probably means that is
probably the time to buy. But know longer term we still think that what's going to happen
is that everything is going to go back to the level that it was at when President Biden got elected on the 4th of November 2020.
That's equities is going to be bonds and probably commodities and oil as well. Well let's look at the banks Japan. I mean
America carried a term doesn't end in a few months. So done anything. I mean it's just essentially done the same thing over
and over again. And these had the same result is nowhere near. I mean you'll get inflation above its 2 percent target but it's
only going to be it's going to be transitory this time isn't it. Well I think I think it is. And I think the problem. But what
does he do. I mean you killed countries doing all sorts of things but has it moving the needle for the economy.
I think it's the alternative that you're preventing. I think that's the major thing. You know you imagine this scenario where
you know you abandon yield curve control. The market's going to take yields up above 1 percent on the on the 10 year. The
Japanese economy is just going to slam into reverse. So all those people who are betting against that the stakes are very
high. And I think the thing is that where the Bank of Japan defers from the RBA is the Bank of Japan has got one point three
trillion dollars of reserves. And you know most of the shorts there are in JD are on an unhedged effect basis. Right. I'm old
enough. That's going to hurt. I remember in 1998 when the Bank of Japan moved dollar yen from 137 to eleven in three days. Now
I'm not saying that's going to happen now but that's a real consideration that we need to be. We need to be thinking about
and they will defend it if it comes down to their national interest I believe.
But Mohamed in nineteen ninety eight the BMJ actually ran out of power. It had to seek the help of the treasuries. No I mean
limited X reserves. Well no not really. I mean what it was was that there was this
idea which is still around today that you don't want to ever be doing intervention on your own. You want to get the approval of
the G7 to be able to do it. Now what we've shown previously is that from a game theory perspective inflation can actually be
controlled if you get dollar yen moving lower and renminbi yen moving lower as well. And at the moment that's not really
happened. So the higher the dollar yen actually goes the worse it is actually for inflation around the world before the central
banks got together and realize that actually lower dollar yen is good for inflation. I think they'll they'll agree to intervene
together. But it's Bank of England today. We've got the ECB they face similar issues high inflation etc. But I mean if you look
at it this way just generally speaking you've got low or shall I say real wage growth slowing down. You've got at the same time
economic growth slowing down. You've got high inflation in the pipeline of markets which are volatile particularly these
stocks. Oil spiking of course particularly. You've got also a war in particular commodity producing area of the world not
that's the 1970s. That's also now. But those things are all happening now. All right. But you can't draw parallels because
the world has changed. But markets have changed as well. So how do they interrupt. I had to interpret all this. Well I think the
major thing that is happening at the moment is this withdrawal of liquidity and the Kutty that is happening. And you know we've
been talking about this now particularly since March 2020 going back over 14 years as well. And I think what this means is that
what is going to be really crucial to what happens to markets is going to be the direction of the dollar. The balance sheets are
now so big that what happens to the dollar determines what happens to to risk. And now it looks like the Fed is taking
rates even higher. The dollar looks like it's going to have one leg higher as well. And that's not contributing. Why. Well well
it's basically the dollar raised balance sheet that matters. And what you couldn't see even on a intraday basis is you see a move
in the dollar. You move you see almost a direct correspondence happening in in markets. I think some of it is to do with. The
way that the balance sheet feeds in to the credit risk into the equity risk premium. But I do think we completely understand
exactly why it's working but it works. Mohamed We talk about the divergence in major policy is not just
a bogey that PIMCO see though the PBS is not grappling with high inflation still within its target and that somehow makes Chinese
stocks Chinese assets unlikely. Haven Place. Will that persist. I think at the moment yes it will. You know I was looking just
before I came here. Hey Jess ISE actually outperformed the S&P S&P by 25 percent since March 15th when China exercised its
liquidity put. Certainly if the dollar weakens that will be a real benefit for those markets. But I think with looser policy
coming from China there's still a lot of money that is overweight in the US that will rotate from there into into
trying to. Now of course if the US sells off very heavily then at some point the Chinese equity markets will also sell off. But
I think that's a little bit further down the line maybe a couple of months away before that will happen.
You talk about dollar strength yen weakness. Surely China's looking at this really really closely. I mean that yen weakness
is not really sitting well with China right. I mean it erodes its competitiveness.
Yes I mean you know again there are parallels with 1998 again here which is that you know the Chinese were getting very
concerned with the yen weakness. Even at that time and the Chinese weaken their currency it's now been stable for about a
month or so. But I think they will be looking at that as well. Remember with the domestic weakness in the economy they are
going to be looking at exports especially within this region to be helping to drive their their economic growth. Again it's the
dollar central. But what about corporate debt. What about dollar denominated debt. That must be a huge concern. Well again. In
this part of the world. Yes. I mean you know I was talking to our traders this morning and I said you know in 1994 when we had
the great bond massacre it was called at that time you know seven months later you had the tequila crisis. And I said well
you know what we need to look out for is who is going to be the potential victim of this. You know you need to be looking for
people who have got high levels of debt. You need to be looking at countries for example with twin deficits. There are a few in
this region as well. I'm not going to name but you know that's something that we are
definitely on alert for.