We're seeing a number of voices then Luke coming out saying hang on maybe we need to see something a little more dramatic from the
Fed. Do you see arguments around the need for some sort of maybe shock therapy for markets and shock and awe in the shape of
larger interest rate hikes and perhaps we've become used to in recent rate hiking cycles. The Fed says and I think everybody
would recognize they need to do something about inflation. An awful lot of people have forgotten the transmission mechanism.
Raising rates doesn't get rid of inflation on its own accord. The point about raising rates you go back to Volcker. I'm old
enough to have been around when he was doing his thing and to spend time with him. The point was he moves rates far enough to
cause a significant contraction. That's how you get rid of inflation. The increase in rates causes the contraction. The
contraction is what reduces forward looking inflation. So the question this year is going to be a constant sort of tradeoff
between whether the market believes that the Fed and the other central banks have really got the gumption to raise rates
aggressively enough to actually reduce forward demand forward and therefore forward inflation. My own guess is you're going to
get a series of these windows where the Fed is giving strong messages. The market gets sort of caught up in the idea oh you
get a push up in rates. And then what happens is you get a sell off in equities and then you'll suddenly find that they're not
sounding quite as punchy as they used to. And suddenly you get a bit of backing off and then things will feel OK. And you're
going to get this sort of stop start to how aggressive the Fed is getting
To get rid of inflation they would have to be a lot more aggressive than they've shown any sign. And given the nature of central
bankers and politicians these days it would be a surprise if they're really aggressive. Why do you think central bankers are
not more willing to make those bold calls. Is it because they're mindful of the feedback loop between equities and the real
economy or is it for other reasons. Well it's partly about that feedback loop but it's it's a lot of it is about if we've lived
in an easy money world for a long time that's led to politicians believing that they can keep printing money in one form or
another or the central bank will do it for them. And the central bankers has had a pretty easy ride of it. And so
we've ended up with a situation where the you know I don't think Volcker could get elected as chair of the Fed today. I mean I'm
not literally him but somebody like him. He was a pretty severe character. And you know he was quite happy to talk about the
need for unemployment in order to get inflation down. I don't see any central bankers or politicians being willing today to
talk about if you want to get that inflation out what you've got to do is create a significant reduction in demand which is
really about creating a recession which would be bad for equities. But you know we're sort of stuck in likely a version
of kicking the can down. How will you be keeping the right side of technology trades then as we go through 2022. Given
how stretched valuations circled some areas but also the pivotal role that tech names play in our economy these days. Sure. I
think one has to avoid confusion between tech and forward earnings companies. So know if you look at Apple it's a tech
stock but they own a lot of money today. And the present value of the cash flows from Apple doesn't look very different. If
you've got interest rates at 10 years at 1 percent or you've got 10 years a 3 percent looks a bit different but not that
different. The real thing you've got is we've been through a world when
interest rates have been so low that a cash flow today is what basically has been value of basically the same as a cash flow in
ten years time. That if you've got a company that only starts earning interesting profits five seven eight years away is a
very significant thing. And I think we're seeing that unwind. Now you know what that does is mean there is more of a focus on
earnings. I'm not sure we've seen a little bump where it's anti growth pro value. I think over time once the sort of froth is
out of that you get to something that's more about quality. It's more about consistency of earnings which is what's likely
to be the thing. But but we're going to get significant factor rotations while we try and work out new leadership.