00:00And Mark, let's start with Japan, if we could, because since the election, we seem to have seen quite a
00:05lot of retreat from some of the earlier Takeichi trades that the market had been playing quite strongly.
00:10So the yen has strengthened and continues to do so a little bit today.
00:14153 is where we trade right now on the yen.
00:16How are you? What's the context around that?
00:21Yeah, good morning, Anna.
00:22It's very much seems to be this buy the rumour, sell the fact type of event.
00:25And people are now suddenly building this whole new narrative.
00:28But this is a turning point to the yen, because now that Takeichi will have four years to implement our
00:33policies, it's pro-growth.
00:34It's a buy Japan moment.
00:36We have certainty what's going to happen.
00:38And therefore, the whole narrative that we are trading on the yen is all wrong.
00:42And therefore, the yen is going to turn around.
00:44It's undervalued and it can start a big macro trade.
00:46As we've talked about a lot, the macro community loves buying the yen, constantly wrong on this.
00:50And so it's very easy for that narrative to kind of get momentum.
00:54I'm not sure it sustains.
00:55I think it can last for a couple of weeks, a couple of months.
00:57But the fundamental reasons for being bearish to the yen have not changed.
01:01Even if Takeichi makes a difference to the margin, this is still a very slow-growth economy with a very
01:05large debt pile that offers deeply negative real yields that are unappealing.
01:09And so therefore, I think the ongoing story is that if yen rallies maybe for a couple of weeks or
01:14a couple of months, it's just a great time to reimplement carry trades and fund to buy other risk assets
01:20in the yen, which Japan itself does.
01:23That's what Japan, Inc. does in en masse.
01:25And therefore, I don't know how long this change in narrative happens, but I don't believe it.
01:29I won't get on board.
01:30I'll just stay quiet to the chance to get bearish to the yen again.
01:33It will come.
01:35Eventually.
01:36Why didn't the dollar go up more yesterday?
01:38Why did the front end only move a little bit?
01:40That was a strong payroll number.
01:43It was a very strong payrolls number.
01:45The reaction in yield surprised me.
01:47I would have thought yields would go much further.
01:49I understand the flattening move in yields, but I would have thought, you know, it should be overall a bigger
01:55shift higher in the yield curve right along the curve than we saw.
01:59The dollar move doesn't surprise me as much.
02:01We've talked a lot.
02:01The world is overexposed to the dollar on a structural basis, and that needs to change over the coming years.
02:07It's not going to happen overnight, but, you know, every time there's a spike in the dollar, it's another chance
02:11to offload.
02:12Hedging ratios need to improve.
02:14The dollar is, you know, is one year into a multi-year downtrend.
02:18That has many more years to go.
02:19So dollar weakness is never going to particularly surprise me.
02:22The backdrop here is that if you get weak data, oh, my God, well, it's justification for cuts and it's
02:27to sell the dollar.
02:28If you get strong data, well, maybe the Fed will still cut rates, and that's even worse for the dollar
02:33because they've got terrible monetary policy.
02:34Basically, it's has the dollar loses, tails the dollar loses.
02:38That's the kind of the underlying backdrop we've got for the year ahead of the dollar.
02:43Mark, another day, another set of anxiety, another round of anxiety when it comes to the AI apocalypse, the assassination,
02:49another sector, real estate.
02:50How anxious are you about this?
02:52And to what extent is this a broader market impact?
02:58So I'm really surprised that the overall index level is holding up already, given the immense rotation we're seeing.
03:04I still kind of think we see a little bit of an equity shock in the coming weeks on some
03:08of this kind of wealth damage that's happening out there, some of the portfolio damage that's happening.
03:13But in the terms of the fundamental level, I don't think that the AI is going to savage jobs quite
03:19as quickly as some of the doom-mongering timelines.
03:20I believe it's happening. I'm not a lot out in this thing, but I think it's farther down the line.
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