00:00We're talking probably a little bit too much about AI, right?
00:02The story of obviously this week was this Cetrini sub stack.
00:06And we're talking about is AI disinflationary?
00:08Is it inflationary?
00:09What's the future in five years or five to ten years going to look like under AI?
00:14You know, what's what's the next trades?
00:16You just said, right, we had a sector yesterday that was up.
00:18Now it's down the most.
00:19So we have this really weird environment where just day by day is a new trend.
00:25And every morning you wake up and say, right, what's going to be the topic du jour today?
00:30And I think we're probably missing that under the hood, there is some proper cyclical recovery going on, right?
00:36You look at PMI is just simple PMI.
00:38So you look at new orders over inventories.
00:40You look at the most open, the most manufacturing driven economies.
00:43Look at Sweden, Taiwan, Korea, you know, the likes of even the Netherlands, Czech, right?
00:48The really open, the smaller, the manufacturing driven economies.
00:51All of them actually have been starting to see a real pickup in the last two months.
00:55And that's, I think, what's a little underappreciated, particularly by U.S. rates now.
01:00I think we're pricing a little bit too much of this.
01:02Oh, my God, AI is going to be disinflationary already now.
01:05And we're going to see, well, we'll have to see even more rate cuts now immediately because of AI disinflation.
01:11And we're ignoring that under the hood, there is a sort of proper textbook style cyclical recovery.
01:18OK, OK, so that's all positive.
01:20But how much is that is that you mentioned some European countries, you also mentioned some in Asia.
01:24And we've got the MSCI Asia Pacific, I think, having its best February ever or since the records began 1998,
01:30many, many, many years ago.
01:31So that's all really good for Asia.
01:34Is it as good for Europe?
01:35Can it be as good for Europe or is Asia going to lead on this?
01:37I think it is.
01:37I think for Europe, you know, it depends on what sectors you're looking at, right?
01:42Is that really the sort of go, like all go really into and the all clear for the autos, for
01:47the chemicals?
01:48I'm not sure.
01:49But if you look at the likes of the banks, right?
01:52SX7E, I mean, you're really just along the level of the yield curve.
01:55So even if the yield curve just stays where it is, if it doesn't steepen much further, even if it
02:00does that and it just stays as steep as it is, you know, that's really good for the mostly retail
02:05and corporate driven banks.
02:06If you look at industrials, look at SXNP, you know, you've got your cap goods in there.
02:10So if manufacturing does pick up, you're along that theme.
02:13You've got your infrastructure names in there.
02:14So if we do see a positive surprise from, let's say, German infrastructure stimulus, maybe some of the order books
02:20going up, you're along that.
02:21You've got the defense names in there, right?
02:23So you've got some sort of geopolitical hedge in there.
02:25So frankly, there's like you look at the industrials in particular and the industrial goods and services in Europe, you're
02:30along a couple of themes with just being along one sector.
02:33That's really positive.
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