00:00We've got European bond markets not playing ball with the global theme that bond markets are worried about inflation.
00:06Not this morning at least, although of course the longer term story is different.
00:09But yields dropping here in Europe just a touch this morning.
00:11But Japanese yields are higher, US yields have been higher.
00:14How concerned are you about the strength of the yields that we're seeing, the weakness in bonds?
00:20I think we've seen a lot of weakness already, but I think there's a lot more to come over the
00:25coming months.
00:26I think that the inflation data out of the US, both the CPI and PPI prints this week, kind of
00:33hammer home a point that's kind of been clear for some time.
00:36That the Strait of Ramirez is causing severe supply chain disruption.
00:41I think the energy impact has maybe been less than some people expected.
00:46We're seeing an extremely rapid releases from the Strategic Petroleum Reserve in the US, which is easing the physical situation.
00:52But that can't go on forever.
00:53And we are seeing much more kind of entrenched impacts on the kind of plastic side, the petrochemical side, farther
01:01kind of down the chain of those fossil fuels.
01:03So, again, the Strait of Ramirez disruption is very much a supply chain issue, not just energy.
01:08And it's going into a hot market.
01:11It's because of the wealth effect from what's happening in stock markets.
01:14And generally, growth is OK.
01:17We're in the part of the AI cycle where people are still getting more efficiency.
01:21It's increasing demand.
01:22We're getting a massive CapEx boost.
01:23We're getting fiscal expenditure.
01:25So we are getting a real big supply side shock into inflation in an economy that's already got very strong
01:33demand at inflation.
01:34And I think that people are not fully registering how bad this could be later on this year.
01:41But later on this year, in the meantime, just get ready to buy the dip, right?
01:46I think sadly, yeah, for the moment, when stocks, I think so.
01:50Look, I think what's really important is that you've got to change the different time spans.
01:56The AI bubble will end in tears, but not until the earnings rug pull that happens at some point when
02:02they realize they're all competing for the same space.
02:03And they're all claiming to project just immense earnings, which is way more than the earnings of the companies they're
02:09supposedly supplying services to.
02:11So it can't sustain.
02:13But I don't think it happens until we get that earnings rug pull.
02:16And I don't think that happens now for another quarter because we just got through this earnings season.
02:19Another quarter at least.
02:20So I think we've still got months more of that big bubble.
02:22And I think in the interim, yes, ultimately dips are to be bought, but the dips will get bigger.
02:26Now, I do think we're probably going to continue to rally in the short term as we've talked the last
02:29couple of weeks until we get through this Trump-shee summit, assuming there's no tail risk there.
02:33I think once we get through that, we'll return focus to the straight of our murs, the fact there's no
02:37resolution.
02:38And I think that will cause quite a nasty swoon.
02:40And because the pace of gains in the herding we've seen, that swoon will be really, really powerful, but it'll
02:44still leave stocks immensely up than where they were only a few months ago.
02:49Just very briefly, do you expect Catalyst to the upside from Trump and Xi?
02:55No, I expect it to be upside only because of relief.
02:58I expect, you know, if they don't do it.
02:59Sorry, I do think there'll be some positive headlines.
03:02In my base case, some positive headlines, but I don't think they'll be dramatic.
03:05And I think we're kind of expecting those platitudes.
03:07Like I've had a beautiful talk and they have a wonderful relationship and there's a bit of buying of soybeans
03:12and there's maybe some chip deals at the margin, but none of them are going to be game changing.
03:16I think it'll be more about relief if there are no tail risks.
03:18So positive in that regard, but not a major bullish catalyst.
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