The yield curve inversion what is it Telling us 50 of the people say look at The end of the world depending recession The other saying look in the last 10 Years everything's changed so don't Worry about it It's basically telling us pay attention Okay that the market is increasingly Concerned that the fed will make a Policy mistake And And the markets are accordingly say Just pay attention okay pay attention do You worry that a 50 basis point hike From the fed is actually the wrong Message because it suggests panic and Too many questions about what happens Next look i worry that we're in a no-win Situation I worry that the fed now has to choose Between one of two mistakes And has to decide which one it would Rather make Go too fast Or go too slow i would go too slow That's the mistake i would make but i Understand that a fed that has lost Credibility may want to go too fast okay Because What do you worry about that if they go Too fast and they have to reverse it Which is what we've seen in europe about 10 years ago i worried it will tip us Into recession
That's what i worry about that they are Late that they mischaracterize inflation For too long they didn't do enough and Now they feel that to regain their Credibility they have to show and they Hike twice by 50 basis points Danny also has a couple questions for You Yeah mohammed good morning to you thanks So much for joining the program and You've been very clear of your fears Over recession earlier this month you Called for the potential of double-digit Inflation figures does an sbr release From the biden administration and lower Oil prices this morning relieve any of Those fears for you It helps but it doesn't remove them i Think that the distribution of outcomes Has shifted Stagflation used to be a risk it's now a Baseline Goldilocks used to be the right Now has moved to being out completely of The distribution And in the left tail Recession has come in I don't think that the release of the Oil will significantly change that Distribution And of course all of this leads to a Market that's very difficult to invest In we saw it last quarter stocks bonds Falling five percent or more you've
Written a recent bloomberg opinion Column saying that this environment will Push investors to private markets with Private markets already three trillion Dollars or more in dry powder what does It mean to have a world more awash in Private money So i made sure to say you also need the Private markets to expand their offering There's a lot of opportunities in Developing countries for example that Remain unex underexploited There are plenty other places where People haven't gone as yet so the Private markets are going to have to Step up and offer a much broader range Of opportunities Can you hear the bells danny ringing in The background it's so very italian i Mean we haven't done this in person for Quite some time muhammad when we were Talking about with lawrence boone about Some of the possible rationing We don't really know how to model a Complete price shock in oil right if Tomorrow the taps are turned off because It's not paid in rule bowls because one Side says right that's it What happens to the world economy So i think europe goes into recession It's almost a certainty that europe goes Into recession i think the rest of the World has a massive stagflationary wind And what we don't talk about enough
Francine Is the Input commodity importers developing Countries they are La they lag self-resilient and i really Worry about them Meaning possible default or or meaning How ugly could it get for them Don't forget the phrase that christine George's who you know well said War in ukraine could equal famine in Europe in africa Yeah because of course they do so much Of the wheat and the flower is there Anything that governments can do so we Talk about and i don't know you know the Markets have not really clocked onto This idea of rationing whether it be Energy prices or is that what we'll have If this war doesn't stop soon Yes if the war doesn't stop soon you're Going to have not just Higher commodity prices you're going to Have significant supply disruptions Remember what you and i will do in a World like that we will stockpile So what you get is lower supply higher Demand coming at the same time What does that mean for the market i Mean the markets at the moment i feel Like have they have blinkers right They're saying i'll be fine we'll work Through it is that going to lead to a Huge correction i don't think they have
Blinkers i think they're living in a Relative world So if you're an equity investor and You're taking on a lot of risk and you Want to move where do you go to Cash guaranteed Negative real return Bonds Capital depreciation where do you go so They're thinking in a relative space What you're talking about which shift us Into absolute space and that's a Different proposition we do see that at Some point i'm going to cash because of The absolute space i mean if we're Talking about rationing i mean this you Know we haven't rea none of this is Modeled this is not priced in anywhere Really so i have an article coming out In the financial times on monday that Says exactly That says exactly this says this is the Time to take some trips off the table The market has been incredibly resilient And investors should take advantage of That
