Mark Tinker on the Markets (Audio)

we've We've been waiting for it. Um. I think we've the whole year, We've we've had these squeezes into particularly quarter end, but certainly a month end. Essentially the asset allow cases have been sat like rabbits in the headlights, while the c t A traders have been running rampant with very heavy short positions in bonds, in equities, and in almost every currency except the dollar, and then as it gets the end of the quarter end of the month,

they closed down those positions. Ever he goes it's all over, But then there's no follow through buying. So I think what we're really waiting for is to see when does the ultimately long term investor start buying the depths, Because at the moment, they sat very much on the sidelines.

So how have we seen capitulation difficult to tell. Really, what we're waiting for is the opposite of that, which is when does that cash that's been pushed the sidelines start start redeploying m you're saying POMO holding a lot of people back as well. How much further does this crowded dollar trade have to run to? Why that that? That is a million dollar question, multimillion dollar question. It reminds me very much of this time last year when

the FOMO trade was. Everybody knew that MidCap text and spacks and and crypto was was going too fast, and they all knew it was going up, but they were all waiting to get out right at the top. And as we ran into Thanksgiving, the trader started to take the money off, and then everybody tried to get it

once and then it came right back down again. And I really feel that that's where we are with a dollar right now, is that everybody, the traders are all in there, but there's a lot of investors are hiding in there right If you're an offshore investor, the best returns you've delivered your clients in local currency just by holding dollar cash, and at some point they're going to need to take that profit and they're going to need to reallocate that. So that's going to be a I

think a similar a similar things. So it is the most crowded tread in the world right now, and everybody's waiting to get out right at the top, which of course nobody efer Haus. So it turns when the FED pivots, obviously, and do you have a sense of whether that could happen maybe in the first quarter of next year quickly. I think this. I mean, the idea that they'll keep going until they completely kill the U s economy is wrong.

The risk that we have outside of the US is that everybody follows the dollar, follows the FED rather and it kills other economies along the way because they are set up very, very differently for sensitivity to interest rate. Bryan talking there about some of the comments we're hearing from Corona Sun about the yen and also saying the recent sudden week yend raises uncertainty is negative. We are

on intervention watch. Do you agree with a comment from one of our Bloomberg writers, Edward Harrison, that you should look to Japan, not Italy for the next meltdown. Ah, that's an interesting one. I think the risk is that the Europeans have got more problems with with bonds and refinancing their bonds. I mean, the Japanese have this huge bond issue, but it is all internally financed. Italy is he equally has a lot of internifiers, but there are

other parts of Europe. I think the big issue is we almost need to think of the UK and Europe, and to some extent, but maybe the UK and Europe as almost been like an emerging market. Now they've had such moves in their currencies. The people who've got dollar debt are the ones that are most at risk um and that's I think where you're going to get most of the problem. The Japanese haven't taken on a whole lot of dollar debt. Companies and and people throughout Europe

have got a mismatch on the currency. They're getting interest rates rising and they're getting the wrong end of the currency. And that's exactly the format that we've seen time and

time again in emerging markets. I know it sounds a bit exaggerated, but you've had huge volatility and bonds, huge volatility incurrencies, and you've got that same kind of stress in a system that has got so used to having cheap and available debt and now it's going back the other way to I would say, actually, I'd still be

looking at Europe rather than Japan. Does that set us up potentially for a really rugged three I mean, if we don't get kind of a calmer situation and volatility does remain elevated, that we could really see some significant disruption. I think actually, you know, to take the positive side of it, and in the black Stone the other day were just pointed this out is is that they've been

beaten down so much. There is enormous value in the assets and the cash flows that are now in Europe, including the UK to a dollar based investor that includes people out here obviously, people in the US and people who have been like the Middle East, who have been hidi in dollar cash. That dollar cash is going to

get deployed and actually pick up those assets. So actually, maybe it's volatility, but maybe it's much more that there's a huge kind of restructuring almost m and a type thing comes through first, and then the next thing happens is is that you then get infrastructure built, because that's the thing that's been exposed is that we haven't got

the infrastructure we now need. Now that we can't have just in time supply chains because we can't afford to tie working capital when capital is costing four when it's costing twenty five bits, you can have loads of working capital tied up, and global supply chains doesn't work anymore. Let's talk about the China picture. Obviously, looking at the China Party Congress, I'm curious as to a line you've given us in your notes at ads will continue to be replaced with g ds. So how does the West

invest in China? Moving forward? The West, If the West wants to invest in China, it has to come through Hong Kong, it has to come through essentially the Chinese system. So essentially we had that kind of magical thinking that a company was a dcent owned by the Americans of the the US investors and add owned by the Chinese at the same time, and that that's what really kind

of ended that whole process. And essentially China is saying we we welcome foreign capital, but it has to come in in the way that we want it to come. So if you want to participate. You could make a case that they got what they wanted in the process, right, And now it's under the second part of the story, and that which kind of takes us to the tension. Now we're peuter chip technology is related between the US and China. Does this have the potential to significantly hold

back the growth of the Chinese economy? Um? Personally, I don't think so. I do think that we've we've spent the last decade wishing China to pave like we wanted to. So we we said, oh, everybody wants to become like live the American dream, and G told us, no, no, this is the China dream, which is similar but different. And then we spent the last five years saying China's going to turn its financial markets into the copies of

our financial markets. And and then G essentially said, now we believe in common prosperity where we're looking for the nine not the one percent, and we don't want George Soros and we don't want the kind of speculators coming in. And actually, what we're going to do and we this is actually we've got the Party Congress at the moment, we had a five year planned last year they set up quite clearly what they're going to do, and it is going to be to be investing in China's domestic

capacity to manufacture what it needs. In terms of the technology side, they've shifted it from made in China. But at the end of the day, I think the most important thing for international investors is to recognize that China is not going to be using the Western financial system and particularly not going to be using the dollar going forward, and that is going to be buying its oil and gas in R and B, which means it has to be it doesn't need to earn a hundred billion in dollars.

It's actually it can just print that R and B, and so that changes the picture dramatically, and I think the West needs to get its head around the fact that China isn't going to be making cheap goods, isn't going to be the factory of the world using polluting technologies. It's actually and that's where the broader picture comes in about it's an end of the disinflationary pulse from China.

China is going to be looking after China, and we've got to work out, you know, how we can kind of fill in the gaps because of the things that it used to give us. Mark always a pleasure. Mark Tinker is ce io at TUSCA Fund Hong Kong in our Hong Kong studio here on Daybreak Asia