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Joining US now portfolio manager Noiro Rubini of Atlas America fund has been way too long, nor We've got to get you in here more and more. You're traveling so much we hardly see you. You've teamed up with Resubunda at Atlas America. Are you running money now? What are you learning running money Alice America?
We're not yet. Actually, what in quiet periodicity is now approving our thing. So you launch, so your registration and.
Speak, this is going to be This is gonna be something to see Noura Rabini run money in the world. We're in the great post pandemic. Shock has been American exceptionalism, American prosperity. Are you willing to say this gift that we have is nothing but trillion dollar deficits.
No, I wouldn't say it's only trillion dollars deficits. I think that a whole bunch of things have happened. We had the Infrastructure Act, We had the IRA where the Chips Act with actually loose migration policies that led to an inflow of workers that increased the labor supply growth and reduce the inflation. So certainly the physical stimulus has helped the margin. But then also we consider these AI
revolution and significant increasing capects. But the private sector potential growth of the US, given technological innovation, by the end of this decade could be in a view higher than three percent. That's a revolution, right. China might be growing less than three percent by the end of this decade. US might be growing faster than China. You know, it's a bit of a bold prediction to make, but I think that in spite of the dysfunctionality of our political
system we're totally partisan and you name it. The private sector innovation is such in lots of the technologies in the industry of the future. It's not just the eyes, robotic automation, by medical research, space exploration, new weapons system act tech, green tech, quantum computing. There's a flurry of new technology can radically change the economy. And I think part of the strength of the economy it has been
growing fast. The potential, in spite of the fact for the last few is tightening, is there is a shift, is a regime shift.
Noroe you mentioned before on the air, They're going to be traveling pretty extensively over the coming weeks here. I suspect internationally they're going to be asking you about your thoughts on the US election coming up. How would you frame a response to some of your national clients.
Well, I think that the major probable risk to the US economy comes from the elections, and the economic policies of a new Trump administration will be very different than those of a Harris administration. If you take at face value what Trump says. It says I'm going to impose tariffs on all imports in the US of ten to up to twenty percent, up to sixty percent on those from China. He wants to dive value the dollar because it thinks it's too strong and has led to the innstrialization.
It wants a more douvish FED, and you have a chance to change some of the leaders with the FED and the Center for Responsible Budgets. As the other day said that his fiscal policy will increase the deficits and the debt by seven point five three million dollars over
the next decade. That's well above what the harn Harriers will have it, but unquot only three point five, and it will have restriction to migrations, severe draconie restriction migration, not it's going to deport millions of people, but even not letting them in implies a significant reduction and the
labor supply. So all these things together, all these policy trade, currency, migration, monetary, fiscal policy may view imply higher inflation, lower economic growth, higher bond yields, and potential for a correction or equity.
You're not willing to give up unstack inflation. A lot of people are saying, maybe it's over.
I don't think is over for the following reason. The three negative aggregate supply shocks of COVID of course have gone away. But as I pointed out, the economic policies of a Trump administration my view, are stackflationary because whether it's immigration, whether it's the currency, where there is trade, where there's monitored and fiscal policy, they are increasing inflation and they would reduce economic growth. So that call it
tackflation light or staculation, but they would be statulationary. And as I pointed out in my Mega thread book, there are other forces a more medium terms that are all stackflationary.
The coupling and protectionism, restriction to migration, aging of population, reshoring and friends shoring, geopolitical riskily to fragmentation, climate change, new pandemics, backlash against liberal democracy into fiscal policies that are pro liber in union increase wage growth and potentially even did organization gradual, but it will increase essentially keep reprisals.
Well, this is your wheels when you're President Clinton, Can you model a week dollar?
Can I model it in which you predict a week dollar? It depends. You know, if we have a very large fiscal deficits and if we have very large current account deficit, this twin definite are going to continue in spite of the strengths of the private sector. I think at some point the bond melt at vigilant is going to wake up.
And in the last few years, in spite of these twin deficits, the dollar was strengthening because we had tight monetary policy and therefore the capital account was essentially compensating for a very large current account deficit. But if the large current account deficits remains at the same time, interest rate differential are implying that the capital inflant us are
going to be less. Let alone, the fact that we are weaponizing the dollar in some country may be gradually the dollarizing that would imply overtime a weeker dollar over time. I'm not talking about the crash of the US dollar will be. The counter argument is that there is so much innovation in the US that the influence of capital is not going to be into fixed income treasuries but rather inequities. That has sustained, of course, the dollar for
the last few years. If that continues, then that might be partially supportive of the dollar, leading to less of a weakenings.
For most of us grew up with globalization as a theme as something we learned and experienced, but that seems to have reversed itself a little bit over the last four or five six years. Eight. Do you agree with that and be will that continue?
Yes?
I would say that both the trends of geopolitical fragmentation are leading to some degree of call it either the globalization or the coupling, or the risking or reshoring and french shorting or changing in the global global supply chains from just in time to just in case, from China to challenge a plus one or plus two from emphasizing in invents s mean economic security rather than economic efficiency.
So the question is not weather that the action is one towards fragmentation is going to continue, giving geopolitics, given AI, given other pressure that are on labor income. The question is not weather, but only how much and how fast?
Norabini whether it's here folks, the down negative ninety two, the vics twenty one point two three, a little bit of wait to take this morning in noural. With all that said, we're in a bullmarket tomorrow. JP Morgan earnings for the last ten years annual return on JP Morgan's twelve thirteen fourteen percent per year. How do you explain the lift in asset valuations in America?
Well, I explained it by the fact that, one we achieved a soft landing, and we achieved it not because of what the FED did, but because we got lucky those three negative aggregate supply shocks of COVID reverse.
The thing's a fact got lucky.
They got lucky because in any other situation, fat going from zero and QE to five and a half in QT would have led not only the lower inflation, but also to significant lower growth and even a recession. Now we had the lower inflation, but we did not have the recession. Why my explanation is the tree in aggat, we aggregate supply shocks of COVID, The impact of COVID on supply goods and services and supply chains and labor
went away. The impact of the shock of Russia Ukraine on commodity prices went away, and China fes done the zero COVID policy. On top of those three, we got other things that happened. One was immigration two point five million people entering US for the last four years, documentary or undocumented, that kept the lead on wage growth, increased growth. We had the Ai revolution that also has led significant
increase in private capects. So all those factors explain why we said stronger growth and inflation and lower was not really the fat was just we got lucky, and we got immigration, and we got the revolution.
Geopolitical risk as front and center for investors really over the last several years, probably more so than it has been in a while. Yet markets are seen the churn higher. How do you factor whether it's coming out of Ukraine or the Middle East had effectored that in well.
My explanation is that for the time being, market have correctly estimated that all these conflicts are regional rather than global. After all, Russia and Ukraine is very ugly. It has damaged severely the Ukrainian economy. It's called some damage to Russia. It's had initial impact on global commodity prices, but now more oil and natural gas from the militia US has led to even the European being able to phase out the Russian oil for now. The conflict between Israel and
a mass was on Gaza. There is a risk of regionalization so far has not occurred, and the Cold War between US and China is a cold war, but it is probably not escalating and the speeding is going to become a hot war in the short run or having global consequences. So then markets are correctly said these things are terrible for specific countries and region, but they don't
have a global impact of all of them. I would say the biggest risk today is that if if Israel were to go and strike Iran, and there's a consensus within Israel, not just on the right Nathania, but even people that are on the opposition, like many Gans has said we have to get rid of this regime in Iran, then if Israel were to go to try to achieve regime change in Iran, you could have really a conflagration
at the Gulf. You could have essentially the production and expert of all from the Gulf being blocked for several months. You could have a shock like nineteen seventy the Yom Kippur or nineteen seventy nine. Islamic are in revolution. I think that's the biggest risk. And by the way, if Trump gets elected, the chance is going to give a green light to Nathaniel to go and say bomb the hell out of Iran, get rid of the regime will be higher than Andre Harris Adminster.
We're just Turkey filming this. Your father moved rugs in Turkey years ago on the next era one. What do you expect to see there?
Well, the economy is still quite fragile. The good news that he put in place as a finance minister I met Simshek was actually very mainstream and orthodox, which yeah, it's very good, and therefore inflation is gradually falling but still too high. But they're going at least in direction that are less a tertodox economic policy and gradually more
orthodox one. So I would say that actually Turkey is a country that based on overall fundamentals strong manufacturing sector, innovation, good financial sector could do well.
Okay, but in America we've heard this scenario. Are you telling me I got thirty seconds? Yes? Are you telling me your long turkishlera going to your first trade year? No?
No, I'm not long term lear because the inflation rate is still too high and the amount of monetoring physical and credit itaning is not yet sufficient. But I'm saying at least they're moving in the right direction compared to what it was the situation before the last presidential action. So finally Loganez realized there was a risk of occurrence
and a financial crisis. He gave power to some orthodox central bankers and finance ministers, and therefore the economic policies are moving in the right direction.
Don't be a stranger, nor Rubin, It's been way too long. Thank you so much for the Elis America fun, Rubini Macro associates, and of course his affiliation with New York University