Lee Ferridge: Thank you. Thank you, Michael. I knew you were going to make a hurricane joke as soon as that came upon the news last week about Hurricane Lee. So, yeah, so as Michael said, my name is Lee Ferridge. I run the macro strategy team here in Boston and I'm going to talk to you today about my views on the macro outlook, what it means to markets. As Michael said, Eric started the day with, you know, copious amounts of optimism about the outlook. And far be it from me to disagree with with Eric, who's obviously very senior in the bank. But I'm going to disagree with Eric. I'm going to talk to you today, though, about resilience, exceptionalism and demographics. And if the eagle eyed among you will spot the first three letters running down there because that's what you're going to see on the screens. Okay. So let's get the tone right to start with. Let's start off with resilience. The biggest surprise, arguably of 2023. Not that half the Premier League players have gone to Saudi Arabia. Not that the Jets season is over after four snaps. Probably not a surprise that one, is it? Sorry. Any Jets fans? Eric's gone, right? He's a Jets fan, I think. But no, for me, the biggest surprise of this year and for many, I think is just the pure resilience we've seen in economies, particularly in the US. You see it here. So over the last 18 months, the Fed funds has gone up by 550 basis points.

Huge hiking cycle, very rapid hiking cycle. And yet what's happened from the start of this year, growth expectations have gone up from 0.3% to 2%. So we've seen this huge hiking cycle and growth expectations have gone up. And if you believe the Atlanta Fed and why wouldn't you? Q3 is going to see growth of over 5% be the strongest outside of the sort of pandemic period would be the strongest since 2003. That's the huge surprise. Why is it happened? What's behind it? So luckily, we can look at the Bloomberg consensus and we can see which components have actually gone up in terms of expectations. It's not investment. Private investment, actually, expectations of private investment growth this year have gone down. Investment is very interest rate sensitive. That makes sense. The two surprises have been government and consumption, and we know the US economy is primarily a consumption based economy. So as an economist, as investors, when we get surprises like this, we need to dig into it and try and find out, okay, is this a cyclical element to it or is there something structural going on here that has changed, something we need to consider? So let's try and dig into it on that front. Let's start with the government. Yeah, on the deficit, look, it's hard to say it's anything but structural now because if you look at the last 50 years, the average average deficit per year is 3% of GDP.

If we look at expectations for the next ten years, and this is from the CBO, these are the government's own forecasts. The expectation is for 6% of GDP deficit, 3% of that is interest costs. So the whole deficit from the last 50 years, if you look ahead the next ten each year, interest costs are going to cost us as much as the total deficit previously each year. So, yeah, the point is it's structural. The budget deficit is going to continue to be significant. So you've got looser fiscal policy. We have to consider that going forward. What about the consumer? What about the consumer? Turn the page. Yeah. What about the consumer? Look, here's the backdrop to the consumer. You look at real spending year on year. We're at 3%. So don't worry about nominal. This is real. 3% increase in consumer spending this year is actually accelerating. You can see there, it's the strongest now since 2021. And then when we look at hourly earnings, that's now positive as well. So hourly earnings have been negative. They've now turned to positive. The consumer is doing all right. And we talk about long and variable lags. Most people estimate monetary policy takes about 12 to 18 months to impact. We are now 18 months into the Fed started hiking and things are getting better, not worse. So what's behind the consumer? What's behind this, this sort of this spending that's accelerating and doing well? I think there are a couple of main reasons.

Well, three, really. But the first two, I'm going to consider excess savings. A lot of debate about this. How much is left? Right. So the San Francisco Fed put out a paper last month. They think it's nearly done. And but they said themselves in that paper, there's huge disagreement on this. I have a very simple way of doing it. I just look at the average savings rates ahead of the pandemic and then apply that to the post pandemic period or during the pandemic post pandemic. I still think there's a fair bit of excess savings there, probably around $1 trillion, maybe a little bit more. But people will say, well, look at credit card borrowing, look at delinquencies. They're rising. True, these savings are not evenly distributed. They are heavily focused at the higher end in terms of income. So here on the chart, on the left, you see the change in bank deposits split by income levels. So I'm looking at three years during the pandemic and post pandemic and then three years prior for a reference, look at the top 20%, top 1%, the 80th to 99th. That's where the savings are. So yeah, we can see excess savings in aggregate and see rising credit card balances, record credit card balances, rising delinquency rates, because it's not split evenly across the economy. But this 20% of people say, well, they don't matter because marginal propensity to consume is lower. It is. But that top 20% account for over 50% of consumption.

Their marginal propensity to consume is lower, but their aggregate level of consumption is higher. So they matter and they still have excess savings. And that's why the consumer has been doing okay. The other thing that is unique to the US is the fact that actually for most people, higher interest rates have made no difference whatsoever. Mortgage debt service ratio is the light blue line on that chart as a percentage of real disposable income. The amount spent servicing mortgages in the US today is lower than it was in January 2020. Rates have gone up by 5.5%. But what happened was during the pandemic, everyone reified. Everyone said sitting at home, you can't go out, you can't do anything. You might as well refi the mortgage. Right. Because rates came down to record levels. I know I did it. And so when you refi in the US, you lock in for 30 years. So it doesn't matter what the Fed does for the next 30 years doesn't affect me. It doesn't affect the vast majority of people in this country. And that's why when you look at aggregate mortgage payments, they're lower than they were in January 2020 because people refined at record lows during the pandemic. Sure. If you want to move, if you want to know, you take out a new mortgage, you're going to be paying the highest mortgage rate in 40 years. That's why we're not seeing any movement in the housing market.

That's why transactions are at such a low level, because no one wants to move, because if you move, you're suddenly paying a much higher mortgage rate. But those people are few and far between because most people now are just sticking where they are with their two and three quarter interest rate, the Fed can't hurt them. Same as if the car loans car loans in this country are fixed rate. Right? Unless you need a new car, you're still paying the low rate you were paying before. Again, you will have some people who borrow on credit cards that is variable. Again, thinking that split I was talking about. But for the vast majority, they're doing okay. And that's why when you look at consumer confidence in the US actually bouncing back. And this just highlights how this mortgage market is different in the US from elsewhere. Look, 90% of US mortgages are 30 year fixed. You look at the rest of the world, look at the UK. God love them. I left 15 years ago. Michael's still there. You look at the UK, around 90% of mortgages are either variable rate or short term fixed, which is less than three years. So every day somebody is fixed rate rolls off and people are seeing their mortgage payments triple overnight. You look at Australia, Sweden, Canada, Japan, wherever you want to look, it's all very different to the US. That's important to realize as well. When we're thinking about the US economy and we're actually thinking about the dollar going forward as well.

So that brings me on to exceptionalism, which I've sort of given the game away here, to be honest. What I'm talking about here is US exceptionalism. You hear about it a lot. People have started using the phrase over the last month or so. It's because of those factors I just told you about the excess savings and the structure of the mortgage market. So what you see again, I've got consensus growth estimates. You see for the US how they've been going up, particularly over the last during the summer and over the last couple of months, we did see an improvement for the eurozone in UK in the sort of January period that wasn't really a fundamental improvement. That was because the weather was actually quite good last winter. Right. Basically, let's be honest, everyone was worried about heating cars. Everyone was worried about fuel bills. It was a mild winter. That meant the disaster scenario didn't happen. So you did see a sort of increase in growth expectations for the Eurozone and the UK. They've petered out, as you can see. The more fundamental change is in the US and that's still going Japan as well, interestingly. But you can see the separation there. But if I look at the US relative to the rest of the G7 comparing US growth versus these countries on the 1st of June of last year, 1st July versus of this year, and now look at the trend in all of them.

Us growth is now expected to be faster than anywhere else in the G7, including Australia as well in G10 then, whereas at some point this year, apart from the UK, US growth is meant to be the same or lower than all of these countries now is expected to be higher. Now I want you to remember that as we move on later on. Now, so far I've talked about cyclical or structural and I talked about exceptionalism. There is another structural factor here that is hugely significant and it's not unique to the US. This is happening all over the world. And this was the D, this is demographics, something that's still not being talked about enough. So the labor market is one of the other main reasons why the consumer is so strong. Because as I showed you earlier, real wage growth is now positive. Let's look at nominal. So this is average hourly earnings. We did have a lower print last month, 0.2 on average. Hourly earnings is only one month. Let's not get carried away. If we look at three month annualized, it's 4.7%. Now if we're going to get to a 2% inflation target. Average hourly earnings probably have to drop somewhere between two and a half and 3%. If you look at the ten years prior to the pandemic, core CPI averaged 1.85%, core inflation averaged 2.3. Average hourly earnings averaged 2.35%. So add 15 basis points on to both.

You want 2% inflation, you need 2.5% average hourly earnings. Now, the optimists of which there are many, will tell you that productivity growth can fill that gap. We can have higher wages with 2% inflation if we have increase in productivity. And it's absolutely fundamentally true. The problem is that's the argument that's been made for the last 30 years and it still hasn't happened. So let's not let's not bet the ranch on productivity growth. So why after 18 months of rate hikes, are we seeing still wages running at four and one half, 4.7% year on year because we have a shortage of workers? Because if you look at this chart on the right, this shows you jolts to unemployed ratio. So jolts being the number of job openings in the economy divided by the number of people unemployed. It's come down a bit, but it's still at 1.5. So for every person out of work in the US, there are 1.5 job openings. Now, the green line there, that shows you the pre-pandemic peak, which was 1.24. So again, 18 months into a hiking cycle, five and one half percent of interest rates, we're still seeing the number of job openings per number of person unemployed at the highest level since pre-pandemic and above the pre-pandemic high. Rather. It's come down, as I said, but it's painfully slow. This is why the labor market is key here and we see that in the data. So this is using our media stats.

You'll hear more about that later and most of you are probably familiar with it. I hope you are. This shows you something called our narrative map. And here we're looking at certain factors, certain macro themes. And we look at not only are they being talked about in the media, but are they moving markets? Are we seeing a correlation between the change in the median number of media stories on a topic and the actual prices in the US equity market? And this is what this shows you for the labor market. So where you've got that sort of light blue, I don't understand. These are the new branding colors. They're lovely, but that light blue background thing there, that that shows you when the labor market is in something we call important hype, that means it's something the media is talking about and something moving markets. And you can see for much of the last 12 months, the labor market has been in that category. The labor market matters. And we can see in the data that it matters to the market, not just to me. So why do we have this shortage of workers putting that into numbers? So this shows you the workforce. I've got the five years prior to the pandemic. I look at the trend in that I extrapolate that out to where we are based on the pre-pandemic trend. The workforce should be about 170 million people. Right now it's 167 million.

We're missing 3 million people. So where are they? I mean, there's been various theories. Everyone retired early because of Covid. Gen Z, they just don't want to work, which hurts me because I only missed out on Gen Z by a couple of years. So I personally find that offensive. But they're not true. And I show you a chart. The next chart I'll show you about the whole Gen Z argument. What's happened is that people have retired not early because they're worried about getting Covid. They retired because they got old. Happens to everyone every day. So I told you. Depressing, right? The chart on the right shows this. So this shows you the the change in various population cohorts in the three and a half years from Jan 2022 to August actually three and a bit years. So the latest data from pre Covid to now. In that period, 4.7 million people moved over the age of 65in the US. Only around 300,000 of them are still working. They retired as they should. They hit 65. They're not all in Congress. They're not going to go on to the 90. So thank you. Political now. Get a round of applause when you get political. Look, 4.7 million of them moved over the age of 65. 300,000 of them are working. That's where the missing people are. They retired. They simply got old. Tell me about the Gen Z thing. This shows you the participation rate of 25 to 54 year olds, prime working age, 25 to 54 against labor force as a share of population.

Look at the trend that's been happening. Look at that participation rate. I mentioned The 25 to 54 participation rate now is the highest since 2001. It's a 22 year high. Those of working age are working. It's the people not of working age. They're just a bigger share of the population now. And that is the big problem we're facing for the future, because basically those baby boomers shown on this chart here, they're retiring. They're at peak retirement age. And the other age cohorts, you can see are nowhere near the same size. So what's happened is we've gone from an oversupply of labor, which is what that sort of green sort of block there is showing you from basically 1990 through to the sort of 2015, 2016, 2017. We've gone from an oversupply of labor working age as a percentage of total population at record highs. Not only that, but in this period, Don't forget we had peak globalization. Right. So not only do we have this huge workforce at home, we actually exported work as well because everywhere else had this huge workforce. So you've gone from complete oversupply of labor, which led to low wage growth, which led to low demand growth, which led to low inflation. We've turned that corner. That's why we have a shortage of workers now. That's why we have sticky wage inflation and it's not going away.

So the pushback here is always, what about Japan? They've had the same problem. They've got low inflation. Japan did a number of things. They work longer. You've seen an increase in the effective retirement age. It's gone up to around 67 from about 6364. Us is around 65. You saw a huge increase in female participation in the labor force. It was very low. It's increased significantly over the last 15 years. The main thing they did, though. Was they offshored? Japan. The Japanese economy is a much more manufacturing based economy than the US and most of the developed world. And what they've done over the last 20 years or so is they've offshored. So there are now around 25,000 affiliate Japanese companies outside of Japan. Back in the late 80s it was 4000. Those companies employ around 6 million people that work for Japanese firms, but not in Japan. And you can see here FDI flows from around sort of 2000. You can see how FDI flows outside of Japan. Fdi flows inside Japan. That's what Japan did. Why can't the rest of us do that? Because everywhere now has ageing populations. Japan hit it early where you had this excess supply of labour, particularly in China. And China was key here because you had the rural move into the into cities which created extra labour and then you had the huge population anyway, Japanese, Chinese, working age population peaked in 2015. That supply of labour isn't there anymore and that means that others can't do it.

And plus the fact we're not as manufacturing based anyway. So we're going to see a decline in workforce as a percentage of the total population increase dependency ratios. That means that wage inflation will stay sticky. And Roberto Alberto, sorry, was on about earlier. What's changed? Why was inflation not going to get back down to 2%? I would argue this has been a big change. What does it mean? I think it means a lot to talk about our star neutral rate. Et cetera. Et cetera. This means that the era of zero interest rates is over. Right. You look at the Fed dot, the long run dot, which we take as sort of neutral nominal rate. Or you can do our style. You take it off 2%, 50 basis points. People think it's set in stone. It's not. Their estimate of neutral came from four and a quarter down to two and a half since the dots were first published in 2012. This is not some fixed thing that doesn't move. This long run dot has been here for the last few years, but not the whole time the Fed had been producing dots and it's starting to move not on the median, but on the average. If you look at the average of the long run dot, it's actually gone up by 25 basis points over the last three meetings. So we've gone from 2.42 to 2.66 as the average dot hasn't moved the median from two and one half.

But it's happening. And if I'm right on demographics, which I think I am, then that is going to start moving higher. Because if we want to hit 2% inflation, the Fed do, they're going to have higher rates because you've got to reduce supply and you've got to reduce demand in the labor force. You do that through higher rates, through tighter policy, particularly if you're running a big fiscal deficit. So average Fed funds rate over the last 50 years is 5%. Average ten year yield is 6%. Zero interest rates are not normal. The post 2008 zero interest rate period is not normal. It's over. Yes, at times of deep recession, we may get back down there, but we're not going to be sitting there for ten years like we were before. So something has to break. So let's bring it back to now. Away from that. Here's the definition of being really, really dumb. It's putting price price stats charts in your presentation on the day of the CPI release when you speaking after Alberto. That's a really dumb thing to do. That's what I've done. Look, I'm going to skip through this quite quickly, but look. Alberto made the point. Inflation has been falling, but it's stopped on his calculations. Headline inflation now is sort of sticky at 3.6. Core is sticky at 3.2. You sort of see it on the three month annualized, which is running around that 3.6%. You see it in other places as well.

The US is going to be worse because what I talked about, the exceptionalism. You look at other measures. Median CPI. I don't know what it is after today's number, but it was running at 5.7%. You look at super core. So super core year on year was 4.7. I don't know what the year on year is after today, but today the super core month on month was 37 basis points. It was the highest since December 2022. All of this ties in exactly with what Alberto was saying this morning. We've seen a disinflation trend, but we're not getting back to 2%. And this is a problem. So somebody earlier mentioned this statistic and I was standing at the side going, that's my statistic. So. If you look back to the 1940s, every time we've seen 5% inflation, within two years, we've gone into recession. Now Alberto, bless him, academic optimism. Things can be different this time. Look, the four most dangerous words in finance are this time is different. It's never different. So 2%, 5% inflation leads to recession within two years. The Fed wants to get inflation back to 2%. That has been the clear message. There's a lot of speculation. Oh, they'll be happy at three. They'll be fine as long as it's coming down. I was on a panel last week with John Williams just name dropping there, but I was on a panel with John Williams and he made a speech. And one of the questions, one of the first questions he got was, look, you've made this speech.

You haven't really told us anything. You know, it's like we're data dependent with this, that all those things you're hearing from the Fed. And he turned around and said, no, I had one very important message for you. We will do anything to get inflation back to 2%. And that was his answer to that question. Whatever else you've heard, I have one very clear message. 2% is the target and it will stay the target. 2% of target will stay the target. You've heard from Alberto, right? We're stuck at 3.2, 3.6. I've shown you all the fundamental reasons why I think that's true. I've shown you why I think that structural changes there in terms of demographics, we are not going to have a soft landing, people. I think the only way they're going to get it down to 2% is through a hard landing recession, whatever you want to call it. And the idea of a soft landing, look, we've never really had one. This shows you the change in US unemployment rate after a 1% every time we've seen a 1% increase on average, if unemployment goes up by 1%, it goes up by 3.7%. The smallest increase we've ever seen was 2.2% in 1960. The idea we can turn it around and just get a 1% increase, Sorry, that's nonsense. We're going to have a hard landing. I think we're going to have recession, but it's in the back end of next year because you're still working through the excess savings.

We still have that demand in the labor market. It's going to take longer. Just because it hasn't happened yet does not mean it's not going to happen. It almost has to happen. If the Fed are intent on the 2% target and they are, that's every single thing they tell us. So what does it all mean for markets? First off, I think yields have got further to go. Right supply and higher for longer are a bad combination. I think the Fed is still going to hike one more time this year, by the way. I think we'll get one in in November. But then they're not cutting four times next year, which is what we have priced so higher for longer and supply are a bad combination. You look at terms of supply, look at the outstanding debt held by the public. You look at debt to GDP. That chart on there is interesting. So this is us official borrowing from the public. So this is the deficit plus cut. Over the last 12 months. It's close to $2.5 trillion, which is the highest we've ever seen, because not only have you got the issuance of the deficit, you've got sht going on as well. We have a huge net supply of treasuries. And that's what's pushing yields up and that will continue to push it up. And for equities, that means there is an alternative.

Tina is no more. And I made that joke about Tina Turner, so forget that. But Tina, as in there is no alternative is no more because you look here. So here I've got you've got dividend yield, which is the bottom line. You've got shareholder yield, which is dividend yield plus buybacks. And then I've got ten year treasuries for the first time since about 2004, ten year Treasury yields are above the shareholder yield in the S&P 500. And the point is it's going to carry on going higher. So I think we will see 5% in ten years. And I think we could settle around that level for quite some time. Real money. Look, they're moving into treasuries. We see it in our flow. So this shows sovereign bond flows 20 days weighted, just total and then cross-border. So foreigners and domestics look at it. It's consistently around the 100th percentile over the last year, 18 months, really, as yields go up, real money investors are buying in particularly duration. So here it shows you the flow, five and 20 day flows by duration. Look at ten plus years 100% on both the strongest buying we've seen in at least five years for anything above ten year duration in Treasuries. As yields go up, real money are buying them. That means they're coming out of something else. But they're buying treasures. But it's not enough to keep the yields down because you have this huge supply.

And this is the thing you can see strong buying by by investors and still see higher yields because of that amount of supply we're seeing. When it comes to rates. As I said, you look at this here. This to me is the biggest anomaly in the market right now. I'm not as if I look at current GDP growth and everything I talked about exceptionalism. Look at the US strongest growth rate cuts priced in in one year. The US more than anywhere else. That makes no sense. We did a poll of the week. Michael mentioned the poll of the week on the on the conviction levels earlier. We did one a few weeks ago, which would be the first central bank to cut rates and we gave them the option of the Fed, the ECB, the Bank of England and the BOJ. Over 60% of our clients said it would be the Fed. And that's what the market's saying as well. But I've just laid out all the reasons why the US is much stronger than everywhere else. That to me makes little sense and that you look at one year change in implied rates. It's narrowing. So the US is sort of flat. The others are coming down. We're taking some hikes out of the eurozone and the and the Bank of England. But the fact is there's further to go because we still have around 100 basis points of relative rates move in favour of the UK over the US in the next 12 months.

50 basis points of hikes from the Bank of England, 50 basis points of cuts from the Fed. Makes no sense. We have 30 basis points when it comes to the ECB. Makes no sense. And this is why I still like the dollar. I've lived in the US for 15 years and unadulterated dollar bull nowadays. I think we'll see Euro below 105. You look at what's driving it. One thing I did want to point out, because I am running out of time, is this one here. This shows you positioning, right? Real money is still overweight. The dollar. Yeah, they are marginally. I looked at the raw data on this yesterday. The dollar overweight now is less than 20% of the size it was back in October. So the overweight has been consistently reduced. It's now fairly minimal. And that means to me, the dollar can rally further. We've got the DXY close to its highest level of the year. It can go further. I think Euro is going below 105. We can get to the low 102, that sort of area. I think against Sterling we get down probably below 120 and I think within a year we're at 110 on Sterling and you can see the relative one year rates there. And that is pretty much it. I was largely on time resilience, exceptionalism, demographics, read high yields, equity markets down as well. And that is the optimistic tale for the day. Done. Thank you.

Speaker2: But thankfully I did promise you copious amounts of cold water. So there's actually there's a oh, and there's some there. The so I've got a couple of questions here already. There's actually a message from Eric he's been watching on the live stream and wants to see you later. So I'll get I'll get my coat. Yeah, but very happy to take any questions from the room just to kick us off. If not, let me just let me just take from here. So do you think that US exceptionalism is to some degree priced in already?

Lee Ferridge: No, because when I when I look at that one year rate changes I showed towards the end you know, central bank price to cut first is the US central bank to cut most in 2024 is the US. We've got as I say, you look at US versus UK, the market is pricing a 1% swing in rates in favour of the UK over the US. So we've priced it in a little bit over the last couple of months and that's why the DXY has rallied. But my whole point is there's more to go, there's more to go till we really reflect this divergence in fundamentals. And I think, you know, I think what's interesting now is this is the first time since the financial crisis we're seeing real divergence in the G10. We've pretty much seen the economies pretty much move together between the financial crisis and the pandemic. For the first time, we're actually seeing divergence, some strengthening while others weaken. And I think that is something the market is grasping to to really react to.

Speaker2: So there's actually a related question to that. So outside of the US, why haven't we seen a housing crash in countries like Australia where both mortgage loans are short duration and rates have gone up significantly?

Lee Ferridge: I mean, there are a lot of mortgages in arrears. You know, define crash. You look at the UK, house prices are down about 5% year on year, which is the most since 0809. But what I would say is and I'll go back to the demographics here, labor markets in these countries are still pretty strong because the whole demographic trends I talked about, they're the same everywhere in the developed world. So you've still got that in some ways excess demand for labor. Although we saw the UK data earlier this week, it's starting to to it's starting to suffer because demand there is falling because consumers are struggling. So I thought real retail sales in the US were up 3%. They're down about 3% in the UK, down about 2.5% in the eurozone. So you're seeing that demand destruction there and that will cause the labour market to weaken. But it hasn't happened yet because the demographics I was talking about. Yeah.

Speaker2: Okay. Lots more questions coming in. Thank you very much. Again, I'll still take any in the room if there are any. How does em fare in your scenario?

Lee Ferridge: Yeah, that's a really good question. I mean, we've got experts who will be talking later, but I think like everything at the moment, I think you have to be really differentiated and you have to be very careful. You know, we know with Asia, we know the problems with China. And as I've sort of touched on there, I think there are structural problems there as well. The labour force peaked in 2015. So you've got sort of structural demand problems there. Europe. So you're thinking about key countries, similar issues. We obviously the war is still ongoing, but then you look at LatAm tied into the US and I sort of touched on globalism, but near-shoring, you know, the US this year now has imported so far this year more from Mexico than it has from China for the first time since 2003. So I think within the end, I think there are still opportunities there, but they're becoming more limited. And you have to be really careful where you go. And Mexico, you know, LatAm generally I would favor over anywhere else. So if you are going to continue with a positive view and, you know, I worry about the rate cuts for the US being taken out and what that does for em. But I do think you have to look at it on a case by case and LatAm certainly as a region, is the one I would favor.

Speaker2: And I'm guessing that the Em talk later this afternoon that we have that's talking about geopolitical risk will probably confirm that, I'm guessing. Okay. So we've got time. I think for one last question. I'm going to, if you don't mind. I'm going to. Oh, no. Actually, you know, I'll take the one from the room. So apologies slide.

Speaker3: Very entertaining. Always informing. Um, given your predictions for the US economy, can you address. I'm from Canada. So we see this ballooning deficit and it's getting bigger and bigger and bigger. How does that factor into all your predictions?

Lee Ferridge: Lee Yeah, no, I mean, look, the deficit thing, I, I steered away from to some degree because that depresses even me, quite honestly. Look, it worries me. I mean, I showed you, you know, right at the beginning that if you look at expected deficit for the next ten years, it's double the average for the last 50 because 3% is just debt servicing. So. Okay, so let's play the demographics thing, right? Demographics are going to lead to higher inflation. I told you are going. The neutral rate higher, those servicing costs are not going to get any better. Right. Those are your first problem. The second problem is with demographics. That is a huge strain on deficits because you have an aging population. And when it comes to health care, care for for for the older generation, that's going to eventually that's going to weigh on the government. You know, you look at the UK with the NHS, it's going to be huge. You look at anywhere that's got the health care system like that, the US doesn't, but you still have, you know, some some support there that's going to be costly. So look, yeah, the argument worries me incredibly. We've managed to balloon deficits in the zero interest rate world. We're not going to be in that anymore. And simple answer, I don't know. I don't know. But it's something that should worry everyone. And I think it's something we have to to really dig into going forward. How do we sustain these levels? Because I'm not sure how it works. But it to me, it doesn't look sustainable at this at this juncture. How it breaks, I don't know. But it doesn't look sustainable.

Speaker2: Okay. So again, thank you again for all your questions. We have excess questions yet again. Like I said, we will get them and Lee will be around in the break as well. But please join me in welcoming. Thank you. Thank you, Lee, for a great talk. Thank you.