Ep.72: Boris Johnson Resigns, What Happens Next?!

Hey, welcome to the latest episode for the Market Maker Podcast, episode 72. And of course, big news, final nail in the coffin for, for Boris, who of course has resigned. So don't want to get too bogged down in the semantics of the politics, and certainly don't want to be giving too much of my political disposition away, but We will definitely talk about what happens next, this contest process for Conservative leadership. I think it's a very important thing that, that people should understand because it's going to be happening every few years. I, I don't say the fixed term amount because it's very rare these days that heads of state make it through a full term, so I won't go that far. But we'll talk about that, and in connection of course to market implications. And so we'll delve into it from, from that perspective. And then going to talk about the euro. We hit a 20-year, 2-decade low, and we're pretty much at parity, something which I know that you'll be in some way pleased about because it was your, your call from several months ago that would be heading in this direction. So what is driving that move? Why has it picked up pace particularly this week? Will be interesting to know. And of course, it comes in the context of Germany heading in for its worst energy crisis since the oil price shock of the early 1970s. In fact, the economy minister of Germany went as far as to say that Germany is facing its Lehman Brothers moment if Russia cuts off natural gas to Europe, which we'll, we'll talk about. But first things first, Piers, Boris is gone. Boris is gone and the pound rallied.

Yep, BoJo, uh, see ya. I mean, talk about being on borrowed time. Um, yeah, so the pound rallied, which, well, really I think is two— I would say two reasons. I, I would like your view as well. I mean, I think primarily it's about the prolonged circus that's been going on in Number 10, and I guess the inevitability of Boris getting shoved out, and just the longer that went on for, a) the— you could argue the more damage it does sort of politically in terms of actually trying to run the country, because all Westminster seemed to have been doing for the last few months is nothing to do with running the country. It's all internally obsessed, trying to find new reasons to bash Boris in order to try and get him out the door, right? So it's kind of— it's all been internally focused. And so in the end, when you're in an inflation crisis, then, you know, we'd kind of like the leadership to be full-on, full focus on actually trying to bring the nation out of this crisis. So I think the fact that Boris is out is definitely a positive. Let's actually try and turn attention back to the crucial things going on out there, the cost of living crisis. So I think that's a good thing. The whole uncertainty around it all as well. I mean, uncertainty is always a negative for markets. So I think that's probably the other key point. And then I'd say Have I already said two points? Maybe I have, but I'm going to say a third. I guess it depends on who comes in to replace Boris, and maybe you could argue the Tories are in a tough spot, and you may well see some tax giveaways here when, you know, when a new kind of leader comes in and they happen to be the leader of the governing party, so they're essentially an unelected Prime Minister, they tend to want to hit the ground running with a few giveaways. So maybe from an economic point of view, there's some kind of argument you could spin that, um, that's a positive, and that's why maybe the pound ticked higher as we went through yesterday's, um, unsurprising news that Boris has gone.

So by what you're saying then, you're ruling out Rishi Sunak? And I say this because his obviously leaning is that he's typically a fiscal, what we classify as a fiscal hawk. His priority is about balancing the books, put it simply. And so therefore he was talking about raising taxes, which was part of his downfall, if you like, of his shooting star in combination with his wife's tax status and so forth. But Is he out of the running then, given what you've said?

I think he's not— well, is he going to run, first of all? Right. I mean, I think when every— I probably— though most of the nation's probably thinking, oh, well, Rishi's going to step up, he'll probably become leader. But number one, he hasn't announced that he's going to run, and there's definitely good reasons why he wouldn't. Just all about timing. He might, and he's still very young relatively. And so, you know, he could easily shelve this and wait for this nightmare situation with regards to inflation, cost of living crisis, Russia, Ukraine. It's not an easy moment to kind of step in. So I wouldn't surprise me if he kind of just steps back and lets someone else take this hospital pass from Boris, and he maybe comes in later down the line. So, and even if he did run, would he win? I mean, certainly the bookies don't have him. As favorite. The bookies have got him as second favorite at the moment.

So, well, yeah, let's talk a little bit about then the timings, the process, then we can talk just briefly about some of these candidates. Um, because, you know, a lot of this would add into the picture, I guess, if you're trading, investing in sterling currency. As much as you're tracking ever-increasing inflation, and we are expecting that to happen— the Bank of England, of course, thinks it's going to go well above and beyond where it is at the moment at kind of the low 9% region, definitely busting double digits. The Bank of England, what do they do next after consecutive hikes and so forth? So definitely the timings around this are quite key. So the process here is that it's going to take some time. You might, you might have observed that from the outgoing speech from the former Prime Minister Boris Johnson, or the current, I should say, for now at least, because it sounded more like a victory rather than— I think he's trying to write his own history in a sense of he will be remembered as someone who secured a resounding majority and got pushed out because of panicked cabinet members and Tory party members. But that aside, so what happens next? So the Conservative Party grandees, who are the people who are in charge of kind of formulating then the scheduling around how the party operates. They've said this morning that basically they intend to try and install a new Prime Minister by early September. This has actually caused a lot of worry for some people. I think former Prime Minister John Major has been banging the drum, and he's been quite anti-Boris for a while. But, you know, what could Boris do between now and September makes some people a little bit nervous, even though the Prime Minister has said he's not going to touch anything major on policies. I must remind people, he did say, there is absolutely no reason for me to resign, 2 days ago. Then he resigned 12 hours later. So in the world of politics, don't believe a word you hear until it becomes like— till it crystallizes. But the timeline, we're looking at early September. And what we're looking out for on Monday, Monday coming, is this 1922 Committee, these backbenchers who basically formalized this process to begin. Now, what happens here is a couple of things. So we do have a summer recess. So an economic crisis, nothing gets in the way of your summer holidays.

Absolutely.

If you're an MP or a politician, this goes pretty much globally, I guess, definitely in Western Europe. So there is a gap. And that comes in. So no business conducted for a couple of weeks. But this does play into partly this race. And so the contest in itself goes in two stages. The first stage is Conservative MPs kind of whittle down a long list of candidates, just two. So in the coming days, weeks, this weekend, you'll likely start to get these candidates throwing their hat in the ring. Yeah, I'm running. And there's been— there's going to be a lot from what I'm reading. I mean, even Steve Baker, like the huge Eurosceptic, he's in it as far as he's concerned. And There's lots of names you've probably never heard of who are going to run, as much as some of the ones more familiar. And like we said, Rishi, still undeclared at this point, Sajid Javid, so on. So what happens is they go through, and they all then kind of get whittled down to a final 2 candidates. And that's followed by a campaign among the party, the Conservative Party's 100,000-odd members that make up the Conservative Party. Who will then decide the next leader. And so in this period, which takes weeks, these candidates get to go out, kind of galvanize popularity internal. The public gets to be a bit more educated about who they are and what they stand for, because this is all gearing up for appointing a new leader of the country, of course. As you rightly said, the person who's the favorite is a guy called Ben Wallace. And I'm going to hazard a guess that probably most people are like, Ben Wallace? Who is that? So a little bit of background on Ben. He served as a whip. So this is the person in— kind of making it super straightforward, he's the person that if you're a cabinet member or a politician like the prime minister, in the Houses of Parliament, you send your whip out and he does all your dirty work, you know, like getting all the troops together to try and push over policies and these sorts of things. He's got the handle, very important position actually, carries a lot of the power internally to get people on side and things like that. So he serves as a whip, also been Northern Ireland Minister, and also lastly the UK's longest-serving security minister. Has come from a background of basically forces, security type roles, and so on. So very much focused in that, that area. We'll come back to why that might be a problem for our friend Ben. Um, but what's happened here, and the reason why the bookies have jumped on Ben, is because a SnapYouGov poll came out at the moment BoJo resigned, and it was taken from 716 Conservative Party members. So a small sample size of that bigger pool, which will then have to consequently vote in the coming weeks. And it had Ben Wallace not just leading the overall race, but he was well ahead when they actually start running models of what about Ben versus Liz Truss, what about Ben versus Sajid Javid, Ben versus Rishi Sunak, and he wins in every scenario, basically. So the bookies have moved in that direction as a reflection of that information. I must stress, the world can change very quickly. He's a leader now, but that doesn't mean it's going to remain that way likely for very long. But the challenge is with Ben— this is what most political commentators are saying, because, you know, I know people listen to this podcast, neither Piers or I are scientists So we're not qualified to talk about COVID vaccines particularly in depth, nor are we political correspondents or strategists. But the general take here from commentators is twofold. The issues with Ben, one, the obvious, who the heck is this guy? So you've got to think about how likely is it that this person is going to have election appeal to the broader public? Now, there is that layover period, obviously, when this race happens, which gives Ben time to educate people around who he is and so forth. The problem there, then, both internally and externally, is no one's got any idea, actually, what he actually thinks about majority of government-led policies, because he's been quite concentrated in the very specific area of— really security, national security-based type, type roles, and given his, you know, kind of history of his career and so forth. So that could be, although he's a leader now, the undoing of him to get everyone on side and for actually the party to get behind him. That's where Rishi comes in because he's the obvious fit, because he's the face that you're very familiar with. And one of the things that these snap polls presented was the third element is who would be the best performing Conservative member against the main lead opposition, Keir Starmer of the Labour Party. And the only candidate that came out favorably in these polls was Rishi Sunak. Um, the caveat being he's ahead of Keir by one point, so it's pretty bad at the moment from the Conservatives' point of view. We know this, there's been a ton of stuff going on for a while in that respect. In terms of Rishi, as you said, not to go into him too much, you kind of talked about it. He did actually write, he penned in his resignation letter, I recognize this may well be my last ministerial job. I don't believe that at all is my initial point of view. So just to kind of give it context again with, I guess, to be clear for any finance student, a politician is definitely not a central banker. And so this whole idea of credibility and sticking to your guns and giving clear transparency and fostering that kind of, I guess, credibility to the point of people making investment decisions, politicians are different. And so the other people then are the newly appointed chancellor, um, who was previously seen as a safe pair of hands. He was actually the vaccine minister, if you remember, and that was actually deemed a big success. Yeah, he got a lot of points on the board for that, and he's kind of under Boris, had a pretty decent rise. But what I've been listening to is the fact that how he's behaved since being appointed as chancellor and then telling his boss to go do one 24 hours later has probably meant that he's burnt a lot of that trust and a lot of, um, the goodwill that he had built up. We'll see, there's a lot of time to run. It's all a bit raw at the moment, um, but he's otherwise seen as a pretty safe set of hands and quite wide broad appeal across the party. So he's in it, he's in the running. Yeah, other candidates: Liz Truss, the Foreign Secretary, Um, yeah, she actually voted Remain, if you remember.

Yeah.

And now she bangs the drum saying just get Brexit done. And like, and she's, she's definitely been right there post-Brexit deals as Trade Minister. She definitely plays into that favoritism of Tory grassroots and so on. She's quite popular. She's up there with the bookies for sure in the runnings. And then Sajid Javid actually was in the running against Boris, lost 2019. Um, he actually is very experienced, never quite really cut it though on top of the top job, um, in the past. So yeah, that's just general the, the process. Hope that makes a bit more sense. So between now and then, one thing I couldn't find which I was very interested to know was, I wonder if Boris can just withdraw his resignation. Do you know what? Forget this. I guess once the 1922 committee formalized on Monday— exactly, that's the— will's in motion. Um, but yeah, you've not heard the last of Boris, so I can tell you that now. But, but I guess from a market's perspective then, yeah, the, the economic picture is going to deteriorate. In the coming weeks and months. So things are going to get materially worse. Consumer confidence will continue to decline amid a worsening of the cost of living crisis under the kind of weight of rising prices. Compound that with the, this uncertainty. Has this, this is, uh, is this cause for reshaping your ideas about sterling? From a direction or conviction point of view? You know, are you bearish before and now you feel more so, or, or is this just kind of a moot point?

No, I, I, I would say that my directional view has not changed, and that's because easily the most powerful force driving the downtrend on cable— so sterling versus the dollar— I mean, this week we've punched down below the 120 handle. So just as a bit of a reminder, that's put us— we're kind of down, but 120 was a really important level back in— it was actually in the summer of 2019 in the post-Brexit vote fallout. That's kind of where we sort of trended down to. And well, I should say the summer of 20— sorry, January 2017 is when we first hit 120. That was in the fallout from the Brexit vote in 2016. That was a floor and then we bounced. 2019, summer of 2019, we retested that 120 handle and bounced. Then COVID hit. And only very, very briefly during that worst COVID, sort of end of March, start of April, we dropped below 120 and we went down to about the 115 handle, but it was a super fast blip. And then back up. So really, taking out that anomaly COVID blip, 120 is massive. Um, and I, I think we break it— well, we've kind of— we're trading below it now. And I would still— I would favor a move further lower. And this is mostly nothing to do with politics in the UK. It's mostly nothing to do with Boris's circus. Um, it's to do with the economic situation in the UK compared to the US. It's to do with the monetary policy outlook in the UK compared to the US. And right now the divergence is widening, which is what's driving this broad dollar strength. So these big moves you're seeing on cable below 120, Eurodollar, we'll talk about in a minute, down to parity. Is definitely a big dollar strengthening story whilst Europe are, you know, A, in a worse position economically, B, the inflation situation in Europe is going to be worse than it is in the UK, C, that's because of their proximity to this Russia-Ukraine situation, which makes the energy price spikes even larger in Europe. And so because of this, For the Bank of England, at least the Bank of England, I guess if we— we've mentioned euro, if you bring in the ECB a little bit here, I mean, at least the Bank of England have been hiking rates. And actually they were the first to hike. And you could argue from that point of view, well, hang on a minute, if the Bank of England were the first bank to hike rates, they hiked back in December. And what was it? 5 meetings in a row? Yeah. So they hiked 1.25% in total. Across 5 meetings, 0.25% increments. Okay. So they hiked 1.25. But if you go back to December, they hiked first, and yet actually sterling did go up against the dollar at the end of December. We moved like from mid-December, it moved from 1.32 up to kind of 1.36. And that was because the Bank of England were the first mover. But as soon as you get to the 13th of January. That's the high of 2022 on the 13th of January. And since then, it's been one-way traffic to the downside, even though the Bank of England did another hike before the Fed even started hiking. So you could say, well, hang on, if you're banging on about monetary policy divergence and how this drives exchange rates, well, the Bank of England were hiking rates and the Fed were not. So shouldn't the value of the pound, shouldn't it have been going up throughout the whole of Q1 of 2022? And the key point is that, well, it not only did it not go up, it went down. And the key point is about future expectations. Markets aren't pricing the present, they're pricing the future. And as we were tracking through January, it became acutely obvious that the Fed were not only going to start hiking, but but actually they were behind the curve. They should have started hiking back in December like the Bank of England, and they're going to have to catch up by hiking faster. And so actually here we are now in July and the Fed, the Fed have hiked more. If you add them up, they've hiked 1.5%. They did 0.25, 0.5, 0.75. So the Fed have hiked 1.5% to the Bank of England's 1.25. More importantly, the Fed are going to continue to hike fast. So we expect another 0.75 hike in July. The Bank of England may well be done. The bank, I mean, I guess it's up for debate, but it could be the case the Bank of England's ended their cycle now. So this is where the divergence comes in. It's like the second half of 2022. What's going to happen to interest rates? And the Fed's going to carry on hiking. And the Bank of England may stop. And the Europeans, although they've said they want to start hiking, they're probably too late. They might get one in and then, oops, we're in recession, and they're going to have to turn the ship. So that's it. That's what's driving these currency pairs to the downside. That's why the dollar's strengthening against everything, and certainly specifically against the euro and the pound. What happens in the UK on the political front, look, doesn't matter. I mean, in the grand scheme of things, that's almost an insignificant force. But you could say it's a positive on a minor case because, look, Boris is out. Let's get someone new in. Who that person is will obviously remain to be seen. But in the end, it doesn't matter who it is. They're not going to be able to— they haven't got the magic pill to solve this crisis that we're in. And so it won't have too much of an effect, I don't think, personally, on the direction of markets into the end of 2022.

Yeah. And to make that rate differential make sense, we're talking about potentially the Bank of England at peak hiking at 1.25%. I was just looking at the Fed's dot plots.

Right.

And for the end of this year, the Fed themselves are saying that the federal funds rate will be at 3.4%. So you're talking 3.4% as the neutral rate where they're heading for now, comparative to 1.25%, which is a big gap.

Yep. That's it.

For sure. It makes sense.

With the euro, I mean, it's all the same arguments, but I guess what's happening this week, all of a sudden it's just all over the press, massive story. Everyone's talking about the euro dollar. Everyone's talking about parity. It's almost like a self-fulfilling story. I mean, the key was We broke the— let me just go back on my chart. There was a key level around 1.06 that was the 2020 low. It was the COVID low. We broke that back in April. Then that got tongues wagging about where's this euro going to go? And all the banks were coming out. Some were saying parity, some were saying no chance, it's going back to 1.20, whatever. There was a real divide in opinion. But then It was the break of the 105 level, which was really what set the cat amongst the pigeons. This was the key bottom in 2015. And then again in 2017, 105, and we've broken it, right? And everyone's talking, right, next it's parity. And this then just, of course, shapes people's attitudes and expectations and behaviors around that market. If everyone's saying it's going to parity, it will go to parity because traders who are trading it think it's going to parity. So the way they're buying and they're selling, there'll be more— there'll be more sell-side volume and it will naturally get down there. Obviously all the fundamentals and now the technicals all point to it happening. Technically, that break of 105 is massive bearish technical breakout, right? But then the fundamentals, and it's accelerated this week because of that technical break, but then also because of the, the data is just providing more and more evidence that this narrative is true, where Europe is suffering more than the US economically, and therefore there won't be as many rate hikes, if any, and whilst the Fed will carry on hiking. And this is where that divergence is coming from. We've had the PMI data out of Europe, which dropped sharply. We're still just above 50. The manufacturing PMI in Europe, in the Eurozone, was 52.1, but a big drop from the 54.6 in May. So the PMIs are looking concerning. And then we've got this, all of a sudden, this German energy crisis, which we'll talk about in a second. And it's just very alarming. And I think the sentiment out there in the marketplace around Europe right now was really negative, and this week has gone even more negative. And that's what's driving that kind of euro-dollar accelerated, almost inevitable move all the way down to parity.

Yeah, the fact that the worst is yet to come for eurozone inflation, but with investor morale, consumer confidence already at its worst point since the depths of COVID which was severe, you throw in the energy crisis, what can the ECB do in this scenario?

I mean, I hope that's a rhetorical question.

I guess then, from more of a trading perspective, are you— does this make you think, right, in terms of my geographic focus, it moves to the US because of the things you've been talking about?

And so when you're talking about from a, yeah, a tactical point of view, yeah, if you're talking about stocks, then Yeah, I mean, for sure, Europe's looking worse than the US. You've seen the likes of Bridgewater took on— we talked about this a few weeks ago, didn't we? They've taken on a massive short bet on European stocks, and just for all of these big top-level macro reasons. And so, yeah, but would you want to be invested in US stocks? I mean, US stocks, they have gone up this week, a little bit strange one. I mean, I think, and again, it's about interest rate expectations, because I think essentially markets have kind of just slightly repriced where they think interest rates will be at the end of this year. You said the Fed dot plot. So the Fed have been telling us 3.4%, but markets, if you go back a few weeks ago, were starting to price 3.9%. But actually this week, it's repriced back to 3.2. This is what I mean about interest rate expectations. That is the big driving force. Stocks have gone up because of that marginal dampening of where we think rates might be at the end of the year. They're still going to go up though. Don't forget, I mean, that causes short-term market moves. A couple of days of upside for the S&P. Great. But long or medium to long term, that future interest rate adjustment, that interest rate expectation adjustment doesn't solve the fundamental underlying economic problem where inflation's too high and companies are starting to cut costs. And there's— whilst the labor market, and we're going to get some really important info about that from the US this afternoon with nonfarm payrolls. But the labor market's super tight, but you've already seen job openings that have been at record 10 million job openings in the US, but they're starting to— that's starting to close and shrink. And I think the general direction from an economic point of view is one of still real uncertainty, real negativity, real almost inevitability about the slide into recession. And so whilst you don't want to own European stocks necessarily, do you want to own US stocks?

So what, you're keeping your powder dry then?

I would say, I mean, look, we've had yield curve inversion again this week, just kind of switching to bonds briefly. The US 10-year yield is below the US 2-year yield now. So that's what we talk about as a curve inversion. US 10-year is at 2.98% and the 2-year yields at 3.02%. So that's your classic recession sort of signal, but it's not like we needed that to suddenly realize, oh wow, there's a recession coming. It's coming. And as I alluded to earlier, It's behavioral, right? If we think there's going to be a recession and it's nailed on, it's definitely going to happen because we humans behave, right? We prepare for the recession. Let's lay off 10% of our workforce. Let's cut our marketing budget in half. These types of actions, that's what actually creates the recession. So if we think there's a recession coming and we prepare for it, It's the preparation for it that actually creates the recession. So really the big— the one unknown in my mind, recession's happening. The one unknown is, does the dampening on the demand side sort out this inflation problem? Does inflation come back down because the recession leads to a dampening of demand? Does that happen? Yes or no? If it's no, then we've got a serious problem.

Talking of dampening demand, oil also traded below $100 momentarily. It's moved back above there, talking about US oil. Yeah. Were you surprised by that at all? It was quite severe. Obviously, we had a long weekend in the States, and then that day they returned to market was the day oil saw a pretty dramatic decline from trading around $110 to eventually, within a pretty short 24-hour period, trading sub-100?

I was surprised.

Why is there such a sudden realization if it's so obvious, as you were saying?

Uh, yeah, I, I was surprised by it, so I'm not sure I have the answer to your question. I mean, I would say that the obvious explanation is that, look, people are now just thinking the recession's— it's going to come sooner, it's going to be more severe. And I guess you can point to the German energy crisis, you can point towards this PMI data, you can point towards the fact inflation's staying really high, but ultimately oil is now behaving off now a demand side collapse because of the recession, which has brought prices lower. But don't forget, we're still above $100. So it's not like— well, I guess, who is it, Citi were calling $65, was it, or $40?

End of the year. $45 end of 2023.

Yeah. Right. So if we have a disaster nightmare recession and inflation drops as a result, then fine. Yeah. Oil has no business being above $100, but we are still above $100 and we've obviously still got a very clear and present danger to supply with the ongoing Russia invasion of Ukraine and how that all plays out. You might say there's an even bigger risk around gas than oil.

But one thing that will, I guess, alleviate any anxieties about the 100 floor is the fact that there was an article in FT And there's a couple of technical analysts who are pointing out that this was purely a technical break of a multi-month trend line. If you actually put, right, um, oil on a trend line going back to around March. Yeah, so March, you had an April retest, May retest, June retest, and we broke it and the price dipped ran through the June low and hit 100, and now it's steady and if anything bounced. So yeah, I mean, it's important to— I guess one of the lessons here from this and also the previous conversation we're having about sterling is that you cannot discount also the technicals, even though we on this podcast talk predominantly about the fundamentals, because there is that behavioral movement that can occur upon the breaking of these key levels. So yeah, that was one thing just to point out that I think explains really the rationale of why that happened so severely. And often that is the case because when you look at price movement, and that's been my job for a career is to look at it day-to-day, second-by-second, you know when there's a piece of news that has acted as a catalyst to spark a price move. And that was not one of them. Because even though the proportionate move was quite large, the way that it transpired over a period of hours is not a one singular headline. Because what tends to happen in that scenario is the market goes from point A to point B immediately. It doesn't hang around and drift lower like it did. And so, yeah. But look, one of the things you briefly touched on, but I'd want to just get your take on a bit more detail, is Germany. Because Tons of headlines this week talking about pretty extreme measures that you probably associate if we're in World War conditions, talking about rationing hot water, dimming streetlights, like pretty crazy stuff. Like even there's a company called Vonovia, the country's largest residential landlord, they're lowering temperatures of its tenants' gas central heating. I mean, thank goodness we're in summer and it's a scorching day, but I mean, that's how far it's gone. So what is happening and what's the impact of this?

Well, this kind of— I think this kind of— well, obviously it's about German dependency on Russian gas. And look, don't forget, let's go back to the stat that 55% of of gas, Germany's gas is imported from Russia. Right, so they're on the hook for over half of their gas. So that's kind of where it all comes from. Obviously then the Russia-Ukraine situation kicks off. Clearly then the West start implementing sanctions. Obviously then this brings into question the reliability of that 55% of supply. But look, it's kicked on a couple of times in the last few weeks. So firstly, this goes back to like mid-June, Gazprom reduced supply volumes through the Nord Stream 1 pipeline. And don't forget, one of the sanctions was that Germany put the kibosh on Nord Stream 2. So they've stopped that from opening. But this is Nord Stream 1, Gazprom reduced supply And this— what they blamed— so Gazprom blamed it on Canadian sanctions that had left pumping equipment maintained by Siemens stranded in Montreal. That this was the kind of official line from Russia. Gazprom have reduced supplies. Nothing— look, it's nothing to do— we're not trying to play games here. No, we've just got some equipment in Montreal, we can't get it. I mean, Come on. I don't think anybody was buying that one. Anyway, that kind of just set some alarm bells off that Putin is weaponizing this gas supply, and Germany are front and center in the firing line of that. On top of that then, on Monday, like next week in 3 days' time, Russia is shutting down the pipeline. Entirely. Now, this, this is officially scheduled. It's— there's a 10-day scheduled maintenance period, okay, that just so happens to be starting on Monday. So the big fear is, and the big panic is, well, what happens if they don't turn it back on? What happens if actually this is the moment Putin uses this maintenance schedule to go, actually, you know what, Oh, the maintenance is taking longer than we thought. It's going to be another 10 days. Actually, it's probably not going to be back online until end of August, blah, blah. So this is what I think people immediately are worried about. So obviously that then plays into, well, what do Germany do? They've gone as far as turning back on their coal-fired power stations. So this, I mean, this, you then start thinking about the whole political agenda towards green renewables. And this is a disaster from that point of view, because now they've literally fired back up two coal-fired power stations. They're supposed to be phasing out coal entirely by 2030. But these power stations can only supply about 5% of gas, sorry, of electricity. apologies. This is to replace that kind of natural gas-produced electricity. Obviously, then you've got all these— I guess one thing about trying to go to the consumer and say, look, let's be more efficient with the way we use gas, with the way we use power. I mean, actually, in a way, maybe this has long-term benefits because maybe you get forced through change now. And actually, breaks bad habits, where we leave our lights on all day, where we run our central heating at 20 degrees throughout the entire night when we're in bed, when we have hot water on tap 24/7, when we have our AC running 24/7. And it's like, well, we don't actually need that. Swimming pools. Yeah, these public swimming pools, they're taking the temperature from 19 degrees down to 17 degrees. Well, all right, it's going to hurt a bit more when you jump in, but it's fine once you're in. So maybe this actually forces some long-term benefit where we become a little bit more conscious about how we're using energy, and that's a good thing. Obviously, in the near term, clearly, it's an absolute crisis. And yeah, they've talked about this could be the Lehman moment. I mean, this is for their kind of gas companies in Germany and how they may need bailing out here. And to think about it economically, so the current analysis— and it's obviously wildly difficult to predict— but they're basically saying that energy prices might rise anywhere between 71% and 200%, depending on how this plays out, right? And that— what does that mean for households? If it goes up 71%, then that would mean they're €1,000 worse off. If it goes up by 200%, they're €2,700 worse off. That's, that's for a one-person household. So one person would be €2,700 worse off. For a household of 4 people, it then goes up to more like €3,800 worse off. That's a lot of money. That is a lot of money. And when you times that by the number of people in the population, then you're talking about billions. That's billions of euros negative hit to the economy from a consumption point of view. And right at the moment when we're teetering on the brink recession anyway. So yeah, there's huge uncertainty out there and we don't know how it's going to play out. And this is definitely feeding through in market sentiment. And so still bearish.

Right. So all of this then gives perfect rationale for why this week, talked about the kind of technical side of it, talked about the rate differential side of it, and talked about the the move compounded by this new emphasis on this energy crisis just happening on the timetable of a scheduled maintenance period from the Russians. And obviously that conflict is at its peaking interest again, um, at this point in time. So look, we'll, we'll finish there. I know we could go on and talk about what's Putin likely to do, which I can already imagine he's going to at least run to the maximum 10-day beyond the period, knowing full well given he is the sole real supplier, exactly how much they have in storage. So I'd see no reason why he would not run them down to a minimum level in order to strengthen his position. But that aside, we won't open up that can of worms. We'll leave it there for today. So as ever, thanks for listening. If you've made it through the full episode, I really appreciate it. And if you could give the, the podcast a rating, depending on what platform you are, uh, follow, subscribe, you'll get a notification as soon as any new episodes come out, um, every week on a Friday. Um, feel free to connect with myself and Piers via LinkedIn, uh, happy to do so. The link will be in the show notes. All right, Piers, thanks as ever, and everyone have a great weekend.

See ya.