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00:00MCNAMARA, AND HE FOCUSES ON EMERGING MARKETS. I WANT TO START WITH TURKEY, THERE IS A CHART ON THE TERMINAL, BECAUSE THEIR CURRENCY HAS BEEN THE WORST PERFORMING SINCE THE ELECTION. YOU CAN SEE THAT THE DOLLAR AND LIRA ARE IN BLUE. YOU CAN SEE THE DOLLAR INCREASING IN VALUE. THE WHITE LINE SHOWS VOLATILITY, REFLECTING THE POTENTIAL -- MARKETS ARE PRICING IT. IT IS ALMOST AS HIGH AS MID-JULY WHEN THE MILITARY IN TURKEY ATTEMPTED A COUP AND FAILED. WHEN IT COMES TO TURKEY, THE PLEDGING OF THEIR CURRENCY, WILL ENFORCE THE CENTRAL BANK'S AND AND CAUSED THEM TO RAISE INFLATION? PAUL: I THINK MOST OF THE TIME, WE WOULD HAVE SAID YES. IN 2014, WE HAD THE MEETING OF THE TURKISH CENTRAL BANK AND THE MASSIVE RATE HIKE IN AN ATTEMPT TO TURN AROUND THE LEADER AND IT HAS HAPPENED A FEW TIMES IN THE PAST. NOW, THE POLITICIANS OUTSIDE OF THE CENTRAL BANK, AND THE PRESIDENT, THEY ARE VERY CLEAR THEY DO NOT WANT HIGHER IT JUST RATES. AND I THINK THERE WAS AN ANNOUNCEMENT BY THE PRESIDENT ABOUT HOW BAD THE HIGH INTEREST RATES ARE. AND AFTER THE QUEUE AND WITH THOSE PURGES AFTERWARD, YOU ARE RIGHT, IF YOU DO SOMETHING THAT MIGHT DISPLEASE THE PRESIDENT -- JOE: THERE IS TALK IN THE U.S. THAT THERE COULD BE TENSION BETWEEN THE CENTRAL BANK AND THE PRESIDENT DOWN THE ROAD, SO WHAT DO YOU DO ECONOMICALLY WHEN YOU HAVE A STATE CALLING OUT THE CENTRAL BANK? WHICH THE PRESIDENT OF TURKEY LIKES TO DO FREQUENTLY. PAUL: I THINK PART OF IT IS, I PROBABLY SHOULD NOT SAY ANYTHING ABOUT THE U.S., BUT SOME OF THE PRESIDENT AND HIS ADVISERS IDEAS ARE UNORTHODOX. FOR EXAMPLE, WHEREVER YOU HAVE HIGH INFLATION YOU HAVE HIGHER JUST RATES, SO THAT MUST MEAN HIGHER JUST RATES ARE CAUSING INFLATION. THIS COMES BACK TO WHAT WE SAID EARLIER, THAT KEY CONCERN IS THAT THE MORE POPULIST POLITICIANS, YOU ARE GOING TO SEE EXPERTS AND PEOPLE WHO HAVE EXPERIENCE IN THESE AREAS, WHETHER OR NOT I OR ANY OTHER INVESTOR AGREE WITH THEM, THEY KIND OF KNOW WHAT THEY ARE DOING. WHEREAS I THINK THE FEELING THAT SOMETHING WITH INTEREST-RATE NOT BEEN IN THE HANDS OF AN INDEPENDENT CENTRAL BANKS AND LESS AT THE WHIM OF POLITICIANS, CAN BE DAMAGING TO THE HEALTH OF THE ECONOMY. JOE: SPEAKING OF POPULIST POLITICIANS AND THOSE AROUND THEM, SCARLET NOTED THE WALL STREET JOURNAL REPORTING THAT WILBUR ROSS COULD BE THE NOMINEE FOR COMMERCE SECRETARY. WILBUR ROSS HAS SAID SYMPATHETIC THINGS ABOUT DONALD TRUMP'S TRADE POLICIES AND SAYS THERE IS TOO BIG OF A DEFICIT AND WE SHOULD TRY TO DO TRADE DEALS THAT NARROW IT. IS THIS THE RIGHT THING? NOT YOUR OPINION ON WILBUR ROSS, BUT IS IT RIGHT TO FOCUS ON THE DEFICIT AND JUDGE THE ECONOMY THAT WAY? PAUL: I THINK YOU HAVE TO TAKE INTO ACCOUNT THE EXTERNAL BALANCE, THE BALANCE OF THE U.S. HAS STRENGTHENED SINCE THE SHALE WORLD CAME THROUGH. AND THE UNITED KINGDOM WHERE THEY HAVE A DEFICIT OF 6%, THAT IS A CAUSE FOR CONCERN. IT IS HARD TO PUT TOO MUCH EMPHASIS ON TRADE DEALS BECAUSE THE U.K. AND U.S. ARE NOT PARTICULARLY OPEN ECONOMIES, THEY HAVE SIMILAR SETUPS THAT COULD BE GERMANY OR FRANCE, THEY MANAGE TO KEEP EXTERNAL BALANCES IN BETTER ORDER. I WOULD SAY CONCERN ABOUT THE BALANCE OF PAYMENTS IS APPROPRIATE. I THINK TRYING TO TWEAK THE TRADE DEALS IN ORDER TO MANIPULATE THE BALANCE WOULD GIVE CAUSE FOR CONCERN. ON THE OTHER HAND, GIVEN SOME OF THE OTHER APPOINTMENTS WE HAVE SEEN, WE COULD DO WORSE THAN SOMEBODY THAT HAS A GREAT DEAL OF EXPERIENCE. SCARLET: WE WILL SEE HOW THAT PLAYS OUT. THE WALL STREET JOURNAL REPORTING THAT WILBUR ROSS COULD BE NOMINATED AS COMMERCE SECRETARY. YOU ARE FAVORABLE ON EMERGING ECONOMY DEBT, ARE YOU IN FAVOR OF LOCAL CURRENCY OR STRONG CURRENCY? P AUL: HARD CURRENCY HAS DONE BETTER OVER THE LONGER TERM. IT IS HARD TO BE BULLISH ON HARD CURRENCY IF YOU ARE CONCERNED ABOUT TREASURIES. PLENTY OF REASONS TO THINK THAT OVER TIME THE U.S. CURVE IS GOING TO MOVE HIGHER AND IT HAS BEEN A LONG AND DRIVING PERFORMANCE, HALF OF THE PERFORMANCE OF THE MAIN DOLLAR INDEX HAS COME FROM THE LONG AND OF DEBT, WHICH ACCOUNTS FOR A THIRD OF THE ACTUAL COMPOSITION OF THE INDEX. ON THE OTHER HAND, THE LOCAL CURRENCIES ARE MORE SENSITIVE IN THE SHORT-TERM, THEY HAVE GIVEN UP MORE SINCE THE ELECTION AND THEY TEND TO BE MORE VOLATILE. SO I THINK IT COMES DOWN TO HOW YOU FEEL ABOUT GLOBAL GROWTH, WHICH WOULD HELP LOCAL CURRENCY, AND HOW YOU FEEL ABOUT THE TREASURY CURVE, BECAUSE THERE IS CONCERN ABOUT U.S. TREASURIES AND YOU DON'T WANT YOUR OWN HARD CURRENCY THERE. JOE: WHEN YOU ARE ON HERE EXACTLY A YEAR AGO, YOU WERE FAVORABLE TO BRAZIL WIN NOBODY LIKED IT AND THEY GOT OFF TO A FANTASTIC START FOR 2016. WE HAVE NOT SPOKEN ABOUT BRAZIL MUCH, WHAT IS YOUR ASSESSMENT OF THINGS THERE NOW? PAUL: THE PROBLEM AT THE MOMENT IS THE POPULAR TRADE AND WHAT TO INVEST IN. IT HAS BEEN HIT HARD, SO LESS FAVORABLE THAN MEXICO AND CHINA, DOES NOT COMPETE WITH THE U.S. HEARTLAND WITH MANUFACTURED GOODS. THEY ARE STILL RUNNING A TRAITOR CIRCLE AND THEY HAVE HIGH INTEREST RATES, SO WE THINK THE FUNDAMENTALS ARE SOUND, BUT NOT MUCH TO STEP OUT -- SN IP AT THERE. THERE IS CONCERN ABOUT RISK AND THE STRONGER DOLLAR, BECAUSE IT

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Tempering Emerging Market Volatility

Paul McNamara, investment director at GAM, discusses the plunging Turkish lira, tension between the central bank and the head of state and emerging market debt. He speaks to Bloomberg's Scarlet Fu and Joe Weisenthal on "What'd You Miss?" (Source: Bloomberg)

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