Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day, we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. I want to follow
Speaker 1: up on that comic I just made of the quote
Speaker 1: there on w T corude oil. You know, one dollars
Speaker 1: sixty cents of barrel seems pretty sticky right about there,
Speaker 1: And you know you think about global energy um and
Speaker 1: it's it's you know, many people have called it a
Speaker 1: crisis situation in Europe in particular. We want to get
Speaker 1: some color on that. We're gonna check in with Jonathan Maxwell,
Speaker 1: CEO and co founder of Sustainable Development Capital l lp UH.
Speaker 1: Sustainable Development Capital operates as an investment banking firm for
Speaker 1: energy efficient project finance. Jonathan, thanks so much for joining
Speaker 1: us here. You know you're based in the UK, I believe,
Speaker 1: and I'd love to get your thoughts of just kind
Speaker 1: of the overview are kind of the energy issues, the
Speaker 1: energy security issues, the energy crisis type of issues that
Speaker 1: Europe is facing now and potentially into the winter, So
Speaker 1: thank you for having me on. I mean, the Russian
Speaker 1: invasion of Ukraine has sparked, well re ignited, i should say,
Speaker 1: an energy crisis in Europe. We've had a very steep
Speaker 1: rise and energy prices in one, low levels of storage,
Speaker 1: low wind production, um so already difficult market background, but
Speaker 1: coming into this year with the Russian invasion of Ukraine
Speaker 1: curtailed supplies of gas coming into Europe. The word that
Speaker 1: I had applied to which I liked was gastastrophe. So
Speaker 1: you know that is the problem, the supply of gas
Speaker 1: from Russia via Ukraine, because that's forty percent ish of
Speaker 1: the whole European gas supply at stake, in fact higher
Speaker 1: earlier in the year from Germany. So you know, that's
Speaker 1: a huge problem for Europe and has created a crisis
Speaker 1: not just in terms of pricing and supply, but also
Speaker 1: trying to find solutions to that problem. You know, how
Speaker 1: how do you replace the natural gas, how do you
Speaker 1: actually provide generation? And what can be the solutions in
Speaker 1: the short media and long term. Well, in every crisis,
Speaker 1: there's an opportunity, right I don't know who said that,
Speaker 1: but um, what what is the opportunity here? I mean,
Speaker 1: is it for just diversifying their resources, you know, diverse, diverse,
Speaker 1: fying their energy providers, or is it for diversifying the
Speaker 1: kind of energy that Europeans use? So you know, as
Speaker 1: with any solution, it's it's going to be a number
Speaker 1: of a number of pollutions to the problem. You know,
Speaker 1: the biggest one, the real fact of life is the
Speaker 1: percent of Europe, like North America, eighty percent of years
Speaker 1: energies or gas and calls. So taking a significant cut
Speaker 1: on gas means it's got to be replaced from somewhere.
Speaker 1: So there are all turns in diversifying sources of natural
Speaker 1: gas supply. In the meantime, Sadly, for decarbonization, Europe has
Speaker 1: leant back on its coal generation, so Germany, Ireland, even
Speaker 1: the UK have got coal. Is up seven percent, says
Speaker 1: the I A European coal demand in Europe driving global
Speaker 1: demand up two peaks not seen since twenty thirteen. So
Speaker 1: diversifying fossil fuel, the opportunity is to try and replace
Speaker 1: those types of that type of generation with cleaner forms
Speaker 1: of generation. Um, the trying to replace that with renewables
Speaker 1: has its own challenges on supply chain, resources and time.
Speaker 1: You know, it takes three or five years to build
Speaker 1: solar and wind on shore. It can take ten to
Speaker 1: fifteen years to build offshore wind in nuclear. So you
Speaker 1: know how you solve the problem in the short run. Actually,
Speaker 1: I think it's a massive opportunity because while we're strut
Speaker 1: spending so much time asking how to replace Russian gas. Actually,
Speaker 1: in the European Commission said if every unit of natural
Speaker 1: gas that we don't buy from Russia, they said, is
Speaker 1: two point six units that we don't have to Sorry
Speaker 1: for every unit of gas that we don't use, there's
Speaker 1: two point six units we don't have to buy from Russia.
Speaker 1: Why it's because we're wasting most of the energy in
Speaker 1: the energy system. There is an enormous amount of inefficiency
Speaker 1: in Europe, about two thirds of energies wasted somewhere between
Speaker 1: the generation, transmission and distribution process. To the opportunity extraordinaries
Speaker 1: about in the US, by the way, So the opportunity
Speaker 1: which is extraordinary is to invest in solutions that reduce
Speaker 1: energy use um and reduce energy demand. So you know,
Speaker 1: what you've seen as a massive response of Europe. They
Speaker 1: had a policy last year which I think frankly they
Speaker 1: were mumbling, but at least it was a policy saying
Speaker 1: energy efficiency first, not second or third, but energy efficiency first.
Speaker 1: But it's now critical there is no solution to the
Speaker 1: problem other than being more efficient, so they have now
Speaker 1: introduced the policy to reduce gas consumption by fift Are
Speaker 1: there companies that are focused on increasing energy efficiency? Big names,
Speaker 1: big projects that we should know there are. There are
Speaker 1: very very large projects being done in aggregate, individual projects
Speaker 1: a smaller ten fifty a hundred megawatts read a hundred
Speaker 1: million dollar projects. So on site solar, on site generation
Speaker 1: even using natural gas, but where you can capture the
Speaker 1: heat co generation it's called so co generation, solar storage,
Speaker 1: ground and surce heat gar firmal. So there is a
Speaker 1: very large marketplace. In fact, the International with New Billenese
Speaker 1: Agency globally says that that market is worth about ten
Speaker 1: trillion dollars compared to say three to five trillion dollars
Speaker 1: of the renewable energy market. So recognizing that so much
Speaker 1: energy is wasted in the global energy system, the i
Speaker 1: e A, the International Video Bill Energy Agency, and the
Speaker 1: growing umber of utilities and specialist companies are targeting the
Speaker 1: energe efficiency and distributed generation space because that is the
Speaker 1: way of delivering lower cost, lower carbon, more relable energy
Speaker 1: into the market. All right, Jonathan, thank you so much
Speaker 1: for that update. We appreciated. I learned something new there
Speaker 1: about the energy inefficiency and how much energy UH is
Speaker 1: lost or wasted between you know, getting out of the
Speaker 1: ground and getting into the home. Jonathan Maxwell, CEO and
Speaker 1: co founder of Sustainable Development Capital. Again, it's operates as
Speaker 1: an investment banking firm for energy efficient project UH finance
Speaker 1: a fandevit. I'm not sure why he's still doing this stuff,
Speaker 1: but he's the chief investment officer of Manetta Group. UH.
Speaker 1: Thank you. Twenty seven billion assets under management, ranked in
Speaker 1: the top ten by barons among independent registered investment advisors,
Speaker 1: So some real real money under management, UH. Efan, thank
Speaker 1: you so much for joining us here. What do you
Speaker 1: make of this, I guess rally in the stock market
Speaker 1: over the last several weeks. Are you buying into it
Speaker 1: or is it just a little bit of a head
Speaker 1: fake and we still need to be cautious. How do
Speaker 1: you think about that? It's really interesting, I mean, the
Speaker 1: market does look now like it has something to prove.
Speaker 1: We're heading towards the best month since the end of
Speaker 1: twenty It comes off the back of a really awful
Speaker 1: start to the years. Look at the SMP when the
Speaker 1: worst starts to the year for the first half in
Speaker 1: a hundred years, so clearly what we were coming off
Speaker 1: the bottom. There has been cash on the sidelines for
Speaker 1: some time. We've seen the assets and money market funds rise,
Speaker 1: so clearly there is still a sense that there is
Speaker 1: really no alternative to being exposed to equities at this time.
Speaker 1: So that's the momentum. Seeing as to whether it's a
Speaker 1: head fake or not, I actually think it has some
Speaker 1: legs this rally because we look at some of the indicators.
Speaker 1: The consumer has very low levels of debt today, we're
Speaker 1: seeing ultimately at a company level, we don't see many
Speaker 1: defaults coming. So even though margins are going to get
Speaker 1: tighter and we're going to see some pressure in terms
Speaker 1: of pricing power and ability to pass through some of
Speaker 1: those prices, there are a lot of quite positive indicators
Speaker 1: and underlying some of this negative momentum, all the headline
Speaker 1: around recession and even when it comes to inflation, yes,
Speaker 1: these two inflation indicators today were positive. That comes off
Speaker 1: the back of our historic high for June. We still
Speaker 1: have to remember that this is still follow on of
Speaker 1: some of the constraints that we've seen come out of COVID.
Speaker 1: The supply chain restrictions are still in there, with a
Speaker 1: little bit of demand destruction happening around the higher prices.
Speaker 1: You see that with oil. So overall, I'm pretty sanguine.
Speaker 1: I'm reasonably optimistic that this market has some legs. Do
Speaker 1: you not expect the Fed to just keep on hiking
Speaker 1: and hiking? I mean three and a half four percent,
Speaker 1: five percent? Is that you think just not going to happen,
Speaker 1: especially if inflation comes down in the growth softense, well
Speaker 1: growth softense, let's face it, Uh, we're in a we're
Speaker 1: in contraction period right exactly. Well, certainly the Fed seems
Speaker 1: to make me it's a confirmation bias that played, but
Speaker 1: it seems to think that already if actions have had
Speaker 1: some effects, it took. It's looking at the weakening markets,
Speaker 1: and Elon Musk agrees. He says more of their prices
Speaker 1: have come down than gone off recently, exactly, So there's
Speaker 1: an indicator. And remember cassy Wood out of that arc
Speaker 1: has had for some time. She's talked with the deflationary
Speaker 1: impulses and markets which are are offsetting the inflationary impulses,
Speaker 1: and those deflationary impulses are why we had no inflation
Speaker 1: for so long. So many of those deflationary impulses have
Speaker 1: not gone away, with the exception of labor. Clearly, we
Speaker 1: saw that labor indication today that's starting to turn around.
Speaker 1: But remember a labor having some price in power is
Speaker 1: a sign that labor is strong, and it's the employment
Speaker 1: picture is strong. Will that be the the buffer that
Speaker 1: prevents the economy from flipping into recession? Maybe even We're
Speaker 1: kind of just in the middle here of this earning
Speaker 1: cycle here, Big tech week this week, and we had
Speaker 1: some really good numbers out of Amazon last night and
Speaker 1: pretty good numbers out of ap All here. What are
Speaker 1: your takeaways here, but that midway through this this earning
Speaker 1: cycle here, I think it's very lumpy. We we did
Speaker 1: see some less positive numbers from Amazon before when it
Speaker 1: looks like they had perhaps that excess inventory or they
Speaker 1: were suffering from supply chain issues. And then the very
Speaker 1: same week we have this canary in the coal mines
Speaker 1: from from Walmart much more less of a perhaps discretionary,
Speaker 1: more of a staple type retail because it is lower end,
Speaker 1: and that that they clearly are seeing a contraction in demand,
Speaker 1: they're seeing high inventories. Target is is in a moment
Speaker 1: of fire sales situation around it's inventories. So that picture
Speaker 1: is still mixed. I think it's really a question of lumpiness.
Speaker 1: Some companies maybe took their lumps earlier and some are
Speaker 1: taking them now, and so I don't actually see that
Speaker 1: there's an overwhelmingly, overwhelmingly clear picture coming out of that.
Speaker 1: In terms of consumer demand, I think we can all
Speaker 1: say that the consumers have said it's stronger than they've
Speaker 1: been in the past since situations like this, because of
Speaker 1: their low debt levels. But they are going to be
Speaker 1: reacting to to these these pricing pressure and they're going
Speaker 1: through reacting to some of their COVID lad largess coming off.
Speaker 1: But you still think there's no other place to be,
Speaker 1: there's no alternative to us docks. Um, what do you
Speaker 1: see happening in bonds and fixed income after they're horrible, terrible,
Speaker 1: no good first half? Yes, exactly. Well, actually that has
Speaker 1: has been a bit of a turnaround too for for years,
Speaker 1: bombs haven't looked like a great place to put money.
Speaker 1: They despite their being in a bond in its bold
Speaker 1: bomb ball market, they have looked like very uninteresting um
Speaker 1: from a return perspective, especially when that return is after inflation.
Speaker 1: Still on a real basis now because of the change
Speaker 1: in rates and a little bit of spread widing, not
Speaker 1: a great deal. We're actually thinking some reasonably compelling yields
Speaker 1: in investment grade and high yield, and even though after
Speaker 1: the high levels of inflations they won't be particularly interesting
Speaker 1: on a real, real basis, they are a huge, hugely
Speaker 1: different from what they were in the past, so there
Speaker 1: is an alternative sequities. But I think ultimately you need
Speaker 1: to be invested across the boards. You need to have
Speaker 1: broad based different by exposure equities, bond and alternatives, and realistate.
Speaker 1: Like your previous plot suggested, there really is no time
Speaker 1: to be too much in cash. A little bit of
Speaker 1: dry powder help all right, Evan, thank you so much
Speaker 1: for joining us. Really appreciate getting your perspective. Efan Devitt,
Speaker 1: chief investment officer of Moneta Group, giving us her thoughts
Speaker 1: on these markets. Group. One of my best friends is
Speaker 1: here Neil Grossman. Uh and just turned sixty five, So
Speaker 1: happy birthday to you, Neil Grossman. I see that you
Speaker 1: got a gold box conjecture cake. What is that? Gold
Speaker 1: box conjecture is one of the oldest unproved mathematical theorems.
Speaker 1: That's something I've been actually working on myself for about
Speaker 1: twenty five years. And there's a painting in our apartment.
Speaker 1: But the conjecture is relatively simple. Number theory is actually
Speaker 1: quite manageable and understandable. So God Christian Goldbach and in
Speaker 1: the late mid sev dred sent the letters of the
Speaker 1: most famous mathematician of his Timelineard Oiler, hypothesizing that every
Speaker 1: even number is the sum of two prime numbers. And
Speaker 1: you can also flip that into one which says that
Speaker 1: every number is the average of two primes. It's neved.
Speaker 1: This is the kind of guy we're dealing with. I
Speaker 1: just wanted to set that up for you. So UM
Speaker 1: physics degree studied a little bit of cosmology under Stephen
Speaker 1: Hawking and Cambridge, and UM has advised that, I said
Speaker 1: the Norwegian Central Bank now he runs t k n
Speaker 1: G Capital and UM discusses economics and policy with FED officials.
Speaker 1: Let's talk about Jerome Pale's meeting on decision, Well, not
Speaker 1: just on Wednesday, but what the FED has been up
Speaker 1: to trying to catch up and trying to catch the curve,
Speaker 1: if you will, because they missed it so badly. Are
Speaker 1: they going to be able to do that without driving
Speaker 1: us into a to stop inflation, without driving us into
Speaker 1: a deep deeper session. I think they're gonna struggle. But
Speaker 1: I don't even think he's trying to catch up. I mean,
Speaker 1: let's be clear a few things. They spent what five
Speaker 1: years or seven years arguing that they needed to push
Speaker 1: inflation a little hot, just to push up the average
Speaker 1: to two percent. You know, he's saying, we want to
Speaker 1: get to a two percent, but he he's years behind.
Speaker 1: If he wants to get back to two percent, averaging
Speaker 1: they got to go to one percent for almost a decade.
Speaker 1: And what's interesting is we'll we'll finish this year having
Speaker 1: average probably six and a half to seven percent for
Speaker 1: two years. If all you do is luck get lucky
Speaker 1: enough to go immediately to two percent and stay there
Speaker 1: ten years in the future, you're still almost twenty percent
Speaker 1: or whatever plus away from what your original target was.
Speaker 1: They've set off distortions that will continue to propagate and
Speaker 1: compound for many years. But you don't hear anybody talking
Speaker 1: about unwinding the impact of what we what's right behind us,
Speaker 1: which is really the problem. They won't right well, they're
Speaker 1: afraid of it. That's what's behind us is all the
Speaker 1: stimulus we had, Well, the stimulus, the stimulus, and and
Speaker 1: and and and and seven and seven or eight percent
Speaker 1: annualized inflation for two years. By the way, it took
Speaker 1: Vulcar post folk, youre pardon me, it was like twenty
Speaker 1: five years before we reached an ambient state of steady
Speaker 1: state of two to two and a half percent inflation. Now,
Speaker 1: it may not be the same this time, but you
Speaker 1: should be expecting that it's going to be a glide
Speaker 1: if they're lucky of a number of years to get
Speaker 1: even close to the tool. So let's talk about that then.
Speaker 1: I mean, as an investor, you have to try and
Speaker 1: figure out what the FED is going to do, not
Speaker 1: what they should do. What do you think we're going
Speaker 1: to see in terms of a terminal rate? Do you
Speaker 1: think they're gonna turn around and start cutting? Are we
Speaker 1: going to see a recession? Are we in one right now? Um,
Speaker 1: we're not in a recession right now. My view, I
Speaker 1: think we were just talking about this. I think you've
Speaker 1: seen two negative quarters of real GDP and I think
Speaker 1: we may see two more. But the difference between what
Speaker 1: we would feel as a recession in a real way
Speaker 1: and what you're seeing statistically is the fact that inflation
Speaker 1: is not and real GDP is nominalist inflation. Nominal GDP
Speaker 1: is very strong still relative to the last Well it's
Speaker 1: not that high, but let's take five or six. It
Speaker 1: was that way last year, but relative to the last
Speaker 1: twenty years, that's still a very strong number. We're still
Speaker 1: at almost historical lows. And unemployment, I do think that
Speaker 1: you have a very Um, you're you're probably likely to
Speaker 1: have a disappointing number this month and maybe even next
Speaker 1: month in employment. But I don't think you're pushing up
Speaker 1: the unemployment rate all that far. But man, if you
Speaker 1: can't have nominal GDP and four or five unemployment after
Speaker 1: spending six trillion of fiscal and doubling the balance sheet
Speaker 1: to eight trillion, what can what can you do? Strows with? Right? Well,
Speaker 1: that's that's that's the problem. We were were were you
Speaker 1: know again, we we basically um borrowed money to keep
Speaker 1: things afloat. You know, on a on a year on
Speaker 1: year comparative basis, it's going to be very hard for
Speaker 1: a while for the economy to compare compare to what
Speaker 1: was the fiscal rainfall of COVID relief. And so you
Speaker 1: you have a natural problem built into the into the
Speaker 1: GDP numbers on top of everything else. And you know, look,
Speaker 1: as long as the balance sheet isn't being reduced, and
Speaker 1: I think this is one of the biggest things out there. Um,
Speaker 1: if they really want to bring inflation down, that balance
Speaker 1: sheet should be going down already, and not slowly. I
Speaker 1: think it's much more effective to deal with the balance
Speaker 1: sheet than they are reducing the balance sheet. You're just saying,
Speaker 1: they just started, but it's slow. Well, they're gonna let it.
Speaker 1: They're not. They're not really selling very much. They're they're
Speaker 1: letting run off much much more. You think they need
Speaker 1: to be more. Well, still, it's still expanding. Actually, right
Speaker 1: in the last few weeks listening, we only have two
Speaker 1: and a half minutes here. What are you doing right
Speaker 1: now in the market? Are you buying stocks after the
Speaker 1: drop that we've just seen. I was here with you.
Speaker 1: A month and a half ago. I bought I've had
Speaker 1: actually had a pretty good I sold yesterday, and what
Speaker 1: I'm looking for, Honestly, I'm not worried about five up
Speaker 1: or down here. I think that either I was thinking
Speaker 1: we get to maybe I'm worried that we're gonna hit
Speaker 1: the fall and there's a lot of people getting excited,
Speaker 1: and all of a sudden we hit October and inflation
Speaker 1: still isn't dropping and you are seeing slowed down. So
Speaker 1: what I'm beginning to do for myself is to buy
Speaker 1: far out of the money, protection and fairly good size
Speaker 1: so in case we have because it's not very expensive volatively,
Speaker 1: although it's little highs come down a lot in case
Speaker 1: we have a catastrophe. That's what I'm really worried about.
Speaker 1: It interest rates. One last thing, if I had to
Speaker 1: be be, I'm a little short bonds now, but not
Speaker 1: very much. I think yield curve steepeners or if you
Speaker 1: want to get technical, yield curve steepeners in forward space
Speaker 1: or where I think you should be doing, because I
Speaker 1: just think there is so much risk yield curve steepeners
Speaker 1: in forward space yet complex here. Well, well, just to
Speaker 1: put a good word in for Bloomberg. One of the
Speaker 1: few systems you can easily use to figure it out.
Speaker 1: It is right in front of you. Bloomberg Technical Analytics
Speaker 1: is fabulous for this type of stuff. We like it
Speaker 1: when people put in a good word for Bloomberg, which
Speaker 1: I will never use any of those things. Probably, I'm like,
Speaker 1: I'm d e S. I'm good to me. The Bloomberg
Speaker 1: terminal is like a Ducati pana gali, you know, V
Speaker 1: four S. I love the bike. I bought the bike,
Speaker 1: and I can extract maybe five to six percent of
Speaker 1: its total. I don't think I don't think you're even close.
Speaker 1: I think it's like sitting on top of a Saturn
Speaker 1: B five. There. All right, that's a better comparison. Neil Grossman,
Speaker 1: thank you so much for joining us here. Neil Grossman,
Speaker 1: t k n G Capital in the Bloomberg Interactive Broker Studio,
Speaker 1: which is huge. You get a gold star for coming in.
Speaker 1: He brought us a bottle of wine. Yeah, we'll pop
Speaker 1: that baby. He made this wine. He made this one
Speaker 1: at the Canoe Hill Vineyard. It's getting a lot of recognition.
Speaker 1: That's like drinking a second growth board dough. I'm excited.
Speaker 1: All right. I don't know what that is, but the
Speaker 1: drink at the where you go out east. All right, Neil,
Speaker 1: thanks so much for joining us here. All right, how
Speaker 1: about this. For a decade, Berlin commended moral and financial
Speaker 1: authority in the European Union, guiding policy and playing bad
Speaker 1: cops to the weaker southern economies. The energy crisis has
Speaker 1: upended that balance. Maria today o joins us. She penned
Speaker 1: those words. She's a European reporter for Bloomberg News and
Speaker 1: she's doing some opinion stuff right now, which is good
Speaker 1: for us. Maria thinks, well, it's not great for us.
Speaker 1: Why because she's she's doing this stint with Bloomberg Opinion,
Speaker 1: which means she hasn't been on Bloomberg TV for like
Speaker 1: three weeks since the point, and we miss her, I know.
Speaker 1: But she gets to spreader wings a little bit and
Speaker 1: do some other stuff. She's so talented. Maria, thanks so
Speaker 1: much for taking the time to join us here. I
Speaker 1: love this piece about Germany. Give us a sense of
Speaker 1: Germany's position in Europe today because it does feel a
Speaker 1: little bit different because you know, this energy crisis is
Speaker 1: really exposing their vulnerability. Yeah, and the ideas and lee
Speaker 1: as that came to mind for me to write this piece.
Speaker 1: It was really the words of the Spanish energy minister
Speaker 1: who came out with a lot of bravado saying, you know,
Speaker 1: Spain did a homework with manager economy in a way
Speaker 1: that is more sustainable, and it's it's words are really
Speaker 1: echoed the way that the Germans used to talk about
Speaker 1: the Southern Europeans to say, you went on this debt
Speaker 1: kind of spiral and you did not manage your finance
Speaker 1: is sustainable and now where we have to come to
Speaker 1: your rescue. So essentially what you see now it's the opposite.
Speaker 1: And the European Commission they get it. The European countries
Speaker 1: are gonna have to lower their energy consumption. It's going
Speaker 1: to be supply but also demand. And what they argued
Speaker 1: that everyone has to cut it down by the Spanish,
Speaker 1: the Portuguese, the Greeks, all of them said that's not
Speaker 1: gonna work. We're not gonna accept one targets for all.
Speaker 1: What I would say, however, and that's all to my piece,
Speaker 1: is that I don't think this is a return to
Speaker 1: the old tensions between the North and the South. I
Speaker 1: don't think they want that a lot of those dynamics
Speaker 1: and did after the pandemic, the joint vaccination and all
Speaker 1: of that. But I do think that this was the
Speaker 1: end of Germany always being right, Germany always be in
Speaker 1: the country that at the table kind of says, listen
Speaker 1: to me, I know what's best for you. Clearly now
Speaker 1: it's obvious that Germany was blind to its own faults
Speaker 1: for a very long time, and everyone else now sees
Speaker 1: it well, either blind or willingly. I mean, um, we
Speaker 1: were talking to somebody I think yesterday about why Germany
Speaker 1: allowed itself to be so dependent on Russian natural gas,
Speaker 1: and he said, you know where former German Chancellor Gerhard
Speaker 1: Schroeder is working these days. He's on the board at
Speaker 1: gas from and he's hanging out at Vladimir Putin's palace. Um.
Speaker 1: You have to wonder. And yesterday I was talking my
Speaker 1: dad actually about this. Uh, how is history gonna judge
Speaker 1: angel a miracle? You know, when Maria, you and I
Speaker 1: were at the G twenty together in um in Hamburg,
Speaker 1: she got a standing ovation and was considered the leader
Speaker 1: of the free world at the time. Now it looks
Speaker 1: like she was in Putin's pocket. Yeah, and you remember
Speaker 1: Matt last year in Berlin at the election, you and
Speaker 1: I were at times critical, you know, we said, for
Speaker 1: all of the time at miracles a woman that kept
Speaker 1: Europe together. There's a lot of issues underneath that have
Speaker 1: not been very nice. You know. Angela Merkel had this
Speaker 1: fundamental view that politics and trade, security and defense, all
Speaker 1: of this could be run separately. It was a huge mistake.
Speaker 1: You can't separate the politics from the trade and your security.
Speaker 1: They're very connected. We also talked about the fact that
Speaker 1: she was someone who at times appeased some of her rivals,
Speaker 1: and not just at home, but also outside Russia Hungary.
Speaker 1: She always had this idea that okay, they're bad guys,
Speaker 1: that it's better to keep them engaged, then pushed them
Speaker 1: in the corner. She was never very forceful. That also
Speaker 1: became an issue. You know, Vladimir Putin could see it.
Speaker 1: The Germans were not really going to go rough on them,
Speaker 1: and then of course the North sting too. I mean
Speaker 1: you remember, up until a few months ago, the Germans
Speaker 1: still we're not willing to say, yes, we're gonna ditch
Speaker 1: it if the Russians invade Ukraine. I think that gave
Speaker 1: Vladimir putting a sense that listen, Germany is not going
Speaker 1: to go all out to help the Ukrainians, so that
Speaker 1: that really was something that they that they had in
Speaker 1: their minds before they invaded Ukraine. I think it's been
Speaker 1: a major wakeup call for the Germans. I think it's
Speaker 1: a huge shock for them. I don't think they even
Speaker 1: realize the impact of this has or the damage that
Speaker 1: has done to the reputation and frankly, met I don't
Speaker 1: even think the Germans understand how big a crisis this is,
Speaker 1: but also just how badly they judged the entire thing
Speaker 1: for fifteen years. I think it's a moment that so
Speaker 1: searching for Germany. But I don't think they're ready to
Speaker 1: eat humble pie yet. By the way, the Europe. By
Speaker 1: the way, this morning, when I heard the French GDP
Speaker 1: numbers and they were better than had been anticipated, my
Speaker 1: first thought was because they had those nuclear reactors at
Speaker 1: full blasts right now, and Germany has decided in its
Speaker 1: wisdom to scrap nuclear power and they're going to go
Speaker 1: through with that. They came out with GDP that was
Speaker 1: less than had been anticipated, and I wonder if we're
Speaker 1: going to see a divide along you know, nuclear lines
Speaker 1: now Maria, where the French GDP continues to outperform, the
Speaker 1: French economy continues to outperform the German economy because the
Speaker 1: Germans are going to have to start rationing and shutting
Speaker 1: down factories um come wintertime, and the French are going
Speaker 1: to be heating their homes with nuclear power. And look
Speaker 1: on Matt. I also think it's the way that you
Speaker 1: frame it is great because it also shows fundamentally that
Speaker 1: for ten years we all repeated and heard and and
Speaker 1: especially something of your bean country. They were told, your
Speaker 1: economy has to be more like the Germans. Look at
Speaker 1: their industry, look at all the things that they make.
Speaker 1: They're very good at that. But you realize that this
Speaker 1: is an economy that was built on very shaky grounds.
Speaker 1: Like it's on the one hand they got a major
Speaker 1: boot by using Brussian gas and then they're exporting a
Speaker 1: lot to China. So look at the Fans the foundations
Speaker 1: of your industry and your egonomy. In the one hand
Speaker 1: we have Russia and the other China. So for ten
Speaker 1: years and the idea that we all heard repeatedly, I
Speaker 1: mean everyone knows some Spanish you have to be more
Speaker 1: like the Germans. Not everyone knows your Spanish, try to
Speaker 1: model yourself after Germany. I think now it's pretty obvious
Speaker 1: for everyone that this is very shaky, and for a
Speaker 1: lot of the other European countries, by the way, they say, Okay,
Speaker 1: we did have a credit bubble, we had a real
Speaker 1: estate bubble, but why is an energy bubble different or
Speaker 1: better than what we did? Right? All right, Maria, that
Speaker 1: is great stuff, A great column out today. I recommend
Speaker 1: folks take a look at that. Uh you can get
Speaker 1: that at Bloomberg dot com, Slash Opinion and also b
Speaker 1: I O P I N go for all the pining
Speaker 1: stuff today covers Europe for Bloomberg News, Bloomberg televis doing
Speaker 1: a stint at Bloomberg Opinion. Some great stuff. Thanks for
Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and
Speaker 1: listen to interviews with Apple Podcasts or whatever podcast platform
Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller.
Speaker 1: Yet I fall Sweeney. I'm on Twitter at pt Sweeney.
Speaker 1: Before the podcast, you can always catch us worldwide at
Speaker 1: Bloomberg Radio.