WEBVTT - Energy, The Fed, And Germany (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.479 at Bloomberg dot com slash podcast. I want to follow 0:00:22.560 --> 0:00:24.759 up on that comic I just made of the quote 0:00:24.760 --> 0:00:27.320 there on w T corude oil. You know, one dollars 0:00:27.400 --> 0:00:29.920 sixty cents of barrel seems pretty sticky right about there, 0:00:29.960 --> 0:00:33.080 And you know you think about global energy um and 0:00:33.159 --> 0:00:35.080 it's it's you know, many people have called it a 0:00:35.200 --> 0:00:38.959 crisis situation in Europe in particular. We want to get 0:00:39.000 --> 0:00:41.360 some color on that. We're gonna check in with Jonathan Maxwell, 0:00:41.520 --> 0:00:47.200 CEO and co founder of Sustainable Development Capital l lp UH. 0:00:47.320 --> 0:00:50.599 Sustainable Development Capital operates as an investment banking firm for 0:00:50.760 --> 0:00:54.520 energy efficient project finance. Jonathan, thanks so much for joining 0:00:54.640 --> 0:00:57.320 us here. You know you're based in the UK, I believe, 0:00:57.360 --> 0:00:59.840 and I'd love to get your thoughts of just kind 0:00:59.840 --> 0:01:04.000 of the overview are kind of the energy issues, the 0:01:04.120 --> 0:01:08.399 energy security issues, the energy crisis type of issues that 0:01:08.520 --> 0:01:13.280 Europe is facing now and potentially into the winter, So 0:01:13.560 --> 0:01:16.319 thank you for having me on. I mean, the Russian 0:01:16.360 --> 0:01:20.440 invasion of Ukraine has sparked, well re ignited, i should say, 0:01:20.480 --> 0:01:24.399 an energy crisis in Europe. We've had a very steep 0:01:24.760 --> 0:01:29.200 rise and energy prices in one, low levels of storage, 0:01:29.440 --> 0:01:35.399 low wind production, um so already difficult market background, but 0:01:35.480 --> 0:01:37.960 coming into this year with the Russian invasion of Ukraine 0:01:38.319 --> 0:01:43.319 curtailed supplies of gas coming into Europe. The word that 0:01:43.400 --> 0:01:47.080 I had applied to which I liked was gastastrophe. So 0:01:47.120 --> 0:01:50.240 you know that is the problem, the supply of gas 0:01:50.240 --> 0:01:54.800 from Russia via Ukraine, because that's forty percent ish of 0:01:54.840 --> 0:01:59.240 the whole European gas supply at stake, in fact higher 0:01:59.600 --> 0:02:03.120 earlier in the year from Germany. So you know, that's 0:02:03.120 --> 0:02:08.359 a huge problem for Europe and has created a crisis 0:02:08.400 --> 0:02:11.600 not just in terms of pricing and supply, but also 0:02:12.120 --> 0:02:15.200 trying to find solutions to that problem. You know, how 0:02:15.240 --> 0:02:17.200 how do you replace the natural gas, how do you 0:02:17.200 --> 0:02:21.160 actually provide generation? And what can be the solutions in 0:02:21.200 --> 0:02:23.239 the short media and long term. Well, in every crisis, 0:02:23.280 --> 0:02:25.960 there's an opportunity, right I don't know who said that, 0:02:26.000 --> 0:02:29.480 but um, what what is the opportunity here? I mean, 0:02:29.600 --> 0:02:36.720 is it for just diversifying their resources, you know, diverse, diverse, 0:02:36.760 --> 0:02:40.680 fying their energy providers, or is it for diversifying the 0:02:40.800 --> 0:02:45.720 kind of energy that Europeans use? So you know, as 0:02:45.760 --> 0:02:47.880 with any solution, it's it's going to be a number 0:02:47.880 --> 0:02:51.000 of a number of pollutions to the problem. You know, 0:02:51.200 --> 0:02:54.799 the biggest one, the real fact of life is the 0:02:55.200 --> 0:02:57.760 percent of Europe, like North America, eighty percent of years 0:02:57.800 --> 0:03:01.120 energies or gas and calls. So taking a significant cut 0:03:01.240 --> 0:03:04.520 on gas means it's got to be replaced from somewhere. 0:03:04.680 --> 0:03:07.120 So there are all turns in diversifying sources of natural 0:03:07.160 --> 0:03:11.320 gas supply. In the meantime, Sadly, for decarbonization, Europe has 0:03:11.400 --> 0:03:15.200 leant back on its coal generation, so Germany, Ireland, even 0:03:15.200 --> 0:03:18.800 the UK have got coal. Is up seven percent, says 0:03:18.840 --> 0:03:22.200 the I A European coal demand in Europe driving global 0:03:22.200 --> 0:03:25.160 demand up two peaks not seen since twenty thirteen. So 0:03:25.240 --> 0:03:31.400 diversifying fossil fuel, the opportunity is to try and replace 0:03:31.760 --> 0:03:35.360 those types of that type of generation with cleaner forms 0:03:35.400 --> 0:03:39.440 of generation. Um, the trying to replace that with renewables 0:03:39.480 --> 0:03:42.840 has its own challenges on supply chain, resources and time. 0:03:43.280 --> 0:03:45.040 You know, it takes three or five years to build 0:03:45.040 --> 0:03:47.720 solar and wind on shore. It can take ten to 0:03:47.760 --> 0:03:51.280 fifteen years to build offshore wind in nuclear. So you 0:03:51.320 --> 0:03:53.960 know how you solve the problem in the short run. Actually, 0:03:54.200 --> 0:03:57.720 I think it's a massive opportunity because while we're strut 0:03:57.760 --> 0:04:03.360 spending so much time asking how to replace Russian gas. Actually, 0:04:03.360 --> 0:04:06.880 in the European Commission said if every unit of natural 0:04:06.920 --> 0:04:09.000 gas that we don't buy from Russia, they said, is 0:04:09.040 --> 0:04:11.680 two point six units that we don't have to Sorry 0:04:11.760 --> 0:04:13.640 for every unit of gas that we don't use, there's 0:04:13.640 --> 0:04:16.080 two point six units we don't have to buy from Russia. 0:04:16.560 --> 0:04:20.520 Why it's because we're wasting most of the energy in 0:04:20.520 --> 0:04:24.040 the energy system. There is an enormous amount of inefficiency 0:04:24.560 --> 0:04:28.239 in Europe, about two thirds of energies wasted somewhere between 0:04:28.279 --> 0:04:33.200 the generation, transmission and distribution process. To the opportunity extraordinaries 0:04:33.240 --> 0:04:36.640 about in the US, by the way, So the opportunity 0:04:36.720 --> 0:04:39.960 which is extraordinary is to invest in solutions that reduce 0:04:40.160 --> 0:04:43.479 energy use um and reduce energy demand. So you know, 0:04:43.480 --> 0:04:45.720 what you've seen as a massive response of Europe. They 0:04:45.800 --> 0:04:49.400 had a policy last year which I think frankly they 0:04:49.400 --> 0:04:51.440 were mumbling, but at least it was a policy saying 0:04:51.560 --> 0:04:55.039 energy efficiency first, not second or third, but energy efficiency first. 0:04:55.480 --> 0:04:58.400 But it's now critical there is no solution to the 0:04:58.400 --> 0:05:01.240 problem other than being more efficient, so they have now 0:05:01.760 --> 0:05:05.160 introduced the policy to reduce gas consumption by fift Are 0:05:05.200 --> 0:05:09.840 there companies that are focused on increasing energy efficiency? Big names, 0:05:09.920 --> 0:05:13.520 big projects that we should know there are. There are 0:05:14.520 --> 0:05:21.600 very very large projects being done in aggregate, individual projects 0:05:21.600 --> 0:05:25.440 a smaller ten fifty a hundred megawatts read a hundred 0:05:25.480 --> 0:05:30.360 million dollar projects. So on site solar, on site generation 0:05:30.480 --> 0:05:32.880 even using natural gas, but where you can capture the 0:05:32.920 --> 0:05:37.080 heat co generation it's called so co generation, solar storage, 0:05:37.160 --> 0:05:39.479 ground and surce heat gar firmal. So there is a 0:05:39.600 --> 0:05:43.120 very large marketplace. In fact, the International with New Billenese 0:05:43.279 --> 0:05:46.360 Agency globally says that that market is worth about ten 0:05:46.440 --> 0:05:50.760 trillion dollars compared to say three to five trillion dollars 0:05:50.800 --> 0:05:53.600 of the renewable energy market. So recognizing that so much 0:05:53.720 --> 0:05:56.360 energy is wasted in the global energy system, the i 0:05:56.520 --> 0:05:59.080 e A, the International Video Bill Energy Agency, and the 0:05:59.400 --> 0:06:02.760 growing umber of utilities and specialist companies are targeting the 0:06:02.839 --> 0:06:06.440 energe efficiency and distributed generation space because that is the 0:06:06.440 --> 0:06:09.680 way of delivering lower cost, lower carbon, more relable energy 0:06:09.680 --> 0:06:12.039 into the market. All right, Jonathan, thank you so much 0:06:12.080 --> 0:06:15.039 for that update. We appreciated. I learned something new there 0:06:15.040 --> 0:06:18.880 about the energy inefficiency and how much energy UH is 0:06:19.000 --> 0:06:20.880 lost or wasted between you know, getting out of the 0:06:20.920 --> 0:06:24.839 ground and getting into the home. Jonathan Maxwell, CEO and 0:06:24.920 --> 0:06:28.840 co founder of Sustainable Development Capital. Again, it's operates as 0:06:28.880 --> 0:06:33.440 an investment banking firm for energy efficient project UH finance 0:06:38.760 --> 0:06:41.320 a fandevit. I'm not sure why he's still doing this stuff, 0:06:41.320 --> 0:06:44.400 but he's the chief investment officer of Manetta Group. UH. 0:06:45.520 --> 0:06:48.800 Thank you. Twenty seven billion assets under management, ranked in 0:06:48.839 --> 0:06:52.960 the top ten by barons among independent registered investment advisors, 0:06:52.960 --> 0:06:56.760 So some real real money under management, UH. Efan, thank 0:06:56.760 --> 0:06:58.800 you so much for joining us here. What do you 0:06:58.839 --> 0:07:02.599 make of this, I guess rally in the stock market 0:07:02.640 --> 0:07:05.159 over the last several weeks. Are you buying into it 0:07:05.240 --> 0:07:07.120 or is it just a little bit of a head 0:07:07.120 --> 0:07:08.640 fake and we still need to be cautious. How do 0:07:08.680 --> 0:07:12.000 you think about that? It's really interesting, I mean, the 0:07:12.040 --> 0:07:14.720 market does look now like it has something to prove. 0:07:14.760 --> 0:07:17.200 We're heading towards the best month since the end of 0:07:17.280 --> 0:07:20.600 twenty It comes off the back of a really awful 0:07:20.640 --> 0:07:22.760 start to the years. Look at the SMP when the 0:07:22.760 --> 0:07:25.040 worst starts to the year for the first half in 0:07:25.040 --> 0:07:27.880 a hundred years, so clearly what we were coming off 0:07:27.920 --> 0:07:30.400 the bottom. There has been cash on the sidelines for 0:07:30.520 --> 0:07:34.120 some time. We've seen the assets and money market funds rise, 0:07:34.480 --> 0:07:36.560 so clearly there is still a sense that there is 0:07:36.600 --> 0:07:39.520 really no alternative to being exposed to equities at this time. 0:07:39.960 --> 0:07:42.400 So that's the momentum. Seeing as to whether it's a 0:07:42.480 --> 0:07:44.600 head fake or not, I actually think it has some 0:07:44.760 --> 0:07:48.200 legs this rally because we look at some of the indicators. 0:07:48.360 --> 0:07:51.640 The consumer has very low levels of debt today, we're 0:07:51.680 --> 0:07:54.240 seeing ultimately at a company level, we don't see many 0:07:54.280 --> 0:07:57.000 defaults coming. So even though margins are going to get 0:07:57.040 --> 0:07:59.960 tighter and we're going to see some pressure in terms 0:07:59.920 --> 0:08:02.600 of pricing power and ability to pass through some of 0:08:02.600 --> 0:08:05.560 those prices, there are a lot of quite positive indicators 0:08:05.560 --> 0:08:08.800 and underlying some of this negative momentum, all the headline 0:08:08.840 --> 0:08:11.960 around recession and even when it comes to inflation, yes, 0:08:12.040 --> 0:08:15.320 these two inflation indicators today were positive. That comes off 0:08:15.360 --> 0:08:18.680 the back of our historic high for June. We still 0:08:18.760 --> 0:08:22.480 have to remember that this is still follow on of 0:08:22.600 --> 0:08:24.920 some of the constraints that we've seen come out of COVID. 0:08:25.280 --> 0:08:27.640 The supply chain restrictions are still in there, with a 0:08:27.680 --> 0:08:31.440 little bit of demand destruction happening around the higher prices. 0:08:31.480 --> 0:08:35.040 You see that with oil. So overall, I'm pretty sanguine. 0:08:35.080 --> 0:08:38.520 I'm reasonably optimistic that this market has some legs. Do 0:08:38.600 --> 0:08:41.559 you not expect the Fed to just keep on hiking 0:08:41.600 --> 0:08:44.520 and hiking? I mean three and a half four percent, 0:08:44.800 --> 0:08:47.959 five percent? Is that you think just not going to happen, 0:08:48.080 --> 0:08:52.040 especially if inflation comes down in the growth softense, well 0:08:52.120 --> 0:08:55.319 growth softense, let's face it, Uh, we're in a we're 0:08:55.320 --> 0:08:59.640 in contraction period right exactly. Well, certainly the Fed seems 0:08:59.679 --> 0:09:02.200 to make me it's a confirmation bias that played, but 0:09:02.240 --> 0:09:05.079 it seems to think that already if actions have had 0:09:05.120 --> 0:09:08.240 some effects, it took. It's looking at the weakening markets, 0:09:08.640 --> 0:09:11.720 and Elon Musk agrees. He says more of their prices 0:09:11.760 --> 0:09:15.120 have come down than gone off recently, exactly, So there's 0:09:15.120 --> 0:09:18.200 an indicator. And remember cassy Wood out of that arc 0:09:18.320 --> 0:09:21.360 has had for some time. She's talked with the deflationary 0:09:21.400 --> 0:09:25.479 impulses and markets which are are offsetting the inflationary impulses, 0:09:25.600 --> 0:09:28.280 and those deflationary impulses are why we had no inflation 0:09:28.360 --> 0:09:31.120 for so long. So many of those deflationary impulses have 0:09:31.200 --> 0:09:33.960 not gone away, with the exception of labor. Clearly, we 0:09:34.000 --> 0:09:36.920 saw that labor indication today that's starting to turn around. 0:09:37.120 --> 0:09:39.800 But remember a labor having some price in power is 0:09:39.800 --> 0:09:42.760 a sign that labor is strong, and it's the employment 0:09:42.800 --> 0:09:46.200 picture is strong. Will that be the the buffer that 0:09:46.280 --> 0:09:50.160 prevents the economy from flipping into recession? Maybe even We're 0:09:50.200 --> 0:09:52.240 kind of just in the middle here of this earning 0:09:52.360 --> 0:09:55.800 cycle here, Big tech week this week, and we had 0:09:55.800 --> 0:09:58.520 some really good numbers out of Amazon last night and 0:09:58.559 --> 0:10:01.240 pretty good numbers out of ap All here. What are 0:10:01.240 --> 0:10:03.839 your takeaways here, but that midway through this this earning 0:10:03.840 --> 0:10:07.280 cycle here, I think it's very lumpy. We we did 0:10:07.320 --> 0:10:10.240 see some less positive numbers from Amazon before when it 0:10:10.280 --> 0:10:13.319 looks like they had perhaps that excess inventory or they 0:10:13.520 --> 0:10:16.240 were suffering from supply chain issues. And then the very 0:10:16.280 --> 0:10:18.560 same week we have this canary in the coal mines 0:10:18.640 --> 0:10:22.160 from from Walmart much more less of a perhaps discretionary, 0:10:22.160 --> 0:10:25.480 more of a staple type retail because it is lower end, 0:10:25.559 --> 0:10:28.600 and that that they clearly are seeing a contraction in demand, 0:10:28.600 --> 0:10:31.520 they're seeing high inventories. Target is is in a moment 0:10:31.559 --> 0:10:34.880 of fire sales situation around it's inventories. So that picture 0:10:34.920 --> 0:10:38.160 is still mixed. I think it's really a question of lumpiness. 0:10:38.160 --> 0:10:41.319 Some companies maybe took their lumps earlier and some are 0:10:41.360 --> 0:10:43.720 taking them now, and so I don't actually see that 0:10:43.760 --> 0:10:47.840 there's an overwhelmingly, overwhelmingly clear picture coming out of that. 0:10:47.840 --> 0:10:50.199 In terms of consumer demand, I think we can all 0:10:50.240 --> 0:10:52.440 say that the consumers have said it's stronger than they've 0:10:52.440 --> 0:10:55.120 been in the past since situations like this, because of 0:10:55.160 --> 0:10:57.240 their low debt levels. But they are going to be 0:10:57.320 --> 0:11:01.280 reacting to to these these pricing pressure and they're going 0:11:01.320 --> 0:11:05.480 through reacting to some of their COVID lad largess coming off. 0:11:05.920 --> 0:11:08.800 But you still think there's no other place to be, 0:11:08.840 --> 0:11:12.280 there's no alternative to us docks. Um, what do you 0:11:12.320 --> 0:11:16.080 see happening in bonds and fixed income after they're horrible, terrible, 0:11:16.080 --> 0:11:19.640 no good first half? Yes, exactly. Well, actually that has 0:11:19.720 --> 0:11:22.200 has been a bit of a turnaround too for for years, 0:11:22.280 --> 0:11:24.400 bombs haven't looked like a great place to put money. 0:11:24.440 --> 0:11:26.280 They despite their being in a bond in its bold 0:11:26.280 --> 0:11:30.160 bomb ball market, they have looked like very uninteresting um 0:11:30.000 --> 0:11:33.880 from a return perspective, especially when that return is after inflation. 0:11:33.960 --> 0:11:37.800 Still on a real basis now because of the change 0:11:37.800 --> 0:11:39.920 in rates and a little bit of spread widing, not 0:11:39.960 --> 0:11:43.120 a great deal. We're actually thinking some reasonably compelling yields 0:11:43.160 --> 0:11:46.280 in investment grade and high yield, and even though after 0:11:46.440 --> 0:11:49.480 the high levels of inflations they won't be particularly interesting 0:11:49.520 --> 0:11:53.000 on a real, real basis, they are a huge, hugely 0:11:53.000 --> 0:11:55.360 different from what they were in the past, so there 0:11:55.440 --> 0:11:57.720 is an alternative sequities. But I think ultimately you need 0:11:57.760 --> 0:11:59.560 to be invested across the boards. You need to have 0:11:59.679 --> 0:12:04.200 broad based different by exposure equities, bond and alternatives, and realistate. 0:12:04.280 --> 0:12:07.520 Like your previous plot suggested, there really is no time 0:12:07.559 --> 0:12:09.800 to be too much in cash. A little bit of 0:12:09.880 --> 0:12:12.160 dry powder help all right, Evan, thank you so much 0:12:12.160 --> 0:12:15.440 for joining us. Really appreciate getting your perspective. Efan Devitt, 0:12:15.600 --> 0:12:19.480 chief investment officer of Moneta Group, giving us her thoughts 0:12:19.480 --> 0:12:24.199 on these markets. Group. One of my best friends is 0:12:24.240 --> 0:12:28.600 here Neil Grossman. Uh and just turned sixty five, So 0:12:28.720 --> 0:12:32.400 happy birthday to you, Neil Grossman. I see that you 0:12:32.559 --> 0:12:37.880 got a gold box conjecture cake. What is that? Gold 0:12:37.920 --> 0:12:42.480 box conjecture is one of the oldest unproved mathematical theorems. 0:12:42.520 --> 0:12:44.640 That's something I've been actually working on myself for about 0:12:44.679 --> 0:12:47.120 twenty five years. And there's a painting in our apartment. 0:12:47.400 --> 0:12:50.120 But the conjecture is relatively simple. Number theory is actually 0:12:50.200 --> 0:12:54.160 quite manageable and understandable. So God Christian Goldbach and in 0:12:54.200 --> 0:12:56.840 the late mid sev dred sent the letters of the 0:12:56.840 --> 0:13:02.440 most famous mathematician of his Timelineard Oiler, hypothesizing that every 0:13:02.480 --> 0:13:05.920 even number is the sum of two prime numbers. And 0:13:06.040 --> 0:13:07.880 you can also flip that into one which says that 0:13:07.920 --> 0:13:11.079 every number is the average of two primes. It's neved. 0:13:11.520 --> 0:13:13.120 This is the kind of guy we're dealing with. I 0:13:13.120 --> 0:13:16.360 just wanted to set that up for you. So UM 0:13:16.600 --> 0:13:20.440 physics degree studied a little bit of cosmology under Stephen 0:13:20.480 --> 0:13:23.720 Hawking and Cambridge, and UM has advised that, I said 0:13:23.760 --> 0:13:26.439 the Norwegian Central Bank now he runs t k n 0:13:26.480 --> 0:13:34.599 G Capital and UM discusses economics and policy with FED officials. 0:13:34.800 --> 0:13:38.679 Let's talk about Jerome Pale's meeting on decision, Well, not 0:13:38.760 --> 0:13:41.480 just on Wednesday, but what the FED has been up 0:13:41.520 --> 0:13:44.439 to trying to catch up and trying to catch the curve, 0:13:44.559 --> 0:13:47.360 if you will, because they missed it so badly. Are 0:13:47.360 --> 0:13:49.079 they going to be able to do that without driving 0:13:49.160 --> 0:13:52.080 us into a to stop inflation, without driving us into 0:13:52.080 --> 0:13:55.320 a deep deeper session. I think they're gonna struggle. But 0:13:55.360 --> 0:13:57.360 I don't even think he's trying to catch up. I mean, 0:13:57.400 --> 0:14:00.800 let's be clear a few things. They spent what five 0:14:00.880 --> 0:14:03.600 years or seven years arguing that they needed to push 0:14:03.760 --> 0:14:06.440 inflation a little hot, just to push up the average 0:14:06.559 --> 0:14:10.560 to two percent. You know, he's saying, we want to 0:14:10.559 --> 0:14:14.839 get to a two percent, but he he's years behind. 0:14:14.880 --> 0:14:17.520 If he wants to get back to two percent, averaging 0:14:17.720 --> 0:14:20.000 they got to go to one percent for almost a decade. 0:14:20.600 --> 0:14:23.480 And what's interesting is we'll we'll finish this year having 0:14:23.520 --> 0:14:26.480 average probably six and a half to seven percent for 0:14:26.560 --> 0:14:30.080 two years. If all you do is luck get lucky 0:14:30.160 --> 0:14:32.640 enough to go immediately to two percent and stay there 0:14:32.640 --> 0:14:37.360 ten years in the future, you're still almost twenty percent 0:14:37.480 --> 0:14:40.960 or whatever plus away from what your original target was. 0:14:41.600 --> 0:14:44.880 They've set off distortions that will continue to propagate and 0:14:44.920 --> 0:14:48.200 compound for many years. But you don't hear anybody talking 0:14:48.240 --> 0:14:52.520 about unwinding the impact of what we what's right behind us, 0:14:52.560 --> 0:14:55.600 which is really the problem. They won't right well, they're 0:14:55.600 --> 0:14:57.520 afraid of it. That's what's behind us is all the 0:14:57.560 --> 0:15:00.080 stimulus we had, Well, the stimulus, the stimulus, and and 0:15:00.160 --> 0:15:03.760 and and and and seven and seven or eight percent 0:15:03.840 --> 0:15:06.240 annualized inflation for two years. By the way, it took 0:15:06.360 --> 0:15:09.400 Vulcar post folk, youre pardon me, it was like twenty 0:15:09.480 --> 0:15:12.760 five years before we reached an ambient state of steady 0:15:12.840 --> 0:15:15.160 state of two to two and a half percent inflation. Now, 0:15:15.200 --> 0:15:17.920 it may not be the same this time, but you 0:15:17.960 --> 0:15:22.000 should be expecting that it's going to be a glide 0:15:22.160 --> 0:15:25.240 if they're lucky of a number of years to get 0:15:25.280 --> 0:15:27.600 even close to the tool. So let's talk about that then. 0:15:27.720 --> 0:15:30.520 I mean, as an investor, you have to try and 0:15:30.640 --> 0:15:32.600 figure out what the FED is going to do, not 0:15:32.720 --> 0:15:36.240 what they should do. What do you think we're going 0:15:36.280 --> 0:15:38.680 to see in terms of a terminal rate? Do you 0:15:38.720 --> 0:15:40.880 think they're gonna turn around and start cutting? Are we 0:15:40.960 --> 0:15:43.560 going to see a recession? Are we in one right now? Um, 0:15:43.720 --> 0:15:45.600 we're not in a recession right now. My view, I 0:15:45.640 --> 0:15:47.280 think we were just talking about this. I think you've 0:15:47.320 --> 0:15:49.720 seen two negative quarters of real GDP and I think 0:15:49.760 --> 0:15:52.320 we may see two more. But the difference between what 0:15:52.480 --> 0:15:55.560 we would feel as a recession in a real way 0:15:55.640 --> 0:15:58.640 and what you're seeing statistically is the fact that inflation 0:15:59.440 --> 0:16:05.680 is not and real GDP is nominalist inflation. Nominal GDP 0:16:06.000 --> 0:16:09.440 is very strong still relative to the last Well it's 0:16:09.480 --> 0:16:11.040 not that high, but let's take five or six. It 0:16:11.200 --> 0:16:13.680 was that way last year, but relative to the last 0:16:13.680 --> 0:16:16.960 twenty years, that's still a very strong number. We're still 0:16:17.040 --> 0:16:21.400 at almost historical lows. And unemployment, I do think that 0:16:21.520 --> 0:16:24.120 you have a very Um, you're you're probably likely to 0:16:24.200 --> 0:16:26.560 have a disappointing number this month and maybe even next 0:16:26.640 --> 0:16:29.560 month in employment. But I don't think you're pushing up 0:16:29.800 --> 0:16:32.800 the unemployment rate all that far. But man, if you 0:16:32.920 --> 0:16:38.880 can't have nominal GDP and four or five unemployment after 0:16:39.040 --> 0:16:43.680 spending six trillion of fiscal and doubling the balance sheet 0:16:43.720 --> 0:16:47.440 to eight trillion, what can what can you do? Strows with? Right? Well, 0:16:47.600 --> 0:16:50.440 that's that's that's the problem. We were were were you 0:16:50.480 --> 0:16:54.560 know again, we we basically um borrowed money to keep 0:16:54.720 --> 0:16:56.840 things afloat. You know, on a on a year on 0:16:56.960 --> 0:16:59.240 year comparative basis, it's going to be very hard for 0:16:59.320 --> 0:17:02.760 a while for the economy to compare compare to what 0:17:03.360 --> 0:17:07.800 was the fiscal rainfall of COVID relief. And so you 0:17:08.000 --> 0:17:11.040 you have a natural problem built into the into the 0:17:11.119 --> 0:17:14.760 GDP numbers on top of everything else. And you know, look, 0:17:15.040 --> 0:17:17.159 as long as the balance sheet isn't being reduced, and 0:17:17.200 --> 0:17:20.200 I think this is one of the biggest things out there. Um, 0:17:20.600 --> 0:17:23.560 if they really want to bring inflation down, that balance 0:17:23.600 --> 0:17:26.200 sheet should be going down already, and not slowly. I 0:17:26.280 --> 0:17:28.600 think it's much more effective to deal with the balance 0:17:28.640 --> 0:17:31.359 sheet than they are reducing the balance sheet. You're just saying, 0:17:31.480 --> 0:17:33.560 they just started, but it's slow. Well, they're gonna let it. 0:17:33.560 --> 0:17:36.120 They're not. They're not really selling very much. They're they're 0:17:36.200 --> 0:17:38.480 letting run off much much more. You think they need 0:17:38.520 --> 0:17:41.080 to be more. Well, still, it's still expanding. Actually, right 0:17:41.080 --> 0:17:43.040 in the last few weeks listening, we only have two 0:17:43.280 --> 0:17:45.959 and a half minutes here. What are you doing right 0:17:46.000 --> 0:17:48.639 now in the market? Are you buying stocks after the 0:17:48.720 --> 0:17:51.359 drop that we've just seen. I was here with you. 0:17:51.400 --> 0:17:54.119 A month and a half ago. I bought I've had 0:17:54.119 --> 0:17:57.200 actually had a pretty good I sold yesterday, and what 0:17:57.320 --> 0:18:01.399 I'm looking for, Honestly, I'm not worried about five up 0:18:01.480 --> 0:18:03.920 or down here. I think that either I was thinking 0:18:03.920 --> 0:18:07.840 we get to maybe I'm worried that we're gonna hit 0:18:07.880 --> 0:18:10.720 the fall and there's a lot of people getting excited, 0:18:10.720 --> 0:18:13.920 and all of a sudden we hit October and inflation 0:18:14.000 --> 0:18:16.960 still isn't dropping and you are seeing slowed down. So 0:18:17.119 --> 0:18:20.040 what I'm beginning to do for myself is to buy 0:18:20.880 --> 0:18:23.719 far out of the money, protection and fairly good size 0:18:24.080 --> 0:18:26.600 so in case we have because it's not very expensive volatively, 0:18:26.640 --> 0:18:28.760 although it's little highs come down a lot in case 0:18:28.840 --> 0:18:32.040 we have a catastrophe. That's what I'm really worried about. 0:18:32.040 --> 0:18:33.879 It interest rates. One last thing, if I had to 0:18:33.920 --> 0:18:36.920 be be, I'm a little short bonds now, but not 0:18:37.119 --> 0:18:40.159 very much. I think yield curve steepeners or if you 0:18:40.200 --> 0:18:43.000 want to get technical, yield curve steepeners in forward space 0:18:43.800 --> 0:18:46.320 or where I think you should be doing, because I 0:18:46.440 --> 0:18:50.440 just think there is so much risk yield curve steepeners 0:18:50.480 --> 0:18:55.520 in forward space yet complex here. Well, well, just to 0:18:55.600 --> 0:18:57.800 put a good word in for Bloomberg. One of the 0:18:57.880 --> 0:19:00.240 few systems you can easily use to figure it out. 0:19:00.240 --> 0:19:03.159 It is right in front of you. Bloomberg Technical Analytics 0:19:03.240 --> 0:19:05.320 is fabulous for this type of stuff. We like it 0:19:05.400 --> 0:19:07.640 when people put in a good word for Bloomberg, which 0:19:07.680 --> 0:19:10.320 I will never use any of those things. Probably, I'm like, 0:19:10.440 --> 0:19:12.720 I'm d e S. I'm good to me. The Bloomberg 0:19:13.000 --> 0:19:16.680 terminal is like a Ducati pana gali, you know, V 0:19:16.920 --> 0:19:20.800 four S. I love the bike. I bought the bike, 0:19:21.200 --> 0:19:23.720 and I can extract maybe five to six percent of 0:19:23.760 --> 0:19:25.840 its total. I don't think I don't think you're even close. 0:19:25.880 --> 0:19:27.800 I think it's like sitting on top of a Saturn 0:19:27.840 --> 0:19:32.400 B five. There. All right, that's a better comparison. Neil Grossman, 0:19:32.440 --> 0:19:34.400 thank you so much for joining us here. Neil Grossman, 0:19:34.880 --> 0:19:38.359 t k n G Capital in the Bloomberg Interactive Broker Studio, 0:19:38.440 --> 0:19:40.800 which is huge. You get a gold star for coming in. 0:19:40.920 --> 0:19:43.680 He brought us a bottle of wine. Yeah, we'll pop 0:19:43.760 --> 0:19:46.159 that baby. He made this wine. He made this one 0:19:46.200 --> 0:19:49.240 at the Canoe Hill Vineyard. It's getting a lot of recognition. 0:19:49.320 --> 0:19:52.520 That's like drinking a second growth board dough. I'm excited. 0:19:52.600 --> 0:19:54.480 All right. I don't know what that is, but the 0:19:54.520 --> 0:19:57.320 drink at the where you go out east. All right, Neil, 0:19:57.320 --> 0:20:04.919 thanks so much for joining us here. All right, how 0:20:04.960 --> 0:20:09.080 about this. For a decade, Berlin commended moral and financial 0:20:09.119 --> 0:20:12.480 authority in the European Union, guiding policy and playing bad 0:20:12.600 --> 0:20:16.200 cops to the weaker southern economies. The energy crisis has 0:20:16.400 --> 0:20:19.840 upended that balance. Maria today o joins us. She penned 0:20:19.960 --> 0:20:23.359 those words. She's a European reporter for Bloomberg News and 0:20:23.440 --> 0:20:25.720 she's doing some opinion stuff right now, which is good 0:20:25.760 --> 0:20:28.359 for us. Maria thinks, well, it's not great for us. 0:20:28.600 --> 0:20:33.600 Why because she's she's doing this stint with Bloomberg Opinion, 0:20:33.640 --> 0:20:36.119 which means she hasn't been on Bloomberg TV for like 0:20:36.320 --> 0:20:39.399 three weeks since the point, and we miss her, I know. 0:20:39.520 --> 0:20:41.480 But she gets to spreader wings a little bit and 0:20:41.560 --> 0:20:43.800 do some other stuff. She's so talented. Maria, thanks so 0:20:43.920 --> 0:20:45.760 much for taking the time to join us here. I 0:20:45.880 --> 0:20:48.480 love this piece about Germany. Give us a sense of 0:20:49.119 --> 0:20:51.920 Germany's position in Europe today because it does feel a 0:20:51.960 --> 0:20:54.960 little bit different because you know, this energy crisis is 0:20:55.000 --> 0:21:00.239 really exposing their vulnerability. Yeah, and the ideas and lee 0:21:00.359 --> 0:21:03.600 as that came to mind for me to write this piece. 0:21:03.840 --> 0:21:07.119 It was really the words of the Spanish energy minister 0:21:07.280 --> 0:21:10.840 who came out with a lot of bravado saying, you know, 0:21:11.040 --> 0:21:14.239 Spain did a homework with manager economy in a way 0:21:14.280 --> 0:21:18.560 that is more sustainable, and it's it's words are really 0:21:18.640 --> 0:21:21.640 echoed the way that the Germans used to talk about 0:21:21.720 --> 0:21:24.800 the Southern Europeans to say, you went on this debt 0:21:25.080 --> 0:21:28.119 kind of spiral and you did not manage your finance 0:21:28.200 --> 0:21:30.399 is sustainable and now where we have to come to 0:21:30.440 --> 0:21:33.760 your rescue. So essentially what you see now it's the opposite. 0:21:33.880 --> 0:21:37.679 And the European Commission they get it. The European countries 0:21:37.720 --> 0:21:40.159 are gonna have to lower their energy consumption. It's going 0:21:40.200 --> 0:21:42.840 to be supply but also demand. And what they argued 0:21:42.880 --> 0:21:46.440 that everyone has to cut it down by the Spanish, 0:21:46.600 --> 0:21:49.520 the Portuguese, the Greeks, all of them said that's not 0:21:49.560 --> 0:21:52.040 gonna work. We're not gonna accept one targets for all. 0:21:52.400 --> 0:21:54.920 What I would say, however, and that's all to my piece, 0:21:55.000 --> 0:21:57.280