WEBVTT - Elon Musk, Stocks, And Ukraine (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 --> 0:00:15.520 with essential market moving news. Find a Bloomberg Markets podcast 0:00:15.560 --> 0:00:18.439 called Apple Podcast or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.480 at Bloomberg dot com slash podcast. We're gonna go to 0:00:22.480 --> 0:00:27.320 Shanelli Basik a forty four billion dollar deal that really 0:00:27.520 --> 0:00:30.200 wasn't going to happen forty eight hours ago it seemed 0:00:30.240 --> 0:00:32.320 like and now it has. Elon Musk, of course, is 0:00:32.320 --> 0:00:35.560 what we're talking about, buying Twitter taking over the platform 0:00:35.640 --> 0:00:39.279 twenty five and a half billion dollars of financing from 0:00:39.320 --> 0:00:41.520 some of the world's biggest bangs. He has to put 0:00:41.520 --> 0:00:44.400 out one billion dollars on his own. Should only walk 0:00:44.479 --> 0:00:47.960 us through the deal dynamics. Yeah, it's really interesting because 0:00:48.320 --> 0:00:50.159 there was a lot of questions at the beginning on 0:00:50.200 --> 0:00:53.199 who's going to finance Elon Musk's bid, But at the 0:00:53.280 --> 0:00:55.640 end of the day, Wall Street has always stepped up 0:00:55.680 --> 0:00:57.920 to Elon Musk's rescue, if you think about it, and 0:00:57.960 --> 0:01:00.560 so it's not surprising to see who ended stepping up, 0:01:00.560 --> 0:01:03.240 which is Morgan Stanley and m u f G, which 0:01:03.240 --> 0:01:06.160 is a big partner. Remember MUFG really came to Morgan 0:01:06.240 --> 0:01:09.600 Stanley's rescue during the financial crisis, became a huge lending 0:01:09.640 --> 0:01:13.880 partner thereafter. Bank of America was listed later on Alan 0:01:13.920 --> 0:01:17.760 and Company. And so you're looking at companies that you know, 0:01:18.240 --> 0:01:20.440 it's not surprising at the end of the day how 0:01:20.480 --> 0:01:22.440 the money came together. But to the point that I 0:01:22.480 --> 0:01:25.720 think you're making here is only part of this is 0:01:25.800 --> 0:01:29.960 done in terms of debt financing and margin loans. There 0:01:30.040 --> 0:01:32.880 is still twenty one billion dollars of equity to put in, 0:01:33.040 --> 0:01:35.640 and so there's news to be had still on who 0:01:35.720 --> 0:01:39.600 joins Elon Musk in providing that equity. Yeah, and only 0:01:39.680 --> 0:01:41.760 this is something that you and I have spoken about 0:01:41.840 --> 0:01:43.480 plenty of times off the air, But let's do it 0:01:43.520 --> 0:01:46.000 on the air. Let's bring in our worldwide audience into this. 0:01:46.040 --> 0:01:47.880 There's a little bit of a rivalry here when it 0:01:47.920 --> 0:01:51.080 comes to the banks as well, JP Morgan and Goldman 0:01:51.160 --> 0:01:54.920 Sachs helping out Twitter's board kind of seems like everyone 0:01:54.960 --> 0:01:57.560 else was on Musk side. Talk to us about the 0:01:57.560 --> 0:02:00.520 bank dynamics, who's backing who would kind of feel almost 0:02:00.520 --> 0:02:03.240 a proxy war between Wall Street. It's funny that you 0:02:03.240 --> 0:02:05.480 put it that way too, because JP Morgan they have 0:02:05.640 --> 0:02:09.400 had some tensions with Tesla before. They have sued Tesla 0:02:09.560 --> 0:02:12.040 over the price of some warrants. So that's a kind 0:02:12.080 --> 0:02:14.600 of messy situation that's there in the background. But then 0:02:14.639 --> 0:02:17.679 there's Goldman Sacks, which has worked on both sides. And 0:02:17.760 --> 0:02:19.200 the thing is, at the end of the day, when 0:02:19.200 --> 0:02:22.400 it came to Twitter, remember the current and former chief 0:02:22.400 --> 0:02:25.560 financial officer of Twitter worked at Goldman Zacs. Goldman Sacs 0:02:25.560 --> 0:02:28.200 was the lead bank that took Twitter public, and so 0:02:28.400 --> 0:02:31.919 on this deal in particular, Goldman was on Twitter side 0:02:31.960 --> 0:02:35.440 of things. Now, Leonna Baker had some and her team 0:02:35.480 --> 0:02:38.880 who's our deals reporter, a deal's team leader. Actually they 0:02:38.880 --> 0:02:41.160 had some great reporting on how in the background they 0:02:41.160 --> 0:02:44.320 came to this price and really convinced Twitters and the 0:02:44.360 --> 0:02:47.520 board that this was the best possible deal, that this 0:02:47.600 --> 0:02:50.400 is a price that you're not going to necessarily see 0:02:50.440 --> 0:02:53.840 for Twitter in in the near term. And so anyone 0:02:53.840 --> 0:02:56.520 who says, well, Twitter was once trading more than seventy 0:02:56.520 --> 0:02:59.160 dollars a share, you know, will it trade at seventy 0:02:59.160 --> 0:03:00.800 dollars a share in the future. So there was a 0:03:00.800 --> 0:03:03.480 lot of people coming together in agreement by the end 0:03:03.480 --> 0:03:07.000 of it. Smart stuff. I'm also pleased to say we 0:03:07.040 --> 0:03:09.160 have Ed Ludlow joining us from San Francisco. I have 0:03:09.160 --> 0:03:11.600 but a good authority. He's had four espressos this morning, 0:03:11.600 --> 0:03:16.200 so he is ready to go talk to us about 0:03:16.240 --> 0:03:20.400 this new dynamic of billionaires buying media. Right because Jeff 0:03:20.440 --> 0:03:24.360 Bezos has the Washington Post, you have other billionaires. I 0:03:24.400 --> 0:03:26.600 believe there's a billionaire in charge of time as his 0:03:26.720 --> 0:03:30.840 name escapes me. Stuff, lots of stuff. And now you 0:03:30.919 --> 0:03:33.600 have Elon Musk looking into Twitter. I'm not sure if 0:03:33.600 --> 0:03:36.360 it's fair to compare the Washington Post and Twitter, but 0:03:36.440 --> 0:03:39.880 this is still significant. Is this the start of a 0:03:39.960 --> 0:03:44.000 trend that we could see continue? Well? Um, well, I 0:03:44.040 --> 0:03:47.360 think we should state festival Twitter was founded by and 0:03:48.480 --> 0:03:51.240 the single big shareholder, Jack Dawsey, is a billionaire in 0:03:51.280 --> 0:03:54.920 his own right. Um. But I think Elon Musk comes 0:03:54.960 --> 0:03:57.360 at this and we're going based on his previous statements 0:03:57.400 --> 0:03:59.360 and and the kind of points that he reiterates it 0:03:59.360 --> 0:04:02.400 in regulatory filings. Over the roller coaster that's been the 0:04:02.440 --> 0:04:05.760 last two weeks. Freedom of speech. You know that he 0:04:05.880 --> 0:04:08.960 has a reason for doing this, that he felt that 0:04:09.360 --> 0:04:13.120 protecting freedom of speech was worth buying a social media 0:04:13.160 --> 0:04:14.920 company for. I don't know if you guys saw the 0:04:14.920 --> 0:04:19.680 tweets overnight from Jack Dorsey, but Jack Dorsey essentially said 0:04:19.720 --> 0:04:24.520 that he was worried about the platform being a publicly 0:04:24.560 --> 0:04:27.640 traded company, and he said I'm paraphrasing, but he said 0:04:27.640 --> 0:04:30.680 in the tweets that the first step was to take 0:04:30.720 --> 0:04:32.880 the company out of the hands of Wall Street and 0:04:32.960 --> 0:04:38.080 that he believes Elon Mark Musk was the single person 0:04:38.240 --> 0:04:41.080 that could kind of bring Twitter back on track with 0:04:41.200 --> 0:04:43.799 what he wants it to be, which is the global 0:04:44.880 --> 0:04:48.159 public town square, you know, the point of consciousness and 0:04:48.200 --> 0:04:51.640 debate for for social media users globally, which we should 0:04:51.680 --> 0:04:53.840 point out Jeff Bezos kind of made fun of him 0:04:53.880 --> 0:04:57.320 for her, right. Um. What's interesting here is also the 0:04:57.360 --> 0:05:00.640 twenty one billion dollars of financing nationality meant if you 0:05:00.720 --> 0:05:02.920 are borrowing or actually twenty five and a half. Actually 0:05:02.920 --> 0:05:04.920 I want to talk about the financing that he got 0:05:05.200 --> 0:05:07.320 twenty five and a half billion dollars. He has to 0:05:07.320 --> 0:05:09.760 pay that back, which means Twitter has to make money. 0:05:10.080 --> 0:05:11.599 How are we going to do that. I did giggle 0:05:11.600 --> 0:05:14.240 a little bit because ultimately he's the world's richest man 0:05:14.560 --> 0:05:16.200 and it doesn't matter. You know, we always joke that 0:05:16.200 --> 0:05:18.400 he's cash poor and rich on paper, but here's the 0:05:18.400 --> 0:05:20.839 world's richest man, and he has options. You know, the 0:05:20.839 --> 0:05:25.000 twenty five point five billion, you know, thirteen billion dollars 0:05:25.000 --> 0:05:28.080 of it is split between fixed term debt and revolving 0:05:28.120 --> 0:05:32.680 credit lines. You saw SMP got global ratings UM put 0:05:33.279 --> 0:05:35.960 Twitter on negative watch overnight because of, you know, the 0:05:36.040 --> 0:05:38.440 debt burden going forward. I think I'm right in saying 0:05:38.480 --> 0:05:41.640 that the interest payments on that debt is greater than 0:05:41.880 --> 0:05:45.680 the forecast for full year bit DAR so, so it's 0:05:45.680 --> 0:05:49.839 a significant transaction that's taking place. The twelve point five 0:05:49.880 --> 0:05:54.880 billion margin loan is secured against sixty two billion dollars 0:05:54.920 --> 0:05:59.480 of Elon Musk's Tesla stock, which is nuts right, sixty 0:05:59.480 --> 0:06:01.760 two billion dollars of class rules of borrow, twelve point 0:06:01.800 --> 0:06:04.400 five billion dollars of debt um and then on the 0:06:04.400 --> 0:06:08.200 twenty one billion dollars side of equity financing. He has options. 0:06:08.200 --> 0:06:10.680 Like We've written a lot on the Bloomberg today about 0:06:10.720 --> 0:06:13.400 those options, and there are many of them. It is wild. 0:06:13.640 --> 0:06:16.000 The story is wild. If there's a lot more going on, 0:06:16.080 --> 0:06:22.640 we have fortunately have to leave it there. Belisa Brahma 0:06:22.640 --> 0:06:25.400 Wix joins me. Thank god during you here to past, 0:06:25.720 --> 0:06:29.560 rescuing me from really a sense of abandonment at the 0:06:29.560 --> 0:06:31.800 top of the show. We can talk about that later. Yes, 0:06:31.880 --> 0:06:34.640 this will not be my therapy session, I promise um. 0:06:34.640 --> 0:06:38.080 But anyways, let's talk about these markets here really tanking 0:06:39.960 --> 0:06:41.520 down one and a half percent. I thought this is 0:06:41.560 --> 0:06:43.599 past us, Lisa. Honestly, I think that this is a 0:06:43.600 --> 0:06:47.840 fascinating moment because we're not just talking about rate hiking fears, 0:06:48.080 --> 0:06:50.720 but also what we're seeing in earnings. And I know 0:06:50.839 --> 0:06:52.920 Gina and Martin Adde's has been tracking this, and I'm 0:06:52.920 --> 0:06:57.240 curious to hear her interpretation of the downside surprises that 0:06:57.279 --> 0:07:00.440 have been absolutely hammered. Yeah, well, let's bring your right. 0:07:00.480 --> 0:07:02.240 I have nothing else to add. We only have the 0:07:02.279 --> 0:07:04.400 wisdom of Gina to go to. Of course, she is 0:07:05.040 --> 0:07:08.119 the head of equity strategy here at Bloomberg Intelligence. Gina, 0:07:08.160 --> 0:07:10.240 thank you so much for joining us. What do you 0:07:10.280 --> 0:07:12.320 make of the cell off today? I think it's fascinating 0:07:12.320 --> 0:07:15.280 that we were worried we went from inflation concerns to 0:07:15.440 --> 0:07:20.040 demand concerns very quickly. Yeah, I think it's honestly, I 0:07:20.040 --> 0:07:22.360 don't think the inflation concerns have gone away pretty so 0:07:22.560 --> 0:07:24.680 I would like to say they have. It is still 0:07:24.720 --> 0:07:26.480 the source of the greatest thanks in the S and 0:07:26.520 --> 0:07:28.800 P five. I think that the demand concerns are an 0:07:28.840 --> 0:07:33.680 interesting point because the demand concerns are not only for 0:07:33.720 --> 0:07:35.560 the mega caps, which is where we're going to see 0:07:35.560 --> 0:07:38.360 the most profound impact in the market, but also there's 0:07:38.400 --> 0:07:40.360 a lot of nervousness that the consumer is just going 0:07:40.440 --> 0:07:41.720 to fall out of bed. I mean, you know, I 0:07:42.040 --> 0:07:44.520 hear this on a day to day basis, is Okay, 0:07:44.520 --> 0:07:46.560 how much can the consumer hold on? How much can 0:07:46.600 --> 0:07:50.239 they keep growing, keep spending. Certainly, now the housing market 0:07:50.320 --> 0:07:52.360 is likely to turn over, We're going to see interest 0:07:52.440 --> 0:07:54.880 rates rise, which is going to increase the cost of 0:07:54.920 --> 0:07:57.400 borrowing and the cost of debt for the consumers. Certainly, 0:07:57.400 --> 0:07:58.960 that's going to be it. So there's a lot of 0:07:59.000 --> 0:08:02.120 pessimism that has bubbled up to the surface over the 0:08:02.120 --> 0:08:04.600 course of the last month with respect to the US consumer, 0:08:04.720 --> 0:08:07.680 and that is new. I do think the companies are 0:08:07.720 --> 0:08:10.760 generally giving us mixed results. We have not seen you know, 0:08:11.280 --> 0:08:14.880 broad widespread weakness, but we have seen some highlighted weakness 0:08:15.520 --> 0:08:19.360 specifically in the industrial space as well as in the 0:08:19.480 --> 0:08:21.760 in the tech and communication space that the market is 0:08:21.800 --> 0:08:24.280 certainly we're nervous about right now. Gina, Let's sit on 0:08:24.360 --> 0:08:27.760 the industrial space, especially with General Electric and the shares 0:08:27.800 --> 0:08:30.440 they're plunging, as well as some of the other issues 0:08:30.440 --> 0:08:33.120 that we're seeing. How much is this an execution story 0:08:33.520 --> 0:08:35.800 and how much is this something else that is a 0:08:35.880 --> 0:08:39.760 broader macro story. No, I think it's mostly with General Electric. 0:08:39.800 --> 0:08:43.640 I think it's mostly about supply chain at this point. Yeah, 0:08:43.800 --> 0:08:46.560 I mean, you know, General Electric, With all due respect 0:08:46.600 --> 0:08:49.000 to GE, it kind of stopped being a massive bell 0:08:49.080 --> 0:08:52.559 weather several years ago. Um, it's not as important as 0:08:52.559 --> 0:08:54.240 it used to be. But I think it's mostly a 0:08:54.280 --> 0:08:57.920 supply chain and inflation story. It's interesting to me that 0:08:58.120 --> 0:09:00.559 sort of sentiment wise, we're talking about e s the 0:09:00.559 --> 0:09:04.280 bell weather and not ups as the bell weather, and 0:09:04.320 --> 0:09:07.959 I think the tell the transportation stocks are significantly more 0:09:08.000 --> 0:09:11.000 important to watch. But it's just a function of sentiment, Right, 0:09:11.000 --> 0:09:12.480 what do we go to, We go to the miss, 0:09:13.240 --> 0:09:16.000 we go to what's not working in the market on 0:09:16.040 --> 0:09:19.280 a day when stocks are down during an earning season 0:09:19.320 --> 0:09:21.199 that was hopefully going to bail us out of all 0:09:21.240 --> 0:09:24.160 this weakness. But kind of the reality is there's more 0:09:24.280 --> 0:09:27.280 ups is out there. There's more positive notes on price 0:09:27.360 --> 0:09:31.160 pass through than there are negatives still um and until 0:09:31.240 --> 0:09:35.240 that balance shifts, we've got to pay attention to both, right. 0:09:35.360 --> 0:09:37.199 So I do think that g E is a function 0:09:37.240 --> 0:09:42.160 of supply chain risks continuing, probably certainly some slow down. 0:09:42.160 --> 0:09:46.000 An end market demanded is a giant conglomerate still, but 0:09:46.200 --> 0:09:48.400 I would watch the transports more importantly. What what do 0:09:48.440 --> 0:09:49.960 you really think is going to lead the market? It's 0:09:49.960 --> 0:09:52.200 going to be things like ups and J. B Hunts 0:09:52.200 --> 0:09:54.480 of the world, the FedEx Is of the world. Where 0:09:54.520 --> 0:09:56.320 you want to watch for weakness to emerge in the 0:09:56.360 --> 0:10:00.160 early cycle, stuff like that first as a precursor or 0:10:00.200 --> 0:10:03.200 to a slowdown. Do you know you're talking about Bell 0:10:03.280 --> 0:10:06.120 Weathers here, and among all the ones you just named, 0:10:06.120 --> 0:10:09.679 I'm also thinking forward GM carmakers, both of which are 0:10:09.720 --> 0:10:12.560 reporting earnings after the bell today. But they're also a 0:10:12.600 --> 0:10:16.640 significant chunk, at least historically, of the American labor market. 0:10:16.640 --> 0:10:18.240 And I think I want to kind of square the 0:10:18.280 --> 0:10:21.160 two because you have auto earnings, you have this labor 0:10:21.200 --> 0:10:24.520 market tightness. Essentially, you also have tech earnings this week, 0:10:24.559 --> 0:10:28.560 and it kind of seems like perhaps Apple, Amazon is 0:10:29.000 --> 0:10:32.319 perhaps on a labor perspective, becoming a bigger part of 0:10:32.360 --> 0:10:35.800 that market. Is that a fair assumption to make and 0:10:35.840 --> 0:10:37.839 is that something to take into account when you look 0:10:37.880 --> 0:10:40.920 at some of these companies. Yeah, I absolutely think you 0:10:40.960 --> 0:10:43.640 want to take into account all forms of price increase. 0:10:43.760 --> 0:10:45.720 Labor is something we've been talking about for the last 0:10:45.760 --> 0:10:50.680 six months as an accelerating concern. It's still not enough 0:10:50.679 --> 0:10:54.080 to compress operating margins. Operating margins for the SMP may 0:10:54.080 --> 0:10:56.480 be surprised to know are actually on track to grow 0:10:57.320 --> 0:10:59.960 um this quarter relative to the quarter a year ago, 0:11:00.080 --> 0:11:03.360 which is a tremendous testament to corporate strength and managing costs. 0:11:04.040 --> 0:11:07.160 That income margins are falling, but operating margins are growing, 0:11:07.320 --> 0:11:09.959 So that's a pretty big positive. You would see operating 0:11:10.000 --> 0:11:13.240 margins start to compress an environment where labor costs was 0:11:13.280 --> 0:11:16.880 becoming a widespread issue, but it is becoming a bigger issue. 0:11:17.040 --> 0:11:19.400 As a matter of fact, we track mentions of labor 0:11:19.480 --> 0:11:23.520 costs in transcripts and the number of mentions has accelerated 0:11:23.600 --> 0:11:27.320 very rapidly over the course of the last several quarters. Certainly, 0:11:27.400 --> 0:11:30.720 also sentiment reflecting labor costs, so we look at sentiment 0:11:30.760 --> 0:11:35.960 around those mentions has also gotten increasingly negative. So companies 0:11:36.000 --> 0:11:39.199 are very concerned about rising labor costs. They're also very 0:11:39.200 --> 0:11:42.959 concerned about simply the supply of labor and sourcing that labor, 0:11:42.960 --> 0:11:46.599 which is pressuring labor costs higher. It's not such a 0:11:46.640 --> 0:11:50.000 widespread issue that I'm worried about it depressing operating margins, 0:11:50.040 --> 0:11:53.520 and certainly results so far this quarter would support that thesis. 0:11:54.120 --> 0:11:56.480 But longer term, if we can't get any new supply 0:11:56.559 --> 0:11:59.680 of labor coming into the market, we're going to continue 0:11:59.679 --> 0:12:02.000 to see abercasts accelerating and they may be a longer 0:12:02.080 --> 0:12:04.760 term depression on those depressants on those margins that we 0:12:04.760 --> 0:12:07.400 need to look out for. Well, Gina Martin Adams, thank 0:12:07.440 --> 0:12:10.760 you so much, as always, Bloomberg Intelligence, Chief equity strategist. 0:12:13.559 --> 0:12:15.600 You know, every day we kind of get the drip 0:12:15.679 --> 0:12:19.319 drip drip out of the Eastern European nations. What's going 0:12:19.360 --> 0:12:22.080 on in Ukraine and the latest with you and Secretary 0:12:22.160 --> 0:12:26.960 Channel Antonio Guterres over in Moscow. Kind of trying to 0:12:27.040 --> 0:12:31.160 dovetail the two nations and pitch it forward. I do wonder, 0:12:31.240 --> 0:12:34.360 cretty how much we're getting to some sort of resolution 0:12:34.960 --> 0:12:38.080 versus just an understanding that we're going to be in 0:12:38.120 --> 0:12:41.120 this for possibly months, if not years. And you know, 0:12:41.640 --> 0:12:44.040 as sad as it is to say on a human level, 0:12:44.400 --> 0:12:47.200 I think from a markets perspective, there's become this kind 0:12:47.240 --> 0:12:50.640 of resilience to those headlines in a way to where 0:12:50.679 --> 0:12:52.920 you now see the markets perhaps trading on China, trading 0:12:52.920 --> 0:12:56.400 on COVID. I feel like the actual, say, risk of 0:12:56.400 --> 0:12:59.400 a nuclear attack, for example, is that priced into the 0:12:59.400 --> 0:13:02.560 market well? And and so I guess the dissonance between 0:13:02.760 --> 0:13:05.559 the market blasans I know that's not really a word, 0:13:05.720 --> 0:13:10.160 and the humanitarian pain and suffering right now are increasingly dissonant. 0:13:10.280 --> 0:13:12.679 Dr Ariel Cohen has been tracking, and he's senior fellow 0:13:13.080 --> 0:13:17.320 at the Atlantic Council in eur Asia Center. I'm wondering, Ariel, 0:13:17.520 --> 0:13:21.199 how much you see a resolution in the near term 0:13:21.240 --> 0:13:23.480 and easing and some of the suffering. Are we just 0:13:23.520 --> 0:13:26.920 getting benumbed to the headlines that really have been dominating 0:13:26.920 --> 0:13:29.320 what we've been watching over the past couple of months. 0:13:30.640 --> 0:13:35.160 I'm not being numbed. I'm horrified. Uh. The mayor of 0:13:35.840 --> 0:13:42.360 mariupol vi Um city uh in southern Ukraine that the 0:13:42.440 --> 0:13:45.520 Russians are fighting to take now for two months, the 0:13:45.559 --> 0:13:51.280 mayor said, twenty thousand people were killed. This is civilians, men, women, men, men, women, 0:13:51.360 --> 0:13:56.240 children and the elderly. It is horrifying. And now we 0:13:56.400 --> 0:14:02.720 see the expansion of the hostilities to include the neighboring Moldova, 0:14:02.960 --> 0:14:08.160 in a separatist part of Moldova called Transnistria. For those 0:14:08.200 --> 0:14:10.880 who don't know it, please open Google and look up 0:14:10.960 --> 0:14:16.640 trans Um. There were several explosions yesterday and today. The 0:14:16.760 --> 0:14:21.000 Kremlin said that they are quote unquote concerned, and the 0:14:21.280 --> 0:14:26.240 rumors swirling that Russia may open another front against Ukraine 0:14:26.240 --> 0:14:30.640 because they're supporting these separatists and they may fly their 0:14:30.680 --> 0:14:34.680 own troops to Transnistria and attack Ukraine from the west. 0:14:35.240 --> 0:14:38.840 Going to the major port city of Odessa on the 0:14:38.840 --> 0:14:42.240 Black Seat Rio, he went exactly where I wanted you 0:14:42.280 --> 0:14:44.640 to go, and that is to Moldova. We hear a 0:14:44.640 --> 0:14:47.720 lot about Holland Belarus. Can you speak a little bit 0:14:47.760 --> 0:14:50.440 about the history of the Moldova when it comes to 0:14:50.480 --> 0:14:53.400 this region and the significance of it when it comes 0:14:53.480 --> 0:14:57.680 to the war in Ukraine. Yeah, but before that, I 0:14:57.880 --> 0:15:01.080 was i'ld like to say that from my talks in 0:15:01.160 --> 0:15:05.720 Moscow before Covient, from reading some of the memoirs and books, 0:15:05.760 --> 0:15:11.160 by putting advisors. When they are in crisis, their strategy, 0:15:11.280 --> 0:15:15.600 the Russian strategy, is to expand the perimeter of the crisis, 0:15:15.920 --> 0:15:19.880 not to shrink it, not to negotiate. But they are 0:15:19.960 --> 0:15:24.280 convinced in their own superiority, I would I would add 0:15:24.400 --> 0:15:29.760 they're convinced erroneously in their own superiority over the West. 0:15:30.000 --> 0:15:33.280 They think we're soft. They think where if heed the thing, 0:15:33.360 --> 0:15:39.000 we're scared, which I didn't see much evidence of that yet. Um. 0:15:39.360 --> 0:15:43.680 And they think that by expanding and escalating, they're going 0:15:43.760 --> 0:15:47.440 to win this war and have no doubt. I'm in 0:15:47.520 --> 0:15:51.000 Sweden right now on a naval base. Uh. This is 0:15:51.040 --> 0:15:55.600 not a war in Ukraine alone. We're mentioning Moldova that 0:15:55.640 --> 0:15:58.000 the Russians may go to the Baltic state and may 0:15:58.040 --> 0:16:01.479 go to Finland and Sweden. I think it'll be suicidal 0:16:01.880 --> 0:16:05.680 because Finland and Sweden are joining NATO. But they are 0:16:05.800 --> 0:16:12.320 expanding so far the perimeter of this all Europe War. Now, 0:16:12.360 --> 0:16:16.360 Moldova was occupied first by the Russian Empire, then by 0:16:16.400 --> 0:16:21.040 the Soviets Union. Part of it was um in Romania, 0:16:21.200 --> 0:16:24.360 and Stalin took in the ninety nine when he made 0:16:24.480 --> 0:16:29.240 a pact with Hitler. Moldova is independent. It's pro Western, 0:16:29.320 --> 0:16:33.880 pro EU, pro Us, pro NATO, and it's led by 0:16:33.880 --> 0:16:37.680 a woman who went to Canada, Schoo, Maya Sandu. And 0:16:37.760 --> 0:16:41.120 the Russians don't like it. They have the separatists in Transistria. 0:16:41.440 --> 0:16:44.320 They probably would like to take Moldova as well. When 0:16:44.320 --> 0:16:47.040 you say they, are you talking about Vladimir Putin? Are 0:16:47.040 --> 0:16:51.160 you talking about Russians at large in the entire military complex. 0:16:52.000 --> 0:16:56.160 You know, this is the sixty four trillion ruble question. 0:16:56.280 --> 0:17:00.600 How much is that worth at this point? Yeah? Right, Um, 0:17:00.640 --> 0:17:07.680 not much so um. It is Putin who is expressing 0:17:08.480 --> 0:17:13.560 the collective unconsciousness of the majority of Russians, not of 0:17:13.600 --> 0:17:17.320 all the Russians far from and just as we saw 0:17:17.400 --> 0:17:20.840 more than a hundred years ago when the Bolsheviks took 0:17:20.880 --> 0:17:24.040 over Russia, all the elite flushed out of there. They 0:17:24.040 --> 0:17:28.000 went to Paris, they went to Germany, to Berlin, to product. 0:17:28.440 --> 0:17:30.600 A lot of people are leaving Russia today. It's a 0:17:30.640 --> 0:17:33.880 huge brain drain. A lot of it professionals, a lot 0:17:33.920 --> 0:17:38.000 of engineers. If you are thinking about your future in 0:17:38.080 --> 0:17:41.480 Russia and you speak English and you're sort of cosmopolitan, 0:17:41.920 --> 0:17:45.520 you get the heck out of there. However, a lot 0:17:45.560 --> 0:17:48.879 of Russian people, less educated, those who don't necessarily live 0:17:48.880 --> 0:17:52.240 in big cities or don't work for the government. Um, 0:17:52.359 --> 0:17:56.280 they are supportive of putting their brainwashed by the horrific 0:17:56.640 --> 0:18:00.959 Russian propaganda who calls Ukraine Nazi, but call of the West. 0:18:01.359 --> 0:18:04.600 You know what, They call it gay ropa because you 0:18:04.640 --> 0:18:09.399 know Europe has more LGBT rights in Russia, which is 0:18:09.440 --> 0:18:14.480 not complicated, right, um and um. They are casting this 0:18:14.600 --> 0:18:19.679 conflict in existential and ideological terms, not unlike what the 0:18:19.680 --> 0:18:23.119 Communists did thirty plus years ago. We just have about 0:18:23.160 --> 0:18:25.760 a minute left. From your perspective, how do you see 0:18:25.760 --> 0:18:30.560 this ending? Well, my big fear and I talked to 0:18:30.600 --> 0:18:35.280 a lot of colleagues about nuclear escalation, not necessarily an 0:18:35.400 --> 0:18:39.240 all out our Mageddon's style nuclear war, but Russia throwing 0:18:39.320 --> 0:18:43.520 a nuke into Ukraine just to bang the table show 0:18:43.600 --> 0:18:46.439 they're serious, and then they think we'll go to some 0:18:47.000 --> 0:18:51.080 serious negotiations, will recognize their sphere of influence, not just 0:18:51.160 --> 0:18:54.120 in the former Soubet Union, but in all of Eastern 0:18:54.119 --> 0:18:57.800 Europe served going to status quo ante the end of 0:18:57.800 --> 0:19:00.800 the Cold War. Eastern Europe is our side of nature, 0:19:00.880 --> 0:19:04.520 and in the Russian influence weakening all of Europe, weakening NATA, 0:19:04.880 --> 0:19:07.840 kicking the US out of Europe? Is that going to happen? 0:19:08.119 --> 0:19:11.520 I don't think well. Dr Ariel Cohen, the senior fellow 0:19:11.560 --> 0:19:13.640 at the Atlantic Council of your Asia Center, we thank 0:19:13.680 --> 0:19:19.119 you so much for your perspective. You know, we are 0:19:19.160 --> 0:19:21.919 a lot talking about a lot of red today, deeply 0:19:22.000 --> 0:19:24.920 negative for a lot of different stocks, and in particular 0:19:25.000 --> 0:19:28.960 a number of potholes in the tech at the industrial spaces. 0:19:29.320 --> 0:19:31.840 And there's no one better to really link industrial and 0:19:32.000 --> 0:19:35.560 macro at a time when we are hearing those concerns 0:19:35.600 --> 0:19:39.200 really coming together than Russell Price, whos chief economists at 0:19:39.280 --> 0:19:44.040 amer Prize Financial, stemming from Detroit and having analyzed companies 0:19:44.080 --> 0:19:47.600 including Caterpillar and John Deere. Russell, thank you so much 0:19:47.640 --> 0:19:49.520 for being with us. I want to read you a 0:19:49.600 --> 0:19:52.720 quote Larry Kulp of General Electric in the earnings call 0:19:52.760 --> 0:19:55.680 It in an interview said it is as challenging a 0:19:55.760 --> 0:19:58.960 back rob backdrop as I think I've ever seen. Do 0:19:59.040 --> 0:20:01.960 you think that we're over or estimating or underestimating the 0:20:02.000 --> 0:20:06.320 effects the ramifications of these pro prolonged supply chain disruptions, 0:20:07.040 --> 0:20:09.840 you know, I think it's a it makes very challenging environment. 0:20:09.920 --> 0:20:14.200 So I think it's it's hard to um uh underestimate 0:20:14.240 --> 0:20:17.640 at this time right now. It's not just the point 0:20:17.720 --> 0:20:21.000 of a product being short supply, but of course we 0:20:21.080 --> 0:20:24.520 also have pricing issues to talk about as well. So 0:20:24.760 --> 0:20:28.520 companies are really struggling not just with their component availability 0:20:28.680 --> 0:20:32.400 when it comes to their energy or technology or even 0:20:32.800 --> 0:20:37.200 low technology goods or even agricultural goods. It really crosses 0:20:37.240 --> 0:20:41.440 the entire spectrum. And so it's very challenging environment for 0:20:41.720 --> 0:20:46.040 the industrial base overall. When we're talking about the industrial basis, 0:20:46.080 --> 0:20:48.600 let's broaden that out to all of corporate America. Not 0:20:48.640 --> 0:20:51.440 to get too brought here, UM, but I'm curious about 0:20:51.480 --> 0:20:53.919 the commodity impact. We're talking about oil prices. I mean, 0:20:53.960 --> 0:20:56.960 they've come off their highs obviously, um. But that I 0:20:57.000 --> 0:20:58.760 think the consensus here is that's very much a short 0:20:58.880 --> 0:21:02.000 term issue. As the more and more dependence on on 0:21:02.080 --> 0:21:04.800 Russian supply kind of get removed from the market. How 0:21:04.880 --> 0:21:09.080 much of an impact does that actually have to Corporate America. 0:21:09.480 --> 0:21:11.240 It's a corporate marria. That's one of the things we're 0:21:11.240 --> 0:21:14.000 evaluating right now during the current earnings release season to 0:21:14.040 --> 0:21:17.439 see which companies are able to pass along there the 0:21:17.520 --> 0:21:20.760 added costs that they're seeing. We're evaluating which companies are 0:21:20.760 --> 0:21:23.840 able to do that, which companies are still struggling with 0:21:23.920 --> 0:21:28.520 the negative effects of just simple supply. So energy overall, 0:21:28.600 --> 0:21:32.560 we expect energy to reduce US GDP this year by 0:21:32.560 --> 0:21:35.280 a little more than half a percentage point just based 0:21:35.320 --> 0:21:39.360 on the cost. So that's a very significant negative impact, 0:21:39.400 --> 0:21:44.840 not just for consumers, but Corporate America is certainly challenged 0:21:45.200 --> 0:21:48.560 as well. But of course with the SMP five you 0:21:48.560 --> 0:21:51.960 have that offset to some degree by the energy related 0:21:52.000 --> 0:21:55.200 companies that are benefiting from that. So it's a it's 0:21:55.200 --> 0:21:58.640 a mix right now, but overall, a very distinct negative. 0:21:59.200 --> 0:22:01.240 How strong is that you as economy. How much of 0:22:01.280 --> 0:22:04.359 a rate hiking cycle can we withstand? I think that 0:22:04.480 --> 0:22:06.840 it's going to be able to withstand the rate hiking 0:22:06.880 --> 0:22:10.000 cycle fairly well better than it has in the past. 0:22:10.480 --> 0:22:13.040 In the past and four of the last five rate 0:22:13.080 --> 0:22:16.800 hip cycles we ended up with recession this in each 0:22:16.840 --> 0:22:21.760 of those periods. However, we're also correlated with high point 0:22:21.840 --> 0:22:25.479 points of consumer debt, and right now consumer debts are 0:22:25.480 --> 0:22:29.400 actually low and borrowing demand is low, So the translation 0:22:29.480 --> 0:22:33.919 mechanism for higher rates into the broader economy is weakened 0:22:34.080 --> 0:22:38.040