WEBVTT - Bloomberg Surveillance: Ukraine War with EU's Dombrovskis 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.799 Find Bloomberg Surveillance on Apple Podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:29.560 and of course on the Bloomberg Terminal. A bit of 0:00:29.600 --> 0:00:32.360 a surprise early in the morning as I scroll through, 0:00:33.000 --> 0:00:38.280 and it's real simple discussion of consulates in the Baltic 0:00:38.520 --> 0:00:41.760 States that sets up an important conversation with the European 0:00:41.800 --> 0:00:44.920 Commissioner for Trade. He's a former Prime Minister of his 0:00:45.040 --> 0:00:48.200 lat Via. Waldis Dombrowskis joins us right now and we've 0:00:48.200 --> 0:00:53.360 had many conversations over the years, Mr Dombroskas, I have 0:00:53.479 --> 0:00:55.480 to rip up the script and speak to you of 0:00:55.520 --> 0:00:59.840 the sea changes from Lithuania to Latvia, up to Estonia 0:01:00.520 --> 0:01:04.480 and across the Finland. Your area is in a tumuth 0:01:04.560 --> 0:01:08.760 we've really never seen since World War Two? What do 0:01:08.800 --> 0:01:12.800 you need from America, from NATO and from your Brussels 0:01:12.840 --> 0:01:16.959 frankly to provide courage to your lat Via and for 0:01:17.080 --> 0:01:25.480 that matter, couraged Sweden in Finland. Good morning, Indeed, Russia's 0:01:25.640 --> 0:01:31.840 aggression against Ukraine is having implications across the entire region, 0:01:32.000 --> 0:01:37.320 and it actually undermines the entire European security architecture. And 0:01:37.760 --> 0:01:42.080 clearly what country since the region, like Baltic states like 0:01:42.160 --> 0:01:48.080 Poland are looking for is a NATO's presence on the ground, 0:01:48.480 --> 0:01:55.080 strengthening of defense capabilities and clearly also support for Ukraine, 0:01:55.320 --> 0:01:58.160 because it's clear that if we do not stop putting 0:01:58.280 --> 0:02:03.280 in Ukraine, he will venture further in his aggressive war. 0:02:03.400 --> 0:02:06.680 So that's why it's so important also to make sure 0:02:06.760 --> 0:02:10.840 that we provide all necessary support to Ukraine to stop 0:02:10.880 --> 0:02:13.720 the war there, but at the same time also step 0:02:13.800 --> 0:02:17.080 up the preparedness in the region. Your Latvia does not 0:02:17.280 --> 0:02:22.120 touch upon this exclave of kleining Grid, it touches Lithuania 0:02:22.280 --> 0:02:25.720 and Poland, but it seems to be front and center. 0:02:26.280 --> 0:02:32.919 Explain to Bloomberg's global audience, how we defend ourselves against 0:02:33.000 --> 0:02:36.120 the reality that Mr. Putin wants some form of bridge 0:02:36.160 --> 0:02:39.000 to his exclaim he can only get there by water. 0:02:40.280 --> 0:02:42.680 Compare that to what we see now on the shores 0:02:42.720 --> 0:02:48.880 of the Black Sea and the path from Russia to Crimea. Well, 0:02:48.919 --> 0:02:53.560 first of all, uh, it's uh more than excuse than 0:02:53.880 --> 0:02:57.959 any real concern, because reality is that Russia has a 0:02:58.400 --> 0:03:04.799 corridor past ability to transport people and goods between mainland 0:03:04.880 --> 0:03:11.560 Russia and Kaliningrad, anclave doing so boss with railway and 0:03:11.720 --> 0:03:16.400 with road transport, and already also now when EU is 0:03:16.440 --> 0:03:20.960 putting lots of sanctions against Russia, this corridor is not 0:03:21.160 --> 0:03:26.440 being subjected to sanctions. So that's indeed more as an 0:03:26.440 --> 0:03:31.240 excuse which Russia is trying to to use potentially to 0:03:31.400 --> 0:03:36.640 close down what is called Chowaki Corridor, which is connecting 0:03:36.880 --> 0:03:39.880 Poland and Leuthania. But it's worth noting that it's all 0:03:39.960 --> 0:03:43.120 a territory of NATO. So that's why it's very important 0:03:43.120 --> 0:03:47.680 that their proper NATO deference plans in a place also 0:03:47.840 --> 0:03:53.480 against this kind of scenario. And you also raised questions 0:03:53.480 --> 0:03:57.960 concerning Finland and Sweden as we know, but those countries 0:03:58.000 --> 0:04:03.680 are currently considering a possible application to actually join NATO. 0:04:04.400 --> 0:04:07.880 Right now, we're talking also about the potential consequences additional 0:04:07.880 --> 0:04:11.480 consequences for Russia. A number of European nations have called 0:04:11.520 --> 0:04:15.200 for a full embargo of oil from Russia. What would 0:04:15.200 --> 0:04:20.279 that do to member states in terms of economics? Uh? Well, Indeed, 0:04:20.480 --> 0:04:24.640 since the beginning of Russia's aggression, EU has implemented already 0:04:24.680 --> 0:04:29.240 five rounds of sanctions against Russia, and now we're discussing 0:04:29.440 --> 0:04:34.400 possible next sanctions, which among others include a possibility of 0:04:34.440 --> 0:04:38.320 some kind of oil embargo in one form or another. 0:04:38.880 --> 0:04:43.640 We held done this assessment of what implications it's going 0:04:43.680 --> 0:04:47.400 to help for the European economy if there is a 0:04:47.440 --> 0:04:52.719 sudden cutting off of Russia's hydrocarbons, not only oil, but 0:04:52.880 --> 0:04:57.760 also gas, and as a conclusion is that not without problems, 0:04:57.880 --> 0:05:03.080 European Union can cope with this scenario. Well, as regards oils, 0:05:03.080 --> 0:05:05.200 there is a global oil market, so there is a 0:05:05.240 --> 0:05:10.279 possibility to find another suppliers. As regards gas, we are 0:05:10.360 --> 0:05:15.320 now working very intensively to diversify guards supplies, including from allergy, 0:05:15.760 --> 0:05:20.000 including from the United States, but also to accelerate the 0:05:20.080 --> 0:05:25.359 green transition rolling out of renewable energy, so basically working 0:05:25.440 --> 0:05:29.680 at full speed to reduce a dependency on Russian hydrocarbons. 0:05:29.920 --> 0:05:33.000 And well, these you talked about potential oil embargo in 0:05:33.120 --> 0:05:36.200 one form or another. There have been some questions about 0:05:36.360 --> 0:05:39.920 how severe these embargoes could actually be given the reluctance 0:05:39.920 --> 0:05:43.080 by Germany, namely to really go forward with this because 0:05:43.120 --> 0:05:45.960 of their dependence on Russia, yes, for gas, but also 0:05:46.080 --> 0:05:49.799 for oil. How quickly could something be implemented and how 0:05:49.920 --> 0:05:55.039 strict could this embargo be? Well, in terms of speed, 0:05:55.080 --> 0:05:59.080 we are actually ready to move up very fast, as 0:05:59.160 --> 0:06:02.080 as regards that take Nicol work. So it's mainly the 0:06:02.160 --> 0:06:06.400 question of reaching political agreement because sanctions are agreed in 0:06:06.520 --> 0:06:11.080 the EU at the principle of unanimity of all member states, 0:06:11.080 --> 0:06:14.880 so all twenty seven member states need to agree. That's 0:06:14.880 --> 0:06:20.080 why those political consultations are now ongoing very intensively. But 0:06:20.200 --> 0:06:23.240 technically we are ready to move very fast. As our 0:06:23.360 --> 0:06:27.400 first sanctions packages had shown, we are ready to put 0:06:27.400 --> 0:06:30.520 them placed in a one or two days. So cut 0:06:30.520 --> 0:06:34.080 to the chase, Mr Dombraska's with your twenty four seven 0:06:34.200 --> 0:06:36.880 work and the work of everyone in Europe. Are you 0:06:37.040 --> 0:06:41.440 essentially waiting for the outcome of the French election? Are 0:06:41.560 --> 0:06:48.760 people like you essentially and hold until Monday? Well, uh, 0:06:48.800 --> 0:06:52.800 it must be said, absolutely not. And as you noted before, 0:06:52.960 --> 0:06:56.880 France has actually voiced its support for oil embargo, so 0:06:57.000 --> 0:07:00.400 it's not something which is holding us back, and that 0:07:00.600 --> 0:07:03.400 was not something which was holding us back for example, 0:07:03.440 --> 0:07:07.360 to presenting the fifth sanctions package. Also in this very 0:07:07.360 --> 0:07:10.440 same pre election context, it must be said that there 0:07:10.520 --> 0:07:14.720 is quite a degree of determination and unity in the 0:07:14.920 --> 0:07:18.960 EU to stop Russia's aggression, to put pressure on Russia 0:07:19.040 --> 0:07:22.320 through sanctions, through other means, and to provide a maximum 0:07:22.360 --> 0:07:25.840 possible support for Ukraine. Varius, do you get the impression 0:07:25.880 --> 0:07:29.480 that the Europeans have finally learned a lesson of dealing 0:07:29.520 --> 0:07:31.600 with Russia, given what happened at the end of the 0:07:31.600 --> 0:07:35.240 first decade of this millennium, warning one Georgia, another one 0:07:35.360 --> 0:07:38.679 in Crimea, and yet the Germans it was just businesses usual, 0:07:38.760 --> 0:07:41.320 business as usual with the German government. Have we finally 0:07:41.400 --> 0:07:46.760 learned that lesson? Well, clearly, I think there is now 0:07:46.960 --> 0:07:50.559 quite a broad acknowledgment that there were mistakes made also 0:07:50.720 --> 0:07:54.720 not reacting in a firm and determined way against Russia, 0:07:54.760 --> 0:08:01.480 aggression against Georgia, annexation of Crimea and other events. So 0:08:01.560 --> 0:08:03.840 from that point point of view, one can say, yes, 0:08:04.240 --> 0:08:09.560 this lesson is finally learned. And actually, as you knows 0:08:09.560 --> 0:08:12.200 that Central East and European countries had been ringing alarm 0:08:12.280 --> 0:08:16.560 bells already for many years, so finally it's hurt and 0:08:16.680 --> 0:08:20.320 there is a firm, undetermined action, and it's important that 0:08:20.440 --> 0:08:23.960 fast stays. Of course, that we stay consistent and make 0:08:24.200 --> 0:08:28.920 sure that this war is really stop and Russia's aggression fails. 0:08:29.120 --> 0:08:31.360 Commissioner even a good friend to this program every years, 0:08:31.360 --> 0:08:33.120 Thank you very much for him with us again this morning, 0:08:33.120 --> 0:08:43.800 Farriston Brodsky, the European Commission. Come on, Claudia, you're killing 0:08:43.840 --> 0:08:47.360 me out of the University of Michigan Inflation combine with 0:08:47.440 --> 0:08:51.760 Matt Superior, Claudia Ship, Claudia Shapiro, Claudius sum joins us 0:08:52.160 --> 0:08:54.800 this morning with Jane Institute. Claudia, I want to cut 0:08:54.800 --> 0:08:57.680 to the chase you are legit pro out of the 0:08:57.720 --> 0:09:03.280 Michigan Combine and the effect of inflation across the different 0:09:03.440 --> 0:09:07.079 death styles of America, Mary Daily and others. They can 0:09:07.120 --> 0:09:11.520 look from sixty feet the working class, the middle class, 0:09:11.600 --> 0:09:15.480 the subclass, the rich, all those partitions, how are they 0:09:15.520 --> 0:09:21.439 affected by this historic inflation? Right? Well, you're absolutely correct. 0:09:21.520 --> 0:09:24.719 Inflation does not affect us all in the same way. 0:09:24.760 --> 0:09:28.600 I mean, frankly, just the thin inflation prices are not 0:09:28.720 --> 0:09:34.120 this big blob of an aggregate number. It's everybody like 0:09:34.160 --> 0:09:38.200 what we put in our shopping basket. It differs right 0:09:38.200 --> 0:09:40.520 in a lot of ways, and what you have to 0:09:40.640 --> 0:09:45.440 pay for it. Say, there's people who working class, even 0:09:45.520 --> 0:09:48.160 up into the middle class, they spend a lot more 0:09:48.320 --> 0:09:51.719 on necessities, on gas, on food right now. I mean 0:09:51.760 --> 0:09:54.640 for a while, housing that have been just not affordable. 0:09:54.679 --> 0:09:56.720 And they're the they're the things we talk about that 0:09:56.760 --> 0:10:01.400 are the prices are rising and and rich people they're 0:10:01.440 --> 0:10:04.160 they're doing okay, Like I'm not worried about them. But 0:10:04.320 --> 0:10:07.160 inflation is complicated because it has you know, it can 0:10:07.200 --> 0:10:09.360 benefit people that have a lot of credit card debt. 0:10:09.880 --> 0:10:13.000 Ain't so good for bond holders, right, So, like there's 0:10:13.040 --> 0:10:16.160 a lot going on, but the big thing is high prices, 0:10:16.240 --> 0:10:20.400 high inflation. They're disruptive, like they make life challenging. And 0:10:20.559 --> 0:10:23.080 this is important. Come on, Michigan has owns a high 0:10:23.080 --> 0:10:26.520 ground on this. You studied there. Allan Meltzer's rolling over 0:10:26.559 --> 0:10:29.920 in his grave at Carnegie Mellon because Allen Meltzer wants 0:10:29.960 --> 0:10:33.760 to go aggregate. Mary Daily is going aggregate. Chairman Powell's 0:10:33.760 --> 0:10:38.160 going aggregate. Can we beat seven percent inflation going aggregate? 0:10:38.520 --> 0:10:40.720 Or do we need a FED that actually has to 0:10:40.840 --> 0:10:45.600 understand the death style and impact. So I firmly believe 0:10:45.640 --> 0:10:47.840 in the FED on this one. Like, if anybody knows 0:10:47.840 --> 0:10:50.400 how to get this under control, it's j Powell and 0:10:50.440 --> 0:10:54.320 his team. Now, I will say, what is very disconcerting, 0:10:54.360 --> 0:10:57.920 and you talked about the war in Ukraine just earlier 0:10:57.960 --> 0:11:02.679 in the show. Food gas prices are totally out of 0:11:02.760 --> 0:11:06.440 control of the FED, right those they don't they would 0:11:06.520 --> 0:11:08.960 have to cut demand in a way that would be 0:11:09.000 --> 0:11:12.400 absolutely frightening, to get people not to drive to work 0:11:12.440 --> 0:11:14.880 as much and bring gas down, or you know, tighten 0:11:14.920 --> 0:11:17.640 the belt and not feed the kids as much. So 0:11:17.880 --> 0:11:20.880 that but there's a lot they can do on all 0:11:20.920 --> 0:11:23.640 the rest of the stuff we buy, right So there 0:11:23.760 --> 0:11:26.720 and and they're making progress. The last Consumer Price Index 0:11:26.800 --> 0:11:31.280 report month over month was kind of encouraging. Okay, a 0:11:31.320 --> 0:11:34.200 long way to go. But but but Claudia, let's say, 0:11:34.360 --> 0:11:37.160 I mean the idea here is that perhaps you don't 0:11:37.160 --> 0:11:39.760 believe that the FED has to go quite as quickly 0:11:39.800 --> 0:11:42.200 as some of the more aggressive hawks out there. I 0:11:42.240 --> 0:11:45.920 do wonder, though, how much you have to reassess when 0:11:45.920 --> 0:11:48.640 you do see things like housing prices continue to climb, 0:11:48.679 --> 0:11:52.640 our housing starts continuing to climb beyond expectations despite the 0:11:52.679 --> 0:11:56.720 tightening that we're seeing in content in financial conditions right. Well, 0:11:56.920 --> 0:11:59.760 to be clear, I mean I my baseline is fifty 0:11:59.760 --> 0:12:02.320 base this points in May and June. Right, I think 0:12:02.600 --> 0:12:06.440 it's pretty clear they're signaling two moves, not just one. 0:12:07.240 --> 0:12:11.160 I think that's appropriate. The housing mortgage rates, I mean 0:12:11.320 --> 0:12:14.880 they have gone up the februaries basis point mortgage rates 0:12:14.920 --> 0:12:17.920 are up two percentage points, right, it is clear that 0:12:17.960 --> 0:12:20.760 there is some of this. I'm gonna buy now before 0:12:20.760 --> 0:12:22.959 prices go even higher. So I think it's going to 0:12:23.040 --> 0:12:25.160 take a little while for us to see the cooling. 0:12:25.800 --> 0:12:29.640 And but like j Powe cannot print houses, right, Like, 0:12:29.720 --> 0:12:31.600 we have a big problem, and we have had a 0:12:31.640 --> 0:12:35.880 big problem for decades of affordable housing and underbuild. So 0:12:36.760 --> 0:12:40.080 maybe this is a wake up call, like build the houses, Claudia. 0:12:40.080 --> 0:12:42.560 What do you think would be a restrictive policy rate? 0:12:45.040 --> 0:12:48.640 I so I wouldn't the FED, and I don't think 0:12:48.640 --> 0:12:52.319 they'll do this if they really um start running out 0:12:52.320 --> 0:12:54.320 of the gate. I know Jim Bullard was putting out 0:12:54.360 --> 0:12:57.360 a hypothetical, but I think like to seventy five basis 0:12:57.440 --> 0:13:01.280 point moves would over do it. I mean, particular, we're 0:13:01.320 --> 0:13:03.960 going to keep getting saved by the June meeting a 0:13:03.960 --> 0:13:07.000 lot more information about the economy. I mean it is 0:13:07.240 --> 0:13:11.240 if they go too hard and the world serves us up, 0:13:11.559 --> 0:13:14.800 you know, a particular set of conditions. But we could 0:13:14.840 --> 0:13:17.120 have an undershoot next year. I mean I think that'd 0:13:17.120 --> 0:13:19.280 be okay. But I mean you don't, like, you can't 0:13:19.280 --> 0:13:22.800 overdo it. You gotta see the data, you know, adjust 0:13:22.800 --> 0:13:27.120 to the data. It's absolutely clear they need to go harder, um, 0:13:27.160 --> 0:13:30.240 but not too much. Like that's that's a big cold. 0:13:30.320 --> 0:13:32.199 That is, if they went too hard, we can have 0:13:32.240 --> 0:13:36.120 an undershoot of their inflation target next year. What would 0:13:36.160 --> 0:13:40.880 too hard to be to get inflation back below two? Recession? 0:13:41.880 --> 0:13:44.600 I mean they need recession? You think would achieve that? 0:13:44.880 --> 0:13:46.480 I mean the reason ask that is because some people 0:13:46.520 --> 0:13:48.800 think that you could actually get a contraction and growth. Well, 0:13:49.160 --> 0:13:53.720 prices are still anovcting above Yeah, good luck with that. Um, 0:13:53.760 --> 0:13:56.000 I mean anything can happen at this point. You know, 0:13:56.080 --> 0:14:00.280 nuclear winter is inflationary right like, so I'm not things 0:14:00.320 --> 0:14:03.080 could be bad, but right now and we lose sight 0:14:03.120 --> 0:14:06.880 of this, we have an economy that is back on track. 0:14:06.960 --> 0:14:10.880 We are on trend for inflation adjusted consumers spending inflation 0:14:10.920 --> 0:14:14.800 adjusted business investment. We never got that after the Great Recession, 0:14:15.400 --> 0:14:20.080 the labor market jobs there there, so inflation, Claude, we're 0:14:20.120 --> 0:14:22.080 running out of time in the clock here. Pharall's got 0:14:22.080 --> 0:14:24.200 to close out the hour. But we're among friends here. 0:14:24.520 --> 0:14:26.920 What's Larry Summers get wrong on this? I mean you 0:14:27.040 --> 0:14:31.000 just basically said the stag inflation hypothesis is nuts. What's 0:14:31.040 --> 0:14:34.240 he get wrong? Well? I think I haven't heard Larry 0:14:34.240 --> 0:14:36.960 talk about COVID for a very long time. I don't 0:14:36.960 --> 0:14:40.680 think there's a serious discussion about the Ukraine. I don't 0:14:40.680 --> 0:14:43.920 know how you miss that, you know whatever. It's useful 0:14:43.960 --> 0:14:46.880 to have somebody going around saying the world is you know, 0:14:47.320 --> 0:14:51.440 stag inflation, inflation, recession. You know it's worth talking about. 0:14:51.560 --> 0:14:54.520 But his story just does not stand up. It's not 0:14:54.600 --> 0:14:59.920 the nineteen seventies Thursday Morning wrestling. I can I can 0:15:00.000 --> 0:15:02.480 see a panel development here. Some you think we get 0:15:02.520 --> 0:15:05.280 the former Trustury secretary on alongside, we can get Simon 0:15:05.400 --> 0:15:08.880 Summers on stage of Davos n step back to you 0:15:09.000 --> 0:15:11.640 can let them do their think and not get involved 0:15:11.640 --> 0:15:14.160 for about six hour's calldy some that of the Jain 0:15:14.280 --> 0:15:23.600 Family Institute done joins US. Now, so down, let's start 0:15:23.640 --> 0:15:25.320 with the broader picture. We were trying to work out 0:15:25.320 --> 0:15:28.680 whether we had a Netflix problem or a market problem. 0:15:28.720 --> 0:15:32.080 Which one is it. I think it's a Netflix problem, 0:15:32.080 --> 0:15:34.080 and I think you have a Facebook problem as well. 0:15:34.680 --> 0:15:36.280 I think we you see more and more it's a 0:15:36.360 --> 0:15:39.720 bifurcated tech teape and I think the work from home 0:15:39.800 --> 0:15:44.040 beneficiaries are going to continue to trade off. I think 0:15:44.040 --> 0:15:46.960 that's catch a falling knife. But what we see, but Tessa, 0:15:47.280 --> 0:15:51.680 we'll see what Apple next week, Microsoft, cyber Semmys, that's 0:15:51.680 --> 0:15:54.000 gonna lead tech hire. I just view it as a 0:15:54.080 --> 0:15:57.360 have and I have not, and Netflix is clearly I 0:15:57.400 --> 0:15:59.760 have not. It's not a market problem, it's companies for 0:16:00.000 --> 0:16:02.640 if I believe it's a strong techer earnings next month. 0:16:02.760 --> 0:16:05.240 You mentioned Facebook that was down yesterday by seven point 0:16:05.240 --> 0:16:07.720 eight percent. That was brutal. You mentioned Apple as well, 0:16:07.720 --> 0:16:11.200 So let's talk about the relationship between say Apple and 0:16:11.200 --> 0:16:13.160 a tesla. Right now, it's China down. I think the 0:16:13.200 --> 0:16:16.880 China story is so important. Namura overnight cut GDP for 0:16:16.960 --> 0:16:19.880 China this year, their forecast to a three handle down. 0:16:19.920 --> 0:16:22.560 How important to the issues in Shanghai? And do you 0:16:22.600 --> 0:16:25.680 think they get them worked out well. I mean that 0:16:25.760 --> 0:16:28.120 was the key from last night because for tests. So 0:16:28.200 --> 0:16:30.720 that's the hearts and lungs of the bull story. In 0:16:30.800 --> 0:16:34.480 terms of Gigga Shanghai, you know obviously the three weeks shutdown, 0:16:34.760 --> 0:16:38.080 but must talk about I mean it's ramping quickly coming 0:16:38.080 --> 0:16:40.920 out of the gate, you know now that it's reopening. 0:16:40.920 --> 0:16:42.400 I think that's gonna be similar what we see with 0:16:42.440 --> 0:16:45.360 Apple next week. And I think the street they're viewing 0:16:45.360 --> 0:16:47.360 this is sort of a contained issue. Of course, you 0:16:47.360 --> 0:16:50.480 can still have zero COVID issues in China, but overall 0:16:50.560 --> 0:16:54.080 supply chain I think slightly improving. And that's actually gonna 0:16:54.080 --> 0:16:56.560 be something that the were of Mapple next week, which 0:16:56.600 --> 0:16:59.120 is I think, you know the boost for Group Retina Dan, 0:16:59.200 --> 0:17:01.480 how confident are you that they can compete well against 0:17:01.720 --> 0:17:08.800 the new upstart electric carmaker Ford. Look, I think fundamentally, 0:17:08.960 --> 0:17:11.000 you know, when you look what's happened right now in 0:17:11.040 --> 0:17:14.600 the e V landscape, it's Howso's world and everyone else's 0:17:14.640 --> 0:17:17.639 paying rent. And I think what you're seeing here is 0:17:17.640 --> 0:17:21.760 they're further flexing their muscles to a manufacturing perspective, and 0:17:21.800 --> 0:17:25.800 even despite Category five hurricane headwinds in China. I mean 0:17:25.800 --> 0:17:28.280 those numbers last night, that's a billion dollar beat, and 0:17:28.320 --> 0:17:30.399 I think it just shows the raising for you. You 0:17:30.480 --> 0:17:34.560 talk about raising prices, they're raising prices and demands increasing. 0:17:35.040 --> 0:17:38.439 It just showed that's an important dynamic right now, demand 0:17:38.440 --> 0:17:41.439 out strip and supply aby about Then, how do you 0:17:41.480 --> 0:17:45.000 determine what a reopening story is and what's fundamental at 0:17:45.000 --> 0:17:47.879 a time when so many people went into cars, bought cars, 0:17:47.960 --> 0:17:51.040 bought new ones because gas prices were climbing, or because 0:17:51.600 --> 0:17:54.000 they didn't want to take public transportation, or they weren't 0:17:54.040 --> 0:17:58.000 traveling on airplanes internationally, how much is that also a 0:17:58.040 --> 0:18:02.440 reopening story versus some kind of set killer shift. Yeah, 0:18:02.480 --> 0:18:05.119 it's a great We take basically what we believe it 0:18:05.160 --> 0:18:07.399 was like a pull forward dynamic, and we saw that 0:18:07.440 --> 0:18:11.199 with obviously some tech names, even like a Microsoft. And 0:18:11.240 --> 0:18:14.680 then what's the sustainable demand trend? And what we're actually 0:18:14.680 --> 0:18:18.520 seeing is the sustainable demand trend for names like tass 0:18:18.520 --> 0:18:20.879 On EVS and I think in tach in terms of 0:18:20.880 --> 0:18:24.600 the cloud, digital transmission a quarter of fourth Industrial Revolution, 0:18:24.920 --> 0:18:28.240 it's unpowered to anything we've seen the last twenty two years. Damn, 0:18:28.359 --> 0:18:31.680 Netflix ran into some competition, whether it's puny paramount ors, 0:18:31.680 --> 0:18:35.200 others that are more sustainable, any number of ev articles, 0:18:35.200 --> 0:18:37.760 and I'm gonna go to Mazda here and their idea 0:18:37.760 --> 0:18:43.160 of sustainable zoom zoom. Everybody wants to compete with Tesla. 0:18:43.400 --> 0:18:46.720 Are you telling me they're going to maintain revenue integrity 0:18:47.119 --> 0:18:51.240 given all that competition, I think it's gonna be a 0:18:51.359 --> 0:18:53.919 rising tie. Is gonna lift a lot of boots, not 0:18:54.000 --> 0:18:56.320 just a zero some game that they're gonna sustain their 0:18:56.480 --> 0:19:00.639 unit dynamics. I think it's gonna Apple five because I 0:19:00.640 --> 0:19:03.359 think we're gonna tempercent automotive that the e v s 0:19:03.400 --> 0:19:05.680 and they're gonna have a bigger and bigger piece of that. 0:19:06.040 --> 0:19:08.159 And the difference just when you compare to Hastings and 0:19:08.240 --> 0:19:14.080 Netflix Hubris, the continue to raipe prices, others all eventually 0:19:14.160 --> 0:19:16.760 kind of caught up, and the difference of testsa from 0:19:16.760 --> 0:19:20.720 the battery technology and continuing to build out factors. That's 0:19:20.720 --> 0:19:23.679 the difference between someone like a Musk and the Hastings 0:19:23.680 --> 0:19:26.399 seeing far ast to the trees. They're one step ahead. 0:19:26.640 --> 0:19:29.000 That's why we saw last night's numbers and I wanted 0:19:29.040 --> 0:19:32.840 no one on the cool Laska at switch up. Look, 0:19:32.920 --> 0:19:35.080 I think right now that was one where you know, 0:19:35.119 --> 0:19:37.840 no one wanted to spoil the party, you know, in 0:19:37.960 --> 0:19:42.479 terms of obviously a test of focused earnings. Obviously on Twitter, 0:19:42.960 --> 0:19:45.320 it's the cleer elephant in the room, you know, the 0:19:45.400 --> 0:19:48.560 collateralized stock in terms of what he's alteringly gonna need 0:19:48.600 --> 0:19:51.600 to do with the musk with Tessa as well as SpaceX. 0:19:51.920 --> 0:19:54.560 But I do believe there will be other times to 0:19:54.600 --> 0:19:58.320 ask that, because there's soap proper just starting in terms 0:19:58.320 --> 0:20:02.160 going to and sometimes spoil the party. You know, that's 0:20:02.240 --> 0:20:05.160 just how these things work, done of wet push. Then 0:20:05.160 --> 0:20:13.719 I screwed to catch up. So Jonathan Gray, thank you 0:20:13.800 --> 0:20:16.080 for joining us here. I want to start here with 0:20:16.119 --> 0:20:19.080 you on that real estate business, because no business did 0:20:19.160 --> 0:20:22.639 better for you than opportunistic and core plus real estate. 0:20:23.000 --> 0:20:26.280 And so when you're looking at this market, this soaring 0:20:26.359 --> 0:20:30.919 real estate pricing market, how long does that dynamic last 0:20:31.000 --> 0:20:35.879 for socitionale? It's great to be here. I think in 0:20:36.040 --> 0:20:39.280 real estate it is a bit of a tale of 0:20:39.320 --> 0:20:42.920 two cities. Um A number of areas of real estate 0:20:42.960 --> 0:20:45.760 actually are still facing big pressure. If you think about 0:20:46.160 --> 0:20:50.200 older office buildings and cities, if you think about regional 0:20:50.240 --> 0:20:55.160 malls where the fundamentals are challenged, where rising rates will 0:20:55.200 --> 0:20:58.399 put pressure on these assets, it's not as good a story. 0:20:58.880 --> 0:21:02.760 We fortunately have some good neighborhoods to deploy capital and 0:21:02.880 --> 0:21:07.040 real estate. We've really focused on global logistics, which has 0:21:07.080 --> 0:21:11.280 been by far our biggest theme. Rental housing, life science, 0:21:11.320 --> 0:21:15.679 office buildings increasingly making a bed on a recovery in 0:21:15.760 --> 0:21:20.680 hotels and in those areas where you have shorter duration leases, 0:21:21.320 --> 0:21:25.879 strong demand um income can continue to grow to offset 0:21:25.960 --> 0:21:30.240 these inflationary pressures. So there are headwinds from rising rates, 0:21:30.240 --> 0:21:33.199 but owning hard assets in the right sectors in this 0:21:33.280 --> 0:21:36.399 kind of environment can be a good thing. John, you're 0:21:36.400 --> 0:21:39.240 being a little meek in terms of how much exactly 0:21:39.280 --> 0:21:44.400 you've invested in the last year in housing thirteen billion dollars. 0:21:44.480 --> 0:21:47.080 Two days ago, you announced in all cash for campus 0:21:47.119 --> 0:21:50.479 housing six billion dollars. Last year for single family rental 0:21:50.520 --> 0:21:52.840 that was seven thousand houses at the time, and this 0:21:52.920 --> 0:21:55.960 year another six billion dollars on an apartment community business. 0:21:56.000 --> 0:21:59.919 So if anyone knows what's happening in a tight housing market, 0:22:00.480 --> 0:22:04.159 it's you. How big of a problem are these rising 0:22:04.200 --> 0:22:09.919 prices for the American HomeBuyer? So the challenge on housing 0:22:10.040 --> 0:22:13.280 has been many years in the making. If you step 0:22:13.320 --> 0:22:16.960 back and look at the supply picture, we have been 0:22:17.040 --> 0:22:23.119 building housing at half the rate we did prior to 0:22:23.280 --> 0:22:27.320 the financial crisis as a percentage of population. So for 0:22:27.400 --> 0:22:31.880 a decade we've built up probably a five million home shortage, 0:22:32.200 --> 0:22:36.360 and that imbalance, particularly after all the stimulus that came 0:22:36.359 --> 0:22:39.760 out from COVID. People's focus on where they live, has 0:22:39.840 --> 0:22:43.520 led to this sharp increase in pricing, and so I 0:22:43.560 --> 0:22:45.680 think that's going to take a while to work through. 0:22:46.240 --> 0:22:50.040 Mortgage rates going up, it's gonna make it harder, costs 0:22:50.080 --> 0:22:53.000 going up for builders, who is gonna make it harder? 0:22:53.320 --> 0:22:56.840 And it's really about new supply coming online. We think 0:22:56.920 --> 0:23:01.800 capital moving into the space helps, you know, encourage new building, 0:23:01.800 --> 0:23:04.760 which is really fundamental Hair. But you're right at some 0:23:04.840 --> 0:23:08.000 point there are some limitations in terms of how much 0:23:08.280 --> 0:23:11.360 folks can charge for a new home or rental prices 0:23:11.400 --> 0:23:15.240 because of earnings. But the long term picture for housing 0:23:15.240 --> 0:23:18.720 in America from a value standpoint is pretty good because 0:23:18.760 --> 0:23:21.760 of this long term shortfall that's built up, John, I 0:23:21.760 --> 0:23:23.399 want to shift gears a little bit here because a 0:23:23.440 --> 0:23:25.840 lot of the troubles we saw that we heard from 0:23:25.840 --> 0:23:29.120 the biggest banks, the idea of deal slowing down, We're 0:23:29.160 --> 0:23:32.200 not seeing it right away in your performance. In fact, 0:23:32.480 --> 0:23:35.120 you're part of one of the largest, the largest deal 0:23:35.240 --> 0:23:39.080 announced and talked about this year for Atlantea. So what 0:23:39.160 --> 0:23:44.000 does this mean about your propensity to deploy capital and 0:23:44.440 --> 0:23:47.119 how big can you see yourself going when it turns 0:23:47.200 --> 0:23:49.640 when it comes to buying assets, where are you looking 0:23:49.680 --> 0:23:54.199 for opportunities? So I would say it really speaks to 0:23:54.240 --> 0:23:58.240 the breath of our platform, and we did announce uh 0:23:58.280 --> 0:24:02.760 this year four large chan in actions that share some characteristics, 0:24:02.840 --> 0:24:05.919 but they speak to our global reach. We committed to 0:24:05.960 --> 0:24:10.000 buy the largest casino company in Australia, the biggest last 0:24:10.080 --> 0:24:14.320 mile logistics business in Europe, um also in Europe, you 0:24:14.400 --> 0:24:17.959 mentioned the large transportation infrastructure company, and then the student 0:24:18.000 --> 0:24:21.400 housing deal that we've talked about as well. These are 0:24:21.400 --> 0:24:24.960 all big businesses, they're not all One of them involved 0:24:24.960 --> 0:24:27.760 our private equity business. A couple of them involved our 0:24:27.800 --> 0:24:32.600 real estate business, also our infrastructure business. And we do 0:24:32.640 --> 0:24:35.919 this globally and that allows us to deploy capital. We also, 0:24:36.040 --> 0:24:38.639 because of the scale of our funds, can do things 0:24:38.640 --> 0:24:41.760 that are bigger and where we have high conviction, we 0:24:41.920 --> 0:24:45.040 lean in and in these areas. These are hard assets, 0:24:45.359 --> 0:24:49.439 they've got good underlying fundamentals, not as much exposure to 0:24:49.560 --> 0:24:52.920 input costs, and as a result, we feel good about 0:24:52.960 --> 0:24:55.600 investing in these areas. So I think one of the 0:24:55.640 --> 0:24:58.480 things for individual investors to think about is in a 0:24:58.600 --> 0:25:01.399