1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg markets podcast. I'm Paul Sweeney. Alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOS, market pros and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,600 Speaker 1: with essential market moving news. Find the Bloomberg markets podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,000 Speaker 1: at Bloomberg Dot com slash podcast. Our Jersey chief US 7 00:00:22,079 --> 00:00:25,079 Speaker 1: interest rate strategies for Bloomberg intelligencies at our Princeton, New 8 00:00:25,160 --> 00:00:28,000 Speaker 1: Jersey office. I read this is your Federal Reserve. Anything 9 00:00:28,080 --> 00:00:30,639 Speaker 1: goes wrong tomorrow, I'm blaming you. But I guess the 10 00:00:30,640 --> 00:00:33,559 Speaker 1: big issue is they've been a table cloth that you're 11 00:00:33,600 --> 00:00:36,879 Speaker 1: wearing exactly. They've got a tough road to Hoe. They 12 00:00:36,960 --> 00:00:39,960 Speaker 1: gotta keep us out of recession while reigning in inflation. 13 00:00:40,280 --> 00:00:43,400 Speaker 1: How do they do that? Yeah, I'm not sure that 14 00:00:43,479 --> 00:00:45,400 Speaker 1: they can, and in fact, you know, our view has 15 00:00:45,400 --> 00:00:48,320 Speaker 1: always been that they have to slow the economy enough 16 00:00:48,400 --> 00:00:50,680 Speaker 1: in order to get inflation down. And the big thing 17 00:00:51,240 --> 00:00:55,520 Speaker 1: right now that that's likely to keep inflation afloat is 18 00:00:55,520 --> 00:00:58,520 Speaker 1: is the wage picture. And when you look at aggregate 19 00:00:58,640 --> 00:01:01,720 Speaker 1: Labor income, it's growing at nine percent year on year, 20 00:01:01,880 --> 00:01:06,959 Speaker 1: even though overall inflation is slowing. That's basically staying, staying steady. 21 00:01:07,080 --> 00:01:10,080 Speaker 1: So you can wind up in a situation where inflation 22 00:01:10,160 --> 00:01:12,720 Speaker 1: is a bit more persistent than that the Fed really wants. 23 00:01:12,760 --> 00:01:15,080 Speaker 1: So Um. So I do think that they're going to 24 00:01:15,200 --> 00:01:17,920 Speaker 1: have to high right. I mean if we can get 25 00:01:17,959 --> 00:01:22,839 Speaker 1: everything else to slow down and just wages rise, well, yeah, 26 00:01:22,840 --> 00:01:25,319 Speaker 1: real income growth would be phenomenal, but the problem is 27 00:01:25,360 --> 00:01:27,640 Speaker 1: that the is that real income growth is likely to 28 00:01:28,000 --> 00:01:32,800 Speaker 1: mean that core inflation prices remained very sticky. Um and so. 29 00:01:32,800 --> 00:01:34,640 Speaker 1: So one of the so so, one of the big 30 00:01:34,720 --> 00:01:37,800 Speaker 1: challenges for the Fed is going to be how do 31 00:01:37,880 --> 00:01:40,240 Speaker 1: you know, how do you thread that needle? Right, and 32 00:01:40,240 --> 00:01:42,000 Speaker 1: and and they haven't been able to do that five 33 00:01:42,040 --> 00:01:44,240 Speaker 1: of the last six times that they've had hiking cycles, 34 00:01:44,560 --> 00:01:46,720 Speaker 1: and the one time that they kind of did thread 35 00:01:46,720 --> 00:01:49,800 Speaker 1: that needle in the early nineties, you had a very 36 00:01:49,840 --> 00:01:53,200 Speaker 1: significant mid cycle slowdown that felt very much like a recession. Um, 37 00:01:53,280 --> 00:01:55,800 Speaker 1: the only reason why you didn't hit a recession is 38 00:01:55,840 --> 00:01:57,240 Speaker 1: because you only got like a one and a half 39 00:01:57,240 --> 00:01:59,120 Speaker 1: percent increase in the unemployment rate. You didn't get a 40 00:01:59,120 --> 00:02:02,200 Speaker 1: two percent increase. Right. Well, I mean the market doesn't 41 00:02:02,200 --> 00:02:06,760 Speaker 1: seem look people don't really think that the Fed can 42 00:02:06,800 --> 00:02:09,520 Speaker 1: thread that needle. When when we have guests on here 43 00:02:09,560 --> 00:02:12,520 Speaker 1: they say the Fed made a huge polymist policy mistake 44 00:02:12,600 --> 00:02:14,840 Speaker 1: last year and they're making a huge one again. This 45 00:02:14,919 --> 00:02:18,560 Speaker 1: seems to be now consensus. They're gonna tighten so much 46 00:02:18,600 --> 00:02:21,760 Speaker 1: that they drive us into a recession and we get 47 00:02:21,800 --> 00:02:26,399 Speaker 1: like Danny Blanche flower style unemployment that's worse than inflation. Well, 48 00:02:26,400 --> 00:02:29,239 Speaker 1: I don't think you see. See. I guess the issue 49 00:02:29,360 --> 00:02:31,519 Speaker 1: is is what is a soft landing? To me, a 50 00:02:31,600 --> 00:02:34,320 Speaker 1: soft landing might be a mild recession. Right. So if 51 00:02:34,320 --> 00:02:37,640 Speaker 1: we get a recession that's, you know, somewhat similar to say, 52 00:02:37,720 --> 00:02:41,040 Speaker 1: the early two thousands, Um, I don't think that that's 53 00:02:41,160 --> 00:02:45,520 Speaker 1: necessarily the worst case scenario for for the economy. And 54 00:02:45,560 --> 00:02:49,360 Speaker 1: if it's, if it's short end uh and mild, that 55 00:02:49,360 --> 00:02:51,120 Speaker 1: that's actually a win for the Fed, right, because the 56 00:02:51,320 --> 00:02:53,760 Speaker 1: Federal Reserve, remember that they have two mandates and right 57 00:02:53,760 --> 00:02:56,079 Speaker 1: now they're not fulfilling one of their mandates by any 58 00:02:56,080 --> 00:02:59,000 Speaker 1: stretch of the imagination. Right. So, Um, you can't say 59 00:02:59,040 --> 00:03:01,799 Speaker 1: that they're fulfilling their stable price mandate at the moment. 60 00:03:02,200 --> 00:03:04,480 Speaker 1: And you know, they only have one real tool in 61 00:03:04,560 --> 00:03:06,440 Speaker 1: order to fight that. So they're going to use it 62 00:03:06,480 --> 00:03:08,560 Speaker 1: in the the only way that they can, and that's 63 00:03:08,560 --> 00:03:11,519 Speaker 1: the hike interest rates and Um. Now I actually think 64 00:03:11,520 --> 00:03:14,840 Speaker 1: that that after this particular meeting they're going to be 65 00:03:14,880 --> 00:03:16,720 Speaker 1: within a hundred basis points of being done. I mean 66 00:03:16,760 --> 00:03:19,280 Speaker 1: our our view is uh here at Plumberg intelligence, that 67 00:03:19,280 --> 00:03:21,040 Speaker 1: they're gonna hike to around four and a half percent. 68 00:03:21,360 --> 00:03:24,080 Speaker 1: The markets currently priced for that. Um. You know, we 69 00:03:24,160 --> 00:03:26,160 Speaker 1: might overshoot that a little bit in terms of pricing, 70 00:03:26,160 --> 00:03:28,160 Speaker 1: but but I think ultimately they'll go to four and 71 00:03:28,160 --> 00:03:30,760 Speaker 1: a half percent, they stay there for six months to 72 00:03:30,800 --> 00:03:33,800 Speaker 1: a year Um and then wait to see what happens 73 00:03:33,800 --> 00:03:36,320 Speaker 1: in the economy and as long as the economy doesn't 74 00:03:36,360 --> 00:03:39,080 Speaker 1: completely fall out of bed and as long as Um 75 00:03:39,280 --> 00:03:42,200 Speaker 1: as inflation continues to come down, then then they're going 76 00:03:42,240 --> 00:03:44,240 Speaker 1: to call that a win. And four and a half percent, 77 00:03:44,280 --> 00:03:47,880 Speaker 1: by long term historical standards, is usually around around way 78 00:03:47,920 --> 00:03:49,640 Speaker 1: you'd expect the high to be. I'm not talking about 79 00:03:49,680 --> 00:03:51,800 Speaker 1: the night. People are much more worried about it now, 80 00:03:52,000 --> 00:03:56,080 Speaker 1: even people who have lived through those, from Barry Stern 81 00:03:56,160 --> 00:04:02,120 Speaker 1: Lick to Um Ray dalio. UH, the alarm has been sounded. 82 00:04:02,200 --> 00:04:04,640 Speaker 1: Four and a half percent, dallio says, would knock the 83 00:04:04,640 --> 00:04:08,720 Speaker 1: equity market down another but the but the slock market 84 00:04:08,800 --> 00:04:10,560 Speaker 1: is not the economy. Right there there are two different 85 00:04:10,600 --> 00:04:13,680 Speaker 1: things and you know, so you're talking about evaluation issue. 86 00:04:14,040 --> 00:04:16,839 Speaker 1: You're talking about, you know, multiples and in equity markets 87 00:04:16,880 --> 00:04:20,719 Speaker 1: and as opposed to the the overall Um, the the 88 00:04:20,760 --> 00:04:23,320 Speaker 1: overall economic backdrop. And when you when you look at 89 00:04:23,400 --> 00:04:25,960 Speaker 1: right now, like like the the challenge that small businesses, 90 00:04:26,000 --> 00:04:28,320 Speaker 1: for example, are having, which is a huge part of 91 00:04:28,320 --> 00:04:30,680 Speaker 1: the of of the U S economy, especially when it 92 00:04:30,680 --> 00:04:32,400 Speaker 1: comes to jobs. It's more than half of the jobs 93 00:04:32,400 --> 00:04:35,480 Speaker 1: in the country. Um, you know, they can't find employees, 94 00:04:35,640 --> 00:04:38,120 Speaker 1: right and and so so. So one of the ironies 95 00:04:38,160 --> 00:04:40,000 Speaker 1: is is that they have to pay more or they 96 00:04:40,000 --> 00:04:42,680 Speaker 1: have to work more hours themselves, and and so. So 97 00:04:42,760 --> 00:04:45,080 Speaker 1: that's one of the reasons why the aggregate Labor income 98 00:04:45,120 --> 00:04:48,160 Speaker 1: continues to climb because, um, because the people who are 99 00:04:48,240 --> 00:04:50,960 Speaker 1: working are making a lot more money, right. So, so, 100 00:04:51,160 --> 00:04:54,320 Speaker 1: so there's there's a strange balancing act and we in 101 00:04:54,360 --> 00:04:58,200 Speaker 1: the markets look more at the markets, I think, a 102 00:04:58,240 --> 00:05:00,240 Speaker 1: lot of times, and we do at the over all 103 00:05:00,480 --> 00:05:03,839 Speaker 1: broad aggregate economy, which is really what the Federal Reserve 104 00:05:03,920 --> 00:05:06,320 Speaker 1: cares about the Federal Reserve, could care less if the 105 00:05:06,360 --> 00:05:08,839 Speaker 1: stock market, if the SMB five hundreds of four thousand 106 00:05:08,880 --> 00:05:10,960 Speaker 1: or three thousand. What they care about is do people 107 00:05:10,960 --> 00:05:13,880 Speaker 1: have jobs and is inflation stable? Right and and the 108 00:05:14,120 --> 00:05:16,839 Speaker 1: stock market is only one indicator of how part of 109 00:05:16,839 --> 00:05:19,840 Speaker 1: that is going. Everybody has jobs, all right, hey, IIRA. 110 00:05:20,640 --> 00:05:23,440 Speaker 1: Everybody's into college at NFL football right now. Thirty seconds. 111 00:05:23,440 --> 00:05:25,160 Speaker 1: What's the soccer match? I gotta need to focus on 112 00:05:25,200 --> 00:05:28,440 Speaker 1: the next few days. Oh Uh yeah, we have Champions 113 00:05:28,520 --> 00:05:30,360 Speaker 1: League coming up, so it's gonna be it's gonna be 114 00:05:30,360 --> 00:05:33,960 Speaker 1: a lot of those, those matches and obviously the because 115 00:05:34,000 --> 00:05:36,960 Speaker 1: of the Queen's because of the queen's funeral, the Premier 116 00:05:37,000 --> 00:05:38,839 Speaker 1: League matches are all going to have to be rescheduled 117 00:05:38,839 --> 00:05:43,200 Speaker 1: in this already very tight, Weird World Cup year. So Um, 118 00:05:43,360 --> 00:05:45,000 Speaker 1: you know, I'm gonna be looking out for that draw, 119 00:05:45,080 --> 00:05:46,800 Speaker 1: like like when are the all these matches going to 120 00:05:46,839 --> 00:05:49,520 Speaker 1: be rescheduled for good stuff? See, you gotta get to it, man, 121 00:05:49,560 --> 00:05:52,719 Speaker 1: you gotta get your your soccer report, and we get 122 00:05:52,720 --> 00:05:55,200 Speaker 1: that from Ira Jersey. That's kind of his main GID 123 00:05:55,560 --> 00:05:58,400 Speaker 1: GIG side hustle. He's chief US interest rate strategist for 124 00:05:58,440 --> 00:06:02,320 Speaker 1: Bloomberg Intelligence. He's just doing that decades on Wall Street, 125 00:06:02,320 --> 00:06:05,480 Speaker 1: but he's also a owner of a minor league soccer 126 00:06:05,480 --> 00:06:08,960 Speaker 1: club Rayale Central New Jersey. Go figure, or something like that. 127 00:06:12,240 --> 00:06:14,880 Speaker 1: Let's get right to our next guest, Daniel Demartino, booth, 128 00:06:14,960 --> 00:06:18,279 Speaker 1: CEO and chief strategist at Quill Intelligence. She was a 129 00:06:18,279 --> 00:06:22,200 Speaker 1: former advisor to fell a Reserve Bank of Dallas as well. Danielle, 130 00:06:22,279 --> 00:06:24,000 Speaker 1: thanks for so much for being in our studio today. 131 00:06:24,000 --> 00:06:26,919 Speaker 1: It's always great to have you in here. Just it 132 00:06:26,960 --> 00:06:30,720 Speaker 1: just seems like everybody's just the base cases. The feds behind. 133 00:06:30,800 --> 00:06:33,160 Speaker 1: They're gonna overdo it, they're gonna push this into recession. 134 00:06:33,520 --> 00:06:36,080 Speaker 1: Is that what's going to happen? Well, I think that's 135 00:06:36,120 --> 00:06:37,880 Speaker 1: a given. I mean I think. I think that is 136 00:06:38,800 --> 00:06:41,720 Speaker 1: I think it's a given. Man. All right, go ahead 137 00:06:41,760 --> 00:06:44,640 Speaker 1: and yeah, I mean look, you your third quarter GDP 138 00:06:44,839 --> 00:06:47,839 Speaker 1: estimates of somewhere around a half a percent third quarter. 139 00:06:47,880 --> 00:06:50,080 Speaker 1: That means that you're likely going to get, the time 140 00:06:50,160 --> 00:06:52,400 Speaker 1: the September data percolate through the data, you're going to 141 00:06:52,480 --> 00:06:54,720 Speaker 1: get a third negative print in a row. And I 142 00:06:55,000 --> 00:06:57,799 Speaker 1: really don't think what we're gonna beat is three quarters 143 00:06:57,800 --> 00:07:01,680 Speaker 1: in a row then of a negative print, and even 144 00:07:01,839 --> 00:07:06,120 Speaker 1: if unemployment is still less than four percent Um, the 145 00:07:06,240 --> 00:07:09,160 Speaker 1: NBR is going to have to say, okay, it's a recession. Well, 146 00:07:09,160 --> 00:07:12,640 Speaker 1: INDUSTA production started to tick down and you know, at 147 00:07:12,640 --> 00:07:14,360 Speaker 1: the end of the day, when you start to hear 148 00:07:14,400 --> 00:07:18,160 Speaker 1: the magnitude of the Fedex and the Ford announcements, you're like, okay, 149 00:07:18,160 --> 00:07:20,560 Speaker 1: I don't think they're messing around. So and you know 150 00:07:20,720 --> 00:07:23,960 Speaker 1: everybody's trying to, as gently as possible, say cost cuts, 151 00:07:24,240 --> 00:07:27,280 Speaker 1: you know, except for the six of CEOS who are like, well, 152 00:07:27,320 --> 00:07:29,880 Speaker 1: welcome the resignations. If people just want to work from home, 153 00:07:29,920 --> 00:07:32,680 Speaker 1: bring it on. So they're not being shy anymore. So 154 00:07:32,800 --> 00:07:36,080 Speaker 1: what if the Fed's got an ulterior motive? Well, okay, 155 00:07:36,120 --> 00:07:38,480 Speaker 1: what is that? You don't think they're just trying to 156 00:07:38,520 --> 00:07:41,160 Speaker 1: fight inflation? Or do you not even think that's their 157 00:07:41,160 --> 00:07:44,760 Speaker 1: main goal now? And I don't, because we all, I 158 00:07:44,760 --> 00:07:46,600 Speaker 1: think people tend to forget that j Powell's and not 159 00:07:46,680 --> 00:07:48,800 Speaker 1: a PhD in economics. He's a lawyer. He looks at 160 00:07:48,840 --> 00:07:51,240 Speaker 1: both sides of every single story. He can read real 161 00:07:51,320 --> 00:07:55,080 Speaker 1: time data. He understands what Zelos saying. He understands that 162 00:07:55,120 --> 00:07:58,600 Speaker 1: if you plot forward new car inventories, their growth rate, 163 00:07:59,120 --> 00:08:02,000 Speaker 1: that they're gonna becoming down in twelve months. He sees 164 00:08:02,120 --> 00:08:05,160 Speaker 1: that homes under construction are at the highest since, God knows, 165 00:08:05,160 --> 00:08:07,520 Speaker 1: one of the seventies. He understands all the real time 166 00:08:07,640 --> 00:08:09,360 Speaker 1: data because he was he was always a practical guy, 167 00:08:09,520 --> 00:08:12,640 Speaker 1: he was always a banker. So you know he he 168 00:08:12,720 --> 00:08:15,080 Speaker 1: sees what's happening. So but he and yet he's pushing 169 00:08:15,160 --> 00:08:19,920 Speaker 1: forward based on the red herring of super lagged data. Why? 170 00:08:20,040 --> 00:08:23,000 Speaker 1: Unless he's got another plan. What's the other plan do 171 00:08:23,000 --> 00:08:24,440 Speaker 1: you think? I think he wants to break the back 172 00:08:24,480 --> 00:08:26,360 Speaker 1: of the Fed put and I think he wants to 173 00:08:26,440 --> 00:08:29,520 Speaker 1: change the name of the ECOS building to the Powell building. Okay, 174 00:08:29,520 --> 00:08:31,640 Speaker 1: explain what you kind of mean about that. So in 175 00:08:31,680 --> 00:08:35,440 Speaker 1: the aftermath of the protection black Monday of seven, you know, 176 00:08:35,920 --> 00:08:38,800 Speaker 1: Greenspan lead information to fixed income trading desks all across 177 00:08:38,800 --> 00:08:41,480 Speaker 1: Wall Street prior to the Fed injecting liquidity into the markets. 178 00:08:41,720 --> 00:08:46,280 Speaker 1: The birth of the Fed put October seven. Who in 179 00:08:46,280 --> 00:08:52,040 Speaker 1: the world is a big there you got October. So 180 00:08:52,640 --> 00:08:55,600 Speaker 1: you need to be a huge, your constitution has to 181 00:08:55,600 --> 00:08:59,560 Speaker 1: be huge to break investors psyche. After that, why would 182 00:08:59,559 --> 00:09:03,120 Speaker 1: you want to do that? Well, I think. I think 183 00:09:03,320 --> 00:09:05,360 Speaker 1: if you look at Fat Powell and you look at 184 00:09:05,360 --> 00:09:08,320 Speaker 1: his net worth north of a million dollars, why would 185 00:09:08,360 --> 00:09:09,920 Speaker 1: you want to do that? You don't need the pension. 186 00:09:10,280 --> 00:09:13,840 Speaker 1: Unless he wants to have monetary policy be independent and 187 00:09:13,920 --> 00:09:19,360 Speaker 1: not have the tail wag the dog. It's a I 188 00:09:19,440 --> 00:09:24,160 Speaker 1: don't think he's not there. I don't think he do 189 00:09:24,200 --> 00:09:26,320 Speaker 1: you really think he's enjoying himself? No, I mean, I 190 00:09:26,360 --> 00:09:29,360 Speaker 1: think it's great if, if that's the case, that's that's 191 00:09:29,480 --> 00:09:33,960 Speaker 1: restoring my hope and humanity. If he's not, he's watching 192 00:09:34,000 --> 00:09:38,200 Speaker 1: a controlled demolition. He's watching one company after another go 193 00:09:38,360 --> 00:09:42,119 Speaker 1: bankrupt and so far there's nothing systemic that's been unleashed. 194 00:09:42,760 --> 00:09:45,880 Speaker 1: If he can manage to do this and break the 195 00:09:45,920 --> 00:09:48,880 Speaker 1: mindset until the job do you want? Until the job 196 00:09:48,960 --> 00:09:51,120 Speaker 1: is done, means that means I'M gonna keep it up 197 00:09:51,160 --> 00:09:54,000 Speaker 1: there for a long time. I'M gonna WE'RE gonna get 198 00:09:54,040 --> 00:09:55,320 Speaker 1: up to four or four and a half and then 199 00:09:55,320 --> 00:09:57,880 Speaker 1: I'm gonna keep it there as long as I can. 200 00:09:58,080 --> 00:10:01,560 Speaker 1: I can't believe the Biden Administration will let him do that. Um, 201 00:10:01,559 --> 00:10:04,840 Speaker 1: he has veto power. There's he's in for four years. Right. 202 00:10:05,480 --> 00:10:11,079 Speaker 1: If trump couldn't fire him for cause nose. What will 203 00:10:11,160 --> 00:10:13,600 Speaker 1: you be looking for in his language tomorrow, in his 204 00:10:13,720 --> 00:10:18,160 Speaker 1: response to questions that may have those ulterior motive type resilience, 205 00:10:19,920 --> 00:10:22,760 Speaker 1: I think. I always think about the stories of Paul 206 00:10:22,840 --> 00:10:26,320 Speaker 1: Volker and how, you know, there was tractors in Washington 207 00:10:26,400 --> 00:10:29,320 Speaker 1: D C causing traffigy. People are throwing bricks through the window, 208 00:10:29,440 --> 00:10:32,520 Speaker 1: you know, mailing him nasty things, the man of the 209 00:10:32,559 --> 00:10:35,000 Speaker 1: many death threats. We forget that. We've got him up 210 00:10:35,000 --> 00:10:37,600 Speaker 1: on this huge pedestal and yet at the time he 211 00:10:37,679 --> 00:10:42,520 Speaker 1: was vilified. But can Powell sustain that kind of if 212 00:10:42,559 --> 00:10:45,360 Speaker 1: we get a recession that's deep or long, if we 213 00:10:45,400 --> 00:10:48,760 Speaker 1: get unemployment? That's high deference to the building that I'm in. 214 00:10:49,040 --> 00:10:52,480 Speaker 1: Think about how the media's narrative shift at last week. 215 00:10:52,920 --> 00:10:54,800 Speaker 1: Is he going to hurt the rest of the world? 216 00:10:55,760 --> 00:10:57,800 Speaker 1: All of a sudden he went from this guy can't 217 00:10:57,840 --> 00:11:00,680 Speaker 1: fight inflation out of a bag to he's the bad guy, 218 00:11:00,880 --> 00:11:04,240 Speaker 1: he's gonna hurt us. So when the narrative changes in 219 00:11:04,280 --> 00:11:07,760 Speaker 1: the media, watch out. But one way or another he's 220 00:11:07,800 --> 00:11:09,520 Speaker 1: going to be the fall guy and he's not stupid 221 00:11:09,600 --> 00:11:11,040 Speaker 1: enough to know he's not going to be the fall 222 00:11:11,080 --> 00:11:14,520 Speaker 1: guy to not know he's going to be the fall guy. 223 00:11:14,559 --> 00:11:15,920 Speaker 1: He knows he's gonna be the fall guy. Went one 224 00:11:15,920 --> 00:11:18,560 Speaker 1: way or another. But why not accomplish something really important 225 00:11:18,600 --> 00:11:20,599 Speaker 1: along the way and get central clearing? This is the 226 00:11:20,640 --> 00:11:24,160 Speaker 1: best hit we've done all day. Look, SEC gainsler. Gainsler said, look, 227 00:11:24,240 --> 00:11:27,000 Speaker 1: they also want central clearing of treasuries. Bring it on, Powell, 228 00:11:27,120 --> 00:11:31,839 Speaker 1: just do it. Um, fascinating take uh. I really think 229 00:11:32,320 --> 00:11:34,400 Speaker 1: I'm speechless. Yeah, what are we doing? I mean, I 230 00:11:34,440 --> 00:11:36,160 Speaker 1: think tomorrow. I mean, I was going to ask you 231 00:11:36,200 --> 00:11:39,679 Speaker 1: stupid questions about what is three fifty nine mean on treasuries? 232 00:11:39,960 --> 00:11:41,720 Speaker 1: Or do you care about the inversion of the day? 233 00:11:41,800 --> 00:11:45,400 Speaker 1: I think the I find it to be very quaint 234 00:11:45,440 --> 00:11:47,600 Speaker 1: that the sales sides like, once the two s tends 235 00:11:47,679 --> 00:11:49,960 Speaker 1: hits negative forty eight basis points, we recommend you sell, 236 00:11:50,520 --> 00:11:52,079 Speaker 1: I mean take take your money off the table. And 237 00:11:52,080 --> 00:11:54,480 Speaker 1: I'm like, what if it's forty eight basis points next 238 00:11:54,559 --> 00:11:56,800 Speaker 1: year at this time? By the way, I uh now 239 00:11:56,960 --> 00:11:58,920 Speaker 1: you kind of have answered this in a sense, but 240 00:11:59,040 --> 00:12:02,160 Speaker 1: we have a listener writing in asking do you think 241 00:12:02,200 --> 00:12:04,720 Speaker 1: the Fed really reads any of the fixed income strategists 242 00:12:04,720 --> 00:12:07,360 Speaker 1: out there, or do they just rely on their internal 243 00:12:07,360 --> 00:12:10,199 Speaker 1: fed color. No, somebody who found at the industrials group 244 00:12:10,240 --> 00:12:12,560 Speaker 1: at the Carlisle and understands private equity and hand hangs 245 00:12:12,559 --> 00:12:13,880 Speaker 1: that with Hedge Fund guys. I don't. I don't think 246 00:12:13,920 --> 00:12:18,240 Speaker 1: he reads all that research. I'm kidding. Very past great stuff. 247 00:12:18,280 --> 00:12:22,200 Speaker 1: Daniel Demartino, booth uh, CEO and chief trategist at Quill Intelligence, 248 00:12:22,280 --> 00:12:27,080 Speaker 1: joining us live here and our Bloomberg Interactive Broker Studio 249 00:12:28,160 --> 00:12:31,520 Speaker 1: U s steal. Yeah, x is the ticker you put 250 00:12:31,559 --> 00:12:33,920 Speaker 1: into your Bloomberg terminal. You pop it in there and 251 00:12:33,960 --> 00:12:36,959 Speaker 1: that's what you get. Rich Fruoff, chief strategy and Sustainability 252 00:12:36,960 --> 00:12:40,360 Speaker 1: Officer for U Steal, is in our Bloomberg interactive broker studio. 253 00:12:40,720 --> 00:12:42,400 Speaker 1: This is so cool. Matt and I. We want to 254 00:12:42,440 --> 00:12:45,240 Speaker 1: talk more company stuff and it doesn't get more company 255 00:12:45,280 --> 00:12:48,000 Speaker 1: stuff than U s steal. And here's a little tidbit 256 00:12:48,040 --> 00:12:49,960 Speaker 1: for you. The only company in the US that minds, 257 00:12:50,360 --> 00:12:54,600 Speaker 1: melts and manufactures steal, and now they're making the commitment 258 00:12:54,640 --> 00:12:56,760 Speaker 1: to sustainability. Rich, thanks so much for coming into our 259 00:12:56,800 --> 00:13:01,319 Speaker 1: studio here. Is that in the US or worldwide? Enterprise wide, worldwide. 260 00:13:01,320 --> 00:13:03,520 Speaker 1: So we've got a presence in Slovakia but then of 261 00:13:03,559 --> 00:13:05,959 Speaker 1: course a lot here in the US are sustainability commitment 262 00:13:06,040 --> 00:13:08,400 Speaker 1: is across the enterprise. But even our slore doesn't do 263 00:13:08,480 --> 00:13:11,440 Speaker 1: all of that entire vertical I you know, I think 264 00:13:11,480 --> 00:13:13,920 Speaker 1: they are. Let's be fair, they're a good company. They're 265 00:13:13,960 --> 00:13:17,120 Speaker 1: very committed to sustainability, but we feel like we've got 266 00:13:17,160 --> 00:13:21,480 Speaker 1: a best in class program how do you smelt steel, 267 00:13:21,520 --> 00:13:23,320 Speaker 1: or whatever the verb is. How do you make steel 268 00:13:23,720 --> 00:13:26,760 Speaker 1: in a sustainability? I think of Pittsburgh and the smokestacks 269 00:13:26,760 --> 00:13:30,280 Speaker 1: and all that kind of stuff, allantown, Allentown, absolutely close 270 00:13:30,320 --> 00:13:33,199 Speaker 1: to here. How do you from a technological perspect of, 271 00:13:33,240 --> 00:13:35,200 Speaker 1: what changes are you making? How do you do that? Yeah, 272 00:13:35,240 --> 00:13:36,880 Speaker 1: absolutely so. First of all, you know I have this 273 00:13:36,960 --> 00:13:40,600 Speaker 1: kind of strange title, right, sustainability and strategy. That's purposeful. 274 00:13:40,760 --> 00:13:43,400 Speaker 1: So sustainability for us it's not a bolt on, it's 275 00:13:43,440 --> 00:13:45,520 Speaker 1: not an add on, it's core to the strategy. So 276 00:13:45,559 --> 00:13:48,240 Speaker 1: when you're asking about steel making technologies, there's really two 277 00:13:48,280 --> 00:13:50,599 Speaker 1: basic ways to make steel, as you said, there's the 278 00:13:50,640 --> 00:13:54,440 Speaker 1: old kind of blast furnace. Your mind iron ore. You 279 00:13:54,520 --> 00:13:56,840 Speaker 1: put it into a blast furnace, you use cold. It's 280 00:13:56,840 --> 00:14:00,439 Speaker 1: turned into coke, very c o two intensive right then. 281 00:14:00,520 --> 00:14:03,560 Speaker 1: You can also now, because of the presence of scrap steel, 282 00:14:03,640 --> 00:14:07,280 Speaker 1: old cars, old washing machines, old bridges. You cut that up, 283 00:14:07,520 --> 00:14:09,720 Speaker 1: you put it into what's called an electric arc furnace. 284 00:14:09,960 --> 00:14:14,000 Speaker 1: It's about sevent less greenhouse gas emissions when you recycle 285 00:14:14,080 --> 00:14:16,280 Speaker 1: that steel. You put that scrap in the electric arc furnace, 286 00:14:16,280 --> 00:14:19,120 Speaker 1: you blast it with electricity, if your electricity is coming 287 00:14:19,160 --> 00:14:23,880 Speaker 1: from renewables or nuclear, very low carbon intensity, you're recycling 288 00:14:23,880 --> 00:14:27,280 Speaker 1: the steel, the beauty of steel. It's the most recycled 289 00:14:27,600 --> 00:14:30,360 Speaker 1: product on earth and every time you recycle it it 290 00:14:30,400 --> 00:14:33,840 Speaker 1: doesn't lose any of its performance characteristics. So we have 291 00:14:34,040 --> 00:14:37,840 Speaker 1: embarked in what we call best for all we are strategy. 292 00:14:37,920 --> 00:14:40,240 Speaker 1: We have been moving more and more towards this electric 293 00:14:40,360 --> 00:14:43,720 Speaker 1: arc furnace uh process route to make steel, and so 294 00:14:44,480 --> 00:14:46,760 Speaker 1: a couple of years ago we bought big river steel 295 00:14:47,120 --> 00:14:51,160 Speaker 1: in Arkansas, cutting edge, lead certified, the only lead certified 296 00:14:51,200 --> 00:14:55,040 Speaker 1: steel mill in the United States. Uh Got Daimler's global 297 00:14:55,080 --> 00:14:58,080 Speaker 1: sustainable supplier of the year award last year and it 298 00:14:58,120 --> 00:15:01,440 Speaker 1: became the first steel company steel a mill in North 299 00:15:01,480 --> 00:15:05,960 Speaker 1: America to receive responsible steel certification. Responsible Steel is a 300 00:15:06,040 --> 00:15:10,120 Speaker 1: kind of a global standard for responsible steelmaking with a 301 00:15:10,120 --> 00:15:12,960 Speaker 1: focus on climate change. So, uh, there's a lot to 302 00:15:13,000 --> 00:15:17,240 Speaker 1: do there. We launched last year as well a line, 303 00:15:17,360 --> 00:15:20,320 Speaker 1: a brand. We call it verd x x for the 304 00:15:20,360 --> 00:15:23,760 Speaker 1: word for green, X for our ticker symbol of low 305 00:15:23,800 --> 00:15:26,240 Speaker 1: carbon intensity steels. And that's what the customers want, the 306 00:15:26,240 --> 00:15:29,160 Speaker 1: automotive customers, they're increasingly looking for that. If you think 307 00:15:29,200 --> 00:15:30,760 Speaker 1: about electric vehicles, you know, if you want to buy 308 00:15:30,760 --> 00:15:33,720 Speaker 1: an electric vehicle, don't you want your steel? Uh, you 309 00:15:33,760 --> 00:15:37,840 Speaker 1: want the whole thing to be sustainable, not just the 310 00:15:37,840 --> 00:15:41,920 Speaker 1: fact that you're getting energy from electricity, hopefully solar generated 311 00:15:42,000 --> 00:15:44,160 Speaker 1: or wind, but you want the building of the car 312 00:15:44,200 --> 00:15:47,280 Speaker 1: as well to be sustainable. Is this how you want 313 00:15:47,280 --> 00:15:49,800 Speaker 1: to separate yourself from the pack? Because if I throw 314 00:15:49,880 --> 00:15:53,720 Speaker 1: up US steel on a chart with Alcoa and our 315 00:15:53,760 --> 00:15:58,000 Speaker 1: slore or any of the big steelmakers, uh, the stock chart, 316 00:15:58,200 --> 00:16:00,840 Speaker 1: they all look the same. You know, the relation is one. 317 00:16:00,920 --> 00:16:04,040 Speaker 1: Pretty much. Yeah, so I think you know. When we 318 00:16:04,080 --> 00:16:05,920 Speaker 1: think about it from a strategy perspective. By the way, 319 00:16:05,920 --> 00:16:07,720 Speaker 1: I used to work at out Coha, so great company 320 00:16:08,040 --> 00:16:11,200 Speaker 1: has had a commitment to sustainability. I'm just saying all 321 00:16:11,200 --> 00:16:16,360 Speaker 1: the steel companies seem to follow the same stock price pattern. So, Um, 322 00:16:16,400 --> 00:16:19,480 Speaker 1: it's hard to outperform or underperform all of them over 323 00:16:19,520 --> 00:16:21,320 Speaker 1: a long period of time. They all run in the 324 00:16:21,360 --> 00:16:24,520 Speaker 1: same basket. Well, you're exactly right. There is that sort 325 00:16:24,520 --> 00:16:28,160 Speaker 1: of compression right, um. And so when I said, you know, 326 00:16:28,280 --> 00:16:32,680 Speaker 1: our sustainability program and our strategy or Inter intertwined, what 327 00:16:32,720 --> 00:16:35,080 Speaker 1: I really meant about that is certainly the customers want 328 00:16:35,800 --> 00:16:38,600 Speaker 1: sustainable solutions, whether it's the automotive customers. So we see 329 00:16:38,600 --> 00:16:42,960 Speaker 1: an ability there to differentiate ourselves commercially. But back to 330 00:16:43,160 --> 00:16:48,320 Speaker 1: this move to electric arc furnaces. They are very efficient, Um, 331 00:16:48,400 --> 00:16:51,680 Speaker 1: not just from a greenhouse gas perspective but from a 332 00:16:51,720 --> 00:16:54,840 Speaker 1: cost perspective. They're very lean. And so big river steel, 333 00:16:54,920 --> 00:16:58,120 Speaker 1: which we bought, we've doubled down this. Uh. This past 334 00:16:58,160 --> 00:17:00,600 Speaker 1: spring we announced we're going to expand at big river, 335 00:17:00,680 --> 00:17:03,560 Speaker 1: double the capacity to about six, two, six three million 336 00:17:03,560 --> 00:17:08,359 Speaker 1: tons of steel making. It's very cost effective, Um, and 337 00:17:08,440 --> 00:17:11,280 Speaker 1: so we see that as the path forward both to 338 00:17:11,320 --> 00:17:15,240 Speaker 1: help us differentiate uh from a performance perspective, from a 339 00:17:15,240 --> 00:17:19,359 Speaker 1: free cash flow generation perspective, from our peers, but also 340 00:17:19,400 --> 00:17:21,840 Speaker 1: from a sustainability perspective. And you know, one of the 341 00:17:21,840 --> 00:17:24,720 Speaker 1: things we're doing is investing in the products we see 342 00:17:25,280 --> 00:17:28,080 Speaker 1: in the future. Um, I mentioned Verdex, but one of 343 00:17:28,119 --> 00:17:30,480 Speaker 1: the other things we're doing, uh, if you think about 344 00:17:30,520 --> 00:17:33,320 Speaker 1: electric vehicles, it's not just do you want to sell 345 00:17:33,359 --> 00:17:37,679 Speaker 1: to your customer a low greenhouse gas car steel on 346 00:17:37,720 --> 00:17:40,840 Speaker 1: the car. You actually need steel. Steals part of the 347 00:17:40,880 --> 00:17:44,240 Speaker 1: solution because you need what's called non grain oriented electrical 348 00:17:44,240 --> 00:17:46,440 Speaker 1: steel to make the motors that go into E v. 349 00:17:46,640 --> 00:17:49,920 Speaker 1: So we're we've invested in a two hundred thousand tons 350 00:17:49,960 --> 00:17:52,880 Speaker 1: non grain oriented electrical steel line should be coming online 351 00:17:52,960 --> 00:17:55,879 Speaker 1: at big river sometime next year. So what percentage of 352 00:17:55,920 --> 00:17:59,959 Speaker 1: your steel production today is, you know, the more sustain 353 00:18:00,000 --> 00:18:02,720 Speaker 1: the one that you mentioned, your technology versus and maybe 354 00:18:02,720 --> 00:18:04,679 Speaker 1: what are your goals? Maybe three to five years down 355 00:18:04,720 --> 00:18:07,640 Speaker 1: the road? Yeah, so right now, I mean look, we're it. Uh. 356 00:18:07,680 --> 00:18:10,000 Speaker 1: I would say we're moving toward half and half. We're 357 00:18:10,040 --> 00:18:13,680 Speaker 1: not there yet in North America. Um, in terms of 358 00:18:13,760 --> 00:18:19,520 Speaker 1: the balance between uh, the integrated and the UH mini mill, 359 00:18:19,640 --> 00:18:22,280 Speaker 1: the electric arc furnace. I think longer term, we put 360 00:18:22,280 --> 00:18:27,080 Speaker 1: out in our sustainability report we called our roadmap, you know, 361 00:18:27,160 --> 00:18:30,440 Speaker 1: and as we think going longer term, you know, thirty 362 00:18:30,480 --> 00:18:33,520 Speaker 1: years out we have a net zero target we set 363 00:18:33,560 --> 00:18:36,520 Speaker 1: for and we see in the first ten years of 364 00:18:36,520 --> 00:18:39,480 Speaker 1: that thirty year journey more electric arc furnaces. Right now 365 00:18:39,480 --> 00:18:42,560 Speaker 1: in the United States about two thirds of steel production 366 00:18:42,640 --> 00:18:45,320 Speaker 1: is through the electric arc furnace route. One third is 367 00:18:45,359 --> 00:18:47,680 Speaker 1: through the blast furnace and interestingly, you know we think 368 00:18:47,680 --> 00:18:50,040 Speaker 1: of Europe as the leader and sustainability. It's flipped there. 369 00:18:50,440 --> 00:18:53,800 Speaker 1: Two thirds or blast furnaces, one third or electric arc versus. 370 00:18:53,800 --> 00:18:56,439 Speaker 1: Sit in China a lot of blast furnaces. So we 371 00:18:56,560 --> 00:18:59,119 Speaker 1: see that as a way to move forward, both from 372 00:18:59,119 --> 00:19:01,920 Speaker 1: a strategy per active and also from a sustainability person 373 00:19:01,960 --> 00:19:05,080 Speaker 1: we love to get your take on Um. The Ford 374 00:19:05,119 --> 00:19:10,200 Speaker 1: announcement today, uh, was interesting because all of the Um 375 00:19:10,400 --> 00:19:13,960 Speaker 1: cost problems that we may have thought were past us 376 00:19:14,040 --> 00:19:16,600 Speaker 1: are clearly still front and center. Do you face the 377 00:19:16,640 --> 00:19:21,880 Speaker 1: same kind of issues with raw materials costs inflation? Well, 378 00:19:21,920 --> 00:19:24,280 Speaker 1: I think everybody. You know, I'm a child of the seventies, 379 00:19:24,320 --> 00:19:26,080 Speaker 1: so you know the inflation. It's like a little bit 380 00:19:26,119 --> 00:19:28,440 Speaker 1: of a Deja Vu again, but all over again, to 381 00:19:28,520 --> 00:19:32,560 Speaker 1: quote Yogi Berra. But you know, Um our benefit, our 382 00:19:32,680 --> 00:19:35,879 Speaker 1: advantage is we also meet mine iron or we're one 383 00:19:35,880 --> 00:19:38,200 Speaker 1: of the largest iron ore miners in the United States. 384 00:19:38,200 --> 00:19:41,320 Speaker 1: So we have this vertical into we have that. Absolutely 385 00:19:41,440 --> 00:19:44,280 Speaker 1: it gives us, I think, a competitive advantage. That iron ore. 386 00:19:44,920 --> 00:19:46,919 Speaker 1: We mind about twenty two million tons of iron ore 387 00:19:46,960 --> 00:19:49,040 Speaker 1: in Minnesota. Coal costs have gone through the roof. And 388 00:19:49,080 --> 00:19:52,280 Speaker 1: when you talk about Europe uh making it a blast furnace, 389 00:19:52,320 --> 00:19:55,040 Speaker 1: I think, damn, that's gonna be expensive and Um, they 390 00:19:55,040 --> 00:19:57,400 Speaker 1: don't really have any other ways of create creating electricity 391 00:19:57,480 --> 00:20:00,560 Speaker 1: right now. Yeah, certainly Europe Challenge, for sure on the 392 00:20:00,600 --> 00:20:03,960 Speaker 1: Electricity Front Um. And so that's uh, I think, you know, 393 00:20:04,000 --> 00:20:05,560 Speaker 1: we're gonna have to see what the EU does in 394 00:20:05,680 --> 00:20:09,159 Speaker 1: terms of policy actions there. Uh. You know, on the 395 00:20:09,160 --> 00:20:11,919 Speaker 1: flip side, we do have a business that's we call 396 00:20:11,960 --> 00:20:14,600 Speaker 1: it our tubular segment. It's in the oil country tubular goods, 397 00:20:14,640 --> 00:20:17,080 Speaker 1: and with the need to move l en g to 398 00:20:17,160 --> 00:20:21,320 Speaker 1: Europe and the increase in drilling here in the United States, 399 00:20:21,320 --> 00:20:23,320 Speaker 1: that business is doing really well. All right, rich, great 400 00:20:23,359 --> 00:20:25,720 Speaker 1: to have you in our studio here. Rich fruhoff. He 401 00:20:25,840 --> 00:20:30,040 Speaker 1: is a chief strategy and sustainability officer for U s steel, 402 00:20:30,160 --> 00:20:32,440 Speaker 1: and the ticker symbol again is X. to put in 403 00:20:32,520 --> 00:20:39,399 Speaker 1: Giblmberg terminal. I want to get to one of the 404 00:20:39,480 --> 00:20:43,240 Speaker 1: big stories we've been covering today and that is forward. 405 00:20:43,320 --> 00:20:46,000 Speaker 1: The company's stock has been decimated in the market, down 406 00:20:46,000 --> 00:20:51,720 Speaker 1: by ten percent, after saying the accurate. Yes, a lot 407 00:20:51,720 --> 00:20:57,639 Speaker 1: of assesimated things. Reduced to ten percent of its former self. 408 00:20:57,720 --> 00:21:00,960 Speaker 1: But decimated is actually reducing, to use it just as 409 00:21:01,000 --> 00:21:04,760 Speaker 1: a just down big. True. Yes, okay, the way. It 410 00:21:04,840 --> 00:21:07,680 Speaker 1: is down big because they said costs are going to 411 00:21:07,760 --> 00:21:10,840 Speaker 1: be up by over a billion dollars in the quarter 412 00:21:11,160 --> 00:21:15,200 Speaker 1: and that's gonna obviously Um put a real weight on margins. 413 00:21:15,240 --> 00:21:19,320 Speaker 1: But their full year forecasts remains unchanged. David Welch joins us. 414 00:21:19,720 --> 00:21:23,160 Speaker 1: He is our go to reporter out of the Detroit 415 00:21:23,280 --> 00:21:28,960 Speaker 1: Bureau for all things automotive. David Um. UH, well, and 416 00:21:29,200 --> 00:21:32,520 Speaker 1: Detroit Bureau chief, my producer reminds me. But yes, uh, 417 00:21:33,080 --> 00:21:37,159 Speaker 1: he mainly keeps tabs on these carmakers for us. David Um, 418 00:21:37,200 --> 00:21:39,400 Speaker 1: you know, this was a bit of surprise for me 419 00:21:39,600 --> 00:21:44,080 Speaker 1: because I have been thinking maybe the supply chain problems, 420 00:21:44,119 --> 00:21:47,800 Speaker 1: commodity inflation is in the rear view mirror. Um, what 421 00:21:47,840 --> 00:21:52,480 Speaker 1: did you think? We've made the mistakes probably many times, 422 00:21:52,560 --> 00:21:54,600 Speaker 1: and the car companies themselves have told us over the 423 00:21:54,640 --> 00:21:58,120 Speaker 1: last two years, particularly in relation to semiconductor, said, Oh, yeah, 424 00:21:58,200 --> 00:22:01,719 Speaker 1: second half of this year, it should get better, and 425 00:22:02,400 --> 00:22:06,280 Speaker 1: I think they really do, uh, at times, believe that. 426 00:22:06,320 --> 00:22:09,600 Speaker 1: And then something else happened. Um, you know in some 427 00:22:09,680 --> 00:22:12,480 Speaker 1: of these cases that you know you could have pandemic 428 00:22:12,520 --> 00:22:15,240 Speaker 1: shutdowns in Asia, that that caused supply chain problems in 429 00:22:15,320 --> 00:22:18,920 Speaker 1: Jack up pricing for certain commodities. But this one feels 430 00:22:19,080 --> 00:22:22,320 Speaker 1: different than the COVID and semiconductor related issues we've had. 431 00:22:22,359 --> 00:22:27,320 Speaker 1: This seems more just general inflationary uh, and that's what 432 00:22:27,359 --> 00:22:29,880 Speaker 1: the fettest fighting today. That's what I think many economies 433 00:22:29,880 --> 00:22:33,520 Speaker 1: around the global fighting. Um, what is a little bit surprising, 434 00:22:34,320 --> 00:22:36,719 Speaker 1: you know, go ahead now. Is it just wondering how 435 00:22:36,760 --> 00:22:40,600 Speaker 1: much this is, you know, just pure inflation for some 436 00:22:40,640 --> 00:22:43,919 Speaker 1: of their inputs, versus still some lingering supply chain issues 437 00:22:43,960 --> 00:22:46,920 Speaker 1: that maybe pushing up, you know, the prices here? Did 438 00:22:47,160 --> 00:22:51,159 Speaker 1: did the company delineate any of that? Not Really. The 439 00:22:51,240 --> 00:22:53,360 Speaker 1: best we kind of have is that they did say 440 00:22:53,359 --> 00:22:56,560 Speaker 1: it's inflation related. Okay, and then we've got analysts, Ryan 441 00:22:56,600 --> 00:22:59,560 Speaker 1: Brinkman from JP Morgan, saying that higher and higher inflation 442 00:22:59,600 --> 00:23:02,360 Speaker 1: related supplier costs seem to have a higher chance of occurring. 443 00:23:03,119 --> 00:23:05,960 Speaker 1: Um as you know, as opposed to chip short just 444 00:23:06,040 --> 00:23:08,600 Speaker 1: this doesn't seem tip related. This seems like general inflation 445 00:23:08,640 --> 00:23:11,520 Speaker 1: out there. For the parts they buy. Fuel is still 446 00:23:11,640 --> 00:23:14,280 Speaker 1: it's come down but it's still expensive and and and everything. 447 00:23:14,320 --> 00:23:16,359 Speaker 1: They you know, all of those thirty thou parts have 448 00:23:16,480 --> 00:23:19,879 Speaker 1: to be shipped someplace. Uh, you know, thirty parts to 449 00:23:19,880 --> 00:23:23,960 Speaker 1: make one vehicle. So look, it's just general inflationary kind 450 00:23:24,000 --> 00:23:26,199 Speaker 1: of stuff. And you know one thing, and that is 451 00:23:26,200 --> 00:23:27,920 Speaker 1: the reason I was a little surprised that the car 452 00:23:27,920 --> 00:23:30,720 Speaker 1: companies always tell us in inflationary periods like this, or 453 00:23:30,760 --> 00:23:33,280 Speaker 1: if there's a certain commodity that that is on the rise, 454 00:23:34,160 --> 00:23:37,640 Speaker 1: that they've got these long term contracts locked in that 455 00:23:37,720 --> 00:23:40,800 Speaker 1: protect them for a significant period of time. But it 456 00:23:40,880 --> 00:23:42,880 Speaker 1: sounds like either for some of these things they've either 457 00:23:42,960 --> 00:23:47,480 Speaker 1: run out of that runway or they had to renegotiate 458 00:23:47,560 --> 00:23:50,320 Speaker 1: contracts just to get stuff. I'm kind of speculating here, 459 00:23:50,320 --> 00:23:52,200 Speaker 1: but that the net result is. You know, they're talking 460 00:23:52,200 --> 00:23:55,400 Speaker 1: about a billion dollars more in cost and if you look, 461 00:23:55,840 --> 00:23:58,800 Speaker 1: Ford stock is down nine percent, GM stock is downe 462 00:23:58,800 --> 00:24:01,760 Speaker 1: on this five percent. GM is not issued a similar warning, 463 00:24:01,800 --> 00:24:03,320 Speaker 1: but they buy a lot of the same things. So 464 00:24:03,359 --> 00:24:07,439 Speaker 1: that Toyota, so does everybody else, so the next shoes 465 00:24:07,480 --> 00:24:11,560 Speaker 1: they could drop could be similar issues at other car companies. Yeah, 466 00:24:11,600 --> 00:24:13,600 Speaker 1: it'll be interesting. We'll be watching closely to see if 467 00:24:13,600 --> 00:24:16,720 Speaker 1: we hear anything from the competitors. What do we know 468 00:24:16,760 --> 00:24:19,439 Speaker 1: about specific models? I have a friend, a buddy of 469 00:24:19,440 --> 00:24:23,400 Speaker 1: mine at a boulder who ordered a Bronco before my 470 00:24:23,520 --> 00:24:27,160 Speaker 1: daughter was born two years ago and still hasn't gotten it. 471 00:24:27,640 --> 00:24:29,719 Speaker 1: And you know, I'm starting to see more of them 472 00:24:29,760 --> 00:24:31,679 Speaker 1: on the road. But I'm thinking this is such a 473 00:24:31,760 --> 00:24:34,560 Speaker 1: slam dunk vehicle for Ford. If they could only make 474 00:24:34,640 --> 00:24:39,840 Speaker 1: more of these so cool and doesn't cost so much Um, 475 00:24:39,880 --> 00:24:44,080 Speaker 1: it just would be a huge seller. Are Those all 476 00:24:44,080 --> 00:24:47,360 Speaker 1: sitting on the lots waiting for chips? In many cases 477 00:24:47,560 --> 00:24:49,960 Speaker 1: you have that and that's really that's what Ford's talking 478 00:24:49,960 --> 00:24:53,639 Speaker 1: about here, is that in the quarter uh, they see 479 00:24:53,720 --> 00:24:56,160 Speaker 1: a lot of vehicles just sitting on lots waiting for chips. 480 00:24:56,200 --> 00:24:58,560 Speaker 1: I'm a little surprised that someone's waiting two years on 481 00:24:58,640 --> 00:25:00,760 Speaker 1: a vehicle. I've heard people waiting six or eight months, 482 00:25:00,760 --> 00:25:04,080 Speaker 1: but not that long. So yeah, you do have a 483 00:25:04,160 --> 00:25:07,239 Speaker 1: lot of vehicles sitting on lots. I drove by the 484 00:25:07,280 --> 00:25:10,320 Speaker 1: General Motors Plant in Flint, Michigan a few weeks ago 485 00:25:11,040 --> 00:25:13,600 Speaker 1: and you know, they make heavy duty pickup trucks out there, 486 00:25:13,640 --> 00:25:16,040 Speaker 1: a big money maker in a in a very popular vehicle, 487 00:25:16,400 --> 00:25:18,199 Speaker 1: and there there were a sea of trucks in the 488 00:25:18,240 --> 00:25:21,639 Speaker 1: parking lot and those trucks are all waiting on chips 489 00:25:21,720 --> 00:25:24,440 Speaker 1: or some module that contained a chip, and when Jim 490 00:25:24,520 --> 00:25:26,639 Speaker 1: gets them in they'll pop it in and put it 491 00:25:26,720 --> 00:25:28,919 Speaker 1: on the truck haller and send it off to some dealerships. 492 00:25:28,960 --> 00:25:31,320 Speaker 1: But in the meantime they're gathering dust out in the 493 00:25:31,400 --> 00:25:33,239 Speaker 1: yard and there's just a lot of that going on 494 00:25:33,320 --> 00:25:35,760 Speaker 1: industry wide. I know how that feels. David is the 495 00:25:36,000 --> 00:25:38,720 Speaker 1: waited on my Silverado actually felt like an eternity, but 496 00:25:39,080 --> 00:25:40,920 Speaker 1: you're right, it wasn't more than six to eight months. 497 00:25:40,920 --> 00:25:43,720 Speaker 1: It was seven. Hey, we got it now, David is 498 00:25:43,760 --> 00:25:47,960 Speaker 1: it days of seventeen millions SAR others days over? Well, 499 00:25:48,280 --> 00:25:50,600 Speaker 1: they're over for the foreseeable future because no one can 500 00:25:50,640 --> 00:25:55,160 Speaker 1: build enough to, you know, to satisfy that kind of demand. 501 00:25:55,640 --> 00:25:58,240 Speaker 1: But automotive pricing is still very high. There are still 502 00:25:58,280 --> 00:26:00,520 Speaker 1: people waiting on vehicles, there are people not even shopping 503 00:26:00,520 --> 00:26:02,640 Speaker 1: because they know they can't find what they want. So 504 00:26:02,800 --> 00:26:05,040 Speaker 1: we'll have pent up demand for a while. The the 505 00:26:06,080 --> 00:26:08,720 Speaker 1: so if they can build the vehicles, they can get 506 00:26:08,720 --> 00:26:12,320 Speaker 1: to whatever, you know, whatever the million vehicles is for 507 00:26:12,359 --> 00:26:15,680 Speaker 1: the year. That that uh that they can build because 508 00:26:15,680 --> 00:26:19,520 Speaker 1: people will buy them. Um, the issue is getting back 509 00:26:19,560 --> 00:26:23,640 Speaker 1: to seventeen million going forward. Does do these interest rate 510 00:26:23,920 --> 00:26:27,200 Speaker 1: cuts and inflation and all the other economic cross winds, 511 00:26:27,200 --> 00:26:30,240 Speaker 1: headwinds that are going on out there? Does that push 512 00:26:30,280 --> 00:26:32,119 Speaker 1: some of these people who have been shopping, are waiting 513 00:26:32,160 --> 00:26:36,120 Speaker 1: to the sidelines out of lack of consumer confidence, lack 514 00:26:36,160 --> 00:26:39,720 Speaker 1: of a job? Right now, employment is great, everyone's working, 515 00:26:39,760 --> 00:26:41,480 Speaker 1: who wants to have you know, who wants to work. 516 00:26:41,840 --> 00:26:44,520 Speaker 1: So there's money being made out there and plenty of 517 00:26:44,520 --> 00:26:46,840 Speaker 1: people can buy vehicles. But does that all cool off 518 00:26:46,840 --> 00:26:48,600 Speaker 1: because of what the Fed may do today and has 519 00:26:48,640 --> 00:26:51,560 Speaker 1: already done so? And that's the thing. First wave here 520 00:26:51,600 --> 00:26:56,520 Speaker 1: is supply chain problem, semiconductors and inflation. Second wave is, 521 00:26:57,320 --> 00:26:59,560 Speaker 1: even if, even if that gets back to normal, what 522 00:26:59,640 --> 00:27:03,440 Speaker 1: happened Stud right, all right, David, great stuff as always, 523 00:27:03,480 --> 00:27:07,280 Speaker 1: David Welch. He's the Detroit Bureau chief for Bloomberg News, 524 00:27:07,320 --> 00:27:10,680 Speaker 1: covering all things autos. Again, Ford down about nine point 525 00:27:10,720 --> 00:27:17,440 Speaker 1: five percent today on higher costs. It is a treat 526 00:27:17,480 --> 00:27:20,119 Speaker 1: from Matt and I because we have barry ridholts. He 527 00:27:20,480 --> 00:27:23,320 Speaker 1: is the ridhult's wealth management dude. He's got a masters 528 00:27:23,320 --> 00:27:26,399 Speaker 1: in business. PODCAST was just rips and he's in studio 529 00:27:26,560 --> 00:27:28,199 Speaker 1: for the next fifteen minutes with how good is that? 530 00:27:29,119 --> 00:27:32,120 Speaker 1: I'm excited. All right, let's talk. Let's talk to our 531 00:27:32,160 --> 00:27:34,440 Speaker 1: next guest about what's going on in the Ukraine. Let's 532 00:27:34,440 --> 00:27:36,600 Speaker 1: do that. David's Ake and CEO and founder of key 533 00:27:36,640 --> 00:27:39,400 Speaker 1: elements group, David, I guess just my first question here 534 00:27:39,520 --> 00:27:43,200 Speaker 1: is this has been a disaster from day one. How 535 00:27:43,280 --> 00:27:46,480 Speaker 1: much of a risk is this in Russia? To Mr Putin, 536 00:27:48,720 --> 00:27:51,720 Speaker 1: thank you for having you here. Now that the best 537 00:27:51,840 --> 00:27:54,280 Speaker 1: has settled a bit, we can begin to understand the 538 00:27:54,280 --> 00:27:58,440 Speaker 1: events of the last weeks. In this decisive counters Ukrainian 539 00:27:58,480 --> 00:28:02,520 Speaker 1: forces managed to day more territory then Russia has seised 540 00:28:02,520 --> 00:28:06,920 Speaker 1: since April. The effect on morale that this victory has 541 00:28:07,119 --> 00:28:11,879 Speaker 1: had cannot be overstated. Ukrainian forces liberated about seven percent 542 00:28:12,040 --> 00:28:17,680 Speaker 1: of occupied territory in just one B um. Russia's desperation 543 00:28:18,040 --> 00:28:21,840 Speaker 1: is now manifesting, and weapons purches from regimes like North 544 00:28:21,960 --> 00:28:25,639 Speaker 1: Korea and they run, which are also signaling that Russian 545 00:28:25,680 --> 00:28:29,160 Speaker 1: industry is struggling to keep up even the production of weapons. 546 00:28:29,160 --> 00:28:34,000 Speaker 1: So straight answer to threat at home. Remember, Russia is 547 00:28:34,040 --> 00:28:37,719 Speaker 1: a petrol of state run by counter and debt counter Intel. 548 00:28:37,800 --> 00:28:43,360 Speaker 1: Palicebero all major decisions down by putting himself and three others, 549 00:28:43,400 --> 00:28:48,360 Speaker 1: and they're under tremendous threats and pressure today and, as 550 00:28:48,360 --> 00:28:52,200 Speaker 1: we noticed, parliament has passed the law introducing concept of 551 00:28:52,200 --> 00:28:55,520 Speaker 1: mobilization and martial law. I want to bring it first. 552 00:28:55,400 --> 00:28:57,280 Speaker 1: At first, I just wanted to explain the listeners why 553 00:28:57,280 --> 00:29:00,560 Speaker 1: we're asking you about this, because you are an expert 554 00:29:00,600 --> 00:29:05,960 Speaker 1: in crisis management. You advise politicians as well as multinational 555 00:29:06,080 --> 00:29:10,040 Speaker 1: brands about how to deal with Um, such crises, and 556 00:29:11,200 --> 00:29:14,440 Speaker 1: you know, surely Vladimir Putin seems like someone who needs 557 00:29:14,440 --> 00:29:19,680 Speaker 1: some advice right now. What would you tell him? Um, 558 00:29:19,800 --> 00:29:23,760 Speaker 1: unfortunately or unfortunately, he wouldn't listen to my advice because 559 00:29:24,120 --> 00:29:29,000 Speaker 1: he's in uh, he's surrounded by UH counter and tea 560 00:29:29,240 --> 00:29:33,440 Speaker 1: and uh their way of dealing with this is doubled down. 561 00:29:34,000 --> 00:29:37,520 Speaker 1: My advice would be uh, find a way to communicate 562 00:29:37,600 --> 00:29:40,920 Speaker 1: to Ukraine, leave the territory, go back to February, twenty 563 00:29:41,000 --> 00:29:44,840 Speaker 1: three boarders, but they wouldn't listen. Um. So this is 564 00:29:44,840 --> 00:29:48,640 Speaker 1: how they doubling down now and I would would expect 565 00:29:48,800 --> 00:29:52,440 Speaker 1: that they will not listen to anybody at this stage yet. 566 00:29:53,200 --> 00:29:55,720 Speaker 1: So let's talk a little bit about the endgame, it 567 00:29:55,960 --> 00:29:58,880 Speaker 1: sounds like. Well, first, it's a too early to be 568 00:29:58,920 --> 00:30:02,680 Speaker 1: discussing the endgame. In second what sort of options does 569 00:30:02,800 --> 00:30:07,320 Speaker 1: Putin have, short of tactical nuclear weapons, to resolve this 570 00:30:07,440 --> 00:30:16,000 Speaker 1: in a way that doesn't dramatically undercut his support at home? Look, 571 00:30:16,560 --> 00:30:26,440 Speaker 1: Russian Army Modessani so far was brutality against innocent civilians. Um, UM, 572 00:30:26,760 --> 00:30:31,600 Speaker 1: extra community to talk about potential attack, but if you 573 00:30:31,720 --> 00:30:35,120 Speaker 1: remember the size of the table you can have when 574 00:30:35,200 --> 00:30:39,040 Speaker 1: he meets somebody, he's not suicidal. So at the end 575 00:30:39,080 --> 00:30:42,840 Speaker 1: of the day, Um, I don't see him moving into 576 00:30:42,920 --> 00:30:46,880 Speaker 1: that direction. Beyond nuclear strikes, my main concern as the 577 00:30:46,960 --> 00:30:51,400 Speaker 1: PARISIA nuclear power station. If you remember, this is one 578 00:30:51,400 --> 00:30:54,400 Speaker 1: of the largest in Europe, and any and all military 579 00:30:54,440 --> 00:30:58,000 Speaker 1: activity within striking distance of the plants it's a great 580 00:30:58,080 --> 00:31:02,240 Speaker 1: risk to the entire European continent. And Russian forces played 581 00:31:02,240 --> 00:31:06,520 Speaker 1: with fire around the area, and this is displaying total 582 00:31:06,600 --> 00:31:10,280 Speaker 1: disregard for human life as the course. So I don't 583 00:31:10,320 --> 00:31:14,160 Speaker 1: see him going that praising. He's not suicidal. But they 584 00:31:14,160 --> 00:31:19,600 Speaker 1: see him doubling down and Um holding referendum uh in 585 00:31:20,200 --> 00:31:25,880 Speaker 1: Thea Porigia, Herson done Gugans, and then saying to Ukrainians 586 00:31:25,920 --> 00:31:30,280 Speaker 1: and Western partners, how about you guys having war now 587 00:31:30,280 --> 00:31:33,360 Speaker 1: with Russian territory called Russian now? All right, I mean 588 00:31:33,360 --> 00:31:36,120 Speaker 1: it's obviously difficult situation. We'll have to see how it 589 00:31:36,120 --> 00:31:38,000 Speaker 1: plays out. Lots of twist and turns coming up. No 590 00:31:38,080 --> 00:31:41,200 Speaker 1: doubt David's can CEO and founder's key elements group there. 591 00:31:44,400 --> 00:31:47,480 Speaker 1: Thanks for listening to the Bloomberg markets podcast. You can 592 00:31:47,560 --> 00:31:51,320 Speaker 1: subscribe and listen to interviews with apple podcasts or whatever 593 00:31:51,440 --> 00:31:55,080 Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on twitter 594 00:31:55,360 --> 00:31:59,160 Speaker 1: at Matt Miller v Three on Falsewheney. I'm on twitter 595 00:31:59,200 --> 00:32:01,800 Speaker 1: at PT Swe need before the podcast. You can always 596 00:32:01,840 --> 00:32:05,680 Speaker 1: catch US worldwide at Bloomberg radio. m