Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keen with
Speaker 1: David Gura. Daily we bring you insight from the best
Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance
Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course,
Speaker 1: on the Bloomberg. We begin this morning with Alan Ruskin.
Speaker 1: He's the global head of G ten Epic Strategy of
Speaker 1: Deutsche Bank. Joins us here in our Bloomberger and leven
Speaker 1: three of studios in New York. Let's start with the
Speaker 1: news out of Spain, right of northern Spain. I suppose
Speaker 1: I should say what does this mean for for the
Speaker 1: economy of the region more generally? There are a number
Speaker 1: of other places, not unlike Cataloni. They're probably watching what's
Speaker 1: what's unfolding there, watching this dynamic between uh Spain and Catalonia.
Speaker 1: What are the lessons to be learned, both politically and
Speaker 1: economically from what we're seeing happened there. Well, I think
Speaker 1: it's some danger that would you of is some resources
Speaker 1: get pulled out of Catalonia to other regions in Spain,
Speaker 1: and you know, net net, those other regions probably benefit
Speaker 1: to some degree. Catalonia loses art. The uncertainty overall probably
Speaker 1: means that they're a Spain tends to lose art to
Speaker 1: some extent, and I think you're seeing that in some
Speaker 1: of the downward revisions to growth. But for the moment
Speaker 1: at least, I think you know, those downward revisions are
Speaker 1: are quite modest. Does it say anything to you about
Speaker 1: the future of the integrity of the European experiment? Does
Speaker 1: it give you concern about where things might be added? Yeah,
Speaker 1: I think there's a wider problem here as such. If
Speaker 1: you know some smaller regions can pull apart and you
Speaker 1: can actually see independence from from regional elements in Spain,
Speaker 1: you would think that could happen anywhere. And I think
Speaker 1: it's indicative of what you're seeing in in in a
Speaker 1: way world, which is, if these smaller regions can fall
Speaker 1: under a defense umbrella and can adopt a currency as
Speaker 1: such as stable currency, then why not have some independence
Speaker 1: in the senses? I think? So, you know, the issue
Speaker 1: you have here is it must be made clear to
Speaker 1: some extent that there costs to independence as well. Otherwise
Speaker 1: I think you're going to see more of this rather
Speaker 1: than less of it. Explain to us why we're not
Speaker 1: seeing wilder swings in the euro as a result of this,
Speaker 1: as a result of you know, what's been a many
Speaker 1: weeks long ordeal here again in northern Spain. But I
Speaker 1: think we've just you know, come off the French election,
Speaker 1: where I think there was a genuine perception that this
Speaker 1: was an existential crisis. Is the possibility that you'd have
Speaker 1: a government that would actually want to pull out of
Speaker 1: the euro um. I think on the contrary over here,
Speaker 1: it's very very likely that even if you had in
Speaker 1: the Catalonian independence, there would still be adopting the Euro.
Speaker 1: Just can't quite see them having their only independent central
Speaker 1: banking such And I think in that sense, you don't
Speaker 1: have any of these concerns about you know, past contracts
Speaker 1: effectively and will there be fulfilled, etcetera. So it's not
Speaker 1: perceived as an existential threat in a direct sense. There
Speaker 1: will be issues that relate to Spanish debt and who
Speaker 1: pays for Spanish debt, etcetera, and that would be more
Speaker 1: problematic I think, in the next downturn, But I don't
Speaker 1: think that's as problematic. Well, you know, it's as big
Speaker 1: an issue as if people feel that, uh, the contracts
Speaker 1: are not going to be on it because there's a
Speaker 1: different currency at play. What was that your takeaway were
Speaker 1: your takeaways from the annual meetings of the i m
Speaker 1: from the World Bank last week? The the outlook that
Speaker 1: was released by the IMF slightly more optimistic than it
Speaker 1: had been, projecting more growth in the global economy. Of course,
Speaker 1: there's the general condizzance of the fact that we have
Speaker 1: low inflation globally as well. What did you take away
Speaker 1: from the conversation of those of those leaders of financing
Speaker 1: the economy gathered and Watchington last week. But I think
Speaker 1: it's a quiet optimism. But beneath that, of course, you
Speaker 1: always have to worry, right, I think these guys are
Speaker 1: to some extent paid to worry and paid to look
Speaker 1: out for what could be the next crisis. Now we've
Speaker 1: really gone through a period of unbelievable stability and global growth.
Speaker 1: I mean we've you know, if you look at I
Speaker 1: think it's the i m F global growth data, we've
Speaker 1: tracked between roughly about three and three point two for
Speaker 1: five years three two thousand and sixteen. That's unbelievable in
Speaker 1: terms of lack of volatility as such, and it's not
Speaker 1: a great performance from a global growth standpoint. But it's
Speaker 1: okay as such, and now I think the perception is
Speaker 1: we're going to error on the top side of that,
Speaker 1: but that maybe there's other issues lurking in the winds
Speaker 1: as such. As I think that then that's that's I
Speaker 1: think what concerns central bankers. Good morning, I want listening.
Speaker 1: I'm sorry, just got in. I can I just say,
Speaker 1: David is a starting point. I love four and five
Speaker 1: pm baseball starts. Yeah, well wrapped up at what that's great.
Speaker 1: The kids children actually watched the baseball game. AILCE hosts
Speaker 1: as well. Yeah, us to talk about today, Ellen Roskin?
Speaker 1: Where this with Deutsche Bank? And I guess one place
Speaker 1: we can start. Alan, lovely to have you here through
Speaker 1: the half hour. It's just a dollar call. It was
Speaker 1: the great missed call of the summer. Why was that?
Speaker 1: Why did Why was everybody long? The dollar? Consensus long? Dollar? Oops?
Speaker 1: It went the other way. Well, I think we've been
Speaker 1: on a trend for a while. It's on and it's
Speaker 1: very difficult to call turning points. And part of the
Speaker 1: turning point I think came through two big sources. One
Speaker 1: was the Trump reflation trade, which had given the dollar
Speaker 1: a boost right at the end of last year that
Speaker 1: that one flagged and flagged quite quite heavily as such.
Speaker 1: And then it came at the same time as the
Speaker 1: French elections tended to remove European political uncertainty to some extent,
Speaker 1: so that put the bit on Europe and put a
Speaker 1: bit on Europe, and then I think you saw a
Speaker 1: lot of investors feel, wait a minute, we were really
Speaker 1: underweight yours and you've had an asset allocation story as
Speaker 1: well into Europe. And then you and I agree that
Speaker 1: technical analysis can keep you out of trouble. You may
Speaker 1: not make any money with it, but it's good at
Speaker 1: not losing money. We've had I guess we've had a
Speaker 1: breakthrough the downtrend. But as you mentioned earlier, there's a
Speaker 1: fragility to this dollar rally. It's not for real, is it. Yes.
Speaker 1: I think it's a problem we have right now in
Speaker 1: the currency world is that we love divergence, right so
Speaker 1: we love the idea that um fed's going to tighten
Speaker 1: and some other central bank's going to ease. That's a
Speaker 1: relatively easy trade. But right now, actually the euro looks okay.
Speaker 1: As I mentioned earlier, I think is under acid allocation,
Speaker 1: long term acid allocation, and that I think will be
Speaker 1: helpful for the euro going forward. And the European Central
Speaker 1: Bank is tightening, albeit it's really effectively just tapering its
Speaker 1: past quear such, but it's we are in a world
Speaker 1: now where central banks in general thinking of tightening. So
Speaker 1: this is we've got a horse race here and they go,
Speaker 1: but they're all running in the same direction, which makes
Speaker 1: a little bit more confusing for us. How cheap is
Speaker 1: the the yeen at this point? Is there value on
Speaker 1: the yeen as you see it right now? There's value
Speaker 1: on a long term basis, and so much as pretty
Speaker 1: much all our longer term metrics suggest it's cheap by
Speaker 1: in the order of saw so PPP purchasing power parity
Speaker 1: indicators suggests the low nineties rather than in a twelve,
Speaker 1: So there's there's a big difference there. And historically when
Speaker 1: you do see divergences of over that does suggest you
Speaker 1: need to go in the opposite direction. It's time to
Speaker 1: buy yen. But I think it's a little too early,
Speaker 1: the cause too early, because I think right now it's
Speaker 1: essentially been driven by US treasuries and the US tenure
Speaker 1: heel you we We confuse that a little bit. We
Speaker 1: pretend we're playing Dolly Yen. Yeah, but we're actually really
Speaker 1: trading the U S tenure heeled, and I think the
Speaker 1: U S tenure heeled on balance is going to move
Speaker 1: highron heeled. I want to ask you the money questions
Speaker 1: just to explain your strong yarn means that yet No.
Speaker 1: One twelve goes down to one hundred or ninety or
Speaker 1: whatever goes to a lower statistic p p P. Can
Speaker 1: guys on the street make money off of p PP analysis?
Speaker 1: I mean this goes ages ago to Kassal of eighteen
Speaker 1: and even before that. Can you make money and a
Speaker 1: p p P analysis or is that just too sixty feet? Um? Yeah, no,
Speaker 1: it might be Highland might be even more rarefied to
Speaker 1: some extent in terms of trying to make money, because look,
Speaker 1: I think you can. You're gonna cross have a p
Speaker 1: p P maybe once every five years exactly, but I
Speaker 1: think you do want to be very alert to extremes
Speaker 1: relative to when you're suggesting. Is a decent democad in
Speaker 1: terms of extremes for old G ten currencies. Actually, this
Speaker 1: is why we do surveillance, folks. You just had a
Speaker 1: clinic on what you do within the set of observations.
Speaker 1: You have to make a set up to get to
Speaker 1: a trade. Whether your trade is two days, I mean
Speaker 1: Ruskin is trading over two hour period. But whether it's
Speaker 1: two hours of two days or two years, there's there's
Speaker 1: a mix here of things, and you've got to be
Speaker 1: sure you're looking at something like P P P over
Speaker 1: the appropriate time frame and amplitude. Here end of the lecture,
Speaker 1: Alan rescued with Deutsche Bank will continue. David Girl will
Speaker 1: try to do something less esoteric than that. David lead
Speaker 1: it off here, but first Abby sends in a really
Speaker 1: smart tweet about what do we mean when we mean
Speaker 1: long dollar. That's that's a really really smart question, and
Speaker 1: that with the dollar is the global currency. You can
Speaker 1: look at it versus many different pairs, or you can
Speaker 1: look at it on a trade weighted basis. Is well
Speaker 1: is taking trade weighted which can be like ten countries
Speaker 1: or twenty seven countries, whatever it is, plus the Euro.
Speaker 1: There are indexes that allow us to look at the
Speaker 1: dollar discreetly. The classic index is the d X Y,
Speaker 1: which we quote, and there's a new index of Bloomberg
Speaker 1: Dollar Index which on your Bloomberg is b B d
Speaker 1: x Y, which is actually really good math. So when
Speaker 1: we say long dollar, that's strong dollar. David is usually
Speaker 1: based off one of those blended in disease that bring
Speaker 1: in all the different currency pairs. Very good. No one
Speaker 1: drove off the road, Ruskin Doll. He's here from Dutch
Speaker 1: back of course, and Allen I wanted to ask. We
Speaker 1: just heard from Chris Kirkham about the parlor game about
Speaker 1: who's going to lead the Fed. Here. We're going to
Speaker 1: get a decision from the president, he says by November
Speaker 1: the third, when he leaves on for this trip to Asia.
Speaker 1: How does the market price that in? We hear that
Speaker 1: John Taylor is in the lead this week, it was
Speaker 1: Kevin Warsh last week. There's still a lot of movement
Speaker 1: among the ranks of these five candidates. The president, his
Speaker 1: interviewer is going to interview. I think he sits down
Speaker 1: with Janet Ye in the FED chair today. How is
Speaker 1: the market processing what may or may not happen here? David,
Speaker 1: It's very difficult for the market process this because we're
Speaker 1: seeing the indicators of who's the favorite things like predict
Speaker 1: to a one one example, very very flighty in terms
Speaker 1: of responding very much to the next headliners. So if
Speaker 1: you took that at face value and say, the market's
Speaker 1: expectations of who's going to be the next chair is
Speaker 1: just flipping around. And I think there's a sense that
Speaker 1: right now Powell is in the forefront, Yellen's certainly in
Speaker 1: the running and on the rise perhaps, and I think
Speaker 1: beyond that, Kevin Walsh is perceived to be in decline
Speaker 1: and John Taylor is on the rise as well. But
Speaker 1: that is, you know, really based off the last few
Speaker 1: Bloomberg headlines. How much does it does it matter after
Speaker 1: somebody dealing with currencies? How much does the appointment of
Speaker 1: a FED term matter in the near term? I think this, this,
Speaker 1: this is one of the matters a lot. Yes, I think,
Speaker 1: you know, you've had a few changes which matter a lot.
Speaker 1: I think Vulka coming in, actually green Span following Volka,
Speaker 1: those who are potential shifts in regime very relevant for
Speaker 1: you know today Black Monday really because that transition was
Speaker 1: part of the Black Monday story. I think the handover
Speaker 1: from Greenspan to Banankee and Banankee to yell And was
Speaker 1: much more benign. I think I think the sense was
Speaker 1: that the frameworks would essentially stay unchanged. It depends now
Speaker 1: who the next FT chair is. If you do have
Speaker 1: someone like Taylor, and if you have someone like more
Speaker 1: warsh or maybe cone Um, then the prospect is that
Speaker 1: actually there's some regime change. If we do shift towards
Speaker 1: a more rules based FED, that's going to be extremely interesting.
Speaker 1: The market right now is taking that as a sign
Speaker 1: that in the short term at least, the FED would
Speaker 1: be more hawkish. In the long term, who knows, um.
Speaker 1: I would say this, it's not that simple in terms
Speaker 1: of market reaction, because what will happen is if you
Speaker 1: get a more hawkish pick for the FED, the equity
Speaker 1: market will probably go down to the point where bonds
Speaker 1: might even rally. Really, so you've got to be careful
Speaker 1: here in a sense. So in fact, the yield curving
Speaker 1: general is going to flatten in a more hawkish pick,
Speaker 1: and it's going to steep and really on a more
Speaker 1: davish pick. And that's partly because the equity market will
Speaker 1: be the arbiter in terms of driving the bond market.
Speaker 1: We've spoken a few times since the last presidential election.
Speaker 1: I think each time I ask you how clear a
Speaker 1: sense you have of this administration's trade policy. What have
Speaker 1: we learned this week? This fourth round of NAP negotiations,
Speaker 1: taking place outside of Washington, ended with a press conference
Speaker 1: that I think could safely say it wasn't optimistic about
Speaker 1: where things are. Hadn't we have a president still talking
Speaker 1: about terminating at the n after deal. How much does
Speaker 1: that weigh on the pay so so? Um, it was
Speaker 1: weighing on the page so over the last few weeks. Absolutely, so,
Speaker 1: it's been a big deal. At the same time, I
Speaker 1: would say, don't get caught up with the short term
Speaker 1: headlines easeration. You really don't have a deal until we
Speaker 1: have a deal. I lost money last night betting on
Speaker 1: the Dodgers. It comes being I'm Hailey, Corfax told me
Speaker 1: to go along Dodgers and I got crushed. Can make
Speaker 1: it back on dollar pay? So is there a directional
Speaker 1: Deutsche Bank a way for me to make that trade back?
Speaker 1: That's not the one I would recommend everybody. Which trade?
Speaker 1: Which trade can I use for immediate alpha? Yeah? Well, look,
Speaker 1: I think you know, if you were looking in Latin America,
Speaker 1: I'd much prefer the idea that you'd go to the
Speaker 1: Brazilian real because that's you know, it's more stable, it's
Speaker 1: it's got decent healed and I think you're gonna earn
Speaker 1: your carry on long Brazilian rail versus US dollar. Yeah.
Speaker 1: And and the yen Colin of the twins put that
Speaker 1: trade in. Please if if we lose money on it,
Speaker 1: take it out of Hailey kofax is Uh Pacheck Dodgers
Speaker 1: Cubs CUB three to two over the Dodgers. Allen Ruskin,
Speaker 1: thank you so much for wisdom across assets and particularly
Speaker 1: on foreign exchange. He is with Deutsche Bank. Stay with us.
Speaker 1: This is Bloomberg. Dennis Gartman tried to buy Kansas City
Speaker 1: wheat in the depths of the crash, of honored that
Speaker 1: he would join us. Uh this morning, Uh, Dennis, I
Speaker 1: think within your beautiful essay we can go to when
Speaker 1: the shift occurred. For me, it was about two pm,
Speaker 1: maybe one thirty in the afternoon, where we took out
Speaker 1: paper tickets and started buying those of us courage and
Speaker 1: courageous enough to know the underlying economics. And we didn't
Speaker 1: know for four four days if our trades were filled.
Speaker 1: What did you do at two pm on the day
Speaker 1: of the crash? Threw up a lot of people were
Speaker 1: doing up. Yeah, it wasn't It was an incredible day,
Speaker 1: and as I was trying to explain this morning in
Speaker 1: my commentary, I knew what was going to happen. On
Speaker 1: Friday afternoon. I was with some friends from North Carolina State.
Speaker 1: We were going to a football game, and we were
Speaker 1: we checked in on our phone because our phone started ringing.
Speaker 1: The doll was down a hundred on Friday afternoon before
Speaker 1: the crash, and people don't think much about a hundred
Speaker 1: points now, but then that was the first time the
Speaker 1: doll had ever fallen by a hundred, and I was
Speaker 1: worried about what was going to happen Monday with what
Speaker 1: we now know. Who became the problem with portfolio insurance
Speaker 1: because you knew that there were going to be a
Speaker 1: huge amount of cell orders coming in. What was I
Speaker 1: doing Tuesday or Monday afternoon? Like I said, I was
Speaker 1: throwing up. It was an incredible experience, one I shall
Speaker 1: never forget, and one that's still here thirty years later.
Speaker 1: Colors how I think about everything because I'm always worried
Speaker 1: that we may have yet another one of those again.
Speaker 1: I strongly agree with that, But to carry forward here
Speaker 1: down twenty six is a bear market? Ten percent is
Speaker 1: a correction? Or with the structure of our economy and
Speaker 1: finance today, Uh, Dennis Gartman, do you have to put
Speaker 1: a new number on a bear market if it's not,
Speaker 1: if it's not eighteen percent, what's a bear mark? In
Speaker 1: two oh? I think actually that we give it much
Speaker 1: too much leeway saying that you have to be down
Speaker 1: before you constituted as a bear market. You can actually
Speaker 1: have a bear market started much earlier than that. If
Speaker 1: you have one failed to go to new highs to
Speaker 1: take out a previous low. You could have the start
Speaker 1: of a bear market if you were only down five percent.
Speaker 1: It's just a matter of how much farther down you
Speaker 1: can go once down gets started. But what's the kount
Speaker 1: What what constitutes today? I guess I'll still go with
Speaker 1: and say when we're down, the public will have become
Speaker 1: concerned that prices may go down further. I want to
Speaker 1: go back to something you just said, which is it
Speaker 1: it really shaped the way that you think about the
Speaker 1: markets and think about investing. How did it change your
Speaker 1: sense of the irrationality of markets? Prior to that time,
Speaker 1: I was a believer that markets were rational until that time,
Speaker 1: I actually did believe that markets probably could remain rational.
Speaker 1: After that time, I understood that irrationality can break out
Speaker 1: it almost any one period of time. And in the
Speaker 1: words of my my good friend Gary showing, the market
Speaker 1: can remain irrational longer than you can remain solvent, and
Speaker 1: my corollary to that, as the market will return to
Speaker 1: rationality the moment you have been rendered insolvent. Let's talk
Speaker 1: a bit about the stock market here. We've been mentioning
Speaker 1: this throughout the show. That we hit twenty three thousand
Speaker 1: on the Dow yesterday. You're right, this morning prices may
Speaker 1: be egregiously, preposterously, dangerously, unimaginably overextended to the upside, but
Speaker 1: they may become even more preposterously, even more dangerously, even
Speaker 1: more unimaginably overextended to the upside before they turn lower.
Speaker 1: How do you react to the highest that we're seeing, Dennis,
Speaker 1: When they start bringing out the hats for the thousand,
Speaker 1: three thousands, you almost become it's as you just did.
Speaker 1: It's almost laughable. The market is ridiculously overpriced. It has
Speaker 1: been for several weeks, it has been for several months.
Speaker 1: Perhaps today, perhaps yesterday was a high who knows, only
Speaker 1: time shall tell, but it does look a little precarious
Speaker 1: this morning. I guess some of the weakness can be
Speaker 1: attributed to the promised extent in Spain and Catalonia. But
Speaker 1: here here, nonetheless, we're down and we're not bouncing today,
Speaker 1: and that is that alone is concerting. Do I think
Speaker 1: that the market can make new highs? No, I really
Speaker 1: don't um but is it possible. It's possible, but I
Speaker 1: don't think it shall Debnis Garment. I spoke to Colne
Speaker 1: resident this week and went through the usual litany of
Speaker 1: optimism and some of the things pushing against it. And
Speaker 1: one thing I mentioned, I'm looking out into two thousand
Speaker 1: eighteen is on the edge of Jack Welch, the idea
Speaker 1: of we lose pricing power, and I'm frankly focusing this
Speaker 1: in where areas were at the revenue line. You've got
Speaker 1: unit dynamics and price dynamics, and there's something in the wind.
Speaker 1: There's something changed. Do you agree with that? Uh, it's
Speaker 1: it's it feels like that this morning, suddenly out of
Speaker 1: nowhere has come rather rather agreed his price weakness today
Speaker 1: could be a very important day. Let's be blunt if
Speaker 1: you don't rally. And in the past, we've had these
Speaker 1: mornings where the Dow was down a hundred, where the
Speaker 1: SMP was down fifteen, where the mask Act was down
Speaker 1: forty or fifty, and by ten thirty or eleven o'clock
Speaker 1: we were staging a rally and heading for new highs.
Speaker 1: If it doesn't do that today, the game has changed.
Speaker 1: Are you willing to put money on that? I mean,
Speaker 1: the great acclaim of Dennis Gartman is he actually shows
Speaker 1: his trades in the back. I believe Dennis in your
Speaker 1: Morning note, there's no equity trades. It's the usual gold malarkey.
Speaker 1: And you and your commodity of fixation and better North
Speaker 1: Carolina football? Are you going to institute an equity trade?
Speaker 1: We got to get out in front of this and
Speaker 1: make news at Bloomberg Surveillance. Well, actually, late yesterday afternoon,
Speaker 1: I'll find things on my own before I'll put them
Speaker 1: in the newsletter, just to test the water. And I
Speaker 1: bought a few puts yesterday afternoon, not many, just a few.
Speaker 1: I gave an order to my to the young man
Speaker 1: who works on me back home. I'm not I'm an
Speaker 1: akron this morning for an endowment committee meeting, but I
Speaker 1: gave him a note saying, if we don't rally by
Speaker 1: and buy some more puts, if we are still down
Speaker 1: by the end of the day, I'll probably officially come
Speaker 1: out tomorrow and say, let's buy some puts. Do you
Speaker 1: place your orders through MC trucks, spread and whatever the
Speaker 1: name is. I mean, do you get taken on put
Speaker 1: options like the rest of us? No? No, not really.
Speaker 1: I mean there's there's the liquidity, and the puts is
Speaker 1: really quite magnificent. So you know, I don't trade large
Speaker 1: twenty and thirty and forty lots of the time. I
Speaker 1: don't trade thousand lots, but thirty and forty you can
Speaker 1: get a good price within a penny or two of
Speaker 1: what you saw last on the screen. And for me,
Speaker 1: that's that's quote David David Doug cast just fell off
Speaker 1: his chair in Florida. He knows Gartman's starting order is
Speaker 1: five thousand. That's his odd lots. Spurious spurious allegations. Dennis,
Speaker 1: I love the I love the occasional estery in your
Speaker 1: your letter, and this morning you write about the importance
Speaker 1: of the Kiwi dollar. Why are you watching the Kiwi
Speaker 1: dollar this morning? Because something strange has happened there. Politically,
Speaker 1: New Zealand has been governed by a reasonably adroit center
Speaker 1: right UH Nationalist Party as they're called. They've done a
Speaker 1: very nice job. But suddenly the Labor Party, which is
Speaker 1: far left, the Young Lady, has taken the reins of
Speaker 1: the Labor Party, got within about five percent of the Nationals,
Speaker 1: and a very strange fellow, Winston Peters, who is trade
Speaker 1: protectionist of the first to order and I think a
Speaker 1: very dangerous fellow, got about fourteen percent of the vote
Speaker 1: and he cast his lot with the left. Suddenly you
Speaker 1: now have a very far left, trade protectionist government in
Speaker 1: New Zealand which is archly different, archly changed. And the
Speaker 1: New Zealand dollar got colabored on that that I find
Speaker 1: to be very dangerous because New Zealand has been a
Speaker 1: very a solid, stable country. Suddenly it looks unstable that
Speaker 1: I find disconcerting. So to send this up your strong
Speaker 1: US dollar, we New Zealand dollar, Yeah, you should be.
Speaker 1: This is a change. This is a very material change
Speaker 1: in governance in New Zealand and in the past, as
Speaker 1: I said, New Zealand has always been an interesting place.
Speaker 1: They were the first place that really aggressively cut tax
Speaker 1: revenues to prove that you could cut revenue, cut tax,
Speaker 1: cut tax rates and take in more revenues. They they've
Speaker 1: been an experimental point and when New Zealand changes, I
Speaker 1: pay attention. Good morning to Julian Robertson. Hope you're listening.
Speaker 1: I'll let Mr Robertson figure out what to do with Kiwi.
Speaker 1: David grew a massive surveillance correction. I was suggesting that
Speaker 1: someone on our Bloomberg surveillance team was from New Zealand. Um,
Speaker 1: I don't really, I don't get. I don't use anything
Speaker 1: under the Southern Hemisphere. I don't get starting with the Philippines.
Speaker 1: But I would suggest that I greatly insulted Mr Bickannan. Yes,
Speaker 1: I don't know where he's from. Maybe one of those
Speaker 1: islands with penguins on it down there. He's not from
Speaker 1: New Zealand and of the world. We don't know. Good morning,
Speaker 1: christ Church. I'm sorry I made a mistake. You're apologizing
Speaker 1: to them for making us very good? All right, why
Speaker 1: don't you bring into this gartment with this here editor
Speaker 1: and publisher, the Gartment letter for another block and down.
Speaker 1: We got to talk about commodities some here. The last
Speaker 1: time you were on, we've just been through the third
Speaker 1: of these three hurricanes that we've experienced over these last
Speaker 1: many months. What's the fallout of the band as you
Speaker 1: look at cotton, as you look at oil, as you
Speaker 1: look at other commodities. How much of an impact that
Speaker 1: those three storms have on the complex? None? Nothing, nothing.
Speaker 1: It had absolutely nothing. It had impact upon refineries, It
Speaker 1: had impact upon the crude oil production facilities for a while,
Speaker 1: but didn't have any impact upon the corn market. No,
Speaker 1: didn't have any impact upon the soybean market. Marginally, didn't
Speaker 1: have any impact at all upon cotton for a day
Speaker 1: or two, and that certainly went away. So there's been
Speaker 1: absolutely no impact from the hurricanes. There was some concern
Speaker 1: several days ago that you might get an early frost
Speaker 1: out on the high plane it's Texas and in some
Speaker 1: of the parts in the Midwest, and it might delay
Speaker 1: the harvest of corn and soybeans, But even that has
Speaker 1: gone the way of all flesh. So the impact has
Speaker 1: been marginal at best and almost non existent. Uh. We
Speaker 1: were talking about the Keywi dollars mentioning estery a moment ago.
Speaker 1: You're right about Egypt in this morning. So this is
Speaker 1: fascinating to me as well. On the subject of wheat. Uh,
Speaker 1: Egypt had been a huge market here and no longer
Speaker 1: is What are we seeing there and what does that
Speaker 1: mean for the global market. Well, what's interesting is people
Speaker 1: don't realize. I mean, first of all, wheat production in
Speaker 1: the world is still the largest employer of any business
Speaker 1: in the world. Uh, it's it's an interesting statistic. Wheat
Speaker 1: is the most important food in the world, and in
Speaker 1: the past, for many, many years, Egypt was Egypt has
Speaker 1: always been the world's largest net importer on a national
Speaker 1: basis of wheat, and they were our best client for
Speaker 1: many years. They have ceased to be. They actually last
Speaker 1: year where the number thirty seven buyer of of of
Speaker 1: wheat from the United States. They didn't take any until
Speaker 1: in May of this year, which is unusual, and we
Speaker 1: have lost that market to the Russians, to the Romanians,
Speaker 1: to the Bulgarians, to the Black Sea States generally, to Australia,
Speaker 1: to Canada. Perhaps it's the response of a stronger US
Speaker 1: dollar in some instances, but even that's not to be
Speaker 1: considered true any longer because the dollar hasn't been that strong.
Speaker 1: It's just interesting that we have lost the the biggest
Speaker 1: buyer on a consistent basis, and it maybe a while
Speaker 1: before we get them back. And what's even more interesting,
Speaker 1: we used to have a buying station there the U
Speaker 1: s WEAD Associates, and they've actually closed their office, which
Speaker 1: might well be a sign of the fact that the
Speaker 1: worst is behind us. How are you watching these these
Speaker 1: negotiations with Canada and Mexico unfold? I wondered the degree
Speaker 1: to which that's weighing on commodities at this point, that
Speaker 1: the prospect of the US pulling out of the North
Speaker 1: American Free Trade Agreement changes to that deal at the
Speaker 1: very least, what does that mean for for American commodities. Well,
Speaker 1: first of all, I think that the idea of pulling
Speaker 1: out of the NAFTA would be one of the silliest
Speaker 1: ideas imaginable. All three countries, Hanada, the United States, and
Speaker 1: Mexico have all been well served on balance and in
Speaker 1: general terms by the NAFTA. Now, have there been some
Speaker 1: industries in the United States where jobs have been lost,
Speaker 1: of course, and those always get the headlines. Perhaps some
Speaker 1: of the in the auto industry have been that way,
Speaker 1: But on balance, it's been good for all three countries.
Speaker 1: And to think that it and and and the press
Speaker 1: always goes to the businesses that have lost jobs. They
Speaker 1: never go to the businesses that have quietly picked up jobs.
Speaker 1: I'm I'm a firm believer that doing away with NAFTA
Speaker 1: would be an ill advised decision, but it has it
Speaker 1: speaks well to the president's political base, and they want
Speaker 1: to be done done away with. I think that would
Speaker 1: be a very very bad decision. Do you have your
Speaker 1: Sugar Bowl tickets yet? I mean, it's using to making jokes.
Speaker 1: But and one North Carolina State folks as a bye
Speaker 1: and then they have Notre Dame in a school named Clemson.
Speaker 1: Am I pronounced correctly? David? You go? You are? You
Speaker 1: got these two sorts coming up after after Clemson has
Speaker 1: lost some of the some people are calling them Clemson
Speaker 1: you have you've written a check for a million dollars
Speaker 1: to the school or something to make this happen or
Speaker 1: how did this miracle happen? Of six and one NC
Speaker 1: State four and oh a MLB. I don't know, but
Speaker 1: I believe in miracles, and let's thank goodness that's happened
Speaker 1: this year. I was getting despondent after years of being
Speaker 1: a doormat. For the first time in a long while,
Speaker 1: we actually look good. No, let's leave it there, Dennis Garton,
Speaker 1: thank you so much, Denni's honor to have you with this.
Speaker 1: This October ninete really an historic It is John and
Speaker 1: Jerry and mentioned on Twitter a really emotional day for
Speaker 1: the people that actually lived through it. Thanks for that note, John,
Speaker 1: David Girl, I want you to bring in our next guest,
Speaker 1: but I want to say this clearly. What you usually
Speaker 1: do in geography is start with the map. But it
Speaker 1: may be a U. S. G S map, maybe this
Speaker 1: map of that map. But what we know is within
Speaker 1: the study of geography, all good work comes out of Scandinavia.
Speaker 1: I really don't know why it is, but the Danes,
Speaker 1: the Swedes, the Norwegians, but particularly Denmark. Denmark, Denmark owns
Speaker 1: the high ground on the global study of human geography
Speaker 1: and the economics of geography. And I'm thrilled that our
Speaker 1: next guest carries that tradition forward. Go Sardia Mattsburg joins
Speaker 1: us now. She's a managing director of the Rockefeller Foundation,
Speaker 1: former senior vice president for Strategic Planning, at the New
Speaker 1: York City Economic Development Corporation and what caught our eyes
Speaker 1: a piece that she co authored for the Rockefeller Foundation,
Speaker 1: also published on the Huffington Post, Fighting Wildfire with Finance.
Speaker 1: As we continue to watch the fires raging in Wine
Speaker 1: country in California, she joins us on our phone line, Saudia,
Speaker 1: I looked at the San Francisco Chronicle this morning. That
Speaker 1: newspaper has done incredible coverage of these fires and made
Speaker 1: that coverage available for free to people who go to
Speaker 1: the paper's website, and the edit torial this morning begins.
Speaker 1: For years now, the U. S. Forest Service has been
Speaker 1: forced to pill for firefighting funds from accounts for fire
Speaker 1: prevention as more and more lands across the West burn.
Speaker 1: And this gets to the heart of what you're writing
Speaker 1: about and what the Rockefeller Foundation is doing. How big
Speaker 1: a problem is this, the gamesmanship involving funds for fighting
Speaker 1: and preventing fires. So thank you for having me on
Speaker 1: the show, David. It is a really serious problem. If
Speaker 1: you look at the development of the U. S. Forest
Speaker 1: Service budget, Historically, UH prevention used to be, you know,
Speaker 1: the biggest chunk of the budget. And by prevention, it's
Speaker 1: basically going in and maintaining the health of our forest,
Speaker 1: you know, taking away dead trees, um, doing controlled burns,
Speaker 1: you know, things that keep the forest healthy and preventing
Speaker 1: it from overgrown. Um. If you look at the budget today,
Speaker 1: it accounts for roughly fifty of the spend. Not because
Speaker 1: the US Force Service doesn't think that it's important to
Speaker 1: do prevention anymore, but they're just so much under pressure
Speaker 1: because of the fires that keep recurring year after year
Speaker 1: and get you know, more and more out of control.
Speaker 1: So they, you know, what used to be fifteen percent
Speaker 1: of the budget is now So as the wrangling over
Speaker 1: the budget goes on in Washington, d C. How you're
Speaker 1: proposing a new way of paying for prevention. Tell us
Speaker 1: a bit about the financial instrument that you've you've written
Speaker 1: about in your piece and how that might effectively or
Speaker 1: more effectively prevent the kind of fires that we're seeing
Speaker 1: in California today. So the situations that we're facing, or
Speaker 1: the US for Our Services facing, is that there's a
Speaker 1: backlog when it comes to prevention that runs in the
Speaker 1: tens of billions. So regardless of what ends up happening
Speaker 1: with you know, next year's budget, that doesn't solve the problem.
Speaker 1: The problem remains. You know, there may be a slight
Speaker 1: budget card or you mean the budget may remain the same,
Speaker 1: but that doesn't take away from the fact that there's
Speaker 1: not enough money to go in and restore the forest.
Speaker 1: So that we don't keep reading about wildfire situations in
Speaker 1: northern California and the great devastation that they're causing era
Speaker 1: the year after year. The idea that we have been
Speaker 1: funding a company called Blue Force Conservation to look at
Speaker 1: is how can you bring capital markets to bear? How
Speaker 1: can you take finance and use it as a powerful
Speaker 1: tool for good. So in a situation where the public
Speaker 1: sector doesn't have the money or not putting up the
Speaker 1: money to do this, and philanthropy doesn't have money in
Speaker 1: the tens of billions of dollars to put against this problem,
Speaker 1: can we create a regular financial product that would be
Speaker 1: attractive to private investors so money can be raised. And
Speaker 1: in this case, it's a debt product that would be
Speaker 1: issued as a bond, the money from those proceeds used
Speaker 1: to do the Force restoration work and and and the
Speaker 1: private investors would get repaid over time as I would
Speaker 1: with any other financial products. Are the incentives from insurance
Speaker 1: adapting and adjusting like they have for hurricanes. Are the
Speaker 1: tragedy of California. Will that be amended in the next
Speaker 1: five to twenty years by insurance companies that say we're
Speaker 1: not going to ensure this risk. So I think many
Speaker 1: things need to happen in parallel term. I don't think
Speaker 1: that it will just be the pressure from the insurance companies,
Speaker 1: because that would just leave us in a situation where
Speaker 1: somebody still has to put up the money. And if
Speaker 1: the public sector doesn't have the money, then where do
Speaker 1: we turn. Um. So, yes, that could help with the situation,
Speaker 1: but that alone wouldn't solve the problem. I was I think,
Speaker 1: I mean, I was looking at some of some numbers yesterday,
Speaker 1: and when we look at the devastation, you know, it's
Speaker 1: it's terrible to read about the fatalities and the people
Speaker 1: that are still missing. But the economic losses are estimated
Speaker 1: to be somewhere between three to six billion currently for
Speaker 1: Northern California and growing um. And you know, it's also
Speaker 1: worsening the state's housing supply crunch. Um there's an estimate
Speaker 1: that the housing stock is going to drop by roughly
Speaker 1: three percent. So those are deeply problematic issues. And yes,
Speaker 1: the pressure from the insurance companies if they refuse to ensure,
Speaker 1: would would you know, force us to address it? But
Speaker 1: but more is needed. How do you respond, as a
Speaker 1: grizzled McKinsey prone at the Rockefeller Foundation to the cynic
Speaker 1: who says, look, we're building the houses where the mountain
Speaker 1: lions used to be. What a surprise, mountain lions are
Speaker 1: eating our dogs? Are we building houses and in fire
Speaker 1: risk areas that we shouldn't be building? So we've been
Speaker 1: doing that for dicades now, tom um and and that's
Speaker 1: just the reality we find ourselves in. We have built
Speaker 1: houses and structures closer and closer to nature, um and
Speaker 1: we have not spent money taking care of the forest.
Speaker 1: So we've left a lot of fuel in those forests,
Speaker 1: which means when natural fires occur, they turn into wildfires.
Speaker 1: And you know, we can't be in a situation where
Speaker 1: we sit and hope that there's going to be rain
Speaker 1: or that the winds are not going to pick up
Speaker 1: so that the situation can come under control. We need
Speaker 1: to be more active. And you know the public sector
Speaker 1: doesn't have the budget. Let's look to the private markets.
Speaker 1: How will that private market incentivize innovation or evolution in
Speaker 1: the way that we fight fires like these. So the
Speaker 1: U S for A Service, if you look at the
Speaker 1: public sector, they recognize that investing in prevention is the
Speaker 1: right thing to do. I mean, you can look a
Speaker 1: lot at the numbers and the case adds up. It
Speaker 1: costs forty times more to put out a fire that
Speaker 1: it costs to prevent it. So you know the numbers
Speaker 1: that there is. There's research that has been done on
Speaker 1: cost avoidance where the U S FORUR Service has worked
Speaker 1: with some of the NGOs in the space, the CRA
Speaker 1: Nevada can Disermancy and the Nature Conservancy. So they recognize
Speaker 1: it the challenges. How do you then take it from
Speaker 1: that and turn it into something that's real and starts
Speaker 1: to have an effect. It won't solve the problem in
Speaker 1: a year. It's going to take years of work to
Speaker 1: do it. Do it right under the governance of the
Speaker 1: US for Service UM. But then we'll get to a
Speaker 1: better place where we don't see the situations that we've
Speaker 1: been reading about this year and last year as well. Sardi,
Speaker 1: thank you very much, appreciate the time to the Sunny Martsburg.
Speaker 1: She say managing direct at the Rockefeller Foundation, as Tom mentioned,
Speaker 1: and McKenzie Alumna, former Senior vice president for Strategic Planning
Speaker 1: at the New York City Economic Development Corporation, and the
Speaker 1: bond that she was talking about through the Forest Resilience
Speaker 1: Impact Bonds. You joined us on our phone lines. Thanks
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform
Speaker 1: you prefer. I'm on Twitter at Tom Keene. David Gura
Speaker 1: is at David Gura. Before the podcast, you can always
Speaker 1: catch us worldwide. I'm Bloomberg Radio