Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along
Speaker 1: with Jonathan Ferroll and Lisa Brownwitz jay Leie. We bring
Speaker 1: you insight from the best and economics, finance, investment and
Speaker 1: international relations. Find Bloomberg Surveillance and Apple Podcast SoundCloud, Bloomberg
Speaker 1: dot com and of course on the Bloomberg Termament. And
Speaker 1: now in Washington and with our John Farrell, the Secretary
Speaker 1: of Labor, it's now I'm pleased to say on the
Speaker 1: payrolls report on TV on radio. It's Marty Wolves, the
Speaker 1: U S Secretary of Labor. Mr Secretary, it's great to
Speaker 1: catch out with you, sir. I cannot think of the
Speaker 1: last payrolls report that got this little attention pay rolls
Speaker 1: at six and seventy eight, because we're focused on everything
Speaker 1: now secretly Wolves, your take first of all, and then
Speaker 1: we need to get to the much, much bigger issues worldwide. Yeah,
Speaker 1: I know, you know, a good, solid report, good briade,
Speaker 1: base gains and all sectors pretty happy with that report.
Speaker 1: Clearly we have more work to do. You're absolutely right. Uh,
Speaker 1: you know, my heart and prayers go out with the
Speaker 1: people of Ukraine. That that's kind of front and center
Speaker 1: for everybody, uh in the world. The world is certainly
Speaker 1: united behind Ukraine, and uh, you know, hopefully we can
Speaker 1: get back to Hopefully we can get through Ukrainian people
Speaker 1: can get through the challenges they have, and we can
Speaker 1: go back to talking about the economy again. I would
Speaker 1: much prefer to be taking taking strong questions from you
Speaker 1: today about the economy and Ukraine people having peace and
Speaker 1: freedom today. Secondary Welsh, I agree with you. I think
Speaker 1: we all do. Let's get back to those days as
Speaker 1: soon as possible. Right now, as you know that we've
Speaker 1: got to talk about Russia. Microsoft moments ago, in the
Speaker 1: last thirty minutes made the decision to suspend new sounds
Speaker 1: of products and services in Russia. Many companies are doing
Speaker 1: the same thing, whether they need to because of sanctions
Speaker 1: or they choose to because they feel like they have
Speaker 1: an obligation. Do you think so? For you as Secretary
Speaker 1: of Labor and for the administration as well, do American
Speaker 1: employers have a moral obligation to pull back from doing
Speaker 1: business with Russia. I think we have to do whatever
Speaker 1: we can in as many places we can to support
Speaker 1: the Ukrainian people. Uh. You know, the President said it
Speaker 1: at the State of the Union the other night from
Speaker 1: the stage. I think a lot of countries and a
Speaker 1: lot of companies are doing what they need to do.
Speaker 1: I think that as we continue to move as the
Speaker 1: as the conflict continues to move forward, I think that
Speaker 1: there will be a lot more companies in America, and
Speaker 1: not just America, around the world will will be taking
Speaker 1: steps like this against Russia. The refiners in America also
Speaker 1: not touching Russian crew as well. That choosing to pull
Speaker 1: back from that, Secretary Walch, is that a good thing? Yeah? Well,
Speaker 1: I think I think you know, as far as the conversations,
Speaker 1: what they're gonna be many conversations. I know that here
Speaker 1: in the United States, Speaker Pelosi, UH, send a mansion.
Speaker 1: Senator Makowski and some other folks you're asking for that, uh.
Speaker 1: And and I'm sure that U the President in the
Speaker 1: White House, we're evaluating the different situations. But again, I
Speaker 1: think that the whole world is going to continue to
Speaker 1: to put sanctions on Russia as we move forward here.
Speaker 1: The pictures on the pictures that we're seeing broadcast from
Speaker 1: Ukraine are horrible and bring you when you go after
Speaker 1: buildings with all the people on the schools it's just
Speaker 1: uncalled for. So when refinance pulled back, I guess what
Speaker 1: I'm trying to work out secontarly, Welsh, is that you've
Speaker 1: tried for an energy carve out. A lot of people
Speaker 1: still don't want to touch crude even if there is
Speaker 1: a carve out. I want to understand the message the
Speaker 1: administration is sending right now. Do you want refiners to
Speaker 1: buy that crude or do you want them to step
Speaker 1: back from it? Is that welcome development even though the
Speaker 1: sanctions aren't there. Well, again, I'm not in a position
Speaker 1: to be able to speak on that right now. I
Speaker 1: know that, as the President had laid out, the sanctions
Speaker 1: last week are actually over the last ten days. Uh.
Speaker 1: He's been very thoughtful in doing them, working across the
Speaker 1: globe and doing them. And I think those I'm sure
Speaker 1: those conversations are happening right now with world leaders. There's
Speaker 1: a conversation that hasn't happened apparently, and I wonder if
Speaker 1: it has happened subsequently, I couldn't get this information from
Speaker 1: the Treasury Department in the last hour, so allow me
Speaker 1: to put this question to you. This came from the
Speaker 1: Devon Energy CEO, big employer here in America, Crude Explorer,
Speaker 1: this is what they said to us this week. Secondary
Speaker 1: Welsh quote. I'm a little mystified that there hasn't been
Speaker 1: some dialogue. If they were to reach out you, the
Speaker 1: administration to them and maybe be a little bit more collaborative,
Speaker 1: it might provide some cover cover from investors who might
Speaker 1: be disappointed their boosting output. Have you reached out to
Speaker 1: any employers in the old patch to boost production to
Speaker 1: this point, I'm not aware of any any conversation, but
Speaker 1: I'm sure that their conversation is going on. Again. I
Speaker 1: have not been part of those have not been party
Speaker 1: to those conversations. Uh. If asked and when asked and
Speaker 1: when told to you by by the President, I will
Speaker 1: absolutely be having those conversations. You have to wait to
Speaker 1: be told to to have that conversation. Well, certainly this
Speaker 1: is a this is a very coordinated effort. When you
Speaker 1: look at what what what what's been going on here
Speaker 1: with the with the with the powers of the countries
Speaker 1: across the globe working collectively together, we've never seen I
Speaker 1: shouldn't say never, I mean having the strength of NATO
Speaker 1: seems so close together, really amazing and working collectively together
Speaker 1: so again, I think there's been there's been a process
Speaker 1: here as we move forward. Crewed right now, w t
Speaker 1: I at one TOURVE eighty seven. You know as well
Speaker 1: as I know that wages haven't been keeping up with inflation.
Speaker 1: Is there anything you can do in the short term.
Speaker 1: When we had from the President earlier this week in
Speaker 1: the State of the Union, there were some big long
Speaker 1: term goals, long term investments that he wanted to make
Speaker 1: to build out the productive capacity of the economy. Is
Speaker 1: the only thing we can do in the short term
Speaker 1: here secondary walls, I think, I think if if you're
Speaker 1: trying around inflation, I think what's happening here is I mean,
Speaker 1: we're in the midst of a worldwide pandemic. Certainly that's
Speaker 1: one we had the midst of dealing with supply chain issues.
Speaker 1: Now now we have a major conflict in the world
Speaker 1: that that that we're all eyes of the world are
Speaker 1: on the Ukrainian people in Ukraine. And I think that
Speaker 1: as we move forward here in the question earlier, as
Speaker 1: oil supply, as oil supply gets cut back from Russia,
Speaker 1: if that's what ultimately happens, we're going to see increasing
Speaker 1: gas prices. And I think that there's a point here
Speaker 1: that we have to we have to just continue to
Speaker 1: move forward. The President has been very clear on on
Speaker 1: bringing down inflation. He talked about it at the State
Speaker 1: of the Union. But we're living in very interesting dynamic,
Speaker 1: dynamic in times that are happening here. So again, there's
Speaker 1: lots of conversations and lots of actions that will be
Speaker 1: taken over the next weeks and months. You're in a
Speaker 1: difficult spot now, and understand that because you need to
Speaker 1: try and stand your lane and not get ahead of
Speaker 1: what other people haven't said yet. But have you spoken
Speaker 1: to the administration this morning and your message following the
Speaker 1: overnight events which were shocking for so many people. I
Speaker 1: haven't heard anyone yet called that an escalation from the
Speaker 1: US administration. Secondly, Wolves, do you believe the events of
Speaker 1: last night were an escalation? Well, I'm sure the President's
Speaker 1: going to address that when he speaks later today. When
Speaker 1: can we hear from him? I don't. I think he
Speaker 1: generally has a not too far from now, a couple
Speaker 1: of hours from now, I think he'll addressed he addresses
Speaker 1: that the country on the issue of of of the jobs,
Speaker 1: but certainly the biggest issue of of the day is Ukraine.
Speaker 1: The biggest issue of our moment is Ukraine. Well, I
Speaker 1: look forward to him from him a little bit later
Speaker 1: and understand. Secondly, Wolves, there's only so much you can say, sir,
Speaker 1: and it's only so much you can say this morning
Speaker 1: as well. Thank you for paying with us, and I
Speaker 1: think we're both on the same page. When we can
Speaker 1: just talk about payrolls for ten minutes. I can't wait
Speaker 1: for that moment, sir. Secondly, well, Stan, thank you our
Speaker 1: conversation of the day on this term sanctions. Right now
Speaker 1: in Ukraine, there is a teacher and a nurse and
Speaker 1: they are leaving Ukraine and maybe they've got an eighteen
Speaker 1: month old with them. It was not war in Nigeria,
Speaker 1: but Wally Adyamo came to California as an eighteen month
Speaker 1: old with his parents. He's done better than good out
Speaker 1: of Yale law, terrific in the Democratic Party with different
Speaker 1: public service positions in the Deputy Treasury Secretary Jones this morning.
Speaker 1: What will happen on sanctions sir this weekend? What I
Speaker 1: can say, um, good morning, thanks for having me, is
Speaker 1: that if President Putin continues to escalate his war in Ukraine,
Speaker 1: we will continue you to increase the sanctions that we've
Speaker 1: put on Russia. It's important to see what's happening in
Speaker 1: the Russian economy today because the sanctions we've put on,
Speaker 1: inflation is likely North Russian markets have been shut down
Speaker 1: for days, and just earlier they announced they're going to
Speaker 1: shut them down for more days, which is the longest
Speaker 1: shutdown they've had since at least when they defaulted on
Speaker 1: their debt. And in addition to that, any investor or
Speaker 1: market princison that I've talked to over the last week,
Speaker 1: what they're trying to do is take their money out
Speaker 1: of Russia, which means that the Russian economy is collapsing.
Speaker 1: You've had experience with that with Mr Finkett Black Rock,
Speaker 1: so you've served both spheres of government and finance. From
Speaker 1: where you sit. Can the Biden administration at unilaterally or
Speaker 1: we must we wait for our allies. The thing that
Speaker 1: the President has discovered is that we are far more
Speaker 1: powerful working with our allies. And that's exactly what we've
Speaker 1: seen here, building alliance that doesn't only include our European partners,
Speaker 1: but also partners and allies in Asia, which has cut
Speaker 1: off Russia from access to the international financial system, the
Speaker 1: global economy. Mr Secretary, your words just moments ago. If
Speaker 1: Russia increases the war in Ukraine, we increase the sanctions
Speaker 1: in Russia. Mrs Secretary, was last night an escalation? So
Speaker 1: I'll leave that to the judgment as we look at
Speaker 1: what happened last night. But our goal is to make
Speaker 1: sure that we continue to increase sanctions as they increase
Speaker 1: their escalation. We took sanctions actions yesterday, were prepared to
Speaker 1: take additional actions to not only cut off the Russian
Speaker 1: economy but cut off Russian elites who are helping support
Speaker 1: President Putin, and we're going to continue to do that
Speaker 1: as long as President Putin chooses us to continue his
Speaker 1: work choice in Ukraine. You'll leave it for another department
Speaker 1: to decide whether that was an escalation. Then you have
Speaker 1: to enforce the sanctions that the White House decides. So
Speaker 1: Mr Secretary, just help us understand how the sausage is made.
Speaker 1: Do you do the groundwork ahead of sanctions being announced
Speaker 1: or do you have to do the groundwork after they've
Speaker 1: been announced. Can you help me understand what order it
Speaker 1: comes through? Do you have to do a load of
Speaker 1: studies now to be prepared to execute on something that
Speaker 1: might be announced down on the road, or do you
Speaker 1: wait for it to be announced. So in November, when
Speaker 1: we started to see Russian troops gathering outside of Ukraine,
Speaker 1: the President ordered Secretary yell And to start planning for
Speaker 1: the imposition of sanctions if Russia were to invade. He
Speaker 1: gave one order, which was to make sure that anything
Speaker 1: we did had a maximum impact on Russia and mitigated
Speaker 1: the impact on the United States and on our allies.
Speaker 1: And that's exactly what we've done, working closely with Europe
Speaker 1: and our allies in Asia, to make sure we design
Speaker 1: sanctions that we could use if Russia invaded. And we
Speaker 1: have a number of things that we've already deployed, the
Speaker 1: number of things that we've planned for over the course
Speaker 1: the last few months to worry to deploy if Russia
Speaker 1: continued invasion of Let's talk about the stuff you planned
Speaker 1: for and haven't deployed. Have you got a plan for
Speaker 1: energy sanctions if you needed to deploy it? Has that
Speaker 1: plan been made at Treasury? So going back to what
Speaker 1: the President gave us as an order, make sure that
Speaker 1: we maximized the pan on Russia and limit the cost
Speaker 1: to the American people are our allies. What we decided
Speaker 1: to do with regard to energy is make sure that
Speaker 1: we do nothing to increase the price of energy um immediately.
Speaker 1: So we're we've created a general licensing that energy can
Speaker 1: be sold through pipelines by boat immediately. But what we're
Speaker 1: doing is that over the long term, we're degrading Russia's
Speaker 1: energy production capabilities so they can pump less energy from
Speaker 1: the ground in order to cut off their source of
Speaker 1: revenue overtime. So I understand what's being announced. I'm trying
Speaker 1: to understand whether you have a plan to deploy if
Speaker 1: you need to announce energy sanctions speak of Alosi says
Speaker 1: band the oil band, Russian oil. I want to understand
Speaker 1: whether you've done the work at Treasury to execute that plan,
Speaker 1: if it needs to be executed. Does that plan exist
Speaker 1: at Treasury? So the plan that we have now is
Speaker 1: to do everything we can to make sure the market
Speaker 1: remains well supplied. Now, what we have plans to do
Speaker 1: is to grade their ability to produce energy into the future,
Speaker 1: because the thing that we know is that if we
Speaker 1: do something immediately that increases the cost of energy, that
Speaker 1: will be a cost on the American people, and it
Speaker 1: will be money that goes into the pocket of President
Speaker 1: Putin if the cost of energy increases around the world.
Speaker 1: So instead of increasing costs now, our goal is to
Speaker 1: make sure that we degrade their ability to produce oil
Speaker 1: overtime time, which will further starve them of the resources
Speaker 1: they need to to conduct the kind of wars they
Speaker 1: are doing today in Ukraine. Mr Secretary, Does that mean
Speaker 1: that the sanctions that we've put out there so far
Speaker 1: are all of the sanctions that we can put out
Speaker 1: there at this time, because what you're talking about will
Speaker 1: take time, So even if there's an escalation, there cannot
Speaker 1: be the sanctions on oil without the having a conflict
Speaker 1: with this goal. No, that's not true. We have other
Speaker 1: sanctions options outside of the immediate sanctions on the energy industry.
Speaker 1: What we have sanctions on the financial industry that we
Speaker 1: can continue to deploy, Sanctions on their defense industry we
Speaker 1: can continue to deploy. We have a number of options
Speaker 1: that we can do that will allow us to meet
Speaker 1: the President's objective, which is maximizing the cost on Russia
Speaker 1: and reducing the costs in the United States and on Europe.
Speaker 1: Our goals and make sure the energy market remains well supplied,
Speaker 1: because that's important to the American people. But by making
Speaker 1: sure that energy prices stay low, it stars President Putin
Speaker 1: of the resources he needs to continue to fight the
Speaker 1: war in Ukraine and also to just ableize the region.
Speaker 1: Mr Secretary, how important is it to then get more
Speaker 1: production domestically, to encourage the domestic oil and shell producers
Speaker 1: to actually increase output, to create a buffer, to give
Speaker 1: you more tools. What I can say is that the
Speaker 1: most important thing we canna do is make sure that
Speaker 1: the market today is well supplied, and we're doing that
Speaker 1: in the United States, but we're also doing that with
Speaker 1: our allies and partners to sexually give me Let's go
Speaker 1: back to the question, are you reaching down to domestic
Speaker 1: supplies of crude in America? Have you spoken to them?
Speaker 1: Deaf and Energy said to us this week. The CEO
Speaker 1: was mystified that you haven't reached out to boost production
Speaker 1: at home. Have you done that? Have you spoken to
Speaker 1: domestic supplies? So as you know, well, um, the domestic
Speaker 1: supplier crude right now is at a peak and that
Speaker 1: it will take time for more supply to come online.
Speaker 1: We're focused on making sure that the energy markets are
Speaker 1: well supplied today because we want to make sure costs
Speaker 1: or reduce for American people today, and we're depriving President
Speaker 1: Putin of the resources he needs to fight the war today.
Speaker 1: Over time, we need to do more to make or
Speaker 1: that the energy market is well supplied, and we're also
Speaker 1: focused on that as well. You said we're to peak
Speaker 1: with eleven points six million pounds of all the day
Speaker 1: back to the north of thirteen. Just looking at that
Speaker 1: off the Blomberg terminal, What what do you mean we're
Speaker 1: to peak? My point is that at the moment we
Speaker 1: are producing a great deal of energy in this country.
Speaker 1: It will take time for additional energy to come online,
Speaker 1: but we want to make sure is that as it takes,
Speaker 1: as that energy comes online, we're well supplied today because
Speaker 1: we want to make sure that Americans who are going
Speaker 1: to the pump today are paying the lowest possible cost.
Speaker 1: That's going to require not just us to take action
Speaker 1: here in the United States, but other producers also to
Speaker 1: make sure that the energy markets well supplied. You're a
Speaker 1: great student of history on this, Mr Secretary, And is
Speaker 1: this a see change for the politics and the energy
Speaker 1: politics of the Democratic Party, Does Joe Biden have to
Speaker 1: leave the Democrats to a new energy theory, a new
Speaker 1: energy philosophy. I don't think it is. I think that
Speaker 1: ultimately only we've always been for a well suppli at
Speaker 1: energy market. We know that in the immediate term that's
Speaker 1: going to require us to rely on fossil fuels. But
Speaker 1: what we should learn from this is that ultimately being
Speaker 1: reliant on fossil fuels, fuels that often come from places
Speaker 1: like Russia, is not in anyone's interests. That's why the
Speaker 1: President is focused on making sure that we move to
Speaker 1: a clean energy future that's not only good for our security,
Speaker 1: but it's good for our planet over time. Mr Secretary,
Speaker 1: I'm a little bit confused, as many people are right now.
Speaker 1: Crudes at one eleven on the Bloomberg right now, once
Speaker 1: in ninety we've got domestic oil suppliers, private companies essentially
Speaker 1: saying we just want to hear from the White House.
Speaker 1: We're surprised we haven't heard from the White House. They
Speaker 1: haven't heard from you, They haven't heard from the White House.
Speaker 1: It doesn't make sense, and you keep repeating the same
Speaker 1: thing over and over again. We need to make sure
Speaker 1: there's enough crude supply. You won't. We can't reach out
Speaker 1: to domestic suppliers. We need to tighten the grip on Russia.
Speaker 1: The fact of the matter is people are stepping back
Speaker 1: from Russian crewed anyway. And as you know, and I'm
Speaker 1: just gonna repeat this for our audience, not for you, sir,
Speaker 1: three percent of crude imports last year for the United
Speaker 1: States came from Russia, just three So people are already
Speaker 1: stepping back from Russian crude. What is it you think
Speaker 1: will happen if the United States comes out and announces
Speaker 1: that they're no longer importing Russian crude? What is it
Speaker 1: that you think will happen? And if you don't want
Speaker 1: to do that, are you essentially suggesting that you want
Speaker 1: domestic refiners to be buying Russian crude? Is that the
Speaker 1: goal of these sanctions still? But you want domestic refiners
Speaker 1: to be buying Russian crude? Still? Is that the message
Speaker 1: you want to send to the American public today? So
Speaker 1: I know that you've repeated twice now that we haven't
Speaker 1: reached out to domestic producers. But as you know well,
Speaker 1: domestic producers are making decisions based on what they see
Speaker 1: in the market um their ability to make money in
Speaker 1: the market, and our goal is to make sure that
Speaker 1: we have a well supplied market. The President has been
Speaker 1: very clear about what our goal is is to make
Speaker 1: sure that with regard to sanctions, that we have a
Speaker 1: maximum impact on Russia and we minimize them impact on
Speaker 1: the United States and our allies. That's why he's taken
Speaker 1: steps like reduced like working with our allies and partners
Speaker 1: to reduce the energy supplies that we have in store,
Speaker 1: and we're going to continue to take steps to try
Speaker 1: and reduce costs for the American people. It's a Secretary,
Speaker 1: thanks for a time today, said well, the U S
Speaker 1: Deputy try to read Secretary. Jeff Rosenberg of black Rock
Speaker 1: joins us right now. Jeff, have you ever seen a
Speaker 1: number as big as six thousand met with a collective
Speaker 1: shrug in the market. Well, it's it's a reminder, Jonathan
Speaker 1: that that the market's focus is really not on on payrolls.
Speaker 1: But if we do just look at some of the
Speaker 1: implications of the payroll report, you know, clearly a very
Speaker 1: strong report across the board. Mike McKee, if you're if
Speaker 1: you're looking, i mean check out the work week that
Speaker 1: may have been behind that kind of disappointing month over
Speaker 1: month A G. I can't quite see it here, but
Speaker 1: this is really a difficult period for markets because you know,
Speaker 1: as we heard earlier this week, you know, the Fed
Speaker 1: is is focused on inflation and its need to get
Speaker 1: on with normalization and raise rates, while the market is
Speaker 1: focused on the implications of of of the Russian invasion,
Speaker 1: and that implication is a negative supply shock um you know,
Speaker 1: negative to growth, positive to inflation. It puts the Fed
Speaker 1: in a difficult position. More importantly, it puts us as
Speaker 1: investors in a difficult position that we can't really look to. Uh,
Speaker 1: you know, interest rates falling um from from from Fed
Speaker 1: policy easing in the face of any kind of growth
Speaker 1: slow down because of the inflationary aspect. So it's a
Speaker 1: it's a very tricky environment. Obviously, market reaction is about
Speaker 1: Russia Ukraine, not really about the pay we say good
Speaker 1: morning to Larry Finco. I know is watching and hanging
Speaker 1: on every word, Mr Rosenberg. I don't want you to
Speaker 1: give away the palace secrets, but does black crack and
Speaker 1: have any sense in full faith and credit and in
Speaker 1: the credit markets of all on all this war that
Speaker 1: you can mark to market. This Friday, Well, you know,
Speaker 1: what we're seeing in the credit markets, and this is
Speaker 1: this is kind of even you know, preceding some of uh,
Speaker 1: you know, the acceleration around the geopolitical uncertainties is you know,
Speaker 1: we're well off the tight levels and the tightest levels
Speaker 1: of spreads. You know, partly a lot of that was
Speaker 1: was just repricing to a higher interest rate environment. I
Speaker 1: think now, you know, you have a difficult time disentangling
Speaker 1: the price signals because there's a liquidity uh premium risk
Speaker 1: premium being built into the market. Uh. And I think
Speaker 1: most of the price response so far as that, but
Speaker 1: we have to recognize that the negative supply shock and
Speaker 1: the stagflationary impact of that is really a tricky environment
Speaker 1: for for credit. But the growth side is ultimately a
Speaker 1: bit more on the negative side. And you've seen some
Speaker 1: wider spreads across UH credit markets, and I think that's
Speaker 1: a a message that makes sense in terms of pricing
Speaker 1: in you know, some higher probabilities around some more negative
Speaker 1: scenarios for for how this all plays out, and so
Speaker 1: that higher risk premium you know, not yet really talking
Speaker 1: about default risk premium, but risk premium around the potential
Speaker 1: to to change some of the probabilities around um economic
Speaker 1: outcomes around this this event. A lot of people who
Speaker 1: we spoke to this week so that they did rethink
Speaker 1: or they are rethinking actively their allocations in response to
Speaker 1: the developments between Ukraine with the Russian invasion. Have you
Speaker 1: done the same? Yeah? You know, you know there there
Speaker 1: is certainly kind of the initial playbook of you know,
Speaker 1: geopolitical risk is very hard for markets to sustainably reflect
Speaker 1: in prices. I think that initial kind of hopeful response
Speaker 1: in terms of this could be a buying opportunity has
Speaker 1: really been replaced, particularly after the weekend sanctions, with a
Speaker 1: much harder reacitity that this could be going on for
Speaker 1: a much longer period with a much more persistent impact
Speaker 1: to energy prices and broader commodity prices. And that's the
Speaker 1: negative supply shock that you're seeing now roll out in
Speaker 1: terms of forecast revisions. Forecast revisions so far are modest,
Speaker 1: but they're significant in terms of reduction and growth increase
Speaker 1: in inflation, a longer period of inflation. And then again
Speaker 1: to the challenge that puts to global central banks in
Speaker 1: terms of how do they manage the cross currents between
Speaker 1: growth and inflation a lot more focused in the U
Speaker 1: S here on inflation. I think for the e c
Speaker 1: B we're gonna see perhaps a different response given the
Speaker 1: central impact this has in a much larger impact on
Speaker 1: the European growth outlook. So we're really upending a lot
Speaker 1: of assumptions. But I think clearly here the shock to commodities,
Speaker 1: the negative supply shock, prolonging the inflationary environment is is
Speaker 1: going to make this a little bit more durable in
Speaker 1: terms of market impact and economic impact as a geopolitical shock.
Speaker 1: Me you watch this move in your DNA just about
Speaker 1: holding onto one oh nine. What a breakdown. I can't
Speaker 1: convey enough. And of course this is something Mr Rosenberg
Speaker 1: is so good at as the cross correlations. If this
Speaker 1: is not John flight nous, it's sort of a rolling
Speaker 1: wave tape to tape of stress euroswissy, not showing me
Speaker 1: euro your euro US dollar, but nevertheless extraordinary ruble at
Speaker 1: one sevent five days of waitness for this euro. Just
Speaker 1: it goes through the banks in Europe, any credits still
Speaker 1: down by more than ten percent, Commas Bank down by eight,
Speaker 1: suck gent Damn by seven, Deutsche Bank Dawn by a
Speaker 1: little more than seven, Jeff, can you frame just how
Speaker 1: much of a problem we're facing in European markets and
Speaker 1: whether you'd go near it? Well, and the problem is
Speaker 1: certainly centered there. You have you know, significant commodity shocked,
Speaker 1: significant growth shock UH and and and and the dependency
Speaker 1: that we know in terms of the Russian energy supplies
Speaker 1: is is centered obviously much more in Europe than in
Speaker 1: the rest of the world. So you know this is
Speaker 1: you know, not only the growth impact, but the stock
Speaker 1: impact that you just described in terms of the financial
Speaker 1: linkage is for the banking sector, um all being reflected
Speaker 1: in this repricing here of Russian sovereign and and and
Speaker 1: credit risk premium. So UH, your second part of the question,
Speaker 1: I think it's a very difficult environment to assess the
Speaker 1: primary and secondary UH spillover effects, and so a more
Speaker 1: cautious stance is one that we're taking when we look
Speaker 1: at some of the impacts UH in our portfolios. Jeff,
Speaker 1: looking forward to catching up with Rick a little bit later.
Speaker 1: I'll be catching up with Rick reader in the next
Speaker 1: hour on a stage. Mr o So David Kelly, a
Speaker 1: JPMUK and Asset Management. We're here from the White House. Well,
Speaker 1: you speak to Jeff, you speak to Jeff, catch up
Speaker 1: with do you want to swap them? Do you want Jeff?
Speaker 1: Would you like to come to me in the next
Speaker 1: hour and Rick can come. Okay, we can work it out.
Speaker 1: We and he's very sensitive this morning, Jeff, I apologize
Speaker 1: for that and something. There's a difference between being long
Speaker 1: into the weekend, being short into the weekend, and just
Speaker 1: hands off into the weekend. I think a lot of
Speaker 1: people are very, very worried about just being wrong and
Speaker 1: this market just going completely in the other direction. I mean,
Speaker 1: on an ancient U S statistic, the vix is mid midway,
Speaker 1: it's thirty up to thirty five, and we're thirty three
Speaker 1: point three three. So that's a journey. You're leaving us right,
Speaker 1: I'm going I was gonna wait for your dollar to
Speaker 1: bring you in one a weight hand or tumper. I'll
Speaker 1: give it a one oh nine or four serious clubs.
Speaker 1: We're making jokes, are John? Seriously? This is not a joke.
Speaker 1: Something on Thursday, just the final word between you and
Speaker 1: I t K on Thursday, c p I and then
Speaker 1: literally a CPI comes out present the guard is going
Speaker 1: to walk into the room. In Frankfurt, Germany, and deliver
Speaker 1: a news conference I one on nine oh three. Were
Speaker 1: there any moment. Jeffrey Rosenberg, thank you so much for
Speaker 1: joining us. As always, black Rock, John Farrell, thank you
Speaker 1: so much for joining us. We get an important perspective
Speaker 1: from Tiffany Wild and Tiffany, thank you so much for
Speaker 1: waiting through the half hour. Really really all of us
Speaker 1: appreciate that. Tiffany, how separate is the United States right
Speaker 1: now with a boom economy? Yeah, well, first of all,
Speaker 1: good morning coming Paul. I mean, I think I think
Speaker 1: what the SERAL report told you was that the US
Speaker 1: economy is coming into the new year with a lot
Speaker 1: of momentum. Um, you know. And you know, so we
Speaker 1: we got a booming jobs market, but not only that,
Speaker 1: we're seeing labor supply improve. Um. You know, the participation
Speaker 1: rate is improving, people are starting to come back, and
Speaker 1: importantly that is starting to cool off wages, um, you
Speaker 1: know a little bit. Of course, wages are still running
Speaker 1: at you know, five point one percent according to this
Speaker 1: morning's data, um, you know, but that was against expectations
Speaker 1: of almost six percent, so you know, that's a big difference.
Speaker 1: So that's going to be important for the FED. UM
Speaker 1: and It's also going to be important because you do have, um,
Speaker 1: you know, the conflict between Russia and Ukraine, you know,
Speaker 1: is going to have economic implications you know, for not
Speaker 1: only you know, Russia and Ukraine, but for Europe, and
Speaker 1: that will spill over to some extent to the United States.
Speaker 1: So it's just it's really good news that we're coming
Speaker 1: into that conflict, you know, with a very strong position
Speaker 1: in the US economy. So, Tiffany, the headline unemployment rate
Speaker 1: is three point eight percent. Is that full employment? Um?
Speaker 1: You know, so I think I think we're getting there
Speaker 1: for sure. Um you know. So I think we were
Speaker 1: at three five right before the pandemic, and so I
Speaker 1: think that's an easy number that people look at. Um
Speaker 1: you know. So, so we're certainly close, um you know,
Speaker 1: if we're not there already. So the bottom line is
Speaker 1: is certainly from the monetary policy perspective, you know, subtle
Speaker 1: reserve should be hiking interest rates. Um you know. But
Speaker 1: I think the question of you know, hiking interest rates
Speaker 1: and still you know, case of you know, maybe a
Speaker 1: quarter per meeting first is doing something like a fifty
Speaker 1: basis point rate hike, which many in the market have
Speaker 1: talked about you know, I think this payroll report definitely
Speaker 1: suggests that, you know, something more extreme like that fifty
Speaker 1: basis point rate hike is probably not needed at Pimco
Speaker 1: and Newport Beach. I mean, it's nothing to go up
Speaker 1: and brunch in Hollywood about. You know, you just do it.
Speaker 1: I mean, Tiffany does it right, and she's probably gonna
Speaker 1: get in the car. It's gonna hit Mammoth Lakes this weekend,
Speaker 1: you know, little That's how they do it. That's how
Speaker 1: that's how Tiffany rolls. And I noticed a gallon of
Speaker 1: gas Tiffany and Mammoth Lakes, a regular gallon clocking in
Speaker 1: at five dollars. I mean, it's a political football, but
Speaker 1: it's also a reality for a huge part of America.
Speaker 1: When does the price of gas really impinge on your
Speaker 1: Excel spreadsheet? Yeah, I mean so it already is, to
Speaker 1: be quite frank with you, So, you know, I think
Speaker 1: the issue here is is that, you know, obviously it
Speaker 1: when people have to pay war for gasoline, something that
Speaker 1: they need they can't really substitute into other products. It
Speaker 1: just means that they have less you know, real discretionary
Speaker 1: spending for other things. So it is it is bad
Speaker 1: for for broader growth. UM. In the past, Um, the
Speaker 1: United States shale revolution has offset that somewhat, you know,
Speaker 1: but recently, um, you know, and and Jonathan Farrell's comments
Speaker 1: UM to Marty Walsh kind of got to this. But
Speaker 1: recently because of you know, environmental and other concerns, that
Speaker 1: production response in the United States in the oil patch
Speaker 1: has been much more sluggish. So it hasn't offset you know,
Speaker 1: offset as much. And so you know, ultimately it will
Speaker 1: be bad for for United States growth to have um,
Speaker 1: you know, energy prices this high. Hopefully this will be
Speaker 1: you know, a temporary shock, um, you know, and things
Speaker 1: will will normalize at least eventually. UM. But I think
Speaker 1: that also, you know, that also puts the FED in
Speaker 1: a little bit trickier of a position, UM, because this,
Speaker 1: the Russia Ukraine situation is a supply side shock, which
Speaker 1: means higher inflation but yet lower growth. UM. And that's
Speaker 1: a tricky position for the FED again. UM. You know.
Speaker 1: Ultimately we think they stay on course because the US
Speaker 1: is in such a strong position coming into this, um
Speaker 1: that they can still hike interest rates. Um. You know,
Speaker 1: but at some point, you know, they have to be mindful,
Speaker 1: you get a further escalation. UM, you get actual trade
Speaker 1: flow disruptions that are more material coming from Europe. UM.
Speaker 1: You know, that's going to drag on US growth much
Speaker 1: more strongly. UM. And then that's going to kind of
Speaker 1: raise questions around if they need to pause or things
Speaker 1: like that. But for right now, we think Punto Reserve
Speaker 1: officials probably will continue on the path to monetary policy
Speaker 1: UM normalization that they've kind of laid out of the
Speaker 1: last several months. All right, so let's just go right there.
Speaker 1: W I r P go on the Bloomberg terminal shows
Speaker 1: me the markets kind of discounting maybe six rate hikes
Speaker 1: incounter your two. Is that seemed reasonable to you? Yeah,
Speaker 1: I mean we we think it does. You know, obviously,
Speaker 1: you know there will be some uncertainty. Um. You know,
Speaker 1: as we've been saying, you know, stuff happens, and I
Speaker 1: think the you know, obviously this Russia Ukraine conflict is
Speaker 1: a is a prime example of that. But historically, you know,
Speaker 1: stuff happens, and and you have to worry about the
Speaker 1: contagion events, you know, the market contagion that the spirals
Speaker 1: from US. It's very difficult to pinpoint market vulnerabilities before
Speaker 1: you have these types of events happen. So I think
Speaker 1: what we're watching right now at least to see if
Speaker 1: you know, the FED maybe goes a little bit slower,
Speaker 1: is if you do get some of that market contagion happening.
Speaker 1: So do you start to see it in credit, um,
Speaker 1: you know, or even bank funding markets? So far we haven't,
Speaker 1: which is great news, um, you know, but I think
Speaker 1: it's appropriate for the market, you know, where the markets
Speaker 1: pricing about sixth rate high because we think more or
Speaker 1: less that's about right this year, um, given the risks
Speaker 1: you know that are out there. Tiffany, Thank you so much, Tiffany,
Speaker 1: Well to this storm. This is the Bloomberg Surveillance Podcast.
Speaker 1: Thanks for listening. Join us live weekdays from seven to
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