WEBVTT - 24h Hedge Fund Fire-Sale, UEFA Vs FIFA, Europe’s Unstoppable Wildfires 0:00:02.520 --> 0:00:10.639 Bloomberg Audio Studios, podcasts, radio news. This says the Bloomberg 0:00:10.720 --> 0:00:13.680 Daybreak europ podcast. Good morning, It's Friday, the thirty first 0:00:13.720 --> 0:00:17.360 of July. I'm Stephen carollin Brussels. Coming up today. A 0:00:17.480 --> 0:00:20.840 dramatic twenty four hours for a leading AI hedge fund, 0:00:21.000 --> 0:00:24.720 as Ken Griffin's Citadel snaps up billions of dollars of 0:00:24.840 --> 0:00:30.440 Leopold Ashenbrenner's leveraged bets that went sour. Europe's football governing 0:00:30.440 --> 0:00:33.080 body UEPHA says it will boycott the World cop if 0:00:33.120 --> 0:00:37.120 FIFA sells a steak in the tournament. Plus feeling the heat, 0:00:37.280 --> 0:00:41.800 while Europe's unstoppable wildfires are now a terrifying new normal. 0:00:42.280 --> 0:00:45.479 Let's start with a roundup of our top stories. Assets 0:00:45.520 --> 0:00:48.320 at the hedge fund Situational Awareness have plunged from forty 0:00:48.360 --> 0:00:51.960 five billion dollars to about ten billion after margin calls 0:00:52.000 --> 0:00:55.680 forced it to unwind heavily leveraged bets on artificial intelligence. 0:00:56.040 --> 0:00:59.560 The fund, led by former Open AI researcher Leopold Ashenbrenner, 0:01:00.200 --> 0:01:03.120 billions of dollars of stock before Ken Griff and Citadel 0:01:03.320 --> 0:01:06.080 stepped in to buy most of the portfolio with more 0:01:06.160 --> 0:01:07.319 here's Boomberg's Crispit. 0:01:07.720 --> 0:01:10.959 He was hailed as the Nostrodamis of AI, a young 0:01:11.040 --> 0:01:14.440 oracle with a bold prophecy for the future. Before launching 0:01:14.440 --> 0:01:17.560 his hedge fund just two years ago. Leopold Ashenbrenner had 0:01:17.560 --> 0:01:21.240 never managed money professionally. Even so, Wall Street banks were 0:01:21.240 --> 0:01:23.600 willing to lend him up to five times his capital 0:01:23.880 --> 0:01:27.080 as he built giant bets on the AI boom. But 0:01:27.200 --> 0:01:31.080 when technology shares tumbled, those same lenders demanded more collateral, 0:01:31.360 --> 0:01:35.240 triggering a wave of force selling calls went out across 0:01:35.240 --> 0:01:38.600 Wall Street, before Ken Griffin Citadel struck an overnight deal 0:01:38.640 --> 0:01:41.800 to buy most of the portfolio at a discount, ending 0:01:41.840 --> 0:01:44.000 the scramble to rescue the funds positions. 0:01:44.959 --> 0:01:45.520 Yet, as the. 0:01:45.560 --> 0:01:48.920 Dust settles on Ashon Brenner's chaotic week, the twenty something 0:01:49.000 --> 0:01:52.440 appears set to emerge only bruised from the saga. He 0:01:52.560 --> 0:01:55.600 still runs one of the world's biggest equity hedge funds 0:01:55.960 --> 0:01:58.880 in London, Chrispit Bloomberg Radio. 0:01:58.920 --> 0:02:01.920 Well after several bruises days for one of leopol Dashenbrenner's 0:02:01.920 --> 0:02:05.040 biggest holdings, ske Heinix, is helping to lead a record 0:02:05.080 --> 0:02:08.239 reband in South Korea's stock market today, the cost be 0:02:08.360 --> 0:02:11.840 surging as much as seventeen percent, its biggest gain on record, 0:02:12.160 --> 0:02:16.000 while sk Heinix climbed almost thirty percent as investors piled 0:02:16.040 --> 0:02:19.360 back into AI stocks. The rally was helped by Citadel's 0:02:19.360 --> 0:02:24.440 purchase of Situational Awareness's AI portfolio, alongside strong global tech 0:02:24.480 --> 0:02:30.160 earnings and fresh government support for South Korea's AI industry. Well, 0:02:30.160 --> 0:02:33.120 big tech earnies are delivering sharply differing verdicts on the 0:02:33.160 --> 0:02:37.040 race to profit from artificial intelligence. Amazon shares jumped after 0:02:37.080 --> 0:02:40.960 cloud revenue grew by thirty seven percent, while Microsoft added 0:02:40.960 --> 0:02:44.600 a record four hundred and fifty billion dollars in market value, 0:02:44.639 --> 0:02:48.920 following its fastest cloud growth in about four years. But 0:02:49.040 --> 0:02:52.240 Apple fell in after hours, trading by around six percent 0:02:52.400 --> 0:02:55.600 after warning the chip shortages and rising memory costs will 0:02:55.639 --> 0:02:58.959 weigh on sales in the current quarter. Here's Bimbertech's ed 0:02:59.040 --> 0:03:00.560 Ludlow really. 0:03:00.480 --> 0:03:03.760 Fell in after hours has Apple explained that the September 0:03:03.800 --> 0:03:06.200 quarter things are going to get more tough, not just 0:03:06.240 --> 0:03:08.960 because of higher memory prices, but tighter supply. 0:03:09.440 --> 0:03:11.680 The underestimated demand. 0:03:11.440 --> 0:03:14.800 Which means that there is a shortage of leading edge processes. 0:03:14.919 --> 0:03:18.880 It is multifaceted, and that outlook where they see revenue 0:03:18.880 --> 0:03:22.400 growth from nine percent to eleven percent in the September quarter, 0:03:22.440 --> 0:03:26.080 below the streets estimate of above twelve percent, it really 0:03:26.120 --> 0:03:28.600 overshadowed what was a strong June quarter. 0:03:29.680 --> 0:03:32.440 Ed Ludlow. They're dissecting Apple's results and what's proved to 0:03:32.480 --> 0:03:35.520 be a mixed bag for big tech earnings. Meta shares 0:03:35.640 --> 0:03:39.200 fell almost eight percent in yesterday's session after outlining plans 0:03:39.240 --> 0:03:42.800 to commit nearly seven hundred billion dollars to future AI spending. 0:03:43.160 --> 0:03:47.320 The diverging share moves underscore that investors now want evidence 0:03:47.360 --> 0:03:53.800 those investments are generating returns. Anthropic says it's artificial intelligence 0:03:53.840 --> 0:03:58.800 models breached three separate organizations during cybersecurity tests that accidentally 0:03:58.920 --> 0:04:01.800 escaped into the real world. The company says its review 0:04:01.840 --> 0:04:05.160 found three instances in which its claud ai tool gained 0:04:05.200 --> 0:04:08.480 access to the Internet and hacked what it described as 0:04:08.600 --> 0:04:13.120 the real world infrastructure of external organizations. Sharin Gafari, as 0:04:13.160 --> 0:04:15.600 our AI reporter, it found. 0:04:15.520 --> 0:04:19.400 In coordination with one of its partners, that yes, its 0:04:19.480 --> 0:04:22.680 models had actually been able to reach the Internet in 0:04:22.720 --> 0:04:29.760 three different cases involving third party organizations and improperly look 0:04:29.880 --> 0:04:33.360 for ways to sort of do better on internal evaluations 0:04:33.440 --> 0:04:35.159 or achieve internal evaluations. 0:04:35.640 --> 0:04:38.479 Sharen Gafari points out that the disclosure comes just over 0:04:38.560 --> 0:04:41.200 a week after open Ai revealed one of its own 0:04:41.320 --> 0:04:45.760 AI models accidentally hacked another during company or another company 0:04:45.760 --> 0:04:50.200 systems during similar testing. The Bank of Japan has kept 0:04:50.240 --> 0:04:53.560 interest rates unchanged at one percent while maintaining a hawkish 0:04:53.600 --> 0:04:58.039 stance on inflation. The decision came after Japanese authorities intervened 0:04:58.040 --> 0:05:00.480 overnight to support the en whose week This has been 0:05:00.520 --> 0:05:04.479 adding to price pressures. Boj's more optimistic assessment of the 0:05:04.520 --> 0:05:08.920 economy reinforced expectations it could raise interest rates again as 0:05:08.960 --> 0:05:13.160 soon as October. The Spanish government has ordered an emergency 0:05:13.200 --> 0:05:15.800 military deployment to one of its African enclays after an 0:05:15.800 --> 0:05:20.440 illegal immigrant surge. Spanish media have reported that thousands Christs 0:05:20.560 --> 0:05:23.240 crossed in to the city known as Theuta yesterday, mainly 0:05:23.279 --> 0:05:27.159 by sea. The crisis has drawn scrutiny from across Europe, 0:05:27.200 --> 0:05:30.039 including a threat by Italian Prime Minister Georgia Maloney to 0:05:30.080 --> 0:05:33.839 suspend the European Union's freedom of movement agreement with Spain. 0:05:34.600 --> 0:05:37.880 The Spanish Defense minister said in a statement yesterday evening 0:05:37.920 --> 0:05:41.600 that soldiers will be sent to reinforce the security forces 0:05:41.600 --> 0:05:46.039 in THEOTA and Europe's football governing body is set to 0:05:46.040 --> 0:05:49.440 boycott FIFA international tournaments if the group goes ahead with 0:05:49.560 --> 0:05:53.600 controversial plans to seal stakes to private investors. The decision 0:05:53.640 --> 0:05:57.840 by Europe's powerful member association was finalized during a virtual 0:05:57.880 --> 0:06:01.520 crisis meeting to address the sell off. Former FA chairman 0:06:01.600 --> 0:06:05.160 David Bernstein's feels the collaborative approach will get the right 0:06:05.279 --> 0:06:06.920 outcome Igland on it. 0:06:07.040 --> 0:06:09.320 So no, you know, we're a big dation in football, 0:06:09.320 --> 0:06:10.960 but we can't do very much on our own. If 0:06:11.000 --> 0:06:13.960 we try to do something against FIFA. Frankly, they would 0:06:14.080 --> 0:06:14.920 tell us where to go. 0:06:15.200 --> 0:06:16.120 But we do a file. 0:06:16.160 --> 0:06:18.520 We're very very powerful, so I think it's absolutely right 0:06:18.920 --> 0:06:20.040 that we work with UEFA. 0:06:20.240 --> 0:06:20.919 We're part of that. 0:06:23.160 --> 0:06:27.799 David Bernstein, speaking their former FA chairman. The news follow 0:06:27.839 --> 0:06:31.719 significant backlash to FIFA President Gianni Infantino's plans to transfer 0:06:31.800 --> 0:06:35.320 major commercial and tournament operations into a new entity called 0:06:35.400 --> 0:06:38.279 FIFA Forward Enterprise and raise up to four point two 0:06:38.320 --> 0:06:42.239 billion dollars from external investors. UEFA said in the statement 0:06:42.480 --> 0:06:45.279 no ua FA national teams will participate in any FIFA 0:06:45.320 --> 0:06:50.440 competition for so long as these proposals remain alive. And 0:06:50.480 --> 0:06:52.599 those are our top stories on the program. On the 0:06:52.600 --> 0:06:55.480 markets this morning, that jump in South Korea's cost me 0:06:55.880 --> 0:06:59.960 almost seventeen percent at the moment, lifting the broader REMSCI 0:07:00.160 --> 0:07:03.400 specific index by four point three percent. Eurostocks fifty future 0:07:03.440 --> 0:07:05.720 is positive two by eight tenths and Nasdaq futures on 0:07:05.800 --> 0:07:07.599 Wall Street up by one point two percent. 0:07:07.680 --> 0:07:07.880 Two. 0:07:08.160 --> 0:07:10.560 Oil prices are lower this morning one point six percent, 0:07:10.600 --> 0:07:14.640 eighty seven dollars and sixty four cents. As we are 0:07:14.720 --> 0:07:17.200 watching the Japanese yen after the Bank of Japan held 0:07:17.240 --> 0:07:19.880 interest rates at one hundred and sixty sixty three, so 0:07:19.920 --> 0:07:22.800 holding on too much of yesterday's strength after the intervention 0:07:22.920 --> 0:07:27.480 by Japanese authorities in the markets. Well, in a moment, 0:07:27.560 --> 0:07:29.520 we'll bring you more on the incredible story of the 0:07:29.520 --> 0:07:32.560 AI bets that went sour for one hedge fund, plus 0:07:32.600 --> 0:07:37.160 why climate change is making Europe's wildfires more extreme and 0:07:37.440 --> 0:07:40.440 more difficult to control. First, a word on other story 0:07:40.440 --> 0:07:42.160 that I've been reading this morning on what to do 0:07:42.240 --> 0:07:46.000 with grand government buildings the state no longer needs Sarah 0:07:46.040 --> 0:07:48.560 Rappaport from Bloomberg Pursuits has been writing about the latest 0:07:48.600 --> 0:07:52.040 conversions in London. So we had the Old War Rooms 0:07:52.080 --> 0:07:55.600 becoming a Raffles hotel, the former US Embassy becoming the 0:07:55.920 --> 0:07:59.760 Chancery Rosewood. Next up in terms of high profile conversions 0:08:00.160 --> 0:08:02.880 is the Admiralty Arch between Trafalgar Square and the Mall, 0:08:03.080 --> 0:08:05.559 which will reopen later this year as a wald office story. 0:08:05.840 --> 0:08:08.520 Now it closes an office building back in twenty eleven. 0:08:08.600 --> 0:08:10.920 It was sold by the UK government for some sixty 0:08:11.320 --> 0:08:13.720 pounds in twenty twelve. It's going to reopen as a 0:08:13.720 --> 0:08:15.720 hotel this year. Series and speaking to some of the 0:08:15.840 --> 0:08:19.000 developers and architects who've been working on these designs and 0:08:19.040 --> 0:08:21.560 it does seem like hotels are a good fit for 0:08:21.640 --> 0:08:24.680 these buildings. Companies don't want them as offices because they're 0:08:24.760 --> 0:08:28.200 technically complex. They're often not very energy efficient. The government 0:08:28.240 --> 0:08:30.640 doesn't want to pay for the upkeep renovating them as 0:08:30.680 --> 0:08:33.640 complex and expensive, so you need deep pockets. Just one 0:08:33.679 --> 0:08:36.520 example cited in the pieces from the renovation of the 0:08:36.559 --> 0:08:39.560 Old War Rooms that cutting a new doorway in the 0:08:39.600 --> 0:08:43.640 building needed planning permission from local authorities. Selling them of 0:08:43.640 --> 0:08:45.600 course does raise revenue for the government as well. They're 0:08:45.600 --> 0:08:49.320 not entirely uncontroversial though as sales of course, questions about 0:08:49.559 --> 0:08:52.120 whether or not they're selling off part of the country's heritage, 0:08:52.120 --> 0:08:54.400 although the heritage body Historic England, who Sarah spoke to 0:08:54.480 --> 0:08:57.359 for this piece, said that the compromises are often preferable 0:08:57.360 --> 0:09:01.960 to watching landmark buildings fall apart or full vacant. I 0:09:01.960 --> 0:09:04.400 should say as well, really interesting piece on the transformation 0:09:04.440 --> 0:09:08.079 of our city centers and what exactly they're being turned into. 0:09:08.480 --> 0:09:10.920 I've been in the old war rooms. It's pretty fancy, 0:09:11.080 --> 0:09:12.640 so at least there is a chance that you can 0:09:12.720 --> 0:09:14.839 go in there as a regular person, which perhaps he 0:09:14.880 --> 0:09:16.000 might not have been able to do when it was 0:09:16.000 --> 0:09:17.880 a government building. So an interesting piece and we'll put 0:09:17.880 --> 0:09:21.160 a link to it in our podcast show notes. Let's 0:09:21.160 --> 0:09:23.360 bring you more now though, on the dramatic twenty four 0:09:23.400 --> 0:09:26.280 hours for the hedge fund, Situational Awareness forced to sell 0:09:26.320 --> 0:09:29.320 billions of its technology investments this week to Citadel at 0:09:29.360 --> 0:09:32.679 a massive discount. Our market supporter Anthony Stevens joins us 0:09:32.720 --> 0:09:35.480 now for more. Anthony, first of all, can you give 0:09:35.559 --> 0:09:38.640 us a bit more background on Situational Awareness and its 0:09:38.679 --> 0:09:40.160 founder Leopold Dashenbranner. 0:09:41.000 --> 0:09:44.280 Yeah, Leopold is actually a really closely followed member of 0:09:44.280 --> 0:09:47.439 the hedge fund community, especially by retail. He has some 0:09:47.559 --> 0:09:50.199 very deep thoughts on AI that are very famous because 0:09:50.240 --> 0:09:53.040 he's authored a pay per in twenty twenty four highlighting 0:09:53.120 --> 0:09:56.200 how we would get to artificial general intelligence, which is 0:09:56.200 --> 0:09:59.240 the holy grail off AI. He has a deep technology 0:09:59.320 --> 0:10:02.840 background and is just generally a really bright guy. He 0:10:02.920 --> 0:10:05.040 grew a two hundred and twenty five million dollar hedge 0:10:05.040 --> 0:10:07.280 fund up to ten billion dollars, so that is his 0:10:07.360 --> 0:10:10.840 track record until this laterst wipeout, and he's done it 0:10:10.880 --> 0:10:14.439 through very concentrated bets across the AI supply chain, whether 0:10:14.480 --> 0:10:19.160 you're talking about energy or chips of this plane lllms 0:10:19.200 --> 0:10:21.360 in the case of anthropy in the private market. So 0:10:21.440 --> 0:10:24.600 he's invested across the supply chain and done really quite well. 0:10:24.840 --> 0:10:28.000 It appears though, that he's been caught off guard with 0:10:28.520 --> 0:10:31.560 the big change in direction over the last couple of 0:10:31.559 --> 0:10:34.520 months when he was at his maximum size, and that's 0:10:34.559 --> 0:10:35.640 what's caused the problem here. 0:10:37.160 --> 0:10:40.760 So I suppose talk us through exactly what happened when 0:10:41.000 --> 0:10:43.440 things started to go wrong and how did sitad Alan 0:10:43.480 --> 0:10:44.720 ken Griffin get involved. 0:10:45.640 --> 0:10:48.000 So what happens when a large fund like this is 0:10:48.120 --> 0:10:50.360 on leverage is that they get that money from a 0:10:50.400 --> 0:10:53.320 prime broker. Now, when those holdings are worthless, the prime 0:10:53.360 --> 0:10:55.400 broker needs their money back because they've lent you the 0:10:55.400 --> 0:10:58.120 money in the first place, and they're getting, you know, 0:10:58.280 --> 0:11:01.319 thirty forty percent marked down in the value of the holdings. 0:11:01.440 --> 0:11:05.160 So these prime brokers came to Situational Awareness for money, 0:11:05.559 --> 0:11:08.079 and to raise that money you would need to sell 0:11:08.320 --> 0:11:10.560 in the market, and there's been some of that pressure 0:11:10.600 --> 0:11:14.200 on the holdings recently. But in the end, you want 0:11:14.240 --> 0:11:16.199 to kind of get the money quicker instead of selling 0:11:16.200 --> 0:11:19.120 it in market, and that's where Citadel comes in. Citadel 0:11:19.240 --> 0:11:21.800 is a block player. They would have charged a discount 0:11:21.840 --> 0:11:25.800 for the liquidity that they are providing for Ashon Brenner 0:11:25.880 --> 0:11:28.920 and Situational Awareness to get out of these positions. Once 0:11:29.000 --> 0:11:32.320 that's done, you can see the selling pressure alleviate in 0:11:32.400 --> 0:11:34.760 the portfolio of names that they own, and most of 0:11:34.760 --> 0:11:37.960 those names up fifteen to twenty percent. That includes the 0:11:38.080 --> 0:11:42.480 Skehenix ADR where Situational Awareness was a cornerstone player in 0:11:42.520 --> 0:11:45.520 the Ada launch. So that's one of the reasons COREA 0:11:45.600 --> 0:11:46.360 is on fire. 0:11:46.120 --> 0:11:49.400 Today, So what does the future look like then? For 0:11:49.480 --> 0:11:52.120 situational awareness and I suppose what's the lesson from this 0:11:52.280 --> 0:11:54.440 story and the volatility of these investments. 0:11:55.120 --> 0:11:57.120 Well, to start with the lesson first is just a 0:11:57.160 --> 0:12:00.400 combination of leverage and voltaity. It never goes well. Seeing 0:12:00.440 --> 0:12:02.760 that even in Korea with the retail investors and their 0:12:02.840 --> 0:12:05.840 leverage ETFs, that combination has not worked out in the 0:12:05.880 --> 0:12:08.240 last couple of months and there's some step losses there 0:12:08.280 --> 0:12:10.800 because the risk management quite frankly you know, is a 0:12:10.800 --> 0:12:11.400 bit stretched. 0:12:11.640 --> 0:12:12.720 In terms of the future. 0:12:12.760 --> 0:12:16.360 He is sitting on very large positions in private markets, 0:12:16.400 --> 0:12:19.800 in most notably in Anthropic and other names in the 0:12:19.840 --> 0:12:22.200 AI space, So how he monetizes that or whether he 0:12:22.240 --> 0:12:25.120 gets to hang on to that is a point of conjecture. 0:12:25.600 --> 0:12:28.160 Reporting suggests that he looked to sell those stakes as 0:12:28.160 --> 0:12:31.199 well before changing his mind after he got the public 0:12:31.760 --> 0:12:35.000 markets liquidity. The next step is he's looking to raise 0:12:35.120 --> 0:12:37.839 new money now. It will be very interesting how whether 0:12:37.880 --> 0:12:41.200 his early LP's limited partners, who did really well with 0:12:41.320 --> 0:12:44.800 him at the beginning, choose to reload, and if they do, 0:12:45.120 --> 0:12:47.559 what does he choose to reload in will he stick 0:12:47.600 --> 0:12:50.640 with the original beds or has his investment thesis changed, 0:12:50.840 --> 0:12:53.400 so when he comes back with new money, his thirteen 0:12:53.520 --> 0:12:56.280 F filings of what he's bought will be super interesting. 0:12:56.760 --> 0:12:59.000 Certainly. Well, Anthony, thank you very much for bringing us 0:12:59.200 --> 0:13:01.720 the background to this fascinating story and also where it 0:13:01.760 --> 0:13:04.960 may go next. That's our Markets reporter Anthony Stevens. Stay 0:13:05.000 --> 0:13:08.160 with us. More from Bloomberg Daybreak Europe coming up after 0:13:08.200 --> 0:13:17.280 this now. Wildfires are continuing to burn in many parts 0:13:17.280 --> 0:13:19.679 of Europe, with hundreds of thousands of people forced from 0:13:19.720 --> 0:13:22.920 their homes in France and in Spain. Scientists say that 0:13:22.960 --> 0:13:27.080 climate change is making fire weather more common and more extreme. 0:13:27.440 --> 0:13:29.840 Our reporter and either Azuke joins us now from Paris 0:13:29.960 --> 0:13:32.800 for more. Now, first of all, you were in Bordeaux 0:13:32.880 --> 0:13:35.360 this week reporting for this story. What is the situation 0:13:35.520 --> 0:13:36.120 like there now? 0:13:37.800 --> 0:13:41.360 Thank you for having me. It was actually a sad 0:13:41.480 --> 0:13:44.080 site to tour the Bordeaux area, which is normally full 0:13:44.080 --> 0:13:46.800 of happy tourists who come to the area to visit 0:13:46.840 --> 0:13:50.000 the beautiful old town. You know, there are camping sites, 0:13:50.040 --> 0:13:54.000 normally upscale resorts like cafet where people come to enjoy 0:13:54.040 --> 0:13:56.319 the oysters. You know, at the end of the day. 0:13:56.400 --> 0:13:59.480 My thought was scratching. You know, even areas where there 0:13:59.480 --> 0:14:01.640 are no fire, it's kind of hard to breathe and 0:14:01.679 --> 0:14:07.239 walk around. I saw people wearing masks. Basically, the firefighters 0:14:07.280 --> 0:14:10.719 are still battening the flames on all fronts, you know, 0:14:10.880 --> 0:14:13.600 in the Bordeaux area, in other places in France and 0:14:13.720 --> 0:14:18.760 also in Spain. They are truly unprecedented wildfires. You know, 0:14:18.800 --> 0:14:22.040 across France and Spain, we've had more than three hundred 0:14:22.080 --> 0:14:26.080 and twenty thousand people evacuated, which is like the largest 0:14:26.160 --> 0:14:34.160 wildfire evacuation operation in Europe possibly ever. Now thousands have 0:14:34.240 --> 0:14:37.280 started to return to areas where the flames are now 0:14:37.360 --> 0:14:40.680 under control. But you know, the largest fire in the 0:14:40.720 --> 0:14:47.760 Bordeaux region continues to you know, continues on and we've 0:14:47.760 --> 0:14:51.880 had more than forty two thousand hectars roughly, if you want, 0:14:51.960 --> 0:14:58.520 four times the size of Paris burnt. Already since January, 0:14:58.880 --> 0:15:02.200 we've had more than one hundred thousand hectars burnt in 0:15:02.280 --> 0:15:05.160 the country, which is very significant. You know, we have 0:15:05.240 --> 0:15:10.040 fires also on hills overlooking the Mediterranean and also in 0:15:10.040 --> 0:15:13.720 the island of Corsica. So basically twenty twenty six is 0:15:13.800 --> 0:15:17.280 already the worst wildfire season on record in France. 0:15:17.360 --> 0:15:22.360 And why are these fires proving so difficult then to control? 0:15:24.280 --> 0:15:29.200 It's really a combination of different factors. Firstly, you know, 0:15:29.240 --> 0:15:32.640 we've seen repeated heat waves. We are at the fourth 0:15:32.680 --> 0:15:35.800 heat wave this year and we're not even in August yet, 0:15:37.080 --> 0:15:40.480 so that's one thing. The temperatures are exceeding forty degrees 0:15:40.520 --> 0:15:43.680 celsius in many parts of France but also in southern 0:15:43.680 --> 0:15:48.520 Europe where you are seeing all these fires. There is 0:15:48.560 --> 0:15:52.280 also another factor where we are having very wet winters 0:15:52.720 --> 0:15:56.200 which allow shrubs to grow, and then you have weeks 0:15:56.200 --> 0:15:59.280 of heat waves and hot, dry weather which make all 0:15:59.320 --> 0:16:03.320 these very bustable in forests and vegetation. And the third 0:16:03.320 --> 0:16:07.560 factor is really strong winds, which you know, allow fires 0:16:07.600 --> 0:16:11.440 to spread very rapidly and change direction with very little warning. 0:16:13.320 --> 0:16:20.560 These can create something which is called in firefighting slang 0:16:20.920 --> 0:16:24.800 pyrocumulon limbus clouds, which are fire clouds that you know, 0:16:24.880 --> 0:16:29.960 generate their own weather. They can have like powerful updrafts 0:16:30.000 --> 0:16:36.160 and unpredictable winds can make these firefighting operations very difficult. 0:16:37.080 --> 0:16:41.120 Firefighters also speak about something called zombie fires, which is 0:16:41.160 --> 0:16:45.560 basically that the fire continued to burn underground without being visible, 0:16:46.120 --> 0:16:48.400 and then they can flare up several days or even 0:16:48.440 --> 0:16:51.760 weeks later. This happened in twenty twenty two. You know, 0:16:51.800 --> 0:16:54.000 there were big fires and it took months in some 0:16:54.160 --> 0:16:57.680 areas years to put them out completely because they continued 0:16:57.720 --> 0:16:58.640 to burn underground. 0:16:59.240 --> 0:17:03.200 Yeah, frightening scenes that we've seen beamed around the world 0:17:03.240 --> 0:17:07.159 from France and Spain and elsewhere as well. In a 0:17:07.200 --> 0:17:09.240 moment like this, it's very difficult, of course, to talk 0:17:09.240 --> 0:17:13.040 about the economic consequences, because this is a live situation 0:17:13.200 --> 0:17:15.000 for those both fighting it and those who are worried 0:17:15.040 --> 0:17:16.679 about the future of their homes. But what do we 0:17:16.760 --> 0:17:20.200 know about what all of this will mean for the economy, 0:17:20.240 --> 0:17:23.080 given that you know, climate change seems to be indicating 0:17:23.280 --> 0:17:25.280 this could be a recurring event. 0:17:26.920 --> 0:17:30.560 So the economic impact will almost certainly amount to billions 0:17:30.560 --> 0:17:34.959 of euros. There are no accurate figures for now, but 0:17:35.160 --> 0:17:37.760 it's surely in the billions of euros. You know, the 0:17:37.960 --> 0:17:43.200 in France's Johonne there are more than thirteen thousand businesses 0:17:43.240 --> 0:17:47.480 that have been disrupted by evacuation orders, affecting more than 0:17:47.600 --> 0:17:50.720 one hundred and fifty thousand workers. You know, you've had 0:17:50.840 --> 0:17:55.360 major industrial and defense sites, including from companies like tals 0:17:55.480 --> 0:18:00.119 and Erbus and Thatsaw Aviation, which have temporarily reduced or 0:18:00.160 --> 0:18:04.320 suspended operations. They evacuated some sites. You know, tourism has 0:18:04.359 --> 0:18:08.639 been taking a very significant hit during the peak holiday season. 0:18:09.119 --> 0:18:09.879 You know this. 0:18:10.200 --> 0:18:14.040 We are in July and August. You know, we have beaches, campsites, 0:18:14.160 --> 0:18:17.879 roads closed. In the Bordeaux area. I saw empty restaurants 0:18:17.880 --> 0:18:21.600 on piazzas normally full of tourists. Hotels are at thirty 0:18:21.640 --> 0:18:25.919 percent occupancy when they are normally at above ninety percent. 0:18:26.520 --> 0:18:29.480 You have agriculture which is suffering from burned forests and 0:18:29.520 --> 0:18:35.159 livestock losses, smoke affecting vineyards and crops. You know, this 0:18:35.280 --> 0:18:39.440 is like the top whining region in France with cint 0:18:39.440 --> 0:18:43.639 Emilion and other areas. And that's not counting the huge 0:18:43.640 --> 0:18:47.240 cost of emergency response, you know, helping people return home, 0:18:47.280 --> 0:18:52.160 rebuilding the homes, the roads, the infrastructure, and insurance claims. 0:18:52.200 --> 0:18:55.480 You know, only maybe ten percent of climate related economic 0:18:55.600 --> 0:18:59.160 losses in Europe are typically inshored, so the rest will 0:18:59.200 --> 0:19:03.080 fall on governments and businesses and local communities. 0:19:03.880 --> 0:19:06.240 Thanks for listening to Bloomberg Daybreak Europe. 0:19:06.400 --> 0:19:08.960 If you're enjoying the podcast, give us a follow, leave 0:19:09.000 --> 0:19:11.199 a rating or review, and maybe send it to that 0:19:11.359 --> 0:19:14.159 one friend or colleague who's always trying to keep up 0:19:14.200 --> 0:19:14.840 with the news. 0:19:15.200 --> 0:19:17.360 And if one podcast today isn't it not for you? 0:19:17.359 --> 0:19:19.880 You can also listen to us live every weekday from 0:19:20.000 --> 0:19:23.000 six am in London on DAB Radio, on tune in 0:19:23.200 --> 0:19:25.080 and on the Bloomberg Business app 0:19:25.480 --> 0:19:27.800 Or if you've got a smart speaker nearby, just say 0:19:27.960 --> 0:19:29.280 play Bloomberg Radio.