WEBVTT - Surveillance: Higher Equities Base Case with Koesterich 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment and 0:00:17.280 --> 0:00:23.280 international relations. Find Bloomberg Surveillance, an Apple podcast, Suncloud, Bloomberg 0:00:23.360 --> 0:00:29.840 dot Com and of course on the Bloomberg terminal. Let's 0:00:29.840 --> 0:00:32.479 talk about this equity market with Russ Coastrick, the portfolio 0:00:32.520 --> 0:00:35.600 manager for the Global Allocation Fund of black Rock. RUSSI, 0:00:35.640 --> 0:00:38.280 your words are base cases equities and the yea higher. 0:00:38.640 --> 0:00:42.080 What's the base case? Based on Russ and more and John, 0:00:42.360 --> 0:00:44.600 I think the base case is pretty simple. That we're 0:00:44.640 --> 0:00:47.239 in an environment where the economy is slowing. That's one 0:00:47.280 --> 0:00:51.360 of the tricky parts. But nominal GDP real growth plus 0:00:51.360 --> 0:00:54.840 inflation is still likely to be somewhere around seven percent 0:00:54.920 --> 0:00:58.000 this year. And when you look at that and you 0:00:58.120 --> 0:01:02.200 think about the relationship between m g DP revenue earnings, 0:01:02.440 --> 0:01:05.360 you're probably gonna have a stronger year for earnings growth 0:01:05.680 --> 0:01:09.160 that is currently discounted. And yes, as rates back up 0:01:09.200 --> 0:01:12.080 a bit, you may get some multiple compression, but to 0:01:12.120 --> 0:01:15.960 our minds, unless they tighten much more aggressively than we 0:01:16.040 --> 0:01:19.400 think you're probably not gonna have so much multiple compression 0:01:19.880 --> 0:01:23.160 that over up it overtakes the earnings growth. So still 0:01:23.200 --> 0:01:26.400 a year where stocks are positive, although not nearly as 0:01:26.400 --> 0:01:28.720 positive as we were last year or the last few 0:01:28.800 --> 0:01:32.320 years Russ, as we saw from Apple and I guess 0:01:32.319 --> 0:01:36.959 Amazon's on Thursday as well. How does black Rock vailue 0:01:37.480 --> 0:01:41.399 these tech bohemus profiting tons of money? How do you 0:01:41.560 --> 0:01:44.760 value that right now? Well, Tom, this is I think 0:01:44.800 --> 0:01:47.360 part of the bull case that you've got companies like 0:01:47.400 --> 0:01:50.720 Apple that are still cash flow machines, and as large 0:01:50.760 --> 0:01:53.480 as they are, they're still growing their cash flow at 0:01:53.480 --> 0:01:57.080 an incredible rate. They're unbelievably profitable. This is where some 0:01:57.160 --> 0:02:00.920 of the dislocations are probably creating opportunities. We know that 0:02:01.000 --> 0:02:02.920 a lot of the early growth names and names that 0:02:02.920 --> 0:02:05.640 are not gonna have earnings for a decade, they've been hit. 0:02:05.960 --> 0:02:07.840 A lot of that is tied to the bubble coming 0:02:07.840 --> 0:02:10.320 out of speculation, a lot of this type of real 0:02:10.400 --> 0:02:13.440 rates going up. When you have companies like Apple and 0:02:13.440 --> 0:02:16.079 you can pick any other name within that large cap 0:02:16.160 --> 0:02:21.160 tech universe, you know they've come under pressure, but maybe 0:02:21.200 --> 0:02:24.079 for the wrong reason, because these are not companies where 0:02:24.120 --> 0:02:27.200 you're looking at discounting cash flow in ten years as 0:02:27.200 --> 0:02:29.800 we saw last week, of generating from menace cash flow 0:02:29.919 --> 0:02:33.040 in real time. Russ. Given the fact that you are 0:02:33.120 --> 0:02:36.079 constructive on these companies, you've got such positive things to say, 0:02:36.120 --> 0:02:37.760 and black Rock has had a stance of holding a 0:02:37.800 --> 0:02:40.200 bit more cash. When do you know it's time to 0:02:40.240 --> 0:02:43.440 deploy it? Well, you know, the cash is not just 0:02:43.520 --> 0:02:45.600 about trying to time the market. I think part of 0:02:45.600 --> 0:02:48.080 the reason for the cash, and honestly so we're running 0:02:48.080 --> 0:02:51.320 with the high cash balance today as well, is less 0:02:51.360 --> 0:02:54.440 about I'm going to time the market, is more about cash. 0:02:54.639 --> 0:02:57.359 In an environment in which bonds have become the source 0:02:57.400 --> 0:03:00.200 of risk. Cash along with that, say, a long hour 0:03:00.280 --> 0:03:03.320 position has become one of your risk mitigainst And if 0:03:03.320 --> 0:03:05.919 you're running a multi asset portfolio and you're thinking about 0:03:06.040 --> 0:03:08.600 risk and managing that risk and you're not getting the 0:03:08.639 --> 0:03:12.000 same diversification used to get from bombs, you're gonna run 0:03:12.040 --> 0:03:14.480 with a bit more cash, Russ. Just quickly before you 0:03:14.520 --> 0:03:17.360 go Friday, A lot of people expecting a self print, 0:03:17.440 --> 0:03:19.400 maybe even a negative one. How do you think we're 0:03:19.400 --> 0:03:22.640 going to internalize that with the number drops, you know, 0:03:22.800 --> 0:03:25.040 I think we're back in the environment where people are 0:03:25.080 --> 0:03:27.799 gonna get a little bit nervous about strong data because 0:03:27.840 --> 0:03:30.480 obviously the big tears that fans going to be more aggressive. 0:03:30.880 --> 0:03:32.880 That said, you know, there's still some noise in this print. 0:03:32.919 --> 0:03:36.040 We know that the seasonality numbers around the holidays have 0:03:36.160 --> 0:03:39.240 been off really since the financial crisis. They've probably been 0:03:39.240 --> 0:03:42.400 even more off since the pandemic, So I wouldn't base 0:03:42.720 --> 0:03:45.840 too much on one print. Russ Coast of black Rock, 0:03:46.120 --> 0:03:55.280 Russ fantastic as always, sir, Thank you very much joining 0:03:55.360 --> 0:03:58.960 us now. Sarah Hunt, portfolio manager at Alpine Woods Capital Investors. Sarah, 0:03:59.000 --> 0:04:02.040 can we just stop here? You're pull photio manage. How 0:04:02.040 --> 0:04:07.040 active were you this month? Well, we were fairly well 0:04:07.080 --> 0:04:09.600 positioned coming into this month, so we've been active in 0:04:09.680 --> 0:04:12.040 terms of what we're looking for that might have gotten 0:04:12.440 --> 0:04:15.360 hit with the rest of the stocks. So we were 0:04:15.560 --> 0:04:18.120 somewhat active, but it's not like we went much. We 0:04:18.160 --> 0:04:20.800 had a much different activity level than normal because we 0:04:20.800 --> 0:04:22.880 were fairly well positioned coming into this because we were 0:04:22.880 --> 0:04:25.400 concerned about this coming into and the end of last year. 0:04:25.600 --> 0:04:28.800 If someone has a bullish cast, where is the opportunity 0:04:29.000 --> 0:04:32.040 right now? I think there's a lot of opportunity in 0:04:32.120 --> 0:04:33.800 some of the tech stocks that have gotten hit. I mean, 0:04:33.880 --> 0:04:35.800 you saw that rally in the Nastack on Friday. I 0:04:35.800 --> 0:04:37.560 think part of that was Apple coming out and saying 0:04:37.560 --> 0:04:39.280 that some of their supply chains of ease. I think 0:04:39.320 --> 0:04:41.799 that gave people some comfort that some of the issues 0:04:41.839 --> 0:04:44.000 that they were concerned about are getting a little bit better. 0:04:45.000 --> 0:04:46.760 I don't have the numbers in front of me, Sarah, 0:04:46.760 --> 0:04:50.240 but this is really important. Joe Feldman, with Dana Telsea's 0:04:50.279 --> 0:04:54.960 advisory group has operating income at Amazon and again over 0:04:55.000 --> 0:04:59.279 a longer time frame of twenty four months. It's breathtaking 0:04:59.320 --> 0:05:02.320 the growth. When you look at the tech stocks, you're 0:05:02.320 --> 0:05:05.880 not looking at one week performance or one quarter. How 0:05:05.920 --> 0:05:10.479 long is your timeline to judge the value of big tech? 0:05:11.880 --> 0:05:14.080 I think the timeline has to be pretty long because 0:05:14.279 --> 0:05:17.279 some of those companies have grown fairly, fairly well for 0:05:17.279 --> 0:05:19.479 a very long period of time. And when people start 0:05:19.560 --> 0:05:21.800 to talk about the tech issue earlier on with a 0:05:21.920 --> 0:05:25.039 great tightening issue, there is a bifurcation and technology for 0:05:25.080 --> 0:05:27.000 the companies that can grow and grow profitably. And I've 0:05:27.040 --> 0:05:29.320 said this before, and I really think that that's starting 0:05:29.320 --> 0:05:31.080 to really starting to see that. But there are some 0:05:31.080 --> 0:05:33.400 stocks that have gotten hit with all of this that 0:05:33.480 --> 0:05:35.480 I think are decent values here. I mean, you've got 0:05:35.480 --> 0:05:38.120 some fifteen times earning stocks and some of the chip 0:05:38.120 --> 0:05:40.200 makers who've got some of the chip equipment makers that 0:05:40.240 --> 0:05:42.160 are cheaper now too than they were before. And I 0:05:42.240 --> 0:05:44.440 think that there's some real growth ahead because you're going 0:05:44.440 --> 0:05:47.320 to continue to move where we're making semiconductors. If the 0:05:47.360 --> 0:05:49.560 supply chain issues have taught us anything, I think you're 0:05:49.560 --> 0:05:51.800 going to see a different People are going to be 0:05:51.800 --> 0:05:54.920 basing their their production of semi conductors in other places 0:05:54.960 --> 0:05:56.960 than they have been because they don't like the dependency. 0:05:57.200 --> 0:05:58.919 So I think that there's a long runway for some 0:05:58.960 --> 0:06:00.960 of these stocks to grow, and I think that that 0:06:01.120 --> 0:06:02.800 is what people are going to be looking for as 0:06:02.839 --> 0:06:05.080 we go forward. Sarah, it has never been a fundamental issue. 0:06:05.120 --> 0:06:08.480 It's always been a valuation issue at least, and some 0:06:08.520 --> 0:06:11.280 people are looking at the potential for real rates in 0:06:11.320 --> 0:06:13.720 the United States to go to zero. David Costin among them, 0:06:13.720 --> 0:06:17.160 of Goldman Sachs, how much are you including that scenario 0:06:17.240 --> 0:06:19.240 when you say it is time to start going in 0:06:19.520 --> 0:06:22.920 and buying some of these high quality names. Well, I mean, 0:06:22.960 --> 0:06:25.200 if you think about the fact that historically we have 0:06:25.279 --> 0:06:27.680 never seen negative rates before, I think just getting back 0:06:27.720 --> 0:06:30.839 to zero should not be a cause for major concern, 0:06:30.880 --> 0:06:33.400 and I think that growth can still happen under those conditions. 0:06:33.400 --> 0:06:35.479 But the problem with inflation is that it's systemic in 0:06:35.520 --> 0:06:38.359 ways it is very difficult to fight. The energy issue 0:06:38.400 --> 0:06:40.479 is one thing, the housing issue is another thing, and 0:06:40.520 --> 0:06:42.440 those are not that easy to fix. I mean, if 0:06:42.480 --> 0:06:46.280 you've got a global move away from hydrocarbons without a 0:06:46.279 --> 0:06:49.520 lot of non expensive ways to replace them, that's not 0:06:49.600 --> 0:06:51.600 going to be a transitory issue. That's going to be 0:06:51.640 --> 0:06:54.119 a longer term issue. And the housing problem, as rents 0:06:54.160 --> 0:06:56.279 go up, is going to be non transitory as well. 0:06:56.600 --> 0:06:58.880 So I think that just getting back to zero is 0:06:58.920 --> 0:07:01.640 not a tragedy most of this group. But I think 0:07:01.680 --> 0:07:03.479 that the longer term question is going to be what 0:07:03.560 --> 0:07:06.320 does that look like going forward, where do rates go, 0:07:06.400 --> 0:07:08.880 and what happens in the interim to inflation. But there 0:07:08.880 --> 0:07:10.360 are a lot of people are saying that because of 0:07:10.400 --> 0:07:12.920 that inflation story, it's the cyclicals that you should lean 0:07:13.000 --> 0:07:15.880 into and not necessarily the growth names that have benefited 0:07:16.040 --> 0:07:18.480 by low rates. Do you disagree with that are you 0:07:18.520 --> 0:07:21.800 saying that actually, these big names have the greatest capacity 0:07:21.880 --> 0:07:25.280 to grow with inflation. I think some of these big 0:07:25.360 --> 0:07:28.200 names have the biggest capacity to continue to raise prices. 0:07:28.200 --> 0:07:29.960 The problem with the cyclicals is that if you've got 0:07:30.000 --> 0:07:32.720 a slowing economy, then you've got you know, a talent 0:07:32.800 --> 0:07:34.480 on one side and the headmand on the other. And 0:07:34.520 --> 0:07:37.400 I'm not sure that that's going to be the biggest 0:07:37.440 --> 0:07:39.440 place to make money. Although we think some of those 0:07:39.440 --> 0:07:41.440 stocks have come down too, so it's not I wouldn't 0:07:41.440 --> 0:07:45.160 ignore them either. It's really just looking at individually, stock 0:07:45.240 --> 0:07:47.400 by stock, what is this company's what does it look 0:07:47.440 --> 0:07:48.920 like for them in the future for the next two 0:07:49.000 --> 0:07:51.840 or three years, what does it look like for what 0:07:51.960 --> 0:07:53.920 does the interest rate due to them? And what do 0:07:54.000 --> 0:07:56.119 their end markets look like? And I think that's really 0:07:56.120 --> 0:07:58.920 the kind of individual stock by stock analysis that has 0:07:58.960 --> 0:08:01.960 to be done. Sarah Vom palm Wood's Capital Investors. Sarah, 0:08:02.040 --> 0:08:04.080 what a busy month, all that work last week for 0:08:04.080 --> 0:08:07.320 a flat market just unread exhausting stuff. Sarah, thank you, 0:08:07.480 --> 0:08:14.240 thank you very much. We start strong with Lisa Hornby, 0:08:14.320 --> 0:08:17.640 head of the US multisector fixed income at Schroeder's with 0:08:17.760 --> 0:08:20.440 a backdrop out of A. Rutger's economics and the great 0:08:20.480 --> 0:08:24.280 Michael Bordeaux as well. Lisa Hornby, you are grounded in 0:08:24.400 --> 0:08:29.040 economic history with Bordo place. The economic history right now 0:08:29.680 --> 0:08:32.920 is you allocate forward to the market. How do you 0:08:33.000 --> 0:08:39.400 combine all the econo babble into an investment view. I 0:08:39.440 --> 0:08:42.280 think it comes back to Lisa's coming earlier about things 0:08:42.320 --> 0:08:47.360 being corrupted. I mean, I would take that a step. 0:08:48.120 --> 0:08:50.360 It's not yield curve, right, It's not just the yield 0:08:50.400 --> 0:08:52.920 curve that's been corrupted. It's all financial assets. I mean, 0:08:52.960 --> 0:08:55.320 you look at the price appreciation we've had over the 0:08:55.360 --> 0:08:58.840 last couple of years, and you'd say nothing could justify 0:08:58.920 --> 0:09:01.000 that except for the fact that we had literally trillions 0:09:01.000 --> 0:09:04.199 of dollars poured into the economy UM, thanks to both 0:09:04.280 --> 0:09:09.199 FED and and and policymakers and UM. Markets now need 0:09:09.240 --> 0:09:11.400 to correct to some level of normalcy, and that's what 0:09:11.400 --> 0:09:14.319 we're seeing. We're in a transition phase now. UM. So 0:09:14.440 --> 0:09:16.880 you know, our view on risk assets is a little 0:09:16.880 --> 0:09:19.400 bit more cautious. We've probably I think we've spoken about 0:09:19.440 --> 0:09:21.360 that on this show for the last couple of months. 0:09:21.800 --> 0:09:24.480 When you get valuations in the bottom quartile and we 0:09:24.480 --> 0:09:26.560 were in the bottom desile. I think in UH in 0:09:26.640 --> 0:09:29.160 November you have to be a bit more cautious in 0:09:29.160 --> 0:09:31.760 your approach to risk taking. So that's where we are. Um. 0:09:31.840 --> 0:09:34.560 You know, we look at at all in treasury yields 0:09:34.600 --> 0:09:36.160 right now and we say they do offer a little 0:09:36.160 --> 0:09:38.720 bit more value and the market is discounting a lot 0:09:38.800 --> 0:09:40.520 in terms of the FED. Maybe we could go a 0:09:40.559 --> 0:09:42.720 little bit further, but certainly we think we're a lot 0:09:42.760 --> 0:09:45.400 of the way there at this point. Um. And so 0:09:46.040 --> 0:09:48.480 you know, we're we're kind of being cautious and waiting 0:09:48.480 --> 0:09:51.920 for the macro backdrop to stabilize a bit. Hopefully the 0:09:51.920 --> 0:09:54.280 Fed gets this right. I think the chance of that 0:09:54.400 --> 0:09:57.120 is is fairly low. But hopefully the Fed does navigate 0:09:57.160 --> 0:10:01.120 this well and doesn't overtighten into a slowing economy. Um. 0:10:01.200 --> 0:10:04.760 But if they can sort of land this uh land 0:10:04.800 --> 0:10:07.320 this well, then there should be opportunities for more risk 0:10:07.320 --> 0:10:11.560 taking later this years. Unreliing on other programs and other 0:10:11.640 --> 0:10:14.240 networks now for Fed speed because no FED officials coming 0:10:14.280 --> 0:10:17.880 back on this program anytime soon. In the ft Atlanta 0:10:17.920 --> 0:10:21.240 FED President Raphael Bostick just opening South up to maybe 0:10:21.280 --> 0:10:23.360 need to go quicker if they need to. Maybe not. 0:10:23.440 --> 0:10:25.839 If they don't, at least we're still sticking with maybe 0:10:25.880 --> 0:10:28.760 three hikes for twenty two. I'm just wondering in your 0:10:28.800 --> 0:10:31.520 mind where the gap is right now between the communication 0:10:31.520 --> 0:10:32.880 we're getting from the FED and what the market is 0:10:32.880 --> 0:10:34.679 baking game. Do you think that's a widespread would you 0:10:34.679 --> 0:10:37.000 think it really narrows the next time we get the 0:10:37.080 --> 0:10:39.360 dot plots safe from the FED in the middle of March, 0:10:40.280 --> 0:10:43.160 so you know, I've seen some of the street forecasts 0:10:43.200 --> 0:10:45.240 out there as far as high as seven hikes. I 0:10:45.240 --> 0:10:47.199 think that's too much. I don't think the FED gets there. 0:10:47.240 --> 0:10:50.079 I think the market disconnected between the FED in two 0:10:50.200 --> 0:10:52.560 is probably not the material. My base case still at 0:10:52.600 --> 0:10:55.200 this point is that they probably do for basis point 0:10:55.200 --> 0:10:58.760 takes rather than five. I do think inflation peaking will 0:10:58.800 --> 0:11:02.199 give them a chance to pivot office something slightly slightly 0:11:02.320 --> 0:11:04.719 as aggressive as they are now, um so, become a 0:11:04.760 --> 0:11:06.800 little bit less aggressive. I think where the gap is 0:11:06.800 --> 0:11:09.600 is probably next year, Uh, the market is discounting very 0:11:09.679 --> 0:11:11.600 very little. I think you probably need to shift some 0:11:11.679 --> 0:11:15.720 of what's in two into three. Um so. I think 0:11:15.760 --> 0:11:18.000 that's probably where the bigger gap is, and and the 0:11:18.040 --> 0:11:22.040 overall terminal funds rate is still fairly low in the market, UM, 0:11:22.080 --> 0:11:24.120 so you know, between one and three quarter percent and 0:11:24.120 --> 0:11:26.360 two percent, that's still a very very low terminal rate. 0:11:26.360 --> 0:11:27.760 I think there could be a little bit of scope 0:11:27.760 --> 0:11:29.960 for that to move higher as well. Lisie, you said 0:11:30.000 --> 0:11:33.480 something earlier that the chances of the FED actually well 0:11:33.679 --> 0:11:37.640 orchestrating a soft landing is fairly low. Can you walk 0:11:37.720 --> 0:11:39.920 us through what it looks like if they fail to? 0:11:40.040 --> 0:11:43.800 I mean, what you see in your likely scenario in 0:11:43.920 --> 0:11:47.520 terms of tightening and subsequent economic reaction. Yeah, I mean 0:11:47.559 --> 0:11:49.120 I think it looks a lot like what happened in 0:11:50.640 --> 0:11:53.760 where you know, the FED was basically overtightening into a 0:11:53.760 --> 0:11:57.760 slowing economic backdrop UM and they were forced to pivot 0:11:57.760 --> 0:12:00.440 in the first quarter, actually the first month of twenty nineteen. 0:12:00.480 --> 0:12:03.480 I think that's that's the template. Uh, this time, I 0:12:03.520 --> 0:12:07.040 think there's more there's potentially even more danger of that. Right. 0:12:07.200 --> 0:12:10.319 A lot of this, a lot of the market, um, 0:12:10.360 --> 0:12:12.760 at least in financial asset terms, has been predicated off 0:12:12.760 --> 0:12:15.320 the fact that we've had very very negative real yields 0:12:15.320 --> 0:12:17.880 for quite some time. If we continue to see really 0:12:17.920 --> 0:12:21.240 yields normalized, which I think they should, to some degree. Um, 0:12:21.320 --> 0:12:24.560 that should put some pressure on how other financial assets, 0:12:24.600 --> 0:12:28.880 how risk assets are discounted, and that macro you know 0:12:28.920 --> 0:12:32.560 that macroeconomic backdrop. That volatility is a bit concerning. It 0:12:32.600 --> 0:12:35.720 doesn't immediately translate into slower economic activity. But if it 0:12:35.760 --> 0:12:37.960 happens too aggressively and too quickly and we start to 0:12:37.960 --> 0:12:43.000 seek companies question the the backdrop and make different decisions 0:12:43.040 --> 0:12:45.960 based on hiring, um, that could be that could pose 0:12:46.000 --> 0:12:48.640 a challenge. So it's I mean, it is financial conditions 0:12:48.720 --> 0:12:50.480 ultimately that we're watching. I think there's a lot of 0:12:50.520 --> 0:12:55.040 metrics that feed into that. So far they're relatively well contained. UM. 0:12:55.080 --> 0:12:56.640 I think the other part of it is that Pale 0:12:56.920 --> 0:12:59.760 was pretty clear that financial conditions don't matter, and so 0:13:00.000 --> 0:13:03.679 are as the household balance sheet is strong, and so 0:13:03.760 --> 0:13:06.280 that's what they're watching. And I suppose there is a 0:13:06.440 --> 0:13:09.480 there is a potential for a gap there. Right. The 0:13:09.480 --> 0:13:12.079 household balance you can remain strong for some time because 0:13:12.080 --> 0:13:15.280 there is there are still some access savings, people are employed, 0:13:15.280 --> 0:13:18.960 we've seen wage gains, UM, household network is high. That 0:13:19.000 --> 0:13:22.280 could probably remain a little bit stronger than the financial 0:13:22.280 --> 0:13:26.120 asset backdrop for some time. You look across sectors just quickly. 0:13:26.400 --> 0:13:28.360 I want to finish on this. Some people have been 0:13:28.440 --> 0:13:31.280 raising cash and I'm wonder if you look across sectors 0:13:31.360 --> 0:13:34.199 right now, what you'd be using to fund that cash position, 0:13:34.200 --> 0:13:37.400 why you'd completely walk away from in credit right now? 0:13:37.440 --> 0:13:39.280 Can you do that on a sector to sector basis? 0:13:39.440 --> 0:13:41.760 Is it an individual name, single name to single name. 0:13:42.320 --> 0:13:44.840 What's the process you go through to do that? I 0:13:44.920 --> 0:13:46.840 don't think it's as simple as that at the moment. 0:13:46.880 --> 0:13:48.480 I think you have to watch the companies you own. 0:13:48.520 --> 0:13:51.440 I think we're seeing the companies that are doing uh 0:13:51.640 --> 0:13:54.120 M and A get hit a little bit harder um, 0:13:54.200 --> 0:13:55.760 at least at the outset. I think we have to 0:13:55.800 --> 0:13:58.920 be careful on security selection here. I mean, I think 0:13:58.960 --> 0:14:01.400 it's about taking broad data down. But there has been 0:14:01.440 --> 0:14:04.280 sector out performance right Energy has done well, at least 0:14:04.280 --> 0:14:07.360 in credit market so far. Triple B is ab outperformed 0:14:07.400 --> 0:14:10.520 on a beta adjusted basis, So you know, I think 0:14:10.520 --> 0:14:13.320 you have to be more specific than just say cut 0:14:13.320 --> 0:14:15.840 a sector um at this juncture. It's more about the 0:14:15.840 --> 0:14:19.400 individual names and the overall level of data in your portfolios. 0:14:19.560 --> 0:14:21.960 Small as always gonna catch up. Lisa Home be there 0:14:29.040 --> 0:14:30.960 right now. A great honor for Lisa, Bryan Watson and 0:14:31.000 --> 0:14:33.680 I to bring to you on radio and television across 0:14:33.720 --> 0:14:38.120 this nation. Someone who viscerally understands this story. As we 0:14:38.160 --> 0:14:41.520 spoke to the ambassador of France to the United States 0:14:41.600 --> 0:14:45.600 last week and his history of Eastern Europe so too, 0:14:46.080 --> 0:14:49.920 George Friedman of Budapest. He is founder and chairman of 0:14:49.960 --> 0:14:54.000 Geopolitical Futures and has a family that has viscerally lived 0:14:54.680 --> 0:14:58.680 living near Russia. George Freedman, what does the media, what 0:14:58.760 --> 0:15:04.480 does the analysis get on about Vladimir Putin? Well, he 0:15:04.520 --> 0:15:09.080 wants Ukraine, but he did something very strange. Wait, he 0:15:09.160 --> 0:15:13.800 did not attack weeks ago. You don't launch an attack 0:15:13.880 --> 0:15:16.960 without surprise if you can get it. And sitting there 0:15:16.960 --> 0:15:19.160 waiting for the United States to build up at its 0:15:19.200 --> 0:15:23.160 defensive capabilities, which the US has done, just increases the 0:15:23.240 --> 0:15:26.080 chance of losing. So right now he's not going to 0:15:26.160 --> 0:15:30.040 defend in the Ukraine. He's really looking at how to 0:15:30.080 --> 0:15:34.080 split NATO. Within splitting NATO. And this is Angela's stent 0:15:34.240 --> 0:15:37.240 writing in Foreign Affairs this weekend on the Putin doctrine. 0:15:37.600 --> 0:15:40.000 I guess I have to ask, what is the Putin 0:15:40.160 --> 0:15:43.400 doctrine that you see that will allow for a split 0:15:43.480 --> 0:15:49.600 a fracture of NATO natural gas. Russia is supplying almost 0:15:49.640 --> 0:15:53.280 all of Germany's natural gas. The rest of Europe too, 0:15:53.360 --> 0:15:55.560 but Germany is a key it's to be a big player. 0:15:56.480 --> 0:16:00.360 If Germany joins with NATO, it risks having a shouldnt 0:16:00.320 --> 0:16:02.840 cut off a natural gas If, on the other hand, 0:16:02.880 --> 0:16:06.560 it doesn't, Uh, it goes against the grain about the 0:16:06.600 --> 0:16:11.760 United States, the British and other players, particularly Eastern Europeans. 0:16:11.800 --> 0:16:14.760 So what I think Putin is really doing is creating 0:16:14.760 --> 0:16:20.680 a situation with his hammerlock on natural gas where the 0:16:20.760 --> 0:16:24.400 Germans are in an impostible position and are likely to 0:16:24.440 --> 0:16:28.480 go and split from the West in resisting the Russians, 0:16:28.800 --> 0:16:31.080 or at least to the extent of not cooperating in 0:16:31.160 --> 0:16:35.040 Billion events George. In other nations, we might ask about popularity. 0:16:35.080 --> 0:16:37.720 Does it even matter here whether this move that Vladimir 0:16:37.760 --> 0:16:40.440 Putin is embarking on is popular among the rank and 0:16:40.440 --> 0:16:44.680 file Russians. I think at this point, near war situations, 0:16:44.680 --> 0:16:48.720 popularity doesn't matter anywhere. Uh. You notice in the United 0:16:48.760 --> 0:16:52.160 States everybody is quite quiet about it. The Germans are 0:16:52.400 --> 0:16:55.080 I'm the whole opposed to any operation to British, are 0:16:55.200 --> 0:16:58.200 very deep into it. Each one of them is following 0:16:58.240 --> 0:17:01.440 their national interest and the decisions are going to be 0:17:01.520 --> 0:17:04.840 made soon, very quickly, very rapidly, and I don't think 0:17:05.280 --> 0:17:08.280 public interests will affected, except that no one wants to 0:17:08.280 --> 0:17:10.640 come out of this looking like a loser. It's how 0:17:10.680 --> 0:17:12.720 you come out of it. This matters. Well. So how 0:17:12.720 --> 0:17:16.000 does Watiman Putin look like a winner from all this? Well, 0:17:16.040 --> 0:17:19.000 at this point he appears to be a winner because 0:17:19.080 --> 0:17:23.159 the West has grown up and gotten really alarmed. So 0:17:23.240 --> 0:17:26.560 already he shows the Russian people that they've taken us seriously, 0:17:26.800 --> 0:17:30.800 which we really haven't. The second step is, however, he's 0:17:30.840 --> 0:17:34.200 got to do something. An invasion is a very risky thing. 0:17:34.280 --> 0:17:37.959 You can lose, and he cannot afford to lose. On 0:17:38.000 --> 0:17:41.720 the other hand, you're in a situation where if he 0:17:41.800 --> 0:17:44.840 can manage to split NATO, if he creates a crisis 0:17:44.880 --> 0:17:47.359 in NATO, you can do something. Which is why the 0:17:47.400 --> 0:17:51.320 United States right now is scrambling defined a natural gas 0:17:51.359 --> 0:17:54.440 frows is that they could send to Europe to support them, 0:17:54.520 --> 0:17:58.240 because that's where the key is. Uh. If he doesn't 0:17:58.280 --> 0:18:01.600 want NATO to advance in the East, perfect way to 0:18:01.640 --> 0:18:04.399 do that is what NATO wide open on the natural 0:18:04.440 --> 0:18:06.920 gas issue. Well, George, this is important and this goes 0:18:06.960 --> 0:18:09.639 back to your at Stratford, and frankly, your academics are 0:18:09.680 --> 0:18:13.879 Cornell before that, is it feasible to salvage Europe with 0:18:14.000 --> 0:18:17.680 a delivery of hydrocarbons? Have you ever seen a study 0:18:17.760 --> 0:18:21.440 where we can deliver to Germany and the rest enough 0:18:21.560 --> 0:18:26.439 oil gas and the rest. What I have seen is 0:18:26.480 --> 0:18:28.840 that it can't be done. There's not enough bottoms to do. 0:18:29.680 --> 0:18:32.240 But at any rate, the United States has to give 0:18:32.280 --> 0:18:34.520 it a try, has to make it clear to the 0:18:34.520 --> 0:18:37.520 Europeans that we care about this situation, that even if 0:18:37.520 --> 0:18:39.000 there's going to be an interruption, it will be a 0:18:39.040 --> 0:18:41.359 short interruption and we'll be able to handle it and 0:18:41.400 --> 0:18:44.600 so on. But the problem, what Putin has done very 0:18:44.640 --> 0:18:47.960 well is to shift the burden over to the Germans 0:18:47.960 --> 0:18:51.399 in particular to Europeans in general, where the choice between 0:18:51.440 --> 0:18:55.920 defending Ukraine and having their economies wrecked has to be made. 0:18:56.440 --> 0:19:00.920 And whatever public opinion now comes in they're gonna go 0:19:02.040 --> 0:19:03.960 craze is not that important to them. Is it a 0:19:04.000 --> 0:19:08.480 generous is it a generational shift of a new German 0:19:08.560 --> 0:19:14.200 government after miracle? Does that matter in your analysis? Well, 0:19:14.359 --> 0:19:19.080 Germany is built an economy that's really very powerful in Europe. 0:19:19.080 --> 0:19:22.680 It is a leader economically in Europe. Without natural gas, 0:19:22.680 --> 0:19:25.840 that doesn't have that economy, it's built itself into that position. 0:19:26.640 --> 0:19:31.240 The U. S should have perhaps try to build alternatives 0:19:31.640 --> 0:19:35.360 years ago, but it didn't, so let this situation develop, 0:19:35.800 --> 0:19:40.199 and now it's playing out. It's really a reality that 0:19:41.240 --> 0:19:44.879 can't be ignored. George Freeman, thank you so much. Greatly appreciated. 0:19:44.920 --> 0:19:49.600 With geopolitical futures today, just authentic analysis. They're one perspective 0:19:49.640 --> 0:19:58.919 on our international relations right now. Josh ra Charstein with 0:19:59.000 --> 0:20:02.240 US Vice JOHNS Hopkins Bloomberg School of Public Health. Of 0:20:02.240 --> 0:20:04.960 course Michael Bloomberg, h are not an acquaintance with his 0:20:05.040 --> 0:20:09.040 television and radio property as well. Dr Scharstein, it is 0:20:09.080 --> 0:20:12.160 good news, whether it is the thousands assembled in Los 0:20:12.160 --> 0:20:15.520 Angeles and Kansas City for football, or in the walk 0:20:15.640 --> 0:20:18.000 up I live in in the lobby, everybody has to 0:20:18.040 --> 0:20:21.080 wear a mask. There seemed to be great polarities. Here's 0:20:21.080 --> 0:20:25.720 the reality. We see cases rolling over nicely, we see 0:20:25.760 --> 0:20:32.000 hospitalizations rolling over somewhat, we're waiting for deaths to roll over. 0:20:32.080 --> 0:20:37.440 When deaths roll over, how will public policy change. Well, 0:20:37.480 --> 0:20:40.919 I think public policy is changing in places where the 0:20:40.960 --> 0:20:44.240 cases are coming down, in the hospitalizations are coming down now, 0:20:44.800 --> 0:20:46.800 so I think it's going to be a regional phenomenon. 0:20:47.240 --> 0:20:49.920 And then I think, to your point, I think the 0:20:50.000 --> 0:20:52.760 national mood will really start to change as deaths come 0:20:53.119 --> 0:20:56.760 much further down. Um. And this is the you know, 0:20:57.160 --> 0:21:01.000 approaching the moment you know where we are going to 0:21:01.040 --> 0:21:03.640 see COVID start to fade a little bit more into 0:21:03.640 --> 0:21:07.399 the background. Um. I don't think we'll have nearly as 0:21:07.520 --> 0:21:12.440 much disruption in our lives in barring the emergence of 0:21:12.560 --> 0:21:15.960