WEBVTT - The Market Bottom 0:00:03.840 --> 0:00:07.120 Welcome to Bloomberg Opinion. I'm Vonnie Quinn. This week, what 0:00:07.240 --> 0:00:10.559 we know is certainly sufficient for impeachmentcy was still on 0:00:10.560 --> 0:00:13.440 the White House, and it may very well be invitable. 0:00:13.640 --> 0:00:17.160 Jonathan Bernstein on the New House January six committee revelations 0:00:17.400 --> 0:00:20.279 and the fallout from the Supreme Court overturning Row and 0:00:20.360 --> 0:00:23.079 later Julianna Goldman on what Mississippi has to teach just 0:00:23.160 --> 0:00:26.599 about the future of abortion politics. First to the markets, 0:00:26.680 --> 0:00:29.400 seemingly a little let's sea this week and generally getting 0:00:29.400 --> 0:00:32.839 warier of weaker economic data this though, as Fed officials 0:00:32.880 --> 0:00:35.800 continue to talk up rate increases, and Terry J. Powell 0:00:35.840 --> 0:00:39.560 talks about finding price stability in the new economy, where 0:00:39.560 --> 0:00:42.400 with Jared Dillion of The Daily Dirt Nap and Bloomberg Opinion. 0:00:42.640 --> 0:00:45.120 Hedgehone manager Michael Bury, famous obviously for getting the big 0:00:45.120 --> 0:00:47.840 short right as the Great Financial Crisis was unfolding, send 0:00:47.840 --> 0:00:49.920 a tweet out this week suggesting the Fed may actually 0:00:49.920 --> 0:00:53.920 pause or even reverse hikes because deflationary impulses are brewing 0:00:53.920 --> 0:00:56.520 in certain areas of the economy. We have seen a 0:00:56.520 --> 0:00:59.280 couple of people float this idea in recent weeks. Is 0:00:59.280 --> 0:01:02.360 he right? Uh? He is right, and what he was 0:01:02.400 --> 0:01:07.080 referring to in particular was this phenomenon where retailers are 0:01:07.240 --> 0:01:11.640 building inventories to record levels. Uh. And inevitably, if you're 0:01:11.640 --> 0:01:15.200 a retailer in your inventories are stuffed, then at some 0:01:15.200 --> 0:01:16.960 point you're gonna have to discount. You're gonna have to 0:01:17.000 --> 0:01:19.480 lower prices in order to get word of those inventories. 0:01:20.080 --> 0:01:24.119 And that is deplationary. I mean, it's inherently depletionary. And 0:01:24.600 --> 0:01:27.000 the inventories piece is just one piece of the puzzle. 0:01:27.440 --> 0:01:30.880 We're really getting a deplationary impulse throughout the economy. You're 0:01:30.920 --> 0:01:33.920 seeing in a lot of places like the manufacturing surveys, 0:01:34.360 --> 0:01:37.200 the regional manufacturing surveys, that that they're just you know, 0:01:37.760 --> 0:01:40.200 dropping like wet socks and a chicken. As one of 0:01:40.240 --> 0:01:43.600 my friends used to say. So, well, this is something. 0:01:43.800 --> 0:01:46.080 And you know, I was moderating pudlic quid space this 0:01:46.120 --> 0:01:50.280 week with four different firms representative and the figures we're 0:01:50.320 --> 0:01:52.840 both mentioned in relation to the prospect of recession. So 0:01:52.920 --> 0:01:55.280 it seems like there are more and more people turning 0:01:55.320 --> 0:01:57.080 a bit negative on the economy. Do we have to 0:01:57.120 --> 0:01:59.400 have the NB or call it before we really know, 0:01:59.560 --> 0:02:03.240 or before the FED even reacts, well, we might actually 0:02:03.280 --> 0:02:06.200 be in recession already. I mean, that's well, you know, 0:02:06.240 --> 0:02:09.680 the NBR uses a number of factors to calculate a recession, 0:02:10.000 --> 0:02:13.840 and it's possible that as months go by that you'll 0:02:13.880 --> 0:02:16.840 see some of the data that we're currently experiencing, you'll 0:02:16.880 --> 0:02:20.000 see that get revised lower. So it's possible that we're 0:02:20.000 --> 0:02:22.160 already in a recession, and then six months from now 0:02:22.200 --> 0:02:25.640 the NBR say, well, yes, we were actually in recession 0:02:25.680 --> 0:02:29.600 back in June. So I think it's totally possible. So 0:02:29.919 --> 0:02:32.680 is the Fed then waiting for more data to come 0:02:32.720 --> 0:02:34.560 in before it does something and kind of continue to 0:02:34.800 --> 0:02:37.640 hike interest rates if indeed there is a high possibility 0:02:37.680 --> 0:02:40.480 that we are in a recession. Well, I think I 0:02:40.520 --> 0:02:42.840 think the one data point that's going to get the 0:02:42.840 --> 0:02:46.560 Fed to stop hiking is the labor market, and really 0:02:46.600 --> 0:02:49.520 because of optics and because the politics around unemployment. If 0:02:49.600 --> 0:02:53.320 unemployment were to go up significantly, say the unemployment where 0:02:53.320 --> 0:02:54.960 it goes to five or five and a half or 0:02:55.000 --> 0:02:59.560 six percent, then you know that's that's a severely lagging indicator, 0:02:59.639 --> 0:03:02.480 but then would be absolutely clear that we're in recession. 0:03:02.919 --> 0:03:04.680 The problem with the FET doing that is that the 0:03:04.720 --> 0:03:09.519 problem doesn't really anticipate, uh, these moves in the economy, 0:03:09.560 --> 0:03:12.959 It really reacts to them after the fact. So yes, 0:03:13.040 --> 0:03:15.840 it's probably true that the FETCH stop hiking now, but 0:03:15.880 --> 0:03:19.560 they won't actually probably for three to six more months. Yeah, 0:03:19.600 --> 0:03:21.840 And I mean that's probably what we're seeing in the 0:03:21.840 --> 0:03:23.600 stock market right now, because it does seem a little 0:03:23.639 --> 0:03:26.120 at sea, you know. I mean we've had multiple days 0:03:26.160 --> 0:03:28.960 of barely any moves, but then sort of one random 0:03:29.000 --> 0:03:32.360 to percent drop on Tuesday. Yeah. I mean I'm actually 0:03:32.840 --> 0:03:36.120 I'm reasonably bullish on stocks. Um. You know, I think 0:03:36.160 --> 0:03:39.360 I think sentiment is pretty terrible here. I think sentiment 0:03:39.480 --> 0:03:42.480 is bombed out and I'm actually expecting a rally. Really, 0:03:42.480 --> 0:03:44.520 the worst the data is, the better it is for 0:03:44.560 --> 0:03:46.760 the stock market, because that builds more of a case 0:03:46.800 --> 0:03:50.280 for the FT to pause rays. Yeah. At the same time, 0:03:50.320 --> 0:03:52.640 the fact can't really pause Radix until we see it 0:03:52.680 --> 0:03:55.960 in inflation expectations, right, I mean, it's actually targeting inflation 0:03:55.960 --> 0:03:59.080 expectations right now, which it said it is. But how 0:03:59.080 --> 0:04:00.880 do we even try to bridge to what the impact 0:04:01.000 --> 0:04:03.640 of that will be on stock and modn markets. Well, 0:04:03.680 --> 0:04:06.000 the interesting thing is is we're getting a little bit 0:04:06.040 --> 0:04:09.400 of early evidence that inflation expectations are coming down. We 0:04:09.520 --> 0:04:12.520 got that the other day UNI University of Michigan survey 0:04:13.160 --> 0:04:16.640 UH that inflation expectations on a one year basis and 0:04:16.680 --> 0:04:18.920 applied to ten year basis had come down just a 0:04:18.960 --> 0:04:22.640 little bit. So, you know, even though they haven't really 0:04:22.839 --> 0:04:25.160 actually hyped interest rates a lot, they've done sort of 0:04:25.200 --> 0:04:27.760 this verbal tightening over the last six to nine months, 0:04:28.040 --> 0:04:30.200 and it has been having an effect. It's been having 0:04:30.200 --> 0:04:32.200 a huge effect. So I'm gonna quote from one of 0:04:32.240 --> 0:04:34.920 your pieces, you say, as laughable as it may seem, 0:04:34.960 --> 0:04:37.719 there may still actually be a transitory element of current 0:04:37.720 --> 0:04:40.800 inflation that was a function of quantitative using government spending 0:04:40.839 --> 0:04:44.039 and pandemic hoarding. You're really buying into this idea that 0:04:44.080 --> 0:04:48.760 we could see inflation coming down pretty precipitously soon. No, absolutely, 0:04:48.800 --> 0:04:51.320 I mean, I'm you know, I'm very confident that the 0:04:51.360 --> 0:04:53.880 eight point six percent print we got on CPI, I 0:04:53.880 --> 0:04:56.159 think that's going to be the highest. I think the 0:04:56.200 --> 0:04:58.720 next print is going to be lower. The economy has 0:04:58.720 --> 0:05:02.920 slowed quite a bit since that last CPI print, So yeah, 0:05:02.960 --> 0:05:04.720 I mean, I think it's very possible that by the 0:05:04.800 --> 0:05:07.320 end of the year we could have inflation somewhere around 0:05:07.560 --> 0:05:10.400 five percent or six percent. Jared, do we have to 0:05:10.400 --> 0:05:13.120 be confident in this Federal Reserve before we make a 0:05:13.120 --> 0:05:15.400 calculation on the economy though? I mean I asked that 0:05:15.440 --> 0:05:18.120 because I'm not sure that even this Federal Reserve is 0:05:18.160 --> 0:05:21.760 confident in itself on this particular cycle. Well, I mean, 0:05:21.920 --> 0:05:24.359 you know, Jerome Powell said that he isn't really you know, 0:05:24.440 --> 0:05:27.679 he doesn't really sure what causes inflation or I forget 0:05:27.760 --> 0:05:30.680 his exact quote, but nobody really is. I mean, it's 0:05:30.680 --> 0:05:34.400 really a psychological phenomenon, and um, you know that's really 0:05:34.440 --> 0:05:36.600 the purpose of the rate hikes is to crush the 0:05:36.640 --> 0:05:40.159 inflationary psychology. And I think it's I think it's doing 0:05:40.279 --> 0:05:44.920 actually a pretty good job. And someone pointed out recently that, 0:05:45.320 --> 0:05:49.080 you know, in previous inflationary episodes, you had to raise 0:05:49.160 --> 0:05:52.000 FED funds above the rate of inflation in order to 0:05:52.040 --> 0:05:54.080 get inflation down, which would mean we would have to 0:05:54.080 --> 0:05:56.440 take you know, FED funds up to nine percent. I 0:05:56.440 --> 0:05:58.159 don't think that's going to happen, and I don't even 0:05:58.160 --> 0:06:00.000 think that's necessary. I mean, I didn't think you could 0:06:00.080 --> 0:06:02.240 raise where it's to three percent, and you're going to 0:06:02.320 --> 0:06:05.600 be able to take this down because of this transitory element. 0:06:05.839 --> 0:06:07.800 You know, everybody made fun of the FETE calling a 0:06:07.839 --> 0:06:11.240 transitory and then capitulating, but I think it may in 0:06:11.320 --> 0:06:14.360 fact be transitory because of these one time factors. Yeah, 0:06:14.400 --> 0:06:16.760 and obviously we're seeing commodity prices coming down, which I'm 0:06:16.760 --> 0:06:20.039 not sure that many people would have predicted even recently. Yeah, 0:06:20.120 --> 0:06:24.280 I mean the uh, the CRB Commodity index is down 0:06:24.320 --> 0:06:26.720 about ten percent from the highs and it happened pretty quick, 0:06:26.760 --> 0:06:28.400 and I expect you're gonna get a little bit more 0:06:28.440 --> 0:06:31.440 downside there. Timing the markets you wrote a column about 0:06:31.520 --> 0:06:34.479 is obviously we're told time and again, you know, investing 0:06:34.480 --> 0:06:36.320 one on one, don't try to time the market. It's 0:06:36.360 --> 0:06:40.440 going to be financial armageddon. Explain your thesis, Jared, Yeah, 0:06:40.520 --> 0:06:43.560 I do. You know. Look, tim in the market is 0:06:43.560 --> 0:06:47.120 is for the people. You should never do it. It's 0:06:47.120 --> 0:06:50.719 really hard. You're gonna make your returns worse. Uh. And 0:06:50.760 --> 0:06:53.600 the reason that's true for most people is because, you know, 0:06:53.640 --> 0:06:57.560 because of human psychology, because people are hardwired to be 0:06:58.080 --> 0:07:00.880 bad investors, because when the market goes up, they get excited, 0:07:00.920 --> 0:07:03.760 they buy more. When the market goes down, they get 0:07:03.960 --> 0:07:08.480 discouraged and they sell, uh, And it's you know, that's 0:07:08.480 --> 0:07:11.560 that's the way people are wired. So but if you 0:07:11.600 --> 0:07:13.960 can sort of do that countercyclically, if you can, say, 0:07:14.160 --> 0:07:16.840 if you can kind of step back and get some 0:07:16.920 --> 0:07:19.800 perspective and examine your emotions and say, look like, I'm 0:07:20.040 --> 0:07:22.480 you knowl on the market and it's going up, and 0:07:22.520 --> 0:07:25.600 I feel really good and I feel very happy about 0:07:25.680 --> 0:07:29.000 my investments. That is actually the time you want to 0:07:29.040 --> 0:07:32.000 cut back exposure. You don't have to sell everything, but 0:07:32.080 --> 0:07:35.080 if you just reduced your exposure by about ten percent 0:07:35.760 --> 0:07:38.120 and then you know, a couple of years later, when 0:07:38.160 --> 0:07:40.320 the market is going down and you feel really terrible 0:07:40.320 --> 0:07:43.680 about your investments and you want to liquidate everything, that's 0:07:43.720 --> 0:07:46.880 actually the time to increase exposure. So just by doing 0:07:46.920 --> 0:07:50.640 these minor tweaks in your asset allocation based on sentiment, 0:07:50.720 --> 0:07:53.120 that's actually a way to outperform the market by a 0:07:53.120 --> 0:07:57.400 little bit over time. Yeah. So it sounds incredibly you know, 0:07:57.440 --> 0:07:59.480 obvious when you put it like that, and it sounds 0:07:59.560 --> 0:08:01.040 quite a drunk to ben packing. Why not do that? 0:08:01.080 --> 0:08:03.040 You get a few extra percentage points for yourself at 0:08:03.040 --> 0:08:06.680 the same time, Timing the market and timing sentiment has 0:08:06.720 --> 0:08:09.520 to be very difficult, or everybody would be doing it 0:08:09.640 --> 0:08:14.000 all of the time. Now, well, everybody does do it 0:08:14.000 --> 0:08:16.280 all the time. I mean, this isn't this isn't like 0:08:16.320 --> 0:08:18.400 a license to day trade. I mean it's not. It's not. 0:08:18.560 --> 0:08:21.360 It's not a license for active training. In the piece 0:08:21.400 --> 0:08:24.440 I have talked about, you know, this is something this 0:08:24.480 --> 0:08:27.240 is something you might do two or three times in 0:08:27.240 --> 0:08:30.760 your investing career. Uh. You know, like an obvious example 0:08:30.800 --> 0:08:33.120 would have been, you know, two thousand in the top 0:08:33.120 --> 0:08:35.880 of the dot com bubble. Another obvious example would have 0:08:35.920 --> 0:08:38.439 been two thousand nine when stocks bottomed at to the 0:08:38.440 --> 0:08:43.320 financial crisis. Um. But these are big, big sentiment turning points. 0:08:43.320 --> 0:08:45.920 And you don't even have to like catch the top 0:08:46.040 --> 0:08:48.360 or catch the bottom as long as you're in the neighborhood. 0:08:48.600 --> 0:08:52.240 And these are tiny adjustments and asset allocations, not saying 0:08:52.240 --> 0:08:54.200 you have to go all out of the marketer all in, 0:08:54.520 --> 0:08:56.680 as Bart says, are we there yet? Then if you 0:08:56.760 --> 0:09:01.440 compare sentiment now to how bad it got in two 0:09:01.480 --> 0:09:05.320 thousand nine, I mean, sentiment is bad now, um, And 0:09:05.679 --> 0:09:07.720 but I don't think where I don't think we're really 0:09:07.720 --> 0:09:09.920 close to where we were in two thousand nine. I 0:09:09.960 --> 0:09:11.840 think it could be a turning point, but I don't 0:09:11.840 --> 0:09:15.040 think it could be one of those generational turning points 0:09:15.040 --> 0:09:17.840 where you want to change your asset allocation, right, And 0:09:18.120 --> 0:09:21.760 do you think one is coming? This particular cycle seems 0:09:21.800 --> 0:09:24.480 so difficult to call because it's not just one thing. 0:09:24.600 --> 0:09:28.360 It's not just one asset clast that seems to be publicious. 0:09:28.800 --> 0:09:30.960 I mean, obviously crypto walls and there are parts of 0:09:31.000 --> 0:09:34.600 the market that are, but there are so many factors 0:09:34.600 --> 0:09:36.480 that are coming together now, from the Ukraine War to 0:09:36.679 --> 0:09:39.000 zero COVID and China to so many other things. Is 0:09:39.040 --> 0:09:42.599 it going to be even possible to time sentiments this time? No, 0:09:42.840 --> 0:09:44.720 I think it's possible, and I think you'll know when 0:09:44.720 --> 0:09:47.320 it happens. Um, you know, I mean I think a 0:09:47.320 --> 0:09:51.720 good analog for what's going on today is actually seventy four. Um. 0:09:52.200 --> 0:09:54.480 You know What's it's similar because you had inflation going 0:09:54.559 --> 0:09:56.040 up and the fet was kind of trapped and they 0:09:56.040 --> 0:09:59.800 had to high rates, and um, it really like the 0:10:00.000 --> 0:10:02.920 markets sort of got into this mode where you know, 0:10:03.000 --> 0:10:06.480 it was like, you know, just it was trapped by 0:10:06.520 --> 0:10:09.320 inflation basically. So it's I think it's similar to that 0:10:09.720 --> 0:10:13.760 in the market was down forty six or forty eight percent, 0:10:13.800 --> 0:10:17.040 I can't remember. Well, So, just quoting from a Bloomberg story, 0:10:17.120 --> 0:10:19.360 stock did buyers across the E t F world have 0:10:19.440 --> 0:10:23.320 vanished this year because they've tried three times, They've seen 0:10:23.320 --> 0:10:27.960 their account balances ravaged three times. So the number of 0:10:27.960 --> 0:10:31.480 five bounces that didn't endure is three. How do you 0:10:31.720 --> 0:10:35.240 then persuade somebody to try again a fourth time? Well, 0:10:35.400 --> 0:10:41.240 it's that's the that's the problem because really, like when 0:10:41.360 --> 0:10:44.160 the time to do it is when you really don't 0:10:44.160 --> 0:10:47.520 want to do it, is when it feels absolutely the worst, 0:10:47.360 --> 0:10:49.800 like when you're when really like you you want to 0:10:49.800 --> 0:10:52.120 do the opposite, you want to want to just liquidate 0:10:52.160 --> 0:10:54.400 everything and go to cash. That's actually the time to 0:10:54.480 --> 0:10:57.480 increase exposure. You know. The funny thing is that I've 0:10:57.480 --> 0:11:00.280 been doing this for twenty three years. So I was 0:11:00.320 --> 0:11:02.360 around for two thousand and I was around for two 0:11:02.400 --> 0:11:06.360 thousand nine, and uh, you know, I I successfully took 0:11:06.400 --> 0:11:09.839 down exposure in two thousand but in two thousand nine, 0:11:10.000 --> 0:11:12.240 I actually I was a victim of my own emotion, 0:11:12.400 --> 0:11:15.839 Like I actually didn't increase exposure because I was so 0:11:15.880 --> 0:11:18.319 scared because you know, City Group was trading at nine 0:11:18.720 --> 0:11:21.960 cents and BA was trading at three bucks. And you know, 0:11:22.000 --> 0:11:26.200 I got I got sucked into the bortex and I thought, well, like, 0:11:26.280 --> 0:11:28.439 the world is actually coming to an end. And it didn't. 0:11:28.800 --> 0:11:31.200 It never does. Well, it's easier to imagine something going 0:11:31.280 --> 0:11:33.520 to zero on it's three dollars then going to zero 0:11:33.520 --> 0:11:36.760 when it's three dollars, right, weird. I mean psychologically it 0:11:36.960 --> 0:11:39.480 shouldn't be, but it is. Yeah. So you know you 0:11:39.520 --> 0:11:41.920 talk about when you're feeling you're worse about your portfolio, 0:11:42.000 --> 0:11:45.319 how risky is acceptable? Then are you just talking equities here? 0:11:45.320 --> 0:11:47.360 Because some might take your advice and say, oh well 0:11:47.400 --> 0:11:49.560 I'll buy a bunch of crypto. Then oh no, we're 0:11:49.600 --> 0:11:51.520 just talking equity. This is just this is just the 0:11:51.559 --> 0:11:55.800 stock market. Yeah, I mean, having having said that, you know, 0:11:55.840 --> 0:11:57.840 I've invested in crypto a little bit, I have some 0:11:58.040 --> 0:12:01.400 right now, and I be a much better buyer here 0:12:01.440 --> 0:12:04.319 than six months ago, for sure. Yeah. Well, I mean 0:12:04.320 --> 0:12:07.880 it's lower. Yeah. Another thing I noticed, and I'm not 0:12:07.920 --> 0:12:10.360 sure if this should give us pause. The Federal Reserve 0:12:10.400 --> 0:12:14.120 Bank of New York launched a Corporate Bond Market Distress 0:12:14.240 --> 0:12:17.440 Index so it's supposed to track the health of a 0:12:17.520 --> 0:12:21.280 trillion dollars of US corporate bonds as financial conditions tightened. 0:12:21.600 --> 0:12:24.280 Should we be concerned that the Fed feels like it 0:12:24.360 --> 0:12:27.199 needs to have this new index? You know, actually, I 0:12:27.240 --> 0:12:29.400 don't think it's a terrible thing. You know, it's interesting 0:12:29.440 --> 0:12:32.920 because the last credit cycle that we had in two 0:12:32.960 --> 0:12:35.520 thousand twenty only lasted about four days. I mean, the 0:12:35.559 --> 0:12:38.960 pandemic happened, the bond market crashed, and then the Fed 0:12:39.000 --> 0:12:42.080 announces liquidity facility, they started buying corporate bonds, so you 0:12:42.120 --> 0:12:44.679 really only had a credit cycle that lasted for four days. 0:12:45.160 --> 0:12:47.240 Now the corporate bond market is actually, I don't want 0:12:47.240 --> 0:12:50.800 to say it's distressed, but it's not good. Like there's 0:12:50.880 --> 0:12:52.920 there's a lot of pain out there in the high 0:12:53.000 --> 0:12:56.800 yield and investment great So I think it's interesting. The 0:12:56.840 --> 0:13:00.000 timing on that is pretty interesting. How do you buy 0:13:00.080 --> 0:13:02.960 gauge sentiments if you're an amateur, Really, the best way 0:13:03.000 --> 0:13:05.160 to do it is to just pay attention to everything 0:13:05.200 --> 0:13:08.120 around you. Pay attention to every magazine cover, pay attention 0:13:08.160 --> 0:13:12.960 to newspapers, pay attention to TV shows, your neighbors who 0:13:13.040 --> 0:13:16.600 you talk to, listen to how they feel about the markets. 0:13:17.040 --> 0:13:19.839 You know, if you if you start getting this consensus 0:13:19.880 --> 0:13:22.320 around all these sources of information that things are really 0:13:22.320 --> 0:13:24.920 good or really bad, then it's probably time to go 0:13:25.000 --> 0:13:28.960 the other way. What are you doing right now? What 0:13:29.000 --> 0:13:31.920 am I doing right now? Not? Not much, not much 0:13:31.920 --> 0:13:34.800 of anything, actually so much. We're not taking your own advice. 0:13:38.040 --> 0:13:40.240 I mean, I'm just I'm not a hundred percent convinced 0:13:40.280 --> 0:13:43.120 we're at the bottom. Jared Dillion of The Daily Dirt, 0:13:43.160 --> 0:13:46.360 Nap and Bloomberg Opinion, We're back with David Fickling on 0:13:46.400 --> 0:13:51.320 global hunger, It's causes and potential alleviating factors. We know 0:13:51.400 --> 0:13:54.160 that there are wheat mountains backed up in ports because 0:13:54.160 --> 0:13:57.880 of Russia's war in Ukraine. Other factors, however, are contributing 0:13:57.920 --> 0:14:02.240 to this global intense hunger cry US. As David Fickling explains, 0:14:02.240 --> 0:14:04.559 how bad is it right now in terms of food 0:14:04.600 --> 0:14:07.920 and security in the world. I think we're approaching a 0:14:08.000 --> 0:14:11.120 quite unusual turn in the sort of history of global 0:14:11.160 --> 0:14:13.560 food security. To be honest, if you look back at 0:14:13.600 --> 0:14:15.520 the long history of this, you know, one of the 0:14:15.520 --> 0:14:18.040 crucial things that helps keep the world fed over the 0:14:18.080 --> 0:14:21.360 past fifty years, while the world population has doubled is 0:14:21.360 --> 0:14:23.920 actually trade. People talk a lot about the growth of 0:14:23.960 --> 0:14:27.040 sort of chemical fertilizers and farm machinery, which have both 0:14:27.040 --> 0:14:29.560 been very important in the twentieth century in keeping the 0:14:29.600 --> 0:14:32.080 world fed, but trade is a really important part of 0:14:32.120 --> 0:14:34.400 that because, of course, if you have drought and crop 0:14:34.440 --> 0:14:37.520 failures in your region, then there's no amount of fertilizer 0:14:37.760 --> 0:14:39.760 or farm machinery that will solve the fact that your 0:14:39.760 --> 0:14:42.440 crop just won't grow. So a really important thing that 0:14:42.480 --> 0:14:45.240 I think is underappreciated is that the cost of ocean 0:14:45.280 --> 0:14:48.400 trade in the nineteenth century dropped by about se and 0:14:48.440 --> 0:14:50.880 so you suddenly have this global trade in grains and 0:14:50.960 --> 0:14:53.000 about a quarter of all the calories we consume it 0:14:53.000 --> 0:14:56.240 and now traded across borders. So it's very important that 0:14:56.280 --> 0:14:59.080 this is a global trade. But I think something's undappreciated 0:14:59.320 --> 0:15:02.240 is that it's quite a concentrated trade. The world's bread 0:15:02.320 --> 0:15:05.200 baskets are rather few. There's probably about six of them, 0:15:05.240 --> 0:15:08.800 the US Midwest, the South America, sort of Argentina, Brazil, 0:15:08.880 --> 0:15:11.920 that area, areas of Western Europe and the Ukraine and 0:15:11.960 --> 0:15:14.640 the former Soviet Union and Russia. And I think most 0:15:14.640 --> 0:15:17.400 importantly the plain between the Indus and the Ganges in 0:15:17.480 --> 0:15:20.360 northern India and Pakistan and eastern China between the Yank 0:15:20.400 --> 0:15:24.120 Sea and the Yellow Rivers. Those six read baskets are 0:15:24.120 --> 0:15:27.480 absolutely crucial to the world's growth. Of these relatively few 0:15:27.560 --> 0:15:30.720 number of crops that we depend on, wheat, rice, corn, soybeans. 0:15:30.760 --> 0:15:33.680 More than half of wheat and rice and corn are 0:15:33.720 --> 0:15:37.320 grown if you put those those areas together, soybeans disclosed. 0:15:39.280 --> 0:15:42.000 Now for most of the time, that's not too much 0:15:42.000 --> 0:15:44.360 of a problem because although there's just half a dozen 0:15:44.360 --> 0:15:46.400 of these bread baskets, if you get a drought in 0:15:46.480 --> 0:15:49.800 one region, it tends to pair with good rainfall and 0:15:49.840 --> 0:15:52.680 another region that leads to higher crop yields, because essentially 0:15:52.720 --> 0:15:55.160 the rainfall has to go somewhere. It evaporates on one 0:15:55.160 --> 0:15:56.680 side of the ocean, it tends to drop on the 0:15:56.680 --> 0:15:58.480 other side of the ocean, and when we talk about 0:15:58.480 --> 0:16:01.640 things like El Nino and Landinia, that's essentially about rainfall 0:16:01.800 --> 0:16:05.440 ending up in different places. However, as the climate is changing, 0:16:05.760 --> 0:16:07.840 a lot of that is getting a lot less secure 0:16:07.880 --> 0:16:09.440 than it has been in the past, and I think 0:16:09.480 --> 0:16:11.800 that's really putting pressure on some of the fairly sort 0:16:11.800 --> 0:16:13.640 of shaky system that we have there in place over 0:16:13.640 --> 0:16:16.080 the stage half a dozen bread baskets to to keep 0:16:16.080 --> 0:16:18.320 the world said, we seeing several weather events right now, 0:16:18.360 --> 0:16:20.880 even just in the United States alone, So weather has 0:16:21.040 --> 0:16:23.480 a lot to do with the fact that there's going 0:16:23.520 --> 0:16:25.480 to be a shortage. It is not just Russias war 0:16:25.480 --> 0:16:28.480 in Ukraine. Absolutely, in normal times you would look to 0:16:28.760 --> 0:16:31.320 the world's other big wheat producers. Now one of the 0:16:31.360 --> 0:16:34.840 world's top three wheat producers may be slightly surprising in fact, 0:16:34.920 --> 0:16:37.040 is India. You don't think of India as a big 0:16:37.040 --> 0:16:39.960 wheat producer. There's not a big wheat exporter normally because 0:16:40.040 --> 0:16:44.880 it's almost all consumed at home for chiparties. And exactly 0:16:45.160 --> 0:16:47.240 what we've seen in India over the past a couple 0:16:47.240 --> 0:16:49.840 of months, we've seen this very extreme heat wave and 0:16:49.920 --> 0:16:53.720 that has caused India to embargo exports of wheat. Places 0:16:53.760 --> 0:16:56.560 like the Middle East. They were very dependent on wheat 0:16:56.640 --> 0:16:59.960 from Ukraine that's obviously been damaged by the war in Ukraine. 0:17:00.320 --> 0:17:02.760 The places they were hoping to get their wheat supplies 0:17:02.800 --> 0:17:05.880 from with India, but now injury is not supplying that either. Obviously, 0:17:05.920 --> 0:17:07.960 you see these high prices in the US as well, 0:17:08.280 --> 0:17:11.359 so you really see how some relatively small changes, and 0:17:11.480 --> 0:17:13.640 especially if you trow geo politics in the mix, as 0:17:13.640 --> 0:17:16.520 with the war in Ukraine, suddenly what looked like a 0:17:16.600 --> 0:17:19.600 decent spread of food baskets can very quickly that are 0:17:19.640 --> 0:17:22.560 rather short. You also point out on a recent piece 0:17:22.720 --> 0:17:26.119 food dependent nations can import nutrition, but they must have 0:17:26.160 --> 0:17:28.399 the foreign exchange to pay for it, and we know 0:17:28.560 --> 0:17:31.159 that because of the dollar strength, that's in short supply 0:17:31.200 --> 0:17:34.000 in many of these countries. Yeah. Absolutely, and of course 0:17:34.000 --> 0:17:37.159 a weak currency becomes a problem for especially the poorest 0:17:37.160 --> 0:17:40.280 in the country, even if there is the availability of 0:17:40.520 --> 0:17:44.800 imported nutrition. I mean, another interesting example you look at Brazil. 0:17:44.880 --> 0:17:47.679 Brazil recently not a country that you really associate with 0:17:47.720 --> 0:17:50.720 a sort of open trade policy, but they've been drastically 0:17:50.720 --> 0:17:54.160 cutting the tariff rates essentially to zero for all food 0:17:54.200 --> 0:17:56.399 imports the EGEA of values. Of course, that inflation is 0:17:56.480 --> 0:17:58.440 very high in Brazil and it is a problem for 0:17:58.480 --> 0:18:01.160 people in Brazil that they can't afford to twell. That 0:18:01.520 --> 0:18:04.199 is a decent policy approach, but the problem is it's 0:18:04.240 --> 0:18:06.120 not nearly sufficient, because if you look at the way 0:18:06.160 --> 0:18:09.760 the real the currency has fallen in recent years, Brazili 0:18:09.760 --> 0:18:11.960 is a big food producer anyway, and it's probably not 0:18:12.000 --> 0:18:14.280 going to lead to any increase in food imports because 0:18:14.480 --> 0:18:18.879 Brazilians simply can't afford the market global price of food. Now, David, 0:18:18.960 --> 0:18:22.800 how bad does this get in terms of people actually starving? 0:18:22.840 --> 0:18:26.680 People in places might even associate and food and security 0:18:26.840 --> 0:18:30.680 with I mean, the past few decades mostly have been 0:18:31.080 --> 0:18:34.840 an extremely successful period of bringing down rates of under 0:18:34.920 --> 0:18:39.199 nutrition under nourishment. That progress continued slowed down through the 0:18:40.200 --> 0:18:44.439 but then just in and then particularly twenties, since of 0:18:44.440 --> 0:18:47.680 course the COVID nineteen pandemic, we've really started to lose 0:18:47.720 --> 0:18:50.080 ground on that. Now, part of that is essentially driven 0:18:50.119 --> 0:18:52.439 by the pandemic and driven by incomes. People don't have 0:18:52.520 --> 0:18:54.439 the money to spend on food that they used to have, 0:18:54.880 --> 0:18:57.040 But it's not just because of that, and I think 0:18:57.280 --> 0:18:59.960 particularly at the moment, we see all sorts of fact 0:19:00.000 --> 0:19:03.080 are leading to a much more insecure environment for food. 0:19:03.160 --> 0:19:05.480 Then you throw into the mix the war in Ukraine 0:19:05.840 --> 0:19:08.359 is a factor. Ukraine and Russia are both big food 0:19:08.359 --> 0:19:11.600 exporters for that matter, and then led up at ports 0:19:11.680 --> 0:19:14.080 in Ukraine and Russia that just won't get out now 0:19:14.160 --> 0:19:17.560 absolutely absolutely, and then even on top of that, then 0:19:17.600 --> 0:19:20.679 you can add some of these export embargoes. Obviously, you know, 0:19:20.720 --> 0:19:25.800 an interesting one was India's wheat embargo follows very rapidly 0:19:25.800 --> 0:19:29.200 on the heels of an export embargo in Indonesia for 0:19:29.320 --> 0:19:32.040 palm oil, which has actually now been revoked, but went 0:19:32.119 --> 0:19:34.119 on for a while. Injury is one of the biggest 0:19:34.119 --> 0:19:36.880 importers of palm or India needs palm oil for basic 0:19:37.000 --> 0:19:40.880 nutrition for Indians. They lose that nutrition from Indonesia. They 0:19:41.040 --> 0:19:44.440 embargo their wet exports elsewhere, and you see these knock 0:19:44.480 --> 0:19:46.920 on effects everywhere. So there are all sorts of impacts 0:19:46.960 --> 0:19:49.600 like this. David Fickling there and don't forget to get 0:19:49.600 --> 0:19:52.280 in touch. All thoughts and opinions are very welcome. I'm 0:19:52.320 --> 0:19:54.720 at Vanney Quinn on Twitter or email v Quinn at 0:19:54.720 --> 0:19:58.560 Bloomberg dart Net. New and unexpected revelations from the House 0:19:58.680 --> 0:20:01.560 January sixth Committee the this week, and of course we're 0:20:01.560 --> 0:20:04.919 several days now post the Roe v Wade overturning Vicecotas. 0:20:05.000 --> 0:20:09.000 We're with Jonathan Bernstein. So, Jonathan, what an intense week 0:20:09.119 --> 0:20:11.560 we began with Row and all of a sudden the 0:20:11.600 --> 0:20:14.439 week has become quite the eventful week with the extra 0:20:14.600 --> 0:20:17.120