WEBVTT - Surveillance: Eurasia Top Risks 2022 0:00:05.160 --> 0:00:09.240 Welcome to the Bloombergs Surveillance podcast name Tom Keene, along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrill and Lisa are Brownwitz Jaylie, we bring 0:00:13.160 --> 0:00:17.160 you insight from the best and economics, finance, investment and 0:00:17.280 --> 0:00:23.360 international relations. Find Bloomberg Surveillance and Apple Podcast SoundCloud, Bloomberg 0:00:23.400 --> 0:00:29.640 dot Com and of course on the Bloomberg terminal. Very 0:00:29.640 --> 0:00:31.520 pleased to say that we have an annual tradition here 0:00:31.520 --> 0:00:33.879 at Bloomberg Surveillance. We catch up with Im Bremer and 0:00:33.880 --> 0:00:36.720 the team at Eurasia Group to go through the top 0:00:36.920 --> 0:00:40.120 ten risks Eurasia Groups Top ten Risks and at number 0:00:40.159 --> 0:00:42.520 four is China at Home. We're lucky to have both 0:00:42.520 --> 0:00:45.800 Iam Brema and Elizabeth Economy with us of the Hoover Institute, 0:00:45.800 --> 0:00:47.839 and Lisa wanted to start with this quote in the report, 0:00:48.200 --> 0:00:52.080 foreign firms will face an increasingly difficult environment inside China, 0:00:52.120 --> 0:00:54.320 the two way political risk of operating in both the 0:00:54.440 --> 0:00:57.960 US and China, the task of keeping both Washington and 0:00:58.080 --> 0:01:00.920 Beijing happy, and perhaps Le's we can extend it further, 0:01:00.960 --> 0:01:04.280 the task of keeping a progressive consumer in America happy 0:01:04.480 --> 0:01:08.000 and an increasingly nationalistic one in China happy. To list 0:01:08.000 --> 0:01:10.400 how tough is that going to be. Yeah, I think 0:01:10.480 --> 0:01:14.240 it is a pretty significant and growing challenge. UM. I 0:01:14.280 --> 0:01:18.160 think many companies are trying to navigate a sort of 0:01:18.240 --> 0:01:21.840 a growing sense that, um, not only do the US companies, 0:01:21.880 --> 0:01:24.319 not only do they need to be concerned about national 0:01:24.400 --> 0:01:28.280 security issues, which have long been present sort of in 0:01:28.680 --> 0:01:31.080 U s foreign policy and for an economic policy right 0:01:31.120 --> 0:01:34.760 to ensure that companies aren't exporting technology that can be 0:01:34.880 --> 0:01:39.039 used by other countries that might pose a national security threat. 0:01:39.080 --> 0:01:43.119 But now increasingly we're dealing with human rights issues as well, 0:01:43.240 --> 0:01:46.759 human rights abuses. And this is particularly important, of course 0:01:46.760 --> 0:01:49.680 in the context of China, where we've seen, you know, 0:01:49.760 --> 0:01:53.360 any very repressive regime under Sident King beginning in twenty 0:01:53.800 --> 0:01:56.120 to the point now that we have you know, over 0:01:56.200 --> 0:02:00.080 a million of Chinese own citizens, the weaker Muslim in 0:02:00.160 --> 0:02:03.880 sin Jong, you know, in labor and and re education camps, 0:02:03.920 --> 0:02:06.920 detained there against their their will. And so, you know, 0:02:07.000 --> 0:02:10.960 how does American business respond to this? And I think 0:02:11.000 --> 0:02:14.000 increasingly Congress and the Biden administration are taking a very 0:02:14.040 --> 0:02:16.960 tough line on this. So I think you are finding 0:02:17.080 --> 0:02:20.800 American companies trying to figure out how to navigate in 0:02:20.880 --> 0:02:25.079 a very new environment. UM. And and in fact, as 0:02:25.080 --> 0:02:28.480 you suggest, the Chinese consumer. Then when companies do stand 0:02:28.520 --> 0:02:31.640 up and say, yes, we're not sourcing from Sindown, right, 0:02:31.639 --> 0:02:34.600 We're not sourcing from this region, We're we're not taking 0:02:34.840 --> 0:02:37.600 any products that are the results of forced labor from 0:02:37.680 --> 0:02:40.560 these weavor Muslims, then you have the Chinese consumers on 0:02:40.600 --> 0:02:44.440 the other and threatening to boycott. And we've seen companies 0:02:44.480 --> 0:02:48.160 like HM and Nike and others facing threats or actual 0:02:48.639 --> 0:02:51.840 boycotts of some sort as a result of these companies 0:02:51.840 --> 0:02:54.400 trying to do the right thing in terms of human rights. 0:02:54.440 --> 0:02:57.080 So it is a very tricky situation. And for a 0:02:57.080 --> 0:02:58.840 long long time, these companies have been able to sit 0:02:58.880 --> 0:03:00.960 on the fence, play the progress of card at home 0:03:01.000 --> 0:03:03.400 in America, then go abroad and do whatever the Chinese 0:03:03.440 --> 0:03:05.440 Communist Party needs them to do. The Disney Company, the 0:03:05.440 --> 0:03:08.160 Walt Disney Company a fantastic example of that, doing all 0:03:08.200 --> 0:03:11.320 it can to embrace the Chinese Communist Party to remain 0:03:11.639 --> 0:03:14.080 to have access to make sure their movies are shown. 0:03:14.120 --> 0:03:16.520 At the same time, and we have a government in 0:03:16.560 --> 0:03:21.000 America accusing the Chinese Communist Party of genocide, and what 0:03:21.120 --> 0:03:24.080 on earth do you advise a multinational operating of both 0:03:24.120 --> 0:03:28.160 America and China right now to do Yeah, how do 0:03:28.160 --> 0:03:30.720 you How do you be a woke CEO for domestic 0:03:30.760 --> 0:03:37.160 audience and participate in an expanding market that you want 0:03:37.240 --> 0:03:40.960 to be in When the American political leadership is saying 0:03:41.000 --> 0:03:44.160 that that country is committing genocide, Well, obviously you have 0:03:44.240 --> 0:03:46.520 to speak out of two sides of your mouth, and 0:03:46.560 --> 0:03:49.160 you get caught when you're doing that, and it's difficult, 0:03:49.200 --> 0:03:53.680 it's very uncomfortable. Look, most American CEOs, despite all of 0:03:53.680 --> 0:03:55.760 the problems that Liz and I have been talking about 0:03:55.800 --> 0:03:59.400 this morning, want to do more business in China. They 0:03:59.440 --> 0:04:01.840 believe that China is going to continue to expand. It's 0:04:01.840 --> 0:04:04.200 an enormous consumption market. They don't want to leave it 0:04:04.240 --> 0:04:08.040 on the table. And yet they know that anything that 0:04:08.080 --> 0:04:10.920 they say about that, or said about that to them 0:04:11.120 --> 0:04:13.840 is going to be problematic for you. Saw Ray Dalio 0:04:13.960 --> 0:04:17.040 on c NBC a while ago just get absolutely hammered 0:04:17.040 --> 0:04:19.680 in the United States for saying, Hey, like I am 0:04:20.000 --> 0:04:22.200 talking about human rights, where am I going to invest? 0:04:22.400 --> 0:04:25.600 I'm just trying to make money. I mean, CNBC Bloomberg. 0:04:25.600 --> 0:04:27.919 We're talking to capitalists here, people that are trying to 0:04:27.960 --> 0:04:30.799 make money, and yet the domestic audience is saying that's 0:04:30.839 --> 0:04:32.680 not enough. You've got to do less. With at the 0:04:32.680 --> 0:04:35.520 Beijing Olympics coming up, and the Biden administration trying to 0:04:35.560 --> 0:04:38.960 square the circle by saying we're gonna diplomatically boycott. But 0:04:39.040 --> 0:04:41.760 the companies, the American companies that are going over there 0:04:41.760 --> 0:04:45.440 and sponsoring, they can still sponsor. Yet we know that 0:04:45.640 --> 0:04:48.279 so many senators and members of the House are going 0:04:48.360 --> 0:04:52.240 to be scrutinizing and criticizing those companies for doing precisely that. 0:04:52.320 --> 0:04:56.160 One more I'll mention Elon Musk, you know, wealthiest man 0:04:56.240 --> 0:05:00.080 in the world, has been enormously you know, sort of 0:05:00.120 --> 0:05:03.400 the critical of the US government, the SEC for going 0:05:03.480 --> 0:05:07.000 after him, making life challenging for him. And yet in 0:05:07.520 --> 0:05:12.840 China he is incredibly supportive of the Chinese Communist Party, 0:05:13.080 --> 0:05:16.200 and it's becoming incredibly difficult for him to continue to 0:05:16.279 --> 0:05:19.839 do that. His SpaceX UH company in the United States, 0:05:19.839 --> 0:05:22.359 which gets a lot of money mostly from NASA and 0:05:22.360 --> 0:05:26.280 the Pentagon, now the Chinese government saying, hey, what's going on. 0:05:26.360 --> 0:05:28.080 You almost hit one of our you know, one of 0:05:28.080 --> 0:05:30.719 our satellites. Um that that all of that is a 0:05:30.920 --> 0:05:34.080 very serious problem for American corporates that are trying to 0:05:34.120 --> 0:05:38.640 avoid politics, politics won't avoid them. Yeah, and Elon Musk, 0:05:38.680 --> 0:05:40.560 I think is a is a very special case in 0:05:40.600 --> 0:05:43.800 so many ways. But I see it here in with 0:05:43.920 --> 0:05:49.400 the leaders of especially German export oriented companies. Right, they 0:05:49.440 --> 0:05:51.960 are not alone though it's not just the corporates. The 0:05:52.000 --> 0:05:56.680 government's here also seem to want to build and and 0:05:56.760 --> 0:05:59.720 hold on to strong ties to the Chinese economy. And 0:05:59.760 --> 0:06:03.520 way is that the Americans in Washington, d C. Wouldn't 0:06:03.520 --> 0:06:07.719 necessarily support. You know, the funny thing is you talk 0:06:07.760 --> 0:06:12.760 to the American leaders privately, and they recognize that the 0:06:12.800 --> 0:06:17.240 private sector wants to do more business, and they recognize 0:06:17.360 --> 0:06:20.400 that the interdependence of the United States in China is 0:06:20.440 --> 0:06:23.800 actually really important to our own national interests, our own 0:06:23.880 --> 0:06:27.240 national security. But they can't say that publicly. You know why, 0:06:27.360 --> 0:06:31.920 because Biden lost votes in swing states in because he 0:06:32.000 --> 0:06:35.160 was perceived as Beijing Biden as soft on China. The 0:06:35.200 --> 0:06:37.120 Republicans hit him on that, and they will not make 0:06:37.160 --> 0:06:40.640 that mistake again, so publicly they must come across as 0:06:40.720 --> 0:06:44.280 much tougher on the corporates, and tougher on the bankers, 0:06:44.440 --> 0:06:47.680 and tougher on anyone that's saying that, you know, China 0:06:47.760 --> 0:06:49.479 is a great place to be and that's why you 0:06:49.520 --> 0:06:52.400 see even the Biden administration talking about the Chinese committing 0:06:52.400 --> 0:06:55.440 genocide on the ground. That makes it much more uncomfortable 0:06:55.440 --> 0:06:58.040 and difficult for the American corporates to operate. There's no 0:06:58.120 --> 0:07:00.679 question that it's extremely uncomfortable. Lucky to have the Embrema 0:07:00.720 --> 0:07:02.680 with us this morning at the Raged Group, and thank you, 0:07:02.839 --> 0:07:06.360 says Elizabeth Economy of the Hoova Institute and the author 0:07:06.600 --> 0:07:09.200 of the Third Revolution List. Great to catch up. Thank 0:07:09.240 --> 0:07:17.600 you joining us now once again on the top risk 0:07:17.640 --> 0:07:21.000 for and also joining us Jane Harmon, President Emerita of 0:07:21.000 --> 0:07:24.640 the Wilson Center and former member of Congress ian the 0:07:24.720 --> 0:07:27.520 U S midterms make the list of these risks. When 0:07:27.520 --> 0:07:30.280 we talk about the political environment in the United States, 0:07:30.400 --> 0:07:32.920 especially on a week that brings the one year anniversary 0:07:32.960 --> 0:07:35.960 of January six, are we more divided now than we 0:07:35.960 --> 0:07:40.280 were a year ago? Yeah, I mean we've learned literally 0:07:40.360 --> 0:07:44.840 zero lessons from the election of two thousand twenty and 0:07:44.840 --> 0:07:47.559 and that's a that's a serious problem. This was the 0:07:47.600 --> 0:07:50.880 most dysfunctional and delegitimized election of our lifetimes in the 0:07:50.960 --> 0:07:54.880 United States, and we've done literally nothing to fix the 0:07:54.960 --> 0:07:59.800 underlying problems. Indeed, the Republican Party is more controlled by 0:08:00.000 --> 0:08:03.560 President Trump today, and more Republicans believe that the election 0:08:03.640 --> 0:08:07.160 was stolen today than did on January sixth. And the 0:08:07.200 --> 0:08:10.560 likelihood is, of course overwhelmingly that the Republicans are going 0:08:10.600 --> 0:08:14.119 to take the House, they may take the Senate um 0:08:14.160 --> 0:08:17.680 in midterm elections, and they'll take it with an underlying 0:08:17.760 --> 0:08:22.200 message that the election of was stolen. This is deeply 0:08:22.440 --> 0:08:26.040 problematic and a pivotal midterm election, probably the most important 0:08:26.040 --> 0:08:29.240 mid term of our lives. Well, and Jane, what's the 0:08:29.240 --> 0:08:31.040 picture that Ian is painting here is one of a 0:08:31.160 --> 0:08:35.480 very politically divided United States, one that doesn't necessarily project 0:08:35.480 --> 0:08:37.920 a picture of strength to the rest of the world. 0:08:37.920 --> 0:08:40.000 As the US in a position right now to be 0:08:40.080 --> 0:08:44.160 a leader on the global stage. Not so much. Um 0:08:44.280 --> 0:08:47.960 Ian has just produced a wonderful report on political risk 0:08:48.679 --> 0:08:51.760 going around the world. And I've been in Europe three 0:08:51.760 --> 0:08:55.840 times in the past few months, and people there are 0:08:55.960 --> 0:08:59.839 very worried. They don't see the Biden administration delivering on 0:09:00.000 --> 0:09:03.040 what had promised, but they also understand the under and 0:09:03.240 --> 0:09:05.760 underlying reason. Maybe some of it has to do with 0:09:05.760 --> 0:09:08.280 the Biden administration. But a big underlying reason is that 0:09:08.360 --> 0:09:12.200 Congress is totally dysfunctional. And something that's in an Even's 0:09:12.280 --> 0:09:15.560 report that got my attention is is UH the comment 0:09:15.679 --> 0:09:19.000 that the only thing possibly worse than President Trump being 0:09:19.000 --> 0:09:22.559 re elected is President Trump being not being re elected. UM, 0:09:22.640 --> 0:09:26.320 the point of which is underlying lack of confidence in 0:09:26.480 --> 0:09:29.439 our voting structure. And you know, I'm listening to all 0:09:29.480 --> 0:09:33.040 this talk about inflation big problem and about whether we 0:09:33.080 --> 0:09:35.760 could pass any form of build back better. I think 0:09:35.760 --> 0:09:38.880 it is crucial for Congress to pass UH some form 0:09:38.920 --> 0:09:42.920 of voting rights reform, or else we may be abdicating 0:09:43.720 --> 0:09:49.320 our our democratic voting process and letting elected legislators are 0:09:49.320 --> 0:09:55.680 appointed electors election officials UH decide what the vote is 0:09:55.840 --> 0:10:01.080 after people's valid votes are discountant. So, Jan Jane, what 0:10:01.200 --> 0:10:04.240 exactly do you mean by that? In which direction would 0:10:04.240 --> 0:10:07.679 this reform go? Are you saying that the Congress should 0:10:07.720 --> 0:10:11.640 pass UH laws that require you to prove your identity, 0:10:11.960 --> 0:10:15.280 prove your citizenship, and limit the amount of absentee voting 0:10:15.280 --> 0:10:19.280 that can happen so that people on the right have 0:10:19.480 --> 0:10:23.960 more faith in the system. Well, I want people on 0:10:24.200 --> 0:10:27.520 across the spectrum to have more faith in the system. Uh. 0:10:27.559 --> 0:10:30.679 It is true than in our constitution that the states 0:10:30.679 --> 0:10:34.880 set the terms of elections, but the federal government does 0:10:35.000 --> 0:10:40.360 have UH, and our constitution does creempt certain aspects of this. 0:10:40.720 --> 0:10:43.680 And it is appropriate, for example, for the federal government, 0:10:43.720 --> 0:10:47.200 which has done this, to declare voting machines critical infrastructure. 0:10:47.240 --> 0:10:51.240 It's also appropriate for the federal government to decide, uh, 0:10:51.280 --> 0:10:55.640 you know what our basic conditions of counting votes. And 0:10:55.800 --> 0:10:59.400 Joe Manchin, his name comes up every five minutes, has 0:10:59.440 --> 0:11:02.800 set out some terms that he would accept on voting rights, 0:11:02.840 --> 0:11:06.040 and they seem broadly acceptable. And so I think it 0:11:06.160 --> 0:11:08.800 is crucial for Congress to act soon before all of 0:11:08.800 --> 0:11:11.760 these laws take effect there in nineteen or twenty states, 0:11:12.160 --> 0:11:16.440 and we end up with a hot mess after November. 0:11:18.880 --> 0:11:22.360 Hotter Mass right, because it's already pretty messy. Ian. Let 0:11:22.400 --> 0:11:24.040 me get back to you and ask you about the 0:11:24.080 --> 0:11:29.559 international reputation of the US in terms of dependability. Was 0:11:30.559 --> 0:11:39.959 the withdrawal from Afghanistan really damaging to the US reputation? Um? 0:11:40.040 --> 0:11:45.000 The way that the withdrawal was executed was damaging, perhaps 0:11:45.080 --> 0:11:48.800 most so with America's Gulf allies, who are going to 0:11:48.880 --> 0:11:55.920 be affected by the Taliban running Afghanistan, the refugees, the radicalism, 0:11:55.960 --> 0:11:59.600 more than anybody else, the Emiratis, for example, the Saudist 0:11:59.640 --> 0:12:03.839 for examp apple um. But but I think much more broadly, 0:12:04.120 --> 0:12:09.000 the issue is that of the underlying American political system. 0:12:09.080 --> 0:12:12.600 That's what's damaging America's ability uh to be seen as 0:12:12.640 --> 0:12:17.280 credible going forward. Jane hit on this. We have just 0:12:17.440 --> 0:12:21.000 had successful elections in some of the world's biggest and 0:12:21.080 --> 0:12:25.679 richest democracies, in Germany, in Japan, in Canada in the 0:12:25.760 --> 0:12:29.920 last few months. No problem, no dysfunction, uh, no questions 0:12:29.960 --> 0:12:34.160 of legitimacy. The United States, on the other hand, increasingly 0:12:34.280 --> 0:12:37.440 has a fundamental structural issue. But whether or not the 0:12:37.480 --> 0:12:41.679 average American believes in its political system, what it stands for, 0:12:41.920 --> 0:12:45.280 whether the elections are legitimate, whether the two parties are 0:12:45.320 --> 0:12:49.840 equally uh legitimate in a representative democracy. These are fundamental 0:12:49.920 --> 0:12:52.240 and profound issues that are not only not about to 0:12:52.280 --> 0:12:55.360 be resolved in the mid terms, but are very likely 0:12:55.440 --> 0:12:58.040 to get aproximately worse. And I agree completely with Jane 0:12:58.360 --> 0:13:01.160 that voting rights is becoming much more important than build 0:13:01.160 --> 0:13:04.160 back better. But voting rights is not about mansion. Voting 0:13:04.280 --> 0:13:06.680 rights is about cinema. She is the vote that you 0:13:06.720 --> 0:13:09.040 have to actually get to make voting rights happen, and 0:13:09.120 --> 0:13:11.880 so far she looks un gettable. People I talked to 0:13:11.920 --> 0:13:14.160 in the Senate tell me that is probably not going 0:13:14.200 --> 0:13:17.120 to happen this year. And so again, your baseline when 0:13:17.120 --> 0:13:20.120 you think about the top risks for two for the 0:13:20.240 --> 0:13:23.880 United States is probably one of the more negative calls 0:13:23.920 --> 0:13:26.040 that you have. You wish when I first started this, 0:13:26.240 --> 0:13:30.000 the firm in the United States was never on this 0:13:30.080 --> 0:13:35.400 list because, frankly, the question of American democracy represented democracy, 0:13:35.480 --> 0:13:38.240 legitimacy of our institutions was something you could count on, 0:13:38.320 --> 0:13:40.959 something the markets could count on, something our allies could 0:13:41.000 --> 0:13:44.240 count on, something even our adversaries had to count on, 0:13:44.360 --> 0:13:47.960 even if they didn't like it. That is no longer true, 0:13:48.440 --> 0:13:52.520 and obviously that's a dominant issue for anyone considering what 0:13:52.640 --> 0:13:54.520 the state of the world is going to be going forward. 0:13:54.720 --> 0:13:56.560 How do you think, Jane, the rest of the world 0:13:56.600 --> 0:13:58.720 is going to view this? Then we're trying two stories together. 0:13:58.800 --> 0:14:00.920 Hit the number one risk Last year you write a 0:14:00.960 --> 0:14:04.079 group was number forty six. It was this presidency. Now 0:14:04.080 --> 0:14:06.679 it's the mid terms at number three, Jane, that's got 0:14:06.679 --> 0:14:08.520 to be music to the ears of the likes of Russia. 0:14:08.720 --> 0:14:11.440 The Chinese Communist Party who were thinking looking ahead to 0:14:11.559 --> 0:14:15.040 say places like Taiwan looking at Ukraine right now, Jane, 0:14:15.080 --> 0:14:17.080 what does it mean for their view that decisions that 0:14:17.120 --> 0:14:20.240 they make the likes of Russia the likes of China. Well, 0:14:20.280 --> 0:14:22.600 I don't think they're unhappy to see dysfunction in the 0:14:22.680 --> 0:14:27.080 United States, and in various ways they're exploiting. Surely Russia is. 0:14:27.160 --> 0:14:30.240 And Ian's report points out that we should expect more 0:14:30.360 --> 0:14:36.400 disinformation um through social media for um that will. I 0:14:36.440 --> 0:14:40.280 think that's dead right on China. China has a lot 0:14:40.280 --> 0:14:43.080 of its own problems, again pointed out in the report. 0:14:43.360 --> 0:14:46.720 But again, but I think since we have made China 0:14:47.240 --> 0:14:51.080 a focus of our foreign policy and the rhetoric has 0:14:51.080 --> 0:14:55.800 been pretty harsh, Shijin Ping is again probably quietly smiling 0:14:55.840 --> 0:14:59.840 at our dysfunction. What worries me and Afghanistan is emblematic 0:15:00.080 --> 0:15:03.400 thing is we may be targeting the right issues, but 0:15:03.520 --> 0:15:08.320 our execution is poor. Leaving Afghanistan was a mess, uh, 0:15:08.320 --> 0:15:12.280 and there was pre planning by the Widen administration, but 0:15:12.600 --> 0:15:15.280 there's all this finger pointing about we had a hard 0:15:15.320 --> 0:15:20.600 deadline with that wasn't based on UH situationally based, and 0:15:20.960 --> 0:15:24.080 we didn't let the military apt sooner and blah blah 0:15:24.080 --> 0:15:27.120 blah are intel, which was pretty bad. I've heard this 0:15:27.200 --> 0:15:30.600 from a very important member of the Senate, projecting a 0:15:30.600 --> 0:15:36.920 pretty bad mess was ignored, etcetera because the President decided 0:15:37.000 --> 0:15:40.040 we had to leave. I'm not against ending the military mission, 0:15:40.360 --> 0:15:42.600 but I think that as the world looked at this, 0:15:42.720 --> 0:15:47.880 and as Europe felt discounted, NATO did not feel fully consulted. UH. 0:15:47.920 --> 0:15:51.440 There was a huge tale on this that was very 0:15:51.440 --> 0:15:54.720 negative and it has hurt us ever since. And I 0:15:54.760 --> 0:15:58.080 don't think we should be abdicating our role as the 0:15:58.120 --> 0:16:00.400 international global leader. I just wrote a U COmON this. 0:16:00.920 --> 0:16:03.280 Since the Cold War, America has not had a foreign 0:16:03.360 --> 0:16:08.200 policy strategy for the world, and I think it's long overdue. 0:16:08.280 --> 0:16:10.800 Biden had the beginnings of this, and I salute him 0:16:10.840 --> 0:16:13.360 for it. It was human rights, it was working with allies, 0:16:13.400 --> 0:16:18.840 it was surging diplomacy, it was making foreign policy relevant 0:16:18.920 --> 0:16:22.160 to Americans average Americans. All of these are good things, 0:16:22.280 --> 0:16:24.880 but now we have to execute Jane. When you hear 0:16:24.920 --> 0:16:30.800 the President say America's back, do you believe him? I 0:16:30.880 --> 0:16:34.120 want to believe him. Europe doesn't believe him. Uh. He 0:16:34.400 --> 0:16:37.400 came to a G seven meeting a year ago and 0:16:37.440 --> 0:16:41.840 said America is back. And then the Afghanistan departure happened 0:16:41.920 --> 0:16:45.920 last summer, and then the messaging around the Australian nuclear 0:16:45.960 --> 0:16:50.720 sub deal happened, which even he confessed was very clumsy. Uh, 0:16:50.760 --> 0:16:53.720 we can do better. His team is good. I'm not 0:16:54.160 --> 0:16:57.480 ragging on the administration's team, but I'm ragging on a 0:16:57.560 --> 0:17:03.840 process that, somehow, uh doesn't convey the kind of competence 0:17:04.320 --> 0:17:08.640 UH and planning that he should be known for. I mean, 0:17:08.680 --> 0:17:11.440 he was the chairman of the Senate Foreign Relations Committee 0:17:11.480 --> 0:17:14.679 for a long time. He has long experience, UH, and 0:17:14.800 --> 0:17:17.400 he knows everybody, and a lot of them work for him. 0:17:17.440 --> 0:17:21.160 And so just let's hope that two is a better beginning, 0:17:21.480 --> 0:17:24.600 although it is fraught with this other controversy around build 0:17:24.640 --> 0:17:29.920 back better inflation, COVID never ending made a surge, possibly 0:17:30.000 --> 0:17:33.800 peak uh and UH, as far as I'm concerned, this 0:17:34.040 --> 0:17:38.240 this looming voting rights catastrophe, and we've got about ninety 0:17:38.240 --> 0:17:39.920 seconds left. I was going out of the top ten 0:17:40.040 --> 0:17:43.159 risks from last year, and I noticed one miss, I 0:17:43.160 --> 0:17:45.040 think one miss from you writer group was the belief 0:17:45.040 --> 0:17:49.160 that energy prices would remain low. One win was Turkey. 0:17:49.280 --> 0:17:51.560 Turkey in your top ten last year, it's in your 0:17:51.560 --> 0:17:54.960 top ten again this year. It's sixty seconds. And why 0:17:55.000 --> 0:17:59.200 the concern about Turkey again this year? Look, I mean 0:17:59.400 --> 0:18:03.680 inflation and spiraling, unemployment really high, and Urdawan and his 0:18:03.800 --> 0:18:07.400 Ak Party are at record lows right now. And he 0:18:07.600 --> 0:18:11.760 is not someone oriented towards representative democracy. He is willing 0:18:11.840 --> 0:18:14.800 to cause lots of repression at home and also be 0:18:14.920 --> 0:18:17.600 much more experimental in his foreign policy, with plenty of 0:18:17.600 --> 0:18:20.080 places he can cause trouble in the region. Think about 0:18:20.119 --> 0:18:23.560 Greek Greece and Cyprus, Think about Syria, think about Libya, 0:18:23.720 --> 0:18:27.359 think about Nagono, Karabak and Armenia, Azerbaijan. This is a 0:18:27.359 --> 0:18:29.520 country that is headed for trouble right now, a hell 0:18:29.600 --> 0:18:32.040 of a lot faster than any other major emerging markets 0:18:32.080 --> 0:18:33.520 out there. It's a country that a lot of us 0:18:33.600 --> 0:18:35.720 care about and should be doing a lot better, but 0:18:35.800 --> 0:18:38.920 the politics have gotten in the way. And wonderful congratulations 0:18:38.960 --> 0:18:40.919 to you and the team. I don't know, a fantastic 0:18:40.920 --> 0:18:42.479 piece of work to kick off a new year. Im 0:18:42.560 --> 0:18:46.040 Brema of Eurasia and to Jane Harmon of the Wilson Center, Jane, 0:18:46.040 --> 0:18:54.119 thank you to you as well, joining us now a 0:18:54.160 --> 0:18:58.640 big equity market bull, Ben Laidler Global Market Strategistic Eats 0:18:58.720 --> 0:19:00.640 or Ben, let's just start right here and not bury 0:19:00.720 --> 0:19:03.679 the lead. We've had three years of double digit gains. 0:19:04.280 --> 0:19:08.000 You think we can make a year for bend later? Why? 0:19:08.800 --> 0:19:12.919 I think we're still significantly underestimating the earning story. Consensus 0:19:12.920 --> 0:19:16.120 earnings growth globally for this year is is well under 0:19:16.160 --> 0:19:19.800 ten percent in a year when GDP growth is going 0:19:19.800 --> 0:19:22.760 to be nearly twice long term average levels. And companies 0:19:22.800 --> 0:19:25.600 have shown us throughout last year, but they are more 0:19:25.640 --> 0:19:29.600 than capable off setting all these cost pressures that they're seeing. 0:19:30.160 --> 0:19:33.600 And I think valuations can stay very high. The FED, 0:19:33.640 --> 0:19:35.760 I think, is going to move, you know, very slowly 0:19:36.119 --> 0:19:39.280 off a very low interest right no on, but bond 0:19:39.359 --> 0:19:42.199 hills are going to stay reasonably low. And this is 0:19:42.200 --> 0:19:45.240 a market that's changed over the last sort a couple 0:19:45.280 --> 0:19:48.840 of decades. It's just full of um you know, bigger, 0:19:49.200 --> 0:19:53.119 more profitable, more sustainably profitable companies. And I think you 0:19:53.160 --> 0:19:56.320 put those two things together, earnings numbers which should probably 0:19:56.320 --> 0:19:59.399 be twice as high as they are right now, and valuations, 0:19:59.400 --> 0:20:00.960 which I think I to come down a bit, but 0:20:00.960 --> 0:20:03.040 but not much. And I think those of your ingredients, 0:20:03.280 --> 0:20:05.239 so I think, I think the biggest risk remains not 0:20:05.280 --> 0:20:08.600 being in equities rather than being out of equities. Well, 0:20:08.640 --> 0:20:11.280 let's focus on one of those points that this thesis 0:20:11.320 --> 0:20:14.320 is predicated on, and that is persistently lower yields. How 0:20:14.400 --> 0:20:16.560 low do they have to stay? What is the threshold 0:20:16.600 --> 0:20:19.000 for equities to still be supported? And not just in 0:20:19.080 --> 0:20:22.760 terms of the nominal yield, but really yields as well. Yeah, 0:20:22.760 --> 0:20:25.159 I mean that's obviously been a huge um you know, 0:20:25.160 --> 0:20:27.879 tell went frequities. But I don't think it changes you 0:20:27.880 --> 0:20:30.760 know that soon, right, I mean we're coming off you know, 0:20:30.760 --> 0:20:33.639 your typical FED cycle is three or four basis points. 0:20:34.000 --> 0:20:36.600 This will probably may be something like half that, and 0:20:36.680 --> 0:20:39.760 it will be much slower and much longer. I think 0:20:39.800 --> 0:20:42.400 that gives you know, that gives economies, that gives markets, 0:20:42.400 --> 0:20:45.560 that gives stocks just a very long time, if you 0:20:45.680 --> 0:20:48.200 like to sort of grow into this and and and 0:20:48.200 --> 0:20:50.680 and the the impact I think that here and now 0:20:50.720 --> 0:20:54.000 impact is going to be on valuations and evaluations opticularly 0:20:54.040 --> 0:20:56.080 look high. I do think that I do think the 0:20:56.080 --> 0:20:57.840 world has changed. Not only a bond yield is going 0:20:57.880 --> 0:21:00.720 to stay low and move up slowly. And to specifically 0:21:00.720 --> 0:21:03.119 answer your point, I think the tipping point is quite 0:21:03.119 --> 0:21:06.440 a long way off. You know, yields are heavily, heavily negative, 0:21:07.080 --> 0:21:12.000 and even even in nominal terms, um, they're still extraordinarily low. 0:21:12.560 --> 0:21:14.600 And again, I think the market has changed. I think 0:21:14.640 --> 0:21:17.920 there's sort of intellectual sort of laziness, so one times 0:21:17.920 --> 0:21:20.520 earnings versus a long term marriage of sixteen for you know, 0:21:20.560 --> 0:21:23.639 the SMP five p you know, the long term average 0:21:23.680 --> 0:21:26.320 is not relevant anymore. The tech sector is twice as large. 0:21:26.640 --> 0:21:28.919 It's pretty much the most profitable sector in the market, 0:21:28.960 --> 0:21:30.600 and it's still got a lot of growth. That's a 0:21:30.720 --> 0:21:33.600 huge change to the composition of this market, which we 0:21:33.720 --> 0:21:36.359 haven't had didn't have twenty thirty years ago. Do you 0:21:36.359 --> 0:21:38.560 think tech will be able to retain its leadership of 0:21:38.680 --> 0:21:41.280 this market? Though, Banner? Is that going to shift shift elsewhere? 0:21:43.440 --> 0:21:46.520 I think the so called everything Raley continues. I mean, 0:21:46.560 --> 0:21:49.480 you look at your your equal weighted SMP five hundred. 0:21:49.800 --> 0:21:53.119 You know outperformed the weighted SMP five hundred last year, 0:21:53.240 --> 0:21:55.159 not about a lot, but it does tell you that 0:21:55.240 --> 0:21:58.080 everything did pretty well last year. I mean the thought 0:21:58.119 --> 0:21:59.679 that this is a sort of tech led market, that 0:21:59.720 --> 0:22:02.600 it's come plea depend on tech tax is important, but 0:22:02.640 --> 0:22:04.880 it's not the only driver here. I mean last year 0:22:04.960 --> 0:22:07.080 was about a lot more than tech, and I think 0:22:07.080 --> 0:22:09.639 that continues this year. I think tech are sort of 0:22:09.640 --> 0:22:11.640 the new defensives, and you definitely want to own them, 0:22:11.960 --> 0:22:13.640 but I don't think they're going to be the leadership 0:22:13.680 --> 0:22:15.600 this year. I think you want the cheaper segments. I 0:22:15.600 --> 0:22:17.480 think you want the higher growth segments. I think that's 0:22:17.520 --> 0:22:20.040 what's going to lead this year. Are you Are you 0:22:20.119 --> 0:22:23.240 worried then about profit margins getting hit hard by inflation? 0:22:25.040 --> 0:22:28.520 Not really, I mean to legitimate question. The market is 0:22:28.560 --> 0:22:30.760 clearly worried about it, which is why you've got these 0:22:30.880 --> 0:22:33.760 very low earnings growth expectations for this year. But I 0:22:33.800 --> 0:22:36.240 think we've if you, I think we've probably had the 0:22:36.280 --> 0:22:39.440 peak of inflation pressure on margins, and companies are still, 0:22:39.520 --> 0:22:42.800 at least in the US are reporting that profit margins 0:22:42.840 --> 0:22:44.920 for the second quarter in a row, which is the 0:22:44.960 --> 0:22:48.080 highest ever. I think companies in this environment where growth 0:22:48.119 --> 0:22:50.440