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Speaker 2: All right, everybody, several stories, no surprise, that are among
Speaker 2: the most read on the Bloomberg have to do with
Speaker 2: Russia and the armed rebellion lad over the weekend and
Speaker 2: then the backing off, And you do wonder where do
Speaker 2: we go from here? So let's get and update some analysis.
Speaker 2: We turn to retired Major General Maston Robson, who is
Speaker 2: a geopolitical intelligence advisor to the advisory board at Academy Securities.
Speaker 2: He is on the Zoom on the Zoom on Zoom
Speaker 2: in Greenville, Greenville, South Carolina. And then also with US
Speaker 2: is Bloomberg News National security reporter Courtney McBride on the
Speaker 2: phone in Washington, DC. Both of you, Thank you, Thank you.
Speaker 3: Courtney.
Speaker 2: I do want to start with you though, where are
Speaker 2: we in terms of Russia and how US government officials
Speaker 2: are viewing it and reacting in thinking about it?
Speaker 4: Well, thanks for having me right now. The US and
Speaker 4: several of its allies and partners in Europe are all
Speaker 4: very much in a wait and see mode, emphasizing that
Speaker 4: they had nothing to do with this and that you know,
Speaker 4: any sort of leadership change or adjustments within Russia are internal.
Speaker 4: That being said, they are framing it as a pretty
Speaker 4: big shift and a potential threat to Putin's authority, though
Speaker 4: he obviously seems to remain in power. That this raises
Speaker 4: some questions about his hold on the forces of the
Speaker 4: country and the Wagner Group, which has been a very
Speaker 4: potent tool of the of the Kremlin.
Speaker 5: And I assume that Wagner Group will continue to be that,
Speaker 5: otherwise they face some real troubles in Ukraine. General Robson,
Speaker 5: is is that not the case that you know Russia,
Speaker 5: I mean, they're military as opposed to the Wagner Group
Speaker 5: hasn't achieved very much down there.
Speaker 6: No, you're absolutely right, Matt. If there's anything we've learned
Speaker 6: out of this, that the Russian military, which we traditionally
Speaker 6: have thought is the number two capable military in the world,
Speaker 6: is not even the number one capable military in Russia.
Speaker 6: That the Bid Group has proved the ability to run
Speaker 6: circles around the Russian military. So it's hard to see
Speaker 6: how who's going to get his way out of this
Speaker 6: where he maintains that military capability that he's going to
Speaker 6: lose if he completely disbands of the Bideny group and
Speaker 6: completely alienates their leader. Because unlike America and in much
Speaker 6: of the of NATO, know, we do everything on a
Speaker 6: constitutional based, democratic public concept. We take an oath of
Speaker 6: office to support and feld the constitution. Not a certain leader,
Speaker 6: not a certain president, not a certain general, not a
Speaker 6: certain ministry of defense. That's not what Russia is built on.
Speaker 6: It's an autocratic society and that becomes very problematic when
Speaker 6: it comes to times like this, because then it becomes
Speaker 6: who's the lead I'm going to choose, not going back
Speaker 6: to the grassroots of a constitutional based society.
Speaker 2: So general Russian President Vladimir Putin is expected to I
Speaker 2: guess he's just started addressing the nation or addressing Moscow,
Speaker 2: and so we'll look for some headlines. Having said that,
Speaker 2: what are you watching out in terms of what he
Speaker 2: has to say in terms of mood, context, or just specifics.
Speaker 6: Yeah, the big decision he has to make is can
Speaker 6: he's one Does he have to choose between his minister
Speaker 6: Defense and chief staff in the Army and the Boden
Speaker 6: Group number two. Can he sway the Russian people who
Speaker 6: seem to have become very positively supportive of the Voden
Speaker 6: Group because of this cess on the battlefield, and he
Speaker 6: makes statements that will make them say, I'm going to
Speaker 6: ban the Widener group. I'm going to basically hold accountable
Speaker 6: the chief of the Vaden Group, even if it puts
Speaker 6: us to the disadvantage military not only in Ukraine, but
Speaker 6: in Syria and in Africa and other parts of the
Speaker 6: world where they've been very successful as his military army.
Speaker 6: That's going to be a hard self for him. So
Speaker 6: how he navigates this, I think is key. I don't
Speaker 6: really think that this has ever been a case where
Speaker 6: it was an anti Putin thing. I think this has
Speaker 6: been a blow his level. This fight that has been going
Speaker 6: on for months between what the group believed was the
Speaker 6: right way to fight a war, the general that putin
Speaker 6: put in charge, that the Vden Group totally supported him,
Speaker 6: being removed by the Minister Defense, the chief staff of
Speaker 6: the army, and the group believed that the army is
Speaker 6: inept and then actually makes it more difficult for group
Speaker 6: to be successful and has even turned contentious where they
Speaker 6: believe they've been targeted on the battlefield by the Russian
Speaker 6: Army at the discretion in the order of the Minister
Speaker 6: of Defense the chief staff of the Army. So it's
Speaker 6: pretty messy situation, right, and now the Putin's got to
Speaker 6: try to manufacture's way through Courtney.
Speaker 5: What do we know about Pregoshan's claims that Soygu was
Speaker 5: mining escape routes or even planning missile attacks on Wagner camps.
Speaker 4: Well, certainly the US officials are being very very quiet
Speaker 4: and discreet about what they have determined, and you know,
Speaker 4: in terms of intelligence, you know, as the General said,
Speaker 4: Pregosion has long been criticizing Shoigu and other Defense ministry officials.
Speaker 4: So the real I think the real shift that we
Speaker 4: saw this weekend was his criticism of even the basis
Speaker 4: for the war, suggesting that Ukraine was never a threat
Speaker 4: and that rather than these leaders simply failing to prosecute
Speaker 4: the war correctly, it never should have occurred in the
Speaker 4: first place. And I think that was that was a
Speaker 4: huge rhetorical shift. And then obviously we saw forces on
Speaker 4: the move that was itself a very jarring and disruptive development.
Speaker 2: Courtney, are reporting, go ahead, please, General Command.
Speaker 6: Those are two great points, Courtney, because that's where I
Speaker 6: think Grosen overplayed his hand. He was attempting, in my opinion,
Speaker 6: to ratchet up his rhetoric of it was a Minister
Speaker 6: of Defense who gave bad advice to Putin. It was
Speaker 6: the fifth but that was a bridge too far. And
Speaker 6: then his quote unquote demonstration certainly was a bridge too far.
Speaker 6: And I think force is Putin to now as a
Speaker 6: strong man, he has to take a hard stand against that,
Speaker 6: even if it's unpopular. So I'm in total agreement Courtney.
Speaker 5: So hard stand meaning he's going to kill pregotion. Is
Speaker 5: that pretty much Putin's only option.
Speaker 6: I don't think his only option. I think it's just
Speaker 6: a function of how much slay he thinks. He has
Speaker 6: both of us, his senior military leadership and with his people,
Speaker 6: to be able to say, for the good in the nation,
Speaker 6: for the good of the war, for the good of
Speaker 6: what we're doing, We've got to find a way to
Speaker 6: pass this back together. I'm not saying that's impossible. Putin
Speaker 6: has certainly proved over the decades to be pretty shrewd
Speaker 6: and how he manufactures somethings wouldn't surprise me if he
Speaker 6: could pull it off, But it's gonna be a tough lift.
Speaker 2: General Robson, I do wonder, though, has this weakened him?
Speaker 2: Does it force Putin's hand to maybe end this war
Speaker 2: earlier rather than later.
Speaker 6: So weakens a relative term. Does it weaken him in
Speaker 6: the eyes of the Russian people, I'm not sure it does.
Speaker 6: It definitely weakens him. I think in the eyes of
Speaker 6: the international community. I'm sure that China is looking at
Speaker 6: this going, this is exactly why we told you not
Speaker 6: to go in Ukraine, because it's gonna be a problem
Speaker 6: for you if it doesn't really go blissfully. And that
Speaker 6: hasn't gone blissfully, and so you're gonna have other partners
Speaker 6: that have been in Russia's camp that will be ruined
Speaker 6: the fact that he's put them all in this position,
Speaker 6: and you're gonna have and the rest of the free
Speaker 6: world going, okay, how do we take advantage of this?
Speaker 6: And certainly Ukraine is going to try to take advantage
Speaker 6: of this by up ramp up their kppability, and does
Speaker 6: NATO and does US and do others say we're going
Speaker 6: to pile them with more equipment and airplanes. I think
Speaker 6: we're going to take it pretty cautiously, because the last
Speaker 6: thing we want to do is is become another talking
Speaker 6: point for Putin In an anti American, anti NATO, anti
Speaker 6: free world, taking advantage of Putin's in Russia's weak moment.
Speaker 5: Nonetheless, Putin can afford to continue to send troops to Ukraine.
Speaker 5: He can afford to keep this war going for years.
Speaker 5: And in terms of weakening, I mean, he still has
Speaker 5: his finger near the nuclear launch button, right, so we
Speaker 5: will always have to be wary of his power.
Speaker 6: Absolutely, and the nuclear launch button really is the one
Speaker 6: that's most significant and impactful. Without the bottom of the group,
Speaker 6: he can certainly hold some of the positions he has.
Speaker 6: I'll have a hard time being offensive in Ukraine without
Speaker 6: the Vagner group. And I think eventually the mothers of
Speaker 6: Russia starting what's going on here?
Speaker 2: Hey Courtney, thirty seconds?
Speaker 7: Here?
Speaker 2: Is there an advantage play here for US officials? What
Speaker 2: are you hearing from the NSA or from the national
Speaker 2: security side of the US government? And GED just got
Speaker 2: about thirty seconds.
Speaker 4: Sure, they're certainly hoping that Ukraine can seize an opportunity,
Speaker 4: whether it's nearly you know, taking advantage of a distracted
Speaker 4: weekend Russia. But I think the general's absolutely right about
Speaker 4: the concern about escalating with NATO or US involvement.
Speaker 2: We will want to point out that President putin a
Speaker 2: six minute address to his country it is over. He
Speaker 2: did say the Wagner troops can join the Russian army
Speaker 2: or go to Belarus. He said most Wagner troops are
Speaker 2: Russian patriots. They were used the mutiny organizers wanted to
Speaker 2: divide Russia, and he says that we took all measures
Speaker 2: to neutralize danger. So, Matt, a very quick statement by
Speaker 2: the Russian president. Thank you both.
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Speaker 2: All right, everybody, We did talk about Scarlett mentioning Kernibal
Speaker 2: as one of the biggest laggards in today's session, shares
Speaker 2: having their biggest one day drop since November sixteenth, down
Speaker 2: seven point six percent. The company to come out reporting
Speaker 2: quarterly results and an annual forecast that outperform, but many
Speaker 2: saying that they failed to keep pace with the high expectations.
Speaker 2: That has fueled a sharp rally in the stock, which
Speaker 2: is up eighty one percent so far here in twenty
Speaker 2: twenty three. But let's get to it, because we were
Speaker 2: delighted to have with us to share some insight on
Speaker 2: the company's business. The Presidency and Chief Climate Officer of Carnival.
Speaker 2: He's Josh Weinstein and he joins us on Zoom in
Speaker 2: New York City. Josh, it's so great to have you
Speaker 2: here with Matt and myself on Bloomberg Business Week. First
Speaker 2: of all, if I may, how do you see the
Speaker 2: broader macro outlook on a day when we're spending a
Speaker 2: lot of time talking about Russia and concerns about instability there.
Speaker 2: How do you see it and how do you kind
Speaker 2: of factor it in as you run what is a
Speaker 2: global business?
Speaker 8: Well, thank you first of all for having me. It's
Speaker 8: a pleasure to be with you. You know, I got
Speaker 8: to be honest with you over the last call it
Speaker 8: nine months, ten months. Our trajectory has only been in
Speaker 8: one direction, and that has been up. And that is
Speaker 8: despite you know, a good amount of geopolitical uncertainty and discord,
Speaker 8: and that's you know, we're a global company and so
Speaker 8: that's part of our global trade and we adapt and
Speaker 8: we evolve and we move on. I'd say in the
Speaker 8: last three months it's been pretty fascinating. We usually have
Speaker 8: our peak demand in bookings in the first quarter, and
Speaker 8: our first quarter is December, January February of the year,
Speaker 8: and in fact, we did have a record first quarter
Speaker 8: in bookings, highest bookings in the company's history. We thought
Speaker 8: that was great, and then we got to our second
Speaker 8: quarter and we shattered it.
Speaker 9: And so the demand that we see is carrying on.
Speaker 8: In the first three weeks of our third quarter, for
Speaker 8: the month of June, it hasn't stopped. And so despite
Speaker 8: the fact that there is geopolitical uncertainty, that is something
Speaker 8: that our consumers, our guests are taking in stride. And
Speaker 8: at the end of the day, they've got a desire
Speaker 8: to travel, they've got a desire for new experiences, and
Speaker 8: they have a lot of pent up demand for experience,
Speaker 8: as you know, and that plays very well into our business.
Speaker 7: Josh.
Speaker 2: It feels like though investors maybe think it's as good
Speaker 2: as it gets, considering the bounce back that we've seen
Speaker 2: in your share price this year. You know how it
Speaker 2: goes as someone who's been at Carnival for a while
Speaker 2: now and looked at it from several different angles. But
Speaker 2: we still have the stock down from about eighty percent
Speaker 2: from a high back in January of twenty eighteen. Is
Speaker 2: it as good as it gets? Do you think in
Speaker 2: terms of bookings and visibility right now? Oh?
Speaker 9: Not at all? You know, you know, So the short
Speaker 9: answer is no.
Speaker 8: It As a matter of fact, even though we're all
Speaker 8: the way back in our booking curve for our North
Speaker 8: American brands, we're still only about ninety percent back for
Speaker 8: our European brands, and so their trajectory is the same thing,
Speaker 8: going in the right direction.
Speaker 9: But they've got a ways to run.
Speaker 8: But to show you the strength of our portfolio of
Speaker 8: world class brands, our European brands, in the second quarter,
Speaker 8: they actually as compared to twenty nineteen, not only do
Speaker 8: they have double digit increased percentages in the volumes book
Speaker 8: for the rest of this year, for the second half
Speaker 8: of the year it was on double digit price increases.
Speaker 8: And so first quarter seven and a half points up
Speaker 8: in pricing. Second quarter of this year seven and a
Speaker 8: half percent percent up in pricing with that demand. On
Speaker 8: a forward looking basis as wind in our back, we're
Speaker 8: very well booked for the rest of this year into
Speaker 8: the first half of next year. So with all due
Speaker 8: respect to you know, to the market. You know, any
Speaker 8: one day you're gonna have ups, you're gonna have downs.
Speaker 9: As you said, we've been on.
Speaker 8: A pretty big tear, about a one hundred percent or
Speaker 8: so since the start of the year. Our job is
Speaker 8: to focus on the business, focus on that demand generation,
Speaker 8: and continue to drive our business forward.
Speaker 5: Josh Matt Miller here with Carol. What needs to happen
Speaker 5: to bring the stock back to pre pandemic levels or
Speaker 5: why hasn't it come back? Is it just that you
Speaker 5: took on a lot of debt that you have a
Speaker 5: lot of investment to do. I mean, you're trading in
Speaker 5: the teams right now, and before the pandemic hit, you
Speaker 5: were trading more like fifties sixty seventy dollars a share.
Speaker 9: Yeah.
Speaker 8: Well, you know, our profile has definitely been impacted by
Speaker 8: by what happened in twenty twenty and what we had
Speaker 8: to do to get through it. Frankly, you know, we
Speaker 8: were a company that entered in with probably about you know,
Speaker 8: the market cap and the and the debt. If you
Speaker 8: added it together, it's probably not too dissimilar to exactly
Speaker 8: where we are now if you add it together. It's
Speaker 8: just that our debt, which used to be about thirteen
Speaker 8: billion dollars, is thirty three billion dollars and hence the
Speaker 8: value of the of the equity is down and it's
Speaker 8: our job over the next you know, several years to
Speaker 8: effectively transfer that back by generating free cash flow. We
Speaker 8: have a good amount of headroom to do to take
Speaker 8: that and delever and pay down debt. We have the
Speaker 8: lowest order book of new builds in frankly my history.
Speaker 8: I've been here for twenty one years, and when I
Speaker 8: started back in November of two thousand and seven as
Speaker 8: the treasurer as one of the stops along my path
Speaker 8: here at Carnival Corporation, we had twenty four ships on order,
Speaker 8: and so our ability to generate a lot of cash
Speaker 8: and we will continue to do that and use it
Speaker 8: to delever is quite strong, to tell you the truth. Now,
Speaker 8: as far as you know, what are the other factors involved?
Speaker 8: For us, it's about getting back to not only full capacity,
Speaker 8: full occupancy, but really leveraging our brands. Our brands are phenomenal.
Speaker 8: I mean, they are world class. We have Carnival Cruise
Speaker 8: Line as America's cruise line. Ada in Germany created modern
Speaker 8: day cruising. They own Germany Piano Cruises. In the UK
Speaker 8: they are synonymous with cruising. They have a Union Jack
Speaker 8: as their livery. We own those markets. They are very
Speaker 8: good markets for us, and they're rebounding and so the
Speaker 8: as far as I'm concerned, there's only one way that
Speaker 8: we're going, and it's up.
Speaker 5: Can I just ask about your debt? You have a
Speaker 5: weighted average fixed coupon of six point nine to four percent,
Speaker 5: which is not bad considering where we are right now,
Speaker 5: and we're I guess, and about.
Speaker 2: Two point nine billion maturing in twenty twenty.
Speaker 5: Four, which is where it would be, which is much
Speaker 5: lower than it would be if you had to refinance. Now,
Speaker 5: is my point right? You guys got in on this
Speaker 5: early and filled your coffers first. Do you think that
Speaker 5: puts you at an advantage relative to your competitors.
Speaker 9: I think we're in good shape.
Speaker 8: You know, we've we've basically gotten to a point where
Speaker 8: We ended the quarter at about seven point two billion
Speaker 8: seven point three billion of liquidity, and we've already started
Speaker 8: to de lever. As far as we're concerned, we can
Speaker 8: always be opportunistic, we can refinance, we can look at
Speaker 8: what's available, but we as far as we see the future,
Speaker 8: we have no need to go out to the markets
Speaker 8: at this point. We can delever with the liquidity buffer
Speaker 8: that we have and starting to generate again all of
Speaker 8: that cash flow. We do have export credits as well,
Speaker 8: so for the new bills that we do have on order,
Speaker 8: we've got about three billion dollars of very competitively priced
Speaker 8: export credit facilities ready and waiting for us if we
Speaker 8: choose to use them between now and two years from.
Speaker 9: Now, in the middle of twenty twenty five, when our
Speaker 9: last ship is ordered.
Speaker 8: So we're in a very strong position when it comes
Speaker 8: to our ability to manage our debt down and manage
Speaker 8: our interest expense down over time. You know, as a
Speaker 8: matter of fact, one of the one of the drivers
Speaker 8: that we had for being able to add two hundred
Speaker 8: and seventy million dollars to the bottom line in our
Speaker 8: guidance change from March to June was in fact interest
Speaker 8: expends savings from starting that process of delevering.
Speaker 9: So we're very we're very pleased with that. With that trajectory, Well, talk.
Speaker 2: To us about you know, Matt and I are going
Speaker 2: back and forth. We're looking at different functions here, so
Speaker 2: tell us. We want to make sure we have this right.
Speaker 2: Is it two point nine billion? Is that correct? Maturing
Speaker 2: in twenty twenty four, I was looking at some of
Speaker 2: our research.
Speaker 9: You know what, I don't want to give you the
Speaker 9: wrong number in a live program. That's fair. We don't
Speaker 9: get back to you and we'll make sure we get
Speaker 9: it squared away for you. Well.
Speaker 2: And the other thing is is you talked about, you know,
Speaker 2: operating good cash flow, and forgive me, we just want
Speaker 2: to make sure we're we're hitting it right too. You
Speaker 2: know the amount that the ships are not inexpensive. You
Speaker 2: guys have did a lot of replacement during the pandemic
Speaker 2: and getting rid of some of the older ships and
Speaker 2: so on. But I do wonder, Josh, can you I
Speaker 2: don't know, what's the capex that you're looking for that
Speaker 2: you can continue to spend, which is really important, you know,
Speaker 2: certainly to your business, and can you do it with
Speaker 2: the debt load the car right detload.
Speaker 9: Yeah.
Speaker 8: I mean the short answer is yes, I think we can,
Speaker 8: you know, And as far as we have new build
Speaker 8: CAPEX and we have non new build CAPEX, our new
Speaker 8: build order pipeline, as I said, is the smallest we
Speaker 8: have had in anyone's memory, and so we are very
Speaker 8: well placed to be able to manage that type of
Speaker 8: CAPEX spend.
Speaker 9: And as I mentioned, it does come with export credits packaged.
Speaker 8: With it, should we choose to use them, as export
Speaker 8: credits are rolling off because we're paying them down every
Speaker 8: year in the normal course. On top of that new
Speaker 8: build CAPEX we've got, we've got maintenance cappex, we've got
Speaker 8: you know, making sure our ships are in good condition.
Speaker 8: That you know, we're forecasting it's going to be you know,
Speaker 8: give or take about one point five billion for this
Speaker 8: year in twenty twenty three, and about one point seven
Speaker 8: billion on an annual basis thereafter for the foreseeable future.
Speaker 8: That profile, that entire CAPEX profile is significantly less than
Speaker 8: what we were living with how we were operating pre pause.
Speaker 8: And so that's why we're so bullish that the amount
Speaker 8: of cash flow that will be able to generate and
Speaker 8: then utilized a d lever is not insignificant.
Speaker 9: You know, we're basically.
Speaker 8: Planning between twenty four, twenty five and twenty six something
Speaker 8: in the magnitude of about five billion of cash from operations,
Speaker 8: where if you net out all these with the capex,
Speaker 8: with the debt, export credits coming in, export credits getting
Speaker 8: paid off, we anticipate over over eight billion dollars will
Speaker 8: be available for us to be able to de lever.
Speaker 8: And that's on top of it, you know, a couple
Speaker 8: a couple billion.
Speaker 9: We're doing this year.
Speaker 2: Josh. One thing I want to ask you, and you
Speaker 2: mentioned this too, that you know, among the different hats
Speaker 2: that you've worn at Carnival, and you've been there, I
Speaker 2: think almost twenty years. I think I'm right.
Speaker 9: If I'm looking at it, twenty one one.
Speaker 2: Is treasure and so you you understand the importance of
Speaker 2: the financial side of that. Having said that, I am
Speaker 2: also curious when you, you know, look at what really moves
Speaker 2: the bottom line. You know, when people come on board, Yep,
Speaker 2: it's the tickets, but it's also excursions and other things.
Speaker 2: Are they upping the spend ahead of time that gives
Speaker 2: you even greater visibility and that's where you make a
Speaker 2: lot of money.
Speaker 9: Oh, it absolutely is. You know.
Speaker 8: We've made a concerted effort over you know, since since
Speaker 8: getting back in our restart to really augment the onboard
Speaker 8: spend profile.
Speaker 9: And we can do that through several mechanisms. You know.
Speaker 9: One of them is the fact is the inflationary environment.
Speaker 10: If you think about twenty nineteen to twenty twenty three,
Speaker 10: people are used to paying more when they go into
Speaker 10: their local restaurant, their local bar, local entertainment, and so
Speaker 10: we have adjusted our pricing accordingly for similar experiences and
Speaker 10: that's taken just fine with the consumer.
Speaker 8: We're not being out of the ordinary. As a matter
Speaker 8: of fact, our service levels are so much better than
Speaker 8: what you can find on land based alternatives that it's
Speaker 8: a great value. On top of that, we're finding different
Speaker 8: ways to forward that spend, as you were referring to,
Speaker 8: and we can do that by bundled ticket prices with
Speaker 8: onboard packages. We can sell people specific packages, whether that's
Speaker 8: beverage or spa packaging, and.
Speaker 2: They're buying it, and they're buying it ahead of time.
Speaker 8: Oh they are, they are. It's you know, we've made
Speaker 8: about a step change for us. But a remarkable opportunities
Speaker 8: to do more. I want to say that it's about
Speaker 8: sixty percent increase per person per day the amount of
Speaker 8: our onboard spend that's being purchased before you get on
Speaker 8: the ship.
Speaker 9: Now, that's great, but it is.
Speaker 8: Still a minority of our overall onboard spend revenue. So
Speaker 8: we've got a tremendous opportunity to keep that momentum going
Speaker 8: by finding different ways to get people to want to
Speaker 8: put down money for those experiences in advance.
Speaker 2: All right, don't kill me, Josh, But thirty seconds left here,
Speaker 2: do you guys think about recession? Are you factoring the
Speaker 2: possibility of a recession?
Speaker 3: Just quickly?
Speaker 9: Yeah? We do, you know we that's part of our job.
Speaker 8: The great thing about our business and our company is
Speaker 8: number one, we are well booked. We're about at any
Speaker 8: one time about fifty percent book for the next twelve months,
Speaker 8: and obviously that's much more weighted in the first half.
Speaker 8: On top of that, we are an outrageous value when
Speaker 8: you compare us to land anywhere from twenty five to
Speaker 8: fifty percent, and that boats very well when people are
Speaker 8: thinking about how do I maintain commuication?
Speaker 2: Forgive me, I got to run because the computer is
Speaker 2: going to take me out. Josh, come back soon. Josh Weinstein,
Speaker 2: President and CEO and chief Climate Officer at Carnival Corporation.
Speaker 2: On Zoom in New York City. This is Bloomberg Radio.
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Speaker 2: You do want to get into a little bit more
Speaker 2: in terms of China, India, Russia. David Riedal is president
Speaker 2: of Retal Research Group, which has analysts on the ground
Speaker 2: around the globe in some fifteen countries covering companies in
Speaker 2: those areas, and he is just back from India. So, David,
Speaker 2: great to have you here with Matt and myself. You're
Speaker 2: joining us on Zoom in San Francisco. So where to begin?
Speaker 2: Where to begin?
Speaker 6: Russia?
Speaker 9: Begin?
Speaker 5: Not begin in Russia?
Speaker 2: Well, I am curious when your clients call you, where
Speaker 2: do they begin.
Speaker 7: Well, they usually begin with China, and more recently they'll
Speaker 7: talk a little bit about India, but they will talk
Speaker 7: about the impact of Russia on those countries. You know,
Speaker 7: Indias and China both have tried to tried a pretty
Speaker 7: fine line, China a little bit more in support of Russia,
Speaker 7: India kind of trying to play both sides.
Speaker 9: Both of them are big oil.
Speaker 7: Importers, so it's important for them to maintain a relationship
Speaker 7: with Russia.
Speaker 5: Does the mutiny though, that we witnessed over the weekend,
Speaker 5: and I guess the solution into that problem have any
Speaker 5: impact on your markets?
Speaker 9: I don't think so at this point.
Speaker 7: You know, it all wrapped up over the weekend, so
Speaker 7: we didn't really see its impact on trading. I think,
Speaker 7: you know, a lot of people were surprised overnight when
Speaker 7: that protest or that rebellion or whatever it was took place,
Speaker 7: but it seemed like it was people were pretty satisfied
Speaker 7: by Monday morning.
Speaker 2: Well, it is interesting too that you did have China's
Speaker 2: Foreign Ministry saying it supports Russia's actions to maintain national stability.
Speaker 2: A brief statement by a ministry spokesperson who said, it's
Speaker 2: Russi's internal affairs, but it's just like China saying, wait,
Speaker 2: we got stuff going on too, and it's our internal affairs.
Speaker 7: That's one of their favorite favorite phrases. As you know,
Speaker 7: they think that the Taiwan straight is their domestic waters.
Speaker 7: They think that the Taiwan issue is a domestic issue.
Speaker 7: Of course, they think the Weager issue and the Tibet
Speaker 7: issue and the Hong Kong issue are all internal affairs.
Speaker 7: So they don't like the idea of people being involved
Speaker 7: in other people's domestic activities.
Speaker 2: But I guess, just to follow internal they don't have.
Speaker 5: A problem with China being involved in Ukraine's domestic activities.
Speaker 7: I know, but these people always pick and choose when
Speaker 7: it's wrong and when it's right when they're doing it,
Speaker 7: I guess.
Speaker 2: It's okay, well pick and choose for us. I mean,
Speaker 2: in terms of I guess we're all trying to as
Speaker 2: international investors, trying to understand which internal affairs become global
Speaker 2: affairs become global investment stories. So how do you kind
Speaker 2: of play that out?
Speaker 4: Well.
Speaker 7: One of the things that I think we've seen over
Speaker 7: the last five years is really people questioning the sensibleness,
Speaker 7: the reasonableness of having so many supply chains linked back
Speaker 7: to one country, China. I think COVID and the breakdown
Speaker 7: and supply chains really reminded people how much risk we
Speaker 7: were taking on having so much of our economy connected
Speaker 7: back to one economy. So I think you've got a
Speaker 7: lot of people looking around the world for alternative places
Speaker 7: to manufacture, whether that's Indonesia or Brazil or Mexico a
Speaker 7: country that we really like, or increasingly India. India has
Speaker 7: made some really major fundamental changes in their policies and
Speaker 7: the way that they run their country that I think
Speaker 7: are changing the growth trajectory for that country, and they
Speaker 7: are definitely set to benefit from people diversifying away from China.
Speaker 7: They've got the large population that one point four billion people,
Speaker 7: they've got the right demographics, a lot more young people
Speaker 7: in India, and they are a positioned to perhaps take
Speaker 7: some of that manufacturing activity and some of those supply
Speaker 7: chains from China.
Speaker 2: But still issues tell us about you just back, what
Speaker 2: were you doing, who were you visiting, What did you
Speaker 2: want to see? Specifically? There's stuff you can get on
Speaker 2: the ground that you cannot get from afar.
Speaker 7: It was fascinating. I was mostly in Bombay and the
Speaker 7: area around Mumbai, and it was amazing to see how
Speaker 7: much infrastructure they're building. One of the frustrations with India
Speaker 7: for a long time was that the national government couldn't
Speaker 7: mobilize enough tax resources across the country to build the
Speaker 7: infrastructure that they needed in the big cities. India's, of course,
Speaker 7: are very lowlarge democracy, largest democracy in the world, but
Speaker 7: that meant that some of those voters expected to have
Speaker 7: infrastructure projects in their provinces, in their cities, in their villages,
Speaker 7: and so that really left the capital cities Delhi and
Speaker 7: the big city like Mumbai without a lot of money
Speaker 7: for infrastructure. Boy, has that changed. They really changed their
Speaker 7: tax basis a few years ago, looking at goods and
Speaker 7: services tax that's much simplified. And they are on a
Speaker 7: building spree, building a huge elevated train through huge parts
Speaker 7: of Bombay and really spending a lot of money on infrastructure,
Speaker 7: which is sorely needed.
Speaker 5: What about the middle class? What's the trajectory looked like there?
Speaker 5: You know China, obviously that was a massive part of
Speaker 5: the story over the past twenty years. So is it
Speaker 5: going to look the same way in India?
Speaker 7: You know, I think it's going to You almost always
Speaker 7: have a situation where rising wages drive the development of
Speaker 7: a middle class. If you've got enough deployment for those people,
Speaker 7: that'll drive demand for motorcycles and then eventually cars, it'll
Speaker 7: drive for apartments and eventually houses, life insurance and other
Speaker 7: sort of products that come with that rising wealth. So
Speaker 7: I think you'll see pretty much the same trajectory in
Speaker 7: India that we saw in China, perhaps not as smooth
Speaker 7: a road. China, having a very centrally planned and organized economy,
Speaker 7: had the advantage of really driving through a lot of
Speaker 7: the changes that they wanted to make without worrying too
Speaker 7: much about voters and the getting other people involved in
Speaker 7: the decision making. So India as a democracy, perhaps stronger institutions,
Speaker 7: but maybe a little bit a few more fits and
Speaker 7: starts on their road to prosperity.
Speaker 2: David, I'm going to probably sound pretty naive, but yeah,
Speaker 2: I'm going to just go for it. India, China, Saudi Arabia, Russia.
Speaker 2: Money trumps all. Investment opportunities trump all even if we
Speaker 2: have some problem about our concerns about internal affairs in
Speaker 2: a part of the country or in part of the world.
Speaker 7: It does you know, people investors are looking for opportunities
Speaker 7: around the world and I think they're looking for opportunities
Speaker 7: for something to surprise to the upside. I think if
Speaker 7: you look at a Saudi or something like that, that's
Speaker 7: a country that's pretty much a one trick pony in
Speaker 7: most ways. It's really a hydrocarbons play. It's a country
Speaker 7: like an Indonesia or a Brazil or in this case, India,
Speaker 7: has a diverse and deep and developing economy that has
Speaker 7: the ability to really create a cycle of value when
Speaker 7: money comes into the system. It has things that it
Speaker 7: can invest in, and has a domestic market that can
Speaker 7: be growing. And so that's the kind of environment you're
Speaker 7: looking for, the large population with relatively stable government that's
Speaker 7: on a new trajectory of growth. And I think that's
Speaker 7: what people are starting to see in India today.
Speaker 2: But I guess my point is that if there's an
Speaker 2: opportunity to make money, I'm thinking about, you know, I'm
Speaker 2: going to go back to Saudi Arabia that we all
Speaker 2: kind of forgot about, you know, or many have you know,
Speaker 2: the killing of Jamal Koshogi. And yet you know, we're
Speaker 2: seeing you know, the PGA tour and live golf, like
Speaker 2: it's just when there's money to be made or opportunities
Speaker 2: that we kind of turn and look the.
Speaker 3: Other way it.
Speaker 7: Unfortunately, I think that's true, and I think that's been
Speaker 7: true with regard to our enthusiasm for China for many years,
Speaker 7: really thinking that changing in involving them more in the
Speaker 7: global fabric and the global business fabric was going to
Speaker 7: change their behavior, and it really didn't. So I think
Speaker 7: that people do need to be careful who they're investing with,
Speaker 7: who they're investing alongside. But in a growing environment, maybe
Speaker 7: you could pick some winners that don't have as much
Speaker 7: downside or as much baggage.
Speaker 5: All right, very interesting stuff. India must be the best
Speaker 5: of those options that Carol listed, right, and they happen
Speaker 5: to have the best growth trajectory as far as we
Speaker 5: can see from this point.
Speaker 9: They really do. It's amazing.
Speaker 7: A lot of people haven't followed this story, but over
Speaker 7: the last ten years they did iris scans and fingerprints
Speaker 7: of every single citizen, which created an environment where they
Speaker 7: could open four hundred million new bank accounts, and it
Speaker 7: created a system where the government can distribute all their benefits,
Speaker 7: payments and things like that electronically directly to the consumer,
Speaker 7: not through other governments, which tend to foster a lot
Speaker 7: of corruption, so they've really stitched together a digitized and
Speaker 7: mostly cash list economy that's much more efficient for taxation
Speaker 7: and for growth.
Speaker 2: David, Yes or nos? Is a point that maybe five
Speaker 2: ten years from now, we look back and we're going
Speaker 2: to say this has been the world turn from China
Speaker 2: to India very quickly.
Speaker 7: Yes or no, it's going to happen. It's already happening today.
Speaker 7: It's bound to happen.
Speaker 2: All right, listen, so good to check in with you
Speaker 2: as always. David Redal, He's present and founder of Retal
Speaker 2: Research Group on zoom from San Francisco. I do think
Speaker 2: about this, Matt, these turning points in our world.
Speaker 5: Yeah, it does potentially feel like we've hit that. As
Speaker 5: David said, from his perspective, we already have.
Speaker 1: If you're listening to the Bloomberg Business Week podcast, catch
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Speaker 2: It does seem like everywhere we're talking about what's going
Speaker 2: on in Russia. So we wanted to get to Angela
Speaker 2: Stent who really understands President Putin. She's written a book.
Speaker 2: It was published in twenty nineteen, Putin's World, Russia Against
Speaker 2: the West and with the Rest. She's a senior fellow
Speaker 2: at the Brookings Institution and a former National intelligence officer
Speaker 2: for Russian Eurasia at the National Intelligence Council. She also
Speaker 2: served in the Office of Policy Planning at the US
Speaker 2: Department of State. She has been a go to I
Speaker 2: say it a million times throughout the Russian invasion and
Speaker 2: war in Ukraine. So I'm so delighted that we could
Speaker 2: actually get some time with her today. You've been so
Speaker 2: generous to Bloomberg today, So Angela, thank you, thank you
Speaker 2: for finding time from me in me as well. Where
Speaker 2: are we now with this and his President Putin?
Speaker 9: Weekend?
Speaker 3: So I just watched a short clip of Putin meeting
Speaker 3: I guess just very recently, with his top officials, including
Speaker 3: the Defense Minister. So that answered questions about whether the
Speaker 3: Defense minister still had his job. And Putin just told
Speaker 3: his assembled colleagues there, we need to get down to work,
Speaker 3: and then of course they cut away and we didn't
Speaker 3: see the rest of it, and he put out a
Speaker 3: statement earlier today six minutes.
Speaker 2: Oh, oh, statement, Okay, this isn't his comments, go ahead, sorry.
Speaker 3: No, this is a statement where he said, you know,
Speaker 3: he thanked the Russian people for standing by the constitution
Speaker 3: and they're all great patriots and this is how they
Speaker 3: managed to weather this threat. But then he did, you know,
Speaker 3: he condemned the people in Wagner who had carried out
Speaker 3: this mutiny. And so I'm not completely you sure that
Speaker 3: the deal we were told about on Saturday, where you've
Speaker 3: got any Progosion, the head of Wagner would not be prosecuted,
Speaker 3: and that the Wagner fighters could all join the you know,
Speaker 3: the Russian military now the regular military. I'm not sure
Speaker 3: whether that deal will hold. So all we know is
Speaker 3: that Putin is back, he's met with officials. We're over
Speaker 3: the mutiny. Now, we don't know where Progosion is. He
Speaker 3: put out a statement he Progosion earlier on you know,
Speaker 3: saying that it was never his intention to overthrow the
Speaker 3: government and so, but we have no proof that he's
Speaker 3: in Bielarus, although that's allegedly where he is.
Speaker 5: Yeah, he seems to be walking back his mutiny, and
Speaker 5: Putin seems to be walking back the deal. He reportedly
Speaker 5: made because he says, these organizers the rebellion, they betrayed
Speaker 5: their country and their people. They betrayed those who were
Speaker 5: dragged into the crime, lied to them, pushed them to
Speaker 5: death under fire. You can't say that about some unless
Speaker 5: you're going to prosecute them. And of course, according to
Speaker 5: Russian news media, they are still officially investigating these people.
Speaker 5: Who is one person Progosian?
Speaker 1: Right?
Speaker 5: I also wonder is Progosian in a powerful place? Because
Speaker 5: you know, you and I were talking earlier, he does
Speaker 5: have a pretty serious military force behind him. He's the
Speaker 5: only thing that's gone right in the Russian invasion of
Speaker 5: Ukraine for Putin. If you get rid of the Wagner group,
Speaker 5: you just have these losers left.
Speaker 6: Yeah.
Speaker 3: I mean, certainly his fighters did the bulk of the
Speaker 3: fighting in Ukraine, particularly around Bathmoot for the last almost year,
Speaker 3: which they finally took. But he doesn't seem to be
Speaker 3: in a very strong position now, because you know, he
Speaker 3: did turn back. I think there is some question about
Speaker 3: how he and his troops managed to get within one
Speaker 3: hundred and twenty miles of Moscow without there was as
Speaker 3: he put on this statement today, there was a little
Speaker 3: bit of firing on them from helicopters, but basically they
Speaker 3: made it through without any resistance. So that would indicate
Speaker 3: that you know, there's some support there, or at least
Speaker 3: not the will or the ability to stop them. But
Speaker 3: because we don't know where he is, and because Putin
Speaker 3: has now signaled again that you know he's going to
Speaker 3: go after the leaders of this insurrection, of this mutiny,
Speaker 3: I would say it's quite questionable still what's going to
Speaker 3: happen to him. And I think we have to wait
Speaker 3: and see whether we actually see Precussion resurface in person
Speaker 3: and whether he's around in a few weeks.
Speaker 5: I mean, I think it's interesting, and we don't know
Speaker 5: why yet he turned around. That's the big question mark
Speaker 5: over this right. But what we've learned over the last
Speaker 5: few days is that Russia has a seemingly weak army,
Speaker 5: much weaker than we may have thought previously, because some
Speaker 5: private faction can get all the way up to Moscow
Speaker 5: without problems. We were talking a little bit earlier with
Speaker 5: Major General Roberson Robson, who said he thinks that Progosion
Speaker 5: should stay in Rostov, should go back to Rostov and
Speaker 5: hold that spot because it's so important militarily, what do
Speaker 5: you think, well, I mean.
Speaker 3: And he managed to take over the garrison there. But
Speaker 3: clearly the issue is that because Pregossion for months has
Speaker 3: been criticizing the Ministry of Defense and particularly the Minister
Speaker 3: of Defense and the Chief of the General Staff for
Speaker 3: their incompetence, this is why they wanted to dissolve at
Speaker 3: least parts of Wagner and make those Vadner troops that
Speaker 3: were fighting in Ukraine joined the regular Russian Army. And
Speaker 3: that of course is why pregaussion that was the I
Speaker 3: think the occasion of his kind of march on Moscow
Speaker 3: was to stop that from happening. So, I mean, we've
Speaker 3: seen the Russian armed forces have not performed well in Ukraine,
Speaker 3: much worse than we thought they had, so that, you know,
Speaker 3: we've known that for some time. But I think maybe
Speaker 3: this mutiny, this failed mutiny, has rein force the fact
Speaker 3: the weakness of the Russian Army.
Speaker 2: Hey, if you were back at the National Intelligence Council
Speaker 2: and advising the President and his team, what would you
Speaker 2: do be telling them about Russia specifically and where what
Speaker 2: the US needs to be doing? And do you think
Speaker 2: that this will ultimately lead to a quicker end of
Speaker 2: the war in Ukraine.
Speaker 3: Well, I think certainly the Biden administration was right to
Speaker 3: say that, you know, this is a domestic Russian affair,
Speaker 3: to make that clear. Even though today the Russian Foreign
Speaker 3: Minister lover Of accused the US somehow of having spies
Speaker 3: them in the Vadner Group, I think that was correct.
Speaker 3: I think showing up the allies, and I think that
Speaker 3: they've been doing that the last few days. And I
Speaker 3: think redoubling our efforts, the US efforts to help the
Speaker 3: Ukrainians win this war, because with all of the uncertainty
Speaker 3: in Russia, you know, this is a top priority. I
Speaker 3: personally would have advised them in the next month's some
Speaker 3: at native some in willing US that more should be
Speaker 3: done to offer Ukraine a perspective for membership in NATO,
Speaker 3: even if it's not going to happen now. Those discussions,
Speaker 3: I think is still going on. But I think we
Speaker 3: need to redouble our efforts, and we need to supply
Speaker 3: the Ukrainians with the weapons that they need and that
Speaker 3: they've been asking for.
Speaker 2: Yes or no. Bottom line is President putin weaker Yes.
Speaker 2: Love you, Thank you so much, angelas stant You're amazing.
Speaker 2: Can't wait for the next book. Senior fellow at the
Speaker 2: Brookings Institution, former national intelligence officer from Russia and Eurasia.
Speaker 2: As we said our twenty nineteen book Putin's World, Russia
Speaker 2: against the West and with the rest joining us via
Speaker 2: zoom from Washington, DC. What a great lineup. Yeah, like
Speaker 2: I'm getting the full picture when it comes to what's
Speaker 2: going on.
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