WEBVTT - Surveillance: Central Bank Decisions with Maher 0:00:05.120 --> 0:00:09.320 Welcome to the Bloomberg Surveillance Podcast hometom Keene. Along with 0:00:09.440 --> 0:00:13.200 Jonathan Ferroll and Lisa A. Brownwitz Jayleie, we bring you 0:00:13.320 --> 0:00:18.640 insight from the best and economics, finance, investment and international relations, 0:00:18.960 --> 0:00:23.840 Fine Bloomberg Surveillance and Apple podcast SoundCloud, Bloomberg dot Com 0:00:23.920 --> 0:00:29.040 and of course, on the Bloomberg termament. Eight years ago, 0:00:29.120 --> 0:00:30.680 Tom and I sat around the table and had a 0:00:30.680 --> 0:00:33.159 big conversation about who would hike first, the Bank of 0:00:33.159 --> 0:00:35.519 England or the Federal Reserve, and who would hike more, 0:00:35.680 --> 0:00:38.360 the Bank of England or the Federal Reserve. In the end, 0:00:38.640 --> 0:00:40.920 the Bank of England waited, waited, and did very little 0:00:40.960 --> 0:00:42.680 the soul. In fact, it was the Federal Reserve that 0:00:42.800 --> 0:00:46.440 was almost flying solo for the big developed markets central banks. 0:00:46.479 --> 0:00:49.519 It will be different this time. Derren Maya, the head 0:00:49.520 --> 0:00:53.120 of America's research and fex strategy at HSBC Securities, joins 0:00:53.159 --> 0:00:56.000 us right now, Darren, how difficult and different will this 0:00:56.040 --> 0:00:58.880 one be compared to what we saw last time around. 0:01:00.440 --> 0:01:03.240 It's it's a really tricky time for central banks. I mean, 0:01:03.280 --> 0:01:06.600 Tom use the word conundrum in the terms of market behavior, 0:01:06.640 --> 0:01:08.960 but for central banks this is it. I mean, you've 0:01:09.000 --> 0:01:11.800 got an inflation problem. So do you respond to that 0:01:11.840 --> 0:01:14.480 you've got a real income squeeze since you take a 0:01:14.560 --> 0:01:16.759 greater account of that. This is really tricky. I mean, 0:01:17.440 --> 0:01:19.840 look as a house where we think the FED errors 0:01:19.840 --> 0:01:22.360 on the side of a fifty basis point move in March, 0:01:22.600 --> 0:01:25.400 whereas for the Bank of England we think they're gonna 0:01:25.440 --> 0:01:27.600 just stake with the twenty five pace that they delivered 0:01:27.680 --> 0:01:30.560 last time around. Clearly the effects takeaway that is it 0:01:30.600 --> 0:01:33.920 should be lower cable um but they are pretty well. 0:01:33.920 --> 0:01:37.400 Certainly the FED call still very finely balanced in our opinion. 0:01:37.520 --> 0:01:40.920 But dare, let's go to the fan distribution. It's personified 0:01:40.959 --> 0:01:44.720 by jump conditions. We have a three point for standard 0:01:44.760 --> 0:01:48.080 deviation move and United Kingdom inflation. Are we going to 0:01:48.240 --> 0:01:52.520 start to see currency markets currency pairs in a jump 0:01:52.560 --> 0:01:58.200 condition where there's big figure opportunity? I think, honestly, I 0:01:58.200 --> 0:02:00.160 think the efex market is struggling to get its head 0:02:00.200 --> 0:02:04.440 around this one because it's facing that same conundrum that 0:02:04.480 --> 0:02:08.200 policymakers they're facing. What will be the spin And you know, 0:02:08.320 --> 0:02:10.840 as as John pointed out in the UK, it's a 0:02:10.919 --> 0:02:14.360 there's gonna be a very transparent income squeeze coming up 0:02:14.400 --> 0:02:17.920 with the energy price hikes that that are legislated for. 0:02:18.400 --> 0:02:21.200 We know they're coming, but that's gonna have a huge 0:02:21.240 --> 0:02:24.919 impact on the consumer consumer sentiment. That said, yesterday we 0:02:25.000 --> 0:02:28.240 had wages data p A y E data which showed 0:02:28.320 --> 0:02:33.040 wages growth at least for that sector growing quicker than inflation, 0:02:33.120 --> 0:02:35.720 so positive real income growth. That's you're not seeing that 0:02:35.760 --> 0:02:38.360 the US, You're not seeing that in the Eurozone. So 0:02:38.400 --> 0:02:40.800 I think that still allows the Bank of England to typen. 0:02:41.240 --> 0:02:43.600 I just don't see that. The five people who voted 0:02:43.880 --> 0:02:46.480 for basis points the last time, why is one of 0:02:46.480 --> 0:02:49.280 them gonna suddenly vote for fifty. I just don't see it. 0:02:49.320 --> 0:02:53.000 Despite that big inflation upside, the market seems to agree 0:02:53.000 --> 0:02:55.280 with some of your concerns about the economy. When you 0:02:55.280 --> 0:02:58.560 look at the two tens yield curve in the United Kingdom, 0:02:58.600 --> 0:03:00.760 it's all the a few basis points way from inversion. 0:03:00.760 --> 0:03:03.680 And George Saravellis was talking about this concern with the 0:03:03.680 --> 0:03:06.440 market even pricing in rate cuts by the Bank of 0:03:06.520 --> 0:03:09.440 England next year. What do you think is sort of 0:03:09.240 --> 0:03:12.680 the consequence for the pound if there is that type 0:03:12.680 --> 0:03:16.560 of backdrop. Look, it is very peculiar, isn't it. And 0:03:17.280 --> 0:03:19.480 I look at the four do I S market, so 0:03:19.680 --> 0:03:21.840 that has you know, all the tightening coming in the 0:03:21.880 --> 0:03:25.840 next twelve months um, and then has a hundred basis 0:03:25.880 --> 0:03:28.640 points lower for five years out. So in other words, 0:03:28.840 --> 0:03:30.520 the market is saying, hey, yeah, we think you're going 0:03:30.560 --> 0:03:33.560 to tighten, but we think it's a mistake or at 0:03:33.639 --> 0:03:37.240 least it won't stick um. And that reflects what we're 0:03:37.240 --> 0:03:40.680 seeing in inflation. As you say, in terms of the economy, 0:03:40.920 --> 0:03:43.240 there's a squeeze and consumers, but there's also squeeze on 0:03:43.280 --> 0:03:46.920 businesses UM. So it's all a pretty toxic mix, I 0:03:46.920 --> 0:03:49.240 would say for sterling. And thankfully none of us that 0:03:49.280 --> 0:03:51.240 you mentioned brexit, so that's great we can get to 0:03:51.240 --> 0:03:53.119 the lower sterling with that. I'm so pleased we don't 0:03:53.160 --> 0:03:55.600 talk about that anymore, Dara. That's the framework for thinking 0:03:55.600 --> 0:03:58.560 about the central banks, the respect of economies, the UK, Europe, 0:03:58.600 --> 0:04:00.920 the United States. What's the in fiction trade in foreign 0:04:00.960 --> 0:04:05.520 exchange for you. Look, I do like lower sterling. I 0:04:05.560 --> 0:04:08.320 think even this morning we were recommending buying you buying 0:04:08.600 --> 0:04:10.960 yours sterling as one way to play that. I think 0:04:11.000 --> 0:04:13.640 lower cable as well. There there for me, the more 0:04:13.680 --> 0:04:17.239 straightforward trades. You've got seventy five basis points of tightening 0:04:17.480 --> 0:04:19.679 priced into the bank amongland over the next two meetings, 0:04:19.680 --> 0:04:22.160 in the words, you have to deliver fifty at one 0:04:22.200 --> 0:04:23.560 of them. I just don't see that. I think we 0:04:23.640 --> 0:04:26.520 get twenty five and twenty five, so that that's one 0:04:27.080 --> 0:04:30.839 and generally conviction still there in terms of our modest 0:04:30.880 --> 0:04:34.240 dollar strengthening. It's not glamorous. It will be a modest 0:04:34.320 --> 0:04:39.159 trand but I think it'll be pretty relentless, so dolerable. Darma, 0:04:39.400 --> 0:04:41.480 thank you, sir of HSP Security is looking for a 0:04:41.520 --> 0:04:44.200 little bit of weakness through sterling. There are as always, 0:04:44.480 --> 0:04:50.720 thank you very much. Let's get to Mandy's to the 0:04:50.839 --> 0:04:54.080 chief equity derivative strategist at Credit Swate, Mandy, should I 0:04:54.120 --> 0:04:56.120 be pricing in great hikes or the cuts that might 0:04:56.120 --> 0:05:01.000 be in our future? Both? So what's interesting, Even as 0:05:01.040 --> 0:05:04.360 traders are pricing in more aggressive rate hikes for this 0:05:04.440 --> 0:05:08.080 year currently just under seven total hikes being priced for 0:05:08.200 --> 0:05:11.719 the year UM, they're also pricing in rate cuts further out, 0:05:11.800 --> 0:05:16.080 So starting in the curve is actually inverted, with about 0:05:16.160 --> 0:05:19.640 seventy percent probability being priced in currently that the FED 0:05:19.680 --> 0:05:22.520 will have to cut rates very soon, right, and that 0:05:22.680 --> 0:05:25.400 what that's held you that there's a real risk that 0:05:25.520 --> 0:05:28.560 the FED is about to embark on a policy state, 0:05:28.680 --> 0:05:32.640 meaning overtaking now and killing out the economic growth and 0:05:32.720 --> 0:05:36.239 having to cut rates very very quickly soon after, Mandy, 0:05:36.279 --> 0:05:39.040 there are four cross moments here the pros like you follow, 0:05:39.080 --> 0:05:41.719 and one of them is this odd thing called scool. Scool. 0:05:41.720 --> 0:05:44.640 We don't do scool, we don't do derivative math on Wednesdays. 0:05:44.640 --> 0:05:46.920 But all we can say, Mandy is it has to 0:05:46.960 --> 0:05:49.880 do with the fear that's out there. And when you 0:05:49.920 --> 0:05:53.560 are a feared folks in global Wall Street, you hedge. 0:05:54.000 --> 0:05:59.320 What is the demand now, the appetite to hedge? So interestingly, 0:05:59.440 --> 0:06:03.080 to start the year, um, we haven't actually seen much, um, 0:06:04.680 --> 0:06:07.599 significant increase in demand for hedges up until I say, 0:06:07.640 --> 0:06:10.480 over the past week. UM. And that's interesting because you know, 0:06:10.480 --> 0:06:12.120 obviously we had a ten percent pulled back in the 0:06:12.240 --> 0:06:16.600 SMP in January and actually volatility really underperformed on that 0:06:16.640 --> 0:06:19.359 sellop because of this lack of hedges UM, and I 0:06:19.440 --> 0:06:21.039 was a part of that reason. It's because you know, 0:06:21.120 --> 0:06:23.919 if you think of the catalyst driving that correction, it 0:06:24.000 --> 0:06:26.960 was fear of higher rates, and that's really a well 0:06:27.040 --> 0:06:30.600 anticipated um, you know, cattle, it is not really an 0:06:30.680 --> 0:06:34.800 unknown or uncertain you know, unexpected risk. UM. What we're 0:06:34.800 --> 0:06:36.960 seeing over the past couple of days is more demand 0:06:37.000 --> 0:06:39.720 for hedges on the back of the Russia Ukraine news 0:06:39.920 --> 0:06:42.440 and also on the back of you know, a speculation 0:06:42.480 --> 0:06:45.640 of the FED maybe hiking intermeding. I think that has 0:06:45.720 --> 0:06:48.240 driven a lot more hedging activity in recent days. What 0:06:48.400 --> 0:06:51.320 is the leverage exposure wrapped around the hedges and frankly 0:06:51.400 --> 0:06:54.760 the entire market. I mean frankly, folks Credit Suite literally 0:06:54.760 --> 0:06:57.919 invented the monitoring of of leverage. I would suggest, what 0:06:58.279 --> 0:07:02.039 is the depth of leverage there? So I think for 0:07:02.080 --> 0:07:05.599 a lot of institutional investors they have the leveraged quite 0:07:05.600 --> 0:07:08.400 a bit. Especially January was very people for a lot 0:07:08.440 --> 0:07:11.040 of hedge funds UM and this is I would say 0:07:11.120 --> 0:07:14.040 the most pronounced of the sector levels for tech UM 0:07:14.080 --> 0:07:17.240 in terms of kind of the protection buying that we're seeing, um, 0:07:17.280 --> 0:07:19.840 you know, they're not crash protection buying typically, you know, 0:07:19.840 --> 0:07:23.400 the protection bying that we are seeing positioning for more 0:07:23.440 --> 0:07:25.840 modest pullback from here. So I would say, you know, 0:07:26.080 --> 0:07:28.600 given what happened in January, given the the leveraging that 0:07:28.640 --> 0:07:31.880 we have already seen, you know, the protection buying that 0:07:31.880 --> 0:07:35.160 we're seeing right now. Um, it's more modest. It's not 0:07:35.280 --> 0:07:38.080 as you know, bearish, um, as you know, as some 0:07:38.200 --> 0:07:40.480 I think, Mandy, a lot of people will think of 0:07:40.520 --> 0:07:42.200 me as the person who comes up with a negative 0:07:42.200 --> 0:07:44.960 scenario no matter what happens. But there is that kind 0:07:44.960 --> 0:07:47.000 of basince the hedges to. They're the people who are 0:07:47.040 --> 0:07:50.080 hedging for a FED policy error on both sides, not 0:07:50.200 --> 0:07:52.680 only moving too fast, but not moving quickly enough at 0:07:52.720 --> 0:07:56.280 a time when inflation itself is crimping demand or there 0:07:56.360 --> 0:07:58.040 is the fear of that. Perhaps we'll see some of 0:07:58.080 --> 0:08:01.040 that in the retail sales at eight thirty. What's your 0:08:01.120 --> 0:08:04.080 view on why people are hedging and how you can 0:08:04.120 --> 0:08:08.320 determine this from the type of hedge. Sure, um so 0:08:08.360 --> 0:08:09.760 I would say, you know, on on the on the 0:08:09.840 --> 0:08:11.920 risk of the FED being behind the curve, U, I 0:08:11.960 --> 0:08:14.280 would say that's a risk that is I think overblown 0:08:14.360 --> 0:08:17.520 because yes, we're seeing very high inflation right now. But 0:08:17.600 --> 0:08:21.320 the important thing to emphasize is that long term inflation expectations, 0:08:21.360 --> 0:08:24.040 whether or not you're looking at you know, market based expectations, 0:08:24.080 --> 0:08:26.440 looking for example, at the five year five year forward 0:08:26.760 --> 0:08:29.640 break even, or you're looking at consumer surveys, they remain 0:08:29.760 --> 0:08:33.600 remarkably well anchored. And as long as that remains the case, 0:08:33.679 --> 0:08:36.520 I do think that that has more breathing room. UM. 0:08:36.559 --> 0:08:38.400 But in terms of you know, what is what people 0:08:38.400 --> 0:08:40.600 are hedging, I would say looking at you know hedges 0:08:40.640 --> 0:08:43.080 and tech has been very popular. And then the second 0:08:43.240 --> 0:08:45.600 one that has been more popular right now is looking 0:08:45.640 --> 0:08:48.280 at cross asset hedges. Given you some of the moves 0:08:48.280 --> 0:08:50.600 and equities that we have seen people looking across other 0:08:50.679 --> 0:08:54.920 asset classes, for example fixed income vs UM precious metal 0:08:55.000 --> 0:08:57.960 like gold for example, that's been another popular one, Mandy. 0:08:58.120 --> 0:09:00.839 Have you've seen a lot of investors decided to shift 0:09:00.840 --> 0:09:04.360 around their allocations with hedges with derivatives rather than actually 0:09:04.400 --> 0:09:07.160 selling some of those holdings. And I think about tech stacts, 0:09:07.160 --> 0:09:09.800 for a long time, people were worried about getting rid 0:09:09.800 --> 0:09:11.440 of them for fear of not being able to buy 0:09:11.480 --> 0:09:15.000 them back at an appropriate price later. Yeah, I don't 0:09:15.000 --> 0:09:17.040 think that fear is that as a dominant at this 0:09:17.120 --> 0:09:20.640 time regarding tech. But in terms of kind of how 0:09:20.679 --> 0:09:23.959 people are hedging and what they're doing, UM, particularly I 0:09:24.080 --> 0:09:27.560 was on the risk of inflation. It's very notable that, Um, 0:09:27.559 --> 0:09:30.600 what we've seen is in high inflation regimes, UM, the 0:09:30.640 --> 0:09:34.080 correlation between equities and bonds breakdown. Right, that's an imperful fact. 0:09:34.320 --> 0:09:36.160 And that's obviously, you know, not good if you're a 0:09:36.240 --> 0:09:39.920 multi asset portfolio, you know, say a sixty forty traditional 0:09:40.000 --> 0:09:42.920 fixing condequity portfolio, because you know your bonds are no 0:09:43.000 --> 0:09:46.080 longer diversifying your equity risk. UM. So what we have 0:09:46.160 --> 0:09:49.000 seen from a lot of institutional investors is a look 0:09:49.040 --> 0:09:52.640 at more equity specific hedges, so less reliance on fixed 0:09:52.640 --> 0:09:55.480 income to be your hedge. UM. And the second thing 0:09:55.559 --> 0:09:59.640 is looking at commodities, right, adding a commodities allocation, because 0:09:59.679 --> 0:10:01.680 obvious the commodity is a big driver of the current 0:10:01.679 --> 0:10:04.600 infletion that we're seeing and historically always been that case. 0:10:04.760 --> 0:10:09.200 So looking at either adding allocation to the underlying commodity 0:10:09.320 --> 0:10:12.920 or increasing upside exposure to some of the commodity sensitive 0:10:12.960 --> 0:10:17.280 sectors for example energy. Great a catch up, Thank you, 0:10:17.480 --> 0:10:26.280 credit swas, thank you very much. Right now to interpret 0:10:26.320 --> 0:10:29.559 and drive forward, Simona Maccata joins US chief economist State 0:10:29.600 --> 0:10:33.000 Street Global Advisors in Boston. Simona thrilled to have you 0:10:33.480 --> 0:10:36.000 with us today. And my arch question all of the 0:10:36.000 --> 0:10:39.760 Bullard McKey talk I just had, is does this kind 0:10:39.800 --> 0:10:46.240 of data assist you in deciding when inflation breaks? If 0:10:46.240 --> 0:10:49.280 we're at a high level of inflation, the game is 0:10:49.320 --> 0:10:52.560 the guestimate of when it starts to roll over. Does 0:10:52.640 --> 0:10:56.440 retail sales today help with that? I don't think so. 0:10:56.840 --> 0:10:59.560 I think of what I see in the data is 0:10:59.600 --> 0:11:02.800 a lot of month month volatility. And you know, the 0:11:02.880 --> 0:11:06.240 January numbers were very strong, but put those against December 0:11:06.440 --> 0:11:10.000 average the two and you get something much milder. I 0:11:10.040 --> 0:11:13.640 think that's how you gauge what the trend of these economies. 0:11:14.040 --> 0:11:17.600 I don't think the retail sales data and specifically help 0:11:17.679 --> 0:11:22.120 you with the inflation question. Personally, um, I'm I'm of 0:11:22.240 --> 0:11:24.480 a view that around media is when we are going 0:11:24.520 --> 0:11:29.440 to see meaningful signs of inflation deceleration. It's it seems 0:11:29.520 --> 0:11:32.080 as though we're pushing on this string, and you know, 0:11:32.120 --> 0:11:35.280 as time goes by and nothing becomes apparent in the data, 0:11:35.320 --> 0:11:38.480 we lose hope. But it's possible that when the change occurs, 0:11:38.960 --> 0:11:42.480 it occurs quite suddenly, and you know, if you go 0:11:42.679 --> 0:11:45.560 from like nothing's here too, there is plenty of evidence 0:11:45.559 --> 0:11:49.120 of inflation decelerated. What is not today's data that helps? 0:11:49.640 --> 0:11:52.760 What is the linkage between an inflation and then under 0:11:52.840 --> 0:11:58.719 a growth estimate? Well, um, it's very simple. It's a 0:11:58.840 --> 0:12:03.600 basic econ concept. The higher the price, the fewer the 0:12:03.720 --> 0:12:08.200 quantity solves. So this is you know, high inflation, think 0:12:08.240 --> 0:12:12.320 of it as a as a demand headwind. Um. Of 0:12:12.360 --> 0:12:15.679 course you can offset it if you have persistent income 0:12:15.760 --> 0:12:21.000 flow to absorb that inflation. You know, wealth destruction or 0:12:21.040 --> 0:12:25.480 income destruction. Purchasing our destruction. But in and of itself, 0:12:25.600 --> 0:12:29.120 high inflation will lead to lower growth. Are we seeing though, 0:12:29.160 --> 0:12:31.200 that that's not coming to forth the way that a 0:12:31.200 --> 0:12:33.199 lot of people are expecting. I mean, we are talking 0:12:33.200 --> 0:12:36.640 about how you're seeing sentiment deteriorate, but it doesn't seem 0:12:36.679 --> 0:12:42.000 to be dramatically crimping purchases. At what point does that 0:12:42.040 --> 0:12:43.960 start to give you a sense that maybe that narrative 0:12:44.160 --> 0:12:48.160 isn't working this time around? The narrative works, the timing 0:12:48.200 --> 0:12:51.400 doesn't work precisely, And the reason it does not work 0:12:51.440 --> 0:12:53.920 precisely is that you have a consumer that in the 0:12:54.040 --> 0:12:58.840 aggregate still sits on a huge amount of accumulated savings, 0:12:58.880 --> 0:13:01.680 so you don't need to have a demand response immediately. 0:13:01.720 --> 0:13:04.800 What you can do you can draw down those accumulated 0:13:04.880 --> 0:13:08.319 savings and still finance consumption in the injury. But if 0:13:08.520 --> 0:13:12.880 that's that's a that works for a while. Eventually, um, 0:13:12.920 --> 0:13:15.440 there will be a demand response. It may not be 0:13:15.480 --> 0:13:18.000 a parent until the second half of the year. And 0:13:18.080 --> 0:13:20.360 let's not forget even in today's data you had a 0:13:20.520 --> 0:13:23.480 very strong help there from all the vehicles. There's still 0:13:23.520 --> 0:13:26.240 a lot of pentap demanding parts of you know, of 0:13:26.320 --> 0:13:29.920 the spectrum, and that will still help. But this is 0:13:29.960 --> 0:13:32.280 the tricky part, you know, trying to dissect you know, 0:13:32.320 --> 0:13:35.120 what is the real message here? I think you cannot 0:13:35.160 --> 0:13:38.160 take any single data point, you know, put too much 0:13:38.200 --> 0:13:40.960 weight on any single data point, and try to take 0:13:41.000 --> 0:13:43.240 a view that takes over the course of the year 0:13:43.280 --> 0:13:45.480 and not just for the next month or two. What 0:13:45.559 --> 0:13:48.800 about the fact that we haven't necessarily seen inflation to 0:13:48.840 --> 0:13:51.160 accelerate to the degree you even start to give signs 0:13:51.160 --> 0:13:54.440 of peaking the way that people have previously expected. How 0:13:54.559 --> 0:13:57.400 high does that mean that inflation could go? How much 0:13:57.480 --> 0:14:02.959 you revising your estimates about the trajectory of this particular cycle. Yeah, 0:14:03.080 --> 0:14:05.400 it's been a tough journey. I have to say, I 0:14:05.440 --> 0:14:09.640 think the inflation revisions are still upwards ums as of 0:14:09.800 --> 0:14:12.880 this point in time. I think what you are starting 0:14:12.920 --> 0:14:17.600 to see is leading indicators of a turning inflation, things 0:14:17.640 --> 0:14:21.520 like um, you know, perhaps things having to do with 0:14:21.600 --> 0:14:25.960 shipping costs, things having to do with expectations of inventory building, 0:14:26.120 --> 0:14:29.680 things having to do with expectations of wage increases. Just 0:14:29.760 --> 0:14:31.960 to give you an example, in the Small Business survey, 0:14:32.000 --> 0:14:36.440 for instance, you had current compensations, so current wage increases 0:14:36.560 --> 0:14:41.600 making a new record, but compensation plans decelerating. So this 0:14:41.720 --> 0:14:44.160 is all you see at the moment. So it's it's 0:14:44.200 --> 0:14:47.120 not even in the inflation data, per say, it's in 0:14:47.200 --> 0:14:50.440 the leading indicators of inflation that you're starting to see 0:14:50.520 --> 0:14:54.520 some some shift. I gotta leave it a Samana, Thank you, 0:14:54.600 --> 0:14:58.640 Samana that of Stay Straight Global Advices, thank you very much. 0:15:02.960 --> 0:15:05.360 Here in America, do you think Ford Motor Company and 0:15:05.440 --> 0:15:09.400 General Motors, which have completely retooled in are retooling their 0:15:09.480 --> 0:15:12.840 factories to build electric Do you think there's suddenly they'll 0:15:12.880 --> 0:15:16.720 say no electrics not the future. Electric is the future 0:15:16.800 --> 0:15:20.080 for automobiles all around the world. The John Carey, the 0:15:20.120 --> 0:15:23.040 former Secretary of State, a most interesting gentleman, and of 0:15:23.080 --> 0:15:25.840 course the US Special Envoy for Climate. I did a 0:15:25.880 --> 0:15:29.600 panel Thank you Bank of America. Mr Mournianne was Secretary 0:15:29.680 --> 0:15:33.880 Carey and Davos on climate and I was thunderstruck. And 0:15:34.000 --> 0:15:38.240 how statistically well informed the Senator was. I still I'm sorry, folks, 0:15:38.280 --> 0:15:41.240 it's Massachusetts. I still call him the Senator. How the 0:15:41.320 --> 0:15:46.200 Senator was informed legitimately on climate. Whatever your beliefs in 0:15:46.240 --> 0:15:49.440 the topic, of course, peer to peer conversations with David 0:15:49.480 --> 0:15:52.960 Rubinstein it will be most interesting as well. I was thunderstruck. 0:15:53.040 --> 0:15:55.640 How this guy did not mail it in on climate? 0:15:55.720 --> 0:15:58.440 Is that what you observed? He knows this stuff colde. 0:15:58.560 --> 0:16:00.720 This is the job he wanted. Most people, when they 0:16:00.760 --> 0:16:02.880 finish being Secretary of State never want to go back 0:16:02.880 --> 0:16:05.320 into government because any position will be less significant than 0:16:05.360 --> 0:16:07.840 the one they had. He's so interested in this subject 0:16:07.880 --> 0:16:11.520 he came back. In effect, is a subordinate to to 0:16:11.600 --> 0:16:13.880 the Secretary State. He's not subordinate, but he's not as 0:16:13.920 --> 0:16:16.560 significant as a Secretary State who used to be his deputy. 0:16:16.880 --> 0:16:19.040 H Tony Lincoln used to be the deputy John Carey, 0:16:19.240 --> 0:16:22.000 now Tony Lincoln Secretary State and John Carey is in 0:16:22.000 --> 0:16:24.040 the State Department, but not as significant in a position 0:16:24.080 --> 0:16:25.760 as he once had. But he wanted to do this 0:16:25.800 --> 0:16:28.680 because he really cares about climate change, David, because of 0:16:28.760 --> 0:16:31.400 news slowly of other topics. But one more question this 0:16:31.440 --> 0:16:35.720 morning on John Carey. He's big time frustrated over where 0:16:35.760 --> 0:16:39.320 we are right now. Headlines today. I think water uh 0:16:39.480 --> 0:16:42.920 water lease is gonna rise two or three feet, Baltimore's 0:16:42.920 --> 0:16:45.280 Camden Yards is going to be flooded. I mean, climate 0:16:45.360 --> 0:16:47.960 change is going the wrong way right now. For John Carey, 0:16:48.040 --> 0:16:49.920 We've had a lot of problems with climate change, and 0:16:49.920 --> 0:16:52.320 I think people recognize that. He said in this interview 0:16:52.520 --> 0:16:55.040 that it's here, it's something we have to do something about. 0:16:55.120 --> 0:16:57.360 But the truth is it's nothing we can do overnight 0:16:57.360 --> 0:16:59.800 that's going to change. The situation is going to take years. 0:17:00.080 --> 0:17:02.600 That's why when we talk about standards, we're talking about 0:17:02.600 --> 0:17:05.320 things we can do by the year. There's a goal 0:17:05.359 --> 0:17:07.480 by many people to be net zero in terms of 0:17:07.480 --> 0:17:10.560 emissions by but that's gonna take some time to get there. 0:17:10.760 --> 0:17:14.639 Lisa the Secretary Secretary blinkoln speaking with Joe over ad 0:17:14.760 --> 0:17:17.960 MSNBC no evidence of a Russia pullback and I know 0:17:18.000 --> 0:17:21.159 that John Kerry did want to talk about the climate 0:17:21.240 --> 0:17:24.640 change issues. He was, though a former Secretary of State, 0:17:24.680 --> 0:17:27.280 and Tony Blinkin was his disciple, which leads us to 0:17:27.280 --> 0:17:30.560 really understand perhaps some of the framework as to how 0:17:30.600 --> 0:17:33.879 they have grappled with the situation. David, to the degree 0:17:33.880 --> 0:17:37.040 that we've gotten some rhetoric out of Tony Blinkin really 0:17:37.119 --> 0:17:40.320 giving a threat that if this region of Ukraine gets 0:17:40.320 --> 0:17:43.439 recognized as independent by Russia as a game changer and 0:17:43.480 --> 0:17:47.040 necessitates a response, how do you think about that in 0:17:47.200 --> 0:17:50.639 terms of gaming out the potential for an escalation or 0:17:50.680 --> 0:17:54.000 de escalation. I think this is reminiscent of what George 0:17:54.040 --> 0:17:56.960 Herbert Walker Bush did in the Kuwait War. He got 0:17:56.960 --> 0:17:59.960 a coalition together, put together very effectively by Jim Baker, 0:18:00.040 --> 0:18:02.400 his Secretary of State, and in the end the Allies 0:18:02.440 --> 0:18:04.720 were so strong that there was no chance for for 0:18:04.760 --> 0:18:08.160 Saddam Saying to prevail in Kuwait. Right now, the Allies 0:18:08.200 --> 0:18:10.880 are so united, uh that I don't think there's any 0:18:11.000 --> 0:18:14.359 chance that that Putin can move forward and not realize 0:18:14.400 --> 0:18:16.080 there's going to be a big, big problem for him. 0:18:16.320 --> 0:18:18.199 So at this point, my view is he's looking for 0:18:18.280 --> 0:18:21.320 a way out a graceful way out, and diplomacy now 0:18:21.359 --> 0:18:23.800 should focus on two things. How can we give him 0:18:23.800 --> 0:18:27.200 a graceful way out? And how can we not brag 0:18:27.240 --> 0:18:29.639 about what happened. We want to do what George Herbert 0:18:29.680 --> 0:18:32.560 Walker Bush did after the Berlin Wall fell. He didn't 0:18:32.560 --> 0:18:36.200 go over and trumpet what he done. He was very graceful. 0:18:36.240 --> 0:18:37.480 He didn't want to do the kind of things that 0:18:37.520 --> 0:18:40.119 people wanted to do because he gave a face saving 0:18:40.119 --> 0:18:42.000 way out for Gorbitchov. That's what you need to do 0:18:42.040 --> 0:18:44.639 here with putin David Rubenstein. My father told me they 0:18:44.680 --> 0:18:48.080 hid the newspapers from me. During the Cuban missile crisis. 0:18:48.200 --> 0:18:51.359 Dean Rusk and the team they're off of the crisis 0:18:51.760 --> 0:18:55.280 had to allow Khruscheff to save face. What do we 0:18:55.440 --> 0:18:57.960 learn then that we can apply now, Well, we did 0:18:58.000 --> 0:19:00.840 give him a way out because we actually gave him something. 0:19:00.880 --> 0:19:03.080 We gave him missiles in Turkey. We said we pull 0:19:03.160 --> 0:19:05.600 them out, and we didn't really need those missiles anyway, 0:19:05.600 --> 0:19:07.720 so it was a face saving way for him. You also, 0:19:07.760 --> 0:19:11.240 we didn't brag about it in the way that uh 0:19:11.280 --> 0:19:13.320 I think we could. We we have to prevail, we 0:19:13.359 --> 0:19:15.040 have to do it in the future as well. We 0:19:15.080 --> 0:19:17.840 shouldn't be saying two people, we just beat Putin, we 0:19:17.920 --> 0:19:20.320 beat him, we trumpeted. We don't want to do that. 0:19:20.480 --> 0:19:22.280 What you really want to do is to say, look, 0:19:22.280 --> 0:19:25.040 we have an agreement. Now it's good and we're every 0:19:25.119 --> 0:19:27.200 both sides one. That's what he needs to really do 0:19:27.560 --> 0:19:29.320 as President Nited States, and I think that's what Joe 0:19:29.320 --> 0:19:32.119 Biden is doing. From an executive perspective. David, and as 0:19:32.160 --> 0:19:34.920 the co founder of Carlisle, I wonder what your experience 0:19:34.960 --> 0:19:37.920 has been with these rising geopolitical tensions in terms of 0:19:38.119 --> 0:19:41.400 how to prepare for possible sanctions, how to prepare for 0:19:41.440 --> 0:19:44.920 a shift in the regulatory landscape. Well, no one can 0:19:44.960 --> 0:19:47.760 really prepare completely for these kind of things, because sometimes 0:19:47.800 --> 0:19:51.360 the regulatory landscape changes so quickly. In the private equi world, 0:19:51.400 --> 0:19:53.399 you tend to be in a longer term investor, but 0:19:53.440 --> 0:19:55.960 there's no doubt that firms like ours do have shorter 0:19:56.040 --> 0:19:58.440 term investments, and we have publicly traded securities as well. 0:19:58.600 --> 0:20:01.040 There's no perfect way to do it, but anytime you 0:20:01.080 --> 0:20:03.840 do a long term investment or short term investment, you 0:20:03.920 --> 0:20:07.000 now increasingly look at geopolitical risks. In the United States 0:20:07.040 --> 0:20:09.520 as well as abroad, and and this particular risk is 0:20:09.520 --> 0:20:12.199 one that people are taking a strong look at now. 0:20:12.240 --> 0:20:14.800 We not recognize that likely that energy prices will go 0:20:14.880 --> 0:20:17.359 up if Putin were to invade, and the markets have 0:20:17.400 --> 0:20:20.119 reflected that, but energy prices should come down if in 0:20:20.160 --> 0:20:22.199 fact we can come up with a peaceful resolution of this. 0:20:22.520 --> 0:20:24.560 The news flow today has been dramatic, and I do 0:20:24.600 --> 0:20:26.760 want to bring you this headline that the Wall Street 0:20:26.840 --> 0:20:30.240 Journal is report reporting that the Justice Department is pursuing 0:20:30.320 --> 0:20:34.160 a wide ranging probe of short sellers, including with Carson Block, 0:20:34.359 --> 0:20:37.439 a prominent short slower who received a subpoena ahead an 0:20:37.520 --> 0:20:41.840 FBI search warrant. From your perspective, David, with your legal prowess, 0:20:42.200 --> 0:20:45.159 what's your view on some of the regulatory crackdown that 0:20:45.160 --> 0:20:48.719 we're seeing right now from this administration. I wouldn't use 0:20:48.760 --> 0:20:51.800 the word crackdown. I would say the chairman of the SEC, 0:20:52.000 --> 0:20:55.359 Gary Gensler, thinks there should be more disclosure of hedge 0:20:55.359 --> 0:20:58.199 fund fees and and private equity fees, and and no 0:20:58.320 --> 0:21:00.880 doubt they'll be comments about that. No something will will 0:21:00.960 --> 0:21:03.960 move forward. But I think it's important that everybody who 0:21:04.000 --> 0:21:06.320 invest in these kind of funds do have that does 0:21:06.400 --> 0:21:08.800 have very good information and fees should be disclosed. And 0:21:08.880 --> 0:21:10.679