WEBVTT - Surveillance: Active Management With O'Rourke

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<v Speaker 1>Welcome to the Bloomberg Surveillance Podcast Time Tom Keene, along

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<v Speaker 1>with Jonathan Ferroll and Lisa Brownwitz jay Leie, we bring

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<v Speaker 1>you insight from the best and economics, finance, investment, and

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<v Speaker 1>international relations. Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg

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<v Speaker 1>dot Com, and of course on the Bloomberg Tournament. John

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<v Speaker 1>Us Now it is Michael Rourke, Chief Market Strategistic Jones Trading. Michael,

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<v Speaker 1>let's start right here where we start. Every single year,

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<v Speaker 1>we start this conversation about this is the year for

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<v Speaker 1>active management, and then we have a double digit gain

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<v Speaker 1>on the SMP five hundred. We've had that over the

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<v Speaker 1>last three years, and here we are year four, Michael,

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<v Speaker 1>we're talking about this is the year for active management.

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<v Speaker 1>Michael Rourke, what do you say when you face that debate,

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<v Speaker 1>that conversation. I think it's interesting because we're for the

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<v Speaker 1>first time in a long time, we're seeing a different economy,

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<v Speaker 1>a different global financial and economic outlook, where you have

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<v Speaker 1>this inflation um scourge that's kind of taking over the globe.

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<v Speaker 1>That's gonna shift monetary policy throughout the world. So when

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<v Speaker 1>you look at the monetary policy of the past thirteen years,

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<v Speaker 1>there's always been this lower for longer outlook or the

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<v Speaker 1>static easy monetary policy that worked really well for index

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<v Speaker 1>investors and passing investors. As far as this year is concerned,

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<v Speaker 1>I think we're going through this major secular shift um

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<v Speaker 1>where rates and inflation are gonna matter, and it's also

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<v Speaker 1>gonna be fueled by things like you know, deglobalization and decarbonization.

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<v Speaker 1>So you're gonna need someone to actually be making decisions

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<v Speaker 1>if you want to navigate what could be a very

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<v Speaker 1>treacherous So give us a sense of your take on

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<v Speaker 1>the diversion that we divergence that we've seen so far

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<v Speaker 1>between value and growth. Michael, is the head fake or

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<v Speaker 1>is this the beginning of a rotation that could persist

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<v Speaker 1>for more than just a couple of months. Well, at least,

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<v Speaker 1>I want to say your daily rundown was superb because

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<v Speaker 1>I'm watching the same things that you are, and I

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<v Speaker 1>do think this value versus growth argue it's important. Um,

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<v Speaker 1>I've been in this value camp for most of one

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<v Speaker 1>so I you know, am I concerned about the head

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<v Speaker 1>fake a little bit? But I think last year's head

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<v Speaker 1>fake really had to do with Jay Powell. You know,

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<v Speaker 1>looking for that further progress in the job market market.

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<v Speaker 1>And we're in a reverse situation this year where all

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<v Speaker 1>of a sudden, Jay Pale has become an inflation hall.

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<v Speaker 1>And again inflation is very aggressive um influence on the

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<v Speaker 1>economy in the sense that it hurts the people who

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<v Speaker 1>can afford the least the most, so it also becomes

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<v Speaker 1>a political football in that case. I think Jay is

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<v Speaker 1>gonna be a little much more diligent this year than

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<v Speaker 1>we've seen him in his past, in the past of

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<v Speaker 1>the Fed, and I think that's gonna be the key

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<v Speaker 1>difference going forward, which I do think plays well for

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<v Speaker 1>the value space. Michael, the moment is a great bull

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<v Speaker 1>market after thirty six months coughing, coming off Christmas Eve

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<v Speaker 1>of two thousand eighteen. What is the character of this

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<v Speaker 1>bull market in the year four? You know what it's

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<v Speaker 1>it's driven by financial conditions. We have record easy financial conditions.

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<v Speaker 1>Don't forget this easy policy that we've had started well

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<v Speaker 1>before the pandemic. Power started cutting rates in the summer

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<v Speaker 1>of nineteen. So you know, there's been a lot of

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<v Speaker 1>liquidity piled at this market, a lot of fiscal stimulus.

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<v Speaker 1>So I think we're watching for as we shift years

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<v Speaker 1>here and looking look to a tighter policy, especially monetary policy,

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<v Speaker 1>whether it's obviously tapering and eventually balance sheet normalization and

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<v Speaker 1>of course tightening. I think that's gonna be the shift.

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<v Speaker 1>But right now, the liquidity is abundant out there, and

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<v Speaker 1>that's why we see so many bubbly aspects of the

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<v Speaker 1>small market. I mean, just to quickly go back to

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<v Speaker 1>the value verse growth argument, Tesla had that move one

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<v Speaker 1>day and add a hundred and forty billion dollars in

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<v Speaker 1>market cap. That's more than City Bank or City Group

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<v Speaker 1>or Goldman Sacks. So again there's a big disparity in

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<v Speaker 1>this market out here. And again that's what this liquidity

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<v Speaker 1>is driving, is that slowly gets taken away. We should

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<v Speaker 1>see big shifts in the market. And Michael, I just

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<v Speaker 1>want to pick up on that story on Test and

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<v Speaker 1>just get a final thought from you on it. I

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<v Speaker 1>think it's important. What does it say to you to

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<v Speaker 1>see that much additional market cap added to that name

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<v Speaker 1>off the back of each and every additional auto they'd

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<v Speaker 1>be estimates by that to me just felt wild. I

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<v Speaker 1>wouldn't call it insane. It happened, the market did it,

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<v Speaker 1>but it felt wild to me, Michael, it was. It

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<v Speaker 1>was definitely wild. What's interesting are we valuing this company

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<v Speaker 1>at you know, a billion dollars per unit sold? I mean,

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<v Speaker 1>it is an insane move, but it's interesting because now

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<v Speaker 1>you had Ford come out yesterday and they said they

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<v Speaker 1>were going to ramp up their production of the e

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<v Speaker 1>v F one fifty and those shares have a nice

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<v Speaker 1>What you're seeing is, you know, obviously competitions coming into

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<v Speaker 1>the space. People see the market reacting like that, traditional automakers.

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<v Speaker 1>Bloomberg obviously has a story this morning about Volkswagen and

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<v Speaker 1>Toyota looking to make a push to take down Tesla.

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<v Speaker 1>You had Sony come out and see yesterday and they're

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<v Speaker 1>gonna introduce their electric car. Uh. This type of euphoria

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<v Speaker 1>and you know, this typer market response definitely invites more competition,

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<v Speaker 1>which is gonna make the environment more challenging. Ford had

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<v Speaker 1>a massive year last year. Can I do that again, Michael?

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<v Speaker 1>Thank you, sir, Michael Royal challenge trading, just going through

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<v Speaker 1>some of the big issues right now. The passive as

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<v Speaker 1>if active debate continues now to an important conversation with

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<v Speaker 1>Christian Millard Listman. He's with Golden Sacks but far more

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<v Speaker 1>importantly acclaimed for very dense detailed reports on the view

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<v Speaker 1>forward and allocation. Christian, thank you so much for joining us.

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<v Speaker 1>One of the hearts of your report is the trajectory

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<v Speaker 1>of the inflation adjusted yield and that the real rate

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<v Speaker 1>in some way will migrate up through a negative statistic

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<v Speaker 1>up near a positive statistic. Is that a linear function?

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<v Speaker 1>Or do we have to worry about acceleration and the

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<v Speaker 1>effect on our portfolios? Is the real you real yield

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<v Speaker 1>moves out of the abyss, it's in. Yeah, listen, I

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<v Speaker 1>think you asked the most important question for two are

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<v Speaker 1>we going to get a significant increase in the real yield?

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<v Speaker 1>And in particular is it going to be gradual or

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<v Speaker 1>is it going to be very quick? And will there

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<v Speaker 1>be step changes? And if you look at the last

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<v Speaker 1>few weeks, it's had this very clear reflationary behavior. The

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<v Speaker 1>market has gotten less worried about omichron, looking at the UK,

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<v Speaker 1>looking at the cases, the hospitalization, at death rates, all

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<v Speaker 1>of that gives gives the market comfort that maybe the

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<v Speaker 1>growth impact is less less bad. So you go back

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<v Speaker 1>to reflation temper it so bomb yields have gone up

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<v Speaker 1>a lot and fast, but most of that increase has

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<v Speaker 1>been in facial expectations, not the real yield. And this

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<v Speaker 1>has been a story which we've seen all of last year,

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<v Speaker 1>but for this year, the big difficulty is that the

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<v Speaker 1>FAT is life and it's going to start hiking. And

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<v Speaker 1>what we found historically is once the FETs starts hiking,

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<v Speaker 1>the real yields and the back end real yields start

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<v Speaker 1>to move higher. So our views, it's a gradual move.

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<v Speaker 1>We're expecting implicit in our forecasts maybe thirty to forty BIPs,

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<v Speaker 1>and that could very well be digested by equities in aggregate,

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<v Speaker 1>but it means law returns and there's always the risk

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<v Speaker 1>that it gets a bit shaky from time to time.

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<v Speaker 1>Every time when we are in this kind of period

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<v Speaker 1>where the FATS starts that tightening cycle, there's a risk

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<v Speaker 1>of a bit more volatility, right. I gotta follow up

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<v Speaker 1>to that, But that answer was so smart, Christian. I'm

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<v Speaker 1>gonna move on to other topics of the moment. I

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<v Speaker 1>want you to speak for all of Goldman sex. I

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<v Speaker 1>don't want to get you in trouble here with Mr

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<v Speaker 1>so Amen, But when are we going to finally and

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<v Speaker 1>the active versus passive management debate. Give us your take

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<v Speaker 1>on the value of active management after what we've seen

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<v Speaker 1>the last twelve months. Yeah, I mean you mentioned it

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<v Speaker 1>at the very early beginning already. I think if returns

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<v Speaker 1>a slow, if you start to see the beta um

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<v Speaker 1>as a driver of your portfolio, return become less important,

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<v Speaker 1>alpha automatically gets more important. And and I think it's

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<v Speaker 1>a typical early cycle versus mid cycle discussion. Early in

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<v Speaker 1>the cycle, things are highly correlated on the way down,

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<v Speaker 1>on the way up, and it's all about getting the

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<v Speaker 1>beta right. Whereas when you are going into a more

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<v Speaker 1>mid cycle backdrop, usually there is a place for active management.

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<v Speaker 1>And we generally think that that we're entering that type

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<v Speaker 1>of period now where even the style rotations which have

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<v Speaker 1>been very violent, and we we saw a bit of

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<v Speaker 1>that again in the last few days, even though style

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<v Speaker 1>rotations become less significant relative to individual stock picking. So

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<v Speaker 1>I definitely think that there is an increasing focus on

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<v Speaker 1>active management. Active management is not just about stockpicking. It's

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<v Speaker 1>about the whole investment process, market timing, it's about timing regions,

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<v Speaker 1>it's about timing styles and individual stocks. But we certainly

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<v Speaker 1>see that there will be much more pressure and much

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<v Speaker 1>more focused on active management as the type of return

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<v Speaker 1>potential comes down a bit Christian. One of the active

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<v Speaker 1>moves so far this year has been into value away

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<v Speaker 1>from growth. And we keep talking about whether this is

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<v Speaker 1>a head fake, something really similar to what we saw

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<v Speaker 1>last year. Is this something that you think will pretend

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<v Speaker 1>a trend or simply something that will get reversed in

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<v Speaker 1>two months? To me, I think the whole coming cycle, um,

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<v Speaker 1>there is a strong case for being a bit better diversified.

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<v Speaker 1>I think in the last cycle, as we know, the

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<v Speaker 1>best thing you could have one is on us large

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<v Speaker 1>kept rold stocks and and you would have been very

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<v Speaker 1>happy with the sharp ratio, very tough to beat. Whereas

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<v Speaker 1>in the coming cycle, we think that the return differentials

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<v Speaker 1>between regions and styles, as I mentioned, they might narrow

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<v Speaker 1>and there's a real risk benefit. I give you an example, um,

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<v Speaker 1>the correlation between value and growth and the two styles

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<v Speaker 1>has actually declined in the last twenty years. UM so

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<v Speaker 1>makes sense because growth has outperformed a law to value

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<v Speaker 1>hasn't done that well. But that type of correlation can

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<v Speaker 1>be a diversification benefit. So it tells you that if

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<v Speaker 1>you want to reduce portfolio risk, there's a really strong

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<v Speaker 1>case to to to just strategically think about incorporating a

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<v Speaker 1>bit more value stocks in your portfolio. But as you

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<v Speaker 1>set yourself, there are these waves, and these waves have

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<v Speaker 1>a bit of that flavor that after one to three

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<v Speaker 1>months you're done with. And I think there's a good

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<v Speaker 1>risk that the kind of current value wave again will

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<v Speaker 1>will kind of excel rate and slow and maybe partially

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<v Speaker 1>reversed depending on the news flow we have on a micron.

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<v Speaker 1>But what's really different with regards to value versus growth

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<v Speaker 1>compared to last year is as I mentioned that the

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<v Speaker 1>fat is very likely to start the tightening process via

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<v Speaker 1>higher rates, and that means that you have maybe a

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<v Speaker 1>bit more longevity towards this rotation. Christian. Before we let

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<v Speaker 1>you go, I want to get your sense. Scott Croner

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<v Speaker 1>of City Group came out two days into the trading

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<v Speaker 1>session and increased his SMP target for your end. Does

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<v Speaker 1>it concern you that everybody is competing to be the

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<v Speaker 1>biggest bill right now? Listen? I think, um, we look

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<v Speaker 1>at the positioning and the sentiment a lot, and um,

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<v Speaker 1>I think people are overweight equities and they're probably at

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<v Speaker 1>the margin more overweight quality equity, not really down in

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<v Speaker 1>quality UM and and and that combination has meant that

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<v Speaker 1>we're not that worried. So I think people at the

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<v Speaker 1>margin at knowledge that equities are kind of especially relative

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<v Speaker 1>to fix income UM, they're having a lot of support

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<v Speaker 1>from flaws from valuations UM and to some extent from fundamentals,

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<v Speaker 1>and I think that's correct. I think we are overweight

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<v Speaker 1>equities as well, and we do actually think that there's

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<v Speaker 1>more scope for demand for equities UM in the coming

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<v Speaker 1>years if you continue to to keep the cycle going.

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<v Speaker 1>What I would be worried about is if increasingly the

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<v Speaker 1>bulishness is focused on very cyclical parts. And we see

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<v Speaker 1>a lot of the indicators with regards to what we're

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<v Speaker 1>just discussing value UM cyclical riskier parts of the market

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<v Speaker 1>leading for a prolonged period of time, and and that

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<v Speaker 1>could then kind of create a certain bullishness for the cycle,

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<v Speaker 1>which eventually could get disappointed and create the risk of

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<v Speaker 1>a larger correction. But we don't have that right now, UM,

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<v Speaker 1>So I think we're not that worried yet about the

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<v Speaker 1>extent of bullishness we have. Christian, thank you always gonna

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<v Speaker 1>have from you, Sir Christian Klisman. There of government sex

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<v Speaker 1>on a year ahead. We drive forward this conversation with

0:13:10.000 --> 0:13:14.120
<v Speaker 1>Bagd and Sadi also at Johns Hopkins University. Dr In Sati,

0:13:14.200 --> 0:13:17.240
<v Speaker 1>thank you so much for joining us. What should the

0:13:17.320 --> 0:13:21.480
<v Speaker 1>CDC do? Should they just say, look, PCR, we tried it,

0:13:21.480 --> 0:13:23.800
<v Speaker 1>it doesn't work and we need to look at far

0:13:23.880 --> 0:13:29.120
<v Speaker 1>more rapid rapid testing. So PCR does work, and that's

0:13:29.200 --> 0:13:32.800
<v Speaker 1>the wrong messaging. But the correct messaging here is look

0:13:33.040 --> 0:13:36.960
<v Speaker 1>right now, we just don't have enough tests, access to tests,

0:13:37.000 --> 0:13:41.880
<v Speaker 1>extremely challenging. Systems are overwhelmed. Rapid tests are expensive but

0:13:42.040 --> 0:13:46.040
<v Speaker 1>also not available to major parts of our society. If

0:13:46.040 --> 0:13:50.240
<v Speaker 1>you are symptomatic given the current pandemic, you should isolate

0:13:50.320 --> 0:13:52.960
<v Speaker 1>for the full ten days because what is also known

0:13:53.160 --> 0:13:56.160
<v Speaker 1>is after five days from your onset of symptoms, most

0:13:56.160 --> 0:14:00.760
<v Speaker 1>people will be uninfectious, but about thirty individuals continue to

0:14:00.800 --> 0:14:03.160
<v Speaker 1>be infectious and there is a risk that they will

0:14:03.160 --> 0:14:09.439
<v Speaker 1>continue to transmit the virus onwards. You're acclaimed doctor Hansatti

0:14:09.679 --> 0:14:15.199
<v Speaker 1>worldwide in dealing with testing and virology in poor nations.

0:14:15.320 --> 0:14:18.680
<v Speaker 1>I don't think that describes America. How did we get

0:14:18.679 --> 0:14:22.080
<v Speaker 1>in the spot where we don't have enough rapid tests?

0:14:23.480 --> 0:14:26.320
<v Speaker 1>You know? I think it was we had a lot

0:14:26.400 --> 0:14:30.160
<v Speaker 1>of tests available within health facilities. I think this is

0:14:30.160 --> 0:14:33.600
<v Speaker 1>a consumer market. UM. Only thirteen rapid tests were ever

0:14:33.640 --> 0:14:37.160
<v Speaker 1>approved by the FDA, right, so number of the number

0:14:37.200 --> 0:14:39.760
<v Speaker 1>of tests is low when it comes from rapid testing.

0:14:39.800 --> 0:14:42.960
<v Speaker 1>There was over four hundred tests approved UM that are

0:14:42.960 --> 0:14:46.640
<v Speaker 1>non rapid tests. But then there's also issues around distribution,

0:14:47.240 --> 0:14:51.120
<v Speaker 1>market share, UM and the pricing of the tests, which

0:14:51.240 --> 0:14:56.080
<v Speaker 1>is really cause delays in making sure that everyone has

0:14:56.120 --> 0:15:01.160
<v Speaker 1>access to a test. Dr Hansati, what's your sense of

0:15:01.200 --> 0:15:04.160
<v Speaker 1>the CDC's guidelines. I mean, John was just reading it's

0:15:04.160 --> 0:15:06.160
<v Speaker 1>as clear as mud that you know, if you have

0:15:06.200 --> 0:15:08.480
<v Speaker 1>a test, great, you can take it. If you don't,

0:15:08.520 --> 0:15:10.680
<v Speaker 1>don't worry about it, Just go about your life. I mean,

0:15:10.800 --> 0:15:13.640
<v Speaker 1>is this more harmful? Is it's going to actually undermine

0:15:13.760 --> 0:15:16.600
<v Speaker 1>trust in a health system that's really struggled to get

0:15:16.640 --> 0:15:20.080
<v Speaker 1>the right message across. I mean, that's been a story

0:15:20.120 --> 0:15:23.200
<v Speaker 1>of this pandemic right to some point. We agree that

0:15:23.240 --> 0:15:26.480
<v Speaker 1>the pandemic has evolved with this guidances also need to evolve,

0:15:26.480 --> 0:15:29.000
<v Speaker 1>as our data or knowledge of vaults, but the messaging

0:15:29.040 --> 0:15:34.000
<v Speaker 1>has been frankly confusing. UM. It leaves employers unsure what

0:15:34.080 --> 0:15:38.840
<v Speaker 1>to do with their workforce. Right, so test symptomatic isolate

0:15:38.920 --> 0:15:41.720
<v Speaker 1>for five days? Okay, that's clear, But then how do

0:15:41.800 --> 0:15:43.720
<v Speaker 1>I get a test to you? Will those test results

0:15:43.720 --> 0:15:45.640
<v Speaker 1>be available on the same day? When do you make

0:15:45.680 --> 0:15:47.720
<v Speaker 1>the decision whether it to isolate for a further five

0:15:47.800 --> 0:15:50.160
<v Speaker 1>days or return back to the workforce. And if you

0:15:50.240 --> 0:15:52.680
<v Speaker 1>do return back to the workforce, how do we ensure

0:15:53.000 --> 0:15:56.200
<v Speaker 1>that that return does not put others at risk? Um

0:15:56.240 --> 0:15:58.800
<v Speaker 1>And so I think that guidance has been challenging to

0:15:58.840 --> 0:16:03.840
<v Speaker 1>interpret but all so challenging to implement, which is frankly

0:16:03.880 --> 0:16:06.120
<v Speaker 1>the reason why people, a lot of companies have gone

0:16:06.120 --> 0:16:08.640
<v Speaker 1>to PCR tests, have gone to something that is the

0:16:08.640 --> 0:16:12.720
<v Speaker 1>most extreme to prevent outbreaks from offices. At what point

0:16:12.880 --> 0:16:15.520
<v Speaker 1>do you see that actually becoming a mood issue. We

0:16:15.520 --> 0:16:17.960
<v Speaker 1>were speaking with Dr Amishdalogy yesterday who said this is

0:16:17.960 --> 0:16:20.880
<v Speaker 1>absolutely the wrong test. Would you agree and do you

0:16:20.920 --> 0:16:22.840
<v Speaker 1>think that it will start being phased out as the

0:16:22.880 --> 0:16:28.680
<v Speaker 1>barometer of infectiousness in the near future. So rapid tests

0:16:28.720 --> 0:16:33.040
<v Speaker 1>are wonderful. True, there are sensitive but extremely specific. So

0:16:33.080 --> 0:16:36.120
<v Speaker 1>if you have a positive rapid test at home, there

0:16:36.240 --> 0:16:39.240
<v Speaker 1>is no reason for you to go and get compromatory testing.

0:16:39.880 --> 0:16:42.720
<v Speaker 1>Use consume that space in the health system that needs

0:16:42.760 --> 0:16:46.320
<v Speaker 1>to be made available to others. Also, PCRs do not

0:16:46.440 --> 0:16:51.040
<v Speaker 1>make sense. Are asymptomatic individuals, symptomatic individuals that need to

0:16:51.160 --> 0:16:54.240
<v Speaker 1>know for certain that they are positive or not. I

0:16:54.280 --> 0:16:57.400
<v Speaker 1>don't have access to a rapid test, although only ones

0:16:57.440 --> 0:16:59.880
<v Speaker 1>that should be getting a PCR at this time. Don't

0:17:00.280 --> 0:17:02.680
<v Speaker 1>wonderful stuff, wonderful word kinds of white We appreciate it.

0:17:02.720 --> 0:17:09.680
<v Speaker 1>Don't about town Sanci that of John's helpkins. Right now,

0:17:09.720 --> 0:17:13.640
<v Speaker 1>we're gonna dovetail in the always interesting Eurasia Group top

0:17:13.680 --> 0:17:18.080
<v Speaker 1>ten risks with what we see immediate and Ian Bremer

0:17:18.160 --> 0:17:20.240
<v Speaker 1>is known for years as he's done the top ten

0:17:20.359 --> 0:17:23.359
<v Speaker 1>risks that he gets rewritten by the moment, we're gonna

0:17:23.400 --> 0:17:25.920
<v Speaker 1>rewrite it right now. Alex Pardeaux joins us right now,

0:17:26.280 --> 0:17:30.359
<v Speaker 1>the expert on Russia at Eurasia Group, Mr Burdeaux. How

0:17:30.560 --> 0:17:36.639
<v Speaker 1>does Putin respond to the upset in kazakh Stone. I

0:17:36.680 --> 0:17:40.520
<v Speaker 1>think he responds carefully at first. Um, everybody's sort of

0:17:40.520 --> 0:17:43.000
<v Speaker 1>watching to see how these protests develop, and I think

0:17:43.040 --> 0:17:45.320
<v Speaker 1>that's true in the Kremlin as well. I think that

0:17:45.400 --> 0:17:47.359
<v Speaker 1>they may have been caught by surprise as much as

0:17:47.400 --> 0:17:50.120
<v Speaker 1>anybody one thing that Putin does not want to see

0:17:50.119 --> 0:17:53.679
<v Speaker 1>his chaos on the streets in Kazakhstan. So they'll be

0:17:53.720 --> 0:17:57.160
<v Speaker 1>looking to see what the Kaza government's responses UH look

0:17:57.280 --> 0:17:59.560
<v Speaker 1>like UH and whether or not they can control the

0:17:59.600 --> 0:18:02.000
<v Speaker 1>situation aation. And I think also they'll take some lessons

0:18:02.040 --> 0:18:05.320
<v Speaker 1>in terms of what this means with popular uprisings that

0:18:05.359 --> 0:18:08.600
<v Speaker 1>are connected in particular to the raising of gas prices,

0:18:08.600 --> 0:18:10.480
<v Speaker 1>which it seems to be the immediate cause of this

0:18:10.560 --> 0:18:16.480
<v Speaker 1>particular situation. When we look at this and study, we

0:18:16.760 --> 0:18:19.560
<v Speaker 1>hearken back to our collective memories, and that is a

0:18:19.640 --> 0:18:25.400
<v Speaker 1>memory of the Soviet Union. Address right now, how much

0:18:25.520 --> 0:18:28.600
<v Speaker 1>there is a tinge of the Soviet Union and your

0:18:28.720 --> 0:18:33.520
<v Speaker 1>analysis of Moscow the present states of Russia and the

0:18:33.560 --> 0:18:38.360
<v Speaker 1>former states of the Soviet Union. M Well, certainly, I

0:18:38.359 --> 0:18:42.920
<v Speaker 1>think for President Putin UH, there are these linkages back

0:18:42.960 --> 0:18:45.640
<v Speaker 1>to the Soviet past that he know he's expressed regret

0:18:45.720 --> 0:18:48.520
<v Speaker 1>about the breakup of the Soviet Union. But I think

0:18:48.520 --> 0:18:51.880
<v Speaker 1>also there really is not a sense that Poton wants

0:18:51.920 --> 0:18:54.879
<v Speaker 1>to go back to those days, um, that this is

0:18:54.920 --> 0:18:57.879
<v Speaker 1>sort of some kind of ambition of his UM. But

0:18:58.040 --> 0:19:01.440
<v Speaker 1>I think in the general area, whether we're talking about Kazakhstan,

0:19:01.480 --> 0:19:04.439
<v Speaker 1>and whether we're talking about Ukraine or the crisis in

0:19:04.640 --> 0:19:08.000
<v Speaker 1>Yellowers as well. Moscow continues to believe that it has

0:19:08.080 --> 0:19:10.399
<v Speaker 1>a very important role to play in this region, that

0:19:10.520 --> 0:19:13.040
<v Speaker 1>it's its sphere of influence, and that leads to some

0:19:13.119 --> 0:19:17.680
<v Speaker 1>of the tensions between Russia and the West that we've

0:19:17.720 --> 0:19:22.000
<v Speaker 1>been seeing just over the last couple of years. So

0:19:22.240 --> 0:19:25.080
<v Speaker 1>Russia is always a problem spot typically when you look

0:19:25.080 --> 0:19:28.399
<v Speaker 1>at some of these geopolitical maps of potential risks, and

0:19:28.440 --> 0:19:31.919
<v Speaker 1>here we have it at number five. It moved up significantly.

0:19:31.960 --> 0:19:33.399
<v Speaker 1>I believe that you said it wasn't even on the

0:19:33.440 --> 0:19:36.840
<v Speaker 1>list last year. So what changed to make it in

0:19:36.880 --> 0:19:39.480
<v Speaker 1>a situation, And certainly the relationship between the US and

0:19:39.560 --> 0:19:43.080
<v Speaker 1>Russia at the brinks edge of precipitating some sort of

0:19:43.119 --> 0:19:47.439
<v Speaker 1>international crisis now versus a twelve months ago when it

0:19:47.520 --> 0:19:51.680
<v Speaker 1>was just Russia. Well, I think in two we're looking at,

0:19:52.240 --> 0:19:55.200
<v Speaker 1>you know, a few issues that could actually lead the crisis. Certainly,

0:19:55.320 --> 0:19:58.280
<v Speaker 1>there's you know, the US Russia relationship has been a

0:19:58.359 --> 0:20:01.120
<v Speaker 1>particularly bad over the last separate years. But it's these

0:20:01.160 --> 0:20:04.920
<v Speaker 1>specific problems, and of course right now the big focuses

0:20:05.000 --> 0:20:08.520
<v Speaker 1>on the situation with Ukraine would put his demands about

0:20:08.560 --> 0:20:13.400
<v Speaker 1>a basically a redrawing of the Eastern European security order

0:20:14.000 --> 0:20:16.359
<v Speaker 1>as well. And that's led to these major tensions just

0:20:16.480 --> 0:20:19.840
<v Speaker 1>over the last couple of months. But beyond that, if

0:20:19.880 --> 0:20:23.040
<v Speaker 1>we look ahead later to the year, there's concerns about

0:20:23.560 --> 0:20:26.040
<v Speaker 1>whether or not Russian actors, whether their state or non

0:20:26.080 --> 0:20:30.520
<v Speaker 1>state actors, will interfere in the US midterm elections. UH.

0:20:30.560 --> 0:20:33.640
<v Speaker 1>That has been a big redline for President Biden. He's

0:20:33.680 --> 0:20:36.399
<v Speaker 1>made that pretty clear, UH. And so the trigger for

0:20:36.560 --> 0:20:41.360
<v Speaker 1>some sort of US response to that UH is fairly low. UM.

0:20:41.640 --> 0:20:44.879
<v Speaker 1>Other issues of concern would be in the cyber realm uh.

0:20:44.920 --> 0:20:49.160
<v Speaker 1>You know, a repeat of the colonial pipeline ransomware attack

0:20:49.280 --> 0:20:52.600
<v Speaker 1>last year or the solar winds case and saw something

0:20:52.640 --> 0:20:55.040
<v Speaker 1>of that nature that would also be a concern. So

0:20:55.119 --> 0:20:58.040
<v Speaker 1>these these problems have been mounting and this year there's

0:20:58.040 --> 0:20:59.680
<v Speaker 1>a real risk that one of them turns into a

0:20:59.760 --> 0:21:04.399
<v Speaker 1>christ Going back to where we began the conversation with

0:21:04.480 --> 0:21:09.280
<v Speaker 1>Kazakhstan and the idea of higher gas prices igniting social unrest,

0:21:09.640 --> 0:21:13.080
<v Speaker 1>how much has the nord stream to issue really caused

0:21:13.080 --> 0:21:16.399
<v Speaker 1>a fissure between Europe and the United States with Europe

0:21:16.400 --> 0:21:19.600
<v Speaker 1>in a much more delicate position, with such a strong

0:21:20.320 --> 0:21:27.440
<v Speaker 1>geopolitical location with respect to gases, gas prices, and Russia. Well,

0:21:27.520 --> 0:21:31.679
<v Speaker 1>certainly the European reactions I think have driven US responses

0:21:31.760 --> 0:21:34.960
<v Speaker 1>to a certain degree. And with the nord Stream to pipeline,

0:21:34.960 --> 0:21:39.080
<v Speaker 1>the Biden administration basically struck a deal with the Germans over,

0:21:39.240 --> 0:21:41.960
<v Speaker 1>you know, to allow that pipeline to go ahead with

0:21:42.040 --> 0:21:46.360
<v Speaker 1>some very heavy conditions. Uh. You know that the instinct

0:21:46.359 --> 0:21:49.159
<v Speaker 1>from Washington has been to impose sanctions to try and

0:21:49.280 --> 0:21:52.840
<v Speaker 1>stop the pipeline. The Biden administration has resisted that, I

0:21:52.880 --> 0:21:56.159
<v Speaker 1>think because they're, you know, in the interest of trying

0:21:56.200 --> 0:21:59.719
<v Speaker 1>to repair the trans atlantic relationship, especially with the German government,

0:21:59.760 --> 0:22:03.119
<v Speaker 1>they want to be very careful about how the US response. Also,

0:22:03.160 --> 0:22:06.320
<v Speaker 1>I think it's a recognition that ultimately the German government

0:22:06.359 --> 0:22:09.280
<v Speaker 1>and their regulatory authority over the pipeline is probably the

0:22:09.320 --> 0:22:13.320
<v Speaker 1>single biggest obstacle to North String to becoming operational. But

0:22:13.359 --> 0:22:16.160
<v Speaker 1>for Russia this is a big deal. Putin certainly wants

0:22:16.160 --> 0:22:18.600
<v Speaker 1>this pipeline to become operational, and he wants to make

0:22:18.600 --> 0:22:22.359
<v Speaker 1>sure that gas from is able to keep its market share. Uh.

0:22:22.560 --> 0:22:26.440
<v Speaker 1>In Europe, uh, and that leads to tensions between Russia

0:22:26.840 --> 0:22:28.920
<v Speaker 1>and the EU as well, where there still is a

0:22:28.960 --> 0:22:32.600
<v Speaker 1>lot of skepticism for many members, included especially Poland, about

0:22:32.640 --> 0:22:37.399
<v Speaker 1>this pipeline and whether it should be operational at all. Alex,

0:22:37.400 --> 0:22:39.320
<v Speaker 1>thank you so much. I've got eight more questions, but

0:22:39.359 --> 0:22:41.360
<v Speaker 1>we don't have the time today. Alex Brudeaux, you raise

0:22:41.400 --> 0:22:43.439
<v Speaker 1>your group on the top ten risks for two thousand

0:22:44.000 --> 0:22:49.000
<v Speaker 1>twenty two. This is the Bloomberg Surveillance Podcast. Thanks for listening.

0:22:49.320 --> 0:22:52.680
<v Speaker 1>Join us live weekdays from seven to ten a m. Eastern.

0:22:52.920 --> 0:22:57.320
<v Speaker 1>I'm Bloomberg Radio and Bloomberg Television each day from six

0:22:57.440 --> 0:23:02.280
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0:23:02.440 --> 0:23:09.160
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0:23:09.320 --> 0:23:12.880
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0:23:12.960 --> 0:23:15.600
<v Speaker 1>Tom Keene and this is Bloomberg