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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along

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Speaker 1: with Jonathan Farrell and Lisa Abramowitz. Join us each day

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Speaker 1: for insight from the best and economics, geopolitics, finance and investment.

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Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and

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Speaker 1: anywhere you get your podcasts, and always I'm Bloomberg dot Com,

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Speaker 1: the Bloomberg Terminal and the Bloomberg Business App. She has

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Speaker 1: the advantages of working for automatic data processing Nila Richardson

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Speaker 1: as chief KADOS for the people that punch out the

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Speaker 1: payroll checks like nobody from C to shining C. Nila

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Speaker 1: at the ADP franchise, what do you see in your

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Speaker 1: ADP granularity? We see wages are strong. Look. ADP provides

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Speaker 1: payroll services for over twenty five million workers, that's about

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Speaker 1: twenty percent of the working population, and we're tracking wage

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Speaker 1: is very carefully, especially as the economy is looking in

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Speaker 1: the phase of inflation, and what we're seeing is a

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Speaker 1: little bit of a deceleration and pay growth but still

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Speaker 1: too high to be consistent with a two percent target,

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Speaker 1: and that speaks to the tightness of the labor market.

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Speaker 1: It's not maximum tightness. Right now, we've seen things come down,

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Speaker 1: We've seen jobless claims go up. It's not at the

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Speaker 1: maximum like it was in the summer and early fall

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Speaker 1: of twenty twenty two, but it's still very, very tight

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Speaker 1: compared to where we were before the pandemic, even though

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Speaker 1: the unemployment rate is about the same. How difficult, Nila,

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Speaker 1: is it to talk about the labor market as a

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Speaker 1: whole rather than the specific parts. And I say this

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Speaker 1: because yesterday in the Beige Book, there was an anecdote

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Speaker 1: about a construction company having a commissioning a plane to

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Speaker 1: fly workers out to it because that was cheaper than

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Speaker 1: trying and actually more effective to get workers, not even

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Speaker 1: cheaper than trying to hire in the region. And I mean,

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Speaker 1: how much are you seeing strength that you've never seen

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Speaker 1: before ongoing in specific industries. It's a very fragmented market.

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Speaker 1: To your point, Lisa, Some parts of the of this

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Speaker 1: economy are so interest rates sensitive housing construction, and yet

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Speaker 1: some of those sectors are chronically undersupply housing construction, and

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Speaker 1: so you're seeing a real mix in the market right now.

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Speaker 1: There are companies that overhired or maybe extended. They're hiring

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Speaker 1: aggressively during the pandemic, you're seeing those same companies fullback.

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Speaker 1: There are smaller companies that we track in our data

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Speaker 1: that never got really a legend to this market because

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Speaker 1: the labor market was so competitive and they had to

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Speaker 1: compete for talent with larger firms. So it's really a

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Speaker 1: mixed bag. But the common thread is that wage growth

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Speaker 1: has been stronger than before the pandemic throughout the economy.

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Speaker 1: How bifurcated is it that wage growth among the lower

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Speaker 1: income sector has outpaced the higher income sectors pretty substantially.

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Speaker 1: I mean, as that gap continued to widen, as you

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Speaker 1: see some of the layoffs in the tech sector and

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Speaker 1: the white collar the middle office workers that have gotten

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Speaker 1: stripped out of certain areas, while you still see some

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Speaker 1: of these service sectors continue to robustly higher. Yeah, so

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Speaker 1: we've still see double digit wage growth in leisure and

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Speaker 1: hospitality sector and the ADP data, and that growth has

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Speaker 1: calmed down. It's down a lot since again the summer

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Speaker 1: of last year. But overall, the wage moderation has been

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Speaker 1: really really modest. In fact, there's only a couple of

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Speaker 1: sectors where wage growth now is lower than it was

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Speaker 1: before the pandemic, Information tech, is actually one of those sectors.

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Speaker 1: So even though we're as we're seeing layoffs, we're actually

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Speaker 1: seeing information in the tech economy decelerate, the sharpest decline

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Speaker 1: in wage growth of any other sector. That's notable. The

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Speaker 1: markets here recovering here they were in negative a lot

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Speaker 1: of red in the screen. Order back to a mixed

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Speaker 1: red and green picture here SMP futures at negative one

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Speaker 1: point five zero. I should point out that widely watched

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Speaker 1: twos tens spread with the pros watch is now at

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Speaker 1: one hundred and five basis points. Interesting to see if

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Speaker 1: that breaks to a less inversion. Neil Richardson, I just

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Speaker 1: did a very informal long term moving average study of

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Speaker 1: claims out eight minutes ago and critically the long term

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Speaker 1: moving average in March of twenty and twenty. The end

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Speaker 1: of the pre pandemic is the same as it was

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Speaker 1: right now. Two hundred nineteen thousand is a close approximation

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Speaker 1: of any arbitrary long term moving average there are we

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Speaker 1: back to pre pandemic now. The economy has changed structurally.

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Speaker 1: There's so many things that are different than they were

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Speaker 1: in twenty twenty. Just the advancement and adoption of hybrid

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Speaker 1: work for example, the fact that we're seeing double digit

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Speaker 1: wage games in the lowest part of the pay scale.

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Speaker 1: That's a complete, one complete change from the pandemic. At

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Speaker 1: During the pandemic, these low wage workers were barely keeping

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Speaker 1: up with then very low inflation, so we even saw

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Speaker 1: declines year over year and pay growth for the lowest

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Speaker 1: end of the spectrum. These workers have become much more

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Speaker 1: competitive post pandemic, as noted by the double digit wage game.

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Speaker 1: So the wage structure has been turned around in the

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Speaker 1: last three years, and the question is will that endure

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Speaker 1: through the next three years. Now, before we let you go,

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Speaker 1: we're hearing from a little birdie named Michael McKee that

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Speaker 1: the Whisper number for tomorrow is currently two hundred and

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Speaker 1: forty seven thousand. Do you think after two two undred

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Speaker 1: forty seven million, to excuse me, being created, I'm curious

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Speaker 1: from your perspective two hundred forty seven thousand, what you

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Speaker 1: believe will be the number based on the anecdotal information

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Speaker 1: that you're seeing come out. I think you're going to

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Speaker 1: get a solid number, let's start there. I think you're

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Speaker 1: going to get strong job growth based on the private

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Speaker 1: sector payroll data that we're seeing an ADP. We're not

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Speaker 1: predicting the BLS. We're just looking at the market as

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Speaker 1: we see it. And if you compare that with other

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Speaker 1: data like jobless claims, like job over thanks, you're still

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Speaker 1: seeing a robust game. But I don't think you're going

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Speaker 1: to get a half a million jobs. We should have

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Speaker 1: me on every day, Neila Richardson, Thank you so much.

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Speaker 1: I can't say enough, folks about the granularity of payroll

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Speaker 1: analysis at Automatic Data Processing. Let's dive into this right now.

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Speaker 1: Andrew Sheets is really quite good at this chief cross

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Speaker 1: asset across asset strategists, I should say, at Morgan Stanley,

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Speaker 1: Andrew coalescing the wonderful and fractious narratives plural at Morgan Stanley,

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Speaker 1: what is your conviction right now? Well? Thanks, it's great

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Speaker 1: to be here with you. So we still think that

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Speaker 1: the US economy is going to slow as we go

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Speaker 1: throughout this year, and I do think the market might

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Speaker 1: be a little bit too fixated on this kind of

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Speaker 1: will they won't they question of a recession when the

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Speaker 1: dominant force we think is still going to be a

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Speaker 1: slowing and economy, both in real and nominal terms. Now,

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Speaker 1: the recent data that we had out of payrolls and

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Speaker 1: retail sales was very strong. I think that definitely worked

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Speaker 1: against that narrative. But we'll see what the data comes

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Speaker 1: this month. We'll see how that data looks without those

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Speaker 1: large seasonal revisions in the same way. And we still

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Speaker 1: see a lot of leading indicators pointing to a slowdown.

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Speaker 1: So we still think that we should be positioned for

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Speaker 1: decelerating growth, weaker than expected earnings, and we still think

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Speaker 1: that that will be the dominant narrative when investors reach

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Speaker 1: the midpoint of the year. You'll underweight global equities Andrew,

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Speaker 1: so let's start there. Is that spread evenly equally between

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Speaker 1: regions or other regions that you favor over others. So

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Speaker 1: I think the story in Asia is actually pretty notably

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Speaker 1: different from the story we see elsewhere. So I think

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Speaker 1: if you talk to investors and you ask them, why

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Speaker 1: are you concerned about markets? The concern is decelerating growth,

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Speaker 1: high inflation, hawkish monetary policy, high competing rates on cash,

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Speaker 1: decelerating earnings, growth, expensive valuations. That's not the story in Asia.

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Speaker 1: That's not the story with Asian equities. These are markets

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Speaker 1: that are generally pretty reasonably valued versus history. Growth is

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Speaker 1: going to be improving, Inflation is not high, the central

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Speaker 1: banks in Asia are not hawkish, and cash as a

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Speaker 1: competing asset is actually quite quite low and yield. So

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Speaker 1: I think that this is a story where overall we

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Speaker 1: still see a lot of signs that suggest that this

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Speaker 1: is a time to hold less equities than normal, to

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Speaker 1: be underweight equities. But within that, we're much more optimistic

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Speaker 1: about stocks in Asia, and we think there's a legitimately

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Speaker 1: different macro story there that could help support that. How

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Speaker 1: can you justify andrew being underweight equities yet more positive,

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Speaker 1: more constructive on credit. So I do think that this

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Speaker 1: is an environment where I think it's a little bit

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Speaker 1: better suited to credit. And you know, some of that

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Speaker 1: is that I think in a decelerating growth environment that

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Speaker 1: is still tough for earnings. You know, my colleague Mike

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Speaker 1: Wilson and our equity strategy team, we are very worried

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Speaker 1: about operating leverage, meaning that earnings really underperform what you

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Speaker 1: see at a GDP. But that type of decline in earnings,

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Speaker 1: we don't think really creates major credit problems, major refinancing

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Speaker 1: problems for the bulk of the credit market. I also

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Speaker 1: think that when we think about incentives as yields move higher,

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Speaker 1: think about this from a corporate treasure perspective. All of

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Speaker 1: a sudden, paying down your debt looks a lot more

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Speaker 1: attractive than buying back your stock if the debt is

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Speaker 1: yielding five and a half six percent, and so the

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Speaker 1: idea that it higher yields we might get more credit

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Speaker 1: friendly activity rather than shareholder friendly activity is another part

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Speaker 1: of our thinking. Andrew to combine these ideas of both

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Speaker 1: the international approach and picking different regions with and equities,

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Speaker 1: and also your appreciation of credit and how it functions.

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Speaker 1: How different is the picture for credit in different regions

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Speaker 1: based on what Christina Kampmany was talking about, which is

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Speaker 1: that there are different regions with different sensitivities to rising rates,

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Speaker 1: potentially more given variable rate interests. So I do think

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Speaker 1: that's a really great and important point, and I think

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Speaker 1: i'll across a lot of these different credit markets you

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Speaker 1: do see different outcomes. So a market like Europe is

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Speaker 1: a market, especially European investment grade is a market we

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Speaker 1: like a lot. You know, that's an investment grade market

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Speaker 1: yields four and a half percent in euros. That's the

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Speaker 1: same yield you've got back in two thousand and three

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Speaker 1: or two thousand and four, and these companies have refinanced

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Speaker 1: their debt to a pretty significant extent at some of

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Speaker 1: the longest duration in that market that we've seen in

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Speaker 1: its history. On the other hand, I think the leverage

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Speaker 1: loan market, where you have more issuers, where those debt

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Speaker 1: costs are resetting quickly. There you have the feed through

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Speaker 1: of costs that are much more significant. And my colleagues

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Speaker 1: are also pretty cautious on the commercial real estate side,

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Speaker 1: you know, we still think that that is a market

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Speaker 1: where you could really get hit from kind of both directions.

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Speaker 1: That cap rates need to come up, as risk free

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Speaker 1: rates have come up, but then also financing costs are

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Speaker 1: up significantly, and so that's an area where we're more cautious.

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Speaker 1: Where we're more cautious on the equity side, and I

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Speaker 1: think that's still an area where we probably want to

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Speaker 1: avoid relative to parts of the corporate credit market we

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Speaker 1: like more. Andrew, just to take this an extra question,

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Speaker 1: I'm quite interested by this thing that you have that

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Speaker 1: ultimately the C suite will make decisions that benefit credit

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Speaker 1: investors more than equity investors. Is this another way of

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Speaker 1: saying I want to bet on fallen angels becoming rise

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Speaker 1: and stars. Is that a story that you like within

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Speaker 1: high yield credit, Well, I do think that this is

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Speaker 1: an environment where I think the incentives to be more

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Speaker 1: conservative and be more cautious would seem to be there.

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Speaker 1: I think if you combine CEO surveys, which are pretty

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Speaker 1: notable that much of the C suite seems relatively downbeat

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Speaker 1: about growth, that's I've gotten a little bit better in

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Speaker 1: the most recent month, but stillatively downbeat. And then just

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Speaker 1: the math of where bond yields are relative to equity

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Speaker 1: and dividend yields that I do think that this is

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Speaker 1: an environment where we want to play for credit improvement

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Speaker 1: more broadly, so in terms of the fallen angels specifically,

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Speaker 1: I think that could be a little bit more complicated

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Speaker 1: because I think there you are often dealing with companies

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Speaker 1: with a little bit more cick locality, and there it

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Speaker 1: might be harder to support that given our below consensus

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Speaker 1: growth forecasts. But I think the idea, I do think

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Speaker 1: it supports the idea of credit versus equities overall within

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Speaker 1: a portfolio context. Andrew, thank you for that smart stuff.

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Speaker 1: Andrew Shaits of Morgan Standing, Christian Maliglishman, Managing Director, Portfolio Strategy, Sex.

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Speaker 1: We're not going to start sinking, Christian Dan Warri. Let's

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Speaker 1: talk about how low that bar is for fifty from

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Speaker 1: this federal Reserve. What would we need Friday morning, tomorrow

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Speaker 1: and on CPID next week. Yeah, I mean, listen. I

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Speaker 1: think it's all about the trend, and the FAT wants

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Speaker 1: to see a down trend that's convincing. I think we

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Speaker 1: had this blockbuster print last time, so it's going to

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Speaker 1: be a down trend. How much I think consensus is

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Speaker 1: looking for two hundred thousand or so. I think we're

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Speaker 1: two hundred and fifty on payrolls, so we're a bit above.

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Speaker 1: I think it's dead enough to push the FAT to fifty.

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Speaker 1: I think you would need to put it in contact

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Speaker 1: with the inflation data, with the average hourly earnings. We're

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Speaker 1: actually expect the average hourly earnings to be a bit

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Speaker 1: more moderate, in line with consensus. We're a bit above

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Speaker 1: on the inflation side as well. But our economists actually

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Speaker 1: kept the twenty five bibs and I think they feel

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Speaker 1: like it's it's making sense for Powell to open the

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Speaker 1: door to fifty. But to step up after you step down.

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Speaker 1: I think that is still a significant step. So the

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Speaker 1: question is really if there's you know, some type of

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Speaker 1: blockbuster surprise to the upside, it can get them there.

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Speaker 1: I think with the current data set, our economy is

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Speaker 1: kept the twenty five. Christian's going to Tony and you

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Speaker 1: did this at the Work Business School years ago. We're

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Speaker 1: Jane attended. Christian. I'm going to look at your phrase

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Speaker 1: macro momentum. I think this is incredibly important physics and

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Speaker 1: the of the mass of the system, the velocity of

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Speaker 1: the system, which leads to an immovable macro momentum. What

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Speaker 1: is the macro momentum right now? Yeah, I mean like

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Speaker 1: the challenge is exactly as you said. The momentum is

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Speaker 1: actually really good. I mean you've had the pms and

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Speaker 1: new orders over inventories, a lot of the leading components

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Speaker 1: are confirming what markets have been pricing now for two

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Speaker 1: months or so, which is that the global economy is

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Speaker 1: kind of accelerating actually and the US is not decelerating

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Speaker 1: as much as anticipated. So the momentum is positive and

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Speaker 1: we've taken the credit for that already. That's the big

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Speaker 1: problem you mentioned it The vixus kind of eighteen nineteen twenty.

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Speaker 1: If you compare it to the move index, the type

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Speaker 1: of rates vonds generating, it tells you, like the market

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Speaker 1: already discounts that better growth, because otherwise equities would have suffered,

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Speaker 1: just like last year from the rates volatility. So so

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Speaker 1: my senses, growth momentum is very good. The challenge is

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Speaker 1: that where we are on the cycle to your statement

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Speaker 1: with regards the state variables, we are still late. We

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Speaker 1: still have unemployment, very low, inflation very high, risk premia

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Speaker 1: very low. That just creates a bit of a tension

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Speaker 1: between momentum and where you are. I was looking at

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Speaker 1: your allocation as you look at this mess that we

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Speaker 1: all are looking at and trying to understand where we're going,

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Speaker 1: and it says that your neutral equities and credit underweight bonds,

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Speaker 1: overweight cash, and commodities underweight bonds. How counter consensus is that?

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Speaker 1: And why? Yeah? I mean, listen, I think as you

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Speaker 1: all like, our view has been that rates volatility over

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Speaker 1: the course of the year is fading and all because

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Speaker 1: you have peak inflation. Center banks are also to the

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Speaker 1: end of their tightening cycles, and now we have this

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Speaker 1: new burst of rates volatility because inflation is stickier, there's

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Speaker 1: re acceleration risk, and we need to get through that

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Speaker 1: in this process. We have to be clear, we're quite advanced.

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Speaker 1: The market has repriced the peak grade for the FAT

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Speaker 1: for the ECB and it looks much more symmetric. We've

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Speaker 1: kept the underweight at this juncture. We've had the underweight

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Speaker 1: for a few weeks now because we feel like it's

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Speaker 1: a h for the portfolio in case there is really

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Speaker 1: this type of blockbuster data that scares the market, And

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Speaker 1: a lot of conversations we currently have with clients evolve

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Speaker 1: around maybe monetary policy is not as effective anymore in

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Speaker 1: tightening financial conditions and possibly getting demand under control. If

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Speaker 1: that narrative gains traction, you could easily overshoot peak grades

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Speaker 1: that are currently priced. And that means that, yeah, you

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Speaker 1: want to probably have a bit of a short duration

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Speaker 1: by and be careful to go back to bonds too quickly.

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Speaker 1: But we have to be clear. The yields that we're

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Speaker 1: starting to see in the front end, they look much

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Speaker 1: more symmetric. How would I play offense in that world?

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Speaker 1: What would I do with my portfolio to set up

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Speaker 1: for that story? In terms of rates, in terms of equities. Yeah,

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Speaker 1: in terms of equities, I think we need to go

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Speaker 1: to the sources where there is the biggest growth momentum,

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Speaker 1: of course, and I think we've been quite focused on Asia,

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Speaker 1: both Asia X Japan, China, and also we like Japan,

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Speaker 1: which is linked to growth in the region but always

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Speaker 1: has a certain global growth linkage. It does have incremented

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Speaker 1: catalysts via the BOJ policies. So we've been very focused

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Speaker 1: on non US markets to kind of add cyclical risk tactically.

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Speaker 1: There is a bit of a setback on some of

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Speaker 1: those traits because you know, you have a bit of

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Speaker 1: a kind of moderation of the narrative and obviously risk

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Speaker 1: appetite that could actually create a good opportunity to revisit

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Speaker 1: doors into that better no momentum at this juncture. Christine,

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Speaker 1: thank you, really fascinating stuff. You said a lot there.

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Speaker 1: Ten minutes. Christie mcclisman of Goldman Sacond on our radar

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Speaker 1: now in the white marble of Capitol Hills, Henrietta Trey's

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Speaker 1: managing director partner, I should say of economic research data

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Speaker 1: partners always informative as well. I'm going to cut to

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Speaker 1: the chase, Henrietta. The budget outlook At cbo IS nineteen

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Speaker 1: xcel spreadsheet lines the interest payment is modeled out at

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Speaker 1: six point eight percent of the budget, and it is

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Speaker 1: jaw dropping their model of what we're going to pay

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Speaker 1: in interest over the next ten years on a per

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Speaker 1: year basis. I thought it was a cumulative summation and

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Speaker 1: it's not. Ten years from now, we're gonna pay one

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Speaker 1: point four trillion in interest. Is it out of control?

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Speaker 1: I think everybody's going to make the case that it

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Speaker 1: is out of control, but nobody's going to do anything

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Speaker 1: to stop it. To put it in perspective, there's a

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Speaker 1: thirty one point three eight one trillion dollars debt ceiling

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Speaker 1: and we're talking about cutting three hundred billion dollars into

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Speaker 1: the deficit. So it is definitely a humongous number. It

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Speaker 1: will continue to rise, but there are no plans on

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Speaker 1: the horizon to materially dentist. So get used to it.

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Speaker 1: Many others say, calm down because the mathematics, the complex

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Speaker 1: mathematics of this is wrapped around the gross rate of

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Speaker 1: a nation versus the our start and the implied economics

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Speaker 1: of the moment. Do we have the growthiness of America

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Speaker 1: to get out five years, let alone ten years. I mean,

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Speaker 1: I think you obviously have the growth right now. And

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Speaker 1: another question is how does it compare to the other

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Speaker 1: nations that are coming out of the COVID stale, that

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Speaker 1: are in recession dealing with bigger inflation than we are.

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Speaker 1: A big question about it in sort of the morality

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Speaker 1: circles of economic policies. How much does it matter? And

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Speaker 1: what are we looking like compared to our peers the

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Speaker 1: rest of the globalized economy. So I think in general,

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Speaker 1: the feeling is and the voters are telling you, we

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Speaker 1: love to rail about the deficit when it's convenient, but

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Speaker 1: we don't have any bandwidth or the backbone to actually

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Speaker 1: do anything about it. So you'll see that play out

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Speaker 1: in the Social Security or the Medicare debate. You'll see

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Speaker 1: that play out with Republicans calling to extend the twenty

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Speaker 1: seventeen tax cut, which alone was a five trillion dollar bill,

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Speaker 1: one and a half trillion dollars of which was pure

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Speaker 1: deficit increases. So nobody's really willing to do anything about it,

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Speaker 1: but they love to jump on about it, which is

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Speaker 1: a reason that maybe we're going to be talking more

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Speaker 1: about TikTok than the debt sailing debate or coming into

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Speaker 1: the election season just because it's easier for people to

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Speaker 1: wrap their heads around I mean, is that basically how

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Speaker 1: you can interpret some of the discussion and the unity

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Speaker 1: that you see within parties otherwise is lacking. Absolutely, this

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Speaker 1: is entirely about comparing and contrasting. And what's interesting about

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Speaker 1: American politics right now is that almost everyone unanimously believes

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Speaker 1: that China is a problem. So you'll see this president's

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Speaker 1: budget come out later today with eight hundred and eighty

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Speaker 1: five I think billion dollars just for defense. That's humongous

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Speaker 1: for a Democrat or a Republican. And then on the

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Speaker 1: other side, we have the issue of China. Obviously, of

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Speaker 1: all these defense folks coming out saying we need more

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Speaker 1: capabilities on the defense side, but we need to continue

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Speaker 1: to bolster Ukraine because it's a proxy war for what

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Speaker 1: China would do to Taiwan. So there's just this tremendous

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Speaker 1: focus on China from every direction, whether it's IP defense spending,

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Speaker 1: TikTok ai, it's across the board. I think the view

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Speaker 1: the budget on the deficit conversation through the lens of China,

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Speaker 1: and it helps everything makes sense. And given the needs

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Speaker 1: or the asks with respect to spending, and given the

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Speaker 1: reluctance on all sides really to raise taxes ahead of

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Speaker 1: an election season, and it's always ahead of an electric season,

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Speaker 1: what is the likelihood that we really have a problem

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Speaker 1: here with respect to the debt ceiling debate. It's different

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Speaker 1: that has a different character than the previous debt ceialing debates.

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Speaker 1: I was just talking to a dear former colleague peak

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Speaker 1: going about this. I love that everybody says this time

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Speaker 1: is different. This time it's a calamity. This time it's

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Speaker 1: a train wreck. The House is a disaster, exactly. None

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Speaker 1: of that is different from how it was in twenty eleven,

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Speaker 1: twenty thirteen, twenty sixteen. I mean, we have seen two

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Speaker 1: consecutive Republican speakers heads role as a result of conflating

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Speaker 1: the death ceiling with the government funding bill and relying

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Speaker 1: on Democrats to provide the bulk of the votes. And

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Speaker 1: that's precisely what's going to happen here this year as well.

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Speaker 1: So I find a lot more consistencies than differences, and

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Speaker 1: the dysfunction is a normal part of especially the House

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Speaker 1: of Representatives. I'm gonna tries one of the best always

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Speaker 1: great to get your thoughts, Hendrid to try cynicism is off.

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Speaker 1: Let's be clear, though, and connect that Washington cynicism with

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Speaker 1: how markets will at least take that point. The biggest

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Speaker 1: risk is that people believe that it isn't different this time.

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Speaker 1: The book is freezing order. Bill Browder, I can't say

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Speaker 1: enough about it with the clarity of three, four and

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Speaker 1: five years ago. Mister Browder joins us this morning from London. Bill,

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Speaker 1: I can go eight ways here, particularly off of Angela

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Speaker 1: Stents work on Putin, my book of the Year last year,

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Speaker 1: but I can't. We've got a Battle of Stalingrad going

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Speaker 1: on right now in Ukraine. The Russians had to stop

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Speaker 1: the Nazis, and they did with a wall of bodies.

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Speaker 1: Translate that analog that mister Putin knows over to what

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Speaker 1: we're witnessing an eastern Ukraine this evening. But Putin basically

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Speaker 1: doesn't care about the number of casualties. He has this

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Speaker 1: huge military advantage that death of his soldiers doesn't even

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Speaker 1: make him sleep worse at night. And so they're losing

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Speaker 1: soldiers at a rate of five to one. Of the

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Speaker 1: Ukrainians right now they're throwing convicts, conscripts, and anyone else

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Speaker 1: who they've been able to corral into this meat grinder.

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Speaker 1: They're throwing them into battle and they're being mowed down.

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Speaker 1: These people don't oftentimes don't have even the proper armor,

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Speaker 1: guns or whatever, and they're being shot down on a

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Speaker 1: major basis. And the purpose of this is to try

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Speaker 1: to just soften up the Ukrainian lines. And no matter

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Speaker 1: how good the Ukrainians are at fighting back, if they

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Speaker 1: if wave after wave of soldiers are being thrown into

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Speaker 1: this meat grinder at the Ukrainians, it has a negative impact.

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Speaker 1: And that is going on right now as we speak.

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Speaker 1: And it's if you watch All Quiet on the Western Front,

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Speaker 1: which is about World War One, this is the type

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Speaker 1: of tactics that are going on right now as we

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Speaker 1: speak in Europe today. And ask a contender, they're Bill Browder.

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Speaker 1: When you were at Chicago, you and I were weaned

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Speaker 1: on Thomas Shelling, the giant theorist on war and game theory.

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Speaker 1: You've been courageous about saying, look, this is all about Putin.

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Speaker 1: But what has changed in the last year when Bro

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Speaker 1: talks about Putin? Now, what's new? Well, the main thing

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Speaker 1: that's knew is that Putin is showing himself to be,

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Speaker 1: you know, totally not credible in all of his chest

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Speaker 1: thumping alpha male threats. He has a weak military. He

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Speaker 1: didn't win in three days. He's running out of ammunition,

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Speaker 1: his gas blackmail against Europe didn't work. They found alternatives.

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Speaker 1: He thought that Europe wouldn't in America and the Allies

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Speaker 1: wouldn't reacts harshly we have. He thought we wouldn't supply

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Speaker 1: weapons we have, and so he's completely i would say,

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Speaker 1: misjudged this war from start to finish, and as a result,

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00:25:46,240 --> 00:25:49,359
Speaker 1: Russia is not in a strong position. Russia is not

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Speaker 1: going to win this war with the capacity and the

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Speaker 1: capability as they have right now, particularly if the West

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00:25:55,320 --> 00:25:59,200
Speaker 1: continues to provide weapons, which we're doing, which raises a

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Speaker 1: question can we expedite the end, especially if it's basically

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00:26:03,200 --> 00:26:05,760
Speaker 1: a meat grinder at the front lines, which is tragic

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Speaker 1: to watch on all accounts. You used to be one

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Speaker 1: of the largest foreign portfolio managers of Russian assets. I mean,

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Speaker 1: how far we have come from that time financially? Have

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Speaker 1: we done everything possible to perhaps expedite an end to

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Speaker 1: this tragedy? Well, there's really two areas that we need

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Speaker 1: to be continuing to help the Ukrainians on. The first,

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Speaker 1: on the military side, is that they have asked for

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Speaker 1: jets which we have not provided. They've asked for long

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Speaker 1: range artillery which we have not provided, and they've asked

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Speaker 1: for a certain number of tanks and we've only given

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Speaker 1: them a fraction of what they've asked for. On the

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Speaker 1: financial side, it's the one thing we can really do

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Speaker 1: for them is to starve Putin of the financial resources

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Speaker 1: to continue to fund this war. And we have done

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Speaker 1: a lot on the financial side in terms of sanctions,

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Speaker 1: but the one huge, huge loophole in this whole system,

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Speaker 1: and that you could drive a truck through this loophole

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00:27:03,240 --> 00:27:05,800
Speaker 1: is the sale of oil and gas from Russia to

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Speaker 1: the West and to the east. Putin receives between five

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00:27:09,800 --> 00:27:12,600
Speaker 1: hundred million and a billion dollars a day, even after

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Speaker 1: all these sanctions, after all the disconnection of Russia from

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Speaker 1: the Western system, and that money is enough money to

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Speaker 1: continue to fight this war into perpetuity. And so we

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00:27:21,640 --> 00:27:23,919
Speaker 1: have to figure out a way to stop him from

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Speaker 1: getting that money, because as long as he gets that money,

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00:27:26,920 --> 00:27:29,760
Speaker 1: there's no stopping this war from his perspective, it's deeply

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Speaker 1: painful to read the articles, the very human articles about

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00:27:33,080 --> 00:27:37,280
Speaker 1: what's going on, the fighting, the victims of this fighting. Bill.

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Speaker 1: I wonder how long it will take and whether this

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00:27:40,119 --> 00:27:45,720
Speaker 1: war can end with Vladimir Putin still the leader of Russia. Well,

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00:27:45,760 --> 00:27:47,880
Speaker 1: there's two ways that this war could end. We could

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Speaker 1: give the Ukrainians enough military weaponry so that they finally

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Speaker 1: overcome Russia, which I think they have the capacity to do.

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00:27:56,200 --> 00:27:58,520
Speaker 1: Or the other thing that could happen, And this scares

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Speaker 1: me a lot is as the war drags on, and again,

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Speaker 1: as I should point out that Putin doesn't care about casualties,

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00:28:05,400 --> 00:28:07,399
Speaker 1: and so he can throw more and more, manage the

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00:28:07,640 --> 00:28:10,480
Speaker 1: grinder more and more casualties, and as it grinds on,

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Speaker 1: the West can lose interest. And you're starting to hear

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Speaker 1: noises in Washington, particularly out of the sort of far

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Speaker 1: right of the Republican Party, the Marjorie Taylor Green, Lauren Bobert,

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Speaker 1: Tucker Carlson. Let's not finance Ukraine anymore, that's what they're saying.

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Speaker 1: And if those fringe people start to become mainstream, America

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Speaker 1: is the single most important backer of Ukraine right now,

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Speaker 1: and if America were to step out. If there was

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Speaker 1: a change in leadership in two years time, Putin could

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Speaker 1: win the war that way instead of winning on the battlefield.

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Speaker 1: And so that, in my mind is probably the scariest

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Speaker 1: prospect that we're facing right now as far as Ukraine

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00:28:49,760 --> 00:28:54,800
Speaker 1: is concerned. Bill Broder can them the dramatic exercise work now.

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Speaker 1: The Ukrainian shocked with damage to a key bridge to

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Speaker 1: Crimea a number of weeks ago, so many in the

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00:29:02,320 --> 00:29:06,120
Speaker 1: West seemed to be looking for a dramatic moment to

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Speaker 1: put mister Putin in his place. I'm guessing that's the

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Speaker 1: thinking of children. Well, not necessarily. Remember, in the summer

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Speaker 1: last year, completely unexpected for me and for anyone else

506
00:29:18,360 --> 00:29:22,760
Speaker 1: who's been following this, the Ukrainians broke through the Russian

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Speaker 1: lines and retook fifty four percent of the territory that

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Speaker 1: Russia had previously taken. It was dramatic all the different

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00:29:30,960 --> 00:29:33,600
Speaker 1: places they pushed Russia back, and the Russians were running,

510
00:29:33,960 --> 00:29:38,440
Speaker 1: you know, running back, retreating, and it's not entirely impossible.

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Speaker 1: And interestingly, where I get this little inkling that there's

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Speaker 1: some chance of that happening is from the Russians themselves.

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Speaker 1: This guy. You have Getny Progosion, Putin's chef, the head

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00:29:49,560 --> 00:29:52,640
Speaker 1: of the Wagner group, this person group. Yeah, he's out

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00:29:52,680 --> 00:29:55,440
Speaker 1: there screaming, bloody murderer saying if I don't get enough

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Speaker 1: weaponry from the Russian government, We're going to collapse, and

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Speaker 1: then everything will collapse. He's the one saying it. No

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Speaker 1: one else is saying it. He's the one saying it. Now.

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Speaker 1: It may be for internal political reasons, but if I

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00:30:08,680 --> 00:30:10,880
Speaker 1: hear him saying that, it makes me feel like, you know,

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Speaker 1: maybe there's a second chance for the Ukrainians to do

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Speaker 1: the same thing that they did last summer. On the

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Speaker 1: other hand, Booms has unlimited numbers of people who can

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Speaker 1: throw at this and he doesn't care whether they die.

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Speaker 1: Bill Browder, thank you so much for joining us with

526
00:30:25,200 --> 00:30:28,960
Speaker 1: this update. With the Hermitage, Capital Management barely describes that

527
00:30:29,040 --> 00:30:32,520
Speaker 1: the book is freezing order. I will not mince words.

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Speaker 1: It is chilling, to say the least. Subscribe to the

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00:30:37,400 --> 00:30:41,680
Speaker 1: Bloomberg Surveillance podcast on Apple, Spotify, and anywhere else you

530
00:30:41,720 --> 00:30:45,960
Speaker 1: get your podcasts. Listen live every weekday starting at seven

531
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Speaker 1: am Eastern. I'm Bloomberg dot com. The iHeartRadio app tune

532
00:30:50,640 --> 00:30:54,520
Speaker 1: in and the Bloomberg Business app. You can watch us live.

533
00:30:54,720 --> 00:30:59,040
Speaker 1: I'm Bloomberg Television and always I'm the Bloomberg Terminal. Thanks

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00:30:59,040 --> 00:31:02,840
Speaker 1: for listening. I'm Tom Keane and this is plumber