Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Farrell and Lisa Abramowitz. Join us each day
Speaker 1: for insight from the best and economics, geopolitics, finance and investment.
Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and
Speaker 1: anywhere you get your podcasts, and always I'm Bloomberg dot Com,
Speaker 1: the Bloomberg Terminal and the Bloomberg Business App. She has
Speaker 1: the advantages of working for automatic data processing Nila Richardson
Speaker 1: as chief KADOS for the people that punch out the
Speaker 1: payroll checks like nobody from C to shining C. Nila
Speaker 1: at the ADP franchise, what do you see in your
Speaker 1: ADP granularity? We see wages are strong. Look. ADP provides
Speaker 1: payroll services for over twenty five million workers, that's about
Speaker 1: twenty percent of the working population, and we're tracking wage
Speaker 1: is very carefully, especially as the economy is looking in
Speaker 1: the phase of inflation, and what we're seeing is a
Speaker 1: little bit of a deceleration and pay growth but still
Speaker 1: too high to be consistent with a two percent target,
Speaker 1: and that speaks to the tightness of the labor market.
Speaker 1: It's not maximum tightness. Right now, we've seen things come down,
Speaker 1: We've seen jobless claims go up. It's not at the
Speaker 1: maximum like it was in the summer and early fall
Speaker 1: of twenty twenty two, but it's still very, very tight
Speaker 1: compared to where we were before the pandemic, even though
Speaker 1: the unemployment rate is about the same. How difficult, Nila,
Speaker 1: is it to talk about the labor market as a
Speaker 1: whole rather than the specific parts. And I say this
Speaker 1: because yesterday in the Beige Book, there was an anecdote
Speaker 1: about a construction company having a commissioning a plane to
Speaker 1: fly workers out to it because that was cheaper than
Speaker 1: trying and actually more effective to get workers, not even
Speaker 1: cheaper than trying to hire in the region. And I mean,
Speaker 1: how much are you seeing strength that you've never seen
Speaker 1: before ongoing in specific industries. It's a very fragmented market.
Speaker 1: To your point, Lisa, Some parts of the of this
Speaker 1: economy are so interest rates sensitive housing construction, and yet
Speaker 1: some of those sectors are chronically undersupply housing construction, and
Speaker 1: so you're seeing a real mix in the market right now.
Speaker 1: There are companies that overhired or maybe extended. They're hiring
Speaker 1: aggressively during the pandemic, you're seeing those same companies fullback.
Speaker 1: There are smaller companies that we track in our data
Speaker 1: that never got really a legend to this market because
Speaker 1: the labor market was so competitive and they had to
Speaker 1: compete for talent with larger firms. So it's really a
Speaker 1: mixed bag. But the common thread is that wage growth
Speaker 1: has been stronger than before the pandemic throughout the economy.
Speaker 1: How bifurcated is it that wage growth among the lower
Speaker 1: income sector has outpaced the higher income sectors pretty substantially.
Speaker 1: I mean, as that gap continued to widen, as you
Speaker 1: see some of the layoffs in the tech sector and
Speaker 1: the white collar the middle office workers that have gotten
Speaker 1: stripped out of certain areas, while you still see some
Speaker 1: of these service sectors continue to robustly higher. Yeah, so
Speaker 1: we've still see double digit wage growth in leisure and
Speaker 1: hospitality sector and the ADP data, and that growth has
Speaker 1: calmed down. It's down a lot since again the summer
Speaker 1: of last year. But overall, the wage moderation has been
Speaker 1: really really modest. In fact, there's only a couple of
Speaker 1: sectors where wage growth now is lower than it was
Speaker 1: before the pandemic, Information tech, is actually one of those sectors.
Speaker 1: So even though we're as we're seeing layoffs, we're actually
Speaker 1: seeing information in the tech economy decelerate, the sharpest decline
Speaker 1: in wage growth of any other sector. That's notable. The
Speaker 1: markets here recovering here they were in negative a lot
Speaker 1: of red in the screen. Order back to a mixed
Speaker 1: red and green picture here SMP futures at negative one
Speaker 1: point five zero. I should point out that widely watched
Speaker 1: twos tens spread with the pros watch is now at
Speaker 1: one hundred and five basis points. Interesting to see if
Speaker 1: that breaks to a less inversion. Neil Richardson, I just
Speaker 1: did a very informal long term moving average study of
Speaker 1: claims out eight minutes ago and critically the long term
Speaker 1: moving average in March of twenty and twenty. The end
Speaker 1: of the pre pandemic is the same as it was
Speaker 1: right now. Two hundred nineteen thousand is a close approximation
Speaker 1: of any arbitrary long term moving average there are we
Speaker 1: back to pre pandemic now. The economy has changed structurally.
Speaker 1: There's so many things that are different than they were
Speaker 1: in twenty twenty. Just the advancement and adoption of hybrid
Speaker 1: work for example, the fact that we're seeing double digit
Speaker 1: wage games in the lowest part of the pay scale.
Speaker 1: That's a complete, one complete change from the pandemic. At
Speaker 1: During the pandemic, these low wage workers were barely keeping
Speaker 1: up with then very low inflation, so we even saw
Speaker 1: declines year over year and pay growth for the lowest
Speaker 1: end of the spectrum. These workers have become much more
Speaker 1: competitive post pandemic, as noted by the double digit wage game.
Speaker 1: So the wage structure has been turned around in the
Speaker 1: last three years, and the question is will that endure
Speaker 1: through the next three years. Now, before we let you go,
Speaker 1: we're hearing from a little birdie named Michael McKee that
Speaker 1: the Whisper number for tomorrow is currently two hundred and
Speaker 1: forty seven thousand. Do you think after two two undred
Speaker 1: forty seven million, to excuse me, being created, I'm curious
Speaker 1: from your perspective two hundred forty seven thousand, what you
Speaker 1: believe will be the number based on the anecdotal information
Speaker 1: that you're seeing come out. I think you're going to
Speaker 1: get a solid number, let's start there. I think you're
Speaker 1: going to get strong job growth based on the private
Speaker 1: sector payroll data that we're seeing an ADP. We're not
Speaker 1: predicting the BLS. We're just looking at the market as
Speaker 1: we see it. And if you compare that with other
Speaker 1: data like jobless claims, like job over thanks, you're still
Speaker 1: seeing a robust game. But I don't think you're going
Speaker 1: to get a half a million jobs. We should have
Speaker 1: me on every day, Neila Richardson, Thank you so much.
Speaker 1: I can't say enough, folks about the granularity of payroll
Speaker 1: analysis at Automatic Data Processing. Let's dive into this right now.
Speaker 1: Andrew Sheets is really quite good at this chief cross
Speaker 1: asset across asset strategists, I should say, at Morgan Stanley,
Speaker 1: Andrew coalescing the wonderful and fractious narratives plural at Morgan Stanley,
Speaker 1: what is your conviction right now? Well? Thanks, it's great
Speaker 1: to be here with you. So we still think that
Speaker 1: the US economy is going to slow as we go
Speaker 1: throughout this year, and I do think the market might
Speaker 1: be a little bit too fixated on this kind of
Speaker 1: will they won't they question of a recession when the
Speaker 1: dominant force we think is still going to be a
Speaker 1: slowing and economy, both in real and nominal terms. Now,
Speaker 1: the recent data that we had out of payrolls and
Speaker 1: retail sales was very strong. I think that definitely worked
Speaker 1: against that narrative. But we'll see what the data comes
Speaker 1: this month. We'll see how that data looks without those
Speaker 1: large seasonal revisions in the same way. And we still
Speaker 1: see a lot of leading indicators pointing to a slowdown.
Speaker 1: So we still think that we should be positioned for
Speaker 1: decelerating growth, weaker than expected earnings, and we still think
Speaker 1: that that will be the dominant narrative when investors reach
Speaker 1: the midpoint of the year. You'll underweight global equities Andrew,
Speaker 1: so let's start there. Is that spread evenly equally between
Speaker 1: regions or other regions that you favor over others. So
Speaker 1: I think the story in Asia is actually pretty notably
Speaker 1: different from the story we see elsewhere. So I think
Speaker 1: if you talk to investors and you ask them, why
Speaker 1: are you concerned about markets? The concern is decelerating growth,
Speaker 1: high inflation, hawkish monetary policy, high competing rates on cash,
Speaker 1: decelerating earnings, growth, expensive valuations. That's not the story in Asia.
Speaker 1: That's not the story with Asian equities. These are markets
Speaker 1: that are generally pretty reasonably valued versus history. Growth is
Speaker 1: going to be improving, Inflation is not high, the central
Speaker 1: banks in Asia are not hawkish, and cash as a
Speaker 1: competing asset is actually quite quite low and yield. So
Speaker 1: I think that this is a story where overall we
Speaker 1: still see a lot of signs that suggest that this
Speaker 1: is a time to hold less equities than normal, to
Speaker 1: be underweight equities. But within that, we're much more optimistic
Speaker 1: about stocks in Asia, and we think there's a legitimately
Speaker 1: different macro story there that could help support that. How
Speaker 1: can you justify andrew being underweight equities yet more positive,
Speaker 1: more constructive on credit. So I do think that this
Speaker 1: is an environment where I think it's a little bit
Speaker 1: better suited to credit. And you know, some of that
Speaker 1: is that I think in a decelerating growth environment that
Speaker 1: is still tough for earnings. You know, my colleague Mike
Speaker 1: Wilson and our equity strategy team, we are very worried
Speaker 1: about operating leverage, meaning that earnings really underperform what you
Speaker 1: see at a GDP. But that type of decline in earnings,
Speaker 1: we don't think really creates major credit problems, major refinancing
Speaker 1: problems for the bulk of the credit market. I also
Speaker 1: think that when we think about incentives as yields move higher,
Speaker 1: think about this from a corporate treasure perspective. All of
Speaker 1: a sudden, paying down your debt looks a lot more
Speaker 1: attractive than buying back your stock if the debt is
Speaker 1: yielding five and a half six percent, and so the
Speaker 1: idea that it higher yields we might get more credit
Speaker 1: friendly activity rather than shareholder friendly activity is another part
Speaker 1: of our thinking. Andrew to combine these ideas of both
Speaker 1: the international approach and picking different regions with and equities,
Speaker 1: and also your appreciation of credit and how it functions.
Speaker 1: How different is the picture for credit in different regions
Speaker 1: based on what Christina Kampmany was talking about, which is
Speaker 1: that there are different regions with different sensitivities to rising rates,
Speaker 1: potentially more given variable rate interests. So I do think
Speaker 1: that's a really great and important point, and I think
Speaker 1: i'll across a lot of these different credit markets you
Speaker 1: do see different outcomes. So a market like Europe is
Speaker 1: a market, especially European investment grade is a market we
Speaker 1: like a lot. You know, that's an investment grade market
Speaker 1: yields four and a half percent in euros. That's the
Speaker 1: same yield you've got back in two thousand and three
Speaker 1: or two thousand and four, and these companies have refinanced
Speaker 1: their debt to a pretty significant extent at some of
Speaker 1: the longest duration in that market that we've seen in
Speaker 1: its history. On the other hand, I think the leverage
Speaker 1: loan market, where you have more issuers, where those debt
Speaker 1: costs are resetting quickly. There you have the feed through
Speaker 1: of costs that are much more significant. And my colleagues
Speaker 1: are also pretty cautious on the commercial real estate side,
Speaker 1: you know, we still think that that is a market
Speaker 1: where you could really get hit from kind of both directions.
Speaker 1: That cap rates need to come up, as risk free
Speaker 1: rates have come up, but then also financing costs are
Speaker 1: up significantly, and so that's an area where we're more cautious.
Speaker 1: Where we're more cautious on the equity side, and I
Speaker 1: think that's still an area where we probably want to
Speaker 1: avoid relative to parts of the corporate credit market we
Speaker 1: like more. Andrew, just to take this an extra question,
Speaker 1: I'm quite interested by this thing that you have that
Speaker 1: ultimately the C suite will make decisions that benefit credit
Speaker 1: investors more than equity investors. Is this another way of
Speaker 1: saying I want to bet on fallen angels becoming rise
Speaker 1: and stars. Is that a story that you like within
Speaker 1: high yield credit, Well, I do think that this is
Speaker 1: an environment where I think the incentives to be more
Speaker 1: conservative and be more cautious would seem to be there.
Speaker 1: I think if you combine CEO surveys, which are pretty
Speaker 1: notable that much of the C suite seems relatively downbeat
Speaker 1: about growth, that's I've gotten a little bit better in
Speaker 1: the most recent month, but stillatively downbeat. And then just
Speaker 1: the math of where bond yields are relative to equity
Speaker 1: and dividend yields that I do think that this is
Speaker 1: an environment where we want to play for credit improvement
Speaker 1: more broadly, so in terms of the fallen angels specifically,
Speaker 1: I think that could be a little bit more complicated
Speaker 1: because I think there you are often dealing with companies
Speaker 1: with a little bit more cick locality, and there it
Speaker 1: might be harder to support that given our below consensus
Speaker 1: growth forecasts. But I think the idea, I do think
Speaker 1: it supports the idea of credit versus equities overall within
Speaker 1: a portfolio context. Andrew, thank you for that smart stuff.
Speaker 1: Andrew Shaits of Morgan Standing, Christian Maliglishman, Managing Director, Portfolio Strategy, Sex.
Speaker 1: We're not going to start sinking, Christian Dan Warri. Let's
Speaker 1: talk about how low that bar is for fifty from
Speaker 1: this federal Reserve. What would we need Friday morning, tomorrow
Speaker 1: and on CPID next week. Yeah, I mean, listen. I
Speaker 1: think it's all about the trend, and the FAT wants
Speaker 1: to see a down trend that's convincing. I think we
Speaker 1: had this blockbuster print last time, so it's going to
Speaker 1: be a down trend. How much I think consensus is
Speaker 1: looking for two hundred thousand or so. I think we're
Speaker 1: two hundred and fifty on payrolls, so we're a bit above.
Speaker 1: I think it's dead enough to push the FAT to fifty.
Speaker 1: I think you would need to put it in contact
Speaker 1: with the inflation data, with the average hourly earnings. We're
Speaker 1: actually expect the average hourly earnings to be a bit
Speaker 1: more moderate, in line with consensus. We're a bit above
Speaker 1: on the inflation side as well. But our economists actually
Speaker 1: kept the twenty five bibs and I think they feel
Speaker 1: like it's it's making sense for Powell to open the
Speaker 1: door to fifty. But to step up after you step down.
Speaker 1: I think that is still a significant step. So the
Speaker 1: question is really if there's you know, some type of
Speaker 1: blockbuster surprise to the upside, it can get them there.
Speaker 1: I think with the current data set, our economy is
Speaker 1: kept the twenty five. Christian's going to Tony and you
Speaker 1: did this at the Work Business School years ago. We're
Speaker 1: Jane attended. Christian. I'm going to look at your phrase
Speaker 1: macro momentum. I think this is incredibly important physics and
Speaker 1: the of the mass of the system, the velocity of
Speaker 1: the system, which leads to an immovable macro momentum. What
Speaker 1: is the macro momentum right now? Yeah, I mean like
Speaker 1: the challenge is exactly as you said. The momentum is
Speaker 1: actually really good. I mean you've had the pms and
Speaker 1: new orders over inventories, a lot of the leading components
Speaker 1: are confirming what markets have been pricing now for two
Speaker 1: months or so, which is that the global economy is
Speaker 1: kind of accelerating actually and the US is not decelerating
Speaker 1: as much as anticipated. So the momentum is positive and
Speaker 1: we've taken the credit for that already. That's the big
Speaker 1: problem you mentioned it The vixus kind of eighteen nineteen twenty.
Speaker 1: If you compare it to the move index, the type
Speaker 1: of rates vonds generating, it tells you, like the market
Speaker 1: already discounts that better growth, because otherwise equities would have suffered,
Speaker 1: just like last year from the rates volatility. So so
Speaker 1: my senses, growth momentum is very good. The challenge is
Speaker 1: that where we are on the cycle to your statement
Speaker 1: with regards the state variables, we are still late. We
Speaker 1: still have unemployment, very low, inflation very high, risk premia
Speaker 1: very low. That just creates a bit of a tension
Speaker 1: between momentum and where you are. I was looking at
Speaker 1: your allocation as you look at this mess that we
Speaker 1: all are looking at and trying to understand where we're going,
Speaker 1: and it says that your neutral equities and credit underweight bonds,
Speaker 1: overweight cash, and commodities underweight bonds. How counter consensus is that?
Speaker 1: And why? Yeah? I mean, listen, I think as you
Speaker 1: all like, our view has been that rates volatility over
Speaker 1: the course of the year is fading and all because
Speaker 1: you have peak inflation. Center banks are also to the
Speaker 1: end of their tightening cycles, and now we have this
Speaker 1: new burst of rates volatility because inflation is stickier, there's
Speaker 1: re acceleration risk, and we need to get through that
Speaker 1: in this process. We have to be clear, we're quite advanced.
Speaker 1: The market has repriced the peak grade for the FAT
Speaker 1: for the ECB and it looks much more symmetric. We've
Speaker 1: kept the underweight at this juncture. We've had the underweight
Speaker 1: for a few weeks now because we feel like it's
Speaker 1: a h for the portfolio in case there is really
Speaker 1: this type of blockbuster data that scares the market, And
Speaker 1: a lot of conversations we currently have with clients evolve
Speaker 1: around maybe monetary policy is not as effective anymore in
Speaker 1: tightening financial conditions and possibly getting demand under control. If
Speaker 1: that narrative gains traction, you could easily overshoot peak grades
Speaker 1: that are currently priced. And that means that, yeah, you
Speaker 1: want to probably have a bit of a short duration
Speaker 1: by and be careful to go back to bonds too quickly.
Speaker 1: But we have to be clear. The yields that we're
Speaker 1: starting to see in the front end, they look much
Speaker 1: more symmetric. How would I play offense in that world?
Speaker 1: What would I do with my portfolio to set up
Speaker 1: for that story? In terms of rates, in terms of equities. Yeah,
Speaker 1: in terms of equities, I think we need to go
Speaker 1: to the sources where there is the biggest growth momentum,
Speaker 1: of course, and I think we've been quite focused on Asia,
Speaker 1: both Asia X Japan, China, and also we like Japan,
Speaker 1: which is linked to growth in the region but always
Speaker 1: has a certain global growth linkage. It does have incremented
Speaker 1: catalysts via the BOJ policies. So we've been very focused
Speaker 1: on non US markets to kind of add cyclical risk tactically.
Speaker 1: There is a bit of a setback on some of
Speaker 1: those traits because you know, you have a bit of
Speaker 1: a kind of moderation of the narrative and obviously risk
Speaker 1: appetite that could actually create a good opportunity to revisit
Speaker 1: doors into that better no momentum at this juncture. Christine,
Speaker 1: thank you, really fascinating stuff. You said a lot there.
Speaker 1: Ten minutes. Christie mcclisman of Goldman Sacond on our radar
Speaker 1: now in the white marble of Capitol Hills, Henrietta Trey's
Speaker 1: managing director partner, I should say of economic research data
Speaker 1: partners always informative as well. I'm going to cut to
Speaker 1: the chase, Henrietta. The budget outlook At cbo IS nineteen
Speaker 1: xcel spreadsheet lines the interest payment is modeled out at
Speaker 1: six point eight percent of the budget, and it is
Speaker 1: jaw dropping their model of what we're going to pay
Speaker 1: in interest over the next ten years on a per
Speaker 1: year basis. I thought it was a cumulative summation and
Speaker 1: it's not. Ten years from now, we're gonna pay one
Speaker 1: point four trillion in interest. Is it out of control?
Speaker 1: I think everybody's going to make the case that it
Speaker 1: is out of control, but nobody's going to do anything
Speaker 1: to stop it. To put it in perspective, there's a
Speaker 1: thirty one point three eight one trillion dollars debt ceiling
Speaker 1: and we're talking about cutting three hundred billion dollars into
Speaker 1: the deficit. So it is definitely a humongous number. It
Speaker 1: will continue to rise, but there are no plans on
Speaker 1: the horizon to materially dentist. So get used to it.
Speaker 1: Many others say, calm down because the mathematics, the complex
Speaker 1: mathematics of this is wrapped around the gross rate of
Speaker 1: a nation versus the our start and the implied economics
Speaker 1: of the moment. Do we have the growthiness of America
Speaker 1: to get out five years, let alone ten years. I mean,
Speaker 1: I think you obviously have the growth right now. And
Speaker 1: another question is how does it compare to the other
Speaker 1: nations that are coming out of the COVID stale, that
Speaker 1: are in recession dealing with bigger inflation than we are.
Speaker 1: A big question about it in sort of the morality
Speaker 1: circles of economic policies. How much does it matter? And
Speaker 1: what are we looking like compared to our peers the
Speaker 1: rest of the globalized economy. So I think in general,
Speaker 1: the feeling is and the voters are telling you, we
Speaker 1: love to rail about the deficit when it's convenient, but
Speaker 1: we don't have any bandwidth or the backbone to actually
Speaker 1: do anything about it. So you'll see that play out
Speaker 1: in the Social Security or the Medicare debate. You'll see
Speaker 1: that play out with Republicans calling to extend the twenty
Speaker 1: seventeen tax cut, which alone was a five trillion dollar bill,
Speaker 1: one and a half trillion dollars of which was pure
Speaker 1: deficit increases. So nobody's really willing to do anything about it,
Speaker 1: but they love to jump on about it, which is
Speaker 1: a reason that maybe we're going to be talking more
Speaker 1: about TikTok than the debt sailing debate or coming into
Speaker 1: the election season just because it's easier for people to
Speaker 1: wrap their heads around I mean, is that basically how
Speaker 1: you can interpret some of the discussion and the unity
Speaker 1: that you see within parties otherwise is lacking. Absolutely, this
Speaker 1: is entirely about comparing and contrasting. And what's interesting about
Speaker 1: American politics right now is that almost everyone unanimously believes
Speaker 1: that China is a problem. So you'll see this president's
Speaker 1: budget come out later today with eight hundred and eighty
Speaker 1: five I think billion dollars just for defense. That's humongous
Speaker 1: for a Democrat or a Republican. And then on the
Speaker 1: other side, we have the issue of China. Obviously, of
Speaker 1: all these defense folks coming out saying we need more
Speaker 1: capabilities on the defense side, but we need to continue
Speaker 1: to bolster Ukraine because it's a proxy war for what
Speaker 1: China would do to Taiwan. So there's just this tremendous
Speaker 1: focus on China from every direction, whether it's IP defense spending,
Speaker 1: TikTok ai, it's across the board. I think the view
Speaker 1: the budget on the deficit conversation through the lens of China,
Speaker 1: and it helps everything makes sense. And given the needs
Speaker 1: or the asks with respect to spending, and given the
Speaker 1: reluctance on all sides really to raise taxes ahead of
Speaker 1: an election season, and it's always ahead of an electric season,
Speaker 1: what is the likelihood that we really have a problem
Speaker 1: here with respect to the debt ceiling debate. It's different
Speaker 1: that has a different character than the previous debt ceialing debates.
Speaker 1: I was just talking to a dear former colleague peak
Speaker 1: going about this. I love that everybody says this time
Speaker 1: is different. This time it's a calamity. This time it's
Speaker 1: a train wreck. The House is a disaster, exactly. None
Speaker 1: of that is different from how it was in twenty eleven,
Speaker 1: twenty thirteen, twenty sixteen. I mean, we have seen two
Speaker 1: consecutive Republican speakers heads role as a result of conflating
Speaker 1: the death ceiling with the government funding bill and relying
Speaker 1: on Democrats to provide the bulk of the votes. And
Speaker 1: that's precisely what's going to happen here this year as well.
Speaker 1: So I find a lot more consistencies than differences, and
Speaker 1: the dysfunction is a normal part of especially the House
Speaker 1: of Representatives. I'm gonna tries one of the best always
Speaker 1: great to get your thoughts, Hendrid to try cynicism is off.
Speaker 1: Let's be clear, though, and connect that Washington cynicism with
Speaker 1: how markets will at least take that point. The biggest
Speaker 1: risk is that people believe that it isn't different this time.
Speaker 1: The book is freezing order. Bill Browder, I can't say
Speaker 1: enough about it with the clarity of three, four and
Speaker 1: five years ago. Mister Browder joins us this morning from London. Bill,
Speaker 1: I can go eight ways here, particularly off of Angela
Speaker 1: Stents work on Putin, my book of the Year last year,
Speaker 1: but I can't. We've got a Battle of Stalingrad going
Speaker 1: on right now in Ukraine. The Russians had to stop
Speaker 1: the Nazis, and they did with a wall of bodies.
Speaker 1: Translate that analog that mister Putin knows over to what
Speaker 1: we're witnessing an eastern Ukraine this evening. But Putin basically
Speaker 1: doesn't care about the number of casualties. He has this
Speaker 1: huge military advantage that death of his soldiers doesn't even
Speaker 1: make him sleep worse at night. And so they're losing
Speaker 1: soldiers at a rate of five to one. Of the
Speaker 1: Ukrainians right now they're throwing convicts, conscripts, and anyone else
Speaker 1: who they've been able to corral into this meat grinder.
Speaker 1: They're throwing them into battle and they're being mowed down.
Speaker 1: These people don't oftentimes don't have even the proper armor,
Speaker 1: guns or whatever, and they're being shot down on a
Speaker 1: major basis. And the purpose of this is to try
Speaker 1: to just soften up the Ukrainian lines. And no matter
Speaker 1: how good the Ukrainians are at fighting back, if they
Speaker 1: if wave after wave of soldiers are being thrown into
Speaker 1: this meat grinder at the Ukrainians, it has a negative impact.
Speaker 1: And that is going on right now as we speak.
Speaker 1: And it's if you watch All Quiet on the Western Front,
Speaker 1: which is about World War One, this is the type
Speaker 1: of tactics that are going on right now as we
Speaker 1: speak in Europe today. And ask a contender, they're Bill Browder.
Speaker 1: When you were at Chicago, you and I were weaned
Speaker 1: on Thomas Shelling, the giant theorist on war and game theory.
Speaker 1: You've been courageous about saying, look, this is all about Putin.
Speaker 1: But what has changed in the last year when Bro
Speaker 1: talks about Putin? Now, what's new? Well, the main thing
Speaker 1: that's knew is that Putin is showing himself to be,
Speaker 1: you know, totally not credible in all of his chest
Speaker 1: thumping alpha male threats. He has a weak military. He
Speaker 1: didn't win in three days. He's running out of ammunition,
Speaker 1: his gas blackmail against Europe didn't work. They found alternatives.
Speaker 1: He thought that Europe wouldn't in America and the Allies
Speaker 1: wouldn't reacts harshly we have. He thought we wouldn't supply
Speaker 1: weapons we have, and so he's completely i would say,
Speaker 1: misjudged this war from start to finish, and as a result,
Speaker 1: Russia is not in a strong position. Russia is not
Speaker 1: going to win this war with the capacity and the
Speaker 1: capability as they have right now, particularly if the West
Speaker 1: continues to provide weapons, which we're doing, which raises a
Speaker 1: question can we expedite the end, especially if it's basically
Speaker 1: a meat grinder at the front lines, which is tragic
Speaker 1: to watch on all accounts. You used to be one
Speaker 1: of the largest foreign portfolio managers of Russian assets. I mean,
Speaker 1: how far we have come from that time financially? Have
Speaker 1: we done everything possible to perhaps expedite an end to
Speaker 1: this tragedy? Well, there's really two areas that we need
Speaker 1: to be continuing to help the Ukrainians on. The first,
Speaker 1: on the military side, is that they have asked for
Speaker 1: jets which we have not provided. They've asked for long
Speaker 1: range artillery which we have not provided, and they've asked
Speaker 1: for a certain number of tanks and we've only given
Speaker 1: them a fraction of what they've asked for. On the
Speaker 1: financial side, it's the one thing we can really do
Speaker 1: for them is to starve Putin of the financial resources
Speaker 1: to continue to fund this war. And we have done
Speaker 1: a lot on the financial side in terms of sanctions,
Speaker 1: but the one huge, huge loophole in this whole system,
Speaker 1: and that you could drive a truck through this loophole
Speaker 1: is the sale of oil and gas from Russia to
Speaker 1: the West and to the east. Putin receives between five
Speaker 1: hundred million and a billion dollars a day, even after
Speaker 1: all these sanctions, after all the disconnection of Russia from
Speaker 1: the Western system, and that money is enough money to
Speaker 1: continue to fight this war into perpetuity. And so we
Speaker 1: have to figure out a way to stop him from
Speaker 1: getting that money, because as long as he gets that money,
Speaker 1: there's no stopping this war from his perspective, it's deeply
Speaker 1: painful to read the articles, the very human articles about
Speaker 1: what's going on, the fighting, the victims of this fighting. Bill.
Speaker 1: I wonder how long it will take and whether this
Speaker 1: war can end with Vladimir Putin still the leader of Russia. Well,
Speaker 1: there's two ways that this war could end. We could
Speaker 1: give the Ukrainians enough military weaponry so that they finally
Speaker 1: overcome Russia, which I think they have the capacity to do.
Speaker 1: Or the other thing that could happen, And this scares
Speaker 1: me a lot is as the war drags on, and again,
Speaker 1: as I should point out that Putin doesn't care about casualties,
Speaker 1: and so he can throw more and more, manage the
Speaker 1: grinder more and more casualties, and as it grinds on,
Speaker 1: the West can lose interest. And you're starting to hear
Speaker 1: noises in Washington, particularly out of the sort of far
Speaker 1: right of the Republican Party, the Marjorie Taylor Green, Lauren Bobert,
Speaker 1: Tucker Carlson. Let's not finance Ukraine anymore, that's what they're saying.
Speaker 1: And if those fringe people start to become mainstream, America
Speaker 1: is the single most important backer of Ukraine right now,
Speaker 1: and if America were to step out. If there was
Speaker 1: a change in leadership in two years time, Putin could
Speaker 1: win the war that way instead of winning on the battlefield.
Speaker 1: And so that, in my mind is probably the scariest
Speaker 1: prospect that we're facing right now as far as Ukraine
Speaker 1: is concerned. Bill Broder can them the dramatic exercise work now.
Speaker 1: The Ukrainian shocked with damage to a key bridge to
Speaker 1: Crimea a number of weeks ago, so many in the
Speaker 1: West seemed to be looking for a dramatic moment to
Speaker 1: put mister Putin in his place. I'm guessing that's the
Speaker 1: thinking of children. Well, not necessarily. Remember, in the summer
Speaker 1: last year, completely unexpected for me and for anyone else
Speaker 1: who's been following this, the Ukrainians broke through the Russian
Speaker 1: lines and retook fifty four percent of the territory that
Speaker 1: Russia had previously taken. It was dramatic all the different
Speaker 1: places they pushed Russia back, and the Russians were running,
Speaker 1: you know, running back, retreating, and it's not entirely impossible.
Speaker 1: And interestingly, where I get this little inkling that there's
Speaker 1: some chance of that happening is from the Russians themselves.
Speaker 1: This guy. You have Getny Progosion, Putin's chef, the head
Speaker 1: of the Wagner group, this person group. Yeah, he's out
Speaker 1: there screaming, bloody murderer saying if I don't get enough
Speaker 1: weaponry from the Russian government, We're going to collapse, and
Speaker 1: then everything will collapse. He's the one saying it. No
Speaker 1: one else is saying it. He's the one saying it. Now.
Speaker 1: It may be for internal political reasons, but if I
Speaker 1: hear him saying that, it makes me feel like, you know,
Speaker 1: maybe there's a second chance for the Ukrainians to do
Speaker 1: the same thing that they did last summer. On the
Speaker 1: other hand, Booms has unlimited numbers of people who can
Speaker 1: throw at this and he doesn't care whether they die.
Speaker 1: Bill Browder, thank you so much for joining us with
Speaker 1: this update. With the Hermitage, Capital Management barely describes that
Speaker 1: the book is freezing order. I will not mince words.
Speaker 1: It is chilling, to say the least. Subscribe to the
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Speaker 1: for listening. I'm Tom Keane and this is plumber