1 00:00:00,840 --> 00:00:04,000 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:05,280 Speaker 1: my co host Matt Miller. 3 00:00:05,640 --> 00:00:09,600 Speaker 2: Every business day we bring you interviews from CEOs, market pros, 4 00:00:09,720 --> 00:00:13,680 Speaker 2: and Bloomberg experts, along with essential market moving news. 5 00:00:14,160 --> 00:00:17,279 Speaker 1: Find the Bloomberg Markets Podcast called Apple Podcasts or wherever 6 00:00:17,360 --> 00:00:20,480 Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. 7 00:00:21,000 --> 00:00:23,000 Speaker 1: All right, so let's up in private credit Randy Schumer 8 00:00:23,079 --> 00:00:26,200 Speaker 1: he joins his cohed of Senior Lending a Churchill Asset Management. Randy, 9 00:00:26,239 --> 00:00:27,639 Speaker 1: thanks so much for joining us again here in our 10 00:00:27,640 --> 00:00:30,480 Speaker 1: Bloomberg Interactive Broker studio. We appreciate you making the walkover 11 00:00:31,920 --> 00:00:35,760 Speaker 1: the banking turmoil or crisis. I don't know where you 12 00:00:35,800 --> 00:00:40,400 Speaker 1: come up on this. How's that impacted the private credit business? 13 00:00:40,760 --> 00:00:45,080 Speaker 3: Yeah, thanks for having me on again. I looked up 14 00:00:45,200 --> 00:00:48,040 Speaker 3: on the FBIIC website the number of bank failures that 15 00:00:48,080 --> 00:00:50,760 Speaker 3: we have had, and I'm surprised. We've had three this year, 16 00:00:50,880 --> 00:00:53,159 Speaker 3: and they've been large, no question about it. But there 17 00:00:53,159 --> 00:00:57,040 Speaker 3: were four in twenty twenty, there were another four in 18 00:00:57,240 --> 00:01:00,279 Speaker 3: twenty nineteen, and there were eight in twenty seventeen, and 19 00:01:00,320 --> 00:01:03,639 Speaker 3: you go back and there were more actually going back 20 00:01:03,680 --> 00:01:07,360 Speaker 3: and obviously the Great Session. So I think that because 21 00:01:07,600 --> 00:01:11,560 Speaker 3: Silicon Valley was large, and because it was part of 22 00:01:11,600 --> 00:01:16,560 Speaker 3: the technology ecosystem, I think investors looked at that and said, 23 00:01:16,600 --> 00:01:18,640 Speaker 3: I wonder if there's something else going on that we 24 00:01:18,720 --> 00:01:22,959 Speaker 3: don't know, And so for some reason they continue to 25 00:01:23,000 --> 00:01:25,440 Speaker 3: be worried about private credit, which actually has none of 26 00:01:25,480 --> 00:01:28,800 Speaker 3: the attributes that the banks have. We are match funded 27 00:01:29,280 --> 00:01:33,400 Speaker 3: long term capital, long term assets. We are floating, right 28 00:01:33,560 --> 00:01:35,840 Speaker 3: so when rates go up, so do our assets and 29 00:01:35,959 --> 00:01:38,880 Speaker 3: liability costs, so we're match funded from that perspective. We 30 00:01:38,959 --> 00:01:42,199 Speaker 3: have no customer deposits, so we don't have fast money. 31 00:01:42,319 --> 00:01:44,720 Speaker 3: And you know, we're serving the middle market, and the 32 00:01:44,720 --> 00:01:48,080 Speaker 3: middle market represents about seventy percent of the growth of 33 00:01:48,120 --> 00:01:52,920 Speaker 3: the entire economy, and these are millions of businesses out there, 34 00:01:53,200 --> 00:01:56,560 Speaker 3: small medium sized companies that are providing a lot of 35 00:01:56,560 --> 00:01:59,520 Speaker 3: the job support in the economy right now. So it's 36 00:01:59,520 --> 00:02:02,600 Speaker 3: really import important that people understand that. You know that 37 00:02:02,680 --> 00:02:05,560 Speaker 3: while the banking system is obviously critical, the businesses that 38 00:02:05,600 --> 00:02:09,120 Speaker 3: we're supporting is also critical, and the private debt arrangers 39 00:02:09,600 --> 00:02:13,200 Speaker 3: are for the most part, none of them are systemically important. 40 00:02:13,960 --> 00:02:16,639 Speaker 3: Because of the fact that again we don't have customer deposits, 41 00:02:16,760 --> 00:02:21,200 Speaker 3: so I think that understanding, you know, transparency is really important, Paul, 42 00:02:21,240 --> 00:02:24,280 Speaker 3: And the thing that I've focused on is telling the 43 00:02:24,320 --> 00:02:27,320 Speaker 3: story with you on Blueberg, and we really appreciate the opportunity. 44 00:02:27,760 --> 00:02:30,320 Speaker 3: And you know, Churchill is one of the leading providers 45 00:02:30,320 --> 00:02:33,560 Speaker 3: of private capital, is in a position where you know, 46 00:02:33,600 --> 00:02:36,239 Speaker 3: we're supported by a trillion dollar parent company in Uvene, 47 00:02:37,200 --> 00:02:40,440 Speaker 3: and that is one of the most stable triple A 48 00:02:40,520 --> 00:02:43,160 Speaker 3: companies around. So we kind of feel when you look 49 00:02:43,160 --> 00:02:45,320 Speaker 3: at the banking system, first of all, I think that 50 00:02:45,360 --> 00:02:47,919 Speaker 3: the crisis seems to have passed. It seems like the stocks, 51 00:02:47,919 --> 00:02:50,799 Speaker 3: and you've been reporting on this, regional stocks have done better. 52 00:02:51,760 --> 00:02:53,760 Speaker 3: So right now in private capital, I think there's a 53 00:02:53,800 --> 00:02:56,440 Speaker 3: stability there which is attracting even more attention than it 54 00:02:56,440 --> 00:02:57,480 Speaker 3: did before the crisis. 55 00:02:58,320 --> 00:02:59,200 Speaker 4: About a year. 56 00:02:59,040 --> 00:03:01,680 Speaker 5: Ago when we started seeing I mean it started we 57 00:03:01,680 --> 00:03:04,080 Speaker 5: were deep in at the carnage you saw in public markets. 58 00:03:04,080 --> 00:03:06,000 Speaker 5: It kind of felt like everyone who was in either 59 00:03:06,000 --> 00:03:08,560 Speaker 5: private equity or private credit was kind of standing on 60 00:03:08,600 --> 00:03:10,399 Speaker 5: a hill being like, we told you this is where 61 00:03:10,480 --> 00:03:11,040 Speaker 5: all the money was. 62 00:03:11,040 --> 00:03:11,600 Speaker 6: Supposed to go. 63 00:03:11,760 --> 00:03:13,480 Speaker 7: Yeah. A year on from that. 64 00:03:13,480 --> 00:03:15,239 Speaker 5: It kind of feels like when you talk to people 65 00:03:15,240 --> 00:03:18,000 Speaker 5: in the private markets, they're starting to be a little 66 00:03:18,000 --> 00:03:20,200 Speaker 5: bit of that worry that we saw in public markets 67 00:03:20,240 --> 00:03:22,320 Speaker 5: a year ago. Has that lag caught up. 68 00:03:22,240 --> 00:03:24,200 Speaker 3: To us when it comes to the private market, It hasn't, 69 00:03:24,280 --> 00:03:26,320 Speaker 3: and we haven't seen it in our business for sure. 70 00:03:26,520 --> 00:03:30,520 Speaker 3: None of the companies in our portfolio have seen any 71 00:03:30,639 --> 00:03:35,560 Speaker 3: real recession, you know indicators. In fact, if anything, the 72 00:03:35,600 --> 00:03:37,960 Speaker 3: growth both in revenues and cash flow have been double 73 00:03:38,040 --> 00:03:41,160 Speaker 3: digit over the last twelve months. But the thing, to 74 00:03:41,240 --> 00:03:44,480 Speaker 3: your point, Critty, that's significant is interest rates have not 75 00:03:44,560 --> 00:03:48,160 Speaker 3: really caught up yet, right, So the twelve percent all 76 00:03:48,240 --> 00:03:51,920 Speaker 3: in return that our investors are getting but borrowers are paying, 77 00:03:52,360 --> 00:03:54,920 Speaker 3: that has not been in the system for twelve months, right, 78 00:03:54,960 --> 00:03:58,280 Speaker 3: because the Fed just stopped raising rates. So over the 79 00:03:58,320 --> 00:04:00,640 Speaker 3: next several quarters, we're going to kind of see which 80 00:04:00,720 --> 00:04:04,280 Speaker 3: companies are over levered because those expenses are going to 81 00:04:04,320 --> 00:04:08,520 Speaker 3: be felt eventually in a full twelve month than four 82 00:04:08,600 --> 00:04:12,360 Speaker 3: quarter results. But I think for the businesses that are 83 00:04:12,680 --> 00:04:17,200 Speaker 3: more free cash flow oriented, more defensive sectors, really the folks, 84 00:04:17,720 --> 00:04:20,159 Speaker 3: most of the focus that we have, you're going to see, 85 00:04:20,160 --> 00:04:22,520 Speaker 3: I think continue support and one of the things that 86 00:04:22,560 --> 00:04:24,680 Speaker 3: Fed's battling against right now is the fact that the 87 00:04:24,680 --> 00:04:28,200 Speaker 3: economy still is pretty strong, Unemployment at a you know, 88 00:04:28,360 --> 00:04:31,960 Speaker 3: forty to fifty whatever is you'll low, and these businesses 89 00:04:31,960 --> 00:04:34,200 Speaker 3: are doing quite well. So I think in the right 90 00:04:34,320 --> 00:04:38,039 Speaker 3: sectors you're going to see much better support and growth 91 00:04:38,480 --> 00:04:40,760 Speaker 3: than in some of the areas that have nots that 92 00:04:40,800 --> 00:04:43,919 Speaker 3: to your point, have been affected, you know, more because 93 00:04:43,960 --> 00:04:46,000 Speaker 3: of the higher interest rates and higher leverage. 94 00:04:46,400 --> 00:04:49,240 Speaker 1: Randy's how would you characterize the deal flow that you're 95 00:04:49,240 --> 00:04:51,839 Speaker 1: seeing today? Because we've heard from the publicly traded big 96 00:04:51,880 --> 00:04:55,160 Speaker 1: investment banks, you know, lamenting the lack of flow and 97 00:04:55,240 --> 00:04:58,240 Speaker 1: advisory business. What are you seeing in your small to 98 00:04:58,240 --> 00:04:58,920 Speaker 1: mid sized market? 99 00:04:59,000 --> 00:05:01,600 Speaker 3: So when I was here last month, Paul, I think 100 00:05:01,640 --> 00:05:04,680 Speaker 3: what I said was there was a wait and see attitude. 101 00:05:05,240 --> 00:05:08,560 Speaker 3: I think I think the waiting is starting to be 102 00:05:08,640 --> 00:05:11,440 Speaker 3: over and I think the seeing is starting to take over. 103 00:05:11,920 --> 00:05:15,520 Speaker 3: So what's happening is the FED stopped raising rates, So 104 00:05:15,600 --> 00:05:18,960 Speaker 3: now there's a sense of the pause, meaning we think 105 00:05:19,000 --> 00:05:21,800 Speaker 3: we've topped out. We don't know when the next move 106 00:05:21,920 --> 00:05:25,920 Speaker 3: down will be. There's indications that I've seen from your 107 00:05:25,920 --> 00:05:29,360 Speaker 3: reports that some market observers are thinking there will be 108 00:05:29,400 --> 00:05:32,200 Speaker 3: a move down before the end, maybe even two before 109 00:05:32,200 --> 00:05:34,320 Speaker 3: the end of the year. So what I think investors 110 00:05:34,360 --> 00:05:36,000 Speaker 3: are looking at is they're saying, you know what, we're 111 00:05:36,040 --> 00:05:38,680 Speaker 3: at the top. The rest of the second half of 112 00:05:38,680 --> 00:05:41,560 Speaker 3: the year is going to be more constructive for credit 113 00:05:41,800 --> 00:05:44,440 Speaker 3: because we've seen the worst, so we can start to 114 00:05:44,520 --> 00:05:47,279 Speaker 3: lean in now. And so we've seen private equity literally 115 00:05:47,320 --> 00:05:49,440 Speaker 3: in the last week, it was almost like it was 116 00:05:50,000 --> 00:05:54,160 Speaker 3: timed for this meeting with you. For the last week. 117 00:05:54,240 --> 00:05:56,880 Speaker 3: We have seen the number of deals that we've gotten 118 00:05:56,920 --> 00:06:01,200 Speaker 3: in double over the last week. And I think it's 119 00:06:01,200 --> 00:06:04,640 Speaker 3: because a certain amount of confidence is returning to investors saying, 120 00:06:04,640 --> 00:06:06,320 Speaker 3: you know what, I think it's the worst is over. 121 00:06:06,839 --> 00:06:09,640 Speaker 3: And I think that while we may have a recession 122 00:06:09,680 --> 00:06:13,599 Speaker 3: because there is still sense that this critique cretic critic. 123 00:06:13,680 --> 00:06:16,159 Speaker 3: To your point, the higher rates could have an impact. 124 00:06:16,240 --> 00:06:17,880 Speaker 3: We may see a model session, but it's going to 125 00:06:17,880 --> 00:06:20,800 Speaker 3: be mild. So we're seeing some increased flow in our 126 00:06:20,800 --> 00:06:22,040 Speaker 3: in our business right now. 127 00:06:22,360 --> 00:06:24,840 Speaker 5: Really really really smart. So Randy, I only have thirty 128 00:06:24,839 --> 00:06:26,120 Speaker 5: seconds left with you, so I'm not going to ask 129 00:06:26,120 --> 00:06:27,800 Speaker 5: you about private credit. I'm going to ask you about 130 00:06:27,880 --> 00:06:30,120 Speaker 5: why you have a bachelor's and masters in English. Why 131 00:06:30,120 --> 00:06:30,880 Speaker 5: do you pick English? 132 00:06:31,320 --> 00:06:35,400 Speaker 3: Yeah, it's a long story for another session. But one 133 00:06:35,400 --> 00:06:38,320 Speaker 3: of the things, to Paul's point that I found as 134 00:06:38,360 --> 00:06:40,960 Speaker 3: an English major was it was way more exciting to 135 00:06:41,000 --> 00:06:44,279 Speaker 3: be interviewing for jobs at Golden Sacks Morgan's family and 136 00:06:44,320 --> 00:06:46,159 Speaker 3: as it turned out for me, JP Morgan where I 137 00:06:46,200 --> 00:06:49,720 Speaker 3: ended up than sitting in the library and so and 138 00:06:49,760 --> 00:06:53,280 Speaker 3: this was in the early eighties. And so I use 139 00:06:53,360 --> 00:06:57,440 Speaker 3: my English degree for our Lead Left, the Lead Left newsletter, 140 00:06:57,480 --> 00:07:01,479 Speaker 3: which you guys get every week, really spreading the word 141 00:07:01,560 --> 00:07:04,120 Speaker 3: the gospel about private credit to everybody every week. We 142 00:07:04,240 --> 00:07:08,240 Speaker 3: got fifty thousand readers thanks to you, and we have 143 00:07:08,400 --> 00:07:10,920 Speaker 3: a lot of attention now in the market. So really 144 00:07:10,920 --> 00:07:12,760 Speaker 3: telling a story is my big thing here. 145 00:07:12,960 --> 00:07:16,760 Speaker 5: You're not getting his favorite author today, next. 146 00:07:16,640 --> 00:07:18,520 Speaker 7: Time, Yeah, exactly. 147 00:07:18,600 --> 00:07:21,600 Speaker 1: Randy Schummer, co head of Senior Lending, Senior Managing Director, 148 00:07:21,720 --> 00:07:24,679 Speaker 1: Churchill Asset Management. We always appreciate getting some of Randy's 149 00:07:24,720 --> 00:07:27,080 Speaker 1: time talk about the private credit business. It's become an 150 00:07:27,080 --> 00:07:29,960 Speaker 1: increasingly big part of the capital market scene. We appreciate 151 00:07:30,000 --> 00:07:30,760 Speaker 1: getting a few minutes. 152 00:07:32,320 --> 00:07:35,760 Speaker 8: You're listening to the team Ken's Are Live program Bloomberg 153 00:07:35,800 --> 00:07:39,160 Speaker 8: Markets weekdays at ten am. Eastern on Bloomberg dot com, 154 00:07:39,240 --> 00:07:42,400 Speaker 8: the iHeartRadio app and the Bloomberg Business app, or listen 155 00:07:42,440 --> 00:07:44,600 Speaker 8: on demand wherever you get your podcasts. 156 00:07:46,880 --> 00:07:49,880 Speaker 7: I'm still going to our next guest. All in Boston, 157 00:07:49,960 --> 00:07:50,240 Speaker 7: all right? 158 00:07:50,280 --> 00:07:55,200 Speaker 1: He gets his undergrad at Boston University NBA Babson. Okay, 159 00:07:55,240 --> 00:07:59,920 Speaker 1: then he goes and works at Fidelity Wellington State Street, 160 00:08:00,480 --> 00:08:02,640 Speaker 1: and now he's at Essex. I mean, has a guy 161 00:08:02,800 --> 00:08:06,600 Speaker 1: ever left Boston ever? Bill Page, Senior portfolio manager, head 162 00:08:06,600 --> 00:08:12,000 Speaker 1: of a global environmental Opportunity strategy at Essex Investment Management. Bill, 163 00:08:12,040 --> 00:08:14,880 Speaker 1: thanks so much for joining us here. I mean, do 164 00:08:14,920 --> 00:08:16,200 Speaker 1: you vacation on the cape? 165 00:08:16,200 --> 00:08:16,880 Speaker 7: You have to. 166 00:08:18,400 --> 00:08:23,520 Speaker 4: Thanks for having me, Johnny Credi, I will say I 167 00:08:23,640 --> 00:08:25,960 Speaker 4: never did leave Boston, but New York's be my second home. 168 00:08:26,000 --> 00:08:28,600 Speaker 7: I'm down there a bunch, so exactly. Well, I consider it. 169 00:08:28,640 --> 00:08:30,520 Speaker 1: I considered Boston my second home when I was on 170 00:08:30,560 --> 00:08:32,200 Speaker 1: the cell side. You had to go up there once 171 00:08:32,200 --> 00:08:34,079 Speaker 1: a quarter and see all the good folks at Essex 172 00:08:34,120 --> 00:08:36,560 Speaker 1: and Fidelity and Putnam and all that kind of good stuff. 173 00:08:36,600 --> 00:08:38,280 Speaker 7: So I know Boston well. 174 00:08:38,559 --> 00:08:43,559 Speaker 1: So Bill, the global environmental Opportunity strategy, talk to what 175 00:08:43,679 --> 00:08:46,559 Speaker 1: is that strategy? How do you guys think about that 176 00:08:46,640 --> 00:08:48,040 Speaker 1: type of investing. 177 00:08:48,720 --> 00:08:52,280 Speaker 4: Sure, Paul, Yeah, so called GEOS for short. We have 178 00:08:52,320 --> 00:08:55,200 Speaker 4: a mutual fund also, we launched about five years ago, 179 00:08:55,920 --> 00:09:00,440 Speaker 4: and our focus is on investing in clean energy tech. 180 00:09:01,000 --> 00:09:03,080 Speaker 4: We've been at it for we get a lot of 181 00:09:03,200 --> 00:09:06,520 Speaker 4: scar tissue. We've been at it for almost almost fourteen 182 00:09:06,600 --> 00:09:10,040 Speaker 4: years next month. And we focus on what's known as 183 00:09:10,120 --> 00:09:14,840 Speaker 4: thematic investing, so we invest across nine themes. So things 184 00:09:14,920 --> 00:09:18,720 Speaker 4: like anything that enables resource efficiency are doing more with less. 185 00:09:19,400 --> 00:09:21,760 Speaker 4: That's how we define clean tech, so things like our 186 00:09:21,880 --> 00:09:26,360 Speaker 4: technology efficient transport, renewables, water, et cetera. 187 00:09:27,320 --> 00:09:29,560 Speaker 5: So it's got to be more complicated, I'm sure than 188 00:09:29,600 --> 00:09:32,360 Speaker 5: say you pick a Tesla for example, or even clean tech. 189 00:09:32,440 --> 00:09:35,400 Speaker 5: I have no at least for sometimes for ESG requirements, 190 00:09:35,559 --> 00:09:38,880 Speaker 5: which I know you don't don't necessarily focus on. Even 191 00:09:38,880 --> 00:09:41,480 Speaker 5: Apple falls under that category. Give us some names here, Bill, 192 00:09:41,559 --> 00:09:43,520 Speaker 5: what are what are you kind of? What names do 193 00:09:43,559 --> 00:09:43,960 Speaker 5: you look at? 194 00:09:44,000 --> 00:09:44,560 Speaker 9: For example? 195 00:09:45,440 --> 00:09:49,440 Speaker 4: Yeah, so we we're not invested in Tesla given our 196 00:09:49,480 --> 00:09:52,600 Speaker 4: concerns on corporate governance and valuation. It's you know, sort 197 00:09:52,640 --> 00:09:56,760 Speaker 4: of becoming more of a regular OEM car company. The 198 00:09:57,160 --> 00:09:58,800 Speaker 4: way we differentiate what we do with when you think 199 00:09:58,800 --> 00:10:01,400 Speaker 4: about Apples, So Apples do went a ton, along with 200 00:10:01,480 --> 00:10:05,079 Speaker 4: a lot of the other megacap tech on investing in 201 00:10:06,040 --> 00:10:11,480 Speaker 4: efficiencies that improve their margins. So think about Apple doing 202 00:10:11,520 --> 00:10:15,040 Speaker 4: a lot on power storage by renewables. So that's what 203 00:10:15,080 --> 00:10:20,160 Speaker 4: I call a sustainability investor. What we do is invest 204 00:10:20,240 --> 00:10:24,560 Speaker 4: in technologies that enable them to have that sustainability profile. 205 00:10:24,960 --> 00:10:27,960 Speaker 4: So with geos, we enable sustainability. So it's investing in 206 00:10:28,280 --> 00:10:32,920 Speaker 4: what I call output, So investing in technologies that enable 207 00:10:33,440 --> 00:10:37,560 Speaker 4: companies like Apple or Google to have good sustainability profiles. 208 00:10:37,960 --> 00:10:40,720 Speaker 4: So we invest in the technologies the companies that are 209 00:10:40,800 --> 00:10:44,280 Speaker 4: enabling this transition to the new energy economy. 210 00:10:44,720 --> 00:10:47,280 Speaker 1: Bill talk to us about an area that I'm really 211 00:10:47,320 --> 00:10:50,319 Speaker 1: interested in, which is, you know, automobile batteries. 212 00:10:50,400 --> 00:10:53,119 Speaker 7: As we migrate to an ev. 213 00:10:54,840 --> 00:10:57,880 Speaker 1: Fleet of automobiles around the world, how do you guys 214 00:10:57,960 --> 00:11:01,960 Speaker 1: think about the development of the whole battery situation infrastructure. 215 00:11:02,320 --> 00:11:03,000 Speaker 7: How do you play that? 216 00:11:04,160 --> 00:11:07,199 Speaker 4: Yeah, it's hard because there's not a lot of profitability 217 00:11:07,559 --> 00:11:11,400 Speaker 4: in the charging companies per se, companies like wall Box 218 00:11:11,440 --> 00:11:17,240 Speaker 4: for instance. But we are invested across the EV ecosystem, 219 00:11:17,600 --> 00:11:21,400 Speaker 4: the electric vehical ecosystem, so we're doing things like investing 220 00:11:21,520 --> 00:11:25,199 Speaker 4: with solar Edge, and these are technologies that help at 221 00:11:25,200 --> 00:11:28,080 Speaker 4: the at the edge of the network. So when you 222 00:11:28,120 --> 00:11:33,079 Speaker 4: think about bi directional vehicle charging or charging technology, you 223 00:11:33,240 --> 00:11:36,599 Speaker 4: need inverter technology and that's what solar edge offers. And 224 00:11:36,640 --> 00:11:39,839 Speaker 4: the other thing that electrification of the car. Where you 225 00:11:39,880 --> 00:11:42,080 Speaker 4: know this is you guys are well aware it's going 226 00:11:42,120 --> 00:11:45,079 Speaker 4: to be a lot of speed bumps on the road 227 00:11:45,160 --> 00:11:48,160 Speaker 4: to electrification of the car the next five or six years. 228 00:11:49,360 --> 00:11:51,840 Speaker 4: It's going to be ugly, but we believe it'll be 229 00:11:51,880 --> 00:11:55,439 Speaker 4: profitable for companies that are helping enable that. So Aptive 230 00:11:55,559 --> 00:12:01,760 Speaker 4: is a company that's helping aptvs, helping electrification, silicon anodes, 231 00:12:02,280 --> 00:12:07,240 Speaker 4: silicon carbide, so these are technologies that help improve the 232 00:12:07,280 --> 00:12:10,280 Speaker 4: performance of the battery. So companies like wolf Speed is 233 00:12:10,320 --> 00:12:14,640 Speaker 4: a company that put there also improving battery safety. So 234 00:12:14,840 --> 00:12:18,800 Speaker 4: thermal runaway is euphemism for battery fires. You saw the 235 00:12:18,840 --> 00:12:24,520 Speaker 4: bolt recall around that in Aspen Aerojails. Ticker ASPN is 236 00:12:24,559 --> 00:12:30,920 Speaker 4: helping provide safety protocols for battery technology. So we believe 237 00:12:31,600 --> 00:12:36,880 Speaker 4: when you think about batteries out five years, probably sixty 238 00:12:36,920 --> 00:12:39,760 Speaker 4: percent will be for electrification in the car. The other 239 00:12:39,880 --> 00:12:44,120 Speaker 4: forty percent are going to go towards battery storage in 240 00:12:44,160 --> 00:12:48,000 Speaker 4: that's an area that we have investments too. The key 241 00:12:48,080 --> 00:12:51,040 Speaker 4: here is that it's an entire broad ecosystem and it 242 00:12:51,120 --> 00:12:53,199 Speaker 4: also involves our electrical grid. 243 00:12:54,120 --> 00:12:54,800 Speaker 10: So we tech. 244 00:12:54,920 --> 00:12:58,439 Speaker 4: We have companies in the portfolio like Quanta, a ticker's 245 00:12:58,440 --> 00:13:03,440 Speaker 4: PWR and Hubble, so they're helping with grid to digitize 246 00:13:03,480 --> 00:13:06,160 Speaker 4: what's known as electrons, and what that means in middle 247 00:13:06,160 --> 00:13:11,480 Speaker 4: school science is utilities need to see the energy flow 248 00:13:11,880 --> 00:13:15,240 Speaker 4: better with these disruptive technologies. We now have electrons going 249 00:13:15,640 --> 00:13:18,680 Speaker 4: obviously to our houses, but now as we have and 250 00:13:18,720 --> 00:13:22,000 Speaker 4: this is more in the future charging capability, will be 251 00:13:22,040 --> 00:13:25,439 Speaker 4: able to move energy from the car back to the grid. 252 00:13:25,480 --> 00:13:28,920 Speaker 4: And so there's a massive need to improve our grid 253 00:13:28,920 --> 00:13:32,600 Speaker 4: infrastructure to make it more resilient for superstorms, but also 254 00:13:32,720 --> 00:13:35,640 Speaker 4: to make it smarter for these electrons that are now 255 00:13:35,679 --> 00:13:37,680 Speaker 4: going Two directions. 256 00:13:37,160 --> 00:13:41,319 Speaker 5: Bill, how much of the clean tech thesis is ultimately 257 00:13:41,360 --> 00:13:44,920 Speaker 5: based on the support from the Biden administration. What happens 258 00:13:44,960 --> 00:13:50,880 Speaker 5: if we get a different administration or Republican administration circa 259 00:13:51,000 --> 00:13:53,480 Speaker 5: twenty twenty four and onwards. Does that kind of throw 260 00:13:53,559 --> 00:13:54,720 Speaker 5: the bull case out the window? 261 00:13:55,760 --> 00:13:56,040 Speaker 10: Yeah? 262 00:13:56,080 --> 00:14:00,880 Speaker 4: So one of the misperceptions about clean tech is that 263 00:14:00,920 --> 00:14:04,480 Speaker 4: it's all dependent on incentive and so full stop we 264 00:14:04,559 --> 00:14:07,840 Speaker 4: invest in what's known as commercially viable technology. So these 265 00:14:07,840 --> 00:14:12,160 Speaker 4: are technologies that work. We don't do lab experiments, so 266 00:14:12,200 --> 00:14:15,720 Speaker 4: they're profitable today. That means it's free cash flow positive 267 00:14:16,280 --> 00:14:20,840 Speaker 4: EPITA margin positive. But also these technologies are commercially viable 268 00:14:20,840 --> 00:14:24,400 Speaker 4: and taking share, so we look at incentives as sort 269 00:14:24,400 --> 00:14:25,440 Speaker 4: of a second derivative. 270 00:14:26,560 --> 00:14:27,480 Speaker 10: All that being. 271 00:14:27,320 --> 00:14:31,160 Speaker 4: Said, the IRA, there's a massive clean tech arms race 272 00:14:31,280 --> 00:14:35,160 Speaker 4: that was created last August when Biden signed the IRA. 273 00:14:35,360 --> 00:14:39,680 Speaker 4: What's interesting about it is that it's a massive growth multiplier. 274 00:14:39,800 --> 00:14:45,080 Speaker 4: So you've got about four hundred billion dollars going in, 275 00:14:45,440 --> 00:14:48,480 Speaker 4: but it's also multiply and according to work out of Princeton, 276 00:14:48,600 --> 00:14:53,080 Speaker 4: five times in the economy now our sources, our work 277 00:14:53,320 --> 00:14:55,920 Speaker 4: is showing that there'll be no roll back in the 278 00:14:56,080 --> 00:15:00,280 Speaker 4: RA if we have new administration next year. Importantly, you're 279 00:15:00,320 --> 00:15:03,680 Speaker 4: seeing in the flyover Red States, that's where you've seen 280 00:15:03,680 --> 00:15:07,040 Speaker 4: the biggest growth YEP of renewables. Is your guys are 281 00:15:07,040 --> 00:15:11,280 Speaker 4: probably aware. The biggest wind power project is just announced 282 00:15:11,320 --> 00:15:15,440 Speaker 4: in New Mexico and Arizona. So we believe this stuff, right, Bob, We're. 283 00:15:15,280 --> 00:15:17,840 Speaker 1: Gonna have to just leave it there just because of 284 00:15:17,840 --> 00:15:19,840 Speaker 1: the time, but we appreciate getting your time. Bill Paige, 285 00:15:19,880 --> 00:15:23,480 Speaker 1: Senior PM and Head of Global Environmental Opportunities Strategy at 286 00:15:23,560 --> 00:15:25,200 Speaker 1: Essex Investment Manage. 287 00:15:25,240 --> 00:15:28,320 Speaker 8: You're listening to the tape Can's are live program Bloomberg 288 00:15:28,360 --> 00:15:31,960 Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the 289 00:15:32,040 --> 00:15:34,120 Speaker 8: tune in app, Bloomberg dot Com. 290 00:15:33,800 --> 00:15:35,240 Speaker 10: And the Bloomberg Business app. 291 00:15:35,280 --> 00:15:38,120 Speaker 8: You can also listen live on Amazon Alexa from our 292 00:15:38,120 --> 00:15:43,960 Speaker 8: flagship New York station, Just say Alexa play Bloomberg eleven thirty. 293 00:15:44,840 --> 00:15:48,480 Speaker 1: Talk about somebody darkening the door that I was not expecting. 294 00:15:48,760 --> 00:15:49,720 Speaker 7: Mike mcgloone. 295 00:15:49,720 --> 00:15:56,360 Speaker 1: Now, Mike mcgloone, reasonably competent analyst, reasonably good career on 296 00:15:56,440 --> 00:15:58,840 Speaker 1: Wall Street. He was one of the But his smartest 297 00:15:58,880 --> 00:16:01,440 Speaker 1: move I think ever was in beginning of this pandemic. 298 00:16:01,560 --> 00:16:04,080 Speaker 1: He said, I'm moving down to Miami Beach, Baby, I'm 299 00:16:04,080 --> 00:16:04,840 Speaker 1: following all the. 300 00:16:04,840 --> 00:16:06,440 Speaker 7: Other smart money down there. 301 00:16:06,520 --> 00:16:08,720 Speaker 1: So he said he's put the flag into ground for 302 00:16:08,720 --> 00:16:10,680 Speaker 1: Bloomberg Intelligence in South Florida. 303 00:16:11,120 --> 00:16:11,840 Speaker 7: We appreciate that. 304 00:16:11,880 --> 00:16:13,920 Speaker 1: Mike mcglohane here, he joins us in our Bloomberg. 305 00:16:13,560 --> 00:16:14,640 Speaker 7: Interactive Brokers studio. 306 00:16:14,680 --> 00:16:17,840 Speaker 1: He covers all the commodity stuff, big strategist guy, and 307 00:16:18,000 --> 00:16:18,920 Speaker 1: appreciate seeing him. 308 00:16:18,920 --> 00:16:21,120 Speaker 7: He's well tanned as you would expect. 309 00:16:21,880 --> 00:16:23,440 Speaker 1: But I'm going to talk to him in like mid 310 00:16:23,520 --> 00:16:26,440 Speaker 1: July and see how that South Florida things going for him. 311 00:16:26,440 --> 00:16:29,040 Speaker 1: Then he talks tough in January and February. We'll see 312 00:16:29,040 --> 00:16:31,920 Speaker 1: how it goes there. Mike, you know, I'm looking at 313 00:16:31,920 --> 00:16:35,840 Speaker 1: your recent note and we get some more inflation data 314 00:16:36,120 --> 00:16:36,840 Speaker 1: this week. 315 00:16:37,240 --> 00:16:38,920 Speaker 7: Talk to us about PPI. 316 00:16:40,080 --> 00:16:42,720 Speaker 1: What is PPI two, why is it important? And what's 317 00:16:42,720 --> 00:16:44,240 Speaker 1: happening with producer prices? 318 00:16:44,320 --> 00:16:46,280 Speaker 9: Well, first I have to get it over. Those introductions 319 00:16:46,320 --> 00:16:49,000 Speaker 9: called those are the best I kept about this, and 320 00:16:49,080 --> 00:16:50,920 Speaker 9: I have to met I've become a Florida assisting being 321 00:16:50,960 --> 00:16:52,880 Speaker 9: from Chicago in that cold weather. But the key thing 322 00:16:52,920 --> 00:16:57,200 Speaker 9: I like is a commodity guys. Facts in PPI. Producer 323 00:16:57,240 --> 00:17:00,320 Speaker 9: price IndX since nineteen forty eight has never dropped at 324 00:17:00,320 --> 00:17:03,200 Speaker 9: the velocity is falling now. The peak was eighteen, it's three. 325 00:17:03,280 --> 00:17:04,960 Speaker 9: Now it's probably going to deprint around two and it's 326 00:17:04,960 --> 00:17:07,080 Speaker 9: going negative. That's a year over year measure. 327 00:17:07,359 --> 00:17:07,600 Speaker 10: Wow. 328 00:17:08,160 --> 00:17:11,080 Speaker 9: And that's just following commodities. And the good news is 329 00:17:11,080 --> 00:17:15,040 Speaker 9: when crude oil was on their way up. I predicted 330 00:17:15,080 --> 00:17:16,400 Speaker 9: that only because that's what. 331 00:17:16,359 --> 00:17:19,240 Speaker 7: It always does. And the Keith fact is. 332 00:17:19,480 --> 00:17:22,679 Speaker 9: Last time we had a similar collapse, similar velocity collapse 333 00:17:22,680 --> 00:17:25,119 Speaker 9: in PPI, you have to go back to the actually 334 00:17:25,160 --> 00:17:28,119 Speaker 9: the fifties, but most recent was the Great Financial Crisis. 335 00:17:28,160 --> 00:17:31,280 Speaker 9: The lowest ever was July PPI from two thousand and nine. 336 00:17:31,280 --> 00:17:34,240 Speaker 9: Why because crude oil peaked in July two thousand and eight. 337 00:17:34,440 --> 00:17:37,800 Speaker 9: Guess when crudeil peaked June of last year one thirty 338 00:17:37,920 --> 00:17:41,120 Speaker 9: or so. So when we measure PPI for June, which 339 00:17:41,160 --> 00:17:43,520 Speaker 9: is going to come out July thirteenth, it's very likely 340 00:17:43,560 --> 00:17:46,119 Speaker 9: to be negative unless crude oil can go back up. 341 00:17:46,119 --> 00:17:48,840 Speaker 9: So there's your deflation. The key thing I find shocking 342 00:17:48,920 --> 00:17:51,480 Speaker 9: is a strategy who just loves to study financial history, 343 00:17:51,600 --> 00:17:54,200 Speaker 9: is the fact that the Fed Reserve is still tightening, 344 00:17:54,280 --> 00:17:58,120 Speaker 9: at least they said they stopped. That's severe deflation coming 345 00:17:58,119 --> 00:18:00,760 Speaker 9: from ppn I. And with this one thing about PPI, 346 00:18:01,040 --> 00:18:05,080 Speaker 9: if you take PPI and subtract Fed funds the highest 347 00:18:05,359 --> 00:18:08,080 Speaker 9: it's it's right now at minus one point four percent, 348 00:18:08,119 --> 00:18:10,920 Speaker 9: which means it's restrictive. That the interest rate is higher 349 00:18:11,240 --> 00:18:13,879 Speaker 9: than that year of a year measure of producer price index, 350 00:18:14,400 --> 00:18:16,560 Speaker 9: it's probably going to go to negative ten percent, just 351 00:18:16,600 --> 00:18:19,359 Speaker 9: on a normal trajectory, which is where it's going right now. 352 00:18:20,000 --> 00:18:21,400 Speaker 7: It's just I look at. 353 00:18:21,280 --> 00:18:25,040 Speaker 1: This, does CPI follow PPI? And if so, what's the lag? 354 00:18:25,200 --> 00:18:26,639 Speaker 1: Like when am I going to start paying less than 355 00:18:26,640 --> 00:18:27,280 Speaker 1: the supermarket? 356 00:18:27,359 --> 00:18:29,359 Speaker 9: So you will, But that's the key thing. The way 357 00:18:29,440 --> 00:18:32,840 Speaker 9: is PPI has basically a two beta to CPI. What 358 00:18:32,840 --> 00:18:35,760 Speaker 9: that means is CPI if PPI. If PPI is up 359 00:18:35,760 --> 00:18:38,920 Speaker 9: ten percent, PPI is usually twenty percent, and the same 360 00:18:38,960 --> 00:18:40,359 Speaker 9: on the way down. Now that's going back to the 361 00:18:40,440 --> 00:18:43,040 Speaker 9: last twenty years, and you can go back fifty years. 362 00:18:43,040 --> 00:18:45,680 Speaker 9: But it's basically a two BATA. It's the leading it's 363 00:18:45,720 --> 00:18:49,679 Speaker 9: basically high beta measure of inflation forward looking, and what 364 00:18:49,720 --> 00:18:52,439 Speaker 9: the Fed's focusing on is backward looking measures, which like 365 00:18:52,480 --> 00:18:55,520 Speaker 9: they have to like personal consumption expenditures, Employment costs Index, 366 00:18:55,840 --> 00:18:57,840 Speaker 9: and core CPI. And key thing I like to say 367 00:18:57,840 --> 00:19:01,240 Speaker 9: about core cpis a nextpon trator is main major component. 368 00:19:01,320 --> 00:19:04,679 Speaker 9: There is owner's equivalent rent. It's the highest ever eight percent. 369 00:19:04,720 --> 00:19:07,080 Speaker 9: It's never been higher, which means there's only one way 370 00:19:07,119 --> 00:19:09,119 Speaker 9: for it to go down and down hard. 371 00:19:09,880 --> 00:19:12,840 Speaker 11: I'm glad you brought up PPI because I feel like 372 00:19:12,880 --> 00:19:15,000 Speaker 11: producer prices a lot of times not as sexy of 373 00:19:15,040 --> 00:19:17,680 Speaker 11: an indicator when you think of CPI or obviously pc 374 00:19:17,880 --> 00:19:20,840 Speaker 11: defence preferred gauge. But your colleagues at Bloomberg Intelligence like 375 00:19:20,880 --> 00:19:23,919 Speaker 11: a Gillian Wolf, they focused a lot on the CPIPPI 376 00:19:24,040 --> 00:19:28,520 Speaker 11: spread and that the divergence there. It shifted dramatically in December, 377 00:19:28,560 --> 00:19:30,840 Speaker 11: and a lot of my sources, especially on the equity 378 00:19:30,880 --> 00:19:33,919 Speaker 11: side of things, they point to producer prices and the 379 00:19:34,000 --> 00:19:36,919 Speaker 11: improvement there as far as pointing to that as seeing 380 00:19:37,040 --> 00:19:40,360 Speaker 11: how that filters in faster before you'll see that into 381 00:19:40,640 --> 00:19:43,119 Speaker 11: when we're looking at CPI prices. So I was kind 382 00:19:43,160 --> 00:19:45,399 Speaker 11: of curious as far as when we're looking at that, 383 00:19:45,560 --> 00:19:48,200 Speaker 11: if this obviously could potentially bode well for the broader 384 00:19:48,200 --> 00:19:50,600 Speaker 11: equity market when you're seeing a vast improvement there on 385 00:19:50,640 --> 00:19:52,359 Speaker 11: the producer prices side. 386 00:19:52,280 --> 00:19:56,159 Speaker 9: It could. The problem is the number one factor in 387 00:19:56,240 --> 00:20:01,080 Speaker 9: equities is liquidity, and we're still in a significant liquidity dump. 388 00:20:01,560 --> 00:20:03,280 Speaker 9: I mean, you just look at bank credit, so you 389 00:20:03,320 --> 00:20:06,800 Speaker 9: look at money supply, and definitely what's the FED been 390 00:20:06,800 --> 00:20:09,320 Speaker 9: doing now they said they stopped tightening. But if the market, 391 00:20:09,320 --> 00:20:11,640 Speaker 9: stock market goes up, So that's the problem. The key 392 00:20:11,680 --> 00:20:15,199 Speaker 9: thing it's I'm looking at indications for commodities are they're showing, 393 00:20:15,760 --> 00:20:21,240 Speaker 9: counter to most consensus, significant global deflationary lack of economic demand, 394 00:20:21,240 --> 00:20:24,040 Speaker 9: poll trends. Natural gas US natural gas is the number 395 00:20:24,040 --> 00:20:27,000 Speaker 9: one benchmark for heat, electricity, and fertilizer in this country. 396 00:20:27,200 --> 00:20:29,040 Speaker 9: It got as high as ten last year, now it's two. 397 00:20:29,160 --> 00:20:31,840 Speaker 9: It's topped eighty percent. That's the same price as it 398 00:20:31,880 --> 00:20:34,520 Speaker 9: started trading in nineteen ninety. Why because in this country 399 00:20:34,560 --> 00:20:36,919 Speaker 9: we create more of it. We actually use morbid but 400 00:20:36,960 --> 00:20:39,560 Speaker 9: we have the technology to continue creating more. So that's 401 00:20:39,600 --> 00:20:42,800 Speaker 9: significant deflation. You look at price of copper, it's down 402 00:20:42,840 --> 00:20:45,520 Speaker 9: about ten ten percent on a twelve month basis. Now 403 00:20:45,520 --> 00:20:48,080 Speaker 9: it's up this year, but everything's up this year. The 404 00:20:48,160 --> 00:20:50,879 Speaker 9: key thing that's up that I find it's significant is 405 00:20:50,960 --> 00:20:53,399 Speaker 9: gold's up on a twelve month basis ten percent or so, 406 00:20:53,600 --> 00:20:56,360 Speaker 9: copper's down. That's a recessionary indication. Then I look over 407 00:20:56,400 --> 00:20:59,120 Speaker 9: what I've learned in life is what's the FED doing 408 00:20:59,160 --> 00:21:03,040 Speaker 9: to help provide They are still contracting that liquidy. So 409 00:21:03,040 --> 00:21:05,439 Speaker 9: what I'm afraid of that. We're heading towards a pretty 410 00:21:05,480 --> 00:21:10,520 Speaker 9: significant economic reset, and commodities are signaling that bond yields 411 00:21:10,520 --> 00:21:12,880 Speaker 9: too inverted curve. You just look at here's one little 412 00:21:12,920 --> 00:21:15,040 Speaker 9: thing ether with Fed funds. I always looked one year out, 413 00:21:15,080 --> 00:21:17,679 Speaker 9: the one year Fed funds on the terminal f F 414 00:21:17,760 --> 00:21:20,760 Speaker 9: one to three. It's price right now three sixty nine 415 00:21:21,440 --> 00:21:23,240 Speaker 9: yield a three six nights. So always look one forward. 416 00:21:23,280 --> 00:21:25,080 Speaker 9: So the market's expecting Fed funds to be a three 417 00:21:25,080 --> 00:21:26,720 Speaker 9: to sixty nine a year from now, and right now 418 00:21:26,800 --> 00:21:29,440 Speaker 9: the effective rates around five percent. There's only one key 419 00:21:29,440 --> 00:21:31,280 Speaker 9: way for that to happen. It's a stock market to 420 00:21:31,320 --> 00:21:34,000 Speaker 9: go down the way I see it, man. 421 00:21:33,760 --> 00:21:36,680 Speaker 11: I'm glad you brought it. Stuff going on here copper prices, 422 00:21:36,720 --> 00:21:39,399 Speaker 11: because that's such a big barometer to your point of 423 00:21:39,480 --> 00:21:42,720 Speaker 11: how the global economy is doing. Is there a particular 424 00:21:42,880 --> 00:21:45,320 Speaker 11: level when it comes to when you're watching copper which 425 00:21:45,320 --> 00:21:47,479 Speaker 11: would be more of a red flag to you? Like 426 00:21:47,520 --> 00:21:49,600 Speaker 11: you mentioned still up for the year. Was obviously on 427 00:21:49,600 --> 00:21:52,560 Speaker 11: a tear last year. But I guess what's that particular 428 00:21:52,720 --> 00:21:55,200 Speaker 11: threshold there to where it would potentially cause some concern 429 00:21:55,280 --> 00:21:55,840 Speaker 11: for investors. 430 00:21:55,960 --> 00:21:59,800 Speaker 9: It's it's the unique thing about copper. If the price 431 00:21:59,840 --> 00:22:01,960 Speaker 9: of copper right now is about four dollars upound, it's 432 00:22:01,960 --> 00:22:04,760 Speaker 9: actually a little bit less if you overlay that with 433 00:22:04,800 --> 00:22:07,439 Speaker 9: the S and P five hundred. Just take three zeros 434 00:22:07,440 --> 00:22:09,000 Speaker 9: off the S and P five hundred, it's the exact 435 00:22:09,000 --> 00:22:12,560 Speaker 9: same price for since twenty fifteen. Within ticks, it's almost 436 00:22:12,560 --> 00:22:15,600 Speaker 9: the same. It's something's happened. So copper is complete. Good 437 00:22:16,640 --> 00:22:20,119 Speaker 9: doctor copper, you know the American known hephd economics. Right 438 00:22:20,160 --> 00:22:22,399 Speaker 9: now it's tilting downward below four. So I look at 439 00:22:22,400 --> 00:22:24,439 Speaker 9: as an next trader, it's been holding a four bid 440 00:22:24,480 --> 00:22:26,800 Speaker 9: and it's think it's going four. Offer to me, that's 441 00:22:26,880 --> 00:22:28,840 Speaker 9: signaling for the S and P five hundred. But right 442 00:22:28,840 --> 00:22:31,359 Speaker 9: now for copper to go up, the stock market needs 443 00:22:31,359 --> 00:22:32,960 Speaker 9: to go up. Now we hear all the things that 444 00:22:33,040 --> 00:22:35,040 Speaker 9: are like, there's some issues with supply out of South 445 00:22:35,080 --> 00:22:38,000 Speaker 9: American people are hopeful for demand out of China. But 446 00:22:38,080 --> 00:22:42,480 Speaker 9: that has been the classic consensus. That's not proving true. 447 00:22:42,520 --> 00:22:44,280 Speaker 9: And I like to end with this. I like to 448 00:22:44,280 --> 00:22:46,800 Speaker 9: point out, with copper and all commonies, if the world's 449 00:22:46,880 --> 00:22:49,760 Speaker 9: largest economy is heading towards recession, which is virtually guarantee 450 00:22:49,800 --> 00:22:51,800 Speaker 9: at this point based on on a Wong and our 451 00:22:51,840 --> 00:22:57,040 Speaker 9: economics team starting in July. It's basically, I think illogical 452 00:22:57,160 --> 00:22:59,400 Speaker 9: to expect demand out of the rest of the world 453 00:22:59,440 --> 00:23:01,919 Speaker 9: for things like that upper and crude oil and natural 454 00:23:01,960 --> 00:23:03,040 Speaker 9: gas and corn. 455 00:23:03,720 --> 00:23:06,760 Speaker 1: All right, I'm a big fan of Yellowstone the TV show, 456 00:23:06,840 --> 00:23:08,520 Speaker 1: so I'm all in and cattle. I checked my cattle 457 00:23:08,600 --> 00:23:12,159 Speaker 1: quotes and lean and live cattle and feeder cattle and 458 00:23:12,160 --> 00:23:14,399 Speaker 1: all that kind of stuff. But I'm sure I'm probably 459 00:23:14,440 --> 00:23:18,480 Speaker 1: the only one there. What is the commodities call you 460 00:23:18,640 --> 00:23:22,040 Speaker 1: have that you've been making most actively this year or 461 00:23:22,240 --> 00:23:24,199 Speaker 1: you're finding a lot of residents with your clients. 462 00:23:24,320 --> 00:23:24,919 Speaker 10: Bear market. 463 00:23:25,560 --> 00:23:28,480 Speaker 9: The Bloomberg Commodity Index on a twelve month basis is 464 00:23:28,520 --> 00:23:31,280 Speaker 9: down about twenty percent in our data since nineteen sixty 465 00:23:31,280 --> 00:23:33,280 Speaker 9: the FED has never tightened in that environment, yet they 466 00:23:33,320 --> 00:23:35,320 Speaker 9: still are. It's been down about twenty percent from last 467 00:23:35,359 --> 00:23:37,080 Speaker 9: year's peak for a while, so it's a clear bear 468 00:23:37,160 --> 00:23:39,320 Speaker 9: market and it's got a lot of room. ID like 469 00:23:39,359 --> 00:23:42,320 Speaker 9: to say it's a bear market with fuel because it's 470 00:23:42,520 --> 00:23:44,800 Speaker 9: just getting started. And the key thing I'm looking at 471 00:23:44,840 --> 00:23:47,240 Speaker 9: I'm looking at is potentially at a cliff's edge and 472 00:23:47,280 --> 00:23:50,960 Speaker 9: deflation commodities are going down, yields are going down, and 473 00:23:51,000 --> 00:23:54,399 Speaker 9: that key final trigger is probably going to come. The 474 00:23:54,440 --> 00:23:56,639 Speaker 9: stock market needs to go up over hitting towards inflation. 475 00:23:56,760 --> 00:24:00,080 Speaker 9: One good primary early indicator for that is crypto's in 476 00:24:00,119 --> 00:24:02,800 Speaker 9: bitcoin because they're the fastest horse in the race massive 477 00:24:02,840 --> 00:24:05,520 Speaker 9: speculation last few years and that's still in the process 478 00:24:05,520 --> 00:24:08,479 Speaker 9: of the liquidity dump, and that's just trades twenty four 479 00:24:08,520 --> 00:24:10,640 Speaker 9: to seven, and bitcoin is one of the ones people 480 00:24:10,680 --> 00:24:12,399 Speaker 9: looking now. It's a good indicator. Matt Miller has been 481 00:24:12,400 --> 00:24:13,520 Speaker 9: over that in the Morning show. 482 00:24:13,920 --> 00:24:19,280 Speaker 1: So twenty seven five on bitcoin, we're going higher or 483 00:24:19,320 --> 00:24:19,879 Speaker 1: lover on this thing. 484 00:24:19,920 --> 00:24:20,840 Speaker 11: Were we going to see thirty? 485 00:24:21,440 --> 00:24:22,320 Speaker 7: No, that's a problem. 486 00:24:22,480 --> 00:24:25,719 Speaker 9: So we hit thirty during the big consensus conference in 487 00:24:25,800 --> 00:24:29,280 Speaker 9: Texas recently, and that's classic Foamo I think. I think 488 00:24:29,480 --> 00:24:32,720 Speaker 9: also Ethereum peaked around two thousand. That was my primary 489 00:24:32,720 --> 00:24:34,680 Speaker 9: resistance early in here I look at that as okay 490 00:24:34,720 --> 00:24:37,359 Speaker 9: in the market says no mosque, there's too much sellers 491 00:24:37,359 --> 00:24:39,760 Speaker 9: above there, and it's a good leading indicator. It could, 492 00:24:40,040 --> 00:24:42,200 Speaker 9: but right now it's tilting back downward. And I think 493 00:24:42,240 --> 00:24:45,560 Speaker 9: this is an indication that all risk as is going downward. 494 00:24:45,840 --> 00:24:48,639 Speaker 9: And that's why I'm still bullish gold and treasury bonds. 495 00:24:48,640 --> 00:24:50,520 Speaker 9: And the key thing is the FED still tight. And 496 00:24:50,560 --> 00:24:52,640 Speaker 9: here's one key question I can ask, what's the key 497 00:24:52,840 --> 00:24:55,800 Speaker 9: metric that can help make our government come to the 498 00:24:55,800 --> 00:24:58,359 Speaker 9: table with his budget impass? What happened two thousand and eleven 499 00:24:58,359 --> 00:25:00,679 Speaker 9: stock market went down and forced and say, okay, we 500 00:25:00,680 --> 00:25:01,320 Speaker 9: got to do something. 501 00:25:01,480 --> 00:25:04,080 Speaker 1: Yep, all right, We'll get to pork bellies and frozen 502 00:25:04,080 --> 00:25:08,440 Speaker 1: concentrated orange juice next time. Mike McLoone, senior macro strategists 503 00:25:08,600 --> 00:25:11,160 Speaker 1: for Bloomberg Intelligence, joining us live here in our Bloomberg 504 00:25:11,560 --> 00:25:14,119 Speaker 1: Interactive Broker Studio, which is always a treatment. 505 00:25:14,160 --> 00:25:14,960 Speaker 7: You appreciate that. 506 00:25:16,560 --> 00:25:17,760 Speaker 10: You're listening to the team. 507 00:25:18,080 --> 00:25:21,480 Speaker 8: Ken's our live program Bloomberg Markets weekdays at ten am 508 00:25:21,520 --> 00:25:24,919 Speaker 8: Eastern on Bloomberg dot Com, the iHeartRadio app, and the 509 00:25:24,960 --> 00:25:26,840 Speaker 8: Bloomberg Business App, or listen. 510 00:25:26,680 --> 00:25:28,800 Speaker 10: On demand wherever you get your podcasts. 511 00:25:31,000 --> 00:25:33,919 Speaker 1: Looking at the k R, which is spider S and 512 00:25:33,960 --> 00:25:38,080 Speaker 1: p Regional Banking ETF, it's off one point one percent today. 513 00:25:38,480 --> 00:25:42,080 Speaker 1: Year to date, it's off thirty six percent. You know, 514 00:25:42,119 --> 00:25:43,200 Speaker 1: I've been going back and forth. 515 00:25:43,280 --> 00:25:46,639 Speaker 7: Is this a crisis? Is just a turmoil? Is just 516 00:25:46,680 --> 00:25:47,400 Speaker 7: a stress? 517 00:25:47,760 --> 00:25:50,520 Speaker 1: I don't know, it goes different days, but it's certainly 518 00:25:50,560 --> 00:25:52,080 Speaker 1: have an impact on the market. We want to check 519 00:25:52,119 --> 00:25:53,600 Speaker 1: in with the professional and see how they're kind of 520 00:25:53,760 --> 00:25:58,120 Speaker 1: factoring that in. David Boson, cio of the Bonson Group, Hey, David, thanks. 521 00:25:57,920 --> 00:26:00,080 Speaker 7: So much for joining us here. I mean, it's not every. 522 00:26:00,119 --> 00:26:02,480 Speaker 1: Day we get a banking crisis here. If that's what 523 00:26:02,520 --> 00:26:05,359 Speaker 1: it is, how is kind of the you know, the 524 00:26:05,400 --> 00:26:08,280 Speaker 1: turmoil we've seen in the banking system. How's that impacted 525 00:26:08,280 --> 00:26:11,399 Speaker 1: your outlook at all, if at all in terms of 526 00:26:11,440 --> 00:26:12,120 Speaker 1: investing here. 527 00:26:13,760 --> 00:26:17,119 Speaker 12: Well, I think that as dividend growth investors, I don't 528 00:26:17,160 --> 00:26:22,359 Speaker 12: necessarily see a macro impact to the way that we're allocating. 529 00:26:22,480 --> 00:26:26,200 Speaker 12: We want companies that are still growing dividends, whether there's 530 00:26:26,240 --> 00:26:30,320 Speaker 12: a regional bank saga, or any other type of you know, 531 00:26:30,400 --> 00:26:33,199 Speaker 12: distressed event. I do think when you say it's not 532 00:26:33,280 --> 00:26:35,800 Speaker 12: every day we get a banking crisis, that we should 533 00:26:35,800 --> 00:26:38,960 Speaker 12: basically point out it's never happened that we get a 534 00:26:38,960 --> 00:26:43,240 Speaker 12: banking crisis when nobody is missing any payments. Ye, all 535 00:26:43,520 --> 00:26:48,920 Speaker 12: banking crisis, all financial panics always are credit impairment events, 536 00:26:49,240 --> 00:26:52,720 Speaker 12: and this isn't. And it's utterly fascinating that We've had 537 00:26:52,760 --> 00:26:56,840 Speaker 12: three banks go down with nobody missing any payments, no 538 00:26:57,040 --> 00:27:03,960 Speaker 12: loan deterioration or credit, purely interest rate driven phenomena of liquidity, 539 00:27:04,480 --> 00:27:07,400 Speaker 12: a really unprecedented moment for financial distress. 540 00:27:07,800 --> 00:27:10,600 Speaker 11: So, David, are you advising clients to buy the dip 541 00:27:10,880 --> 00:27:12,880 Speaker 11: on any of these bank shares right now? 542 00:27:14,000 --> 00:27:17,560 Speaker 12: Well, the one that we bought, and bought heavily is Truest, 543 00:27:17,760 --> 00:27:22,800 Speaker 12: the ticker KEFC, because we really don't think it belongs 544 00:27:23,000 --> 00:27:26,399 Speaker 12: in the list of regionals, and yet it is down 545 00:27:26,440 --> 00:27:28,560 Speaker 12: on the year. Now, I should be clear, it's down 546 00:27:29,040 --> 00:27:32,800 Speaker 12: thirty three percent and not you know, seventy eighty ninety 547 00:27:32,960 --> 00:27:35,480 Speaker 12: like some of the Pack West and these others that 548 00:27:35,520 --> 00:27:39,399 Speaker 12: have gotten really hammered. But Truest is really, in a 549 00:27:39,440 --> 00:27:42,040 Speaker 12: lot of ways more like a JP Morgan than it 550 00:27:42,119 --> 00:27:45,280 Speaker 12: is a pack West. I mean, nobody's JP Morgan in 551 00:27:45,320 --> 00:27:48,400 Speaker 12: terms of sheer size. But it was bb and T 552 00:27:48,800 --> 00:27:51,919 Speaker 12: and sun Trust that merged together. They're kind of a 553 00:27:52,000 --> 00:27:56,920 Speaker 12: super regional with ample liquidity, their deposit base is not eroded, 554 00:27:57,480 --> 00:27:59,680 Speaker 12: and yet they've gotten hit. So we want to look 555 00:27:59,720 --> 00:28:02,840 Speaker 12: to those opportunities were maybe someone threw a little baby 556 00:28:02,840 --> 00:28:06,280 Speaker 12: out with bathwater and created a value opportunity. 557 00:28:06,760 --> 00:28:08,640 Speaker 1: So I mean it kind of goes to the I'm 558 00:28:08,640 --> 00:28:09,960 Speaker 1: not sure how you feel about this, but a lot 559 00:28:09,960 --> 00:28:11,800 Speaker 1: of concern out there is maybe some of the stress 560 00:28:11,840 --> 00:28:15,360 Speaker 1: on our regional banks will just hasten tighter credit conditions 561 00:28:15,359 --> 00:28:18,880 Speaker 1: and then really accelerate or hasten the recession and maybe 562 00:28:18,920 --> 00:28:21,040 Speaker 1: the depths of the recession. Do you see that kind 563 00:28:21,080 --> 00:28:23,720 Speaker 1: of scenario playing out, Well, I. 564 00:28:23,640 --> 00:28:26,520 Speaker 12: Think it's entirely possible, but i'd look to one step 565 00:28:26,560 --> 00:28:29,920 Speaker 12: beyond that. It's also possible that that ends up being 566 00:28:29,960 --> 00:28:33,000 Speaker 12: the catalyst that forces the FED to throw in the 567 00:28:33,000 --> 00:28:35,880 Speaker 12: white flag, to wave the white flag. I think that 568 00:28:36,840 --> 00:28:38,920 Speaker 12: they've been acting for some time as if they were 569 00:28:38,920 --> 00:28:41,040 Speaker 12: going to keep going until they broke something, and this 570 00:28:41,120 --> 00:28:44,080 Speaker 12: may very well be the thing that they broke. Now 571 00:28:44,160 --> 00:28:46,240 Speaker 12: people who are looking at it saying there's going to 572 00:28:46,280 --> 00:28:49,720 Speaker 12: be less residential lending, I think they're missing what's really 573 00:28:49,720 --> 00:28:52,440 Speaker 12: going on there on the demand side and the affordability side. 574 00:28:52,520 --> 00:28:55,400 Speaker 12: Prices just simply had to come down there, and there's 575 00:28:55,440 --> 00:28:58,720 Speaker 12: ample equity in the homeowner's market. I don't think that's 576 00:28:58,760 --> 00:29:02,280 Speaker 12: a systemic event. We've been talking about commercial real estate forever, 577 00:29:02,640 --> 00:29:04,800 Speaker 12: and that's one of the great most bullish things you 578 00:29:04,800 --> 00:29:07,840 Speaker 12: could say is when everybody's talking about it, there's no 579 00:29:07,960 --> 00:29:12,160 Speaker 12: way it's a systemically bad event. It's never happened that 580 00:29:12,360 --> 00:29:15,480 Speaker 12: the number one story people talk about, usually in this case, 581 00:29:15,920 --> 00:29:19,440 Speaker 12: treating industrial and multifamily buildings as if there's the same 582 00:29:19,520 --> 00:29:23,080 Speaker 12: thing as an abandoned office building in Portland, Oregon. There's 583 00:29:23,160 --> 00:29:27,480 Speaker 12: just not a monolithic thing called commercial real estate. So 584 00:29:28,040 --> 00:29:30,680 Speaker 12: what would the systemic impact be? I think it's small business. 585 00:29:30,720 --> 00:29:33,120 Speaker 12: I think that if you really do see credit tighten 586 00:29:33,240 --> 00:29:36,320 Speaker 12: enough at a small business level, that could end uphitting 587 00:29:36,360 --> 00:29:40,360 Speaker 12: labor markets, wages, corporate profits, and that's usually what we 588 00:29:40,400 --> 00:29:41,280 Speaker 12: call a recession. 589 00:29:42,280 --> 00:29:45,080 Speaker 11: And beyond even just when we were talking about the 590 00:29:45,280 --> 00:29:47,680 Speaker 11: bank stocks, what are their corners of the market are 591 00:29:47,720 --> 00:29:49,920 Speaker 11: you snapping up right now? And which corners do you 592 00:29:49,960 --> 00:29:52,440 Speaker 11: think are still just more vulnerable at this point? 593 00:29:53,880 --> 00:29:56,920 Speaker 12: Yeah, I do think that we have been really good 594 00:29:56,920 --> 00:29:59,560 Speaker 12: in the way we picked up consumer staples. I wouldn't 595 00:29:59,560 --> 00:30:03,000 Speaker 12: say that it's streaming cheap now, but the thesis we 596 00:30:03,040 --> 00:30:05,800 Speaker 12: had a year ago that they were going to maintain 597 00:30:05,920 --> 00:30:09,520 Speaker 12: pricing power, and these were products people still had to buy, 598 00:30:09,600 --> 00:30:12,960 Speaker 12: and so even if volumes dipped, prices would stay the 599 00:30:13,000 --> 00:30:16,040 Speaker 12: same and they would ultimately end up with margin expansion. 600 00:30:16,960 --> 00:30:18,960 Speaker 12: So I think consumer staples has proven to be a 601 00:30:19,000 --> 00:30:22,719 Speaker 12: great story. Energy is our number one sector. Obviously, it 602 00:30:22,760 --> 00:30:25,840 Speaker 12: was up huge in twenty twenty one and twenty twenty two. 603 00:30:26,320 --> 00:30:28,400 Speaker 12: This year it has not done as well, and yet 604 00:30:28,440 --> 00:30:31,760 Speaker 12: midstream is hung in there just fine. Still up on 605 00:30:31,800 --> 00:30:34,680 Speaker 12: the year for the pipelines, and you're getting six seven 606 00:30:34,720 --> 00:30:38,400 Speaker 12: percent dividend yields. On financials, though, I want to point 607 00:30:38,440 --> 00:30:41,400 Speaker 12: out that everyone talks about financials like their banks, and 608 00:30:41,480 --> 00:30:45,040 Speaker 12: I think asset managers have something really interesting to offer here. 609 00:30:45,080 --> 00:30:45,880 Speaker 13: You look at. 610 00:30:45,920 --> 00:30:49,640 Speaker 12: Blackstone and Apollo. We don't own KKR. I know they 611 00:30:49,680 --> 00:30:54,000 Speaker 12: were leased yesterday, but some of these fee based asset 612 00:30:54,040 --> 00:30:57,040 Speaker 12: managers that are somewhat rate sensitive, a lot of that 613 00:30:57,120 --> 00:30:58,440 Speaker 12: was priced in last year. 614 00:30:58,760 --> 00:30:59,600 Speaker 13: I think they have a. 615 00:30:59,560 --> 00:31:03,200 Speaker 12: Ton of leverage and they're operating models to do really 616 00:31:03,240 --> 00:31:04,040 Speaker 12: good things from here. 617 00:31:04,760 --> 00:31:07,080 Speaker 1: Apollo is one of the names you just mentioned. What's 618 00:31:07,120 --> 00:31:08,800 Speaker 1: the play right there, because I think they're moving into 619 00:31:08,840 --> 00:31:12,959 Speaker 1: private wealth, which I know is a It's an attractive business, 620 00:31:13,000 --> 00:31:16,440 Speaker 1: but it's also very competitive business. 621 00:31:16,920 --> 00:31:18,960 Speaker 12: Well, the thing is very interesting, and this is sort 622 00:31:18,960 --> 00:31:21,160 Speaker 12: of like where I feel sometimes like we have inside 623 00:31:21,200 --> 00:31:24,000 Speaker 12: information because I run a nearly four and a half 624 00:31:24,040 --> 00:31:27,480 Speaker 12: billion dollar private wealth firm, and I've been with Blackstone 625 00:31:27,880 --> 00:31:31,640 Speaker 12: for twelve years and watch them enter private wealth from 626 00:31:31,640 --> 00:31:36,080 Speaker 12: the ground up and do it extremely well, very very profitably. 627 00:31:36,120 --> 00:31:38,959 Speaker 12: And Apollo is a little bit late, but they're really 628 00:31:39,000 --> 00:31:41,680 Speaker 12: good at what they do. And I think that we're 629 00:31:41,760 --> 00:31:45,360 Speaker 12: watching Apollo do all the right things for distribution, for 630 00:31:45,440 --> 00:31:49,560 Speaker 12: product development. It's a profitable space. There's a lot of 631 00:31:50,000 --> 00:31:52,960 Speaker 12: opportunity there. And if we're right on a macro level 632 00:31:53,000 --> 00:31:54,560 Speaker 12: that we're not going to be in a decade of 633 00:31:54,600 --> 00:31:58,240 Speaker 12: a screaming bowl market in stocks and bonds like the 634 00:31:58,280 --> 00:32:01,280 Speaker 12: post financial crisis decade, then I think you're going to 635 00:32:01,280 --> 00:32:04,600 Speaker 12: see more people go back to alternatives, more kind of 636 00:32:04,640 --> 00:32:08,720 Speaker 12: bespoke product, private credit, real estate, hedge funds, some of 637 00:32:08,720 --> 00:32:12,200 Speaker 12: the things that places like Apollo and Blackstone do really well. 638 00:32:12,240 --> 00:32:14,160 Speaker 12: And I think there are those two in particular in 639 00:32:14,200 --> 00:32:17,440 Speaker 12: a unique position to do well with private wealth. 640 00:32:18,520 --> 00:32:22,200 Speaker 11: You mentioned the pipeline stocks, and what's interesting when I 641 00:32:22,200 --> 00:32:24,680 Speaker 11: think about energy, people have brought up the concern about 642 00:32:24,680 --> 00:32:26,720 Speaker 11: whether value in that corner of the market can still 643 00:32:26,720 --> 00:32:29,120 Speaker 11: hold up as we see inflation begin to continue to fall. 644 00:32:29,160 --> 00:32:32,600 Speaker 11: But what is it specifically about pipelines that might diversify 645 00:32:32,600 --> 00:32:34,520 Speaker 11: a little bit more. And obviously you mentioned the dividend 646 00:32:34,560 --> 00:32:37,840 Speaker 11: growth there that other potential corners of energy might not 647 00:32:37,960 --> 00:32:39,200 Speaker 11: be able to deliver as much. 648 00:32:40,320 --> 00:32:42,840 Speaker 12: Well, it's fascinating to me that when we're dealing with 649 00:32:42,920 --> 00:32:45,600 Speaker 12: let's call it seventy to ninety dollars oil, and we 650 00:32:45,680 --> 00:32:48,920 Speaker 12: have that in a couple other points in the last decade, 651 00:32:49,200 --> 00:32:52,160 Speaker 12: and some of those pipeline companies were paying out over 652 00:32:52,240 --> 00:32:55,720 Speaker 12: one hundred percent of free cash flow and dividends. Right now, 653 00:32:55,800 --> 00:32:58,840 Speaker 12: the average in our portfolio, and as far as really 654 00:32:58,840 --> 00:33:02,400 Speaker 12: well run midstream type companies people could buy, has one 655 00:33:02,480 --> 00:33:06,880 Speaker 12: hundred and sixty percent coverage of their distribution. They're using 656 00:33:07,120 --> 00:33:10,880 Speaker 12: way less leverage, they don't have to sell equity to 657 00:33:10,960 --> 00:33:14,360 Speaker 12: fund capex, and frankly, they're not doing as much capex. 658 00:33:14,400 --> 00:33:18,960 Speaker 12: They're not overbuilding, over investing. There's a lot more capital discipline, 659 00:33:19,080 --> 00:33:23,160 Speaker 12: So you basically have better fundamentals with companies behaving better, 660 00:33:24,120 --> 00:33:27,640 Speaker 12: and you still have a really attractive yield spread. So 661 00:33:28,080 --> 00:33:32,840 Speaker 12: the pipelines to us have less commodity sensitivity than upscreen 662 00:33:32,920 --> 00:33:36,720 Speaker 12: producers and drillers, and yet even better fundamentals. 663 00:33:37,560 --> 00:33:41,280 Speaker 1: So just thirty seconds, David, what's the call that you're 664 00:33:41,320 --> 00:33:43,160 Speaker 1: making that no one else really gets. 665 00:33:43,160 --> 00:33:49,360 Speaker 12: Maybe, well, that's a permanent answer. Given in growth, I 666 00:33:49,360 --> 00:33:51,360 Speaker 12: think people continue to believe they can buy a whole 667 00:33:51,360 --> 00:33:54,880 Speaker 12: index or constantly by faying and technology and get a 668 00:33:54,920 --> 00:33:57,560 Speaker 12: market return, and they don't understand that they're buying at 669 00:33:57,720 --> 00:34:01,240 Speaker 12: very high multiples, praying for higher multiples, and then the 670 00:34:01,280 --> 00:34:03,240 Speaker 12: worst thing is and as you get them and you 671 00:34:03,280 --> 00:34:05,520 Speaker 12: think you know what you're doing, and the reality is 672 00:34:06,000 --> 00:34:09,160 Speaker 12: multiples revert to the mean. A dividend growth is about 673 00:34:09,160 --> 00:34:11,319 Speaker 12: pre cash flow generation and I just think it's an 674 00:34:11,440 --> 00:34:14,400 Speaker 12: entirely different way to think about investing. So that's what 675 00:34:14,440 --> 00:34:16,279 Speaker 12: we do all the time. And it is different. It 676 00:34:16,320 --> 00:34:18,279 Speaker 12: is contrarion. And you had a lot of people right 677 00:34:18,280 --> 00:34:22,720 Speaker 12: now like the idea more defensive investments, more stable business models. 678 00:34:23,080 --> 00:34:25,520 Speaker 12: So I can't say enough about the overall world of 679 00:34:25,560 --> 00:34:26,320 Speaker 12: dividend growth. 680 00:34:26,520 --> 00:34:28,040 Speaker 1: All right, David, thank you so much for joining us. 681 00:34:28,080 --> 00:34:30,760 Speaker 1: We really appreciate getting your perspective giving us some time. 682 00:34:30,960 --> 00:34:35,280 Speaker 1: David Boson, he's the CIO of the Bonson Group, talking stocks, 683 00:34:35,640 --> 00:34:38,960 Speaker 1: talking markets here again, he's had a lot of experience 684 00:34:39,000 --> 00:34:41,840 Speaker 1: at Ubs and Morgan Stanley, so we appreciate getting some 685 00:34:41,920 --> 00:34:42,439 Speaker 1: of his time. 686 00:34:42,800 --> 00:34:45,920 Speaker 8: You're listening to the tape. Ken's are live program Bloomberg 687 00:34:46,000 --> 00:34:49,560 Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the 688 00:34:49,640 --> 00:34:51,719 Speaker 8: tune in app, Bloomberg dot Com. 689 00:34:51,440 --> 00:34:52,879 Speaker 10: And the Bloomberg Business App. 690 00:34:52,920 --> 00:34:55,719 Speaker 8: You can also listen live on Amazon Alexa from our 691 00:34:55,760 --> 00:34:59,640 Speaker 8: flagship New York station just say Alexa playing Bloomberg eleven. 692 00:34:59,640 --> 00:35:03,880 Speaker 7: And Third, let's talk to geopolitics. 693 00:35:03,920 --> 00:35:05,920 Speaker 1: When we do that, we check in with Mick mulroy. 694 00:35:06,239 --> 00:35:08,560 Speaker 1: He's the co founder of the Lobo Institute and former 695 00:35:08,680 --> 00:35:11,680 Speaker 1: Deputy Assistant Secretary of Defense for the Middle East at 696 00:35:11,719 --> 00:35:16,080 Speaker 1: the US Department of Defense. He joins us from Doha, Kutter, 697 00:35:16,960 --> 00:35:19,600 Speaker 1: so he is at a security meeting there. We appreciate 698 00:35:19,640 --> 00:35:21,839 Speaker 1: getting a few minutes of his times. Mick, let's talk 699 00:35:21,880 --> 00:35:26,360 Speaker 1: about Ukraine. It's springtime and that's when the war tends 700 00:35:26,400 --> 00:35:29,480 Speaker 1: to kick up in terms of intensity. Give us your 701 00:35:29,600 --> 00:35:31,640 Speaker 1: view of kind of where we are in this conflict 702 00:35:31,680 --> 00:35:32,400 Speaker 1: in Ukraine. 703 00:35:34,600 --> 00:35:37,040 Speaker 13: So I think we're at a pivotal moment. We've had 704 00:35:37,640 --> 00:35:40,360 Speaker 13: around forty thousand troops get trained in the West to 705 00:35:40,480 --> 00:35:43,279 Speaker 13: use all the equipment we've been providing him over the 706 00:35:43,320 --> 00:35:46,680 Speaker 13: last several months, and now they're all getting back to 707 00:35:46,840 --> 00:35:50,880 Speaker 13: Ukraine and getting ready to launch, as you said, a 708 00:35:50,960 --> 00:35:53,640 Speaker 13: counter offensive. So there's a lot of pressure on him, 709 00:35:54,000 --> 00:35:57,920 Speaker 13: there's a lot of expectations, but I do think they're ready, 710 00:35:57,960 --> 00:36:00,279 Speaker 13: and I think the General Staff has been really good 711 00:36:00,360 --> 00:36:04,760 Speaker 13: at integrating these new weapon systems like the Bradley A Striker, 712 00:36:05,480 --> 00:36:09,960 Speaker 13: the Leopard tanks, all these really advanced weapon systems that 713 00:36:10,040 --> 00:36:12,440 Speaker 13: should be able to give them a power to punch 714 00:36:12,480 --> 00:36:14,800 Speaker 13: through the Russian lines and hopefully take back from Joying 715 00:36:15,280 --> 00:36:15,640 Speaker 13: and Mick. 716 00:36:15,800 --> 00:36:18,640 Speaker 11: Just last week we saw how Russia did have those 717 00:36:18,640 --> 00:36:22,520 Speaker 11: claims that Ukraine attempted to assassinate Vladimir Putin with this 718 00:36:22,640 --> 00:36:25,480 Speaker 11: drone attack. Can you discuss with us these allegations that 719 00:36:25,480 --> 00:36:27,520 Speaker 11: were made by the Kremlin and the response from the 720 00:36:27,640 --> 00:36:29,400 Speaker 11: US as well as Ukraine. 721 00:36:31,840 --> 00:36:36,000 Speaker 13: So I don't know who was behind it, but the idea, 722 00:36:37,000 --> 00:36:39,200 Speaker 13: of course the United States is behind it, I think 723 00:36:39,280 --> 00:36:44,200 Speaker 13: is just nonsensical. There's a lot of factors that I'm 724 00:36:44,239 --> 00:36:46,560 Speaker 13: sure the intelligence community is looking at. I do believe 725 00:36:46,560 --> 00:36:49,080 Speaker 13: they'll get to the bottom of it. But for example, 726 00:36:49,239 --> 00:36:53,760 Speaker 13: the type of drone could not fly from Ukraine, to Moscow. 727 00:36:53,920 --> 00:36:57,160 Speaker 13: That's around three hundred miles. Most of the Ukrainian drones only 728 00:36:57,400 --> 00:37:00,960 Speaker 13: go about one hundred and eighty piles. Very unlikely they 729 00:37:00,960 --> 00:37:03,520 Speaker 13: would have gone on three hundred miles without being shot 730 00:37:03,560 --> 00:37:07,640 Speaker 13: down by multiple eensectric layers of air defense. So it's 731 00:37:07,719 --> 00:37:09,439 Speaker 13: and then of course why with somebody at the two 732 00:37:09,440 --> 00:37:12,920 Speaker 13: thirty more wanting just filming this prema. So there's a 733 00:37:12,960 --> 00:37:15,280 Speaker 13: lot of questions. That's just what we know in the public, 734 00:37:15,520 --> 00:37:17,719 Speaker 13: But the intelligence community will be able to look back 735 00:37:17,880 --> 00:37:21,240 Speaker 13: with the signals intelligence look at imagery and likely determine 736 00:37:21,239 --> 00:37:24,320 Speaker 13: whether this would be staged what they call false flag 737 00:37:24,400 --> 00:37:27,360 Speaker 13: operations by the Russians or whether it's some kind of 738 00:37:27,360 --> 00:37:31,680 Speaker 13: internal opposition. Potentially they launched this. I don't know, but 739 00:37:31,760 --> 00:37:32,560 Speaker 13: I think we will be. 740 00:37:32,640 --> 00:37:36,360 Speaker 1: Able to nick when do we expect this counter offensive 741 00:37:36,360 --> 00:37:37,279 Speaker 1: by the Ukrainians? 742 00:37:37,360 --> 00:37:37,759 Speaker 7: Number one? 743 00:37:37,760 --> 00:37:40,719 Speaker 1: And number two, what's the feeling in your community, the 744 00:37:40,760 --> 00:37:43,680 Speaker 1: intelligence community here about the confidence you. 745 00:37:43,680 --> 00:37:45,760 Speaker 7: May have in them having some success. 746 00:37:48,040 --> 00:37:50,760 Speaker 13: So a lot of the troops that have been trained 747 00:37:50,840 --> 00:37:53,040 Speaker 13: are back. I think they're waiting for all the rest 748 00:37:53,040 --> 00:37:55,920 Speaker 13: to get back and to get into place. Most likely 749 00:37:56,200 --> 00:38:00,040 Speaker 13: for me looking at it pactically, is them to go 750 00:38:00,120 --> 00:38:03,040 Speaker 13: to the Zapparisia River I mean a region and goes 751 00:38:03,040 --> 00:38:05,359 Speaker 13: straight all the way to the ce of Azor. And 752 00:38:05,400 --> 00:38:07,920 Speaker 13: what that does is will cut Russia off from the 753 00:38:08,000 --> 00:38:12,080 Speaker 13: land bridge to Crimea and potentially being able to control 754 00:38:12,120 --> 00:38:15,040 Speaker 13: the water go into Crimea. That will give them probably 755 00:38:15,080 --> 00:38:18,480 Speaker 13: the most leverage, and it's also maximizing the new weapon 756 00:38:18,520 --> 00:38:21,080 Speaker 13: systems they have based on the terrain in the south, 757 00:38:21,120 --> 00:38:23,480 Speaker 13: and I think that is likely what they'll do. I 758 00:38:23,480 --> 00:38:26,840 Speaker 13: don't think we should expect large games. I think that's 759 00:38:26,880 --> 00:38:29,160 Speaker 13: too much to ask. The Russian's been digging in for 760 00:38:29,400 --> 00:38:32,360 Speaker 13: months and months. But I think as long as Ukraine 761 00:38:32,400 --> 00:38:36,440 Speaker 13: starts taking back to terrain and Russia obviously loses terrain, 762 00:38:36,560 --> 00:38:38,480 Speaker 13: we're headed in the right direction. I think that's the 763 00:38:38,480 --> 00:38:39,640 Speaker 13: standard we should be looking for. 764 00:38:40,040 --> 00:38:42,440 Speaker 11: Nick, what's the timeline on this as far as how 765 00:38:42,520 --> 00:38:44,239 Speaker 11: much longer this could continue? 766 00:38:46,400 --> 00:38:52,440 Speaker 13: Unfortunately, it could be years. I mean the Russians, you know, 767 00:38:52,440 --> 00:38:56,520 Speaker 13: they're talking about another nationwide call up. They have it's 768 00:38:56,560 --> 00:38:58,880 Speaker 13: three to four times besides Ukraine, so they have a 769 00:38:58,960 --> 00:39:02,440 Speaker 13: huge population. Ukrainians obviously are not going to give up 770 00:39:02,440 --> 00:39:04,719 Speaker 13: because if they give up, there no more Ukraine. So 771 00:39:04,840 --> 00:39:07,839 Speaker 13: there's a lot of reasons. Unfortunately, to see this's going 772 00:39:07,880 --> 00:39:10,160 Speaker 13: on for a long period of time. The biggest thing 773 00:39:10,200 --> 00:39:12,120 Speaker 13: for Ukraine is that the West stays with them. If 774 00:39:12,160 --> 00:39:16,000 Speaker 13: they stay as we stay as solid partners from Russia, 775 00:39:16,560 --> 00:39:19,000 Speaker 13: they're going to have to eventually show some gains or 776 00:39:19,000 --> 00:39:23,800 Speaker 13: even in their system. It'll start challenging Kutin's leadership of 777 00:39:23,920 --> 00:39:29,000 Speaker 13: the country because it is a growing dissatisfaction with this war, 778 00:39:29,320 --> 00:39:32,080 Speaker 13: which has crossed the lives of an around one hundred 779 00:39:32,160 --> 00:39:35,280 Speaker 13: thousand or more of Russians already. 780 00:39:36,120 --> 00:39:37,680 Speaker 1: Nick, what do you think the appetite is of the 781 00:39:37,680 --> 00:39:43,560 Speaker 1: West to take that next major step of support with airpower? 782 00:39:46,800 --> 00:39:49,600 Speaker 13: So I think that is probably a good question that 783 00:39:49,680 --> 00:39:52,000 Speaker 13: probably the next step would be do we give them 784 00:39:52,000 --> 00:39:55,880 Speaker 13: advanced fighter aircraft like the F sixteen. There are F 785 00:39:55,960 --> 00:39:58,960 Speaker 13: sixteens I think going there right now from other countries. 786 00:39:59,000 --> 00:40:02,000 Speaker 13: But when the US divides these really advanced weapon systems. 787 00:40:02,040 --> 00:40:05,120 Speaker 13: We do so trying to ensure that this doesn't escalate 788 00:40:05,200 --> 00:40:08,600 Speaker 13: into a war between the United States Russia, obviously, but 789 00:40:08,800 --> 00:40:12,200 Speaker 13: really the criticism of that, although I think it's I 790 00:40:12,200 --> 00:40:13,879 Speaker 13: think it's a fair thing to do. We don't want 791 00:40:13,920 --> 00:40:15,759 Speaker 13: this to be a war between the US and Russia. 792 00:40:15,960 --> 00:40:20,040 Speaker 13: But the criticism then we're just incrementally giving them eventually 793 00:40:20,040 --> 00:40:22,600 Speaker 13: what they needed to win in the first place. So 794 00:40:22,640 --> 00:40:24,680 Speaker 13: it almost, even though it's in our intent, it almost 795 00:40:24,680 --> 00:40:27,400 Speaker 13: looks like it's delaying the outcome of the war. But 796 00:40:27,480 --> 00:40:30,000 Speaker 13: I do think we will look at that and give 797 00:40:30,040 --> 00:40:33,319 Speaker 13: them what they need, which is combined arms maneuveral work 798 00:40:33,360 --> 00:40:35,920 Speaker 13: there which is air ground be done a lot of 799 00:40:35,960 --> 00:40:39,040 Speaker 13: the ground in long range fires. The long range fires 800 00:40:39,400 --> 00:40:42,280 Speaker 13: like the HIMAR system, and the attack on the system 801 00:40:42,640 --> 00:40:44,359 Speaker 13: is what they really need to be able to reach 802 00:40:44,480 --> 00:40:47,320 Speaker 13: into Crimea to really take out a lot of the logistics. 803 00:40:47,320 --> 00:40:49,959 Speaker 13: Before that, the Russians started using to keep their grip 804 00:40:50,040 --> 00:40:50,239 Speaker 13: on that. 805 00:40:50,640 --> 00:40:53,200 Speaker 11: Fans in the US did announce a one point two 806 00:40:53,280 --> 00:40:57,239 Speaker 11: billion dollar aid package to Ukraine with this counter offensive 807 00:40:57,360 --> 00:41:00,200 Speaker 11: that is beginning to loom here. I mean, is that an. 808 00:41:02,760 --> 00:41:05,719 Speaker 13: So it won't be enough. It is certainly a good thing. 809 00:41:05,840 --> 00:41:08,160 Speaker 13: It's a good thing to get this rolling, and I 810 00:41:08,200 --> 00:41:10,279 Speaker 13: am my understanding of the aid package is going to 811 00:41:10,320 --> 00:41:13,959 Speaker 13: come directly from the manufacturer, so it won't be pulled 812 00:41:13,960 --> 00:41:16,680 Speaker 13: out of our own stock. But I mean, we have 813 00:41:16,719 --> 00:41:19,600 Speaker 13: to understand that this is a war that's going to 814 00:41:19,880 --> 00:41:24,120 Speaker 13: be a war of attrition when it comes to munitions 815 00:41:24,280 --> 00:41:27,840 Speaker 13: and the ability to logistically keep supplying one side or 816 00:41:27,840 --> 00:41:29,960 Speaker 13: the other. The Russians are having a hard time with it. 817 00:41:30,320 --> 00:41:32,879 Speaker 13: We have to give the Ukrainians, which are vastly outnumbered, 818 00:41:33,040 --> 00:41:35,200 Speaker 13: at least the ability to keep up when it comes 819 00:41:35,200 --> 00:41:38,400 Speaker 13: to communition, and that's going to take a lot of money. 820 00:41:38,680 --> 00:41:40,560 Speaker 13: But I think we should look at it instead of 821 00:41:40,719 --> 00:41:44,360 Speaker 13: like charity. It's not charity. Russia is one of our 822 00:41:44,440 --> 00:41:47,279 Speaker 13: number one adversaries next to China. You have Russia. The 823 00:41:47,320 --> 00:41:49,520 Speaker 13: amount of money we're sending on this, it depleted the 824 00:41:49,600 --> 00:41:53,359 Speaker 13: Russian forces by fifty percent. So just from a US 825 00:41:53,440 --> 00:41:56,200 Speaker 13: point of view, a national security point of view, that 826 00:41:56,560 --> 00:42:01,920 Speaker 13: is money well spent. They have significantly depleted. Are one 827 00:42:01,960 --> 00:42:05,400 Speaker 13: of our most significant adversaries capacity a wage war in 828 00:42:05,480 --> 00:42:06,040 Speaker 13: the United States. 829 00:42:06,719 --> 00:42:09,800 Speaker 7: Mack thirty seconds. What's the status of the Russian Armed forces? 830 00:42:12,400 --> 00:42:15,359 Speaker 13: So it is, you know, I think one of the 831 00:42:15,360 --> 00:42:17,760 Speaker 13: things that we learned out of this is we vastly 832 00:42:17,920 --> 00:42:22,920 Speaker 13: overestimated the Russian Armed forces. They have a failure of 833 00:42:23,000 --> 00:42:25,880 Speaker 13: leadership from the top all the way to the bottom. 834 00:42:26,080 --> 00:42:30,280 Speaker 13: They've essentially conducted a campaign of war crimes that focused 835 00:42:30,320 --> 00:42:33,000 Speaker 13: almost primarily now when it comes to their air defense 836 00:42:33,080 --> 00:42:37,000 Speaker 13: or air strikes against civilian targets. And now the most 837 00:42:37,040 --> 00:42:41,560 Speaker 13: significant fighting force is actually a mercenary force, the Wadner Group, 838 00:42:41,640 --> 00:42:45,560 Speaker 13: which just showed you that the Russian military can't even 839 00:42:45,600 --> 00:42:47,960 Speaker 13: do that. They turned to a mercenary group that's now 840 00:42:48,000 --> 00:42:52,160 Speaker 13: composed primarily a convicts. It is far less of a 841 00:42:52,200 --> 00:42:54,640 Speaker 13: significant military force than we ever thought. 842 00:42:54,719 --> 00:42:56,799 Speaker 1: All right, and Nick, thanks so much for joining us. 843 00:42:56,800 --> 00:42:58,480 Speaker 1: We really appreciate you taking time out. We know you're 844 00:42:58,800 --> 00:43:01,400 Speaker 1: over in Doha at a conference. Mc moulory co founder 845 00:43:01,400 --> 00:43:05,000 Speaker 1: of the Lobo Institute and former Assistant Secretary of Defense 846 00:43:05,000 --> 00:43:07,040 Speaker 1: for the Middle East at the US Department of Defense. 847 00:43:07,560 --> 00:43:11,359 Speaker 1: And he was a US Marine Infantry officer for sixteen years, 848 00:43:11,400 --> 00:43:13,200 Speaker 1: so we thank him for his service. 849 00:43:13,600 --> 00:43:16,719 Speaker 8: You're listening to the tape. Catch our live program Bloomberg 850 00:43:16,760 --> 00:43:20,360 Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the 851 00:43:20,440 --> 00:43:22,399 Speaker 8: tune in app, Bloomberg dot Com, and. 852 00:43:22,360 --> 00:43:23,680 Speaker 10: The Bloomberg Business App. 853 00:43:23,680 --> 00:43:26,520 Speaker 8: You can also listen live on Amazon Alexa from our 854 00:43:26,520 --> 00:43:30,839 Speaker 8: flagship New York station. Just say Alexa, play Bloomberg eleven. 855 00:43:30,640 --> 00:43:34,160 Speaker 7: Thirty stat ceiling thing. 856 00:43:35,239 --> 00:43:36,719 Speaker 1: I think it's I don't know if it's become a 857 00:43:36,760 --> 00:43:39,320 Speaker 1: thing yet for this marketplace, but I think it will. 858 00:43:39,840 --> 00:43:40,880 Speaker 7: So such are when. 859 00:43:41,160 --> 00:43:43,320 Speaker 11: My sources feel like it's more of a bond story 860 00:43:43,360 --> 00:43:45,840 Speaker 11: at the moment rather than a stock story. But to 861 00:43:46,000 --> 00:43:48,600 Speaker 11: what point does it then become more of a broader 862 00:43:48,680 --> 00:43:49,920 Speaker 11: equity market story. 863 00:43:50,120 --> 00:43:51,799 Speaker 1: All I know is I feel like we need to 864 00:43:51,800 --> 00:43:53,480 Speaker 1: get a little bit smarter on this whole thing. So 865 00:43:53,520 --> 00:43:55,480 Speaker 1: we've got a great roundtable to help us do that. 866 00:43:55,560 --> 00:43:59,960 Speaker 1: I'm excited Doctor Lori Esposito Murray President for the commite. 867 00:44:00,000 --> 00:44:02,400 Speaker 1: We have Economic Development at the conference board. Now, folks, 868 00:44:02,560 --> 00:44:05,160 Speaker 1: she has a resume as long as my arm. 869 00:44:05,080 --> 00:44:05,960 Speaker 7: I can't go through it. 870 00:44:06,000 --> 00:44:08,880 Speaker 1: But let me just tell you she's been all over Washington, 871 00:44:08,960 --> 00:44:11,640 Speaker 1: d C. Both on the Democratic side and the Republican side, 872 00:44:12,560 --> 00:44:14,319 Speaker 1: and you can tell a lot of folks depend upon 873 00:44:14,360 --> 00:44:17,719 Speaker 1: her and her opinions and her analysis. So we're gonna 874 00:44:18,000 --> 00:44:22,040 Speaker 1: we're thrilled to have Lori Esposito Murray with us. Also, 875 00:44:22,200 --> 00:44:26,799 Speaker 1: Jack Fitzpatrick, our go to guy at Bloomberg down there 876 00:44:26,840 --> 00:44:29,319 Speaker 1: in Washington, DC. He knows how the capital works, he 877 00:44:29,360 --> 00:44:31,200 Speaker 1: knows how the sausage is made, so we have him 878 00:44:31,239 --> 00:44:34,439 Speaker 1: as well, and we appreciate getting his time. Doctor, let's 879 00:44:34,440 --> 00:44:37,759 Speaker 1: start with you here. Is this just how again, how 880 00:44:37,760 --> 00:44:41,120 Speaker 1: the sausage get gets made, how government works? Or should 881 00:44:41,160 --> 00:44:43,279 Speaker 1: we be concerned to citizens that it seems like we're 882 00:44:43,320 --> 00:44:45,120 Speaker 1: at this point every couple of years. 883 00:44:45,200 --> 00:44:49,279 Speaker 6: It seems like, well, we should definitely be concerned. But 884 00:44:49,360 --> 00:44:51,640 Speaker 6: there are two things to be concerned about here, which 885 00:44:51,680 --> 00:44:53,839 Speaker 6: is really important and really important in terms of this 886 00:44:54,040 --> 00:44:58,960 Speaker 6: round of death sealing debate crisis. One is the death 887 00:44:59,000 --> 00:45:03,040 Speaker 6: sealing itself. We're at thirty one trillion dollars. In twenty 888 00:45:03,040 --> 00:45:05,640 Speaker 6: eleven when we had this crisis, we were at sixteen 889 00:45:05,640 --> 00:45:08,960 Speaker 6: trillion dollars. It has doubled since that crisis, and that 890 00:45:09,120 --> 00:45:11,040 Speaker 6: is a real concern that should be a real concern 891 00:45:11,120 --> 00:45:14,360 Speaker 6: to Americans and policymakers. And then of course there's the 892 00:45:14,440 --> 00:45:17,160 Speaker 6: debt ceiling default itself, which at this time, in a 893 00:45:17,239 --> 00:45:19,960 Speaker 6: very fragile economy, can really up end the economy. 894 00:45:20,560 --> 00:45:22,799 Speaker 11: Jack, I want to bring you into this conversation. Can 895 00:45:22,840 --> 00:45:25,359 Speaker 11: you lead the groundwork for us as far as what's 896 00:45:25,400 --> 00:45:26,920 Speaker 11: the latest developments when it comes to. 897 00:45:26,880 --> 00:45:27,160 Speaker 10: All of this. 898 00:45:28,440 --> 00:45:30,239 Speaker 14: Well, there's supposed to be a key meeting at four 899 00:45:30,239 --> 00:45:33,440 Speaker 14: o'clock today. The President is supposed to meet with the 900 00:45:33,480 --> 00:45:37,120 Speaker 14: top four congressional leaders, the majority and minority leaders in 901 00:45:37,160 --> 00:45:39,920 Speaker 14: the House and Senate. Really, this is expected to be 902 00:45:40,600 --> 00:45:45,239 Speaker 14: the beginning of negotiations between the President and Speaker Kevin McCarthy, 903 00:45:45,680 --> 00:45:48,319 Speaker 14: Although some Democrats kind of hope that Mitch McConnell will 904 00:45:48,360 --> 00:45:51,520 Speaker 14: step in and he's got more of a history negotiating 905 00:45:51,560 --> 00:45:54,280 Speaker 14: with Biden. I think there's sort of almost a fantasy 906 00:45:54,320 --> 00:45:57,600 Speaker 14: that he'll come in and save the day. But after 907 00:45:57,680 --> 00:46:01,000 Speaker 14: they come out of that meeting, which has fair low expectations, 908 00:46:01,040 --> 00:46:02,600 Speaker 14: I don't think anybody thinks that they're going to come 909 00:46:02,640 --> 00:46:04,080 Speaker 14: out and say we have a deal to sort of 910 00:46:04,080 --> 00:46:07,440 Speaker 14: an opening discussion. After that, we may get a sense 911 00:46:07,480 --> 00:46:11,040 Speaker 14: of how close or far apart they are, and what 912 00:46:11,080 --> 00:46:12,840 Speaker 14: the mood is in the room, if there's going to 913 00:46:12,840 --> 00:46:16,160 Speaker 14: be a subsequent meeting, if there's a counteroffer coming from Democrats, 914 00:46:16,680 --> 00:46:20,000 Speaker 14: But really just starting the conversation which has been long 915 00:46:20,080 --> 00:46:23,279 Speaker 14: stalled at four o'clock today and that key meeting is 916 00:46:23,600 --> 00:46:24,640 Speaker 14: the big next step. 917 00:46:25,640 --> 00:46:30,200 Speaker 1: Laurie, this is a domestic issue primarily, but how does 918 00:46:30,239 --> 00:46:33,160 Speaker 1: this play on a global scale? There are allies and adversaries. 919 00:46:33,160 --> 00:46:35,400 Speaker 1: Did they look at this and say, boy, the Americans 920 00:46:35,480 --> 00:46:40,160 Speaker 1: can't even pay their bills on time. Here, How does again, 921 00:46:40,480 --> 00:46:42,560 Speaker 1: folks outside the US view this process if at. 922 00:46:42,520 --> 00:46:46,320 Speaker 6: All, Well, of course it's it's a global issue because 923 00:46:46,360 --> 00:46:49,600 Speaker 6: the US economy is so significant the global economy. But 924 00:46:49,640 --> 00:46:52,520 Speaker 6: you're absolutely right. I mean, this is larger than the 925 00:46:52,560 --> 00:46:56,680 Speaker 6: economic disruption that will occur. It is about US leadership. 926 00:46:57,040 --> 00:47:00,719 Speaker 6: It's about the strength of the dollar. It's about US 927 00:47:01,080 --> 00:47:05,160 Speaker 6: leadership with the dollar, how our allies are looking at 928 00:47:05,280 --> 00:47:07,480 Speaker 6: us in terms of how we can lead, how we 929 00:47:07,520 --> 00:47:09,680 Speaker 6: can govern, and what is going to be our role 930 00:47:09,840 --> 00:47:12,919 Speaker 6: going forward in terms of global leadership. And this does 931 00:47:12,960 --> 00:47:14,280 Speaker 6: not help, Laurie. 932 00:47:14,280 --> 00:47:16,439 Speaker 11: I'm curious as far as what are you hearing from 933 00:47:16,520 --> 00:47:19,400 Speaker 11: businesses and CEOs right now about their concerns around this. 934 00:47:20,760 --> 00:47:23,719 Speaker 6: Oh, there is really serious concern about this. And as 935 00:47:23,760 --> 00:47:26,120 Speaker 6: it says, it's taking place on two levels. It's taking 936 00:47:26,160 --> 00:47:29,840 Speaker 6: place both in terms of default itself, and there is 937 00:47:30,040 --> 00:47:34,640 Speaker 6: very strong sentiment that we cannot afford a default. We 938 00:47:34,680 --> 00:47:37,720 Speaker 6: can't even afford the threat of going to the cliff 939 00:47:37,840 --> 00:47:41,040 Speaker 6: or getting close to the cliff, which is what happened 940 00:47:41,520 --> 00:47:44,200 Speaker 6: just a couple of years ago when we were looking 941 00:47:44,280 --> 00:47:47,320 Speaker 6: at possibly going to default, and you saw the market's 942 00:47:47,400 --> 00:47:51,040 Speaker 6: up end just with that possibility, So we don't want 943 00:47:51,080 --> 00:47:53,520 Speaker 6: to go there. There's real concern about going there. There's 944 00:47:53,560 --> 00:47:56,720 Speaker 6: real concern about the necessity of coming to an agreement 945 00:47:56,760 --> 00:48:00,920 Speaker 6: on this and not defaulting. But there's also extreme concern 946 00:48:00,960 --> 00:48:04,280 Speaker 6: and this is why this cycle is very different. Extreme 947 00:48:04,320 --> 00:48:07,040 Speaker 6: concern about the thirty one trillion dollars in debt and 948 00:48:07,239 --> 00:48:09,879 Speaker 6: rising that we have and how do you get your 949 00:48:09,880 --> 00:48:14,120 Speaker 6: hands around that? And that's been really prompted by two things. 950 00:48:14,160 --> 00:48:18,200 Speaker 6: One is the extreme spending during the current crisis COVID 951 00:48:18,239 --> 00:48:20,759 Speaker 6: of course, with you know, the six trillion dollars in 952 00:48:20,800 --> 00:48:25,759 Speaker 6: bills plus that were passed by Congress to meet the crisis, 953 00:48:26,040 --> 00:48:30,000 Speaker 6: and now the disruption that's happening with Ukraine war. But 954 00:48:30,160 --> 00:48:34,080 Speaker 6: also what's really changing the dynamic here is inflation. Inflation 955 00:48:34,360 --> 00:48:37,439 Speaker 6: is causing the price to rise to service the debt 956 00:48:37,880 --> 00:48:41,360 Speaker 6: and threatens to really consume the federal budget so that 957 00:48:41,440 --> 00:48:43,000 Speaker 6: we can't meet international meets. 958 00:48:43,840 --> 00:48:48,560 Speaker 1: So Jack, given that backdrop, you know, how important is 959 00:48:48,560 --> 00:48:51,560 Speaker 1: it for President Biden to really win the day here? 960 00:48:51,600 --> 00:48:53,239 Speaker 1: I mean he was elected in large part on his 961 00:48:53,320 --> 00:48:55,440 Speaker 1: ability to a be an adult in the room, and 962 00:48:56,400 --> 00:48:58,440 Speaker 1: you know, based upon his forty years experience in the 963 00:48:58,480 --> 00:49:00,799 Speaker 1: Senate and maybe you know, in negotia shading and get 964 00:49:00,840 --> 00:49:03,680 Speaker 1: some legislation passed. How important is is it for present 965 00:49:03,680 --> 00:49:06,040 Speaker 1: Biden to kind of win the day here. 966 00:49:07,040 --> 00:49:09,680 Speaker 14: It's going to be very difficult for him to win 967 00:49:09,760 --> 00:49:12,439 Speaker 14: the day. His concern seems to be a bit more 968 00:49:12,440 --> 00:49:16,560 Speaker 14: about cutting his losses. For example, you know, the proposal 969 00:49:16,600 --> 00:49:19,160 Speaker 14: from House Republicans is to get a bunch of concessions, 970 00:49:19,200 --> 00:49:22,640 Speaker 14: a bunch of spending cuts and tougher work requirements for 971 00:49:22,800 --> 00:49:26,200 Speaker 14: social safety net stuff, and only kick this down about 972 00:49:26,239 --> 00:49:29,160 Speaker 14: a year. He probably does not want to have to 973 00:49:29,239 --> 00:49:31,319 Speaker 14: deal with this again in this term. If he can 974 00:49:31,320 --> 00:49:35,200 Speaker 14: strike a deal that extends this for long enough that 975 00:49:35,320 --> 00:49:38,000 Speaker 14: it's not a problem next year going into the election. 976 00:49:38,480 --> 00:49:40,959 Speaker 14: That that's not winning the day, but that would be 977 00:49:41,239 --> 00:49:44,200 Speaker 14: you know, cutting his losses. He also doesn't want to 978 00:49:44,320 --> 00:49:49,040 Speaker 14: reward Republicans for making demands on something so explosive as 979 00:49:49,080 --> 00:49:51,319 Speaker 14: the debt limit. You know, if you if you give 980 00:49:51,400 --> 00:49:53,880 Speaker 14: them a lot here and then you've got another deadline 981 00:49:53,880 --> 00:49:55,560 Speaker 14: that you set, whether it's a year or two down 982 00:49:55,600 --> 00:49:57,839 Speaker 14: the road, you know what they're gonna want coming back. 983 00:49:57,920 --> 00:50:00,880 Speaker 14: They're gonna they're gonna come back for more. It's very 984 00:50:00,920 --> 00:50:03,800 Speaker 14: difficult for the president to win things from this. The 985 00:50:03,920 --> 00:50:06,560 Speaker 14: leverage kind of belongs to the Republicans. But there's a 986 00:50:06,640 --> 00:50:10,319 Speaker 14: question of one, how little can he give and what 987 00:50:10,440 --> 00:50:14,560 Speaker 14: precedent does that set for future negotiations. And two, if 988 00:50:14,560 --> 00:50:17,319 Speaker 14: this is an unpopular bill, because it's going to lead 989 00:50:17,320 --> 00:50:20,920 Speaker 14: to spending cuts, the subsequent appropriations bills might not be 990 00:50:20,960 --> 00:50:25,040 Speaker 14: so popular. Democrats want Republicans to take the blame for that. 991 00:50:25,080 --> 00:50:27,560 Speaker 14: They want the Republicans to take the heat and establish 992 00:50:27,600 --> 00:50:30,800 Speaker 14: that this was their idea so they have something to 993 00:50:30,880 --> 00:50:32,640 Speaker 14: campaign on in twenty twenty. 994 00:50:32,520 --> 00:50:37,160 Speaker 11: Four, Laurie, what specific industries are more vulnerable to this 995 00:50:37,440 --> 00:50:39,840 Speaker 11: versus those that might be able to withstand it more so? 996 00:50:41,680 --> 00:50:44,640 Speaker 6: Oh, well, it's going to effect the entire economy. So 997 00:50:44,680 --> 00:50:49,480 Speaker 6: you're going to see the American public, the consumer really 998 00:50:49,560 --> 00:50:53,200 Speaker 6: hurt by this. You're going to see further inflation. You know, 999 00:50:53,239 --> 00:50:56,600 Speaker 6: in twenty eleven we saw mortgage crisises go up, you know, 1000 00:50:57,600 --> 00:51:01,640 Speaker 6: quite with a high increase. So you're going to it's 1001 00:51:01,719 --> 00:51:04,160 Speaker 6: really the consumer. It's the Americans who are going to 1002 00:51:04,160 --> 00:51:09,520 Speaker 6: be really hurt by default getting to the cliff. And 1003 00:51:09,560 --> 00:51:12,920 Speaker 6: they're also obviously as I'm making the point about the 1004 00:51:13,520 --> 00:51:16,759 Speaker 6: howth businesses are concerned about the debt. They're also going 1005 00:51:16,800 --> 00:51:19,880 Speaker 6: to be hurt by the fact if we don't deal 1006 00:51:20,000 --> 00:51:24,360 Speaker 6: with particularly the debt to GDP ratio, which is almost 1007 00:51:24,360 --> 00:51:26,400 Speaker 6: that it was just about it a hundred percent of 1008 00:51:27,120 --> 00:51:29,160 Speaker 6: economy right now. So I would say the consumer, the 1009 00:51:29,160 --> 00:51:32,200 Speaker 6: American public is going to be most hurt. All businesses 1010 00:51:32,239 --> 00:51:34,280 Speaker 6: are really going to feel the effect on this, as 1011 00:51:34,440 --> 00:51:35,440 Speaker 6: is the global economy. 1012 00:51:36,120 --> 00:51:39,680 Speaker 1: Laurie, Why doesn't there seem to be any you know, 1013 00:51:40,239 --> 00:51:43,959 Speaker 1: I guess bipartisan effort to kind of address the national debt, 1014 00:51:44,000 --> 00:51:47,439 Speaker 1: as you point out it as a big and growing problem. 1015 00:51:47,960 --> 00:51:51,000 Speaker 6: Yeah, it's It's interesting. It's not something that grabs a 1016 00:51:51,040 --> 00:51:53,680 Speaker 6: lot of attention. It's not something that either party has 1017 00:51:53,719 --> 00:51:56,520 Speaker 6: been interested in in a consistent way. It seems to 1018 00:51:56,560 --> 00:52:00,279 Speaker 6: be one of its most expedient for them to ain't 1019 00:52:00,280 --> 00:52:02,480 Speaker 6: about the debt. But I do think we're at a 1020 00:52:02,520 --> 00:52:06,160 Speaker 6: pivot point here where the debt has increased so large 1021 00:52:06,239 --> 00:52:10,040 Speaker 6: because of the really challenging crises we've been dealing with 1022 00:52:10,040 --> 00:52:12,760 Speaker 6: with COVID and now the disruption of the global economy 1023 00:52:12,840 --> 00:52:16,720 Speaker 6: with the war in Ukraine and food prices and energy prices, 1024 00:52:16,760 --> 00:52:21,680 Speaker 6: So there's actually a you know, a new focus on 1025 00:52:21,719 --> 00:52:25,720 Speaker 6: the implications, at least among policy makers, and I'm actually 1026 00:52:25,880 --> 00:52:32,520 Speaker 6: a little bit more encouraged that given those given these circumstances, 1027 00:52:32,840 --> 00:52:37,640 Speaker 6: there is room for a compromise because the actual impact 1028 00:52:37,680 --> 00:52:40,640 Speaker 6: is so high. But among the American public there hasn't 1029 00:52:40,680 --> 00:52:42,839 Speaker 6: been that much focus on this issue because it hasn't 1030 00:52:42,880 --> 00:52:46,760 Speaker 6: really been discussed in any real serious way in Washington. 1031 00:52:47,160 --> 00:52:52,080 Speaker 6: But that's also changing with inflation and with the disruption 1032 00:52:52,200 --> 00:52:57,480 Speaker 6: you might see as we approach the xtape for default. 1033 00:52:57,719 --> 00:53:00,719 Speaker 1: All right, Really appreciate getting the comments from both of you, 1034 00:53:00,800 --> 00:53:04,160 Speaker 1: doctor Lori Esposito Murray, president for the Committee of Economic 1035 00:53:04,200 --> 00:53:07,279 Speaker 1: Development at the Conference Board, and Jack Fitzpatrick, reporter for 1036 00:53:07,320 --> 00:53:10,640 Speaker 1: Bloomberg Industry Group down in Washington, DC covers all things 1037 00:53:11,120 --> 00:53:13,959 Speaker 1: coming out of DC, So love getting both perspectives there. 1038 00:53:14,440 --> 00:53:16,840 Speaker 1: The debt ceiling, it is an issue that must be addressed. 1039 00:53:16,840 --> 00:53:19,359 Speaker 1: And the X date that date it could be as 1040 00:53:19,400 --> 00:53:22,240 Speaker 1: early as you know, June first, or sometime into August 1041 00:53:22,239 --> 00:53:26,239 Speaker 1: sometime there. It seems like something has to get done again. 1042 00:53:26,280 --> 00:53:28,160 Speaker 1: A big meeting at the White House this afternoon at 1043 00:53:28,200 --> 00:53:29,239 Speaker 1: four pm Wall Street Time. 1044 00:53:32,480 --> 00:53:35,600 Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can 1045 00:53:35,640 --> 00:53:39,400 Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever 1046 00:53:39,480 --> 00:53:43,200 Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 1047 00:53:43,400 --> 00:53:45,319 Speaker 2: at Matt Miller nineteen seventy three. 1048 00:53:45,760 --> 00:53:48,160 Speaker 1: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney. 1049 00:53:48,280 --> 00:53:50,960 Speaker 1: Before the podcast, you can always catch us worldwide at 1050 00:53:50,960 --> 00:53:52,000 Speaker 1: Bloomberg Radio