WEBVTT - Bloomberg Surveillance: Global Debt with Malpass 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg's Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.799 Find Bloomberg Surveillance on Apple, podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:29.200 and of course, on the Bloomberg Terminal. Let's get a 0:00:29.240 --> 0:00:31.080 quick word from Margie Bitta and the City of potfolio 0:00:31.120 --> 0:00:33.640 manager at all Spring Global Investments. Margie, I want to 0:00:33.640 --> 0:00:35.920 start here with just the real yield turning positive. Briefly, 0:00:36.200 --> 0:00:37.879 how much of the game change to risk that when 0:00:37.920 --> 0:00:43.040 it comes to big investments in say big tech. Uh? Well, 0:00:43.080 --> 0:00:45.360 I think one thing is shows you is maybe the 0:00:45.400 --> 0:00:48.599 FED maybe nearing a pause as far as the aggressive 0:00:48.640 --> 0:00:51.320 rate increases people were looking for. And I think that's 0:00:51.320 --> 0:00:54.440 why the market rallied yesterday saying well the economy looks 0:00:54.480 --> 0:00:57.360 pretty good. But on the other hand, maybe the Fed 0:00:57.440 --> 0:00:59.600 isn't going to be as aggressive because the market, having 0:00:59.600 --> 0:01:02.920 moved up, has done a law of their work for them. 0:01:03.280 --> 0:01:05.720 I look, Margaine, where we are now, and we all 0:01:05.800 --> 0:01:11.480 have to readjust can you buy bills, notes and bonds now? 0:01:11.720 --> 0:01:15.120 As Bank of America suggests this morning, can you actually 0:01:15.120 --> 0:01:20.480 go in with confidence and acquire fixed income? Uh? Well, 0:01:20.520 --> 0:01:23.840 I think treasuries is more of a trading opportunity. But 0:01:23.880 --> 0:01:26.039 when you look at high yield, I think that actually 0:01:26.120 --> 0:01:30.240 looks pretty attractive for the income only oriented investor. The 0:01:30.319 --> 0:01:33.520 average yields are between five and a half and seven percent, 0:01:34.120 --> 0:01:37.480 and prices are now at a discount about on the dollar, 0:01:37.600 --> 0:01:40.480 so you have room for capital appreciation if yield spread 0:01:40.480 --> 0:01:43.720 as a narrowed And also, most importantly, defaults are only 0:01:43.840 --> 0:01:46.040 going to be under one percent this year and next 0:01:46.080 --> 0:01:48.520 year according to the rating agencies, so that means you'll 0:01:48.520 --> 0:01:50.440 get to keep all that extra yield. So that looks 0:01:50.480 --> 0:01:52.880 like a good risk reward bargain to me. Monkey, Based 0:01:52.920 --> 0:01:54.880 on what we've priced at the front end, do you 0:01:54.920 --> 0:01:59.800 sense things are fully priced? I think the longer part 0:01:59.840 --> 0:02:02.440 of the curve looks pretty appropriate. I think we can 0:02:02.480 --> 0:02:05.639 expect the FED to try to move up the short end. Again. 0:02:05.720 --> 0:02:07.800 I think they're going to be talking more aggressively than 0:02:07.840 --> 0:02:10.799 what they actually do. But I think the FED it 0:02:10.880 --> 0:02:13.040 isn't like the FED as a precision machine, and they 0:02:13.080 --> 0:02:15.600 know what's going to happen with each change of the dial. 0:02:15.600 --> 0:02:17.640 And change in rate. So I think they'll be cautious 0:02:17.919 --> 0:02:20.760 and we'll see a small increase and it won't have 0:02:20.800 --> 0:02:23.720 a much of a negative effect on the markets. Okay, 0:02:23.720 --> 0:02:27.000 thank you, that's always market there of old sprint Global Investments. 0:02:33.560 --> 0:02:36.040 Jump to Steven Roach with us now of Yale University 0:02:36.040 --> 0:02:39.000 and the Jackson Institute of Global Affairs, and of course 0:02:39.120 --> 0:02:43.720 Accidental Conflict is a new effort out by Dr Roach. 0:02:43.760 --> 0:02:46.960 Steve Roach, I want to celebrate right now. How you, 0:02:47.080 --> 0:02:50.280 more than anyone I know, was out front on a 0:02:50.400 --> 0:02:53.280 FED that looks at interest rates, a FED that looks 0:02:53.320 --> 0:02:56.120 at employment, and you said, this is a FED that 0:02:56.240 --> 0:02:59.200 has to look at the asset build up within the 0:02:59.240 --> 0:03:03.560 American economic experiment. I believe we're now where we're trying 0:03:03.560 --> 0:03:07.240 to shrink the asset build up. Do we have any history, 0:03:07.480 --> 0:03:11.720 model or theory that explains to us what quantitative tightening 0:03:12.000 --> 0:03:17.040 in whatever formula is, will be. Well, Tom, you know, 0:03:17.040 --> 0:03:21.400 the FED is clearly in uncharted territory both in terms 0:03:21.400 --> 0:03:26.680 of providing stimulus at the zero bound for an interminably 0:03:26.760 --> 0:03:29.880 long period of time, and it's you know, promised to 0:03:29.919 --> 0:03:32.040 get us away from that. But so far we've seen 0:03:33.240 --> 0:03:37.520 basis points of that promise. UH, and the tapering you 0:03:37.560 --> 0:03:42.600 allude to is coming off again UH an extraordinarily high level. 0:03:42.880 --> 0:03:45.360 And UH. You know, every time they've tried to do 0:03:45.400 --> 0:03:48.680 that in the past, the markets have had a tantrum 0:03:48.800 --> 0:03:53.320 or some other adverse reaction, and it sets the FED 0:03:53.440 --> 0:03:57.520 up for having a very difficult time UH in ween 0:03:57.880 --> 0:04:01.520 the U S economy and the financial off of frothy 0:04:01.560 --> 0:04:05.080 asset markets that they have created. And that's that's a 0:04:05.080 --> 0:04:08.280 big challenge. You're right. The world economic all lookout yesterday 0:04:08.360 --> 0:04:11.040 really points out the history here of taper tantrum and 0:04:11.080 --> 0:04:13.840 the testing of yield dynamics, and that I want to 0:04:13.880 --> 0:04:17.200 go Steve to what you weaned at Morgan Stanley, which is, 0:04:17.279 --> 0:04:20.240 let's not forget the back end of the GDP equation, 0:04:20.680 --> 0:04:24.400 which is trade growth. I m F says trade growth 0:04:24.520 --> 0:04:28.520 is slowing for any number of reasons, including tourism, but 0:04:28.640 --> 0:04:34.159 twenty one three it is diminishing. Are we anywhere near 0:04:34.200 --> 0:04:39.159 global recession? No, we're not there now. But you know 0:04:39.279 --> 0:04:43.919 the dynamic of a of a recession in the face 0:04:44.040 --> 0:04:51.479 of UH central bank normalization. UM, this inflation shock that 0:04:51.560 --> 0:04:56.039 everybody is convinced, I mean, Jonathan just uh decided some 0:04:57.360 --> 0:05:00.040 bank report that is absolutely convinced that inflation is and 0:05:00.240 --> 0:05:02.920 vanished into thin air. By the end of the year. 0:05:03.000 --> 0:05:06.160 Maybe it will, but the odds are probably won't. And 0:05:06.240 --> 0:05:10.040 then you add to that, you know the geo strategic 0:05:10.080 --> 0:05:13.680 shocks that are playing out on our screens real time. 0:05:14.080 --> 0:05:18.440 You know, the world economy is facing some real serious challenges, 0:05:18.640 --> 0:05:22.440 and you know it comes in with a strong post 0:05:22.960 --> 0:05:27.080 COVID rebound cushion. But you know, as we're seeing in China, 0:05:27.200 --> 0:05:30.800 that cushion can disappear very quickly. Stephen, have you've been 0:05:30.800 --> 0:05:35.200 surprised by this dollar strength? Yeah, putting it mildly. I mean, 0:05:35.279 --> 0:05:39.360 you know, this is one of those great great lessons. 0:05:39.480 --> 0:05:42.520 I should have gathered this when I first ventured the 0:05:42.560 --> 0:05:45.440 idea that the dollar would fall, that you should never 0:05:45.520 --> 0:05:49.120 make a currency forecast. Alan Greenspan advised me of that 0:05:49.880 --> 0:05:53.360 decades ago, and he was entirely right. So I'm prepared 0:05:53.400 --> 0:05:56.200 to as much crow as you guys want to feed me. Stephen. 0:05:56.480 --> 0:05:58.680 It wasn't the intent of the question. Really. The question 0:05:58.680 --> 0:06:00.400 that I'm having is how do you can come up 0:06:00.440 --> 0:06:02.680 with a forecast? How does the FED even operate in 0:06:02.720 --> 0:06:06.279 an environment set by not only really unique circumstances on 0:06:06.279 --> 0:06:09.000 the fiscal side, but also these conflicts that you're writing 0:06:09.000 --> 0:06:11.080 about with this book that's coming up, this idea of 0:06:11.120 --> 0:06:14.000 how does a FED sort of arrange itself and its 0:06:14.040 --> 0:06:20.039 forecasts around conflicts that have unexpected impacts on inflation? Well, 0:06:20.080 --> 0:06:25.960 which it's a it's a classic risk management exercise for forecasters, 0:06:26.040 --> 0:06:29.680 you know, way the balance or risks UH, and UH, 0:06:30.120 --> 0:06:34.040 assign some probabilities to it and then try to be objective. UH. 0:06:34.040 --> 0:06:37.159 And we reading through that, and remember what your mandate is. 0:06:37.160 --> 0:06:41.479 Your mandate is UH, you know, price stability and full employment. 0:06:41.520 --> 0:06:45.839 The FED does not have to worry about the labor 0:06:45.880 --> 0:06:47.839 market at this point in May at some point in 0:06:47.880 --> 0:06:51.680 the future. But it's behind the curve on inflation in 0:06:51.680 --> 0:06:54.440 a way that it's never been before. And I've looked 0:06:54.440 --> 0:06:56.760 at the you know, the real Federal funds rate, which 0:06:56.760 --> 0:07:01.320 are just the benchmark policy rate for inflation or deeper 0:07:01.320 --> 0:07:05.080 in negative territory right now by conventional measures than ever 0:07:05.160 --> 0:07:08.800 at any point in history, including the early seventies, UH 0:07:08.920 --> 0:07:12.080 and the the early eighties, which of course bookend the 0:07:12.120 --> 0:07:16.160 Great Inflation. So you know, the FED has miles to 0:07:16.240 --> 0:07:22.520 go on. UH. Normalization let alone putting some restraint into 0:07:22.560 --> 0:07:25.320 its policy if it needs to do that to to 0:07:25.400 --> 0:07:28.080 cool off inflation even more. Well, but seven, a lot 0:07:28.080 --> 0:07:30.800 of people are saying Bank of America included that if 0:07:30.840 --> 0:07:33.720 the FED is aggressive and they're getting more aggressive, that 0:07:33.760 --> 0:07:36.239 will end up in the same scenario before we started 0:07:36.280 --> 0:07:40.760 the pandemic. That basically the dynamic of the demographic getting 0:07:40.800 --> 0:07:44.360 older and not necessarily as much productivity will lead inflation 0:07:44.440 --> 0:07:46.560 to go back to where it was. Why do you 0:07:46.600 --> 0:07:49.080 push back on that and how high do you think 0:07:49.080 --> 0:07:51.000 that rates really are going to go? If you do 0:07:51.120 --> 0:07:54.720 disagree with this call of Bank of Americas, it's Bank 0:07:54.760 --> 0:07:59.000 of America one of my favorite banks. UM. Look, I am. 0:08:00.560 --> 0:08:07.920 I think that the inflation dynamic right now is one 0:08:07.960 --> 0:08:13.480 that has far surpassed UH FED expectations, most market expectations 0:08:14.160 --> 0:08:17.000 UH and UH and and certainly mine, even though I 0:08:17.040 --> 0:08:20.600 was very negative on inflation a couple of years ago. 0:08:22.240 --> 0:08:27.160 But the idea that UH, the forward looking FED can 0:08:27.240 --> 0:08:32.520 count on a return two pre COVID UH sub two 0:08:32.559 --> 0:08:39.200 percent inflation and the face of supply chain disruptions geostrategic 0:08:39.840 --> 0:08:45.160 uncertainty dynamic that has now afflicted UH wage and labor 0:08:45.200 --> 0:08:49.319 cause pressure. It's possible, but do you want to count 0:08:49.320 --> 0:08:53.920 on that is your best case? Steve, you invented fractious economics. 0:08:54.000 --> 0:08:56.160 You literally invented it out of thin air. You're the 0:08:56.160 --> 0:08:58.560 first guy I know that ever used a PDF file 0:08:58.960 --> 0:09:01.480 to do economic So you and Dick Burner set up 0:09:01.520 --> 0:09:04.760 at the wonderful Galbraith and All and Morgan Stanley set 0:09:04.800 --> 0:09:08.080 up this raging debate. And there's no one you're raged 0:09:08.160 --> 0:09:11.400 more with than Stephen Yen in the dollar call. You 0:09:11.520 --> 0:09:15.880 have been calling for a week dollar. It hasn't happened. 0:09:16.280 --> 0:09:20.040 When does it happen? Well, it may never happen. Yeah, 0:09:20.040 --> 0:09:25.320 I mean, you know, Stephen jen my old currency strategist colleague, 0:09:25.360 --> 0:09:30.080 had this great image of the dollar smile. And you know, 0:09:31.000 --> 0:09:33.760 I'm sure he's smiling at me right now and trying 0:09:33.760 --> 0:09:36.719 to weasel my way out of here. Steven, I don't 0:09:36.720 --> 0:09:39.240 mean to interrupt. This is really really important. We've had 0:09:39.240 --> 0:09:42.280 a resilient dollar. Most of the street has gotten this wrong. 0:09:43.080 --> 0:09:46.600 At some point the dollar breaks. What will be the 0:09:46.679 --> 0:09:49.760 events that we need to watch for where we will 0:09:49.840 --> 0:09:55.440 see dollar break? I personally tell him I think the 0:09:55.520 --> 0:09:58.840 dynamic is still there in terms of the current account 0:09:59.760 --> 0:10:02.920 the domestic savings rate. They're all pointing the dollar weakness. 0:10:03.360 --> 0:10:08.359 They haven't played out in a period of geo strategic uncertainty. 0:10:08.440 --> 0:10:11.959 And my guess is, if we ever get through this war, uh, 0:10:12.000 --> 0:10:14.640 you know, once we're on the other side of geo 0:10:14.679 --> 0:10:20.040 strategic uncertainty, the dollars fundamentals will reassert themselves. It won't 0:10:20.040 --> 0:10:22.200 be the end of the world, not the demise of 0:10:22.200 --> 0:10:26.720 the dollars status of the reserve currency. But you know, 0:10:26.760 --> 0:10:31.040 the dollars had three major corrections since the early nineteen seventies, 0:10:31.320 --> 0:10:34.640 and these are big ones. They average close to on 0:10:34.679 --> 0:10:38.360 a trade weighted basis, and each time they've been triggered 0:10:38.400 --> 0:10:43.840 by uh, you know, either inflation, geostrategic uncertainty, or the 0:10:44.320 --> 0:10:48.000 you know, some other type of financial event that uh 0:10:48.120 --> 0:10:52.000 afflicts the world. But the US a little bit worse 0:10:52.400 --> 0:10:54.360 than the rest of the world, and you know, there 0:10:54.480 --> 0:10:57.079 is that possibility, and I wouldn't rule it out. We're 0:10:57.120 --> 0:11:00.880 setting ourselves up for dollar weakness. They're that's set up. 0:11:01.240 --> 0:11:04.240 Actually gets triggered remains to be seen. Stephen Grants to 0:11:04.280 --> 0:11:06.240 catch up to head from you as a white Stephen 0:11:06.280 --> 0:11:16.520 Rush University. For someone that writes a wonderful research. No, 0:11:16.720 --> 0:11:19.760 James Bianco joins us out. Jim Bianco, president of founder 0:11:19.800 --> 0:11:23.320 of Bianco Research. Jim, I love, love, love, love love 0:11:23.360 --> 0:11:26.320 your chart where you say, would everybody stand up, wake 0:11:26.400 --> 0:11:32.319 up and understand that weak Japanese yen matters to American investors. 0:11:32.440 --> 0:11:37.480 Why the Japanese are the largest owner of treasury, largest 0:11:37.480 --> 0:11:40.440 country owner of treasury securities. They own more than China 0:11:40.559 --> 0:11:43.800 does right now one point three trillion dollars. As they 0:11:43.800 --> 0:11:48.000 try to hold the Japanese government bond yield at twenty 0:11:48.040 --> 0:11:50.840 five basis points when every other yield in the world 0:11:51.000 --> 0:11:53.839 is going up, they're increasing their spread to the rest 0:11:53.880 --> 0:11:57.400 of the world that they're making their currency unattractive. If 0:11:57.440 --> 0:12:01.040 they keep doing it and yen is twelve percent in 0:12:01.080 --> 0:12:04.280 a month, it's going to have big implications for their 0:12:04.280 --> 0:12:07.040 financial markets and economy. And they're a major country and 0:12:07.080 --> 0:12:09.760 we're gonna gonna feel it. Jim, what's so important here? 0:12:09.800 --> 0:12:12.240 And this begins our coverage. I'm gonna say, ninety days ago, 0:12:12.240 --> 0:12:15.600 if David focus Landau at Deutsche Bank making real clear 0:12:15.720 --> 0:12:19.640 his number one concern is devaluation of currencies against an 0:12:19.640 --> 0:12:23.600 ever stronger resilient dollar. At what point does yen tip 0:12:24.080 --> 0:12:27.800 into some form of devaluation panic where Japan has to act. 0:12:29.000 --> 0:12:31.240 They're very close to it right now. I mean, as 0:12:31.280 --> 0:12:33.680 I said, they've moved up twelve or lost twelve percent 0:12:33.720 --> 0:12:36.160 of their value in the last month. They approached one 0:12:36.280 --> 0:12:38.640 thirty on the yen overnight, and I guess the b 0:12:38.720 --> 0:12:41.000 f J has got a difficult question they got to answer. 0:12:41.360 --> 0:12:44.720 They can continue to hold their yield curve control PEG 0:12:44.760 --> 0:12:47.679 at twenty five basis points in the tenure yield or 0:12:47.800 --> 0:12:49.920 and let the currency go. Or they can let the 0:12:49.960 --> 0:12:52.439 PEG go and defend the currency. But they can't do 0:12:52.600 --> 0:12:55.720 both at the same time. And I think we're getting 0:12:55.760 --> 0:12:57.480 close to the point where they're going to have to 0:12:57.480 --> 0:13:00.520 start thinking more about their currency than they are about 0:13:00.559 --> 0:13:02.760 their yield curve PEG. Jim, do you think that people 0:13:02.760 --> 0:13:05.400 ought to be paying more attention to the consequence of 0:13:05.520 --> 0:13:09.880 Japanese policy monetary policy on the US treasury market, considering 0:13:09.880 --> 0:13:13.360 the fact that the Japanese investor owns more treasuries and 0:13:13.440 --> 0:13:18.440 even China more than any other external investor. Yeah, they should, 0:13:18.559 --> 0:13:22.800 because as their currency goes and as their interest rates go, 0:13:22.960 --> 0:13:27.240 that's gonna maintain its relative attractiveness of the U S 0:13:27.280 --> 0:13:30.560 treasury market. Should they let the PEG go and interest 0:13:30.640 --> 0:13:33.720 rates rise a lot in Japan? And we saw that 0:13:33.880 --> 0:13:37.880 last fall when Australia abandoned yield curve control and it 0:13:37.960 --> 0:13:40.280 rose a lot. A lot of those investors that are 0:13:40.320 --> 0:13:44.040 buying treasury securities again one point three trillion might find 0:13:44.040 --> 0:13:46.839 detractive yields in Japan for the first time in a generation, 0:13:47.240 --> 0:13:49.720 and that will lessen the demand for treasuries at a 0:13:49.760 --> 0:13:52.200 time that the Fed is leading the market and other 0:13:52.240 --> 0:13:55.640 people that are saying that the treasury market or interest 0:13:55.760 --> 0:13:58.400 rates of the bond market are uninvestable because of the 0:13:58.480 --> 0:14:01.719 higher rates, you're gonna lose another major player and you're 0:14:01.760 --> 0:14:04.160 just gonna compound the problems in the bond market. What 0:14:04.320 --> 0:14:07.360 does that translate into in terms of how much higher 0:14:07.400 --> 0:14:10.920 yields can go? You know, when you see yields do 0:14:11.000 --> 0:14:14.520 what they've done so far this year and on a 0:14:14.600 --> 0:14:17.280 total return basis, when you caf actor in the yield 0:14:17.320 --> 0:14:20.240 and the price, this has been the worst year in 0:14:20.280 --> 0:14:23.160 the history of statistics. The Bloomberg Global Aggregate Index goes 0:14:23.200 --> 0:14:26.520 back in mid seventies. It's down ten percent for the year. 0:14:26.800 --> 0:14:29.920 That is an extraordinarily large move for the bond market. 0:14:29.960 --> 0:14:32.920 And it's only the middle of April. As we continue 0:14:33.000 --> 0:14:35.840 to see this happen, you have to start to worry. 0:14:35.880 --> 0:14:38.920 And I am that there's going to be knock on effects, 0:14:38.920 --> 0:14:43.240 are unintended consequences. The bond market, the banking system, the 0:14:43.560 --> 0:14:46.520 financial system is not really designed to have the entire 0:14:46.600 --> 0:14:49.960 bond market lose ten percent of its value in four months. 0:14:50.320 --> 0:14:53.520 Every other time we've seen this, it's always run We've 0:14:53.560 --> 0:14:55.880 always run into problems now that same we have problems 0:14:55.880 --> 0:14:58.360 now and it might be a while off. And we've 0:14:58.400 --> 0:15:01.520 also seen when you see extraordinary moves like this, I 0:15:01.560 --> 0:15:03.840 hate to say it, but they continue to go until 0:15:03.920 --> 0:15:07.360 something breaks. That's what happened in That's what happened in 0:15:08.400 --> 0:15:10.880 That's what happened in eighty seven when you had huge 0:15:11.000 --> 0:15:13.640 rises in yield. They kept going and going, and everybody 0:15:13.680 --> 0:15:16.280 kept saying it's over, it's over, and it wasn't over 0:15:16.520 --> 0:15:20.200 until something broke. And that's what I'm afraid of now 0:15:20.240 --> 0:15:23.160 because this move is getting into that kind of territory. Him. 0:15:23.200 --> 0:15:25.640 Conversations with you were always foundab always got about sixty 0:15:25.640 --> 0:15:27.840 seconds left when you say something might break. What have 0:15:27.880 --> 0:15:30.840 you got in mind? At the moment you all either 0:15:30.960 --> 0:15:34.000 that the stock market wakes up to higher interest rates 0:15:34.040 --> 0:15:36.720 all eighty seven. I'm not talking about crash. I'm talking 0:15:36.720 --> 0:15:39.240 about that they just recognize that higher rates are bad, 0:15:39.920 --> 0:15:44.160 or that higher rates that translating the mortgages and borrowing 0:15:44.200 --> 0:15:48.040 costs really shut the economy down fast, or some kind 0:15:48.080 --> 0:15:50.080 of a plumbing problem like we saw in September of 0:15:50.120 --> 0:15:52.960 two thousand nineteen with the repall market. This stuff is 0:15:53.080 --> 0:15:56.160 very complicated, and when you see extraordinary moves like this, 0:15:56.680 --> 0:15:58.600 you never know what kind of impact they're gonna have 0:15:58.680 --> 0:16:01.160 on it. Jim super smell as always that kind shops soon. 0:16:01.280 --> 0:16:12.320 Jim Bianco, that of Bianco Research. Brian Weezer is legendary 0:16:12.440 --> 0:16:16.040 for his courage on Facebook when it was launched years 0:16:16.160 --> 0:16:18.960 ago at Pivotal at the time. He's now a group 0:16:18.960 --> 0:16:23.520 president for Business Intelligence Group m where away from by 0:16:23.600 --> 0:16:27.360 Hold Cell. He really really thinks about the trends in 0:16:27.400 --> 0:16:32.840 the industry. A definitive and constructive note on Netflix this morning, Brian, 0:16:32.880 --> 0:16:34.960 thank you for joining. I'm gonna cut to the chase. 0:16:35.480 --> 0:16:40.560 Can read Hastings do a Brian Roberts, can read Hastings 0:16:41.080 --> 0:16:45.680 move to a cash flow driven company? Ola what Comcast 0:16:45.840 --> 0:16:50.360 did years ago. I think it is already. I mean, 0:16:50.400 --> 0:16:52.760 if you look at the most mature market, the company 0:16:52.840 --> 0:16:54.840 is already very probable. This is one of the things 0:16:54.920 --> 0:16:58.400 I think many people, certainly in the industry ignored think 0:16:58.440 --> 0:17:02.000 about the company produces. A lot of guys were already well. 0:17:02.000 --> 0:17:04.960 The point here is the industry zeitgeist is he is 0:17:05.040 --> 0:17:08.439 no Brian Roberts, And you're saying, wait a minute, lose 0:17:08.480 --> 0:17:12.399 the caution. Can you only shares here given the collapse 0:17:12.800 --> 0:17:17.160 and your enthusiasm over their development of free cash flow? Well, 0:17:17.200 --> 0:17:20.240 I would pretty this way. I think that the expectations 0:17:20.240 --> 0:17:23.520 for the company were way out of whack, way out 0:17:23.520 --> 0:17:26.160 of whack. I think that the company that the investors 0:17:26.160 --> 0:17:30.040 were trying to make up business mall they misled is 0:17:30.040 --> 0:17:35.399 too important, Brian stopped. Were they misled by Netflix? I 0:17:35.400 --> 0:17:38.040 think investors found a way to jumpify the stock price. 0:17:38.640 --> 0:17:41.080 That's not uncommon, right, both momenting driving stocks. Do you 0:17:41.080 --> 0:17:44.040 see that with any stock will call over value? So 0:17:44.119 --> 0:17:47.320 that happens, So, Brian, how do you assess what the 0:17:47.400 --> 0:17:49.400 actual value is at a time? But we don't even 0:17:49.480 --> 0:17:51.520 know what the real problem was. I mean, you actually 0:17:51.520 --> 0:17:54.800 throw some cold water on this theory that consumers were 0:17:54.800 --> 0:17:58.320 cutting Netflix subscriptions because of the rising commodity costs and 0:17:58.400 --> 0:18:02.439 the rising costs. More broadly, Yeah, exactly. I know that 0:18:02.480 --> 0:18:04.240 there's a narrative out there, a RAND in place of 0:18:04.359 --> 0:18:06.119 being issued, but you wouldn't CEP and G a ten 0:18:06.240 --> 0:18:09.560 percent organic growth or loreal with double digit organic growth 0:18:09.600 --> 0:18:12.119 that treats are spending with the problem here? Um, I 0:18:12.160 --> 0:18:14.280 think the issues. Think about it this way. Spending on 0:18:14.320 --> 0:18:16.679 streaming services in the United States and about thirty billion 0:18:16.720 --> 0:18:19.639 dollars last year. There's about a hundred billion dollars of 0:18:19.720 --> 0:18:24.040 spending on traditional pay TV services, traditional cable. There is 0:18:24.080 --> 0:18:25.680 an awful lot of room to go in to echo 0:18:25.800 --> 0:18:27.880 Tim Nolan's points earlier, just bang on when he talked 0:18:27.880 --> 0:18:31.800 about competitive issue. That's the issue. There's just more streaming 0:18:31.800 --> 0:18:34.200 out there. So, Brian, who's going to be the winner? 0:18:34.240 --> 0:18:35.879 A lot of people thought that Netflix would be the 0:18:35.920 --> 0:18:38.399 clear winner. Can you come out now and say it's 0:18:38.400 --> 0:18:40.840 a lot less clear the Netflix will be one of 0:18:40.840 --> 0:18:43.560 the winners of the streaming wars. I think there's a 0:18:43.680 --> 0:18:47.760 very direct relationship between share spend on content and share viewing. 0:18:48.080 --> 0:18:50.680 If you spend twenty billion dollars in the global industry 0:18:50.680 --> 0:18:53.159 with three billion dollars, let's say, of spending on content, 0:18:53.200 --> 0:18:55.600 you'll get about six percent share of total viewing. It's 0:18:55.640 --> 0:18:58.920 actually pretty simple. The algorithm isn't that complicated. If you 0:18:59.000 --> 0:19:01.679 spend thirty billion dollars in the three billion dollar industry, 0:19:01.720 --> 0:19:05.359 you'll get more of doing. It's as simple as that. Brian, 0:19:05.400 --> 0:19:07.879 I got to talk about the new mating that we 0:19:07.960 --> 0:19:11.960 have of Warner Discovery, Hulu, Animal Planet, and forty seven 0:19:11.960 --> 0:19:16.840 other things including CNN. They have fifteen billion large of debt. 0:19:16.920 --> 0:19:20.760 I believe it's fifty of their balance sheet as well. 0:19:21.359 --> 0:19:24.320 Can Zev left pull this off? Can he actually do 0:19:24.440 --> 0:19:29.400 the entertainment and news artistry of it and the financial 0:19:29.760 --> 0:19:34.159 is well and bring synergies to that new shop. I 0:19:34.200 --> 0:19:36.840 think it's absolutely possible, of course. I mean I think 0:19:36.880 --> 0:19:39.159 we're sometimes looking at this acquisition come back in the 0:19:39.160 --> 0:19:42.840 long way. This is really a Warner Brothers takeover of Discovery, 0:19:43.119 --> 0:19:45.760 but inserting Discovery management on top of Warner. At least 0:19:45.760 --> 0:19:47.639 that's what it looks like based on the ecouagement started 0:19:47.680 --> 0:19:50.520 to announce so far to the extent that the company 0:19:50.600 --> 0:19:54.359 was really well position by Jason Kyler for a long 0:19:55.280 --> 0:19:58.359 future ahead to They said that David Gussa keeps focused 0:19:58.400 --> 0:20:01.920 on that and doesn't focus on a short term built 0:20:01.920 --> 0:20:04.359 think very well for themselves. I think the risk is 0:20:04.400 --> 0:20:06.400 that they start to focus more on short term metrics, 0:20:06.600 --> 0:20:09.680 but they try to focus on making the quarter work. Um, 0:20:09.680 --> 0:20:11.720 I'll cultivate a shareholder base and they won't want that 0:20:11.800 --> 0:20:16.359 will lead to less optimoil comes. I think the course 0:20:16.400 --> 0:20:19.320 and he didn't work for Netflix, that's for sure. From 0:20:19.320 --> 0:20:21.720 ways to recruit fam thank you, sir, fantastic to catch 0:20:21.800 --> 0:20:30.280 up one. David Malpass joins as the President of the 0:20:30.320 --> 0:20:34.240 World Bank, truly in time of crisis. David, I want 0:20:34.240 --> 0:20:37.439 to cut to one of the quiet stories here, and 0:20:37.520 --> 0:20:40.680 it does have to do with Russia selling an awful 0:20:40.760 --> 0:20:45.520 lot a fertilizer to the United States of America. Your 0:20:45.680 --> 0:20:52.000 shop has led on building the supply a fertilizer critical 0:20:52.440 --> 0:20:58.399 to this humanitarian crisis. How are you doing. I'm happy, 0:20:58.520 --> 0:21:02.480 happy to see more fertilizer is critical in this planting season. 0:21:02.560 --> 0:21:05.840 Countries are really at the moment where they need to 0:21:05.840 --> 0:21:08.160 get the cross in the ground and they need fertilizers. 0:21:08.160 --> 0:21:11.000 So that's good that Russia is doing that. I saw yesterday, 0:21:11.040 --> 0:21:14.240 India was selling some wheat to Egypt. My view is 0:21:14.280 --> 0:21:16.679 that there really is a lot of supply in the world, 0:21:16.920 --> 0:21:19.520 if it can be guided or if it can be 0:21:19.560 --> 0:21:23.640 allowed to find the best use. What can your institution 0:21:23.800 --> 0:21:27.560 do to get us away from five six seven standard 0:21:27.640 --> 0:21:35.800 deviation jumps in agricultural products. We can help with data, 0:21:36.000 --> 0:21:39.240 We can help with the supply change themselves. We can 0:21:39.320 --> 0:21:44.000 provide trade finance, which is important in moving goods around UH, 0:21:44.080 --> 0:21:48.840 and we can also encourage countries to find new sources 0:21:48.880 --> 0:21:52.400 to to realize that that they need to move quickly 0:21:52.760 --> 0:21:56.520 in order to increase supply. And importantly, tom we can 0:21:56.600 --> 0:21:59.679 encourage the advanced economies to do all they can to 0:22:00.280 --> 0:22:04.800 lease access stocks UH and to make more more products. 0:22:04.840 --> 0:22:07.920 They have huge production capacity and I think if they 0:22:07.960 --> 0:22:11.080 communicate that that will help with the world pricing levels. 0:22:11.359 --> 0:22:14.720 David time has become incredibly important when we're talking about 0:22:14.880 --> 0:22:19.040 issues of hunger, especially for places where the averages half 0:22:19.080 --> 0:22:22.440 of the income of every household goes to spending for food. 0:22:22.560 --> 0:22:26.560 Sri Lanka stopped paying debt payments as a result of 0:22:26.640 --> 0:22:29.879 their need to buy food and fuel. How much do 0:22:29.960 --> 0:22:33.320 you see this as becoming a routine issue with debt, 0:22:33.880 --> 0:22:36.600 with debt defaults at a time when Sri Lanka says 0:22:36.600 --> 0:22:38.520 the I m F eight is going to take six months, 0:22:38.960 --> 0:22:42.200 which is going to be tough for them, High Lisa. 0:22:42.600 --> 0:22:45.880 Different countries are in different positions. Sri Lanka had waited 0:22:45.920 --> 0:22:48.800 in order to begin to tackle its debt problem, and 0:22:48.840 --> 0:22:52.680 there they continued making payments on heavy debt burns, including 0:22:52.720 --> 0:22:56.760 those to China, and so that drains resources. Other countries 0:22:56.880 --> 0:23:03.160 are have faced different bums, each one of a unique 0:23:03.760 --> 0:23:07.359 I was in Romania and Poland last week. They're facing 0:23:07.440 --> 0:23:11.840 the changes in the energy supplies within Europe. I'm sorry 0:23:11.840 --> 0:23:13.879 I miss Tom when he was in Washington, d C. 0:23:14.080 --> 0:23:19.359 Last week. But the point is that the world needs 0:23:19.720 --> 0:23:23.720 to have a resolution process for debt that's more robust 0:23:24.240 --> 0:23:27.760 than than we have right now and starts earlier. At 0:23:27.760 --> 0:23:30.399 a meeting this morning, there was a call for China 0:23:30.480 --> 0:23:34.520 to convene a creditors committee for Zambia. I think that 0:23:34.520 --> 0:23:38.880 would be a very helpful step because Zambia, like Zambia, 0:23:38.920 --> 0:23:42.439 stopped paying its creditors more than a year ago and 0:23:42.520 --> 0:23:46.040 still doesn't have a pathway to a debt resolution. I 0:23:46.040 --> 0:23:49.000 think the world needs to work hard to provide that path, 0:23:49.080 --> 0:23:51.439 and that would be a good step forward. David, as 0:23:51.440 --> 0:23:53.720 we try to understand what the obligations are of some 0:23:53.800 --> 0:23:55.719