WEBVTT - Ukraine, Markets, And The Supply Chain 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market crows, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.000 at Bloomberg dot com slash podcast. Matt, we are so 0:00:22.079 --> 0:00:24.919 fortunate for our next guest here to help us with context. 0:00:24.960 --> 0:00:27.200 Here um one of our all time favorites as we 0:00:27.240 --> 0:00:31.600 think about these geopolitical military issues around the world. James Travitas, 0:00:31.840 --> 0:00:34.360 Admiral the United States Navies retired adam all the US 0:00:34.440 --> 0:00:37.320 Navies in the U S Navy thirty seven years, served 0:00:37.320 --> 0:00:40.960 as a fifteen commander in US European Command and NATO's 0:00:41.000 --> 0:00:44.519 sixteen Supreme Allied Commander. In your, Admiral, thank you so 0:00:44.600 --> 0:00:47.120 much for joining us Right now, we just heard from 0:00:47.400 --> 0:00:51.840 President Zelenski's chief of staff taking a very very hard 0:00:51.920 --> 0:00:55.040 line about how far the people of Ukraine will take 0:00:55.080 --> 0:00:57.720 this fight to Russia. What is your view of what 0:00:57.800 --> 0:01:02.880 you're seeing on the ground. Well, first of all, what 0:01:02.960 --> 0:01:06.160 we are learning is that the center of gravity in 0:01:06.200 --> 0:01:10.600 this fight is not the Russian army and it's not 0:01:10.680 --> 0:01:15.520 really the Ukrainian military arms. The center of gravity is 0:01:15.560 --> 0:01:20.360 the spirit, the will of these Ukrainians. It's become remarkable 0:01:20.520 --> 0:01:25.039 and it's personified by President Zelinski. And I agree with you. 0:01:25.120 --> 0:01:27.840 I caught the tail end of the interview. The chief 0:01:27.840 --> 0:01:31.040 of staff does a great job channeling his boss, who 0:01:31.160 --> 0:01:35.920 is marching around the world doing these inspirational speeches at 0:01:35.959 --> 0:01:40.039 every major parliament and congress in the world. Um so 0:01:40.120 --> 0:01:43.720 there's a great deal to admire on the Ukrainian side 0:01:43.720 --> 0:01:47.440 of this. In terms of his comments about negotiation, Hey, 0:01:47.480 --> 0:01:51.360 it's Bloomberg right. We're a business network. We know how 0:01:51.400 --> 0:01:56.360 you negotiate, and you negotiate in two ways. One is 0:01:56.920 --> 0:02:01.840 you been as much positive of momentum for your side 0:02:01.880 --> 0:02:04.280 as you possibly can. At number two, you start with 0:02:04.320 --> 0:02:08.280 a hardline position, recognizing you're going to have to negotiated 0:02:08.320 --> 0:02:10.320 in from that. And I think both those are true 0:02:10.360 --> 0:02:14.200 in this case. In terms of the Russian response, Admiral, 0:02:14.240 --> 0:02:19.040 we've seen UM more and more destructive weapons used. There 0:02:19.080 --> 0:02:23.320 was a lot of criticism when the hypersonic missiles UM 0:02:23.480 --> 0:02:26.080 were put into action, but isn't that to be expected, 0:02:26.120 --> 0:02:31.040 as uh war rages on this long. Of course, they 0:02:31.040 --> 0:02:35.639 expected to march in and you know, be greeted much 0:02:35.720 --> 0:02:39.679 the way Hitler's troops were greeted when they um completed 0:02:39.680 --> 0:02:42.639 on Schlis of Austria. That didn't happen, So they're going 0:02:42.680 --> 0:02:49.080 to use bigger force. Indeed, they were expecting bouquets of 0:02:49.160 --> 0:02:51.880 flowers and bottles of vodka, and what they got were 0:02:51.960 --> 0:02:55.160 bottles of gas lead with rags, stuff to the top 0:02:55.240 --> 0:02:59.760 Molotov cocktails. UM. It has been extraordinary to watch the 0:02:59.800 --> 0:03:04.200 fit alire of Russian intelligence and the isolation of Vladimir 0:03:04.280 --> 0:03:08.680 Putin personally, who clearly had no clue what this was 0:03:08.720 --> 0:03:12.280 going to look like, and his people, uh failed miserably 0:03:12.400 --> 0:03:15.600 at least thus far. So Plan A, you're exactly right, 0:03:15.800 --> 0:03:20.120 was unchlus. It was sweep across the country, blitz creeb, 0:03:20.160 --> 0:03:23.760 a little bit of fighting, find Zalinsky sued him and 0:03:23.800 --> 0:03:27.120 put a public government in Kiev that was planned in UM. 0:03:27.240 --> 0:03:31.959 That is over. Plan B, you're also correct, is kind 0:03:31.960 --> 0:03:36.200 of looking like fifteenth century siege warfare. Bring all your 0:03:36.280 --> 0:03:40.240 cannons around the city and just pounded to dirt, terrorized 0:03:40.320 --> 0:03:43.240 the population, and UM at the end of the day, 0:03:43.280 --> 0:03:47.920 then you can gain strength for negotiations. That's what Putin's 0:03:47.960 --> 0:03:50.640 doing on his side of the coin. None of this 0:03:51.000 --> 0:03:54.280 is unexpected in the way that worth typically unfold but 0:03:55.120 --> 0:03:58.600 has got But Admiral concern is that Plan C is 0:03:58.840 --> 0:04:06.000 a biological weapon and possibly tactical nukes. It certainly is 0:04:06.040 --> 0:04:08.720 a deep concern, and you saw it addressed yesterday by 0:04:08.760 --> 0:04:11.600 President Biden and the heads of NATO. UM. And so 0:04:11.680 --> 0:04:15.000 what are we doing about it? We are send Putent 0:04:15.160 --> 0:04:18.560 signals that if he crosses that kind of weapon of 0:04:18.680 --> 0:04:22.240 mass destruction line, there will be serious consequences. What I 0:04:22.279 --> 0:04:25.640 suspect would happen. That's what would finally lead NATO to 0:04:25.680 --> 0:04:29.039 put a doe flies on up. That's very risky, very 0:04:29.200 --> 0:04:33.279 potential confrontation between ducle ron pounds. But we've got to 0:04:33.320 --> 0:04:36.120 tell Putin that if he does that, if he uses 0:04:36.200 --> 0:04:40.159 a tactical nuke of biologic a chemical weapon, UM, he 0:04:40.279 --> 0:04:44.160 will face the full might of the alliance. UM boy, 0:04:44.200 --> 0:04:46.719 I hope we don't go there, because it is a 0:04:46.800 --> 0:04:50.920 potential for real miscalculation at a higher level conflict. Admiral 0:04:50.960 --> 0:04:54.760 I got to ask about not a day goes by 0:04:54.960 --> 0:04:57.200 in this conflict when I'm not reminded of your novel. 0:04:57.600 --> 0:04:59.320 And I was telling Paul earlier, I think you know, 0:04:59.360 --> 0:05:02.880 in terms of a fictional entertaining work, it's up there 0:05:02.880 --> 0:05:05.280 with anything that Jack Carr or or Lee Child has 0:05:05.279 --> 0:05:09.160 ever written. But um, the problem with your book is 0:05:09.200 --> 0:05:12.520 that it's so realistic, and it's ringing true truer and 0:05:12.560 --> 0:05:16.880 truer as days go by. Here, how much of a 0:05:16.920 --> 0:05:21.520 problem is China? And what what do you think President 0:05:21.640 --> 0:05:26.839 She is thinking and doing here? Yeah, novel in the 0:05:26.880 --> 0:05:29.279 Next World War, of course, has about a potential war 0:05:29.320 --> 0:05:32.520 between the US and China, And I agree with you, 0:05:32.960 --> 0:05:35.000 what's happening in front of us ought to act as 0:05:35.040 --> 0:05:38.080 a real cautionary tale because if you think this is 0:05:38.200 --> 0:05:42.400 destructive picture of war between US and China, what President 0:05:42.520 --> 0:05:45.200 She is trying to do is kind of keep the 0:05:45.240 --> 0:05:48.880 ball on the middle of the fairway. He doesn't want 0:05:48.920 --> 0:05:53.359 to completely align his nation with Russia, partly because he 0:05:53.400 --> 0:05:56.279 thinks Russia is looking weaker by the minute and it's 0:05:56.320 --> 0:05:59.320 looking like a losing bet to do so. On the 0:05:59.360 --> 0:06:01.760 other hand, doesn't want to align with the West and 0:06:02.200 --> 0:06:06.640 fall in completely on these sanctions because he objects to 0:06:06.680 --> 0:06:09.880 a great deal of how Russia and China, in his view, 0:06:09.880 --> 0:06:11.920 are treated by the way, so he'll try and play 0:06:11.960 --> 0:06:15.120 the ball down the middle of the field. He will violate. 0:06:15.200 --> 0:06:19.160 I suspect some of the sanctions, perhaps about oil and gas, 0:06:19.240 --> 0:06:22.600 will allow Russian banks that come off the Swift system 0:06:22.640 --> 0:06:25.719 to go on his SIPs system, a kind of binib 0:06:26.040 --> 0:06:30.560 version of the Swift system. He'll say some generally supportive things, 0:06:30.680 --> 0:06:34.360 but on the other hand, he's given humanitarian aid to Ukraine, 0:06:34.680 --> 0:06:39.960 he has spoken against invading other sovereign countries. Um. He 0:06:40.120 --> 0:06:44.279 is also finally watching Taiwan and thinking how does this 0:06:44.400 --> 0:06:48.360 play with my calculus? I think, interestingly, Matt, it makes 0:06:48.440 --> 0:06:52.320 him less enthusiastic about an attack on Taiwan because he's 0:06:52.360 --> 0:06:55.200 watching what happened to Russia not going so well. All Right, 0:06:55.240 --> 0:06:58.200 we're speaking with James Travitas, Admiral United States Navy, and 0:06:58.400 --> 0:07:02.000 most importantly for this conversation, and I think NATO's sixteen 0:07:02.360 --> 0:07:07.240 supreme Allied Commander in Europe certainly has the you know, 0:07:07.320 --> 0:07:11.560 informed opinion. Admiral, if you were advising President Biden right 0:07:11.680 --> 0:07:15.400 now today, what would you tell him about what we 0:07:15.440 --> 0:07:17.760 should do, what NATO should do over the coming days 0:07:17.760 --> 0:07:22.240 and weeks, and maybe months. First, I'd say it's gone 0:07:22.520 --> 0:07:26.080 as well as could be expected at this point. The 0:07:26.200 --> 0:07:30.040 unity of the NATO alliance has been quite extraordinary. Continue 0:07:30.080 --> 0:07:33.520 to encourage the Germans to increase their defense spending, which 0:07:33.520 --> 0:07:37.400 they've done. Move NATO troops to the borders. The thing 0:07:37.480 --> 0:07:40.360 I would say to do that we're not doing. I 0:07:40.400 --> 0:07:42.920 would say, Mr President, We've got to look again at 0:07:42.920 --> 0:07:47.240 giving the Ukrainians tactical aircraft Big twenty nine and others. 0:07:47.560 --> 0:07:50.160 Let's give them the tools to implement a dough fly's 0:07:50.160 --> 0:07:52.960 So that's a big advantage for Russia. It's a whole 0:07:53.000 --> 0:07:56.560 in our strategy. Beyond that single point, I think we're 0:07:56.560 --> 0:08:01.000 doing a reasonably good job. I wonder what you think about, UM, 0:08:01.040 --> 0:08:04.640 the Middle East in this scenario, Uh, you know, because 0:08:05.480 --> 0:08:09.280 this White House has snubbed Crown Prince Mohammed been Salmon 0:08:09.360 --> 0:08:14.280 for understandable reasons. His humanitarian record and Yemen is not good, 0:08:14.440 --> 0:08:19.320 and he allegedly dismembered a journalist. UM. On the other hand, 0:08:20.240 --> 0:08:23.120 you know, Saudi Arabia is so important strategically for the 0:08:23.200 --> 0:08:25.840 US as far as I understand it. What's your thought? 0:08:27.560 --> 0:08:31.080 I agree with your assessment, and we um if we're 0:08:31.080 --> 0:08:34.760 going to make up Russian oil and gas in the markets, 0:08:34.840 --> 0:08:36.880 which we want to do because we don't want to 0:08:36.880 --> 0:08:41.800 see inflationary pressures jump even more. We have got to 0:08:41.840 --> 0:08:44.640 get not just the Saudis, but the Gulf States. You 0:08:44.840 --> 0:08:48.640 a guitar, et cetera. UM, that is where you have 0:08:48.880 --> 0:08:52.280 for capacity. Um. Last thought on the Middle East, by 0:08:52.280 --> 0:08:54.760 the way, I think the events of this war in 0:08:54.920 --> 0:08:58.840 Ukraine have elevated the chances of a deal with Iran. 0:08:59.320 --> 0:09:01.400 And we could go back and forth on whether that's 0:09:01.440 --> 0:09:03.880 a good deal or a bad deal, but it would 0:09:03.880 --> 0:09:08.800 certainly also add capacity into the hydrocarbon marketplaces. I think 0:09:08.840 --> 0:09:12.320 that puts upward pressure on concluding the deal. I would 0:09:12.360 --> 0:09:15.880 say that is probably in the realm of that deal 0:09:15.920 --> 0:09:19.400 will occur, sanctions will come off of the Iran and 0:09:19.440 --> 0:09:22.680 Iran will rejoin global energy markets. How do you think, 0:09:22.720 --> 0:09:27.400 Admiral we judge how does history judge? Angelomericle and kind 0:09:27.440 --> 0:09:32.480 of the German appeasement of Putin, because I remember when 0:09:32.559 --> 0:09:34.640 the US was over there begging them to put in 0:09:34.840 --> 0:09:37.000 l en G terminals, and they didn't want to hear 0:09:37.040 --> 0:09:41.400 it because they were so excited about Nordstream too. UM. 0:09:41.480 --> 0:09:43.800 And believe me, I was part of that whole effort. 0:09:43.800 --> 0:09:47.960 As Supreme elect's manner, I would talk to Chncellor Merkel 0:09:48.080 --> 0:09:52.559 constantly about not only that but also defense spending. We 0:09:52.720 --> 0:09:56.400 got nowhere. Vladimir Putin in four weeks has managed to 0:09:56.440 --> 0:09:59.480 close those arguments and now Germany has going to the 0:09:59.600 --> 0:10:02.920 right place. But Angela Merkel was chancellor for sixteen years, 0:10:02.920 --> 0:10:06.559 elected four times. She has a very strong record overall. 0:10:06.920 --> 0:10:09.280 But she'll look back. I hope she would look back 0:10:09.320 --> 0:10:11.680 and say I made a mistake there. Nord Street two 0:10:12.040 --> 0:10:15.560 was a mistake. Trust in Russia in any capacity was 0:10:15.600 --> 0:10:18.400 a mistake. I think Germany gets yeah, and not raising 0:10:18.440 --> 0:10:21.640 defense spending. I remember when I lived over there for 0:10:21.720 --> 0:10:26.760 years as well. There military was practicing with broomsticks because 0:10:26.760 --> 0:10:30.880 they didn't have enough rifles. They had one working sub 0:10:30.920 --> 0:10:35.160 and like you know, twenty five working tanks. Um, it's 0:10:35.200 --> 0:10:37.600 not going to be an easy you know, just like 0:10:37.720 --> 0:10:39.920 getting l n G over there. It's not gonna happen 0:10:39.920 --> 0:10:42.800 overnight or this year, next year, the year after building 0:10:42.840 --> 0:10:46.160 their army back is going to take a decade. I 0:10:46.160 --> 0:10:49.640 don't think it'll take a decade because there is a 0:10:49.720 --> 0:10:53.840 reasonable base inside the German military. In my experience having 0:10:53.920 --> 0:10:58.800 commanded those troops in combat. But you're absolutely correct that 0:10:58.960 --> 0:11:02.400 it does not turn on a dime. So where do 0:11:02.480 --> 0:11:04.440 I score it. I think it's a three to five 0:11:04.520 --> 0:11:06.920 year project, and they made a great down payment on 0:11:07.000 --> 0:11:11.360 it by effectively doubling their defense budget. UM. Think of 0:11:11.400 --> 0:11:14.480 it this way. It's kind of like when Carter was 0:11:14.600 --> 0:11:18.280 defeated and Ronald Reagan came in. It took us three 0:11:18.400 --> 0:11:20.640 to five years to get the U. S. Military back 0:11:20.640 --> 0:11:22.800 where it needed to be. That's what I think we're 0:11:22.800 --> 0:11:26.319 going to see in Germany. Admiral, just lastly here thirty seconds. 0:11:26.920 --> 0:11:30.480 Do you think President Putin ever resorts to nuclear and 0:11:30.760 --> 0:11:36.960 or chemical weapons? I think not nuclear. He recognizes the 0:11:37.000 --> 0:11:39.920 immense downside of that in every dimension. I think it's 0:11:39.960 --> 0:11:43.760 possible he would attempt something with chemical weapons, try and 0:11:43.840 --> 0:11:47.839 blame it on the Ukrainians and further terrorize the population 0:11:47.880 --> 0:11:50.680 of Ukraine. He is a dark figure and I would 0:11:50.720 --> 0:11:53.160 not put it past him. Adamal Sevidiz, thank you so 0:11:53.240 --> 0:11:54.679 much for joining us. We've got a couple of extra 0:11:54.760 --> 0:11:56.959 minutes with you, which we really appreciate. We really love 0:11:57.000 --> 0:12:01.160 getting your perspective here, given your experiences in Europe and 0:12:01.200 --> 0:12:07.360 with our military and NATO. They have a federal reserve 0:12:07.480 --> 0:12:10.719 that's taken a very hawkish pivot, and City Group was 0:12:10.760 --> 0:12:14.480 out this morning with an economics piece talking about multiple 0:12:14.760 --> 0:12:18.160 fifty basis point rate increases from this federal reserve over 0:12:18.160 --> 0:12:20.880 the next several months, getting even more hawkish. But there's 0:12:20.880 --> 0:12:24.319 still some people that say, despite all that, the feed 0:12:24.440 --> 0:12:26.920 is behind the curve? Is that a thing? We'll joining 0:12:26.960 --> 0:12:29.160 us right now? Is Matt Winkler, Editor in Chief Emeritus 0:12:29.200 --> 0:12:32.679 Bloomberg News, the founder of Bloomberg News. He joins us 0:12:32.679 --> 0:12:35.960 here in our Bloomberg Interactive studio. He ain't phoning it 0:12:36.080 --> 0:12:38.720 in from some of New Jersey. He is here, Matt, 0:12:38.840 --> 0:12:41.880 Thanks for joining us here. Is the facts still behind 0:12:41.920 --> 0:12:44.160 the curve? They seem pretty aggressive to me. And by 0:12:44.160 --> 0:12:48.240 the way, we've heard people say this now, Matt, almost 0:12:48.240 --> 0:12:52.360 every day. It's become um, it's become rope to say 0:12:52.360 --> 0:12:55.480 the Fed is behind the curve. Well, that's that's really 0:12:55.640 --> 0:12:59.439 the point, which is that you have this massive group 0:12:59.559 --> 0:13:04.480 think uh with everyone if you like, led by Larry Summers, 0:13:05.080 --> 0:13:07.880 probably the most prominent saying the FETE is behind the curb, 0:13:08.760 --> 0:13:13.160 and uh, there are a handful of people very smart 0:13:13.200 --> 0:13:16.880 people like Brad DeLong Is, an economist at Berkeley who 0:13:16.960 --> 0:13:22.040 recently asked the question somewhat rhetorically, Um, okay, if the 0:13:22.040 --> 0:13:26.320 FETE is behind the curb, then who are who are 0:13:26.360 --> 0:13:31.000 the people who are the authorities who are supposed to 0:13:31.000 --> 0:13:35.760 be directing us? And the evidence is there is nothing 0:13:36.040 --> 0:13:39.280 out there other than the bond market, which in fact 0:13:39.679 --> 0:13:41.960 shows that the FETE actually is not behind the curve. 0:13:42.040 --> 0:13:45.680 The FETE is following in its data driven way what 0:13:45.840 --> 0:13:48.520 the bond market is telling it. And so to assert 0:13:48.559 --> 0:13:51.360 that the FETE is, you know, behind the curve, is 0:13:51.400 --> 0:13:53.920 to assert that the bond market, which as you know, 0:13:54.160 --> 0:13:59.160 is thirty trillion dollars and millions of people, is meaningless. 0:13:59.200 --> 0:14:02.199 And of course it isn't meaningless because that's where people 0:14:02.360 --> 0:14:05.360 have their reputations and everything that they have at stake 0:14:05.480 --> 0:14:09.439 is on the line. And you're historically a bondman. Um 0:14:09.800 --> 0:14:12.080 wrote about bonds for the Journal before you came and 0:14:12.120 --> 0:14:17.360 created Bloomberg News. And at least as at least once 0:14:17.400 --> 0:14:19.960 I've heard you mentioned Nick from The Great Gats He 0:14:20.040 --> 0:14:22.920 was he a bond trader as well? Uh yeah, he was, 0:14:23.360 --> 0:14:25.920 and uh very much so. I was gonna I was 0:14:25.920 --> 0:14:28.440 gonna ask, so, so, what's the data that the bond 0:14:28.480 --> 0:14:33.640 market provides us with um to help us decide, you know, 0:14:34.360 --> 0:14:39.520 how how far behind the curve or or with um 0:14:39.600 --> 0:14:43.200 the picture the FED is what inflation is expected to be? Like, 0:14:43.680 --> 0:14:45.440 I guess the break evens are the best way to 0:14:45.440 --> 0:14:47.640 look at this. So what the bond market does is 0:14:47.680 --> 0:14:51.280 it's a huge bazaar, a global bazaar, and in that bazaar, 0:14:51.480 --> 0:14:54.480 you have every kind of point of view, every kind 0:14:54.520 --> 0:15:00.160 of activity that's possible, and it's all UH cataloged by 0:15:00.200 --> 0:15:04.200 price and yield. And the bond market shows you every day, 0:15:04.240 --> 0:15:07.840 going back in time to the present, what expectations are. 0:15:08.000 --> 0:15:10.440 That's why it's so valuable. And what you just referred 0:15:10.440 --> 0:15:13.280 to as what we call break even. If you want 0:15:13.320 --> 0:15:16.960 to know what is the expectation of inflation, for example, 0:15:17.800 --> 0:15:20.760 thirty years out, the bond market can show you that 0:15:20.840 --> 0:15:23.920 what is the expectation of inflation ten years out and 0:15:24.040 --> 0:15:27.680 five years out? UH, That is the measure that you 0:15:27.800 --> 0:15:30.280 referred to called break even, and the break even rates 0:15:30.320 --> 0:15:34.320 show sure enough, UH, people who are buying and selling 0:15:34.360 --> 0:15:39.080 securities every day into the future expect inflation to surge 0:15:40.240 --> 0:15:43.080 robustly over the next two years. But at some point 0:15:43.560 --> 0:15:47.400 over the next eight years, uh, that will change and 0:15:47.440 --> 0:15:50.720 there will be a precipitous decline in the expectation of inflation. 0:15:51.000 --> 0:15:54.080 And that's why the bond market is so useful and 0:15:54.200 --> 0:15:58.720 valuable because the FED, in its activity, can use the 0:15:58.760 --> 0:16:03.160 bond market as a way to keep the economy stable. Actually, 0:16:03.560 --> 0:16:06.120 how reliable are I mean, I'm looking at the break 0:16:06.160 --> 0:16:08.400 evens I type I l B on the Bloomberg TERMAO, 0:16:08.480 --> 0:16:10.000 I'm looking at the two year break even, and I 0:16:10.040 --> 0:16:14.120 see it's almost five percent. I then here from people 0:16:14.160 --> 0:16:17.200 like Michael McKee who covers economics for us, that that's 0:16:17.240 --> 0:16:19.840 hardly likely considering we're going to be moving off of 0:16:19.880 --> 0:16:24.240 base effects at that point. So this isn't saying it's 0:16:24.280 --> 0:16:26.880 going to be five percent two years out right. So 0:16:27.680 --> 0:16:31.000 what what is valuable about the bond market is people 0:16:31.160 --> 0:16:37.360 are literally taking their wherewithal their assets, and they're making 0:16:37.440 --> 0:16:41.160 bets about where things are today, where they're going to 0:16:41.240 --> 0:16:42.920 be five years from now, where they're going to be 0:16:43.000 --> 0:16:46.640 thirty years from now, and that's all reflected in price 0:16:46.920 --> 0:16:50.880 and yield, And of course it could change. The point 0:16:50.960 --> 0:16:54.080 here is that and it will change the point here 0:16:54.120 --> 0:16:57.200 is that the FED is not behind the curve. If 0:16:57.520 --> 0:17:01.680 what it's doing today is following what the data shows 0:17:01.800 --> 0:17:04.159 us from the bond market, the FETE is simply doing 0:17:04.200 --> 0:17:09.000 what's appropriate. And the argument, if you will, against the 0:17:09.119 --> 0:17:11.639 people who are asserting that the FETE is behind the 0:17:11.640 --> 0:17:14.240 curve is okay, Well, if it's not the bond market 0:17:14.280 --> 0:17:17.080 where all this data exists, what is it and nobody 0:17:17.080 --> 0:17:20.160 can say what it is? And as Brad DeLong has suggested, 0:17:20.200 --> 0:17:21.679 what is it? The bond market is a bunch of 0:17:21.680 --> 0:17:24.920 weirdos now and the bond vigilantes don't count. I mean, 0:17:25.320 --> 0:17:28.720 no one is asserting that, so, uh, you can't have 0:17:28.800 --> 0:17:32.919 it both ways. Um. This is why the criticism of 0:17:32.960 --> 0:17:36.160 the FED seems to be unfounded, because there's no evidence 0:17:36.200 --> 0:17:38.680 to suggest that there's an alternative for what the FET 0:17:38.800 --> 0:17:41.960 is doing. As I mentioned earlier, Matt City came out 0:17:42.000 --> 0:17:44.840 so research report this morning talking about, you know, multiple 0:17:44.880 --> 0:17:49.000 fifty basis point rate hikes this year going into next year. 0:17:50.600 --> 0:17:53.240 Is there a risk that this FED gets too aggressive 0:17:53.320 --> 0:17:56.280 and does in fact push us into a recession and 0:17:56.320 --> 0:17:58.080 the interest of trying to cool inflation, Well, there are 0:17:58.080 --> 0:18:01.160 plenty of people who would suggest that and are suggesting that. 0:18:01.600 --> 0:18:04.480 Having said that, UM, again, if you look at the 0:18:04.520 --> 0:18:08.000 market right now, what might be surprising to people is 0:18:08.240 --> 0:18:12.600 why is the stock market seemingly becalmed UH in the 0:18:12.640 --> 0:18:14.560 face of it And if you look at something else 0:18:14.640 --> 0:18:17.480 that is worth paying a lot of attention to. The 0:18:17.520 --> 0:18:25.359 Bloomberg Financial Conditions Measure Index. Yeah, very valuable tool. If 0:18:25.840 --> 0:18:28.760 we were suddenly de anchored, and if we had, you know, 0:18:28.800 --> 0:18:31.520 the FED had lost its way, you would expect financial 0:18:31.560 --> 0:18:34.760 markets to be turbulent, and you would expect great volatility. 0:18:34.800 --> 0:18:38.480 But in fact, the Financial Conditions Index shows us we're 0:18:38.520 --> 0:18:41.800 not too far from the average, the thirty year average, 0:18:42.119 --> 0:18:44.840 just a little bit below it UM, and that kind 0:18:44.880 --> 0:18:49.800 of suggests that UM investors worldwide, even with the invasion 0:18:49.800 --> 0:18:54.800 of creating Ukraine and Mr Putin's war against it and 0:18:54.840 --> 0:19:00.080 the sanctions against him, the market is relatively stable. So 0:19:00.200 --> 0:19:03.600 in equities, the dumb money, so to speak, has have 0:19:03.720 --> 0:19:07.160 recovered UM with strength. We were down fourteen percent from 0:19:07.520 --> 0:19:08.920 UM the beginning of the year, just a couple of 0:19:08.920 --> 0:19:10.960 weeks ago. Now we're only down five percent as the 0:19:11.040 --> 0:19:14.439 SMP comes back. Yeah, I mean, look, there's always a 0:19:14.480 --> 0:19:18.960 problem when you try to impose what happened before now 0:19:19.400 --> 0:19:21.880 on what is happening today and what what people are 0:19:21.920 --> 0:19:25.879 looking at is this period in the seventies when interest 0:19:26.000 --> 0:19:29.720 rates went up, you know, fifteen percentage points between ninete 0:19:32.040 --> 0:19:34.399 and you know, that was just a very different time 0:19:34.760 --> 0:19:37.280 in place. And Matt, thanks so much for joining us 0:19:37.320 --> 0:19:39.800 here in our Bloomberg Interactive Broker Studio. Matt Winkler, Editor, 0:19:39.880 --> 0:19:42.280 Chief Emeritus and Bloomberg News. He did not get the 0:19:42.320 --> 0:19:45.520 Friday casual memo. He's in a sharp navy blue suit 0:19:45.560 --> 0:19:47.960 with the bow tie. He and Tom Keaney can't break 0:19:47.960 --> 0:19:53.359 them of that habit. Jonathan Webb CEO and founder of 0:19:53.359 --> 0:19:55.720 app Harvest. That's a public traded company a p p 0:19:56.560 --> 0:19:59.800 u H building some of the largest greenhouses, combining conventional 0:20:00.119 --> 0:20:04.040 cultural techniques with today's technology to grow non gmo chemical 0:20:04.080 --> 0:20:06.880 free produce. Jonathan, thanks so much for joining us here. 0:20:07.280 --> 0:20:10.679 I would love to get your view here of the 0:20:10.840 --> 0:20:14.760 supply chain and the challenges that companies across so many 0:20:14.840 --> 0:20:17.280 industries are dealing with it. How are you seeing it 0:20:17.760 --> 0:20:22.280 in your business? Yeah? So uh, We're growing fruits and 0:20:22.440 --> 0:20:26.080 vegetables and the controlled environment year round with far less 0:20:26.160 --> 0:20:30.080 land and far less water and using technology. And I 0:20:30.080 --> 0:20:32.840 think the general theme right now is it's it's it's 0:20:32.840 --> 0:20:34.840 a it's a great time for us to rethink and 0:20:34.920 --> 0:20:39.800 reimagine American agriculture and reinvest in farming across the US. 0:20:39.920 --> 0:20:43.440 It's uh, you we clearly see what's been happening over 0:20:43.480 --> 0:20:45.640 the last year or two years with COVID and then 0:20:45.680 --> 0:20:48.880 now obviously you know the the very unfortunate events playing 0:20:48.920 --> 0:20:52.960 out in Ukraine. But but there's there's no reason why 0:20:53.040 --> 0:20:55.359 here in the US we're importing two thirds of our 0:20:55.400 --> 0:20:59.239 fruits and vegetables. That's just unacceptable. We're, uh, you know, 0:20:59.280 --> 0:21:01.840 one of the largest land rich, water rich regions in 0:21:02.119 --> 0:21:05.040 the world, and yet we're importing two thirds of our 0:21:05.080 --> 0:21:07.520 fruits and vegetables. And uh, you know, we can we 0:21:07.560 --> 0:21:11.080 can change that dramatically and pretty quickly overnight by using 0:21:11.119 --> 0:21:14.520 technology and creating a new innovative business models to grow 0:21:14.600 --> 0:21:17.119 here here at home in the US. And I have 0:21:17.160 --> 0:21:19.760 to say, I am married to a one from Spain, 0:21:20.320 --> 0:21:25.080 from Valencia, so she is constantly unhappy about the produce 0:21:25.119 --> 0:21:28.159 in this country. Really because where she's from, you just 0:21:28.240 --> 0:21:31.000 walk down the street and pick up tomatoes and oranges 0:21:31.200 --> 0:21:33.840 off the ground next to your neighbor's field, you know. So, 0:21:34.200 --> 0:21:40.760 but how local can we make this um production? Jonathan, Yeah, 0:21:40.760 --> 0:21:44.520 I mean hyperlocal, very local to two cities, to two 0:21:44.520 --> 0:21:47.240 regions all across the US. So we at app Harvest 0:21:47.280 --> 0:21:50.240 will have about eight million square feet operating by the 0:21:50.320 --> 0:21:53.880 end of the year. We'll be growing strawberries, leafy greens, 0:21:53.920 --> 0:21:57.199 a variety of tomatoes. But our focus is bringing that 0:21:57.280 --> 0:22:00.200 fruit and vegetable production back to the US that's been 0:22:00.720 --> 0:22:03.280 uh pushed south of the border. Uh. And yeah, Matt, 0:22:03.320 --> 0:22:06.280 I mean many of the European countries, especially the Netherlands 0:22:06.359 --> 0:22:08.560 really being kind of the world leader and in high 0:22:08.560 --> 0:22:14.159 tech agriculture, Spain has a pretty good robust agriculture system 0:22:14.200 --> 0:22:18.320 that that's utilizing technology. But uh, you know, again reshaping 0:22:18.320 --> 0:22:21.159 what farming looks like. We we you know, we we 0:22:21.200 --> 0:22:25.560 have the opportunity to grow much more nutritious, higher quality stuff. Uh. 0:22:25.720 --> 0:22:27.560 And do that with with a lot less land and 0:22:27.600 --> 0:22:30.560 a lot less water. Uh. And and that's you know, 0:22:30.720 --> 0:22:35.760 that's bringing technology to farming. Where the last big technological 0:22:35.800 --> 0:22:38.440 revolution in American farming is when the when the tractor 0:22:38.560 --> 0:22:43.280 was introduced. My concern is the concern is Jonathan that 0:22:43.320 --> 0:22:48.080 your hand, Yeah, The concern is that you displace American 0:22:48.119 --> 0:22:53.280 family farmers, who I mean, frankly have been displaced already 0:22:53.320 --> 0:22:55.720 but still managed to hang on somehow. How do you 0:22:56.359 --> 0:22:58.960 how do you work around that? Well, I mean, Matt, 0:22:59.000 --> 0:23:01.720 they've already we've already lost that. Two thirds of our 0:23:01.760 --> 0:23:04.360 fruit and vegetables are imported into the US every year. 0:23:04.760 --> 0:23:07.879 You know, four billion pounds of tomatoes alone are imported. 0:23:08.280 --> 0:23:10.240 Why are we not growing that in the US. Why 0:23:10.240 --> 0:23:14.160 are we not getting small farmers technology where you're using 0:23:14.320 --> 0:23:20.040 led lights, hydroponic growing less water, thirty thirty plus, uh, 0:23:20.280 --> 0:23:23.399 getting thirty times yield per acre. Uh, We've we've had 0:23:23.440 --> 0:23:26.359 a lot of meetings in DC over the last few weeks. Uh. 0:23:26.480 --> 0:23:30.240 Food resiliency has become a very high focus at the 0:23:30.320 --> 0:23:32.119 U s d A. But on the right side and 0:23:32.200 --> 0:23:34.960 left side of the aisle. And you know, if we 0:23:35.119 --> 0:23:37.600 in the US want to take this seriously, you know, 0:23:37.600 --> 0:23:39.920 there needs to be some policy around it. You look 0:23:39.960 --> 0:23:42.280 at you know, look at what renewable energy was in 0:23:42.320 --> 0:23:45.840 the US fifteen years ago. It was boutique, it was nascent, 0:23:46.040 --> 0:23:49.680 non existent, and now you know, every state has large portfolios. 0:23:49.720 --> 0:23:52.400 Look at electric vehicles. You know, you've got to put 0:23:52.480 --> 0:23:56.280