Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Farrell and Lisa Bramowitz. Daily we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com,
Speaker 1: and of course on the Bloomberg Terminal. Someone who has
Speaker 1: written about the torrential reign of the world landscape is
Speaker 1: Daniel Jurgen. He is vice chairman at SMP Global and
Speaker 1: yes the prize and oil and yes Brent Crudz a
Speaker 1: hundred and fift. But in this more somber Dabos, we
Speaker 1: must speak to Daniel Jurgen about the Commanding Heights that
Speaker 1: he codified a good thirty years ago. Daniel Jurgen, in
Speaker 1: Commanding Heights, you spoke of the journey of Communism, What
Speaker 1: is the journey of Putin? I think what we are
Speaker 1: really at an end of an era, and it's bracketed
Speaker 1: by Davos, because it was in Davos where you saw
Speaker 1: the opening up the reconnection of what had been the
Speaker 1: Soviet Union and the Soviet satellites with the world economy
Speaker 1: in one global economy that's now fragmenting. Of course, no
Speaker 1: Russians here, no Chinese here, and it's back to a
Speaker 1: more fragmented, less globalized world. How much finger pointing has
Speaker 1: there been, both in conversations on and off the record,
Speaker 1: that you've had a Germany and the reluctance to move
Speaker 1: away from Russia in terms of their dependence on oil, Well,
Speaker 1: I haven't heard. The German economics ministers said it was
Speaker 1: a strategic mistake to what they've done for the last
Speaker 1: year and a half, a decade and a half rather
Speaker 1: and that he said in a matter of weeks we've
Speaker 1: got to change that. So it really is a big change.
Speaker 1: And meanwhile, going forward, do you get the sense that
Speaker 1: there is a cohesive plan to really move away and
Speaker 1: substitute that those supplies or do you think that that
Speaker 1: plan is still lacking? I would say it's an uncohesive plan.
Speaker 1: I mean Europe wants to the EU wants to bargo
Speaker 1: Russian crude oil. They can't get Hungry on board, so
Speaker 1: they keep postponing it. But I think individual countries are
Speaker 1: going to cut cut back. And what Putin has done
Speaker 1: is he's basically over the law next two years has
Speaker 1: undercut his what is his baseload market, and that's why
Speaker 1: Russia is not going to be an energy superpower anymore.
Speaker 1: Dr you're in. George Will September twelfth, two thousand one,
Speaker 1: wrote of our holiday from history is over. Robert Gates,
Speaker 1: esteemed by all in politics in Washington, has spoken of
Speaker 1: our holiday from history is over, and acclaimed Infantry Officer
Speaker 1: General Mark Kimmitt says, our holiday from history is over.
Speaker 1: You more than anyone in the modern you're have written
Speaker 1: about this. If our holiday from history is over, what
Speaker 1: are we going to? Well? I think we've moved from
Speaker 1: what I have called the w t O consensus, which
Speaker 1: is globalization to great power competition. Which do you agree
Speaker 1: in deglobalization. I think fragmented globalization is what we have
Speaker 1: and it's the problem for companies, of course, multinationals. They're
Speaker 1: played by the playbook of globalization, but that playbook doesn't
Speaker 1: work anymore in the world's fragmenting. In Commanding Heights, you
Speaker 1: do a beautiful job of bouncing between the elites and
Speaker 1: the people. I remember in the chapter on Brazil was
Speaker 1: just brilliant in this regard. A great theme here is
Speaker 1: the elites are disassociated from the broader middle class, higher inflation,
Speaker 1: which crushes the middle class. You know the story and
Speaker 1: the drill. What's your prescription for institutions and elites to
Speaker 1: reconnect with their middle class. I don't think it's a
Speaker 1: it's a simple thing. Obviously, the inflation is so undercutting
Speaker 1: of society and build so much anger. So I think
Speaker 1: they're dealing with inflation. But you're dealing at a time
Speaker 1: when world energy is going to is disrupted food and
Speaker 1: of course of the cost of food is actually energy
Speaker 1: processing and everything. So I think these are still going
Speaker 1: to be very much. I think it's a troubled period
Speaker 1: I had, and you're gonna see a social instability as
Speaker 1: a result of this in countries. Is it appropriate that
Speaker 1: China isn't here, given the fact that that economy has
Speaker 1: such a massive influence and whether we get a global recession. Yeah, absolutely,
Speaker 1: But they're not here because of COVID and because you'd
Speaker 1: have to go back and uh and and uh quarantine.
Speaker 1: But you know, Russia, you understand. But but the lack
Speaker 1: of China here is actually more significant and probably more
Speaker 1: of the reason why there is so much uncertainty. I
Speaker 1: was looking at a number of reports that came out.
Speaker 1: If we keep getting these waves of COVID, China remains
Speaker 1: in lockdown for longer. All of a sudden, you have
Speaker 1: a very different parameter of risks in terms of the
Speaker 1: downside to growth. What's your view on this in terms
Speaker 1: of how much of a swing factor that will be? Well,
Speaker 1: I think you see it, because once again means you
Speaker 1: get the supply chain problems. Again that adds to the disruption,
Speaker 1: that adds to the inflation. So waves of COVID, if
Speaker 1: and that is what continues to unfold, is in itself
Speaker 1: deglobalizing factor in the world. Learning Aaron Dubos of the
Speaker 1: I'm going to call its certification by the Philippine Congress
Speaker 1: of Mr Marcos Jr. You may of the name from
Speaker 1: many years ago. Dan Jurgen certainly does huge debate within
Speaker 1: Philippine society of his resounding win over Ms Robetto and
Speaker 1: other candidates as well. And some would say not me,
Speaker 1: but some would say this has an autocratic tendency or
Speaker 1: return to autocracy, as maybe we see in Hungry. I'll
Speaker 1: let you suggest other nations. How does a liberal society
Speaker 1: fight against a trend of autocracy? Well, I think it
Speaker 1: is you can see it in a in a lot
Speaker 1: of countries. I mean, the most important thing is actually
Speaker 1: elections that people. Once people are in power for eight
Speaker 1: or ten years, you're in a different game. And we've
Speaker 1: seen that. Look what happened with Russia. Well look what
Speaker 1: up with Russia. But we're all hinged on the Chinese
Speaker 1: Party Congress, where it's I believe you for life. I mean,
Speaker 1: is that an important meeting coming up? That's a late
Speaker 1: autumn central meeting, because it will set the course for
Speaker 1: China for some time to come, and obviously they're struggling
Speaker 1: with party control at the same time maintaining a vibrant economy.
Speaker 1: Do you get the sense that the conversation around moving
Speaker 1: away from fossil fuels and oil in particular is taking
Speaker 1: on a new geopolitical significance at this Davos rather than
Speaker 1: just good wishes of people who want to do the
Speaker 1: right thing. Yeah, I think it's it's cutting both ways
Speaker 1: because it also means that there's much more concerned about
Speaker 1: access to fossil fuels investment and the kind of pre
Speaker 1: emptive under investment that there's been. So a lot of
Speaker 1: the discussions I've heard is actually you need you're gonna
Speaker 1: need more investment resources and you can't just count on
Speaker 1: a smooth path ahead. But I think it's the bigger
Speaker 1: problem now. It's it's a more discordant discussion now than
Speaker 1: it's been in the past. Here Global Wall Street doesn't
Speaker 1: give a damn about international relations. None of them were
Speaker 1: at the commanding heights. JP Morgan's London desk models out
Speaker 1: a hundred hundred and fifty dollar brand. Is that feasible?
Speaker 1: I think you could have that happened. Where see this
Speaker 1: market tightening right now, and if Chinese comes out of
Speaker 1: COVID and demand goes up, the pressure will be there,
Speaker 1: and the responses to that are gonna be there's gonna
Speaker 1: be a political response, and there's going to be obviously
Speaker 1: big economic crisip. Where does even gasoline prices go? Then
Speaker 1: with the refined goods listen to your gloom, Well, no,
Speaker 1: I like Brent, we're having. We're having not only a
Speaker 1: problem with crude oil is the problem. We're refining. That's
Speaker 1: where the real problem is. And that's where diesel gasoline
Speaker 1: all those prices. And you know we had a global
Speaker 1: refining system and that's been disrupted too by as a
Speaker 1: result of putent. We're out of time with a new map.
Speaker 1: Danielgan with us of course of SMP Global. Right now,
Speaker 1: this is a joy within the sphere of international relations.
Speaker 1: There can be vogues, It could be moments, and one
Speaker 1: of those moments was I'm going to guess twenty years
Speaker 1: ago for read Zacaria with the post American world. He says,
Speaker 1: there is a revolutionary moment now and a required read
Speaker 1: is Ian Bremer's The Power of Crisis. Dr Bremer joins
Speaker 1: us this morning, of course, you raise your group, of
Speaker 1: which we do an annual beginning of the year visit.
Speaker 1: I thought free Zakaria was dead on about the moment
Speaker 1: we're in in the power of crisis, except it's not crisis.
Speaker 1: I don't know what the plural is a crisis. You're
Speaker 1: the fav sees the crisis descend upondas. Don't think. Why
Speaker 1: are you shaking your head? That is the plural of christ.
Speaker 1: I know. It's just that really has to deal with
Speaker 1: me on a daily things. The many crisis we have now,
Speaker 1: which matters, uh well, Russia Ukraine is the one that
Speaker 1: matters to everyone here. It's also the one that's least
Speaker 1: well understood because for the last three months, the focus
Speaker 1: has been Ukraine, but of course the confrontation is also
Speaker 1: between Russia and NATO. The potential for negotiations to bear
Speaker 1: fruit virtually zero. It's the first time in history that
Speaker 1: we have forcibly decoupled a G twenty economy from the
Speaker 1: world's advanced industrial economies. That is a very big deal,
Speaker 1: especially for a forum that traffics in globalization. It is
Speaker 1: purely because of the acts that Russia has taken, and
Speaker 1: and this is the fact of the matter. Is not
Speaker 1: just a cold war between Russia and NATO, but there
Speaker 1: are elements of a hot war. So of course people
Speaker 1: are rather disconcerted by that. People are focused on that,
Speaker 1: but are they focused on the right thing. We were
Speaker 1: just speaking with Daniel Jurgen just moments ago, and he said, frankly,
Speaker 1: the bigger news is that China is not here because
Speaker 1: of COVID, and that that has a much more substantive
Speaker 1: impact on the global economy. Should we be more focused
Speaker 1: on a decoupling there, Uh no, because we are not
Speaker 1: doing a significant decoupling there. I mean, look, yesterday everyone
Speaker 1: was asking about the Biden Taiwan statement, which was much
Speaker 1: ado about the exact same thing that he said a
Speaker 1: couple of times already, and that the White House backtrack. China,
Speaker 1: of course, is the most important rising power in the world,
Speaker 1: second large economy. We're not taking anyway from that, but
Speaker 1: the fact is that U S. China relations are very
Speaker 1: interdependent and they are more stable where Russia has just
Speaker 1: completely subverted a thirty year piece dividend that Europe has enjoyed.
Speaker 1: And I mean, I understand that I'm a New Yorker,
Speaker 1: but also we are in Europe, and so this is
Speaker 1: this is truly a generation will change. That is what
Speaker 1: we should be focused on. So how much is this
Speaker 1: an issue of supply chains of food and issues with
Speaker 1: just what we're seeing in terms of a widening divide
Speaker 1: if nothing else, in the quality of life between wealthy
Speaker 1: and the number of times that I have heard from
Speaker 1: people in the last three months that well, you're focused
Speaker 1: on Ukraine because it's white people, because it's Europeans. You
Speaker 1: don't care about Syria, you don't care about Afghanistan. There
Speaker 1: is a point to that argument, But the fact is
Speaker 1: that the poorest people in the world are going to
Speaker 1: be vastly more impacted by the Ukraine crisis than any
Speaker 1: of those other crisis that have for precisely the reason
Speaker 1: you just mentioned. How much is this also an existential
Speaker 1: threat of the geopolitical order of Europe? And that's why
Speaker 1: you made the point. We're in Europe and people are
Speaker 1: focused on that. How much are people concerned about this
Speaker 1: trickling out into some sort of bigger challenge that is unanticipated? Well,
Speaker 1: I mean, how much are they concerned that gas from
Speaker 1: Russia through Ukraine to Europe could be cut off at
Speaker 1: any moment by the Russians, by the Europeans, or by
Speaker 1: the Ukrainians, or by a non state terrorist actor for
Speaker 1: that matter. I mean, seriously, They're the vulnerability that comes
Speaker 1: from the mistake, the strategic mistake made by Europeans to
Speaker 1: allow themselves to become as dependent as they had on
Speaker 1: energy as Dan was discussing, from Russia, is an enormous
Speaker 1: vulnerability right now. And and furthermore, the fact that a
Speaker 1: country in Ukraine is a big delegation here right now
Speaker 1: is fighting fighting for their survival, fighting to avoid being
Speaker 1: wiped off the map by the President of Russia. And
Speaker 1: they're doing that fighting in part so that the polls
Speaker 1: don't have to so the balls don't have to. The
Speaker 1: Europeans do feel that, not all of them. Okay, maybe
Speaker 1: you talk to Belgians here, maybe they don't feel as
Speaker 1: strong about that. The Germans do. The polls do they matter?
Speaker 1: The Fins and the Swedes who are about to join
Speaker 1: NATO do so. I mean, don't underestimate how much of
Speaker 1: a change this reflects for a europe that for thirty
Speaker 1: years felt like national security didn't matter for them. How
Speaker 1: do we support them? We had always understood here and
Speaker 1: if it's every nation for itself a phrase Ian that
Speaker 1: you codified from eight miles of the finished border down
Speaker 1: to air Twan with Turkish learror through sixteen and the
Speaker 1: incredible calculus he has with the Boss, the Darknells, the
Speaker 1: Bosphorus and up to the Black See in that huge
Speaker 1: span of the new Eastern Front. How does America respond? Well,
Speaker 1: forty billion dollars is the one way. Look, when I'll
Speaker 1: bring back the Biden Taiwan thing. When Biden says the
Speaker 1: United States will defend Taiwan, my view is what he's
Speaker 1: saying is not changing the policy. Biden feels like we're
Speaker 1: defending Ukraine, not because there aren't boots on the ground,
Speaker 1: They're not doing a no fly zone. But are the
Speaker 1: Americans defending Ukraine? And when you talk about the level
Speaker 1: of sanctions when you literally freeze half of Russia's global
Speaker 1: assets the central Bank, when you literally cut them off
Speaker 1: from the G seven, when you support with the Ukrainians
Speaker 1: with the intelligence, put the money with the arms. The
Speaker 1: reason the Ukrainian still exists is first and foremost because
Speaker 1: of the courageousness of the Ukrainian fighters, but secondarily because
Speaker 1: of what the Americans and the American allies are actually doing.
Speaker 1: And if Putin had any clue that that was going
Speaker 1: to happen, he wouldn't have invaded. Is an advantage for
Speaker 1: Mr Putin? The new character of American isolationism? Is it
Speaker 1: a different isolation He thought it was. He thought it was.
Speaker 1: I thought it, well, what is the character of our
Speaker 1: new isolationism if we're going to choose to engage in
Speaker 1: China or choose to engage in Ukraine. I think that
Speaker 1: if Trump gets the nomination for the Republican presidency and
Speaker 1: he says, why are you sending forty billion dollars to
Speaker 1: the Ukraine's wise is our fight? Why would we antagonize
Speaker 1: the Russians, which, by the way his son has been
Speaker 1: tweeting over the course of the past few days, I
Speaker 1: think the view will be different there it is today. Meanwhile,
Speaker 1: we just saw the Treasury Department agree to end some
Speaker 1: of the exemptions that's basically going to force Russia into
Speaker 1: the fall and its people surprise, they didn't do that
Speaker 1: a month ago. Correct, But how much of a liability
Speaker 1: does this become? That the US is using and weaponizing
Speaker 1: the financial prowess of the nation in a way that
Speaker 1: it really hasn't before. Um. I think that the United
Speaker 1: States is showing that some red lines actually matter. Maybe
Speaker 1: not Obama's red line on Syrian chemical weapons use. Um,
Speaker 1: but this maybe maybe not you know, Bush's line. But
Speaker 1: is that how it's being perceived by the rest of
Speaker 1: the world. It depends on who you're talking to. I
Speaker 1: think the Chinese are taking lessons from the fact that
Speaker 1: the Americans and the Europeans actually really do care. Certainly
Speaker 1: that affects the way they think about Taiwan. Um. But
Speaker 1: you're right, I mean, the dollar is being weaponized, American
Speaker 1: financial systems and weaponized. But you know, what where else
Speaker 1: are you going? I mean, if there were credible alternatives,
Speaker 1: then I think that there would be a significant challenge
Speaker 1: to America's global reserve status. But if my grandmother had wheels,
Speaker 1: should be a bicycle. I mean, those are not useful comparison. Well,
Speaker 1: do you see any kind of move away from the US.
Speaker 1: Is this basically increase the fragmentation that we're seeing in
Speaker 1: frankly the strength of the alliance between say, China and
Speaker 1: Russia and even Saudi Arabia. No, you don't think so, No,
Speaker 1: I don't. I think that the Chinese are angry, and
Speaker 1: I understand why they're angry because they have a similar
Speaker 1: worldview with Putin that's very aligned. But the Chinese economy
Speaker 1: is ten x the Russian economy. So are we seeing
Speaker 1: them break American sanctions? No? Why because they don't want
Speaker 1: to lose their business with the Americans, the Europeans, the Japanese,
Speaker 1: and we seen them provide military support to the Russians.
Speaker 1: Know what we saw is that a China that feels
Speaker 1: antagonized and annoyed did some military exercises with the Chinese.
Speaker 1: Wild Biden was in Asia symbolically important, economically useless. The
Speaker 1: single biggest thing I've gotten wrong in international relations was
Speaker 1: the end of yelts. What does the end of Putin
Speaker 1: look like no time soon? I mean, the likelihood that
Speaker 1: Putin is gonna removed is extremely low until after it happens, right,
Speaker 1: I mean, clearly, if you're thinking about trying it, you're
Speaker 1: not letting anybody know, or it's it for you and
Speaker 1: your friends and your family. Um. But the fact is
Speaker 1: the Putin is quite popular in Russia right now, and
Speaker 1: it's not just because they control information. It's also because
Speaker 1: they believe that they've been humiliated by the West four
Speaker 1: decades and Putin is the guy that is saying I
Speaker 1: won't have it. Um, that's populism. You've seen in the
Speaker 1: United States, you seen Brazilians in a lot of countries.
Speaker 1: If Putin leaves that feeling of resentment and antagonism towards
Speaker 1: the West West kind of well, no, it'll be someone
Speaker 1: else from the National Security Council. I got ten seconds.
Speaker 1: How many times did you rewrite the power of crisis
Speaker 1: since it had to go to press on the six
Speaker 1: of May. Uh those last two days were very significant,
Speaker 1: Dr brother, thank you. So is with Eurasia Grove, we
Speaker 1: will attempt to migrate to what matters. And with Scott Miner,
Speaker 1: who has been of such support to us in our
Speaker 1: coverage of the Federal Reserve. As Chief Investment Officer of Guggenheim,
Speaker 1: we are going to digress because we are three days
Speaker 1: in here and we have yet to mention the collapse
Speaker 1: of bitcoin and the rest of critical it. So this
Speaker 1: is a side topic for Mr Minor is certainly not
Speaker 1: his wheelhouse. But you've been focused on it. When you
Speaker 1: talk about crypto, what does everyone else at Guggenheim think?
Speaker 1: Are they? Do they leave forward and hang on every word? Uh? Well, yes,
Speaker 1: because I'm probably the only person who spends enough time
Speaker 1: looking at it. Um, I mean it's it's uh, you know, Tom,
Speaker 1: I was an early believer in crypto. I remember getting
Speaker 1: looking into bitcoin first when it was at a hundred dollars. Uh.
Speaker 1: I did a presentation up at the Nantucket Project on crypto, Uh,
Speaker 1: you know, how to deal with it, how to invest
Speaker 1: in it? And I really thought that, um, you know,
Speaker 1: this is a viable investment vehicle. But one of my
Speaker 1: big concerns is that no one has cracked the paradigm
Speaker 1: in crypto. And when I say they cracked the paradigm, uh,
Speaker 1: it's use as a currency, right, as you know, the
Speaker 1: definition of a currency is that it's a medium of exchange,
Speaker 1: it's a store of value, it's a unit of account
Speaker 1: that the last ninety days not at all. And so
Speaker 1: we we've learned that none of this stuff stable coins,
Speaker 1: the whole bit everything is suspect. You're a really, really
Speaker 1: bright guy. I want you to explain the divide between
Speaker 1: Alan Hour at the Bank of International Settlements, who owns
Speaker 1: a high ground, with Ken Rogoff at Harvard on the
Speaker 1: study of bitcoin and in the entire scarcity that derives
Speaker 1: scarcity of it, with the community of bitcoin that just
Speaker 1: seems miles apart, and they won't read Alan Hour right now. Well,
Speaker 1: I think, look, because bitcoin and any any cryptocurrency at
Speaker 1: this point has not really established itself as a credible
Speaker 1: institutional investment, right Uh, It's really become the market of
Speaker 1: a bunch of Yahoo's and backwaters. And I know I'm
Speaker 1: already going to be plastered on Twitter now for what
Speaker 1: I just said. You get back to your desk exactly.
Speaker 1: Use the cell phone just melted down over there. But
Speaker 1: you know, when you consider we have nineteen thousand digital
Speaker 1: currencies or cryptos or whatever we want to call them today,
Speaker 1: most of them are junk. They don't make any sense whatsoever.
Speaker 1: Do you have any crypto asset investments? We did. We
Speaker 1: had bitcoin. We bought it around twenty thousand. We soldered
Speaker 1: at forty thousand UM, and I really thought we were
Speaker 1: going to correct, you know, after we got to sixty,
Speaker 1: I thought we would correct to thirty. We got there. Uh,
Speaker 1: and then I began to look at it and say,
Speaker 1: why are we stopping here? And so my latest work,
Speaker 1: which is entirely technical because there's nothing else to look
Speaker 1: at here, is that we were probably going to hit
Speaker 1: eight thousand dollars before what was the number eight thousand
Speaker 1: until we totally flush. I mean, if I were, i'd
Speaker 1: be short. That'll get me shot to You've been predictably
Speaker 1: barished for a while talking about how you do think
Speaker 1: that the US is heading towards recession, but you've remained
Speaker 1: a sanguine on certain risk assets amid this because of
Speaker 1: the short term. Has that changed as people bring forward
Speaker 1: the slow slowing growth narrative, It definitely. It isn't the
Speaker 1: slowing growth narrative that caused me to change. It was
Speaker 1: my time at Stanford a few weeks ago at the
Speaker 1: Hoover Central Bank Conference, and I saw current FED officials,
Speaker 1: ex Fed officials and the uniformly were extremely hawkish. Um
Speaker 1: I engaged in opportunities to talk about the market and
Speaker 1: the functioning of the market, and so on and so forth.
Speaker 1: The bottom line is is that short of uh a
Speaker 1: sudden collapse in in equity prices, I don't believe the
Speaker 1: Federal Reserve is going to respond. The words I kept
Speaker 1: saying is as long as the decline remains orderly, we
Speaker 1: would like to see financial conditions tighten. And that that
Speaker 1: I think is the game plan in the land of
Speaker 1: Michael us In, particularly in the land of John Taylor,
Speaker 1: in the Taylor rule. Obviously this is a whole original
Speaker 1: architecture for everybody involved in economics. But if a central
Speaker 1: bank blinks, how is that expressed? Is it going to
Speaker 1: be expressed through dollar dynamics? Absolutely? I think give the
Speaker 1: Fed blinks, we're gonna make some news here, give me
Speaker 1: a dollar call. Well, I think as long as we
Speaker 1: stay the course on tightening, which I think we will
Speaker 1: through the summer, the dollar is going to do fun.
Speaker 1: But if the Fed blinks because of of financial panic,
Speaker 1: which I think there's a high probability of towards the
Speaker 1: second half of the year, and then I think that
Speaker 1: the dollar will come under pressure. What happens though, if
Speaker 1: it doesn't, if the FED doesn't blink because of that,
Speaker 1: but because growth is actually slowing, which is basically what
Speaker 1: people are pricing in right now, right. But I think
Speaker 1: that for the FED, the dynamic is not the slowing growth,
Speaker 1: it's the inflation number, right, and the the growth can
Speaker 1: slow and we can still have high inflation, which you
Speaker 1: know Tom is very familiar with. We called it stag inflation. Um,
Speaker 1: and uh, I don't buy into that whole dynamic, but
Speaker 1: I'm just saying that that they're they're tightening. I think
Speaker 1: financial conditions faster than they can you use a tailor rule.
Speaker 1: Given the fiscal impulse we had off a natural medical disaster. Well,
Speaker 1: I don't think so. And I think, um, Tom, what
Speaker 1: we're looking at here is more akin to the post
Speaker 1: Second World War period. So you're gonna give me a
Speaker 1: forty seven analogy here exactly. And the the analogy is
Speaker 1: that we had inflation in the FED stopped expanding, the
Speaker 1: balance sheet, stopped monetizing debt, phisical spending was reduced. At
Speaker 1: the end of the war, we had supply shocks as
Speaker 1: as consumers looked to buy consumer goods. At the end
Speaker 1: of the war, factories were geared for wartime, and by
Speaker 1: forty nine we had a mild recession. Stocks had pulled
Speaker 1: back and it went fine. It's the problem I'm seeing
Speaker 1: is that we're raising rates and we're gonna shrink the
Speaker 1: balance sheet at the same time. And I can remember
Speaker 1: sitting I think with you on Bloomberg back in December
Speaker 1: of two thousand eighteen when the chair made his famous
Speaker 1: statement that the the shrinking of the balance sheet was
Speaker 1: on autopilot. And the next day we were mopping up
Speaker 1: from the Fed and the stock market was down. I
Speaker 1: can't remember what I had for dinner last night. It
Speaker 1: Scott minored of GUK and I'm thank you so much,
Speaker 1: and hopefully you will remember many more things from this meeting.
Speaker 1: I know that it has been very productive for you
Speaker 1: and for many people joining us now. Neila Richardson, chief
Speaker 1: economist at a DP and proud mother. The trends here
Speaker 1: are international, but there's a domestic overlay. Mr Gentalini, speaking
Speaker 1: of recession, I'm worn out by it. Brian Moyne had
Speaker 1: a Bank of America making clear yeah to happen, But no,
Speaker 1: what is the call of your steam group? You know?
Speaker 1: I think that the fundamentals in the US they're still
Speaker 1: pretty strong. Whenever the FED starts raising interest rates, the
Speaker 1: specter of inflation goes from the back burner to the
Speaker 1: front burner and people are talking about it. I also
Speaker 1: think that ten years of economic expansion has dulled our
Speaker 1: senses that recessions are routine. They happen periodically, um, and
Speaker 1: it doesn't imply that even a recession will be deep
Speaker 1: or long. But that being said, I think globally there
Speaker 1: are going to be countries that have some really serious challenges.
Speaker 1: And the purpose of Davos is to go beyond the
Speaker 1: domestic and recognize that what happens abroad doesn't stay abroad,
Speaker 1: it comes back home. So what's the most notable thing
Speaker 1: that you've discussed while at Davos about that interconnectiveness. I
Speaker 1: think this tension around deglobalization is being dismantled. And so
Speaker 1: this is my hope, um, with all the concerns and
Speaker 1: crisis there are in the world when it comes to everything,
Speaker 1: even my perspective something very domestic labor markets. You can't
Speaker 1: stay local, not even with labor If you look at
Speaker 1: the trends that are moving the jobs markets a real
Speaker 1: economy over the next ten years, it's democratic, democrat, demographics
Speaker 1: and digitization. Those are not local phenomena. So we're talking
Speaker 1: about a lot of secular changes amid some of these
Speaker 1: crises that we're talking about. Whether it's the Ukrainian War
Speaker 1: that's very much focusing the conversation, or the shutdowns over
Speaker 1: in China. People are honing in on data that is
Speaker 1: starting to slow soft data. Do you think that will
Speaker 1: be reflected in the hard data enough to really move
Speaker 1: away from some of the hard landing scenarios? You know,
Speaker 1: the risks are accelerating, and I think every country has
Speaker 1: experienced the pandemic slightly differently, and so there is uh
Speaker 1: no gear and tee that there won't be turbulence for everybody. Um,
Speaker 1: we're hoping that there won't be crashes, but hard landings
Speaker 1: I think are inevitable. Excuse me, sorry, no, I know
Speaker 1: it's my bad. But as a group, bad folks group bad.
Speaker 1: But where do you expect the hard landings to come?
Speaker 1: The places where the food crisis is most acute? So, um,
Speaker 1: I know that we spend a lot of time talking
Speaker 1: about monetary policy. I'm coming from the really economy, and
Speaker 1: nothing's more real than what you play. Let's get on
Speaker 1: the curve. This is aport. I had a panel of
Speaker 1: this morning with get to Go Open f Masicado Uh
Speaker 1: and Uh Jim Jim Uh shadow of marisk and of
Speaker 1: Semens and I quoted from the New York Times in
Speaker 1: the paper this morning of renters in New York now
Speaker 1: pay over fifty of their income for their monthly rent.
Speaker 1: The middle class and you any peep guy, they know
Speaker 1: this better than anybody. The middle class is flat on
Speaker 1: their back. Is there a policy prescription you see in
Speaker 1: Washington to not protect them but assist them as we
Speaker 1: come off this high nominal GDP? The operative word in
Speaker 1: that question is now. I would argue that that's been
Speaker 1: a decade long or more challenged, that the housing market
Speaker 1: has been chronically undersupplied, and in fact, at least New
Speaker 1: York City has, you know, subsidized rents in a way
Speaker 1: that most of America doesn't have. But it is a
Speaker 1: key challenge. Is a challenge that there used to be
Speaker 1: a housing platform around um but that platform was dismantled
Speaker 1: during the Great Recession, and it hasn't been completely restored,
Speaker 1: and so we do have a policy challenge when it
Speaker 1: comes to affordable housing, and it's everywhere. How lone is
Speaker 1: Brian moyneheady pops to twenty two dollars per hour with
Speaker 1: a set of other initiatives for people under a hundred thousand?
Speaker 1: Is he alone or is that a new trend for rich,
Speaker 1: fancy America. I would argue, yes, he's not alone. There
Speaker 1: are There is a trend, and I think we'll see
Speaker 1: that contenue. But there's only so much raising wages will
Speaker 1: do to address the chronically low housing supply. It just
Speaker 1: makes the rent absolutely and in the short term that's
Speaker 1: that's really really valuable. In the longer term, you have
Speaker 1: to build and that requires investments at a local level,
Speaker 1: which is a challenge in this country. When do you
Speaker 1: think that we're going to see an appropriate level of
Speaker 1: wage gains? And I say this because talking to Tom's point,
Speaker 1: people are now saying the wage gains are too problematic
Speaker 1: because they're going to just fuel inflation. What's the appropriate
Speaker 1: rate that we should be looking for? It depends on
Speaker 1: who you ask, because if you look at the people
Speaker 1: who have experienced the greatest wage gains. That's the lowest
Speaker 1: quartile of people who are getting paid right now in
Speaker 1: terms of the hourly wages. They are actually making your
Speaker 1: over your wages according to ADP data, UH of eight
Speaker 1: point three percent. You're on ye. What's the middle doing?
Speaker 1: They're keeping up with the inflation. It's closer to three percent.
Speaker 1: Tom on the middle, so the lower But you have
Speaker 1: to look at not just the rate of change, but
Speaker 1: the levels. What's that eight percent represents. It's basically less
Speaker 1: than two dollars an hour. It doesn't even fill your
Speaker 1: gas tank. That's that's really important in terms of the
Speaker 1: most important domestic comment we've heard since we've been here.
Speaker 1: What's the instagram the length on the X axis of
Speaker 1: this negative wage growth? Are you looking at three quarters?
Speaker 1: Are you looking at three years? I think three years?
Speaker 1: Remember that even with even with called years of expansion,
Speaker 1: it took a very long time to see any thing
Speaker 1: other than wage sag nation. It took a long time
Speaker 1: to see an acceleration of wages at the low end
Speaker 1: ten years. UM. If you fast forward that the three years,
Speaker 1: I hope you see stronger wage gains than inflation, but
Speaker 1: it's not guaranteed. UM and it's not happening now. That's
Speaker 1: we will continue with Neilor Richardson on our job. Say
Speaker 1: when's the neck? Were like, I've lost the calendar early June.
Speaker 1: We have a job to day right, yeah, what month?
Speaker 1: We had a couple of weeks Tailor Richardson there with
Speaker 1: a DP. This is a joy right now. And there's
Speaker 1: a joy because you know the visibility of someone like
Speaker 1: Ray Dalio and of course we gazed yesterday on the
Speaker 1: dal Yo goat farm with Bob Prince. There's Rebecca Patterson.
Speaker 1: Now there's a Bridgewater. They've got a full force compliment
Speaker 1: this year. But beneath the names, you know, are really
Speaker 1: first order people. One is Richard Falkrath, who was with
Speaker 1: us years ago expert on Russia and security and folded
Speaker 1: into that is sustainable Investing. Karen Karney Oak Timber is
Speaker 1: Chief Investment Officer, I should say co c i O
Speaker 1: of Sustainable Investing at Bridgewater Associate. So you and Falcon
Speaker 1: Roth on speaking terms, love Richard, who's such a great guy.
Speaker 1: How do you fold in your analysis the geopolitics of
Speaker 1: what everyone wants is some better outcome in climate? With
Speaker 1: his dead serious analysis of geo security, I think that
Speaker 1: what is happening now is that there's sort of a
Speaker 1: tough realization that to make progress on climate, a lot
Speaker 1: of the levers that we've put out there, for the
Speaker 1: most effective levers are actually pretty inflationary, and that's more
Speaker 1: difficult to do at a time when inflation is already rising.
Speaker 1: And at the same time, we can't really think about
Speaker 1: energy without also thinking about energy security. So now we've
Speaker 1: gone from sort of a one dimensional equation bring carbon
Speaker 1: down to a three dimensional equation to it acceptably given
Speaker 1: inflation and handle energy security at the same time. This
Speaker 1: is a critical question, and particularly I mentioned Newcastle Cole
Speaker 1: only because if I don't mention Australia every fifteen minutes,
Speaker 1: I can't be on air. But Cole is you can't
Speaker 1: even do a standard deviation analysis on Australian call. It's
Speaker 1: such a it's such a moonshot. Right now, are you
Speaker 1: amending the Bridgewater E s G view or are you
Speaker 1: pausing it waiting for a place to restart the present
Speaker 1: E s G view? You know, for us there's two
Speaker 1: types of quote s G views. One is just you
Speaker 1: can't really analyze any markets anymore without thinking about environmental
Speaker 1: social and governance issues. It's almost silly and outdated to
Speaker 1: think that you could really imagine what's going on in in
Speaker 1: the world without talking about what are people gonna do
Speaker 1: about climate change? Is governance gonna work for us, what's
Speaker 1: gonna happen within equality? To just critical issues. And then
Speaker 1: there's a different call, which is people increasingly coming to
Speaker 1: us and saying, you know, I don't just care about
Speaker 1: risk and return, I do want to think about the
Speaker 1: impact of my money is having. And coal is a
Speaker 1: great example because you might do great financial analysis and
Speaker 1: say maybe I can make a lot of money actually
Speaker 1: investing in coal and get the answer back of actually,
Speaker 1: I want my money to be supporting the transition. I
Speaker 1: don't want my money benefiting off of that. So that's
Speaker 1: really a paradigm shift in our view we're seeing in
Speaker 1: global investors. There's also been a lot of discussion about
Speaker 1: greenwashing this year, and Elon Musk's comments for very much
Speaker 1: of the Forefront where he basically really challenged some of
Speaker 1: the legitimacy of the E s G criteria. What's your
Speaker 1: response to that, especially given the fact that Brian Moynehannet
Speaker 1: Bank of America seemed to support what Elon Musk was saying.
Speaker 1: I think that you need to think about splitting what's
Speaker 1: the point in time picture and what's the forward looking picture.
Speaker 1: For point time, we should just have good answers right
Speaker 1: the same way that we know if a company today
Speaker 1: is profitable, we should have good answers about whether or
Speaker 1: not companies are emitting and what they're doing today and
Speaker 1: all these standards and sec and everything. It's gonna move
Speaker 1: us there. We're gonna get to the point where we
Speaker 1: know the answer. But then forward looking, you know, there's
Speaker 1: always been disagreement. Why do we have equity analysts. One
Speaker 1: analyst is gonna tell you this product is gonna work.
Speaker 1: One equity analyst can tell it's probably going to fail.
Speaker 1: That's how it should be. They should be analyzing what's
Speaker 1: happening in the future. This is no different. Investors are
Speaker 1: paid to predict the future. And if you're looking at
Speaker 1: a company and saying, how are they going to do
Speaker 1: over the next ten years? Are they going to succeed
Speaker 1: in transitioning what they're doing. If a company is promising
Speaker 1: you I'm gonna get out of the you know, regular
Speaker 1: vehicle business, I'm not. I'm gonna make all e v s.
Speaker 1: You gotta decide if you trust that, and that's no
Speaker 1: different than assessing other things about the future. They are
Speaker 1: on certain times. So you were talking about the inflationary
Speaker 1: aspect of having a secure and frankly a greener energy system.
Speaker 1: It's not just energy, right, it's broadly across the entire
Speaker 1: ecosystem that supply chain, and people are talking about how
Speaker 1: do you make things more sustainable If you have to
Speaker 1: look and see if it's sustainable in China, all of
Speaker 1: a sudden, you might have to pay people a lot
Speaker 1: more and do it somewhere else to do it. How
Speaker 1: much have we actually factored in the inflationary aspects of
Speaker 1: some of this shift in E s G types of investing. Well,
Speaker 1: I think these are some of the forces, the secular
Speaker 1: forces underpinning the shift from deflation to inflation. Every investment
Speaker 1: we made abroad for forty years was extremely you know,
Speaker 1: efficiency producing, You've got cheaper things out of it. And
Speaker 1: now if we want to invest because we need to
Speaker 1: turn over our energy system, by definition, we're rebuilding what
Speaker 1: we have and we need to do that in order
Speaker 1: to get have client change. If we want to rebuild
Speaker 1: because we want security, So we don't want certain providers,
Speaker 1: we want others, or we just want to have resilience
Speaker 1: in the supply chain. If this one goes down, I
Speaker 1: can have these three others. That's proactive new spending that
Speaker 1: doesn't create savings the way that old ones did. So
Speaker 1: these are secular reasons why you're going to get inflationary spending. Karen,
Speaker 1: we have a Bloomberg hut Rathi. It was leading our
Speaker 1: coverage on green. He write some newsletter called net zero
Speaker 1: which is read worldwide. And his religion off of his
Speaker 1: chemistry work, is it's science based. Are the corporations that
Speaker 1: Bridgewaters talking to are they science based or are they
Speaker 1: almost pr and policy based? Is there science underneath the
Speaker 1: E S G of business? Mean, Look, there's a wide
Speaker 1: range because this is all changing so fast. So I'd
Speaker 1: say two years ago, the average investor we talked to
Speaker 1: it sort of say it's great you guys doing sustainability,
Speaker 1: but that's not part of what I do. That's totally
Speaker 1: different today, and so companies are getting really increasing pressures
Speaker 1: from their investors. They're asking tougher questions, they have better data,
Speaker 1: So what was sufficient you know, even six months or
Speaker 1: a year ago might be something glossy that doesn't mean much.
Speaker 1: It's increasingly being consed big oil right now. Is Delio
Speaker 1: up to his eyeballs in big oil? I would say
Speaker 1: that in a strategy where you care about the impact
Speaker 1: of your money alongside risk and return, no big oil
Speaker 1: company as yet reached that bar, but it can because honestly,
Speaker 1: they have a lot of expertise that could really meaningfully contribute,
Speaker 1: and so we could easily see in the next you know,
Speaker 1: year less an big oil company saying this is how
Speaker 1: we're gonna use your expertise. But how much does this
Speaker 1: moment challenge the move to green Considering the fact that
Speaker 1: everyone's rushing head over heels into commodities to protect against inflation,
Speaker 1: including big oil, I think that commodities are a very
Speaker 1: important inflation hedge, and that the idea that you wouldn't
Speaker 1: own commodities if you care about the transition is totally wrong.
Speaker 1: Do you know how much we need to get out
Speaker 1: of the ground of things that are not oil, whether
Speaker 1: it's copp or lithium, iron, you name it, in order
Speaker 1: to have a transition. There's no transition without commodities. And
Speaker 1: so this idea that to be green. You know, they're
Speaker 1: definitely bad practices at some of the miners, but responsible
Speaker 1: investors should try to shift those practices because there's no
Speaker 1: future without getting more of those things out. And the
Speaker 1: reality is these are long supplied man dynamics. It takes
Speaker 1: you years to get a copper mine up and running
Speaker 1: and actually supply on. So for an investor that's seeing
Speaker 1: supply demand pressures and saying an inflationary protection, these are
Speaker 1: grain inflation protection assets. Karen think Karen Colonel Timber with
Speaker 1: us with Bridgewater Associates. I got a lovely email yesterday
Speaker 1: as with the former Prime Minister of Finland. I tried
Speaker 1: to mention something most Americans don't know about, and that
Speaker 1: is the Winter War. I believe it was thirty nine
Speaker 1: were five thousand of Finland and so many others of
Speaker 1: Scandinavia gave their lives. This is front and center for
Speaker 1: the discussion of Finland and Sweden as they consider a
Speaker 1: new Russia. Mcael Donberg as a Swedish finance minister and
Speaker 1: joins us this morning. This morning at is front and
Speaker 1: center your Prime Minister, Prime Minister Anderson, with these very
Speaker 1: difficult decisions for a neutral suite and I believe to
Speaker 1: fifteen twenty three. How are abrupt is this change for Sweden,
Speaker 1: knowing the history of World War two and knowing where
Speaker 1: we're going now with Russia. It's a huge decision for
Speaker 1: us because we've been non aligned for two hundred years.
Speaker 1: So actually we're one of the countries in the world
Speaker 1: that has been in peace for the longest time. So
Speaker 1: for us taking the decision after the Russian invasion of
Speaker 1: Ukraine to change and to see that our security is
Speaker 1: stronger within NATO than outside, it is a historic decision.
Speaker 1: From am I've never understood the politics and social humor
Speaker 1: or seriousness from the distance from Oslo to Helsinki, across
Speaker 1: in Denmark as well across all of Scandinavia. I'm not
Speaker 1: informed on it. How colst How united is Scandinavia, Denmark, Norway, Sweden,
Speaker 1: Finland at this time of crisis, enormous unity because we
Speaker 1: we we share borders, we share history. As you mentioned, Finland,
Speaker 1: Finland and Sweden us the same country for hundreds of years.
Speaker 1: Before Finland became their own country, they were part of Sweden,
Speaker 1: and my grandfather actually died in in the Winter War
Speaker 1: nineteen nine. My mother was four years old when she
Speaker 1: was sent from Helsinki to Sweden as a ward child.
Speaker 1: What was Mr Putin thinking knowing that history, I don't understand.
Speaker 1: Given everything I've read about the resiliency of the Baltic
Speaker 1: Sea and the people that surrounded frankly, including northern Germany
Speaker 1: at the time, what did he misjudge about Sweden? I
Speaker 1: think he misjudged the situation in Ukraine. He thought that
Speaker 1: he could just go in take Ukraine and the brother
Speaker 1: people of Ukraine and Russia would unite in Greater Russia.
Speaker 1: I think that was a very mistake because now they
Speaker 1: invaded a democratic country. They sent a signal not least
Speaker 1: to Finland with one thirty miles mile in English. I
Speaker 1: don't know the English world, but very very long boarder.
Speaker 1: Extremely historic moment with your bid for NATO. It's also
Speaker 1: historic moment with some of the economic backdrop that you're
Speaker 1: facing as finance minister and the inflationary inputs. I know
Speaker 1: that a lot of European countries are turning to subsidies
Speaker 1: to offset the burden, particularly for lower income What are
Speaker 1: you working toward? What is your next plan? First of all,
Speaker 1: Sweden is in a different position. We don't have a
Speaker 1: dependence on Russian oil or gas. We have a hundred
Speaker 1: percent fossile free energy system in Sweden, but we get
Speaker 1: affected anyway because of the joint pricing system in Europe,
Speaker 1: so the prices are very high. So with this winter
Speaker 1: we actually went in and gave support to household with
Speaker 1: very high electricity bills. And now we also have a
Speaker 1: scheme that we we lowered the kind of burden on
Speaker 1: people that drives car. Sweden it's a very long country
Speaker 1: that you have to have a car to actually live
Speaker 1: your life and go to work. How is you how
Speaker 1: do you counter the fragmentation of a system that is
Speaker 1: unified only about how high the prices are for everyone nobody.
Speaker 1: I think Europe has shown tremendous unity and together with
Speaker 1: US on sanctions on Russia. So just six months or
Speaker 1: a year ago, people are talking to Europe, can Europe unite?
Speaker 1: Will Europe split up? Now we see a more united
Speaker 1: Europe than ever. So I think this crisis has actually
Speaker 1: brought Europe together in a tremendous way. Swedish economics is acclaimed.
Speaker 1: The contribution of the central bank to monetary theory and
Speaker 1: thinking has been there forever tell us about the Swedish
Speaker 1: currency with Europe. I mean, we look at euro swissy,
Speaker 1: we look at euro Hungarian foreign is a mortgage proxy
Speaker 1: as well. Tell us how you treat the Swedish currency.
Speaker 1: It's the central bank that handles the currency. But I
Speaker 1: could go to the Constitutional Committee to have opinion about
Speaker 1: the central bank in Sweden because it's under the parliament,
Speaker 1: not under the government. But they have made decision to
Speaker 1: hire interest rate and they have a plan for it
Speaker 1: going a bit faster than the European Central Bank, but
Speaker 1: a bit after the American Fed. So I think this.
Speaker 1: We usually are in between US and Europe and don't
Speaker 1: mean to interrupt, but this is too important. Do you
Speaker 1: have Swedish Central Bank minutes like we do. We report
Speaker 1: our minutes six weeks after the meeting. Yeah. Do you
Speaker 1: read them? Yes? And and the central bank always calls
Speaker 1: me and tells me about their decision, So I understand it. Okay,
Speaker 1: really you're asking for justification for you but we all
Speaker 1: know this. I know he's looking for justification from the
Speaker 1: Finance Minister of Sweden for not reading the minutes. He didn't.
Speaker 1: I think it's fascinating. Thank you so much. I will
Speaker 1: read them for you. Thank you so much, Thank you
Speaker 1: too much. Was time right now and this is an
Speaker 1: important conversation for markets. Is something that is in Davos,
Speaker 1: but I think in a really clumsy way. In Davos,
Speaker 1: painted on every hotel, on every wall, on every storefront
Speaker 1: is a nation or a company bragging about infrastructure. We're
Speaker 1: gonna build this, We're gonna build that. Infrastructure is misunderstood.
Speaker 1: Infrastructure is something it's easy to talk about and it's
Speaker 1: much harder to do at Carlyle doing it as a
Speaker 1: gentleman from Quebec Hydro of years ago in Montreal, Macital
Speaker 1: joins US now Global Infrastructure Chairman of Carlyle. Thank you
Speaker 1: so much for joining us UH this morning. What is
Speaker 1: the biggest thing we get wrong about the ginormous infrastructure
Speaker 1: projects you're looking at well, I think as as you
Speaker 1: the reason why you see that everywhere in Davas is
Speaker 1: for a good reason. The world is in dire need
Speaker 1: of infrastructure. For decades, there has been under investment across
Speaker 1: the sector and infrastructure need. If you look at civil infrastructure,
Speaker 1: are roads or bridges or water systems. If you look
Speaker 1: at the energy infrastructure, if you look at other sectors
Speaker 1: digital infrastructure. In the more recent past, the economy has
Speaker 1: been fast digitalizing across sectors. That has been accelerated by
Speaker 1: the pandemic that creates huge investment requirement in data in
Speaker 1: data center, in UH, fiber into homes and the like.
Speaker 1: What is the constraint? What is the holding up of this? If?
Speaker 1: If Carlisle and others are up to their eyeballs in capital,
Speaker 1: why is infrastructure delayed? Um, it is delayed by the
Speaker 1: needs of all the infrastructure but also new sectors. UH.
Speaker 1: The energy transition is requiring humongous, huge quantities of in
Speaker 1: ESSE months to be able to meet that climate challenge
Speaker 1: to Earth Faces. I was mentioning digital infrastructure, So I
Speaker 1: think the challenge is the sheer nature of the investment needs.
Speaker 1: I think governments are doing what they can, but the
Speaker 1: private sector and private groups like carl and private equity
Speaker 1: groups have a role to play because we have the capital,
Speaker 1: expertsise and and capability to also contribute to filling that gap.
Speaker 1: But it is the size of it. How difficult is
Speaker 1: it to game out profitability of a company in transition?
Speaker 1: That's sort of it is sort of bedrock of a transition,
Speaker 1: particularly with energy well, we take as a principle to
Speaker 1: carefully select our investment, to make sure that every every
Speaker 1: investment we make is profitable. We manage money for our
Speaker 1: own peace who represent you know, private people. So we
Speaker 1: believe that that's present everywhere. In particular, and energy transition, Lissa,
Speaker 1: I mean the investment opportunity created by the energy transition,
Speaker 1: we think is significant. It's possibly one of the most
Speaker 1: significant in the investment space. So can you give us
Speaker 1: a sense of tangible types of investments and the possible
Speaker 1: r o I that you're looking at. Yes, of course, Well,
Speaker 1: in particular, let's take renewable energy, which is an area
Speaker 1: that we have been active into insectors like wind, solar,
Speaker 1: in emerging sectors like batteries, energy storage in the form
Speaker 1: of battery. You have emerging sectors which I will get
Speaker 1: into in a second. In that case, clearly, if you
Speaker 1: have the skill set and capacity to develop these projects,
Speaker 1: to properly locate a solar project in the right location,
Speaker 1: close to a lot center, close to the right interconnection,
Speaker 1: where there is a good solar resource, you're able to
Speaker 1: generate with that capacity robust double digit returns as a
Speaker 1: result of that development and being able to deliver that
Speaker 1: project to customers that have an appetite for that clean power.
Speaker 1: If you invest in existing, already developed renewable projects, then
Speaker 1: you do not have that development premium, and so you're
Speaker 1: investing into more operating renewable projects. In that case, you
Speaker 1: may be looking at a single digit load doable digitire,
Speaker 1: but more in the single digit I would say, given
Speaker 1: the lower risk returned profile, if rates go up, does
Speaker 1: your r R go up? Where are we in the
Speaker 1: continue do you see a longer rate, higher rate regime
Speaker 1: before Highers Just well, I mean, Tim, you're referring to
Speaker 1: the fact that we are in an environment where rates
Speaker 1: are increasing, where there is inflation, and what I would
Speaker 1: say it's an important point for investors is to face
Speaker 1: that challenging environment. There is a need for a diversified portfolio,
Speaker 1: and we believe that infrastructure contributes in a robust way
Speaker 1: to a portfolio that's going to be more resilient in
Speaker 1: that environment. The reason that they are that these infrastructure
Speaker 1: investments by their nature, where you have high visibility on
Speaker 1: the revenue. Often if you take renewable project, the revenues
Speaker 1: are contracted long term with indexation mechanism. In the contracts.
Speaker 1: So I don't think you make more money out of
Speaker 1: higher interest rates, but you get the degree of protection
Speaker 1: because your revenues are indexed to that. I please visit
Speaker 1: us in New York. I mean, there's so much to
Speaker 1: talk about here. McTell got one question. We see the
Speaker 1: miracle of a Guardia, world's worst airport. Finally with a
Speaker 1: constortion of investors. Is fine. There's optimism. They're optimisms that
Speaker 1: we can refurbish and that we can rebuild quickly. Here
Speaker 1: can Carlile taken on the Montreal Canadians and refurbish and
Speaker 1: rebuild them. Is Canada's infrastructure project that would be I'm
Speaker 1: sure a project that you know the challenge might be difficult.
Speaker 1: I would remind you that the Mantrel can agent finished
Speaker 1: close to last or last in the league, so that
Speaker 1: might be more difficult. Thank you that investment. I'm sorry,
Speaker 1: Zone Belloo, there's no internal ready to return this year
Speaker 1: on the Montreal Canadians. He of Montreal mackital Carlisle with
Speaker 1: us today now without question, my most important interview of
Speaker 1: his Davos on Asia, the focal point of the South China.
Speaker 1: See because sure marble Bonni joins us to say that
Speaker 1: he's Distinguished Fellow of the Asia Research Institute at the
Speaker 1: National University of Singapore barely describes his contribution to the
Speaker 1: highest compliment I could give him. Even the people that
Speaker 1: disagree with him read his books to go to try
Speaker 1: to understand the true the Swirl of Asia Marble Bonnie,
Speaker 1: thank you so much for joining Bloomberg to my leisure.
Speaker 1: Has China One? What a provocative book a number of
Speaker 1: years ago. Give us the update we need. Has China One? Well?
Speaker 1: I think clearly twenty twenty two is a bad year
Speaker 1: for China, and because partly because they're struggling to get
Speaker 1: out of COVID nineteen domestics, a domestic storm they have
Speaker 1: to deal with, and then Joe politically. Of course, China
Speaker 1: has also suffered from the Russian invasion of Ukraine on
Speaker 1: several counts, just a few examples. Number one, as I said,
Speaker 1: China wanted stability into any two because they're having a
Speaker 1: major political conference lator this year. Instead they get instability.
Speaker 1: The number one strategic partner, Russia has been weakened. They
Speaker 1: wanted to deal with the United States and Europe separately.
Speaker 1: Now there's been a consolidation of the West, which is
Speaker 1: obviously a negative for China. And fourthfully, of course they
Speaker 1: didn't expect the Russians and of bank reserves could be
Speaker 1: taken away so easily by the West and China. As
Speaker 1: you know, Russians only have seven billions, but the Chinese
Speaker 1: have three point two trillion dollars of assets, and the
Speaker 1: assets cannot become liability, so too, therefore is a bad year.
Speaker 1: But I think the Chinese have also shown a capacity
Speaker 1: to manage crisis very well. So I would say same
Speaker 1: time next year when you come back, things will probably
Speaker 1: be better for China and the long term trajectory will
Speaker 1: continue after lockdown. And I'm thinking of Robert T. Caplan's
Speaker 1: wonderful Asia's Cauldron of the tour around yourself China see
Speaker 1: including your Singapore. After the lockdown, China feels they own
Speaker 1: a huge part of that body of water. How does
Speaker 1: Asia's Cauldron respond to China and particularly after the election
Speaker 1: of Marcos Jr. In Philippines. Well, the good news I
Speaker 1: can give you is that even though the Chinese have
Speaker 1: drawn a nine dash line which seems to imply that
Speaker 1: they're claiming ownership of the South China see, I can
Speaker 1: categorically say that they do not claim ownership of the
Speaker 1: South China Sea, and they actually allow total freedom of
Speaker 1: navigation through those waters, and China doesn't regard those waters
Speaker 1: as internal waters. How badly to Singapore and the other
Speaker 1: nations of the Pacific RIM need the United States to
Speaker 1: show the flag with the dynamic navy and also with
Speaker 1: the reinvigorated based structure across the Pacific RIM. Well, as
Speaker 1: you know, the reason why East Asia is the most
Speaker 1: successful and most dynamic economic region in the world is
Speaker 1: because the United States has had this is I'm talking
Speaker 1: about fifty sixty years a consistent commitment to keeping that
Speaker 1: region stable and secure and allowing growth and prosperity. And
Speaker 1: Asian you know, the Southeast Asia tends out. These Asian
Speaker 1: nations have done very well primarily also because of the
Speaker 1: American presence. And just give you one statistic. In the
Speaker 1: year two thousand, Japan's economy was eight times the size
Speaker 1: of US Ian. Now it's only one point five times
Speaker 1: larger by any bigger than Japan and down just like radio,
Speaker 1: you're getting an endorsement right there. Now, there is a
Speaker 1: really very real question underpinning of what you've just discussed,
Speaker 1: which is the rise of China, maybe paused by the pandemic.
Speaker 1: It's been a very bad year. How far have they
Speaker 1: pushed out their overtaking the US in terms of size
Speaker 1: of their economy? Well, I mean the Chinese economy has
Speaker 1: literally exploded. Let me give you another statistic. In twenty twelve,
Speaker 1: ten years ago, China's g NP was eight and a
Speaker 1: half trillion dollars. Two, it's eighteen trillion dollars. No country
Speaker 1: in human history has added ten trillion dollars to its
Speaker 1: economy in one decade. So the long term growth trajectory
Speaker 1: of China, this in t T two will slow down,
Speaker 1: no doubt whatsoever, but he will bounce back up because
Speaker 1: the Chinese have made massive investments, you know, in the economy.
Speaker 1: Do you think that people here at Davos, the representatives
Speaker 1: fully understand this at a time when China is not
Speaker 1: represented and the main focus has really been on Ukraine
Speaker 1: and Russia. Well, as you know, Davos is like an onion.
Speaker 1: What you see in the open sessions and public sessions
Speaker 1: is what they're talking about publicly, but equally important at
Speaker 1: the all of the onion of Davos, that hundreds of
Speaker 1: private conversations, private dinners, private encounters. And as someone who
Speaker 1: wrote a book called has China One, I can assure
Speaker 1: you that there's a lot of interest in China and
Speaker 1: what it means. I mean, people know intuitively that within
Speaker 1: ten to fifteen years China will have the largest economy
Speaker 1: in the world and the world will be very different.
Speaker 1: So how are people positioning for that in those private
Speaker 1: conversations inside the onion? Well, I think what's happening is
Speaker 1: that there seems to be a bifurcation between the Western
Speaker 1: approaches and the rest of the world. And by the way,
Speaker 1: out of the world's population, twelve percent live in the West,
Speaker 1: eight percent live outside the West, and most of the
Speaker 1: eight percent in Latin America. And just give it quickly
Speaker 1: one statistic. Ten years ago, it took Brazil like one
Speaker 1: year to export one billion dollars to China. Now it's
Speaker 1: exempted two hours. Okay, So you see that, You see
Speaker 1: the dramatic changes. So the rest of the world understands
Speaker 1: that they have to adapt and adjust to a new China.
Speaker 1: And the more we can engage China multilaterally, and this
Speaker 1: is what we hope the United States will do in
Speaker 1: a sense and mash China in various multilateral arrangements, which
Speaker 1: will then frankly, a strange China. I think as of now,
Speaker 1: while they are still number two, I think they're very
Speaker 1: the Chinese, you know, Chinese, in the Chinese psyche, after
Speaker 1: four thousand years of Chinese civilization, what they fear most
Speaker 1: is chaos. That's a Chinese word for it. Loe. And
Speaker 1: if rules, if rules give stability, they'll accept the rules
Speaker 1: were running out of time. And this is so important
Speaker 1: because I can't say enough about it. Do we need
Speaker 1: a dose in America of kissingerion real politic? I mean,
Speaker 1: what do you need from America to change the dialogue?
Speaker 1: Where the fact is the legislature of the United States
Speaker 1: does not want to engage with China. So what's the
Speaker 1: real politics that we need to begin to look post
Speaker 1: World War two, post Vietnam in a new Pacific rim.
Speaker 1: You're absolutely right. In fact, the central insight of my
Speaker 1: book Has China One is based on a lunch conversation
Speaker 1: I had one on one with Henry Kissinger where he
Speaker 1: said that what the United States really needs is a comprehensive,
Speaker 1: long term strategy for managing the rise of China to
Speaker 1: match the comprehensive long term strategy that China has to
Speaker 1: manage its relationship with the United States. So it is
Speaker 1: Henry Kissinger who gave me the central insight for my book.
Speaker 1: Thank you so much for taking the time of the
Speaker 1: National University of Singapore. This is the Bloomberg Surveillance of podcast.
Speaker 1: Thanks for listening. Join us live weekdays from seven to
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Speaker 1: Keene and this is Bloomberg