WEBVTT - Surveillance: Delayed Ukraine Rate Decision 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, sun Cloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.360 and of course on the Bloomberg terminal. Right now, joining us, 0:00:30.360 --> 0:00:32.320 and we welcome all of you on Bloomberg Radio and 0:00:32.360 --> 0:00:36.760 Bloomberg Television worldwide and particularly on the continent of Europe. 0:00:37.240 --> 0:00:41.320 The Ukraine at National Bank Deputy Governor Serge Nikolai Chuck 0:00:41.400 --> 0:00:44.960 joins us now from his Ukraine. Thank you so much, 0:00:44.960 --> 0:00:47.520 sir for joining us this morning. I want to stay 0:00:47.560 --> 0:00:50.600 on the financial right now. So many questions to ask you. 0:00:51.120 --> 0:00:55.000 What do you need is an institution, your economist? What 0:00:55.120 --> 0:00:58.360 do you need now from the Bank of International Settlements 0:00:58.640 --> 0:01:01.440 and the major central bank acres such as chairman Power, 0:01:01.840 --> 0:01:05.240 what do they need to do to assist your nation? 0:01:07.560 --> 0:01:10.399 Thank you very much for inviting me, and thank you 0:01:10.480 --> 0:01:14.680 very much for the globe for supporting the Ukraine against 0:01:14.800 --> 0:01:20.520 this Russian aggression. Definitely today's today, we are very happy 0:01:20.680 --> 0:01:28.000 that major advanced countries and also international financial organizations support 0:01:28.319 --> 0:01:32.600 US and also we try to do our best to 0:01:32.760 --> 0:01:37.560 impose as most harsh sanctions to Russia in order to 0:01:38.280 --> 0:01:44.160 in order to UH increase the cost of this invasion 0:01:44.440 --> 0:01:49.760 on Ukraine. Coming back to your question regarding BI S 0:01:49.800 --> 0:01:54.560 and I AM. So far, we tried to persuade the managers, 0:01:54.680 --> 0:01:59.080 the leaders of this UH, of this organization that in 0:01:59.200 --> 0:02:05.600 the car environment, Russia cannot be allowed to be the 0:02:05.800 --> 0:02:11.040 member of this respected organization in the situation with where 0:02:12.560 --> 0:02:18.240 with this such military military aggression and direct invasion into 0:02:18.240 --> 0:02:22.959 the territory of Ukraine. That's why we approach this organization 0:02:23.040 --> 0:02:28.000 with the request to suspend the membership of the Russia 0:02:28.160 --> 0:02:34.280 in UH. In a way in the financial organization of 0:02:34.400 --> 0:02:36.239 the world, it's definitely cover it. Do you know you 0:02:36.320 --> 0:02:38.760 aware of the I m F and whether it's helping 0:02:38.800 --> 0:02:42.160 the Russians understand the sanctions and work around the sanctions 0:02:42.240 --> 0:02:44.480 they're seeking advice from them. Most your interpretation of what's 0:02:44.480 --> 0:02:46.960 happening between a multilatural institutions at the moment and how 0:02:46.960 --> 0:02:53.440 they're actually working with Russia day by day. My understanding 0:02:53.480 --> 0:02:57.840 that at the current moment, so the active cooperation between 0:02:57.880 --> 0:03:04.160 the International Financial Organization and Russian financial institution is suspended. 0:03:05.200 --> 0:03:09.720 We hope that this that is the only first step. 0:03:10.240 --> 0:03:14.040 We hope that you know, in the current environment, you know, 0:03:14.160 --> 0:03:19.560 the membership of Russian financial organization like central Bank, like 0:03:19.680 --> 0:03:23.760 Ministry of Finance, and so ONCEO can cannot be allowed it. 0:03:24.240 --> 0:03:28.480 So all this respected organized respected in the past, organization 0:03:28.560 --> 0:03:32.760 like Central Bank of Russia. So nowadays they try to 0:03:32.760 --> 0:03:37.960 to you know, to finance to support their terroristic state, 0:03:38.480 --> 0:03:43.680 which we consider the Russian state. Uh uh is now 0:03:44.320 --> 0:03:48.080 so we don't think that in the current moment, is 0:03:48.080 --> 0:03:53.120 is reasonable to have any any operations, any relations with 0:03:54.120 --> 0:03:58.520 Russian authorities. Your continue. I'm just wondering. We all see 0:03:58.520 --> 0:04:01.640 these numbers, huge numbers beaing under around. Have you got 0:04:01.640 --> 0:04:03.960 to rate? Have you done any studies on how much 0:04:03.960 --> 0:04:06.080 age you actually need? Do you have a number in 0:04:06.160 --> 0:04:11.080 mind of what you need right now? Uh? So far 0:04:11.200 --> 0:04:14.880 we try to keep our financial system under control. But 0:04:15.200 --> 0:04:19.480 again our preliminary estimates show that on the daily basis, 0:04:19.560 --> 0:04:24.839 our GDP now only half of the you know, of 0:04:24.960 --> 0:04:32.760 the normal GDP amount under the peace peaceful conditions. So 0:04:32.960 --> 0:04:37.120 definitely it will put a huge strain on our public finances. 0:04:37.160 --> 0:04:39.640 On the also on the resource of the Central Bank, 0:04:40.080 --> 0:04:44.039 And definitely we need the support of the global community 0:04:44.200 --> 0:04:50.560 to to keep our to keep our finances viable, and 0:04:50.839 --> 0:04:55.000 to support us in our fighting against Russia. But it's 0:04:55.080 --> 0:05:01.120 very difficult now, you know, to account how many billions 0:05:01.160 --> 0:05:06.960 of dollars, how many probably hundreds of millions billions of 0:05:07.000 --> 0:05:13.720 dollars we will need again after the war, to uh to, 0:05:13.720 --> 0:05:19.160 to to to to to restore how economy, economy, How 0:05:19.200 --> 0:05:22.839 do we even begin to do normal central banking in 0:05:22.880 --> 0:05:25.839 such an abnormal time? How do you even assess the 0:05:25.920 --> 0:05:29.360 economic damage and even hold meetings at a time when 0:05:29.360 --> 0:05:35.200 things are so in flux? You know, actually that was 0:05:35.960 --> 0:05:39.599 that you already eight years from the start of the 0:05:39.640 --> 0:05:44.839 military conflict with the Russian Federation, And definitely we had 0:05:45.160 --> 0:05:49.359 some business continuity plans how to deal in the case 0:05:49.440 --> 0:05:54.680 of the direct military innovasion. All the time we consider 0:05:54.760 --> 0:05:59.200 it such scenarios as to be of low probability, but 0:05:59.360 --> 0:06:05.520 unfortunate plea, this low probability realized neverthe will nevertheless, so 0:06:05.720 --> 0:06:08.799 we I suppose that we were more or less prepared 0:06:08.920 --> 0:06:13.480 even for such for such a scenario, and we continue 0:06:13.480 --> 0:06:17.840 to do our our work in these conditions as much 0:06:17.920 --> 0:06:21.240 effective as its possible. So, Jay, you wrote a paper 0:06:21.279 --> 0:06:25.560 in another time in place two thousand nineteen and monetary transmission. 0:06:26.240 --> 0:06:29.360 I want you to tell me what the currency will do, 0:06:29.760 --> 0:06:32.320 not only the revenue, but what ruble will do as 0:06:32.440 --> 0:06:36.960 ruble weekends. Do you just assume that Russia bombs itself 0:06:37.000 --> 0:06:44.880 back to a barter economy? You know, definitely the monitor 0:06:45.440 --> 0:06:49.440 monitory transmission even described in my paper does not work now. 0:06:50.240 --> 0:06:54.839 So we don't want to play these games and like 0:06:55.120 --> 0:06:58.600 Russian Central Bank does, and we don't think that they 0:06:58.680 --> 0:07:04.080 key policy. Read nowadays, it's an effective instrument. So we 0:07:04.279 --> 0:07:11.520 just suspended to consider the our monetary policy and as 0:07:11.560 --> 0:07:17.240 conducted by under the inclation targeting regime. We we suspended 0:07:17.320 --> 0:07:20.680 to consider our policy rate as the main instrument. So 0:07:20.720 --> 0:07:24.960 now we would say, so we do we manage our 0:07:25.160 --> 0:07:29.440 financial sector, we manage our economy. We are monetory instruments, 0:07:29.520 --> 0:07:34.120 instruments almost manually as an economist, So what do you 0:07:34.200 --> 0:07:37.720 make of the financial warfare that Western nations have really 0:07:37.760 --> 0:07:40.120 been waging to try to isolate Russia. Do you think 0:07:40.120 --> 0:07:42.320 that when we look back in history it will be 0:07:42.360 --> 0:07:48.560 considered a success? Uh, you know, probably the unique situation 0:07:49.000 --> 0:07:58.600 nowadays that um Uh. The unique situation is that you know, 0:07:58.840 --> 0:08:03.200 you hit the Western world nowadays, hit the economy which 0:08:03.600 --> 0:08:08.360 used to function in completely normal market conditions, I mean 0:08:08.720 --> 0:08:12.680 market conditions, normal market conditions in the economic sense, and 0:08:12.800 --> 0:08:17.520 also for the financial system. We used to live uh 0:08:17.600 --> 0:08:22.680 in the Soviet Union, but which was was also isolated 0:08:22.760 --> 0:08:25.880 from the Western world. But at that time, you know, 0:08:26.120 --> 0:08:32.080 so they were uh that economy, that economy was you know, 0:08:32.360 --> 0:08:36.920 was built from the beginning on completely different grounds. Nowadays, 0:08:37.040 --> 0:08:40.120 I suppose that this hit to the economy which was 0:08:40.320 --> 0:08:44.480 really integrated in the global economic and financial world. So 0:08:44.679 --> 0:08:50.079 it's really massive and frankly speaking, I expect really catastrophic 0:08:50.120 --> 0:08:52.960 consequences of the Russian economy and for the Russian and 0:08:53.000 --> 0:08:56.560 financial system. Deely want to finition something important, not just 0:08:56.600 --> 0:08:58.319 for your economy, but for the rest of the world, 0:08:58.480 --> 0:09:01.160 and I think it might help papers the tension. We've 0:09:01.160 --> 0:09:03.520 gone through the stats on this program. The Russian Ukraine 0:09:03.559 --> 0:09:05.880 supply more than a quarter of the world's we exports. 0:09:06.040 --> 0:09:08.600 One fit at the corn sales and any percent of 0:09:08.640 --> 0:09:12.040 the sun flower royal can't goes at some point, Deputy Government, 0:09:12.040 --> 0:09:14.280 the farmers need to get back out into the fields. 0:09:14.360 --> 0:09:17.479 And get back to work. Can you help us understand 0:09:18.200 --> 0:09:22.040 the amount of devastation we could see to those goods 0:09:22.200 --> 0:09:24.640 if those farmers can't get back into the fields and 0:09:24.760 --> 0:09:31.080 work in the next several months. Yes, So that's a 0:09:31.160 --> 0:09:34.400 very important question for the global equonomy, for for for 0:09:34.480 --> 0:09:39.840 the feud security globally. Yeah, Ukraine and also Russia and 0:09:39.920 --> 0:09:44.120 some extents that are very very important suppliers of their wheat, 0:09:44.480 --> 0:09:49.880 of the card, of the oil seeds and or sunflower 0:09:49.960 --> 0:09:55.400 oil to the global markets. And I hope that, I 0:09:55.440 --> 0:10:01.320 hope that this military invasion will be suspended very fast 0:10:01.760 --> 0:10:06.400 and our farmers will be able to uh to have 0:10:06.559 --> 0:10:15.240 the normal agricultural year this year. Otherwise, I'm afraid that 0:10:16.320 --> 0:10:20.040 I'm a friend that even global consequences could be very 0:10:20.280 --> 0:10:23.400 very very very very toll. Could you help people understand 0:10:23.400 --> 0:10:26.320 what that would look like depu the governor if this 0:10:26.400 --> 0:10:29.240 wasn't down with quickly enough and this went into the summer, 0:10:30.960 --> 0:10:33.320 I don't know, I don't know, I I don't I'm 0:10:33.320 --> 0:10:36.079 not able to provide you any estimates at the moment. 0:10:36.160 --> 0:10:39.400 And you know, currently we try to do our best 0:10:39.480 --> 0:10:44.280 to secure there to ensure the function of the payments 0:10:44.280 --> 0:10:48.320 in the country and secure the financial community in this environment. 0:10:48.400 --> 0:10:51.600 So probably will will will we have to do such 0:10:51.679 --> 0:10:56.080 calculations and to in order to understand how the world 0:10:56.120 --> 0:11:00.640 will you know, live without the supply of this food 0:11:00.679 --> 0:11:03.880 stoff from from your queen. Well, let's hope so it 0:11:03.920 --> 0:11:06.559 doesn't come to that. Deputy Governor, thank you so much 0:11:06.600 --> 0:11:09.280 for your time today and our thoughts here at Bloomberger 0:11:09.320 --> 0:11:10.960 with you all, with the people of Ukraine and with 0:11:11.000 --> 0:11:13.520 you and your government and the Central Bank this morning. 0:11:13.720 --> 0:11:16.640 Say you Nikolai Chuck there, the Deputy Governor of the 0:11:16.640 --> 0:11:25.400 Bank Ukraine. Thank you, sir, thank you very much. Let's 0:11:25.440 --> 0:11:27.600 get right to it, at least so Mario Gabelli joins 0:11:28.000 --> 0:11:31.720 to say he's co investment Officer for Value at Gabelly Funds. 0:11:31.720 --> 0:11:37.000 Barely describes his contribution to investment finance in America, and 0:11:37.040 --> 0:11:39.520 we do make note of long ago and far away, 0:11:39.880 --> 0:11:43.200 Mario Gabella used to write twelve page sell side analyst 0:11:43.360 --> 0:11:46.600 notes on what's going on in the market. Mario, let's 0:11:46.600 --> 0:11:49.200 go there. I love your note of this morning where 0:11:49.200 --> 0:11:52.000 you say look for M and A. Given all that's 0:11:52.040 --> 0:11:55.640 going on in American finance, and you speak of vertical 0:11:56.280 --> 0:12:03.120 and horizontal mergers and acquisitions. I love that describe well, Tom, 0:12:03.640 --> 0:12:06.880 make it simple. Uh. We have a new regulatory regime 0:12:06.920 --> 0:12:10.480 in the United States, Lina Khan and others looking at 0:12:10.640 --> 0:12:13.760 and saying, should a company that has five percent market 0:12:13.800 --> 0:12:15.760 share in a company that has eight percent market share, 0:12:15.800 --> 0:12:18.720 should they be combined under the old h F index 0:12:18.760 --> 0:12:20.800 Without getting into the details of that because I don't 0:12:20.800 --> 0:12:23.280 know how to pronounce it, but basically what I'd like 0:12:23.360 --> 0:12:27.640 to see the buyers of companies. The buyers of companies 0:12:27.679 --> 0:12:31.520 are strategic. For example, Cummins Engine decided to buy what 0:12:31.559 --> 0:12:34.880 I used to call Arvin Meritor are meritory. But on 0:12:35.000 --> 0:12:37.560 the same time, private equity is buying companies in the 0:12:37.600 --> 0:12:43.160 same and that's Tenneco. So uh is uh? What is 0:12:43.320 --> 0:12:46.880 Cummins doing is that a vertical integration into products that 0:12:46.920 --> 0:12:49.920 will then go into the products that they sell. Is 0:12:49.960 --> 0:12:53.200 that their customer pipeline. So that's as simple as that. Today. 0:12:53.320 --> 0:12:56.080 For example, well built and from my point of view, 0:12:56.559 --> 0:13:00.440 you cannot have the government look at things in linear 0:13:00.520 --> 0:13:03.679 way the way aerojet was turned down. They are a 0:13:03.720 --> 0:13:08.079 producer of hypersonic capability in this country, which is a 0:13:08.080 --> 0:13:14.320 major defense dynamic. Extraordinarily good balance sheet. They've got a 0:13:14.320 --> 0:13:17.160 couple of hundred million dollars in cash the Maxus assets 0:13:17.160 --> 0:13:19.840 that they can sell off. Lockheed was trying to buy them, 0:13:20.200 --> 0:13:23.320 but they can't put five hundred million dollars. You just 0:13:23.360 --> 0:13:25.959 don't have it, whereas Lockheed could do it. And we 0:13:26.000 --> 0:13:28.800 all have to be prepared for I want to get 0:13:29.000 --> 0:13:31.000 I want to get Lisa Bramitt's and there, Lisa, give 0:13:31.040 --> 0:13:33.960 me one short answer here from Mario Gabelli. Mario, you're 0:13:34.000 --> 0:13:38.199 flogging your book on television behind you, uh, merger Masters. 0:13:38.240 --> 0:13:39.760 I mean, I know you need to sell a couple 0:13:39.840 --> 0:13:43.280 more copies to make the month go. But Mario, if 0:13:43.320 --> 0:13:47.080 I look at Merger Masters now when you wrote that book, yeah, 0:13:47.160 --> 0:13:48.880 get up and get the book on a radio. Folks. 0:13:49.000 --> 0:13:55.079 This is this is but but Mario, seriously you mentioned it. 0:13:55.320 --> 0:13:59.200 Private equity is in there right now. How does your 0:13:59.240 --> 0:14:04.960 world chase that. Steve Schwartzman is in buying companies now? 0:14:05.120 --> 0:14:08.000 But they always do that Tom And basically instead of 0:14:08.040 --> 0:14:10.959 just buying it, holding it and then recapitalizing and then 0:14:11.000 --> 0:14:14.439 spending it in five years, they not only buy the company, Tom, 0:14:14.640 --> 0:14:18.480 but they basically then go in and add companies to 0:14:18.640 --> 0:14:21.080 what they're buying. And what that means is the follow 0:14:21.120 --> 0:14:26.160 If you're buying something today, what ideal world, ideal world 0:14:26.240 --> 0:14:28.880 on a PE world is to buy something that has 0:14:28.960 --> 0:14:33.160 cash flow minus capex at a multiple that five years 0:14:33.240 --> 0:14:36.000 or ten years you can sell off at no lower 0:14:36.160 --> 0:14:39.920 multiple and then uh, but interest rates changing. So that's 0:14:39.920 --> 0:14:42.280 what they do, and they do it effectively, and they're 0:14:42.320 --> 0:14:45.360 raising significant amounts of capital and they're moving around. So 0:14:45.560 --> 0:14:50.520 any organization, and if Lisa is interested and looking at 0:14:50.560 --> 0:14:53.920 putting private equity into the funds, because they marked not 0:14:54.040 --> 0:14:57.440 to market, which is what happens daily to money managers 0:14:57.440 --> 0:15:01.800 like us, but they market, uh, mark the portfolios to model, 0:15:01.880 --> 0:15:04.800 which means that institutions like the lag effect that changes 0:15:04.840 --> 0:15:07.840 in the in the stock market. Then what happens is 0:15:08.320 --> 0:15:12.200 not complicated. Uh, you know, more money goes in. So 0:15:12.240 --> 0:15:14.320 what you want to do, you want to do is 0:15:14.360 --> 0:15:18.680 buy Schwartzmann's company. You want to buy Keke Henrykravis's company 0:15:18.760 --> 0:15:21.440 k k R. So by the PE firms now in 0:15:21.480 --> 0:15:24.920 the public markets, there's one called their public market stocks. 0:15:25.520 --> 0:15:27.880 John Malone would be a good example of that. Yeah, 0:15:28.080 --> 0:15:32.120 Another good example would be aren't Buffetts Berkshire Hathaway Mario, 0:15:32.480 --> 0:15:35.400 I am very interested in all of the different ways 0:15:35.440 --> 0:15:38.120 to formulate value. But at the same time, right at 0:15:38.160 --> 0:15:40.320 this moment, a lot of people are trying to understand 0:15:40.360 --> 0:15:44.400 the parameters to input into these flip formulas. Where is 0:15:44.440 --> 0:15:48.040 the price of oil? Where is uh the interest rate strategy? 0:15:48.080 --> 0:15:49.840 So when it comes to oil, as we're trying to 0:15:49.880 --> 0:15:52.360 game out commodities, how do you even come up with 0:15:52.440 --> 0:15:55.920 input prices? At this point, at least when you look 0:15:55.960 --> 0:15:58.600 at the companies that reported earnings and the balance sheet, 0:15:58.720 --> 0:16:02.480 you basically have to look get the ecosystem. Two years 0:16:02.520 --> 0:16:05.840 ago in March, or when we had a disaster in 0:16:05.880 --> 0:16:09.080 the market where we had COVID impact, basically the only 0:16:09.120 --> 0:16:12.040 thing that did well was God gouges and then eventually 0:16:12.120 --> 0:16:15.280 growth stocks by growth based on a multiple of revenues 0:16:15.360 --> 0:16:20.080 and revenue percentage growth. Today you're having the market look 0:16:20.080 --> 0:16:23.720 at let's say energy, I, as a buyer of related 0:16:23.760 --> 0:16:27.240 products two years ago, was cutting down on my inventory, 0:16:27.280 --> 0:16:30.000 cutting down to my capex because I needed to preserve 0:16:30.040 --> 0:16:33.720 my working capital in my cash. Today, I'm taking whatever 0:16:33.760 --> 0:16:37.520 I can put into my inventory at whatever price I 0:16:37.560 --> 0:16:40.800 have to pay, and I need to understand life accounting. 0:16:40.920 --> 0:16:43.600 I need to understand firefolk counting. You know, we're dusting 0:16:43.640 --> 0:16:47.400 awful lot of old technologies to get that part energy oil. 0:16:47.600 --> 0:16:51.400 We as a country, they forgot about it as a 0:16:51.480 --> 0:16:54.600 strategic element, even though you had the Sundies and the 0:16:54.640 --> 0:16:57.000 she is fighting forever and you had all sorts of 0:16:57.400 --> 0:17:00.600 those dynamics. And it was a bad policy. It failed 0:17:00.640 --> 0:17:04.439 in transition. We all want we all want renewables, we 0:17:04.480 --> 0:17:09.200 all want a solar wind hydro, but we need transmission, 0:17:09.240 --> 0:17:13.000 we need storage, and it's not coming. It's bad policy. 0:17:13.000 --> 0:17:15.280 We're out of time here, but you're gonna continue on radio, 0:17:15.359 --> 0:17:18.359 Mario on TV for radio. I need you to hold 0:17:18.440 --> 0:17:21.400 up Merges and Masters again so we can move. Hold 0:17:21.440 --> 0:17:23.840 the book up right now, Mario, so we can move. 0:17:24.920 --> 0:17:28.400 This was written by a colleague of mine on Barrens 0:17:28.440 --> 0:17:34.520 for thirty five years. It's a great yea. It deals 0:17:34.560 --> 0:17:37.960 with how to make money when a romance is announced. 0:17:38.040 --> 0:17:40.200 In other words, company A wants to buy company B. 0:17:40.680 --> 0:17:43.560 And it also tells you how the investment bankers, the lawyers, 0:17:43.600 --> 0:17:47.480 tomp and the orbit treasures work in the process of 0:17:47.600 --> 0:17:51.320 doing this. And uh, you know, it's a good discipline 0:17:51.359 --> 0:17:55.560 for someone that has mathematical background, has common sense and 0:17:55.600 --> 0:17:57.840 wants to make money over there. And we're gonna wrap 0:17:57.880 --> 0:17:59.439 this up and go to the headlines to Mario. But 0:17:59.480 --> 0:18:01.280 all I'm gonna say, folks is this is a grown 0:18:01.359 --> 0:18:03.359 up book for Global Wall Street. And if you're on 0:18:03.400 --> 0:18:06.080 Global Wall Street, it's a single best book on the 0:18:06.160 --> 0:18:15.719 machinery of Gabelli's world. Margot Belly. A quick brief now 0:18:15.800 --> 0:18:19.640 from Nila Richardson, chief economist at a DP. I'm sorry, Nila, 0:18:19.640 --> 0:18:23.159 I say automatic data processing because I'm a fossil. Uh, Nila, 0:18:23.320 --> 0:18:26.639 we do have the US economic data. Does it signal 0:18:26.720 --> 0:18:32.320 a buoyant economy or we truly in some form of slowdown? Well, 0:18:32.520 --> 0:18:34.879 we're going to slow down from last year's high pace. 0:18:35.000 --> 0:18:39.359 We are a healthy economy. I think we continue to 0:18:39.400 --> 0:18:43.600 grow robustly, but we are in the economy that has 0:18:43.720 --> 0:18:47.320 the absence of a high degree of federal spending and 0:18:47.440 --> 0:18:51.000 monetary easing that is going to fade away. So yes, 0:18:51.560 --> 0:18:55.200 healthy economy. Uh. And those jobless claims are another good 0:18:55.280 --> 0:18:58.800 sign how far we've come in the labor market. But 0:18:59.000 --> 0:19:01.880 we should see some following growth. And the real battle now, 0:19:02.240 --> 0:19:05.159 the real the real issue now, not the battle The 0:19:05.280 --> 0:19:08.560 issue now is inflation, and inflation that is only getting 0:19:08.680 --> 0:19:11.520 hotter as we see commodities surge the fastest pace, going 0:19:11.560 --> 0:19:14.760 back at least by one measure, to the nineties seventies. 0:19:14.880 --> 0:19:18.239 How much do you expect wages to respond to this 0:19:18.359 --> 0:19:22.119 to the upside versus actually people coming back into the 0:19:22.200 --> 0:19:25.760 labor market in order to get paychecks in response to 0:19:25.800 --> 0:19:30.560 this inflation. Well, we really saw inflation accelerate in the 0:19:30.600 --> 0:19:33.520 fourth quarter. And the interesting of the thing about it 0:19:33.560 --> 0:19:38.040 is that inflation in terms of inflation rising for wages 0:19:38.119 --> 0:19:41.080 wage gains in the fourth quarter. Was interesting about it 0:19:41.119 --> 0:19:43.480 is through most of the recovery, it's been the low 0:19:44.000 --> 0:19:47.359 pay sector that's seen the high wage increases, right, so 0:19:47.760 --> 0:19:50.880 those people who are making lower wages, those wages were 0:19:50.880 --> 0:19:54.000 increasing faster. Now we're seeing a bit of a flip 0:19:54.000 --> 0:19:57.439 in our data. We're seeing those industries that are correlated 0:19:57.480 --> 0:20:02.320 with high page jobs, information tech, finance, professional business services 0:20:02.560 --> 0:20:07.600 really accelerate and that might not only show wage inflation, 0:20:07.720 --> 0:20:11.880 but wage disparity between people who can deal with inflation 0:20:11.920 --> 0:20:14.160 a little bit better and the higher incomes and people 0:20:14.160 --> 0:20:17.639 who are still struggling to So to your point, getting 0:20:17.640 --> 0:20:20.800 people back into the labor force and a time with 0:20:21.320 --> 0:20:24.199 very high price levels is really important, so as we 0:20:24.480 --> 0:20:27.520 as the FED looks to contain inflation, and it's really 0:20:27.520 --> 0:20:31.440 important that the job's recovery continues because it's not quite 0:20:31.480 --> 0:20:33.880 complete yet. How do you even begin to game out 0:20:34.160 --> 0:20:37.479 the ramifications of a hundred and thirty dollars of barrel 0:20:37.520 --> 0:20:40.240 oil a hundred and fifty dollars of barrel oil as 0:20:40.280 --> 0:20:44.280 we talk about that on this bifurcated recovery of the 0:20:44.320 --> 0:20:47.480 haves and the have nots as you put it, well, 0:20:47.560 --> 0:20:50.560 let's just talk about getting the work. Where most of 0:20:50.640 --> 0:20:53.680 Main Street sees those higher oil prices is at the 0:20:53.720 --> 0:20:57.520 gas pump, and so it's transportation costs and accelerate. We 0:20:57.560 --> 0:21:01.600 already know that housing costs have accelerated, childcare costs have 0:21:01.800 --> 0:21:04.840 been high through the pandemic, and we're already high before 0:21:05.200 --> 0:21:10.199 it's really a material concern for main street families and 0:21:10.240 --> 0:21:14.160 for working families. And we know that energy prices fill 0:21:14.200 --> 0:21:17.040 over into other goods and other inputs. And so if 0:21:17.040 --> 0:21:21.280 you add on accelerated energy prices to what is already 0:21:21.480 --> 0:21:25.720 UH supply shortages and the great interview you just did 0:21:25.840 --> 0:21:30.040 pointing to the effect of both energy and agriculture and 0:21:30.080 --> 0:21:33.720 perhaps food prices. You're seeing that for people who are 0:21:33.800 --> 0:21:37.200 still trying to work their way out of this pandemic. Economically, 0:21:38.000 --> 0:21:43.040 headline inflation is a big concern if inflation is entrenched, Nila, 0:21:43.600 --> 0:21:47.000 do you look at top line inflation, does the core 0:21:47.119 --> 0:21:50.440 and all the fancy economists like you do, all those 0:21:50.480 --> 0:21:55.080 fancy inflation measurements drift away or do they become more important? 0:21:56.119 --> 0:21:58.760 You look at the consumer, because the consumer is looking 0:21:58.760 --> 0:22:01.760 at headline inflation. The consumers go into the grocery store 0:22:02.800 --> 0:22:05.520 Belk and they're seeing the bear shelves, and so the 0:22:05.560 --> 0:22:09.360 consumers expectations are going to feed inflation over the long term. 0:22:09.400 --> 0:22:12.080 The good news is a year out we're seeing high 0:22:12.160 --> 0:22:15.840 consumer inflation expectations, but three to five years out they 0:22:15.880 --> 0:22:19.240 start to decline. That's the trend we want to keep. 0:22:19.680 --> 0:22:24.399 So I think that fancy economics has its place, but 0:22:24.600 --> 0:22:27.440 also go into the grocery store and watching the consumer 0:22:27.960 --> 0:22:30.200 at the gas pumping at the grocery store has its 0:22:30.200 --> 0:22:33.920 place to particularly in this environment. It's getting expensive, that's 0:22:33.920 --> 0:22:36.399 for sure, Nata. Thank you as always, Nata Richards in 0:22:36.440 --> 0:22:45.440 that of a d P in all of our reporting 0:22:45.560 --> 0:22:48.159 it is not just oil. It is a complex story. 0:22:48.280 --> 0:22:51.840 Joining us now thrilled to bring you Dary County's portfolio 0:22:51.880 --> 0:22:55.719 manager and a head of commodities at DWS with years 0:22:55.800 --> 0:22:58.760 of experience on the up and down and right now 0:22:58.840 --> 0:23:02.879 the very up up on commodities. Don't these are not 0:23:03.119 --> 0:23:08.640 financial instruments. What is the media coverage missing about the 0:23:08.680 --> 0:23:13.639 fact that aluminum or wheat have huge fixed costs in 0:23:13.680 --> 0:23:16.479 their production? What are we missing that these are not 0:23:16.600 --> 0:23:20.960 the usual liquid instruments were used to good money and 0:23:21.040 --> 0:23:25.080 thanks Tom, that's a wonderful question. We do see sniff 0:23:25.119 --> 0:23:29.800 and price impact across all commodities. However, there's also a 0:23:29.880 --> 0:23:33.040 human element to all of the prices. We tend to 0:23:33.080 --> 0:23:38.320 forget as market market protectioners that we focus on price 0:23:38.400 --> 0:23:43.000 and return. But alumnus used for industrial uses and many 0:23:43.040 --> 0:23:47.240 countries depend on aluminum as input to help keep the 0:23:47.280 --> 0:23:51.000 factories going and help keep the workers employed. Wheat is 0:23:51.080 --> 0:23:55.919 even bigger issue. It directly links to food security. Both 0:23:56.480 --> 0:24:00.480 Ukraine and Russia are large exporters of wheat, in particular 0:24:00.600 --> 0:24:05.919 to areas like Northern Africa, Central Asia, Middle East. For 0:24:06.080 --> 0:24:10.240 these countries, they're going to experience very sharp press inflation. 0:24:10.960 --> 0:24:15.320 Should the conflict escalate from here and interrupt the production 0:24:15.359 --> 0:24:18.480 process for weed, we might see even worse, such a 0:24:18.640 --> 0:24:22.119 squid shortage that could lead to significance of all This 0:24:22.240 --> 0:24:24.879 leads to the microeconomics at the moment, how do you 0:24:24.960 --> 0:24:28.359 define as a portfolio manager of great success? How do 0:24:28.400 --> 0:24:35.000 you define demand destruction? Demand destruction really comes in a 0:24:35.040 --> 0:24:38.879 couple of different ways. One is, if the press gets 0:24:38.960 --> 0:24:42.040 high enough, for example, the gasoline press gets high enough, 0:24:42.320 --> 0:24:46.399 people may choose to drive less, trouble less to save 0:24:46.480 --> 0:24:48.960 money so they can afford other goods. So it's one 0:24:49.000 --> 0:24:53.359 way to see that it's more impact on lower growth 0:24:53.400 --> 0:24:57.840 rate assumption rather than completely replacement. That's a second type 0:24:57.880 --> 0:25:02.480 of a demand disruption comes in the fact that people 0:25:02.520 --> 0:25:07.280 could find alternative energy, additive energy shift from gasoline based 0:25:07.280 --> 0:25:12.280 cars to electrical cars um in the US in particular, 0:25:12.359 --> 0:25:14.600 that will have a very big impact on energy price. 0:25:14.880 --> 0:25:17.040 It's always a lot of people along right now, and 0:25:17.080 --> 0:25:19.320 the price shift we've seen, the distliccations we've seen when 0:25:19.359 --> 0:25:21.560 we think about what the hedge is, what the hedges 0:25:21.640 --> 0:25:23.760 is not what the hedge was a month or so ago. 0:25:24.560 --> 0:25:26.600 If we got a headline that basically said we had 0:25:26.600 --> 0:25:29.959 a ceasefire. I'm just wondering when you look across your portfolio, 0:25:30.160 --> 0:25:32.400 how you've hedged that that way, What kind of instruments 0:25:32.440 --> 0:25:36.280 you look to, what kind of trades you've got on. Well, 0:25:36.440 --> 0:25:39.040 there are two things we focused on. One is outside 0:25:39.040 --> 0:25:42.960 of oil, what are other commodities that have more long 0:25:43.080 --> 0:25:46.240 term impact given the current environment. And we think based metal, 0:25:47.119 --> 0:25:52.359 which is currently behind the other commodities in terms of 0:25:52.400 --> 0:25:55.080 the price elevation, we think that's actually a great way 0:25:55.080 --> 0:25:58.720 to hedge the portfolio because we do anticipate trying not 0:25:58.800 --> 0:26:02.760 to continue to improve off the credit for the economy, 0:26:02.880 --> 0:26:06.360 and that will help with demand on base metal regardless 0:26:06.400 --> 0:26:09.080 of the energy performance. The second thing we are doing 0:26:09.119 --> 0:26:12.600 in our portfolio is to think about having more deferred 0:26:12.600 --> 0:26:17.760 exposure in our funds um the back end of the curve, 0:26:17.880 --> 0:26:21.000 and let me use a more plane language, that later 0:26:21.040 --> 0:26:24.520 delivery of oil that particular prices is not moving up 0:26:24.560 --> 0:26:28.280 nearly as much as the prompt the near delivery of oil. 0:26:28.680 --> 0:26:31.840