Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Farrell and Lisa Brownowitz Jaily 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 Termament. We continue our discussion, folks,
Speaker 1: John Farrell, Lisa bramwa to myself and now is a
Speaker 1: conversation that could be two hours long, because there is
Speaker 1: no one with a family more qualified on Russia and
Speaker 1: the fears of Mr Putin than William Browder. Yes, he
Speaker 1: is founder, chief executive officer of Hermitage Capital Management, But
Speaker 1: what you don't know is his family's heritage back to
Speaker 1: the height of mathematics in America and before that, courage
Speaker 1: on continental Europe, Central Europe and the bravery of fighting
Speaker 1: off Tyranny. Bill Browder honored to have you with Bloomberg
Speaker 1: Surveillance today. What would Earl Browders say? What would he
Speaker 1: say long ago to standing up to Vladimir Putin? Well, so,
Speaker 1: just just to make it clear, so my grandfather was
Speaker 1: the General secretary of the American Communist Party, and at
Speaker 1: a time when when Russia and America were at war
Speaker 1: with the Nazis the moment that the war ended, um
Speaker 1: Uh Stalin kicked my grandfather out of the Communist Party
Speaker 1: for being too much of a capitalist and then started
Speaker 1: murdering his followers all over all over Eastern Europe and
Speaker 1: other places. And and there's a famous car we are
Speaker 1: we returned. I don't mean to interrupt, Bill, but this
Speaker 1: is so so important with your perspective. Are we returning
Speaker 1: to that tyranny? Um There's there's no question that we're
Speaker 1: returning to that year. And Vladimir Putin um is is
Speaker 1: a nineteen thirties style European dictator who is doing exactly
Speaker 1: I wouldn't compare him so much to Stalin as I
Speaker 1: would compare him to Hitler. Um what we have going
Speaker 1: on right in this minute, as we as we speak
Speaker 1: um is is the equivalent of when Adolf Hitler was
Speaker 1: taking a chunk of of Czechoslovakia and everybody was trying
Speaker 1: to figure out what to do, and first they tried
Speaker 1: to appease him and it didn't work, and then we
Speaker 1: ended up with with the World War two. Glandimer Putin
Speaker 1: is starting with Ukraine. And make no no mistake about it,
Speaker 1: this is not the end goal. He he has gotten
Speaker 1: bigger things in his sight. He wants, he wants to
Speaker 1: dominate the European continent, and he will move further. Bill,
Speaker 1: are you surprised that the US hasn't joined the reporting,
Speaker 1: at least from the Financial Times saying the EU is
Speaker 1: preparing to freeze the assets of Putin and Lavrov Um. Well,
Speaker 1: first of all, i should say that I'm surprised that
Speaker 1: europe has taken such a step. I mean, I've spent
Speaker 1: the last ten years in a conflict with Gladom Reputin
Speaker 1: trying to get the Europeans to do the bare minimum
Speaker 1: things in terms of human rights abuse so on in Russia,
Speaker 1: and the European Union has always been on the back foot,
Speaker 1: never doing the right thing in the in the US
Speaker 1: has always been the the country taking the lead on this,
Speaker 1: and so I'm very surprised that the European unions done this.
Speaker 1: I'm very happy that the European Union has done this.
Speaker 1: If it's for real, um and uh, and I'm sure
Speaker 1: that the US will will will quickly uh come into
Speaker 1: conformity with it. I don't think that it's uh, it's
Speaker 1: just if you were to look around. Uh, you know,
Speaker 1: two weeks ago, the Germans were not even ready to
Speaker 1: supply any military equipment to the Ukrainians other than five
Speaker 1: thousand helmets, and now they're saying Vladimir Putin it's a
Speaker 1: pretty big staff bill. Given your intimate experience with the
Speaker 1: financial system of Russia and the subsequent problems that can
Speaker 1: emerge there, what's your view on how effective some of
Speaker 1: these sanctions, some of these asset phreezes could be at
Speaker 1: a time when so far it seems like they have
Speaker 1: not caused Vladimir Putin are retreat in any way. Well,
Speaker 1: so far they haven't sanctioned Vladimir Putin. I mean, so,
Speaker 1: first of all, it's very important that that when they
Speaker 1: say they're sanctioning Gladim Reputin, they're sanctioning also his trustees.
Speaker 1: Because Gladim Reputin, it's it's very symbolic to say we're
Speaker 1: sanctioned Vladim Reputin. He doesn't have He's an extremely rich man.
Speaker 1: He's worth i would say more than two billion dollars,
Speaker 1: but none of that money is held in his own name,
Speaker 1: is held in the name of people he trusts on
Speaker 1: handshake agreements. I called him all the Garth trustees. And
Speaker 1: so unless you're to sanction the top fifty aligars at
Speaker 1: the same time, you're not. I'm actually going to get
Speaker 1: his money. However, if you do, if you were to
Speaker 1: sanction those people, um, you're you're hitting him exactly where
Speaker 1: it counts. Putin, he doesn't care if you sanction a
Speaker 1: Russian bank or if you do something to the oil industry.
Speaker 1: He cares about his own money. And if you actually
Speaker 1: get his money, then then then he's he's going to
Speaker 1: stop and pay attention, because what you know, he's he's spent.
Speaker 1: He's worked very hard for the last twenty years, torturing, killing,
Speaker 1: hospit taking hostage people and to try to get all
Speaker 1: their money, um, and to have all the money taken
Speaker 1: a way. That's twenty years of hard work for a dictator.
Speaker 1: And so that would work, that would have a real
Speaker 1: and serious and dramatic effect. Bill. I want to get
Speaker 1: to headlines with John Ferrell and I want you to
Speaker 1: stay with us. But very importantly, your hermatage Capital is
Speaker 1: based off St. Petersburg and one of the glorious museums
Speaker 1: of the world. That's two hundred and fifty miles from Estonia.
Speaker 1: At what risks are the Baltic states based on your
Speaker 1: experience of Russia, UM, well so in my estimation. So
Speaker 1: after Putin is done with Ukraine, UM, assuming he gets
Speaker 1: done with Ukraine, and that's not a given. The Ukrainians
Speaker 1: are fighting like Allen and and actually having some success
Speaker 1: at the moment. But assuming he's done with Ukraine, UM,
Speaker 1: then his next goal is going to be to test
Speaker 1: the resolve of the United States and many countries in
Speaker 1: the EU to defend the Baltics. We we have that
Speaker 1: we're all members of NATO. It's NATO is a one
Speaker 1: for all, all for one military defense organization and and
Speaker 1: gladi Reprutin in his mind doesn't believe that we will
Speaker 1: all come and defend Estonia or Lithuania. He doesn't believe
Speaker 1: that America want to go to war with Russia to
Speaker 1: defend the country most people have never heard of. But
Speaker 1: I would love your reaction to these headlines in real time,
Speaker 1: so allow me to bring them to you. As you know,
Speaker 1: a little bit earlier this morning, there were talks between
Speaker 1: the Russian leader and the Chinese leader. According to State TV,
Speaker 1: the Chinese urged Russia and Ukraine to negotiate to address problems.
Speaker 1: We just had a headline moments ago. Let me read
Speaker 1: that out for you and then I'd love your reaction.
Speaker 1: Russia is ready to send a delegation to Minsk for
Speaker 1: Ukraine talks. This according to Winter Facts. They're ready to
Speaker 1: send their defense minister, foreign minister for delegation for talks.
Speaker 1: This according to inter Facts. But just as you react
Speaker 1: to that, what is your first reaction? What does that mean?
Speaker 1: How would you interpret that kind of report? The Chinese
Speaker 1: were spoken to the Russians. We're getting a headline now
Speaker 1: from Into Facts they're ready for talks. I'm thinking about
Speaker 1: what their objectives are at the moment, how the Ukrainians
Speaker 1: might receive a statement like what are you thinking about? Well?
Speaker 1: On one hand, we could say, wow, good news, Okay,
Speaker 1: there's talks now, um, But but the reality is, and
Speaker 1: I've been involved in all sorts of ugly conflicts and
Speaker 1: negotiations with the Russians. They stick this stuff out there
Speaker 1: to try to give a little bit of hope. You
Speaker 1: remember a couple of weeks ago they said we're we're
Speaker 1: we're withdrawing our troops in the border. And remember that
Speaker 1: that bunch of pictures of a few tanks going back,
Speaker 1: and everyone that the markets went up. Everyone reads the
Speaker 1: side of relief and it meant nothing. The Russians can
Speaker 1: do talks. They should have been doing talks all along.
Speaker 1: Um I I wouldn't. I would put like a two
Speaker 1: percent probability that this leads to the end of the
Speaker 1: conflict in any It's it's pure theater in my mind,
Speaker 1: but you know maybe I I'd love to be proven wrong. Well,
Speaker 1: this market is responding to that theater. Not a big move, sir,
Speaker 1: But Tom, we've seen in a move of about a
Speaker 1: third of one percent, a quarter of one percent into
Speaker 1: positive territory on the SMP looking at Tenure Bundo. It's
Speaker 1: now with the high set a session up five faces
Speaker 1: points to about positive and t two off the back
Speaker 1: of the headline from into facts Tom that Russia is
Speaker 1: ready to send a delegation to Minsk for Ukraine silks.
Speaker 1: Some of the haven ratio is doing well as well.
Speaker 1: Swiss Frank a little bit weaker. Bill Brodder and the
Speaker 1: markets be a tool against Vladimir Putin. The markets in
Speaker 1: a broader sense, the actions of London, the City, the
Speaker 1: actions of Wall Street, the actions of corporate managers, boards
Speaker 1: of directors exiting Russian companies. Does any of it have
Speaker 1: power over his decisions? I think it all has power.
Speaker 1: I mean, Vladimer Putin has spent twenty years recruiting all
Speaker 1: of these uh Gerhard Schroeder's and the town former Italian
Speaker 1: prime minister and Austrian foreign minister, you know, and and
Speaker 1: all of a sudden, after twenty years building up his credibility,
Speaker 1: they've all in one fell swoop designed from their from
Speaker 1: their positions. Um, markets have have an enormous effect on
Speaker 1: Vladimir Putin. He's got to have enough money to do
Speaker 1: all this stuff, and and so we we got it.
Speaker 1: So everyone says Russia has got six hundred billion of
Speaker 1: hard currency reserves. Well let me tell you something, UM,
Speaker 1: if if he's totally isolated from that, they can burn
Speaker 1: through that real quick. The words that's been used by
Speaker 1: some of our guests has been pria. If he's a prior,
Speaker 1: how will we know he's separated? And what will that mean?
Speaker 1: With all your knowledge? Bill Browder of Moscow in St. Petersburg,
Speaker 1: how will the domestic Russian elite and the less elite,
Speaker 1: react to Vladimir Putin as prior as removed. Well, I
Speaker 1: mean they're they're not happy at all. The Russians love to,
Speaker 1: you know, travel to Paris and Italy and all these
Speaker 1: places and spend their money and live it up and
Speaker 1: pop the champagne and buy properties and doing all this
Speaker 1: kind of stuff. And now all of a sudden, you
Speaker 1: know that they're they're not going to be welcome and
Speaker 1: their their bank accounts will be closed and and it's
Speaker 1: gonna be you know, it's it's not a lot of
Speaker 1: fun for the Russian elite to be in in this position.
Speaker 1: But I should point out that Putin doesn't really care
Speaker 1: about what his people think about him. He doesn't he
Speaker 1: doesn't want to be overthrown by his people. But he's
Speaker 1: running a dictatorship, and anybody who says a bad word
Speaker 1: about him on the telephone and in private, um, we'll
Speaker 1: get into trouble. And so it's not like these people
Speaker 1: are gonna if they're unhappy because they can't go to
Speaker 1: skiing in course of all France, Um, there they have
Speaker 1: any impact on him. But they're they're definitely not happy.
Speaker 1: And there's been demonstrations all over Russia over the last
Speaker 1: twenty four hours byular people saying this is not good. Bill,
Speaker 1: you were talking about the theater that you are basically
Speaker 1: interpreting this as that, basically he's putting out a neugget
Speaker 1: of hope. Who is the hope for? Is it for
Speaker 1: the US, Is it for Europe? Or is it for China?
Speaker 1: Now it's not for China. China, China has got nothing
Speaker 1: to do with this. Um. The purpose of this is
Speaker 1: that he's seen how really as super angry everybody has
Speaker 1: become around the world. And I think he's surprised that
Speaker 1: the Europeans have stepped up and done all these dramatic
Speaker 1: things like put his name on a sanctions list and
Speaker 1: and uh. The best way of of trying to like
Speaker 1: create some divisions among allies is to hang out a
Speaker 1: tiny little fig leaf of hope so that everyone says,
Speaker 1: wait a second, maybe we shouldn't be so tough, Maybe
Speaker 1: we shouldn't follow through on that, Maybe we shouldn't do
Speaker 1: the next terrible thing, Maybe we shouldn't cut them off
Speaker 1: from swift, let's negotiate that. That's how he that's how
Speaker 1: he plays this game. And then he hopes that in
Speaker 1: two weeks time, we've all you know, all of our
Speaker 1: uh you know, outrage has subsided to it to to
Speaker 1: a point that he just carries on doing what he's doing.
Speaker 1: But but he doesn't have us all aligned together trying
Speaker 1: to cause him trouble. But we're lucking to have you
Speaker 1: with the Sismonic Thank you very much for your situation
Speaker 1: of what we've tried to do the last number of
Speaker 1: days with our wonderful team is bringing you authorities like
Speaker 1: General Hodges, infantry on the ground for the U. S Army,
Speaker 1: a U S Army putting seven thousand more troops into Europe.
Speaker 1: I believe this morning or last night, we just showed
Speaker 1: you Bill Browder with all of his family's heritage of
Speaker 1: Eastern Europe, the difficulties of Stalin and Ford, and now
Speaker 1: we do the same thing from Ukrainian village in Chicago, Illinois.
Speaker 1: If you are Ukraine or from Eastern Europe, there is
Speaker 1: a huge position in Chicago, Illinois of people watching this crisis.
Speaker 1: One of those is a daughter of Chicago, Natalie Drusco,
Speaker 1: joins us in Puerto Rico at a swarming. She's a
Speaker 1: former Ukraine Minister of Finance and of course her service
Speaker 1: to Puerto Rico with their financial issues as well. Natalie,
Speaker 1: thank you so much for joining us. You are one
Speaker 1: of the lead members of Ukraine. There's no question about
Speaker 1: that one. Have you learned in your phone calls to
Speaker 1: Kiev and all of Ukraine in the recent hours, It
Speaker 1: has been a horrible night and morning in Kiev. Uh.
Speaker 1: The bombing has taken everyone by surprise with its intensity. Um.
Speaker 1: Most people are in bunkers, in bomb shelters, spent the
Speaker 1: night in those bomb shelters right now being advised to
Speaker 1: stay there. Uh. And as you probably know, I think, Uh,
Speaker 1: it's fair to share with you that there is an
Speaker 1: incredible disappointment with the strength and with the urgency of
Speaker 1: the Western response to what is in essence and unprovoked
Speaker 1: genocide of the Ukrainian people. What does the Ukrainian community
Speaker 1: of America need from President Biden. Well, this is what
Speaker 1: the Ukrainian community in Ukraine needs. The Ukrainian Community of
Speaker 1: America supports that. But what we need from President Biden
Speaker 1: from all of the Western democracies is much more urgent,
Speaker 1: much deeper, much broader financial sanctions, sanctions against energy companies,
Speaker 1: sanctions to end the disinformation in the media, world, and
Speaker 1: on top of that, much more massive support for the
Speaker 1: Ukrainian military that is defending its self. No one is
Speaker 1: asking for US boots on the ground, but yes, we
Speaker 1: need more ammunition, we need more javelins, we need more stingers,
Speaker 1: and they need to be trucked in from our eastern
Speaker 1: flank in in NATO, so that the Ukrainian military can
Speaker 1: do its job, and not only defending Ukrainians, but frankly
Speaker 1: all of Europe, because if it doesn't end in Ukraine,
Speaker 1: and if it doesn't end with democracy in Ukraine, everyone
Speaker 1: else will be will be involved later anyway, Not only
Speaker 1: can you talk a little bit about the defense attempts
Speaker 1: and the defense efforts in Kiev, in the broader Ukrainian region,
Speaker 1: Given the fact that there is a conscription among all
Speaker 1: men I believe the age eighteen to sixty, how forceful
Speaker 1: is it, How quickly is it assembling? First of all,
Speaker 1: it's important to note that people were lining up yesterday,
Speaker 1: even before that to volunteer their services. Ukrainians are extraordinarily
Speaker 1: committed to defending their peace and freedom. This is not
Speaker 1: the first time in thirty years, but this is certainly
Speaker 1: worse than anything we experienced in two thousands fourteen or
Speaker 1: prior to that. I will tell you that um men
Speaker 1: are not being allowed to leave. I have heard the
Speaker 1: stories and spoken to people who are trying to leave
Speaker 1: with their families. Men are taken out of the buses
Speaker 1: and told to go serve, and frankly, it's only fair.
Speaker 1: Everyone needs to serve. At this point, the only hope
Speaker 1: we have is that the Ukrainian military continues what has
Speaker 1: been an extraordinarily um successful defense thus far in in
Speaker 1: terms of what's happening on the ground. Natalie, you are
Speaker 1: arguably in the Western world, the definitive expert on small
Speaker 1: business in Ukraine up to Belarus with your Horizon Capital
Speaker 1: as well. Please your opinion of how Mr Putin if
Speaker 1: he takes Ukraine and if we assume he's taken Belarus,
Speaker 1: what is his threat to the Baltic States. There's no
Speaker 1: question that President Putin has explained to the world very
Speaker 1: clearly that he believes the collapse of the Civiet Union
Speaker 1: was a mistake. It is also very clear that he
Speaker 1: has absolutely no problem attacking unprovoked peaceful countries, as he's
Speaker 1: doing right now in Ukraine. So obviously the Baltics should
Speaker 1: be very concerned that their next extraordinarily concerned Natalie. One
Speaker 1: more question, I may and an arduous warning for you
Speaker 1: and the news flow as well. We have sanctions. I
Speaker 1: don't mean to be trite, but from where you sit
Speaker 1: and with your experience, to sanctions work, Sanctions that are
Speaker 1: weak end or are doled out too slowly will not
Speaker 1: work because this is not about the effort. Cannot be about,
Speaker 1: you know, seeing what happens in a month or two
Speaker 1: in the Russian economy. What we need to do our
Speaker 1: sanctions that create such a dire response to what they're
Speaker 1: doing that it causes the elites in Russia to think twice.
Speaker 1: If it doesn't cause President Putin to do so, at
Speaker 1: least it causes the elites. Therefore, all of the banking
Speaker 1: system swift. It has to be eliminating the sanctioning all
Speaker 1: the state owned energy companies, and it has to be
Speaker 1: done immediately. It cannot be done in ranches. Hundreds of
Speaker 1: people are dying every hour. We do not have time
Speaker 1: for tranches. It also needs to be more than money.
Speaker 1: It needs to be kicking out and ending our diplomatic
Speaker 1: relationships with Russia. There should not be a diplomat of
Speaker 1: Russia enjoying peace and democracy in our western countries if
Speaker 1: they will not allow Ukrainians to joy peace and democracy.
Speaker 1: So there are a variety of things, and it needs
Speaker 1: to be massive, urgent, meaningful, and it will have an effect.
Speaker 1: But dolling it out in tranches over a period of
Speaker 1: weeks absolutely not not. I remember first talking to you
Speaker 1: about eight years ago and it's saddening that we're having
Speaker 1: this conversation still into it again eight years later. Natalie,
Speaker 1: Thank you, Natalie Jarresco that the former Ukraine Finance Minister
Speaker 1: John on the liquidity of the financial system of Europe.
Speaker 1: We have the right guests. Let's get to Tony Chris Sensei,
Speaker 1: market strategist and portfolio manager at PIMCO. Tell you what
Speaker 1: I'd love straight off the bat is just your observations
Speaker 1: in the last twenty four hours, how the market has
Speaker 1: been functioning, what you've been seeing. It does seem investors
Speaker 1: are doing what they often do, which is take a
Speaker 1: leap of faith. In fact, all of the debt that
Speaker 1: exists in the world exists in part because of that
Speaker 1: leap of faith. Investors have to have confidence in cash flows,
Speaker 1: whether it be to bond investors, to equity investors being dividends, buyback, etcetera.
Speaker 1: Seems they're retaining that. Uh, and we we know that
Speaker 1: over time human beings, generally speaking, sure remarkable ability to adapt.
Speaker 1: That's the phrase keep calm and carry on is a
Speaker 1: phrase you of course attributed to England in the World
Speaker 1: War Two. And Winston Churchill is if there's a feeling
Speaker 1: that investors tend to have. And so it's not a
Speaker 1: shock that the echoes from recent inflation data at the
Speaker 1: FED at least are louder than the rumblings in Ukraine.
Speaker 1: It's said state of affairs. But this finance and the
Speaker 1: way things are tony just right now and the here
Speaker 1: and now, there is an issue that things are moving
Speaker 1: so quickly that sometimes parts of the marks markets actually
Speaker 1: do break, and people are looking for potential nodes of
Speaker 1: a contagion, particularly in money markets with the Russian sanctions
Speaker 1: on particular oligarchs, particularly with a flight to cash amid
Speaker 1: all the uncertainty. Have you seen any signs of that?
Speaker 1: Are you looking for that? As we do see all
Speaker 1: of these developments really evolving in real time, there remains
Speaker 1: ample financial liquidity in in the global financial system, clearly
Speaker 1: in Europe, also Asia, and of course the United States.
Speaker 1: So the the easiest cage to look at is the
Speaker 1: repo overnight transactions. The exchange that occurs betwe swen uh
Speaker 1: two parties between securities in cash that's still extraordinarily low,
Speaker 1: reflecting the surfeit of money that exists in the system.
Speaker 1: And even if there were some tightening of conditions in
Speaker 1: that realm, we would expect the central banks to do
Speaker 1: what they always do is, which is read up printing presses,
Speaker 1: and they've certainly shown a remarkable ability to do that
Speaker 1: in the last decade or so, so perhaps liquidity is
Speaker 1: consistent or at least ample. However, there has been a
Speaker 1: huge divergence right now going between the US and Europe
Speaker 1: with respect to what the impact from the Ukrainian conflict
Speaker 1: could be. We just get this headline at the ECB
Speaker 1: s Lane sees the Ukrainian war shaving up to zero
Speaker 1: point four percent from the g d P. This is
Speaker 1: according to Reuter's how much have you shifted your view
Speaker 1: on how quickly the e c B could move versus
Speaker 1: the Federal reserve on the On the margin, we think
Speaker 1: that the stress reduced, of course, increases the downside risk
Speaker 1: to global economic both. PIMCO will hold a quarterly meeting
Speaker 1: in about a week and a half in Newport Beach
Speaker 1: and around the world be a video with its investment
Speaker 1: professionals to discuss the matter. But we currently have penciled
Speaker 1: in the growth rate of in the mid threes or
Speaker 1: so for the US this year and close to four
Speaker 1: somewhere in high threes for Europe. The downside risk, of
Speaker 1: course emerges from a drop in confidence in Europe more
Speaker 1: than it would be in the United States, and the
Speaker 1: impact of energy costs, which is greater in Europe than
Speaker 1: it will be in the United States, and so there
Speaker 1: is some impact there, but it's probably too soon to
Speaker 1: say that the numbers will calm down. And importantly, looking
Speaker 1: at the two years story, one should remain sanguine right
Speaker 1: now with a high degree of caution about the the
Speaker 1: the predictability of that though with respect to the global
Speaker 1: album and that's what markets scene three reflecting with the
Speaker 1: current information it has, things could change very rapidly, and
Speaker 1: so we'd say about the outlook, there's a degree of uncertainty,
Speaker 1: and so one wants to have portfolios at a liquid,
Speaker 1: resilient and agile on this climate. Does that mean more cash, Tony,
Speaker 1: a little more cash, not to say, uh, sell everything,
Speaker 1: of course, we think right now, just simply maintaining flexibility.
Speaker 1: This might mean choosing more liquid assets, staying in, staying invested,
Speaker 1: but simply choosing or liquid assets. For example, on the
Speaker 1: credit markets, an institutional investor could choose a credit index
Speaker 1: rather than cash instruments because the amount of money on
Speaker 1: the bid and offer, so called quote depth, tends to
Speaker 1: be rather large in comparison. Sony always wantedful to catch
Speaker 1: up with you important moments, Johns, thank you, sir of
Speaker 1: Pimcoake C. Michan joins us. Now for principal global Investors, Seeming.
Speaker 1: Let's start there, the difficulty to stay level headed in
Speaker 1: a moment like this one. Yeah, you see the bullets
Speaker 1: and to you see the headlines, and of course the
Speaker 1: knee jeck reaction is going to be to go straight
Speaker 1: into cash. But when we look at previous geo political
Speaker 1: crisis in the way that the market is reacted, it's
Speaker 1: really down to the macro backdrop. So if you are
Speaker 1: to see its significant deterioration in the macro backdrop because
Speaker 1: of the surgeonal prices, then yes, you know we should
Speaker 1: be fleeing for St. Favan's. However, if you're not going
Speaker 1: to see a very significant move inflation and you're not
Speaker 1: going to see the FED moving from its path, then
Speaker 1: I think the macro back droop actually still stays pretty
Speaker 1: solid and this is probably a good time to keep
Speaker 1: your head and stay in the game. Seema, how will
Speaker 1: the centerbying some particularly Chairman Powell, are just yield in
Speaker 1: the next six months. I understand there's massive uncertainty, but
Speaker 1: what will you be listening for from the Chairman, the
Speaker 1: President's and the governors. Look, they've clearly got very This
Speaker 1: is they're all already facing a dilever and this is
Speaker 1: just simply increase that dilever. We need to be hearing
Speaker 1: out for what they're going to say about financial conditions.
Speaker 1: But really, given the uncertainty and the fact that they
Speaker 1: have said that they're very much data dependent, it's very
Speaker 1: difficult to see that this conflict is going to push
Speaker 1: the Fed office path within the near future. Once you
Speaker 1: get into the second half of the year, then it
Speaker 1: gives in time to redien analyze to see what the
Speaker 1: repercussions are if it is still continuing, and at that point,
Speaker 1: that's when you could see maybe a pause and the
Speaker 1: fat if you are having consumer start to really react
Speaker 1: to a rise in all prices. But until then, actually
Speaker 1: we don't see much of a change. And what the
Speaker 1: phot was planning to do for weeks, that divergence between
Speaker 1: the u US and the European Union, it has been
Speaker 1: caused for some people to shift their assets into European equities.
Speaker 1: How much does the development with Russia invading Ukraine change
Speaker 1: that equation for you Well, you know, when we came
Speaker 1: into attribution to I know, the consensus view as they
Speaker 1: looked at valuations, Europe look looking a lot cheaper technicals
Speaker 1: and fundamentals. Maybe the growth story was looking that much stronger,
Speaker 1: But actually we maintained and overweight to US versus you're
Speaker 1: because of the concerns around the conflict and also because
Speaker 1: of concerns around natural gas prices. Now we know that
Speaker 1: Europe is more vulnerable to any kind of move. So
Speaker 1: if anything, this is just confirmed our our concerns about
Speaker 1: Europe and actually increases our conviction that the US is
Speaker 1: probably the safest place to be sitting and seem with
Speaker 1: just a word on the banks trade if you can
Speaker 1: as well because that's come up so many times in
Speaker 1: the European story over the last few weeks. Bank of
Speaker 1: America put out a note this morning. Don't like them.
Speaker 1: Obviously the upside is limited now for yields on buns.
Speaker 1: The dollars set to get stronger, growth set to decelerate
Speaker 1: in Europe. Any words of advice for people who are
Speaker 1: sitting there in European banks still seema, Look, I think
Speaker 1: you need to have some some exposure to value, and
Speaker 1: I think really it's could be quality value. If you're
Speaker 1: going to be in banks, look at like quality, what
Speaker 1: are the bound shoots, what have the cash the cash
Speaker 1: prior of these places. Overall, though we don't think that
Speaker 1: that's the best place to be. We don't see considerable
Speaker 1: upside to yield from him. Maybe a little bit, but
Speaker 1: not too much. So we think there are all the
Speaker 1: sect two whould be preferable and art energy. If you
Speaker 1: have any concerns about your political shocks or inflation, probably energies,
Speaker 1: you've got a place to be sitting of Principal Global Investors. Sama.
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