1 00:00:00,840 --> 00:00:04,000 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:05,280 Speaker 1: my co host Matt Miller. 3 00:00:05,640 --> 00:00:09,600 Speaker 2: Every business day, we bring you interviews from CEOs, market pros, 4 00:00:09,720 --> 00:00:13,600 Speaker 2: and Bloomberg experts, along with essential market moving news. 5 00:00:14,160 --> 00:00:17,279 Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 6 00:00:17,400 --> 00:00:20,480 Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. 7 00:00:20,960 --> 00:00:24,200 Speaker 1: All right, let's check in on this federal reserve. You know, 8 00:00:24,640 --> 00:00:26,320 Speaker 1: I mean I hate to talk to Arad Jersey because 9 00:00:26,320 --> 00:00:28,680 Speaker 1: then he just want to talk soccer, soccer, soccer. You 10 00:00:28,680 --> 00:00:30,920 Speaker 1: want to talk to Manchester United. You know, they just 11 00:00:30,960 --> 00:00:33,160 Speaker 1: won the Premiership, but we're going to try to focus 12 00:00:33,240 --> 00:00:35,960 Speaker 1: them back a little bit on rates here. So I 13 00:00:36,000 --> 00:00:39,400 Speaker 1: we're getting a lot of ego data this week. I 14 00:00:39,400 --> 00:00:41,760 Speaker 1: don't know how you're feeling about the debt ceiling. Let's 15 00:00:41,800 --> 00:00:45,040 Speaker 1: assume it kind of gets done with that backdrop, How 16 00:00:45,080 --> 00:00:47,320 Speaker 1: do you think your your feederal reserve is feeling these days? 17 00:00:47,640 --> 00:00:50,240 Speaker 3: Well, first, let's before you get a lot of angry 18 00:00:50,280 --> 00:00:52,600 Speaker 3: tweets and emails. If it's Manchester City. 19 00:00:52,320 --> 00:00:54,320 Speaker 1: The Manchester City, okay, thank you. 20 00:00:54,360 --> 00:00:57,760 Speaker 3: Manchester United is fighting for a Champions League place right now? 21 00:00:57,960 --> 00:01:01,040 Speaker 1: Okay, But you're not a fan of either Manchester. 22 00:01:00,720 --> 00:01:03,840 Speaker 3: Team, right, So my son is actually a very big 23 00:01:03,960 --> 00:01:06,880 Speaker 3: United supporter, but yeah, I'm not a fan of city 24 00:01:07,000 --> 00:01:08,080 Speaker 3: at all. 25 00:01:08,720 --> 00:01:09,320 Speaker 1: And what's your team? 26 00:01:09,319 --> 00:01:11,000 Speaker 3: By the way, aston Villa? 27 00:01:11,920 --> 00:01:13,840 Speaker 1: Why would it be aston Villa? Where'd you pick that 28 00:01:13,880 --> 00:01:14,240 Speaker 1: one up? 29 00:01:14,400 --> 00:01:17,160 Speaker 3: I I when I did a postgraduate degree at the 30 00:01:17,240 --> 00:01:20,199 Speaker 3: University of Birmingham, which is very close to aston Villa. 31 00:01:20,240 --> 00:01:21,759 Speaker 3: So a bunch of Villa matches. 32 00:01:21,800 --> 00:01:23,560 Speaker 1: All right, there you go. Everybody's got to see. 33 00:01:24,160 --> 00:01:27,319 Speaker 3: Yeah, so let's assume that the dead ceiling gets raised, 34 00:01:27,360 --> 00:01:29,840 Speaker 3: because they probably will raise it, and if they don't, 35 00:01:29,959 --> 00:01:33,360 Speaker 3: there's so many disaster scenarios that could potentially come around 36 00:01:33,400 --> 00:01:35,160 Speaker 3: that that, you know, we'd rather not kind of think 37 00:01:35,160 --> 00:01:37,600 Speaker 3: about it at the moment. It's we've spent way too 38 00:01:37,680 --> 00:01:40,600 Speaker 3: much gray matter on thinking about it. I think that 39 00:01:41,080 --> 00:01:43,360 Speaker 3: you know that the Federal Reserve is contending with kind 40 00:01:43,360 --> 00:01:45,600 Speaker 3: of two competing forces at the moment. So one is 41 00:01:46,040 --> 00:01:48,320 Speaker 3: inflation coming down as quickly as they want. You know, 42 00:01:48,800 --> 00:01:52,520 Speaker 3: some of the data that we've seen, the the jobs 43 00:01:52,560 --> 00:01:55,000 Speaker 3: data continues to deteriorate a little bit, but we're still 44 00:01:55,040 --> 00:01:57,559 Speaker 3: creating a lot of jobs and there's still very tight 45 00:01:57,640 --> 00:02:00,560 Speaker 3: labor markets. But then on the other side, you know 46 00:02:00,600 --> 00:02:02,240 Speaker 3: that I think the FED will be a little bit 47 00:02:02,280 --> 00:02:04,800 Speaker 3: reluctant to hike because they're worried about what might happen 48 00:02:04,880 --> 00:02:08,000 Speaker 3: to some of the banking sectors. Right, so we obviously 49 00:02:08,600 --> 00:02:11,440 Speaker 3: all know what happened back in March, and I don't 50 00:02:11,480 --> 00:02:14,040 Speaker 3: think that the FED Reserve wants to be the impetus 51 00:02:14,080 --> 00:02:17,720 Speaker 3: for additional bank failures and bank runs, especially since they've 52 00:02:17,720 --> 00:02:20,760 Speaker 3: already raised interest rates five hundred basis points. So our 53 00:02:20,800 --> 00:02:22,840 Speaker 3: base case remains that the Fed is going to be 54 00:02:22,880 --> 00:02:26,480 Speaker 3: on hold that they might job try to talk the 55 00:02:26,560 --> 00:02:30,880 Speaker 3: market out of pricing for interest rate cuts later this year. 56 00:02:31,600 --> 00:02:34,280 Speaker 3: But I think that that the bulk of the Committee 57 00:02:34,320 --> 00:02:36,360 Speaker 3: is not going to agree with James Bullard saying that 58 00:02:36,400 --> 00:02:38,799 Speaker 3: we're going to hike interest rates another twenty five or 59 00:02:38,840 --> 00:02:41,840 Speaker 3: fifty basis points. I think that most people on the 60 00:02:41,840 --> 00:02:43,680 Speaker 3: Committee want to take a little bit of a wait 61 00:02:43,720 --> 00:02:44,760 Speaker 3: and see attitude from now. 62 00:02:45,080 --> 00:02:47,800 Speaker 4: Hey, Ira, I'm looking at the four week Treasury bills 63 00:02:47,800 --> 00:02:50,280 Speaker 4: and how they're hovering around five point four percent, So 64 00:02:50,320 --> 00:02:52,800 Speaker 4: that would basically bring their rise since the beginning of 65 00:02:52,840 --> 00:02:55,400 Speaker 4: May to more than sixty basis points. I'm wondering what 66 00:02:55,480 --> 00:02:58,359 Speaker 4: kind of movement are you expecting to see Indy bond 67 00:02:58,400 --> 00:03:02,440 Speaker 4: market on which hopefully be a potential deal soon here. 68 00:03:03,080 --> 00:03:05,239 Speaker 3: Yeah, so I think that some of those bills that 69 00:03:05,280 --> 00:03:08,880 Speaker 3: are trading super cheap right now will we'll come back 70 00:03:08,919 --> 00:03:14,200 Speaker 3: into line with kind of the market expectation. So the 71 00:03:14,280 --> 00:03:17,040 Speaker 3: thing to look at for, you know, the real market 72 00:03:17,080 --> 00:03:19,440 Speaker 3: expectations for what the Fed is going to do in June, 73 00:03:19,520 --> 00:03:21,720 Speaker 3: would be looking at the overnight interest rate swap market. 74 00:03:21,800 --> 00:03:24,920 Speaker 3: So these are short term derivative instruments that are based 75 00:03:24,960 --> 00:03:28,320 Speaker 3: on the Federal Funds effective rate. So so that that 76 00:03:28,360 --> 00:03:31,080 Speaker 3: will be a much better gauge than looking at treasury bills, 77 00:03:31,120 --> 00:03:34,040 Speaker 3: because treasury bills right now, even the one month treasury bills, 78 00:03:34,040 --> 00:03:36,560 Speaker 3: are being very skewed by the debt ceiling ancs that 79 00:03:36,600 --> 00:03:40,080 Speaker 3: are that are going on. So we are pricing some 80 00:03:40,160 --> 00:03:43,600 Speaker 3: probability of an interest rate hike by the Fed at 81 00:03:43,640 --> 00:03:45,720 Speaker 3: the June meeting. And when we look at these overnight 82 00:03:45,720 --> 00:03:50,680 Speaker 3: index swaps for the next Fed meeting, what we wind 83 00:03:50,720 --> 00:03:53,800 Speaker 3: up seeing is that we are pricing for you know, 84 00:03:53,880 --> 00:03:56,560 Speaker 3: more or less a thirty thirty five percent chance that 85 00:03:56,640 --> 00:04:00,640 Speaker 3: the Federal Reserve does another twenty five basis point interest increase. Now, 86 00:04:00,640 --> 00:04:02,240 Speaker 3: I think as we get closer to that and as 87 00:04:02,280 --> 00:04:05,400 Speaker 3: we get more data. Uh So, we get the pc 88 00:04:05,720 --> 00:04:09,160 Speaker 3: data this week for the month of April, and that's 89 00:04:09,280 --> 00:04:12,280 Speaker 3: that's the measure that that the Federal Reserve really likes 90 00:04:12,320 --> 00:04:16,760 Speaker 3: and is their preferred gauge of inflation. You know, if 91 00:04:16,760 --> 00:04:18,640 Speaker 3: that comes out as expected, then I think that you 92 00:04:18,720 --> 00:04:23,359 Speaker 3: wind up probably with the with uh that price that 93 00:04:23,520 --> 00:04:26,640 Speaker 3: pike being priced out of the market at least at 94 00:04:26,720 --> 00:04:28,719 Speaker 3: least in the near term until we get the CPI report, 95 00:04:28,760 --> 00:04:32,360 Speaker 3: which we get very soon before the June meeting. 96 00:04:32,720 --> 00:04:36,479 Speaker 1: So again you mentioned on a Friday, get the PCE data, 97 00:04:36,560 --> 00:04:39,200 Speaker 1: and as you mentioned, the core deflator, which is kind 98 00:04:39,200 --> 00:04:42,839 Speaker 1: of the preferred metric for the Fed month on month 99 00:04:42,880 --> 00:04:45,320 Speaker 1: of consensus is zero point three percent. That's even with 100 00:04:45,480 --> 00:04:49,080 Speaker 1: last month. On an annualized basis, that's four point six percent, 101 00:04:49,200 --> 00:04:52,760 Speaker 1: even with with last month. Those numbers just that I 102 00:04:52,839 --> 00:04:56,599 Speaker 1: just quoted, they feel sticky to me, number one, and 103 00:04:57,200 --> 00:04:59,080 Speaker 1: but number two, I guess that four point six is 104 00:04:59,080 --> 00:05:01,520 Speaker 1: that the number they want to see Closer to two percent? 105 00:05:02,560 --> 00:05:05,680 Speaker 3: Yeah, it is, and it's not getting there very quickly, 106 00:05:05,760 --> 00:05:08,080 Speaker 3: which is the reason why I think that the the 107 00:05:08,760 --> 00:05:12,239 Speaker 3: you know, J. Powell mentioned this even in his little 108 00:05:12,279 --> 00:05:14,680 Speaker 3: round table discussion last week when he was on with 109 00:05:14,800 --> 00:05:19,600 Speaker 3: former chair Ben Bernanki that the Federal Reserve is not 110 00:05:19,640 --> 00:05:24,039 Speaker 3: going to be cutting interest rates anytime soon, and especially 111 00:05:24,040 --> 00:05:26,560 Speaker 3: when you continue to get kind of zero point three 112 00:05:26,600 --> 00:05:31,960 Speaker 3: percent core core deflator or headline deflator measures. So think 113 00:05:32,000 --> 00:05:34,359 Speaker 3: about what zero point three is, Paul, because if you 114 00:05:34,440 --> 00:05:37,960 Speaker 3: annualize that, then you're talking about three point nine percent inflation. 115 00:05:38,080 --> 00:05:38,240 Speaker 5: Right. 116 00:05:38,279 --> 00:05:40,960 Speaker 3: It's a pretty simple calculation, right, or three point six 117 00:05:41,000 --> 00:05:43,440 Speaker 3: Excuse me, I can't do math today. Three point six 118 00:05:43,480 --> 00:05:46,039 Speaker 3: percent inflation, and three point six percent is still well 119 00:05:46,080 --> 00:05:50,320 Speaker 3: above the Fed's two percent measure. You know, I think 120 00:05:50,360 --> 00:05:52,480 Speaker 3: the Feds kind of box themselves into a corner a 121 00:05:52,520 --> 00:05:55,719 Speaker 3: little bit because focusing in on two percent, we want 122 00:05:55,720 --> 00:05:58,000 Speaker 3: to get inflation back to two percent. Paul. You and 123 00:05:58,120 --> 00:06:00,159 Speaker 3: I grew up in this industry back and then in 124 00:06:00,200 --> 00:06:02,800 Speaker 3: the eighties and nineties when we had inflation that was 125 00:06:02,839 --> 00:06:05,920 Speaker 3: above three percent, but wages were growing above three percent, 126 00:06:05,960 --> 00:06:09,800 Speaker 3: and no one was you know, consumer confidence was reasonably good. 127 00:06:09,839 --> 00:06:13,720 Speaker 3: People weren't unhappy about their employment situation because jobs were 128 00:06:13,720 --> 00:06:16,839 Speaker 3: reasonably plentiful and people were getting four percent pay raises 129 00:06:16,880 --> 00:06:19,960 Speaker 3: every year when inflation was three percent, so that wasn't 130 00:06:20,000 --> 00:06:22,080 Speaker 3: the worst thing in the world. And I think if 131 00:06:22,120 --> 00:06:24,200 Speaker 3: we fall back into an environment like that, it's going 132 00:06:24,279 --> 00:06:26,400 Speaker 3: to be difficult at this point for the FED to 133 00:06:26,440 --> 00:06:30,159 Speaker 3: pivot back to saying, well, maybe three percents not so 134 00:06:30,240 --> 00:06:33,840 Speaker 3: bad for inflation, right. And I think that that's the 135 00:06:34,320 --> 00:06:37,719 Speaker 3: challenge with having these inflation targets, like a lot of 136 00:06:37,720 --> 00:06:40,360 Speaker 3: central banks have, is that moving away from them ends 137 00:06:40,440 --> 00:06:43,200 Speaker 3: up being disrupted to the markets and confusing from a 138 00:06:43,480 --> 00:06:44,719 Speaker 3: communications perspective. 139 00:06:44,760 --> 00:06:47,160 Speaker 4: And Ira, you're bringing up the CPI report, I was 140 00:06:47,200 --> 00:06:49,800 Speaker 4: looking at the schedule. It's actually coming out on June thirteenth, 141 00:06:49,839 --> 00:06:52,480 Speaker 4: so that would be day one of the fed's next meeting, 142 00:06:52,480 --> 00:06:55,600 Speaker 4: and the decision is on June fourteenth. I was curious 143 00:06:55,640 --> 00:06:58,520 Speaker 4: what we do hear from Obviously, as you know, tons 144 00:06:58,520 --> 00:07:00,440 Speaker 4: of Feds speak this week. We just heard from James 145 00:07:00,440 --> 00:07:03,040 Speaker 4: Bullard yesterday talking about trying to get in potentially two 146 00:07:03,080 --> 00:07:05,839 Speaker 4: more rate hikes because of the labor market being strong. 147 00:07:06,080 --> 00:07:08,360 Speaker 4: How much whenever we do have FED speak like that, 148 00:07:08,400 --> 00:07:10,680 Speaker 4: do you see those types of potential changes there in 149 00:07:10,720 --> 00:07:13,400 Speaker 4: the bond market or even just pricing in those expectations 150 00:07:13,440 --> 00:07:16,480 Speaker 4: for potentially another rate cut or rate rise rather at 151 00:07:16,480 --> 00:07:17,160 Speaker 4: the next meeting. 152 00:07:17,640 --> 00:07:17,840 Speaker 5: Yeah. 153 00:07:17,880 --> 00:07:19,440 Speaker 3: Well, I think that's one reason why you saw two 154 00:07:19,480 --> 00:07:22,200 Speaker 3: year yields move, and you certainly saw the overnight index 155 00:07:22,240 --> 00:07:24,160 Speaker 3: swop market and some of the derivatives market move a 156 00:07:24,200 --> 00:07:28,840 Speaker 3: little bit after after President Bullard spoke yesterday. You'll still 157 00:07:28,880 --> 00:07:33,080 Speaker 3: see volatility around that. And one people have focused very 158 00:07:33,120 --> 00:07:36,280 Speaker 3: much on James Bullard's cycle in particular because he was 159 00:07:36,320 --> 00:07:39,320 Speaker 3: pretty early in being one of the more hawkish members 160 00:07:39,400 --> 00:07:43,120 Speaker 3: that that basically, you know, was kind of the southsayer 161 00:07:43,360 --> 00:07:49,800 Speaker 3: for for the FED hiking and inflation remaining high and sticky. 162 00:07:49,920 --> 00:07:52,160 Speaker 3: You know, I'm not sure that his colleagues on the 163 00:07:52,160 --> 00:07:54,960 Speaker 3: FED agree with him. So, you know, as we hear 164 00:07:55,320 --> 00:07:58,200 Speaker 3: from other speakers, you know, maybe we you know, hear 165 00:07:58,240 --> 00:08:00,520 Speaker 3: from a couple of governors for example, this week, and 166 00:08:00,600 --> 00:08:03,040 Speaker 3: if they're they found a little bit more dubbish than Billard, 167 00:08:03,240 --> 00:08:05,440 Speaker 3: then maybe we'll, you know, that will be the impetus 168 00:08:05,480 --> 00:08:07,640 Speaker 3: for us to take some of those hikes out of 169 00:08:07,640 --> 00:08:08,080 Speaker 3: the market. 170 00:08:08,120 --> 00:08:10,400 Speaker 1: All right, Ira, thanks so much for joining us. As always, 171 00:08:10,640 --> 00:08:14,280 Speaker 1: Ira Jersey, chief US interest rate strategists for Bloomberg Intelligence. 172 00:08:14,320 --> 00:08:18,080 Speaker 1: He's also the resident Aston Villa uber fan, so we 173 00:08:18,120 --> 00:08:21,240 Speaker 1: appreciate getting some of his thoughts again fed front and 174 00:08:21,280 --> 00:08:22,680 Speaker 1: center as usual. 175 00:08:24,120 --> 00:08:27,520 Speaker 5: You're listening to the team Ken's are Live program Bloomberg 176 00:08:27,600 --> 00:08:31,000 Speaker 5: Markets weekdays at ten am Eastern on Bloomberg dot Com, 177 00:08:31,040 --> 00:08:34,160 Speaker 5: the iHeartRadio app and the Bloomberg Business App, or listen 178 00:08:34,240 --> 00:08:36,360 Speaker 5: on demand wherever you get your podcasts. 179 00:08:38,520 --> 00:08:41,640 Speaker 1: Jess, we are so fortunate. I think here at Bloomberg 180 00:08:41,640 --> 00:08:46,560 Speaker 1: we've got, you know, seventeen hundred reporters and bi analysts 181 00:08:46,559 --> 00:08:49,040 Speaker 1: around the world that are experts at what they do, 182 00:08:49,760 --> 00:08:52,360 Speaker 1: and for the most part, they're very friendly. And if 183 00:08:52,400 --> 00:08:53,800 Speaker 1: you call them up and say, hey, can you help 184 00:08:53,880 --> 00:08:56,319 Speaker 1: us out on Bloomberg Radio, more times than not they 185 00:08:56,400 --> 00:08:58,160 Speaker 1: say yes. And that is just a treat for us 186 00:08:58,200 --> 00:09:01,000 Speaker 1: and for our audience. And boy, this round table takes 187 00:09:01,000 --> 00:09:03,000 Speaker 1: the cake because we want to talk about this debt ceiling. 188 00:09:03,000 --> 00:09:04,920 Speaker 1: I'm going to call a dilemma. I don't know what's 189 00:09:04,920 --> 00:09:06,600 Speaker 1: going on at there. I assume it's going to get them, 190 00:09:06,640 --> 00:09:08,560 Speaker 1: but what do I know. But a couple of our 191 00:09:08,600 --> 00:09:10,520 Speaker 1: guests are really smart and they can help us shine 192 00:09:10,559 --> 00:09:13,280 Speaker 1: some light on it. Liz McCormick, Chief correspondent for Global 193 00:09:13,320 --> 00:09:16,040 Speaker 1: Macro markets with Bloomberg News. She joins us as well 194 00:09:16,040 --> 00:09:19,360 Speaker 1: as Cameron Christ macro strategists with Bloomberg News as well. 195 00:09:19,400 --> 00:09:21,439 Speaker 1: So we get a couple smart minds here. They've got 196 00:09:21,440 --> 00:09:23,680 Speaker 1: some experience, they've got some perspective. Liz, let's start with 197 00:09:23,720 --> 00:09:26,720 Speaker 1: you. You know, I'm just an equity guy, and I don't 198 00:09:26,720 --> 00:09:29,480 Speaker 1: see I got my equity indexes up this year. It 199 00:09:29,480 --> 00:09:31,840 Speaker 1: doesn't seem like the equity market's too worried about it. 200 00:09:31,840 --> 00:09:33,679 Speaker 1: If I were to look deeply in the bond market 201 00:09:33,679 --> 00:09:36,040 Speaker 1: when I see some tension, some growing tension in the 202 00:09:36,080 --> 00:09:39,640 Speaker 1: bond market about a potential debt issue. 203 00:09:40,600 --> 00:09:44,120 Speaker 6: Yeah, exactly. There's like two worlds going on. So it 204 00:09:44,160 --> 00:09:47,800 Speaker 6: seems right between stocks and the fixed income market. But yeah, 205 00:09:47,800 --> 00:09:50,080 Speaker 6: and that's kind of the fixed income market's job front 206 00:09:50,080 --> 00:09:52,560 Speaker 6: and center early on to do a read on this 207 00:09:52,600 --> 00:09:55,880 Speaker 6: debt ceiling issue, and you're seeing it. You're seeing treasury 208 00:09:55,880 --> 00:09:59,080 Speaker 6: bills that mature around now. Janet Yelling was out I 209 00:09:59,080 --> 00:10:02,120 Speaker 6: believe it was yesterday, just yesterday, with a new letter 210 00:10:02,200 --> 00:10:05,160 Speaker 6: to Congress saying she thinks there's a lot of risk 211 00:10:05,240 --> 00:10:07,400 Speaker 6: they could run out of capacity to pay all the 212 00:10:07,400 --> 00:10:10,400 Speaker 6: bills as early as June one, she's you know, that's 213 00:10:10,480 --> 00:10:13,920 Speaker 6: highly likely. So the treasury market, there's you know, kind 214 00:10:13,960 --> 00:10:17,880 Speaker 6: of a buffer range maybe through early June. Treasury investors 215 00:10:17,880 --> 00:10:20,760 Speaker 6: are kind of weary of buying treasury bills that mature 216 00:10:20,800 --> 00:10:23,120 Speaker 6: around that time. So you're seeing those bills with very 217 00:10:23,160 --> 00:10:27,120 Speaker 6: high rates, well over five percent, and those rates are 218 00:10:27,160 --> 00:10:30,000 Speaker 6: higher than those with longer maturities, which usually have a 219 00:10:30,080 --> 00:10:33,400 Speaker 6: higher rate. So people are avoiding that. You're seeing credit 220 00:10:33,440 --> 00:10:37,000 Speaker 6: to caul swamps, their costs go up as people buy 221 00:10:37,040 --> 00:10:40,600 Speaker 6: some insurance, and just a level of angst in the marketplace. 222 00:10:40,640 --> 00:10:42,160 Speaker 6: But yeah, I mean the stock market. There's a lot 223 00:10:42,200 --> 00:10:44,760 Speaker 6: of people say until the stock market really kind of 224 00:10:45,080 --> 00:10:48,160 Speaker 6: takes it hard, maybe politicians won't, you know, step off 225 00:10:48,200 --> 00:10:50,800 Speaker 6: the face of getting a deal. But that's another topic. 226 00:10:50,880 --> 00:10:53,199 Speaker 4: I guess, you know, Cameron, I wanted to bring you 227 00:10:53,280 --> 00:10:56,640 Speaker 4: to this conversation. Who we call Macroman at Bloomberg so 228 00:10:56,720 --> 00:10:58,560 Speaker 4: is so exciting. I know, you just put out a 229 00:10:58,600 --> 00:11:01,600 Speaker 4: column that the head line is where the yield curve 230 00:11:01,760 --> 00:11:05,079 Speaker 4: thinks the neutral rate may be. What do you find here? 231 00:11:07,440 --> 00:11:11,559 Speaker 7: Yeah, I mean, unsurprisingly it's lower than where we are. 232 00:11:12,360 --> 00:11:15,160 Speaker 7: I mean, listen, taking a step back, the whole idea 233 00:11:15,400 --> 00:11:19,760 Speaker 7: of neutrality is like an economist dream because they get 234 00:11:19,800 --> 00:11:26,600 Speaker 7: to make very complicated models with lots of Greek letters. 235 00:11:26,720 --> 00:11:30,199 Speaker 7: But what we also find is that they tend to 236 00:11:30,240 --> 00:11:33,480 Speaker 7: be revised a lot, and they're not necessarily terribly accurate. 237 00:11:33,640 --> 00:11:36,800 Speaker 7: So my approach was just, well, let's just look at 238 00:11:36,840 --> 00:11:39,120 Speaker 7: what the old curve says, because we know that when 239 00:11:39,120 --> 00:11:41,360 Speaker 7: the yield curve is very steep, it's basically saying that 240 00:11:41,440 --> 00:11:43,800 Speaker 7: rates are easy, and when the yeld curve is very inverted, 241 00:11:44,120 --> 00:11:47,560 Speaker 7: it's saying that rates are restrictive, and obviously the curve 242 00:11:47,640 --> 00:11:50,439 Speaker 7: is very restrictive. The curve is very inverted at the moment, 243 00:11:50,760 --> 00:11:54,480 Speaker 7: saying that rates are restrictive, and the best I can 244 00:11:54,520 --> 00:11:56,720 Speaker 7: tease out, it's saying that in the US at least, 245 00:11:56,720 --> 00:11:59,319 Speaker 7: the neutral level of rates is about three point six 246 00:11:59,360 --> 00:11:59,959 Speaker 7: percent at the moment. 247 00:12:01,080 --> 00:12:05,120 Speaker 1: So Cameron, for your perspective, I don't know, are you 248 00:12:05,200 --> 00:12:07,679 Speaker 1: gaming out at all yet? Have you pre written a 249 00:12:07,679 --> 00:12:10,600 Speaker 1: column about we just defaulted on our debt? I mean, 250 00:12:10,760 --> 00:12:11,800 Speaker 1: how are you thinking about it? 251 00:12:12,160 --> 00:12:12,240 Speaker 6: No? 252 00:12:12,480 --> 00:12:14,559 Speaker 7: I haven't because I hope it doesn't come to that. 253 00:12:14,760 --> 00:12:16,920 Speaker 7: I mean, I mean honest with you, I feel like 254 00:12:17,320 --> 00:12:19,439 Speaker 7: I'm at the circus just watching a bunch of clowns. 255 00:12:20,080 --> 00:12:21,960 Speaker 7: I wish I had a bag of peanuts I could throw, 256 00:12:22,080 --> 00:12:24,880 Speaker 7: you know, I could throw at them. I think the 257 00:12:24,960 --> 00:12:29,880 Speaker 7: assumption is pretty prevalent in the market that when push 258 00:12:29,920 --> 00:12:34,400 Speaker 7: comes to shove, nobody wants their name on a default, 259 00:12:34,960 --> 00:12:37,199 Speaker 7: and that they at the very least they will come 260 00:12:37,240 --> 00:12:39,600 Speaker 7: to some agreement to kick the can down the road 261 00:12:40,640 --> 00:12:46,040 Speaker 7: a few months to allow for more robust negotiations. I 262 00:12:46,120 --> 00:12:49,559 Speaker 7: suspect that the Republicans would like the issue to become 263 00:12:49,640 --> 00:12:54,000 Speaker 7: front and center again early next year with the presidential campaign, 264 00:12:54,920 --> 00:12:58,480 Speaker 7: and I'm equally sure that the White House would prefer 265 00:12:58,559 --> 00:13:02,240 Speaker 7: that not to be the case. So there's still you know, 266 00:13:02,320 --> 00:13:07,800 Speaker 7: there's still some political considerations there. But you know, nobody 267 00:13:07,840 --> 00:13:12,040 Speaker 7: comes out with their reputation enhanced by a government default, 268 00:13:12,080 --> 00:13:14,240 Speaker 7: and I think we have to operate on the on 269 00:13:14,280 --> 00:13:16,240 Speaker 7: the notion, at the end of the day, the sole goal, 270 00:13:16,480 --> 00:13:18,280 Speaker 7: or the primary goal of every politician is to be 271 00:13:18,320 --> 00:13:18,840 Speaker 7: re elected. 272 00:13:19,440 --> 00:13:21,160 Speaker 4: Liz, I know you've been looking at how the US 273 00:13:21,280 --> 00:13:24,480 Speaker 4: Treasury thirty year yield hit four percent for the first 274 00:13:24,480 --> 00:13:27,440 Speaker 4: time since March. Whenever you're speaking with your sources, what 275 00:13:27,480 --> 00:13:30,400 Speaker 4: are they thinking as far as what we could see 276 00:13:30,559 --> 00:13:33,920 Speaker 4: happen in the bond market once there hopefully would be 277 00:13:34,000 --> 00:13:35,400 Speaker 4: a deal coming soon. 278 00:13:37,000 --> 00:13:38,880 Speaker 6: Well, I think if there's a deal, and I think 279 00:13:38,960 --> 00:13:41,160 Speaker 6: Cameron is right, there's a lot of us who are like, 280 00:13:41,240 --> 00:13:43,560 Speaker 6: can we turn this movie off? We've seen it before, 281 00:13:43,640 --> 00:13:46,240 Speaker 6: can we just get it, get the deal. We're tired 282 00:13:46,320 --> 00:13:48,680 Speaker 6: of it. Don't tell my boss that now. I'm just kidding, 283 00:13:49,240 --> 00:13:54,040 Speaker 6: but I think, yeah, I think if we get a deal, 284 00:13:54,280 --> 00:13:57,560 Speaker 6: the bond market reverts its focus, which hasn't forgotten, but 285 00:13:57,640 --> 00:14:01,280 Speaker 6: it's all about the economy and the and like you 286 00:14:01,320 --> 00:14:04,480 Speaker 6: guys were talking earlier with IRA, we did have some 287 00:14:04,520 --> 00:14:08,280 Speaker 6: hawker speakers yesterday that doesn't seem to jive with what 288 00:14:08,600 --> 00:14:11,080 Speaker 6: Chairman Palell said, who kind of seemed to lay the 289 00:14:11,120 --> 00:14:14,600 Speaker 6: case for a pause in June. So I think, you know, 290 00:14:14,760 --> 00:14:17,280 Speaker 6: whereas maybe the stocks, even though they haven't gotten beaten 291 00:14:17,360 --> 00:14:19,720 Speaker 6: up too much, there's folks that say they see immediate 292 00:14:19,760 --> 00:14:22,320 Speaker 6: relief rally if there's a dead ceiling deal, I think 293 00:14:22,360 --> 00:14:25,120 Speaker 6: bond yields can creep higher because there has been no 294 00:14:25,280 --> 00:14:27,880 Speaker 6: kind of indications. In fact, some of the easing that 295 00:14:28,040 --> 00:14:30,080 Speaker 6: was priced in the second half of the year from 296 00:14:30,160 --> 00:14:32,880 Speaker 6: the swats traders has kind of paired back a little. 297 00:14:33,320 --> 00:14:35,680 Speaker 6: So I think the market needs to see some you know, 298 00:14:35,760 --> 00:14:39,640 Speaker 6: strong information signaling a recession is really coming soon, or 299 00:14:39,680 --> 00:14:43,440 Speaker 6: that the Fed is not only ready to for sure pause, 300 00:14:43,520 --> 00:14:46,640 Speaker 6: but pivot, which they clearly have not indicated. There's a 301 00:14:46,680 --> 00:14:48,680 Speaker 6: lot of people who think there could be some move 302 00:14:48,800 --> 00:14:51,120 Speaker 6: higher in rates. So, like you said, Jess, we saw 303 00:14:51,160 --> 00:14:54,760 Speaker 6: the thirty year ago about four percent. The whole curve 304 00:14:54,880 --> 00:14:57,440 Speaker 6: is have greats higher today, with the short end even 305 00:14:57,520 --> 00:14:59,920 Speaker 6: higher than the long end. So I think, yeah, that's 306 00:15:00,040 --> 00:15:03,080 Speaker 6: kind of filtering back into the system. What happens next? 307 00:15:04,040 --> 00:15:04,320 Speaker 5: Right? 308 00:15:04,400 --> 00:15:06,880 Speaker 1: So, Lis you mentioned earlier credit default swaps, and I 309 00:15:06,880 --> 00:15:09,760 Speaker 1: think all of us, you know, learned a lot about 310 00:15:09,800 --> 00:15:12,080 Speaker 1: credit the fault swaps back in a great financial crisis 311 00:15:12,080 --> 00:15:14,400 Speaker 1: when we're looking at all these banks and all that. 312 00:15:15,400 --> 00:15:17,280 Speaker 1: So you're telling us there are credit default swaps on 313 00:15:17,320 --> 00:15:19,720 Speaker 1: the US government, and if so, what are they telling 314 00:15:19,760 --> 00:15:20,200 Speaker 1: us today? 315 00:15:21,680 --> 00:15:24,880 Speaker 6: Yeah, it's it's kind of crazy, right, And let's just 316 00:15:24,880 --> 00:15:27,640 Speaker 6: say which I know Cameron would I would think agree 317 00:15:27,680 --> 00:15:30,880 Speaker 6: with me. It's a very thinly traded market. There's always 318 00:15:30,920 --> 00:15:33,280 Speaker 6: kind of a lot of people who are suspect. Let's 319 00:15:33,280 --> 00:15:35,760 Speaker 6: not read too much into this because you know, it's 320 00:15:35,800 --> 00:15:39,240 Speaker 6: not a huge market, but the cost to buy them 321 00:15:39,320 --> 00:15:42,000 Speaker 6: has gone up the very short maturities like a year, 322 00:15:42,720 --> 00:15:45,560 Speaker 6: which at least shows you some broad signal that there, 323 00:15:45,720 --> 00:15:47,880 Speaker 6: you know, people are a little bit worried or doing 324 00:15:47,920 --> 00:15:50,960 Speaker 6: some hedging that there could be a default. But by 325 00:15:51,000 --> 00:15:53,760 Speaker 6: all means that it's a more actively traded market and 326 00:15:53,840 --> 00:15:59,240 Speaker 6: emerging markets where unfortunately defaults have in some countries been commonplace. 327 00:15:59,400 --> 00:16:01,640 Speaker 6: But yeah, I mean it's definitely something we look at. 328 00:16:01,640 --> 00:16:03,840 Speaker 6: If you look at Alex Harrison nineteen, who does this 329 00:16:03,920 --> 00:16:07,400 Speaker 6: great little debt ceiling tracker, you know she has that 330 00:16:07,480 --> 00:16:09,680 Speaker 6: in there. It's just important to kind of keep on 331 00:16:09,720 --> 00:16:11,560 Speaker 6: your radar screen of what's going on. 332 00:16:11,720 --> 00:16:14,920 Speaker 4: Yeah, Cameron, I know you've been keeping a close eye 333 00:16:14,960 --> 00:16:19,840 Speaker 4: on real yields. What are they telling us right now, Well. 334 00:16:19,880 --> 00:16:25,240 Speaker 7: They're telling us that that if you are long gold, 335 00:16:25,360 --> 00:16:27,360 Speaker 7: or if you are long stocks, maybe you want to 336 00:16:27,360 --> 00:16:29,720 Speaker 7: be a little worried because they've been they've been taking 337 00:16:29,800 --> 00:16:32,920 Speaker 7: higher two. Your real yields are basically at their highs 338 00:16:32,960 --> 00:16:36,880 Speaker 7: of the entire cycles. So this sort of rebound in 339 00:16:36,880 --> 00:16:40,040 Speaker 7: interest rates that we've seen over the last couple of 340 00:16:41,040 --> 00:16:43,960 Speaker 7: weeks has not been the market pricing and more inflation 341 00:16:44,080 --> 00:16:47,840 Speaker 7: moving forward, essentially the market pricing and tighter policy settings 342 00:16:48,080 --> 00:16:52,320 Speaker 7: or tighter effective policy settings moving forward. And that is 343 00:16:52,600 --> 00:16:57,520 Speaker 7: not a particularly positive one for assets that are dependent 344 00:16:57,640 --> 00:17:01,960 Speaker 7: on kind of free money or the ample liquidity and 345 00:17:02,360 --> 00:17:04,800 Speaker 7: there we were thinking of gold, or we're thinking of 346 00:17:04,880 --> 00:17:09,440 Speaker 7: the sort of infinite maturity or infinite durationtech dot complex. 347 00:17:09,480 --> 00:17:10,680 Speaker 7: It has done so well this year. 348 00:17:11,200 --> 00:17:13,760 Speaker 1: Hey, Keim, just about thirty seconds here. Are you surprised 349 00:17:13,880 --> 00:17:16,760 Speaker 1: that the nasdak's up twenty one percent, the NASDAK one 350 00:17:16,800 --> 00:17:20,560 Speaker 1: hunters up twenty six percent, the SMP's up nine percent? 351 00:17:20,600 --> 00:17:22,520 Speaker 1: You're surprised that these moves in the equity. 352 00:17:22,119 --> 00:17:26,159 Speaker 7: Markets over the course of the year. Yeah, I mean, yes, 353 00:17:26,440 --> 00:17:26,800 Speaker 7: very much. 354 00:17:26,840 --> 00:17:26,919 Speaker 6: So. 355 00:17:27,359 --> 00:17:30,120 Speaker 7: I mean, to some extent, you can sort of post 356 00:17:30,160 --> 00:17:33,320 Speaker 7: hawk explain it via the move in interest rates, but 357 00:17:33,680 --> 00:17:37,240 Speaker 7: it looks to me a lot like equity investors trying 358 00:17:37,280 --> 00:17:39,800 Speaker 7: to convince themselves that they get all the benefit of 359 00:17:39,840 --> 00:17:42,720 Speaker 7: low rates without any of the pain that causes the 360 00:17:42,760 --> 00:17:43,240 Speaker 7: said to. 361 00:17:43,160 --> 00:17:45,919 Speaker 1: Cut All right, guys, really appreciate getting some time from 362 00:17:45,960 --> 00:17:49,280 Speaker 1: both of you. Cameron christ Macro Strategists, Bloomberg News End. 363 00:17:49,320 --> 00:17:53,200 Speaker 1: Liz McCormick, chief correspondent covering the global macro markets. Two 364 00:17:53,280 --> 00:17:57,879 Speaker 1: seasoned reporters and observers of these markets, and they are 365 00:17:57,880 --> 00:18:00,800 Speaker 1: both graduates. So two of my favorite institutes of higher learning. 366 00:18:01,080 --> 00:18:05,000 Speaker 1: Liz McCormick of the Rutgers University, the State University of 367 00:18:05,040 --> 00:18:08,000 Speaker 1: New Jersey, and Camera Christ, a little school down in Durmoruth, 368 00:18:08,000 --> 00:18:09,399 Speaker 1: Carolina known as Duke. 369 00:18:09,760 --> 00:18:12,840 Speaker 5: You're listening to the tape Kent's are live program Bloomberg 370 00:18:12,960 --> 00:18:16,560 Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the 371 00:18:16,600 --> 00:18:19,840 Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 372 00:18:19,880 --> 00:18:22,679 Speaker 5: You can also listen live on Amazon Alexa from our 373 00:18:22,720 --> 00:18:27,840 Speaker 5: flagship New York station. Just say Alexa, play Bloomberg eleven thirty. 374 00:18:28,400 --> 00:18:31,320 Speaker 1: All right, let's talk delivering stuff boxes. Now when you 375 00:18:31,359 --> 00:18:33,000 Speaker 1: get home tonight, just how many boxes are gonna be 376 00:18:33,040 --> 00:18:34,680 Speaker 1: in front of your door? Probably? 377 00:18:34,800 --> 00:18:37,320 Speaker 4: I mean, my birthday was last week, so I have 378 00:18:37,359 --> 00:18:37,640 Speaker 4: a lot. 379 00:18:37,560 --> 00:18:40,600 Speaker 8: Of people been sending me some things, so I hope 380 00:18:40,720 --> 00:18:42,600 Speaker 8: that there are more boxes waiting for me. 381 00:18:42,640 --> 00:18:45,360 Speaker 1: You get, It's just it's unbelievable how the world's changed here. 382 00:18:45,400 --> 00:18:47,280 Speaker 1: So let's break it all down with Mike Para. He's 383 00:18:47,280 --> 00:18:50,359 Speaker 1: the CEO for the Americas at DHL Express joining us 384 00:18:50,400 --> 00:18:53,160 Speaker 1: live here in our Bloomberg Interactive Broker studio. So, Mike, 385 00:18:53,240 --> 00:18:55,240 Speaker 1: thanks so much for joining us here. Appreciate you coming. 386 00:18:55,280 --> 00:18:57,080 Speaker 1: And you got a whole bunch of notes with you, 387 00:18:57,119 --> 00:18:59,160 Speaker 1: but this is a note free studio. See, I got nothing. 388 00:18:59,280 --> 00:19:02,320 Speaker 1: I just kind of for four of it talk to 389 00:19:02,400 --> 00:19:05,080 Speaker 1: us about your business here. I'm gonna ask you to 390 00:19:05,119 --> 00:19:07,439 Speaker 1: go back and tell us, you know, a minute or 391 00:19:07,440 --> 00:19:09,359 Speaker 1: so what the pandemic was like for you guys, and 392 00:19:09,400 --> 00:19:10,879 Speaker 1: then we'll go to kind of where you are today. 393 00:19:11,280 --> 00:19:13,199 Speaker 9: Yeah, So, first of all, thank you for having me 394 00:19:13,280 --> 00:19:15,639 Speaker 9: and thank you for having us. You know, the pandemic 395 00:19:15,680 --> 00:19:18,960 Speaker 9: for us was a blessing and obviously it was a curse. 396 00:19:19,000 --> 00:19:21,879 Speaker 9: First of all, on the curse side, we lost forty 397 00:19:21,920 --> 00:19:24,600 Speaker 9: two employees here in the Americas, and that was the 398 00:19:24,640 --> 00:19:27,159 Speaker 9: curse side. That was the difficult side for us. The 399 00:19:27,200 --> 00:19:30,520 Speaker 9: blessing side of it was that workers absolutely. 400 00:19:30,600 --> 00:19:31,280 Speaker 1: Yeah. 401 00:19:31,280 --> 00:19:35,399 Speaker 9: The blessing side was that our business just blossomed and 402 00:19:35,480 --> 00:19:37,880 Speaker 9: blossomed in many different ways. Number one is we were 403 00:19:37,920 --> 00:19:42,840 Speaker 9: able to successfully deliver over two point one billion vaccines 404 00:19:43,000 --> 00:19:46,199 Speaker 9: across the world. Many of the countries that got their 405 00:19:46,280 --> 00:19:50,320 Speaker 9: vaccines were delivered via DHL, so that was a blessing. 406 00:19:50,359 --> 00:19:53,760 Speaker 9: And then we had a growth and explosion over a 407 00:19:53,800 --> 00:19:55,920 Speaker 9: two year period of time that we had never seen 408 00:19:55,960 --> 00:19:58,840 Speaker 9: in the you know the history of our organization. So 409 00:19:59,160 --> 00:20:00,919 Speaker 9: that's what I would say. The ability to help to 410 00:20:00,920 --> 00:20:04,480 Speaker 9: connect people and improve lives was the blessing. To lose 411 00:20:04,600 --> 00:20:07,080 Speaker 9: colleagues across the world was painful. 412 00:20:07,840 --> 00:20:10,680 Speaker 4: And when you're looking at the market at this point, 413 00:20:10,960 --> 00:20:13,200 Speaker 4: what is it telling you is through your business because 414 00:20:13,200 --> 00:20:15,000 Speaker 4: I would imagine this is a big key as far 415 00:20:15,040 --> 00:20:18,480 Speaker 4: as what things are looking, not just nationally, but globally 416 00:20:18,520 --> 00:20:18,920 Speaker 4: as well. 417 00:20:19,119 --> 00:20:22,560 Speaker 9: Yeah, oh look the market right now is interesting. Just 418 00:20:22,600 --> 00:20:25,320 Speaker 9: coming off an interview and discussing this, you know, what 419 00:20:25,320 --> 00:20:28,239 Speaker 9: I would say from a macro level is, you know, 420 00:20:28,280 --> 00:20:31,160 Speaker 9: we went through this whole fear of running out what 421 00:20:31,240 --> 00:20:34,199 Speaker 9: I call four to roho and now to you know, 422 00:20:34,240 --> 00:20:38,119 Speaker 9: to access inventory and where you have supply is greater 423 00:20:38,200 --> 00:20:40,439 Speaker 9: than the demand that is out there at the moment. 424 00:20:40,680 --> 00:20:42,960 Speaker 9: But we are starting to see some signs of life. 425 00:20:42,960 --> 00:20:45,720 Speaker 9: We're starting to see some tailwinds out of China and 426 00:20:45,800 --> 00:20:47,640 Speaker 9: out of Hong Kong, so we're starting to see those 427 00:20:47,760 --> 00:20:48,400 Speaker 9: numbers grow. 428 00:20:48,720 --> 00:20:48,880 Speaker 4: Now. 429 00:20:48,920 --> 00:20:51,439 Speaker 9: Remember the baseline of this also is coming off the 430 00:20:51,480 --> 00:20:54,520 Speaker 9: fact that last year they were in a lockdown from 431 00:20:54,560 --> 00:20:57,400 Speaker 9: that perspective. So we're starting to see some momentum. We're 432 00:20:57,480 --> 00:21:01,720 Speaker 9: starting to add some additional capacit out of China and 433 00:21:01,800 --> 00:21:05,520 Speaker 9: out of Hong Kong into the United States predominantly. So 434 00:21:06,040 --> 00:21:07,960 Speaker 9: what we do know is that we're a bit more 435 00:21:08,000 --> 00:21:12,800 Speaker 9: optimistic than what everybody is saying in regards to the 436 00:21:12,960 --> 00:21:16,240 Speaker 9: US consumer, and we think we're going to you know, 437 00:21:16,280 --> 00:21:19,200 Speaker 9: we're getting ready for what will be a good fourth quarter. 438 00:21:19,560 --> 00:21:21,600 Speaker 9: So some people are saying the bounce back will come 439 00:21:21,600 --> 00:21:23,800 Speaker 9: back in the third quarter. You know, my thoughts, it's 440 00:21:23,840 --> 00:21:25,879 Speaker 9: going to be much more in the fourth quarter. I 441 00:21:25,880 --> 00:21:28,720 Speaker 9: think we're going to see more experiences happen, people taking 442 00:21:28,760 --> 00:21:32,200 Speaker 9: more vacation. The airlines are ramping up for that for June, July, 443 00:21:32,320 --> 00:21:35,320 Speaker 9: and August, and as a result of that, that's why 444 00:21:35,400 --> 00:21:38,480 Speaker 9: I'm saying it's going to be much more fourth quarter related. 445 00:21:38,880 --> 00:21:40,600 Speaker 1: Talk to us about you know, one of the key 446 00:21:40,600 --> 00:21:44,720 Speaker 1: components of your cost structure your business is your people. Yea, 447 00:21:44,960 --> 00:21:48,360 Speaker 1: labor Do you have enough people, do you have them employed? 448 00:21:48,440 --> 00:21:50,600 Speaker 1: Is it hard to get them? Do you have to 449 00:21:50,600 --> 00:21:52,919 Speaker 1: pay them more? Talk to us about your labor force. 450 00:21:53,119 --> 00:21:55,399 Speaker 9: Thank you, Thank you for asking that question. In regards 451 00:21:55,480 --> 00:21:57,879 Speaker 9: do we have enough people, yes, do we need to 452 00:21:57,920 --> 00:22:00,160 Speaker 9: pay them more? We just put out the law. Our 453 00:22:00,320 --> 00:22:03,359 Speaker 9: just pay increase in the history of the company was 454 00:22:03,400 --> 00:22:05,960 Speaker 9: this year in twenty twenty three, and rightfully so, based 455 00:22:06,000 --> 00:22:09,119 Speaker 9: on inflation and cost of living in general that's going on. 456 00:22:09,160 --> 00:22:10,639 Speaker 9: And by the way, this was not just here in 457 00:22:10,680 --> 00:22:14,320 Speaker 9: the United States but also globally from that perspective, so 458 00:22:14,960 --> 00:22:18,680 Speaker 9: less concerned about that. In regards to recruitment and recruitment efforts. 459 00:22:18,920 --> 00:22:24,520 Speaker 9: We are replacing folks as we have either attrition or promotions. 460 00:22:24,600 --> 00:22:28,360 Speaker 9: We are replacing roles. But we are constantly looking at 461 00:22:28,400 --> 00:22:31,879 Speaker 9: our efficiencies and how we can optimize our network, not 462 00:22:31,920 --> 00:22:33,879 Speaker 9: only in the air but also on the ground. 463 00:22:34,359 --> 00:22:37,000 Speaker 4: What are your thoughts on geopolitics right now? And is 464 00:22:37,040 --> 00:22:38,919 Speaker 4: the debt sealing a concern for you? 465 00:22:38,920 --> 00:22:40,840 Speaker 9: You know, somebody asked me as well that question on 466 00:22:40,880 --> 00:22:44,160 Speaker 9: the debt ceiling. We're not spending a lot of time 467 00:22:44,640 --> 00:22:46,760 Speaker 9: because that's going to work its way out as it 468 00:22:46,840 --> 00:22:50,120 Speaker 9: has historically. Now some might say, well, Mike, everybody says that, 469 00:22:50,400 --> 00:22:52,840 Speaker 9: but in all reality, I think it's just much more 470 00:22:52,880 --> 00:22:55,360 Speaker 9: of a timetable of when it's going to get negotiated 471 00:22:55,400 --> 00:22:58,159 Speaker 9: and worked out. I think there's more fear associated with 472 00:22:58,200 --> 00:23:00,360 Speaker 9: the whole debt ceiling and are we going to out 473 00:23:00,359 --> 00:23:02,240 Speaker 9: of time? And are you know what's going to happen 474 00:23:02,280 --> 00:23:06,439 Speaker 9: to the US economy. But so we're not spending a 475 00:23:06,480 --> 00:23:09,480 Speaker 9: lot of time on it, and from a global perspective, people, 476 00:23:09,480 --> 00:23:13,119 Speaker 9: we're watching it, but from a perspective of it, you know, 477 00:23:13,240 --> 00:23:14,879 Speaker 9: I'm not going to bed at night, not sleeping. 478 00:23:14,920 --> 00:23:17,719 Speaker 4: I'm less concerned any of those fears affecting the business 479 00:23:17,760 --> 00:23:19,440 Speaker 4: at all through your models. 480 00:23:19,640 --> 00:23:22,040 Speaker 9: At the moment, I would say, no, you know, some 481 00:23:22,119 --> 00:23:23,960 Speaker 9: of the bigger challenges that we face, and we face 482 00:23:24,040 --> 00:23:26,199 Speaker 9: challenges every day, right. I mean we've got you know, 483 00:23:26,240 --> 00:23:28,480 Speaker 9: what's going on in Russia and Ukraine, that's always been 484 00:23:28,520 --> 00:23:31,640 Speaker 9: a concern. You've got the potential concern of China and Taiwan. 485 00:23:32,119 --> 00:23:35,920 Speaker 9: That's a concern. So we watch all those spaces closely. 486 00:23:36,760 --> 00:23:39,239 Speaker 9: What we are what we are seeing is as we 487 00:23:39,320 --> 00:23:42,000 Speaker 9: get through this inventory. And you were talking about luxury 488 00:23:42,000 --> 00:23:44,080 Speaker 9: goods before I came on board. By my way, my 489 00:23:44,160 --> 00:23:48,119 Speaker 9: wife is a huge LVBAH so you know, and I 490 00:23:48,240 --> 00:23:50,760 Speaker 9: purchase our bags as well. But what I would say 491 00:23:50,800 --> 00:23:53,080 Speaker 9: is we have seen as slow down in luxury goods, 492 00:23:53,119 --> 00:23:55,400 Speaker 9: and that slowed down in luxury goods. What we're hearing 493 00:23:55,400 --> 00:23:58,760 Speaker 9: from our customers is they're spending much more on experiences. 494 00:23:58,800 --> 00:24:01,320 Speaker 9: Having come out of two years in COVID and not 495 00:24:01,440 --> 00:24:03,640 Speaker 9: being able to travel, not being able to get out. 496 00:24:03,800 --> 00:24:06,000 Speaker 9: They're using the money that they do have and they're 497 00:24:06,080 --> 00:24:08,840 Speaker 9: using it on experiences. And that's why I think we'll 498 00:24:08,840 --> 00:24:10,240 Speaker 9: see that through the summer as well. 499 00:24:10,320 --> 00:24:12,400 Speaker 4: What do you think that tells us about the economy? 500 00:24:12,400 --> 00:24:14,320 Speaker 4: Then if you're seeing sort of a shift, there is 501 00:24:14,359 --> 00:24:17,119 Speaker 4: this more of an optimistic sign for the economy rather 502 00:24:17,200 --> 00:24:19,280 Speaker 4: than when everyone's focused on the health of the consumer. 503 00:24:19,480 --> 00:24:21,040 Speaker 9: Yeah, and that's why I said it was a bit 504 00:24:21,080 --> 00:24:24,840 Speaker 9: more optimistic about the US consumer going into Q four. 505 00:24:24,840 --> 00:24:26,640 Speaker 9: And I do think we're going to have a real 506 00:24:26,680 --> 00:24:30,159 Speaker 9: peak season this year, whereas last year we had the 507 00:24:30,200 --> 00:24:33,399 Speaker 9: eternal Black Friday, the eternal Cyber Monday, and the sales 508 00:24:33,440 --> 00:24:36,199 Speaker 9: that went on for a healthy period of time. I 509 00:24:36,200 --> 00:24:38,080 Speaker 9: think we're going to see a bounce back in retail 510 00:24:38,200 --> 00:24:41,840 Speaker 9: from that perspective as well, and we're starting to see 511 00:24:41,880 --> 00:24:44,359 Speaker 9: that in the number of activations that are happening with 512 00:24:44,440 --> 00:24:45,080 Speaker 9: our customers. 513 00:24:45,280 --> 00:24:48,320 Speaker 1: Talk to us about the competitive environment. I mean FedEx 514 00:24:48,440 --> 00:24:51,359 Speaker 1: ups the United States Postal Service. I guess I don't know, 515 00:24:52,000 --> 00:24:55,000 Speaker 1: but FedEx, I mean they had the integrated T and T. 516 00:24:55,200 --> 00:24:57,399 Speaker 1: So talk just about the competitive land landscape. 517 00:24:57,560 --> 00:25:02,360 Speaker 9: Yeah, I mean, look, both our competitors, good companies, very 518 00:25:02,440 --> 00:25:06,480 Speaker 9: large domestic presence. Their focus is big time focus on domestic. 519 00:25:06,520 --> 00:25:10,400 Speaker 9: Our focus is predominantly one hundred percent internationally, more specifically 520 00:25:10,440 --> 00:25:12,920 Speaker 9: here in the United States. You know, you've got two 521 00:25:12,920 --> 00:25:15,520 Speaker 9: different things going on. You've got a transformation going on 522 00:25:15,520 --> 00:25:18,840 Speaker 9: on one side, which is an optimization of you know, 523 00:25:18,960 --> 00:25:22,240 Speaker 9: of an organization, uh as well as the future of 524 00:25:22,280 --> 00:25:24,879 Speaker 9: combining two different entities, which will be a first for 525 00:25:24,960 --> 00:25:27,600 Speaker 9: them on one side, and that that could potentially be 526 00:25:27,640 --> 00:25:30,879 Speaker 9: a distraction, is what I would say. The other or 527 00:25:31,040 --> 00:25:34,120 Speaker 9: the other side is an organization that is focusing on 528 00:25:34,240 --> 00:25:37,280 Speaker 9: yield and margin, which we focus on consistently from a 529 00:25:37,320 --> 00:25:41,639 Speaker 9: pricing perspective, an efficiency perspective, but also you know, a 530 00:25:41,720 --> 00:25:45,200 Speaker 9: labor potential challenge that they may be facing. So again 531 00:25:45,280 --> 00:25:49,280 Speaker 9: that's another distraction. Our focus right now is on making 532 00:25:49,320 --> 00:25:51,840 Speaker 9: sure that we're protecting the jobs that we do have, 533 00:25:52,200 --> 00:25:55,520 Speaker 9: protecting the customers that we do have, and growing our 534 00:25:55,520 --> 00:25:56,359 Speaker 9: business the right. 535 00:25:56,240 --> 00:25:59,119 Speaker 1: Way, Hey, Jess, I got to call out here, Mike's 536 00:25:59,160 --> 00:26:04,480 Speaker 1: worrying and a Miami Heat Cup links. Oh about the 537 00:26:04,520 --> 00:26:07,400 Speaker 1: Heat and Miami. How big a story is that in Miami. 538 00:26:07,480 --> 00:26:10,119 Speaker 9: Well, look, there's two big stories going on in Miami 539 00:26:10,200 --> 00:26:12,720 Speaker 9: right now. One is the Florida Panthers that are three 540 00:26:12,840 --> 00:26:15,800 Speaker 9: and oh right and in twenty seven years have never 541 00:26:16,080 --> 00:26:20,800 Speaker 9: reached the the NHL finals. And then we've got my 542 00:26:20,960 --> 00:26:24,240 Speaker 9: Miami Heat, God bless them, three and oh against Boston 543 00:26:24,560 --> 00:26:28,360 Speaker 9: eight seed, seven undrafted free agents that everybody keeps reminding 544 00:26:28,400 --> 00:26:31,640 Speaker 9: us about. And you've got an organization that really has 545 00:26:31,720 --> 00:26:34,400 Speaker 9: been there before but said they weren't going to beat 546 00:26:34,440 --> 00:26:36,919 Speaker 9: Milwaukee and they did. If you're a Knicks fan, I 547 00:26:37,000 --> 00:26:40,960 Speaker 9: apologize for everyone here said hey, you're going to have 548 00:26:40,960 --> 00:26:43,320 Speaker 9: a hard time against the Knicks, and we were able 549 00:26:43,320 --> 00:26:45,080 Speaker 9: to win there. And now we're up three to zero 550 00:26:45,119 --> 00:26:48,800 Speaker 9: against Boston and hoping to close it out tonight at home. 551 00:26:48,960 --> 00:26:53,600 Speaker 9: So excited. Excited for Jimmy Butler, excited for the Miami 552 00:26:53,600 --> 00:26:58,399 Speaker 9: Heat organization, but excited in general for sports sports because 553 00:26:58,400 --> 00:27:00,280 Speaker 9: you have an underdog team in both the We're the 554 00:27:00,320 --> 00:27:04,000 Speaker 9: Panthers eight seed in the NHL that are potentially going 555 00:27:04,040 --> 00:27:06,680 Speaker 9: to close it out and the eight seed Miami Heat 556 00:27:06,680 --> 00:27:07,119 Speaker 9: that can do it. 557 00:27:07,160 --> 00:27:09,320 Speaker 1: So good the story from them, that good story from im. 558 00:27:09,400 --> 00:27:11,479 Speaker 1: Now you get the baseball. The guess we all set. 559 00:27:11,840 --> 00:27:15,080 Speaker 1: Mike Paris, CEO of America, is for DHL Express, joining 560 00:27:15,119 --> 00:27:17,320 Speaker 1: us here in our studio. Appreciate geting the update on 561 00:27:17,400 --> 00:27:20,440 Speaker 1: the business and our friends at DHL. 562 00:27:20,240 --> 00:27:22,719 Speaker 4: As well as the thirtieth anniversary is coming up. 563 00:27:22,760 --> 00:27:25,560 Speaker 1: I know you've been at the companies and like out 564 00:27:25,680 --> 00:27:26,119 Speaker 1: very college. 565 00:27:26,320 --> 00:27:28,640 Speaker 9: Boom, it's my marriage, my wife. 566 00:27:30,000 --> 00:27:31,639 Speaker 1: Yeah, this is Bloomberg. 567 00:27:33,119 --> 00:27:36,520 Speaker 5: You're listening to the team. Ken's are live program Bloomberg 568 00:27:36,560 --> 00:27:39,919 Speaker 5: Markets weekdays at ten am eastering on Bloomberg dot com, 569 00:27:40,000 --> 00:27:43,160 Speaker 5: the iHeartRadio app and the Bloomberg Business app, or listen 570 00:27:43,240 --> 00:27:45,360 Speaker 5: on demand wherever you get your podcasts. 571 00:27:47,320 --> 00:27:50,679 Speaker 1: Currently, right now in Katara, there is the Qatar Economic 572 00:27:50,760 --> 00:27:54,159 Speaker 1: Form and that's where Caroline Hyde, a host of Bloomberg Technology, 573 00:27:54,480 --> 00:27:57,440 Speaker 1: track down the CEO of Tiktoks. We want to check 574 00:27:57,480 --> 00:27:59,760 Speaker 1: in with Caroline. We also got Man Deep singing here, 575 00:28:00,359 --> 00:28:03,280 Speaker 1: senior technologyannels for Bloomberg Intelligence. He's in our studio here, 576 00:28:03,960 --> 00:28:06,840 Speaker 1: Meek and Pepper Caroline some questions too, Caroline thanks so 577 00:28:06,880 --> 00:28:10,960 Speaker 1: much for joining us. You know your interview with show 578 00:28:11,160 --> 00:28:14,760 Speaker 1: Cho the CEO, hope I got that somewhat correct. For TikTok, 579 00:28:14,800 --> 00:28:16,880 Speaker 1: What were the key items? What were the key takeaways 580 00:28:16,880 --> 00:28:19,360 Speaker 1: you had from your discussion with the CEO of TikTok. 581 00:28:21,320 --> 00:28:24,480 Speaker 10: I mean, ah, boy, wasn't it newsie, Because of course, 582 00:28:24,760 --> 00:28:27,280 Speaker 10: just less than twenty four hours before sitting down with him, 583 00:28:27,560 --> 00:28:31,160 Speaker 10: it became public that indeed TikTok was suing the State 584 00:28:31,160 --> 00:28:31,800 Speaker 10: of Montana. 585 00:28:32,080 --> 00:28:33,520 Speaker 11: After of course, the state. 586 00:28:33,359 --> 00:28:35,399 Speaker 10: Of Antana has said that they're going to be going 587 00:28:35,440 --> 00:28:38,640 Speaker 10: further than any state has ever gone before and banning 588 00:28:38,720 --> 00:28:41,440 Speaker 10: the app from the beginning of January twenty twenty four. 589 00:28:41,600 --> 00:28:45,200 Speaker 10: So here was the statement coming from the CEO that 590 00:28:45,480 --> 00:28:48,520 Speaker 10: they feel that this is unconstitutional. The key takeaway was 591 00:28:48,560 --> 00:28:50,960 Speaker 10: that the key takeaway was feeling also that it looks 592 00:28:50,960 --> 00:28:55,280 Speaker 10: pretty confident. Ultimately, he feels that they will prevail, they'll 593 00:28:55,320 --> 00:28:57,280 Speaker 10: be able to stay in the United States. And why 594 00:28:57,400 --> 00:28:59,600 Speaker 10: is that Because they have one hundred and fifty million users, 595 00:28:59,640 --> 00:29:02,560 Speaker 10: they have people consuming next content and actually more business 596 00:29:02,640 --> 00:29:05,720 Speaker 10: is depending on it. But he didn't offer anything new 597 00:29:05,840 --> 00:29:09,400 Speaker 10: really in terms of what they're doing the state and 598 00:29:09,720 --> 00:29:13,200 Speaker 10: protect the privacy of US users. That's why Montana's of 599 00:29:13,240 --> 00:29:15,680 Speaker 10: course taking the step wanting to bang the lord about 600 00:29:15,680 --> 00:29:20,320 Speaker 10: the Chinese government having access to US data and still 601 00:29:20,360 --> 00:29:24,320 Speaker 10: there standing by this Oracle plan that is Project Texas, 602 00:29:24,360 --> 00:29:27,880 Speaker 10: that would be able to secure your data in the US, 603 00:29:27,960 --> 00:29:31,040 Speaker 10: they say, and ultimately prevent back door. He said, no 604 00:29:31,120 --> 00:29:33,880 Speaker 10: company can do and prevent them a backdoor any risks 605 00:29:33,920 --> 00:29:37,680 Speaker 10: one hundred percent that will be underrepresent the risks without level. 606 00:29:37,760 --> 00:29:40,320 Speaker 4: And Carolin, to your point, especially with lawmakers in the 607 00:29:40,400 --> 00:29:43,120 Speaker 4: US in these sort of ongoing security fears when it 608 00:29:43,120 --> 00:29:46,440 Speaker 4: comes to TikTok. You mentioned Oracle on how their TikTok 609 00:29:46,480 --> 00:29:49,000 Speaker 4: is working with them to sort of allay these types 610 00:29:49,040 --> 00:29:52,840 Speaker 4: of fears. He laid out any sort of options as 611 00:29:52,840 --> 00:29:56,080 Speaker 4: far as what there could be to potentially end up 612 00:29:56,360 --> 00:29:58,280 Speaker 4: mitigating some of these fears that are out there. 613 00:30:01,360 --> 00:30:04,880 Speaker 10: Ultimately, no, I mean they feel that they've gone further 614 00:30:04,960 --> 00:30:08,760 Speaker 10: than any other company to make clear that they can 615 00:30:08,840 --> 00:30:11,600 Speaker 10: protect data. Now remember, I mean Mandy will be able 616 00:30:11,640 --> 00:30:14,120 Speaker 10: to discuss this in depth. But this is but a 617 00:30:14,200 --> 00:30:17,680 Speaker 10: day after we understand that the EU is also finding 618 00:30:17,720 --> 00:30:20,320 Speaker 10: a record fine more than a billion to Meta. So 619 00:30:20,440 --> 00:30:23,280 Speaker 10: the fact that look, it's doing exactly what they currently 620 00:30:23,280 --> 00:30:26,760 Speaker 10: the Montana is warting that Chinese will do europe is 621 00:30:26,800 --> 00:30:30,920 Speaker 10: claiming that the US in meta is access and could 622 00:30:30,960 --> 00:30:36,400 Speaker 10: potentially access Europeans user data of Facebook or Instagram users 623 00:30:36,480 --> 00:30:39,600 Speaker 10: or WhatsApp or the other products that meta users, and 624 00:30:39,680 --> 00:30:43,480 Speaker 10: so they're doing meta. They're finding meta in fact by 625 00:30:43,520 --> 00:30:46,040 Speaker 10: saying that you haven't done enough to protect the privacy 626 00:30:46,120 --> 00:30:49,640 Speaker 10: of the EU user from the US. So, ultimately, this 627 00:30:49,720 --> 00:30:53,080 Speaker 10: is actually a deeply global conversation. We're getting very divided, 628 00:30:53,120 --> 00:30:55,400 Speaker 10: and I have to say that's actually something so Chu 629 00:30:55,520 --> 00:30:58,720 Speaker 10: spoke very eloquently on saying we are sort of heading 630 00:30:58,720 --> 00:31:05,480 Speaker 10: towards vulcanism here, ultimately putting barriers between a global internet 631 00:31:05,520 --> 00:31:09,600 Speaker 10: with creating frictions. And this is the worry he says ultimately, like, 632 00:31:09,800 --> 00:31:11,560 Speaker 10: how are you going to do this without the quote 633 00:31:11,600 --> 00:31:13,440 Speaker 10: unquote breaking the internet? 634 00:31:13,520 --> 00:31:17,680 Speaker 12: With his great fear Here, Caroline, you had a great 635 00:31:17,720 --> 00:31:20,480 Speaker 12: point around you know, the user of chat GPT and 636 00:31:20,720 --> 00:31:24,720 Speaker 12: how TikTok could actually use that for you know, generating 637 00:31:24,800 --> 00:31:28,240 Speaker 12: video content. What was your sense in terms of how 638 00:31:28,400 --> 00:31:31,120 Speaker 12: TikTok plans to use that or are they going to 639 00:31:31,120 --> 00:31:32,200 Speaker 12: develop their own model? 640 00:31:34,360 --> 00:31:37,440 Speaker 10: Ah, that would have been a great answer to get 641 00:31:37,480 --> 00:31:40,920 Speaker 10: to get from him. And then you're always analysis is 642 00:31:40,960 --> 00:31:45,080 Speaker 10: so thoughtful and discussion points about all these things about 643 00:31:45,160 --> 00:31:48,320 Speaker 10: ultimately how AI is going to make it a lot easier, 644 00:31:48,320 --> 00:31:52,360 Speaker 10: a lot more perhaps exciting for users and for content creators. 645 00:31:52,720 --> 00:31:54,640 Speaker 10: He didn't go as far to say that they're developing 646 00:31:54,680 --> 00:31:57,120 Speaker 10: their own lunch language model. I did put that to him, 647 00:31:57,160 --> 00:32:00,760 Speaker 10: and he said, they're just analyzing how a in generator 648 00:32:00,840 --> 00:32:04,000 Speaker 10: AI could be interesting and utiful to his business. They're 649 00:32:04,040 --> 00:32:06,520 Speaker 10: still assessing the risks, is the way that he said it. 650 00:32:06,640 --> 00:32:10,440 Speaker 10: But ultimately, I think AI this is why TikTok is 651 00:32:10,480 --> 00:32:15,040 Speaker 10: so successful and to many fears so addictive. It's because 652 00:32:15,160 --> 00:32:17,640 Speaker 10: of official intelligence and machine learning has meant that we 653 00:32:17,720 --> 00:32:20,560 Speaker 10: are posted things that we all find deeply interesting. It 654 00:32:20,600 --> 00:32:23,800 Speaker 10: happens to spark our imagination. The worry I put to 655 00:32:23,840 --> 00:32:26,240 Speaker 10: him as well is what if AI am particularly from 656 00:32:26,240 --> 00:32:29,120 Speaker 10: the AI filter, What if they make it even more 657 00:32:29,120 --> 00:32:33,600 Speaker 10: addictive to the young, or give even more unrealistic assessments 658 00:32:33,600 --> 00:32:36,280 Speaker 10: of what reality is like. Just think of the AI 659 00:32:37,200 --> 00:32:40,160 Speaker 10: filter that currently makes people more beautiful. I think it's 660 00:32:40,160 --> 00:32:43,800 Speaker 10: called the golden AI effects. Well, we've already empherticizing that 661 00:32:43,800 --> 00:32:46,320 Speaker 10: that it gives an unfair idea of really what beauty 662 00:32:46,480 --> 00:32:49,840 Speaker 10: is for the younger teenage, particularly female user of TikTok. 663 00:32:49,920 --> 00:32:55,360 Speaker 1: Right now, Hey, Caroline, is there a scenario, reasonable scenario 664 00:32:55,520 --> 00:32:59,640 Speaker 1: at all, where maybe white Edance would divest its ownership 665 00:32:59,680 --> 00:33:02,000 Speaker 1: of TikTok? Is that something that's even on the table. 666 00:33:02,000 --> 00:33:02,640 Speaker 1: Do you think. 667 00:33:05,200 --> 00:33:07,480 Speaker 10: They won't go there? They've said time and time again 668 00:33:07,600 --> 00:33:10,520 Speaker 10: that that will not solve the national security issue that 669 00:33:10,640 --> 00:33:14,880 Speaker 10: play here. They won't really go into it as to why. Ultimately, 670 00:33:14,920 --> 00:33:18,479 Speaker 10: I think because bike Dance receives the overall valuation of 671 00:33:18,480 --> 00:33:21,680 Speaker 10: this company the most valuable set up out there, and 672 00:33:21,880 --> 00:33:24,320 Speaker 10: doesn't want to have to forcibly go there at a 673 00:33:24,360 --> 00:33:28,520 Speaker 10: price point that isn't at the top level IPO. Would 674 00:33:28,640 --> 00:33:30,960 Speaker 10: an IPO solve this? I mean, it's certainly something there 675 00:33:30,960 --> 00:33:33,200 Speaker 10: eventually will be on the agenda for the company, But 676 00:33:33,840 --> 00:33:37,680 Speaker 10: I think for now they're really taking any selling to 677 00:33:37,800 --> 00:33:41,360 Speaker 10: another US party off the agenda, off the table. They 678 00:33:41,360 --> 00:33:44,479 Speaker 10: don't feel that's going to secure the national security argument. 679 00:33:44,560 --> 00:33:48,400 Speaker 10: What will they say is the Project Texas, Project Clover's 680 00:33:48,560 --> 00:33:51,400 Speaker 10: ability to keep the US data safely in the US 681 00:33:51,560 --> 00:33:53,920 Speaker 10: and ensure there's no backdoors, But certainly any sort of 682 00:33:53,960 --> 00:33:55,720 Speaker 10: spinough doesn't seem to be something that they want to 683 00:33:55,760 --> 00:33:56,320 Speaker 10: negotiate on. 684 00:33:56,880 --> 00:33:59,640 Speaker 4: Something that struck me, Caroline, is that despite what's going 685 00:33:59,680 --> 00:34:03,320 Speaker 4: on with these political tensions, TikTok hasn't really eased its 686 00:34:03,320 --> 00:34:05,560 Speaker 4: push when it comes to monetization. Can you talk to 687 00:34:05,640 --> 00:34:08,600 Speaker 4: us more about some of these other ventures like live streaming, 688 00:34:08,640 --> 00:34:11,200 Speaker 4: commerce and in other places of the world that they're 689 00:34:11,200 --> 00:34:12,359 Speaker 4: still going into at this. 690 00:34:12,360 --> 00:34:16,719 Speaker 10: Point, Yeah, and actually really rolling it out much more 691 00:34:16,719 --> 00:34:20,160 Speaker 10: fast and furiously. In the United States, for example, it's 692 00:34:20,239 --> 00:34:24,320 Speaker 10: one much more it in say Singapore and in Asia 693 00:34:24,520 --> 00:34:27,440 Speaker 10: is ecommerce basically making it that much easier to be 694 00:34:27,480 --> 00:34:29,560 Speaker 10: able to purchase, to do your shopping, to bring more 695 00:34:29,560 --> 00:34:33,520 Speaker 10: than mediums to identerprises onto TikTok. Of course, the general 696 00:34:33,600 --> 00:34:36,000 Speaker 10: revenue model in the US thus far and in Europe 697 00:34:36,040 --> 00:34:39,600 Speaker 10: as you're a user, has been advertising, as is the 698 00:34:39,640 --> 00:34:42,080 Speaker 10: way with all social media products at the moment, and 699 00:34:42,280 --> 00:34:44,080 Speaker 10: that the highs and the lows. That that ends up 700 00:34:44,080 --> 00:34:48,920 Speaker 10: meaning in a way that we are sent various pushes 701 00:34:49,000 --> 00:34:53,799 Speaker 10: to make purchases, but they want intertwined commerce far more 702 00:34:53,840 --> 00:34:56,439 Speaker 10: into the business. So TikTok shop is something that's really 703 00:34:56,440 --> 00:34:59,200 Speaker 10: being rolled out at the moment and focused in particular 704 00:34:59,239 --> 00:35:01,040 Speaker 10: in the US and U. The XP had to piece 705 00:35:01,080 --> 00:35:03,239 Speaker 10: out how they're moving some of their talents tickly from 706 00:35:03,280 --> 00:35:05,719 Speaker 10: Brazil and other countries to the US and UK to 707 00:35:05,800 --> 00:35:09,280 Speaker 10: focus in on how I can ultimately, yeah, monetize our rivals. 708 00:35:09,440 --> 00:35:10,520 Speaker 10: The room of the health hard at. 709 00:35:10,480 --> 00:35:14,680 Speaker 1: The moment, Man Manty. From a technical perspective, this is 710 00:35:14,719 --> 00:35:17,880 Speaker 1: on showing of data this project Texas. As you know, 711 00:35:17,880 --> 00:35:19,799 Speaker 1: as Caroline was talking to the CEO, it kind of 712 00:35:19,840 --> 00:35:23,799 Speaker 1: made sense to me from a technical perspective, shouldn't that 713 00:35:23,840 --> 00:35:24,680 Speaker 1: be a good fix? 714 00:35:24,840 --> 00:35:27,160 Speaker 12: I mean, look at this week, you know Meta having 715 00:35:27,160 --> 00:35:30,520 Speaker 12: to pay fines because of data sovereignty issues. So clearly 716 00:35:30,600 --> 00:35:33,879 Speaker 12: this is something and Caroline touched on that during her 717 00:35:33,960 --> 00:35:37,120 Speaker 12: interview that you know, this is something that every company 718 00:35:37,120 --> 00:35:39,759 Speaker 12: has to do it. There is no choice, and the 719 00:35:39,840 --> 00:35:42,240 Speaker 12: sooner they do it, I think the better off. David, 720 00:35:42,239 --> 00:35:45,520 Speaker 12: it'll be from a regulatory standpoint, I do think, you know, 721 00:35:45,600 --> 00:35:49,759 Speaker 12: with the proliferation of machine generated data, it's going to 722 00:35:49,840 --> 00:35:52,799 Speaker 12: get harder and harder. You can control user generated data 723 00:35:52,800 --> 00:35:55,080 Speaker 12: in terms of where it's stored, but when it comes 724 00:35:55,160 --> 00:35:58,880 Speaker 12: to you know, a large language model, curating new types 725 00:35:58,920 --> 00:36:01,880 Speaker 12: of content, how do you control that? And so that 726 00:36:01,960 --> 00:36:03,480 Speaker 12: will be the hard problem to solve. 727 00:36:04,800 --> 00:36:07,000 Speaker 4: Mand But what do you think is coming next as 728 00:36:07,040 --> 00:36:09,279 Speaker 4: far as what you're watching as an analyst when it 729 00:36:09,320 --> 00:36:12,360 Speaker 4: comes to all of the sort of political in security 730 00:36:12,440 --> 00:36:14,280 Speaker 4: questions when it comes to TikTok. 731 00:36:14,400 --> 00:36:18,000 Speaker 12: Well, so I think again, it was a wide ranging 732 00:36:18,040 --> 00:36:20,799 Speaker 12: interview and he touched on a few things, but for me, 733 00:36:21,040 --> 00:36:25,279 Speaker 12: the key question was what happens to TikTok's independence if 734 00:36:25,760 --> 00:36:28,080 Speaker 12: you know they are forced to divest and and that 735 00:36:28,719 --> 00:36:31,000 Speaker 12: you know, Oracle seems to be the front runner when 736 00:36:31,040 --> 00:36:33,759 Speaker 12: it comes to you know, how they have engaged with 737 00:36:33,880 --> 00:36:37,560 Speaker 12: the company. Clearly, there are only a handful of social 738 00:36:37,640 --> 00:36:41,640 Speaker 12: media assets which have you know, over a billion monthly 739 00:36:41,680 --> 00:36:45,040 Speaker 12: active users, and TikTok is that kind of platform where 740 00:36:45,320 --> 00:36:47,759 Speaker 12: it can be very powerful, but it comes when it 741 00:36:47,760 --> 00:36:51,399 Speaker 12: comes to security. Clearly there are threats and I think 742 00:36:51,600 --> 00:36:54,880 Speaker 12: there are a lot of unanswered questions even uh, I 743 00:36:54,880 --> 00:36:57,560 Speaker 12: think Aroline covered a lot of ground in our interview, 744 00:36:57,600 --> 00:37:02,960 Speaker 12: but definitely something that I'm sure regulators will Pressdick dot 745 00:37:03,000 --> 00:37:03,960 Speaker 12: com all right. 746 00:37:04,120 --> 00:37:06,240 Speaker 1: And everybody you can check out. That is a great interview. 747 00:37:06,280 --> 00:37:09,120 Speaker 1: Caroline Hyde with the CEO of TikTok from the Cutter 748 00:37:09,239 --> 00:37:11,319 Speaker 1: Economic Form. You can catch that on Bloomberg dot Com. 749 00:37:11,400 --> 00:37:14,879 Speaker 1: It's Caroline Hyde, anchor for Bloomberg Technology, man Deep Seeing 750 00:37:15,160 --> 00:37:18,920 Speaker 1: senior techanomals for Bloomberg Intelligence. And again Caroline's interview this 751 00:37:18,960 --> 00:37:21,960 Speaker 1: morning from Qatar was really interesting. I'm not sure what 752 00:37:22,000 --> 00:37:24,959 Speaker 1: the solution there is because of this Chinese ownership, Jess. 753 00:37:25,880 --> 00:37:28,200 Speaker 1: You know, I just don't know where we go. Is 754 00:37:28,239 --> 00:37:30,640 Speaker 1: it an ipo? Is it a spin off this oracle 755 00:37:30,640 --> 00:37:31,320 Speaker 1: buy it? 756 00:37:31,440 --> 00:37:31,640 Speaker 6: Right? 757 00:37:31,760 --> 00:37:34,680 Speaker 1: But it's not going away. I mean it's too popular. 758 00:37:34,360 --> 00:37:38,080 Speaker 4: Right, and Bloomberg Intelligence recently had this evaluation on it 759 00:37:38,120 --> 00:37:40,880 Speaker 4: that was, I mean north of fifty billion dollars. 760 00:37:41,200 --> 00:37:41,439 Speaker 13: Wow. 761 00:37:41,640 --> 00:37:44,279 Speaker 1: Yeah, So again it's big, as many people saying, and 762 00:37:44,360 --> 00:37:46,560 Speaker 1: it's got size, it's got scale, So you just got 763 00:37:46,600 --> 00:37:48,640 Speaker 1: to figure out what the best ownership structure is. 764 00:37:48,920 --> 00:37:52,000 Speaker 5: You're listening to the tape. Catch our live program Bloomberg 765 00:37:52,080 --> 00:37:55,680 Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the 766 00:37:55,719 --> 00:37:58,959 Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business app. 767 00:37:59,000 --> 00:38:01,640 Speaker 5: You can also listen. I have on Amazon Alexa from 768 00:38:01,680 --> 00:38:05,440 Speaker 5: our flagship New York station, just say Alexa playing Bloomberg 769 00:38:05,480 --> 00:38:06,200 Speaker 5: eleven thirty. 770 00:38:06,640 --> 00:38:10,320 Speaker 1: That all right, Jess, commodities and stuff commodities here, the 771 00:38:10,360 --> 00:38:13,439 Speaker 1: Bloomber commodity index over the trailing twelve months is off 772 00:38:13,520 --> 00:38:17,279 Speaker 1: twenty six percent. I mean, what does that tell us. 773 00:38:17,560 --> 00:38:20,000 Speaker 1: I'm going to sign some blame here, folks. I'm going 774 00:38:20,080 --> 00:38:22,080 Speaker 1: to sign the blame to Mike mac bloane. He's a 775 00:38:22,120 --> 00:38:24,960 Speaker 1: senior macro strategist. He's our commodities. Go to the person 776 00:38:24,960 --> 00:38:27,640 Speaker 1: for Bloomberg Intelligence. Mike. When you see that kind of 777 00:38:27,640 --> 00:38:30,120 Speaker 1: move in the Bloomer commodity Nicks, what's that telling you? 778 00:38:30,520 --> 00:38:32,680 Speaker 14: Well? And thank you to take the blame. Happy to 779 00:38:32,719 --> 00:38:35,680 Speaker 14: take the blame. It is showing pretty severe deflation. The 780 00:38:35,760 --> 00:38:38,279 Speaker 14: last time it was down more than that on a 781 00:38:38,280 --> 00:38:41,280 Speaker 14: twelve oneth basis was that the depth of the financial crisis. 782 00:38:41,280 --> 00:38:44,280 Speaker 14: And the key difference is the FED was aggressively easing, 783 00:38:44,320 --> 00:38:46,680 Speaker 14: in fact, started easing in September two thousand and seven, 784 00:38:46,719 --> 00:38:49,880 Speaker 14: and commodities didn't really bottom until beginning to two thousand 785 00:38:49,920 --> 00:38:52,480 Speaker 14: and nine. And that's the difference. Now they're showing severe 786 00:38:52,520 --> 00:38:55,880 Speaker 14: deflationary forces. That's the fact. As you mentioned, yet the 787 00:38:55,880 --> 00:38:57,680 Speaker 14: FED is still tightening. And if you look at our 788 00:38:57,800 --> 00:39:00,960 Speaker 14: warp function, and the futures they're showing that we actually 789 00:39:01,040 --> 00:39:04,240 Speaker 14: might tighten at the June meeting. 790 00:39:05,080 --> 00:39:07,680 Speaker 4: So, Mike, what does that tell us about the trajectory 791 00:39:07,760 --> 00:39:10,480 Speaker 4: of the economy. Then, when we're looking at how quantity 792 00:39:10,520 --> 00:39:11,920 Speaker 4: prices are performing at this. 793 00:39:11,880 --> 00:39:14,799 Speaker 14: Point, lowis lose. I'm glad you mentioned it, Jessa. There 794 00:39:14,880 --> 00:39:17,680 Speaker 14: was a lot of optimism that we'd see decent demand 795 00:39:17,760 --> 00:39:20,360 Speaker 14: pull out at China and the reopening, and that's clearly 796 00:39:20,400 --> 00:39:23,600 Speaker 14: not happening. We're seeing very disappointing data. Now we somewhat 797 00:39:23,640 --> 00:39:26,280 Speaker 14: predicted that, and it's also showing up in copper copper 798 00:39:26,360 --> 00:39:28,960 Speaker 14: doctor copper, the metal known as the APH and D 799 00:39:29,080 --> 00:39:31,719 Speaker 14: in economics, it jumped up twelve percent of the year 800 00:39:31,760 --> 00:39:33,759 Speaker 14: and now it's back down in the year, and that 801 00:39:33,920 --> 00:39:38,040 Speaker 14: is very deflation neary implications also for risk acids. So 802 00:39:38,080 --> 00:39:40,520 Speaker 14: I like to let's just tilt it over to copper copper. 803 00:39:40,560 --> 00:39:42,319 Speaker 14: If you look at the dollar price of copper, it's 804 00:39:42,320 --> 00:39:45,560 Speaker 14: about two dollars and seventy five cents a pound. If 805 00:39:45,560 --> 00:39:47,480 Speaker 14: you overlay it with a stock market and just take 806 00:39:47,480 --> 00:39:49,520 Speaker 14: the s P five hundred divide by thousand, they've been 807 00:39:49,560 --> 00:39:52,360 Speaker 14: almost the same price since twenty fifteen. So it shows 808 00:39:52,760 --> 00:39:55,080 Speaker 14: we're not getting that demand pull. The FED is still 809 00:39:55,120 --> 00:39:58,200 Speaker 14: tightened based on kind of lagging measures of inflation. Yet 810 00:39:58,239 --> 00:40:01,920 Speaker 14: the forward looking markets are severe deflation just starting to 811 00:40:01,960 --> 00:40:03,919 Speaker 14: kick in. So I look at it as a train 812 00:40:03,960 --> 00:40:04,920 Speaker 14: wreck for deflation. 813 00:40:05,760 --> 00:40:08,520 Speaker 1: So, Mike, in your research, you've written that you believe 814 00:40:08,600 --> 00:40:11,360 Speaker 1: we are in the midst of the biggest economic reset 815 00:40:11,440 --> 00:40:13,360 Speaker 1: of our lifetimes. Now, I want you to explain that 816 00:40:13,400 --> 00:40:15,520 Speaker 1: to me as if I'm a fifty nine year old person. 817 00:40:17,360 --> 00:40:20,040 Speaker 14: Well, okay, how about a six year old person. That 818 00:40:20,120 --> 00:40:22,439 Speaker 14: might help for me. I think I peaked when IL six. 819 00:40:23,440 --> 00:40:27,560 Speaker 14: It's the Let's go back to Ben Bernaki's warning about 820 00:40:27,640 --> 00:40:30,600 Speaker 14: the when he wrote the Essays and the Great Depression. 821 00:40:30,640 --> 00:40:32,520 Speaker 14: He said, the number one reason we all kind of 822 00:40:32,600 --> 00:40:35,360 Speaker 14: knew what happened was because central banks, most know the 823 00:40:35,480 --> 00:40:39,400 Speaker 14: find of reserve, was pulling back on liquidity and money 824 00:40:39,440 --> 00:40:43,960 Speaker 14: markets and money supply at the time the economy started 825 00:40:44,000 --> 00:40:47,160 Speaker 14: a tilt lower. That's exactly what we're doing now. And also, 826 00:40:47,200 --> 00:40:49,640 Speaker 14: if you study the lessons of history, all booms and 827 00:40:49,680 --> 00:40:51,400 Speaker 14: busts come on the back of the booms start with 828 00:40:51,480 --> 00:40:55,080 Speaker 14: massive liquidity, and then they bust when that liquidity goes away. 829 00:40:55,280 --> 00:40:57,640 Speaker 14: We've had the biggest boom in liquidity ever and the 830 00:40:57,680 --> 00:41:00,440 Speaker 14: sharpest bust in liquidity ever. It's all happened now, and 831 00:41:00,480 --> 00:41:03,400 Speaker 14: I look at it as simple lessons of history, simple 832 00:41:03,480 --> 00:41:05,680 Speaker 14: lessons of markets that you should be very careful. And 833 00:41:05,719 --> 00:41:07,160 Speaker 14: I just look at the fact that the FED is 834 00:41:07,200 --> 00:41:11,080 Speaker 14: still tightening despite the producer price index dropping at the 835 00:41:11,080 --> 00:41:13,640 Speaker 14: fastest pace in history. Now, yes, we only go back 836 00:41:13,719 --> 00:41:16,000 Speaker 14: seventy five years. It peaked at eighteen percent last year. 837 00:41:16,080 --> 00:41:18,239 Speaker 14: Year of year, now it's two percent. It's very likely 838 00:41:18,280 --> 00:41:20,040 Speaker 14: to go negative in the next few months. Is just 839 00:41:20,480 --> 00:41:23,359 Speaker 14: classic cases of the FED venue a little bit too 840 00:41:23,360 --> 00:41:27,440 Speaker 14: far behind and actually, you know, responding to all that 841 00:41:27,480 --> 00:41:30,200 Speaker 14: massive pump and liquidity, and now they're fighting an inflation 842 00:41:30,320 --> 00:41:33,080 Speaker 14: game that's starting to tilt towards deflation and it's just 843 00:41:33,160 --> 00:41:36,400 Speaker 14: getting started. The long and variable lags are quite disconcerting. 844 00:41:36,800 --> 00:41:37,000 Speaker 11: Mike. 845 00:41:37,040 --> 00:41:39,960 Speaker 4: You brought up copper, obviously very critical when it comes 846 00:41:39,960 --> 00:41:41,719 Speaker 4: to a base metal, and what that means for the 847 00:41:41,760 --> 00:41:44,600 Speaker 4: global economy. What's sort of the make or break levels 848 00:41:44,600 --> 00:41:47,280 Speaker 4: that you're watching for copper to mean if it breaks 849 00:41:47,280 --> 00:41:49,439 Speaker 4: below a particular point, what that could mean for other 850 00:41:49,480 --> 00:41:52,120 Speaker 4: asset classes, especially say when we look at the US 851 00:41:52,160 --> 00:41:52,800 Speaker 4: stock market. 852 00:41:53,120 --> 00:41:55,000 Speaker 14: Well, I'm glad you mentioned that, Jess. It's actually right 853 00:41:55,000 --> 00:41:59,000 Speaker 14: now with three dollars and sixty six three hours of 854 00:41:59,040 --> 00:42:01,040 Speaker 14: sixty six of pump on, which implies the S and 855 00:42:01,040 --> 00:42:04,440 Speaker 14: P five hundred should be about three thousand, six hundred. 856 00:42:04,520 --> 00:42:06,879 Speaker 14: Right now it's four two hundred. That's just course, maybe 857 00:42:06,880 --> 00:42:09,480 Speaker 14: that has broken down. But when copper broke down below 858 00:42:09,640 --> 00:42:12,560 Speaker 14: four four dollars, that was to me the signal that, Okay, 859 00:42:12,719 --> 00:42:15,040 Speaker 14: everything's sot in a tilt lower now, because one thing 860 00:42:15,040 --> 00:42:17,400 Speaker 14: that led it was natural gas. Natural gas has dropped 861 00:42:17,480 --> 00:42:19,680 Speaker 14: eighty percent from last year's peak and it dropped to 862 00:42:19,719 --> 00:42:22,640 Speaker 14: the same level as nineteen ninety. First traded in nineteen ninety, 863 00:42:22,640 --> 00:42:26,080 Speaker 14: So it's severe deflation for a significant commodity. And to me, 864 00:42:26,200 --> 00:42:28,120 Speaker 14: all that is tilting lower, and it keeps the question 865 00:42:28,160 --> 00:42:30,520 Speaker 14: I like to ask myself, Jess, is what stops this 866 00:42:30,560 --> 00:42:33,000 Speaker 14: downward trajectory? Now natural gas is bottom of two, but 867 00:42:33,320 --> 00:42:36,160 Speaker 14: had to drop eighty percent to get there. Typically takes 868 00:42:36,480 --> 00:42:40,279 Speaker 14: prices to go very low, squash that to supply and 869 00:42:40,320 --> 00:42:43,200 Speaker 14: increase that demand, and we're just in that current trajectory. 870 00:42:43,239 --> 00:42:46,000 Speaker 14: And I asked myself, so what stops this downward trajectory. 871 00:42:46,320 --> 00:42:49,960 Speaker 14: Typically it takes lower prices or most notably a long 872 00:42:50,040 --> 00:42:52,879 Speaker 14: and variable lackt is significant federal reserve easing and we're 873 00:42:52,920 --> 00:42:54,560 Speaker 14: still priced are tightening next month. 874 00:42:55,239 --> 00:42:57,000 Speaker 1: So if we are in the midst of the biggest 875 00:42:57,000 --> 00:42:59,560 Speaker 1: economic reset of our lifetime, do I just go long 876 00:42:59,600 --> 00:43:01,240 Speaker 1: gold and short everything else? 877 00:43:01,840 --> 00:43:04,160 Speaker 14: Well, there's nothing wrong with good old government to your 878 00:43:04,200 --> 00:43:06,279 Speaker 14: notes that are given you right now four point three 879 00:43:06,400 --> 00:43:08,560 Speaker 14: nine percent. Remember they piked at five percent, that was 880 00:43:08,640 --> 00:43:12,200 Speaker 14: right before the crisis. I think that's what most rational 881 00:43:12,239 --> 00:43:15,319 Speaker 14: boomers in the planet are doing, saying thank you very much, 882 00:43:15,680 --> 00:43:17,480 Speaker 14: meaning in two years I'm going to get almost nine 883 00:43:17,560 --> 00:43:21,160 Speaker 14: percent back guaranteed. Of course, of defenderal the government, Well, 884 00:43:21,160 --> 00:43:23,120 Speaker 14: they might delay the payment in wood, but there won't 885 00:43:23,120 --> 00:43:25,759 Speaker 14: be the fault, so that sweeps what's happening. There was 886 00:43:25,760 --> 00:43:28,080 Speaker 14: some prominent analysts today coming out and recommending gold, and 887 00:43:28,120 --> 00:43:32,160 Speaker 14: I will point about gold. Gold is the best performing 888 00:43:32,239 --> 00:43:34,640 Speaker 14: major commodity on the year of a year basis. Despite 889 00:43:34,640 --> 00:43:37,560 Speaker 14: the Bloomer Commodity Index down twenty six six percent, Gold 890 00:43:37,640 --> 00:43:39,799 Speaker 14: is in that index, but it's up six percent. I 891 00:43:39,840 --> 00:43:42,680 Speaker 14: think gold's on the customs a pretty significant breakout, just 892 00:43:42,719 --> 00:43:44,520 Speaker 14: like it did in two thousand and seven and eight, 893 00:43:44,560 --> 00:43:46,960 Speaker 14: it was bumping up against eight hundred dollars and they 894 00:43:47,040 --> 00:43:49,520 Speaker 14: finally popped to around nineteen hundred. We got by the 895 00:43:49,520 --> 00:43:52,399 Speaker 14: time we got to twenty eleven, Paul I pulled up. 896 00:43:52,360 --> 00:43:55,600 Speaker 4: The copper to gold ratio here on the terminal. There 897 00:43:55,680 --> 00:43:56,439 Speaker 4: is such a thing. 898 00:43:56,920 --> 00:43:57,640 Speaker 1: Why do you know it? 899 00:43:57,800 --> 00:44:01,160 Speaker 8: I mean, what is that cover this on the for 900 00:44:01,320 --> 00:44:05,200 Speaker 8: US stocks? As Oh, okay, follow these things, all things macro, 901 00:44:05,360 --> 00:44:08,680 Speaker 8: not just equities. But I want to get your thoughts 902 00:44:08,719 --> 00:44:11,320 Speaker 8: on this because when you're looking at the copper to 903 00:44:11,360 --> 00:44:14,920 Speaker 8: gold ratio, and we saw it this year hit a 904 00:44:14,960 --> 00:44:18,680 Speaker 8: high in February, but now you're seeing that even below 905 00:44:19,000 --> 00:44:22,239 Speaker 8: where it had been last summer. I'm wondering, again, what 906 00:44:22,320 --> 00:44:24,759 Speaker 8: does this tell us when you're seeing that ratio, because 907 00:44:24,800 --> 00:44:27,200 Speaker 8: typically when the ratio is higher, that usually mean better 908 00:44:27,280 --> 00:44:29,080 Speaker 8: days ahead for the stock market. 909 00:44:29,280 --> 00:44:31,680 Speaker 14: Yes, I'm justin glad you bring that up. I watch 910 00:44:31,719 --> 00:44:36,360 Speaker 14: it a lot, and also some prominent infix and interest 911 00:44:36,440 --> 00:44:39,520 Speaker 14: rate people watch it. It's showing a tilt towards recession. 912 00:44:40,200 --> 00:44:42,319 Speaker 14: And one thing I'll point about copper goals. Oftentimes I 913 00:44:42,400 --> 00:44:44,600 Speaker 14: like to walk it with gold divided by copper because 914 00:44:44,640 --> 00:44:46,720 Speaker 14: that shows an the neurine upward trend. And it's keating 915 00:44:46,719 --> 00:44:50,080 Speaker 14: to remember about gold, it basically outperforms almost all commondies 916 00:44:50,120 --> 00:44:53,080 Speaker 14: over time, partly because it's money you can store cheaply, 917 00:44:53,120 --> 00:44:55,239 Speaker 14: and it's really no cost to store, and there's a 918 00:44:55,360 --> 00:44:58,960 Speaker 14: limited supply. Copper you can bring on rather not quickly, 919 00:44:59,000 --> 00:45:03,280 Speaker 14: but there's it's just much easier to produce and create 920 00:45:03,320 --> 00:45:05,120 Speaker 14: more of it than gold. But the key thing that 921 00:45:05,200 --> 00:45:08,800 Speaker 14: you mentioned is comparent declining versus gold is a clear recession. 922 00:45:08,800 --> 00:45:11,000 Speaker 14: You're introjectory. And I asked myself, okay, so what might 923 00:45:11,040 --> 00:45:13,640 Speaker 14: stop this? Typically I would say, okay, well we've been 924 00:45:13,680 --> 00:45:15,480 Speaker 14: a year or two and two FED easing and the 925 00:45:16,080 --> 00:45:19,839 Speaker 14: economy is starting to expand and recover. We're still here 926 00:45:19,840 --> 00:45:21,840 Speaker 14: and started at easing, we're still tightening. That's why I 927 00:45:21,920 --> 00:45:23,600 Speaker 14: really concerned that this is going to be one of 928 00:45:23,640 --> 00:45:25,040 Speaker 14: the biggest resets of our lifetime. 929 00:45:25,080 --> 00:45:25,279 Speaker 9: Now. 930 00:45:25,600 --> 00:45:28,000 Speaker 14: In the defense of the FED, they are tightening, they 931 00:45:28,040 --> 00:45:30,000 Speaker 14: have to, but the inflation measures they're looking at, like 932 00:45:30,040 --> 00:45:33,920 Speaker 14: personal consumption expenditures as on a wong Or Chief Economists 933 00:45:33,920 --> 00:45:36,080 Speaker 14: told us those are going to be very sticky, and 934 00:45:36,160 --> 00:45:38,200 Speaker 14: she pointed out the FED will not be easing like 935 00:45:38,200 --> 00:45:40,560 Speaker 14: they have in the past, although their models have pointed 936 00:45:40,560 --> 00:45:43,480 Speaker 14: to ease, but they can't because inflation is sticky. That 937 00:45:43,560 --> 00:45:46,560 Speaker 14: shows all the negativity that I see. And I don't 938 00:45:46,680 --> 00:45:48,520 Speaker 14: like to be mcloum, which has been my nickname. I 939 00:45:48,560 --> 00:45:49,760 Speaker 14: like to be more Mick facts. 940 00:45:50,040 --> 00:45:50,600 Speaker 5: These are the. 941 00:45:50,560 --> 00:45:54,040 Speaker 1: Facts, all right, Mike. Somehow you scam to move down 942 00:45:54,080 --> 00:45:56,600 Speaker 1: to South Florida and getting a little warm down there, 943 00:45:56,960 --> 00:45:58,440 Speaker 1: you still committed. 944 00:45:58,800 --> 00:46:01,279 Speaker 14: Oh yes it is. I'm getting older and it's it's 945 00:46:01,480 --> 00:46:03,680 Speaker 14: much better on the bones and muscles of that humidity. 946 00:46:04,040 --> 00:46:06,120 Speaker 1: All right, Mike, great stuff, Really appreciate it. Mike mcglohan, 947 00:46:06,320 --> 00:46:08,840 Speaker 1: Senior macro strategist for Bloomberg Intelligence. 948 00:46:09,320 --> 00:46:12,440 Speaker 5: You're listening to the tape Ken's are Live program Bloomberg 949 00:46:12,480 --> 00:46:16,080 Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the 950 00:46:16,120 --> 00:46:19,359 Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 951 00:46:19,400 --> 00:46:22,200 Speaker 5: You can also listen live on Amazon Alexa from our 952 00:46:22,239 --> 00:46:27,200 Speaker 5: flagship New York station, just say Alexa playing Bloomberg eleven thirty. 953 00:46:28,280 --> 00:46:30,400 Speaker 1: All right, let's go to this Low's So we had 954 00:46:30,440 --> 00:46:33,120 Speaker 1: home deepot before. They were kind of cautious, and we 955 00:46:33,160 --> 00:46:36,880 Speaker 1: saw that reflected in the lower stock price, their guidance 956 00:46:36,960 --> 00:46:39,919 Speaker 1: was a little bit soft Low's. I'm looking at the stock, 957 00:46:40,000 --> 00:46:42,560 Speaker 1: it's up three percent even though they cut their view here. 958 00:46:42,600 --> 00:46:44,560 Speaker 1: So let's bring in somebody who does this stuff for 959 00:46:44,600 --> 00:46:47,600 Speaker 1: a living, Drew Redding. He's a research channels to Bloomberg Intelligence. 960 00:46:47,600 --> 00:46:50,040 Speaker 1: He covers all the housing and housing related industries. 961 00:46:50,360 --> 00:46:50,600 Speaker 6: Drew. 962 00:46:50,600 --> 00:46:53,600 Speaker 1: What's your takeaway from Low's particularly and maybe differentiate it 963 00:46:53,680 --> 00:46:55,160 Speaker 1: from what we saw from Home Depot. 964 00:46:56,200 --> 00:46:58,719 Speaker 11: Yeah, So, to be honest, we didn't hear anything that 965 00:46:58,800 --> 00:47:00,560 Speaker 11: was all that different compared to what we heard last 966 00:47:00,560 --> 00:47:03,560 Speaker 11: week from Home Depot, and that sales were impacted by 967 00:47:03,560 --> 00:47:07,720 Speaker 11: a late start spring. You had commodity deflation, particularly for lumber, 968 00:47:08,280 --> 00:47:11,680 Speaker 11: and a slowdown in discretionary spending. So we're finally starting 969 00:47:11,680 --> 00:47:14,239 Speaker 11: to see that moderation big ticket spending, which has been 970 00:47:14,280 --> 00:47:17,360 Speaker 11: a key driver for the industry in terms of the 971 00:47:17,400 --> 00:47:20,560 Speaker 11: stock reaction. There's probably a couple of factors of play 972 00:47:20,600 --> 00:47:23,120 Speaker 11: here for starters. We did see last week Home Deep 973 00:47:23,160 --> 00:47:25,160 Speaker 11: be lower the guide, and so I think it was 974 00:47:25,239 --> 00:47:28,239 Speaker 11: kind of increasingly understood that Lows would be under a 975 00:47:28,239 --> 00:47:31,200 Speaker 11: bit of pressure here from a fundamental perspective, and at 976 00:47:31,200 --> 00:47:32,719 Speaker 11: the same time, a lot of the weakness in the 977 00:47:32,800 --> 00:47:36,960 Speaker 11: quarter was attributable to weather commodity deflation, which aren't necessarily 978 00:47:37,040 --> 00:47:40,200 Speaker 11: representative of the underlying business, and I think that led 979 00:47:40,200 --> 00:47:42,360 Speaker 11: to a little bit of optimism around the guide. But 980 00:47:42,440 --> 00:47:44,480 Speaker 11: that's actually where we think that there could still be 981 00:47:44,520 --> 00:47:47,399 Speaker 11: some risk, particularly since they didn't cut it as much 982 00:47:47,440 --> 00:47:50,200 Speaker 11: as some depot. You know, from where we're sitting, it 983 00:47:50,200 --> 00:47:53,800 Speaker 11: seems like we're just getting started with this slowdown indiscretionary spending, 984 00:47:53,920 --> 00:47:56,839 Speaker 11: particularly for big ticket spending. So I think that's where 985 00:47:56,840 --> 00:47:59,279 Speaker 11: a lot of the debate will be going forward into 986 00:47:59,280 --> 00:47:59,680 Speaker 11: the next. 987 00:47:59,560 --> 00:48:02,160 Speaker 4: Couple of So, Drew, it sounds like you're saying their 988 00:48:02,200 --> 00:48:05,480 Speaker 4: outlook seems to be a bit too optimistic, even though 989 00:48:05,480 --> 00:48:06,440 Speaker 4: they already cut it. 990 00:48:08,080 --> 00:48:10,759 Speaker 11: Yeah, so they lowered their their same source sales view 991 00:48:10,840 --> 00:48:13,480 Speaker 11: to a decline of two to four percent from flat 992 00:48:13,520 --> 00:48:16,400 Speaker 11: to down two percent last time, and that assumes that 993 00:48:16,480 --> 00:48:20,480 Speaker 11: the broader home improvement industry is down about mid single digits. 994 00:48:21,600 --> 00:48:23,800 Speaker 11: You know, we think that there is risk that the 995 00:48:24,360 --> 00:48:27,359 Speaker 11: broader industry declines more in the high single digit range. 996 00:48:27,400 --> 00:48:29,839 Speaker 11: It's something we heard from Home Depot. We actually heard 997 00:48:29,840 --> 00:48:33,160 Speaker 11: it from a number of the building product manufacturers who 998 00:48:33,200 --> 00:48:35,880 Speaker 11: were tied into the repairing ram modeling market. So, like 999 00:48:35,920 --> 00:48:37,560 Speaker 11: I said, I think the debate will be did they 1000 00:48:37,560 --> 00:48:41,080 Speaker 11: bring down guidance enough or are we just starting to 1001 00:48:41,160 --> 00:48:44,200 Speaker 11: kind of see this downward revision because there's still some 1002 00:48:44,320 --> 00:48:46,160 Speaker 11: strain on the consumer as we get through the end 1003 00:48:46,160 --> 00:48:46,560 Speaker 11: of the year. 1004 00:48:47,239 --> 00:48:49,839 Speaker 1: Drew Occasionally I do get lost and I find myself 1005 00:48:49,880 --> 00:48:52,680 Speaker 1: in the middle of a home depot or lows and 1006 00:48:52,719 --> 00:48:55,200 Speaker 1: what I noticed is there's a ton of stuff out 1007 00:48:55,239 --> 00:48:58,160 Speaker 1: on the floor, like of tons of inventory. How are 1008 00:48:58,160 --> 00:49:00,560 Speaker 1: these those companies and the home improvement bus is how 1009 00:49:00,600 --> 00:49:02,200 Speaker 1: are their inventories? I know that was an issue for 1010 00:49:02,200 --> 00:49:04,920 Speaker 1: a lot of retail. Was that also an issue for 1011 00:49:04,960 --> 00:49:06,920 Speaker 1: these homer furnishing folks. 1012 00:49:07,800 --> 00:49:10,160 Speaker 11: Yeah, not at this point. I mean, they did get 1013 00:49:10,200 --> 00:49:12,200 Speaker 11: ahead of the game earlier in the pandemic, so they 1014 00:49:12,200 --> 00:49:14,120 Speaker 11: were well stocked. They did have a couple of quarters 1015 00:49:14,120 --> 00:49:16,400 Speaker 11: where they started to work down some of that inventory, 1016 00:49:17,200 --> 00:49:19,080 Speaker 11: but now their inventory is in a good position, so 1017 00:49:19,120 --> 00:49:22,239 Speaker 11: it's really not a concern in terms of having to discount. 1018 00:49:22,640 --> 00:49:24,960 Speaker 11: You know, they implement a lot of technology into the 1019 00:49:24,960 --> 00:49:27,239 Speaker 11: stuff they're doing, particularly you know, when the work on 1020 00:49:27,280 --> 00:49:30,360 Speaker 11: their marchandise categories, they know what's moving they have a 1021 00:49:30,360 --> 00:49:34,280 Speaker 11: pretty good read on demand, so from an inventory perspective, 1022 00:49:34,320 --> 00:49:35,239 Speaker 11: they're looking pretty good. 1023 00:49:35,640 --> 00:49:38,080 Speaker 4: So what do you think this tells us about the 1024 00:49:38,160 --> 00:49:40,880 Speaker 4: state of the US consumer at this point? 1025 00:49:42,560 --> 00:49:45,120 Speaker 11: So we do think that there's still some challenges out 1026 00:49:45,120 --> 00:49:46,960 Speaker 11: there for the consumer, and it looks like, you know, 1027 00:49:46,960 --> 00:49:49,400 Speaker 11: in the home improvement category, which has been one of 1028 00:49:49,440 --> 00:49:53,480 Speaker 11: the retail bright spots recently, we think they're just starting 1029 00:49:53,520 --> 00:49:56,920 Speaker 11: to show. You know, you've got inflation which is hurting 1030 00:49:56,960 --> 00:50:00,560 Speaker 11: people's wallets, Real incomes are down, We've seen credit card 1031 00:50:00,600 --> 00:50:05,359 Speaker 11: balances starting to balloon. So all of these things point 1032 00:50:05,400 --> 00:50:09,000 Speaker 11: to more stress among the consumer. You know, at the 1033 00:50:09,000 --> 00:50:11,840 Speaker 11: same time, interest rates have sneakily crept back up to 1034 00:50:11,960 --> 00:50:14,759 Speaker 11: seven percent, so you know, to the extent that you 1035 00:50:14,800 --> 00:50:19,400 Speaker 11: see more pressure on the existing home market, obviously that'll 1036 00:50:19,400 --> 00:50:21,400 Speaker 11: trickle down into what we're seeing at the home improvement 1037 00:50:21,400 --> 00:50:22,279 Speaker 11: retailers as well. 1038 00:50:22,800 --> 00:50:25,640 Speaker 1: All Right, Drew, you also cover the broader housing market. 1039 00:50:25,719 --> 00:50:28,400 Speaker 1: Talk to us about kind of where we are in 1040 00:50:28,560 --> 00:50:30,279 Speaker 1: the housing market. What are you seeing, What are you 1041 00:50:30,280 --> 00:50:32,640 Speaker 1: hearing from the Toll Brothers of the world, the d 1042 00:50:32,760 --> 00:50:34,640 Speaker 1: H Wardens, What are they saying about their business? Given 1043 00:50:34,640 --> 00:50:36,520 Speaker 1: that you know, as you mentioned, we have mortgage rates 1044 00:50:36,520 --> 00:50:37,840 Speaker 1: around seven Pasl. 1045 00:50:37,400 --> 00:50:39,240 Speaker 4: Brothers also reports after the bell today. 1046 00:50:39,280 --> 00:50:40,200 Speaker 1: Oh very good, thank you. 1047 00:50:40,960 --> 00:50:43,319 Speaker 11: Yep. It's a great question, because I think there's right 1048 00:50:43,360 --> 00:50:45,879 Speaker 11: now we're seeing a bifurcation in the US housing market 1049 00:50:45,920 --> 00:50:48,480 Speaker 11: between the existing home market and the new home market. 1050 00:50:49,160 --> 00:50:51,080 Speaker 11: And it really has to do with a couple of factors. One, 1051 00:50:51,520 --> 00:50:53,320 Speaker 11: there's not a whole heck of a lot of inventory 1052 00:50:53,360 --> 00:50:55,880 Speaker 11: in the resale market. One of the reasons is because 1053 00:50:55,880 --> 00:50:58,799 Speaker 11: a lot of current homeowners have rates below four below 1054 00:50:58,840 --> 00:51:01,600 Speaker 11: three and a half percent, so there's a disincentive for 1055 00:51:01,640 --> 00:51:03,640 Speaker 11: them to list their home and take on a rate 1056 00:51:03,680 --> 00:51:06,920 Speaker 11: that's now, as you said, approaching seven percent. So that's 1057 00:51:07,000 --> 00:51:09,880 Speaker 11: keeping inventory low. At the same time, nobody wants to 1058 00:51:09,920 --> 00:51:12,719 Speaker 11: lower the prices. They made all this equity over the 1059 00:51:12,800 --> 00:51:14,279 Speaker 11: last couple of years, and they want to sell their 1060 00:51:14,320 --> 00:51:17,239 Speaker 11: house at last year's prices, and buyers are playing ball. 1061 00:51:18,080 --> 00:51:20,680 Speaker 11: On the other hand, the business model the home builders 1062 00:51:20,719 --> 00:51:24,560 Speaker 11: requires that they turn their inventory over. So what they've 1063 00:51:24,600 --> 00:51:26,600 Speaker 11: done is they at the end of last year, they 1064 00:51:26,600 --> 00:51:29,719 Speaker 11: got aggressive and cutting prices. They cut base prices, they're 1065 00:51:29,719 --> 00:51:32,840 Speaker 11: offering more incentives. But most importantly, and what's worth the 1066 00:51:32,880 --> 00:51:36,600 Speaker 11: best is that builders are able to offer the buyers 1067 00:51:36,760 --> 00:51:40,080 Speaker 11: rate by downs. So whereas somebody looking in the existing 1068 00:51:40,120 --> 00:51:42,040 Speaker 11: home market is looking at the interest rate of six 1069 00:51:42,080 --> 00:51:44,400 Speaker 11: and a half to seven percent, builders are getting people 1070 00:51:44,440 --> 00:51:46,600 Speaker 11: through the door at five to five and a half percent. 1071 00:51:47,080 --> 00:51:50,160 Speaker 11: So the combination of lower prices and offering a lower 1072 00:51:50,239 --> 00:51:53,319 Speaker 11: rates helped the math work better in the new home market, 1073 00:51:53,320 --> 00:51:55,160 Speaker 11: and that's why we're seeing share gains there and we 1074 00:51:55,200 --> 00:51:57,640 Speaker 11: think that continues in the coming quarters. 1075 00:51:57,400 --> 00:52:00,840 Speaker 4: Also, and it comes to just the low amount of inventory. 1076 00:52:00,880 --> 00:52:03,319 Speaker 4: Clearly that was a problem before the pandemic, but then 1077 00:52:03,400 --> 00:52:07,240 Speaker 4: even exacerbated more So, how are home builders still benefiting 1078 00:52:07,280 --> 00:52:09,759 Speaker 4: from that? Because when I'm talking to portfolio managers, a 1079 00:52:09,760 --> 00:52:12,280 Speaker 4: lot of them are still adding exposure to homebuilder stocks 1080 00:52:12,280 --> 00:52:14,600 Speaker 4: because they feel like there's just this mixed smash there 1081 00:52:14,760 --> 00:52:17,320 Speaker 4: and that they'll ply continue to benefit from that low inventory. 1082 00:52:18,280 --> 00:52:20,880 Speaker 11: Yeah, you're absolutely right. I mean, the lack of resale 1083 00:52:20,880 --> 00:52:24,440 Speaker 11: supply continues to funnel buyers into the new home market. 1084 00:52:25,920 --> 00:52:28,440 Speaker 11: And the interesting thing is that builders were putting all 1085 00:52:28,440 --> 00:52:31,440 Speaker 11: this new supply into market and it's just kind of 1086 00:52:31,440 --> 00:52:34,399 Speaker 11: this steady drip that you know, a couple months ago, 1087 00:52:35,120 --> 00:52:37,440 Speaker 11: everybody was worried about there's going to be an oversupply 1088 00:52:37,520 --> 00:52:40,319 Speaker 11: of new housing. But as builders have kind of made 1089 00:52:40,360 --> 00:52:44,799 Speaker 11: the math work, we're seeing that home shoppers are increasingly 1090 00:52:44,840 --> 00:52:47,760 Speaker 11: preferring this quick move in inventory that where a buyer 1091 00:52:47,800 --> 00:52:49,440 Speaker 11: can go, they can lock in their rate and they 1092 00:52:49,440 --> 00:52:52,400 Speaker 11: have some confidence that they know what their monthly payment's 1093 00:52:52,440 --> 00:52:54,680 Speaker 11: going to be. So I think that builders who have 1094 00:52:54,920 --> 00:52:57,480 Speaker 11: a spec focused model where the inventory is there a 1095 00:52:57,520 --> 00:53:01,240 Speaker 11: buyer can move right in, are position in this environment 1096 00:53:01,280 --> 00:53:04,680 Speaker 11: because buyers are looking for certainty given all the rate volatility. 1097 00:53:05,000 --> 00:53:08,960 Speaker 1: How about the inexisting market, how how's that trending? 1098 00:53:10,560 --> 00:53:13,440 Speaker 11: Yeah, so it's I mean from a transaction perspective, like 1099 00:53:13,480 --> 00:53:16,040 Speaker 11: we said, sales are down sharply compared to the new 1100 00:53:16,040 --> 00:53:18,760 Speaker 11: home market, and that's because there's not enough people willing 1101 00:53:18,800 --> 00:53:22,000 Speaker 11: to sell their home. From a pricing perspective, prices have 1102 00:53:22,120 --> 00:53:25,520 Speaker 11: held up relatively well, you know, from the peak. We're 1103 00:53:25,520 --> 00:53:27,200 Speaker 11: only down low single digits. 1104 00:53:28,000 --> 00:53:28,200 Speaker 1: One. 1105 00:53:28,239 --> 00:53:30,960 Speaker 11: That's because people don't have to sell. There's no forced sellers. 1106 00:53:31,040 --> 00:53:34,000 Speaker 11: People have a lot of equity right now. The job 1107 00:53:34,040 --> 00:53:36,160 Speaker 11: market is still strong, so people aren't forced to put 1108 00:53:36,200 --> 00:53:39,080 Speaker 11: their home on the market. They're comfortable with their low rate, 1109 00:53:39,120 --> 00:53:43,239 Speaker 11: they're comfortable with their wage increases. Conversely, in the new 1110 00:53:43,239 --> 00:53:45,480 Speaker 11: home market, prices are down much more because builders have 1111 00:53:45,520 --> 00:53:47,960 Speaker 11: been aggressive and kind of cutting them. So in the 1112 00:53:48,000 --> 00:53:52,680 Speaker 11: resale markets, transactions down prices supported by that low inventory. 1113 00:53:54,080 --> 00:53:56,759 Speaker 4: That's interesting because if you don't want to move and 1114 00:53:56,800 --> 00:53:59,719 Speaker 4: you've locked in this low rate, wouldn't that still help 1115 00:53:59,760 --> 00:54:02,600 Speaker 4: home builders, especially if there's already that low inventory that 1116 00:54:02,640 --> 00:54:03,560 Speaker 4: we were talking about. 1117 00:54:04,800 --> 00:54:07,920 Speaker 11: Yeah, certainly, so I think that that dynamic favors homebuilders, 1118 00:54:07,920 --> 00:54:11,759 Speaker 11: and it also favors renovating over moving, and I think 1119 00:54:11,760 --> 00:54:13,720 Speaker 11: we saw a lot of that with the home depot 1120 00:54:13,719 --> 00:54:16,759 Speaker 11: and lows and building product manufacturers, where you probably saw 1121 00:54:16,800 --> 00:54:19,280 Speaker 11: a lot of demand pulled forward over the last couple 1122 00:54:19,280 --> 00:54:22,000 Speaker 11: of years. Now, those same people that aren't moving have 1123 00:54:22,200 --> 00:54:24,880 Speaker 11: massive amounts of home equity, so even if home prices 1124 00:54:25,480 --> 00:54:29,200 Speaker 11: were to fall mid single digits, there's still a lot 1125 00:54:29,239 --> 00:54:32,920 Speaker 11: of equity built in those properties. So with decreased mobility, 1126 00:54:32,960 --> 00:54:35,359 Speaker 11: we would expect that remodeling, once we kind of get 1127 00:54:35,360 --> 00:54:38,400 Speaker 11: through this air pocket of demand, starts to pick back up, 1128 00:54:38,440 --> 00:54:41,000 Speaker 11: and that industry is looking really good over the longer term. 1129 00:54:41,320 --> 00:54:43,359 Speaker 1: All right, Drew, thanks so much for joining us. Always 1130 00:54:43,400 --> 00:54:46,239 Speaker 1: appreciate getting your perspective on the broader housing market and 1131 00:54:46,719 --> 00:54:49,720 Speaker 1: also on some of these housing related retailers like Low's 1132 00:54:49,800 --> 00:54:52,960 Speaker 1: and Home Depot reading. He's a research analyst covers all 1133 00:54:52,960 --> 00:54:56,360 Speaker 1: the housing stuff for Bloomberg Intelligencies based down in our Princeton, 1134 00:54:56,960 --> 00:54:58,160 Speaker 1: New Jersey campus. 1135 00:54:58,520 --> 00:55:01,600 Speaker 5: You're listening to the date. That's our live program, Bloomberg 1136 00:55:01,680 --> 00:55:05,239 Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the 1137 00:55:05,320 --> 00:55:08,520 Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 1138 00:55:08,600 --> 00:55:11,400 Speaker 5: You can also listen live on Amazon Alexa from our 1139 00:55:11,440 --> 00:55:16,480 Speaker 5: flagship New York station Just Say Alexa, playing Bloomberg eleven thirty. 1140 00:55:17,480 --> 00:55:19,560 Speaker 1: When reading kind of the background the resume of our 1141 00:55:19,600 --> 00:55:22,840 Speaker 1: next guest, I noted the fact that he's a twenty 1142 00:55:22,920 --> 00:55:25,680 Speaker 1: nine year Navy veteran. There's like I who does not 1143 00:55:25,880 --> 00:55:28,800 Speaker 1: like change, but he served all over the globe. That 1144 00:55:28,880 --> 00:55:30,520 Speaker 1: kind of got my attention, and we thank him for 1145 00:55:30,560 --> 00:55:35,239 Speaker 1: his service. Of course, Jess looks at it and she sees, oh, 1146 00:55:35,280 --> 00:55:36,640 Speaker 1: he went to Texas a and m. 1147 00:55:36,880 --> 00:55:38,840 Speaker 8: As I did too, so too, Aggie. 1148 00:55:38,920 --> 00:55:41,000 Speaker 4: Is how exciting to have it in one segment? 1149 00:55:41,080 --> 00:55:44,000 Speaker 1: All right? Kevin Brand defense policy anols for Bloomberg Intelligence. Kevin, 1150 00:55:44,000 --> 00:55:47,200 Speaker 1: thanks so much for joining us here. I need you know, 1151 00:55:47,239 --> 00:55:50,880 Speaker 1: I follow the military military history pretty closely over for 1152 00:55:50,920 --> 00:55:53,319 Speaker 1: a long time. Here's a new one for me when 1153 00:55:53,320 --> 00:55:57,680 Speaker 1: this war broke out in Ukraine. Hypersonic weapons. What is 1154 00:55:57,680 --> 00:56:00,560 Speaker 1: a hypersonic hypersonic weapon? I've never heard of that before. 1155 00:56:01,480 --> 00:56:02,560 Speaker 13: Yeah, great, thanks for having me. 1156 00:56:02,800 --> 00:56:02,880 Speaker 6: So. 1157 00:56:02,880 --> 00:56:06,560 Speaker 13: A hypersonic weapon is really the next generation of air 1158 00:56:07,239 --> 00:56:12,400 Speaker 13: or ballistic missile threat that's facing friendly troops. If you 1159 00:56:12,440 --> 00:56:15,799 Speaker 13: think about it from a speed perspective, hypersonic speeds are 1160 00:56:15,840 --> 00:56:18,840 Speaker 13: really anything over the over about mock five, which is 1161 00:56:18,960 --> 00:56:22,400 Speaker 13: five times a speed of sound. Think that highway speeds. 1162 00:56:22,440 --> 00:56:25,920 Speaker 13: Your car moves about a mile, about a mile in 1163 00:56:26,000 --> 00:56:28,680 Speaker 13: one minute. At mock five, you're talking about moving a 1164 00:56:28,760 --> 00:56:32,239 Speaker 13: mile in one second. That's what a hypersonic weapon essentially is. 1165 00:56:32,800 --> 00:56:35,239 Speaker 4: And I know that you wrote in a note that's 1166 00:56:35,280 --> 00:56:39,120 Speaker 4: on the terminal about how it basically falls into two 1167 00:56:39,160 --> 00:56:41,680 Speaker 4: broad categories. Can you kind of break down what two 1168 00:56:41,719 --> 00:56:42,719 Speaker 4: categories are? 1169 00:56:43,480 --> 00:56:47,000 Speaker 13: Sure? So, hypersonic weapons fall into one of two categories 1170 00:56:47,000 --> 00:56:50,200 Speaker 13: as you as you mentioned, it's either a ballistic missile essentially, 1171 00:56:50,200 --> 00:56:54,320 Speaker 13: think about a launcher with a big solid fuel rocket 1172 00:56:54,320 --> 00:56:56,839 Speaker 13: on it that launches something into the atmosphere, whether it 1173 00:56:56,880 --> 00:56:59,560 Speaker 13: be a space shuttle or something else, but it moves 1174 00:56:59,600 --> 00:57:03,200 Speaker 13: into the atmosphere into outer space and essentially arcs in 1175 00:57:03,239 --> 00:57:06,319 Speaker 13: a very ballistic sort of trajectory and then re enters 1176 00:57:06,320 --> 00:57:10,360 Speaker 13: the atmosphere at incredible speeds. The space Shuttle or the 1177 00:57:10,400 --> 00:57:13,600 Speaker 13: Apollo missions came back at almost mock twenty five if 1178 00:57:13,640 --> 00:57:16,520 Speaker 13: you think about that. The second category of weapon is 1179 00:57:16,600 --> 00:57:22,520 Speaker 13: really an air breathing jet powered engine, a type of 1180 00:57:22,560 --> 00:57:25,720 Speaker 13: cruise missile. It uses what they call a scramjet, which 1181 00:57:25,760 --> 00:57:29,400 Speaker 13: means you have to get this missile up to incredible 1182 00:57:29,400 --> 00:57:32,760 Speaker 13: speeds like four mock five, and then it opens a 1183 00:57:32,800 --> 00:57:38,000 Speaker 13: thrust an intake and then becomes hypersonic and accelerate up 1184 00:57:38,040 --> 00:57:40,520 Speaker 13: to mock ten mock twenty five. If you watch the 1185 00:57:40,560 --> 00:57:45,040 Speaker 13: Top Gun Maverick movie that Stump Works project, Maverick was 1186 00:57:45,080 --> 00:57:48,040 Speaker 13: flying a hypersonic jet capable of movie at mock ten 1187 00:57:48,120 --> 00:57:51,280 Speaker 13: or faster. So it hypersonic weapon falls into one of 1188 00:57:51,280 --> 00:57:54,200 Speaker 13: those two categories, either something ballistic that leaves the atmosphere 1189 00:57:54,280 --> 00:57:57,320 Speaker 13: and then comes back down or something that stays inside 1190 00:57:57,360 --> 00:58:01,960 Speaker 13: the atmosphere and uses a scramjet power motor to really 1191 00:58:02,000 --> 00:58:02,480 Speaker 13: move back. 1192 00:58:02,920 --> 00:58:05,120 Speaker 1: All right, So if Russia is firing these things that 1193 00:58:05,600 --> 00:58:08,280 Speaker 1: Ukraine can Ukraine shoot these things down? 1194 00:58:09,880 --> 00:58:12,480 Speaker 13: Well, Ukraine apparently has shot down up to seven of 1195 00:58:12,520 --> 00:58:16,600 Speaker 13: these early what I would call first generation hypersonic missiles. 1196 00:58:16,720 --> 00:58:20,360 Speaker 13: And as we mentioned earlier, almost anything that can leave 1197 00:58:20,400 --> 00:58:23,240 Speaker 13: the atmosphere travels at a hypersonic speed at a MOCK five. 1198 00:58:23,360 --> 00:58:27,880 Speaker 13: And the Kinsol missile, which is what Russia has supposedly launched, 1199 00:58:27,960 --> 00:58:30,680 Speaker 13: is capable of speed something between mock five and Mak ten. 1200 00:58:31,600 --> 00:58:34,440 Speaker 13: And what we know is that those should be very 1201 00:58:34,560 --> 00:58:38,280 Speaker 13: very hard to defend against with today's technology. But Ukraine 1202 00:58:38,360 --> 00:58:40,600 Speaker 13: was successful in shooting that, we think up to about 1203 00:58:40,640 --> 00:58:42,160 Speaker 13: seven of these in recent weeks. 1204 00:58:42,480 --> 00:58:45,000 Speaker 4: So what does this Russian mag thirty one? So they're 1205 00:58:45,000 --> 00:58:47,320 Speaker 4: basically carrying some of these missiles. 1206 00:58:47,680 --> 00:58:50,600 Speaker 13: That's right. So Russia has a capability on it. Some 1207 00:58:50,640 --> 00:58:53,480 Speaker 13: of its spider aircraft and some of its bombers to 1208 00:58:53,600 --> 00:58:57,160 Speaker 13: carry air are essentially air to surface missiles, in this 1209 00:58:57,200 --> 00:59:00,480 Speaker 13: case a cruise missile, and in this particular case, that Kinzal, 1210 00:59:00,520 --> 00:59:03,400 Speaker 13: which we know is capable of achieving at least speeds 1211 00:59:03,400 --> 00:59:06,000 Speaker 13: of mock five. And what we surmise at this point 1212 00:59:06,040 --> 00:59:10,080 Speaker 13: in time is that Russia was targeting one of Ukraine's 1213 00:59:10,160 --> 00:59:13,120 Speaker 13: Patriot air defense batteries, and so the missile was inbound 1214 00:59:13,240 --> 00:59:16,520 Speaker 13: directly at that weapon system, and so it was a 1215 00:59:16,560 --> 00:59:19,280 Speaker 13: nose to nose sort of a point defense weapon shot, 1216 00:59:19,480 --> 00:59:22,160 Speaker 13: and the Patriot was successful in shooting this weapon down. 1217 00:59:22,880 --> 00:59:24,760 Speaker 1: All right, Kevin, let's let's pull the focus out a 1218 00:59:24,800 --> 00:59:28,000 Speaker 1: little bit and talk about you know, kind of arming Ukraine. 1219 00:59:28,240 --> 00:59:30,360 Speaker 1: That's been you know, a long time for this war, 1220 00:59:30,440 --> 00:59:32,640 Speaker 1: and there seems to be kind of a no end 1221 00:59:32,680 --> 00:59:37,000 Speaker 1: to sit here. We seem to be the armory for Ukraine. 1222 00:59:38,640 --> 00:59:40,240 Speaker 1: Can we still do that? Can we do that on 1223 00:59:40,280 --> 00:59:42,720 Speaker 1: a long term basis? Can we continue to do that 1224 00:59:42,800 --> 00:59:45,240 Speaker 1: and still meet our own defense needs? 1225 00:59:47,480 --> 00:59:48,520 Speaker 11: I think so. 1226 00:59:48,520 --> 00:59:48,640 Speaker 7: So. 1227 00:59:48,720 --> 00:59:51,880 Speaker 13: We certainly still have a lot of inventory that's capable 1228 00:59:51,920 --> 00:59:54,720 Speaker 13: of being moved from different theaters, whether it be the 1229 00:59:54,760 --> 00:59:58,040 Speaker 13: European theater or the Asia Pacific theater to help Ukraine. 1230 00:59:58,080 --> 01:00:00,760 Speaker 13: We can draw those down from US weapons style, or 1231 01:00:00,800 --> 01:00:03,280 Speaker 13: we have the ability to potentially ramp up production of 1232 01:00:03,320 --> 01:00:06,320 Speaker 13: the defense industrial base from the big defense companies. The 1233 01:00:06,400 --> 01:00:09,280 Speaker 13: latter has been a concern as you know in recent months, 1234 01:00:09,760 --> 01:00:12,200 Speaker 13: especially with Congress looking at the defense industrial base and 1235 01:00:12,240 --> 01:00:15,240 Speaker 13: how do we maximize production Certainly, if we keep this 1236 01:00:15,360 --> 01:00:19,280 Speaker 13: up for extended period of time, I think years will 1237 01:00:19,360 --> 01:00:22,600 Speaker 13: draw down before we can replenish our inventories, and that 1238 01:00:22,760 --> 01:00:24,760 Speaker 13: is a concern. But I think in the short term 1239 01:00:25,040 --> 01:00:28,440 Speaker 13: to maybe eighteen months, that really won't be a very 1240 01:00:28,480 --> 01:00:31,240 Speaker 13: acute problem for the Western militaries. 1241 01:00:31,560 --> 01:00:33,640 Speaker 1: So, Kevin, the probably one of the big decisions that 1242 01:00:33,680 --> 01:00:37,320 Speaker 1: the President made about Ukraine is sending over F Sixteen's 1243 01:00:37,480 --> 01:00:40,160 Speaker 1: explain to us how that may play out in terms 1244 01:00:40,240 --> 01:00:44,400 Speaker 1: of timing, how many aircraft they're pilots and what impact 1245 01:00:44,480 --> 01:00:45,160 Speaker 1: you think that might have. 1246 01:00:46,080 --> 01:00:48,560 Speaker 13: Yeah, great question. So I think there's two aspects of this. 1247 01:00:48,640 --> 01:00:50,800 Speaker 13: One is whether the United States sends any of its 1248 01:00:50,800 --> 01:00:53,760 Speaker 13: own F sixteens or from the Defense Industrial Base are 1249 01:00:53,800 --> 01:00:56,360 Speaker 13: able to provide those to Ukraine. But the second thing 1250 01:00:56,400 --> 01:00:59,360 Speaker 13: I think more importantly that the Biden administration recently did 1251 01:00:59,440 --> 01:01:01,880 Speaker 13: is they sort of cleared the decks for action and 1252 01:01:02,600 --> 01:01:06,080 Speaker 13: authorized our allies to provide S sixteens if they are 1253 01:01:06,080 --> 01:01:09,400 Speaker 13: so inclined to Ukraine's defense. But before any of those 1254 01:01:09,440 --> 01:01:12,000 Speaker 13: aircraft can really get there, the big thing that Ukraine 1255 01:01:12,120 --> 01:01:14,640 Speaker 13: and the West has to do is start training Ukrainian 1256 01:01:14,680 --> 01:01:17,080 Speaker 13: pilots on how to use those aircraft, and that could 1257 01:01:17,120 --> 01:01:21,960 Speaker 13: take anywhere from several months for very proficient pilots just 1258 01:01:22,040 --> 01:01:24,640 Speaker 13: kind of type model series training to convert them to 1259 01:01:24,760 --> 01:01:27,760 Speaker 13: use Western equipment, to up to a year to eighteen 1260 01:01:27,800 --> 01:01:29,440 Speaker 13: months to really get them proficient on how to use 1261 01:01:29,480 --> 01:01:30,440 Speaker 13: those aircraft. 1262 01:01:30,600 --> 01:01:32,480 Speaker 4: We only have about a minute left, but I was 1263 01:01:32,520 --> 01:01:35,760 Speaker 4: curious about the supply chain threats that exist right now 1264 01:01:35,840 --> 01:01:38,600 Speaker 4: when it comes to China and did coupling that's happening there. 1265 01:01:39,760 --> 01:01:42,560 Speaker 13: Yeah, great question if you look at what's sort of happening, 1266 01:01:42,800 --> 01:01:45,200 Speaker 13: whether you take the COVID pandemic and what we saw 1267 01:01:45,200 --> 01:01:48,560 Speaker 13: in supply chains there, or how difficult it was from 1268 01:01:48,600 --> 01:01:50,880 Speaker 13: Europe to kind of get off. Russian oil and natural 1269 01:01:50,880 --> 01:01:55,800 Speaker 13: gas disruptions really have got the attention of the defense 1270 01:01:55,840 --> 01:01:58,400 Speaker 13: industrial base, and what they're really looking to do is 1271 01:01:58,440 --> 01:02:01,560 Speaker 13: how do you sort of do you risk your supply chains. 1272 01:02:02,360 --> 01:02:06,480 Speaker 13: It's not a really good idea if you have a 1273 01:02:06,520 --> 01:02:09,320 Speaker 13: potential foreign adversary or a foreign thread or somebody who's 1274 01:02:09,360 --> 01:02:13,800 Speaker 13: geopolitically opposed your objectives to be over reliant upon them 1275 01:02:13,840 --> 01:02:17,080 Speaker 13: for any source of supply, whether those be critical raw materials, 1276 01:02:17,320 --> 01:02:19,480 Speaker 13: oil and natural gas. And so I think you're seeing 1277 01:02:19,520 --> 01:02:21,560 Speaker 13: a very natural tendency right now for people to take 1278 01:02:21,600 --> 01:02:23,800 Speaker 13: a look at where are they over concentrated and how 1279 01:02:23,800 --> 01:02:26,720 Speaker 13: do I de risk that, How do I spread sort 1280 01:02:26,760 --> 01:02:28,680 Speaker 13: of the wealth around so that I'm not beholding to 1281 01:02:28,720 --> 01:02:30,960 Speaker 13: any one supplier in the future. 1282 01:02:31,640 --> 01:02:33,640 Speaker 1: Kevin, thanks so much for joining us. I really appreciate 1283 01:02:33,680 --> 01:02:37,800 Speaker 1: getting the benefit of your expertise. Kevin Brand defense policy 1284 01:02:37,840 --> 01:02:42,480 Speaker 1: analysts for Bloomberg Intelligence and a twenty nine year Navy veteran. 1285 01:02:42,560 --> 01:02:45,560 Speaker 1: So we thank Kevin for his many years of service 1286 01:02:45,600 --> 01:02:48,080 Speaker 1: and he really helps us kind of understand what's happening 1287 01:02:48,440 --> 01:02:51,680 Speaker 1: on the ground and in the air in the war 1288 01:02:51,800 --> 01:02:53,360 Speaker 1: in Ukraine. 1289 01:02:54,640 --> 01:02:57,720 Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can 1290 01:02:57,760 --> 01:03:01,520 Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever 1291 01:03:01,640 --> 01:03:05,320 Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 1292 01:03:05,560 --> 01:03:07,479 Speaker 2: at Matt Miller nineteen seventy three. 1293 01:03:07,920 --> 01:03:10,360 Speaker 1: And I'm fall Sweeney. I'm on Twitter at pt Sweeney. 1294 01:03:10,400 --> 01:03:13,080 Speaker 1: Before the podcast, you can always catch us worldwide at 1295 01:03:13,080 --> 01:03:14,880 Speaker 1: Bloomberg Radio.