1 00:00:01,760 --> 00:00:04,400 Speaker 1: This is Bloomberg Business Week. I'm Karl Masser and I'm 2 00:00:04,440 --> 00:00:07,240 Speaker 1: Bloomberg Quick Takes Tim Stanabek. We're here every day bringing 3 00:00:07,280 --> 00:00:09,760 Speaker 1: you the latest news from the world to business and finance, 4 00:00:09,800 --> 00:00:13,640 Speaker 1: plus technology, politics, economics, all partnising the power of Business 5 00:00:13,640 --> 00:00:17,119 Speaker 1: Week reporters and editors, not to mention our journalists and 6 00:00:17,120 --> 00:00:19,960 Speaker 1: analysts in more than one twenty countries. You can download 7 00:00:20,000 --> 00:00:23,200 Speaker 1: Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot com. 8 00:00:23,400 --> 00:00:25,120 Speaker 1: You can also listen to our radio show at two 9 00:00:25,160 --> 00:00:27,840 Speaker 1: pm Eastern Time on Bloomberg Radio or watch us on 10 00:00:27,880 --> 00:00:32,279 Speaker 1: YouTube search Bloomberg Global News. Well, talk about Houston. There's 11 00:00:32,320 --> 00:00:34,960 Speaker 1: a problem FedEx shares. As you know, we've been talking 12 00:00:35,040 --> 00:00:37,880 Speaker 1: about how they have tumbled today down uh the most 13 00:00:37,920 --> 00:00:40,720 Speaker 1: and over forty years after pulling its earnings forecast on 14 00:00:40,840 --> 00:00:44,680 Speaker 1: worsening business conditions potentially worrying signed for the global economy. 15 00:00:44,760 --> 00:00:47,360 Speaker 1: And I think about this kind of story twenty four 16 00:00:47,400 --> 00:00:50,400 Speaker 1: hours ago, tim Essentially we just started to break down 17 00:00:50,640 --> 00:00:53,239 Speaker 1: this and I wondered about analysis, especially when it comes 18 00:00:53,240 --> 00:00:55,800 Speaker 1: to our Bloomberg intelligence to you and look at it now. Yeah, 19 00:00:55,920 --> 00:00:58,800 Speaker 1: really eager to speak to Leak Glasgow, Senior transport logistics 20 00:00:58,800 --> 00:01:01,600 Speaker 1: and shipping analysts for Blue Brig Intelligence. Lee joins us 21 00:01:01,600 --> 00:01:05,120 Speaker 1: this afternoon via zoom from Bloomberg Intelligence headquarters in at Princeton, 22 00:01:05,200 --> 00:01:07,680 Speaker 1: New Jersey. Uh. Lee, good to have you with us. 23 00:01:07,720 --> 00:01:09,560 Speaker 1: We were really itching to get you on to talk 24 00:01:09,560 --> 00:01:12,000 Speaker 1: all about this this afternoon. I think the question that 25 00:01:12,080 --> 00:01:15,319 Speaker 1: Carol asked sort of rhetorically earlier was about whether this 26 00:01:15,400 --> 00:01:18,119 Speaker 1: is a company specific story, if it's FedEx specifically, because 27 00:01:18,120 --> 00:01:20,960 Speaker 1: we're seeing it way on certainly other sectors and uh 28 00:01:21,120 --> 00:01:23,600 Speaker 1: peers within the sector. But but take us into what 29 00:01:23,720 --> 00:01:27,200 Speaker 1: exactly the concern is that FedEx has. Yeah, So what 30 00:01:27,280 --> 00:01:29,880 Speaker 1: I would say is it is a company's specific yes, 31 00:01:29,959 --> 00:01:31,880 Speaker 1: and is there a read through for the rest of 32 00:01:31,920 --> 00:01:35,240 Speaker 1: the broader economy a little? And why we say that 33 00:01:35,400 --> 00:01:37,640 Speaker 1: is that, you know, in the release, the company mentioned 34 00:01:37,640 --> 00:01:41,800 Speaker 1: the fact that there are some service challenges in Europe 35 00:01:41,800 --> 00:01:44,920 Speaker 1: and we view that as mostly dealing with the T 36 00:01:45,040 --> 00:01:48,720 Speaker 1: and T integration, coupled with the fact that you know, um, 37 00:01:48,720 --> 00:01:51,160 Speaker 1: Europe is I'm sure you're all aware that Europe having 38 00:01:51,200 --> 00:01:54,840 Speaker 1: some problems with inflation due to high energy costs and 39 00:01:54,880 --> 00:01:57,360 Speaker 1: that's having a major impact in demand. You know, the 40 00:01:57,440 --> 00:01:59,840 Speaker 1: risk of your going into a recession or if they're 41 00:01:59,880 --> 00:02:01,840 Speaker 1: not a recession already is a lot higher than here 42 00:02:01,880 --> 00:02:04,920 Speaker 1: in the US UM and you know that that is 43 00:02:05,080 --> 00:02:07,800 Speaker 1: probably driving some of the weakness that we saw. And 44 00:02:07,920 --> 00:02:12,480 Speaker 1: Express Express revenues came in five percent below expectations for 45 00:02:12,560 --> 00:02:15,400 Speaker 1: the first quarter when they pre announced yesterday. And then 46 00:02:15,440 --> 00:02:19,040 Speaker 1: the margins that you know that they showed the the 47 00:02:19,080 --> 00:02:23,560 Speaker 1: adjusted operating um operating margins were about one point seven percent, 48 00:02:23,639 --> 00:02:28,040 Speaker 1: which is very low relative to history. I mean history, 49 00:02:28,160 --> 00:02:31,480 Speaker 1: historically it's been around about five to six percent UH 50 00:02:31,520 --> 00:02:34,960 Speaker 1: and and so you've seen a real step down in 51 00:02:35,080 --> 00:02:38,520 Speaker 1: margins and it probably has to do with higher costs, UH, 52 00:02:38,919 --> 00:02:42,360 Speaker 1: with the inflationary aspects that we were talking, lower demand, 53 00:02:42,600 --> 00:02:45,880 Speaker 1: and some integration problems at T and T and and 54 00:02:46,040 --> 00:02:47,960 Speaker 1: for some background, you know T and T was an 55 00:02:47,960 --> 00:02:51,239 Speaker 1: acquisition they made two thousand and sixteen, UH and they 56 00:02:51,280 --> 00:02:53,680 Speaker 1: did it so they could be more competitive in Europe 57 00:02:53,720 --> 00:02:56,959 Speaker 1: with UPS and and and Deutsche Post. You know, there's 58 00:02:57,000 --> 00:02:59,560 Speaker 1: still a third when it comes to Europe, but there 59 00:02:59,560 --> 00:03:01,359 Speaker 1: are a lot, you know, a lot closer to the 60 00:03:01,440 --> 00:03:04,400 Speaker 1: number two ups in Europe now. But the problem was 61 00:03:04,440 --> 00:03:07,040 Speaker 1: in two thousand and seventeen there was a huge um 62 00:03:07,160 --> 00:03:10,760 Speaker 1: cyber attack on TNT which rendered it pretty much useless. 63 00:03:11,000 --> 00:03:13,520 Speaker 1: And it wasn't for fed x's capital, the company probably 64 00:03:13,560 --> 00:03:16,360 Speaker 1: wouldn't be around today. And then that couple with a 65 00:03:16,400 --> 00:03:20,080 Speaker 1: couple of management missteps, will call them, really slowed the 66 00:03:20,120 --> 00:03:23,040 Speaker 1: progress of integrating T n T. And then you know, 67 00:03:23,080 --> 00:03:24,919 Speaker 1: we had a pandemic and that threw a wrench and 68 00:03:25,000 --> 00:03:29,000 Speaker 1: everyone's business model. UM. And so we just think that 69 00:03:29,000 --> 00:03:31,400 Speaker 1: that the benefits, if any, are really going to be 70 00:03:31,480 --> 00:03:35,440 Speaker 1: kicked down the road as management tries to properly resource 71 00:03:35,520 --> 00:03:38,360 Speaker 1: its network in the US and in Europe. Hey Ley, 72 00:03:38,440 --> 00:03:40,920 Speaker 1: what does this mean for the company's new CEO, who 73 00:03:41,000 --> 00:03:44,880 Speaker 1: who took over just in June, inherited this and just 74 00:03:44,960 --> 00:03:48,400 Speaker 1: trying to make it right or is this maybe a 75 00:03:48,480 --> 00:03:53,040 Speaker 1: first big stumble? Yeah? So um, you know Roger Subramani 76 00:03:53,120 --> 00:03:56,960 Speaker 1: in UM he's became the CEO and president in June. UM. 77 00:03:57,000 --> 00:03:59,880 Speaker 1: You know, also Richard Smith became the CEO of its 78 00:04:00,040 --> 00:04:03,880 Speaker 1: rest in April. Uh So they're relatively new, shall we say, 79 00:04:03,960 --> 00:04:06,600 Speaker 1: to their role, but they've been long time managers in 80 00:04:06,760 --> 00:04:09,520 Speaker 1: the organization. You know what, I would say that's very 81 00:04:09,560 --> 00:04:12,040 Speaker 1: different than what we're seeing at fed X. Versus UPS. 82 00:04:12,120 --> 00:04:16,120 Speaker 1: You know, in UPS got a new CEO, Carol Toma, 83 00:04:16,640 --> 00:04:18,560 Speaker 1: and she was on the board UM. But you know, 84 00:04:18,560 --> 00:04:20,640 Speaker 1: people were a little skeptical about her because most of 85 00:04:20,760 --> 00:04:23,000 Speaker 1: UPS senior managers will always used to be able to 86 00:04:23,000 --> 00:04:25,120 Speaker 1: say that, you know, my first job was when I 87 00:04:25,160 --> 00:04:27,520 Speaker 1: was in college, loading on loading EPs trucks, and I've 88 00:04:27,520 --> 00:04:30,080 Speaker 1: been there forever. And so she was like, not quite 89 00:04:30,120 --> 00:04:32,880 Speaker 1: an outsider, but kind of an outsider. And she's really 90 00:04:32,960 --> 00:04:36,039 Speaker 1: done a phenomenal job. She's she's been selling off on 91 00:04:36,120 --> 00:04:39,440 Speaker 1: profitable businesses. She sold their less than truckload business off 92 00:04:39,480 --> 00:04:42,680 Speaker 1: to t f I. UM. They're really focused on what 93 00:04:42,720 --> 00:04:46,640 Speaker 1: they're calling better not bigger strategy, which really seems to 94 00:04:46,680 --> 00:04:49,240 Speaker 1: be paying off. And UPS had a sales side event 95 00:04:49,360 --> 00:04:52,240 Speaker 1: on September nine, and they didn't call that any any 96 00:04:52,360 --> 00:04:56,520 Speaker 1: glaring issues. They actually reiterated their two guidance. And that's 97 00:04:56,520 --> 00:05:00,120 Speaker 1: why we think it's mostly a company specific issue for 98 00:05:00,200 --> 00:05:03,479 Speaker 1: fed X versus the broader economy. You know, we'd be 99 00:05:03,600 --> 00:05:06,000 Speaker 1: naive to think, yes, you know, growth has slowed over 100 00:05:06,040 --> 00:05:09,120 Speaker 1: the last three months, but you know, also you know 101 00:05:09,160 --> 00:05:13,280 Speaker 1: fed X is has more of exposure in China, uh, 102 00:05:13,400 --> 00:05:17,760 Speaker 1: and you know the the zero tolerance policy of the 103 00:05:17,839 --> 00:05:22,359 Speaker 1: Chinese government due to COVID have really restricted economic activity 104 00:05:22,400 --> 00:05:25,039 Speaker 1: there and that's gone on longer than I think most 105 00:05:25,080 --> 00:05:27,520 Speaker 1: of us have would have wanted or thought, uh, And 106 00:05:27,560 --> 00:05:30,440 Speaker 1: that's also something weighing on on FedEx's business as well. 107 00:05:30,600 --> 00:05:32,320 Speaker 1: Just want to throw out some numbers. Looking at the 108 00:05:32,360 --> 00:05:35,000 Speaker 1: d e S page on the Bloomberg when you look 109 00:05:35,000 --> 00:05:39,360 Speaker 1: at fed X USOV almost sixty five billion international was 110 00:05:39,400 --> 00:05:42,680 Speaker 1: almost twenty nine. If you pull up ups US is 111 00:05:42,720 --> 00:05:45,880 Speaker 1: about seventy four billion internationals about twenty three. So that 112 00:05:45,960 --> 00:05:48,520 Speaker 1: speaks really to your point. So I mean, when we 113 00:05:48,520 --> 00:05:51,320 Speaker 1: think about ups LEE, that's more of a US play 114 00:05:51,400 --> 00:05:54,719 Speaker 1: domestic play. Yeah. And when I was also in up 115 00:05:54,800 --> 00:05:57,200 Speaker 1: s U p SS one integrated network, so they have, 116 00:05:57,480 --> 00:06:01,080 Speaker 1: you know, an express in domestic business. But you know, 117 00:06:01,200 --> 00:06:03,919 Speaker 1: when someone delivers a package to your house, it's not 118 00:06:04,000 --> 00:06:08,440 Speaker 1: a separate organization. At FedEx. The majority of their packages 119 00:06:08,520 --> 00:06:11,880 Speaker 1: here on the ground network which are independent contractors, or 120 00:06:11,920 --> 00:06:15,360 Speaker 1: their express network, which are employees. A lot of people 121 00:06:15,400 --> 00:06:18,080 Speaker 1: on the street are kind of wondering, you know what 122 00:06:18,120 --> 00:06:21,839 Speaker 1: the rationale for that is and does it truly make sense, uh, 123 00:06:22,040 --> 00:06:24,440 Speaker 1: to not have an integrated network. Well, great, to check 124 00:06:24,480 --> 00:06:27,640 Speaker 1: in with you, Lee Clascow of our Bloomberg Intelligence team. 125 00:06:27,720 --> 00:06:31,320 Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and 126 00:06:31,400 --> 00:06:35,680 Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. The new 127 00:06:35,680 --> 00:06:37,800 Speaker 1: issue of Bloomberg Business Week out. It is online at 128 00:06:37,839 --> 00:06:40,400 Speaker 1: Bloomberg dot com, slash business Week, on the Bloomberg Terminal, 129 00:06:40,440 --> 00:06:42,760 Speaker 1: and of course on news stands. One story in the 130 00:06:42,800 --> 00:06:44,920 Speaker 1: issue takes a look at the biggest US copper mind 131 00:06:44,960 --> 00:06:47,800 Speaker 1: that may not be able to actually deliver on its 132 00:06:47,800 --> 00:06:50,680 Speaker 1: good stint. We're talking about Rio Tinto's Resolution Project. It's 133 00:06:50,680 --> 00:06:53,000 Speaker 1: got enough of the medal for two seventy five million 134 00:06:53,080 --> 00:06:56,560 Speaker 1: e vs. Some locals say though, it should never be developed. 135 00:06:56,640 --> 00:06:59,920 Speaker 1: The story by Joe Dough. He is Medals and Agricultural 136 00:07:00,000 --> 00:07:02,359 Speaker 1: America's deputy team leader for Bloomberg News. He's with us 137 00:07:02,400 --> 00:07:05,479 Speaker 1: right now in the Bloomberg Interactive Broker's studio. Joel Weber 138 00:07:05,520 --> 00:07:07,000 Speaker 1: is going to be joining us to He's editor of 139 00:07:07,000 --> 00:07:09,440 Speaker 1: Bloomberg Business Week. He's with us in the Bloomberg Interactive 140 00:07:09,440 --> 00:07:12,720 Speaker 1: Broker Studio. Joe, I want to start with you just because, um, 141 00:07:12,760 --> 00:07:14,880 Speaker 1: you know, you got to go visit this mine in Arizona, 142 00:07:15,080 --> 00:07:17,280 Speaker 1: and what was it like? So, I mean, you're in 143 00:07:17,400 --> 00:07:20,560 Speaker 1: Phoenix and you drive about forty five minutes east of 144 00:07:20,560 --> 00:07:22,680 Speaker 1: Phoenix and suddenly you just go from like city to 145 00:07:22,800 --> 00:07:27,280 Speaker 1: desert to like this beautiful, rolling, hilly, uh kind of 146 00:07:27,360 --> 00:07:29,640 Speaker 1: cliffy area, and then you kind of go through this 147 00:07:30,320 --> 00:07:34,120 Speaker 1: crevasse and you enter this beautiful kind of range with 148 00:07:34,160 --> 00:07:36,920 Speaker 1: these rocks and whatnot. And they're at the top of 149 00:07:36,920 --> 00:07:41,520 Speaker 1: all this is this kind of like plane shaft. Right, 150 00:07:41,560 --> 00:07:44,600 Speaker 1: there's a couple of large pieces of iron that have 151 00:07:44,920 --> 00:07:47,480 Speaker 1: clear lifts going down to the ground, and but you 152 00:07:47,480 --> 00:07:50,840 Speaker 1: don't think anything other about it. So that's where the 153 00:07:50,840 --> 00:07:53,080 Speaker 1: actual mine is located. And I said, well, you know, 154 00:07:53,120 --> 00:07:54,880 Speaker 1: I want to go down into it because it's the 155 00:07:54,960 --> 00:07:57,560 Speaker 1: deepest mine in in the Americas. It's about a mile 156 00:07:57,560 --> 00:07:59,520 Speaker 1: and a half DP. So we went all the way 157 00:07:59,520 --> 00:08:02,040 Speaker 1: down there, and you get down there and it's it's 158 00:08:02,080 --> 00:08:04,200 Speaker 1: kind of like, uh, I don't know, you go to 159 00:08:04,240 --> 00:08:07,240 Speaker 1: like a new library, right, it's all concrete and lit 160 00:08:07,320 --> 00:08:09,720 Speaker 1: up by fluorescent lights and everything else. And if you 161 00:08:09,720 --> 00:08:11,400 Speaker 1: didn't know you were a mile a mile and a 162 00:08:11,440 --> 00:08:12,880 Speaker 1: half in the ground, you might think you're like a 163 00:08:13,200 --> 00:08:17,480 Speaker 1: casino or you know, someplace without windows. Uh. But that's 164 00:08:17,480 --> 00:08:20,720 Speaker 1: where it stops because there is no mind being built 165 00:08:21,320 --> 00:08:23,720 Speaker 1: because they don't actually have the right to the land 166 00:08:23,800 --> 00:08:27,200 Speaker 1: right now to build where the actual copper veins are. Right. 167 00:08:27,240 --> 00:08:28,920 Speaker 1: So this is gonna be a copper mine. It's gonna have, 168 00:08:29,040 --> 00:08:31,600 Speaker 1: like you said, be producing the most copper in all 169 00:08:31,640 --> 00:08:36,600 Speaker 1: of North America. And it sits below this uh Native 170 00:08:36,600 --> 00:08:40,200 Speaker 1: American site. It is a campground actually owned by the 171 00:08:40,240 --> 00:08:44,439 Speaker 1: Forest Service, but uh, the San Carlos Apache tribe say, 172 00:08:44,760 --> 00:08:49,120 Speaker 1: this has been our land for time and prepeptuity. That 173 00:08:49,280 --> 00:08:51,839 Speaker 1: I was actually talking to the guy who is one 174 00:08:51,840 --> 00:08:54,559 Speaker 1: of the former Apache leaders who's now leading the kind 175 00:08:54,559 --> 00:08:56,680 Speaker 1: of charge to say, you should not give this land 176 00:08:56,720 --> 00:08:58,880 Speaker 1: over to Rio Tinto. The United States should hold onto 177 00:08:58,880 --> 00:09:01,920 Speaker 1: this land. And yeah, well so there's tension. I want 178 00:09:01,920 --> 00:09:04,280 Speaker 1: to bring Joe Webber into because Joel, you know the 179 00:09:04,320 --> 00:09:06,200 Speaker 1: reason we this is such an important story. As we 180 00:09:06,200 --> 00:09:09,679 Speaker 1: talked so much about electrical vehicles EVS, and we talk 181 00:09:09,720 --> 00:09:12,200 Speaker 1: about Lithian that's so important, but actually copper is really 182 00:09:12,240 --> 00:09:14,720 Speaker 1: important when it comes to EVS and we need a 183 00:09:14,720 --> 00:09:17,200 Speaker 1: lot of it, yes, like so much of it, Like 184 00:09:17,280 --> 00:09:19,920 Speaker 1: you need you need like maybe a big gigantic mind 185 00:09:19,960 --> 00:09:23,959 Speaker 1: with like the biggest deposit in the US may be visited. Yeah, exactly. 186 00:09:24,080 --> 00:09:26,200 Speaker 1: And but you know, I think it does speak to 187 00:09:26,520 --> 00:09:30,560 Speaker 1: when you mentioned some other materials there, some metals, They're like, 188 00:09:31,200 --> 00:09:33,760 Speaker 1: look like the US has really never been at the 189 00:09:33,800 --> 00:09:36,480 Speaker 1: forefront of getting this stuff out of the ground and 190 00:09:36,880 --> 00:09:39,680 Speaker 1: making it be a supply chain that could end up 191 00:09:39,679 --> 00:09:43,680 Speaker 1: in electric vehicles. I think that really changed with the 192 00:09:43,720 --> 00:09:48,560 Speaker 1: new incentives from Washington. And and this shows how, uh, 193 00:09:48,720 --> 00:09:52,440 Speaker 1: there's this reality that has yet to meet where you know, 194 00:09:52,520 --> 00:09:55,400 Speaker 1: we might end up in the future. But but in 195 00:09:55,400 --> 00:09:58,640 Speaker 1: this specific example, it you know, how likely is rio 196 00:09:58,800 --> 00:10:01,800 Speaker 1: tend to gonna be even to get this copper out 197 00:10:01,840 --> 00:10:06,480 Speaker 1: of the ground anytime? Anytimes? I mean, if you assume 198 00:10:06,600 --> 00:10:08,920 Speaker 1: that the United States government does end up approving the 199 00:10:08,960 --> 00:10:10,959 Speaker 1: land swap and it is on hold right now because 200 00:10:11,000 --> 00:10:13,200 Speaker 1: the Biden administration said, wait a minute, we feel like 201 00:10:13,240 --> 00:10:16,200 Speaker 1: some of the licensing wasn't actually done correctly. We feel 202 00:10:16,200 --> 00:10:18,080 Speaker 1: like some of the environment and impact studies were not 203 00:10:18,120 --> 00:10:20,760 Speaker 1: done correctly, so maybe we should redo those. Even if 204 00:10:20,760 --> 00:10:22,480 Speaker 1: they suddenly said, you know what, we're going to reverse 205 00:10:22,520 --> 00:10:24,960 Speaker 1: that and allow for the swap, it would still take 206 00:10:25,040 --> 00:10:29,720 Speaker 1: ten years before Rio Tinto is actually pulling copper or 207 00:10:29,840 --> 00:10:32,960 Speaker 1: up out of the ground. So I mean, it just 208 00:10:33,000 --> 00:10:36,320 Speaker 1: reminds us that mining projects take minimum ten years to 209 00:10:36,320 --> 00:10:38,640 Speaker 1: get up off the ground. And this is the problem 210 00:10:38,760 --> 00:10:41,680 Speaker 1: I was I was saying on Twitter just yesterday. You know, 211 00:10:41,720 --> 00:10:45,160 Speaker 1: the Biden administration has been front and center talking about 212 00:10:45,160 --> 00:10:49,640 Speaker 1: the materials being domestically produced. And even though most people 213 00:10:49,679 --> 00:10:52,240 Speaker 1: don't think, oh, energy transition, we need to talk about 214 00:10:52,280 --> 00:10:55,480 Speaker 1: the minds. And this is like constantly being talked about 215 00:10:55,480 --> 00:10:58,000 Speaker 1: in the White House and being talked about around Congress. 216 00:10:58,040 --> 00:11:01,360 Speaker 1: Everybody's for this, but you get into complexities of this 217 00:11:01,480 --> 00:11:04,960 Speaker 1: situation with resolution, and you see why it is so difficult, 218 00:11:05,520 --> 00:11:08,560 Speaker 1: um and the problem that we have right if we 219 00:11:08,600 --> 00:11:10,719 Speaker 1: truly want to do this at home, we got to 220 00:11:10,760 --> 00:11:13,720 Speaker 1: be ready for understanding it's going to take ten twenty 221 00:11:13,800 --> 00:11:17,079 Speaker 1: years to actually have the ability to do that all domestically. 222 00:11:17,120 --> 00:11:19,520 Speaker 1: Makes me wonder that idea of what two fifths of 223 00:11:19,559 --> 00:11:23,800 Speaker 1: passenger cars carsels to be e vs makes me wonder 224 00:11:23,840 --> 00:11:25,520 Speaker 1: how the heck do we do it, especially if we 225 00:11:25,559 --> 00:11:28,120 Speaker 1: want everything to be made domestically or a lot of it. Right, 226 00:11:28,320 --> 00:11:30,160 Speaker 1: And this wasn't in the story, but I was recently 227 00:11:30,200 --> 00:11:32,400 Speaker 1: having a conversation with a very big trading firm that 228 00:11:32,520 --> 00:11:36,160 Speaker 1: actually trades all these medals, and they said, it's just 229 00:11:36,280 --> 00:11:39,480 Speaker 1: now getting on people's radar exactly how much copper you need. 230 00:11:39,559 --> 00:11:42,360 Speaker 1: And what is in the story is Goldman's most recent 231 00:11:42,440 --> 00:11:44,840 Speaker 1: research says we're not going to hit a deficit for 232 00:11:44,920 --> 00:11:51,200 Speaker 1: three more years, but the price is going to more 233 00:11:51,240 --> 00:11:54,559 Speaker 1: than double for copper. And that's because the market the 234 00:11:54,600 --> 00:11:57,400 Speaker 1: world's going to start. China is very much aware of that, 235 00:11:57,480 --> 00:12:00,280 Speaker 1: and they are the ones also going out there to 236 00:12:00,360 --> 00:12:04,720 Speaker 1: secure off take agreements. And by part of minds in 237 00:12:04,800 --> 00:12:07,320 Speaker 1: all different parts of the world that people like Elon 238 00:12:07,400 --> 00:12:09,600 Speaker 1: Musk say, you know what, maybe we don't want to 239 00:12:09,600 --> 00:12:12,400 Speaker 1: touch that copper mine and the Democratic Republic of Congo, 240 00:12:12,760 --> 00:12:15,280 Speaker 1: maybe we do just want the one that's in Arizona 241 00:12:15,320 --> 00:12:16,920 Speaker 1: that we can trust, or the one that's in Chile 242 00:12:17,080 --> 00:12:18,800 Speaker 1: that we can trust. By the way, there was a 243 00:12:18,840 --> 00:12:23,000 Speaker 1: proposed land swap. What happened there? Uh? So the land 244 00:12:23,040 --> 00:12:27,320 Speaker 1: swap was written into law uh in a bill passed 245 00:12:28,200 --> 00:12:31,920 Speaker 1: during the Obama administration. It was tucked into a defense 246 00:12:32,640 --> 00:12:35,800 Speaker 1: bill of course, so there's debates over did Obama actually 247 00:12:36,240 --> 00:12:38,360 Speaker 1: like this thing? Uh? And then by the end of 248 00:12:38,400 --> 00:12:41,840 Speaker 1: the Trump administration. The Trump administration had enough push going 249 00:12:41,960 --> 00:12:44,160 Speaker 1: from behind the scenes from lobbyists and whatnot. They said, 250 00:12:44,360 --> 00:12:47,760 Speaker 1: let's approve the land swap. Let's go. Biden gets in 251 00:12:47,760 --> 00:12:51,120 Speaker 1: in the first month, and the Forest Service, the U. 252 00:12:51,160 --> 00:12:53,000 Speaker 1: S d A, which actually is in charge of all this, 253 00:12:53,080 --> 00:12:55,000 Speaker 1: come and say, you know, actually we're putting a halt 254 00:12:55,040 --> 00:12:57,320 Speaker 1: on the land swap. And so that's where we are 255 00:12:57,360 --> 00:13:01,160 Speaker 1: at right now. The land swap hasn't happen. Uh. The 256 00:13:01,200 --> 00:13:04,160 Speaker 1: United States government says we still need to do more 257 00:13:04,240 --> 00:13:06,920 Speaker 1: due diligence on this, and of course Rio says, the 258 00:13:07,000 --> 00:13:09,640 Speaker 1: due diligence has been done. We've chosen all the various 259 00:13:09,640 --> 00:13:13,400 Speaker 1: spots around Arizona to give them, uh, to give the 260 00:13:13,480 --> 00:13:16,880 Speaker 1: United States government. Um, so let's get this thing moving on. 261 00:13:17,040 --> 00:13:19,440 Speaker 1: Are there other areas of the United States that have 262 00:13:19,880 --> 00:13:21,640 Speaker 1: copper veins such as this? I know this is the 263 00:13:21,640 --> 00:13:26,280 Speaker 1: biggest potential one. But what what if if Riotinto doesn't 264 00:13:26,280 --> 00:13:30,680 Speaker 1: get access to this? What happens? So where this mine 265 00:13:30,760 --> 00:13:33,600 Speaker 1: is located is actually like for over a hundred years, 266 00:13:33,600 --> 00:13:35,679 Speaker 1: been known as one of the great deposits of copper 267 00:13:35,800 --> 00:13:38,800 Speaker 1: in the world. I asked one of the geologists there 268 00:13:38,880 --> 00:13:41,839 Speaker 1: should I've never thought it was the US, but it's 269 00:13:41,880 --> 00:13:44,360 Speaker 1: I mean right there in Arizona. Right, Arizona is like 270 00:13:44,480 --> 00:13:48,800 Speaker 1: copper Universe. I asked one of the geologists. Why, why, like, 271 00:13:48,880 --> 00:13:50,800 Speaker 1: what's interesting? He showed me this weird map with all 272 00:13:50,800 --> 00:13:52,600 Speaker 1: this crud on it. I said, I don't get this, 273 00:13:52,640 --> 00:13:54,600 Speaker 1: but I do notice this one spot here that makes 274 00:13:54,640 --> 00:13:56,920 Speaker 1: no sense to me. The lines all converge. He goes, 275 00:13:57,400 --> 00:13:59,520 Speaker 1: my job is to make money by getting copper out 276 00:13:59,520 --> 00:14:01,760 Speaker 1: of the ground. What makes me love my job is 277 00:14:01,800 --> 00:14:04,600 Speaker 1: the thing you just pointed out there about the geology, 278 00:14:04,720 --> 00:14:07,560 Speaker 1: and he said, basically, we're still trying to figure out, 279 00:14:07,600 --> 00:14:10,520 Speaker 1: after hundreds of years of looking in this area, what 280 00:14:10,679 --> 00:14:13,240 Speaker 1: happened to the Earth millions of years ago for this 281 00:14:13,360 --> 00:14:16,120 Speaker 1: to be the spot where copper is found. It's in 282 00:14:16,200 --> 00:14:20,360 Speaker 1: Jurassic Park. Just watch them. That's all there, which I 283 00:14:20,360 --> 00:14:22,400 Speaker 1: don't know. I don't know. I only like the first one, 284 00:14:22,560 --> 00:14:25,320 Speaker 1: all right. Our Thanks to Joe doo Middleton, a America's 285 00:14:25,320 --> 00:14:27,160 Speaker 1: deputy team leader of Bloomberg News, this story in the 286 00:14:27,200 --> 00:14:29,440 Speaker 1: new issue of Bloomberg Business Week magazine. It is out 287 00:14:29,520 --> 00:14:32,080 Speaker 1: or thanks to the editor of the magazine, Jill Webber, 288 00:14:35,200 --> 00:14:39,239 Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg 289 00:14:39,320 --> 00:14:43,240 Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. Get ready for 290 00:14:43,280 --> 00:14:47,000 Speaker 1: another likely year weather disasters that destroy homes, ruined crops, 291 00:14:47,000 --> 00:14:49,240 Speaker 1: disrupt shipping and threatened lives. Yeah, you thought you were 292 00:14:49,240 --> 00:14:51,320 Speaker 1: going to have a good Friday. Forget about it. It's 293 00:14:51,320 --> 00:14:53,320 Speaker 1: not happening here. Check out today is a big take. 294 00:14:53,400 --> 00:14:56,000 Speaker 1: You can do that by visiting a Bloomberg dot Com 295 00:14:56,040 --> 00:14:58,160 Speaker 1: slash Big Take. Also type and I Big Take on 296 00:14:58,200 --> 00:15:01,000 Speaker 1: the Bloomberg Terminal. We've got Elizabeth Elkin with us. She's 297 00:15:01,000 --> 00:15:03,560 Speaker 1: agricultural reporter for Bloomberg New She's with U right now 298 00:15:03,560 --> 00:15:06,480 Speaker 1: in the Bloomberg Interactive Broker Studio. Elizabeth, I gotta tell 299 00:15:06,520 --> 00:15:08,720 Speaker 1: you it's not just you know, the American West, or 300 00:15:08,760 --> 00:15:10,800 Speaker 1: what's happening in Australia. Over the last few years. We've 301 00:15:10,800 --> 00:15:14,040 Speaker 1: got deadly floods in Pakistan. We've got scorching heat all 302 00:15:14,120 --> 00:15:16,560 Speaker 1: over the western part of the country. In Europe as well, 303 00:15:16,960 --> 00:15:19,920 Speaker 1: we've got torrential rains in Indonesia than the Mega Droute 304 00:15:19,920 --> 00:15:24,640 Speaker 1: in Brazil and Argentina to what's going on, Yeah, absolutely 305 00:15:24,760 --> 00:15:28,680 Speaker 1: absolutely so. La Nina has been the driver behind weather 306 00:15:28,720 --> 00:15:33,440 Speaker 1: disaster since like mid um, and it's all but guaranteed 307 00:15:33,720 --> 00:15:36,640 Speaker 1: that we're going to see another year of Ladina at 308 00:15:36,680 --> 00:15:39,800 Speaker 1: this point. Um. Now, three years of Laddinia in a 309 00:15:39,920 --> 00:15:43,440 Speaker 1: row has only happened like twice since nineteen fifty and 310 00:15:43,480 --> 00:15:48,640 Speaker 1: the last time started in so it's like really rare um. 311 00:15:48,720 --> 00:15:51,640 Speaker 1: And by the time three finishes, the world could see 312 00:15:51,680 --> 00:15:55,760 Speaker 1: one trillion dollars in weather disaster damages for these three 313 00:15:55,840 --> 00:15:59,800 Speaker 1: years of London. So is Landinia getting worse? Like like 314 00:15:59,840 --> 00:16:02,320 Speaker 1: you just said, it doesn't happen a lot, but we 315 00:16:02,440 --> 00:16:05,080 Speaker 1: keep talking about that. The current, the warming of the planet. 316 00:16:05,440 --> 00:16:09,320 Speaker 1: The planet just makes the what we're seeing in terms 317 00:16:09,320 --> 00:16:11,880 Speaker 1: of climate imbalances and the impact on our world. It's 318 00:16:11,920 --> 00:16:15,240 Speaker 1: gotten even worse as a result. Absolutely, Yeah, So I 319 00:16:15,280 --> 00:16:18,440 Speaker 1: would describe it as La Nina is like the driver 320 00:16:18,680 --> 00:16:22,000 Speaker 1: behind all of this weather chaos, but climate change just 321 00:16:22,200 --> 00:16:25,880 Speaker 1: magnifies everything. So like for me, you know, I'm a 322 00:16:25,880 --> 00:16:27,960 Speaker 1: football fan. Um, if I were to give it a 323 00:16:28,000 --> 00:16:31,280 Speaker 1: sports analogy, right, uh, La Nina is like setting the 324 00:16:31,360 --> 00:16:33,760 Speaker 1: rules of the game. It's like how you play, and 325 00:16:33,760 --> 00:16:35,760 Speaker 1: then climate change is like if you put in the 326 00:16:35,800 --> 00:16:39,040 Speaker 1: best quarterback ever and you just watched that guy hurl 327 00:16:39,120 --> 00:16:42,720 Speaker 1: the ball down the field. Right, that's climate change. What's 328 00:16:42,720 --> 00:16:46,560 Speaker 1: the atmospheric phenomenon behind Landina? Like how does it work? 329 00:16:47,160 --> 00:16:51,360 Speaker 1: So I think the atmosphere of the atmospheric phenomenon behind 330 00:16:51,440 --> 00:16:54,480 Speaker 1: Landinia just it ends up making it so that the 331 00:16:54,520 --> 00:16:58,040 Speaker 1: ocean is just a little bit cooler, right, It's just 332 00:16:58,080 --> 00:17:01,320 Speaker 1: a little bit cooler, and that tiny little bit can 333 00:17:01,400 --> 00:17:04,159 Speaker 1: just cause all of these massive weather disasters. And I 334 00:17:04,200 --> 00:17:06,840 Speaker 1: think about right when we have crazy storms like in 335 00:17:06,880 --> 00:17:09,159 Speaker 1: our world, like when there's a real hot and then 336 00:17:09,200 --> 00:17:11,200 Speaker 1: you get hit by a cold front. Like it's right, 337 00:17:11,240 --> 00:17:15,680 Speaker 1: it's the extremes that just magnify everything, whether it's lots 338 00:17:15,680 --> 00:17:19,400 Speaker 1: of rains or an extreme drought. Absolutely absolutely, and then 339 00:17:19,560 --> 00:17:21,680 Speaker 1: you know you end up with things like yeah, the 340 00:17:22,080 --> 00:17:24,960 Speaker 1: droughtout rest, but also like the deadly flog floods in 341 00:17:25,000 --> 00:17:28,000 Speaker 1: Pakistan like we were talking about. Um, you know, I 342 00:17:28,040 --> 00:17:31,040 Speaker 1: know for me, like I love coffee, right, and so 343 00:17:31,520 --> 00:17:35,760 Speaker 1: like problems growing coffee in places like Brazil that's like 344 00:17:35,840 --> 00:17:38,760 Speaker 1: super inflationary. Talk to us about this because agriculture, right, 345 00:17:38,760 --> 00:17:41,080 Speaker 1: we always think about the old economy. You cares about it. 346 00:17:41,119 --> 00:17:43,879 Speaker 1: But like just like with the rail, just with the 347 00:17:43,960 --> 00:17:47,480 Speaker 1: rail strikes, we realized getting stuff around, which seems so old. 348 00:17:47,520 --> 00:17:50,879 Speaker 1: Economy it's important. It's it's how the economy keeps things moving. 349 00:17:51,200 --> 00:17:54,120 Speaker 1: Act like, it's so crucial in so many different ways. 350 00:17:54,280 --> 00:17:56,320 Speaker 1: What are you hearing as you report on this in 351 00:17:56,320 --> 00:17:59,280 Speaker 1: a daily basis and then as it relates to climate change? Yeah? 352 00:17:59,320 --> 00:18:02,680 Speaker 1: Absolutely absolutely. I mean, you know, when I talk to farmers, 353 00:18:02,960 --> 00:18:06,880 Speaker 1: you hear stories about like almond farmers literally ripping out 354 00:18:06,920 --> 00:18:09,399 Speaker 1: their trees because it's so dry, right, and they just 355 00:18:09,440 --> 00:18:12,520 Speaker 1: don't have enough rain year after year, which is a 356 00:18:12,560 --> 00:18:14,960 Speaker 1: real problem for people who like want to eat almonds 357 00:18:15,080 --> 00:18:17,119 Speaker 1: or you know, the things that almond goes into, like 358 00:18:17,280 --> 00:18:19,679 Speaker 1: almond milk and all of that. Like, that's that's going 359 00:18:19,720 --> 00:18:22,639 Speaker 1: to be a real problem. Um, you know, I covered dairy, 360 00:18:22,760 --> 00:18:25,880 Speaker 1: so talking to dairy farmers, dairy farmers are talking about 361 00:18:25,920 --> 00:18:29,080 Speaker 1: whether they can even do what they do in places 362 00:18:29,080 --> 00:18:32,639 Speaker 1: like California anymore over the next you know, decades or 363 00:18:32,680 --> 00:18:35,080 Speaker 1: however long. That's pretty remarkable to think about. I mean, 364 00:18:35,080 --> 00:18:38,919 Speaker 1: California is you know, it's it's it's the agricultural center 365 00:18:39,080 --> 00:18:42,440 Speaker 1: of the United States. It provides so much produce to 366 00:18:42,720 --> 00:18:44,960 Speaker 1: the rest of the country. What does that mean for 367 00:18:44,960 --> 00:18:49,200 Speaker 1: for all of US Americans. Yeah, it is very, very inflationary. 368 00:18:49,320 --> 00:18:52,320 Speaker 1: I mean, you know, as it becomes more expensive to 369 00:18:52,680 --> 00:18:55,840 Speaker 1: grow things, to to grow fruits, to grow vegetables, to 370 00:18:55,840 --> 00:18:59,960 Speaker 1: grow everything else. Um, it just spins down the supple 371 00:19:00,040 --> 00:19:01,960 Speaker 1: Hi Chaine, right, So it becomes more expensive for you 372 00:19:02,000 --> 00:19:04,600 Speaker 1: to buy it. Um. And in the long term, you know, 373 00:19:04,720 --> 00:19:08,639 Speaker 1: there could be issues of like can we even grow 374 00:19:08,920 --> 00:19:11,480 Speaker 1: things in California the way that we have been um, 375 00:19:11,520 --> 00:19:14,239 Speaker 1: And you know you talk about fruits and veggies, but 376 00:19:14,400 --> 00:19:17,720 Speaker 1: it's also like dairy. I mean, California is our number 377 00:19:17,720 --> 00:19:20,679 Speaker 1: one dairy state. R It's like a lot of what 378 00:19:20,760 --> 00:19:23,280 Speaker 1: we grow comes out of this one area that has 379 00:19:23,400 --> 00:19:26,000 Speaker 1: so many problems for us. But as you guys started, 380 00:19:26,040 --> 00:19:28,159 Speaker 1: I think Timmy pointed out, I mean it's a global problem. 381 00:19:28,200 --> 00:19:30,760 Speaker 1: So whether it's the flooding in Pakistan or you know, 382 00:19:30,800 --> 00:19:33,000 Speaker 1: incredible droughts in South America. I mean, we are seeing 383 00:19:33,000 --> 00:19:36,359 Speaker 1: this globally, this these extremes, and and while it's felt 384 00:19:36,400 --> 00:19:38,600 Speaker 1: like a really really rough here, it sounds like, you know, 385 00:19:38,600 --> 00:19:41,200 Speaker 1: get ready for more to come. UM. So important and 386 00:19:41,280 --> 00:19:43,199 Speaker 1: so much a sign of our times. Elizabeth, thank you 387 00:19:43,200 --> 00:19:46,359 Speaker 1: so much, really appreciate it. Elizabeth Elkin, agg reporter here 388 00:19:46,400 --> 00:19:48,840 Speaker 1: at Bloomberg News, joining us in our interactive broker story 389 00:19:49,440 --> 00:19:51,720 Speaker 1: Broker studio. This is our Bloomberg Big Take today. Yeah, 390 00:19:51,800 --> 00:19:53,720 Speaker 1: check it out and I Big Take on the Bloomberg 391 00:19:53,800 --> 00:20:03,000 Speaker 1: terminal and also at Bloomberg dot Com Slash Big Take Journal. Yeah, 392 00:20:03,080 --> 00:20:06,720 Speaker 1: but you let me drive? Oh no, no, no, no no home? 393 00:20:07,240 --> 00:20:13,880 Speaker 1: All right, please, I'll go. I want to drive. It's 394 00:20:13,920 --> 00:20:23,760 Speaker 1: good question. This is the drive to the clothes on 395 00:20:23,880 --> 00:20:27,480 Speaker 1: Bloomberg Radio Tik Talk. Everybody. Ten minutes left in today 396 00:20:27,520 --> 00:20:29,800 Speaker 1: as well, actually nine and a half, let's be exact here. 397 00:20:29,840 --> 00:20:32,359 Speaker 1: We like numbers and like being exact on Bloomberg's about 398 00:20:32,400 --> 00:20:34,359 Speaker 1: nine and a half minutes left in today's trading session, 399 00:20:34,400 --> 00:20:36,880 Speaker 1: getting ready to wrap up what has been a week, 400 00:20:36,960 --> 00:20:40,080 Speaker 1: certainly for the equity trade, a bearish one. We're seeing 401 00:20:40,119 --> 00:20:43,320 Speaker 1: significant losses losses in today's trade, although we are off 402 00:20:43,400 --> 00:20:45,560 Speaker 1: tim our worst levels of the day today, we are 403 00:20:46,080 --> 00:20:48,880 Speaker 1: really interested to hear what Brian Railing has to say. 404 00:20:48,880 --> 00:20:51,960 Speaker 1: He's head of Global fixed income strategy at Wells Farges 405 00:20:52,080 --> 00:20:54,320 Speaker 1: Investment Institute. He joins us on the phone from St. 406 00:20:54,320 --> 00:20:58,080 Speaker 1: Louis this afternoon. Brian, how are you great. Okay, let's 407 00:20:58,119 --> 00:21:01,000 Speaker 1: talk fixed income here. Um, just give us an overview 408 00:21:01,040 --> 00:21:02,879 Speaker 1: of where you think we are right now and what 409 00:21:02,960 --> 00:21:04,879 Speaker 1: the fixed income market is telling us about the economy, 410 00:21:04,880 --> 00:21:07,639 Speaker 1: because if you look at the equity market, uh, you know, 411 00:21:07,680 --> 00:21:10,960 Speaker 1: you're pretty much seeing alarm bells across the board. Yeah. Well, 412 00:21:10,960 --> 00:21:13,200 Speaker 1: the pick thinker market has been giving alarm bells here 413 00:21:13,240 --> 00:21:16,840 Speaker 1: since June with the yield curve inverted. And you know 414 00:21:16,920 --> 00:21:21,639 Speaker 1: that inversion maintains itself. Um. Uh, you know if you 415 00:21:21,680 --> 00:21:24,240 Speaker 1: look at just twos to tends almost forty basis points 416 00:21:24,240 --> 00:21:28,000 Speaker 1: inverted there. So, um, you're saying that rough times ahead 417 00:21:28,040 --> 00:21:30,399 Speaker 1: for the economy. So where's the value and where's the 418 00:21:30,440 --> 00:21:32,520 Speaker 1: difficulty and figuring out, especially when it comes to the 419 00:21:32,560 --> 00:21:34,560 Speaker 1: fixed income market, when you're looking at price and yield 420 00:21:34,680 --> 00:21:38,320 Speaker 1: right now, where's the value? Where's the right trade? Yeah? Well, 421 00:21:38,320 --> 00:21:40,639 Speaker 1: I mean the easy trade is just short term because 422 00:21:40,640 --> 00:21:44,040 Speaker 1: you can get really nice yields there, um, with very 423 00:21:44,040 --> 00:21:47,520 Speaker 1: little risk. Now, I'm not sure. I don't believe you 424 00:21:47,640 --> 00:21:49,720 Speaker 1: put in the peak yet in those longer term rates, 425 00:21:49,760 --> 00:21:51,439 Speaker 1: but I don't think we're too far away from that. 426 00:21:51,560 --> 00:21:53,800 Speaker 1: So I do think we're gonna come a time when 427 00:21:53,840 --> 00:21:56,680 Speaker 1: really extending duration and buying long term bonds will pay 428 00:21:56,720 --> 00:21:58,600 Speaker 1: off in the long run. You know, the sentiment numbers 429 00:21:58,640 --> 00:22:01,560 Speaker 1: today we're talking about UM, you know one and I 430 00:22:01,600 --> 00:22:05,639 Speaker 1: think was a ten year in inflation expectations and coming down. 431 00:22:06,160 --> 00:22:09,120 Speaker 1: So do you anticipate that we will see a significant 432 00:22:09,600 --> 00:22:12,800 Speaker 1: UH turnaround when it comes to the rate outlook? Maybe 433 00:22:12,920 --> 00:22:16,680 Speaker 1: it's next year, Maybe it's late next year, maybe it's 434 00:22:16,680 --> 00:22:18,400 Speaker 1: early in the following year. It's about the the one 435 00:22:18,440 --> 00:22:21,000 Speaker 1: year in five year excuse me, inflation expectations as a 436 00:22:21,040 --> 00:22:23,800 Speaker 1: result of the University of Michigan surveys showed lower than 437 00:22:23,840 --> 00:22:28,879 Speaker 1: expect expectations. So how how what's your expectation when it 438 00:22:28,920 --> 00:22:31,840 Speaker 1: comes to rates? Yeah, I do. I do believe that 439 00:22:31,880 --> 00:22:33,919 Speaker 1: we're entering a point again. I don't think we've hit 440 00:22:33,920 --> 00:22:35,520 Speaker 1: the peak yet. We're entering a point where it's a 441 00:22:35,600 --> 00:22:39,880 Speaker 1: really good buying opportunity for UH longer term duration. UH. 442 00:22:40,160 --> 00:22:44,920 Speaker 1: Simply for that reason, I do expect that inflation expectations 443 00:22:44,960 --> 00:22:49,240 Speaker 1: and eventually inflation over the intermediate to long term will 444 00:22:49,280 --> 00:22:51,880 Speaker 1: go down. I believe that the Fed will win its 445 00:22:51,920 --> 00:22:55,159 Speaker 1: war and will hit its targets. Now, not over the 446 00:22:55,200 --> 00:22:57,520 Speaker 1: near term. There's going to be a lot more. I 447 00:22:57,520 --> 00:22:59,959 Speaker 1: think fear around inflation a lot more work to fit 448 00:23:00,000 --> 00:23:01,159 Speaker 1: it's going to have to do. But I think the 449 00:23:01,240 --> 00:23:04,000 Speaker 1: Fed will do the work that's required. Brian. What's near 450 00:23:04,119 --> 00:23:05,960 Speaker 1: term though? In your view? I mean, I think what's 451 00:23:06,000 --> 00:23:08,600 Speaker 1: so crucial and and to be fair, I think no 452 00:23:08,640 --> 00:23:12,560 Speaker 1: one anticipated the inflationary pressures in terms of the timeline 453 00:23:12,800 --> 00:23:14,640 Speaker 1: and that they would be so sticky for so long. 454 00:23:14,680 --> 00:23:17,520 Speaker 1: But do you have a timeline when you think inflation 455 00:23:17,560 --> 00:23:21,000 Speaker 1: starts to come down significantly? Well significantly, I think we're 456 00:23:21,000 --> 00:23:24,840 Speaker 1: gonna probably have to wait until you know, at least 457 00:23:24,840 --> 00:23:27,000 Speaker 1: the first quarter of next year, if not a little 458 00:23:27,000 --> 00:23:30,679 Speaker 1: bit beyond that. But you know, significantly still is not 459 00:23:30,760 --> 00:23:35,920 Speaker 1: down to the feeds target. The markets really have to appreciate. 460 00:23:36,240 --> 00:23:38,920 Speaker 1: And you know, just because we get inflation maybe down 461 00:23:38,960 --> 00:23:41,560 Speaker 1: to five percent or four percent, yeah, that's a big 462 00:23:41,600 --> 00:23:44,240 Speaker 1: move down. But um, I don't look for the Fed 463 00:23:44,600 --> 00:23:47,160 Speaker 1: to blink. I think the FED will continue to hold 464 00:23:47,160 --> 00:23:50,320 Speaker 1: those rates at high level until their confident they're gonna win. 465 00:23:51,160 --> 00:23:54,080 Speaker 1: Hey Brian, um, what about when it comes to quality 466 00:23:54,359 --> 00:23:58,000 Speaker 1: of fixed income? What what are you telling clients right now? 467 00:23:58,040 --> 00:24:01,560 Speaker 1: What should they be focused on? We got we're we're 468 00:24:01,640 --> 00:24:05,680 Speaker 1: up in quality UM, but the yields are looking more 469 00:24:05,720 --> 00:24:08,800 Speaker 1: attracted by the day in a lower quality. That's said, uh, 470 00:24:09,000 --> 00:24:13,119 Speaker 1: buying low quality, buying below investment grade fixed income going 471 00:24:13,280 --> 00:24:16,919 Speaker 1: into a recession is not a good strategy. We're likely 472 00:24:16,960 --> 00:24:19,640 Speaker 1: to see more fear in the markets. See those spreads 473 00:24:19,640 --> 00:24:23,720 Speaker 1: widen out again. I think there's gonna be great buying opportunities. Uh. 474 00:24:23,760 --> 00:24:27,080 Speaker 1: And maybe spreads won't widen out to the seven we've 475 00:24:27,080 --> 00:24:30,800 Speaker 1: seen in past recessions. But I hold off here until 476 00:24:31,440 --> 00:24:34,040 Speaker 1: it's a little bit more certain exactly. You know that 477 00:24:34,119 --> 00:24:36,199 Speaker 1: we've entered into a recession and we maybe get to 478 00:24:36,200 --> 00:24:38,040 Speaker 1: spread wide. So what would be the sign that that 479 00:24:38,040 --> 00:24:39,560 Speaker 1: that that that that's happened. I mean, you need the 480 00:24:39,640 --> 00:24:41,040 Speaker 1: n b ARE to come out and say that we're 481 00:24:41,040 --> 00:24:43,520 Speaker 1: in a recession. No, no, no, no, I just I 482 00:24:43,560 --> 00:24:46,879 Speaker 1: would just like to see the spreads UM, you know, 483 00:24:46,960 --> 00:24:51,080 Speaker 1: widen out six seven hundred uh in those below investment 484 00:24:51,080 --> 00:24:54,200 Speaker 1: grade indicries. To me, that would be the bottom market 485 00:24:54,280 --> 00:24:57,680 Speaker 1: saying listen, we've already got the fear with the yield curve, 486 00:24:57,920 --> 00:25:00,320 Speaker 1: and we get some fear in credit spreads, you know, 487 00:25:00,359 --> 00:25:02,240 Speaker 1: it starts to line up. You do not want to 488 00:25:02,280 --> 00:25:05,480 Speaker 1: wait for a recession to be called or to be obvious, 489 00:25:05,480 --> 00:25:08,480 Speaker 1: we're in a recession, but waiting for those indicators. Um, 490 00:25:08,520 --> 00:25:12,280 Speaker 1: you know, those the cheapening prices, it's almost certainly going 491 00:25:12,320 --> 00:25:14,399 Speaker 1: to happen into a recession. All right, How do you 492 00:25:14,480 --> 00:25:18,600 Speaker 1: put the US versus maybe overseas? Where are the opportunities? Essentially? 493 00:25:18,680 --> 00:25:21,400 Speaker 1: How do you play it? Yeah, I mean we're still 494 00:25:21,560 --> 00:25:24,320 Speaker 1: US centric for sure. I think Overseas has a lot 495 00:25:24,560 --> 00:25:28,960 Speaker 1: more issues and uh, you know, their economies are not 496 00:25:29,760 --> 00:25:33,080 Speaker 1: in as good as shape as ours ours is, uh, 497 00:25:33,240 --> 00:25:37,400 Speaker 1: even if ours is weakening, and we've got energy crises 498 00:25:37,480 --> 00:25:41,800 Speaker 1: looming potentially uh this winter, especially over in Europe. And 499 00:25:42,200 --> 00:25:44,240 Speaker 1: so to me, you know, I would I would definitely 500 00:25:44,320 --> 00:25:47,439 Speaker 1: stay US centric. I know this depends on you know, 501 00:25:47,600 --> 00:25:51,080 Speaker 1: a person's risk tolerance and where they are in their lifetimes. 502 00:25:51,080 --> 00:25:52,720 Speaker 1: But how do you look at the role of fixed 503 00:25:52,760 --> 00:25:55,639 Speaker 1: income in two and a portfolio given that rates have 504 00:25:55,680 --> 00:25:58,840 Speaker 1: been so low for so long? Yeah? Well, I mean 505 00:26:00,000 --> 00:26:02,800 Speaker 1: in the rough year for all asset classes, including uh 506 00:26:02,840 --> 00:26:07,919 Speaker 1: fixed income, but number one fixed income, you know you 507 00:26:08,000 --> 00:26:12,879 Speaker 1: do see less volatility. Uh. So again, as you are 508 00:26:13,040 --> 00:26:16,919 Speaker 1: an investor looking maybe less on the return side and 509 00:26:16,960 --> 00:26:20,560 Speaker 1: more on the uh, you know your your stability, You're 510 00:26:20,560 --> 00:26:23,000 Speaker 1: gonna continue to add more and more fixed income. But 511 00:26:23,040 --> 00:26:26,919 Speaker 1: now things are getting very interesting with these higher yields UM. 512 00:26:27,080 --> 00:26:29,960 Speaker 1: You know, with even very low risk in short term 513 00:26:30,000 --> 00:26:32,520 Speaker 1: being able to get yields that we have not seen 514 00:26:32,520 --> 00:26:35,439 Speaker 1: in some time. And if you are specifically in a 515 00:26:35,520 --> 00:26:39,280 Speaker 1: high tax bracket, you know, muni bonds look particularly attractive 516 00:26:39,320 --> 00:26:43,840 Speaker 1: to UM. Again, the high quality shorter term, Uh, it's 517 00:26:43,920 --> 00:26:45,720 Speaker 1: kind of a no brainer. Hey, do you have a 518 00:26:45,760 --> 00:26:48,200 Speaker 1: quick thought on mortgage rates and what happens. We certainly 519 00:26:48,240 --> 00:26:51,400 Speaker 1: saw homebuilders a little bit of a rally in today's 520 00:26:51,760 --> 00:26:54,159 Speaker 1: overall downward equity trade, and that was because of some 521 00:26:54,160 --> 00:26:58,320 Speaker 1: of the optimism about longer term inflationary expectations. As we 522 00:26:58,359 --> 00:27:02,280 Speaker 1: talked about some thoughts on mortgage rates just quickly, again, 523 00:27:02,560 --> 00:27:08,080 Speaker 1: they're gonna remain elevated. That market is going to remain difficult. 524 00:27:08,480 --> 00:27:11,240 Speaker 1: It's going to be difficult for people to afford the affordability. 525 00:27:11,720 --> 00:27:14,320 Speaker 1: But again kind of with my intermediate to longer term 526 00:27:14,320 --> 00:27:17,680 Speaker 1: out look, I do expect the inflation expectations and eventually 527 00:27:17,760 --> 00:27:21,480 Speaker 1: inflation to move lower and that should uh cause those 528 00:27:21,520 --> 00:27:23,760 Speaker 1: longer term rates to start to take a little bit 529 00:27:23,800 --> 00:27:26,600 Speaker 1: lower and that will actually bring down mortgage rates. All Right, 530 00:27:26,640 --> 00:27:28,720 Speaker 1: we gotta run. Hey, have a great weekend. Brian Railing, 531 00:27:28,760 --> 00:27:31,040 Speaker 1: he's head of Global fixed Income Strategy at Wells Fargo 532 00:27:31,080 --> 00:27:34,840 Speaker 1: Investment Institute, joining us on the phone from St. Louis 533 00:27:35,080 --> 00:27:39,080 Speaker 1: on this Friday. Thanks for listening to Bloomberg Business Week. 534 00:27:39,200 --> 00:27:42,680 Speaker 1: Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, 535 00:27:42,800 --> 00:27:44,479 Speaker 1: and you can also listen to our radio show at 536 00:27:44,480 --> 00:27:47,560 Speaker 1: two pm Eastern on Bloomberg Radio or watch us on YouTube. 537 00:27:47,680 --> 00:27:49,120 Speaker 1: Starch to Bloomberg Global News