1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,400 Speaker 2: with Lisa Bromwitz and a Marie Hordern. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:37,159 Speaker 2: Bloomberg Terminal and the Bloomberg Business App. Joining us now, 10 00:00:37,240 --> 00:00:40,519 Speaker 2: Emily Ryblands of John Hancock. Emily, good morning. We have 11 00:00:40,600 --> 00:00:43,879 Speaker 2: been whibsored from headline to headline, from data point to 12 00:00:43,960 --> 00:00:44,480 Speaker 2: data point. 13 00:00:44,560 --> 00:00:45,520 Speaker 1: Is this one any different? 14 00:00:45,720 --> 00:00:47,760 Speaker 3: I mean, it's just remarkable. And one of the things 15 00:00:47,760 --> 00:00:49,440 Speaker 3: that we've been watching closely. 16 00:00:49,120 --> 00:00:50,560 Speaker 4: Is the moves in the US dollar. 17 00:00:50,760 --> 00:00:52,360 Speaker 3: One of the things that we think is started to 18 00:00:52,360 --> 00:00:55,680 Speaker 3: constrain equity markets so far this year, as you've seen 19 00:00:55,720 --> 00:00:58,600 Speaker 3: the significant strengthening in the US dollar, you think about 20 00:00:58,680 --> 00:01:02,160 Speaker 3: large cap equities which or just carrying the crown of leadership. 21 00:01:02,600 --> 00:01:05,800 Speaker 3: Last year, forty percent of their revenues are derived from abroad. 22 00:01:05,880 --> 00:01:08,280 Speaker 4: So that could be a significant. 23 00:01:07,520 --> 00:01:10,039 Speaker 3: Issue for large cap stocks this year. So I think 24 00:01:10,080 --> 00:01:13,120 Speaker 3: this morning you're seeing a bit of a modest pullback 25 00:01:13,120 --> 00:01:15,480 Speaker 3: in the dollar and that's probably helping risk outs as 26 00:01:15,720 --> 00:01:16,200 Speaker 3: a little bit. 27 00:01:16,280 --> 00:01:19,360 Speaker 2: Mike Wilson Molkan Stanley said, right, strife beta and what 28 00:01:19,360 --> 00:01:22,199 Speaker 2: you're seeing in foreign exchange strife's dispersion, are you starting 29 00:01:22,200 --> 00:01:23,920 Speaker 2: to see that beneath the surface on the S and. 30 00:01:23,920 --> 00:01:26,119 Speaker 3: P we're seeing a little bit of a broadening out 31 00:01:26,160 --> 00:01:29,360 Speaker 3: in market leadership. Leadership is a tough word, I guess right. 32 00:01:29,200 --> 00:01:31,240 Speaker 4: Now where we're seeing some pressure. 33 00:01:30,680 --> 00:01:33,440 Speaker 3: On markets, But what we typically see in these environments 34 00:01:33,480 --> 00:01:37,520 Speaker 3: where bond yields are backing up inflationary pressures or potential 35 00:01:37,600 --> 00:01:38,759 Speaker 3: inflationary pressures. 36 00:01:38,800 --> 00:01:40,119 Speaker 4: To your point our. 37 00:01:40,040 --> 00:01:42,840 Speaker 3: Building is things like value stocks start to do a 38 00:01:42,840 --> 00:01:43,360 Speaker 3: bit better. 39 00:01:43,480 --> 00:01:44,640 Speaker 4: Small caps get hurt. 40 00:01:44,680 --> 00:01:47,880 Speaker 3: Of course, they have the highest levels of indebtedent indebtedness 41 00:01:47,920 --> 00:01:49,880 Speaker 3: which can be an issue when the cost of capital 42 00:01:50,000 --> 00:01:53,840 Speaker 3: is elevated. But I think value equities, in particular areas 43 00:01:53,920 --> 00:01:58,640 Speaker 3: like energy, utilities, infrastructure related assets, those are lower beta 44 00:01:58,680 --> 00:02:02,280 Speaker 3: than more defensive business is they have dividends and they 45 00:02:02,320 --> 00:02:05,600 Speaker 3: have some element of inflation protection here that we think 46 00:02:05,720 --> 00:02:08,440 Speaker 3: might be a creative to investors into this year if 47 00:02:08,440 --> 00:02:12,280 Speaker 3: we see maybe another twenty twenty two type playbook. 48 00:02:12,760 --> 00:02:14,880 Speaker 5: This is a confusing moment. This is a confusing for 49 00:02:14,880 --> 00:02:15,359 Speaker 5: all of us. 50 00:02:15,440 --> 00:02:16,000 Speaker 4: It's hard to. 51 00:02:15,960 --> 00:02:18,440 Speaker 5: Really understand where the load star is at a time 52 00:02:18,480 --> 00:02:21,440 Speaker 5: where there's so many different narratives that go completely contrary 53 00:02:21,440 --> 00:02:23,160 Speaker 5: to each other. I want to go back to six 54 00:02:23,240 --> 00:02:26,160 Speaker 5: am this morning when we got nfib A small business 55 00:02:26,160 --> 00:02:28,760 Speaker 5: optimism which came in at the highest rate going back 56 00:02:28,800 --> 00:02:31,240 Speaker 5: to twenty and eighteen to one hundred and five, really 57 00:02:31,280 --> 00:02:34,720 Speaker 5: superseding expectations. Do you want to be more levered to 58 00:02:34,760 --> 00:02:39,160 Speaker 5: a growth story or more levered to a conservative portfolio, 59 00:02:39,160 --> 00:02:43,320 Speaker 5: one that is more protective and levered to maybe downside risk. 60 00:02:43,440 --> 00:02:44,320 Speaker 4: Right now, we. 61 00:02:44,280 --> 00:02:47,679 Speaker 3: Would say a more conservative portfolio right now. What we're 62 00:02:47,720 --> 00:02:51,480 Speaker 3: seeing right now is the biggest catchup in history between 63 00:02:51,639 --> 00:02:54,520 Speaker 3: soft data and hard data. So the hard data had 64 00:02:54,520 --> 00:02:56,640 Speaker 3: been coming in well, things like the labor market. 65 00:02:56,680 --> 00:02:59,040 Speaker 4: Of course, we added two hundred and fifty thousand new 66 00:02:59,120 --> 00:03:00,200 Speaker 4: jobs last month. 67 00:03:00,280 --> 00:03:02,360 Speaker 3: But when we look at this, soft data had really 68 00:03:02,400 --> 00:03:05,040 Speaker 3: been struggling, and then boom, you get the results of 69 00:03:05,080 --> 00:03:07,880 Speaker 3: the election, and you have this massive amount of optimism 70 00:03:07,919 --> 00:03:11,079 Speaker 3: and sentiment just pervading the markets. So we want to 71 00:03:11,120 --> 00:03:13,840 Speaker 3: be mindful of here of watching this kind of mini 72 00:03:13,960 --> 00:03:18,160 Speaker 3: bump in reacceleration and animal spirits and sort of in 73 00:03:18,200 --> 00:03:21,040 Speaker 3: the way that business owners and people are feeling in general. 74 00:03:21,120 --> 00:03:23,760 Speaker 3: Of course, there's a huge divergence between Republicans that are 75 00:03:23,760 --> 00:03:26,440 Speaker 3: responding to those surveys and Democrats that are responding to 76 00:03:26,480 --> 00:03:28,840 Speaker 3: those surveys, so we want to be mindful of that. 77 00:03:29,280 --> 00:03:32,080 Speaker 3: We may be seeing a modest reacceleration. 78 00:03:31,680 --> 00:03:34,280 Speaker 4: In the economy, but the challenges. 79 00:03:33,720 --> 00:03:35,440 Speaker 3: And you guys have talked a lot about this on 80 00:03:35,480 --> 00:03:39,080 Speaker 3: the show, is kind of the self limiting dynamic of 81 00:03:39,120 --> 00:03:41,520 Speaker 3: this backup and treasure yields that we're seeing on this 82 00:03:41,640 --> 00:03:45,760 Speaker 3: potential reacceleration and growth. Borrowing costs are high, mortgage rates 83 00:03:45,760 --> 00:03:50,000 Speaker 3: are above seven percent, Mortgage applications are plunging, inventories are up. 84 00:03:50,280 --> 00:03:52,840 Speaker 4: Housing is the economic. 85 00:03:52,400 --> 00:03:54,760 Speaker 3: Cycle, and if we start to see the shelter component 86 00:03:54,800 --> 00:03:58,880 Speaker 3: of CPI decelerating, that could speak volumes to the process 87 00:03:59,280 --> 00:03:59,960 Speaker 3: asset dynamic. 88 00:04:00,280 --> 00:04:02,480 Speaker 5: But this story has been one that's consistent over the 89 00:04:02,520 --> 00:04:05,200 Speaker 5: past couple of years, and it's been a frozen housing 90 00:04:05,280 --> 00:04:07,960 Speaker 5: market and that's only led to higher prices because everything 91 00:04:07,960 --> 00:04:10,760 Speaker 5: else is doing okay and there hasn't been enough supply. 92 00:04:11,320 --> 00:04:13,560 Speaker 5: How much conviction do you have in this call of 93 00:04:13,560 --> 00:04:17,520 Speaker 5: a slowdown to go headlong into longer term treasuries at 94 00:04:17,560 --> 00:04:19,760 Speaker 5: a time where other people are saying, you know, you 95 00:04:19,839 --> 00:04:20,440 Speaker 5: might want to wait. 96 00:04:20,360 --> 00:04:20,800 Speaker 4: A little bit. 97 00:04:20,880 --> 00:04:24,120 Speaker 3: Well, it's not headlong, so we still haven't been overweight duration. 98 00:04:24,279 --> 00:04:26,680 Speaker 3: We've just suggested that investors that are sitting at the 99 00:04:26,680 --> 00:04:29,520 Speaker 3: short end of the curve leg into the intermediate part 100 00:04:29,560 --> 00:04:32,200 Speaker 3: of the curve with a benchmark level of duration, and 101 00:04:32,279 --> 00:04:34,039 Speaker 3: right now the way the yeal curve is slow, if 102 00:04:34,080 --> 00:04:36,560 Speaker 3: we now have the potential for rolldown as well, with 103 00:04:36,640 --> 00:04:39,320 Speaker 3: the short end of the curve actually being significantly lower 104 00:04:39,640 --> 00:04:41,400 Speaker 3: than the long end of the curve. I think what's 105 00:04:41,480 --> 00:04:45,720 Speaker 3: notable about the housing market is you're seeing inventories up 106 00:04:45,760 --> 00:04:48,320 Speaker 3: about thirty percent year over year, and a lot of 107 00:04:48,320 --> 00:04:51,400 Speaker 3: that's concentrated in the hot spots. Like remember when everybody 108 00:04:51,480 --> 00:04:54,599 Speaker 3: left Manhattan during the pandemic, or the West Coast and 109 00:04:54,640 --> 00:04:57,360 Speaker 3: they went to Austin, and they went to Nashville, by 110 00:04:57,360 --> 00:04:59,360 Speaker 3: the way, Great Cities, they went to Colorado. 111 00:05:00,000 --> 00:05:01,080 Speaker 4: So what's happening now. 112 00:05:01,000 --> 00:05:03,599 Speaker 3: Is Manhattan based companies are saying you have a job 113 00:05:03,640 --> 00:05:04,120 Speaker 3: in New York. 114 00:05:04,160 --> 00:05:06,080 Speaker 4: Gu's where you have to go New York. 115 00:05:06,440 --> 00:05:09,440 Speaker 3: So you're starting to see all that built up inventory 116 00:05:09,520 --> 00:05:12,159 Speaker 3: come back online in some of those areas as people 117 00:05:12,240 --> 00:05:13,600 Speaker 3: migrate back to the major city. 118 00:05:13,720 --> 00:05:15,520 Speaker 6: Family do have a call on how high you think 119 00:05:15,560 --> 00:05:17,920 Speaker 6: we could see the ten years. People are debating whether 120 00:05:18,000 --> 00:05:21,080 Speaker 6: or not we actually will hit and consustain five percent. 121 00:05:21,520 --> 00:05:24,520 Speaker 3: Yeah, so five percent, I think is about the area 122 00:05:24,760 --> 00:05:28,279 Speaker 3: where you kind of see that self limiting mechanism creep in. 123 00:05:28,400 --> 00:05:31,920 Speaker 3: We're watching bond yields of course overseas, which you're going 124 00:05:31,960 --> 00:05:34,560 Speaker 3: to see sort of an element of tracking there. And 125 00:05:34,640 --> 00:05:37,560 Speaker 3: if all these overseas markets also have a harder time 126 00:05:37,600 --> 00:05:40,839 Speaker 3: adjusting higher rates, you could see some downward pressure on 127 00:05:40,920 --> 00:05:42,960 Speaker 3: treasury yields from there. But let's just do do we 128 00:05:42,960 --> 00:05:44,560 Speaker 3: want to do a little bond math. I know it's 129 00:05:44,600 --> 00:05:45,919 Speaker 3: really early in the morning. 130 00:05:45,960 --> 00:05:48,719 Speaker 4: Lisave, like, so think about say. 131 00:05:48,600 --> 00:05:50,719 Speaker 3: Yields went back up to five and a half percent, 132 00:05:51,200 --> 00:05:53,719 Speaker 3: You're still not seeing a negative return on the aggregate 133 00:05:53,760 --> 00:05:54,800 Speaker 3: bond index. 134 00:05:54,560 --> 00:05:56,279 Speaker 4: Because the yield is there. 135 00:05:56,560 --> 00:05:58,720 Speaker 3: We're looking at yields that are above five percent on 136 00:05:58,839 --> 00:06:01,200 Speaker 3: high quality bonds right now. You might have to get 137 00:06:01,240 --> 00:06:04,120 Speaker 3: paid to wait on the duration front. If yields sort 138 00:06:04,160 --> 00:06:07,480 Speaker 3: of chop around from here. But think about what equity 139 00:06:07,520 --> 00:06:10,080 Speaker 3: markets might do in an environment where we're at a 140 00:06:10,120 --> 00:06:12,400 Speaker 3: five and a half percent treasury. I don't think they 141 00:06:12,400 --> 00:06:14,719 Speaker 3: would like it. So I think the fact that you're 142 00:06:14,800 --> 00:06:17,000 Speaker 3: flat on bonds you might want to take that. 143 00:06:17,040 --> 00:06:18,920 Speaker 2: I'm not sure what Lisa's started, but Kevin Gordon, the 144 00:06:18,960 --> 00:06:21,520 Speaker 2: Schwab has ridden in and said it's Bob Arra bonds 145 00:06:21,560 --> 00:06:23,560 Speaker 2: are ready back and ready awesome. 146 00:06:23,720 --> 00:06:24,120 Speaker 4: I love it. 147 00:06:24,120 --> 00:06:25,480 Speaker 2: I'm not sure that's catching on either. 148 00:06:25,520 --> 00:06:26,000 Speaker 4: More of this. 149 00:06:26,080 --> 00:06:28,240 Speaker 2: I got another message as well on the Bloomberg terminal. 150 00:06:28,440 --> 00:06:31,520 Speaker 2: Turn her Bloomberg off and tell it to start her vacation. Now, 151 00:06:32,120 --> 00:06:33,040 Speaker 2: what's this vacation? 152 00:06:33,120 --> 00:06:35,719 Speaker 4: Hey, hey, I know you really want me to go 153 00:06:35,760 --> 00:06:38,479 Speaker 4: on vacation. I'll happily lease. Thank you so much, it's 154 00:06:38,480 --> 00:06:39,400 Speaker 4: been really real. 155 00:06:39,360 --> 00:06:51,560 Speaker 2: Emily, appreciate your time's going to see you. Just turned 156 00:06:51,560 --> 00:06:54,520 Speaker 2: to the rush of Ukraine Warresident elect Donald Trump continuing 157 00:06:54,560 --> 00:06:57,600 Speaker 2: his push to increase defense spending. The German chancellor I'll 158 00:06:57,600 --> 00:07:01,159 Speaker 2: have Sheltz, rejecting Trump's demands. That night, Allies increased defense 159 00:07:01,200 --> 00:07:05,520 Speaker 2: spending to five from two percent of GDP joining US now. 160 00:07:05,720 --> 00:07:10,360 Speaker 2: Armin Papager, CEO of RAEMATAU, a German defense and engineering group. 161 00:07:10,440 --> 00:07:11,800 Speaker 2: I'm in good morning, it's going to see you in 162 00:07:11,800 --> 00:07:12,200 Speaker 2: New York. 163 00:07:12,240 --> 00:07:12,800 Speaker 1: Good morning. 164 00:07:12,840 --> 00:07:14,960 Speaker 2: It's got to start with a very serious topic and 165 00:07:15,160 --> 00:07:17,200 Speaker 2: from there the topics get even more serious. But let's 166 00:07:17,240 --> 00:07:19,960 Speaker 2: start with you first of all, said personally, according to 167 00:07:20,160 --> 00:07:23,680 Speaker 2: multiple US and Western officials, the Russian government plan to 168 00:07:23,720 --> 00:07:25,720 Speaker 2: assassinate you. This has been in the news over a 169 00:07:25,760 --> 00:07:28,160 Speaker 2: number of months. Now, can we start with that and 170 00:07:28,240 --> 00:07:31,000 Speaker 2: taught you about how things are going personally? When were 171 00:07:31,080 --> 00:07:32,920 Speaker 2: you told about that and by who? 172 00:07:33,880 --> 00:07:38,080 Speaker 1: It's about one year ago and the information we've got 173 00:07:38,400 --> 00:07:43,320 Speaker 1: from the US from FBI, and I'm very happy about 174 00:07:43,360 --> 00:07:47,000 Speaker 1: that that they very early gave us that information. German 175 00:07:47,000 --> 00:07:50,480 Speaker 1: government took that information and the protection level now is 176 00:07:50,600 --> 00:07:53,440 Speaker 1: very high. I have the same protection level than the chancellor. 177 00:07:53,760 --> 00:07:56,280 Speaker 2: Wow, you have the same security protections as the chancellor. 178 00:07:56,280 --> 00:07:58,320 Speaker 2: I'll f Sholtz and you feel secure. 179 00:07:58,680 --> 00:07:59,520 Speaker 1: I feel secure. 180 00:08:00,080 --> 00:08:01,640 Speaker 2: So the reason why you wanted to stay in the 181 00:08:01,720 --> 00:08:03,480 Speaker 2: job even though that threat was hanging over you. 182 00:08:04,160 --> 00:08:06,400 Speaker 1: I love that job. We have to work. We have 183 00:08:06,520 --> 00:08:08,920 Speaker 1: to to work for freedom and we have to work 184 00:08:08,960 --> 00:08:12,040 Speaker 1: for democracy, and nobody can stop. 185 00:08:11,840 --> 00:08:15,880 Speaker 2: Us, including Russia. Let's talk about the challenge that comes 186 00:08:15,920 --> 00:08:18,440 Speaker 2: from Russia now and the push from the incoming president 187 00:08:18,960 --> 00:08:21,440 Speaker 2: to push defense spending perhaps as high as five percent 188 00:08:21,520 --> 00:08:23,240 Speaker 2: is GDP, and we know it's been a struggle for 189 00:08:23,280 --> 00:08:25,560 Speaker 2: many NATAL members to get to two percent over the 190 00:08:25,640 --> 00:08:28,280 Speaker 2: last number of years. Do you think that's doable to 191 00:08:28,320 --> 00:08:29,640 Speaker 2: get to five percent of GDP? 192 00:08:30,600 --> 00:08:33,640 Speaker 1: I think five percent. It's a big value. Five percent, 193 00:08:33,880 --> 00:08:36,880 Speaker 1: and I believe that if we first of all get 194 00:08:36,880 --> 00:08:39,120 Speaker 1: to three percent, it would be it would be great 195 00:08:39,160 --> 00:08:43,040 Speaker 1: because over the last twenty five years, the Europeans did 196 00:08:43,080 --> 00:08:46,240 Speaker 1: not invest in US money in security. I understand one 197 00:08:46,280 --> 00:08:49,760 Speaker 1: hundred percent President Trump, He's right that Europe has to 198 00:08:49,800 --> 00:08:52,400 Speaker 1: spend more into the Western security and we have to 199 00:08:52,440 --> 00:08:53,440 Speaker 1: do it well. 200 00:08:53,440 --> 00:08:55,720 Speaker 6: My reporting over the summer was actually they were looking 201 00:08:55,760 --> 00:08:58,320 Speaker 6: at three percent, so potentially this falls down to anywhere 202 00:08:58,320 --> 00:09:01,480 Speaker 6: from three to five. Germany, though, is only spending two percent. 203 00:09:01,559 --> 00:09:03,319 Speaker 6: Do you think they can spend more on defense? 204 00:09:03,800 --> 00:09:06,480 Speaker 1: I think they can, and they think they have to 205 00:09:06,520 --> 00:09:09,079 Speaker 1: do because at the end of the day, Germany is 206 00:09:09,120 --> 00:09:12,920 Speaker 1: the biggest economic in Europe and they have to help 207 00:09:13,000 --> 00:09:14,360 Speaker 1: her to make Europe safe. 208 00:09:14,760 --> 00:09:17,200 Speaker 6: We just heard from Mark Rutta last month talking about 209 00:09:17,200 --> 00:09:20,359 Speaker 6: it's time for Europe to shift to a wartime mindset. 210 00:09:20,559 --> 00:09:24,280 Speaker 6: For decades, Europe decided to curb their defense spending and 211 00:09:24,360 --> 00:09:29,319 Speaker 6: really outsource their defense to United States. That failed, obviously 212 00:09:29,400 --> 00:09:32,840 Speaker 6: when Russia invaded Ukraine. Do you think Europe is still 213 00:09:32,920 --> 00:09:35,160 Speaker 6: unprepared for the war that's on their doorstep. 214 00:09:35,880 --> 00:09:38,640 Speaker 1: We prepare ourselves and if you see what we do 215 00:09:38,679 --> 00:09:42,600 Speaker 1: in rymetal is we invested over the last two years 216 00:09:42,760 --> 00:09:47,080 Speaker 1: more than seven billion to build up the capacities and 217 00:09:47,120 --> 00:09:50,120 Speaker 1: that's very important. And in between, I am able to 218 00:09:50,160 --> 00:09:52,800 Speaker 1: produce one point one million's artillery rounds, which is more 219 00:09:52,840 --> 00:09:55,040 Speaker 1: than the US is doing at the moment. So I 220 00:09:55,080 --> 00:09:57,439 Speaker 1: think we prepare ourselves, but we have to do more. 221 00:09:57,600 --> 00:10:01,760 Speaker 6: You also have production facilities inside Ukraine? Yes, how quickly 222 00:10:01,800 --> 00:10:05,359 Speaker 6: will we be able to get ammunition production going inside. 223 00:10:04,960 --> 00:10:06,680 Speaker 1: The country in twelve months time? 224 00:10:06,920 --> 00:10:09,400 Speaker 6: In twelve months time, there is potential that in twelve 225 00:10:09,400 --> 00:10:12,160 Speaker 6: months time, according to President elect, this war could be over. 226 00:10:12,600 --> 00:10:16,360 Speaker 6: Do you first see a scenario where Puchin will agree 227 00:10:16,800 --> 00:10:19,240 Speaker 6: to some sort of ceasefire in Ukraine? 228 00:10:19,800 --> 00:10:23,280 Speaker 1: Nobody knows that, and as you know, President Trump said 229 00:10:23,320 --> 00:10:25,960 Speaker 1: he's able to do it very fast. We will see 230 00:10:26,000 --> 00:10:29,440 Speaker 1: if that really will happen. But even if that will happen, 231 00:10:29,520 --> 00:10:32,959 Speaker 1: we need a lot more defense goods because at the moment, 232 00:10:33,000 --> 00:10:36,120 Speaker 1: as you know, the stocks are empty, especially for ammunitions. 233 00:10:36,120 --> 00:10:39,440 Speaker 1: But although the tanks, we have not enough tanks, we 234 00:10:39,559 --> 00:10:41,360 Speaker 1: cannot protect ourselves. 235 00:10:41,760 --> 00:10:45,320 Speaker 6: What about the incoming administration in terms of communication, you 236 00:10:45,400 --> 00:10:48,720 Speaker 6: are really the massive player in Europe, almost the only 237 00:10:48,760 --> 00:10:51,200 Speaker 6: game in town when it comes to the European defense 238 00:10:51,240 --> 00:10:55,280 Speaker 6: industrial complex. Are you talking to the incoming Trump administration? 239 00:10:55,800 --> 00:10:58,720 Speaker 1: We start to talk to that and I will talk 240 00:10:58,880 --> 00:11:02,720 Speaker 1: very very early with a Trump administration because we have 241 00:11:02,800 --> 00:11:05,120 Speaker 1: to do it. And the reason is that I also 242 00:11:05,160 --> 00:11:07,760 Speaker 1: have a lot of investments here in US, and I 243 00:11:07,840 --> 00:11:11,040 Speaker 1: invested some months ago more than one billion to buy 244 00:11:11,040 --> 00:11:14,880 Speaker 1: a company here because I believe in the transatlantic relationship. 245 00:11:15,480 --> 00:11:18,520 Speaker 6: Do you think that you can partner with this incoming administration? 246 00:11:18,640 --> 00:11:21,480 Speaker 6: And how was the communication in partnership with the buy 247 00:11:21,520 --> 00:11:22,240 Speaker 6: An administration. 248 00:11:22,760 --> 00:11:25,040 Speaker 1: It was good. But at the end of the day, 249 00:11:25,160 --> 00:11:28,040 Speaker 1: we as a company, we must be politically, let me say, 250 00:11:28,080 --> 00:11:30,520 Speaker 1: a little bit independent, and we have to work with 251 00:11:30,559 --> 00:11:34,200 Speaker 1: all governments and that's very important. And I believe that 252 00:11:34,240 --> 00:11:37,720 Speaker 1: we really can work with the Trump administration because I 253 00:11:37,800 --> 00:11:40,800 Speaker 1: believe that he is right and the pressure that he 254 00:11:40,880 --> 00:11:43,280 Speaker 1: is creating at the moment is good for Europe. 255 00:11:44,000 --> 00:11:47,680 Speaker 5: He's right with respect to spending more on defense, but 256 00:11:47,880 --> 00:11:50,760 Speaker 5: is he right about the US retracting some of its 257 00:11:50,760 --> 00:11:54,040 Speaker 5: spending on Ukraine and really leaving it to the European 258 00:11:54,160 --> 00:11:56,160 Speaker 5: Union to finance the efforts there. 259 00:11:56,559 --> 00:11:59,160 Speaker 1: I believe that we have we have to help Ukraine. 260 00:11:59,600 --> 00:12:03,240 Speaker 1: If Ukraine will fall, we will have a big problem 261 00:12:03,240 --> 00:12:05,839 Speaker 1: in Europe. If we have a big problem in Europe, 262 00:12:05,880 --> 00:12:10,600 Speaker 1: because I believe that Putin will not stop with the 263 00:12:10,720 --> 00:12:14,959 Speaker 1: Ukrainian on the Ukrainian border, So what about the Baltics, 264 00:12:15,360 --> 00:12:19,640 Speaker 1: what about Georgia, what about Moldavia and all the other things? 265 00:12:20,400 --> 00:12:24,720 Speaker 1: And I believe that it'd be look very, very helpful 266 00:12:24,760 --> 00:12:27,560 Speaker 1: if the US and Europe is working together in this area, 267 00:12:27,600 --> 00:12:30,920 Speaker 1: and at the moment Europe needs us because the resources 268 00:12:30,920 --> 00:12:32,199 Speaker 1: are not good enough in Europe. 269 00:12:32,280 --> 00:12:32,920 Speaker 4: Do you think there is. 270 00:12:32,920 --> 00:12:37,080 Speaker 5: A political will in Europe to offset any decrease in 271 00:12:37,160 --> 00:12:41,000 Speaker 5: financing from the United States At a time of political turmoil, 272 00:12:41,040 --> 00:12:44,520 Speaker 5: where there's even upset in leadership in Germany and real 273 00:12:44,600 --> 00:12:47,520 Speaker 5: questions around how much the public wants to keep financing this. 274 00:12:48,400 --> 00:12:50,760 Speaker 1: I believe that the new government in Germany, and as 275 00:12:50,800 --> 00:12:54,640 Speaker 1: you know, we have election in seven eight weeks, that 276 00:12:54,679 --> 00:12:57,880 Speaker 1: the new government will create a very strong contact to 277 00:12:58,040 --> 00:13:02,480 Speaker 1: the Trump administration, and I believe that they want to 278 00:13:02,559 --> 00:13:05,199 Speaker 1: work out a good plan and to make a deal together. 279 00:13:05,400 --> 00:13:08,800 Speaker 1: Europe and the US has to make a deal for security. 280 00:13:09,080 --> 00:13:11,600 Speaker 5: You talked about how you're investing in the United States, 281 00:13:11,960 --> 00:13:14,480 Speaker 5: and I'm wondering how important it is to get a 282 00:13:14,480 --> 00:13:18,239 Speaker 5: foothold in the US to get around any potential tariffs 283 00:13:18,320 --> 00:13:20,640 Speaker 5: or other types of issues that come down the pike. 284 00:13:21,280 --> 00:13:24,960 Speaker 1: Very important, very important. I understand all the issues that 285 00:13:25,000 --> 00:13:27,200 Speaker 1: the US has, and I said, Okay, we want to 286 00:13:27,200 --> 00:13:30,200 Speaker 1: make money, and President Trump wants to make deals, and 287 00:13:30,240 --> 00:13:33,520 Speaker 1: he's right about that, and we have to take care 288 00:13:33,559 --> 00:13:35,800 Speaker 1: about that. That's the reason that we are investing also 289 00:13:35,840 --> 00:13:36,319 Speaker 1: in the US. 290 00:13:36,400 --> 00:13:39,560 Speaker 5: Are you also ratcheting back certain businesses in Europe that 291 00:13:39,640 --> 00:13:41,280 Speaker 5: you think are going to be more exposed. 292 00:13:41,760 --> 00:13:44,240 Speaker 1: We grow at the moment forty percent per year, so 293 00:13:44,280 --> 00:13:46,840 Speaker 1: we can grow in Europe and we have to grow 294 00:13:46,840 --> 00:13:47,319 Speaker 1: in the US. 295 00:13:47,800 --> 00:13:49,640 Speaker 2: The President wants to make Dale's. Do you want to 296 00:13:49,640 --> 00:13:52,040 Speaker 2: make Dale's? Do you think we need some consolidation in 297 00:13:52,120 --> 00:13:53,319 Speaker 2: European defense. 298 00:13:53,400 --> 00:13:56,160 Speaker 1: Yes, it's I think it's possible and I think it's 299 00:13:56,200 --> 00:13:59,840 Speaker 1: important to do it. As always said, Europe needs also 300 00:14:01,360 --> 00:14:04,440 Speaker 1: a bigger, bigger machine in defense, and what I believe 301 00:14:04,559 --> 00:14:07,920 Speaker 1: is we need a company which makes forty billion per year. 302 00:14:08,360 --> 00:14:10,000 Speaker 1: We are at the moment only on the level of 303 00:14:10,040 --> 00:14:12,080 Speaker 1: ten billion, but we will grow over the next years 304 00:14:12,080 --> 00:14:15,880 Speaker 1: to twenty billion, maybe more. And the backlock is a 305 00:14:15,960 --> 00:14:19,040 Speaker 1: very good one. So I believe that consolidation is very important. 306 00:14:19,040 --> 00:14:22,200 Speaker 2: You can grow organically to twenty s Yes, acquisitions, have 307 00:14:22,280 --> 00:14:23,080 Speaker 2: you got any in mind? 308 00:14:23,920 --> 00:14:27,000 Speaker 1: Yes, we have a lot of You have a lot 309 00:14:27,040 --> 00:14:30,240 Speaker 1: in mind because, as you said, over the last two 310 00:14:30,320 --> 00:14:34,840 Speaker 1: years we bought the lot Lock Performance here in the 311 00:14:34,920 --> 00:14:38,800 Speaker 1: US and the Spanish company. We invested two point two 312 00:14:38,800 --> 00:14:41,480 Speaker 1: billion in that, and we want to invest more and 313 00:14:41,600 --> 00:14:42,600 Speaker 1: we have more firepower. 314 00:14:42,600 --> 00:14:43,640 Speaker 2: Have you spoken to Bia. 315 00:14:45,080 --> 00:14:47,280 Speaker 1: We always speak with PAE, But i'm. 316 00:14:47,120 --> 00:14:48,680 Speaker 2: About a possible acquisition. 317 00:14:49,080 --> 00:14:51,800 Speaker 1: No, we didn't speak about to merge or other things. 318 00:14:51,840 --> 00:14:52,760 Speaker 2: Would you be open to that? 319 00:14:54,400 --> 00:14:56,240 Speaker 1: At the moment, there is no discussion, but. 320 00:14:56,240 --> 00:14:57,080 Speaker 2: Would you be open to it? 321 00:14:57,080 --> 00:15:00,119 Speaker 1: Would that make sense? I'm always open if it makes sense. 322 00:15:00,040 --> 00:15:00,960 Speaker 2: And does it make sense? 323 00:15:01,920 --> 00:15:04,000 Speaker 1: I'm not sure, but we have to analyze that. 324 00:15:04,480 --> 00:15:06,720 Speaker 6: I want to go back to how John really started 325 00:15:06,760 --> 00:15:09,520 Speaker 6: this topic, the fact that your life was put at risk. 326 00:15:09,560 --> 00:15:11,840 Speaker 6: You're basically on a Russian hit list, but it goes 327 00:15:11,920 --> 00:15:16,040 Speaker 6: beyond that. Dmitry Peskov last year said your company is 328 00:15:16,080 --> 00:15:19,760 Speaker 6: called a legitimate target. How is a company are you 329 00:15:19,880 --> 00:15:23,680 Speaker 6: responding to Russia's hybrid warfare on the continent. 330 00:15:24,480 --> 00:15:26,840 Speaker 1: First of all, we have a very very good cyber center. 331 00:15:26,880 --> 00:15:29,400 Speaker 1: That's the most important thing. That cyber attexts will not 332 00:15:29,480 --> 00:15:32,040 Speaker 1: come in. And the second point is we are not 333 00:15:32,120 --> 00:15:34,000 Speaker 1: in war at the moment. I have not the air 334 00:15:34,040 --> 00:15:39,640 Speaker 1: defense and missiles around my factories. But if there is 335 00:15:39,680 --> 00:15:43,120 Speaker 1: a higher potential that something will grow up, then we 336 00:15:43,360 --> 00:15:45,840 Speaker 1: have to do that. For sure. We will protect our 337 00:15:45,920 --> 00:15:47,600 Speaker 1: factories and we have to do it right. 338 00:15:47,640 --> 00:15:52,160 Speaker 6: And you feel like the German government is a partner 339 00:15:52,200 --> 00:15:52,720 Speaker 6: with you in this. 340 00:15:53,040 --> 00:15:57,000 Speaker 1: Absolutely, absolutely, we are absolutely fighting shoulder on shoulder. 341 00:15:57,360 --> 00:16:00,760 Speaker 6: And when it comes to this assassinization attempt on your life, 342 00:16:00,800 --> 00:16:02,960 Speaker 6: do you believe it came from Vladimir Putin himself? 343 00:16:03,840 --> 00:16:07,040 Speaker 1: I don't know. I don't know, and I at the 344 00:16:07,120 --> 00:16:10,560 Speaker 1: end of the day, the information, as I told you, 345 00:16:10,640 --> 00:16:14,320 Speaker 1: came from secret services, and we have to take care 346 00:16:14,400 --> 00:16:17,560 Speaker 1: about that, and the government in Germany takes care about it. 347 00:16:17,680 --> 00:16:20,640 Speaker 1: Not only the German government, also government if I travel 348 00:16:20,680 --> 00:16:23,400 Speaker 1: to other countries, although that governments take care about that. 349 00:16:23,920 --> 00:16:25,160 Speaker 1: I'm very grateful about that. 350 00:16:25,440 --> 00:16:27,360 Speaker 2: You've been very gracious with your time, sir, and we 351 00:16:27,400 --> 00:16:29,600 Speaker 2: appreciate it this morning. Thank you very much, thank you, 352 00:16:29,720 --> 00:16:43,840 Speaker 2: thank you. I'm in Pampaca, the Ramata cup, Sonia masking 353 00:16:43,880 --> 00:16:46,480 Speaker 2: a ubs Chiant just Nata how Parsida's question Sonic and 354 00:16:46,520 --> 00:16:50,080 Speaker 2: mornech Co. So how good news is that papia from Molitzagog. 355 00:16:50,720 --> 00:16:51,720 Speaker 4: It is very good news. 356 00:16:51,760 --> 00:16:55,840 Speaker 7: But to be clear, we do actually expect in the ubs, 357 00:16:55,840 --> 00:16:57,840 Speaker 7: and we have been saying this for a while, we 358 00:16:57,920 --> 00:17:01,840 Speaker 7: do expect inflation to be porarily a little sticky in 359 00:17:01,960 --> 00:17:05,600 Speaker 7: Q one of this year and then to continue to disslerate. 360 00:17:05,160 --> 00:17:07,239 Speaker 2: What is it about Q ones because we did this 361 00:17:07,280 --> 00:17:09,400 Speaker 2: in Q one of last year. What is it about 362 00:17:09,440 --> 00:17:10,040 Speaker 2: the first quarter? 363 00:17:10,480 --> 00:17:13,359 Speaker 7: It's the seasonals and frankly, since COVID, really some of 364 00:17:13,359 --> 00:17:15,679 Speaker 7: these seasonals have been just off and we see it 365 00:17:15,680 --> 00:17:17,280 Speaker 7: in the labor data and we see it in the 366 00:17:17,280 --> 00:17:18,119 Speaker 7: inflation data. 367 00:17:18,720 --> 00:17:21,920 Speaker 5: So how much do you see an actual disinflation that's 368 00:17:21,960 --> 00:17:25,080 Speaker 5: taking hold because the numbers have been very noisy. PPI 369 00:17:25,240 --> 00:17:27,919 Speaker 5: tends to be something that people look through as not 370 00:17:27,960 --> 00:17:30,360 Speaker 5: necessarily indicative of what's going to come out with CPI. 371 00:17:30,840 --> 00:17:33,480 Speaker 5: What do other data really say when you take a 372 00:17:33,520 --> 00:17:34,200 Speaker 5: look at them. 373 00:17:34,200 --> 00:17:35,040 Speaker 4: You're exactly right. 374 00:17:35,080 --> 00:17:37,440 Speaker 7: So the PPI is actually more relevant for the PCEE, 375 00:17:38,359 --> 00:17:41,040 Speaker 7: which is in turn quite relevant for the Federal Reserve. 376 00:17:41,119 --> 00:17:43,360 Speaker 7: Right the Federal Reserve has said many times that they 377 00:17:43,800 --> 00:17:47,160 Speaker 7: really see the core trend and inflation as the core 378 00:17:47,240 --> 00:17:50,360 Speaker 7: PCEE trend over time, but the CPI is very important. 379 00:17:50,359 --> 00:17:53,520 Speaker 7: That's what the consumer piece at the register, so to speak. 380 00:17:54,040 --> 00:17:56,680 Speaker 7: And for the CPI, we do see still an upside 381 00:17:56,760 --> 00:18:00,280 Speaker 7: for the release this week tomorrow, and that is coming 382 00:18:00,320 --> 00:18:04,040 Speaker 7: primarily from just like here, we saw an optic in 383 00:18:04,240 --> 00:18:07,200 Speaker 7: energy goods prices. We see that also in the piece 384 00:18:07,280 --> 00:18:09,440 Speaker 7: in the CPI tomorrow as well. 385 00:18:09,600 --> 00:18:11,720 Speaker 5: What's fascinating to me is that people are trying to 386 00:18:11,720 --> 00:18:14,720 Speaker 5: wrap their head around the ramifications of the strong dollar. 387 00:18:15,040 --> 00:18:17,920 Speaker 5: And we've been talking about it with respect to corporate earnings, 388 00:18:17,920 --> 00:18:20,159 Speaker 5: We've been talking about it with respect to demand for 389 00:18:20,359 --> 00:18:24,080 Speaker 5: US assets. There's also a question of the disinflationary impact 390 00:18:24,160 --> 00:18:27,520 Speaker 5: of that when exports and imports in particular have been 391 00:18:27,560 --> 00:18:30,800 Speaker 5: increasing quite significantly. How much is that a piece of 392 00:18:30,840 --> 00:18:33,200 Speaker 5: what we're seeing, particularly in data like PPI. 393 00:18:33,680 --> 00:18:37,679 Speaker 7: Absolutely, But however, historically it's taken quite some time for 394 00:18:37,760 --> 00:18:41,320 Speaker 7: the strong dollar to translate into prices in the United States, 395 00:18:42,040 --> 00:18:45,239 Speaker 7: and so here we would only really see it so 396 00:18:45,440 --> 00:18:49,160 Speaker 7: quickly if we saw truly good evidence of a ramp 397 00:18:49,240 --> 00:18:53,400 Speaker 7: up in you know, in imports ahead of anticipated tariffs. 398 00:18:53,560 --> 00:18:56,439 Speaker 7: We don't really see much conclusive data on the ground 399 00:18:57,119 --> 00:18:59,639 Speaker 7: on that front to definitively say that this has had 400 00:18:59,680 --> 00:19:00,000 Speaker 7: a name. 401 00:19:00,520 --> 00:19:04,080 Speaker 6: What do you make of this basically competing narratives we 402 00:19:04,119 --> 00:19:06,320 Speaker 6: see in the space when it comes to tariffs, broad 403 00:19:06,400 --> 00:19:10,160 Speaker 6: based ones that may be a bit more gradual. How 404 00:19:10,160 --> 00:19:12,639 Speaker 6: do you take all of that and put it into 405 00:19:12,880 --> 00:19:15,600 Speaker 6: an outlook for twenty twenty five Extremely difficult. 406 00:19:15,640 --> 00:19:18,760 Speaker 7: The main point I would say of the outlook is 407 00:19:18,800 --> 00:19:22,440 Speaker 7: that what we're expecting is uncertainty, and the key area 408 00:19:22,520 --> 00:19:25,560 Speaker 7: to watch for US is business investment and how much 409 00:19:25,640 --> 00:19:30,120 Speaker 7: this uncertainty around tariffs that business businesses have already expressed 410 00:19:30,160 --> 00:19:33,119 Speaker 7: in some of the survey data, is actually going to 411 00:19:33,160 --> 00:19:37,680 Speaker 7: translate into their investment plans and into their hiring plans. 412 00:19:37,840 --> 00:19:40,360 Speaker 6: So everyone is talking about Trump two point zero being 413 00:19:40,400 --> 00:19:44,040 Speaker 6: solid for growth, But the fact is, if it's so uncertain, 414 00:19:44,119 --> 00:19:46,600 Speaker 6: so unpredictable, do you just have paralysis? 415 00:19:47,359 --> 00:19:50,680 Speaker 7: Well potentially yes, And that's exactly right. And I think 416 00:19:50,680 --> 00:19:53,359 Speaker 7: the narrative has been shifting, and the narrative has been 417 00:19:53,400 --> 00:19:56,520 Speaker 7: shifting in part because there is so much uncertainty regarding 418 00:19:56,560 --> 00:19:58,360 Speaker 7: what the administration will actually do. 419 00:19:58,840 --> 00:20:01,359 Speaker 5: So when we look forward, we have a core CPI 420 00:20:01,480 --> 00:20:04,800 Speaker 5: tomorrow and then we're heading into the administration, we hear 421 00:20:05,160 --> 00:20:07,960 Speaker 5: that we have inauguration day and beyond when we start 422 00:20:08,000 --> 00:20:10,399 Speaker 5: to get a whole host of executive orders. What are 423 00:20:10,440 --> 00:20:12,399 Speaker 5: you looking for in particular, what can really move the 424 00:20:12,440 --> 00:20:14,280 Speaker 5: needle for your forecasts? 425 00:20:14,880 --> 00:20:18,840 Speaker 7: Well, any certainty around what it happens around immigration and 426 00:20:18,920 --> 00:20:21,560 Speaker 7: tariffs will be very important into our input for the 427 00:20:21,680 --> 00:20:25,840 Speaker 7: labor market and for industrial production and business investment. 428 00:20:26,520 --> 00:20:28,320 Speaker 2: Sonny Meski, if you bs or the back of p 429 00:20:28,320 --> 00:20:31,400 Speaker 2: Api PPI coming in just a little bit softer than expected. 430 00:20:31,480 --> 00:20:35,760 Speaker 2: That This is the Bloomberg Sevenants podcast, bringing you the 431 00:20:35,760 --> 00:20:39,159 Speaker 2: best in markets, economics, angiot politics. 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