WEBVTT - Surveillance: Fed Day with Zentner 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferroll and Lisa Brownwitz. Daily we bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.280 and of course on the Bloomberg Terminent Laurence Somers was 0:00:30.360 --> 0:00:32.800 with us the other day, the Secretary of Treasury and 0:00:33.200 --> 0:00:37.960 obviously from Harvard University, and he wrote a blistering essay 0:00:38.000 --> 0:00:40.760 today in the Washington Post, and we will begin with 0:00:40.800 --> 0:00:44.320 that with the wonderful Ellen Setner of Morgan Stanley. The 0:00:44.400 --> 0:00:49.480 FETE is not internalized, the magnitude, the magnitude of its 0:00:49.640 --> 0:00:53.720 errors over the past year, is operating with an inappropriate 0:00:53.800 --> 0:00:58.080 and dangerous framework. Professor Somers, with alan Stonemash, goes on 0:00:58.160 --> 0:01:01.400 to say, there can be no reliable progress against inflation 0:01:01.840 --> 0:01:06.759 without substantial increases in real interest rates, which means temporary 0:01:06.840 --> 0:01:12.480 increases in unemployment. Mazentner is with Morgan Stanley. Ellen, you 0:01:12.560 --> 0:01:15.600 know that the word magnitude is used differently by people 0:01:15.680 --> 0:01:19.200 like Xanner, people like Summers. How hard is it right 0:01:19.200 --> 0:01:24.440 now to gauge the magnitude of this moment, this march magnitude. 0:01:24.720 --> 0:01:28.440 How hard is it to gauge the how muchness forward 0:01:28.560 --> 0:01:31.760 for you? The how much of nous? I love it? 0:01:32.160 --> 0:01:36.560 Uh So, look the the It's easy to get on 0:01:36.800 --> 0:01:40.080 the train of saying the feed is behind the curve. 0:01:40.600 --> 0:01:42.320 And I think there are folks on the FO m 0:01:42.360 --> 0:01:46.040 C that would agree that they're probably behind the curve. UM. 0:01:46.120 --> 0:01:49.480 But there are enough risks in the economy still and 0:01:49.600 --> 0:01:54.360 with renewed geo new geopolitical concerns, um, that does make 0:01:54.400 --> 0:01:57.680 sense to start off with the basis point hike. You 0:01:57.760 --> 0:01:59.840 don't want to add to the volatility that's already in 0:01:59.840 --> 0:02:02.240 the markets. I think what we're going to see is 0:02:02.280 --> 0:02:04.200 that Chair Pal is going to leave the door open 0:02:04.240 --> 0:02:06.640 to the door. Then markets know that they can go 0:02:06.680 --> 0:02:09.800 in bigger increments at any time. But to say that 0:02:09.919 --> 0:02:13.160 the FED is operating under the wrong framework, I think 0:02:13.200 --> 0:02:17.959 it's just absolutely uh inconsistent with what we've heard from 0:02:17.960 --> 0:02:20.320 the FED. I think it was pretty quickly that they 0:02:20.360 --> 0:02:23.800 abandoned the new framework when they went solely to focusing 0:02:23.840 --> 0:02:28.040 on UH inflation. Uh. I don't think they're operating on 0:02:28.080 --> 0:02:34.040 the under that old framework. The old twenty framework framework, 0:02:34.080 --> 0:02:37.000 and the headline there is Zentor pushing back against somers Ellen. 0:02:37.040 --> 0:02:39.040 I want to stay on magnitude, which goes to the 0:02:39.080 --> 0:02:43.200 reaction functions of the Fed. Can we have any predictable 0:02:43.240 --> 0:02:47.919 reaction functions given the mix of economic data the dynamics 0:02:47.960 --> 0:02:51.600 of the American system? Are we literally with Chairman Powell 0:02:52.000 --> 0:02:55.440 flying blind out of this pandemic with the overlay of 0:02:55.480 --> 0:03:00.000 war in Ukraine? Yeah? So, uh, I mean flying blind? 0:03:00.040 --> 0:03:02.520 There is a good way to put it. Uh. You know, 0:03:02.560 --> 0:03:06.600 I think under this environment, it's absolutely appropriate to expect 0:03:07.160 --> 0:03:12.600 high volatility to continue. Um Volatility equals uncertainty, and it 0:03:12.639 --> 0:03:15.160 means that you have monetary policy makers that are going 0:03:15.200 --> 0:03:17.640 to have to make decisions meeting by meeting based on 0:03:17.760 --> 0:03:20.400 the data that they have in hand and where they 0:03:20.440 --> 0:03:24.040 think it is likely going. You know, when you're when 0:03:24.080 --> 0:03:26.639 you're following financial conditions so closely, and when those are 0:03:26.680 --> 0:03:30.720 being impacted uh, not just by your own communication, but 0:03:31.280 --> 0:03:36.160 uh of late by external sources. You know, it's it's 0:03:36.200 --> 0:03:38.480 out of your control and you just really have to 0:03:38.560 --> 0:03:41.680 watch and take it step by step, feel your way 0:03:41.720 --> 0:03:45.040 in the sand with your toes. Uh. And that's what 0:03:45.080 --> 0:03:46.240 the FED is going to be doing, and so I 0:03:46.280 --> 0:03:49.120 think Chap is going to underscore that in his Q 0:03:49.320 --> 0:03:53.200 and A session uh today, um. And that means that 0:03:53.320 --> 0:03:56.600 markets are going to have to really be nimble as 0:03:56.640 --> 0:03:58.880 the FED is going to be nimble. That you could 0:03:58.880 --> 0:04:02.080 see twenty five basis points fifty fifty or all twenty 0:04:02.120 --> 0:04:05.000 five or what we do know is that they're hiking. 0:04:05.040 --> 0:04:08.560 The hiking cycle has begun, and there is a lot 0:04:08.600 --> 0:04:12.160 of room for them to get far in rate hikes 0:04:12.800 --> 0:04:16.120 without impacting the economy. And I think that's what is 0:04:16.240 --> 0:04:19.400 most misunderstood by the market. Well, Ellen to that point, 0:04:19.480 --> 0:04:21.640 let's put some numbers on that that you expect we're 0:04:21.680 --> 0:04:25.279 going to end the year of three with a base 0:04:25.360 --> 0:04:27.960 of FED funds rate of two point six to five, 0:04:28.560 --> 0:04:31.160 well above where the tenure and frankly the thirty year 0:04:31.160 --> 0:04:34.599 are at this point. And you also expect quantitative tightening, 0:04:34.640 --> 0:04:38.600 not just a cessation of purchases of bonds, but actually 0:04:38.720 --> 0:04:41.800 the shrinking of the balance sheet to begin in May. 0:04:41.839 --> 0:04:44.800 So here's what I'm struggling with, struggling with Ellen. If 0:04:44.839 --> 0:04:48.520 this is actually going to be effective FED tightening, why 0:04:48.520 --> 0:04:52.000 will that not translate to a slower growth paradigm that 0:04:52.040 --> 0:04:56.359 could potentially slow the trajectory of their rate hikes. Yeah, 0:04:56.400 --> 0:04:59.360 so it's it's a great question, Lisa, So they do. 0:04:59.480 --> 0:05:04.159 So here's the part of Summer's uh op ed that 0:05:04.240 --> 0:05:07.320 I do agree with. The Basically, he's laying out in 0:05:07.320 --> 0:05:10.080 a way that the Fed can um that their other 0:05:10.200 --> 0:05:13.000 job is to raise the unemployment rate. Um. Now, it 0:05:13.040 --> 0:05:15.839 doesn't sound very good for policymakers to stand in front 0:05:15.839 --> 0:05:17.800 of the public and say, hey, we're we need to 0:05:17.880 --> 0:05:19.960 raise the unemployment rate, but that's part of their job. 0:05:20.000 --> 0:05:22.200 They have to create slack, and to create slack, you've 0:05:22.200 --> 0:05:24.560 got to slow the economy. So we do have the 0:05:24.600 --> 0:05:27.960 economy slowing. Uh And we've taken growth forecast down for 0:05:28.040 --> 0:05:32.080 this year and significantly raised inflation forecast, but the economy 0:05:32.160 --> 0:05:35.480 is still growing well beyond its potential, which is in 0:05:35.600 --> 0:05:38.040 the one and a half to one point eight percent range. 0:05:38.600 --> 0:05:41.240 Uh And, so you are still gonna put downward pressure 0:05:41.240 --> 0:05:44.400 on the unemployment rates. At the very least towards the 0:05:44.480 --> 0:05:46.599 end of the year, we should start to see the 0:05:46.640 --> 0:05:49.600 unemployment rate flat and out. If it doesn't, as policymakers 0:05:49.640 --> 0:05:52.920 have warned, then you could see an unemployment rate in 0:05:52.960 --> 0:05:54.960 the high twos, and that's still going to mean as 0:05:54.960 --> 0:05:57.159 the Fed has a lot more to do, so I 0:05:57.160 --> 0:06:01.559 think in order to slow the economy and help inflation cool, 0:06:02.000 --> 0:06:04.240 they are going to have to hike as much as 0:06:04.240 --> 0:06:08.920 we believe in Again, you all mentioned the market is 0:06:08.960 --> 0:06:14.240 expecting seven rate hikes this year is a basis point equivalent. 0:06:14.240 --> 0:06:19.719 We're expecting six basis point equivalent. It's really in three 0:06:19.839 --> 0:06:22.960 where we expect four additional hikes to get UH in 0:06:23.080 --> 0:06:25.960 that range of two and a half to two and 0:06:26.080 --> 0:06:29.920 three quarters per cent. That's where the market has it wrong. 0:06:30.120 --> 0:06:34.760 This economy is less sensitive to hire interest rates UH, 0:06:34.800 --> 0:06:36.600 and so the Feed is going to have to hike 0:06:36.640 --> 0:06:39.279 further in order to slow the economy enough and raise 0:06:39.320 --> 0:06:41.880 the unemployment rate enough. And we have to leave in 0:06:41.920 --> 0:06:51.200 that ammon center of Morgan Stanley, thank you right now. 0:06:51.240 --> 0:06:52.640 We got to get to this and there's like eight 0:06:52.640 --> 0:06:54.800 ways to go here, including the news out of Chelsea 0:06:55.160 --> 0:06:57.599 and football. But on a serious note, we talked Abob 0:06:57.640 --> 0:07:00.640 Michael right now see I oh at JP Morgan Investment 0:07:00.680 --> 0:07:02.640 management of the note and Bob, I just want to 0:07:02.680 --> 0:07:06.240 tell you I have completed my bracket. And Gorgonzola is 0:07:06.279 --> 0:07:08.400 who I have going all the way to the finals. 0:07:08.560 --> 0:07:11.119 That's what I'm looking forward to. Put too much money 0:07:11.120 --> 0:07:16.960 on Gorgons. Not go with Yale, folks, I had to 0:07:16.960 --> 0:07:19.240 go with Purdue because the woman from Produce signs my 0:07:19.320 --> 0:07:23.239 paycheck is as simple as that, Bob. On a serious note, 0:07:23.360 --> 0:07:29.080 Chairman Powell faces serious consequences of the decisions today and 0:07:29.160 --> 0:07:32.680 may fourth, what's his biggest focus to get to the 0:07:32.800 --> 0:07:36.200 autumn of this year. Well, it's interesting to me if 0:07:36.240 --> 0:07:38.520 you go back to January, who walked into this year 0:07:38.920 --> 0:07:42.360 surprisingly hawkish and that that caught the market off guard. 0:07:42.760 --> 0:07:45.440 I'm looking for three things from the FETE today. I 0:07:45.520 --> 0:07:48.040 want to see if they're opening the door to fifty 0:07:48.120 --> 0:07:51.040 basis point hikes and how soon they'll do it. I'm 0:07:51.080 --> 0:07:55.520 also looking at um the quantitative tightening. How fast will 0:07:55.560 --> 0:07:57.560 they roll that forward? I think they should bring that 0:07:57.600 --> 0:08:00.560 forward to June. And then lastly, I want to see 0:08:00.600 --> 0:08:04.120 that trade off between growth and inflation. For sure, growth 0:08:04.160 --> 0:08:06.440 will slow down in the back end of the year, 0:08:06.480 --> 0:08:09.040 but if inflation is still high, I think the market 0:08:09.080 --> 0:08:11.360 expects they may back off a bit. I think the 0:08:11.400 --> 0:08:14.440 market will be surprised how hawk as she is today 0:08:14.720 --> 0:08:17.240 and how focused on inflation he is today. Let's go 0:08:17.360 --> 0:08:19.160 through that point by point, Bob, and let's start with 0:08:19.160 --> 0:08:21.080 the dot plot and then we'll go to the news conference. 0:08:21.280 --> 0:08:23.640 The DOP plot for twenty three right now about six, 0:08:25.400 --> 0:08:27.760 just a little north of two. What kind of shift 0:08:27.760 --> 0:08:33.080 are you expecting that? Well, it's throwing darts today given 0:08:33.160 --> 0:08:36.320 where all the data is. But what I'd like to 0:08:36.360 --> 0:08:39.040 see is I'd like to see the dots for the 0:08:39.120 --> 0:08:41.679 end of this year at two percent, and I want 0:08:41.720 --> 0:08:44.440 to see if anyone has the courage to put them 0:08:44.440 --> 0:08:50.640 at three percent at the end of That's that's what 0:08:50.720 --> 0:08:53.120 you want to happen. What do you think will happen? Oh, 0:08:53.160 --> 0:08:55.600 I think they'll do it. I'm certain they'll do it. 0:08:55.679 --> 0:08:58.160 I think they'll throw in a fifty at the main 0:08:58.200 --> 0:09:02.760 meeting and they'll do uh six basis point hikes at 0:09:02.800 --> 0:09:05.240 the other six meetings this year. So, Bob, where does 0:09:05.280 --> 0:09:07.840 quantitative tightening fit into this? How much can they really 0:09:07.880 --> 0:09:11.800 execute a shrinking of the balance sheet? Oh? I think 0:09:12.040 --> 0:09:14.440 they'll announce it at the main meeting and do it 0:09:14.480 --> 0:09:17.160 in June. I think all of it gets pulled forward. Look, 0:09:17.240 --> 0:09:20.920 they've already made one policy error so far by letting 0:09:20.920 --> 0:09:23.720 inflation get to where it is. We're looking at the 0:09:23.800 --> 0:09:28.600 Dallas trim mean personal consumption expenditures, it's close to seven percent. 0:09:29.160 --> 0:09:32.720 And that's without all the inflation that's going in the 0:09:32.760 --> 0:09:35.280 pipeline now that we're going to see over the next 0:09:35.320 --> 0:09:37.960 three to six months. So they've got a lot to 0:09:38.040 --> 0:09:40.800 do to lean into inflation. And I think what you're 0:09:40.840 --> 0:09:43.520 going to hear from them is that's their focus, even 0:09:43.600 --> 0:09:46.400 if it means sacrificing growth at the end of the year. Well, 0:09:46.480 --> 0:09:48.640 but Bob, that's exactly where I wanted to go, because 0:09:48.679 --> 0:09:51.240 you're saying that they've already made a huge policy error. 0:09:51.400 --> 0:09:54.120 But a lot of the inflationary inputs are far out 0:09:54.120 --> 0:09:57.680 of their control. Their commodity driven. They also are driven 0:09:57.960 --> 0:10:02.040 by some of the pandemic era distortion. So at this point, 0:10:02.400 --> 0:10:05.160 is that the only tool they have to materially slow 0:10:05.200 --> 0:10:09.280 the economy even further than inflation will do naturally, nonsense. 0:10:09.480 --> 0:10:12.439 Not everything has been out of their control. There have 0:10:12.520 --> 0:10:14.280 been an awful lot of things that have been in 0:10:14.320 --> 0:10:18.360 their control. Look at the price of new homes, look 0:10:18.360 --> 0:10:21.080 at the cost of shelter, the cost of housing that's 0:10:21.120 --> 0:10:24.200 gone through the roof. Why because if it costs more, 0:10:24.480 --> 0:10:27.079 but the cost to finance it remains close to zero. 0:10:27.320 --> 0:10:30.040 Guess what you can pay more. They should have hiked 0:10:30.120 --> 0:10:34.320 rates and stop purchasing mortgages six to twelve months ago, 0:10:34.679 --> 0:10:37.960 and that would have slowed down the housing market a bit. 0:10:38.320 --> 0:10:41.520 I think they've got a tough summer ahead because there's 0:10:41.679 --> 0:10:44.960 a lot of pent up demand yet to be satiated. 0:10:45.240 --> 0:10:47.640 That's going to happen over the summer. I see the 0:10:47.720 --> 0:10:50.560 toughest month for them to get through as July. Well, Michael, 0:10:50.640 --> 0:10:53.000 you know this works. You do one, Mike, We've got 0:10:53.000 --> 0:10:54.199 a ton of money to put some work. What do 0:10:54.240 --> 0:10:56.760 you tell them now? What'd you put it? Well? As 0:10:56.760 --> 0:10:59.800 you know, we walked into this year somewhat conservative thinking 0:11:00.000 --> 0:11:02.400 at things, have gotten a bit of themselves ahead of 0:11:02.440 --> 0:11:05.240 themselves in the credit market and raise cash. Now we're 0:11:05.240 --> 0:11:08.120 putting it back to work. I think over the course 0:11:08.200 --> 0:11:10.880 of a couple of months, we've got a year's worth 0:11:10.920 --> 0:11:14.679 of repricing. We're looking at high yield for example, that 0:11:14.760 --> 0:11:17.000 we came into this year at an all in yield 0:11:17.040 --> 0:11:20.640 around four percent, we're now at over six percent. You 0:11:20.679 --> 0:11:24.280 look at investment grade credit spreads have gone up from 0:11:24.840 --> 0:11:27.640 eighty or ninety basis points to a hundred and fifty 0:11:27.679 --> 0:11:30.880 basis points. Yields are up one point three, so there's 0:11:30.880 --> 0:11:34.360 a lot of concern about what's going to happen to 0:11:34.600 --> 0:11:37.880 corporate America. In corporate Europe, we think they'll be more 0:11:37.920 --> 0:11:41.680 resilient than a lot of investors anticipate. And there's a 0:11:41.679 --> 0:11:43.640 lot of cash on the sidelines. There was a lot 0:11:43.679 --> 0:11:46.600 coming into this year because of the d risking. More 0:11:46.679 --> 0:11:49.080 has built off build up. I think you're going to 0:11:49.080 --> 0:11:51.120 see that put to work in the second quarter. But 0:11:51.360 --> 0:11:56.000 Michael Friday evening seven pm, you're gaming Liverpool's next victory. 0:11:56.040 --> 0:11:59.960 I'm reading Kasman and Faroli cover to cover and Weekly Prospect. 0:12:00.280 --> 0:12:03.520 As you read your colleagues Kasmin and Faroli, what does 0:12:03.520 --> 0:12:08.280 it tell you, given higher yields, what foreign flows will do? 0:12:08.800 --> 0:12:11.160 My problem with the dooming gloom of moving out to 0:12:11.240 --> 0:12:14.839 higher yields lower fixed ingram prices is the foreigners always 0:12:14.880 --> 0:12:19.079 show up, don't they? Yeah, they do, And you'll probably 0:12:19.240 --> 0:12:23.560 see some of that in the coming quarter. Because for sure, 0:12:23.679 --> 0:12:25.840 you're not going to see the Bank of Japan raise 0:12:26.000 --> 0:12:28.440 rates in here. For sure, the e c B, I 0:12:28.480 --> 0:12:31.560 think they'll still hike this year. But they'll talk it 0:12:31.600 --> 0:12:34.640 down until the back end of the year, so that 0:12:34.720 --> 0:12:37.080 money will look at the higher yields and come in. 0:12:37.320 --> 0:12:40.720 That's probably why you don't get to three ten years 0:12:40.720 --> 0:12:43.679 treasuries over the next couple of months. Can you get 0:12:43.720 --> 0:12:45.480 there by the end of the year. I think with 0:12:45.520 --> 0:12:48.120 the inflationary pressures in the pipeline, you will get there. 0:12:48.160 --> 0:12:49.920 What would you like to see the cops at Chausea? 0:12:50.679 --> 0:12:53.080 Just as a Red Sox Liverpool man, would you like 0:12:53.120 --> 0:12:55.160 to see that happen? There are so many bad things 0:12:55.160 --> 0:12:57.839 in that question. First of all, I'm a Philadelphia guy, 0:12:58.240 --> 0:13:01.240 so it's the Phillies and now I'm a Liverpool supporter. 0:13:02.400 --> 0:13:04.600 This is just a bridge too far from me. How 0:13:04.600 --> 0:13:08.599 did it happen? How did the Liverpool thing happen? Bob Um, 0:13:08.640 --> 0:13:11.600 It's a it's a very long story, but we have time. 0:13:11.640 --> 0:13:17.800 We I spent nine years in London. We landed in 0:13:17.920 --> 0:13:22.320 London the year that England beat Germany five one. Michael 0:13:22.360 --> 0:13:25.320 Owen scored a hat trick. We all looked at Michael Evan, 0:13:25.360 --> 0:13:27.679 who did he play for Liverpool? And that became our 0:13:27.720 --> 0:13:30.240 club and that was that. But Michael, thank you, sir, 0:13:36.280 --> 0:13:40.679 our goal here for this invasion. This war, or as 0:13:40.760 --> 0:13:44.200 Mr Putin says, this special operation is to bring you 0:13:44.320 --> 0:13:48.719 guests of authority and earned expertise. Georgia is to the 0:13:48.760 --> 0:13:52.000 southern side, think Joseph Stalin. And it was one of 0:13:52.240 --> 0:13:56.240 Mr Putin's first wars in Russia. It was violent, in brutal, 0:13:56.720 --> 0:14:00.480 with courage. Ian Kelly is the former US Ambassador Georgia, 0:14:00.679 --> 0:14:03.679 served in a very tenuous time, and he joins US 0:14:03.720 --> 0:14:07.400 now with his brilliant academics out of Colombia and his 0:14:07.559 --> 0:14:13.400 academics out of Northwestern this day, Professor Kelly, Ambassador Kelly, 0:14:13.440 --> 0:14:16.320 Welcome to Bloomberg. Wonderful to have you today. My book 0:14:16.360 --> 0:14:20.960 of the year is Angelus Stents Putin's World. You use 0:14:21.040 --> 0:14:25.400 it in class. What does Putin's world look like right now? 0:14:27.120 --> 0:14:31.920 Putin's world looks very, very circumscribed right now. He started 0:14:31.920 --> 0:14:36.080 out telling the Russian people that they were going to 0:14:36.160 --> 0:14:42.880 be able to become fully participatory in international financial systems, 0:14:42.920 --> 0:14:46.960 be able to travel, be able to use UH and 0:14:46.960 --> 0:14:49.720 and hold in their banks foreign currency, be able to 0:14:49.840 --> 0:14:54.480 use H worldwide credit cards. And of course that has 0:14:54.560 --> 0:15:00.200 now come crashing down and UH. The Putin's world, as 0:15:00.200 --> 0:15:02.760 I say, is now very small. Let's let's go to 0:15:02.800 --> 0:15:05.720 your expertise. And I don't want to make allusions here 0:15:05.760 --> 0:15:08.760 to Hitler and Putin and that that would be inappropriate, 0:15:09.120 --> 0:15:11.880 but I will suggest that all of his work, including 0:15:11.960 --> 0:15:15.800 his battles in Georgia, is with a Slavic certitude. You 0:15:15.960 --> 0:15:20.720 study the Slavic nations culture in language. Is that breaking 0:15:20.720 --> 0:15:24.040 down for Mr Putin right now? That certitude of the 0:15:24.160 --> 0:15:30.120 Russian Slavic experience. Well, I think that he made a 0:15:30.240 --> 0:15:35.960 serious mistake in thinking that the that the Ukrainians would 0:15:36.040 --> 0:15:39.800 welcome their Eastern Slavic brothers. I think what he's trying 0:15:39.840 --> 0:15:43.760 to do in in Ukraine and what he has been 0:15:43.800 --> 0:15:46.720 doing with UH, with Yellow Rouse and to a certain 0:15:46.720 --> 0:15:50.640 extent Kazaks down where are many Russian speakers, is to 0:15:50.840 --> 0:15:55.200 try and create a Russian world, to create a Moscow 0:15:55.400 --> 0:16:00.360 centric community. UH. I don't think he wants to build 0:16:00.360 --> 0:16:04.760 the Soviet Union, but he does want to restore in 0:16:04.960 --> 0:16:10.080 Eastern Slavic homeland or or community. The idea that there 0:16:10.120 --> 0:16:16.440 are borders between Russia and Ukraine UH pains him. And 0:16:16.560 --> 0:16:19.080 what even more pains him is the idea that the 0:16:19.200 --> 0:16:24.480 Ukrainians would want to orient themselves towards the West and 0:16:24.560 --> 0:16:27.960 not towards Moscow, Ambassador. As we sit here today, we 0:16:28.000 --> 0:16:30.680 are still getting a series of headlines saying that talks 0:16:30.800 --> 0:16:34.120 are ongoing and seem more realistic between Ukraine and Russia. 0:16:34.520 --> 0:16:37.000 Do you buy that, given that we cannot reset the 0:16:37.000 --> 0:16:39.000 clock and go back to where we were, that it 0:16:39.040 --> 0:16:42.640 means more NATO troops on the borders of Russia, that 0:16:42.680 --> 0:16:48.600 it means a Ukraine that's living with this scarred history. Well, 0:16:48.640 --> 0:16:52.960 I think it's it was impossible for anyone, really, I 0:16:53.000 --> 0:16:56.000 think to see how there could be a diplomatic solution 0:16:56.400 --> 0:17:00.880 based on Putin's initial maximalist goal goals, which was the 0:17:00.920 --> 0:17:05.080 decapitation of the Ukrainian government and what he called the 0:17:05.160 --> 0:17:11.040 demilitarization of the Ukrainian armed forces, which he said, falsely, 0:17:11.119 --> 0:17:15.960 we're being controlled by the US and NATO. It's interesting 0:17:16.200 --> 0:17:20.119 that you're starting to see UM a change in the 0:17:20.240 --> 0:17:24.080 rhetoric in terms of their goals. They're not talking about 0:17:24.119 --> 0:17:29.240 the de nazification of the government. They're talking more about 0:17:30.119 --> 0:17:35.520 Ukraine becoming neutral, in other words, not joining NATO. Uh 0:17:35.760 --> 0:17:41.000 So that I think is significant UM. But whether or 0:17:41.040 --> 0:17:45.520 not it leads to a cessation of hostilities because uh, 0:17:45.640 --> 0:17:49.119 the the other the new demand that they put in 0:17:49.160 --> 0:17:53.680 as a recognition of Crimea and the eastern Ukraine enclave 0:17:53.760 --> 0:17:56.960 of of dom Bas And I can't see the Ukrainians 0:17:58.000 --> 0:18:01.359 giving up the sovereignty over a chunk of their territory. 0:18:01.560 --> 0:18:03.800 Ambasta can I just jumped in just quickly slightly off 0:18:03.800 --> 0:18:06.040 track where we just got a headline about how to 0:18:06.119 --> 0:18:08.440 get Ukraine more military help. We've been trying to figure 0:18:08.480 --> 0:18:11.159 out why sending them mix would be considered an escalation. 0:18:11.800 --> 0:18:14.439 Why has the US declared that as an escalation if 0:18:14.480 --> 0:18:18.080 they were to do so. I think what it is 0:18:18.320 --> 0:18:23.240 is uh uh, the uh Poles wanted to send the 0:18:23.240 --> 0:18:26.360 the planes to uh Ramstein air Base and US air 0:18:26.359 --> 0:18:29.760 base in Germany and then have the planes flown in 0:18:29.920 --> 0:18:33.880 from a US base in Germany. I think it's that particular, 0:18:34.800 --> 0:18:37.639 Uh you know, it's it's it's the origin of the planes, 0:18:37.720 --> 0:18:42.480 I think, which is giving UH Washington pause and I uh, 0:18:42.640 --> 0:18:48.160 I I think that they're they're overestimating the possible risk 0:18:49.440 --> 0:18:52.200 of flying from me from a US base. But it 0:18:52.400 --> 0:18:54.720 is my understanding of it. And thank you just for 0:18:54.760 --> 0:18:56.720 that clarification at the end there as well. In Kelly 0:18:56.760 --> 0:19:03.600 that the former US Ambassador to Georgia. If you are 0:19:03.640 --> 0:19:06.480 a gentleman from North Carolina state, you know the distance 0:19:06.520 --> 0:19:10.520 from my seventy five from Knoxville down to Chattanooga. Yes, 0:19:10.560 --> 0:19:14.840 Dennis Gartman, in my bracket, I've got Knoxville playing Chattanooga. 0:19:14.840 --> 0:19:17.320 I'm gonna go for the romance of a South there 0:19:17.560 --> 0:19:23.360 in basketball. But the backdrop here in America, across our 0:19:23.400 --> 0:19:28.080 agricultural complex is the planting season. In the serious moment 0:19:28.160 --> 0:19:31.840 for Ukraine and their agriculture. We speak to the younger. 0:19:32.040 --> 0:19:35.719 The younger Dennis Gartman of the Kansas Kansas Board of Trade, 0:19:35.960 --> 0:19:38.320 Chairman of the University of Akron and Domin. Dennis, I 0:19:38.320 --> 0:19:40.040 don't want to buy stocks today. I don't want to 0:19:40.040 --> 0:19:42.480 go long short. I want to talk to you from 0:19:42.520 --> 0:19:45.760 your ute and the Kansas Board of Trade about the 0:19:45.840 --> 0:19:51.840 planting season. How serious is that for Ukraine? Very serious, Tom, 0:19:51.880 --> 0:19:53.719 It's it's something that we have to pay very much 0:19:53.720 --> 0:19:56.639 attention to. Ukraine and Russia are about eight percent of 0:19:56.640 --> 0:19:59.960 the world's exports of wheat. The fact is the winner 0:20:00.040 --> 0:20:02.119 wheat crop, which is in the ground now is probably 0:20:02.119 --> 0:20:05.800 deteriorating something fierce. Nobody's paying attention to it, nobody's being 0:20:05.800 --> 0:20:07.879 able to get into the fields to take care of it. 0:20:07.880 --> 0:20:09.679 It's coming out of dormancy, and it's going to be 0:20:09.760 --> 0:20:12.720 a greatly reduced crop. There will be a corn crop 0:20:12.840 --> 0:20:15.560 of some size, but it'll be demonstrably smaller than in 0:20:15.600 --> 0:20:17.920 the past. And the question shall be, well they get 0:20:18.000 --> 0:20:20.840 next year's winter weak crop planted in September and October 0:20:20.920 --> 0:20:23.160 November when that crop has to go on the ground. 0:20:23.200 --> 0:20:25.760 So the wheat crop prices here in the United States 0:20:26.080 --> 0:20:28.160 have been on an absolute tear from the lower left 0:20:28.160 --> 0:20:30.119 of the upper right. They've dropped a little bit in 0:20:30.160 --> 0:20:33.440 the past several days, but it's been just a demonstrative, 0:20:33.560 --> 0:20:36.520 monstrous bull market led by week. Dennis, you and I 0:20:36.560 --> 0:20:38.440 have said in the boardroom of the New York Stock 0:20:38.520 --> 0:20:42.840 Exchange and talked about this. Can we monitor the Ukraine 0:20:42.960 --> 0:20:47.159 planting season by whether or are there other factors we 0:20:47.280 --> 0:20:52.000 can't observe, including the danger of Russian troops? Well, clearly, 0:20:52.040 --> 0:20:53.840 the danger of Russian troops is one thing. That the 0:20:53.880 --> 0:20:55.919 ability to get the crop out of the ground and 0:20:55.960 --> 0:20:59.680 shift is another thing. Completely. Whether the port facilities that 0:20:59.760 --> 0:21:02.800 are so will be operative is is another question. Entirely. 0:21:02.800 --> 0:21:05.680 Will the rail facilities that have to move the crop 0:21:05.800 --> 0:21:08.040 from from the interior of the country to the to 0:21:08.160 --> 0:21:12.040 the ports is another question entirely. It's one question after another, 0:21:12.160 --> 0:21:16.160 and confusion breeds contempt. Confusion breeds uh higher prices under 0:21:16.160 --> 0:21:19.280 most circumstances for a while, and then suddenly you see 0:21:19.280 --> 0:21:22.200 an increase in the planet acreage here in the United States, 0:21:22.200 --> 0:21:24.600 will probably see a big increase in spring weed planting 0:21:25.040 --> 0:21:27.000 here in the US to take advantage of the fact 0:21:27.000 --> 0:21:29.320 that wheat prices have gone so high. So it's a 0:21:29.359 --> 0:21:32.520 real question that it's something people are not paying much 0:21:32.520 --> 0:21:34.320 attention to. The other thing we paid we need to 0:21:34.359 --> 0:21:37.440 pay attention to, is that here in the States, how 0:21:37.520 --> 0:21:40.200 high soybean prices are, and the fact that you're gonna 0:21:40.200 --> 0:21:43.119 have and how high fertilizer prices are, which means you're 0:21:43.119 --> 0:21:45.880 gonna have a huge shift probably three four or five 0:21:45.920 --> 0:21:49.240 million acres out of corn into soybeans because you need 0:21:49.320 --> 0:21:51.600 you don't need fertilizer for the bean prop and you 0:21:51.640 --> 0:21:54.040 need fertilizer for the for the corn crop. This this 0:21:54.080 --> 0:21:56.240 could be the first time in twenty years that we 0:21:56.280 --> 0:21:58.879 actually plant more acreage to soybeans that we do to corn. 0:21:59.320 --> 0:22:03.800 Strange during strange circumstances. Indeed, Dennis, do you feel like 0:22:03.880 --> 0:22:07.240 the market is underestimating the elasticity of some of these 0:22:07.240 --> 0:22:13.160 agricultural commodities. Yes, yes, I think the market is underestimating. 0:22:13.160 --> 0:22:16.040 I think that we can still see demonstrably higher prices 0:22:16.080 --> 0:22:18.120 over the course of the next year or two. As 0:22:18.280 --> 0:22:20.640 as I always tell people, watch what the term structures 0:22:20.640 --> 0:22:24.440 are doing in storable commodities. When the backwardations widen on 0:22:24.440 --> 0:22:27.440 on updates and then backwardations widen on down days, Also 0:22:27.880 --> 0:22:30.119 it tells you that the market still wants to go higher. 0:22:30.359 --> 0:22:33.719 So the answer to your question, yes, Dennis, has been 0:22:33.720 --> 0:22:36.000 a while, it's gonna catch up, particularly in this environment, 0:22:36.000 --> 0:22:45.160 Dennis countyman that on this commonity market. What we're gonna 0:22:45.160 --> 0:22:47.920 do here is have a bit of a different conversation 0:22:48.000 --> 0:22:51.600 with David Rubinstein. This morning we celebrate his interview here 0:22:51.960 --> 0:22:54.800 with Mr Chesky. Let's do that quickly as we can. 0:22:54.920 --> 0:22:57.160 Who is Mr Chesky and why is he ger Main 0:22:57.440 --> 0:23:00.400 right now? Brian Chesky is one of the three people 0:23:00.440 --> 0:23:04.439 that started Airbnb, which is a phenomenon among young people 0:23:04.480 --> 0:23:07.560 but also middle aged people now. And it's relevant now 0:23:07.640 --> 0:23:09.960 because as the world is changing, and people aren't coming 0:23:10.000 --> 0:23:11.840 to the office quite the much as much they used to. 0:23:12.080 --> 0:23:15.480 They're working remotely. More and more people are using Airbnb 0:23:15.680 --> 0:23:20.320