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Speaker 1: political concerns and warnings about Russia's intentions when it comes
Speaker 1: to Ukraine. Investors in financial markets, though, do seem to
Speaker 1: be calming down today over those concerns and tensions between
Speaker 1: Russia and the rest of the world. We saw the
Speaker 1: German Chancellor meeting with President Vladimir Putin in Moscow as
Speaker 1: Western allies expressed reservations over a Russian statement that it
Speaker 1: was beginning to pull back troops from the Ukrainian border. Well,
Speaker 1: let's get into it with our next guest, Angela Stent,
Speaker 1: Senior Advisor at the Center for Eurasian at Russian and
Speaker 1: East European Studies. You join just on the phone from Washington,
Speaker 1: D C. Angela. You were also a National Intelligence Officer
Speaker 1: for Russian and Eurasia at the National Intelligence Council. You
Speaker 1: are also in the Office of Policy Planning at the U.
Speaker 1: S Department of State. Give us an idea of the
Speaker 1: conversations that are happening right now at the highest levels
Speaker 1: as the United States and the rest of the world
Speaker 1: really try to understand and prepare for what Putin could
Speaker 1: be doing. So on the one hand, you know, if
Speaker 1: you look at the actual military deployments, there are still
Speaker 1: what about a hundred and thirty thousand troops, Russian troops
Speaker 1: surrounding Ukraine on three sides, even though the Russians have
Speaker 1: now said that they are pulling back some of those troops.
Speaker 1: On the other hand, you have President Putin coming out
Speaker 1: with the German Chancellor today saying, you know, there's room
Speaker 1: for dialogue as room for diplomacy. You have the Russian
Speaker 1: Foreign Minister saying that yesterday he wouldn't be saying that
Speaker 1: if he wasn't told that it was okay to say it.
Speaker 1: So we have mixed signals, and it's always the issue.
Speaker 1: Do you only look at the military capabilities, which would
Speaker 1: really lead you to believe there'll be some kind of invasion,
Speaker 1: or do you look at the broader picture and the
Speaker 1: politics and think that this is all part of Putin's plan,
Speaker 1: that we've been responding to all of his demands, and
Speaker 1: he's more or less got us where we are, which
Speaker 1: is we keep floundering and not knowing what's going to happen.
Speaker 1: I feel like to understand the situation that's happening right now,
Speaker 1: you need to understand Vladimir Putin. What do we need
Speaker 1: to understand about the individual? Uh? Mr Putin? Well, I
Speaker 1: think Putin now feels that his time has come. He
Speaker 1: looks out at the West and he sees us all polarized, divided,
Speaker 1: unable to get our own agendas through, and he is
Speaker 1: really you know. Fifteen years ago, he made a speech
Speaker 1: at the Munich Security Conference where he criticized the United
Speaker 1: States for imposing its will on the rest of the
Speaker 1: world and said that Russia had been really excluded from
Speaker 1: decision making after the collapse of the Soviet Union. So
Speaker 1: he sees this as his moment to sort of sees
Speaker 1: upon Western weakness as he sees it and try and
Speaker 1: force us to re say the way we organized security
Speaker 1: in Europe and what Russia's role is in that structure.
Speaker 1: Are we rethinking the way we organized security in Western Europe?
Speaker 1: And are we doing that as a result of the
Speaker 1: European unions reliance on Russia for oil? So we've actually
Speaker 1: made proposals in response to the Russian demands that we
Speaker 1: want to sit down with them and discuss a host
Speaker 1: of issues with them. Um. In fact, yes, the European
Speaker 1: Union gets about of its gas supplies from Russia, although
Speaker 1: the US has been exporting a lot of l n
Speaker 1: G recently to Europe. So the dependence on gas is
Speaker 1: clearly a factor here. But I think more in more
Speaker 1: general terms, we realize that the Russians are one thing
Speaker 1: that they can use it. Foreign policy is sort of
Speaker 1: military force and the thread of it, and we are
Speaker 1: responding to that by saying, maybe we have to take
Speaker 1: some of their demands at least into consideration. Ala, how
Speaker 1: did we get here? And I ask you you understand
Speaker 1: the inner workings and meetings that must go on in
Speaker 1: terms of stuff that wouldn't be in the headlines that
Speaker 1: most Americans would see on a daily basis. Our most
Speaker 1: global citizens wouldn't write the conversations that you guys are
Speaker 1: having behind the scenes, the subjects and countries that you're
Speaker 1: keeping an eye and I would assume Russia and Vladimir
Speaker 1: Putin are there. So how did we get there? Did
Speaker 1: this catch us off guard that we didn't maybe understand
Speaker 1: truly Putin's intentions? Yeah, I mean Putin has been signaling
Speaker 1: this for a long time, as I say, fifteen years
Speaker 1: at least since the annexation of krom and we listened
Speaker 1: to him, but we maybe didn't take it seriously enough. Uh.
Speaker 1: And I think also the bign administration coming in and
Speaker 1: saying we want to focus on China as our major threat,
Speaker 1: and we want to have to stable a predictable relationship
Speaker 1: with Russia so that we can sort of put Russia
Speaker 1: to one side and really focus on China, and Russia
Speaker 1: were saying, oh, no, you can't do that. You have
Speaker 1: to pay attention to us. So I think this is
Speaker 1: part of that re orientation. And then I think the
Speaker 1: Russians have looked at what happened the way we got
Speaker 1: out of Afghanistan, and also since you know, this is
Speaker 1: a time to sort of be tougher with the United States,
Speaker 1: I think probably we should all have taken what who
Speaker 1: we're saying more seriously earlier on. Well, we obviously can't
Speaker 1: go back in time and do that. But what the
Speaker 1: United States do now going forward, well, I think it's
Speaker 1: doing the right thing, which is offering diplomacy and talks
Speaker 1: with Russia, threatening massive sanctions if Russia invades, although I
Speaker 1: have to say I do not know how far the
Speaker 1: Europeans would go along with these very very tough financial
Speaker 1: and energy sanctions. Is that because they need Russian oil.
Speaker 1: It's because they have a much closer economic relationship with
Speaker 1: Russia than the US does, and they'll be much more
Speaker 1: adversely affected by it. Yes, it's energy, but it's also
Speaker 1: you know, their trade that they have with Russia would
Speaker 1: be adversely affected if they cut off from these you know,
Speaker 1: from the banks and things like that. So um, I
Speaker 1: think we could expect some cooperation from them, but not
Speaker 1: maybe as much as we wish. We're speaking with Angelus
Speaker 1: stant senior advisor for Center of Eurasian, Russian and Eastern
Speaker 1: European Studies. Her most recent Putin's world Russia against the
Speaker 1: West and with the rest. Also was in the Office
Speaker 1: of Policy Planning at the U s Department of State,
Speaker 1: among many other rules. Angela, I want to talk to
Speaker 1: you about what tools the United States has at its
Speaker 1: disposal in order to curb potential Russian aggression. Apart from sanctions,
Speaker 1: What can the US do, Well, there's a little bit
Speaker 1: an amount to what it can do. Obviously, we've been
Speaker 1: arming the Ukrainians, trying to give them more resilience, supporting them.
Speaker 1: But at President Biden the Senate, as there's obvious US
Speaker 1: troops are not going to go and fight Russian troops
Speaker 1: if there were to be an invasion of Ukraine. We're
Speaker 1: both nuclear superpowers. We've actually never afford each other before,
Speaker 1: so that is off the table. Uh. The other thing
Speaker 1: we're doing is strengthening our NATO allies in the region Poland,
Speaker 1: the Baltic States, Roumania. We've deployed extra troops, both NATO
Speaker 1: and US troops there because, of course, if there were
Speaker 1: an invasion, Uh, it's not necessarily true that it would
Speaker 1: just stop with Russia and Ukraine. You know, Poland shares
Speaker 1: a border with Ukraine at those Romania, so we you'd
Speaker 1: have to be very careful that this didn't spill over
Speaker 1: UM into our NATO allies. So I think those are
Speaker 1: the tools that we have UM and they so far
Speaker 1: they have probably been effective in staving off an invasion.
Speaker 1: That is, if you assume that Putin did want to
Speaker 1: invade in the first place, and not that he's just
Speaker 1: been using this to get to gain other goals. Okay,
Speaker 1: So I'm thinking about if you were, you know, putting
Speaker 1: together some documents for a presidential security team and advising them,
Speaker 1: what's the worst case scenario of what we are dealing
Speaker 1: with right now? What's the best case scenario? The best
Speaker 1: I can kind of get an idea of Russian backs
Speaker 1: down essentially, what's the worst case scenario you talk about
Speaker 1: that spillover UH into other NATO allies and that makes
Speaker 1: me a little nervous. Yeah, I mean, once you have
Speaker 1: a real war breakout, you can't predict what's going to happen.
Speaker 1: So the worst case scenario would be a full fledged invasion.
Speaker 1: You know, where the Russians go and they take here
Speaker 1: for capital, which they could do pretty quickly, and then
Speaker 1: what happens um. You know, the Ukrainian army is obviously
Speaker 1: weaker than the Russian one, but people will be fighting back.
Speaker 1: You just don't know in the fog of war what
Speaker 1: would happen, So you would have to try and make
Speaker 1: very sure that this didn't spread to some of Ukraine's
Speaker 1: neighbors who are NATO members. Um. But but but that
Speaker 1: I think would be would be the very worst scenario.
Speaker 1: The best scenario is if there is no invasion, um,
Speaker 1: and there are diplomatic talks. But even in the best scenario,
Speaker 1: this isn't gonna go away. There is no quick solution
Speaker 1: to this. Uh. The you know Russians want to reorder
Speaker 1: the European security for this, So um, you could have
Speaker 1: this pressure going on. You could have Russian troops withdraw
Speaker 1: then some bad um and the pressure would still be
Speaker 1: on Ukraine. How long does put And stay in power? Well,
Speaker 1: technically he can stay until six he had to constitution change.
Speaker 1: In reality, I think he can stay as long as
Speaker 1: he likes. He's turning seventy this year. Um. You know
Speaker 1: he runs for re election again in two but we
Speaker 1: could see him in office certainly until he's in his eighties.
Speaker 1: You talked about best kiss scenario, you talked about worst
Speaker 1: case scenario. What about likely scenario here? So I think
Speaker 1: the likely scenario is there isn't a full invasion UM
Speaker 1: or there isn't an invasion at all. There is constant
Speaker 1: pressure on Ukraine to make concessions, including saying that it
Speaker 1: doesn't want to join NATO UH, and then there will
Speaker 1: be constant pressure on the United States and Europe to
Speaker 1: renegotiate with the Russians UM to UH to in you know,
Speaker 1: to to exceed to some of Russia's security concerns, UH
Speaker 1: to discuss so called indivisible security with Russia. This could
Speaker 1: go on for a very long time, and I think
Speaker 1: that's the most likely scenario. We're not going to get
Speaker 1: back to the situation we were really before ten, where
Speaker 1: we still thought we could work with Russia on a
Speaker 1: lot of issues. We are working with them still on
Speaker 1: some with them, but I think we're going to get
Speaker 1: back more to a Cold war type system where we
Speaker 1: have to rethink, we have to dust off George Kennon's
Speaker 1: writings from and we have to think about how we
Speaker 1: can contain Russia UM more effectively. WHOLDA think that this
Speaker 1: is the kind of conversation we'd be having in Angela
Speaker 1: UM thank you so much for your insight, UH and
Speaker 1: your knowledge sharing. Angela Stent, Senior advisor at the Center
Speaker 1: for Eurasian Russian UH and East European Studies, during us
Speaker 1: on the phone from DC. Her book Putin's World, Russia
Speaker 1: against the West and with the Rest. She has served
Speaker 1: at the U. S State Department and the National Intelligence Council,
Speaker 1: So really some smart insight when it comes to the situation.
Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes Tim Stenovic on Bloomberg Radio. Well, the upcoming
Speaker 1: issue of Bloomberg Business Week. We're talking digital currencies, Carol, UH,
Speaker 1: and what China is doing specifically at the Olympics to
Speaker 1: show off that it has this digital version of its currency.
Speaker 1: And I gotta say I love the opening lot into
Speaker 1: this story. China is competing for more than just medals
Speaker 1: at those games in Beijing. It's also quietly trying to
Speaker 1: define the future of money. So let's get more on
Speaker 1: this story. Bloomberg News reporter Joe Light with us on
Speaker 1: the phone in our Washington, d C. Bureau, along with
Speaker 1: Bloomberg Business Week editor Joe Webber on the remote access
Speaker 1: line in Brooklyn. You know, Joe, I feel like the
Speaker 1: U s and China are dueling on so many different fronts,
Speaker 1: but China really being aggressive when it comes to a
Speaker 1: digital currency. Yeah, this is one where if any of
Speaker 1: us were in Beijing right now and we're attempting to
Speaker 1: interact with commerce and I actually, you know, I have
Speaker 1: been to Beijing and the before times and it is
Speaker 1: actually incredibly difficult to to pay for a meal by
Speaker 1: a souvenir because you're really not part of their ecosystem.
Speaker 1: UM and China kind of cracked that for the games
Speaker 1: and you basically can just pay with a digital u
Speaker 1: on and that has led uh a lot of watcher
Speaker 1: is of this space to look closely at it and say,
Speaker 1: could the US ever get there? Joe? And what's the
Speaker 1: answer so far? Uh? Well, I guess the answers maybe
Speaker 1: it is the first question is whether the US UM
Speaker 1: wants to get there. UM. The Federal Reserve just UM
Speaker 1: earlier this year put out a discussion paper which is
Speaker 1: really supposed to be the start of a multi year
Speaker 1: process of evaluating whether or not the US will issue
Speaker 1: its own for its own form of a central bank
Speaker 1: digital currency. And you know, even they're they're tepting feedback
Speaker 1: into may. Um. Lawmakers are supposed to get involved and
Speaker 1: help kind of define the contours what do you have
Speaker 1: CEBDC would look like. But so far central bankers, you know,
Speaker 1: are a little skeptical that it's necessary in the US,
Speaker 1: and they see a lot of see a lot of
Speaker 1: risk cooping before. Hey, Joe, you read about this in
Speaker 1: the piece, but I still need to get my head
Speaker 1: around this. The difference between this a central bank digital
Speaker 1: currency in just using your phone to pay for something,
Speaker 1: whether that is through a Chinese super app or you
Speaker 1: through Apple Pay here in the United States. Yeah, totally.
Speaker 1: That that's a great question, and I think for um,
Speaker 1: you know, most consumer transactions, it wouldn't look that much
Speaker 1: different at all. I mean, the way I think of
Speaker 1: a central bank divisual currency is basically a replacement for
Speaker 1: the cash in your pocket. It's a liability of the
Speaker 1: central bank, and if you went to use it, I
Speaker 1: mean basically just use it, probably just opened an app,
Speaker 1: hold up a QR code, and the money would transfer
Speaker 1: instantaneously to whoever you're You're dying from the big differences
Speaker 1: what's happening on the back end when you're using like
Speaker 1: Apple pay or sell, there are intermediaries involved. UM. If
Speaker 1: you're making an international payment, you know, you might have
Speaker 1: like your bank might have to talk to a correspondent bank,
Speaker 1: which talks to a correspondent bank in another country. That
Speaker 1: that whole process UM, you know, for an international transfer
Speaker 1: can take days, and all those inter mediaries are kind
Speaker 1: of taking their cut the central bank digital currency, that
Speaker 1: transfer would be happening, you know, instantaneously over government trolled
Speaker 1: servers UM without those cuts being taken UM. So it's
Speaker 1: really it's really more about, you know, what's happening on
Speaker 1: the back end when those payments are made, rather than UM.
Speaker 1: You know, the consumer experience if we look you know,
Speaker 1: pretty much the same, and you know, as it should
Speaker 1: because it's pretty easy already right your phone to the
Speaker 1: paper stuff. So it's safe to say that we're still
Speaker 1: figuring it out, and you definitely feel kind of hesitation
Speaker 1: amongst some central bankers, even though they're moving steps or
Speaker 1: taking steps to embrace UM a digital currency at the
Speaker 1: central bank level. Having said that, what is the advantage,
Speaker 1: What is the first mover advantage? If China is much
Speaker 1: more aggressive and moves faster than the US. What is
Speaker 1: the advantage to a country in Central Bank that does that. Yeah,
Speaker 1: So the key thing to remember that it's not just
Speaker 1: China who's developing UM CBDC s now UM. There are
Speaker 1: eight seven countries that are in the process of exploring
Speaker 1: a CBDC UM and and China is probably China, even
Speaker 1: though it's a pilot project still in China, UM, it's
Speaker 1: probably the largest economy that actually has something out there
Speaker 1: that's being experimented with. And that's an advantage because since
Speaker 1: you have all these other countries developing at once, they're
Speaker 1: gonna start UM tailoring their own CBDCs to UH to
Speaker 1: what's going what the largest economies are working working on.
Speaker 1: So if you have if you're a smaller country and
Speaker 1: you want your CBDC to interact as China CBBC, you're
Speaker 1: going to put in the privacy protections, you know, the protocols,
Speaker 1: the sorts of things that larger economy is kind of
Speaker 1: dictating to you. So China gets too far ahead of
Speaker 1: the US on setting these standards and the US kind
Speaker 1: of remains relatively silent, they could end up dictating you
Speaker 1: know what cb DC looks like UM worldwide. No, not
Speaker 1: just its own country and so bring it back to
Speaker 1: the US here, UM, who are the naysayers who don't
Speaker 1: want to see the US you know, be be at
Speaker 1: the tip of the speer here. Yeah. So some of
Speaker 1: the central bankers of themselves, you know, some members of
Speaker 1: the UM Board of Governors of the Federal Reserve have
Speaker 1: have expressed skepticism that it's necessary. UM banks are against it,
Speaker 1: and and one of the reason banks, you know, both
Speaker 1: both banks and central bankers are against it, is that
Speaker 1: having a CBDC could less than the amount of UM
Speaker 1: deposits that Americans keeping their banks. UM. So you know,
Speaker 1: if you're if you're if you're keeping a bank deposit,
Speaker 1: I mean basically that's a loan to your bank, and
Speaker 1: the bank will take that deposit and end up you know,
Speaker 1: using it to fund mortgages, using it to fund small
Speaker 1: business loans. That whole you know, web of credit in
Speaker 1: the US is very important and a lot of who
Speaker 1: have studied tvdcs think that if people could, you know,
Speaker 1: keep more electronic cash in little wallet instead of at
Speaker 1: a bank, they choose to do that, And if you
Speaker 1: reduced deposits in the US, you know by ten percent,
Speaker 1: even something that sounds relatively small like that, I could
Speaker 1: potentially have big ramifications for you know, the cost of
Speaker 1: credit and the amount of credit that's available. Interesting world
Speaker 1: that we're living in. It's a great deep dive into
Speaker 1: in terms of what China already doing. Um, thank you
Speaker 1: so much. Bloomberg News reporter Joe Lighte from our Washington
Speaker 1: d C. Bureau along with Bloomberg Business Week editor Joe Weber.
Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. It is
Speaker 1: today's Bloomberg Big Take. It's also among the most right
Speaker 1: on the Bloomberg terminal about the unknown hedge fund manager
Speaker 1: that you may want to know about. Why? How about
Speaker 1: two billion reasons? Why? Yeah, we're talking about Karthick Sarma
Speaker 1: out earning the likes of Steve Cohen last year. Yeah.
Speaker 1: I know, seriously, Well, I you know that's why we
Speaker 1: have him. A parmer in here, who's hedge fund reporter
Speaker 1: for Bloomberg News. She's with us in the Bloomberg Interactive
Speaker 1: Broker Studio. Check out him a story and more from
Speaker 1: the Bloomberg Big Take. It's on the Bloomberg Terminal and
Speaker 1: of course at Bloomberg dot com as well. Hammaum. Who
Speaker 1: is Karthik Sarma So Karthik Summer As you mentioned, Uh,
Speaker 1: he is a very little known hedge fund manager of
Speaker 1: people hadn't really heard about him much until the past year. UM,
Speaker 1: But he runs SRS Investment Management, which is a hedge
Speaker 1: fund that manages about eight billion dollars. And he used
Speaker 1: to work at Tiger Global, which is one of the
Speaker 1: pre eminent funds has had long term So is he
Speaker 1: considered a Tiger cub. He is considered a Tiger Grand
Speaker 1: cub actually because Tiger cubs come from Tiger managements. But yes,
Speaker 1: from this lineage of like very successful managers UM and
Speaker 1: he has a very strong reputation. And so what's interesting
Speaker 1: is that he made this very big bet on Avis
Speaker 1: UM the budget car rental company and UM and that
Speaker 1: earned him two billion dollars that he made personally. Last
Speaker 1: year alone, his hedge fund was up about thirty five percent,
Speaker 1: so investors did well as well. And this wasn't an
Speaker 1: eleven year old bet on Avis that he UM had held.
Speaker 1: And when the stock grew like four percents um, it
Speaker 1: paid off very well for him. You write in the
Speaker 1: story that this was this wager was an unusual one
Speaker 1: for him. It was UM So he's not sort of
Speaker 1: the typical hedge fund manager UM, and he doesn't take
Speaker 1: a lot of leverage on like like many funds too,
Speaker 1: and who actually runs the best short book. But he
Speaker 1: took UM a pretty sizeable position in AVIS, which is
Speaker 1: a typical for him. And he took a seat on
Speaker 1: the board, which you don't see a lot of funds
Speaker 1: like wanting to do UM. So this was unique for him.
Speaker 1: But UM, it's based on this belief that UM any
Speaker 1: company that owns a fleet of cars is going to
Speaker 1: do well in the like uber of the future environment
Speaker 1: where people are relying on these modes of transportation. How
Speaker 1: lucky was it When did he first get into because
Speaker 1: was it? It was a fight years ago. So it
Speaker 1: was a great pandemic play right where people renting, and
Speaker 1: then it became a meme stock like there was a
Speaker 1: lot of stuff there was the yes exactly, so he
Speaker 1: helped us for a long time. But then that there
Speaker 1: was that big meme stock bump that helped to meet
Speaker 1: cash out a little bit. And I think you took
Speaker 1: five percent profits um. And but it's it's still in
Speaker 1: the position and um it has since then grown a
Speaker 1: great deal. Well, speaking of the pandemic, where was where
Speaker 1: was Karthick riding out the pandemic? Was it the Hampton's?
Speaker 1: Was it Aspen? Maybe outside of the United States somewhere.
Speaker 1: So that's a very good question. A lot of the
Speaker 1: Hedgeman managers fled to places like Florida and Aspen or
Speaker 1: someplace beautiful, um and and luxurious. He actually moved to
Speaker 1: New Jersey and he spent some time with this family there.
Speaker 1: Carol's raising her hands. She's basically saying, Okay, the New
Speaker 1: Jersey is the Hamptons of New Jersey. It's a new specialty. UM.
Speaker 1: And he spent time with his family in a more
Speaker 1: modest home. UM. And so you know, it's a bit
Speaker 1: of a unique um, which is completely fine, um, but
Speaker 1: definitely a bit of a unique frend. Yeah, I think
Speaker 1: like a you know, billionaires earn a couple of billion dollars. UM.
Speaker 1: What's he like? Well, UM, these hedgement managers are in
Speaker 1: quite private and UM don't always want to comment and
Speaker 1: don't want to necessarily engage. So UM, everything we've heard
Speaker 1: about him is that he um is well respected that
Speaker 1: he has a good you know, his investors are certainly happy.
Speaker 1: Modest down to Earth is the reputation he's earned. So
Speaker 1: he's getting attention because of this, you know, out performance,
Speaker 1: especially among the establishment in the hedge fund community. Has
Speaker 1: he I would assume that eleven years been a consistent performer.
Speaker 1: What do we know about his consistent performance? So there's
Speaker 1: not a whole lot of like detailers to going back,
Speaker 1: but he's got Yeah, it's tricky, but he does. He does.
Speaker 1: He is known for being a strong performer. Obviously this
Speaker 1: has been quite an quite a significant year for him.
Speaker 1: Um but um. If we look at some of his
Speaker 1: numbers even in the past two years, he's pretty use
Speaker 1: double digit games. One was a very strong year and
Speaker 1: the year before we're still you know, single to double
Speaker 1: digit game. Um, but making him, you know, one of
Speaker 1: the strongest performers. And you know, we do this this
Speaker 1: ranking of hedge fund managers and who had the most
Speaker 1: last year and we see some very common names appearing
Speaker 1: on our list every year. You know, Ken Griffin was
Speaker 1: on this year, Chris Hohne both one last year is
Speaker 1: the England or these are names you expect Um, but
Speaker 1: we saw some new names in Karthik being number three,
Speaker 1: beating the likes of Steve Cohen. Um, I just see
Speaker 1: the news room like when the stuff starts to pop up, right. Yeah,
Speaker 1: And and you know it's nice to see some fresh
Speaker 1: faces on this list, you know, Steve Schoenfeld, Richard Michelle,
Speaker 1: these are also newer names that made the top fifteen
Speaker 1: lists calculations and no women, there hasn't There hasn't been
Speaker 1: a woman on the top fifteen list unfortunately fingers crossed
Speaker 1: the one day that that happens. Hey, how have hedge
Speaker 1: funds done? How have they done? Yes? So, Um, there's
Speaker 1: a bit of dispersion. You see some outperformers, some funds
Speaker 1: doing very well, like the multi strategy funds like the Citadels,
Speaker 1: the millenniums, those did very well. Um. Some multi shrats
Speaker 1: like point seventy two didn't do nearly as well compared
Speaker 1: to like I said at all um, the quant struggled
Speaker 1: a lot in but made a come back last year.
Speaker 1: So renaissance terrible year, double digit gains did bounce back.
Speaker 1: Investors still redeeming from Renaissance because they were not thrilled
Speaker 1: with that that first very difficult year. Um, so they
Speaker 1: still have seen fifty and billion dollars in outflows and
Speaker 1: redemptions alone. Um in like fourteen months. Was such an
Speaker 1: ow performer for so long. I'm just generally twenty seconds
Speaker 1: is more money though. In general, overalls continuing to come
Speaker 1: into hedge funds. Yes, the hedge of an assets globally
Speaker 1: are I think they talked to four trillion dollars now
Speaker 1: they're generally going to the bigger managers, the bigger players.
Speaker 1: A lot of money, small amount of hands, still a
Speaker 1: lot going on. UM. I love this story. It is
Speaker 1: among the most read. We said, it's the Bloomberg Big take.
Speaker 1: Read it in its entirety. Just head to the Bloomberg
Speaker 1: or Bloomberg dot com. Hema par March. She's hedge fund
Speaker 1: report at Bloomberg News Inner Interactive Broker Studio. So good
Speaker 1: to see her. You're listening to Bloomberg Radio road. Yeah,
Speaker 1: but you let me drive? No, no, no, all right, please,
Speaker 1: I want to drive. It's good question. This is the
Speaker 1: ride to the clothes on Bluebird Radio. All right. Got
Speaker 1: about fourteen minutes left in today's trading session. We did
Speaker 1: see the SMP five hundred, Nasdaq one under both pair
Speaker 1: some gains, as President Biden was speaking there from the
Speaker 1: East room, but just slightly. I think it was about
Speaker 1: a twelve or fourteen point moved to the downside on
Speaker 1: the S and P, but then we've bounced back off
Speaker 1: of that. So I would say overall, as to me,
Speaker 1: you were noting to kind of little change in terms
Speaker 1: of market reaction. Let's get to it, Let's get to
Speaker 1: the drive to the close. Mace McCain is chief investment
Speaker 1: officer at Frost Investment Advisers five point one billion dollars
Speaker 1: in assets under management. Mace joins us on the phone
Speaker 1: from San Antonio, Texas. Mace, how are you. I'm great
Speaker 1: this afternoon and enjoying this upmarket. Well, it's it's been
Speaker 1: choppy though, It's it's you know, today is certainly up,
Speaker 1: but yesterday it was a different story. In your to day,
Speaker 1: we're down on the major industries. UM, what are you
Speaker 1: hearing from from clients right now? What are their concerns?
Speaker 1: There was some concern with the increases in UM, the
Speaker 1: potential increases in the FED and rates. Uh, I think
Speaker 1: we'll be looking past that. Typically, you know, when we
Speaker 1: get the first rate increases we're up twelve months later,
Speaker 1: and we think that that pattern holds. We're counseling people
Speaker 1: to the whole type that things are going to the
Speaker 1: rest of yours can't look better, all right? Does that matter?
Speaker 1: If the FED, let's say, comes out of that March
Speaker 1: meeting and is very aggressive and does a half a
Speaker 1: point uh increase when it comes to rates, will investors
Speaker 1: feel confident at that point? Are you talking about games
Speaker 1: that come later in the year, maybe when a lot
Speaker 1: of the moves by the FED are already done. I
Speaker 1: think by mid year we'll be looking better on the market.
Speaker 1: The you know, the odds of the FED going twenty
Speaker 1: five or fifty I think are about evil now. Um,
Speaker 1: you know, it could be either, But I just don't
Speaker 1: see the figure overly aggressive when we still have unemployment
Speaker 1: numbers below where the the we started, If we still
Speaker 1: have two and a half million people that we're trying
Speaker 1: to get into the workforce. M Hey, what is the
Speaker 1: main concern right now that you have when it comes
Speaker 1: to thinking about asset allocation. I've been asking a lot
Speaker 1: of our guests to weigh in on how they're thinking
Speaker 1: about asset allocation for their clients. In a time when
Speaker 1: a lot of people are arguing that there's really not
Speaker 1: a big reason to have fixed income into portfolio. What
Speaker 1: are you telling clients right now? Well, I think the
Speaker 1: fixed income is serving a very important function. Of course,
Speaker 1: we're keeping ours fairly short, so we had positive returns
Speaker 1: last year in our funds because we're keeping the income
Speaker 1: high in the duration shorts, so we're not taking a
Speaker 1: lot of price risks. We're still positioned that way, and
Speaker 1: I think it's still important to have that fixing component. Um,
Speaker 1: you know, if if we the FED makes a mistake
Speaker 1: and we head towards recession, the stock market to be
Speaker 1: very vulnerable, so people be loving the fixed income if
Speaker 1: we get in that situation. A lot of ifs and butts, right,
Speaker 1: it seems at this point is that fair that we know, Um,
Speaker 1: when the FED enters a rate hiking cycle and then
Speaker 1: we've got the balancie to deal with as well. Um
Speaker 1: that while certainly equities tend to go up early in
Speaker 1: that cycle, the Fed it's not an exact, you know,
Speaker 1: policy guide, right or it's not. There's not an exact
Speaker 1: playbook in terms of how the FED needs to do this,
Speaker 1: and certainly coming off of the unprecedented times that we had.
Speaker 1: Likely many say that the Fed is going to make
Speaker 1: a policy mistake. So for investors thinking about that, how
Speaker 1: do they ride it so that they're not you know,
Speaker 1: riding the volatility, which is, as you know, a tough
Speaker 1: thing to do. I think the Feds in a very
Speaker 1: difficult position. You know, they have dollmandates, a full employment
Speaker 1: and an inflation target, and the inflation targets coming way
Speaker 1: in hot, and there's still their full employment mandate. We
Speaker 1: still have a workforce participation well below what the normalized
Speaker 1: rate is. So they're not achieving either mandate today and
Speaker 1: it's going to be very hard for them to get there.
Speaker 1: And as you point out, so I think that them
Speaker 1: being able to land this plane without making a big
Speaker 1: policy mistake is uh. The odds are way against them.
Speaker 1: So Mace, does that mean that you think they're going
Speaker 1: to have to make a do something drastic in the
Speaker 1: sense of an increase of fifty basis points perhaps to
Speaker 1: the next meeting. They may do fifty Uh, but we
Speaker 1: are in the camp that we don't think they'll be
Speaker 1: able to sustain rate increases for very long. We have
Speaker 1: a lot of debt in the in the system, and
Speaker 1: the consumers are are spending pretty quickly, spending down all
Speaker 1: the government incentive checks that they were giving during the pandemic.
Speaker 1: And we just don't see the ghosts of the the
Speaker 1: big driver to the economy going into um later this year.
Speaker 1: And in so I'm curious, um mace new money that
Speaker 1: comes in. You guys work with a lot of institutional investors,
Speaker 1: pension funds. Where does that new money where our investors
Speaker 1: asking you to put that money at this point, and
Speaker 1: I understand that they invest for the long term, but
Speaker 1: in this kind of uncertain still environment, as some would say,
Speaker 1: where where is that new money flowing too? So we're
Speaker 1: continuing our asset allocation with generous allocations to equities, but
Speaker 1: we have our eye on the door, you know, we
Speaker 1: are looking for the FED mistake, We're looking at the
Speaker 1: potential recession, and so we're just being very vigilant about
Speaker 1: when we may want to become more conservative allocate more
Speaker 1: into the bottom market still US equities or equities outside
Speaker 1: the US, while still keeping your eye on the door.
Speaker 1: Primarily US equities, especially the growth stocks and and the
Speaker 1: ones have been so successible, and we've been underweight Europe
Speaker 1: and UH and international equities for a while, we just
Speaker 1: were betting when US recovering first. Is that something that
Speaker 1: you see continuing to play out in I do. I
Speaker 1: think the next big move in our economy is inventory
Speaker 1: restocking and the UH. But that's been delayed. We get
Speaker 1: delayed into lay and delayed. We had a acron slow
Speaker 1: us down, and now we've had the Canadian trucker protests
Speaker 1: slowing us down. So it's been UM. We didn't see
Speaker 1: an inventory building one of the most recent economic reports, right,
Speaker 1: We did see that fairly, a fair amount of that
Speaker 1: happening though, Yes, and we think that that continues for
Speaker 1: the next couple of quarters. We think inventory build is
Speaker 1: a big growth factor as a consumer just starts to
Speaker 1: slow down a little bit. Just to rehash for just
Speaker 1: about eight minutes away from the closing bello, we arec
Speaker 1: investors buying into this close. We are at our highs
Speaker 1: of this session, so up one point six percent, up
Speaker 1: almost seventy one on the SNPI, seventy two down, Jones
Speaker 1: Industrial average up four hundred forty one point again at
Speaker 1: one NASDAC the outperformer that average up two and a
Speaker 1: half percent. Here and tim we're looking about three forty
Speaker 1: eight points higher. But again you're seeing us, certainly on
Speaker 1: the SNP and the NASDAC pretty much at our best
Speaker 1: levels of the session. Carol brings up a really good
Speaker 1: point that investors seeming to take President Biden's comments about
Speaker 1: Russian and Ukraine in stride. Why do you think that is?
Speaker 1: I don't think that the prospect of war or the
Speaker 1: is a big driver here. Um. There just isn't enough
Speaker 1: upside for them. There's a chance for them getting bogged down.
Speaker 1: There's just not the probability of them UM trading into
Speaker 1: that and and facing the sanctions. I think there's really
Speaker 1: large distancentives. So I just don't see that moving forward. UM.
Speaker 1: Having said that, you like you said some of those
Speaker 1: big tech names, and it was interesting I came across
Speaker 1: the story. I think it was b of a UM
Speaker 1: that was talking about specifically that in terms of investors
Speaker 1: holding on to text shares, I think it was at
Speaker 1: one of the lowest levels that we've seen in some time.
Speaker 1: Be of A clients most under right on textox since
Speaker 1: two thousand six. That was their latest Bank of America survey. Uh,
Speaker 1: you like the technology? I do. I think our forecast
Speaker 1: on interest rates is probably a little bit more benign
Speaker 1: than the consensus. Do you think investors at this point
Speaker 1: in the markets in general are just getting kind of
Speaker 1: crazy when it comes to rate hikes. I do. When
Speaker 1: I'm seeing seven and eight rate hikes. I don't think
Speaker 1: our economy is strong enough to sustain seven or eight
Speaker 1: rate hikes. I don't think the Fed is going to
Speaker 1: look at the employment numbers anytime soon and believe that
Speaker 1: they can raise that much. So does that leave the
Speaker 1: So does that take us back to the recession comment
Speaker 1: that you made earlier? Uh? And why you think there
Speaker 1: will be a recession in? What makes you makes you
Speaker 1: say that? I think there's the dead ending economy and
Speaker 1: the consumer is you know, we're hitting a cliff on
Speaker 1: the stimulus. Uh, You're of the stimulus is going to
Speaker 1: have been taking money basically out of the economy, and
Speaker 1: I think that there's just not a driver there after
Speaker 1: that happens, and after the rebuild, the inventory build is complete.
Speaker 1: We talked earlier with our Creedy group of our Bloomberg
Speaker 1: Markets correspondent who's been watching very closely the energy sector.
Speaker 1: We did see oil did back a little bit and
Speaker 1: talked about the correlation between that and what we saw
Speaker 1: in the rise in in U S docks energy though
Speaker 1: by and far still you know, your outperformer among the
Speaker 1: eleven major industry groups in the S and P five hundred,
Speaker 1: it is up two so far this year. You still
Speaker 1: see opportunities there. Yes, we you know, we're sitting in
Speaker 1: San Antonio. We have a front row seat to what's
Speaker 1: going on in energy, and I would say there's been
Speaker 1: a really large underinvestment in real in energy, and um,
Speaker 1: we're going to see the outcome of that as the
Speaker 1: economy worldwide starts to open up. I think we're going
Speaker 1: to be consistently short on oil and gas and uh
Speaker 1: in a lot of other commodities is re reopen. So
Speaker 1: even though you think is not going to be pretty,
Speaker 1: you're not ready to move new assets to cash or
Speaker 1: or over index at least when it comes to asset
Speaker 1: allocation on cash or or on bonds. At this point
Speaker 1: you're still going you're still over indexing on on equities. Right. Yes,
Speaker 1: you know we're seeing really strong price increases today. We
Speaker 1: think we're going to see really good earnings reports. Um,
Speaker 1: you know, we will be watching the FED very closely
Speaker 1: to see if they'd make the mistake that we're worried
Speaker 1: about and um, that would cause us to get more bearished.
Speaker 1: But right now we're to wait and see is there
Speaker 1: something that we're gonna get fed minutes tomorrow. I don't
Speaker 1: know how much you closely follow that. Is there something
Speaker 1: that could be in those minutes that might might kind
Speaker 1: of change your thinking a little bit? When it comes
Speaker 1: to the investment environment, the same cross talk could lead
Speaker 1: just to believe that there really isn't a consensus to
Speaker 1: go uh, go really quickly and go hard. So we
Speaker 1: think there's still enough WI sentiment there too to to
Speaker 1: claus and to go slowly. I think it's mostly related
Speaker 1: to the labor numbers. All right, One last question fixed
Speaker 1: income play, Is there any way you play the yeel curve.
Speaker 1: We're still short, you know, you are pretty much on
Speaker 1: the short end, and but we are looking to with
Speaker 1: our forecast of possible recession in twenty three, you'll see
Speaker 1: us start to lengthen out because we don't want to
Speaker 1: stay too short too long. All right, Really appreciate all
Speaker 1: your time today. Our drive to the close with Mace McCain, President,
Speaker 1: managing director and chief investment Officer at Frost Investment Advisors
Speaker 1: on the phone from San Antonio, Texas. They've got about
Speaker 1: five point one billion in assets under management. Thanks for
Speaker 1: listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud,
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