WEBVTT - Surveillance: Sanctions Impact with Kasman

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<v Speaker 1>Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along

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<v Speaker 1>with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring

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<v Speaker 1>you insight from the best and economics, finance, investment, and

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<v Speaker 1>international relations. Find Bloomberg Surveillance, an Apple podcast, Suncloud, Bloomberg

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<v Speaker 1>dot Com and of course on the Bloomberg terminal. Let's

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<v Speaker 1>get to the conversation with Bruce Cassman of JP Morgan. Bruce,

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<v Speaker 1>let's start here just quickly, your reaction to this handline

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<v Speaker 1>and how you'd process a line like that. There are

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<v Speaker 1>certain positive developments as far as negotiate is from our side,

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<v Speaker 1>informed me the President of Russia. Your thoughts on the

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<v Speaker 1>political side. I'm just gonna keep an open mind here,

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<v Speaker 1>recognize the wide range of uncertainty, but also recognize how

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<v Speaker 1>far the conflict has gone so far in terms of sanctions,

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<v Speaker 1>in terms of the damage to the Russian economy, and

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<v Speaker 1>I think the damage that will be inflicted on the

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<v Speaker 1>global me I don't think that will be reversed. I

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<v Speaker 1>don't think the sanctions will be reversed very quickly, even

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<v Speaker 1>if there's good news. So from a macro econ on

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<v Speaker 1>point of view, which is the world I live in.

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<v Speaker 1>We are going to feel the effects of this clearly

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<v Speaker 1>for a while. Dr kesmen, you know I would never

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<v Speaker 1>front run Michael Faroli, but let's do it. Okay, you've

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<v Speaker 1>got a research report coming out tonight, Weekly Prospects. How

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<v Speaker 1>are you going to adjust g d P. I don't

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<v Speaker 1>want to get out in front of your clients or

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<v Speaker 1>Faroli was working with a slide rule, but how are

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<v Speaker 1>you going to adjust American and global GDP this weekend? Well,

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<v Speaker 1>I'm not allowed to front run my faecasts either. But

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<v Speaker 1>what we've been doing as the as a general rule,

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<v Speaker 1>has been increasing the drag as we've continued to see

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<v Speaker 1>more pressure on energy prices. Obviously, the natural gas is

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<v Speaker 1>is a big factor in Europe, crude oil as a

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<v Speaker 1>factor elsewhere. Broadly speaking, what we're doing is raising inflation

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<v Speaker 1>and lowering growth, and we can tinue to move down

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<v Speaker 1>that path. I would emphasize though that we still have

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<v Speaker 1>growth for the US this year running above trend. We

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<v Speaker 1>still have the unemployment rate falling. Uh. These are all

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<v Speaker 1>works in progress in terms of understanding the impact. But

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<v Speaker 1>we've done We've dented our views on the US and

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<v Speaker 1>the global economy. We haven't derailed our view on a

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<v Speaker 1>still solid recovery at least. I thought that was very diplomatic.

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<v Speaker 1>I thought has been handled that well well. Basically, you

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<v Speaker 1>can expect a downward revision perhaps if you are lowering

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<v Speaker 1>the growth estimates, and it leads us to the our word,

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<v Speaker 1>the recession call, and Goldman Sacks put out their note

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<v Speaker 1>with their downgrade of their expectation. They said, the US

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<v Speaker 1>recession chance for the next twelve months, they see it

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<v Speaker 1>as about twenty percent. Is that consistent with what you're

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<v Speaker 1>thinking of right now, Bruce? I think somewhere in the

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<v Speaker 1>range and makes sense to me. I mean, that's just

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<v Speaker 1>recognizing how much uncertainty is here. But I would emphasize

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<v Speaker 1>that the US economy has shown already pretty significant resilience

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<v Speaker 1>in the face of shocks. The underpinnings are healthy. So

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<v Speaker 1>I think what these recession probabilities reflect is how certain

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<v Speaker 1>the potential outcomes are here, not the fragility of the

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<v Speaker 1>U s economy right now. Although Bruce at ten o'clock

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<v Speaker 1>am Eastern, we're going to get that University of Michigan

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<v Speaker 1>sentiment survey. We're expecting it to post a new post

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<v Speaker 1>twenty eleven low. How significant is that in terms of

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<v Speaker 1>consumer spending, and how long this resilience can last. As

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<v Speaker 1>you know, the Michigan survey has already moved down to sharply,

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<v Speaker 1>and I think it's telling us something important, which is

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<v Speaker 1>consumers are worried, and particularly worried about the rise of inflation.

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<v Speaker 1>What's happening in the conflict is pushing higher prices on energy,

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<v Speaker 1>higher prices on food. US inflation is going to stay elevated.

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<v Speaker 1>I think the qualitative signal is important. I don't think

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<v Speaker 1>the level of confidence specifically lines up with spending. The

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<v Speaker 1>key issue here is we're getting hit by a huge

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<v Speaker 1>resiliency test in terms of household purchasing power, and we

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<v Speaker 1>do need households to eat into what is a large

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<v Speaker 1>reservoir of excess savings to make it through this. We

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<v Speaker 1>do think that's gonna happen, but it's not gonna happen

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<v Speaker 1>without some pain in terms of US consumption, in US

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<v Speaker 1>growth overall. Bruce, just quickly, how hard is it going

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<v Speaker 1>to be for the Europeans to avoid recession over the

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<v Speaker 1>next tw half months, Much harder than the US. And

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<v Speaker 1>I think the question there really is how strong is

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<v Speaker 1>their commitment to take the pain of cutting off natural

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<v Speaker 1>gas supply from Russia, and how willing are they to

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<v Speaker 1>offset some of that drag with fistal supports. Right now,

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<v Speaker 1>we're thinking Europe is going to be flirting with quarters

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<v Speaker 1>of growth close to zero uh. And I think we

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<v Speaker 1>do need to see a significant fistful response here, cushioning

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<v Speaker 1>the blow to keep the European recovery going. Hey, Bruce,

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<v Speaker 1>awesome as always, Bruce Kasman and JAKP. Morgan right now

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<v Speaker 1>on the attitude of America towards war and towards the

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<v Speaker 1>moment of this fractious two thousand and twenty two, Mohammed

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<v Speaker 1>units joined US editor in chief Gallop Gallup as a

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<v Speaker 1>poem organization. They've never done work for this party or

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<v Speaker 1>that party. They were seminal in the thirties of saying

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<v Speaker 1>no FDR will win versus alf Landon and they moved

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<v Speaker 1>on there to measuring America's tone. I want to know,

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<v Speaker 1>Mohammed on the death of the American liberal order. We've

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<v Speaker 1>got a reaffirmation of war in Europe. Not the Liberal

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<v Speaker 1>Party or the left of the Democrats, but the sense

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<v Speaker 1>of a liberal order coming out of World War two.

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<v Speaker 1>The end of the Cold War. How have you pulled

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<v Speaker 1>that in recent days? I'll tell you Tom, there couldn't

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<v Speaker 1>have been a better time to come out of the field.

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<v Speaker 1>With our last survey, we do something called the World

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<v Speaker 1>Affair Survey, where we ask Americans basically what role should

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<v Speaker 1>America playing the world and what threats We came out

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<v Speaker 1>of the field literally on the eve of the invasion Ukraine,

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<v Speaker 1>and before any troops or tanks actually crossed the border.

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<v Speaker 1>Americans were pretty focused on this issue, more than we

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<v Speaker 1>usually see. And I can point to many metrics. First

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<v Speaker 1>of all, just the favorability of Russia has hit an

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<v Speaker 1>all time negative high of eighty five percent. So when

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<v Speaker 1>you think about China as a focus in the United States,

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<v Speaker 1>it's only seventy favorability. Russia has now outdone that. For context,

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<v Speaker 1>in two thousand and three, Russia had a sixty three

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<v Speaker 1>percent favorable rating with the American public. When we ask

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<v Speaker 1>Americans about who's the greatest enemy facing the United States,

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<v Speaker 1>not the party think China comes on top at forty nine.

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<v Speaker 1>Russia actually came out right under them at thirty two.

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<v Speaker 1>UM we asked about a series of critical threats to

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<v Speaker 1>the vital interests of the United States. We saw an

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<v Speaker 1>uptake in Americans concern with the military power of Russia increasing.

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<v Speaker 1>Fifteen percent of Americans described that because of time. I

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<v Speaker 1>want to be sure because Lisa and John want to

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<v Speaker 1>get in here, or how isolationist are we right now?

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<v Speaker 1>We're not that isolationists. I would argue that when you

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<v Speaker 1>look at the recent polls of the last week, the

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<v Speaker 1>public is actually far ahead of leadership both here and

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<v Speaker 1>in Europe. UM. Every decision the Biden administration has made

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<v Speaker 1>has been supported by public opinion prior to it being taken.

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<v Speaker 1>So the notion that Americans are isolationists they're checking out,

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<v Speaker 1>is not in any way supported by data. And we

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<v Speaker 1>see a huge difference between now in twenty fifteen when

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<v Speaker 1>there was a war in Ukraine between Russia, UM and Ukraine,

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<v Speaker 1>and Americans were not nearly a styled in her focused

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<v Speaker 1>on but Mohammed, how much are they concerned also about

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<v Speaker 1>the inflationary backdrop and does that contribute to a concern

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<v Speaker 1>about their own well being versus this feeling of injustice

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<v Speaker 1>it's going on with Ukraine. Lisa, you nailed it. Before

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<v Speaker 1>the invasion, Seventy nine percent of Americans said that inflation

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<v Speaker 1>is likely to go a lot in the next six months.

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<v Speaker 1>That was a record high that we haven't seen in

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<v Speaker 1>decades here it so you can only imagine now that

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<v Speaker 1>oil prices have exploded, that concern is only going to skyrocket. Um.

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<v Speaker 1>I do though, caution against thinking that because of that

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<v Speaker 1>financial impact, Americans are going to kind of shy away,

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<v Speaker 1>because the decisions the Biden administration have taken, like no

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<v Speaker 1>longer importing rushing gas and a lot of talk about

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<v Speaker 1>oil prices and gas prices don't seem to have scared

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<v Speaker 1>Americans away from the focus on the importance of this

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<v Speaker 1>conflict for US vital interests. Mohammed, what are you looking

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<v Speaker 1>for to determine a shift in that? Because we were

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<v Speaker 1>just talking with Bruce Kasmin of JP Morgan about the

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<v Speaker 1>resiliency of the American consumer about despite some of the

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<v Speaker 1>concern of inflation, the concern of yet another crisis in

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<v Speaker 1>a crisis riddle riddled area era, that people are going

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<v Speaker 1>out and spending, people are still living. What are you

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<v Speaker 1>looking at for the sentiment to shift to indicate perhaps

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<v Speaker 1>a deterioration in that? Well, are econ on a confidence

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<v Speaker 1>index measure which you basically ask Americans, how are the

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<v Speaker 1>economy doing for you right now and in the future.

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<v Speaker 1>In the foreseeable future remains in a negative. It's been improving,

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<v Speaker 1>but inflation has really been dragging down American's perceptions of

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<v Speaker 1>the economy. So we're starting at a net negative. Um.

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<v Speaker 1>If I would look to something, obviously we're gonna look

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<v Speaker 1>to see how much that now dips, now that prices

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<v Speaker 1>have gone through the roof, not only on gas, butt

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<v Speaker 1>on goods as well. UM. So that is the critical question.

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<v Speaker 1>But we shouldn't assume that because inflation is hitting Americans

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<v Speaker 1>far that they somehow are willing to compromise or switch

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<v Speaker 1>it out for no longer being involved in supporting Ukraine MOhm.

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<v Speaker 1>With this new line that the administration is using around

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<v Speaker 1>the inflation story, the Peuton gas hike, is that resonating?

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<v Speaker 1>Do they still believe that it's Biden's felt is a

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<v Speaker 1>shifting untold? What is your rate on that? One thing

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<v Speaker 1>that we've known, Jonathan from this, at least at this

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<v Speaker 1>point of the Biden administration is they have failed at

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<v Speaker 1>their number one objective, which is too minimize the partisanship

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<v Speaker 1>in American public opinion. My answer to your question is essentially,

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<v Speaker 1>people that's a poor President Biden will buy that line.

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<v Speaker 1>But all the people that don't support President Biden, we're

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<v Speaker 1>complaining about gas prices long before this situation erupted. So

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<v Speaker 1>I think, unfortunately, Party I D is still gonna drive

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<v Speaker 1>primarily how people react to president by its presentation of

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<v Speaker 1>the facts. Right to catcha Mohammed as wise, Mohammed Tunis

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<v Speaker 1>at Gallab. We're looking at Ukraine, the war. Some of

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<v Speaker 1>the news is just flat out grimm and it folds

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<v Speaker 1>over to the repricing. In the Bloomberg world, the repricing

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<v Speaker 1>is most critical on the bye side where the assets

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<v Speaker 1>are held, and that includes Columbia, thread Needle. Ed Al

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<v Speaker 1>Hosseini joins US now their senior interest rate strategies, and

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<v Speaker 1>we're not talking price and yield today, we're talking markdowns

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<v Speaker 1>the ft. With the article on black Rock with a

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<v Speaker 1>huge number given their scale, do you presume that we

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<v Speaker 1>will see markdowns on fixed income in the coming days. Yeah.

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<v Speaker 1>I think investors broadly are crystallizing their losses on Russia holdings,

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<v Speaker 1>and I think the good news so far is that

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<v Speaker 1>we've not seen spillover effects, particularly demand for liquidity demand

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<v Speaker 1>for cash more broadly, So we're seeing margin calls in

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<v Speaker 1>in the you know, grand scheme of things, but they're

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<v Speaker 1>not really triggering a massive run in the in the

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<v Speaker 1>asset management system overall. Explain the pressure and I look

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<v Speaker 1>at f R A O I S, which is one

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<v Speaker 1>of the thermometers here the short term system, and it's rain.

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<v Speaker 1>It's elevated, but range bounded is not broken out to

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<v Speaker 1>a worst statistic. Explain the pressure on the bye side

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<v Speaker 1>to reprice troubled debt. Does that come from guys like

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<v Speaker 1>you do? You call up the managers and say, look,

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<v Speaker 1>you gotta re price this. How does that happen? So

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<v Speaker 1>to the fraud I asked in terms of dollar demands,

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<v Speaker 1>I mean bills, notes and bonds that are gonna be

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<v Speaker 1>marked down. Where does the pressure come from to mark

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<v Speaker 1>them down? Ultimately the asset owners? Right, I think this

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<v Speaker 1>by and large, if you look at Russian assets, there's

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<v Speaker 1>a collective decision here in terms of asset owners saying

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<v Speaker 1>we do not want exposure to to this risk, regardless

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<v Speaker 1>of how it unfolds in the short term. So there's

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<v Speaker 1>a broad movement out of Russian debt and equities. UH

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<v Speaker 1>in the investment world. There's a broad movement of companies

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<v Speaker 1>out of Russia as well, so we're seeing exposure to

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<v Speaker 1>physical assets in Russia getting written down um and altogether

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<v Speaker 1>that means we're taking the slice of Russia that's in

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<v Speaker 1>the financial system out of the equation. Edwards, there is

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<v Speaker 1>an issue right now with respect to an exogenist shock.

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<v Speaker 1>At what point ed do we shift into something that

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<v Speaker 1>looks like a growth scare? And I wonder at what

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<v Speaker 1>point they are the recession talks that we have been

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<v Speaker 1>hearing sort of perkly up through yield curve discussions start

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<v Speaker 1>to become that much louder. Yeah, I think I think

0:13:06.400 --> 0:13:10.320
<v Speaker 1>we're kind of there right now at your conversation. The

0:13:10.360 --> 0:13:14.679
<v Speaker 1>consensus view on US growth is starting to weaken. If

0:13:14.720 --> 0:13:17.160
<v Speaker 1>you look at the Fed's expectations, the FED has a

0:13:17.200 --> 0:13:20.840
<v Speaker 1>print of about four two grow. That's like they get

0:13:20.840 --> 0:13:24.480
<v Speaker 1>marked down a little bit next next week. But by

0:13:24.480 --> 0:13:26.520
<v Speaker 1>and large, I think the good news is we're starting

0:13:26.520 --> 0:13:29.280
<v Speaker 1>for a position of relative strength in terms of corporate

0:13:29.280 --> 0:13:33.640
<v Speaker 1>balance sheets, household balance sheets, UM, the labor market coming

0:13:33.720 --> 0:13:36.680
<v Speaker 1>into into this year, so we have some buffers to

0:13:36.760 --> 0:13:41.360
<v Speaker 1>eat through before the risk of recession UH becomes real,

0:13:41.400 --> 0:13:44.400
<v Speaker 1>But I think that turning point usually happens when things

0:13:44.400 --> 0:13:48.199
<v Speaker 1>are good. So unemployment, so four percent, the yield curve

0:13:48.760 --> 0:13:52.120
<v Speaker 1>almost inverted. This is when you start talking about things

0:13:52.160 --> 0:13:54.440
<v Speaker 1>starting to get worse. And right now I'm looking at

0:13:54.480 --> 0:13:56.840
<v Speaker 1>the interest rate expectations for the rest of the year,

0:13:56.960 --> 0:13:59.480
<v Speaker 1>and we're still pricing in six or even seven rate

0:13:59.520 --> 0:14:02.160
<v Speaker 1>hikes by your end, at least when it comes to

0:14:02.160 --> 0:14:03.959
<v Speaker 1>Fed funds futures. Do you think that the rest of

0:14:04.000 --> 0:14:08.080
<v Speaker 1>the complex of bonds and frankly everything else has factored

0:14:08.080 --> 0:14:12.199
<v Speaker 1>in seven rate hikes. I think we've done a pretty

0:14:12.200 --> 0:14:13.840
<v Speaker 1>good job. Yeah, And I think, especially if you look

0:14:13.880 --> 0:14:17.720
<v Speaker 1>at the credit space, the move wider in credit spreads, spreads,

0:14:17.760 --> 0:14:21.000
<v Speaker 1>investment great high yield. You know, we're about at fifteen

0:14:21.040 --> 0:14:24.120
<v Speaker 1>month wides now. Most of that move has not been

0:14:24.160 --> 0:14:28.320
<v Speaker 1>because the underlying fundamental story has deteriorated. It's been because

0:14:28.360 --> 0:14:30.400
<v Speaker 1>of the interest rate volatility. So I think we've done

0:14:30.400 --> 0:14:33.560
<v Speaker 1>a decent job of pricing that in at the stage.

0:14:33.800 --> 0:14:35.840
<v Speaker 1>So do you think right now that yields in the

0:14:35.880 --> 0:14:37.600
<v Speaker 1>long end are basically going to stay where they are

0:14:37.600 --> 0:14:40.160
<v Speaker 1>around two percent? Or do you think that as we

0:14:40.240 --> 0:14:43.040
<v Speaker 1>contemplate this, I don't want to call it stagflationary, but

0:14:43.600 --> 0:14:47.720
<v Speaker 1>this sort of unfortunately high inflation rate impacting growth for

0:14:47.760 --> 0:14:50.280
<v Speaker 1>a longer period of time that we could go significantly higher.

0:14:52.080 --> 0:14:55.960
<v Speaker 1>The biggest question in debt markets is will the Fed

0:14:56.040 --> 0:14:59.480
<v Speaker 1>have to raise fet funds above two And if we

0:14:59.560 --> 0:15:01.560
<v Speaker 1>have to rice that, how quickly do we need to

0:15:01.600 --> 0:15:03.840
<v Speaker 1>price that in? At the moment we're priced for the

0:15:03.840 --> 0:15:05.720
<v Speaker 1>fat to get two percent by the other next year

0:15:05.760 --> 0:15:08.160
<v Speaker 1>and kind of stay there. That's a relatively low level.

0:15:08.760 --> 0:15:11.240
<v Speaker 1>It's not a level that's really squeezing the economy from

0:15:11.280 --> 0:15:13.880
<v Speaker 1>it from a growth at an inflation perspective, If we

0:15:13.920 --> 0:15:17.280
<v Speaker 1>have to go there, that's a rapid repricing. I think

0:15:17.320 --> 0:15:19.800
<v Speaker 1>that creates him downside for risk and that very likely

0:15:19.840 --> 0:15:23.520
<v Speaker 1>inverts the curve very quickly, potentially as early as the

0:15:23.560 --> 0:15:26.320
<v Speaker 1>second half of this year. We gotta run. We've gotta

0:15:26.400 --> 0:15:28.360
<v Speaker 1>leave it there. Thank you, BUDDYSA White and who send

0:15:28.400 --> 0:15:37.480
<v Speaker 1>me that of Columbia thread NATO right now, Lisa Bramonts

0:15:37.480 --> 0:15:40.560
<v Speaker 1>and I are absolutely thrilled to present to you as

0:15:40.600 --> 0:15:44.280
<v Speaker 1>we've talked to General KIMMITTT, General Hodges, Animal Safrida's and

0:15:44.320 --> 0:15:49.320
<v Speaker 1>of course a wonderful angelis Stonard Brookings, Myra Rodriguez Vobry

0:15:49.480 --> 0:15:53.480
<v Speaker 1>areas managing principle of m R. V associates who is

0:15:53.560 --> 0:15:57.840
<v Speaker 1>beyond esteem in the study of Russia. Her shingle is

0:15:57.880 --> 0:16:02.680
<v Speaker 1>from Harvard of long ago, Mare, Uh Goldman and others. Myra.

0:16:02.840 --> 0:16:06.640
<v Speaker 1>What does our audience need to know right now about

0:16:06.680 --> 0:16:12.440
<v Speaker 1>the loneliness, the a loneness of Vladimir Putin? You know,

0:16:13.040 --> 0:16:15.320
<v Speaker 1>this is a man who for a very very long

0:16:15.400 --> 0:16:20.280
<v Speaker 1>time has been planning this tragic invasion. And for anybody

0:16:20.280 --> 0:16:23.760
<v Speaker 1>who's been observing this, sadly, you know, we're not we're

0:16:23.800 --> 0:16:27.680
<v Speaker 1>not surprised, and you know, I don't actually know how

0:16:27.720 --> 0:16:30.080
<v Speaker 1>alone he is. I don't think so, because he actually

0:16:30.080 --> 0:16:33.680
<v Speaker 1>has a lot, a lot of supporters. Uh. He has

0:16:33.800 --> 0:16:38.760
<v Speaker 1>had support for decade amongst many many Russians, not just

0:16:39.000 --> 0:16:43.320
<v Speaker 1>at the upper echelons of the Kremlin. And he also

0:16:43.360 --> 0:16:46.080
<v Speaker 1>has still a lot of supporters in the former Soviet Union.

0:16:46.120 --> 0:16:49.120
<v Speaker 1>I know, right now we're obviously very focused on Ukraine,

0:16:49.200 --> 0:16:52.040
<v Speaker 1>but he has a lot of supporters in Central Asia,

0:16:52.160 --> 0:16:54.880
<v Speaker 1>and he has done this invasion because he really thought

0:16:54.920 --> 0:16:57.000
<v Speaker 1>he could get away with it. What is the media

0:16:57.040 --> 0:17:00.720
<v Speaker 1>getting wrong in our analysis right now? Is the global

0:17:00.840 --> 0:17:05.720
<v Speaker 1>onslaught of analysis of the military, the humanitarian crisis and such.

0:17:06.000 --> 0:17:08.840
<v Speaker 1>What does it ring true to the analysis right now?

0:17:10.000 --> 0:17:12.280
<v Speaker 1>I think there is a lot of truth in what

0:17:12.400 --> 0:17:15.879
<v Speaker 1>the media is saying. However, I think that unfortunately, what

0:17:16.119 --> 0:17:18.639
<v Speaker 1>my biggest fear is going to happen is that with

0:17:18.800 --> 0:17:21.600
<v Speaker 1>time there will be a level of weariness and there

0:17:21.600 --> 0:17:23.800
<v Speaker 1>will be the next big story and it could be

0:17:23.800 --> 0:17:26.480
<v Speaker 1>coming out of Asia or the Middle East or who knows. Right,

0:17:26.520 --> 0:17:29.760
<v Speaker 1>there's always that unfrictability, and I worry that people are

0:17:29.800 --> 0:17:32.560
<v Speaker 1>going to be weary and tired, and that's what Vladimir

0:17:32.600 --> 0:17:35.840
<v Speaker 1>Putin is also counting on. I think that the media

0:17:35.880 --> 0:17:38.159
<v Speaker 1>also needs to focus on the fact that the not

0:17:38.280 --> 0:17:41.119
<v Speaker 1>only is there, of course, the tragic loss of life

0:17:41.320 --> 0:17:45.359
<v Speaker 1>in Ukraine, there will be decades of incredible dislocation in

0:17:45.400 --> 0:17:49.160
<v Speaker 1>that country from the psychological effects as well of being

0:17:49.200 --> 0:17:53.320
<v Speaker 1>at war. From a market's perspective, obviously a lot less

0:17:53.359 --> 0:17:56.359
<v Speaker 1>important than the human tool, but the markets are also

0:17:56.440 --> 0:18:00.240
<v Speaker 1>going to feel the volatility for for time to come.

0:18:00.240 --> 0:18:02.399
<v Speaker 1>We're seeing a lot of action and medals. Of course,

0:18:02.440 --> 0:18:06.520
<v Speaker 1>we're seeing action uh In in the spreads, but this

0:18:06.600 --> 0:18:09.760
<v Speaker 1>is there's going to be a contagion effect in emerging markets,

0:18:09.800 --> 0:18:12.240
<v Speaker 1>A contagion effect and emerging markets, we've been trying to

0:18:12.280 --> 0:18:15.240
<v Speaker 1>game out at the potential contagion effect for big banks.

0:18:15.280 --> 0:18:18.639
<v Speaker 1>We've seen that certainly in the price action in European institutions.

0:18:18.960 --> 0:18:21.919
<v Speaker 1>How do you assess the potential risk at a time

0:18:21.960 --> 0:18:24.359
<v Speaker 1>where it's not just the operations in Russia with the

0:18:24.400 --> 0:18:27.439
<v Speaker 1>likes of Goldman, Sachs and JP Morgan exiting the region,

0:18:27.480 --> 0:18:29.520
<v Speaker 1>but also all of the instruments tied to it, and

0:18:29.520 --> 0:18:32.439
<v Speaker 1>then all of the instruments tied to the commodities that

0:18:32.480 --> 0:18:35.400
<v Speaker 1>are significantly affected. How are you going about giving your

0:18:35.400 --> 0:18:39.800
<v Speaker 1>fed experience gaming that out. Yeah, that's a great point,

0:18:39.840 --> 0:18:42.200
<v Speaker 1>and I'm glad that you're reminding you of viewers of it.

0:18:42.440 --> 0:18:47.520
<v Speaker 1>From a credit perspective, American banks have very very little

0:18:47.600 --> 0:18:51.159
<v Speaker 1>risks with Russia. If you look at Goldman Sacks announcement

0:18:51.240 --> 0:18:54.720
<v Speaker 1>that it's pulling out, you know, less than one percent

0:18:54.840 --> 0:18:58.679
<v Speaker 1>of our its entire assets are in Russia. JP Morgan

0:18:58.760 --> 0:19:01.159
<v Speaker 1>I happen to be working JP Morgan when it was

0:19:01.200 --> 0:19:04.520
<v Speaker 1>first getting into Russian markets back in the in the

0:19:04.560 --> 0:19:09.480
<v Speaker 1>mid nineties, tremendously exciting period. But the assets as a

0:19:09.520 --> 0:19:12.880
<v Speaker 1>percent of all of the over trillion dollar asset based

0:19:12.880 --> 0:19:17.040
<v Speaker 1>for JP Morgan is very little. So from a credit perspective,

0:19:17.480 --> 0:19:21.000
<v Speaker 1>the risk is low. The market risk, however, is much higher.

0:19:21.080 --> 0:19:25.320
<v Speaker 1>You have all kinds of commodity linked bonds, you have

0:19:25.440 --> 0:19:29.919
<v Speaker 1>securitizations that are also based on Russian assets, You have

0:19:30.000 --> 0:19:34.040
<v Speaker 1>foreign exchange portfolios, and then you have, of course the

0:19:34.080 --> 0:19:36.680
<v Speaker 1>fact that you have all kinds of countries like Street Lanka,

0:19:36.840 --> 0:19:40.080
<v Speaker 1>the former uh f SU, you know, the former Soviet

0:19:40.200 --> 0:19:43.800
<v Speaker 1>Union countries. You have some in Latin America that are

0:19:44.000 --> 0:19:48.560
<v Speaker 1>very interconnected to exports and imports with Russia, not to

0:19:48.600 --> 0:19:51.959
<v Speaker 1>mention Africa of course, So that's really where I worry

0:19:52.040 --> 0:19:54.880
<v Speaker 1>that some of that spillover is going to happen more

0:19:54.920 --> 0:19:59.119
<v Speaker 1>from a market risk perspective rather than a counterparty a

0:19:59.280 --> 0:20:02.479
<v Speaker 1>credit risk perspective. Are there specific banks Myra that you're

0:20:02.560 --> 0:20:05.480
<v Speaker 1>keeping your eye on in terms of this risk expressing

0:20:05.520 --> 0:20:10.000
<v Speaker 1>itself in a more concentrated fashion. Yes, I think definitely Socitation,

0:20:10.000 --> 0:20:13.680
<v Speaker 1>Moral and UNI Credit from Italy. Those two banks are

0:20:13.800 --> 0:20:17.280
<v Speaker 1>much much more supposed to Russia from a credit perspective,

0:20:17.560 --> 0:20:20.520
<v Speaker 1>and so then of course there's also the market risk perspective.

0:20:20.840 --> 0:20:24.840
<v Speaker 1>Of course, City Bank, Goldman socks JP Morgan. Because they

0:20:24.920 --> 0:20:29.040
<v Speaker 1>are the largest trading houses, You're still going to see

0:20:29.080 --> 0:20:32.119
<v Speaker 1>some volatility in their trading portfolios. And it's not just

0:20:32.200 --> 0:20:34.840
<v Speaker 1>going to be Russia on Ukraine. It's going to be

0:20:35.000 --> 0:20:38.920
<v Speaker 1>all of the enormous emerging market portfolios that they trade. Mayra,

0:20:39.000 --> 0:20:40.760
<v Speaker 1>thank you so much. Too short of visit, will do

0:20:40.800 --> 0:20:44.399
<v Speaker 1>it again very soon. Mayro Rodriguez Va Derris, thank you

0:20:44.480 --> 0:20:46.080
<v Speaker 1>so much for the m r V. This is the

0:20:46.119 --> 0:20:50.760
<v Speaker 1>Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays

0:20:50.800 --> 0:20:54.240
<v Speaker 1>from seven to ten am Eastern on Bloomberg Radio and

0:20:54.400 --> 0:20:58.199
<v Speaker 1>on Bloomberg Television each day from six to nine am

0:20:58.720 --> 0:21:02.480
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0:21:02.600 --> 0:21:09.120
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0:21:09.280 --> 0:21:12.840
<v Speaker 1>Bloomberg dot com, and of course on the terminal. I'm

0:21:12.920 --> 0:21:15.560
<v Speaker 1>Tom keene In. This is Bloomberg