1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,240 --> 00:00:13,200 Speaker 1: with Jonathan Ferroll and Lisa Abramowitz. Daily we bring you 3 00:00:13,280 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,840 Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:30,360 Speaker 1: and of course, on the Bloomberg Terminal. The Churchill States 6 00:00:30,440 --> 00:00:34,440 Speaker 1: was a British protectorate that became the United Arab Emirates 7 00:00:34,479 --> 00:00:37,600 Speaker 1: and the families of the United Arab Emirates came together 8 00:00:38,040 --> 00:00:41,199 Speaker 1: with the power of Abu Dhabi and their oil to 9 00:00:41,320 --> 00:00:44,559 Speaker 1: control a large part of the market and culturally to 10 00:00:44,600 --> 00:00:48,000 Speaker 1: be a huge part of the Arabian peninsula. So he'll 11 00:00:48,040 --> 00:00:51,239 Speaker 1: Ben Mohammed al Missouri joins us right now. He is 12 00:00:51,440 --> 00:00:55,080 Speaker 1: Energy Minister for the United Arab Emirates, and I'm honored 13 00:00:55,120 --> 00:00:58,400 Speaker 1: to say from one of our most prestigious petroleum engineering 14 00:00:58,440 --> 00:01:02,600 Speaker 1: schools the universe, you have Tulsa. He is hugely qualified 15 00:01:02,960 --> 00:01:06,679 Speaker 1: to speak on his these matters. Ministers, thank you so 16 00:01:06,800 --> 00:01:10,320 Speaker 1: much for joining Bloomberg Surveillance this morning. I'd like to 17 00:01:10,319 --> 00:01:15,280 Speaker 1: know the power did ascendant United Arab Emirates has right 18 00:01:15,319 --> 00:01:20,920 Speaker 1: now over Russia. Explained the dialogue explained the change in 19 00:01:20,959 --> 00:01:24,960 Speaker 1: the relationship of you A with Russia in the last 20 00:01:25,000 --> 00:01:28,760 Speaker 1: week's Well, it's great to be with you and to 21 00:01:29,000 --> 00:01:34,040 Speaker 1: address your audiences. Um. First of all, you A, as 22 00:01:34,080 --> 00:01:38,440 Speaker 1: you know, is a member of an alliance called Open Plus. 23 00:01:38,920 --> 00:01:44,479 Speaker 1: That alliance since formed, have been doing a great job, 24 00:01:44,560 --> 00:01:48,520 Speaker 1: in my view, balancing the market, balancing the supply and demand. 25 00:01:49,200 --> 00:01:54,080 Speaker 1: And we we have a history within that alliance and 26 00:01:54,160 --> 00:01:58,640 Speaker 1: we've been through wars. We've been member countries, been through wars, 27 00:01:59,080 --> 00:02:05,280 Speaker 1: been through confort been through sanctions. Some of the members, 28 00:02:05,320 --> 00:02:09,040 Speaker 1: as you know, we're on and Venezuela. But something we 29 00:02:09,120 --> 00:02:14,360 Speaker 1: always do and that's almost a law in the way 30 00:02:14,400 --> 00:02:18,560 Speaker 1: that we work. We have one objective only, which is 31 00:02:19,000 --> 00:02:24,720 Speaker 1: trying to maintain the supply to the market and ensure 32 00:02:25,120 --> 00:02:30,400 Speaker 1: that that supply is affordable. Nowadays when the new politics 33 00:02:30,760 --> 00:02:35,680 Speaker 1: heads and we also the price is going higher, and 34 00:02:35,880 --> 00:02:41,400 Speaker 1: we are increasing the production gradually according to a plan, 35 00:02:42,040 --> 00:02:49,600 Speaker 1: but we cannot under any circumstances see a replacement for 36 00:02:49,720 --> 00:02:53,760 Speaker 1: ten percent of the world production that's from oil gas 37 00:02:53,800 --> 00:02:58,600 Speaker 1: as well. So I don't think practically if we bring 38 00:02:58,760 --> 00:03:03,080 Speaker 1: politics into the organization we can help the consumers would 39 00:03:03,080 --> 00:03:06,480 Speaker 1: start to help the consumers. Whatever you say that, sir, 40 00:03:06,639 --> 00:03:09,280 Speaker 1: but very importantly, and this is your public service to 41 00:03:09,360 --> 00:03:14,680 Speaker 1: desired family as well. Movebadalla and others within Abu Dhabi 42 00:03:14,760 --> 00:03:20,240 Speaker 1: are considering their Russian businesses. Should the United Arab Emirates 43 00:03:20,320 --> 00:03:25,600 Speaker 1: provide sanctions of some form, formal or informal to Mr 44 00:03:25,720 --> 00:03:29,360 Speaker 1: Putin and Russia. Well, I'm not going to talk about 45 00:03:29,480 --> 00:03:32,800 Speaker 1: the politics. I'm here to tell you about the market. 46 00:03:32,880 --> 00:03:36,680 Speaker 1: I'm here to tell you what can we do to 47 00:03:36,920 --> 00:03:40,200 Speaker 1: ensure that the consumers in the US and Europe and 48 00:03:40,320 --> 00:03:45,720 Speaker 1: elsewhere are getting an affordable supply of hydrocarbon? And in 49 00:03:45,840 --> 00:03:48,920 Speaker 1: order for us to do that, we have to use 50 00:03:49,520 --> 00:03:52,680 Speaker 1: every battle that is available. If you if someone is 51 00:03:52,720 --> 00:03:56,320 Speaker 1: asking us to let go of ten percent, then we 52 00:03:56,360 --> 00:03:59,280 Speaker 1: are asking we're telling the consumers that we are going 53 00:03:59,360 --> 00:04:02,240 Speaker 1: to increase the prices higher, and that is something we 54 00:04:02,280 --> 00:04:05,280 Speaker 1: cannot be part of. We have to be we have 55 00:04:05,440 --> 00:04:09,480 Speaker 1: to be wise in what we are asking for. Excuse me, minister, 56 00:04:09,720 --> 00:04:11,680 Speaker 1: I am wondering you keep saying it's important to have 57 00:04:11,880 --> 00:04:17,120 Speaker 1: affordable gas, affordable crude. What's affordable? What barrel? Is sort 58 00:04:17,120 --> 00:04:18,760 Speaker 1: of the line in the sand when it comes to 59 00:04:18,800 --> 00:04:21,560 Speaker 1: a price point for you, well, the price is a 60 00:04:21,600 --> 00:04:24,719 Speaker 1: result and the balance between the supply and demand is 61 00:04:24,760 --> 00:04:27,520 Speaker 1: that's that's where where we are worth argeting that we 62 00:04:27,600 --> 00:04:31,520 Speaker 1: had the five years the five years average, but you know, 63 00:04:32,000 --> 00:04:36,560 Speaker 1: we do our best and the world six months ago 64 00:04:37,440 --> 00:04:41,400 Speaker 1: have convened in COPI and asked us and asked the 65 00:04:41,400 --> 00:04:47,240 Speaker 1: the financial institutions to limit the the financing of new 66 00:04:47,560 --> 00:04:51,080 Speaker 1: oil and gas projects and that and now six months 67 00:04:51,120 --> 00:04:54,719 Speaker 1: after that they are asking some more. Oyal that does 68 00:04:54,760 --> 00:04:57,560 Speaker 1: not go hand in hand. We need now to put 69 00:04:57,560 --> 00:05:00,280 Speaker 1: a strategy and we need to come up with the 70 00:05:00,360 --> 00:05:06,840 Speaker 1: resources to find a new new new battles. The loss 71 00:05:06,839 --> 00:05:10,080 Speaker 1: in the group more than a million battle Minister, you 72 00:05:10,120 --> 00:05:13,080 Speaker 1: raise such an interesting point about the idea that there's 73 00:05:13,080 --> 00:05:15,800 Speaker 1: been a lack of investment which has caused a lack 74 00:05:15,839 --> 00:05:18,120 Speaker 1: of production in this market, which is the reason why 75 00:05:18,120 --> 00:05:21,640 Speaker 1: people say it's so tight. Given that backdrop is the 76 00:05:21,760 --> 00:05:24,520 Speaker 1: level of the price at which there is demand destruction, 77 00:05:24,839 --> 00:05:27,960 Speaker 1: that supply demand push and pull a lot higher than 78 00:05:27,960 --> 00:05:30,159 Speaker 1: it's that it used to be for OPAC, in other words, 79 00:05:30,400 --> 00:05:33,240 Speaker 1: is a hundred dollars a barrel much more sustainable over 80 00:05:33,320 --> 00:05:35,800 Speaker 1: a longer term for you, based on the lack of 81 00:05:35,839 --> 00:05:39,320 Speaker 1: production and a lack of investment. Well, we always look 82 00:05:39,360 --> 00:05:42,680 Speaker 1: at the consumers and we all know that the current 83 00:05:42,720 --> 00:05:47,080 Speaker 1: prices today are not comfortable to many countries and they 84 00:05:47,360 --> 00:05:49,800 Speaker 1: they we need to get the prices to something that 85 00:05:49,920 --> 00:05:53,039 Speaker 1: is reasonable. What is that price level? I think the 86 00:05:53,120 --> 00:05:56,200 Speaker 1: market will dictate that. It's the balance between the supply 87 00:05:56,240 --> 00:05:59,520 Speaker 1: and demand. So if we put more resources, we can 88 00:05:59,600 --> 00:06:03,640 Speaker 1: bring more oil and we can sustain that oil for 89 00:06:03,800 --> 00:06:06,680 Speaker 1: years to come. As you know, where the world is 90 00:06:06,720 --> 00:06:10,960 Speaker 1: almost consuming a hundred million barrels a day every year, 91 00:06:11,279 --> 00:06:14,360 Speaker 1: we lose eight millions of that and then his investment 92 00:06:14,720 --> 00:06:19,479 Speaker 1: who's investing. Very limited countries are investing, or our afford 93 00:06:19,560 --> 00:06:23,440 Speaker 1: to invest because we've been into a rollercoaster from seeing 94 00:06:23,800 --> 00:06:29,520 Speaker 1: at twenty dollars oil to a hundred hundred plus today. 95 00:06:29,600 --> 00:06:35,599 Speaker 1: So it is not encouraging investments. And many countries and 96 00:06:35,960 --> 00:06:39,520 Speaker 1: shareholders have been to have been telling the companies, the 97 00:06:39,560 --> 00:06:44,279 Speaker 1: IOSS who are reliable partners, and the shale oil producers 98 00:06:44,320 --> 00:06:47,000 Speaker 1: as well, we're not going to give you the resources 99 00:06:47,160 --> 00:06:51,159 Speaker 1: to to grow your production. That is troublesome when you 100 00:06:51,200 --> 00:06:54,680 Speaker 1: are hit with a geo political conflict like we are 101 00:06:54,760 --> 00:06:57,440 Speaker 1: having today. So what we need to do we need 102 00:06:57,480 --> 00:07:01,000 Speaker 1: to get our acts together. You will do whatever we 103 00:07:01,040 --> 00:07:06,080 Speaker 1: can as an open plus, but we need the financial markets. 104 00:07:06,400 --> 00:07:10,840 Speaker 1: We need the lenders to start easing on financing oil 105 00:07:10,880 --> 00:07:13,720 Speaker 1: and gas project so we can bring more battles in 106 00:07:13,760 --> 00:07:17,200 Speaker 1: the future. Minister, if you're taking this so seriously, why 107 00:07:17,280 --> 00:07:22,320 Speaker 1: was the OPEC plus meeting this month thirteen minutes long? Well, 108 00:07:22,840 --> 00:07:26,120 Speaker 1: we we we are meeting in a few days and 109 00:07:26,160 --> 00:07:29,600 Speaker 1: we are looking at the market. That was question. Just 110 00:07:29,640 --> 00:07:31,640 Speaker 1: to go back to the meeting early this month, it 111 00:07:31,760 --> 00:07:35,400 Speaker 1: was thirteen minutes long. This is one of the biggest 112 00:07:35,480 --> 00:07:37,720 Speaker 1: energy crisis we've seen it a long long time, and 113 00:07:38,080 --> 00:07:42,320 Speaker 1: you had a gathering that lasted thirteen minutes. Why should 114 00:07:42,320 --> 00:07:45,480 Speaker 1: we take what you're doing seriously if you only meet 115 00:07:45,560 --> 00:07:49,760 Speaker 1: for thirteen minutes. Well, there, when we meet, we look, well, 116 00:07:50,000 --> 00:07:53,720 Speaker 1: we look at the nons and NaNs and uh and 117 00:07:55,000 --> 00:07:58,720 Speaker 1: there are lots of unknowns at that meeting, including how 118 00:07:58,800 --> 00:08:02,800 Speaker 1: many battles are we're going to miss. And another thing 119 00:08:03,040 --> 00:08:07,680 Speaker 1: is is the deal closed with Iran, which is a 120 00:08:07,840 --> 00:08:13,040 Speaker 1: major partner and producer in in into the alliance, and 121 00:08:13,080 --> 00:08:16,520 Speaker 1: how many battles of the stone capacity going to come 122 00:08:16,560 --> 00:08:19,480 Speaker 1: to the market. All of these things are unknown to us, 123 00:08:19,480 --> 00:08:23,080 Speaker 1: so it's very difficult to come and and make other 124 00:08:23,200 --> 00:08:26,160 Speaker 1: than the plans. So we increased the four hundred thousand 125 00:08:26,520 --> 00:08:29,880 Speaker 1: and that's what we have agreed to do earlier. Minister, 126 00:08:30,040 --> 00:08:33,439 Speaker 1: I am fascinated by the view east from Dubai and 127 00:08:33,600 --> 00:08:37,480 Speaker 1: Abu Dhabt India. With all of your remit for the 128 00:08:37,559 --> 00:08:42,240 Speaker 1: Zayd family, can you please explain the India response to 129 00:08:42,320 --> 00:08:47,000 Speaker 1: this war in Ukraine. There's such an interesting relationship between 130 00:08:47,000 --> 00:08:50,600 Speaker 1: the United Arab Emirates in the India. Please explain to 131 00:08:50,760 --> 00:08:55,400 Speaker 1: us the India approach that you see. Well, many many 132 00:08:55,440 --> 00:09:01,480 Speaker 1: countries have have purchased from there, looked at at opportunities 133 00:09:02,000 --> 00:09:06,439 Speaker 1: and some have seen a discount and acted on it. 134 00:09:06,600 --> 00:09:11,000 Speaker 1: And I think I think that's the the the southern 135 00:09:11,080 --> 00:09:14,439 Speaker 1: right decisions of these countries. We don't have an oil 136 00:09:14,440 --> 00:09:19,120 Speaker 1: and gas sanctions or Russians on on Russian oil and gas, 137 00:09:19,160 --> 00:09:23,360 Speaker 1: so I think many countries have elected to go and 138 00:09:23,360 --> 00:09:27,320 Speaker 1: and purchase because there is there has been a discount, 139 00:09:27,360 --> 00:09:29,640 Speaker 1: and I think that's that's what we saw in the 140 00:09:29,640 --> 00:09:33,160 Speaker 1: news if if if that's what you mean, and many 141 00:09:33,200 --> 00:09:36,560 Speaker 1: others are going to do the same. So thinking of 142 00:09:36,720 --> 00:09:39,880 Speaker 1: squeezing barrels outside the market. When a discount is there 143 00:09:40,400 --> 00:09:44,160 Speaker 1: is just illusional. In my view, countries are going to 144 00:09:44,240 --> 00:09:50,400 Speaker 1: go and buy the cheaper available crude effort fits their refineries. Minister, 145 00:09:50,480 --> 00:09:52,439 Speaker 1: we have to leave it there. Thank you very much 146 00:09:52,440 --> 00:09:54,000 Speaker 1: for betting with us this morning. The u A a 147 00:09:54,200 --> 00:09:56,720 Speaker 1: energy minister on some of the big issues in the 148 00:09:56,800 --> 00:10:05,640 Speaker 1: energy markets right now. We now adapt with David Malpass. 149 00:10:05,760 --> 00:10:08,160 Speaker 1: He is President of the World Bank, and I know 150 00:10:08,280 --> 00:10:10,640 Speaker 1: he's laughing at me because he knows I really want 151 00:10:10,679 --> 00:10:13,760 Speaker 1: to quiz him on the end of valuation dynamics, but 152 00:10:13,880 --> 00:10:17,960 Speaker 1: that would be inappropriate this morning with the President of 153 00:10:18,080 --> 00:10:21,400 Speaker 1: the World Bank, Mr Malpass, thank you for joining. I 154 00:10:21,400 --> 00:10:23,800 Speaker 1: want to cut to the chase, David, with wheat down 155 00:10:24,920 --> 00:10:28,720 Speaker 1: from the panic peaks. If you shift at the World 156 00:10:28,760 --> 00:10:33,280 Speaker 1: Bank to aid for whatever ends up in Ukraine, how 157 00:10:33,320 --> 00:10:39,280 Speaker 1: will you affect that process? Hi? Hi Tom. It's a 158 00:10:39,320 --> 00:10:42,880 Speaker 1: worldwide problem. So that with the prospect of wheat shortages 159 00:10:42,960 --> 00:10:47,440 Speaker 1: drove up the price, but the markets are really adjusting some. 160 00:10:48,200 --> 00:10:50,760 Speaker 1: The World Bank puts a lot of money into food aid, 161 00:10:50,840 --> 00:10:53,880 Speaker 1: which is one of the crises facing poor people. We 162 00:10:53,880 --> 00:10:58,120 Speaker 1: we do seventeen billion dollars per year UH in various 163 00:10:58,160 --> 00:11:01,280 Speaker 1: forms of food support. One of the critical things for 164 00:11:01,400 --> 00:11:04,760 Speaker 1: people UH in poor countries is that there they have 165 00:11:05,080 --> 00:11:10,319 Speaker 1: targeted support meaning UH not subsidies that that support everyone 166 00:11:10,600 --> 00:11:13,640 Speaker 1: uh and are costly, but can you target it towards 167 00:11:13,679 --> 00:11:16,240 Speaker 1: the people that need it the most. As we look 168 00:11:16,280 --> 00:11:19,800 Speaker 1: at Ukraine, then we're we put in a lot of 169 00:11:19,800 --> 00:11:22,600 Speaker 1: money already. We were able to disperse in the in 170 00:11:22,720 --> 00:11:26,000 Speaker 1: recent weeks over half a billion dollars, which is very 171 00:11:26,080 --> 00:11:29,480 Speaker 1: fast aid that was much needed by the government at 172 00:11:29,480 --> 00:11:32,199 Speaker 1: the here at the at the beginning of the or 173 00:11:32,280 --> 00:11:36,160 Speaker 1: early in the in in the war. And I'm hopeful 174 00:11:36,200 --> 00:11:41,040 Speaker 1: the headlines that you were you were just giving sound optimistic. Thanks, David, 175 00:11:41,120 --> 00:11:44,400 Speaker 1: I am absolutely fascinated. I say this with great respect 176 00:11:44,440 --> 00:11:49,439 Speaker 1: for the institution. How the World Bank treats Russia moments 177 00:11:49,440 --> 00:11:53,280 Speaker 1: ago Johnson and Johnson with further sanctions as many of you, 178 00:11:53,360 --> 00:11:56,200 Speaker 1: I'm sure I heard in the Bloomberg World Bloomberg making 179 00:11:56,840 --> 00:11:59,600 Speaker 1: decisions in the last forty eight hours on the use 180 00:11:59,600 --> 00:12:03,160 Speaker 1: of our terminal within Russia. David mel Pass, how does 181 00:12:03,200 --> 00:12:10,200 Speaker 1: the World Bank address as sanctioned Russia around your usual mandates. 182 00:12:12,240 --> 00:12:15,640 Speaker 1: Russia is a shareholder of the World Bank and participates 183 00:12:15,640 --> 00:12:18,520 Speaker 1: in board discussions, but we stopped lending to them in 184 00:12:18,640 --> 00:12:24,760 Speaker 1: teen after the Crimea invasion and we've suspended all operations 185 00:12:24,800 --> 00:12:29,280 Speaker 1: and programs UH in Russia and in Belarus. UH. In 186 00:12:29,440 --> 00:12:33,280 Speaker 1: the current environment are people UM Many people have come 187 00:12:33,360 --> 00:12:36,400 Speaker 1: out of Russia UH, and so that's not so much 188 00:12:36,400 --> 00:12:40,000 Speaker 1: an issue for us. The bigger issue is building the 189 00:12:40,120 --> 00:12:44,199 Speaker 1: response for not only Ukraine but also people the refugees 190 00:12:44,240 --> 00:12:47,160 Speaker 1: in the Eastern Europe. How do you build a response, David, 191 00:12:47,240 --> 00:12:49,800 Speaker 1: when you do have these constraints on prices, when you 192 00:12:49,840 --> 00:12:53,840 Speaker 1: do see to Tom's point, we still is incredibly elevated. 193 00:12:53,880 --> 00:12:56,080 Speaker 1: You have seen some of the farming of fields in 194 00:12:56,240 --> 00:13:00,040 Speaker 1: Ukraine decimated. Farmers can't get out there. How much is 195 00:12:59,840 --> 00:13:03,199 Speaker 1: this going to disrupt frankly, your ability to help and 196 00:13:03,280 --> 00:13:07,079 Speaker 1: what you think should be priced into the market. The 197 00:13:08,520 --> 00:13:14,000 Speaker 1: critical is that supply increase outside of of Russia and 198 00:13:14,080 --> 00:13:17,920 Speaker 1: even and of Ukraine. Ukraine may have some comeback in crops, 199 00:13:17,960 --> 00:13:20,679 Speaker 1: but they need to need to have fertilizer and seeds 200 00:13:20,679 --> 00:13:24,640 Speaker 1: and meet the planting cycle. So critical variable for the 201 00:13:24,679 --> 00:13:30,520 Speaker 1: world is how responsive is supply elsewhere. That gets into UH, 202 00:13:30,559 --> 00:13:34,040 Speaker 1: the the UH, the subsidies that are being done that 203 00:13:34,200 --> 00:13:38,920 Speaker 1: sometimes stop people farmers from from producing and increasing their output. 204 00:13:39,240 --> 00:13:42,240 Speaker 1: So that's one. And then as far as the refugees, 205 00:13:42,320 --> 00:13:46,360 Speaker 1: we have a great deal of contact with the other 206 00:13:46,480 --> 00:13:49,880 Speaker 1: agencies that along with the World Bank are responding to 207 00:13:50,160 --> 00:13:54,800 Speaker 1: two refugees in Poland, in Moldova, UH, in Romania, UM, 208 00:13:54,960 --> 00:13:57,439 Speaker 1: and we have programs in each of those that are 209 00:13:57,520 --> 00:14:02,960 Speaker 1: directly UH engaging with the refugees and helping the European 210 00:14:03,040 --> 00:14:06,920 Speaker 1: agencies and the national agencies that are helping those people. 211 00:14:07,400 --> 00:14:10,000 Speaker 1: We hope that your efforts are successful. David, we were 212 00:14:10,040 --> 00:14:13,520 Speaker 1: talking about what this changes if this ceasefire does come 213 00:14:13,520 --> 00:14:17,000 Speaker 1: to fruition, if this is real coming to the table 214 00:14:17,120 --> 00:14:20,280 Speaker 1: on both sides with Ukraine and Russia. How much does 215 00:14:20,320 --> 00:14:23,680 Speaker 1: that change your outlook? How much of an improvement versus 216 00:14:23,720 --> 00:14:26,320 Speaker 1: just removing some of the worst tail risks does this 217 00:14:26,400 --> 00:14:31,320 Speaker 1: present for you? Well, I was watching your market indicators 218 00:14:31,320 --> 00:14:34,320 Speaker 1: this morning, so you were showing the decline in oil prices. 219 00:14:34,400 --> 00:14:38,160 Speaker 1: That helps. I was just in Senegal and Morocco. One 220 00:14:38,160 --> 00:14:43,600 Speaker 1: of the burdens on countries that are that are facing UH, 221 00:14:43,640 --> 00:14:46,280 Speaker 1: that are facing fragility in the region. You know, in 222 00:14:46,360 --> 00:14:50,680 Speaker 1: North Africa, big problem is the weapons inflow coming from 223 00:14:50,720 --> 00:14:56,320 Speaker 1: Europe through Libya into North Africa into Islamic Uh fundamentalism 224 00:14:56,360 --> 00:14:59,800 Speaker 1: that even this morning there was a bombing in Nigeria. 225 00:15:00,160 --> 00:15:03,200 Speaker 1: These are big problems. And on top of that, then 226 00:15:03,280 --> 00:15:06,480 Speaker 1: the price of diesel fuel goes up and of of 227 00:15:06,560 --> 00:15:10,560 Speaker 1: wheat goes up. So the the best response from the 228 00:15:10,600 --> 00:15:15,880 Speaker 1: world can be more production and market access. For Senegal, 229 00:15:16,040 --> 00:15:18,920 Speaker 1: the most important thing in the world really is if 230 00:15:18,960 --> 00:15:21,160 Speaker 1: they were able to where if they were allowed to 231 00:15:21,520 --> 00:15:24,600 Speaker 1: to ship peanuts to the United States right now their 232 00:15:24,600 --> 00:15:29,320 Speaker 1: biggest customers China advised some four hundred thousand tons per year, 233 00:15:29,520 --> 00:15:33,080 Speaker 1: and uh, the the US not because we have so 234 00:15:33,200 --> 00:15:36,960 Speaker 1: many barriers. Also, you know, the ethanol subsidies in the 235 00:15:37,080 --> 00:15:43,840 Speaker 1: US are so punishingly expensive that it distorts common agricultural 236 00:15:43,960 --> 00:15:46,480 Speaker 1: policy in Europe. I just want to make the point 237 00:15:46,560 --> 00:15:49,360 Speaker 1: that there's a lot that the advanced economies can do 238 00:15:49,480 --> 00:15:53,520 Speaker 1: to allow people to sell to those markets and ethanol. 239 00:15:53,560 --> 00:15:56,120 Speaker 1: There there's a David mal Pass we know, we love 240 00:15:56,160 --> 00:15:58,560 Speaker 1: and know from another time in place Mr male Pass. 241 00:15:58,640 --> 00:16:02,680 Speaker 1: One final uh comment, if you will, you have a 242 00:16:02,720 --> 00:16:07,960 Speaker 1: staff that is world class, including Dr Pangestu from Indonesia. 243 00:16:08,040 --> 00:16:12,920 Speaker 1: Marie al capangestu is she speaks of resiliency and food. 244 00:16:13,640 --> 00:16:18,080 Speaker 1: How do you bring food resiliency to the planting season 245 00:16:18,560 --> 00:16:26,120 Speaker 1: of Ukraine. Uh So fertilizer from western Europe would help. 246 00:16:26,200 --> 00:16:29,000 Speaker 1: You know they've been cut off from Belarus. But I 247 00:16:29,040 --> 00:16:32,400 Speaker 1: think cessation of the of the violence is the starting 248 00:16:32,440 --> 00:16:36,800 Speaker 1: point the You know, farmers are resilient by nature. They work, 249 00:16:37,160 --> 00:16:39,800 Speaker 1: they work their tails off and they grow a lot 250 00:16:39,920 --> 00:16:43,600 Speaker 1: for the world, Ukrainian farmers included. So you have to 251 00:16:43,760 --> 00:16:48,560 Speaker 1: stop the war, uh and then quickly provide them enough 252 00:16:48,600 --> 00:16:53,440 Speaker 1: funding for for for seeds and for the fertilizer. Uh 253 00:16:53,720 --> 00:16:57,160 Speaker 1: that I think those steps can't could still be taken 254 00:16:57,440 --> 00:17:01,600 Speaker 1: here in March mon pass thank you not evel conversation 255 00:17:01,680 --> 00:17:03,560 Speaker 1: set and a Tommy wants to thanks for reacting to 256 00:17:03,560 --> 00:17:05,560 Speaker 1: that breaking news to have amount pass that the president 257 00:17:05,800 --> 00:17:14,080 Speaker 1: of the World Bank. There are moments John and Lisa 258 00:17:14,440 --> 00:17:17,399 Speaker 1: of privilege at Bloomberg, and one of them was a 259 00:17:17,440 --> 00:17:20,760 Speaker 1: good long decade or more so ago in a small 260 00:17:20,880 --> 00:17:25,000 Speaker 1: room with Thomas Shelling, the giant of thinking about war, 261 00:17:25,119 --> 00:17:29,120 Speaker 1: the Nobel Laureate, where he sat and I sat mesmerized. 262 00:17:29,240 --> 00:17:34,560 Speaker 1: Is Professor Shelling spoke about how you end wars. Michael 263 00:17:34,600 --> 00:17:37,600 Speaker 1: Kimidge and Leona Fix have taken this to a new 264 00:17:37,760 --> 00:17:41,840 Speaker 1: wonderful extreme in Foreign Affairs magazine. Leona Fixes, with the 265 00:17:41,920 --> 00:17:45,080 Speaker 1: Corbel Foundation in Berlin, were honored that she could join 266 00:17:45,200 --> 00:17:48,520 Speaker 1: us this morning. Leon. I love how you frame if 267 00:17:48,640 --> 00:17:53,359 Speaker 1: Russia wins, if Russia loses. Professor Shelling would suggest, the 268 00:17:53,400 --> 00:17:56,760 Speaker 1: only way to end the war is exhaustion. Do we 269 00:17:56,840 --> 00:18:03,439 Speaker 1: need an exhausted putin? What we certainly need is we 270 00:18:03,520 --> 00:18:06,679 Speaker 1: need a sustainable piece and not a provisional piece. And 271 00:18:06,720 --> 00:18:10,199 Speaker 1: despite the optimistic news of today, this will be the 272 00:18:10,280 --> 00:18:14,560 Speaker 1: main challenge for Ukraine moving ahead in negotiations. So basically, 273 00:18:14,640 --> 00:18:18,159 Speaker 1: how to prevent that any negotiated agreement right now with 274 00:18:18,280 --> 00:18:23,560 Speaker 1: Russia will only leave Ukraine weaker, especially in military terms, 275 00:18:23,680 --> 00:18:27,280 Speaker 1: and could encourage Russia to come back in a couple 276 00:18:27,320 --> 00:18:29,639 Speaker 1: of months or a a couple of years to finish the 277 00:18:29,680 --> 00:18:33,840 Speaker 1: business they've started. And that's the crucial, the crucial point. 278 00:18:33,880 --> 00:18:38,119 Speaker 1: How to prevent an unjust piece, as sit Settle said 279 00:18:38,600 --> 00:18:44,080 Speaker 1: um and prevent also a continuation of a very cool 280 00:18:44,440 --> 00:18:47,879 Speaker 1: war that we've seen so far. If Russia wins or 281 00:18:47,960 --> 00:18:52,880 Speaker 1: Russia loses, is the equal outcome a partition of Ukraine. 282 00:18:55,920 --> 00:18:58,680 Speaker 1: I think the challenge now is that we don't see 283 00:18:58,720 --> 00:19:02,440 Speaker 1: this clear cut options anymore. So Russia is too weak 284 00:19:03,160 --> 00:19:06,440 Speaker 1: to win, but at the same time they are too 285 00:19:06,480 --> 00:19:10,440 Speaker 1: strong to loose, and that makes the situation right now 286 00:19:10,640 --> 00:19:14,960 Speaker 1: so difficult to navigate UM and the Ukrainians have put 287 00:19:15,000 --> 00:19:17,800 Speaker 1: up a formidable resistance as we've seen the last weeks, 288 00:19:17,840 --> 00:19:21,680 Speaker 1: but again they are also too weak to finally, UM 289 00:19:22,440 --> 00:19:26,280 Speaker 1: make Russia withdraw from all parts of Ukraine. So the 290 00:19:26,359 --> 00:19:30,040 Speaker 1: question of territorial concessions that you just raised will be 291 00:19:30,040 --> 00:19:33,560 Speaker 1: a crucial one in negotiations. And for President Zelenski, who 292 00:19:33,560 --> 00:19:37,239 Speaker 1: has been able to gather Ukrainians behind his brave and 293 00:19:37,280 --> 00:19:41,880 Speaker 1: courageous stands UM, he has a little room for compromise 294 00:19:42,000 --> 00:19:46,000 Speaker 1: there because there's no appetite whatsoever to give up on 295 00:19:46,200 --> 00:19:50,040 Speaker 1: Crimea on other parts of Ukraine. But also from the 296 00:19:50,080 --> 00:19:55,520 Speaker 1: Russian side, they will want to leave negotiations with successes 297 00:19:55,600 --> 00:19:57,919 Speaker 1: that they can sell at home, and the minimum success 298 00:19:57,960 --> 00:20:02,159 Speaker 1: from a Russian perspective would be to have liberated quote 299 00:20:02,240 --> 00:20:06,159 Speaker 1: quote um di don bust in eastern Ukraine. Leanna, so 300 00:20:06,160 --> 00:20:08,800 Speaker 1: that we can understand the points of leverage here and 301 00:20:08,920 --> 00:20:12,080 Speaker 1: what exactly brought both sides to the table at the 302 00:20:12,080 --> 00:20:14,639 Speaker 1: place where they are now. Was it the sanctions or 303 00:20:14,760 --> 00:20:17,760 Speaker 1: was it really the resistance that has brought Vladimir Putin 304 00:20:17,800 --> 00:20:23,040 Speaker 1: to a more compromising stance. Absolutely both of it, and 305 00:20:23,040 --> 00:20:26,679 Speaker 1: I want to underline this, without Ukrainian Ukraine's resistance, we 306 00:20:26,680 --> 00:20:30,120 Speaker 1: would not have seen this incredible sanctions package, also because 307 00:20:30,119 --> 00:20:34,000 Speaker 1: there was such an international outcry in the European public, 308 00:20:34,040 --> 00:20:37,840 Speaker 1: in the US public. So what helps Ukraine is to 309 00:20:37,920 --> 00:20:43,399 Speaker 1: strengthen its negotiation position by weakening Russia's position and putting 310 00:20:43,480 --> 00:20:49,080 Speaker 1: further pressure on Russia to not put out maximalist positions 311 00:20:49,080 --> 00:20:52,800 Speaker 1: in negotiations with Ukraine, but to be open for compromises. 312 00:20:53,000 --> 00:20:55,600 Speaker 1: So this is the moment where we have to keep 313 00:20:55,680 --> 00:21:00,000 Speaker 1: up pressure on Russia, and only if Ukraine asks us 314 00:21:00,160 --> 00:21:05,040 Speaker 1: to lose some of the pressure to think about sanctions, 315 00:21:05,200 --> 00:21:08,320 Speaker 1: then we can consider these options. Our main aim should 316 00:21:08,320 --> 00:21:13,000 Speaker 1: be how can we help Ukraine to negotiate a sustainable piece, 317 00:21:13,320 --> 00:21:16,120 Speaker 1: and that should be the goal of all Western policy 318 00:21:16,160 --> 00:21:18,600 Speaker 1: at the moment, Leona. Then it goes to this question 319 00:21:18,880 --> 00:21:21,600 Speaker 1: of what the West response should be in order to 320 00:21:21,600 --> 00:21:25,119 Speaker 1: get Vladimir Putin to continue negotiating and to continue to 321 00:21:25,160 --> 00:21:29,160 Speaker 1: make good how much will there be discussions about loosening 322 00:21:29,240 --> 00:21:31,920 Speaker 1: some of the sanctions in response to a certain period 323 00:21:31,960 --> 00:21:34,800 Speaker 1: of ceasefire. Is that feasible or does that seem wrong 324 00:21:34,880 --> 00:21:37,600 Speaker 1: considering the fact that we're still talking about war crimes. 325 00:21:40,840 --> 00:21:43,520 Speaker 1: This is a discussion that we might have at some point, 326 00:21:43,560 --> 00:21:45,919 Speaker 1: but this is certainly not the discussion that we should 327 00:21:45,920 --> 00:21:48,600 Speaker 1: have right now. We've seen in the past that Russian 328 00:21:48,760 --> 00:21:52,080 Speaker 1: words have always very often not being followed up by 329 00:21:52,119 --> 00:21:58,560 Speaker 1: rushington deeds. So until we really see some credible Russian deeds, 330 00:21:58,600 --> 00:22:03,200 Speaker 1: some credible withdraw, some signals that Russia is seriously willing 331 00:22:03,520 --> 00:22:06,800 Speaker 1: to make concessions and to negotiate, we should not waste 332 00:22:06,840 --> 00:22:10,159 Speaker 1: the issue of sanctions yet. Only if we see that 333 00:22:10,200 --> 00:22:12,840 Speaker 1: there's a credible path ahead and Ukraine asked us to 334 00:22:12,880 --> 00:22:16,880 Speaker 1: do so, then we should again put our efforts into 335 00:22:16,920 --> 00:22:19,919 Speaker 1: the service of Ukraine, even if this might be a 336 00:22:19,960 --> 00:22:23,399 Speaker 1: tough decision to make. As a broader strategic goal is 337 00:22:23,400 --> 00:22:28,040 Speaker 1: certainly to weaken Russia in general, to prevent that Russia 338 00:22:28,160 --> 00:22:33,720 Speaker 1: has further ambitions towards you pen security. But at the moment, 339 00:22:33,760 --> 00:22:36,560 Speaker 1: it really is about keeping up the pressure to help 340 00:22:36,680 --> 00:22:40,840 Speaker 1: Ukraine Leona fix We started with Thomas Shelling, and of 341 00:22:40,880 --> 00:22:44,800 Speaker 1: course he defined our study of deterrence in nuclear threat 342 00:22:45,800 --> 00:22:53,439 Speaker 1: is putin a nuclear threat. He is certainly willing to 343 00:22:53,760 --> 00:22:58,119 Speaker 1: use nuclear coersion as an instrument. Um he has a 344 00:22:58,160 --> 00:23:02,080 Speaker 1: lot many more conventional means at his disposal before he 345 00:23:02,119 --> 00:23:05,760 Speaker 1: would actually consider the nuclear option. We've learned from the 346 00:23:05,800 --> 00:23:08,440 Speaker 1: past that we should never say never when it comes 347 00:23:08,480 --> 00:23:12,439 Speaker 1: to Putine and to Russia. But again this is something 348 00:23:12,480 --> 00:23:16,040 Speaker 1: that at the moment he uses to curse the West 349 00:23:16,400 --> 00:23:20,280 Speaker 1: to deter the West from further support for Ukraine, and 350 00:23:20,359 --> 00:23:23,640 Speaker 1: that is something where the West should not be intimidated 351 00:23:23,640 --> 00:23:27,280 Speaker 1: because especially military support for Ukraine, even if there is 352 00:23:27,320 --> 00:23:32,000 Speaker 1: a negotiated outcome, will be incredibly important again because Ukraine 353 00:23:32,000 --> 00:23:36,119 Speaker 1: should not leave these negotiations weaker than they've entered it 354 00:23:36,480 --> 00:23:39,040 Speaker 1: and be at risk of another Russian aggression in a 355 00:23:39,080 --> 00:23:44,119 Speaker 1: couple of months or or years. Perhaps so not being intimidated, 356 00:23:44,200 --> 00:23:47,240 Speaker 1: but at the same time being cool headed as the 357 00:23:47,359 --> 00:23:50,119 Speaker 1: US President has been when he did not raise the 358 00:23:50,160 --> 00:23:53,639 Speaker 1: alert levels of US nuclear forces. That is at the moment, 359 00:23:53,720 --> 00:23:57,640 Speaker 1: the right strategy, but obviously not to take off anything 360 00:23:57,960 --> 00:24:01,080 Speaker 1: from the list because the Russian press that has proved 361 00:24:01,119 --> 00:24:04,679 Speaker 1: in the past to do, um to do things that 362 00:24:04,760 --> 00:24:07,639 Speaker 1: we've not expected him to do. Leanna Fix thank you 363 00:24:07,640 --> 00:24:16,399 Speaker 1: with the Coba Foundation and fixed income on the Mystery. 364 00:24:16,480 --> 00:24:20,440 Speaker 1: Serradorajapa joins us now with Society General, where they've got 365 00:24:20,480 --> 00:24:25,040 Speaker 1: just terrific dynamic analysis. Sobrato, the dynamics of equities is simple, 366 00:24:25,400 --> 00:24:28,119 Speaker 1: down we go a vix of thirty six, boom, up 367 00:24:28,200 --> 00:24:31,600 Speaker 1: we go with a huge growth rally. Is there any 368 00:24:31,640 --> 00:24:36,679 Speaker 1: presumption of price down in fixed income and the idea 369 00:24:36,760 --> 00:24:39,200 Speaker 1: that we get a hall mary of lower yield and 370 00:24:39,440 --> 00:24:43,879 Speaker 1: higher bond prices. Um. I think we're starting to reach 371 00:24:43,960 --> 00:24:48,120 Speaker 1: some key resistance points. At two fifteen tents, for instance, 372 00:24:48,640 --> 00:24:51,000 Speaker 1: is going to be a level that I'm going to 373 00:24:51,040 --> 00:24:53,040 Speaker 1: be watching to see if tenny years can actually break 374 00:24:53,080 --> 00:24:56,119 Speaker 1: through that level. But to me, really all the focuses 375 00:24:56,200 --> 00:24:57,920 Speaker 1: on the curve, as you guys have been discussing them 376 00:24:57,920 --> 00:24:59,320 Speaker 1: in the two times part of the curve is very 377 00:24:59,400 --> 00:25:01,600 Speaker 1: very close to voting. It could actually invert by the 378 00:25:01,680 --> 00:25:04,040 Speaker 1: end of this this week. I was thinking you could 379 00:25:04,200 --> 00:25:06,720 Speaker 1: invert in the first half. It looks like it's gonna 380 00:25:06,760 --> 00:25:09,240 Speaker 1: happen a lot sooner. So that's really where the focus 381 00:25:09,280 --> 00:25:12,280 Speaker 1: is right now. The nuance to pros and the derivative 382 00:25:12,320 --> 00:25:16,720 Speaker 1: expertise of society general is the idea of a flat 383 00:25:16,880 --> 00:25:23,320 Speaker 1: curve saying yield twos intense or a true inversion or 384 00:25:23,359 --> 00:25:28,600 Speaker 1: a depth of inversion. Do you predict a certain negative 385 00:25:28,640 --> 00:25:33,280 Speaker 1: amount which gives us that depth of inversion which signals recession. 386 00:25:35,000 --> 00:25:36,560 Speaker 1: So I don't think that there's any sort of a 387 00:25:36,640 --> 00:25:40,439 Speaker 1: magic number that we're watching. What typically tends to happen 388 00:25:40,600 --> 00:25:44,359 Speaker 1: is when the curve gets flat or inverted, you tend 389 00:25:44,400 --> 00:25:48,040 Speaker 1: to see that in about a year's time or years lag, 390 00:25:48,080 --> 00:25:51,080 Speaker 1: I should say, you start seeing a meaningful store around 391 00:25:51,119 --> 00:25:54,919 Speaker 1: in growth. And so you know, the the inversion starts, 392 00:25:55,000 --> 00:25:56,679 Speaker 1: you know, first in the back of the curve typically 393 00:25:56,720 --> 00:25:59,280 Speaker 1: and then as we progress it starts moving towards the 394 00:25:59,320 --> 00:26:01,080 Speaker 1: front of the curve. Now you see the two stands 395 00:26:01,080 --> 00:26:03,480 Speaker 1: part of the curve chare Powell is looking at the 396 00:26:03,520 --> 00:26:05,640 Speaker 1: three montenure part of the of the curve and saying 397 00:26:05,640 --> 00:26:07,400 Speaker 1: that part of the curve is not avert, so we're 398 00:26:07,400 --> 00:26:09,760 Speaker 1: not concerned. But the two stands part of the curve 399 00:26:09,840 --> 00:26:11,840 Speaker 1: is saying that the tent that the three month part 400 00:26:11,840 --> 00:26:14,000 Speaker 1: of the curve is going to start. Three month rates 401 00:26:14,000 --> 00:26:16,560 Speaker 1: are gonna start moving higher, and that the that the 402 00:26:16,600 --> 00:26:19,440 Speaker 1: next sort of progression is going to be for the 403 00:26:19,560 --> 00:26:22,080 Speaker 1: front end, uh you front front part of the yield 404 00:26:22,080 --> 00:26:25,160 Speaker 1: curve to start to to flatten. Regardless, I would say, 405 00:26:25,160 --> 00:26:29,320 Speaker 1: within a year's time, you're gonna see, uh that the 406 00:26:29,320 --> 00:26:31,720 Speaker 1: impact of the flatter curve on the broader economy and 407 00:26:31,760 --> 00:26:34,240 Speaker 1: that typically what you know, tends to lead to a 408 00:26:34,240 --> 00:26:36,960 Speaker 1: surround in growth. So about we had on Steve off 409 00:26:37,000 --> 00:26:39,080 Speaker 1: of Federated earlier and he said, when he looks at 410 00:26:39,080 --> 00:26:41,880 Speaker 1: the yield curve, he sees a bond market that's pricing 411 00:26:41,880 --> 00:26:45,959 Speaker 1: in a soft landing. Do you agree? It's hard to know, 412 00:26:46,160 --> 00:26:48,520 Speaker 1: because you know, I think the barn market, the reaction 413 00:26:48,640 --> 00:26:50,640 Speaker 1: bond market is a lot more dire than what you're 414 00:26:50,640 --> 00:26:53,399 Speaker 1: seeing in all the other markets, right like you like 415 00:26:53,440 --> 00:26:57,359 Speaker 1: you're you're discussing earlier financial conditions broadly speaking, are still 416 00:26:57,520 --> 00:27:01,159 Speaker 1: very very accommodative. So really what the bond market seems 417 00:27:01,160 --> 00:27:03,560 Speaker 1: to be a little bit ahead of itself in expressing 418 00:27:03,600 --> 00:27:08,040 Speaker 1: concern about the the the health of the economy, if 419 00:27:08,080 --> 00:27:10,119 Speaker 1: you will. And that's when it gets really really tricky, 420 00:27:10,160 --> 00:27:12,520 Speaker 1: because it's going to be very very hard for the 421 00:27:12,520 --> 00:27:15,399 Speaker 1: FED to be able to raise rates from from the 422 00:27:15,560 --> 00:27:19,200 Speaker 1: zero lower bound to two and fifty you know, basis 423 00:27:19,240 --> 00:27:21,840 Speaker 1: points in a matter of you know, six to eight 424 00:27:21,880 --> 00:27:25,439 Speaker 1: months and not have the economy, um, you know, have 425 00:27:25,760 --> 00:27:27,720 Speaker 1: some sort of hard landing. And that's really where it 426 00:27:27,720 --> 00:27:30,280 Speaker 1: gets very tricky. Um. And that's why I think it's 427 00:27:30,320 --> 00:27:33,000 Speaker 1: it's it's really hard to know. Do you think, Subadre 428 00:27:33,200 --> 00:27:34,919 Speaker 1: that what we're seeing in risk markets and I'm not 429 00:27:34,920 --> 00:27:37,760 Speaker 1: just talking about equities but also in riskier credit that 430 00:27:37,880 --> 00:27:39,800 Speaker 1: basically the bet is that the FED will have to 431 00:27:39,920 --> 00:27:42,399 Speaker 1: backtrack on some of the hawkishness, that they won't be 432 00:27:42,440 --> 00:27:44,919 Speaker 1: able to go that fast, or else they will be 433 00:27:44,960 --> 00:27:47,440 Speaker 1: able to and the economy will have accelerated to enough 434 00:27:47,680 --> 00:27:49,240 Speaker 1: of a degree that it will be able to hold in. 435 00:27:49,280 --> 00:27:54,440 Speaker 1: And basically, are they praising in something that seems increasingly impossible? Yeah, 436 00:27:54,520 --> 00:27:56,040 Speaker 1: I mean I think I would agree with that view 437 00:27:56,080 --> 00:27:58,760 Speaker 1: in the sense that the FED is very, very eager 438 00:27:59,119 --> 00:28:02,320 Speaker 1: to raise rates very fast at least, you know, front 439 00:28:02,400 --> 00:28:06,359 Speaker 1: load these rate hikes because you know they can. The 440 00:28:06,520 --> 00:28:09,720 Speaker 1: unemployment numbers are are very very low, the economy generally 441 00:28:09,720 --> 00:28:12,520 Speaker 1: speaking is very strong. The growth trajectory for this year 442 00:28:12,560 --> 00:28:15,719 Speaker 1: is very strong, so they're very very eager to frontload 443 00:28:16,160 --> 00:28:18,920 Speaker 1: these these rate hikes. You know, we'll have to see 444 00:28:18,960 --> 00:28:21,200 Speaker 1: what happens in the latter half of the year after 445 00:28:21,240 --> 00:28:24,240 Speaker 1: they say deliver a fifty basis point at the main 446 00:28:24,320 --> 00:28:26,560 Speaker 1: meeting and perhaps even at the June meeting and then 447 00:28:26,600 --> 00:28:29,280 Speaker 1: they announced the runoff in the bounty. You know, we'll 448 00:28:29,320 --> 00:28:31,160 Speaker 1: have to see how the market reacts to the market 449 00:28:31,240 --> 00:28:34,240 Speaker 1: still holds up, then they could probably raise rates once 450 00:28:34,240 --> 00:28:35,920 Speaker 1: a meeting for the remainder of the year. If not, 451 00:28:36,000 --> 00:28:38,560 Speaker 1: they're going to have to pause, you know, sometime in 452 00:28:38,680 --> 00:28:41,360 Speaker 1: the latter half of this year, or perhaps even early 453 00:28:41,440 --> 00:28:43,600 Speaker 1: next year. So I think the Fed is very much 454 00:28:43,760 --> 00:28:46,640 Speaker 1: keen on front loading these rate hikes. Whether they can 455 00:28:46,760 --> 00:28:50,000 Speaker 1: keep that sustained pace of of hiking this year and 456 00:28:50,080 --> 00:28:52,600 Speaker 1: well into each next year is is yet to be seen. 457 00:28:53,440 --> 00:28:56,360 Speaker 1: We are not there yet. We are a little bit 458 00:28:56,440 --> 00:29:00,720 Speaker 1: away to three digits from a positive yield on the 459 00:29:00,880 --> 00:29:08,040 Speaker 1: German two year piece. What does that signal? But you know, 460 00:29:08,200 --> 00:29:13,120 Speaker 1: the world is getting to a non negative you know, 461 00:29:13,240 --> 00:29:17,920 Speaker 1: bond yield environment because of the inflation dynamics. So inflation 462 00:29:18,000 --> 00:29:20,080 Speaker 1: is not just a US story, it's it's it's a 463 00:29:20,160 --> 00:29:24,080 Speaker 1: global story. You're starting to see even you know Japanese, 464 00:29:24,200 --> 00:29:26,320 Speaker 1: you know j g B, you'll start to hit up 465 00:29:26,360 --> 00:29:30,680 Speaker 1: against yield curve control restrictions there. So I think that 466 00:29:30,800 --> 00:29:35,520 Speaker 1: the general trend, and especially in Europe, the inflation dynamics 467 00:29:35,520 --> 00:29:38,720 Speaker 1: are a lot more pronounced because of their dependence on 468 00:29:39,080 --> 00:29:42,480 Speaker 1: Russian oil, and they have i would say, a greater 469 00:29:42,520 --> 00:29:46,440 Speaker 1: propensity to or to go into a recession because of 470 00:29:46,480 --> 00:29:50,280 Speaker 1: their dependence on on Russian oil and commodity prices in general. 471 00:29:50,640 --> 00:29:53,480 Speaker 1: The US in some respects is much more insulated because 472 00:29:53,480 --> 00:29:57,640 Speaker 1: we're energy independent. So I think the move now reflects, 473 00:29:58,040 --> 00:30:00,840 Speaker 1: you know, the reality of the inflation adnamics and the 474 00:30:00,880 --> 00:30:04,040 Speaker 1: global inflation dyna mixed with you know, with bonds getting 475 00:30:04,040 --> 00:30:08,440 Speaker 1: out of negative gentry across you know, across the world. Santra, 476 00:30:08,720 --> 00:30:15,640 Speaker 1: thank you sevent for that of silk Chin right now 477 00:30:15,800 --> 00:30:19,680 Speaker 1: on what this devolves down to for investment branch, Shoot joins, 478 00:30:19,680 --> 00:30:23,800 Speaker 1: his chief investment strategist at Northwestern Mutual. We're short term, 479 00:30:23,840 --> 00:30:27,160 Speaker 1: as I'm going to suggest three years, Brent. The emotions 480 00:30:27,200 --> 00:30:31,720 Speaker 1: of the moment, the uncertainty of the moment, causes confusion 481 00:30:31,880 --> 00:30:37,160 Speaker 1: for anyone looking long term. How do you adapt well? 482 00:30:37,200 --> 00:30:38,560 Speaker 1: I think Jonathan of the nail on the head and 483 00:30:38,600 --> 00:30:41,120 Speaker 1: his opening when he talked about this being a positive 484 00:30:41,160 --> 00:30:43,200 Speaker 1: but certainly a lot of uncertainty. But I think the 485 00:30:43,240 --> 00:30:45,560 Speaker 1: most important part is it's a little bit less than 486 00:30:45,600 --> 00:30:47,640 Speaker 1: it was yesterday, and so to me, that is why 487 00:30:47,680 --> 00:30:49,640 Speaker 1: the markets moving higher, and that's a positive in the 488 00:30:49,640 --> 00:30:52,320 Speaker 1: near term. In the longer term, I still think you 489 00:30:52,400 --> 00:30:55,040 Speaker 1: have room for the market to move higher. Um certainly 490 00:30:55,120 --> 00:30:57,640 Speaker 1: the rise and oil prices have put upward pressure on inflation. 491 00:30:57,960 --> 00:31:00,080 Speaker 1: The FED could be raising rights here, but I think 492 00:31:00,120 --> 00:31:02,000 Speaker 1: all in all, the economy is still in a decent place, 493 00:31:02,040 --> 00:31:03,480 Speaker 1: and I think that means that we have room to 494 00:31:03,520 --> 00:31:06,080 Speaker 1: move higher in the near to intermediate term. Bran, do 495 00:31:06,080 --> 00:31:07,920 Speaker 1: you think that, frankly, if we do get some sort 496 00:31:07,960 --> 00:31:10,680 Speaker 1: of resolution or at least not a worsening in this situation, 497 00:31:11,080 --> 00:31:13,280 Speaker 1: that gives the FED the green light to go as 498 00:31:13,280 --> 00:31:17,080 Speaker 1: aggressively as they can. Yeah, I don't know. I mean, 499 00:31:17,120 --> 00:31:18,520 Speaker 1: I guess to me, I think the FED is going 500 00:31:18,560 --> 00:31:20,160 Speaker 1: to try to tighten as much as they need to 501 00:31:20,160 --> 00:31:22,760 Speaker 1: to get the inflation narrative under control just a bit. 502 00:31:22,960 --> 00:31:25,320 Speaker 1: And certainly they've done that with their words. We'll see 503 00:31:25,320 --> 00:31:28,360 Speaker 1: if their actions follow. I still don't believe the FED 504 00:31:28,440 --> 00:31:33,320 Speaker 1: intends to cause any sort of economic recession like overtightening. 505 00:31:33,560 --> 00:31:36,600 Speaker 1: They want to tighten just enough to actually, um, you know, 506 00:31:36,680 --> 00:31:39,840 Speaker 1: keep inflation under control and to keep expectations under control, 507 00:31:40,000 --> 00:31:42,360 Speaker 1: which has been lost in all this. The five year 508 00:31:42,400 --> 00:31:44,800 Speaker 1: five year forward break even is at two forty. That 509 00:31:44,960 --> 00:31:48,880 Speaker 1: is hardly out of control. This isn't This is two 510 00:31:48,920 --> 00:31:51,280 Speaker 1: thousand and twenty two, and to me, that doesn't mean 511 00:31:51,280 --> 00:31:54,120 Speaker 1: the FED. That means the FED doesn't have to overdo it. 512 00:31:54,560 --> 00:31:58,720 Speaker 1: Inflation expectations are not embedded yet and it's not permanent. Meanwhile, 513 00:31:58,760 --> 00:32:01,400 Speaker 1: I was looking at this, uh, this dashboard that Gino 514 00:32:01,440 --> 00:32:04,880 Speaker 1: Martin Adams of Bloomberg Intelligence put out. We're basically only 515 00:32:04,920 --> 00:32:08,600 Speaker 1: ten out of fifteen indicators were flashing yellow or red 516 00:32:08,720 --> 00:32:12,080 Speaker 1: and only five remaining are green, including relative earnings per 517 00:32:12,120 --> 00:32:15,360 Speaker 1: share growth. However, all of these flashing signs, which are 518 00:32:15,400 --> 00:32:17,960 Speaker 1: you actually watching to see whether you should change some 519 00:32:18,040 --> 00:32:20,880 Speaker 1: of your constructive view? Yeah, I think people are focused 520 00:32:20,920 --> 00:32:23,160 Speaker 1: on the yield curve first and foremost. Into me, I 521 00:32:23,200 --> 00:32:24,680 Speaker 1: would take that with a grain of salt. I mean, 522 00:32:24,720 --> 00:32:27,120 Speaker 1: let's think about the tenure Treasury and think about what 523 00:32:27,200 --> 00:32:30,280 Speaker 1: has actually happened with quantitative easing over the past few years, 524 00:32:30,360 --> 00:32:32,400 Speaker 1: and how distorted the term premium is probably on the 525 00:32:32,440 --> 00:32:34,920 Speaker 1: tenure treasury, And so to me, I would take that 526 00:32:34,920 --> 00:32:37,120 Speaker 1: with a grain of salt. Certainly it shows that we 527 00:32:37,160 --> 00:32:39,240 Speaker 1: are aging in the cycle. We are getting further along, 528 00:32:39,280 --> 00:32:41,480 Speaker 1: there is no doubt about that. But a recession could 529 00:32:41,520 --> 00:32:43,680 Speaker 1: still be, you know, two years away, and during that 530 00:32:43,720 --> 00:32:45,800 Speaker 1: time periode, the market can move higher. And I guess 531 00:32:45,800 --> 00:32:47,600 Speaker 1: can kind of put this into numbers because I noticed 532 00:32:47,640 --> 00:32:49,680 Speaker 1: the spread between the ten and two with somewhere around 533 00:32:49,720 --> 00:32:53,680 Speaker 1: eight basis points. This morning, the spread between the ten 534 00:32:53,800 --> 00:32:56,360 Speaker 1: and two year was eight point five basis points to positive. 535 00:32:56,920 --> 00:32:58,880 Speaker 1: What happened after that, you didn't have a rescessant of 536 00:32:58,920 --> 00:33:00,560 Speaker 1: two thousand and one, and you had one of the 537 00:33:00,560 --> 00:33:03,000 Speaker 1: best equity markets in the history of this country. And 538 00:33:03,040 --> 00:33:05,040 Speaker 1: so take it with a grain of salt and realize 539 00:33:05,080 --> 00:33:07,800 Speaker 1: that it is one indicator. And overall, to me, the 540 00:33:07,840 --> 00:33:10,600 Speaker 1: consumer is still in good shape, leading economic indicators are 541 00:33:10,600 --> 00:33:13,280 Speaker 1: still rising, and corporations are still in good shape. And 542 00:33:13,320 --> 00:33:15,320 Speaker 1: so I don't think our recession is imminent, and I 543 00:33:15,320 --> 00:33:17,760 Speaker 1: think we still have him to run, Brent. We were 544 00:33:17,800 --> 00:33:21,240 Speaker 1: weaned on the optimal portfolio some of us a little 545 00:33:21,240 --> 00:33:24,560 Speaker 1: bit older know that price down, yield up can occur. 546 00:33:24,640 --> 00:33:27,760 Speaker 1: It's called a bear market in the bond market. Great, 547 00:33:28,080 --> 00:33:33,080 Speaker 1: does the efficient portfolio work here with bonds in retreat? Yes, 548 00:33:33,160 --> 00:33:34,160 Speaker 1: But I think you need to think about it a 549 00:33:34,200 --> 00:33:36,480 Speaker 1: little differently. And so people think about a sixty is 550 00:33:36,520 --> 00:33:38,720 Speaker 1: just being the SMP in the bond market. We think 551 00:33:38,720 --> 00:33:41,160 Speaker 1: about it as including commodities and gold, and so I 552 00:33:41,160 --> 00:33:43,320 Speaker 1: think people have gotten a lesson in diversification over the 553 00:33:43,320 --> 00:33:44,880 Speaker 1: past few months, and I think they're gonna continue to 554 00:33:44,920 --> 00:33:47,680 Speaker 1: get one going forward. You need to own those as 555 00:33:47,880 --> 00:33:51,440 Speaker 1: hedges against different economic environments, which is what we have seen. 556 00:33:52,000 --> 00:33:54,720 Speaker 1: I think the SMP five hunded is still frankly expensive. 557 00:33:55,080 --> 00:33:57,600 Speaker 1: You get better earnings growth right now, all else being equal, 558 00:33:57,800 --> 00:34:00,400 Speaker 1: outside of the SMP five hundred at a cheaper price. 559 00:34:00,760 --> 00:34:03,040 Speaker 1: And so I'm not suggesting investors run from that, but 560 00:34:03,120 --> 00:34:04,880 Speaker 1: I still want to be in things that are cheap 561 00:34:04,960 --> 00:34:06,720 Speaker 1: because I do think there's still upper pressure on the 562 00:34:06,720 --> 00:34:08,480 Speaker 1: bond market and I think the economy has for the 563 00:34:08,600 --> 00:34:11,040 Speaker 1: room to run. Hi Brent, thank you buddy for Bamida 564 00:34:11,080 --> 00:34:13,719 Speaker 1: spread shitty of Northwestern Many Child. This is the Bloomberg 565 00:34:13,760 --> 00:34:18,120 Speaker 1: surveillance podcast. Thanks for listening. Join us live weekdays from 566 00:34:18,160 --> 00:34:21,520 Speaker 1: seven to ten am Eastern on Bloomberg Radio and on 567 00:34:21,600 --> 00:34:25,880 Speaker 1: Bloomberg Television each day from six to nine am for 568 00:34:26,120 --> 00:34:31,080 Speaker 1: insight from the best in economics, finance, investment, and international relations. 569 00:34:31,520 --> 00:34:36,200 Speaker 1: And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, 570 00:34:36,360 --> 00:34:39,960 Speaker 1: Bloomberg dot com, and of course, on the terminal. I'm 571 00:34:40,000 --> 00:34:42,640 Speaker 1: Tom Keene, and this is Bloomberg