1 00:00:01,360 --> 00:00:13,119 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. 2 00:00:13,240 --> 00:00:17,440 Speaker 1: Always with Michael McKee. Daily we bring you insight from 3 00:00:17,480 --> 00:00:22,279 Speaker 1: the best in economics, finance, investment, and international relations. Find 4 00:00:22,320 --> 00:00:26,880 Speaker 1: Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and of 5 00:00:26,920 --> 00:00:33,720 Speaker 1: course on the Bloomberg. So the trend remains in place 6 00:00:33,800 --> 00:00:38,640 Speaker 1: for oil to continue falling, does it go much farther? 7 00:00:38,720 --> 00:00:41,640 Speaker 1: What's the what's the next support level? And cannot break 8 00:00:41,640 --> 00:00:44,279 Speaker 1: through it? With Mackenzie's let skip your kids with us 9 00:00:44,280 --> 00:00:48,519 Speaker 1: and skip People are saying forty dollars that because it's 10 00:00:48,520 --> 00:00:51,920 Speaker 1: a round number, or or is there some significance to 11 00:00:52,000 --> 00:00:55,080 Speaker 1: forty as as the next resistance point. Well, I think 12 00:00:55,120 --> 00:00:57,600 Speaker 1: it's helpful that that forty is a round number. But 13 00:00:58,120 --> 00:01:00,440 Speaker 1: when we look at our wellhead economic so we see 14 00:01:00,480 --> 00:01:02,920 Speaker 1: there just isn't a lot of oil that works sub forty. 15 00:01:03,000 --> 00:01:06,880 Speaker 1: So forty is a good number to hang to because 16 00:01:07,160 --> 00:01:10,360 Speaker 1: now that non OPEQ is in decline and demand continues 17 00:01:10,400 --> 00:01:13,120 Speaker 1: to grow, at some point we're gonna need new supply 18 00:01:13,160 --> 00:01:15,000 Speaker 1: to come into the market to keep it balanced out. 19 00:01:15,160 --> 00:01:18,200 Speaker 1: If your cheapest oil UH in the non OPAQ world 20 00:01:18,280 --> 00:01:20,440 Speaker 1: is in the forty dollar range. Then that's probably a 21 00:01:20,560 --> 00:01:24,360 Speaker 1: fairly good Florida to hang your hat on. Well, Mike 22 00:01:24,400 --> 00:01:28,640 Speaker 1: can I interrupt? Well, had Economics was a great band. 23 00:01:28,800 --> 00:01:32,000 Speaker 1: I saw them open for sleep at the wheel. They 24 00:01:32,040 --> 00:01:35,679 Speaker 1: were great. Um, we have had reports lately the oil 25 00:01:36,640 --> 00:01:39,720 Speaker 1: more oil is starting to come to market and uh, 26 00:01:40,120 --> 00:01:43,000 Speaker 1: the drig jill rigg count is up. And our friend 27 00:01:43,040 --> 00:01:47,040 Speaker 1: Alex Steele, who is our oil commodities nerds, as you know, 28 00:01:47,480 --> 00:01:50,559 Speaker 1: the fractors are coming back. Now, well, well we're starting 29 00:01:50,600 --> 00:01:52,440 Speaker 1: to see is how we're starting to see some rigs 30 00:01:52,480 --> 00:01:56,000 Speaker 1: creeping back in. Uh, We're starting to see oil kind 31 00:01:56,040 --> 00:01:59,080 Speaker 1: of starting to slow. The declines are slowing down. So 32 00:01:59,080 --> 00:02:01,880 Speaker 1: what the first well those rigs that are coming into 33 00:02:01,880 --> 00:02:05,240 Speaker 1: the field will do is they won't return the US 34 00:02:05,280 --> 00:02:07,280 Speaker 1: supply back to a growth mode, but it will start 35 00:02:07,280 --> 00:02:10,080 Speaker 1: slowing down the rate of decline. And we're starting to 36 00:02:10,120 --> 00:02:12,280 Speaker 1: see that activity is starting to come in. When we 37 00:02:12,360 --> 00:02:14,960 Speaker 1: talk to those small producers, the ones that are procuring 38 00:02:15,000 --> 00:02:18,799 Speaker 1: the rigs, their concern is they can get two or 39 00:02:18,840 --> 00:02:21,160 Speaker 1: three rigs today, They might be able to get two 40 00:02:21,240 --> 00:02:23,480 Speaker 1: or three rigs tomorrow, but could they get a hundred rigs? 41 00:02:23,600 --> 00:02:25,880 Speaker 1: And just in terms of you know, is the equipment 42 00:02:25,919 --> 00:02:29,080 Speaker 1: still there? Uh and in working condition? And the second 43 00:02:29,080 --> 00:02:30,600 Speaker 1: one is how am I going to hire people? I 44 00:02:30,600 --> 00:02:33,760 Speaker 1: think what's important for people to remember is that when 45 00:02:33,760 --> 00:02:36,720 Speaker 1: we went through the last the tight oil surge in 46 00:02:36,760 --> 00:02:39,280 Speaker 1: two thousand nine and two thousand ten, when that started, 47 00:02:39,360 --> 00:02:43,240 Speaker 1: unemployment was at nine and a half percent. Today unemployment's 48 00:02:43,240 --> 00:02:45,680 Speaker 1: four point nine. So it's gonna be a much tighter 49 00:02:45,760 --> 00:02:49,280 Speaker 1: labor market in general. And uh, you know, anecdotally, a 50 00:02:49,320 --> 00:02:51,280 Speaker 1: lot of those guys that were released over the last 51 00:02:51,320 --> 00:02:54,600 Speaker 1: eighteen months have wandered off and found other jobles. Is 52 00:02:54,639 --> 00:02:56,560 Speaker 1: it true? Do you buy the idea we hear from 53 00:02:56,680 --> 00:03:01,000 Speaker 1: some that the income statement mix of a given oil 54 00:03:01,080 --> 00:03:06,160 Speaker 1: company is okay because yes, prices down, but the expense 55 00:03:06,680 --> 00:03:10,600 Speaker 1: of doing business is down as well. Is that true? Well, 56 00:03:10,639 --> 00:03:13,000 Speaker 1: it is true, but you know, prices have fallen more 57 00:03:13,040 --> 00:03:15,519 Speaker 1: than their than the cost basis have fallen down, so, 58 00:03:16,000 --> 00:03:18,080 Speaker 1: you know, and you see, you see earnings under a 59 00:03:18,080 --> 00:03:20,160 Speaker 1: lot of pressure. You saw that last week with you know, 60 00:03:20,160 --> 00:03:23,640 Speaker 1: with VP Chevron, And so when you see those announcements, 61 00:03:23,639 --> 00:03:27,000 Speaker 1: are they one offs or is there a chronic nature 62 00:03:27,680 --> 00:03:30,040 Speaker 1: to the carnage we saw? Yeah, I'm gonna I'm gonna 63 00:03:30,080 --> 00:03:32,080 Speaker 1: be a true economist and say it's both. On the 64 00:03:32,120 --> 00:03:34,760 Speaker 1: one handed, it's the one off because we know the 65 00:03:34,880 --> 00:03:37,120 Speaker 1: prices were low. We knew that we earnings ought to 66 00:03:37,120 --> 00:03:39,560 Speaker 1: be weak. What you need to be watching is do 67 00:03:39,640 --> 00:03:42,760 Speaker 1: they have a strategy. You know, oil companies should not 68 00:03:42,920 --> 00:03:45,560 Speaker 1: be managing their their income statements on a quarter by 69 00:03:45,640 --> 00:03:48,280 Speaker 1: quarter basis. So do you have belief that, yes, the 70 00:03:48,320 --> 00:03:51,560 Speaker 1: second quarter was bad, but I believe that you've got 71 00:03:51,560 --> 00:03:54,840 Speaker 1: plans in place it's going to either stem the decline 72 00:03:54,880 --> 00:03:57,040 Speaker 1: in the third or fourth quarter or actually then eventually 73 00:03:57,120 --> 00:04:01,040 Speaker 1: turn things around. What is the time frame for eventually 74 00:04:01,040 --> 00:04:04,440 Speaker 1: turning things around? I think you're looking you know, from 75 00:04:04,440 --> 00:04:07,600 Speaker 1: a corporate perspective. You know, you're probably looking into seventeen 76 00:04:07,640 --> 00:04:09,640 Speaker 1: at this point. You know, a lot of sixteen is 77 00:04:09,680 --> 00:04:13,640 Speaker 1: pretty much locked in, uh, from an activity basis, even 78 00:04:13,680 --> 00:04:16,159 Speaker 1: if oil prices rise. We've sort of seen that is 79 00:04:16,200 --> 00:04:19,800 Speaker 1: that as oil prices doubled from February, we didn't see 80 00:04:19,800 --> 00:04:21,920 Speaker 1: a lot of activity on the physical side. We saw 81 00:04:22,440 --> 00:04:25,680 Speaker 1: you know, riggs didn't really recover until mayor So is 82 00:04:25,839 --> 00:04:27,920 Speaker 1: this is important? What Mike brought up is a pro 83 00:04:28,680 --> 00:04:31,520 Speaker 1: we went twenty nine worlds coming to an end to 84 00:04:32,640 --> 00:04:35,960 Speaker 1: great everybody was saying we'd have a workout in the 85 00:04:36,040 --> 00:04:38,880 Speaker 1: second half of two thousand and sixteen. I just heard 86 00:04:38,880 --> 00:04:42,240 Speaker 1: you say, that's not gonna happen. Are you surprised that 87 00:04:42,360 --> 00:04:45,480 Speaker 1: didn't happen. Well, what we're surprised is we're not really 88 00:04:45,520 --> 00:04:48,360 Speaker 1: surprised with it with a lack of activity because you know, 89 00:04:48,560 --> 00:04:51,400 Speaker 1: a lot of the oil outside of the US, and 90 00:04:51,600 --> 00:04:55,120 Speaker 1: you know, the forty or oil, the oil that works 91 00:04:55,120 --> 00:04:58,680 Speaker 1: in the forties is largely concentrated in the non OPEC world. 92 00:04:58,680 --> 00:05:01,240 Speaker 1: It's largely concentrated in West Texas, and that's where the 93 00:05:01,320 --> 00:05:04,360 Speaker 1: rigs are coming back. But we didn't expect to see 94 00:05:04,360 --> 00:05:07,880 Speaker 1: a lot of activity in the outside of the Permian, 95 00:05:07,920 --> 00:05:10,039 Speaker 1: whether it be in the US or in the other 96 00:05:10,080 --> 00:05:12,880 Speaker 1: parts of the non OPAQ world, because you know, we 97 00:05:12,960 --> 00:05:15,880 Speaker 1: just didn't hit a threshold that told them to trigger. Actually, 98 00:05:16,120 --> 00:05:18,200 Speaker 1: something I wanted to ask you about when I knew 99 00:05:18,240 --> 00:05:19,839 Speaker 1: you were coming on today, and that is the non 100 00:05:19,880 --> 00:05:22,200 Speaker 1: OPEC world. We haven't paid a whole lot of attention 101 00:05:22,240 --> 00:05:24,240 Speaker 1: to what's been going on in Russia lately. The ruble 102 00:05:24,320 --> 00:05:28,920 Speaker 1: this morning at sixty uh, it's moved into the sixties 103 00:05:29,080 --> 00:05:32,560 Speaker 1: and sort of stabilized there. What's their production like and 104 00:05:32,560 --> 00:05:36,240 Speaker 1: are they making any money on oil right now? Well, 105 00:05:36,279 --> 00:05:39,240 Speaker 1: they're probably you know that they're probably making money on 106 00:05:39,279 --> 00:05:42,720 Speaker 1: oil because the cost basis last year resets so so 107 00:05:42,800 --> 00:05:46,480 Speaker 1: dramatically UH in Russia and it and what it did 108 00:05:46,520 --> 00:05:48,479 Speaker 1: is is it was one of the few places where 109 00:05:48,520 --> 00:05:51,920 Speaker 1: the cost basis actually fell faster than oil prices fell. 110 00:05:51,960 --> 00:05:53,920 Speaker 1: And that's why we saw so much activity in their 111 00:05:53,960 --> 00:05:57,599 Speaker 1: Their production is held up so far. The question is, 112 00:05:57,760 --> 00:06:00,160 Speaker 1: you know, can they can they lock those costs in 113 00:06:00,800 --> 00:06:03,039 Speaker 1: when outside of the outside of the US and outside 114 00:06:03,040 --> 00:06:04,880 Speaker 1: of the rest of the rest of Russia, you know, 115 00:06:05,040 --> 00:06:07,400 Speaker 1: you're seeing the climbs in the rest of the world. 116 00:06:07,440 --> 00:06:10,240 Speaker 1: You know, we're off about a million barrels a day 117 00:06:10,240 --> 00:06:12,440 Speaker 1: in the U S we're off about five thousand barrels 118 00:06:12,440 --> 00:06:14,119 Speaker 1: a day, and the rest of the non OPAQ world. 119 00:06:14,520 --> 00:06:16,800 Speaker 1: And then we get these unplanned outages that show up 120 00:06:16,839 --> 00:06:20,120 Speaker 1: in in places like wildfires in Canada which have largely 121 00:06:20,160 --> 00:06:23,440 Speaker 1: recovered UH. And then Nigeria is off four hundred thousand 122 00:06:23,440 --> 00:06:26,080 Speaker 1: barrels a day. So there's oil coming out out of 123 00:06:26,120 --> 00:06:28,760 Speaker 1: the supply side. Some of it is being driven by 124 00:06:28,800 --> 00:06:32,760 Speaker 1: economic subfit's being driven by above ground issues like political 125 00:06:32,760 --> 00:06:36,279 Speaker 1: turmoil in Nigeria. But you know, the non opaque world 126 00:06:36,440 --> 00:06:40,040 Speaker 1: is contracting, uh, and that's what's driving this market. And 127 00:06:40,400 --> 00:06:43,080 Speaker 1: it's a slow process, but that's what's driving this market 128 00:06:43,360 --> 00:06:46,680 Speaker 1: into balance. Do you have a calculated terminal value at 129 00:06:46,760 --> 00:06:49,720 Speaker 1: five years? It's part of what you guys do. Yeah, 130 00:06:49,760 --> 00:06:51,839 Speaker 1: so if we're out five years, we think we're in. 131 00:06:52,000 --> 00:06:54,279 Speaker 1: You know the low also called the low eighties eight 132 00:06:54,360 --> 00:06:59,480 Speaker 1: to eighty five coffee. There be careful skip climbing. This 133 00:06:59,520 --> 00:07:03,560 Speaker 1: is for the week well and eighty dollars well because 134 00:07:03,600 --> 00:07:06,760 Speaker 1: when you know that there just isn't enough sixty dollar 135 00:07:06,839 --> 00:07:09,760 Speaker 1: oil to work. When you think about between now and 136 00:07:11,080 --> 00:07:13,840 Speaker 1: global supply needs to replace nine and a half million 137 00:07:13,840 --> 00:07:16,120 Speaker 1: barrels a day of supply, and that there just isn't 138 00:07:16,200 --> 00:07:17,720 Speaker 1: nine and a half million barrels a day of new 139 00:07:17,760 --> 00:07:21,360 Speaker 1: supply at sixty dollars. We're gonna get an education right 140 00:07:21,400 --> 00:07:25,240 Speaker 1: now from Skip York of Wyoming in Virginia. Dr York, 141 00:07:25,320 --> 00:07:30,320 Speaker 1: I want to talk to you about downstream Baytown Refinery 142 00:07:30,960 --> 00:07:35,760 Speaker 1: nineteen nineteen exonmobile capacity five or eighty four thousand dollars 143 00:07:36,120 --> 00:07:39,200 Speaker 1: barrels a day. I would assume ninety nine point nine 144 00:07:39,200 --> 00:07:41,840 Speaker 1: percent of the surveillance audience would know a refinery if 145 00:07:41,840 --> 00:07:45,280 Speaker 1: they drove by it. First of all, is it a rusted, 146 00:07:45,760 --> 00:07:49,960 Speaker 1: rusted halk because it was built in nineteen nineteen, or 147 00:07:50,000 --> 00:07:52,440 Speaker 1: is it like state of the art modern It would 148 00:07:52,480 --> 00:07:54,680 Speaker 1: be a state of the art facility in particular, if 149 00:07:54,680 --> 00:07:56,360 Speaker 1: you you know, the thing to remember is that if 150 00:07:56,360 --> 00:08:00,000 Speaker 1: a refinery was built in nineteen it's probably been rebuilt 151 00:08:00,160 --> 00:08:03,640 Speaker 1: three or four times in a hundred years. And so 152 00:08:03,760 --> 00:08:06,320 Speaker 1: if you went down into along the Houston Ship Channel, 153 00:08:06,720 --> 00:08:08,800 Speaker 1: you know, you're around a lot of refineries that have 154 00:08:08,840 --> 00:08:11,120 Speaker 1: been around a hundred years. But you wouldn't know it 155 00:08:11,160 --> 00:08:14,280 Speaker 1: by looking at them. They'd be shiny steel. Uh you know, 156 00:08:14,320 --> 00:08:16,280 Speaker 1: you wouldn't see a lot of rust around them because 157 00:08:16,400 --> 00:08:20,800 Speaker 1: you know, rust is corrosion. Corrosion can create uh, you know, leakages, 158 00:08:20,960 --> 00:08:23,360 Speaker 1: and that's just something that you know that's not healthy 159 00:08:23,360 --> 00:08:25,280 Speaker 1: for an oil refinery. And so you see that they're 160 00:08:25,360 --> 00:08:29,120 Speaker 1: actually fairly welcomed. I don't do this to be snarky, 161 00:08:29,160 --> 00:08:32,000 Speaker 1: but with immense respect, particularly when I think of our 162 00:08:32,040 --> 00:08:35,000 Speaker 1: images of refineries in Eastern Europe and Russia and all 163 00:08:35,040 --> 00:08:39,120 Speaker 1: that are these polluters well, certainly there there there is 164 00:08:39,120 --> 00:08:43,000 Speaker 1: an an emissions profile to them. There's just no escaping it. 165 00:08:43,080 --> 00:08:47,400 Speaker 1: When you're converting hydrocarbons, you're going to release smaller hydrocarbons 166 00:08:47,440 --> 00:08:50,679 Speaker 1: and carbon and those things go into the atmosphere. I 167 00:08:50,720 --> 00:08:53,360 Speaker 1: think that the important thing to remember is how much 168 00:08:53,480 --> 00:08:57,840 Speaker 1: cleaner they are now than say, fift years ago. Uh 169 00:08:58,000 --> 00:09:00,520 Speaker 1: so that they've there isn't emissions pro file, but it's 170 00:09:00,520 --> 00:09:03,920 Speaker 1: a much smaller profile than it has been historically, and 171 00:09:03,960 --> 00:09:07,360 Speaker 1: it continues that profile continues to shrink. If you don't 172 00:09:07,360 --> 00:09:11,720 Speaker 1: mean to catch on, help us with three emotions. Los Angeles. 173 00:09:11,760 --> 00:09:13,680 Speaker 1: I couldn't see the mountains when I was a kid, 174 00:09:13,760 --> 00:09:18,440 Speaker 1: Now I can. I guess that's autos, trucks, you have refineries, 175 00:09:19,040 --> 00:09:21,880 Speaker 1: and you've got the dawning awareness that everybody's flying around 176 00:09:21,920 --> 00:09:25,720 Speaker 1: in jet aircraft, which I believe are polluting. Which is 177 00:09:25,720 --> 00:09:30,400 Speaker 1: the biggest defender without pinning it down, which is the 178 00:09:30,480 --> 00:09:34,360 Speaker 1: which is the one you think about is being the 179 00:09:34,440 --> 00:09:38,360 Speaker 1: bad guy or a none of them because they're relatively better. 180 00:09:38,520 --> 00:09:41,640 Speaker 1: They're all relatively better, but sort of which one you know? 181 00:09:41,720 --> 00:09:45,160 Speaker 1: Probably if you think about autos in particular in California, 182 00:09:45,200 --> 00:09:49,760 Speaker 1: the California autos, they're they're probably the biggest improvement. Refineries 183 00:09:49,800 --> 00:09:51,640 Speaker 1: are probably number two. And I would sort of say that, 184 00:09:51,640 --> 00:09:55,679 Speaker 1: you know that the jet fuel is probably the less improvement. 185 00:09:55,679 --> 00:09:58,560 Speaker 1: But we're making now, we're making efforts in jet fuel 186 00:09:58,640 --> 00:10:01,920 Speaker 1: that we were making an years ago. What does big 187 00:10:01,960 --> 00:10:04,800 Speaker 1: oil want? Obviously they want to make more money and 188 00:10:04,960 --> 00:10:08,200 Speaker 1: more return on invested capital. I get that, But do 189 00:10:08,280 --> 00:10:11,800 Speaker 1: they want to do it within a green upstream to 190 00:10:12,000 --> 00:10:15,840 Speaker 1: downstream profile or is it just sort of a pr 191 00:10:15,920 --> 00:10:18,440 Speaker 1: stunt off? You know, you guys take care of that. Well, 192 00:10:18,480 --> 00:10:21,120 Speaker 1: we go make the marginal barrel. Now, I think if 193 00:10:21,160 --> 00:10:23,480 Speaker 1: you ask the refine you know, if you ask refiners, 194 00:10:23,480 --> 00:10:25,840 Speaker 1: are you asked the integrated oil companies? What do they want? 195 00:10:25,920 --> 00:10:30,520 Speaker 1: They want regulatory certainty, and they want let's regulate the end. 196 00:10:31,200 --> 00:10:34,560 Speaker 1: Let's regulate the tailpipe, not regulate the process. So tell 197 00:10:34,600 --> 00:10:37,640 Speaker 1: me what it is you want. Let me figure out 198 00:10:37,640 --> 00:10:40,320 Speaker 1: what's the most cost effective way because because of the 199 00:10:40,360 --> 00:10:42,960 Speaker 1: margin environment, let me figure out the most cost effective 200 00:10:42,960 --> 00:10:46,200 Speaker 1: way to get that emission reduction that you're looking for. 201 00:10:46,440 --> 00:10:48,160 Speaker 1: And part of it is, and this is a word 202 00:10:48,160 --> 00:10:52,840 Speaker 1: from Secretary Clinton. Fair play Hillary Clinton years ago, folks, 203 00:10:52,920 --> 00:10:55,840 Speaker 1: is I'm gonna say a senator, I can't remember when 204 00:10:56,240 --> 00:11:00,960 Speaker 1: talked about fair trade. Are the refineries eight to state? 205 00:11:01,160 --> 00:11:04,520 Speaker 1: And then looking at Canada, Mexico and Europe, are we 206 00:11:04,679 --> 00:11:06,920 Speaker 1: fair or are we trying to be too strict with 207 00:11:06,960 --> 00:11:10,559 Speaker 1: ours where they can't compete? Well, I think, um, what 208 00:11:10,600 --> 00:11:13,120 Speaker 1: we're discovering is that are you know our refineries, Our 209 00:11:13,160 --> 00:11:16,960 Speaker 1: refineries can compete even with a more stringent regulatory environment 210 00:11:17,000 --> 00:11:18,439 Speaker 1: that we see in other parts of the world because 211 00:11:18,440 --> 00:11:22,320 Speaker 1: the cost basis a different. In particular, natural gas is 212 00:11:22,559 --> 00:11:25,600 Speaker 1: a huge advantage. It's worth probably four dollars a barrel 213 00:11:25,640 --> 00:11:27,800 Speaker 1: to the US refinery. But when you look at the 214 00:11:27,800 --> 00:11:31,120 Speaker 1: regulatory structure around the world, it's it's a checkerboard. I mean, 215 00:11:31,360 --> 00:11:35,720 Speaker 1: the new refineries tend to be much more in emissions 216 00:11:35,760 --> 00:11:38,240 Speaker 1: efficient just because their state of the art refineries, but 217 00:11:38,320 --> 00:11:41,280 Speaker 1: not every refinery has the second, when you see a 218 00:11:41,320 --> 00:11:44,880 Speaker 1: research note saying we're switching from summer fuel to winter fuel, 219 00:11:45,440 --> 00:11:48,800 Speaker 1: is that noise in the forty a barrel debate or 220 00:11:48,840 --> 00:11:52,000 Speaker 1: is it actually something that can move price and move 221 00:11:52,040 --> 00:11:54,240 Speaker 1: the rate of change of price? It should be it 222 00:11:54,240 --> 00:11:56,679 Speaker 1: should be noise in terms of crude oil prices. It 223 00:11:56,720 --> 00:11:59,080 Speaker 1: should it should be in the noise because we we 224 00:11:59,200 --> 00:12:03,120 Speaker 1: make that summer to winter shift every year. So and 225 00:12:03,120 --> 00:12:05,560 Speaker 1: and it's and it's a blending issue. It's not that 226 00:12:05,559 --> 00:12:07,880 Speaker 1: we're going to refine a different crude. We're gonna it's 227 00:12:07,920 --> 00:12:10,439 Speaker 1: not we're refining less crude. It's that we're going to 228 00:12:10,559 --> 00:12:14,680 Speaker 1: blend the gasoline differently, using different blending components in the winter, 229 00:12:14,720 --> 00:12:16,560 Speaker 1: that we're doing the fault than we do in the summer. 230 00:12:16,600 --> 00:12:19,240 Speaker 1: But it's still do But Mike, this is a huge issue. 231 00:12:19,360 --> 00:12:23,320 Speaker 1: I'm having more and more trouble finding decent gas for 232 00:12:23,320 --> 00:12:27,520 Speaker 1: the Nash Rambler. I mean, I'm sorry, the blends are 233 00:12:27,559 --> 00:12:34,000 Speaker 1: like his cast his car runs unleaded gas. Yeah, serious problem. 234 00:12:34,040 --> 00:12:41,800 Speaker 1: It's not funny you go over to skip yard is 235 00:12:41,840 --> 00:12:58,680 Speaker 1: always great. Mentioned earlier the idea that the equity markets 236 00:12:58,679 --> 00:13:02,000 Speaker 1: in the bond markets are sort of seeing the possibility 237 00:13:02,040 --> 00:13:05,280 Speaker 1: of the FED different ways, although I don't want to 238 00:13:05,280 --> 00:13:07,800 Speaker 1: make too much of it because the moves aren't that big. 239 00:13:07,840 --> 00:13:12,000 Speaker 1: But Ira Jersey is uh senior portfolio manager at Oppenheimer Funds, 240 00:13:12,160 --> 00:13:14,920 Speaker 1: and he has to follow both sides of the argument, 241 00:13:15,120 --> 00:13:17,520 Speaker 1: and he joins us now here in the studio era, 242 00:13:18,559 --> 00:13:21,240 Speaker 1: the equity markets seem to be thinking the GDP report 243 00:13:21,280 --> 00:13:24,720 Speaker 1: bad news is good news. The Fed won't tighten, and 244 00:13:24,760 --> 00:13:29,560 Speaker 1: therefore we can continue to buy stocks, whereas in the 245 00:13:29,600 --> 00:13:33,560 Speaker 1: bond market they're sort of a little unsure about what's 246 00:13:33,559 --> 00:13:37,000 Speaker 1: going on now with Bill Dudley and Robert Kaplan out saying, hey, 247 00:13:37,000 --> 00:13:40,360 Speaker 1: don't rule out September. Yeah, I think I think there's 248 00:13:40,360 --> 00:13:42,920 Speaker 1: always some confusion when you get FED speak and you 249 00:13:42,960 --> 00:13:46,120 Speaker 1: have presidents like especially big names like Bill Dudley, who 250 00:13:46,160 --> 00:13:49,880 Speaker 1: are considered one of the three kind of primary um 251 00:13:50,160 --> 00:13:53,120 Speaker 1: primary members of the Federal Open Market Committee that helps 252 00:13:53,120 --> 00:13:57,040 Speaker 1: set policy, and and people follow them closely. So when 253 00:13:57,040 --> 00:13:59,679 Speaker 1: he says, hey, September is alive meeting, you can't completely 254 00:13:59,679 --> 00:14:01,600 Speaker 1: disc out that. I think what they're trying to do here, Mike, 255 00:14:01,600 --> 00:14:04,560 Speaker 1: because bring back some optionality. I mean they basically the 256 00:14:04,600 --> 00:14:08,760 Speaker 1: markets have completely discounted all of their talk. They've discounted UM, 257 00:14:08,800 --> 00:14:12,280 Speaker 1: the dot plot, and all of the statements that they've 258 00:14:12,320 --> 00:14:15,280 Speaker 1: made at at the June meeting and even the July meeting. 259 00:14:15,640 --> 00:14:18,400 Speaker 1: So they were in a real quandary because they want 260 00:14:18,440 --> 00:14:21,760 Speaker 1: to be able to hike and then prep the market 261 00:14:22,000 --> 00:14:23,760 Speaker 1: for them to be able to hike. But they have 262 00:14:23,840 --> 00:14:26,240 Speaker 1: a real problem doing it. And some of this Fed 263 00:14:26,320 --> 00:14:28,720 Speaker 1: speak is the way that they attempt that when your 264 00:14:28,760 --> 00:14:31,680 Speaker 1: traders come to you and say, what's the FED gonna do? 265 00:14:32,160 --> 00:14:34,480 Speaker 1: What are you telling? So? I I think that the 266 00:14:34,520 --> 00:14:37,000 Speaker 1: Fed probably well, I think the Fed's not gonna hike 267 00:14:37,040 --> 00:14:39,920 Speaker 1: in September. Um. I think that's pretty clear. The market's 268 00:14:39,960 --> 00:14:43,040 Speaker 1: not prepped for it. Yes, you get too employment numbers 269 00:14:43,080 --> 00:14:46,720 Speaker 1: before them, but um, but generally speaking, you're not going 270 00:14:46,760 --> 00:14:49,800 Speaker 1: to have enough confidence in order to uh in order 271 00:14:49,840 --> 00:14:52,560 Speaker 1: to hike again. UH. And but by then I think 272 00:14:52,560 --> 00:14:55,680 Speaker 1: December is a distinct possibility. Um. You continue with the 273 00:14:55,720 --> 00:14:58,680 Speaker 1: trends that we've had in the US, and you wind 274 00:14:58,760 --> 00:15:02,600 Speaker 1: up with um, with it becoming clear that that Brexit's 275 00:15:02,640 --> 00:15:05,280 Speaker 1: not going to affect Europe in in such a significantly 276 00:15:05,840 --> 00:15:08,640 Speaker 1: detrimental way that they will actually be able to hike. UM. 277 00:15:08,680 --> 00:15:10,560 Speaker 1: You know, one of the things about Europe in particular 278 00:15:10,640 --> 00:15:12,720 Speaker 1: is that they've always surprised to the upside over the 279 00:15:12,800 --> 00:15:16,560 Speaker 1: last three years. UM, that that growth there has has 280 00:15:16,560 --> 00:15:18,560 Speaker 1: picked up. It might slow a tenth or two, but 281 00:15:18,640 --> 00:15:20,240 Speaker 1: a tenth or two is not going to be enough 282 00:15:20,280 --> 00:15:22,920 Speaker 1: for for the Fed to say, Hey, things really bad, 283 00:15:23,040 --> 00:15:30,040 Speaker 1: let's uh, let's remain unhold forever. Well, the September meeting approaches. UM, 284 00:15:30,280 --> 00:15:33,680 Speaker 1: could the market start to price something in if we 285 00:15:33,720 --> 00:15:36,640 Speaker 1: get better numbers that then gives them the optionality or 286 00:15:36,720 --> 00:15:40,160 Speaker 1: is it just uh too far off the radar. I 287 00:15:40,200 --> 00:15:43,040 Speaker 1: think it's probably too far off. You probably won't. I 288 00:15:43,360 --> 00:15:45,720 Speaker 1: don't think that you'll price in more than more than 289 00:15:45,760 --> 00:15:48,120 Speaker 1: a fifty percent chance, which is you know that that 290 00:15:48,160 --> 00:15:51,040 Speaker 1: doesn't mean that they can't hike. Certainly, the Federal Up 291 00:15:51,040 --> 00:15:52,920 Speaker 1: and Market Committee controls interest rates, so they can do 292 00:15:52,960 --> 00:15:56,280 Speaker 1: what they'd like to do. But the market, I don't think, well, 293 00:15:56,640 --> 00:15:59,640 Speaker 1: well should they mean? Are they getting pushed around by 294 00:15:59,640 --> 00:16:01,160 Speaker 1: the market. It's in a in a way that is 295 00:16:01,200 --> 00:16:04,120 Speaker 1: not good for monetary policy making. So this is always 296 00:16:04,120 --> 00:16:06,360 Speaker 1: the conndrum when you sit in my seat on a 297 00:16:06,400 --> 00:16:08,720 Speaker 1: you know, by side shop as a fixed income strategist, 298 00:16:08,960 --> 00:16:11,640 Speaker 1: is you know, is it my job to opine on 299 00:16:12,160 --> 00:16:13,920 Speaker 1: what the Fed should do or what the Fed will do? 300 00:16:14,000 --> 00:16:15,800 Speaker 1: And what the Fed will do is more important to 301 00:16:15,880 --> 00:16:18,440 Speaker 1: us because that's the way that we wind up positioning 302 00:16:18,440 --> 00:16:23,240 Speaker 1: our portfolio for UM, for for any central bank movements, 303 00:16:23,520 --> 00:16:26,200 Speaker 1: I think that they probably shouldn't. UM. You know, when 304 00:16:26,280 --> 00:16:29,760 Speaker 1: you when you talk to our Chief Investment Officer, Christian Mamani, 305 00:16:29,800 --> 00:16:32,280 Speaker 1: and we look at, um, you know, everything going on 306 00:16:32,320 --> 00:16:34,320 Speaker 1: in the world and some of the fragilities in the 307 00:16:34,320 --> 00:16:37,720 Speaker 1: global financial world. Still the FED needs to go very 308 00:16:37,720 --> 00:16:40,960 Speaker 1: slowly and very cautiously because you know they are concerned. 309 00:16:40,960 --> 00:16:44,440 Speaker 1: When you talk to some FED officials and you ask them, hey, 310 00:16:44,480 --> 00:16:48,040 Speaker 1: what is your biggest concern, it's financial tightening. Um, well, 311 00:16:48,440 --> 00:16:50,880 Speaker 1: they won't be tightening financial policy if that's your big concern. 312 00:16:51,040 --> 00:16:55,880 Speaker 1: It's math. August, let's get started the school year. Yeah, yeah, 313 00:16:55,920 --> 00:16:58,120 Speaker 1: fe it starts every day? Is the school year? At 314 00:16:58,120 --> 00:17:02,560 Speaker 1: the key household? F the equals PV one plus R 315 00:17:02,920 --> 00:17:07,639 Speaker 1: to the T. What if there's no t iro Jersey 316 00:17:07,680 --> 00:17:13,719 Speaker 1: on perpetual bonds? The math of this is is not sobering, 317 00:17:13,800 --> 00:17:18,160 Speaker 1: but is something to be respected. How do you respond 318 00:17:18,240 --> 00:17:22,880 Speaker 1: when your responsible people say what we need is perpetual bonds. Well, 319 00:17:23,560 --> 00:17:25,560 Speaker 1: you know, the the question is if we do have 320 00:17:25,600 --> 00:17:28,560 Speaker 1: perpetual bonds, will they have other features like call features 321 00:17:28,600 --> 00:17:30,960 Speaker 1: and the like. You know, one of the things that 322 00:17:31,720 --> 00:17:33,600 Speaker 1: if you go back in the forever history I'm going 323 00:17:33,680 --> 00:17:35,600 Speaker 1: a nerd out here a little bit, but if you 324 00:17:35,640 --> 00:17:39,320 Speaker 1: go back to the six seventeen hundreds and early eighteen hundreds, 325 00:17:39,640 --> 00:17:42,320 Speaker 1: you didn't have maturities on bonds um. You know, bonds 326 00:17:42,320 --> 00:17:44,720 Speaker 1: were issued by governments and they were perpetuals, and they 327 00:17:44,760 --> 00:17:47,719 Speaker 1: all had call features, so so the governments could recall 328 00:17:47,800 --> 00:17:51,120 Speaker 1: them at at any at any point, and of course 329 00:17:51,160 --> 00:17:53,400 Speaker 1: they did that when interest rates became lower and they 330 00:17:53,400 --> 00:17:56,080 Speaker 1: became better credit quality, so then they would call them, 331 00:17:56,320 --> 00:17:57,520 Speaker 1: you know, when we do have a lot of them 332 00:17:57,520 --> 00:18:00,920 Speaker 1: outstanding today. In fact, a lot of bank capital notes 333 00:18:01,119 --> 00:18:04,880 Speaker 1: UM have to be issued with very either extremely long 334 00:18:04,960 --> 00:18:08,119 Speaker 1: maturities or as perpetuals. So they you know, these types 335 00:18:08,160 --> 00:18:11,120 Speaker 1: of securities still exist. They all have call features. Whether 336 00:18:11,160 --> 00:18:13,240 Speaker 1: they can be called every five years or every ten years, 337 00:18:13,560 --> 00:18:15,919 Speaker 1: they can still be called. But but they still do exist, 338 00:18:16,000 --> 00:18:18,120 Speaker 1: and you know they do they have more risk than 339 00:18:18,160 --> 00:18:20,399 Speaker 1: say a thirty year or fifty year bond. You know, 340 00:18:20,440 --> 00:18:23,919 Speaker 1: the bond math says no, UM in reality, you know, 341 00:18:23,960 --> 00:18:26,760 Speaker 1: they could be outstanding for a very long period of time, 342 00:18:27,040 --> 00:18:28,679 Speaker 1: but as long as they keep on paying their coupon, 343 00:18:28,800 --> 00:18:31,480 Speaker 1: then the investors should be should be okay with that, 344 00:18:31,600 --> 00:18:35,280 Speaker 1: But but they do provide a certain amount of special risk. 345 00:18:35,840 --> 00:18:39,240 Speaker 1: What do you see happening as far as yields going 346 00:18:40,119 --> 00:18:42,760 Speaker 1: through the rest of the year, shall we say, well, 347 00:18:42,800 --> 00:18:44,439 Speaker 1: I think I think long term yields, you know, ten 348 00:18:44,520 --> 00:18:46,720 Speaker 1: year yields, thirty year yields in the US will wind 349 00:18:46,800 --> 00:18:50,359 Speaker 1: up being relatively range bound. UM. There's the possibility that 350 00:18:50,400 --> 00:18:53,440 Speaker 1: they could even move lower. UM. I think there's two 351 00:18:53,840 --> 00:18:56,280 Speaker 1: two ways that they can move lower. One is that 352 00:18:56,320 --> 00:19:00,879 Speaker 1: you wind up with slowing economic environment and UM people 353 00:19:01,760 --> 00:19:04,800 Speaker 1: other central banks wind up cutting interest rates further. Uh. 354 00:19:04,840 --> 00:19:07,359 Speaker 1: You can see that potentially in Europe and and in 355 00:19:07,480 --> 00:19:10,680 Speaker 1: some of the emerging markets. UM. If that were to happen, 356 00:19:10,760 --> 00:19:14,199 Speaker 1: the US being again the high yielder visa VI, some 357 00:19:14,280 --> 00:19:17,440 Speaker 1: of these other jurisdictions ends up being a beneficiary of that. 358 00:19:17,520 --> 00:19:20,480 Speaker 1: So ten year yields can move lower. UM. The second way, 359 00:19:20,520 --> 00:19:23,320 Speaker 1: which is I think less likely, uh if if for 360 00:19:23,400 --> 00:19:26,560 Speaker 1: yields to move move lower in the long end, would 361 00:19:26,560 --> 00:19:28,600 Speaker 1: be if the Federal reserve war to hike in September 362 00:19:28,640 --> 00:19:30,920 Speaker 1: and then potentially in December. So you wind up with 363 00:19:31,280 --> 00:19:33,679 Speaker 1: a lot of calls that the Feds making a policy mistake. 364 00:19:33,760 --> 00:19:37,119 Speaker 1: They're going to be UM more calls that that this 365 00:19:37,160 --> 00:19:40,840 Speaker 1: will be deflationary or disinflationary, and you wind up with 366 00:19:41,160 --> 00:19:43,600 Speaker 1: a much flatter yield curve, so two year front end 367 00:19:43,680 --> 00:19:46,680 Speaker 1: yields go moving higher while long end yields like tens 368 00:19:46,680 --> 00:19:49,320 Speaker 1: and thirties wind up moving lower UM just because of 369 00:19:49,359 --> 00:19:52,600 Speaker 1: the UH, you know, the outlook that that the Feds 370 00:19:52,680 --> 00:19:55,800 Speaker 1: making a mistake UM. Ultimately, though, I think that that 371 00:19:55,880 --> 00:19:58,639 Speaker 1: ten ure yields probably your range bound between you know, 372 00:19:58,720 --> 00:20:01,879 Speaker 1: call at the one forty up to up to maybe 373 00:20:01,880 --> 00:20:05,280 Speaker 1: one sixty one seventy UM for for the remainder of 374 00:20:05,280 --> 00:20:07,359 Speaker 1: the year. What do you think the Fed needs to 375 00:20:07,440 --> 00:20:10,800 Speaker 1: see from the markets before they feel comfortable. I don't 376 00:20:10,800 --> 00:20:12,640 Speaker 1: know if it's so much the markets. I think they 377 00:20:12,640 --> 00:20:15,320 Speaker 1: have to be extremely comfortable, and it has to they 378 00:20:15,359 --> 00:20:18,199 Speaker 1: have to have clear and convincing evidence from UM, from 379 00:20:18,240 --> 00:20:21,199 Speaker 1: the economy, from from the data side in order to 380 00:20:21,480 --> 00:20:23,560 Speaker 1: for for the markets to be convinced that the Federal 381 00:20:23,560 --> 00:20:25,360 Speaker 1: Reserve is able to hike. And it's not only data 382 00:20:25,440 --> 00:20:28,359 Speaker 1: here in the US, but it is UH data globally 383 00:20:28,400 --> 00:20:31,119 Speaker 1: that really matters. I think the removal one thing that 384 00:20:31,160 --> 00:20:33,600 Speaker 1: I found really interesting in the statement last week from 385 00:20:33,600 --> 00:20:37,400 Speaker 1: the from the Federal Market Committee statement was the removal 386 00:20:37,440 --> 00:20:40,520 Speaker 1: of this you know, the their fear about what was 387 00:20:40,560 --> 00:20:43,720 Speaker 1: going on in the global global economy. UM. I think 388 00:20:43,720 --> 00:20:45,560 Speaker 1: that there was a big fear that you know, breggsit 389 00:20:45,640 --> 00:20:48,200 Speaker 1: would wind up being very detrimental to both markets and 390 00:20:48,440 --> 00:20:52,240 Speaker 1: the real economy in Europe. UM. And the expectations are that, yes, 391 00:20:52,280 --> 00:20:54,640 Speaker 1: it's gonna maybe lead to a slight slowdown, but it's 392 00:20:54,680 --> 00:20:58,119 Speaker 1: not really uh, it's not really the worst case scenario 393 00:20:58,240 --> 00:21:00,480 Speaker 1: is not likely to play out. We're are you on 394 00:21:00,600 --> 00:21:04,639 Speaker 1: the adjustment of our GDP quietly. The shock last week 395 00:21:04,840 --> 00:21:09,000 Speaker 1: was the Atlanta derby went under two percent and a 396 00:21:09,160 --> 00:21:12,680 Speaker 1: day later that's what we saw. That was a big surprise. 397 00:21:13,280 --> 00:21:15,719 Speaker 1: It was I mean, particularly on the investment side and 398 00:21:15,800 --> 00:21:18,080 Speaker 1: on the inventory side, so that that was really the 399 00:21:18,080 --> 00:21:20,560 Speaker 1: weak part of the economy. You wound up and you know, 400 00:21:20,600 --> 00:21:23,400 Speaker 1: you wind up looking at things like personal consumption, which 401 00:21:23,400 --> 00:21:26,199 Speaker 1: is the largest part of GDP. The expectations were for 402 00:21:26,320 --> 00:21:29,239 Speaker 1: to be um, you know, relatively robust, and it came 403 00:21:29,280 --> 00:21:31,919 Speaker 1: in a little bit lower than expectations, but it wasn't 404 00:21:32,520 --> 00:21:35,200 Speaker 1: wasn't so low that if the rest of the UM, 405 00:21:35,240 --> 00:21:37,600 Speaker 1: if the rest of the data and the report had 406 00:21:38,160 --> 00:21:40,359 Speaker 1: had kept up pace, then then you know, you wind 407 00:21:40,400 --> 00:21:42,919 Speaker 1: up with more or less and as expected report. I 408 00:21:42,960 --> 00:21:45,720 Speaker 1: think that the real worrying thing is the business investment side. 409 00:21:45,800 --> 00:21:49,040 Speaker 1: So the business investment was down UM on an annualized 410 00:21:49,040 --> 00:21:52,280 Speaker 1: basis almost ten percent. That's really worrying because if you 411 00:21:52,440 --> 00:21:54,959 Speaker 1: don't have animal spirits, if you don't have businesses growing, 412 00:21:54,960 --> 00:21:57,879 Speaker 1: and that means that you the likelihood that you have 413 00:21:58,280 --> 00:22:01,960 Speaker 1: UM extended employment owth and uh and and a more 414 00:22:02,040 --> 00:22:04,920 Speaker 1: robust economy is is unlikely. But you know where the 415 00:22:05,040 --> 00:22:06,560 Speaker 1: risk rey rate is. I mean, if they're running a 416 00:22:06,560 --> 00:22:09,200 Speaker 1: dividend discount, you know, if they're running something a net 417 00:22:09,200 --> 00:22:12,440 Speaker 1: present value rather analysis. Could you give them a plug 418 00:22:12,440 --> 00:22:15,400 Speaker 1: in number to do on a net present value analysis 419 00:22:15,960 --> 00:22:20,280 Speaker 1: of a project? Well, I guess that depends on you know, 420 00:22:20,320 --> 00:22:23,400 Speaker 1: the growth rate of the of that that you UM 421 00:22:23,480 --> 00:22:26,720 Speaker 1: that you subscribe to, what you're um, what your sales 422 00:22:26,720 --> 00:22:28,719 Speaker 1: are going to be, or how you're gonna make revenue 423 00:22:28,720 --> 00:22:31,240 Speaker 1: from that particular project to right, So the risk free 424 00:22:31,320 --> 00:22:34,560 Speaker 1: rates near zero, credit spreads are very low. So so 425 00:22:34,640 --> 00:22:38,760 Speaker 1: the borrowing environment is UM is extremely positive. But that 426 00:22:38,840 --> 00:22:41,720 Speaker 1: doesn't mean that if if your expectations are for growth 427 00:22:41,760 --> 00:22:44,880 Speaker 1: the slow and for personal consumption the slow, then you're 428 00:22:44,920 --> 00:22:47,879 Speaker 1: not going to invest. Mike, here's a British triple B 429 00:22:49,040 --> 00:22:54,960 Speaker 1: SMP triple B piece out to two thousand seventy three. Mike, 430 00:22:55,040 --> 00:22:58,719 Speaker 1: you're gonna be doing the show solo in two thousand 431 00:22:58,840 --> 00:23:01,960 Speaker 1: seventy three. It's gone from a hundred to a hundred 432 00:23:01,960 --> 00:23:06,879 Speaker 1: and twelve. So the bonds appreciated twelve off a five 433 00:23:06,920 --> 00:23:11,520 Speaker 1: and five eights coupon to yield four percent four point 434 00:23:11,640 --> 00:23:15,280 Speaker 1: zero zero percent. So that's like a perpetual yield. I 435 00:23:15,320 --> 00:23:18,720 Speaker 1: guess you could almost base you're net present value study 436 00:23:19,000 --> 00:23:22,520 Speaker 1: out what sixty years? Well, yeah, I mean for us 437 00:23:22,600 --> 00:23:26,600 Speaker 1: it's perpetual. Maybe some people in the millennium. I don't 438 00:23:26,600 --> 00:23:28,639 Speaker 1: know where, I don't know how. I do know how 439 00:23:28,680 --> 00:23:33,240 Speaker 1: you do investment analysis adults CF. Well, that isn't It's 440 00:23:33,240 --> 00:23:36,280 Speaker 1: an interesting the whole topic, you know, with people talk 441 00:23:36,320 --> 00:23:38,600 Speaker 1: about hundred year bonds and I mean, how do you analyzed? 442 00:23:39,800 --> 00:23:42,600 Speaker 1: I mean you're not around, you know, yeah. I mean 443 00:23:42,640 --> 00:23:46,000 Speaker 1: it's funny when when companies have issued bonds um that 444 00:23:46,040 --> 00:23:49,959 Speaker 1: were you know, older, that that matured, um well beyond 445 00:23:50,000 --> 00:23:51,919 Speaker 1: what they had already existed. You know, Disney did a 446 00:23:51,960 --> 00:23:54,080 Speaker 1: hundred year bond a few years ago, and you know 447 00:23:54,119 --> 00:23:57,480 Speaker 1: they've been in existence for sixty odd years um, and 448 00:23:57,520 --> 00:24:00,440 Speaker 1: they issued a hundred year bond. Um. I think those 449 00:24:00,560 --> 00:24:02,560 Speaker 1: very long term bonds. I mean, they do have some 450 00:24:02,640 --> 00:24:05,720 Speaker 1: value to someone, but um, you know, for most people, 451 00:24:05,840 --> 00:24:08,080 Speaker 1: when you're trying to why do you buy a bond? 452 00:24:08,119 --> 00:24:10,520 Speaker 1: You buy a bond because you either need income or 453 00:24:10,600 --> 00:24:13,280 Speaker 1: you have some liability that you need to to match. 454 00:24:13,359 --> 00:24:15,879 Speaker 1: So if you're an insurance company and you say, Okay, 455 00:24:16,000 --> 00:24:18,760 Speaker 1: the average person who I am ensuring their life is 456 00:24:18,760 --> 00:24:21,800 Speaker 1: going to live for thirty years, so therefore I need 457 00:24:21,840 --> 00:24:24,040 Speaker 1: to buy thirty year bonds, you know, the people who 458 00:24:24,080 --> 00:24:28,080 Speaker 1: buy a hundred year bond are you know, thinking that, hey, 459 00:24:28,119 --> 00:24:30,600 Speaker 1: I just need income. Um. They're not someone who's matching 460 00:24:30,640 --> 00:24:33,000 Speaker 1: any type of reliability. And that's one of the reasons 461 00:24:33,000 --> 00:24:35,040 Speaker 1: why people always say, like, why aren't is in the 462 00:24:35,119 --> 00:24:37,639 Speaker 1: U s. Government issuing fifty year bonds or sixty year bonds. 463 00:24:37,800 --> 00:24:40,120 Speaker 1: And one is that it really for the people who 464 00:24:40,160 --> 00:24:43,000 Speaker 1: tend to buy very long dated assets, it doesn't do 465 00:24:43,160 --> 00:24:45,480 Speaker 1: much for them because they don't really have a need 466 00:24:45,520 --> 00:24:47,600 Speaker 1: to buy fifty and sixty year bonds. The need is 467 00:24:47,600 --> 00:24:50,679 Speaker 1: in the more thirty year space. So the government's just decided, hey, 468 00:24:50,720 --> 00:24:54,480 Speaker 1: I'll issue more thirty years instead of anything longer. Uh, 469 00:24:54,640 --> 00:24:58,320 Speaker 1: very quickly about thirty seconds? Is anything overseas look attractively? 470 00:24:58,359 --> 00:25:02,120 Speaker 1: A lot of central banks meaning this week? Yeah, so 471 00:25:02,359 --> 00:25:05,320 Speaker 1: so overseas we like some some emerging market debt is 472 00:25:05,320 --> 00:25:08,600 Speaker 1: pretty attractive to us. Um are big? Are big? Like? 473 00:25:08,920 --> 00:25:12,080 Speaker 1: Kind of non consensus is India? Um? We way you 474 00:25:12,080 --> 00:25:14,679 Speaker 1: can actually get seven percent yields. And I know your 475 00:25:14,720 --> 00:25:16,239 Speaker 1: eyes are probably gonna bug out of your head when 476 00:25:16,240 --> 00:25:18,760 Speaker 1: you hear, Oh my goodness, there's seven percent yields somewhere 477 00:25:18,760 --> 00:25:21,040 Speaker 1: in the world. You know, it's investment. Great country and 478 00:25:21,240 --> 00:25:25,800 Speaker 1: uh it's liberalizing their economy. They they're doing some economic reforms. Um, 479 00:25:25,880 --> 00:25:29,480 Speaker 1: you know, slowly but also steadily. Um so places like that. 480 00:25:29,520 --> 00:25:33,480 Speaker 1: We were were overweight in uh in places like India. Right, Jersey, 481 00:25:33,520 --> 00:25:37,240 Speaker 1: thank you so much, particularly for the perpetual interview. Mr 482 00:25:37,320 --> 00:25:51,479 Speaker 1: Jersey is with an Appenheimer Funds. James Trevitis with us 483 00:25:51,480 --> 00:25:54,720 Speaker 1: with a Fletcher School. In the previous life he was 484 00:25:54,760 --> 00:25:58,400 Speaker 1: an admiral. You know something about this linkage of our 485 00:25:58,400 --> 00:26:01,680 Speaker 1: military to our power ticks. Um, I've got to rip 486 00:26:01,760 --> 00:26:05,880 Speaker 1: up the script. Admiral STEVINUS, good morning, and uh look 487 00:26:05,920 --> 00:26:08,240 Speaker 1: at the idea of the military at conventions. All I 488 00:26:08,240 --> 00:26:13,160 Speaker 1: could think about with General Dempsey's criticism of General Allen 489 00:26:13,440 --> 00:26:16,000 Speaker 1: and others being at a convention was I believe in 490 00:26:16,040 --> 00:26:20,439 Speaker 1: my collective memory, someone named Eisenhower wandered in as a 491 00:26:20,520 --> 00:26:25,480 Speaker 1: retired general and made an impact at a convention. Should 492 00:26:25,520 --> 00:26:30,400 Speaker 1: people like Stravins be at political conventions? Well, first, I'll 493 00:26:30,400 --> 00:26:34,000 Speaker 1: say I think these are intensely personal decisions for the 494 00:26:34,080 --> 00:26:39,960 Speaker 1: officers involved. Number two, every citizen, whether a military officer 495 00:26:40,080 --> 00:26:43,960 Speaker 1: or a butcher, baker, candlestick maker, certainly has the right 496 00:26:44,640 --> 00:26:46,560 Speaker 1: to do that. That's why we have a military to 497 00:26:46,640 --> 00:26:50,520 Speaker 1: defend those rights. And number three, I think that it 498 00:26:50,600 --> 00:26:53,400 Speaker 1: depends on the election, depends on the time. So when 499 00:26:53,400 --> 00:26:56,320 Speaker 1: you point, I think correctly, Tom to somebody like Ike 500 00:26:57,080 --> 00:27:01,520 Speaker 1: who comes in as at a moment of national desire 501 00:27:01,680 --> 00:27:05,600 Speaker 1: to embody that greatest generation and make someone a president, 502 00:27:05,640 --> 00:27:09,119 Speaker 1: I think that works. I think for General Allen, I 503 00:27:09,160 --> 00:27:11,359 Speaker 1: support what he did at the convention. I think he 504 00:27:11,400 --> 00:27:15,040 Speaker 1: did the right thing. He feels very strongly about this election. Well, 505 00:27:15,119 --> 00:27:17,199 Speaker 1: that was the argument that he made that this is 506 00:27:17,480 --> 00:27:20,720 Speaker 1: a one off, that he wouldn't do this ordinarily, But 507 00:27:20,840 --> 00:27:24,280 Speaker 1: the danger he sees is so great that he felt 508 00:27:24,280 --> 00:27:27,560 Speaker 1: he had to get involved. But the other generals who 509 00:27:27,600 --> 00:27:29,639 Speaker 1: have been quoted on this say it makes it harder 510 00:27:29,680 --> 00:27:34,080 Speaker 1: for those of us still on active duty. Um can 511 00:27:34,119 --> 00:27:39,280 Speaker 1: you from that point of view? I can, Although having 512 00:27:39,280 --> 00:27:41,639 Speaker 1: served thirty seven years on active duty, and in the 513 00:27:41,640 --> 00:27:44,520 Speaker 1: course of that period we saw generals like Wes clark 514 00:27:44,640 --> 00:27:49,040 Speaker 1: Land for president, I never felt that that particularly tinged 515 00:27:49,720 --> 00:27:53,760 Speaker 1: the politics of my life, even as a very senior officer. Again, 516 00:27:53,880 --> 00:27:55,919 Speaker 1: I don't think we're going to see a rash of 517 00:27:55,960 --> 00:28:00,040 Speaker 1: generals and admirals leaping into the political fray. But to 518 00:28:00,119 --> 00:28:03,320 Speaker 1: give particular officer feel strongly and feels this is an 519 00:28:03,320 --> 00:28:05,600 Speaker 1: election everyone matters and wants to do it, and I 520 00:28:05,640 --> 00:28:08,720 Speaker 1: am supportive of that. Could could I point out, Mike, 521 00:28:09,000 --> 00:28:12,000 Speaker 1: and the biggest problem with you guys, with all the 522 00:28:12,000 --> 00:28:14,480 Speaker 1: brass at your shoulders as your bios are too damn 523 00:28:14,520 --> 00:28:18,240 Speaker 1: long buried in the middle of the strafetus bio is 524 00:28:18,280 --> 00:28:21,800 Speaker 1: a single trench. In sentence, Mr McKee, he was the 525 00:28:21,880 --> 00:28:28,200 Speaker 1: longest serving combatant commander in recent US history. That goes 526 00:28:28,240 --> 00:28:30,800 Speaker 1: back I think the Washington crossing the Delaware Mike, pick 527 00:28:30,840 --> 00:28:34,760 Speaker 1: it up. I'm not sure what that exactly means. But 528 00:28:34,800 --> 00:28:38,760 Speaker 1: it sounds like a pretty good thing. Um, well, what 529 00:28:38,760 --> 00:28:41,680 Speaker 1: it means is, you know we have these, uh we 530 00:28:41,760 --> 00:28:45,400 Speaker 1: have nine combatan commands around the world, US European Command, 531 00:28:45,600 --> 00:28:48,680 Speaker 1: US Southern Commands for Latin America, Central Command for the 532 00:28:48,680 --> 00:28:51,960 Speaker 1: Middle East, etcetera. I happen to hold two of those 533 00:28:52,560 --> 00:28:55,440 Speaker 1: over the course of seven years Southern Command, Latin America, 534 00:28:55,800 --> 00:28:59,000 Speaker 1: European Command, while I was concurrently the NATO commander. I 535 00:28:59,160 --> 00:29:01,800 Speaker 1: tribute that to a computer error of some kind of 536 00:29:01,920 --> 00:29:07,760 Speaker 1: tom I was. I was fascinated listening to General Allen 537 00:29:07,880 --> 00:29:12,880 Speaker 1: over the weekend when he was asked, what happens if 538 00:29:14,040 --> 00:29:17,280 Speaker 1: we get a President Trump and he follows through on 539 00:29:17,640 --> 00:29:21,960 Speaker 1: what he says he will do, ordering the military to 540 00:29:22,040 --> 00:29:26,000 Speaker 1: do things like torture or or kill families of the enemy, 541 00:29:26,160 --> 00:29:28,160 Speaker 1: that sort of thing, And he said, we would have 542 00:29:28,280 --> 00:29:34,040 Speaker 1: a a military civilian crisis. What what would that mean 543 00:29:34,320 --> 00:29:37,760 Speaker 1: and how would you deal with that? I think the 544 00:29:37,840 --> 00:29:41,920 Speaker 1: first thing that would happen is you would see resignations 545 00:29:41,960 --> 00:29:47,080 Speaker 1: of extremely senior officers. Secondly, I think you'd see the Congress, 546 00:29:47,680 --> 00:29:51,880 Speaker 1: which regardless of party, I think would overwhelmingly not support 547 00:29:52,520 --> 00:29:56,240 Speaker 1: using the military for torture i e. Water Boarding, using 548 00:29:56,280 --> 00:29:59,200 Speaker 1: the military to kill the families of terrorists, or any 549 00:29:59,240 --> 00:30:01,760 Speaker 1: of the other things have been mentioned. Um, and this 550 00:30:01,800 --> 00:30:04,040 Speaker 1: is why we have checks and balances in the system. 551 00:30:04,120 --> 00:30:07,400 Speaker 1: I actually think it would be more of a legislative 552 00:30:07,480 --> 00:30:12,200 Speaker 1: executive branch kind of crisis than a civil military crisis. 553 00:30:12,600 --> 00:30:15,560 Speaker 1: You don't think we would get that far. I don't. 554 00:30:15,680 --> 00:30:18,560 Speaker 1: I don't think you'd see a military and revolt because 555 00:30:18,560 --> 00:30:21,720 Speaker 1: I think the Congress would act immediately. And let's say 556 00:30:21,760 --> 00:30:24,760 Speaker 1: said waterboarding is illegal. It's against the laws of the 557 00:30:24,840 --> 00:30:29,960 Speaker 1: United States. So the Congress would never continence, the executive 558 00:30:30,000 --> 00:30:32,920 Speaker 1: branch overturning the law, and the judicial branch would not 559 00:30:32,960 --> 00:30:36,880 Speaker 1: support it. Roll could you place in context the number 560 00:30:37,000 --> 00:30:41,480 Speaker 1: of Muslims in our military. There has been a terrific 561 00:30:41,560 --> 00:30:45,000 Speaker 1: focus on one brave soul. But I think a lot 562 00:30:45,040 --> 00:30:47,680 Speaker 1: of Americans say, Okay, there's like seven people in the army. 563 00:30:47,720 --> 00:30:50,640 Speaker 1: I mean, that's like the knee jerk reaction. And yet 564 00:30:50,640 --> 00:30:54,120 Speaker 1: that can't be true. You've got experience at work College, 565 00:30:54,120 --> 00:30:57,200 Speaker 1: You've got experience at Fletcher. Of course, your Navy and 566 00:30:57,320 --> 00:31:03,480 Speaker 1: Pentagon experience is l How does the military actually deal 567 00:31:03,520 --> 00:31:07,120 Speaker 1: with a diverse set of people, and particular with Muslims. 568 00:31:07,120 --> 00:31:11,320 Speaker 1: I mean, it's just they're just another person, right, Yeah, exactly, Tom, 569 00:31:11,360 --> 00:31:14,200 Speaker 1: And I think in so many ways the military tends 570 00:31:14,280 --> 00:31:17,480 Speaker 1: to be the canary and the tunnel for society. We 571 00:31:17,600 --> 00:31:21,080 Speaker 1: sort of led the way on integration in the military, 572 00:31:21,320 --> 00:31:23,680 Speaker 1: like the way in many ways on women, and I 573 00:31:23,720 --> 00:31:27,480 Speaker 1: think Muslims the same. Tom. We have conversations these days 574 00:31:27,480 --> 00:31:31,120 Speaker 1: about wickens, uh, you know, pagan worshippers in the military. 575 00:31:31,160 --> 00:31:34,880 Speaker 1: We have very small numbers of a lot of different religions. 576 00:31:34,920 --> 00:31:38,640 Speaker 1: We have a more moderate number of Muslims, but it's 577 00:31:38,680 --> 00:31:41,840 Speaker 1: not an overwhelming number, but in my experience, are extremely 578 00:31:41,880 --> 00:31:44,440 Speaker 1: well accepted. But this goes and why you again, our 579 00:31:44,480 --> 00:31:48,280 Speaker 1: producer comes up with a statistic fifty d Muslims within 580 00:31:48,320 --> 00:31:52,240 Speaker 1: the military, I mean, Admiral. This goes back to outside 581 00:31:52,240 --> 00:31:56,800 Speaker 1: the Thayer Hotel at West Point is where the Buffalo 582 00:31:57,000 --> 00:32:01,160 Speaker 1: soldiers practiced, where they got ready. I mean, you guys, 583 00:32:01,360 --> 00:32:05,840 Speaker 1: the military is way out front of general society, right 584 00:32:06,880 --> 00:32:10,440 Speaker 1: it is. And and the reasons for that are simply 585 00:32:10,480 --> 00:32:13,680 Speaker 1: because we're better organized and if you make a decision, 586 00:32:13,760 --> 00:32:16,280 Speaker 1: you actually can implement it down through the ranks and 587 00:32:16,360 --> 00:32:20,040 Speaker 1: you don't have huge amounts of pushback look at the 588 00:32:20,120 --> 00:32:24,800 Speaker 1: integration of gays and now more recently transsexuals into the military. 589 00:32:24,880 --> 00:32:28,800 Speaker 1: It's all going very well. We do this, it's called 590 00:32:28,880 --> 00:32:32,360 Speaker 1: following orders and it's um it works out pretty well 591 00:32:32,400 --> 00:32:34,960 Speaker 1: in the military. Doesn't mean we don't have problems. We 592 00:32:35,040 --> 00:32:38,520 Speaker 1: continue to in all of these categories, but we meet 593 00:32:38,560 --> 00:32:41,400 Speaker 1: those challenges. We put in programs, and I think generally 594 00:32:41,440 --> 00:32:44,280 Speaker 1: people in the military join the military because they believe 595 00:32:44,320 --> 00:32:48,080 Speaker 1: in freedom and the ability to express yourself in that 596 00:32:48,160 --> 00:32:53,080 Speaker 1: kind of way. Mike, West Point March is when the 597 00:32:54,160 --> 00:32:58,280 Speaker 1: Cavalry UH and the Buffalo Soldiers happened and before that. Yeah, 598 00:32:58,320 --> 00:33:01,480 Speaker 1: and people may not know who the Buffalo Soldiers are. 599 00:33:01,480 --> 00:33:03,800 Speaker 1: You certainly do. These who are a very great set 600 00:33:03,840 --> 00:33:07,360 Speaker 1: of cavalry troops who fought in the American West uh 601 00:33:07,400 --> 00:33:10,960 Speaker 1: and with great deal of distinction over the years, the 602 00:33:11,040 --> 00:33:14,040 Speaker 1: first all black units to go into major combat. Like 603 00:33:14,200 --> 00:33:17,479 Speaker 1: there we are talking with Admiral James trevitas Din of 604 00:33:17,480 --> 00:33:20,480 Speaker 1: the Fletcher School. We've been gossips university, we've been gossiping. 605 00:33:20,480 --> 00:33:22,080 Speaker 1: Now we have to talk about real stuff. Yeah, we're 606 00:33:22,080 --> 00:33:25,440 Speaker 1: gonna talk about some specific issues. Over the weekend. Foreign 607 00:33:25,440 --> 00:33:27,800 Speaker 1: policy certainly came up in the news with one of 608 00:33:27,800 --> 00:33:30,960 Speaker 1: the candidates demonstrating sort of lack of knowledge about what's 609 00:33:31,000 --> 00:33:34,200 Speaker 1: going on, but raising at least a question worth exploring, 610 00:33:34,240 --> 00:33:39,440 Speaker 1: and that is, uh, does NATO have the value it 611 00:33:39,560 --> 00:33:44,000 Speaker 1: once had? Is it worthwhile? Could it be changed? Should 612 00:33:44,000 --> 00:33:46,600 Speaker 1: it be changed? And uh, you know, are are we 613 00:33:46,640 --> 00:33:51,880 Speaker 1: being short changed by our NATO involvement? Yeah, I don't 614 00:33:51,960 --> 00:33:55,080 Speaker 1: think we're being short changed. And you know, I'll stipulate 615 00:33:55,120 --> 00:33:58,160 Speaker 1: that I'm a former Supreme Allied Commander in NATO for 616 00:33:58,160 --> 00:34:02,760 Speaker 1: four years, so UM, I am predisposed to admire the organization. 617 00:34:02,840 --> 00:34:05,520 Speaker 1: But let me give you some facts. UM. NATO as 618 00:34:05,560 --> 00:34:09,840 Speaker 1: an organization has been involved in founter terrorism in Afghanistan 619 00:34:10,040 --> 00:34:14,400 Speaker 1: and in Iraq. It continues to deter adventurism on the 620 00:34:14,440 --> 00:34:17,400 Speaker 1: part of Vladimir Putin to the east. It's very engaged 621 00:34:17,440 --> 00:34:20,960 Speaker 1: in the Arctic in the north, and it's also involved 622 00:34:21,080 --> 00:34:25,439 Speaker 1: in the crisis of migrants moving across the Mediterranean. It's 623 00:34:25,440 --> 00:34:29,840 Speaker 1: a big, muscular organization, twenty nine nations, fifty two percent 624 00:34:29,920 --> 00:34:34,240 Speaker 1: of the world's GDP, three million soldiers under arms, almost 625 00:34:34,239 --> 00:34:36,880 Speaker 1: all volunteers. Why would we want to walk away from 626 00:34:36,880 --> 00:34:39,880 Speaker 1: an organization like that? There is truth in the argument 627 00:34:39,960 --> 00:34:43,160 Speaker 1: that some of those countries are not spending what they 628 00:34:43,200 --> 00:34:47,640 Speaker 1: have committed to spend in terms of providing military or 629 00:34:47,960 --> 00:34:51,760 Speaker 1: or money to support the organization. You know that's true. 630 00:34:51,920 --> 00:34:54,160 Speaker 1: But let's keep it in perspective and let me just 631 00:34:54,280 --> 00:34:57,200 Speaker 1: do the numbers. This is Bloomberg. You guys respect numbers. 632 00:34:57,320 --> 00:34:59,799 Speaker 1: We love numbers. I know. Okay, here we go. So 633 00:34:59,880 --> 00:35:03,480 Speaker 1: the US spent six hundred billion dollars a year on defense, 634 00:35:03,520 --> 00:35:06,360 Speaker 1: which is a lot of money. The Russians spend about 635 00:35:06,400 --> 00:35:10,560 Speaker 1: eighty billion. The Chinese spend about a hundred and twenty billions. 636 00:35:10,560 --> 00:35:15,080 Speaker 1: So Russian and Chinese spending together is two hundred billions. 637 00:35:15,080 --> 00:35:18,400 Speaker 1: How much do you think those Europeans spend. They spend 638 00:35:18,480 --> 00:35:22,120 Speaker 1: three hundred billion dollars a year on defense, so they 639 00:35:22,120 --> 00:35:25,120 Speaker 1: spend a ton of money. They they spend more than 640 00:35:25,160 --> 00:35:28,600 Speaker 1: Russia and China combined. Now, it is true they have 641 00:35:28,719 --> 00:35:32,040 Speaker 1: set a goal of two percent of GDP. They're floating 642 00:35:32,080 --> 00:35:35,200 Speaker 1: below that at about one point six percent of GDP. 643 00:35:35,880 --> 00:35:38,040 Speaker 1: They have put in place plans as of the Worst 644 00:35:38,040 --> 00:35:41,520 Speaker 1: SAW summit a month ago to hit those targets by 645 00:35:41,520 --> 00:35:44,960 Speaker 1: and I think they will so on balance, despite the 646 00:35:45,000 --> 00:35:47,920 Speaker 1: fact that yeah, they could spend a bit more. I 647 00:35:47,960 --> 00:35:50,759 Speaker 1: think it's pretty good value for the money. And will 648 00:35:50,840 --> 00:35:54,239 Speaker 1: you mentioned a word I love, adventurism. I looked at 649 00:35:54,239 --> 00:36:00,439 Speaker 1: the Oxford English Dictionary. Was was the first feeling of that, 650 00:36:01,080 --> 00:36:04,520 Speaker 1: and it really hearkens back to a Westphalian world in 651 00:36:04,560 --> 00:36:09,399 Speaker 1: the tradition of a traditional military. Is that really what 652 00:36:09,440 --> 00:36:13,719 Speaker 1: we're going back to. We're showing the flag and fleets 653 00:36:13,760 --> 00:36:18,279 Speaker 1: and soldiers planted on foreign territory will be the new new. 654 00:36:19,320 --> 00:36:21,640 Speaker 1: I think there will be a fair amount of that. 655 00:36:21,680 --> 00:36:26,040 Speaker 1: Tom what's gonna be new, really new? Alongside it is 656 00:36:26,040 --> 00:36:31,200 Speaker 1: going to be conflict in cyberspace with special forces with 657 00:36:31,440 --> 00:36:34,400 Speaker 1: unmanned vehicles. So we're gonna have a kind of high 658 00:36:34,400 --> 00:36:38,719 Speaker 1: tech version of that great game that you recall from 659 00:36:38,760 --> 00:36:41,840 Speaker 1: the nineteenth century. And we need to be careful that 660 00:36:41,960 --> 00:36:44,399 Speaker 1: we don't stumble back into some kind of a full 661 00:36:44,440 --> 00:36:46,520 Speaker 1: blown Cold war. I think we have the tools to 662 00:36:46,640 --> 00:36:49,399 Speaker 1: navigate this, but we are going to see challenges from 663 00:36:49,400 --> 00:36:52,799 Speaker 1: both Russia and China. What do you consider crimea That 664 00:36:52,880 --> 00:36:56,040 Speaker 1: was one of the themes this weekend. Is crimea part 665 00:36:56,080 --> 00:36:59,800 Speaker 1: of the Ukraine that Russia's annexed? Is that the right word? 666 00:37:00,239 --> 00:37:03,400 Speaker 1: Your lecturing and Fletcher, how do you draw Crimea on 667 00:37:03,440 --> 00:37:08,080 Speaker 1: the map? Crimea is in every sense under international law 668 00:37:08,200 --> 00:37:11,799 Speaker 1: part of the sovereign state of Ukraine. It has been 669 00:37:12,360 --> 00:37:15,359 Speaker 1: uh annexed is the correct word, by Russia, which has 670 00:37:15,400 --> 00:37:18,719 Speaker 1: passed a law in the Duma, their parliament that now 671 00:37:18,760 --> 00:37:22,120 Speaker 1: says Crimea is part of Russia. There are some historical 672 00:37:22,800 --> 00:37:26,719 Speaker 1: antecedents and arguments that lend support to that, but under 673 00:37:26,800 --> 00:37:30,800 Speaker 1: international law this is a clear violation. Any international lawyer 674 00:37:30,840 --> 00:37:32,920 Speaker 1: will tell you that what can you do about it? 675 00:37:33,320 --> 00:37:36,840 Speaker 1: I think from a pragmatic perspective, it's highly unlikely that 676 00:37:36,920 --> 00:37:41,240 Speaker 1: Crimea is going to be returned to Ukraine. The Russian 677 00:37:41,719 --> 00:37:47,399 Speaker 1: population there is making a very strong successionist case um 678 00:37:47,480 --> 00:37:49,520 Speaker 1: and what you can do about it is put in 679 00:37:49,560 --> 00:37:52,040 Speaker 1: place to sanctions that we have. And I think the 680 00:37:52,080 --> 00:37:54,719 Speaker 1: trade space in the end will not be Crimea. The 681 00:37:54,760 --> 00:37:58,920 Speaker 1: trade space is going to be Russian troops in the 682 00:37:59,000 --> 00:38:02,200 Speaker 1: southeastern portion of Ukraine the don Bass they're going to 683 00:38:02,280 --> 00:38:04,640 Speaker 1: have to go. I think Ukraine in the end is 684 00:38:04,640 --> 00:38:07,960 Speaker 1: gonna have to swallow hard and accept that deal. Abrol Stravitz, 685 00:38:08,040 --> 00:38:10,080 Speaker 1: thank you very much for joining us. Never enough time 686 00:38:10,520 --> 00:38:12,200 Speaker 1: such a big world where you have to get it 687 00:38:12,239 --> 00:38:15,279 Speaker 1: back soon to continue. It never ends the Foreign Policy Tour. 688 00:38:17,000 --> 00:38:21,120 Speaker 1: Thanks for listening to the Bloomberg Surveillance Podcast. Subscribe and 689 00:38:21,160 --> 00:38:26,560 Speaker 1: listen to interviews on iTunes, SoundCloud, or whichever podcast platform 690 00:38:26,640 --> 00:38:30,759 Speaker 1: you prefer. I'm on Twitter at Tom Keane, Michael McKee 691 00:38:30,800 --> 00:38:34,400 Speaker 1: is at Economy Before the podcast. You can always catch 692 00:38:34,480 --> 00:38:37,000 Speaker 1: us worldwide. I'm Bloomberg Radio