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Speaker 2: I want to get back to our top story out
Speaker 2: of Washington, DC. The President and President Zelenski of Ukraine
Speaker 2: are now talking with Europe's leaders. It's a second meeting
Speaker 2: that followed the Trump Zelenski bilateral that we saw earlier today.
Speaker 2: The President has reiterated that he will call President Putin
Speaker 2: of Russia after talks are over, and you will try
Speaker 2: to arrange a three way Russia Ukraine US meeting. I
Speaker 2: want to bring in Jennifer Welch. She's been watching this
Speaker 2: very closely. She's chief geoeconomics analyst for Bloomberg Economics. She
Speaker 2: joins us from our Washing.
Speaker 3: To DC bureau.
Speaker 2: The signs out of the meeting with Zelensky earlier today
Speaker 2: there was certainly a different tone, Jennifer. I'm wondering how
Speaker 2: you're viewing this, and then also the commentary that we
Speaker 2: got from more than half a dozen leaders of NATO
Speaker 2: and Europe.
Speaker 4: All signs so far look positive. The meeting is still ongoing,
Speaker 4: which is also a positive sign. This is very much
Speaker 4: a strong contrast from Zelenski's last meeting in the Oval Office,
Speaker 4: which ended early, which blew up into fireworks in front
Speaker 4: of the press. The camaraderie that Trump and Zelenski were
Speaker 4: demonstrating to each other in front of the cameras first
Speaker 4: and there by a lot and then again when surrounded
Speaker 4: by European leaders, I think just signals how far that
Speaker 4: relationship has come, and I think, in particular how far
Speaker 4: Zolensky and European leaders have come in developing a playbook
Speaker 4: for how to deal with Trump. And we saw this
Speaker 4: in the way in which they all engaged in that
Speaker 4: press conference just about an hour ago, going around the
Speaker 4: table praising Trump, sort of incepting this idea of maybe
Speaker 4: we should really emphasize the ceasefire for us to give
Speaker 4: time to negotiating a larger peace deal, and the security
Speaker 4: guarantees are going to be a really important part of this.
Speaker 4: And thank you so much, President Trump for bringing us
Speaker 4: all here today, So I think we have moved quite
Speaker 4: a bit from where we were earlier this year. The
Speaker 4: key question though, is what are the terms that they're
Speaker 4: all going to agree on and that Trump will then
Speaker 4: be presenting to putin. Will those be enough to kind
Speaker 4: of get us forward momentum towards an ultimate piece deal
Speaker 4: of some sort.
Speaker 5: Yeah, it was really interesting to just watch at least
Speaker 5: the footage that we could see here the European leaders
Speaker 5: and Trump. The tone looked fairly positive. People were, you know, laughing,
Speaker 5: making jokes at least in a lighter kind of casual sense.
Speaker 5: And you mentioned that it seems like the European leaders
Speaker 5: are taking a different approach to Trump now, maybe more
Speaker 5: willing to all work together. What, in your view has
Speaker 5: sparked that that change in tone.
Speaker 4: I think part of it is the recognition of presenting
Speaker 4: a united front to President Trump.
Speaker 6: Right.
Speaker 4: The fact that all of these leaders came into town
Speaker 4: today to join President Zelenski when he was meeting with Trump,
Speaker 4: so it's not just Lenski and Trump one on one.
Speaker 4: I think that was really critical. I think also it
Speaker 4: gives Trump the opportunity to kind of play host, to
Speaker 4: look like the peacemaker, which is something he signaled over
Speaker 4: and over again he's really interested in doing. I think
Speaker 4: all of these tactics are kind of born out of
Speaker 4: seeing what didn't work earlier in the year, which was
Speaker 4: Lenski meeting one on one with Trump, or rather being
Speaker 4: the only form representative in the Oval Office with Trump
Speaker 4: and his team having that more combative conversation. European leaders
Speaker 4: have been coaching him behind the scenes on how to
Speaker 4: deal more effectively with Trump, and I think that that
Speaker 4: has shown a lot of fruit by the time that
Speaker 4: we get to the meetings happening place today.
Speaker 2: It's pretty remarkable that you're you know, that's working so well,
Speaker 2: and it's and it's yeah, go.
Speaker 4: Ahead, no, no, it is, and you have some really
Speaker 4: clear players at the table earlier today, most notably the
Speaker 4: NATO Secretary General Mark Rutha, who's someone who is in
Speaker 4: part picked for that job because of his ability to
Speaker 4: know how to work well with Trump and the fact
Speaker 4: that Trump seemed to not so subtly indicate that part
Speaker 4: of his openness to security guarantees for Ukraine is taking
Speaker 4: place in the context of what he sees as NATO
Speaker 4: agreeing to spend more on defense NATO members beyond the
Speaker 4: United States, That is what I mean. Spending more on
Speaker 4: their defense is for him a consideration. But it comes
Speaker 4: to thinking about how much skinned the US is putting
Speaker 4: in this game. For Ukraine, what do.
Speaker 3: You think they're talking about as we speak right now?
Speaker 4: I think there are a couple of key issues it
Speaker 4: sounds like are still being worked out at the moment
Speaker 4: based on that press conference we saw in the last hour.
Speaker 4: The first one is this question of are we going
Speaker 4: for a ceasefire first or a full peace deal. Coming
Speaker 4: out of his meeting with President Putin, Trump seemed to
Speaker 4: be emphasizing We're just going to go for the peace deal.
Speaker 4: We're not going to pause, you know, We're not going
Speaker 4: to focus on sort of this lower end of a ceasefire.
Speaker 4: We're just going to end this thing once and for all.
Speaker 4: European leaders Ukraine have actually been pushing the opposite direction.
Speaker 4: They want to ceasefire first, one because they don't want
Speaker 4: to be negotiating something as massive as a peace seal
Speaker 4: while under fire quite literally. And two because this tends
Speaker 4: to be kind of a Russia delay tactic to push
Speaker 4: for a larger peace seal that's going to take a
Speaker 4: long time to resolve while still trying to make gains
Speaker 4: on the battlefield. So I think that's one issue that
Speaker 4: seems clear they're going to be still discussing. A second
Speaker 4: one is going to be territorial issues Russia. Again, we
Speaker 4: don't know exactly what Putin and Trump discussed on Friday,
Speaker 4: but most likely Putin was reiterating some of Russia's long
Speaker 4: standing and demands that Ukraine seed over formal recognition of
Speaker 4: territories that Russia has occupied for some period of time,
Speaker 4: as well as withdrawal from territory that Russia doesn't currently
Speaker 4: control but would like to occupy. Those have been non
Speaker 4: starters for Ukraine and by extension, for a lot of
Speaker 4: European leaders as well. And then the third issue that
Speaker 4: I think they're likely to discuss it was a huge
Speaker 4: point of it emphasis and that press conference is what
Speaker 4: are the nature of security guarantees that the US and
Speaker 4: Europe will be providing to Ukraine to hold this deal
Speaker 4: firmly in place. President Trump said himself that he wants
Speaker 4: a deal to last. He doesn't want to have to
Speaker 4: be going at this again in a couple of years
Speaker 4: that the deal breaks down and we see complete heat
Speaker 4: back up again. That's also a key concern for European
Speaker 4: and obviously Ukrainian leaders as well. Security guarantees could ideally
Speaker 4: hold that deal in place so that we're not just
Speaker 4: existing in some sort of frozen armiscist or frozen conflict
Speaker 4: that could reheat at any point in time.
Speaker 5: Given the fact that Russia is not in the room
Speaker 5: right now, Putin is not there as a part of
Speaker 5: any of these discussions, how much progress can the EU
Speaker 5: and Zelenski and Trump make on all of these points
Speaker 5: that you raise right now with Russia not there.
Speaker 4: I think from European and Ukrainian leader's perspective, but they're
Speaker 4: probably more focused on even obviously they all want to
Speaker 4: reach a peace seal, but they want to reach the
Speaker 4: right peace seal for Ukraine. They don't want to make
Speaker 4: concessions just so that Russia will agree to it. That
Speaker 4: could end up compromising Ukraine's security and by extension, europe
Speaker 4: security down the line. I think what they're more focused
Speaker 4: on in this current moment in time is making sure
Speaker 4: that they don't look like the obstacles to peace. So,
Speaker 4: in a sense, a still positive outcome for them out
Speaker 4: of this meeting would be they get Trump to agree
Speaker 4: to certain terms or conditions. He's said earlier he was
Speaker 4: going to call Putin right after this meeting if Putin
Speaker 4: doesn't agree to them. Now, Putin's the one who's vietoing
Speaker 4: the peace process, right and the onus is back on
Speaker 4: him and back on Moscow. I think it's very likely
Speaker 4: that we're going to reach a sort of stalemate here,
Speaker 4: just given how far apart the different parties of this
Speaker 4: are on the key terms for a deal, and the
Speaker 4: fact that Russia probably still thinks time is on its side,
Speaker 4: and so it's playing for that time because it thinks
Speaker 4: the more that it has time to make gains on
Speaker 4: the battlefield, the more it will win back, the more
Speaker 4: fatigue the West will become, and the more likely President
Speaker 4: Trump will move on to other issues. So they are
Speaker 4: not necessarily genuinely interested in resolving this conflict at this
Speaker 4: moment in time, and I think that reduces the chance
Speaker 4: that they'll agree to anything, even terms that could otherwise
Speaker 4: be considered relatively favorable.
Speaker 2: So what does that mean just to you said stalemate
Speaker 2: but a continuation of what we've been saying, continuation.
Speaker 4: Of the conflict, potentially a continuation of efforts at peace,
Speaker 4: but ultimately we think Moscow isn't really interested in ending
Speaker 4: the war right now, let alone agree to some sort
Speaker 4: of ceasefire or something that would put it on pause
Speaker 4: and give Ukraine a chance to kind of recoup and
Speaker 4: reconstitute its forces.
Speaker 2: Jennifer thirty seconds left here. What position does that leave
Speaker 2: Europe in?
Speaker 4: I think Europe's main focus right now is maintaining that
Speaker 4: United Front, figuring out ways that they can backfield support
Speaker 4: for Ukraine without the United States being the direct pride
Speaker 4: of it. And so far this weapons for money scheme
Speaker 4: that they've worked out with the US seems to be working.
Speaker 2: Jennifer Welch always great when you join us. We really
Speaker 2: appreciate you taking the time this afternoon. Jennifer Welch's chief
Speaker 2: geoeconomics analyst for Bloomberg Economics. Check out her research on
Speaker 2: the Bloomberg Terminal in the entire team's analysis from Bloomberg
Speaker 2: Economics on the Bloomberg Terminal and at Bloomberg dot Com.
Speaker 2: Stay with us more from Bloomberg BusinessWeek Daily coming up
Speaker 2: after this.
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Speaker 2: I want to right now bring in doctor Angela Stench.
Speaker 2: She's a senior fellow at the Brookings Institution, also the
Speaker 2: author of Putin's World, Russia Against the West and With
Speaker 2: the Rest. She's a former National Intelligence officer for Russia
Speaker 2: and Eurasia at the National Intelligence Council. She served in
Speaker 2: the Office Policy Planning at the US Department of State.
Speaker 2: She joins us from Nantucket this afternoon, Doctor sten I'm
Speaker 2: sure like you and the rest of the world, like us,
Speaker 2: we watched the meeting just now that press availability. What
Speaker 2: we heard from these European leaders with great interest, what
Speaker 2: we heard from Zelensky and Trump in the Oval Office earlier,
Speaker 2: with great interest. One word kept coming up over and
Speaker 2: over again. Trilateral the idea of meeting to end this
Speaker 2: war between Russia, Ukraine and the United States. Is this
Speaker 2: finally the beginning of the end of this war.
Speaker 7: I would definitely hope that it is, but I'm still
Speaker 7: not convinced that President Putin would be interested in a
Speaker 7: trilateral meeting. He had what seemed to be a very
Speaker 7: successful meeting with President Trump on Friday in Alaska, where
Speaker 7: we had President Trump seemingly agreeing with everything that President
Speaker 7: Putin said. We had something different today from President Trump
Speaker 7: in the Oval Office. And by the way, it was
Speaker 7: a great relief that there was a successful meeting between
Speaker 7: President Trump and Zelensky in the Oval Office when you
Speaker 7: think back to the last time that President Zelensky was there.
Speaker 7: But the fact that President Trump was willing to say
Speaker 7: that the UN West would consider security guarantees to Ukraine
Speaker 7: were there to be a peace agreement, and even you know,
Speaker 7: possibly supplying more military assistance to Ukraine. This is not
Speaker 7: something that we heard on Friday in Alaska. And Putin
Speaker 7: has already come out today and said that the Russia
Speaker 7: would not accept any Western troops in Ukraine. He's in
Speaker 7: fact said that before, he reiterated that now. So it
Speaker 7: just makes one wonder whether Putin would be really willing
Speaker 7: to sit down with President Zelenski and presumably President Trump
Speaker 7: as well, to sincerely negotiate an enter this war.
Speaker 5: Doctor sent the two world leaders, Trump and Putin. They
Speaker 5: met on Friday for hours on end this meeting that
Speaker 5: we've seen so far, at least between Zelenski and Trump.
Speaker 5: It was only about thirty minutes. What is your take
Speaker 5: on really who came out stronger after the Alaska meeting.
Speaker 5: Was this a win for Putin?
Speaker 7: Well, I would argue that it was largely a win
Speaker 7: for Putin. I mean, here is an indicted war criminal
Speaker 7: being given the red carpet treatment, literally arriving in the
Speaker 7: United States meeting with the President of the United States.
Speaker 7: He hadn't had a meeting with the President of the
Speaker 7: United States since two thousand and seven on US soil.
Speaker 7: And you had President Trump going into the meeting saying
Speaker 7: that a ceasefire had to precede negotiations, and he came
Speaker 7: out saying, no, We'll go right to the negotiations without
Speaker 7: a ceasefire. And the reason why Putin doesn't want a
Speaker 7: cease fire is because he wants to go on fighting.
Speaker 7: In fact, as all these talks are going on in Washington,
Speaker 7: the Russians are bombarding the Ukrainians. So it definitely seemed
Speaker 7: from that Friday meeting that Putin had won a great deal.
Speaker 7: And if you look at the Russian media, I mean,
Speaker 7: they were quite ecstatic after this meeting because they said,
Speaker 7: you know, finally we're back to where we wanted. The
Speaker 7: Russians a great power and Putin God is meeting with
Speaker 7: the American president.
Speaker 2: And potentially President Putin gets some land from Ukraine at
Speaker 2: the conclusion of this conflict. Do you think that will happen,
Speaker 2: doctor Stan, I think it's going to.
Speaker 7: Be very difficult. By the way, when you hear the
Speaker 7: phrase land swap, there's no land swap, right. I mean,
Speaker 7: the Russians want the Ukrainians to concede or to see
Speaker 7: territory to them that they don't control, and this is
Speaker 7: quite strategic territory. Were the Ukrainians to see that, they'd
Speaker 7: be in a weaker position. So I think that they
Speaker 7: would only get that if the Ukrainians really feel that
Speaker 7: they have iron clad guarantees as much as that's possible
Speaker 7: from the US and from our European allies to deter
Speaker 7: Russia from any future attack. So I think that would
Speaker 7: probably depend on it.
Speaker 2: What would those what would those guarantees be if up
Speaker 2: to now there have been no repercussions apart from sanctions
Speaker 2: or even secondary sanctions on Russia as a result of
Speaker 2: what it's done in Ukraine.
Speaker 7: Yeah, so they're now talking about Article five type guarantees.
Speaker 7: Article five is you know the essence of the NATO alliance,
Speaker 7: which is, if one member is attacked, the other members
Speaker 7: will come to its defense, as NATO did after nine
Speaker 7: eleven when the US was attacked. And I'm not sure
Speaker 7: that anyone really believes that if Russia were, say to
Speaker 7: attack Ukraine again, you would have the guaranteurs then get
Speaker 7: into a war with Russia, because you always come back
Speaker 7: to the question that Russia is a nuclear power and
Speaker 7: everything that that involves. So it's still difficult to understand
Speaker 7: what security guarantees would mean in this situation. Maybe at
Speaker 7: a minimum would mean sort of arming Ukraine to the teeth,
Speaker 7: and the Ukrainian army is now very strong anyway, as
Speaker 7: a way of deter Russia. If the Russians really think
Speaker 7: as they mistakenly thought that the Ukrainians would capitulate when
Speaker 7: they invaded in twenty twenty two, if now they believe
Speaker 7: that if they invaded again, they really would be faced
Speaker 7: with a very strong Ukrainian army that could push them back,
Speaker 7: maybe that's a security guarantee. It really is harder to
Speaker 7: imagine any other one that would be credible.
Speaker 5: How should we be thinking about territory right now? Is
Speaker 5: it fair to say that Ukraine is going to have
Speaker 5: to seed some territory in order for the war to end.
Speaker 7: I think what the Ukrainians will have to do at
Speaker 7: a minimum is to recognize that Russia does now occupy
Speaker 7: twenty percent of Ukraine. That doesn't mean dejure recognition, but
Speaker 7: they factor does. But that's without sealing more territory to Russia.
Speaker 7: I think the Ukrains won't have any choice if the
Speaker 7: war is to end, but for the time being, to
Speaker 7: have that land under Russian occupation.
Speaker 2: What would this land symbolize to Europe as a result
Speaker 2: of Russia's ambitions on the continent. The idea that Ukraine
Speaker 2: excuse me, that Russia could go to war with the
Speaker 2: country and even yes, after a three and a half year,
Speaker 2: very bloody and terrible war for both sides, end with
Speaker 2: additional territory.
Speaker 7: I mean, it's a terrible precedent because since World War Two,
Speaker 7: this is the first time you've had a major war
Speaker 7: with a land drop like that, entirely unprovoked. So the
Speaker 7: president for the Europeans, I think would be very worrying,
Speaker 7: and particularly so those former Soviet states, either Baltic states
Speaker 7: or former members of the Warsaw packed Poland for instance,
Speaker 7: that are in the vicinity there and where we know
Speaker 7: that certainly Russia might have designed certainly on the Baltic States.
Speaker 7: So it's a very dangerous president, not only for Europe
Speaker 7: but really for the rest of the world, that a
Speaker 7: land grab light that unprovoked goes unpunished.
Speaker 2: We're speaking right now with doctor Angelis stan senior fellow
Speaker 2: at the Burkings Institution, the author of Putin's World Russia
Speaker 2: against the West, and with the rest doctor Stent. Does
Speaker 2: it set a precedent for what could happen to a
Speaker 2: country like Poland? For example? Is it crazy for us
Speaker 2: to think that that Putin would I mean, the whole
Speaker 2: narrative right in the last few years and at the
Speaker 2: beginning of this was what's to stop him moving past
Speaker 2: Ukraine and into greater Europe? Is that a realistic thing
Speaker 2: for us to talk about or is that something that
Speaker 2: would never happen?
Speaker 7: So? I think Poland is a member of NATO and
Speaker 7: therefore so far right until this point, Russia has not
Speaker 7: directly attacked a NATO member state, you know, which leads
Speaker 7: to the argument, correct, I think that had Ukraine been
Speaker 7: a member of NATO, Russia wouldn't have attacked it. But
Speaker 7: we now know that NATO membership at the moment is
Speaker 7: off the table for Ukra, So it would be unprecedented
Speaker 7: because again, if Russia were to try to invade Poland,
Speaker 7: then you would have NATO Article Fight guarantees, and then
Speaker 7: you could have a major war between Russia and NATO,
Speaker 7: which of course includes the United States and the two
Speaker 7: nuclear superpowers, which would be potentially very dangerous.
Speaker 5: Trump has said that Putin wants to see the war ended.
Speaker 5: I'm wondering in your view if you think Putin is
Speaker 5: showing any sense of urgency to end it.
Speaker 7: Putin's not showing any signs of urgency. Putin only wants
Speaker 7: the war to end on his terms, and right now,
Speaker 7: his terms are very different than what President Trump and
Speaker 7: the European leaders and President Zelenski are discussing, because he
Speaker 7: wants Ukraine to see all of this in this territory.
Speaker 7: He wants Ukraine to cut down on the size of
Speaker 7: its military, to promise that it will never join NATO,
Speaker 7: and so essentially he wants the war to end with
Speaker 7: Ukraine's subjugation. And that's not what's on the table today
Speaker 7: at the White House.
Speaker 2: One thing that I found noticeable today was that the
Speaker 2: topic of children in this conflict, and it's not something
Speaker 2: that's we talk about every day. We probably should talk
Speaker 2: about it every day. We had President Zelensky talk about
Speaker 2: a letter that he received from the First Lady of
Speaker 2: the US, Millennia Trump. On this subject, the President mentioned
Speaker 2: children in the conflict. We had European commissioned President Ursula
Speaker 2: vonder lyon mentioned children in the conflict.
Speaker 3: Is the narrative shifting a little bit?
Speaker 7: So? First of all, the letter that he was talking
Speaker 7: about was actually a letter that the First Lady of
Speaker 7: the United States wrote to Putin and which President Trump
Speaker 7: gave to Putin at the summit, which had to do
Speaker 7: with children. I think it's unfortunate that in many ways
Speaker 7: the US media haven't talked about this enough. The Russians
Speaker 7: have abducted about twenty thousand Ukrainian children, taken them away
Speaker 7: from their families, forced them either into the occupied areas
Speaker 7: of Ukraine or to Russia, trying to annihilate their Ukrainian identity.
Speaker 7: And by the way, this is part of a broader problem,
Speaker 7: which is the way that the Russians are treating Ukrainians
Speaker 7: in the occupied areas which right Russia now controls, which
Speaker 7: is treating them very badly, to put it mildly. It's
Speaker 7: good that this has now come up to this level,
Speaker 7: and that the First Lady of Ukraine has apparently written
Speaker 7: a letter to the US First Lady thanking her for
Speaker 7: bringing this up. But I think there should be much
Speaker 7: more focus on the humanitarian catastrophe that has befallen so
Speaker 7: many Ukrainians in this war. What do you mean by that, Well,
Speaker 7: just the first of all, the abduction of children, the
Speaker 7: bombing of civilians, the bombing of maternity hospital, all of
Speaker 7: the things that the Russians have done in terms of
Speaker 7: their attacks on Ukraine. You know what it's done to families,
Speaker 7: the thousands and millions of refugees really and displace people.
Speaker 7: All of that is part of this war, and we
Speaker 7: probably don't read enough about that or see enough in the.
Speaker 5: Media, right And these are attacks that are ongoing do
Speaker 5: this day, even as we have the leaders coming together
Speaker 5: and talking about, you know, a potential end to the war.
Speaker 5: What would an end look like? Is a ceasefire something
Speaker 5: that you know we should be paying closer attention to
Speaker 5: would a ceasefire stop the fighting and these humanitarian issues
Speaker 5: that you bring up.
Speaker 7: Well, a ceasefire might if it were properly observed. But
Speaker 7: even then, if even if they did say, well we
Speaker 7: agree to a cease fire, it has to be properly implemented.
Speaker 7: It has to be properly monitored, so that in itself,
Speaker 7: you know, could be more complicated. And the thing about
Speaker 7: the ceasefire is it would be important that it not
Speaker 7: be one in which Russia could then recoup and then
Speaker 7: attack Ukraine again. So you could have, you know, a
Speaker 7: thirty day cease fire, which is what people were talking
Speaker 7: about a few months ago, and then in the if
Speaker 7: in the interim, then you could negotiate more of a
Speaker 7: peace settlement. I just heard one of the people in
Speaker 7: the press conference talk about maybe some kind of a
Speaker 7: pause if there were to be a trilateral meeting, which
Speaker 7: as I said, I don't think it's very likely soon,
Speaker 7: but at least to have a pause in the fighting.
Speaker 7: But so far, when the Russians have said that they
Speaker 7: would observe there was a brief ceasefire that was supposed
Speaker 7: to be observed, just in terms of attacking the energy infrastructure,
Speaker 7: of the other countries they didn't do it, so even
Speaker 7: that would have to be very closely monitored to make
Speaker 7: sure that the Russians didn't violate it.
Speaker 2: We're speaking with doctor Angelas Stan, senior fellow at the
Speaker 2: Brookings Institution, also the author of Putin's World, Russia against
Speaker 2: the West and with the rest a reminder of where
Speaker 2: we are right now. The President participated in a so
Speaker 2: called family photo with European leaders at the White House
Speaker 2: in the last hour. He, alongside President Zelenski and Europe's leaders,
Speaker 2: spoke after their first meeting. End of the second meeting
Speaker 2: now underway with European and NATO leaders. The President rearea
Speaker 2: that he will call Putin after the meetings and he
Speaker 2: will try to arrange a three way meeting after that.
Speaker 2: Doctor Stent, what do you make of the notion that
Speaker 2: the President at the end of the speaking to reporters
Speaker 2: in the Oval Office, said that he would call Putin
Speaker 2: after the meetings. What does that mean to you? What
Speaker 2: does that symbolize to you?
Speaker 7: Well, it symbolizes to me that even though he's making
Speaker 7: an effort now obviously with our allies to listen to
Speaker 7: that concerns as he tries to bring peace. You know,
Speaker 7: he had a poundy quite what he considered a successful
Speaker 7: summit with President Putin, and you know, he wants to
Speaker 7: keep President Putin informed of what's going on, and so
Speaker 7: it means he wants to keep up all of those
Speaker 7: contacts with President Putin and make sure that Putin doesn't
Speaker 7: change his mind about anything.
Speaker 5: On the prospects here for a trilateral meeting. Do you
Speaker 5: think that something would have to maybe give way before
Speaker 5: we see Trump, Zolensky, and Putin all in the same
Speaker 5: room together.
Speaker 7: Yes, I mean, so far, President Putin has refused to
Speaker 7: sit down with President Zelenski because he doesn't consider Zelensky
Speaker 7: his equal, and because, as he keeps saying, Zelenski is
Speaker 7: an illegitimate president, because they haven't had elections in Ukraine
Speaker 7: since the war began, presidential elections, because there's a war
Speaker 7: going on with martial law. So that is what would
Speaker 7: have to change. It's Putin being willing to do that.
Speaker 7: And again, you know, he's already been criticized by the
Speaker 7: more militant bloggers in Russia for sitting down with President
Speaker 7: Trump and talking about peace. So he in some ways
Speaker 7: he has to worry about domestic opinion, that is to
Speaker 7: say that the people who are you know, fanatically in
Speaker 7: favor of continuing this war, right.
Speaker 5: So, how are we supposed to understand you know, Trump's comments?
Speaker 5: Then he said to reporters today, if everything works out,
Speaker 5: well today, we'll have a try. Lad, We're going to
Speaker 5: work with everyone. I mean, how do we interpret that?
Speaker 4: Then?
Speaker 7: Well, I think that's probably what President Trump would like,
Speaker 7: and he would like people to believe that he can
Speaker 7: bring that about. But you know, that doesn't necessarily mean
Speaker 7: that it's going to happen that. We don't know what
Speaker 7: President Putin told him privately in Alaska. Maybe he believes
Speaker 7: that people would be willing to sit down with President Vilensky.
Speaker 7: But again, those of us that follow this very closely
Speaker 7: and follow what Putin says and does, we'd be more
Speaker 7: skeptical about it.
Speaker 2: On a weapons front, the idea of the US supporting
Speaker 2: Ukraine through weapons sales or weapons sales to European allies,
Speaker 2: does that continue? Does the US have the appetite for that?
Speaker 2: Do politicians have the appetite for that? Jd Vance, the
Speaker 2: Vice president has been outspoken about this, at least before
Speaker 2: he became vice president.
Speaker 7: Well, we've barely started the process by which the Europeans
Speaker 7: are going to be purchasing weapons from the United States
Speaker 7: and then giving them to Ukraine. There's been an agreement
Speaker 7: on it. My sense is that it hasn't actually begun
Speaker 7: yet because the Europeans are waiting to get these weapons
Speaker 7: from the United States. I think that will continue as
Speaker 7: long as President Trump's magabase understands and in fight manufacturing
Speaker 7: those weapons and selling them to the Europeans. These are
Speaker 7: American jobs. I mean, much of the assistance of the
Speaker 7: US has given to Ukraine even since the war began
Speaker 7: in for Overview twenty twenty two, has been you know,
Speaker 7: enhanced the American economy and given Americans who work in
Speaker 7: the arms industry and things like that a job. So
Speaker 7: I think that that would continue. I think that what
Speaker 7: is more difficult I think the President Trump would be
Speaker 7: to say that we'll supply weapons to Ukraine without making
Speaker 7: them pay for it.
Speaker 5: Just zooming out here, what do you think are the
Speaker 5: key takeaways that are going to come out of the
Speaker 5: meeting with the EU? What is at stake for the
Speaker 5: EU leaders here and when we're talking about this, you know,
Speaker 5: this meeting tomorrow, What do you think we're going to
Speaker 5: be talking about.
Speaker 7: Well, I think the EU leaders really would like to
Speaker 7: have a ceasefire in place, even though President Trump has
Speaker 7: now said maybe we don't need one. That'll be one
Speaker 7: thing they'll focus on. And then I think the security
Speaker 7: guarantees talking about, well, if there is if Ukraine is
Speaker 7: forced to make some kind of territorial concession to Russia,
Speaker 7: then are we sure that there will be real security
Speaker 7: guarantees which are backed up by the United States.
Speaker 2: One thing that we were talking about before we heard
Speaker 2: from these European leaders and before we heard from Zelenski,
Speaker 2: was how earlier the European leaders actually met ahead of time.
Speaker 2: I believe it was at the Ukrainian embassy, but do
Speaker 2: not quote me on that. I'm just looking through my
Speaker 2: notes here. They met ahead of their meeting at the
Speaker 2: White House today to get aligned on what their goals were.
Speaker 2: What would you say their goals are obviously they want
Speaker 2: an end to the war, but what do they want
Speaker 2: that end to look like?
Speaker 3: What are they unified on?
Speaker 7: Well, they did meet at the Ukrainian embassy earlier today.
Speaker 7: You can look at the pictures of it. Great, Yeah,
Speaker 7: I mean they wanted to make sure that this war
Speaker 7: ends in such a way that Russia. I mean, it's
Speaker 7: easy to say, as President Trump did early, will never
Speaker 7: again attack Ukraine, given you know of years of history,
Speaker 7: I think you have to be cautious about saying that,
Speaker 7: but to ensure that for the foreseeable future Russia will
Speaker 7: not be tempted to attack Ukraine again, and that Russia
Speaker 7: under Putin even will be willing to accept an independent,
Speaker 7: sovereign Ukraine, which is free to make its own decisions
Speaker 7: if we put the NATO issue aside about where to
Speaker 7: align itself in foreign policy. So they want to make
Speaker 7: sure not only that the war ends, but then it
Speaker 7: won't start again in two or three years.
Speaker 5: I want to get your thoughts on NATO here, just
Speaker 5: as we talk about this meeting with the EU. Is
Speaker 5: there any chance that we would see Ukraine get added
Speaker 5: to NATO or is all of this kind of making
Speaker 5: the chances lesson or.
Speaker 2: Would that be a precondition on Vladimir Putin's side that
Speaker 2: he says, no, you cannot add Ukraine to NATO.
Speaker 7: Well, Putin, I mean that's one of the conditions he has,
Speaker 7: which is that Ukrainian encounter, Ukraine can't join NATO. But
Speaker 7: I don't think anyone's going to agree to that. I
Speaker 7: think what the US side would say is not for
Speaker 7: the time being. And I think certainly President Trump has
Speaker 7: said that might Ukraine join NATO in the future, That's
Speaker 7: quite possible. It'll depend, you know, on what happens to NATO.
Speaker 7: It'll depend on what happens after the end of the war.
Speaker 7: So it's not on the horizon. But it also I
Speaker 7: think you can't expect Ukraine or it's European backers to
Speaker 7: say that it will never join NATA.
Speaker 2: Why do you think that European leaders are right now
Speaker 2: all visiting the White House three and a half years
Speaker 2: into this. Is it President Trump who's brought them together?
Speaker 2: Why didn't they do this two weeks after the war started,
Speaker 2: a month after the war started, a year after the
Speaker 2: war started.
Speaker 3: Why is this happening now?
Speaker 7: Well, because I think under the Biden administration, first of all,
Speaker 7: they believe that the US was giving a lot of
Speaker 7: support to Ukraine, and they let the US do that.
Speaker 7: They were still in the mindset that the US was
Speaker 7: the most powerful country, had all the weapons. So I
Speaker 7: think it's a combination effect is I think it's because
Speaker 7: the war has gone on for so long. Then you
Speaker 7: have President Trump coming in and saying he's going to
Speaker 7: end the war quickly, also questioning NATO, also questioning why
Speaker 7: the US should be supporting NATO, all of these things.
Speaker 7: I think what happened at the end of February with
Speaker 7: the disastrous Oval Office meeting the previous one with President
Speaker 7: Zelanski was a wake up call. But I think the
Speaker 7: real wake up call is understanding that they cannot any
Speaker 7: longer rely on the United States to support them for
Speaker 7: their security or really to provide for their security in
Speaker 7: the way that it used to, and that they have
Speaker 7: to take much more of a burden on themselves. And
Speaker 7: then I think the other factor is clearly realizing after
Speaker 7: the Alaska summit, but even before then, that they weren't
Speaker 7: quite sure that President Trump, you know, wasn't willing to
Speaker 7: tell Ukraine that it had to exceed to Russian demands,
Speaker 7: which would you know, could also be quite dangerous for Europe.
Speaker 7: So I think it's a combination of factors.
Speaker 3: Do you see it as a good sign though?
Speaker 7: I do, because I think that President Trump, first of all,
Speaker 7: will understand now that Europeans are really quite united about this,
Speaker 7: and that they're back in Ukraine.
Speaker 2: So, doctor stan I want to end the interview with
Speaker 2: the question that I always ask you, and I've asked
Speaker 2: you this for the last three and a half years,
Speaker 2: and I want to know if your answer has changed
Speaker 2: based on today.
Speaker 3: How does this war end?
Speaker 7: I don't think anyone knows how it ends yet. I
Speaker 7: mean the you know, the best solution would be a
Speaker 7: negotiated settlement which doesn't take too long, which doesn't involve
Speaker 7: too many concessions, and which guarantees that Russia will not
Speaker 7: in the near future again try and attack Ukraine.
Speaker 2: Is it closer now to ending than at any point
Speaker 2: that then we spoke to you in the past three
Speaker 2: and a half years.
Speaker 7: Possible? I mean that there's too much that we don't know,
Speaker 7: but possibly it is.
Speaker 2: Yeah, Okay, want to let you go even so generous
Speaker 2: with your time today, Doctor Stent, really appreciate you joining us.
Speaker 2: That's doctor Angela Stent. She's senior fellow at the Brookings Institution.
Speaker 2: She's the author of Putin's World, Russia Against the West
Speaker 2: and With the Rest. She's also a former National Intelligence
Speaker 2: officer for Russia and Eurasia at the National Intelligence Council.
Speaker 2: She also served in the Office of Policy Planning at
Speaker 2: the US Department of State. She's been a go to
Speaker 2: voice over the last three and a half years for US,
Speaker 2: as we've reported on Russia's invasion of Ukraine.
Speaker 3: Stay with us.
Speaker 2: More from Bloomberg Business Week Daily coming up after this.
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Speaker 2: Eleven thirty shares of the green hydrogen company Plug Power,
Speaker 2: closed two and a half percent lower last Tuesday. That
Speaker 2: was the first day of trading after the company reported
Speaker 2: net revenue for the second quarter that came in above estimates,
Speaker 2: but the bottom line was the issue. EPs missed the
Speaker 2: average analyst estimate. Plug provides hydrogen products including electrolizers, hydrogen transport,
Speaker 2: storage and dispensing solutions, and more to a variety of
Speaker 2: customers including Walmart, Amazon, Home Depot, Airbus, at and t Kroger, FedEx, Pgene,
Speaker 2: Coca Cola, and more. We've got back with us Andy Marsh,
Speaker 2: the CEO of Plug power. He joins us from just
Speaker 2: outside of Albany, Andy. Always good to have you on
Speaker 2: the program. I want to start with your customers. I
Speaker 2: mentioned just about ten of them. The list goes on,
Speaker 2: what are you hearing from them in a world where
Speaker 2: green energy is no longer sort of the buzz phrase,
Speaker 2: the buzzword, there's not the same government incentives for this
Speaker 2: stuff that there was in the last administration.
Speaker 3: What are you hearing from them right now?
Speaker 6: So the last part of that, tim's not true. The
Speaker 6: incentives for forty eighty, which is the tax credit for
Speaker 6: fuel cells and the last bill is actually much better
Speaker 6: than it was.
Speaker 2: Well, I was talking about green energy as sort of
Speaker 2: a monoliss just to be clear.
Speaker 6: Yeah, So when I look at first globally, the incentives
Speaker 6: for hydrogen and fuel cells and green energy remains robust.
Speaker 6: And if you look at our business in the second quarter,
Speaker 6: our revenue in Europe for electoralizers and all of it's
Speaker 6: really primarily Europe actually tripled to forty five million dollars
Speaker 6: from what it was a year ago. And here in
Speaker 6: the United States, you know, when we look at the
Speaker 6: tax lands the credit landscape, we actually see it better
Speaker 6: today that it was a year ago.
Speaker 3: So why is that happy?
Speaker 6: Well, I think because when you looked at the tax
Speaker 6: credit for fuel cells, it was you know, not well
Speaker 6: structured or positioned in forty eight eight, and we see
Speaker 6: an extension of what was essentially the ITC, which was
Speaker 6: extended the last time under President Trump in twenty eighteen
Speaker 6: in the latest bill, which extends a credit for fuel
Speaker 6: cells which is used by Amazon, Walmart and many of
Speaker 6: the customers you mentioned through twenty thirty two. So we're
Speaker 6: actually pretty thrilled with what happened for hydrogen, especially in
Speaker 6: the last bill.
Speaker 5: When you look at plug Power's earnings, the margins are
Speaker 5: still negative, but they have improved from the last year.
Speaker 5: What are your thoughts on just how much more runway
Speaker 5: you guys need before plug power is consistently profitable.
Speaker 6: Yeah, so you know, we I think you hit on
Speaker 6: the point. You know, we moved gross margins from a
Speaker 6: year ago by over sixty percent, and we are targeting
Speaker 6: to be gross margin zero by the fourth quarter. And
Speaker 6: there's a clear map with our hydrogen plants and the
Speaker 6: improvements we've seen in service and more importantly, selling more
Speaker 6: and that really helps us a great deal. And we're
Speaker 6: targeting being EBODOS positive by the end of next year.
Speaker 6: And I think with our project Quantum Leap, where we
Speaker 6: really focused on cost and selling, that we are on
Speaker 6: the right track. And I think you're beginning to see
Speaker 6: it in the financials. Even the miss when EPs was
Speaker 6: right downs, which were non cash right downs associated with
Speaker 6: our plants. That really align the business for the future
Speaker 6: to be successful.
Speaker 2: What's the US market right now for green hydrogen that's
Speaker 2: hydrogen made from water using clean electricity to power the
Speaker 2: electrolysis process.
Speaker 6: So big straight it is a bit slower than what
Speaker 6: you see in Europe and other places. You know, our
Speaker 6: primarily focus for electoralizers are really Europe Australia where the
Speaker 6: climate's right. But we actually operate the largest green hydrogen
Speaker 6: liquid hydrogen plant in the world at the moment in Georgia.
Speaker 6: And when I looked I reviewed this morning our demand
Speaker 6: for hydrogen from the second quarter of the fourth quarter,
Speaker 6: we actually see that our daily usage go up from
Speaker 6: fifty five tons per day to about sixty seven tons
Speaker 6: per day by the end of the year. So we're
Speaker 6: using our plants, we're creating green hydrogen. We're involved in
Speaker 6: some blue hydrogen projects, so we feel comfortable about the
Speaker 6: long term trajectory and even near term trajectory for hydrogen
Speaker 6: in the United States.
Speaker 5: Talk a little bit more about that demand and where
Speaker 5: it's coming from. Are you seeing customers, you know, pivoting
Speaker 5: from other sources of energy or are you seeing you know,
Speaker 5: just increasing need for more sources of energy and that's
Speaker 5: what's really driving your growth here.
Speaker 6: That's actually a real good question because when we look
Speaker 6: at the world the United States, with what we've deployed
Speaker 6: already about it's you know, two hundred and seventy five
Speaker 6: sites in our material handling business across the US. We've
Speaker 6: actually taken off the grid approximately five hundred megawatts of electricity,
Speaker 6: and as I think everybody knows, it has become more
Speaker 6: and more challenging to bring electricity to you know, there's
Speaker 6: over a three and a half year backlup log to
Speaker 6: get electricity to facilities. No typical distribution center. We take
Speaker 6: off two to three megawatt off the grid, which can
Speaker 6: then be used for things like increasing freezer capabilities. So
Speaker 6: if you think about if you're or fuel food retailer
Speaker 6: and you want to sell more frozen goods, which is
Speaker 6: a growth area, one way you can One way you
Speaker 6: can increase the size of your freezer and not have
Speaker 6: to worry about the power needs is actually use fuel
Speaker 6: sales and hydrogen from plug Power.
Speaker 2: We're speaking with Andy Marsh, the CEO of Plug Power,
Speaker 2: joining us from just outside of Albany. Andy, I want
Speaker 2: to go back to regulatory issues, tax credits and that
Speaker 2: sort of thing, because you did say that demand is better.
Speaker 2: We were in a better position than you were a
Speaker 2: year ago. Our own will wide and team reporting that
Speaker 2: a year ago credits were expected to help lead about
Speaker 2: one point two million metric tons of annual green hydrogen
Speaker 2: production by twenty thirty. That's according to BNF or in
Speaker 2: house Bloomberg New Energy Finance. Now projects with just one
Speaker 2: hundred and fifty thousand tons of production capacity are expected
Speaker 2: to qualify for the incentives, dramatically reducing anticipated US output.
Speaker 2: Is after the Trump administration's tax and spending legislation significantly
Speaker 2: limited tax credits to produce the fuel.
Speaker 3: How is that affecting you?
Speaker 6: Well, when I take a when I look at I'm
Speaker 6: already using the tax credits. We expect to have online
Speaker 6: our additional Texas plant by twenty twenty eight before they fire,
Speaker 6: which allows us to use those credits through twenty thirty two.
Speaker 6: I think when we look at our own needs, you know,
Speaker 6: we're looking at other expansion opportunities. You know, we think
Speaker 6: that we'll be able to generate the hydrogen to meet
Speaker 6: our customers' needs and be able to take tax credits
Speaker 6: through twenty thirty two. So, you know, quite honestly, I'm
Speaker 6: very comfortable with the present legislation.
Speaker 5: Back in January, there was a Bloomberg News story about
Speaker 5: the White House confirming a one point six billion loan
Speaker 5: guarantee for plug Power to build hydrogen plants. How have
Speaker 5: you guys received that that loan yet and how crucial
Speaker 5: is support like that to continue to grow plug Power.
Speaker 6: It's important, but it's not you know, we will still
Speaker 6: move ahead with building plants. Ultimately, we're focused, and I've
Speaker 6: been down to the DOE recently, uh and we're working
Speaker 6: on details to make sure we can pull down funding
Speaker 6: for the plant in Texas, which is a plant that
Speaker 6: gets very very low cost electric electric electric energy from
Speaker 6: a next era wind farm. When we take a look
Speaker 6: at that, we're working through the final details to start
Speaker 6: being able to pull down funding from the DOE. I know,
Speaker 6: they've canceled many projects. We haven't been on the cancel list,
Speaker 6: and we have a good relatelationship. I think the Trump
Speaker 6: administration and their goals of being energy dominant. You know,
Speaker 6: the world's going to one green saff the world's going
Speaker 6: to one green pneumonia. The US is well positioned to
Speaker 6: be the leader in providing those fuels in green hydrogen
Speaker 6: is critical the becoming energy dominant for the long term. Additionally,
Speaker 6: hydrogen generation is really important for national security. I mean
Speaker 6: next to SpaceX, all the vehicles use hydrogen, so we
Speaker 6: really think about the long term benefits. And then on
Speaker 6: top of that, when you think about hydrogen, over thirty
Speaker 6: percent of detail food moved through a plug power fuel cells. Boy,
Speaker 6: you don't want that disrupted overnight.
Speaker 3: No you don't.
Speaker 2: Andy, We only have about a minute and a half left,
Speaker 2: and I want to talk about the stock price. It's
Speaker 2: down about ninety seven percent since the twenty twenty one highs.
Speaker 2: Even though you're a relatively small company, you're still among
Speaker 2: at least today the most actively traded stocks, with fifty
Speaker 2: four point seven million dollars or million shares rather trading today.
Speaker 2: It's massive. The volume this year has been massive. You've
Speaker 2: got twenty eight percent of your shares floated. What's your
Speaker 2: message to investors and traders right now.
Speaker 6: Well, I think I would tell them it's a great
Speaker 6: opportunity to come in. You. You can look at the
Speaker 6: financials revenue growing at twenty percent, gross margin improving dramatically.
Speaker 6: The deployments in Europe, where the electoralizer industry is really
Speaker 6: happening today, has tripled in the past year. You know,
Speaker 6: I think this is the opportunity to successfully enter the
Speaker 6: stock and it's one of the reasons our CFO has
Speaker 6: made significant investments. And I'm putting about twenty five percent
Speaker 6: of my salary to work buying stock, actually fifty percent
Speaker 6: of my salary to work buying stock every week.
Speaker 2: Andy, thanks for coming on. Appreciate you taking the time
Speaker 2: this afternoon. Always get a check in with you, and
Speaker 2: it has been quite a few months since we last spoke,
Speaker 2: so don't.
Speaker 3: Be a stranger. Come back soon.
Speaker 2: Andy Marsh, CEO of Plug Power, joining us from just
Speaker 2: outside of Albany.
Speaker 3: Stay with us.
Speaker 2: More from Bloomberg Business Week Daily coming up after this.
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Speaker 3: Roamco.
Speaker 6: I'll bet you let me drive.
Speaker 2: Oh no, no, no, no, this is not a twin.
Speaker 1: Holright please, I'll do Excuse me, I want to drive.
Speaker 2: It's good question.
Speaker 1: This is the Drive to the Clothes Punk's a thing
Speaker 1: on Bloomberg Radio.
Speaker 5: All right, welcome back, guys, it's time for the Drive
Speaker 5: to the Close. We're here today with Andrew Krye. He's
Speaker 5: co chief investment officer at Crescent Grove Advisors. It's got
Speaker 5: about five billion dollars in aum. Andrew's joining us from Milwaukee.
Speaker 5: We've been talking all about geopolitics today. We've been talking
Speaker 5: about the meeting at the White House with Ukrainian President Zelenski,
Speaker 5: Trump and a number of other European leaders. So we
Speaker 5: have to start there. Andrew, how are you factoring in
Speaker 5: geopolitical risk into your investment strategy right now?
Speaker 8: You know, I would say from our perspective, I think
Speaker 8: the markets have largely been desensitized to the geopolitical circumstances
Speaker 8: that we've found ourselves in now. For the last several years.
Speaker 8: Whether you look at Russia, Ukraine, you look at the
Speaker 8: situation in the Middle East, perhaps there's a little bit
Speaker 8: of excess risk premium that could still be wrung out
Speaker 8: if we were to find some sort of resolution over
Speaker 8: the coming weeks and months. But nonetheless, we tend to
Speaker 8: think it's more about just the fundamental economic drivers, the
Speaker 8: business cycle. The FED. You know, we're more focused, let's say,
Speaker 8: on Jackson Hole this week, than we are on what's
Speaker 8: happening with these geopolitical negotiations that are happening.
Speaker 2: Let's let's go to the Federal Reserve and to Friday
Speaker 2: where we'll hear from FED chair j Powell. Emily, remind
Speaker 2: me what was the FED theme this year?
Speaker 5: Oh, I don't have it in front of the title.
Speaker 5: It's labor. It's about It's about labor, and we had
Speaker 5: some fancy words.
Speaker 2: We spoke to Jim Bianco earlier about the changing labor market,
Speaker 2: and I mean, he's kind of just blowing my mind
Speaker 2: with this idea that if we don't have immigration into
Speaker 2: the US, the numbers that we'll see when it comes
Speaker 2: to the monthly jobs report will be very tiny. And
Speaker 2: I'm wondering how you're looking at the labor market. Obviously
Speaker 2: that's half of the Fed's dual mandate.
Speaker 3: What does J. Powell say about it?
Speaker 2: How does it shift in this in this no immigrant
Speaker 2: immigration environment.
Speaker 8: Yeah, I think that's a key factor to look at
Speaker 8: for sure. I think you've ended up in this situation
Speaker 8: where we're kind of low hiring, low firing. I think
Speaker 8: that's actually a phrase he's used now several times. But
Speaker 8: you know, we've got a situation where one of the
Speaker 8: metrics we look at is continuing claims is a percentage
Speaker 8: of the labor force. It's ticked up modestly, but it's
Speaker 8: not anything that's terribly concerning, particularly in a historical context.
Speaker 8: You look at, you know, sort of initial claims. Yeah,
Speaker 8: they've moved up somewhat, but again not to the point
Speaker 8: where it's it's ultimately an acute issue, we would say,
Speaker 8: again from a labor perspective. So I think it's something
Speaker 8: that the Fed's clearly watching. And you go back to
Speaker 8: the Jobs report most recently in the revisions that we saw,
Speaker 8: needless to say, they're going to be concerned about it,
Speaker 8: and that was a real headline grabber. But I think
Speaker 8: they've got this dual mandate and they're going to have
Speaker 8: to balance you know, sort of a pick your poison
Speaker 8: scenario here, where they want to support the labor market
Speaker 8: that might be softening somewhat, or do they want to risk,
Speaker 8: you know, inflation ticking back up because they're cutting and
Speaker 8: providing stimulus in an environment where inflation hasn't really been tamed.
Speaker 8: At this point, I think there's still a lot of
Speaker 8: uncertainty around the tariff impact on inflation.
Speaker 5: Yeah, there's certainly a lot of kind of I guess,
Speaker 5: just still lack of clarity on how the tariffs are
Speaker 5: being passed on to companies and being passed on to consumers.
Speaker 5: What's your assessment right now of whether consumers are feeling
Speaker 5: the effects of tariffs or have you seen at least
Speaker 5: in the earnings that the companies are I guess the
Speaker 5: party able to absorb the tariff increases.
Speaker 6: Yeah.
Speaker 8: I think what we've seen so far is that there's
Speaker 8: clearly a lagged effect here that's happening. There's an element
Speaker 8: where companies are able to absorb some of the price increases,
Speaker 8: you know, I think it's yet to be seen the
Speaker 8: full impact, and it's if we're able to kind of
Speaker 8: spread this over a long enough period in terms of
Speaker 8: these incremental pricing increases along the way, then maybe we
Speaker 8: don't see a real uptick in inflation in sort of
Speaker 8: a meaningful acute way, kind of a you know this
Speaker 8: concerning number where CPI spikes, pc spikes, those sorts of things,
Speaker 8: but we just slowly kind of adjust and see, you know,
Speaker 8: this not a step function change again, but just an
Speaker 8: insidious level of sort of inflation building in the system.
Speaker 8: And then, you know, I think part of the argument
Speaker 8: that the Fed's making here too for being a little
Speaker 8: bit more I guess cautious about this whole scenario is
Speaker 8: that it could really just be a one time reset
Speaker 8: that as well, right, and then we start going to
Speaker 8: comps next year on a year over year basis, And
Speaker 8: once we've gotten through this initial wave of the tariff
Speaker 8: adjustments within pricing, you know, then really it's all baked
Speaker 8: into the cake. At that point, we're kind of back
Speaker 8: to where we started in terms of figuring out the
Speaker 8: balance between what's fundamental inflation, what's sort of that underlying
Speaker 8: structural level of inflation, and then what's the labor market doing.
Speaker 8: And then they're balancing their dual mandate and their policy
Speaker 8: settings around those two factors.
Speaker 2: So it sounds like what you're saying, Andrew is you
Speaker 2: don't find the tariffs being inflationary.
Speaker 8: Well, for sure, they will be inflationary to a degree.
Speaker 8: I think it's this idea that we were going to
Speaker 8: see this one time or you know, really acute sense of,
Speaker 8: you know, a three month period where inflation spikes really meaningfully.
Speaker 8: I don't think the evidence is suggesting that that's what
Speaker 8: we're going to see. It's going to be spread out
Speaker 8: over several months, which you know, I guess tells us.
Speaker 8: You know that we just have to be a little
Speaker 8: bit more patient in terms of understanding the full impact
Speaker 8: of these tariff levels, which, mind you, are still changing
Speaker 8: as well. I think that's part of the other issue.
Speaker 2: So so okay, so how should investors and how should
Speaker 2: investors and traders think about that, like in the sense
Speaker 2: of how should they think about them still changing or
Speaker 2: should they think about them being Well, President Trump's favorite
Speaker 2: word in the dictionary is tariff, so they're here at
Speaker 2: least while he's president.
Speaker 8: Yeah, I think we've reverted back to some level now
Speaker 8: of what we can expect going forward in terms of
Speaker 8: you know, we to look at the most extreme version
Speaker 8: that was put forth going back to the March April
Speaker 8: Liberation Day discussions, right, and we've reverted back to something
Speaker 8: that's not nearly as extreme. Is that so if there's
Speaker 8: some band I guess around where we are today, Okay,
Speaker 8: that's reasonable enough. But I think from investors' perspectives, we
Speaker 8: start to zoom out and look at sort of derivative
Speaker 8: effects of everything related to not only tariff policy, but
Speaker 8: broader trade policy, broader America first policy, and for US
Speaker 8: that's still the sort of incremental shift away from dollar
Speaker 8: assets from US markets, looking at things that might be
Speaker 8: cheaper in non US markets, in particular in areas where
Speaker 8: we've potentially got a catalyst as well, So like Europe
Speaker 8: for instance, where now they're loosening the fiscal purse strings,
Speaker 8: they've got consumers that didn't spend down all of their
Speaker 8: COVID stimulus that are still pretty well healed from a
Speaker 8: savings perspective, that could support their economy were they to
Speaker 8: fall on a little bit of a hard time. But
Speaker 8: we just tend to think that there's an interesting catalyst
Speaker 8: in non US markets. And again this idea that the
Speaker 8: dollar may not be kind of the end all be
Speaker 8: all that once was this haven currency for a variety
Speaker 8: of reasons, not least to which is the policies we've
Speaker 8: talked about.
Speaker 2: Andrew Crye Co, Chief investment Officer at Crescent Grove Advisor.
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