Latest / Bloomberg Intelligence / CarMax, CPI Secrecy, Ukraine, and Scott Minerd (Podcast)

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CarMax, CPI Secrecy, Ukraine, and Scott Minerd (Podcast) · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day, we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. All right, let's talk cars, Matt,
• 0:22
  Speaker 1: how about that? Okay? CarMax And when we talk cars,
• 0:26
  Speaker 1: we talked to Kevin Tyne and he's the car dude
• 0:28
  Speaker 1: at Bloomberg Intelligence. He's been covering the auto industry, uh forever.
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  Speaker 1: All right, So Kevin talked to us about the used
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  Speaker 1: car business. I understand, during the pandemic, the values of
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  Speaker 1: used cars shot through the roof because Detroit wasn't making
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  Speaker 1: any cars because they were shut down. Now it's coming down.
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  Speaker 1: Is that what we're seeing at CarMax. Yeah, So what
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  Speaker 1: you had was uh, retailers, especially the used only is
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  Speaker 1: like CarMax or Carbon Room Shift companies like that, overpaying
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  Speaker 1: for their inventory. Prices fall and now you're stuck basically underwater.
• 1:07
  Speaker 1: And that's what's being worked through right now, and it's
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  Speaker 1: gonna impact all the all the new and used vehicle retailers.
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  Speaker 1: And when I say new and used, I mean the
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  Speaker 1: full line dealerships you know, your automations and pen skis
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  Speaker 1: that also do used cars UM are going to feel
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  Speaker 1: this pain. They won't feel it as bad as they
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  Speaker 1: used only guys because they had nowhere else to go
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  Speaker 1: but to acquire off lease vehicles expensively, and then as
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  Speaker 1: the bottom sell out of pricing a little bit. We're
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  Speaker 1: certainly not back to where we were pre pandemic. But
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  Speaker 1: now you're selling things that you overpaid for, and that's
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  Speaker 1: the window we're in right now. Well, you can't sell
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  Speaker 1: the things you overpaid for is the problem because the
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  Speaker 1: way I read the CarMax release, because rates are so
• 1:55
  Speaker 1: high and you know, people who typically would be in
• 1:57
  Speaker 1: the market can't afford the payment, that has to play
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  Speaker 1: into that has to play through to the new car
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  Speaker 1: UM sales as well, doesn't it because rates aren't any lower, Well,
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  Speaker 1: they are, they are lower. Sorry, for a new car,
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  Speaker 1: you get a lower rate than you do for a
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  Speaker 1: used car, but they're not they're not as low as
• 2:15
  Speaker 1: they were. Right, We're not looking at zero percent, We're
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  Speaker 1: not looking at one point nine percent. We're not looking
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  Speaker 1: at two point nine percent that we previously had been seeing.
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  Speaker 1: Now we're looking at more like six for most people,
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  Speaker 1: seven eight percent. So isn't aren't new cars going to
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  Speaker 1: get hit as well with these higher rates? Sure? Yeah,
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  Speaker 1: but but supply is much more constrained on the new
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  Speaker 1: vehicle side. But really that was that's exactly it, right.
• 2:40
  Speaker 1: You had this this confluence of events where you had
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  Speaker 1: retailer is overpaying for inventory. You had money was cheap
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  Speaker 1: and easy at the time, and then it's not right.
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  Speaker 1: So prices were high and then they're not, and rates
• 2:53
  Speaker 1: were low and then they're not, and and that's what
• 2:56
  Speaker 1: this window is. But it's not you know, and I
• 2:58
  Speaker 1: think you know, on as far as pricing goes, and
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  Speaker 1: especially in the used vehicle market, I think this works
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  Speaker 1: its way through the system because we're not doing leasing
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  Speaker 1: like we used to. You know, a lot of these
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  Speaker 1: vehicles that are coming back or came back from lease
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  Speaker 1: in two we're twenty nineteen leases, which were pre pandemic.
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  Speaker 1: So what you had was, you know, we're looking back
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  Speaker 1: at nineteen now three years ago, you had seventeen million
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  Speaker 1: units being sold. Thirty to some odd percent were leased,
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  Speaker 1: So in two, are used vehicle market was supplied by
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  Speaker 1: like five point three million off lease vehicles. Now, as
• 3:41
  Speaker 1: we move out and we look at what happened in
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  Speaker 1: two projecting forward to because most leases are three years,
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  Speaker 1: you know, we're not even going to do a fourteen
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  Speaker 1: million this year and lease penetration is about eight So
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  Speaker 1: that supply that feeds they used vehicle market in two
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  Speaker 1: goes from five point three million to about two point
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  Speaker 1: five million. So as we go out further, I think
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  Speaker 1: used car prices stay very firm because we're just not
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  Speaker 1: going to have the supply like we used to from
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  Speaker 1: the off lease market. Are there manufacturers? Are the Gems
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  Speaker 1: and the Fords of the world in the Volkswagens, Are
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  Speaker 1: they producing as many as they want right now? Are
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  Speaker 1: they still constrained? Well? As many as they want? But
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  Speaker 1: they don't want to produce that many right So inventory
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  Speaker 1: now is about one point seven million to start December.
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  Speaker 1: To put that in context, historically it would be about
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  Speaker 1: four millions. So it's not the nine hundred thousand that
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  Speaker 1: we saw at at the bottom, you know, about a
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  Speaker 1: year ago, but it's certainly not what it used to be.
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  Speaker 1: So I think that window for the new vehicle market
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  Speaker 1: is exactly where manufacturers are trying to figure out where
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  Speaker 1: do we want to be so that we're not we're
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  Speaker 1: not sacrificing margin and pricing, but we're not leaving sales
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  Speaker 1: on the table either. Alright, So in terms of the
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  Speaker 1: new car deliveries, production and deliveries, how close are we
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  Speaker 1: to normal? Well, our normal? I think next year is
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  Speaker 1: going to be about fifteen million units, and I think
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  Speaker 1: that's a healthy normal. I think the seven still constrained
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  Speaker 1: or not? No, I don't think so, because look, Matt,
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  Speaker 1: if you look at it this way, if you think
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  Speaker 1: about a volume number as the end all be all
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  Speaker 1: seventeen point five million units in sixteen, average price was
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  Speaker 1: thirty five thousand dollars, that pool of revenue is actually
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  Speaker 1: smaller than it would be in a fifteen million unit
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  Speaker 1: market in three at forty seven thousand dollars per unit.
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  Speaker 1: So if you want to look at volume, you can say, well,
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  Speaker 1: it's not as great as it used to be, But
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  Speaker 1: if you're looking at the revenue pool, it's actually better.
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  Speaker 1: Are people buying cars at dollars or unit that's the average,
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  Speaker 1: that's the average. And now, by the way, and now,
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  Speaker 1: by the way, with a six or seven or eight
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  Speaker 1: percent loan, right because most people don't buy cars all
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  Speaker 1: cash and it's in kevinet, Does the industry believe that's sustainable? Yeah,
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  Speaker 1: it is, Yeah, because because right that, the automakers are
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  Speaker 1: saying that, hey, look if you and look, here's the
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  Speaker 1: risk if if you want to look, Ford and GM
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  Speaker 1: are in the fifty two thousand range. Mercedes BMW, which
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  Speaker 1: used to be in that range are now up in
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  Speaker 1: the sixties and seventies. So automakers are saying, like, hey,
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  Speaker 1: the stuff we can't make money on, uh, we don't
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  Speaker 1: want to be in it. And that's why inventory is
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  Speaker 1: half of what it used to be, why transaction prices
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  Speaker 1: are so much higher, because not every sale was a
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  Speaker 1: good sale, and they've gotten out of the bad sale business. Well,
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  Speaker 1: I'm hoping that one of those auto guys is going
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  Speaker 1: to blink in cave and start ramping up production and
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  Speaker 1: screw up the entire market but making horrible models for
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  Speaker 1: rental fleets and just pushing them out there. No, that's
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  Speaker 1: not okay, it's not it for the industry, right, Kevin Tynon,
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  Speaker 1: Everything I know about the auto industry, the economically the
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  Speaker 1: auto industry. I learned from Kevin Tynan. He's our Bloomberg
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  Speaker 1: Intelligence auto analyst breaking it down here. Carmack's tough numbers.
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  Speaker 1: Stock down seven. Let's scan for stocks here. Let's do
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  Speaker 1: it on a down day. Maybe we can find some
• 7:18
  Speaker 1: some bargains out there. We're gonna roundtable this thing like
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  Speaker 1: we like to do. Phil Palumbo, CEO and founder of
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  Speaker 1: Plumbo Wealth Management, joins us as well as David Kat's
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  Speaker 1: Matrix Asset Advisors, UH joins us as well. So Phil,
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  Speaker 1: let's start with you here. I mean, you know, I've
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  Speaker 1: got twenty two in my rear view. Let's forget about it. Equities,
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  Speaker 1: fixed income, it was a disaster. What do I do
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  Speaker 1: for three? What are you telling your clients? Okay, So
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  Speaker 1: I've been very vocal that I have been selling on
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  Speaker 1: any type of rips all year this year because the
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  Speaker 1: bear market was going to be persistent. Now I'm a
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  Speaker 1: buyer in the pain that we're gonna feel coming intree.
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  Speaker 1: So yes, why I use buying pain together? Right? So
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  Speaker 1: the pain part is the Feds are going to continue
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  Speaker 1: to step on the gas until he gets what he wants.
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  Speaker 1: And he's going to get what he wants right in
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  Speaker 1: terms of bring inflation down. And also the so the
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  Speaker 1: bi side of the equation is the strength of the
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  Speaker 1: consumer job markets. Height Jold numbers over ten million, and
• 8:15
  Speaker 1: they have their flushwood cash right through the COVID. That
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  Speaker 1: stimulus money is still there. So with that, how do
• 8:22
  Speaker 1: you measure that phil Because we've we've been hearing um
• 8:25
  Speaker 1: bankers tell us that those savings are being depleted. There's
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  Speaker 1: there's so many different types of articles out there that
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  Speaker 1: are saying six hundred billion or a trillion. It's aggregate
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  Speaker 1: savings that that we look at from the FED, and
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  Speaker 1: based on those numbers, there's a trillion dollars that's still
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  Speaker 1: left started with two trillion beginning a year or at
• 8:40
  Speaker 1: the trillion can others are saying six hundred billion or more.
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  Speaker 1: Just remember about that number though, right the low income household,
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  Speaker 1: middle income household, they already spent that money. It's the
• 8:50
  Speaker 1: upper tier, higher income earners where they still have that money.
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  Speaker 1: They don't have that much of a present propensity to
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  Speaker 1: spend money, but they do have that money and it's available,
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  Speaker 1: and it's gonna provide a cushion under what I believe.
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  Speaker 1: I think we get a mild recession in three. And
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  Speaker 1: that's the whole by the Paine trade that I'm talking about. Sorry, David, Yeah, no,
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  Speaker 1: So David, you know what do you think about that? Um?
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  Speaker 1: I get the premise, but it just seems like the
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  Speaker 1: markets have trouble believing the Fed, and every time the
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  Speaker 1: Fed reminds markets the path it's on, we come crashing
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  Speaker 1: back down again. Right, But we do believe that the
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  Speaker 1: Fed is getting its job done. Inflation is definitely breaking.
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  Speaker 1: So there will be a meeting, whether it's the next
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  Speaker 1: meeting or the meeting thereafter, where the Fed says, Okay,
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  Speaker 1: we've raised rights enough. Now we're just gonna watch. And
• 9:38
  Speaker 1: at that point, we think the market is going to
• 9:40
  Speaker 1: look beyond the Fed, look at the economy, and look
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  Speaker 1: at beyond the possible recession towards six to twelve months out. Generally,
• 9:48
  Speaker 1: stocks will rally as you enter or as you're in
• 9:51
  Speaker 1: a recession. So we think with the markets sell off
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  Speaker 1: in two, that we've discounted a lot of the negatives,
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  Speaker 1: and we think if you look to tw the twenty three,
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  Speaker 1: that the market's going to start to discount the negative's lesson,
• 10:05
  Speaker 1: start to discount some of the positives and stocks have
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  Speaker 1: very meaningful upside for here, so we'd be buying, um,
• 10:11
  Speaker 1: you know, into this current sell off, you want to
• 10:13
  Speaker 1: turn the volume down. We think six to twelve months
• 10:16
  Speaker 1: out of stocks are going to be meaningfully higher, and
• 10:18
  Speaker 1: there are a lot of great stock prices, really good
• 10:20
  Speaker 1: businesses at low valuations that we would just buy and
• 10:24
  Speaker 1: turn down the news. So so, Amazon is a company
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  Speaker 1: that's a great business, but it's always been really richly priced.
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  Speaker 1: If you look at it now on a price to
• 10:34
  Speaker 1: sales or price to ebita basis, it's at a five
• 10:36
  Speaker 1: year low, So we like that. Google on technology also
• 10:39
  Speaker 1: sixteen times next year's earnings. PayPal is a really good company,
• 10:44
  Speaker 1: good growth prospects at sixteen times next year's earnings. And
• 10:47
  Speaker 1: then on a more traditional value type of stocks, we
• 10:50
  Speaker 1: like Bank of New York, truest Te, Connectivity, Metronic. So
• 10:55
  Speaker 1: they're really good businesses out there. Those businesses are all
• 10:58
  Speaker 1: like ten eleven times things. When you can do that,
• 11:01
  Speaker 1: you're gonna do very well if you have a twelve
• 11:03
  Speaker 1: month time frame. They phil you know, we talked to
• 11:07
  Speaker 1: fixed income investors. They say two was the worst year
• 11:11
  Speaker 1: on record. Is it time to buy bonds here in
• 11:15
  Speaker 1: twenty three, yeah, I think is gonna be bit the
• 11:17
  Speaker 1: best year on record for fixed income. I think what
• 11:19
  Speaker 1: you're gonna see in three is peak inflations. In peak
• 11:23
  Speaker 1: rates are in peake dollars in dollar declines, and with
• 11:28
  Speaker 1: that you're gonna see bonds rally and rip. You know again,
• 11:31
  Speaker 1: I think one of the biggest rips we're gonna see
• 11:34
  Speaker 1: in history coming into three. So so I would be
• 11:37
  Speaker 1: a buyer even on long duration treasuries which we own
• 11:42
  Speaker 1: um within our portfolios, and intermediate term duration treasuries. I
• 11:45
  Speaker 1: think those investments going at thee I think you can
• 11:48
  Speaker 1: perform really well. So where do you see rates? Then?
• 11:53
  Speaker 1: I always say you could overshoot the upside, and I
• 11:55
  Speaker 1: feel like we already did that. So I think that
• 11:57
  Speaker 1: the peak number is is already in. I don't see
• 11:59
  Speaker 1: us going to a five handle on the ten year.
• 12:01
  Speaker 1: I think you're at four and a quarter right around
• 12:03
  Speaker 1: there peak. Yeah, exactly, So I think that I think
• 12:05
  Speaker 1: that peak numbers in going back to what what what
• 12:08
  Speaker 1: David just said in terms of the FED, I do
• 12:10
  Speaker 1: think the Fed is going to press along more than
• 12:12
  Speaker 1: market dispen stink um. So for that reason, it's possible
• 12:16
  Speaker 1: we can break the recent peak. I think the odds
• 12:19
  Speaker 1: are very low because I think the job as you see,
• 12:21
  Speaker 1: as we start to see things go through, as we're
• 12:25
  Speaker 1: gonna see inflation come down, I think the FED is
• 12:26
  Speaker 1: going to be satisfied and then eventually, just like David said,
• 12:29
  Speaker 1: will stop. So, David, one of the sectors that you
• 12:33
  Speaker 1: know defined the logic here, or not define logic, but
• 12:35
  Speaker 1: certainly defined the weak market in two has been energy.
• 12:39
  Speaker 1: Is that played out in your perspective, awards are more
• 12:41
  Speaker 1: room to go on the energy trade here. I'm looking
• 12:44
  Speaker 1: at w T a crude oil here about seven eight
• 12:46
  Speaker 1: bucks a barrel. So we think oil prices can drift
• 12:50
  Speaker 1: a little bit higher. But we think oil stocks have
• 12:53
  Speaker 1: discounted a lot of the good things. If you look
• 12:54
  Speaker 1: at the last seven years, oil stocks have lagged behind
• 12:59
  Speaker 1: the oil price on an annual basis. This year oil
• 13:03
  Speaker 1: prices are basically flat to maybe up five or ten
• 13:05
  Speaker 1: percent UM where is the oil stocks are up fifty
• 13:11
  Speaker 1: So we're not looking for a repeat next year. We'd
• 13:13
  Speaker 1: be taking some profits in oil stocks. We also would
• 13:16
  Speaker 1: be taking profits in consumer stables, which also had a
• 13:19
  Speaker 1: great year this year. Um, you know they're at the
• 13:21
  Speaker 1: higher end of their valuation ranges, and we'd be redeploying
• 13:24
  Speaker 1: into technology, communications services, UM, some medical technology, and the
• 13:30
  Speaker 1: banking group. Interesting. So consumer staples taking profits now is
• 13:36
  Speaker 1: is a fascinating move because if we do go into
• 13:39
  Speaker 1: a recession. I know a lot of people are saying
• 13:42
  Speaker 1: we already are in a recession, but consumers seem very confident.
• 13:44
  Speaker 1: If we do go into a recession, those consumers are
• 13:48
  Speaker 1: likely to buckle down and only buy what they need. Right. Well,
• 13:52
  Speaker 1: it's not a question that people are going to buy
• 13:54
  Speaker 1: less Kelly cereals or General Mill cereals, or or or
• 13:58
  Speaker 1: Pepsi snacks. It's a question that the stock box would
• 14:01
  Speaker 1: generally sell at about sixteen times earnings are now at
• 14:03
  Speaker 1: about twenty two times earnings. So we think that they
• 14:07
  Speaker 1: discounted the recession, you know, whether we're in one now
• 14:10
  Speaker 1: or we're going to be in one in a few months.
• 14:12
  Speaker 1: And as the market starts to look beyond the recession,
• 14:15
  Speaker 1: they're going to say, Okay, the consumer staples did their job.
• 14:17
  Speaker 1: They got us through the difficult stock market. Now let's
• 14:20
  Speaker 1: use them as a source of funds. We just think
• 14:22
  Speaker 1: the businesses are gonna slow, not that they're going to crash,
• 14:25
  Speaker 1: but rather the valuations are at the higher end of
• 14:27
  Speaker 1: the range. We think they're going to regress to the mean,
• 14:30
  Speaker 1: and there are lots of things that are the lower
• 14:31
  Speaker 1: end of the range, and we think that's where the
• 14:33
  Speaker 1: money is going to go. It's a it's a good point.
• 14:35
  Speaker 1: And Phil, I wonder if I could get your take
• 14:37
  Speaker 1: on valuations because it's such a fascinating piece of the equation.
• 14:43
  Speaker 1: Um where do you see evaluations next year? Investors have
• 14:47
  Speaker 1: to recognize that anytime you go into a recession, typically
• 14:50
  Speaker 1: in the middle of the recession on averages, where the
• 14:52
  Speaker 1: market will bottom and what leads the market out of
• 14:54
  Speaker 1: the bottom is technology. So, like David said, I agree
• 14:57
  Speaker 1: that I think I think when investors, you know, staples
• 14:59
  Speaker 1: right now are rich because the anticipation of a recession,
• 15:02
  Speaker 1: so valuations got really high. So rebalance that into the
• 15:06
  Speaker 1: technology sector, which he has gotten crushed and there could
• 15:08
  Speaker 1: be more pain to to be had in that sector.
• 15:11
  Speaker 1: But as you start the dollar course average into that sector.
• 15:14
  Speaker 1: There's some great businesses right now that are trading at
• 15:17
  Speaker 1: really great multiples and a great example that and David mentioned,
• 15:20
  Speaker 1: it's something that is on our list to buy is Google. Right,
• 15:23
  Speaker 1: I've always want to be a big ownering Google, and
• 15:24
  Speaker 1: I think you know now is a great opportunity to
• 15:26
  Speaker 1: forward multiple is extremely attractive, free cash flow is one
• 15:30
  Speaker 1: of the best I've ever seen within the business. To
• 15:32
  Speaker 1: return on investment capital is and it's a and it's
• 15:36
  Speaker 1: a growing business. And it's down right now because the
• 15:38
  Speaker 1: ads spend. Right eight percent of the business is advertising,
• 15:41
  Speaker 1: so it's trading down because of that. But again, once
• 15:43
  Speaker 1: we rebound a trough out with the economy and get
• 15:47
  Speaker 1: on the get out on the other side of this,
• 15:49
  Speaker 1: Google is going to be a winner and other type
• 15:51
  Speaker 1: of technology stocks. You gotta be forward thinking as an investor.
• 15:54
  Speaker 1: You can't just say, Okay, recession is coming, let me
• 15:56
  Speaker 1: just load up in staple stocks. You know that trade
• 15:58
  Speaker 1: is done already. It's it's want to move on and
• 16:00
  Speaker 1: get ready for the recovery. I think the news today
• 16:03
  Speaker 1: on Google is uh YouTube, which Google owns, agrees on
• 16:07
  Speaker 1: a deal for the NFL Sunday ticket two billion dollars,
• 16:11
  Speaker 1: so taking away from direct TV. So that's huge, But wait,
• 16:14
  Speaker 1: does that mean you get all the games? All the games?
• 16:17
  Speaker 1: So it's only two billion dollars for that, Yeah, for
• 16:19
  Speaker 1: a year, So it's pretty good. All right, guys, thanks
• 16:22
  Speaker 1: so much for joining us. That was the big news
• 16:24
  Speaker 1: I thought this morning. You know, Sunday Ticket, which was
• 16:27
  Speaker 1: on Direct TV for years and years, is now on Google.
• 16:30
  Speaker 1: So we're going tech. Philip Palumbo, CEO and founder of
• 16:32
  Speaker 1: Plumbo Wealth Management, thanks so much for joining us. In
• 16:34
  Speaker 1: David Kat's with Matrix Asset Advisors. Those guys agree too often.
• 16:38
  Speaker 1: They're pretty good, yeah, but they agree with each other.
• 16:41
  Speaker 1: We need to get get we can find that because
• 16:44
  Speaker 1: I mean we got There's a lot of bears out there, um,
• 16:47
  Speaker 1: folks that are just saying, hey, how can I buy
• 16:48
  Speaker 1: stocks in front of a recession? But uh, both Phil
• 16:51
  Speaker 1: and David saying, hey, that's kind of priced into the
• 16:54
  Speaker 1: market here, um, and we've got room to go. Thread
• 17:00
  Speaker 1: headline crossing the Blueberg terminal. Uh. Matt Guggenheim's Scott Miner
• 17:04
  Speaker 1: has died. Person familiar says uh, and we see it.
• 17:09
  Speaker 1: We have a report from the company that he died yesterday, Wednesday,
• 17:15
  Speaker 1: December one, from a heart attack during his regular workout.
• 17:19
  Speaker 1: He was sixty three years old. Scott Minored was a
• 17:21
  Speaker 1: founding partner global Chief Investment Officer and chairman of Guggenheim Partners.
• 17:26
  Speaker 1: So one of the leaders, one of the leading voices
• 17:29
  Speaker 1: on Wall Street passed away unexpected. Yeah, absolutely, one of
• 17:33
  Speaker 1: um early the oracles that we talked to, well, we
• 17:37
  Speaker 1: try to talk to on a regular basis, and who
• 17:41
  Speaker 1: has so much depth in terms of his knowledge on
• 17:46
  Speaker 1: everything from fixed income UM to equities to crypto. And
• 17:55
  Speaker 1: it's just far too he's far too young, sixty three
• 17:58
  Speaker 1: years old, and he shaped UM Googgenheim together with Mark Walter.
• 18:02
  Speaker 1: Let's bring in Tom Keene right now, who interviewed got
• 18:05
  Speaker 1: minored countless times. And um, Tom, what are your immediate thoughts?
• 18:11
  Speaker 1: I mean, really a fixed income guru in a way. Yeah,
• 18:15
  Speaker 1: I would go further than that. And that what we
• 18:18
  Speaker 1: loved about I can't believe I'm talking in the past tense.
• 18:21
  Speaker 1: What we loved about Mr Minord was he approached this
• 18:25
  Speaker 1: differently than most strategists, differently than most traders, and that
• 18:29
  Speaker 1: this guy was at heart a certified public accountant and
• 18:35
  Speaker 1: that made him hugely unique And the one I would
• 18:39
  Speaker 1: really lean on on this at this terrific shock and
• 18:45
  Speaker 1: and just sadness. If you will love Scott Minor dying
• 18:49
  Speaker 1: is the era of Bob Diamond, of the era of trading,
• 18:55
  Speaker 1: and it was back in the nineties with lots of volatility,
• 18:58
  Speaker 1: particularly Scott's were I believe at the time it was
• 19:01
  Speaker 1: at Morgan Stanley on European Credit, and he just approached
• 19:05
  Speaker 1: it totally differently as he does on our FED show
• 19:09
  Speaker 1: every FED meeting. He approaches it totally differently, and that
• 19:13
  Speaker 1: was the value that we saw. We have to remind
• 19:16
  Speaker 1: ourselves this is a guy who walked away from Wall
• 19:19
  Speaker 1: Street like you did. Uh, Paul Sweeney at thirty seven
• 19:23
  Speaker 1: years old. Yeah, it's you know, he he made it.
• 19:27
  Speaker 1: He made it interesting. I'm just as you mentioned Tom
• 19:29
  Speaker 1: starting on as an accountant Price Waterhouse, then what the
• 19:32
  Speaker 1: Continental Bank, Assault Lake and Meryll Lynch, Morgan Stanley, Credit
• 19:35
  Speaker 1: Swiss before going to Googgenheim Capital and becoming their chief
• 19:40
  Speaker 1: investment officer than chairman and managing partner. He could retire.
• 19:44
  Speaker 1: I mean, he's so smart and again so different and
• 19:49
  Speaker 1: his his brain works. So I have to talk in
• 19:52
  Speaker 1: the present tense. I can't get to the past tense
• 19:55
  Speaker 1: with Mr Miner that that there's such an acute and
• 20:00
  Speaker 1: different analysis. That's what made him valuable. Not only do
• 20:04
  Speaker 1: all those firms, but you know they understood he didn't
• 20:07
  Speaker 1: have to work. I mean, he was independently wealthy in
• 20:11
  Speaker 1: his late thirties into his forties, and uh kept wandering
• 20:16
  Speaker 1: back to Wall Street as he did when they set
• 20:18
  Speaker 1: up a wonderfully successful because it wasn't about work for him.
• 20:23
  Speaker 1: He thought of the markets, finance, economics the way normal
• 20:27
  Speaker 1: people think about sports. And by the way, he thought
• 20:29
  Speaker 1: about sports a lot as well. So this was just
• 20:31
  Speaker 1: part of his life, which is why he was such
• 20:35
  Speaker 1: a pleasure to talk to about, you know, these issues.
• 20:40
  Speaker 1: And he was so thoughtful because he lived um Wall
• 20:45
  Speaker 1: Street and uh, you know the rates story and his
• 20:50
  Speaker 1: takes were always um so fascinating because they weren't consensus. Tom. Uh,
• 20:56
  Speaker 1: what's it been like having him on the Fed? The
• 20:58
  Speaker 1: Fed decides it's a you and Bramo and Pharaoh. Every
• 21:02
  Speaker 1: FED meeting, stay late into the afternoon and talked to
• 21:06
  Speaker 1: Scott and we usually spend the next day playing you know,
• 21:09
  Speaker 1: sound bites of what he told you. Well, it was
• 21:11
  Speaker 1: great because it mixed up so well with the other thinking,
• 21:14
  Speaker 1: you know, where the surveillance is completely focused on critical
• 21:17
  Speaker 1: thinking skills and they can be different. And Mohammad Hilarion
• 21:21
  Speaker 1: has a certain framework from his legitimate PhD work in
• 21:25
  Speaker 1: game theory. And Diane Swunk has that classic economic analysis
• 21:31
  Speaker 1: of the University of Michigan. And again what Scott Minor
• 21:34
  Speaker 1: brought was this almost it appeared slow motion analysis of
• 21:41
  Speaker 1: looking at the transactions, whether it was economic policy like
• 21:44
  Speaker 1: the FED or the bond market. Here the statement now
• 21:47
  Speaker 1: out from Guggenheim Mark Walter Matt Miller, as you mentioned quote,
• 21:53
  Speaker 1: I have known Scott for over thirty years. We were
• 21:55
  Speaker 1: partners much of that time. Scott was a key innovator
• 21:58
  Speaker 1: and thought leader who was in trumental in building Guggenheim
• 22:01
  Speaker 1: Investments into the global business it is today. He will
• 22:05
  Speaker 1: be greatly missed by all condolences or with his husband,
• 22:09
  Speaker 1: family and loved ones as as well. So a statement
• 22:13
  Speaker 1: from Guggenheim there on on this shock. There's no other
• 22:17
  Speaker 1: way to put Guggenheim in their statement is obviously they're
• 22:19
  Speaker 1: trying to uh calm the concerns with some of their clients,
• 22:23
  Speaker 1: saying Guggenheim has implemented its succession plan, which is designed
• 22:26
  Speaker 1: to deal with unexpected events. Guggenheim Investments has nine employees,
• 22:30
  Speaker 1: more than three or fifty of whom our investment professionals. So, uh, Googgenheim,
• 22:35
  Speaker 1: you know, trying to make clear to their clients that
• 22:37
  Speaker 1: it is you know, business will continue to go. But
• 22:39
  Speaker 1: the fact is, and I'm sure Mark would tell you
• 22:41
  Speaker 1: as well a Scott Minor, it is really irreplaceable. You know.
• 22:46
  Speaker 1: If I think about um, the great commentators that I've
• 22:52
  Speaker 1: been watching on surveillance for the last I don't know,
• 22:54
  Speaker 1: ten fifteen years, He's among a handful of people that
• 22:59
  Speaker 1: I'm always excited did to watch that I always stopped
• 23:01
  Speaker 1: to turn up the volume four, that I always remember
• 23:03
  Speaker 1: what he said that I always, you know, use in
• 23:06
  Speaker 1: my show the next day. Um, and I get what
• 23:10
  Speaker 1: Mark and Guggenheim are saying. We have a succession plan,
• 23:13
  Speaker 1: but he is an irreplaceable. Uh. Personally, look at the
• 23:23
  Speaker 1: lead in this story. The data are so important. Steph
• 23:26
  Speaker 1: were once instructed to have no facial expressions when walking
• 23:30
  Speaker 1: the reports into the West wing of the White House,
• 23:32
  Speaker 1: and yet a surge in trading last week and the
• 23:35
  Speaker 1: minutes before the release of the Consumer Price Index, closely
• 23:38
  Speaker 1: watched US inflation measure spurred concerns The figures fell into
• 23:42
  Speaker 1: the wrong hands. The reporter uh that read Pickert, along
• 23:48
  Speaker 1: with a colleague at Christopher Condon, reported that read, thanks
• 23:51
  Speaker 1: so much for joining us here. What happened here? I mean,
• 23:55
  Speaker 1: this is a fascinating article that you have on the
• 23:57
  Speaker 1: Bloomberg terminal talking about some surge and trading um, just
• 24:02
  Speaker 1: the minutes before that CPI data was released, right, And
• 24:06
  Speaker 1: and it's important to say that that we don't know
• 24:08
  Speaker 1: what happened. We saw some you know, unusual buying of
• 24:13
  Speaker 1: treasury features in a time where typically there's not a
• 24:17
  Speaker 1: lot of treading. And essentially folks got ahead of that
• 24:21
  Speaker 1: rally that we saw when the inflation data came in
• 24:24
  Speaker 1: lower than expected or you know, better than expected. And
• 24:28
  Speaker 1: so this story is kind of meant to look at
• 24:32
  Speaker 1: what the timeline leading up to those releases look like,
• 24:36
  Speaker 1: because you know, quite a few people do see this report. Um.
• 24:40
  Speaker 1: But it's a really tightly controlled process and it's you know,
• 24:44
  Speaker 1: kind of like clockwork in terms of how it moves
• 24:47
  Speaker 1: through this process, who all sees it, um, the types
• 24:50
  Speaker 1: of agreements that people are are sworn to in terms
• 24:53
  Speaker 1: of not sharing this information, um. And so the point
• 24:57
  Speaker 1: of this article was really to inform people from you know,
• 25:00
  Speaker 1: about a week ahead of the report up until the
• 25:03
  Speaker 1: minutes right before. Who really sees and touches this highly
• 25:07
  Speaker 1: sensitive information And so it could be I mean, it
• 25:12
  Speaker 1: could be that someone just made a big bet, a
• 25:17
  Speaker 1: very prescient bet, at the right time. I'm sure you
• 25:20
  Speaker 1: want to be if you're making that kind of bet,
• 25:21
  Speaker 1: trading in the minutes before the release, not you know,
• 25:25
  Speaker 1: days before or weeks before, um and then getting out
• 25:28
  Speaker 1: right away. Uh. But it looks suspicious because we don't
• 25:33
  Speaker 1: see that kind of movement. We haven't seen it at
• 25:37
  Speaker 1: the release of other reports right exactly. And you know,
• 25:41
  Speaker 1: given the timing of it and picking the right direction
• 25:44
  Speaker 1: of it on an indicator that economists have been persistently,
• 25:49
  Speaker 1: frankly wrong on, there's only two directions, so you've got
• 25:51
  Speaker 1: a pretty good chance of getting the pretty good chance.
• 25:54
  Speaker 1: But whoever, whoever, whatever, whoever made those trades, they turned
• 25:57
  Speaker 1: out to be quite profitable. So we really wanted to
• 26:00
  Speaker 1: do our due diligence here. And you know, something that
• 26:03
  Speaker 1: was really interesting in terms of looking into kind of
• 26:06
  Speaker 1: what this process looks like, UM is you know, in
• 26:09
  Speaker 1: the lead, you know, my colleague Chris Condon talked to
• 26:12
  Speaker 1: someone who you know, used to work at the c
• 26:13
  Speaker 1: e A and she was even saying, you know that
• 26:16
  Speaker 1: they because they knew reporters were outside, they really tried
• 26:20
  Speaker 1: to not have facial expressions when they were walking this data.
• 26:23
  Speaker 1: There's a lot of secure transfers of this data. Um,
• 26:27
  Speaker 1: there's all kinds of rules about who can see it
• 26:30
  Speaker 1: and win and UM, it was really amazing. I mean
• 26:34
  Speaker 1: a former BLS commissioner, So the BLS, the Bureau of
• 26:37
  Speaker 1: Labor Statistics is who produces this report. And you know
• 26:40
  Speaker 1: she mentioned that, you know, when she was commissioner UM
• 26:44
  Speaker 1: several years ago, I had a big reports that they
• 26:47
  Speaker 1: used to not even let maintenance staff empty the trash
• 26:50
  Speaker 1: cans um for fear of folksing the numbers early. So
• 26:55
  Speaker 1: it was a really interesting one. Is a really interesting
• 26:58
  Speaker 1: story to report out. So is there any formal review
• 27:02
  Speaker 1: of this trading activity? Is the SEC looking into it
• 27:05
  Speaker 1: or what kind of where does it standard? Because this
• 27:07
  Speaker 1: kind of trading is traceable in the past, authorities have
• 27:10
  Speaker 1: found needles in bigger haystacks. Yeah, so you know, we
• 27:15
  Speaker 1: did reach out to both the SEC and the cftc UM.
• 27:18
  Speaker 1: The SEC UM sadly declined to comment on whether the
• 27:23
  Speaker 1: exist since or non existence of a possible investigation, and
• 27:27
  Speaker 1: the CFTC declined to comment. UM, but both of those
• 27:30
  Speaker 1: regulators could have authority to kind of investigate any potential
• 27:34
  Speaker 1: attempts to manipulate the treasuries market. That you know, I
• 27:37
  Speaker 1: think what's studying about this kind of just whole story
• 27:40
  Speaker 1: and conundrum is it's really captured the attention of market
• 27:45
  Speaker 1: participants because of how odd it was and how closely
• 27:48
  Speaker 1: watched this measure is UM. And so it's certainly something
• 27:52
  Speaker 1: that kind of we're trying to report out as thoroughly
• 27:55
  Speaker 1: as we can, and hopefully we'll have more stories on
• 27:58
  Speaker 1: in the future as we try to dig into this
• 28:00
  Speaker 1: a little bit more, because you know, right now it's
• 28:03
  Speaker 1: it's it's really unclear what what actually happened. We the
• 28:06
  Speaker 1: government has said that there was no leak. UM, the
• 28:09
  Speaker 1: BLS has said that their systems weren't compromised in any way. UM,
• 28:14
  Speaker 1: we don't know if someone was somehow managed to scrape
• 28:18
  Speaker 1: the data off of BLS is data at website early
• 28:21
  Speaker 1: or something like that, and you know, we don't know
• 28:24
  Speaker 1: if there was a leak. It's just it's kind of
• 28:26
  Speaker 1: amazing that we how little we kind of know about
• 28:29
  Speaker 1: what could have happened here, or it might have just
• 28:32
  Speaker 1: been a really good bet. As you said, all right, Red,
• 28:34
  Speaker 1: you're the U S Economy reporter. We had a GDP
• 28:37
  Speaker 1: number come out today, pretty darn good, three point two
• 28:40
  Speaker 1: the third reading. What's up? I think it was the
• 28:43
  Speaker 1: third reading, So it's I mean, unless unless we're really
• 28:47
  Speaker 1: bad at measuring this stuff, it has to be pretty
• 28:49
  Speaker 1: close to in line with the last two readings, right,
• 28:51
  Speaker 1: But then it was a little bit i mean stronger
• 28:53
  Speaker 1: than expected. What did you take from that? Yeah, So,
• 28:56
  Speaker 1: so basically the main thing that moved this this number
• 28:59
  Speaker 1: is that you saw UM stronger business investment and stronger
• 29:03
  Speaker 1: consumers spending, and the consumer spending upward revision really reflected
• 29:08
  Speaker 1: UM bringing in some new services data and showed that
• 29:11
  Speaker 1: services spending was you know, better than expected in the quarter.
• 29:15
  Speaker 1: And what what I find really interesting about this is
• 29:19
  Speaker 1: it really shows that, you know, the economy really re
• 29:23
  Speaker 1: accelerated in the second half of the year, and we've
• 29:27
  Speaker 1: really seen that across quarterly data as well as monthly data.
• 29:31
  Speaker 1: And it's kind of this unique moment where we're in
• 29:34
  Speaker 1: where you know, everything was slowing down, and it seems
• 29:38
  Speaker 1: to be speeding back up again. All right, great stuff.
• 29:40
  Speaker 1: Read Picker U s economy reporter and editor for Bloomberg News,
• 29:44
  Speaker 1: former reporter at The Cavalier Daily. At u v A,
• 29:51
  Speaker 1: it's talk energy. I'm talking at w T I crude
• 29:53
  Speaker 1: oil here, seventy eight dollars a barrel kind of holding
• 29:56
  Speaker 1: steady here. Um, but boy, down from that high earlier
• 30:00
  Speaker 1: New year of about one twenty. But a lot of
• 30:02
  Speaker 1: people are still bullish on the energy space show. I
• 30:04
  Speaker 1: kind of feel like I missed my opportunity quite frankly.
• 30:07
  Speaker 1: Those stocks have ripped uh this year. Let's talk to uh,
• 30:10
  Speaker 1: somebody who does a lot of this energy stuff, Danny
• 30:12
  Speaker 1: Rice the Fourth. He's our a C director for Rice
• 30:16
  Speaker 1: Acquisition Corporation. Danny, thanks so much for joining us here.
• 30:21
  Speaker 1: What are you guys doing at RICE these days? I'm
• 30:23
  Speaker 1: assuming you're acquiring energy assets. Yeah, Paul Matt, great to
• 30:27
  Speaker 1: be with you guys. Um. So, we we formed Rice
• 30:29
  Speaker 1: Acquisition Corps about a year and a half ago, really
• 30:32
  Speaker 1: charged with the mandate of going to find in taking
• 30:36
  Speaker 1: public a private company that's developing, um what we call
• 30:40
  Speaker 1: the energy trifecta which is clean, low cost, reliable power. So, uh,
• 30:50
  Speaker 1: what are we talking about in that sense, um gas,
• 30:54
  Speaker 1: natural gas. Well, we're really looking at everything. I think
• 30:58
  Speaker 1: what we've really seen over the last couple of is
• 31:01
  Speaker 1: consumers and companies they've become a lot more just environmentally conscious,
• 31:05
  Speaker 1: and they're starting to say, not only do I want
• 31:08
  Speaker 1: my energy to be low cost and reliable, which is
• 31:10
  Speaker 1: how it's been for the last hundred years, but they're
• 31:12
  Speaker 1: all of a sudden us saying we want it to
• 31:14
  Speaker 1: be clean, we want it to be low carbon, we
• 31:16
  Speaker 1: wanted to have load and no emissions. And so we
• 31:19
  Speaker 1: were really tasked with that mandate of going and finding
• 31:21
  Speaker 1: a private company across the entire energy space that's developing
• 31:26
  Speaker 1: some really novel exciting stuff to be able to deliver
• 31:30
  Speaker 1: that energy trifecta. And so we're actually taking in public
• 31:34
  Speaker 1: a company called net Power, and what net Powers developed
• 31:36
  Speaker 1: as an entirely new power generation process that uses natural
• 31:40
  Speaker 1: gas to create power to create electricity. But in their
• 31:44
  Speaker 1: really novel patented process, it captures nearly of the emissions
• 31:49
  Speaker 1: from net power generation cycle. And so not only can
• 31:52
  Speaker 1: we deliver that low cost, reliable energy that typically comes
• 31:55
  Speaker 1: from fossil fields, but now it automatically becomes clean because
• 32:00
  Speaker 1: of those low emissions as a result of this patented
• 32:03
  Speaker 1: process that the company has invented over the course of
• 32:05
  Speaker 1: the last twelve years. So my immediate thought, especially if
• 32:10
  Speaker 1: I think of Texas is fracking um here in the Northeast.
• 32:15
  Speaker 1: It hasn't got such a great reputation. How do you
• 32:18
  Speaker 1: sell that? Yep, So it's it's quite interesting. So I
• 32:22
  Speaker 1: actually got my start in the shale patch. I started
• 32:25
  Speaker 1: a company back in two thousand and seven with my
• 32:27
  Speaker 1: brothers called Rice Energy, and over the course of the
• 32:29
  Speaker 1: next ten years, we grew it into one of the
• 32:32
  Speaker 1: largest natural gas producers in this country, primarily from shale development.
• 32:36
  Speaker 1: And I think one of the interesting things if you
• 32:38
  Speaker 1: look at shale development, particularly for natural gas here in
• 32:41
  Speaker 1: the United States, we have an amazing abundance of it,
• 32:45
  Speaker 1: and not only an amazing abundance of it, but it's
• 32:47
  Speaker 1: actually a lower carbon intensity than coal. And so what
• 32:50
  Speaker 1: we saw over that ten year period from seven to
• 32:52
  Speaker 1: eight team as we saw natural gas actually starting to
• 32:56
  Speaker 1: replace coal for power generation, and in the course of
• 32:59
  Speaker 1: doing so, we had she saw a reduction in US
• 33:02
  Speaker 1: c O two emissions and for us that really sparked
• 33:05
  Speaker 1: this idea of if we can find ways to decarbonize
• 33:07
  Speaker 1: natural gas even more, that actually becomes the most impactful
• 33:11
  Speaker 1: way to achieve our climate ambitions, both here domestically but
• 33:16
  Speaker 1: also internationally. I think it's important for people to understand
• 33:21
  Speaker 1: of World CEO two emissions comes from natural gas and
• 33:24
  Speaker 1: coal fired power generation, and so that's really the market
• 33:27
  Speaker 1: opportunity that we're really going after with net powers technology
• 33:31
  Speaker 1: is to be able to eliminate the emissions from the
• 33:34
  Speaker 1: eighteen thousand coal and gas fired power plants really powering
• 33:38
  Speaker 1: the world today. So, Daniel, one of the things I think,
• 33:41
  Speaker 1: at least I've learned over the last a couple of
• 33:43
  Speaker 1: years and maybe just thinking about the energy crisis in
• 33:46
  Speaker 1: Europe precipitated in part by the war in Ukraine, is Okay,
• 33:50
  Speaker 1: we all want to get to a green energy grid,
• 33:53
  Speaker 1: but it's going to take a while, and in interim
• 33:56
  Speaker 1: we need to have plenty of oil and gas and
• 34:00
  Speaker 1: liquified natural gas. We gotta have the fossil stuff, maybe
• 34:03
  Speaker 1: not maybe not the coal. But how do you how
• 34:06
  Speaker 1: do you think about it? How did the folks in
• 34:08
  Speaker 1: your energy world think about that? Yeah? And I think
• 34:12
  Speaker 1: this gets back to exactly why why net power is
• 34:15
  Speaker 1: really really special is I think forever everybody said we
• 34:19
  Speaker 1: need access to low cost, reliable energy. And then when
• 34:22
  Speaker 1: when this clean movement really started to pick up, as
• 34:24
  Speaker 1: people started to say there is an environmental impact, um
• 34:28
  Speaker 1: global warming is real and it's really because of just
• 34:31
  Speaker 1: the CEO two in the atmosphere, people pivoted really quickly
• 34:34
  Speaker 1: to saying we need clean energy and we need to
• 34:36
  Speaker 1: phase possible fuels a step. And I think what's started
• 34:40
  Speaker 1: to come to the root everybody's realization is clean energy
• 34:45
  Speaker 1: just is not there on the cost for the reliability
• 34:48
  Speaker 1: side to be able to replace fossil fuels. And so
• 34:51
  Speaker 1: our approach to being able to play a role in
• 34:54
  Speaker 1: this energy transition isn't focusing on wind or solar like
• 34:59
  Speaker 1: a lot of other folks. We're not really focusing on batteries. Well,
• 35:02
  Speaker 1: we're really focusing on and what net power is really
• 35:04
  Speaker 1: focusing on is fossil fuels are going to be with
• 35:07
  Speaker 1: us for a very long time. It's o of total
• 35:11
  Speaker 1: energy use in the world today, and that's just the
• 35:13
  Speaker 1: reality of where we are. And so for us, we said,
• 35:17
  Speaker 1: if we really want to achieve the climate goals we have,
• 35:19
  Speaker 1: we have to find ways to decarbonize coal, oil, natural gas,
• 35:25
  Speaker 1: and so with net power, the technology allows us to
• 35:28
  Speaker 1: capture all of the emissions from natural gas. And so
• 35:32
  Speaker 1: as we continue to see natural gas playing a larger
• 35:36
  Speaker 1: larger role in the power mix as it continues to
• 35:39
  Speaker 1: displace coal, being able to put that natural gas into
• 35:42
  Speaker 1: a net power plant captures over of the emissions. And
• 35:47
  Speaker 1: when you look at it on a heads up basis
• 35:49
  Speaker 1: on just the total carbon intensity versus wind, versus solar,
• 35:52
  Speaker 1: versus hydro versus nuclear, you name it net power on
• 35:56
  Speaker 1: a carbon intensity basis per unit of energy produced, it's
• 36:00
  Speaker 1: as low as any of them. How much still has Sorry,
• 36:05
  Speaker 1: I was just thinking of the pricing volatility that we've seen,
• 36:09
  Speaker 1: especially in Europe. Obviously it's been more um uh, it's
• 36:13
  Speaker 1: been more severe than it has here, but we've seen
• 36:16
  Speaker 1: real volatility in these markets as well. How much does
• 36:19
  Speaker 1: that matter to you to net power? Well, so that's
• 36:22
  Speaker 1: the beauty of net power is the feedstock for this
• 36:25
  Speaker 1: power generation process is natural gas. And if you look
• 36:28
  Speaker 1: at just domestically here in the United States, natural gas
• 36:31
  Speaker 1: prices are lower here than anywhere else in the world,
• 36:35
  Speaker 1: and quite frankly, they could be lower. Right. I think
• 36:37
  Speaker 1: we really just need more infrastructure to be able to
• 36:40
  Speaker 1: get this natural gas to market. And I think that's
• 36:42
  Speaker 1: where a little bit of the catch twenty two is
• 36:44
  Speaker 1: is there's a lot of reluctance to build new natural
• 36:47
  Speaker 1: gas infrastructure because natural gas has these emissions, especially visit administration, right,
• 36:51
  Speaker 1: I mean we've we've heard from a number of people
• 36:54
  Speaker 1: on this program that that infrastructure just isn't coming from
• 36:58
  Speaker 1: a Biden administration. Yeah. And I think that's what's so
• 37:01
  Speaker 1: exciting about net power is it really is a paradigm
• 37:05
  Speaker 1: shift for people's perception of natural gas because I think
• 37:08
  Speaker 1: it's it's not about labels, it's not about what is
• 37:10
  Speaker 1: the fuel source. It's really about what's the carbon intensity
• 37:13
  Speaker 1: of this fuel source. And I think the thing that
• 37:15
  Speaker 1: net power is able to unlock is all of a sudden,
• 37:19
  Speaker 1: natural gas is transformed into a very very low emission
• 37:23
  Speaker 1: power generation source. And if and if we're able to
• 37:27
  Speaker 1: leverage the cost and reliability of natural gas and pair
• 37:30
  Speaker 1: it with you know, how clean it becomes with net power,
• 37:33
  Speaker 1: that should in a way start to unlock and really
• 37:37
  Speaker 1: enable further development of natural gas and using is this fuel,
• 37:41
  Speaker 1: but only because it becomes this low emission fuel source
• 37:45
  Speaker 1: with net power. So when we think about natural gas,
• 37:49
  Speaker 1: I think of it just in the context most recently
• 37:51
  Speaker 1: of liquefying it and sending across the Atlantic Ocean to Europe,
• 37:55
  Speaker 1: which is starving for fuel. Give us just your understanding
• 37:59
  Speaker 1: of where that global infrastructure is for liquefied natural gas. Yeah,
• 38:04
  Speaker 1: so Europe, I mean Europe is in a bit of
• 38:06
  Speaker 1: a predicament right. Um, For the longest time, they've been
• 38:09
  Speaker 1: dependent on Russia for their sources of natural gas, and
• 38:12
  Speaker 1: now all of a sudden they're saying, we need to
• 38:14
  Speaker 1: show up our resources for natural gas for more trustworthy counterparties.
• 38:18
  Speaker 1: There's probably no more trustworthy counterparty in the United States.
• 38:22
  Speaker 1: And it gets back to we have such an abundance
• 38:24
  Speaker 1: of natural gas that we've really unlocked over the course
• 38:27
  Speaker 1: of the last ten years. And it's really really low
• 38:30
  Speaker 1: cost gas too, and so it's we're able to produce
• 38:33
  Speaker 1: more natural gas here than the United States is consuming today,
• 38:36
  Speaker 1: and so we have an abundance of it which is
• 38:38
  Speaker 1: primed for export to Europe. And I think the thing
• 38:43
  Speaker 1: that really makes net power play an active role in
• 38:45
  Speaker 1: all of that because Europe still has very ambition, very
• 38:49
  Speaker 1: ambitious climate reduction goals, right, and so they're saying, I
• 38:53
  Speaker 1: need the reliability and affordability of natural gas, but if
• 38:56
  Speaker 1: I compare that up with net power, in that l
• 38:59
  Speaker 1: MG that's being liquefied and transported to Europe can then
• 39:02
  Speaker 1: go into a net power plant, all of a sudden,
• 39:05
  Speaker 1: we have the reliability coming from the US l G,
• 39:08
  Speaker 1: but now we have the carbon entity that is on
• 39:11
  Speaker 1: par with wind and solar, and so we can achieve
• 39:14
  Speaker 1: our energy needs while also achieving our climate goals. And
• 39:19
  Speaker 1: I think that's I think those those examples like that
• 39:22
  Speaker 1: are are are some of the reasons why you know,
• 39:24
  Speaker 1: net power is quite unique. But I think in addition
• 39:27
  Speaker 1: to being unique, like there's a huge responsibility because this
• 39:31
  Speaker 1: is the only type of technology out there that can
• 39:33
  Speaker 1: do this. Um Alright, So it's that's good stuff, Danny.
• 39:37
  Speaker 1: We're gonna have to leave it. They're good stuff, Danny.
• 39:39
  Speaker 1: Rice the fourth the Rice Acquisition Corps, that's a spack
• 39:43
  Speaker 1: recently emerge with net Power LLC. It's a go public
• 39:48
  Speaker 1: merger special so doing some stuff on the energy space.
• 39:56
  Speaker 1: What a world wind Wait, just six hours through Wash
• 40:00
  Speaker 1: and in d C for President Zelinsky of Ukraine. And
• 40:02
  Speaker 1: here a couple of headlines that I think captured Zlinsky
• 40:04
  Speaker 1: wins applause, aid in half day dash through Washington and
• 40:08
  Speaker 1: zom Bloomberg, and also on Bloomberg, Zolinsky insists the Congress
• 40:12
  Speaker 1: US aid for Ukraine is not charity. So when we talked,
• 40:16
  Speaker 1: geopolitics and military issues are number one voice that we
• 40:20
  Speaker 1: strive forwards. James Servitis, he was retired admiral with the U. S. Navy.
• 40:24
  Speaker 1: He was there for thirty seven years. He couldn't get
• 40:26
  Speaker 1: another job, served as fifteen Commander in US European Command
• 40:30
  Speaker 1: in NATO's sixteenth Supreme Allied Commander in Europe. Admiral, thank
• 40:34
  Speaker 1: you so much for joining us once again. What is
• 40:36
  Speaker 1: your take away what you heard from President Zelinsky yesterday?
• 40:42
  Speaker 1: I thought he did an excellent job. And let's face it,
• 40:46
  Speaker 1: he had uh four separate audiences he had to speak to.
• 40:51
  Speaker 1: He spoke to us here as Americans. In the overriding
• 40:54
  Speaker 1: message I got was one of gratitude. Appropriately um, he
• 40:59
  Speaker 1: was speaking to the Europeans, and I think his message
• 41:02
  Speaker 1: was one of solidarity between the United States the European Union,
• 41:08
  Speaker 1: the two biggest contributors to Ukraine, as well as his
• 41:12
  Speaker 1: own people audience number three. Here he needed to reassure them,
• 41:18
  Speaker 1: to show them that he had the kind of personal
• 41:21
  Speaker 1: connectivity in Washington that could keep this vital aid flowing
• 41:25
  Speaker 1: and then forth, and finally, maybe the most important audience
• 41:28
  Speaker 1: is in Moscow, in the Kremlin, and there it's a message,
• 41:33
  Speaker 1: I would say, of defiance and scorn. I think, uh,
• 41:37
  Speaker 1: it was a big performance, but I thought Zealinsky delivered.
• 41:41
  Speaker 1: I was captivated by his words. His ability to convey
• 41:46
  Speaker 1: the emotion as well as the situation on the ground
• 41:50
  Speaker 1: as well as the stakes really quite extraordinary. So I
• 41:53
  Speaker 1: thought he did a very good job. How are they
• 41:57
  Speaker 1: doing in terms of the situation on the ground, How
• 41:59
  Speaker 1: would you judge the progress that the Ukrainians have made
• 42:03
  Speaker 1: in pushing back this Russian offensive? Yeah, I think it's
• 42:08
  Speaker 1: a tale of two wars, if you will. One war
• 42:12
  Speaker 1: is the ground war, and here the Ukrainians are winning.
• 42:16
  Speaker 1: They are pushing back the Russians. As you say, they've
• 42:19
  Speaker 1: taken back a big chunk of the territory that Russia
• 42:24
  Speaker 1: tried to invade and annex just ten months ago, eleven
• 42:28
  Speaker 1: months ago, Um, so they're kind of winning on the
• 42:31
  Speaker 1: ground with our help and support, of course, But the
• 42:34
  Speaker 1: second war is the air war, and here I think
• 42:37
  Speaker 1: the Russians are winning simply because the Ukrainians don't have
• 42:41
  Speaker 1: all the technology, all the tools they need to really,
• 42:45
  Speaker 1: as President Zelinsky often says, closed the skies of Ukraine.
• 42:49
  Speaker 1: So that's why you heard yesterday such importance. But on
• 42:55
  Speaker 1: the delivery of this Patriot battery, it's one of many
• 42:59
  Speaker 1: systems that are going to be flowing toward the Ukrainians
• 43:01
  Speaker 1: to help them in this air war. If we can
• 43:05
  Speaker 1: shut down Putin's ability to simply bomb at long range,
• 43:09
  Speaker 1: let the Ukrainians continue on the ground the way they are.
• 43:12
  Speaker 1: I like the Ukrainians chances Admiral will Patriot missiles by themselves,
• 43:18
  Speaker 1: you know, kind of shut off the air wharfer for Russia.
• 43:22
  Speaker 1: Or does the Ukraine need planes and trained pilots? How
• 43:28
  Speaker 1: does that play out? UM? I go with yes, they
• 43:32
  Speaker 1: need aircraft combat aircraft. Two paths available on the table
• 43:38
  Speaker 1: right now. One is mid twenty nine's they already have
• 43:42
  Speaker 1: pilots who are trained to fly the mid twenty nine
• 43:45
  Speaker 1: Those are old Soviet era aircraft or in the inventory
• 43:49
  Speaker 1: of Poland, and the polls have indicated they're willing to
• 43:53
  Speaker 1: give those to the Ukrainians. They'd like to get the
• 43:56
  Speaker 1: US to help Poland buy back fit f its teams
• 44:00
  Speaker 1: from the US. A second solution would take a bit longer,
• 44:05
  Speaker 1: but it would be the US F six team, not
• 44:07
  Speaker 1: a terribly complex aircraft. We could train the Ukrainians in
• 44:12
  Speaker 1: how to fly it in Ramstein Air Force Base, for example,
• 44:15
  Speaker 1: in Germany and provide them those F six teams. I
• 44:19
  Speaker 1: think Patriot is necessary but not sufficient to close those guys.
• 44:24
  Speaker 1: They're going to ultimately need more combat aircraft. I'm gonna ask,
• 44:29
  Speaker 1: I guess a political question without really taking a side,
• 44:33
  Speaker 1: but um in the in the in that imposing it,
• 44:37
  Speaker 1: I guess I kind of am the President. Biden said,
• 44:39
  Speaker 1: the American people are with you every step of the way,
• 44:42
  Speaker 1: and we will stay with you. We will stay with
• 44:44
  Speaker 1: you for as long as it takes. Is it fair
• 44:48
  Speaker 1: for the President to say this so soon after pulling
• 44:50
  Speaker 1: out of Afghanistan? Yeah, well, I was thinking about that yesterday.
• 44:57
  Speaker 1: How our Afghan allies must receive those words directed towards
• 45:03
  Speaker 1: the Ukrainians. And I think it is a very fair
• 45:07
  Speaker 1: criticism to make the Biden administration that they chose to
• 45:12
  Speaker 1: withdraw quite abruptly from Afghanistan and now have gone all
• 45:19
  Speaker 1: in on Ukraine. And we could have a long conversation
• 45:22
  Speaker 1: about the differences and why that has unfolded. But I
• 45:25
  Speaker 1: think it is a very valid criticism in this case.
• 45:29
  Speaker 1: What we need to do, my view, is stay very
• 45:33
  Speaker 1: strong with Ukrainians, UM, and we're going to have to
• 45:36
  Speaker 1: work to overcome some of the lingering concern that we
• 45:41
  Speaker 1: raised by that abrupt poll out from Afghanistan. Admiral unfair question,
• 45:47
  Speaker 1: but I'll ask you anyway, how do you really think
• 45:49
  Speaker 1: this plays out and over what time frame? Um? Really,
• 45:54
  Speaker 1: I can give an answer in two words, nobody knows
• 45:58
  Speaker 1: and uh, you know, the great st experts in the
• 46:00
  Speaker 1: world with the deepest military knowledge how this one's gonna
• 46:05
  Speaker 1: play out. But I'll give you my best guess. I
• 46:09
  Speaker 1: think that over the next six to twelve months, both
• 46:12
  Speaker 1: sides are going to run out of ammunition, fresh troops, enthusiasm,
• 46:20
  Speaker 1: and I think you're gonna see a movement towards some
• 46:23
  Speaker 1: kind of negotiation. In our job here in the United
• 46:29
  Speaker 1: States is too and I think the President said this
• 46:31
  Speaker 1: yesterday is to give the Ukrainians the tools to put
• 46:35
  Speaker 1: them in the best possible position at the negotiating table.
• 46:39
  Speaker 1: So I think that wars ultimately ended negotiation almost every time.
• 46:45
  Speaker 1: This one will as well, all right, James Servides, thank
• 46:48
  Speaker 1: you so much for joining us. We always appreciate your perspective,
• 46:52
  Speaker 1: your experience, and your time. James Servites, retired admiral with
• 46:55
  Speaker 1: the U. S. Navy, served as a fifteenth Command in
• 46:57
  Speaker 1: US European Command in NATO, sixteenth Supreme Allied Commander in Europe,
• 47:02
  Speaker 1: so certainly has the chops uh to give us the
• 47:05
  Speaker 1: breakdown on what's going on in Ukraine. Thanks for listening
• 47:11
  Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen
• 47:15
  Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer.
• 47:19
  Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller. P
• 47:24
  Speaker 1: On Fall Sweeney I'm on Twitter at pt Sweeney. Before
• 47:27
  Speaker 1: the podcast, you can always catch us worldwide at Bloomberg
• 47:30
  Speaker 1: Radio