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Ukraine, Inflation, ETFs, and Adobe (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day, we bring
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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
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
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Speaker 1: at Bloomberg dot com slash podcast. We're gonna check in
0:22
Speaker 1: with Kevin Brand. Kevin's a Defense policy ann also Bloomberg Intelligence.
0:25
Speaker 1: I don't know Kevin, and I thought I knew everyone
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Speaker 1: at BI. That's because he just recently joined. He's at
0:30
Speaker 1: twenty nine year Navy vetter. Whoa, I mean, what's up
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Speaker 1: with that? Kevin? Twenty nine years? Thank you for your service. Yeah,
0:38
Speaker 1: thank you for your service. But twenty nine years, I mean,
0:40
Speaker 1: you got it. You had to be the old guy, right, Yeah.
0:42
Speaker 1: I couldn't figure out what I was gonna do when
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Speaker 1: I grew up. Kevin, You're you've been in this defense
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Speaker 1: game a long time in the Navy, with experience in
0:51
Speaker 1: security strategy. You've got so much experience. When you look
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Speaker 1: back on this last year in Ukraine, what are some
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Speaker 1: of your key takeaways? Yeah, I tell you it's it's
1:01
Speaker 1: really sad. You know, we here, we are one year
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Speaker 1: into the conflict, and this is a you know, a
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Speaker 1: war of choice by by mister Putin just to satisfy
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Speaker 1: his zone ego, kind of restore the borders of what
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Speaker 1: he sees as the former Soviet Empire, and he's caused,
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Speaker 1: you know, untold suffering on the country of Ukraine. We're
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Speaker 1: talking about one trillion dollars in potential infrastructure repairs that
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Speaker 1: have to be done to the country, Over eight million refugees,
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Speaker 1: primarily in Poland and Germany, five million displaced persons, you know,
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Speaker 1: thousands of deaths, Yeah, hundreds of thousands of deaths on
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Speaker 1: both sides, all for really a war of choice, completely unnecessary,
1:36
Speaker 1: just tragic. But my question, Kevin is who could possibly
1:43
Speaker 1: see an end to this? I've seen, I've read so
1:45
Speaker 1: many stories over the past few days about how this
1:47
Speaker 1: war is going to end, what it's going to take
1:49
Speaker 1: for this war to end, and I just can't imagine
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Speaker 1: one year into it, people are willing to write that
1:55
Speaker 1: we were in Vietnam for at least seven or eight years, right, right,
2:00
Speaker 1: we were in Afghanistan for thirteen years. Now they're different
2:04
Speaker 1: they're all different situations. But Russia was in Afghanistan for
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Speaker 1: nine years during their conflict. Why would anybody think, especially
2:12
Speaker 1: with Vladimir Putin, who acts to you know, somewhere between
2:18
Speaker 1: you know, a megalomaniac dictator and a cornered animal, why
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Speaker 1: would anyone think he has any reason to get out
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Speaker 1: other than total loss for him. Yeah, I think that's
2:29
Speaker 1: the difficulty here. I mean this is this is definitely
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Speaker 1: a choice by Putin to have invaded Ukraine. I think
2:34
Speaker 1: there's some difficulty associated with the US geopolitical position and
2:38
Speaker 1: that of our Western allies that we didn't really be
2:40
Speaker 1: more forceful in twenty fourteen during the annexation of Crimea.
2:44
Speaker 1: I think that's set a precedent. Unfortunately, the precedent here
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Speaker 1: that is most important, and what I think is most
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Speaker 1: important for the international community, is upholding this standard that
2:55
Speaker 1: we're not going to allow countries to forcibly change borders,
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Speaker 1: to force their will on others by using military force.
3:02
Speaker 1: That's an Interestion state, I think is galvanized Europe. I
3:04
Speaker 1: think it's very positive to see NATO coming together the
3:07
Speaker 1: you know, Finland and Sweden about ready to join NATO.
3:10
Speaker 1: Turkey willing to reintertalks. That's positive. But as far as
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Speaker 1: what convinces Putin to a band of this, he has
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Speaker 1: to fundamentally be defeated on the battlefield first and foremost.
3:20
Speaker 1: He needs to be defeated personally. I can't imagine that
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Speaker 1: he backs away from this until he's thrown out of
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Speaker 1: office or dies. Yeah, I think this is going to
3:29
Speaker 1: be very difficult. If you look at mister Putin, he
3:32
Speaker 1: seems to have secured his power base. He's definitely an oligarch,
3:35
Speaker 1: you know, he's a dictator authoritarian government. Absent some sort
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Speaker 1: of popular revolt, it's going to be very difficult to
3:43
Speaker 1: remove him from power. So the only way to stop
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Speaker 1: this invasion is mister Putin's internal calculation has to be
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Speaker 1: that he can no longer achieve his results, and that
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Speaker 1: means the West really has to provide for Ukrainians defense,
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Speaker 1: and Ukraine must secure their borders and repel the Russian
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Speaker 1: from their territorial kevin Land space. What role do you
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Speaker 1: think China should play, will play, could play in the
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Speaker 1: netcoming year. Yeah, that's a great question. This is you know,
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Speaker 1: this is a very important international political contest. We have
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Speaker 1: authoritarian regimes out there revisionist powers who are wanting to
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Speaker 1: use force to achieve their national will. The West, the
4:27
Speaker 1: international community has to stand up to that. When you
4:30
Speaker 1: look at China ran to a lesser extent in North Korea.
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Speaker 1: The West has to galvanize international support to punish those
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Speaker 1: sort of behaviors. I think it's positive development that China
4:41
Speaker 1: has so far not provided obstensibly lethal aid, but it
4:45
Speaker 1: would be. It would be. One of the things I
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Speaker 1: think we need to see is China step up to
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Speaker 1: the plate and be a little bit more proactive besides
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Speaker 1: just offering a piece plan, be more proactive in pushing
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Speaker 1: back against Russia, both in the United Nations Security Council
5:00
Speaker 1: and sort of internationally public diplomacy. Peace boys. Hey, Kevin,
5:03
Speaker 1: we also have Maria todayo joining us. She's Bloomberg Television.
5:06
Speaker 1: She is reporting today live from Kiev. Lets live from Kiev.
5:10
Speaker 1: Let's bring Maria in. Maria, thank you so much for
5:12
Speaker 1: joining us. Um. I know you've spent a lot of
5:15
Speaker 1: time in Kiev, in Poland on trains interacting with Ukrainians.
5:20
Speaker 1: What's the mood today one year in what is their
5:23
Speaker 1: level of resolve? Hopefully we have Maria, but sometimes she's
5:32
Speaker 1: in war zone. Yeah, no, it doesn't sound well. First
5:35
Speaker 1: of all, your microphones off, okay, thank you. And second
5:37
Speaker 1: of all, we're we don't have Maria now. She is
5:40
Speaker 1: in the capitol and it is Fortress city, so it
5:45
Speaker 1: doesn't I don't think that we have any kind of
5:48
Speaker 1: war zone issues, but we do have your typical global
5:51
Speaker 1: telecommunications problems. Producer Eric mullis as we got her back. Maria.
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Speaker 1: You have been after I think a seventeen hour train
6:00
Speaker 1: reporting live from the capital of Ukraine, Kiev, and Paul
6:04
Speaker 1: was wondering, you know, the people that you talk to
6:07
Speaker 1: on the train, the people that you talk to in
6:08
Speaker 1: the streets, what's what's there feeling? One Ye're in yes,
6:13
Speaker 1: and listen. I have to apologize because I know the
6:15
Speaker 1: lines are dropping, but really this is also part of it,
6:18
Speaker 1: is the reality of it. And we're not even using
6:20
Speaker 1: our real phones here pretty much for security essentially. I think,
6:25
Speaker 1: to me, what is just incredible of the story is,
6:29
Speaker 1: you know, you get on this train from Poland and
6:31
Speaker 1: then you're making your way to Ukraine, and then at
6:34
Speaker 1: one point I catch myself thinking, wow, it's one am
6:37
Speaker 1: in the morning. This train is full. You know, you're
6:39
Speaker 1: in this little carriage with four other people, and then
6:43
Speaker 1: it just hits you. You know, we're all women here.
6:45
Speaker 1: And then at that point you ask why are you
6:48
Speaker 1: going there to this women? And then what's your situation?
6:51
Speaker 1: And then they tell you, well, I'm either going to
6:53
Speaker 1: see a relative where I'm going back to my husband,
6:55
Speaker 1: or I had to come to Poland because there is
6:57
Speaker 1: no visa process in Ukraine. And that's when it really
6:59
Speaker 1: hid to the men cannot leave. It's the women that
7:02
Speaker 1: are going in and out to their country. A lot
7:05
Speaker 1: of these world husbands are fighting or they expect that
7:09
Speaker 1: they will be called to some extent to fight this year,
7:12
Speaker 1: particularly in the spring. And then you get to Ukraine
7:16
Speaker 1: and the reality hit too. You see the first man
7:19
Speaker 1: actually that you interact for many hours, or all dressed
7:21
Speaker 1: in military year. They ask for your papers for passports,
7:24
Speaker 1: they let you in, and then of course from that
7:26
Speaker 1: point on you start to see the scenery. As you
7:28
Speaker 1: enter kivs Bucha. We don't know the massacre that happened there.
7:32
Speaker 1: Then you go into Rapine, which is just outside and
7:35
Speaker 1: there was active fighting there, and that's when you really
7:37
Speaker 1: realize the Russians were just so close to Kiev. Then
7:41
Speaker 1: you see the airports that they had to blow up.
7:43
Speaker 1: Remember the initial plan from the Russians was to take
7:45
Speaker 1: hold of the airports and helicopter people from Belarus into Ukraine.
7:51
Speaker 1: And that's the reality of the war. I think yesterday
7:53
Speaker 1: for us on PubL the reality check. You see it firsthand,
7:57
Speaker 1: and you're on this train and the train next to
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Speaker 1: you it's ready to send the weapons. And this is
8:01
Speaker 1: a train that's really next to you as you're making
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Speaker 1: your way into Ukraine for seventeen hours. The airspace obviously
8:07
Speaker 1: shut now for a year because of the missile strikes.
8:10
Speaker 1: I think for today we heard already from Pricedent Lanski,
8:13
Speaker 1: who was given out medals in the morning, to the
8:16
Speaker 1: army again repeating the reason why we'll starts standing a
8:19
Speaker 1: year later is because of our army and they have
8:21
Speaker 1: beat in blood. So that I'm here, Slanski's here, is
8:24
Speaker 1: the press that we're all here reporting this. It's because
8:27
Speaker 1: of the huge fight that the army has put up
8:29
Speaker 1: with a lot of weapons from the West. Sure, but
8:31
Speaker 1: the reality is the soldiers that are dying there. And
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Speaker 1: the one thing that also really caught my eyes when
8:36
Speaker 1: you look at Ukrainian TV the way they present this
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Speaker 1: is not the one year mark. It's not the one
8:41
Speaker 1: year anniversary. What they say is one year now to victory.
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Speaker 1: All right, Maria Today, reporting live from Kiev. I know
8:51
Speaker 1: you spoke with the mayor this morning, Vitali Klitschko, So
8:54
Speaker 1: I want to talk to you about that later. We
8:56
Speaker 1: can get you back on the program. And then Kevin
8:59
Speaker 1: Brand he is Defense Policy and Bloomberg Intelligence, We're going
9:02
Speaker 1: to get you back as well, because this is obviously
9:05
Speaker 1: such an important issue geo politically, and we definitely want
9:09
Speaker 1: to get all caught up on the one year anniversary
9:13
Speaker 1: of this tragic war. How do we keep supplying Ukraine?
9:18
Speaker 1: It seems like they're just going through munitions as you
9:20
Speaker 1: would expect. Do we and the West have the capability
9:24
Speaker 1: to continue to replenish their bullets and shells and tanks
9:29
Speaker 1: and all that kind of stuff. Well, I think for
9:30
Speaker 1: the short term absolutely, you know, we really don't have
9:32
Speaker 1: a choice in this matter. It's sort of an existential
9:35
Speaker 1: threat to Ukraine, and really the only thing that's bolstering
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Speaker 1: their defense forces is the Western weapons that are flowing in,
9:42
Speaker 1: including some of the former Soviet Bloc countries that still
9:45
Speaker 1: have some Eastern former Soviet sort of slide weapons that
9:48
Speaker 1: we're able to do to kind of keep them in
9:50
Speaker 1: the game. But that's the critical thing as we look
9:52
Speaker 1: forward at this, you know, barring a return of the
9:56
Speaker 1: Russian advance or that if they're able to get better
9:58
Speaker 1: and moved into territory, what we really have to prepare
10:01
Speaker 1: for is the Ukrainian counter offensive, which is probably going
10:03
Speaker 1: to kick off later to spring, and so the importance
10:06
Speaker 1: of getting those arms and weapons into Ukraine and get
10:09
Speaker 1: them trained up ready to use them before that spring
10:12
Speaker 1: offensive kicks off is kind of the number one problem
10:13
Speaker 1: right now. I imagine that the US military just has
10:18
Speaker 1: amazing capabilities in terms of supply chain management, and we
10:24
Speaker 1: have the tools to get everything there right I mean,
10:27
Speaker 1: we have more aircraft carriers and anybody else than everybody
10:30
Speaker 1: else in the world combined, I believe. So is that
10:35
Speaker 1: what's happening right now? Are we utilizing the Army and
10:38
Speaker 1: the Navy to get them the gear that they need
10:41
Speaker 1: as quickly as possible. Well, I think you've got a
10:43
Speaker 1: combination of a couple things. So we're energizing the contractor base.
10:46
Speaker 1: There's lots of security assistance dollars that are on contract
10:49
Speaker 1: right now to get industry to ramp up production both
10:52
Speaker 1: to resupply the US arsenal. Plus we'll also have the
10:55
Speaker 1: ability to move weapons from the US arsenal these presidential
10:58
Speaker 1: drawdowns that you've heard about, and move actually US weapons
11:01
Speaker 1: stocks in through the supply chain and get those two Ukraine,
11:04
Speaker 1: not to mention what's already the NATO countries are providing,
11:06
Speaker 1: So there's enough arms and ammunitions to keep Ukraine's supply,
11:09
Speaker 1: but we are starting to dip down into US and
11:11
Speaker 1: NATO inventories. How concerned are you, Kevin about I mean,
11:17
Speaker 1: this is clearly a well in some ways, it's a
11:20
Speaker 1: proxy war between Russia and NATO. Right, How concerned are
11:25
Speaker 1: you that that escalates into a hot war because I
11:30
Speaker 1: feel like we've been watching China, but it looks like
11:34
Speaker 1: this could be an an active threat that happens even
11:37
Speaker 1: even sooner. No, this is serious concern. I think everyone
11:40
Speaker 1: is watching that closely, and there's always a risk of
11:42
Speaker 1: escalation when you get in and Russia has been clearly
11:45
Speaker 1: signaling that they're unhappy with what the West is doing.
11:48
Speaker 1: But you know, I think the West has made its
11:52
Speaker 1: position clear. This is about the defense of Ukraine. This
11:54
Speaker 1: is about Russia's unprovoked aggression against Ukraine, the violation of
11:59
Speaker 1: territory borders, and this is what the international community stands
12:02
Speaker 1: up for. Right non interference in the international affairs of others,
12:06
Speaker 1: no forceful movement of borders by use of military force.
12:09
Speaker 1: And so these are core international principles that are at
12:12
Speaker 1: stake here, and the West really does need to step up, Kevin,
12:15
Speaker 1: I guess in terms of stepping up, the next big,
12:18
Speaker 1: big leap would be providing air cover, air force jets
12:24
Speaker 1: F sixteens. What are the pros and cons that you
12:27
Speaker 1: think our leaders are weighing right now, and how do
12:30
Speaker 1: you think that's what we'll play out? Well, I think
12:32
Speaker 1: you hit the nail on the head earlier. There's always
12:34
Speaker 1: a risk of escalation. You know, what sort of weapon
12:36
Speaker 1: systems do we bring? What is Russer's response to that?
12:39
Speaker 1: I think we've had sort of an incremental approach to this,
12:42
Speaker 1: increasing arms, longer range, arms, more lethal aid. I think
12:45
Speaker 1: air support is next. When you think about a Ukrainian
12:48
Speaker 1: offensive that's upcoming, you really have to have a combination
12:51
Speaker 1: of infantry supported by armor, artillery and air support, not
12:56
Speaker 1: just unmanned airs and sort of reconnaissance because golos you
12:59
Speaker 1: need to have tact fighters that can provide close air
13:01
Speaker 1: support to those troops. So I think it's inevitable. The
13:04
Speaker 1: question is just a matter of time before the West
13:06
Speaker 1: commits to that. Do we always have to pre announce
13:09
Speaker 1: this stuff? Is that a part of, you know, avoiding escalation?
13:15
Speaker 1: We say we're going to do it, we float that balloon,
13:18
Speaker 1: and then we eventually do. Or is it possible that
13:20
Speaker 1: we give them give the Ukrainians fighter jets to use
13:24
Speaker 1: in the offensive without telling anybody and upping the element
13:27
Speaker 1: of surprise. It's possible, But you know, these sort of
13:32
Speaker 1: deliberations are so complex. Inside the National Security Council, they're
13:36
Speaker 1: weighing the pros and cons are looking at the risk
13:38
Speaker 1: of escalation. It's very, very hard to hide these moves.
13:43
Speaker 1: So even if we didn't announce them publicly, which I
13:45
Speaker 1: think would be a mistake, but even if we didn't,
13:48
Speaker 1: Russia would clearly know that we're doing it. The information
13:51
Speaker 1: would get out. So I think it's really the deliberate
13:53
Speaker 1: process by which the NSC and the White House, the
13:56
Speaker 1: Administration needs to go through, work with our NATO partners,
13:59
Speaker 1: and then term of what the best air assets to
14:01
Speaker 1: provide are from an intelligence perspective, Kevin, how do you
14:06
Speaker 1: what do you believe or how good do you think
14:08
Speaker 1: our capabilities are in that part of the world. And
14:11
Speaker 1: are we providing intelligence support for the Ukrainians? Absolutely, I
14:16
Speaker 1: think that's one of the key things that we're actually
14:18
Speaker 1: providing the Ukrainians besides the arms in Western is that
14:21
Speaker 1: intelligence support. I mean, they clearly know the adversary better
14:25
Speaker 1: than any of us. They're on the ground, they're there,
14:28
Speaker 1: But the non technical means that we have the satellite
14:31
Speaker 1: sort of surveillance, the overflight capability that we have the UAVs,
14:35
Speaker 1: we are providing pretty critical intelligence that helps them tactically
14:39
Speaker 1: and operationally make decisions on the ground as to where
14:42
Speaker 1: they need to defend, where Russia is massing troops, where
14:45
Speaker 1: they need to reallocate resources. And I think that's absolutely
14:48
Speaker 1: critical to Ukraine's defense. You got your master's National Security
14:52
Speaker 1: policy from the National War College US Naval War College.
14:59
Speaker 1: How much did they talk about China then and how
15:03
Speaker 1: much of a threat do you think China is now?
15:04
Speaker 1: Because I know an Air Force general recently said we
15:07
Speaker 1: could have war with them in twenty twenty five. Absolutely,
15:11
Speaker 1: so China, China and Russia. I mean China to the
15:14
Speaker 1: most part has been sort of the premiere up and
15:16
Speaker 1: coming long term strategic competitor for the United States least
15:22
Speaker 1: going back fifteen twenty years in military parlance. The national
15:25
Speaker 1: security establishment really focused on that more recently in the
15:28
Speaker 1: last ten years. But absolutely that's the up and coming
15:31
Speaker 1: challenge that we've got from a great power competition perspective. Hey, Kevin,
15:34
Speaker 1: we're fortune once again have Maria todayo joining us live
15:38
Speaker 1: from Kiev, so we want to go to her. Maria,
15:41
Speaker 1: thanks so much for you know, dialing, and we know
15:43
Speaker 1: it's hectic there. I believe you recently sat down with
15:47
Speaker 1: the mayor of Fatal. Yeah, the mayor of Kiev. Could
15:50
Speaker 1: you tell us just gives a little color about what
15:53
Speaker 1: you learn from your discussion. Yeah, and he was here
15:56
Speaker 1: this morning with us a clitch car. Obviously, you know
15:59
Speaker 1: the two others. At this point, they've become something of
16:03
Speaker 1: a popular icon here and they have been also in
16:06
Speaker 1: a number of European countries because they speak for German,
16:09
Speaker 1: and they have it pretty smart in fact, to reach
16:11
Speaker 1: out to Germany and speak in Germany and reach out
16:14
Speaker 1: to the German media because they knew that a lot
16:16
Speaker 1: of the weapons, the key to unlock the heavy weapons
16:19
Speaker 1: would be in Berlin. Which also speaks to the fact
16:23
Speaker 1: that when you look overall at the Ukrainian government and
16:26
Speaker 1: Zelenski's doing this in real time, he was doing a
16:28
Speaker 1: press conference a lot of international media. When you look
16:31
Speaker 1: at the foreign minister who's speaking today at the United Nations,
16:34
Speaker 1: it's almost this new generation of Ukrainian politicians who get
16:38
Speaker 1: very well that they need to have a big media
16:40
Speaker 1: presence and that they need to gather message across and
16:43
Speaker 1: this was something that for Zelenski was obvious for day one.
16:47
Speaker 1: If they wanted to really survive, they needed to make
16:50
Speaker 1: this a global story. And it has been now for
16:53
Speaker 1: a year now we are seeing pictures presences like the
17:00
Speaker 1: cell the cell phone call has dropped, and as Maria
17:04
Speaker 1: told us, you know, she and U producer Oliver Krook
17:08
Speaker 1: traveled into Ukraine. They had to uh leave their actual
17:14
Speaker 1: you know, personal cell phones and business cell phones at
17:17
Speaker 1: the border, so they took in m communication devices that
17:22
Speaker 1: are not necessarily reliable. Hopefully we can get her back.
17:26
Speaker 1: But she was talking about the importance of you know,
17:30
Speaker 1: the clich goes have have been huge Kevin in in
17:34
Speaker 1: building support as well as obviously Zelenski. Do you think
17:39
Speaker 1: that that support still is the popular support still um
17:44
Speaker 1: as big as it was when this war started a
17:46
Speaker 1: year ago? Has it waned at all? No? You know,
17:50
Speaker 1: it's always difficult to tell, and that's always a risk
17:53
Speaker 1: that you lose popular support and backing and that you know,
17:55
Speaker 1: the implications go with that in a democratic uh, you know,
18:00
Speaker 1: environment is difficult in order to maintain support. But I
18:03
Speaker 1: would say, actually, what we've seen as a strengthening the
18:06
Speaker 1: uniting of NATO and the uniting of Europe behind this
18:09
Speaker 1: and behind the international principles involved. So I actually look
18:12
Speaker 1: at this as a very positive sort of step forward.
18:15
Speaker 1: And Kevin, realistically, what do other NATO countries, what can
18:19
Speaker 1: they provide? What are they providing? How much can we
18:22
Speaker 1: as a you know, really depend upon them for real material? Yeah?
18:27
Speaker 1: So I think there's two things. There's one, there's the
18:29
Speaker 1: international support, the aligning of NATO sort of the getting
18:32
Speaker 1: back to basics as to what the alliance is for,
18:35
Speaker 1: and that's absolutely critical. The second thing is this stepping
18:38
Speaker 1: up in the defense budgets the nations across the NATO
18:41
Speaker 1: are coming back to their two percent pledges. They're plussing
18:43
Speaker 1: up their defense budgets. That's great for the Alliance. The
18:45
Speaker 1: third thing, though, to your point directly, is they have
18:47
Speaker 1: tons of arms and ammunition available, especially small arms. That
18:51
Speaker 1: is critical for the infantry sup fight infantry fight. They
18:55
Speaker 1: have the ability to provide non technical means. They have
18:58
Speaker 1: the ability to provide logistic support. They have the ability
19:00
Speaker 1: to provide humanitarian support. All that comes together, I think
19:03
Speaker 1: and provides a very important backing for Ukraine. All Right,
19:07
Speaker 1: we have Maria today, O back. I believe Maria, if
19:09
Speaker 1: you're there, talk to us about the push for fighter jets.
19:13
Speaker 1: I know that Ukraine has been not only behind obviously publicly,
19:18
Speaker 1: but also behind the scenes on a daily basis trying
19:21
Speaker 1: to get air support. Yeah. Absolutely. And you know, Matt,
19:25
Speaker 1: when you listen to the Ukrainian FOREM Minister at the
19:27
Speaker 1: Midriku level, who's just before the United Nations, he says,
19:31
Speaker 1: Ukraine when this board started had a checklist almost of
19:34
Speaker 1: the seven things that they needed, the seven type of
19:36
Speaker 1: weapons that they needed, and he says, at this point
19:39
Speaker 1: we've crossed six. The red lines have been crossed repeatedly.
19:43
Speaker 1: Remember there was major fear of tanks. And funnily enough,
19:45
Speaker 1: they're now making their way from Poland into Ukraine. And
19:49
Speaker 1: it's funny. When I was on the train, see that
19:51
Speaker 1: in the train to Poland to Ukraine, there's another lane,
19:54
Speaker 1: huge lane where all of this equipment is just crossing
19:57
Speaker 1: the border. And that's when it really hits you that
19:59
Speaker 1: this is real and these weapons are massive. They're enormous.
20:02
Speaker 1: Seeing the one thing they need is alluded to is
20:04
Speaker 1: the fighter jets. This is still an open debate and
20:07
Speaker 1: Ukrainians will say the rational for this is that they
20:10
Speaker 1: want to make a big push to get back essentially
20:13
Speaker 1: the twenty percent around the country that Russia right now
20:16
Speaker 1: controls and the east and going down to the south.
20:18
Speaker 1: And to do that, they argue, you need to have
20:22
Speaker 1: a position from the ear that allows your soldiers to
20:24
Speaker 1: move in freely and obviously with less of confrontation with
20:27
Speaker 1: trips on the ground. And they also say the long
20:29
Speaker 1: range missiles also do that. They provide cover and support
20:33
Speaker 1: two soldiers that are on the ground. It's very difficult
20:36
Speaker 1: to make inroads if you don't have the backup from
20:39
Speaker 1: aviation and the long range missiles this is an ongoing story,
20:42
Speaker 1: but they continue to push for it. And if you
20:44
Speaker 1: look at the track record, you know, Matt I would
20:46
Speaker 1: not be surprised if they get them again. They had
20:48
Speaker 1: seven things they wanted, they have six for the time being. Hey, Maria,
20:52
Speaker 1: can you give us the latest what you're hearing from
20:55
Speaker 1: government officials about casualties, casualty rates, expectations. Kind of because
21:01
Speaker 1: we're again one year into this. Look, this is the
21:05
Speaker 1: biggest secret and you understand why for Ukrainians to put
21:09
Speaker 1: out a number of dead soldiers, to put out a
21:13
Speaker 1: total number of population that here we all know the
21:16
Speaker 1: number is probably great and it is a big number.
21:19
Speaker 1: And this is the secrecy that goes on in every
21:22
Speaker 1: war in US is Ukraine, in any war, the act
21:25
Speaker 1: of government will do everything that I can to make
21:27
Speaker 1: sure that those numbers be precisive for that effective moral. Understandably,
21:36
Speaker 1: we've lost Maria yet again. So it's just kind of
21:38
Speaker 1: what we've become accustomed to in Kiev because communications there
21:42
Speaker 1: are very tenuous at best. Um, Kevin, as we just
21:46
Speaker 1: heard from Maria, you know, the the you know, the
21:49
Speaker 1: the push is to get some aircraft in there, so um,
21:52
Speaker 1: you know, we'll have to see how that plays out.
21:54
Speaker 1: But we just want to thank Kevin Brand, defense policy
21:56
Speaker 1: annalyst for Bloomberg Intelligence, joining us on the phone from
21:59
Speaker 1: marsh in DC and Maria TODAYO on the ground in
22:04
Speaker 1: Kiev was some on the ground reporting. We appreciate both
22:07
Speaker 1: there and again, Matt, this one year anniversary of the
22:10
Speaker 1: invasion by Russia of Ukraine. Yeah, and it's interesting to
22:13
Speaker 1: also hear from Maria not only about travel into Kiev
22:15
Speaker 1: and the mood on the ground there, but about the
22:19
Speaker 1: push for more weaponry and the armor that she sees
22:24
Speaker 1: rolling in, and to hear from Kevin as well about
22:29
Speaker 1: the counter offensive that we expect to come in the
22:33
Speaker 1: not too distant future. That's what the armors rolling in
22:36
Speaker 1: there for. And I guess the question now is how
22:39
Speaker 1: much damage they can do and how quickly they can
22:42
Speaker 1: do it in order to hurt the Russian offensive and
22:44
Speaker 1: to hurt Russian morale. But the market is certainly saying,
22:50
Speaker 1: all right, this inflation is here. It's a little bit
22:53
Speaker 1: hotter than we thought. That means fed's going to be
22:55
Speaker 1: potentially higher for longer, and that's kind of what we're
22:58
Speaker 1: seeing in the market here. The snp off one points
23:00
Speaker 1: percent the two year treasury again, we've touched four point
23:02
Speaker 1: eight two percent. We're now at four point seven nine
23:05
Speaker 1: percent on the two year. Let's bring in somebody who
23:07
Speaker 1: does this stuff for a living. Alex Schalloff, cohead of
23:10
Speaker 1: investment Strategies at Bernstein Private Wealth Management. Alex, thanks so
23:15
Speaker 1: much for joining us here. God, we've looked back on
23:17
Speaker 1: twenty twenty two. It was ugly. I don't care where
23:20
Speaker 1: you are. Equities, fixed income, tough time, tough time to
23:23
Speaker 1: make money. Here we are in twenty twenty three, started
23:25
Speaker 1: off a little bit pretty darn good in January. What
23:28
Speaker 1: are you telling your clients these days? I think, good morning, guys.
23:32
Speaker 1: I think we're probably a little bit ahead of ourselves
23:35
Speaker 1: with where we were in January, and I think people
23:37
Speaker 1: can acknowledge that it seemed as though nothing had changed
23:42
Speaker 1: from twelve thirty one through one thirty one, and in
23:46
Speaker 1: the month we had outstanding returns in stocks and bonds.
23:49
Speaker 1: So our clients were scratching their heads, just like we were, saying,
23:53
Speaker 1: this doesn't feel right, and we're probably a little bit
23:56
Speaker 1: ahead of ourselves. The good news is, like you said
24:00
Speaker 1: in twenty twenty two, it's really hard to make money
24:02
Speaker 1: in stocks and bonds. But when you moved outside of
24:04
Speaker 1: traditional markets, there was a lot of opportunity and frankly,
24:07
Speaker 1: a lot of money to be made. So where and
24:12
Speaker 1: is that still a good trade? Yeah? The alternative space
24:15
Speaker 1: is still a trade. And when we say alternatives, we
24:18
Speaker 1: think about real estate, we think about private equity, private lending.
24:22
Speaker 1: Even hedge funds made money last year. So even hedge
24:26
Speaker 1: funds made money. I love it. Even Head even those
24:30
Speaker 1: guys made money. Remember when they were the masters of
24:32
Speaker 1: the universe. Yea, listen, it's weird. I'm in Los Angeles.
24:35
Speaker 1: I got a blizzard warning this morning, so the world
24:38
Speaker 1: is not normal. We just have to acknowledge that. But look,
24:41
Speaker 1: you could make if you were able to take some
24:45
Speaker 1: illiquidity on, you could make a lot more money than
24:48
Speaker 1: was available in the public markets. And that continues today.
24:52
Speaker 1: When I see markets read today, what that says is
24:55
Speaker 1: there's a lot of anxiety out there. There's uncertainty, and
24:58
Speaker 1: when people want their money every single moment of the
25:01
Speaker 1: day and you're willing to say, you know what, I
25:03
Speaker 1: don't need it tomorrow or next week or even next month. Yeah,
25:06
Speaker 1: there's an interesting trade there. So where do we go here.
25:09
Speaker 1: I mean, you know, the sixty forty portfolio did not
25:12
Speaker 1: work last year. So you talk your clients, are you
25:16
Speaker 1: are you heavier in risk assets? Here are you saying,
25:19
Speaker 1: hey boy, we can actually make some money in the
25:20
Speaker 1: fist income space. You can park your money into your
25:23
Speaker 1: paper and get four point eight percent. Where are you
25:27
Speaker 1: kind of pushing people these days? Are leading them? Well,
25:30
Speaker 1: it comes back to this idea of alternative investments, of
25:33
Speaker 1: having things outside of traditional stocks and bonds. So again,
25:37
Speaker 1: private equity, private debt a big part of our solution
25:42
Speaker 1: and it's worked. But if somebody says, look, I am
25:45
Speaker 1: looking for that traditional portfolio. I need access to my
25:48
Speaker 1: to liquidity for spending, there's an interesting opportunity that exists
25:53
Speaker 1: today in municipal bonds for sure. You know you talked
25:56
Speaker 1: about treasuries generating more yield. I would look because most
26:00
Speaker 1: to our clients are at the highest marginal bracket. They
26:02
Speaker 1: want that tax free income, and in exists today immunis.
26:06
Speaker 1: We saw a nice move in January, giving them some
26:09
Speaker 1: back this month. But again that's normal. And if all
26:12
Speaker 1: you're concerned about is cash flow in the yield, it's
26:15
Speaker 1: juicy today. So Alex in terms of the alternatives, again,
26:22
Speaker 1: how out there on the risk premium do you get.
26:24
Speaker 1: Are you out there buying timber for your clients or
26:28
Speaker 1: is it more private equity hedge fund type stuff. You
26:32
Speaker 1: could do both. I mean, I think right down the
26:34
Speaker 1: middle of the fairway core type of cash flow centric
26:38
Speaker 1: real estate is interesting. We're about to see a significant
26:43
Speaker 1: shake up in the commercial real estate market given what's
26:45
Speaker 1: gone on in rates and just having some dry powder
26:48
Speaker 1: there to take advantage of it. I don't think you
26:50
Speaker 1: need to do anything exotic or special to win there.
26:53
Speaker 1: I think in private equity it's really you know, we've
26:56
Speaker 1: done a good job of staying out of venture just
26:59
Speaker 1: because we felt like it was frothy the last couple
27:01
Speaker 1: of years. Now it's interesting prices have started to correct there,
27:06
Speaker 1: and so I think, you look, you don't need to
27:08
Speaker 1: overreach to win in the private markets today. There's a
27:11
Speaker 1: lot of opportunity in terms of what you expect from
27:15
Speaker 1: on the inflation front, what you expect from the Fed.
27:19
Speaker 1: We got it hotter than expected PCE core deflator this
27:23
Speaker 1: morning year over year four point seven percent. We were
27:26
Speaker 1: looking for four point three percent, and that's up from
27:29
Speaker 1: the four point six percent we had last month. That's
27:33
Speaker 1: even up from the revised up from the four point
27:35
Speaker 1: four percent. Anyway, it just looks like inflation is not
27:38
Speaker 1: cooling down at the rate that this market expected. What
27:41
Speaker 1: does that mean the Fed has to do well. I
27:44
Speaker 1: think everyone's been saying this morning, it's higher for longer.
27:47
Speaker 1: I don't think that's a surprise. Really. What's interesting is
27:51
Speaker 1: the narrative change from hard landing versus soft landing to
27:55
Speaker 1: now potentially no landing. I think, on the positive side,
27:58
Speaker 1: this is an economy that's moving. You know, you can't
28:02
Speaker 1: get a restaurant reservation, you can't get a hotel reservation,
28:05
Speaker 1: you can't get a concert ticket. You know, you can't
28:08
Speaker 1: get an ev there's a there's still is a massive
28:11
Speaker 1: amount of demand. You can't get a Dodge Challenger, Hellcat,
28:16
Speaker 1: Red Eye, right, go old school, that's right, each wealth.
28:20
Speaker 1: But look that the point is people are spending, and
28:24
Speaker 1: you know, we can sit around in a restaurant waiting
28:27
Speaker 1: for a table and say, wow, this is a real
28:28
Speaker 1: recession here. I can't get a table for you know,
28:31
Speaker 1: it's gonna take me seven weeks, and I can get
28:33
Speaker 1: a table at nine thirty on a Monday night. I mean,
28:35
Speaker 1: people are really spending. So I don't think it's reasonable
28:38
Speaker 1: for any of us to expect that inflation levels are
28:41
Speaker 1: going to come down in the near future, but they're
28:44
Speaker 1: going to trend lower over time. And look, the real question.
28:48
Speaker 1: I know people within bursting or asking this, And a
28:51
Speaker 1: colleague was on the counterpart on television this morning, just
28:56
Speaker 1: talking about this idea that while it doesn't look like
28:59
Speaker 1: it's going to bend today, it will bend in the future.
29:02
Speaker 1: And so it's maybe it's not the first half of
29:04
Speaker 1: the year, and maybe it's Q three and Q four
29:06
Speaker 1: frankly where we start to see some relief. But as
29:09
Speaker 1: long as the economy is steaming as it is, then
29:12
Speaker 1: we can get through here again with a no landing scenario.
29:15
Speaker 1: It's a it's a new idea. So do we do
29:18
Speaker 1: the economics team at Bernstein, have they taken the recession
29:22
Speaker 1: risk kind of off the table? No? No, no, Actually
29:26
Speaker 1: they're in our base case, which is fifty percent of
29:29
Speaker 1: the outcomes that we see in our forecast, we've got
29:32
Speaker 1: a mild recession, and then our bear case, another twenty
29:37
Speaker 1: five percent likelihood is more moderate recession. So I'd actually
29:40
Speaker 1: say this is new. This is new. Our our forecast
29:43
Speaker 1: still calls base case that will be in a mild recession.
29:47
Speaker 1: But it'll be one of those recessions where you really
29:50
Speaker 1: don't know if you're in or if you're out, And
29:51
Speaker 1: then a year later they'll come back and say, oh,
29:53
Speaker 1: remember Q four twenty two and Q one twenty three. Yeah, guys,
29:57
Speaker 1: we actually were in recession. So it's it's not going
30:00
Speaker 1: to feel like a normal recession. It's gonna be one
30:03
Speaker 1: of the weirdest recessions will be in. But no, the
30:05
Speaker 1: base case is still a mild recession. Alex got a
30:07
Speaker 1: question from a listener writing in, and I hope you're
30:11
Speaker 1: not friends with anybody on the f OMC because that
30:14
Speaker 1: could taint your answer. So do you feel like the
30:18
Speaker 1: FED has the guts to surprise the market with an
30:21
Speaker 1: intermeding hike or MBS sales or will the market front
30:25
Speaker 1: run the FED in perpetuity? Wow, I think all of
30:31
Speaker 1: us have learned a lesson around FED guessing we're all
30:35
Speaker 1: hoping that cherre Powell doesn't have the will to crush
30:40
Speaker 1: the US economy and that they do break early. But
30:44
Speaker 1: but the MBS side is interesting. But we've had the
30:47
Speaker 1: reduction and balance sheet going on in the background. Two
30:50
Speaker 1: years ago, that was a huge deal. Everyone was saying,
30:52
Speaker 1: when is it going to happen, How is it going
30:53
Speaker 1: to happen? And quietly it has been happening, and that's
30:57
Speaker 1: something that's been lost. But if I were to answer
31:00
Speaker 1: the question directly, because that's what we try to do
31:02
Speaker 1: answer questions, I would say, I think the FED is
31:06
Speaker 1: We think the FED is likely to pause before inflation
31:11
Speaker 1: certainly gets to that two percent long run number. Alex,
31:13
Speaker 1: you mentioned you're in Los Angeles. There weather issues aside,
31:16
Speaker 1: and I did see some video of some snow by
31:18
Speaker 1: the Hollywood sign, which I've never seen before. What's the
31:21
Speaker 1: feeling in the LA market are in terms of the economy,
31:24
Speaker 1: in terms of the outlook that that type of thing.
31:28
Speaker 1: It is much like the rest of the country. It's
31:32
Speaker 1: it's the economy is working. The parking garage and the
31:36
Speaker 1: office buildings are full. People are coming back to the office.
31:40
Speaker 1: There are not as many cranes as there are in Miami,
31:43
Speaker 1: but there's a lot of construction activity. New home sales
31:46
Speaker 1: continue to be tight. There's not a lot of inventory.
31:49
Speaker 1: Some of it's related to California in the PROP thirteen.
31:52
Speaker 1: But frankly, you know, there's so much home equity today
31:57
Speaker 1: that didn't exist in prior periods pre recession in the past,
32:02
Speaker 1: that the housing market is quite strong again on that
32:04
Speaker 1: lack of inventory. So, you know, California, there's been lots
32:09
Speaker 1: and lots of calls for it to be over, the
32:11
Speaker 1: story to be over, the people leaving because of taxes,
32:15
Speaker 1: you know, again back to restaurant reservations. I wish people
32:17
Speaker 1: would leave. It's moving, all right. Alex kuran On, get
32:22
Speaker 1: out of here, Get out of Austin, Texas. Alex Chalaf, Co,
32:26
Speaker 1: head of Investment Strategies at Bernstein Private Wealth Management. We
32:33
Speaker 1: have a killer panel in here in the Bloomberg Interactive
32:38
Speaker 1: Broker studio. Listeners may know that I have with Katie
32:43
Speaker 1: Greifeld and Eric Palcunas an ETF program. Wait, what day
32:47
Speaker 1: do we do that? We do that on Mondays, sometimes
32:49
Speaker 1: on Wednesdays. That's right, Mondays and Wednesdays, sometimes even Thursdays.
32:53
Speaker 1: I think it's happened in the past. But anyway, one
32:55
Speaker 1: PM in the afternoon and one of my favorite guests
32:58
Speaker 1: just joined me and Katie in the studio, Joanna Glegis
33:01
Speaker 1: joins Us. She's a co founder of bond Blocks, one
33:03
Speaker 1: of I think the really innovative ETF providers that I
33:09
Speaker 1: guess appeared out of the blue last year. Not out
33:12
Speaker 1: of the blue, right, Joanna, because you've had experienced a
33:15
Speaker 1: couple of the biggest ECF firms in the world. But
33:18
Speaker 1: all right, so let's talk first of all about what
33:20
Speaker 1: you're seeing in the flows and you focus your products.
33:24
Speaker 1: You have nineteen ETFs focused really on the fixed income
33:27
Speaker 1: world and nobody else does that, and then you cut
33:30
Speaker 1: them into different slices so you can see what's happening
33:32
Speaker 1: in high yield, what's happening and ig What are you
33:35
Speaker 1: seeing right now? Yeah, so I think, as you would imagine,
33:38
Speaker 1: we're seeing a lot of flow and interest on the
33:41
Speaker 1: shorter end of the curve, especially in treasuries, so that
33:45
Speaker 1: and also in short credit funds are taking on flow
33:50
Speaker 1: just in the last few weeks. But it's kind of
33:52
Speaker 1: depends on what week you're talking about, because in the
33:54
Speaker 1: beginning of the year, maybe if you looked back ninety days,
33:58
Speaker 1: you saw a big risk SCNE trade in high yield,
34:02
Speaker 1: and so some of that we saw some coming off
34:04
Speaker 1: last week. I think the markets are just trying to
34:06
Speaker 1: absorb and ETFs are always are great poor to call
34:08
Speaker 1: to see where people are moving around in their risk.
34:10
Speaker 1: But we see, you know, mostly you're seeing things coming
34:12
Speaker 1: in on the shorter end and on the you know,
34:15
Speaker 1: less risky side. What's going to happen next week? Do
34:18
Speaker 1: you think if it is a week by week. I mean,
34:20
Speaker 1: it feels like just in the last few hours we
34:22
Speaker 1: had so many hawkish data points, hawkish noises coming from
34:26
Speaker 1: FED members, etc. Yeah, I mean, I will pull out
34:29
Speaker 1: my crystal ball and tell you right now exactly what's
34:31
Speaker 1: going to happen next week. But we tend to focus
34:34
Speaker 1: on structurally what's going on in fixed income. And that's
34:37
Speaker 1: why bomb Blocks was launched, is because we felt like
34:40
Speaker 1: these markets, these modern markets are going to be so
34:43
Speaker 1: different from the last ten years, in the last couple
34:45
Speaker 1: decades and going forward. When we think about next week,
34:49
Speaker 1: this week, the beginning of January, we're just thinking about
34:52
Speaker 1: exposures for clients, and so it's it's not something we
34:55
Speaker 1: try to make a call on. We try to give people,
34:57
Speaker 1: you know, exposures into credit and exposures onto onto treasuries
35:02
Speaker 1: for them to play duration credit risk. And I don't
35:06
Speaker 1: think that. In talking to clients, you know, everybody's looking
35:10
Speaker 1: to make a call for the bottom or a call
35:11
Speaker 1: for this week or next week. It's just been too
35:13
Speaker 1: hard to predictives and too volatile for people to It
35:16
Speaker 1: really has been at the short end. I look at
35:18
Speaker 1: X one has the X one and x HL I
35:20
Speaker 1: have the biggest flows right, which is YEP year to date,
35:25
Speaker 1: which is what one year duration is six month duration YEP,
35:28
Speaker 1: so one year duration and six months duration. They're precise
35:31
Speaker 1: duration tools, and I think that that's been really resonating
35:34
Speaker 1: with clients in this market. And since it looks like
35:37
Speaker 1: the FED and we just were looking at some data
35:40
Speaker 1: that like the market is now pricing in more rate
35:42
Speaker 1: hikes than the FED is until we hear more from them.
35:45
Speaker 1: But like going forward, clients have looked at the shorter
35:49
Speaker 1: end but also wanting to manage and control their duration
35:51
Speaker 1: exposures very precisely. Duration has been your highest inflow products really,
35:55
Speaker 1: I mean it's way above and beyond triple C or
36:00
Speaker 1: high yield. If I look at the top five in
36:03
Speaker 1: terms of your to date flows, it's one, six months,
36:06
Speaker 1: two years, five years, seven years. So investors are really
36:10
Speaker 1: using the duration products are really using in duration products,
36:12
Speaker 1: and they're going on different points of the curve, which
36:14
Speaker 1: we find really interesting, and they're able to reflect their
36:16
Speaker 1: views across the products set. But you know, it's just
36:19
Speaker 1: this simple notion that, like it is not twenty twenty
36:22
Speaker 1: two interest rates moved four hundred and twenty five basis
36:24
Speaker 1: points last year. The curve has moved. There's so much
36:27
Speaker 1: you can do, at least in the treasury market right now,
36:30
Speaker 1: and people are taking advantage of it. We launched these
36:32
Speaker 1: in September and they immediately start to resonate with clients.
36:36
Speaker 1: So obviously the duration products really a hit. You have
36:40
Speaker 1: nineteen funds and it's really interesting. It covers a broad
36:43
Speaker 1: swath of fixed income markets. It's not just treasuries. You
36:46
Speaker 1: have an emerging markets fund which has done really well.
36:48
Speaker 1: Then you have the rating specific and the sector specific
36:51
Speaker 1: funds over the past year. Because you've been in business
36:54
Speaker 1: for about a year now, are there any funds any
36:56
Speaker 1: areas that have struggled in ways you didn't expect why?
37:00
Speaker 1: I think all the volatilility last year and the correlation
37:02
Speaker 1: between equities and fixed income was just really hard for
37:05
Speaker 1: everyone to absorb the first half of the year, you know,
37:08
Speaker 1: we saw a lot of de risking, and then towards
37:10
Speaker 1: the fourth quarter, we saw people and our clients talking
37:12
Speaker 1: about getting back into credit, and so, you know, everywhere
37:16
Speaker 1: was hard last year. What's so interesting this year is
37:20
Speaker 1: that one thing we heard consistently last year is I'm
37:23
Speaker 1: waiting for a certain spread in credit to happen before
37:26
Speaker 1: I come back in and it didn't materialize at you know,
37:30
Speaker 1: levels of distress that people were expecting. So you know,
37:33
Speaker 1: think about like GFC and other times in the pandemic.
37:37
Speaker 1: You know, you're you're going to upwards of a thousand
37:39
Speaker 1: basis points if spread in high yield or other areas
37:43
Speaker 1: in credit, and that didn't materialize. We're still like hovering
37:45
Speaker 1: around five five hundred basis points. And so we found
37:49
Speaker 1: it's interesting that clients have sort of had to realize
37:51
Speaker 1: that calling the bottom here or waiting for that distress,
37:54
Speaker 1: that that's starting to lessen and alleviate in their in
37:56
Speaker 1: their opinion. So for twenty twenty three, I mean, granted
37:59
Speaker 1: the last few weeks had sort of extended the concern,
38:02
Speaker 1: we're sort of we have more information that maybe the
38:05
Speaker 1: deeper session and the fundamentals of companies are stronger than
38:08
Speaker 1: we think and there's a lot of resilience. So that's
38:10
Speaker 1: one thing we think didn't go the way we thought
38:12
Speaker 1: it would last year, where clients were looking for a
38:14
Speaker 1: much deeper distress levels than appeared. Paul, she has a
38:18
Speaker 1: crystal ball out. You can ask her anything you want.
38:21
Speaker 1: I want to ask her, is are you seeing flows
38:24
Speaker 1: into high yield? Because the reason I ask is, you
38:27
Speaker 1: know the recession call. It seems to be still out there,
38:30
Speaker 1: but maybe not as strong as it was a few
38:32
Speaker 1: months ago. Maybe it all depends on what the Fed does, right,
38:36
Speaker 1: because even if we like we just talked to Alex
38:38
Speaker 1: shall Off and he says, you know what, you can't
38:40
Speaker 1: get a dinner reservation until seven weeks out, nine thirty
38:43
Speaker 1: on a Monday. There's no way you're getting an EV
38:46
Speaker 1: without paying a premium. And I can't even get my
38:48
Speaker 1: Dodge Challenger. So this economy is hot, but that just
38:53
Speaker 1: means the Fed has to keep raising rates and hold
38:57
Speaker 1: higher for longer. So would you be calling for the
38:59
Speaker 1: eventual recession. I've just been listening to it for the
39:02
Speaker 1: most part, Pala says. But the eventual recession could hit harder,
39:05
Speaker 1: could hit harder. So I mean, does that mean you're
39:07
Speaker 1: not seeing people wanting to get into these high yield
39:09
Speaker 1: funds that you have. Yeah, so I think that there's
39:12
Speaker 1: there are certain trades where we're seeing risks come back
39:14
Speaker 1: into portfolios. I think what we will see is that
39:17
Speaker 1: people will build their high yield portfolios and their cutit
39:19
Speaker 1: portfolios differently than they have in the past. Maybe they
39:22
Speaker 1: don't go as broad they general high yeld index or
39:26
Speaker 1: a high old ETF has ten eleven percent of triple
39:29
Speaker 1: C maybe you want to be more precise there. But
39:31
Speaker 1: we like to also focus on the industry sectors in
39:34
Speaker 1: high old because they're very different. There's a thousand basis
39:36
Speaker 1: points of difference in the highest performance sector last year
39:40
Speaker 1: and the worst performance sector last year. That was energy
39:42
Speaker 1: and healthcare. And today, you know, we think when we
39:46
Speaker 1: can be really positive construction constructive on industries that have
39:50
Speaker 1: cash flow now and are less focused on growth than
39:54
Speaker 1: having cash flow now. So that's energy, industrials, financials, and
39:58
Speaker 1: so we just you shouldn't look fixed income as a
40:01
Speaker 1: big swath. You should be looking for opportunities introsectors of
40:06
Speaker 1: fixed income, and then obviously in credit look into industry
40:08
Speaker 1: sectors ratings. There's lots of opportunity and differentiation, good stuff.
40:13
Speaker 1: We could talk ETFs. That's why you guys have a
40:14
Speaker 1: show about etips because you could just go into this topic.
40:19
Speaker 1: Well currently thirty minutes currently TVD. I'm looking at a
40:23
Speaker 1: little bit of expansion. Are you looking at an expansion?
40:25
Speaker 1: All right? Well, if you're looking for it, Johanna Gaylagos, Uh, Diegos,
40:28
Speaker 1: I'm sorry, co founder Joins is it? How do your
40:31
Speaker 1: parents say it? Diegos? Yeah, I'm going, oh, okay, that's good.
40:36
Speaker 1: I like that Spanish. Yeah. Katie Greifeld, that's easy. I've
40:39
Speaker 1: been down with that for a long time. No problems there,
40:41
Speaker 1: joining us talking about ETF's great stuff. Bond blocks is
40:44
Speaker 1: the company, join us a co founder there, we'll talk
40:51
Speaker 1: tech talk, MNA have the regulators. They're coming down on
40:57
Speaker 1: some of these big deals. It's tough to get some
40:59
Speaker 1: of these deals done. So we want to bring in
41:00
Speaker 1: gen Rye. She covers all anti trust stuff for Bloomberg Intelligence.
41:05
Speaker 1: Is the expert here, and I want to talk about
41:07
Speaker 1: some of these bigger deals. Adobe Figma that's a twenty
41:10
Speaker 1: billion dollar deal. We've got Microsoft and Activision. So Jen
41:14
Speaker 1: talk to us about how the regulators, the DJ the
41:17
Speaker 1: Federal Trade Commission, how are they looking at big tech deals?
41:20
Speaker 1: Can you get a deal done today? You know it's
41:22
Speaker 1: going to be a really rough year, I think for
41:24
Speaker 1: tech and other industries too, but right the focus is tech.
41:27
Speaker 1: I think the regulators today are trying to make up
41:30
Speaker 1: for lost time. I think they believe they allowed far
41:32
Speaker 1: too many transactions in the last ten years or so
41:35
Speaker 1: to clear through, either all the way through or with
41:37
Speaker 1: some sort of a divestment to settle the case, and
41:40
Speaker 1: that what's happened is we've created these giant companies with
41:43
Speaker 1: just too much power and too much dominance today. So
41:46
Speaker 1: you know, they're trying to make up for lost time.
41:48
Speaker 1: They're looking at these deals really carefully. They're going to
41:51
Speaker 1: be more interventionist, they're less likely to settle, and they're
41:54
Speaker 1: a lot more likely to challenge deals even if they
41:57
Speaker 1: have a hard roading chord. I mean, it seems like
42:01
Speaker 1: they can regulators can stop deals, but I wonder if
42:04
Speaker 1: they had the power that they once did. If I'm correct,
42:09
Speaker 1: the last big breakup we saw was mob Bell and
42:12
Speaker 1: I mean we were kids then, right, So eighty four
42:15
Speaker 1: have they done anything like that since because they seem
42:20
Speaker 1: to have designs on Google in that right, in that
42:22
Speaker 1: sense absolutely so they almost did with Microsoft, that would
42:26
Speaker 1: have been them next occasion, right, that was in the
42:28
Speaker 1: nineteen nineties early two thousand. They actually did get a
42:31
Speaker 1: lower court order for Microsoft to break itself apart, but
42:35
Speaker 1: then the appellate court reversed some things, put question on
42:38
Speaker 1: that remedy and it settled, ultimately settled, and that didn't happen.
42:42
Speaker 1: So that was the last time they came close. I
42:44
Speaker 1: think the DOJ right now is really gunning for Google.
42:47
Speaker 1: You know, they have two lawsuits there maybe another there
42:50
Speaker 1: actually could be two others that come from the DOJ,
42:53
Speaker 1: and I think they're really gunning for some sort of
42:55
Speaker 1: an order that businesses are broken off. It doesn't mean
42:58
Speaker 1: they're going to win that, You're right, It's really hard
43:00
Speaker 1: to win something like that in court. It's a drastic remedy,
43:03
Speaker 1: and sometimes there are less drastic remedies that can fix
43:06
Speaker 1: the problem. Was it very different back then? You I
43:09
Speaker 1: mean knowing that we were, you know, all playing you know,
43:13
Speaker 1: four square kickball time. Was it a different environment where
43:18
Speaker 1: government had more power than giant corporations because it seems
43:22
Speaker 1: like now the opposite is true. I think the treatment
43:24
Speaker 1: of antitrust laws changed over the years. Right. Earlier in time,
43:29
Speaker 1: antitrust was more interventionist. The way the judges would interpret
43:33
Speaker 1: the law when cases were brought by private parties or
43:36
Speaker 1: by the government was less business friendly. But then doctrine
43:39
Speaker 1: developed over time by economists. It's sort of called the
43:42
Speaker 1: Chicago school because a lot of the thought came from
43:44
Speaker 1: the University of Chicago that we needed to look at
43:49
Speaker 1: efficiencies a little bit differently, and that sometimes deals can
43:52
Speaker 1: be pro competitive and efficient because of what they do
43:56
Speaker 1: for those companies and products that could be brought to market,
43:59
Speaker 1: more innovation, things like that, And judges started to adopt
44:02
Speaker 1: that kind of philosophy and became much more business friendly.
44:05
Speaker 1: So over time it became harder in court to try
44:08
Speaker 1: to prove that there's actually anti competitive harm being caused
44:11
Speaker 1: either by a company acting on its own or by
44:14
Speaker 1: a merger. All right, So to excid that we have
44:16
Speaker 1: a higher degree of antitrust scrutiny here is that a
44:19
Speaker 1: function of the administration in the White House such that
44:22
Speaker 1: in two years time, if we get a Republican administration,
44:25
Speaker 1: it'll just go the other way again, absolutely, and we
44:28
Speaker 1: absolutely have a push by this administration to do something
44:31
Speaker 1: about the economy, and part of that something is to
44:34
Speaker 1: bolster antitrust enforcement. It could change, absolutely, but I will
44:39
Speaker 1: say this that there is a lot of bipartisan interest
44:41
Speaker 1: in sort of curbing the power of some of the
44:43
Speaker 1: dominant big tech platforms. So it's not necessarily a given
44:46
Speaker 1: that if with the next administration as a Republican one
44:49
Speaker 1: in the anti trust leadership flips to Republicans, that this
44:52
Speaker 1: push won't continue, at least to some extent. How much
44:55
Speaker 1: does I mean, I'm a cynic when it comes to
44:58
Speaker 1: so I sort of have the view that these companies
45:01
Speaker 1: fund all of the congressmen and senators campaigns, and as
45:06
Speaker 1: a result, they have these politicians in their pockets. You know,
45:10
Speaker 1: I think that there's quite a bit of truth to
45:12
Speaker 1: that statement. I happen to be a cynic also, But
45:15
Speaker 1: you know, there was a lot of momentum for some
45:16
Speaker 1: new laws, antitrust laws that would have targeted and regulated
45:20
Speaker 1: big tech platforms, and there was a lot of lobbying
45:22
Speaker 1: money put in by some big companies against that, and
45:25
Speaker 1: nothing happened. When a lot of people thought something would
45:28
Speaker 1: happen last year. It's interesting that they're so. You know,
45:32
Speaker 1: lately there's been a lot of talk about what are
45:34
Speaker 1: these old Supreme Court justices know about tech? And I
45:37
Speaker 1: think that's pretty fascinating. But it's interesting that they would
45:41
Speaker 1: go after Microsoft for activision, Like, what are these old
45:46
Speaker 1: judges or old regulators know about video games? Why do
45:49
Speaker 1: they care about Call of Duty? I know it's a
45:52
Speaker 1: big number, right, but who cares if somebody has all
45:55
Speaker 1: the video games? It's funny you should say that. I
45:57
Speaker 1: spoke on a panel about this, and none of the
45:59
Speaker 1: panelists had ever played Call of Duty, so we thought,
46:03
Speaker 1: maybe we're not the best. You know, isn't there a
46:05
Speaker 1: great story by the way of a couple of justices
46:08
Speaker 1: I think Briar was one and Elena Kayden playing Call
46:14
Speaker 1: of Duty. They had someone set up the video game
46:17
Speaker 1: and bring it down to their quarters. I think Briar
46:21
Speaker 1: said it was disgusting and he couldn't believe anybody liked it,
46:24
Speaker 1: and Kayden was like, I want to play more. Right. Well,
46:29
Speaker 1: you know, the thing is that the agencies are really
46:31
Speaker 1: focused on certain kinds of mergers right now, and one
46:33
Speaker 1: of them is called vertical right, and Microsoft represents that
46:36
Speaker 1: it's where the two companies don't necessarily compete, but they
46:39
Speaker 1: have a relationship in this supply chain. Right, So Microsoft
46:42
Speaker 1: has consoles, they're sort of a distributor, so to speak,
46:45
Speaker 1: of these video games, and Activision makes the games, and
46:48
Speaker 1: that is a vertical deal. So it's one of the
46:50
Speaker 1: focuses of the agencies right now. And I think this
46:53
Speaker 1: was a case where they thought this is a good
46:55
Speaker 1: one for us to sort of exercise that kind of
46:57
Speaker 1: theory of harm. Well, you know, one of the ones
46:59
Speaker 1: that's you're dear to my heart that I couldn't believe
47:02
Speaker 1: got approved is Live Nation and Ticketmaster. I mean, you
47:06
Speaker 1: take the biggest concert promoter in the world, right and
47:09
Speaker 1: you put it together the largest ticketing organization in the world.
47:13
Speaker 1: And now, you know, people were saying, I even heard
47:15
Speaker 1: President Biden talking about it. You know, I'm going to
47:18
Speaker 1: do something to take care of those fees. Somebody has
47:20
Speaker 1: to do something. Somebody. Let me tell you something a
47:23
Speaker 1: little inside baseball, right Paul worked on that deal, and
47:26
Speaker 1: he and the bankers that were on it said, just
47:29
Speaker 1: you know, we were surprised that it got We were
47:31
Speaker 1: surprised that it got approved. So well, you know, as
47:34
Speaker 1: an X former anti trust lawyer, when we saw the
47:36
Speaker 1: banker's documents sometimes it really caused us to shake our
47:39
Speaker 1: head because the banker documents can cause a lot of trouble, yeah,
47:42
Speaker 1: when you're trying to defend a deal. But that kind
47:44
Speaker 1: of those are the issue. I mean, if you could
47:46
Speaker 1: argue they should be broken up, right, but there's nobody
47:50
Speaker 1: really thinks they're going to be broken up because again,
47:52
Speaker 1: it's so hard. Now, this is a perfect example of
47:55
Speaker 1: what I was talking about at the beginning of this segment.
47:57
Speaker 1: This is part of the regret. You know, that is
47:59
Speaker 1: one of the deals that likely the DJ today regrets
48:02
Speaker 1: that it allowed to go through even with the consent agreement.
48:05
Speaker 1: And I believe they're still investigating today and they very
48:07
Speaker 1: well could bring a lawsuit to try to break it up.
48:09
Speaker 1: But you know, they're facing a judge who knows what
48:12
Speaker 1: judge that they're going to go in front. And it
48:13
Speaker 1: is a difficult path to do something like that. It's
48:15
Speaker 1: the DJ or the FTC the harder one to deal with. Interesting,
48:20
Speaker 1: right now, I think they're really aligned. Okay, at one
48:22
Speaker 1: point I would have said FTC, but I think now
48:24
Speaker 1: they're really aligned. They're doing things the same way. They're
48:27
Speaker 1: equally as aggressive. Right now, Okay, great stuff. Here's Matt.
48:31
Speaker 1: Here's another great thing about Bloomberg Intelligence. We have world
48:35
Speaker 1: class analys to cover litigation. And so when you got
48:39
Speaker 1: a big deal and you're worried and you're you're invested
48:42
Speaker 1: in Microsoft and you really want to know this deal
48:44
Speaker 1: is going to go through, don't talk about financial analysts
48:46
Speaker 1: like me want I know, you go to Jen Rie
48:48
Speaker 1: and she's the expert. And Bloomberg Intelligence had the foresight
48:53
Speaker 1: to make sure that we had these kinds of experts
48:55
Speaker 1: available for our clients. Thanks for listening to the Bloomberg
48:59
Speaker 1: Markets podcast. You can subscribe and listen to interviews of
49:03
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.
49:08
Speaker 1: I'm on Twitter at Matt Miller nineteen seventy three. And
49:11
Speaker 1: I'm Fall Sweeney. I'm on Twitter at pt Sweeney. Before
49:14
Speaker 1: the podcast, you can always catch us worldwide at Bloomberg
49:17
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