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The Fed, Airlines, War, And Return-To-Work · Bloomberg Intelligence

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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 crows, 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
0:18
Speaker 1: at Bloomberg dot com slash podcast The Fed. We've got
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Speaker 1: minutes coming out today, Matt, two pm. Wall Street time
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Speaker 1: rates are going up. Balance Sheet's gonna be watched. Just
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Speaker 1: any minutes though, Okay, minutes that Jerome Powell said we're
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Speaker 1: going to be important. You know, he recommended that we
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Speaker 1: read these minutes. Really. Yeah, well, you don't have to
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Speaker 1: do that for me, all right. That's get a little
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Speaker 1: bit of a roundtable going here, Matt, because there's a
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Speaker 1: lot to break down and when we think about this
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Speaker 1: FEDER Reserve and what they're going to be doing for
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Speaker 1: the remainder this year into next. Former New York Fed
0:51
Speaker 1: President Bill Dudley joins us, as well as Blomberg Blues
0:54
Speaker 1: Editor in chief Matt Winkler joining us here in our
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Speaker 1: Bloomberg and actor studio emeritus absolutely founder of a bloom
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Speaker 1: creator exactly, Um, Bill, thanks so much for joining us
1:05
Speaker 1: via zoom here. You know, a lot of investors are saying,
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Speaker 1: you know, I think the Fed is still behind the
1:11
Speaker 1: curve here, even if we're talking multiple rate hikes fifty
1:14
Speaker 1: basis points here, fifty basis points there. What's your view?
1:19
Speaker 1: Of course, they're far far behind the Yelk curve, for
1:22
Speaker 1: far behind the curve in terms of tightening montary policy.
1:24
Speaker 1: Look at where short term indistrates are relative to inflation.
1:28
Speaker 1: Look at where short term ingistrates are relative to how
1:31
Speaker 1: tight the labor market is. The Fed basically says we
1:34
Speaker 1: want to be a neutral uh, and they're not even
1:37
Speaker 1: close to that. So they're going going to go very
1:39
Speaker 1: fast this year towards neutral over the next you know,
1:42
Speaker 1: nine months. What is neutral, Bill, Well, neutral obviously does
1:46
Speaker 1: depend a bit on where inflation settles out. If the
1:50
Speaker 1: Fed was at their two percent inflation objective, then neutral
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Speaker 1: be a brown two and a half percent in terms
1:55
Speaker 1: of not all short term interest rates. But if inflation
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Speaker 1: is higher, neutral fire as well. So it's also going
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Speaker 1: to be important where we see inflation settle out. Matt,
2:03
Speaker 1: what do you think about? Um? It does seem that
2:06
Speaker 1: everyone's turned very hawkish and inflation, sorry, employment UM went
2:12
Speaker 1: from being questionable as to whether it's full now UM
2:16
Speaker 1: daily yesterday said it's tight, a very tight labor market.
2:21
Speaker 1: So I think the best way to look at this
2:24
Speaker 1: from the Fed's perspective is if you take a look
2:28
Speaker 1: at their preferred monthly measure of inflation, which is the
2:31
Speaker 1: US Personal consumption expenditure core Price Index, which if you
2:35
Speaker 1: juxtaposed it with a thirty trillion dollar bond markets expectation
2:39
Speaker 1: of inflation, and uh, what that shows is tenure break
2:43
Speaker 1: even rate or yield gap between the benchmark treasury and
2:48
Speaker 1: what we call treasury inflation protection securities are tips. The
2:52
Speaker 1: FED inflation measure shows us every day through yesterday, while
2:56
Speaker 1: the bond market anticipates all the days to come. And
2:58
Speaker 1: what we see is that between the second half of
3:01
Speaker 1: last year and today is an increase in inflation to
3:04
Speaker 1: five point four percent, the highest since bond investors, on
3:09
Speaker 1: the other hand, see inflation at about three percent. So
3:12
Speaker 1: this is a record divergence. And I think you know,
3:16
Speaker 1: since Bill and I started talking about such things more
3:19
Speaker 1: than three decades ago, um, you look at something else
3:24
Speaker 1: that's relevant, which is the FED Zones Survey the February
3:28
Speaker 1: survey of consumer expectations, and it shows consumers anticipate inflation
3:34
Speaker 1: subsiding to three point eight percent in three years. Um.
3:39
Speaker 1: So you know, before you go any further, I would
3:42
Speaker 1: ask Bill he has said. You have said, Bill consistently
3:46
Speaker 1: that the FED is behind the curve. So what's wrong
3:48
Speaker 1: with these pictures? The market is basically assuming that the
3:52
Speaker 1: FED is ultimately going to do their job. They may
3:55
Speaker 1: have gotten a late start, but they now are moving
3:57
Speaker 1: pretty rapidly in attaining direction of the market's view I
4:01
Speaker 1: think is that the federalis are will in fact get
4:03
Speaker 1: this done. Um. I think that's probably right. I think
4:06
Speaker 1: the big risk though, to the downside, is that whenever
4:09
Speaker 1: the FED has had to tighten sufficiently to push the
4:11
Speaker 1: unemployer rate up, the US economy has always fallen into recession.
4:15
Speaker 1: I'm not looking for a recession anytime soon, because montre
4:19
Speaker 1: policy first has to get to be tight. But I
4:21
Speaker 1: do think that the chances of the FED pulling off
4:23
Speaker 1: the soft laying this time are very very low at
4:26
Speaker 1: this point. Wait, so you don't see a recession in
4:28
Speaker 1: the next, say, twelve to eighteen months. It's retainly not
4:32
Speaker 1: in the next twelve months. The US economy has a
4:34
Speaker 1: lot of momentum behind it as we're as we're going
4:36
Speaker 1: into the opening up stage. So you've seen seeing the
4:39
Speaker 1: strength and payil employment over the last few months. We
4:42
Speaker 1: also have an imbalanced in a lot of areas between
4:44
Speaker 1: demand and supply where demand ex seeds supply. So even
4:48
Speaker 1: if the FED knocks back demand a little bit, supply
4:51
Speaker 1: is going to continue to recover as supply chains are normalized.
4:56
Speaker 1: And so I think it's quite a bit of momentum
4:58
Speaker 1: over the next twelve months or so. It's I think
5:00
Speaker 1: there's a recession coming. I don't think it's in the
5:02
Speaker 1: near room. And that's, by the way, consistent. You know,
5:04
Speaker 1: if you look at the Bloomberg's own survey of fifty
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Speaker 1: seven economists, and it shows no consensus for that outcome
5:10
Speaker 1: a recession at least before the fourth quarter of And
5:14
Speaker 1: you can see that. We have a table that shows
5:17
Speaker 1: the average GDP forecast for each quarter in the next
5:20
Speaker 1: eight quarters ranges from two point three percent to four
5:23
Speaker 1: and a half percent, and even the lowest forecast and
5:25
Speaker 1: the eight quarters that we're talking about ranges from half
5:29
Speaker 1: a percent to three point two percent. So in other words,
5:32
Speaker 1: the worst of these scenarios, which we've compiled, doesn't anticipate
5:37
Speaker 1: a recession. And you've written about the strength of corporate
5:40
Speaker 1: America as well. I think a couple of columns ago
5:42
Speaker 1: you had had been quoting the Business round Table, UM
5:48
Speaker 1: and also the most recent earnings releases saying that you know,
5:51
Speaker 1: companies are looking to hire more than they ever have before.
5:54
Speaker 1: That's absolutely right. Um. You know, if you went to
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Speaker 1: the Business round Table, which is the two if you like,
6:00
Speaker 1: most prominent companies c e O s, and they said
6:03
Speaker 1: they anticipated this year hiring more people than they have
6:08
Speaker 1: in the past two decades, which is saying a lot.
6:12
Speaker 1: And then if you look at something like debt ratios
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Speaker 1: of American companies, even with all the record corporate borrowing
6:18
Speaker 1: that we've seen because interest rates have been so low,
6:21
Speaker 1: the debt ratios show that companies are actually very healthy.
6:26
Speaker 1: So it's not like we're coming out of, if you will,
6:29
Speaker 1: the financial crisis, which Bill is all too familiar with,
6:32
Speaker 1: because and consumers back and consumer balance sheets are healthy
6:37
Speaker 1: as well. So I mean, Bill, it's safe to say
6:39
Speaker 1: there will be a recession someday. But what pushes us
6:43
Speaker 1: in to a recession. Um. You know, even if the
6:46
Speaker 1: FED raises aggressively, we're going from uh um as close
6:52
Speaker 1: to zero as as damn it. I think the English
6:54
Speaker 1: would say um and uh. You know if the neutral
6:59
Speaker 1: rate is where where? Where you think when you think
7:02
Speaker 1: the neutral rate is um right now? Well, again it
7:06
Speaker 1: depends on where you think recession is. But would you
7:08
Speaker 1: hazard a guess? And you know, I think I think
7:12
Speaker 1: neutral today is probably you know, three and a half
7:14
Speaker 1: ish because inflation is above the fence two objective. I
7:19
Speaker 1: think the problem for the FET is this, whenever the ft,
7:21
Speaker 1: the FET needs to make the labor market looser. If
7:24
Speaker 1: it's going to actually get control of inflation, to make
7:27
Speaker 1: the labor market looser, it has to tighten sufficiently to
7:30
Speaker 1: push the unemployer rate up. Whenever the FET has pushed
7:34
Speaker 1: the unemployer rate up, it's been very difficult to control
7:37
Speaker 1: how much. Every time that has happened, the US economy
7:40
Speaker 1: has ultimately ended in recession. So don't get me wrong.
7:42
Speaker 1: The FEEN is going to try for a soft land.
7:45
Speaker 1: That's what they're going to try for, and of course
7:47
Speaker 1: they have to do that if they're going to try
7:48
Speaker 1: to control inflation. The problem is almost always, they overdo
7:52
Speaker 1: it and the commy dips into recession. So if you
7:56
Speaker 1: don't mind, Bill, let's let's go back in time. You
7:59
Speaker 1: probably we have as much experience with inflation and deflation
8:02
Speaker 1: in our time as any economists, And during your leadership
8:06
Speaker 1: at the New York Fed, you persistently defended quantitative using
8:09
Speaker 1: when so many critics derided KEWI as irresponsibly inflationary and
8:13
Speaker 1: a debasement of the dollar. The critics were wrong. When
8:17
Speaker 1: Janet Yellen became FED chair in two thousand fourteen, unemployment
8:20
Speaker 1: and the labor participation rate we're still in emic, she said,
8:23
Speaker 1: and you agreed with her at that time that the
8:26
Speaker 1: economy needed to run a little hot to get to
8:28
Speaker 1: an optimal job market. So just last Friday, we learned
8:33
Speaker 1: US gained four hundred and thirty one thousand jobs. In March,
8:37
Speaker 1: unemployment felt at three point six percent average big as
8:41
Speaker 1: we average hour le earnings registered to five point six
8:44
Speaker 1: percent increase from the same period last year, and the
8:47
Speaker 1: labor participation rate rose significantly. So I guess, Bill, why
8:52
Speaker 1: is Brad DeLong wrong when he said recently it's time
8:56
Speaker 1: for another victory lap led by the Fed. Well, they
9:01
Speaker 1: deserve a victory lap in terms of getting generating as
9:04
Speaker 1: strong I cannot recovery and getting us back to full
9:07
Speaker 1: employment quickly. The problem now, though, is that they're behind
9:10
Speaker 1: in terms of where they need to be related to
9:13
Speaker 1: what the labor market is. If the FIG wants to
9:15
Speaker 1: sustain the economic expansion, it's gonna keep inflation under control.
9:19
Speaker 1: And to keep inflation under control, they have to tighten
9:22
Speaker 1: Monterrey policy. So I think the problem for the FED
9:25
Speaker 1: here was that they adopted a monterrey policy framework that
9:29
Speaker 1: the operationalized by saying we're not gonna even begin to
9:32
Speaker 1: lift off until we've actually reached to percent inflation, where
9:35
Speaker 1: confident inflation is gonna be both two percent in the
9:37
Speaker 1: future and we're confident that we're at full employment. So
9:40
Speaker 1: we find ourselves in this unusual circumstance at the time
9:43
Speaker 1: where Monterrey policy needs to be neutral or tight, the
9:46
Speaker 1: fit still is on a very very accommodative monetary setting.
9:49
Speaker 1: Big today between where the fit should be and where
9:52
Speaker 1: it is. How much of this match is about monetary
9:56
Speaker 1: policy because there was such a huge fiscal impetus. When
10:00
Speaker 1: Bill says the FED did a great job getting us
10:01
Speaker 1: back to full employment. It seems to me the five
10:04
Speaker 1: six trillion dollars that the US government spent was also helpful.
10:08
Speaker 1: And I noticed yesterday in the Esther George interview that
10:11
Speaker 1: Michael McKee did she said, um, you know, the fiscal
10:14
Speaker 1: impetus is gonna wane here. Well, that's definitely true. I mean,
10:18
Speaker 1: and there's been considerable discussion about to what extent did
10:22
Speaker 1: the Relief Act last year have on inflation? And there
10:26
Speaker 1: are plenty of economists who say not that much, um,
10:30
Speaker 1: And you know, Frankly uh to credit Bill, he has
10:34
Speaker 1: been very consistent, going back at least a couple of
10:36
Speaker 1: years and saying the Fed really needs to get on
10:40
Speaker 1: the escalator um, and that we are going to see
10:43
Speaker 1: you know, higher interest rates. It's just a question of when.
10:46
Speaker 1: But they have to get there. So I'm not so
10:48
Speaker 1: sure it's so much a fiscal issue here with respect
10:52
Speaker 1: to inflation. It's more the latter coming out of you know,
10:56
Speaker 1: this expansion and uh, you know, interest rates and you
11:00
Speaker 1: have to come up. So that's kind of where I
11:02
Speaker 1: wanted to go, Bill. I mean, the inflation that I experience,
11:06
Speaker 1: I'm sure many Americans experience. It's at the gas pump.
11:09
Speaker 1: It's at the supermarket, it's maybe the local deli um.
11:14
Speaker 1: But a lot of that is just supplying demand in
11:16
Speaker 1: an economy. We I've got a global reopening economy. I've
11:20
Speaker 1: got these crazy supply chain issues that are vexing all
11:23
Speaker 1: types of industries. In that scenario, what can the FED
11:26
Speaker 1: really do in terms of inflation, Well, the supply chains
11:30
Speaker 1: did that. That has to be has to be patient.
11:33
Speaker 1: But the problem we have with inflation now it's not
11:35
Speaker 1: just about supply chain disruptions, because we've seen the inflation
11:39
Speaker 1: pressure broadened out. So if you look at, for example,
11:41
Speaker 1: the Cleveland fled or the Dallas that that have measures
11:44
Speaker 1: of median CPI trim mean uh, they basically show that
11:49
Speaker 1: the pressures are now much broader than they were earlier.
11:51
Speaker 1: So it's not just the question of use car prices
11:54
Speaker 1: going up because there's chip shortages that are inhibiting new
11:58
Speaker 1: car production. Is much broader then think you know, the
12:00
Speaker 1: wage trend I think is also relevant here. You know,
12:03
Speaker 1: if you act yourself, what wage inflation rate is consistent
12:06
Speaker 1: with two percent inflation? You wouldn't pick five and a
12:09
Speaker 1: half to six percent. You pick something in the probably
12:11
Speaker 1: the three or four percent Rang, So the wage trend
12:14
Speaker 1: already is higher than what's consistent with two percent inflation.
12:20
Speaker 1: I do wish the FED could somehow get General Motors
12:22
Speaker 1: to produce more Sierra fift hundred, you know, a T
12:26
Speaker 1: four x is if the FED could just supply them
12:29
Speaker 1: with the microchips, you know, maybe the price increase has
12:32
Speaker 1: been insane. By the way, I've come back just a
12:34
Speaker 1: few months ago, I've been looking at trucks, and trucks
12:38
Speaker 1: that were fifty five thousand dollars in January became sixty
12:42
Speaker 1: dollars in February. Now there's sixty five dollars. This is
12:45
Speaker 1: new m s r P. It's unbelievable. But there's not
12:48
Speaker 1: much the FED can really do about that. Matt Well,
12:50
Speaker 1: what the Fed we'll pay attention to us they should
12:54
Speaker 1: is expectations. And the one variable here that is somewhat
13:00
Speaker 1: encouraging is that we are not seeing yet built into
13:04
Speaker 1: this market the expectation like we did in the seventies,
13:08
Speaker 1: that everything is going to go up um and our
13:11
Speaker 1: behavior is measured by that. We're not there yet. So
13:14
Speaker 1: will we get there? Do you think? Hopefully not? Billy Bill,
13:21
Speaker 1: We're gonna get to that spot I mean, I mean,
13:23
Speaker 1: I think, I think Matth exactly right. That is the
13:25
Speaker 1: positive in the in the outlook is that inflation expectations
13:28
Speaker 1: are still pretty well anchored. And you could argue that's
13:31
Speaker 1: actually a little bit of a surprise. I mean, if
13:32
Speaker 1: you sort of looked at what's actually happening to in
13:35
Speaker 1: terms of inflation and how slow the FIT has been
13:37
Speaker 1: to react, it's quite striking that market participants in households
13:40
Speaker 1: and businesses still are comfortable that the FETE is ultimately
13:43
Speaker 1: going to do their job. This is precisely what you've
13:46
Speaker 1: been writing, Matt. Well, yeah, it could be a semantic discussion,
13:50
Speaker 1: but I've been saying that it's kind of hard for
13:52
Speaker 1: me to accept the fact that when the FETE is
13:54
Speaker 1: data dependent, which means that the data changes, the FED changes,
13:58
Speaker 1: that it's behind the curve, and Bill and the majority
14:01
Speaker 1: of economists say no, no, no, no no, no, they're behind
14:04
Speaker 1: the behind the curve. All right, that's fantastic, Bill Dudley,
14:07
Speaker 1: thank you so much for joining us. Former New York
14:09
Speaker 1: Fed President Bill Dudley and Bloomberg News Editor in chief
14:12
Speaker 1: emeritus founder of Bloomberg News Matt wink with joining us
14:15
Speaker 1: here in our Bloomberg Interactive Broker Studio. Fascinating discussion on
14:19
Speaker 1: what we're gonna see from this photo reserve going forward again.
14:22
Speaker 1: Fo MC meetings Meeting minutes will be released today two
14:27
Speaker 1: pm Wall Street time. Time to get the update that
14:34
Speaker 1: I think we all need on Ukraine. It is a
14:36
Speaker 1: fluid situation, certainly in some of the images coming out
14:39
Speaker 1: of parts of Ukraine are very very disturbing. Let's bringing
14:42
Speaker 1: Amor Hordern, Washington correspondent for Bloomberg Television and Marie thanks
14:46
Speaker 1: so much for joining us here. It feels what's the
14:50
Speaker 1: I guess I'll just step back and say what's really
14:52
Speaker 1: the latest thinking from Washington, d C About how this
14:56
Speaker 1: situation in the Ukraine can go, will go, and maybe
15:00
Speaker 1: how we should be continuing to engage well. Jake Sullivan
15:04
Speaker 1: recently had a briefing, was saying that they see some
15:07
Speaker 1: practical changes and in Russia and that there's going to
15:10
Speaker 1: be a focus more on eastern and southern Ukraine specifically,
15:14
Speaker 1: especially making sure they can maintain that stronghold in Luhansk
15:18
Speaker 1: and don Yesk. But what is very clear, and you
15:22
Speaker 1: just need to turn your television or open up Twitter
15:24
Speaker 1: to see, is that the assault on the Russian cities
15:27
Speaker 1: and the attacks on civilians. It's not just Bucha, it's
15:30
Speaker 1: Mario pol It's a number of cities that continues every day,
15:36
Speaker 1: and so it continues in a nasty, nasty way. And
15:41
Speaker 1: I know the atrocities are we are alleging that Russians
15:44
Speaker 1: committed atrocities. They're saying that the photographic and video evidence
15:48
Speaker 1: has been faked somehow. Um. But our Western government's prepared
15:53
Speaker 1: to really take the final step. We can say we're
15:58
Speaker 1: not going to buy any coal from Russia anymore. That's
16:00
Speaker 1: easy because we don't want coal and we have enough
16:03
Speaker 1: coal ourselves. Um. But saying for Germany to say we
16:08
Speaker 1: refused to pay hundreds of billions for natural gas, that's
16:12
Speaker 1: that's a big step to take. It would be a
16:15
Speaker 1: big step to take. And also are they prepared to
16:17
Speaker 1: take that step in the sense that not just morally prepared,
16:21
Speaker 1: which I think they wished they were at uh or
16:24
Speaker 1: they are at excuse me, but in terms of the infrastructure,
16:27
Speaker 1: I think they wished they were there. Because Shulton said
16:30
Speaker 1: today the German Chancellor, that what is going on and
16:34
Speaker 1: the image of that a Busha, these are war crimes.
16:37
Speaker 1: So you do see Germany wanting to wratch it up
16:40
Speaker 1: that pressure and really hurt Russia. For what is going
16:44
Speaker 1: on the issue is they're just way to rely on.
16:47
Speaker 1: What we can potentially see is individual European states coming
16:52
Speaker 1: out and unilaterally going further. I know Lithuania is tiny,
16:56
Speaker 1: but they did this themselves. Potentially, maybe you'll see other
16:59
Speaker 1: Baltic trees do this themselves, because it's going to take
17:02
Speaker 1: a while to get all twenty seven European countries to
17:05
Speaker 1: agree on this, right well, and most of them are
17:07
Speaker 1: so small that it doesn't matter. Right. Germany is the
17:09
Speaker 1: biggest economy in Europe m eighty million people and they
17:14
Speaker 1: gets I think sixty of their energy needs from Russian gas.
17:18
Speaker 1: So the idea is they're willing to hurt Russia, but
17:21
Speaker 1: they're not willing to hurt themselves yet. Um. You know.
17:25
Speaker 1: The the interesting thing is the Ukrainians would ask, why
17:29
Speaker 1: you know you're watching these atrocities, why haven't you done
17:31
Speaker 1: more like at least give us a no fly zone,
17:34
Speaker 1: right And NATO's response is, well, we don't want to
17:37
Speaker 1: directly engage Russia because there goes World War three. Um,
17:41
Speaker 1: you have been really excellent in your coverage of Mikhail Kardarkowski.
17:46
Speaker 1: For those who don't know, he was once Russia's richest man.
17:49
Speaker 1: He was a billionaire who ran Yukos oil and he
17:52
Speaker 1: was politically opposed to Putin. Um that didn't go well.
17:55
Speaker 1: He was accused of tax evasion to the tune of
17:57
Speaker 1: something like billion and then spent ten years in a
18:01
Speaker 1: gulag Um. Now he's out, and he's very vocal about um.
18:05
Speaker 1: Obviously his criticism of Vladimir Putin. But he said something
18:08
Speaker 1: really interesting yesterday, which is that the West is already
18:11
Speaker 1: engaged with Russia, at least from Putin's perspective. Kodakovski says,
18:15
Speaker 1: we're already. He thinks the West is already in a
18:18
Speaker 1: war against him. Yes, Michel Kolkowski is very interesting to
18:22
Speaker 1: talk to you, because you really can understand the thinking
18:25
Speaker 1: of the Russian elite and also the thinking of President
18:28
Speaker 1: Putin the Kremlin. And he says, from Putin's eyes, the
18:32
Speaker 1: United States Western allies already at war with Russia. And
18:37
Speaker 1: he says the same mistake that the West does not
18:40
Speaker 1: realized and they do not understand that. That is Putin's perspective.
18:44
Speaker 1: And a lot of the time when you hear from
18:45
Speaker 1: Western leaders is you know, we will defend NATO every
18:49
Speaker 1: single inch. But this is almost a nuance that doesn't
18:52
Speaker 1: even filter into Putin's mind. He already thinks he's there
18:56
Speaker 1: and he's fighting a war with America. And if you
18:58
Speaker 1: look at any Russian state TV, that is also the
19:01
Speaker 1: sense that you get that this is a US backed war,
19:05
Speaker 1: Western backed war against Russia and Ukraine. So, Henry, what's
19:11
Speaker 1: the feeling in Washington these days about next steps for
19:15
Speaker 1: the US and maybe the US as it relates to NATO.
19:19
Speaker 1: Is there any consensus as to what we should do?
19:22
Speaker 1: I guess next, more, better, bigger. Well, just in the
19:26
Speaker 1: past hour we got a brief on the latest sanctions,
19:29
Speaker 1: so still more economic sanctions and those included a full
19:32
Speaker 1: blocking sanctions on Spur Bank, which is Russia's biggest bank,
19:36
Speaker 1: as well as ALFA Bank. But again they include energy
19:39
Speaker 1: carve out. So it really comes full circle to the
19:41
Speaker 1: start of this conversation with winners Germany and Europe going
19:45
Speaker 1: to get on board with or be able to block
19:47
Speaker 1: Russian oil and gas. He also we also have sanctions
19:51
Speaker 1: on Putin's two adult children, Catherina and Maria. Interesting enough,
19:55
Speaker 1: Putto has gone through great lengths his entire life to
19:59
Speaker 1: really cloud them in secrecy. Uh so, quite symbolic, but
20:03
Speaker 1: also very personal, and also a ban on investments in Russia.
20:07
Speaker 1: But just to take it back to Miyaw Karakowski, because
20:09
Speaker 1: I spent more than an hour with him yesterday and
20:11
Speaker 1: he's in Washington meeting with officials as well. He says
20:15
Speaker 1: that Putin is not afraid of sanctions. Sanctions alone cannot
20:19
Speaker 1: to ter Putin. And the idea of going after the oligarch,
20:23
Speaker 1: you know, makes sense, but the presumption that they can
20:27
Speaker 1: have a change on Putin is just not there. And
20:30
Speaker 1: maybe the West thinks that could happen, but he says
20:33
Speaker 1: that is just not how Russia works. It is a
20:35
Speaker 1: complete dictatorship. Some have said that, you know, these sanctions
20:39
Speaker 1: aren't so much to deter Putin has to make the
20:42
Speaker 1: West feel better about ourselves, right, Yeah, interesting to say.
20:45
Speaker 1: It's a very difficult situation. And Re Hordern, thank you
20:48
Speaker 1: so much for joining us. We love getting your perspective
20:51
Speaker 1: from Washington, d C. And Re Hoarder, and Washington correspondent
20:53
Speaker 1: for Bloomberg Television, has a story out on the Bloomberg
20:56
Speaker 1: terminal with her interview of that ex oligarch from Russia
21:00
Speaker 1: who Henry's set is in Washington making the rounds there.
21:04
Speaker 1: So I appreciate getting her perspective. There. There's m and
21:10
Speaker 1: A activity, there's a consalination going on in the airline
21:13
Speaker 1: business today. Got Jet Blue taking a look um at
21:16
Speaker 1: the business as well, looking to make a bid for Spirit.
21:19
Speaker 1: George Ferguson the fourth, by the way, senior Aerospace, Defense
21:22
Speaker 1: and Airlines Annos with Bloomberg Intelligence joins us. So from
21:25
Speaker 1: your military intelligence to Bloomberg Intelligence exactly. So yeah, George
21:29
Speaker 1: was in the army and military intelligence. That tells you
21:32
Speaker 1: all we need to know about our military. As I
21:34
Speaker 1: always say, George, thanks so much for joining us here.
21:37
Speaker 1: What's jet Blues? What's strategy here? Why does it want
21:40
Speaker 1: to own uh Spirit Airlines? Yes to thank for having
21:44
Speaker 1: me yet, um so I really think you know Jet
21:46
Speaker 1: Blue has spent you know a number of years, um,
21:49
Speaker 1: a lot of years from on the periphery of the business.
21:52
Speaker 1: Right there's uh, you know the main carriers you have.
21:56
Speaker 1: You know you have American, United, Delta, the big full
21:59
Speaker 1: service carriers got you got the Southwest and Jet Blue
22:02
Speaker 1: and Alaska have had this smaller role in the marketplace.
22:06
Speaker 1: I think Jet Blue is looking at Spirit and Frontier
22:09
Speaker 1: getting together, thinking about how rough that's going to be
22:12
Speaker 1: on competition, thinking about where their position in the industry is,
22:16
Speaker 1: maybe even the ability to grow, because their order book
22:19
Speaker 1: just is in as as large as Spirits and Frontiers
22:23
Speaker 1: um a couple of years into the future, and they're
22:25
Speaker 1: thinking this is their opportunity to try to get in
22:28
Speaker 1: the mix, because otherwise they're gonna be fighting against a
22:31
Speaker 1: really intense competitor of a combined Spirit and in Frontier. George,
22:36
Speaker 1: how much competition is really allowed in the US market.
22:40
Speaker 1: When I um lived here, I didn't think about it much.
22:44
Speaker 1: I moved to Germany, back to Germany in two thousand
22:47
Speaker 1: and sixteen, spent six years there, and I've just come
22:50
Speaker 1: back and I realized, Um, I thought, why did I
22:54
Speaker 1: travel so much in Europe? Every weekend? I was in Rome,
22:58
Speaker 1: I was in Paris, I was in Madrid, I was
23:00
Speaker 1: all over the place. And the reason is plane tickets
23:04
Speaker 1: who were like sometimes twenty euros, you know, but they
23:08
Speaker 1: weren't more than a hundred euros in any direction usually,
23:12
Speaker 1: And here in the US that's just not the case.
23:14
Speaker 1: Not by a long shot is that how has that
23:17
Speaker 1: competition been stifled here? Yeah, so the US has been
23:22
Speaker 1: a more consolidated market than the rest of the world,
23:25
Speaker 1: especially sort of Europe. Actouldn't say the best world then
23:28
Speaker 1: Europe um. And you know, I think you're both has
23:31
Speaker 1: a different phenomena where there's more vacation, and so if
23:36
Speaker 1: you got five or six weeks of vacation to take
23:38
Speaker 1: more trips, like Matt doesn't, you know you yeah, like
23:41
Speaker 1: Matt does. And you know, Matt, you you wanted to
23:43
Speaker 1: spend fifty euros of the flight and spend the rest
23:45
Speaker 1: of the money in Barcelona rather than spending on the
23:48
Speaker 1: flight where Americans kind of get two to three weeks,
23:51
Speaker 1: they might do one flight a year, um, you know,
23:55
Speaker 1: And and they're kind of, I think, willing to pay
23:57
Speaker 1: a little more. Although Spirit in Frontier are the ones
24:00
Speaker 1: testing that model right there, testing the idea that Americans
24:04
Speaker 1: might people might desire to pay a lot less and
24:07
Speaker 1: get less in their flight but there's less. Do you
24:10
Speaker 1: do you think that consumer behavior could be different post pandemic?
24:15
Speaker 1: You know, we've seen things like the Great Resignation, which
24:18
Speaker 1: we're still trying to figure out. Is it possible that
24:20
Speaker 1: consumers are like, you know what, I'm I'm working from
24:23
Speaker 1: home now or some kind of hybrid model. I'm I'm
24:26
Speaker 1: demanding thirty days off a year, and I'm gonna travel.
24:30
Speaker 1: I'm gonna go see the Grand Canyon. I'm gonna go
24:33
Speaker 1: to Joshua Tree on shrooms or whatever. And I mean,
24:36
Speaker 1: they're gonna be taking more flights, I think, so, I
24:41
Speaker 1: hope so. I think the other big part of this
24:44
Speaker 1: is um. I mean, because look, first, we do have
24:47
Speaker 1: to change some of the US employer behavior to give
24:49
Speaker 1: you a little more time off or I guess we
24:51
Speaker 1: all call it working from homes are flying somewhere, which
24:53
Speaker 1: I guess. You know, if WiFi is good enough in
24:55
Speaker 1: the airplane, maybe you get away with that. But the
24:58
Speaker 1: other big thing that we're looking at is just that
25:01
Speaker 1: the consumer pocketbook is going to be pressured here right
25:04
Speaker 1: The price of fuel is um, you know, fuel and
25:08
Speaker 1: heating oil and uh, it's gonna ripple through your economy
25:11
Speaker 1: is just astronomical right now. And that's going to pressure
25:15
Speaker 1: their pocketbook. And so the consumer is going to go
25:17
Speaker 1: out and say I want to go on vacation, but
25:20
Speaker 1: I'm I can't spend a lot of money getting there. Oh,
25:22
Speaker 1: look at Spirit in Frontier, whatever the combined company might
25:26
Speaker 1: be called. If it gets done. Oh, they've got a
25:28
Speaker 1: flight for forty dollars, I'll do that, right. I can
25:32
Speaker 1: suck up the fact that I'm not going to get
25:34
Speaker 1: any recline on my seat on the on the weight
25:36
Speaker 1: of vegas or something like that. So that's the challenge.
25:39
Speaker 1: The consumer is going to be pressured here, and that's
25:41
Speaker 1: why that's a really interesting thing about this merger or sorry,
25:44
Speaker 1: this this purchase of jet Blue. Jet Blue wants to
25:47
Speaker 1: take Spirit and turn it into jet Blue. Now, look,
25:51
Speaker 1: I think jet Blue's got a great product, but I
25:53
Speaker 1: think that the consumer is again pressured. Consumer is going
25:57
Speaker 1: to say, just give me the cheapest ticket price, not
26:01
Speaker 1: giving me give me you know, aircs love to talk
26:04
Speaker 1: about sort of the quality of the product, the product experience.
26:07
Speaker 1: People just want to get there. Then they want to
26:10
Speaker 1: have fun. And I think that's that's the interesting part
26:12
Speaker 1: of this is that jet Blue wants to turn Spirit
26:15
Speaker 1: into jet Blue, which I think will be very challenging.
26:17
Speaker 1: George thirty seconds. Does this deal get past the regulators.
26:20
Speaker 1: I do think it will get past regulars. I don't
26:22
Speaker 1: think any of these airlines are so important to the
26:24
Speaker 1: US economy. You have so much market share anywhere that
26:27
Speaker 1: it can't get done. All right, George, good stuff. Appreciate that.
26:30
Speaker 1: George Ferguson, Senior Aerospace, Defense and Airline annalys from Bloomberg Intelligence.
26:34
Speaker 1: He's been coming in stocks for decades. Back to work,
26:42
Speaker 1: getting back to the office. New York businesses, they're figuring
26:46
Speaker 1: out how to go. You're bringing people back how many days? Well,
26:49
Speaker 1: when they deal with that, They've also got some new
26:51
Speaker 1: legislation that they have to think about in terms of
26:53
Speaker 1: whistleblower protections. Some new legislation coming there as well as
26:58
Speaker 1: disclosing salaries for external and internal job posting. So some
27:02
Speaker 1: new regulations coming. Question is how will some of these
27:05
Speaker 1: businesses deal with that. We welcome, Rania said Home, managing
27:08
Speaker 1: partner of the set Home Law Group. So Rania talked
27:10
Speaker 1: to us about some of the this new legislation that
27:12
Speaker 1: employers and employees in New York need to deal with.
27:19
Speaker 1: Thanks for having me on the show. Thanks so much. Well,
27:22
Speaker 1: the whistle Blower Act is actually retroactive to January, and
27:26
Speaker 1: it may come as a surprise for many. We were
27:29
Speaker 1: all scrambling, you know, to start this new year hopefully
27:32
Speaker 1: COVID free. And we might have missed this one, but
27:35
Speaker 1: the whistleblower protections in New York have it expanded, and
27:39
Speaker 1: now it protects employees who complain about any actual or
27:43
Speaker 1: suspected violation of any law. Prior to January two, they
27:49
Speaker 1: would only have whistle lower protection if their complaints related
27:53
Speaker 1: to a specific danger or public health and safety. So
27:57
Speaker 1: there's truly no exception at this point. The only uh,
28:01
Speaker 1: you know, argument that an employer can make if they
28:03
Speaker 1: fire someone who complained is that, uh, there was no
28:07
Speaker 1: reasonable belief about what the employee was complaining about. We
28:12
Speaker 1: have to wait and see what that means. It's so interesting.
28:14
Speaker 1: First of all, I have a few friends named Brownia,
28:17
Speaker 1: So you do. Yes, okay, so that's great, Thank you
28:23
Speaker 1: so much. Second second of all, um, so we've really seen,
28:28
Speaker 1: or you know, Bloomberg News been writing about a shift
28:31
Speaker 1: towards labor the likes of which we haven't seen in decades.
28:33
Speaker 1: And I know when you were at Syracuse you were
28:36
Speaker 1: the editor of the Labor Lawyer, um and a digest there,
28:39
Speaker 1: so you um do labor law. Do you agree that
28:44
Speaker 1: we've seen a big shift towards the rights of workers.
28:48
Speaker 1: I do see this shift, and I see more coming.
28:52
Speaker 1: I don't have a crystal ball, but I have intuition,
28:55
Speaker 1: and I think there's going to be more and more
28:57
Speaker 1: of a shift. And I think you negotiations are going
29:01
Speaker 1: to be more aggressive, um, you know, toward the labor side.
29:05
Speaker 1: I think employers need to gear up. We hear more
29:08
Speaker 1: and more stories Uh, Amazon, the the union, UM want
29:13
Speaker 1: to vote their Starbucks. UM. And these aren't you know, nationwide.
29:18
Speaker 1: These are in specific areas. But we also have seen
29:23
Speaker 1: UM average hourly wages continue to rise. Um. And Paul
29:28
Speaker 1: was just talking about disclosure rules. So what's the story.
29:31
Speaker 1: Now They companies have to disclose what they're paying to
29:34
Speaker 1: employees who come into the office as opposed to employees
29:37
Speaker 1: who work from home. No. Effective May fourteen, New York
29:43
Speaker 1: City employers, not New York State, just New York City.
29:46
Speaker 1: Now the law changed slightly, actually two days ago. Now
29:50
Speaker 1: it applies to those employers who employ at least fifteen employees.
29:55
Speaker 1: Whenever you post an advertisement, whether it's internal or external,
29:59
Speaker 1: for any of available job, you have to provide the
30:02
Speaker 1: salary range for that job, and failure to do so
30:06
Speaker 1: is going to be deemed an unlawful discriminatory practice and
30:10
Speaker 1: comes with a fine of up two I see so
30:14
Speaker 1: internal external meaning like inside of work, outside of work.
30:17
Speaker 1: I mean, if my manager sends around a group email
30:21
Speaker 1: and says we're looking for a new director of East
30:24
Speaker 1: Coast Operations, Um, she has to then include the salary
30:29
Speaker 1: range if they've done so for an external posting. Uh,
30:33
Speaker 1: you have to do it for both listings. But yes,
30:35
Speaker 1: your your analogy is correct. By the way, in terms
30:37
Speaker 1: of working from home, Paul and I were talking about
30:39
Speaker 1: this earlier. Um, if you work in New York, you
30:42
Speaker 1: gotta pay New York City taxes. And a lot of
30:44
Speaker 1: people who used to work in New York City offices
30:48
Speaker 1: now telecommute in from Connecticut or New Jersey or Florida
30:53
Speaker 1: or Texas. Do those people have to pay New York
30:57
Speaker 1: City income taxes since they're not physically coming to this place,
31:01
Speaker 1: even if um, you know, they remote into computers at
31:06
Speaker 1: on Manhattan Island. The employees income tax is going to
31:11
Speaker 1: be based upon their residents. I don't know if these
31:14
Speaker 1: employees have changed their residents officially or not, but uh,
31:19
Speaker 1: that's on them. But the employer may have to register
31:23
Speaker 1: to do business in a state that there are otherwise
31:26
Speaker 1: not registered to do business and because of this telecommuter
31:30
Speaker 1: that they have. Interesting. So, Ronnie, when you talk to
31:33
Speaker 1: your clients, is it is hybrid the way it's going
31:38
Speaker 1: to be going forward? You know, I still hear they're
31:42
Speaker 1: prepping for that, some Goldman Sachs executives trying to hold steady. No,
31:45
Speaker 1: you've got to be in the office every single day,
31:47
Speaker 1: blah blah blah. Bank you American workers to come back
31:50
Speaker 1: in June. But what do you what do you see
31:51
Speaker 1: from your clients. I think a lot of my clients
31:55
Speaker 1: and just um, you know other business owners who I
31:58
Speaker 1: know who are friends, they're worried that if they proclaim
32:03
Speaker 1: that it's a five day in office work week that
32:06
Speaker 1: they'll lose employees. And so several of them are easing
32:09
Speaker 1: into returning to work and having a hybrid workplace. One
32:14
Speaker 1: is because again they're afraid that they'll lose their employees.
32:17
Speaker 1: And two there's still some uncertainty with the pandemic and
32:20
Speaker 1: they don't need any liability. But I think ultimately we
32:24
Speaker 1: are going to go back to, you know, in office
32:28
Speaker 1: work because it's easier to collaborate and when everybody is
32:32
Speaker 1: working from home, it's different than if we're in a
32:35
Speaker 1: meeting and two people are on the phone or on
32:38
Speaker 1: zoom whatever people are using, and everyone else is in
32:41
Speaker 1: the conference room. Um, I can understand that. Although I
32:47
Speaker 1: I can understand, I can imagine a future in which
32:49
Speaker 1: we all um work in the metaverse. I know, using
32:53
Speaker 1: that term makes it sound weird, I know, but you
32:55
Speaker 1: know what, try and think of it as a like
32:57
Speaker 1: a zoom call where we that we all go to
33:00
Speaker 1: and then we can all walk from our zoom desk
33:02
Speaker 1: to the zoom cafeteria or to the zoom you know
33:06
Speaker 1: coat room. I mean, it doesn't seem that strange to me.
33:10
Speaker 1: I wonder how the legal issues change when you go
33:13
Speaker 1: from uh an in office work situation to one where
33:17
Speaker 1: we all work in the cloud. Well, there are several
33:23
Speaker 1: you know, things that will arise. For example, you know,
33:26
Speaker 1: workers compensation insurance. It's mandatory and uh it's based upon
33:31
Speaker 1: where the employee is working, doesn't even matter whether where
33:35
Speaker 1: their residence is. So I could have decided to go
33:38
Speaker 1: to Hawaii and work from there during the pandemic, my
33:42
Speaker 1: company would have to purchase workers compensation for me in Hawaii,
33:46
Speaker 1: and then there are all of these issues surrounding well,
33:50
Speaker 1: you know, what happened to you, what injury happened, and
33:54
Speaker 1: was it work related? And was it during work hours?
33:57
Speaker 1: And as we've heard several people say, working from home
34:00
Speaker 1: is convenient on one hand, but inconvenience on the other hand,
34:03
Speaker 1: because there's a blurry of what is what am I
34:06
Speaker 1: doing for work? On what am I doing for myself?
34:10
Speaker 1: There's also you know, unemployment insurance, you'd have to purchase
34:13
Speaker 1: it wherever it is a person is working again. And
34:16
Speaker 1: then uh employee reimbursements. This you know, varies from state
34:21
Speaker 1: to state how aggressive the reimbursement policies are. For example,
34:25
Speaker 1: in some states you have to pay a portion of
34:28
Speaker 1: your employees electricity bill and internet bill because that's your
34:32
Speaker 1: new office. So there are a lot of things to consider,
34:35
Speaker 1: and that's why I think as these things percoate, we're
34:38
Speaker 1: not everybody's gonna have to figure it out. Everybody's got
34:41
Speaker 1: to figure it out, all right. Ronnie, thank you so
34:43
Speaker 1: much for joining us, Ronnie set Home, Managing Partner, set
34:45
Speaker 1: Home a Law Group. Thanks for listening to the Bloomberg
34:51
Speaker 1: Markets podcast. You can subscribe and listen to interviews of
34:54
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.
35:00
Speaker 1: I'm on Twitter at Matt Miller seventy three. And I'm
35:03
Speaker 1: fall Sweeney. I'm on Twitter at pt Sweeney. Before the podcast,
35:06
Speaker 1: you can always catch us worldwide at Bloomberg Radio