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Energy, The Fed, And Germany (Podcast) · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day, we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. I want to follow
• 0:22
  Speaker 1: up on that comic I just made of the quote
• 0:24
  Speaker 1: there on w T corude oil. You know, one dollars
• 0:27
  Speaker 1: sixty cents of barrel seems pretty sticky right about there,
• 0:29
  Speaker 1: And you know you think about global energy um and
• 0:33
  Speaker 1: it's it's you know, many people have called it a
• 0:35
  Speaker 1: crisis situation in Europe in particular. We want to get
• 0:39
  Speaker 1: some color on that. We're gonna check in with Jonathan Maxwell,
• 0:41
  Speaker 1: CEO and co founder of Sustainable Development Capital l lp UH.
• 0:47
  Speaker 1: Sustainable Development Capital operates as an investment banking firm for
• 0:50
  Speaker 1: energy efficient project finance. Jonathan, thanks so much for joining
• 0:54
  Speaker 1: us here. You know you're based in the UK, I believe,
• 0:57
  Speaker 1: and I'd love to get your thoughts of just kind
• 0:59
  Speaker 1: of the overview are kind of the energy issues, the
• 1:04
  Speaker 1: energy security issues, the energy crisis type of issues that
• 1:08
  Speaker 1: Europe is facing now and potentially into the winter, So
• 1:13
  Speaker 1: thank you for having me on. I mean, the Russian
• 1:16
  Speaker 1: invasion of Ukraine has sparked, well re ignited, i should say,
• 1:20
  Speaker 1: an energy crisis in Europe. We've had a very steep
• 1:24
  Speaker 1: rise and energy prices in one, low levels of storage,
• 1:29
  Speaker 1: low wind production, um so already difficult market background, but
• 1:35
  Speaker 1: coming into this year with the Russian invasion of Ukraine
• 1:38
  Speaker 1: curtailed supplies of gas coming into Europe. The word that
• 1:43
  Speaker 1: I had applied to which I liked was gastastrophe. So
• 1:47
  Speaker 1: you know that is the problem, the supply of gas
• 1:50
  Speaker 1: from Russia via Ukraine, because that's forty percent ish of
• 1:54
  Speaker 1: the whole European gas supply at stake, in fact higher
• 1:59
  Speaker 1: earlier in the year from Germany. So you know, that's
• 2:03
  Speaker 1: a huge problem for Europe and has created a crisis
• 2:08
  Speaker 1: not just in terms of pricing and supply, but also
• 2:12
  Speaker 1: trying to find solutions to that problem. You know, how
• 2:15
  Speaker 1: how do you replace the natural gas, how do you
• 2:17
  Speaker 1: actually provide generation? And what can be the solutions in
• 2:21
  Speaker 1: the short media and long term. Well, in every crisis,
• 2:23
  Speaker 1: there's an opportunity, right I don't know who said that,
• 2:26
  Speaker 1: but um, what what is the opportunity here? I mean,
• 2:29
  Speaker 1: is it for just diversifying their resources, you know, diverse, diverse,
• 2:36
  Speaker 1: fying their energy providers, or is it for diversifying the
• 2:40
  Speaker 1: kind of energy that Europeans use? So you know, as
• 2:45
  Speaker 1: with any solution, it's it's going to be a number
• 2:47
  Speaker 1: of a number of pollutions to the problem. You know,
• 2:51
  Speaker 1: the biggest one, the real fact of life is the
• 2:55
  Speaker 1: percent of Europe, like North America, eighty percent of years
• 2:57
  Speaker 1: energies or gas and calls. So taking a significant cut
• 3:01
  Speaker 1: on gas means it's got to be replaced from somewhere.
• 3:04
  Speaker 1: So there are all turns in diversifying sources of natural
• 3:07
  Speaker 1: gas supply. In the meantime, Sadly, for decarbonization, Europe has
• 3:11
  Speaker 1: leant back on its coal generation, so Germany, Ireland, even
• 3:15
  Speaker 1: the UK have got coal. Is up seven percent, says
• 3:18
  Speaker 1: the I A European coal demand in Europe driving global
• 3:22
  Speaker 1: demand up two peaks not seen since twenty thirteen. So
• 3:25
  Speaker 1: diversifying fossil fuel, the opportunity is to try and replace
• 3:31
  Speaker 1: those types of that type of generation with cleaner forms
• 3:35
  Speaker 1: of generation. Um, the trying to replace that with renewables
• 3:39
  Speaker 1: has its own challenges on supply chain, resources and time.
• 3:43
  Speaker 1: You know, it takes three or five years to build
• 3:45
  Speaker 1: solar and wind on shore. It can take ten to
• 3:47
  Speaker 1: fifteen years to build offshore wind in nuclear. So you
• 3:51
  Speaker 1: know how you solve the problem in the short run. Actually,
• 3:54
  Speaker 1: I think it's a massive opportunity because while we're strut
• 3:57
  Speaker 1: spending so much time asking how to replace Russian gas. Actually,
• 4:03
  Speaker 1: in the European Commission said if every unit of natural
• 4:06
  Speaker 1: gas that we don't buy from Russia, they said, is
• 4:09
  Speaker 1: two point six units that we don't have to Sorry
• 4:11
  Speaker 1: for every unit of gas that we don't use, there's
• 4:13
  Speaker 1: two point six units we don't have to buy from Russia.
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  Speaker 1: Why it's because we're wasting most of the energy in
• 4:20
  Speaker 1: the energy system. There is an enormous amount of inefficiency
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  Speaker 1: in Europe, about two thirds of energies wasted somewhere between
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  Speaker 1: the generation, transmission and distribution process. To the opportunity extraordinaries
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  Speaker 1: about in the US, by the way, So the opportunity
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  Speaker 1: which is extraordinary is to invest in solutions that reduce
• 4:40
  Speaker 1: energy use um and reduce energy demand. So you know,
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  Speaker 1: what you've seen as a massive response of Europe. They
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  Speaker 1: had a policy last year which I think frankly they
• 4:49
  Speaker 1: were mumbling, but at least it was a policy saying
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  Speaker 1: energy efficiency first, not second or third, but energy efficiency first.
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  Speaker 1: But it's now critical there is no solution to the
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  Speaker 1: problem other than being more efficient, so they have now
• 5:01
  Speaker 1: introduced the policy to reduce gas consumption by fift Are
• 5:05
  Speaker 1: there companies that are focused on increasing energy efficiency? Big names,
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  Speaker 1: big projects that we should know there are. There are
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  Speaker 1: very very large projects being done in aggregate, individual projects
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  Speaker 1: a smaller ten fifty a hundred megawatts read a hundred
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  Speaker 1: million dollar projects. So on site solar, on site generation
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  Speaker 1: even using natural gas, but where you can capture the
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  Speaker 1: heat co generation it's called so co generation, solar storage,
• 5:37
  Speaker 1: ground and surce heat gar firmal. So there is a
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  Speaker 1: very large marketplace. In fact, the International with New Billenese
• 5:43
  Speaker 1: Agency globally says that that market is worth about ten
• 5:46
  Speaker 1: trillion dollars compared to say three to five trillion dollars
• 5:50
  Speaker 1: of the renewable energy market. So recognizing that so much
• 5:53
  Speaker 1: energy is wasted in the global energy system, the i
• 5:56
  Speaker 1: e A, the International Video Bill Energy Agency, and the
• 5:59
  Speaker 1: growing umber of utilities and specialist companies are targeting the
• 6:02
  Speaker 1: energe efficiency and distributed generation space because that is the
• 6:06
  Speaker 1: way of delivering lower cost, lower carbon, more relable energy
• 6:09
  Speaker 1: into the market. All right, Jonathan, thank you so much
• 6:12
  Speaker 1: for that update. We appreciated. I learned something new there
• 6:15
  Speaker 1: about the energy inefficiency and how much energy UH is
• 6:19
  Speaker 1: lost or wasted between you know, getting out of the
• 6:20
  Speaker 1: ground and getting into the home. Jonathan Maxwell, CEO and
• 6:24
  Speaker 1: co founder of Sustainable Development Capital. Again, it's operates as
• 6:28
  Speaker 1: an investment banking firm for energy efficient project UH finance
• 6:38
  Speaker 1: a fandevit. I'm not sure why he's still doing this stuff,
• 6:41
  Speaker 1: but he's the chief investment officer of Manetta Group. UH.
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  Speaker 1: Thank you. Twenty seven billion assets under management, ranked in
• 6:48
  Speaker 1: the top ten by barons among independent registered investment advisors,
• 6:52
  Speaker 1: So some real real money under management, UH. Efan, thank
• 6:56
  Speaker 1: you so much for joining us here. What do you
• 6:58
  Speaker 1: make of this, I guess rally in the stock market
• 7:02
  Speaker 1: over the last several weeks. Are you buying into it
• 7:05
  Speaker 1: or is it just a little bit of a head
• 7:07
  Speaker 1: fake and we still need to be cautious. How do
• 7:08
  Speaker 1: you think about that? It's really interesting, I mean, the
• 7:12
  Speaker 1: market does look now like it has something to prove.
• 7:14
  Speaker 1: We're heading towards the best month since the end of
• 7:17
  Speaker 1: twenty It comes off the back of a really awful
• 7:20
  Speaker 1: start to the years. Look at the SMP when the
• 7:22
  Speaker 1: worst starts to the year for the first half in
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  Speaker 1: a hundred years, so clearly what we were coming off
• 7:27
  Speaker 1: the bottom. There has been cash on the sidelines for
• 7:30
  Speaker 1: some time. We've seen the assets and money market funds rise,
• 7:34
  Speaker 1: so clearly there is still a sense that there is
• 7:36
  Speaker 1: really no alternative to being exposed to equities at this time.
• 7:39
  Speaker 1: So that's the momentum. Seeing as to whether it's a
• 7:42
  Speaker 1: head fake or not, I actually think it has some
• 7:44
  Speaker 1: legs this rally because we look at some of the indicators.
• 7:48
  Speaker 1: The consumer has very low levels of debt today, we're
• 7:51
  Speaker 1: seeing ultimately at a company level, we don't see many
• 7:54
  Speaker 1: defaults coming. So even though margins are going to get
• 7:57
  Speaker 1: tighter and we're going to see some pressure in terms
• 7:59
  Speaker 1: of pricing power and ability to pass through some of
• 8:02
  Speaker 1: those prices, there are a lot of quite positive indicators
• 8:05
  Speaker 1: and underlying some of this negative momentum, all the headline
• 8:08
  Speaker 1: around recession and even when it comes to inflation, yes,
• 8:12
  Speaker 1: these two inflation indicators today were positive. That comes off
• 8:15
  Speaker 1: the back of our historic high for June. We still
• 8:18
  Speaker 1: have to remember that this is still follow on of
• 8:22
  Speaker 1: some of the constraints that we've seen come out of COVID.
• 8:25
  Speaker 1: The supply chain restrictions are still in there, with a
• 8:27
  Speaker 1: little bit of demand destruction happening around the higher prices.
• 8:31
  Speaker 1: You see that with oil. So overall, I'm pretty sanguine.
• 8:35
  Speaker 1: I'm reasonably optimistic that this market has some legs. Do
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  Speaker 1: you not expect the Fed to just keep on hiking
• 8:41
  Speaker 1: and hiking? I mean three and a half four percent,
• 8:44
  Speaker 1: five percent? Is that you think just not going to happen,
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  Speaker 1: especially if inflation comes down in the growth softense, well
• 8:52
  Speaker 1: growth softense, let's face it, Uh, we're in a we're
• 8:55
  Speaker 1: in contraction period right exactly. Well, certainly the Fed seems
• 8:59
  Speaker 1: to make me it's a confirmation bias that played, but
• 9:02
  Speaker 1: it seems to think that already if actions have had
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  Speaker 1: some effects, it took. It's looking at the weakening markets,
• 9:08
  Speaker 1: and Elon Musk agrees. He says more of their prices
• 9:11
  Speaker 1: have come down than gone off recently, exactly, So there's
• 9:15
  Speaker 1: an indicator. And remember cassy Wood out of that arc
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  Speaker 1: has had for some time. She's talked with the deflationary
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  Speaker 1: impulses and markets which are are offsetting the inflationary impulses,
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  Speaker 1: and those deflationary impulses are why we had no inflation
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  Speaker 1: for so long. So many of those deflationary impulses have
• 9:31
  Speaker 1: not gone away, with the exception of labor. Clearly, we
• 9:34
  Speaker 1: saw that labor indication today that's starting to turn around.
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  Speaker 1: But remember a labor having some price in power is
• 9:39
  Speaker 1: a sign that labor is strong, and it's the employment
• 9:42
  Speaker 1: picture is strong. Will that be the the buffer that
• 9:46
  Speaker 1: prevents the economy from flipping into recession? Maybe even We're
• 9:50
  Speaker 1: kind of just in the middle here of this earning
• 9:52
  Speaker 1: cycle here, Big tech week this week, and we had
• 9:55
  Speaker 1: some really good numbers out of Amazon last night and
• 9:58
  Speaker 1: pretty good numbers out of ap All here. What are
• 10:01
  Speaker 1: your takeaways here, but that midway through this this earning
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  Speaker 1: cycle here, I think it's very lumpy. We we did
• 10:07
  Speaker 1: see some less positive numbers from Amazon before when it
• 10:10
  Speaker 1: looks like they had perhaps that excess inventory or they
• 10:13
  Speaker 1: were suffering from supply chain issues. And then the very
• 10:16
  Speaker 1: same week we have this canary in the coal mines
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  Speaker 1: from from Walmart much more less of a perhaps discretionary,
• 10:22
  Speaker 1: more of a staple type retail because it is lower end,
• 10:25
  Speaker 1: and that that they clearly are seeing a contraction in demand,
• 10:28
  Speaker 1: they're seeing high inventories. Target is is in a moment
• 10:31
  Speaker 1: of fire sales situation around it's inventories. So that picture
• 10:34
  Speaker 1: is still mixed. I think it's really a question of lumpiness.
• 10:38
  Speaker 1: Some companies maybe took their lumps earlier and some are
• 10:41
  Speaker 1: taking them now, and so I don't actually see that
• 10:43
  Speaker 1: there's an overwhelmingly, overwhelmingly clear picture coming out of that.
• 10:47
  Speaker 1: In terms of consumer demand, I think we can all
• 10:50
  Speaker 1: say that the consumers have said it's stronger than they've
• 10:52
  Speaker 1: been in the past since situations like this, because of
• 10:55
  Speaker 1: their low debt levels. But they are going to be
• 10:57
  Speaker 1: reacting to to these these pricing pressure and they're going
• 11:01
  Speaker 1: through reacting to some of their COVID lad largess coming off.
• 11:05
  Speaker 1: But you still think there's no other place to be,
• 11:08
  Speaker 1: there's no alternative to us docks. Um, what do you
• 11:12
  Speaker 1: see happening in bonds and fixed income after they're horrible, terrible,
• 11:16
  Speaker 1: no good first half? Yes, exactly. Well, actually that has
• 11:19
  Speaker 1: has been a bit of a turnaround too for for years,
• 11:22
  Speaker 1: bombs haven't looked like a great place to put money.
• 11:24
  Speaker 1: They despite their being in a bond in its bold
• 11:26
  Speaker 1: bomb ball market, they have looked like very uninteresting um
• 11:30
  Speaker 1: from a return perspective, especially when that return is after inflation.
• 11:33
  Speaker 1: Still on a real basis now because of the change
• 11:37
  Speaker 1: in rates and a little bit of spread widing, not
• 11:39
  Speaker 1: a great deal. We're actually thinking some reasonably compelling yields
• 11:43
  Speaker 1: in investment grade and high yield, and even though after
• 11:46
  Speaker 1: the high levels of inflations they won't be particularly interesting
• 11:49
  Speaker 1: on a real, real basis, they are a huge, hugely
• 11:53
  Speaker 1: different from what they were in the past, so there
• 11:55
  Speaker 1: is an alternative sequities. But I think ultimately you need
• 11:57
  Speaker 1: to be invested across the boards. You need to have
• 11:59
  Speaker 1: broad based different by exposure equities, bond and alternatives, and realistate.
• 12:04
  Speaker 1: Like your previous plot suggested, there really is no time
• 12:07
  Speaker 1: to be too much in cash. A little bit of
• 12:09
  Speaker 1: dry powder help all right, Evan, thank you so much
• 12:12
  Speaker 1: for joining us. Really appreciate getting your perspective. Efan Devitt,
• 12:15
  Speaker 1: chief investment officer of Moneta Group, giving us her thoughts
• 12:19
  Speaker 1: on these markets. Group. One of my best friends is
• 12:24
  Speaker 1: here Neil Grossman. Uh and just turned sixty five, So
• 12:28
  Speaker 1: happy birthday to you, Neil Grossman. I see that you
• 12:32
  Speaker 1: got a gold box conjecture cake. What is that? Gold
• 12:37
  Speaker 1: box conjecture is one of the oldest unproved mathematical theorems.
• 12:42
  Speaker 1: That's something I've been actually working on myself for about
• 12:44
  Speaker 1: twenty five years. And there's a painting in our apartment.
• 12:47
  Speaker 1: But the conjecture is relatively simple. Number theory is actually
• 12:50
  Speaker 1: quite manageable and understandable. So God Christian Goldbach and in
• 12:54
  Speaker 1: the late mid sev dred sent the letters of the
• 12:56
  Speaker 1: most famous mathematician of his Timelineard Oiler, hypothesizing that every
• 13:02
  Speaker 1: even number is the sum of two prime numbers. And
• 13:06
  Speaker 1: you can also flip that into one which says that
• 13:07
  Speaker 1: every number is the average of two primes. It's neved.
• 13:11
  Speaker 1: This is the kind of guy we're dealing with. I
• 13:13
  Speaker 1: just wanted to set that up for you. So UM
• 13:16
  Speaker 1: physics degree studied a little bit of cosmology under Stephen
• 13:20
  Speaker 1: Hawking and Cambridge, and UM has advised that, I said
• 13:23
  Speaker 1: the Norwegian Central Bank now he runs t k n
• 13:26
  Speaker 1: G Capital and UM discusses economics and policy with FED officials.
• 13:34
  Speaker 1: Let's talk about Jerome Pale's meeting on decision, Well, not
• 13:38
  Speaker 1: just on Wednesday, but what the FED has been up
• 13:41
  Speaker 1: to trying to catch up and trying to catch the curve,
• 13:44
  Speaker 1: if you will, because they missed it so badly. Are
• 13:47
  Speaker 1: they going to be able to do that without driving
• 13:49
  Speaker 1: us into a to stop inflation, without driving us into
• 13:52
  Speaker 1: a deep deeper session. I think they're gonna struggle. But
• 13:55
  Speaker 1: I don't even think he's trying to catch up. I mean,
• 13:57
  Speaker 1: let's be clear a few things. They spent what five
• 14:00
  Speaker 1: years or seven years arguing that they needed to push
• 14:03
  Speaker 1: inflation a little hot, just to push up the average
• 14:06
  Speaker 1: to two percent. You know, he's saying, we want to
• 14:10
  Speaker 1: get to a two percent, but he he's years behind.
• 14:14
  Speaker 1: If he wants to get back to two percent, averaging
• 14:17
  Speaker 1: they got to go to one percent for almost a decade.
• 14:20
  Speaker 1: And what's interesting is we'll we'll finish this year having
• 14:23
  Speaker 1: average probably six and a half to seven percent for
• 14:26
  Speaker 1: two years. If all you do is luck get lucky
• 14:30
  Speaker 1: enough to go immediately to two percent and stay there
• 14:32
  Speaker 1: ten years in the future, you're still almost twenty percent
• 14:37
  Speaker 1: or whatever plus away from what your original target was.
• 14:41
  Speaker 1: They've set off distortions that will continue to propagate and
• 14:44
  Speaker 1: compound for many years. But you don't hear anybody talking
• 14:48
  Speaker 1: about unwinding the impact of what we what's right behind us,
• 14:52
  Speaker 1: which is really the problem. They won't right well, they're
• 14:55
  Speaker 1: afraid of it. That's what's behind us is all the
• 14:57
  Speaker 1: stimulus we had, Well, the stimulus, the stimulus, and and
• 15:00
  Speaker 1: and and and and seven and seven or eight percent
• 15:03
  Speaker 1: annualized inflation for two years. By the way, it took
• 15:06
  Speaker 1: Vulcar post folk, youre pardon me, it was like twenty
• 15:09
  Speaker 1: five years before we reached an ambient state of steady
• 15:12
  Speaker 1: state of two to two and a half percent inflation. Now,
• 15:15
  Speaker 1: it may not be the same this time, but you
• 15:17
  Speaker 1: should be expecting that it's going to be a glide
• 15:22
  Speaker 1: if they're lucky of a number of years to get
• 15:25
  Speaker 1: even close to the tool. So let's talk about that then.
• 15:27
  Speaker 1: I mean, as an investor, you have to try and
• 15:30
  Speaker 1: figure out what the FED is going to do, not
• 15:32
  Speaker 1: what they should do. What do you think we're going
• 15:36
  Speaker 1: to see in terms of a terminal rate? Do you
• 15:38
  Speaker 1: think they're gonna turn around and start cutting? Are we
• 15:40
  Speaker 1: going to see a recession? Are we in one right now? Um,
• 15:43
  Speaker 1: we're not in a recession right now. My view, I
• 15:45
  Speaker 1: think we were just talking about this. I think you've
• 15:47
  Speaker 1: seen two negative quarters of real GDP and I think
• 15:49
  Speaker 1: we may see two more. But the difference between what
• 15:52
  Speaker 1: we would feel as a recession in a real way
• 15:55
  Speaker 1: and what you're seeing statistically is the fact that inflation
• 15:59
  Speaker 1: is not and real GDP is nominalist inflation. Nominal GDP
• 16:06
  Speaker 1: is very strong still relative to the last Well it's
• 16:09
  Speaker 1: not that high, but let's take five or six. It
• 16:11
  Speaker 1: was that way last year, but relative to the last
• 16:13
  Speaker 1: twenty years, that's still a very strong number. We're still
• 16:17
  Speaker 1: at almost historical lows. And unemployment, I do think that
• 16:21
  Speaker 1: you have a very Um, you're you're probably likely to
• 16:24
  Speaker 1: have a disappointing number this month and maybe even next
• 16:26
  Speaker 1: month in employment. But I don't think you're pushing up
• 16:29
  Speaker 1: the unemployment rate all that far. But man, if you
• 16:32
  Speaker 1: can't have nominal GDP and four or five unemployment after
• 16:39
  Speaker 1: spending six trillion of fiscal and doubling the balance sheet
• 16:43
  Speaker 1: to eight trillion, what can what can you do? Strows with? Right? Well,
• 16:47
  Speaker 1: that's that's that's the problem. We were were were you
• 16:50
  Speaker 1: know again, we we basically um borrowed money to keep
• 16:54
  Speaker 1: things afloat. You know, on a on a year on
• 16:56
  Speaker 1: year comparative basis, it's going to be very hard for
• 16:59
  Speaker 1: a while for the economy to compare compare to what
• 17:03
  Speaker 1: was the fiscal rainfall of COVID relief. And so you
• 17:08
  Speaker 1: you have a natural problem built into the into the
• 17:11
  Speaker 1: GDP numbers on top of everything else. And you know, look,
• 17:15
  Speaker 1: as long as the balance sheet isn't being reduced, and
• 17:17
  Speaker 1: I think this is one of the biggest things out there. Um,
• 17:20
  Speaker 1: if they really want to bring inflation down, that balance
• 17:23
  Speaker 1: sheet should be going down already, and not slowly. I
• 17:26
  Speaker 1: think it's much more effective to deal with the balance
• 17:28
  Speaker 1: sheet than they are reducing the balance sheet. You're just saying,
• 17:31
  Speaker 1: they just started, but it's slow. Well, they're gonna let it.
• 17:33
  Speaker 1: They're not. They're not really selling very much. They're they're
• 17:36
  Speaker 1: letting run off much much more. You think they need
• 17:38
  Speaker 1: to be more. Well, still, it's still expanding. Actually, right
• 17:41
  Speaker 1: in the last few weeks listening, we only have two
• 17:43
  Speaker 1: and a half minutes here. What are you doing right
• 17:46
  Speaker 1: now in the market? Are you buying stocks after the
• 17:48
  Speaker 1: drop that we've just seen. I was here with you.
• 17:51
  Speaker 1: A month and a half ago. I bought I've had
• 17:54
  Speaker 1: actually had a pretty good I sold yesterday, and what
• 17:57
  Speaker 1: I'm looking for, Honestly, I'm not worried about five up
• 18:01
  Speaker 1: or down here. I think that either I was thinking
• 18:03
  Speaker 1: we get to maybe I'm worried that we're gonna hit
• 18:07
  Speaker 1: the fall and there's a lot of people getting excited,
• 18:10
  Speaker 1: and all of a sudden we hit October and inflation
• 18:14
  Speaker 1: still isn't dropping and you are seeing slowed down. So
• 18:17
  Speaker 1: what I'm beginning to do for myself is to buy
• 18:20
  Speaker 1: far out of the money, protection and fairly good size
• 18:24
  Speaker 1: so in case we have because it's not very expensive volatively,
• 18:26
  Speaker 1: although it's little highs come down a lot in case
• 18:28
  Speaker 1: we have a catastrophe. That's what I'm really worried about.
• 18:32
  Speaker 1: It interest rates. One last thing, if I had to
• 18:33
  Speaker 1: be be, I'm a little short bonds now, but not
• 18:37
  Speaker 1: very much. I think yield curve steepeners or if you
• 18:40
  Speaker 1: want to get technical, yield curve steepeners in forward space
• 18:43
  Speaker 1: or where I think you should be doing, because I
• 18:46
  Speaker 1: just think there is so much risk yield curve steepeners
• 18:50
  Speaker 1: in forward space yet complex here. Well, well, just to
• 18:55
  Speaker 1: put a good word in for Bloomberg. One of the
• 18:57
  Speaker 1: few systems you can easily use to figure it out.
• 19:00
  Speaker 1: It is right in front of you. Bloomberg Technical Analytics
• 19:03
  Speaker 1: is fabulous for this type of stuff. We like it
• 19:05
  Speaker 1: when people put in a good word for Bloomberg, which
• 19:07
  Speaker 1: I will never use any of those things. Probably, I'm like,
• 19:10
  Speaker 1: I'm d e S. I'm good to me. The Bloomberg
• 19:13
  Speaker 1: terminal is like a Ducati pana gali, you know, V
• 19:16
  Speaker 1: four S. I love the bike. I bought the bike,
• 19:21
  Speaker 1: and I can extract maybe five to six percent of
• 19:23
  Speaker 1: its total. I don't think I don't think you're even close.
• 19:25
  Speaker 1: I think it's like sitting on top of a Saturn
• 19:27
  Speaker 1: B five. There. All right, that's a better comparison. Neil Grossman,
• 19:32
  Speaker 1: thank you so much for joining us here. Neil Grossman,
• 19:34
  Speaker 1: t k n G Capital in the Bloomberg Interactive Broker Studio,
• 19:38
  Speaker 1: which is huge. You get a gold star for coming in.
• 19:40
  Speaker 1: He brought us a bottle of wine. Yeah, we'll pop
• 19:43
  Speaker 1: that baby. He made this wine. He made this one
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  Speaker 1: at the Canoe Hill Vineyard. It's getting a lot of recognition.
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  Speaker 1: That's like drinking a second growth board dough. I'm excited.
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  Speaker 1: All right. I don't know what that is, but the
• 19:54
  Speaker 1: drink at the where you go out east. All right, Neil,
• 19:57
  Speaker 1: thanks so much for joining us here. All right, how
• 20:04
  Speaker 1: about this. For a decade, Berlin commended moral and financial
• 20:09
  Speaker 1: authority in the European Union, guiding policy and playing bad
• 20:12
  Speaker 1: cops to the weaker southern economies. The energy crisis has
• 20:16
  Speaker 1: upended that balance. Maria today o joins us. She penned
• 20:19
  Speaker 1: those words. She's a European reporter for Bloomberg News and
• 20:23
  Speaker 1: she's doing some opinion stuff right now, which is good
• 20:25
  Speaker 1: for us. Maria thinks, well, it's not great for us.
• 20:28
  Speaker 1: Why because she's she's doing this stint with Bloomberg Opinion,
• 20:33
  Speaker 1: which means she hasn't been on Bloomberg TV for like
• 20:36
  Speaker 1: three weeks since the point, and we miss her, I know.
• 20:39
  Speaker 1: But she gets to spreader wings a little bit and
• 20:41
  Speaker 1: do some other stuff. She's so talented. Maria, thanks so
• 20:43
  Speaker 1: much for taking the time to join us here. I
• 20:45
  Speaker 1: love this piece about Germany. Give us a sense of
• 20:49
  Speaker 1: Germany's position in Europe today because it does feel a
• 20:51
  Speaker 1: little bit different because you know, this energy crisis is
• 20:55
  Speaker 1: really exposing their vulnerability. Yeah, and the ideas and lee
• 21:00
  Speaker 1: as that came to mind for me to write this piece.
• 21:03
  Speaker 1: It was really the words of the Spanish energy minister
• 21:07
  Speaker 1: who came out with a lot of bravado saying, you know,
• 21:11
  Speaker 1: Spain did a homework with manager economy in a way
• 21:14
  Speaker 1: that is more sustainable, and it's it's words are really
• 21:18
  Speaker 1: echoed the way that the Germans used to talk about
• 21:21
  Speaker 1: the Southern Europeans to say, you went on this debt
• 21:25
  Speaker 1: kind of spiral and you did not manage your finance
• 21:28
  Speaker 1: is sustainable and now where we have to come to
• 21:30
  Speaker 1: your rescue. So essentially what you see now it's the opposite.
• 21:33
  Speaker 1: And the European Commission they get it. The European countries
• 21:37
  Speaker 1: are gonna have to lower their energy consumption. It's going
• 21:40
  Speaker 1: to be supply but also demand. And what they argued
• 21:42
  Speaker 1: that everyone has to cut it down by the Spanish,
• 21:46
  Speaker 1: the Portuguese, the Greeks, all of them said that's not
• 21:49
  Speaker 1: gonna work. We're not gonna accept one targets for all.
• 21:52
  Speaker 1: What I would say, however, and that's all to my piece,
• 21:55
  Speaker 1: is that I don't think this is a return to
• 21:57
  Speaker 1: the old tensions between the North and the South. I
• 22:00
  Speaker 1: don't think they want that a lot of those dynamics
• 22:03
  Speaker 1: and did after the pandemic, the joint vaccination and all
• 22:05
  Speaker 1: of that. But I do think that this was the
• 22:07
  Speaker 1: end of Germany always being right, Germany always be in
• 22:11
  Speaker 1: the country that at the table kind of says, listen
• 22:14
  Speaker 1: to me, I know what's best for you. Clearly now
• 22:17
  Speaker 1: it's obvious that Germany was blind to its own faults
• 22:21
  Speaker 1: for a very long time, and everyone else now sees
• 22:23
  Speaker 1: it well, either blind or willingly. I mean, um, we
• 22:27
  Speaker 1: were talking to somebody I think yesterday about why Germany
• 22:31
  Speaker 1: allowed itself to be so dependent on Russian natural gas,
• 22:34
  Speaker 1: and he said, you know where former German Chancellor Gerhard
• 22:37
  Speaker 1: Schroeder is working these days. He's on the board at
• 22:40
  Speaker 1: gas from and he's hanging out at Vladimir Putin's palace. Um.
• 22:44
  Speaker 1: You have to wonder. And yesterday I was talking my
• 22:46
  Speaker 1: dad actually about this. Uh, how is history gonna judge
• 22:51
  Speaker 1: angel a miracle? You know, when Maria, you and I
• 22:53
  Speaker 1: were at the G twenty together in um in Hamburg,
• 22:57
  Speaker 1: she got a standing ovation and was considered the leader
• 23:00
  Speaker 1: of the free world at the time. Now it looks
• 23:02
  Speaker 1: like she was in Putin's pocket. Yeah, and you remember
• 23:06
  Speaker 1: Matt last year in Berlin at the election, you and
• 23:08
  Speaker 1: I were at times critical, you know, we said, for
• 23:12
  Speaker 1: all of the time at miracles a woman that kept
• 23:15
  Speaker 1: Europe together. There's a lot of issues underneath that have
• 23:19
  Speaker 1: not been very nice. You know. Angela Merkel had this
• 23:22
  Speaker 1: fundamental view that politics and trade, security and defense, all
• 23:26
  Speaker 1: of this could be run separately. It was a huge mistake.
• 23:29
  Speaker 1: You can't separate the politics from the trade and your security.
• 23:32
  Speaker 1: They're very connected. We also talked about the fact that
• 23:35
  Speaker 1: she was someone who at times appeased some of her rivals,
• 23:39
  Speaker 1: and not just at home, but also outside Russia Hungary.
• 23:43
  Speaker 1: She always had this idea that okay, they're bad guys,
• 23:46
  Speaker 1: that it's better to keep them engaged, then pushed them
• 23:50
  Speaker 1: in the corner. She was never very forceful. That also
• 23:52
  Speaker 1: became an issue. You know, Vladimir Putin could see it.
• 23:54
  Speaker 1: The Germans were not really going to go rough on them,
• 23:57
  Speaker 1: and then of course the North sting too. I mean
• 24:00
  Speaker 1: you remember, up until a few months ago, the Germans
• 24:03
  Speaker 1: still we're not willing to say, yes, we're gonna ditch
• 24:05
  Speaker 1: it if the Russians invade Ukraine. I think that gave
• 24:09
  Speaker 1: Vladimir putting a sense that listen, Germany is not going
• 24:12
  Speaker 1: to go all out to help the Ukrainians, so that
• 24:15
  Speaker 1: that really was something that they that they had in
• 24:18
  Speaker 1: their minds before they invaded Ukraine. I think it's been
• 24:21
  Speaker 1: a major wakeup call for the Germans. I think it's
• 24:23
  Speaker 1: a huge shock for them. I don't think they even
• 24:27
  Speaker 1: realize the impact of this has or the damage that
• 24:30
  Speaker 1: has done to the reputation and frankly, met I don't
• 24:33
  Speaker 1: even think the Germans understand how big a crisis this is,
• 24:36
  Speaker 1: but also just how badly they judged the entire thing
• 24:39
  Speaker 1: for fifteen years. I think it's a moment that so
• 24:42
  Speaker 1: searching for Germany. But I don't think they're ready to
• 24:45
  Speaker 1: eat humble pie yet. By the way, the Europe. By
• 24:49
  Speaker 1: the way, this morning, when I heard the French GDP
• 24:52
  Speaker 1: numbers and they were better than had been anticipated, my
• 24:56
  Speaker 1: first thought was because they had those nuclear reactors at
• 25:00
  Speaker 1: full blasts right now, and Germany has decided in its
• 25:04
  Speaker 1: wisdom to scrap nuclear power and they're going to go
• 25:08
  Speaker 1: through with that. They came out with GDP that was
• 25:12
  Speaker 1: less than had been anticipated, and I wonder if we're
• 25:14
  Speaker 1: going to see a divide along you know, nuclear lines
• 25:18
  Speaker 1: now Maria, where the French GDP continues to outperform, the
• 25:23
  Speaker 1: French economy continues to outperform the German economy because the
• 25:26
  Speaker 1: Germans are going to have to start rationing and shutting
• 25:28
  Speaker 1: down factories um come wintertime, and the French are going
• 25:32
  Speaker 1: to be heating their homes with nuclear power. And look
• 25:35
  Speaker 1: on Matt. I also think it's the way that you
• 25:38
  Speaker 1: frame it is great because it also shows fundamentally that
• 25:40
  Speaker 1: for ten years we all repeated and heard and and
• 25:44
  Speaker 1: especially something of your bean country. They were told, your
• 25:47
  Speaker 1: economy has to be more like the Germans. Look at
• 25:49
  Speaker 1: their industry, look at all the things that they make.
• 25:51
  Speaker 1: They're very good at that. But you realize that this
• 25:54
  Speaker 1: is an economy that was built on very shaky grounds.
• 25:56
  Speaker 1: Like it's on the one hand they got a major
• 25:58
  Speaker 1: boot by using Brussian gas and then they're exporting a
• 26:02
  Speaker 1: lot to China. So look at the Fans the foundations
• 26:04
  Speaker 1: of your industry and your egonomy. In the one hand
• 26:07
  Speaker 1: we have Russia and the other China. So for ten
• 26:09
  Speaker 1: years and the idea that we all heard repeatedly, I
• 26:11
  Speaker 1: mean everyone knows some Spanish you have to be more
• 26:13
  Speaker 1: like the Germans. Not everyone knows your Spanish, try to
• 26:17
  Speaker 1: model yourself after Germany. I think now it's pretty obvious
• 26:21
  Speaker 1: for everyone that this is very shaky, and for a
• 26:22
  Speaker 1: lot of the other European countries, by the way, they say, Okay,
• 26:26
  Speaker 1: we did have a credit bubble, we had a real
• 26:28
  Speaker 1: estate bubble, but why is an energy bubble different or
• 26:31
  Speaker 1: better than what we did? Right? All right, Maria, that
• 26:34
  Speaker 1: is great stuff, A great column out today. I recommend
• 26:37
  Speaker 1: folks take a look at that. Uh you can get
• 26:39
  Speaker 1: that at Bloomberg dot com, Slash Opinion and also b
• 26:42
  Speaker 1: I O P I N go for all the pining
• 26:45
  Speaker 1: stuff today covers Europe for Bloomberg News, Bloomberg televis doing
• 26:50
  Speaker 1: a stint at Bloomberg Opinion. Some great stuff. Thanks for
• 26:54
  Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and
• 26:58
  Speaker 1: listen to interviews with Apple Podcasts or whatever podcast platform
• 27:02
  Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller.
• 27:07
  Speaker 1: Yet I fall Sweeney. I'm on Twitter at pt Sweeney.
• 27:10
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• 27:13
  Speaker 1: Bloomberg Radio.