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Elon Musk, Stocks, And Ukraine (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 a Bloomberg Markets podcast
• 0:15
  Speaker 1: called Apple Podcast or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. We're gonna go to
• 0:22
  Speaker 1: Shanelli Basik a forty four billion dollar deal that really
• 0:27
  Speaker 1: wasn't going to happen forty eight hours ago it seemed
• 0:30
  Speaker 1: like and now it has. Elon Musk, of course, is
• 0:32
  Speaker 1: what we're talking about, buying Twitter taking over the platform
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  Speaker 1: twenty five and a half billion dollars of financing from
• 0:39
  Speaker 1: some of the world's biggest bangs. He has to put
• 0:41
  Speaker 1: out one billion dollars on his own. Should only walk
• 0:44
  Speaker 1: us through the deal dynamics. Yeah, it's really interesting because
• 0:48
  Speaker 1: there was a lot of questions at the beginning on
• 0:50
  Speaker 1: who's going to finance Elon Musk's bid, But at the
• 0:53
  Speaker 1: end of the day, Wall Street has always stepped up
• 0:55
  Speaker 1: to Elon Musk's rescue, if you think about it, and
• 0:57
  Speaker 1: so it's not surprising to see who ended stepping up,
• 1:00
  Speaker 1: which is Morgan Stanley and m u f G, which
• 1:03
  Speaker 1: is a big partner. Remember MUFG really came to Morgan
• 1:06
  Speaker 1: Stanley's rescue during the financial crisis, became a huge lending
• 1:09
  Speaker 1: partner thereafter. Bank of America was listed later on Alan
• 1:13
  Speaker 1: and Company. And so you're looking at companies that you know,
• 1:18
  Speaker 1: it's not surprising at the end of the day how
• 1:20
  Speaker 1: the money came together. But to the point that I
• 1:22
  Speaker 1: think you're making here is only part of this is
• 1:25
  Speaker 1: done in terms of debt financing and margin loans. There
• 1:30
  Speaker 1: is still twenty one billion dollars of equity to put in,
• 1:33
  Speaker 1: and so there's news to be had still on who
• 1:35
  Speaker 1: joins Elon Musk in providing that equity. Yeah, and only
• 1:39
  Speaker 1: this is something that you and I have spoken about
• 1:41
  Speaker 1: plenty of times off the air, But let's do it
• 1:43
  Speaker 1: on the air. Let's bring in our worldwide audience into this.
• 1:46
  Speaker 1: There's a little bit of a rivalry here when it
• 1:47
  Speaker 1: comes to the banks as well, JP Morgan and Goldman
• 1:51
  Speaker 1: Sachs helping out Twitter's board kind of seems like everyone
• 1:54
  Speaker 1: else was on Musk side. Talk to us about the
• 1:57
  Speaker 1: bank dynamics, who's backing who would kind of feel almost
• 2:00
  Speaker 1: a proxy war between Wall Street. It's funny that you
• 2:03
  Speaker 1: put it that way too, because JP Morgan they have
• 2:05
  Speaker 1: had some tensions with Tesla before. They have sued Tesla
• 2:09
  Speaker 1: over the price of some warrants. So that's a kind
• 2:12
  Speaker 1: of messy situation that's there in the background. But then
• 2:14
  Speaker 1: there's Goldman Sacks, which has worked on both sides. And
• 2:17
  Speaker 1: the thing is, at the end of the day, when
• 2:19
  Speaker 1: it came to Twitter, remember the current and former chief
• 2:22
  Speaker 1: financial officer of Twitter worked at Goldman Zacs. Goldman Sacs
• 2:25
  Speaker 1: was the lead bank that took Twitter public, and so
• 2:28
  Speaker 1: on this deal in particular, Goldman was on Twitter side
• 2:31
  Speaker 1: of things. Now, Leonna Baker had some and her team
• 2:35
  Speaker 1: who's our deals reporter, a deal's team leader. Actually they
• 2:38
  Speaker 1: had some great reporting on how in the background they
• 2:41
  Speaker 1: came to this price and really convinced Twitters and the
• 2:44
  Speaker 1: board that this was the best possible deal, that this
• 2:47
  Speaker 1: is a price that you're not going to necessarily see
• 2:50
  Speaker 1: for Twitter in in the near term. And so anyone
• 2:53
  Speaker 1: who says, well, Twitter was once trading more than seventy
• 2:56
  Speaker 1: dollars a share, you know, will it trade at seventy
• 2:59
  Speaker 1: dollars a share in the future. So there was a
• 3:00
  Speaker 1: lot of people coming together in agreement by the end
• 3:03
  Speaker 1: of it. Smart stuff. I'm also pleased to say we
• 3:07
  Speaker 1: have Ed Ludlow joining us from San Francisco. I have
• 3:09
  Speaker 1: but a good authority. He's had four espressos this morning,
• 3:11
  Speaker 1: so he is ready to go talk to us about
• 3:16
  Speaker 1: this new dynamic of billionaires buying media. Right because Jeff
• 3:20
  Speaker 1: Bezos has the Washington Post, you have other billionaires. I
• 3:24
  Speaker 1: believe there's a billionaire in charge of time as his
• 3:26
  Speaker 1: name escapes me. Stuff, lots of stuff. And now you
• 3:30
  Speaker 1: have Elon Musk looking into Twitter. I'm not sure if
• 3:33
  Speaker 1: it's fair to compare the Washington Post and Twitter, but
• 3:36
  Speaker 1: this is still significant. Is this the start of a
• 3:39
  Speaker 1: trend that we could see continue? Well? Um, well, I
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  Speaker 1: think we should state festival Twitter was founded by and
• 3:48
  Speaker 1: the single big shareholder, Jack Dawsey, is a billionaire in
• 3:51
  Speaker 1: his own right. Um. But I think Elon Musk comes
• 3:54
  Speaker 1: at this and we're going based on his previous statements
• 3:57
  Speaker 1: and and the kind of points that he reiterates it
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  Speaker 1: in regulatory filings. Over the roller coaster that's been the
• 4:02
  Speaker 1: last two weeks. Freedom of speech. You know that he
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  Speaker 1: has a reason for doing this, that he felt that
• 4:09
  Speaker 1: protecting freedom of speech was worth buying a social media
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  Speaker 1: company for. I don't know if you guys saw the
• 4:14
  Speaker 1: tweets overnight from Jack Dorsey, but Jack Dorsey essentially said
• 4:19
  Speaker 1: that he was worried about the platform being a publicly
• 4:24
  Speaker 1: traded company, and he said I'm paraphrasing, but he said
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  Speaker 1: in the tweets that the first step was to take
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  Speaker 1: the company out of the hands of Wall Street and
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  Speaker 1: that he believes Elon Mark Musk was the single person
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  Speaker 1: that could kind of bring Twitter back on track with
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  Speaker 1: what he wants it to be, which is the global
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  Speaker 1: public town square, you know, the point of consciousness and
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  Speaker 1: debate for for social media users globally, which we should
• 4:51
  Speaker 1: point out Jeff Bezos kind of made fun of him
• 4:53
  Speaker 1: for her, right. Um. What's interesting here is also the
• 4:57
  Speaker 1: twenty one billion dollars of financing nationality meant if you
• 5:00
  Speaker 1: are borrowing or actually twenty five and a half. Actually
• 5:02
  Speaker 1: I want to talk about the financing that he got
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  Speaker 1: twenty five and a half billion dollars. He has to
• 5:07
  Speaker 1: pay that back, which means Twitter has to make money.
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  Speaker 1: How are we going to do that. I did giggle
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  Speaker 1: a little bit because ultimately he's the world's richest man
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  Speaker 1: and it doesn't matter. You know, we always joke that
• 5:16
  Speaker 1: he's cash poor and rich on paper, but here's the
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  Speaker 1: world's richest man, and he has options. You know, the
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  Speaker 1: twenty five point five billion, you know, thirteen billion dollars
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  Speaker 1: of it is split between fixed term debt and revolving
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  Speaker 1: credit lines. You saw SMP got global ratings UM put
• 5:33
  Speaker 1: Twitter on negative watch overnight because of, you know, the
• 5:36
  Speaker 1: debt burden going forward. I think I'm right in saying
• 5:38
  Speaker 1: that the interest payments on that debt is greater than
• 5:41
  Speaker 1: the forecast for full year bit DAR so, so it's
• 5:45
  Speaker 1: a significant transaction that's taking place. The twelve point five
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  Speaker 1: billion margin loan is secured against sixty two billion dollars
• 5:54
  Speaker 1: of Elon Musk's Tesla stock, which is nuts right, sixty
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  Speaker 1: two billion dollars of class rules of borrow, twelve point
• 6:01
  Speaker 1: five billion dollars of debt um and then on the
• 6:04
  Speaker 1: twenty one billion dollars side of equity financing. He has options.
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  Speaker 1: Like We've written a lot on the Bloomberg today about
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  Speaker 1: those options, and there are many of them. It is wild.
• 6:13
  Speaker 1: The story is wild. If there's a lot more going on,
• 6:16
  Speaker 1: we have fortunately have to leave it there. Belisa Brahma
• 6:22
  Speaker 1: Wix joins me. Thank god during you here to past,
• 6:25
  Speaker 1: rescuing me from really a sense of abandonment at the
• 6:29
  Speaker 1: top of the show. We can talk about that later. Yes,
• 6:31
  Speaker 1: this will not be my therapy session, I promise um.
• 6:34
  Speaker 1: But anyways, let's talk about these markets here really tanking
• 6:39
  Speaker 1: down one and a half percent. I thought this is
• 6:41
  Speaker 1: past us, Lisa. Honestly, I think that this is a
• 6:43
  Speaker 1: fascinating moment because we're not just talking about rate hiking fears,
• 6:48
  Speaker 1: but also what we're seeing in earnings. And I know
• 6:50
  Speaker 1: Gina and Martin Adde's has been tracking this, and I'm
• 6:52
  Speaker 1: curious to hear her interpretation of the downside surprises that
• 6:57
  Speaker 1: have been absolutely hammered. Yeah, well, let's bring your right.
• 7:00
  Speaker 1: I have nothing else to add. We only have the
• 7:02
  Speaker 1: wisdom of Gina to go to. Of course, she is
• 7:05
  Speaker 1: the head of equity strategy here at Bloomberg Intelligence. Gina,
• 7:08
  Speaker 1: thank you so much for joining us. What do you
• 7:10
  Speaker 1: make of the cell off today? I think it's fascinating
• 7:12
  Speaker 1: that we were worried we went from inflation concerns to
• 7:15
  Speaker 1: demand concerns very quickly. Yeah, I think it's honestly, I
• 7:20
  Speaker 1: don't think the inflation concerns have gone away pretty so
• 7:22
  Speaker 1: I would like to say they have. It is still
• 7:24
  Speaker 1: the source of the greatest thanks in the S and
• 7:26
  Speaker 1: P five. I think that the demand concerns are an
• 7:28
  Speaker 1: interesting point because the demand concerns are not only for
• 7:33
  Speaker 1: the mega caps, which is where we're going to see
• 7:35
  Speaker 1: the most profound impact in the market, but also there's
• 7:38
  Speaker 1: a lot of nervousness that the consumer is just going
• 7:40
  Speaker 1: to fall out of bed. I mean, you know, I
• 7:42
  Speaker 1: hear this on a day to day basis, is Okay,
• 7:44
  Speaker 1: how much can the consumer hold on? How much can
• 7:46
  Speaker 1: they keep growing, keep spending. Certainly, now the housing market
• 7:50
  Speaker 1: is likely to turn over, We're going to see interest
• 7:52
  Speaker 1: rates rise, which is going to increase the cost of
• 7:54
  Speaker 1: borrowing and the cost of debt for the consumers. Certainly,
• 7:57
  Speaker 1: that's going to be it. So there's a lot of
• 7:59
  Speaker 1: pessimism that has bubbled up to the surface over the
• 8:02
  Speaker 1: course of the last month with respect to the US consumer,
• 8:04
  Speaker 1: and that is new. I do think the companies are
• 8:07
  Speaker 1: generally giving us mixed results. We have not seen you know,
• 8:11
  Speaker 1: broad widespread weakness, but we have seen some highlighted weakness
• 8:15
  Speaker 1: specifically in the industrial space as well as in the
• 8:19
  Speaker 1: in the tech and communication space that the market is
• 8:21
  Speaker 1: certainly we're nervous about right now. Gina, Let's sit on
• 8:24
  Speaker 1: the industrial space, especially with General Electric and the shares
• 8:27
  Speaker 1: they're plunging, as well as some of the other issues
• 8:30
  Speaker 1: that we're seeing. How much is this an execution story
• 8:33
  Speaker 1: and how much is this something else that is a
• 8:35
  Speaker 1: broader macro story. No, I think it's mostly with General Electric.
• 8:39
  Speaker 1: I think it's mostly about supply chain at this point. Yeah,
• 8:43
  Speaker 1: I mean, you know, General Electric, With all due respect
• 8:46
  Speaker 1: to GE, it kind of stopped being a massive bell
• 8:49
  Speaker 1: weather several years ago. Um, it's not as important as
• 8:52
  Speaker 1: it used to be. But I think it's mostly a
• 8:54
  Speaker 1: supply chain and inflation story. It's interesting to me that
• 8:58
  Speaker 1: sort of sentiment wise, we're talking about e s the
• 9:00
  Speaker 1: bell weather and not ups as the bell weather, and
• 9:04
  Speaker 1: I think the tell the transportation stocks are significantly more
• 9:08
  Speaker 1: important to watch. But it's just a function of sentiment, Right,
• 9:11
  Speaker 1: what do we go to, We go to the miss,
• 9:13
  Speaker 1: we go to what's not working in the market on
• 9:16
  Speaker 1: a day when stocks are down during an earning season
• 9:19
  Speaker 1: that was hopefully going to bail us out of all
• 9:21
  Speaker 1: this weakness. But kind of the reality is there's more
• 9:24
  Speaker 1: ups is out there. There's more positive notes on price
• 9:27
  Speaker 1: pass through than there are negatives still um and until
• 9:31
  Speaker 1: that balance shifts, we've got to pay attention to both, right.
• 9:35
  Speaker 1: So I do think that g E is a function
• 9:37
  Speaker 1: of supply chain risks continuing, probably certainly some slow down.
• 9:42
  Speaker 1: An end market demanded is a giant conglomerate still, but
• 9:46
  Speaker 1: I would watch the transports more importantly. What what do
• 9:48
  Speaker 1: you really think is going to lead the market? It's
• 9:49
  Speaker 1: going to be things like ups and J. B Hunts
• 9:52
  Speaker 1: of the world, the FedEx Is of the world. Where
• 9:54
  Speaker 1: you want to watch for weakness to emerge in the
• 9:56
  Speaker 1: early cycle, stuff like that first as a precursor or
• 10:00
  Speaker 1: to a slowdown. Do you know you're talking about Bell
• 10:03
  Speaker 1: Weathers here, and among all the ones you just named,
• 10:06
  Speaker 1: I'm also thinking forward GM carmakers, both of which are
• 10:09
  Speaker 1: reporting earnings after the bell today. But they're also a
• 10:12
  Speaker 1: significant chunk, at least historically, of the American labor market.
• 10:16
  Speaker 1: And I think I want to kind of square the
• 10:18
  Speaker 1: two because you have auto earnings, you have this labor
• 10:21
  Speaker 1: market tightness. Essentially, you also have tech earnings this week,
• 10:24
  Speaker 1: and it kind of seems like perhaps Apple, Amazon is
• 10:29
  Speaker 1: perhaps on a labor perspective, becoming a bigger part of
• 10:32
  Speaker 1: that market. Is that a fair assumption to make and
• 10:35
  Speaker 1: is that something to take into account when you look
• 10:37
  Speaker 1: at some of these companies. Yeah, I absolutely think you
• 10:40
  Speaker 1: want to take into account all forms of price increase.
• 10:43
  Speaker 1: Labor is something we've been talking about for the last
• 10:45
  Speaker 1: six months as an accelerating concern. It's still not enough
• 10:50
  Speaker 1: to compress operating margins. Operating margins for the SMP may
• 10:54
  Speaker 1: be surprised to know are actually on track to grow
• 10:57
  Speaker 1: um this quarter relative to the quarter a year ago,
• 11:00
  Speaker 1: which is a tremendous testament to corporate strength and managing costs.
• 11:04
  Speaker 1: That income margins are falling, but operating margins are growing,
• 11:07
  Speaker 1: So that's a pretty big positive. You would see operating
• 11:10
  Speaker 1: margins start to compress an environment where labor costs was
• 11:13
  Speaker 1: becoming a widespread issue, but it is becoming a bigger issue.
• 11:17
  Speaker 1: As a matter of fact, we track mentions of labor
• 11:19
  Speaker 1: costs in transcripts and the number of mentions has accelerated
• 11:23
  Speaker 1: very rapidly over the course of the last several quarters. Certainly,
• 11:27
  Speaker 1: also sentiment reflecting labor costs, so we look at sentiment
• 11:30
  Speaker 1: around those mentions has also gotten increasingly negative. So companies
• 11:36
  Speaker 1: are very concerned about rising labor costs. They're also very
• 11:39
  Speaker 1: concerned about simply the supply of labor and sourcing that labor,
• 11:42
  Speaker 1: which is pressuring labor costs higher. It's not such a
• 11:46
  Speaker 1: widespread issue that I'm worried about it depressing operating margins,
• 11:50
  Speaker 1: and certainly results so far this quarter would support that thesis.
• 11:54
  Speaker 1: But longer term, if we can't get any new supply
• 11:56
  Speaker 1: of labor coming into the market, we're going to continue
• 11:59
  Speaker 1: to see abercasts accelerating and they may be a longer
• 12:02
  Speaker 1: term depression on those depressants on those margins that we
• 12:04
  Speaker 1: need to look out for. Well, Gina Martin Adams, thank
• 12:07
  Speaker 1: you so much, as always, Bloomberg Intelligence, Chief equity strategist.
• 12:13
  Speaker 1: You know, every day we kind of get the drip
• 12:15
  Speaker 1: drip drip out of the Eastern European nations. What's going
• 12:19
  Speaker 1: on in Ukraine and the latest with you and Secretary
• 12:22
  Speaker 1: Channel Antonio Guterres over in Moscow. Kind of trying to
• 12:27
  Speaker 1: dovetail the two nations and pitch it forward. I do wonder,
• 12:31
  Speaker 1: cretty how much we're getting to some sort of resolution
• 12:34
  Speaker 1: versus just an understanding that we're going to be in
• 12:38
  Speaker 1: this for possibly months, if not years. And you know,
• 12:41
  Speaker 1: as sad as it is to say on a human level,
• 12:44
  Speaker 1: I think from a markets perspective, there's become this kind
• 12:47
  Speaker 1: of resilience to those headlines in a way to where
• 12:50
  Speaker 1: you now see the markets perhaps trading on China, trading
• 12:52
  Speaker 1: on COVID. I feel like the actual, say, risk of
• 12:56
  Speaker 1: a nuclear attack, for example, is that priced into the
• 12:59
  Speaker 1: market well? And and so I guess the dissonance between
• 13:02
  Speaker 1: the market blasans I know that's not really a word,
• 13:05
  Speaker 1: and the humanitarian pain and suffering right now are increasingly dissonant.
• 13:10
  Speaker 1: Dr Ariel Cohen has been tracking, and he's senior fellow
• 13:13
  Speaker 1: at the Atlantic Council in eur Asia Center. I'm wondering, Ariel,
• 13:17
  Speaker 1: how much you see a resolution in the near term
• 13:21
  Speaker 1: and easing and some of the suffering. Are we just
• 13:23
  Speaker 1: getting benumbed to the headlines that really have been dominating
• 13:26
  Speaker 1: what we've been watching over the past couple of months.
• 13:30
  Speaker 1: I'm not being numbed. I'm horrified. Uh. The mayor of
• 13:35
  Speaker 1: mariupol vi Um city uh in southern Ukraine that the
• 13:42
  Speaker 1: Russians are fighting to take now for two months, the
• 13:45
  Speaker 1: mayor said, twenty thousand people were killed. This is civilians, men, women, men, men, women,
• 13:51
  Speaker 1: children and the elderly. It is horrifying. And now we
• 13:56
  Speaker 1: see the expansion of the hostilities to include the neighboring Moldova,
• 14:02
  Speaker 1: in a separatist part of Moldova called Transnistria. For those
• 14:08
  Speaker 1: who don't know it, please open Google and look up
• 14:10
  Speaker 1: trans Um. There were several explosions yesterday and today. The
• 14:16
  Speaker 1: Kremlin said that they are quote unquote concerned, and the
• 14:21
  Speaker 1: rumors swirling that Russia may open another front against Ukraine
• 14:26
  Speaker 1: because they're supporting these separatists and they may fly their
• 14:30
  Speaker 1: own troops to Transnistria and attack Ukraine from the west.
• 14:35
  Speaker 1: Going to the major port city of Odessa on the
• 14:38
  Speaker 1: Black Seat Rio, he went exactly where I wanted you
• 14:42
  Speaker 1: to go, and that is to Moldova. We hear a
• 14:44
  Speaker 1: lot about Holland Belarus. Can you speak a little bit
• 14:47
  Speaker 1: about the history of the Moldova when it comes to
• 14:50
  Speaker 1: this region and the significance of it when it comes
• 14:53
  Speaker 1: to the war in Ukraine. Yeah, but before that, I
• 14:57
  Speaker 1: was i'ld like to say that from my talks in
• 15:01
  Speaker 1: Moscow before Covient, from reading some of the memoirs and books,
• 15:05
  Speaker 1: by putting advisors. When they are in crisis, their strategy,
• 15:11
  Speaker 1: the Russian strategy, is to expand the perimeter of the crisis,
• 15:15
  Speaker 1: not to shrink it, not to negotiate. But they are
• 15:19
  Speaker 1: convinced in their own superiority, I would I would add
• 15:24
  Speaker 1: they're convinced erroneously in their own superiority over the West.
• 15:30
  Speaker 1: They think we're soft. They think where if heed the thing,
• 15:33
  Speaker 1: we're scared, which I didn't see much evidence of that yet. Um.
• 15:39
  Speaker 1: And they think that by expanding and escalating, they're going
• 15:43
  Speaker 1: to win this war and have no doubt. I'm in
• 15:47
  Speaker 1: Sweden right now on a naval base. Uh. This is
• 15:51
  Speaker 1: not a war in Ukraine alone. We're mentioning Moldova that
• 15:55
  Speaker 1: the Russians may go to the Baltic state and may
• 15:58
  Speaker 1: go to Finland and Sweden. I think it'll be suicidal
• 16:01
  Speaker 1: because Finland and Sweden are joining NATO. But they are
• 16:05
  Speaker 1: expanding so far the perimeter of this all Europe War. Now,
• 16:12
  Speaker 1: Moldova was occupied first by the Russian Empire, then by
• 16:16
  Speaker 1: the Soviets Union. Part of it was um in Romania,
• 16:21
  Speaker 1: and Stalin took in the ninety nine when he made
• 16:24
  Speaker 1: a pact with Hitler. Moldova is independent. It's pro Western,
• 16:29
  Speaker 1: pro EU, pro Us, pro NATO, and it's led by
• 16:33
  Speaker 1: a woman who went to Canada, Schoo, Maya Sandu. And
• 16:37
  Speaker 1: the Russians don't like it. They have the separatists in Transistria.
• 16:41
  Speaker 1: They probably would like to take Moldova as well. When
• 16:44
  Speaker 1: you say they, are you talking about Vladimir Putin? Are
• 16:47
  Speaker 1: you talking about Russians at large in the entire military complex.
• 16:52
  Speaker 1: You know, this is the sixty four trillion ruble question.
• 16:56
  Speaker 1: How much is that worth at this point? Yeah? Right, Um,
• 17:00
  Speaker 1: not much so um. It is Putin who is expressing
• 17:08
  Speaker 1: the collective unconsciousness of the majority of Russians, not of
• 17:13
  Speaker 1: all the Russians far from and just as we saw
• 17:17
  Speaker 1: more than a hundred years ago when the Bolsheviks took
• 17:20
  Speaker 1: over Russia, all the elite flushed out of there. They
• 17:24
  Speaker 1: went to Paris, they went to Germany, to Berlin, to product.
• 17:28
  Speaker 1: A lot of people are leaving Russia today. It's a
• 17:30
  Speaker 1: huge brain drain. A lot of it professionals, a lot
• 17:33
  Speaker 1: of engineers. If you are thinking about your future in
• 17:38
  Speaker 1: Russia and you speak English and you're sort of cosmopolitan,
• 17:41
  Speaker 1: you get the heck out of there. However, a lot
• 17:45
  Speaker 1: of Russian people, less educated, those who don't necessarily live
• 17:48
  Speaker 1: in big cities or don't work for the government. Um,
• 17:52
  Speaker 1: they are supportive of putting their brainwashed by the horrific
• 17:56
  Speaker 1: Russian propaganda who calls Ukraine Nazi, but call of the West.
• 18:01
  Speaker 1: You know what, They call it gay ropa because you
• 18:04
  Speaker 1: know Europe has more LGBT rights in Russia, which is
• 18:09
  Speaker 1: not complicated, right, um and um. They are casting this
• 18:14
  Speaker 1: conflict in existential and ideological terms, not unlike what the
• 18:19
  Speaker 1: Communists did thirty plus years ago. We just have about
• 18:23
  Speaker 1: a minute left. From your perspective, how do you see
• 18:25
  Speaker 1: this ending? Well, my big fear and I talked to
• 18:30
  Speaker 1: a lot of colleagues about nuclear escalation, not necessarily an
• 18:35
  Speaker 1: all out our Mageddon's style nuclear war, but Russia throwing
• 18:39
  Speaker 1: a nuke into Ukraine just to bang the table show
• 18:43
  Speaker 1: they're serious, and then they think we'll go to some
• 18:47
  Speaker 1: serious negotiations, will recognize their sphere of influence, not just
• 18:51
  Speaker 1: in the former Soubet Union, but in all of Eastern
• 18:54
  Speaker 1: Europe served going to status quo ante the end of
• 18:57
  Speaker 1: the Cold War. Eastern Europe is our side of nature,
• 19:00
  Speaker 1: and in the Russian influence weakening all of Europe, weakening NATA,
• 19:04
  Speaker 1: kicking the US out of Europe? Is that going to happen?
• 19:08
  Speaker 1: I don't think well. Dr Ariel Cohen, the senior fellow
• 19:11
  Speaker 1: at the Atlantic Council of your Asia Center, we thank
• 19:13
  Speaker 1: you so much for your perspective. You know, we are
• 19:19
  Speaker 1: a lot talking about a lot of red today, deeply
• 19:22
  Speaker 1: negative for a lot of different stocks, and in particular
• 19:25
  Speaker 1: a number of potholes in the tech at the industrial spaces.
• 19:29
  Speaker 1: And there's no one better to really link industrial and
• 19:32
  Speaker 1: macro at a time when we are hearing those concerns
• 19:35
  Speaker 1: really coming together than Russell Price, whos chief economists at
• 19:39
  Speaker 1: amer Prize Financial, stemming from Detroit and having analyzed companies
• 19:44
  Speaker 1: including Caterpillar and John Deere. Russell, thank you so much
• 19:47
  Speaker 1: for being with us. I want to read you a
• 19:49
  Speaker 1: quote Larry Kulp of General Electric in the earnings call
• 19:52
  Speaker 1: It in an interview said it is as challenging a
• 19:55
  Speaker 1: back rob backdrop as I think I've ever seen. Do
• 19:59
  Speaker 1: you think that we're over or estimating or underestimating the
• 20:02
  Speaker 1: effects the ramifications of these pro prolonged supply chain disruptions,
• 20:07
  Speaker 1: you know, I think it's a it makes very challenging environment.
• 20:09
  Speaker 1: So I think it's it's hard to um uh underestimate
• 20:14
  Speaker 1: at this time right now. It's not just the point
• 20:17
  Speaker 1: of a product being short supply, but of course we
• 20:21
  Speaker 1: also have pricing issues to talk about as well. So
• 20:24
  Speaker 1: companies are really struggling not just with their component availability
• 20:28
  Speaker 1: when it comes to their energy or technology or even
• 20:32
  Speaker 1: low technology goods or even agricultural goods. It really crosses
• 20:37
  Speaker 1: the entire spectrum. And so it's very challenging environment for
• 20:41
  Speaker 1: the industrial base overall. When we're talking about the industrial basis,
• 20:46
  Speaker 1: let's broaden that out to all of corporate America. Not
• 20:48
  Speaker 1: to get too brought here, UM, but I'm curious about
• 20:51
  Speaker 1: the commodity impact. We're talking about oil prices. I mean,
• 20:53
  Speaker 1: they've come off their highs obviously, um. But that I
• 20:57
  Speaker 1: think the consensus here is that's very much a short
• 20:58
  Speaker 1: term issue. As the more and more dependence on on
• 21:02
  Speaker 1: Russian supply kind of get removed from the market. How
• 21:04
  Speaker 1: much of an impact does that actually have to Corporate America.
• 21:09
  Speaker 1: It's a corporate marria. That's one of the things we're
• 21:11
  Speaker 1: evaluating right now during the current earnings release season to
• 21:14
  Speaker 1: see which companies are able to pass along there the
• 21:17
  Speaker 1: added costs that they're seeing. We're evaluating which companies are
• 21:20
  Speaker 1: able to do that, which companies are still struggling with
• 21:23
  Speaker 1: the negative effects of just simple supply. So energy overall,
• 21:28
  Speaker 1: we expect energy to reduce US GDP this year by
• 21:32
  Speaker 1: a little more than half a percentage point just based
• 21:35
  Speaker 1: on the cost. So that's a very significant negative impact,
• 21:39
  Speaker 1: not just for consumers, but Corporate America is certainly challenged
• 21:45
  Speaker 1: as well. But of course with the SMP five you
• 21:48
  Speaker 1: have that offset to some degree by the energy related
• 21:52
  Speaker 1: companies that are benefiting from that. So it's a it's
• 21:55
  Speaker 1: a mix right now, but overall, a very distinct negative.
• 21:59
  Speaker 1: How strong is that you as economy. How much of
• 22:01
  Speaker 1: a rate hiking cycle can we withstand? I think that
• 22:04
  Speaker 1: it's going to be able to withstand the rate hiking
• 22:06
  Speaker 1: cycle fairly well better than it has in the past.
• 22:10
  Speaker 1: In the past and four of the last five rate
• 22:13
  Speaker 1: hip cycles we ended up with recession this in each
• 22:16
  Speaker 1: of those periods. However, we're also correlated with high point
• 22:21
  Speaker 1: points of consumer debt, and right now consumer debts are
• 22:25
  Speaker 1: actually low and borrowing demand is low, So the translation
• 22:29
  Speaker 1: mechanism for higher rates into the broader economy is weakened
• 22:34
  Speaker 1: by that effect of consumers demand for borrowing being weaker.
• 22:38
  Speaker 1: Can we tie in where we began this idea of
• 22:39
  Speaker 1: supply chain disruptions, especially as we talk about lockdowns in
• 22:43
  Speaker 1: China and how much that could stem the tide of
• 22:46
  Speaker 1: growth and really reduce some of the strength in order
• 22:51
  Speaker 1: to see a more material impact negatively from these rate hikes, Yeah,
• 22:55
  Speaker 1: I think that's going to have certainly some negative impact,
• 22:59
  Speaker 1: but I think it will be reletively modest. Consumers are
• 23:02
  Speaker 1: in the transsition period, transitioning from spending more on services, uh,
• 23:08
  Speaker 1: from spending more on goods. We had the surge and
• 23:12
  Speaker 1: spending on goods there for about two years as the
• 23:15
  Speaker 1: ability to spend on services has been so significantly diminished
• 23:19
  Speaker 1: by COVID h conditions. Now, as COVID conditions are alleviating,
• 23:25
  Speaker 1: we hopefully that that remains the case. That consumers are
• 23:29
  Speaker 1: spending more of their dollars on services and UH so
• 23:32
  Speaker 1: some of the pressure on the good side of the
• 23:34
  Speaker 1: equation should ease to some degree, and that that corresponds
• 23:39
  Speaker 1: with the supply pressures that are coming out of China
• 23:42
  Speaker 1: because of their widespread lockdowns, well widespread lockdowns. But does
• 23:47
  Speaker 1: that create an environment where a lot of these companies
• 23:50
  Speaker 1: are very quickly trying to find alternative alternative sources. I mean,
• 23:55
  Speaker 1: I think one of the major kind of appeals of
• 23:58
  Speaker 1: Apple and Microsoft and the like up besides the fact
• 24:01
  Speaker 1: of the Apple and Microsoft, is that their supply chains
• 24:03
  Speaker 1: are incredibly secure. Tim Cook has been hailed as kind
• 24:06
  Speaker 1: of that's been his legacy that he secured these very
• 24:08
  Speaker 1: strong supply chains that have weathered COVID that whether the
• 24:12
  Speaker 1: trade war and vice versa, are more and more companies
• 24:14
  Speaker 1: trying to do that, Yes, I think so, I mean,
• 24:18
  Speaker 1: certainly uh from a related perspective, But that gets expensive
• 24:22
  Speaker 1: very quickly. Yes, it does, particularly when you're competing with
• 24:25
  Speaker 1: so many of your UH peers trying to secure additional
• 24:30
  Speaker 1: supplies at a time when supply is actually diminishing rather
• 24:34
  Speaker 1: than improving. And you see that particularly with semiconductors UH
• 24:38
  Speaker 1: for the last several months, being based outside of Detroit,
• 24:41
  Speaker 1: we've been looking for the signs of improvement semiconductor supplies
• 24:45
  Speaker 1: going to the automobile industry because that's so important to
• 24:49
  Speaker 1: the health and vibrancy of the US economy, and uh,
• 24:52
  Speaker 1: we just haven't seen that. Semiconductor supplies remained a very
• 24:56
  Speaker 1: significant impediment and they really have not improved shown much
• 24:59
  Speaker 1: improvement at all. So we're still hoping to see that
• 25:02
  Speaker 1: in the months ahead, particularly in the second half of
• 25:05
  Speaker 1: the year as additional supply is supposed to come online,
• 25:08
  Speaker 1: but we have yet to uh to see that well.
• 25:12
  Speaker 1: Russell Price, chief economist at a Mail Price Financial, We
• 25:15
  Speaker 1: thank you so much for your time joining us here
• 25:17
  Speaker 1: live in our interactive broker studio. Rare treat for Lisa
• 25:20
  Speaker 1: and myself. Thank you as always a throwback to an
• 25:23
  Speaker 1: era where we were unmasked and actually seeing each other
• 25:26
  Speaker 1: in person, so we appreciate that. Yeah, it feels like
• 25:28
  Speaker 1: twenty nineteen all over again, sort of. Thanks for listening
• 25:34
  Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen
• 25:37
  Speaker 1: to interviews with Apple Podcasts or whatever podcast platform you prefer.
• 25:42
  Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three
• 25:46
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• 25:49
  Speaker 1: Before the podcast. You can always catch us worldwide at
• 25:51
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