'Bloomberg The Open' Full Show (04/07/2022)
JONATHAN: LIVE FROM NEW YORK CITY FOR OUR AUDIENCE THIS MORNING, GOOD MORNING. EQUITIES LOWER. YOUR 10 YEAR YIELD HIGHER. THE COUNTDOWN TO THE OPEN STARTS RIGHT NOW.
>> EVERYTHING YOU NEED TO GET SET FOR THE START OF U.S. TRADING. THIS IS "BLOOMBERG: THE OPEN" WITH JONATHAN FERRO.
JONATHAN: LIVE FROM NEW YORK CITY, WE BEGIN WITH THE BIG ISSUE. SETTING THE STAGE FOR MAY. >> THE FED GOVERNORS ARE SPEAKING MORE HAWKISH LATE. >> THE FED MINUTES. >> 50 BASIS POINT RATE HIKES ARE ON THE TABLE. >> THEY ARE LIKELY TO GO 50 BASIS POINTS IN MAY. >> THE MARKET IS WELCOMING THESE 50 BASIS POINT HIKES.
>> THE MAY 4 MEETING. >> THE NEED TO RAISE RATES AND START CUTTING DOWN THE SIDES OF THE BALANCE SHEET. >> THEY ARE THROWING THE KITCHEN SINK AT FORWARD GUIDANCE TRYING TO RE-ANCHOR THOSE INFLATION EXPECTATIONS. >> THEY ARE TRYING SO HARD TO GET THE SOFT LANDING AND RETAIN INFLATION CREDIBILITY.
>> THIS JOB OF ORCHESTRATING A SOFT LANDING WILL BE DIFFICULT. TOM: JOINING US IS GERALDINE -- JONATHAN: JOINING US IS GERALDINE SUNDSTROM AND GEORGE BORY. GERALDINE, LET'S START WITH YOU. YOU CALL THE ANTI-GOLDILOCKS. WALK ME THROUGH IT. GERALDINE:
LIKE AN GOLDILOCKS, THE TEMPERATURES ARE NOT QUITE RIGHT. INFLATION IS TOO HOT AND GROWTH IS GETTING TOO COLD. THAT IS THE CROSS THE FED HAS TO FACE. WE ARE STARTING WITH GROWTH
THAT IS PRETTY ROBUST SO FAR, BUT CERTAIN LEADING INDICATORS ARE PUSHING DOWNWARD. THE FED PROBABLY HAS A BETTER JOB THAN THE ECB WHERE THERE GROWTH IS FALLING MOST SUBSTANTIALLY. EXPECTATIONS ARE SKYHIGH. BANK OF AMERICA GOES WITH A 50 BASIS POINT MOVE AT THE NEXT MEETING, THE ONE AFTER THAT, AND THE ONE AFTER THAT.
25 AFTER ALL OF THAT UNTIL WE GET THE FED FUNDS TO 3.25% OR 3.50%. THE EXPECTATIONS ARE HUMONGOUS. GEORGE BORY, IN YOUR CAREER HAVE YOU EVER SEEN THE FEDERAL RESERVE THIS HAWKISH? GEORGE: IN OVER 30 YEARS OF WORKING IN THE BOND MARKET I HAVE NEVER SEEN THE FED AS HAWKISH AND AS EXPLICITLY HAWKISH AS THEY HAVE BEEN OVER LAST MONTH AND A HALF OR SO. THE PIPIT STARTED IN JANUARY AND THE RUSSIAN INVASION -- THE PIPIT STARTED IN JANUARY -- THE PIVOT STARTED IN JANUARY AND THE RUSSIAN INVASION ACCELERATED IT. WHEN THE DOVES BECOME HAWKS IN THE HAWKS START DESCENDING ON MARKETS, IT IS CLEAR A SHOCK AND AWE STRATEGY IS EXACTLY WHAT THEY ARE TRYING TO DO. THEY NEED TO NORMALIZE AND THEY
NEED TO NORMALIZE QUICKLY. THEY WERE BEHIND THE CURVE, THEY ARE BEHIND THE CURVE. THEY ARE USING AS MUCH GUIDANCE AS POSSIBLE TO GET MARKET EXPECTATIONS UP. MARKET EXPECTATIONS ARE UP BUT NOW THEY NEED TO EXECUTE.
MARKETS ARE STILL HEAVILY BRUISED FROM THEIR ACTIONS AND THEIR COMMENTS OVER THE LAST SEVERAL WEEKS. OUR BIAS IS YIELDS PROBABLY STILL GO HIGHER FROM HERE. TOM: THIS IS THE ISSUE -- JONATHAN: THIS IS THE ISSUE.
WE HAVE NEVER SEEN THEM THIS HAWKISH BECAUSE WE HAVE NEVER SEEN THEM THIS DOVISH. THE FOMC PUT MINUTES OUT. ONE OR MORE 50 BASIS POINT INCREASES IN THE TARGET RANGE COULD BE APPROPRIATE IN FUTURE MEETINGS. ON BALANCE SHEET REDUCTION, MONTHLY CAPS OF ABOUT $60 BILLION FOR TREASURY SECURITIES AND ABOUT 35 BILLION DOLLARS FOR AGENCY MBS WOULD LIKELY BE APPROPRIATE. THEY HAVE SOME BIG PLANS. MICHAEL: THIS IS PROBABLY DOUBLE WHAT THEY DIDN'T 2017 VERSUS 2019.
-- WHAT THEY DID IN 2017 THROUGH 2019. THEY ARE GOING TO START WITH ABOUT $95 BILLION A MONTH, ACTUALLY PHASED IN OVER THREE MONTHS. 95 BILLION DOLLARS A MONTH IN TREASURIES AND MBS. BECAUSE THEY WILL NOT HAVE THAT MUCH REFUNDING EACH MONTH, THEY WILL FILL IN THE BALANCE WITH TREASURY BILLS AND SPEND THEIR TREASURY BILLS DOWN TO ZERO BECAUSE IN AN AMPLE RESERVE SYSTEM THEY ARE USING THEY DO NOT NEED THE T-BILLS AS THEY USED TO IN THE PAST. WHAT DOES THIS MEAN FOR THE SIZE OF THE
BALANCE SHEET? THAT IS THE OPEN QUESTION. HOW FAR DO THEY GO? IF YOU LOOK AT THE PLOT OF WHAT THEIR PLANS WOULD DO, IF THE END OF 2024 YOU WOULD HAVE JUST UNDER $6 TRILLION ON THE BALANCE SHEET. JUST UNDER $9 TRILLION. IS THAT GOING TO BE ENOUGH?
YOU CAN SEE THE TWO CIRCLES WHERE THE BALANCE SHEET GOT TO REMEMBER THE MARKETS BROKE. SHORT-TERM AND REPO STRUGGLED AND JAY POWELL WAS THE FIRST TO REVERSE HIMSELF WHEN THEY BUILT THE BALANCE SHEET BACK UP AGAIN. HOW FAR DO THEY GO? THEY'LL PROBABLY HAVE TO GO UNTIL THEY BREAK SOMETHING. THAT RAISES THE QUESTION OF WHAT YOU DO WITH MORTGAGES.
THE FUNNY THING ABOUT THE MORTGAGE CHART IS IT IS LUMPY AS IT GETS BIGGER AND THAT IS BECAUSE YOU HAVE PREPAYMENT RISK. DOES THE FED HOLD ONTO MORTGAGES FOR 30 YEARS? THEY ARE TALKING ABOUT THE POSSIBILITY OF SELLING THEM AND WE DO NOT KNOW WHAT IMPACT THAT WILL HAVE ON THE MORTGAGE MARKET. WE HAVE SOME ANSWERS AS TO WHAT THEY ARE PLANNING BUT WE DO NOT KNOW WHAT WE ARE GOING TO GET OUT OF IT. JONATHAN: MASSIVE PLANS. THANK YOU. JOINING US NOW IS CHRIS HARVEY OF WELLS FARGO. CAN YOU TAKE A COMFORT ON THE PLANS BEING LAID OUT BY THIS FEDERAL RESERVE? CHRIS: CAN I TAKE ANY COMFORT? WHAT THE FED IS GOING TO DO IS FOLLOW THE INSTRUCTIONS OF THE MARKET. THE MARKET HAS TOLD THEM TO GET MORE HAWKISH. AS FAR AS THE BALANCE SHEET,
THIS IS MY PET PEEVE, WE WILL LOOK BACK OVER THE YEARS, ACADEMICS, INVESTORS, AND WE WILL SCRATCH OUR HEADS AND SAY WHY DID THE FED EVER CONTINUE TO BUY BONDS IN JUNE, JULY, AUGUST, SEPTEMBER. IT MADE NO SENSE AT THAT TIME. WHAT THEY'RE DOING IS A TACIT AGREEMENT WITH THAT BELIEVE, WE MADE A MISTAKE AND WE HAVE TO REVERSE THAT MISTAKE AND WE HAVE TO REVERSE IT AS QUICKLY AS WE CAN. MANY INVESTORS ARE FOCUSED ON RATE HIKES, THEY ARE FOCUSED ON BALANCE SHEETS. ONE THING I THINK PEOPLE DO NOT FOCUS ON ENOUGH IS THE FACT YOU'VE TAKEN A TRILLION DOLLAR BUYER OUT OF THE MARKETPLACE. IF YOU LOOK AT WHEN THE FED OFFICIALLY ENDED BUYING BONDS, WHICH IS MARCH 9 OF THIS YEAR.
IF YOU LOOK AT 10 YEAR NOMINAL THEY STARTED TO WALK HIGHER. THE PERSON WHO IS STEPPING IN FOR THAT TRILLION DOLLAR BUYER -- WHAT WE ARE SEEING IS THE NORMALIZATION OF INTEREST RATES AS WE SHOULD HAVE SEEN A LONG TIME AGO. JONATHAN: ONE THING A LOT OF PEOPLE ARE SAYING IS THE FED WILL KEEP GOING UNTIL SOMETHING BREAKS. ARE YOU CONCERNED ABOUT Q4 --
ABOUT A REPEAT OF Q4 2018? GERALDINE: THEY NEED TO DELIVER AT THE PEAK OF INFLATION, WHICH COULD HAPPEN SOMETIME DURING THE SUMMER. AT WHAT POINT THEY WILL DECIDE THEY HAVE TO SOFT LAND. I THINK THAT IS THEIR INTENTION. I DO NOT THINK IT IS THEIR INTENTION TO BREAK SOMETHING.
LENDING INFLATION WITHOUT BREAKING GROWTH IS GETTING HARDER AND HARDER. JONATHAN: GEORGE BORY, YOUR THOUGHTS ON A REPEAT OF 2018? GEORGE: AS CHRIS SAID, THEY NEED TO NORMALIZE AS QUICKLY AS POSSIBLE. IF WE LOOK AT THE FIXED INCOME MARKET, THE FIXED INCOME MARKET HAS IT ABOUT RIGHT. WE ARE VERY FIXATED ON THE SHAPE OF THE CURVE. THE CURVE IS BASICALLY FLAT. THAT IS TELLING US THE FED IS MOVING VERY AGGRESSIVELY AND IT IS VERY DIFFICULT TO TAKE A MEANINGFUL DIRECTIONAL MOVE ON THE CURVE. WHEN YOU LOOK AT THOSE OUT OF 30, WE ARE VERY FLAT. WE THINK THAT WILL PERSIST FOR
QUITE SOME TIME. THE FED HAS THE WINDOW TO START TO MOVE POLICY UP TO NORMALIZE THE FRONT END OF THE CURVE, AND THEN WILL COME DOWN TO THE ECONOMICS AND THE TRAJECTORY OF INFLATION. WE STILL OF NEGATIVE REAL YIELDS AND WE THINK WE ARE GOING TO GET POSITIVE REAL YIELDS OVER THE COURSE OF THIS YEAR. WITH INFLATION STILL RUNNING HOT , NOT LIKELY TO PEAK UNTIL PROBABLY THE SUMMER, IT MEANS YIELDS CONTINUE TO PUSH HIGHER.
WE KNOW HIGHER YIELDS TEND TO BREAK THINGS FROM AN ECONOMIC PERSPECTIVE. WE ARE GOING TO SEE A SLOWDOWN IN GROWTH. THE BIG QUESTION IS DOES IT MORPH INTO A RECESSION? IT SEEMS UNLIKELY THAT WE WILL BE ABLE TO AVOID A HARDER LANDING. THE QUESTION IS WHEN?
IS IT IN SIX MONTHS? 12 MONTHS? MUCH FURTHER OUT? THE BOND MARKET IS TELLING YOU IT IS NOT THE NEXT 12 MONTHS BUT THAT COULD COME FORWARD IF THINGS START TO BREAK MORE QUICKLY THAN WE EXPECT. JONATHAN: I WOULD'VE EQUITIES ARE POSITIONED FOR THAT -- I WONDER IF EQUITIES ARE POSITIONED FOR THAT? ARE YOU STARTING TO SEE THAT BIAS CREEP IN, HOMEBUILDERS SOFTER, TRANSPORT SOFTER. WHAT IS YOUR INTERPRETATION OF THE PRICE ACTION? CHRIS: THE PRICE ACTION IS MORE DEFENSIVE. YOU ARE SEEING UTILITIES
OUTPERFORM, YOU ARE SEEING STAPLES OUTPERFORM. YOU ARE SEEING CYCLICALS AS TALK OF RECESSION BEGINNING TO UNDERPERFORM. BANKS ARE BEGINNING TO UNDERPERFORM DOUBLE DIGITS AT THE END OF FEBRUARY. WE THINK RECESSION IS PREMATURE. ECONOMIC MALAISE, ECONOMIC
SLOWDOWN, GUEST. WE WILL HAVE A RECESSION. I THINK MICHAEL HIT IT RIGHT ON THE HEAD. IF THE FED BREAKS SOMETHING WE ARE GOING TO HAVE A RECESSION. WHEN WE LOOK AT INFLATION, THERE IS INFLATION CAUSED BY GEOPOLITICAL AND INFLATION CAUSED BY THE DAY-TO-DAY ECONOMICS. IF THEY TRY TO FIGHT THE
INFLATION THAT IS GEOPOLITICAL DRIVEN, IN ALL LIKELIHOOD THINGS ARE GOING TO BREAK. WHAT I WORRY ABOUT IS DOES THIS FED SAY WE DO NOT WANT TO BE THE FED KNOWN AS THE ONES LETTING INFLATION BACK IN AND GETTING TOO HAWKISH? THIS IS TO BE DECIDED. DO YOUR POINT, WE ARE SEEING THE MARKETS REACT. I THINK IT IS PREMATURE. WE WILL SEE HOW THINGS PLAY OUT AS WE GO FORWARD. JONATHAN:
A GREAT LINEUP. CHRIS HARVEY, GEORGE BORY, GERALDINE SUNDSTROM STICKING WITH US. WITH YOUR MOVERS, HERE IS ABBY. ABIGAIL: LOTS OF IDIOSYNCRATIC STOCK MOVERS. SHARES OF HP SOARING ON THE NEWS WARREN BUFFETT'S BERKSHIRE HATHAWAY HAS TAKEN A $4.2 BILLION STAKE IN HP. IT REINFORCES THE COMPUTER MAKERS LONG-TERM CAPITAL VALUE STORY. OCCIDENTAL, ANOTHER BUFFETT
STOCK RAISING PIPER SANDLER TO OVERWEIGHT. TO THE DOWNSIDE, BARCLAYS NEGATIVE. THE BANK SEE MORE RISK TO AUTOS. DESPITE THE RECENT SELLOFF, ANALYSTS SAYING PRODUCTION PRESSURE IS ALL OF CONCERN FOR FORD. WAYFAIR ALSO CUT AT WELLS FARGO TO UNDERWEIGHT. THE BANK IS TURNING MORE
CAUTIOUS ON HOME RELATED STOCKS. HAVING EVERYTHING TO DO WITH THE WEAKNESS WE ARE SEEING IN THE HOUSING SECTOR. JONATHAN: A TON OF WEAKNESS THERE. NOT IN THE DATA BUT CERTAINLY IN THE STOCKS. COMING UP, LAWMAKERS GRILLING
OIL EXECUTIVES ON CAPITOL HILL. >> WE HAVE NO TOLERANCE FOR PRICE GOUGING. >> THE REALITY IS DURING THIS CRISIS YOU HAVE RECORD PROFITS AND STOCK BUYBACKS. JONATHAN: THAT CONVERSATION IS UP NEXT. >> WE HAVE A PANDEMIC AND WE HAVE PUTIN, AND YOU'RE USING THESE CRISES TO COUCH THE AMERICAN PEOPLE -- TO GOUGE THE AMERICAN PEOPLE.
>> THE REALITY IS DURING THE CRISIS YOU HAVE HAD RECORD PROFITS. >> YOU THINK WE CAN RETURN VALUE TO OUR SHAREHOLDERS AS WELL AS INVEST FOR THE FUTURE IN RENEWABLES, LOW AND NO CARBON FUELS FOR OUR CUSTOMERS, WILL BE DOING ALL OF THAT. >> MIXED MESSAGES FROM THE GOVERNMENT DO NOT ENCOURAGE US TO MAKE INVESTMENTS WITH CONFIDENCE. JONATHAN:
THIS WENT ABOUT AS WELL AS YOU WOULD EXPECT IT TO GO. ENERGY EXECUTIVES FACING A GRILLING ON CAPITOL HILL GIVEN SURGING PRICES. D.C. HAS QUESTIONS. SHELL HAS ANSWERS. THEY CAME OUT WITH A MONSTER RIGHT DOWN REFLECTING VOLATILITY IN PRICES THROUGH THE END OF THE QUARTER. ADDITIONAL MOVES COULD BE SEEN IN CASH FLOW FROM OPERATIONS. THEY ARE SAYING THE WITHDRAW
FROM RUSSIA COULD COST THEM BETWEEN $4 BILLION AND $5 BILLION. ANNMARIE HORDERN JOINS US FROM D.C.. HOW CONTROVERSIAL WILL THOSE PROFITS FOR Q1 BE? ANNMARIE: THEY WILL BE VERY CONTROVERSIAL. WE HAVE A SIGNAL FROM EXXON THEIR FIRST QUARTER MIGHT BE $11 BILLION, THE HIGHEST IN 13 YEARS. AN AWKWARD MOMENT TO GET THIS GRILLING ON CAPITOL HILL. SIX HOURS OF IT. IT WENT AS WELL AS YOU CAN
EXPECT. YOU HAVE THE DEMOCRATS SAYING THEY ARE PRICE GOUGING, AND REPUBLICANS WHO WANT TO MAKE THE POINT AND POINT THE FINGER USING THE OIL EXECUTIVES THAT IT IS ACTUALLY THE POLICIES OF THE BIDEN ADMINISTRATION. WHICHEVER WAY YOU LOOK AT IT, THE ISSUE IS GOING INTO THE MIDTERM ELECTIONS THIS IS A MASSIVE PROBLEM FOR POLITICIANS. GAS PRICES ARE HIGHER, THEY ARE NOT COMING DOWN, AND ALREADY THE POLLS SHOW INFLATION IS A HUGE CONCERN FOR AMERICANS. JONATHAN: LET'S TALK ABOUT POLICY.
WE KNOW ABOUT THE SBR RELEASE. THINGS HAVE BEEN COUNTERPRODUCTIVE. WHAT IS THE NEXT STEP? IS THERE ONE? ANNMARIE: THERE'S ONLY SO MUCH OF THESE RESOURCES IN THE WORLD. WHAT YOU HEARD FROM EXECUTIVES IS THEY WANT TO AND THEY ARE GOING TO INCREASE CAPEX TO TRY TO GET MORE PRODUCTION ONLINE. THIS COMES AS THE EXECUTIVES EXPLAINED AFTER AN INCREDIBLE YEAR WHERE WE SAW OIL GO NEGATIVE, ACTUALLY DECIMATED IN TERMS OF THE FUEL DEMAND, AND THEN AT THE SAME TIME OTHER COMPANIES FORCING TO LEAVE BUSINESS BECAUSE OF HOW BAD THE PANDEMIC WAS.
NOW THEY'RE COMING BACK AND THEY HAVE BEEN FORCED TO GIVE THE MONEY BACK TO SHAREHOLDERS. THEY ARE NOT INVESTED. THE BIDEN ADMINISTRATION SAYS THE SBR RELEASE ALONGSIDE OTHER PARTNERS IS A GAP TO GET THERE. THE ISSUE IS RUSSIA IS A MASSIVE COMMODITY PLAYER AND EVERY DAY THE TALKS RATCHETED UP IN EUROPE THAT POTENTIALLY THEY MIGHT START SHUNNING RUSSIAN OIL. THAT WILL BE A HIGHER PREMIUM ON THE PRICE. JONATHAN: WILL CATCH UP WITH YOU LATER ON THAT AND WITH MARIA TADEO AS WELL.
AS PRIME MR. MARIO DRAGHI OF ITALY SAYS DO YOU WANT PEACE OR AIR CONDITIONING IN THE SUMMER? DANIEL YERGIN HAD THIS TO SAY ABOUT ENERGY. >> WHAT PEOPLE GO BACK TO HIS 1970'S AT THE MOST SEVERE. I THINK THIS IS POTENTIALLY WORSE BECAUSE IT INVOLVES NOT ONLY OIL, INVOLVES NATURAL GAS, IT INVOLVES COAL, AND TWO COUNTRIES THAT HAPPEN TO BE NUCLEAR SUPERPOWERS. AS HIGHS THEY SEEMED IN THE 1970'S, THE RISKS NOW ARE HIGHER. JONATHAN: GERALDINE, CAN YOU WALK ME
THROUGH YOUR PORTFOLIO AND HOW IT IS EXPOSED TO WHAT IS TAKING PLACE AT THE MOMENT? GERALDINE: THE ENERGY AND THE COMPLEX OF COMMODITIES THAT HAVE SEEN THEIR PRICE GOING HIGHER COMMAND AND AS HARVEST SEASONS ARISE WE MIGHT SEE GRAINS GOING HIGHER. ONE WAY OF DOING THIS IS TO GAIN EXPOSURE TO PARENTHESES -- TO PARENTHESES AND COUNTRIES -- EXPOSURE TO CURRENCIES AND COUNTRIES THAT ARE EXPOSING TO BRAIN SO WE HAVE A POSITIVE ATTITUDE -- EXPOSING TO GRAIN SO WE HAVE POSITIVE ATTITUDES. EVEN THOSE COUNTRIES THAT HAVE POSITIVE TRADE, THE CENTRAL BANKS HAVE ALSO BEEN HIKING INTEREST RATES IN EMERGING MARKETS SO THE CARRY IS VERY ATTRACTIVE. JONATHAN:
HOW MUCH TROUBLE IS THE IMPORT? GERALDINE: IT DEPENDS ON SOME PART OF ASIA AND EUROPE ARE IN A NOT SO GOOD POSITION AND WE HAVE SEEN SOME TRADE DEFICITS FOR THE EUROZONE. THIS IS PROBABLY SOMETHING THAT IS GOING TO CARRY ON. JONATHAN: THE WORLD HAS CERTAINLY BEEN TURNED UPSIDE DOWN AS WE FIND DM BEHIND THE CURVE AND EM AHEAD OF THE CURVE. IS THAT A FACTOR IN YOUR THINKING AROUND EM RIGHT NOW? GEORGE: IT CERTAINLY IS.
BRAZIL IS DEEP INTO MONETARY TIGHTENING POLICY. WE SEE SEVERAL COUNTRIES, EMERGING MARKET COMPANIES IN PARTICULAR, ALREADY STARTING TO FIGHT HIGH INFLATIONARY MEASURES. THEY ARE STILL SUSCEPTIBLE TO SOME OF THE PRICE CHALLENGES THAT MANY OTHER COUNTRIES ARE FOLLOWING -- ARE FINDING. THEIR POLICY IS WELL AHEAD OF
WHERE THE DEVELOPED WORLD IS. IN ADDITION TO THAT, BIG COMMODITY EXPORTERS ARE FINDING THEMSELVES IN A POSITIVE POSITION TO BE ABLE TO MEET THE DEMAND THAT HAS BEEN CREATED BY RUSSIA BEING BOXED OUT OF THE INTERNATIONAL MARKET. THERE IS A MAJOR ROTATION GOING ON ACROSS THE GLOBAL COMMODITY LANDSCAPE, AND ALSO ACROSS FIXED INCOME. THE FIXED INCOME MARKETS ARE TRYING TO CALIBRATE THEMSELVES TO THE SHIFT.
WE DO SEE OPPORTUNITIES IN EMERGING MARKETS, PARTICULARLY ON THE BOND SIDE AND ON THE CORPORATE SIDE. FOR COMPANIES THAT STICK WITHIN COUNTRIES THAT ARE WELL AHEAD ON THE RATE TIGHTENING CYCLE AND COMPANIES THAT ARE WELL-POSITIONED TO SELL INTO THE DEMAND THAT HAS BEEN CREATED BY THE PIVOT AWAY FROM RUSSIA INTO OTHER COUNTRIES. THERE ARE INTERESTING OPPORTUNITIES WE THINK BECOME BOND FRIENDLY AND ECONOMIC FRIENDLY. JONATHAN: THE FEAR IN THE UNITED STATES SEEMS CLEAR. ENERGY PRICES UP, FOOD PRICES UP, MORTGAGE COSTS GOING UP. CHRIS, FROM YOUR STANDPOINT, THE OPTIMAL WAY TO THINK ABOUT THE U.S. CONSUMER, WHAT IS IT? CHRIS:
LET'S START WITH THE BALANCE SHEET OF THE U.S. CONSUMER. THE BALANCE SHEET IS QUITE STRONG. WHAT THE CONSUMER IS DOING IS NORMALIZING. THEY ARE MOVING AWAY FROM DURABLES TO MORE SERVICES TYPE SITUATIONS, TO MORE EXPERIENCES. THEY ARE LOOKING FOR MORE VALUE WHEN THEY GO TO THE SUPERMARKET OR THE STORE. THERE IS A TREND DOWN INTO GENERICS.
THIS IS NOT A CASH SITUATION. ONE OF THE THINGS WE HAVE TO GO BACK TO IS THE INDIVIDUAL IS STILL COMPOTE -- IS STILL COMFORTABLE IN HIS OR HER JOB AND BELIEVE THE PROSPECTS ARE GOOD. THE U.S. CONSUMER IS NOT IN A RECESSION. IT IS MORE WE ARE BEGINNING TO NORMALIZE. LET'S GO BACK TO WHERE OIL IS. BRENT IS NOT AT 127. WE COULD HAVE SOME ISSUES WITH REFINING. I'D A LONG CONVERSATION WITH OUR ENERGY ANALYST AND THERE'S A LOT OF ADDITIONAL NEWS WITH GASOLINE AND GASOLINE PRICES GOING HIGHER. I THINK THE ADMINISTRATION
STANDS WITH REGARD TO THE RELATIONSHIP WITH ENERGY IS NOT A GOOD ONE. YOU'RE GOING TO SEE PRICES STAY ELEVATED. AS FAR AS THE CONSUMER, THE CONSUMER STILL SPENDING BUT THEY ARE CHANGING AROUND THAT BASKET LOOKING FOR MORE VALUE. THEY STILL HAVE A TON OF MONEY AND ARE FEELING COMFORTABLE IN THEIR PROSPECTS. WE ARE GOING INTO A NORMALIZATION, WE ARE GOING TO DO SOME SORT OF ECONOMIC MALAISE, BUT IT IS WAIVED TOO EARLY TO CALL THIS A RECESSION. JONATHAN:
CHRIS HARVEY STICKING WITH US ALONGSIDE GEORGE AND GERALDINE. LATER, RISING BONDS WEIGHING ON BIG TECH. JONATHAN: FIVE MINUTES AWAY FROM THE OPENING BELL. FUTURES LOWER. HERE THE MORNING CALLS. JP MORGAN UPGRADING AUTONATION TO OVERWEIGHT, HIGHLIGHTING AN IMPRESSIVE BALANCE SHEET AND ATTRACTIVE VALUATION. WELLS FARGO DOWNLOADING -- DOWNGRADING WAYFAIR TO UNDERWEIGHT, GROWING INCREASINGLY CAUTIOUS. BARCLAYS DOWNGRADING FORD PEOPLE WAIT, WARNING INVESTORS ARE UNDERESTIMATING -- DOWNGRADING FORD TO EQUAL WEIGHT. FINANCIALS ENTERING THE SESSION
ON A SIX-DAY LOSING STREAK. JONATHAN: 24 SECONDS AWAY FROM THE OPENING BELL. GOOD MORNING. -.2% ON THE S&P. A LITTLE BIT SOFTER ON THE
NASDAQ. ON THE NASDAQ 100 OVER THE PREVIOUS DISCO DAYS, DOWN 4%. THE LOSING STREAK STARTING TO BUILD AGAIN. I KEEP GOING OVER THIS. WE CLOSED OUT LAST YEAR AT 70 BASIS POINTS ON THE TWO YEAR YIELD IN AMERICA. WHAT A TRANSFORMATION OF THIS BOND MARKET. YOUR TWO YEAR 2.45. YIELDS HIGHER ON 10 GETTING
CLOSE TO 2.65. THE CURVE A BIT STEEPER AGAIN, GETTING CLOSER TO 20 BASIS POINTS. YOU'RE A STRONGER, DOLLAR WEAKER -- EURO STRONGER, DOLLAR WEAKER. ON CRUDE, ABOUT $97 A BARREL.
PROCESS IT INTO THE SESSION, HERE IS ABBY WITH YOUR MOVERS. ABIGAIL: STARTING OUT WITH ONE OF THE TOP STOCKS ON THE OPEN. HP, BERKSHIRE HATHAWAY HAS TAKEN A $4.2 BILLION STAKE IN HP. A LONG-TERM CAPITAL'S VALUE
STORY. THE 8.8 BILLION DOLLAR POTATO PRODUCTS COMPANY BEAT ESTIMATES. THE SUPPLIER FOR MCDONALD'S AND YUM! BRANDS. CAN AGGREGATE -- CONAGRA -- SOARING INFLATION HAS CAUSED THAT COMPANY TO LOWER ITS GUIDANCE. WELL OFF OF ITS DOWN 4% FREE MARKET LOWS. NETFLIX DOWN OFF OF ITS FREE MARKET LOWS -- DOWN OFF OF ITS PRE MARKET LOWS. THE BIG THEME IN RECENT DAYS,
RATES BACKING UP, PRESSURING THESE HIGH VALUATION STOPS AND SENDING TECHNOLOGY LOWER. JONATHAN: IT HAS NOT HELPED THE BANKS. COMING INTO TODAY THE KBW BANKS INDEX HAS BEEN DOWN FOR SIX STRAIGHT SESSIONS. WE ARE UNCHANGED TODAY. OVER THE LAST SEVEN WE ARE DOWN
ON MS. 9%. KAILEY LEINZ TAKING -- WE ARE DOWN ALMOST -- KAILEY: THE LONGEST STREAK SINCE JANUARY 21. THE WEIRD THING, THAT HAS HAPPENED OVER THE SAME STRETCH OF TIME IN WHICH THE 10 YEAR YIELDS HAS RISEN 25 BASIS POINTS OR SO. USUALLY WHEN YIELDS GO UP, BANKS GO UP. THE LINES OF TRACK EACH OTHER SO WELL FOR SO LONG BUT NOW WE ARE SEEING A SERIOUS REVERSAL GOING IN COMPLETELY OPPOSITE DIRECTIONS. IT IS NOT JUST THAT BANK STOCKS ARE HEADING LOWER, THEY ARE ACTUALLY OUTPERFORMING THE BROADER EQUITY MARKET. THIS IS LATE MARCH RALLY.
THE BANKS HAVE BEEN THE WORST LEVEL TWO S&P 500 GROUP. THE QUESTION IS WHY, ESPECIALLY WHEN WE'VE SEEN THE PROSPECT OF MORE AGGRESSIVE RATE HIKES FROM THE FEDERAL RESERVE, WHICH IN THEORY SHOULD HELP THE BANKS. IT LIKELY BOILS DOWN TO THE THEORY THE FED WILL BE TOO AGGRESSIVE. POTENTIALLY CAUSING A RECESSION. THAT WILL END UP HURTING DEMAND
FOR LOANS AND THE FUNDAMENTAL PICTURE FOR THE COMPANY'S. SPEAKING OF THE FUNDAMENTAL PICTURE, JP MORGAN TAKING THINGS OFF NEXT ONE-DAY WITH ITS FIRST REPORT FOR 2022. 2022 NOT EXPECTED TO BE AS GREAT A YEAR AS LAST YEAR WAS WHEN IT COMES TO NET INCOME. NET INCOME ESTIMATES FOLLOWING $44 BILLION COLLECTIVELY, DOWN 20% FROM LAST YEAR'S RECORD.
JONATHAN: JP MORGAN TAKING THINGS OFF NEXT WEEK. WE HAVE GONE OVER THIS A FEW TIMES. THIS EQUITY MARKET IS GETTING INTERESTING, EVEN WITH A TICK HIGHER IN RATES. BIG MOVES FOR THE FEDERAL RESERVE.
THE BANKS ARE UNDERPERFORMING. THE STAPLES AND UTILITIES, THE MORE DEFENSIVE PARTS OF THE MARKET TRY TO PICK UP. YOU SEE THE WEAKNESS IN THE HOMEBUILDERS OVER THE LAST YEAR, THE WEAKNESS IN THE TRANSPORT MORE RECENTLY.
EVERYBODY HAS BEEN TALKING ABOUT THAT. WHAT YOU DO? BIOTIN HAT OR BY THE WEAKNESS -- BUY A TIN HAT OR BUY THE WEAKNESS? -- WE MAINTAIN A PREFERENCE FOR U.S. VALUE THAT IS LESS IMPACTED BY HEIGHT YIELDS AND SHOULD BENEFIT FROM RELATIVELY SOLID U.S. ECONOMIC GROWTH. CHRIS, I KNOW YOU ARE LOOKING FOR A BOUNCE THROUGH EARNINGS SEASON. WALK ME THROUGH IT. CHRIS: BANKS OF THE GEORGE: STANZA OF THE EQUITY SPACE -- BANKS ARE THE GEORGE CONSTANZA OF THE EQUITY SPACE.
THEY UNDERPERFORM. WE HAVE SEEN THIS OVER A FIVE MONTH WINDOW ENDED UNDER -- THERE UNDERPERFORMING BECAUSE WE ARE TALKING ABOUT RECESSION. IF WE ARE TALKING ABOUT RECESSION WE ARE TALKING ABOUT. IF CREDIT GOES BAD THAT IS A PROBLEM. THE UNDER THING WE ARE TALKING ABOUT IS DEPOSIT RATE. THE BAR THINKING DEPOSIT RATE
IS TOO HIGH. AT THE END OF THE DAY WE DO NOT THINK THE UNDERLYING FUNDAMENTALS WILL BE AS BAD AS FEARED. WE DO NOT THINK DIETS WILL BE AS BAD AS FEARED AND WHAT WE WILL SEE IS A RALLY FOR THE BANKS. WE THINK YOU WILL SEE A POP IN THE SHORT TERM. IF YOU ARE NEGATIVE ON THE BANKS, FINE, TAKE THIS AS AN OPPORTUNITY TO REPOSITION. WE THINK THERE IS MORE GROWTH, WE THINK THERE IS MORE OPPORTUNITIES, WE THINK THE FUNDAMENTALS ARE STILL GOOD AND THE RECESSION IS NOT COMING TOMORROW, OR AT LEAST UNTIL THE END OF THE YEAR IF NOT LATER. AT THE END OF THE DAY WHAT WE
EXPECT TO SEE RIGHT NOW IS ONCE WE GO WHERE THEY WILL TRADE DOWN INTO THE PRINT, ONCE WE GET THAT PRINT IT IS PROBABLY NOT AS BAD AS EXPECTED. WE THINK THEY CONTINUE TO GO HIGHER. AT THE END OF THE DAY WE THINK YOU WILL GET SOME SORT OF SHORT-TERM POP. JONATHAN: WAS THAT A SEINFELD REFERENCE? CHRIS: IT WAS A SEINFELD REFERENCE. JONATHAN: WE HAVE AN AUDIENCE OUTSIDE OF THE U.S. AS WELL.
GERALDINE, THE WEAKNESS CHRIS AND I WERE TALKING ABOUT, ANY REASON TO LEAD INTO THE SECTORS TO BUY THIS WEAKNESS? GERALDINE: WE THINK WE ARE LATE IN THE ECONOMIC EXPANSION. OUR TENDENCY WOULD BE TO GO FOR QUALITY AS OPPOSED TO VALUE, WHICH TENDS TO DO POORLY LATE IN THE CYCLE. WHEN IT COMES TO BANKS, THERE ARE ALSO FACTORS LIKE COST PRESSURES WHICH HAVE BEEN QUITE IMPORTANT. THE CAPITAL MARKET ACTIVITY IS GOING TO SEE A BIG DROP, AND THEREFORE WE PREFER WHEN WE INVEST IN BANKS TO DO IT BY CREDIT AS OPPOSED EQUITY. JONATHAN: CAN YOU BUILD ON THAT AS WELL. CREDIT VERSUS EQUITIES WHEN IT COMES TO FINANCIALS? GEORGE: WHEN YOU THINK ABOUT CREDIT AS A BONDHOLDER, WHAT WE ARE LOOKING FOR INSTABILITY AND UNCERTAINTY OF COUPON PAYMENTS AND CASH FLOWS.
FROM THAT PERSPECTIVE THE BANKS ARE STILL IN PRETTY GOOD SHAPE. THE IMPORTANT THING TO REMEMBER IS BANKS MAKE MONEY NOT ONLY ON THE LEVEL OF YIELDS BUT ON THE SHAPE OF THE CURVE. THE FLAT CURVE MAKES FOR HEAVY SLEDDING AND IT IS NOT SURPRISING THE BANKS ARE UNDERPERFORMING. THE MORE IMPORTANT QUESTION IS CREDIT QUALITY AND CREDIT IN GENERAL. CERTAINLY ALL OF THE
INTERVENTION IN 2020 MATERIALLY IMPROVE THE CORPORATE CREDIT BACKDROP AND CREDIT CONDITIONS IN GENERAL. IF THE FED STEPS BACK, TO EXPECT CREDIT TO IMPROVE FROM HERE IS PROBABLY A MEANINGFUL ASSUMPTION. THE REALITY IS CREDIT CONVICTIONS ARE STARTING TO HAVE TIGHTENED UP OR LIKELY CONTINUE TO TIGHTEN UP AND CREDIT QUALITY WILL START TO ERODE.
THE REALITY IS IT IS NOT GOING TO UNRAVEL VERY QUICKLY, BUT OVER TIME HIGHER RATES AND FLATTER CURVES AND A MORE TOUGH OPERATING ENVIRONMENT MEANS CREDIT QUALITY WILL START TO DETERIORATE. WHEN WE THINK ABOUT CREDIT AND CREDIT PORTFOLIOS, WE WANT TO MOVE UP IN QUALITY. THAT IS THE MESSAGE. FROM A VALUE VERSUS GROWTH PERSPECTIVE, WE LIKE VALUE. WE LIKE COMPANIES THAT WILL BE CERTAIN IN TERMS OF PAYMENT AND WE LIKE THE FASTEST CASE OF CASH FLOW POSSIBLE, SO WE THINK ABOUT THE SECURITIES OF THOSE COMPANIES, WE WANT TO BE SHORTER DURATION, WE WANT AS MUCH CASH FLOW COMING TO US AS QUICKLY AS POSSIBLE SO WE CAN REINVEST AS RATES RISE.
IT IS A STRATEGY THAT HARBORS THE ECONOMIC BACKDROP AND THE TECHNICALS THAT SIT WITHIN FIXED INCOME. JONATHAN: WOULD YOU BE WILLING TO SUGGEST WE SHOULD BE BUILDING UP A CASH POSITION GIVEN WHAT IS HAPPENING AROUND US? GEORGE: I THINK CASH IS BECOMING AN IMPORTANT COMMODITY. AS RATES START TO RISE YOU SHOULD SEE CASH BALANCES INCREASE. IF CASH RATES ARE GOING TO BE AT 2.5% TWO YEARS OUT, THAT IS NOT A TERRIBLE POSITION. THE REALITY IS THAT IS DRY POWDER. THERE ARE SUBSTANTIAL. OF DRY POWDER -- THERE ARE SUBSTANTIAL POOLS OF DRY POWDER ALREADY IN EXISTENCE. SOME OF THAT CASH IS GETTING
ABSORBED BY INFLATION. FROM AN INVESTMENT PERSPECTIVE, HOLDING A LOW BIT MORE CASH RIGHT NOW MAKES SENSE. WE WOULD WANT TO LOOK TO DEPLOY THAT AS WE MOVE FORWARD. JONATHAN: CHRIS, I WANT TO GIVE YOU THE FINAL WORD ON BIG TECH. WE CAUGHT UP WITH DAN IVES. HE SAID RATE NEWS IS BAKED IN, NOW IT IS TIME TO OWN TECH.
THE SECTOR IS IS OVER SHOWED -- IS AS OVERSOLD AS WE HAVE SEEN. THAT LINE, AS OVERSOLD AS WE HAVE SEEN SINCE 2015. AND I LOOK AT SOME OF THESE NAMES I WOULD NOT CALL IT OVERSOLD. CHRIS: I WOULD NOT CALL IT OVERSOLD.
IN OUR PORTFOLIO EARLY THIS YEAR WE DID PICK UP SOME SECULAR GROWTH STORIES. WE PICKED UP NVIDIA. ALL WHEN THEY WERE DOWN 20% TO 30% FROM THEIR RECENT HIGHS. NOW THAT WE HAVE POPPED WHAT WE ARE BEGINNING TO SEE COMMON WITH THE R WORD BEING BANDIED ABOUT, WE ARE STARTING TO PICK UP MORE SECULAR AND VALUE STORIES. THIS WEEK WE PICKED UP A BATH AND BODY WORKS. WE ARE BEING TACTICAL AND OPPORTUNISTIC.
AT THE END OF THE DAY WE ARE GOING TO GO INTO A STAGFLATIONARY ENVIRONMENT. THAT IS PROBABLY GOING TO BE PRETTY GOOD FOR GROWTH, BUT WE THINK AT THIS POINT IS NOT OPPORTUNISTIC. A COUPLE WEEKS AGO, YES. RIGHT NOW NOT SO MUCH. JONATHAN: APPRECIATE YOUR INSIGHT. ALONGSIDE GEORGE BORY AND GERALDINE SUNDSTROM. THANK YOU VERY MUCH. ON STAGFLATION, DID YOU SEE THE ECB ACCOUNT THIS MORNING THAT CAME OUT? THIS IS WHAT THE ECB HAD TO SAY. GIVEN THE EXTREMELY STRONG
STARTING POINT AND THE ANCHORING OF MEDIUM-TERM EXPECTATIONS, IT WAS DIFFICULT TO SEE HOW THE SHOCK COULD PUSH THE EUROZONE INTO STAGFLATION. I'M NOT GOING TO TAKE A VIEW ON WHETHER WE GOING TO STAGFLATION WERE NOT IN THE EURO ZONE. I STRUGGLED TO SEE HOW IT IS DIFFICULT TO SEE HOW THAT WILL HAPPEN. I THINK FOR MOST OF YOU ENGAGING IN THIS PROGRAM ON A
DAILY BASIS YOU MIGHT FIND IT SOMEWHAT EASY TO SEE HOW THAT COULD BE A SCENARIO WE END UP IN. THAT IS THE ECB FOR YOU. COMING UP, THE U.S. ANNOUNCING FRESH SANCTIONS AGAINST RUSSIA. PRES. BIDEN: IN ONE YEAR OUR SANCTIONS ARE
GOING TO WIPE OUT THE LAST 15 YEARS OF RUSSIA'S ECONOMIC GAINS. JONATHAN: THAT CONVERSATION IS UP NEXT. THAT IS AT 1:00 IN NEW YORK, FIVE: -- 5:00 IN LONDON. THIS IS BLOOMBERG. PRES. BIDEN: IN ONE YEAR OUR SANCTIONS ARE
LUCKY TO WIPE OUT THE LAST 15 YEARS OF RUSSIA'S ECONOMIC GAINS. BECAUSE WE CUT RUSSIA OFF FROM IMPORTING TECHNOLOGY LIKE SEMICONDUCTORS AND ENCRYPTION SECURITY AND CRITICAL COMPONENTS AND QUANTUM TECHNOLOGY THEY NEED TO COMPETE IN THE 21ST CENTURY, WE WILL STIFLE RUSSIA'S ABILITY TO GROW FOR YEARS TO COME. JONATHAN: WESTERN ALLIES RAMPING UP SANCTIONS AGAINST RUSSIA AS UKRAINE'S FOREIGN MINISTER PLEADS FOR ONE THING. >> MY AGENDA IS SIMPLE AND HAS ONLY THREE ITEMS. IT IS WEAPONS, WEAPONS, AND WEAPONS. WE ARE CONFIDENT THE BEST WAY
TO HELP UKRAINE NOW IS TO PROVIDE IT WITH ALL NECESSARY TO CONSTRAIN VLADIMIR PUTIN AND TO DEFEAT THE RUSSIAN ARMY IN UKRAINE, IN THE TERRITORIES OF UKRAINE. JONATHAN: TEAM COVERAGE STARTS WITH MARIA TADEO IN BRUSSELS AND AMH IN D.C.. HAVE WE COME TO AN AGREEMENT IN BRUSSELS? MARIA: JUST GO THINGS HAPPENING HERE. ONE IS ABOUT THE SANCTIONS. ONE OF THOSE HAS TO DO WITH THE WINDING DOWN OF CONTRACTS OF COAL. THERE IS BACK AND FORTH IMPRESSION WE HAVE IS THIS IS GOING TO BE SOLVED TODAY.
THE HEAD OF THE EUROPEAN COMMISSION, URSULA VON DER LEYEN , IS GOING TO UKRAINE TOMORROW TO MEET WITH THE PRESIDENT OF UKRAINE AND SHE CANNOT GO EMPTY-HANDED. WHEN IT COMES TO THE WEAPONS, THAT IS NOT CLEAR. WE JUST HEARD FROM THE CHRETIEN FOREIGN MINISTER WHO SAYS WE NEED THESE WEAPONS. -- WE JUST HEARD FROM THE UKRAINIAN FOREIGN MINISTER WHO SAYS WE NEED THESE WEAPONS. HE SAYS WE ARE NOT GOING TO SEE A CEASE FIRE BECAUSE THE TWO SIDES ARE PREPARING FOR THE BIGGEST BATTLE WE HAVE SEEN IN THIS WAR. HE SAYS WHOEVER WINS THE BATTLE WILL HAVE THE STRONGEST HAND IN THE FUTURE TALKS.
HE REPEATED THEY NEED WEAPONS, TANKS, PLANES, AND HEAVY ARTILLERY. HE SAYS NATO IS NOT GOING TO PROVIDE THIS BUT HE HOPES AFTER THIS MEETING TODAY COUNTRIES THAT ARE MEMBERS OF NATO WILL SUPPLY IT ON AN INDIVIDUAL BASIS. WHAT IS STRIKING IS HE SAID OUT LOUD WHAT WE ALL KNOW. ULTIMATELY A LOT OF THIS WILL
COME DOWN TO THAT BATTLE FOR DONBAS AND THIS IS GOING TO BE THE BIGGEST BATTLE WE HAVE SEEN IN THIS WAR BY A LARGE MARGIN. JONATHAN: THEY WANT WEAPONS AND THEY WANT MORE SANCTIONS. ANNMARIE: THE UNITED STATES, THERE IS NOT A TON THAT IS LEFT IN TERMS OF HITTING HARDER AT VLADIMIR PUTIN IN THE LIFELINE OF THE RUSSIAN ECONOMY. THEY CAN DO MORE IN TERMS OF
MAYBE FULL BLOCKING SANCTIONS ON MORE BANKS. THOSE ALSO COME WITH ENERGY CARVEOUTS. THEY COULD POTENTIALLY NOT HAVE THE ENERGY CARVEOUTS. THE OTHER THING IS IT COMES DOWN TO WHAT IS GOING ON IN EUROPE. IS THE UNITED STATES GOING TO PUT PRESSURE ON EUROPE TO NOT STOP AT COAL? JONATHAN: EMERY -- ANNMARIE HORDERN ALONGSIDE MARIA TADEO.
JOINING US IS THE DIRECTOR OF THE INTERNATIONAL ENERGY AGENCY. YOU JUST HAD A WEEKLONG TRIP TO UKRAINE AND RUSSIA. WE HAVE NUCLEAR REACTORS OPERATING IN A WAR ZONE. CAN YOU SHARE WHAT YOU'VE LEARNED AND IS THERE ANY REASON FOR IMMEDIATE CONCERN? RAFAEL: REASONS FOR CONCERN ARE CLEAR AND THEY CONTINUE. YOU JUST HEARD THAT THIS CONFLICT IS NOWHERE NEAR AT AN END. FOR THE FIRST TIME THAT YOU HAVE AN ACTIVE WAR, AND ONGOING WAR IN A TERRITORY, IT HAS A VERY DEVELOPED NUCLEAR INFRASTRUCTURE THERE. FROM THE VERY BEGINNING OF IT,
MYSELF AND THE IAEA WAS OFFERING ITS SERVICES TO MAKE SURE THE NUCLEAR FACILITIES IN UKRAINE WOULD BE SAFE AND SECURE. WE HAD PROBLEMS IN TWO PLACES. ONE OF WHICH HAS JUST BEEN FREED FROM THE OCCUPATION FORCES, WHICH IS THE FAMOUS FACILITY AT CHERNOBYL, WHERE THE FAMOUS NUCLEAR ACCIDENT TOOK PLACE IN 1986. THEN THE BIGGEST REACTOR IN EUROPE, THE BIGGEST PLANT IN EUROPE. SIX REACTORS.
STILL UNDER RUSSIAN CONTROL. THERE WAS A LOT FOR ME TO LOOK AT AND DISCUSS. I WAS VISITING ANOTHER FACILITY, THE CLOSEST TO THE WAR ZONE IN THE SOUTH OF THE COUNTRY, NOT FAR AWAY FROM AREAS BETWEEN THE DONBAS AND THE SOUTH OF THE COUNTRY, WHERE WE ALSO HAVE AN OPEN FRONT. WE WERE LOOKING AT THE NUCLEAR SAFETY AND NUCLEAR SECURITY SITUATION THERE AND ALSO TALKING ABOUT WHAT NEEDS TO BE DONE IN THE NEXT FEW WEEKS TO RESTORE SOME CAPABILITIES THAT HAVE BEEN LOST IN CHERNOBYL AND TO LOOK AT WHAT MAY BE NEEDED IN SOME OF THE OTHERS. THIS IS AN ONGOING WORK. IT IS NOT SOMETHING THAT HAS
ENDED. I HOPE TO BE VISITING CHERNOBYL AS SOON AS POSSIBLE. JONATHAN: A PLANT GOT WORLDWIDE ATTENTION IN THE LAST MONTH FOR ALL OF THE WRONG REASONS. HAVE YOU BEEN CONTACT WITH THE STAFF THERE AND CAN YOU GIVE ME INSIGHT INTO THEIR WORKING CONDITIONS IN ANY REASON TO BELIEVE THEIR WELL-BEING COULD IMPACT THE SAFETY OF THAT OPERATION? RAFAEL: YOU HAVE THIS VERY UNIQUE SITUATION WHERE YOU HAVE THE PLANT ITSELF HAS BEEN OPERATED BY THE NORMAL OPERATORS, THE UKRAINIAN STAFF. AT THE SAME TIME YOU HAVE SECURITY FORCES THAT ARE CONTROLLING THE PERIMETER AND THE MAIN ACTIVITIES ON-SITE. WE ARE IN CONSTANT CONTACT WITH UKRAINIAN AUTHORITIES AND THE UKRAINIAN NUCLEAR REGULATOR AND THE STAFF AS WELL THROUGH OUR EMERGENCY CENTER HERE AT THE IAEA AND WE HAVE SEEN THOSE UPDATES ON WHAT THE SITUATION IS. WE ARE IN CONTACT WITH THEM,
AND I WAS REPORTING THIS YESTERDAY, WE KNOW THE SITUATION, THE MORALE OF THE STAFF IS VERY LOW. THEY FEEL THE PRESSURE. IT HAS BEEN A LONG TIME. YOU MAY REMEMBER ON THE NIGHT OF MARCH 3 TO MARCH 4 THERE WAS A VIOLENT EPISODE INSIDE THE SITE WHERE AN ADJACENT BUILDING TO ONE OF THEIR REACTORS WAS UNDER FIRE.
THERE WAS A FIRE THAT HAS TO BE CONTAINED. THERE HAS BEEN A LOT OF STRESS. IT IS NOT SUSTAINABLE LIKE THIS. THIS IS ALSO SOMETHING THAT WAS DISCUSSED IN MY TRIP TO UKRAINE AND TRYING TO FIND SOLUTIONS IN CASE, AS WE SEE THIS CONFLICT.
THE CONFLICT HAS NOT COME TO AN END, THERE IS NO END IN SIGHT FOR NOW. WE HAVE TO BE LOOKING AT THE SAFETY AND THE SECURITY AND ALSO ALLOW ME TO ADD ONE ADDITIONAL POINT, WHICH IS THE SAFEGUARDS. WE NEED TO PERFORM INSPECTIONS. NORMALLY IT IS ACTORS.
A LOT OF NUCLEAR MATERIAL THERE. OUR SAFEGUARD INSPECTORS NEED TO GO THERE, WOULD HAVE NEEDED TO BE THERE UNDER NORMAL CIRCUMSTANCES. NOW WE HAVE TO SEE HOW TO KNOW THAT. OTHERWISE WE WILL LOSE WHAT WE CALL THE CONTINUITY OF KNOWLEDGE. WE WILL NOT BE ABLE TO KNOW WHAT HAPPENED WITH THE NUCLEAR MATERIALS WITHIN A PERIOD OF TIME. THIS COULD LEND ITSELF TO QUESTIONS IN THE FUTURE. LOTS OF WORRIES.
WE ARE WORKING, WE ARE IN CONTACT. WE ARE TALKING TO EVERYBODY. IT IS IMPORTANT TO MAINTAIN CHANNELS OF COMMUNICATION. WE ARE TRYING TO SET UP AN OPERATION OF THE IAEA AT DIFFERENT PLANTS. JONATHAN: I HOPE YOU CAN CONTINUE THIS CONVERSATION WITH ME IN THE FUTURE. THIS WAS SUCH A VALUABLE CONVERSATION.
THE IAEA DIRECTOR GENERAL ON THE SITUATION IN RUSSIA AND UKRAINE. JONATHAN: TIME FOR YOUR TRADING DIARY. THE U.N. GENERAL ASSEMBLY MEETING AT THE TOP OF THE HOUR. SECRETARY BLINKEN HOLDING A NEWS CONFERENCE AT 11:15, PLUS FED SPEAK FROM BULLARD, BOSTIC, AND EVANS. THIS WAS "THE COUNTDOWN TO THE
OPEN." THIS IS BLOOMBERG.
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