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  • 00:00From the world of politics I'm not aware of any Republican support for his Raskin. I'm just not aware of it. To the world of business provoking Russia is in Belarus's special trading relationship with America goes after those other products. This is balance of power with David Westin. From Bloomberg World Headquarters in New York to a television and radio audiences worldwide welcome to Balance of Power. We're gonna start with Ukraine once again today as we have the prime ministers of three neighboring countries neighboring of Ukraine traveling to key even as Kiev itself the capital of Ukraine is under bombarded by the Russians. At the same time Russia now has imposed counter sanctions on President Biden and Secretary State Biden to wrap all this together for us. We now go to Joe Matthew at the White House. He of course is host of Sound on every day of the week on Bloomberg Radio. So Joe thanks for being there. Give us a sense of what's going at the White House. Yes your point. The prime minister's David of Poland the Czech Republic and Slovenia heading into a war zone an incredibly unusual development. Even more surprising that they would make this known before they arrive. David I know you were directly involved in covering American presidents visiting Iraq and Afghanistan. Among the only people who knew they were going until they touched down. Right. There were no cell phones no leaks. This is a very different approach. And it's one that's been getting quite a bit of intentionally a day after we heard that President Biden himself may be headed for Europe as soon as next week. The White House has been pretty quiet about the details on this plan understandably but there is talk of him visiting NATO headquarters in Brussels and a lot of questions about whether he might head into Eastern Europe maybe visit a country like Poland that has been directly impacted directly I should say by this war in Ukraine. We talked a lot about some of the differences here David. It's all about projecting unity and confidence. That would be the idea behind a trip like this. It's unclear how long these three prime ministers will stay in key. Although I had to note a comment this morning from Ian Bremmer of the Eurasia Group because he comes on this program so frequently. He said it would be an extraordinary move David if those three prime ministers simply stayed in Kiev because Russia would never directly attack three leaders of NATO states. Exactly John. That actually makes me wonder whether part of the reason why as you say unusually they telegraphed they were going to send a message to Russia please don't bomb that train because they're going on stand by train. Right. So the one last thing they want to do is hit that train. It's a very dangerous situation of course not to be daring Vladimir Putin right now. So you know some consider it to be remarkable. Others consider it to be reckless. David we'll see how long they stay there. It's almost a human shield though at the moment. It's fascinating story. Thank you so much to belugas Joe Matthew from the White House. He of once again is host of Sound on every day of the week at 5:00 p.m. Eastern Time on Bloomberg Radio. And now we're going to go to Stephen Stanley's AM Pierpont chief economist because we do have the Fed meetings coming up this week. And of course we have the inflation issues the basic issues the economy now with the overlay of this Ukraine war. Stephen thank you so much for being with us. I was saying to others around here you are consistently ranked at the very top by Bloomberg on economists. So it's a delight to have you here as the Fed goes into their meetings today and then have a decision tomorrow. Are they going to be thinking primarily about the war or about inflation. How can they balance those two. I think inflation has to be job one at this point. I mean certainly the war introduces more uncertainties but it introduces uncertainties on both sides of the equation for them because it could be a drag on the economy but it could also further exacerbate inflation pressures and it could make inflation expectations rise which is something that they're very fearful of. So I think they have to do what they've set out to do which is to try to get their hands around this inflation problem. Okay. How big a problem is that right now. We've got more numbers in this morning the producer numbers and they came in a little softer than people had expected. Is that really a little the pressure from the Fed. Well I mean of course they're focused mostly on the consumer price numbers. And I think they're I mean certainly we're going to get an energy price spike in March and that's going to exacerbate the numbers in the short run. But if he even if you look at the core consumer price numbers they've been rising at point five or point six every month. That's about a six percent annual rate. That's way too high. So what we've seen over the last six months is it feels like inflation has started to become entrenched. It's broadening out to you know more and more categories. And it seems like it's got legs to it. So I think the Fed's got its work cut out for it. How far and how fast do they have to move. Because I think everyone pretty much agrees. Maybe even Chair Paul agrees. They're a little behind the curve at this point. What does that mean about having to catch up. Yeah well I think ultimately it means they're going to have to raise rates to a higher level. And the markets have been have not really embraced that idea. The markets are thinking in terms of the Fed getting to something at or even below the Fed's own assessment of what a neutral policy would be. But I think ultimately if they're going to if they're going to be aggressive in terms of getting inflation under control they're going to have to move to a restrictive stance which means moving above neutral. I think rates eventually you're going to have to move somewhere between 3 and 4 percent. I think they have. They feel like if they're moving you know let's say 25 basis points at every meeting in their minds that would be pretty rapid. And so you know that's kind of what I have pencilled in for the next year or so. And that certainly gets us to neutral within about a year. So you know I think from their perspective that would be aggressive. Whether that's going to be sufficient or not remains to be seen. Stephen do they have another job as well which is to really restore some of the credibility because some people are really saying you made a big mistake. We talked with Larry Summers former treasury secretary last Friday for Wall Street week. And he said one of the things he want to see for the Fed is for them to admit that they made a big mistake and explain how they're going to go. This is part of what Larry had to say. It needs to portray itself as troubled by how egregiously mis estimated the inflation problem through all of last year and it needs to tell us what it's doing to learn from that experience. Stephen is Larry being too harsher. No. No. The two of us have gone back and forth on this and I think Larry was very early in assessing the inflation problem. The Fed was very late. And you know it was interesting. Chairman Powell admitted at its hearings last week that he said something along the lines of hindsight says we should have moved earlier. The Fed rarely admits mistakes. So I don't know if they're going to go quite so far as Larry would like. But I think that I think they are going to have to revisit ultimately revisit this new framework that they established a couple of years ago because it doesn't seem appropriate for the current environment. That 2020 Jackson Hole speech was all about what happens when inflation stays low even when the economy's running hot. And obviously what we have today is very different than that. So I think the Fed was very geared for a low inflation environment and now has to kind of rethink things a little bit and see what it's going to take to get inflation back under control. Yeah you have to wonder if Chair Paul would like a do over on that Jackson Hole speech. In retrospect at the same time they have to be a little careful right. Because there is the danger of tipping us over in a recession. We see growth quite possibly slowing down as projected slowdown because of the war. We see the yield curve flattening we see consumer confidence erode and we see credit spreads blowing out. Did they have to really be careful about the recession issue. I think eventually yes. But in the short term no not so much. I mean the economy has a lot of momentum. We're still I think recovering to some degree from Covid. And as economy continues to fully reopen this year hopefully we don't get any more big Covid waves than I think there will be a tail into growth. It looks like this gasoline price spike is going to be pretty short lived. So I don't think that's going to have lasting repercussions for the economy either. So I think the economy is going to be growing above trend for a while. And don't forget monetary policy is still going to be easy for quite some time. I mean going from you know near zero to 25 basis points higher is just going to make policy slightly less accommodative. So it's going to take a while until we get to a monetary policy setting that we would actually need to worry might slow down growth too much. Still when we talk about monetary policy we have a tendency many of us to focus on the rates issue. What about the balance sheet. We're going to hear much about the balance sheet here. Yes they're making progress. They've kind of at each meeting they've made a little bit more progress in terms of fleshing out what they want to do. My guess is they're looking to maybe start balance sheet reduction around the middle of the year maybe announce it at the June meeting and get it going in July. So you know obviously running short on time to figure out exactly what they want to do. So I think we'll learn more details this week about about how that might progress. But I think you know they've been pretty clear that their preference is that balance sheet reduction would just be kind of running steadily in the background and not be the primary focus of monetary policy. So once they get it going in the markets kind of adjusts to that new you know new mode of operation. I think the Fed would be just happy for people to kind of stop talking about it. And finally Stephen obviously there's a dual mandate for the Fed. It's full employment as well as price stability. Given the fact that we seem to have a pretty tight labor market can they afford to not worry about jobs right now and really just focus laser like on the inflation issue. Yeah I think both the labor market inflation are telling the Fed the same thing which is the economy has overheated and policy has been too easy and they need to make an adjustment. And it seems like whether you're talking about hawks or doves on the committee everybody seems to be on board with that idea. And so I think it's just a matter as you alluded to before of how how soon and how fast they get from where they are today to something that's much more appropriate in terms of policy stance. Steven thank you so much for being with us. Really appreciate that. Steven Stanley of Amherst Pierpont. Coming up the French minister of gender inequality Elizabeth Moreno. This is balance of power on Bloomberg television and on radio. This is balance of power on Bloomberg Television Radio. I'm David Westin to keep you up to date with news from all around the world. With that we go to Mark Crumpton with first word. David thank you. Ukraine's president Vladimir Zelinsky says talks with Russia are resuming today. In a video address President Zelinsky said the Ukrainian delegation did good work in Monday's session but he did not elaborate. The leader also urged Russian soldiers to stop fighting. Russia has introduced sanctions against President Biden Secretary of State Anthony Blinken and other top American officials there. Tit for tat measures for current U.S. restrictions. That's according to a statement from Russia's foreign ministry. The sanctions would block entry to Russia and freeze any assets there. China is scrambling to contain its worst outbreak of Covid-19 since the pandemic began. Lockdowns there are affecting more than 45 million people playing Cui. China's National Bureau of Statistics spokesperson addressed the issue earlier today. There have been sporadic outbreaks in some regions across the country recently. And the epidemic situation is becoming increasingly serious. So this will objectively have a certain impact on the recovery of the local economy. However from a national perspective the situation of economic prevention and control in the country is generally stable and economic functions has remained basically stable. The highly transmissible Omicron variant has challenged China's pandemic strategy of aggressive testing and large lockdowns. Top executives and two of the biggest Covid vaccine makers disagree on whether a fourth dose is needed. Pfizer's CEO Albert Borland told CBS that protection from three shots will wane and a fourth one is needed now. Daryn as President Stephen Holmes said his second booster is probably only necessary for older people or those who are immunocompromised. Both agree the virus is here to stay. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and over 120 countries. I'm Mark Crumpton this is Bloomberg. Thank you so much Mark. Diversity equity inclusion and belong is very much an issue in corporate boardrooms and in corporations right through the United States. But it's not just United States. It's true as well around the world. And we welcome now the woman who is charged with addressing these issues for the economy in France. She is Elizabeth Moreno the French minister of gender and Equality. So Madam Minister thank you so much for joining us. Great to have you here. Thanks for having me. David it's a pleasure. Explain to those who might not have been following closely what progress you've made in France as I understand particularly on the gender issue. Well you know we have realized President Macron has decided that gender equality would be the great cause of his five years mandate simply because when he was elected he has spoken to many women and he realized that although we were in 2017 everywhere in the country women are facing discrimination and inequalities. And it starts with the first beat out. We started working with the violence because we've if you do not eradicate violence you cannot get to visa equality. And the second topic is professional economic equality. And we have voted to lows within five years just to make sure that women you know what country do have access to the same opportunities because women do not lack talent. They do not lack ambition. They just lack opportunities. And they have faced so many times these glass ceiling that we needed to vote below that to lose their seats them to express their abilities and their competencies. Hence at the end of December the government has voted a low that forces companies above 1000 employees to have 40 percent women on their executive position within eight years which is based on the example we have achieved. We voted a copay Zimmerman low 10 years ago eleven years ago and in eleven years we moved from 9 percent women on boards to 45 percent which shows that low can work. And we are using law to accelerate the process of equality in companies. And I've read that in France you have more women more people who are female in senior positions in corporations than in other Western European countries who succeeded with that because I'm not. Not so many CEOs. I mean we face some of that here in United States as well. People get into positions but they don't make it to the top. How you can make progress on CEOs. So we only have four actually out of a what 40 largest companies in the country. So at a minimum we can say is that we can do better. And that's the reason why we have voted these low because the question here is how do you build a sufficient pipeline. So when there is a CEO position free we do not have to search for women for too long. So the fact that we are asking companies to prepare women to take executive positions within eight years. Otherwise they are sanctioned 1 percent of their global payroll. Then it makes sure that companies put a focus on this topic and they prepare the future much better an inclusive future that does not leave behind women. And just to tell you something during the pandemic we realized that women are occupying the most essential jobs in our country. Like everywhere is true here too right. The problem is these jobs are not recognized. They are not considered. They are underpaid. And voting lows is the best way to change the statue co and make sure that everybody has a chance to succeed. So that's gender. And as you say you have two different laws now in effect respect gender women in positions. What about race and ethnicity. Do you have laws similarly applicable to that. Because that's an issue of DHB as well. Yeah. You know France is one of the country. Let me remind you France is called the petri of human rights although we are very very focused on liberty eagerly to fly down eating you know freedom and equality and fraternity. We see that equality is not such a simple thing to achieve and we know that not everybody is considered as equal. Hence we have voted many laws and we have 25 prohibited discrimination. Eric elation within our country. So it is not a question of law. It's a question of education. It's a question of send civilization. And recently I have launched President Macron asked us to launch a platform where if you are discriminated because of your gender because of a disability because of a sexual orientation of or are because of age or so on and so forth you have people who can support you. You have people. You have associations. You have the states. You have people who can tell you what your rights are. So you do not feel discriminated and you feel that you are respected with dignity. That's what our focus is. We need to respect people who ever they are. You're about to have an election in France. You have a really important election. What about the politics of that. Because again in the United States this has become quite politicized. There is something of a backlash from if I can call it the right against what is called Wolk ism. Do you have that against what you're trying to accomplish in France too. Because you have some. I would call them rather conservative candidates running for president. Well we do have this discussion around identity and so on and so forth. And you know I think it is not surprising because when people are not doing well and the minimum we can say is that this pandemic has had a huge impact. Our health. You know what a mental. And when people do not feel well they tend to focus on themselves. They tend to reject others. They tend to hate others and to blame others for their own situation. So what you are seeing is in the U.S. is not different from what is happening in Europe or all across the world. And we are seeing this populism rising. We are seeing the far right taking too much place to my taste in our country because they are just trying to divide people. They are just trying to consider you because of the color of your skin because of your gender because. But who cares. At the end of the day I think this pandemic has shown us that we are all human and we need to protect these human dignity values because we are at a time where we need each other. We do not need division. We do not need to consider you as a white man and near black women because at the end of the day we suffer the same. We have the same struggle. And we need to work together and find the right solutions. And Mr thank you so much for being here. Really appreciate it. That is Elizabeth Moreno. She is French minister of Gender and Equality. Still to come Henry McVey of KKR on managing their balance sheet in very uncertain times. This is balance of power on Bloomberg television and on radio. Big things are happening on Bloomberg in March. First Bloomberg triple take. Breaking down the day's biggest story a triple take. Focus on the energy transition and the return of Bloomberg ETF IQ the last major hold outs of the ETF revolution and the debut of Bloomberg Crypto. The CEO of Finance Suite. And finally David Rubenstein brings your insight and advice from the world's greatest investors on a new season of Bloomberg Wealth. All this march right here on Bloomberg. The balance of power on Bloomberg television or radio. I'm David Westin while the markets have been all over the place in particular it comes to oil with wild fluctuations as much as 40 dollars a barrel. To take us through it now we welcome critic Gupta. So we've gone from really bullish to really bearish in the market of course a couple days. I mean the volatility here is mind blowing. And I'm going to quote our really great report on the oil team Alex Longley. He said that the bid to ask price in itself you're starting to see these differences of six to seven cents a day usually not more than one or two cents when you kind of make these trades or really tells you that not only is there this surging demand and this kind of mixed messages from the geopolitical tensions that are going on in the world but there's also a liquidity crunch. And this is really the point that a lot of people are looking at because when you talk about do you want to ramp up production how can you do that when prices are this volatile you can't actually forecast them. And without that forecast what's the incentive to ramp up production. If you actually look at the volatility by the way going all the way back to April 2020 which if you'll remember is when oil went negative. That's how much volatility is in the market right now. That's what it's been compared to a critic. Can you break it down between two things. One of them is fundamentals that something really shift or at least our perception of this shift as opposed to just technicals. Well we'll start with technicals the easy one right. When you have something go as high as it did with such extreme levels the drop is going to be pretty violent as well. That's really what you're seeing here a pretty violent correction if you will in pretty steep moving findings. But the fundamentals matter too because at the beginning when you did see this kind of reasons for commodities to rally a lot of this was that Russia's supply was coming off the market. But then you speak to some of these OPEC officials and say well there's no physical shortage here. And also it's coming at a time when the global economy's already decelerating. You have China which is a major oil consuming nation the second largest right after the United States. They're shutting down their ports because there's no point. Did the Covid problem China actually help the oil price. I hadn't thought of that. It did. It did a little bit. It didn't. I think it's probably not the entire reason but it certainly helped with that. But then you also see talks of Ukraine and Russia trying to talk in some way. It doesn't seem like that's working out very well. But it does seem like there is that on the table. And then on top of that you have folks like this out like Saudi Arabia the UAE Nigeria coming on saying we might actually discuss boosting output later. Wild fluctuations. Thank you so much. A critic Gupta on oil coming up to talk with NIKKEI Henry McVey. This is balance of power on Bloomberg Television and on Bloomberg Radio. Welcome back. The Balance of power on Bloomberg Television and radio I'm Guy Johnson in London where European equities are about to close up for the day. Let me talk you through the price action before I hand you back to David. This is what we're seeing right now a fairly muted map actually. European equities starting the session very negative and then climbing towards the close. So the footsie one hundred down by just three tenths of 1 percent. The CAC in Paris down by two tenths of 1 percent. The banks in Germany absolutely flat. So a much more positive session than we started off with but nevertheless still largely negative. Let me quickly show you the session chart just to give you an idea of what is happening here. For those on radio listening what we started off with was a very negative session on the left hand side of the chart Asia. The session in particular shut out of China very negative. Since then the positive momentum out of the United States helping lift European equities. So we climbed back up but don't quite make it back up to the flatline on the right hand side of the chart down by three tenths of 1 percent in terms of the sector breakdown. And we kind of show you what is happening here. This is the story at the top end of the market with this huge move that pretty Gupta was just talking about in oil. We see the RTS have come to the Brent crude shots that we get 5.2 percent to the downside. The Hang Seng I mentioned what was happening in Asia overnight down by five point seventy percent. Euro dollar positive as we watch what is going to happen tomorrow with the facts. I got that the wrong way around. So let me get you the right way round and show you what is happening with the sector story here in Europe. This is the picture that we have a big move down in oil that is helping out some of the industrials and some of the airline stocks. Similar story we're seeing over in United States. So media is up today. That's the Pearson. The car sector is coming up. The Travel Leisure sector is coming up very nicely all in positive territory. Bottom end of the market commodities down. Basic resources are off today. The luxury sector also under pressure as well today as we see a number of European countries basically banning the export of luxury goods into Russia. That's why LVMH is down. The world's biggest luxury stock down by one point four said today. Oil stocks interestingly enough actually positive despite the move down we've had in oil for Shell actually up by six tenths of 1 percent. But the airline sector really benefiting Ryanair very negative first thing this morning but climbing back quite nicely. Real positive momentum moving the United States as well. The European carriers David hedged their fuel costs. They get the same pickup as U.S. carriers do when the price comes down. David back to you. Thank you so much for that terror summary of what happened in European clothes from my colleague Guy Johnson. Now welcome back. The United States in turn to Henry McVeigh. He's KKR head of Global Macro Balance Sheet and Risk as well as CIO of KKR ISE balance sheet. So Henry thank you so much for being with us. We have fed meetings coming up today. Tomorrow we'll get announcement tomorrow. Give us a sense from your point of view from your chair. What is the Fed facing here. Because on the one hand we have perhaps slowing growth because of the war in Ukraine and other factors sent. And we have rampant inflation and they're already close to the zero bound. So I think it will first. Thank you for having me. I think we are starting this Fed episode at the lower bound. As you mentioned the last time inflation was like this was actually July of 1978. It was just under 8 percent. But short rates at that point were 8 percent and the 10 year was just above 8 percent. So we're at 15 basis points today. So the Fed's got to get started. I think there are. It's not just interest rates in terms of using that as a tool. They need to be more forceful around the balance sheet. If you've travelled anywhere around the United States of late. And you look at the housing market I think the Fed got off track in terms of the bond buying that was supposed to be 100 percent related to the pandemic. And with Covid cases going down and not impacting economic growth as much they need to put an end to that. So this is an interesting time for investors. Ultimately KKR we do think we're going to have a higher resting heart rate for inflation. It's driven really by three things. One is wages. There's a shortage of labor in the U.S. workforce. Two is housing as I mentioned. We've got a supply demand mismatch. It's being exacerbated by Fed buying. And then the third thing which really brings us to the Ukraine war and obviously there's a huge human element that we want to make sure that we reflect our concerns and KKR. But. But the energy transition is a very noble goal. But ultimately the energy transitions bumpy. It's inflationary. And I think it's highlighted the importance of energy security. And I think that's starting to play out in the markets as as you've described very well to to your viewers. So so that is you've described a really complicated situation. The Fed is facing here. So what is it to do. I mean I think some people would say that is behind the curve a bit on raising rates. Given where inflation is gone perhaps emphasizing employment a bit more than price stability. Do they need to make a turn on that. And actually if anything emphasize price stability over employment. I think if you go back through the minutes in August of. 20 the Fed talked about in my view favoring employment over price stability and that's when we had almost a deflationary environment said look it's been incredibly difficult environment for the Fed to but right now I think we need to equalize those two forces. And part of that is is bringing the balance sheet more to the forefront and then getting to me. This year we need to do at least five to seven hikes just to get back anywhere towards neutral. If you look at longer term inflation expectations they've crept up just to around to around shy of 3 percent. And that's above the Fed's the Fed's target. But it's complicated. They're really three forces at work here. One is as we've seen overnight you're starting to see more Covid cases going up in China again. And that's going to affect supply chains that will be inflationary in nature although it'll slow growth. Second is the Russian Ukraine conflict which will create inflation. God if he thinks take something like wheat 25 percent that wheat production comes out of the Ukraine and Russia. There are other commodity prices such as nickel that are being impacted. And then the third thing is wages in the US. Those are really the three forces at work right now globally that are creating a difficult situation. And so you know KKR we own or and or partner with over 200 companies globally. We've been navigating this. But you know in the years I've been doing this business this is one of the more complicated times. I do want to emphasize though we're doing a good job of playing defense particularly taking care of our portfolio companies and making sure that we're protecting margins. But we're also playing offense. And that's part of what we use our balance sheet for. We've got about 25 billion dollars of our own money that we ask investors to come alongside. And we've been very aggressive around infrastructure real estate asset base finance and certain parts of private equity where we have the ability to demonstrate pricing power. So it's not business as usual but there are opportunities that have emerged and we've been able to take advantage of those and we'll continue to do so on behalf of our limited partners. And that's just what I'd like to turn from if I could. The Fed's balance sheet to KKR is a balance sheet which you're responsible for have some control over. First of all when it comes to Russian some of the sanctions being imposed what is K.K. ISE exposure. We have essentially no exposure directly to to Russia less than 1 percent. That's not. We've for many years have elected not to have direct business connections there and a majority stake. So that's not that's really not a concern for us. I think the human element. And then what is the second order. Derivatives what I talked about which is making sure that you protect margins around some of the supply chain issues that we're going to see particularly in Europe. We have a huge business in Europe across credit across equities know private equity and infrastructure. And so we are in a good position but that's something we're watching closely. Particularly given the natural gas prices in terms of what we're doing with the balance sheet. We've been emphasizing things that have collateral based cash flows such as infrastructure. We've been doing a lot in the fiber space towers areas of transportation where you have long term contracts and real estate. We've been very active around multi-family where we think there's a housing shortage and we can provide homes to individuals. And then we've also been very active on leasing in areas such as airlines and other forms of transportation. But those are all things that have collateral. Where investors have downside protection they do well in a rising inflation environment. And then on the private equity side we've really focused more so on things that have high cash flow conversion. This is a time not to ever leave our balance sheets. I don't think this is like the pandemic where as I mentioned earlier the central banks can come to your back very quickly. So this is this is a walk not run environment but there are things to do. And then the final thing David we've been doing with the balance sheet is we've created opportunistic pools of capital where we can lean in both in liquid credit where there's some dislocations among high yield and bank loans and toggle between those. And then finally we have a fund where we spend time or a pool of capital where we spend time doing things where we can provide capital solutions growth companies that may not have a down round next time that may need to borrow money to get through this bumpy period. Those are all things that are interesting to us today. And I think we're well set up as a firm to to be a capital solutions provider in those areas. Yeah I saw yesterday that you announced a 17 billion dollar I think it was infrastructure fund to address that infrastructure issue. I think the larger ahead. But just one more if I could on the sanctions which is not directly involving Russia. But we had Senator Pat Toomey from Pennsylvania on yesterday and he said well we need to do next. The United States government is go to secondary sanctions. That is to effect third party countries that are dealing with Russia. Certainly China might come to mind given what's going on is there's some potential exposure for your over 200 companies there. We do business all over the world. So if you picked any one country we're obviously going to have some element of exposure. We spent a lot of time as a firm thinking through that. I guess my comment on the sanctions would be when you think about what's happening to the Russian economy. It's going to be significant. This is a structural change in the way that war is being conducted where economic policy can drive outcomes. And you're seeing that in terms of what's happening with the with the Russian economy and that'll make everybody think through security. I mentioned that earlier security payments security of data security of communications and health care. That coming on the heels of Covid will be something that all politicians and senior leaders around the world talk about. So I'll leave that the policies to the folks in D.C.. But you know in terms of how we think about our business we think a lot about supply chains creating redundancy. And then ultimately can we find investments that deliver value for the employees but also do it in a way that's that's friendly to the environment that we live in. So let's leave it there. Again thank you for having me and very much appreciate it. OK. Thank you very much for being with us as KKR. Henry McVey. Coming up Republican Senator Thom Tillis of North Carolina. This is balance of power on Bloomberg television and radio. This is balance of power on Bloomberg Television Radio. I'm David Westin. Well yesterday we heard from Senator Joe Manchin of West Virginia about his inability. I think it's fair to say to support the nomination of Sarah Bloom Raskin for the Federal Reserve. We now welcome Republican Senator from Thom Tillis in North Carolina. He's a member of the Banking and Judiciary Committees. And the senator tell us earlier tweeted now that it's clear Sarah Bloom Raskin has no path to confirmation. It's time for the Senate Banking Committee to proceed with the other four nominees as committee Republicans have been pushing for. So welcome Senator tells. Good to have you here. Push forward to the other four. Where do you stand on the other four. Well we certainly support having the markup. I intend to vote for Chair Powells confirmation. And Mr. Jefferson the other one. So I'm leaning no. But I think that we want to move it out of the committee and move it to the floor with the exception of Raskin. And I think now that Chair Brown and the administration need to recognize that there's no path for Miss Raskin to be confirmed for the supervisory role. So let me understand exactly if in fact the Republicans vote along party lines and Democrats photo party lines for example on Lael Brainard the current board governor who's been nominated for the vice chair position that would pass it to the full floor. Is it likely she would be confirmed in those circumstances. I think so. I think where Senator Manchin definitively stated his position on Raskin that it would likely be a 50 50 vote or maybe one or two other Republicans for some of the other nominees. But that's not the case with Miss Raskin. And why do you find it uncomfortable to support to Lael Brainard. You know to me if you if you look at what I'm mainly concerned with what the Fed is to make sure it continues to be a consensus driven organization we've seen what's happened over the FDIC with former chair McWilliams. Miss Brainard was characterized as the dissenter in chief. Maybe she would change her behavior but I really want that more consensus driven body to move forward. And that would be the reason why I will not be supporting her confirmation. How important is that we get full staffing on the Fed given what's going on right now. We're having meetings as you know today and tomorrow with announcement. Inflation is a big concern. And the Fed is really front and center with monetary policy when it comes to trying to fight inflation. Well first they have a functioning body. So I think some people may be led to believe or some members may lead people to believe that they can't move forward with their current numbers. I do agree that we should go ahead and move forward with the confirmations see how they end up in the Senate chamber but they can already do their work like they're doing this week and they are probably the ultimate decision to raise interest rates. So let's move to another nomination is pending in a different committee server which is judiciary. We of course have the nomination. Caetano G. Brown Jackson to the Supreme Court United States. I know you voted against her for the D.C. Circuit but you recently met with her. Can you tell us what you took away from that meeting. Well she was very prepared very engaging had many of my staff. She she handled my way of having these sorts of meetings and answered many questions of my staff many who had worked on Judiciary Committee before they came into my office. So she was very well prepared. But at the end of the day we're looking at a even broader base of information than we did for the circuit court nomination which I did vote in opposition to really form a basis for determining whether or not her judicial philosophy fits with my ideal baseline for someone who's going to serve on the Supreme Court. And what is it that has she has said or done that would suggest it's not consistent with your judicial philosophy. Well David what you have to do is you go through she's written over 500 different opinions. And what what we have to go through now is connect and see if there are any patronize. With respect to the theory that she used in adjudicating the cases and going all the way back to work when she was in private private practice and her defense as a defense attorney and just try to put together a series of questions that would either satisfy me that she doesn't come in with a judicial predisposition and if she does then I would have to vote against her. But I'm going in with my mind open and encouraging my Republican colleagues to not repeat the despicable scenario that I saw during the cabin. All hearings treat the nominee with respect. Agree to disagree. And then make a vote out of committee and then in the chamber. Senator do you think it's fair to say that she is an experienced lawyer just as a lawyer. And what is the importance of that in the Supreme Court. Because a lot of the Supreme Court deals with as you know isn't high constitutional theory at all. Well I think that she's got tremendous experience and great academic credentials so that the the what's really important to me though is to make sure that we have somebody who goes to the Constitution and the plain words of the text to make a decision once you get elevate. I mean in the circuit court where she is today or even at the Supreme Court. That's what we have to look at in terms of patterns of behavior. Okay. So finally just a change a little because a headline crossed the Bloomberg as we were talking. And you are on armed services and also have a role respect to NATO as well. We have now President Putin saying that Ukraine is not serious about finding acceptable solutions. The headline at least is a bit discouraging the possibility of a negotiated settlement in Ukraine. What do you think. Where do you think we're headed on Ukraine. I think we have to continue to keep our foot on the accelerator for sanctions. We have to take Putin for what he is. He's a liar. He's actually allowing mass murders and war crimes being committed in Ukraine. So it's very very difficult for me to actually take anything that comes from his mouth as serious and truthful. Senator it's really such a pleasure to have you with us as always. That's Republican Senator Thom Tillis of North Carolina. Coming up here we're going to talk about that sharp drop in Chinese stocks. This is balance of power on Bloomberg television and on radio. This is balance of power on Bloomberg Television Radio. I'm David Westin and we've been covering the market's going up and going down going all around. And part of the driver recently has been Chinese shares particular tech shares. And for that we turn to critique. GUPTA So as I said they were down. Is a big sell off maybe not as quite far down now. Yeah. A little bit of dip buying when you're looking at some of these names you still have some other names like Alibaba for example under a lot of pressure. But then you look at J.D. is actually in the green. So once again a little bit of red and green on the screen. But something. Keep in mind here is that Chinese 80 Rs have dropped 76 percent from their peak. Remember all the rage last year when they were going to be kind of the best of both worlds bid. They were tech stocks but they were also this exposure to E M to cyclicals through China. And now just without regulatory scrutiny you've seen under a lot of pressure. Then the cherry on top of a pretty bad sundae is you are also now feeling is seeing China kind of slowly aligned with Russia in some ways at least that's how it's viewed from the outside. And that's making a lot of these stocks. ISE J.P. Morgan would put it on investable. And by the way they also have a little Covid problem. They have a shut down Shenzhen or things like that which can't be helping them. Exactly. Especially in Shenzhen which is their tech hub essentially for China. So that puts on additional pressure. On the one hand your time out earlier in the show the oil. Oil stocks perhaps possibly down because of less consumption. But for a lot of these tech shares that actually operate in the area that's the additional view and especially from an outside investor that wants that exposure there. It's not exactly good news. You mentioned 80 hours before. Do we have a sense of the extent to which China is really depending upon outs outside of China investors to support their stock market. Because I've seen some suggestions. In effect retail investors in China are stepping in to some of the foreign investors who are leading. Yeah I've heard that too. But also remember China has a much bigger retail following than the United States. So for them to do that you could actually see that move the market in a way that it wouldn't in the United States. But to your point about foreign investors leaving this is really the problem here. And this is what you're seeing arguably with Russian assets as well that at what point does the regulatory crackdown overstep or kind of overshadow perhaps any positives coming in the stock. And that's something that people are still dealing with right now. We have to tow a currency as the yuan doing. We'd have talk about currencies fell flat against the dollar right now but that is significant in itself. We did see a headline earlier that Saudi Arabia is considering a big emphasis on considering doing some oil deals in the yuan between Saudi Arabia and China. This is significant given that everything is kind of priced in the dollar when you look at commodities. And that's really where you saw this major drop in the dollar or weakness in the dollar against the you want a strengthening of the yuan off the back of the headline. We know that a lot of countries have start to think about this. How do you diversify away from the dollar especially in the wake of some of these sanctions from Russia. One of the risks we've talked about does it actually undermine the dollar's reserve currency. People say it's pretty sticky but at some point people start to find other alternatives. Well you know I was reading about this earlier. This in history there's always going to be some sort of transition. Right. Historically started with the Dutch currency. Then it went to the British pound and the dollar. And perhaps some people are saying not immediately but in the long term that next candidate for whatever the future reserve currency is that could be the you want to you're kind of seeing perhaps very small start of that right now. China's been volunteering on that for quite some time. They're happy to step in if we like. Thank you so much for that report on the Chinese shares from Kitty Gupta. Check out the Balance of Power newsletter on the terminal and online. Coming up Balance of Power continues on Bloomberg Radio. And in our second hour we're going to talk to retired Brigadier General Mark Kimmitt on the status of the ground war in Ukraine. And this is Bloomberg.
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Balance of Power Full Show (03/15/2022)

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March 15th, 2022, 8:49 PM GMT+0000

On Balance of Power with David Westin, Stephen Stanley, Amherst Pierpoint securities chief economist, on CPI and PPI numbers, Elisabeth Moreno, France's Minister of Gender Equality on diversity an equal opportunities for women in France, Henry H. McVey, KKR Head of the Global Macro, Balance Sheet and Risk team on Fed moves and Senator Thom Tillis, (R) NC on Federal Reserve and Supreme Court picks. (Source: Bloomberg)


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