'Mixed Signals' Coming from Russia on Ukraine Situation

You can also listen to our radio show at two pm Eastern Time on the Bloomberg Radio or watch us on YouTube. Search Bloomberg Clovel News, back and forth geo political concerns and warnings about Russia's intentions when it comes to Ukraine. Investors in financial markets, though, do seem to be calming down today over those concerns and tensions between

Russia and the rest of the world. We saw the German Chancellor meeting with President Vladimir Putin in Moscow as Western allies expressed reservations over a Russian statement that it was beginning to pull back troops from the Ukrainian border. Well, let's get into it with our next guest, Angela Stent, Senior Advisor at the Center for Eurasian at Russian and East European Studies. You join just on the phone from Washington, D C. Angela. You were also a National Intelligence Officer

for Russian and Eurasia at the National Intelligence Council. You are also in the Office of Policy Planning at the U. S Department of State. Give us an idea of the conversations that are happening right now at the highest levels as the United States and the rest of the world really try to understand and prepare for what Putin could

be doing. So on the one hand, you know, if you look at the actual military deployments, there are still what about a hundred and thirty thousand troops, Russian troops surrounding Ukraine on three sides, even though the Russians have now said that they are pulling back some of those troops. On the other hand, you have President Putin coming out with the German Chancellor today saying, you know, there's room

for dialogue as room for diplomacy. You have the Russian Foreign Minister saying that yesterday he wouldn't be saying that if he wasn't told that it was okay to say it. So we have mixed signals, and it's always the issue.

Do you only look at the military capabilities, which would really lead you to believe there'll be some kind of invasion, or do you look at the broader picture and the politics and think that this is all part of Putin's plan, that we've been responding to all of his demands, and he's more or less got us where we are, which is we keep floundering and not knowing what's going to happen. I feel like to understand the situation that's happening right now,

you need to understand Vladimir Putin. What do we need to understand about the individual? Uh? Mr Putin? Well, I think Putin now feels that his time has come. He looks out at the West and he sees us all polarized, divided, unable to get our own agendas through, and he is really you know. Fifteen years ago, he made a speech at the Munich Security Conference where he criticized the United States for imposing its will on the rest of the world and said that Russia had been really excluded from

decision making after the collapse of the Soviet Union. So he sees this as his moment to sort of sees upon Western weakness as he sees it and try and force us to re say the way we organized security in Europe and what Russia's role is in that structure. Are we rethinking the way we organized security in Western Europe? And are we doing that as a result of the

European unions reliance on Russia for oil? So we've actually made proposals in response to the Russian demands that we want to sit down with them and discuss a host of issues with them. Um. In fact, yes, the European Union gets about of its gas supplies from Russia, although the US has been exporting a lot of l n G recently to Europe. So the dependence on gas is clearly a factor here. But I think more in more general terms, we realize that the Russians are one thing

that they can use it. Foreign policy is sort of military force and the thread of it, and we are responding to that by saying, maybe we have to take some of their demands at least into consideration. Ala, how did we get here? And I ask you you understand the inner workings and meetings that must go on in terms of stuff that wouldn't be in the headlines that

most Americans would see on a daily basis. Our most global citizens wouldn't write the conversations that you guys are having behind the scenes, the subjects and countries that you're keeping an eye and I would assume Russia and Vladimir Putin are there. So how did we get there? Did this catch us off guard that we didn't maybe understand

truly Putin's intentions? Yeah, I mean Putin has been signaling this for a long time, as I say, fifteen years at least since the annexation of krom and we listened to him, but we maybe didn't take it seriously enough. Uh. And I think also the bign administration coming in and saying we want to focus on China as our major threat, and we want to have to stable a predictable relationship with Russia so that we can sort of put Russia to one side and really focus on China, and Russia

were saying, oh, no, you can't do that. You have to pay attention to us. So I think this is part of that re orientation. And then I think the Russians have looked at what happened the way we got out of Afghanistan, and also since you know, this is a time to sort of be tougher with the United States, I think probably we should all have taken what who we're saying more seriously earlier on. Well, we obviously can't

go back in time and do that. But what the United States do now going forward, well, I think it's doing the right thing, which is offering diplomacy and talks with Russia, threatening massive sanctions if Russia invades, although I have to say I do not know how far the Europeans would go along with these very very tough financial and energy sanctions. Is that because they need Russian oil.

It's because they have a much closer economic relationship with Russia than the US does, and they'll be much more adversely affected by it. Yes, it's energy, but it's also you know, their trade that they have with Russia would be adversely affected if they cut off from these you know, from the banks and things like that. So um, I think we could expect some cooperation from them, but not

maybe as much as we wish. We're speaking with Angelus stant senior advisor for Center of Eurasian, Russian and Eastern European Studies. Her most recent Putin's world Russia against the West and with the rest. Also was in the Office of Policy Planning at the U s Department of State, among many other rules. Angela, I want to talk to you about what tools the United States has at its

disposal in order to curb potential Russian aggression. Apart from sanctions, What can the US do, Well, there's a little bit an amount to what it can do. Obviously, we've been arming the Ukrainians, trying to give them more resilience, supporting them. But at President Biden the Senate, as there's obvious US troops are not going to go and fight Russian troops if there were to be an invasion of Ukraine. We're both nuclear superpowers. We've actually never afford each other before,

so that is off the table. Uh. The other thing we're doing is strengthening our NATO allies in the region Poland, the Baltic States, Roumania. We've deployed extra troops, both NATO and US troops there because, of course, if there were an invasion, Uh, it's not necessarily true that it would just stop with Russia and Ukraine. You know, Poland shares a border with Ukraine at those Romania, so we you'd have to be very careful that this didn't spill over

UM into our NATO allies. So I think those are the tools that we have UM and they so far they have probably been effective in staving off an invasion. That is, if you assume that Putin did want to invade in the first place, and not that he's just been using this to get to gain other goals. Okay, So I'm thinking about if you were, you know, putting together some documents for a presidential security team and advising them, what's the worst case scenario of what we are dealing

with right now? What's the best case scenario? The best I can kind of get an idea of Russian backs down essentially, what's the worst case scenario you talk about that spillover UH into other NATO allies and that makes me a little nervous. Yeah, I mean, once you have a real war breakout, you can't predict what's going to happen. So the worst case scenario would be a full fledged invasion. You know, where the Russians go and they take here for capital, which they could do pretty quickly, and then

what happens um. You know, the Ukrainian army is obviously weaker than the Russian one, but people will be fighting back. You just don't know in the fog of war what would happen, So you would have to try and make very sure that this didn't spread to some of Ukraine's neighbors who are NATO members. Um. But but but that I think would be would be the very worst scenario. The best scenario is if there is no invasion, um, and there are diplomatic talks. But even in the best scenario,

this isn't gonna go away. There is no quick solution to this. Uh. The you know Russians want to reorder the European security for this, So um, you could have this pressure going on. You could have Russian troops withdraw then some bad um and the pressure would still be on Ukraine. How long does put And stay in power? Well, technically he can stay until six he had to constitution change. In reality, I think he can stay as long as

he likes. He's turning seventy this year. Um. You know he runs for re election again in two but we could see him in office certainly until he's in his eighties. You talked about best kiss scenario, you talked about worst case scenario. What about likely scenario here? So I think the likely scenario is there isn't a full invasion UM

or there isn't an invasion at all. There is constant pressure on Ukraine to make concessions, including saying that it doesn't want to join NATO UH, and then there will be constant pressure on the United States and Europe to renegotiate with the Russians UM to UH to in you know, to to exceed to some of Russia's security concerns, UH to discuss so called indivisible security with Russia. This could go on for a very long time, and I think

that's the most likely scenario. We're not going to get back to the situation we were really before ten, where we still thought we could work with Russia on a lot of issues. We are working with them still on some with them, but I think we're going to get back more to a Cold war type system where we have to rethink, we have to dust off George Kennon's writings from and we have to think about how we

can contain Russia UM more effectively. WHOLDA think that this is the kind of conversation we'd be having in Angela UM thank you so much for your insight, UH and your knowledge sharing. Angela Stent, Senior advisor at the Center for Eurasian Russian UH and East European Studies, during us on the phone from DC. Her book Putin's World, Russia

against the West and with the Rest. She has served at the U. S State Department and the National Intelligence Council, So really some smart insight when it comes to the situation. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stenovic on Bloomberg Radio. Well, the upcoming

issue of Bloomberg Business Week. We're talking digital currencies, Carol, UH, and what China is doing specifically at the Olympics to show off that it has this digital version of its currency. And I gotta say I love the opening lot into this story. China is competing for more than just medals at those games in Beijing. It's also quietly trying to define the future of money. So let's get more on

this story. Bloomberg News reporter Joe Light with us on the phone in our Washington, d C. Bureau, along with Bloomberg Business Week editor Joe Webber on the remote access line in Brooklyn. You know, Joe, I feel like the U s and China are dueling on so many different fronts, but China really being aggressive when it comes to a

digital currency. Yeah, this is one where if any of us were in Beijing right now and we're attempting to interact with commerce and I actually, you know, I have been to Beijing and the before times and it is actually incredibly difficult to to pay for a meal by a souvenir because you're really not part of their ecosystem.

UM and China kind of cracked that for the games and you basically can just pay with a digital u on and that has led uh a lot of watcher is of this space to look closely at it and say, could the US ever get there? Joe? And what's the answer so far? Uh? Well, I guess the answers maybe it is the first question is whether the US UM

wants to get there. UM. The Federal Reserve just UM earlier this year put out a discussion paper which is really supposed to be the start of a multi year process of evaluating whether or not the US will issue its own for its own form of a central bank digital currency. And you know, even they're they're tepting feedback into may. Um. Lawmakers are supposed to get involved and help kind of define the contours what do you have

CEBDC would look like. But so far central bankers, you know, are a little skeptical that it's necessary in the US, and they see a lot of see a lot of risk cooping before. Hey, Joe, you read about this in the piece, but I still need to get my head around this. The difference between this a central bank digital currency in just using your phone to pay for something, whether that is through a Chinese super app or you through Apple Pay here in the United States. Yeah, totally.

That that's a great question, and I think for um, you know, most consumer transactions, it wouldn't look that much different at all. I mean, the way I think of a central bank divisual currency is basically a replacement for

the cash in your pocket. It's a liability of the central bank, and if you went to use it, I mean basically just use it, probably just opened an app, hold up a QR code, and the money would transfer instantaneously to whoever you're You're dying from the big differences what's happening on the back end when you're using like

Apple pay or sell, there are intermediaries involved. UM. If you're making an international payment, you know, you might have like your bank might have to talk to a correspondent bank,

which talks to a correspondent bank in another country. That that whole process UM, you know, for an international transfer can take days, and all those inter mediaries are kind of taking their cut the central bank digital currency, that transfer would be happening, you know, instantaneously over government trolled servers UM without those cuts being taken UM. So it's really it's really more about, you know, what's happening on the back end when those payments are made, rather than UM.

You know, the consumer experience if we look you know, pretty much the same, and you know, as it should because it's pretty easy already right your phone to the paper stuff. So it's safe to say that we're still figuring it out, and you definitely feel kind of hesitation amongst some central bankers, even though they're moving steps or taking steps to embrace UM a digital currency at the central bank level. Having said that, what is the advantage,

What is the first mover advantage? If China is much more aggressive and moves faster than the US. What is the advantage to a country in Central Bank that does that. Yeah, So the key thing to remember that it's not just China who's developing UM CBDC s now UM. There are eight seven countries that are in the process of exploring a CBDC UM and and China is probably China, even though it's a pilot project still in China, UM, it's probably the largest economy that actually has something out there

that's being experimented with. And that's an advantage because since you have all these other countries developing at once, they're gonna start UM tailoring their own CBDCs to UH to what's going what the largest economies are working working on. So if you have if you're a smaller country and you want your CBDC to interact as China CBBC, you're going to put in the privacy protections, you know, the protocols, the sorts of things that larger economy is kind of

dictating to you. So China gets too far ahead of the US on setting these standards and the US kind of remains relatively silent, they could end up dictating you know what cb DC looks like UM worldwide. No, not just its own country and so bring it back to the US here, UM, who are the naysayers who don't want to see the US you know, be be at the tip of the speer here. Yeah. So some of the central bankers of themselves, you know, some members of the UM Board of Governors of the Federal Reserve have

have expressed skepticism that it's necessary. UM banks are against it, and and one of the reason banks, you know, both both banks and central bankers are against it, is that having a CBDC could less than the amount of UM deposits that Americans keeping their banks. UM. So you know, if you're if you're if you're keeping a bank deposit, I mean basically that's a loan to your bank, and the bank will take that deposit and end up you know, using it to fund mortgages, using it to fund small

business loans. That whole you know, web of credit in the US is very important and a lot of who have studied tvdcs think that if people could, you know, keep more electronic cash in little wallet instead of at a bank, they choose to do that, And if you reduced deposits in the US, you know by ten percent, even something that sounds relatively small like that, I could potentially have big ramifications for you know, the cost of credit and the amount of credit that's available. Interesting world

that we're living in. It's a great deep dive into in terms of what China already doing. Um, thank you so much. Bloomberg News reporter Joe Lighte from our Washington d C. Bureau along with Bloomberg Business Week editor Joe Weber. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. It is today's Bloomberg Big Take. It's also among the most right on the Bloomberg terminal about the unknown hedge fund manager

that you may want to know about. Why? How about two billion reasons? Why? Yeah, we're talking about Karthick Sarma out earning the likes of Steve Cohen last year. Yeah. I know, seriously, Well, I you know that's why we have him. A parmer in here, who's hedge fund reporter for Bloomberg News. She's with us in the Bloomberg Interactive Broker Studio. Check out him a story and more from the Bloomberg Big Take. It's on the Bloomberg Terminal and

of course at Bloomberg dot com as well. Hammaum. Who is Karthik Sarma So Karthik Summer As you mentioned, Uh, he is a very little known hedge fund manager of people hadn't really heard about him much until the past year. UM, But he runs SRS Investment Management, which is a hedge fund that manages about eight billion dollars. And he used to work at Tiger Global, which is one of the pre eminent funds has had long term So is he considered a Tiger cub. He is considered a Tiger Grand

cub actually because Tiger cubs come from Tiger managements. But yes, from this lineage of like very successful managers UM and he has a very strong reputation. And so what's interesting is that he made this very big bet on Avis UM the budget car rental company and UM and that earned him two billion dollars that he made personally. Last year alone, his hedge fund was up about thirty five percent, so investors did well as well. And this wasn't an eleven year old bet on Avis that he UM had held.

And when the stock grew like four percents um, it paid off very well for him. You write in the story that this was this wager was an unusual one for him. It was UM So he's not sort of the typical hedge fund manager UM, and he doesn't take a lot of leverage on like like many funds too, and who actually runs the best short book. But he took UM a pretty sizeable position in AVIS, which is a typical for him. And he took a seat on the board, which you don't see a lot of funds

like wanting to do UM. So this was unique for him. But UM, it's based on this belief that UM any company that owns a fleet of cars is going to do well in the like uber of the future environment where people are relying on these modes of transportation. How lucky was it When did he first get into because was it? It was a fight years ago. So it was a great pandemic play right where people renting, and then it became a meme stock like there was a lot of stuff there was the yes exactly, so he

helped us for a long time. But then that there was that big meme stock bump that helped to meet cash out a little bit. And I think you took five percent profits um. And but it's it's still in the position and um it has since then grown a great deal. Well, speaking of the pandemic, where was where was Karthick riding out the pandemic? Was it the Hampton's? Was it Aspen? Maybe outside of the United States somewhere.

So that's a very good question. A lot of the Hedgeman managers fled to places like Florida and Aspen or someplace beautiful, um and and luxurious. He actually moved to New Jersey and he spent some time with this family there. Carol's raising her hands. She's basically saying, Okay, the New Jersey is the Hamptons of New Jersey. It's a new specialty. UM. And he spent time with his family in a more modest home. UM. And so you know, it's a bit of a unique um, which is completely fine, um, but

definitely a bit of a unique frend. Yeah, I think like a you know, billionaires earn a couple of billion dollars. UM. What's he like? Well, UM, these hedgement managers are in quite private and UM don't always want to comment and don't want to necessarily engage. So UM, everything we've heard about him is that he um is well respected that he has a good you know, his investors are certainly happy.

Modest down to Earth is the reputation he's earned. So he's getting attention because of this, you know, out performance, especially among the establishment in the hedge fund community. Has he I would assume that eleven years been a consistent performer. What do we know about his consistent performance? So there's not a whole lot of like detailers to going back, but he's got Yeah, it's tricky, but he does. He does.

He is known for being a strong performer. Obviously this has been quite an quite a significant year for him. Um but um. If we look at some of his numbers even in the past two years, he's pretty use double digit games. One was a very strong year and the year before we're still you know, single to double digit game. Um, but making him, you know, one of

the strongest performers. And you know, we do this this ranking of hedge fund managers and who had the most last year and we see some very common names appearing on our list every year. You know, Ken Griffin was on this year, Chris Hohne both one last year is the England or these are names you expect Um, but we saw some new names in Karthik being number three, beating the likes of Steve Cohen. Um, I just see

the news room like when the stuff starts to pop up, right. Yeah, And and you know it's nice to see some fresh faces on this list, you know, Steve Schoenfeld, Richard Michelle, these are also newer names that made the top fifteen lists calculations and no women, there hasn't There hasn't been a woman on the top fifteen list unfortunately fingers crossed the one day that that happens. Hey, how have hedge funds done? How have they done? Yes? So, Um, there's

a bit of dispersion. You see some outperformers, some funds doing very well, like the multi strategy funds like the Citadels, the millenniums, those did very well. Um. Some multi shrats like point seventy two didn't do nearly as well compared to like I said at all um, the quant struggled a lot in but made a come back last year. So renaissance terrible year, double digit gains did bounce back. Investors still redeeming from Renaissance because they were not thrilled

with that that first very difficult year. Um, so they still have seen fifty and billion dollars in outflows and redemptions alone. Um in like fourteen months. Was such an ow performer for so long. I'm just generally twenty seconds is more money though. In general, overalls continuing to come into hedge funds. Yes, the hedge of an assets globally are I think they talked to four trillion dollars now they're generally going to the bigger managers, the bigger players.

A lot of money, small amount of hands, still a lot going on. UM. I love this story. It is among the most read. We said, it's the Bloomberg Big take. Read it in its entirety. Just head to the Bloomberg or Bloomberg dot com. Hema par March. She's hedge fund report at Bloomberg News Inner Interactive Broker Studio. So good to see her. You're listening to Bloomberg Radio road. Yeah, but you let me drive? No, no, no, all right, please, I want to drive. It's good question. This is the

ride to the clothes on Bluebird Radio. All right. Got about fourteen minutes left in today's trading session. We did see the SMP five hundred, Nasdaq one under both pair some gains, as President Biden was speaking there from the East room, but just slightly. I think it was about a twelve or fourteen point moved to the downside on the S and P, but then we've bounced back off of that. So I would say overall, as to me, you were noting to kind of little change in terms

of market reaction. Let's get to it, Let's get to the drive to the close. Mace McCain is chief investment officer at Frost Investment Advisers five point one billion dollars in assets under management. Mace joins us on the phone from San Antonio, Texas. Mace, how are you. I'm great this afternoon and enjoying this upmarket. Well, it's it's been choppy though, It's it's you know, today is certainly up, but yesterday it was a different story. In your to day,

we're down on the major industries. UM, what are you hearing from from clients right now? What are their concerns? There was some concern with the increases in UM, the potential increases in the FED and rates. Uh, I think we'll be looking past that. Typically, you know, when we get the first rate increases we're up twelve months later, and we think that that pattern holds. We're counseling people to the whole type that things are going to the

rest of yours can't look better, all right? Does that matter? If the FED, let's say, comes out of that March meeting and is very aggressive and does a half a point uh increase when it comes to rates, will investors feel confident at that point? Are you talking about games that come later in the year, maybe when a lot of the moves by the FED are already done. I think by mid year we'll be looking better on the market. The you know, the odds of the FED going twenty

five or fifty I think are about evil now. Um, you know, it could be either, But I just don't see the figure overly aggressive when we still have unemployment numbers below where the the we started, If we still have two and a half million people that we're trying to get into the workforce. M Hey, what is the main concern right now that you have when it comes to thinking about asset allocation. I've been asking a lot of our guests to weigh in on how they're thinking

about asset allocation for their clients. In a time when a lot of people are arguing that there's really not a big reason to have fixed income into portfolio. What are you telling clients right now? Well, I think the fixed income is serving a very important function. Of course, we're keeping ours fairly short, so we had positive returns last year in our funds because we're keeping the income high in the duration shorts, so we're not taking a

lot of price risks. We're still positioned that way, and I think it's still important to have that fixing component. Um, you know, if if we the FED makes a mistake and we head towards recession, the stock market to be very vulnerable, so people be loving the fixed income if we get in that situation. A lot of ifs and butts, right, it seems at this point is that fair that we know, Um, when the FED enters a rate hiking cycle and then

we've got the balancie to deal with as well. Um that while certainly equities tend to go up early in that cycle, the Fed it's not an exact, you know, policy guide, right or it's not. There's not an exact playbook in terms of how the FED needs to do this, and certainly coming off of the unprecedented times that we had. Likely many say that the Fed is going to make

a policy mistake. So for investors thinking about that, how do they ride it so that they're not you know, riding the volatility, which is, as you know, a tough thing to do. I think the Feds in a very difficult position. You know, they have dollmandates, a full employment and an inflation target, and the inflation targets coming way in hot, and there's still their full employment mandate. We still have a workforce participation well below what the normalized

rate is. So they're not achieving either mandate today and it's going to be very hard for them to get there. And as you point out, so I think that them being able to land this plane without making a big policy mistake is uh. The odds are way against them. So Mace, does that mean that you think they're going to have to make a do something drastic in the sense of an increase of fifty basis points perhaps to

the next meeting. They may do fifty Uh, but we are in the camp that we don't think they'll be able to sustain rate increases for very long. We have a lot of debt in the in the system, and the consumers are are spending pretty quickly, spending down all the government incentive checks that they were giving during the pandemic. And we just don't see the ghosts of the the big driver to the economy going into um later this year. And in so I'm curious, um mace new money that

comes in. You guys work with a lot of institutional investors, pension funds. Where does that new money where our investors asking you to put that money at this point, and I understand that they invest for the long term, but in this kind of uncertain still environment, as some would say,

where where is that new money flowing too? So we're continuing our asset allocation with generous allocations to equities, but we have our eye on the door, you know, we are looking for the FED mistake, We're looking at the potential recession, and so we're just being very vigilant about when we may want to become more conservative allocate more into the bottom market still US equities or equities outside the US, while still keeping your eye on the door.

Primarily US equities, especially the growth stocks and and the ones have been so successible, and we've been underweight Europe and UH and international equities for a while, we just were betting when US recovering first. Is that something that you see continuing to play out in I do. I think the next big move in our economy is inventory restocking and the UH. But that's been delayed. We get

delayed into lay and delayed. We had a acron slow us down, and now we've had the Canadian trucker protests slowing us down. So it's been UM. We didn't see an inventory building one of the most recent economic reports, right, We did see that fairly, a fair amount of that happening though, Yes, and we think that that continues for the next couple of quarters. We think inventory build is a big growth factor as a consumer just starts to

slow down a little bit. Just to rehash for just about eight minutes away from the closing bello, we arec investors buying into this close. We are at our highs of this session, so up one point six percent, up almost seventy one on the SNPI, seventy two down, Jones Industrial average up four hundred forty one point again at one NASDAC the outperformer that average up two and a half percent. Here and tim we're looking about three forty

eight points higher. But again you're seeing us, certainly on the SNP and the NASDAC pretty much at our best levels of the session. Carol brings up a really good point that investors seeming to take President Biden's comments about Russian and Ukraine in stride. Why do you think that is? I don't think that the prospect of war or the is a big driver here. Um. There just isn't enough upside for them. There's a chance for them getting bogged down.

There's just not the probability of them UM trading into that and and facing the sanctions. I think there's really large distancentives. So I just don't see that moving forward. UM. Having said that, you like you said some of those big tech names, and it was interesting I came across the story. I think it was b of a UM that was talking about specifically that in terms of investors holding on to text shares, I think it was at one of the lowest levels that we've seen in some time.

Be of A clients most under right on textox since two thousand six. That was their latest Bank of America survey. Uh, you like the technology? I do. I think our forecast on interest rates is probably a little bit more benign than the consensus. Do you think investors at this point in the markets in general are just getting kind of crazy when it comes to rate hikes. I do. When I'm seeing seven and eight rate hikes. I don't think our economy is strong enough to sustain seven or eight

rate hikes. I don't think the Fed is going to look at the employment numbers anytime soon and believe that they can raise that much. So does that leave the So does that take us back to the recession comment that you made earlier? Uh? And why you think there will be a recession in? What makes you makes you say that? I think there's the dead ending economy and the consumer is you know, we're hitting a cliff on

the stimulus. Uh, You're of the stimulus is going to have been taking money basically out of the economy, and I think that there's just not a driver there after that happens, and after the rebuild, the inventory build is complete. We talked earlier with our Creedy group of our Bloomberg Markets correspondent who's been watching very closely the energy sector.

We did see oil did back a little bit and talked about the correlation between that and what we saw in the rise in in U S docks energy though by and far still you know, your outperformer among the eleven major industry groups in the S and P five hundred, it is up two so far this year. You still see opportunities there. Yes, we you know, we're sitting in

San Antonio. We have a front row seat to what's going on in energy, and I would say there's been a really large underinvestment in real in energy, and um, we're going to see the outcome of that as the economy worldwide starts to open up. I think we're going to be consistently short on oil and gas and uh in a lot of other commodities is re reopen. So even though you think is not going to be pretty, you're not ready to move new assets to cash or or over index at least when it comes to asset

allocation on cash or or on bonds. At this point you're still going you're still over indexing on on equities. Right. Yes, you know we're seeing really strong price increases today. We think we're going to see really good earnings reports. Um, you know, we will be watching the FED very closely to see if they'd make the mistake that we're worried about and um, that would cause us to get more bearished. But right now we're to wait and see is there

something that we're gonna get fed minutes tomorrow. I don't know how much you closely follow that. Is there something that could be in those minutes that might might kind of change your thinking a little bit? When it comes to the investment environment, the same cross talk could lead just to believe that there really isn't a consensus to go uh, go really quickly and go hard. So we think there's still enough WI sentiment there too to to claus and to go slowly. I think it's mostly related

to the labor numbers. All right, One last question fixed income play, Is there any way you play the yeel curve. We're still short, you know, you are pretty much on the short end, and but we are looking to with our forecast of possible recession in twenty three, you'll see us start to lengthen out because we don't want to stay too short too long. All right, Really appreciate all

your time today. Our drive to the close with Mace McCain, President, managing director and chief investment Officer at Frost Investment Advisors on the phone from San Antonio, Texas. They've got about five point one billion in assets under management. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio

or watch us on YouTube. Search to Bloomberg Global News.