Equities, COP27, and Big Tech Turmoil (Podcast)

states are having some some big races. Here Bloomberg, we'd like to talk about the political side in the context of the impacts on markets. So we bring in Cameron christ He's a macro strategist for Bloomberg News. So Cameron, you know you're looking across the markets here broadly defined. How are you kind of handicapping this midterm election as it relates to markets. Are you thinking traders are putting on any bets? Is it a wait and see type

of thing? What are you hearing? Yeah? I think it's I mean, it's tough because there's so much going on outside of the of the US political sphere. Um as you alluded to, We've got CPI later this week, and there's also the China stuff. I mean, people seem to be getting excited about the prospect of China reopening, even though domestically, you know, there are still officially denying that that's imminent, and COVID cases in China are are rising. So it's it's kind of tough to sort of just

pick out the isolated impact of mid terms. Um, insofar as you can. I guess there's this idea that, um, that a switch in in the House would be kind of positive for the stock market. UM. I'm not sure how plausible that is. I think generally speaking, people tend to overestimate the significance of individual political actors in driving economic and certainly financial market returns. Now, obviously there are

exceptions to that we've seen in the UK this year. Uh, But broadly speaking, UM, I mean, is the is the US economy gonna look radically different depending on who wins the House uh tomorrow? You know, is it gonna look radically different over the next two years? Arguably not that much different. Cam. So, I was just sitting on set with John Farrow from nine to ten AM, and I loved the question that he asked. Morgan Stanley's Mike Wilson

I want to ask you the same question. If you could know the outcome of the midterm elections, or you could know what this week's CPI reading would be, which one would you pay without a doubt CPI without a doubt. That's actually not what Mike Wilson said. Why would you rather know cp I? Because you know, as I just said, I I really don't think it matters UM who gets

in UH to to to Congress. I really don't. I mean, the the pattern there is a quite a strong path earned based on the calendar UH in in in terms of UM, the third year of a presidential term is typically very very strong UH for the stock market. UM. And that is kind of irrespective of who of who of who gets in UM. I know, I know Wilson thinks that it's it's going to be it's pretty supportive of the stop mark in the near term if the Republicans get in, so obviously, if he has that view,

and then that's what he wants to know. UH. And I guess in the micro term, if people want to get excited about the outcome of the election, whatever it might be, then yeah, maybe you want to know that. But again, I'm pretty skeptical that it matters very much at all in the in the medium term. Um, so I would rather know the CPI. I would rather know the CBI number, even though as we saw on Friday, and maybe that doesn't matter either. So I guess I really want to know is one's China going to reopen?

If I can I canswer the question? Yeah please? Yeah, yeah, all right? So Cameron, Um, you know, the CPI data is on the Thursday, and obviously that will be a key driver for these markets and handicapping what the Feds are gonna do. But a lot of folks are saying, you know, that's a backward looking, uh kind of measurement here. What's what's your inflation call? Do you feel like it's peaked?

You feel like it's coming down? I mean, we heard from Rich Truman, who produces Bloomberg Surveillance this morning that his favorite pasta dish at his favorite restaurant from eighteen bucks pre pandemic to thirty two dollars today. That's inflation. How are you viewing inflation? Yeah, I mean, I mean I have to sort of define the rules of engagement here. If you're talking about the year on your change in the headline CPI index. Then yeah, it's it's it's very

likely peaked. UM. If you're saying that if inflation is peaked, that means that the marginal price changes are going to get with with some rapidity, go back to levels of the FED is comfortable with. I think that's that's that's less likely. UM. For one, the shelter component UH tends to lag. It's a big portion of c b I PC partically on a core basis, UH, and that's going to continue to push up inflation for you know, the

next few quarters. UM. Kind of regardless of what what the housing market does, not just the nature of of the beast UM. More generally, as long as the labor market reminds tight services beyond the housing market are are going to continue generating inflation because it's still tough to get you know, it's still tough to get labor. I mean, part of that pasta dish cost is. Yeah, the price of the price of rigatoni has gone up. Part of it's the price of bolon at sauce have gone up.

But part of it is because it's difficult to hire people to cook the food and serve the food and then clean the food up. Yep, that's kind of what he was lamenting. But I mean, you've gotta feel for a guy whose favorite pasta dish so much, so much over the past few years. That's when he brings it, brings it home. There, Camera Christ good stuff. They're appreciated as always. Cameras a macro strategists for Bloomberg News comfortably working from home. We might add so a great time too, Yeah,

I mean exactly. So, you know, I'm just looking at these markets. It's kind of an odd day. Obviously, the dollop you know, two points, that's a half of one percent, whereas NASDAC still feeling the hangover. I think of the earnings we saw, you know, last week, and now some

of these layoff announcements today. Uh, you know, I think it's really calling into question kind of the growth story underpinning that tech sector, maybe getting a little bit of a rerating their mid term elections tomorrow, CPI Data Thursday. Lots for this market to digest. In addition to continued earnings, got Mickey Mouse's uh Walt Disney Company reporting after the close tomorrow. Lots of cross currents there. Let's check in with the professional who does this stuff for living. Hugh

Robert's head of analytics at quant Insights. Before that, he did stints at Merrill Lynch, my former firm, Credit Swiss, my former firm. You get a sense of what's going on here, Hugh, Thanks so much for joining us here again. Lots across currents out there, tons of underperformance no matter where you look as a classes so far in two.

What are you telling clients these days? Yeah? I agree totally with the lots of cross currents, and I think what's jumping out off our models at the moment is that now we've been pretty bearish on equities for most of two. You know, the message from the power FED about tightening financial conditions to fight inflation has been very evident on our models, and we've seen a substantial move

in that direction. But even though we kind of got Jackson hole two or whatever you want to label the tone to last week's FED meeting ads, we haven't seen the same move in terms of tightening financial conditions. If you look at credit spreads, tighter real yields of stop legging higher, the dollars come back a bit. Now, there are indio some trastic stories at play. Even there you know that the dollar move might be as much about China reopening as it is about anything the estic us driven.

But the bottom line on our modeling is that the tightening the financial conditions there has been a huge headwind and the major driver of the equity by bear market. In the last few months, they've stopped tightening and that opens up a little bit of evaluation gap on our models where you're starting to see US equity indices spoons now is that there they are all cheap to macro on the modeling that we've done. So that's probably the most interesting thing that we're watching at the moment. So

talk to me about what cheap to macro means. Is that a bi signal in your models? It is, yes, Sorry, So it to be clear what we do is we take a huge number of macro factors, but they fall into three broad buckets. So it's economic fundamentals, that's levels

of growth, tracking GDP numbers, expectations around inflation. They fall into a bucket that is kind of overall financial conditions at the level of real yields, the slope of the yield curve, how strong the dollar is, um what the Fed might be doing in terms of tightening or easing, both in terms of rates and the balance sheet. And then the last big bucket would be measures of risk appetites and stuff like vix um and then more traditional

measures like cold silver. But it's all those economic fundamentals, financial conditions, risk appetite all rolled up to say, right, given where all these macro variables are right here, right now, fair value on spoons is X, on the net back

is y, etcetera. And because mainly because of the financial condition side of that three legged kind of input, because they've not actually tightened and actually come back a bit, our model values actually tipped a little bit higher for your sequity and disease while you've had this sell off of the last couple of weeks. So that's opened up a cheap valuation in our language. So I guess what is your recession call here? I mean, I guess you know there's definitely and over in Europe, you guys have

some real real economic challenges. What's your recession car for the US? So we're not actually a traditional kind of a macro forecasting shop. We don't have a call to say, you know, the Eurozone is going to contract by this much whereas the US might just engineer a softer landing. Um, there's plenty of very clever economists out there and talking heads who do that. What q I S value added is we can tell you the market's reaction function to

those economic fundamentals. So if you were, for example, a massive growth bear and you said Eurozone is going to bear the brunt of it because of geographical proximity to Russia and the energy crisis and everything else, we can tell you, right, but it's had a long duration trade. Should I be long buns? Should I be short the EUROFX? Is it a short eurostock fifty play? Or which sector

within euros is it? So that's really more Our value added is measuring the relationship between any financial security, bond, currency equity, whatever it may be, and the macro environment. But we're not a shop that's going to turn around and say three U s GDP is going to be this euro presenting GDP is going to be that. All right, Well you're based and looking at the Bloomber turnal fifty Liverpool Street, is that right where we were? Yet we're London based, Yeah, yeah, So what's it like in the

city of London these days? It's you know, three thirty a p m. There you went out for lunch, presumably. How are the streets of London the prett marmang airs for example. Yeah, well there's a there's a very rude acronym that I can't repeat live on air. But most people have turned into Tuesday, Wednesday, Thursday working from the office and Monday and Friday from home, So Monday is probably not a fair representative I got you. Yeah, middle

of the week. I would say London is back to kind of like volume and foot traffic or what you used to see. I think in terms of the mood, um, yeah, people are very aware, especially near the whole trosonomic saga. Um, I think brought so much of what we do, which is normally quite leash uh in the middle of the newspaper, brought it very much onto the front pages. I think, you know, mortgage rates is probably where what do meets Main Street right first and foremost, and that story has

been splashed everywhere in the UK media. So the mood is pre downbeat. I think people are expecting now the housing market correction and tough times ahead. So it is not greater the UK. All right, we'll hanging there, Hugh Robert's head of analytics at quant Insights. Well, this Federal Reserve, if nothing else, has been quite clear in its messaging

what it's what it's doing with rates. You had, obviously, uh, a couple of big, big meetings recently, and they've been quite clear that number one issue is to fight inflation. How how did they go? When do they start? Pre a Miserraam, Managing director and global head of rates Strategy of TV Securities, joins us. So, what's your takeaway here, um as as to where this Federal Reserve is going after we think about the next three to six months

in terms of rates. Sure, thanks for having me. So. I think that the Fed is trying to give a very nuanced message here that they could slow down the pace, and that's what they suggested, could happen as early as the December meeting, but they could keep going until they see very clear and convincing signs. Those are the terms

that they've been using that inflation is decelerating. So our view is a fifty basis point in December, another fifty in March, and then a series of twenty to bring the terminal rate to five and a half and that's really because we see inflation declining and actually we have a lower than consensus called CPI podcast for Thursday, But it's it's so broad based that we think that decline is going to be slow and inflation is sticky because

it's so broad based. So you know, if inflation doesn't decelerate that fast, we think it's going to prevent the FED from being able to stop soon. So they can slow down the pace but keep going. We think until really middle of next year in doing it five and a half and then they're going to have to be resolute and just keep it there because inflation is still

going to look high. We focus about four percent inflation at what point they stop, and then we actually have them easing by the end of next year or more so really into twenty four because by then inflation becomes less of an issue, but the growth side becomes problematic for the FED because we see the unemployment rate rising. So I think it's going to be a tricky one

for the FED next year. Preal Let's game plan what a five and a half percent terminal rate would look like in terms of the bond market, because I'm looking at two year yields right now at four points seven per cent, do they eclipse five? The terminal rate really does go that far. You know, I think we could just about touch five, but I don't think we get as high as five and a half, or that we can sustain five for the two years because the markets forward looking and is going to price in rate cuts.

I mean, we think we're already seeing signs of some slowing in the consumer. You look at the third quarter GDP number, how sing of course it's clearly snow slowing. So this is the first time the fat is going to be hiking into a growth slowdown, and I think that's going to keep these cuts. In twenty four I think we'll actually see more of that cut pricing being built in and that will prevent that front tent from rising.

But yeah, I would say risks are more asymmetric, meaning those front ten rates can still keep rising because you know, we're saying five and a half. Maybe it's higher than five and a half if inflation really doesn't decelerate fast. So I'm looking at the two year and a ten year treasury still inverted, you know, fifty fifty one points here. What does that tell you? What is what? What are

you hearing from clients about that? Is that's still an issue? Yeah, I think the inversion has been something we've had to get used to, and I think we'll have to live with this inversion for quite some time. I think investors are asking me, you know, when's the time to put on a steep now? If we think the fat's going to be cutting at the end of next year, is now the time for the steep now? And you know a term, Yes, if you get a weaker CPI, the curve can steepen a little bit. I think it's still

too early for that steep now. We really the curve tends to only steepen when cuts are about three months UM priced out. And I don't think this FED can even talk about cutting let alone. I mean they're not even talking about pausing. So I think the curve stays inverted. Any big steepening should be feeded. And you really have to wait for that inflation fear from the FED from the market to come down before we can start legging

into steepness, legging into steepness. So you said that you know three months out from the cut is if I'm understanding you correctly, that's when you would start going in on the steepener or recommending it. If if the FED is going to cut by the end of next year, does that mean September next year is when you know, maybe you do see that two year ye'ld start following

those steepeners make a little bit more sense. Sure, yes, so we're thinking fourth quarters when you start thinking about steepness. I mean, if inflation has ends up being high than our forecast, which is possible, I would say that bias is higher inflation just because wage inflation is high and it's a broad based increase. Maybe it's even closer to

the end of next year. So the trade I think between now and then is more a long duration stand rather than a curve steepna because you know, at some point investors are going to want to a recession risk hedge, and I think that's just owning long end treasuries rather than playing for that fadies because the Fed is going to be very reluctantly easy when they do. So we do have midterm elections tomorrow. I wonder how you think about that. I don't know how much you've kind of

factor in politics geopolitics into your outlook. How do you think about that sure, so not a whole lot um. I mean, even with the Democrats controlling all three chambers of government, we actually didn't see a whole lot of stimulus. I think other than COVID stimulus, we haven't had much physical stimulus. So if you get gridlock, normally conventional with them would mean less policy. Good for risk assets, probably good for bonds. I would say we've been in that

regime already because it was such a tight split. I do worry about the dead ceiling. I hate talking about it, but we're going to be dealing with dead ceiling early next year. It's going to go down to the wire. Markets never like that, so I think that's one source of sort of wild card around the dead ceiling. I think political pressure on the FED will be high as well, But I think this FED has been clear that it's about inflation um, and I think we don't get any

fiscal stimulas. So even in my view, where the economy hits the recession by the third quarter of next year, normally we'd look for fiscal easing and monitories ing. I think this time, inflation doesn't allow monitories. In split government doesn't allow fiscal easing, so that's why you know that recession need not be very short lived because you just

don't have any policy support. Pretty I'm going to ask you the question that John Pharaoh asked Michaelson from Morgan Stanley, and then I asked him Christ about an hour ago, I think, or a little lessn't that would you rather know the outcome of the midterm elections or would you rather know what the CPI print on Thursday is going to be? Oh? C p I A need. I think that's what's going to tell us a lot more about FED policy, which is actually front and center in everyone's mind.

Mike Wilson is the odd man out. He is. I know he wants to know the mid term election chare, but I kind of agree with Prea. Just feels like what's driving this market is and earnings, it's it's it's just kind of the Fed and what are they going to do? So I agree with you, so Priam, thank you so much for joining us. Managing Director and Global head of Rate Strategy for t D Securities. United Nations Climate Change Conference, more commonly known as COP twenty seven

is taking place as we speak in Egypt. Uh. The question is what can they get done at this conference here, and let's check in with Sadekwaba, member of the President's National Infrastructure Advisory Council. Uh. He is also the founder, chairman and managing partner of I Squared Capital. He's a member of the Council of Foreign Relations since March. He's also got a few advanced degrees. Uh. You know, kind of just thrown in there for good measure. But Soedak,

thanks so much for joining us from Egypt. Given the global geopolitical backdrop, Sedek, what is a reasonable expectations for COP twenty seven in your mind? Thanks for having the appointing to so. Look, the purpose of the COP twenties seven is really to achieve five goals. One is an obvious one, which is stronger commitments from countries in terms of reducing carbon emission, which is what they've degreed in

the previous confidence. The second one, which is a little bit more controversial, which is what they call loss of damage, not of the emerging markets and emerging economies are basically seeing we're going to bear the disproportionate share of climate change, so you need to in one way or another compensate us, and of course the world compensate is not something that industrial economies like to hear. And also given the economic crisis we're all feeling today, it's unclear where this money

is going to come from. Another goal is adaptation. We need to find ways to reduce emission and these helped African economies and other madrigal economies find those technological ways. And then of course climate finance. How are you going to pay for all this? So at the bottom line, it's a question of where can we get the money, who's going to pay for it, and who's going to

help pay for those increased expenses. Uh. And in the current environment, I think it's cant be very difficult because we have rising budget deficits uh GDP debt of soevern economies is at an all time high, in fact higher than World War two levels UH and we're all facing inflation and potential recession of the coming theory. So the challenges.

You don't want any of the goals of the conference to completely collapse, and I think you want to be able to have everyone agree, maybe to disagree, and pundit to the next conference and hopefully a good help, not great, that's not that And so dak I mean, how optimistic are you that those goals that you just lined out will actually be met? Does that need to happen for this conference to be considered a success. I think I

didn't think so. I think for this conference to be a success is for the we didn't end up in recrimination between various countries, the countries that have and the

countries that don't. I think if you achieve that goal and everyone agrees that the current economic circumstances a tough for everyone, and we all agree that we need to need these goals, uh, then I think that even the itself will be a great achievement and try to focus on particular projects rather than macroeconomic goals, which becomes difficult to monitor. So, so that you've written about the need to greenify infrastructure, can you talk about that, what it means,

what it means for investors and markets. Yeah. Absolutely. Look, when you think about the investment that is being made for electric vehicles, Um, you know, it's nice. It's of vehicles are moved from ice internal compass engine into electric vehicles. But at the end of the day, those electric vehicles will drive on roads which is native written in asphalt, on bridges which is made of concrete, steel, and these products are themselves high plaiting inputs. Right um, a percent

of steel production still uses coal UH. Asphalt and concrete uses a huge amount of water and electricity, again a lot of it coming from call. So how do you deal with these issues is really going to be a problem. So it's not enough to talk about the electric vehicles. We think it's important to be able to talk about the inputs themselves. Think about the following statistics. We will need to build a New York City equivalent every month

for the coming forty years. To think of the amount of inputs infrastructure that will need to be built globally, the amount of energy that it will require. So the way we need to do it is not just by saying let's all have electric vehicles, among other things, is

to think creatively about the urban city. And to be fair, Bloomberg and Bloomberg Philanthropies have been focusing precisely on that because that, I think is where the future is, which is the use of technology to be able to have it smart cities that will reduce carbon footprint across the board. And I think the future you've been finding technological solutions

like we did, for example, in UH controlling COVID. We spent ten plus billion dollars in the span of nine months to be able to find the right back seats. So I think that needs to be that huge push towards the adopting and adopting of technology to our daily life. That's absolutely critical. You won't be able to do it through conventional methods. All right, that's great stuff. Sekuaba, member of the President's National Infrastructure Advisory Council, is also the founder,

chairman and managing partner of I Squared Capital. Reporting to US live from Egypt. The Top twenty seven conference taking place there. It's gonna be going on for a couple of weeks there uh in Egypt. And again it's an annual conference talking on climate change. Uh. It's kind of public private solutions. Perhaps going forward, let's talk big tech and you think back, since it's great financial crisis that's

been the leader for this stock market. But we had some really rough earnings this past reporting period and some people starting to question that a little bit. Let's bring some experts on board and get their U ideas. Man Deep singh Uh and A rag Rana there two technology annels with Bloomberg Intelligence Man Deeps in our Bloomberg Interactive

broker studio, A Rock joins us on the phones. On Rock, let's start with you, because I want to start with We'll get the man Deeps crazy companies later, the ones that don't ever even have profits. But you've got Microsoft, I mean, that's the bluest of blue chips. Even they we're seeing some challenges in their business model, whether it's earnings, heads winds, or maybe concern from some of their corporate customers, how's that big software space doing? When my Microsoft, my

leader is a little bit concerning. So when you think about it, over the past five to six years, they have had a great run in terms of top line growth, you know, north of twelve in constant currency, so pretty much their you know, revenue has doubled just in the last five six years. Now, what's going to happen is over the next year year and a half, when we

see the global economy slowing down a little bit. You know, those companies or those clients for them for that matter, that have been spending so robustly on software, they're gonna pull back a little bit. And and this is more so just a mere function of economic think rather than anything to do with the digital or you know, all the emerging technologies that we see now. Having said that, we have confidence that the year after that we're going

to see a bounce back in that spending. Okay, I want to talk about the crazy companies that Paul mentioned. I want to do that with man Deep. I want to talk about Twitter. I think I don't know, we should check the the size and scope on this. How much time we talk spending about private companies? Twitter has to be number one, But obviously the news from last week,

there's been a lot of news. But one of the big headlines from last week that you had the likes of General Mills, You had Auti Fiser joining the list of companies that aren't going to advertise on Twitter anymore. And the state of ad spending is a little hairy right now. But what could that mean for other social

media companies? Were those dollars going to go? Yes? I actually think you know, other competitors like a Snapchat or Meta for example, may benefit from some of that ad dollars that could move from Twitter to you know, companies

with more of a direct response UH spend exposure. And the reason I say that is because Twitter is eight brand advertising, they don't use a lot of personalization when it comes to ads, whereas companies with direct response ads they personalized as Even though Apple's privacy changes were a headwind, there's still better R o I in terms of the ad spend. So clearly I think it could make a

difference for a company like Snapchat. For Meta, it's just too large for you know, maybe you know, two hundred million dollars moving to Metta. It's not going to make a big difference in their fortunes. Hey, you know, let's step back a little bit here. We are either you know, if you listen to most economists either in or approaching sometime in twe recession. Talk to us about kind of how tech spending tends to kind of perform in a

recessionary environment. What are you hearing from the big companies you talk to? Yeah, thanksful. So, So the way we want to think about is the first thing that goes is hardware spending. If you unless you have to upgrade the big hardware equipment that you have, you're going to push that out for a year. The second place you also go is, you know, your legacy on premise software packages. You know, you're not going to upgrade your UM you know,

databases or other software packages. But what happens is there are certain areas that you just cannot turn off, so security spending being one of them. You have certain areas within cloud that increases productivity that you're going to still

spend a little bit. And the third area that gets spending which cuts in spending I D services, but it's done with I would say a little bit of a lag because the contract that you've signed up or are still driving revenue and you know that's the new booking start to slow down and that has usually a six

to nine month lag. Now, having said that, you know, from our side, if we do see a reversal in the interest rate cuts or slow down, I think the fundaments may still be weak, but I think the bounce back is going to come there on all the tech valuations that have been beaten up so far. Alright, Mandy talked to us about the other one of the big growth drivers in the tech area has been this, you know, the secular ship of advertising dollars onto these digital platforms, Google, YouTube, Meta,

all those types of things. UM, how are you thinking about that app that revenue stream in a recession. Well, so clearly you're going to see broad based slowdown and adds spending, whether it's on the traditional channels or the digital channels. It's not going to change the secular trend. Although I would argue that connected TV is becoming a much bigger deal than we thought, you know, it was before, simply because a lot of the focus was on mobile.

Mobile ads was really the holy glare and the reason why you know, Meta did so well. Connected TV to me is just a different medium when it comes to you know, how you move your traditional broadcast streaming to digital channels and it can curate a lot of first party data. So that's where I feel like there will be a lot of investments. YouTube clearly is the category

leader with connected TV. We've seen Roku kind of go through its struggles because they don't have a clear platform, but you could see there's a lot of emphasis around connected TV, you know, for the foreseeable future. All right, good stuff. Guys always appreciate getting a quick round table there on all things technology. We can do that with Man Deep Seeing on a round Bloomberg Intelligence tech analysts. This is the big take the Bloomberg's in depth, original

reporting from around the globe. This is a really fast moving story that's caused a lot of outrage among investors. This is so fascinating. The market shutdown in a way it's never done before. That's gonna have consequences for years to come. The Big Take on Bloomberg Radio. All right, well, you know we are big, big fans of The Big Take. These are stories, in depth reported stories on Bloomberg News. And now they've got their own podcast and they've got

all kinds of radio shows. You can listen to The Big Take podcasts on the I Heart Radio app, Apple and anywhere else you get your podcast and listen to The Big Take every night at eleven pm Eastern on Bloomberg Radio. I want to bring in West Coast of a host of Bloomberg Big Take. It's a great story. We've all read about how these Russian billionaire oligarchs their yachts are being seized, and there's some amazing yachts and they're being seized due to the kind of response to

the war in Ukraine. Now the question is what do you do with them once you got them? Um Wes, you've got a fascinating story here. So it turns out it costs money to own a yacht, doesn't it. Oh yeah, these yachts are very expensive, not just to buy, but to maintain. And as you said at the top there, if you seize one of these yachts, as the US government does and other European governments have done, as their pursuing sanctioned Russian billionaires and trying to get what they

call the spoils of war, they take these things. Uh, they haullow into port and then they sit there and it is not cheap to maintain them. As one person told Stephanie Baker, who is the guest on the show today on the Big Take podcast, she says, these things are trying to sink every day if you do not maintain them. Well, I don't actually own a yacht at least not yet. Walk me through some of the costs here. If these yachts are just sitting there, what kind of

where and tear are they get in? Um? Yeah, Katie, Unfortunately I'm also in the don't own a super yacht club on now. Yeah, I can always save my pennies. Um so. Uh. Anyone who's ever owned any boat, whether it's a little dingy or it's a giant yacht. Knows that, especially if they're in salt water, they are constantly being attacked by a hostile environment. And these these enormous yachts are more like floating hotels than they are just your

ordinary boat. They have um, really uh sophisticated like desalinization systems so they can make their own water on transoceanic voyages. Um. They have all kinds of systems. They don't have an engine, they have engine rooms that you walk into, they have control rooms, they have huge staffs, they have state rooms, and you know, with all all the amenities in them. Uh, and just trying to keep them afloat and in good

repair takes daily care. And so say the US seizes one of these boats, and then they have to have an entire crew of people maintaining it every day, as though the billionaire still owned it, because of course those people would also have a crew taking care of it. Why don't why doesn't the US just turn around and sell these things? Why why are they in the business of owning and maintaining boats. So this is a really

good question. This is something that Stephanie Baker, who reported and wrote this brilliant story got into and the problem is what is the market for a seized Russian super yacht? So let me just back up. The first thing is they actually have to prove who owns it, because it's not like you just kind of walk into the super yacht show room and say I'll take that one and the guy says, you know, what does it take for me to put you in a super yott today? Um,

you have to order it. Of course, it's built to your specifications. These things cost hundreds of millions of dollars um and then they're they're built for you. And most of them are not owned outright by the person who buys them. They're bought through shell companies, and sometimes it's a shell company inside a shell company that owns these vessels.

And so when the U S comes along and says, well, we're gonna see this because it's owned by a sanctioned Russian billionaire, they have to actually prove it, and that can take a long time. So let's say they actually do prove it or to the satisfaction of a court, and they bring it into port and they are legally allowed to say we have sees this as quote unquote ill gotten gains, and they could sell it. Who's going

to buy that thing? As one person told Stephanie, Uh, let's say you buy one of these yachts and you sail it out into Asian waters, you know, outside the reach of the US, and the billionaire comes back and says, I want my boat. Uh. It's it's a risky sort of thing to do. And so it's not that easy to unload them. So it's not that easy to sell them off, I guess unless you are selling them to

Russian billionaires, which can't do right now. But who is paying for the upkeep at the end of the day, who is paying for the cruise that maintain these huge, beautiful boats. Well, I'm gonna give everybody listening, yes it's uh,

the taxpayers are and um. Stephanie tells the story of this one enormous boat called Amadeia, which the US claims is owned by this Russian gold tycoon named Suleiman Karama who was sanctioned by the US and eighteen and they tracked down this enormous three hundred twenty five million dollar Yeah, it's three hundred and forty ft long. In fact, it's so big that um. In boat parlance, it's not even a super yacht. It's called mega yacht or a giga

yacht because it's so big. And they tracked this thing down uh To to Fiji where it was located, and eventually, after this very long you know, back and forth and wrangling and questioning the crew, they hauled this thing back to San Diego and that's where it's sitting in port. The annual cost of keeping the Amadia in port, well they're trying to figure out what to do with this thing is about ten million dollars and that's paid for

by the taxpayers. So do the Russian oligarchs to purported owners of these shots, did they have any recourse here? What are they doing? Um? So this is also a really interesting question. A lot of them either don't respond to, you know, request for comment. Of course, I'm I'm really repeating here because this is Stephanie's story. She came on the Big Take podcast today and so I interviewed her UM and she has said, um, that she reached out

to some of them that they didn't even answer. Others of them say no, I'm not the owner, and the owner can be a notional other person or it can be a person who's the head of a shell company and say no, no, there's the owner. They just use the boat and so um, it's very complicated about trying to identify that identity, and in part because they don't just come out and say, hey, you took my boat. Yeah, it's a it's interesting story. I didn't even think about it,

you know, I just until I read the story. It's like, it's one thing to seize a yacht. It's another thing too, I guess kind of do something with it, you know, either monetize it or I don't know what West Coast about. Thanks so much for joining us. West is the host of Bloomberg's Big Take and again the Big Take story is entitled and Pounded. Russian super yachts are costing millions to maintain. So again and in this story, I saw great photographs of these mega yachts in there, you know,

all over the world. One that one is in Spain, one's in the UK, as West was saying, ones docked in in San Diego. Um. And you know, these oligarchs states tried to race out of Russian waters and get the safe waters. Some made it, some did not. Uh, And some had their boats seized here. Uh it's I just thought you could just turn around and just sell it, but apparently that's not the case. There might be some legal issues there that they have to work out, but

a fascinating story. Uh. And you can listen to The Big Take podcast on my Heart radio, app, Apple and anywhere else you get your podcast. And you can listen to The Big Take every night at love in pm Eastern on Bloomberg Radio. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews of Apple podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three and

on Fall Sweeney I'm on Twitter at pt Sweeney. Before the podcast. You can always catch us worldwide at Bloomberg Radio