Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside my co host Matt Miller.
Every business day, we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moving news.
Find the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. Ukraine Russia. Boy, we did not see this coming over the weekend, or at least I didn't. We need to figure out what's happening over there, so we asked to get two of our smarter voices over in that part of the world. Maria Today, European correspondent for Bloomberg Knows, and Leonid Brashitski, calumnist with Bloomberg Opinion. Maria, thanks so
much for taking the time. I know you're extremely busy today. I tell you, it feels like the world knows almost nothing about what did happen over the weekend. What is happening? What's the latest reporting about what's going on in Russia?
Yes, and it's very difficult to tell because well, the Kremlin, on the one hand, has gone radio silent since Saturday morning. That's the last time we saw from Vladimir put And talk about this situation. It was interesting that at the time the language that he used he basically said Pegasian was carrying out with his treason. At one point he didn't mention him by name, but he did say it echoed nineteen seventeen, which obviously is a crucial date for Russian history.
Today, we have seen the Kremlin to.
Some extent, trying to take back as some of the narrative we did see Vladimir Putin, but almost and a topic completely unrelated to this, almost suggesting it's business as usual. We had also some tape video footage from the Russian Defense Minister Sergei Shoigu. I mean, a lot of the tensions with Pegashiin and Wagner had stamped because of his criticism in terms of the way that the Russian mod
was carrying out were operations. So the message would be that sure was still in his job and it continues to do his job. But again the question is, how do we know if this footage was filmed today? This is all happening today, And of course I've seen that in the past Russia can be very good at just putting out a message on tape and footage and comments, pictures of things that are not happening in the moment but are already pre recorded.
They just put the map because it suits a narrative to me.
The real takeaway, however, is that today you see Russian's state media suggesting that this idea that there would be amnesty, that there would be no charges into Prigotten or even Wagner, that a lot of that had been part.
Of a deal broker by Alexander Rokashenka.
Remember he's the head of Belarus who the international community doesn't really recognize because they say he rigged the twenty twenty election, but nonetheless remains an ally, a transactional ally. I would say to Russia again, the terms of that deal that was brokeer to diffuse the situation now are being called into question. And there's a lot of questions too in terms of what is going to happen to Wagner, but also where is Pregauson.
The idea is that he would be.
On his way to Belarus, but we've had no indication that he's arrived here.
All right, well, let's bring lean it into the conversation here. Leanid Burshitski, Thanks for getting on a call with us. Talk to me about what this tells us about Putin's control and specifically his popularity with the Russian people.
Well, his control is not really in question. If there's actually a deal with pre version, such a deal could not have been engineered without Puttin's consent, Putting's permission, or putting participation somehow in the like deciding what should happen. His actual power isn't question though, because when you ask, the mutiny unfolded, nobody really made a serious move to defemp Putting and to stop the mutineers. A lot of people prefer loyalty, but nobody actually do anything to stop them.
So it's a twofold situation in terms of, you know, whether whether Putting is still in control or not. He's still able to engineer deals. You know, people, the bureaucracy, the government apparatus still abasing, clearly, but nobody will go out of their way to send them against an armed threat.
Maria, Is there any feeling or consensus building after the weekend about what this may mean for the actual war on the ground in Ukraine? Does this strengthen at all the Ukrainian position well.
Actually, we just heard from the head of Nature of the Secretary General Staltenberg, who had what is to me a subtle maybe not even a subtle dick, but just criticism the operation in Russian just seeing the chaos that we saw play out over the past for eight hours. This is exactly what happens when you hire mercenaries, the people that will fight for money to fight you war. And again he said, this pointed to weakness in the way that Russia has conducted this operation.
And this idea that the war would be easy to win.
It's obviously by no means the reality now we've seen a play out for more than a year and a half. Anything that is chaos internally for Russia, the Ukrainians would perceive it as good for them. But again, one of the things that I would stress, however, is that for a lot of the European officials, especially the ones that I was on the phone with yesterday, what they say is that you have to be very clear here, precaussion
is not an ally to the West. It's not again, if there had been a coup or put had been overthrown, that things of Russia would be better. If anything, you could argue there could be more hardliners that could come in and the situation could become even more destable.
And this is a country that still holds nuclear weapons.
I think at this point, does it help the Ukrainians in terms of the symbolic nature of this for them? They say yes, because again it goes back to this idea that Latimer Putting is not invincible, that this myth that the KJB man is a myth extent, but will play out on the battlefield, and will they help them logistically?
I think that is very very early to tell. And again when I.
Spoke to the Ukraine and Prime Minister last week, he did say to me, look, this is not a Hollywood movie. It's not that things happen and changed from one day to another. A counter offensive counts with many different operations. Will it change something substantially on the battlefield ass of today?
I think that's overly or an overly stretch. But again it goes back to this idea, at least.
For NATO today, reinforcing this message that whatever happens internally in Russia, for NATO you have to help Ukraine. That's what Stottenburg said, and at this point maintain that support.
Well, leonet on that I wonder to what extent you feel that Putin's authority had already been undermined based on his performance and conduct within the Ukraine invasion.
Well, it's clear that his authority has been undermined by this, but by having to actually make a deal with people who are station open revolt. But whether that affects the events on the battlefield is another a different matter. The Russian generals coordinating the Russian resistance to the Ukrainian Culter offensive out of the headquarters in Rostov actually continued as if nothing had happened, even as the Wagner fighters were patrolling the perimeter. So it's not as if some sort
of anti war force threatened to overthrow Putting. The Precaussian is firmly in the pro war camp, even if he questions the motives that led to the war being started, Like whatever happens to Putting personally, whether that ends the war is an open question.
Lean, what do you expect I guess the next thing we will hear from mister Putin? What do you expect him to do next?
What do I expect Putin to do? He hasn't really been doing much lately, he's kind of been weighing in wait on letting the letting the military do their job. He really has kept out of the action to such a degree that the sort of the ultra nationalist contingent in Russia is questioning whether he's still around or you know, the Kremlin is being run by a double So what's she gonna what's she gonna do next? Nothing?
Okay? H and Maria just so quickly, mister Pregosian doing what do we know about him? His whereabouts?
And yeah, sorry, at this point it's not clear. It's not clear at all.
And and in fact, this morning on the show, we spoke with Spilan, who was the again. Remember she challenged uh in the twenty twenty election, again which the Internet community says was rigged, and that lukashenk A rigged in twenty twenty four himself so that he was a winner.
The one thing she said is that frankly, this should not be.
A problem for Belarus to deal with, that this is an independent of sovereign country and theory and they should not be dealing with which she said or quote sucks. But of course a lot of the focus will now be unaware, is he But also what kind of reception and treatment will he get from Lukashenka. One of the things that I thought was interesting from Tigeroskaya is that she said he's not.
Really been a mediator.
He probably just passed on a message for Vladimir Putting and he will treat and do with Privashin whatever Button tells him he needs to do next.
All right, Maria, thank you so much for joining us. We know you're busy. Maria today European correspondent for Bloomberg News and lead in Brashitski. He's a calmnist for Bloomberg Opinion, spent a lot of time in Moscow. He's done a lot of work with in Ukraine as well, So really informed.
A couple of voices there, and Maddie, I guess you know, we're like the rest of the world, just kind of waiting to see what kind of news or what kind of information will be disclosed about what really happened over the weekend and what it means for mister Putin going forward. So but again we had two very very good voices here, well informed to give us a little bit of perspective here, but again a lot more needs to be learned here.
You're listening to the team Ken's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
Joining us here in our Bloomberg Interactive Broker Studio, which means he's live on YouTube as well, because you know we YouTube stream this thing. Oh yeahs if you can go to you cross platform, thank you. That's a good like multimedia thing. Yeah, you just have to go to YouTube and search Bloomberg Global News you and you'll get that stream. David, thanks so much for joining us here. Again. Kind of a markets year to date that hasn't The
indexes look good. The numbers kind of look good, but if you didn't own a handful of stocks, you're you're lagging. How do you think about the first half and kind of how the market performed, and what do you think about for second half of the year.
Yeah, there's only.
Two precedents where I've seen it where the cap weighted index was so good from such a few amount of companies, and that was in nineteen ninety nine. In that period in twenty twenty and it never ever ever ends. Well, you look at the equal weighted S and P on the year, it's a totally different story. Now people can say, I don't care, I don't ownly equal weighted S and P. So as long if it's six companies carrying the index and I own the index, I'm fine. But the problem
with that, of course, is it's unsustainable. Markets are mean reverting things. This will revert to the mean. You will need more participation to see a broader market movement.
So what about what you're looking at next? I'm stealing this from Abigail Do a little from earlier in the show. She was saying that markets are going to be moving more on earnings than FED moves in the next couple of months. Do you agree.
I think markets always move off of earnings, other than sometimes in a couple of months or weeks days. Ultimately, this is a Ben Graham one oh one. Markets moved by earnings. And I think that you will get better cash flow growth outside of AI and big tech, and that the idea of people anticipating the FED or trying to gain what the FED will do. The fed's role in market movements is way too high, and it's only a matter of when not if that reverts to more normal wing of market movement.
Looking at some of your stock pics here, I see some financial services. So let's start off just kind of how you're viewing financial services. I guess that many little crisis we had in some of the regional banks that didn't scare you away from the sector.
Well, we only like a couple names, and Truest is the big regional we own. But it wasn't because we weren't afraid of what happened. It's because we didn't think what happened affected Truest.
Now Truest is the old Remember.
BB and T and Sunrine merge together, and that's a super regional by any definition of the word. It's only a little smaller than some of those kind of cities and Bank of Americas, and it's a lot bigger than the Silicon Valleys and First Republic. So it's kind of in this no man's land, but it was being treated as a regional. It's interesting we remember when they put the deposit together to help out First Republic. Truis was one of the banks that did that. They put a
billion dollars into that. They weren't in need of deposit money, they were giving deposit money. So we think truest was misunderstood in the market. Has great cash flows to get through this tough period.
So I've noticed in your stock pigs none of them are super AI related at all. What do you say to clients then, who are calling in and saying, why are we not getting in on the AI rally?
So I believe that the way we're investing in AI is the only way people should be invested in it, and that's with companies that actually already have incumbent businesses that make a ton of money. Broadcom, Cisco, and IBM. We own all three. Broad comes the most AI adjacent, but it's not relying on AI. Like if something were to happen that moves with AI, the whole sentiment changed and VIDIA could drop fifty percent in one day. Broadcom is far less reliant on that and yet really does
have fundamental exposures. So we like the idea of hedging with cash flow with a balance sheet with a real business, and there is an AI component in oldline businesses like IBM and Cisco. It's not the most leverage, it's obviously not the most beta, but we think it's a safer way to still be exposed to AI.
So we are coming up on earnings in a couple of weeks, we get the big banks kicking us off. Here, I'm looking at the S and P five hundred, the bottoms up numbers like two hundred and twenty bucks per share EPs. I've heard people, I guess not recently, but they were talking about this thing could be two hundred bucks something like that. I mean, do you still see some meaningful earnings risk in this market?
I believe that if you're going to have a severe recession, it's inevitable. In fact, it's sort of a tautology. There is no recession if earnings stay at two twenty. Like by definition, a recession means corporate profits drop, and at two hundred, that would be about a reasonable expectation. I think the market priced a lot of that expectation in last year. Remember we were at one point looking forward at what's two fifty or so, and so I don't think that it is the most likely scenario to happen.
I think there's been a lot of earnings resilience, But the problem is the way the market's set up now, it's really dependent on one or two sectors and you could have earnings an aggregate that hold in there, but the impact sector by sector is very different.
What needs to happen to change that, to change that dynamic of just the narrow rally that we've seen in the S and P.
Yeah, it's inevitable, it happened, but it's going to be when the FED is not our number one story, when everyone isn't just sitting around waiting on the words of a press conference with Jpal, that'll ultimately be what changes it. And you know, I don't think it's good for index investors if we go into the next phase nineteen or twenty times forward earnings. You'd rather be at sixteen or
seventeen forward and even that's not cheap. But to go into the next phase already above average valuation, I think it would be a difficult place to start at. We just prefer be much more selective and we run a really concentrated portfolio.
Are you so concentrate portfolio? Define what that means for you?
Guys?
We have right now thirty three stocks. I've never had less than twenty five. I've never had more than thirty five. But that's not by design. If we had fifty companies that met our criteria, we may own fifty, but it's always right around third.
How much cash do you have right now?
We have about three percent. We don't usually like to run more, clients pay us to get them risk premia, but we have cash right now just from a sale position that we haven't replaced.
And how many tech names would you say are in there right now?
See, I don't think that the cool kids would consider these tech names, but Cisco, Broadcom, I do.
Those are tech names.
But if it's not a dividend growing, cash flow generative name, which takes out Fang, it takes out Nvidia, AI, the Big six seven, even Microsoft, they just quit growing the divid in relative to the valuation they had, so we sold that years ago. So whether it's new tech or even some of those old tech names, Apple and Microsoft both should be two of the biggest divid and growing names in history.
That's what I've been saying. I mean, like Apple, and I say this to all the tech investors and they push back on me, But I mean they have a yield less than one percent in dividend. You'll you know, they got a gajillion dollars with a cash said ninety two hundred million dollars of free cash. So yes, I know they buy back stock, but a lot of that's just just to cover the options that that that you're issuing. Why do you think they don't have a three three and a half percent dividend yield?
Oh?
I think it is purely an ego issue in silicon value where they believe, like the reason people push back with you is tech investors believe that they can invest the money better than we can, and they can do a point, but there's a diminishing return. That's why diving and growth is so important for shareholders. At some point, the c suite starts doing dumb things. Now, Apple makes so much money they got away with it. My example years ago is they bought doctor Dre's headphone company for
three billion dollars. It wasn't worth eight hundred million, soaking wet. Now for a normal company to throw two two and a half billion in the trash can, that'd be a problem. For Apple, it didn't matter. But that's the kind of bad deals companies do when they're not returning cash.
So give me a name in your portfolio that is a good dividing growth story that you guys own.
For all thirty three days at our portfolio, good dividend growing names. But you look at the consumer staples, You're Johnson Johnson's, Procter Gambles, Pepsi's Coreox. They could bore people to death. They've had the best pricing power of any sector through this period of time. Their top line sales have either come down or stayed flat, and yet profits are up anywhere from seven to fifteen percent. You have
a lot of dividend growth embedded in that sector. And then energy, the midstream pipelines are growing dividends double digits and they're less levered now than they were when they started. So we really like that midstream energy for divid and growth.
Any discretionary names in our final couple of seconds together.
See this is a funny thing is I've only owned what I consider one consumer discretionary name my whole career, and it's McDonald's.
But I'm not sure.
I'm not sure it's really a consumer dissive. I think it's a staatepoint. I think you have to own those you have to buy those French fries, and it's really a real estate company.
At the end of the day.
Oh yeah, exactly. And I learned that from watching the movie. Oh yeah, yeah, that's I learned. I didn't know that. It made it a ton of sense. You're not in the hamburger business, You're in the real estate. So go all right, David, thanks so much for joining us. David Boston, he's the CIO of the Boson Group. I like the strategy of you know, consolidated portfolio and looking at dividends. I mean, that's something you can get your head around.
Where do that takes you? I don't know, but it takes you to some of those big staples as well.
You're listening to the tape. Cat's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa, play Bloomberg eleven thirty.
Madison Olds, and Paul Smitty here in our Bloomberg Interactive Broker's studio. You can check out the live stream on YouTube. Just go to YouTube and search Bloomberg Global News. A little Bit of a Merger Monday. Here, Maddie. I mean, not a big deal, but it's in tech, so it kind of got my attention. It's IBM there buying app to you for four point six billion dollars in an Audi nation. Push here, but just give you some perspective. IBM's got a market cap about one hundred and twenty
billion dollars, so not a huge deal. But let's get see what it means for our good friends in Armack, New York, if that's even where they still are located. Ana rog Rana, I know where he is. He's in Bloomberg Chicago office, Happy camper in Chicago. He's a tech on als for Bloomberg Intelligence. He's been covering IBM and this space for a long time. Anurak, thanks for joining us here. What is IBM buying here?
Yeah, this is a very small company. I think from a logical point of view, IBM make a very big push on hybrid cloud with the acquisition of red Hat many years ago. This product kind of goes along with it. If you are a company, let's say you Pepsi and Coca Cola, you have a very old IT architecture, which is all your products or workloads are on premise and you want to move some of them to the cloud.
This product helps you figure out, you know, whether some products are better off you keep it in house, and whether some workloads are better if you So it's like a cost stoppization product. And in this market where every every company wants to save more costs on technology, this is this is you know, that fits right in with that.
And Ana, we've talked a lot about the challenges of getting any deals done right now. Why is IBM one of the few tech companies that's been able to get a deal done in this environment?
Yeah, I mean we have been writing about this for some time that we think they are only a handful of public companies who can make some deals. And you know, IBM being such a small compare to like the likes of Microsoft or Google or Apple or Facebook. I mean, this is this is a you know, this is the only one that can make a deal right now other than private equity firms. I mean, they're really having a ball out there with you know, chief funding as well
as valuations in the software world going down. So IBM is one of the few ones I can do it. And then and as Paul mentioned, you know four point six billion dollars is not a whole lot of money.
The company didn't divulge there financials, but we think the revenue run rate would be somewhere between four hundred to five hundred million, given that apt Yeo was public three years ago, so if you extrapolate that, so from that point, it's you know, it's going to be less than one percent of IBM's sales from a contribution point of view, so it's a very small deal, frankly.
So I'm looking at the stock of IBM here on Rock I see the stocks down about seven and a half percent year today, So it's clearly not getting the AI love a lot that a lot of other tech names have. Why is that because they're not an AI play or how does a company kind of try to position itself there.
Yeah, I'm a bit surprised that they haven't been you know, they haven't gotten any love where a lot of company like C three AI have seen their stock go up I don't know, two hundred three hundred percent or so. IBM actually is one of the first ones to come up with AI products with the Watson suite over the last ten years, and you know, it really was difficult to commercialize some of those products because of the difficulty in you know, implementing those in the enterprise or the
corporate world. And then I'm sorry price that they haven't gotten any left. Those products are still there. People are going to use them as they come up with their AI strategy. It also has a good consulting arm, which is very required. I think they really need to market themselves a little bit better over the next twelve months with some of the products that they have and perhaps you know, people will look at as them as another player in the market.
Do you think within that marketing they need to have a certain number of AI word counts.
Basically, I think they already you know, kind of used all of that in the last ten years with Watson, and since nothing came out of it, people are not People don't believe that they can do anything in that area. And I don't really believe that because they have very good They work with almost every major company out there, so if you want to try something new, I mean,
you're going to give it a try. With their products as well, I think I think there is a lot of consumer use that's easy to figure out, and IBM is not a consumer play, frankly, and that's partially the reason why you get more visibility from the likes of Microsoft and what it's doing with bing or Excel and you know, Google and others, rather than you know, the likes of IBM.
So anag you and men Deep Singh lead our global technology coverage for Bloomberg Intelligence. And of course one of the biggest issues out there for investors is a I how are you and the technology team at BI suggesting investors really play this at this stage.
See I think over the next twelve months it's going to be a lot of weight and watch things. I think the first applications, as I said, would be more on the search side. We're going to really see what Microsoft does with you know, getting some search market share over the next twelve months. That's really that I think the first area that we have to see. Then you
have cloud investments going in. Companies are going to do test environments in you know, one of the larger cloud providers, whether that's Microsoft, Amazon or Google, to come up with new applications. So it's going to be a steady progress. But this is this is one place I think over then and then you know, moniep and I have done some work on it. We have published a big report on this topic. We think this is really going to support very strong tech spending over the next decade.
What is that tech spending looking like?
I think, you know, if you go back historically, technology spending has you know, been somewhere around five to seven percent, with software being the bigger portion of it with ten to twelve percent. But we think, you know, this thing supports that level of growth with more spending going towards software and less on the you could say services side of it or some of the other areas.
So on our give us a sense here just kind of overall tech spend out there. I feel like it's you know, it's been a obviously such a great secular growth story for decades. Now where are we in that now? I mean, I know people are talking about a recession and concerns about that. Where are we in just overall tech spend so the near.
Time we have a problem, I mean, we are not seeing that level of spending. We saw some fairly neutral to i would say bearish results from Accentia last week, and they are the biggest I T services companies in the world. They're saying their consulting bookings were down, which
is a third consecutive quarter. So I would say as it comes to the second half or even the results we're going to see in July, we are not very optimistic that we're going to see some massive positive bump coming out because of all the AI rush that we are seeing now. Having said that, I think they will indicate a lot of new product launches and new things happening.
And with that in mind, I think, you know, things could change in the latter half of the year with bookings improving, and then you know, twenty twenty four year could be where we see some rebound.
All right, Honrod, thanks so much for joining us. Really appreciate it. Honor rog Rana, he's the senior technology analyst for Bloomberg Intelligence based out in our Chicago office. Just giving us some color here in another little m and a trade here in the tech space, IBM buying app deal for four point six billion dollars.
You're listening to the Team Ken's are Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or listen on demand wherever you get your podcasts.
What a treat it is to welcome our next guest, Jack Divine. He's a president and founding partner of Arcan Group. But we love talking to Jack because he is a thirty two year veteran of the Central Intelligence Agency. Folks that know call it CIA, not the CIA, It's just CIA and folks. His resume is way too long to go over. But he was in Europe, he was in Latin America. He was pretty much everywhere and probably places we don't know about and we're not supposed to know about.
But he's going to give some good perspective here on what's happening in the world. Jack, it was a crazy weekend this weekend. Can you give us your thoughts here as we try to process what happened in Russia?
Well, that's a big question, Paul. I was splanning on doing a lot of things this weekend, but right away and pull myself away. You know, back in March of twenty twenty two, I put an outbed in the Wall Street Journal saying that Putin's invasion of Ukraine ensured his demise. I didn't say next week, right, this isn't quite what I had in mind. But you could see this building that something had to give between the Wagner group, the military and Putin. It just couldn't go on the way
it was. Was I expecting that they were going to march up the highway the Moscow and that they'd have a get as far as they could. A bit of a surprise. I think this is not this is really important. It has damaged Putin significantly. It's changed the world's perception of him and internally, but this isn't what I had in mind, and that he won't endure. I think it's a bit longer coming. I think that precusion moving back was part of their strategy to just get him to
stop and head back, and I think it was good move. However, they sold it, and so I think prokosion days are gone. Now Putin has the job of trying to patch it up, and this is where I think the troubles begin. I was actually expecting to begin after the second offensive, but right now I think he's got his hands full regaining the control he needs.
What do you think is going on in Ukraine right now? And do you think that Ukrainian officials are feeling like this is going to be a moment for them to finally come out on top.
Well, I think they broke out the champagne. Yeah, maybe they shouldn't use it. All saved for later. But I think it's a very positive development because I think it weakens Putin's arguments, both internally and externally about why he's there. I think the battlefield will continue looking the way it has recently. Everyone was expecting the big counter offensive. I'm saying, it's David Goliath. If he's just holding goliathal of this is really good. So I think expecting too much from
the second from the counter offensive was not realistic. I think they will make progress, they will continue. This helps them because I think the forces on the ground are going to be demoralized in trying to sort out where they are and why they're shooting why are they being shot at. But it's a tough, tough, tough haul. So I think the bigger picture is the long game, and the Ukrainians should be upbeat about that part of it.
So Jack, if there is going to be some challenge to Putin and his authority within Russia, and maybe the events over the weekend will serve as a catalyst to maybe accelerate that. Where do you think it will actually come from. Will it come from the military, will it come from other political factions? What are your sources kind of telling you.
Well, first of all, I didn't think you would see a coupe, in other words, the Army, Navy, Air Force yankeing them out. I didn't think he'd lose an election. I didn't think the mass demonstrations in the streets would push him out. I think when he becomes a liability to the elites and the establishment. Now we can spend a lot of time defining that, and it's an amorphous group. It's elements within the intelligence services, within the security apparatus,
within the military, but then the money people. So I think he's more of a liability today, but he's not enough of a liability for them to act. This is bad news what they're looking at. If you're in the military and you're looking at your armed forces, you're having a bad day and you want this to end. I think there's more sentiment about trying to figure out how to get out of Ukraine. It doesn't mean a deal.
I don't see a deal in the cards. So I think if anything happens, and I thought this in March of twenty twenty two. It'll be when he fails in the offensive and the Ukrainians sort of stabilize where they are and it becomes a liability, and at that point a conspiracy develops and it's not as I said, It might be something like a palace coup, and we will be surprised some morning we wake up that suddenly he's
walked to the door or carried to the door. That's what I anticipated, but it's not an eminent in my view, not eminent, Okay, I guess.
I wonder then it feels like in some ways he's already hit that definition of a liability. What changes that dynamic?
Then?
What is the thing that he has to mess up? The single biggest thing?
So I think Progrosion is now out of the game. That doesn't mean he can't cause a major problem tomorrow morning, but his ability to remove Putin, and I don't think that was his original objective or maybe never, but I think the real challenge now is Putin has given a bit of a breather and a chance to crack down solidify his position. So I believe the old KGB and their running around doing everything can to figure out test everybody. But this is a delicate thing. He doesn't have an
iron hand anymore. He may be holding a clay hand, and that's what we're going to find out. How a depth is he doing this, because if you start doing it, you may then trigger elements within that elite that I talked about to decide to take action. So I think he's got a very tricky hand to play. I used to say it was very good tactically, but not very good strategically. I'm not sure he's good at either anymore, just like we're not so sure if the Russian military
is how good it is. So I'm not optimistic that he's going to be able to handle it over the long run. But I wouldn't count him out of the game now. Despite what I'm saying, I think he's insured his demise, but it isn't I don't see that as being an eminent issue.
President Jiji, King of China, I guess tacitly has been supporting Russia. Mister She's probably gonna be saying, who did I get into bed with? I mean, who's this guy? And he can't even take care of his own country? Where do you think? How do you think China is viewing all this.
I think they see Putin has a liability, but not enough of a liability. No, there is, it can be a liability. It's a question of where is that pressure point, and that burns burns slower. But the embrace. It's very important that China and Russia, from China's point of view, remain together because together they represent a counter block to the Democratic nations. Right, So even though Russia is a weaker partner, it's an important alliance. So they wanted to stay,
but they haven't embraced that. It's not a bear hug. I mean there's some deep issues between Russians and Chinese historically, but I won't go back into my days and the the effort in Afghanistan.
Yes, exactly, Jack, I mean one of the things I'm also thinking about is Mattie and I were talking about it. I mean, Putin, he's totally irrelevant to the world's leaders, right, he has no standing with a Biden, She the European Union, he doesn't. He doesn't get invited to the G sevens or G twenties or any of those types of things, does he.
He can't come back, can't come back there's no roadback. That's what I was saying before. There's no way in Russia.
I can't have that, can I?
And that's at the point where at what point does that become intolerable for what mix of people and do they have and how hard can he? How hard can he be? So I think we just have to wait and see how that plays out. It's interesting that Erdowan
called him among the first. Now, remember they tried to ask, right, So if I were guessing this is Jack's guess that he gave him a couple of tips that when they try and push you out, these are a couple of things from and one of them is get any deal going, so they back off and then you get a breathe and then make sure your count knows this interesting?
All right, Jack, thanks so much for joining us. Really appreciate you coming here. Jack Divine, he's a president and founding partner of the ARC and Group, joining us live in the Bloomberg Interactive Brokers to do no phoning it in for Jack Divine.
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Let's talk venture capital investing. I wonder how how that market is reacting to a market where you've got rising interest rates. We've got potentially a recession on the horizon. What's that mean for the folks in the VC buz Zoe Peden joins us. She's a VC partner at Ananda Impact Ventures. Zoey, thanks so much for joining us here via zoom. Talk to us about what you guys do at Anando. How's your what is your angle on venture capital investing?
Thanks Paul. Yes, so, Ananda's impact focused bench capital fund based in Europe. We invest in sustainable solutions to the world's most pressing ecological and social challenges across biodiversity, climate, health, education and employment. So two hundred million euros across four impact funds and we've got an active portfolio of thirty three investments.
So talk to us about how your portfolio and your work day to day has changed given the higher interest rates that we're experiencing. That Paul mentioned earlier, how is a higher interest rate environment impacting you?
So it's out of a higher interest rate environment the companies, Well, the advice that you see in media and reading in the papers is quite conflicting. Sometimes. Many of the companies before the interest rates were really growing really fast, and I think a lot of the advice that we're giving them now is to look at the areas where they're growing fast. If they're working in different industries, to focus on those ones rather than new ones that might be
a few years away yet, and then cutting back. If there's anything that they can trim, they will trim. And if they can put up those prices too, if that market is elastic enough to be able to do that, then now's the time to put those prices up. But they're strong, they're faced, they're faced at the things before they We're all used to working in difficult environments. So yes, it's an interesting time for sure.
Hey, so we give us an example of maybe a recent investment you guys made. You know, what attracted you to that investment, What are some analysis you did and why did you actually end up investing?
Okay, yes, so this is quite related to the challenges of hand, which you ask a company to cut back. Because one of the recent investments we did is a company called Nature Metrics, and this is the world's leading environmental DNA company. And what I mean by that is they're using the measuring biodiversity to be able to help enterprises,
very large enterprises, become nature positive. So we're talking about all the regulated industries such as extracted marine water utilities, as well as non regulated industries looking at nature and a lot of climate finances starting to look at nature and start to build bonds and loans around these metrics to be able to offer large industries banks special loans based on these metrics. So for us to start saying to this company, I think it's time that you need
to be watching your finances. This is such a cutting edge area that's in such high demand. So for us, the analysis around it, it's you know, this is nature is the new carbon. So you've got carbon credits. I believe biodiversity credits are the next thing coming up.
So talk to me about how you measure the impact of these companies over time. We talk a lot about, you know, the obsession and interest in ESG investing and impact driven investing, but how how do you specifically measure the success of those initiatives.
Well, I's something to really be conscious of here. It's around terminology. There's a lot of confusion in the market around impact and ESG, and I think a great resource that your listeners might be intoed by Tideline at tideline dot com, New York Agency outlines real simple difference between ESG and impact. So first of all, it's important to get the terminology correct. And impact is around intention is outcomes focus, whereas ESG is more around inputs and is
more risk management focused. So the way we go about it is we will look at a company and start to ask the founders intent what their intentions are for their end goal. So look at their theory of change. This is very outcomes focused, what do they want to change in the world. And then looking over this could be ten year horizon, but looking at what is going to happen over the next two to three years, what are those outputs? So maybe two to three KPIs that
we can measure. So with nature metrics, it might be around the kilometer the hector spread of the area that they're able to measure on the planet. With environmental DNA when they're collecting that, and we also might be around the number of red listed IUCN endangered species that are able to collect too, so we're able to demonstrate the growth and their efficacy. So their business drivers as well as impact drivers, and we have two to three of those. It's of the earlier stage ones and a few more
when they get later stage. And is it possible for me to mention about our impact carry in the in the turn sheet that we have. I think that's quite exciting actually. So something that really demonstrates, you know, what an impact investor is from maybe someone who calls themselves ESG or a mainstream impact investor, is the fact that we have this impact turnsheet and we have a carry model.
So as you know, vcs always talk about, you know, they have their basic salaries, but there's the carry that we get so often it's beyond a certain hurd also two or three or sometimes five times and then they get twenty percent of the extra above that is their carry. Now, Fernanda, we wrote alongside the European Investment funds the carry model where it's integrated, so we do not see our carrie as investors unless we've met certain impact hurdles as well
as the financial hurdles. So that's kind of that you get all values aligned with the impact then, and it's not just about the finances.
Hey, Zoey, thanks so much for taking the time to speak with us here. Talk to us a little bit about impact investing and maybe some of the differences with ESG and how investors can invest in the impact space. Zoe Pedan, VC partner for Ananda Impact Ventures.
Thanks for listening to the Bloomberg Markets podcasts. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three.
And I'm Fall Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.