Taking Cover

presidential palace. First though, a conversation about the monumental shift we're seeing in markets with near Casar so near. Is this market rational? I think it is. This looks to me like a classic repricing. And what I mean by that is, I think the market is looking at the price tax on the stocks that it has had for a while, and it's just revisiting whether these prices make sense. And I think for some of these stacks, clearly these prices did not make sense. And the reason I say

that is because two things. One is when you look at the declines, they're not across the board. This is largely a large company, mostly growth phenomenon. When you look at the stocks that are getting hit the hardest is generally the stocks that are more expensive on the valuation basis, and also it's separate from that also the stocks that have the least amount of profitability, So the lower quality, high valuation stocks are getting hit the most. That started

about a year ago. More recently this has spread even to the high quality name So so you're seeing names like Facebook, Amazon, Netflix. These are hugely profitable companies, but also very expensive companies, and I think the market is just saying these prices are inappropriate and they need to come down. We're not seeing the same thing with companies that are cheaper. The value segment of the market has done pretty well. It's down too, but it's not down

anywhere near where the growth names are. And all of this has happened in a relatively orderly fashion. There's a lot of liquidity in the market, people can buy and sell, so I think this is just a repricing. So that's where I have a little bit of trouble because there are a lot of comparisons to the dot com bubble, for example, But is that fair because it seems to me like this isn't really an emperor has no clothes scenario like it was in two thousands. Some of these companies,

as you say, are very profitable. That's right, and I think the comparison is fair insofar as this is the first time that anything like this since the late nineties have happened. From there, I think it does start to break down on a number of dimensions. One is that you know, these valuations I don't think, by any objective measure, were anywhere near as expensive as the dot com pete. So from that perspective, I don't know that they're comfortable. But as you say, Vanny, the second thing is that

it was a mixed bag. I mean, yes, you did have companies this time that didn't make any money that we're just trading on growth and expectations and so on. But the larger segment of that cohort, the Apples, the Microsoft, the Google, the facebooks of the world. These are hugely profitable companies. They just happen to be expensive, but they weren't going away. So I don't think you're gonna have a situation where there's going to be a wipe out.

They're just gonna trade at lower multiple. So can these high growth stocks take this kind of beating and still be considered high growth. I think what remains to be seen is to what extent their financing is going to

impact their growth. If some of these companies that hadn't yet gotten the profitability or some of the coronavirus lockdown sort of era of stocks, you know, these zooms of the Peltons of the world, thrown to the extent that they needed financing in order to get to their growth potential, this could be a threat to them because you know a lot of investors have basically taken their money and

gone home. For the bigger companies that are already established, it's hard to see how revaluing them is going to have any impact on her growth. I think ultimately what's going to be harder for them is that this is what investors are telling these companies that we just no longer believe that you Amazon, you Facebook, or whoever can grow at the growth that they put up during the two thousand tents and in the last decade, and so you know, that's lower growth necessary really means that they

deserve lower multiple. It's so interesting because it feels like we've been waiting for this for many years. I mean, it's been a thirteen year bullmarket one at the very least, if not more than that. And you have to wonder if it is just because of the FED turning, or if this was just a moment waiting to happen and it's a convenient moment now. It's interesting to think about

the timing of it. I've been thinking about what we can attribute this to, and I think ultimately the honest answer is, we just don't know why these things happen when they when they happen. This could have happened any time in the last three or four years, if I'm being generous. But I think my my best guest as to wife's happening now is that is simply when when clouds gather, I think investors pay more attention to price

and profits, and they don't when they're bullish. And I think right now, there's just a lot of things to worry about, and that's what they appear to be doing. Now. At what point will these market declines impact the Fed's decision making In the sense that multiples are coming in that's probably a healthy thing to some degree, But does there come a point which this off market drop is one factor that the FED takes more seriously. I don't

think so. Um. Well, in a couple of ways. One is, I think we we often analogize this moment to previous moments when the FED is stepped in dot com, financial crisis, pandemic, um. But the difference between now and those moments is in those moments, they didn't have to tackle inflation. Now that they're sitting on an inflation rate that's that's you know, that's the highest that spin in four decades, going back

to the scary late nineteen seventies early nineteen eighties. Um, they don't really have a choice, I don't think, and I think I believe them when they say that they're taking this very seriously and they're going to get this inflation down. And I think what that basically means is that the FED put is off the table. Investors don't look to us for help. If you want to overpay for companies, you're gonna have to take the repricing, which is what they're doing now. So I don't think that

the FED is going to come to their rescue. So near do we have? Economy hasn't quite marrid the bittle markets over the last decade, and that's an understatement. But now do the capital markets help engender a recession? Does it become the case that the capital markets do mirror

the real economy eventually? Well, you know, it's interesting to think about because you know, just as there was a bifurcation between the market and economy during the darkest days of the pandemic, it looks like it's going the other way now. So, if anything, I think you might continue to have a bifurcation between the economy and the market,

but in the opposite direction. I think people might wonder why the market doing so poorly if the economy is still relatively healthy, And I think the answer is that they just don't track each other very well, and that you should never look to the market as a proxy for what the economy is doing. Near case are there, don't forget listeners, do get in touch via Twitter at Vonney Quinn or email v Quinn at Bloomberg dot net.

Opinions and commons always welcome. We have incrementally more data now on primary voting behavior following Nebraska and West Virginia this week, and the Pennsylvania primary, among other takes place Tuesday. We're joined by Jonathan Bernstein, What did we learn from the primaries this week in terms of what a Trump endorsement means? Jonathan, Well, after Trump got off to a good start in May in Ohio and the Senate campaign there,

he had a mixed record. This Tuesday. In West Virginia, there were two incumbent members of the House running against each other because of reapportion in West Virginia lost the seat and so that tossed two of their Republican members of the House against each other, and the one that Trump endorsed one pretty comfortably. On the other hand, in Nebraska and the gubernatorial race there, Trump's candidate lost by

several percentage points exactly. Now, the thing is that you can do sort of the win loss ratio, you know, but it's complicated, right. We don't know how the candidate would have done if there was no Trump at all. Um. This was a candidate who was a very strong Trump supporter for Trump's entire political career, but also had been accused credibly of groping several women. Um. So you know, if he has no Trump endorsement, does he does he campaign at all? Does he do better? Um? Does he

do worse? You know? What what. It's very hard when political scientists study primary campaigns. It's extremely difficult to figure out some sort of baseline because you can't judge how much any particular factor influence the outcome if you can't come up with the baseline, if that hadn't happened then. And the other thing about Nebraska is that the Republican establishment there one, so their endorsement was not Trump's endorsement, and so you have to wonder, what about statewide Republican

go op institutions? Yeah, And you know, the thing is that it's not that these are moderate Republicans who won that race, just like Ohio, you know, we had JD. Vance, Trump's candidate one, but the radical candidates who were seeking Trump's endorsement trying to imitate Trump, took about sixty of the vote. Who you classify how And so you know, on the one hand, it's not as if Trump snaps his fingers and all the Republican voters say, oh, that's what we want. But on the other hand, it's a

very radical party. Whether you attribute that to Trump, which is true in part, or say this is something that precedes Trump and only got sort of more so as a result of him, but also has a lot to do with Republican align media. Well, you know, it's complicated, it is, and that brings us right back to Pennsylvania

where it's becoming really interesting. In the last week of the race, it had been a race between Dr Oz and former Bridgewater CEO David McCormack, who obviously was spending a fortune a version of his own as well, emulating the then Young Can playbook. But suddenly we have Cathy Barnett getting two endorsements, one from the Club for Growth and one from the Susan Bianthony Elis Candidate Fund pack.

She would be the first Republican black woman elected to the US and she is on message right now when it comes to the dominant issue, which is abortion. What happens, Jonathan, Well, you know, one of the things that it tells you is that in these multi candidate primaries they can be very unstable. So you have here a situation where two

candidates Trump backing Doctor Oz, the TV celebrity doctor. We're going at each other with a lot of money on TV, attacking each other, and so a third candidate appears to have benefited. Now we don't know how it's going to turn out. The latest polls seem to show pretty close to a three way tie. But we've seen that happen before in elections, where two candidates who have tons of

money attack each other at the third candidate benefits. In this case, those endorsements came out after she had already moved up in the polls, spending very very little money of her own or anybody on her behalf, while tons of money is coming in for the other two candidates. And then we should just point out that on the

Democratic side of things, it's gotten a little clearer. John Fetterman seems to be the shorefire when even though he has his own problematic past pointing a shotgun and an unarmed black jogger back into but he seems to be the candidate that they've chosen that has the best against Republicans. That seems to be the case according to all the polling right now. That Venoman who's the lieutenant governor of

the state. So he had run for Senate when he was a small town mediumtown mayor six years ago and got nowhere. The party was not interested in him. But once he proved himself as a statewide winner, the Lieutenant governor that gave him the statewide publicity and contacts and party support to apparently pull away from the other two candidates. Jonathan, what does that say about Joe Manin's position in terms of legislation? Is the candidate that he endorsed lost in

West Virginia. Should the Democrats hed this as a lesson somehow? I don't think. I mean, yeah, I don't think it really tells us anything. Mansion's position is strong in the Senate because he's the fiftieth vote um and it doesn't matter. What we know about Mansion is that Democrats can't primary him, they have very little overage over him, and I don't that it really matters how popular he is in Less Virginia.

What really matters is that no Democrat other than Joe Manchin has any chance of holding that seat in the future, and so Democrats basically have to accept he is who he is. They get a lot of votes out of him on things like judges and Executive branch confirmation, and on some legislative issues, and the ones that they don't get, there's really no other place for them to go. I have a question about the narrative at the moment, as well as obviously and for obvious reasons, started to center

around abortion and women's rights. Is that what sways primaries, You know it can. Primaries are not general elections. What often matters in primaries is how candidates differentiate from each other.

If you're a primary voter, you're a little bit involved because many people don't vote in primaries at all, So you're paying some attention, but you probably don't know a huge amount about these candidates, especially in places where there's five, six, seven candidates on the ballot, which is the case in many of these places, and so you're looking for something, somebody that stands out for some reason. That's why endorsements

often can be very important. Money spent is far more important in primary elections than general elections, but the stuff of narratives actually tends to matter more. So, you know, the idea that these two candidates in Pennsylvania and the Senate campaign are bashing each other, that's something that Republicans were paying attention probably notice. Whereas in a general election, you're eventually going to find your party most of the time. But since there's no sort of place that you start

from in a primary campaign, if you're a voter. You're looking for some reason to vote for a candidate, and therefore issues endorsements, money, a good ads, stuff like that really can make more of a difference than it would in a general election. Are you watching anything else come Tuesday, Jonathan,

or is it really just Pennsylvania? The Idaho juvenatorial which Trump endorsed the lieutenant governor who's going to lose to the incumbent governor apparently, which didn't seem like the kind of endorsement to make if you're trying to maximize your reputation for influencing daughters. But I'm not that that's very hard to know whether Trump is rational about stuff. Say,

I'm not sure that that's the calculation that's being made here. Yeah, he tends to be impulsive, and it's very hard to figure out, well exactly it could be says somebody knew how to flatter him, or he saw somebody on Fox News in the right moment and that's why he made this. Jonathan Bernstein, There, don't forget to reach out with thoughts, suggestions, opinions. I'm at Bonnie Quinn on Twitter or email v Quinn at Bloomberg dot net. We're also available as a podcast.

Just look us up on Apple or Spotify. Russia's war on Ukraine grinds on, prompting new questions, including whether the war is turning into a proxy war between the US and its allies and Russia. Let's get straight to hal Brand's columnist and also professor of global affairs at Johns Hopkins University. So, how at what point does an intervention or aid or whatever you would have called this, at what point does it turn into a proxy war? Proxy war is an invention where most of the fighting and

frankly the dying is done by a third party. And so if the United States were to use Ukrainian forces to inflict damage on the Russian military, for instance, without directly fighting Russian military itself, that would be an example of a proxy war. Was this a proxy war? From the beginning? I think the initial idea was to try to help Ukraine maintain as much of its sovereignty and

independence as possible. What became clear, though, was that the Ukrainian resistance was very acceptive, that the Russian military was vulnerable and over extended, and that the United States and allies US had a chance to inflict a pretty severe cost on the Russians simply by helping the Ukrainians fight better. And I think that's really the genesis of the situation where we are today, where the Pentagon, it's essentially acknowledged that what we're doing is trying to use the Ukraine

War to weaken Russia's capabilities over time. Right, And so you wrote inspiracy of silence is necessary for any kind of proxy war. But the U S isn't being particularly silent about this war. Does that make it more ethical? Let's say, I don't know that it's a question of ethics.

I think it's a it's a question of prudence. And so the reason it's important to stay quiet about a proxy war is that there's typically a limit to what even a vulnerable state will tolerate, and they're more likely to tolerate having a proxy war waged against them if their face isn't being rubbed in it by the other side.

And I think this is why it's damaging to have leaks about the role that U S Intelligence may or may not be playing in certain Ukrainian military operations, because it makes the fact of the U S proxy war in Ukraine harder to ignore, and it potentially ratchets up the humiliation Plutin may feel if the damage he's suffering there. We can look to examples from the past that have been obvious proxy war is this is, I think, a different kind of proxy war. It certainly didn't start out,

as you said, as a proxy war. It's just because one over time, and that's a little bit the problem that motivation can change over time. So what's the escalation from here, Well, we don't know yet. There are Russian escalation options, and so if Putin really wanted to try to put a stop to NATO countries arming and responding Ukraine, he could, for instance, target those countries and militarily he could try to ramp up the effort to interdict supplies

coming into Ukraine across its land borders. He could do even something more drastic. He could use chemical weapons or battlefield nuclear weapons, try to turn the conflict in his favor, resolve it on his terms. You know, we don't know whether people do so or not. I think the situation could become more dangerous though, if he realizes that Russian forces are on the verge of losing in Ukraine and worries that I will defeat in Ukraine could potentially spell

the end of his regime. How is the average American citizens supposed to feel about this proxy war? I mean, on the one hand, there's a lot of support for it. Give us some kind of matrix for how we should weigh the war. Americans seem to be pretty happy with the way that the war is going, which is not to say, of course, that they approve of the destruction

of Ukraine. But the US military and economic aid Ukraine is popular on a bipartisan basis, both in Congress and in the population, which indicates to me he's that Americans see Russia as a military and geopolitical threat. They don't like the fact that a big, aggressive autoxicy is beating up on a smaller democracy next door, and so they favor giving Ukraine the help it needs to defend itself.

Whether they see it as a proxy war simply a case of defending a vulnerable democracy or helping that democracy to spend itself, I can't really say, but the overall policy has quite a great deal of approval. How what's the danger that Putin turns elsewhere next? I mean, he obviously has puppet regimes in several former Soviet territories and states. But at some point he could try something new and

pick a new former Soviet state to invade. Does the US then get involved there wouldn't have a handful at the moment. He may want to stir up trouble in Moldova or take a poke at the Baltic States or something like that, but it's going to be pretty difficult as long as his army is so fully committed and it's staring so poorly in Ukraine. And so I think the danger is less one that Putin decides to launch another war elsewhere than this war escalates, perhaps in dangerous ways.

And so that's the scenario that I would worry more about. And then I guess, you know, final question that needs to be examined, as our proxy war is successful. How has the US waged a successful proxy war in the past. Some of them succeeds, some of them fail. It really

depends on the setting. The United States failed utterly to overthrow Fidel Castro's regime via proxy invasion at the Bay of Pigs in nineteen sixty one, it succeeded beyond its wildest expectations and helping the Afghan Jahadem pushed the Soviets out of Afghanistan in the nineteen eighties. There's no hard and fast rule that says the UH some fail and

some succeeds. It typically depends on the strength of the forces involved, their level of commitment, how well supported they are, and so there's a lot of contingency and these sorts of things. We leave those questions there for now, our thanks to hal Brand's. By the way, do get in touch. Comments and opinions are always welcome. Find me at Vonnie Quinn on Twitter or email v Quinn at Bloomberg dot net. We're also available as a podcast. Find us on Apple

or Spotify. Now to the Philippines. Thirty six years after Dictator Ferdinand Marcos fled to Hawaii a mad a People's Revolution, his son was elected president of the nearly one ten million people strong Philippines with nearly sixty percent of the vote. Happy to have Clara Ferreira Marquez join us now from Singapore, quite the extraordinary turn of events, Clara explained to us

the context for this election. The selection is coming at the end of the really Loan campaigned by the Marcus family to reinstate the name, to rehabilitate the name and to put a Marcos back in the malcan in the presidential palace. And it's been an extraordinary success. The ingredients of it have been, to a large extent, nostalgia social media, the fact that for many Filipinos the fruits of democracy

have not really filtered down. You know, for many of them, it's really the same families and powered the same other gopolise, the same economic troubles. And also the fact that this is every young electorate. Remember about half the electorate is under forty. So it's been the combination that has allowed Ferdinand Marcos Jr. Known as Bong Bongs, to be elected

in the Landslide. And it is quite extraordinary. His mother, Emelda Marcos, the person that was known around the world for her wardrobe, in particularly her shoes, obviously voted initialal suit and carrying a rosary beads? Is this another example of a populist candidate getting into office, not just another populist I mean it's very unusual to see not unusual to see dictator's sons come back, but it is unusual

to see them come back after a hiatus of this. London, in particular, after a period of democracy problematic perhaps would

certainly democracy. It's extraordinary how fast they've done it. So that and Marcus father died, they returned very shortly after his death, and Marcus Jr. Was elected to Congress a couple of years afterwards, and since then a number of people in the family, including his sister and the Northern Marcus herself, and they've since worked to really gloss over some of the more problematic aspects of the regime, So the killing and torturing of thousands of opponents, and of

course the plundering of states, so ten billion dollars and much of it still missing today. Really, the human rights abuses were phenomenal, but it continued after Marcus was out of office and had flown to Hawaii. Most recently, President of Tourday has had some controversial practices. Amnesty actually says that his war on drugs was, and I'm quoting here, a systematic killing of the urban poor and a large

scale murdering enterprise. And it appears now that since his daughter is vice president, the two dynasties have come together and there won't be any reckoning for any crimes or

potential crimes that have happened in the Philippines history. So Dutte has certainly had a lot of excessive and is well known for his inflammatory comments that his his period, that the president's being his period as mayor of Devout with nowhere near the brutality of the Marcus regime of course, but he hoses, he say, enabled it, and I think he's enabled it, not only through the tactics he's used in actually devastating drug war which had bring little impact

on drugs and plenty of impact on extra judicial killing, but he has, for example, legitimized talk of martial law, something which for the Philippines brings back horrific memories of the late Marcus period. And I would also just distinguished Dutete from his daughter, so has not formerly either bang Bang Marcus or his daughter, who is in fact one

by an even higher margin than Christ himself. But the Vice president is related separately in the Philippines that she has her own Pwiday and she is trying to be a different person to her father. We have successful she will be, of course, it's a different question entirely. Let's get the policy because in fact, Fernland Margot's Jr. Didn't really campaign. Do we know what his platform will be, given that he has governed before, he was a congressman

and a governor. In fact, well, I mean that the actual absence of policies is sort of a screaming omission here and um as congressman, you know, to his time in office, he has really done by little. He has an absolutely negligible allegedative record, and his campaign, as you say, was marked again by the absence of policy. Talked about the motherhood and apple pie issues that he talked about

national unity. Things are pretty difficult to disagree with. I mean, he's going to disagree with the idea that you need national unity. His social media seeds are really interesting because again complete absence of policy, but lots and lots of black and white footage of the their them in Ferdinand marcos reminiscence of childhood, really trying to sort of create a nostalgia of rose tinted view of the past, and

a lot of Philippinos don't remember it. Philipino history is not mandatory even in high school, so you know, it's very easy given as well the grip that social media has in the Philippines, it's very easy to spread a biased narrative that programs has a new tube beep, but a sort of glossily produced peculates all this sub glammar of the mail Democrats. She was very beautiful, so it's sort of nineteen sixties glamor Democrats and the mixes, the

markets and the rabans. It's all like you're really appeal it. There was a very interesting dynamic between the United States and the Philippines for a long time, but much time again has passed. What will the dynamic be now between the US and the Philippines, particularly regarding the South China Sea with China's having military presence there. Again, we don't know a lot about certain markets juniors policy here, so

Bo Bong hasn't provided a huge machite. So we do expect would be more friendly towards China than a Lenny, but brother it would have been a lot more pro us so she was his main opponent in the presidential way. But probably he will be less pro China or less sort of aggressively pro China than Deterredy. I think he

will be much more pragmatic. There is a need for investment and need for infrastructure that will require China, and he will probably amper very a lot of the issues that have been so controversial, but it's just really striking how absent policy is being, even an economic policy. For example, remember, the Philippines is coming out for an absolutely brutal pandemic just had awful effects on human capital and indeed employment well and inflation, although it's not quite as high as

some other countries in Asia or Southeast Asia. And also we have policymakers saying that GDV needs to grow at least six percent for the next five to six years just to help impare the debt and took on to fight COVID nineteen. Now it did take on debt to fight covid idina. I suppose that is a little bit of a consolation. But at the same time, the Central Bank does have questions, and there's going to be a

new central Bank governor as well. The previous governor's term expires, So yes that the Centril Bank governer very well regarded these next year I mean in terms of lots of those things, we do expect there could be some continuity with the presidency and Detti, for all his bluster, actually had quite competent and technocratic economic management. We pushed through some pre important reforms in terms of foreign ownership, phitical reforms to make the Philippines a lot more competitive with

its neighbors. I think the keeping about the numbers and the Philippines is that they look very good on paper. It all looks very high. Philippines is one of the fastest growing economies in Asia. The reality is that just hasn't translated into a genuinely competitive economy and economy that attracts sufficient investment. Member because it's a huge market, it should be bringing in a lot more, and it's unclear that without a very sort of forceful vision, indeed a

competent vision, that the Marcus presidency can do that. In terms of markets overseas, investors did sell start, but the Philippinas all gained what our investors liking about Marcos Jr. That helped strengthen the pacer or was it for other reasons? Do you think there was some hope perhaps that he will bring in or at least continue some of the reforms that were in disficult terms, for example, from the infrastructure investencies set and talked about logistics very vague terms.

But all the same people may be hoping for some continuity there. I mean, there is very little to hang onto. I have to say in the commentary that I've read, Clara, it does seem to be the poster child for troll farm elections due to Day's victory back in credited in part at least two disinformation spread by troll farms. Did that happen this time or was it a genuine victory on the part of Monglong or Marcus Jr. It's a

genuine run slide victory. But I think it was really important to look at the role of disintillation here and that what we can learn from the Philippines and software.

So one of the things that's really notable about the Philippines obviously extensive social media use and not just the extensive social media usually expensive use of influence, so so people who guide the opinion of others, and we know from surveys the Filipinos are much more likely to follow that and to use that to guide, for example, plitical opinions than other countries. It makes those so powerful by young electorates and a lot of time on social media,

one of the highest usage RAITs I think globally. And then it was the very clever use of social media

by the Markets campaign. So of course the many of are Bread campaign awesome youth social media, but they were I think a little bit less nimble and the Markets campaign, on the other hand, was absolutely clear about the message they were going to put across nostalgia black and white footage pictures of Bong Bong walking through fields with Sarah Why said to say, with these very bland soogans about together we rise again. I mean, that's very, very effective

when you're dealing with a young electorate. Also, there's absolutely nothing in place by the government to bite disinformation, and that's quite different to places like Brazil again and a big, big issues that a lot of government efforts have been put in place. As you say, Clara, it's that strange combination you don't see too often of a very healthy electorate in terms of turnout or interest in the election, but not so much perhaps interest in the substance or

the platforms of the candidates. It's a performance like people who love the election because the zero policy and it's all personalities. It's all about the pas, celebrities and culpial. Official media is full of everyone going to vote, all the celebrities showing that because they sort of market your finger, but like in India they mark your nail yes, and to people sort of showing off the finger and it's a performance. I mean, what concerns me is a completely

absolute policy of any sort, so it's really shocking. Clara Ferreira Marquez, we are now choosing to end all conversations not with you, though, as always we love to hear from you at Vonnie Quinn on Twitter, or send your thoughts to v Quinn at Bloomberg dot net. And by the way, Bloomberg Opinion was Vonny Quinn is available as a podcast on Apple or Spotify or produced by Eric mollow Till next Time on Bloomberg Opinion. Adopt us Kids presents what do you expect when you're expecting a teenager?

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