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This is the Bloomberg Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join us each day for insight from the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen and always I'm Bloomberg Radio,
the Bloomberg Terminal, and the Bloomberg Business App. Paul went to our team and he said, can you get us somebody here that's completely holistic on global shipping that can understand a Where's mayors Copenhagen, I think Denil I care you remember from the Baltic Sea over to Sri Lanka through Singapore. All these geographies are around and there has to be somebody who's encyclopedic and global shipping and the
many geographies. John Krtsonis fits the bill. Not only was his work at City Group years ago, but with Breakwave Advisors. He's a board member with Synergy as well. He's encyclopedic on shipping. What are the people doing? John? Thank you so much first of all for being with us on short notice. What is Maersk doing this morning? What are the people in the shipping business do when they have a horrific event like this?
Good morning and thank you for having me.
Yes, indeed, that's a horrific event, and I think like from a shipping perspective, the first thing you have to do is obviously find what went wrong? Right, I mean, these are state of the r ships, especially this one involved in this accident is a brand new ship. He's less than ten years old building Korea. These are high quality shapes, so very it's a very unlikely phenomenon that you get something like that. The other thing is, obviously
you have to look at the human error. But again, when the ships approach ports or tight waterways or areas that they don't know very well, you have experienced personnel that gets on board from the port, called basically pilots, and the other ones we're going to steer the ship through the waterway. So there are a lot of elements here. One is obviously the human element. The other is the
mechanical failure, which seems to be the case here. But there's also obviously the timing here, because if you happened like ten or fifteen minutes later, nothing would have gone wrong.
Is a process here in the coming quarters in months and years, a litigious years in the making process or is it covered by insurance and reinsurance and offices in Hamilton, Bermuda that I don't know about where there's almost the routine how the shipping industry deals with a tragedy like this.
Well, I don't think it's routine at all.
I mean usually human laws and hopefully there is none here, but human loss, especially outside the ship, is kind that is very rare in the maritime industry. You have very few incidents globally that you have basically this type of an event that will cause basically ordinary citizens to you know.
To die.
So I think that's definitely not an ordinary process. It will take a very very long time, and it will have.
A multiple.
You know, multiple agents organizations involved, especially given that this happened in the US.
John, can you give us a sensis for folks that you're not in this business, like at one thirty in the morning navigating through a harbor. Is this navigation visual Is it by instruments? How is that done? Because it seemed like it was significantly you know, off course here.
Yeah, of course it's not visual.
Obviously, This are as I said at the beginning, state of the art equipment on board and very experienced pilots and captains that are going to steer the ship outside, you know, to go towards the ocean. So as we all saw on the videos, it seems that there's a
blackout happening just moments before the collision. So again we don't know what was happening at that point on the bridge, what people were discussing, what was the incident, But it seems that a blackout where basically everything stops, the engine stops, there is no power, and there is no way you can steer the boat the ship away from either.
Currents or maybe the router get stuck.
Who knows, but it seems that the mechanical failure is most likely scenario here.
John, Just give us a sense how big Baltimore is in the in the global scale of shipping. It seems like a busy board. Just give us a sense of its relative scale.
It is very significant in terms of especially of consumer goods, cars, stuff that the US imports from abroad is not as significant in the commodities business. I mean that to export a call from the Baltimore area. But I think like probably what's going to be affected most is like deliveries
of new cars, for example, or consumer goods. But again, I mean there is a lot of other areas obviously north the New York Harbord all the way down to Georgia, Savannah and so on, so that you have alternative destinations. But obviously that's going to take a while for the situation to resolve and this thing to begin operating normally again. So definitely the delays will cause delays in deliveries of goods if.
You're joining US now worldwide and across this nation. As we look at a horrific bridge accident in Baltimore. John Katsunas joins US now managing partner Breakaway Advisors, has worked with Energy, has worked with City Group over the years, just truly cyclopedic on the linkage of global shipping in the equity and helysis. John, I think a question that a lot of Americans have today that needs to be reviewed. It seems like everybody in America is involved in shipping.
Mariska is over in the Baltic Sea. You and your board membership with Centergy. They're out of Athens, Greece. Okay, I get that, breakwaves his own beast. Why aren't Americans involved? Why aren't there American ships, US ships, US shipping, US ship building. Why is America left out of the discussion?
Huh, that's that's a very interesting question. And it goes back to I think that what everybody knows that it is cheaper and more efficient to build it abroad or to stop it abroad. I mean, this is something that has gone through you know, decades now, the US maritime business, if you go back one hundred and hundred years, was thriving. But this has changed over the years and right now basically Asia and you know, some European countries are dominating
the global shipping space. You know, it has to do with cost. It has to do with the cost of building a ship. I mean, you can build a ship in the US, but it's gonna cost you three times more because of like the protectionism that the shipping industry is enjoying the US.
So you know, that's that's the main reason for.
US just thirty seconds left, John, totally unfair question. But you're I mean, you're an act former exa analyst at City Group. It was used to it. John, When does the Baltimore Harbor open up again? And you're just guests here in the moments of this tragedy, when would you see free sailing down the river towards the Chesapeake Bay again?
I would say not this year. If I was taken, I would take a while.
Yes here, John, thank you so much on short notice. Thanks to our team, Eric Mulane, everybody forgetting just such an authority. John carsonis with with Breakwave Advisors here with some real pro perspective there. I'm this tragedy joining us
in the Peterson Institute. Adam Posen here on the state, Adam, I love the beginning of the interview with Robert Armstrong and you say something that's on the edge of Robert Taylor out of Chicago, Richard Taylor, excuse me, and that you say you underestimated the resiliency of the people of the American and global economy. Discuss how you fold a character, a culture, a fabric of people into economics.
Thank you Tom for reading and having me back. It's great to be with you on this, and I'm grateful of Robert and the Ft for taking me through all that. I think what we have to think about is going into the pandemic. There was reason for fear. We didn't know what was going to happen, and we have in the US, in particular this enormous spike in unemployment, and rightly, the FED and first the Trump and then the Biden administration started providing some social benefits, some healthcare, all things
I supported. But what was amazing and became evident within the first few months was that people adapted. They set up new businesses, they moved to new jobs, they arranged care. That doesn't mean we should leave them to that. It's better that we didn't. But we as economists, and particularly people who are on the progressive side, where I sort of am. You know, we understandably worry a lot about people buffeted by large shocks that they have no fault
in and they can't control. But what I think COVID showed us is people's ability to adapt to these shocks is much much bigger than we worried about, and that leads into all kinds of positive though non intended labor market changes in the US that I think came out of this process.
One of the things, Adam, I think folks are concerned about is the economic divide in this country may have been even exacerbated from even prior levels by this pandemic. Just simply, you know, it could be as simple as some people can afford to work from home, some jobs you can't do that. How big of a concern is that for you?
I mean, Paul, you're absolutely right, and I mean it doesn't get much more basic and important than what you said that people who have different levels of income, different levels well, particularly in the US, have different vulnerabilities. Nonetheless, it's more about, let's call it, the health gradient than
the economic gradient. Over the last few years, so what we've seen is people who didn't have good healthcare, people who had pre existing conditions, which is associated with socioeconomic status, people who had less access to medicine, and people unfortunately, who were less educated and more willing to believe lies and fears about vaccinations. They had much worse health outcomes,
much higher mortality and morbidity, as they say. But on the economics, what we've seen for the last few years is we've actually seen a closing of the income inequality. We've seen much more growth in real income for the lower end of the income distribution than for the higher end. And again I don't think I certainly didn't. I don't think anybody else was expecting that going in.
When you look at adamire running out of time here where the news flow out of Baltimore this morning. I want to get you back really soon here on more Adam posting economics. But just as a general statement, do you buy the new productivity and is it just simply total factor productivity the oddities of technology over on the right side of the equation.
Tom, I am reluctantly a productivity bulk. I think it's a productivity two step. The first is what we've seen for the last year and are seeing still, is this labor market transition where millions of lower income workers we're more willing to take risks and have more of a sense of backstop, and are moving on large numbers to bigger employers and becoming more productive. And I think that's what we're benefiting from. I think we're at the start of a boom created by generative AI. We've had many
guests I know you've been talking about this way early. Tom. We don't know when that's going to hit. We don't know how big it's going to hit, but it's pretty certain it's coming.
Adam, thank you so much. Way too short of visit. We'll have doctor Poson on again here more than soon. It's tough to get him, he's busy, but we'll try to get him out here with a news flow today in our studios. Now, as someone who knows we rip.
Up the script regularly, we can do this with Peter Sheer, Academy Securities, Bloomberg Newspeter moments ago reporting I'm going to read it verbatim because I really have not dived into a link.
They article. Apple iPhone shipments in China fell about thirty three percent in February from a year earlier. This according to official data. I guess it's part of the China mix here, which you are expert on the export import of America to China, from China to America. Is it anything like we knew or is it a whole new world? After all?
I think it's a very new world, and I think people are a little bit dismissive and saying, well, sales right, now, for some companies in China are slower because the Chinese economy is slowing. Yes, that is true, but I think that's far more than that. What we see China doing is repressing sales of Western brands in China, whether they're telling certain agencies that they can't use the sorts of phones,
whether they're putting outright bands. So the one thing they're trying to do is suppress sales of Western brands in China to elevate Chinese sales. And I think they're also trying to do that globally. They're pushing and emerging markets. They have companies like Shine and Timu who are really aggressively competing on price with US brands, And I think people are being a little bit too dismissive and saying, oh,
this is just weakness in China. I think this is an attempt by China to replace our brands with their brands domestically and pushing globally, which will not be good for valuations of US docs.
From your perspective, I'm looking at your research here. What is the difference between made in China versus made by China.
So traditionally, right, we took western companies took our products, made them in China, and then we took and tried to sell those products globally, so they were really our products, but they happen to be made in China. So to me, the difference is China's having difficulty attracting people to manufacture in there, so if they're going to do manufacturing, they
have to manufacture their own brands and sell there. So that's why I think it's more of a made by China because you're going to start seeing byd much more frequently Huawei, these companies you never heard of, whether it's through Shine or Timo Timu sorry, And I think that's why I'm calling it made by China because they've been making all the goods so long time, but it was largely them making our goods. I think they're now more aggressively trying to develop their own brands sell those, and
that will lead into market share. It will cut profit because they are going to compete on price.
So you know, I think about these companies, I mean tim Cook, I think as we speak is in China, we see Western CEOs making that seemingly weekly monthly pilgrimage to China, Yet we do in fact, appear to have some type of technological cold war between China and the West.
What does Apple do?
What does Tesla do? I mean some of these companies are really intertwined with China.
Yeah, and so at Academy Securities, as Tom knows, we've got eighteen retired generals and admirals who service our Geopolitical Intelligence Group. I would say I'm seeing a disconnect where a lot of corporations are still trying to figure out, Okay, how do we work with China? How do we sell into China?
Right?
That's still the brand and everything that we're hearing At a national security level, it is all about China. It is completely bipartisan, It doesn't matter which party the people are in charge of national security. And SISO, which puts out a lot of bulletins on cyber warfare and cyber attacks, they came out with, you know, really a big warning on this typhoon volt which they part clearly label as the People Republic of China's Communist Party. Their hackers working
on their behalf trying to infiltrate US infrastructure. So this is not going to get better. This is going to get worse. As these you know you see an entity like that very willing to public a common and I just say state actors.
So you know, I've never asked this question before. There's always a firse what does it mean for Nvidia? And I just all of our audiences glued into growth stocks quality Lizzie Saunders off on yesterday with Schwab talking about quality. Are you saying exit the glorified stocks of the moment?
You know, I do think some of we may be peak AI in this particular cycle where you know, I was mentioning earlier that all of a sudden brushes now have AI components or something like that. So I think everyone's kind of latching onto this. We've got one of their generals who's been very good helps advise DC on AI in particular, and we see AI developing into four worlds. We've got what's going on in the US, which we think is very healthy. It's growing, it's going to be
a big part of our economy. It might be overdone. You've got Europe, where I think AI is going to stagnate because they have so much data restriction, so Europe's not going to be competitive in AI. You've got India, which is actually a rising place, and you're seeing places like Nvidia investors, so I think that'll be exciting. And China is marching to the beat of their own drum. They have a very strong AI plan. They're one directional. If they get it right, it could be dangerous if
they get it wrong. We have hope, but that to me, there is no work for Nvidia or US companies in China that is getting separated.
Peter, we have major, major breaking news. You can stay with us and take this in. I'm sure it'll fold into your report this morning. Peter, Chair Academy securitizers. With a difficult news flow, We're going to try to make light of it, and only Lisa Matteo can do that. You look at the front pages around the world. Lisa, were you bruised from my beard yesterday? We took a.
Yes, I got a little mark right here, but I'm okay. I recovered yet.
This is this is you like this. I went to the I went to the grower barber shop. This is is what I went to. They gave it. It was so difficult. They took a razor out with it. So it was so difficult. I had to shave twice. But thank you to the good people at the Grower of Barbershop.
Really it was fantastic. Well, by the way the poll, a lot of people wanted you to.
Lose it, so that it was a mixed effort. But the tilt is that both that Bill and missus Keane wanted me to keep the beard.
O oay, No, I can't do it.
You get a call from the grower of Barbershop, shave that you're no Matt Miller shave that off. What do you got, Lisa?
All Right, kids in Florida under the age of fourteen, they're a little upset. They will no longer be able to have a social media this went through. Yeah, Florida the first state to do this. It's apps like TikTok and Snapchat. Fourteen and fifteen year olds though, they are allowed to do it, but they will have to get their parents' permission in order to do that. But under fourteen, so.
Are the Florida police going to go in?
How?
This is exactly that is the question.
How do you just the world tiktoking from? I mean that's like Nirvana.
Yes, so they're gonna have to go back TikTok, Snapchat and see how old.
Some of these kids are who's got it's going.
To be it's gonna be along the companies TikTok, Snapchat, all these companies are gonna have to go back and possibly delete some. But the question is if it's going to happen. I mean, this is going to face you know, backlash and constitutional challenges.
And and all that.
That's the realities of the marketplace. You know whatever, the parent sounds like a parent.
You know, some kids down there on group with somebody from Bloomberg to see mcgloone, who's you know, they're on the porch of the Betsy on South Beach and the kids TikTok and from the Betsy and what the police show up.
It's it's gonna be a long road. Let's just put it that way. It's the first step. Let's just put it that way. The first step. Okay, So we're going to the Wall Street Journal. You know how Mark Zuckerberg's known. He was known for wearing the hoodies and the shower slides and that whole casual kind of look. Well, maybe he's doing a little middle aged makeover. It's a new Zuckerberg he's wearing.
He's been seen wearing suits.
And a shirllink jacket, you know, different cardigans.
So he's stepping up.
The hoodies are out, he's stepping up his look. I don't know if it's a middle aged thing. But there's also you know, scrutiny for the industry, the tech industry. Well he's sharpening up the image.
As according to rich go on the Bloomberg terminal, the fourth wealthiest person on the planet one hundred and seventy eight and a half billion dollars. So he can afford to upgrade.
He can afford a suit, or you can.
Get a hoodie from you or Selene or you know. I mean, can you imagine. I don't even know what they caused, but can you imagine?
Oh ridiculous and I oh, by the way, in terms of the increase year to date in the net worth on Richiko, he is number one, up fifty billion dollars this year. It's been a good year.
So I'm not going to mention the mutual fund, it doesn't matter. But the number one holding is met a Facebook, and it's gone up so much. It's gone from eleven percent of the portfolio to fourteen percent of the portfolio. It's Lau Paul Navis, this has never happened, Lisa posts of my life. I mean it's original. What else do you have?
So, you know, we always talk about how lises in the city are really expensive for a lot of retailers.
Not if you are Kim Kardashian.
Yes, she's getting a big least discount. She has a Skim store coming to New York City. She is leasing a twenty thousand square foot space right along Fifth Avenue in the heart of New York City for at least seventy five percent less than what was paid by the last tenant for Sachi. This is from the New York Post,
That's what they're saying. So if you break it down, Skin has paid less than two hundred dollars per square foot for the lot, whereas Versace I had about seven hundred and seventy dollars per square foot.
Is for that?
I mean, seriously, this is the I've noticed this just in the last couple of days. Let me make it clear. Paris does not have the empty stores in their primary area. They have some selected ones, but Paris doesn't look like a ghost town, Paul, parts of Midtown look like a ghost team.
Tom this is six forty seven to Fifth Avenue, right near East fifty second Street. This is an iconic retail, luxury retail address on Fifth Avenue.
So, but isn't this solution. It's just the lower rents. Yeah, I mean I get the taxes go down and all that. But basically she got a good deal.
She got a very good deal.
Are you done? Is there one more?
One more? This is breaking.
Yes, McDonald's bringing Krispy Cream Donuts.
They are coming to McDonald's.
Yes.
Is that?
Well, you know what they want to get more breakfast people. They want to get more of those you know, all day snackers.
Krispy Kreme shares actually up about fourteen percent right now, wow on this news. If that gain holds, Krispy Kreme will be set for its biggest rise since December of twenty twenty one.
So this is big news for Krispy Kreme.
McDonald's still a little bit lower with their shares, but big news for Krispy Kreme. It could happen by the end of the year, nationwide rolled out roll out by the end of twenty twenty sex.
I girl like you, I'm sure has her faith. It's not Dunkin Donuts. It's not Krispy Kreme. Is there is there like a local donut that you think is?
Oh, Duck Donuts. That's another one donuts. Yes, that's a big in Jersey.
Yes, they make them right there. You could watch it.
I'm forever Dunkin Donuts. They took away my favorite. But you know it's it's not Krispy Kreme.
Well, Chrispy, there will be three of them.
You have the original glaze chocolate ice with the sprinkles and the chocolate ice cream filled all there.
They're going to be there, Ken, what do you think. Let's go to our global technical director, Ken. I'll tell you Ken, what do you think? Chispy Kreamer, Dunkin Donuts?
No, oh Krispy, that was definitive.
Yeah, Evan, he's the baker. Thank you so much. Lisa Mantello had a tough day. A little lightness there with our news report. This is the Bloomberg Surveillance Podcast, bringing you the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our
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