Markets Have Been Ridiculously Overpriced for Weeks, Gartman Says

news out of Spain, right of northern Spain. I suppose I should say what does this mean for for the economy of the region more generally? There are a number of other places, not unlike Cataloni. They're probably watching what's what's unfolding there, watching this dynamic between uh Spain and Catalonia. What are the lessons to be learned, both politically and

economically from what we're seeing happened there. Well, I think it's some danger that would you of is some resources get pulled out of Catalonia to other regions in Spain, and you know, net net, those other regions probably benefit to some degree. Catalonia loses art. The uncertainty overall probably means that they're a Spain tends to lose art to some extent, and I think you're seeing that in some

of the downward revisions to growth. But for the moment at least, I think you know, those downward revisions are are quite modest. Does it say anything to you about the future of the integrity of the European experiment? Does it give you concern about where things might be added? Yeah, I think there's a wider problem here as such. If you know some smaller regions can pull apart and you can actually see independence from from regional elements in Spain,

you would think that could happen anywhere. And I think it's indicative of what you're seeing in in in a way world, which is, if these smaller regions can fall under a defense umbrella and can adopt a currency as such as stable currency, then why not have some independence in the senses? I think? So, you know, the issue you have here is it must be made clear to some extent that there costs to independence as well. Otherwise I think you're going to see more of this rather

than less of it. Explain to us why we're not seeing wilder swings in the euro as a result of this, as a result of you know, what's been a many weeks long ordeal here again in northern Spain. But I think we've just you know, come off the French election, where I think there was a genuine perception that this was an existential crisis. Is the possibility that you'd have a government that would actually want to pull out of

the euro um. I think on the contrary over here, it's very very likely that even if you had in the Catalonian independence, there would still be adopting the Euro. Just can't quite see them having their only independent central banking such And I think in that sense, you don't have any of these concerns about you know, past contracts effectively and will there be fulfilled, etcetera. So it's not

perceived as an existential threat in a direct sense. There will be issues that relate to Spanish debt and who pays for Spanish debt, etcetera, and that would be more problematic I think, in the next downturn, But I don't think that's as problematic. Well, you know, it's as big an issue as if people feel that, uh, the contracts are not going to be on it because there's a different currency at play. What was that your takeaway were your takeaways from the annual meetings of the i m

from the World Bank last week? The the outlook that was released by the IMF slightly more optimistic than it had been, projecting more growth in the global economy. Of course, there's the general condizzance of the fact that we have low inflation globally as well. What did you take away from the conversation of those of those leaders of financing the economy gathered and Watchington last week. But I think

it's a quiet optimism. But beneath that, of course, you always have to worry, right, I think these guys are to some extent paid to worry and paid to look out for what could be the next crisis. Now we've really gone through a period of unbelievable stability and global growth. I mean we've you know, if you look at I think it's the i m F global growth data, we've tracked between roughly about three and three point two for

five years three two thousand and sixteen. That's unbelievable in terms of lack of volatility as such, and it's not a great performance from a global growth standpoint. But it's okay as such, and now I think the perception is we're going to error on the top side of that, but that maybe there's other issues lurking in the winds as such. As I think that then that's that's I think what concerns central bankers. Good morning, I want listening. I'm sorry, just got in. I can I just say,

David is a starting point. I love four and five pm baseball starts. Yeah, well wrapped up at what that's great. The kids children actually watched the baseball game. AILCE hosts as well. Yeah, us to talk about today, Ellen Roskin? Where this with Deutsche Bank? And I guess one place we can start. Alan, lovely to have you here through the half hour. It's just a dollar call. It was the great missed call of the summer. Why was that?

Why did Why was everybody long? The dollar? Consensus long? Dollar? Oops? It went the other way. Well, I think we've been on a trend for a while. It's on and it's very difficult to call turning points. And part of the turning point I think came through two big sources. One was the Trump reflation trade, which had given the dollar a boost right at the end of last year that that one flagged and flagged quite quite heavily as such.

And then it came at the same time as the French elections tended to remove European political uncertainty to some extent, so that put the bit on Europe and put a bit on Europe, and then I think you saw a lot of investors feel, wait a minute, we were really underweight yours and you've had an asset allocation story as well into Europe. And then you and I agree that technical analysis can keep you out of trouble. You may not make any money with it, but it's good at

not losing money. We've had I guess we've had a breakthrough the downtrend. But as you mentioned earlier, there's a fragility to this dollar rally. It's not for real, is it. Yes. I think it's a problem we have right now in the currency world is that we love divergence, right so we love the idea that um fed's going to tighten and some other central bank's going to ease. That's a relatively easy trade. But right now, actually the euro looks okay.

As I mentioned earlier, I think is under acid allocation, long term acid allocation, and that I think will be helpful for the euro going forward. And the European Central Bank is tightening, albeit it's really effectively just tapering its past quear such, but it's we are in a world now where central banks in general thinking of tightening. So this is we've got a horse race here and they go, but they're all running in the same direction, which makes

a little bit more confusing for us. How cheap is the the yeen at this point? Is there value on the yeen as you see it right now? There's value on a long term basis, and so much as pretty much all our longer term metrics suggest it's cheap by in the order of saw so PPP purchasing power parity indicators suggests the low nineties rather than in a twelve, So there's there's a big difference there. And historically when you do see divergences of over that does suggest you

need to go in the opposite direction. It's time to buy yen. But I think it's a little too early, the cause too early, because I think right now it's essentially been driven by US treasuries and the US tenure heel you we We confuse that a little bit. We pretend we're playing Dolly Yen. Yeah, but we're actually really trading the U S tenure heeled, and I think the U S tenure heeled on balance is going to move

highron heeled. I want to ask you the money questions just to explain your strong yarn means that yet No. One twelve goes down to one hundred or ninety or whatever goes to a lower statistic p p P. Can guys on the street make money off of p PP analysis? I mean this goes ages ago to Kassal of eighteen and even before that. Can you make money and a

p p P analysis or is that just too sixty feet? Um? Yeah, no, it might be Highland might be even more rarefied to some extent in terms of trying to make money, because look, I think you can. You're gonna cross have a p p P maybe once every five years exactly, but I think you do want to be very alert to extremes relative to when you're suggesting. Is a decent democad in terms of extremes for old G ten currencies. Actually, this

is why we do surveillance, folks. You just had a clinic on what you do within the set of observations. You have to make a set up to get to a trade. Whether your trade is two days, I mean Ruskin is trading over two hour period. But whether it's two hours of two days or two years, there's there's a mix here of things, and you've got to be sure you're looking at something like P P P over the appropriate time frame and amplitude. Here end of the lecture,

Alan rescued with Deutsche Bank will continue. David Girl will try to do something less esoteric than that. David lead it off here, but first Abby sends in a really smart tweet about what do we mean when we mean long dollar. That's that's a really really smart question, and that with the dollar is the global currency. You can look at it versus many different pairs, or you can

look at it on a trade weighted basis. Is well is taking trade weighted which can be like ten countries or twenty seven countries, whatever it is, plus the Euro. There are indexes that allow us to look at the dollar discreetly. The classic index is the d X Y, which we quote, and there's a new index of Bloomberg Dollar Index which on your Bloomberg is b B d x Y, which is actually really good math. So when

we say long dollar, that's strong dollar. David is usually based off one of those blended in disease that bring in all the different currency pairs. Very good. No one drove off the road, Ruskin Doll. He's here from Dutch back of course, and Allen I wanted to ask. We just heard from Chris Kirkham about the parlor game about who's going to lead the Fed. Here. We're going to get a decision from the president, he says by November the third, when he leaves on for this trip to Asia.

How does the market price that in? We hear that John Taylor is in the lead this week, it was Kevin Warsh last week. There's still a lot of movement among the ranks of these five candidates. The president, his interviewer is going to interview. I think he sits down with Janet Ye in the FED chair today. How is

the market processing what may or may not happen here? David, It's very difficult for the market process this because we're seeing the indicators of who's the favorite things like predict to a one one example, very very flighty in terms of responding very much to the next headliners. So if you took that at face value and say, the market's expectations of who's going to be the next chair is

just flipping around. And I think there's a sense that right now Powell is in the forefront, Yellen's certainly in the running and on the rise perhaps, and I think beyond that, Kevin Walsh is perceived to be in decline and John Taylor is on the rise as well. But that is, you know, really based off the last few Bloomberg headlines. How much does it does it matter after somebody dealing with currencies? How much does the appointment of a FED term matter in the near term? I think this, this,

this is one of the matters a lot. Yes, I think, you know, you've had a few changes which matter a lot. I think Vulka coming in, actually green Span following Volka, those who are potential shifts in regime very relevant for you know today Black Monday really because that transition was part of the Black Monday story. I think the handover from Greenspan to Banankee and Banankee to yell And was much more benign. I think I think the sense was

that the frameworks would essentially stay unchanged. It depends now who the next FT chair is. If you do have someone like Taylor, and if you have someone like more warsh or maybe cone Um, then the prospect is that actually there's some regime change. If we do shift towards a more rules based FED, that's going to be extremely interesting. The market right now is taking that as a sign that in the short term at least, the FED would be more hawkish. In the long term, who knows, um.

I would say this, it's not that simple in terms of market reaction, because what will happen is if you get a more hawkish pick for the FED, the equity market will probably go down to the point where bonds might even rally. Really, so you've got to be careful here in a sense. So in fact, the yield curving general is going to flatten in a more hawkish pick, and it's going to steep and really on a more

davish pick. And that's partly because the equity market will be the arbiter in terms of driving the bond market. We've spoken a few times since the last presidential election. I think each time I ask you how clear a sense you have of this administration's trade policy. What have we learned this week? This fourth round of NAP negotiations, taking place outside of Washington, ended with a press conference that I think could safely say it wasn't optimistic about

where things are. Hadn't we have a president still talking about terminating at the n after deal. How much does that weigh on the pay so so? Um, it was weighing on the page so over the last few weeks. Absolutely, so, it's been a big deal. At the same time, I would say, don't get caught up with the short term headlines easeration. You really don't have a deal until we have a deal. I lost money last night betting on the Dodgers. It comes being I'm Hailey, Corfax told me

to go along Dodgers and I got crushed. Can make it back on dollar pay? So is there a directional Deutsche Bank a way for me to make that trade back? That's not the one I would recommend everybody. Which trade? Which trade can I use for immediate alpha? Yeah? Well, look, I think you know, if you were looking in Latin America, I'd much prefer the idea that you'd go to the Brazilian real because that's you know, it's more stable, it's it's got decent healed and I think you're gonna earn

your carry on long Brazilian rail versus US dollar. Yeah. And and the yen Colin of the twins put that trade in. Please if if we lose money on it, take it out of Hailey kofax is Uh Pacheck Dodgers Cubs CUB three to two over the Dodgers. Allen Ruskin, thank you so much for wisdom across assets and particularly on foreign exchange. He is with Deutsche Bank. Stay with us. This is Bloomberg. Dennis Gartman tried to buy Kansas City wheat in the depths of the crash, of honored that

he would join us. Uh this morning, Uh, Dennis, I think within your beautiful essay we can go to when the shift occurred. For me, it was about two pm, maybe one thirty in the afternoon, where we took out paper tickets and started buying those of us courage and courageous enough to know the underlying economics. And we didn't know for four four days if our trades were filled. What did you do at two pm on the day of the crash? Threw up a lot of people were

doing up. Yeah, it wasn't It was an incredible day, and as I was trying to explain this morning in my commentary, I knew what was going to happen. On Friday afternoon. I was with some friends from North Carolina State. We were going to a football game, and we were we checked in on our phone because our phone started ringing.

The doll was down a hundred on Friday afternoon before the crash, and people don't think much about a hundred points now, but then that was the first time the doll had ever fallen by a hundred, and I was worried about what was going to happen Monday with what we now know. Who became the problem with portfolio insurance because you knew that there were going to be a huge amount of cell orders coming in. What was I doing Tuesday or Monday afternoon? Like I said, I was

throwing up. It was an incredible experience, one I shall never forget, and one that's still here thirty years later. Colors how I think about everything because I'm always worried that we may have yet another one of those again. I strongly agree with that, But to carry forward here down twenty six is a bear market? Ten percent is a correction? Or with the structure of our economy and finance today, Uh, Dennis Gartman, do you have to put a new number on a bear market if it's not,

if it's not eighteen percent, what's a bear mark? In two oh? I think actually that we give it much too much leeway saying that you have to be down before you constituted as a bear market. You can actually have a bear market started much earlier than that. If you have one failed to go to new highs to take out a previous low. You could have the start of a bear market if you were only down five percent. It's just a matter of how much farther down you

can go once down gets started. But what's the kount What what constitutes today? I guess I'll still go with and say when we're down, the public will have become concerned that prices may go down further. I want to go back to something you just said, which is it it really shaped the way that you think about the markets and think about investing. How did it change your

sense of the irrationality of markets? Prior to that time, I was a believer that markets were rational until that time, I actually did believe that markets probably could remain rational. After that time, I understood that irrationality can break out it almost any one period of time. And in the words of my my good friend Gary showing, the market can remain irrational longer than you can remain solvent, and my corollary to that, as the market will return to

rationality the moment you have been rendered insolvent. Let's talk a bit about the stock market here. We've been mentioning this throughout the show. That we hit twenty three thousand on the Dow yesterday. You're right, this morning prices may be egregiously, preposterously, dangerously, unimaginably overextended to the upside, but they may become even more preposterously, even more dangerously, even more unimaginably overextended to the upside before they turn lower.

How do you react to the highest that we're seeing, Dennis, When they start bringing out the hats for the thousand, three thousands, you almost become it's as you just did. It's almost laughable. The market is ridiculously overpriced. It has been for several weeks, it has been for several months. Perhaps today, perhaps yesterday was a high who knows, only time shall tell, but it does look a little precarious this morning. I guess some of the weakness can be

attributed to the promised extent in Spain and Catalonia. But here here, nonetheless, we're down and we're not bouncing today, and that is that alone is concerting. Do I think that the market can make new highs? No, I really don't um but is it possible. It's possible, but I don't think it shall Debnis Garment. I spoke to Colne resident this week and went through the usual litany of

optimism and some of the things pushing against it. And one thing I mentioned, I'm looking out into two thousand eighteen is on the edge of Jack Welch, the idea of we lose pricing power, and I'm frankly focusing this in where areas were at the revenue line. You've got unit dynamics and price dynamics, and there's something in the wind.

There's something changed. Do you agree with that? Uh, it's it's it feels like that this morning, suddenly out of nowhere has come rather rather agreed his price weakness today could be a very important day. Let's be blunt if you don't rally. And in the past, we've had these mornings where the Dow was down a hundred, where the SMP was down fifteen, where the mask Act was down forty or fifty, and by ten thirty or eleven o'clock we were staging a rally and heading for new highs.

If it doesn't do that today, the game has changed. Are you willing to put money on that? I mean, the great acclaim of Dennis Gartman is he actually shows his trades in the back. I believe Dennis in your Morning note, there's no equity trades. It's the usual gold malarkey. And you and your commodity of fixation and better North Carolina football? Are you going to institute an equity trade? We got to get out in front of this and

make news at Bloomberg Surveillance. Well, actually, late yesterday afternoon, I'll find things on my own before I'll put them in the newsletter, just to test the water. And I bought a few puts yesterday afternoon, not many, just a few. I gave an order to my to the young man

who works on me back home. I'm not I'm an akron this morning for an endowment committee meeting, but I gave him a note saying, if we don't rally by and buy some more puts, if we are still down by the end of the day, I'll probably officially come out tomorrow and say, let's buy some puts. Do you place your orders through MC trucks, spread and whatever the name is. I mean, do you get taken on put options like the rest of us? No? No, not really. I mean there's there's the liquidity, and the puts is

really quite magnificent. So you know, I don't trade large twenty and thirty and forty lots of the time. I don't trade thousand lots, but thirty and forty you can get a good price within a penny or two of what you saw last on the screen. And for me, that's that's quote David David Doug cast just fell off his chair in Florida. He knows Gartman's starting order is

five thousand. That's his odd lots. Spurious spurious allegations. Dennis, I love the I love the occasional estery in your your letter, and this morning you write about the importance of the Kiwi dollar. Why are you watching the Kiwi dollar this morning? Because something strange has happened there. Politically, New Zealand has been governed by a reasonably adroit center right UH Nationalist Party as they're called. They've done a

very nice job. But suddenly the Labor Party, which is far left, the Young Lady, has taken the reins of the Labor Party, got within about five percent of the Nationals, and a very strange fellow, Winston Peters, who is trade protectionist of the first to order and I think a very dangerous fellow, got about fourteen percent of the vote and he cast his lot with the left. Suddenly you now have a very far left, trade protectionist government in

New Zealand which is archly different, archly changed. And the New Zealand dollar got colabored on that that I find to be very dangerous because New Zealand has been a very a solid, stable country. Suddenly it looks unstable that I find disconcerting. So to send this up your strong US dollar, we New Zealand dollar, Yeah, you should be. This is a change. This is a very material change in governance in New Zealand and in the past, as I said, New Zealand has always been an interesting place.

They were the first place that really aggressively cut tax revenues to prove that you could cut revenue, cut tax, cut tax rates and take in more revenues. They they've been an experimental point and when New Zealand changes, I pay attention. Good morning to Julian Robertson. Hope you're listening. I'll let Mr Robertson figure out what to do with Kiwi. David grew a massive surveillance correction. I was suggesting that someone on our Bloomberg surveillance team was from New Zealand. Um,

I don't really, I don't get. I don't use anything under the Southern Hemisphere. I don't get starting with the Philippines. But I would suggest that I greatly insulted Mr Bickannan. Yes, I don't know where he's from. Maybe one of those islands with penguins on it down there. He's not from New Zealand and of the world. We don't know. Good morning, christ Church. I'm sorry I made a mistake. You're apologizing

to them for making us very good? All right, why don't you bring into this gartment with this here editor and publisher, the Gartment letter for another block and down. We got to talk about commodities some here. The last time you were on, we've just been through the third of these three hurricanes that we've experienced over these last many months. What's the fallout of the band as you look at cotton, as you look at oil, as you look at other commodities. How much of an impact that

those three storms have on the complex? None? Nothing, nothing. It had absolutely nothing. It had impact upon refineries, It had impact upon the crude oil production facilities for a while, but didn't have any impact upon the corn market. No, didn't have any impact upon the soybean market. Marginally, didn't have any impact at all upon cotton for a day or two, and that certainly went away. So there's been

absolutely no impact from the hurricanes. There was some concern several days ago that you might get an early frost out on the high plane it's Texas and in some of the parts in the Midwest, and it might delay the harvest of corn and soybeans, But even that has gone the way of all flesh. So the impact has been marginal at best and almost non existent. Uh. We were talking about the Keywi dollars mentioning estery a moment ago. You're right about Egypt in this morning. So this is

fascinating to me as well. On the subject of wheat. Uh, Egypt had been a huge market here and no longer is What are we seeing there and what does that mean for the global market. Well, what's interesting is people don't realize. I mean, first of all, wheat production in the world is still the largest employer of any business

in the world. Uh, it's it's an interesting statistic. Wheat is the most important food in the world, and in the past, for many, many years, Egypt was Egypt has always been the world's largest net importer on a national basis of wheat, and they were our best client for many years. They have ceased to be. They actually last year where the number thirty seven buyer of of of

wheat from the United States. They didn't take any until in May of this year, which is unusual, and we have lost that market to the Russians, to the Romanians, to the Bulgarians, to the Black Sea States generally, to Australia, to Canada. Perhaps it's the response of a stronger US dollar in some instances, but even that's not to be considered true any longer because the dollar hasn't been that strong.

It's just interesting that we have lost the the biggest buyer on a consistent basis, and it maybe a while before we get them back. And what's even more interesting, we used to have a buying station there the U s WEAD Associates, and they've actually closed their office, which might well be a sign of the fact that the worst is behind us. How are you watching these these

negotiations with Canada and Mexico unfold? I wondered the degree to which that's weighing on commodities at this point, that the prospect of the US pulling out of the North American Free Trade Agreement changes to that deal at the very least, what does that mean for for American commodities. Well, first of all, I think that the idea of pulling out of the NAFTA would be one of the silliest

ideas imaginable. All three countries, Hanada, the United States, and Mexico have all been well served on balance and in general terms by the NAFTA. Now, have there been some industries in the United States where jobs have been lost, of course, and those always get the headlines. Perhaps some of the in the auto industry have been that way, But on balance, it's been good for all three countries. And to think that it and and and the press

always goes to the businesses that have lost jobs. They never go to the businesses that have quietly picked up jobs. I'm I'm a firm believer that doing away with NAFTA would be an ill advised decision, but it has it speaks well to the president's political base, and they want to be done done away with. I think that would be a very very bad decision. Do you have your Sugar Bowl tickets yet? I mean, it's using to making jokes.

But and one North Carolina State folks as a bye and then they have Notre Dame in a school named Clemson. Am I pronounced correctly? David? You go? You are? You got these two sorts coming up after after Clemson has lost some of the some people are calling them Clemson you have you've written a check for a million dollars to the school or something to make this happen or how did this miracle happen? Of six and one NC

State four and oh a MLB. I don't know, but I believe in miracles, and let's thank goodness that's happened this year. I was getting despondent after years of being a doormat. For the first time in a long while, we actually look good. No, let's leave it there, Dennis Garton, thank you so much, Denni's honor to have you with this. This October ninete really an historic It is John and Jerry and mentioned on Twitter a really emotional day for

the people that actually lived through it. Thanks for that note, John, David Girl, I want you to bring in our next guest, but I want to say this clearly. What you usually do in geography is start with the map. But it may be a U. S. G S map, maybe this map of that map. But what we know is within the study of geography, all good work comes out of Scandinavia. I really don't know why it is, but the Danes,

the Swedes, the Norwegians, but particularly Denmark. Denmark, Denmark owns the high ground on the global study of human geography and the economics of geography. And I'm thrilled that our next guest carries that tradition forward. Go Sardia Mattsburg joins

us now. She's a managing director of the Rockefeller Foundation, former senior vice president for Strategic Planning, at the New York City Economic Development Corporation and what caught our eyes a piece that she co authored for the Rockefeller Foundation, also published on the Huffington Post, Fighting Wildfire with Finance. As we continue to watch the fires raging in Wine country in California, she joins us on our phone line, Saudia,

I looked at the San Francisco Chronicle this morning. That newspaper has done incredible coverage of these fires and made that coverage available for free to people who go to the paper's website, and the edit torial this morning begins. For years now, the U. S. Forest Service has been forced to pill for firefighting funds from accounts for fire prevention as more and more lands across the West burn. And this gets to the heart of what you're writing

about and what the Rockefeller Foundation is doing. How big a problem is this, the gamesmanship involving funds for fighting and preventing fires. So thank you for having me on the show, David. It is a really serious problem. If you look at the development of the U. S. Forest Service budget, Historically, UH prevention used to be, you know,

the biggest chunk of the budget. And by prevention, it's basically going in and maintaining the health of our forest, you know, taking away dead trees, um, doing controlled burns, you know, things that keep the forest healthy and preventing it from overgrown. Um. If you look at the budget today,

it accounts for roughly fifty of the spend. Not because the US Force Service doesn't think that it's important to do prevention anymore, but they're just so much under pressure because of the fires that keep recurring year after year and get you know, more and more out of control. So they, you know, what used to be fifteen percent of the budget is now So as the wrangling over the budget goes on in Washington, d C. How you're

proposing a new way of paying for prevention. Tell us a bit about the financial instrument that you've you've written about in your piece and how that might effectively or more effectively prevent the kind of fires that we're seeing in California today. So the situations that we're facing, or the US for Our Services facing, is that there's a backlog when it comes to prevention that runs in the

tens of billions. So regardless of what ends up happening with you know, next year's budget, that doesn't solve the problem. The problem remains. You know, there may be a slight budget card or you mean the budget may remain the same, but that doesn't take away from the fact that there's not enough money to go in and restore the forest. So that we don't keep reading about wildfire situations in northern California and the great devastation that they're causing era

the year after year. The idea that we have been funding a company called Blue Force Conservation to look at is how can you bring capital markets to bear? How can you take finance and use it as a powerful tool for good. So in a situation where the public sector doesn't have the money or not putting up the money to do this, and philanthropy doesn't have money in the tens of billions of dollars to put against this problem, can we create a regular financial product that would be

attractive to private investors so money can be raised. And in this case, it's a debt product that would be issued as a bond, the money from those proceeds used to do the Force restoration work and and and the private investors would get repaid over time as I would with any other financial products. Are the incentives from insurance adapting and adjusting like they have for hurricanes. Are the

tragedy of California. Will that be amended in the next five to twenty years by insurance companies that say we're not going to ensure this risk. So I think many things need to happen in parallel term. I don't think that it will just be the pressure from the insurance companies, because that would just leave us in a situation where somebody still has to put up the money. And if the public sector doesn't have the money, then where do we turn. Um. So, yes, that could help with the situation,

but that alone wouldn't solve the problem. I was I think, I mean, I was looking at some of some numbers yesterday, and when we look at the devastation, you know, it's it's terrible to read about the fatalities and the people that are still missing. But the economic losses are estimated to be somewhere between three to six billion currently for Northern California and growing um. And you know, it's also

worsening the state's housing supply crunch. Um there's an estimate that the housing stock is going to drop by roughly three percent. So those are deeply problematic issues. And yes, the pressure from the insurance companies if they refuse to ensure, would would you know, force us to address it? But but more is needed. How do you respond, as a grizzled McKinsey prone at the Rockefeller Foundation to the cynic who says, look, we're building the houses where the mountain

lions used to be. What a surprise, mountain lions are eating our dogs? Are we building houses and in fire risk areas that we shouldn't be building? So we've been doing that for dicades now, tom um and and that's just the reality we find ourselves in. We have built houses and structures closer and closer to nature, um and we have not spent money taking care of the forest. So we've left a lot of fuel in those forests, which means when natural fires occur, they turn into wildfires.

And you know, we can't be in a situation where we sit and hope that there's going to be rain or that the winds are not going to pick up so that the situation can come under control. We need to be more active. And you know the public sector doesn't have the budget. Let's look to the private markets. How will that private market incentivize innovation or evolution in

the way that we fight fires like these. So the U S for A Service, if you look at the public sector, they recognize that investing in prevention is the right thing to do. I mean, you can look a lot at the numbers and the case adds up. It costs forty times more to put out a fire that it costs to prevent it. So you know the numbers that there is. There's research that has been done on cost avoidance where the U S FORUR Service has worked with some of the NGOs in the space, the CRA

Nevada can Disermancy and the Nature Conservancy. So they recognize it the challenges. How do you then take it from that and turn it into something that's real and starts to have an effect. It won't solve the problem in a year. It's going to take years of work to do it. Do it right under the governance of the US for Service UM. But then we'll get to a better place where we don't see the situations that we've

been reading about this year and last year as well. Sardi, thank you very much, appreciate the time to the Sunny Martsburg. She say managing direct at the Rockefeller Foundation, as Tom mentioned, and McKenzie Alumna, former Senior vice president for Strategic Planning at the New York City Economic Development Corporation, and the bond that she was talking about through the Forest Resilience Impact Bonds. You joined us on our phone lines. Thanks

for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene. David Gura is at David Gura. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio