Surveillance: Afghanistan With Adm. Stavridis

dot com, and of course on the Bloomberg terminal. There are seventeen miles of corridor in the Pentagon, and the distance between the second and the fourth floor and the acclaimed e ring where the fancy people said it's maybe thirty ft. James Travitis on September eleventh, two thousand one, was on the fourth floor. Is a plane hit the second floor? He was directly involved in that rescue effort, and of course went on to a longer tenure on a rock and on Afghanistan than literally any officer in

the American military forces. He joins us now off of an extraordinary essay in Time magazine. Um At Musterrvidas, I just congratulate you on the clearest statement from all the experts weighing in on this debacle. Let's start with the simple idea. When you constructed that essay, what was the greatest mystery about where we are now in Afghanistan. I think the mystery for all of us has been the sudden complete collapse of the Afghan military. And to me,

you can pull a lot of different threads together. But I spent a good deal of my four years as Supreme a life commander of NATO, that's of course Afghanistan NATO mission training the Afghan security forces. I would have bet they could have held on for a long time if we had continued to supply them and resource them. So this sudden collapse with a shock to me, must we have to get x thousands of people out. You are expert at deploying helicopters, planes, whatever to do it.

I guess we're not going to deploy boats and ships to get people out. How do we get them out? Admiral Yeah, three miles to the sea, that's not a good option. Landlocked country. Um, we have the technology to get them out. The challenge is going to get them in. By that, I mean getting them into the airport. We've got to find a mechanism to bring in, first and foremost the American citizens, but also the interpreters. The allies

who worked with us are are native partners. Um, there are tens of thousands of people who need to get out. The Taliban are around that airport. I think the only path forward to get the people in is going to be through the Taliban. No one likes that, but we're going to have to have a very direct dialogue with them, offering them some carrots and some sticks to open up the doors and let the people in who want to leave. A weal what do you make of this Taliban two

point oh? As some folks who are calling it they've seen too on their initial press conference say everything that a Westerner would want to hear. What did you make of that Taliban two point oh? And I've been using that phrase for quite a while. Um is taliban one point oh with really good media training and and and I for one do not believe they are going to change their stripes. They're not going to suddenly listen to their better rangels. They are not going to be kind

of a gentler. And even in the last couple of days, we've seen shootings, beatings, their reports from out in the provinces, out from under the side of Western media of girls being taken away from their homes. I don't look for big improvements. Unfortunately, all right, Adam, given where we are, and it's it's easy to obviously keep focusing on the video that we see on our news shows over the last several days, but you've got the perspective of the

longer term as you look back over the last twenty years. Here, what are your thoughts as you see these events of unfolding on the screen. I think there's three vectors of failures here. Uh One is the Afghan government and in that sense, the people of Afghanistan. They did not buy into, by and large, the vision that we had for the country.

I think a second vector is ourselves, our belief, our hubris in believing that we could create a kind of highly democratic, very Western oriented structure, train a national army. Um we believe too much in our own mission. And then thirdly, you've got to give credit to the Taliband here. That's the third vector. They've been very successful and have

found ways to maneuver around us. And well, I've got about forty two more questions, paulse we need tells me with fifty more questions, But here's the single final question on this morning, and it's just simply, isn't it to the benefit of the Taliban. They're pushed in their tribe. They've got their own rules set. Don't they want all those elites to leave cobble. Isn't it your best interest

to get the elites out? It is, and frankly, not just the elites they want to get In my view, they ought to want to get all of these people out. The question is what's their appetite for vengeance as opposed to their rational calculus. Let's hope they land on the ladder almost tribus. Thank you so much for joining us. We've barely had time to touch on my Book of the Summer two thousand thirty four, a novel of the

next World War. It is a different novel than what we've been talking about, but I can't say enough about it. It is. It is just a phenomenal read. I'd also mentioned Thomas Barfield's one volume in Afghanistan. Paul just superb, just superb on this stew We go macro. We do that with George gun Comvas with m u f G Securities, America's head of US macro strategy. George, I want you to fold the g d P guestimates into the dynamics

of the market. You are acclaimed it yield dynamics. How do you fold a movable feast of g d P guesses into that? You don't, tom, I mean, and that's really the bottom line. We've been really divorced from these fundamentals for you know, going on five ten years. And this is something that you know, I think most rate forecasters have been kind of struggling with is trying to go back to what, you know, what does growth and inflation really mean for what should be captured within an

interest rate forecast? And I think that's that's you know, that's the way the way things go. I mean, the bomb market trades more and more on price and on momentum. It trains almost like a commodity in many, many regards, where yield becomes like a second thought until yields get too low and then people start saying, wait, why am I buying it? There's a lot of carry. George Lason brought up a quote yesterday from Bank America that I think it's really important. I was talking about it as well.

Bank America suggested we were at the threshold of a major bifurcation of scenarios. They could say, you know, it's go to north of two percent by the end of the year, south of one percent by the end of the year. Do you think things are that funny balanced right now. I mean, maybe not that finally balanced, but I do think that there is a break potentially coming

up soon and that and that is definitely true. And I think you kind of in your intro kind of alluded to these things that on the one hand, the FETE is not gonna get boxed in. I mean, we saw from the RB and Z you know, if you know, the delta virus were to get worse, or if we get any sort of kind of slow downs beyond what we're being projected, or or the concerns of like this kind of peak growth gets you know, further in trenched, and that factors into a slower end of the year,

and it's the early part of Q one. The fact can just kind of always push back. That's that's that's what they'll always do. They're never gonna pull forward tightening, They're always gonna push it back. And of course these global factors matter too. And so even if we were to handle the delta virus better in the US, if the rest of the world either has a more lockdowns.

That's that's an issue. Plus this China growth dynamic, if if that starts a really way on commodities and overall just kind of economic financial conditions, the Fed's going to take that into account as well. When you say the FED won't get boxed in in other words, they don't want to necessarily commit to tapering. There is an issue of harmful effects of their carrying on with their programs the way they are for a longer period of time,

especially as we do see inflationary pressures. Yes, they're idiosyncratic with respect to supply chain issues, but also on the margin, if we do get a rebound like Goldban, Sachs thinks it could be that much bigger if the FED keeps pumping money into the financial system. How much are you concerned that the FED is drugging off some of these dill interious effects of their continuing of monetary stimulus at

this point, Oh, I'm concerned. I mean, as we all know, it's all not what we want the FED to do, or we think to fetch should do. It's what they will do, right, so we're always trying to forecast that. I mean, I do think that they should be in the process of tapering and maybe they've overstayed there their Q we welcome for from quarters now potentially and they maybe, you know, we should have been starting sooner. But you know that's that's my my opinion, not necessarily what they're

gonna do. Well, well, let's go with that. Then what's the negative consequence of that that you're willing to bet on or that you're gaming out in terms of your market call. Yeah, so right now, like the concern is and we're seeing it manifests itself in the r RP in the reverse repot program and how there's too much liquidity.

Even in the minutes yesterday, Uh, you know, there was referenced that potentially as we headed to a debt ceiling with all this liquidity, with the Fed not tapering yet, potentially uh you know, most likely, I don't think they're going to do it in September unless things really perfectly line up in terms of tapering announcement any even that

they do that, they're not gonna start in September. So there's gonna be a lot of liquidity still flows in the system into this very acute period of excess liquidity, and so that you know, causes an intertal potentially for the money market. So there's definitely a science that you know, they need to be tapering and they need to get out of this que business. You've spent a long time with Japanese banks, George. The reason I bring that up is because you've got a lot of experience looking at

the Japanese bond market. I want to understand from your perspective, because some people raise this question just because I'm asking it doesn't mean I believe it's going to happen. I think it's a question we need to be asking. Do you think we could replicate what we've seen type place in Japan over the last twenty years, which ultimately Europe took over in the last ten Do you think that

could happen in America? So Europe is still struggling with believing that there's a Japanification going on within their bond market. But when you have negative rates and you have just low activity overall in Europe, I think the Europe looks a lot more like Japan than the US will for

the most part. But I think that you know, yeah, that we talk about always like these breaks and markets for the next quarter, but the real breaks is trying to understand the next three or five years, if the U S can really get it back into a growth trend that would prevent us from falling into like this Japan scenario. I would say, I would say, we're not there. It's not clear yet. I agree m u f G Securities Matt Cross, head of US MACROI Strategy. He is optimistic.

His name is Neil Datta, and he is courageously carved an optimistic tone on the classic g DP formula. He joins us down on a day of a multiple set of glooms. Neil, within the GDP formula, what's gonna come to the rescue? Is it the consumer? Is it investment, net exports? What comes to the rescue to give us

a better than good outcome? Well, I think it's inventories. Uh. You know when you look at UM, the last I s M number, the customer inventories index that looks at UM, you know respondents that are saying their current level of inventories are too low compared to too high, and it's basically at a record. So basically manufacturing UM survey respondents are telling you the inventory levels are too low. Basically, what that means is they're going to be um, you know,

working to fill those inventories. Right. They need to get inventories into line with final demand. And while inventories, you know, over long periods of time kind of net out to zero, they do in the short run contribute a lot to cyclical swings and growth. And that's gonna put manufacturing production into overdrive. So you know, when you look at things like Philly fed at nineteen point four, that's still a pretty healthy number. Uh. And so you know, manufacturing production

is going to be a talent for economic activity. And as those inventories catch up to final demand, that's gonna be a big tale went for overall GDP. I just took Philadelphia fed photos off my terminal. You're uh back fifteen years and Neil's right, it's nicely above the long term moving average. Neil Dudda, what is your g DP for two thousand tow you one? We're seeing everybody market and market down. Where are you for the economic growth

of the nation for this calendar year? Yeah, I mean, I think like six and a half seven percent is not beyond the realm of expectations. And I understand that people are taking their their forecast down for the third quarter. I think that's largely just a mechanical adjustment to what's going on with the delta variants. So you have increasing COVID spread. People are taking matters into their own hands and staying away from restaurants, their travel hotels, these sort

of high touch services. But you know, I mean the people that I talked to have a time horizon that extends beyond three weeks, and um, you know, when I look further out the twelve to eighteen month outlook, can anyone really say that that's materially changed. Um. If anything, you're seeing more activity getting pushed into that into that time frame. Is such an important point, if you allow me to jump in, We've been talking about your point

through this morning. For you and other it's recovery delayed, not derailed. That any growth we lose in this quarter, we gain regain in the in the next quarter in the year after that. Now, what's the difference between a recovery that's delayed in the recovery that's derailed. What distinguishes the two things. Well, I'm just saying there's not as much structural, um, you know, changes in consumer behavior than

people are expecting right now. So just extrapolating what's going on, UM, and you know in August isn't necessarily going to tell you much about what's going to happen next August. It may well be John that we're trading a bit more COVID risk now for a lot less COVID risk later. UM. Certainly, if you look at UM, you know, some of the data on coronavirus, it looks like cases will probably start to peak sometime in the next week and case growth

will begin to moderate. To the extent that COVID is an issue, I think it's more of an issue in the Asia Pacific economies, right Australia, New Zealand, UM, certainly Vietnam, you know you're seeing and so maybe that's going to exacerbate some supply chain issues. But at the end of the day, I don't think it's going to matter much for the U S housing situation. Well, but you know, there does seem to be a one to punch here. On one hand, I mean, I'm just throwing this out there.

Aren't you tired of being wrong? For the last skeptical I'm not making a market call, honestly, it's honestly trying to come up to look around corners. Wow, you come out with gloves on. Um, bear with me while I try to ask my question. But like just this one two punch of supply chain disruptions that are causing higher input costs in addition to a FED that's being that much more patient because of some of the headwinds that

the economy is is experiencing. I mean, does this contribute to higher inflation on the margins down the line than otherwise would happen? Well, I think it's not so much about the inflation in my view, it's about what the FED is gonna do about it, right, I mean, so, I mean I conceive that point. I mean, you have had a little bit of you could say, stagflation light concerns coming to the market. Growth has weakened. I mean even the FED staff took down their growth outlook and

revised up their inflation outlook. We saw it in the minutes yesterday. Um. But again I think that's probably going to be uh temporary and certainly, um, you know you have seen things like use car prices come down. I mean, if anything, in the July data, the supply chain issues

are becoming less prevalent, right. I mean, if you look at building unit housing units under construction still going up, completions going up, so even as starts moderated, right, So that tells you that buildings are working through those backlogs and similar we had a nice popping manufacturing production driven

by h autos motor vehicles. Neil, Can I ask you a question, does it what does it make you upset to hear people try to come up with the potential barish counterpoints at a time where there still is a lot of pain in the economy. I mean, yes, it has been my right. My job, Lisa is to take an economics call and help investors turned that into some kind of a market call. In other words, make them

help help them make money. So if I wanted to be bearish, I would tell people to pile I mean, at the end of the day, it's not about what GDP is. It's irrelevant. It's using that two and translating it into a market call. So if you want to go head first and buy utilities hand over first, be my guest, but I will I'll be telling people to do something else. Uh. And that's ultimately how business economics market economics That's why it's important. A GDP call on

its own is irrelevant. What matters is taking that GDP call and translating into some kind of market outlook. So uh, you know, if if I'm looking at it and I'm telling people are saying you want to be raising cash for the last twelve months, it's ridiculous. So um, I think the cyclical trade is probably taking a temporary break. But this is essentially my view of consolidation within an ongoing up trend in the market. You two should have to run, could just sit, I could just take a break,

nail dust, Nanny's gonna catch up. Appreciate your time and nice research had of US economic research. This is an important conversation because Jennifer news Oh reads the research. Jennifer news O The New York Times has a standout article on these silly plastic barriers that have invaded our lives That includes JOHNS Hopkins University research which say death screens could actually give us an increased risk versus intelligent use of mass. Can you help us with the plastic that's

engulfed us. I am hermetically sealed from Lisa and John. I haven't hugged Lisa in like eighteen months. I mean, help me, Jennifer. I think Lisa nets out rotten out home. Can you watch the ductor about a question? I missed you guys so much. Jennifer, Please on the plastic screen. Somebody reach over and hog Tom. He really needs it. Go ahead. I mean, you know, listen. Uh. We don't have a lot of evidence for a lot of these things. I think intuitively, there are probably some environments in which

it makes sense. It's, for instance, toll both operators people who have a lot of exposure with the public. Putting another barrier between those people and the people they're serving, I think makes a lot of sense. But when you see people sitting at a desk and they have like a three foot um, you know, plexiglass between them, it's it's not clear what that does, if anything, and it sounds like it could potentially cause harm. The bottom line is UM probably not going to be as protective as

a mask. Although you know, we always try to layer these interventions, but UM, you know, I think the most egregious example of the plastic was that one of the vice presidential debate, those tiny little things that UM separated m vice presidential candidates not going to do much help me with then the need to get vaccinated. What is the last forty hour show you within all your reading and research about the getting vaccinated, that has not changed.

If we do anything to put ourselves back to normal, to go to back to our lives, it is to get vaccinated. There is nothing new in the data that suggests otherwise. Heard a lot of news yesterday about the potential need for a third dose. I will tell you most people, including myself, think that the data aren't quite there to suggest that most people need it. There are clearly some small groups of people that absolutely need extra help, and that's the immune compromise, and they're already able to

access a third dose. But as far as people broadly, uh, you know, we're not yet convinced that that's happened. The bottom line is the vaccines are still doing exactly what they need them to do. They prevent us from getting still enough to get in the hospital, which again, if this virus can't do it, we'd never hear of it. Dr Newts. So then when do we stop caring whether

we get infected? Because right now I'll tell you, I'll be honest, it is a vaccinated individual who has a child at home, and I sound like a broken record who is not needed. I care as much about getting infected as I do about getting very sick, just simply because this will affect the people who I care about. So when does when does that change? Sure? So I think that's exactly a potential off ramp for caring about

getting infected. UM. I have also unvaccinated kids at home because they're too young, and hopefully when vaccines become available for them, that'll that will lessen those worries. But getting a third dose doesn't necessarily prevent you from getting infected in the first place, so that's unfortunately not going to use those worries for you. Dr needs. There have been reports about new antibody therapies coming out of China that

have actually been somewhat promising. How much does that potentially provide a game changer here where we can actually combat this and treat it more like a regular illness. I think that's, you know, one of the missing areas that we need more progress on it is treatments because you know there will be still some breakthrough infections, but also we know we have a lot of people who are not vaccinated and are gonna need treatment. So that is I think an important area of research. We have some

things now, but they're not very scala. But you still have the the monoclonal anivis and hear about you have to go to uh A center and basically be hooked up to an ivy. And so it's very hard to deliver that UM at scale, particularly given the number of cases that we have. If we could give somebody a pill and treat them potentially even at home, like we do for influenza, I think that would have an enormous

contribution to lessening our worries about this virus. Jennifer, New York City restaurants and I'm sure other restaurants that are listeners and viewers are familiar with UH. They're in an uproar about paper vaccine inspection to get into their restaurant. When do we get away from silliness of what the eighteen fifties? When do we get away from a paper document that's clearly instantly forgible. Yeah, well, I mean I think that's a real problem. People can forge it. Unfortunately,

UM the apps are not potentially better than that. I think there was a story about one of the apps being news in New York where you could just upload any photo and get a green check and then it's on. Uh, you know, the bouncer at a club to scrutinize whether you've got your two fighter ghost is on time. Um. I think there are people who are pushing for a

more verified vaccine record. Of course, that raises all sorts of concerns and potentially concerns among the people who have not yet gotten vaccinated, and we absolutely don't want to turn those folks off. But I think, um, you know, we're seeing right now the challenges of the immunization records that we have there um easily forgeable. In my view, Um, you know, people who are determined to not comply, we'll

find a way not to. People are very crafty, and so I tend to focus on changing hearts and minds and make sure we convince people to get vaccinated. Don't thank you. I appreciate you a time of perspective. As always, Dontor Jennifer news Sock. I think John's help can sense behind security. This is the Bloomberg Surveillance Podcast. Thanks for listening.

Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course, on the terminal. I'm Tom Keene, and this is Bloomberg