1 00:00:02,360 --> 00:00:06,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always, on the Bloomberg 9 00:00:34,000 --> 00:00:36,839 Speaker 2: Terminal and the Bloomberg Business App. Here's the view on 10 00:00:36,880 --> 00:00:40,040 Speaker 2: Wall Street stocks falling crew jumping above one hundred dollars 11 00:00:40,080 --> 00:00:42,200 Speaker 2: a barrow for the first time since twenty two. Sarah 12 00:00:42,280 --> 00:00:45,239 Speaker 2: Hunt of Valpine saxon words, writing, the positives that investors 13 00:00:45,240 --> 00:00:47,280 Speaker 2: we're looking for are hard to hang one's hat on 14 00:00:47,440 --> 00:00:50,240 Speaker 2: given the oil price Serge. Sarah joins us now for more. Sarah, 15 00:00:50,240 --> 00:00:52,480 Speaker 2: good mornig, Good morning. What changed with triple digit crud 16 00:00:52,520 --> 00:00:52,720 Speaker 2: for you? 17 00:00:53,440 --> 00:00:55,200 Speaker 3: I think it changes a lot of things. I think 18 00:00:55,200 --> 00:00:58,160 Speaker 3: it's really, as we've all spoken about many times, it's 19 00:00:58,160 --> 00:01:00,400 Speaker 3: going to depend on how long this lasts. Curve does 20 00:01:00,440 --> 00:01:02,160 Speaker 3: not seem to think that this is a permanent state, 21 00:01:02,520 --> 00:01:04,679 Speaker 3: and I think that what it changes is one the 22 00:01:04,720 --> 00:01:07,480 Speaker 3: possibility of an economic slowdown or even going into RECESSI 23 00:01:07,480 --> 00:01:09,640 Speaker 3: because higher energy prices can often cause that kind of 24 00:01:09,680 --> 00:01:13,600 Speaker 3: an economic shock, and what happens on the earnings front, 25 00:01:13,600 --> 00:01:16,920 Speaker 3: both to margins and to spending into everything else. Right now, 26 00:01:16,959 --> 00:01:18,880 Speaker 3: this is a near term problem. If it looks like 27 00:01:18,920 --> 00:01:20,640 Speaker 3: it's going longer, it's going to change some of the 28 00:01:20,640 --> 00:01:22,680 Speaker 3: mouth that everyone's been looking for for the next couple 29 00:01:22,720 --> 00:01:23,600 Speaker 3: of years in terms of earnings. 30 00:01:23,680 --> 00:01:27,040 Speaker 2: Consumer facing names get and beaten up airlines, cruise lines, 31 00:01:27,240 --> 00:01:30,080 Speaker 2: or get an absolutely hammered as crew continues to tick out. 32 00:01:30,280 --> 00:01:31,600 Speaker 2: We have the point of demand destruction. 33 00:01:31,720 --> 00:01:31,920 Speaker 4: Now. 34 00:01:32,720 --> 00:01:34,680 Speaker 3: I think it's a little early for demand destruction. I 35 00:01:34,720 --> 00:01:36,640 Speaker 3: think that there's some obvious things that are going to 36 00:01:36,640 --> 00:01:38,640 Speaker 3: happen as you see prices move very higher in the 37 00:01:38,680 --> 00:01:41,360 Speaker 3: short term, but I think from a longer term perspective, 38 00:01:41,560 --> 00:01:44,440 Speaker 3: it takes longer than a couple of weeks of higher prices. 39 00:01:44,440 --> 00:01:45,959 Speaker 3: Do we get a couple of months of higher prices, 40 00:01:45,959 --> 00:01:48,240 Speaker 3: that's definitely going to hurt it. And they're on the margins. 41 00:01:48,240 --> 00:01:50,000 Speaker 3: People are going to travel less, people are worried about 42 00:01:50,000 --> 00:01:52,440 Speaker 3: traveling to begin with, just because there's something going on 43 00:01:52,720 --> 00:01:54,800 Speaker 3: in a big part of the world that's really important. 44 00:01:54,880 --> 00:01:57,040 Speaker 3: So I think you're definitely going to see some pullback 45 00:01:57,080 --> 00:01:59,600 Speaker 3: in activity, and that is in and of itself slowing 46 00:01:59,600 --> 00:02:00,000 Speaker 3: things down. 47 00:02:00,240 --> 00:02:03,240 Speaker 5: Sarah, have you been reluctant to sell stocks any stocks 48 00:02:03,280 --> 00:02:05,200 Speaker 5: in response to this, given the fact that in the 49 00:02:05,240 --> 00:02:08,280 Speaker 5: past geopolitics is something that has always been a short 50 00:02:08,360 --> 00:02:09,480 Speaker 5: term event for markets. 51 00:02:10,600 --> 00:02:12,639 Speaker 3: I think this is yes, I would say, I wouldn't 52 00:02:12,639 --> 00:02:14,600 Speaker 3: say I'm afraid to sell anything, But it's more that 53 00:02:14,760 --> 00:02:16,800 Speaker 3: is this something that is really a permanent change? And 54 00:02:16,800 --> 00:02:18,760 Speaker 3: what's your time horizon if I needed you know, I 55 00:02:18,760 --> 00:02:20,320 Speaker 3: tell people all the time, if you need money in 56 00:02:20,320 --> 00:02:22,320 Speaker 3: the very short term, you should have it liquid. If 57 00:02:22,360 --> 00:02:23,959 Speaker 3: you're in there for the long term, you're going to 58 00:02:23,960 --> 00:02:26,040 Speaker 3: see a lot of volatility. We knew coming into this 59 00:02:26,120 --> 00:02:27,720 Speaker 3: year it was going to be volatile. We didn't know 60 00:02:27,800 --> 00:02:30,200 Speaker 3: why and how volatile it would be so quickly. But 61 00:02:30,320 --> 00:02:32,800 Speaker 3: you expect after a couple of years, especially if such 62 00:02:32,840 --> 00:02:35,640 Speaker 3: strong equity performance, that you'll see more volatility. The question 63 00:02:35,720 --> 00:02:37,280 Speaker 3: is really going to be whether or not this sticks, 64 00:02:37,480 --> 00:02:39,960 Speaker 3: or whether or not this is something that markets continue 65 00:02:39,960 --> 00:02:41,880 Speaker 3: to see through and look through and I think that 66 00:02:41,919 --> 00:02:43,720 Speaker 3: there are other things going on in the background that 67 00:02:43,800 --> 00:02:46,320 Speaker 3: are also potentially problematic. So it's going to be interesting 68 00:02:46,360 --> 00:02:48,880 Speaker 3: to see how that plays out, and not interesting in 69 00:02:48,880 --> 00:02:49,240 Speaker 3: a good way. 70 00:02:49,320 --> 00:02:51,680 Speaker 5: Yeah, we see, of course what's going on with private credit. 71 00:02:51,760 --> 00:02:54,560 Speaker 5: We see cracks in the US economy. I'm just wondering, 72 00:02:54,919 --> 00:02:57,919 Speaker 5: is there an inflection point, something that you're looking for 73 00:02:58,040 --> 00:03:00,200 Speaker 5: that would change your view, that would make you materially 74 00:03:00,280 --> 00:03:02,640 Speaker 5: shift your longer term outlook for twenty twenty six. 75 00:03:03,480 --> 00:03:07,639 Speaker 3: I think if this continues to go on without figuring 76 00:03:07,639 --> 00:03:09,920 Speaker 3: out what the off ramps are, I think that you know, 77 00:03:09,960 --> 00:03:12,399 Speaker 3: it was a good move to say that we'll globally 78 00:03:12,400 --> 00:03:15,040 Speaker 3: the G seven will release some energy because prices spikes 79 00:03:15,040 --> 00:03:17,160 Speaker 3: so high, that's not going to solve the problem. The 80 00:03:17,160 --> 00:03:19,520 Speaker 3: problem needs to be solved by having some resolution and 81 00:03:19,560 --> 00:03:21,160 Speaker 3: having tankers be able to get through the straight up 82 00:03:21,160 --> 00:03:24,560 Speaker 3: home moves. Until we see some path for that, I 83 00:03:24,600 --> 00:03:26,400 Speaker 3: think you're going to start to see people get more 84 00:03:26,400 --> 00:03:29,639 Speaker 3: and more worried about those longer term both earnings estimates 85 00:03:29,639 --> 00:03:32,760 Speaker 3: and just general economic conditions and the market. Right now, 86 00:03:32,840 --> 00:03:35,600 Speaker 3: it's still we're still in early days. If that really extends, 87 00:03:35,640 --> 00:03:37,720 Speaker 3: I think that's really going to be the tipping point. 88 00:03:37,800 --> 00:03:39,640 Speaker 2: Some of that depends on what your starting point is, 89 00:03:39,760 --> 00:03:42,520 Speaker 2: what your assessment of current conditions actually is, and we've 90 00:03:42,520 --> 00:03:45,360 Speaker 2: got very different views on that. Some people think we're okay. 91 00:03:45,560 --> 00:03:47,200 Speaker 2: In fact, the Federal Reserve, the top of the Federal 92 00:03:47,200 --> 00:03:49,720 Speaker 2: Reserve chair and power would it says that things are stable, 93 00:03:49,720 --> 00:03:52,480 Speaker 2: they're okay. Others would say things at front out, what'd 94 00:03:52,480 --> 00:03:53,760 Speaker 2: you come down on that one of the other. 95 00:03:54,360 --> 00:03:56,240 Speaker 3: I think that they are a little bit more fragile 96 00:03:56,240 --> 00:03:58,720 Speaker 3: than I look. I think that you've seen some disruptions 97 00:03:58,720 --> 00:04:00,360 Speaker 3: in the labor market. You certainly hear a lot of 98 00:04:00,400 --> 00:04:02,800 Speaker 3: rumblings in the labor market about what's going to happen 99 00:04:02,840 --> 00:04:05,720 Speaker 3: because of ai different sectors. There's a lot of spending 100 00:04:05,720 --> 00:04:07,600 Speaker 3: that's coming out of that, though, so there are offsets 101 00:04:07,640 --> 00:04:10,720 Speaker 3: to that. I think generally speaking, absent this shock, the 102 00:04:10,720 --> 00:04:14,480 Speaker 3: economy was doing fairly well. There were definite pockets of weakness, 103 00:04:14,480 --> 00:04:16,159 Speaker 3: and you could see that in rotation in sectors in 104 00:04:16,200 --> 00:04:19,360 Speaker 3: the market. You could see major rotation sectors. The headline 105 00:04:19,360 --> 00:04:21,880 Speaker 3: industries are still fairly close to all time his, but 106 00:04:21,920 --> 00:04:25,040 Speaker 3: there's been some major devastation in different sectors along the way. 107 00:04:25,360 --> 00:04:27,880 Speaker 3: This is going to be one of those situations where 108 00:04:28,080 --> 00:04:30,240 Speaker 3: depending on how long it lasts, and this is you know, 109 00:04:30,480 --> 00:04:33,120 Speaker 3: just going to keep saying that we don't know yet 110 00:04:33,160 --> 00:04:35,520 Speaker 3: what's going to happen. But on the margin, nothing good 111 00:04:35,560 --> 00:04:38,200 Speaker 3: comes out of spiking oil prices this high and shutting. 112 00:04:37,960 --> 00:04:40,200 Speaker 2: In oil and for well, let's pick a sector, financials. 113 00:04:40,320 --> 00:04:43,400 Speaker 2: Lisa talked about private credit, Blackstone, then black Rock going 114 00:04:43,440 --> 00:04:45,720 Speaker 2: into the weekend with a bit of trumble there. Then 115 00:04:45,760 --> 00:04:48,160 Speaker 2: we've seen Morkan, Stanley and Goldman Sachs start to want 116 00:04:48,200 --> 00:04:50,880 Speaker 2: to perform as well. This is going through the whole 117 00:04:50,920 --> 00:04:53,240 Speaker 2: sector now, and not just the private market players. What 118 00:04:53,240 --> 00:04:54,200 Speaker 2: do you think that's Siglink. 119 00:04:54,760 --> 00:04:57,159 Speaker 3: I think that's signaling some concern about weakness ahead and 120 00:04:57,200 --> 00:04:59,880 Speaker 3: some concern about what are if you're going to have 121 00:05:00,240 --> 00:05:03,240 Speaker 3: potential issues in both equity and bond markets, but you 122 00:05:03,360 --> 00:05:06,120 Speaker 3: also have this private credit thing. Is this would be 123 00:05:06,120 --> 00:05:09,200 Speaker 3: the top of the story if we weren't going on this, 124 00:05:09,200 --> 00:05:11,120 Speaker 3: this would be the absolute top story. I think if 125 00:05:11,160 --> 00:05:13,039 Speaker 3: we weren't going through what we're going through right now 126 00:05:13,200 --> 00:05:15,800 Speaker 3: with I Ran because this is one of those it 127 00:05:15,960 --> 00:05:17,840 Speaker 3: started out small and now you're seeing a couple of 128 00:05:17,920 --> 00:05:19,279 Speaker 3: other things and then a couple of other things, and 129 00:05:19,320 --> 00:05:20,920 Speaker 3: that's the kind of things that market don't like. It's 130 00:05:20,920 --> 00:05:23,359 Speaker 3: that uncertainty that markets don't like and investors don't like 131 00:05:23,600 --> 00:05:25,760 Speaker 3: when everyone has been sort of trying to reassure everyone 132 00:05:25,760 --> 00:05:27,760 Speaker 3: that it's all okay, and then you start to see 133 00:05:27,760 --> 00:05:29,560 Speaker 3: things that make it look a little less okay. So 134 00:05:29,600 --> 00:05:31,600 Speaker 3: I think that would be a much bigger headline if 135 00:05:31,600 --> 00:05:33,200 Speaker 3: we weren't in the middle of this, and that would 136 00:05:33,240 --> 00:05:35,600 Speaker 3: be something that would be starting to worry markets going forward. 137 00:05:35,640 --> 00:05:38,040 Speaker 5: Yeah, the idea that panic and sort of retail investors 138 00:05:38,080 --> 00:05:39,640 Speaker 5: trying to pull their money and not getting it all 139 00:05:39,680 --> 00:05:42,280 Speaker 5: back is very concerning to people. Can you put these 140 00:05:42,320 --> 00:05:45,040 Speaker 5: two stories together off the oil price shock and credit 141 00:05:45,080 --> 00:05:48,400 Speaker 5: concerns tied to private credit. The idea that some kind 142 00:05:48,400 --> 00:05:52,760 Speaker 5: of increase in oil and decrease in consumer spending power 143 00:05:53,120 --> 00:05:56,880 Speaker 5: could catalyze the fears that people see in credit soon 144 00:05:57,000 --> 00:05:58,760 Speaker 5: arthan maybe otherwise would take place. 145 00:05:59,200 --> 00:06:01,880 Speaker 3: Well, it's interesting because I think those fears were catalyzing 146 00:06:01,960 --> 00:06:04,880 Speaker 3: on the back of expectations of problems in certain sectors, 147 00:06:04,920 --> 00:06:07,760 Speaker 3: like the software sector specifically, But whether or not the 148 00:06:07,800 --> 00:06:10,200 Speaker 3: reality on the ground is that they were as bad 149 00:06:10,240 --> 00:06:12,359 Speaker 3: as it looked I think the problem is more that 150 00:06:12,400 --> 00:06:14,919 Speaker 3: everybody makes a decision in one direction. I don't know 151 00:06:14,960 --> 00:06:16,680 Speaker 3: that the higher oil presses are going to make that worse, 152 00:06:16,680 --> 00:06:19,120 Speaker 3: because I don't think that the credits that people are 153 00:06:19,120 --> 00:06:21,160 Speaker 3: worried about are ones that are so tied to the consumer, 154 00:06:21,320 --> 00:06:22,920 Speaker 3: and I think that would be the link that I'm 155 00:06:22,920 --> 00:06:25,000 Speaker 3: not sure we see yet, but it doesn't mean that 156 00:06:25,040 --> 00:06:26,680 Speaker 3: it isn't there, and certainly people are going to start 157 00:06:26,720 --> 00:06:27,240 Speaker 3: looking for that. 158 00:06:27,880 --> 00:06:31,359 Speaker 2: Stay with us more Bloomberg surveillance coming up after this. 159 00:06:40,520 --> 00:06:43,040 Speaker 2: Janette laws Statigue's right to the following. President Trump can 160 00:06:43,040 --> 00:06:45,600 Speaker 2: pull out of Iran in three weeks and gas prices 161 00:06:45,640 --> 00:06:47,680 Speaker 2: will go back to normal. The risk is if the 162 00:06:47,760 --> 00:06:50,960 Speaker 2: conflict lar Slonka Jeanette joined just now for more Jeanette, 163 00:06:51,080 --> 00:06:53,719 Speaker 2: that statement begs the question if the president, if this 164 00:06:53,800 --> 00:06:56,640 Speaker 2: is still in the President's hands, and if Iran wants 165 00:06:56,680 --> 00:06:58,720 Speaker 2: to make this messy, they can make this messy for 166 00:06:58,800 --> 00:06:59,400 Speaker 2: quite a while. 167 00:07:01,279 --> 00:07:04,000 Speaker 4: Absolutely, I mean this could definitely be their risk here 168 00:07:04,040 --> 00:07:06,320 Speaker 4: for the United States is obviously that this becomes a 169 00:07:06,400 --> 00:07:09,960 Speaker 4: much more protracted war, or it also creates civil war 170 00:07:10,200 --> 00:07:13,440 Speaker 4: and just chaos within Iran and then within the larger 171 00:07:13,520 --> 00:07:15,800 Speaker 4: Middle East. Region. So there are definitely a lot of 172 00:07:16,000 --> 00:07:18,360 Speaker 4: risks to the administration here, but I do think that 173 00:07:18,400 --> 00:07:20,800 Speaker 4: the administration is really focused on this four to five 174 00:07:20,840 --> 00:07:23,400 Speaker 4: week timeline. Do you think that they think that they 175 00:07:23,480 --> 00:07:27,760 Speaker 4: have a plan to accelerate attacks on Iran to try 176 00:07:27,760 --> 00:07:31,120 Speaker 4: to get to their specific goals, which is getting rid 177 00:07:31,200 --> 00:07:33,040 Speaker 4: of the weapons that could be targeted at the United 178 00:07:33,080 --> 00:07:37,480 Speaker 4: States and Israel, getting annihilating the army of I'm sorry, 179 00:07:37,520 --> 00:07:40,320 Speaker 4: the Navy of Iran, and trying to then also prevent 180 00:07:40,360 --> 00:07:42,800 Speaker 4: them from going after ships in the Strait of Hormuz, 181 00:07:43,080 --> 00:07:45,400 Speaker 4: and also maybe potentially trying to get some sort of 182 00:07:45,480 --> 00:07:48,760 Speaker 4: regime change or at least governance changes going forward. So 183 00:07:48,840 --> 00:07:51,240 Speaker 4: do you think there's obviously some risks, but the administration 184 00:07:51,360 --> 00:07:53,400 Speaker 4: probably is looking at this still being a four to 185 00:07:53,480 --> 00:07:57,200 Speaker 4: five week timeline. We'll obviously see if that changes, and 186 00:07:57,240 --> 00:07:59,080 Speaker 4: then what does this look like they have so that 187 00:07:59,120 --> 00:08:02,000 Speaker 4: there is a surge coming that they will increase their 188 00:08:02,040 --> 00:08:04,320 Speaker 4: attacks on Iran. So we'll kind of have to see 189 00:08:04,400 --> 00:08:06,480 Speaker 4: over the next week to see how does this play 190 00:08:06,480 --> 00:08:08,800 Speaker 4: out and then how does that change the timeline going forward? 191 00:08:09,040 --> 00:08:13,080 Speaker 5: Janette, are there any independent assessments of where the administration 192 00:08:13,280 --> 00:08:16,880 Speaker 5: is on achieving main principles of that timeline, in particular 193 00:08:17,320 --> 00:08:21,320 Speaker 5: wiping out weapons that could attack US and allies, as 194 00:08:21,360 --> 00:08:24,280 Speaker 5: well as potentially regime change at a time where we 195 00:08:24,320 --> 00:08:26,920 Speaker 5: now have a new supreme leader that President Trump has 196 00:08:26,920 --> 00:08:28,480 Speaker 5: already said is unacceptable to him. 197 00:08:29,760 --> 00:08:32,040 Speaker 4: Yeah, I mean, I think obviously the regime change is 198 00:08:32,040 --> 00:08:35,040 Speaker 4: going to be the biggest challenge for the United States 199 00:08:35,040 --> 00:08:37,480 Speaker 4: and Israel. And I think you have seen the United 200 00:08:37,480 --> 00:08:41,040 Speaker 4: States a little bit walk back that exact goal for 201 00:08:41,120 --> 00:08:44,320 Speaker 4: this military operation, but you are kind of seeing the 202 00:08:44,360 --> 00:08:46,839 Speaker 4: fact that they are trying to They were focused on 203 00:08:47,040 --> 00:08:51,160 Speaker 4: getting Iran's air defenses along the coast so they could 204 00:08:51,200 --> 00:08:55,760 Speaker 4: then strike deeper into Iranian territory. They to have achieved 205 00:08:55,800 --> 00:08:58,880 Speaker 4: that goal at least particularly so far, but I think 206 00:08:58,920 --> 00:09:00,839 Speaker 4: the big question is there's a lot of unknowns. We 207 00:09:00,920 --> 00:09:04,960 Speaker 4: don't know if Iran has more missile capacity that they 208 00:09:04,960 --> 00:09:08,160 Speaker 4: are still kind of holding onto, that would be important. 209 00:09:08,440 --> 00:09:10,760 Speaker 4: I think that the United States has been highlighting the 210 00:09:10,840 --> 00:09:14,280 Speaker 4: fact that missile attacks and drone attacks coming from Iran 211 00:09:14,320 --> 00:09:16,920 Speaker 4: have been down seventy or eighty percent, and they do 212 00:09:17,000 --> 00:09:19,760 Speaker 4: think that they are losing firepower, but we don't also 213 00:09:19,960 --> 00:09:22,440 Speaker 4: know what actually might still be there, So there's definitely 214 00:09:22,520 --> 00:09:25,120 Speaker 4: still this risk, but I do think the administration sees 215 00:09:25,120 --> 00:09:27,640 Speaker 4: that they have made some progress with getting out certain 216 00:09:27,640 --> 00:09:30,960 Speaker 4: air defenses, using up some of the supplies that Iran 217 00:09:31,080 --> 00:09:33,960 Speaker 4: has that has been using against the US and its allies, 218 00:09:34,600 --> 00:09:36,760 Speaker 4: and also that they're starting to be able to strike 219 00:09:36,960 --> 00:09:39,600 Speaker 4: further and deeper into Iran. So that is a little 220 00:09:39,600 --> 00:09:42,720 Speaker 4: bit of some progress towards these ultimate goals. 221 00:09:43,040 --> 00:09:46,720 Speaker 5: The US is fighting this war alongside Israel. How aligned 222 00:09:46,760 --> 00:09:48,920 Speaker 5: are these two nations that they are ultimate goals? 223 00:09:49,960 --> 00:09:52,000 Speaker 4: Yeah, I mean, I think there's I think the one 224 00:09:52,000 --> 00:09:55,080 Speaker 4: thing that was important about why potentially we may have 225 00:09:55,120 --> 00:09:57,959 Speaker 4: gone into this is that there was an alignment between 226 00:09:58,000 --> 00:10:02,880 Speaker 4: the two countries on the actual ability to go after Iran, 227 00:10:02,920 --> 00:10:04,560 Speaker 4: and this is a they both I think see this 228 00:10:04,720 --> 00:10:08,280 Speaker 4: as an opportunity to really kind of strike at the 229 00:10:08,320 --> 00:10:10,760 Speaker 4: weapons that Iran had that it was potentially using to 230 00:10:10,880 --> 00:10:14,680 Speaker 4: threaten both of those countries, also trying to go after certain, 231 00:10:15,640 --> 00:10:18,200 Speaker 4: you know, other pieces that the Iran has been trying 232 00:10:18,240 --> 00:10:21,400 Speaker 4: to do with its nuclear program. But obviously we may 233 00:10:21,480 --> 00:10:24,960 Speaker 4: see some disagreements longer term. We saw the disagreement over 234 00:10:24,960 --> 00:10:27,840 Speaker 4: the weekend about the fact that Israel struck oil depots 235 00:10:27,840 --> 00:10:30,360 Speaker 4: in Iran and the US was opposed to that. We 236 00:10:30,400 --> 00:10:33,079 Speaker 4: also may see differences of opinion as to whether or 237 00:10:33,120 --> 00:10:35,320 Speaker 4: not we're actually going to get regime change, or would 238 00:10:35,320 --> 00:10:40,040 Speaker 4: the US be more willing to accept some other outcome 239 00:10:40,200 --> 00:10:43,720 Speaker 4: versus Israel. So I think there could be more fractures 240 00:10:43,760 --> 00:10:46,840 Speaker 4: going forward, but we haven't seen a lot yet. But 241 00:10:46,920 --> 00:10:49,800 Speaker 4: obviously the longer this takes, that could obviously become something 242 00:10:49,840 --> 00:10:50,839 Speaker 4: that becomes a bigger risk. 243 00:10:51,200 --> 00:10:52,719 Speaker 2: How much physipal they say, do we have on what's 244 00:10:52,720 --> 00:10:56,120 Speaker 2: happening inside Iran right now? This is a population of 245 00:10:56,200 --> 00:10:59,280 Speaker 2: ninety million people something like that, with very very complex 246 00:10:59,520 --> 00:11:02,160 Speaker 2: power stress. As anyone who's followed that country for a while, 247 00:11:02,360 --> 00:11:05,560 Speaker 2: we'll understand, Janet, those strikes from Israel are really really 248 00:11:05,600 --> 00:11:09,520 Speaker 2: important because that undermines the domestic support for what is happening. 249 00:11:09,760 --> 00:11:12,240 Speaker 2: And that's been an argument of both Israel and the 250 00:11:12,320 --> 00:11:14,080 Speaker 2: US for quite a while to try and get the 251 00:11:14,080 --> 00:11:17,640 Speaker 2: Iranian people on side to ultimately tople the leadership. There's 252 00:11:17,640 --> 00:11:19,559 Speaker 2: a little sign of that right now. How do those 253 00:11:19,600 --> 00:11:20,200 Speaker 2: strikes help? 254 00:11:21,360 --> 00:11:21,520 Speaker 5: Yeah? 255 00:11:21,520 --> 00:11:23,079 Speaker 4: I think that was one of the main concerns that 256 00:11:23,120 --> 00:11:26,920 Speaker 4: the United States had was that those tacks could actually 257 00:11:27,040 --> 00:11:31,040 Speaker 4: make opposition less willing to go after the regime and 258 00:11:31,120 --> 00:11:33,680 Speaker 4: less willing to kind of a rise up in that way, 259 00:11:34,160 --> 00:11:35,880 Speaker 4: And so that was why the administration was a little 260 00:11:35,920 --> 00:11:39,160 Speaker 4: bit more upset with Israel for going after those attacks, 261 00:11:39,640 --> 00:11:41,240 Speaker 4: because they do want to make sure that there are 262 00:11:41,360 --> 00:11:45,160 Speaker 4: conditions where we're not actually helping to rally the Iranian 263 00:11:45,200 --> 00:11:48,439 Speaker 4: people behind the leadership and feeling like they in particular 264 00:11:48,559 --> 00:11:51,199 Speaker 4: are being attacked rather than the regime and the security 265 00:11:51,240 --> 00:11:54,280 Speaker 4: forces that hold up that regime. So that is definitely 266 00:11:54,320 --> 00:11:56,760 Speaker 4: a risk. Obviously. The other issues that we do have 267 00:11:56,800 --> 00:11:59,600 Speaker 4: these internet blackouts, which doesn't mean we always have a 268 00:11:59,600 --> 00:12:03,040 Speaker 4: full understanding of what is actually happening within Iran, and 269 00:12:03,080 --> 00:12:05,120 Speaker 4: that makes it a little bit more difficult to know 270 00:12:05,600 --> 00:12:08,200 Speaker 4: what could be the ultimate outcome. Obviously, one of the 271 00:12:08,200 --> 00:12:12,040 Speaker 4: big issues here is that we don't necessarily have a 272 00:12:12,080 --> 00:12:15,560 Speaker 4: good understanding of could there be an opposition leader who 273 00:12:15,559 --> 00:12:19,360 Speaker 4: could actually rise up and take over in Iran like 274 00:12:19,440 --> 00:12:21,280 Speaker 4: what you saw in nineteen seventy nine. The fact that 275 00:12:21,559 --> 00:12:24,480 Speaker 4: the Iotola was a particular figure that I think is 276 00:12:24,480 --> 00:12:26,480 Speaker 4: something that is going to be a risk going forward, 277 00:12:26,600 --> 00:12:29,040 Speaker 4: and to see if that ultimate goal can be achieved. 278 00:12:29,520 --> 00:12:33,040 Speaker 2: Stay with us more Bloomberg surveillance coming up. After this 279 00:12:42,400 --> 00:12:45,360 Speaker 2: surging oil prices sending bond you attire across the globe, 280 00:12:45,520 --> 00:12:48,280 Speaker 2: investors raising bet central banks will keep ranks on hold. 281 00:12:48,440 --> 00:12:50,960 Speaker 2: The former Kansas City FED president as the George, writing, 282 00:12:51,200 --> 00:12:53,920 Speaker 2: with oil prices surging over one hundred dollars a barrel, 283 00:12:53,960 --> 00:12:56,560 Speaker 2: inflation is sure to move higher. The Fed will want 284 00:12:56,600 --> 00:12:59,320 Speaker 2: to look through this price pressure, but it will likely 285 00:12:59,360 --> 00:13:03,800 Speaker 2: stay there and for entering radcouts or entertaining redcouts. The 286 00:13:03,840 --> 00:13:06,400 Speaker 2: former Fed president joins us now for more and so 287 00:13:06,520 --> 00:13:08,600 Speaker 2: welcome to the program. Let's just get to that statement 288 00:13:08,640 --> 00:13:10,600 Speaker 2: and your experience too. I always want to lean on 289 00:13:10,640 --> 00:13:13,800 Speaker 2: that you lift the twenty two energy shock. Can you 290 00:13:13,840 --> 00:13:17,160 Speaker 2: frame for our audience the similarities the differences between this 291 00:13:17,320 --> 00:13:19,679 Speaker 2: moment and that one. 292 00:13:20,200 --> 00:13:21,400 Speaker 1: Well, good morning, Jonathan. 293 00:13:21,480 --> 00:13:21,680 Speaker 2: Yeah. 294 00:13:21,760 --> 00:13:25,160 Speaker 1: I think I think the uncertainty that we've talked about 295 00:13:25,200 --> 00:13:28,720 Speaker 1: for some time is one of the characteristics here that 296 00:13:28,760 --> 00:13:31,600 Speaker 1: we have to remember. We have been relying heavily on 297 00:13:31,640 --> 00:13:37,480 Speaker 1: a consumer that has faced significant price shock coming out 298 00:13:37,480 --> 00:13:41,079 Speaker 1: of the pandemic. This is a consumer that has felt 299 00:13:41,240 --> 00:13:44,199 Speaker 1: the impact of the tariffs, and they also have felt 300 00:13:44,200 --> 00:13:49,679 Speaker 1: the uncertainty associated with a job market that has shifted significantly, 301 00:13:49,880 --> 00:13:52,560 Speaker 1: and so when we rely on the consumer, as we 302 00:13:52,600 --> 00:13:56,600 Speaker 1: do here in the US, that becomes a real focal point. 303 00:13:56,679 --> 00:13:59,880 Speaker 1: I think for trying to understand now we have added 304 00:14:00,440 --> 00:14:04,160 Speaker 1: a new shock, this gasoline price at the pump. We 305 00:14:04,280 --> 00:14:07,520 Speaker 1: understand that diesel prices will be affected, which of course 306 00:14:07,600 --> 00:14:10,600 Speaker 1: will feed into the cost of transportation and other things. 307 00:14:10,640 --> 00:14:13,720 Speaker 1: And I think it creates a real point not just 308 00:14:13,800 --> 00:14:17,320 Speaker 1: of uncertainty, but I think heightened risk around consumer spending 309 00:14:17,360 --> 00:14:18,640 Speaker 1: and growth as we look ahead. 310 00:14:18,760 --> 00:14:21,120 Speaker 2: When you were at the Federalserve through the twenty two shock, 311 00:14:21,520 --> 00:14:25,240 Speaker 2: household balance sheets arguably much stronger and the labor market 312 00:14:25,480 --> 00:14:28,600 Speaker 2: was much tighter. Do you think differently about how this 313 00:14:28,680 --> 00:14:30,720 Speaker 2: price shock or the energy market will work its way 314 00:14:30,760 --> 00:14:31,920 Speaker 2: through the economy. 315 00:14:33,240 --> 00:14:35,720 Speaker 1: Yeah, I think you hear a lot about the K 316 00:14:35,960 --> 00:14:38,560 Speaker 1: shaped economy, and I think that will come into the 317 00:14:38,600 --> 00:14:41,160 Speaker 1: four now. We have really been relying on a group 318 00:14:41,200 --> 00:14:44,520 Speaker 1: of consumers that can power through this. But you can 319 00:14:44,560 --> 00:14:49,720 Speaker 1: only stress weaker household balance sheets that have again had 320 00:14:49,760 --> 00:14:52,600 Speaker 1: the benefit of having jobs. That has been really I 321 00:14:52,600 --> 00:14:55,560 Speaker 1: think one of the tailwinds here. But there is a 322 00:14:55,640 --> 00:14:58,120 Speaker 1: breaking point, I think, and so I think the FED 323 00:14:58,240 --> 00:15:02,360 Speaker 1: will have to be particularly focused on thinking about how 324 00:15:02,400 --> 00:15:05,880 Speaker 1: that consumer is going to be positioned today to be 325 00:15:06,000 --> 00:15:10,720 Speaker 1: able to look through this kind of additional price pressure after. 326 00:15:10,800 --> 00:15:12,880 Speaker 5: They could go one or two ways. On one hand, 327 00:15:12,920 --> 00:15:15,160 Speaker 5: you can make an argument for easing policy and to 328 00:15:15,200 --> 00:15:19,040 Speaker 5: try to give lower income consumers a better scenario, a 329 00:15:19,080 --> 00:15:22,440 Speaker 5: better backdrop to meet this price shock. On the other hand, 330 00:15:22,480 --> 00:15:24,640 Speaker 5: you could say the FED has a role to play 331 00:15:24,960 --> 00:15:28,080 Speaker 5: to combat inflation. Which side of the equation do you 332 00:15:28,120 --> 00:15:28,480 Speaker 5: fit on? 333 00:15:29,720 --> 00:15:30,000 Speaker 2: Well? 334 00:15:30,120 --> 00:15:33,040 Speaker 1: The FED has been focusing on the labor market and 335 00:15:33,080 --> 00:15:38,720 Speaker 1: on weakness at I think the risk of inflation even 336 00:15:38,760 --> 00:15:42,880 Speaker 1: before this oil price shock. Now, I think the FED 337 00:15:42,920 --> 00:15:46,040 Speaker 1: and you hear them increasingly talking about the risk of inflation. 338 00:15:46,800 --> 00:15:49,600 Speaker 1: They have allowed it to extend out for a period 339 00:15:49,640 --> 00:15:52,600 Speaker 1: of time. That now puts them in a very very 340 00:15:52,640 --> 00:15:56,400 Speaker 1: difficult position, I think, and understanding how they're going to 341 00:15:56,440 --> 00:16:00,280 Speaker 1: weigh their policy risk, whether they continue to think they 342 00:16:00,320 --> 00:16:04,680 Speaker 1: are as well balanced coming into this March meeting, I 343 00:16:04,680 --> 00:16:06,880 Speaker 1: think is going to be something to listen for here, 344 00:16:06,960 --> 00:16:11,200 Speaker 1: because you are going to have headline inflation for sure, 345 00:16:11,320 --> 00:16:14,040 Speaker 1: We'll be getting more numbers than this week to see that, 346 00:16:14,880 --> 00:16:19,760 Speaker 1: and I think the calculus around keeping those inflation expectations 347 00:16:19,760 --> 00:16:23,080 Speaker 1: in the long run anchored is going to be a 348 00:16:23,120 --> 00:16:24,360 Speaker 1: point worth talking. 349 00:16:24,040 --> 00:16:27,200 Speaker 5: About rates Traders are pricing in rate hikes over at 350 00:16:27,200 --> 00:16:29,680 Speaker 5: the ECB as well as the Bank of England. Do 351 00:16:29,720 --> 00:16:32,440 Speaker 5: you think that as this progresses, if it does continue 352 00:16:32,480 --> 00:16:34,920 Speaker 5: for a longer period of time, that that's going to 353 00:16:34,920 --> 00:16:39,000 Speaker 5: be a scenario that's reflected in how the Federal Reserve 354 00:16:39,120 --> 00:16:39,760 Speaker 5: is being priced. 355 00:16:41,200 --> 00:16:41,520 Speaker 4: Well. 356 00:16:41,680 --> 00:16:44,520 Speaker 1: I think obviously a little bit different for the US 357 00:16:44,640 --> 00:16:47,840 Speaker 1: to think about that in the FED as it contemplates 358 00:16:47,440 --> 00:16:51,880 Speaker 1: its updated dot plots, But I do think it stays 359 00:16:51,920 --> 00:16:56,520 Speaker 1: their hand on being able to suggest that they are 360 00:16:56,720 --> 00:17:00,680 Speaker 1: looking to rate cuts, but maybe in a pause mode. 361 00:17:00,720 --> 00:17:04,320 Speaker 1: I think this kind of environment will really remind them 362 00:17:04,480 --> 00:17:08,200 Speaker 1: that inflation target has to be credible and they have 363 00:17:08,280 --> 00:17:11,640 Speaker 1: to keep focused on that, even if their tools right 364 00:17:11,680 --> 00:17:14,960 Speaker 1: now are in conflict. They are looking at a job 365 00:17:15,040 --> 00:17:19,240 Speaker 1: market that may be stable but has shown signs of weakness, 366 00:17:19,840 --> 00:17:22,879 Speaker 1: while they have been looking at inflation that continues not 367 00:17:22,920 --> 00:17:25,520 Speaker 1: only to be persistent, but as we've been talking about, 368 00:17:25,960 --> 00:17:28,320 Speaker 1: is now going to show some upward pressure. 369 00:17:28,600 --> 00:17:30,400 Speaker 2: Would you describe this lave market as stable? 370 00:17:32,480 --> 00:17:35,440 Speaker 1: You know, I consider it stable in the sense when 371 00:17:35,440 --> 00:17:38,280 Speaker 1: you step back and look at the unemployment rate, which 372 00:17:38,320 --> 00:17:40,679 Speaker 1: is our best gauge. I think of how that labor 373 00:17:40,720 --> 00:17:45,560 Speaker 1: market looks, it does mask what is underneath that surface 374 00:17:45,920 --> 00:17:48,919 Speaker 1: of a lot of moving parts. I think we're beginning 375 00:17:48,960 --> 00:17:51,840 Speaker 1: to see the real impact of some of the immigration 376 00:17:52,000 --> 00:17:56,800 Speaker 1: policy hits here. We're beginning to see the uncertainty, I 377 00:17:56,840 --> 00:17:59,920 Speaker 1: would argue, play out where businesses are happy to hire 378 00:18:00,119 --> 00:18:03,200 Speaker 1: for positions they feel confident about, but they're not going 379 00:18:03,240 --> 00:18:07,960 Speaker 1: to move hard and fast relative to the growth levels 380 00:18:07,960 --> 00:18:11,119 Speaker 1: that we've seen. So I think it's a tentative labor 381 00:18:11,200 --> 00:18:14,000 Speaker 1: market in my view, even though we continue to enjoy 382 00:18:14,160 --> 00:18:15,920 Speaker 1: relatively low and employment br. 383 00:18:16,680 --> 00:18:20,240 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 384 00:18:20,240 --> 00:18:23,800 Speaker 2: in markets, economics, angiopolitics. You can watch the show live 385 00:18:23,880 --> 00:18:26,880 Speaker 2: on Bloomberg TV weekday mornings from six am to nine 386 00:18:26,960 --> 00:18:30,679 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 387 00:18:30,720 --> 00:18:33,320 Speaker 2: anywhere else you listen, and as always on the Bloomberg 388 00:18:33,400 --> 00:18:35,280 Speaker 2: Terminal and the Bloomberg Business app.