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Speaker 1: Good morning. It's Thursday, the nineteenth of October here in London.

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Speaker 1: This is the Bloomberg Daybreak podcast. I'm Caroline Hepka. Coming

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Speaker 1: up today, Rishi Sunak is set to visit Israel as

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Speaker 1: President Biden's trip fails to calm fears of a wider war.

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Speaker 1: Elon Musk dials back expectations for Tesla and the cyber truck,

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Speaker 1: plus a stream of cash. Netflix adds millions more customers

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Speaker 1: and increases prices in the US and UK. Let's start

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Speaker 1: with a round up of our top stories. The Prime

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Speaker 1: Minister Isshisunak is about to begin a two day trip

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Speaker 1: to Israel, a day after President Biden's visit to the

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Speaker 1: country failed to cool vising tensions in the region. It's

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Speaker 1: understood that Sunak will hold meetings with Israeli Prime Minister

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Speaker 1: Benjamin net and Yahoo today before heading to a number

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Speaker 1: of other unnamed regional capitals. The trip comes as concerns

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Speaker 1: grow over the deepening humanitarian crisis in god Biden says

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Speaker 1: that he has now secured agreements from both Egypt and

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Speaker 1: Israel to allow twenty trucks of aid into the Palestinian territory.

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Speaker 2: Today, I asked the Israeli cabinet I met with for

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Speaker 2: some time this morning to agree to the delivery of

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Speaker 2: life saving humanitarian assistants to civilians in Gaza, based on

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Speaker 2: the understanding that there will be inspections that the age

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Speaker 2: should go to civilians, not to amass an agree humanitarian

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Speaker 2: assistance can begin to move from Egypt to Gaza.

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Speaker 1: Amid growing signs that the conflict may be spinning out

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Speaker 1: of control. President Biden also made plain that the US

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Speaker 1: will protect its ally and promise a new package of

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Speaker 1: quote unprecedented support. The decision to offer increased military support

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Speaker 1: is a huge boost for the Jewish state, but will

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Speaker 1: do little to bring Arab nations on side in a

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Speaker 1: conflict that has already cost thousands of Israeli and Palestinian lives.

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Speaker 1: There are still also contradicts three accounts over the cause

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Speaker 1: of a blast that a Girl's a hospital that was

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Speaker 1: reported to have killed more than five hundred people. President

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Speaker 1: Biden says that he has been shown evidence by the

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Speaker 1: Pentagon that Israel was not behind the explosion, but Arab

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Speaker 1: leaders have disputed that view. Mohammed al Naka is a

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Speaker 1: doctor at the girls a hospital where the blast occurred.

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Speaker 3: There was no advance warning before the targeting of the hospital.

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Speaker 3: There were more than three thousand people here for whom

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Speaker 3: this place was a safe haven. A shell struck the hospital.

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Speaker 3: We don't know what it was, but we saw its

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Speaker 3: devastating impact, with children being torn to pieces.

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Speaker 1: Mohammad al Naka, doctor at the Al Ali Hospital, speaking

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Speaker 1: there through a translator. The explosion sparked protests throughout the

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Speaker 1: region and the cancelation of the planned summit between President

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Speaker 1: Biden and regional leaders. Biden will now speak by phone

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Speaker 1: with the head of the Palestinian Authority. Those conversations will

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Speaker 1: be crucial as the US presidence seeks to ease the

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Speaker 1: flow of refugees and supplies across Gaza's border a head

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Speaker 1: of an expected ground assault by Israel. Now let's send

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Speaker 1: our attention to other news. This morning, Elon Musk is

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Speaker 1: dialing back expectations for Tesla has years of rapid expansion

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Speaker 1: collide with rising interest rates and a more cost conscious consumer.

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Speaker 1: The CEO of the world's biggest electric vehicle maker says

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Speaker 1: that their much hyped cyber truck will begin being delivered

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Speaker 1: to consumers next month. That's two years behind schedule, and we.

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Speaker 4: Dug our ound graveless or cyberfact in.

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Speaker 5: Generally, if by every figs are great, better than themselves

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Speaker 5: and special pridcs they come along once in a long

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Speaker 5: while are just incredibly difficult to bring to market, to

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Speaker 5: reach by in to be price brus.

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Speaker 1: Masks also warned that the cyber truck won't be a

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Speaker 1: significant contributor to cash flow for at least eighteen months. Meanwhile,

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Speaker 1: Tesla announced weaker than expect third quarter earnings, with revenue

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Speaker 1: reaching twenty three point four billion dollars. The results come

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Speaker 1: after the automaker continued to slash prices this year, with

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Speaker 1: must saying that he's willing to sacrifice margins for sales volume.

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Speaker 1: Netflix is raising prices for some customers in the US,

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Speaker 1: UK and France after posting its best quarter for subscriber

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Speaker 1: growth in years. The world's biggest streaming service, blew Away

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Speaker 1: forecasts adding close to eight point eight million new customers

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Speaker 1: in the third quarter. The Netflix c FO Spenser Newman,

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Speaker 1: says that the successful rollout of paid sharing, which lets

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Speaker 1: customers purchase additional access for friends or family, has allowed

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Speaker 1: them to raise prices.

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Speaker 6: We'll keep getting better at monetizing that big and growing

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Speaker 6: reach and engagement. So we believe we've got a long

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Speaker 6: runway for growth in both kind of more membership and

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Speaker 6: higher arm over time, in a more balanced way than

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Speaker 6: what you saw this year, which was again a pretty

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Speaker 6: unusual year.

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Speaker 1: Newman's comments came as Netflix reported third quarter revenue and

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Speaker 1: profit that exceeded expectations. Earnings rose to three point seven

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Speaker 1: three dollars per share, whilst revenue grew to eight point

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Speaker 1: five four billion dollars. Shares of Netflix also rose as

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Speaker 1: much as thirteen percent in extended trading after the results

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Speaker 1: were announced. A forensic accountant says that the missing nine

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Speaker 1: billion dollars from ftx's books were used for Alimaeder's investments,

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Speaker 1: property purchases, and political donations. Accounting Professor Peter Eastern was

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Speaker 1: testifying at the trial of the former FTX CEO, Sam

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Speaker 1: bankmanfreed the thirty one year old facis decades in prison

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Speaker 1: on a variety of fraud and conspiracy charges at the

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Speaker 1: New York trial. The outlook for the US economy is

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Speaker 1: broadly stable, according to the FED Survey of Regional Businesses.

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Speaker 1: Companies say that they have struggled to pass along cost

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Speaker 1: pressures and see prices rising at a slower rate in

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Speaker 1: the future, but the Federal Reserve Governor Christopher Waller says

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Speaker 1: that it's still too early to call time on the

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Speaker 1: central Bank's campaign against inflation.

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Speaker 4: I'll be looking carefully at the data to see whether

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Speaker 4: the real side of the economy begins to cool off

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Speaker 4: or whether prices the nominal side of the economy fed on.

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Speaker 4: As of today, it is too soon to tell. Consequently,

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Speaker 4: I believe we can wait, watch and see how the

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Speaker 4: economy evolves before making definitive moves on the path of

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Speaker 4: the policy rate.

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Speaker 1: So Waller has been one of the more hawkish rate

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Speaker 1: setters as the Central Bank tries to balance taming price

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Speaker 1: rises with safeguarding US growth. He told an audience that

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Speaker 1: the Middle East conflict shouldn't affect that struggle unless it

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Speaker 1: grows into a much wider crisis. And just lastly, JP

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Speaker 1: Morgan says that the time honored strategy of investing sixty

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Speaker 1: percent inequities and forty percent in treasuries is about to

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Speaker 1: make a comeback. The bank's strategists argue that the sixty

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Speaker 1: to forty portfolio will outperform cash and inflation by more

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Speaker 1: than four percentage points over the next decade. The traditional

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Speaker 1: asset mix has fallen out of favor recently, as last

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Speaker 1: years hiking cycle led to its worst performance since the

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Speaker 1: financial crisis. Now, as the Israel and Hamas wage war,

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Speaker 1: worries are building that the conflict will escalate to engulf

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Speaker 1: the wider Middle East, and in particular with Iran backed

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Speaker 1: Hezbala on Israel's border with Lebanon. Iranian officials celebrated the

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Speaker 1: seventh of October Hama's attack, and they have worn that

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Speaker 1: multiple fronts could be opened against Israel if it continues

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Speaker 1: its air strikes on Gaza and the blockade of the territory. This,

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Speaker 1: of course, after President Biden has spent as something under

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Speaker 1: eight hours in Israel yesterday. Joining me now to discuss

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Speaker 1: is Bloomberg's Breaking News editor in the Middle East, Patrick Sykes. Patrick,

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Speaker 1: good morning, and thank you for being with me. What

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Speaker 1: are the risks now? Do you think that a ground

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Speaker 1: offensive widely expected by as well in Gaza tips into

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Speaker 1: open warfare with Iran?

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Speaker 7: Morning? Yes, I think that is the worst case scenario

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Speaker 7: that people are drawing up right now. You had that

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Speaker 7: quite shocking line that you mentioned from Iran just the

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Speaker 7: other day that a multiple front war is approaching the

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Speaker 7: inevitable stage. They've also worn separately that time for a

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Speaker 7: political solution is running out. I think in the immediate

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Speaker 7: term the risk is more the proxy war side of

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Speaker 7: things rather than open conflict with Iran. So that's already

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Speaker 7: happening on the ground in Gaza with groups like Ahmas

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Speaker 7: and Islamic Jahad, both supported by Iran. But Hezbola is

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Speaker 7: the big unknown. You know, are they going to continue

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Speaker 7: to limit themselves to the recent pattern of relatively limited

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Speaker 7: strikes or are they going to enter the war in

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Speaker 7: earnest We had the Foreign Minister touring the region last week,

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Speaker 7: meeting the leaders of Hezbola and Hamas, so it's clear

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Speaker 7: that there's an element of coordination and consultation going on

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Speaker 7: between the proxys and Tehran. What's less clear is sort

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Speaker 7: of the command the lines of command right so, Iran

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Speaker 7: denies that it was involved in the attack. It says

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Speaker 7: that these resistance groups as they call them, act independently,

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Speaker 7: but at the same time, you know, it's meeting the

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Speaker 7: leaders of these groups on their home turf. So I

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Speaker 7: think for the moment we're facing a proxy war. But

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Speaker 7: the worst case scenario is definitely open warfare.

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Speaker 1: Yeah, indeed, So what is the view Patrick on President

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Speaker 1: Biden's visit to Israel in brain of Benjamin Ett and

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Speaker 1: Yahoo the Israeli president also Isaac Hertzog. It was an

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Speaker 1: incredibly difficult diplomatic mission. How successful was it? How do

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Speaker 1: we assess that?

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Speaker 7: I think for the US side, some very limited successes

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Speaker 7: they can claim. I mean, it was an important display

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Speaker 7: of support for a very important ally. It seems there

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Speaker 7: has been a little movement on aid, though not enough

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Speaker 7: to actually open the Rafa crossing between Gaza and Egypt.

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Speaker 7: But more importantly and more strategically, it was clearly hasn't

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Speaker 7: won over Arab leaders in the region who are facing

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Speaker 7: a lot of pressure from their populations, among whom there's

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Speaker 7: a lot of sympathy for the Palestinians to oppose the

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Speaker 7: latest Israel operations in Gaza and the potential ground incursion

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Speaker 7: means meanwhile, called it provocative, and that's a word they've

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Speaker 7: used a few times now. So they say the US

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Speaker 7: is calling for restraint from everyone, but at the same time,

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Speaker 7: you know, sending arms into the region at the same

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Speaker 7: time the Commander in chief touring the region. The Uranians

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Speaker 7: say that this is not helping to de escalate the situation.

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Speaker 1: Yeah, okay, So then in terms of the oil embargo,

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Speaker 1: also that Iran has a call for against Israel by

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Speaker 1: Muslim countries. How significant a threat or an escalation.

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Speaker 7: Is that significant? But at this stage a rather empty threat.

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Speaker 7: So Israel is a pretty small important and needless to say,

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Speaker 7: Iran is not supplying it due to their long standing enmity.

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Speaker 7: What would make it more significant is if we see

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Speaker 7: maybe Arab countries starting to call for the same and

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Speaker 7: so far they've shown radio silence basically on this call

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Speaker 7: from Iran yesterday, despite them all being in the same

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Speaker 7: room yesterday. And two, if the threat expands to not

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Speaker 7: just earn embargo on Israel, but on the supporters of Israel.

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Speaker 7: That's what happened in the nineteen seventy three embargo and

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Speaker 7: that's what made it such a global or price shock.

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Speaker 7: At the moment, this is more limited, and it doesn't

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Speaker 7: appear they have the wide original diplomatic backing to make

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Speaker 7: it a shock to the market.

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Speaker 1: The Biden administration has also issued new sanctions against Iranian

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Speaker 1: weapons makers Russian entities, So tightening up of sanctions, what

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Speaker 1: impact could that have.

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Speaker 7: I think the timing of that was important, less of

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Speaker 7: what's going on in Gaza and more this came just

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Speaker 7: after the expiration of UN Security Council sanctions on Iran's

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Speaker 7: missile and drone program. They'd been agreed as part of

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Speaker 7: the twenty fifteen nuclear agreement Russia and Iran, I mean

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Speaker 7: particularly run increasingly Russia or so, you know, they've had

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Speaker 7: the time now to get used to these sanctions. Unfortunately.

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Speaker 7: Maybe more important, we also this week had sanctions from

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Speaker 7: the US on some individuals that they said both HAMAS

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Speaker 7: members or har Mass supporters, and some of them were

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Speaker 7: in Turkey, for example, where I'm based, and that just

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Speaker 7: underlined I think the difficulty of trying to rally support

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Speaker 7: by the US or opposition to what HAMAS did on

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Speaker 7: October the seventh among allies take up Turkey being a

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Speaker 7: NATO ally, while also having to deal with the fact

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Speaker 7: that countries in the region, like Turkey, like some of

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Speaker 7: those Arab states, have had accommodating policies towards HAMAS and

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Speaker 7: to an extens support some of their activities, though needless

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Speaker 7: to say, not the kind of attacks we saw on

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Speaker 7: October the seventh itself.

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Speaker 1: Yeah, Patrick, thank you so much for being with me

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Speaker 1: this morning. Bloomberg's Breaking News editor in the Middle East,

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Speaker 1: Patrick Sykes, just bringing us the latest when it comes

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Speaker 1: to the Israel Hamas war. What is happening. We know

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Speaker 1: also that President Joe Biden will be making an Oval

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Speaker 1: Office address on this to the US people on Thursday.

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Speaker 1: Rishisinas in Israel. Also the Foreign Secretary James Cleverly set

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Speaker 1: to begin a tour of the Middle East too. Richinac

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Speaker 1: expected to spend two days in Israel, and James Cleverly

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Speaker 1: beginning in Egypt also today a tour of the Middle East.

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Speaker 1: So those are continuing developments and diplomatic efforts that we

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Speaker 1: will follow for you and track for you throughout the

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Speaker 1: day here on Bloomberg Radio. Now, let's talk about earnings Tesla,

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Speaker 1: which announts weaker than expected third quarter earnings. Our offits

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Speaker 1: excluding some items fell to six six cents per share,

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Speaker 1: so that was a lot less than Wall Street had

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Speaker 1: expected or estimated at seventy four cents per share. Shares

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Speaker 1: in Tesla also fell after market. They've been cutting the

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Speaker 1: price of their vehicles that has hit margin. So joining

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Speaker 1: me now to discuss this Boomberg's Danny Lee. Good morning, Danny,

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Speaker 1: Thank you so much for your time. It was a

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Speaker 1: difficult quarter for Tesla. We had a little snippet there

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Speaker 1: of elon mask but sort of prepared to make the

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Speaker 1: sacrifice of margins in order to have the numbers and

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Speaker 1: the sales. The sales are quite strong though, of Tesla vehicles.

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Speaker 5: Yeah, good morning, Caroline. So let's just talk about the

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Speaker 5: earnings care because it sums up the post market investor reaction.

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Speaker 5: Tesla's shares were down as much as eight point eight

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Speaker 5: percent in extended trading, and this was after Elil Musks

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Speaker 5: started talking on the earnings call. Shares were rising. They

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Speaker 5: actually rose around one point five percent high. So then

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Speaker 5: they pulled back sharply, and it's all that gloom. Yes,

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Speaker 5: there is the bleak out, well not bleak outlook, but

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Speaker 5: more the miss on the third quarter profits and sales.

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Speaker 5: But then, as Elil must kept talking through this earnings cores,

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Speaker 5: it's more more bad news, you know, one after the other,

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Speaker 5: stuff like the cyber truck. The cyber truck which has

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Speaker 5: been long delayed. First delivery now is going to be

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Speaker 5: at the end of November. But you know, it's a

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Speaker 5: challenging product for Tesla to produce, and so as a result,

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Speaker 5: it's not going to be a cash generative earnings driver

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Speaker 5: into at least twenty twenty five. So as Tesla grapples

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Speaker 5: with not having the most extensive lineup of evs, they

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Speaker 5: are very much the EV sales leader at the moment,

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Speaker 5: and when you look at their sales, you know they are.

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Speaker 5: You know, they've been growing a quarter and quarter, although

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Speaker 5: this quarter we knew in the third quarter that sales

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Speaker 5: were are going to be more challenged because they were

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Speaker 5: upgrading its production lines to prepare for new products. So

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Speaker 5: that is why then the earnings was weaker than expected.

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Speaker 5: Wall Street was pricing this in, but it's still worse

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Speaker 5: than expected. And then with more bad news, whether it

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Speaker 5: be the cyber truck to this new factory in Mexico

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Speaker 5: which will be taking a lot longer to get online.

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Speaker 5: You know, you see their reaction there in the shares.

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Speaker 1: Yeah. But then having said that, Tesla schepos has done

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Speaker 1: I thought really well, and it's still much bigger than

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Speaker 1: the valuation of a lot of other global car makers. So,

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Speaker 1: you know, are we right to be so pessimistic or

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Speaker 1: for investors to have reacted so pessimistically. What was the outlook,

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Speaker 1: you know, looking forwards?

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Speaker 5: Yeah, so Tesla still has a huge potential when it

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Speaker 5: comes to its delivery forecast. They're still sticking to their

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Speaker 5: forecast of delivering one point eight million electric vehicles this year.

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Speaker 5: So where they stand currently, they should in theory then

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Speaker 5: deliver half a million evs and that would be a

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Speaker 5: record and that's all help its earnings in the fourth quarter.

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Speaker 5: The question is with the comments around the interest rates

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Speaker 5: and how tough it is for someone like Tesla to

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Speaker 5: sell in the current environment the economic backdrop, does it

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Speaker 5: need to start cutting prices again because it has been

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Speaker 5: playing around with its prices a lot now over the past.

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Speaker 5: Eu orsodes has been part of the playbook too, as

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Speaker 5: elil Musk wanted to do is to defend its market share,

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Speaker 5: boost sales and he doesn't mind sacrificing margins as a result.

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Speaker 5: So the outlook is promising when it looks like it

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Speaker 5: will sell a record number in the fourth quarter, but

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Speaker 5: how it achieves that is another big question.

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