1 00:00:05,120 --> 00:00:07,119 Speaker 1: This is the Bloomberg Surveillance Podcast. 2 00:00:07,160 --> 00:00:11,080 Speaker 2: I'm Tom Keane, along with Jonathan Farrow and Lisa Abramowitz. 3 00:00:11,280 --> 00:00:15,760 Speaker 2: Join us each day for insight from the best and economics, geopolitics, 4 00:00:15,760 --> 00:00:20,720 Speaker 2: finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 5 00:00:20,960 --> 00:00:25,400 Speaker 2: Spotify and anywhere you get your podcasts, and always on 6 00:00:25,520 --> 00:00:29,880 Speaker 2: Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app. 7 00:00:30,160 --> 00:00:33,519 Speaker 2: Right now, our conversation of the day. Synthesizing all this together. 8 00:00:33,960 --> 00:00:38,159 Speaker 2: Torson Stock is chief economist at Apollo Global Management. Torson 9 00:00:38,159 --> 00:00:41,040 Speaker 2: I'm going to pull in here a whole bunch of threads. 10 00:00:41,440 --> 00:00:45,920 Speaker 2: The Bloomberg Financial Conditions Index is showing massive accommodation, and 11 00:00:46,000 --> 00:00:48,479 Speaker 2: yet I look at the old liboard, the news, Sofa, 12 00:00:48,680 --> 00:00:53,080 Speaker 2: sofr and I'm seeing huge restriction within the short term 13 00:00:53,200 --> 00:00:56,400 Speaker 2: paper market tensions on Wall Street and the ill liquidity 14 00:00:56,480 --> 00:01:00,720 Speaker 2: on Wall Street. How urgent is it for the FED 15 00:01:01,120 --> 00:01:04,320 Speaker 2: to make some direction on a March cut or dare 16 00:01:04,360 --> 00:01:06,920 Speaker 2: I even say a January first cut? 17 00:01:07,120 --> 00:01:09,640 Speaker 3: Well, it has a number of different dimensions. First, there 18 00:01:09,680 --> 00:01:12,160 Speaker 3: is a dimension on the real economy. It's clear that 19 00:01:12,160 --> 00:01:15,800 Speaker 3: the FED pivot has eased financial conditions dramatically, and this 20 00:01:15,880 --> 00:01:17,520 Speaker 3: begins to run the risk that we might see a 21 00:01:17,560 --> 00:01:20,160 Speaker 3: repeat of what happened at the citycon Valley Bank. Remember 22 00:01:20,240 --> 00:01:22,639 Speaker 3: Chris Waller just said a few weeks ago the easing 23 00:01:22,640 --> 00:01:25,320 Speaker 3: of financial conditions in Q two that boost the GDP 24 00:01:25,440 --> 00:01:28,039 Speaker 3: growth to five percent in Q three. Could we see 25 00:01:28,080 --> 00:01:30,520 Speaker 3: the same now where the easing of financial conditions after 26 00:01:30,560 --> 00:01:33,640 Speaker 3: the fat pivot might actually be boosting the housing market, 27 00:01:33,680 --> 00:01:37,039 Speaker 3: the label market, services inflation, goods inflation. We are not 28 00:01:37,240 --> 00:01:39,440 Speaker 3: out of the woods when it comes to battling inflation. 29 00:01:39,520 --> 00:01:42,520 Speaker 3: So on the real economy, absolutely, the easing of financial 30 00:01:42,560 --> 00:01:46,039 Speaker 3: conditions is very supportive. There are some issues when it 31 00:01:46,040 --> 00:01:49,040 Speaker 3: comes to the plumbing when the tightness as you're highlighting 32 00:01:49,360 --> 00:01:51,920 Speaker 3: in very short term markets, and the FED for sure 33 00:01:52,280 --> 00:01:55,880 Speaker 3: has to play this difficult talk of wall between do 34 00:01:55,920 --> 00:01:57,760 Speaker 3: we want to ease financial condition on the rial side 35 00:01:57,920 --> 00:02:00,160 Speaker 3: or how much can we ease financial conditions in the 36 00:02:00,200 --> 00:02:01,720 Speaker 3: very front end of the curve. But this is the 37 00:02:02,000 --> 00:02:04,240 Speaker 3: challenge for the FED. At the moment that you're highlighting. 38 00:02:03,880 --> 00:02:06,440 Speaker 4: Torsten, you didn't listen. They didn't respond to the idea 39 00:02:06,480 --> 00:02:09,000 Speaker 4: of financial conditions. They didn't seem to think it mattered 40 00:02:09,000 --> 00:02:11,040 Speaker 4: at all at the last press conference. Why should it 41 00:02:11,120 --> 00:02:12,960 Speaker 4: matter now? I mean we're going to actually hear them 42 00:02:12,960 --> 00:02:15,720 Speaker 4: come back and say, actually, just kidding about that financial 43 00:02:15,720 --> 00:02:16,520 Speaker 4: conditions question. 44 00:02:16,840 --> 00:02:19,880 Speaker 3: Well, they were debating in October and September, well maybe 45 00:02:19,880 --> 00:02:21,840 Speaker 3: financial conditions have done a lot of the work for us, 46 00:02:22,320 --> 00:02:24,800 Speaker 3: and now they're saying, well, maybe financial conditions it doesn't 47 00:02:24,800 --> 00:02:27,200 Speaker 3: really matter because it can fluctuate so much. So I 48 00:02:27,240 --> 00:02:29,679 Speaker 3: still think that it's a little bit inconsistent what they're 49 00:02:29,680 --> 00:02:31,920 Speaker 3: saying when that data dependency, it only talks about the 50 00:02:31,960 --> 00:02:35,560 Speaker 3: real data, whereas the financial conditions impulse. If you take 51 00:02:35,720 --> 00:02:38,280 Speaker 3: the easy and financial conditions that we've had since the 52 00:02:38,360 --> 00:02:40,880 Speaker 3: fit pivot and stuff it into furpose the fed's model 53 00:02:40,880 --> 00:02:42,960 Speaker 3: of the US economy, you will get a boom of 54 00:02:43,040 --> 00:02:44,880 Speaker 3: up to one and a half percent growth over the 55 00:02:44,880 --> 00:02:47,160 Speaker 3: next slevel quarters in GDP. It's going to be very 56 00:02:47,160 --> 00:02:49,320 Speaker 3: supportive as a tailwind to the economic outlook. 57 00:02:49,360 --> 00:02:52,280 Speaker 4: Although we did have Ganadi on earlier of TD securities, 58 00:02:52,320 --> 00:02:55,239 Speaker 4: and he said even with this idea that inflation could 59 00:02:55,320 --> 00:02:58,320 Speaker 4: remain stickier, that we could get this ongoing growth, the 60 00:02:58,320 --> 00:03:01,040 Speaker 4: FED could still cut rates and still be restrictive. Given 61 00:03:01,280 --> 00:03:02,639 Speaker 4: the positive real rate. 62 00:03:02,960 --> 00:03:03,799 Speaker 5: Do you ascribe to. 63 00:03:03,720 --> 00:03:05,120 Speaker 4: That kind of thing or do you think that just 64 00:03:05,280 --> 00:03:07,600 Speaker 4: means many fewer rate cuts going. 65 00:03:07,400 --> 00:03:08,040 Speaker 5: Forward for the Fed. 66 00:03:08,200 --> 00:03:10,240 Speaker 3: I think that's absolutely right that we have. Of course, 67 00:03:10,280 --> 00:03:11,800 Speaker 3: for the better part of the last year, we have 68 00:03:11,840 --> 00:03:14,760 Speaker 3: talked about higher for longer. Now the conversation is more 69 00:03:14,760 --> 00:03:17,360 Speaker 3: restrictive for longer, because they can still be restrictive if 70 00:03:17,360 --> 00:03:20,360 Speaker 3: inflation is coming down, because real interest rates is what matters. 71 00:03:20,520 --> 00:03:22,960 Speaker 3: So if real interest rates are still positive as inflation 72 00:03:23,040 --> 00:03:26,080 Speaker 3: comes down, the fact and according you also gradually begin 73 00:03:26,200 --> 00:03:29,000 Speaker 3: to lower rates. But note also that if you look 74 00:03:29,040 --> 00:03:32,360 Speaker 3: at the outlook for sofa futures, as also Tom was mentioning, 75 00:03:32,480 --> 00:03:34,720 Speaker 3: you still have that the bottom will still be around 76 00:03:34,760 --> 00:03:37,360 Speaker 3: three and a half four percent. So one very important 77 00:03:37,360 --> 00:03:39,320 Speaker 3: conclusion for as an allocation is that we. 78 00:03:39,280 --> 00:03:40,640 Speaker 1: Are not going back to zero. 79 00:03:40,920 --> 00:03:43,000 Speaker 3: We have still higher for longer, in the sense that 80 00:03:43,040 --> 00:03:45,480 Speaker 3: the level of interest rates, the level of the free 81 00:03:45,560 --> 00:03:48,080 Speaker 3: rate on page one in your finance textbook, will be 82 00:03:48,320 --> 00:03:51,160 Speaker 3: significantly higher for the next several years than where it 83 00:03:51,320 --> 00:03:53,080 Speaker 3: was from the period from twosand and eight to twenty 84 00:03:53,120 --> 00:03:53,440 Speaker 3: twenty two. 85 00:03:53,520 --> 00:03:55,040 Speaker 6: Let's try and get to the half of what we're discussing. 86 00:03:55,120 --> 00:03:58,480 Speaker 6: Care the interest rates sensitivity of the US economy exactly. 87 00:03:58,480 --> 00:03:59,880 Speaker 6: And now what we've seen over the last two years 88 00:03:59,920 --> 00:04:02,440 Speaker 6: is rates go up aggressively and not slow down the economy. 89 00:04:02,800 --> 00:04:04,800 Speaker 6: And what you're suggesting is that as rates start to 90 00:04:04,800 --> 00:04:07,240 Speaker 6: come in and financial conditions ease, that the economy picks 91 00:04:07,320 --> 00:04:09,160 Speaker 6: up again. Can you help explain that to people why 92 00:04:09,280 --> 00:04:11,880 Speaker 6: higher rates haven't slowed the economy down but easy find 93 00:04:11,920 --> 00:04:13,400 Speaker 6: financial conditions will boost it. 94 00:04:13,480 --> 00:04:13,560 Speaker 7: Ye. 95 00:04:13,680 --> 00:04:15,800 Speaker 3: But what's very important in that debate, and that's also 96 00:04:15,920 --> 00:04:17,840 Speaker 3: taking place on Twitter and X of course here at 97 00:04:17,839 --> 00:04:18,600 Speaker 3: the moment, is that. 98 00:04:18,920 --> 00:04:21,200 Speaker 6: My lift very critically sophisticate. 99 00:04:21,320 --> 00:04:25,160 Speaker 3: Important to remember that that is significantly a function of 100 00:04:25,200 --> 00:04:27,640 Speaker 3: whether you talk about the interest rate sensitive components of 101 00:04:27,680 --> 00:04:30,760 Speaker 3: GDP or the non interest rate sensitive components of GDP. 102 00:04:30,960 --> 00:04:33,839 Speaker 3: If you split GDP into the cyclical components and the 103 00:04:33,920 --> 00:04:37,520 Speaker 3: non signal components, the main component that is sensitive to 104 00:04:37,520 --> 00:04:41,080 Speaker 3: interest rates is housing. And housing did respond dramatically to 105 00:04:41,160 --> 00:04:43,719 Speaker 3: higher rates. So this whole idea that the economy didn't 106 00:04:43,760 --> 00:04:46,680 Speaker 3: respond to higher rates, that's just completely wrong. Of course, 107 00:04:46,720 --> 00:04:48,920 Speaker 3: the economy responded to rates. It was the interest rate 108 00:04:48,960 --> 00:04:52,000 Speaker 3: sensitive parts that responded to rates going up. Housing started 109 00:04:52,040 --> 00:04:55,159 Speaker 3: slowing down. But the non interest rate sensitive components, in 110 00:04:55,200 --> 00:04:58,760 Speaker 3: this case travel, restaurants, hotels. After COVID had such a 111 00:04:58,760 --> 00:05:01,520 Speaker 3: long tailwind that that more than dominate the slow down 112 00:05:01,560 --> 00:05:04,440 Speaker 3: in the housing market. So splitting that debate away from 113 00:05:04,520 --> 00:05:07,640 Speaker 3: the academic textbook, which we all love, is so important 114 00:05:07,760 --> 00:05:10,479 Speaker 3: because it becomes so critical to think about did the 115 00:05:11,040 --> 00:05:12,960 Speaker 3: parts of the economy that are sensitive to interest rates 116 00:05:12,960 --> 00:05:16,240 Speaker 3: did they actually respond? And absolutely, in particular housing Kapix 117 00:05:16,600 --> 00:05:18,800 Speaker 3: also of COMMERCIALI state things that are sensus of two 118 00:05:18,800 --> 00:05:22,000 Speaker 3: interest rates they did absolutely respond to when interest rates window. 119 00:05:22,160 --> 00:05:24,520 Speaker 6: This is a fantastic explanation. So let's build on it. 120 00:05:24,600 --> 00:05:26,919 Speaker 6: Let's project this out. What are the forecasts now for 121 00:05:26,960 --> 00:05:28,760 Speaker 6: you for GDP in the next couple of quarters. We 122 00:05:28,800 --> 00:05:31,800 Speaker 6: heard from the likes of Max Kanner of HSBC who said, 123 00:05:31,839 --> 00:05:33,919 Speaker 6: the biggest risk right now is that we have to 124 00:05:33,960 --> 00:05:37,479 Speaker 6: reprice rates again higher because exactly of what you're talking about, 125 00:05:37,480 --> 00:05:38,880 Speaker 6: what are you looking for in the data? 126 00:05:38,960 --> 00:05:41,560 Speaker 3: Well, if I type ECFCG on my Bloomberg screen, I 127 00:05:41,600 --> 00:05:44,040 Speaker 3: will see that over the next six months we are 128 00:05:44,240 --> 00:05:46,520 Speaker 3: very close to zero, zero point four and zero point 129 00:05:46,520 --> 00:05:48,320 Speaker 3: five on GDP for Q one and Q two. So 130 00:05:48,400 --> 00:05:51,160 Speaker 3: the consensus answer to your question is GP growth is 131 00:05:51,200 --> 00:05:54,279 Speaker 3: continuously slowing as a result of the fat's campaign of 132 00:05:54,320 --> 00:05:57,000 Speaker 3: hiking rates. The new risk that has emerged is that 133 00:05:57,040 --> 00:05:59,200 Speaker 3: because of the fit pivot, that means that the interest 134 00:05:59,279 --> 00:06:02,080 Speaker 3: rates sensitive components that we're dragging down GDP for the 135 00:06:02,080 --> 00:06:04,719 Speaker 3: better part of last year, they might now begin to rebound. 136 00:06:04,760 --> 00:06:07,240 Speaker 3: Housing most importantly, case SHILLA is now up five percent. 137 00:06:07,520 --> 00:06:10,120 Speaker 3: Case SHILLA is a very important leading indicator for the OEI, 138 00:06:10,360 --> 00:06:13,520 Speaker 3: meaning the shelter components of the CPI, and shelter makes 139 00:06:13,560 --> 00:06:15,400 Speaker 3: up forty percent of the index, So that means that 140 00:06:15,400 --> 00:06:17,120 Speaker 3: if something that makes up forty percent of the index 141 00:06:17,200 --> 00:06:19,279 Speaker 3: is about to rebound, we could come back to that 142 00:06:19,320 --> 00:06:22,120 Speaker 3: discussion about maybe the rates markets we'll have to reprise 143 00:06:22,240 --> 00:06:24,479 Speaker 3: to higher for long gun and more restrictive for longer. 144 00:06:24,560 --> 00:06:27,320 Speaker 2: I just looked at the two year inflation adjusted yield. 145 00:06:27,320 --> 00:06:29,960 Speaker 2: I haven't looked at it since time began Nixon was president, 146 00:06:30,360 --> 00:06:33,560 Speaker 2: and I can use the word never over twenty years, 147 00:06:33,600 --> 00:06:37,360 Speaker 2: the integran, or the duration of a high two year 148 00:06:37,400 --> 00:06:40,159 Speaker 2: real rate, we've never seen. We had a spike in 149 00:06:40,360 --> 00:06:44,680 Speaker 2: eight with a great financial crisis, but these sustained high 150 00:06:44,839 --> 00:06:49,839 Speaker 2: two year real yields are absolutely unprecedented for global Wall Street. 151 00:06:50,120 --> 00:06:52,120 Speaker 2: How unstable are we right now? 152 00:06:52,279 --> 00:06:54,640 Speaker 3: I would say, at least from a fet perspective. If 153 00:06:54,640 --> 00:06:56,760 Speaker 3: you just take the economic textbook out and think about 154 00:06:56,800 --> 00:06:59,680 Speaker 3: what matters, it is absolutely as you're highlighting real rates, 155 00:07:00,040 --> 00:07:02,080 Speaker 3: So real rates being at these levels would tell you 156 00:07:02,120 --> 00:07:05,520 Speaker 3: that we're still in very restrictive territory. So the challenge 157 00:07:05,560 --> 00:07:07,800 Speaker 3: here for the FIT is that they still want to 158 00:07:07,800 --> 00:07:09,359 Speaker 3: have the soft landing, and we all want to have 159 00:07:09,400 --> 00:07:11,880 Speaker 3: the soft landing. That will be the best outcome, of course, 160 00:07:12,200 --> 00:07:15,679 Speaker 3: from so many dimensions. But what is beginning to matter 161 00:07:15,760 --> 00:07:18,280 Speaker 3: is that they have now sucked so much liquidity out. 162 00:07:18,400 --> 00:07:20,400 Speaker 3: We've gotten to a point where we are beginning to 163 00:07:20,400 --> 00:07:23,440 Speaker 3: see some strains in the plumbing that you're highlighting. And 164 00:07:23,480 --> 00:07:26,840 Speaker 3: that's why real rates it has a very significant different 165 00:07:26,840 --> 00:07:28,960 Speaker 3: impact on the long end and what it means for 166 00:07:28,960 --> 00:07:31,600 Speaker 3: the real economy relative to what high real rates means 167 00:07:31,800 --> 00:07:33,720 Speaker 3: for the front end and what it means for financial 168 00:07:33,760 --> 00:07:34,400 Speaker 3: markets as host. 169 00:07:34,440 --> 00:07:40,920 Speaker 6: And this has been an absolute Cameron Dawson joins US 170 00:07:40,920 --> 00:07:44,600 Speaker 6: now chief investment Officer at New Edge Wealth Camic and morning. 171 00:07:44,400 --> 00:07:46,080 Speaker 5: And happy New year, Good morning, Happy nowear are you. 172 00:07:46,120 --> 00:07:48,080 Speaker 6: Sitting on the fence because I'm written this first line 173 00:07:48,080 --> 00:07:49,800 Speaker 6: in your work. It says we could have a scenario 174 00:07:49,800 --> 00:07:52,160 Speaker 6: where both bulls and hairs are right this year, which 175 00:07:52,160 --> 00:07:52,680 Speaker 6: one is it? 176 00:07:52,880 --> 00:07:55,239 Speaker 8: Well, I think that we have to be nimble because 177 00:07:55,320 --> 00:07:57,160 Speaker 8: I believe that there is going to be a scenario 178 00:07:57,160 --> 00:07:59,800 Speaker 8: where you could very easily see people get drawn even 179 00:08:00,000 --> 00:08:03,160 Speaker 8: further into this market. We think positioning is overweight, but 180 00:08:03,240 --> 00:08:05,560 Speaker 8: not quite as is extreme as it was in times 181 00:08:05,600 --> 00:08:07,480 Speaker 8: like twenty twenty one or twenty eighteen. 182 00:08:07,840 --> 00:08:09,800 Speaker 5: So you could see some pain get pulled in. 183 00:08:10,000 --> 00:08:12,760 Speaker 8: But the other reality is that you could see a 184 00:08:12,840 --> 00:08:16,160 Speaker 8: rationalization of the fact that sentiment is very extended and 185 00:08:16,200 --> 00:08:19,320 Speaker 8: that valuations are extended. So it's how you react to 186 00:08:19,760 --> 00:08:22,640 Speaker 8: market rallies or market corrections, I think is how you 187 00:08:22,760 --> 00:08:23,200 Speaker 8: will win. 188 00:08:23,280 --> 00:08:24,400 Speaker 5: In twenty twenty four. 189 00:08:24,360 --> 00:08:26,520 Speaker 6: We mentioned that HSBC. So let's talk about the work 190 00:08:26,520 --> 00:08:29,000 Speaker 6: coming from Max Kentna this morning. Here's this line, biggest 191 00:08:29,080 --> 00:08:31,760 Speaker 6: risk another repricing and rights. Do you agree with. 192 00:08:31,640 --> 00:08:34,320 Speaker 5: That one hundred percent? That's the pain trade. 193 00:08:34,400 --> 00:08:36,800 Speaker 8: The pain trade is that everybody thinks that inflation is 194 00:08:36,840 --> 00:08:39,880 Speaker 8: fully vanquished and then gets surprised if things like oil 195 00:08:39,920 --> 00:08:43,359 Speaker 8: prices move higher. Wages end up being stickier than expected 196 00:08:43,800 --> 00:08:46,240 Speaker 8: rates move higher, and then all of those stocks that 197 00:08:46,320 --> 00:08:49,240 Speaker 8: rerated in the last two months up thirty forty percent 198 00:08:49,400 --> 00:08:51,080 Speaker 8: because now they're not worried about their. 199 00:08:50,920 --> 00:08:52,000 Speaker 5: Balance sheets anymore. 200 00:08:52,360 --> 00:08:55,000 Speaker 8: Balance sheet risk becomes an issue again, and you get 201 00:08:55,000 --> 00:08:57,120 Speaker 8: a reversion of a lot of the names that were 202 00:08:57,160 --> 00:08:59,360 Speaker 8: lower quality that happened to lead at the end of 203 00:08:59,440 --> 00:08:59,920 Speaker 8: last year. 204 00:09:00,120 --> 00:09:02,839 Speaker 2: The modeled out earnings are nine percent ten percent. Dare 205 00:09:02,880 --> 00:09:06,120 Speaker 2: I say double digit eleven percent earnings growth for this year? 206 00:09:06,400 --> 00:09:08,520 Speaker 2: Is that in the price now or is that going 207 00:09:08,559 --> 00:09:10,640 Speaker 2: to develop out in the first half of next year. 208 00:09:11,040 --> 00:09:12,680 Speaker 8: It is in the price now, and I think that 209 00:09:12,760 --> 00:09:15,240 Speaker 8: we always have to think about the path of twenty 210 00:09:15,240 --> 00:09:17,600 Speaker 8: four will be pricing in what actually happens in twenty 211 00:09:17,640 --> 00:09:20,520 Speaker 8: twenty five. So if a recession looks more likely in 212 00:09:20,559 --> 00:09:22,640 Speaker 8: twenty twenty five, that's when you'll start to see those 213 00:09:22,640 --> 00:09:25,880 Speaker 8: earning estements get cut into the out years. The thing 214 00:09:25,920 --> 00:09:28,440 Speaker 8: that's the biggest challenge for us for earning estments in 215 00:09:28,480 --> 00:09:31,920 Speaker 8: twenty four is the expectation that top line growth will 216 00:09:31,920 --> 00:09:35,840 Speaker 8: re accelerate in a year where nominal growth because of 217 00:09:35,880 --> 00:09:40,160 Speaker 8: inflation is expected to decelerate. Can you see that happen 218 00:09:40,200 --> 00:09:42,920 Speaker 8: at the same time where we get less inflation, less 219 00:09:42,960 --> 00:09:46,040 Speaker 8: pricing power, and yet we get a big acceleration in top. 220 00:09:46,040 --> 00:09:48,320 Speaker 2: So away for the romance of Apple and Microsoft. If 221 00:09:48,320 --> 00:09:51,360 Speaker 2: you look at Staples and discretionary and all, you've got 222 00:09:51,400 --> 00:09:53,640 Speaker 2: to model out there, what you go back from a 223 00:09:53,679 --> 00:09:57,480 Speaker 2: six percent wonderment of growth back to four percent revenue growth? 224 00:09:57,640 --> 00:09:58,600 Speaker 5: Yeah, very likely. 225 00:09:58,640 --> 00:10:01,680 Speaker 8: And there are idiots and pockets where you're going to 226 00:10:01,679 --> 00:10:04,319 Speaker 8: see improvement. You know, healthcare had its earnings down almost 227 00:10:04,360 --> 00:10:07,680 Speaker 8: twenty percent last year, that will flip positive this year 228 00:10:07,800 --> 00:10:10,280 Speaker 8: just because of easy comps. So that's where we're trying 229 00:10:10,320 --> 00:10:14,160 Speaker 8: to look outside of just the macro drivers, Staples being 230 00:10:14,160 --> 00:10:16,280 Speaker 8: a great example of one that can't get away from 231 00:10:16,320 --> 00:10:21,640 Speaker 8: this inflationary dynamic, and look instead to the more idiotsyncratic opportunities. 232 00:10:20,960 --> 00:10:23,199 Speaker 4: Our banks to douse syncratic opportunities. And I ask with 233 00:10:23,320 --> 00:10:25,960 Speaker 4: JP Morgan at new record high, Yeah. 234 00:10:25,840 --> 00:10:27,840 Speaker 8: I mean you've seen such a huge rerating. Of course, 235 00:10:27,840 --> 00:10:31,720 Speaker 8: there's pockets of banks where there is still inexpensive areas. 236 00:10:32,040 --> 00:10:34,080 Speaker 8: You know, banks do have the tailwind of a less 237 00:10:34,280 --> 00:10:38,080 Speaker 8: inverted curve, hopefully a reopening of capital markets. But then 238 00:10:38,120 --> 00:10:40,640 Speaker 8: we have to consider things like BTFP, does it get 239 00:10:40,640 --> 00:10:43,400 Speaker 8: re extended Basil three in game, all of these things 240 00:10:43,440 --> 00:10:46,120 Speaker 8: that could be big drivers of bank earnings or at 241 00:10:46,200 --> 00:10:49,080 Speaker 8: least appetite for bank risk as. 242 00:10:48,920 --> 00:10:50,920 Speaker 5: We go through twenty twenty four. It sounds like you're 243 00:10:50,920 --> 00:10:54,040 Speaker 5: not buying the rotation story. I am buying the rotation story. 244 00:10:54,120 --> 00:10:54,360 Speaker 9: Yeah. 245 00:10:54,559 --> 00:10:56,520 Speaker 8: I think that we have to have an open mind 246 00:10:56,520 --> 00:11:00,640 Speaker 8: that even great companies with great balance sheets, with monopolies 247 00:11:01,120 --> 00:11:05,520 Speaker 8: could still underperform simply because positioning is so crowded and 248 00:11:05,559 --> 00:11:07,320 Speaker 8: because valuations are so elevated. 249 00:11:07,440 --> 00:11:09,920 Speaker 2: That's the smartest insight I've heard in the last forty 250 00:11:09,920 --> 00:11:10,520 Speaker 2: eight hours. 251 00:11:10,559 --> 00:11:13,640 Speaker 1: Are we going to have rotation or not? That's a really, 252 00:11:13,960 --> 00:11:15,960 Speaker 1: really undersaid cool question. 253 00:11:16,000 --> 00:11:17,640 Speaker 4: I think that that was really some of the anks 254 00:11:17,720 --> 00:11:20,160 Speaker 4: behind the sell off that we've seen that was living, 255 00:11:20,520 --> 00:11:22,560 Speaker 4: that was really led by big tech. We were talking 256 00:11:22,600 --> 00:11:25,040 Speaker 4: about this yesterday with Apple, and I guess that you know, 257 00:11:25,080 --> 00:11:27,800 Speaker 4: how much does that have legs versus what we saw 258 00:11:27,960 --> 00:11:28,800 Speaker 4: last year, which was. 259 00:11:28,800 --> 00:11:31,280 Speaker 5: A headfake and everyone came in saying, all right. 260 00:11:31,200 --> 00:11:32,959 Speaker 4: This is the year to sell tech, and by the 261 00:11:33,080 --> 00:11:34,520 Speaker 4: end of the year of them was saying in Nvidia 262 00:11:34,600 --> 00:11:37,040 Speaker 4: Magnificent seven, it's going to change the world. Kumba Yah 263 00:11:37,080 --> 00:11:39,080 Speaker 4: it's going to save the United States, I mean, et cetera, 264 00:11:39,120 --> 00:11:39,559 Speaker 4: et cetera. 265 00:11:39,840 --> 00:11:42,280 Speaker 8: And what a different setup because at the very end 266 00:11:42,280 --> 00:11:43,920 Speaker 8: of twenty twenty two you had. 267 00:11:43,840 --> 00:11:45,839 Speaker 5: Record outflows from tech ETFs. 268 00:11:46,120 --> 00:11:47,960 Speaker 8: You look at the course of twenty twenty three, you 269 00:11:48,000 --> 00:11:52,200 Speaker 8: had forty billion dollars of inflows into technology compared to 270 00:11:52,240 --> 00:11:54,800 Speaker 8: twenty billion dollars of outflows out of things like energy 271 00:11:54,840 --> 00:11:57,920 Speaker 8: and financials and healthcare. So really this could just be 272 00:11:58,000 --> 00:12:00,880 Speaker 8: about positioning and pain trades and the fact that you 273 00:12:01,040 --> 00:12:04,640 Speaker 8: already re rated tech because now it's already just one 274 00:12:04,720 --> 00:12:07,760 Speaker 8: turn away from its twenty twenty one peak valuation, so 275 00:12:07,800 --> 00:12:08,680 Speaker 8: you're hitting a ceiling. 276 00:12:08,920 --> 00:12:10,120 Speaker 10: Let's put a couple of stories together. 277 00:12:10,200 --> 00:12:12,280 Speaker 6: You said, maybe the biggest paying trait the risk here 278 00:12:12,320 --> 00:12:14,720 Speaker 6: is high, right, so reprice give rights again at Lisa 279 00:12:14,720 --> 00:12:16,880 Speaker 6: brought up banks. How woud the banks respond to that 280 00:12:17,120 --> 00:12:19,120 Speaker 6: given what we saw last year? 281 00:12:19,200 --> 00:12:21,480 Speaker 5: Yeah, I mean it would raise balance sheet risk again. 282 00:12:21,679 --> 00:12:25,280 Speaker 8: It probably puts into sharp focus again issues with commercial 283 00:12:25,320 --> 00:12:28,679 Speaker 8: real estate because we've all kind of breathed this collective 284 00:12:28,760 --> 00:12:32,640 Speaker 8: sigh of relief that higher for longer is dead if 285 00:12:32,679 --> 00:12:35,120 Speaker 8: it's not dead, and the path of the cost of 286 00:12:35,200 --> 00:12:37,679 Speaker 8: capital instead of the last forty years of being down 287 00:12:38,080 --> 00:12:41,800 Speaker 8: is actually marching slightly higher and in a choppy path. 288 00:12:42,200 --> 00:12:44,760 Speaker 8: Could mean that we have to reprice some of the 289 00:12:44,840 --> 00:12:46,280 Speaker 8: risk in some of these balance sheets. 290 00:12:46,360 --> 00:12:48,720 Speaker 6: Is it just JP Morgan then everyone else? When we 291 00:12:48,720 --> 00:12:50,440 Speaker 6: talk about the banks, is that what we're talking about? 292 00:12:50,520 --> 00:12:52,160 Speaker 6: JP Morgan then everybody else? 293 00:12:52,240 --> 00:12:54,360 Speaker 8: We actually just are looking very deeply at some of 294 00:12:54,400 --> 00:12:57,600 Speaker 8: the regional banks. Some of the regional banks are underpriced. 295 00:12:57,679 --> 00:12:59,440 Speaker 8: We think if we look at the balance sheets, they're 296 00:12:59,480 --> 00:13:01,640 Speaker 8: not as extended as or. 297 00:13:01,520 --> 00:13:03,520 Speaker 5: As issued as some parts of. 298 00:13:03,679 --> 00:13:06,240 Speaker 8: Regional banks that some don't have as much commercial real 299 00:13:06,320 --> 00:13:09,640 Speaker 8: estate exposure, have great presence in their local areas, so 300 00:13:09,800 --> 00:13:13,000 Speaker 8: they're trading at very discounted valuations. If we're going down 301 00:13:13,040 --> 00:13:16,000 Speaker 8: in value, that's one of the areas we're actually looking. 302 00:13:16,120 --> 00:13:18,560 Speaker 2: Yeah, it's somebody at you know, the last five six, 303 00:13:18,679 --> 00:13:21,280 Speaker 2: seven days at JP Morgan's capturing one out of five 304 00:13:21,440 --> 00:13:26,040 Speaker 2: profit dollars in American banking. If that isn't the third 305 00:13:26,120 --> 00:13:28,600 Speaker 2: or fourth or fifth national bank of the United States, 306 00:13:28,600 --> 00:13:29,440 Speaker 2: I don't know what is. 307 00:13:30,240 --> 00:13:33,480 Speaker 6: There is nothing else. It's JP Morgan versus everyone else. 308 00:13:33,520 --> 00:13:34,480 Speaker 6: That's been a story the last year. 309 00:13:34,520 --> 00:13:35,679 Speaker 1: I'll refer to our guests done this. 310 00:13:35,840 --> 00:13:38,880 Speaker 2: But yeah, I mean they're capturing some twenty percent of 311 00:13:38,920 --> 00:13:40,760 Speaker 2: profits according to the source. I'm sorry you don't have 312 00:13:40,760 --> 00:13:42,199 Speaker 2: a source in front of me to side. I think 313 00:13:42,200 --> 00:13:45,720 Speaker 2: it's it's the it's the Bramow newsletter. You know that newsletters. 314 00:13:45,800 --> 00:13:46,319 Speaker 10: It's a muster r. 315 00:13:46,480 --> 00:13:47,120 Speaker 1: It's a muster reader. 316 00:13:47,200 --> 00:13:48,719 Speaker 10: Camic. Thank you got to leave this. It's going to 317 00:13:48,760 --> 00:13:50,120 Speaker 10: catch up. It's going to say a happy new Year, 318 00:13:50,200 --> 00:13:51,560 Speaker 10: Cameron Dawson, the new h. 319 00:13:51,559 --> 00:14:03,040 Speaker 1: Wel let's get right to it. 320 00:14:03,160 --> 00:14:06,800 Speaker 2: This is so important right now. Dan Ives joins us. 321 00:14:06,840 --> 00:14:10,720 Speaker 2: He is a bull on any number of technology companies. 322 00:14:10,800 --> 00:14:13,200 Speaker 2: We wait for him to come out on controlled data 323 00:14:13,280 --> 00:14:15,480 Speaker 2: here and with a birecommendation at some point. 324 00:14:15,559 --> 00:14:16,760 Speaker 1: That's a little bit of history there. 325 00:14:16,880 --> 00:14:21,200 Speaker 2: Dan Ives with webbush Dan, what's a channel check? What 326 00:14:21,400 --> 00:14:24,880 Speaker 2: exactly is a channel check? I just I just don't 327 00:14:24,920 --> 00:14:25,200 Speaker 2: see it. 328 00:14:26,880 --> 00:14:30,080 Speaker 11: Yeah, and look for us in terms of our easier 329 00:14:30,160 --> 00:14:34,280 Speaker 11: supply gene checks, really trying to focus on what demand 330 00:14:34,400 --> 00:14:37,520 Speaker 11: looks like in terms of the suppliers for iPhones. 331 00:14:38,240 --> 00:14:41,160 Speaker 9: There have been no cuts from an iPhone perspective as 332 00:14:41,200 --> 00:14:43,880 Speaker 9: of data, and I think that's that's bullets and ultimately 333 00:14:44,000 --> 00:14:47,800 Speaker 9: that shows demand through howadays season has actually been on part, 334 00:14:47,920 --> 00:14:49,320 Speaker 9: actually better than expected. 335 00:14:50,200 --> 00:14:52,280 Speaker 12: And to me, that's what I focus on rather than 336 00:14:52,320 --> 00:14:53,480 Speaker 12: the haters continue. 337 00:14:53,160 --> 00:14:56,360 Speaker 2: Okay, but data tell Okay, you've been gracious about this, 338 00:14:56,480 --> 00:15:00,480 Speaker 2: and they've been gracious about your twenty twenty three ganormous success. 339 00:15:00,880 --> 00:15:04,080 Speaker 2: But when you do a channel check, are you counting iPhones? 340 00:15:04,200 --> 00:15:08,120 Speaker 2: Are you over in China guessing the manufacturing line? Are 341 00:15:08,160 --> 00:15:10,800 Speaker 2: you in the store on Madison Avenue looking at how 342 00:15:10,840 --> 00:15:13,880 Speaker 2: many people from Lisa's family are buy an Apple loot? 343 00:15:14,160 --> 00:15:15,280 Speaker 1: What's a channel check? 344 00:15:15,760 --> 00:15:15,920 Speaker 9: Yeah? 345 00:15:16,040 --> 00:15:16,920 Speaker 12: All above time. 346 00:15:16,960 --> 00:15:19,880 Speaker 9: I mean, we feel we're in Apple stores around the country, 347 00:15:19,920 --> 00:15:20,560 Speaker 9: around the world. 348 00:15:21,280 --> 00:15:23,840 Speaker 12: We're also talking to suppliers. 349 00:15:23,360 --> 00:15:26,600 Speaker 9: Basically trying to triangulate to what we think units is 350 00:15:26,680 --> 00:15:29,320 Speaker 9: going to look like for the quarter and for the year. 351 00:15:29,400 --> 00:15:30,440 Speaker 12: And that's how we've done. 352 00:15:30,280 --> 00:15:32,640 Speaker 9: It from the beginning, I mean, over the last decades so. 353 00:15:33,800 --> 00:15:35,880 Speaker 9: And it's one of you're always gonna have different opinions. 354 00:15:35,880 --> 00:15:39,960 Speaker 9: You just talk about the Barclays downgrade. We continue to 355 00:15:40,040 --> 00:15:42,680 Speaker 9: stick with our checks. That that has navigated us, you know, 356 00:15:42,720 --> 00:15:44,880 Speaker 9: a lot more right than wrong. I think when you 357 00:15:44,920 --> 00:15:47,440 Speaker 9: look at I from fifty, it's easy to take shots, 358 00:15:47,720 --> 00:15:50,480 Speaker 9: you know, relative to maybe some of the fears out there, 359 00:15:51,120 --> 00:15:53,560 Speaker 9: especially fire and a crowd theater first day at the 360 00:15:53,640 --> 00:15:58,280 Speaker 9: trading you know a year I it's a groundhog day. 361 00:15:58,560 --> 00:16:01,760 Speaker 9: You know, we saw it last year as well. It's underestimated. 362 00:16:02,360 --> 00:16:06,280 Speaker 9: Two hundred and fifty million. Is the install based upgrade 363 00:16:06,480 --> 00:16:09,920 Speaker 9: cycle that's due in that window has an upgrade in 364 00:16:10,040 --> 00:16:10,880 Speaker 9: four years. 365 00:16:11,480 --> 00:16:13,880 Speaker 6: Dan, let's get into it. You mentioned Barkleys, Tom mentioned 366 00:16:13,920 --> 00:16:15,720 Speaker 6: it too. I mentioned this, so let's get to that line. 367 00:16:16,000 --> 00:16:19,320 Speaker 6: The continued period of weak results coupled with multiple expansion 368 00:16:19,880 --> 00:16:23,040 Speaker 6: not sustainable in that it is a statement of fact, 369 00:16:23,200 --> 00:16:25,240 Speaker 6: and then there's an opinion of the end. The statement 370 00:16:25,280 --> 00:16:27,920 Speaker 6: of fact is iPhone cuts. They haven't been great for 371 00:16:27,960 --> 00:16:28,920 Speaker 6: the last twelve months. 372 00:16:29,480 --> 00:16:30,160 Speaker 10: That's the fact. 373 00:16:30,680 --> 00:16:34,080 Speaker 6: Yet it's been coupled with multiple expansion, also a fact. 374 00:16:34,480 --> 00:16:38,000 Speaker 6: The opinion piece is they're saying it's not sustainable. Are 375 00:16:38,040 --> 00:16:39,520 Speaker 6: you suggesting that it is? 376 00:16:40,840 --> 00:16:44,080 Speaker 9: Yeah, So what I'm suggesting is that the next three 377 00:16:44,160 --> 00:16:47,200 Speaker 9: to four quarters you're going to have iPhone growth. You 378 00:16:47,320 --> 00:16:50,240 Speaker 9: have growth coming out in China despite the fears and 379 00:16:50,480 --> 00:16:53,200 Speaker 9: abs are the bare noise, and I think the most 380 00:16:53,240 --> 00:16:55,840 Speaker 9: important thing is services, and I think services is going 381 00:16:55,880 --> 00:16:59,120 Speaker 9: to be teenager type of growth. That's key to the 382 00:16:59,240 --> 00:17:03,120 Speaker 9: multiples Manson story. And then we go into later this year, 383 00:17:03,160 --> 00:17:05,840 Speaker 9: there's gonna be more monization from an AI as we 384 00:17:06,000 --> 00:17:06,480 Speaker 9: talked about. 385 00:17:06,520 --> 00:17:08,760 Speaker 12: That's gonna be the next layer. I think it all 386 00:17:08,920 --> 00:17:11,520 Speaker 12: results and this is gonna be viewed. 387 00:17:11,320 --> 00:17:13,680 Speaker 9: As more of a golden buying opportunity rather than the 388 00:17:13,840 --> 00:17:16,679 Speaker 9: start to hit the elevator exit. 389 00:17:17,080 --> 00:17:19,840 Speaker 4: How much Dan, is your bullish call predicated on this 390 00:17:20,000 --> 00:17:22,760 Speaker 4: idea of rate cuts, the idea of rates coming down 391 00:17:22,920 --> 00:17:24,040 Speaker 4: as much as people think. 392 00:17:25,200 --> 00:17:30,000 Speaker 9: Yeah, look, that's probably five ten percent from multiple perspective. 393 00:17:30,040 --> 00:17:32,040 Speaker 9: I mean, as we saw twenty two to the disaster 394 00:17:32,640 --> 00:17:36,160 Speaker 9: twenty three in terms of now popcorn movement, in terms 395 00:17:36,160 --> 00:17:38,680 Speaker 9: of FED gonna cut in twenty four. Look, it speaks 396 00:17:38,720 --> 00:17:42,440 Speaker 9: to our overall bull tech thesis, right that the soft 397 00:17:42,600 --> 00:17:45,159 Speaker 9: landing Killsberry do a boys soft landing. 398 00:17:45,680 --> 00:17:48,520 Speaker 12: You're starting to see now more and more focus on tech. 399 00:17:48,880 --> 00:17:49,760 Speaker 12: I do think now. 400 00:17:50,119 --> 00:17:53,080 Speaker 9: You know, as Pharaoh's talked about multiple expansion twenty three, 401 00:17:53,680 --> 00:17:56,080 Speaker 9: I think the numbers show it in twenty four. 402 00:17:56,280 --> 00:17:57,080 Speaker 12: That's the difference. 403 00:17:57,200 --> 00:17:59,920 Speaker 9: Twenty four is where the numbers come through, and tech 404 00:18:00,480 --> 00:18:02,679 Speaker 9: twenty three was more than multiple expansion. 405 00:18:03,560 --> 00:18:06,000 Speaker 4: Well, you mentioned China and how China demand is going 406 00:18:06,040 --> 00:18:07,800 Speaker 4: to pick back up, But I wonder if it's going 407 00:18:07,880 --> 00:18:09,320 Speaker 4: to be for iPhones. And I know we've been talking 408 00:18:09,359 --> 00:18:11,680 Speaker 4: about this for a long time, but yesterday this caught 409 00:18:11,720 --> 00:18:17,119 Speaker 4: my attention. The Chinese automaker BYD surpassed Tesla in terms 410 00:18:17,280 --> 00:18:20,639 Speaker 4: of deliveries for the first time. You're seeing that really 411 00:18:20,760 --> 00:18:23,520 Speaker 4: start to be a main theme. People said that that 412 00:18:23,680 --> 00:18:25,840 Speaker 4: was never going to happen. People say that it's never 413 00:18:25,920 --> 00:18:28,080 Speaker 4: going to happen, that Chinese consumers are going to throw 414 00:18:28,080 --> 00:18:30,000 Speaker 4: out their iPhones. What makes you so confident that we're 415 00:18:30,000 --> 00:18:31,760 Speaker 4: not going to see the same thing happen in the 416 00:18:31,840 --> 00:18:34,080 Speaker 4: iPhone cycle that we're seeing right now in the electric 417 00:18:34,160 --> 00:18:34,600 Speaker 4: vehicle one? 418 00:18:35,280 --> 00:18:36,120 Speaker 12: Yeah, great question. 419 00:18:36,400 --> 00:18:39,000 Speaker 9: And look, when you focus on Tesla, I mean that's 420 00:18:39,040 --> 00:18:42,080 Speaker 9: essentially two horse race between TESTSA and BID. Tests actually 421 00:18:42,160 --> 00:18:44,840 Speaker 9: beat numbers and China was strong for them. But I 422 00:18:44,920 --> 00:18:48,840 Speaker 9: think it does speak to look domestically BID they're beast. 423 00:18:49,000 --> 00:18:51,680 Speaker 9: I mean, they've done a phenomenal job, but Tessa is 424 00:18:51,680 --> 00:18:54,240 Speaker 9: always going to be aware there in China. When you 425 00:18:54,359 --> 00:18:56,760 Speaker 9: look at what's happening within the China market from an 426 00:18:56,800 --> 00:19:00,159 Speaker 9: idphone perspective, it speaks to just a massive and all 427 00:19:00,240 --> 00:19:02,600 Speaker 9: bays that they built in China. You have one hundred 428 00:19:02,600 --> 00:19:06,320 Speaker 9: million iPhones in China right now, window of an upgrade opportunity, 429 00:19:06,520 --> 00:19:09,879 Speaker 9: and the irony is despite geopolitical the last eighteen months, 430 00:19:10,480 --> 00:19:13,200 Speaker 9: Apples gained three inch books of market share because the 431 00:19:13,320 --> 00:19:17,920 Speaker 9: average high end, as in middle income Chinese consumer, they 432 00:19:18,040 --> 00:19:21,800 Speaker 9: want an iPhone despite government basically trying to push WAWE. 433 00:19:22,280 --> 00:19:24,200 Speaker 6: And I'm so pleased to Lisa brought up the EV 434 00:19:24,359 --> 00:19:27,200 Speaker 6: comparison because I think that industry right now has the 435 00:19:27,240 --> 00:19:30,800 Speaker 6: potential to be the industry story of twenty twenty four 436 00:19:31,280 --> 00:19:35,040 Speaker 6: and beyond byd beyond Tesla. How much of a reality 437 00:19:35,160 --> 00:19:37,520 Speaker 6: check are we getting for the industry for the likes 438 00:19:37,560 --> 00:19:38,639 Speaker 6: of GM and Ford. 439 00:19:39,560 --> 00:19:42,680 Speaker 12: I think a big reality shacka. That's why you've seen Farley. 440 00:19:42,800 --> 00:19:45,640 Speaker 9: I think Mary they pull back, you know, in terms 441 00:19:45,680 --> 00:19:49,560 Speaker 9: of a bit from the EV strategy in Detroit. And 442 00:19:49,920 --> 00:19:53,359 Speaker 9: the problem here is do consumers want EV or they 443 00:19:53,480 --> 00:19:55,920 Speaker 9: just want to tessel And I think that that's really 444 00:19:56,000 --> 00:19:57,920 Speaker 9: the issue that's really starting to play out. 445 00:19:58,760 --> 00:20:01,000 Speaker 12: And at this point, Tesla's. 446 00:20:00,560 --> 00:20:04,040 Speaker 9: Doubling down on evs, but no doubt there's been I 447 00:20:04,119 --> 00:20:07,520 Speaker 9: think much more moderate demand that we're seeing across the board, 448 00:20:08,160 --> 00:20:10,080 Speaker 9: and you know, I think as that puts out, you're 449 00:20:10,080 --> 00:20:13,320 Speaker 9: going to see others peel back while others go more aggressively, 450 00:20:13,440 --> 00:20:14,439 Speaker 9: like the likes of the Tesla. 451 00:20:14,520 --> 00:20:16,439 Speaker 6: I wonder what you think the endgame actually is. If 452 00:20:16,480 --> 00:20:18,640 Speaker 6: you speak to the leadership at GM of thought, they've 453 00:20:18,640 --> 00:20:21,040 Speaker 6: been generous with that time we've had this conversation with them. 454 00:20:21,240 --> 00:20:24,040 Speaker 6: They talk about a change in execution, maybe not a 455 00:20:24,160 --> 00:20:26,680 Speaker 6: change in strategy. Would you expect to see a change 456 00:20:26,680 --> 00:20:28,879 Speaker 6: in strategy this year and what would that look like? 457 00:20:29,800 --> 00:20:33,160 Speaker 9: I think slight changing strategy where maybe they pull back 458 00:20:33,240 --> 00:20:35,720 Speaker 9: on some of their long term numbers in terms of 459 00:20:35,880 --> 00:20:38,720 Speaker 9: EV when they expect to go fully EV you know, 460 00:20:38,800 --> 00:20:41,840 Speaker 9: as a two thousand and thirty four thirty five. 461 00:20:42,080 --> 00:20:44,800 Speaker 12: Look, the UAW also put their back against the wall. 462 00:20:44,840 --> 00:20:48,800 Speaker 9: It's a different cost structure and they're trying right now 463 00:20:48,960 --> 00:20:52,159 Speaker 9: to it's a tight balancing act that they're trying to 464 00:20:52,240 --> 00:20:55,320 Speaker 9: get to in Detroit. And I think also it's tough 465 00:20:55,480 --> 00:20:57,520 Speaker 9: going up against the likes of Tesla and some of 466 00:20:57,520 --> 00:20:59,840 Speaker 9: these other evs. That's been a big part of the 467 00:21:00,080 --> 00:21:03,520 Speaker 9: problem that they're focused on, especially now with the UAW. 468 00:21:03,880 --> 00:21:05,760 Speaker 12: Increase in the cost structure, well said Dan. 469 00:21:06,000 --> 00:21:07,560 Speaker 6: Going to hear from your happy new year, Sir Dan 470 00:21:07,640 --> 00:21:15,440 Speaker 6: is Wetbush. Jere Cassidy, Large Camp Bank analyst that RBC 471 00:21:15,600 --> 00:21:19,040 Speaker 6: Capital markets rights in this. After a tumultuous twenty twenty three, 472 00:21:19,400 --> 00:21:21,760 Speaker 6: we believe the banks are our positioned for investors to 473 00:21:21,800 --> 00:21:25,200 Speaker 6: warn outsize returns in twenty twenty four and investors should 474 00:21:25,200 --> 00:21:29,320 Speaker 6: overweight the sector in their portfolios. Jer Cassidy, I'm pleased 475 00:21:29,320 --> 00:21:31,680 Speaker 6: to say join us. Now let's go straight to it. 476 00:21:31,840 --> 00:21:34,000 Speaker 6: Number one question. This is a question for me, and 477 00:21:34,040 --> 00:21:35,919 Speaker 6: I know it's a question for Lisa. Is this off 478 00:21:35,920 --> 00:21:38,080 Speaker 6: the back of high yields or lower yields? 479 00:21:39,320 --> 00:21:42,520 Speaker 7: I would say John that we're expecting that the yields 480 00:21:43,000 --> 00:21:45,920 Speaker 7: gravitate lower, especially at the front end of the curve 481 00:21:46,200 --> 00:21:48,360 Speaker 7: when you take a look at what the Fed has done. 482 00:21:49,000 --> 00:21:51,680 Speaker 7: If we truly are at the terminal rate for FED 483 00:21:51,800 --> 00:21:56,040 Speaker 7: funds in the past four tightening cycles when they started 484 00:21:56,080 --> 00:21:59,360 Speaker 7: to cut rates, it's always been a catalyst for bank stocks. 485 00:21:59,600 --> 00:22:02,480 Speaker 7: And think what we're expecting as the market is that 486 00:22:02,600 --> 00:22:05,120 Speaker 7: at some point in twenty four the Fed could cut 487 00:22:05,200 --> 00:22:06,280 Speaker 7: your term interest rates. 488 00:22:06,600 --> 00:22:09,040 Speaker 4: Is this for bank stops or is this for JP Morgan. 489 00:22:10,600 --> 00:22:14,440 Speaker 7: At least a very good question, because JP Morgan has 490 00:22:14,520 --> 00:22:17,720 Speaker 7: been the risk off trade and it's been spectacular, as 491 00:22:17,760 --> 00:22:20,720 Speaker 7: you guys mentioned, record highs. And so if we're going 492 00:22:20,800 --> 00:22:23,320 Speaker 7: into a risk on environment, which I believe we are, 493 00:22:23,480 --> 00:22:27,040 Speaker 7: if the FED is finished tightening, then actually JP Morgan 494 00:22:27,160 --> 00:22:29,440 Speaker 7: is probably going to be a source of funds for 495 00:22:29,560 --> 00:22:32,800 Speaker 7: many investors. It is a stock that is owned everywhere. 496 00:22:33,000 --> 00:22:35,680 Speaker 7: It's been a great stock, but risk on may be 497 00:22:35,840 --> 00:22:38,000 Speaker 7: the better way to go with a Bank America or 498 00:22:38,160 --> 00:22:39,760 Speaker 7: City Group or others like. 499 00:22:39,840 --> 00:22:41,320 Speaker 5: That a source of funds. 500 00:22:41,359 --> 00:22:43,480 Speaker 4: I love that it's a euphemism for it gets sold, 501 00:22:43,520 --> 00:22:45,040 Speaker 4: so that you could raise money to buy something you 502 00:22:45,080 --> 00:22:46,879 Speaker 4: think is going to return more the fact that you 503 00:22:46,920 --> 00:22:48,600 Speaker 4: think it's going to be Bank of America. Do you 504 00:22:48,680 --> 00:22:50,960 Speaker 4: also lean into the Mic Mayo idea that City Group 505 00:22:51,040 --> 00:22:54,760 Speaker 4: and its whole revamp with some of its streamlining, hutting units, 506 00:22:54,880 --> 00:22:58,520 Speaker 4: massive job cuts is going to be the real winner over. 507 00:22:58,520 --> 00:23:01,960 Speaker 7: Time is going to be certainly an opportunity to be 508 00:23:02,080 --> 00:23:04,720 Speaker 7: a winner. They've still got a lot of heavy lifting. 509 00:23:04,920 --> 00:23:08,159 Speaker 7: Jane Frasier's leading the charge here, of course, and I 510 00:23:08,240 --> 00:23:12,080 Speaker 7: think it's a very big, complicated job. It's turning around 511 00:23:12,160 --> 00:23:16,119 Speaker 7: the notion liner. There's early progress, a lot of heavy lifting, 512 00:23:16,280 --> 00:23:19,080 Speaker 7: as I said to do. But if she can succeed 513 00:23:19,200 --> 00:23:23,080 Speaker 7: in the management, succeed this stock is definitely undervalued and 514 00:23:23,119 --> 00:23:25,960 Speaker 7: it has great upside, but it's been a value trapped 515 00:23:26,000 --> 00:23:27,800 Speaker 7: for many years, so we'll have to wait and see. 516 00:23:28,080 --> 00:23:30,080 Speaker 2: Jarred I went to a seminar once at a firm 517 00:23:30,160 --> 00:23:33,600 Speaker 2: long ago called Tucker, Anthony and Rlday, and I was 518 00:23:33,760 --> 00:23:37,600 Speaker 2: lectured that banks are supposed to return nominal GDP plus 519 00:23:37,680 --> 00:23:40,440 Speaker 2: a little bit. I'm going to center tendency. Is that 520 00:23:40,640 --> 00:23:44,200 Speaker 2: make an eight, nine, ten percent once in your lifetime? 521 00:23:44,800 --> 00:23:47,840 Speaker 2: JP Morgan has turned that upside down. You didn't see 522 00:23:47,880 --> 00:23:50,920 Speaker 2: this coming. You're the expert, nor did anybody else. The 523 00:23:51,119 --> 00:23:55,119 Speaker 2: returns of ten years, of twenty years or fifteen percent 524 00:23:55,760 --> 00:24:00,520 Speaker 2: or so. Their thirty year return is solid double digit return. 525 00:24:01,240 --> 00:24:04,520 Speaker 1: What did Harrison? What did Diamond get right? 526 00:24:06,520 --> 00:24:09,479 Speaker 7: Tom? It's really Jamie Diamond. I think you could get 527 00:24:09,600 --> 00:24:12,760 Speaker 7: give Harrison credit, I guess for merging with Bank one 528 00:24:13,160 --> 00:24:16,320 Speaker 7: when Jamie Diamond was their CEO. And of course Diamond 529 00:24:16,359 --> 00:24:19,520 Speaker 7: has taken over since then, and it's been his steadfast 530 00:24:19,640 --> 00:24:24,600 Speaker 7: focus on delivering for shareholders, both through expansion and growth, 531 00:24:24,680 --> 00:24:27,800 Speaker 7: but at the same time controlling expenses. They also have 532 00:24:27,920 --> 00:24:30,840 Speaker 7: done a very good job in diversifying their revenue. Their 533 00:24:30,920 --> 00:24:35,960 Speaker 7: consumer banking business, similar to Bank America, is very very profitable. 534 00:24:36,200 --> 00:24:38,840 Speaker 7: On top of that, they've got a very strong capital 535 00:24:38,920 --> 00:24:42,840 Speaker 7: markets business. The bear Stearns acquisition, which was very difficult 536 00:24:43,000 --> 00:24:46,399 Speaker 7: in early years because of the reputational problems that came 537 00:24:46,440 --> 00:24:49,000 Speaker 7: along with it, has worked out extremely well for them. 538 00:24:49,240 --> 00:24:51,600 Speaker 7: So I would say the diversity of revenue, Tom and 539 00:24:51,680 --> 00:24:54,639 Speaker 7: the focus on leading or delivering for shareholders. 540 00:24:54,760 --> 00:24:56,920 Speaker 2: But back to Andrew Jackson, who you covered, you know 541 00:24:57,080 --> 00:24:59,520 Speaker 2: years ago, Girardi, I mean, are they the fifth bank 542 00:24:59,560 --> 00:25:02,480 Speaker 2: of the Uni United States? Over the holidays, somebody said 543 00:25:02,520 --> 00:25:05,760 Speaker 2: one out of five profit dollars comes to JP Morgan. 544 00:25:05,960 --> 00:25:09,720 Speaker 2: They're building their palace on fifth on Park Avenue right now. 545 00:25:10,000 --> 00:25:13,639 Speaker 1: I mean to the Butch Cassidy idea, who are these guys? 546 00:25:14,000 --> 00:25:16,760 Speaker 1: Are they the Bank of the United States. 547 00:25:18,520 --> 00:25:20,600 Speaker 7: I don't think they're the Bank of the United States. 548 00:25:20,640 --> 00:25:23,040 Speaker 7: But they have done a great job in delivering for 549 00:25:23,160 --> 00:25:27,280 Speaker 7: their shareholders and for their employees and their communities as well. 550 00:25:27,680 --> 00:25:32,160 Speaker 7: It's been a big growth engine for the company. This economy, 551 00:25:32,280 --> 00:25:35,800 Speaker 7: the global economy as well. And again it's this leadership 552 00:25:35,880 --> 00:25:38,960 Speaker 7: that they have under Diamond and his executive management team. 553 00:25:39,080 --> 00:25:41,639 Speaker 7: And Tom, you know, many of his senior folks have 554 00:25:41,840 --> 00:25:45,399 Speaker 7: left JP Morgan and are now CEOs of other banks, 555 00:25:45,520 --> 00:25:48,440 Speaker 7: like Charlie Sharp at Wells Fargo, and so he's got 556 00:25:48,480 --> 00:25:50,600 Speaker 7: a very deep bench and they execute. 557 00:25:51,000 --> 00:25:51,680 Speaker 1: And that's the key. 558 00:25:51,760 --> 00:25:54,639 Speaker 7: Tom. You know, banking is a commodity business. As you 559 00:25:54,760 --> 00:25:57,920 Speaker 7: well know, it's all about execution. And JP Morgan is 560 00:25:58,000 --> 00:25:59,880 Speaker 7: that you executed extremely well. 561 00:26:00,160 --> 00:26:02,200 Speaker 4: What is the business model though, that you want to 562 00:26:02,320 --> 00:26:04,720 Speaker 4: execute as a big US bank? Chard And this, I 563 00:26:04,760 --> 00:26:06,440 Speaker 4: think is one of the key questions that we had 564 00:26:06,800 --> 00:26:10,879 Speaker 4: during last year when the rise of private capital, private equity, 565 00:26:10,960 --> 00:26:14,760 Speaker 4: private debt really was challenging the capital markets activity of 566 00:26:14,920 --> 00:26:19,000 Speaker 4: certain big financial institutions. Can the JP Morgans, the Bank 567 00:26:19,040 --> 00:26:22,200 Speaker 4: of Americas, the city groups get into the private debt 568 00:26:22,240 --> 00:26:24,560 Speaker 4: world that in some ways has been stealing their lunch? 569 00:26:26,320 --> 00:26:28,840 Speaker 7: I think it Ken, Lisa, And when you think about it, 570 00:26:29,119 --> 00:26:31,960 Speaker 7: and you're right, the private equity private debt area is 571 00:26:32,040 --> 00:26:35,399 Speaker 7: certainly growing much faster than the banks. But believe it 572 00:26:35,520 --> 00:26:38,560 Speaker 7: or not, the shadow banking industry has been taking the 573 00:26:38,640 --> 00:26:41,520 Speaker 7: bank's market share for forty years you go back to 574 00:26:41,600 --> 00:26:44,080 Speaker 7: the early eighties and you look at the market share 575 00:26:44,160 --> 00:26:47,439 Speaker 7: that the banks had of lending into the United States, 576 00:26:47,920 --> 00:26:50,760 Speaker 7: it was well over forty percent. The private or shadow 577 00:26:50,800 --> 00:26:53,920 Speaker 7: banking market was in the low twenties. Today it's completely 578 00:26:54,000 --> 00:26:56,560 Speaker 7: flip flopped. The bank's market share now is in the 579 00:26:56,640 --> 00:26:59,879 Speaker 7: low twenties and the shadow banking is in the fifty 580 00:27:00,040 --> 00:27:03,120 Speaker 7: over fifty percent. So the banks have done it through consolidation. 581 00:27:03,520 --> 00:27:05,359 Speaker 7: You know, when Tom and I were young, we had 582 00:27:05,400 --> 00:27:07,680 Speaker 7: over eighteen thousand banks in the United States in the 583 00:27:07,720 --> 00:27:11,400 Speaker 7: early nineteen eighties. Today there's forty six hundred. JP Morgan 584 00:27:11,520 --> 00:27:14,040 Speaker 7: has been a big beneficiary of that, and they've been 585 00:27:14,080 --> 00:27:17,159 Speaker 7: able to create those efficiencies. So yes, they can compete. 586 00:27:17,240 --> 00:27:19,879 Speaker 7: They will compete, and I don't think that the banks 587 00:27:19,920 --> 00:27:22,000 Speaker 7: are going to be put out of business, but certainly 588 00:27:22,320 --> 00:27:24,600 Speaker 7: they don't have the market share that they used to have. 589 00:27:24,880 --> 00:27:27,480 Speaker 7: But we have to remember too, the economy has grown 590 00:27:27,600 --> 00:27:30,800 Speaker 7: dramatically in forty years, and they have the smallest slice 591 00:27:30,840 --> 00:27:33,040 Speaker 7: of the pie, but they're more profitable than ever, not 592 00:27:33,200 --> 00:27:34,880 Speaker 7: just JP Morgan, but other banks as well. 593 00:27:35,000 --> 00:27:37,680 Speaker 4: What about the smaller banks, Given the fact that you're 594 00:27:37,720 --> 00:27:41,760 Speaker 4: talking about a bigger slice of just overall activity. You 595 00:27:41,880 --> 00:27:43,560 Speaker 4: haven't seen that so much in the smaller banks, and 596 00:27:43,640 --> 00:27:46,080 Speaker 4: with rates forbading high, you're going to have real commercial 597 00:27:46,119 --> 00:27:47,280 Speaker 4: real estate pressures as well. 598 00:27:48,560 --> 00:27:51,720 Speaker 7: It's interesting, it depends on you know how small the 599 00:27:51,800 --> 00:27:54,560 Speaker 7: bank is and who owns it. I've always maintained this 600 00:27:54,800 --> 00:27:57,880 Speaker 7: banking system we have in the United States is obviously 601 00:27:58,080 --> 00:28:00,479 Speaker 7: very polarized. You got the very small banks at one 602 00:28:00,640 --> 00:28:02,679 Speaker 7: end and the very large banks at the other end. 603 00:28:02,960 --> 00:28:05,440 Speaker 7: And if it's a non if it's if the owners 604 00:28:05,560 --> 00:28:08,600 Speaker 7: of the smaller banks, private banks, or mutual savings banks 605 00:28:08,760 --> 00:28:11,560 Speaker 7: or another group of banks, if their owners are comfortable 606 00:28:11,640 --> 00:28:14,760 Speaker 7: with earning returns on equities of four or five percent, 607 00:28:15,200 --> 00:28:17,399 Speaker 7: and they're not going to sell the bank as long 608 00:28:17,440 --> 00:28:20,240 Speaker 7: as they have FDIC insurance, they're going to remain in 609 00:28:20,320 --> 00:28:23,080 Speaker 7: business indefinitely. On the other end, if you do have 610 00:28:23,160 --> 00:28:25,560 Speaker 7: a bank with thirty billion in assets and it's not 611 00:28:25,720 --> 00:28:28,760 Speaker 7: earning up to what its shareholders want it's to earn, 612 00:28:29,080 --> 00:28:31,720 Speaker 7: then they're going to have to consolidation. Consolidation is going 613 00:28:31,800 --> 00:28:34,280 Speaker 7: to continue. We're in a pause right now, but the 614 00:28:34,440 --> 00:28:37,360 Speaker 7: long term trend has been consolidation in the industry will 615 00:28:37,400 --> 00:28:40,120 Speaker 7: continue to consolidate in the future and argue. 616 00:28:40,120 --> 00:28:41,840 Speaker 10: Jared, let's finish on Washington if we can. 617 00:28:41,880 --> 00:28:44,120 Speaker 6: I was speaking to your colleague Amy with Silverman just 618 00:28:44,240 --> 00:28:46,280 Speaker 6: yesterday and were reflected on a line that came from 619 00:28:46,600 --> 00:28:49,760 Speaker 6: Lori Cavasina, who I think described presidential politics in the 620 00:28:49,800 --> 00:28:51,640 Speaker 6: election on the horizon like staring at the sun. 621 00:28:52,160 --> 00:28:53,720 Speaker 10: I just wonder if that's what it's like for you. 622 00:28:53,880 --> 00:28:56,440 Speaker 6: Have you given any thought to changes in leadership in 623 00:28:56,600 --> 00:28:59,320 Speaker 6: Washington and what might mean for the companies to fall 624 00:28:59,400 --> 00:28:59,840 Speaker 6: under your cover? 625 00:29:01,840 --> 00:29:04,160 Speaker 7: John, It's a good question because it's going to be 626 00:29:04,200 --> 00:29:06,440 Speaker 7: the topic du jour this year, of course, with the 627 00:29:06,480 --> 00:29:09,640 Speaker 7: election coming. And what we can say is that under 628 00:29:09,920 --> 00:29:13,480 Speaker 7: the current administration there's been more regulation of banks, particularly 629 00:29:13,560 --> 00:29:16,920 Speaker 7: with the Consumer Financial Protection Bureau. We don't know who's 630 00:29:16,960 --> 00:29:19,600 Speaker 7: going to be running, you know, just yet in November, 631 00:29:19,680 --> 00:29:22,080 Speaker 7: but if Trump is the candidate for the other party, 632 00:29:22,120 --> 00:29:25,200 Speaker 7: the Republican Party, and if he was to win, his 633 00:29:25,320 --> 00:29:30,000 Speaker 7: administration had less regulation for banks. So if that administration 634 00:29:30,280 --> 00:29:32,440 Speaker 7: was to come back, you would have to expect they 635 00:29:32,520 --> 00:29:35,480 Speaker 7: would change the heads of different regulatory agencies in twenty 636 00:29:35,560 --> 00:29:38,480 Speaker 7: twenty five, and it probably would be less regulation for 637 00:29:38,600 --> 00:29:40,440 Speaker 7: the banks as we move forward. 638 00:29:40,320 --> 00:29:40,920 Speaker 1: You know, Johnny. 639 00:29:40,960 --> 00:29:43,160 Speaker 2: I think Bloomberg Radio is missing it today because we're 640 00:29:43,160 --> 00:29:46,760 Speaker 2: seeing the fireplace with your dacity here on Bloomberg Television 641 00:29:47,640 --> 00:29:51,720 Speaker 2: talks about inflation South Paris, Maine. Three hundred and twenty 642 00:29:51,840 --> 00:29:55,800 Speaker 2: five dollars per cord of red oak that's delivered to 643 00:29:55,920 --> 00:29:59,560 Speaker 2: Shake Cassidy and he's he's popping like eight night cords 644 00:29:59,600 --> 00:29:59,880 Speaker 2: of winter. 645 00:30:00,520 --> 00:30:02,400 Speaker 1: He used a thing about that. I mean, it's adding up. 646 00:30:02,560 --> 00:30:04,200 Speaker 10: It's expensive. But don't you love the smell. 647 00:30:04,440 --> 00:30:07,280 Speaker 1: The smell's great. The damn dog is over by the fireplace. 648 00:30:07,440 --> 00:30:10,440 Speaker 10: The smell you know, this dog's called Elizabeth. 649 00:30:10,520 --> 00:30:11,520 Speaker 1: We won't call Aaron. 650 00:30:12,280 --> 00:30:17,400 Speaker 10: We want to thank you, Joe Capital of Marcus, Thank you, sir. 651 00:30:27,600 --> 00:30:29,160 Speaker 2: Let's get to it, and we do it with an 652 00:30:29,200 --> 00:30:31,960 Speaker 2: authority that we have had through Auto Tournament of the 653 00:30:32,000 --> 00:30:35,280 Speaker 2: Eastern Mediterranean. Norman rule joins us now senior advisor at 654 00:30:35,280 --> 00:30:38,680 Speaker 2: the Center for Strategic and International Studies and the courses 655 00:30:38,720 --> 00:30:41,440 Speaker 2: work for the nation in intelligence. 656 00:30:41,880 --> 00:30:42,240 Speaker 1: Norman. 657 00:30:42,760 --> 00:30:45,640 Speaker 2: When I say Lebanon, for all of us of a 658 00:30:45,760 --> 00:30:50,760 Speaker 2: certain persuasion, we are completely formed by something frankly is 659 00:30:50,840 --> 00:30:54,960 Speaker 2: stunning forty years ago, which is the Beirut Barracks bombing. 660 00:30:55,120 --> 00:31:00,400 Speaker 2: When we lost marines at accountable iwo Jima level. Where 661 00:31:00,440 --> 00:31:04,640 Speaker 2: are we now with Lebanon, with Hesbela, Do we have 662 00:31:04,760 --> 00:31:09,000 Speaker 2: a relationship? Was it forever fractured forty years ago? 663 00:31:10,800 --> 00:31:14,120 Speaker 13: That's an excellent point, and I regret I remember that 664 00:31:14,280 --> 00:31:20,280 Speaker 13: incident well and lost friends. The event of forty years 665 00:31:20,280 --> 00:31:23,080 Speaker 13: ago actually had a different message for the world. The 666 00:31:23,480 --> 00:31:27,200 Speaker 13: US pulled out of Lebanon at that time, and Osama 667 00:31:27,200 --> 00:31:30,200 Speaker 13: bin Laden later stated that watching the withdrawal of the 668 00:31:30,280 --> 00:31:33,280 Speaker 13: United States from Lebanon was one of the motivators for 669 00:31:33,440 --> 00:31:36,880 Speaker 13: him to undertake his operations because he realized the West 670 00:31:36,960 --> 00:31:39,280 Speaker 13: could be pushed back out of the region. 671 00:31:39,920 --> 00:31:41,680 Speaker 1: Are we being pushed back now? 672 00:31:41,880 --> 00:31:45,160 Speaker 2: I mean within the multiple fronts at Lisa Abramowitz's outlined 673 00:31:45,560 --> 00:31:48,160 Speaker 2: this morning Gods of the West Bank and again up 674 00:31:48,200 --> 00:31:51,520 Speaker 2: to the border with Lebanon as the West is America 675 00:31:51,640 --> 00:31:52,719 Speaker 2: being pushed out now? 676 00:31:54,080 --> 00:31:57,120 Speaker 13: No, we have a very different profile, and indeed, diplomacy 677 00:31:57,280 --> 00:32:00,000 Speaker 13: is likely going to increase in intensity and come out 678 00:32:00,160 --> 00:32:02,520 Speaker 13: weeks because we need to come up with a way 679 00:32:02,600 --> 00:32:05,720 Speaker 13: to move. Lebanese has belowed north of the Israeli border 680 00:32:06,120 --> 00:32:09,400 Speaker 13: so that Israeli citizens can return to their homes. The 681 00:32:09,520 --> 00:32:12,800 Speaker 13: thousands tens of thousand of Israeli citizens to open their businesses, 682 00:32:12,920 --> 00:32:15,280 Speaker 13: go to school, and also so that tens of thousands 683 00:32:15,320 --> 00:32:18,080 Speaker 13: of Lebanese can return south to that border which has 684 00:32:18,120 --> 00:32:20,160 Speaker 13: become such a flashpoint in recent weeks. 685 00:32:20,320 --> 00:32:23,760 Speaker 4: Yeah, hundreds of thousands of people have been misplaced or 686 00:32:23,800 --> 00:32:25,680 Speaker 4: displaced as a result of some of the fighting on 687 00:32:25,760 --> 00:32:28,000 Speaker 4: both sides. But Norman and I'm curious whether this is 688 00:32:28,040 --> 00:32:33,080 Speaker 4: an escalation the fact that Israel did attack according to Hamas, 689 00:32:33,400 --> 00:32:36,040 Speaker 4: but also with a wink, wink, nod nod from Israeli 690 00:32:36,080 --> 00:32:39,520 Speaker 4: officials to kill this is Mamas executive. 691 00:32:40,760 --> 00:32:43,040 Speaker 13: Well, to be clear, Israel has stated from the beginning 692 00:32:43,080 --> 00:32:45,920 Speaker 13: of the October seventh massacred that it would eradicate the 693 00:32:46,600 --> 00:32:50,520 Speaker 13: Hamas leadership responsible for that action, and therefore this is 694 00:32:50,600 --> 00:32:52,320 Speaker 13: no surprise. I think what you have to look at 695 00:32:52,480 --> 00:32:55,720 Speaker 13: is this drone attack, which Israel has not admitted but 696 00:32:55,960 --> 00:32:59,920 Speaker 13: is understood to have undertaken, took place in an incredibly secure, 697 00:33:00,000 --> 00:33:03,920 Speaker 13: prey conscious neighborhood, and it demonstrates an exquisite and dynamic 698 00:33:04,040 --> 00:33:08,560 Speaker 13: intelligence capacity. So as Hesbula thinks about it's connor its 699 00:33:08,640 --> 00:33:11,520 Speaker 13: response to this, it's got to think about what is 700 00:33:11,680 --> 00:33:13,720 Speaker 13: known around us and what can we get away with 701 00:33:13,960 --> 00:33:15,720 Speaker 13: and what will happen to the people who might be 702 00:33:15,800 --> 00:33:17,440 Speaker 13: involved in that attack against Israel. 703 00:33:17,720 --> 00:33:19,680 Speaker 4: Do you have any sense, Norman, of what the conversations 704 00:33:19,720 --> 00:33:23,680 Speaker 4: are like with Hamas, with Hesbelah, with the Iranian leadership, 705 00:33:23,880 --> 00:33:26,600 Speaker 4: given the fact that a lot of people think that 706 00:33:26,640 --> 00:33:29,040 Speaker 4: they're taking some cues from Iran, that there has been 707 00:33:29,120 --> 00:33:31,840 Speaker 4: funding from Iran, that you have the Iranian warship going 708 00:33:31,880 --> 00:33:34,720 Speaker 4: to the Red Sea, and the huthis also Iranian fact 709 00:33:35,440 --> 00:33:38,400 Speaker 4: making noise and trying to interrupt Western shipping lines. 710 00:33:39,720 --> 00:33:44,000 Speaker 13: Iran It's proxies have no strategic drivers to involve themselves 711 00:33:44,120 --> 00:33:47,520 Speaker 13: more fully in this conflict. It would impact multiple strategic 712 00:33:47,560 --> 00:33:50,080 Speaker 13: equities for a game that is uncertain that they have 713 00:33:50,400 --> 00:33:54,080 Speaker 13: multiple incentives to continue and perhaps raise the intensity of 714 00:33:54,160 --> 00:33:56,720 Speaker 13: attacks against Israel to show that they have skin in 715 00:33:56,760 --> 00:33:59,400 Speaker 13: the resistance game. I should also note that today, the 716 00:33:59,480 --> 00:34:02,320 Speaker 13: January third, is the fourth anniversary of the killing of 717 00:34:02,680 --> 00:34:05,600 Speaker 13: Cossum Solomoni, and that's a day when one would expect 718 00:34:06,920 --> 00:34:11,360 Speaker 13: Iranian proxies to attack US or Israeli versus just for 719 00:34:11,520 --> 00:34:13,120 Speaker 13: that symbolic anniversary. 720 00:34:13,440 --> 00:34:15,640 Speaker 6: Exactly where I wanted to go normally let's talk about it, 721 00:34:15,680 --> 00:34:18,600 Speaker 6: the assassination of the major General. It's easy to forget 722 00:34:18,680 --> 00:34:21,759 Speaker 6: that it ever happened because several weeks later, many weeks later, 723 00:34:21,840 --> 00:34:24,600 Speaker 6: we were all drowning in a global pandemic. What has 724 00:34:24,680 --> 00:34:28,280 Speaker 6: happened since then with the relationship between the United States 725 00:34:28,480 --> 00:34:33,200 Speaker 6: and Iran, between two different white Houses, very little. 726 00:34:33,400 --> 00:34:38,520 Speaker 13: The indirect engagement that took place did produce the possibility 727 00:34:38,760 --> 00:34:44,520 Speaker 13: of some sort of engagement, a hostage released by the 728 00:34:44,600 --> 00:34:47,800 Speaker 13: Iranians in exchange for the release of personnel. But Iran's 729 00:34:47,840 --> 00:34:50,160 Speaker 13: regional activities did not change, and I don't think the 730 00:34:50,200 --> 00:34:53,680 Speaker 13: White House expected them to change. More So, Iran's nuclear 731 00:34:53,719 --> 00:34:56,640 Speaker 13: program has continue to expand. And here's the important point. 732 00:34:57,000 --> 00:35:00,640 Speaker 13: Iran is now producing enriched uranium at level that no 733 00:35:00,920 --> 00:35:04,320 Speaker 13: state that is not pursued a nuclear weapon has ever produced. 734 00:35:04,560 --> 00:35:07,040 Speaker 13: It has no civilian use for the nature of its 735 00:35:07,080 --> 00:35:09,759 Speaker 13: current enrichment. So you have to ask yourself the question, 736 00:35:10,080 --> 00:35:14,440 Speaker 13: has the West de facto recognized the Iranian military nuclear program? 737 00:35:14,560 --> 00:35:16,960 Speaker 13: The White House would say no. The facts do raise 738 00:35:17,000 --> 00:35:17,359 Speaker 13: the question. 739 00:35:17,960 --> 00:35:20,040 Speaker 2: Norman a tough way to Segui here, but I'm going 740 00:35:20,080 --> 00:35:23,640 Speaker 2: to do it as one final question. Taiwan continues to 741 00:35:23,760 --> 00:35:26,759 Speaker 2: come up within our first of the year conversations. 742 00:35:27,160 --> 00:35:30,200 Speaker 1: Do we have good intelligence on mainland China? 743 00:35:32,880 --> 00:35:36,799 Speaker 13: The United States intelligence program against China, has stated by 744 00:35:37,560 --> 00:35:41,799 Speaker 13: Central Intelligence Agency had Bill Burns, is robust and works significantly. 745 00:35:42,200 --> 00:35:44,840 Speaker 13: I won't comment on those operations to the extent that 746 00:35:44,920 --> 00:35:46,680 Speaker 13: I know of them, but I will say that this 747 00:35:46,800 --> 00:35:50,200 Speaker 13: remains such a priority that it's an all source intelligence 748 00:35:50,280 --> 00:35:53,120 Speaker 13: programs at all imagery and a variety of different aspects. 749 00:35:53,320 --> 00:35:55,759 Speaker 13: We're going to have a good understanding of some of 750 00:35:55,920 --> 00:35:59,040 Speaker 13: China's activities that will provide the warning policy maker's need 751 00:36:00,480 --> 00:36:00,960 Speaker 13: for the update. 752 00:36:01,000 --> 00:36:04,120 Speaker 6: You're insights so valuable, Norman Roll there for the Center 753 00:36:04,440 --> 00:36:06,160 Speaker 6: for Strategic and International Studies. 754 00:36:06,320 --> 00:36:06,799 Speaker 10: Thank you, sir. 755 00:36:07,239 --> 00:36:11,040 Speaker 2: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and 756 00:36:11,200 --> 00:36:15,360 Speaker 2: anywhere else you get your podcasts. Listen live every weekday 757 00:36:15,680 --> 00:36:19,120 Speaker 2: starting at seven am Eastern. I'm Bloomberg dot Com, the 758 00:36:19,320 --> 00:36:23,759 Speaker 2: iHeartRadio app, tune In, and the Bloomberg Business app. You 759 00:36:23,880 --> 00:36:27,920 Speaker 2: can watch us live on Bloomberg Television and always I'm 760 00:36:27,920 --> 00:36:28,960 Speaker 2: the Bloomberg Terminal. 761 00:36:29,400 --> 00:36:33,560 Speaker 1: Thanks for listening. I'm Tom Keen, and this is Bloomberg