WEBVTT - Bloomberg Surveillance TV: May 27th, 2026

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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<v Speaker 2>with Lisa Bromwitz and Amrie Hordernt. Join us each day

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<v Speaker 2>for insight from the best in markets, economics, and geopolitics

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<v Speaker 2>from our global headquarters in New York City. We are

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<v Speaker 2>live on Bloomberg Television weekday mornings from six to nine

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<v Speaker 2>am Eastern. Subscribe to the podcast on Apple, Spotify or

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<v Speaker 2>anywhere else you listen, and as always on the Bloomberg

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<v Speaker 2>Terminal and the Bloomberg Business app. We begin this out

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<v Speaker 2>with Stock's extending gains on another chip field search, Mark

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<v Speaker 2>Hayfley of UBS raising his year end price target to

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<v Speaker 2>seventy nine hundred, writing, continued economic growth and AI adoption

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<v Speaker 2>should drive further US earnings increases, supporting additional market gains

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<v Speaker 2>over the medium term. Mark joins us now for more.

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<v Speaker 2>Welcome to the program. Maybe this is a gut check

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<v Speaker 2>on sentiment with the following question are you bullish enough?

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<v Speaker 3>That's a good one, Thank you. You know, I think

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<v Speaker 3>that we're bullish on the SMP, but we're probably even

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<v Speaker 3>more bullish on this rally. Broadening out from kind of

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<v Speaker 3>the top names and extending.

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<v Speaker 4>Globally from here. So you know, for.

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<v Speaker 3>Those people who haven't been in on the rally and

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<v Speaker 3>are afraid to get in, we think there is a

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<v Speaker 3>lot of opportunity globally.

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<v Speaker 4>Now, how much is.

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<v Speaker 1>This coming from the AI sectors that have already gotten

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<v Speaker 1>bid up, and how much is this coming from the

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<v Speaker 1>broadening out that is sensibly will come with some sort

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<v Speaker 1>of resolution in the Middle East.

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<v Speaker 3>Well, I don't think you can discount the AI impact

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<v Speaker 3>in a broader sense, which is that you know, the

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<v Speaker 3>capex spend from AI is probably having two times the

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<v Speaker 3>impact of the negative effects of the rise in oil

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<v Speaker 3>prices on global GDP, so that's factoring into this as well. Now,

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<v Speaker 3>of course, our economist Paul Donovan talks about the wily

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<v Speaker 3>coyote effect, where you know, behavioral economics. At some point,

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<v Speaker 3>if oil prices continue to be elevated, or they continue

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<v Speaker 3>to surge over one hundred, behavioral economics can take over

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<v Speaker 3>and things can start to break and we can see

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<v Speaker 3>this unravel. But I like that AI to oil statistic

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<v Speaker 3>a little bit because it gives people a sense of

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<v Speaker 3>you know, there are.

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<v Speaker 4>Other factors besides what's going on.

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<v Speaker 1>In the oil story, Mark, we were just talking about

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<v Speaker 1>how difficult it is to really price some of the

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<v Speaker 1>moonshots that we've seen in the tech universe, how far

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<v Speaker 1>some of the prices have come of the shares as

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<v Speaker 1>well as price targets that can't keep up with how

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<v Speaker 1>fast it's moving. How do you price a moonshot? How

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<v Speaker 1>do you price a technology where we don't have a

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<v Speaker 1>sense of what the ultimate goal is or frankly even

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<v Speaker 1>how quickly it's moving.

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<v Speaker 3>Well, the good news is I don't have to do

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<v Speaker 3>that because we've had AI power and resources and healthcare

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<v Speaker 3>as long term themes for a considerable period of time.

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<v Speaker 4>And you know, playing.

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<v Speaker 3>It that way, you uh, you can you can benefit

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<v Speaker 3>from this without trying to pick one or the other names.

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<v Speaker 3>And I think that's even more important now as we've

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<v Speaker 3>had some very large moves.

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<v Speaker 4>Uh.

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<v Speaker 3>You know, I think if you're gonna, if you're gonna

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<v Speaker 3>start picking names, you really have to dig in, be

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<v Speaker 3>very selective, or you can just play the larger themes

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<v Speaker 3>that we think are going to be durable.

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<v Speaker 2>Mark, the big person right now is just to highlight

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<v Speaker 2>where the constraints are, the so called bottlenecks. Do you

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<v Speaker 2>see that shifting in the years ahead. Do you see

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<v Speaker 2>a visible runway to so called over capacity, which is

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<v Speaker 2>the ultimate worry, that's the bus further down the road

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<v Speaker 2>that people worry about. Do you see any runways towards

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<v Speaker 2>that in the medium term.

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<v Speaker 3>I think it's very hard right now to get to

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<v Speaker 3>over capacity.

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<v Speaker 4>And as as you point out, it's.

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<v Speaker 3>More like there's more and more bottlenecks in the chain

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<v Speaker 3>as just the the cap X projections keep growing and

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<v Speaker 3>so uh, you know that that's I think a little

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<v Speaker 3>bit more more The worry at this end is where's

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<v Speaker 3>the you know, where's the power going to come from?

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<v Speaker 3>Where are the transformers that are going to the ground,

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<v Speaker 3>you know what, where's all these parts of the value chain?

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<v Speaker 3>How are they going to add up? And who's going

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<v Speaker 3>to benefit from that and who may not benefit from it.

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<v Speaker 3>Now that now that the realization that there is this

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<v Speaker 3>scarcity uh is out there, the risk reward on kind

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<v Speaker 3>of just the pure play, say chip names is a

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<v Speaker 3>little harder to make mark.

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<v Speaker 2>How a clin's stating with this, How are they avoiding

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<v Speaker 2>so called company specific risks? How do you mitigate them?

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<v Speaker 2>What kind of advice are you offering?

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<v Speaker 4>Well?

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<v Speaker 3>I will say that our clients have been very sanguine

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<v Speaker 3>through this. I think many of them, uh, you know,

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<v Speaker 3>as we get together and talk and talk about the

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<v Speaker 3>impact of AI on people's businesses, it's generally been positive.

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<v Speaker 3>I do think a lot of clients have stayed invested

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<v Speaker 3>and they have not really been phased by this situation.

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<v Speaker 3>And you know, we've kind of said, don't don't get

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<v Speaker 3>too caught up in the headlines, stay focused on the data.

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<v Speaker 3>You know, oil prices being one on the negative side,

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<v Speaker 3>but also, as you pointed out, this tremendous earnings growth,

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<v Speaker 3>this tremendous cap X build. And then something that we

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<v Speaker 3>have to keep in mind is what usually kills these

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<v Speaker 3>bull markets is FED hikes. And given what's going on

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<v Speaker 3>with with wages and the fact that a lot of

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<v Speaker 3>the inflation is probably driven by energy, we still don't

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<v Speaker 3>see the FED hiking anytime soon.

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<v Speaker 5>Is that one of the bigger concerns so that investors

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<v Speaker 5>are bringing up with you. They're concerned that the Federal

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<v Speaker 5>Reserve is going to potentially hike interest rates this year.

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<v Speaker 3>Well, I think that you know, for our international investors,

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<v Speaker 3>there are two of big concerns out there that are

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<v Speaker 3>related of course, one is inflation and then what does

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<v Speaker 3>that mean, probably in particular for the dollar, because last

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<v Speaker 3>year a lot of international investors saw their US gains

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<v Speaker 3>eaten up by dollar weakness compared to other currencies, and

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<v Speaker 3>so I think d dollarization is a topic that comes

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<v Speaker 3>up a lot.

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<v Speaker 4>Now.

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<v Speaker 3>We think that getting the global diversification and for many

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<v Speaker 3>of our international investors looking at China and China tech

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<v Speaker 3>as a way to be invested in an almost completely

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<v Speaker 3>different system. At this point, it remains an important theme.

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<v Speaker 3>But given what's going on, we like the US market.

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<v Speaker 3>Given what's going on in the US market, investors haven't

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<v Speaker 3>given up on the US yet.

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<v Speaker 4>Mark.

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<v Speaker 1>For about twenty years, a lot of people talked about

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<v Speaker 1>the financialization of money and how people would invest and

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<v Speaker 1>they'd make money and then they put it back in investments,

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<v Speaker 1>and it wasn't making its way in to the real world.

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<v Speaker 1>And suddenly it's making its way to the real world

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<v Speaker 1>in a big way. I just wonder if you can

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<v Speaker 1>see these incredible valuation rises, these incredible capex budgets without

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<v Speaker 1>some of it producing inflationary results. We're talking about how

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<v Speaker 1>you aren't going to see some sort of persistent inflation.

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<v Speaker 1>Doesn't some of this lead to a persistently higher inflation

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<v Speaker 1>moment at a time of deglobalization and reindustrialization.

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<v Speaker 3>Well, it's it's look, it's a great point, But there again,

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<v Speaker 3>I think it's one of these races.

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<v Speaker 4>Uh. You know, I think we can all point.

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<v Speaker 3>To the potential for deflationary forces from ai.

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<v Speaker 4>Uh.

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<v Speaker 3>You know that that could be out there, I think,

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<v Speaker 3>But to your point right now, given given just this uh,

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<v Speaker 3>this scarcity of tokens, we're all we're all focused on scarcity.

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<v Speaker 3>We're all focused on, you know, the need to settle

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<v Speaker 3>prices higher, uh, perhaps to even create some demand destruction.

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<v Speaker 3>But I think one of the points you made at

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<v Speaker 3>the beginning of this is that there is there is

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<v Speaker 3>so much uncertainty around it.

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<v Speaker 4>So the way that we.

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<v Speaker 3>Think about it is that you know, a little bit

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<v Speaker 3>of inflation and even a little bit of higher rates,

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<v Speaker 3>as long as that's driven by growth. And we you know,

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<v Speaker 3>we're expecting twenty percent earnings growth for the S and

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<v Speaker 3>P five hundred. The equity markets are likely to tolerate that.

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<v Speaker 3>And I think, you know, one of the things that

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<v Speaker 3>we've talked about in the past is how we have

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<v Speaker 3>been more focused on equities now that we've come out

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<v Speaker 3>of the zero interest rate policies, as as a place

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<v Speaker 3>for asset allocations, because they are more likely to weather

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<v Speaker 3>bouts of inflation, say, of course than bonds can do.

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<v Speaker 2>What'd you think gold fits into that?

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<v Speaker 4>Well, we still like the gold.

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<v Speaker 3>I think it's it's you know, I think gold Actually

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<v Speaker 3>when there was talk around the FED and things like that,

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<v Speaker 3>you know that that was driving money into gold. And

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<v Speaker 3>now as people think that interest rates are going to

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<v Speaker 3>go higher, that's taken money out of the gold trade.

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<v Speaker 3>But when we look at the fundamental drivers that got

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<v Speaker 3>us into the gold trade, which is concerns about the

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<v Speaker 3>weaponization of the US dollar with sanctions, what our clients

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<v Speaker 3>tell us about their interest in d dollarization, we think

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<v Speaker 3>that the gold trade is still going to have legs

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<v Speaker 3>in the future and it does provide something of a

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<v Speaker 3>hedge in portfolios.

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<v Speaker 2>Stay with US mult Bloomberg Surveillance coming up after this.

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<v Speaker 2>The President gathering his cabinet today as the administration continues

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<v Speaker 2>high stakes negotiations with Iran, the former US Sentcom Commander

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<v Speaker 2>General Joseph Fotel saying Giran is using the straight of

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<v Speaker 2>foremost a strategic leverage in a wider confrontation. The likely

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<v Speaker 2>trajectory for future US military operations is a prolonged mission.

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<v Speaker 2>General Votel joined US now for more, General, welcome to

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<v Speaker 2>the programs. We're all well familiar with the situation in

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<v Speaker 2>the Middle East. We understand the importance to energy. We

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<v Speaker 2>can just about identify the stratiformers on a map. General

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<v Speaker 2>for people haven't been there, who don't understand what it

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<v Speaker 2>actually looks like to go through that waterway. Why is

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<v Speaker 2>it so difficult to get energy flowing even now?

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<v Speaker 6>Oh? Thanks, good morning, John, it's good to be with you.

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<v Speaker 4>Well.

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<v Speaker 6>First of the reason geographically, it's a very narrow passage

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<v Speaker 6>where the main transit routes are only about two miles long.

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<v Speaker 4>The water in the.

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<v Speaker 6>Got in the strait is generally pretty shallow, it's very rocky,

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<v Speaker 6>particularly on the Omani Ammaradi side, UH, and it's really

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<v Speaker 6>subject to weather.

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<v Speaker 4>It's it's when you go.

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<v Speaker 6>Through the straits of Homos, it's very difficult to see,

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<v Speaker 6>it's very difficult to you know, kind of be oriented

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<v Speaker 6>to where you are. So it's just a very very

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<v Speaker 6>difficult UH portion of water to get through. And of

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<v Speaker 6>course it's dominated geographically by Iran. You can't dispute the

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<v Speaker 6>fact that on at least you know, three sides of

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<v Speaker 6>it as you go through, the Iranians have the geographical

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<v Speaker 6>advantage there general.

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<v Speaker 5>Yesterday the Wall Street Journal said the Navy started assisting

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<v Speaker 5>in terms of escorts of vessels to the Straight and

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<v Speaker 5>then Syncome came out and said, they're not currently.

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<v Speaker 4>Escorting commercial vessels.

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<v Speaker 5>If we were to see mass escorts, what would that

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<v Speaker 5>look like?

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<v Speaker 6>Yeah, and real with that, what generally look like as

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<v Speaker 6>the commitment of a number of our destroyers, probably someone

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<v Speaker 6>in the order of fifteen to twenty that would be

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<v Speaker 6>dedicated to the mission. And what they would basically do

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<v Speaker 6>is not only ticket and what maritime assets and key

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<v Speaker 6>positions where they could provide protection over the top of

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<v Speaker 6>these of these convoys, but they'd also be in a

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<v Speaker 6>position where they would be escorting them. Sometimes we would

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<v Speaker 6>try we might try to, uh, you know, bring together

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<v Speaker 6>a number of tankers and then move them as a

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<v Speaker 6>package through the through the golf with with close escort

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<v Speaker 6>by US Navy destroyers, or we may move in smaller packets,

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<v Speaker 6>or we may try to do what, you know, what

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<v Speaker 6>I would describe kind of as his zone defense create

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<v Speaker 6>up bubble under which these uh, these ships can move.

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<v Speaker 6>But important to do that is we have to be

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<v Speaker 6>certain that they can move through safely, so they aren't

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<v Speaker 6>going to bump into minds, they're not gonna have they're

0:12:33.920 --> 0:12:36.959
<v Speaker 6>not going to be subject to attacks from the Iranians.

0:12:37.000 --> 0:12:39.240
<v Speaker 6>And that's what takes up a lot of the resources.

0:12:39.559 --> 0:12:43.439
<v Speaker 6>It's the mind clearing, it's uh, the defensive resources we

0:12:43.520 --> 0:12:45.360
<v Speaker 6>have to put in place. There's a number of ships

0:12:45.360 --> 0:12:47.800
<v Speaker 6>that we have to have there, uh in order to

0:12:47.880 --> 0:12:50.400
<v Speaker 6>do that to relieve the pressure in the in the

0:12:50.440 --> 0:12:51.120
<v Speaker 6>golf right now.

0:12:51.240 --> 0:12:54.200
<v Speaker 5>Well, based off the US presence right now, would the

0:12:54.280 --> 0:12:56.079
<v Speaker 5>United States be able to undertake this.

0:12:57.520 --> 0:12:59.640
<v Speaker 6>Well, I think there's certainly a considerable amount of a

0:12:59.640 --> 0:13:04.360
<v Speaker 6>maritime resources in the region, and I think probably I'm

0:13:04.400 --> 0:13:07.920
<v Speaker 6>an army guy talking here, but I think probably with

0:13:07.960 --> 0:13:11.920
<v Speaker 6>the resources that are in place, we probably could certainly

0:13:12.120 --> 0:13:15.040
<v Speaker 6>begin to do some type of escort emissions, but that

0:13:15.080 --> 0:13:17.360
<v Speaker 6>would likely come to the cost of other things are doing,

0:13:17.480 --> 0:13:19.719
<v Speaker 6>so it would be difficult for US to maintain a

0:13:19.800 --> 0:13:24.920
<v Speaker 6>blockade and to escort And of course, you know it

0:13:24.960 --> 0:13:29.080
<v Speaker 6>isn't just maritime assets, it's US Air Force assets, in

0:13:29.120 --> 0:13:35.439
<v Speaker 6>some cases ground resources without marines or military army organizations

0:13:35.440 --> 0:13:38.000
<v Speaker 6>that have to man air defense sites and have to

0:13:38.040 --> 0:13:40.000
<v Speaker 6>be paired to board ships and have to be prepared

0:13:40.000 --> 0:13:42.840
<v Speaker 6>to go ashore if we need to to remove threats.

0:13:42.920 --> 0:13:46.040
<v Speaker 6>So it's a more comprehensive effort. So there's enough force

0:13:46.160 --> 0:13:48.440
<v Speaker 6>to probably do some of that right now, but it

0:13:48.480 --> 0:13:50.920
<v Speaker 6>would really limit our ability to do anything else.

0:13:51.280 --> 0:13:52.679
<v Speaker 1>General. This doesn't seem to be what a lot of

0:13:52.720 --> 0:13:55.440
<v Speaker 1>people are talking about with respect to striking a deal.

0:13:55.760 --> 0:13:58.640
<v Speaker 1>They expect a resolution to the conflict. How do you

0:13:58.760 --> 0:14:02.679
<v Speaker 1>understand some of the discussions around the negotiations between the

0:14:02.800 --> 0:14:06.160
<v Speaker 1>US and Iran and assertions that we are close to

0:14:06.200 --> 0:14:07.520
<v Speaker 1>reaching some sort of deal.

0:14:09.240 --> 0:14:13.120
<v Speaker 6>Well, we're working through interlocutors right now, and for the

0:14:13.200 --> 0:14:16.080
<v Speaker 6>last several weeks has been the Pakistanis and now most

0:14:16.120 --> 0:14:19.360
<v Speaker 6>recently the Kataris are joined. Of course, they're recognized and

0:14:19.520 --> 0:14:22.600
<v Speaker 6>very capable negotiators where we have a lot of trust

0:14:22.640 --> 0:14:25.840
<v Speaker 6>in and so I'm sure there are discussions going back

0:14:25.880 --> 0:14:29.800
<v Speaker 6>and forth and some communications that would give people the

0:14:29.840 --> 0:14:33.280
<v Speaker 6>impression that we are making some problemies on this, and

0:14:33.320 --> 0:14:34.800
<v Speaker 6>I hope that we are. I mean, I think it's

0:14:34.800 --> 0:14:38.840
<v Speaker 6>in our interest to resolve this, but you know, fundamentally,

0:14:38.960 --> 0:14:43.800
<v Speaker 6>negotiations and are about trust. It's about trust between both sides,

0:14:43.840 --> 0:14:46.000
<v Speaker 6>and of course that's lacking between the United States and

0:14:46.040 --> 0:14:49.600
<v Speaker 6>Iran right now. And then there are fundamental differences on

0:14:49.680 --> 0:14:52.960
<v Speaker 6>the major issues, whether it's non proliferation, whether it's the

0:14:53.040 --> 0:14:56.120
<v Speaker 6>highly enriched uranium and what happens with that, whether it's

0:14:56.240 --> 0:15:00.760
<v Speaker 6>what happens with sanctions and and frozen assets, or the

0:15:01.560 --> 0:15:03.680
<v Speaker 6>status of the straits of hormones. How do we get

0:15:03.800 --> 0:15:06.520
<v Speaker 6>back to kind of the open passage way that it was,

0:15:06.800 --> 0:15:09.600
<v Speaker 6>or the situation in Lebanon. And I think it's important

0:15:09.680 --> 0:15:12.480
<v Speaker 6>most Americans are not necessarily paying intention to what's happening

0:15:12.520 --> 0:15:15.400
<v Speaker 6>in Lebanon, but it is directly linked, certainly in the

0:15:15.440 --> 0:15:18.080
<v Speaker 6>eyes of the Iranians, to what is happening in the goal.

0:15:18.680 --> 0:15:22.160
<v Speaker 2>Stay with us more Bloomberg surveillance coming up after this.

0:15:31.440 --> 0:15:34.600
<v Speaker 2>Minneapolis FED president Nil Kashgawi and the Dallas FED president

0:15:34.600 --> 0:15:38.480
<v Speaker 2>Lori Logan both warning of increasing price pressure and pressure

0:15:38.480 --> 0:15:40.880
<v Speaker 2>on the broader economy. Blarina, you're Richie a t rou

0:15:40.920 --> 0:15:43.160
<v Speaker 2>price writing. The FED outlook is now a fork in

0:15:43.200 --> 0:15:46.040
<v Speaker 2>the road. The most likely outcome is the fed stays

0:15:46.040 --> 0:15:49.280
<v Speaker 2>on hold for the next twelve months. Blarina joins us

0:15:49.280 --> 0:15:51.640
<v Speaker 2>now for more Now, Blarina, if that's the most likely

0:15:51.680 --> 0:15:56.160
<v Speaker 2>outlook twelve months on hold, where's inflation and how easy

0:15:56.240 --> 0:15:58.680
<v Speaker 2>is the Federal Reserve getting in the meantime, it's a

0:15:58.800 --> 0:15:59.560
<v Speaker 2>very good question.

0:15:59.600 --> 0:16:03.400
<v Speaker 7>The art look for inflation has become much more uncertain

0:16:03.480 --> 0:16:06.080
<v Speaker 7>that it was, let's say, three or six months ago,

0:16:06.400 --> 0:16:09.920
<v Speaker 7>and I think that's what is driving that fork on

0:16:09.960 --> 0:16:13.760
<v Speaker 7>the road language for me, in the sense that we

0:16:13.960 --> 0:16:18.600
<v Speaker 7>have some structural things building up in the inflation pipeline,

0:16:18.600 --> 0:16:21.400
<v Speaker 7>including the AI story, which you discussed with your guests

0:16:21.480 --> 0:16:24.280
<v Speaker 7>earlier in the show. We don't know how much of

0:16:24.320 --> 0:16:27.360
<v Speaker 7>that AI price boost is actually going to feed to

0:16:27.560 --> 0:16:31.000
<v Speaker 7>consumer prices, but the risks are to the upside clearly,

0:16:31.040 --> 0:16:33.240
<v Speaker 7>at least in the near term, and that's the narrative

0:16:33.320 --> 0:16:36.600
<v Speaker 7>that the market is prepared for. We also have a

0:16:36.640 --> 0:16:39.480
<v Speaker 7>story from China where for the last two years, China

0:16:39.520 --> 0:16:42.840
<v Speaker 7>PPI has been trending lower. It's been helping with this

0:16:43.000 --> 0:16:46.360
<v Speaker 7>inflation in the goods sector globally, not just the US.

0:16:46.760 --> 0:16:50.680
<v Speaker 7>But now we're hearing anecdotal evidence from companies in China

0:16:50.760 --> 0:16:53.840
<v Speaker 7>for raising prices. Again, it's a question how much of

0:16:53.880 --> 0:16:56.800
<v Speaker 7>that does get feed through to consumer prices, but it

0:16:56.840 --> 0:17:00.000
<v Speaker 7>does present upside risks. And then you have the energy

0:17:00.120 --> 0:17:04.560
<v Speaker 7>price shock where we're seeing first round effects into energy

0:17:04.640 --> 0:17:09.520
<v Speaker 7>services and at the pump we might see airfares increasing again.

0:17:09.920 --> 0:17:12.960
<v Speaker 7>But in this environment where companies are used to passing

0:17:13.000 --> 0:17:15.760
<v Speaker 7>through prices to consumers, are we going to get second

0:17:15.880 --> 0:17:20.600
<v Speaker 7>round effects spillovers into core goods and services inflation this year?

0:17:20.880 --> 0:17:22.920
<v Speaker 7>And a lot of that has to do with how

0:17:23.000 --> 0:17:26.520
<v Speaker 7>much higher is the oil curve going to be from here?

0:17:26.640 --> 0:17:30.760
<v Speaker 7>And this headline news on the conflict with Iran? Are

0:17:30.760 --> 0:17:33.960
<v Speaker 7>they going to lead to a resolution of the conflict

0:17:34.119 --> 0:17:38.520
<v Speaker 7>and the oil traveling freely through the strait of Hormus?

0:17:38.640 --> 0:17:41.080
<v Speaker 7>So where is inflation going to be over the next

0:17:41.119 --> 0:17:44.560
<v Speaker 7>twelve months? I'm afraid it's very uncertain and it does

0:17:44.600 --> 0:17:48.160
<v Speaker 7>feel like a binary outcome whether we move towards two

0:17:48.200 --> 0:17:50.760
<v Speaker 7>percent or we stay at three percent or both higher.

0:17:51.040 --> 0:17:54.280
<v Speaker 7>And in those scenarios, I could see a path for

0:17:54.359 --> 0:17:57.400
<v Speaker 7>the FAT cutting interest rates. They could start in December

0:17:57.480 --> 0:18:00.320
<v Speaker 7>or January of next year, or I could see path

0:18:00.359 --> 0:18:03.240
<v Speaker 7>where the Fed could actually have to hike interest rates

0:18:03.280 --> 0:18:06.399
<v Speaker 7>even sooner than the market has currently priced.

0:18:06.440 --> 0:18:08.080
<v Speaker 1>There's a lot to unpack there blorin now. I'm just

0:18:08.080 --> 0:18:10.800
<v Speaker 1>curious how much of the inflationary story truly is oil.

0:18:10.840 --> 0:18:14.800
<v Speaker 1>Oil prices today WTI down some six percent and just

0:18:14.840 --> 0:18:18.120
<v Speaker 1>fluctuating on that level. After some headlines came out. People

0:18:18.160 --> 0:18:20.760
<v Speaker 1>are looking for this conflict to end. How much does

0:18:20.800 --> 0:18:23.679
<v Speaker 1>that relieve the bulk of the inflationary pressures that have

0:18:23.760 --> 0:18:25.280
<v Speaker 1>led to a lot of the upside surprises.

0:18:26.240 --> 0:18:29.560
<v Speaker 7>So I would separate the oil story with a core

0:18:29.640 --> 0:18:33.840
<v Speaker 7>inflation pressure story. Here we have seen a big build

0:18:33.920 --> 0:18:37.840
<v Speaker 7>up in energy prices because of the oil shock. I

0:18:37.920 --> 0:18:40.800
<v Speaker 7>don't think we have seen that spilling over to core

0:18:40.920 --> 0:18:45.479
<v Speaker 7>services besides airfares yet, or to core goods prices. So

0:18:45.680 --> 0:18:48.720
<v Speaker 7>a resolution of the conflict, an oil price is coming down,

0:18:48.800 --> 0:18:52.480
<v Speaker 7>I think it's going to be great news for headline inflation,

0:18:52.720 --> 0:18:56.040
<v Speaker 7>and then it leaves a little bit intact the progress

0:18:56.119 --> 0:18:59.480
<v Speaker 7>on core inflation that I had expected before the war

0:18:59.520 --> 0:19:02.080
<v Speaker 7>in the second half of the year. So I think

0:19:02.119 --> 0:19:05.280
<v Speaker 7>that oil story is really key for the path for

0:19:05.359 --> 0:19:08.080
<v Speaker 7>core inflation in the second half, but also for core

0:19:08.119 --> 0:19:09.600
<v Speaker 7>inflation expectations.

0:19:09.920 --> 0:19:11.040
<v Speaker 4>The good news.

0:19:10.840 --> 0:19:13.720
<v Speaker 7>So far is that when you look at diffusion indices,

0:19:13.760 --> 0:19:17.320
<v Speaker 7>the ISMS and pmis and the regional PMIS. We have

0:19:17.560 --> 0:19:21.600
<v Speaker 7>seen a spike in input costs, especially from energy and

0:19:21.680 --> 0:19:25.000
<v Speaker 7>other raw materials. What companies are reporting is that they

0:19:25.040 --> 0:19:27.720
<v Speaker 7>don't plan to pass through much of that yet, maybe

0:19:27.800 --> 0:19:31.320
<v Speaker 7>twenty to thirty percent of those cost increases. And that's

0:19:31.359 --> 0:19:34.480
<v Speaker 7>good news, I think for core inflation. But if that

0:19:34.640 --> 0:19:37.840
<v Speaker 7>dynamic were to change because the war is lasting longer

0:19:37.880 --> 0:19:40.720
<v Speaker 7>and oil prices increase from here, I think we could

0:19:40.760 --> 0:19:42.119
<v Speaker 7>be looking at a different story.

0:19:43.000 --> 0:19:46.560
<v Speaker 2>This is the Bloomberg Seventans podcast, bringing you the best

0:19:46.560 --> 0:19:50.120
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0:19:59.680 --> 0:20:01.560
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