WEBVTT - Bloomberg Surveillance TV: August 7th, 2026 0:00:02.360 --> 0:00:06.720 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amerie Hordert. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.040 Terminal and the Bloomberg Business app. We begin this out 0:00:37.080 --> 0:00:39.959 with stocks pairing modest losses holding their all time high. 0:00:39.960 --> 0:00:42.320 It's Christopher Own of Ben Fatiguis writing with the S 0:00:42.360 --> 0:00:45.320 and P five hundred rallying with such potency, there's also 0:00:45.479 --> 0:00:49.120 likely some value when identifying what is not exhibiting similar vigor. 0:00:49.360 --> 0:00:51.400 Chris joins us. Now for more, Chris corningicot see. I 0:00:51.400 --> 0:00:54.120 great to be here, and what is not exhibiting similar rigor? 0:00:54.360 --> 0:00:55.680 Well, I would say I'm balance. This has been a 0:00:55.760 --> 0:00:58.600 very good rally, certainly the last week, but just go 0:00:58.720 --> 0:01:01.120 back the last six, seven, eight weeks. They threw everything 0:01:01.160 --> 0:01:03.720 they could at this market, whether it was bond yields, 0:01:03.720 --> 0:01:06.560 whether it was oil, whether it was the war, and 0:01:07.080 --> 0:01:08.680 the best they could do was maybe a two or 0:01:08.680 --> 0:01:12.880 three percent draw down in the SMP extremely rotational tape. 0:01:13.040 --> 0:01:15.399 You know, we've been observing for weeks and weeks that 0:01:15.440 --> 0:01:17.720 the internals have been getting better, not worse. Here now 0:01:17.880 --> 0:01:20.080 there are some pockets of maybe the market that are 0:01:20.120 --> 0:01:23.760 a little bit squirming here the utilities as an example. 0:01:23.800 --> 0:01:26.240 I think there's a political crosswind that started to impact 0:01:26.280 --> 0:01:29.640 a number of those names, particularly in the power producer side, 0:01:29.680 --> 0:01:32.600 the cegs and the Talons and the vistras. But I'd say, 0:01:32.600 --> 0:01:35.080 on balance, you know, seventy five percent of the smpiece 0:01:35.120 --> 0:01:37.440 above the tun or day right now, that's about as 0:01:37.480 --> 0:01:39.880 broad as we've seen in two or plus years. 0:01:40.040 --> 0:01:42.600 Is this bun market close to becoming a promplum? Speaking 0:01:42.640 --> 0:01:44.640 of squarey, you know how it had funny curve in 0:01:44.640 --> 0:01:46.039 the last week. Go on, give me a thoughts. 0:01:46.120 --> 0:01:47.480 I'm going to tell you something that I think might 0:01:47.520 --> 0:01:51.400 surprise you here. So it's we're four hundred days since 0:01:51.560 --> 0:01:54.200 Trump two point zero started in January of twenty five. 0:01:54.400 --> 0:01:57.240 That four hundred day period, the range of the ten 0:01:57.280 --> 0:02:00.240 ure yields eighty five basis points. It's the low list 0:02:00.360 --> 0:02:03.640 four hundred day range in history, go back as long 0:02:03.680 --> 0:02:08.560 as you want. Bonvall is very very muted right here right. 0:02:08.840 --> 0:02:12.280 I think when you look at what the reaction function 0:02:12.360 --> 0:02:16.080 from Treasury or from the administration has been his or 0:02:16.280 --> 0:02:20.040 I think the goal is to limit Bonvall preserve optionality. 0:02:20.480 --> 0:02:23.200 And when you look at one of the tightest four 0:02:23.280 --> 0:02:26.280 hundred day ranges in history, I think that certainly speaks 0:02:26.280 --> 0:02:26.520 to that. 0:02:26.800 --> 0:02:29.760 Wouldn't you think, though, that less communication would introduced four vol. 0:02:30.360 --> 0:02:33.079 So you think so, But the market's response has been 0:02:33.360 --> 0:02:38.680 entirely different thus storm. I mean, even from the Fed 0:02:39.200 --> 0:02:42.480 last week, two year yield are lower and higher. Thirty 0:02:42.560 --> 0:02:45.079 year yield is flat. Double B corporate spreads, you know, 0:02:45.200 --> 0:02:48.280 talking about alphabet onto the bomb market. Why wouldn't you 0:02:48.440 --> 0:02:51.200 Double B corporate spreads are on the tights right now. 0:02:51.360 --> 0:02:54.000 So I think the things that we look at to 0:02:54.120 --> 0:02:56.679 kind of gauge the health of the economy, of the 0:02:56.720 --> 0:02:59.639 bomb market, and the equity market are still pretty much 0:02:59.680 --> 0:03:02.120 in I mean, every bank stock around the world's at 0:03:02.280 --> 0:03:05.400 new highs right now. Credit conditions everywhere are about as 0:03:05.440 --> 0:03:08.160 benign as it gets. I'm not saying those things can't change. 0:03:08.280 --> 0:03:10.880 But if you're looking at the landscape today and trying 0:03:10.919 --> 0:03:14.120 to evaluate in the present moment, our conditions still supportive, 0:03:14.320 --> 0:03:15.079 I think they are well. 0:03:15.080 --> 0:03:16.760 I think that the equity market is telling you that 0:03:16.800 --> 0:03:19.280 with the fastest kind of whipsaw back to oversold that 0:03:19.320 --> 0:03:20.880 we've seen in modern history, are one of. 0:03:20.800 --> 0:03:22.679 The fastest reversals. 0:03:22.680 --> 0:03:25.040 Bank for America's index says that we're now the most 0:03:25.120 --> 0:03:28.600 over solder over bullish in terms of sentiment going back 0:03:28.639 --> 0:03:31.560 to twenty twenty one. Is that a sell indicator to 0:03:31.600 --> 0:03:33.679 you the same way that it is to Michael Hartnett. 0:03:34.000 --> 0:03:37.119 I think you need bulls for both markets. So I'm 0:03:37.120 --> 0:03:39.720 not as convinced that you know, when you look at 0:03:39.760 --> 0:03:43.320 and you know we've dived into this for years and 0:03:43.400 --> 0:03:46.640 years and years, sentiment at tops is not very helpful. 0:03:46.760 --> 0:03:50.240 It's very helpful what loads right. Fear and panic is 0:03:50.240 --> 0:03:54.920 a much more actionable emotion than the greed that's often 0:03:54.960 --> 0:03:59.040 found at tops. So listen, We're very mindful that you know, 0:03:59.080 --> 0:04:01.120 as this market has made new highs, you have certainly, 0:04:01.200 --> 0:04:04.160 I think seen the attitudes get a little bit spicier here. 0:04:04.720 --> 0:04:06.640 I would yet to say that we're in that you know, 0:04:06.720 --> 0:04:09.440 everyone is completely all in and there's no buyers left. 0:04:09.440 --> 0:04:12.360 I don't think we're at that at that point yet when. 0:04:12.240 --> 0:04:14.080 You look at that narrow range on the ten year 0:04:14.160 --> 0:04:16.560 and you say that you know the reactionary function from 0:04:16.560 --> 0:04:19.960 the administration, is that the reactionary function that this bond 0:04:20.000 --> 0:04:23.159 market for this administration still remains the key. It's the 0:04:23.160 --> 0:04:25.400 biggest check on Trump and the Treasury. 0:04:25.680 --> 0:04:27.600 You know. I think it's interesting, and Marie, because you 0:04:28.160 --> 0:04:30.880 brought up Japan and yen, which I think certainly playing 0:04:31.080 --> 0:04:34.560 a role in some of this. You go about to 0:04:34.560 --> 0:04:36.320 look at the last two and a half three years 0:04:36.360 --> 0:04:38.280 on the end, char I mean, it's every time you're 0:04:38.320 --> 0:04:40.680 in this one sixty one, sixty two, and I know 0:04:40.720 --> 0:04:42.840 we pushed one sixty five a couple of weeks ago 0:04:43.360 --> 0:04:47.440 where you get kind of either boj or Treasury lil 0:04:47.440 --> 0:04:50.080 agitated here. And I think the actions of the last 0:04:50.240 --> 0:04:52.200 week or so certainly reflect that. But I would just 0:04:52.200 --> 0:04:55.039 make an observation. I think all these calls out there 0:04:55.040 --> 0:04:58.040 that higher JGB yild's are about to blow the world 0:04:58.160 --> 0:05:04.120 up are so hyperbole and so misleading. 0:05:04.160 --> 0:05:05.040 What are people getting wrong? 0:05:05.480 --> 0:05:07.039 I think people are getting wrong that we're in a 0:05:07.080 --> 0:05:09.600 reflationary boom in Japan for the first time in thirty 0:05:09.640 --> 0:05:10.279 or forty years and. 0:05:10.360 --> 0:05:12.719 So on that's so freaked out by what's happening. 0:05:13.600 --> 0:05:17.040 I think it drifts with yields in Japan higher. I 0:05:17.040 --> 0:05:20.560 think it raises the floor on yields around the world. 0:05:20.880 --> 0:05:23.920 So I understand the adjective there. But as far as 0:05:24.000 --> 0:05:27.000 japan Japanese bank stocks trade grade, Japanese is short stocks 0:05:27.000 --> 0:05:29.720 trade grade. So if there was something truly systemic about 0:05:29.800 --> 0:05:31.960 higher JGB yields, I think it'd be showing up in 0:05:32.000 --> 0:05:33.040 those avenues. It hasn't. 0:05:33.120 --> 0:05:35.120 This sounds like more like a canceling session for the 0:05:35.200 --> 0:05:37.719 Japanese officials and scale best and that it does people 0:05:37.720 --> 0:05:39.560 on war straight. Because the concern that I've seen at 0:05:39.600 --> 0:05:42.040 the moment over the last month or so stems from 0:05:42.080 --> 0:05:45.560 the treasury and stems from Japanese authorities. I haven't actually 0:05:45.560 --> 0:05:47.600 heard too many people around this type will freak out 0:05:47.640 --> 0:05:48.880 about the situation in Japan. 0:05:49.120 --> 0:05:51.360 No. I think it's pretty remarkable, and we've said it 0:05:51.640 --> 0:05:55.200 off airs and Japanese tens are about to cross German 0:05:55.240 --> 0:05:57.320 tens for the first time in a very very long 0:05:57.360 --> 0:05:59.960 period of time. I mean, which economy is in better 0:06:00.080 --> 0:06:03.600 condition right here. I would argue what's happening in Japan 0:06:04.400 --> 0:06:06.760 is a massive departure and change from what we've seen 0:06:06.800 --> 0:06:08.799 from that economy in thirty years. 0:06:08.839 --> 0:06:10.760 Part of the problem is that you can talk to 0:06:10.800 --> 0:06:12.800 the ten year and how range bound it's been. The 0:06:12.800 --> 0:06:15.680 thirty year has not been range bound. And this reflationary 0:06:15.680 --> 0:06:18.240 boom is happening in the backdrop of massive capital rays. 0:06:18.240 --> 0:06:20.239 We talked about alphabet and the twenty five billion dollars 0:06:20.240 --> 0:06:22.840 of bond sales. I just wonder how much does that 0:06:22.880 --> 0:06:26.000 constrain some of what the Fed and Treasury can do. 0:06:26.200 --> 0:06:28.839 Speaking to a job was saying the concern about the 0:06:28.880 --> 0:06:30.800 reflationary boom that they're seeing in Japan. 0:06:31.240 --> 0:06:34.640 So nominal GDP is what six and a half? Where 0:06:34.680 --> 0:06:37.200 should thirty year yels be? With six and a half nominal, 0:06:37.960 --> 0:06:41.360 I think you could make a very valid case that 0:06:41.680 --> 0:06:45.920 you know, five point twenty is by no means extraordinary. 0:06:47.279 --> 0:06:48.640 You kind of go back and you look at the 0:06:48.800 --> 0:06:51.520 kind of great decade at the nineteen nineties. There wasn't 0:06:51.560 --> 0:06:53.160 a day in the nineteen nineties where the ten year 0:06:53.200 --> 0:06:56.160 yield was under five percent, right, So I just think 0:06:56.200 --> 0:06:58.360 we'd have to put this in a little bit of context, 0:06:59.000 --> 0:07:00.840 I've always been to the when you look at these 0:07:00.920 --> 0:07:04.120 kind of bubble like equity environments or melt up like environments, 0:07:04.360 --> 0:07:08.520 they tend to end with both equities going parabolic and 0:07:08.560 --> 0:07:11.240 bond yields going in parabolic. I think eighty seven it happened. 0:07:11.400 --> 0:07:13.240 In eighty nine in Japan, it happened. You had the 0:07:13.280 --> 0:07:16.520 Nikke double that year, JGB yields one from four to eight. 0:07:16.680 --> 0:07:19.000 In ninety nine, it happened. The Nasdaq clearly did what 0:07:19.080 --> 0:07:21.200 it did. But people forget us ten yere yeels in 0:07:21.240 --> 0:07:23.880 ninety nine, one from four to seven. So that's how 0:07:23.880 --> 0:07:27.200 these typically end. I don't think we're in that explosive 0:07:27.320 --> 0:07:28.800 bond environment just yet. 0:07:29.000 --> 0:07:32.280 To gendp right shows have changed. Yeah, we're running persistent 0:07:32.360 --> 0:07:36.120 six percent budget deficits even in good times. That's problematic. 0:07:36.680 --> 0:07:40.360 Clearly the Treasury is very uncomfortable about allowing people to 0:07:40.400 --> 0:07:42.840 monetize their double reserves at the moment. Based on the 0:07:42.880 --> 0:07:45.800 access that the Japanese have been given to a particular vehicle 0:07:46.000 --> 0:07:48.200 over the federal reserve, that would speak not used. 0:07:48.320 --> 0:07:49.960 I believe it hasn't been US hasn't been used ft 0:07:50.080 --> 0:07:51.400 reporters warning has not been used, but. 0:07:51.400 --> 0:07:54.280 It speaks to unease of the Treasury, and some people 0:07:54.320 --> 0:07:56.800 might say, for good reason, that these yields are getting 0:07:56.800 --> 0:07:58.520 away from them at the wrong time. When the bank 0:07:58.600 --> 0:08:01.320 drop for fixed income right now has changed. There are 0:08:01.320 --> 0:08:04.040 problems in Germany, there are problems in Japan that we 0:08:04.080 --> 0:08:06.160 didn't have to otherwise confront. And you know where I'm 0:08:06.160 --> 0:08:09.400 going with this, because fifteen years ago, when we would 0:08:09.400 --> 0:08:11.520 all sit around this table and people would complain about 0:08:11.560 --> 0:08:14.000 the deficit and you know, the supply concerns and a 0:08:14.000 --> 0:08:16.000 lot of those concerns were misplaced, but the bank drop 0:08:16.040 --> 0:08:18.240 for fixed income was so different. We had an anchor 0:08:18.240 --> 0:08:21.280 in Japan, we had an anchor in Germany, and the 0:08:21.320 --> 0:08:24.640 biggest companies in this country weren't issuing debt in quite 0:08:24.640 --> 0:08:26.680 the same way. There's competition for capital in a way 0:08:26.720 --> 0:08:29.640 that did not exist ten to fifteen years ago. We 0:08:29.680 --> 0:08:31.880 have to confront that the Treasury does too, and there's 0:08:31.880 --> 0:08:33.640 obviously a reluctance for them to turn out the debt 0:08:33.640 --> 0:08:35.840 as well. So you say this is normal, I don't 0:08:35.840 --> 0:08:37.880 think the Treasury thinks this is normal at all, which 0:08:37.880 --> 0:08:41.080 is why they won't extend duration at all, and they 0:08:41.160 --> 0:08:44.280 keep guiding the treasury market to expect the same kind 0:08:44.360 --> 0:08:47.000 of issuance because they're nervous about what's happening with long end. 0:08:47.000 --> 0:08:48.920 Well, if you look historically, the issues on the short 0:08:48.960 --> 0:08:51.200 end are STI running below the long term average. And 0:08:51.200 --> 0:08:53.160 this is you know, it's really no different than how 0:08:53.160 --> 0:08:57.599 the own treasury funded the government. Here as well, I 0:08:57.640 --> 0:09:00.400 think what's interesting, and we use the term we're entering 0:09:00.440 --> 0:09:03.959 the alpha market, right, this is a market where you know, 0:09:04.000 --> 0:09:07.440 I think ambiguity is greater than people are used to. 0:09:08.480 --> 0:09:11.240 I think it's an environment where there's no free lunch. 0:09:11.280 --> 0:09:13.720 You have to pick stocks. This is no longer the 0:09:14.280 --> 0:09:18.040 kind of fifteen years of que and Fower guidance that 0:09:18.160 --> 0:09:21.000 everyone gets trophies. So I think it's an important shift 0:09:21.960 --> 0:09:25.720 and one will have to adjust. There are so many 0:09:25.760 --> 0:09:28.480 moving pieces here at the moment. You know, in this 0:09:28.800 --> 0:09:31.240 ten minute discussion, right, we've talked about treasury yields, We've 0:09:31.240 --> 0:09:34.240 talked about yen, we've talked about equities. I think you've 0:09:34.280 --> 0:09:36.280 really got to stay on your toes here, and I 0:09:36.720 --> 0:09:39.480 you know, I kind of liken this from the transition 0:09:39.520 --> 0:09:41.400 from the fifties into the sixties, where you had a 0:09:41.559 --> 0:09:44.640 very docile decade in the fifties. Bonnyields got to about 0:09:44.679 --> 0:09:46.280 five and a half or six in the early part 0:09:46.320 --> 0:09:48.679 of the sixties. You bounced around for the next six 0:09:48.720 --> 0:09:52.040 seven eight years. It was a decent decade for stocks, 0:09:52.280 --> 0:09:57.080 but you had multiple corrections, multiple better markets, multiple economic cycles. 0:09:57.480 --> 0:09:59.400 I think that's the environment we're in. Think about the 0:09:59.440 --> 0:10:03.200 equity market this year, it's been all e not pe right. 0:10:03.280 --> 0:10:06.480 PE's are down straight ease up a lot. That's inherently 0:10:06.520 --> 0:10:08.120 a more cyclical economy. 0:10:08.160 --> 0:10:09.480 I think it's one that we ought to get used 0:10:09.520 --> 0:10:13.720 to stay with US Multlmberg Savannan's coming up after this 0:10:22.840 --> 0:10:25.719 and the Savannahs this morning. A diplomatic deadlock in the 0:10:25.760 --> 0:10:26.200 Strato for. 0:10:26.320 --> 0:10:30.360 Merse sort of open right now. You know, we have 0:10:30.400 --> 0:10:33.079 a thing called the blockade, headed up by the US Navy, 0:10:33.720 --> 0:10:36.080 and we control it. I think we're doing very well. 0:10:36.080 --> 0:10:39.199 I just you know, I'm involved in the negotiation. I 0:10:39.240 --> 0:10:41.719 think it's gonna end pretty soon. I don't think they 0:10:41.720 --> 0:10:43.440 can go much longer. 0:10:43.600 --> 0:10:46.120 So here's the lices this morning. The President claiming to 0:10:46.160 --> 0:10:48.719 have control of the Strato for mercs around six to 0:10:48.760 --> 0:10:51.400 bloc the US and is righty ships from transiting the 0:10:51.440 --> 0:10:52.520 critical waterway, and. 0:10:52.480 --> 0:10:56.000 There was also apparently some attacks as well at the 0:10:56.040 --> 0:10:58.040 opening of the Trader for Most yesterday, which is why 0:10:58.120 --> 0:11:01.800 you saw oil prices of higher. The fact of the 0:11:01.800 --> 0:11:04.040 matter is, the President said yesterday, it is sort of 0:11:04.120 --> 0:11:07.160 somewhat open. It sounds very much like concepts of a plan. 0:11:07.600 --> 0:11:10.080 They have an idea of how they can get traffic 0:11:10.200 --> 0:11:12.000 back through. But the fact of the matter is, if 0:11:12.040 --> 0:11:14.880 Iran is not going to allow US or as Rali ships, 0:11:14.920 --> 0:11:17.600 what Insuran is going to allow other ships even to 0:11:17.679 --> 0:11:20.040 want to transit through the straight up from Moose very 0:11:20.160 --> 0:11:21.760 very very messy situation. 0:11:21.840 --> 0:11:23.280 It's a built on that. They form a city of 0:11:23.400 --> 0:11:26.000 US intelligence official Norman rule rights the following. The US 0:11:26.080 --> 0:11:29.000 around of conflict now has many fronts where violences in 0:11:29.040 --> 0:11:32.680 submits and but could flare up with strategic consequences. Norman 0:11:32.760 --> 0:11:35.640 joins us now for more. Norman, welcome back to the program, sir, 0:11:35.840 --> 0:11:39.080 How would you characterize this particular agreement, would you even 0:11:39.120 --> 0:11:40.440 call it an agreement? 0:11:41.360 --> 0:11:44.480 Good morning? Well, we certainly have a greater possibility of 0:11:44.480 --> 0:11:48.000 a diplomatic agreement now than any time in recent weeks. 0:11:48.080 --> 0:11:51.800 But the maximalist demands of Tehran and its use of 0:11:52.160 --> 0:11:59.200 intermittent regional violence is making the conclusion of the agreement unpredictable. Likewise, 0:11:59.200 --> 0:12:02.160 we should note that just execution of this agreement will 0:12:02.200 --> 0:12:06.319 require Treasury to issue rules as to how firms could pay. 0:12:06.520 --> 0:12:09.800 If fees are paid, and if fees are not paid, 0:12:09.880 --> 0:12:13.240 then we have to prepare for additional violence by Iran 0:12:14.000 --> 0:12:18.040 in the future. Iranian decision making is not unified on 0:12:18.080 --> 0:12:21.640 the need for concessions, and indeed there is no sign 0:12:21.880 --> 0:12:26.319 of a concession a pro concession party in Iran at 0:12:26.320 --> 0:12:26.720 this point. 0:12:27.040 --> 0:12:30.800 Norm how can treasuring green light these fees if Iran 0:12:30.920 --> 0:12:33.720 is not allowing US vessels to transit. 0:12:34.520 --> 0:12:37.040 That's an excellent point, and we should keep in mind 0:12:37.080 --> 0:12:42.000 it's US Israeli could be US or Israeli related. The 0:12:42.080 --> 0:12:46.160 definition of that concept could be quite significant. And in essence, 0:12:46.200 --> 0:12:48.679 what Iran is doing is not only keeping the US out, 0:12:48.760 --> 0:12:52.560 but dictating to Gulf states who can deliver their food, 0:12:52.960 --> 0:12:56.439 their energy, their trade partners. This would have a significant 0:12:56.480 --> 0:12:59.520 impact on global commerce, so it can't be conducted. We 0:12:59.559 --> 0:13:02.720 can't lot that this is just a negotiating threat by 0:13:02.720 --> 0:13:06.240 the Iranian parliament. It doesn't have a decision making authority, 0:13:06.400 --> 0:13:09.800 but there have been examples of Iranian parliament making decisions 0:13:09.840 --> 0:13:13.240 such as sixty percent enrichment that have been executed by 0:13:13.280 --> 0:13:15.960 the government when approved by the Supreme Leader and the 0:13:16.040 --> 0:13:17.080 National Security Council. 0:13:17.280 --> 0:13:19.360 Norm there have been some golf countries that have been 0:13:19.400 --> 0:13:22.320 able to get oil and other products out, namely the UAE. 0:13:22.520 --> 0:13:23.760 How have they been able to do this? 0:13:25.480 --> 0:13:28.480 Most of the golf countries that use the straight up 0:13:28.520 --> 0:13:31.640 removes have exported oil in recent weeks. They've done it 0:13:31.920 --> 0:13:35.240 quietly through the Oman channel, the in closed coordination with 0:13:35.280 --> 0:13:40.040 the US military and obviously the government of Oman. But 0:13:40.240 --> 0:13:46.680 Iran has intermittently used its degraded missile and drone capability 0:13:46.720 --> 0:13:49.640 to demonstrate that it has a capacity to strike some 0:13:49.720 --> 0:13:53.160 of this shipping, and that capacity has the greatest impact 0:13:53.200 --> 0:13:57.480 on LNG, which has essentially been shut down. 0:13:57.559 --> 0:14:00.240 In the golf norm we've heard about a toll being 0:14:00.320 --> 0:14:03.199 unacceptable not only to the US but other golf countries 0:14:03.760 --> 0:14:05.360 that are neighboring Iran. 0:14:05.800 --> 0:14:07.079 Is a service fee acceptable? 0:14:07.200 --> 0:14:09.640 A five to seven percent service fee is currently being 0:14:09.679 --> 0:14:10.520 proposed by Iran. 0:14:11.240 --> 0:14:13.800 Certainly not you can call it whatever you wish, but 0:14:13.840 --> 0:14:17.120 it's a shakedown, and that fee can be changed. Now, 0:14:17.120 --> 0:14:21.200 Iran is entitled to a compensation or charge if it 0:14:21.560 --> 0:14:24.680 we're to take care of a pollution issue, a security issue, 0:14:24.960 --> 0:14:28.640 rescue a ship in danger. That's not unreasonable that any 0:14:28.680 --> 0:14:32.320 country would ask for that. But Iran is providing no services. 0:14:32.360 --> 0:14:34.760 And to be clear, the last time anyone charged a 0:14:34.880 --> 0:14:37.680 fee in the straight up or moves was April sixteen, 0:14:37.760 --> 0:14:39.760 twenty two, and that was the Portuguese. 0:14:40.480 --> 0:14:42.640 How do you see this evolving given the fact that 0:14:42.720 --> 0:14:45.880 it seems like President Trump has some reluctance to engaging 0:14:45.920 --> 0:14:49.240 in kinetic warfare again. There's been a discourse about whether 0:14:49.240 --> 0:14:53.520 that's tied to the munition stockpiles, Questions around whether anything 0:14:53.600 --> 0:14:57.320 additional can be accomplished with airstrikes that hasn't already been accomplished. 0:14:57.640 --> 0:15:01.120 What do you see as a potential of travel should 0:15:01.120 --> 0:15:03.080 these negotiations not yield anything. 0:15:03.720 --> 0:15:08.600 Time tenacity by the diplomats and the intermediaries. The United 0:15:08.680 --> 0:15:12.640 States is certainly pursuing a diplomatic route along with the 0:15:12.800 --> 0:15:17.360 Gulf parties, but events may shape that into a different direction. 0:15:18.000 --> 0:15:21.360 The Huthi attack on Saudi Arabia, we'll have to see 0:15:21.360 --> 0:15:25.760 if the Saudi's follow through with retaliation. The reported attack 0:15:25.800 --> 0:15:29.040 that took place yesterday on shipping and will the US 0:15:29.080 --> 0:15:33.600 retaliate If we don't, Iran will continue these attacks, and 0:15:33.600 --> 0:15:37.000 it's not assure that diplomacy will succeed. But at the 0:15:37.040 --> 0:15:41.160 same time, the diplomatic path forward will require concessions from Iran. 0:15:41.160 --> 0:15:43.240 If that doesn't occur, we're in a new normal. 0:15:43.720 --> 0:15:46.560 Where has the US set de terrence then, because the 0:15:46.560 --> 0:15:49.400 IRGC is still going after vessels to the Strait of 0:15:49.400 --> 0:15:51.800 Hormus and at the same time the Huthis are now involved. 0:15:52.600 --> 0:15:54.640 Well, that is true, but the nature of the attacks 0:15:54.640 --> 0:15:59.640 are limited, they're infrequent, they're usually singular, they're not involving 0:15:59.640 --> 0:16:03.880 sature strikes. There is no question that Iran's and military 0:16:03.920 --> 0:16:08.560 capacity has been significantly degraded. But degraded does not mean eliminated, 0:16:08.760 --> 0:16:09.920 and that's really the question. 0:16:10.480 --> 0:16:14.000 Stay with us. More Bloomberg surveillance coming up after this. 0:16:23.200 --> 0:16:25.680 Let's talk about a messy process developing in the Middle East, 0:16:25.680 --> 0:16:28.080 the Rum seeking to prevent US and is Rady ships 0:16:28.080 --> 0:16:30.520 from entering the Stratiform mers. A potential deal with a 0:16:30.600 --> 0:16:33.480 man could grant ten run tighter control of the waterway. 0:16:33.640 --> 0:16:36.560 The part of Los Angeles Executive director Gene Soroka, writing, 0:16:36.600 --> 0:16:40.680 regional instability continues to think global shipping by increasing fuel 0:16:40.800 --> 0:16:44.440 and transportation expenses. Those high costs ripple through the economy, 0:16:44.560 --> 0:16:48.440 ultimately affecting businesses and consumers alike. Geno places to say 0:16:48.520 --> 0:16:50.320 is with us here in New York, Chink and MORNINGO 0:16:50.400 --> 0:16:50.680 to see you. 0:16:50.760 --> 0:16:51.480 Good to see you, John. 0:16:51.560 --> 0:16:54.480 How has that instability changed your world in the last 0:16:54.520 --> 0:16:55.040 five months. 0:16:55.120 --> 0:16:58.800 It's been really unbelievable because while there is about ten 0:16:58.840 --> 0:17:01.240 percent of world what cargo that goes in and out 0:17:01.280 --> 0:17:04.119 of the Middle East, it's taking up ninety five percent 0:17:04.200 --> 0:17:07.720 of everyone's time in the supply chain. New base cases 0:17:07.880 --> 0:17:12.320 on prices of energy, new base cases on how waterborne 0:17:12.320 --> 0:17:15.320 deployment architecture is going to look on these big ships 0:17:15.359 --> 0:17:17.280 and where they're going, and how we're going to handle 0:17:17.320 --> 0:17:19.880 the cargo. Case in point was this summer you saw 0:17:19.880 --> 0:17:22.919 a lot of small to middle sized importers bringing in 0:17:22.960 --> 0:17:26.480 their cargo earlier because the fuel prices were going to 0:17:26.520 --> 0:17:29.040 go up. They lagged by about three months in the industry, 0:17:29.400 --> 0:17:32.280 and you had a target date of those tariffs, the 0:17:32.359 --> 0:17:36.359 Section one twenty twos going offline on July twenty fourth, 0:17:36.440 --> 0:17:40.280 So we saw an abnormal rise in cargo May June July, 0:17:40.600 --> 0:17:42.440 ahead of a traditional peak season. 0:17:42.160 --> 0:17:44.400 And we got problems in the rest. To say now as. 0:17:44.200 --> 0:17:48.760 Well, four years now, John, the suics Canal receipts are 0:17:48.840 --> 0:17:53.080 down eighty percent on average, which means the shipping lines 0:17:53.119 --> 0:17:55.520 take a longer route around the Cape of Good Hope 0:17:55.560 --> 0:17:59.399 of Africa, adding fourteen to seventeen maybe even twenty one 0:17:59.480 --> 0:18:02.960 days long are on transit time. Now with the price 0:18:02.960 --> 0:18:05.960 of bunker fuel up sixty percent since February twenty eighth, 0:18:06.160 --> 0:18:08.840 that means the spend on each one of those vessel 0:18:08.880 --> 0:18:10.760 voyages is so much higher. 0:18:11.000 --> 0:18:14.199 Our vessels and shipping companies just prepared to live through this. 0:18:14.359 --> 0:18:16.840 As you said, four years you've been doing the Red Sea. 0:18:16.880 --> 0:18:18.880 Are they prepared to live through the straight of her 0:18:18.920 --> 0:18:21.000 moves that's off and on like a light switch. 0:18:21.280 --> 0:18:21.480 Yeah. 0:18:21.520 --> 0:18:23.800 I don't think anybody is sitting back and Marie San 0:18:23.880 --> 0:18:25.320 you know this is just the way it's going to be. 0:18:25.600 --> 0:18:29.280 But the amount of time that's being invested in scenario analysis, 0:18:29.520 --> 0:18:33.320 whether it's the importer exporter shipping line three PO Logistics 0:18:33.359 --> 0:18:35.879 company has just been off the charts. What do I 0:18:35.920 --> 0:18:39.040 do if this happens? There are so many announcements once 0:18:39.080 --> 0:18:42.920 again emanating out of Washington. This whipsaw effect of information 0:18:43.240 --> 0:18:46.200 has got people just planning as much as they can 0:18:46.600 --> 0:18:49.120 and then executing to the best of their ability. 0:18:49.280 --> 0:18:51.560 How expensive is it to take these roots? 0:18:52.400 --> 0:18:56.560 These routes add so much time and the fuel burn 0:18:56.640 --> 0:18:59.960 at these elevated levels. You're talking about prices that are 0:19:00.160 --> 0:19:04.399 up sixty percent over the last six months on average, 0:19:04.480 --> 0:19:08.240 the transit time has increased by two and a half fold, 0:19:08.560 --> 0:19:11.800 and right now the fuel burn is about thirty to 0:19:11.880 --> 0:19:14.120 thirty five percent of the cost of a vessel voyage 0:19:14.240 --> 0:19:16.440 one ship sailing thirty thirty five percent is what you're 0:19:16.480 --> 0:19:17.720 looking at on the energy price. 0:19:18.040 --> 0:19:20.639 What I'm struck by is how we've had one supply 0:19:20.760 --> 0:19:24.080 shock after another, and people keep saying, well, at first 0:19:24.080 --> 0:19:27.080 it was transitory, the second one it was just inconvenient 0:19:27.119 --> 0:19:29.879 that one shock came after another. And now people are 0:19:29.880 --> 0:19:31.720 saying this is a new normal, that a lot of 0:19:31.760 --> 0:19:34.920 the old rules are breaking down, the sort of free 0:19:34.960 --> 0:19:38.320 traverse of the seas kind of dissipating. How do your 0:19:38.359 --> 0:19:41.320 clients think about the supply side shocks when it comes 0:19:41.400 --> 0:19:43.600 to the influence over their prices and how they plan 0:19:43.680 --> 0:19:44.320 for the future. 0:19:44.920 --> 0:19:48.640 The question really is to that how much more can 0:19:48.680 --> 0:19:50.800 we take? We go through COVID, we had one hundred 0:19:50.800 --> 0:19:52.920 and nine ships backed up in la and Long Beach 0:19:52.960 --> 0:19:56.040 because people were buying so much product and then sitting 0:19:56.119 --> 0:19:58.439 on it like a warehouse complex at the Port of 0:19:58.480 --> 0:20:02.040