Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordernt. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
Speaker 2: live on Bloomberg Television weekday mornings from six to nine
Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or
Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business app. So here's the latist
Speaker 2: this morning. Kevin Walsh's confirmation hearing set for Tuesday, the
Speaker 2: DOJA investigation into the Fed's renovation project, threatening to stand
Speaker 2: in his way. We've got a perfect guest to have
Speaker 2: this conversation. The Republican Congressman French Hill joins us around
Speaker 2: the table, also the chair of the House Financial Services Committee.
Speaker 2: Mister chairman, it's going to see you.
Speaker 3: Great to be with you and great to have view
Speaker 3: all three.
Speaker 2: And thank you for hosting us. Thank you for hosting us. Sir,
Speaker 2: Let's talk about this. I've asked so many people this question.
Speaker 2: I'll ask you why isn't the President taking the off
Speaker 2: ramp and getting his man confirmed at the Federal's.
Speaker 4: Well, it's what I recommend. I mean.
Speaker 3: I said back in January that I didn't think Jay
Speaker 3: Pal had done anything criminal and that it was a
Speaker 3: distraction to have the DOJ dew that investigation, which is,
Speaker 3: as I've said many times, doesn't exempt the FED from criticism.
Speaker 3: I've had plenty of things that I think that Jay
Speaker 3: Power the FED Board should have done differently over the years.
Speaker 4: But it's time to.
Speaker 3: Move on from this. The petitions to the court have
Speaker 3: been rejected, and I think it's time to move on
Speaker 3: from the case and put our attention around getting Kevin
Speaker 3: Warsh confirmed by the United States Senate.
Speaker 5: Do you think it's enough pressure right now in the
Speaker 5: White House for the President to take the off ramp.
Speaker 1: Well, I would hope.
Speaker 3: So you see this letter that you just had the
Speaker 3: reporting on from the Democrats, and Senator tell Us is
Speaker 3: still very committed to holding his support of the nomination
Speaker 3: until this is behind us. The House Committee or the
Speaker 3: Senate Committee continue to work look at the investigation of
Speaker 3: the building if they want to, and that kind of thing.
Speaker 4: But when it comes to.
Speaker 3: Our oversight, of monetary policy, our overside of the treasury
Speaker 3: market structure, the face of just doing our routine work
Speaker 3: and overseeing the FED. I'd like to see the new
Speaker 3: chair confirmed and let President Trump have a new partner
Speaker 3: at the FED. Let Treasury Secretary Bessett have a new
Speaker 3: partner in bank supervision and monetary policy. It's time and
Speaker 3: I think it's important to move.
Speaker 5: It feels like the president's doubling down. Maybe he doesn't
Speaker 5: want to lose face. So what could potentially be an offer?
Speaker 5: I mean, he likes deals, is potentially I'm going to
Speaker 5: drop the DOJ case. But J Powell, you're not staying
Speaker 5: on till twenty twenty eight.
Speaker 3: Well, I think Chairman Powell is interested in seeing his
Speaker 3: replacement confirmed, and I think Chairman pal is probably interested
Speaker 3: in going on to the next phase of his career
Speaker 3: in his life quite frankly, So.
Speaker 5: You don't think he's staying on as governor, Well.
Speaker 3: I think that depends on According to J. Powell, that's
Speaker 3: how he's inclined to stay on. According to J. Pal,
Speaker 3: if Kevin's not confirmed and if this case is not dropped.
Speaker 1: So this is why I think it's if you're.
Speaker 3: For the Trump administration and the Treasury moving on having
Speaker 3: an economic policy that's in alignment. Then I think it's
Speaker 3: in the president's interest to see the case move on
Speaker 3: and let's go forward with the Trump administration's appointees at
Speaker 3: the FED.
Speaker 6: In the meantime, Rick Reader of black Croft was just
Speaker 6: on and he was talking about how he would like
Speaker 6: to see whoever comes into the FED next work with
Speaker 6: the federal government on initiatives to try to get mortgage
Speaker 6: rates lower, try to get benchmark rates lower on the
Speaker 6: long end as well, in order to keep affordability under check.
Speaker 6: What currently is a discussion on the House Financial Committee,
Speaker 6: given the fact that this has got a fiscal overtone
Speaker 6: as well as potentially a broad based different agency initiative.
Speaker 3: Well, I think the best way to make sure that
Speaker 3: takes place is to make sure inflation is well anchored.
Speaker 3: And I think we do that by taking steps to
Speaker 3: on the supply side to see that the big beautiful
Speaker 3: bill from last year on the tax side is fully implemented.
Speaker 3: Let the Americans, both in business and home and their
Speaker 3: households reap the benefits of those important supply side tax changes,
Speaker 3: and let's continue our work to right size regulation. Those
Speaker 3: things would free up more capital to the housing sector.
Speaker 3: Particularly six out of ten on home construction loans are
Speaker 3: not made by the biggest banks in the country. They're
Speaker 3: made by banks under ten billion dollars. And that's what
Speaker 3: I've had as a focus of the committee. Let's have
Speaker 3: a regulatory supply side housing bill, which the House has
Speaker 3: passed and we're negotiating with the Senate on. Let's continue
Speaker 3: our effort to put in law these tailored regulatory issues
Speaker 3: that allow our regional banks and community banks to thrive
Speaker 3: because they're under the burden in a lot more significant
Speaker 3: way when it comes to capital levels, return on investment
Speaker 3: than the biggest banks in the country are putting that
Speaker 3: into law, I think does exactly that. It helps anchor inflation,
Speaker 3: moves capital into the economy, and I think that allows
Speaker 3: what short term rates to fall, and that in turn
Speaker 3: has a modest impact on pulling down that tenure rate,
Speaker 3: which is so important as a benchmark.
Speaker 2: Let's finish on financial services. What are you hearing about,
Speaker 2: mythos and how dangerous this might be? We sho you
Speaker 2: understanding of things right now?
Speaker 3: Well, the Committee has both ranking Member Waters and I
Speaker 3: are concerned about that. We've actually asked the Treasury for
Speaker 3: a brief there we have noted the treasure Secretary's engagement
Speaker 3: and the FED with the largest financial institutions in the country.
Speaker 3: When I meet with the private sector, I hear from
Speaker 3: them that Claude is a very effective AI partner and
Speaker 3: that they've been most impressed with it, and that they
Speaker 3: want to get into a mode where they can see
Speaker 3: and determine any risks associated with the Mythos product. And
Speaker 3: that speaks to my philosophy about AI. To begin with,
Speaker 3: we aughto let the compliance sector meaning the supervisors, the regulators,
Speaker 3: and the private sector work in a sandbox type environment
Speaker 3: sheltered from someone's network to see what the impact of
Speaker 3: these large language models are. Because they bring tremendous benefits
Speaker 3: to consumers to business ahead of us, but they also
Speaker 3: have these risks, and we should make sure that all
Speaker 3: of our network operators have full understanding that.
Speaker 2: Making some bold claims ahead of IPOs, they've got an
Speaker 2: interest to really hype this up over the next twelve months.
Speaker 2: It's hot to understand what's random, what is in and
Speaker 2: the thirty seconds we have left, do you foresee any
Speaker 2: hearings to get some of these CEOs in front of
Speaker 2: you guys, for the public to have what's random, what is.
Speaker 3: In Well, we've started our hearings on AI, both from
Speaker 3: a regulatory compliance point of view, and we have done roundtables,
Speaker 3: meaning not public hearings yet with the business sector, both
Speaker 3: the tech sector and the users. And I think you'll
Speaker 3: see us continue that work this year.
Speaker 2: Stay with us multile impex Savan's coming up off to this.
Speaker 2: We begin this hour with stelf sitting of record highs
Speaker 2: as investors are potential us around Truce Rick, Reader of
Speaker 2: Black Rock, writing, the immense disruption of trade and global
Speaker 2: supply conditions will be what truly influences market price sick.
Speaker 2: Rick joins us now for more. Rick, welcome to the program, buddy.
Speaker 2: Always a privilege, a pleasure to catch up with you, sir.
Speaker 2: This move that we've seen in this equity market, we've
Speaker 2: thrown so much of the stock market over the last
Speaker 2: several months. AI disruption, private market jitters and now the
Speaker 2: straight andform most remaining closed for almost two months now, Rick,
Speaker 2: and here we are at all time highs. Does that
Speaker 2: bring you comfort or make you nervous?
Speaker 7: Good question, so I'd I'd say a couple of things.
Speaker 7: First of all, I think what it tells you is
Speaker 7: the technicals in the equity market are extraordinary, and the
Speaker 7: earnings numbers that are coming through are pretty powerful. And so,
Speaker 7: you know, you look at the US economy and you
Speaker 7: look at what's you know, I heard the beginning of
Speaker 7: the showtime about the economies week. Economies is strong. Actually
Speaker 7: the parts of the economy and the primary drivers are
Speaker 7: doing quite well.
Speaker 1: You look at tech.
Speaker 7: I mean, you look at some of the numbers yesterday
Speaker 7: that you cited, and you look at these earnings growth
Speaker 7: and I was looking at some of the semies.
Speaker 1: You took about ninety seven percent earnings.
Speaker 7: Growth year on here. I mean, like unbelievably powerful numbers.
Speaker 7: And then you look at you know, the high end consumer,
Speaker 7: that consumption, You look at retail sales when you break it.
Speaker 1: Down, pretty darn good.
Speaker 7: So you've got an economy and by the way, you've
Speaker 7: got housing's not in good shape, lower income's not in
Speaker 7: good shape.
Speaker 1: So that is is what it is.
Speaker 7: But what drives the equity market is in pretty good shape.
Speaker 7: And the technicals. So you had this period of time
Speaker 7: that nobody wanted to buy stocks, and then you realize,
Speaker 7: you know, I've said it before. You you know you're
Speaker 7: gonna have an IPO calendar this year that maybe's a
Speaker 7: couple hundred billion. Maybe we're going to buy back a
Speaker 7: trillion of stock this year, so we're actually there's not
Speaker 7: enough stock to buy.
Speaker 1: So it's just a pretty You talk about how explosive
Speaker 1: this is.
Speaker 7: You realize people sit on their hands, I don't want
Speaker 7: to do anything, particularly in tech, and then all of
Speaker 7: a sudden, you know, maybe a little bit of better news,
Speaker 7: the earnings come in, and then then you create this
Speaker 7: the technicals and equities, by the way, it's complete different.
Speaker 7: And when you think about the treasury market, et cetera,
Speaker 7: because we're getting we get five hundred and twenty billion
Speaker 7: a week of supply, it's I mean, it's amazing. In
Speaker 7: the equity market, how good the technicals are.
Speaker 6: Rick, Is there a contradiction in the fact that we're
Speaker 6: seeing such explosive confidence in equities?
Speaker 4: You're seeing so much cash.
Speaker 6: Out there that are looking for places to go, and
Speaker 6: at the same time people are expecting inflation to come
Speaker 6: back down to two percent over the next five to
Speaker 6: ten years.
Speaker 1: Does that seem contradictory?
Speaker 7: No, man, Listen, I think I think, and I've been
Speaker 7: doing this for many, many few decades. I've never seen
Speaker 7: a productivity revolution like this before. I mean, so you
Speaker 7: go through I mean almost every company I look at,
Speaker 7: you see a similar dynamic. I grow my top line revenue,
Speaker 7: let's say it's four to ten percent. Obviously techt's significantly
Speaker 7: more significant that. But then if I keep my labor
Speaker 7: static to down, and then if I can get my
Speaker 7: costs of good soul and you see this in M
Speaker 7: and I, if I can create synergies, I can run
Speaker 7: a higher operating margin. If you could run a higher
Speaker 7: op operating margin, then my roees is significantly higher. And
Speaker 7: so then it just keeps striving this dynamic. So thinking
Speaker 7: about what and by the way, we haven't really seen
Speaker 7: automation AI really kick in yet, So I think, you know,
Speaker 7: there's this transmission. Part of why I think big cap
Speaker 7: stocks are so powerful is you're building a mode because
Speaker 7: you utilize data so effectively. We're seeing productivity take place
Speaker 7: in Buoye's earnings.
Speaker 1: Companies do great.
Speaker 7: By the way, the counter of that, it's not great
Speaker 7: from an employee point of view. You're seeing that playout,
Speaker 7: which you know is part of what you know what
Speaker 7: affects the interest rate transmission. So it's a really good
Speaker 7: story from a productivity and a corporate earnings point of view,
Speaker 7: not so much for the broad world population.
Speaker 6: So Rackel bullish are you right now? It sounds like
Speaker 6: you're incredibly bullish on big colaps. I mean, are you
Speaker 6: essentially going all in? Do you think it is a
Speaker 6: time to go into equities over bonds, to go into
Speaker 6: equities over cash, to go into equities over commodities.
Speaker 7: I'm not that bullish, but I listen, I think, listen.
Speaker 1: You know we are long the equity market.
Speaker 4: You know.
Speaker 7: One of the things that happens when you know you
Speaker 7: had what happened a few weeks ago, when volatility spikes,
Speaker 7: you can't really it's hard to have a very long
Speaker 7: equity position because you can't manage your risk using the
Speaker 7: volatility markets.
Speaker 1: Now vall has come.
Speaker 7: Down, it allows you to run a bit longer equity disposition.
Speaker 1: And so, yeah, I like equities.
Speaker 7: If you said to me, let's look at the credit markets,
Speaker 7: he say, gosh, where is high yield? Where's investment grade credit?
Speaker 7: And I say, okay, I've got some beta that I
Speaker 7: could put in the portfolio. Look at where spreads are
Speaker 7: investment grade credit not interesting?
Speaker 1: High yield you know it carries well. Spreads are not
Speaker 1: that interesting. So I said, gosh, I'm going to.
Speaker 7: Take my beta and orient it a bit more towards
Speaker 7: the equity market, or more towards the equity market where
Speaker 7: the earnings growth is explosive. I got convexity of the
Speaker 7: upside and I can manage the risk. That's a better
Speaker 7: in a portfolio construct. That's a better disposition than I
Speaker 7: think than you know, parts of the credit market are today.
Speaker 5: We're how do I think the Federal Reserve is thinking
Speaker 5: about all of this, especially given the fact that we
Speaker 5: are seeing higher energy costs in the United States, not
Speaker 5: as high as Asian Europe, but they are still sticking higher.
Speaker 7: You know, I tell you there's a pretty extraordinary point
Speaker 7: in time, and you know part of what I'm talking
Speaker 7: about productivity and the employment dynamic.
Speaker 1: Listen.
Speaker 7: I think the Fed you will be on hold and
Speaker 7: watch the data and you'll see it by the way
Speaker 7: you're going to see and we are seeing some what
Speaker 7: will be some particularly headline inflation, some heavier numbers on inflation.
Speaker 7: I think what the FED has to do and the
Speaker 7: ECB has to do is think about you having a
Speaker 7: supply shock. This is not a demand driven inflation. By
Speaker 7: the way you think about what's happening to lower income,
Speaker 7: middle income people. You're getting hurt on food costs, fuel costs.
Speaker 7: You know, why do we raise interest rates to raise
Speaker 7: your mortgage? It doesn't make any any sense. So I
Speaker 7: think what what your synopsis is around that is, gosh,
Speaker 7: I'll stay on hold for a.
Speaker 1: Bit, I'll watch the data. I think the ECB should
Speaker 1: do the same.
Speaker 7: Maybe they get ahead of it and hike a couple
Speaker 7: of times, but I listen, I think you know when
Speaker 7: we talked about before, how's it. Look at the housing
Speaker 7: numbers this week. You look at existing home sales. When
Speaker 7: the mortgage race shifts up, home sales come down, and
Speaker 7: then you look at the breakdown of retail sales. You
Speaker 7: know what's happening. And I mean, is the dispersion keeps growing?
Speaker 7: Lower income, middle income having a hard time. That's where
Speaker 7: the interest sensitivity is. So listen, I think they still
Speaker 7: the FED has to get the rate down.
Speaker 1: I still think you'll get a couple of cuts. Do
Speaker 1: you push it back a little bit?
Speaker 4: Yeah?
Speaker 7: Maybe, but you're talking about a very two speed economy
Speaker 7: where interest rates really affects things housing, small business, lower income,
Speaker 7: and it's part of what I think the rate can
Speaker 7: come down.
Speaker 2: So reck, let's look across the curve right now. If
Speaker 2: the Fed's going to stand hold, that's going to anchor
Speaker 2: the front end. We've seen a lot of that in
Speaker 2: the performance of fixed incoming treasurey yields over the past
Speaker 2: few weeks. If you go further out along the curve,
Speaker 2: it just feels like the ten year is anchored around
Speaker 2: four thirty, which was the upper end of the pre
Speaker 2: wall range. How does your thinking sort of a just
Speaker 2: when you talk about what's going to happen with FED
Speaker 2: funds and the relationship between that and how it informs
Speaker 2: your view of how we'll get some performance further out
Speaker 2: along the curve.
Speaker 7: You know, I had to tell you, Jonathan a minute
Speaker 7: when you know, I hear people come on and say
Speaker 7: I think rates are going to higher things, I think
Speaker 7: rates are going lower. I actually find the turn year
Speaker 7: part of the curve from an acid allocation point of view,
Speaker 7: not interesting, as you said. But by the way, my
Speaker 7: colleague Rus Brownback talks about your show all the time.
Speaker 7: If you go back over the last year or so,
Speaker 7: and you look at the end of every quarter, you
Speaker 7: look at the end of the year, we've made pretty
Speaker 7: much hover around four twenty five, maybe maybe four thirty,
Speaker 7: but it's pretty unbelievably stable. There's a lot of discussion
Speaker 7: about what do you do with the with the with
Speaker 7: a ten yure point. I do think there'll be initiatives,
Speaker 7: and I do think what you know, when Kevin Wursh
Speaker 7: is confirmed, I do think you'll see a dynamic where
Speaker 7: can you contain the ten year point of the curve?
Speaker 1: Can you keep mortgage rates down? Are there initiatives to.
Speaker 7: Actually pull that mortgage rate down that you can have
Speaker 7: through fiscal stimulus?
Speaker 1: That's really powerful.
Speaker 7: My sense is that ten year note will drift lower
Speaker 7: over the you know, through this year as you get
Speaker 7: maybe you get the funds rate down a bit. Can
Speaker 7: you keep the ten year alongside of it? But I
Speaker 7: will tell you, Donathan, in our portfolios, I say, look,
Speaker 7: you know, particularly the back end not interesting. I just
Speaker 7: want to, you know, try and do is keep my
Speaker 7: front to the belly yield curve exposure and I just
Speaker 7: clip coupon like this is a year, like if we
Speaker 7: can just keep giving clients six in a quarter type
Speaker 7: of coupon type of yield, which you could do without
Speaker 7: without compromising rating. I'm just going to keep staying there
Speaker 7: and then, you know, let people get excited about where
Speaker 7: we're going in the back end of the curve.
Speaker 2: Rick, We've got to ask you what kind of initiatives
Speaker 2: would bring down rights yields at the long end of
Speaker 2: the curve.
Speaker 7: So, by, by the way, a bunch of things from
Speaker 7: the FED. From the FED point of view, you can
Speaker 7: use your balance sheet effectively. We have eighty nine percent
Speaker 7: of the debt of the treasury markets in the zero
Speaker 7: to two year part of the yield curve. It's actually
Speaker 7: not that much out in the back end. The FED
Speaker 7: can actually be very very effective. And how you manage
Speaker 7: the back end of the yield curve. Second thing you do,
Speaker 7: you see the administration through the GSC program is actually
Speaker 7: buying a huge amount of mortgages, a couple hundred billion mortgages.
Speaker 7: You can actually do a bit more with regard to that.
Speaker 7: There are things you can do in terms of creating
Speaker 7: initiatives to stimulate housing, home builder incentives, etc. That pull
Speaker 7: that mortgage rate down. There's a whole series of things.
Speaker 7: Listen I mean you look at existing home sales.
Speaker 1: We should talk about.
Speaker 7: You look at how there's not enough inventory of houses today.
Speaker 7: It influences labor mobility to the negative. Because we don't
Speaker 7: have enough inventory, people can't move. It influences we don't
Speaker 7: build enough houses. We don't put enough people to.
Speaker 1: Work in shelter.
Speaker 7: And by the way, you can't bring down shelter inflation
Speaker 7: because we don't have enough houses. There's tremendous motivation and
Speaker 7: quite frankly, the initiative to actually bring down housing costs
Speaker 7: and a brainer to build more inventory to bring down
Speaker 7: that mortgage rate. You know, I think it has much more,
Speaker 7: much more benefit than people give credit.
Speaker 4: To stay with us.
Speaker 2: More Bloomberg surveillance coming up after this, and Stephen Kirk
Speaker 2: of the Council on Foreign Relations writing, the Iranians will
Speaker 2: demand a role in whatever is planned and will not
Speaker 2: give up whatever leverage they have. Steven joins us now
Speaker 2: for more. Stephen, good morning, good to see. Let's talk
Speaker 2: about some of the claims coming from the president. I mean,
Speaker 2: they've made some concessions. Can you just outline your understanding
Speaker 2: of what the demands are and what the concessions might be.
Speaker 8: Well, the demands have been pretty consistent that the Iranians
Speaker 8: have to give up their nuclear program, they have to
Speaker 8: give up their missile program, and stop arming and supporting
Speaker 8: their proxies. I don't see any real movement on the
Speaker 8: part of the Iranians.
Speaker 4: There may be a negotiation.
Speaker 8: The Iranians may demonstrate some tactical flexibility in order to
Speaker 8: get themselves out from under the problem that they've now
Speaker 8: found themselves with an economy that's teetering on the edge.
Speaker 8: But they want to live to fight another day. And
Speaker 8: the people in charge in Iran right now are the
Speaker 8: hardest of the hard line. I mean, the President keeps
Speaker 8: talking about this new pragmatic regime. These are people with
Speaker 8: a history of waging war against the United States and
Speaker 8: its partners for the last forty seven years.
Speaker 5: Is the President just basically insinuating their pragmatic because they
Speaker 5: showed up to talks.
Speaker 4: Is that it is that.
Speaker 5: The only step we've seen from Iran to be willing
Speaker 5: to negotiate with the United States is that they actually
Speaker 5: showed up in Islamabad.
Speaker 8: Yeah, that's precisely willing to talk. So essentially the President
Speaker 8: is roy cohening this. He's saying something that he wants
Speaker 8: everybody to believe, and he's trying to create his own
Speaker 8: reality on this. But there's no indication that this group
Speaker 8: of people are willing to meet the United States. There's
Speaker 8: certainly they're not willing to capitulate on the battlefield. What
Speaker 8: makes anybody believe they're going to capitulate at a negotiating table.
Speaker 5: You're right to say this administration has been very consistent
Speaker 5: with what they wanted to see from Iran. But now
Speaker 5: there's this extra additional need, which is the opening of
Speaker 5: the Strait of Hermos. Would the United States or golf
Speaker 5: partners except the Strade of Removes be open, but Iran
Speaker 5: would get some sort of monetary fund for that a toll.
Speaker 8: It strikes me that the United States will accept that.
Speaker 8: At some point the Golf States will be very very
Speaker 8: unhappy about this. I mean, think about the strategic setback
Speaker 8: this is for both the United States and our golf partners.
Speaker 8: Before this war was launched, there was freedom of navigation
Speaker 8: through the Strait of Hormoves.
Speaker 4: Now the Iranians have some notional.
Speaker 8: Leverage over the strait, although we're blockade it right now.
Speaker 8: Some resolution of this that gives the Iranians a role
Speaker 8: is something that no one ever imagined. And can you
Speaker 8: imagine a situation in which the Amorandis or the Saudis
Speaker 8: have to pay their primary regional adversary for transit through
Speaker 8: the Strait of Hormors to keep their economies going.
Speaker 4: This is a.
Speaker 8: Tremendous strategic setback for the United States as well as
Speaker 8: the Amorandis, the Saudis, the Iraqis, the Bahrainis, everybody.
Speaker 4: In the region.
Speaker 6: And it's not just about Iran, It's also about China.
Speaker 6: And the Atlanta Council put out a graph showing that
Speaker 6: the number of cross border payments transacted in run minbi
Speaker 6: has gone up tremendously in the past six weeks. I mean,
Speaker 6: how much do you see China stepping in and trying
Speaker 6: to create the Petro Yuan to try to reassert themselves
Speaker 6: in terms of the voice of influence over the region.
Speaker 8: Yeah, you know, I think the Chinese stand to gain
Speaker 8: here at the expense of the United States. But I
Speaker 8: think that the Chinese also have a compelling interest in
Speaker 8: freedom of navigation throughout the throughout the world, but particularly
Speaker 8: in the Strait of Hormos. I also have a ton
Speaker 8: of oil in storage. So I think the Chinese are
Speaker 8: well placed to play a role. They have pushed the
Speaker 8: Iranians into talks and made their preferences known. But I
Speaker 8: don't think the Chinese are really wanting to step in
Speaker 8: and replace the United States here. After all, to the
Speaker 8: extent that the United States gets wrapped around the strait
Speaker 8: of removes Iran in the region, there's less time for
Speaker 8: the United States and less resources to the United States
Speaker 8: to focus on East Asia.
Speaker 6: It is not completely clear what all of the goals are.
Speaker 6: There's a general goal though in the United States and
Speaker 6: in the Western world, freedom of navigation through the seas,
Speaker 6: a desire not to see a nuclear Iran. What's Iran's
Speaker 6: ultimate goal given the new leadership.
Speaker 4: The ultimate goal of this regime is.
Speaker 6: Survival, okay, but beyond that, but beyond this.
Speaker 8: To continuous nuclear program, I mean the ultimate guarantee of
Speaker 8: regime survival, to hold on to the leverage that it
Speaker 8: now has in.
Speaker 4: The strait of rumors, which is something new, which.
Speaker 8: Is almost as good as, if not better than, a
Speaker 8: nuclear program, because you might be able to make money
Speaker 8: off of.
Speaker 4: It and to continue.
Speaker 8: To play a role and put pressure on the rest
Speaker 8: of the region. The Iranians have not given up despite
Speaker 8: the battering that they've taken any of the basics of
Speaker 8: their approach to the region and their approach to.
Speaker 4: The United States.
Speaker 2: That has been a change of strategy from the United States.
Speaker 2: There is now a blockade of the blockade. Does that
Speaker 2: mean Iran has lost leverage or they just going to
Speaker 2: wipe the out?
Speaker 8: The Iranians look at the world in a very different
Speaker 8: way the way we look at the world. We look
Speaker 8: at the world in two four to six eight year
Speaker 8: periods because that's how electoral cycle. Those in charge of
Speaker 8: the Islamic Republic have a much longer timeframe, So.
Speaker 4: They'll wait us out. They'll wait out.
Speaker 8: A new administration will come in, they'll have some new approach,
Speaker 8: and even if there is some change, there's a blockade
Speaker 8: of a blockade, but there's some negotiation that's going to
Speaker 8: go on about the status of about the straight up ormos.
Speaker 8: They're going to insist that they play some role in it.
Speaker 5: But right now they can't move their product either. And
Speaker 5: at some point in the next few weeks, analysts say
Speaker 5: there's going to be shut ins. They could do some
Speaker 5: serious damage of their wills, which is oil is basically
Speaker 5: the main driver of their economy. Do you think that
Speaker 5: could force them to be a little bit more pragmatic.
Speaker 8: Well, certainly the economy is on the verge of collapse.
Speaker 8: The Israelis and the United States have done tremendous damage
Speaker 8: from the air and now this blockade is making things
Speaker 8: even worse. But keep in mind, as I said before,
Speaker 8: this is the hardest of the hard line. They'd rather
Speaker 8: eat dust than capitulate to the United States.
Speaker 4: So I think this is going to go on much longer, and.
Speaker 8: Again at the negotiating table there might be some tactical flexibility.
Speaker 8: They're interested in sanctions relief, but are they interested in.
Speaker 4: Solving all the issues between the United States and are
Speaker 4: on I don't think so.
Speaker 2: Really tough question to answer, But I've got a while
Speaker 2: skin forgive. I've got a pvice case of how long
Speaker 2: the strike's going to be closed full I think.
Speaker 8: That the straits are going to be closed for at
Speaker 8: least in the next few months.
Speaker 2: The next few months, I think.
Speaker 8: It's entirely possible that, you know, it's going to take
Speaker 8: time to negotiate this. The end of this blockade that
Speaker 8: the Europeans are talking about this mechanism, it will take
Speaker 8: time for them to get it together to get naval
Speaker 8: escorts through the Strait of Homs. That's even assuming that
Speaker 8: the Europeans have the kind of kind of organizational capacity
Speaker 8: to actually do this kind of thing without the help
Speaker 8: of the United States. And as I said, I think
Speaker 8: we're talking about the hardest of the hardliners. There's going
Speaker 8: to be tactical maneuvering around negotiations, but it could be
Speaker 8: a while before the straits actually opened in a way
Speaker 8: that the economy can get going again.
Speaker 2: This is the Bloomberg Survendics podcast, bringing you the best
Speaker 2: in markets, economics, antient politics. You can watch the show
Speaker 2: live on Bloomberg TV weekday mornings from six am to
Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify,
Speaker 2: or anywhere else you listen, and as always on the
Speaker 2: Bloomberg Terminal and the Bloomberg Business Amp.