00:00:00 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube. 00:00:27 Speaker 2: Scheduled is Greg Daker. Let me explain this, folks. 00:00:29 Speaker 3: The National Association for Business Economics, of which I was a member for years, is really viscerally within the economic dialogue of American business. Mister Daco has served gloriously as president of the shop. 00:00:42 Speaker 2: And he joins us this morning. 00:00:44 Speaker 3: Greg, let me start with the boom economy before we get to the FED. John Writing writes to Ethan Harris this morning on LinkedIn that consumption puts business investment is something like an eight percent GDP. Do we have a two boomy of an economy right now? Is it too effervescent? 00:01:03 Speaker 4: I don't think it's too effervescent, but we are seeing strong growth in underlying momentum. When it comes to consumer spending activity and business investment. 00:01:11 Speaker 5: I would actually flip it slightly. 00:01:13 Speaker 4: I would say that we have too much of a concentrated growth environment because when you look at what's driving growth. It's really more the affluent consumers and AI driven business investment. If you exclude those, you don't really have much of breadth in terms of economic momentum. And that's really the risk to get to the. 00:01:30 Speaker 3: Press conference disaster that we saw this week. If we see yield shift as they shifted in the press conference, what will that mean for American business? 00:01:41 Speaker 5: I think that's a key element to focus on. 00:01:43 Speaker 4: That's really one of the key points that I've been highlighting with a lot of the CFOs I talk to, which is this notion that the cost of capital is going to be structurally higher going forward, not because of what the fence next move is going to be, but because we have fiscal imbalances that. 00:01:59 Speaker 5: Are likely to be present for the foreseeable future. 00:02:01 Speaker 4: Because we have a very large pull for private capital that's putting upward pressure on yields, including the big AI investment surge. Because we have inflation that is much more volatile in this environment of layered supply shocks, and because we have questions about central bank credibility and those were even more visible after the most recent press conference. So those elements are likely to keep long term interest rates higher than they've historically been and be a constraint in terms of private sector investment, and. 00:02:32 Speaker 6: Greg, you're higher for longer. 00:02:33 Speaker 7: Was echoed by a note from Torsten Slock at Apollo this morning. 00:02:36 Speaker 6: He basically said the exact same thing here. 00:02:38 Speaker 7: We love to get your thoughts, Greg, as it relates to what we saw from the Federal Reserve this week, what we saw from Fed Chairman Wash What were your takeaways. 00:02:46 Speaker 4: I think we have to distinguish two elements here when it comes to the critics as to Fed Chair Warsh's performance. You can essentially have a view that maybe a rate hike is not necessary in September. 00:02:58 Speaker 5: That's very possible. You've seen the likes. 00:03:01 Speaker 4: Of Governor Waller, Governor Cook, Vice Jir Jefferson, New York Fed chair President williams All arguing. 00:03:07 Speaker 5: That we'll have to watch the data. 00:03:09 Speaker 4: If core inflation does not show signs of moving back towards the two percent target, then a tighter monetary policy stance will be required. 00:03:16 Speaker 5: I think what. 00:03:16 Speaker 4: Markets are penalizing right now is essentially the inconsistencies having a new FED chair that's criticizing the old FED. 00:03:23 Speaker 5: But not doing much about it. 00:03:25 Speaker 4: Seeing that inflation is a choice, but not doing much about it, that's a risk. Talking about resolute commitment to the two percent inflation target and then delivering actual thinking again an issue. And then finally saying that you're going to deliver on the two percent target, but then talking about moving the goalpost at the next strategy review is another inconsistency. And those are the real issues, not so much whether you tighten or not in September. 00:03:48 Speaker 3: You know, I have no idea, folks, see academic Craig here. Credibility I should say here, Greg Dotco came out of Levin in Belgium, and that is where the giant Mark blog was on economic epistemology and theory. 00:04:03 Speaker 2: Let's layer on that. Greg. 00:04:04 Speaker 3: Is one final question here this morning. The chairman is trying to do economic philosophy. He's trying to do almost economic politics with his comments. Can he get away with that? Or, like Claudia Sam says, should he just look at inflation and PCEE is a data point, a measurement point, and not a lot of you know Mark blog, George Sorow's theory. 00:04:30 Speaker 4: I think you have to be very careful in trying to be too intellectually out there in terms of trying to comment. During the press conference, in particular, the questions from the journalists, including Mike McKee's question, were very clear. What is your reaction function? How would you react in terms of monetary policy in different circumstances. That's not very complicated. That's the basic for. 00:04:50 Speaker 5: A fet chair. 00:04:51 Speaker 4: If inflation moves in one direction, what are you going to be doing? If inflation moves in another direction, what are you going to be doing? You can't hide behind the Lucas critique or potentially the good Hearts law. I mean, these are valuable laws and valuable theories, but they're not going to help you when it comes to setting policy in the very near term. 00:05:10 Speaker 2: Greg, thank you so much. 00:05:11 Speaker 3: Thank you for your service to NAB as well, mister docos with ey parts of it. 00:05:16 Speaker 2: Stay with us. 00:05:17 Speaker 3: More from Bloomberg Surveillance coming up after this. 00:05:28 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube. 00:05:40 Speaker 3: Victoria Fernandez is and she's Deck Police Chief Market strategist Crossmark Global Investors. What's the biggest argument, Victoria, of families or couples are having in this booming economy, this big bull market. 00:05:56 Speaker 8: Like Tom, it's got to be how they're going to invest around tech? Right? 00:05:59 Speaker 9: Do we buy chips? Do we not? Do we buy memory? 00:06:02 Speaker 10: Do we not? 00:06:03 Speaker 8: With the volatility that we're seeing in these markets. I think that's going to be the biggest conversation people are having. And really and truly we need to be tactical. It's what we're doing for our investors. There is so much going on underneath the surface right now. Even though you've got a VIX that's like an eighteen handle, the correlations are not high, and anything except energy and utilities you don't have high correlations. So stockpicking is important. 00:06:28 Speaker 3: Bloomberg Money question. Then we'll do that at twelve noon today, Victoria Fernandez. What does it mean for rebalancing? Do you less rebalance and let tech go or do you have increased scrutiny on rebalancing a portfolio. 00:06:43 Speaker 9: I think it's going to be. 00:06:44 Speaker 8: More of the latter, Tom, and I think that's because of what we're talking about in regards to these correlations. I mean every day a stock can change, right. I mean, we've seen that with Microsoft, We've seen it with s k Heini, so we've seen it with a ton of names. You have to be able to be tactical. So little bites at the apple is what we're saying. Don't go in and make big bets because it can turn around the next day and kind of bite you in the rear. So little bits and pieces here and there when the stock comes down, add a. 00:07:12 Speaker 9: Little bit to your portfolio. 00:07:13 Speaker 8: When it runs high, say thank you very much, take some profits off the table. 00:07:17 Speaker 9: That's what we're doing for our clients. 00:07:18 Speaker 8: I think that's the best way to approach this volatility we're seeing in the tech sector. 00:07:23 Speaker 6: Victoria, we're right in the teeth of earnings here. We've got a lot of technic earnings this past week. 00:07:28 Speaker 3: Here. 00:07:29 Speaker 7: What's your view of kind of how Corporate America is delivering on the earnings front. 00:07:34 Speaker 8: It seems like they're doing quite well. Right when we look at the blended earnings expectations, those that have reported plus expectations, I mean, you're what, you're close to thirty a little over thirty percent earnings growth for the second quarter. 00:07:47 Speaker 9: That's amazing. 00:07:48 Speaker 8: And I think we have to be a little bit worried about is that as good as it gets looking at coming up quarters. But they're actually performing quite well. The problem is they're not all getting rewarded for that. We've seen that in some of the high yer scaler names. A lot of that coming down to the communication around what the ROI is on these names, what the future looks like in terms of this spending that we're seeing. When you're upping your capex by ten twenty percent, investors want to know exactly how they're going to get rewarded for that. But all in all, earning so far and profits, I mean, look at the energy names this morning. Profits are off the chart. So so far, so good. 00:08:24 Speaker 7: It was also a big week for central bankers, particularly the US FED and Chairman Walsh. 00:08:31 Speaker 6: What did you take away from this midweek meeting? 00:08:34 Speaker 8: You know, Paul, it's interesting after the press conference, you had so many people coming out saying how horrible it was that all the credibility issues around Warsh and what's happening. 00:08:45 Speaker 9: And I had to kind of, you know. 00:08:47 Speaker 8: Do a double take, because isn't this kind of what we expected? 00:08:50 Speaker 9: Isn't this what he told us? Was going to happen. 00:08:53 Speaker 8: I mean, he's not going to front run these task forces that he's put in place, So we shouldn't have expected there to be a lot of discussion around that. 00:09:01 Speaker 9: We didn't think there'd be hikes. The market wasn't pricing in really a hike for this. 00:09:05 Speaker 8: Meeting, So I'm really kind of surprised at the reaction that we've seen. I do think it sets up a lot more from now till the September meeting in terms of FED speak and what. 00:09:14 Speaker 9: We're going to hear. People will be listening closely. 00:09:16 Speaker 3: Do you take advantage of price down, yield up out the curve ten year, twenty years, thirty year paper? 00:09:22 Speaker 8: Well, I am in our fixed income portfolios. I want to lock in some of that because our clients are using fixed income, high quality fixed income for cash flow. So if we're going to get some better yields, then why not go ahead and lock a little bit of that in, maybe up to ten years or so and have that in your portfolio, set it aside and just collect your caps. 00:09:43 Speaker 2: It's like Sweeny Gospel, Yeah right away there. 00:09:46 Speaker 7: What are the risks here Victoria to this economy and the consumer seems to be kind of hanging in there. 00:09:52 Speaker 6: Earning seem pretty solid. I don't know what are the risks here. 00:09:56 Speaker 8: Those are the exact risks fall if we see earning start to turn next quarter or even later in the second quarter, when we start to get more of the consumer facing retail names report, if those are weak, then I think we have to start getting a little bit concerned because we've got consumption higher than Income's right, real disposable income was down with consumption higher. That's unsustainable over the long run. So I think let's watch earnings. If they start to drift a little bit, we have to start worrying a little bit more about the consumer. And we did see credit and debit spending up over six percent last month, so let's keep an eye on that. 00:10:33 Speaker 3: And now, folks, on July thirty, First we look towards August, the first tinge of the leaves across Central part in the discussion. You're not even thinking about it. Why are you here on Tria. Now let's start with the autumnal glow is upon us, and we do that always and only with Victoria Fernandez. First of all, do you have your Texas Texas A and M tickets for November twenty seventh. 00:10:59 Speaker 8: I do not have them yet, but don't worry. It is on my to do list, so we. 00:11:03 Speaker 9: Will have them. 00:11:04 Speaker 2: I'll bet it is. 00:11:04 Speaker 9: Are you going to come join me? 00:11:06 Speaker 3: Are you going to go? Well, we said we would love to do a remote round there, Hallabalu, Canuck Kanuck. We would love to do that Texas at College station, folks, November twenty seventh. That's Friday day after thanks coming small It's it's like a state holiday. I'll be working in Texas to see that. 00:11:23 Speaker 9: I won't be joining you on that day for the radio. 00:11:25 Speaker 3: As we get to Q three ending September thirty, as we stagger into Q four. In your research note, Victoria, you say it best. 00:11:34 Speaker 2: Sometime this earning's joy is going to end? 00:11:37 Speaker 3: Is it going to end Q four or do we stagger into twenty twenty seven as Texas A and. 00:11:42 Speaker 2: M goes to the Rose Bowl. 00:11:45 Speaker 8: I like the way you think, Tom for the Rose bul At least, I do think that we'll probably do a little bit of staggering here at the end of the year into the first quarter of next year, mainly because we know how consumers are. We don't underestimate the US consumer in the fourth quarter of the year. Around holiday, they spend whether they have it or not. Unfortunately, and we know that the bottom consumer and some of the younger consumers are being held up by baby boomers and Gen X money supply there. 00:12:14 Speaker 9: So I think we'll continue to see. 00:12:16 Speaker 8: A little bit of support in the fourth quarter, but will need to be cautious going into the new year. 00:12:20 Speaker 2: Victoria, thank you. 00:12:21 Speaker 3: Victoria Fernandez with is the Crossmark at Global Investments. 00:12:25 Speaker 2: Stay with us. 00:12:26 Speaker 3: More from Bloomberg Surveillance coming up after this. 00:12:37 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch US Live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch US Live on YouTube. 00:12:49 Speaker 2: She is the worst job in London. 00:12:51 Speaker 3: Can you imagine waking up at Deutsche Bank over by the wall, like the Roman Wall is across the street and you have to work with George Saravellos. I mean it's it's it's like difficult joining us now at Queen Victoria Street. Finally, Malika Sakeva joins US FX strategist at Deutsche Bank. 00:13:08 Speaker 2: Her research just jumps out of the screen. 00:13:11 Speaker 3: Of course, coming out of Chicago, I got to start with something I didn't think i'd start with. Malika. When you talk to Matt Lozetti in New York at the Deutsche Bank building at the southwest corner of Central Park. 00:13:23 Speaker 11: It's not the time warn out, not anywhere, It's the Deutsche Bank Tower, Maliki when you get briefed by Lozetti, how did the Chairman of the Federal Reserve System change our foreign exchange strategy at that press conference. 00:13:38 Speaker 12: So there's been a lot of focus on central banks this week, especially in the currency market. Certainly, the FED meeting earlier in the week was a big focus for the dollar, which weekend after we didn't perhaps get the degree of commitment to immediately acting on some of the price stability conviction that we'd had in June. But the other sime bank which has been in focus this week and where I spend a lot of attention is the Bank of Japan, which met this morning and had a hawkish hold and put a lot of emphasis on the currency. Obviously, going into the Bank of Japan meeting this morning, we had some signs of FX intervention in DOLLI n yesterday and so they certainly are sort of growing signs of policy discomfort with where the yen is. 00:14:23 Speaker 3: But you know of Durant Bush one oh one. Can an intervention be successful if it's alone and repeated, So I. 00:14:34 Speaker 12: Think four four yen for the end to truly strengthen back The path really is the Bank of Japan has to lift rates, but if officials want to give them a bit of a runway, you know, give them some time to raise rates, then FX intervention can be very helpful. Japan not only has a lot of central bank reserves, they also have a tremendous amount of other fics assets across pension fund insurance balance sheet. So I would say does have the resources to defend the currency if they so wish. 00:15:03 Speaker 5: To do that. 00:15:04 Speaker 7: Markot Bloomberg News is reporting that Japan likely spent around fifty three billion dollars US dollars intervening. 00:15:10 Speaker 6: In the currency market on Thursday. 00:15:12 Speaker 7: I prop up the end that would likely be the biggest ever intervention on a single day by Hokyo. The question I think a lot of people are asking is that enough did these interventions really work or they just kind of short term in nature typically. 00:15:27 Speaker 12: So it's not the first time that we've seen intervention in Japan this year. The Bank of Japan did intervene in April and in May. I would actually argue that considering what we've seen this year, We've seen a war, we've seen an energy shock, who've seen a tremendous amount of FED volatility. Dolly in has actually been relatively stable around one sixty. I do think the market will need the Bank of Japan to walk the hawkish talk that we heard today. They will need to accelerate the pace of rate hikes. They are talking about inflation being north of two percent over their forecast horizon, and so keeping rates at one percent is simply not enough. But I do think that, you know, there is a runway here for them to use FX intervention to provide some room and some support for the currency and malca. 00:16:11 Speaker 7: As we came into twenty twenty six, I think as it relates to the US dollar, the consensus was probably weaker dollar, but then the war in Iran started and that kind of reversed pretty subdly. But now I'm looking at the d X Y indexit you know, one hundred spot three. We did trade a little bit below one hundred today on the d X Y How do you think this plays out? 00:16:34 Speaker 12: So, I think the focus of my research over the last few weeks has been something very interesting is happening in the US dollar. We are seeing a sort of a swap from a lot of interest in US treasuries to a lot of foreign interest in US equities, and this tremendous amount of inflow into the US stock market over the last year or so has actually provided a good amount of support for the dollar. Now, my thesis is that looking ahead, the risk profile of the dollar could start to change. So in the next big equity correction, it's not necessary that the dollar will necessarily do well because the dollar is now much more linked to and much more sensitive to equity capital than it has been in the past. So I think the change in correlations between stocks and the dollar is really going to be a big focus for the market. 00:17:21 Speaker 3: Okay, so where are we six months or a year out give us levels there? 00:17:25 Speaker 2: Where are we on euro dollar, where are we on sterling? 00:17:30 Speaker 12: So I think when we think about the dollar, I mean the interesting things about currencies are they're relative prices. Right, So the dollar is strong because something else is weak against it, And if we look across the global currency universe, the currencies that are particularly cheap at the moment, our Japan, our career, and a lot of other currencies in Asia. So really, I would argue that the outlook for the dollar in six months and twelve months is not really about what happens to the euro or what happens to the sterling. It's what happens to currencies in Asia. It's what the boj does. It's whether we see repatriation from Japanese investors back into Japan rather dolly in is significantly lower from here. That's what's going to drive the broad dollar. 00:18:05 Speaker 3: So is Chairman Worsh central banker to the Pacific RIM. 00:18:12 Speaker 12: So so, I mean, I think, you know, we're central banks everywhere. There's there's a lot of focus on whether they're going to be really really serious about price stability. And I think what we've seen this week is, you know, where the market catches a whiff that they may not be than currencies could could come under pressure. So I think Japan is going to be very focused on that. Probably in the US as well, the central bank is going to be very focused on that. 00:18:36 Speaker 2: Malika, thank you so much. Really appreciate it. Thank you so much for being on. 00:18:39 Speaker 3: Malika Sacheva with this FX strategist with George Saravella's at Deutsche Bank, and. 00:18:45 Speaker 2: Stay with us. 00:18:46 Speaker 3: More from Bloomberg Surveillance coming up after this. 00:18:57 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern. Listen on Apple Karplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube. 00:19:09 Speaker 3: Major shout out to all of our team in Dubai and across up to Istanbul and over actually to Dublin, Ireland for the coverage on the war. 00:19:19 Speaker 2: Ellen Wald is definitive on this. 00:19:20 Speaker 3: She's senior Fellow at Atlantic Council and has a one volume in Saudi Arabia that is a required read for those that need to learn of the of the Arab Peninsula. What does the media get most wrong? 00:19:35 Speaker 2: Ellen Wald? 00:19:36 Speaker 3: About the Arab Peninsula from the Persian Gulf over to the Red Sea. 00:19:43 Speaker 13: I think the media I would say that the most common misperception is that everything is defined by the Sunishia conflict. I think that that's a very simplistic way to look at it. There's a lot going on. You know, there's a lot going on between different of sex, Islamic sex, that kind of it really transcends it. On the other hand, I would say that the one thing that has really stood out for me in conversations with people in the Gulf right now is that they, at least the people are fairly united in their sentiment against Iran. That a lot of the attacks that Iran has leveled against these countries uh in you know, in Saudi Arabia, in the UAE, uh you know, in Inkuait have really kind of solidified at least popular popular sentiment against Iran, and that they are potentially much more united in efforts to fight Iran than is I think being really portrayed in the United States and the media and from state takes at this point. 00:20:48 Speaker 7: Ellen, if I were an insurer whose job it is to ensure these tankers, I think my base case today has to be as long as this leadership is still in position of power in Iran, straight will never be open. 00:21:02 Speaker 6: Is that a fair assumption. 00:21:04 Speaker 13: That's what I would advise. You know, if I was an insurer, I would not be ensuring these ships. I think you're taking an absolutely massive risk if you are going to you know, provide insurance for a ship that's that's transitting. I really think right now we are at basically kind of a status quo, kind of stands still in pass. 00:21:24 Speaker 14: Iran is not. 00:21:25 Speaker 13: Going to give up any way to control this straight unless something really really shifts internally or with their firepower ability, They're not going to give it up. And the United States seems like it's not going to give up its position either. So either we have to just dig in here for the long haul until something changes economically on either side, or we have to you know, change something militarily. But otherwise we're kind of we're kind of stuck. This is going to become a situation of attrition, and the world may have to adjust to this new normal. 00:22:01 Speaker 7: But if I'm Saudi Arabia, not to mention all the other countries in that region, can I live with that? Can I live with that reality that the strait is closed? I would like to think those neighbors could exert some type of pressure on. 00:22:16 Speaker 13: Iran, you know, I think that they absolutely do have that ability. I think that the pressure they can exert is really finding the workarounds, and it's an interesting situation because Saudi Arabia is actually you know, differently positioned I would say than say Kuwait or Iraq or buck Rain or Qatar or even the UAE, because it has a different geography. 00:22:40 Speaker 14: It has access to the Red. 00:22:42 Speaker 13: Sea and it's been using that and it can continue to use that access to its advantage. 00:22:48 Speaker 14: Now that has all come into. 00:22:49 Speaker 13: Question now that we're getting other actors in other geographic regions involved. The who they's getting involved in the Red Sea absolutely threatens that. And then we have militias apparently Irenian back milicias in Iraq that are now threatening ports in the Mediterranean, and so that definitely, you know, kind of enlarges the regional aspect of this of this conflict. 00:23:15 Speaker 3: Okay, here's why you watch Bloomberg surveillance, folks, and we're thrilled to do this. Our team. 00:23:19 Speaker 2: It wasn't Eric Marlow, it was it was one of the interns. 00:23:22 Speaker 3: They put ellen Wald back to back with leslie venjer Murray. 00:23:26 Speaker 2: It's too much, folks. 00:23:27 Speaker 3: Ellen Wald's senior fellow of the Atlantic Council and joining us now dropping in with ellen Wald. It's a panel, folks, a surveillance Bloomberg panel. Leslie Ven Jean Murray, Chicago Council on Global Affairs. Ellen Wald explained to doctor Vin Jamary the relationship of the tribes of the Arab world. Does Saudi get along with the UAE, Does the UAE get along with Byren, Does Biering get along with Kuwait, et cetera. 00:23:57 Speaker 2: Ellen discussed that. 00:23:59 Speaker 13: They definitely do get along, but it's not like they're all just brothers here, you know, they're they're definitely different sex and they've definitely taken different approaches in uh particularly. 00:24:10 Speaker 14: In modern times. 00:24:12 Speaker 13: But there's absolutely, you know, you could say, kind of long seated bad blood in some respects. One particularly fascinating part it has to do with Jordan, Okay, Jordan is actually you know, the Hashamite kingdom of Jordan that comes from a family that the Saudi king, the original king Abdola disease, and so he actually kicked out the ancestor of the current king of Jordan from Mecca. 00:24:38 Speaker 14: Way to make it over Saudi Arabia. 00:24:40 Speaker 2: We're going to stop the show, Ellen. 00:24:42 Speaker 3: In Lawrence of Arabia was the Hashemike king that went to Jordan were their great grandfather was that played by Anthony. 00:24:49 Speaker 14: Quinn, I believe, so you believe. 00:24:53 Speaker 2: So I nailed that. Leslie's impressed Leslievinger. 00:24:56 Speaker 3: Murray helps us out with ellen Wall this morning there's Leslie's been just on fire with discussion at Chicago Consul and global affairs all over work previously at Chatham Mouse Leslie. The question every listener wants to know, including ellen Wald, how do we extricate ourselves from this mess? 00:25:16 Speaker 10: If you mean the United States? I think the answer is we don't. We started. 00:25:22 Speaker 9: You know, it's a little bit of the pottery barn rule. Tom. You break it, you own it. You have to fix it. 00:25:29 Speaker 10: President Trump, I'm sure and many Americans would like nothing more, quite frankly. 00:25:35 Speaker 9: Than to return to the you know, pre late. 00:25:38 Speaker 10: Feb status quo. But I think we all know at this point it's not on offer. So this is a manage it. Try to get things into a stable position, and I think, from the US administration perspective, sooner rather than later, and certainly sooner than the early November midterm elections. But there's no sign right now of any plan coming into place that brings that stability. You know, the US is kind of doubling down on sanctions force and Iran has demonstrated that it is in it to win it, it can bear those costs, It has that leverage over the Strait, and it doesn't seem to be flinching. 00:26:22 Speaker 9: So at the. 00:26:24 Speaker 10: Moment again we're seeing escalation tip for tat, and the few proposals on the table don't seem to be getting the kind of traction that we need to see to get back to some sort of stability. 00:26:36 Speaker 7: Leslie with a little bit of a time here that we've had to kind of study this last few months. 00:26:43 Speaker 6: How did we misread this so terribly wrong? 00:26:47 Speaker 2: Again? 00:26:48 Speaker 9: I would ask who is the we here? 00:26:50 Speaker 10: I think if you go back to the very deep bench of US geopolitical experts, Middle East experts, folks who worked in the national security and intelligence agencies for decades, they've played out this scenario of Iran weaponizing the Strait of horror moves. 00:27:10 Speaker 9: They understood the the you know, the very. 00:27:14 Speaker 10: Disproportionate power advantage, the asymmetric leverage that was possible. And I think, you know, we're sort of telling the same story that we've been telling for a while. Originally it looked like the United States was being pulled in by Israel. Trump by Netsan Yahoo. That equation has changed. That's one of the more surprising things that has come out of the last few months that Donald Trump no longer seems to be playing along with that playbook, but now he has his own considerations and concerns. 00:27:46 Speaker 3: Ellen Well brief, Leslie, Venjamury and all of us here and a royal family that goes back to seventeen twenty seven, those of us, Leslie and you were too young to remember this, but I remember Faisal clearly a huge dominant in the minds of Americans coming out of World War too. You're going to prize in all that brief us now on the royal family of Saudi Arabia. How stable is it, How dominant are they in the discussion? 00:28:17 Speaker 14: The Saudi royal family is quite stable. 00:28:19 Speaker 13: I don't think we're concerned really about any destabilization in terms of the leadership there. But it is interesting to see as the conflict has gone on that they really have not been the most vocal, at least publicly, you know, in terms of the you know, the the Gulf States. I mean, I think we've seen the UEE maybe taking much more of a vocal stand on certain issues, particularly concerning the fact that that stay free passage through the straight of war moves is not negotiable for them, and they've been the ones really taking this stand, though Saudi has has also borne the brunt of a lot of the you know damage also obviously create Bakrain have too, but they do seem to be pretty resolute in their you know opposition, and I don't think that we're really concerned about any kind of destabilizing UH measures taking place in at least in Saudi Arabia Leslie. 00:29:22 Speaker 7: One of the I think objectives of the administration for the initial attack on Iran was regime change. And granted there are different players now leading around, but they are still theocrats. Is there any reason to believe that continued military action on the part of the US that the pressure would be so great that there may be an uprising of the people to change the government. 00:29:45 Speaker 6: How do we look at that these days? 00:29:47 Speaker 10: I mean, I see no evidence of that, and I don't My reading of those who have been following this for a very long time is that they see no evidence of that. It is is not really in America's gift, I think, unfortunately, coming out of the removal of Maduro Venezuela's leader that President Trump perhaps was kind of leaning into America's unwielding power. And you know, power is very contextual and so we haven't seen that delivered in this case. But I think we're long past the moment where we believe that this is going to lead. 00:30:27 Speaker 9: To regime change. 00:30:28 Speaker 10: At best, we're hoping for, you know, getting into a direction which can lead to some sort of stability over the Strait. I even think the question of getting to a nuclear deal is you know, very far away at this point time. 00:30:42 Speaker 3: Leslie, help us with how we've shattered our relationships. I mean, you were at Chathamouse and now doing this wonderful work in Chicago, like Britain. Can Britain like show up along the Persian golf like that did in eighteen oh nine eighteen ten, or we just shattered the West in the Arab world. 00:31:03 Speaker 9: Well, well, first of all, the West was already dividing internally. First thing. 00:31:08 Speaker 10: First, Tom, you know it better than anyone. The UK also the United States, but not nearly as much as had its own domestic internal problems. And you know, the new Prime Minister, Andy Burnham is going to be very focused internally on as Jillian Ted told me earlier this week, growth, growth and growth top three priorities. 00:31:31 Speaker 9: So the West has a lot of internal economic. 00:31:33 Speaker 10: Problems, but that division has been a long time coming. Europe is leaning in, not to the golf, it's leaning into you know what it perceives to be. It's number one security threat, which is coming from Russia and from Putin, and Donald Trump has been back. 00:31:49 Speaker 2: And fronts on that one. I want to do one final question to both you. 00:31:52 Speaker 3: This has been so special folks, Leslie, vin Ja Murray, and Ellen Wald with us. Allen, let me start with you same question, then to Leslie. We seem to have a new diplomacy out of the State Department running out of the Oval Office in the White House. Ellen, how is our diplomacy perceived in the world of your book Saudi Inc. 00:32:13 Speaker 13: I would say there's probably a lot of confusion, because it does seem like there's one kind of diplomacy maybecoming a State Department and another kind coming. 00:32:20 Speaker 14: Out of the White House. 00:32:21 Speaker 13: And I think for states in the Gulf who are looking at there for security, this is a really volatile thing and is probably a bit concerning Leslie. 00:32:33 Speaker 3: Along that line, can we repair our shattered diplomacy. 00:32:39 Speaker 9: Not under this administration. 00:32:41 Speaker 10: I don't feel, unfortunately, we're not seeing the strategy. We don't see the quite frankly, the interest in doing that. If anything, on the current administration is aiming to do exactly the opposite, to disrupt America's most recent long stand alliances, to really rethink how they do just diplomacy right, just simply not the goal. 00:33:06 Speaker 9: It's not the project. So I don't see it happening anytime soon. 00:33:09 Speaker 3: You two have made a Friday Morning in the summer special. I mean, that's a world class panel. Paul Yeah, ellen Wald, Senior Fellow Atlantic Council, Leslie vin Ja Murray, President of the Chicago Council and Global Affairs. Just really special to have the two of you together, Ellen Wald and Leslie Vinja Murray. 00:33:26 Speaker 7: Thank you. 00:33:27 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, seven to ten am Easter and on Bloomberg dot Com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal