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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is your weekly

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Speaker 1: Washington Policy Pulse, the Balance of Power Podcast. I'm Joe Matthew.

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Speaker 1: Every Monday, Bloomberg Intelligence, senior policy analyst and friend of

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Speaker 1: the show, Nathan Dean shares his weekly call on upcoming

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Speaker 1: catalysts in the nation's capital. Listen for the most recent

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Speaker 1: and relevant policy research from our team at Bloomberg Intelligence.

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Speaker 1: Now with today's installment, here's Nathan Dean.

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Speaker 2: Good afternoon, everybody. Welcome to the Washington Policy Pulse. My

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Speaker 2: name is Nathan Dean. I'm a senior policy analyst with

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Speaker 2: Bloomberg Intelligence here in the Washington, DC Bureau. We want

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Speaker 2: to say thank you very much for joining. Happy New Year.

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Speaker 2: We hope you had a RESTful holiday season, and we want,

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Speaker 2: obviously want to say thank you to those of you

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Speaker 2: who are joining us via the Balance of Power podcast.

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Speaker 2: We're recording this call on Monday, January fifth at ten

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Speaker 2: two am. And just like how everything's moving Washington, is

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Speaker 2: important to timestamp that because things are happening fairly quickly

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Speaker 2: at the moment, and that starts with Venezuela. And so

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Speaker 2: what I want to do is just take a few

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Speaker 2: moments to talk about what some of the research that

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Speaker 2: Bloomberg Intelligence and Bloomberg Economics is putting out on the terminal,

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Speaker 2: And then I'm going to turn it over to my

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Speaker 2: colleague Wayene Sanders, our senior defense analyst, to talk a

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Speaker 2: little bit more through of what he's seeing in terms

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Speaker 2: of what happened this past weekend going forward. Now, what

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Speaker 2: you need to know is is that Bloomberg Intelligence has

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Speaker 2: been putting out notes on the energy impacts, things like

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Speaker 2: how Venezuelan oil, if it were to come on in

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Speaker 2: the market, could be a detriment to Canadian oil, the

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Speaker 2: industrial impact, the OPAC impact, and if you need copies

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Speaker 2: of that, please let me know. I can certainly share

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Speaker 2: those links with you. And then our colleagues over at

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Speaker 2: Bloomberg Economics have been putting out notes in terms of

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Speaker 2: what they think the three scenarios are going forward. Do

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Speaker 2: they think that this is going to be the most

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Speaker 2: favorable where the US support opens a youth path for

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Speaker 2: a democratic transition, or is it going to be a

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Speaker 2: transactional focus for the Trump administration, or is it going

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Speaker 2: to be a worst outcome for Venezuela where the US

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Speaker 2: in the world would slightly slide into chaos as rival

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Speaker 2: factions jostle for power. That also is available for you

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Speaker 2: on the Bloomberg Turmo, but more importantly for those of

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Speaker 2: you who are on the call at the moment, I

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Speaker 2: want to turn it over to Wayne Sanders because Wayne's

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Speaker 2: been looking at this this past weekend. He and his

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Speaker 2: team have put out some notes on the terminal, but

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Speaker 2: what it means for the defense industry, and also what

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Speaker 2: do we think is going to be coming going forward

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Speaker 2: in terms of the United States and Venezuela. President Trump's

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Speaker 2: comments on Cuba, Columbia, Greenland for example. And the last

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Speaker 2: thing I'll say before we turn over to Wayne is

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Speaker 2: is that you know, from a congressional standpoint, I don't

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Speaker 2: think you're going to see much in the way of

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Speaker 2: pushback from Congress towards the President on this generally speaking,

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Speaker 2: and that when these types of things happen, you know,

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Speaker 2: Congress always gets a little upset that they weren't notified

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Speaker 2: in advance, or they'll say that you know there is

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Speaker 2: you know, Congress is the one that has to declare war.

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Speaker 2: This goes all the way back. Doesn't matter which president

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Speaker 2: is power, Congress always just doesn't like it when presidents

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Speaker 2: take steps like this without notifying them first. But again,

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Speaker 2: I don't think you're going to see much of a

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Speaker 2: political pushback from most either party on this. Democrats really

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Speaker 2: want the message in twenty twenty six to be about affordability,

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Speaker 2: and Republicans generally aren't going to be pushing back outside

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Speaker 2: of some of books like Representative Massi and Representative Marjorie

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Speaker 2: Tayley Green on that. So Wayne, let's bring you into

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Speaker 2: the conversation. So, Wayne, when you saw in the news

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Speaker 2: the United States had arrested and taken Venezuelan President Nicholas

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Speaker 2: Maduro to New York, what were your first thoughts, What

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Speaker 2: were your thoughts on the operation, and what's your thoughts

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Speaker 2: on the defense industry going forward?

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Speaker 3: Thanks Nathan, Yeah, I was surprised at first, just based

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Speaker 3: off at the timing. I think that I wasn't I

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Speaker 3: wasn't quite expecting it to go this early in January.

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Speaker 3: I know President Trump said that he wanted to actually

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Speaker 3: do it at the end of last year. But when

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Speaker 3: you look at the way that this went down, it

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Speaker 3: was pretty much just a three hour extraction of an

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Speaker 3: indicted individual from a company or from a country. But

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Speaker 3: One of the key pieces here is when you look

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Speaker 3: at how precise US did this, I think this is

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Speaker 3: also a strategic message to a lot of folks as well.

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Speaker 3: You look at the Navy build up for this, right

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Speaker 3: you had Huntington Angles Ford class carriers out there. You

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Speaker 3: had general dynamics, Huntington Angles, destroyers, amphibious warships, highlighting the

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Speaker 3: need to strengthen domestic shipbuilding capacity, which I think has

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Speaker 3: been another one of the key pieces in there. You

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Speaker 3: had one hundred and fifty aircraft B one bombers at

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Speaker 3: thirty five f twenty two strike fighters, you had helicopters,

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Speaker 3: you had electronic warfare, and then you also had in

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Speaker 3: their offensive cyber capability. So you were able to see

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Speaker 3: a lot of the might of the US military when

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Speaker 3: it's actually being put together into this type of joint operation.

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Speaker 3: So I think from a defense perspective, in the industrial base,

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Speaker 3: I think you're really going to see a lot of

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Speaker 3: the boost for precision munitions. That's something that we knew

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Speaker 3: was going to be coming out. That's going to be

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Speaker 3: positive for RTX and Lockheed. You're still going to see

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Speaker 3: a lot for shipbuilding. Continued focus on this. They continue

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Speaker 3: to try and fix the maritime industrial base inside the

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Speaker 3: United States. So I think there's one of the kind

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Speaker 3: of the key pieces that are in there. You mentioned

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Speaker 3: Cuba and Columbia earlier. I think it's a little harder

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Speaker 3: to go after Cuba and Columbia because you don't have

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Speaker 3: an indictment that really brings you in to allow some

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Speaker 3: more of the law enforcement side of the house and

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Speaker 3: less on the military operations side of the house. But

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Speaker 3: from defense industrial spending, I don't see this changing anything.

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Speaker 3: I think that the focus for indopaycom the Indo Pacific

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Speaker 3: region as a whole, for long range munitions, hypersonic stealth

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Speaker 3: bombers and all that that's still going to be there,

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Speaker 3: and I think this narrative just solidifies a lot of

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Speaker 3: that based off of the use of the Navy.

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Speaker 1: Right.

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Speaker 2: Well, Wayne, I funny enough, so we're going to call

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Speaker 2: this in the Happy New Year aspect of Nathan didn't

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Speaker 2: get his board setup correctly. So I actually didn't hear

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Speaker 2: a single thing you said, Wayne, But because I can

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Speaker 2: read lips, I usually can't. But I'm just going to

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Speaker 2: presume that you said everything that you said on our

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Speaker 2: team call that we had at eight thirty this morning. So, Waine,

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Speaker 2: I guess the one question I have for you, and

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Speaker 2: I hope that you didn't answer this, but if you did,

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Speaker 2: just give me a wave and say hey, hello, you

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Speaker 2: know I already sent this so forth like that. You know,

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Speaker 2: as you think of President Trump's strategy, you know, as

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Speaker 2: you think of how the defense industry and how the

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Speaker 2: military is actually going to respond to this, do you

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Speaker 2: think that this is something that's going to play out

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Speaker 2: through the rest of twenty twenty six or do you

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Speaker 2: think that this is something that's more of just like

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Speaker 2: a nuance that markets are going to be like, Okay, yes,

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Speaker 2: we had this operation. You know, Nicholas Maduro has been

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Speaker 2: under indictment for the last five years. That's what the

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Speaker 2: administration is using as justification for going in there. You know,

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Speaker 2: it's very important for the administration the stress that FBI

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Speaker 2: agents were on the ground and were the ones that

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Speaker 2: actually took him as opposed to a military operation. When

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Speaker 2: you hear the President talk about Colombia and Cuba and Greenland,

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Speaker 2: I think that's where a lot of our investors are

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Speaker 2: interested in, is what's coming next? What are your thoughts.

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Speaker 2: Obviously I'm not going to hear them. So if you

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Speaker 2: could just give me a smile and a wave when

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Speaker 2: you're done, and then I'll come back and listen. I'm

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Speaker 2: going to presume that you said some great stuff. Yeah,

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Speaker 2: I think.

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Speaker 3: I think really you're going to be looking for what

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Speaker 3: we look for. It is called indicators and warnings on

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Speaker 3: the military side, as you would you would look at

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Speaker 3: some type of additional build up. Right, you've already seen

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Speaker 3: some of the key focuses of carrier strike groups going

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Speaker 3: down and being into the Latin America region. I think

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Speaker 3: that's an area where that you're probably going to see

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Speaker 3: some impact. You're going to see some variations that are

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Speaker 3: in there. But in terms of trying to pull off

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Speaker 3: the same type of thing that they did against Cuba

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Speaker 3: and Columbia, I think that that does that ends up

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Speaker 3: being a different kind of capacity that we end up having.

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Speaker 3: We did put one out where we actually looked at

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Speaker 3: the difference between Cuba and Venezuela in terms of size

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Speaker 3: and GDP in terms of what you're actually able to

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Speaker 3: throw at it. Right, Cuba is at eighty one billion

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Speaker 3: and Venezuela at one hundred and eleven billion, So in

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Speaker 3: terms of being able to come forward and defense capacity.

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Speaker 3: I don't see him doing it from the military side.

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Speaker 2: Okay, great, thank you Waane. Really appreciate it. And folks,

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Speaker 2: if you do want to have a deeper dive conversation

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Speaker 2: with Wayne or individual from a Bloomberg Economics team, please

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Speaker 2: just let us know. I highly recommend you know, the

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Speaker 2: BEE team, Chris Chris Kennedy beca wasser. They were up

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Speaker 2: over the weekend working on this. We also have our

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Speaker 2: energy analysts, Rob Barnett's, Vince Piazza, Tailing Talent Custer, and

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Speaker 2: our industrials teams. They've been writing about this as well.

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Speaker 2: So great, thank you. Wayne. Feel free to drop if

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Speaker 2: you want, but appreciate and again apologize for the technical difficulties.

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Speaker 2: So let's just move on to a couple of the

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Speaker 2: other congressional stuff that's happening. You know. First off, let's

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Speaker 2: we have to talk about Obamacare. Now. The Senate returns today,

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Speaker 2: the House returns tomorrow. We're not anticipating a lot happening

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Speaker 2: this week. Fun fact, there's actually a vote on showerhead

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Speaker 2: regulations that I'm actually going to watch just because I

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Speaker 2: think there are some regulations and we need power as

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Speaker 2: shower heads to be a little more powerful. But the

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Speaker 2: one vote that it could come up this week is

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Speaker 2: the discharge petition on Obamacare subsidies. Now, obviously those subsidies,

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Speaker 2: the enhanced subsidies, expired at the end of the year.

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Speaker 2: My colleague Dayne Wright Can he used to write about this.

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Speaker 2: The latest that he's put out is that, you know,

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Speaker 2: it's very unlikely you're going to see Congress come together

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Speaker 2: and actually create a deal to extend these subsidies, even

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Speaker 2: with the discharge petition. There's just too many Republicans who

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Speaker 2: want these subsidies to end, and there's really no reason

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Speaker 2: here politically why you know, the Republican Party would want

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Speaker 2: to change this, despite the fact that there's a lot

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Speaker 2: of moderate Republicans who are somewhat you know, they're a

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Speaker 2: little bit on the fence about this and a little

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Speaker 2: bit concerned on that. So expect some headlines, but unfortunately

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Speaker 2: for the subsidy advocates, it doesn't seem like that's going

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Speaker 2: to go anywhere. We should also talk about the government shutdown.

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Speaker 2: So the government shutdown on January thirty first, This would

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Speaker 2: be nine out of the twelve appropriation bills. I actually

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Speaker 2: just put my outlook on the shutdown out this morning.

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Speaker 2: I don't think it's going to happen. I think I'm

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Speaker 2: at a thirty percent, and I actually think that's a

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Speaker 2: little high at the moment. Senator Schumer did one of

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Speaker 2: the Sunday shows over the weekend and essentially just ruled

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Speaker 2: out the idea of saying, look, and I'm paraphrasing here,

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Speaker 2: you know, look, affordability is going to be the word

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Speaker 2: for twenty twenty six. This is something that the Dummer

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Speaker 2: Crats succeeded in pushing the message in the Virginia, New Jersey, Tennessee,

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Speaker 2: the Georgia special election, and so forth like that. And

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Speaker 2: I don't think you're going to see Democrats really want

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Speaker 2: to rock the boat in terms of trying to risk

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Speaker 2: another government shutdown, changing that narrative. And then from the

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Speaker 2: Republican perspective, again, it's not something that they largely got

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Speaker 2: the blame, according to the pulling data amongst independence for

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Speaker 2: the previous shutdown. It's not something that you're going to

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Speaker 2: likely see now. I do think you're going to see

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Speaker 2: a continuing resolution that pushes this to either February or March.

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Speaker 2: And I think part of that is because of what

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Speaker 2: just happened over the weekend. I think you are going

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Speaker 2: to see some of the defense hawks push for additional

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Speaker 2: spending on the defense side. The appropriators probably don't have

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Speaker 2: enough time to get that done. Maybe they will, they

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Speaker 2: probably don't have enough time to get that done. The

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Speaker 2: easiest thing for them to kick the can to March

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Speaker 2: and then continue to push this forward. So again, I

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Speaker 2: don't think the government shutdown is going to occur, But

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Speaker 2: the problem with kicking the can to march is that

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Speaker 2: you're going to take time away from other bills. The

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Speaker 2: one that I'm most tracking and the one that I

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Speaker 2: get the most client interactions with is the Crypto the

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Speaker 2: Bipartisan Market Structure Bill, the Clarity Act. Now, what I'm

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Speaker 2: telling my clients is, you know, on January first, I

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Speaker 2: was at a seventy percent chance of passage, and I'm

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Speaker 2: sticking with that. Right now. This is slightly becoming out

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Speaker 2: of consensus. But if we get into mid February and

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Speaker 2: we haven't seen any real substantial movement on this, then

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Speaker 2: the odds of that are going to slowly decrease. Because

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Speaker 2: there are a lot of hang ups right now related

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Speaker 2: to the President's involvement at Crypto some of the privacy

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Speaker 2: security secureance. I think the privacy security securities, sorry, privacy

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Speaker 2: security concerns can be dealt with. But every day that

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Speaker 2: we go forward into twenty twenty six and substantial progress

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Speaker 2: on this crypto bill hasn't been made, my odds are

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Speaker 2: going to decrease. So right now I'm going to give

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Speaker 2: it to about Valentine's Day before I really start changing

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Speaker 2: things unless we see as a statement or two. But

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Speaker 2: something to keep in mind is at the crypto bill

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Speaker 2: right now, I'm at seventy percent chance, but I'm slowly

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Speaker 2: becoming out of consensus on that because again more and

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Speaker 2: more folks are saying, yeah, maybe not. Also on the

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Speaker 2: legislative side, let's talk about reconciliation because you're gonna hear

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Speaker 2: a lot of that in terms of headlines this year

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Speaker 2: as well. So if you remember, under the One Big

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Speaker 2: Beautiful Bill, this was passed via reconciliation. This is that

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Speaker 2: by part sorry, not bipartisan. It's certainly not bipartisan. It's

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Speaker 2: the budgetary maneuver, the budgetary resolution that allows a majority

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Speaker 2: vote in the House and a majority vote in the Senate.

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Speaker 2: You can bypass the Senate filibuster and you can pass

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Speaker 2: legislation vias reconciliation. It only can be used one time

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Speaker 2: per fiscal year. The fiscal year ended on September thirtieth,

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Speaker 2: and so Republicans have this new ability to pass another

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Speaker 2: reconciliation bill. Now, I don't think it's gonna happen. I'm

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Speaker 2: gonna have a much more in depth note coming out

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Speaker 2: later this week on this. But the one thing to

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Speaker 2: keep in mind is that Senator Lindsay Graham over the

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Speaker 2: weekend is pushing this idea for another reconciliation bill. And

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Speaker 2: right now it's healthcare, tariffs, defense spending. Those are the

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Speaker 2: three areas that folks are really talking about potentially putting

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Speaker 2: it in in terms of trying to get something past.

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Speaker 2: But again, I'm not exactly sure that they have the votes.

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Speaker 2: The easiest way I've said it, and folks who have

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Speaker 2: been on this call, I have heard me say this before.

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Speaker 2: You know, if it was easy the first time, they

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Speaker 2: would have done it. It's much harder the second time.

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Speaker 2: So again, we'll see. But my bigger note is coming

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Speaker 2: out later this week. Also, keep in mind the Supreme

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Speaker 2: Court tariff piece we're still waiting in the Supreme Court

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Speaker 2: argument on the tariffs. President Trump obviously just put on

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Speaker 2: truth Social this morning something about that. I think he's

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Speaker 2: not too happy with what the Supreme Court is thinking.

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Speaker 2: Holly from our legal analyst, still gives it a sixty

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Speaker 2: percent chance that the Supreme Court is going to deem

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Speaker 2: those tariffs to be unlawful. She's going to put her

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Speaker 2: update on timing for later this month. This update's going

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Speaker 2: to come out tomorrow, so again, stay tuned on that.

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Speaker 2: And then the last thing I want to point out,

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Speaker 2: just because we've been a little bit a little bit

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Speaker 2: longer than I like these calls to go, is now

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Speaker 2: that it's January. Prisident. Trump has always said the FED

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Speaker 2: share decision is coming in January. Now, there hasn't been

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Speaker 2: any reporting that this is going to come anytime soon,

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Speaker 2: but it's January, so be very careful that, you know,

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Speaker 2: expect some headlines related to that because it can come

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Speaker 2: at any point at this time. So again I want

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Speaker 2: to say apologize for the technical difficulties. I'm sure Wayne

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Speaker 2: did some great speaking. I didn't hear it. I'll hear

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Speaker 2: it when I go back and do the replay. But

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Speaker 2: as we get into twenty twenty six, if there's anything

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Speaker 2: we can do. If you want to ask us questions

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Speaker 2: to talk about on the call, please feel free to

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Speaker 2: reach out. My email is ending ten at Bloomberg dot net. Again,

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Speaker 2: that's ending ten at bloomber dot net. And that is

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Speaker 2: whether or not you're actually on this call or if

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Speaker 2: you're listening to us via the Balance of Power podcast.

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Speaker 2: We certainly want to hear from you either way. Again,

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Speaker 2: if you have any suggestions on improvements or anything like that,

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Speaker 2: we'll certainly take it. I will stop there, We'll say

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Speaker 2: Happy New Year, thank you again for attending, and we

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Speaker 2: wish you a great week.

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Speaker 1: Our thanks to Nathan Dean, Bloomberg Intelligence Senior Analyst, bringing

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Speaker 1: you the latest installment of his weekly Washington Policy Pulse.

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Speaker 1: For more from BI or to join this call live

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Speaker 1: each week, you can email Nathan at ndan at Bloomberg

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Speaker 1: dot net. That's n d e A n at Bloomberg

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Speaker 1: dot net and come back to the podcast later today

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Speaker 1: for the latest edition of Balance of Power