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 Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
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Speaker 2: Bloomberg's Mike Shepard Sharp walk us through the latest and
Speaker 2: the latest developments over the last few days on this front.
Speaker 3: Well, there's really been a lot happening with respect to Intel.
Speaker 3: We've chronicled over the years, thanks for our colleague Ian King,
Speaker 3: all of the company's struggles, and they really reached an
Speaker 3: inflection point last month. We saw that really rough earnings
Speaker 3: outlook that they gave toward the end of August that
Speaker 3: sent the company's share sliding by the most in decades,
Speaker 3: and since then everybody's been wondering where do they go
Speaker 3: from here? Well, the company has had a board meeting,
Speaker 3: they've decided to cut more than fifteen thousand jobs try
Speaker 3: to trim ten billion dollars in spending. But now we're
Speaker 3: getting a few other bits of good news this week.
Speaker 3: One of them is this news from the company and
Speaker 3: from the Pentagon and Commerce Department that Intel is eligible
Speaker 3: for up to three billion dollars for military chip production,
Speaker 3: and this company's roughly twenty billion dollars in loans and
Speaker 3: grants that Intel is due to receive for commercial production
Speaker 3: under the Chips and Science Act that the President was
Speaker 3: just talking about in that clip. The company also announced
Speaker 3: this week of partnership with Amazon World Services to produce
Speaker 3: a multi billion dollar and it's a multi billion dollar
Speaker 3: initiative to produce semiconductors for artificial intelligence for Amazon's cloud
Speaker 3: computing arm This is potentially more significant than the military
Speaker 3: chip we were just talking about, only because it shows
Speaker 3: that Intel is developing a commercial customer base that could
Speaker 3: feed some of the new plants and support some of
Speaker 3: the new plants that Biden was talking about and hoping
Speaker 3: to see built.
Speaker 4: This isn't just about building manufacturing bases in the United States.
Speaker 4: This is a national security concern. Why is the ministration
Speaker 4: coming out and touting this but at the same time
Speaker 4: looking to block. Now there's an extension when it comes
Speaker 4: to Nipon Steel, an ally of the United States, a
Speaker 4: Japanese company, and they're fourteen billion dollar takeover of US steel.
Speaker 3: Well, on the steel front, it's very much a politically
Speaker 3: charged question because Nipon Steels attempted buy US steel. There
Speaker 3: is such symbolism and it is so freighted with US
Speaker 3: steal being an iconic company for the US and especially
Speaker 3: for President Joe Biden, who hails from Pennsylvania. So the
Speaker 3: resistance politically lead to that proposal is not surprising. I
Speaker 3: think we have to separate a little bit that national
Speaker 3: security front on chips because that is a really core
Speaker 3: and consequential technology that if the US loses any ground
Speaker 3: to China on this front, it would be a potential
Speaker 3: risk militarily in the Pacific.
Speaker 4: Basin chev Do you know what the national security concerns
Speaker 4: are when it comes to US steel and Nippon Steel.
Speaker 3: You know, one of the concerns is that, you know,
Speaker 3: Nipon Steel actually does a fair amount of business in China,
Speaker 3: and would would US steals production somehow be vulnerable to shifts,
Speaker 3: you know, once the company takes over. If the transaction
Speaker 3: were ultimately improved, approved, and it is not looking terribly favorable,
Speaker 3: would some of the production be shifted over there? And
Speaker 3: if US steel makes some advances domestically and you know,
Speaker 3: perfect some of its techniques, would those get transferred somehow
Speaker 3: to production in China. So what they're worried about is
Speaker 3: that nexus of US production with Chinese production that Nippon
Speaker 3: still ultimately have control over, should it somehow pull off
Speaker 3: a trans completion of this deal.
Speaker 1: Call me cynical here, but when I saw that it
Speaker 1: was pushed back until after the election, this particular decision
Speaker 1: with Knee Pun Steel, I thought to myself, well, doesn't
Speaker 1: that make it convenient for a lot of the politicians
Speaker 1: They can rail against it, say they're completely you know,
Speaker 1: for keeping US businesses domestic in their entire ownership, and
Speaker 1: then approve it later when it seems like there's no
Speaker 1: better option really for US steal? Is that the right
Speaker 1: way to read this?
Speaker 3: Well, Lisa, I'll share your cynicism. It really did look
Speaker 3: like a convenient move to push it after the election,
Speaker 3: to also remove it as an issue if the decision
Speaker 3: were made before November fifth. That would expose the current
Speaker 3: Democratic nominee and presidential Canada Kamala Harris, accusations that no
Speaker 3: matter which way it goes, it would somehow be harming
Speaker 3: US industry and if they decided to approve it, it
Speaker 3: would hurt the party's standing with union workers, whose votes
Speaker 3: and support they really need come November.
Speaker 2: I shaf appreciate the update down in Washington Bloomberg's My
Speaker 2: Shepherd with the latest on several fronts. Listen to this
Speaker 2: for a forecast. It comes from Max Light in a
Speaker 2: city thinking prices will actually grind lower over the next
Speaker 2: three to six months, and afterage sixty dollars a barrel
Speaker 2: in twenty twenty five, Max joins is now for more Max.
Speaker 2: We've got plenty to talk about, and lots of commodities
Speaker 2: to discuss as well, but let's start with crude. Why
Speaker 2: isn't this a bigger factor in your roundelook? Sure?
Speaker 5: I mean, just to clarify, in the short run, we're
Speaker 5: seeing a lot of upside risks in the oil market.
Speaker 5: We have an average price forecast of seventy seventy four
Speaker 5: dollars for Brent for the fourth quarter of this year,
Speaker 5: so there's upside risk from what's going on in the
Speaker 5: Middle East in terms of potential risk premium in the market, Russia, Ukraine,
Speaker 5: hurricane risk, Libya's outage is ongoing, and you may go
Speaker 5: on for months and months. The market may continue to
Speaker 5: get a boost from the FED cutting cycle in the
Speaker 5: very short run, But I guess the broader dynamic, which
Speaker 5: we've been highlighting since at least January of this year,
Speaker 5: is that they're slowing demand growth, whether it's led by
Speaker 5: China or just a broader global cyclical weakness, and it's
Speaker 5: being met by solid non OPEC plus supply growth. So
Speaker 5: OPEK plus has a problem, and they have a problem
Speaker 5: with spare capacity. They've been cutting for two years, so
Speaker 5: you know they've got a big decision to make in
Speaker 5: early December.
Speaker 1: There's a question about whether oil is getting increasingly divorced
Speaker 1: from the economic cycle in terms of an indicator, and
Speaker 1: whether there is divergency in China and the makes it
Speaker 1: increasingly confusing. As well as the transformation of a lot
Speaker 1: of the energy ecosystems to electric vehicle and other types
Speaker 1: of renewable energy sources. How much do you attribute that
Speaker 1: transformation or transition as part of that sort of decline
Speaker 1: and demand.
Speaker 5: Yeah, we think that's a big, big part of the story.
Speaker 5: So there's a structural part of it which is being
Speaker 5: led by China, which is investing massively in the energy transition,
Speaker 5: and in response to shocks, China's probably going to double
Speaker 5: down on that investment in the energy transition and specifically
Speaker 5: going to accelerate the adoption of electric vehicles, which retail
Speaker 5: adoption was around fifty four percent last month of electric vehicles,
Speaker 5: which is up about twenty percentage points over the last
Speaker 5: twelve months, so massive. China's basically solving all the problems
Speaker 5: we talk about in the West with respect to electric vehicles.
Speaker 5: We talk about range anxiety, price anxiety, charging anxiety, weather anxiety,
Speaker 5: latest vehicles, the latest batteries. Some of them haven't been
Speaker 5: mass produced yet in terms of the vehicles and the batteries,
Speaker 5: but you know, they're solving these problems. And it's evidence
Speaker 5: in the data, and it's evidence in the slowing in
Speaker 5: oil demand growth. And there's a cyclical element as well,
Speaker 5: which is you know why the Fed's most likely going
Speaker 5: to be starting a pretty aggressive cutting cycle this week.
Speaker 1: What I find fascinating is the oil used to be
Speaker 1: sort of a geopolitical temperature taker, or at least an
Speaker 1: economic temperature taker, and now it seems to be shifting
Speaker 1: a bit to precious metals. You expect that precious metals
Speaker 1: will actually get arguably the biggest boost from some of
Speaker 1: the rate cuts that we're expecting to see. Can you
Speaker 1: explain why that is and why that's maybe the better
Speaker 1: macroeconomic indicator right now than oil.
Speaker 5: Yeah, we're really excited about precious metals, particularly silver, but
Speaker 5: also gold. But the reason why silver looks super interesting
Speaker 5: right now is, you know, I spoke a bit about
Speaker 5: how oil is negatively exposed to China's energy transition. Silver
Speaker 5: is positively exposed to China's energy transition has this bifurcat
Speaker 5: economy where energy transition sectors are relatively strong and the cyclical,
Speaker 5: the housing, the private sector, the prices of property, wealth impacts,
Speaker 5: they're all super negative sentiments, quite negative in China. Silver's
Speaker 5: also bullishly exposed to that. The retail retail buying of
Speaker 5: silver just started to pick up over the last couple
Speaker 5: of months. You're seeing the first kind of imports of
Speaker 5: silver in bar and coin form into China that we've
Speaker 5: seen for years. And years and years. So silver's kind
Speaker 5: of uniquely exposed in a bullish way to both the
Speaker 5: bearish part of China and the bullish part of China.
Speaker 5: It's going into solar panels on the energy transition side
Speaker 5: in particular, as well as ebs. Yeah, obviously, both gold
Speaker 5: and silver are super exposed to lower real rates in
Speaker 5: the US weakening US growth for years, and we're going
Speaker 5: to probably get a big wealth shift into gold and
Speaker 5: silver from US and global investors exposed to their own
Speaker 5: regional cutting cycles.
Speaker 4: Max, do you continuously see central banks buying goal to
Speaker 4: diversify away from the US dollar.
Speaker 5: Continuously certainly received for the next twelve to eighteen months.
Speaker 5: Tough to forecast beyond that horizon. That's a long enough
Speaker 5: horizon for me, but yes, certainly there's enough treasury holdings
Speaker 5: left to sell to buy more, much more.
Speaker 2: Gold, Max, We've got to do more of this. Appreciate
Speaker 2: the clarity on the outlook, sir. Thank you. Max. Later
Speaker 2: in the of Citry, I just want to pause and
Speaker 2: talk about the biggest story of the last twenty four hours.
Speaker 2: Just pause. Imagine you received this movie script. Imagine you
Speaker 2: saw this movie at the theater. I don't think you'd
Speaker 2: believe it. I think you think this was a stretch.
Speaker 2: What took place in Lebanon in the last twenty four hours.
Speaker 2: Thousands of pages in Lebanon exploding yesterday simultaneously, all at
Speaker 2: the same time, killing several people and leaving almost three
Speaker 2: thousand wounded across the country, including hundreds of members of
Speaker 2: the hospital. Militant groups accusing is of orchestraking the attack.
Speaker 2: Israel declining to comment, let's head over to the region
Speaker 2: and cantshat with Jamanabas said, you now joining us now
Speaker 2: from Dubai Jamala, walk me through this. This looked like
Speaker 2: an action movie out of Hollywood. It was not. It
Speaker 2: was real life. What do we know happened?
Speaker 1: That's it.
Speaker 6: Feeling of shock, disbelief, fear is prevailing right now in Lebanon.
Speaker 6: So what we do know is at three thirty pm
Speaker 6: local time yesterday these pages all exploded simultaneously. The Lebanon
Speaker 6: Health Minister just put out a statement now saying twy
Speaker 6: eight hundred people were injured. Twelve people were killed, including
Speaker 6: two children, and many of them are in serious condition.
Speaker 6: They are about two hundred to three hundred as serious cases.
Speaker 6: Interestingly enough, The Iranian ambassador was also harmed in this attack,
Speaker 6: and both Hesbelah and the Lebanese government were very quick
Speaker 6: to blame Israel, with the Lebanese Prime Minister Najidmiati saying
Speaker 6: that this is an attack on Lebanon sovereignty. Israel themselves
Speaker 6: have declined to comment and they haven't said anything about
Speaker 6: the incident. But what this constitutes is uh Ah an
Speaker 6: embarrassing security breach for Hesbela. It is the biggest security
Speaker 6: breach ever. And lots of people were saying, what were
Speaker 6: these operatives doing walking around with pagers? Anyway, And you
Speaker 6: have to rewind back to this speech that Hassen Losarella,
Speaker 6: the commander in chief of Hesbella, gave back in February,
Speaker 6: where he warns military operatists to not use their cell
Speaker 6: phones out of concerns that they may be intercepted by
Speaker 6: Israeli intelligence and he thought that maybe if they use
Speaker 6: these low tech devices, the pagers, it would be safer.
Speaker 6: But obviously you fast forward to today and what we're
Speaker 6: seeing is a massive intelligence and security breach and now
Speaker 6: Hesbela is on the defensive.
Speaker 4: Jumana, is this a case of escalation to de escalate
Speaker 4: or do we think or do you think, haw you
Speaker 4: reine the tea leaves Isra wants to escalate, to escalate.
Speaker 4: What happens next?
Speaker 6: I think, Amrie, that we are seeing a whole new
Speaker 6: level of warfare, and what we have seen since October
Speaker 6: seven is daily crossfire, exchange of fire on that border
Speaker 6: uh with Israel, the northern border. What this has meant
Speaker 6: now is we're moving towards a new type of warfare,
Speaker 6: and this is cyber warfare. A lot more question marks,
Speaker 6: a lot of different operators going behind the scenes. If
Speaker 6: you look at all of the cybersecurity comments that came
Speaker 6: through yesterday, trying to understand exactly what happened, it's still
Speaker 6: not clear. But what has emerged is this feeling that
Speaker 6: these devices had been tampered with in potentially a different
Speaker 6: country and therefore the shipments that came through just a
Speaker 6: week ago. According to a Lakhbard, this is a news
Speaker 6: agency that's closely associated to Hasbala. We're all contaminated with
Speaker 6: these explosive devices. So it does raise a lot of
Speaker 6: questions about the new type of warfare that we're entering into.
Speaker 6: But certainly Lebanon is on a high state of alert
Speaker 6: and even if you rewind back earlier on in the day. Yesterday,
Speaker 6: the Israeli government, the Prime Minister Nataieha, was saying that
Speaker 6: they've got a new war objective now and that is
Speaker 6: ensuring that security on the northern border is taken care
Speaker 6: of so that people can start return running back to
Speaker 6: their homes because since October seven, there has been this
Speaker 6: daily exchange of crossfire and people have been forced to evacuate,
Speaker 6: and so they want to resume some normalcy. And the
Speaker 6: question is, unless there is a diplomatic solution, will this
Speaker 6: open the door to a larger scale operation.
Speaker 2: Shocking scenes yesterday, Jemana, thank you as always, Jemina have
Speaker 2: sent you there of Bloomberg leading our coverage out of
Speaker 2: the region. This is the Bloomberg Surveillance Podcast, bringing you
Speaker 2: the best in markets, economics, angiopolitics. You can watch the
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