1 00:00:00,040 --> 00:00:06,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:35,840 Speaker 2: Terminal and the Bloomberg Business app. 10 00:00:36,400 --> 00:00:37,040 Speaker 1: Here's the latest. 11 00:00:37,080 --> 00:00:39,920 Speaker 2: This morning, the President slamming NATO, telling the Telegraph he 12 00:00:40,000 --> 00:00:42,479 Speaker 2: is strongly considering pulling the United States out of the 13 00:00:42,520 --> 00:00:45,520 Speaker 2: Alliance as members refuse to join the war with Iran 14 00:00:45,800 --> 00:00:48,360 Speaker 2: joining US. Now is Admiral Pierre van Die, the NATO 15 00:00:48,400 --> 00:00:51,919 Speaker 2: commander for Transformation. Admiral, welcome to the program, sir. I'll 16 00:00:51,960 --> 00:00:54,520 Speaker 2: share with you what the President said to the Telegraph. 17 00:00:54,840 --> 00:00:56,960 Speaker 2: In their story this morning, they say the President was 18 00:00:57,000 --> 00:01:00,280 Speaker 2: asked if he would consider reconsider the US's membersh ship 19 00:01:00,320 --> 00:01:03,040 Speaker 2: of the Alliance after the conflict. He said, quote, oh yes, 20 00:01:03,320 --> 00:01:06,320 Speaker 2: I would say it's beyond reconsideration. I was never swayed 21 00:01:06,319 --> 00:01:09,160 Speaker 2: by NATO. I always knew they were a paper tiger, 22 00:01:09,440 --> 00:01:12,760 Speaker 2: and Putin knows that too. By the way, Admiral, what's 23 00:01:12,800 --> 00:01:15,480 Speaker 2: your reaction to that quote and what's the future of 24 00:01:15,520 --> 00:01:16,160 Speaker 2: this alliance? 25 00:01:17,440 --> 00:01:18,560 Speaker 3: So thank you for having me. 26 00:01:18,600 --> 00:01:21,720 Speaker 4: It's the first time I'm on a US TV or life, 27 00:01:22,120 --> 00:01:24,200 Speaker 4: so I'm very happy to be able to share some 28 00:01:24,240 --> 00:01:28,160 Speaker 4: comments with you. So well clearly understand that we themity 29 00:01:28,360 --> 00:01:32,360 Speaker 4: are not maneuvering on the political level. So I will 30 00:01:32,360 --> 00:01:36,720 Speaker 4: not commend this debate, which is a strong one, which 31 00:01:36,800 --> 00:01:41,039 Speaker 4: is about the transathletical inks and how the things go 32 00:01:41,160 --> 00:01:42,080 Speaker 4: on the political side. 33 00:01:42,160 --> 00:01:43,360 Speaker 3: I think what we have in. 34 00:01:43,240 --> 00:01:46,960 Speaker 4: Front of us is a world where the crisis is 35 00:01:46,959 --> 00:01:49,280 Speaker 4: not any more the good understanding of how the things 36 00:01:49,320 --> 00:01:53,000 Speaker 4: are going. It's much more a question of shock. If 37 00:01:53,040 --> 00:02:00,080 Speaker 4: I may an image, A crisis is when you're the 38 00:02:00,080 --> 00:02:01,600 Speaker 4: ties of your car are flat. 39 00:02:03,040 --> 00:02:05,160 Speaker 3: A shock is what you hit a tree. 40 00:02:05,480 --> 00:02:08,160 Speaker 4: We are in a world where hitting trees now it's 41 00:02:08,240 --> 00:02:10,920 Speaker 4: a new normal, and I think for an alliance it's 42 00:02:10,960 --> 00:02:14,400 Speaker 4: a strong, strong challenge to be able to adapt at 43 00:02:14,440 --> 00:02:16,440 Speaker 4: a very high speed to these shocks. 44 00:02:17,080 --> 00:02:20,400 Speaker 2: Admiral, though this goes beyond just politics. This is about 45 00:02:20,440 --> 00:02:24,720 Speaker 2: operational issues for the Alliance. When the UK only allows 46 00:02:24,720 --> 00:02:27,240 Speaker 2: the US to use Basis for limited defensive action. 47 00:02:27,680 --> 00:02:29,440 Speaker 1: When we see reports that Italy is. 48 00:02:29,360 --> 00:02:32,880 Speaker 2: Denying and military aircraft permission to land in Sicily, and 49 00:02:32,919 --> 00:02:35,160 Speaker 2: you have the US questioning whether they should even have 50 00:02:35,240 --> 00:02:38,400 Speaker 2: bases in those places if they can't use them, the 51 00:02:38,480 --> 00:02:41,480 Speaker 2: question still remains, what is the future of this alliance 52 00:02:41,600 --> 00:02:45,120 Speaker 2: From an operational standpoint, what is the future of this alliance? 53 00:02:46,680 --> 00:02:49,840 Speaker 4: I think the strength of the Alliance is to have 54 00:02:50,120 --> 00:02:55,120 Speaker 4: having been able during more than seventy eighteen years to 55 00:02:55,240 --> 00:02:59,919 Speaker 4: discuss and to find a way together. It's the consensus ace, 56 00:03:00,040 --> 00:03:03,560 Speaker 4: which is not driven by majority but by consensus. And 57 00:03:03,639 --> 00:03:06,040 Speaker 4: so that means that you have a unique place in 58 00:03:06,080 --> 00:03:08,880 Speaker 4: the world where you have thirty two nations that discuss 59 00:03:09,040 --> 00:03:12,920 Speaker 4: at political level on a daily basis. And so I 60 00:03:12,960 --> 00:03:16,400 Speaker 4: know that since this war is going on in Ukraine, 61 00:03:16,480 --> 00:03:20,360 Speaker 4: they are very intensive discussion at natal level. It's not 62 00:03:20,400 --> 00:03:23,760 Speaker 4: only the nations themselves one by one with the US, 63 00:03:24,080 --> 00:03:27,639 Speaker 4: it's it's all together in the in the NAC. It's 64 00:03:27,639 --> 00:03:31,200 Speaker 4: a NATO non athnotic console where this discussion occur. And 65 00:03:31,240 --> 00:03:33,680 Speaker 4: I think it's a strength for the West. It's something 66 00:03:33,680 --> 00:03:36,800 Speaker 4: we need never to neglect is the fact that we 67 00:03:36,880 --> 00:03:40,480 Speaker 4: are together. We are committed by bonds, and so we 68 00:03:40,600 --> 00:03:44,880 Speaker 4: need to there always tensions that it's not the first time, 69 00:03:45,520 --> 00:03:49,280 Speaker 4: but we need to to solve this as a united alliance. 70 00:03:50,680 --> 00:03:54,600 Speaker 5: Can the alliance exist though without the support of the United. 71 00:03:54,360 --> 00:03:58,280 Speaker 3: States, This is a great question. 72 00:03:58,760 --> 00:04:03,720 Speaker 4: So mister Trump, during the LA he submits UH last 73 00:04:03,880 --> 00:04:09,200 Speaker 4: summer he achieved to ask to the Allies to spend 74 00:04:09,240 --> 00:04:12,400 Speaker 4: three point five percent of the GDP for their own defense. 75 00:04:12,720 --> 00:04:15,960 Speaker 4: That comes by the fact that the US have other priorities. 76 00:04:16,160 --> 00:04:19,760 Speaker 4: They are not only focused on Europe, and the crisis 77 00:04:19,800 --> 00:04:22,039 Speaker 4: in a round is a good demonstration of what they said. 78 00:04:22,440 --> 00:04:24,720 Speaker 3: So it's a moment for you Open to stand up 79 00:04:24,960 --> 00:04:25,320 Speaker 3: and to. 80 00:04:25,279 --> 00:04:29,240 Speaker 4: Do largely more than they have been habitted to they 81 00:04:29,240 --> 00:04:33,520 Speaker 4: did before during the during the Postcord War decades, UH, 82 00:04:33,600 --> 00:04:37,160 Speaker 4: the Opens have been somehow the free riders of their 83 00:04:37,200 --> 00:04:41,159 Speaker 4: own security. Today there is a great change, and now 84 00:04:41,200 --> 00:04:43,800 Speaker 4: we need to ramp up in all domains and to 85 00:04:43,880 --> 00:04:47,200 Speaker 4: be able not to do without the US, but largely 86 00:04:47,360 --> 00:04:51,000 Speaker 4: with a smaller force of the US given the other 87 00:04:51,080 --> 00:04:54,560 Speaker 4: commitment these US forces up over the world. 88 00:04:55,120 --> 00:04:57,520 Speaker 5: And what is it ability or will to potentially help 89 00:04:57,560 --> 00:04:59,560 Speaker 5: the United States when it comes to reopening the straight 90 00:04:59,600 --> 00:05:03,040 Speaker 5: or hormone A. We're struck by the UK Defense Secretary 91 00:05:03,080 --> 00:05:07,920 Speaker 5: minister in an interview really struggling to answer basic questions 92 00:05:08,000 --> 00:05:10,800 Speaker 5: even about how many frigates the US has the UK 93 00:05:10,960 --> 00:05:12,760 Speaker 5: has presently at the moment. 94 00:05:15,000 --> 00:05:18,479 Speaker 4: So there is we he inher it third years of 95 00:05:18,520 --> 00:05:22,360 Speaker 4: these investments in all domains, in the industry, in the 96 00:05:22,360 --> 00:05:26,440 Speaker 4: weapon stock, bise, in the in themitry, in the number 97 00:05:26,480 --> 00:05:29,240 Speaker 4: of soldiers. So it's not by a flick of a 98 00:05:29,279 --> 00:05:32,400 Speaker 4: switch that will we change that. That means a strong, 99 00:05:32,640 --> 00:05:35,800 Speaker 4: long lasting commitment from the opens to be able to 100 00:05:35,880 --> 00:05:39,719 Speaker 4: ramp up. So we inherit a very bad situation, and 101 00:05:39,760 --> 00:05:41,240 Speaker 4: I think it's time out to wake up. 102 00:05:41,600 --> 00:05:43,839 Speaker 6: Given the fact that there is a lot of questions 103 00:05:43,960 --> 00:05:48,039 Speaker 6: right now about the US and the US's role with NATO. 104 00:05:48,560 --> 00:05:50,640 Speaker 6: How likely is it that in five years NATO will 105 00:05:50,640 --> 00:05:51,200 Speaker 6: still exist. 106 00:05:53,360 --> 00:05:54,880 Speaker 3: It's a very political question. 107 00:05:55,160 --> 00:05:58,960 Speaker 4: I think we don't kill we he inher it a 108 00:05:59,080 --> 00:06:03,520 Speaker 4: system which is a good one. In fact, in other 109 00:06:03,680 --> 00:06:06,320 Speaker 4: parts of the world, I think most of the alliance 110 00:06:06,360 --> 00:06:09,159 Speaker 4: we discuss with, especially in the PACIFY, they are saying 111 00:06:09,200 --> 00:06:12,000 Speaker 4: we should have something that looks like NET. So it 112 00:06:12,320 --> 00:06:15,719 Speaker 4: is how it is, it's it's it's a big organization, 113 00:06:15,880 --> 00:06:18,320 Speaker 4: but it's the one where we discuss on every day. 114 00:06:18,640 --> 00:06:20,839 Speaker 4: You have a more than twelve thousand met read that 115 00:06:21,000 --> 00:06:23,520 Speaker 4: on a daily basis. They work on plants, they work 116 00:06:23,560 --> 00:06:26,760 Speaker 4: on intability, they work on training, they work on concepts. 117 00:06:26,880 --> 00:06:29,839 Speaker 3: So this is a goal in the in Odiens. 118 00:06:30,200 --> 00:06:32,240 Speaker 4: And so I think it's a moment where we need 119 00:06:32,279 --> 00:06:35,360 Speaker 4: to have a cool hands and not saying okay, because 120 00:06:35,360 --> 00:06:37,479 Speaker 4: there is a crisis, we will kill the baby. I 121 00:06:37,480 --> 00:06:40,039 Speaker 4: think it's a moment we have an heritage, we have 122 00:06:40,120 --> 00:06:43,360 Speaker 4: something that works. I think it's a moment where all 123 00:06:43,440 --> 00:06:45,680 Speaker 4: the stakeholders need to be responsible. 124 00:06:45,960 --> 00:06:48,320 Speaker 3: They need to they need to say okay what we 125 00:06:48,400 --> 00:06:48,800 Speaker 3: hearer it? 126 00:06:49,160 --> 00:06:52,200 Speaker 4: And with this, this this alliance, I think there is 127 00:06:52,240 --> 00:06:55,600 Speaker 4: a lot to do still uh and killing it will 128 00:06:55,640 --> 00:06:57,599 Speaker 4: not make the world safer. 129 00:06:58,400 --> 00:07:01,480 Speaker 6: There was some questions about the act that missiles were 130 00:07:01,520 --> 00:07:05,919 Speaker 6: logged at Turkey from Oran and that this potentially could 131 00:07:06,000 --> 00:07:08,919 Speaker 6: engage NATO more directly in the conflict. 132 00:07:09,440 --> 00:07:10,560 Speaker 1: What's your response to that? 133 00:07:12,040 --> 00:07:15,720 Speaker 4: So some measures have been taken by secure It's the 134 00:07:15,840 --> 00:07:19,640 Speaker 4: US General Greenevic, which is in chid of that kind 135 00:07:19,680 --> 00:07:23,760 Speaker 4: of answers uh, and so he has taken measures in 136 00:07:23,840 --> 00:07:27,560 Speaker 4: order to be sure that the NATO AR Area of 137 00:07:27,640 --> 00:07:32,240 Speaker 4: responsibility is well protected against the will of Iran. 138 00:07:31,960 --> 00:07:34,400 Speaker 3: To spread the crisis outside of its borders. 139 00:07:34,840 --> 00:07:37,200 Speaker 2: And well, before you go, can I get clarification on something. 140 00:07:37,680 --> 00:07:41,560 Speaker 2: Can you confirm whether Iran did try to strike the 141 00:07:41,600 --> 00:07:45,120 Speaker 2: Diego Gassia base in the Internet Ocean, because we're still 142 00:07:45,160 --> 00:07:47,920 Speaker 2: trying to gauge what the range actually is. What do 143 00:07:47,960 --> 00:07:48,800 Speaker 2: you know about that? 144 00:07:49,960 --> 00:07:52,960 Speaker 4: So it looks like they have tried to send a 145 00:07:53,000 --> 00:07:56,120 Speaker 4: three stage ballistic missile which is much more looking like 146 00:07:56,480 --> 00:07:57,400 Speaker 4: a commercial rocket. 147 00:07:57,680 --> 00:07:58,200 Speaker 3: I think it was. 148 00:07:58,400 --> 00:08:01,760 Speaker 4: It was a messaging and they are trying to demonstrate 149 00:08:01,800 --> 00:08:06,640 Speaker 4: their their ability to expand and to spill the crisis 150 00:08:06,680 --> 00:08:08,120 Speaker 4: outside of the Middle East. 151 00:08:08,560 --> 00:08:09,520 Speaker 3: It's their strategy. 152 00:08:10,120 --> 00:08:11,960 Speaker 4: And so I think it's a moment where back to 153 00:08:12,040 --> 00:08:14,600 Speaker 4: the Islands, it's a moment where I think we need 154 00:08:14,640 --> 00:08:18,160 Speaker 4: to show that we are united, we are committed to 155 00:08:18,200 --> 00:08:21,200 Speaker 4: defend one billion pre citizen over the world and not 156 00:08:21,280 --> 00:08:22,320 Speaker 4: kill the baby at a. 157 00:08:22,280 --> 00:08:25,240 Speaker 3: Moment of tension with which I fully understand. 158 00:08:26,040 --> 00:08:29,680 Speaker 1: Stay with us. More Bloomberg surveillance coming up after this. 159 00:08:38,720 --> 00:08:40,880 Speaker 2: Oil down this morning by about a half of one 160 00:08:40,880 --> 00:08:43,640 Speaker 2: percent on per and crude oil falling. As the President 161 00:08:43,679 --> 00:08:46,080 Speaker 2: stokes optimism the AROUND war is nearing an end and 162 00:08:46,120 --> 00:08:49,760 Speaker 2: possibly withdrawing before reopening the stratiformers and a world of 163 00:08:49,760 --> 00:08:52,880 Speaker 2: the Atlantic Council noting potential issues with the plan, writing 164 00:08:52,880 --> 00:08:55,120 Speaker 2: this would be a terrible president for the US because 165 00:08:55,160 --> 00:08:58,240 Speaker 2: around it's actually in an enhanced position of making more 166 00:08:58,280 --> 00:09:01,240 Speaker 2: money than before and joins US now for more and 167 00:09:01,280 --> 00:09:03,400 Speaker 2: welcome to the program. The last time we spoke, which 168 00:09:03,400 --> 00:09:05,880 Speaker 2: I believe was about a week ago, you said, unless 169 00:09:05,880 --> 00:09:08,840 Speaker 2: this sends in ten to fourteen days, the energy crisis 170 00:09:08,840 --> 00:09:11,679 Speaker 2: are going to approach severe levels. The President is now 171 00:09:11,720 --> 00:09:14,440 Speaker 2: saying it's going to take another two weeks potentially. And 172 00:09:14,600 --> 00:09:16,280 Speaker 2: with that in mind, what kind of levels are we 173 00:09:16,320 --> 00:09:18,280 Speaker 2: going to approach in the next two weeks. 174 00:09:19,080 --> 00:09:21,720 Speaker 7: Well, if you look at what's happening already in France 175 00:09:22,600 --> 00:09:25,120 Speaker 7: and other countries where they're having runs. 176 00:09:24,840 --> 00:09:27,080 Speaker 8: On gasoline stations, I mean gasoline stations are. 177 00:09:27,000 --> 00:09:31,080 Speaker 7: Running dry because they're putting in these price controls and 178 00:09:31,120 --> 00:09:35,800 Speaker 7: that's making everyone rush to buy. We're really having severe 179 00:09:35,840 --> 00:09:37,839 Speaker 7: issues in a lot of countries that we in the 180 00:09:37,960 --> 00:09:41,400 Speaker 7: US are quite insulated from because we're not experiencing this. Yes, 181 00:09:41,440 --> 00:09:45,680 Speaker 7: we are seeing much higher gasoline prices, but the fact 182 00:09:45,720 --> 00:09:49,520 Speaker 7: that we're not seeing any shortages is really giving us 183 00:09:49,600 --> 00:09:53,800 Speaker 7: this sense of isolation. I think from the most important 184 00:09:53,800 --> 00:09:55,960 Speaker 7: impact of this conflict. 185 00:09:55,880 --> 00:09:59,280 Speaker 6: Ellen, can the straight be reopened or can you see 186 00:09:59,280 --> 00:10:02,400 Speaker 6: a supplies start to flow through there? If Iran continues 187 00:10:02,440 --> 00:10:05,800 Speaker 6: to hold on to a control of this region, And 188 00:10:05,840 --> 00:10:08,360 Speaker 6: I ask this at a time when Cutter is seeing 189 00:10:08,360 --> 00:10:11,520 Speaker 6: oil tankers being bombed in Qatari land. 190 00:10:12,520 --> 00:10:16,160 Speaker 7: This is a really severe problem because if the United 191 00:10:16,200 --> 00:10:20,719 Speaker 7: States ends this conflict or declares an end to it 192 00:10:21,120 --> 00:10:26,120 Speaker 7: while leaving Iran basically a de facto control over passage 193 00:10:26,160 --> 00:10:29,360 Speaker 7: into and out of the Persian Gulf, then we've actually 194 00:10:29,400 --> 00:10:32,240 Speaker 7: put Iran in a much better position than they were 195 00:10:32,280 --> 00:10:35,319 Speaker 7: in before this started, because. 196 00:10:35,040 --> 00:10:37,800 Speaker 8: Now beforehand, they weren't actually controlling it. 197 00:10:37,800 --> 00:10:41,800 Speaker 7: It was just this threat that they might actually limit 198 00:10:41,840 --> 00:10:45,360 Speaker 7: traffic or they might threaten the safety of ships passing through. 199 00:10:45,520 --> 00:10:47,920 Speaker 7: Now they are threatening the safety of ships passing through, 200 00:10:47,960 --> 00:10:51,440 Speaker 7: and it is effective because tankers are refusing to cross 201 00:10:51,480 --> 00:10:54,480 Speaker 7: because of Intera's issues and because they don't want to 202 00:10:54,480 --> 00:10:56,240 Speaker 7: get hit by a drone. 203 00:10:56,920 --> 00:10:58,679 Speaker 8: And then if we leave Iran's. 204 00:10:58,280 --> 00:11:00,319 Speaker 7: Basically in a position to say, well, how how much 205 00:11:00,320 --> 00:11:00,640 Speaker 7: are you. 206 00:11:00,640 --> 00:11:03,080 Speaker 8: Going to pay us to leave you alone? 207 00:11:03,160 --> 00:11:05,880 Speaker 7: And that is that's a whole new role for this 208 00:11:05,960 --> 00:11:08,800 Speaker 7: country and also puts them in the position to make 209 00:11:08,840 --> 00:11:09,480 Speaker 7: more money. 210 00:11:09,800 --> 00:11:12,200 Speaker 5: Well, when it comes to the money ellen in the past, 211 00:11:12,240 --> 00:11:15,880 Speaker 5: anytime the United States offered waivers for Iranian oil, it 212 00:11:15,920 --> 00:11:18,600 Speaker 5: was put into an escrow account, and there was it 213 00:11:18,640 --> 00:11:21,280 Speaker 5: was dictated that it had to be used for humanitarian 214 00:11:21,360 --> 00:11:24,720 Speaker 5: aid for the people of Iran. I didn't see any 215 00:11:24,760 --> 00:11:27,800 Speaker 5: of that sort of language in the general license. So 216 00:11:28,000 --> 00:11:31,040 Speaker 5: where is this money going that the regime is making 217 00:11:31,120 --> 00:11:33,880 Speaker 5: right now off of selling their crude and the toll. 218 00:11:34,800 --> 00:11:36,679 Speaker 8: Presumably it's going straight to Iran. 219 00:11:37,320 --> 00:11:40,719 Speaker 7: It's not going in dollars because there's still restrictions on 220 00:11:41,320 --> 00:11:42,760 Speaker 7: what kind of currency Iran can use. 221 00:11:42,800 --> 00:11:44,640 Speaker 8: But at this point do they really. 222 00:11:44,400 --> 00:11:47,320 Speaker 7: Care whether you know, Pakistan is paying them in yon 223 00:11:47,520 --> 00:11:47,720 Speaker 7: or not. 224 00:11:48,400 --> 00:11:50,800 Speaker 8: It's going straight to the government now. 225 00:11:51,240 --> 00:11:54,920 Speaker 7: Because militarily we've hit certain sites, We've we've hit you know, 226 00:11:55,000 --> 00:11:56,040 Speaker 7: factories where their. 227 00:11:55,840 --> 00:11:58,640 Speaker 8: Making these these missiles and drones. 228 00:11:58,880 --> 00:12:02,199 Speaker 7: They're not necessarily to produce more of it right away, 229 00:12:02,400 --> 00:12:04,319 Speaker 7: but the fact that they that they have this money 230 00:12:04,320 --> 00:12:06,520 Speaker 7: means that they will be able to get back to 231 00:12:06,600 --> 00:12:08,320 Speaker 7: this in the future, or they can funnel it to 232 00:12:08,360 --> 00:12:09,679 Speaker 7: their to their proxies. 233 00:12:09,720 --> 00:12:12,920 Speaker 8: I mean, the Hoothies are still a wild card here that. 234 00:12:14,240 --> 00:12:18,160 Speaker 7: Could completely change the situation in the Red Sea. And 235 00:12:18,240 --> 00:12:22,400 Speaker 7: if they're doing that with Iranian funds, then have we 236 00:12:22,559 --> 00:12:26,600 Speaker 7: really even put you know, anything in this situation in 237 00:12:26,640 --> 00:12:29,439 Speaker 7: a better place? And I would argue that not necessarily. 238 00:12:29,800 --> 00:12:32,320 Speaker 5: I was told once again by a source yesterday that 239 00:12:32,360 --> 00:12:34,840 Speaker 5: the Saudis are basically paying off the Hoothies to not 240 00:12:34,880 --> 00:12:35,520 Speaker 5: get involved. 241 00:12:35,720 --> 00:12:37,040 Speaker 1: At what point does that stop? 242 00:12:38,240 --> 00:12:41,920 Speaker 7: It stops when they have access to the Persian Gulf 243 00:12:42,080 --> 00:12:45,400 Speaker 7: again once they can once they can ship out of 244 00:12:45,440 --> 00:12:47,280 Speaker 7: the Persian Golf, and they don't have a need to 245 00:12:47,800 --> 00:12:50,720 Speaker 7: continue to pay off the Hoothies at maybe such a 246 00:12:50,760 --> 00:12:51,560 Speaker 7: such a high rate. 247 00:12:52,280 --> 00:12:55,280 Speaker 6: Ellen just more broadly, what's Saudi Arabia's role in all 248 00:12:55,320 --> 00:12:56,960 Speaker 6: of this. We've heard from the UA, or at least 249 00:12:56,960 --> 00:12:59,920 Speaker 6: reporting from the Wall Street Journal that they're considering serious 250 00:13:00,160 --> 00:13:03,360 Speaker 6: getting involved in some sort of effort to make the 251 00:13:03,360 --> 00:13:07,040 Speaker 6: straight of war moves independent and a free flow for traffic. 252 00:13:07,280 --> 00:13:09,680 Speaker 6: When does Saudi Arabia get more intensely involved. 253 00:13:10,679 --> 00:13:13,000 Speaker 7: I think they get intensely involved as a member of 254 00:13:13,040 --> 00:13:13,600 Speaker 7: the GCC. 255 00:13:14,320 --> 00:13:16,320 Speaker 8: You know, this is a waterway that they depend on. 256 00:13:16,400 --> 00:13:19,880 Speaker 7: Me. Remember, we've had major, major wars on a much 257 00:13:20,000 --> 00:13:23,920 Speaker 7: larger scale fought simply, you know, for freedom of the seas. 258 00:13:23,960 --> 00:13:26,360 Speaker 7: This was something that that Woodrow Wilson cited when he 259 00:13:26,400 --> 00:13:27,760 Speaker 7: brought the United States into. 260 00:13:27,600 --> 00:13:28,360 Speaker 8: World War One. 261 00:13:28,679 --> 00:13:31,679 Speaker 7: So the idea that Saudi Arabia and the UAE and 262 00:13:32,320 --> 00:13:36,000 Speaker 7: Cutter and Kuwait and Iraq want free passage or a 263 00:13:36,040 --> 00:13:39,079 Speaker 7: freedom of the season and freedom for passage through the 264 00:13:39,080 --> 00:13:43,840 Speaker 7: straight of for moves, that's a very basic right of nations. 265 00:13:43,960 --> 00:13:47,280 Speaker 7: And so I do think that if there's a potential 266 00:13:47,360 --> 00:13:49,760 Speaker 7: for them to make a difference in securing that that 267 00:13:49,840 --> 00:13:53,400 Speaker 7: they will get involved as part of the greater GCC. 268 00:13:54,440 --> 00:13:57,839 Speaker 2: Stay with us Multblemberg Savannah's coming up off to this, 269 00:14:07,400 --> 00:14:09,720 Speaker 2: The first treading day of April could be a long 270 00:14:10,040 --> 00:14:13,720 Speaker 2: treading day. The President addressing the nation later on this evening, 271 00:14:13,840 --> 00:14:14,040 Speaker 2: I was. 272 00:14:14,040 --> 00:14:16,400 Speaker 6: Thinking to myself, how many people were excited, thinking maybe 273 00:14:16,400 --> 00:14:17,920 Speaker 6: this is an April Fools joke, and I don't have 274 00:14:17,960 --> 00:14:20,520 Speaker 6: to stay up until ten or eleven PM to understand 275 00:14:20,560 --> 00:14:22,520 Speaker 6: exactly what the mood for Q two is going to be. 276 00:14:22,640 --> 00:14:24,800 Speaker 5: Well, source called me last night after that news became 277 00:14:24,840 --> 00:14:27,600 Speaker 5: public and said it's going to be the Academy Awards 278 00:14:27,640 --> 00:14:28,640 Speaker 5: of Verbal Intervention. 279 00:14:29,320 --> 00:14:31,440 Speaker 2: What's come a little bit later on this evening, it's 280 00:14:31,480 --> 00:14:34,080 Speaker 2: everyone walked straight this morning, Steve and Uthur federated right 281 00:14:34,120 --> 00:14:36,040 Speaker 2: in the following We are treating this as another brick 282 00:14:36,040 --> 00:14:38,240 Speaker 2: in the wall of worry as the US markets advanced 283 00:14:38,240 --> 00:14:40,680 Speaker 2: toward towards our s and P five hundred target of 284 00:14:40,720 --> 00:14:44,440 Speaker 2: seventy five hundred for twenty twenty six. Steve, John Zusnaphimos, Steve. 285 00:14:44,280 --> 00:14:45,320 Speaker 1: Good morning, good morning. 286 00:14:45,400 --> 00:14:48,080 Speaker 2: Why is this just another brick and a climbable wall 287 00:14:48,320 --> 00:14:48,840 Speaker 2: of worry? 288 00:14:50,160 --> 00:14:52,320 Speaker 9: Well, we have an expression at federating hermies. 289 00:14:52,320 --> 00:14:55,600 Speaker 10: You know, if it can't happen, it won't and I 290 00:14:55,600 --> 00:14:59,040 Speaker 10: think you know the alternative really can't happen, and you're 291 00:14:59,040 --> 00:15:06,080 Speaker 10: seeing her, you stepping in here. We can't have twenty million, okay. 292 00:15:05,840 --> 00:15:08,200 Speaker 9: Eleven million barrels a day. I guess if they can. 293 00:15:08,200 --> 00:15:11,920 Speaker 10: Keep the Red Sea open of the world's oil supply, 294 00:15:11,960 --> 00:15:17,560 Speaker 10: which is eleven percent unavailable, that just takes oil, you know, roughly, 295 00:15:17,920 --> 00:15:19,880 Speaker 10: I think, as you guys know, it's about ten bucks 296 00:15:19,880 --> 00:15:23,360 Speaker 10: a barrel. So you're looking at a number in the 297 00:15:23,360 --> 00:15:28,640 Speaker 10: one fifties that would kill the global economy. So we 298 00:15:28,760 --> 00:15:34,280 Speaker 10: have a fifteen percent probability that that's what happens. So 299 00:15:34,360 --> 00:15:37,000 Speaker 10: that's why we're sort of suddenly cautioned here. We have 300 00:15:37,080 --> 00:15:41,000 Speaker 10: not added to equities. We're keeping our forecast in place 301 00:15:41,040 --> 00:15:45,760 Speaker 10: at the moment, but every week that goes by, you know, 302 00:15:45,760 --> 00:15:48,280 Speaker 10: we get closer to the summer driving season. I think 303 00:15:48,320 --> 00:15:53,200 Speaker 10: you know that the gasoline output, you know, they have 304 00:15:53,240 --> 00:15:56,040 Speaker 10: to store it in advance. They can't produce enough to 305 00:15:56,120 --> 00:16:01,160 Speaker 10: meet demand during the summer season. So yeah, crack spreads 306 00:16:01,800 --> 00:16:04,480 Speaker 10: are closing in on twenty dollars on top of the 307 00:16:04,480 --> 00:16:07,360 Speaker 10: oil price. You know, that gets you two levels That 308 00:16:08,000 --> 00:16:13,040 Speaker 10: often results in a demand response. So a few more 309 00:16:13,040 --> 00:16:15,480 Speaker 10: weeks of this, you know, we're going to have to 310 00:16:15,520 --> 00:16:17,400 Speaker 10: take down our GDP forecast. 311 00:16:17,960 --> 00:16:19,960 Speaker 1: Just tell you it's going to be a fewal weeks. 312 00:16:20,400 --> 00:16:23,000 Speaker 9: I think that's why he's looking at those number of weeks. 313 00:16:23,240 --> 00:16:25,480 Speaker 10: I think they're doing the math on this, so they 314 00:16:25,520 --> 00:16:27,360 Speaker 10: really do have to figure out a way to get 315 00:16:27,360 --> 00:16:31,240 Speaker 10: this over in a couple more weeks or people are 316 00:16:31,240 --> 00:16:34,520 Speaker 10: going to start taking down their GDP forecasts. We you know, 317 00:16:34,560 --> 00:16:38,200 Speaker 10: we entered into this with GDP ahead of consensus. We're 318 00:16:38,240 --> 00:16:40,280 Speaker 10: at four percent for this year because of all the 319 00:16:40,280 --> 00:16:42,680 Speaker 10: stuff that's going on with the one big beautiful bill 320 00:16:42,760 --> 00:16:45,280 Speaker 10: and you know, the stuff people have talked about, and 321 00:16:45,400 --> 00:16:47,040 Speaker 10: the underlying earnings pretty good. 322 00:16:47,040 --> 00:16:48,080 Speaker 9: Investments are pretty good. 323 00:16:48,120 --> 00:16:53,400 Speaker 10: So fortunately we're entering into this with strong number. So 324 00:16:53,560 --> 00:16:56,400 Speaker 10: this doesn't yet put us into a recession scenario. It's 325 00:16:56,440 --> 00:17:01,160 Speaker 10: more like lower growth than we're anticipating. I'm also looking 326 00:17:01,240 --> 00:17:04,960 Speaker 10: very carefully now. We've got earning season coming up in 327 00:17:05,000 --> 00:17:09,040 Speaker 10: another ten days or so, and you know it's going 328 00:17:09,119 --> 00:17:11,520 Speaker 10: to be great. We know that coming into the thing. 329 00:17:11,600 --> 00:17:14,159 Speaker 10: But the question is is this going to be like 330 00:17:14,200 --> 00:17:16,760 Speaker 10: the weather. You know, everyone's going to be talking about 331 00:17:16,760 --> 00:17:21,840 Speaker 10: the weather here, which is the Mid East, and guidance 332 00:17:21,920 --> 00:17:24,879 Speaker 10: might be more conservative, and that's probably not good for 333 00:17:24,920 --> 00:17:25,640 Speaker 10: the market either. 334 00:17:25,720 --> 00:17:27,000 Speaker 1: So there are a lot of unknowns. 335 00:17:27,119 --> 00:17:29,439 Speaker 6: There are no unknowns, so then they're unknown unknowns and 336 00:17:29,480 --> 00:17:32,320 Speaker 6: it's just a really muddy moment and everyone's really frustrated. 337 00:17:32,359 --> 00:17:34,360 Speaker 6: Which when analyst came in yesterday and said, it gives 338 00:17:34,400 --> 00:17:35,720 Speaker 6: me a lot of time to take a step back 339 00:17:35,760 --> 00:17:37,879 Speaker 6: and have big thoughts. So I'm curious for you to 340 00:17:37,920 --> 00:17:41,600 Speaker 6: have big thoughts to understand how structurally the market has changed. 341 00:17:41,960 --> 00:17:44,800 Speaker 6: Even if say this is a short conflict, there will 342 00:17:44,800 --> 00:17:47,840 Speaker 6: be an inflationary read through, and if the economy is strong, 343 00:17:47,880 --> 00:17:50,080 Speaker 6: even more so. And right now it seems like we're 344 00:17:50,080 --> 00:17:53,400 Speaker 6: pushing up against the limits of both fiscal borrowing as 345 00:17:53,440 --> 00:17:55,920 Speaker 6: well as just how much the FED can stimulate or 346 00:17:55,960 --> 00:17:58,520 Speaker 6: monetary policy makers can really stimulate. On the other end, 347 00:17:59,160 --> 00:18:01,119 Speaker 6: how much do rates at four and a half to 348 00:18:01,160 --> 00:18:04,000 Speaker 6: five percent in the United States maturely change the outlook 349 00:18:04,040 --> 00:18:06,440 Speaker 6: for US equities going forward if they're not going to 350 00:18:06,520 --> 00:18:08,120 Speaker 6: come down all that much, and if it's the same 351 00:18:08,160 --> 00:18:08,800 Speaker 6: around the world. 352 00:18:08,960 --> 00:18:12,480 Speaker 10: Okay, so we tend Lisa, you know, we're trying to 353 00:18:12,480 --> 00:18:15,480 Speaker 10: invest against a three here horizon. So we're looking out 354 00:18:15,840 --> 00:18:18,359 Speaker 10: past this and saying what world are we going to be? 355 00:18:18,400 --> 00:18:20,399 Speaker 10: And we should be back to a world that's growing 356 00:18:20,480 --> 00:18:24,160 Speaker 10: reasonably well, all those drivers we've talked about, the AI revolution, 357 00:18:24,240 --> 00:18:27,239 Speaker 10: et cetera, and a market that is significantly cheaper than 358 00:18:27,320 --> 00:18:31,600 Speaker 10: it was three months ago. So on that view, we'll 359 00:18:31,600 --> 00:18:34,320 Speaker 10: come through this. The question is in the meantime, how 360 00:18:34,320 --> 00:18:37,520 Speaker 10: do you navigate your way there? And as I said, 361 00:18:37,560 --> 00:18:40,159 Speaker 10: if this goes on longer, I'm more worried about the 362 00:18:40,200 --> 00:18:43,520 Speaker 10: demand impact. You're more worried about the inflation impact. But 363 00:18:43,680 --> 00:18:45,840 Speaker 10: I would say four and a half is another Magano 364 00:18:46,040 --> 00:18:49,720 Speaker 10: line for the Trump administration. We saw that back in 365 00:18:49,800 --> 00:18:53,720 Speaker 10: April of last year. We got close to it again 366 00:18:54,000 --> 00:18:57,000 Speaker 10: just recently. We're not backed down quite a bit now. 367 00:18:57,040 --> 00:18:59,600 Speaker 10: But yeah, I mean four and a half is not 368 00:18:59,640 --> 00:19:00,120 Speaker 10: a good. 369 00:19:00,480 --> 00:19:04,080 Speaker 6: Can you have both not necessarily downside surprise if you 370 00:19:04,119 --> 00:19:06,040 Speaker 6: do have some sort of ends to this and companies 371 00:19:06,080 --> 00:19:09,200 Speaker 6: can maneuver through it, and then also get the disinflationary 372 00:19:09,280 --> 00:19:11,120 Speaker 6: pull through that a lot of people are expecting later 373 00:19:11,160 --> 00:19:12,600 Speaker 6: this year. I mean, do you have to have one 374 00:19:12,600 --> 00:19:15,280 Speaker 6: of the other, either a downturn and growth or stick 375 00:19:15,320 --> 00:19:17,520 Speaker 6: your inflation and central banks are not going to be 376 00:19:17,560 --> 00:19:19,719 Speaker 6: cutting rates that potentially could pressure valuations. 377 00:19:19,760 --> 00:19:21,439 Speaker 10: Well, I don't think the inflation is going to be 378 00:19:21,480 --> 00:19:24,679 Speaker 10: stickier if they really do get this done in the 379 00:19:24,720 --> 00:19:27,880 Speaker 10: next few weeks and get the straits reopened, right, because 380 00:19:28,119 --> 00:19:31,199 Speaker 10: people are not going to factor in those higher prices forever, 381 00:19:31,240 --> 00:19:34,480 Speaker 10: which is what you need to be stickier. So I'm 382 00:19:34,520 --> 00:19:37,040 Speaker 10: still not on the sticky inflat. I'm more worried about 383 00:19:37,480 --> 00:19:41,480 Speaker 10: the summer driving season, the demand impact. They're going to 384 00:19:41,600 --> 00:19:44,919 Speaker 10: figure out a way, whether it's Trump declaring victory, but 385 00:19:45,040 --> 00:19:47,560 Speaker 10: the Iranians, what are they going to do? The only 386 00:19:47,600 --> 00:19:49,400 Speaker 10: thing they've got left is the straight of forem moves. 387 00:19:49,440 --> 00:19:51,720 Speaker 5: So the markets, though, can you declare victory and still 388 00:19:51,720 --> 00:19:53,680 Speaker 5: have the Iranians in control of the strait of removes 389 00:19:53,720 --> 00:19:54,960 Speaker 5: and not have normal traffic? 390 00:19:55,080 --> 00:19:58,160 Speaker 10: I think that's going to be very difficult, right, That's 391 00:19:58,200 --> 00:20:01,440 Speaker 10: going to be the issue. So it's a two way negotiation. 392 00:20:02,840 --> 00:20:05,000 Speaker 10: The you know, the market right now is like a 393 00:20:05,119 --> 00:20:08,800 Speaker 10: multi dimensional chess board with some very smart players in it. 394 00:20:08,840 --> 00:20:12,200 Speaker 10: And so I think when I play that kind of chess, 395 00:20:12,200 --> 00:20:14,320 Speaker 10: I've got a board at my home if anyone wants 396 00:20:14,359 --> 00:20:19,520 Speaker 10: to try it. The thing that the thing that makes 397 00:20:19,560 --> 00:20:22,879 Speaker 10: me most difficult for me when I was younger and 398 00:20:23,000 --> 00:20:24,840 Speaker 10: used to pay my sons were younger and a little 399 00:20:24,880 --> 00:20:30,920 Speaker 10: bit crazier, is an unorthodox player that you can't predict 400 00:20:31,200 --> 00:20:32,159 Speaker 10: that's on the board. 401 00:20:32,320 --> 00:20:34,800 Speaker 2: If I think dying is winning, you're dating with an 402 00:20:34,920 --> 00:20:36,400 Speaker 2: unorthodox player, that's for sure. 403 00:20:36,600 --> 00:20:40,080 Speaker 10: Yeah, And that's what makes this so difficult for everybody, 404 00:20:40,160 --> 00:20:44,720 Speaker 10: because we've got an unorthodox player here who's playing for 405 00:20:44,800 --> 00:20:51,639 Speaker 10: different things. You know, economics is not necessarily their their driver. 406 00:20:51,640 --> 00:20:52,520 Speaker 1: Te pot steel question. 407 00:20:52,600 --> 00:20:55,280 Speaker 2: By the way, the first pot was is the market 408 00:20:55,320 --> 00:20:57,440 Speaker 2: is going to be okay with around controlling the stratiful 409 00:20:57,520 --> 00:21:00,399 Speaker 2: mus And the second pot was with restricted energy For 410 00:21:00,440 --> 00:21:01,760 Speaker 2: the first part the short term, I don't think the 411 00:21:01,800 --> 00:21:03,680 Speaker 2: market will care who's in control of the stratophormus along 412 00:21:03,680 --> 00:21:06,320 Speaker 2: as the energy is flowing. The most important part is 413 00:21:06,640 --> 00:21:08,960 Speaker 2: whether the energy is flowing, and right now it's not flowing. 414 00:21:09,119 --> 00:21:12,320 Speaker 2: There's just a hope that the President moves on Ironte's 415 00:21:12,359 --> 00:21:15,440 Speaker 2: control in the near term maybe and then the energy 416 00:21:15,440 --> 00:21:17,320 Speaker 2: starts flowing again, they'll charge people for it. I don't 417 00:21:17,359 --> 00:21:18,560 Speaker 2: think in the near term the market is going to 418 00:21:18,600 --> 00:21:20,280 Speaker 2: care about that. Over the longer term, that will have 419 00:21:20,359 --> 00:21:22,240 Speaker 2: consequences for the kind of premium that will be put 420 00:21:22,240 --> 00:21:25,000 Speaker 2: on crude coming through the stratiform mods, the risk around that. 421 00:21:25,040 --> 00:21:27,040 Speaker 2: But in the near term, this market has been itching 422 00:21:27,080 --> 00:21:27,439 Speaker 2: to move on. 423 00:21:27,560 --> 00:21:31,600 Speaker 10: Now the longer term outlook for oil has gone higher 424 00:21:31,640 --> 00:21:32,800 Speaker 10: regardless because of that. 425 00:21:32,800 --> 00:21:34,400 Speaker 1: Job, which is why they said was trading at eight. 426 00:21:34,640 --> 00:21:37,120 Speaker 10: And you know what we're looking at is a demand 427 00:21:37,200 --> 00:21:39,879 Speaker 10: impact here of people saying I got to have a 428 00:21:40,600 --> 00:21:44,920 Speaker 10: bigger reserve to avoid this, and longer term, this is 429 00:21:44,960 --> 00:21:47,280 Speaker 10: probably really good for nuclear energy companies. 430 00:21:47,560 --> 00:21:48,560 Speaker 1: That's the structural shift. 431 00:21:48,560 --> 00:21:52,680 Speaker 2: Just one final question, tech multiples, real multiple contration through 432 00:21:52,720 --> 00:21:55,560 Speaker 2: the last month or so, is that compression and opportunity 433 00:21:55,720 --> 00:21:57,680 Speaker 2: or does that speak to the structural shift we're seeing 434 00:21:57,680 --> 00:22:00,280 Speaker 2: and how we value this s equity market. 435 00:21:59,800 --> 00:22:02,919 Speaker 10: Think, you know, as you know what before just the 436 00:22:03,000 --> 00:22:05,760 Speaker 10: day before this started, we took down our target for 437 00:22:05,800 --> 00:22:08,560 Speaker 10: the year and we took down the tech multiples because 438 00:22:09,000 --> 00:22:12,920 Speaker 10: we saw the big megacaps going from big free cash 439 00:22:12,960 --> 00:22:15,680 Speaker 10: flow generators to in the near term, not being big 440 00:22:15,720 --> 00:22:16,880 Speaker 10: free cash flow generators. 441 00:22:16,920 --> 00:22:18,520 Speaker 9: And we don't know how long that's going to go 442 00:22:18,600 --> 00:22:18,879 Speaker 9: on for. 443 00:22:19,080 --> 00:22:23,520 Speaker 10: So we've kind of switched our portfolios, fortunately towards hard 444 00:22:23,560 --> 00:22:28,560 Speaker 10: asset companies, you know, more value intensive. And I think 445 00:22:28,760 --> 00:22:31,359 Speaker 10: once you come out of this, you're still faced with 446 00:22:31,440 --> 00:22:34,680 Speaker 10: that problem, the AI disruption on the software side of tech, 447 00:22:35,280 --> 00:22:38,680 Speaker 10: and you know, the free cash flow decline. That's why 448 00:22:38,880 --> 00:22:42,920 Speaker 10: companies that are growing free cash flow right now tend 449 00:22:43,000 --> 00:22:45,359 Speaker 10: to be on the old economy side of the of 450 00:22:45,440 --> 00:22:48,680 Speaker 10: the kind of like Chevron. I mean, they're scree cash 451 00:22:48,680 --> 00:22:52,280 Speaker 10: flows ballooning Micron by the way, free cash flow and 452 00:22:52,280 --> 00:22:55,800 Speaker 10: that stock you know, down significantly here down thirty percent, 453 00:22:55,880 --> 00:22:57,919 Speaker 10: but their free cash flow is going to go up 454 00:22:57,960 --> 00:22:59,760 Speaker 10: by eight times over the next couple of years. 455 00:22:59,800 --> 00:23:01,760 Speaker 9: So I think that's where the market is going to 456 00:23:01,880 --> 00:23:02,600 Speaker 9: end up going to. 457 00:23:06,000 --> 00:23:09,000 Speaker 10: You know, the tech is okay, you're the price I 458 00:23:09,040 --> 00:23:12,119 Speaker 10: think has already kind of corrected, but yeah, I'm not 459 00:23:12,119 --> 00:23:14,560 Speaker 10: sure it can lead us out of this. 460 00:23:14,560 --> 00:23:18,119 Speaker 2: This is the Bloomberg Survanans podcast, bringing you the best 461 00:23:18,119 --> 00:23:21,200 Speaker 2: in markets, economics, an gier politics. You can watch the 462 00:23:21,240 --> 00:23:24,240 Speaker 2: show live on Bloomberg TV weekday mornings from six am 463 00:23:24,359 --> 00:23:27,520 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple, 464 00:23:27,800 --> 00:23:30,639 Speaker 2: Spotify or anywhere else you listen, and as always, on 465 00:23:30,680 --> 00:23:33,160 Speaker 2: the Bloomberg Terminal and the Bloomberg Business app.