1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:22,000 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App. 4 00:00:22,360 --> 00:00:25,680 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:27,040 Speaker 1: us live on YouTube. 6 00:00:27,280 --> 00:00:29,560 Speaker 2: We're gonna look at a spread right now of the 7 00:00:29,600 --> 00:00:33,720 Speaker 2: market in terms of asset allocation and tone of a 8 00:00:33,760 --> 00:00:36,559 Speaker 2: given house. This would be JP Morgan Madison follow it 9 00:00:36,640 --> 00:00:43,159 Speaker 2: joins US Global investment strategist JP Morgan, Private Bank. This morning, Madison, 10 00:00:43,240 --> 00:00:45,680 Speaker 2: what have you adjusted? How many days are we get into. 11 00:00:45,520 --> 00:00:46,280 Speaker 3: The warp already? 12 00:00:46,280 --> 00:00:46,360 Speaker 2: One? 13 00:00:46,440 --> 00:00:48,760 Speaker 3: I believe, Madison? What is the bank? 14 00:00:48,880 --> 00:00:54,440 Speaker 2: The Private Bank adjusted over thirty two days? Morning? 15 00:00:54,840 --> 00:00:57,120 Speaker 4: So I do want to be clear that heading into 16 00:00:57,120 --> 00:01:00,800 Speaker 4: twenty twenty six, we did have an outlook centered upon 17 00:01:00,920 --> 00:01:04,479 Speaker 4: three predominant themes, which are global fragmentation, a shift towards 18 00:01:04,480 --> 00:01:08,080 Speaker 4: structurally higher inflation, and the proliferation of AI. And I 19 00:01:08,120 --> 00:01:10,559 Speaker 4: think so far this year these themes are very much 20 00:01:10,640 --> 00:01:14,559 Speaker 4: accelerating and markets are working to price in all three 21 00:01:14,600 --> 00:01:16,880 Speaker 4: at once. So in my mind, when I go back 22 00:01:16,920 --> 00:01:18,959 Speaker 4: to that beginning of the year outlook, which was focused 23 00:01:18,959 --> 00:01:21,759 Speaker 4: on both promise for investors and also the pressure points 24 00:01:21,760 --> 00:01:25,679 Speaker 4: and the challenges. That thesis hasn't changed. I think the 25 00:01:25,880 --> 00:01:28,840 Speaker 4: urgency has. So of course there are challenges and we 26 00:01:28,920 --> 00:01:32,120 Speaker 4: are stress testing our base case outlook. But I think 27 00:01:32,200 --> 00:01:34,280 Speaker 4: under the assumption that you know, we do see a 28 00:01:34,319 --> 00:01:38,320 Speaker 4: de escalation within you know, oil markets, and even if 29 00:01:38,360 --> 00:01:40,520 Speaker 4: we do, let's say, move to a higher average of 30 00:01:40,640 --> 00:01:42,600 Speaker 4: call it, eighty dollars a barrel over the next three 31 00:01:42,600 --> 00:01:45,160 Speaker 4: to six months, if we do continue to see a 32 00:01:45,160 --> 00:01:47,720 Speaker 4: recovery from there, we do think that's still a benign 33 00:01:48,240 --> 00:01:51,520 Speaker 4: impact for both growth and inflation, and still a constructive 34 00:01:51,560 --> 00:01:53,080 Speaker 4: one for risk assets. 35 00:01:53,320 --> 00:01:55,840 Speaker 5: On the bond market here, fixed income market, we're looking 36 00:01:55,840 --> 00:01:59,280 Speaker 5: at the ten year treasury. You know, yields have come 37 00:01:59,320 --> 00:02:00,920 Speaker 5: in here a little bit, but we're still in that 38 00:02:01,040 --> 00:02:03,880 Speaker 5: trading range kind of a three seventy five, four and 39 00:02:03,920 --> 00:02:07,440 Speaker 5: a half percent. What's your fixed income call here today? 40 00:02:07,480 --> 00:02:10,080 Speaker 5: How much credit risk should do you think investors should 41 00:02:10,120 --> 00:02:11,320 Speaker 5: be taken in this environment? 42 00:02:12,800 --> 00:02:14,799 Speaker 4: So when it comes to fixed income, I think there's 43 00:02:14,840 --> 00:02:18,440 Speaker 4: a really compelling entry points, specifically on the shorter end 44 00:02:18,480 --> 00:02:20,680 Speaker 4: of the curve, so think one to five years in. 45 00:02:21,360 --> 00:02:23,240 Speaker 4: I think, you know, when we look at how investors 46 00:02:23,280 --> 00:02:26,480 Speaker 4: have been responding to this conflict. We have seen a 47 00:02:26,520 --> 00:02:30,600 Speaker 4: rebuilding of cash positions, selling stock, spawns and gold all 48 00:02:30,639 --> 00:02:33,720 Speaker 4: at once. And to your point, rates have surged, even 49 00:02:33,760 --> 00:02:35,280 Speaker 4: if they have come back a little bit over the 50 00:02:35,320 --> 00:02:38,720 Speaker 4: course the last twenty four hours, especially on the front end, 51 00:02:39,040 --> 00:02:41,919 Speaker 4: and that's been predominantly around inflation risk, and we think 52 00:02:41,919 --> 00:02:45,239 Speaker 4: that's an opportunity to lock in elevated levels of yield. 53 00:02:45,560 --> 00:02:47,640 Speaker 4: So we do think that the market may have gone 54 00:02:47,680 --> 00:02:50,880 Speaker 4: too far in that initial repricing. We don't think this 55 00:02:50,919 --> 00:02:54,480 Speaker 4: is twenty two. Long term inflation expectations are still anchored, 56 00:02:54,680 --> 00:02:57,120 Speaker 4: and so I think bond markets are underestimating you know 57 00:02:57,360 --> 00:02:57,799 Speaker 4: of some of this. 58 00:02:58,160 --> 00:03:00,400 Speaker 2: I think I know what you're going to say about 59 00:03:00,440 --> 00:03:04,480 Speaker 2: the duration of a conflict, a war. The press conference 60 00:03:04,520 --> 00:03:06,560 Speaker 2: again coming up, folks in less than an hour with 61 00:03:06,639 --> 00:03:10,160 Speaker 2: the Secretary of Defense Madison on a really on a 62 00:03:10,160 --> 00:03:15,040 Speaker 2: private bank global basis. What are you hearing from your clients? 63 00:03:15,160 --> 00:03:20,840 Speaker 2: What's the actual granular mood out there among JP Morgan 64 00:03:21,800 --> 00:03:25,120 Speaker 2: investors who choose to place their money with your private bank. 65 00:03:26,960 --> 00:03:30,160 Speaker 4: I think, broadly speaking, there is a degree of warrior 66 00:03:30,280 --> 00:03:32,800 Speaker 4: especially as we you know, continue to move forward in 67 00:03:32,840 --> 00:03:35,800 Speaker 4: this conflict. The longer at lasts, the greater the duration, 68 00:03:35,880 --> 00:03:39,120 Speaker 4: the greater the impact on the economy and markets broadly. 69 00:03:39,480 --> 00:03:41,560 Speaker 4: And so I do think that when we're looking and 70 00:03:41,600 --> 00:03:43,480 Speaker 4: speaking with our client base, there is a degree of 71 00:03:43,800 --> 00:03:48,920 Speaker 4: hesitancy in terms of, you know, how to participate in 72 00:03:48,960 --> 00:03:51,480 Speaker 4: a market like this. We came into the year very 73 00:03:51,560 --> 00:03:56,800 Speaker 4: much focused on portfolio resilience and bolstering portfolios with assets 74 00:03:56,800 --> 00:03:59,960 Speaker 4: and strategies that we felt could you provide a degree 75 00:04:00,200 --> 00:04:04,520 Speaker 4: of resiliency through cycles. And so when we're speaking with 76 00:04:04,560 --> 00:04:08,040 Speaker 4: our clients today, I think we're also talking about managing 77 00:04:08,240 --> 00:04:10,760 Speaker 4: through this volatility and taking advantage of some of these 78 00:04:11,880 --> 00:04:14,120 Speaker 4: you know, swings that we're seeing in markets, and that 79 00:04:14,120 --> 00:04:16,080 Speaker 4: could you know, range from you know, a more bullish 80 00:04:16,120 --> 00:04:18,320 Speaker 4: client that's looking to you know, dip into some of 81 00:04:18,320 --> 00:04:20,919 Speaker 4: these high conviction sectors that we have, whether that be 82 00:04:21,040 --> 00:04:24,240 Speaker 4: you know, technology industrials, financials that have pulled back a bit, 83 00:04:25,120 --> 00:04:27,760 Speaker 4: or you know, thinking through strategies that can actually play 84 00:04:27,760 --> 00:04:31,599 Speaker 4: that volatility, like structured nodes or like hedge funds to 85 00:04:31,720 --> 00:04:34,000 Speaker 4: navigate through this period of time. 86 00:04:35,000 --> 00:04:36,720 Speaker 5: Madison, what do you think about gold here we had 87 00:04:37,040 --> 00:04:39,680 Speaker 5: surging above five thousand dollars announce now we've pulled back 88 00:04:39,720 --> 00:04:42,839 Speaker 5: here to forty five hundred. Not really sure how investors 89 00:04:42,880 --> 00:04:45,080 Speaker 5: are viewing gold at this moment. 90 00:04:46,440 --> 00:04:49,880 Speaker 4: A lot of investors are frustrated about gold. It's pulled 91 00:04:49,880 --> 00:04:52,640 Speaker 4: back over fifteen percent from its highs. That's been a 92 00:04:52,680 --> 00:04:56,640 Speaker 4: combination of the result of you know, stronger dollar, higher rates, 93 00:04:56,640 --> 00:04:59,680 Speaker 4: some profit taking. But what I literally stress is that 94 00:04:59,720 --> 00:05:03,160 Speaker 4: goal is not meant to be a point in time hedge. 95 00:05:03,800 --> 00:05:06,080 Speaker 4: We view this as a you know, it as a 96 00:05:06,120 --> 00:05:10,720 Speaker 4: diversifier for the bigger picture structural risks, so higher deficits 97 00:05:10,720 --> 00:05:14,920 Speaker 4: a world that is gradually fragmenting, those factors haven't gone away, 98 00:05:14,960 --> 00:05:18,480 Speaker 4: if anything, they are accelerating. So we do have conviction 99 00:05:20,480 --> 00:05:23,839 Speaker 4: from here, and so I do think it's really important 100 00:05:23,839 --> 00:05:25,719 Speaker 4: to keep that in mind. And so even if we 101 00:05:25,920 --> 00:05:29,279 Speaker 4: have nudged our base case outlook down from north of 102 00:05:29,320 --> 00:05:31,800 Speaker 4: six thousand to you know, the high five thousands, that's 103 00:05:31,839 --> 00:05:33,400 Speaker 4: still twenty percent upside from here. 104 00:05:33,640 --> 00:05:37,400 Speaker 2: Madison, thank you so much, really really appreciate your efforts. 105 00:05:37,480 --> 00:05:42,520 Speaker 2: Madison follower with a JP Morgan Private Bank. Stay with us. 106 00:05:42,760 --> 00:05:46,000 Speaker 2: More from Bloomberg Surveillance coming up after this. 107 00:05:53,240 --> 00:05:56,839 Speaker 1: You're listening to the Bloomberg surveillance podcast. Catch US live 108 00:05:56,880 --> 00:06:00,120 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 109 00:06:00,160 --> 00:06:03,800 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 110 00:06:03,960 --> 00:06:05,440 Speaker 1: watch US live on YouTube. 111 00:06:05,640 --> 00:06:09,240 Speaker 2: Andrew Sliman joins us right now with Morgan Stanley. You're 112 00:06:09,520 --> 00:06:14,120 Speaker 2: just to recalibrate and reset. Andrew, we have seen this 113 00:06:14,960 --> 00:06:20,240 Speaker 2: before where there is a corrective type event. Is this 114 00:06:20,279 --> 00:06:23,560 Speaker 2: one different than the other forty two you've witnessed in 115 00:06:23,600 --> 00:06:27,920 Speaker 2: your career? By two? Exactly right? 116 00:06:27,960 --> 00:06:31,320 Speaker 6: Tom, Look, yeah, it's different because the narrative is different, 117 00:06:32,120 --> 00:06:36,640 Speaker 6: but the narrative was different last year terriffs, but it 118 00:06:36,760 --> 00:06:38,599 Speaker 6: caused a correction, and I'm not sure we'll have a 119 00:06:38,680 --> 00:06:42,200 Speaker 6: nineteen percent correction. But I just feel like we started 120 00:06:42,279 --> 00:06:46,279 Speaker 6: this year with a lot of optimism on Wall Street, 121 00:06:46,279 --> 00:06:50,240 Speaker 6: which is classic late cycle, just as we did last year, 122 00:06:50,360 --> 00:06:52,400 Speaker 6: and the terrorists came along and washed away a lot 123 00:06:52,400 --> 00:06:55,000 Speaker 6: of that optimism. And now you know, we have three 124 00:06:55,080 --> 00:07:00,680 Speaker 6: narratives AI disruption, private credit concerns, and more. And will 125 00:07:00,800 --> 00:07:03,400 Speaker 6: one of those cause the same type of correction? No, 126 00:07:03,560 --> 00:07:06,880 Speaker 6: but I think it's washing out some of that excess 127 00:07:06,960 --> 00:07:09,080 Speaker 6: of optimism, and I think that's healthy. 128 00:07:09,279 --> 00:07:09,520 Speaker 3: Paul. 129 00:07:09,520 --> 00:07:11,880 Speaker 2: I just noticed that's buried in the Bloomberg lunch pad. 130 00:07:11,920 --> 00:07:15,400 Speaker 2: The ten year inflation adjust a yield has driven under 131 00:07:15,440 --> 00:07:19,080 Speaker 2: a two percent to a one point nine handle, Paul, 132 00:07:19,160 --> 00:07:21,920 Speaker 2: that's a big deal of the shift in the last oh, 133 00:07:21,960 --> 00:07:23,480 Speaker 2: i'll call it seventy two hours. 134 00:07:23,360 --> 00:07:26,680 Speaker 5: Two hours, Andrew, Are you surprised that the S and 135 00:07:26,760 --> 00:07:29,200 Speaker 5: P is not down more than seven percent? 136 00:07:30,120 --> 00:07:33,320 Speaker 6: I am, and I think Paul, one of the reasons 137 00:07:33,360 --> 00:07:36,360 Speaker 6: for that is that a lot of people really got 138 00:07:36,400 --> 00:07:40,960 Speaker 6: burned last year by turning bearish on the market. Now 139 00:07:41,040 --> 00:07:43,080 Speaker 6: sentiment has really washed down. We've had a lot of 140 00:07:43,480 --> 00:07:46,960 Speaker 6: bad days, and the market really, you know, really, even 141 00:07:46,960 --> 00:07:51,560 Speaker 6: into this correction wasn't really higher than it was last fall. 142 00:07:51,840 --> 00:07:55,000 Speaker 6: So but I think I think it has a lot 143 00:07:55,040 --> 00:07:58,080 Speaker 6: to do with the fact that Wall Street is very 144 00:07:58,160 --> 00:08:02,080 Speaker 6: hesitant about turning negative after doing that last year and 145 00:08:02,200 --> 00:08:03,760 Speaker 6: you know, being wrong. 146 00:08:05,040 --> 00:08:08,040 Speaker 5: So prior to the war here, Andrew, we had a 147 00:08:08,120 --> 00:08:11,080 Speaker 5: profound rotation taking place in the markets, maybe out of 148 00:08:11,080 --> 00:08:14,280 Speaker 5: some of the more growthy or higher multiple sectors of 149 00:08:14,320 --> 00:08:18,440 Speaker 5: the market and just maybe more lower evaluation, maybe a 150 00:08:18,480 --> 00:08:21,160 Speaker 5: little bit more cyclical small and mid caps. We're actually 151 00:08:21,160 --> 00:08:23,560 Speaker 5: getting a little bit of a move there. How do 152 00:08:23,560 --> 00:08:27,080 Speaker 5: you think about that rotation. Given what's happened, let me ask. 153 00:08:26,840 --> 00:08:30,240 Speaker 6: You a question, Paul, sure would the would a recession 154 00:08:30,320 --> 00:08:33,120 Speaker 6: be around the corner if the market was pivoting into 155 00:08:33,240 --> 00:08:37,360 Speaker 6: value smaller catach stocks. The market was screaming to you 156 00:08:37,840 --> 00:08:42,200 Speaker 6: that all these problems will not cause an economic downturn. 157 00:08:42,240 --> 00:08:46,240 Speaker 6: We're not seeing the market. You know, consumer staples, healthcare, 158 00:08:46,440 --> 00:08:51,800 Speaker 6: they're not outperforming. They always outperform before downturn. Financials aren't 159 00:08:51,800 --> 00:08:54,160 Speaker 6: getting killed. They usually get killed right in front of 160 00:08:54,520 --> 00:08:57,760 Speaker 6: economic downtown. So the market is saying, we might be 161 00:08:57,840 --> 00:09:00,760 Speaker 6: a little bit more worried about inflation, but we don't 162 00:09:00,760 --> 00:09:03,559 Speaker 6: think it's a economic commentary. 163 00:09:04,200 --> 00:09:07,520 Speaker 3: So, you know, the earnings out there still look pretty strong. 164 00:09:07,559 --> 00:09:10,760 Speaker 5: We'll start hearing from companies in a couple of weeks, 165 00:09:10,760 --> 00:09:12,400 Speaker 5: but I mean, earnings have been pretty strong. Are they 166 00:09:12,400 --> 00:09:15,760 Speaker 5: strong enough to kind of forge through some of the 167 00:09:15,840 --> 00:09:18,960 Speaker 5: uncertainty that maybe is a black swan event like a war. 168 00:09:19,800 --> 00:09:23,120 Speaker 6: I think that's another reason, Paul, why the market isn't 169 00:09:23,160 --> 00:09:28,360 Speaker 6: trading off is because basically for the last four quarters, 170 00:09:28,400 --> 00:09:32,760 Speaker 6: the market has beaten estimates and Whilstreet's been forced to 171 00:09:32,840 --> 00:09:35,760 Speaker 6: raise and I think that's going to happen again. The 172 00:09:36,760 --> 00:09:41,000 Speaker 6: only question will be will the commentary be cautious enough 173 00:09:41,120 --> 00:09:42,319 Speaker 6: that you know people. 174 00:09:42,080 --> 00:09:42,960 Speaker 2: Will look through it. 175 00:09:43,080 --> 00:09:45,760 Speaker 6: Look right now, there's a real great opera, in my opinion, 176 00:09:45,760 --> 00:09:48,640 Speaker 6: a great opportunity in the market, which is companies with 177 00:09:48,720 --> 00:09:54,800 Speaker 6: the strongest earnings revisions haven't necessarily done the best because 178 00:09:54,800 --> 00:09:59,360 Speaker 6: there's a multiple you know, macro stories out there that 179 00:09:59,440 --> 00:10:03,560 Speaker 6: are causing uneasy So you know, whether it's again AI 180 00:10:03,640 --> 00:10:08,280 Speaker 6: disruption or the wall credit issues, the market is focused 181 00:10:08,280 --> 00:10:12,040 Speaker 6: on macro, not the micro, and that's that could be 182 00:10:12,040 --> 00:10:14,880 Speaker 6: a great setup going into quarterly earnings. 183 00:10:14,960 --> 00:10:17,800 Speaker 2: Andrew Slimming with this head of applied to equity advisors, 184 00:10:17,840 --> 00:10:22,560 Speaker 2: Morgan Stanley, with decades of experience. Well into the quarterly report, 185 00:10:23,200 --> 00:10:25,559 Speaker 2: you know, I noticed Andrew Ubs had out. It happened 186 00:10:25,559 --> 00:10:28,040 Speaker 2: to be on luxury stocks, and they said, you know 187 00:10:28,120 --> 00:10:31,440 Speaker 2: what our channel checks are, it's pretty good. What's the 188 00:10:31,520 --> 00:10:35,959 Speaker 2: Andrew Slimming channel check look right? Look like right now 189 00:10:36,240 --> 00:10:38,520 Speaker 2: into another double digit earnings growth? 190 00:10:39,480 --> 00:10:41,600 Speaker 6: Well, I think it's it's strong. I would you know, 191 00:10:41,679 --> 00:10:44,440 Speaker 6: as it pertains the retail look at the real strong 192 00:10:44,559 --> 00:10:47,400 Speaker 6: stocks or the watching stocks are in the toilet. It's 193 00:10:47,480 --> 00:10:52,160 Speaker 6: the it's the gray down stocks. They are doing very 194 00:10:52,240 --> 00:10:55,400 Speaker 6: very well, so I think I'm not sure it's a 195 00:10:55,400 --> 00:10:58,160 Speaker 6: comment on you know, the k economies not as bad 196 00:10:58,200 --> 00:11:01,960 Speaker 6: as people think. I think people are grading down in 197 00:11:02,120 --> 00:11:07,440 Speaker 6: their retail so I'm pretty optimistic on the quarterly earnings. 198 00:11:07,480 --> 00:11:11,240 Speaker 6: I think you stick with what's working. I see I'm 199 00:11:11,320 --> 00:11:14,160 Speaker 6: changing my tune in terms of I think these megacap 200 00:11:14,280 --> 00:11:17,440 Speaker 6: tech socks they've been creamed and I think they're going 201 00:11:17,480 --> 00:11:20,040 Speaker 6: to all come in with good numbers and the multiples 202 00:11:20,040 --> 00:11:23,040 Speaker 6: are very, very cheap. So I think the market, we 203 00:11:23,120 --> 00:11:26,160 Speaker 6: need the market to get back to focusing on fundamentals, 204 00:11:26,160 --> 00:11:28,360 Speaker 6: and when they do, I think the groups that have 205 00:11:28,480 --> 00:11:32,719 Speaker 6: worked the last year or so, financials, tech industrials, I 206 00:11:32,720 --> 00:11:34,280 Speaker 6: think they'll come back. 207 00:11:35,520 --> 00:11:37,920 Speaker 5: Andrew, it doesn't seem like the Fed's going to lend 208 00:11:37,960 --> 00:11:39,960 Speaker 5: a hand here this year. I'm looking at the w 209 00:11:40,120 --> 00:11:42,600 Speaker 5: I RP function and the market's kind of not looking 210 00:11:42,600 --> 00:11:44,440 Speaker 5: for any rate cuts, not looking for any rate hikes. 211 00:11:44,440 --> 00:11:46,880 Speaker 5: On the other hand, But is that okay for this market? 212 00:11:48,320 --> 00:11:48,520 Speaker 2: Yeah? 213 00:11:48,559 --> 00:11:54,360 Speaker 6: I mean again, I doubt the FED will be raising rais. 214 00:11:54,520 --> 00:11:56,319 Speaker 6: But I think you know, one of the reasons why 215 00:11:56,360 --> 00:11:58,679 Speaker 6: I think the war is going to be short is 216 00:11:58,840 --> 00:12:00,560 Speaker 6: you know, Howard the heck are you going to get 217 00:12:00,920 --> 00:12:04,440 Speaker 6: a FED rate cut, which the president wants if oils 218 00:12:04,480 --> 00:12:08,920 Speaker 6: at these levels. So you know, I think the market 219 00:12:08,920 --> 00:12:11,800 Speaker 6: can survive. It would do a lot better if we 220 00:12:11,800 --> 00:12:13,599 Speaker 6: were to get a rate cut at some point in 221 00:12:13,960 --> 00:12:16,800 Speaker 6: the future. But you know, keep in mind, the midterm 222 00:12:16,880 --> 00:12:20,040 Speaker 6: year is never all that great a year till after 223 00:12:20,280 --> 00:12:24,920 Speaker 6: the midterms, and then it is a very powerful next 224 00:12:24,960 --> 00:12:27,600 Speaker 6: twelve months post the midterms. I wouldn't be surprised we 225 00:12:27,640 --> 00:12:28,760 Speaker 6: see this set up yet again. 226 00:12:28,920 --> 00:12:32,760 Speaker 2: Andrew too much optimism, Go away, Anderslimmon with us, Morgan Stanley, 227 00:12:34,240 --> 00:12:38,400 Speaker 2: stay with us. More from Bloomberg Surveillance coming up after this. 228 00:12:45,640 --> 00:12:49,240 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live 229 00:12:49,320 --> 00:12:52,440 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 230 00:12:52,559 --> 00:12:56,200 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 231 00:12:56,360 --> 00:12:57,880 Speaker 1: watch us live on YouTube. 232 00:12:58,160 --> 00:13:02,880 Speaker 2: Lindsey Newman is shocking expert and thinking about the war 233 00:13:03,800 --> 00:13:06,080 Speaker 2: the resume. I won't go into it just because of time, 234 00:13:06,160 --> 00:13:10,480 Speaker 2: but just extraordinary geopolitical risk expert at G zero Media 235 00:13:10,840 --> 00:13:13,839 Speaker 2: and of course always affiliated with King's College. They are 236 00:13:13,880 --> 00:13:18,120 Speaker 2: definitive in London in the study of war, lindsay, you've 237 00:13:18,120 --> 00:13:23,280 Speaker 2: got a single sentence in your report. I'm the president. 238 00:13:24,200 --> 00:13:27,480 Speaker 2: He has squared these ideals with a pathway to peace 239 00:13:27,760 --> 00:13:32,280 Speaker 2: through war. I think we all see that. Is that original? 240 00:13:32,760 --> 00:13:36,040 Speaker 2: Or is mister Trump President Trump repeating history? 241 00:13:38,040 --> 00:13:40,840 Speaker 7: Thanks Tom for having me on. You know, he started 242 00:13:40,840 --> 00:13:43,840 Speaker 7: his administration in the second term saying that he visions 243 00:13:43,920 --> 00:13:46,560 Speaker 7: himself as the peacemaker and unifar. That's going to be 244 00:13:46,679 --> 00:13:50,120 Speaker 7: his greatest legacy. That was from his inaugural address. We 245 00:13:50,200 --> 00:13:53,000 Speaker 7: all know, of course that he has these incredible ambitions 246 00:13:53,040 --> 00:13:57,280 Speaker 7: around the Nobel Peace Prize, longstanding ambitions. And you know, 247 00:13:57,320 --> 00:13:59,680 Speaker 7: one of the questions I get asked most is how 248 00:14:00,040 --> 00:14:02,800 Speaker 7: could Trump have run a campaign on ending forever wars 249 00:14:03,320 --> 00:14:07,080 Speaker 7: and being this peacemaker and unifier and yet find himself 250 00:14:07,240 --> 00:14:10,440 Speaker 7: throughout the world really not just in Iran, but of 251 00:14:10,440 --> 00:14:13,319 Speaker 7: course what we're watching right now is Iran pursuing force 252 00:14:13,360 --> 00:14:16,160 Speaker 7: and force posturing. How do you square that? And I 253 00:14:16,240 --> 00:14:20,040 Speaker 7: truly think that he envisions the way through to lasting 254 00:14:20,080 --> 00:14:22,720 Speaker 7: peace in the Middle East, a rewriting of Middle East 255 00:14:22,800 --> 00:14:26,280 Speaker 7: history is through this operation epic theory that they have 256 00:14:26,360 --> 00:14:28,560 Speaker 7: been pursuing for the last five weeks. 257 00:14:29,400 --> 00:14:30,000 Speaker 3: Doctor Newman. 258 00:14:30,000 --> 00:14:32,800 Speaker 5: If President and Trump were your client, what would you 259 00:14:32,840 --> 00:14:35,640 Speaker 5: tell him here about how to proceed from here? 260 00:14:37,400 --> 00:14:40,120 Speaker 7: Well, what I tell him first is you are confusing everybody, 261 00:14:40,160 --> 00:14:42,800 Speaker 7: and nobody knows what's coming next, and everybody wants to 262 00:14:42,880 --> 00:14:45,520 Speaker 7: know what are the off rams. Are we going to 263 00:14:45,520 --> 00:14:47,280 Speaker 7: see an off ramp in the four to six week 264 00:14:47,360 --> 00:14:50,960 Speaker 7: window that the US administration had initially anticipated, or is 265 00:14:51,000 --> 00:14:54,080 Speaker 7: there some slippage in the timeline. But what I would 266 00:14:54,160 --> 00:14:58,000 Speaker 7: say is that he has now owned the war in Iran, 267 00:14:58,240 --> 00:15:01,920 Speaker 7: and the idea that we're hearing the overnight that the 268 00:15:02,040 --> 00:15:06,200 Speaker 7: US could actually leave the region without pursuing some sort 269 00:15:06,200 --> 00:15:08,200 Speaker 7: of re establishment of deterrence in the strait of horror 270 00:15:08,200 --> 00:15:11,160 Speaker 7: moves is not really feasible in a sense, they broke it, 271 00:15:11,200 --> 00:15:13,480 Speaker 7: they bought it. They need to resolve this conflict now 272 00:15:13,520 --> 00:15:16,720 Speaker 7: because the idea that the Middle East and the rest 273 00:15:16,720 --> 00:15:20,000 Speaker 7: of the world will now have to face rising energy prices, 274 00:15:20,480 --> 00:15:23,600 Speaker 7: energy costs, supply chain disruption, and it's not just to 275 00:15:23,640 --> 00:15:27,360 Speaker 7: oil and energy, although we know overnight that gas pumps 276 00:15:27,360 --> 00:15:30,040 Speaker 7: at home are now four dollars a gallon, but it's 277 00:15:30,080 --> 00:15:33,160 Speaker 7: also to aluminum as well as helium. So these are 278 00:15:33,880 --> 00:15:37,160 Speaker 7: actually components that Trump himself should be caring about it 279 00:15:37,440 --> 00:15:41,080 Speaker 7: to that Ai revolution that's happening. So the idea here 280 00:15:41,160 --> 00:15:43,320 Speaker 7: is they have to re establish some sort of deterrence 281 00:15:43,360 --> 00:15:45,600 Speaker 7: over the strait of horror moves, whether that is a 282 00:15:45,640 --> 00:15:48,160 Speaker 7: blockade of carg Island, an invasion of car G Island, 283 00:15:48,240 --> 00:15:53,240 Speaker 7: something more military intensive. In a sense, this is the 284 00:15:53,280 --> 00:15:56,320 Speaker 7: stakes that are now here and there are this is 285 00:15:56,360 --> 00:15:59,479 Speaker 7: the zone of risk, because those operations are all incredibly 286 00:15:59,600 --> 00:16:03,960 Speaker 7: incredible risky and would involve potential loss of life. 287 00:16:04,280 --> 00:16:07,640 Speaker 5: So doctor newmana just even by the tweet this morning 288 00:16:07,680 --> 00:16:11,920 Speaker 5: from President Trump about talking to other European countries about hey, 289 00:16:11,920 --> 00:16:14,440 Speaker 5: if you need if you have jet fuel shortages, that's 290 00:16:14,440 --> 00:16:17,280 Speaker 5: your problem. We've done the heavy lifting in Iran, We've 291 00:16:18,440 --> 00:16:21,840 Speaker 5: you know, decimated their military, taken out their leadership. If 292 00:16:21,880 --> 00:16:24,280 Speaker 5: you need energy out of the straits, you got to 293 00:16:24,320 --> 00:16:26,080 Speaker 5: either deal with it yourself or come take it. 294 00:16:26,120 --> 00:16:28,600 Speaker 3: That suggests that maybe he's. 295 00:16:28,520 --> 00:16:31,920 Speaker 5: Laying the groundwork for maybe pulling back from that part 296 00:16:31,920 --> 00:16:34,040 Speaker 5: of the world and letting the world figure out how 297 00:16:34,040 --> 00:16:35,840 Speaker 5: to deal with the straight up from moves. Is that 298 00:16:35,880 --> 00:16:37,520 Speaker 5: a potential takeaway. 299 00:16:38,960 --> 00:16:41,640 Speaker 7: That is certainly what the message is being relayed today. 300 00:16:41,640 --> 00:16:43,400 Speaker 7: He's saying, look, you can buy it from the US 301 00:16:43,480 --> 00:16:45,320 Speaker 7: or go take it yourself. It's an easy job now 302 00:16:45,360 --> 00:16:48,120 Speaker 7: because we have now hit eleven thousand targets with in 303 00:16:48,280 --> 00:16:51,920 Speaker 7: or on itself. That's not really sort of the endgame 304 00:16:51,960 --> 00:16:54,720 Speaker 7: here of this of the statement, it is sort of 305 00:16:54,720 --> 00:16:56,840 Speaker 7: the pretext. But you know, I think we need to 306 00:16:56,840 --> 00:16:58,720 Speaker 7: dig in a little bit more. Trump is trying to 307 00:16:58,760 --> 00:17:02,120 Speaker 7: pressure Europe and sure the region itself to get more 308 00:17:02,120 --> 00:17:06,119 Speaker 7: involved to support any mission an operation that remains to 309 00:17:06,200 --> 00:17:10,919 Speaker 7: re establish determs over the region. But again the issue 310 00:17:10,960 --> 00:17:13,680 Speaker 7: is that they can't to leave it, to leave the 311 00:17:13,720 --> 00:17:16,080 Speaker 7: straight of horror moves as it currently stands is just 312 00:17:16,160 --> 00:17:19,359 Speaker 7: a status quo that means signals the world that Iran 313 00:17:19,400 --> 00:17:21,640 Speaker 7: has the potential to be a more volatile, a more 314 00:17:21,680 --> 00:17:24,879 Speaker 7: impactful actor after this conflict than it was before the 315 00:17:24,880 --> 00:17:28,080 Speaker 7: conflict itself, despite all of the personnel changes and all 316 00:17:28,160 --> 00:17:31,320 Speaker 7: the strikes and the reduction in drone missile capabilities and 317 00:17:31,359 --> 00:17:32,919 Speaker 7: production that's happened in Iran. 318 00:17:33,480 --> 00:17:36,800 Speaker 2: Lindsay Newman with this, and we continue geopolitical risks. Expert 319 00:17:36,880 --> 00:17:41,520 Speaker 2: G zero Media visiting Research Fellow King's College barely describes 320 00:17:41,560 --> 00:17:46,000 Speaker 2: her holistic ability of law and war and the study 321 00:17:46,160 --> 00:17:50,399 Speaker 2: of these conflicts. She joins us now before the press 322 00:17:50,440 --> 00:17:55,480 Speaker 2: conference of Secretary of Defense. Hegsith here in a bit 323 00:17:55,560 --> 00:17:58,720 Speaker 2: top of the hour for that about fifteen minutes away, 324 00:17:59,119 --> 00:18:03,080 Speaker 2: Professor Newman, I look at where we are, and I 325 00:18:03,119 --> 00:18:05,400 Speaker 2: do think you know, and it's part of my act 326 00:18:05,520 --> 00:18:08,720 Speaker 2: is to know the history. But I want to know 327 00:18:08,840 --> 00:18:13,920 Speaker 2: the emotional linkages of say an ally the United Kingdom, 328 00:18:14,160 --> 00:18:17,439 Speaker 2: who the President went after this morning. I assume the 329 00:18:17,480 --> 00:18:21,600 Speaker 2: President's not aware of the Trucial States. I assume he's 330 00:18:21,680 --> 00:18:24,879 Speaker 2: not aware of this real love hate relationship of the 331 00:18:24,880 --> 00:18:29,160 Speaker 2: British Empire with the Persian golf and the Arab tribes. 332 00:18:29,359 --> 00:18:33,440 Speaker 2: How attached is the United Kingdom to assisting the United 333 00:18:33,480 --> 00:18:34,959 Speaker 2: Arab Emirates. 334 00:18:36,720 --> 00:18:39,960 Speaker 7: The UK is really you know, what you're pointing to, Tom, 335 00:18:39,960 --> 00:18:42,159 Speaker 7: which is quite interesting and doesn't get highlight enough, is 336 00:18:42,200 --> 00:18:44,960 Speaker 7: how much of geopolitics is actually affected not just by 337 00:18:45,320 --> 00:18:48,400 Speaker 7: foreign policy but also about domestic politics. And there is 338 00:18:48,480 --> 00:18:51,320 Speaker 7: just not an appetite right now within the UK to 339 00:18:51,359 --> 00:18:53,879 Speaker 7: get involved in this conflict. And we know that the 340 00:18:53,920 --> 00:18:57,960 Speaker 7: government itself is facing its own various financial fiscal issues 341 00:18:57,960 --> 00:19:00,479 Speaker 7: here in the UK, and so you know, the idea 342 00:19:00,760 --> 00:19:02,840 Speaker 7: that the UK is just going to throw their hat 343 00:19:02,840 --> 00:19:07,480 Speaker 7: in quite quite uh, sort of robustly towards supporting any 344 00:19:07,560 --> 00:19:10,119 Speaker 7: sort of operation. You know, we've seen the writing on 345 00:19:10,160 --> 00:19:12,399 Speaker 7: the wall from the very beginning. Keir Starmer did not 346 00:19:12,480 --> 00:19:17,560 Speaker 7: want to allow the US military to redeploy from Garcia, 347 00:19:18,080 --> 00:19:20,479 Speaker 7: and then, interestingly enough to you, Garcia became a target 348 00:19:20,480 --> 00:19:23,919 Speaker 7: of Iran action. This is a clear signal from the 349 00:19:24,000 --> 00:19:27,240 Speaker 7: UK government of how hesitant that they are in getting involved, 350 00:19:27,359 --> 00:19:29,640 Speaker 7: even if they too want to see the straight upform 351 00:19:29,720 --> 00:19:33,160 Speaker 7: news reopen. Like regional states. You know, we're hearing behind 352 00:19:33,160 --> 00:19:36,040 Speaker 7: the scenes these you know, these regional leaders are pushing 353 00:19:36,080 --> 00:19:39,639 Speaker 7: the US to remain involved, to continue to finish the 354 00:19:39,720 --> 00:19:42,920 Speaker 7: job in Trump's language, but they too are not yet 355 00:19:42,960 --> 00:19:45,360 Speaker 7: at the position where they are willing to put sort 356 00:19:45,400 --> 00:19:46,639 Speaker 7: of their own resources behind it. 357 00:19:47,200 --> 00:19:48,200 Speaker 3: Uh, Doctor Newman. 358 00:19:48,640 --> 00:19:51,280 Speaker 5: It seems like perhaps in one scenario, Iran is even 359 00:19:51,440 --> 00:19:53,879 Speaker 5: has stronger now than it was before the war in 360 00:19:53,960 --> 00:19:56,359 Speaker 5: terms of having influence on the straight of horror moves. 361 00:19:58,119 --> 00:19:59,560 Speaker 3: How does that get resolved? 362 00:20:00,720 --> 00:20:02,560 Speaker 7: Yeah, I mean, I absolutely agree with that, Paul, in 363 00:20:02,560 --> 00:20:06,480 Speaker 7: the sense that this conflict. Iran strategy throughout this conflict 364 00:20:06,520 --> 00:20:10,320 Speaker 7: has been to deploy horizontal escalation to make this conflict 365 00:20:10,359 --> 00:20:12,960 Speaker 7: not just Iran's problem, but to make the conflict the 366 00:20:13,040 --> 00:20:15,880 Speaker 7: region's problem. So it's in a way, and it has 367 00:20:16,000 --> 00:20:19,840 Speaker 7: leveraged just massive asymmetry and might and capabilities to its 368 00:20:19,880 --> 00:20:24,480 Speaker 7: advantage quite effectively. And what that means now is that 369 00:20:24,560 --> 00:20:27,280 Speaker 7: Iran has learned some key lessons in this conflict, right 370 00:20:27,320 --> 00:20:30,360 Speaker 7: to how to be sustainable, how to stay in the conflict, 371 00:20:30,800 --> 00:20:34,919 Speaker 7: and so in order to if this conflict were to 372 00:20:35,000 --> 00:20:36,720 Speaker 7: end today, as I said, the status quo is not 373 00:20:36,760 --> 00:20:41,080 Speaker 7: sustainable because Iran has learned that its potentially can subject 374 00:20:41,119 --> 00:20:43,399 Speaker 7: all of the regional states and the world to its 375 00:20:43,440 --> 00:20:44,480 Speaker 7: wins going forward. 376 00:20:44,640 --> 00:20:47,720 Speaker 2: Lizzie, I read very carefully Robert T. Kaplan, my book 377 00:20:47,720 --> 00:20:50,679 Speaker 2: of the summer three four summers ago, The Loom of Time, 378 00:20:51,320 --> 00:20:55,920 Speaker 2: This changeable path from Morocco over to Persia, and Robert T. 379 00:20:56,080 --> 00:21:02,400 Speaker 2: Kaplan talks about America's affinity for little wars, not little wars, 380 00:21:02,560 --> 00:21:07,080 Speaker 2: not world wars, but middle size wars. How does a 381 00:21:07,720 --> 00:21:12,520 Speaker 2: secretary defense prosecute a sort of kind of like Middle War. 382 00:21:13,320 --> 00:21:15,160 Speaker 7: Yeah, I have not read that one. Of course, I've 383 00:21:15,160 --> 00:21:17,879 Speaker 7: heard about a lot of conversation around the Middle wars concept. 384 00:21:17,920 --> 00:21:20,080 Speaker 7: I mean, we're expecting in the next few minutes that 385 00:21:20,119 --> 00:21:23,280 Speaker 7: we're going to hear from Secretary Headseth as well as 386 00:21:23,359 --> 00:21:25,560 Speaker 7: Joint Chiefs Kane, and what they're going to tell us 387 00:21:25,680 --> 00:21:29,000 Speaker 7: is that the objectives at the US Administration set forth 388 00:21:29,119 --> 00:21:33,000 Speaker 7: a couple of weeks ago, which were to degrade Iran's naval, 389 00:21:33,160 --> 00:21:36,480 Speaker 7: missile and nuclear capabilities as well as its leadership structure. 390 00:21:36,720 --> 00:21:38,520 Speaker 7: That job has been done. That's what they're going to 391 00:21:38,520 --> 00:21:40,760 Speaker 7: tell us. We know that the US has struck more 392 00:21:40,800 --> 00:21:44,639 Speaker 7: than eleven thousand sites across Iran, that ninety percent of 393 00:21:45,119 --> 00:21:48,040 Speaker 7: drone and missiles leaving Iran have now have come down, 394 00:21:48,160 --> 00:21:52,240 Speaker 7: that two thirds of Iran's production capabilities have now been hit. 395 00:21:52,920 --> 00:21:56,600 Speaker 7: And so from that, from that vantage point, they're going 396 00:21:56,640 --> 00:21:59,160 Speaker 7: to be telling the US public and the world that 397 00:21:59,400 --> 00:22:03,120 Speaker 7: this Operation EPI Fury has been successful. It has achieved 398 00:22:03,160 --> 00:22:05,720 Speaker 7: many of its teams. The issue, though, Tom, is that 399 00:22:05,760 --> 00:22:09,719 Speaker 7: this has been an incredibly costly conflict for the US administration. 400 00:22:09,840 --> 00:22:12,359 Speaker 7: We know that there has been a request for perhaps 401 00:22:12,440 --> 00:22:15,000 Speaker 7: an additional two hundred billion in funding. We know that 402 00:22:15,040 --> 00:22:18,040 Speaker 7: there is this budget that's coming forward with the defensive 403 00:22:18,080 --> 00:22:20,640 Speaker 7: budget that could be up to one point five trillion 404 00:22:20,720 --> 00:22:24,200 Speaker 7: ask from President Trump, and the US administration is now 405 00:22:24,240 --> 00:22:27,760 Speaker 7: facing a position where it's wondering, you know, do we 406 00:22:27,920 --> 00:22:30,480 Speaker 7: finish the quote unquote finish the job as Trump has said, 407 00:22:30,520 --> 00:22:34,320 Speaker 7: which according to Trump, would involve taking back the straight 408 00:22:34,359 --> 00:22:36,200 Speaker 7: of Horn moves. It would be going in and getting 409 00:22:36,200 --> 00:22:39,960 Speaker 7: the quote nuclear dust that enriched uranium from deep with 410 00:22:40,080 --> 00:22:43,840 Speaker 7: in Iran. Or is it unwilling to pay further cost 411 00:22:43,880 --> 00:22:47,560 Speaker 7: here because gases at the pump's four dollars. We know 412 00:22:47,680 --> 00:22:51,240 Speaker 7: that three quarters of Americans already think that the US 413 00:22:51,280 --> 00:22:53,520 Speaker 7: is too involved in the conflict in Iran. So the 414 00:22:53,600 --> 00:22:57,040 Speaker 7: US is trying to battle these these counterpoints about where 415 00:22:57,040 --> 00:22:59,920 Speaker 7: do they go forward. So I fully expect that Heggs 416 00:23:00,200 --> 00:23:02,360 Speaker 7: and King will say, look, we've done what we came 417 00:23:02,440 --> 00:23:05,240 Speaker 7: to do. But the reality is everybody's feeling it in 418 00:23:05,280 --> 00:23:08,760 Speaker 7: the wallets. Everybody's watching Brent Crude grow up, go up 419 00:23:09,520 --> 00:23:13,120 Speaker 7: and wondering about those other supply chain impacts. 420 00:23:13,080 --> 00:23:16,280 Speaker 5: To the extent Doctor Newman that the US does at 421 00:23:16,280 --> 00:23:19,119 Speaker 5: some point look to pull back here. Is there any 422 00:23:19,240 --> 00:23:22,600 Speaker 5: way that the world can work with Iran in opening 423 00:23:22,640 --> 00:23:23,600 Speaker 5: the straight Offoe moves? 424 00:23:23,720 --> 00:23:26,000 Speaker 3: Or is it simply Iran's decision to make. 425 00:23:27,760 --> 00:23:29,760 Speaker 7: Yeah, I mean, look, I wish I had the answer 426 00:23:29,800 --> 00:23:31,640 Speaker 7: to that. I wish I could pick out my crystal 427 00:23:31,640 --> 00:23:34,520 Speaker 7: ball right now. I felt like that quite a bit 428 00:23:34,560 --> 00:23:37,159 Speaker 7: over the last couple of days. It's very hard to 429 00:23:37,200 --> 00:23:40,280 Speaker 7: see the way forward for Iran when it went after 430 00:23:40,440 --> 00:23:43,760 Speaker 7: neutral actors in the region that we're sitting by, not 431 00:23:43,880 --> 00:23:46,240 Speaker 7: involved in the conflict. You know, Europe has taken, as 432 00:23:46,240 --> 00:23:49,120 Speaker 7: we discussed earlier, strategic decision not really to get involved 433 00:23:49,160 --> 00:23:52,080 Speaker 7: in any in concrete way. The golf states the same, 434 00:23:52,400 --> 00:23:57,400 Speaker 7: and yet Iran went after those golf states, those regional actors, 435 00:23:58,080 --> 00:24:00,240 Speaker 7: and that has been the strategy. So the idea that 436 00:24:00,280 --> 00:24:02,920 Speaker 7: you can put this back into Pandora's box and forget, 437 00:24:03,000 --> 00:24:05,240 Speaker 7: you know, that your neighbor wanted you dead, is very 438 00:24:05,280 --> 00:24:09,399 Speaker 7: hard to anticipate. It has affected not just global markets, 439 00:24:09,440 --> 00:24:13,359 Speaker 7: but it will affect It will have on how investors 440 00:24:13,359 --> 00:24:16,359 Speaker 7: and investment view the Middle East region and how quickly 441 00:24:16,400 --> 00:24:20,520 Speaker 7: they're willing to continue to put, you know, invest in 442 00:24:20,560 --> 00:24:23,560 Speaker 7: their money on their personnel, building these capabilities over there. 443 00:24:23,800 --> 00:24:27,440 Speaker 2: I want to try to get this in professors, I can. 444 00:24:27,520 --> 00:24:29,720 Speaker 2: We may have to go to the press conferences. They're 445 00:24:29,760 --> 00:24:32,919 Speaker 2: so punctual you think they were in the military and 446 00:24:33,200 --> 00:24:38,159 Speaker 2: with respect to our service men and women, Lindsey, I 447 00:24:38,200 --> 00:24:42,000 Speaker 2: look at the headline out now, US Israel airstrike hits 448 00:24:42,080 --> 00:24:46,440 Speaker 2: Iran's Kesham Island in the Harmers Straight. This is directly 449 00:24:46,600 --> 00:24:49,240 Speaker 2: north of the narrowest part of the Strait, but just 450 00:24:49,480 --> 00:24:52,640 Speaker 2: right up against Iran. I'm measuring it one hundred miles 451 00:24:52,960 --> 00:24:58,160 Speaker 2: from Dubai. This is getting heated. Isn't into this press conference? Professor? 452 00:24:58,240 --> 00:25:00,000 Speaker 2: This is getting heated, isn't it? 453 00:25:01,560 --> 00:25:03,960 Speaker 7: Yeah? I agree with you, Tom. I think that we're 454 00:25:04,000 --> 00:25:06,919 Speaker 7: more likely in an escalatory pathway still before we stumble 455 00:25:07,000 --> 00:25:09,920 Speaker 7: upon an off ramp. Kesham Island is one of those 456 00:25:10,280 --> 00:25:13,919 Speaker 7: locations that the US administration has considered taking invading. I 457 00:25:14,000 --> 00:25:17,040 Speaker 7: will say really important to note, Unlike carg Island, Kesham 458 00:25:17,080 --> 00:25:20,000 Speaker 7: Island is vast. It is fifteen hundred square kilometers, Kesham 459 00:25:20,000 --> 00:25:22,720 Speaker 7: Island is only about forty. So the idea of holding 460 00:25:22,760 --> 00:25:26,520 Speaker 7: and invading Kesham Island, which as you said, is strategically important, 461 00:25:27,160 --> 00:25:31,520 Speaker 7: that is an incredibly complex and costly operation that the 462 00:25:31,600 --> 00:25:32,480 Speaker 7: US would be pursuing. 463 00:25:32,800 --> 00:25:35,920 Speaker 2: I would mention it is a UNESCO world side folks 464 00:25:36,080 --> 00:25:40,360 Speaker 2: with geology, I should say that looks more like Mars 465 00:25:40,400 --> 00:25:43,760 Speaker 2: in America. That's the tourist selling point, but of course 466 00:25:43,840 --> 00:25:46,520 Speaker 2: today it's not a tourism. Paul, try to get one 467 00:25:46,520 --> 00:25:48,680 Speaker 2: more question in with Lindsay. 468 00:25:48,400 --> 00:25:52,720 Speaker 5: Newman, Doctor Newman, do we know how Israel plans to 469 00:25:52,800 --> 00:25:55,000 Speaker 5: behave over the coming days and weeks to the extent 470 00:25:55,040 --> 00:25:57,720 Speaker 5: that US looks to step maybe down a little bit? 471 00:25:59,240 --> 00:26:01,160 Speaker 7: Yeah. I think this is something that not enough people 472 00:26:01,200 --> 00:26:03,200 Speaker 7: are focused on. We know that from the beginning of 473 00:26:03,240 --> 00:26:06,520 Speaker 7: this conflict there has been a distribution of sort of 474 00:26:06,800 --> 00:26:09,720 Speaker 7: ambitions and goals and objectives. Here. The US has been 475 00:26:09,760 --> 00:26:13,879 Speaker 7: pursuing degrading those major programs from Iran, and Israel has 476 00:26:13,920 --> 00:26:17,800 Speaker 7: been passed with degrading the regime, the regime structure and personnel. 477 00:26:18,359 --> 00:26:20,680 Speaker 7: There is not a lot of attention on what does 478 00:26:20,720 --> 00:26:22,840 Speaker 7: it mean if the US does fully pull back as 479 00:26:22,840 --> 00:26:25,360 Speaker 7: you're saying here, does that mean that Israel also pulls back, 480 00:26:25,400 --> 00:26:28,359 Speaker 7: given that they have different objectives, Given that iron is 481 00:26:28,400 --> 00:26:31,960 Speaker 7: perceived as an existential threat for Israel from within the 482 00:26:32,040 --> 00:26:35,400 Speaker 7: Israeli government, I would expect that there would be some 483 00:26:35,560 --> 00:26:38,080 Speaker 7: consequent ramped down as well, but I wouldn't expect that 484 00:26:38,119 --> 00:26:41,200 Speaker 7: it would be a total tech They're going to move 485 00:26:41,240 --> 00:26:43,360 Speaker 7: completely in parallel, completely in tandem. 486 00:26:43,560 --> 00:26:47,000 Speaker 2: Lindsey, thank you so much. Doctor Newman is geopolitical risk experts. 487 00:26:47,000 --> 00:26:51,520 Speaker 2: You zero media visiting research fellow at King's College. Can't 488 00:26:51,560 --> 00:26:57,440 Speaker 2: state enough the value. Stay with us. More from Bloomberg 489 00:26:57,560 --> 00:26:59,600 Speaker 2: Surveillance coming up after this. 490 00:27:06,840 --> 00:27:10,440 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 491 00:27:10,480 --> 00:27:13,639 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 492 00:27:13,720 --> 00:27:17,399 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 493 00:27:17,560 --> 00:27:19,040 Speaker 1: watch us live on YouTube. 494 00:27:19,280 --> 00:27:21,919 Speaker 2: You know, Meredith Whitney walks in the studio and now 495 00:27:21,960 --> 00:27:24,560 Speaker 2: I'm trying to keep up. She's with Whitney Advisory Group, 496 00:27:24,600 --> 00:27:28,439 Speaker 2: a definitive within the study of finance. She starts talking 497 00:27:28,520 --> 00:27:29,639 Speaker 2: Schrodeger equations. 498 00:27:29,640 --> 00:27:33,520 Speaker 8: No boy, I mean we're talking quantum mechanics with Meredith Whitney, 499 00:27:33,720 --> 00:27:35,960 Speaker 8: which is the way you roll. And so I'm looking 500 00:27:36,000 --> 00:27:38,120 Speaker 8: at here, I'm trying to catch up here, and I'm 501 00:27:38,160 --> 00:27:41,119 Speaker 8: looking at the partial derivative with a respect to time, 502 00:27:41,640 --> 00:27:46,400 Speaker 8: which securities perfectly into Meredith Whitney on how a CEO 503 00:27:46,560 --> 00:27:51,360 Speaker 8: of a major bank handles the partial derivative with respect 504 00:27:51,359 --> 00:27:52,800 Speaker 8: to time and. 505 00:27:52,840 --> 00:27:59,880 Speaker 2: Knows when to exit. What do you presume mister moynihan 506 00:28:00,200 --> 00:28:03,440 Speaker 2: or mister Diamond will do to know when to exit? 507 00:28:04,119 --> 00:28:04,479 Speaker 3: Exit? 508 00:28:04,520 --> 00:28:04,600 Speaker 9: What? 509 00:28:05,880 --> 00:28:09,800 Speaker 2: Okay, this is now we're getting Wittgenstein in here. Exit 510 00:28:09,880 --> 00:28:11,399 Speaker 2: what exit the bank job? 511 00:28:11,960 --> 00:28:16,000 Speaker 9: Oh oh oh, excuse me. I think Jamie loves his 512 00:28:16,720 --> 00:28:19,480 Speaker 9: job so much. Agreed, I would expect more in hand 513 00:28:19,480 --> 00:28:24,440 Speaker 9: to leave sooner than Jamie really, But you know, morn 514 00:28:24,440 --> 00:28:26,720 Speaker 9: Han's done a great job. But he's got he's got 515 00:28:26,880 --> 00:28:32,080 Speaker 9: he's got clear successors. It's unclear who Jamie's successors will be, 516 00:28:32,119 --> 00:28:33,600 Speaker 9: even though he's got an incredible bench. 517 00:28:33,760 --> 00:28:36,159 Speaker 2: But with all of your you know, bench building, and 518 00:28:36,200 --> 00:28:38,720 Speaker 2: I know all the Harvard Sonenberg's out with a book 519 00:28:38,720 --> 00:28:43,040 Speaker 2: on Trump, now the Yale CEO chit chat, you've lived this. 520 00:28:43,720 --> 00:28:46,880 Speaker 2: How do you succeed at a major bank where you 521 00:28:47,000 --> 00:28:48,720 Speaker 2: have twenty direct reports? 522 00:28:50,040 --> 00:28:53,600 Speaker 9: Well, you know, it's a lot of ego, it's a 523 00:28:53,600 --> 00:28:56,640 Speaker 9: lot of you know, you can stay. Both of them 524 00:28:56,720 --> 00:28:59,360 Speaker 9: have the support of the board. And I think that 525 00:28:59,600 --> 00:29:02,760 Speaker 9: the stuff, you know, JP Morgan Stock is heavily tied 526 00:29:02,760 --> 00:29:05,640 Speaker 9: to Jamie Diamond, so that there's a risk there. So 527 00:29:05,680 --> 00:29:08,440 Speaker 9: the theory is that when he leaves, there's a risk 528 00:29:09,720 --> 00:29:12,640 Speaker 9: to the stock. Right, there's a premium risk to the stock. 529 00:29:13,600 --> 00:29:17,240 Speaker 5: When President Jump came into office for the second time. Here, 530 00:29:17,320 --> 00:29:18,960 Speaker 5: the one of the sectors that was thought to be 531 00:29:19,000 --> 00:29:22,320 Speaker 5: a real beneficiar would be the large financial institution to 532 00:29:22,320 --> 00:29:22,800 Speaker 5: the banks. 533 00:29:22,920 --> 00:29:24,720 Speaker 3: Has that in fact been the case? And what are 534 00:29:24,760 --> 00:29:25,680 Speaker 3: you expecting going forward? 535 00:29:25,680 --> 00:29:32,440 Speaker 9: Maybe it was until it wasn't right, So the remarkably 536 00:29:32,640 --> 00:29:35,240 Speaker 9: read the regulatory environment has changed, and I would say 537 00:29:35,240 --> 00:29:38,320 Speaker 9: that SEC is open for business, but not open for 538 00:29:38,440 --> 00:29:42,640 Speaker 9: enforcement because it's been gutted with Doge and anybody who 539 00:29:42,720 --> 00:29:45,280 Speaker 9: could leave and get another job at the SEC did 540 00:29:45,640 --> 00:29:48,800 Speaker 9: and so they're really like, they're really short staffed there. 541 00:29:49,080 --> 00:29:52,880 Speaker 9: So I think that what Mickey Bowman did recently is 542 00:29:53,320 --> 00:29:56,479 Speaker 9: take all this subjectivity out of the bank ratings. Right, 543 00:29:56,520 --> 00:29:59,440 Speaker 9: there was a ton of subjectivity to to it. So 544 00:29:59,480 --> 00:30:02,920 Speaker 9: there's gonna be regulatory relief, There'll be consolidation, but nobody 545 00:30:02,960 --> 00:30:08,440 Speaker 9: wants to consolidate when your stock is twenty thirty percent down, 546 00:30:08,760 --> 00:30:12,280 Speaker 9: So there will be consolidation. I don't think it's been 547 00:30:12,560 --> 00:30:15,600 Speaker 9: it's certainly been a horrible time for anyone the non 548 00:30:15,640 --> 00:30:20,120 Speaker 9: bank financials that are down forty percent, but look, the 549 00:30:20,200 --> 00:30:22,960 Speaker 9: high volatility will mean the trading desks do very well. 550 00:30:23,400 --> 00:30:27,680 Speaker 9: If there's the big risk here is if the SpaceX 551 00:30:27,840 --> 00:30:31,240 Speaker 9: ipo does not do well, I think the IPO market's 552 00:30:31,280 --> 00:30:32,640 Speaker 9: closed for a very long time. 553 00:30:33,320 --> 00:30:35,520 Speaker 2: Can we make this a three hour conversation? 554 00:30:35,880 --> 00:30:40,480 Speaker 5: Just continue, Paul, I mean SpaceX ip I mean it 555 00:30:40,560 --> 00:30:44,280 Speaker 5: should be a moonshot to use a bad analogy. 556 00:30:44,400 --> 00:30:44,960 Speaker 3: You shouldn't. 557 00:30:45,120 --> 00:30:47,520 Speaker 9: You would think so, right, You would think so? It 558 00:30:47,680 --> 00:30:49,760 Speaker 9: just any anything goes in this market, right. 559 00:30:50,240 --> 00:30:52,440 Speaker 5: So I mean, so when you're talking to your clients 560 00:30:52,440 --> 00:30:55,160 Speaker 5: about the big banks, are what's the key thing they 561 00:30:55,200 --> 00:30:58,040 Speaker 5: need to they're asking you these days. 562 00:30:58,200 --> 00:31:00,760 Speaker 9: They're not asking, they're just saying they they don't want 563 00:31:00,760 --> 00:31:03,400 Speaker 9: to be caught either their way. So the most of 564 00:31:03,440 --> 00:31:08,560 Speaker 9: my clients are very bearish, maybe very verish, because they 565 00:31:08,560 --> 00:31:11,280 Speaker 9: weigh all of the factors in the market and just 566 00:31:11,280 --> 00:31:14,120 Speaker 9: think this is going to be logroom. And the midterm 567 00:31:14,160 --> 00:31:16,800 Speaker 9: elections I think throw a big risk into the market 568 00:31:16,840 --> 00:31:19,080 Speaker 9: because the Save Act is not going to go through. 569 00:31:19,480 --> 00:31:22,280 Speaker 9: Most people don't have passports, they can't show a passport 570 00:31:22,320 --> 00:31:26,720 Speaker 9: at registration, and it gives the administration a big, a 571 00:31:26,800 --> 00:31:30,040 Speaker 9: big if like, oh, the re elections were rigged, Like 572 00:31:30,080 --> 00:31:32,959 Speaker 9: that's not good for the markets right, So aside from 573 00:31:33,240 --> 00:31:35,080 Speaker 9: the straight of hormones, there's a lot of risk that 574 00:31:35,120 --> 00:31:37,560 Speaker 9: will be factored into the market. But what clients are 575 00:31:37,600 --> 00:31:40,080 Speaker 9: worried about is getting caught on the short side. So 576 00:31:40,280 --> 00:31:44,080 Speaker 9: clients don't have short positions right, and they they de 577 00:31:44,200 --> 00:31:45,720 Speaker 9: levered here for. 578 00:31:45,680 --> 00:31:48,360 Speaker 2: Two short visits. Morning Dow up four hundred and sixty 579 00:31:48,400 --> 00:31:53,560 Speaker 2: points Brent Crude one eighteen forty five. So you know, 580 00:31:53,680 --> 00:31:56,360 Speaker 2: I look at this, Meredith. I remember going to your 581 00:31:56,400 --> 00:31:59,960 Speaker 2: soiree once. She had the best wine. Everybody else was 582 00:32:00,120 --> 00:32:04,040 Speaker 2: servant Ogan David or yellow the box. She's served some visa. 583 00:32:04,120 --> 00:32:07,560 Speaker 2: I got you to come, and you know you've been 584 00:32:07,600 --> 00:32:10,960 Speaker 2: a pinata. Meredith got this wrong. Meredith got this right. 585 00:32:11,760 --> 00:32:17,920 Speaker 2: Visa home run, straight, moonshot, whatever the timeframe. Where's the next, 586 00:32:18,000 --> 00:32:22,280 Speaker 2: Meredith Whitney visa that will show me persistency of cash 587 00:32:22,320 --> 00:32:24,320 Speaker 2: flow around concept. 588 00:32:24,720 --> 00:32:28,800 Speaker 9: I still think rocket right, rockets down? Oh geez, Rocket's 589 00:32:28,840 --> 00:32:34,320 Speaker 9: just been taken out with the it's down year. 590 00:32:34,360 --> 00:32:36,240 Speaker 2: Why is it a visa equivalent? 591 00:32:36,680 --> 00:32:39,760 Speaker 9: Because I think it is a market disruptor. So you 592 00:32:39,920 --> 00:32:41,800 Speaker 9: have banks who do not want to be in the 593 00:32:41,840 --> 00:32:44,720 Speaker 9: mortgage space and banks that cannot be in the mortgage 594 00:32:44,760 --> 00:32:47,080 Speaker 9: space on an effective basis because they don't have the 595 00:32:47,080 --> 00:32:50,200 Speaker 9: digital presence right They've de emphasized it for so long, 596 00:32:50,280 --> 00:32:54,360 Speaker 9: so it becomes an issue of technology and execution. Banks 597 00:32:54,400 --> 00:32:58,760 Speaker 9: don't from from a home equity standpoint. Rockets home equity 598 00:32:58,800 --> 00:33:02,080 Speaker 9: closed down, home equity originated already are up twenty percent 599 00:33:02,200 --> 00:33:05,440 Speaker 9: year every year. Last year they were tremendously. They can 600 00:33:05,480 --> 00:33:10,360 Speaker 9: execute a home equity loan close tocty loan in a 601 00:33:10,400 --> 00:33:13,120 Speaker 9: matter of days. It takes a bank a month at least. 602 00:33:13,160 --> 00:33:16,640 Speaker 9: And the fastest growing loan product within consumer finance is 603 00:33:16,680 --> 00:33:19,840 Speaker 9: home equity credit card lending, which is really interesting. This 604 00:33:19,920 --> 00:33:24,080 Speaker 9: cycle is decelerating in terms of growth, and so it's 605 00:33:24,120 --> 00:33:28,160 Speaker 9: growing at a slower pace than inflation. And the available 606 00:33:28,560 --> 00:33:31,760 Speaker 9: unused lines aren't there close to five trillion dollars. What 607 00:33:31,760 --> 00:33:34,440 Speaker 9: does that say about the consumer? So it says that 608 00:33:34,640 --> 00:33:38,200 Speaker 9: there's plenty of liquidity for the consumer. The consumers really 609 00:33:38,240 --> 00:33:41,400 Speaker 9: not stretched. I think that the I think that I 610 00:33:41,400 --> 00:33:44,560 Speaker 9: think this economy is going to hold in better than expected. 611 00:33:44,600 --> 00:33:46,160 Speaker 9: I know that's a little bit of a segue, but 612 00:33:46,840 --> 00:33:49,239 Speaker 9: you're not going to see credit losses. You're not going 613 00:33:49,280 --> 00:33:53,040 Speaker 9: to see the fundamentals are a lot better than people seen. 614 00:33:53,080 --> 00:33:55,880 Speaker 9: But I'm a big fan of Rocket over the next 615 00:33:55,920 --> 00:33:56,560 Speaker 9: several years. 616 00:33:56,800 --> 00:33:59,280 Speaker 5: All right, So that means you must have a view 617 00:33:59,320 --> 00:34:01,680 Speaker 5: of the US home market. Here, it's how is the 618 00:34:01,800 --> 00:34:04,760 Speaker 5: US residential home market these days? Because interest rates moving 619 00:34:04,760 --> 00:34:06,160 Speaker 5: back higher again, that can't be good. 620 00:34:06,680 --> 00:34:10,120 Speaker 9: Well, a couple things are going on. So twenty twenty 621 00:34:10,120 --> 00:34:12,760 Speaker 9: five was the slowest home market in terms of sales 622 00:34:13,680 --> 00:34:16,480 Speaker 9: on record, so over twenty five years, and twenty twenty 623 00:34:16,520 --> 00:34:19,920 Speaker 9: six is going to be just like that because most importantly, 624 00:34:19,960 --> 00:34:23,080 Speaker 9: people aren't selling. So people are most old people, people 625 00:34:23,120 --> 00:34:26,520 Speaker 9: over sixty one, over sixty percent of homes they're not selling. 626 00:34:26,800 --> 00:34:29,000 Speaker 9: And the more people tap into the equity in their 627 00:34:29,040 --> 00:34:31,759 Speaker 9: homes means they don't have to sell. So you're just 628 00:34:31,800 --> 00:34:34,640 Speaker 9: going to be stuck in a gummed up market. And 629 00:34:34,719 --> 00:34:38,120 Speaker 9: I also think that let's look at the American dream 630 00:34:38,640 --> 00:34:42,000 Speaker 9: the key owner, you know, first time buyers. Between thirty 631 00:34:42,000 --> 00:34:45,040 Speaker 9: five and forty four, home ownership rate has dropped like 632 00:34:45,080 --> 00:34:45,600 Speaker 9: a stone. 633 00:34:45,640 --> 00:34:46,920 Speaker 3: Maybe they don't want to really. 634 00:34:46,760 --> 00:34:48,879 Speaker 2: Gets the sin. You don't remember this year too young. 635 00:34:48,920 --> 00:34:50,840 Speaker 2: There was a thing called Persian Gulf War. It was 636 00:34:50,880 --> 00:34:53,239 Speaker 2: twenty five thirty years ago. You weren't in the game. 637 00:34:53,280 --> 00:34:55,680 Speaker 2: Then okay, so we got a war going on. Now 638 00:34:56,080 --> 00:34:58,560 Speaker 2: we got the distraction of all this news in that 639 00:34:59,000 --> 00:35:02,200 Speaker 2: how opportunitists? Is that for Meredith Whitney. 640 00:35:01,840 --> 00:35:04,080 Speaker 9: And investing, well, I think people need a lot of advice. 641 00:35:04,480 --> 00:35:06,840 Speaker 9: You know, the first couple of weeks were very confusing. 642 00:35:07,200 --> 00:35:09,440 Speaker 9: I just you know, you don't want to catch a 643 00:35:09,480 --> 00:35:11,560 Speaker 9: falling knife. But now I think what is clear is 644 00:35:11,840 --> 00:35:14,600 Speaker 9: it's accelerated. A lot of things were on the or 645 00:35:14,640 --> 00:35:19,040 Speaker 9: on the table before, like uranium stocks are down twenty 646 00:35:19,600 --> 00:35:22,839 Speaker 9: plus percent, Like uranium is no brainer here, right, It's been. 647 00:35:24,360 --> 00:35:26,760 Speaker 9: It's been a great investment of the last several years. 648 00:35:27,160 --> 00:35:30,040 Speaker 9: I think that you follow the money. A lot of 649 00:35:30,120 --> 00:35:32,840 Speaker 9: investment is going to go into getting around straight up 650 00:35:32,840 --> 00:35:35,120 Speaker 9: horror moves. So I've put a lot of research into 651 00:35:35,160 --> 00:35:39,360 Speaker 9: the middle corridor. So like, there's a lot to do here. 652 00:35:39,880 --> 00:35:42,520 Speaker 2: We've got to run. Please come back, don't be a stranger. 653 00:35:42,560 --> 00:35:48,439 Speaker 2: Meredith Whitney there talking up racket. Stay with us. More 654 00:35:48,560 --> 00:35:51,480 Speaker 2: from Bloomberg Surveillance coming up after this. 655 00:35:58,719 --> 00:36:02,000 Speaker 1: You're listening to the bloom Work Surveillance podcast. Catch us 656 00:36:02,040 --> 00:36:05,360 Speaker 1: live weekday afternoons from seven to ten am Eastern Listen 657 00:36:05,440 --> 00:36:09,000 Speaker 1: on Apple karplay and Android auto with the Bloomberg Business app, 658 00:36:09,200 --> 00:36:10,920 Speaker 1: or watch US live on YouTube. 659 00:36:11,200 --> 00:36:14,720 Speaker 2: Joining US now Eric Fine, head of Active em Debt 660 00:36:15,280 --> 00:36:19,280 Speaker 2: at van k Funds, and it directly touches your family, right, Yeah. 661 00:36:19,120 --> 00:36:20,440 Speaker 10: I'm surprised you mentioned that. 662 00:36:20,600 --> 00:36:23,200 Speaker 2: I don't know how you knew it was spiritual when 663 00:36:23,200 --> 00:36:23,799 Speaker 2: I was there. 664 00:36:24,200 --> 00:36:27,239 Speaker 10: My father worked for MacArthur for eight years during the 665 00:36:27,280 --> 00:36:32,400 Speaker 10: occupation of Japan as a the PhD economist. That was 666 00:36:32,560 --> 00:36:35,040 Speaker 10: fairly unusual at that point, and so yeah, I now 667 00:36:35,120 --> 00:36:35,560 Speaker 10: grew up. 668 00:36:35,440 --> 00:36:39,160 Speaker 2: With hugely unusual and viscerally it gives you your expertise 669 00:36:39,200 --> 00:36:42,920 Speaker 2: across the specific rim. What does to you Not that 670 00:36:43,000 --> 00:36:46,279 Speaker 2: it's em but what does the new Japan look like 671 00:36:47,040 --> 00:36:52,600 Speaker 2: with the shattered l DP and perhaps some more conservative stance. Interesting. 672 00:36:52,640 --> 00:36:57,000 Speaker 10: I wasn't expecting a question on Japan, but on the 673 00:36:57,080 --> 00:37:01,080 Speaker 10: show it's an emerging market. Yes, that I would agree with. 674 00:37:01,560 --> 00:37:04,960 Speaker 10: The countries that are the most em like are highly indebted. 675 00:37:05,040 --> 00:37:07,479 Speaker 2: Japan UK put us in that camp. 676 00:37:08,320 --> 00:37:10,799 Speaker 10: What my father told me when I was growing up 677 00:37:11,160 --> 00:37:17,120 Speaker 10: was that one don't credit the US for Japan's success 678 00:37:17,239 --> 00:37:22,120 Speaker 10: as much as you should credit number one nationalism. Right 679 00:37:22,400 --> 00:37:25,480 Speaker 10: in the US, it has culture generally negative contact and 680 00:37:25,560 --> 00:37:29,960 Speaker 10: female education of course, right, that's you know, transformative for 681 00:37:30,040 --> 00:37:34,480 Speaker 10: a country. And he also said that the politics always 682 00:37:34,600 --> 00:37:39,040 Speaker 10: were not so much designed, although maybe to suppress the 683 00:37:39,080 --> 00:37:41,759 Speaker 10: basic tendency, which is nationalistic. So I think that's a 684 00:37:42,200 --> 00:37:43,520 Speaker 10: not unreasonable conclusion. 685 00:37:43,880 --> 00:37:46,760 Speaker 2: For one more question Paul wants to begin the interview. 686 00:37:47,680 --> 00:37:51,320 Speaker 2: One more question, then, what will your EM at Vannik, 687 00:37:51,440 --> 00:37:54,439 Speaker 2: what will your em and the Pacific RIOM bounce off 688 00:37:54,520 --> 00:37:57,200 Speaker 2: of Is they not only look to Japan, but now 689 00:37:57,200 --> 00:38:00,359 Speaker 2: I have to look to a China radically different from 690 00:38:00,400 --> 00:38:01,400 Speaker 2: your father's tenure. 691 00:38:02,040 --> 00:38:05,360 Speaker 10: They're going to look to China. They already are most 692 00:38:05,400 --> 00:38:07,600 Speaker 10: of my countries, not just in Asia but around the 693 00:38:07,640 --> 00:38:11,719 Speaker 10: world other than basically Poland and Mexico trade more with 694 00:38:11,920 --> 00:38:15,000 Speaker 10: China than they do with the US. And what did 695 00:38:15,040 --> 00:38:17,880 Speaker 10: they see as far as I'm concerned, they see the FX. 696 00:38:18,200 --> 00:38:21,360 Speaker 10: The FX is stabled to stronger, which is a tailwind 697 00:38:21,400 --> 00:38:24,759 Speaker 10: or a stabilizing factor for them. So now you can 698 00:38:24,920 --> 00:38:27,080 Speaker 10: like that or dislike it. That's not my job. My 699 00:38:27,200 --> 00:38:30,840 Speaker 10: job is to acknowledge it and invest around that. But 700 00:38:30,840 --> 00:38:33,799 Speaker 10: I would say that's the biggest fact is that the 701 00:38:34,120 --> 00:38:36,360 Speaker 10: dollars is not going to lose its reserve status, but 702 00:38:36,880 --> 00:38:39,759 Speaker 10: it could or should share it with other deserving currencies, 703 00:38:39,800 --> 00:38:43,640 Speaker 10: and CNY definitely wants to fill that role and is 704 00:38:43,680 --> 00:38:46,520 Speaker 10: slowly filling it. So I think that's the big feature 705 00:38:47,440 --> 00:38:49,520 Speaker 10: in Asia that's very, very different. 706 00:38:49,640 --> 00:38:52,480 Speaker 5: So what is the thirty thousand foot call on emerging markets? 707 00:38:52,480 --> 00:38:52,640 Speaker 6: Here? 708 00:38:53,040 --> 00:38:56,440 Speaker 5: Seems like I had a nice run in twenty twenty five, 709 00:38:57,000 --> 00:38:58,719 Speaker 5: partially do the weakness in the US dollar. 710 00:38:59,160 --> 00:38:59,880 Speaker 3: What's the call rate? 711 00:38:59,920 --> 00:39:00,000 Speaker 2: Now? 712 00:39:00,840 --> 00:39:03,200 Speaker 10: The call is that what's been happening for the last 713 00:39:03,280 --> 00:39:08,520 Speaker 10: twenty plus years will continue. EM bonds volatility adjusted have 714 00:39:08,600 --> 00:39:12,239 Speaker 10: done better than DM bonds. Bonds overall may have been 715 00:39:12,239 --> 00:39:16,520 Speaker 10: on exciting, but EM always did better, and that's continuing. 716 00:39:16,880 --> 00:39:20,600 Speaker 10: The straightest answer I always give is we're most likely 717 00:39:20,680 --> 00:39:24,160 Speaker 10: return our carry. Our carry our coupon's divided by our 718 00:39:24,200 --> 00:39:27,799 Speaker 10: prices around seven develop market bonds here in the four 719 00:39:27,840 --> 00:39:31,120 Speaker 10: to five range, and some of my countries have really 720 00:39:31,160 --> 00:39:34,200 Speaker 10: low inflation, lower than the US, Malaysias at one percent, 721 00:39:34,280 --> 00:39:38,240 Speaker 10: China's arguably one to deflation, so on their local markets 722 00:39:38,239 --> 00:39:40,960 Speaker 10: are getting a high real yield, and so that's a 723 00:39:40,960 --> 00:39:44,840 Speaker 10: good default answer. Last year there was an explosion of interest, 724 00:39:44,920 --> 00:39:47,360 Speaker 10: so we got our carry. The currencies rallied and the 725 00:39:47,360 --> 00:39:50,480 Speaker 10: spreads did a little better, but I think you should 726 00:39:50,480 --> 00:39:53,600 Speaker 10: expect them to continue to outperform DM bonds because that's 727 00:39:53,600 --> 00:39:55,719 Speaker 10: where the unpriced problems are. 728 00:39:56,280 --> 00:39:59,920 Speaker 5: What's the EM world? How does the EM world re 729 00:40:00,239 --> 00:40:02,560 Speaker 5: to a hot warn in Middle East? 730 00:40:03,560 --> 00:40:07,080 Speaker 10: It depends and the general answer is for DM, it's 731 00:40:07,200 --> 00:40:11,760 Speaker 10: largely a quote unquote risk of via inflation essentially, Whereas 732 00:40:11,760 --> 00:40:15,560 Speaker 10: for EM there are plenty of winners. Most of my 733 00:40:15,640 --> 00:40:20,279 Speaker 10: countries in our benchmark are commodity exporters. And what's the 734 00:40:20,320 --> 00:40:24,000 Speaker 10: big one that isn't China? Well, it's still a net export, 735 00:40:24,160 --> 00:40:27,480 Speaker 10: right it It runs current account and trade surpluses, and 736 00:40:28,160 --> 00:40:33,319 Speaker 10: so it's a story of many excellent opportunities. Basically all 737 00:40:33,360 --> 00:40:35,759 Speaker 10: of Latin America, which is a big chunk of our benchmark, 738 00:40:36,120 --> 00:40:40,359 Speaker 10: and all of Sub Saharan Africa our winners is replacing 739 00:40:41,160 --> 00:40:44,000 Speaker 10: or benefiting at least from the price or in a 740 00:40:44,040 --> 00:40:47,560 Speaker 10: longer term, potentially replacing at least Russia and others as 741 00:40:47,600 --> 00:40:48,800 Speaker 10: Europe's major supplier. 742 00:40:48,840 --> 00:40:51,440 Speaker 2: It's still to bring you this morning across American around 743 00:40:51,440 --> 00:40:55,520 Speaker 2: the world. Eric Fine, head of Active em Debt Vanik 744 00:40:55,640 --> 00:41:00,799 Speaker 2: funds prodigious abilities on Emerging Americas and the tie in 745 00:41:00,840 --> 00:41:04,440 Speaker 2: to total return features up seventy earlier off the Trump tweet, 746 00:41:04,680 --> 00:41:07,800 Speaker 2: now up sixty two. The Vixen of full two sticks 747 00:41:08,040 --> 00:41:11,640 Speaker 2: twenty eight point sixty two. A better tape. This morning, 748 00:41:11,640 --> 00:41:14,120 Speaker 2: we are twenty eight minutes away from a scheduled press 749 00:41:14,160 --> 00:41:18,839 Speaker 2: conference with the Secretary of Defense from the Pentagon. I 750 00:41:18,840 --> 00:41:22,799 Speaker 2: don't talk enough about Eastern Europe. Greece was a miracle recovery. 751 00:41:23,160 --> 00:41:27,360 Speaker 2: Poland is maybe even more so a miracle recovery adjacent 752 00:41:27,440 --> 00:41:31,960 Speaker 2: to a full scale war. An update on the e eminedness. 753 00:41:32,600 --> 00:41:38,000 Speaker 2: That's a new word, emdness of Eastern Europe. Yeah, great framing. 754 00:41:38,480 --> 00:41:42,280 Speaker 2: The center of gravity's moved east. Poland is the center 755 00:41:42,360 --> 00:41:49,839 Speaker 2: of certainly US strategic thinking and economic heft. Nuclear power 756 00:41:49,920 --> 00:41:52,640 Speaker 2: plants are being built. It's become the center of defense industry, 757 00:41:52,680 --> 00:41:57,480 Speaker 2: both manufacturing and logistics. Romania is more about logistics just 758 00:41:57,520 --> 00:42:01,440 Speaker 2: since you started the conversation, so interestingly, those were the 759 00:42:01,520 --> 00:42:04,640 Speaker 2: kinds of things that ended up developing Korea way more. 760 00:42:05,920 --> 00:42:08,880 Speaker 2: Is this a nascent South Korea? And I'm making the 761 00:42:08,960 --> 00:42:11,520 Speaker 2: number up, folks, help here nineteen fifty eight. 762 00:42:11,800 --> 00:42:15,200 Speaker 10: Absolutely, I don't see why not. And it's certainly a 763 00:42:15,320 --> 00:42:19,720 Speaker 10: relative it's a relatively strong position relative to the rest 764 00:42:19,760 --> 00:42:22,839 Speaker 10: of Europe. It's been able to tolerate higher levels of debt. 765 00:42:22,880 --> 00:42:26,480 Speaker 10: Now we're generally it's not our first place in this 766 00:42:26,640 --> 00:42:30,160 Speaker 10: environment in general, with rising commodity prices, but it's a winner. 767 00:42:30,360 --> 00:42:33,399 Speaker 10: Hungary's are arguably a winner as well. Both of them, though, 768 00:42:33,520 --> 00:42:39,279 Speaker 10: have really reasonably good central bank attitudes compared to the 769 00:42:39,280 --> 00:42:41,799 Speaker 10: developed markets. Though none of the central banks really wake 770 00:42:41,880 --> 00:42:43,800 Speaker 10: up in the morning and think it's their job to 771 00:42:43,840 --> 00:42:46,960 Speaker 10: get the stock market up. So all of my countries 772 00:42:47,040 --> 00:42:47,800 Speaker 10: generally have that. 773 00:42:49,200 --> 00:42:52,279 Speaker 2: They're they're okay that way. I mean, he's so. I 774 00:42:52,320 --> 00:42:56,080 Speaker 2: don't mean to interrupt, Paul, but he's so academic schooled 775 00:42:56,080 --> 00:42:59,440 Speaker 2: at the Kennedy School. But what he took is he 776 00:42:59,600 --> 00:43:03,200 Speaker 2: was in a your bracketology at Duke years. 777 00:43:02,960 --> 00:43:03,960 Speaker 3: Ago, back in the day. 778 00:43:04,239 --> 00:43:09,440 Speaker 2: Can you explain the collapse of Duke University. We're baffled. 779 00:43:10,280 --> 00:43:11,240 Speaker 2: I have no comment. 780 00:43:11,960 --> 00:43:15,279 Speaker 5: I smart, he's smart. I'll go I'll a fine on 781 00:43:15,320 --> 00:43:17,839 Speaker 5: that for a couple of minutes. So real quickly here 782 00:43:18,320 --> 00:43:20,319 Speaker 5: you mentioned China. It's still a big part of your 783 00:43:20,400 --> 00:43:21,920 Speaker 5: next Is it an investible? 784 00:43:21,960 --> 00:43:23,480 Speaker 3: Is it not invescible? How do we play it? 785 00:43:24,600 --> 00:43:28,080 Speaker 10: A great detailed question. I would say to the extent 786 00:43:28,160 --> 00:43:31,440 Speaker 10: that it there that a US based investor should be 787 00:43:31,480 --> 00:43:35,680 Speaker 10: concerned about investability. It would be the domicile of custody. 788 00:43:35,960 --> 00:43:41,880 Speaker 10: So you may want to consider owning an offshore, domiciled 789 00:43:42,080 --> 00:43:44,960 Speaker 10: version of the exact same thing may be issued by 790 00:43:45,000 --> 00:43:48,120 Speaker 10: an international financialis or like a big like an Asian 791 00:43:48,120 --> 00:43:53,200 Speaker 10: Development bank, because it gets forgotten. But the you know, 792 00:43:53,239 --> 00:43:56,120 Speaker 10: sanctions risk is not zero. We know that, and they 793 00:43:56,120 --> 00:44:00,440 Speaker 10: can go both ways, right, And that's essentially about locate custody, location, 794 00:44:00,680 --> 00:44:04,359 Speaker 10: and so why not if it's free avoid that risk. 795 00:44:04,400 --> 00:44:06,320 Speaker 10: That would be the only thing I'd mentioned. 796 00:44:06,440 --> 00:44:06,920 Speaker 2: In general. 797 00:44:07,000 --> 00:44:10,960 Speaker 10: It's a stable currency, low inflation, and they want it 798 00:44:11,000 --> 00:44:13,600 Speaker 10: to be a reserve currency. They're creating funding markets in it. 799 00:44:13,920 --> 00:44:16,319 Speaker 2: Eric, thank you so much for joining us today, Head 800 00:44:16,360 --> 00:44:18,840 Speaker 2: of Active em Debt at Venex Funds. 801 00:44:19,080 --> 00:44:23,920 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 802 00:44:24,040 --> 00:44:28,320 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 803 00:44:28,480 --> 00:44:31,920 Speaker 1: seven to ten am Eastern on Bloomberg dot Com, the 804 00:44:32,000 --> 00:44:36,040 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 805 00:44:36,080 --> 00:44:39,440 Speaker 1: can also watch us live every weekday on YouTube and 806 00:44:39,640 --> 00:44:41,360 Speaker 1: always on the Bloomberg terminal