Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to the Bloomberg day Break Asia Podcast. I'm Doug Prisner.
Speaker 2: Iran is facing its most perilous moment in decades. This
Speaker 2: after the US and Israel attacked Iran's nuclear facilities. It
Speaker 2: was Saturday night in the US. President Trump authorized a
Speaker 2: massive strike, even though he previously hinted at a delay.
Speaker 2: Here is Trump as he addressed the nation in televised
Speaker 2: remarks late Saturday.
Speaker 3: Iranski nuclear and Richmond facilities have been completely and totally obliterated. Aranda,
Speaker 3: bully of the Middle East, must now make peace. If
Speaker 3: they do not, future attacks would be far greater and
Speaker 3: a lot easier.
Speaker 2: The mission was dubbed Operation Midnight Hammer. It used B
Speaker 2: two stealth bombers, Tomahawk missiles, and precision guided weapons to
Speaker 2: disable three Irani nuclear facilities. In a moment, we'll take
Speaker 2: a look at market implications of the strikes. I'll be
Speaker 2: joined by Gene Goldman. He is the chief investment officer
Speaker 2: at SETA Financial Group. But we begin in Washington, where
Speaker 2: we heard earlier from John Bolton, former US Ambassador to
Speaker 2: the United Nations. He spoke with Bloomberg's Bounce of Power
Speaker 2: host Joe Matthew and Kaylee Lyons.
Speaker 4: I don't know what you make of this rhetorical dance
Speaker 4: that we're hearing about the extent of damage. Starting with
Speaker 4: President Trump suggesting that Fourdeaux was obliterated, we've heard more
Speaker 4: tempered comments from the Chairman of the Joint Chiefs and
Speaker 4: other analysts who are looking at this, including the IAEA.
Speaker 5: Did we go far enough? Well, I don't think the
Speaker 5: job is finished.
Speaker 6: I think it's very difficult to make evaluations of how
Speaker 6: effectively been for example, at foordoh which by definition was
Speaker 6: under a mountain and it's very difficult to see inside.
Speaker 6: But my guess is that what the Chairman of the
Speaker 6: Joint Chiefs, General Cain said is accurate that there were
Speaker 6: severe damage. We'll be checking further and seeing what happened.
Speaker 5: There are a lot of.
Speaker 6: Other pieces, though, that need to be put into play here.
Speaker 6: We know we've seen from overhead photographs that during the
Speaker 6: sixty plus days of negotiation that President Trump offered, the
Speaker 6: Iranians did a fair amount of work trying to move
Speaker 6: perhaps uranium stockpiles, perhaps sensitive machinery out of some of
Speaker 6: these key target areas. We may or may not know
Speaker 6: where that is, but I don't think this is over yet.
Speaker 6: Just on the mission of destroying these three sides.
Speaker 7: Well, and on that mission, administration officials have maintained today
Speaker 7: that the objective was solely to focus on Iran's nuclear capabilities,
Speaker 7: that this objective was not regime change. But sir, even
Speaker 7: if it wasn't the objective, could that still be the
Speaker 7: end result?
Speaker 5: And how well exactly?
Speaker 6: And even as we just heard the President has been
Speaker 6: tweeting about regime change.
Speaker 5: I mean, I think regime change has.
Speaker 6: To be the objective because the Eye Tollas are never
Speaker 6: going to give up their pursuit of nuclear weapons.
Speaker 5: They have to be worst out of power.
Speaker 6: That's the only shot we have at really lasting peace
Speaker 6: and security in the Middle East. And a strike like
Speaker 6: this and potentially others, and certainly Israel's ongoing attacks can
Speaker 6: disrupt the regime, can destabilize it. Look at the choice
Speaker 6: that the top military officials and Keiia Tollas now have
Speaker 6: to face after the US attack.
Speaker 5: They've been beaten.
Speaker 6: Badly by the Israelis ever since Hamasa's attack on out
Speaker 6: of Gaza on October seventh, twenty twenty three.
Speaker 5: Now they have to make a choice.
Speaker 6: Do they want to take on a second military adversary
Speaker 6: in the form of the United States.
Speaker 5: They may well do it. Look, it's a regime.
Speaker 6: Run by medieval religious fanatics. They may well retaliate against
Speaker 6: the United States, but they will be making a big
Speaker 6: mistake from the point of view of regime survival.
Speaker 4: Well, when we consider the day after, whether it's an
Speaker 4: attack on the alasad Air basis we saw for the
Speaker 4: killing of Costume Solo mony, maybe against Bahrain, the home
Speaker 4: of the Fifth Fleet. Maybe it's something we're not thinking
Speaker 4: of here. What would be the US response?
Speaker 5: What should it be?
Speaker 6: Well, I think there are three categories of possible targets. One,
Speaker 6: obviously is more attacks on Israel. Second would be a
Speaker 6: tax against the Golf Arab States, the oil producing nations
Speaker 6: of the Golf, And third on the US deployed military forces,
Speaker 6: our consulates, our embassies, private American citizens in the region,
Speaker 6: and terrorist attacks against Americans and others around the world,
Speaker 6: including in this country. Obviously, our first concern is the Americans,
Speaker 6: but we're going to do everything we can to defend Israel,
Speaker 6: and I think we should make it clear to the
Speaker 6: Golf Arab states and Jordan and Egypt that will be
Speaker 6: defending them too. We have a common interest against this
Speaker 6: Iranian threat, and it really at this point is much
Speaker 6: harder for Iran to do what they might like to do,
Speaker 6: given the pounding that they've been taking from Israel, given
Speaker 6: that their terrorist proxies Hamas and Hezbela have been badly beaten,
Speaker 6: their key ally, the Aside regime in.
Speaker 5: Syria has fallen.
Speaker 6: This is not the Iran it was on October the sixth,
Speaker 6: twenty twenty three, that's for sure.
Speaker 7: Well, as we consider what capabilities Iran may have to
Speaker 7: retaliate militarily, what if it just is in the form
Speaker 7: of Iran no longer cooperating or participating in, say, the
Speaker 7: Nuclear Non Proliferation Treaty, no longer allowing IAEA inspectors to
Speaker 7: monitor what Iran is doing. Even if we may have
Speaker 7: diminished the threat of Iran's nuclear capability in the short term,
Speaker 7: does that not potentially risk if they were to exit
Speaker 7: that agreement much greater danger in the long term.
Speaker 5: Now, it wouldn't make any difference at all.
Speaker 6: They've been violating the Nuclear Non Proliferation Treaty for twenty
Speaker 6: five or thirty years, as it is now because their
Speaker 6: commitment under that treaty was not to seek nuclear weapons
Speaker 6: in any form, and that's exactly what they've been doing.
Speaker 5: So withdrawal from the treaties just meaningless.
Speaker 6: And as for the IAEA, look, it's it's been excluded
Speaker 6: from key sites, the weaponization activities, and many others for
Speaker 6: quite some time.
Speaker 5: IAEA is a good agency.
Speaker 6: I have a lot of respect for it, but it's
Speaker 6: not an intelligence agency. Frequently, the most important information that
Speaker 6: the IAE deals with we have given them.
Speaker 4: Iran's parliament has voted to close the Strait of horror moves.
Speaker 4: As you've heard. You may not take that seriously, John Bolton,
Speaker 4: but I wonder what our capability would be if we
Speaker 4: see Iran begin to lay minds. Could we stop that
Speaker 4: or is there another way that they could close the straight?
Speaker 6: Well, there are a number of ways they could try
Speaker 6: and do it, and that's why we've put substantially greater
Speaker 6: naval assets in the region more on the way. This
Speaker 6: is something I think that maybe more bluster than anything else,
Speaker 6: can raise the level of danger.
Speaker 5: But we're fully aware that.
Speaker 6: This has been a possibility and if they try it,
Speaker 6: it won't simply be clearing minds away from the strait
Speaker 6: of horror moves that we do. I expect we would
Speaker 6: put much of the Iranian navy on the bottom of
Speaker 6: the Red Sea, and we would be striking other targets
Speaker 6: inside Iran. This is a no win proposition for them
Speaker 6: if they up the stakes that way.
Speaker 7: All right, John Bolton, former US Ambassador to the UN
Speaker 7: and former National Security Advisor under the first Trump administration.
Speaker 7: Thank you.
Speaker 2: Welcome back to the Daybreak Asia podcast. I'm Doug Chrisner.
Speaker 2: We're seeing market reaction to the US attack on Iran's
Speaker 2: three main nuclear sites. Stock index futures or down, Crude
Speaker 2: oil prices are higher, and treasury bonds are being boosted
Speaker 2: by some haven buying. For a closer look at market action,
Speaker 2: I'm joined now by Gene Goldman. He is the chief
Speaker 2: investment officer at Satara Financial Group. Jean joins us here
Speaker 2: in our New York studio. Nice of you to drop
Speaker 2: by on a Sunday in the US. We're focused very
Speaker 2: much on the developments with respect to the US strikes
Speaker 2: on nuclear targets in Iran. I'm curious just to how
Speaker 2: you're thinking about this right now.
Speaker 1: Sure, I think if you think about the weekend, and
Speaker 1: obviously the US hit Iran and investors are hitting the
Speaker 1: brakes on the markets right now. And this is for us.
Speaker 1: We're not saying this is any type of you know,
Speaker 1: this is just a detour, not any type of derailment.
Speaker 1: What do you mean by that?
Speaker 4: Is?
Speaker 1: Yes, this what we're seeing play out is a classic
Speaker 1: market playbook. We're seeing, you know, safe haven investments rise,
Speaker 1: gold dollar for example, US egletes are a weeker. We
Speaker 1: see some overnight futures, of course, we also see treasuries.
Speaker 1: We do think that the yalkurb will flatten a bit,
Speaker 1: especially some upper pressure and short term yields downward pressure
Speaker 1: as potential recession worries start to push down lower yields.
Speaker 1: Oil of course up two to three percent. Everything is
Speaker 1: playing out as we expect. The big question is what's next.
Speaker 1: What's going to happen after this? Does Iran shut down
Speaker 1: the straight up poor moose? I mean I don't think
Speaker 1: they will. I mean twenty percent of oil goes through
Speaker 1: that straight upore moose. China is going to push back politically.
Speaker 1: The US will push back, you know, militarily or politically.
Speaker 1: Does ira attack US interests in the middle East. With
Speaker 1: all it said, though, we do think any pullback is
Speaker 1: going to be a buying opportunity because you think about this,
Speaker 1: we've pretty much eliminated a terrorist threat, We've pretty much
Speaker 1: eliminated a nuclear threat, and you take all this together,
Speaker 1: if you look at the fact that geopolitical risks and
Speaker 1: geopolitical uncertainty in the last big nine big events, the
Speaker 1: S and P five hundred was positive about a year
Speaker 1: later and seven of the nine. We're not too worried.
Speaker 1: We're taking this as a buying opportunity if market's modestly pullback.
Speaker 2: So do we have to be prepared for oil prices
Speaker 2: remaining at higher levels? And if you look at that
Speaker 2: in concert with the inflationary risk, let's say, of tariffs,
Speaker 2: are we in an environment right now where stagflation is
Speaker 2: still a threat, which is to say that we could
Speaker 2: see an upward tick in inflationary pressures and maybe declining
Speaker 2: growth or no growth.
Speaker 1: That's a great question, because we do think inflation is
Speaker 1: going to rise. I mean, we haven't seen the effective
Speaker 1: tariffs yet in terms of economic data. We have seen
Speaker 1: you as you know, when tariffs first come out, they
Speaker 1: tend to be pretty much deflationary because as you have
Speaker 1: demand destruction and you have pressure on economically sensitive commodities oil, copper,
Speaker 1: for example. But now this puts a little put upward
Speaker 1: pressure oil to an extent. But remember, we have significant
Speaker 1: capacity in terms of oil. You know, you look at
Speaker 1: you know the amount of oil that we are producing,
Speaker 1: the amount oiler we're drilling, the amount oil we can export.
Speaker 1: So I'm not too worried about this sulus. If you
Speaker 1: look at the US strategic reserves. We bought out of
Speaker 1: oil over the last few months in anticipation of this,
Speaker 1: so there was some I think advanced warning in terms
Speaker 1: that we were buying a lot of oil in advance.
Speaker 1: All this together, we do think inflation does rise because
Speaker 1: I do think, as Powell said last week in this
Speaker 1: press conference, he said that we're going to get some
Speaker 1: data in July and in terms of where inflation is headed.
Speaker 1: And I do think some of those July data points
Speaker 1: will be a little bit higher than expected, not the
Speaker 1: headline inflation, but more the core inflation when you take
Speaker 1: out food and energy. I do think the terriffts will
Speaker 1: finally work their way in and at the end of
Speaker 1: the day, one of our key themes is that are
Speaker 1: We've said throughout the year, we don't think the FED
Speaker 1: cuts as rates as much as they said they would,
Speaker 1: So right now they're pricing into the market's pricing in two.
Speaker 1: We think zero one for this year they should be.
Speaker 1: The economy is weakening, we get that, but the inflation
Speaker 1: is a bigger worry.
Speaker 2: So we heard from FED Governor Chris Waller last Friday.
Speaker 2: He seemed to set the table for the possibility of
Speaker 2: a July cut. Is that prematurity.
Speaker 1: I think that's way premature. I think think about you know, obviously,
Speaker 1: I'm going to keep pause in this a little bit.
Speaker 1: I mean, he's grappling to be the next FED chair
Speaker 1: and if you look at some of the odds, there's
Speaker 1: an eighty percent chance he becomes a FED chair to
Speaker 1: replace Pale next May. At the end of the day, though,
Speaker 1: he's one person, one vote. And I do think even
Speaker 1: you saw Daily on San Francisco's Daily came on Friday
Speaker 1: and she also said we need to wait on data.
Speaker 1: And if you listen to the Jay Palace press conference,
Speaker 1: all his key points were we need to wait, we
Speaker 1: need to be very data depends that data, analyze the
Speaker 1: data and focus and wait because I as I do believe.
Speaker 1: I know the FED has made a lot of mistakes,
Speaker 1: and I've called him out a few times. I do
Speaker 1: believe that they get this right, that inflation is actually
Speaker 1: rising and the FED can't cut rais in this environment.
Speaker 2: So if your mentality right now was by the dip,
Speaker 2: are there things on your shopping list if there is
Speaker 2: a significant pullback and a sector or an industry group
Speaker 2: that you would be a buyer?
Speaker 1: Yeah? I think if you take a step back, how
Speaker 1: do you get yourself set up for it to be
Speaker 1: in a good place when markets are volatile like this.
Speaker 1: Number one, be diversified. Number two, focus on fundamentals to fundamentals,
Speaker 1: focus on secular themes. Number three focus on active money manager,
Speaker 1: especially during volatile periods, and for as an investor, focused
Speaker 1: on policy shifts. That's how you should be situated in
Speaker 1: an uncertain environment. Now, how do you take advantage of this?
Speaker 1: To your question, our favorite sectors include technology, I mean
Speaker 1: really technology, especially AI, artificial intelligence, especially cybersecurity. All those
Speaker 1: events are going to be driving earnings growth on a
Speaker 1: go forward basis. Financials, we do think the economy, Yes,
Speaker 1: there's some weakness in the economy, but I think it's
Speaker 1: a little over exaggerating some of the banking numbers. And lastly, industrials.
Speaker 1: We've liked industrials for a long time. Geopolitical risks increasing,
Speaker 1: it's a good opportunity for industrials.
Speaker 2: How are you exposed offshore if at all? Right now?
Speaker 1: Yeah, we have non US exposure through some international growth,
Speaker 1: international value, and some emerging markets are more diversifiers. You know,
Speaker 1: the whole thought that the US is, you know, the
Speaker 1: US exceptionalism. Exceptionalism is dying. We don't believe that the
Speaker 1: US is going to be the biggest, the best. I
Speaker 1: guess what's the end. I'm really bad with mixed metaphors.
Speaker 1: It's the best house in a terrible neighborhood with high valuations.
Speaker 1: All that stuff taken together, there's I think it's exaggerated
Speaker 1: in terms of the US exceptionalism actually weakning. I know
Speaker 1: the dollar is weakened about twelve thirteen percent this year,
Speaker 1: but if you think about next year, our earnings growth,
Speaker 1: our economic growth looks better than Europe, looks better than Asia,
Speaker 1: especially in Japan. If you look at our average age,
Speaker 1: our average age is younger than Europe than also in
Speaker 1: Japan and Also, at the end of the day, you
Speaker 1: have better economic growth. And I do think I've talked
Speaker 1: about this when we were on I was on your
Speaker 1: show last time. We do think we win the terraff war.
Speaker 1: We do think we win the terrafar against the other country.
Speaker 1: At the end of the day, you think about this,
Speaker 1: you look at tariffs, we are not going to get
Speaker 1: the full you know, tariff surplus at you know, President
Speaker 1: Trump wont But the end of the day, we'll be
Speaker 1: in the right direction and those few less tariff rates
Speaker 1: will actually help our economy. And if you look at
Speaker 1: twenty twenty six earnings growth esseens for the S and
Speaker 1: P five hundred, they're actually rising in this whole environment.
Speaker 1: This is the fact that we do think a better
Speaker 1: tariff environment for US companies.
Speaker 2: So I hear the case that you're making to be
Speaker 2: long US equities right now? Are you avoiding the bond market?
Speaker 2: Are there opportunities there?
Speaker 6: Oh?
Speaker 1: No, So let's just say for a sixty to forty portfolio,
Speaker 1: we have you know, forty percent fixed income. But what
Speaker 1: we are avoiding, we're avoiding high yield. We think high
Speaker 1: yield is super expensive, spreads are super narrow, not praising
Speaker 1: any bad news within fixed income itself. That we love duration.
Speaker 1: We love high quality treasuries, high quality corporates. The reason
Speaker 1: we do is that we do think the treasury yields
Speaker 1: are going to stay between say four to five percent
Speaker 1: for some time. The peak for treasury should be about
Speaker 1: the year of a year nominal gdp US growth. That's
Speaker 1: about five oh seven last time I checked, and that's
Speaker 1: sort of the peak in terms of where rates should
Speaker 1: be for the ten year treasury. You know, we're hovering
Speaker 1: around there right now. We'll see. And also we do
Speaker 1: think we've increased duration. We do think yield going to
Speaker 1: come back down eventually. We also think that the Fed
Speaker 1: may become a little bit too. You know, they've said
Speaker 1: they're very not no longer preemptive, but much more reactive.
Speaker 1: That puts the question of a potential need to accelerate
Speaker 1: rate cuts next year. I know the Fed came out
Speaker 1: in their dot plug and said we cut rates only once,
Speaker 1: and they reduced that from two to one. I do
Speaker 1: think they cut more next year and less this year.
Speaker 1: That's a good play for duration.
Speaker 2: I'm wondering if you're focused at all on the fiscal
Speaker 2: situation in Washington. The big beautiful bill. Right now, it's
Speaker 2: being hammered out in the Senate. This may be something
Speaker 2: that misses the July fourth deadline. I think that's highly
Speaker 2: probable right now. Is it part of the conversations that
Speaker 2: you're having at your firm whether or not we get
Speaker 2: the kind of tax cuts to the extent that the
Speaker 2: market was preparing for. Is there anything in this bill
Speaker 2: that you're concerned about?
Speaker 1: Well, I mean, obviously the big sticking point of this
Speaker 1: assault tax. We're watching that very carefully. We're also watching
Speaker 1: where do the Republicans and Democrats pay for this? Where
Speaker 1: does it get paid for? But the good news is
Speaker 1: that if you look at tariff revenues, tariff revenues are
Speaker 1: likely to be between two hundred and fifty to four
Speaker 1: hundred billion dollars. That's a good sort of pro growth opportunity,
Speaker 1: and that those tariff revenues are recycled back into the
Speaker 1: economy in pro growth areas like tax cuts or like
Speaker 1: some type of stimulus. That's good. That helps us avoid
Speaker 1: any type of recession. We're optimistic about that, and we
Speaker 1: do think you combine a potential for a big beautiful
Speaker 1: bill plus second half deregulation that goes back to one
Speaker 1: of our favorite sectors, financials. Deregulation will definitely help financials
Speaker 1: and help our whole industry.
Speaker 2: But it was only a couple of weeks ago that
Speaker 2: there was a tantrum of sorts in the bond market
Speaker 2: on concern about higher deficits. That doesn't trouble you at all.
Speaker 1: Doesn't trouble us right now. I mean unfortunate, just like
Speaker 1: infrastructure spending, just like deficit, this will take some we
Speaker 1: continue to be kicked down the road. Unfortunately. We're watching
Speaker 1: it carefully, but the end of the day, this will
Speaker 1: continue to be kicked down the road. Unfortunately. I don't
Speaker 1: think this gets solved anytime soon.
Speaker 2: What is the biggest concern that you are hearing from
Speaker 2: your clients right now?
Speaker 1: Biggest concern is valuations. You know, how do you invest
Speaker 1: in the stock market? Tewing twenty two and a half
Speaker 1: times forward earnings. And we tell our clients and our advisors, listen,
Speaker 1: everything is priced to perfection. Any type of hiccup, any
Speaker 1: type of fed uncertainty, any type of misstep from JPAL
Speaker 1: or from a geopolitical risk. It's setting the market, is
Speaker 1: setting it stuff up for a pullback. For maybe another correction.
Speaker 1: But what we also say is, listen, we're continuing to
Speaker 1: buy the dips because you think about our commy. We
Speaker 1: have potentially nine percent earnings growth. We also have FED
Speaker 1: not raising rates. FED is on our side. We also
Speaker 1: have the fact that we have a pretty solid labor market.
Speaker 1: I know it's slowing down. A solid labor market with
Speaker 1: the fact that you have global stimulus in our global
Speaker 1: economy and you have inflation moderating to an extent. Take
Speaker 1: that together, we do believe that stocks will be higher
Speaker 1: a year than they are right now.
Speaker 2: We'll leave it there, Gene, It's always a pleasure. Thank
Speaker 2: you so much. Jane Goldman there. He is the chief
Speaker 2: investment officer at Satera Financial Group. Joining us here in
Speaker 2: New York City on the Daybreak Asia Podcast. Thanks for
Speaker 2: listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Speaker 2: Each weekday, we look at the story shaping markets, finance,
Speaker 2: and geopolitics in the Asia Pacific. You can find us
Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
Speaker 2: else you listen. Join us again tomorrow for insight on
Speaker 2: the market moves from Hong Kong to Singapore. And Australia.
Speaker 2: I'm Doug Prisoner and this is Bloomberg