1 00:00:02,720 --> 00:00:10,559 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,560 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,600 --> 00:00:17,840 Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg 4 00:00:17,920 --> 00:00:21,040 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,360 --> 00:00:23,520 Speaker 1: or watch us live on YouTube. 6 00:00:24,480 --> 00:00:28,639 Speaker 2: I don't really fully appreciate sensitivity to language in Canada, 7 00:00:28,720 --> 00:00:30,600 Speaker 2: and once again it came again today, and I don't 8 00:00:30,640 --> 00:00:32,880 Speaker 2: think the CEO of Air Canada does as. 9 00:00:32,720 --> 00:00:34,080 Speaker 3: Well, and that might be the problem. 10 00:00:34,320 --> 00:00:38,040 Speaker 2: Yes, exactly right. So the Air Canada CEO is gonna 11 00:00:38,080 --> 00:00:41,920 Speaker 2: stepping down after a furor over the crash condolence video 12 00:00:41,960 --> 00:00:45,920 Speaker 2: that it was only really in English, not in French, 13 00:00:45,960 --> 00:00:47,960 Speaker 2: and of course for the twenty one percent of the 14 00:00:47,960 --> 00:00:51,240 Speaker 2: people in Canada that have French as their primary language, 15 00:00:51,320 --> 00:00:51,920 Speaker 2: that's a problem. 16 00:00:51,960 --> 00:00:53,800 Speaker 4: And one of the two pilots who was killed in 17 00:00:53,840 --> 00:00:56,720 Speaker 4: the crash was from Quebec, and this flight was actually 18 00:00:58,160 --> 00:01:00,480 Speaker 4: headquartered in the Montreal region. I believe it came from 19 00:01:00,520 --> 00:01:03,600 Speaker 4: Montreal as well. He did say bonjour and mercy. 20 00:01:03,800 --> 00:01:05,080 Speaker 3: I can do that, but that's it. 21 00:01:05,160 --> 00:01:05,360 Speaker 5: Yeah. 22 00:01:05,880 --> 00:01:09,759 Speaker 2: Matthew Jon joins us here Bloomberg Montreal Bureau Chief. Matthew, 23 00:01:09,800 --> 00:01:13,200 Speaker 2: thanks so much for joining us. What's happening at Air Canada. 24 00:01:14,520 --> 00:01:16,680 Speaker 6: I think we have to go back a few years 25 00:01:16,720 --> 00:01:20,080 Speaker 6: ago to understand what's going on. So in twenty twenty one, 26 00:01:20,600 --> 00:01:23,480 Speaker 6: Michael Russeau was CFO and then became in twenty twenty 27 00:01:23,520 --> 00:01:27,760 Speaker 6: one the CEO of Eric Canada. He made a speech 28 00:01:28,040 --> 00:01:30,880 Speaker 6: in front of business leaders in Montreal. Montreal is a 29 00:01:30,880 --> 00:01:35,199 Speaker 6: bidy Goual city, right but within French speaking Quebec. It's 30 00:01:35,240 --> 00:01:39,720 Speaker 6: the only territory essentially in North America where people still 31 00:01:40,160 --> 00:01:44,080 Speaker 6: talk French and Quebri. Kars wants to preserve that, and 32 00:01:44,120 --> 00:01:46,280 Speaker 6: there are some laws in place to preserve it because 33 00:01:46,400 --> 00:01:49,400 Speaker 6: there's a lot of pressure from English coming in and 34 00:01:49,440 --> 00:01:50,320 Speaker 6: a lot of influence. 35 00:01:50,440 --> 00:01:50,640 Speaker 7: Right. 36 00:01:51,160 --> 00:01:55,600 Speaker 6: So after his speech, Michael Rousseau talks to reporters and 37 00:01:55,640 --> 00:01:58,960 Speaker 6: some reporters are asking him, why did you deliver your 38 00:01:58,960 --> 00:01:59,720 Speaker 6: speech only in. 39 00:01:59,760 --> 00:02:03,400 Speaker 8: Name, Why not even a few words in French? And 40 00:02:03,440 --> 00:02:05,160 Speaker 8: he's essentially said that he's been. 41 00:02:05,360 --> 00:02:08,520 Speaker 6: Able to live in Montreal for more than a decade 42 00:02:08,919 --> 00:02:10,360 Speaker 6: without speaking French. 43 00:02:10,400 --> 00:02:12,080 Speaker 8: It was proud of that. 44 00:02:12,080 --> 00:02:15,240 Speaker 6: That sparked outrage and over the years it was a 45 00:02:15,240 --> 00:02:19,200 Speaker 6: constant criticism about him from French Canadians. 46 00:02:19,240 --> 00:02:20,720 Speaker 8: French speaking Quebecers. 47 00:02:21,320 --> 00:02:25,880 Speaker 6: Then last Monday he makes this video statement entirely in English. 48 00:02:25,919 --> 00:02:28,359 Speaker 8: Like you said, he said, bonjour and mercy. That's high 49 00:02:28,360 --> 00:02:29,119 Speaker 8: and thank you. Right. 50 00:02:29,919 --> 00:02:32,240 Speaker 6: There was some captions in French at the bottom. But 51 00:02:32,400 --> 00:02:35,720 Speaker 6: considering that one of the boat pilots killed was a 52 00:02:35,760 --> 00:02:39,640 Speaker 6: French speaker, antoine fare and you have a lot of 53 00:02:39,680 --> 00:02:43,080 Speaker 6: employees working at Eric Canada or from Quebec, so it 54 00:02:43,160 --> 00:02:47,639 Speaker 6: sparked outrage in the province because it was the last stow. Essentially, 55 00:02:47,880 --> 00:02:51,639 Speaker 6: then you have Prime Minister Mark Karney coming in saying 56 00:02:51,720 --> 00:02:56,040 Speaker 6: that Eric Canada has a responsibility to always communicate in 57 00:02:56,080 --> 00:02:57,560 Speaker 6: both languages. 58 00:02:57,280 --> 00:02:59,160 Speaker 8: Regardless of the situation. 59 00:03:00,080 --> 00:03:03,600 Speaker 6: That is subject to the Official Languages Act in Canada. 60 00:03:03,800 --> 00:03:07,680 Speaker 6: There's a law in place the two languages in Canada 61 00:03:07,760 --> 00:03:10,920 Speaker 6: are French and English. So that's essentially what happened there. 62 00:03:11,080 --> 00:03:13,720 Speaker 6: And you even have the National Assembly of Quebec passing 63 00:03:13,760 --> 00:03:17,480 Speaker 6: a motion last week asking for Michael Rousseau to resign. 64 00:03:17,760 --> 00:03:19,680 Speaker 8: So that brought us essentially to today. 65 00:03:20,200 --> 00:03:22,639 Speaker 4: Matthew, I'm looking at the Airic Canada ticker on the 66 00:03:22,680 --> 00:03:24,720 Speaker 4: Bloomberg terminal. If you go to the DIES page, it 67 00:03:24,720 --> 00:03:27,040 Speaker 4: gives you all the basic information, and what you see 68 00:03:27,040 --> 00:03:30,160 Speaker 4: there is that Eric Canada is based in Quebec, in 69 00:03:30,240 --> 00:03:33,919 Speaker 4: Quebec city Saint Laurent, which I'm probably mispronouncing. So this 70 00:03:33,960 --> 00:03:37,000 Speaker 4: is a company that's probably based in Quebec itself. 71 00:03:37,960 --> 00:03:40,120 Speaker 3: Why was this not an issue from the get go? 72 00:03:40,280 --> 00:03:44,240 Speaker 4: Why did he become CEO even with this language deficiency. 73 00:03:46,040 --> 00:03:47,360 Speaker 8: That's a real good question. 74 00:03:47,440 --> 00:03:51,040 Speaker 6: A lot of CEOs are appointed in Montreal and with 75 00:03:51,160 --> 00:03:54,160 Speaker 6: the promise to learn a little bit of French. Michael 76 00:03:54,240 --> 00:03:57,960 Speaker 6: Russo said that he took more than three hundred hours 77 00:03:58,000 --> 00:04:01,480 Speaker 6: of classes in French and today all he's able to 78 00:04:01,520 --> 00:04:06,880 Speaker 6: say is bonjo and merci. So a lot of cuemakers 79 00:04:06,920 --> 00:04:10,920 Speaker 6: are just seeing that as a lack of consideration or 80 00:04:10,960 --> 00:04:15,120 Speaker 6: even something like that's very condescending on this part regarding 81 00:04:15,160 --> 00:04:19,080 Speaker 6: the French language. So, I mean, it was appointed with 82 00:04:19,120 --> 00:04:23,520 Speaker 6: the promise probably that it would learn French. I mean 83 00:04:23,760 --> 00:04:26,599 Speaker 6: as a CEO, it did deliver at the beginning with 84 00:04:26,720 --> 00:04:31,520 Speaker 6: our Canada delivering the company from the COVID pandemic. Over 85 00:04:31,560 --> 00:04:35,200 Speaker 6: the past few months year or so, the company has 86 00:04:35,400 --> 00:04:41,240 Speaker 6: underperformed global peers, but it delivered from a CEOs point 87 00:04:41,279 --> 00:04:43,839 Speaker 6: of view, if you want. But on the French Langritish 88 00:04:43,839 --> 00:04:46,839 Speaker 6: side like it really failed here and he failed especially 89 00:04:46,920 --> 00:04:51,440 Speaker 6: last week and today the company had to issue his 90 00:04:51,680 --> 00:04:54,960 Speaker 6: notice to shareholders for the annual meeting on May first, 91 00:04:55,640 --> 00:04:58,440 Speaker 6: and the documents and the filings you have the compensation 92 00:04:58,760 --> 00:05:02,279 Speaker 6: of the CEO in twenty two so Michael Russo earned 93 00:05:02,320 --> 00:05:06,160 Speaker 6: a compensation of thirteen point one million dollars Canadian dollars 94 00:05:06,200 --> 00:05:09,280 Speaker 6: in twenty twenty five, of five six percent from a 95 00:05:09,360 --> 00:05:13,080 Speaker 6: year ago. So that would have added another layer into 96 00:05:13,120 --> 00:05:16,719 Speaker 6: this debate. And it's our understanding that Eric and I 97 00:05:16,760 --> 00:05:19,480 Speaker 6: wanted to end this, and there was especially a global 98 00:05:19,520 --> 00:05:22,479 Speaker 6: search for a new CEO anyway because it was planning 99 00:05:22,480 --> 00:05:23,160 Speaker 6: to retire. 100 00:05:24,120 --> 00:05:26,400 Speaker 8: That search started in January. 101 00:05:26,360 --> 00:05:29,800 Speaker 6: So probably that they just announced this sooner than expected. 102 00:05:30,120 --> 00:05:32,760 Speaker 6: And now he's expected to retire at the end of 103 00:05:32,800 --> 00:05:35,680 Speaker 6: the third quarter of this year, which is on September. 104 00:05:35,960 --> 00:05:39,840 Speaker 3: Thurio Stay with us. More from Bloomberg Intelligence coming up 105 00:05:39,880 --> 00:05:40,360 Speaker 3: after this. 106 00:05:44,000 --> 00:05:47,719 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 107 00:05:47,800 --> 00:05:50,840 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 108 00:05:50,880 --> 00:05:54,200 Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever 109 00:05:54,240 --> 00:05:57,799 Speaker 1: you get your podcasts, or watch us live on YouTube through. 110 00:05:58,600 --> 00:06:03,760 Speaker 2: Matter platforms at eighteen percent this month, putting them on 111 00:06:03,839 --> 00:06:08,080 Speaker 2: pace for the worst performance since October twenty two. I 112 00:06:08,120 --> 00:06:10,800 Speaker 2: think there's some legal risks in there, maybe some spending 113 00:06:10,800 --> 00:06:13,960 Speaker 2: on artificial intelligence. I don't know. Mandy sing joins us here. 114 00:06:14,000 --> 00:06:17,880 Speaker 2: He's Global tech research head for Bloomberg Intelligence. What's going 115 00:06:17,880 --> 00:06:19,760 Speaker 2: on with Meta these days? Because it was a story 116 00:06:19,760 --> 00:06:23,040 Speaker 2: that was working on cost cutting on number one and 117 00:06:23,120 --> 00:06:26,640 Speaker 2: number two AI seemed to be a really viable work 118 00:06:26,640 --> 00:06:29,680 Speaker 2: caase to augment their advertising platforms. It's gone on with 119 00:06:29,720 --> 00:06:30,360 Speaker 2: the stop yeah. 120 00:06:30,440 --> 00:06:34,560 Speaker 7: I mean, look, they have underperformed relative to the MACS 121 00:06:34,600 --> 00:06:37,520 Speaker 7: seven peers, and on top of that, they had that 122 00:06:37,680 --> 00:06:42,640 Speaker 7: addiction lawsuit that they lost along with the Google. So 123 00:06:42,880 --> 00:06:47,680 Speaker 7: from that perspective, it could create that negative sentiment that 124 00:06:48,640 --> 00:06:51,760 Speaker 7: I don't think is going away anytime soon, simply because 125 00:06:51,960 --> 00:06:54,880 Speaker 7: when you look at their free cash flow expectations for 126 00:06:54,960 --> 00:06:58,440 Speaker 7: this year, I mean they're spending almost one hundred and 127 00:06:58,520 --> 00:07:02,120 Speaker 7: thirty five billion dollars in capex. That'll take them to 128 00:07:02,240 --> 00:07:07,040 Speaker 7: almost you know, native free cash flow territory. And last 129 00:07:07,080 --> 00:07:10,160 Speaker 7: year they had almost forty five billion dollars in free 130 00:07:10,240 --> 00:07:14,400 Speaker 7: cash flow. So look, when you have you know, this 131 00:07:14,560 --> 00:07:19,000 Speaker 7: much investment and people aren't even clear what the focus 132 00:07:19,080 --> 00:07:22,520 Speaker 7: is on. Yes, they are building data centers. That's a 133 00:07:22,560 --> 00:07:25,880 Speaker 7: real asset, but we know it's a depreciating asset. And 134 00:07:26,040 --> 00:07:28,880 Speaker 7: when I look at their model relative to open Ai, 135 00:07:29,160 --> 00:07:31,520 Speaker 7: Google and Anthropic, they. 136 00:07:31,360 --> 00:07:34,200 Speaker 2: Don't even have a model, so they don't have a 137 00:07:34,280 --> 00:07:36,040 Speaker 2: large language model of their own. 138 00:07:36,480 --> 00:07:39,440 Speaker 7: They have a large angleg model, but in the leaderboards 139 00:07:39,520 --> 00:07:43,080 Speaker 7: it's nowhere. Okay, So from that perspective, like look at 140 00:07:43,240 --> 00:07:45,640 Speaker 7: how well Claude has done, you know, in terms of 141 00:07:45,880 --> 00:07:50,880 Speaker 7: coding agents and their anthropic claud is almost adding billion 142 00:07:50,920 --> 00:07:51,440 Speaker 7: dollars in. 143 00:07:51,440 --> 00:07:52,960 Speaker 3: Revenue every week. 144 00:07:53,440 --> 00:07:54,160 Speaker 5: I didn't know that. 145 00:07:54,520 --> 00:07:57,640 Speaker 7: Well, there are some league sources and when you look 146 00:07:57,720 --> 00:08:01,080 Speaker 7: at you know, the token usage, that's the one metric 147 00:08:01,200 --> 00:08:05,320 Speaker 7: that everyone is tracking right now for these llms is 148 00:08:05,480 --> 00:08:08,960 Speaker 7: how much is that token usage growing? And some of 149 00:08:09,000 --> 00:08:13,800 Speaker 7: that can be reflected in the revenue run rates, others 150 00:08:13,920 --> 00:08:16,280 Speaker 7: is tied to training these llms, But at the end 151 00:08:16,320 --> 00:08:18,880 Speaker 7: of the day, that's a real metric in terms of 152 00:08:19,000 --> 00:08:22,800 Speaker 7: how your model is getting used. Meta doesn't even have 153 00:08:22,880 --> 00:08:27,000 Speaker 7: a model that is being utilized externally. So the promise 154 00:08:27,200 --> 00:08:31,400 Speaker 7: was Meta will use the llms within their own ecosystem, 155 00:08:31,800 --> 00:08:35,199 Speaker 7: and that will drive revenue. And so what saved Meta, 156 00:08:35,520 --> 00:08:38,040 Speaker 7: otherwise the stock would have been down even more is 157 00:08:38,080 --> 00:08:40,680 Speaker 7: their top line is still quite healthy. You know, they've 158 00:08:40,679 --> 00:08:44,160 Speaker 7: guided to mid twenty percent top line growth, but that 159 00:08:44,240 --> 00:08:47,920 Speaker 7: will reduce in the back half because of tougher commps. 160 00:08:48,160 --> 00:08:52,360 Speaker 7: So I think that's the challenge. And that lawsuit. I mean, 161 00:08:52,679 --> 00:08:55,760 Speaker 7: this has never happened in terms of Meta losing a 162 00:08:55,880 --> 00:09:01,320 Speaker 7: lawsuit around their product being addictive and dangerous and so 163 00:09:01,400 --> 00:09:05,120 Speaker 7: we already know they are banned in Australia and in 164 00:09:05,160 --> 00:09:08,040 Speaker 7: the EU there is a proposal to ban the app 165 00:09:08,040 --> 00:09:11,400 Speaker 7: for under sixteen. So from that perspective, if you are 166 00:09:11,559 --> 00:09:16,520 Speaker 7: losing that demographic that is one of the highest using 167 00:09:16,600 --> 00:09:19,880 Speaker 7: demographics for your platform, that becomes a challenge. And now 168 00:09:20,360 --> 00:09:23,520 Speaker 7: there could be more lawsuits, you know, along the similar 169 00:09:23,559 --> 00:09:26,360 Speaker 7: lines to the ones where they had, you know, where 170 00:09:26,360 --> 00:09:27,280 Speaker 7: they go against them. 171 00:09:27,360 --> 00:09:31,320 Speaker 2: So the first time, really one of the first times, 172 00:09:31,360 --> 00:09:32,760 Speaker 2: I'm not to sayd for someone of the first time 173 00:09:32,880 --> 00:09:35,880 Speaker 2: were some of these the legal issues for a technology 174 00:09:35,920 --> 00:09:41,800 Speaker 2: company are really material potentially because I mean you asked myself, 175 00:09:41,800 --> 00:09:43,880 Speaker 2: included you ask everybody on the street. I spent too 176 00:09:43,960 --> 00:09:46,480 Speaker 2: much time on my phone. If they have children, they 177 00:09:46,520 --> 00:09:48,760 Speaker 2: will site that I'm thinking is one of their top 178 00:09:49,320 --> 00:09:50,120 Speaker 2: top worries. 179 00:09:50,320 --> 00:09:51,160 Speaker 8: Yeah, and. 180 00:09:52,760 --> 00:09:55,160 Speaker 2: I think that's a global situation. Any parent anyone in 181 00:09:55,160 --> 00:09:56,360 Speaker 2: the world would probably say that. 182 00:09:56,480 --> 00:09:56,720 Speaker 5: Yeah. 183 00:09:57,200 --> 00:10:01,679 Speaker 7: And now the judge said it actually harms in this case, 184 00:10:01,679 --> 00:10:04,120 Speaker 7: so it's true. And I mean, the million dollar fines 185 00:10:04,200 --> 00:10:07,000 Speaker 7: are not that big, but suddenly if you've got two 186 00:10:07,000 --> 00:10:08,400 Speaker 7: thousand more lawsuits like. 187 00:10:08,360 --> 00:10:09,880 Speaker 8: That, then it all adds on. 188 00:10:10,000 --> 00:10:14,679 Speaker 2: I was just similar risk for a Google for I 189 00:10:14,720 --> 00:10:17,079 Speaker 2: don't know. I mean, you could argue YouTube, you spend 190 00:10:17,080 --> 00:10:18,319 Speaker 2: too much time on YouTube. 191 00:10:18,360 --> 00:10:22,720 Speaker 7: But in YouTube's case, the you know, the harm was 192 00:10:22,760 --> 00:10:27,319 Speaker 7: more in terms of AutoPlay than the content or the filters. 193 00:10:27,840 --> 00:10:30,680 Speaker 7: So in terms of the you know, the type of content, 194 00:10:31,160 --> 00:10:34,400 Speaker 7: I think the verdict said that it was more harmful 195 00:10:34,600 --> 00:10:37,680 Speaker 7: from the meta side compared to YouTube, where it was 196 00:10:37,760 --> 00:10:41,920 Speaker 7: more like, yes, it shouldn't be autoplaying content or things 197 00:10:41,920 --> 00:10:44,959 Speaker 7: along those lines. Not not about the type of content, 198 00:10:45,040 --> 00:10:47,840 Speaker 7: but there's a very fine line. And I do agree, 199 00:10:47,880 --> 00:10:51,079 Speaker 7: you know, YouTube and Instagram are similar in that regard. 200 00:10:51,160 --> 00:10:54,840 Speaker 7: But we'll see more lawsuits. 201 00:10:54,280 --> 00:10:57,760 Speaker 2: All right, just real quicker you get an ai IPO 202 00:10:57,840 --> 00:11:00,080 Speaker 2: this year, like is it anthropic or is it. 203 00:11:00,760 --> 00:11:04,640 Speaker 7: Most likely it's going to be Entropic four q IPO 204 00:11:05,000 --> 00:11:07,680 Speaker 7: and they really at the rundred that they are in. 205 00:11:08,000 --> 00:11:11,440 Speaker 7: I mean everyone in the private market right now is 206 00:11:11,559 --> 00:11:15,760 Speaker 7: queuing to get you know, a small slice of that 207 00:11:17,040 --> 00:11:19,840 Speaker 7: a transaction which we're. 208 00:11:19,480 --> 00:11:21,080 Speaker 2: Expecting, so Entropic would be one. 209 00:11:21,360 --> 00:11:23,200 Speaker 3: What else does chpt goo? 210 00:11:23,440 --> 00:11:26,160 Speaker 7: Yeah, I mean if Entropic is going public, I think 211 00:11:26,280 --> 00:11:30,319 Speaker 7: right now open Ai fields they're losing share to Entropic 212 00:11:30,440 --> 00:11:34,280 Speaker 7: given they had a headstart. So from that perspective, I 213 00:11:34,320 --> 00:11:37,319 Speaker 7: do think open Ai will likely go public if Nthropic 214 00:11:37,320 --> 00:11:38,720 Speaker 7: announces they're going public. 215 00:11:39,280 --> 00:11:39,920 Speaker 3: Stay with us. 216 00:11:40,080 --> 00:11:42,439 Speaker 2: More from Bloomberg Intelligence coming up after this. 217 00:11:46,280 --> 00:11:50,000 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 218 00:11:50,080 --> 00:11:53,120 Speaker 1: weekdays at ten am Eastern on Apple Cockplay and Android 219 00:11:53,160 --> 00:11:56,480 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 220 00:11:56,520 --> 00:11:59,600 Speaker 1: you get your podcasts, or watch us live on YouTube. 221 00:12:00,240 --> 00:12:01,920 Speaker 2: Let's get right to it. Ed Price joins us here 222 00:12:02,040 --> 00:12:04,920 Speaker 2: in studio. He's a non resident senior fellow at NYU. 223 00:12:05,720 --> 00:12:09,360 Speaker 2: Edward day thirty one into this war and Iran. I 224 00:12:09,400 --> 00:12:11,520 Speaker 2: think if you ask ten different people out there, they 225 00:12:11,600 --> 00:12:14,000 Speaker 2: might give you ten different reasons. What are our objectives 226 00:12:14,000 --> 00:12:16,680 Speaker 2: for being there? I'm not sure they were clearly articulated, 227 00:12:16,679 --> 00:12:20,319 Speaker 2: so that makes it maybe even more difficult to articulate 228 00:12:20,800 --> 00:12:23,160 Speaker 2: how we get out of there. What's your view of 229 00:12:23,200 --> 00:12:26,240 Speaker 2: how the warn Iran has developed over the past four weeks. 230 00:12:26,559 --> 00:12:28,400 Speaker 5: Thanks Paul. Well. Let me first of all start by 231 00:12:28,440 --> 00:12:30,720 Speaker 5: saying that I hope and pray are a service personnel 232 00:12:30,760 --> 00:12:32,600 Speaker 5: as safe, so I don't revel in this at all. 233 00:12:33,320 --> 00:12:35,760 Speaker 5: I think that the initial strikes that we carried out 234 00:12:35,760 --> 00:12:38,280 Speaker 5: on Iran were successful in the sense, like I said 235 00:12:38,360 --> 00:12:40,760 Speaker 5: last time, they are our enemies and we killed them, 236 00:12:40,800 --> 00:12:42,840 Speaker 5: and we can't forget that as a bottom line. I 237 00:12:42,840 --> 00:12:44,720 Speaker 5: think you're right now to say what is the second 238 00:12:44,760 --> 00:12:46,840 Speaker 5: phase of this war? And it does look like there's 239 00:12:46,840 --> 00:12:49,559 Speaker 5: a growing consensus that it's not being handled very well 240 00:12:50,000 --> 00:12:52,960 Speaker 5: and possibly also a mistake. And you have people august, 241 00:12:53,000 --> 00:12:55,079 Speaker 5: people like Larry Fink pointing to the price of oil, 242 00:12:55,120 --> 00:12:57,760 Speaker 5: which does seem to be the coloration point, the muster 243 00:12:57,800 --> 00:13:01,440 Speaker 5: point for those who are concerned. Paint a quick counter factual. 244 00:13:01,840 --> 00:13:06,600 Speaker 5: In February twenty twenty two, Russia attacked Ukraine. Imagine if 245 00:13:07,000 --> 00:13:09,360 Speaker 5: China had gone after Taiwan and Iran had gone after 246 00:13:09,440 --> 00:13:11,640 Speaker 5: Israel on the same day. So I know that this 247 00:13:11,679 --> 00:13:15,040 Speaker 5: war looks messy right now, but there is a counterfactual 248 00:13:15,240 --> 00:13:18,760 Speaker 5: in which our enemies overwhelm us and we lose that war. 249 00:13:18,840 --> 00:13:21,000 Speaker 5: I think that Russia and Iran are losing. 250 00:13:20,800 --> 00:13:24,120 Speaker 4: Theirs, but that didn't happen, and right now the US 251 00:13:24,480 --> 00:13:28,040 Speaker 4: is in a bit of a mess, some would say, 252 00:13:28,320 --> 00:13:32,760 Speaker 4: and Americans are rightly questioning what the objective is at 253 00:13:32,760 --> 00:13:36,440 Speaker 4: this point to pass point, How does the US resolve 254 00:13:36,440 --> 00:13:37,079 Speaker 4: this in the end? 255 00:13:37,640 --> 00:13:38,679 Speaker 3: What does victory look like? 256 00:13:39,320 --> 00:13:42,080 Speaker 5: So the obvious is the obvious answer to that is 257 00:13:42,080 --> 00:13:44,040 Speaker 5: the one that Americans don't want to hear, which is 258 00:13:44,080 --> 00:13:46,720 Speaker 5: that there'll be an escalatory ladder in which the United 259 00:13:46,760 --> 00:13:49,600 Speaker 5: States has to pour more and more resource, more and 260 00:13:49,600 --> 00:13:51,959 Speaker 5: more blood and treasure. And that means boots on the ground, 261 00:13:51,960 --> 00:13:56,120 Speaker 5: and that means regime change. That is the way Thatgion 262 00:13:56,360 --> 00:13:58,200 Speaker 5: the regime would fall, right, and that's the way the 263 00:13:58,240 --> 00:14:02,000 Speaker 5: region would be reconfigured. I'm slightly stumbling of my words 264 00:14:02,000 --> 00:14:04,640 Speaker 5: because it's a terrifying prospect even to think about that, 265 00:14:04,880 --> 00:14:07,720 Speaker 5: But that is the way that this war ends very successfully. 266 00:14:07,880 --> 00:14:10,320 Speaker 5: I would say, however, that it's not a binary between 267 00:14:10,360 --> 00:14:13,079 Speaker 5: win and loss. If the United States and Israel have 268 00:14:13,200 --> 00:14:16,400 Speaker 5: degraded the power of the Iranian regime. They're not as 269 00:14:16,559 --> 00:14:19,080 Speaker 5: powerful a player in a future confrontation. That is a 270 00:14:19,080 --> 00:14:20,680 Speaker 5: general war scenario. 271 00:14:20,720 --> 00:14:23,680 Speaker 2: So could Some people are suggesting that at some point 272 00:14:24,160 --> 00:14:27,360 Speaker 2: President Trump will look at everything that's been accomplished militarily, 273 00:14:27,360 --> 00:14:32,280 Speaker 2: which is substantial, claim victory and leave that part of 274 00:14:32,320 --> 00:14:34,680 Speaker 2: the world. Is that a scenario I think is possible, 275 00:14:34,680 --> 00:14:35,800 Speaker 2: And I'm so under what time frame? 276 00:14:36,400 --> 00:14:40,000 Speaker 5: Well, President Trump, I mean, we've spent years discussing his 277 00:14:40,120 --> 00:14:44,480 Speaker 5: mind together, and it is another terrifying prospect. I'm not 278 00:14:44,520 --> 00:14:46,880 Speaker 5: sure what he's thinking. I think that he could very 279 00:14:46,880 --> 00:14:49,880 Speaker 5: well act like a wounded tiger. At this point. He's 280 00:14:49,920 --> 00:14:53,120 Speaker 5: an elderly gentleman. He's going to be out of power, 281 00:14:53,160 --> 00:14:55,920 Speaker 5: if not office, in November, and so I think he's thinking, 282 00:14:55,920 --> 00:14:58,960 Speaker 5: this is my last chance to make a splash. And 283 00:14:59,000 --> 00:15:02,560 Speaker 5: he made very well move up that escalatory ladder simply 284 00:15:02,600 --> 00:15:04,680 Speaker 5: through vanity. It's an ugly thing to say, but I 285 00:15:04,680 --> 00:15:06,440 Speaker 5: think he might do that. That would be my bet. 286 00:15:07,000 --> 00:15:09,120 Speaker 5: But again, he might get distracted by something else. I mean, 287 00:15:09,400 --> 00:15:13,520 Speaker 5: Rubio was talking about Cuba, and Trump is always thinking 288 00:15:13,560 --> 00:15:16,520 Speaker 5: about things like ballrooms. So there's another sort of ADHD 289 00:15:16,600 --> 00:15:18,760 Speaker 5: scenario here where he just loses interest. 290 00:15:19,000 --> 00:15:20,240 Speaker 3: What about oil prices? 291 00:15:20,560 --> 00:15:23,600 Speaker 4: We see oil prices surge and they're up I think 292 00:15:23,680 --> 00:15:26,720 Speaker 4: ninety percent so far since the start of the war. 293 00:15:28,960 --> 00:15:29,600 Speaker 3: How does this go? 294 00:15:29,680 --> 00:15:32,760 Speaker 4: I mean, even if the US decides to come up 295 00:15:32,800 --> 00:15:35,320 Speaker 4: with a definition for victory and retreat in any way 296 00:15:35,440 --> 00:15:38,560 Speaker 4: or wind things down and Trump says we got what 297 00:15:38,600 --> 00:15:41,560 Speaker 4: we wanted. If oil prices stay elevated because Iran controls 298 00:15:41,560 --> 00:15:43,920 Speaker 4: the seriit of horror moves, how does that shake out 299 00:15:44,000 --> 00:15:47,520 Speaker 4: for not just the global economy, but for geopolitics, for 300 00:15:47,600 --> 00:15:51,720 Speaker 4: who's got leverage, who doesn't bad for the economy. 301 00:15:52,160 --> 00:15:54,520 Speaker 5: JPM Morgan just released an excellent report which is kind 302 00:15:54,560 --> 00:15:57,640 Speaker 5: of like a doomsday scenario if oil gets anywhere near 303 00:15:57,640 --> 00:16:00,200 Speaker 5: one hundred and fifty hundred and eighty. But it's so 304 00:16:00,240 --> 00:16:02,480 Speaker 5: bad for China. So we talk a lot about how 305 00:16:02,520 --> 00:16:04,760 Speaker 5: this is good for Russia because their oil revenue is 306 00:16:04,800 --> 00:16:07,120 Speaker 5: funding their war in Ukraine. I imagine that's true at 307 00:16:07,200 --> 00:16:09,520 Speaker 5: least in the short term. But China gets a lot 308 00:16:09,560 --> 00:16:11,280 Speaker 5: of its oil, a lot of its energy out of 309 00:16:11,280 --> 00:16:14,720 Speaker 5: that area. And so one scenario is that China decides, look, 310 00:16:14,800 --> 00:16:17,600 Speaker 5: enough is enough and communicates with the Americans to try 311 00:16:17,600 --> 00:16:20,000 Speaker 5: and wind this thing up. It's also not in European interests, 312 00:16:20,280 --> 00:16:22,920 Speaker 5: so I'm always cautious of what I think about is 313 00:16:22,920 --> 00:16:28,280 Speaker 5: the financialization of geopolitics and strategy. Yes, the economists are 314 00:16:28,360 --> 00:16:30,200 Speaker 5: right to warn us about the price of oil, but 315 00:16:30,240 --> 00:16:32,240 Speaker 5: I think that's an independent variable. I think the most 316 00:16:32,280 --> 00:16:35,720 Speaker 5: important thing is Western security. And at the end of 317 00:16:35,760 --> 00:16:37,880 Speaker 5: the day, like I say, the Iranians have been at 318 00:16:37,880 --> 00:16:40,520 Speaker 5: war with US for effectively fifty years, and now we're 319 00:16:40,520 --> 00:16:41,080 Speaker 5: fighting back. 320 00:16:42,120 --> 00:16:46,680 Speaker 2: So if the US, if President Trump were to claim 321 00:16:46,760 --> 00:16:50,280 Speaker 2: victory and cease operations, is it a fair assumption that 322 00:16:50,400 --> 00:16:51,640 Speaker 2: Israel will follow our lead. 323 00:16:52,240 --> 00:16:56,000 Speaker 5: I have absolutely no idea. I don't think Israel follows 324 00:16:56,040 --> 00:16:59,640 Speaker 5: anybody's marching orders. If anything, we've followed theirs to some 325 00:16:59,680 --> 00:17:02,760 Speaker 5: extent in the timing and nature of this operation. I 326 00:17:02,760 --> 00:17:05,600 Speaker 5: don't think that's necessarily a bad thing, because Israel is 327 00:17:05,640 --> 00:17:08,040 Speaker 5: a foundation or ally of the United States and of 328 00:17:08,040 --> 00:17:11,280 Speaker 5: the West, and is effectively fighting people in that region 329 00:17:11,280 --> 00:17:14,359 Speaker 5: that would otherwise be in Europe or in the United States. 330 00:17:14,400 --> 00:17:18,600 Speaker 5: It's that simple. But I am not an analyst of Israel, 331 00:17:18,760 --> 00:17:20,879 Speaker 5: and I would defy anyone who claims they are to 332 00:17:21,280 --> 00:17:22,680 Speaker 5: guess at the next move. I mean, look at the 333 00:17:22,720 --> 00:17:26,359 Speaker 5: pager thing. Nobody saw that kind of behavior coming. So 334 00:17:27,000 --> 00:17:27,440 Speaker 5: no idea. 335 00:17:28,200 --> 00:17:29,080 Speaker 3: What are you thinking? 336 00:17:29,240 --> 00:17:32,480 Speaker 4: How are you preparing yourself, bracing yourself for what could come? 337 00:17:32,640 --> 00:17:36,160 Speaker 3: What's on your mind? As we as we enter into 338 00:17:36,200 --> 00:17:37,520 Speaker 3: the second month of this war. 339 00:17:39,280 --> 00:17:43,960 Speaker 5: We are struggling to describe World War three. Gary Kasparov 340 00:17:44,000 --> 00:17:46,000 Speaker 5: calls it world War four because the Russians think of 341 00:17:46,119 --> 00:17:48,400 Speaker 5: World War three has been the Cold War. I've called 342 00:17:48,440 --> 00:17:51,439 Speaker 5: it the Central War Ukraine and Iran's word war. But 343 00:17:51,520 --> 00:17:55,000 Speaker 5: this is a global conflict. It only gets worse, it 344 00:17:55,040 --> 00:17:58,560 Speaker 5: only gets bigger. And that's why, with that very zoomed 345 00:17:58,560 --> 00:18:01,040 Speaker 5: out lens, I look at what's going on in Iran 346 00:18:01,200 --> 00:18:04,200 Speaker 5: and think, on balance, this is the thing to do. Again, 347 00:18:04,359 --> 00:18:06,840 Speaker 5: I repeat myself, If we had waited, if we had 348 00:18:06,880 --> 00:18:09,399 Speaker 5: just sat in that boiling water like a frog and 349 00:18:09,440 --> 00:18:12,920 Speaker 5: waited for a much more coordinated attack through these three powers, 350 00:18:13,080 --> 00:18:15,280 Speaker 5: we could have been overwhelmed and morale could have been broken. 351 00:18:15,920 --> 00:18:18,720 Speaker 5: All credit to the president. I'm a massive critic of his, 352 00:18:19,240 --> 00:18:21,520 Speaker 5: but he is crazy enough to see a bad guy 353 00:18:21,560 --> 00:18:22,600 Speaker 5: and do something about it. 354 00:18:23,600 --> 00:18:28,240 Speaker 2: So again, what are the oar firstwhile airline allies around 355 00:18:28,280 --> 00:18:28,600 Speaker 2: the world. 356 00:18:28,600 --> 00:18:29,320 Speaker 8: What are they saying. 357 00:18:29,560 --> 00:18:32,480 Speaker 2: The only sense that they're saying, Okay, we're really getting 358 00:18:32,520 --> 00:18:35,040 Speaker 2: hurt by this energy situation more than you, the United States, 359 00:18:35,080 --> 00:18:37,959 Speaker 2: because you're net exporter of oil. Do you think that 360 00:18:37,960 --> 00:18:39,600 Speaker 2: pressure has any bearing at all. 361 00:18:39,720 --> 00:18:41,880 Speaker 5: I don't think that the president is subject to any 362 00:18:41,880 --> 00:18:45,560 Speaker 5: pressure of any kind. But the Germans are seriously rearming, 363 00:18:45,680 --> 00:18:47,480 Speaker 5: and they're talking about a war with Russia in the 364 00:18:47,520 --> 00:18:48,000 Speaker 5: near future. 365 00:18:48,920 --> 00:18:53,600 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, 366 00:18:53,800 --> 00:18:57,280 Speaker 1: and anywhere else you get your podcasts. Listen live each 367 00:18:57,280 --> 00:19:01,040 Speaker 1: week day ten am to Noone's tern on bloom dot com, 368 00:19:01,160 --> 00:19:04,680 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 369 00:19:05,119 --> 00:19:08,040 Speaker 1: You can also watch us live every weekday on YouTube 370 00:19:08,440 --> 00:19:10,680 Speaker 1: and always on the Bloomberg terminal.