1 00:00:00,120 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,240 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,920 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,320 Speaker 2: Terminal and the Bloomberg Business app. Jenny and Manuel of 10 00:00:37,400 --> 00:00:39,680 Speaker 2: evercret I I right in this The phrase it is 11 00:00:39,720 --> 00:00:43,000 Speaker 2: different this time is being heard everywhere, especially since the 12 00:00:43,040 --> 00:00:45,480 Speaker 2: FED has promised the cut raids from a position where 13 00:00:45,479 --> 00:00:48,360 Speaker 2: the economy is not slowing. We do think that Friday's 14 00:00:48,360 --> 00:00:51,320 Speaker 2: core PC number could surprise to the upside and a 15 00:00:51,320 --> 00:00:54,480 Speaker 2: cut would get quickly priced out and the market would 16 00:00:54,520 --> 00:00:57,880 Speaker 2: respond with stock weakness. Judian and place to say with 17 00:00:57,960 --> 00:01:00,319 Speaker 2: us for more. Julian, good morning, good morning to see 18 00:01:00,360 --> 00:01:03,040 Speaker 2: you said in the exuberance zone. Can you describe what 19 00:01:03,080 --> 00:01:05,240 Speaker 2: that zone is irrational or not? 20 00:01:05,760 --> 00:01:08,920 Speaker 3: It is not irrational, okay, because I think when we 21 00:01:09,080 --> 00:01:12,119 Speaker 3: as investors think about history. We have to go back 22 00:01:12,160 --> 00:01:17,480 Speaker 3: to the time where, frankly, having run money during that time, 23 00:01:17,680 --> 00:01:21,360 Speaker 3: you knew there was irrationality. In year two thousand that 24 00:01:21,480 --> 00:01:24,240 Speaker 3: was twenty eight times earnings. We are at twenty three 25 00:01:24,319 --> 00:01:25,080 Speaker 3: times earnings. 26 00:01:25,120 --> 00:01:27,120 Speaker 4: Now. The S and P and rview. 27 00:01:26,880 --> 00:01:29,080 Speaker 3: Would have to get a lot closer to six thousand 28 00:01:29,520 --> 00:01:33,600 Speaker 3: to get to irrational. However, we are seeing signs of 29 00:01:35,080 --> 00:01:40,839 Speaker 3: the wall of warri having given completely dissolved, very barrant 30 00:01:40,959 --> 00:01:44,679 Speaker 3: behavior in the options markets. Betting on stocks doubling in 31 00:01:44,720 --> 00:01:48,680 Speaker 3: the course of three or four days, incredible betting on 32 00:01:49,400 --> 00:01:53,280 Speaker 3: the Nasdaq rallying a further thirty three percent out to 33 00:01:53,400 --> 00:01:57,480 Speaker 3: June after already rallying thirty percent since the October low. 34 00:01:57,800 --> 00:01:58,720 Speaker 4: All of these. 35 00:01:58,480 --> 00:02:04,120 Speaker 3: Signs you see short interest being a decade lows. All 36 00:02:04,240 --> 00:02:07,400 Speaker 3: these things say that there is a feeling that the 37 00:02:07,400 --> 00:02:10,880 Speaker 3: market isn't invincible. And when you think about the narrative 38 00:02:11,000 --> 00:02:13,919 Speaker 3: of the last several months where we walk back from 39 00:02:14,080 --> 00:02:18,480 Speaker 3: six rate cuts to three rate cuts without the market 40 00:02:18,919 --> 00:02:21,799 Speaker 3: you know, pausing for even a moment, Yeah, you can 41 00:02:21,919 --> 00:02:25,360 Speaker 3: understand why we're there. We think that the reaction to 42 00:02:25,480 --> 00:02:27,359 Speaker 3: hotter inflation may be different. 43 00:02:27,160 --> 00:02:28,760 Speaker 2: You know, what the comeback might be. Just because you 44 00:02:28,800 --> 00:02:32,280 Speaker 2: found someone playing blackjack doesn't mean we're in Las Vegas, right, 45 00:02:32,440 --> 00:02:34,720 Speaker 2: You know, you can always find something like that. You 46 00:02:35,200 --> 00:02:37,640 Speaker 2: find it, you can find the gambling going on somewhere. 47 00:02:37,720 --> 00:02:39,880 Speaker 2: That stuff always exists. What's new about this? 48 00:02:40,880 --> 00:02:45,359 Speaker 3: So what's new about this is that this phenomenon known 49 00:02:45,400 --> 00:02:49,079 Speaker 3: as zero daised expiration options really in a lot of 50 00:02:49,120 --> 00:02:52,240 Speaker 3: ways is the equivalent of what we saw back in 51 00:02:52,280 --> 00:02:53,400 Speaker 3: the late nineteen nineties. 52 00:02:53,440 --> 00:02:54,919 Speaker 4: It was called day trading then. 53 00:02:55,240 --> 00:02:58,760 Speaker 3: Obviously it's called high frequency quantitative trading now. 54 00:02:59,200 --> 00:03:02,080 Speaker 4: But the speculation that. 55 00:03:02,000 --> 00:03:06,000 Speaker 3: You can really cause to happen every single day, and 56 00:03:06,040 --> 00:03:09,560 Speaker 3: we saw it in this earning season, this last earning season, 57 00:03:09,560 --> 00:03:11,680 Speaker 3: and we're likely to see it again this earning season, 58 00:03:12,080 --> 00:03:15,280 Speaker 3: where you have these stocks that have enormous gaps to 59 00:03:15,360 --> 00:03:20,640 Speaker 3: the upside and the downside because of the exuberance that 60 00:03:20,800 --> 00:03:22,960 Speaker 3: really has no precedent in the options market. 61 00:03:23,000 --> 00:03:25,360 Speaker 5: Which race is a question where is the reality check? 62 00:03:25,480 --> 00:03:26,480 Speaker 5: Where is the gut check? 63 00:03:26,600 --> 00:03:27,079 Speaker 2: You say it. 64 00:03:27,040 --> 00:03:29,520 Speaker 5: Comes from in some ways the inflation data, It comes 65 00:03:29,520 --> 00:03:33,160 Speaker 5: from FED expectations, it comes from the bond market. What's 66 00:03:33,200 --> 00:03:35,480 Speaker 5: the trigger though, at a time where the market is 67 00:03:35,560 --> 00:03:38,520 Speaker 5: hearing what the FED is saying, and then some they're 68 00:03:38,560 --> 00:03:40,560 Speaker 5: hearing the rosiest picture that the Fed's going to let 69 00:03:40,600 --> 00:03:43,560 Speaker 5: inflation come down very slowly, but that they will get 70 00:03:43,560 --> 00:03:44,280 Speaker 5: an under control. 71 00:03:44,520 --> 00:03:47,920 Speaker 3: So, when you have momentum of this kind of strength, 72 00:03:47,920 --> 00:03:51,040 Speaker 3: and we have to acknowledge that this is among the 73 00:03:51,040 --> 00:03:55,040 Speaker 3: most record scenting periods of momentum that we've seen, there 74 00:03:55,120 --> 00:03:57,680 Speaker 3: tends not to be a discrete trigger. 75 00:03:57,720 --> 00:03:59,160 Speaker 4: The one thing we would point to. 76 00:03:59,480 --> 00:04:01,960 Speaker 3: Is when you think about it, actually the month of 77 00:04:02,000 --> 00:04:05,680 Speaker 3: April is sort of an outlier in that what you 78 00:04:05,800 --> 00:04:09,080 Speaker 3: tend to see is sort of momentum reversals, and what 79 00:04:09,120 --> 00:04:11,560 Speaker 3: we've looked at over the month of March is some 80 00:04:11,640 --> 00:04:14,240 Speaker 3: of these momentum names have stalled. 81 00:04:14,440 --> 00:04:16,520 Speaker 4: They haven't reversed, they've stalled. 82 00:04:16,800 --> 00:04:20,920 Speaker 3: But when you are trying to feed that sort of exuberance, 83 00:04:21,560 --> 00:04:24,320 Speaker 3: stalling is something that we take note of. And again 84 00:04:24,680 --> 00:04:28,160 Speaker 3: with this tendency, turning the page to the second quarter, 85 00:04:28,560 --> 00:04:31,560 Speaker 3: there is a potential in our view of momentum really 86 00:04:31,600 --> 00:04:32,560 Speaker 3: taking a backseat. 87 00:04:32,680 --> 00:04:35,480 Speaker 5: How do some of the retail investors, the traders that 88 00:04:35,640 --> 00:04:39,039 Speaker 5: use these options contracts that you were talking about fit 89 00:04:39,120 --> 00:04:41,720 Speaker 5: into the picture of how this will develop. Do you 90 00:04:41,760 --> 00:04:44,000 Speaker 5: think that they increase the fragility of markets, or do 91 00:04:44,040 --> 00:04:46,840 Speaker 5: you think that essentially they're just a feature of the 92 00:04:46,839 --> 00:04:47,520 Speaker 5: moment we're in. 93 00:04:47,960 --> 00:04:51,880 Speaker 3: Well, no, actually, and we said this when zero disted 94 00:04:51,960 --> 00:04:55,680 Speaker 3: expiration options first became quote unquote a thing that we 95 00:04:55,800 --> 00:04:59,760 Speaker 3: felt very highly convicted that it would suppress volatility because 96 00:05:00,120 --> 00:05:03,080 Speaker 3: think about it, the casino is open from nine point 97 00:05:03,080 --> 00:05:05,720 Speaker 3: thirty to four and then you cast your chips in 98 00:05:05,960 --> 00:05:09,720 Speaker 3: and there's no overnight risk, okay. And actually, as a 99 00:05:09,720 --> 00:05:13,680 Speaker 3: professional investor, that gives you opportunities that you might not 100 00:05:13,839 --> 00:05:17,000 Speaker 3: normally have because when you're pushing the action on a 101 00:05:17,080 --> 00:05:19,520 Speaker 3: day to day basis in this way and you get 102 00:05:19,560 --> 00:05:22,760 Speaker 3: these gap moves. If you're a disciplined buyer and seller 103 00:05:22,800 --> 00:05:25,840 Speaker 3: of stocks, you get these opportunities to add. 104 00:05:25,640 --> 00:05:28,400 Speaker 4: To positions, to trim positions. 105 00:05:28,040 --> 00:05:32,640 Speaker 3: That actually increase the alpha and make this it really 106 00:05:33,240 --> 00:05:37,360 Speaker 3: The environment that we're in of stock selection is also 107 00:05:37,560 --> 00:05:40,200 Speaker 3: unlike anything we've seen, But a lot of this is 108 00:05:40,320 --> 00:05:43,480 Speaker 3: driven by this constant exuberance that we see on the 109 00:05:43,520 --> 00:05:44,159 Speaker 3: part of the public. 110 00:05:44,200 --> 00:05:46,279 Speaker 2: Can you talk to us about opportunities right now? Then 111 00:05:46,440 --> 00:05:47,039 Speaker 2: what are they? 112 00:05:47,640 --> 00:05:51,520 Speaker 3: So we continue to think that there's a likelihood of 113 00:05:51,560 --> 00:05:55,599 Speaker 3: the economy slowing in the second half and into twenty 114 00:05:55,680 --> 00:05:58,240 Speaker 3: twenty five. And when you think about it, some of 115 00:05:58,320 --> 00:06:01,840 Speaker 3: these more defensive sectors that actually tend to do well 116 00:06:02,360 --> 00:06:05,960 Speaker 3: in the period from the last hike to the first 117 00:06:06,000 --> 00:06:11,680 Speaker 3: cut it have lagged. They've had idiosyncratic issues. Healthcare, consumer 118 00:06:11,760 --> 00:06:15,200 Speaker 3: staples really sort of working off the GLP one phenomenon. 119 00:06:15,480 --> 00:06:18,880 Speaker 3: We think there's a lot of value there. And there's 120 00:06:18,920 --> 00:06:23,440 Speaker 3: also this entire subset of names whose valuations haven't moved 121 00:06:23,440 --> 00:06:26,320 Speaker 3: out in the way the index has that still have 122 00:06:26,440 --> 00:06:27,240 Speaker 3: strong earnings. 123 00:06:27,360 --> 00:06:28,279 Speaker 4: It's a cross sector. 124 00:06:28,360 --> 00:06:30,159 Speaker 2: Now, can we get to healthcare on place? You put 125 00:06:30,160 --> 00:06:31,799 Speaker 2: it out, what am I buying? Going to buy healthcare? 126 00:06:31,960 --> 00:06:34,760 Speaker 2: Is it just the JLP well semantic story and some 127 00:06:34,800 --> 00:06:36,600 Speaker 2: people might point to that as a zuber and well 128 00:06:36,600 --> 00:06:37,560 Speaker 2: am I buying well? 129 00:06:37,640 --> 00:06:41,480 Speaker 3: So that's what held the rest of the sector back 130 00:06:41,480 --> 00:06:44,080 Speaker 3: for the majority of last year. But when you look 131 00:06:44,160 --> 00:06:48,359 Speaker 3: at it right, there's this whole notion that we've started 132 00:06:48,360 --> 00:06:52,400 Speaker 3: to CM and a activity come back because financing conditions 133 00:06:52,640 --> 00:06:56,440 Speaker 3: have remained as favorable as they have and that really 134 00:06:56,480 --> 00:06:59,919 Speaker 3: points to, you know, the future. In terms of biotech, 135 00:07:00,560 --> 00:07:04,560 Speaker 3: small cap biotech has done pretty well this year. We 136 00:07:04,680 --> 00:07:08,080 Speaker 3: think there's a broadening, and of course, in this environment 137 00:07:08,920 --> 00:07:13,600 Speaker 3: where the likelihood is that you know it with a 138 00:07:13,720 --> 00:07:17,800 Speaker 3: yield on some of these names four or five six percent, 139 00:07:19,000 --> 00:07:21,560 Speaker 3: bar belling into some of the safer names, cash flow 140 00:07:21,640 --> 00:07:23,280 Speaker 3: generators makes sense to us as well. 141 00:07:23,320 --> 00:07:25,720 Speaker 2: Interesting, Julian, thank you. It's good to see you as always. 142 00:07:25,720 --> 00:07:28,400 Speaker 2: Thank you saying Jenny and Monnuwether of Evercore in the 143 00:07:28,400 --> 00:07:42,960 Speaker 2: Exuberance Zone. Israel Prime Minister Benjamin Nettania, who's office canceling 144 00:07:43,000 --> 00:07:46,480 Speaker 2: a planned visit by senior aide to Washington. The decision 145 00:07:46,520 --> 00:07:49,760 Speaker 2: coming after the US abstained from voting a UN resolution 146 00:07:49,880 --> 00:07:52,720 Speaker 2: demanding an immediate cease far in Gaza. One of the 147 00:07:52,720 --> 00:07:55,360 Speaker 2: eighth scheduled to visit the US was Ron Dermer. These 148 00:07:55,360 --> 00:07:59,280 Speaker 2: Arareel Strategic Affairs Minister. He joined us now from Jerusalem. Minister, 149 00:07:59,320 --> 00:08:01,880 Speaker 2: wonderful to catch with you once again, Sir. I want 150 00:08:01,920 --> 00:08:04,760 Speaker 2: to begin our conversation if we can, with a quote 151 00:08:04,760 --> 00:08:08,280 Speaker 2: from John Kirby, the spokesperson for the UST National Security Council, 152 00:08:08,360 --> 00:08:10,360 Speaker 2: and Minister. This is what he had to say. There's 153 00:08:10,400 --> 00:08:12,400 Speaker 2: no reason for this to be seen as some sort 154 00:08:12,440 --> 00:08:16,280 Speaker 2: of escalation. Nothing has changed about our policy. Nothing. We 155 00:08:16,360 --> 00:08:18,920 Speaker 2: still want to see a ceasefire, we still want to 156 00:08:18,920 --> 00:08:21,560 Speaker 2: get hostages out. Minister, Can we just begin with that 157 00:08:21,600 --> 00:08:24,280 Speaker 2: line coming from the administration, What exactly do you believe 158 00:08:24,360 --> 00:08:27,600 Speaker 2: has changed as they turn around and say nothing has. 159 00:08:29,040 --> 00:08:31,840 Speaker 6: Well, I believe there are policy that has been pretty consistent, John, 160 00:08:31,920 --> 00:08:33,960 Speaker 6: since the beginning of the war about six months ago, 161 00:08:34,920 --> 00:08:37,160 Speaker 6: was to not accept the cease fire. That would be 162 00:08:37,760 --> 00:08:40,720 Speaker 6: unconditional and it would have to be connected to an 163 00:08:40,760 --> 00:08:45,160 Speaker 6: agreement to release hostages. Unfortunately, in this text there was passed. 164 00:08:45,720 --> 00:08:48,400 Speaker 6: Those two issues were separated for the first time. In fact, 165 00:08:48,400 --> 00:08:51,240 Speaker 6: five days before there was a resolution that the United 166 00:08:51,280 --> 00:08:55,200 Speaker 6: States put forward that was vetoed by a China and Russia. 167 00:08:55,240 --> 00:08:57,040 Speaker 6: And one of the reasons why they vetoed it is 168 00:08:57,080 --> 00:08:59,080 Speaker 6: because it connected those two issues. And if you look 169 00:08:59,120 --> 00:09:01,520 Speaker 6: at the text, and everyone can go see it on 170 00:09:01,559 --> 00:09:04,480 Speaker 6: the UN website, and you look at the resolution five 171 00:09:04,559 --> 00:09:07,720 Speaker 6: days ago and you look at the resolution that passed yesterday, 172 00:09:07,800 --> 00:09:10,679 Speaker 6: you'll see a huge difference. And unfortunately, that's a change 173 00:09:10,679 --> 00:09:11,520 Speaker 6: in US policy. 174 00:09:11,559 --> 00:09:11,679 Speaker 1: Now. 175 00:09:11,720 --> 00:09:14,680 Speaker 6: I'm glad to hear that John Kirby said, it's not 176 00:09:14,720 --> 00:09:17,240 Speaker 6: a change in US policy, and I hope that they 177 00:09:17,280 --> 00:09:20,160 Speaker 6: will continue to connect those two issues. But that's not 178 00:09:20,240 --> 00:09:23,719 Speaker 6: the text of the resolution, and that's why Tamas celebrated 179 00:09:23,720 --> 00:09:25,000 Speaker 6: the resolution and welcomed it. 180 00:09:25,320 --> 00:09:26,720 Speaker 1: That's why Iran welcomed it. 181 00:09:26,800 --> 00:09:30,439 Speaker 6: Believe me, any resolution by the UN Security Council that 182 00:09:30,559 --> 00:09:33,280 Speaker 6: Kamas welcomes is not a good resolution for Israel. 183 00:09:33,320 --> 00:09:35,640 Speaker 2: A minister, you would you to travel yesterday evening. Could 184 00:09:35,640 --> 00:09:37,559 Speaker 2: you share with us what you said to the administration 185 00:09:37,679 --> 00:09:39,480 Speaker 2: directly after that decision? 186 00:09:41,400 --> 00:09:42,400 Speaker 1: Well, I spoke to them. 187 00:09:42,440 --> 00:09:44,480 Speaker 6: I haven't spoken to them after that decision. I spoke 188 00:09:44,480 --> 00:09:46,920 Speaker 6: to them before that decision. When we first learned about 189 00:09:46,960 --> 00:09:49,840 Speaker 6: which direction this was going. I did on I think 190 00:09:49,840 --> 00:09:53,560 Speaker 6: it was Sunday night, and when I heard what was happening, 191 00:09:53,640 --> 00:09:56,000 Speaker 6: I said, look, you're going to have it's the wrong 192 00:09:56,080 --> 00:09:58,880 Speaker 6: message at the wrong time. I explained to you, why 193 00:09:59,040 --> 00:10:01,839 Speaker 6: was the wrong message because it's not connecting the issue 194 00:10:01,840 --> 00:10:03,800 Speaker 6: of a ceasefire with the return of the hostages. 195 00:10:03,840 --> 00:10:05,640 Speaker 1: And why is it such bad timing. 196 00:10:05,800 --> 00:10:09,679 Speaker 6: Because we had negotiators in Doha trying to get an 197 00:10:09,679 --> 00:10:14,880 Speaker 6: agreement to release hostages. And it's not surprising that Hamas 198 00:10:14,920 --> 00:10:17,400 Speaker 6: decided to reject the latest proposal that was put forward 199 00:10:17,400 --> 00:10:20,840 Speaker 6: by the Americans, because why should they not reject it? 200 00:10:20,840 --> 00:10:22,720 Speaker 6: They think they're going to get a ceasefire without giving 201 00:10:22,800 --> 00:10:25,360 Speaker 6: up the hostages, because that's what the resolution said. And 202 00:10:25,400 --> 00:10:28,080 Speaker 6: I understand and I appreciate that the United States has 203 00:10:28,120 --> 00:10:31,240 Speaker 6: said that's not our policy, but that's not the text 204 00:10:31,240 --> 00:10:31,960 Speaker 6: of the resolution. 205 00:10:32,120 --> 00:10:32,920 Speaker 1: And that's the problem. 206 00:10:33,000 --> 00:10:35,640 Speaker 6: I told them before if this would be the case, 207 00:10:35,679 --> 00:10:38,000 Speaker 6: I would find it very difficult to believe that the 208 00:10:38,000 --> 00:10:41,280 Speaker 6: Prime Minister would send a delegation to Washington. Why because 209 00:10:41,320 --> 00:10:44,440 Speaker 6: the purpose of us going to Washington was to discuss 210 00:10:44,480 --> 00:10:47,400 Speaker 6: and to actually listen to American ideas of how we 211 00:10:47,400 --> 00:10:50,120 Speaker 6: should go into Rafa the other ideas that they said 212 00:10:50,160 --> 00:10:53,480 Speaker 6: they had without a major military operation in Rafa. What 213 00:10:53,679 --> 00:10:56,240 Speaker 6: message John is going to send to hamas that the 214 00:10:56,320 --> 00:11:00,200 Speaker 6: day after that the Americans separate these two issues. Hey, 215 00:11:00,200 --> 00:11:02,079 Speaker 6: you know what, you could have a ceasefire without a 216 00:11:02,120 --> 00:11:05,199 Speaker 6: hostage negotiations, and then the United States is presenting its 217 00:11:05,200 --> 00:11:07,640 Speaker 6: proposal how we should not go into Rafa. 218 00:11:08,160 --> 00:11:09,200 Speaker 1: That's a real big problem. 219 00:11:09,240 --> 00:11:11,360 Speaker 6: And that's why the Prime Minister made the right decision, 220 00:11:12,120 --> 00:11:14,560 Speaker 6: made the right decision to stop the delegation which I 221 00:11:14,640 --> 00:11:16,520 Speaker 6: was leading to go to Washington. 222 00:11:16,600 --> 00:11:19,400 Speaker 7: Okay, so this trip was suspended. Is there any plans 223 00:11:19,440 --> 00:11:21,720 Speaker 7: for you to come to Washington then in the future. 224 00:11:23,200 --> 00:11:23,560 Speaker 1: I don't know. 225 00:11:23,559 --> 00:11:25,680 Speaker 6: We'll have to discuss it with the US administration. We 226 00:11:25,720 --> 00:11:29,120 Speaker 6: haven't had those discussions yet. I think the context here 227 00:11:29,520 --> 00:11:33,200 Speaker 6: was particularly problematic. Obviously, the US has ideas, and I'm 228 00:11:33,240 --> 00:11:34,800 Speaker 6: sure they'll share it with us. I don't know if 229 00:11:34,800 --> 00:11:37,320 Speaker 6: it'll be in a delegation in Washington's people coming here 230 00:11:37,800 --> 00:11:40,000 Speaker 6: us speaking over the phone, but they have ideas that 231 00:11:40,040 --> 00:11:42,200 Speaker 6: they won't want to present to us. The President asked 232 00:11:42,480 --> 00:11:45,440 Speaker 6: the Prime Minister of Israel to send the delegation so 233 00:11:45,480 --> 00:11:48,360 Speaker 6: that we can hear their ideas. We have our Defense 234 00:11:48,440 --> 00:11:52,400 Speaker 6: minister in Washington now. I'm sure he's discussing. 235 00:11:51,960 --> 00:11:52,480 Speaker 1: This with them. 236 00:11:52,840 --> 00:11:56,600 Speaker 6: But I think that timing was particularly problematic because of 237 00:11:56,640 --> 00:12:00,600 Speaker 6: the message that this UN Security Council resolution was sending. 238 00:12:00,679 --> 00:12:03,560 Speaker 6: It was a very very bad message, both for the 239 00:12:03,600 --> 00:12:07,040 Speaker 6: hostage negotiations and also we have to be very clear 240 00:12:07,120 --> 00:12:09,760 Speaker 6: with Hamas. We have to be very clear that we're 241 00:12:09,760 --> 00:12:11,720 Speaker 6: going to fight this war until the end. And the 242 00:12:11,800 --> 00:12:14,719 Speaker 6: last thing we want them to believe that the international 243 00:12:14,800 --> 00:12:18,160 Speaker 6: pressure on Israel will get us to simply not finish 244 00:12:18,200 --> 00:12:21,240 Speaker 6: the war. That's not going to happen now. I don't 245 00:12:22,040 --> 00:12:24,560 Speaker 6: decide what the United States will do or won't do. 246 00:12:24,640 --> 00:12:27,199 Speaker 6: They're a sovereign government, they'll have to make their own decisions. 247 00:12:27,360 --> 00:12:30,080 Speaker 6: But Israel has to make clear to Hamas did we 248 00:12:30,120 --> 00:12:32,520 Speaker 6: intend to fight this fight till the very end, and 249 00:12:32,640 --> 00:12:35,760 Speaker 6: hopefully that pressure they're understanding that we're going to fight 250 00:12:35,840 --> 00:12:37,959 Speaker 6: this to the end will enable us to get to 251 00:12:38,000 --> 00:12:38,760 Speaker 6: a hostage deal. 252 00:12:38,960 --> 00:12:41,760 Speaker 7: Well, these really defense minister, as you say, is in Washington. 253 00:12:42,240 --> 00:12:46,080 Speaker 7: We have Benjamin Ettiaho, the Prime Minister, approving a Rafa operation. 254 00:12:46,679 --> 00:12:49,080 Speaker 7: But the Israeli Defense minister said he had a good 255 00:12:49,120 --> 00:12:52,880 Speaker 7: meeting with officials in Washington. Did anyone convince anyone on 256 00:12:52,920 --> 00:12:54,280 Speaker 7: other side to change? 257 00:12:55,720 --> 00:12:58,320 Speaker 6: Well, look, we've been in discussions with the US administration 258 00:12:58,440 --> 00:13:01,679 Speaker 6: for a long time. The initial US policy was essentially 259 00:13:02,080 --> 00:13:05,679 Speaker 6: not that they're against an operation in Rafa full stop. 260 00:13:06,120 --> 00:13:09,800 Speaker 6: What they said initially was that Israel has to make 261 00:13:09,840 --> 00:13:12,640 Speaker 6: efforts to get the civilians out of harms way and 262 00:13:12,679 --> 00:13:15,200 Speaker 6: to ensure that humanitarian assistants can get to them. And 263 00:13:15,240 --> 00:13:17,800 Speaker 6: guess what, we agree, and we've been working on a 264 00:13:17,840 --> 00:13:20,080 Speaker 6: plan to get the civilians out of harms way and 265 00:13:20,120 --> 00:13:22,920 Speaker 6: to get ramp up humanitarian assistance to them. So this 266 00:13:23,000 --> 00:13:25,800 Speaker 6: is something where the two governments should be able to 267 00:13:25,840 --> 00:13:28,000 Speaker 6: get to common ground and should be able to get on. 268 00:13:27,960 --> 00:13:28,480 Speaker 1: The same page. 269 00:13:28,520 --> 00:13:30,679 Speaker 6: Now, if the position of the United States is there 270 00:13:30,720 --> 00:13:34,000 Speaker 6: should not be a major military operation in Gaza, then 271 00:13:34,040 --> 00:13:35,680 Speaker 6: we're not going to be on the same page because 272 00:13:35,679 --> 00:13:39,440 Speaker 6: we have to go in to Rafa, we have to 273 00:13:39,480 --> 00:13:41,240 Speaker 6: finish the job. We have to take care of these 274 00:13:41,280 --> 00:13:44,280 Speaker 6: four battalions. We can lead, leave twenty percent or twenty 275 00:13:44,320 --> 00:13:46,679 Speaker 6: five percent of the Hamas force in Gaza so they 276 00:13:46,679 --> 00:13:51,479 Speaker 6: can simply reorganize and comeback. And Israel's major military operations 277 00:13:51,520 --> 00:13:55,120 Speaker 6: actually have enabled us to do much smaller operations and 278 00:13:55,200 --> 00:13:57,920 Speaker 6: achieve great success. Look at what happened in Shifa Hospital. 279 00:13:57,920 --> 00:14:00,000 Speaker 6: I don't know if you're following that, in the northern 280 00:14:00,040 --> 00:14:01,000 Speaker 6: part of the Gaza strip. 281 00:14:01,360 --> 00:14:02,680 Speaker 1: We were there a few months. 282 00:14:02,440 --> 00:14:05,120 Speaker 6: Ago and we did a major operation just now. We 283 00:14:05,240 --> 00:14:08,400 Speaker 6: went back last week and we have done one of 284 00:14:08,400 --> 00:14:12,240 Speaker 6: the most successful operations in Shifa Hospital in our history. 285 00:14:12,320 --> 00:14:15,840 Speaker 6: Nearly two hundred terrorists were killed there, over eight hundred 286 00:14:15,880 --> 00:14:20,240 Speaker 6: terrorists were captured, and there have been zero civilian casualties. 287 00:14:20,280 --> 00:14:23,000 Speaker 6: In fact, there have been more Israeli soldiers too who 288 00:14:23,000 --> 00:14:26,760 Speaker 6: have died in that operation. Than civilian casualties. Why can't 289 00:14:26,760 --> 00:14:28,160 Speaker 6: we do that? And I think this is a very 290 00:14:28,160 --> 00:14:31,200 Speaker 6: important point for your viewers to understand, because once you 291 00:14:31,280 --> 00:14:35,400 Speaker 6: do the major military operations, once you crush these battalions 292 00:14:35,440 --> 00:14:37,480 Speaker 6: and defeat them, Israel has to. 293 00:14:37,440 --> 00:14:40,280 Speaker 1: Come in with a much smaller force, much more. 294 00:14:40,160 --> 00:14:44,320 Speaker 6: Careful military operations, and achieved great success. That's why it's 295 00:14:44,360 --> 00:14:46,120 Speaker 6: so important for us to go to Rafah and to 296 00:14:46,160 --> 00:14:46,800 Speaker 6: finish the job. 297 00:14:46,920 --> 00:14:49,440 Speaker 5: You keep saying, fight this until the end. People have 298 00:14:49,480 --> 00:14:53,080 Speaker 5: already talked about when you have people living in dire situations, 299 00:14:53,240 --> 00:15:00,080 Speaker 5: people who've seen their loved ones being killed, that breeds extremist. 300 00:14:59,000 --> 00:14:59,720 Speaker 2: Type of behavior. 301 00:15:00,040 --> 00:15:02,840 Speaker 5: You're already seeing that in certain places that even if 302 00:15:02,880 --> 00:15:05,200 Speaker 5: you kill Hamas, something else will come in its place 303 00:15:05,280 --> 00:15:08,280 Speaker 5: because there isn't leadership and there isn't a sense of 304 00:15:08,280 --> 00:15:11,240 Speaker 5: what the future is. How do you counter those types 305 00:15:11,280 --> 00:15:13,840 Speaker 5: of discussions? How do you say there is an end 306 00:15:14,040 --> 00:15:14,960 Speaker 5: that you have in sight? 307 00:15:16,280 --> 00:15:18,360 Speaker 1: Well, first of all, understand what we're trying to achieve. 308 00:15:18,520 --> 00:15:23,360 Speaker 6: We're trying to destroy Kamas's military in Gaza. They're not 309 00:15:23,560 --> 00:15:27,760 Speaker 6: a terror organization in Gaza. They're a military terror organization 310 00:15:27,800 --> 00:15:29,760 Speaker 6: in Gaza, and we have to crush their military and 311 00:15:29,800 --> 00:15:32,560 Speaker 6: it's divided up into battalions, and we're doing that I 312 00:15:32,640 --> 00:15:34,800 Speaker 6: think very well. But what you just said about it 313 00:15:34,840 --> 00:15:37,360 Speaker 6: breeds extremism. I'd ask you, do you think that the 314 00:15:37,400 --> 00:15:40,600 Speaker 6: action of the United States against the Nazis in Germany? 315 00:15:40,640 --> 00:15:43,120 Speaker 1: Do you think that bred extremism among Germans? Do you 316 00:15:43,120 --> 00:15:43,520 Speaker 1: think the. 317 00:15:43,480 --> 00:15:46,680 Speaker 6: Actions of the United States in Japan bred extremism? I mean, 318 00:15:46,840 --> 00:15:49,400 Speaker 6: you were smart enough to first of all finish the 319 00:15:49,480 --> 00:15:53,160 Speaker 6: job and win the war, and you demanded unconditional surrender 320 00:15:53,200 --> 00:15:55,640 Speaker 6: to achieve it, and then you were smart enough to 321 00:15:55,640 --> 00:15:58,800 Speaker 6: be magnanimous in victory and provide a different path for 322 00:15:58,880 --> 00:16:01,520 Speaker 6: the future. Have to finish the job is what if 323 00:16:01,560 --> 00:16:05,160 Speaker 6: you not finish the job, the situation will actually be worse. 324 00:16:05,760 --> 00:16:08,360 Speaker 6: You have to finish the job, defeat them, and then 325 00:16:08,400 --> 00:16:10,440 Speaker 6: you can talk about a day after. Then we can 326 00:16:10,520 --> 00:16:12,920 Speaker 6: talk about how we can expand peace in the region, 327 00:16:13,200 --> 00:16:15,280 Speaker 6: what we should do in the long term prospects of 328 00:16:15,320 --> 00:16:17,480 Speaker 6: Israelis and Paal sittings. But there will be no day 329 00:16:17,520 --> 00:16:19,400 Speaker 6: after Hamas if Ramas is still there. 330 00:16:19,600 --> 00:16:21,000 Speaker 1: That's why we have to finish the job. 331 00:16:21,120 --> 00:16:23,320 Speaker 5: I guess that one of the key questions that has 332 00:16:23,360 --> 00:16:25,280 Speaker 5: been kind of hanging over this is we don't have 333 00:16:25,320 --> 00:16:28,640 Speaker 5: a clear sense of how you provide that type of 334 00:16:28,680 --> 00:16:31,720 Speaker 5: structure in any way when you don't have that being 335 00:16:31,760 --> 00:16:34,040 Speaker 5: provided with respect to who's going to be the leader, 336 00:16:34,120 --> 00:16:36,240 Speaker 5: with respect to who's going to provide the financing, with 337 00:16:36,280 --> 00:16:38,240 Speaker 5: respect to even whether there'll be two states and what 338 00:16:38,280 --> 00:16:40,200 Speaker 5: that will look like with a certain land in the 339 00:16:40,200 --> 00:16:42,880 Speaker 5: West Bank being seized. So how do you address those 340 00:16:42,960 --> 00:16:45,360 Speaker 5: kinds of questions that do need to be put into 341 00:16:45,440 --> 00:16:47,920 Speaker 5: place before you finish the job. 342 00:16:48,680 --> 00:16:50,240 Speaker 6: I don't believe they have to be put in place 343 00:16:50,240 --> 00:16:51,200 Speaker 6: before you finish the job. 344 00:16:51,200 --> 00:16:52,840 Speaker 1: In fact, I think just the opposite. 345 00:16:53,040 --> 00:16:54,880 Speaker 6: I think if you try to put the that in 346 00:16:54,920 --> 00:16:57,600 Speaker 6: place now, you can actually undermine the effort to get 347 00:16:57,600 --> 00:17:01,120 Speaker 6: to a real good day after plan afterwards, because first 348 00:17:01,280 --> 00:17:05,120 Speaker 6: everybody has to understand that Hamas and Gaza is finished. 349 00:17:05,480 --> 00:17:08,240 Speaker 6: Until they understand that, no one will step forward. So 350 00:17:08,320 --> 00:17:10,000 Speaker 6: you're going to actually have a plan that's going to 351 00:17:10,040 --> 00:17:13,000 Speaker 6: be stillborn the second you win. That's the time when 352 00:17:13,040 --> 00:17:16,480 Speaker 6: the international community, obviously led by the United States, Israel, 353 00:17:16,520 --> 00:17:18,720 Speaker 6: Ara partners in the region, have to come in and say, Okay, 354 00:17:18,720 --> 00:17:21,320 Speaker 6: what do we do now? Now Hamas is defeated, in Gaza. 355 00:17:21,760 --> 00:17:24,159 Speaker 6: What is the next step to think that anyone is 356 00:17:24,200 --> 00:17:27,760 Speaker 6: going to emerge now when you have four terrorist battalions 357 00:17:28,000 --> 00:17:31,480 Speaker 6: of Hamas and Gaza, maybe around fifteen thousand terrorists fighting there, 358 00:17:31,480 --> 00:17:34,240 Speaker 6: and that somebody is going to step forward kidding themselves. 359 00:17:34,359 --> 00:17:36,040 Speaker 6: We saw what happened in the northern part of the 360 00:17:36,080 --> 00:17:38,600 Speaker 6: Gaza strip when we try to work with local actors. 361 00:17:38,760 --> 00:17:41,600 Speaker 6: Hamas took them out and executed them. That's what's going 362 00:17:41,680 --> 00:17:44,040 Speaker 6: to happen until we finish the job. That's why I 363 00:17:44,080 --> 00:17:46,760 Speaker 6: think it is in the interest of all countries who 364 00:17:46,880 --> 00:17:49,320 Speaker 6: not only are interested in israel security, but interested in 365 00:17:49,320 --> 00:17:51,960 Speaker 6: a better future for the Palestinians to get Israel to 366 00:17:51,960 --> 00:17:54,440 Speaker 6: finish the job as quickly as possible so we can 367 00:17:54,480 --> 00:17:56,679 Speaker 6: move on to a day after. And the truth is, 368 00:17:57,119 --> 00:17:59,480 Speaker 6: we have real partners in the region for that day after. 369 00:17:59,520 --> 00:18:00,919 Speaker 1: I think the are a partner. 370 00:18:01,080 --> 00:18:03,440 Speaker 6: I think the Amarades are a partner. I think they 371 00:18:03,480 --> 00:18:07,040 Speaker 6: are starting and they've worked to deradicalize their own societies. 372 00:18:07,320 --> 00:18:09,280 Speaker 6: I think we need to look for them into their 373 00:18:09,400 --> 00:18:11,680 Speaker 6: leadership to see what we can do in a day after, 374 00:18:11,760 --> 00:18:14,679 Speaker 6: and then we can talk about all of those political issues. 375 00:18:14,680 --> 00:18:16,960 Speaker 6: But first we have to get to a day after. 376 00:18:17,040 --> 00:18:19,240 Speaker 6: We have to finish the job. You cannot leave that 377 00:18:19,400 --> 00:18:22,480 Speaker 6: force in Gaza. It would be like, as one Israeli 378 00:18:22,520 --> 00:18:25,199 Speaker 6: minister said, Minister against He said, it would be like 379 00:18:26,200 --> 00:18:29,199 Speaker 6: fighting eighty percent of a fire, leaving twenty percent of 380 00:18:29,200 --> 00:18:30,880 Speaker 6: the fire and simply hoping that it's. 381 00:18:30,680 --> 00:18:32,320 Speaker 1: Not going to come back. Of course it'll come back. 382 00:18:32,400 --> 00:18:34,719 Speaker 6: We have to douse these flames and then we can 383 00:18:34,760 --> 00:18:35,680 Speaker 6: talk about the day after. 384 00:18:35,880 --> 00:18:37,640 Speaker 2: Minista, I know we only have a few minutes left 385 00:18:37,640 --> 00:18:39,360 Speaker 2: with you. I had a few direct questions to work 386 00:18:39,400 --> 00:18:41,600 Speaker 2: through with you, if I may. The Vice President of 387 00:18:41,600 --> 00:18:44,040 Speaker 2: the United States spoke over the weekend. Here's a quote 388 00:18:44,040 --> 00:18:46,960 Speaker 2: from her. Any major military operation in Rafa would be 389 00:18:46,960 --> 00:18:50,320 Speaker 2: a huge mistake. I'm not trying to understand from your 390 00:18:50,359 --> 00:18:52,360 Speaker 2: site why you think that's not a mistake. I'm trying 391 00:18:52,359 --> 00:18:55,040 Speaker 2: to understand now what the consequences would be if you 392 00:18:55,119 --> 00:18:57,840 Speaker 2: cross that perceived red line. Now, have they communicated what 393 00:18:57,840 --> 00:19:01,399 Speaker 2: the consequences would be for Israel and the relationship between 394 00:19:01,440 --> 00:19:04,119 Speaker 2: you and the United States? Have you heard anything whatsoever? 395 00:19:05,680 --> 00:19:08,239 Speaker 6: No, they haven't communicated that with this, But I can 396 00:19:08,280 --> 00:19:10,159 Speaker 6: tell you, John, what the consequences will be if we 397 00:19:10,200 --> 00:19:12,520 Speaker 6: don't go in and finish the job. It'll be that 398 00:19:12,560 --> 00:19:15,760 Speaker 6: October seventh will happen again and again and again. People 399 00:19:15,760 --> 00:19:17,840 Speaker 6: in the United States have to understand that the people 400 00:19:17,840 --> 00:19:20,800 Speaker 6: of Israel see what happened on October seventh as an extent, 401 00:19:21,000 --> 00:19:23,080 Speaker 6: as an existential threat to the country. 402 00:19:23,119 --> 00:19:25,080 Speaker 1: And I'll explain to you what I mean. It's not 403 00:19:25,200 --> 00:19:26,040 Speaker 1: because I think. 404 00:19:25,960 --> 00:19:29,760 Speaker 6: Hamas can destroy the State of Israel. They cannot. But 405 00:19:30,040 --> 00:19:33,160 Speaker 6: if we do not destroy the terror organization that did 406 00:19:33,240 --> 00:19:35,720 Speaker 6: that on October seventh, if we do not take them 407 00:19:35,720 --> 00:19:38,960 Speaker 6: out as a military organization in Gaza, then I truly 408 00:19:39,000 --> 00:19:41,080 Speaker 6: believe that this country has no future Because all the 409 00:19:41,119 --> 00:19:44,040 Speaker 6: buzzards who are circling around Israel and are looking to 410 00:19:44,080 --> 00:19:46,960 Speaker 6: see what's going to happen to Hamas after they perpetrated 411 00:19:47,000 --> 00:19:49,840 Speaker 6: that attack, they have to understand that Hamas is a 412 00:19:49,920 --> 00:19:53,639 Speaker 6: terror organization in Gaza, as a military is finished. You know, 413 00:19:53,680 --> 00:19:56,120 Speaker 6: they are American officials. This happened a couple months ago. 414 00:19:56,119 --> 00:19:58,000 Speaker 6: A senior official came and he said, you know, Hamas 415 00:19:58,119 --> 00:20:01,080 Speaker 6: is an idea, and you can't destroy idea. And I 416 00:20:01,200 --> 00:20:04,080 Speaker 6: countered by saying, you know, Nazism is an idea and 417 00:20:04,119 --> 00:20:07,040 Speaker 6: there are Nazis in Charlottesville walking around with tiki torches 418 00:20:07,040 --> 00:20:08,560 Speaker 6: that they bought at bed Bath and beyond. 419 00:20:08,840 --> 00:20:10,560 Speaker 1: But they don't have a state called Germany. 420 00:20:10,720 --> 00:20:14,080 Speaker 6: ISIS is an idea, and there are people who follow ISIS. 421 00:20:14,119 --> 00:20:17,200 Speaker 6: You saw the attack in Moscow just a few days ago, 422 00:20:17,480 --> 00:20:20,240 Speaker 6: and there are black flags that are in bedrooms, probably 423 00:20:20,359 --> 00:20:21,920 Speaker 6: not just in the Middle East, but in Europe and 424 00:20:21,960 --> 00:20:22,720 Speaker 6: even places in. 425 00:20:22,640 --> 00:20:25,280 Speaker 1: The United States. But they don't have a state. 426 00:20:25,320 --> 00:20:28,680 Speaker 6: They don't control the territory of a caliphate between Iraq 427 00:20:28,760 --> 00:20:30,760 Speaker 6: and Syria. It is one thing to deal with a 428 00:20:30,840 --> 00:20:34,199 Speaker 6: terror organization is It's another thing to deal with a 429 00:20:34,440 --> 00:20:38,439 Speaker 6: military that is a terror group. That's a total different story. 430 00:20:38,480 --> 00:20:43,280 Speaker 6: And we're going to dismantle comases military regime in Gaza. 431 00:20:43,400 --> 00:20:46,119 Speaker 6: It's gonna happen, and I would like to have the 432 00:20:46,200 --> 00:20:49,119 Speaker 6: United States by our side. They've been there for the 433 00:20:49,160 --> 00:20:51,400 Speaker 6: last five months, five and a half months, with critical 434 00:20:51,400 --> 00:20:53,840 Speaker 6: support out of the gate. The moral clarity of the 435 00:20:53,880 --> 00:20:57,919 Speaker 6: President calling a hamas sheher evil. Worse than isis the 436 00:20:57,960 --> 00:21:00,880 Speaker 6: fact that they send aircraft carriers here that the President 437 00:21:00,960 --> 00:21:03,440 Speaker 6: himself visited ten days into the war, where we could 438 00:21:03,440 --> 00:21:07,080 Speaker 6: have had an escalation in the northern part with Hezbella. 439 00:21:07,320 --> 00:21:09,040 Speaker 1: So they've done very important things. 440 00:21:09,080 --> 00:21:11,119 Speaker 6: And what I would and what I have implored them, 441 00:21:11,280 --> 00:21:13,760 Speaker 6: is to stand with Israel until the end, because we're 442 00:21:13,760 --> 00:21:16,040 Speaker 6: going to achieve this victory. And I think it's not 443 00:21:16,080 --> 00:21:18,280 Speaker 6: only an Israel's interest to achieve that victory. I think 444 00:21:18,280 --> 00:21:21,200 Speaker 6: it's an America's interest to achieve that victory because they've 445 00:21:21,240 --> 00:21:23,120 Speaker 6: been part of this through the prom They've been part 446 00:21:23,160 --> 00:21:25,240 Speaker 6: of this victory up until now, and now we're down 447 00:21:25,240 --> 00:21:27,720 Speaker 6: the home stretch. I think, stand with us. Let us 448 00:21:27,760 --> 00:21:30,080 Speaker 6: finish the job and let's get to a day after 449 00:21:30,119 --> 00:21:32,320 Speaker 6: where we could actually have a real peace process that 450 00:21:32,400 --> 00:21:35,560 Speaker 6: can give hope not just to Israelis but also to Palestinians. 451 00:21:35,680 --> 00:21:37,800 Speaker 2: Minister, this is a conversation that you and I will 452 00:21:37,800 --> 00:21:39,960 Speaker 2: have to continue the requires a. Heck, have a lot 453 00:21:40,000 --> 00:21:42,200 Speaker 2: more time than the ten minutes we just had. Run Tom, 454 00:21:42,359 --> 00:21:45,159 Speaker 2: thank you, sir for joining us today. The Israel Strategics 455 00:21:45,200 --> 00:21:58,199 Speaker 2: minista more upside surprises in America, Let's get said the 456 00:21:58,320 --> 00:22:01,440 Speaker 2: chafe US economist Andrew Haldenhoe to break down some of this. Andrew, 457 00:22:01,480 --> 00:22:03,600 Speaker 2: you listen to my mcase breakdown of it as your 458 00:22:03,600 --> 00:22:04,480 Speaker 2: first reaction to it. 459 00:22:04,520 --> 00:22:06,600 Speaker 8: Please yeah, I mean, I think, like Mike, I would 460 00:22:06,600 --> 00:22:09,600 Speaker 8: emphasize that these numbers have really been bounced around by aircraft, 461 00:22:09,640 --> 00:22:11,439 Speaker 8: by autos. You want to kind of look at the 462 00:22:11,440 --> 00:22:13,000 Speaker 8: core of it, and what are we seeing at the core? 463 00:22:13,119 --> 00:22:17,600 Speaker 8: Is week not too exciting, not too positive on the 464 00:22:17,600 --> 00:22:19,439 Speaker 8: shipment side. We saw that this morning. 465 00:22:19,560 --> 00:22:19,879 Speaker 4: Again. 466 00:22:20,520 --> 00:22:23,240 Speaker 8: I think if you look at the various manufacturing diffusion indices, 467 00:22:23,440 --> 00:22:25,800 Speaker 8: they've bottomed, they've come off of the bottom, but they're 468 00:22:25,840 --> 00:22:29,879 Speaker 8: still sitting close to contractionary territory or in contractionary territory. 469 00:22:29,960 --> 00:22:31,920 Speaker 8: So I don't think we're really changing the narrative around 470 00:22:32,000 --> 00:22:32,640 Speaker 8: CAPEX here. 471 00:22:32,800 --> 00:22:35,200 Speaker 2: We're all super familiar with your research. One thing that's 472 00:22:35,240 --> 00:22:37,000 Speaker 2: come up throughout this year, and I keep sing in 473 00:22:37,000 --> 00:22:39,720 Speaker 2: every single note that you send down this economy is 474 00:22:39,720 --> 00:22:42,399 Speaker 2: going to slow down, slow down by such an amount 475 00:22:42,400 --> 00:22:43,800 Speaker 2: that this federal Reserve is going to need to cut 476 00:22:43,840 --> 00:22:47,280 Speaker 2: interest rates. You're still thinking about endcycle type stuff, dynamics 477 00:22:47,280 --> 00:22:49,560 Speaker 2: that are going to become more apparent and obvious through 478 00:22:49,600 --> 00:22:51,840 Speaker 2: the year. What's leading to that conclusion for you? 479 00:22:52,040 --> 00:22:54,000 Speaker 8: It's really the labor market. It's really what we're seeing 480 00:22:54,000 --> 00:22:56,119 Speaker 8: in the labor market where you're seeing things like ours 481 00:22:56,160 --> 00:22:58,600 Speaker 8: work that are coming down, a hiring rate that's coming down. 482 00:22:58,800 --> 00:23:01,640 Speaker 8: I think that's why we heard share Powell saying in 483 00:23:01,720 --> 00:23:04,720 Speaker 8: his evaluation of the data, it's not that we're weakening yet, 484 00:23:04,760 --> 00:23:07,399 Speaker 8: and I would agree with that, but the labor market 485 00:23:07,440 --> 00:23:10,240 Speaker 8: is his emphasis. In terms of a point of concern, 486 00:23:10,280 --> 00:23:11,080 Speaker 8: it would be mine also. 487 00:23:11,359 --> 00:23:13,520 Speaker 5: So do you think that at this point he had 488 00:23:13,520 --> 00:23:16,200 Speaker 5: the right message? The market's gotten it and it's only 489 00:23:16,280 --> 00:23:20,000 Speaker 5: us it's kind of trying to understand and freak out 490 00:23:20,000 --> 00:23:20,520 Speaker 5: around him. 491 00:23:20,600 --> 00:23:20,800 Speaker 4: Yeah. 492 00:23:20,800 --> 00:23:23,040 Speaker 8: I mean, I think one thing that was probably constructive 493 00:23:23,040 --> 00:23:24,760 Speaker 8: that Shair Powell tried to do and that the Committee 494 00:23:24,800 --> 00:23:26,520 Speaker 8: is trying to do, is to get away from responding 495 00:23:26,560 --> 00:23:29,880 Speaker 8: to each individual data point as it comes in. That's 496 00:23:29,920 --> 00:23:32,760 Speaker 8: a very difficult way to set policy. They're kind of 497 00:23:32,760 --> 00:23:35,000 Speaker 8: trying to tell us that we're on a path to 498 00:23:35,040 --> 00:23:38,280 Speaker 8: get to rate cuts now inflation has come down enough 499 00:23:38,320 --> 00:23:40,600 Speaker 8: that they think that they can be cutting interest rates. Now, 500 00:23:40,640 --> 00:23:42,840 Speaker 8: it's not all clear that inflation's returned to two percent 501 00:23:42,920 --> 00:23:44,960 Speaker 8: with some of these supply side disruptions. It's a good 502 00:23:45,200 --> 00:23:47,440 Speaker 8: reminder of why they're still upside risks to inflation. 503 00:23:47,520 --> 00:23:49,359 Speaker 5: Let's sit on that for a minute, because really this 504 00:23:49,440 --> 00:23:51,560 Speaker 5: is really dominating my thoughts right now is the Baltimore 505 00:23:51,640 --> 00:23:54,280 Speaker 5: Bridge and what that means for infrastructure spending. What that 506 00:23:54,359 --> 00:23:57,359 Speaker 5: means for some of the importance right now of getting 507 00:23:58,160 --> 00:24:00,760 Speaker 5: more spending has tried to us at a time with 508 00:24:00,880 --> 00:24:04,160 Speaker 5: the deficit, as John Righty said, is like having fifteen 509 00:24:04,200 --> 00:24:06,639 Speaker 5: big mac So at what point do you see this 510 00:24:06,840 --> 00:24:09,760 Speaker 5: as an inflationary type of impulse where the US has 511 00:24:09,800 --> 00:24:12,480 Speaker 5: to keep borrowing to keep investing to prop up certain 512 00:24:12,560 --> 00:24:16,040 Speaker 5: industries at the expense potentially of bond heels and inflation. 513 00:24:16,320 --> 00:24:18,880 Speaker 8: Yeah, this comes back to the idea of fiscal space. 514 00:24:19,000 --> 00:24:21,080 Speaker 8: Right We usually don't really worry too much about fiscal 515 00:24:21,160 --> 00:24:24,399 Speaker 8: space in the US because politically there always seems to 516 00:24:24,440 --> 00:24:27,160 Speaker 8: be more space to do more spending. But when you've 517 00:24:27,200 --> 00:24:29,760 Speaker 8: already done a lot of spending, when you've already put 518 00:24:29,760 --> 00:24:31,960 Speaker 8: a lot of stimulus into the economy, then when you 519 00:24:32,000 --> 00:24:34,280 Speaker 8: have real shocks to the economy, clearly no one would 520 00:24:34,320 --> 00:24:36,240 Speaker 8: disagree that we should be rebuilding this bridge, that we 521 00:24:36,240 --> 00:24:39,880 Speaker 8: should be investing in infrastructure, But that spending, to John's point, 522 00:24:39,960 --> 00:24:42,880 Speaker 8: is going to come on top of a large deficit 523 00:24:42,920 --> 00:24:45,359 Speaker 8: that we're already running. So I think that's where you 524 00:24:45,400 --> 00:24:48,760 Speaker 8: really get into difficulties potentially politically but also economically. Is 525 00:24:48,760 --> 00:24:52,000 Speaker 8: that also increasing price pressures in the short term and 526 00:24:52,040 --> 00:24:54,960 Speaker 8: the long term investing in infrastructure is going to be 527 00:24:54,960 --> 00:24:57,919 Speaker 8: deflationary positive for productivity, but in the short term you 528 00:24:57,920 --> 00:25:00,760 Speaker 8: need to hire people, you need to source material and inputs, 529 00:25:00,880 --> 00:25:02,560 Speaker 8: and that puts upward pressure on prices. 530 00:25:02,960 --> 00:25:05,680 Speaker 7: Public debt situation. Most urgent I can ever remember is 531 00:25:05,680 --> 00:25:09,040 Speaker 7: from Larry Fink this morning. What do you think this 532 00:25:09,160 --> 00:25:10,880 Speaker 7: does in terms of the impact. 533 00:25:10,520 --> 00:25:11,000 Speaker 2: Of a dollar. 534 00:25:11,760 --> 00:25:14,560 Speaker 8: Yeah, I think that that is something that's increasingly in focus. 535 00:25:14,640 --> 00:25:16,840 Speaker 8: I think we saw a bit of that last year. 536 00:25:16,880 --> 00:25:18,960 Speaker 8: We saw it maybe less in currencies, we saw it 537 00:25:18,960 --> 00:25:21,119 Speaker 8: more in treasury yields, where you had the tenure yield 538 00:25:21,359 --> 00:25:24,320 Speaker 8: there was upwards of five percent, And I think that 539 00:25:24,600 --> 00:25:28,400 Speaker 8: was some foreign investor concern that is this a country 540 00:25:28,400 --> 00:25:31,080 Speaker 8: that is going to run sustainable deficits. They certainly do 541 00:25:31,160 --> 00:25:34,720 Speaker 8: not look sustainable right now. That's ultimately an issue for 542 00:25:34,760 --> 00:25:35,199 Speaker 8: the currency. 543 00:25:35,200 --> 00:25:36,800 Speaker 2: Also, I want to build on on LEAs this line 544 00:25:36,800 --> 00:25:39,400 Speaker 2: of questioning around this port in Baltimore and what could 545 00:25:39,400 --> 00:25:41,200 Speaker 2: develop in the East Coast in the weeks and months 546 00:25:41,200 --> 00:25:43,800 Speaker 2: to come. Can you help us understand just frame briefly, 547 00:25:43,920 --> 00:25:46,800 Speaker 2: how strong the tail winds are that disinflation retail winds 548 00:25:47,080 --> 00:25:49,439 Speaker 2: in goods at the moment in America, because there was 549 00:25:49,440 --> 00:25:51,520 Speaker 2: some sign in the last few months and maybe that's fading, 550 00:25:51,560 --> 00:25:53,560 Speaker 2: And I just wonder how vulnerable we are to maybe 551 00:25:53,600 --> 00:25:55,720 Speaker 2: a reacceleration in goods prices off the back of a 552 00:25:55,840 --> 00:25:57,560 Speaker 2: development like this one this morning. 553 00:25:57,680 --> 00:25:59,239 Speaker 8: Yeah, I think it's a really important thing to draw 554 00:25:59,280 --> 00:26:02,080 Speaker 8: attention to because a lot of the disinflation that we've 555 00:26:02,080 --> 00:26:05,119 Speaker 8: had has been that goods price disinflation, and that was 556 00:26:05,240 --> 00:26:06,480 Speaker 8: energy prices coming down. 557 00:26:06,840 --> 00:26:08,240 Speaker 2: That was supply. 558 00:26:08,040 --> 00:26:11,800 Speaker 8: Constraints that had been constraining supply and boosting prices that 559 00:26:11,840 --> 00:26:12,640 Speaker 8: were relaxing. 560 00:26:13,320 --> 00:26:14,400 Speaker 1: Look at where we are now. 561 00:26:14,440 --> 00:26:17,400 Speaker 8: We have gasoline prices that are rising, that are projected 562 00:26:17,440 --> 00:26:20,320 Speaker 8: to rize further into the summer. We now have this 563 00:26:20,440 --> 00:26:23,960 Speaker 8: supply side disruption related to the port in Baltimore that 564 00:26:24,040 --> 00:26:27,480 Speaker 8: would also indicate that, if anything, goods prices. 565 00:26:27,160 --> 00:26:27,720 Speaker 4: Could be higher. 566 00:26:27,720 --> 00:26:30,240 Speaker 8: We already know about the Panama Canal, we know about 567 00:26:30,240 --> 00:26:32,960 Speaker 8: the Red Sea and the Suez Canal, and we saw 568 00:26:33,000 --> 00:26:35,520 Speaker 8: on the last inflation report. To your point, core goods 569 00:26:35,520 --> 00:26:38,119 Speaker 8: prices came up. They've been coming down. They came up 570 00:26:38,160 --> 00:26:39,560 Speaker 8: in the last report. It doesn't mean they're going to 571 00:26:39,560 --> 00:26:43,399 Speaker 8: come up in every report. But this period of deflation 572 00:26:43,520 --> 00:26:45,280 Speaker 8: and goods that we've been in for the last six 573 00:26:45,320 --> 00:26:47,360 Speaker 8: months or so, we're probably coming out of that now. 574 00:26:47,440 --> 00:26:49,359 Speaker 2: Do you think services can do the heavy lifting as 575 00:26:49,400 --> 00:26:50,840 Speaker 2: that develops on the good side? 576 00:26:51,040 --> 00:26:53,560 Speaker 8: So I think that's what you need to happen. Have 577 00:26:53,680 --> 00:26:55,840 Speaker 8: happened to bring inflation down, So in some ways, this 578 00:26:56,119 --> 00:26:58,639 Speaker 8: kind of idea that the labor market is softening, you 579 00:26:58,760 --> 00:27:02,840 Speaker 8: really need to see that continue to bring inflation overall down, 580 00:27:02,920 --> 00:27:04,919 Speaker 8: which is a very unfortunate scenario. We'd like to have 581 00:27:04,920 --> 00:27:07,040 Speaker 8: a strong labor market and we like to have inflation 582 00:27:07,119 --> 00:27:10,640 Speaker 8: come down. There's a reason it hasn't happened historically. If 583 00:27:10,720 --> 00:27:15,240 Speaker 8: goods are going to be less disinflationary, less deflationary, then 584 00:27:15,280 --> 00:27:16,959 Speaker 8: services needed to pick up for that, and that has 585 00:27:17,040 --> 00:27:18,080 Speaker 8: to be through a software labor mark. 586 00:27:18,160 --> 00:27:19,560 Speaker 2: What I hear from you is different to what I 587 00:27:19,600 --> 00:27:20,960 Speaker 2: heard from the chairman. Is that fair? 588 00:27:21,160 --> 00:27:21,880 Speaker 8: I think that's fair. 589 00:27:22,040 --> 00:27:24,399 Speaker 2: So basically you're saying to get inflation back to target, 590 00:27:24,440 --> 00:27:25,280 Speaker 2: we need a recession. 591 00:27:26,119 --> 00:27:28,400 Speaker 8: That's still the most likely way you bring inflation back 592 00:27:28,440 --> 00:27:31,480 Speaker 8: to target. Is there some probability that you get a 593 00:27:31,480 --> 00:27:34,520 Speaker 8: true soft landing. Sure, there's some probability, but I think 594 00:27:34,520 --> 00:27:36,560 Speaker 8: what we're seeing is just consistent with the idea that 595 00:27:36,600 --> 00:27:39,119 Speaker 8: wage growth is kind of stalled out around four to 596 00:27:39,200 --> 00:27:42,320 Speaker 8: five percent by various different measures. If you want wage 597 00:27:42,320 --> 00:27:45,679 Speaker 8: growth to discelerate further, the labor market probably needs to soften. 598 00:27:45,680 --> 00:27:49,240 Speaker 5: From you disruptions like what we're going to see inevitably, 599 00:27:49,320 --> 00:27:52,200 Speaker 5: either on a very small term or potentially medium term 600 00:27:52,440 --> 00:27:55,720 Speaker 5: with respect to the Baltimore Bridge and shipping passages, we've 601 00:27:55,760 --> 00:27:58,720 Speaker 5: seen shipping disrupted in general. Does that make it more 602 00:27:58,840 --> 00:28:01,560 Speaker 5: or less likely we'll get the recession that you're talking 603 00:28:01,600 --> 00:28:03,640 Speaker 5: about to bring inflation under control. 604 00:28:04,000 --> 00:28:05,959 Speaker 8: So the worst thing that can happen for the economy 605 00:28:05,960 --> 00:28:07,359 Speaker 8: of the worst thing that can happen for the FED 606 00:28:07,560 --> 00:28:10,440 Speaker 8: are these kind of supply side shocks, because what they 607 00:28:10,520 --> 00:28:13,280 Speaker 8: do is they reduce the productive capacity of the US 608 00:28:13,400 --> 00:28:16,320 Speaker 8: economy and they boost inflation at the same time. So 609 00:28:16,320 --> 00:28:19,560 Speaker 8: it's negative for growth and it means you get higher inflation. 610 00:28:19,840 --> 00:28:22,199 Speaker 8: That's different than a demand shock, where you get stronger 611 00:28:22,240 --> 00:28:24,080 Speaker 8: growth and you get higher inflation. That's kind of been 612 00:28:24,119 --> 00:28:24,880 Speaker 8: where we've been. 613 00:28:25,080 --> 00:28:26,919 Speaker 5: But this goes to something that John was talking about 614 00:28:27,000 --> 00:28:29,800 Speaker 5: if we get that kind of stagflationary shock, which is 615 00:28:29,880 --> 00:28:33,639 Speaker 5: essentially what you're describing, are the FEDS hands tied or 616 00:28:33,680 --> 00:28:35,479 Speaker 5: have they made it clear that they're going to air 617 00:28:35,600 --> 00:28:37,919 Speaker 5: on the side of supporting the economy and the labor 618 00:28:37,960 --> 00:28:40,040 Speaker 5: market over continuing the. 619 00:28:40,000 --> 00:28:40,880 Speaker 2: Fight for inflation. 620 00:28:41,320 --> 00:28:43,960 Speaker 8: I think they're in a transition here. But what they're 621 00:28:44,000 --> 00:28:47,760 Speaker 8: transitioning to is this increased emphasis on the labor market 622 00:28:47,800 --> 00:28:49,959 Speaker 8: on the economy, the idea which we saw in their 623 00:28:49,960 --> 00:28:53,200 Speaker 8: summary of economic projections, inflation can run closer to three 624 00:28:53,240 --> 00:28:55,720 Speaker 8: percent than two percent, and they still plant to cut rates. 625 00:28:55,760 --> 00:28:57,080 Speaker 8: That's what they have in their projections. 626 00:28:57,120 --> 00:28:57,400 Speaker 4: Now. 627 00:28:57,920 --> 00:29:00,240 Speaker 8: If that number sneaks up a little bit higher on 628 00:29:00,240 --> 00:29:01,560 Speaker 8: core inflation at the end of this year, and I 629 00:29:01,560 --> 00:29:03,440 Speaker 8: suspect it will over the course of the year, I 630 00:29:03,440 --> 00:29:04,400 Speaker 8: think they'll still be cutting. 631 00:29:04,560 --> 00:29:06,720 Speaker 2: Some debate this morning about whether the Federer serve is 632 00:29:06,760 --> 00:29:09,520 Speaker 2: basically saying they've got a high tolerance for inflation. I'd 633 00:29:09,520 --> 00:29:11,200 Speaker 2: love your response to that. We caught it with Barclay's 634 00:29:11,200 --> 00:29:13,560 Speaker 2: earlier this morning and kind of push back against that view. 635 00:29:13,720 --> 00:29:16,520 Speaker 2: Others have endorsed it. Mohammadd Aaron said this could be 636 00:29:16,560 --> 00:29:19,080 Speaker 2: the beginning of a long story, but the beginning of 637 00:29:19,080 --> 00:29:21,320 Speaker 2: a story that suggests this FED is now targeting a 638 00:29:21,400 --> 00:29:23,479 Speaker 2: range and not a point target. Can I get your 639 00:29:23,560 --> 00:29:24,000 Speaker 2: view on that? 640 00:29:24,200 --> 00:29:27,080 Speaker 8: Yeah, I think implicitly that's true. Explicitly, are we going 641 00:29:27,120 --> 00:29:28,640 Speaker 8: to hear FED officials come out and say, you know what, 642 00:29:28,640 --> 00:29:31,560 Speaker 8: we've got uncomfortable being away from target to the upside? 643 00:29:31,640 --> 00:29:32,840 Speaker 8: I don't think we're going to hear that in the 644 00:29:32,840 --> 00:29:36,320 Speaker 8: near term. But this idea that they can accept somewhat 645 00:29:36,360 --> 00:29:39,479 Speaker 8: stronger inflation, I think everybody would basically say, yeah, two 646 00:29:39,560 --> 00:29:41,640 Speaker 8: and a half percent inflation, that's close enough to two 647 00:29:41,680 --> 00:29:44,360 Speaker 8: percent inflation. Now the problem that you get to is, well, 648 00:29:44,480 --> 00:29:46,560 Speaker 8: is three percent close enough to two and a half percent? 649 00:29:46,840 --> 00:29:49,440 Speaker 8: Is four percent close enough to three percent? And we're 650 00:29:49,520 --> 00:29:53,080 Speaker 8: kind of in that region now. I think it is 651 00:29:53,120 --> 00:29:55,840 Speaker 8: a transition though, where they're moving more towards this kind 652 00:29:55,880 --> 00:29:58,800 Speaker 8: of labor market concern, economy concern, and the reality is 653 00:29:58,800 --> 00:30:00,000 Speaker 8: that they will accept higher inflation. 654 00:30:00,280 --> 00:30:02,240 Speaker 2: The issue with that, and you know it well, once 655 00:30:02,280 --> 00:30:04,520 Speaker 2: you begin to give signs, even if you don't say 656 00:30:04,520 --> 00:30:07,120 Speaker 2: it explicitly, doesn't that make it harder to get back 657 00:30:07,160 --> 00:30:08,040 Speaker 2: down it even more? 658 00:30:08,200 --> 00:30:08,400 Speaker 4: Yeah? 659 00:30:08,440 --> 00:30:12,600 Speaker 8: Absolutely, this can easily lock US into not just a 660 00:30:12,680 --> 00:30:15,000 Speaker 8: short period, but but really a new regime where inflation 661 00:30:15,120 --> 00:30:17,360 Speaker 8: is higher, more elevated, or more volatile. 662 00:30:17,560 --> 00:30:20,120 Speaker 2: This switch in Bianco of Bianca Research was talking about yesterday. 663 00:30:20,120 --> 00:30:22,400 Speaker 2: In fact, I'd go back almost a full twelve months. 664 00:30:22,840 --> 00:30:26,000 Speaker 2: Richard Clarender in a second outlook for Pimco coming out 665 00:30:26,000 --> 00:30:27,320 Speaker 2: and saying this FED is going to be accept two 666 00:30:27,360 --> 00:30:29,760 Speaker 2: points somethink, which sounded controversial at the time, and it's 667 00:30:29,800 --> 00:30:32,240 Speaker 2: almost consensus now on Wall Street. 668 00:30:32,560 --> 00:30:34,959 Speaker 5: And it's led to this incredible euphoria that people are 669 00:30:35,000 --> 00:30:37,640 Speaker 5: pointing to in markets because you're basically having the FED 670 00:30:37,640 --> 00:30:39,240 Speaker 5: that's got your back and you can eat your cake 671 00:30:39,280 --> 00:30:41,960 Speaker 5: and have it too. What is the consequence of that? 672 00:30:42,240 --> 00:30:44,560 Speaker 5: Is it inflation that's not two point something but it's 673 00:30:44,560 --> 00:30:47,000 Speaker 5: three points something to Andrew's point, And then at what 674 00:30:47,040 --> 00:30:49,800 Speaker 5: point does the FED have to say bastard enough, like 675 00:30:50,320 --> 00:30:52,520 Speaker 5: we got to actually do something and hold raise higher. 676 00:30:52,360 --> 00:30:54,840 Speaker 2: Need to put an Italian on the FMC, don't we? Andrew? 677 00:30:54,840 --> 00:30:58,920 Speaker 2: Thank you, Andrew hartenhaus A City. This is the Bloomberg 678 00:30:59,000 --> 00:31:02,720 Speaker 2: Seventans podcast, bringing you the best in markets, economics, and 679 00:31:02,840 --> 00:31:05,640 Speaker 2: geo politics. You can watch the show live on Bloomberg 680 00:31:05,680 --> 00:31:08,840 Speaker 2: TV weekday mornings from six am to nine am Eastern. 681 00:31:09,120 --> 00:31:12,480 Speaker 2: Subscribe to the podcast on Apple, Spotify, or anywhere else 682 00:31:12,520 --> 00:31:15,120 Speaker 2: you listen, and as always, on the Bloomberg Terminal and 683 00:31:15,240 --> 00:31:16,440 Speaker 2: the Bloomberg Business app.