Speaker 1: Bloomberg Audio Studios, podcasts, radio news, war, geopolitics, tariffs. How
Speaker 1: is an investor supposed to navigate their way through an
Speaker 1: environment where the US bombs Iran's nuclear sites, Israeli drone
Speaker 1: attacks have taken place in the Middle East, as well
Speaker 1: as aircraft bombing raids. All of this comes after months
Speaker 1: of noisy tariff announcements and walking those back geopolitical wrangling.
Speaker 1: What are investors supposed to do when a war breaks out?
Speaker 1: I'm Barry Dheltson on today's edition of At the Money.
Speaker 1: We're going to discuss how to manage your way through war,
Speaker 1: tariffs and all manner of headline risks. To help us
Speaker 1: unpack all of this and what it means for your portfolio,
Speaker 1: let's bring in veteran markets journalist and CFA Sam Row.
Speaker 1: Sam's known for his clear, data driven insights into markets
Speaker 1: and the economy. He is a journalistic veteran who has
Speaker 1: worked at Forbes, Yahoo, Business Insider, and Axios. His sub
Speaker 1: stack ticker was named by the Society of Business Editors
Speaker 1: and Writers as the best in Business for twenty twenty two.
Speaker 1: So Sam, let's start with something you wrote recently. Quote
Speaker 1: the US stock market has a long history of demonstrating
Speaker 1: resilience in the face of major geopolitical risk events.
Speaker 2: Explain that, Yeah, I mean it's every couple of years
Speaker 2: or every couple of months. I think you and I,
Speaker 2: or you and your clients and me and my readers
Speaker 2: have the same kind of discussion. Some conflict breaks out
Speaker 2: fallatilly it comes to the markets. What are we supposed
Speaker 2: to do? And you know, of course, you know, as
Speaker 2: a human being, this is very scary. As someone who
Speaker 2: cares about or has friends and family connected to those events,
Speaker 2: it's really distressing. And then you put your investor hat
Speaker 2: on and think about, you know, what does history tell
Speaker 2: us here? Now, obviously every event is going to be
Speaker 2: slightly different, but history also tells us that the markets
Speaker 2: seem to eventually look past this. Even with what's going
Speaker 2: on in the Middle East right now. I think for
Speaker 2: as long as we've been alive, there's been some permutation
Speaker 2: of a Middle East conflict, and it's always been scary,
Speaker 2: and there's always you know, secondary effects in the financial markets,
Speaker 2: whether it's with oil prices or volatility and interest rates
Speaker 2: and currencies and all these sort of things. And I
Speaker 2: think for traders who are trying to weave in and
Speaker 2: out of this. It's a big deal, and you really
Speaker 2: should be paying close up a tension to every development here.
Speaker 2: But you know, as someone who has to get somewhere
Speaker 2: in terms of retirement and long term savings or if
Speaker 2: you're saving for your college, your kid's college fund or something,
Speaker 2: you have to wonder, you know, what does five years
Speaker 2: out look like, what does ten years out look like?
Speaker 2: What does even three years out look like? And you know,
Speaker 2: when you see some of these reviews of various geopolitical
Speaker 2: events in the past, there are some conflicts that go
Speaker 2: on for a very long time and may or may
Speaker 2: not have a sort of a longer term impact on
Speaker 2: the financial market. But for the most part, the market
Speaker 2: hits tend to be very brief. I think I saw
Speaker 2: something from Deutsche Bank recently that reviewed something like thirty
Speaker 2: geopolitical events of the last hundred years, and from the
Speaker 2: beginning of the event that triggered, you know, the conflict
Speaker 2: to the bottom of the S and B five hundred
Speaker 2: on average, and the median stretches about fifteen days.
Speaker 1: Fifteen trading days, essentially three weeks. So that's kind of interesting.
Speaker 1: You you said something not too long ago that I
Speaker 1: thought was intriguing, and I'm wondering if it was geared
Speaker 1: to investors or traders. Stocks usually look past geopolitical events,
Speaker 1: but these events shouldn't be ignored. How do you have
Speaker 1: it both ways?
Speaker 2: Absolutely? You know, I think I think one of the
Speaker 2: mistakes that a long term investor can make is to
Speaker 2: try to pretend like nothing else is happening in the world.
Speaker 2: I mean, of course, you know this stuff matters, and
Speaker 2: you know we're going to fall news in our personal
Speaker 2: lives and all that kind of stuff. But you know,
Speaker 2: sometimes we want to just ignore all this stuff, especially
Speaker 2: if we have, you know, fifteen twenty thirty years until
Speaker 2: we actually have to begin selling these stocks. But I
Speaker 2: don't know if that's totally healthy, because maybe the study
Speaker 2: says fifteen days till the market bottoms, but the study
Speaker 2: might also have a range of out comes where it
Speaker 2: might take three years till the market bottoms.
Speaker 1: Fifteen days is the average, but that doesn't necessarily mean
Speaker 1: each time it's going to be fifteen days exactly.
Speaker 2: So I think, you know, you definitely want to be
Speaker 2: mindful of the possibility that things can get worse, like
Speaker 2: even with what's happening right now. The markets seem to
Speaker 2: have bounced back pretty quickly all the time highs, all
Speaker 2: time highs. We're within reach of all time highs. But
Speaker 2: that doesn't mean, you know, there isn't going to be
Speaker 2: another flare up, you know, tomorrow, or next week or
Speaker 2: in a couple of months. So I think you have
Speaker 2: to be mindful of the fact that this stuff is
Speaker 2: going on in the world. And then you go back
Speaker 2: to the history and say, hey, the odds actually say
Speaker 2: people want the escalation. People would rather not have violence
Speaker 2: out there, and that involves all parties. And so as
Speaker 2: long as there are more people who would rather not
Speaker 2: have violence than one violence, I think there's some gravity
Speaker 2: toward the escalation and a pullback and violent activity.
Speaker 1: So let's delve into the history of we'll deal with
Speaker 1: tariffs in a little bit. Let's talk about war. There's
Speaker 1: a history of the last century of small wars, large wars,
Speaker 1: world wars. We have World War One and World War Two,
Speaker 1: we have the Korean War of Vietnam, Iraq in nineteen
Speaker 1: ninety one, and then Afghanistan and Iraq and three and
Speaker 1: today it's Imran, which seems to have been building. I
Speaker 1: don't know since nineteen seventy nine, when the hostages were
Speaker 1: taken following the Iranian Revolution. How should investors, not in
Speaker 1: their personal or family life, but as stewards of capital,
Speaker 1: contextualize the dangers of war and the dangers of being
Speaker 1: frightened out of the market because of war.
Speaker 2: You know, it's I was just having a conversation about
Speaker 2: this the other day about you know, this whole matter
Speaker 2: of you turn on the TV and someone will tell you, well,
Speaker 2: uncertainty is elevated today, uncertainty. It doesn't make sense that
Speaker 2: the market's so high because of all this uncertainty that's
Speaker 2: out there. Well, uncertainty just defines the nature of investing
Speaker 2: in the stock market. Right, if there was no uncertainty,
Speaker 2: you wouldn't get a great return.
Speaker 1: Right if you want, if you want certain returns, you
Speaker 1: can get four point something on the ten year treasury.
Speaker 2: Right exactly. But I was just thinking about, you know,
Speaker 2: the history of conflicts, especially you know, in the Middle East,
Speaker 2: and I remember when the Gulf War started in nineteen
Speaker 2: ninety and you know, I was eight years old and
Speaker 2: I was looking at the data and apparently that was
Speaker 2: a pretty rough time, both in the oil markets, and
Speaker 2: in the financial markets, and it was a tough time
Speaker 2: to to be an investor, you know, going through all
Speaker 2: this volatility, because you know, maybe this is it, maybe
Speaker 2: this is the end of of of of all that.
Speaker 2: But then you know it's it's not long after that
Speaker 2: you realize that's actually an incredible time to start putting
Speaker 2: money into sam Rose five pointy. I wish my parents
Speaker 2: put money into a five twenty nine plant at that time,
Speaker 2: but they didn't. But again, you just look backwards and
Speaker 2: if there's any if there's a more powerful force than
Speaker 2: geopolitical tensions, it's going to be everyone's desire to want
Speaker 2: things to be better. And even from like a business perspective,
Speaker 2: you know, they want better technologies, they want things to
Speaker 2: be cheaper, they want things to be faster, and that
Speaker 2: force that's driving earnings and profits and productivity and the
Speaker 2: economy and employment and quality of life, standards of living
Speaker 2: and all this stuff, you know, will continue to be
Speaker 2: the dominant force in the markets. So I think that's
Speaker 2: what people miss. Like if you were to be able
Speaker 2: to if you could put all that into like a
Speaker 2: pie chart. Sure you have these flare ups and you know,
Speaker 2: geopolitical events, but the dominant forces, you know, remain.
Speaker 1: That makes a lot of sense. You mentioned oil earlier
Speaker 1: in the nineteen nineties, and especially in the nineteen seventies.
Speaker 1: Anytime we saw a Mid East tension, that always translated
Speaker 1: into higher oil prices, which then pushed into CPI inflation
Speaker 1: driving it higher. Are we in the same set of
Speaker 1: circumstances today? Ever since the new fracking technologies in the
Speaker 1: two thousands and the United States just cranking out oil
Speaker 1: for the past I don't know, ten twelve years at
Speaker 1: old time record rates. Does the US lesser dependence on
Speaker 1: Middle Eastern oil make it more or less likely that
Speaker 1: Middle East flare ups are not going to be as
Speaker 1: inflationary as they once were.
Speaker 2: I think it's going to be not as inflationary as
Speaker 2: they once were. One of my favorite metrics that's out
Speaker 2: there is energy consumption spending as a percentage of personal
Speaker 2: consumption expenditures, and that was somewhere that was floating around
Speaker 2: at about ten percent. Energy spending as a percentage of
Speaker 2: personal consumption household budgets, yeah, household budgets, yeah, about ten
Speaker 2: percent in the late seventies, early eighties, and that's steadily
Speaker 2: been declining and now it's closer to somewhere between three
Speaker 2: and four percent.
Speaker 1: That's amazing.
Speaker 2: Yeah, so energy, the direct spending on energy has has
Speaker 2: shrunk us significantly. And then past that, like you know,
Speaker 2: you know, the car you drive today is far more
Speaker 2: fuel efficient than the car you drove, you know, twenty
Speaker 2: years ago. So fuel economy has improved for you know,
Speaker 2: one of the biggest purchases of energy, which is gasoline
Speaker 2: for cars.
Speaker 1: To say nothing about hybrids and evs.
Speaker 2: Hybrids, evs. Your refrigerator is more energy efficient, the ac
Speaker 2: is more energy efficient. The the.
Speaker 1: We switched to natural gas from oil, I don't know
Speaker 1: ten years ago. It costs a fraction of what oil
Speaker 1: costs and and pollutes less. And you know, as much
Speaker 1: as people say natural gas is a problem, it's certainly
Speaker 1: much better than coal, right, and better than oil.
Speaker 2: Right right, right. Having said that, it can certainly have
Speaker 2: a psychological effect on consumers, especially, we can spend all
Speaker 2: day talking about how I get, you know, twenty five
Speaker 2: miles per gallon now as opposed to fifteen when I
Speaker 2: first got my driver's license. But when you see gas
Speaker 2: prices go from two fifty to three twenty five in
Speaker 2: a very short period of time. That affects you because
Speaker 2: that's immediately coming out of you know, whatever your Starbucks
Speaker 2: budget might be.
Speaker 1: Huh, really interesting. So we've seen an argument pushing for
Speaker 1: home shoring. We'll bring these factories back to the US,
Speaker 1: We'll create all these new jobs. Is that realistic in
Speaker 1: the modern age of advanced automation, new technologies, artificial intelligence,
Speaker 1: and robotics. Are we really going to fill factories with
Speaker 1: workers or are we going to be filling new US
Speaker 1: based factories with a whole bunch of robots.
Speaker 2: Yeah? I think I think there's several ways to answer
Speaker 2: that question, and in every way it's going to be No,
Speaker 2: We're not going to have a ton of home shoring.
Speaker 2: We might have some at the margin. Everything happens at
Speaker 2: the margins, right, some people, some people who are saving
Speaker 2: you know, point zero zero one percentage point. You know,
Speaker 2: manufacturing China might figure out a way to move to
Speaker 2: the US. But for the most part, it's not gonna
Speaker 2: be that much cheaper to move your manufacturing to the
Speaker 2: US just because it was so expensive in China. You're
Speaker 2: gonna move to Vietnam, You're gonna move to Mexico, You're
Speaker 2: gonna move to Indonesia and all these other places where
Speaker 2: it might be more expensive than you know, China for instance,
Speaker 2: but it's still going to be cheaper than the US.
Speaker 2: So I think that's one of the unintended consequences of that.
Speaker 2: But as far as like what you're saying about AI
Speaker 2: and machinery and robotics and all this stuff, yeah, absolutely
Speaker 2: that's already happening. And so it's a question uh that
Speaker 2: like I don't know, I don't know if you can
Speaker 2: fight that, right, like, unless unless you decide that unless
Speaker 2: there's a po I'll see that decides that there's a
Speaker 2: limitation on how many robots you can have in your
Speaker 2: factories are or I mean it's this is not we're
Speaker 2: not even talking about production manufacturing anymore, or goods production.
Speaker 2: We're also talking about services, right everyone in the service.
Speaker 2: It's like AI has gotten to the point where it's
Speaker 2: not just affecting the assembly line. It's affecting people who
Speaker 2: go into an office and you know, go to meetings
Speaker 2: and strategize for their you know, their marketing departments or
Speaker 2: you know, if they work in banking, you know, suddenly
Speaker 2: you can cut a couple steps out of you know,
Speaker 2: putting numbers into an Excel spreadsheet.
Speaker 1: Really really interesting. So last question, how can investors balance
Speaker 1: staying invested against all of these geopolitical risks, war risks,
Speaker 1: trade war risks, tariffs, and just unexpected escalations. How do
Speaker 1: they balance the need to stay invested through this against
Speaker 1: the potential downside risks of all these headline.
Speaker 2: You got to study the history, and you got to
Speaker 2: look at the data, and you got to remember how
Speaker 2: bad things were at various points in history. Me personally,
Speaker 2: I like to keep a journal when bad things happen.
Speaker 2: I wish I had done this more actively during the
Speaker 2: financial crisis, but I didn't. I certainly did during COVID
Speaker 2: and something that I mean, you know, you can sort
Speaker 2: of get this by proxy through reading a really deep
Speaker 2: account of various historical events. But reading my own memories
Speaker 2: or my own real time accounts of something like COVID
Speaker 2: reminded me that it always feels like the end of
Speaker 2: the world, and it lasts so much longer than you expected. Like,
Speaker 2: you know, I have you know, fifty pages here where
Speaker 2: it's just like day after day after day. You know,
Speaker 2: we live in a new era where we're never going
Speaker 2: to be in the same office again, We're never going
Speaker 2: to meet anybody ever again, and all these kinds of things,
Speaker 2: And you know, it's something I like to do every
Speaker 2: once in a while, especially when things are calm. Right.
Speaker 2: It's one thing to be in the middle of a
Speaker 2: crisis and then study the history of crises and it's
Speaker 2: like no, no, no, no, no, this time it's different. But when
Speaker 2: things are calm, that's probably actually the best time to
Speaker 2: go back and remember things like, well, here here's another
Speaker 2: I'm sorry to sort of keeping Oh no, I'm interested
Speaker 2: digress a little bit. I got a notification on Facebook
Speaker 2: saying that, uh, I think it was exactly fifteen years
Speaker 2: ago I submitted an idea for fixing the deep Water
Speaker 2: Horizon disaster. I don't know if you're if people remember this.
Speaker 1: But that was Bpmico and and Feinberg oversaw this. Yeah, yeah,
Speaker 1: I recall that.
Speaker 2: Yeah yeah, Gulf of Mexico and oil wall blows up
Speaker 2: and it's spewing oil into the Gulf of Mexico. Do
Speaker 2: you remember how long it was spewing oil into.
Speaker 1: The golf sixty days some crazy three months? Yeah, ninety days, wow.
Speaker 2: Three months that they were eventually able to put a
Speaker 2: cap in it, and it took I think it took
Speaker 2: another two or three months to officially say this thing
Speaker 2: was sealed. Right, It's insane how long this went on.
Speaker 2: Four But you know, everyone's memory is gonna be, oh, well,
Speaker 2: it was something in the past. It's like I remember
Speaker 2: it being three months. Oh, I remember being it could
Speaker 2: have lasted longer than two weeks.
Speaker 1: But when you're in the moment in the humans live
Speaker 1: in the here and now, and when it's happening, especially
Speaker 1: day after day after day. It's funny you mentioned journaling
Speaker 1: during these things. I was essentially ended up writing Bail
Speaker 1: Out Nation in real time in public on the blog.
Speaker 1: I recall having a conversation with my trading desk back then,
Speaker 1: who were just like exhausted from the volatility. Everybody was
Speaker 1: making money, but it was exhausting. And there's this fantastic
Speaker 1: line in Apocalypse Now. Do you remember the Charlie Don't
Speaker 1: Surf scene where Dval goes up to Martin Sheen and
Speaker 1: he says, with this wistfulness, you know, Sun, someday this
Speaker 1: war's gonna end, like disappointed, and when you're in the
Speaker 1: middle of it, it feels like it's never going to end.
Speaker 1: Financial crisis is never going to end. Deep Water Horizon's
Speaker 1: not going to end, the tariffs war are not going
Speaker 1: to end. But we always seem to come out the
Speaker 1: other side.
Speaker 2: Yeah. And again, we just came out of COVID like we.
Speaker 1: Were really felt like it was never going to end.
Speaker 2: We were literally living a science fiction movie, like it's
Speaker 2: there's no there's no amount of money you can throw
Speaker 2: at this problem, Like you just have to pray that
Speaker 2: the science is going to be good enough that we
Speaker 2: figure out how to come up with a vaccine and
Speaker 2: contain this thing. But the amount, the scale of death
Speaker 2: was unbelievable.
Speaker 1: Yeah, millions, millions of people America and tens of millions
Speaker 1: around the world.
Speaker 2: Yeah, and yet this, you know, the economy has never
Speaker 2: been stronger and the stock market has never been higher.
Speaker 2: So I think, I think, listen, it's not to sort
Speaker 2: of necessarily downplay what's going on in terms of you
Speaker 2: and it's not just you know, uh, eron. We still
Speaker 2: have a war going on between Russia and Ukraine. It's
Speaker 2: not forget about that, right.
Speaker 1: So it's the Middle East, it's Russian Ukraine. There are
Speaker 1: other hotspots going on Africa as well.
Speaker 2: Yep and there's gonna be something else that's gonna flair up.
Speaker 2: That's inevitable. But you know, again, I think not the
Speaker 2: downplan of it. But to offer some perspective, it might
Speaker 2: help to go back and just sort of remember those
Speaker 2: times when things were really tough.
Speaker 1: So to wrap up, we experience these geopolitical disruptions in
Speaker 1: a form of duality. As human beings. We are aware
Speaker 1: of the emotional turmoil of the toll in human suffering
Speaker 1: and just how psychologically damaging all these horrific events are.
Speaker 1: And yet at the same time we have to be
Speaker 1: good stewards of our own capital and recognize that this
Speaker 1: too shall pass. I'm Barry Riudt Halts, and this is
Speaker 1: Bloomberg's at the Money. You know you talk about