1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,040 Speaker 2: Terminal and the Bloomberg Business App. You are Denny if 10 00:00:37,040 --> 00:00:39,760 Speaker 2: your DNNY research selling a year round SMP target of 11 00:00:39,800 --> 00:00:43,120 Speaker 2: seventy seven hundred and a decade end target of ten k. 12 00:00:43,440 --> 00:00:46,440 Speaker 2: He writes this, this ballmarket could be one of the 13 00:00:46,479 --> 00:00:48,720 Speaker 2: longer ones. Joined us now for more ed Good morning, 14 00:00:48,920 --> 00:00:51,040 Speaker 2: Good morning. Let's just start with the longevity of this thing. 15 00:00:51,320 --> 00:00:53,720 Speaker 2: Already several years Indio, why do you think this can 16 00:00:53,760 --> 00:00:56,000 Speaker 2: take another leg and another lequa after that? 17 00:00:56,280 --> 00:00:59,720 Speaker 3: Well, I think the economy is demonstrated its resilience or 18 00:00:59,760 --> 00:01:02,200 Speaker 3: with the past few years, I mean all the shocks 19 00:01:02,200 --> 00:01:04,640 Speaker 3: that have hit it, starting with the pandemic and then 20 00:01:05,520 --> 00:01:10,000 Speaker 3: the tariffs most recently and yet real GDP is at 21 00:01:10,000 --> 00:01:12,960 Speaker 3: an all time record high, and so I'm just extrapolating 22 00:01:13,000 --> 00:01:15,520 Speaker 3: that that continues, that the economy will continue to grow 23 00:01:16,040 --> 00:01:18,560 Speaker 3: through the end of the decade, and that by the 24 00:01:18,640 --> 00:01:20,480 Speaker 3: end of the decade we could very well see the 25 00:01:20,520 --> 00:01:25,040 Speaker 3: market anticipating something like five one hundred dollars a share 26 00:01:25,360 --> 00:01:27,440 Speaker 3: for the S and P five hundred, but a twenty 27 00:01:27,520 --> 00:01:29,119 Speaker 3: multiple on it and you get ten thousand. 28 00:01:29,440 --> 00:01:31,520 Speaker 2: Certain things happened last year that people thought would be 29 00:01:31,600 --> 00:01:34,399 Speaker 2: relevant and turned out to be irrelevant. I'm thinking of 30 00:01:34,400 --> 00:01:36,560 Speaker 2: the tariffs of April of last year, irrelevant to the 31 00:01:36,600 --> 00:01:39,000 Speaker 2: headline a's acre of five hundred index at least, and 32 00:01:39,040 --> 00:01:40,679 Speaker 2: then later on and through the year, the fact that 33 00:01:40,720 --> 00:01:43,720 Speaker 2: unemployment carried on climbing and it didn't seem to disrupt 34 00:01:43,720 --> 00:01:45,479 Speaker 2: this secuity market. It's not going to be the story 35 00:01:45,480 --> 00:01:46,759 Speaker 2: for twenty six as well. Yeah. 36 00:01:46,760 --> 00:01:50,920 Speaker 3: Absolutely, And I think twenty twenty five demonstrated that the 37 00:01:50,960 --> 00:01:53,559 Speaker 3: economy could grow even when we have a labor market 38 00:01:53,600 --> 00:01:57,040 Speaker 3: that's not growing much at all, and that can only 39 00:01:57,040 --> 00:02:02,080 Speaker 3: happen if productivity is booming. Productivity growth during the first 40 00:02:02,120 --> 00:02:04,720 Speaker 3: half of the decade kind of recovered. It was really 41 00:02:04,800 --> 00:02:06,920 Speaker 3: quite depressed at the beginning of the decade, it's recovered 42 00:02:06,920 --> 00:02:10,120 Speaker 3: to kind of this annual average of about two percent. 43 00:02:10,520 --> 00:02:12,960 Speaker 3: I think we're heading to three percent and going from 44 00:02:13,000 --> 00:02:14,760 Speaker 3: two to three percent, it doesn't seem like a lot, 45 00:02:14,760 --> 00:02:16,679 Speaker 3: but it is a lot when it comes to real 46 00:02:16,720 --> 00:02:18,519 Speaker 3: GDP and keeping a lot on inflation. 47 00:02:18,680 --> 00:02:20,760 Speaker 2: As you know better than most, what often happens coming 48 00:02:20,760 --> 00:02:22,959 Speaker 2: into the new year. People look for the other thing, 49 00:02:23,360 --> 00:02:25,000 Speaker 2: not the thing that's been working for years, but they 50 00:02:25,000 --> 00:02:26,800 Speaker 2: look for the other things that they sa time to 51 00:02:26,840 --> 00:02:27,440 Speaker 2: move away from. 52 00:02:27,600 --> 00:02:29,200 Speaker 4: If you get to the other thing. 53 00:02:29,560 --> 00:02:32,520 Speaker 3: Well I'm in that camp. I'm in the notion that 54 00:02:32,560 --> 00:02:35,799 Speaker 3: it's time to rebalance them. I mean, when you've got 55 00:02:35,880 --> 00:02:40,160 Speaker 3: information technology and communication services accounting for forty five percent 56 00:02:40,560 --> 00:02:42,640 Speaker 3: of the market cap of the S and P five hundred, 57 00:02:42,680 --> 00:02:46,079 Speaker 3: maybe it's time to rebalance a bit. And I've been 58 00:02:46,120 --> 00:02:52,440 Speaker 3: recommending also overweighting financials and industrials, and I would continue 59 00:02:52,440 --> 00:02:54,400 Speaker 3: to overweight them and put some money also on an 60 00:02:54,400 --> 00:02:59,200 Speaker 3: overweight basis into healthcare. I think every company is basically 61 00:02:59,200 --> 00:03:01,760 Speaker 3: turning about to be a technology company. Either make it 62 00:03:01,840 --> 00:03:04,679 Speaker 3: or you use it, and so I am kind of 63 00:03:04,760 --> 00:03:08,280 Speaker 3: key on the impressive four ninety three everybody's focusing on 64 00:03:08,280 --> 00:03:10,800 Speaker 3: the Magnificent seven. But I don't know about you. I'm 65 00:03:10,840 --> 00:03:14,440 Speaker 3: getting AI fatigue. I'm a little tired of the whole 66 00:03:15,320 --> 00:03:18,480 Speaker 3: thesis here, and I think the market's starting to show 67 00:03:18,520 --> 00:03:21,080 Speaker 3: that as well, and the four ninety three are looking 68 00:03:21,120 --> 00:03:22,919 Speaker 3: more interesting because there would be the ones that are 69 00:03:23,240 --> 00:03:25,800 Speaker 3: using the technology to reach productivity. At earnings. 70 00:03:26,160 --> 00:03:28,400 Speaker 5: Last year, there was a big overhang on questions of 71 00:03:28,400 --> 00:03:31,919 Speaker 5: how tariffs would impact companies in thus their share price. 72 00:03:32,200 --> 00:03:33,359 Speaker 5: What do you think is going to be the big 73 00:03:33,360 --> 00:03:35,040 Speaker 5: policy question mark of this year? 74 00:03:35,920 --> 00:03:39,480 Speaker 3: Well, I think everybody's focusing on the fiscal stimulus that's 75 00:03:40,080 --> 00:03:43,280 Speaker 3: kind of locked into the system with the One Big 76 00:03:43,320 --> 00:03:46,840 Speaker 3: Beautiful Bill Act that was passed last July, but it 77 00:03:46,880 --> 00:03:49,920 Speaker 3: was retroactive to the beginning of last year, and so 78 00:03:50,320 --> 00:03:55,400 Speaker 3: according to Secretary of Treasury Avestent, a lot of a 79 00:03:55,400 --> 00:03:57,960 Speaker 3: lot of households are going to get an extra one 80 00:03:57,960 --> 00:04:01,160 Speaker 3: thousand to two thousand dollars in refine, more than would 81 00:04:01,160 --> 00:04:03,680 Speaker 3: otherwise have been the case, and that could be very stimulative. 82 00:04:04,080 --> 00:04:07,000 Speaker 3: We already have very simulative monetary policy. The Fed's cut 83 00:04:07,000 --> 00:04:08,640 Speaker 3: the FED funds rate by one hundred and seventy five 84 00:04:08,680 --> 00:04:14,240 Speaker 3: basis points since twenty twenty three, and so you know, 85 00:04:14,840 --> 00:04:18,680 Speaker 3: I think the policies are kind of locked in, and 86 00:04:18,720 --> 00:04:21,200 Speaker 3: the question is what kind of impact they'll have on 87 00:04:21,240 --> 00:04:23,919 Speaker 3: the economy. Obviously a positive one, but the big question 88 00:04:24,040 --> 00:04:25,200 Speaker 3: is what about inflation. 89 00:04:25,600 --> 00:04:28,520 Speaker 5: Well, given they're locked in, do you think consumers are 90 00:04:28,560 --> 00:04:32,800 Speaker 5: ready preemptively spent those checks they're about to get. 91 00:04:32,520 --> 00:04:35,640 Speaker 3: I don't think so. I think they're going to be 92 00:04:35,680 --> 00:04:40,839 Speaker 3: pleasantly surprised by the refunds. I mean, you know, claiming 93 00:04:40,880 --> 00:04:45,680 Speaker 3: your refunds is not something that's easily to predict, So 94 00:04:45,920 --> 00:04:47,760 Speaker 3: I do think that there's going to be a stimulus 95 00:04:47,800 --> 00:04:48,120 Speaker 3: from it. 96 00:04:48,320 --> 00:04:50,040 Speaker 2: Why do you think this will leave the Federal Reserve 97 00:04:50,120 --> 00:04:51,279 Speaker 2: and policy for the year ahead. 98 00:04:52,120 --> 00:04:55,960 Speaker 3: Well, you know, we've got a lot of known unknowns. 99 00:04:56,000 --> 00:04:58,320 Speaker 3: We'll see who the next FED chair is, but we 100 00:04:58,360 --> 00:05:01,280 Speaker 3: also know that whoever is the FED, it's only really 101 00:05:01,360 --> 00:05:04,159 Speaker 3: one vote on the FMC, so defense are going to 102 00:05:04,160 --> 00:05:08,000 Speaker 3: remain data dependent. And I think that with the economy 103 00:05:08,080 --> 00:05:10,119 Speaker 3: likely to be quite strong, at least in the first 104 00:05:10,400 --> 00:05:13,599 Speaker 3: half of the year, I think the Fed's done at 105 00:05:13,680 --> 00:05:14,839 Speaker 3: least for the next six months. 106 00:05:14,880 --> 00:05:16,840 Speaker 2: One man, one vote is not how we've been thinking 107 00:05:16,839 --> 00:05:20,960 Speaker 2: about the Federal reserve of a previous leaderships and previous administrations. 108 00:05:20,960 --> 00:05:21,719 Speaker 2: Why is it changing. 109 00:05:22,080 --> 00:05:27,360 Speaker 3: Well, the previous FED chairs were consensus builders. That's what 110 00:05:27,400 --> 00:05:29,440 Speaker 3: they spent a lot of time doing, and there was 111 00:05:29,839 --> 00:05:32,479 Speaker 3: very successful at it. Particularly FED Chair Powell was a 112 00:05:32,520 --> 00:05:36,800 Speaker 3: great consensus builder builder. But I think the next FED 113 00:05:36,880 --> 00:05:39,960 Speaker 3: chair is going to be much more aligned with the President, 114 00:05:40,000 --> 00:05:41,920 Speaker 3: with the White House, and I think there could be 115 00:05:41,960 --> 00:05:43,760 Speaker 3: a lot I think there could be a lot more 116 00:05:43,760 --> 00:05:47,280 Speaker 3: independence among the FED committee. 117 00:05:47,279 --> 00:05:49,560 Speaker 2: Is that the unintended consequence of this push five for us? 118 00:05:49,680 --> 00:05:51,479 Speaker 3: Yeah, I mean everybody's been talking about the FED is 119 00:05:51,480 --> 00:05:56,120 Speaker 3: going to be less independent. I think they'll be more independent. 120 00:05:56,200 --> 00:05:57,960 Speaker 3: I think you'll see more dissension. 121 00:05:58,520 --> 00:06:00,560 Speaker 5: You mean they're going to be more independent because it's 122 00:06:00,600 --> 00:06:03,560 Speaker 5: so obvious. Potentially the FED chair is so tethered to 123 00:06:03,600 --> 00:06:06,680 Speaker 5: the president, everyone else will feel like they can be 124 00:06:06,800 --> 00:06:07,839 Speaker 5: honest and speak out. 125 00:06:08,080 --> 00:06:08,279 Speaker 6: Yeah. 126 00:06:08,320 --> 00:06:10,720 Speaker 3: Well, if you've got a FED chair that's Trump dependent, 127 00:06:11,880 --> 00:06:14,880 Speaker 3: everybody else's data dependent. I think you're going to have 128 00:06:15,640 --> 00:06:18,880 Speaker 3: a difference of opinion and it's going to be pretty visible, 129 00:06:18,920 --> 00:06:20,400 Speaker 3: as it has been in the last minutes. 130 00:06:20,839 --> 00:06:24,159 Speaker 5: When you say that they only have one vote. Do 131 00:06:24,200 --> 00:06:26,640 Speaker 5: you think this administration might take a different approach when 132 00:06:26,640 --> 00:06:29,320 Speaker 5: I think about the FED and potentially elevate a governor 133 00:06:29,360 --> 00:06:31,800 Speaker 5: Waller so they get an extra seat because it is 134 00:06:31,839 --> 00:06:32,839 Speaker 5: a deliberative body. 135 00:06:33,160 --> 00:06:36,440 Speaker 3: Well, I think Waller would make the most sense because 136 00:06:36,440 --> 00:06:39,520 Speaker 3: he's got the experience, he knows all the players, and 137 00:06:40,200 --> 00:06:43,159 Speaker 3: he could be more of a consensus builders than somebody 138 00:06:43,160 --> 00:06:50,440 Speaker 3: that's just kind of you figure out the FED. But yeah, 139 00:06:49,839 --> 00:06:52,760 Speaker 3: I think whoever is the next FED chair, they're going 140 00:06:52,800 --> 00:06:55,440 Speaker 3: to realize they have a consensus problem and they have 141 00:06:55,480 --> 00:06:57,440 Speaker 3: to deal with it. And so I think at the 142 00:06:57,520 --> 00:07:00,599 Speaker 3: end of the day, the FED it isn't going to 143 00:07:00,600 --> 00:07:02,720 Speaker 3: be much different than what it is right now. Even 144 00:07:02,720 --> 00:07:07,599 Speaker 3: if the President continues to demand that the FED funds 145 00:07:07,600 --> 00:07:09,960 Speaker 3: will be brought down to one percent, it's just not 146 00:07:10,040 --> 00:07:11,760 Speaker 3: going to happen if the economy is doing well and 147 00:07:11,800 --> 00:07:14,880 Speaker 3: if inflation is still kind of stuck around three percent 148 00:07:14,960 --> 00:07:15,920 Speaker 3: rather than down to two. 149 00:07:17,280 --> 00:07:20,760 Speaker 2: Stay with us more Bloomberg surveillance coming up after this. 150 00:07:30,080 --> 00:07:32,600 Speaker 2: Former City and US Intelligence official Norman Rule rights in 151 00:07:32,640 --> 00:07:35,280 Speaker 2: the following. In addition to ensuring US influence out of 152 00:07:35,320 --> 00:07:38,880 Speaker 2: Venezuela's all reserves, the administration will seek to reduce China's 153 00:07:38,880 --> 00:07:42,960 Speaker 2: political influence over a region normal. Jounderstaw for more normally 154 00:07:42,960 --> 00:07:46,240 Speaker 2: and welcome. We talked about how impressively clean this operation 155 00:07:46,560 --> 00:07:50,200 Speaker 2: was over the weekend. Given your experience, given historic examples 156 00:07:50,240 --> 00:07:53,480 Speaker 2: of similar events, what was your reaction to what took place? 157 00:07:56,400 --> 00:08:00,360 Speaker 7: Ordinary display of the skill of US military and untelgence 158 00:08:00,400 --> 00:08:04,559 Speaker 7: officials working together for many months and then putting an 159 00:08:04,600 --> 00:08:10,240 Speaker 7: amazing array of US military intelligence operatives together on the ground. 160 00:08:10,280 --> 00:08:14,640 Speaker 7: But it also showed the extraordinary nature of US technology. 161 00:08:15,320 --> 00:08:19,800 Speaker 7: The Venezuelans talked about having air defenses that could spot 162 00:08:20,040 --> 00:08:24,000 Speaker 7: stealth fighters, and the United States managed to put not 163 00:08:24,120 --> 00:08:30,440 Speaker 7: only dozens of aircraft but helicopters throughout Venezuela's skies, and 164 00:08:30,520 --> 00:08:33,080 Speaker 7: Venezuela's air defense was not able to pick it up. Now, 165 00:08:33,120 --> 00:08:37,520 Speaker 7: put that in context of the US military technology being 166 00:08:37,600 --> 00:08:40,480 Speaker 7: used by Israel and the United States in Iran just 167 00:08:40,559 --> 00:08:47,920 Speaker 7: a few months ago against Russian and Iranian technology in Iran, 168 00:08:48,040 --> 00:08:51,320 Speaker 7: and you really get a picture of the extraordinary capacity 169 00:08:51,400 --> 00:08:56,560 Speaker 7: for US military technology, personnel, and intelligence capability with our 170 00:08:56,600 --> 00:09:00,400 Speaker 7: partners worldwide. It's quite a picture for our ad series 171 00:09:00,440 --> 00:09:00,960 Speaker 7: and partners. 172 00:09:01,240 --> 00:09:04,280 Speaker 5: Iran was the big focus in June. Obviously, Venezuela is 173 00:09:04,320 --> 00:09:07,720 Speaker 5: the big focus now norm what country could be next 174 00:09:07,760 --> 00:09:10,400 Speaker 5: where the US has a more aggressive foreign policy. 175 00:09:11,679 --> 00:09:13,880 Speaker 7: I think it's important to take a real hard look 176 00:09:13,920 --> 00:09:17,960 Speaker 7: at the December National Security Strategy, because the National Security 177 00:09:18,000 --> 00:09:21,640 Speaker 7: Strategy makes clear that the United States will be inclined 178 00:09:21,679 --> 00:09:26,000 Speaker 7: to be non interventionist, but use robust military and economic force, 179 00:09:26,160 --> 00:09:29,760 Speaker 7: most likely in the Western hemisphere, and then otherwise use 180 00:09:29,880 --> 00:09:35,280 Speaker 7: economic and military tools only when needed outside of that 181 00:09:35,440 --> 00:09:42,040 Speaker 7: environment for limited purposes, not state building, not to put 182 00:09:42,280 --> 00:09:46,000 Speaker 7: new governments in place. And I think that template has 183 00:09:46,080 --> 00:09:50,480 Speaker 7: been consistent for the administration throughout the previous year, and 184 00:09:50,559 --> 00:09:53,040 Speaker 7: I think in twenty twenty six as well, So I 185 00:09:53,080 --> 00:09:56,920 Speaker 7: think the Western hemisphere is likely to remain the administration's focus, 186 00:09:57,280 --> 00:10:00,319 Speaker 7: but the Iranians have been put on notice. Has been 187 00:10:00,320 --> 00:10:05,760 Speaker 7: some additional social media activity by the administration, but if activity, 188 00:10:05,920 --> 00:10:09,240 Speaker 7: military activity work undertaken by the administration, it would likely 189 00:10:09,320 --> 00:10:10,000 Speaker 7: be limited. 190 00:10:10,080 --> 00:10:10,679 Speaker 4: This is not an. 191 00:10:10,520 --> 00:10:14,280 Speaker 7: Administration looking to involve the US in a conventional conflict. 192 00:10:14,520 --> 00:10:17,280 Speaker 5: When it comes to Venezuela and now, the acting President 193 00:10:17,400 --> 00:10:21,120 Speaker 5: of Rodriguez, given the fact that she was the number 194 00:10:21,120 --> 00:10:24,679 Speaker 5: two her brother runs the National Assembly, she was by 195 00:10:24,720 --> 00:10:29,240 Speaker 5: the Panamanian leader said this in thedorism without Maduro. Is 196 00:10:29,280 --> 00:10:32,800 Speaker 5: this regime containment instead of change. 197 00:10:33,440 --> 00:10:35,920 Speaker 7: Well, I think you've got a couple of different issues here. 198 00:10:35,960 --> 00:10:38,800 Speaker 7: So the US posture again is being clarified as interest 199 00:10:38,880 --> 00:10:43,600 Speaker 7: driven state craft. We're interested in stopping drugs, migration, adversary, 200 00:10:43,640 --> 00:10:48,520 Speaker 7: exclusion from oil, democracy restoration is being positioned as. 201 00:10:48,720 --> 00:10:50,359 Speaker 4: A downstream objective. 202 00:10:50,640 --> 00:10:53,640 Speaker 7: Now, let's put this in the contact as the Venezuelans, 203 00:10:53,640 --> 00:10:56,640 Speaker 7: they've just seen an extraordinary display of US power. They 204 00:10:56,720 --> 00:11:00,800 Speaker 7: cannot compete with us. They have no allies of any consequence. 205 00:11:01,400 --> 00:11:03,600 Speaker 7: So they're going to try to do several things. First, 206 00:11:03,600 --> 00:11:06,960 Speaker 7: they need to buy time, They need to sustain internal cohesion, 207 00:11:07,040 --> 00:11:11,199 Speaker 7: they need to deal legitimize any potential successor, and they 208 00:11:11,200 --> 00:11:14,200 Speaker 7: need to then think about how do they manage this 209 00:11:14,360 --> 00:11:18,800 Speaker 7: environment while Congress the rest of the world puts themselves 210 00:11:18,800 --> 00:11:22,040 Speaker 7: together against the Trump administration, and then seek out maybe 211 00:11:22,240 --> 00:11:26,240 Speaker 7: overtures for a negotiated coexistence with the Trump administration, if 212 00:11:26,240 --> 00:11:29,440 Speaker 7: only to prevent follow on strikes, and then maximize their 213 00:11:29,440 --> 00:11:32,320 Speaker 7: influence in any possible ongoing transition. 214 00:11:32,559 --> 00:11:35,079 Speaker 2: Norman, we're tracking live pitches of the form of Venezweman 215 00:11:35,160 --> 00:11:37,080 Speaker 2: leader heading to a court here in New York City, 216 00:11:37,440 --> 00:11:40,160 Speaker 2: which is stunning in and of itself. In an ideal 217 00:11:40,200 --> 00:11:42,880 Speaker 2: world norm this is what people would like to see. 218 00:11:43,280 --> 00:11:45,080 Speaker 2: They would have liked to send this guy step down 219 00:11:45,120 --> 00:11:47,400 Speaker 2: a long time ago. And then the nobel prize is 220 00:11:47,400 --> 00:11:50,120 Speaker 2: when it walks into Caracas the following day to streets 221 00:11:50,160 --> 00:11:53,160 Speaker 2: celebrating her arrival and she takes over in democracy rates. 222 00:11:53,760 --> 00:11:54,880 Speaker 4: No, and that's not the real world. 223 00:11:55,120 --> 00:11:57,280 Speaker 2: Could you share with us the cold hard reality of 224 00:11:57,320 --> 00:11:59,880 Speaker 2: the real world and how difficult it will be between 225 00:12:00,080 --> 00:12:04,679 Speaker 2: age the resistance that hasn't yet shown itself yet in Venezuela, 226 00:12:04,760 --> 00:12:07,920 Speaker 2: but could manifest materialize in a months to count. 227 00:12:09,320 --> 00:12:12,680 Speaker 7: Well. To be clear, I'm not of Venezuelan in domestic 228 00:12:12,760 --> 00:12:17,040 Speaker 7: political expert, but for the Venezuelan opposition to take charge, 229 00:12:17,080 --> 00:12:21,400 Speaker 7: they're going to have to overcome the architecture of the military, 230 00:12:21,520 --> 00:12:25,960 Speaker 7: the security forces, the Cuban security forces who are ingrained 231 00:12:26,000 --> 00:12:30,040 Speaker 7: within the architecture of the Venezuelan government, the entire political 232 00:12:30,080 --> 00:12:32,920 Speaker 7: system of Venezuela, which will be among the first to 233 00:12:32,920 --> 00:12:36,840 Speaker 7: be put on trial. I mean, the Venezuelan Interior Minister 234 00:12:37,040 --> 00:12:39,880 Speaker 7: and the acting the new president will be among the 235 00:12:39,920 --> 00:12:42,360 Speaker 7: first to be put on trial for corruption and human rights. 236 00:12:42,600 --> 00:12:46,239 Speaker 7: So they're going to need a safe haven, a amnesty. 237 00:12:46,320 --> 00:12:48,480 Speaker 7: This is an awful lot to ask for. So the 238 00:12:48,520 --> 00:12:51,360 Speaker 7: President was not out of his lane to say that 239 00:12:51,400 --> 00:12:53,760 Speaker 7: it's going to be a tough road to hope for 240 00:12:53,880 --> 00:12:58,840 Speaker 7: the incoming president to just to just step in. And 241 00:12:58,880 --> 00:13:00,880 Speaker 7: I think for this reason, the Secretary of State was 242 00:13:00,880 --> 00:13:04,000 Speaker 7: also accurate to describe this as a as a process. 243 00:13:04,040 --> 00:13:08,160 Speaker 8: But in any case, this is a situation in motion. 244 00:13:10,080 --> 00:13:13,560 Speaker 2: Stay with US mult Bloomberg surveillance coming up after this. 245 00:13:22,120 --> 00:13:24,360 Speaker 2: Let's stick with the energy market. The US of course 246 00:13:24,440 --> 00:13:27,360 Speaker 2: ready to use the commodity for leverage in Venezuela. 247 00:13:28,559 --> 00:13:31,920 Speaker 1: There's a quarantine right now in which sanctioned oil shipments. 248 00:13:32,080 --> 00:13:34,240 Speaker 1: There's a boat and that boat is under US sanctions. 249 00:13:34,240 --> 00:13:35,960 Speaker 1: We go get a quarter or or we will seize it. 250 00:13:36,200 --> 00:13:38,839 Speaker 1: That remains in place, and that's a tremendous amount of 251 00:13:38,880 --> 00:13:41,440 Speaker 1: leverage that will continue to be in place until we 252 00:13:41,480 --> 00:13:43,839 Speaker 1: see changes not just further the national interests of the 253 00:13:43,960 --> 00:13:46,800 Speaker 1: United States, which is number one, but also that lead 254 00:13:46,880 --> 00:13:49,040 Speaker 1: to a better future for the people of Venezuela. 255 00:13:49,200 --> 00:13:52,000 Speaker 2: Bob mcdaney, the founder and president of Rapidant Energy Group, 256 00:13:52,080 --> 00:13:53,960 Speaker 2: joined US now for more Bob, as you and I 257 00:13:54,120 --> 00:13:56,720 Speaker 2: start this conversation with tracking live pictures of the former 258 00:13:56,760 --> 00:13:59,920 Speaker 2: Venaswevan leader making this way to court here in New York. 259 00:14:00,240 --> 00:14:03,560 Speaker 2: This is an individual whoever saw the biggest energy reserves 260 00:14:03,840 --> 00:14:06,439 Speaker 2: on the planet, and this was a sector an industry 261 00:14:06,440 --> 00:14:09,760 Speaker 2: in that country plagued by under investment. Can you frame 262 00:14:09,840 --> 00:14:12,640 Speaker 2: for us, Bob, how long it would take to really 263 00:14:12,720 --> 00:14:16,120 Speaker 2: scale up production in that country now that individual is 264 00:14:16,120 --> 00:14:16,920 Speaker 2: out of the country. 265 00:14:17,720 --> 00:14:21,280 Speaker 9: Hi, Jonathan, Sure, it's a matter of many years to 266 00:14:21,440 --> 00:14:25,800 Speaker 9: decades and tens of billions of dollars. The good news is, 267 00:14:26,520 --> 00:14:29,000 Speaker 9: especially US companies, they know how to do it. They 268 00:14:29,040 --> 00:14:34,000 Speaker 9: have the engineering, logistical, technical expertise. But it's going to 269 00:14:34,040 --> 00:14:37,680 Speaker 9: take boatloads of money and we won't be seeing real 270 00:14:37,800 --> 00:14:41,160 Speaker 9: oil until after the end of the second Trump term. 271 00:14:41,160 --> 00:14:42,840 Speaker 4: We just need to be realistic about that. 272 00:14:43,240 --> 00:14:45,360 Speaker 5: But Bob, is the will there given the fact that 273 00:14:45,400 --> 00:14:48,280 Speaker 5: these are companies that had to flee Venezuela in two 274 00:14:48,320 --> 00:14:49,040 Speaker 5: thousand and seven. 275 00:14:50,400 --> 00:14:54,480 Speaker 9: Absolutely, you know they're tantalized, but they are cautiously tantalized. 276 00:14:54,520 --> 00:14:56,360 Speaker 9: I was in the White House twenty three years ago 277 00:14:56,880 --> 00:14:59,880 Speaker 9: after we were chased out by Hugo Chavez. No fun 278 00:15:00,120 --> 00:15:02,760 Speaker 9: at all, and they will be very cautious in going 279 00:15:02,840 --> 00:15:05,640 Speaker 9: back in. But it also gets to this transition will 280 00:15:05,920 --> 00:15:07,480 Speaker 9: what kind of government are we going to have there, 281 00:15:07,480 --> 00:15:10,000 Speaker 9: what kind of contract terms, what kind of physical security 282 00:15:10,400 --> 00:15:14,040 Speaker 9: there are There's a wide and deep set of big 283 00:15:14,160 --> 00:15:17,400 Speaker 9: questions that these oil companies and their boards are going 284 00:15:17,440 --> 00:15:20,680 Speaker 9: to consider before they rush in. I think it's right 285 00:15:20,720 --> 00:15:22,440 Speaker 9: that they're up in inequity pricing. 286 00:15:22,440 --> 00:15:23,600 Speaker 4: It's an arc. It's got this right. 287 00:15:23,640 --> 00:15:26,720 Speaker 9: It's a nothing burger for short term crude futures. It's 288 00:15:26,760 --> 00:15:30,440 Speaker 9: another tailwind for US oil companies majors coming after this 289 00:15:30,520 --> 00:15:32,960 Speaker 9: sort of walk back from this peak demand narrative. You 290 00:15:32,960 --> 00:15:35,240 Speaker 9: think about it, US oil majors have just had a 291 00:15:35,280 --> 00:15:39,360 Speaker 9: great extended holiday season. Peak demand is fading in twenty thirty. 292 00:15:39,440 --> 00:15:42,280 Speaker 9: That's good for them, and now the world's largest oil 293 00:15:42,320 --> 00:15:44,960 Speaker 9: reserves may be available to them when it really counts 294 00:15:45,040 --> 00:15:45,920 Speaker 9: after twenty thirty. 295 00:15:46,240 --> 00:15:48,200 Speaker 5: Well, you also got it right. I actually thought of 296 00:15:48,240 --> 00:15:51,040 Speaker 5: you in the morning after this all took place, because 297 00:15:51,240 --> 00:15:53,840 Speaker 5: before the Christmas holidays you said there was a seventy 298 00:15:53,880 --> 00:15:56,920 Speaker 5: percent chance that Madua would be out. Did you think 299 00:15:56,960 --> 00:15:58,560 Speaker 5: it was going to happen this quickly? 300 00:15:59,760 --> 00:16:01,240 Speaker 4: Yeah, yes, we did. 301 00:16:01,760 --> 00:16:04,360 Speaker 9: I think the market has gotten you mentioned June in 302 00:16:04,400 --> 00:16:05,320 Speaker 9: the Iran war. 303 00:16:06,080 --> 00:16:07,720 Speaker 4: The market doesn't understand Trump. 304 00:16:08,480 --> 00:16:11,920 Speaker 9: It was surprised when he attacked Iran, It was surprised 305 00:16:12,000 --> 00:16:15,479 Speaker 9: when he puts sanctions on Rosneft and Luke Oil in October, 306 00:16:15,800 --> 00:16:19,000 Speaker 9: and it was surprised when he attacked when he removed Maduro. 307 00:16:19,480 --> 00:16:22,080 Speaker 9: I think what the market doesn't understand is the President's 308 00:16:22,160 --> 00:16:27,000 Speaker 9: willingness to take risk when it comes to confronting adversaries 309 00:16:27,000 --> 00:16:30,680 Speaker 9: on top tier foreign policy challenges, even if energy is 310 00:16:30,720 --> 00:16:33,000 Speaker 9: at stake. And the reason why Emmerie and you just 311 00:16:33,040 --> 00:16:35,800 Speaker 9: mentioned it. The President the White House believes, and I 312 00:16:35,880 --> 00:16:39,440 Speaker 9: happen to agree, we're heading into oversupply. He can lean 313 00:16:39,560 --> 00:16:43,080 Speaker 9: into this softening crude market and take risk even with 314 00:16:43,240 --> 00:16:46,360 Speaker 9: Iran and Russia, which are really more important near term 315 00:16:46,440 --> 00:16:47,320 Speaker 9: than Venezuela. 316 00:16:47,800 --> 00:16:50,720 Speaker 5: So what are you telling clients is the next potential 317 00:16:51,080 --> 00:16:53,520 Speaker 5: risk taking this administration is going to go for? 318 00:16:54,840 --> 00:16:57,640 Speaker 9: Iran and Russia are up next. Look at the presidents 319 00:16:57,680 --> 00:17:03,680 Speaker 9: talking about Israel is not kidding about preventing Iran from 320 00:17:03,720 --> 00:17:09,439 Speaker 9: reconstituting its its missile and nuclear programs, and with the 321 00:17:09,560 --> 00:17:12,960 Speaker 9: unrest for seeing there maybe stirring the pot. So the 322 00:17:12,960 --> 00:17:15,240 Speaker 9: President's been talking very forcefully. Look what he said with 323 00:17:15,240 --> 00:17:18,479 Speaker 9: Prime Minister net Yahoo willingness to intervene if the regime 324 00:17:18,520 --> 00:17:21,760 Speaker 9: shoots protesters. I think when the market sort of lifts 325 00:17:21,800 --> 00:17:25,040 Speaker 9: its gaze from this fascination with Venezuela and realize this 326 00:17:25,280 --> 00:17:28,199 Speaker 9: is not a real issue with a short term, it's 327 00:17:28,280 --> 00:17:31,440 Speaker 9: going to say, wait a minute, how credible is President 328 00:17:31,480 --> 00:17:33,879 Speaker 9: Trump when it comes to Russia and Iran. 329 00:17:33,960 --> 00:17:36,960 Speaker 4: With Russia, Putin's not going to agree to armistice. 330 00:17:37,000 --> 00:17:40,680 Speaker 9: And while President Trump often has a friendly demeanor towards Putin, 331 00:17:40,800 --> 00:17:44,280 Speaker 9: says nice things, he also tightened sanctions and I think 332 00:17:44,320 --> 00:17:47,120 Speaker 9: he's willing to do so even more into next year. 333 00:17:47,200 --> 00:17:50,600 Speaker 9: So let's look to Iran and Russia for real potential 334 00:17:50,640 --> 00:17:52,480 Speaker 9: supply disruptions, not Venezuela. 335 00:17:52,480 --> 00:17:54,320 Speaker 2: When you say that up next, well, can you just 336 00:17:54,320 --> 00:17:56,359 Speaker 2: give a staytown on what you mean by that? Because 337 00:17:56,440 --> 00:17:58,320 Speaker 2: up next, after what we saw I have had, awakens 338 00:17:58,320 --> 00:18:00,720 Speaker 2: a very different scenario for Iran and for Russia. What 339 00:18:00,760 --> 00:18:01,840 Speaker 2: do you mean by their up next? 340 00:18:02,680 --> 00:18:07,320 Speaker 9: Well, I think if Iran doesn't agree to halt its 341 00:18:07,359 --> 00:18:11,360 Speaker 9: missile capabilities, its reconstitution, it's nuclear capabilities, and as if 342 00:18:11,400 --> 00:18:13,919 Speaker 9: we even see this continued unrest. I think there will be, 343 00:18:13,960 --> 00:18:17,760 Speaker 9: and we told clients seventy percent probability of another wave 344 00:18:17,840 --> 00:18:22,800 Speaker 9: of at least Israelia strikes on Iran, perhaps supported or 345 00:18:22,920 --> 00:18:25,399 Speaker 9: joined by the United States. We're at a solid seventy 346 00:18:25,440 --> 00:18:29,680 Speaker 9: percent on that also sanctions, tighter sanctions we've let Iran off. 347 00:18:29,840 --> 00:18:31,760 Speaker 9: Trump could go to China and say cut it out, 348 00:18:31,800 --> 00:18:34,520 Speaker 9: We're serious, do business with Iran or do business in the 349 00:18:34,600 --> 00:18:35,199 Speaker 9: United States. 350 00:18:35,760 --> 00:18:36,919 Speaker 4: So really cutting. 351 00:18:36,680 --> 00:18:39,879 Speaker 9: Into their oil exports at least and military action at 352 00:18:39,880 --> 00:18:43,200 Speaker 9: best seventy percent probability in the coming let's say months. 353 00:18:43,920 --> 00:18:46,960 Speaker 9: Putin Russia same thing so far. They just wanted to 354 00:18:47,000 --> 00:18:49,800 Speaker 9: widen the Eural's discount to Brent. They just wanted to, 355 00:18:50,280 --> 00:18:53,720 Speaker 9: you know, hurt Putin's revenue, not cut into production. If 356 00:18:53,760 --> 00:18:56,240 Speaker 9: oil prices keep falling, it's a big condition. If oil 357 00:18:56,280 --> 00:18:58,800 Speaker 9: prices keep softening, I think he'll be willing to be 358 00:18:58,920 --> 00:19:02,240 Speaker 9: tougher on in India, China and other customers of Russians 359 00:19:02,320 --> 00:19:03,160 Speaker 9: Russia's crude. 360 00:19:03,520 --> 00:19:05,960 Speaker 2: How consistent is that with the national security strategy that 361 00:19:06,000 --> 00:19:07,760 Speaker 2: they put out at the end of last year. 362 00:19:09,240 --> 00:19:11,399 Speaker 4: You know, it is consistent, But the subtle you got 363 00:19:11,440 --> 00:19:12,040 Speaker 4: to read into it. 364 00:19:12,080 --> 00:19:15,480 Speaker 9: Trump didn't say, Look, we're going back to the Western hemisphere, 365 00:19:15,520 --> 00:19:17,639 Speaker 9: and we're all about not only the Monroe doctrine, but 366 00:19:17,640 --> 00:19:19,679 Speaker 9: the Trump correlated which means we won't even let our 367 00:19:19,680 --> 00:19:22,639 Speaker 9: adversaries have economic stakes in our region. That's what the 368 00:19:22,640 --> 00:19:25,840 Speaker 9: focus was. But he didn't say we're completely pulling up 369 00:19:25,920 --> 00:19:28,840 Speaker 9: stakes in Europe, the Middle East and Asia. 370 00:19:28,960 --> 00:19:30,440 Speaker 4: Didn't say that not acting that way. 371 00:19:30,480 --> 00:19:32,560 Speaker 9: We don't think China has a free hand in Taiwan, 372 00:19:32,960 --> 00:19:34,840 Speaker 9: we don't think Putin has a free hand in Putin 373 00:19:35,240 --> 00:19:38,040 Speaker 9: in Ukraine, and in the Middle East, we're going nowhere. 374 00:19:38,040 --> 00:19:40,359 Speaker 4: So we're kind of having it both ways. I think we're. 375 00:19:40,480 --> 00:19:43,960 Speaker 9: Having our internationalism, our global alliances and the Eurasian land 376 00:19:44,000 --> 00:19:46,800 Speaker 9: mass on the one hand, but telling the world, yeah, 377 00:19:46,800 --> 00:19:49,720 Speaker 9: we're really going to be busy in the Western Hemisphere. 378 00:19:49,760 --> 00:19:51,720 Speaker 2: I'm ready. That was certainly part of the conversation over 379 00:19:51,760 --> 00:19:54,160 Speaker 2: the weekend. Does this speed to the idea that maybe 380 00:19:54,200 --> 00:19:57,520 Speaker 2: they're going to refocus everything on the so called Western hemisphere, 381 00:19:57,600 --> 00:19:59,600 Speaker 2: ultimately Latin American, and take their off the ball in 382 00:19:59,640 --> 00:20:01,760 Speaker 2: places the Middle East and Europe. 383 00:20:01,840 --> 00:20:04,840 Speaker 5: Well, one thing is for sure is that they definitely 384 00:20:04,880 --> 00:20:07,680 Speaker 5: are monitoring the price of oil and to Bob's point, 385 00:20:07,720 --> 00:20:09,840 Speaker 5: does that give them a lot more leverage around the world? 386 00:20:09,960 --> 00:20:12,640 Speaker 5: Only there Arepasca actually came out with a telegram over 387 00:20:12,680 --> 00:20:15,480 Speaker 5: the weekend and was talking about how if the US 388 00:20:15,560 --> 00:20:17,840 Speaker 5: is able to hold prices near fifty dollars a barrel, 389 00:20:18,080 --> 00:20:21,760 Speaker 5: that puts serious pressure on Russia's state capitalist economic model. 390 00:20:22,040 --> 00:20:24,199 Speaker 5: So already this is going to put pressure on all 391 00:20:24,240 --> 00:20:26,960 Speaker 5: these other countries, even if the administration decides they're just 392 00:20:27,080 --> 00:20:28,760 Speaker 5: focusing on the Western hemisphere. 393 00:20:28,800 --> 00:20:30,359 Speaker 2: Well, just before you go, I wanted to combat some 394 00:20:30,400 --> 00:20:32,560 Speaker 2: time and talk about a much longer term issue, the 395 00:20:32,640 --> 00:20:36,560 Speaker 2: life Spanish shale. How are you considering the life Spanish 396 00:20:36,560 --> 00:20:39,320 Speaker 2: shale with the developments that we saw took place over 397 00:20:39,359 --> 00:20:39,840 Speaker 2: the weekend. 398 00:20:41,560 --> 00:20:43,960 Speaker 9: Well, we think shale is going to be around forever, 399 00:20:44,200 --> 00:20:46,560 Speaker 9: and there are other deposits around the world. Look at 400 00:20:46,600 --> 00:20:50,119 Speaker 9: what Argentina is doing, so other shale deposits open up. 401 00:20:50,119 --> 00:20:53,679 Speaker 9: We could see new, strongly emerging shale plays. In the US, 402 00:20:53,960 --> 00:20:56,560 Speaker 9: we think it's a mature sector. We don't see a 403 00:20:56,600 --> 00:20:59,760 Speaker 9: lot of net growth, but you know what, look at AI, 404 00:21:00,000 --> 00:21:03,159 Speaker 9: look at technology gains. Real big mistake to bet against, 405 00:21:03,240 --> 00:21:06,840 Speaker 9: especially US engineers, US oil geologists, et cetera. And I 406 00:21:06,880 --> 00:21:10,399 Speaker 9: can see us getting those recovery reserves up from ten percent, 407 00:21:10,600 --> 00:21:13,960 Speaker 9: we get that up five ten percent more. I think 408 00:21:14,080 --> 00:21:16,840 Speaker 9: we can see surprises and our ability to produce oil. 409 00:21:16,840 --> 00:21:20,760 Speaker 9: But look, it's high cost, it's vulnerable to supply price swings, 410 00:21:21,240 --> 00:21:23,480 Speaker 9: it's going to be challenging, it's mature for the time being. 411 00:21:23,520 --> 00:21:26,199 Speaker 4: So shale is sort of in a plateau for the 412 00:21:26,240 --> 00:21:26,760 Speaker 4: time being. 413 00:21:26,800 --> 00:21:28,439 Speaker 9: But if we get a surprise, it's not going to 414 00:21:28,440 --> 00:21:29,480 Speaker 9: be the death of shale. 415 00:21:29,720 --> 00:21:31,639 Speaker 4: It's going to be that Wow, we can recover a 416 00:21:31,640 --> 00:21:33,760 Speaker 4: lot more. We even got more efficient. 417 00:21:34,359 --> 00:21:37,880 Speaker 2: Stay with us mult Bloomberg surveillance coming up after this. 418 00:21:46,760 --> 00:21:47,639 Speaker 4: Well, here's the late system. 419 00:21:47,640 --> 00:21:50,000 Speaker 2: The choice remarket so far this morning yields falling for 420 00:21:50,040 --> 00:21:51,800 Speaker 2: the first time at a week on escalating to your 421 00:21:51,800 --> 00:21:54,520 Speaker 2: political tensions, adding to the games we saw through last year, 422 00:21:54,800 --> 00:21:57,000 Speaker 2: a forty basis point move lower on a ten year 423 00:21:57,000 --> 00:21:59,240 Speaker 2: maturity through the year, this morning we down to four 424 00:21:59,320 --> 00:22:02,240 Speaker 2: sixteen seventy one. To discuss joining us now is Jimpnco 425 00:22:02,520 --> 00:22:04,800 Speaker 2: of Pienco Research. Jim, Welcome to the show. So the 426 00:22:04,840 --> 00:22:07,000 Speaker 2: move of the front end phenomenal, of course, in line 427 00:22:07,000 --> 00:22:09,119 Speaker 2: with the rate reductions at the federal reserve, but it 428 00:22:09,160 --> 00:22:10,639 Speaker 2: was a reserve to the front ended a curve. We 429 00:22:10,680 --> 00:22:12,320 Speaker 2: also thought that rally in the longer end of a 430 00:22:12,359 --> 00:22:14,119 Speaker 2: curve and a ten year mature, it's' bit a leakage 431 00:22:14,119 --> 00:22:15,280 Speaker 2: in a thirty year. We can get to that in 432 00:22:15,320 --> 00:22:17,320 Speaker 2: the moment. Jim, what do you think was behind that 433 00:22:17,400 --> 00:22:19,720 Speaker 2: move given the sal America story that really immerged in 434 00:22:19,760 --> 00:22:22,280 Speaker 2: April then was very quickly ignored in the back half 435 00:22:22,320 --> 00:22:22,680 Speaker 2: of the year. 436 00:22:23,680 --> 00:22:25,240 Speaker 8: Well, I think we need to first put that in 437 00:22:25,280 --> 00:22:26,359 Speaker 8: a little bit of perspective. 438 00:22:26,440 --> 00:22:29,760 Speaker 6: In twenty twenty five, all the ten year yields around 439 00:22:29,760 --> 00:22:33,440 Speaker 6: the developed world were either unchanged or higher. The only 440 00:22:33,480 --> 00:22:36,520 Speaker 6: one that was lower was the US. All the thirty 441 00:22:36,600 --> 00:22:39,480 Speaker 6: year yields not every country has a thirty year were 442 00:22:39,560 --> 00:22:43,560 Speaker 6: unchanged to higher, including the US. So there was only 443 00:22:43,640 --> 00:22:46,800 Speaker 6: one long term yield around the world that went down 444 00:22:46,880 --> 00:22:48,680 Speaker 6: last year, and that was the US ten year yield. 445 00:22:48,800 --> 00:22:53,199 Speaker 6: So something specific to the tenure yield happened last year. Now, 446 00:22:53,240 --> 00:22:56,200 Speaker 6: if I had to guess, it's not the GDP numbers, 447 00:22:56,240 --> 00:22:59,120 Speaker 6: it's not the inflation numbers, because everybody else had very 448 00:22:59,160 --> 00:23:01,920 Speaker 6: similar to about the developed world had very similar type 449 00:23:01,960 --> 00:23:02,359 Speaker 6: of numbers. 450 00:23:02,400 --> 00:23:03,399 Speaker 8: But their yields went up. 451 00:23:03,400 --> 00:23:06,359 Speaker 6: I think the difference might be political, and that is 452 00:23:06,480 --> 00:23:10,480 Speaker 6: the President has tied his success to lower tenyure yields 453 00:23:10,640 --> 00:23:14,040 Speaker 6: and has been demanding that the Federal Reserve cut interest rates, 454 00:23:14,320 --> 00:23:17,320 Speaker 6: and that had had an effect in twenty twenty five. 455 00:23:17,359 --> 00:23:19,800 Speaker 8: Whether it does in twenty twenty six is a different question. 456 00:23:20,000 --> 00:23:20,760 Speaker 4: Jim, you're sug Jansen. 457 00:23:20,760 --> 00:23:23,359 Speaker 2: There was almost an implicit treasury per coming from the 458 00:23:23,359 --> 00:23:26,720 Speaker 2: administration that's making people reluctant to sound that specific maturity. 459 00:23:28,040 --> 00:23:31,000 Speaker 6: Yeah, I am, because that specific maturity was the only 460 00:23:31,040 --> 00:23:32,720 Speaker 6: one that was down. Now, if we had a bunch 461 00:23:32,800 --> 00:23:35,680 Speaker 6: of them down on yield, like the US was down 462 00:23:35,760 --> 00:23:38,440 Speaker 6: forty basis points in the tenure, then I would argue 463 00:23:38,480 --> 00:23:40,119 Speaker 6: to you that, you know, it wasn't but there was 464 00:23:40,119 --> 00:23:43,240 Speaker 6: something specific about that maturity, and I don't think that 465 00:23:43,240 --> 00:23:44,360 Speaker 6: that can last forever. 466 00:23:44,600 --> 00:23:46,480 Speaker 8: It did last for twenty twenty five. 467 00:23:46,960 --> 00:23:49,080 Speaker 6: So really it's going to come down to what is 468 00:23:49,119 --> 00:23:51,640 Speaker 6: the economics of twenty twenty six. Now, if it looks 469 00:23:51,720 --> 00:23:54,280 Speaker 6: like twenty five, we had strong growth, we had a 470 00:23:54,320 --> 00:23:56,879 Speaker 6: four point three percent GDP in the third quarter, the 471 00:23:56,920 --> 00:23:59,520 Speaker 6: last number we had we had inflation, it is still 472 00:23:59,520 --> 00:24:02,359 Speaker 6: in the up or twos. We're almost six years past 473 00:24:02,480 --> 00:24:05,360 Speaker 6: the beginning of COVID and we're still in nowhere near 474 00:24:05,400 --> 00:24:09,080 Speaker 6: two percent that those types of numbers will produce higher 475 00:24:09,080 --> 00:24:11,280 Speaker 6: tenure yields throughout twenty twenty six. 476 00:24:11,480 --> 00:24:13,240 Speaker 2: Jamis, you consider the rest of the world, not just 477 00:24:13,280 --> 00:24:16,040 Speaker 2: the US bond market, but the global bond market. Is 478 00:24:16,080 --> 00:24:18,919 Speaker 2: the center of gravity for US bonds in the US 479 00:24:19,520 --> 00:24:22,399 Speaker 2: or the dynamics that you're speaking to. Actually, I swear 480 00:24:22,480 --> 00:24:23,639 Speaker 2: the in places like Japan. 481 00:24:25,000 --> 00:24:27,520 Speaker 6: Oh, I think you're right that where it's not if 482 00:24:27,520 --> 00:24:29,679 Speaker 6: I could talk about the default is it's not in 483 00:24:29,760 --> 00:24:32,600 Speaker 6: China anymore. China's now fallen to the third largest country 484 00:24:32,600 --> 00:24:35,480 Speaker 6: that owns treasuries behind the UK, and so it has 485 00:24:35,560 --> 00:24:39,520 Speaker 6: definitely moved to somewhat in Japan, and that is probably 486 00:24:39,520 --> 00:24:43,000 Speaker 6: in that negative with their rates going up, the incentive 487 00:24:43,080 --> 00:24:46,480 Speaker 6: to sell US fixed income securities and move. 488 00:24:46,359 --> 00:24:49,440 Speaker 8: Back to China to Japan, excuse me, grows every day. 489 00:24:49,520 --> 00:24:52,240 Speaker 6: So yes, then by default it comes back to the 490 00:24:52,359 --> 00:24:55,520 Speaker 6: US and it comes back to FED policy, and that 491 00:24:55,640 --> 00:24:58,440 Speaker 6: comes back to how the growth is and our mind 492 00:24:58,480 --> 00:25:01,200 Speaker 6: everybody that if you look at the last FED meeting, 493 00:25:01,280 --> 00:25:03,119 Speaker 6: it was a nine to three vote, But if you 494 00:25:03,160 --> 00:25:06,120 Speaker 6: look at the way that everybody was talking, it might 495 00:25:06,160 --> 00:25:09,000 Speaker 6: have been ten to nine among the nineteen members of 496 00:25:09,040 --> 00:25:11,639 Speaker 6: the Fed whether or not they should have cut rates 497 00:25:11,680 --> 00:25:14,000 Speaker 6: at the December meeting. So if we could continue to 498 00:25:14,000 --> 00:25:16,200 Speaker 6: get strong growth like this, we might not see another 499 00:25:16,280 --> 00:25:17,800 Speaker 6: rate cut through twenty twenty six. 500 00:25:17,960 --> 00:25:20,840 Speaker 5: Do you think twenty twenty six will be risks or 501 00:25:20,880 --> 00:25:25,679 Speaker 5: opportunities to marketants participants? Especially given the stunning developments just 502 00:25:25,720 --> 00:25:27,600 Speaker 5: over the weekend when it comes to foreign policy of 503 00:25:27,640 --> 00:25:29,040 Speaker 5: this administration. 504 00:25:29,680 --> 00:25:31,760 Speaker 6: Well, there's always going to be risks, But I guess 505 00:25:32,119 --> 00:25:34,520 Speaker 6: the real question is where do the risks come. Do 506 00:25:34,600 --> 00:25:37,920 Speaker 6: they come in denting growth or slowing down growth, or 507 00:25:38,000 --> 00:25:41,919 Speaker 6: do they come in potentially pushing up inflation? And I 508 00:25:41,960 --> 00:25:44,399 Speaker 6: would you know, I am one that has been and 509 00:25:44,560 --> 00:25:48,640 Speaker 6: continues to be concerned about inflation. What happened in Venezuela 510 00:25:48,800 --> 00:25:51,399 Speaker 6: is a good long term story for crude oil, but 511 00:25:51,440 --> 00:25:53,560 Speaker 6: it might not even be a twenty twenty sixth story 512 00:25:54,119 --> 00:25:55,040 Speaker 6: for crudelf anything. 513 00:25:55,040 --> 00:25:57,320 Speaker 8: It might be somewhat bullish for crude oil over the 514 00:25:57,440 --> 00:25:58,080 Speaker 8: very short. 515 00:25:57,920 --> 00:26:01,480 Speaker 6: Term as they cut off shipment to China that has 516 00:26:01,520 --> 00:26:04,159 Speaker 6: to replace it by buying it from other places and 517 00:26:04,240 --> 00:26:06,159 Speaker 6: pushing it up just over the very short term, but 518 00:26:06,240 --> 00:26:08,800 Speaker 6: longer term it could be. But I think that most 519 00:26:08,800 --> 00:26:11,640 Speaker 6: of the risks that I see are going to lead 520 00:26:11,680 --> 00:26:15,439 Speaker 6: to them to inflation staying in the high twos to 521 00:26:15,520 --> 00:26:18,399 Speaker 6: the low threes, and the market starting to realize that 522 00:26:18,400 --> 00:26:20,159 Speaker 6: a three and a half percent funds rate and a 523 00:26:20,320 --> 00:26:23,800 Speaker 6: four point two percent or so ten yure yield might 524 00:26:23,840 --> 00:26:25,320 Speaker 6: be too low when it. 525 00:26:25,240 --> 00:26:28,160 Speaker 5: Comes to inflation. What makes you the most nervous because 526 00:26:28,160 --> 00:26:30,639 Speaker 5: many people were talking about tariffs last year, but we 527 00:26:30,680 --> 00:26:33,520 Speaker 5: haven't seen a real impact. 528 00:26:33,080 --> 00:26:33,400 Speaker 3: On that. 529 00:26:34,960 --> 00:26:35,280 Speaker 4: Yet. 530 00:26:35,640 --> 00:26:37,800 Speaker 6: And the reason I say yet is that while you 531 00:26:37,840 --> 00:26:41,359 Speaker 6: look at the announced rates that the Trump administration is 532 00:26:41,400 --> 00:26:45,399 Speaker 6: said about tariffs, it averages about seventeen to eighteen percent 533 00:26:45,560 --> 00:26:47,040 Speaker 6: is what the tariff rate was a year ago. 534 00:26:47,040 --> 00:26:49,360 Speaker 8: It was two, so we went from two to seventeen. 535 00:26:49,600 --> 00:26:52,480 Speaker 6: But if you look at the actual tariffs collected, it's 536 00:26:52,560 --> 00:26:55,560 Speaker 6: more around ten percent. And I think that accounts for 537 00:26:55,640 --> 00:26:58,880 Speaker 6: a lot of why you're not seeing the inflation in tariffs, 538 00:26:58,960 --> 00:27:02,159 Speaker 6: because the collect action of those tariffs takes time. But 539 00:27:02,200 --> 00:27:04,560 Speaker 6: the ten percent number has been moving up all year, 540 00:27:04,760 --> 00:27:08,000 Speaker 6: and it's at its highest level in November, the last 541 00:27:08,040 --> 00:27:10,520 Speaker 6: data that we have, and I suspect that number will 542 00:27:10,520 --> 00:27:13,199 Speaker 6: continue to move up into twenty twenty six, and that 543 00:27:13,359 --> 00:27:16,400 Speaker 6: tariff story about inflation might still be ahead of us, 544 00:27:16,640 --> 00:27:18,320 Speaker 6: probably around the middle of next year. 545 00:27:18,520 --> 00:27:21,160 Speaker 2: Jim, let's finish on the unintended consequences of the president's 546 00:27:21,200 --> 00:27:23,800 Speaker 2: push for Laurynteriest rights. We spoke to ed Jhon Danny 547 00:27:23,840 --> 00:27:26,520 Speaker 2: earlier on this morning, and he echoed your argument that 548 00:27:26,520 --> 00:27:28,200 Speaker 2: I want to give you some credit for as well, 549 00:27:28,600 --> 00:27:31,800 Speaker 2: the fact that this has galvanized every voter on the committee, 550 00:27:32,080 --> 00:27:34,199 Speaker 2: and it's a change from what we've seen on the 551 00:27:34,240 --> 00:27:37,199 Speaker 2: previous leadership at the Federal Reserve. Jim, can you just 552 00:27:37,280 --> 00:27:39,480 Speaker 2: spend some time fleshing out what's happening care and why 553 00:27:39,480 --> 00:27:41,159 Speaker 2: it might be consequential for the year ahead. 554 00:27:42,160 --> 00:27:44,919 Speaker 6: For the last forty years, everybody votes with what the 555 00:27:45,000 --> 00:27:47,840 Speaker 6: chairman wants. They talk internally, and then they come to 556 00:27:47,840 --> 00:27:49,760 Speaker 6: an agreement before the meeting, and that's where you get 557 00:27:49,800 --> 00:27:53,159 Speaker 6: these twelve zero, eleven to one votes. But now it 558 00:27:53,200 --> 00:27:54,919 Speaker 6: looks like the Fed is shifting to be more like 559 00:27:54,920 --> 00:27:57,200 Speaker 6: the Bank of England or to make Japan, and that 560 00:27:57,359 --> 00:27:59,639 Speaker 6: is is that each voter is going to vote in 561 00:28:00,440 --> 00:28:01,640 Speaker 6: or think the Supreme Court. 562 00:28:02,200 --> 00:28:04,679 Speaker 8: We saw nine three there was a good argument that 563 00:28:04,720 --> 00:28:06,439 Speaker 8: you could have had a seven to five vote. 564 00:28:06,480 --> 00:28:09,679 Speaker 6: I've advocated that that would actually be a positive for 565 00:28:09,760 --> 00:28:13,520 Speaker 6: the FED, not a negative. Each Each governor, each president 566 00:28:13,600 --> 00:28:15,840 Speaker 6: is supposed to represent the American people and vote the 567 00:28:15,880 --> 00:28:19,720 Speaker 6: way that they think is the best for monetary policy, 568 00:28:20,040 --> 00:28:22,840 Speaker 6: and there should be disagreement in that. And if they 569 00:28:22,880 --> 00:28:25,360 Speaker 6: start to move that way, the biggest thing that could 570 00:28:25,400 --> 00:28:28,359 Speaker 6: happen is President Trump could put somebody in place. That 571 00:28:28,400 --> 00:28:32,520 Speaker 6: person could advocate for what President Trump wants one percent funds, but. 572 00:28:32,520 --> 00:28:34,000 Speaker 8: Does he have seven votes to get it. 573 00:28:34,320 --> 00:28:36,159 Speaker 6: And he might not have seven votes to get it 574 00:28:36,200 --> 00:28:38,760 Speaker 6: in twenty twenty six if the economy stays strong and 575 00:28:38,840 --> 00:28:41,680 Speaker 6: inflation stays sticky, and that could be a big departure 576 00:28:41,680 --> 00:28:43,600 Speaker 6: from what we've seen from the FED in recent decades. 577 00:28:43,760 --> 00:28:45,200 Speaker 2: Jim, It's not one of the main pillars for your 578 00:28:45,200 --> 00:28:47,040 Speaker 2: call for this year that ultimately we don't get much 579 00:28:47,080 --> 00:28:48,360 Speaker 2: action from the Federal Reserve. 580 00:28:49,400 --> 00:28:50,080 Speaker 8: Yeah, I think so. 581 00:28:50,320 --> 00:28:51,960 Speaker 6: I think there's a lot of people that are thinking 582 00:28:51,960 --> 00:28:53,880 Speaker 6: two or three cuts because we're going to get an 583 00:28:53,960 --> 00:28:57,160 Speaker 6: uber Davish FED chairman because Trump is going to replace 584 00:28:57,280 --> 00:29:00,640 Speaker 6: j Poll by May. But again, it really comes down 585 00:29:00,680 --> 00:29:03,440 Speaker 6: to yes in the old way, the chairman would tell 586 00:29:03,480 --> 00:29:06,520 Speaker 6: everybody how to vote, and they would do Chris disagree internally, 587 00:29:06,560 --> 00:29:08,400 Speaker 6: but they would do what he would want. But in 588 00:29:08,440 --> 00:29:10,520 Speaker 6: the new way, they might just say, no, you just 589 00:29:10,560 --> 00:29:12,920 Speaker 6: don't have the votes for it. We're going to vote 590 00:29:12,920 --> 00:29:14,560 Speaker 6: otherwise on this policy. 591 00:29:15,720 --> 00:29:19,240 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 592 00:29:19,320 --> 00:29:22,400 Speaker 2: in markets, economics, an gient politics. You can watch the 593 00:29:22,400 --> 00:29:25,400 Speaker 2: show live on Bloomberg TV weekday mornings from six am 594 00:29:25,560 --> 00:29:29,520 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple, Spotify, 595 00:29:29,680 --> 00:29:31,880 Speaker 2: or anywhere else you listen, and as always, on the 596 00:29:31,920 --> 00:29:34,360 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.