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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Krisner,

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Speaker 2: US doc. Index futures are a bit lower after a

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Speaker 2: market holiday in the US. In a moment, we'll take

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Speaker 2: a look at market action with David Lott. He is

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Speaker 2: the chief investment officer at a Bound Financial But we

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Speaker 2: begin with geopolitics and the White House saying President Trump

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Speaker 2: will decide within the next two weeks on whether or

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Speaker 2: not to strike against Iran. Now, the President has publicly

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Speaker 2: mused for days about having the US increase the stakes

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Speaker 2: by joining Israel strikes on Iran. Earlier Thursday, in Iranian

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Speaker 2: missile struck an Israeli hospital, and at the same time

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Speaker 2: Israel struck at more of Iran's nuclear sites and warned

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Speaker 2: its attacks could bring down the leadership in Tehran. We

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Speaker 2: got reaction from Maria Roost Rubie, professor of international relations

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Speaker 2: at the University of Melbourne. She spoke with Bloomberg, scherry

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Speaker 2: On and Heidi Stroud Watts.

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Speaker 3: Great to have you with us. What would US military

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Speaker 3: action mean in this conflict? How much worse could the

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Speaker 3: conflict get from here?

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Speaker 4: Well, there is a lot of pressure on Trump from

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Speaker 4: Israel to get involved, because the only way to take

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Speaker 4: out the uranium enrichment facilities in FORDOH is with US

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Speaker 4: bunk or busting bombs.

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Speaker 5: These are thirty thousand pounds.

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Speaker 4: Only one can be carried in a b two at

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Speaker 4: a time, and so Israel can't finish the campaign against

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Speaker 4: Iran's nuclear program unless the US gets involved. But if

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Speaker 4: the US gets involved, that means that Iran is there

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Speaker 4: will be a lot of pressure within the Iranian leadership

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Speaker 4: to attack US facilities, and if that happens, all bets

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Speaker 4: are off. I mean, the US will really Trump has

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Speaker 4: already threatened that if you touch our people, if you.

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Speaker 5: Touch our facilities, that's it.

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Speaker 4: And I do think that then, even though you know

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Speaker 4: Magda really does not want to see more foreign entanglements,

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Speaker 4: if there's an attack against US facilities or people.

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Speaker 5: Then there will be just basically a war crowd within

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Speaker 5: the US for a retribution.

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Speaker 3: We're hearing from experts that Israel cannot necess can actually

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Speaker 3: hit Iranian nuclear sides even without the help of the

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Speaker 3: United States. How much capacity does Israel have right now

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Speaker 3: to finish this conflict without US involvement. I think you're

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Speaker 3: alluding to the fact that Washington actually needs to be involved,

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Speaker 3: especially if there is a need for regime change.

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Speaker 4: Yes, look, I mean Israel has already done a lot

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Speaker 4: of damage to Iranian nuclear facilities. In fact, they just

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Speaker 4: recently bombed, you know, some of the older closed sites.

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Speaker 5: But there's this key.

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Speaker 4: Site, the Ford out Uranium and Richmond site. It's buried

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Speaker 4: under a mountain and the only way to take it

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Speaker 4: out would be bunker buster bombs. In fact, the US

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Speaker 4: would have to drop one, then it would have to

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Speaker 4: drop another on top of it, and possibly another on

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Speaker 4: top of it.

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Speaker 5: Israel does not have that capability.

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Speaker 4: By look Nettna who has just said recently in the

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Speaker 4: past twenty four hours that they don't need US assistance

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Speaker 4: to finish their campaign. So I guess that depends on

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Speaker 4: what do they mean by their campaign. But we can

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Speaker 4: pretty conclusively say that unless Israel is prepared to use

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Speaker 4: nuclear weapons against Iran, which is extremely unlikely, I mean,

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Speaker 4: I think that's pretty much off.

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Speaker 5: The table, that Israel.

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Speaker 4: Cannot get the Ford out urim in Richmond site on

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Speaker 4: its own.

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Speaker 1: Maria, I think you've alluded to this a little bit

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Speaker 1: earlier about what we're now hearing that the potential for

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Speaker 1: taking down the entire Iranian leadership in this next phase

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Speaker 1: of the conflict. If that happens, what are the ramifications

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Speaker 1: across the region, across the globe? Really, what does it

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Speaker 1: mean for the Uranian proxies, and what does it mean

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Speaker 1: for the necessity of US involvement, because you know, at

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Speaker 1: this point, where are we going to see that sort

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Speaker 1: of global leadership come from?

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Speaker 4: Yes, I mean, that's a great question that nat yall

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Speaker 4: who has said, you know that regime change could happen,

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Speaker 4: but it is not the intent of his campaign.

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Speaker 5: Of course, that's what he's saying.

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Speaker 4: You know, he may indeed have other plans, you know

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Speaker 4: that he's not discussing. And Trump has also alluded to

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Speaker 4: the fact that, you know that assassination of Commandie is possible.

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Speaker 5: Of course, there are lots of.

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Speaker 4: US executive orders against the US assassinating a foreign official,

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Speaker 4: and so look, if the regime was taken out, then

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Speaker 4: sort of all bets are off.

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Speaker 5: What's going to happen?

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Speaker 4: You know, some people say that Israel clearly has you

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Speaker 4: know people in mind, you know potential you know Iranian uh,

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Speaker 4: you know, domestic groups that could step in that would

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Speaker 4: while you know, not friendly to Israel, would be willing

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Speaker 4: to back off the nuclear program.

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Speaker 5: However, other experts are saying.

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Speaker 4: That, you know, if something like that happens Iranian public

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Speaker 4: opinion and the Iranian military foreign policy elite, it's essentially.

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Speaker 5: Going to really harden the need for Iran to.

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Speaker 4: Have its own nuclear weapons to be able to prevent

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Speaker 4: future attacks on Iranian leadership in the future.

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Speaker 1: I think it's interesting that the assumption and the rhetoric

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Speaker 1: right now is that regime change or the toppling the

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Speaker 1: leadership is not the main goal here for Israel, for

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Speaker 1: Nstanna who at the same time, we've of course seen

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Speaker 1: since the October seven attacked, a real redirection of what

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Speaker 1: Israel's strategy has been in the region. Right there's sort

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Speaker 1: of you know, deterrence clearly is being.

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Speaker 6: Seen as not working.

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Speaker 7: They've been a lot more aggressive, and you know, when

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Speaker 7: it comes to multiple fronts at this point, do you

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Speaker 7: think that changes the game when it comes to what

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Speaker 7: we can expect from the Nashiahu government.

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Speaker 5: Yes, I think so.

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Speaker 4: I think Netna, who sees that he's been able to

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Speaker 4: carry out things that previously he wouldn't have been able

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Speaker 4: to I mean, despite all of the you know, protests

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Speaker 4: worldwide against what's happening in Gaza, and you know, even

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Speaker 4: you know, certain Israeli foreign Israeli officials being sanctioned by

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Speaker 4: you know, countries such as Australia, you know, essentially not

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Speaker 4: now who sees that he's been able to carry these

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Speaker 4: things out. And now with Trump's implicit approval or or

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Speaker 4: at least not disapproval, being able to carry out these

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Speaker 4: strikes on the running and nuclear program. And so you know,

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Speaker 4: Netanyahu may feel like, you know, now's the time that

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Speaker 4: he's got the freedom to do who he wants. And

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Speaker 4: you know, the real question is if this is about

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Speaker 4: Iran's nuclear weapons program, which it does seem to be,

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Speaker 4: you know, you can't become a country out of its

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Speaker 4: nuclear program. I mean, you can set it back, but

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Speaker 4: unless you're going to sort of erase the universe, cities

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Speaker 4: and industrial capability, countries can always build back, and they'll

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Speaker 4: learn to build back in much more secret ways. Of course,

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Speaker 4: there are ways to detect secret nuclear programs, as we've

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Speaker 4: seen with Iran. You know, that's how we found out

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Speaker 4: about the Poo site. But really, you know.

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Speaker 8: The question is this effective, and.

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Speaker 4: That's why European countries, you know, there are you know

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Speaker 4: several year countries, European.

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Speaker 5: Countries are sending diplomats to.

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Speaker 4: Meet with the Ronnie Foreign Minister today in Geneva to say,

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Speaker 4: you know, how can we fix this before this ends up?

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Speaker 4: You know, we have a conflagration across entire Middle East

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Speaker 4: which is going to affect you know, petrol prices. It's

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Speaker 4: going to essentially affect the cost of everything, even more

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Speaker 4: so than the Ukrainian Moore.

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Speaker 1: That's what it goes to the crux of what happens next, right,

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Speaker 1: I'll just in the next two weeks, you know, depending

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Speaker 1: on what the US does, but kind of in the

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Speaker 1: next I guess generational sense, how quick could Iran potentially

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Speaker 1: recover when it comes to the damage done to the

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Speaker 1: nuclear program and does this sort of attack potentially strengthen

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Speaker 1: the domestic narrative that it needs to have those capabilities?

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Speaker 5: Yes, I mean that's a good question.

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Speaker 4: So essentially, what Israel has done, They've only set back

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Speaker 4: the physical infrastructure by maybe three or four months.

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Speaker 8: I mean, they've taken out the above ground Uramian Richmond

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Speaker 8: facility at Naton's, but they haven't taken out the underground

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Speaker 8: facility there, and of course they haven't taken out Pordoh.

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Speaker 5: They have taken out though.

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Speaker 4: In terms of personnel, a number of key nuclear scientists

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Speaker 4: from the reporting that we've seen. But psychologically, look, the

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Speaker 4: question is, you know, will this harden the Iranian leadership

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Speaker 4: and people?

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Speaker 5: You know, the best way to.

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Speaker 4: Prevent this type of attack against you know, from a

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Speaker 4: nuclear weapons state, which Israel is, is to have your

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Speaker 4: own nuclear weapons, and so Iran is in a bit

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Speaker 4: of a hard spot here. You know, they don't have

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Speaker 4: so they have highly enriched they have enriched uranium, but

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Speaker 4: it's not highly enriched. However, they could get there and

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Speaker 4: some people say two to three weeks. But highly enriched

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Speaker 4: uranium by itself does not give you a deliverable nuclear weapon.

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Speaker 4: I mean, you've got to convert it from gas to metal.

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Speaker 5: You've got to.

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Speaker 4: Then turn it into a bomb, and then you have

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Speaker 4: to be able to deliver it. And the only realistic

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Speaker 4: way for Iran to deliver a nuclear weapon to Israel

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Speaker 4: would be on missiles. And then that means you have

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Speaker 4: to miniaturize nuclear weapons, which is a really hard work

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Speaker 4: and in fact, you know, it took for example, North Korea,

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Speaker 4: you know, several tests nuclear tests to do that, and

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Speaker 4: Iran hasn't done.

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Speaker 5: Any nuclear testing at all.

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Speaker 4: So for the Iranian position is to we back off,

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Speaker 4: you know, And essentially this is where diplomacy comes in

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Speaker 4: to say, look, you know, Iran is not likely to

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Speaker 4: give up enriching uranium, but if we can come up

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Speaker 4: with a deal that says you can only enrich to

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Speaker 4: two to three percent, which is what you need for

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Speaker 4: civilian nuclear power, and have really strict, you know, inspection arrangements.

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Speaker 5: So that we can make sure they're not cheating.

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Speaker 4: And if we can keep that in for a while,

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Speaker 4: that could actually then help the Iranian population to say, okay, well,

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Speaker 4: you know, so sanctions are lesson, you know, things are

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Speaker 4: getting better and could potentially give time for domestic sentiment

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Speaker 4: to change to say we actually prefer engaging in the

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Speaker 4: international economy and international society over the you know, being

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Speaker 4: hell bent on a nuclear weapons program that's just going

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Speaker 4: to turn us into an ugly rogue state like North Korea.

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Speaker 9: Maria.

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Speaker 1: Really great to have you with us. Samara Ross Stribli,

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Speaker 1: who's the professor of international relations at the University of.

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Speaker 2: Melbourne, welcome back. To the Daybreak Asia podcast. I'm Doug Prisner.

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Speaker 2: Has expected the FED held its policy rates steady at

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Speaker 2: this week's meeting. Let's get some reaction now from David Lott.

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Speaker 2: He is the chief investment officer at a Bound Financial.

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Speaker 2: David is on the line from Granite Bay, California. Thank

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Speaker 2: you so much for taking the time to chat with me.

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Speaker 2: A moment ago, we were talking about the FED the

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Speaker 2: downgrade of the estimate for economic growth this year, while

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Speaker 2: at the same time the FED is projecting higher inflation.

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Speaker 2: It seems as though this is kind of a stagflationary

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Speaker 2: type of scenario. Is that the way that you would

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Speaker 2: understand it and make sense of it?

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Speaker 9: You know, I'm not an economist, but I have to

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Speaker 9: say I was at a conference, one of the top

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Speaker 9: conferences in the country about a week and a half ago.

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Speaker 6: It's called a NorCal, a Financial Planning.

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Speaker 9: Association conference, and one of the most premier economists in

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Speaker 9: the world spoke for an hour, and he spent an

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Speaker 9: hour telling all of us.

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Speaker 6: Room things to be concerned about.

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Speaker 9: You know, he saw maybe eve inflation going to four

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Speaker 9: percent later this year, A lot of things that would

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Speaker 9: discourage an investor, but in about the last ninety seconds

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Speaker 9: of his conversation, he said, but hey, look, investor sentiments

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Speaker 9: pretty negative, and that's usually a great time to be

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Speaker 9: investing money. And so I think it's such a great

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Speaker 9: representation of being an equity or bond market investor and

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Speaker 9: then looking at this economic forecast component, because at the

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Speaker 9: end of the day, prices move first, then earnings than

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Speaker 9: the economy, and vice versa. And that's why we've seen

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Speaker 9: prices reflate so quickly even though the economic outlook is

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Speaker 9: still uncertain. So I would actually encourage investors to say, hey,

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Speaker 9: let's look at prices, let's look at statistics, and what

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Speaker 9: happens during these types of market environments. I think that

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Speaker 9: that gives us much more line of sight into what

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Speaker 9: happens versus, you know, a FED who's just trying to

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Speaker 9: be careful, trying not to make a mistake, and trying

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Speaker 9: to really forecast the weather that could change at any time.

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Speaker 2: The market is really desiring clarity on many issues. There

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Speaker 2: is the terriff situation, obviously, there is the conflict between

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Speaker 2: Israel and Iran, the path of interest rates going forward,

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Speaker 2: and whether or not the FED is going to be

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Speaker 2: in a wait and see pattern because of the Fed's

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Speaker 2: concerned about maybe a stagflationary type environment. Is there something

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Speaker 2: that is predominating your thinking when you think about the

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Speaker 2: greatest risk right now, that's overhanging markets?

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Speaker 9: You know, I'll say the greatest risk, and then I'm

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Speaker 9: going to kind of just share something that I think

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Speaker 9: will be food for thought. My concern, if I had one,

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Speaker 9: is that longer term rates are going to continue to

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Speaker 9: float higher. It is not hard, it's not rocket science

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Speaker 9: to pull up a thirty year chart of the ten

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Speaker 9: year treasury and see that we're heading in a different

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Speaker 9: direction than we've been headed in many decades. And so

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Speaker 9: that becomes challenging people who are trying to create stability

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Speaker 9: in their portfolio to generate income from it when they're

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Speaker 9: trying to position conservative, intermediate and long term growth buckets

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Speaker 9: to generate that income. And so, you know, we may

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Speaker 9: to start looking at different ways to generate stability and

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Speaker 9: portfolios outside of buying intermediate bonds.

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Speaker 6: And that's something that is a bit of a head scratcher.

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Speaker 9: One thing I will say that that I think with

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Speaker 9: surprise people, you have all these topics you mentioned them, stagflation, wars, tariffs,

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Speaker 9: geopolitical uncertainty.

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Speaker 6: But let me just pose this to you.

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Speaker 9: In the last three to five years, the MAG seven

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Speaker 9: has accounted for fifty percent of the equity market returns. Okay,

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Speaker 9: six months ago, those companies had PE ratios in the

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Speaker 9: mid thirties. Today they're at twenty seven. So when you

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Speaker 9: think about that and you think about what those companies do,

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Speaker 9: largely technologically oriented, you really have to consider all those

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Speaker 9: things we just mentioned.

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Speaker 6: How does that impact fail Book's ability to sell ads?

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Speaker 9: How does that and Google's ability to sell ads? How

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Speaker 9: does that impact you know, in video or Microsoft's ability

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Speaker 9: to have AI be infused into companies' businesses and allow

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Speaker 9: them to grow their margin. So you know, sometimes it's

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Speaker 9: not quite as complicated to get higher in the market

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Speaker 9: as it may seem.

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Speaker 2: So that said, would you be overweight those names the

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Speaker 2: mag seven right now?

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Speaker 9: Well, they led the market lower and now they're leading

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Speaker 9: the market higher, And I personally would be overweight anything

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Speaker 9: that's leveraged to rates coming down short term rates in particular.

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Speaker 9: So what are some of those asset classes, Well, you

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Speaker 9: just mentioned large growth is one why because it's a

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Speaker 9: long duration asset, it generally doesn't pay you any income today,

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Speaker 9: and so it tends to do better when rates are falling. Oh,

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Speaker 9: by the way, so does gold, so does cryptocurrency, so

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Speaker 9: do small caps and mid cap growth companies. So I

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Speaker 9: think there's a lot of opportunities to leverage your portfolio.

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Speaker 6: To following rates.

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Speaker 9: Which, by the way, we had the market and fed

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Speaker 9: a line around two more cuts this year. That's where

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Speaker 9: I think the ball is going to continue to roll.

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Speaker 9: And oh, by the way, tech stocks aren't as expensive

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Speaker 9: as they've been in the last five years. We're not

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Speaker 9: even close to the highs of you know, priciness from

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Speaker 9: a valuation standpoint that we were closer to twenty twenty.

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Speaker 6: That didn't even that pailed comparison to where they were

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Speaker 6: out in the late nineties. So I think that there's

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Speaker 6: a lot more room and a lot more.

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Speaker 9: You know, frankly, if we want to talk about economic

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Speaker 9: tailwind around those names.

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Speaker 2: What about opportunities off shore? We're talking here about stuff

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Speaker 2: that may be domestically driven. I'm wondering whether you're seeing

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Speaker 2: anything internationally that has sparked your curiosity or piqued your interest.

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Speaker 9: Well, there's no I was teasing by brother today, we're

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Speaker 9: going to have the opportunity to go skiing in Canada.

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Speaker 6: Here this next winner, and he's been.

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Speaker 9: Waiting to pay for the second half of his trip

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Speaker 9: to see if maybe the US Canadian dollar exchange rate

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Speaker 9: might work in his favor.

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Speaker 6: It has not to this point. So what's the story.

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Speaker 9: The story is that with a dollar weakening, which maybe

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Speaker 9: another beginning of a trend that of course is going

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Speaker 9: to give some buoyancy to international profits as they're repatriated.

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Speaker 9: So sure, in general, and okay, evaluations has been a

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Speaker 9: conversation for years and years, it really hasn't moved the needle.

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Speaker 9: I think that the dollar weakening is certainly starting to

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Speaker 9: move the needle with international markets. I'm still going to

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Speaker 9: be oriented on the tech side, and I prefer to

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Speaker 9: look at China. I'd prefer to look at a place

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Speaker 9: where the government can come in and make a radical

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Speaker 9: change to the economy with stimulus. And oh, by the way,

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Speaker 9: the United States economy's biggest booms in the last ten

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Speaker 9: years have been from our government.

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Speaker 6: Doing stimulative things.

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Speaker 9: Right, So when I look overseas to chat and I say, wow,

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Speaker 9: they seem to.

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Speaker 6: Be leading in evs. They seem to be doing darnk

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Speaker 6: close to leading in Ai.

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Speaker 9: And oh, by the way, they're also selling more waway

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Speaker 9: phones than Apple iPhone over there with a population that's tremendous.

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Speaker 6: So I am interested.

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Speaker 9: Where I am internationally invested is going to have an

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Speaker 9: overweight to those Chinese tech names.

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Speaker 2: Talk to me a little bit about the themes that

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Speaker 2: you're avoiding right now. I mean to maybe call it

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Speaker 2: herd mentality. We talked about the meg seven, But are

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Speaker 2: there corners of the market that you feel are kind

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Speaker 2: of overrated right now and that you would be looking

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Speaker 2: to either lighten up on or to avoid altogether.

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Speaker 9: I think that if there's anybody talking about a bear

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Speaker 9: market rally still that you're listening to, you might want

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Speaker 9: to change your favorite station or commentator.

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Speaker 6: I would not be anywhere in the defensive space.

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Speaker 9: I'm just not that interested in utilities or staples.

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Speaker 4: You know.

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Speaker 9: Of course, in times of uncertainty like this, those tend

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Speaker 9: to have a little bit of a support. But I

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Speaker 9: would I really would lean into I mean, look at

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Speaker 9: consumer descript estionary half that index is Amazon and Tesla,

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Speaker 9: both of which got really beat up and probably are

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Speaker 9: going to be turning higher. That's an easy place to

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Speaker 9: look for opportunity. Obviously within the tech stock tech stack,

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Speaker 9: the semiconductors are a lot more interesting. So you know,

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Speaker 9: it just doesn't pay to bet against the market long term,

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Speaker 9: and it would take a tremendous change for the market

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Speaker 9: not to hit new highs within the next few months.

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Speaker 2: David, we'll leave it there. Thank you so much for

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Speaker 2: joining us. David Lotte is the chief investment officer at

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Speaker 2: a Bound Financial, joining from Granite Bay, California. Here on

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Speaker 2: the Daybreak Asia Podcast. Thanks for listening to today's episode

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Speaker 2: of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we

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Speaker 2: look at the story shaping markets, finance, and geopolitics in

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Speaker 2: the Asia Pacific. You can find us on Apple, Spotify,

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Speaker 2: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

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Speaker 2: Join us again tomorrow for insight on the market moves

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Speaker 2: from Hong Kong to Singapore and Australia. I'm Doug Prisoner

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Speaker 2: and this is Bloomberg

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Speaker 9: M HM.