1 00:00:05,080 --> 00:00:07,200 Speaker 1: This is the Bloomberg Surveillance Podcast. 2 00:00:07,680 --> 00:00:08,280 Speaker 2: I'm Lisa A. 3 00:00:08,320 --> 00:00:11,640 Speaker 1: Bramwoid's, along with Tom Keen and Jonathan Ferrell, join us 4 00:00:11,680 --> 00:00:15,280 Speaker 1: each day for insight from the best in economics, geopolitics, 5 00:00:15,320 --> 00:00:19,480 Speaker 1: finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 6 00:00:19,600 --> 00:00:22,840 Speaker 1: Spotify and anywhere you get your podcasts, and always on 7 00:00:22,880 --> 00:00:26,440 Speaker 1: Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app. 8 00:00:26,720 --> 00:00:29,000 Speaker 3: Joining us right now is John Mclelthwaite, the Bloomberg News 9 00:00:29,120 --> 00:00:32,240 Speaker 3: editor in chief, joining us from our London studio. John, 10 00:00:32,240 --> 00:00:34,120 Speaker 3: thanks so much for taking the time this morning. Keeps 11 00:00:34,120 --> 00:00:38,199 Speaker 3: the occasion of your discussion. Most recently, mister Kissinger, this 12 00:00:38,360 --> 00:00:39,479 Speaker 3: boy so timely. 13 00:00:39,560 --> 00:00:41,720 Speaker 4: That well, that was his one hundredth birthday. But I 14 00:00:41,760 --> 00:00:45,000 Speaker 4: suppose I've interviewed him over the over the decades and 15 00:00:45,040 --> 00:00:49,480 Speaker 4: different capacities, and I think the main thing about him 16 00:00:49,520 --> 00:00:52,080 Speaker 4: being aged one hundred is that he had the ability 17 00:00:52,120 --> 00:00:55,840 Speaker 4: to look back over that life and it does go 18 00:00:56,000 --> 00:00:58,440 Speaker 4: right the way back. We have a actually other good 19 00:00:58,680 --> 00:01:03,440 Speaker 4: column this morning by Andrew Kluth, who's from that one 20 00:01:03,440 --> 00:01:06,560 Speaker 4: of my columns from Germany. He talks about Heinz Kissinger, 21 00:01:06,600 --> 00:01:09,640 Speaker 4: as he was born and the world in which he arrived. 22 00:01:09,680 --> 00:01:13,199 Speaker 4: You know, Kissinger was born very obviously back in nineteen 23 00:01:13,200 --> 00:01:16,680 Speaker 4: twenty three, I think two years later Adolf Hitler came 24 00:01:16,720 --> 00:01:20,640 Speaker 4: to his home time of Firth to denounce it as 25 00:01:20,640 --> 00:01:24,000 Speaker 4: a kind of haven of sort of Jewish people. Basically, 26 00:01:24,480 --> 00:01:26,440 Speaker 4: for the first sort of fourteen fifteen years of his 27 00:01:26,480 --> 00:01:30,880 Speaker 4: life he was continually chased, harried and messed around before 28 00:01:30,920 --> 00:01:33,000 Speaker 4: he escaped, first to London and then to New York. 29 00:01:33,640 --> 00:01:36,080 Speaker 4: And I think that that sort of beginning, you know, 30 00:01:36,440 --> 00:01:40,759 Speaker 4: he offers a perspective on the whole of recent history 31 00:01:40,840 --> 00:01:43,920 Speaker 4: in a way that struck me that only weirdly, the 32 00:01:44,000 --> 00:01:46,600 Speaker 4: queen in recent times has been similar to the extent 33 00:01:46,640 --> 00:01:51,160 Speaker 4: of you know, Kissinger met everybody. He saw a vast 34 00:01:51,200 --> 00:01:54,160 Speaker 4: amount of history in his life, ironic for somebody who 35 00:01:54,200 --> 00:01:57,000 Speaker 4: began life as a history professor exactly. 36 00:01:57,080 --> 00:01:59,120 Speaker 3: And you know, John, one of my earliest memories as 37 00:01:59,120 --> 00:02:02,360 Speaker 3: a child is my father and my older brother arguing 38 00:02:02,400 --> 00:02:06,240 Speaker 3: at the dinner table about Vietnam, about Henry Kissinger, about 39 00:02:06,280 --> 00:02:11,440 Speaker 3: all of those things. He has served officially and unofficially 40 00:02:11,880 --> 00:02:16,080 Speaker 3: twelve presidents, from President Kennedy the President Biden. Have we 41 00:02:16,160 --> 00:02:20,760 Speaker 3: ever seen a diplomat with that range of experience, well, I. 42 00:02:20,760 --> 00:02:23,840 Speaker 4: Think we have. And they were the ones that he studied. 43 00:02:24,160 --> 00:02:27,919 Speaker 4: They it was people like Mesenik and Taryon and people 44 00:02:27,960 --> 00:02:31,760 Speaker 4: like that. Those were his heroes who lived in a 45 00:02:31,800 --> 00:02:33,919 Speaker 4: time of kind of warfare in Europe and it was 46 00:02:33,960 --> 00:02:38,920 Speaker 4: about bringing the peace. That's how he first emerged as 47 00:02:38,960 --> 00:02:42,040 Speaker 4: a kind of semi public figure, was writing about the 48 00:02:42,040 --> 00:02:44,880 Speaker 4: Congress of Vienna and things like that. But those were 49 00:02:44,919 --> 00:02:47,240 Speaker 4: people who came and went. Obviously it was a different time, 50 00:02:47,280 --> 00:02:52,240 Speaker 4: there were fewer democratic governments, and it had a different, 51 00:02:52,520 --> 00:02:55,760 Speaker 4: very different feeling, But those were the people. Those were 52 00:02:55,800 --> 00:02:59,200 Speaker 4: the thoughts that he carried throughout his life, this idea 53 00:02:59,320 --> 00:03:03,320 Speaker 4: that nation have kind of sets of interests and it's 54 00:03:03,360 --> 00:03:06,119 Speaker 4: about paying attention to those interests, but at the same 55 00:03:06,160 --> 00:03:10,480 Speaker 4: time trying to to try and bring some degree of 56 00:03:10,560 --> 00:03:13,640 Speaker 4: kind of loftier aims to it, but never forgetting you 57 00:03:13,680 --> 00:03:16,720 Speaker 4: know that the rail in rail politic was something that 58 00:03:16,800 --> 00:03:18,359 Speaker 4: was very close to his heart. 59 00:03:19,240 --> 00:03:22,040 Speaker 3: John. I think you know, for many folks around the world, 60 00:03:22,040 --> 00:03:25,720 Speaker 3: not just in America, Henry Kissinger kind of represents the 61 00:03:25,760 --> 00:03:30,920 Speaker 3: whole post World War two thinking about global diplomacy. Global 62 00:03:31,520 --> 00:03:34,160 Speaker 3: I just just the way the East versus the West 63 00:03:34,600 --> 00:03:37,480 Speaker 3: that's changed recently in the last four or five six years, 64 00:03:37,480 --> 00:03:40,560 Speaker 3: where a lot of countries are seemingly more nationalistic. 65 00:03:40,680 --> 00:03:41,640 Speaker 5: America first, for it. 66 00:03:41,680 --> 00:03:44,240 Speaker 4: Yes, you just you heard him on that clip in 67 00:03:44,280 --> 00:03:47,480 Speaker 4: America first, that was very un Kissinger. He didn't he 68 00:03:47,560 --> 00:03:51,360 Speaker 4: didn't like that. He was acutely aware of America's set 69 00:03:51,400 --> 00:03:53,640 Speaker 4: of interests, just as I think he would argue he 70 00:03:53,680 --> 00:03:56,760 Speaker 4: was acutely aware of China's set of interests. But he 71 00:03:56,880 --> 00:03:59,680 Speaker 4: thought that America should play a role that was bigger 72 00:03:59,720 --> 00:04:02,600 Speaker 4: than that. And again that was partly because he I 73 00:04:02,600 --> 00:04:05,160 Speaker 4: think he did not least as a refugee you came 74 00:04:05,200 --> 00:04:08,280 Speaker 4: to America. He saw America something bigger than that. But 75 00:04:08,320 --> 00:04:12,320 Speaker 4: also for political reasons. If you have a hegemon, you know, 76 00:04:12,360 --> 00:04:17,200 Speaker 4: again controversial issue whether hegemons exist. But for time it 77 00:04:17,240 --> 00:04:20,600 Speaker 4: was Britain, and he liked the way that the British 78 00:04:20,680 --> 00:04:23,760 Speaker 4: politicians in the nineteenth century managed to keep the peace 79 00:04:23,800 --> 00:04:26,440 Speaker 4: by balancing different people against each other. And he thought 80 00:04:26,880 --> 00:04:30,600 Speaker 4: America should do the same, and that was its role. 81 00:04:30,760 --> 00:04:35,080 Speaker 4: It had two roles. One was to promote American interest democracy, 82 00:04:35,880 --> 00:04:38,279 Speaker 4: but the other was just to keep the peace. And 83 00:04:38,320 --> 00:04:41,800 Speaker 4: so when it came to things like China and what 84 00:04:41,880 --> 00:04:45,320 Speaker 4: was happening there, he was absolutely kind of clear that 85 00:04:45,400 --> 00:04:49,760 Speaker 4: you couldn't just go to the Chinese and give them 86 00:04:49,760 --> 00:04:52,880 Speaker 4: a lecture on human rights. And at this point plenty 87 00:04:52,880 --> 00:04:55,159 Speaker 4: of people listening to this, so well, that was typical Kissinger. 88 00:04:55,200 --> 00:04:57,039 Speaker 4: He never cared about those things. I think he did. 89 00:04:57,080 --> 00:05:02,000 Speaker 4: I think he understood, perhaps farm Or with one more 90 00:05:02,040 --> 00:05:06,200 Speaker 4: personal experience and most of his critics, just how horrific 91 00:05:06,400 --> 00:05:08,480 Speaker 4: man could be. To man, you know, he is not 92 00:05:08,600 --> 00:05:11,160 Speaker 4: just growing up in Nazi Germany as a twenty year old, 93 00:05:11,240 --> 00:05:14,320 Speaker 4: he went back and visited a concentration camp. He saw 94 00:05:14,360 --> 00:05:17,720 Speaker 4: a huge amount of sort of evil done to people 95 00:05:17,880 --> 00:05:21,640 Speaker 4: in his youth, so he wasn't unaware of that side 96 00:05:21,680 --> 00:05:25,840 Speaker 4: of things. His main thing was to try and project 97 00:05:25,839 --> 00:05:26,640 Speaker 4: to kind of peace. 98 00:05:27,320 --> 00:05:30,000 Speaker 1: John, we were speaking about this earlier on Bloomberg Television, 99 00:05:30,200 --> 00:05:32,960 Speaker 1: and I have to say, I keep thinking in my 100 00:05:33,040 --> 00:05:36,240 Speaker 1: head about the change of social media and the change 101 00:05:36,279 --> 00:05:39,840 Speaker 1: of the way that information is transmitted, and how he 102 00:05:39,960 --> 00:05:43,080 Speaker 1: viewed that as he did see the world and a 103 00:05:43,120 --> 00:05:45,479 Speaker 1: sort of right and wrong and trying to push forward 104 00:05:45,520 --> 00:05:49,200 Speaker 1: certain ideals, how he viewed that effort at a time 105 00:05:49,560 --> 00:05:52,679 Speaker 1: where the mode of communication was very different. 106 00:05:53,440 --> 00:05:55,000 Speaker 4: I think that's really at least I think that's a 107 00:05:55,120 --> 00:05:58,760 Speaker 4: really good point. The answer is that kind of and 108 00:05:58,880 --> 00:06:01,680 Speaker 4: it's not. You know, it's possible to admire Kissinger and 109 00:06:01,760 --> 00:06:05,279 Speaker 4: be aware of his be aware of his faults, but 110 00:06:05,400 --> 00:06:08,320 Speaker 4: the kind of paranoid, secretive side of Hendrick Kissinger, I mean, 111 00:06:08,360 --> 00:06:11,799 Speaker 4: social media was a nightmare. He didn't like that, and 112 00:06:11,839 --> 00:06:14,480 Speaker 4: he you know, and actually he would argue, look, he 113 00:06:14,520 --> 00:06:17,159 Speaker 4: could not. It would have been far far more difficult 114 00:06:17,680 --> 00:06:20,400 Speaker 4: to go reach out to China and bring them in 115 00:06:20,440 --> 00:06:23,400 Speaker 4: from the cold in an era of social media. He 116 00:06:23,480 --> 00:06:25,440 Speaker 4: you know, he went, he went to China on these 117 00:06:25,480 --> 00:06:29,560 Speaker 4: secret missions he did, and because of that he was 118 00:06:29,600 --> 00:06:34,200 Speaker 4: able to get Mao to effectively agree to come in. 119 00:06:34,279 --> 00:06:37,919 Speaker 4: That changed the world history. Ditto the negotiations the Russians, 120 00:06:37,960 --> 00:06:40,520 Speaker 4: Dito other things. His critics will immediately say, well, yes, 121 00:06:40,520 --> 00:06:43,160 Speaker 4: and he also bombed Cambodia in the in the background, 122 00:06:43,279 --> 00:06:45,760 Speaker 4: Well yes, that that would also be part of it. 123 00:06:46,279 --> 00:06:49,960 Speaker 4: But his underlying, his underlying thing was to find different 124 00:06:49,960 --> 00:06:53,599 Speaker 4: ways to bring people together. The interesting, one, very interesting 125 00:06:53,680 --> 00:06:57,200 Speaker 4: thing from his perspective was he sometimes talked about the 126 00:06:57,240 --> 00:07:00,440 Speaker 4: fact that leaders didn't get the same degree of kind 127 00:07:00,440 --> 00:07:03,400 Speaker 4: of break that they once did. His last book, which 128 00:07:03,520 --> 00:07:08,000 Speaker 4: was a portrait of six people who he admired, people 129 00:07:08,080 --> 00:07:11,640 Speaker 4: Margaret Thatcher and Lee Kuan Knew and Richard Nixon, wasn't 130 00:07:12,120 --> 00:07:14,880 Speaker 4: that great a one. But the stuff on Shelde Gaull particularly, 131 00:07:14,920 --> 00:07:17,760 Speaker 4: I thought was an amazing piece of history. But what 132 00:07:18,280 --> 00:07:20,640 Speaker 4: he what entreat him a bit was you know, you 133 00:07:20,680 --> 00:07:22,720 Speaker 4: look at somebody like Winston church or you look at 134 00:07:22,720 --> 00:07:27,440 Speaker 4: somebody like Kennedy, would they have survived in an era 135 00:07:27,680 --> 00:07:31,360 Speaker 4: of as much intrusion from great journalists like all of us, 136 00:07:31,440 --> 00:07:35,000 Speaker 4: or certainly the two of you would. Would they have survived? 137 00:07:35,000 --> 00:07:38,960 Speaker 4: And that would in the era of gaffes and things? 138 00:07:39,000 --> 00:07:42,120 Speaker 4: Would somebody like Churchill have continued? We don't know exactly, 139 00:07:42,200 --> 00:07:45,120 Speaker 4: but he was. He was very acutely conscious of the 140 00:07:45,160 --> 00:07:48,600 Speaker 4: need to have leaders who could sort of look more 141 00:07:48,680 --> 00:07:52,600 Speaker 4: long term, who could sort of think about the underlying elements. 142 00:07:53,200 --> 00:07:56,960 Speaker 3: Hey, John, do we know how mister Kishener felt about 143 00:07:57,040 --> 00:07:59,240 Speaker 3: the relationship between the US and China? That's kind of 144 00:08:00,040 --> 00:08:01,480 Speaker 3: I guess you've ad over the last three four or 145 00:08:01,520 --> 00:08:03,760 Speaker 3: five six years. You know, if at the very least 146 00:08:03,760 --> 00:08:06,040 Speaker 3: a technology called war, if not something a little bit more. 147 00:08:06,120 --> 00:08:09,360 Speaker 4: Yeah, this is somewhat self referential, and I apologize to 148 00:08:09,400 --> 00:08:11,000 Speaker 4: people for it, but that I used to do a 149 00:08:11,040 --> 00:08:13,400 Speaker 4: regular interview with him at the New Economy Forum. And 150 00:08:13,440 --> 00:08:15,520 Speaker 4: it began as we were in the foothills of a 151 00:08:15,560 --> 00:08:18,160 Speaker 4: Cold War and the Cold War, and then we were 152 00:08:18,200 --> 00:08:20,400 Speaker 4: on the edge of a precipice on the Cold War, 153 00:08:20,480 --> 00:08:23,520 Speaker 4: and then we were near the Helm High Mountain passes. 154 00:08:24,360 --> 00:08:28,200 Speaker 4: You know, it just generally got worse. I think right now, 155 00:08:28,840 --> 00:08:31,480 Speaker 4: I think he was. He got gradually more and more 156 00:08:31,480 --> 00:08:34,760 Speaker 4: pessimistic about it, I think, and I think with good reason, 157 00:08:35,280 --> 00:08:38,080 Speaker 4: and what I think he despaired of a bit. On 158 00:08:38,400 --> 00:08:42,320 Speaker 4: the American side, we see to spare to people who 159 00:08:42,440 --> 00:08:45,800 Speaker 4: sort of understood China and were willing to look towards 160 00:08:45,800 --> 00:08:48,920 Speaker 4: a sort of bigger goal. And so those people who 161 00:08:48,960 --> 00:08:51,840 Speaker 4: criticized Henrik Gistjoe, you know, in some cases very obviously 162 00:08:51,880 --> 00:08:54,720 Speaker 4: correctly for not doing as much about human rights as 163 00:08:54,760 --> 00:08:59,199 Speaker 4: perhaps you could, they sometime, you know, hit the lessons 164 00:08:59,200 --> 00:09:02,560 Speaker 4: of his life were that you had to talk, you 165 00:09:02,640 --> 00:09:05,800 Speaker 4: have to get people to come together to do things. 166 00:09:05,880 --> 00:09:08,240 Speaker 4: And you see what he managed to do in the 167 00:09:08,440 --> 00:09:11,640 Speaker 4: Middle East, especially in the context of what's happening now, 168 00:09:12,160 --> 00:09:15,040 Speaker 4: and you do get some sense of the importance of 169 00:09:15,120 --> 00:09:18,040 Speaker 4: rail politic. One thing I said to Lisa earlier, which 170 00:09:18,040 --> 00:09:20,320 Speaker 4: I think is probably true, is that you know, you 171 00:09:20,320 --> 00:09:25,080 Speaker 4: look at American foreign policy, this arch rail politica. If 172 00:09:25,080 --> 00:09:27,920 Speaker 4: he had been running American foreign policy over the past 173 00:09:27,960 --> 00:09:30,880 Speaker 4: thirty years, do you think that America and the cause 174 00:09:30,920 --> 00:09:33,000 Speaker 4: of diplomacy would be better or not? I think it 175 00:09:33,040 --> 00:09:34,000 Speaker 4: probably would be better. 176 00:09:34,200 --> 00:09:36,720 Speaker 3: Very good, John mccordthwaite, thank you so much for a 177 00:09:36,720 --> 00:09:39,000 Speaker 3: couple of minutes of your time. We really appreciate John mccorthwaite. 178 00:09:39,000 --> 00:09:42,000 Speaker 3: Bloomberg News editor in chief Hughes reporting to us from 179 00:09:42,160 --> 00:09:44,120 Speaker 3: London on the passing of Henry Kissinger. 180 00:09:48,440 --> 00:09:52,240 Speaker 1: Neil Dutta, head of economics at Renaissance Macro Research, joining 181 00:09:52,280 --> 00:09:55,800 Speaker 1: us now fresh off his Thanksgiving holiday. Neil, does this 182 00:09:55,920 --> 00:09:59,440 Speaker 1: data just sort of underscore this soft landing nirvana that 183 00:09:59,480 --> 00:10:02,400 Speaker 1: you really pin pinned over the last few months. 184 00:10:04,640 --> 00:10:07,240 Speaker 6: Well, thank you, Lisa, you're giving me too much credit. 185 00:10:07,280 --> 00:10:09,000 Speaker 6: I think I pinned it over the last few weeks. 186 00:10:09,120 --> 00:10:11,120 Speaker 6: But you know, I do think that the data is 187 00:10:11,160 --> 00:10:13,680 Speaker 6: lining up and we're on a glide path now to 188 00:10:13,720 --> 00:10:16,640 Speaker 6: a rate cut, probably by March. Frankly, if you look 189 00:10:16,679 --> 00:10:20,920 Speaker 6: at core PC inflation since June, it's up just two 190 00:10:21,000 --> 00:10:23,120 Speaker 6: point three percent at an annual rate. 191 00:10:23,240 --> 00:10:25,920 Speaker 7: And there's a lot of disinflation in the pipeline as 192 00:10:25,960 --> 00:10:29,000 Speaker 7: we know. We know that, you know, when we look at. 193 00:10:28,920 --> 00:10:31,960 Speaker 6: Car prices at the wholesale level that's declining. We see 194 00:10:31,960 --> 00:10:34,000 Speaker 6: that pretty much month in and month out. That's going 195 00:10:34,040 --> 00:10:37,720 Speaker 6: to bleed into core consumer prices over the next few months. 196 00:10:38,480 --> 00:10:41,840 Speaker 6: We know that rendeal inflation is moderating, that's going to 197 00:10:41,840 --> 00:10:44,680 Speaker 6: also bleed into core inflation over the next few months. 198 00:10:44,720 --> 00:10:48,400 Speaker 6: And the normalization of supply chain should take pressure off 199 00:10:48,400 --> 00:10:52,280 Speaker 6: of prices for core consumer goods outside of cars. So 200 00:10:52,800 --> 00:10:57,040 Speaker 6: I think it's highly likely that you know, core inflation 201 00:10:57,440 --> 00:10:59,839 Speaker 6: is you know, running sub to and a half for 202 00:11:00,360 --> 00:11:04,280 Speaker 6: probably you know, on a six month basis by the 203 00:11:04,320 --> 00:11:08,720 Speaker 6: first quarter of next year. And you know, when you 204 00:11:08,720 --> 00:11:11,160 Speaker 6: think about the FED is giving us the playbook, I mean, 205 00:11:11,160 --> 00:11:14,320 Speaker 6: if we just want to read it, Waller basically told 206 00:11:14,400 --> 00:11:17,080 Speaker 6: us this week that he's following sort of a standard 207 00:11:17,080 --> 00:11:20,880 Speaker 6: Taylor rule type or framework, and if inflation slows, the 208 00:11:20,920 --> 00:11:21,920 Speaker 6: FED will cut it. 209 00:11:21,960 --> 00:11:22,960 Speaker 7: Really is that simple. 210 00:11:23,040 --> 00:11:24,840 Speaker 6: I don't want to make a judgment about whether that's 211 00:11:25,160 --> 00:11:27,120 Speaker 6: right or wrong, but that's what they're going to do. 212 00:11:27,679 --> 00:11:31,240 Speaker 1: So I think, sorry Tony cut in here, but I'm 213 00:11:31,240 --> 00:11:33,640 Speaker 1: just struck by what you were saying earlier in the year, 214 00:11:33,720 --> 00:11:37,400 Speaker 1: when you were saying people have underestimated how much momentum 215 00:11:37,400 --> 00:11:39,680 Speaker 1: there is in the economy and that come next year, 216 00:11:39,720 --> 00:11:43,160 Speaker 1: we're going to be surprised by the stickiness of the inflation, 217 00:11:43,320 --> 00:11:46,800 Speaker 1: the stickiness of just what we see in terms of growth. 218 00:11:47,120 --> 00:11:49,000 Speaker 8: How do you pair that idea. 219 00:11:48,679 --> 00:11:50,400 Speaker 1: And the fact that we continue to get better than 220 00:11:50,440 --> 00:11:53,679 Speaker 1: expected economic data, how do you pair that with ongoing 221 00:11:53,720 --> 00:11:56,480 Speaker 1: disinflation in tandem with what the FED was hoping for? 222 00:11:56,559 --> 00:11:59,280 Speaker 1: And even then some well, I mean, the. 223 00:11:59,200 --> 00:12:03,200 Speaker 6: Economy is whole up, but it's clear that there's more 224 00:12:03,240 --> 00:12:07,080 Speaker 6: disinflation despite that growth. And you know, I think the 225 00:12:07,120 --> 00:12:11,120 Speaker 6: FED is looking at what's happening with realized inflation, right, 226 00:12:11,200 --> 00:12:14,160 Speaker 6: So the fact that actual inflation is moderating, that will 227 00:12:14,160 --> 00:12:16,959 Speaker 6: pressure them to cut interest rates because they don't want 228 00:12:17,000 --> 00:12:22,280 Speaker 6: to get real interest rates in their framework unduly high, 229 00:12:22,320 --> 00:12:24,840 Speaker 6: too high. And so I think, really that's what it 230 00:12:24,880 --> 00:12:28,000 Speaker 6: comes down to. And as I say, I mean, part 231 00:12:28,040 --> 00:12:30,000 Speaker 6: of this job isn't so much what I think they 232 00:12:30,000 --> 00:12:32,240 Speaker 6: should do. But what I think they will do and 233 00:12:32,800 --> 00:12:34,880 Speaker 6: what they're telling us what they what they will do. 234 00:12:34,920 --> 00:12:37,559 Speaker 6: If inflation continues to come in like it's been coming in, 235 00:12:38,920 --> 00:12:40,800 Speaker 6: the FED is going to respond to that. I don't 236 00:12:40,800 --> 00:12:43,600 Speaker 6: think it's a situation where they're cutting aggressively. I mean, 237 00:12:43,600 --> 00:12:45,520 Speaker 6: I think part of the issue right now, Lisa is that, 238 00:12:45,920 --> 00:12:47,360 Speaker 6: you know a lot of folks aren't used to the 239 00:12:47,360 --> 00:12:49,439 Speaker 6: FED just surgically cutting interest rates. 240 00:12:49,480 --> 00:12:51,360 Speaker 7: I mean, it's usually they do a lot or nothing 241 00:12:51,400 --> 00:12:51,720 Speaker 7: at all. 242 00:12:52,920 --> 00:12:56,920 Speaker 6: But I think what we're talking about for next year, 243 00:12:57,000 --> 00:13:00,440 Speaker 6: for twenty twenty four is really a recalibration of monetary 244 00:13:01,040 --> 00:13:04,360 Speaker 6: not unlike frankly, what we saw in nineteen ninety five, 245 00:13:04,400 --> 00:13:07,320 Speaker 6: where the FED came off of air very very aggressive 246 00:13:07,360 --> 00:13:10,640 Speaker 6: tightening and cut rates a few times, trying to just 247 00:13:10,679 --> 00:13:11,760 Speaker 6: basically trying to. 248 00:13:12,040 --> 00:13:13,000 Speaker 7: You know, fine tune. 249 00:13:14,200 --> 00:13:16,600 Speaker 6: You know, their their monetary policy, which frankly, I think 250 00:13:16,920 --> 00:13:20,280 Speaker 6: you know they can justify that based on the inflation 251 00:13:20,360 --> 00:13:21,480 Speaker 6: data as it's going to come in. 252 00:13:21,800 --> 00:13:23,360 Speaker 1: Well, I know that earlier in the year you were 253 00:13:23,400 --> 00:13:25,760 Speaker 1: also talking about how inflation is going to be higher 254 00:13:26,000 --> 00:13:27,880 Speaker 1: for a longer period of time. Do you still think that, 255 00:13:30,160 --> 00:13:30,600 Speaker 1: I mean, I. 256 00:13:31,200 --> 00:13:33,600 Speaker 6: Do, but the question is around the time horizon. I mean, 257 00:13:33,600 --> 00:13:36,800 Speaker 6: I think that the economy is growing above trend. That's 258 00:13:36,880 --> 00:13:40,200 Speaker 6: ultimately going to have some effects on prices. But I 259 00:13:40,600 --> 00:13:42,400 Speaker 6: you know, there is a lot of disinflation in the 260 00:13:42,440 --> 00:13:45,280 Speaker 6: process and in train, and the FED is going to 261 00:13:45,320 --> 00:13:45,960 Speaker 6: respond to that. 262 00:13:47,360 --> 00:13:49,160 Speaker 7: You Know, the issue, frankly. 263 00:13:48,880 --> 00:13:54,720 Speaker 6: Is does the soft landing enthusiasm today does that reignite 264 00:13:54,760 --> 00:13:58,360 Speaker 6: inflation later. I think that that's something that Feds should 265 00:13:58,440 --> 00:14:00,439 Speaker 6: keep in the back of the of their mind. Frankly, 266 00:14:01,040 --> 00:14:03,440 Speaker 6: that may be one reason, you know, kind of puts 267 00:14:03,920 --> 00:14:04,640 Speaker 6: a ceiling on. 268 00:14:04,600 --> 00:14:05,760 Speaker 7: How many cuts they can do. 269 00:14:06,000 --> 00:14:07,960 Speaker 6: But I do think we have to get through this 270 00:14:08,000 --> 00:14:10,760 Speaker 6: period of disinflation first, and I think the FED is 271 00:14:10,800 --> 00:14:13,400 Speaker 6: going to react to that disinflation, which is why I 272 00:14:13,440 --> 00:14:15,920 Speaker 6: think they'll cut interest rates and they'll probably front load 273 00:14:15,960 --> 00:14:18,520 Speaker 6: the cuts and sort of get it out of the 274 00:14:18,520 --> 00:14:21,560 Speaker 6: system quickly. Look, they're already telling you that they're going 275 00:14:21,600 --> 00:14:23,360 Speaker 6: to cut rates. I mean, they were at. 276 00:14:23,200 --> 00:14:26,440 Speaker 7: Four in June, as Mike. 277 00:14:26,520 --> 00:14:29,760 Speaker 6: As Mike mentioned, they went to two in September, and 278 00:14:29,800 --> 00:14:32,320 Speaker 6: they might they might signal that, you know, a pause 279 00:14:32,400 --> 00:14:35,920 Speaker 6: in December and pencil in three three cuts for twenty 280 00:14:36,000 --> 00:14:38,400 Speaker 6: twenty four. I mean, that doesn't tell you when they 281 00:14:38,440 --> 00:14:40,080 Speaker 6: do it, and that's why I said I think given 282 00:14:40,120 --> 00:14:42,080 Speaker 6: the glide path and inflation that we're likely to get, 283 00:14:42,120 --> 00:14:43,920 Speaker 6: they probably do it sooner than later. 284 00:14:44,120 --> 00:14:46,360 Speaker 1: Neil, I'm curious from your vantage point, a lot of 285 00:14:46,360 --> 00:14:48,920 Speaker 1: people have been saying it's going to be the bond 286 00:14:48,960 --> 00:14:51,360 Speaker 1: market's dream and that you're going to get an ongoing 287 00:14:51,480 --> 00:14:54,520 Speaker 1: rally in bonds that that will tee off an equity 288 00:14:54,560 --> 00:14:57,400 Speaker 1: market rally. Do you agree with that type of recipe 289 00:14:57,520 --> 00:14:59,480 Speaker 1: or do you think that it's not so simple, especially 290 00:14:59,520 --> 00:15:02,480 Speaker 1: if there is a longer term question embedded in bonds 291 00:15:02,520 --> 00:15:06,600 Speaker 1: of what the new neutral rate is that actually solid 292 00:15:06,600 --> 00:15:10,240 Speaker 1: inflation but not overly hot a bank that's a central 293 00:15:10,280 --> 00:15:13,160 Speaker 1: bank that's surgically cutting that's really positive for risk, but 294 00:15:13,200 --> 00:15:15,680 Speaker 1: not necessarily on the other side for bonds. 295 00:15:17,240 --> 00:15:18,200 Speaker 7: Well, I mean, I think. 296 00:15:18,080 --> 00:15:22,360 Speaker 6: It probably may weigh on longer term rates obviously, right, 297 00:15:22,400 --> 00:15:23,320 Speaker 6: I mean, but that's I. 298 00:15:23,280 --> 00:15:24,560 Speaker 7: Mean again for the stock market. 299 00:15:24,640 --> 00:15:27,080 Speaker 6: I mean, it's it's ultimately an environment where companies can 300 00:15:27,120 --> 00:15:30,880 Speaker 6: make money, which should continue to help, you know, stock 301 00:15:30,960 --> 00:15:31,960 Speaker 6: prices go higher. 302 00:15:33,320 --> 00:15:35,640 Speaker 1: Neil Dudda of Renaissance Macro, thank you so much for 303 00:15:35,680 --> 00:15:56,560 Speaker 1: being with us. 304 00:15:46,320 --> 00:15:48,960 Speaker 2: The latest from four this morning, a new range for 305 00:15:49,000 --> 00:15:52,400 Speaker 2: twenty twenty three adjusted earnings before interest ten billion to 306 00:15:52,480 --> 00:15:55,960 Speaker 2: ten point five billion, the previous range before suspending guidance 307 00:15:56,040 --> 00:15:58,560 Speaker 2: eleven to twelve. We've got a lot to talk about. 308 00:15:58,600 --> 00:15:59,960 Speaker 2: We can do that now with John Lord of four 309 00:16:00,280 --> 00:16:02,800 Speaker 2: C five. Good morning, John, Good morning. Let's talk about it. 310 00:16:02,840 --> 00:16:05,040 Speaker 2: Where is it? Where's my ten billion dollar buyback? Why 311 00:16:05,080 --> 00:16:06,520 Speaker 2: a different approach from you and the team. 312 00:16:06,640 --> 00:16:08,760 Speaker 9: Well, we have a great plan in our Ford plus plan, 313 00:16:08,960 --> 00:16:12,720 Speaker 9: and we're focused on investing in growth and profitability and 314 00:16:12,800 --> 00:16:16,120 Speaker 9: through that rewarding our shareholders with a higher price, plus 315 00:16:16,200 --> 00:16:19,000 Speaker 9: also paying out forty to fifty percent of our free 316 00:16:19,000 --> 00:16:22,160 Speaker 9: cash flow in dividends. And so we're investing in the business. 317 00:16:22,200 --> 00:16:26,160 Speaker 9: We have three great segments that are growth segments, Ford 318 00:16:26,200 --> 00:16:30,640 Speaker 9: Pro Our commercial business margins in the mid teens for us, 319 00:16:30,720 --> 00:16:33,600 Speaker 9: that's very high in our industry. Profits are going to 320 00:16:33,600 --> 00:16:36,680 Speaker 9: almost double this year, more than double this year, and 321 00:16:36,840 --> 00:16:40,320 Speaker 9: we have a great opportunity with the mostes. We have 322 00:16:40,720 --> 00:16:43,480 Speaker 9: to drive significant profitability. 323 00:16:42,960 --> 00:16:44,680 Speaker 2: Costs to gun up as well. So let's talk about 324 00:16:44,720 --> 00:16:47,640 Speaker 2: the labor contract nine hundred dollars to the cost of 325 00:16:47,680 --> 00:16:50,840 Speaker 2: each car. Off the back of that UAW contract now 326 00:16:50,880 --> 00:16:53,880 Speaker 2: just for our audience, because you're aware of these figures already, GM, 327 00:16:53,920 --> 00:16:56,920 Speaker 2: who we spoke to yesterday are at five seventy five. 328 00:16:57,680 --> 00:16:59,440 Speaker 2: I'm still trying to sit here and work out how 329 00:16:59,480 --> 00:17:02,400 Speaker 2: do we get from five to seventy five GM and 330 00:17:02,520 --> 00:17:04,720 Speaker 2: nine hundred dollars to the cost of each car forward? 331 00:17:04,760 --> 00:17:05,720 Speaker 2: What is that about? 332 00:17:05,960 --> 00:17:08,040 Speaker 9: Well, when you look at it, we're five hundred dollars 333 00:17:08,119 --> 00:17:10,880 Speaker 9: to start in twenty twenty four, and that grows over 334 00:17:10,960 --> 00:17:14,120 Speaker 9: time as wages increase. The biggest increase in this contract 335 00:17:14,160 --> 00:17:17,200 Speaker 9: is gross wage increase. It's significant over twenty five percent. 336 00:17:18,160 --> 00:17:21,000 Speaker 9: And then our footprint in the US is bigger than 337 00:17:21,040 --> 00:17:24,040 Speaker 9: General Motors. But the rest of that, I'm not exactly 338 00:17:24,080 --> 00:17:27,120 Speaker 9: sure why their number is that much lower than ours. 339 00:17:27,160 --> 00:17:29,719 Speaker 9: That's something that would have unpacked with them. We know 340 00:17:29,800 --> 00:17:31,840 Speaker 9: what we've done with this contract. We know what the 341 00:17:31,920 --> 00:17:35,119 Speaker 9: start point is. It's sixty to seventy basis points on 342 00:17:35,119 --> 00:17:38,479 Speaker 9: our income statement basis. And now what we need to 343 00:17:38,520 --> 00:17:41,000 Speaker 9: do is we need to work on driving productivity and 344 00:17:41,040 --> 00:17:44,800 Speaker 9: efficiencies and reducing the labor hours, the hours it takes 345 00:17:44,800 --> 00:17:46,919 Speaker 9: to build a vehicle and reducing that cost. And that's 346 00:17:46,960 --> 00:17:48,920 Speaker 9: what we're going to be focused on going forward. 347 00:17:48,680 --> 00:17:52,000 Speaker 1: So it's going to be cost reductions rather than trying 348 00:17:52,040 --> 00:17:54,560 Speaker 1: to raise prices for the end consumer. 349 00:17:54,600 --> 00:17:55,120 Speaker 2: Is that right? 350 00:17:55,440 --> 00:17:58,199 Speaker 9: Well, now you have to think about pricing differently in 351 00:17:58,240 --> 00:18:01,200 Speaker 9: our industry because all segments aren't the same. There's different 352 00:18:01,200 --> 00:18:04,399 Speaker 9: pricing power across the segments. That's why we feel that 353 00:18:04,440 --> 00:18:06,679 Speaker 9: what we did in segmenting the business and having the 354 00:18:06,720 --> 00:18:09,280 Speaker 9: transparency around that, it's important. If you look at the 355 00:18:09,280 --> 00:18:12,080 Speaker 9: commercial business in pro we believe they're still pent up 356 00:18:12,080 --> 00:18:15,040 Speaker 9: demand and pricing power there. However, in blue in the 357 00:18:15,040 --> 00:18:17,400 Speaker 9: more of the retail consumer segment, you're going to see 358 00:18:17,440 --> 00:18:20,680 Speaker 9: prices come down. We've been consistent talking about that. Back 359 00:18:20,720 --> 00:18:24,000 Speaker 9: in thirteen thirteen point four percent of disposable income to 360 00:18:24,000 --> 00:18:26,680 Speaker 9: buy a vehicle went up to fifteen point seven and 361 00:18:26,760 --> 00:18:29,879 Speaker 9: twenty twenty two it's down to fourteen point five percent roughly. 362 00:18:29,920 --> 00:18:32,160 Speaker 9: Now we see that coming back to thirteen point four 363 00:18:32,200 --> 00:18:33,920 Speaker 9: percent as you move through twenty twenty four. 364 00:18:34,320 --> 00:18:36,760 Speaker 1: Well, when you talk about lower price points, I think 365 00:18:36,800 --> 00:18:40,360 Speaker 1: about some of the Chinese car manufacturers and the production 366 00:18:40,680 --> 00:18:44,959 Speaker 1: much more cheaply of electric vehicles in particular, that are 367 00:18:45,000 --> 00:18:47,760 Speaker 1: really making a competitive advantage. How do you compete with them, 368 00:18:47,840 --> 00:18:50,680 Speaker 1: especially given the labor contracts and some of the other 369 00:18:51,000 --> 00:18:52,760 Speaker 1: working operating costs that you're dealing with. 370 00:18:52,960 --> 00:18:54,840 Speaker 9: Yeah, it's a good point, and that's something that we're 371 00:18:54,960 --> 00:18:58,520 Speaker 9: very focused on. Again, the segmentation, each segment is different. 372 00:18:58,760 --> 00:19:01,520 Speaker 9: We've seen prices come down now in the electric segment 373 00:19:01,640 --> 00:19:04,320 Speaker 9: much quicker than we expected, and the reason for that 374 00:19:04,920 --> 00:19:07,679 Speaker 9: is that we're moving out of the early adopters who 375 00:19:07,760 --> 00:19:11,040 Speaker 9: are willing to pay for higher prices. Early majority customers aren't. 376 00:19:11,160 --> 00:19:13,600 Speaker 9: They're not willing to pay that premium. So we're seeing 377 00:19:13,600 --> 00:19:15,800 Speaker 9: those come down and we expect them to equalize with 378 00:19:15,840 --> 00:19:18,040 Speaker 9: gas prices. So it's all going to be about cost 379 00:19:18,119 --> 00:19:21,520 Speaker 9: in efficiency, capital efficiency, et cetera. We have to get 380 00:19:21,560 --> 00:19:23,679 Speaker 9: more competitive on cost and that's what we're focused on 381 00:19:23,720 --> 00:19:26,040 Speaker 9: in our second generation and third generation vehicles. 382 00:19:26,080 --> 00:19:28,800 Speaker 2: What is handing with demand in the evase? What is 383 00:19:28,800 --> 00:19:31,159 Speaker 2: hanpden mag is this real pushback that changes to approach. 384 00:19:31,760 --> 00:19:33,960 Speaker 9: I think what it is is it's the adoption rate. 385 00:19:34,000 --> 00:19:37,320 Speaker 9: It's that flatter than what we had expected. That increase 386 00:19:37,400 --> 00:19:41,159 Speaker 9: isn't as great fifty percent up this year from sales standpoints, 387 00:19:41,160 --> 00:19:43,680 Speaker 9: so they're coming. It's going to be part of the industry. 388 00:19:43,960 --> 00:19:46,679 Speaker 9: Eventually we'll get to those higher growth rates. So we 389 00:19:46,760 --> 00:19:49,960 Speaker 9: have to adjust our capital investment. We have to adjust 390 00:19:50,000 --> 00:19:50,919 Speaker 9: our approach in the near turn. 391 00:19:51,040 --> 00:19:53,320 Speaker 2: That sounds like a change in execution, no strategy. 392 00:19:53,640 --> 00:19:56,200 Speaker 9: Absolutely, it is a change in execution. 393 00:19:55,840 --> 00:19:56,359 Speaker 5: Not strategy. 394 00:19:56,400 --> 00:19:58,320 Speaker 2: So let's talk about the numbers. You've pushed at twelve 395 00:19:58,359 --> 00:20:01,399 Speaker 2: billion an EV related and vestments. Should we expect to 396 00:20:01,440 --> 00:20:03,560 Speaker 2: say a little bit more of that going on? 397 00:20:03,720 --> 00:20:06,480 Speaker 9: Depends on the customer and the adoption rate and how 398 00:20:06,520 --> 00:20:09,480 Speaker 9: that pushes out. If the adoption rate starts to grow faster, 399 00:20:09,720 --> 00:20:11,600 Speaker 9: we'll increase our capital investments. 400 00:20:11,680 --> 00:20:13,680 Speaker 2: Let's get through the guide. I've got two points. Sure, 401 00:20:13,680 --> 00:20:15,080 Speaker 2: I want to say if these is still up tonight, 402 00:20:15,359 --> 00:20:17,439 Speaker 2: So you did expect half the sales to be electric 403 00:20:17,480 --> 00:20:19,000 Speaker 2: vehicles by twenty thirty, still the case. 404 00:20:20,240 --> 00:20:21,800 Speaker 9: Now we think it's going to be less than that. 405 00:20:21,720 --> 00:20:23,440 Speaker 2: Given where how much slimmer by Johon. 406 00:20:23,520 --> 00:20:25,280 Speaker 9: We haven't put a number on that yet. We're still 407 00:20:25,320 --> 00:20:26,959 Speaker 9: looking at what that rate will be. I think we'll 408 00:20:27,000 --> 00:20:28,360 Speaker 9: know more as we go through next year. 409 00:20:28,440 --> 00:20:30,880 Speaker 2: Is it the same for margins on those evs as well? 410 00:20:31,000 --> 00:20:33,399 Speaker 2: Do you have to reassess how big those margins will be? 411 00:20:33,600 --> 00:20:33,760 Speaker 1: Yeah? 412 00:20:33,800 --> 00:20:35,680 Speaker 9: I think as the industry adjusts, you have to look 413 00:20:35,680 --> 00:20:37,840 Speaker 9: at that. But we're targeting. We've set up our business 414 00:20:37,880 --> 00:20:40,159 Speaker 9: structure and we think the right target is around the 415 00:20:40,200 --> 00:20:42,040 Speaker 9: eight percent or high single digits. 416 00:20:42,240 --> 00:20:44,560 Speaker 1: You said that you're very focused on trying to be 417 00:20:44,640 --> 00:20:48,400 Speaker 1: competitive in the ev spice on price. Is that when 418 00:20:48,400 --> 00:20:50,679 Speaker 1: we asked about margin compression, you're basically saying, we're going 419 00:20:50,760 --> 00:20:53,320 Speaker 1: to see as we go on what the competitive landscape 420 00:20:53,320 --> 00:20:55,480 Speaker 1: looks like. But how do you plan to reduce costs? 421 00:20:55,520 --> 00:20:57,359 Speaker 1: Is it going to be with job cuts? Is it 422 00:20:57,359 --> 00:20:58,760 Speaker 1: going to be with more automation. 423 00:20:59,600 --> 00:21:02,560 Speaker 9: So when yes, absolutely, automation that is going to be 424 00:21:02,600 --> 00:21:04,320 Speaker 9: a key part of what we do. Now when you 425 00:21:04,359 --> 00:21:07,159 Speaker 9: look at this contract, it's also important to understand for 426 00:21:07,320 --> 00:21:10,160 Speaker 9: us where the battery plants are and the battery plants 427 00:21:10,160 --> 00:21:12,600 Speaker 9: aren't part of the contract, and so that's important for 428 00:21:12,680 --> 00:21:17,200 Speaker 9: vertical integration. And when you're talking about electric vehicles, battery 429 00:21:17,320 --> 00:21:20,399 Speaker 9: and design is really important and the efficiency of that 430 00:21:20,440 --> 00:21:23,119 Speaker 9: battery and getting the smallest battery possible in so that 431 00:21:23,240 --> 00:21:25,439 Speaker 9: second generation design is going to be critical from a 432 00:21:25,480 --> 00:21:28,160 Speaker 9: cost standpoint. And then overall for us as a company, 433 00:21:28,200 --> 00:21:30,560 Speaker 9: we have work to do on our cost and quality, 434 00:21:30,840 --> 00:21:34,320 Speaker 9: and we're focused on that. We've made significant progress over 435 00:21:34,320 --> 00:21:37,800 Speaker 9: the last few years. We've restructured international operations, we moved 436 00:21:37,800 --> 00:21:40,800 Speaker 9: out of autonomous vehicles and pulled capital investment out of that. 437 00:21:41,119 --> 00:21:44,000 Speaker 9: Focused on L two. We have the best driving system 438 00:21:44,000 --> 00:21:46,399 Speaker 9: out there and blue crews according to consumer reports. So 439 00:21:46,440 --> 00:21:48,200 Speaker 9: we're making the adjustments as we go. 440 00:21:48,359 --> 00:21:52,040 Speaker 1: When you talk about automation and you know there's a 441 00:21:52,119 --> 00:21:54,479 Speaker 1: question around job cuts and how much this will reduce 442 00:21:54,520 --> 00:21:58,560 Speaker 1: the overall number of workers who will have to be 443 00:21:58,640 --> 00:22:01,520 Speaker 1: employed to make cars, is that what you foresee that 444 00:22:01,560 --> 00:22:04,800 Speaker 1: there is going to be a fewer team of professionals 445 00:22:04,800 --> 00:22:07,919 Speaker 1: that are creating vehicles in say five years, think today 446 00:22:08,000 --> 00:22:08,760 Speaker 1: at the Ford plants. 447 00:22:08,800 --> 00:22:11,000 Speaker 9: So in certain areas there may be in other areas 448 00:22:11,000 --> 00:22:14,440 Speaker 9: we see growth. The key is driving efficiency and productivity. 449 00:22:14,640 --> 00:22:18,040 Speaker 9: So more coming out per unit of labor doesn't necessarily 450 00:22:18,040 --> 00:22:21,320 Speaker 9: mean you take the labor out that you get more productivity. 451 00:22:21,480 --> 00:22:22,640 Speaker 9: That's what we need to drive towards. 452 00:22:22,720 --> 00:22:25,080 Speaker 2: Let's finish on a dedicate question. I asked this question 453 00:22:25,119 --> 00:22:26,479 Speaker 2: a lot, and I'd like to ask it directly. 454 00:22:26,520 --> 00:22:26,760 Speaker 5: If you. 455 00:22:28,280 --> 00:22:31,280 Speaker 2: Is a Ford F one fifty lightning truck which weighs 456 00:22:31,280 --> 00:22:35,000 Speaker 2: about six pounds really good for the environment because I 457 00:22:35,040 --> 00:22:40,280 Speaker 2: struggle with the association between these heavy electrified trucks and 458 00:22:40,359 --> 00:22:43,800 Speaker 2: climate change. What is the relationship? Are we kind of 459 00:22:43,840 --> 00:22:44,800 Speaker 2: kidding ourselves here? 460 00:22:45,000 --> 00:22:47,160 Speaker 9: I don't think so. I think that there's two things 461 00:22:47,160 --> 00:22:50,320 Speaker 9: about the electric truck. One, it's moving into electric is 462 00:22:50,359 --> 00:22:53,359 Speaker 9: important for the overall environment, that's true. But number two, 463 00:22:53,560 --> 00:22:55,520 Speaker 9: you also have to think about the consumer and what 464 00:22:55,560 --> 00:22:57,760 Speaker 9: that truck can do. It fills a niche that hadn't 465 00:22:57,760 --> 00:23:00,480 Speaker 9: been out there. There are certain individuals that just will 466 00:23:00,600 --> 00:23:03,800 Speaker 9: not drive an internal combustion vehicle. They never had access 467 00:23:03,840 --> 00:23:06,240 Speaker 9: to a vehicle and utility like a pickup truck. They 468 00:23:06,280 --> 00:23:09,440 Speaker 9: now have that. Plus, for our commercial customers, it's a tool, 469 00:23:09,520 --> 00:23:11,680 Speaker 9: it's a generator. They use it on the job site 470 00:23:11,720 --> 00:23:14,840 Speaker 9: to power. Now you don't have gas generators sitting out there. 471 00:23:15,400 --> 00:23:19,080 Speaker 9: It's electric. It's coming from the vehicle itself. So it 472 00:23:19,119 --> 00:23:23,120 Speaker 9: is a good step forward in the environmental push in 473 00:23:23,200 --> 00:23:25,040 Speaker 9: reducing the CO two footprint that comes. 474 00:23:25,119 --> 00:23:26,800 Speaker 2: Sition will continue. It's going to hear from you, gra 475 00:23:26,840 --> 00:23:28,520 Speaker 2: it's getting update and the numbers as wow. Thank you, John, 476 00:23:28,560 --> 00:23:29,080 Speaker 2: I appreciate it. 477 00:23:29,119 --> 00:23:29,280 Speaker 5: John. 478 00:23:29,320 --> 00:23:29,639 Speaker 10: Load of that. 479 00:23:29,880 --> 00:23:37,560 Speaker 2: The forward CFO Cassie Perrot joined us now fixed income 480 00:23:37,560 --> 00:23:40,560 Speaker 2: portfolio manager at JP Morgan Asset Management. Causie, good morning 481 00:23:40,600 --> 00:23:40,760 Speaker 2: to you. 482 00:23:40,920 --> 00:23:41,439 Speaker 8: Good morning. 483 00:23:41,520 --> 00:23:44,760 Speaker 2: The world's moving towards you lower bond yots, maybe a 484 00:23:44,800 --> 00:23:47,400 Speaker 2: slow economy in our future. How are you thinking about 485 00:23:47,400 --> 00:23:48,200 Speaker 2: fixed income now? 486 00:23:48,960 --> 00:23:51,240 Speaker 8: So you're right, yields have moved lower. 487 00:23:52,160 --> 00:23:55,560 Speaker 10: What we've had is the situation where the narrative can 488 00:23:55,600 --> 00:23:59,760 Speaker 10: take you much further than what's actually happening in terms 489 00:23:59,800 --> 00:24:03,639 Speaker 10: of reality. And so we looked at the move higher 490 00:24:03,640 --> 00:24:07,080 Speaker 10: and yields in September and October getting to five percent 491 00:24:07,119 --> 00:24:09,320 Speaker 10: on the tenure, and we dated. We did think that 492 00:24:09,320 --> 00:24:11,879 Speaker 10: that was just a bit too far in terms of 493 00:24:11,920 --> 00:24:15,040 Speaker 10: a move, and that we would look back and view 494 00:24:15,080 --> 00:24:18,320 Speaker 10: this as honestly a great buying opportunity. We've had a 495 00:24:18,359 --> 00:24:21,440 Speaker 10: positive view on fixed income this year. Yield to move 496 00:24:21,480 --> 00:24:24,520 Speaker 10: back down and that's essentially brought us back to where 497 00:24:24,560 --> 00:24:28,480 Speaker 10: we were before the September FMC meeting. So what I'm 498 00:24:28,520 --> 00:24:32,159 Speaker 10: really focused on right now continues to be the inflation data. 499 00:24:32,480 --> 00:24:35,480 Speaker 10: So the inflation data, you know, what do we benchmark 500 00:24:35,480 --> 00:24:38,720 Speaker 10: ourselves against. It's coming down, it's still above the Fed's target. 501 00:24:38,840 --> 00:24:42,080 Speaker 10: So you have people on both sides saying we haven't 502 00:24:42,080 --> 00:24:44,840 Speaker 10: done enough, but maybe we have. I look at what 503 00:24:44,920 --> 00:24:48,640 Speaker 10: they projected in September, and September was a fairly hawkish 504 00:24:48,680 --> 00:24:52,359 Speaker 10: meeting for them. They were projecting inflation of three point 505 00:24:52,359 --> 00:24:53,200 Speaker 10: seven percent on. 506 00:24:53,200 --> 00:24:55,399 Speaker 8: Core PCEE today's number. 507 00:24:55,400 --> 00:24:57,600 Speaker 10: If it comes in on consensus at eight point thirty, 508 00:24:57,960 --> 00:24:59,800 Speaker 10: we'll be down to three and a half percent on 509 00:24:59,840 --> 00:25:02,040 Speaker 10: the year over your rate, and we'll be down to 510 00:25:02,359 --> 00:25:05,520 Speaker 10: two point six percent on the six month run rate. 511 00:25:05,640 --> 00:25:09,439 Speaker 10: So bottom line, inflation is coming down faster than they expected. 512 00:25:10,160 --> 00:25:13,200 Speaker 8: We think that the Fed's last rate hike was to lie. 513 00:25:13,240 --> 00:25:15,400 Speaker 8: We've had that call for quite a while. Now we're 514 00:25:15,440 --> 00:25:16,200 Speaker 8: sticking to that. 515 00:25:16,160 --> 00:25:20,280 Speaker 10: Call, and that makes the moves for yields asymmetric. We 516 00:25:20,320 --> 00:25:22,840 Speaker 10: can move a little bit higher here, for sure. I 517 00:25:22,840 --> 00:25:25,200 Speaker 10: mean there's a lot of volatility on every given day. 518 00:25:25,720 --> 00:25:28,040 Speaker 10: But on the other hand, we can move a lot 519 00:25:28,119 --> 00:25:30,640 Speaker 10: lower if next year we're looking at rate cuts. 520 00:25:31,359 --> 00:25:33,560 Speaker 1: You said the narrative can take you much further than 521 00:25:33,560 --> 00:25:36,679 Speaker 1: the reality. Does that mean that we're in a trader's market? 522 00:25:37,840 --> 00:25:40,800 Speaker 10: So I do think that the technicals and the positioning 523 00:25:40,920 --> 00:25:42,160 Speaker 10: are very important. 524 00:25:42,240 --> 00:25:44,479 Speaker 8: You need to understand not just what's going on, but 525 00:25:44,520 --> 00:25:44,840 Speaker 8: what is. 526 00:25:44,840 --> 00:25:48,359 Speaker 10: The sentiment around what's going on, And you had a 527 00:25:48,359 --> 00:25:51,760 Speaker 10: couple things that were really fueling that that bearish sentiment 528 00:25:51,840 --> 00:25:54,800 Speaker 10: in October. One of them was the fact that you 529 00:25:54,840 --> 00:25:58,000 Speaker 10: had a blockbuster GDP report and there was uncertainty about 530 00:25:58,000 --> 00:26:00,840 Speaker 10: what was going to come next. Right, we've now at 531 00:26:00,960 --> 00:26:03,800 Speaker 10: least gotten to the point where we feel comfortable that 532 00:26:03,880 --> 00:26:06,960 Speaker 10: we're not going to see another five point two percent 533 00:26:07,080 --> 00:26:10,360 Speaker 10: on real GDP and nine percent on nominal GDP. Atlanta 534 00:26:10,400 --> 00:26:13,359 Speaker 10: FED tracking has come out, we're normalizing back to around 535 00:26:13,400 --> 00:26:17,280 Speaker 10: two percent, so we can feel comfortable with that. I 536 00:26:17,320 --> 00:26:20,240 Speaker 10: think the other thing that you're not hearing any words 537 00:26:20,280 --> 00:26:23,920 Speaker 10: about anymore is the deficit. Right, the auctions, at least, 538 00:26:23,960 --> 00:26:25,520 Speaker 10: I know you love watching the auctions. 539 00:26:25,640 --> 00:26:28,120 Speaker 8: They've been mixed, right, You've had some weak ones, you've 540 00:26:28,119 --> 00:26:28,920 Speaker 8: had some poor ones. 541 00:26:28,920 --> 00:26:31,320 Speaker 10: In fact, you had that five basis point tail on 542 00:26:31,359 --> 00:26:34,479 Speaker 10: the thirty year auction on November ninth that ended up 543 00:26:34,480 --> 00:26:37,960 Speaker 10: being a great entry point into the bond market. And 544 00:26:38,040 --> 00:26:42,879 Speaker 10: so you know, sometimes the market fixates on something. Ultimately, 545 00:26:42,920 --> 00:26:45,000 Speaker 10: we think it's going to be about the fundamentals. Again, 546 00:26:45,600 --> 00:26:48,280 Speaker 10: what's our view on inflation, at what's our view on 547 00:26:48,320 --> 00:26:53,560 Speaker 10: the FED. Ultimately, it's not about if people will buy treasuries. 548 00:26:53,880 --> 00:26:56,760 Speaker 10: It's at what price do they think it's fair? And 549 00:26:56,880 --> 00:27:00,399 Speaker 10: if inflation's coming down and the FED is done jump in, 550 00:27:00,440 --> 00:27:01,200 Speaker 10: the price is fair. 551 00:27:01,280 --> 00:27:03,320 Speaker 2: Why isn't the deficit part of the fundamentals? 552 00:27:04,640 --> 00:27:06,640 Speaker 10: I mean, I think it is part of the fundamentals 553 00:27:06,640 --> 00:27:09,040 Speaker 10: in terms of the growth and inflation outlook. 554 00:27:09,200 --> 00:27:10,200 Speaker 8: But here's the thing. 555 00:27:10,680 --> 00:27:13,760 Speaker 10: The deficit was wider than expected this year, but inflation 556 00:27:13,920 --> 00:27:16,439 Speaker 10: came down. When you're a country that can print their 557 00:27:16,480 --> 00:27:19,360 Speaker 10: own currency and they have their own reserve currency, it's. 558 00:27:19,200 --> 00:27:21,439 Speaker 8: Not really about default risk. We're not worried about the 559 00:27:21,480 --> 00:27:22,560 Speaker 8: treasury defaulting, right. 560 00:27:22,600 --> 00:27:26,399 Speaker 10: The risk is inflation if you print too much money. 561 00:27:26,680 --> 00:27:28,080 Speaker 8: We are not seeing inflation. 562 00:27:28,320 --> 00:27:31,720 Speaker 10: That's because the increase in the deficit this year was 563 00:27:31,800 --> 00:27:35,760 Speaker 10: because of two factors. One higher interest cost, but more importantly, 564 00:27:35,880 --> 00:27:39,440 Speaker 10: lower tax revenue. We're not talking about fiscal stimulus here. 565 00:27:39,720 --> 00:27:44,080 Speaker 10: We're talking about an economy that was normalizing revenues that 566 00:27:44,160 --> 00:27:46,680 Speaker 10: were falling, and then a government that has to fund 567 00:27:46,720 --> 00:27:48,320 Speaker 10: more because the FED stepping out of the way. 568 00:27:48,359 --> 00:27:50,280 Speaker 1: It strikes me that you said that the moves now 569 00:27:50,280 --> 00:27:53,119 Speaker 1: are asymmetric when it comes to the bond market. It 570 00:27:53,160 --> 00:27:55,119 Speaker 1: makes sense to me on the short end, because if 571 00:27:55,160 --> 00:27:57,919 Speaker 1: the FED is done raising rates, sure, I can imagine 572 00:27:57,920 --> 00:28:00,080 Speaker 1: that that's the case for the long end though, So 573 00:28:00,400 --> 00:28:03,360 Speaker 1: there just are so many variables, as John was mentioning earlier, 574 00:28:03,359 --> 00:28:05,280 Speaker 1: whether it's the deficit or whether it's the fact that 575 00:28:05,320 --> 00:28:09,240 Speaker 1: the FED cutting rates sooner leads to perhaps higher inflation 576 00:28:09,440 --> 00:28:12,120 Speaker 1: over the longer period of time. How much less conviction 577 00:28:12,240 --> 00:28:15,320 Speaker 1: do you have over your longer term bond yield call 578 00:28:15,560 --> 00:28:16,199 Speaker 1: on the tenure. 579 00:28:17,320 --> 00:28:20,240 Speaker 8: So there's multiple parts to that question. 580 00:28:20,600 --> 00:28:23,520 Speaker 10: One the first thing that comes to mind is that 581 00:28:23,600 --> 00:28:27,440 Speaker 10: we are moving into regime where we should be seeing 582 00:28:27,480 --> 00:28:31,479 Speaker 10: the curve steepen. So the part of the curve that 583 00:28:31,560 --> 00:28:34,760 Speaker 10: we should see the most rally, the most moved lower 584 00:28:34,800 --> 00:28:36,800 Speaker 10: if the FED is cutting rates, is going to be 585 00:28:36,840 --> 00:28:39,280 Speaker 10: that front end. So I would agree the asymmetry around 586 00:28:39,360 --> 00:28:42,520 Speaker 10: yields is more compelling in the front end than that 587 00:28:42,760 --> 00:28:46,560 Speaker 10: is in the long end. And I do think that structurally, 588 00:28:46,680 --> 00:28:51,160 Speaker 10: longer term, we are exiting a period of financial repression, 589 00:28:51,520 --> 00:28:55,080 Speaker 10: and so we are probably at a point and this 590 00:28:55,160 --> 00:28:57,120 Speaker 10: is a good thing for bond investors. You know, we're 591 00:28:57,120 --> 00:28:59,880 Speaker 10: not dealing with negative real yields anymore. We're not dealing 592 00:28:59,920 --> 00:29:03,880 Speaker 10: with thirty percent of the global bond index having negative yields. 593 00:29:04,000 --> 00:29:07,720 Speaker 10: This is ultimately a good thing higher real yields, but 594 00:29:07,800 --> 00:29:10,240 Speaker 10: it does mean that we're not necessarily looking at fifty 595 00:29:10,280 --> 00:29:13,120 Speaker 10: basis points on the tenure next time we're in a recession, 596 00:29:13,120 --> 00:29:14,360 Speaker 10: which is what we saw during COVID. 597 00:29:14,360 --> 00:29:16,280 Speaker 2: It's what LASA complained about it for ten years in 598 00:29:16,320 --> 00:29:18,480 Speaker 2: every single column. Yes, the world of negative. 599 00:29:18,280 --> 00:29:21,280 Speaker 1: Rates true one percent. I stand by it. 600 00:29:21,640 --> 00:29:25,080 Speaker 2: I think everyone does. It was ridiculous. Honestly, what was 601 00:29:25,080 --> 00:29:27,120 Speaker 2: absurd about that period is we all knew it was absurd. 602 00:29:27,520 --> 00:29:29,680 Speaker 2: It was unlike one of those bubbles that people would 603 00:29:29,720 --> 00:29:31,959 Speaker 2: come on and sort of like rationalize and justify. It's 604 00:29:32,000 --> 00:29:33,960 Speaker 2: one of those things where we all knew it was absurd, 605 00:29:33,960 --> 00:29:36,640 Speaker 2: but it was pinned their place there by policy. Policy 606 00:29:36,720 --> 00:29:39,600 Speaker 2: was deliberately anchoring it, and that was what was totally 607 00:29:39,640 --> 00:29:41,160 Speaker 2: absurd and original about that moment. 608 00:29:41,280 --> 00:29:43,440 Speaker 1: The biggest surprise for me is that we heard all 609 00:29:43,480 --> 00:29:45,360 Speaker 1: these people saying the world was going to fall when 610 00:29:45,400 --> 00:29:47,239 Speaker 1: you didn't have zero rates, and the fact that it 611 00:29:47,280 --> 00:29:50,200 Speaker 1: hasn't continues to be one of the biggest surprises that 612 00:29:50,240 --> 00:29:53,920 Speaker 1: we haven't seen. The complete demolition of balance sheets that 613 00:29:53,960 --> 00:29:56,440 Speaker 1: were really grown up, that were really raised in zero 614 00:29:56,480 --> 00:29:56,840 Speaker 1: rate posts. 615 00:29:56,840 --> 00:29:58,640 Speaker 2: How many people came on this show and said the 616 00:29:58,680 --> 00:30:01,520 Speaker 2: long convaiable lacks would be thirty years lung. Hardly only 617 00:30:01,560 --> 00:30:03,880 Speaker 2: one did, No one did, And now it's like, yeah, 618 00:30:03,880 --> 00:30:07,800 Speaker 2: they're longer, much longer. Cassie got to see Cassie Barrett 619 00:30:07,840 --> 00:30:21,280 Speaker 2: of JP Morgan Asset Management the news yesterday evening. I'm 620 00:30:21,320 --> 00:30:23,760 Speaker 2: sure most of you are up to date foreign policy. 621 00:30:23,800 --> 00:30:27,760 Speaker 2: Giant Secretary of State in the nineteen seventies, Henry Kissinger 622 00:30:27,800 --> 00:30:30,120 Speaker 2: has died, aged one hundred and place to say, we 623 00:30:30,160 --> 00:30:32,760 Speaker 2: can catch up with Norman raw, the former senior US 624 00:30:32,760 --> 00:30:36,240 Speaker 2: intelligence official and non resident senior advisor at the Center 625 00:30:36,400 --> 00:30:40,240 Speaker 2: for Strategic and International Studies. Norman, first of all, to you, sir, 626 00:30:40,400 --> 00:30:43,520 Speaker 2: I know you knew Secretary Kissinger. Can you just help 627 00:30:43,600 --> 00:30:47,120 Speaker 2: us understand how his approach to foreign policy changed everyone 628 00:30:47,120 --> 00:30:49,640 Speaker 2: else's approach for the decades afterwards? 629 00:30:50,720 --> 00:30:51,800 Speaker 5: Yes, good morning. Well. 630 00:30:51,920 --> 00:30:55,960 Speaker 11: Henry Kissinger was a titanic if controversial figure who brought 631 00:30:56,120 --> 00:30:58,760 Speaker 11: to his work a sense of the importance of a 632 00:30:58,880 --> 00:31:01,360 Speaker 11: balance of power. He was a creature of a very 633 00:31:01,360 --> 00:31:05,400 Speaker 11: interesting time. A Jew in Nazi Germany, a military intelligence 634 00:31:05,400 --> 00:31:08,240 Speaker 11: officer in the Second World War, a scholar during the 635 00:31:08,280 --> 00:31:11,440 Speaker 11: most dangerous days of the Cold War. His background in 636 00:31:11,480 --> 00:31:14,240 Speaker 11: the Congress of the end of eighteen fifteen and that 637 00:31:14,320 --> 00:31:17,520 Speaker 11: period gave him a sense of the importance of ensuring 638 00:31:17,560 --> 00:31:21,959 Speaker 11: that key powers found war less palatable than engagement. And 639 00:31:22,000 --> 00:31:25,240 Speaker 11: also he brought together a sense of the United States 640 00:31:25,280 --> 00:31:29,320 Speaker 11: would triangulate, would be closer relations with key powers than 641 00:31:29,360 --> 00:31:32,960 Speaker 11: they would with themselves, to enable that process to continue. 642 00:31:33,160 --> 00:31:36,040 Speaker 11: Since that time, every Secretary of State has attempted to 643 00:31:36,160 --> 00:31:40,280 Speaker 11: emulate doctor Kissinger's approach, but no one has achieved his 644 00:31:40,360 --> 00:31:41,720 Speaker 11: extraordinary successes. 645 00:31:42,200 --> 00:31:45,280 Speaker 1: Henry Kissinger was a highly polarizing person. A lot of 646 00:31:45,280 --> 00:31:48,000 Speaker 1: people point to the fact that he kind of rejected 647 00:31:48,000 --> 00:31:51,320 Speaker 1: idealism and really was a pragmatist and really talked about 648 00:31:51,360 --> 00:31:53,520 Speaker 1: the goals that you ended up achieving rather than the 649 00:31:53,520 --> 00:31:56,200 Speaker 1: methods of how to achieve them. Where does that play 650 00:31:56,320 --> 00:31:59,960 Speaker 1: in the strategy of foreign policy today in America? 651 00:32:00,800 --> 00:32:03,800 Speaker 11: Well, Henry Kissinger's quote on that issue, I think probably 652 00:32:03,880 --> 00:32:07,600 Speaker 11: would be a country that seeks moral perfection and its 653 00:32:07,640 --> 00:32:11,920 Speaker 11: foreign policy will achieve neither that perfection nor security. And 654 00:32:12,000 --> 00:32:14,440 Speaker 11: I think we see a sense of this in the 655 00:32:14,560 --> 00:32:18,040 Speaker 11: United States today in how it deals with the world. 656 00:32:18,280 --> 00:32:21,360 Speaker 11: There are key core interests, there are lesser interests that 657 00:32:21,480 --> 00:32:25,360 Speaker 11: can be discarded or at least put aside for the moment. 658 00:32:25,560 --> 00:32:28,440 Speaker 11: And I think that's how the Biden administration is approaching 659 00:32:28,440 --> 00:32:33,240 Speaker 11: the world, China, climate change, international institutions, avoiding conflicts which 660 00:32:33,280 --> 00:32:34,920 Speaker 11: would disrupt the US economy. 661 00:32:35,480 --> 00:32:39,040 Speaker 1: Do you think that society has shifted dramatically enough to 662 00:32:39,640 --> 00:32:42,040 Speaker 1: not really go along as much with that type of 663 00:32:42,080 --> 00:32:44,520 Speaker 1: ethos as it did in the nineteen seventies. I was 664 00:32:44,520 --> 00:32:46,440 Speaker 1: going to say, you know, how much of social media 665 00:32:46,520 --> 00:32:49,200 Speaker 1: changed the picture? How much has the immediate imagery? Is 666 00:32:49,240 --> 00:32:51,920 Speaker 1: there some kind of shift in the population that makes 667 00:32:51,920 --> 00:32:53,000 Speaker 1: that difficult. 668 00:32:53,320 --> 00:32:54,720 Speaker 5: It's certainly a very different world. 669 00:32:54,760 --> 00:32:57,040 Speaker 11: But I think we need to recall that nineteen sixty 670 00:32:57,080 --> 00:33:00,240 Speaker 11: eight in the late sixties in general were an extraordinary 671 00:33:00,280 --> 00:33:04,000 Speaker 11: time in the US and European society, with the protests 672 00:33:04,080 --> 00:33:08,280 Speaker 11: against Vietnam, the protest against our US actions in Cambodia, 673 00:33:08,400 --> 00:33:11,080 Speaker 11: the US actions in Chile. I mean, this was also 674 00:33:11,160 --> 00:33:13,960 Speaker 11: a very polarizing figure and he was able to navigate 675 00:33:14,200 --> 00:33:18,360 Speaker 11: through that period, which also included Watergate, to achieve the 676 00:33:18,440 --> 00:33:21,640 Speaker 11: successes with the Soviet Union, China and the Arab peace 677 00:33:21,680 --> 00:33:24,360 Speaker 11: disengagements which have lasted fifty years. 678 00:33:24,840 --> 00:33:27,560 Speaker 2: We now need to talk about modern war and twenty 679 00:33:27,600 --> 00:33:31,560 Speaker 2: twenty three normal let's talk about Israel and Hamas. Hostages 680 00:33:31,560 --> 00:33:34,560 Speaker 2: have been released, two hundred trucks of value to going 681 00:33:34,640 --> 00:33:37,640 Speaker 2: in every single day into Gaza. What's the argument against 682 00:33:37,920 --> 00:33:39,000 Speaker 2: extending this ceasefire? 683 00:33:39,040 --> 00:33:42,880 Speaker 11: Norman, Well, the argument against extending the ceasefire would be 684 00:33:42,920 --> 00:33:46,080 Speaker 11: that allows for the survival of Hamas, an organization which 685 00:33:46,160 --> 00:33:50,240 Speaker 11: continues to state that it is interested in the eradication 686 00:33:50,400 --> 00:33:52,600 Speaker 11: of Israel and those who live there. 687 00:33:52,680 --> 00:33:54,120 Speaker 5: So, if you believe the. 688 00:33:54,040 --> 00:33:59,160 Speaker 11: Phrase never again is as a driver, you must eradicate 689 00:33:59,200 --> 00:34:03,000 Speaker 11: Hamas only to move to a peace process that is legitimate. 690 00:34:03,040 --> 00:34:05,280 Speaker 11: I mean, the idea of a two state solution is 691 00:34:05,560 --> 00:34:08,560 Speaker 11: certainly everyone's goal, but no one is looking for the 692 00:34:08,600 --> 00:34:10,719 Speaker 11: Palestinian state to be led by Hamas. 693 00:34:10,880 --> 00:34:13,360 Speaker 5: So Hamas must be removed. 694 00:34:12,880 --> 00:34:15,200 Speaker 11: From this equation if we are to move forward with 695 00:34:15,280 --> 00:34:18,320 Speaker 11: peace and a lasting sense of security for the Israeli people. 696 00:34:18,560 --> 00:34:20,960 Speaker 1: Norman, do have a sense of where Iran is in 697 00:34:21,000 --> 00:34:23,160 Speaker 1: all of these negotiations. There was a report yesterday at 698 00:34:23,160 --> 00:34:25,759 Speaker 1: Saudi Arabia is talking about maybe even giving aid to 699 00:34:25,880 --> 00:34:29,480 Speaker 1: Iran if they would call back their proxy fighters, whether 700 00:34:29,480 --> 00:34:31,960 Speaker 1: it was Hasblah or whether it was Hamas, to try 701 00:34:32,000 --> 00:34:34,520 Speaker 1: to create more stability in the Middle East. Do you 702 00:34:34,600 --> 00:34:38,000 Speaker 1: buy into any of these things getting traction well. 703 00:34:37,880 --> 00:34:40,880 Speaker 11: Saudi Arabia, the Emirates, and other Gulf states have certainly 704 00:34:40,920 --> 00:34:45,360 Speaker 11: attempted to achieve a detent with Iran, much as Kissinger 705 00:34:45,400 --> 00:34:48,719 Speaker 11: looked at or to taunt with Russia and Destante in 706 00:34:48,840 --> 00:34:51,880 Speaker 11: essence means you don't empower your adversary, but you create 707 00:34:51,920 --> 00:34:55,080 Speaker 11: conditions by which the adversary is not interested in war 708 00:34:55,520 --> 00:34:57,960 Speaker 11: with Saudi Arabia and the Emirates and others. There is 709 00:34:58,000 --> 00:35:00,400 Speaker 11: the issue of US sanctions, so there is a limited 710 00:35:00,400 --> 00:35:03,560 Speaker 11: amount of engagement in which they can they can put 711 00:35:03,560 --> 00:35:04,400 Speaker 11: forward to Iran. 712 00:35:04,719 --> 00:35:06,400 Speaker 5: Iran has multiple. 713 00:35:06,440 --> 00:35:09,560 Speaker 11: Incentives to continue its current efforts in the region, but 714 00:35:09,719 --> 00:35:13,760 Speaker 11: very few drivers for involvement in the conflict itself. 715 00:35:13,840 --> 00:35:15,799 Speaker 5: And I think over time, what we're watching is that 716 00:35:15,880 --> 00:35:17,839 Speaker 5: Iran is not a winner. 717 00:35:17,560 --> 00:35:21,239 Speaker 11: In this conflict, that its allies have not been able 718 00:35:21,280 --> 00:35:24,200 Speaker 11: to change the military balance, and it risks losing its 719 00:35:24,239 --> 00:35:26,080 Speaker 11: primary Sunni proxy partner. 720 00:35:26,400 --> 00:35:30,400 Speaker 2: Two words eradicate Hamas Norman. What does that mean? In practice? 721 00:35:31,680 --> 00:35:36,400 Speaker 11: It means eradicating Hamas's senior leadership, the operational leadership. But 722 00:35:36,480 --> 00:35:39,919 Speaker 11: it doesn't mean destroying thirty to forty thousand fighters, who, 723 00:35:39,920 --> 00:35:43,120 Speaker 11: by the way, will remain heavily armed in the post 724 00:35:43,719 --> 00:35:49,120 Speaker 11: conflict environment. And those fighters and their indoctrinated families and 725 00:35:49,200 --> 00:35:52,280 Speaker 11: culture must be dealt with. Where to prevent the rise 726 00:35:52,360 --> 00:35:55,120 Speaker 11: of a Haamas two point zero or an isis and 727 00:35:55,160 --> 00:35:57,040 Speaker 11: in the Arab world and I've spoken with a number 728 00:35:57,080 --> 00:36:00,000 Speaker 11: of senior artificials. They have a concern that this conflict 729 00:36:00,160 --> 00:36:03,400 Speaker 11: could produce exactly that, not only in Gaza, but in 730 00:36:03,440 --> 00:36:07,799 Speaker 11: places ranging from Southeast Asia to Subsai Heal Africa. So 731 00:36:08,360 --> 00:36:10,799 Speaker 11: their comment is we've got to avoid this turning into 732 00:36:10,840 --> 00:36:14,360 Speaker 11: another problem, just as Elpada turned into Isis Norman. 733 00:36:14,360 --> 00:36:16,319 Speaker 1: You said that these fighters are still going to be 734 00:36:16,320 --> 00:36:19,360 Speaker 1: there and heavily armed, that some of the sentiment and 735 00:36:19,600 --> 00:36:23,000 Speaker 1: education has to be dealt with. What do you mean, 736 00:36:23,040 --> 00:36:24,160 Speaker 1: how is that accomplished? 737 00:36:25,080 --> 00:36:26,960 Speaker 5: Well, there is a track record for this. 738 00:36:27,080 --> 00:36:30,239 Speaker 11: Saudi Arabia, the Emirates have actually an excellent record of 739 00:36:30,320 --> 00:36:33,480 Speaker 11: de radicalization, and we've learned a lot from them as 740 00:36:33,480 --> 00:36:36,479 Speaker 11: they've dealt with their own culture and the region as well. 741 00:36:36,840 --> 00:36:40,120 Speaker 11: But This requires giving the Palestine people a sense of hope, 742 00:36:40,280 --> 00:36:44,720 Speaker 11: a sense of security, and dealing with the witch's brew 743 00:36:45,080 --> 00:36:50,480 Speaker 11: of multiple Palestinian splinter organizations, most of which are dedicated 744 00:36:50,520 --> 00:36:53,920 Speaker 11: to violence and the destruction of Israel and the United States. 745 00:36:54,360 --> 00:36:55,959 Speaker 2: With that, a mind morment just to find a question 746 00:36:56,000 --> 00:36:58,279 Speaker 2: from us, how do you expect the knischa of this 747 00:36:58,360 --> 00:37:01,320 Speaker 2: wall to develop to change in the coming weeks and months. 748 00:37:02,360 --> 00:37:06,239 Speaker 11: This remains a likely long term conflict, although it will 749 00:37:06,280 --> 00:37:10,319 Speaker 11: play out not necessarily in terms of a traditional war. 750 00:37:10,960 --> 00:37:13,640 Speaker 11: There are so many factors in here that need to 751 00:37:13,680 --> 00:37:16,040 Speaker 11: be put together. I think the United States will focus 752 00:37:16,080 --> 00:37:20,840 Speaker 11: on hostages, hot return of hostages, preventing and expansion the conflict, 753 00:37:20,960 --> 00:37:24,000 Speaker 11: laying the groundwork for the future. But beyond that, I 754 00:37:24,000 --> 00:37:25,799 Speaker 11: think we're off the map and we should have a 755 00:37:25,840 --> 00:37:30,000 Speaker 11: lot of patients and look for a lower intensity conflict 756 00:37:30,040 --> 00:37:34,040 Speaker 11: that protects civilian lives while eradicating a terrorist organization. 757 00:37:34,440 --> 00:37:37,680 Speaker 2: Norman, Thank you, sir, Field contribution always foundingable nomen roll 758 00:37:37,760 --> 00:37:38,880 Speaker 2: there cs is. 759 00:37:39,400 --> 00:37:42,840 Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and 760 00:37:42,880 --> 00:37:46,320 Speaker 1: anywhere else you get your podcasts. Listen live every weekday 761 00:37:46,320 --> 00:37:48,920 Speaker 1: starting at seven am Eastern on bloombergk dot com, the 762 00:37:48,960 --> 00:37:52,759 Speaker 1: iHeartRadio app tune In, and the Bloomberg Business app. You 763 00:37:52,760 --> 00:37:56,120 Speaker 1: can watch us live on Bloomberg Television and always on 764 00:37:56,120 --> 00:37:59,600 Speaker 1: the Bloomberg Terminal. Thanks for listening. I'm Lisa Abramowitz and 765 00:37:59,640 --> 00:38:00,560 Speaker 1: this blue bark