1 00:00:00,600 --> 00:00:10,799 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. You're listening to the 2 00:00:10,840 --> 00:00:15,040 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:15,040 --> 00:00:18,040 Speaker 1: Eastern on Apple Cardplay and Android Auto with the Bloomberg 4 00:00:18,079 --> 00:00:21,400 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,640 --> 00:00:24,480 Speaker 1: or watch us live on YouTube. 6 00:00:25,079 --> 00:00:27,200 Speaker 2: A couple pieces of news. One, you have the senior 7 00:00:27,280 --> 00:00:30,840 Speaker 2: VP resigns, So that's Drew, but Baglino, that's one part 8 00:00:30,880 --> 00:00:32,440 Speaker 2: of the story. The other part of the story is 9 00:00:32,440 --> 00:00:36,879 Speaker 2: at the carmaker slashing headcount by about ten percent. So 10 00:00:36,960 --> 00:00:38,760 Speaker 2: put those two things together and what does that tell 11 00:00:38,840 --> 00:00:41,040 Speaker 2: us about where Tesla is right now? So joining us 12 00:00:41,080 --> 00:00:45,000 Speaker 2: is Steve Man, Bloomberg Intelligence Global Autos and Industrial Research analyst. 13 00:00:45,159 --> 00:00:47,400 Speaker 2: This is a great example of why Bloomberg Intelligence Radio 14 00:00:47,440 --> 00:00:49,559 Speaker 2: can bring you the best analyst from all of our 15 00:00:49,600 --> 00:00:51,919 Speaker 2: guys all around the world, and Steve is definitely one 16 00:00:51,960 --> 00:00:54,000 Speaker 2: of them. What has been your take over the last 17 00:00:54,000 --> 00:00:58,480 Speaker 2: few hours on management shakeups as well as headcount at Tesla? 18 00:00:58,600 --> 00:01:01,760 Speaker 3: Wow, it's actually worse than I thought I thought. You know, 19 00:01:01,840 --> 00:01:07,280 Speaker 3: the first quarter sales drop was you know, hopefully close 20 00:01:07,319 --> 00:01:10,080 Speaker 3: to the end, but you know, there's seems to be 21 00:01:10,280 --> 00:01:11,920 Speaker 3: the light at the end of the tunnel is not 22 00:01:12,120 --> 00:01:17,000 Speaker 3: really here yet, and it looks like, you know, it's running. 23 00:01:17,600 --> 00:01:21,480 Speaker 3: Their plants are running just pretty much well below capacity 24 00:01:21,520 --> 00:01:25,240 Speaker 3: at the moment, and there's still a lot of cost 25 00:01:25,319 --> 00:01:28,520 Speaker 3: headwinds facing them. They're trying to balance a lot of 26 00:01:28,560 --> 00:01:32,840 Speaker 3: things in terms of deliveries production. They're raising prices. I 27 00:01:32,880 --> 00:01:36,839 Speaker 3: don't know how long that's gonna last. So execution is risk. 28 00:01:37,280 --> 00:01:40,840 Speaker 3: Execution is key for the company in the next you know, 29 00:01:40,920 --> 00:01:42,360 Speaker 3: six to nine months. 30 00:01:42,880 --> 00:01:45,520 Speaker 4: So Steve, where are we now or where is the 31 00:01:45,560 --> 00:01:47,880 Speaker 4: market when you talk to investors in terms of getting 32 00:01:47,880 --> 00:01:51,960 Speaker 4: a sense of where EV demand is in the US 33 00:01:52,040 --> 00:01:53,720 Speaker 4: and then maybe globally. 34 00:01:54,440 --> 00:01:58,200 Speaker 3: Well, EV demand is is waning. I think the interest 35 00:01:58,280 --> 00:02:01,920 Speaker 3: rate is not helping, you know, it's uh they're looking 36 00:02:01,960 --> 00:02:04,160 Speaker 3: to you know, as you know, the FED is probably 37 00:02:04,200 --> 00:02:07,080 Speaker 3: not going to cut rates anytime soon in the next 38 00:02:07,600 --> 00:02:10,560 Speaker 3: couple of months, next quarter or so, so that's going 39 00:02:10,639 --> 00:02:15,320 Speaker 3: to condude away on big purchases like automobiles. We're seeing 40 00:02:15,320 --> 00:02:19,200 Speaker 3: that across the board in the US as well as 41 00:02:19,240 --> 00:02:22,080 Speaker 3: in China. Trying is a little bit worse for Tesla 42 00:02:22,160 --> 00:02:26,320 Speaker 3: because there's so much new competition there. But you know, 43 00:02:26,720 --> 00:02:30,440 Speaker 3: sales is slowing for GM, sales is slowing for Ford 44 00:02:30,560 --> 00:02:35,240 Speaker 3: for just had to cut production of their lightning recently 45 00:02:35,280 --> 00:02:37,120 Speaker 3: announced about a couple of weeks ago. 46 00:02:37,600 --> 00:02:41,200 Speaker 5: So I think this year will be tough for the industry. 47 00:02:41,919 --> 00:02:44,040 Speaker 3: Now, you know, we probably won't see any improvement until 48 00:02:45,440 --> 00:02:47,360 Speaker 3: as far as I'm concerned in twenty twenty six. 49 00:02:47,760 --> 00:02:49,919 Speaker 2: Oh wow, Okay, well that pushes it a way out. 50 00:02:49,919 --> 00:02:52,440 Speaker 2: Here was interesting headline too, Paul. To your point is 51 00:02:52,440 --> 00:02:55,880 Speaker 2: that Reuters is reporting that BP is cutting over one 52 00:02:55,919 --> 00:02:58,840 Speaker 2: hundred jobs and it's electric vehicle charging unit. And we 53 00:02:58,880 --> 00:03:01,519 Speaker 2: all talk about how we really need chargers to deal 54 00:03:01,560 --> 00:03:03,280 Speaker 2: with the range anxiety, and now you have a big 55 00:03:03,320 --> 00:03:08,200 Speaker 2: player here studding some jobs in this EV charging unit. Steve, 56 00:03:08,240 --> 00:03:10,600 Speaker 2: why twenty twenty six? Why is it going to take 57 00:03:10,639 --> 00:03:11,000 Speaker 2: that long? 58 00:03:11,720 --> 00:03:12,600 Speaker 5: Yeah? I think. 59 00:03:13,120 --> 00:03:17,000 Speaker 3: I think what the market, the EV market is facing 60 00:03:17,160 --> 00:03:21,320 Speaker 3: today is that we had early adopters, especially on the 61 00:03:21,600 --> 00:03:25,359 Speaker 3: high end, they're you know, they're pretty much tapped out. 62 00:03:25,520 --> 00:03:28,440 Speaker 3: You know, they they can buy only so many The 63 00:03:28,480 --> 00:03:32,440 Speaker 3: market is relatively small, smaller than the mass market. I'm 64 00:03:32,480 --> 00:03:35,440 Speaker 3: looking at twenty twenty six because if you look at 65 00:03:35,440 --> 00:03:39,800 Speaker 3: the Inflation Reduction Act, it's bringing in on shoring a 66 00:03:39,800 --> 00:03:42,880 Speaker 3: lot of the EV battery production in the US, hopefully 67 00:03:42,880 --> 00:03:45,880 Speaker 3: it will cut costs. And at the same time, in 68 00:03:45,960 --> 00:03:50,080 Speaker 3: twenty twenty six, where we're looking at more affordable evs 69 00:03:50,760 --> 00:03:54,000 Speaker 3: coming into the market, that's going to expand the addressable 70 00:03:54,000 --> 00:03:58,040 Speaker 3: market for EV's and that's why we're we're thinking, you know, 71 00:03:58,120 --> 00:04:02,120 Speaker 3: twenty twenty six will probably be a better time for 72 00:04:02,200 --> 00:04:04,400 Speaker 3: the EV market than it is today. 73 00:04:05,080 --> 00:04:08,480 Speaker 4: So how about profitability in that scenario, Steve, It's tough 74 00:04:08,480 --> 00:04:10,680 Speaker 4: to make an argument that, you know, these evs can 75 00:04:10,720 --> 00:04:13,160 Speaker 4: be profitably manufactured at a higher price point. 76 00:04:14,280 --> 00:04:16,480 Speaker 6: How are they going to adjust their cost structure to get. 77 00:04:16,440 --> 00:04:18,400 Speaker 4: Be profitable with maybe have a lower price point, I 78 00:04:18,400 --> 00:04:20,159 Speaker 4: don't know, thirty thousand dollars or something like that. 79 00:04:21,160 --> 00:04:21,919 Speaker 5: That's a good question. 80 00:04:21,960 --> 00:04:24,800 Speaker 3: I think if you look at the EV startups in 81 00:04:24,839 --> 00:04:29,320 Speaker 3: the US, you know that the only one that's really 82 00:04:29,520 --> 00:04:35,080 Speaker 3: still profitable is Tesla. You saw Fisker being delisted. There's 83 00:04:35,279 --> 00:04:40,599 Speaker 3: risk of them filing bankruptcy. Both Lucid and Rivian will need, 84 00:04:41,080 --> 00:04:43,240 Speaker 3: you know, billions of dollars just to get them through 85 00:04:43,279 --> 00:04:45,520 Speaker 3: the next couple of years. We're not sure if they're 86 00:04:45,520 --> 00:04:49,320 Speaker 3: gonna get that money. Given the slowdown and the EV market. 87 00:04:49,720 --> 00:04:52,240 Speaker 3: But on a bright side, I think Tesla is still 88 00:04:52,320 --> 00:04:55,479 Speaker 3: generating cash. You know, they're making some of the cuts today, 89 00:04:55,560 --> 00:04:59,159 Speaker 3: I think really to maintain cash generation so they can 90 00:04:59,200 --> 00:05:01,960 Speaker 3: continue it in vests for the long term, you know. 91 00:05:02,040 --> 00:05:05,840 Speaker 3: For them, I think what's really important for them is 92 00:05:06,200 --> 00:05:11,400 Speaker 3: the AI, the FSD, the full self driving systems that 93 00:05:11,400 --> 00:05:13,840 Speaker 3: they're trying to build out. That that's going to be 94 00:05:13,880 --> 00:05:17,560 Speaker 3: the future of the automotive industry. It's really those software 95 00:05:17,640 --> 00:05:21,760 Speaker 3: based subscriptions that's going to drive revenue, not so much 96 00:05:21,839 --> 00:05:25,120 Speaker 3: of the automaking. So if they're trying to get there, 97 00:05:25,120 --> 00:05:28,960 Speaker 3: trying to maintain cash, maintain some level of profitability, profitability 98 00:05:29,279 --> 00:05:31,200 Speaker 3: to make those investments to get them there. 99 00:05:31,920 --> 00:05:33,719 Speaker 2: Interesting, I was thinking about self driving as I was 100 00:05:33,760 --> 00:05:36,080 Speaker 2: coming up the Taconic, oring down the Taconic yesterday, and 101 00:05:36,120 --> 00:05:37,520 Speaker 2: I was like, would I want to be in a 102 00:05:37,560 --> 00:05:39,640 Speaker 2: self driving car right now? In the Taconic. I don't 103 00:05:39,640 --> 00:05:41,680 Speaker 2: need the answer to that. I was driving and I 104 00:05:41,720 --> 00:05:43,520 Speaker 2: was like, I don't know, man, I think I want 105 00:05:43,520 --> 00:05:45,880 Speaker 2: to trust myself behind the wheel. Anyway, before we let 106 00:05:45,920 --> 00:05:48,800 Speaker 2: you go, Steve, let's go to the SVP departing, So 107 00:05:48,880 --> 00:05:53,120 Speaker 2: Drew Baglino. He leaving the company. As I mentioned senior 108 00:05:53,200 --> 00:05:56,800 Speaker 2: vice president, who is he? Do we care? Like how 109 00:05:56,839 --> 00:05:58,440 Speaker 2: big a deal he was in Tesla? What did he 110 00:05:58,560 --> 00:05:59,560 Speaker 2: do walk us through it? 111 00:06:00,279 --> 00:06:01,320 Speaker 5: Yeah, we do care. 112 00:06:01,480 --> 00:06:04,120 Speaker 3: He's he's you know, I think he's the face to 113 00:06:04,279 --> 00:06:07,559 Speaker 3: he's also the face of Tesla. Seems to be looks 114 00:06:07,600 --> 00:06:10,760 Speaker 3: like to be the right hand person for Elon Musk. 115 00:06:11,240 --> 00:06:13,479 Speaker 3: So it's a big loss for the company, no doubt 116 00:06:13,520 --> 00:06:16,720 Speaker 3: about it. But you know, he's a he's a powertrain 117 00:06:16,800 --> 00:06:21,160 Speaker 3: engineer for the most part, energy engineer, so he's you know, 118 00:06:21,240 --> 00:06:23,320 Speaker 3: he's really involved in the battery if you saw him 119 00:06:23,360 --> 00:06:26,520 Speaker 3: on battery day. I think, you know, if you look 120 00:06:26,560 --> 00:06:30,520 Speaker 3: at Tesla and what Elon Musk have been saying about 121 00:06:30,520 --> 00:06:35,320 Speaker 3: Tesla's future, which is on AI, which is on full 122 00:06:35,360 --> 00:06:36,600 Speaker 3: self driving. 123 00:06:37,880 --> 00:06:38,760 Speaker 5: Is it a big loss? 124 00:06:38,800 --> 00:06:41,200 Speaker 3: I mean, you can you can argue that, hey, you know, 125 00:06:41,279 --> 00:06:44,680 Speaker 3: Tesla's moving on to the next phase. It's not about 126 00:06:45,120 --> 00:06:49,000 Speaker 3: building the motor, is not about building the batteries. They've 127 00:06:49,080 --> 00:06:52,839 Speaker 3: gone through that process over the past fifteen eighteen years. 128 00:06:53,279 --> 00:06:56,680 Speaker 3: You know, I think, you know, looking forward, they probably 129 00:06:56,720 --> 00:07:01,320 Speaker 3: need somebody more people around. You know, AI, you know, 130 00:07:01,400 --> 00:07:04,520 Speaker 3: developed them algorithms for the future of the car. 131 00:07:05,520 --> 00:07:07,320 Speaker 4: All right, Steve Man, thanks so much for joining us. 132 00:07:07,360 --> 00:07:10,200 Speaker 4: As always, Steve Mann, he covers the global auto industry 133 00:07:10,200 --> 00:07:13,640 Speaker 4: for Bloomberg Intelligence base down there in Princeton, New Jersey. 134 00:07:14,120 --> 00:07:15,920 Speaker 4: It's got to be tough, I think, to be like 135 00:07:15,920 --> 00:07:19,160 Speaker 4: a Kathy would be so invested in this company, you know, 136 00:07:19,360 --> 00:07:22,200 Speaker 4: not only financially, but kind of reputationally, and to have 137 00:07:22,280 --> 00:07:25,360 Speaker 4: that to deal with a CEO like Elon Musk is 138 00:07:25,400 --> 00:07:26,360 Speaker 4: so mercurial. 139 00:07:26,400 --> 00:07:27,640 Speaker 6: I guess it is maybe the right term. 140 00:07:27,680 --> 00:07:30,600 Speaker 4: And one of the you know, the results of that 141 00:07:30,720 --> 00:07:33,680 Speaker 4: is you know, executive turnover, and that's got to be 142 00:07:33,760 --> 00:07:35,840 Speaker 4: really challenging for investors. 143 00:07:36,120 --> 00:07:37,680 Speaker 2: Yeah, but you know what's interesting with her view is 144 00:07:37,680 --> 00:07:39,840 Speaker 2: that it's so long term that I wonder if these 145 00:07:39,880 --> 00:07:42,000 Speaker 2: things become just blips to her, you know. 146 00:07:42,280 --> 00:07:42,480 Speaker 7: Yep. 147 00:07:43,000 --> 00:07:45,240 Speaker 4: On the other side of it, Yeah, she's very you know, 148 00:07:45,320 --> 00:07:49,760 Speaker 4: obviously had great success with this disruption kind of theory. 149 00:07:49,800 --> 00:07:54,120 Speaker 4: But boy, got to ride with Elon Musk and his foibles. 150 00:07:53,440 --> 00:07:55,400 Speaker 2: It's true. Yeah, No, that'd be really hard. Would you 151 00:07:55,400 --> 00:07:58,240 Speaker 2: do self driving? By the way, I really yeah, okay, good, 152 00:07:58,280 --> 00:08:00,640 Speaker 2: so we're on the same page, But well. 153 00:08:00,880 --> 00:08:03,080 Speaker 6: Can drive me around? I mean, you know, I trust him? 154 00:08:03,080 --> 00:08:05,520 Speaker 2: Well, that's his second job makes sense. 155 00:08:07,280 --> 00:08:11,160 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 156 00:08:11,240 --> 00:08:14,280 Speaker 1: weekdays at ten am Eastern on Apple card Play and 157 00:08:14,280 --> 00:08:17,200 Speaker 1: Android Otto with the Bloomberg Business App. You can also 158 00:08:17,280 --> 00:08:20,760 Speaker 1: listen live on Amazon Alexa from our flagship New York station, 159 00:08:21,160 --> 00:08:24,640 Speaker 1: Just say Alexa Play Bloomberg eleven thirty. 160 00:08:25,120 --> 00:08:29,040 Speaker 4: Let's pivot to the geopolitical front, because another busy weekend 161 00:08:29,160 --> 00:08:33,760 Speaker 4: in the Middle East with the Iranian attack on Israel. Response, 162 00:08:34,000 --> 00:08:36,560 Speaker 4: Doctor Aeriel Cohen joins us. He's a senior fellow at 163 00:08:36,600 --> 00:08:39,559 Speaker 4: the Atlantic Council. Doctor Cohen, thanks so much for joining 164 00:08:39,640 --> 00:08:43,680 Speaker 4: us here. How would you characterize the I guess the 165 00:08:44,240 --> 00:08:48,360 Speaker 4: Iranian back attack on Israel over the weekend? 166 00:08:48,559 --> 00:08:49,920 Speaker 6: How would you characterize it? 167 00:08:51,880 --> 00:08:54,920 Speaker 8: First of all, it's an avert act of war. Israel 168 00:08:55,040 --> 00:08:59,680 Speaker 8: was attacked with three hundred missiles, ballistic missiles, cruise missiles, 169 00:08:59,720 --> 00:09:04,880 Speaker 8: and owns. The systems worked very well. Both in sentcam 170 00:09:05,000 --> 00:09:09,040 Speaker 8: US Central Command that Israel was joined several years ago. 171 00:09:09,120 --> 00:09:12,480 Speaker 8: That was the right decision to integrate Israel was its 172 00:09:12,600 --> 00:09:20,880 Speaker 8: Arab neighbors, and the US, UK, France, Saudi Jordan and 173 00:09:21,000 --> 00:09:26,120 Speaker 8: apparently UAE all participated in shooting down the Iranian missiles. 174 00:09:26,640 --> 00:09:31,440 Speaker 7: But this is just a first try. 175 00:09:31,280 --> 00:09:36,120 Speaker 8: By the Iranians, and a successful try, the largest drone 176 00:09:36,120 --> 00:09:39,960 Speaker 8: and missile attack of the twenty first century. Both the 177 00:09:40,000 --> 00:09:44,240 Speaker 8: Americans and Israelis and the Iranians, the Russians and the 178 00:09:44,320 --> 00:09:48,680 Speaker 8: Chinese are going to learn do lessons learn from this, 179 00:09:49,360 --> 00:09:57,200 Speaker 8: and probably moved to program to plan bigger and worse. 180 00:09:57,640 --> 00:09:58,920 Speaker 7: Strikes against each other. 181 00:09:59,400 --> 00:10:02,480 Speaker 8: We saw many, many, many drone attacks in Ukraine, and 182 00:10:03,600 --> 00:10:07,600 Speaker 8: one of the lessons learned is the massive drone type 183 00:10:07,600 --> 00:10:11,400 Speaker 8: of swarms of drones as we saw can be counted. 184 00:10:12,040 --> 00:10:13,000 Speaker 7: So that's a good news. 185 00:10:13,000 --> 00:10:16,040 Speaker 8: The bad news is the Iranian regime is dead set 186 00:10:16,400 --> 00:10:20,480 Speaker 8: on destroying Israel. The chant every Friday in Tehran is 187 00:10:20,520 --> 00:10:23,720 Speaker 8: death to America, death to Israel, and they will continue 188 00:10:24,160 --> 00:10:24,959 Speaker 8: on their merry way. 189 00:10:25,160 --> 00:10:29,680 Speaker 2: So, doctor Cohen, the question yesterday was is this the 190 00:10:29,720 --> 00:10:32,840 Speaker 2: start of a direct war between Iran and Israel and 191 00:10:32,880 --> 00:10:38,439 Speaker 2: its allies or was Iran's attack calibrated and telegraphed retaliation. 192 00:10:38,600 --> 00:10:40,760 Speaker 2: It sounds like you're in the former camp of that. 193 00:10:44,480 --> 00:10:48,880 Speaker 8: The direct war all Iran against the US and Israel 194 00:10:49,160 --> 00:10:52,120 Speaker 8: is going on since the days of the founder of 195 00:10:52,200 --> 00:10:53,560 Speaker 8: the Islamic Republic. 196 00:10:53,960 --> 00:10:58,120 Speaker 7: The Ayatolla Komani. You remember the. 197 00:10:57,800 --> 00:11:03,120 Speaker 8: American ci A station chief was kidnapped and tortured and 198 00:11:03,280 --> 00:11:06,520 Speaker 8: then murdered in Lebanon in nineteen eighty three, Colonel Buckley, 199 00:11:07,080 --> 00:11:10,679 Speaker 8: And one way or another I was covering a studying 200 00:11:12,000 --> 00:11:16,920 Speaker 8: these events now for forty years. So it's an ongoing war. 201 00:11:17,559 --> 00:11:21,840 Speaker 8: But this was an escalatory operation, and this is the 202 00:11:21,840 --> 00:11:26,200 Speaker 8: Middle East. Israelis sooner or later will have to retaliate, 203 00:11:26,320 --> 00:11:30,720 Speaker 8: even as President Biden is telling them to step down 204 00:11:30,880 --> 00:11:34,280 Speaker 8: and take a win. When you have three hundred missiles 205 00:11:34,600 --> 00:11:40,400 Speaker 8: lobbed against your country, this is not going to stop there. 206 00:11:40,960 --> 00:11:45,120 Speaker 4: So, doctor Cole, what do you think Israel's response will 207 00:11:45,160 --> 00:11:46,840 Speaker 4: be and or should be. 208 00:11:49,440 --> 00:11:53,720 Speaker 8: I think that as Israel has ongoing business of Gaza 209 00:11:53,800 --> 00:11:59,440 Speaker 8: in the northern border against Gizabala in Lebanon, they will. 210 00:11:59,200 --> 00:12:00,000 Speaker 7: Not be able to. 211 00:12:01,640 --> 00:12:05,400 Speaker 8: Launch a large scale attack against around They shouldn't not 212 00:12:05,559 --> 00:12:06,040 Speaker 8: right now. 213 00:12:06,840 --> 00:12:08,040 Speaker 7: But they have other tools. 214 00:12:08,040 --> 00:12:12,079 Speaker 8: They have cyber They were very successful with cyber attacks 215 00:12:12,440 --> 00:12:16,960 Speaker 8: against the Iranian nuclear program, and they have other means 216 00:12:17,320 --> 00:12:22,440 Speaker 8: to disrupt the Iranian military establishment and the Iranian economy. 217 00:12:23,520 --> 00:12:29,560 Speaker 2: Will this side step in many ways containment of Russia. 218 00:12:29,640 --> 00:12:31,920 Speaker 2: So I follow the oil markets. And there is an 219 00:12:31,960 --> 00:12:35,559 Speaker 2: narrative out there that if you wind up moving deeper 220 00:12:35,559 --> 00:12:38,280 Speaker 2: into sanctioned territory or even enforcing the sanctions that are 221 00:12:38,280 --> 00:12:41,720 Speaker 2: there on Iran, that opens up an avenue for Russia 222 00:12:41,760 --> 00:12:44,360 Speaker 2: to sell more oil and make more money. How does 223 00:12:44,400 --> 00:12:46,360 Speaker 2: the US weigh these two events? 224 00:12:48,080 --> 00:12:50,679 Speaker 8: Well, let me connect this to something that Biden administration 225 00:12:50,840 --> 00:12:55,960 Speaker 8: just recently did, the foot of freeze on our LNG 226 00:12:57,320 --> 00:13:03,200 Speaker 8: development going forward. And I think when we have malign 227 00:13:03,320 --> 00:13:08,120 Speaker 8: actors like Russia, like Iran who are oil exporters, we 228 00:13:08,360 --> 00:13:12,600 Speaker 8: the United States, Canada and others need to produce more, 229 00:13:12,880 --> 00:13:15,559 Speaker 8: not less oil and natural gas for the market. 230 00:13:17,240 --> 00:13:19,839 Speaker 4: All right, doctor Cohen, So I guess one of the 231 00:13:19,920 --> 00:13:22,440 Speaker 4: questions here is we think about next steps is the 232 00:13:22,480 --> 00:13:25,840 Speaker 4: positions of mister net Nyahu within Israel itself. 233 00:13:25,880 --> 00:13:28,000 Speaker 6: How is his gripple on power? 234 00:13:28,040 --> 00:13:31,480 Speaker 4: How is his ability to continue to move forward with 235 00:13:31,520 --> 00:13:33,480 Speaker 4: this conflict? 236 00:13:34,880 --> 00:13:38,080 Speaker 8: Well, I was in Israel during the attack. The morale 237 00:13:38,200 --> 00:13:41,439 Speaker 8: is high, but people are sick and tired of NATANIAO. 238 00:13:41,520 --> 00:13:46,560 Speaker 8: If the elections took place today, he would lose and 239 00:13:46,960 --> 00:13:51,960 Speaker 8: his credibility is shot, both because of the criminal investigation 240 00:13:52,080 --> 00:13:53,280 Speaker 8: that predate. 241 00:13:53,240 --> 00:13:55,760 Speaker 7: The Hamas attack, of October seventh. 242 00:13:55,800 --> 00:14:00,960 Speaker 8: And because of the huge, unprecedented failure of the Israeli 243 00:14:01,040 --> 00:14:06,440 Speaker 8: intelligence and the military on Netanyao's watch. So he may 244 00:14:06,600 --> 00:14:11,559 Speaker 8: be trying to distract the attention to move on towards 245 00:14:11,559 --> 00:14:15,680 Speaker 8: the Iranian confrontation. I do not want to speculate, but 246 00:14:16,440 --> 00:14:19,680 Speaker 8: I think sooner or later Israel will do the right thing. 247 00:14:20,000 --> 00:14:23,640 Speaker 7: There'll be a judiciary commission of inquiry like there. 248 00:14:23,640 --> 00:14:28,160 Speaker 8: Was after the Young People War of nineteen seventy three, 249 00:14:28,200 --> 00:14:31,920 Speaker 8: when Israel also got a huge to teach a surprise 250 00:14:32,720 --> 00:14:37,760 Speaker 8: fifty years ago to the day of the attack of 251 00:14:37,840 --> 00:14:43,200 Speaker 8: October seventh, And after that commission of inquiry there will 252 00:14:43,240 --> 00:14:48,840 Speaker 8: be consequences can etaniao after including criminal proceedings. I don't 253 00:14:48,840 --> 00:14:54,360 Speaker 8: want to speculate right now, but he is politically living 254 00:14:54,400 --> 00:14:55,160 Speaker 8: corpse walking. 255 00:14:56,080 --> 00:14:58,400 Speaker 2: Doctor thanks a lot. We really appreciate Doctor Ala Cohen, 256 00:14:58,680 --> 00:15:02,760 Speaker 2: senior Fellow at the Atlantic Council, has had extensive experience 257 00:15:02,840 --> 00:15:05,360 Speaker 2: twenty years. He served at a senior research fellow in 258 00:15:05,440 --> 00:15:08,840 Speaker 2: Russia and Eurasian Studies and International Energy Policy at the 259 00:15:08,840 --> 00:15:11,960 Speaker 2: Heritage Foundation. Wonderful to get his perspective. I think what's 260 00:15:11,960 --> 00:15:15,080 Speaker 2: interesting Paul for the markets is how do you hedge 261 00:15:15,080 --> 00:15:17,600 Speaker 2: the unthinkable, like going into Friday. It's like, okay, you 262 00:15:17,640 --> 00:15:19,320 Speaker 2: don't want to take risk into the weekend. You want 263 00:15:19,320 --> 00:15:22,480 Speaker 2: to take some safety. But now, now, how do you 264 00:15:22,520 --> 00:15:25,720 Speaker 2: do that? Do you sell puts? Like you know, I 265 00:15:25,720 --> 00:15:26,040 Speaker 2: don't know. 266 00:15:26,160 --> 00:15:28,560 Speaker 4: Well, some folks are some folks are selling oil here 267 00:15:28,600 --> 00:15:31,280 Speaker 4: Brent Crue down now about one point seven percent still, 268 00:15:31,360 --> 00:15:33,800 Speaker 4: you know, up around eighty nine dollars per barrel. But 269 00:15:33,840 --> 00:15:36,640 Speaker 4: maybe a little bit of a breathe of sigh relief a. 270 00:15:36,600 --> 00:15:37,160 Speaker 6: Little bit there. 271 00:15:37,280 --> 00:15:40,000 Speaker 2: Oh, absolutely, And also there's a seminary about there, like 272 00:15:40,280 --> 00:15:42,720 Speaker 2: why would Iron want to hurt themselves even more on 273 00:15:42,760 --> 00:15:44,160 Speaker 2: the oil front. Anyway, we'll discuss. 274 00:15:46,560 --> 00:15:50,440 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 275 00:15:50,520 --> 00:15:53,120 Speaker 1: weekdays at ten am Eastern on Apple car Play and 276 00:15:53,160 --> 00:15:55,800 Speaker 1: then broud Otto with the Bloomberg Business app. Listen on 277 00:15:55,880 --> 00:15:59,160 Speaker 1: demand wherever you get your podcasts, or watch us live 278 00:15:59,240 --> 00:16:00,600 Speaker 1: on YouTube. 279 00:16:01,040 --> 00:16:03,160 Speaker 4: Let's get the Ben Emmetts Senior portfolio manager and had 280 00:16:03,160 --> 00:16:05,560 Speaker 4: to fixed income, new age wealth, the joints here in 281 00:16:05,600 --> 00:16:08,800 Speaker 4: our Bloomberg Interactive Brooker Studio Ben A million ways to 282 00:16:08,840 --> 00:16:11,200 Speaker 4: go here. Let's start with some of the economic data 283 00:16:11,200 --> 00:16:14,960 Speaker 4: we got today. Some retail sales came in really strong. Here. 284 00:16:15,520 --> 00:16:18,280 Speaker 6: The consumer seems to be in pretty good shape. I 285 00:16:18,280 --> 00:16:19,240 Speaker 6: guess it. 286 00:16:19,280 --> 00:16:20,000 Speaker 5: Still is BOM. 287 00:16:20,040 --> 00:16:22,800 Speaker 9: I think that the employment reporters start to have an 288 00:16:22,800 --> 00:16:26,160 Speaker 9: effect here, you know, because this was actually the numbers 289 00:16:26,200 --> 00:16:28,760 Speaker 9: that were weak in generary ferry as we talked about earlier, 290 00:16:29,440 --> 00:16:31,400 Speaker 9: and as I looked through these reports that you're seeing, 291 00:16:31,760 --> 00:16:34,120 Speaker 9: you know, basically items that are going to be feeding 292 00:16:34,120 --> 00:16:37,800 Speaker 9: directly into GDP that were up as well. 293 00:16:37,680 --> 00:16:38,840 Speaker 5: As those non star sales. 294 00:16:38,840 --> 00:16:41,480 Speaker 9: So I think what the market is doing today is 295 00:16:41,480 --> 00:16:45,440 Speaker 9: to say, you know, GDP's once again accelerating. This brings 296 00:16:45,520 --> 00:16:47,360 Speaker 9: us actually back to the summer of last year we 297 00:16:47,400 --> 00:16:50,400 Speaker 9: had a similar phase of having higher bond yields started 298 00:16:50,440 --> 00:16:53,480 Speaker 9: indicating that having a stronger economy, and this report then 299 00:16:54,080 --> 00:16:58,040 Speaker 9: confirms it. So I think it's a yeah, this just shows. 300 00:16:57,760 --> 00:16:59,800 Speaker 5: Once again like we just cannot be knocked off course 301 00:17:00,040 --> 00:17:02,200 Speaker 5: no matter what guest is. The prices are doing, these 302 00:17:02,200 --> 00:17:02,640 Speaker 5: sales are. 303 00:17:02,640 --> 00:17:04,800 Speaker 4: Up to I mean I'm looking at the tenure, I 304 00:17:04,800 --> 00:17:06,800 Speaker 4: mean rates are higher. Alex and I've been talking about 305 00:17:06,800 --> 00:17:08,840 Speaker 4: this all day. Rach are up another twelve basis points 306 00:17:08,880 --> 00:17:11,640 Speaker 4: on the tenure. The four point sixty five percent here, 307 00:17:11,680 --> 00:17:14,560 Speaker 4: the two year run a five percent watch here. So 308 00:17:14,600 --> 00:17:17,280 Speaker 4: the bond market is telling you, I don't know, rach 309 00:17:17,280 --> 00:17:18,160 Speaker 4: are higher for longer. 310 00:17:18,200 --> 00:17:19,760 Speaker 5: I guess higher for longer. 311 00:17:19,800 --> 00:17:23,080 Speaker 9: And if you, if you, if this continues, then the 312 00:17:23,119 --> 00:17:25,240 Speaker 9: tenure is going to drift towards where the fat fund's 313 00:17:25,280 --> 00:17:27,879 Speaker 9: rate is, maybe not exactly but not too far off. 314 00:17:28,280 --> 00:17:30,399 Speaker 9: That would, I think be a really interesting moment for 315 00:17:30,520 --> 00:17:32,920 Speaker 9: Marcus because that means that if you're getting a ten 316 00:17:33,320 --> 00:17:35,960 Speaker 9: fet funds rate about equal, it puts all should puts 317 00:17:35,960 --> 00:17:38,600 Speaker 9: a lot of pressure on the economy. So but I 318 00:17:38,640 --> 00:17:41,480 Speaker 9: think for now, and this is our view, that we're 319 00:17:41,480 --> 00:17:43,639 Speaker 9: going to probably move into this four seventy five to 320 00:17:43,680 --> 00:17:46,440 Speaker 9: five percent zone. You know, if this type of data 321 00:17:46,480 --> 00:17:48,760 Speaker 9: shows that the GDP is going to be upgraded and 322 00:17:48,800 --> 00:17:51,080 Speaker 9: the PC is going to be higher, we're going to 323 00:17:51,160 --> 00:17:53,159 Speaker 9: have to expect that it's also going to be continued 324 00:17:53,200 --> 00:17:54,520 Speaker 9: to reflect better growth. 325 00:17:54,560 --> 00:17:56,400 Speaker 5: On top of the supply. 326 00:17:56,359 --> 00:17:58,600 Speaker 9: We're going to continue a half it was very substantial 327 00:17:58,720 --> 00:17:59,359 Speaker 9: terasury supply. 328 00:17:59,600 --> 00:18:02,760 Speaker 2: So Ben that definitely means like a biotech thing because 329 00:18:02,800 --> 00:18:05,080 Speaker 2: like they have the growth, they have the cash flow, 330 00:18:05,880 --> 00:18:07,720 Speaker 2: they're not going to be subject to any of the 331 00:18:07,760 --> 00:18:10,480 Speaker 2: refinancing et cetera. But I'm wondering if this scenario just 332 00:18:10,560 --> 00:18:13,280 Speaker 2: dens the rotation that we've seen. Right, this I'm sure 333 00:18:13,359 --> 00:18:14,960 Speaker 2: is bad for small caps. What does it do the 334 00:18:14,960 --> 00:18:16,080 Speaker 2: cickle goals space. 335 00:18:17,080 --> 00:18:19,560 Speaker 9: Yeah, you could think of that that anything interest rates 336 00:18:19,640 --> 00:18:24,560 Speaker 9: sensitive as in the small cap space typically underperforms. With 337 00:18:24,800 --> 00:18:27,760 Speaker 9: the view though that that we think the rotation, you know, 338 00:18:27,800 --> 00:18:31,720 Speaker 9: the financial energy rotations really happens that that's not so 339 00:18:31,800 --> 00:18:34,720 Speaker 9: much deriilty one it shows today with golden sacks like 340 00:18:34,760 --> 00:18:38,040 Speaker 9: it's just you know, good trading environments. The energy market's 341 00:18:38,040 --> 00:18:40,520 Speaker 9: obviously in play with because of the geopolitics. So I 342 00:18:40,520 --> 00:18:43,720 Speaker 9: think that part of rotation is we think is working. 343 00:18:44,840 --> 00:18:46,840 Speaker 9: But you're right about tech like that you gotta let 344 00:18:46,880 --> 00:18:50,040 Speaker 9: your winners ride as Cameras said too, like we really 345 00:18:50,080 --> 00:18:53,480 Speaker 9: have to not trade them but basically invest in them 346 00:18:53,560 --> 00:18:56,520 Speaker 9: and stay with them because that is that is where 347 00:18:56,880 --> 00:18:59,920 Speaker 9: it's happening in the economy. I think this is part 348 00:18:59,920 --> 00:19:03,159 Speaker 9: of an impact to once again from all the infrastructure 349 00:19:03,200 --> 00:19:05,920 Speaker 9: spending that starts to show up in the economists, making 350 00:19:05,920 --> 00:19:08,960 Speaker 9: it each time stronger. Right, So why getting so much 351 00:19:09,480 --> 00:19:14,040 Speaker 9: strength of unemployment rate? Unemployment and it feits to spending 352 00:19:14,320 --> 00:19:19,520 Speaker 9: so I think concluding tech remains in play here even 353 00:19:19,560 --> 00:19:21,399 Speaker 9: though the tay yield may go to five percent. 354 00:19:22,520 --> 00:19:25,000 Speaker 4: So I mean, oh, your head of fix thing comes, 355 00:19:25,119 --> 00:19:27,080 Speaker 4: let me ask you, I can sit into your treasury 356 00:19:27,080 --> 00:19:28,439 Speaker 4: at four point ninety five percent. 357 00:19:28,880 --> 00:19:29,520 Speaker 6: Should I do that? 358 00:19:29,640 --> 00:19:31,399 Speaker 4: Or should I go out on the credit curve a 359 00:19:31,400 --> 00:19:34,160 Speaker 4: little bit and maybe look at some corporate bonds, whether 360 00:19:34,160 --> 00:19:35,600 Speaker 4: it's an investment grade or high yield. 361 00:19:35,760 --> 00:19:36,800 Speaker 6: How are you guys positioning? 362 00:19:37,320 --> 00:19:40,399 Speaker 9: So I put a little note out on Friday for 363 00:19:40,520 --> 00:19:42,600 Speaker 9: New Edge that was I was sort of coming to 364 00:19:42,640 --> 00:19:44,480 Speaker 9: the point of looking at the very short of the 365 00:19:44,520 --> 00:19:48,680 Speaker 9: ye curve where anything that's floating rate, investment grade, or treasury. 366 00:19:48,760 --> 00:19:51,600 Speaker 9: So even someone to extent howgh yield, it's just performing 367 00:19:51,680 --> 00:19:54,840 Speaker 9: like so incredibly stable because you're getting all this interest. 368 00:19:54,880 --> 00:19:57,080 Speaker 5: Right, So the spread of floating rate. 369 00:19:57,000 --> 00:20:00,480 Speaker 9: Bonds over the treasury are anywhere but to two hundred 370 00:20:00,440 --> 00:20:03,040 Speaker 9: three hundred basis points depending which area. 371 00:20:02,840 --> 00:20:05,000 Speaker 5: In, that's pretty attractive. 372 00:20:05,040 --> 00:20:07,880 Speaker 9: You keep collecting that interest and if you think about 373 00:20:07,880 --> 00:20:09,960 Speaker 9: what's going on with the ten year yields. So on 374 00:20:10,040 --> 00:20:12,359 Speaker 9: Friday we rally a lot. On geopolitics, we come in 375 00:20:12,400 --> 00:20:15,479 Speaker 9: today we have a completely opposite picture. That's a lot 376 00:20:15,520 --> 00:20:18,159 Speaker 9: of volatility. So I think from our point of view, 377 00:20:18,640 --> 00:20:20,160 Speaker 9: you want to be a little bit more positioned down 378 00:20:20,160 --> 00:20:22,160 Speaker 9: on the shorter end of yel curved because the yuka 379 00:20:22,280 --> 00:20:24,520 Speaker 9: is not going to normalize much as fats on holds. 380 00:20:24,520 --> 00:20:26,680 Speaker 9: You collect all that interest and give you very stable 381 00:20:26,720 --> 00:20:29,480 Speaker 9: performance and sort of wait it down until we get 382 00:20:29,800 --> 00:20:32,399 Speaker 9: higher yields in the low end that at some point 383 00:20:32,440 --> 00:20:35,000 Speaker 9: is going to start slowing down the economy. We do 384 00:20:35,040 --> 00:20:37,320 Speaker 9: think though, that the by zone for the ten year 385 00:20:37,359 --> 00:20:39,360 Speaker 9: will probably be in that for the four seventy five 386 00:20:39,359 --> 00:20:41,959 Speaker 9: five percent range, that we would think that a lot 387 00:20:41,960 --> 00:20:44,280 Speaker 9: of people will start looking at it and buying. 388 00:20:45,040 --> 00:20:46,240 Speaker 5: We probably do. 389 00:20:46,240 --> 00:20:48,080 Speaker 2: Do you think we get to five percent on the tenure? 390 00:20:48,600 --> 00:20:51,919 Speaker 9: I think it's fairly likely, and that's not just because 391 00:20:52,000 --> 00:20:55,800 Speaker 9: of just today's number. But one thing with bonds Kurrny 392 00:20:55,880 --> 00:20:57,919 Speaker 9: is that if you look at term premium as we 393 00:20:58,000 --> 00:21:00,520 Speaker 9: call it a little like wonky term. But if you 394 00:21:00,560 --> 00:21:02,680 Speaker 9: take what's expect from the fatter the next couple of 395 00:21:02,760 --> 00:21:05,040 Speaker 9: years and where inflation is, you take that out of 396 00:21:05,040 --> 00:21:07,160 Speaker 9: the ten year, there's almost no yield there. 397 00:21:07,040 --> 00:21:08,600 Speaker 5: There's very little compensation. 398 00:21:09,440 --> 00:21:12,040 Speaker 9: And if I then judge the way this geopolitical event 399 00:21:12,119 --> 00:21:15,680 Speaker 9: is played out against an economy that doesn't get off thrown. 400 00:21:15,760 --> 00:21:19,040 Speaker 9: Of course, it stays above trend. The volatility of bonds 401 00:21:19,160 --> 00:21:21,560 Speaker 9: long end bounds will stay higher and should likely drive 402 00:21:21,600 --> 00:21:25,000 Speaker 9: it a little bit up towards that five percent. Lastly, 403 00:21:25,800 --> 00:21:29,000 Speaker 9: this refunding announcement that we're going to get believes that 404 00:21:29,119 --> 00:21:32,600 Speaker 9: on April twenty ninth. There's something really interesting, Alex about 405 00:21:32,720 --> 00:21:35,800 Speaker 9: the t bag the advisory community that put presentation out 406 00:21:35,800 --> 00:21:38,480 Speaker 9: a few weeks ago, they actually made it forecast the 407 00:21:38,480 --> 00:21:40,960 Speaker 9: tee will supprit you decline, but the long end supplies 408 00:21:40,840 --> 00:21:44,040 Speaker 9: to stay the same. If the Treasury follows through on 409 00:21:44,160 --> 00:21:47,520 Speaker 9: that advice, that should be refracted into the U curve. 410 00:21:47,560 --> 00:21:49,760 Speaker 5: And that isn't right now, not enough. I think there's 411 00:21:49,800 --> 00:21:50,800 Speaker 5: a low term premium. 412 00:21:50,840 --> 00:21:54,080 Speaker 9: So I think for all these reasons throwing the fat 413 00:21:54,080 --> 00:21:56,520 Speaker 9: to that the fat's gonna got's going to be more 414 00:21:56,600 --> 00:21:59,639 Speaker 9: more priced out. You're gonna get to five percent, you 415 00:21:59,720 --> 00:22:02,720 Speaker 9: believe the technical analysis from prefinancial CRISI up with the 416 00:22:02,760 --> 00:22:05,159 Speaker 9: now you look at retracements, you could go even as 417 00:22:05,200 --> 00:22:06,840 Speaker 9: high as five point three, which is where the fet 418 00:22:06,840 --> 00:22:09,399 Speaker 9: funds rates. That will be pretty extreme, I think, and 419 00:22:09,400 --> 00:22:12,280 Speaker 9: it will be a real buying opportunity. We think the 420 00:22:12,400 --> 00:22:14,359 Speaker 9: zone comes into four seventy five five percent. 421 00:22:14,840 --> 00:22:17,200 Speaker 4: So the Fed, what's your call for twenty twenty four? 422 00:22:17,400 --> 00:22:18,960 Speaker 4: Will they cut in twenty twenty four? 423 00:22:19,600 --> 00:22:22,199 Speaker 9: So I was listening to Williams today who were with 424 00:22:22,280 --> 00:22:25,320 Speaker 9: Mike McKee, a good interview. He still stays very confident 425 00:22:25,359 --> 00:22:28,399 Speaker 9: that they can do it. But and he's important to 426 00:22:28,400 --> 00:22:30,760 Speaker 9: listen to because he's actually the person that put out 427 00:22:30,960 --> 00:22:33,840 Speaker 9: the framework and how they want to do it. Meaning 428 00:22:34,760 --> 00:22:37,919 Speaker 9: if inflation continues to get on track down to two percent, 429 00:22:37,960 --> 00:22:41,000 Speaker 9: even though it's slower now, that fat that fat Fund's 430 00:22:41,040 --> 00:22:43,680 Speaker 9: rate that's restrictive can be at some point cut down 431 00:22:43,760 --> 00:22:46,920 Speaker 9: to take the restriction out. He thinks that's that they're 432 00:22:46,960 --> 00:22:49,639 Speaker 9: still on course with that. I do think that the 433 00:22:49,640 --> 00:22:52,600 Speaker 9: markets are probably more rational about earlier this year and 434 00:22:52,640 --> 00:22:55,560 Speaker 9: saying yeah, it was not seven cuts, that's probably one 435 00:22:55,560 --> 00:22:59,160 Speaker 9: of the two cuts. The windows obviously narrowed a lot, right, 436 00:22:59,200 --> 00:23:01,600 Speaker 9: because as much Bowle said in the interview, I think 437 00:23:01,600 --> 00:23:04,720 Speaker 9: it was also Mike Cue anyone else. The election didn't 438 00:23:04,720 --> 00:23:07,639 Speaker 9: matter for them to make this great decision started in 439 00:23:07,720 --> 00:23:09,080 Speaker 9: seeing you. 440 00:23:09,119 --> 00:23:10,840 Speaker 5: Probably they are going to keep that in mind. 441 00:23:11,240 --> 00:23:14,240 Speaker 2: The windows I'm giving Ben a look of like, yeah, 442 00:23:14,400 --> 00:23:16,439 Speaker 2: all right, Ben Emmons, Yep, you go, yeah. 443 00:23:16,400 --> 00:23:17,520 Speaker 6: Ben, Thanks so much for joining us. 444 00:23:17,520 --> 00:23:20,240 Speaker 4: Ben Emmonds, Senior portfolio Manager, head of fixed Income at 445 00:23:20,280 --> 00:23:22,520 Speaker 4: New Edge. Well joining us live here in our Bloomberg 446 00:23:22,560 --> 00:23:23,760 Speaker 4: Interactive Brokers Studio. 447 00:23:25,320 --> 00:23:29,200 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 448 00:23:29,280 --> 00:23:32,320 Speaker 1: weekdays at ten am Eastern on Apple car Play and 449 00:23:32,320 --> 00:23:35,600 Speaker 1: Android Auto with the Bloomberg Business. You can also listen 450 00:23:35,720 --> 00:23:38,840 Speaker 1: live on Amazon Alexa from our flagship New York station 451 00:23:39,200 --> 00:23:42,920 Speaker 1: Just say Alexa playing Bloomberg eleven thirty. 452 00:23:43,760 --> 00:23:46,760 Speaker 2: This is Bloomberg Intelligence Radio. Happy Monday, Happy Tax Day. 453 00:23:46,840 --> 00:23:49,320 Speaker 2: I'm Alex the alongside Paul Sweeney. We're live from Interactive 454 00:23:49,320 --> 00:23:53,159 Speaker 2: Broker Studio right here in Midtown Manhattan. Looking at the 455 00:23:53,160 --> 00:23:55,480 Speaker 2: crud market. Here, you're looking at Brent down by about 456 00:23:55,520 --> 00:23:58,480 Speaker 2: almost two percent, same for WTI, so you're now at 457 00:23:58,520 --> 00:24:02,240 Speaker 2: eighty eight for Brent, about eighty four for WTI. So 458 00:24:02,359 --> 00:24:05,960 Speaker 2: kind of what's next. Ellen Walld is president of Transversal Consulting, 459 00:24:06,000 --> 00:24:07,480 Speaker 2: and she's a great person to talk to on the 460 00:24:07,520 --> 00:24:10,159 Speaker 2: price and fundamentals as well as the geopolitical risk. Just 461 00:24:10,200 --> 00:24:12,840 Speaker 2: a handful of guys who do that really, really well Ellen, 462 00:24:12,880 --> 00:24:15,840 Speaker 2: It's great to get your perspective. I've gotten so many 463 00:24:15,880 --> 00:24:18,320 Speaker 2: notes for Strategist this morning on sort of what they're 464 00:24:18,520 --> 00:24:20,560 Speaker 2: what's baked in now to the oil price? What's your 465 00:24:20,560 --> 00:24:24,119 Speaker 2: call what geopolitical premium is in? How much should be in? 466 00:24:25,440 --> 00:24:29,680 Speaker 10: I think there's definitely some geopolitical premium that is baked 467 00:24:29,720 --> 00:24:32,000 Speaker 10: into oil prices, but I think it's been that way 468 00:24:32,320 --> 00:24:36,199 Speaker 10: for some time now. I think that because this attack 469 00:24:36,280 --> 00:24:40,719 Speaker 10: happened over the weekend, the price action was really really muted, 470 00:24:40,800 --> 00:24:44,280 Speaker 10: even more than it would have been, you know, it 471 00:24:44,359 --> 00:24:47,119 Speaker 10: was otherwise considering that there was no oil supply that 472 00:24:47,280 --> 00:24:50,399 Speaker 10: was involved or threatened in any way, and so we 473 00:24:50,400 --> 00:24:53,680 Speaker 10: didn't even see any you know, potential ups and downs 474 00:24:54,119 --> 00:24:56,920 Speaker 10: or brief spikes just because there was no trading going on. 475 00:24:57,680 --> 00:25:01,399 Speaker 10: I think the question really is, now that prices are 476 00:25:01,480 --> 00:25:04,879 Speaker 10: kind of backing down, what's the next step. Where are 477 00:25:04,960 --> 00:25:09,760 Speaker 10: things going? And if there are any indications that Israel 478 00:25:09,840 --> 00:25:12,879 Speaker 10: is going to launch further attacks against Iran or there 479 00:25:12,920 --> 00:25:16,360 Speaker 10: could be more retaliatory attacks from Iran, I think that 480 00:25:16,400 --> 00:25:19,080 Speaker 10: could definitely cause oil prices to go up, maybe another 481 00:25:19,520 --> 00:25:22,679 Speaker 10: dollar or so, but we'd have to get some really 482 00:25:23,080 --> 00:25:28,080 Speaker 10: strong indications that something incredibly major or explosive would happen 483 00:25:28,119 --> 00:25:31,840 Speaker 10: in order, I think for oil prices to really spike 484 00:25:31,960 --> 00:25:34,040 Speaker 10: higher and stay higher for longer. 485 00:25:35,000 --> 00:25:37,160 Speaker 6: Ellen talk to us about the demand side of the equation. 486 00:25:37,600 --> 00:25:40,480 Speaker 4: Before October seventh, that seemed to be the driver here 487 00:25:40,560 --> 00:25:43,640 Speaker 4: of global oil prices, you know, the ups and downs 488 00:25:43,680 --> 00:25:44,480 Speaker 4: of global demand. 489 00:25:45,000 --> 00:25:47,200 Speaker 6: What are you seeing in terms of demand these days. 490 00:25:48,359 --> 00:25:51,160 Speaker 10: Yeah, what we're looking at is, you know, we did 491 00:25:51,200 --> 00:25:53,560 Speaker 10: see some pretty strong demand in the United States. Gasoline 492 00:25:53,600 --> 00:25:56,440 Speaker 10: demand is not quite as strong this week is maybe 493 00:25:56,440 --> 00:26:00,199 Speaker 10: it was in previous weeks. But when we go, you know, 494 00:26:00,320 --> 00:26:03,000 Speaker 10: looking forwards the summer, I think we're expecting to see 495 00:26:03,040 --> 00:26:06,760 Speaker 10: pretty strong gasoline demand over the summer in the US. 496 00:26:06,800 --> 00:26:10,760 Speaker 10: And also what's going on with Asia, especially with China, 497 00:26:10,880 --> 00:26:14,280 Speaker 10: because they're big drivers of demand as well. And I 498 00:26:14,320 --> 00:26:20,000 Speaker 10: think we're seeing some reluctance in Asian buyers to buy 499 00:26:20,800 --> 00:26:23,840 Speaker 10: oil or to order cargoes more cargoes from the Middle 500 00:26:23,880 --> 00:26:26,240 Speaker 10: East because there's a concern about whether it we'll get there. 501 00:26:26,480 --> 00:26:31,040 Speaker 10: And that's actually fueling demand for American oil, which could 502 00:26:31,080 --> 00:26:35,560 Speaker 10: actually either push up the price of WTI or keep 503 00:26:35,600 --> 00:26:38,320 Speaker 10: it a bit more elevated as opposed to coming back 504 00:26:38,359 --> 00:26:44,080 Speaker 10: down as the geopolitical premium goes down. So I think 505 00:26:44,080 --> 00:26:47,200 Speaker 10: that it's kind of a complicated picture and does depend 506 00:26:47,320 --> 00:26:50,960 Speaker 10: obviously on the economic situation globally. If we see some 507 00:26:51,080 --> 00:26:54,639 Speaker 10: kind of more recession, we could see demand falter. But 508 00:26:55,119 --> 00:26:58,200 Speaker 10: right now it looks pretty strong heading into the summer. 509 00:26:58,040 --> 00:27:00,959 Speaker 2: Which brings us back to the supply picture. Ellen. So 510 00:27:01,200 --> 00:27:04,680 Speaker 2: when you were talking about stronger action from Iran, the 511 00:27:05,080 --> 00:27:07,240 Speaker 2: elephant in the room is closing the straight or Her 512 00:27:07,359 --> 00:27:09,359 Speaker 2: moves where a lot of oil passes through, and that 513 00:27:09,520 --> 00:27:11,400 Speaker 2: would be a huge line in the sand for oil 514 00:27:11,440 --> 00:27:14,159 Speaker 2: and would cause unbelievable spikes in the oil price. What 515 00:27:14,359 --> 00:27:18,399 Speaker 2: is Iran's capacity to actually do that because they've gotten 516 00:27:18,520 --> 00:27:21,000 Speaker 2: kind of a good gig under President Biden in terms 517 00:27:21,000 --> 00:27:24,800 Speaker 2: of you know, their exports are up, right, their oil 518 00:27:24,840 --> 00:27:26,920 Speaker 2: exports are up. Do they really want to mess with that? 519 00:27:28,560 --> 00:27:31,159 Speaker 10: Exactly? And I think the only case in which Iran 520 00:27:31,359 --> 00:27:33,760 Speaker 10: takes any kind of action to shut the streets of 521 00:27:33,840 --> 00:27:37,400 Speaker 10: hor Moos to shipping. And so remember what we're talking 522 00:27:37,400 --> 00:27:42,119 Speaker 10: about is this is a small passage and Iran, you know, 523 00:27:42,200 --> 00:27:43,720 Speaker 10: could do this in number of ways. It could either 524 00:27:43,720 --> 00:27:46,320 Speaker 10: block it with ships or it could fire missiles off 525 00:27:46,359 --> 00:27:50,440 Speaker 10: of nearby land. That could make it impossible for ships 526 00:27:50,480 --> 00:27:53,480 Speaker 10: to traverse this area. But for them to really take 527 00:27:53,520 --> 00:27:57,040 Speaker 10: that action means that Iran has nothing to lose, because 528 00:27:57,359 --> 00:28:01,119 Speaker 10: if Iran cuts off other ships abilities to go through that, 529 00:28:01,280 --> 00:28:03,880 Speaker 10: then you're going to see the US Navy cutting off 530 00:28:04,000 --> 00:28:06,960 Speaker 10: Iranian ship's ability to come through the streets of Horror 531 00:28:06,960 --> 00:28:09,840 Speaker 10: moves as well. So Iran really has to have nothing 532 00:28:09,880 --> 00:28:12,280 Speaker 10: to lose, and right now it's got a lot to lose. 533 00:28:12,760 --> 00:28:17,040 Speaker 10: It's got a very thriving contraband oil industry going on. 534 00:28:17,480 --> 00:28:19,679 Speaker 10: It's making a lot of money, and as oil prices 535 00:28:19,760 --> 00:28:22,920 Speaker 10: go higher, even though Iran has to sell its oil 536 00:28:23,000 --> 00:28:26,399 Speaker 10: added discount, it's going to make more money, so it 537 00:28:26,480 --> 00:28:28,359 Speaker 10: doesn't want to mess with that. In fact, it probably 538 00:28:28,359 --> 00:28:31,320 Speaker 10: wants to sell more oil to you know, to its 539 00:28:31,359 --> 00:28:35,800 Speaker 10: buyers as opposed to less. So if Biden starts to 540 00:28:35,880 --> 00:28:40,320 Speaker 10: mess with that by enforcing sanctions harder, then that could 541 00:28:41,160 --> 00:28:44,120 Speaker 10: kind of stir things up and make things more tense. 542 00:28:44,280 --> 00:28:47,840 Speaker 10: But right now, you know, unless Iran's oil industry is 543 00:28:47,880 --> 00:28:51,000 Speaker 10: shut down, it's to say, if it's oil industry was destroyed, 544 00:28:51,280 --> 00:28:53,880 Speaker 10: then it might have the motive to do that because 545 00:28:53,920 --> 00:28:55,440 Speaker 10: it's got nothing to lose, but it's. 546 00:28:55,320 --> 00:28:58,520 Speaker 2: Definitely not yet. I mean just from perspective, Like in March, 547 00:28:58,880 --> 00:29:01,240 Speaker 2: I runing oil output hit a five year high, about 548 00:29:01,280 --> 00:29:03,320 Speaker 2: three point two five million barrels of oil a day. 549 00:29:03,720 --> 00:29:06,200 Speaker 2: And the conversation we were having earlier with doctor Ariel 550 00:29:06,280 --> 00:29:10,200 Speaker 2: Cohen was if sanctions are lined up heavier on Iran 551 00:29:10,320 --> 00:29:12,800 Speaker 2: so they can't export that much, that opens the door 552 00:29:12,920 --> 00:29:15,400 Speaker 2: for Russia to start selling a little bit more as well. 553 00:29:15,920 --> 00:29:19,080 Speaker 2: So talk to me about how you balance, as someone 554 00:29:19,120 --> 00:29:21,560 Speaker 2: in the Biden administration, how do you balance those two 555 00:29:22,840 --> 00:29:24,200 Speaker 2: where how do you do that? 556 00:29:26,000 --> 00:29:26,160 Speaker 4: Well? 557 00:29:26,240 --> 00:29:28,800 Speaker 10: I think the Biden administration also has to come to 558 00:29:28,920 --> 00:29:33,080 Speaker 10: terms with the fact that it's price cap policy on 559 00:29:33,680 --> 00:29:37,240 Speaker 10: Russia is basically a failure. It's not really stopping Russia 560 00:29:37,280 --> 00:29:39,520 Speaker 10: from making oil on it from making money on its 561 00:29:39,560 --> 00:29:42,560 Speaker 10: oil industry. So yes, if Iran has less to offer, 562 00:29:42,680 --> 00:29:45,800 Speaker 10: then Russia can fill in those gaps. But I think 563 00:29:45,840 --> 00:29:49,479 Speaker 10: there's also the issue of Russia's participation in the OPEP 564 00:29:49,560 --> 00:29:53,239 Speaker 10: plus output cuts, and if come June oil prices are 565 00:29:53,280 --> 00:29:56,080 Speaker 10: still in the nineties, then there's gonna be a lot 566 00:29:56,080 --> 00:29:59,560 Speaker 10: of practic on OPEK to raise its output and Russia's 567 00:29:59,600 --> 00:30:01,920 Speaker 10: part of that, and Russia would love to sell more 568 00:30:01,960 --> 00:30:05,920 Speaker 10: oil obviously, so this whole whole thing is a very 569 00:30:06,480 --> 00:30:09,840 Speaker 10: complicated dance. Meanwhile, the Biden administration wants it's going to 570 00:30:09,880 --> 00:30:12,000 Speaker 10: want more oil on the market because it doesn't want 571 00:30:12,280 --> 00:30:16,080 Speaker 10: high gasoline prices going into an election year. So they 572 00:30:16,160 --> 00:30:18,680 Speaker 10: both want Russian oil on the market. They just don't 573 00:30:18,680 --> 00:30:20,640 Speaker 10: want Russia to make a lot of money off of 574 00:30:20,720 --> 00:30:24,160 Speaker 10: that oil. But it seems like they can't really have 575 00:30:24,360 --> 00:30:25,200 Speaker 10: both of those things. 576 00:30:25,760 --> 00:30:25,920 Speaker 7: Well. 577 00:30:25,960 --> 00:30:28,480 Speaker 4: Torsten Slock over to Pola Management put out a chart 578 00:30:28,520 --> 00:30:31,480 Speaker 4: today that for me, who's not a oil expert, was 579 00:30:31,520 --> 00:30:32,760 Speaker 4: really illuminating what you're saying. 580 00:30:33,040 --> 00:30:34,360 Speaker 6: The US is the biggest. 581 00:30:34,080 --> 00:30:36,200 Speaker 4: Oil producer in the world, with about twelve point nine 582 00:30:36,240 --> 00:30:40,040 Speaker 4: million barrels per day. Why don't our friends in Texas 583 00:30:40,120 --> 00:30:42,520 Speaker 4: and Oklahoma just start pumping out more oil? 584 00:30:42,600 --> 00:30:42,719 Speaker 7: Here? 585 00:30:44,120 --> 00:30:47,120 Speaker 10: Great question, and the answer is that this is not 586 00:30:47,520 --> 00:30:50,560 Speaker 10: the same oil industry as it was in twenty fifteen, 587 00:30:50,640 --> 00:30:55,360 Speaker 10: twenty sixteen, twenty seventeen, where it was all pump pump, pump, drill, drill, drill, 588 00:30:55,600 --> 00:30:58,160 Speaker 10: put out as much as you can, don't think about, 589 00:30:58,600 --> 00:31:00,280 Speaker 10: you know what, you're selling it for the return arns. 590 00:31:00,320 --> 00:31:03,560 Speaker 10: It's just growth, growth, growth. That's not the oil industry. Now, 591 00:31:04,120 --> 00:31:07,760 Speaker 10: there've been a lot of consolidations. Oil companies are running 592 00:31:07,920 --> 00:31:10,480 Speaker 10: very lean games. They really cut out a lot of 593 00:31:10,960 --> 00:31:15,440 Speaker 10: of you know, fat during the pandemic, and they're at 594 00:31:15,480 --> 00:31:19,120 Speaker 10: a point where they don't have to produce producers, they 595 00:31:19,160 --> 00:31:22,520 Speaker 10: don't have to grow in order to satisfy you know, 596 00:31:22,680 --> 00:31:26,480 Speaker 10: their uh, you know, their their shareholders. They're they're sitting 597 00:31:26,640 --> 00:31:30,360 Speaker 10: very well. Sometimes, you know, they may drill more wells, 598 00:31:30,440 --> 00:31:33,560 Speaker 10: but it's become much more expensive inflation. We all think 599 00:31:33,560 --> 00:31:37,240 Speaker 10: about oil prices causing inflation, but what we don't often 600 00:31:37,280 --> 00:31:40,400 Speaker 10: think about is how inflation acts on oil production. And 601 00:31:40,600 --> 00:31:44,360 Speaker 10: so everything costs more to drill now, and so they 602 00:31:44,720 --> 00:31:48,120 Speaker 10: may see a benefit in not expanding drilling so much. 603 00:31:48,520 --> 00:31:52,360 Speaker 10: They are increasing production by getting more out of every well, 604 00:31:53,000 --> 00:31:56,000 Speaker 10: but there isn't necessarily a benefit to drill, drill, drill 605 00:31:56,480 --> 00:31:59,120 Speaker 10: when uh, you know, they've got a good thing going 606 00:31:59,280 --> 00:32:03,520 Speaker 10: right now, and it's becoming more difficult to drill more 607 00:32:03,720 --> 00:32:06,680 Speaker 10: in terms of the prices, the supplies and all of that. 608 00:32:07,040 --> 00:32:09,920 Speaker 10: So uh, and there's there's less incentive for them to 609 00:32:10,000 --> 00:32:10,800 Speaker 10: do that at the moment. 610 00:32:11,200 --> 00:32:14,040 Speaker 2: You're all oil learn on you, Paul, Right, okay, all 611 00:32:14,080 --> 00:32:17,200 Speaker 2: oil nerd for you. The US produces a different type 612 00:32:17,280 --> 00:32:19,360 Speaker 2: of oil than the oil you're going to get in 613 00:32:19,440 --> 00:32:20,000 Speaker 2: the Middle East. 614 00:32:20,120 --> 00:32:20,680 Speaker 6: Sweet cruit. 615 00:32:21,200 --> 00:32:28,000 Speaker 2: Yes, yes, John Tucker, we were just talking about you yet. 616 00:32:28,720 --> 00:32:30,200 Speaker 5: Just real quick boil b O. 617 00:32:30,960 --> 00:32:33,000 Speaker 2: I l great function all. 618 00:32:32,880 --> 00:32:35,240 Speaker 5: The different types of oil. It's like sixty different types 619 00:32:35,280 --> 00:32:36,040 Speaker 5: of oil, and. 620 00:32:36,080 --> 00:32:38,080 Speaker 2: All of them have different qualities and you can use 621 00:32:38,160 --> 00:32:41,200 Speaker 2: them to refine into different kind of products. Uh So, 622 00:32:41,400 --> 00:32:44,480 Speaker 2: even if the US was producing like forty million barrels 623 00:32:44,480 --> 00:32:46,800 Speaker 2: of oil day, which obviously is like not possible, it 624 00:32:46,840 --> 00:32:49,040 Speaker 2: wouldn't make up for the loss that you'd see in 625 00:32:49,080 --> 00:32:50,960 Speaker 2: some of the Middle Eastern countries because they have the 626 00:32:51,000 --> 00:32:53,480 Speaker 2: heavier stuff, which is really good for other products. So 627 00:32:54,200 --> 00:32:56,000 Speaker 2: that is your Alex Laine of the morning. You are 628 00:32:56,040 --> 00:32:59,560 Speaker 2: so welcome, Ellen, Thank you very much. Ellen Walld a 629 00:32:59,600 --> 00:33:02,920 Speaker 2: president of Transversal Consulting joining us there. There was also 630 00:33:02,960 --> 00:33:04,720 Speaker 2: an interesting article, I think it was in a journal 631 00:33:05,120 --> 00:33:08,120 Speaker 2: that US oil executives finally have a direct line to 632 00:33:08,200 --> 00:33:10,720 Speaker 2: the White House that like now their calls won't be 633 00:33:10,880 --> 00:33:13,080 Speaker 2: rejected and they actually can go and talk to the 634 00:33:13,160 --> 00:33:14,080 Speaker 2: Biden administration. 635 00:33:14,320 --> 00:33:15,960 Speaker 6: So I that's why it's interesting. 636 00:33:16,600 --> 00:33:19,880 Speaker 2: Oh yeah, Like a few years ago, when first time 637 00:33:19,920 --> 00:33:22,680 Speaker 2: gasoline prices went to five dollars. I asked a CEO 638 00:33:22,720 --> 00:33:24,360 Speaker 2: of a major oil company in the US, has the 639 00:33:24,400 --> 00:33:28,720 Speaker 2: Biden administration called you. He's like, not even tried. Wow, yeah, 640 00:33:28,800 --> 00:33:30,200 Speaker 2: but now that may be changing a little bit. 641 00:33:30,280 --> 00:33:33,120 Speaker 6: So yeah, I would think. So we get star oil 642 00:33:33,160 --> 00:33:35,160 Speaker 6: and gas industry as long as well as we need 643 00:33:35,200 --> 00:33:36,120 Speaker 6: the green stuff. 644 00:33:38,640 --> 00:33:42,480 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 645 00:33:42,600 --> 00:33:45,520 Speaker 1: weekdays at ten am Eastern on Apple car Play and 646 00:33:45,640 --> 00:33:48,520 Speaker 1: Android Auto with the Bloomberg Business app. You can also 647 00:33:48,640 --> 00:33:52,120 Speaker 1: listen live on Amazon Alexa from our flagship New York station. 648 00:33:52,520 --> 00:33:55,280 Speaker 1: Just say Alexa, play Bloomberg eleven thirty. 649 00:33:56,840 --> 00:33:56,959 Speaker 7: Here. 650 00:33:57,000 --> 00:34:00,640 Speaker 4: When we get back to geopolitics, front and send yet again, 651 00:34:00,720 --> 00:34:03,600 Speaker 4: Aaron David Miller joins his senior fellow at the Carnegie 652 00:34:03,800 --> 00:34:07,600 Speaker 4: Endowment for International Peace, joining us in Washington, DC via 653 00:34:07,960 --> 00:34:11,600 Speaker 4: that thing called Zoom. Aaron, talk to us about kind 654 00:34:11,640 --> 00:34:16,440 Speaker 4: of how you view the Iranian response the Israeli defense. 655 00:34:16,680 --> 00:34:19,480 Speaker 6: Over the weekend. Here where do we go from here? 656 00:34:20,719 --> 00:34:22,640 Speaker 11: No, I think it's a story. Thanks for having me. 657 00:34:22,920 --> 00:34:25,560 Speaker 11: What I would describe as the good, the bad, and 658 00:34:25,600 --> 00:34:28,400 Speaker 11: the ugly. I mean, the good is easy at Israel's 659 00:34:28,440 --> 00:34:33,040 Speaker 11: technical mastery of air defense backstop by the United States, 660 00:34:33,160 --> 00:34:37,719 Speaker 11: it's military aircraft and air defenses by the Europeans, the 661 00:34:37,800 --> 00:34:41,759 Speaker 11: French and the Brids. And not surprisingly, but I think 662 00:34:42,360 --> 00:34:45,759 Speaker 11: in an unprecedented fashioned by kiirg states who participated in 663 00:34:45,840 --> 00:34:52,080 Speaker 11: this Middle East air defense alignment of radars and intelligence, 664 00:34:52,560 --> 00:34:55,120 Speaker 11: which is in precedent. There's never been a Middleast war 665 00:34:55,280 --> 00:34:59,320 Speaker 11: where the at least the Israelis received that kind of support, 666 00:34:59,360 --> 00:35:01,799 Speaker 11: including oak and so word from the Jordanians who downed 667 00:35:01,800 --> 00:35:05,240 Speaker 11: a number of drums. That's the good news. The bad 668 00:35:05,320 --> 00:35:09,359 Speaker 11: and potentially ugly news is number one in a real war, 669 00:35:10,440 --> 00:35:15,160 Speaker 11: and I think the Iranians actually telegraph this and calculating 670 00:35:15,239 --> 00:35:21,960 Speaker 11: and calibrated it so that they wouldn't prompt a massive 671 00:35:22,040 --> 00:35:24,760 Speaker 11: Israeli response. In a real war, the Iranians would probably 672 00:35:25,400 --> 00:35:31,520 Speaker 11: launched thousands of missiles and drone drones. That's number one. 673 00:35:31,600 --> 00:35:34,520 Speaker 11: Number two, you have new rules established now. I mean 674 00:35:34,880 --> 00:35:37,879 Speaker 11: it was thirty three years, been thirty three years since 675 00:35:38,000 --> 00:35:42,200 Speaker 11: any Arab state attacked Israel directly. That was Saddam Hussein 676 00:35:42,280 --> 00:35:45,440 Speaker 11: in ninety one, who launched forty three scud missiles. Then 677 00:35:45,520 --> 00:35:49,279 Speaker 11: Prime Minister Shamir was persuaded by the Bush first Bush 678 00:35:49,280 --> 00:35:52,280 Speaker 11: administration not to respond. But you now have new rules 679 00:35:53,080 --> 00:36:01,200 Speaker 11: between Iran and Israel, established an a rivalry and for 680 00:36:01,320 --> 00:36:05,319 Speaker 11: which there's no solution. So we're now forced to deal 681 00:36:05,440 --> 00:36:08,400 Speaker 11: with the cruel realities that we're best going to be 682 00:36:08,560 --> 00:36:11,600 Speaker 11: managing this and trying to contain it. The Israelis have 683 00:36:11,719 --> 00:36:15,360 Speaker 11: made it unmistakably clear. I think that they intend to respond. 684 00:36:16,000 --> 00:36:18,200 Speaker 11: The timing and the scale of that response, I think 685 00:36:18,320 --> 00:36:21,000 Speaker 11: is still very much up in the air. Maybe they'll 686 00:36:21,040 --> 00:36:27,960 Speaker 11: look for a calibrated response that reinforces what has clearly 687 00:36:28,040 --> 00:36:33,800 Speaker 11: been obvious, which is Israel's technical mastery and superiority over Iran. 688 00:36:33,880 --> 00:36:36,480 Speaker 11: But there's no guarantee, of course, once you go up 689 00:36:36,520 --> 00:36:40,239 Speaker 11: the escalatory ladder that Iron won't respond. Then then you 690 00:36:40,400 --> 00:36:45,600 Speaker 11: raise the issue Balla. You know, that's kilometers away, that's 691 00:36:45,719 --> 00:36:48,719 Speaker 11: not hours away. There's Balla lunch, missus will It's not 692 00:36:48,800 --> 00:36:51,040 Speaker 11: gonna take hours to get Israel and they got a 693 00:36:51,080 --> 00:36:51,480 Speaker 11: lot of them. 694 00:36:51,560 --> 00:36:54,520 Speaker 2: Aaron, this is a pretty grim picture that you're painting 695 00:36:54,560 --> 00:36:57,440 Speaker 2: at this point. What are the chances that that's how 696 00:36:57,680 --> 00:37:00,720 Speaker 2: it's going to play out or is there real ability 697 00:37:01,160 --> 00:37:03,480 Speaker 2: for President to President Biden to diffuse this. 698 00:37:05,360 --> 00:37:12,200 Speaker 11: You know, diffusing would mean meeting Iran's and Israel's core requirements. 699 00:37:13,480 --> 00:37:18,000 Speaker 11: I'm not predicting regional war, which would lead to dramatic 700 00:37:18,080 --> 00:37:21,480 Speaker 11: spike in oil prices and probably plunging financial markets, and 701 00:37:21,560 --> 00:37:24,120 Speaker 11: a degree of instability in the Middle East has never 702 00:37:24,280 --> 00:37:29,600 Speaker 11: experienced before. It's a matter of managing and containing, that's 703 00:37:29,640 --> 00:37:32,279 Speaker 11: the question, because there's no solution to deal with the 704 00:37:32,360 --> 00:37:35,759 Speaker 11: fact reality that Iran is a nuclear weapons threshold state. 705 00:37:36,360 --> 00:37:40,319 Speaker 11: There's no real solution to deal with Iran's proxies. That's 706 00:37:40,400 --> 00:37:45,800 Speaker 11: always been management issue, whether these are shelling international shipping 707 00:37:46,560 --> 00:37:49,000 Speaker 11: or seeing shippers to go around the Cave of Good Hope, 708 00:37:49,000 --> 00:37:52,800 Speaker 11: which is additional thirty five hundred miles, which raises rates 709 00:37:53,400 --> 00:37:57,120 Speaker 11: and interferes with the global supply chain. There are no determinative, 710 00:37:57,280 --> 00:38:03,279 Speaker 11: comprehensive answers to any of this, and if we need 711 00:38:03,360 --> 00:38:06,560 Speaker 11: to complicate it even more, you have an Israeli Amas war. 712 00:38:07,160 --> 00:38:09,879 Speaker 11: Although the Israelis seem to have scaled down their ground 713 00:38:09,960 --> 00:38:15,000 Speaker 11: campaign in Gaza, that carries so many uncertainties, including the 714 00:38:15,080 --> 00:38:18,120 Speaker 11: fate of one hundred and thirty four hostages, thirty of 715 00:38:18,160 --> 00:38:22,719 Speaker 11: whom Israelis believed were either killed in captivity or died 716 00:38:22,800 --> 00:38:25,520 Speaker 11: on October seventh. Their body's taken to Gaza to trade 717 00:38:25,560 --> 00:38:28,759 Speaker 11: for Palestinian prisoners. So, you know, I wish I could 718 00:38:28,800 --> 00:38:33,759 Speaker 11: make it happy. But again, I'm not predicting we're going 719 00:38:33,880 --> 00:38:37,160 Speaker 11: to a major regional war. But I guess my takeaway 720 00:38:37,200 --> 00:38:40,440 Speaker 11: here is it's going to require a degree of restraint 721 00:38:41,080 --> 00:38:45,840 Speaker 11: from Iran and Israel, and to a certain degree, some 722 00:38:46,080 --> 00:38:50,280 Speaker 11: diplomacy from the Biden administration, particularly with Ralis Aaron. 723 00:38:51,239 --> 00:38:54,239 Speaker 4: Do we have any clearer picture today than we did 724 00:38:54,320 --> 00:38:57,840 Speaker 4: on October eighth? What really the end goals are for 725 00:38:58,200 --> 00:39:00,360 Speaker 4: Israel here? What would be a victory. 726 00:39:02,719 --> 00:39:06,239 Speaker 11: A victory, I guess would be three things. Number One, 727 00:39:06,400 --> 00:39:09,000 Speaker 11: Hamas would be not as a political force, but as 728 00:39:09,080 --> 00:39:16,279 Speaker 11: a military force, would be undermined and destroyed, so it 729 00:39:16,320 --> 00:39:19,400 Speaker 11: would not be in a position to pull off another 730 00:39:19,520 --> 00:39:23,960 Speaker 11: October seven. Israel would kill the senior leadership responsible for 731 00:39:24,200 --> 00:39:28,040 Speaker 11: the October seven attacks, and the redemption of the hostages. 732 00:39:29,400 --> 00:39:33,120 Speaker 11: If those three things were accomplished, that would be I 733 00:39:33,239 --> 00:39:36,440 Speaker 11: think you could put that in the victory category. Although 734 00:39:36,520 --> 00:39:41,960 Speaker 11: the price of victory, the price of victory is something 735 00:39:42,000 --> 00:39:46,120 Speaker 11: that needs to be factored into this, particularly when it 736 00:39:46,200 --> 00:39:51,759 Speaker 11: involves the exponential rise of Palestinian deaths and the humanitarian catastrophe, 737 00:39:51,920 --> 00:39:56,920 Speaker 11: catastrophic starvation. Samantha Power, the AID Administrator, even used the 738 00:39:57,000 --> 00:39:58,240 Speaker 11: words several days ago. 739 00:40:00,640 --> 00:40:01,040 Speaker 7: Famine. 740 00:40:02,160 --> 00:40:05,439 Speaker 11: So I'm not sure the Israelis can accomplish those three 741 00:40:05,520 --> 00:40:08,000 Speaker 11: things right now, six months. 742 00:40:07,840 --> 00:40:08,319 Speaker 7: Into the war. 743 00:40:08,719 --> 00:40:13,320 Speaker 11: There's no indication, right they have not killed the senior leadership. 744 00:40:13,480 --> 00:40:17,000 Speaker 11: You've got a truly tragic situation with respect to hostages, 745 00:40:17,000 --> 00:40:23,040 Speaker 11: particularly the women hostages. And you have a situation where Hamas, 746 00:40:23,600 --> 00:40:27,239 Speaker 11: probably out of their thirty thousand fighters, have at least 747 00:40:27,320 --> 00:40:33,720 Speaker 11: ten thousand fighters that remain. So I think we're talking 748 00:40:33,840 --> 00:40:39,719 Speaker 11: here again about a lot of uncertainties, and I just 749 00:40:39,840 --> 00:40:43,600 Speaker 11: don't see a sort of determinative ending where Gaza becomes 750 00:40:43,640 --> 00:40:47,239 Speaker 11: secure and stable, the Israelis in the Saudis normalized, in 751 00:40:47,320 --> 00:40:53,040 Speaker 11: the Middle East remains as converted into a happy conflict place, 752 00:40:53,160 --> 00:40:56,640 Speaker 11: or everybody's getting along with one another, all. 753 00:40:56,560 --> 00:40:59,080 Speaker 2: Right, erin thanks Lott, we really appreciate it. Aaron David Miller, 754 00:40:59,160 --> 00:41:02,400 Speaker 2: Senior Fellow at Carnie Endowment for International Peace, is standing 755 00:41:02,440 --> 00:41:05,400 Speaker 2: by and then or thank you for joining us. I 756 00:41:05,520 --> 00:41:08,239 Speaker 2: have to wonder then, you know, as an investor, how 757 00:41:08,320 --> 00:41:10,239 Speaker 2: do you It just means we're going to be very 758 00:41:10,360 --> 00:41:12,799 Speaker 2: sensitive to any kind of headline that's going to cross, 759 00:41:12,840 --> 00:41:14,759 Speaker 2: which is maybe what we're seeing in the market sort 760 00:41:14,800 --> 00:41:17,040 Speaker 2: of right now, and it's going to make the overall 761 00:41:17,120 --> 00:41:20,040 Speaker 2: data that we see. I wonder how much more relevant 762 00:41:20,080 --> 00:41:22,960 Speaker 2: that's going to be when these headlines can be very effective. 763 00:41:23,200 --> 00:41:26,719 Speaker 4: Yeah, it seems like, you know, just to date, the 764 00:41:26,840 --> 00:41:30,160 Speaker 4: market is kind of powered through all of this Middle 765 00:41:30,200 --> 00:41:36,040 Speaker 4: East tension, much as it has the European geoconflict in Ukraine, 766 00:41:36,360 --> 00:41:40,360 Speaker 4: seems to just generally bypass it and focusing on, you know, 767 00:41:40,440 --> 00:41:42,640 Speaker 4: maybe a little bit more local issues, I eat, central 768 00:41:42,680 --> 00:41:46,600 Speaker 4: bank policy, corporate earnings, so maybe a day to day 769 00:41:46,600 --> 00:41:48,640 Speaker 4: basis that might be totally from this. But if you 770 00:41:48,680 --> 00:41:51,239 Speaker 4: look at this market really since October, which is you know, 771 00:41:51,360 --> 00:41:54,080 Speaker 4: kind of the low of this market, you know, s 772 00:41:54,160 --> 00:41:56,400 Speaker 4: and p up about twenty five percent during that time here, 773 00:41:56,520 --> 00:42:00,160 Speaker 4: So despite all the geopolitical tensions around the world, much 774 00:42:00,280 --> 00:42:02,919 Speaker 4: much hotter than I think anybody would like to see, 775 00:42:03,600 --> 00:42:05,359 Speaker 4: this market is moving higher. 776 00:42:05,560 --> 00:42:10,040 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apples, Spotify, 777 00:42:10,239 --> 00:42:13,880 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 778 00:42:14,040 --> 00:42:17,000 Speaker 1: ten am to noon Eastern on Bloomberg dot com, be 779 00:42:17,120 --> 00:42:20,480 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 780 00:42:20,600 --> 00:42:23,719 Speaker 1: can also watch us live every weekday on YouTube and 781 00:42:23,920 --> 00:42:25,480 Speaker 1: always on the Bloomberg terminal