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

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business app.

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Speaker 3: So here's the lisis this morning.

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Speaker 2: The President struggling to find a coalition to escort tankers

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Speaker 2: through the stratiform Merz. The President also threatening to expand

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Speaker 2: strikes on carg Island, Iran to Maine or like Sport Hub.

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Speaker 2: The former Deputy National Security Advisor, Victoria Coast joins us

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Speaker 2: some more. Victoria, welcome back to the program. Let's just

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Speaker 2: recap some headlines. So an hour ago we got a

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Speaker 2: headline from Israel, a minister from Israel that the security

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Speaker 2: chief in Iran had been quote eliminated. The fate of

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Speaker 2: the Supreme leader is still very much unclear at this point.

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Speaker 2: Who is leading the war effort in Iran.

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Speaker 4: Well, good morning, John. It's very difficult to tell.

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Speaker 1: And the elimination of Ali Larjani, who is essentially their

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Speaker 1: national security advisor, is a.

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Speaker 4: Huge blow to them.

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Speaker 1: He is a long term politician, he was the speaker

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Speaker 1: of their parliament, also deeply involved in their nuclear program,

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Speaker 1: part of a very powerful family, and would have been

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Speaker 1: in contention to be one of our candidate rather to

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Speaker 1: be Supreme leader in the event that Moshtaba Kammani turns

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Speaker 1: out to have not survived his injuries. So this is

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Speaker 1: a huge blow to the decision making of the Iranian government. Again,

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Speaker 1: another powerful figure. He was marching in the Cuds Day

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Speaker 1: Parade last Friday, very active Twitter feed. His pin tweet

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Speaker 1: is mocking the dignified transfer of our six heroes through

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Speaker 1: Dover earlier this month. So this is this is a

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Speaker 1: very very big deal, and I think we'll can tribute

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Speaker 1: to the just kind of disintegration of command and control

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Speaker 1: that we've seen in Tehran.

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Speaker 5: A significant elevan of development for sure. Victoria this morning,

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Speaker 5: coming off the heels with the President, said yesterday we

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Speaker 5: don't know if he's dead or live, talking about the

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Speaker 5: Supreme Leader. Nobody's seen it, which is unusual. Building on

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Speaker 5: Jonathan's point, if the US wants to have discussions with

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Speaker 5: the regime, who do they actually have an outreach to.

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Speaker 4: Well, again, this is an excellent question, and I.

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Speaker 1: Think what we may start to see are some lesser

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Speaker 1: known figures who are more kind of career bureaucrats in

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Speaker 1: the Iranian system start to step forward. We'll see if

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Speaker 1: this has the intended effect of getting what's left of

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Speaker 1: the Iranian leadership to reconsider their very hardline positions, and potentially,

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Speaker 1: you know, they will reach out to the Americans to

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Speaker 1: try to make a deal. Another problem they have, Lisa, though,

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Speaker 1: is that they have been They've been attacking systematically all

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Speaker 1: of their neighbors, including countries like Oman and tar who

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Speaker 1: traditionally are interlockertors. They're the negotiators who could be carrying

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Speaker 1: out these discussions, but by very aggressively attacking them, Iran

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Speaker 1: has alienated them, so they're not all that interested in

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Speaker 1: talking to the Iranians either. So the Iranians are in

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Speaker 1: an increasingly difficult.

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Speaker 5: Position when it comes to energy and the flow through

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Speaker 5: the Strait of Hormuz.

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Speaker 3: Do you think the.

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Speaker 5: President is going in the end to get this coalition together.

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Speaker 5: He voiced a tremendous amount of frustration yesterday with the

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Speaker 5: countries he had previously called upon.

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Speaker 1: Yes, and you know, this should have happened ten years ago.

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Speaker 1: I mean, the United States is not dependent on the

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Speaker 1: flow of energy out of the Gulf. The countries who

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Speaker 1: are countries like China, South Korea, the Europeans, you know.

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Speaker 4: They have to have that energy.

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Speaker 3: We don't.

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Speaker 1: And so the fact that we've been spending billions upon

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Speaker 1: billions of dollars in ensuring this safe passage is patently unfair.

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Speaker 1: So this is the kind of capability these countries should

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Speaker 1: have developed a long time ago. The President absolutely correct,

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Speaker 1: I'm calling on them to do it. However, the fact

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Speaker 1: of the matter is that, particularly for the Europeans, they

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Speaker 1: don't have the kind of force, the ability to project power,

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Speaker 1: force protection.

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Speaker 4: They haven't been building their navies.

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Speaker 1: And so it's not that kir Starmer doesn't want to

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Speaker 1: send a carrier to the Gulf. I don't think he

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Speaker 1: can at this point. I don't think he has the

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Speaker 1: force readiness. I mean, they couldn't even get a destroyer

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Speaker 1: to Cyprus in ten days at the beginning of the war.

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Speaker 1: So I think we're really exposing a terrible weakness in

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Speaker 1: NATO and something that needs to be addressed long term.

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Speaker 6: With long term what does that mean for the future

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Speaker 6: of NATO, Well.

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Speaker 1: I mean, I think it could be a really good

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Speaker 1: thing for the future of NATO. I think what the

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Speaker 1: President did at at the NATO summit last year in

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Speaker 1: the Hague, getting our European allies to commit to that

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Speaker 1: five percent of GDP on defense was an excellent first step.

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Speaker 1: We need that money to be spent though, We need

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Speaker 1: those ships to be purchased, and then if they want

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Speaker 1: to protect their national interests security, then they should be

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Speaker 1: able to deploy them.

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Speaker 6: Does it make it easier or harder to open the

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Speaker 6: straight up our moves that we have chaos right now

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Speaker 6: in Tehran?

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Speaker 4: I guess that's sort of a mixed bag.

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Speaker 1: I mean, the more we degrade their ability to fire missiles,

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Speaker 1: you know, the easier it is to open the strait.

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Speaker 1: But that said, you know, one guy with a limpet

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Speaker 1: mine on a small boat can do a lot of damage.

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Speaker 1: So it remains a menace and a nuisance. But the

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Speaker 1: other thing we have that's coming online and it looks

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Speaker 1: like we can expand its capacity. Are some pipelines that

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Speaker 1: bypass the Strait. We have petroline in Saudi Arabia from

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Speaker 1: Abbocq to Yambo, essentially from the Persian Gulf to the

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Speaker 1: Red Sea that can run. Apparently we thought it was

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Speaker 1: about five million barrels a day. It's up around eight now.

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Speaker 1: So that's not all of the twenty million barrels that

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Speaker 1: usually come out of the Gulf, but it's big chunk

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Speaker 1: of it. So I think we'll see that pipeline activity

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Speaker 1: expand and that really in a way diffuses the Iranian

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Speaker 1: the Iranian threat.

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Speaker 2: Stay with us more Bloomberg surveillance coming up after this

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Speaker 2: Bran crude holding it over one hundred dollars a hour

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Speaker 2: this morning is down to linka over US land coalition

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Speaker 2: to protect energy flows through the straight Offormers. Bob McNally

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Speaker 2: of Rapid and Energy Predicting Disruptions will last a few

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Speaker 2: more weeks. Right in this it appears that our thirty

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Speaker 2: day worst case allmost disruption scenario modeled last June may

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Speaker 2: have been overly optimistic. Bob john just now for more,

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Speaker 2: but welcome to the program. Speaking of optimism, there were

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Speaker 2: a number of tankers that got through the strain yesterday.

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Speaker 2: I think that provided some people in this market some comfort.

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Speaker 2: Could you give us some perspective on that.

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Speaker 3: Hey, John, I think you're right. You know, we also

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Speaker 3: saw traders are probably hedging the beginning of the spr

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Speaker 3: draw in the United States. The President are called for

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Speaker 3: escorts and so forth, and as you noted, the Iranians

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Speaker 3: are letting out a few hostages and so Secretary Besson

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Speaker 3: also made comments saying this is a good thing. You know,

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Speaker 3: we're supporting it. So you know, the market, John, in

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Speaker 3: my view, is still coming to terms with the fact

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Speaker 3: that a load bearing assumption in energy is collapsing, and

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Speaker 3: that load bearing assumption is that the US would permit

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Speaker 3: anybody to strangle the horror move straight for more than

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Speaker 3: a few hours today's max. And so I think there's

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Speaker 3: still this reservoir of kind of disbelief and hope that

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Speaker 3: this is going to be over soon, that this math,

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Speaker 3: these disruptions not only for oil other things. As you

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Speaker 3: just noted, Danny noted, it's got to stop, and so

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Speaker 3: we took a breather yesterday, but it's not stopping, and

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Speaker 3: crude is going to march higher I'm afraid, Bob, is

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Speaker 3: it a good thing?

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Speaker 5: Though I know you reiterated the words of the Treasury secretary. Basically,

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Speaker 5: the regime is saying this international waterway is not closed,

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Speaker 5: it's controlled, and it's controlled by.

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Speaker 3: Us, right, Anne, Marie. But they're not going to let

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Speaker 3: enough oil out to put oil prices. What should have

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Speaker 3: been obvious is Iran would play the only card it had,

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Speaker 3: which was to inflict an oil price increase and a

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Speaker 3: gas price increase on the President's the only thing it

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Speaker 3: has left. It's military has gone even since last June.

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Speaker 3: So Iran's going to let out a few tankers just

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Speaker 3: to divide the United States from other countries and curry

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Speaker 3: favor just enough. But it is not going to allow

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Speaker 3: enough out to halt the upward march in crude and

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Speaker 3: product prices. In my view, is.

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Speaker 5: There a point where the prices are too high where

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Speaker 5: some of Iran's backers, like China, start to put pressure

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Speaker 5: on the regime.

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Speaker 3: You know? I think so. I think as we get

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Speaker 3: closer to that level, which we may discover, which is

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Speaker 3: where global economic growth starts to slow, because you can't

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Speaker 3: have global economic growth without twenty percent of the energy returning.

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Speaker 3: Whether that level is one fifty, one sixty, we don't know,

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Speaker 3: but yes, when we start seeing shortages too, when refiners

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Speaker 3: have to start dropping runs, which we're starting to see,

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Speaker 3: when folks run out of refined products and Asia jet fuel,

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Speaker 3: that's when things get serious and China will increase pressure

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Speaker 3: we expect solo other countries.

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Speaker 6: What's your forecast for full year oil prices given the

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Speaker 6: fact that when you look at the forward curve, you're

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Speaker 6: looking at something like seventy five dollars in barrel by

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Speaker 6: the end of this year, does it seem like that

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Speaker 6: is an underestimation or an overestimation.

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Speaker 3: Well, one thing I've learned is the future's curve is

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Speaker 3: an awful predictor of future spots, so we ignore it

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Speaker 3: entirely for that. Lisa, it's really tough. I'll say my

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Speaker 3: oil analyst colleagues at Rapid and Energy Group, we're we're

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Speaker 3: putting together balances, we're updating them here. But you know,

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Speaker 3: we could be we could be at thirty by the

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Speaker 3: end of the year if we have to go to

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Speaker 3: one fifty or one sixty. But booms tend to be

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Speaker 3: followed by busts, so seventy is as good as any

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Speaker 3: other price at the end of the year. It's wildly uncertain,

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Speaker 3: as you guys noted with all the shark circling, almost

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Speaker 3: any price is imaginable toward the end of the year.

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Speaker 3: And the higher we go, though, I'll say, the lower

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Speaker 3: we're likely to be at the end of the year.

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Speaker 4: Can you welpo us.

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Speaker 6: Through what goes into that? Is it demand destruction or

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Speaker 6: is it people looking for alternative uses of energy? I'm

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Speaker 6: struck by Jeff Curry. He put out another note this morning.

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Speaker 6: You can't print molecules talking about all the stockpiling that's

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Speaker 6: going to take place after this, and how we really

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Speaker 6: never even recovered from the Huthis and what happened in

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Speaker 6: the Red Sea.

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Speaker 3: It took a while.

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Speaker 6: Why do you think that isn't likely and prices could

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Speaker 6: inflect so much lower?

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Speaker 3: Well, it's about demand destruction. So what happens is if

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Speaker 3: you look at all the major recessions in the last

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Speaker 3: since World War Two, an oil price spike is usually

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Speaker 3: present at the scene of the crime. They either caused

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Speaker 3: it or contributed to it. Because oil demand, if you

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Speaker 3: think about it, is really an elastic It's not like

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Speaker 3: going to the movies or buying cigars or whatever people do.

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Speaker 3: It is necessary for life.

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Speaker 7: Right.

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Speaker 3: If the pump price is higher, you still have to

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Speaker 3: drive to work. So the only way to get demand

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Speaker 3: down is to stop the work, if you will, is

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Speaker 3: to slow economic activity because oil is embedded in that.

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Speaker 3: So what happens is oil keeps on rising until it

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Speaker 3: causes a demand slow down, and then when that happens,

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Speaker 3: demand collapses. It goes away and the price collapses. We

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Speaker 3: saw that in two thousand and eight, we saw that

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Speaker 3: in other times, and I'm afraid that's what we could

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Speaker 3: be looking at here if we have to balance this

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Speaker 3: market by demand destruction at much higher levels.

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Speaker 5: Bob, I'm really glad you brought up products. Goldman Sachs

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Speaker 5: is out on a note saying that the greater impact

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Speaker 5: will be on products like jet fuel. Like on diesel.

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Speaker 5: We saw diesel hit five dollars dollars a gallon, north

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Speaker 5: of five dollars a gallon. That is important for freight,

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Speaker 5: that's important for construction, for the factories in America. We

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Speaker 5: haven't seen that since the spike of December twenty twenty two.

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Speaker 4: You worked in the White House.

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Speaker 5: What policy tools do you think this administration is ready

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Speaker 5: to deploy.

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Speaker 3: Well, we've seen the policy tools more or less deployed already,

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Speaker 3: looking at a Jones Act waiver, which helps because now

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Speaker 3: the East Coast the United States can bring in a

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Speaker 3: little more product from the Gulf Coast at lower price.

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Speaker 3: That was a good step. There are a few of

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Speaker 3: the things they can ease RVP or kind of volatility waivers,

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Speaker 3: regulations on gasoline to make it a little easier to

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Speaker 3: make gasoline this summer a little more cheaply. So there

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Speaker 3: are nips in tucks they can do around the edges,

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Speaker 3: but they're really marginal andmory. I think there's really nothing

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Speaker 3: they can do. The only major things now I think

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Speaker 3: on the table would be big mistakes. The idea of

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Speaker 3: intervening in futures or restricting exports. I don't think export

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Speaker 3: restrictions are on the table, but in a panic, you

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Speaker 3: can't rule that out. Future's intervention I know has been

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Speaker 3: an issue you have been covering, though right now it's

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Speaker 3: about avoiding mistakes, I think, not coming up with policy

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Speaker 3: solutions to these especially refined product problems.

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Speaker 2: Bob, I've got to ask you, because you mentioned it,

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Speaker 2: what would that look like? Restricting exports because as a

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Speaker 2: professional like yourself, it's obviously something you don't think would work.

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Speaker 2: But don't roll it out for a politician who is

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Speaker 2: probably looking at other things.

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Speaker 3: But what would that look like? Yeah, stroke of the pa, John,

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Speaker 3: I mean, president has clear authority there under emergency economic powers.

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Speaker 3: He could just stroke of the pen say we're not

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Speaker 3: going to export gasoline and diesel anymore, We're not going

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Speaker 3: to export crude. He can say we're gonna wait until

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Speaker 3: stocks get to a certain level, or if they get

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Speaker 3: a below a level, we'll restrict exports. He can do

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Speaker 3: pretty much whatever he wants with regard to restricting exports.

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Speaker 3: So the power is clear. It would take two minutes

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Speaker 3: stroke of the pen. It would be an amazing, massive mistake.

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Speaker 3: But you can't really again, I hear listen, I'm not.

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Speaker 3: I don't think they're looking at it. I don't I

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Speaker 3: think they know it's dumb. I mean they got elected

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Speaker 3: by partly by criticizing President Biden for restricting kind of

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Speaker 3: gas LNG exports. So it's a last it's a last

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Speaker 3: ditch stay with us.

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Speaker 2: Mulplinpeg Savan's coming up off to this coloria. If the

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Speaker 2: a Tiphisen has it bind and a two point fifty

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Speaker 2: price target on shares with and video GIL joined us

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Speaker 2: now for more GIL welcome. You heard ed talking about

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Speaker 2: it there. Supply constrained. Is that a good problem to have?

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Speaker 8: Well, not for Nvidia, And in fact, they're working very

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Speaker 8: hard to help all the other participants in the ecosystem

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Speaker 8: figure it out so they can sell more chips. And

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Speaker 8: Vidia's biggest problem right now is that everybody is not

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Speaker 8: catching up to demand as well as they are, and

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Speaker 8: so they've actually gone as far as organizing the whole

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Speaker 8: supply chain arount what they're calling an AI factory, which

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Speaker 8: is to say they're going to start coordinating all of

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Speaker 8: the different participants in building out data centers on their

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Speaker 8: platform so they can be more coordinated so there won't

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Speaker 8: be as many delays in data centers. If there is

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Speaker 8: not a warm shell in a data center ready for GPUs,

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Speaker 8: they can't sell GPUs. So now in Vidia, beyond just

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Speaker 8: making its own product, has to help everybody else make

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Speaker 8: their product in time so they can sell more GPUs.

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Speaker 6: Bother you that we don't have a lot of clarity

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Speaker 6: around this one trillion dollar number that was massive but

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Speaker 6: didn't really offer much visibility.

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Speaker 3: You know.

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Speaker 8: I'll take the other side of that, which is to say,

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Speaker 8: for the longest time in video just guided one quarter

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Speaker 8: at a time, and that meant that investors didn't really

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Speaker 8: have that much visibility going forward. In October they extended

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Speaker 8: that for twelve to fifteen months, and now they're extending

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Speaker 8: it out another twelve months. That's actually very helpful. Now

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Speaker 8: is a specific number with qualifications, maybe not, but keep

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Speaker 8: in mind consensus estimates for next year or four hundred

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Speaker 8: and sixty billion, and he just added five hundred billion,

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Speaker 8: so it doesn't matter how you qualify that number. That

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Speaker 8: means that Nvidia expects to grow more than thirty percent

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Speaker 8: next year, not just this year, but next year. But

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Speaker 8: part of the problem is the market.

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Speaker 7: Is not believing it.

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Speaker 8: If in Vidia is trading at twenty two to twenty

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Speaker 8: three times earnings, which is basically a market multiple and

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Speaker 8: on a very low end of their historical multiple range,

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Speaker 8: that tells you the market just doesn't believe it.

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Speaker 7: Jensen Wong is pushing rope.

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Speaker 8: He could have said two trillion dollars for next year

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Speaker 8: and the market's just not believing it. Now he has

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Speaker 8: a lot of credibility he's gained it over the years,

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Speaker 8: but the market is saying, we are skeptical that this

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Speaker 8: great data center build out will continue into next year.

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Speaker 8: The good news for end video shareholders is the closer

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Speaker 8: we get to that, the more in Vidia can show

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Speaker 8: that it is actually going to grow into next year,

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Speaker 8: that's the upside to the stock.

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Speaker 6: What was Oloff doing on stage with Jensen Wong.

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Speaker 8: They were trying to illustrate that humanoid robotics and other

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Speaker 8: types of robotics are making huge leaps forward. So they

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Speaker 8: brought Olaf from Frozen to life.

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Speaker 7: They had a music video recap up.

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Speaker 8: It was a very high production event yesterday. And Vidia

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Speaker 8: is expanding well beyond the GPU. That's the big takeaway

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Speaker 8: from day one of GtC is that really, up until

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Speaker 8: now it's been GPU and Kuda and maybe networking, and

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Speaker 8: now they've expanded that a lot, so multiple software options,

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Speaker 8: multiple networking options. They're going to start selling CPUs individually.

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Speaker 8: And the most important takeaway from yesterday is the addition

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Speaker 8: of the GROC chip into their data center systems. That

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Speaker 8: will bring them to such a level of inference productivity

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Speaker 8: that's going to extend their lead over broad common AMD

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Speaker 8: that's the biggest takeaway because there were a lot of

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Speaker 8: concerns that, oh, broad COMMAMD catching up with GPUs custom

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Speaker 8: GPUs A six and what and Vidia just did is

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Speaker 8: by integrating Rock, they're saying, no, we're going to extend

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Speaker 8: our lead. The cost per token on our platform for

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Speaker 8: inference is going to be a fraction of everybody else.

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Speaker 7: The productivity per.

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Speaker 8: Second for inference is going to be much better than

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Speaker 8: our competitors.

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Speaker 7: So that was the big news yesterday.

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Speaker 2: This is the Bloomberg Surveillance podcast, bringing you the best

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