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Speaker 2: Let's check in with one of the experts we always
Speaker 2: love to chat with when it comes to global energy,
Speaker 2: and that's Ellen Wald, Senior Fellow at the Atlantic Council. Ellen,
Speaker 2: we're seeing, obviously, the spike up and energy prices and
Speaker 2: that seems like we've seen this before. Is this an
Speaker 2: efficient market that you're looking at right here? And how
Speaker 2: do you think this plays out over the coming days.
Speaker 3: Honestly, what I think we're seeing is a global energy
Speaker 3: crisis unfolding in real time.
Speaker 4: I'm surprised, honestly.
Speaker 3: That prices didn't spike to eighty five when the market opened,
Speaker 3: you know, Sunday night in Asia, because it was clear
Speaker 3: once uh you know, tankers were not moving through the
Speaker 3: straight orform moves either way, that this is going to
Speaker 3: be a major energy crisis unless it was resolved by today.
Speaker 3: I mean, I think that that unless they can get
Speaker 3: the tankers moving in the next couple of days, we're
Speaker 3: going to see extremely high oil prices, which will frankly
Speaker 3: be warranted given that no oil is moving out of
Speaker 3: the Persian Gulf. And while you know, consumers in the
Speaker 3: United States may have plenty of oil, we're not going
Speaker 3: to necessarily see you know, gas lines, We've got product,
Speaker 3: we've got oil. We're not immune to you know, price
Speaker 3: bikes in the in the price of crude oil globally,
Speaker 3: and so this is going to affect people, you know,
Speaker 3: in terms of what they're paying at the pump. But
Speaker 3: other countries, okay, that depend and rely on this oil
Speaker 3: could potentially start to see shortages unless there is a plan,
Speaker 3: unless they start rolling out a plan to either get
Speaker 3: things moving or you know, find alternatives.
Speaker 5: So you say that some of the important issues in
Speaker 5: terms of oil prices as well as natural gas prices
Speaker 5: are the potential damage to oil infrastructure in Iran. You
Speaker 5: also talk about the extent of delays and marine traffic
Speaker 5: entering and exiting the Persian Golf, as well as OPEK,
Speaker 5: plus the response there from the US and China as well.
Speaker 5: How do you think about some of these challenges or
Speaker 5: all the different important variables that we're seeing as it
Speaker 5: relates to oil prices.
Speaker 3: I think that the most important variable right now is
Speaker 3: how long this military conflict is going to last, because
Speaker 3: that's what is pushing up the price of insurance so
Speaker 3: much that tankers are unwilling to attempt even to cross
Speaker 3: the straight orform moves. It's just too expensive, meaning it's
Speaker 3: too risky. So, you know, if they can get a
Speaker 3: handle in this military conflict, but it doesn't look like
Speaker 3: that's going to happen, you know, within the next week
Speaker 3: or two at least, seems like it's probably going to
Speaker 3: intensify in fact, and so that means that yes, opek
Speaker 3: plus has reacted.
Speaker 4: But the problem is most.
Speaker 3: Of its big producers, the ones with all the spare capacity,
Speaker 3: are the same ones that are in the Persian Gulf
Speaker 3: that rely on, you know, on the Persian Gulf to
Speaker 3: get oil out. Now we know that Saudi Arabia is
Speaker 3: starting to make plans to load more oil on the
Speaker 3: red seed. That's great, but it's still not going to
Speaker 3: account for all of the oil. Iraq is going to
Speaker 3: be in a huge issue. They're going to have to
Speaker 3: shut down production. In fact, they're already starting to shut
Speaker 3: down production because they don't have the storage capacity to
Speaker 3: just hold on to crude oil if it can't be
Speaker 3: loaded into tankers. So that's already starting to affect affect production.
Speaker 3: And then I do think that China is a big
Speaker 3: wild card here. Can China put its considerable economic weight
Speaker 3: to bear on Iran potentially to get it to maybe
Speaker 3: concede or make some concessions to end the military conflict
Speaker 3: sooner so that we can get the oil flowing.
Speaker 2: It seems oddly enough that one of the winners here
Speaker 2: might be President Putin and Russia to the extent that
Speaker 2: they can move their oil at these higher prices.
Speaker 4: Is Russia as a player.
Speaker 3: Here, yeah, exactly, Well, Russia is in a very good
Speaker 3: spot personally, That's what I think.
Speaker 4: Russia is in a very good spot.
Speaker 3: It can move more oil to China to satisfy some
Speaker 3: of the oil that China's not getting from the Middle East.
Speaker 4: Although I believe there.
Speaker 3: Have been some issues in terms of loading at one
Speaker 3: port that was recently attacked by Ukraine, which is certainly
Speaker 3: precipitous on their part. But Russia is also going to
Speaker 3: be able to charge a lot more for its oil,
Speaker 3: So this kind of conflagration is having the effect of
Speaker 3: kind of lining Putent's pockets, which is probably going to
Speaker 3: cause some problems down the road for the Trump administration
Speaker 3: if they're really looking to put an end to the
Speaker 3: Russia UK Craine conflict, you know, some time in the
Speaker 3: next year or so.
Speaker 5: So I'm also curious how will multinational companies, if you
Speaker 5: think about energy shipping insurance, how do they assess and
Speaker 5: price in the geopolitical risk here from conflicts like this.
Speaker 3: I mean, I'm not you know, I'm not an insurance
Speaker 3: expert here, but they're definitely looking at this and they're saying, Wow,
Speaker 3: the potential for a ship to get you know, severely damaged,
Speaker 3: have an oil spill and whatnot is really high right
Speaker 3: now in the Persian Gulf, and so they are adjusting
Speaker 3: their rates accordingly. Now there will be some ships who
Speaker 3: may be willing to you know, either self insure or
Speaker 3: chance it and may take that risk that right now
Speaker 3: that doesn't seem very likely. Plus you've also got the
Speaker 3: risk in you know, in the Red Sea of the
Speaker 3: hoothis that they could you know, kind of take up
Speaker 3: their mission again and start harassing ships there, which is
Speaker 3: a problem because you know, a Ramco at the very
Speaker 3: least is hoping to start loading oil out of its
Speaker 3: port in Gyanbu. And then if it wants to send
Speaker 3: that oil to Asia, it's going to have to leave
Speaker 3: the Red Sea, you know, go round the Arabian Peninsula
Speaker 3: and out that way. And if the houthis start posing problems,
Speaker 3: that's another issue to increase prices.
Speaker 2: And we got the oil pricing spiking high. Here's an
Speaker 2: intra day high, seventy seven dollars eighty five cents for.
Speaker 4: WTI good oil. A rack.
Speaker 2: Here's a red headline crossing the Bloomberg terminal. A rack
Speaker 2: starts shutting oil output at Ramala as storage fills. So,
Speaker 2: just as you were saying, Ellen, so Ellen, what role
Speaker 2: does the US play here? Can we just crank up
Speaker 2: our drilling and are refining to maybe offset some of
Speaker 2: the decreased supply out the middle least?
Speaker 3: Well, you can bet that, you know, every every fracking
Speaker 3: company is calling up people there. You know, anyone who's
Speaker 3: idled rigs has got to be putting them back into production.
Speaker 1: Now.
Speaker 3: I bet there's teams headed from North Dakota at the
Speaker 3: moment to get things going. I mean, this is really
Speaker 3: you know, this is the moment for the American oil industry,
Speaker 3: and it can really prove how agile, how quick it is.
Speaker 4: If these producers that have been.
Speaker 3: Talking about slowing down production, this is their moment to
Speaker 3: get things going and sell that oil, refine that oil.
Speaker 3: We have limited extra refining capacity in the United States,
Speaker 3: but we do have more production capacity. It's all about
Speaker 3: you know what we can get going, and you know
Speaker 3: what American companies can do with personnel, with people. You know,
Speaker 3: if there's money and financing available, they're certainly going to
Speaker 3: make that money selling oil, either you know, internationally or
Speaker 3: at home. So I would say this is the moment
Speaker 3: for the American fracker.
Speaker 4: Great, great to hear. I'm sure the folks down in
Speaker 4: the patch they're ready to go.
Speaker 2: Ellen Wald, Senior Fellow at the Atlantic Council, giving us
Speaker 2: the latest on global energy.
Speaker 6: Stay with us more from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
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Speaker 2: Win thin chief econmisce at Bank of Nasau. Wait, when
Speaker 2: you see the geopolitics on certay, we've kind of become
Speaker 2: a little bit used to that, but now we see
Speaker 2: it in time with higher energy prices, for example, how
Speaker 2: is the last several days or last several weeks has
Speaker 2: that impacted your economic outlook at all?
Speaker 7: Well, first of all, thanks for having me. It's always
Speaker 7: a pleasure. So I still think we're still in early days.
Speaker 7: I think the big question that's hanging over us, over
Speaker 7: everyone is, well, is this what's the duration and scope
Speaker 7: of this attack? Is it going to be a twelve
Speaker 7: day attack we saw last June? Because is it gonna
Speaker 7: be a month of a bartment followed by a groundovation
Speaker 7: like you saw during the first Golf War?
Speaker 4: Would be a groundovation followed by multi year occupants occupancy.
Speaker 4: We don't know. It's so so early, And be.
Speaker 7: Honest, it's it's the goals that the administration have put
Speaker 7: forth have been very fuzzy. So I think markets, as
Speaker 7: you know, hate uncertainty, They hate they really hate prolonged uncertainty.
Speaker 7: So it's really it's the big question is how long is.
Speaker 4: This going to go on? And you know, sort of
Speaker 4: the breadth and depth and it's to be determined.
Speaker 7: But you know, I think the problem with market is
Speaker 7: after a while you start pricing and like really bad outcomes,
Speaker 7: and that that's the concern.
Speaker 5: I mean, how do you actually forecast during a time
Speaker 5: like this. It's been so much uncertainty. I can only
Speaker 5: imagine what it was like when we had this gap
Speaker 5: in data, government data because the government shut down. You've
Speaker 5: got tariffs. Now we've also got this geopolitical uncertainty.
Speaker 4: What does your job look like?
Speaker 7: It's tinari, It's it's you know, the whole the phrase,
Speaker 7: the fog of war, that's that's where we are.
Speaker 4: When when does this fog lift?
Speaker 7: Obviously again the market's the quicker the better, But you know,
Speaker 7: to me, you just you can only see downside here.
Speaker 7: You know, we've talked about I'm go ingenough to remember
Speaker 7: all the oil shocks from the seventies. You know, it's
Speaker 7: it's stacklation, higher unemployment, high inflation.
Speaker 4: It really gets ugly.
Speaker 7: So the markets are repricing, and I think Paul you
Speaker 7: mentioned that the risk of higher inflation because it's not
Speaker 7: just what supplies, it's the shipping lanes, transport, it's all
Speaker 7: sort of all sorts of like sort of second third
Speaker 7: level effects that we just don't know about.
Speaker 4: But to me, they're all bad.
Speaker 7: If you're you know, to me, uncertainty, if your household
Speaker 7: all of a sudden your gas prices.
Speaker 4: Go well, you pull in right uncertainly, you're pulling. You
Speaker 4: worred about your job, you're pull in.
Speaker 7: If you're firm and looking at best thinking about investing,
Speaker 7: you see all what's going on while we're gonna pull
Speaker 7: in and if you're the Fed, we're gonna do it
Speaker 7: while we want to cut rates, probably because the livey
Speaker 7: labor markets is softening.
Speaker 4: But you don't know to your point, nor you don't
Speaker 4: really know what's going on.
Speaker 1: You don't.
Speaker 4: It's kind of being on.
Speaker 7: Hold, so to me, so being on hold and pulling
Speaker 7: back is not a good thing in sort of in
Speaker 7: terms of sort of wider economy. So I do see
Speaker 7: some downside risks if this is prolonged.
Speaker 2: Yep, Okay, let's put that to the side just for
Speaker 2: the moment. How is the US economy doing?
Speaker 7: From your perspective, it's doing solid. You know, we saw
Speaker 7: the Q four g D print a couple of weeks ago.
Speaker 7: Headline was, you know, softly expected. We know there is
Speaker 7: some impact from the government shutdown, But I was focusing
Speaker 7: on the consumption portions slower it's been.
Speaker 4: It's been sequentially slowing since I think mid year of
Speaker 4: last year.
Speaker 7: Yeah, sure, of course there's all these distortions, right, we
Speaker 7: had the shutdown, we had the weather, all these things.
Speaker 4: But taking junk conjunction note to me like nor you mentioned.
Speaker 7: This, like as what do you do with this sort
Speaker 7: of figure out what it's To me, it's like a puzzle,
Speaker 7: big puzzle that you're trying to figuret you get some
Speaker 7: clues pieces here and there. So got slow inflation, I'm sorry,
Speaker 7: slowing consumption as well as to me when I think
Speaker 7: is a very soft labor mark that's still softening, and
Speaker 7: to me, you put those two together and it's not
Speaker 7: a great mix. Then you've got higher oil prices can
Speaker 7: hit the pocketbook. So I don't think it's a recession.
Speaker 7: I think that's you know, that's tail risk.
Speaker 4: But I do look for sort of.
Speaker 7: Softening economy the fens on hold because obviously there's inflation risks.
Speaker 4: But I think when pushed customs comes.
Speaker 7: To shove, they worry about their full employment mandate.
Speaker 5: Right now, So what do you make of the disconnect
Speaker 5: because I think if you ask the average US consumer,
Speaker 5: they would say times are tough right now, right economically,
Speaker 5: but then you see a solid economy when we're looking
Speaker 5: at the data. What do you make of that disconnect
Speaker 5: between the super consumer confidence and then the actual data
Speaker 5: that we're seeing right now.
Speaker 4: No, that's been like a million O A question for
Speaker 4: the last couple quarters. Things haven't really aligned.
Speaker 7: But you know, we talked about this K shape economy
Speaker 7: where I can't remember the exact numbers, but something like
Speaker 7: twenty percent of the upper income people driving like over
Speaker 7: half of the.
Speaker 4: Consumption something like that. Thinks even more than that.
Speaker 7: So the bulk of Americans AAA eighty percent are struggling.
Speaker 7: They are worried about the price of eggs, they worry
Speaker 7: about their prices of gas. They're not getting these They're
Speaker 7: not the ones they are benefiting from the massive tax cuts.
Speaker 7: So the question has always been, well, in this K
Speaker 7: shape economy, can can that upper sloping K sort of
Speaker 7: support the lower sloping K part.
Speaker 4: The other distortion I think that's out there is the
Speaker 4: AI investment. You know, investment has been a big driver
Speaker 4: and we get this unbalanced growth.
Speaker 7: Whether it's the K shape whether it's the sort of
Speaker 7: AI stuff, it's it's to me, healthy economy is where
Speaker 7: people are getting hired, people feel comfortable going out and spending,
Speaker 7: people aren't worried about the jobs, and that's to me
Speaker 7: is sort of the US the most sort of the
Speaker 7: healthiest outlook. And again it's uh, you know, it's to be.
Speaker 4: Determined right now.
Speaker 7: The good news that the economy's been resilient, We're coming
Speaker 7: into this year pretty solid.
Speaker 4: But again, the longest drags out there more worried. I get.
Speaker 2: And you mentioned AI, and I think you know a
Speaker 2: lot of folks feel like that's having some impact on
Speaker 2: the liabor market today.
Speaker 4: And maybe A characterized as a.
Speaker 2: Low fire, low higher job economy, maybe that's being impacted
Speaker 2: by AI.
Speaker 4: Do we need as many entry level jobs.
Speaker 2: On the white collar side and all that type of things,
Speaker 2: And how do you get how do you feel?
Speaker 4: Well? I hear you talk about solid time, Paul.
Speaker 7: You're you're the view that that A as a job killer,
Speaker 7: and I'm with you on that one, at least over
Speaker 7: the short to medium term. It's hard to me to
Speaker 7: figure out how this ends up. Sure, some engineers and
Speaker 7: what have you, We'll get some jobs but short term,
Speaker 7: I just see so much you know, sort of downside
Speaker 7: for the labor market. So that's another yet another sort
Speaker 7: of I would just also say, you know, investment in
Speaker 7: data center, that's all capital intensives, not labor intensive.
Speaker 5: Right. I want to end where we started talking about
Speaker 5: the geopolitical tensions. What does consumer spending tend to look
Speaker 5: like during periods of uncertainty as it relates to geopolitical conflict?
Speaker 4: Yeah, so again it's on the present duration.
Speaker 7: But if it's I think in general like we saw
Speaker 7: after say nine to eleven, or you know, some.
Speaker 4: Of these big geopilical events, people.
Speaker 7: Just sort of pull in you thing of buying a car,
Speaker 7: buying Washington, Well, you're probably gon to put that off,
Speaker 7: and she kind of fail.
Speaker 4: What's going on? It sounds silly, you know.
Speaker 7: I don't think grandma's waiting home, you know, trying to
Speaker 7: figure out what's going on.
Speaker 4: You're on. But when you're seeing this on the news, uh,
Speaker 4: and you're seeing.
Speaker 7: Impact cast pump and you're hearing your neighbor getting laid off,
Speaker 7: these are all things that sort of things that make
Speaker 7: you go hmm. And And that's again Mark's hayten uncertainty.
Speaker 7: Firms hating certainty in households hat and I hate uncertainty.
Speaker 7: Everyone you know wants some sort of certainty and and
Speaker 7: I think that's sort of where we're at right now.
Speaker 4: So I use my fingers crossed right exactly, my fingers crossed. Wain,
Speaker 4: thanks so much for joining us.
Speaker 2: Always appreciate getting a few minutes of your.
Speaker 4: Time went in.
Speaker 2: He's the chief economist at the Bank of Nassau.
Speaker 8: Stay with us.
Speaker 6: More from Bloomberg Surveillance coming up after this.
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Speaker 4: Well.
Speaker 2: One of the reasons offered by the administration as to
Speaker 2: go to war with Iran is potentially regime change, and
Speaker 2: a lot of folks are asking is that possible? Who
Speaker 2: would ignite that regime change and who perhaps would assume power?
Speaker 2: I think our next guest has some views on that.
Speaker 4: Ali Safabi.
Speaker 2: He is a member of Iran's Parliament in exile, the
Speaker 2: National Council of Resistance of Iran, and he's also a
Speaker 2: president of Near Eastern Policy Research, which is a consulting
Speaker 2: in policy analysis firm in Washington, DC, Ali, thanks so
Speaker 2: much for joining us here. Is regime change possible with
Speaker 2: these events in Iran over the last several days.
Speaker 9: There's all good to be with you. Well, regime change
Speaker 9: is indeed possible. There's no doubt about it, because you
Speaker 9: have a nation that has been suppressed for forty seven years.
Speaker 9: You have had one hundred thousand dissidents of the main
Speaker 9: Ranian opposition, the major diner have executed by this regime.
Speaker 9: And you saw this past January, thousands were slaughtered, and
Speaker 9: of course we have seen the same thing happening in
Speaker 9: twenty twenty two, twenty nineteen, twenty seventeen. And yes, the
Speaker 9: Iranian people are very determined despite the cost that it
Speaker 9: has exacted on them to overthrow this regime. But that said, we,
Speaker 9: as the resistance movement that has been fighting this regime
Speaker 9: for forty seven years and the previous regime, the Shaws
Speaker 9: regime since nineteen sixty five, do not believe that change
Speaker 9: would come from the air. The change will not come
Speaker 9: true foreign intervention. Change must come from within Iran, underground,
Speaker 9: indigenous organic by the Ranian people and by a very
Speaker 9: potent and structured resistance within Iran itself. But yes, change
Speaker 9: is indeed possible. I think the a Reny regime is
Speaker 9: at the end of the line. Their economy is bankrupt,
Speaker 9: their currency is in a free fall, There's massive unemployment,
Speaker 9: systemic corruption, and the regional policy has been defeated.
Speaker 8: So yes, indeed changes is at hand.
Speaker 2: So President Trump called on the Iranian people to rise
Speaker 2: up and topple their government. Do you expect that the
Speaker 2: Iranian people are prepared to do that?
Speaker 9: I believe that the Iranian people are very independent minded people,
Speaker 9: as has been demonstrated throughout our history, and they're not
Speaker 9: going to rise up or sit down on a call
Speaker 9: of anybody from the outside. They will decide to rise
Speaker 9: up when they think the time is right. Obviously, at
Speaker 9: this current moment, with bombs dropping all over Iran, Iranian
Speaker 9: people are understandably careful not to do anything to get
Speaker 9: themselves into harms way, after all, there's a war ongoing.
Speaker 9: But as missus Rajavi said the other day, that they
Speaker 9: should try to take care take care of especially those
Speaker 9: who've been injured, and she also called on the all
Speaker 9: party it involved to exercise restraint when it comes to
Speaker 9: Iranian infrastructure and civilian areas. And yes, they will rise up,
Speaker 9: but in a methodic way, and this has to be organized.
Speaker 9: To expect that when bombs are dropping for millions, one
Speaker 9: is to come to the streets. It's just very unrealistic.
Speaker 9: No similar situation. You have seen people coming up. But
Speaker 9: once these conflicts of size and given that they're in,
Speaker 9: regime is weakened tremendously with the loss of harmony, which
Speaker 9: as Missus Rajavi said yesterday, means the end of the
Speaker 9: religious tyranny in Iran. They will come out, but it
Speaker 9: has to be an organized fashion. Nothing will happen spontaneously.
Speaker 5: In what ways has the current conflict altered the domestic,
Speaker 5: political or social environment inside Iran?
Speaker 8: Well, the very good question.
Speaker 9: Well, I think it has demonstrated to the people of
Speaker 9: Iran that the possibility to toppling this regime is much
Speaker 9: greater than any other time in the history of our nation.
Speaker 9: And it has also shown that the Ringing people in
Speaker 9: order to topple this regime, they must get organized. And
Speaker 9: I think if you look at the trend of events
Speaker 9: in Iran, particularly since twenty seventeen. You see that happening. Previously,
Speaker 9: there were protests by let's say, some sectors of Iranian society.
Speaker 9: But what happened in January you had basically all walks
Speaker 9: of life in Iran, from students to bizarre merchants, to workers,
Speaker 9: to farmers, nurses, you name it, were out on the streets.
Speaker 9: And this wasn't just in one or two cities. It
Speaker 9: was in four hundred different cities in thirty one provinces.
Speaker 9: And interestingly, the slogans were all universal. One as to
Speaker 9: the dictator too down with the oppressor, whether the Shah
Speaker 9: or the leader, meaning that Theyrenian people having learned the
Speaker 9: lessons of the nineteen seventy nine revolution when an impostor
Speaker 9: Romaine came in from abroad and stole that revolution, they
Speaker 9: are not very clear that I they know exactly what
Speaker 9: they want. They don't want relics of the past, and
Speaker 9: they don't want the current regime. They wanted to look
Speaker 9: to the future, which is a democratic future, a republican
Speaker 9: form of government, which is why mister Rajavi and the
Speaker 9: NCRO announced the formation of a provisional government that would
Speaker 9: hold three and fair elections in Iran within six months
Speaker 9: of the Milor's overthrow to elect the Constituted Assembly, whose
Speaker 9: members elected by the real people would draft the new
Speaker 9: constitution for a new republic and lead Iran into the
Speaker 9: twenty first century towards a glorious future which we are
Speaker 9: very hopeful for and we have fought for for forty
Speaker 9: seven years. So this is a very realistic objective, very
Speaker 9: realistic future, and it will come. It just takes time,
Speaker 9: it takes effort, it takes sacrifice, and Iranian people are ready.
Speaker 9: They're ready, and of course the organized resistance also is ready.
Speaker 9: Bear in mind that before the US attacked Commedies Compound
Speaker 9: a week earlier, the Amkare resistance units attacked the two
Speaker 9: hundred and fifty of them and they had no drawnes
Speaker 9: and they had no Tomahawk missiles. They attacked it underground,
Speaker 9: while of course we lost about one hundred and some arrested,
Speaker 9: but the remaining members of that two hundred and fifty
Speaker 9: assault force returned safety.
Speaker 8: So there is an organized opposition to do this.
Speaker 2: Just about the Ayatola Kamani was targeted and killed by
Speaker 2: the US military. How important of an event is that
Speaker 2: and what is next for the clerical leadership of Iran.
Speaker 9: Given that Sesson, well, that was a very very important development.
Speaker 9: In a sense, it beheaded the regime eliminated if you
Speaker 9: were the lynch pin of the clerical establishment. And I
Speaker 9: do not believe despite the pretenses that you see these
Speaker 9: days a three man council trying to appoint his successor,
Speaker 9: that's not going to happen. Kameny's stature and the power
Speaker 9: emerge for him being at the helm for thirty nine years,
Speaker 9: nobody can replace him.
Speaker 8: And I think in the weeks ahead you will see.
Speaker 9: Some sort of if you will, I don't want to
Speaker 9: call it disintegration, but fragmentation within the regime itself, and
Speaker 9: of course to the extent that the organized opposition and
Speaker 9: there Inni people can get better organized take actions that
Speaker 9: is needed to be taken.
Speaker 8: I think change will come.
Speaker 9: Change will come, and I must say that a firm
Speaker 9: policy is a Virnean regime is helpful to the Rani people.
Speaker 9: Remember that for forty seven years the West.
Speaker 8: Offered concessions to this regime.
Speaker 9: Even now, some countries are not willing to call for
Speaker 9: the overthrow of the Iranian regime. The British haven't yet
Speaker 9: put the IRGC on the terrorist list, and so I
Speaker 9: think that's what the watershed moment, and we are now
Speaker 9: in an entirely new phase, a new, if you will,
Speaker 9: a strategic situation.
Speaker 2: Yep, Ali, thank you so much, Sir Ali Savabi. He
Speaker 2: is the member of Iran's Parliament exile, that is the
Speaker 2: National Council of Resistance of Iran. With the reporting from
Speaker 2: what may come next for the leadership of Iran, but
Speaker 2: again the military operation continues and mister Sabab saying this
Speaker 2: will take time.
Speaker 6: Stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
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Speaker 2: Volatility today, again, we like to look at the VIX
Speaker 2: here just for the equity market volatility up almost four
Speaker 2: big points here to twenty five and change here. We
Speaker 2: did get the twenty seven earlier today, So this is
Speaker 2: a VIX level that's been hovering around sixteen, seventeen eighteen
Speaker 2: for a long time.
Speaker 4: So big increase in global volatility. Somebody gets paid to
Speaker 4: do this stuff.
Speaker 2: Michael schau Will put folio manager in Ion Asset Management. Michael,
Speaker 2: you wake up over the last couple of days and
Speaker 2: you see this geopolitical news and the market's been a
Speaker 2: little bit pricing a lot of it in. But boy,
Speaker 2: got some volatility today?
Speaker 4: Is it looks like.
Speaker 2: This adventure in Iran looks like it will be going
Speaker 2: on maybe a little bit longer than initially thought it.
Speaker 4: How do you dress volatility in a portfolio?
Speaker 10: I mean you have to come in set up for it.
Speaker 10: As you said that, you did have plenty of warning
Speaker 10: last week that something was happening. And frankly, anybody who's
Speaker 10: been alive in paying attention over the last couple of
Speaker 10: months has known that something that something was in the air.
Speaker 10: You know, I would say, right now, it looks like
Speaker 10: the Asians were least prepared, or maybe it's because there's
Speaker 10: so much US money in Asia right now, it seems
Speaker 10: to me that the bulk of a panic took place
Speaker 10: Sunday afternoon Monday evening. We calmed down in yesterday's US session,
Speaker 10: and it looks like things got pitty hairy in Asia overnight,
Speaker 10: judging by what I saw when I woke up this morning.
Speaker 5: So how do you play this market? I mean, how
Speaker 5: are you advising your clients during this time period? I mean,
Speaker 5: we saw energy as the best performing sector in the
Speaker 5: S and P five hundred today. But are there any
Speaker 5: specific sectors that you're keeping an eye on?
Speaker 10: Well, I mean, I think energy was what you wanted
Speaker 10: to own, and I think you wanted to earn it
Speaker 10: for various reasons. We've been bullished on energy since the
Speaker 10: fourth quarter and fortunately added to positions you know at
Speaker 10: that point in time, you know, I think now, I
Speaker 10: think there's a lot of noise going on. I do
Speaker 10: think it's very important to keep an eye on credit.
Speaker 10: Credit had been quietly misbehaving, or particularly credit related equities
Speaker 10: have been quietly misbehaving going into this, I think, without
Speaker 10: any obvious linkage to a van So look, I think
Speaker 10: this is going to be a test of the market's
Speaker 10: nerve now and we'll learn a lot by you know,
Speaker 10: what bottom's early and what bottom's like.
Speaker 2: Allocation here, what's typically your portfolios allocation? Stocks, bonds, commodities, alternatives,
Speaker 2: because diversification is the tried and true way to try
Speaker 2: to deal with volatile well.
Speaker 10: I mean I run a hedge fund, I'm not an advisor,
Speaker 10: so you know, in my portfolio we've been sort of
Speaker 10: heavy on commodities for the last eighteen months or so,
Speaker 10: and you know, just as I say, we spent the
Speaker 10: fourth quarter lightening up somewhat on precious medals and adding
Speaker 10: to adding to energy. Look, I think the global economy
Speaker 10: is still fine. I think the global economy will will
Speaker 10: find a way. You know, we'll find a way through this.
Speaker 10: But you know, we've been adamant for more than a
Speaker 10: year now that the ownership of commodities is much much
Speaker 10: more important, both of the sort of industrial and economic
Speaker 10: level and at the portfolio level than people understand.
Speaker 5: So how far do you think these precious metals, Well,
Speaker 5: how many legs do you have to run? If I
Speaker 5: think about it on a year to date basis, I'm
Speaker 5: looking at spot gold, it's not about twenty percent so
Speaker 5: far in twenty twenty six. How much further do you
Speaker 5: think this rally can go?
Speaker 10: You know, I think precious medals probably made a major
Speaker 10: peak in January, and I think it's going to take
Speaker 10: quite some time to get who that silver may actually
Speaker 10: have made its peak at one hundred and twenty Gold
Speaker 10: I think makes a higher high. But I think it's
Speaker 10: going to be some distant stand of rode as I
Speaker 10: say it's it's I think it's all about energy for
Speaker 10: the rest of this half of the year. And I
Speaker 10: think what's going to surprise people is that even if
Speaker 10: this particular episode calms down in the next two to
Speaker 10: three weeks and energy has a pullback, it doesn't pull
Speaker 10: back to where it was a couple of months ago.
Speaker 2: So I mean just recently is a few a month
Speaker 2: or two ago, or even a few weeks ago, there
Speaker 2: was a discussion of there's a global oil glut in
Speaker 2: the marketplace.
Speaker 4: We don't buy that. No, we did.
Speaker 10: We bought crude when we saw that. We were buyers
Speaker 10: of crude after Venezuela, where there was this sort of
Speaker 10: final flush out of this idea that somehow, you know,
Speaker 10: a few million extra vowels and Venezuela were going to
Speaker 10: come on board. No, I think the balance between supply
Speaker 10: and demand for crude is tighter than people realized. I
Speaker 10: think the tendency to stockpile globally is accelerating arm and
Speaker 10: I think at fifty five dollars a bowel, crude was
Speaker 10: a pretty good one way beat to the upside. No, granted,
Speaker 10: at seventy five eighty dollars to the bowels, it's a
Speaker 10: more nuance bet. But as I say, I think people
Speaker 10: came into via much too bearish crude oil arm and
Speaker 10: you know there's been a somewhat hurried adjustment to that.
Speaker 5: How do you think about opportunities outside of the United States.
Speaker 10: I mean, we like non US markets. I think the
Speaker 10: you know, the relationship between emerging market performance and S
Speaker 10: and P performance, it's what I would call a very
Speaker 10: trendy performance. What I mean by that is it tends
Speaker 10: to be several years in one direction or the other.
Speaker 10: And I think emerging markets, you know, sort of finished
Speaker 10: a ten to fifteen year period of out underperformance against
Speaker 10: the US last year, and all things being equal, I
Speaker 10: think over the next five years EM beats EM beats
Speaker 10: V S and P.
Speaker 4: That doesn't mean it.
Speaker 10: Goes up every day for five years. There'll be plenty
Speaker 10: of pullbacks. But I think you want to be looking
Speaker 10: to diversify outside. And again I have the latitude to
Speaker 10: do whatever I want to do. I run a much
Speaker 10: more glow wal portfolio today and I would have done
Speaker 10: two or three years ago.
Speaker 2: And that kind of goes to the issue of just
Speaker 2: an economic discussion globalism. I mean, this is an administration
Speaker 2: that suggests, you know, America first, and we've seen that
Speaker 2: actually in a lot of corporate movements, corporate actions. Do
Speaker 2: you think globalization is on the wayne dead dying on the.
Speaker 10: Way and yeah, yeah, I mean basically, look, I start
Speaker 10: with China first before I said America first. Look, I've
Speaker 10: coined a phrase fragmentation, which I've been using to describe
Speaker 10: as sort of end of globalization and tracking it. You
Speaker 10: sort of see this word fragment, fragmented, fragmentation. It's popping
Speaker 10: up all over the place all of a sudden. And look,
Speaker 10: I think globalization its peak was probably twenty fifteen in retrospect.
Speaker 10: It clearly took a big ding in twenty eighteen, took
Speaker 10: another ding in COVID, and what was left of it,
Speaker 10: you know, I think fell apart over the last eighteen months.
Speaker 10: Doesn't mean we don't We're still going to have tons
Speaker 10: and tons of global trade, but I think the tendency
Speaker 10: is going to be to split the world between a
Speaker 10: US dominated sphere of influence and a Chinese dominated sphere
Speaker 10: of influence.
Speaker 4: And although there.
Speaker 10: Will be trade between those spheres, you know, the tendency
Speaker 10: is to see those relationships attenuate and a deeper relationship
Speaker 10: within the spheres of influence.
Speaker 5: It feels like the word uncertainty has been used more
Speaker 5: times than not. I'm curious, you know, as we think
Speaker 5: about a potential resurgence or surge in inflation, as people
Speaker 5: are really weighing some of these geopolitical tensions, how do
Speaker 5: you think about the outlook and how to position yourself
Speaker 5: given the lack of you know, certainty on the outlook
Speaker 5: for inflation and the economy more broadly.
Speaker 10: I mean again, I you know, came into be strongly
Speaker 10: believing in at least reflation. You know, I think we certainly,
Speaker 10: we certainly see that. You certainly see strengthening PPI actual inflation. Yeah, Look,
Speaker 10: I think it's very sticky. I think it's easier for
Speaker 10: inflation to get from two and a half to three
Speaker 10: and a half and from two and a half to
Speaker 10: one and a half. So, you know, I look at
Speaker 10: the long end of the curves as potentially dangerous. But
Speaker 10: there's a lot of cross currents here. As I say, credit, wow,
Speaker 10: is me more than inflation at this point in time.
Speaker 10: I think the performance of credit is absolutely going to
Speaker 10: make all bake twenty twenty six thirty seconds.
Speaker 2: Private credit cockroaches, is that where you think the concern
Speaker 2: is the first and foremost.
Speaker 10: Private credit is where the excess was and whether his
Speaker 10: excess for his mistakes.
Speaker 4: Very good, Michael.
Speaker 2: Shall, thank you so much for joining us. Michael Shall
Speaker 2: is a portfolio manager for Ion Asset Management based here
Speaker 2: in New York City.
Speaker 6: Stay with us more from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
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Speaker 2: The military operations in Iran, the US has hit more
Speaker 2: than one thousand Iran assets. Now comes a hard part,
Speaker 2: so says our next guest, Becca Wasser, Defense lead for
Speaker 2: Bloomberg Economics Beca. I'd love for you to just summarize
Speaker 2: what you understand to be the military operations to date,
Speaker 2: and then maybe what maybe coming in the next several
Speaker 2: days and maybe even weeks.
Speaker 11: So, the United States has hit over one thousand targets
Speaker 11: in Iran. These are largely going after Iran's missile program,
Speaker 11: both its missile storage sites, production facilities, and missile launchers,
Speaker 11: as well as Iran's navy and key command and control centers.
Speaker 11: There's been a division of labor with Israel, who has
Speaker 11: largely gone after some of the leadership, as well as
Speaker 11: government buildings and at least one nuclear site. So this
Speaker 11: is what it's looked like to date. There's been a
Speaker 11: tremendous amount of firepower and intense firepower at that thrown
Speaker 11: at Iran. In the coming days, I think we expect
Speaker 11: to see more strikes, in part because President Trump has
Speaker 11: said that the big wave is coming, and so what
Speaker 11: that ends up looking like is probably going after more
Speaker 11: navy targets, additional missile targets. But at some point the
Speaker 11: United States is going to run out of pre planned
Speaker 11: targets to strike, which means it's going to either have
Speaker 11: to restrike some of the same targets or generate more,
Speaker 11: which can be a little bit of a riskier endeavor
Speaker 11: because it requires US intelligence and surveillance and reconnaissance assets
Speaker 11: and fighter jets flying overhead.
Speaker 4: BETA.
Speaker 5: Tell us what exactly you understand to be the depth
Speaker 5: of Iran's missile capabilities.
Speaker 11: So nobody truly knows exactly how many missiles Ron has
Speaker 11: and how many they actually have left after their missile
Speaker 11: program has been severely degraded by Israeli and U strikes.
Speaker 11: But prior to all of this, the United States estimated
Speaker 11: in twenty twenty two that Iran had about three thousand
Speaker 11: ballistic missiles of various ranges. Israel said that that number
Speaker 11: dropped to about two thousand after the Twelve Day War,
Speaker 11: So we can assume that there had been some rebuilding
Speaker 11: between the Twelve Day War and this operation, but no
Speaker 11: one knows exactly how many they have. That being said,
Speaker 11: it's not just Iran's missiles that matter here, it's also
Speaker 11: its large amount of one way attack drones that it
Speaker 11: has used in great effect to menace some of the
Speaker 11: Gulf states and to attack US bases throughout the region.
Speaker 4: Beka.
Speaker 2: We understand one of the objectives for the US intervention
Speaker 2: here was to degrade the nuclear capabilities of the Iranians.
Speaker 2: But again past reporting, we've learned that those are those facilities,
Speaker 2: many of them are built way underground and very hardened bunkers.
Speaker 2: Is there, what's the US military saying about its ability
Speaker 2: to attack those targets.
Speaker 11: Has the ability to attack those targets, It requires heavy
Speaker 11: bombers flying either from the continental United States or somewhere
Speaker 11: else overseas, like the base in Diego, Garcia that has
Speaker 11: been in the news so much lately, or bases in Europe,
Speaker 11: and it also requires them to use heavy bunker buster
Speaker 11: bombs to get to those hardened targets. Underneath that being said,
Speaker 11: we haven't seen the United States try and strike any
Speaker 11: of those nuclear sites quite yet, but we have seen
Speaker 11: them use bombers and some of the more heavier bombs
Speaker 11: to go after some of the missile cities that Iran
Speaker 11: has that are also hardened underground. So we can maybe
Speaker 11: see some additional strikes on nuclear sites in the coming
Speaker 11: days as part of that big wave that both President
Speaker 11: Trump and Secretary Rubio have talked about. But it does
Speaker 11: go against what President Trump has said previously that his
Speaker 11: earlier operation obliterated Iran's nuclear program, So if the US
Speaker 11: restrikes those, it might go against what he's said before.
Speaker 5: Super quickly, just curious, how do you think about the
Speaker 5: idea of how complex and costly this could potentially be
Speaker 5: for Washington as we look toward more than difficult, more
Speaker 5: difficult targets.
Speaker 11: Absolutely, there are risks ahead and abound, and I think
Speaker 11: that's something that we've heard really consistently from President Trump
Speaker 11: and from other leaders, particularly General Dan Keane at the
Speaker 11: Defense Department, where they have warned that more casualties are likely,
Speaker 11: not only civilian casualties, but casualties of military service members.
Speaker 11: And at the end of the day, we can cost
Speaker 11: the number of airplanes that have been shot down in
Speaker 11: friendly fire incidents, we can cost the number of missiles,
Speaker 11: but the one thing that we can't actually put a
Speaker 11: price tag on is the blood and treasure lost from
Speaker 11: our service members.
Speaker 2: Beer Defense lead for Bloomberg Economics, based in Washington and DC.
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