1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:33,239 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. When 7 00:00:33,240 --> 00:00:37,160 Speaker 1: I hear about distressed debt investors today, I think there's 8 00:00:37,159 --> 00:00:40,120 Speaker 1: got to be such a dearth of investing opportunities. Our 9 00:00:40,159 --> 00:00:42,880 Speaker 1: next guest, though, not only focuses on distressed debt, but 10 00:00:42,960 --> 00:00:46,680 Speaker 1: also distressed equities. George schultzy Joins is now chief executive 11 00:00:46,680 --> 00:00:49,920 Speaker 1: officer of Salty Asset Management, which oversees about two hundred 12 00:00:49,920 --> 00:00:52,400 Speaker 1: million dollars. It is based in Purchase, New York. He's 13 00:00:52,400 --> 00:00:56,000 Speaker 1: in the studios today. Um, George, when we sat down, 14 00:00:56,280 --> 00:00:58,240 Speaker 1: you said to me, you know, there really aren't that 15 00:00:58,280 --> 00:01:01,400 Speaker 1: many opportunities on the debt side. Nothing is cheap on 16 00:01:01,440 --> 00:01:04,480 Speaker 1: the debt side. But in the equity world, you're seeing 17 00:01:04,640 --> 00:01:08,440 Speaker 1: some potential opportunities. Just before we get into the specific 18 00:01:08,520 --> 00:01:12,319 Speaker 1: names that you're looking at, why is that, Well, it 19 00:01:12,319 --> 00:01:15,040 Speaker 1: starts at a high level it's a good question. Um, 20 00:01:15,080 --> 00:01:18,160 Speaker 1: you know, the bond market and treasury market has been 21 00:01:18,160 --> 00:01:21,160 Speaker 1: on fire for decades, but that's finally starting to reverse. 22 00:01:21,680 --> 00:01:25,360 Speaker 1: You have monetary policy that's been extremely accommodated for years, 23 00:01:26,000 --> 00:01:28,360 Speaker 1: and the Fed is starting to tighten. Now the ten 24 00:01:28,440 --> 00:01:33,560 Speaker 1: year treasury is at about three UM. Policy remains accommodative, 25 00:01:33,880 --> 00:01:36,160 Speaker 1: but the Fed has raised rates six times since two 26 00:01:36,160 --> 00:01:38,240 Speaker 1: thousand and fifteen, and we're you know, most people are 27 00:01:38,280 --> 00:01:41,600 Speaker 1: expecting more rate increases going forward. There's also, of course, 28 00:01:41,640 --> 00:01:44,000 Speaker 1: the unwinding of the FED balance sheet, otherwise known as 29 00:01:44,080 --> 00:01:46,720 Speaker 1: quantitative So there's been there's been a gradual move up 30 00:01:46,720 --> 00:01:49,160 Speaker 1: in yields. And you said that basically at this point, 31 00:01:49,240 --> 00:01:51,920 Speaker 1: bonds are priced perfection. You're seeing sort of more of 32 00:01:51,960 --> 00:01:55,360 Speaker 1: the sort of que induced froth in the bond world. 33 00:01:55,440 --> 00:01:58,520 Speaker 1: Why aren't we seeing in the equities? Well, what's interesting 34 00:01:58,520 --> 00:02:02,040 Speaker 1: in what happens after come needs restructure. Um, if they 35 00:02:02,040 --> 00:02:05,240 Speaker 1: do it right, they eliminate sometimes billions of dollars in 36 00:02:05,280 --> 00:02:07,920 Speaker 1: debt and what comes out on the other end, all 37 00:02:07,920 --> 00:02:11,239 Speaker 1: of the things equal. As a company with a restructured, 38 00:02:11,520 --> 00:02:14,800 Speaker 1: de leveraged balance sheet, that really isn't that dependent on 39 00:02:14,800 --> 00:02:17,800 Speaker 1: the fixed income market anymore. And what we look for 40 00:02:17,880 --> 00:02:22,079 Speaker 1: there is really an arbitrage between where the former lenders 41 00:02:22,120 --> 00:02:25,760 Speaker 1: who received the new post distress common stock and in 42 00:02:26,040 --> 00:02:29,400 Speaker 1: a restructuring versus and where they'll hold it and what 43 00:02:29,440 --> 00:02:32,080 Speaker 1: they how they value that versus where the equity market 44 00:02:32,120 --> 00:02:36,679 Speaker 1: will eventually value that very same company. You know, I 45 00:02:36,760 --> 00:02:39,240 Speaker 1: want to ask you about Tesla and whether you can 46 00:02:39,360 --> 00:02:42,520 Speaker 1: use Tesla as an example of a company that exists 47 00:02:42,560 --> 00:02:47,080 Speaker 1: because of low interest rates. Uh, well, yes, it is. 48 00:02:47,680 --> 00:02:50,040 Speaker 1: What we do in our strategy is we invest long 49 00:02:50,080 --> 00:02:53,600 Speaker 1: and short, up and down the capital structure for companies 50 00:02:53,639 --> 00:02:57,480 Speaker 1: that are either headed into potential bankruptcy in bankruptcy or 51 00:02:57,600 --> 00:03:00,320 Speaker 1: previously and after they've come out of bank or see 52 00:03:00,560 --> 00:03:04,800 Speaker 1: Tesla actually fits a template for a company that has 53 00:03:04,840 --> 00:03:08,880 Speaker 1: bankruptcy risk. And what's interesting there, Hold on a second. 54 00:03:08,880 --> 00:03:11,760 Speaker 1: That was the most sanguine way of saying, Tesla looks 55 00:03:11,760 --> 00:03:14,720 Speaker 1: like it's heading for bankruptcy. That's what you mean, right? Uh? 56 00:03:14,760 --> 00:03:17,040 Speaker 1: It is? That is what I mean. Now, it might 57 00:03:17,080 --> 00:03:21,760 Speaker 1: not happen imminently. The company certainly has a large equity capitalization, 58 00:03:22,120 --> 00:03:25,040 Speaker 1: but it's clearly overleveraged. The company has about twelve and 59 00:03:25,080 --> 00:03:28,720 Speaker 1: a half billion in debt including non nonrecourse liabilities, it 60 00:03:28,800 --> 00:03:32,119 Speaker 1: has twenty one billion if you include other balance sheet liabilities. 61 00:03:32,480 --> 00:03:35,640 Speaker 1: And it also has this arcane liability on his balance sheet, 62 00:03:35,680 --> 00:03:39,080 Speaker 1: which most other carmakers don't. That's one point four billion 63 00:03:39,440 --> 00:03:42,440 Speaker 1: of resale value guarantees. But hold on a second. I 64 00:03:42,440 --> 00:03:44,360 Speaker 1: want to get a sense of how do you short 65 00:03:44,440 --> 00:03:47,160 Speaker 1: this thing? Because everybody and their mother is short testla. 66 00:03:47,280 --> 00:03:49,960 Speaker 1: You look at this sort of short float and it's off. 67 00:03:49,960 --> 00:03:52,760 Speaker 1: The it's off. Is it expensive to short test? Thank you? 68 00:03:53,200 --> 00:03:56,880 Speaker 1: It's not very expensive. But investors should know that for 69 00:03:56,960 --> 00:04:01,120 Speaker 1: companies that go into bankruptcy, equity holders are almost always 70 00:04:01,120 --> 00:04:03,000 Speaker 1: wiped out. So it might take a little time. You 71 00:04:03,080 --> 00:04:04,880 Speaker 1: might have to pay to borrow the stock. But you're 72 00:04:04,920 --> 00:04:09,400 Speaker 1: doing that right now. We are. We are doing it 73 00:04:09,440 --> 00:04:12,560 Speaker 1: for about six months. Has it been paidful? Oh no, 74 00:04:12,800 --> 00:04:15,240 Speaker 1: it's actually been profitable. It's been a good trade so far. 75 00:04:15,520 --> 00:04:18,640 Speaker 1: Um The company has about two point seven billion of 76 00:04:18,680 --> 00:04:20,839 Speaker 1: cash on the balance sheet, but in the last twelve 77 00:04:20,880 --> 00:04:24,160 Speaker 1: months they burned five billion in cash. And if you 78 00:04:24,160 --> 00:04:26,120 Speaker 1: you know, look at their last several years, going back 79 00:04:26,160 --> 00:04:29,400 Speaker 1: four years, they've burned over nine billion dollars in cash 80 00:04:29,480 --> 00:04:33,200 Speaker 1: over the last four years. This year, Tesla has about 81 00:04:33,200 --> 00:04:35,280 Speaker 1: two point two billion in debt coming to and next 82 00:04:35,360 --> 00:04:38,560 Speaker 1: year another one point nine billion. Um. Yeah, but all 83 00:04:38,600 --> 00:04:40,640 Speaker 1: of this adding up. Elon Musk says they don't have 84 00:04:40,680 --> 00:04:43,039 Speaker 1: to raise more money. Well, that's the thing, and I 85 00:04:43,080 --> 00:04:46,400 Speaker 1: think that's where he's being a little bit misleading or 86 00:04:46,440 --> 00:04:49,800 Speaker 1: maybe just not knowledgeable, because clearly at that pace the 87 00:04:49,839 --> 00:04:52,440 Speaker 1: company doesn't have enough cash. You have the most even 88 00:04:52,520 --> 00:04:55,960 Speaker 1: tone while you say the most cutting things. Maybe he's 89 00:04:56,000 --> 00:04:58,800 Speaker 1: just not that's why. That's why he's able to do it. 90 00:05:00,520 --> 00:05:02,560 Speaker 1: He doesn't know what he's talking about, and he's wrong. 91 00:05:03,120 --> 00:05:06,200 Speaker 1: That's the translation to carry on. Yeah. Another another indication 92 00:05:06,279 --> 00:05:08,960 Speaker 1: is also what happened with their capex projections. They were 93 00:05:09,000 --> 00:05:11,839 Speaker 1: expecting to spend almost three and a half billion dollars 94 00:05:11,839 --> 00:05:14,120 Speaker 1: in capital expenditures this year. I mean, this is a 95 00:05:14,200 --> 00:05:16,880 Speaker 1: high growth company, it's basically a startup, so they need 96 00:05:16,920 --> 00:05:19,640 Speaker 1: to spend that money to continue growing now and they're 97 00:05:19,640 --> 00:05:21,840 Speaker 1: in their last conference call they've reduced that amount to 98 00:05:21,880 --> 00:05:24,320 Speaker 1: three billion, which is a big drop. Okay, So when 99 00:05:24,320 --> 00:05:27,159 Speaker 1: do you think that they could potentially declare bankruptcy. Well, 100 00:05:27,160 --> 00:05:30,320 Speaker 1: that's a date I think what's going to happen in 101 00:05:30,320 --> 00:05:32,200 Speaker 1: the near term. Is they're going to admit that they 102 00:05:32,200 --> 00:05:34,680 Speaker 1: had to raise money, and I don't think the equity 103 00:05:34,720 --> 00:05:36,599 Speaker 1: market is going to like that because it will likely 104 00:05:36,640 --> 00:05:39,920 Speaker 1: be dilutive. Um. If they don't, they could file for 105 00:05:39,960 --> 00:05:43,320 Speaker 1: bankruptcy any quarter from now. All right, So let's shift 106 00:05:43,320 --> 00:05:46,160 Speaker 1: gears a little bit. So we've already decimated Tesla. You're 107 00:05:46,160 --> 00:05:48,960 Speaker 1: expecting that if they don't raise new money at some 108 00:05:49,040 --> 00:05:52,719 Speaker 1: point in the next few upcoming quarters, they could file 109 00:05:52,760 --> 00:05:56,240 Speaker 1: for bankruptcy. A very bold call. Um, what about in 110 00:05:56,279 --> 00:05:59,720 Speaker 1: the retail sector, sort of what are the most attractive 111 00:05:59,720 --> 00:06:01,679 Speaker 1: play that you're seeing they're given some of the distress 112 00:06:01,680 --> 00:06:05,039 Speaker 1: we've seen. That's a tough question, Lisa, because I don't 113 00:06:05,080 --> 00:06:08,400 Speaker 1: see anything that's attractive in the retail space unfortunately. Um, 114 00:06:08,480 --> 00:06:12,039 Speaker 1: except for maybe Amazon, but it's probably priced for perfection. Um. 115 00:06:12,080 --> 00:06:15,320 Speaker 1: You know, the whole sector has been decimated by this 116 00:06:15,400 --> 00:06:18,400 Speaker 1: extreme form of new competition with Amazon, you know, just 117 00:06:18,480 --> 00:06:21,599 Speaker 1: turning the whole business upside down from a secular perspective. 118 00:06:23,160 --> 00:06:25,719 Speaker 1: Just to go back to this idea of of Tesla 119 00:06:25,839 --> 00:06:28,360 Speaker 1: for just a second, Lisa, because I want to know, 120 00:06:28,520 --> 00:06:31,640 Speaker 1: is this emblematic of indebted companies? Because I think that. 121 00:06:31,839 --> 00:06:36,400 Speaker 1: There was a report by PIMCO that showed that I know, 122 00:06:36,480 --> 00:06:38,960 Speaker 1: it's a long time ago, about a quarter of investment 123 00:06:39,000 --> 00:06:41,680 Speaker 1: grade debt was rated trip will B or lower. Today 124 00:06:41,720 --> 00:06:45,960 Speaker 1: that number is near fifty percent. Yeah, we are clearly 125 00:06:46,279 --> 00:06:49,080 Speaker 1: in something that I view as a as a debt 126 00:06:49,120 --> 00:06:51,719 Speaker 1: bubble that's starting to reverse. And I think it is 127 00:06:51,760 --> 00:06:55,599 Speaker 1: emblematic um for a company to go bankrupt one of 128 00:06:55,600 --> 00:06:57,680 Speaker 1: the one of the it's a scene quand on. You 129 00:06:57,720 --> 00:07:00,799 Speaker 1: need to have excessive debt. And there are many companies 130 00:07:00,800 --> 00:07:03,680 Speaker 1: that have excessive debt because the fixed income market has 131 00:07:03,680 --> 00:07:06,280 Speaker 1: been so hospitable to new financings. Because rates have been 132 00:07:06,279 --> 00:07:08,640 Speaker 1: so low, people have been desperate to lend and that's 133 00:07:08,640 --> 00:07:11,000 Speaker 1: why I startup companies like Tesla have been able to 134 00:07:11,040 --> 00:07:13,440 Speaker 1: borrow money in the high yield market. But people have 135 00:07:13,520 --> 00:07:17,160 Speaker 1: been calling the debt market a bubble for years now 136 00:07:17,200 --> 00:07:19,720 Speaker 1: and it hasn't burst. And you have seen waves of 137 00:07:19,760 --> 00:07:22,760 Speaker 1: distress like in retail, I mean Gibson and Toys r 138 00:07:22,840 --> 00:07:26,239 Speaker 1: US some of the recent filings for bankruptcy. Um, there's 139 00:07:26,240 --> 00:07:29,960 Speaker 1: a lot of distress and pain baked in there. Why 140 00:07:30,120 --> 00:07:31,880 Speaker 1: is it still not enough? I mean, what are you 141 00:07:31,880 --> 00:07:35,280 Speaker 1: looking for? Well? I think as interest rates continue climbing 142 00:07:35,320 --> 00:07:38,120 Speaker 1: from here, you get a market that becomes less and 143 00:07:38,200 --> 00:07:43,080 Speaker 1: less hospitable, and people investors can look at reasonable alternatives 144 00:07:43,080 --> 00:07:45,840 Speaker 1: without taking that much risk in the junk debt market 145 00:07:46,440 --> 00:07:48,400 Speaker 1: to get the yield that they're looking for. I think 146 00:07:48,440 --> 00:07:51,000 Speaker 1: that will change and become more and more apparent going forward. 147 00:07:51,360 --> 00:07:54,000 Speaker 1: And what it means for the borrowing companies that the 148 00:07:54,120 --> 00:07:57,400 Speaker 1: riskiest ones is they won't necessarily be able to refinance 149 00:07:57,440 --> 00:07:59,640 Speaker 1: as their debt becomes do. Okay, just a real quick 150 00:07:59,680 --> 00:08:03,480 Speaker 1: we've got at thirty seconds here. Aside from Tesla, what 151 00:08:03,720 --> 00:08:08,000 Speaker 1: is your highest conviction short position right now? Well, that's 152 00:08:08,000 --> 00:08:10,440 Speaker 1: a tough call, you know. Besides Tesla, we have just 153 00:08:10,520 --> 00:08:13,720 Speaker 1: an overall equity market short to hedge our portfolio. That's 154 00:08:13,720 --> 00:08:16,720 Speaker 1: probably your highest conviction shot besides Cela. What's your highest 155 00:08:16,720 --> 00:08:19,520 Speaker 1: conviction long. One of the names we like long is 156 00:08:19,680 --> 00:08:23,880 Speaker 1: Peabody Energy Taker BTU. This is post distress equity. The 157 00:08:23,920 --> 00:08:27,640 Speaker 1: company came out of bankruptcy early last year, eliminated seven 158 00:08:27,720 --> 00:08:31,080 Speaker 1: billion dollars in debt and trades at about let's see, 159 00:08:31,120 --> 00:08:33,960 Speaker 1: at about two point nine times IBADA, which is extremely cheap. 160 00:08:34,920 --> 00:08:38,839 Speaker 1: Well done, Thank you very much, Georgia Shalty joining us 161 00:08:39,360 --> 00:08:43,320 Speaker 1: telling us about the world of Elon Musk, Tesla and 162 00:08:43,600 --> 00:08:46,400 Speaker 1: Peabody Energy. Peabody Energy have four tents of a percent 163 00:08:47,080 --> 00:08:50,480 Speaker 1: today that shares a down four percent for the year. 164 00:08:50,559 --> 00:08:54,800 Speaker 1: Symbol b TU. George a Salty, Chief Executive Officer Shalty 165 00:08:54,840 --> 00:09:13,680 Speaker 1: Asset Management based in Purchase, New York. Companies such as 166 00:09:13,760 --> 00:09:17,240 Speaker 1: A T and T and no V Artists paying money 167 00:09:17,320 --> 00:09:19,920 Speaker 1: to Michael Cohen at least a shell company that was 168 00:09:19,960 --> 00:09:24,880 Speaker 1: controlled by Michael Cohen, President Donald Trump's personal attorney. Here 169 00:09:24,880 --> 00:09:28,280 Speaker 1: to tell us more is Larry Noble, Senior Director and 170 00:09:28,320 --> 00:09:32,439 Speaker 1: general counsel to the Campaign Legal Center. They're based in Washington, 171 00:09:32,559 --> 00:09:36,040 Speaker 1: d C. Also joining us as Bill Allison campaign finance 172 00:09:36,080 --> 00:09:39,160 Speaker 1: reporter for Bloomberg News, and he joins us from our 173 00:09:39,200 --> 00:09:43,160 Speaker 1: ninety nine one studios in Washington. Bill, maybe you could 174 00:09:43,160 --> 00:09:45,480 Speaker 1: just outline for people what do we know so far 175 00:09:45,600 --> 00:09:50,840 Speaker 1: about companies and their payments to Mr Michael Cohen. What 176 00:09:50,960 --> 00:09:55,040 Speaker 1: we know is is that after Donald Trump's election, Michael 177 00:09:55,080 --> 00:09:58,480 Speaker 1: Cohen sort of advertised himself as somebody who understood the 178 00:09:58,520 --> 00:10:02,959 Speaker 1: thinking of and had acces us too, um President Trump. 179 00:10:03,040 --> 00:10:05,280 Speaker 1: And at this point in time, you have to remember 180 00:10:05,320 --> 00:10:07,640 Speaker 1: that you know, you have somebody who ran as an outsider, 181 00:10:07,640 --> 00:10:11,160 Speaker 1: who was an outsider who didn't have the long Washington history, 182 00:10:11,320 --> 00:10:15,160 Speaker 1: and companies were looking for UM people who could provide 183 00:10:15,200 --> 00:10:19,360 Speaker 1: guidance or help them understand how the Trump administration was working. 184 00:10:19,520 --> 00:10:22,120 Speaker 1: And we know from statements from A T and T 185 00:10:22,280 --> 00:10:25,960 Speaker 1: and nov Artists, two of the companies that hired Michael 186 00:10:26,000 --> 00:10:28,160 Speaker 1: Cohen that that that's what they were That's what they 187 00:10:28,160 --> 00:10:30,360 Speaker 1: say they were looking for. They hired Michael Cohen to 188 00:10:30,360 --> 00:10:34,480 Speaker 1: try to give them insights into the thinking of this administration. 189 00:10:34,840 --> 00:10:38,400 Speaker 1: UM Novartists was worried about. You know, there's uh. President 190 00:10:38,400 --> 00:10:42,040 Speaker 1: Trump campaigned against high drug prices. Uh. He made comments 191 00:10:42,080 --> 00:10:44,920 Speaker 1: about that. You know during the transition, A T and 192 00:10:44,960 --> 00:10:48,000 Speaker 1: T had appending merger that it was concerned about, and 193 00:10:48,600 --> 00:10:51,079 Speaker 1: Michael Cohen was the guy who could tell them what 194 00:10:51,400 --> 00:10:55,040 Speaker 1: Donald Trump is thinking. Okay, so Larry, come on in here. 195 00:10:55,320 --> 00:10:59,480 Speaker 1: How common is this, uh in a campaign for companies 196 00:10:59,559 --> 00:11:03,760 Speaker 1: to people who have worked around them to just give 197 00:11:03,800 --> 00:11:07,920 Speaker 1: them advice on how to handle them. It's it's very common. 198 00:11:07,920 --> 00:11:10,400 Speaker 1: And one of the things we see is UM the 199 00:11:10,480 --> 00:11:13,360 Speaker 1: routine revolving door where people have worked for administration go 200 00:11:13,440 --> 00:11:16,880 Speaker 1: out and there are rules about post employment work you 201 00:11:16,920 --> 00:11:18,720 Speaker 1: can do. But they go out and they advise companies 202 00:11:18,760 --> 00:11:22,880 Speaker 1: on strategy, um and how to how to best get 203 00:11:22,880 --> 00:11:25,000 Speaker 1: their message across to the administration. Are also they also 204 00:11:25,040 --> 00:11:27,319 Speaker 1: sell contacts and access in the sense that they say 205 00:11:27,360 --> 00:11:29,800 Speaker 1: I can get you, I can help you meet whoever 206 00:11:29,840 --> 00:11:32,559 Speaker 1: you need to meet. What is very unusual about this 207 00:11:32,880 --> 00:11:34,640 Speaker 1: is most of the time that we see it are 208 00:11:34,760 --> 00:11:37,120 Speaker 1: there are people who have worked for the government or 209 00:11:37,160 --> 00:11:40,079 Speaker 1: people who just hold themselves as consultants. I've never seen 210 00:11:40,240 --> 00:11:43,640 Speaker 1: for the president's personal lawyer while he's still representing the 211 00:11:43,720 --> 00:11:47,680 Speaker 1: president offer that access because he's actually acting in other 212 00:11:47,720 --> 00:11:50,320 Speaker 1: capacities at least as agent of the of the president. 213 00:11:50,600 --> 00:11:54,199 Speaker 1: It's his client, and so to these companies, it looks 214 00:11:54,240 --> 00:11:57,760 Speaker 1: like the client, the lawyer for the president, is selling 215 00:11:57,800 --> 00:11:59,960 Speaker 1: access and that's I think that's very different than something 216 00:12:00,080 --> 00:12:02,600 Speaker 1: leaving the government and then you know, saying you can 217 00:12:02,600 --> 00:12:05,000 Speaker 1: depend on my knowledge and my friendship. Here it is 218 00:12:05,120 --> 00:12:07,440 Speaker 1: it's an active relationship he has with the president. I 219 00:12:07,440 --> 00:12:10,440 Speaker 1: think that's the really unusual part of this. Larry, what 220 00:12:10,520 --> 00:12:13,640 Speaker 1: would the role of the Campaign Legal Center be in 221 00:12:13,679 --> 00:12:17,000 Speaker 1: a situation like this? I mean, would you file some 222 00:12:17,120 --> 00:12:19,800 Speaker 1: kind of brief with the government in order to get 223 00:12:19,840 --> 00:12:22,719 Speaker 1: more information or what exactly would the role of your 224 00:12:22,800 --> 00:12:26,240 Speaker 1: organization be. Well, it was kind of context. We're research 225 00:12:26,280 --> 00:12:29,800 Speaker 1: and analysis organization and also watched organizations, so we are 226 00:12:29,840 --> 00:12:33,040 Speaker 1: watching it closely. One of the things that UM is 227 00:12:33,040 --> 00:12:35,680 Speaker 1: happening to the facts are developing each day. So yesterday 228 00:12:35,720 --> 00:12:37,120 Speaker 1: was a very active day in this and we don't 229 00:12:37,160 --> 00:12:39,240 Speaker 1: have all the facts. But if we think there is 230 00:12:39,240 --> 00:12:41,120 Speaker 1: a there is a violation of the law here, and 231 00:12:41,120 --> 00:12:43,920 Speaker 1: there's a potential violation of the law of the Lobbying 232 00:12:43,920 --> 00:12:47,360 Speaker 1: Disclosure Act UM by Michael Cone. UM. But we don't 233 00:12:47,360 --> 00:12:49,720 Speaker 1: have all the facts yet. UM. There's even a possible 234 00:12:49,800 --> 00:12:52,559 Speaker 1: violation of the Foreign Agents Registration Act depending on the facts. 235 00:12:52,679 --> 00:12:55,040 Speaker 1: If we see the facts develop that way, we can 236 00:12:55,160 --> 00:12:57,400 Speaker 1: very well file a complaint with the government. All right, 237 00:12:57,480 --> 00:12:59,800 Speaker 1: So Bill, come on back in here. Can we just 238 00:12:59,800 --> 00:13:02,160 Speaker 1: get a sense of where A. T and T and 239 00:13:02,240 --> 00:13:06,160 Speaker 1: novartists are. They did come out with statements. Some people 240 00:13:06,200 --> 00:13:10,720 Speaker 1: expressed some confusion over Nevartis's statement. What do you think 241 00:13:10,800 --> 00:13:14,760 Speaker 1: is going on inside their corporate headquarters right now? Well, 242 00:13:14,760 --> 00:13:16,559 Speaker 1: I'm sure that they I mean, you know, they've kind 243 00:13:16,600 --> 00:13:19,880 Speaker 1: of been dragged into because it was the same company 244 00:13:19,920 --> 00:13:23,840 Speaker 1: involved in the payments to Stormy Daniels, to Stephanie Clifford, 245 00:13:23,880 --> 00:13:29,920 Speaker 1: the woman that Trump company exactly right, the same shell company. 246 00:13:30,000 --> 00:13:33,680 Speaker 1: So there's also the talk of the payments from a 247 00:13:33,720 --> 00:13:38,440 Speaker 1: company that's linked to a Russian oligarch. So, uh, you know, 248 00:13:38,480 --> 00:13:41,480 Speaker 1: in terms of corporate reputation, this was not probably the 249 00:13:41,480 --> 00:13:43,800 Speaker 1: smartest thing that they've done. I mean, I don't know 250 00:13:43,800 --> 00:13:46,560 Speaker 1: that they necessarily knew what Essential Consultants was. I mean, 251 00:13:46,600 --> 00:13:48,680 Speaker 1: I'm sure they thought it was a vehicle that Michael 252 00:13:48,720 --> 00:13:52,280 Speaker 1: Cohen could be paid through. But um, what nev Artist 253 00:13:52,360 --> 00:13:54,360 Speaker 1: did is they came out and said that essentially we 254 00:13:54,400 --> 00:13:57,040 Speaker 1: stopped using the services uh, you know, a few months 255 00:13:57,040 --> 00:14:00,520 Speaker 1: after hiring uh Michael Cohen, but they had a contract 256 00:14:00,559 --> 00:14:02,280 Speaker 1: that they honored all the way through to the end 257 00:14:02,320 --> 00:14:05,079 Speaker 1: of the year, and you know, paid him a hundred 258 00:14:05,120 --> 00:14:07,679 Speaker 1: thousand dollars a month for you know, several months when 259 00:14:07,720 --> 00:14:10,200 Speaker 1: they weren't using his services. And I think that's raised 260 00:14:10,200 --> 00:14:13,199 Speaker 1: some confusion about you know, what actually was this relationship 261 00:14:13,240 --> 00:14:17,600 Speaker 1: and what were these payments for? Bill who is Elliott Broidy. 262 00:14:19,080 --> 00:14:24,440 Speaker 1: He is a Republican fundraiser, a guy who came onto 263 00:14:24,440 --> 00:14:28,400 Speaker 1: the Trump campaign was one of the top fundraisers director 264 00:14:28,440 --> 00:14:34,080 Speaker 1: of finance after Trump won the UH nomination or clinch 265 00:14:34,120 --> 00:14:37,720 Speaker 1: the nomination, and he was a member of the Republican 266 00:14:37,800 --> 00:14:44,240 Speaker 1: National Committee's finance committee. UH. And he's somebody who UM 267 00:14:44,440 --> 00:14:48,320 Speaker 1: also used the services of Michael Cohen to UH with 268 00:14:48,360 --> 00:14:50,440 Speaker 1: a woman that he had had an affair with who 269 00:14:50,920 --> 00:14:55,200 Speaker 1: UM basically paid her hush money in the same way. UH, 270 00:14:55,240 --> 00:14:59,080 Speaker 1: Michael Cohen arranged the same sorts of payments that he 271 00:14:59,400 --> 00:15:05,600 Speaker 1: did for Donald Trump. And when the UH Stephanie Clifford matter, 272 00:15:06,360 --> 00:15:09,760 Speaker 1: and UH. You know, so Broydi has also had his 273 00:15:09,840 --> 00:15:13,720 Speaker 1: emails hacked. UH. And there's all kinds of information that 274 00:15:13,760 --> 00:15:17,200 Speaker 1: has come out from these, you know, supposed emails showing 275 00:15:17,200 --> 00:15:19,920 Speaker 1: that he was somebody who right after the election was 276 00:15:19,960 --> 00:15:24,840 Speaker 1: going to foreign governments, to UM UH companies and so 277 00:15:24,920 --> 00:15:28,400 Speaker 1: on and offering his services as somebody who was close 278 00:15:28,440 --> 00:15:31,760 Speaker 1: to the president and could provide access to UH an 279 00:15:31,760 --> 00:15:34,480 Speaker 1: insight into and lobbying for I mean, he wasn't just 280 00:15:34,720 --> 00:15:37,840 Speaker 1: limited to I can tell you what the president is thinking. 281 00:15:37,840 --> 00:15:40,640 Speaker 1: He was saying that he could influence policy for his clients. 282 00:15:41,880 --> 00:15:43,960 Speaker 1: I want to thank both of you for joining us. 283 00:15:44,000 --> 00:15:47,480 Speaker 1: Really interesting and I'm sure this issue will not die 284 00:15:47,600 --> 00:15:49,360 Speaker 1: in the short term because there are a lot of 285 00:15:49,400 --> 00:15:54,000 Speaker 1: questions about the line between lobbying UH and pay to play. 286 00:15:54,080 --> 00:15:57,160 Speaker 1: Larry Double, Senior Director in General counsel of the Campaign 287 00:15:57,240 --> 00:16:01,000 Speaker 1: at Legal Center in Washington, d C. And Allison Campaign, 288 00:16:01,080 --> 00:16:05,880 Speaker 1: finance reporter for Bloomberg News in Washington, d C. Yesterday 289 00:16:05,880 --> 00:16:07,960 Speaker 1: we were talking about how A T and T in 290 00:16:07,960 --> 00:16:11,160 Speaker 1: particular probably has an internal investigation going on, probably as 291 00:16:11,200 --> 00:16:13,880 Speaker 1: does no artists as to who authorized the payments, who 292 00:16:13,960 --> 00:16:17,880 Speaker 1: is checking on the efficacy of the data and information 293 00:16:17,960 --> 00:16:21,600 Speaker 1: they were getting from the company. We will keep you posted. 294 00:16:36,680 --> 00:16:40,120 Speaker 1: The shares of companies that make solar panels are surging today. 295 00:16:40,240 --> 00:16:43,400 Speaker 1: Sun Run one of the biggest such company. It shares 296 00:16:43,440 --> 00:16:47,800 Speaker 1: are up nearly eight percent. Why. California just passed a 297 00:16:47,880 --> 00:16:51,120 Speaker 1: new rule saying that all new homes built in the 298 00:16:51,160 --> 00:16:53,880 Speaker 1: state need to have solar panels on their roofs. Here 299 00:16:53,920 --> 00:16:56,160 Speaker 1: to talk about this is Hugh Bromley. He is a 300 00:16:56,200 --> 00:16:59,200 Speaker 1: solar market analyst for Bloomberg New Energy Finance in New 301 00:16:59,240 --> 00:17:02,240 Speaker 1: York City. Joins and eleven three of studios. Thank you 302 00:17:02,280 --> 00:17:04,440 Speaker 1: so much for being here. Can you first just lay 303 00:17:04,480 --> 00:17:08,239 Speaker 1: out what California did and how long this has been 304 00:17:08,280 --> 00:17:11,480 Speaker 1: in the making. Sure, so you're you're exactly right. They've 305 00:17:11,480 --> 00:17:14,720 Speaker 1: introduced these these new building standards, one of which requires 306 00:17:14,760 --> 00:17:17,200 Speaker 1: that solar panels being stalled on all new build homes 307 00:17:17,200 --> 00:17:21,120 Speaker 1: at homes only, not businesses. From it follows seven other 308 00:17:21,240 --> 00:17:24,080 Speaker 1: U s c US cities, six in California, one in Florida, 309 00:17:24,440 --> 00:17:28,240 Speaker 1: and several countries internationally that that pented similar mandates on 310 00:17:28,359 --> 00:17:30,680 Speaker 1: new homes, in some cases those mandates of extending into 311 00:17:30,680 --> 00:17:33,720 Speaker 1: commercial properties as well. So it's by no means unprecedented, 312 00:17:33,760 --> 00:17:35,200 Speaker 1: but it is the first U. S state to move 313 00:17:35,240 --> 00:17:38,280 Speaker 1: as move as a whole. I just want to know, 314 00:17:38,440 --> 00:17:41,479 Speaker 1: does this make any economic sense? I mean, because there 315 00:17:41,520 --> 00:17:45,399 Speaker 1: are other ways to generate solar powered electricity, such as 316 00:17:45,480 --> 00:17:49,840 Speaker 1: solar farms, you know, run by utilities. By some estimates, 317 00:17:49,880 --> 00:17:52,560 Speaker 1: this is going to cost at least twice as much 318 00:17:52,600 --> 00:17:56,199 Speaker 1: if not more, by putting them on the roof of 319 00:17:56,240 --> 00:18:04,040 Speaker 1: residential structures, then by adding them to more utility style operations. Yeah, 320 00:18:04,040 --> 00:18:05,840 Speaker 1: that's right. So there's obviously lots of places you can 321 00:18:05,840 --> 00:18:07,800 Speaker 1: put solar panels. Whether it's gonna be a big field 322 00:18:07,800 --> 00:18:09,800 Speaker 1: for the utility off takes or whether it's on your 323 00:18:09,840 --> 00:18:12,800 Speaker 1: rooftop two tops that your energy need. And in the US, 324 00:18:12,840 --> 00:18:14,320 Speaker 1: when you put it on your routop, it cost about 325 00:18:14,320 --> 00:18:16,000 Speaker 1: three times as much in fact as if you were 326 00:18:16,040 --> 00:18:19,399 Speaker 1: to build a large solar farm out out in a field. 327 00:18:19,680 --> 00:18:22,720 Speaker 1: That's kind of unusual. In fact, when you look at internationally, 328 00:18:22,800 --> 00:18:24,560 Speaker 1: you see the cost of routop is only about one 329 00:18:24,600 --> 00:18:26,280 Speaker 1: and a half times the cost of your of your 330 00:18:26,320 --> 00:18:29,240 Speaker 1: of ground mount utility scale projects. So the US does 331 00:18:29,240 --> 00:18:31,120 Speaker 1: have a bit of a cost challenge there to get 332 00:18:31,119 --> 00:18:33,160 Speaker 1: through to probe why are we doing this? Why does 333 00:18:33,200 --> 00:18:35,280 Speaker 1: this make any sense? If this is the goal to 334 00:18:35,400 --> 00:18:39,719 Speaker 1: try to make an efficient renewable energy source. Some estimates. 335 00:18:39,760 --> 00:18:43,040 Speaker 1: I was looking at something called the National Renewable Energy Laboratory. 336 00:18:43,119 --> 00:18:46,800 Speaker 1: They had a report last year that's said residential solar 337 00:18:46,880 --> 00:18:51,800 Speaker 1: systems cost between thirteen and sixteen cents per killer what hour. 338 00:18:52,280 --> 00:18:56,679 Speaker 1: If you look at utility scale solar systems, they're like 339 00:18:56,920 --> 00:19:00,280 Speaker 1: four to six and a half cents for this same 340 00:19:00,920 --> 00:19:04,040 Speaker 1: a killer white hour. Why would California do this then? 341 00:19:04,160 --> 00:19:06,600 Speaker 1: But the reason is that the solar energy is sitting 342 00:19:06,640 --> 00:19:08,399 Speaker 1: out in a field by itself is of no use 343 00:19:08,480 --> 00:19:10,080 Speaker 1: to anybody. It needs to get to the where the 344 00:19:10,320 --> 00:19:12,399 Speaker 1: demand is, and that demand is in the suburbs in 345 00:19:12,400 --> 00:19:14,879 Speaker 1: the city, so it needs to arrive in there. So 346 00:19:15,040 --> 00:19:17,400 Speaker 1: there's no point comparing the energy costs to be out 347 00:19:17,440 --> 00:19:19,639 Speaker 1: in the in the rural areas, in a field compared 348 00:19:19,680 --> 00:19:22,520 Speaker 1: to being on your rooftop. You're you're also avoiding the 349 00:19:22,600 --> 00:19:25,440 Speaker 1: need for all the copper infrastructure, the networks, the distribution 350 00:19:25,480 --> 00:19:27,960 Speaker 1: system to move that power to you. And in that 351 00:19:28,040 --> 00:19:31,400 Speaker 1: way rooftop solar can make sense. You're offsetting more than 352 00:19:31,520 --> 00:19:35,880 Speaker 1: just the value of energy generation, but also network costs. 353 00:19:35,880 --> 00:19:39,240 Speaker 1: So I'm looking just going back to the shares of 354 00:19:39,400 --> 00:19:41,720 Speaker 1: sun Run in particular, since I believe it's the leader, 355 00:19:42,560 --> 00:19:45,199 Speaker 1: rising more than seven and a half percent. I'm just 356 00:19:45,280 --> 00:19:48,119 Speaker 1: wondering how big of a deal is this for them. 357 00:19:48,520 --> 00:19:52,520 Speaker 1: So all the national vendors, sun Run, Vivent Solar, TSLA 358 00:19:52,560 --> 00:19:55,520 Speaker 1: to a lesser extent there, they specialize in installation. They 359 00:19:55,520 --> 00:19:58,840 Speaker 1: don't manufacture much equipment themselves at all, and they've all 360 00:19:58,840 --> 00:20:00,919 Speaker 1: been struggling with kind of the climbing sales of the 361 00:20:00,960 --> 00:20:04,000 Speaker 1: last eighteen months to year period and and high and 362 00:20:04,080 --> 00:20:08,040 Speaker 1: increasing costs, particularly customer acquisition costs. So a mandate on 363 00:20:08,040 --> 00:20:11,159 Speaker 1: on on solar on new homes removes a lot of 364 00:20:11,200 --> 00:20:13,720 Speaker 1: that customer acquisition. The customer needs solar is just about 365 00:20:13,720 --> 00:20:16,159 Speaker 1: who they who they get it from um if you 366 00:20:16,160 --> 00:20:18,720 Speaker 1: look just last night's sun run reported its lowest level 367 00:20:18,720 --> 00:20:22,560 Speaker 1: of quarterly installations since Q two and its highest costs 368 00:20:22,760 --> 00:20:25,600 Speaker 1: since Q two. So this is one way of breaking 369 00:20:25,600 --> 00:20:28,680 Speaker 1: through that and finding additional demand. That's that's agnostic enterprice. 370 00:20:28,840 --> 00:20:31,040 Speaker 1: One of the question that I have about this is 371 00:20:31,600 --> 00:20:35,320 Speaker 1: do houses have to generate a certain proportion of their 372 00:20:35,359 --> 00:20:37,919 Speaker 1: electricity using these solar panels on their roofs? You know, 373 00:20:37,920 --> 00:20:41,480 Speaker 1: I mean basically, not only are you building them, but 374 00:20:42,280 --> 00:20:45,960 Speaker 1: you know, essensibly you'll have less demand for energy from 375 00:20:46,359 --> 00:20:50,000 Speaker 1: other utilities exactly right. So, like the California Energy Commission 376 00:20:50,000 --> 00:20:52,320 Speaker 1: WUL actually like these homes to be essentially energy energy 377 00:20:52,640 --> 00:20:55,880 Speaker 1: neutral net zero, so produce enough power during the day 378 00:20:56,000 --> 00:20:58,480 Speaker 1: feeded into the grid such that they essentially use that 379 00:20:58,560 --> 00:21:01,520 Speaker 1: energy back at nighttime. That does cause problems in the grid. 380 00:21:01,560 --> 00:21:03,359 Speaker 1: If everyone were to do the same thing and feed 381 00:21:03,359 --> 00:21:04,960 Speaker 1: power into the grid, someone needs to be there to 382 00:21:05,040 --> 00:21:08,000 Speaker 1: use it during the day daytime hours, So that that 383 00:21:08,240 --> 00:21:11,080 Speaker 1: opens up questions about how do we find a mechanism 384 00:21:11,080 --> 00:21:14,440 Speaker 1: that encourages these these households to store the energy themselves 385 00:21:14,560 --> 00:21:16,840 Speaker 1: to use it later on at night if they are 386 00:21:16,880 --> 00:21:20,600 Speaker 1: to supply their nighttime needs as well. And this is estimate. 387 00:21:20,600 --> 00:21:24,000 Speaker 1: It the cost word at least ten thousand dollars more. Yeah, 388 00:21:24,000 --> 00:21:26,480 Speaker 1: on on today's levels. That's that's quite a conservative estimate. 389 00:21:26,520 --> 00:21:28,960 Speaker 1: I think, you know, average system costs in California today 390 00:21:29,000 --> 00:21:31,639 Speaker 1: are close to the fifteen thousand. So the California and 391 00:21:31,680 --> 00:21:34,800 Speaker 1: Commission is probably betting on some price reductions in the future, 392 00:21:35,240 --> 00:21:38,400 Speaker 1: that that may or may not come to fruition based 393 00:21:38,440 --> 00:21:40,639 Speaker 1: on the past couple of years of experience. And doesn't 394 00:21:40,680 --> 00:21:43,320 Speaker 1: this mean that it ends up being subsidized by repairers 395 00:21:43,359 --> 00:21:47,240 Speaker 1: who don't have solar power. Ultimately, not the cost of 396 00:21:47,280 --> 00:21:49,440 Speaker 1: building solo we rolled into the cost of the home 397 00:21:49,640 --> 00:21:52,560 Speaker 1: and likely into the into the householders mortgage. Where there 398 00:21:52,600 --> 00:21:55,560 Speaker 1: could be some cross subsidization is if if the extra 399 00:21:55,640 --> 00:21:59,080 Speaker 1: sola being fed into the grid means that the grid 400 00:21:59,119 --> 00:22:01,640 Speaker 1: needs an upgrade and other customers are left to pay 401 00:22:01,680 --> 00:22:05,200 Speaker 1: for their storage capacity or storage capacity. But that's actually 402 00:22:05,240 --> 00:22:06,439 Speaker 1: what I was going to ask, how is this going 403 00:22:06,480 --> 00:22:10,240 Speaker 1: to affect other utilities in California that currently exist. So 404 00:22:10,240 --> 00:22:13,520 Speaker 1: the utilities you know are already seen in many cases 405 00:22:13,520 --> 00:22:16,200 Speaker 1: seeing declining sales as a result of roof top solo 406 00:22:16,200 --> 00:22:18,800 Speaker 1: as a result of efficiency, as a result of many 407 00:22:18,880 --> 00:22:21,800 Speaker 1: factors and communities moving away from the from the utility 408 00:22:21,880 --> 00:22:24,720 Speaker 1: through through a kind of unusual model we see in California. 409 00:22:25,240 --> 00:22:27,359 Speaker 1: But what what it does mean for them is that 410 00:22:27,400 --> 00:22:29,600 Speaker 1: they may need to spend more investing in the grid, 411 00:22:29,680 --> 00:22:32,760 Speaker 1: investing in energy storage, investing in network upgrades. And that's 412 00:22:32,760 --> 00:22:34,840 Speaker 1: actually how they make money. They make money by spending 413 00:22:34,880 --> 00:22:38,879 Speaker 1: money and rate basing those investments. Would it be better 414 00:22:38,920 --> 00:22:42,000 Speaker 1: if they just went to a larger scale project, But 415 00:22:42,320 --> 00:22:45,000 Speaker 1: the California market, the wholesale market at the moment, is saying, 416 00:22:45,040 --> 00:22:47,159 Speaker 1: don't build any more solo. We've got more than we need, 417 00:22:47,800 --> 00:22:49,840 Speaker 1: So we don't need solo. Whether it's on rooftop or 418 00:22:49,880 --> 00:22:52,320 Speaker 1: whether it's it's in a field. The only reason to 419 00:22:52,400 --> 00:22:55,879 Speaker 1: build it is for is for environmental reasons and and 420 00:22:55,960 --> 00:22:59,440 Speaker 1: potentially for some industry industry industrial policy. So what we're 421 00:22:59,440 --> 00:23:03,520 Speaker 1: seeing here is actually a policy makers forcing in more 422 00:23:03,560 --> 00:23:06,000 Speaker 1: solo when the market says we don't need it. Uh 423 00:23:06,000 --> 00:23:08,959 Speaker 1: and uh, And it's just another way to bring in 424 00:23:09,400 --> 00:23:12,760 Speaker 1: new capacity when the economics are saying no more. Thanks 425 00:23:12,840 --> 00:23:15,080 Speaker 1: very much for being with us and educating us and 426 00:23:15,200 --> 00:23:19,320 Speaker 1: educating me. Hugh Bromley, solar market analyst for Bloomberg New 427 00:23:19,480 --> 00:23:24,120 Speaker 1: Energy Finance, on California requiring solar panels in new homes. 428 00:23:40,520 --> 00:23:43,480 Speaker 1: Israel has said it has dealt a blow to Iran 429 00:23:43,760 --> 00:23:47,760 Speaker 1: in Syria after I failed Iranian rocket barrage against Israeli 430 00:23:47,840 --> 00:23:51,919 Speaker 1: military posts in the Galan Heights. Toby Harshaw is an 431 00:23:52,119 --> 00:23:55,800 Speaker 1: editor for a Bloomberg opinion and you can follow Toby 432 00:23:56,000 --> 00:24:00,320 Speaker 1: on Tobin at Tobin Harshaw on Twitter and he joins 433 00:24:00,440 --> 00:24:05,160 Speaker 1: us now from our eleven from our one studios in Washington, 434 00:24:05,440 --> 00:24:08,840 Speaker 1: d C. A, Toby, what can you tell us about 435 00:24:09,040 --> 00:24:14,560 Speaker 1: the reaction of let's say, non Middle East nations to 436 00:24:15,080 --> 00:24:19,520 Speaker 1: this increase in the conflict in the region. US allies 437 00:24:19,560 --> 00:24:24,119 Speaker 1: in Russia, for example. Um, First, let me say it's 438 00:24:24,119 --> 00:24:27,320 Speaker 1: been a pretty exciting forty eight hours for US national 439 00:24:27,359 --> 00:24:30,240 Speaker 1: security geeks, so we can talk about North Korea anything 440 00:24:30,240 --> 00:24:35,440 Speaker 1: you guys want to on on the immediate reaction between 441 00:24:36,760 --> 00:24:40,720 Speaker 1: between Iran and it's um, it's Syrian proxies and Israel. 442 00:24:41,320 --> 00:24:44,000 Speaker 1: Is that I think this was a nautvitable uh, no 443 00:24:44,040 --> 00:24:47,760 Speaker 1: matter what Trump had decided on the nuclear deal. Um, 444 00:24:47,800 --> 00:24:50,359 Speaker 1: and it's going to get a lot worse. Okay, So 445 00:24:50,440 --> 00:24:54,080 Speaker 1: you're talking about the situation in the Golan Heights in 446 00:24:54,119 --> 00:24:58,000 Speaker 1: Israel and UH Iranian troops in Syria. Correct, correct that 447 00:24:58,040 --> 00:25:01,280 Speaker 1: You're you're seeing that get a lot worse. Yeah, there's 448 00:25:01,359 --> 00:25:04,840 Speaker 1: already you know, the phrase great Northern War is already 449 00:25:04,840 --> 00:25:07,159 Speaker 1: being thrown around Israel, and it has been for a while. 450 00:25:07,760 --> 00:25:10,160 Speaker 1: I think they've resigned themselves to the fact that as 451 00:25:10,240 --> 00:25:14,560 Speaker 1: soon as uh as Iranian troops and HAS Bullet troops 452 00:25:14,560 --> 00:25:18,719 Speaker 1: had had dug themselves in on the Syrian border across 453 00:25:18,760 --> 00:25:21,359 Speaker 1: the goal on UH, that this is that this is 454 00:25:21,359 --> 00:25:24,119 Speaker 1: going to be a major conflict. Can we just zoom 455 00:25:24,160 --> 00:25:26,919 Speaker 1: out a little bit or talk about the implications of this, 456 00:25:27,040 --> 00:25:31,080 Speaker 1: because just recently a headline crossing the Bloomberg terminal the 457 00:25:31,200 --> 00:25:35,359 Speaker 1: US is condemning Iran for the attacks on northern Israel, 458 00:25:35,400 --> 00:25:39,560 Speaker 1: so clearly lining up behind Israel in this escalating conflict. 459 00:25:40,200 --> 00:25:42,440 Speaker 1: How big could it get? I mean, who who gets 460 00:25:42,480 --> 00:25:47,240 Speaker 1: drawn in here? Um? How how big could it get? 461 00:25:47,280 --> 00:25:52,760 Speaker 1: As you know, nobody knows? Unfortunately, UM, I don't think 462 00:25:52,960 --> 00:25:56,440 Speaker 1: that you'll see Israel UM. You know, I don't think 463 00:25:56,440 --> 00:25:59,800 Speaker 1: this will be like Lebanon in the eighties. I don't 464 00:25:59,800 --> 00:26:02,800 Speaker 1: think we see Israel moving in and taking large chunks 465 00:26:02,800 --> 00:26:06,040 Speaker 1: of the country to to create a protective border. UM. 466 00:26:06,080 --> 00:26:09,399 Speaker 1: If they do send darn ground troops across the border, 467 00:26:09,400 --> 00:26:11,159 Speaker 1: I think it would be just to clear out the 468 00:26:12,160 --> 00:26:16,280 Speaker 1: rocket sites. UM. As to that, who else could get 469 00:26:16,359 --> 00:26:20,119 Speaker 1: drawn in? UM? You know, you've got a lot there 470 00:26:20,119 --> 00:26:23,200 Speaker 1: with Hesbelah. I don't think that the Russians would probably 471 00:26:23,680 --> 00:26:27,000 Speaker 1: want their troops UH and and their support for the 472 00:26:27,000 --> 00:26:30,240 Speaker 1: Assad government to get involved in any sort of tangle 473 00:26:30,720 --> 00:26:33,560 Speaker 1: with Israel. But you've got a lot of different factions 474 00:26:33,560 --> 00:26:36,159 Speaker 1: on the ground there. A lot of things can go wrong, 475 00:26:36,320 --> 00:26:39,760 Speaker 1: especially if the UH, if the US starts actually doing 476 00:26:39,840 --> 00:26:44,840 Speaker 1: something actively to support the the Israeli effort. Toby the 477 00:26:44,920 --> 00:26:48,919 Speaker 1: Russian Foreign Minister Sergei Lavrov. He was speaking at a 478 00:26:48,920 --> 00:26:54,760 Speaker 1: news conference with his German counterpart Hiko muss in Moscow, 479 00:26:55,440 --> 00:26:58,439 Speaker 1: saying that the Israeli Wroung conflict is very worrying, but 480 00:26:58,600 --> 00:27:02,640 Speaker 1: also that Germany is skiing Russia to help keep Iran 481 00:27:02,880 --> 00:27:06,520 Speaker 1: in the nuclear deal. I wonder if you could expand 482 00:27:06,520 --> 00:27:10,520 Speaker 1: on that, why would they be doing that well? Um, Actually, 483 00:27:10,600 --> 00:27:13,000 Speaker 1: both sides seemed to be seemed to be at least 484 00:27:13,040 --> 00:27:16,200 Speaker 1: paying lip service to this. As soon as Trump announced 485 00:27:16,200 --> 00:27:20,840 Speaker 1: his decision, UM, the UH, the rest of the P 486 00:27:21,000 --> 00:27:25,480 Speaker 1: five plus so one members and Iran itself talked about 487 00:27:25,560 --> 00:27:29,040 Speaker 1: trying to to salvage the deal UM with the US 488 00:27:29,119 --> 00:27:32,119 Speaker 1: not being a part of it. UM. I personally don't 489 00:27:32,160 --> 00:27:35,240 Speaker 1: see how that's practicable. Um, if the US is actually 490 00:27:35,240 --> 00:27:39,320 Speaker 1: going to enforce sanctions on you know, any firms that 491 00:27:39,400 --> 00:27:42,560 Speaker 1: do business with Iran, and we're gonna punish them, you know, 492 00:27:42,600 --> 00:27:45,960 Speaker 1: in the banking as well, because you know, let's face it, 493 00:27:46,080 --> 00:27:49,560 Speaker 1: every every transaction goes through US financial markets in some 494 00:27:49,600 --> 00:27:53,399 Speaker 1: way or another. I don't see how they could continue 495 00:27:53,440 --> 00:27:57,199 Speaker 1: to have their trade arrangement unless the US gave the 496 00:27:57,240 --> 00:28:00,399 Speaker 1: Europeans some sort of wave around that and trying to 497 00:28:00,400 --> 00:28:04,960 Speaker 1: figure out how quickly this could escalate. So you have also, UM, 498 00:28:05,000 --> 00:28:08,680 Speaker 1: Saudi Arabia coming out and saying, look, if Iran pursues 499 00:28:08,840 --> 00:28:12,840 Speaker 1: nuclear weapons, we will too. Uh. You have the U 500 00:28:12,960 --> 00:28:15,240 Speaker 1: s weighing in on this whole Israeli conflict. I do 501 00:28:15,320 --> 00:28:18,119 Speaker 1: wonder when you talk ground troops whether the US would 502 00:28:18,119 --> 00:28:21,880 Speaker 1: send anyone to the region. This is the reason why 503 00:28:21,880 --> 00:28:24,080 Speaker 1: I ask, you know, how big could the conflict get? 504 00:28:24,280 --> 00:28:26,200 Speaker 1: Are we seeing the beginnings of a sort of more 505 00:28:26,280 --> 00:28:32,520 Speaker 1: protracted and involved, complicated, UM military altercation here? Well, I 506 00:28:32,520 --> 00:28:34,320 Speaker 1: think the Israelities would say, it's been going on for 507 00:28:34,359 --> 00:28:37,879 Speaker 1: a while. Um. And now the Iranians are overtly helping 508 00:28:37,880 --> 00:28:40,720 Speaker 1: Haus below with actual troops on the ground. Uh. And 509 00:28:40,760 --> 00:28:43,280 Speaker 1: these you know, the Israelis have been hitting targets in 510 00:28:43,400 --> 00:28:47,440 Speaker 1: serious since last year. UM. To go back to the 511 00:28:47,480 --> 00:28:50,280 Speaker 1: Saudi Arabia thing, I wouldn't give that a lot of 512 00:28:50,320 --> 00:28:53,680 Speaker 1: credence right now. UM, we don't know what the Trump 513 00:28:53,720 --> 00:28:57,280 Speaker 1: administration would do. Would be a great idea to make 514 00:28:57,320 --> 00:29:02,280 Speaker 1: an explicit promise that they are under our nuclear umbrella, 515 00:29:02,520 --> 00:29:06,320 Speaker 1: that it basically the equivalent of Article five which we 516 00:29:06,360 --> 00:29:08,160 Speaker 1: have with Europe, that an attack on one is an 517 00:29:08,200 --> 00:29:10,400 Speaker 1: attack on all, which is actually an arrangement we have 518 00:29:10,560 --> 00:29:13,479 Speaker 1: with you know, countries like Thailand, which not many people now. 519 00:29:13,760 --> 00:29:18,080 Speaker 1: I think we could bring the Gulf Arab states under that, Toby, 520 00:29:18,200 --> 00:29:24,160 Speaker 1: does the US pull out from the Iran nuclear accord? Uh? 521 00:29:24,480 --> 00:29:29,719 Speaker 1: Does that also punish Iran not only economically but because 522 00:29:29,960 --> 00:29:34,880 Speaker 1: of its continued shipments, let's say, of weapons into Syria 523 00:29:35,120 --> 00:29:41,600 Speaker 1: or support for Hezbollah. Well. Um, actually, the the US 524 00:29:41,720 --> 00:29:46,160 Speaker 1: was able to um, you know, interdict those shipments and 525 00:29:46,600 --> 00:29:51,440 Speaker 1: to sanction around Iranian airlines, etcetera that have been you know, 526 00:29:51,520 --> 00:29:55,840 Speaker 1: helping to set up this this passage. Um. Even if 527 00:29:55,880 --> 00:29:58,640 Speaker 1: the deal had been in place, there's a United Nations 528 00:29:58,840 --> 00:30:04,520 Speaker 1: resolution that um that Iran cannot export any arms. Um. 529 00:30:04,560 --> 00:30:08,440 Speaker 1: It's shocking to me how little the US and the 530 00:30:08,520 --> 00:30:11,760 Speaker 1: Gulf allies have done, uh to actually and addict the 531 00:30:11,760 --> 00:30:15,360 Speaker 1: ones going to the Hootie rebels in Yemen by water. 532 00:30:15,800 --> 00:30:18,240 Speaker 1: It's a little trickier obviously to take care of the 533 00:30:18,240 --> 00:30:21,840 Speaker 1: stuff going by air to Syria. To be just in 534 00:30:21,840 --> 00:30:24,960 Speaker 1: the aftermath of the US announcement with respect to Iran, 535 00:30:25,040 --> 00:30:27,720 Speaker 1: I'm wondering, do you expect any kind of regime change 536 00:30:27,960 --> 00:30:33,880 Speaker 1: within that nation? I mean, I not regime change in 537 00:30:33,920 --> 00:30:37,400 Speaker 1: the Saddam Hussein's No, I'm not looking for like a 538 00:30:37,440 --> 00:30:40,400 Speaker 1: sculpture being. I think there could be, Um. Yeah, I 539 00:30:40,480 --> 00:30:43,240 Speaker 1: mean I think that everyone hopes, even you know a 540 00:30:43,280 --> 00:30:46,480 Speaker 1: lot of Iranians hope possibly even you know a majority 541 00:30:46,840 --> 00:30:50,080 Speaker 1: of of the Iranian people that there will be a 542 00:30:50,200 --> 00:30:53,800 Speaker 1: very slow regime change, not not technically a regime change 543 00:30:53,800 --> 00:30:57,240 Speaker 1: at all, um, but a change in their political system 544 00:30:57,360 --> 00:31:00,760 Speaker 1: that would, you know, disempower or lessen the power of 545 00:31:01,000 --> 00:31:05,080 Speaker 1: the of the religious authorities and allow them to have 546 00:31:05,320 --> 00:31:08,560 Speaker 1: free elections, which they have not had at all. Um. 547 00:31:08,640 --> 00:31:11,040 Speaker 1: Despite all the talk that you get you'll hear from, 548 00:31:11,120 --> 00:31:14,400 Speaker 1: say proponents of the of the nuclear deal about the 549 00:31:14,600 --> 00:31:18,520 Speaker 1: HNI administration, calling them moderates is simply foolish. Look at 550 00:31:18,560 --> 00:31:20,640 Speaker 1: look at all the people they've imprisoned and cracked down. 551 00:31:21,080 --> 00:31:23,880 Speaker 1: But I think that's gonna be a lengthy process, um. 552 00:31:23,920 --> 00:31:26,600 Speaker 1: And I think even if you had that, uh, the 553 00:31:26,600 --> 00:31:29,120 Speaker 1: Iranians are going to pursue nuclear weapons, even if they 554 00:31:29,120 --> 00:31:32,480 Speaker 1: had a US friendly government in place. Thank you so 555 00:31:32,560 --> 00:31:35,480 Speaker 1: much for being with us. Choby Harshaw, Bloomberg opinion columnist 556 00:31:35,720 --> 00:31:43,280 Speaker 1: talking about the situation with e Iron. Thanks for listening 557 00:31:43,360 --> 00:31:46,200 Speaker 1: to the Bloomberg p m L podcast. You can subscribe 558 00:31:46,240 --> 00:31:49,840 Speaker 1: and listen to interviews at Apple Podcasts, SoundCloud, or whatever 559 00:31:49,920 --> 00:31:53,400 Speaker 1: podcast platform you prefer. I'm pim Fox. I'm on Twitter 560 00:31:53,680 --> 00:31:57,200 Speaker 1: at pim Fox. I'm on Twitter at Lisa Abramo. It's 561 00:31:57,240 --> 00:31:59,920 Speaker 1: one before the podcast. You can always catch US world 562 00:32:00,000 --> 00:32:04,360 Speaker 1: wide on Bloomberg radioh