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Speaker 2: Is this one? This story at the moment crude climbing
Speaker 2: on renewed uncertainty through the stred of for mers Am
Speaker 2: world of the Atlantic Council writing, instead of trying to
Speaker 2: jawbone markets with positive sentiment, the president should stick with
Speaker 2: messaging from a position of strength and no vacillation. And
Speaker 2: then joined us now for more Adan, Welcome to the program.
Speaker 2: I was speaking to a market contact earlier who had
Speaker 2: a basic question, is the worst of it behind us?
Speaker 2: Is this the post Liberation day picture of the market
Speaker 2: right now? Is it a similar story or is it
Speaker 2: different this time?
Speaker 3: I'm not sure whether we're really whether the worst is passed.
Speaker 3: So I think that the US actually commandeering or blockading
Speaker 3: these ships is pretty much an escalation of events. It
Speaker 3: depends I guess, whether we see more active bombing and
Speaker 3: whether we see Iran responding to that by hitting its neighbors.
Speaker 3: I think that that's absolutely still in the cards, though
Speaker 3: the fact that the ceasefire is I guess technically still
Speaker 3: in place, though I'm not sure you can say it's
Speaker 3: still in place.
Speaker 4: If we've had.
Speaker 3: Iranian ships firing on ships trying to transit the Straight
Speaker 3: and the US firing on Iranian ships, I'm not sure
Speaker 3: we can really call that a ceasefire. But it does
Speaker 3: seem to still be in place, and so I wouldn't
Speaker 3: be too hesitant to say that the worst is passed,
Speaker 3: but it's could get worse very very quickly.
Speaker 2: Let me ask you what you think was more likely
Speaker 2: that in the next twenty four forty eight hours an
Speaker 2: extension of the ceasefire or a resumption of hostilities.
Speaker 3: I think an extension of the ceasefire is more likely,
Speaker 3: but only maybe a little over fifty percent, I would
Speaker 3: put it at.
Speaker 5: So at this point, Ellen, how feasible do you see
Speaker 5: the outcome that the market is pricing in. This is
Speaker 5: sort of what we're trying to get our head around,
Speaker 5: because it seems like people come on the show who
Speaker 5: are in the equity space or who even trade oil,
Speaker 5: and they say, well, you know, this actually roughly games
Speaker 5: out what's probable, and an oil commodity strategist come on
Speaker 5: and they say, absolutely not, that seems highly unlikely.
Speaker 4: What's your take.
Speaker 3: I think it's it's pretty unlikely right now. I think
Speaker 3: the market is over exuberant in terms of.
Speaker 4: A fast fix to all of this.
Speaker 3: I think that despite what President trum tweeted on Friday,
Speaker 3: Iran and the United States are leagues and leagues and
Speaker 3: worlds apart in terms terms of what they want, and
Speaker 3: Iran has absolutely no incentive to give in on anything
Speaker 3: at this point, because, first of all, it doesn't see
Speaker 3: anything wrong with higher oil prices, whereas Trump keeps going
Speaker 3: back to these very positive statements to try to get
Speaker 3: prices down and get the Dow drones up. And yet
Speaker 3: I think it's pretty clear at this point that once
Speaker 3: everything actually is resolved, we're going to go back to
Speaker 3: where we.
Speaker 4: Were in a hurry.
Speaker 3: Prices will go to oil prices will go down, equities
Speaker 3: will go up, and so it seems like it's kind
Speaker 3: of confusing to me. So why he keeps trying to
Speaker 3: make things seem better than they are, just to get
Speaker 3: things looking better at the beginning of the week or
Speaker 3: when market's open, when you know, let it be, you know,
Speaker 3: say say your position holds strong, because that's clearly what
Speaker 3: he wants to do, and then let it all, you know,
Speaker 3: but let the cards fall where they will when it ends.
Speaker 5: Ellen, you wrote the book on Saudi Arabia Saudi Inc.
Speaker 5: Talking about how the kingdom really came to fruition and
Speaker 5: some of the monetary backing of the oil complex. Do
Speaker 5: you have a sense of how much Saudi Arabia and
Speaker 5: the other Golf countries are shifting alliances moving away from
Speaker 5: the US maybe amid this conflict.
Speaker 3: I do think that we're in a different paradigm than
Speaker 3: we used to be. Really, you know, Asia is the
Speaker 3: most important customer now for Saudi Arabia and the UAE
Speaker 3: and other big oil exporters. It used to be that
Speaker 3: the US was their most important customer. However, China and
Speaker 3: Asian countries are not big military suppliers. China's Navy is
Speaker 3: never going to go into the Persian Gulf, whereas the
Speaker 3: US Navy, they're the ones.
Speaker 4: That are there.
Speaker 3: So it's a slightly different dynamic in that the US
Speaker 3: is still very important financially, very important as a military
Speaker 3: supplier and as a naval force and an air force
Speaker 3: in the region, but it's not that it doesn't play
Speaker 3: that same role as buyer of oil. And so that
Speaker 3: means that these countries have a bit less leverage over
Speaker 3: the US than they used to.
Speaker 1: But at the same time, they're not going to want
Speaker 1: to create all this friction with their security blanket, are
Speaker 1: they exactly?
Speaker 3: And so it is a bit of a careful line
Speaker 3: that they're walking because they need the military protection, but
Speaker 3: they can't necessarily say to the US, hey, we're we're
Speaker 3: going to you know, we're going to control oil supplies now,
Speaker 3: and to make sure we get that. It's it's not
Speaker 3: so much of a quid pro qo here, And I
Speaker 3: think that they do need to tread carefully, and we're
Speaker 3: seeing them tread carefully. You know, they haven't been all
Speaker 3: that vocal about about what's going on, and I think
Speaker 3: that that that's a sign that they know that their
Speaker 3: position is perhaps a little more precarious than it used
Speaker 3: to be.
Speaker 1: Well, there are of courts of mahome Ben Salmon had
Speaker 1: a phone call with Shijingping earlier. Today. Are the Golf
Speaker 1: arab partners you think pressing on China to put the
Speaker 1: thumb on the scale on Iran?
Speaker 3: I think they absolutely could, because China is one partner
Speaker 3: of Iran. They that has that economic pull with Iran.
Speaker 3: On the other hand, I do think that you know,
Speaker 3: these calls could be all about just maintaining, you know,
Speaker 3: maintaining the conversation about the fact that you know, China
Speaker 3: has a lot of investments in Saudi Arabia that are
Speaker 3: not doing all that well right now because they can't
Speaker 3: get oil out and you know, there are issues with
Speaker 3: the petrochemicals, and so I wouldn't be surprised to see
Speaker 3: the Saudis and counterparts in the UA reaching out to
Speaker 3: people in China to assure them that the relationship is
Speaker 3: strong that once this is over, you know, things are
Speaker 3: going to be repaired and go back to everyone making
Speaker 3: money the way it used to be.
Speaker 2: And what happened on Friday, can we just finish on that.
Speaker 2: Between eight and nine am Eastern time, On Friday, there
Speaker 2: was a series of messages from one delegate coming out
Speaker 2: of Iran and another in the US making the case
Speaker 2: of the stratiform merc that reopened and we were sitting
Speaker 2: care thinking maybe it has let's say, let's wait and
Speaker 2: find out. And then we found out pretty quickly it
Speaker 2: has an And so what happened that? Was it something
Speaker 2: the US diad or was it just that the Iranians
Speaker 2: committed to something that ultimately not all Iranians and all
Speaker 2: interested parties had a great suit.
Speaker 4: Yeah, I think it's I think it's both.
Speaker 3: It's it's a bit of both here, because there's a
Speaker 3: bit of over exuberance on the part of Trump to
Speaker 3: say the street reforms is open, Iran has agreed to
Speaker 3: everything we want, you know.
Speaker 4: Let's let's move on now.
Speaker 3: I think there's a huge amount of pressure, particularly from Trump,
Speaker 3: to for that to be the message on Iran's part.
Speaker 3: On the other hand, remember these are these are not
Speaker 3: These parties are not talking to each other. They're talking
Speaker 3: to intermediaries who are then talking to each other, who
Speaker 3: are then going and talking to the other parties. So
Speaker 3: so Iran and the US are not communicating with each other,
Speaker 3: and so there's a bit of a dance in the
Speaker 3: wordplay that comes over comes around the US may say
Speaker 3: we want X, Y and Z, and with that message
Speaker 3: gets to the Iranians. It's not the same as exactly
Speaker 3: what the US said. And so when Iran agrees to
Speaker 3: something they're agreeing to, what would they think they're agreeing
Speaker 3: to could fly with their people, which is not necessarily
Speaker 3: what Trump thinks they're agreeing to. And this happens a
Speaker 3: lot in diplomacy, particularly when the parties are not actually
Speaker 3: sitting down at the same table as each other and
Speaker 3: not speaking the same languages. And so I think this
Speaker 3: means there's a lot more to bridge. Iran also needs
Speaker 3: to message to its own people, and as you mentioned
Speaker 3: on the program earlier, we're not entirely sure exactly who
Speaker 3: we're speaking to with regards to Iran. There's the IRGC
Speaker 3: and there's the elected government, and those are not necessarily
Speaker 3: the same and don't have the same opinion and don't
Speaker 3: even necessarily have the same elements under their control in
Speaker 3: the country.
Speaker 2: Stay with us more Bloomberg surveillance coming up after this.
Speaker 2: President Donald Trump threatenings a quote knock out every single
Speaker 2: power plant and every single bridge in Iran if adal
Speaker 2: is not reached.
Speaker 4: Wallways.
Speaker 2: On global infrastructure, Sodak Wabba of Ice Squad Capital is
Speaker 2: remaining positive on the sector, writing the fundamental need for
Speaker 2: infrastructure in this part of the world doesn't disappear because
Speaker 2: the environment is difficult. If anything, it intensifies. Sodak joins
Speaker 2: us now for more. Good morning, sir, it's good to
Speaker 2: see you. Thank you, thank you very much for being
Speaker 2: care so in your opinion, in your mind, the war
Speaker 2: of the last two months or so doesn't upend infrastructure,
Speaker 2: it might accelerate it.
Speaker 6: Unfortunately in that sense. Yes, So two things. First, you're
Speaker 6: going to get at least sixty billion dollars probably more
Speaker 6: in terms of direct infrastructure damage. The problem is that's
Speaker 6: the physical damage, but you have consequences in addition to that,
Speaker 6: meaning it will take you a couple of years to
Speaker 6: rebuild some of that infrastructure. You'll have to spend on defense.
Speaker 6: So overall, the governments of the GCC have probably another
Speaker 6: hundred billion dollars that they need to spend over the
Speaker 6: coming years. What that will do, in my view, is
Speaker 6: it will push these governments into investing in these projects
Speaker 6: through direct government intervention and national oil companies, but then
Speaker 6: let the private sector focus on the remaining infrastructure over
Speaker 6: the course of the coming decade. If you look at
Speaker 6: the share, for example, in Saudi of non government oil,
Speaker 6: that's about forty percent. What's that number in the US
Speaker 6: about fifteen percent. So that share of government expenditure needs
Speaker 6: to come down any way over the coming years, and
Speaker 6: that I think will be accelerated because of what has happened.
Speaker 2: What do you think the key priorities will be now?
Speaker 6: I think there are two key priorities. One is redundancies
Speaker 6: and the other one is accelerated growth. So redundancies because
Speaker 6: we've seen that there's too much concentration in particular areas.
Speaker 6: So for example, twenty percent of the oil goes through
Speaker 6: the Strait of Homos. Twenty percent of the energy goes
Speaker 6: through the Strait of Homos. So what the GCC countries
Speaker 6: will need to do is to create redundancies, more pipelines,
Speaker 6: more storage facilities. And you're talking, by the way, they're
Speaker 6: already talking about that, right, it's not something that is speculative.
Speaker 6: What kind of pipeline do we need to build to
Speaker 6: remove that reliance on the Strait of homost one kind
Speaker 6: of storage facilities do we need to put in. So
Speaker 6: you're going to get a huge boost and investment in
Speaker 6: that kind of infrastructure to reduce that reliance. So that's
Speaker 6: one aspect. The second aspect of it is if you
Speaker 6: look at the non energy infrastructure, a lot of it
Speaker 6: has been concentrated in particular geographic areas. So for example,
Speaker 6: take data centers. One of the highest penetrations by the
Speaker 6: way of mobile phones, fantastic, but the digital infrastructure is
Speaker 6: highly concentrated in a few hubs, so a few hubs.
Speaker 6: Global cloud dependency, a fiber optic comes in particular geographic
Speaker 6: areas which we don't need to mention, so all concentrated
Speaker 6: in those areas, So that will have to change over
Speaker 6: the coming years. So one is data center. Another one
Speaker 6: is water resources. Sixty seven of the population in the
Speaker 6: GCC relies exclusively on diesel water and all the diesel
Speaker 6: plants are along that coast which is in the Gulf
Speaker 6: of Pressure, so you'll need to create a new infrastructure
Speaker 6: for water. Water reserves that need to be put in.
Speaker 5: This is a lot of money, and it's even more
Speaker 5: money when you think about how much the commodity prices
Speaker 5: are increasing as a result of all of this infrastructure
Speaker 5: build Where is the money going to come from. Is
Speaker 5: it going to be diverted from other initiatives that these
Speaker 5: Middle East countries are now investing in, whether it's golf
Speaker 5: or whether it's the premier league in football, or is
Speaker 5: it going to be coming from outside investors.
Speaker 6: I think it will come primarily from outside investors. So
Speaker 6: take a private equity firm like Iceweat Capital. We're looking
Speaker 6: to deploy easily over two billion dollars in the coming
Speaker 6: years in the region in that kind of infrastructure. It
Speaker 6: could be in water resources data centers, which already doing renewables.
Speaker 6: Renewables penetration in that area is five to seven percent,
Speaker 6: US is twenty world overall globally it's about thirty percent.
Speaker 6: Europe is sixty percent, So the weigh behind in terms
Speaker 6: of integrating renewables power into their system. So I think
Speaker 6: you're going to get a lot of investments. It should
Speaker 6: come primarily from foreign direct investments, private capital, and that's
Speaker 6: already happened in the last couple of years.
Speaker 5: Do you get the sense that there is an allegiance
Speaker 5: in terms of where the money comes from to go
Speaker 5: into some of these projects, the infrastructure projects. And I
Speaker 5: say this at a time where it seems like the
Speaker 5: world is kind of fracturing and there's a real question
Speaker 5: about US money going into the region or is it
Speaker 5: Asian money that's going into the region. At a time
Speaker 5: when this used to be sort of the new financial capital,
Speaker 5: that's kind of been called to a question. I mean,
Speaker 5: do you have a sense of where the flows are
Speaker 5: going to be coming from.
Speaker 6: I think, interestingly, the flows are going to continue to
Speaker 6: come from the US because we are the largest, deepest
Speaker 6: capital markets in the world. There's no doubt about that.
Speaker 6: We tend to be sometimes short term and forget about
Speaker 6: the long term. Asia tend to be more longer term.
Speaker 6: But you have a huge base of private equity investors
Speaker 6: in the US that is looking to invest in the
Speaker 6: region and will continue to invest in the region and
Speaker 6: are willing to take a longer term view. I don't
Speaker 6: think that was the case ten years ago, because you've
Speaker 6: seen fundamental changes in the region notwithstanding the war. But sorry,
Speaker 6: but Asia capital your point, I think, is going to
Speaker 6: be very aggressive, like it has been in Latin America
Speaker 6: likely it's been in Europe through Belton Road, through other
Speaker 6: mechanism that China has developed.
Speaker 1: Absolutely, Sometimes there's a habit to talk about the region
Speaker 1: as a monolith, but it's not who's hit the hardest
Speaker 1: right now? Is it Bahrain in Kuwait? Are they you
Speaker 1: don't need the most money.
Speaker 6: The truth is the people think of these as different countries,
Speaker 6: which of course they are, but they all rely on
Speaker 6: that energy infrastructure which has been hit that I think
Speaker 6: will need to be rebuilt very quickly. Some of it
Speaker 6: will take years. As I said, because I'll give you
Speaker 6: an example today, I want to build in the US
Speaker 6: a power plant. We have huge needs for power plants
Speaker 6: right because of data centers. For me to order a
Speaker 6: turbine from Siemens Mitsubishi ge five to seven years. So
Speaker 6: think about that region where they have to rebuild. It's
Speaker 6: not as much as the cost, as much as the
Speaker 6: time that's going by, so they will have to wait
Speaker 6: quite a bit to be able to rebuild that. So
Speaker 6: it's honestly across all of the energy sector. What has
Speaker 6: been most hit is of course anything that has to
Speaker 6: do with the US, so US basis where US activities
Speaker 6: occurred that was hit.
Speaker 1: What about the trillions of dollars these countries have pledged
Speaker 1: to invest into the United States if the President made
Speaker 1: that huge foreign policy trip last year.
Speaker 6: Yes, I was actually part of that trip with President Trump.
Speaker 6: I think those investments will happen, but maybe will happen
Speaker 6: over a longer period of time than expected. Let's put
Speaker 6: it that way.
Speaker 4: That's what I heard.
Speaker 1: I heard all those investments are now getting kicked down
Speaker 1: the road, kick the can. But for the president, I say,
Speaker 1: this was a huge foreign policy win.
Speaker 6: Yes, you see, there's an irony to that. I think
Speaker 6: those economies are willing to invest in the US. The
Speaker 6: question is in what sector and are we able? Do
Speaker 6: we have the mechanism to take on those investments. So
Speaker 6: it's easy to invest in the stock market, it's much
Speaker 6: more difficult to invest in a multi billion dollar pipeline
Speaker 6: that needs to be built. So ironically, it's the availability
Speaker 6: of projects in the US that is the challenge. The permitting,
Speaker 6: the regulatory frameworks, all that is effectively slowing down the
Speaker 6: ability to observe that kind of capital.
Speaker 2: At least, try to ask the question, and do you
Speaker 2: think the Sundias will stick with liftgolf? Have you got
Speaker 2: an opinion on that, sir?
Speaker 6: None?
Speaker 2: But I think they will stick. Yes, stay with us.
Speaker 2: More Bloomberg surveillance coming up after this and the Savannahs
Speaker 2: this morning. A change of course, we're going to focus
Speaker 2: on a Federal Reserve confirming Kevin Walsh.
Speaker 7: It's time to move on from this. So the petitions
Speaker 7: to the court have been rejected, and I think it's
Speaker 7: time to move on from the case and put our
Speaker 7: attention around getting Kevin Warsh confirmed by the United States Senate.
Speaker 7: Let President Trump have a new partner at the Fed.
Speaker 7: What Treasury Secretary of Bessett have a new partner in
Speaker 7: bank supervision and monetary policy. It's time and I think
Speaker 7: it's important to.
Speaker 2: Move So here's the laces this morning, Kevin WASH's confirmation hearing.
Speaker 2: Facing headwinds. Senator Tom Tiller is still voving to block
Speaker 2: the nomination until the DOJ ends its probe into the
Speaker 2: Central Bank joining us now as Claudia sum of New
Speaker 2: Century Advisors, Claudia, thanks for making some time for today
Speaker 2: once again ahead of an important hearing. I have to say,
Speaker 2: but you're anticipating more theater than signaled and insight in
Speaker 2: the next twenty four hours.
Speaker 4: Well.
Speaker 8: Confirmation hearings always have an aspect of political theater to them.
Speaker 8: But this one, frankly, I think Kevin Worsh might almost
Speaker 8: be a sideshow at his own confirmation hearing.
Speaker 4: President Trump is going to.
Speaker 8: Loom very large in these hearings tomorrow and the pressure
Speaker 8: campaign he's put on the FED, and we might learn
Speaker 8: not so much about Kevin Warsh and his views on
Speaker 8: monetary policy.
Speaker 4: That's that, Claudia.
Speaker 5: It feels like people are on tenter hooks waiting for
Speaker 5: him to give some signal of how high the bar
Speaker 5: is for him to cut rates and exactly what he
Speaker 5: plans to do with the balance sheet? Are you expecting
Speaker 5: no signal from him with respect to cutting rates at
Speaker 5: this moment, given the fact that Secretary Treasury Secretary Scott
Speaker 5: Besson essentially gave him a green light to be a
Speaker 5: little more hawkish than perhaps President Trump would like.
Speaker 8: Well, first of all, somebody's got to ask him about it,
Speaker 8: right again, That's where I mean him not being part
Speaker 8: of the center of focus. If a lot of the
Speaker 8: questions are about President Trump and FED independence and like, that.
Speaker 4: Just wouldn't get to what's Kevin.
Speaker 8: Worsh's reaction function, Like how does he think about what
Speaker 8: the federal funds rate should be what is he balancing?
Speaker 4: And it is difficult.
Speaker 8: Over his career, it's a bit of an enigma what
Speaker 8: his reaction function is. So I think that's absolutely what
Speaker 8: we should be learning about tomorrow. I hope we get
Speaker 8: more guidance from him on this, but again senators have
Speaker 8: got to ask him about and really push him on
Speaker 8: how does he think about setting the federal funds rate.
Speaker 4: We might get some of that tomorrow, but I suspect
Speaker 4: we're not.
Speaker 8: Going to get as much as we really should be
Speaker 8: getting to kind of think about him as a candidate, Claude,
Speaker 8: are you.
Speaker 5: Surprised that the market's been relatively sanguine in the face
Speaker 5: of some real drama and real questions around a who's
Speaker 5: going to be atop the Federal Reserve and be what
Speaker 5: would the composition look like given some of the drama
Speaker 5: with current Fed share J Powell.
Speaker 8: So there has been absolutely nothing normal about this transition
Speaker 8: in leadership at the FED.
Speaker 4: And again that doesn't go back to Kevin Warre.
Speaker 8: Since President Trump has chosen to run the vetting process
Speaker 8: in a certain way, being very clear that he's only
Speaker 8: putting someone in place that wants low interest rates like
Speaker 8: he does the fact that we have an open criminal
Speaker 8: investigation against the current FED chair that's holding.
Speaker 4: Up the confirmation vote.
Speaker 8: We have another governor whose job is before the Supreme
Speaker 8: Court because the president's.
Speaker 4: Trying to remove him. Like, nothing about this is normal.
Speaker 4: I mean, I think it will be good.
Speaker 8: There's a potential for Kevin Wosh to come in and
Speaker 8: kind of set the tone about how he's going to
Speaker 8: smooth out this leadership transition, because right now it's really
Speaker 8: it's quite chaotic.
Speaker 1: If Senators Jack read or Mark Warner Cythia Lumis are
Speaker 1: watching this morning, what would you ask them to ask Kevin.
Speaker 8: Warsh Again, I think it's really important to help us
Speaker 8: understand how does Kevin worsh think about rates policy. There's
Speaker 8: been a lot of times where he's talked about the
Speaker 8: balance sheet. We understand that he doesn't like the tool
Speaker 8: of the balance sheet. He wants a smaller balance sheet.
Speaker 8: One thing that I've been concerned about is often he said, well,
Speaker 8: as we drink the balance sheet, that's going to give
Speaker 8: us space to lower interest rates. Okay, his agenda to
Speaker 8: shrink the Fed's balance sheet requires a real change to
Speaker 8: the framework that is going to take a lot of time. Okay,
Speaker 8: say he doesn't get that, is that what rate policy
Speaker 8: is tied to? Is him getting a smaller balance sheet?
Speaker 8: If not, what is it that rate policy is tied to?
Speaker 8: And how is he going to make these arguments because
Speaker 8: again he's had very hawkish positions in the past and
Speaker 8: now he has very dubvish positions, and he's just trying
Speaker 8: to make sense of it, like what is his past?
Speaker 8: And I think for the Republican senators as well, they
Speaker 8: need to understand who is this person that they are
Speaker 8: elevating to fence here? How does he really process information
Speaker 8: about the economy. And there's just there's a lot of
Speaker 8: question marks. Confirmation hearing is where question marks should get
Speaker 8: resolved totally.
Speaker 2: Just to find a question from us in your opinion,
Speaker 2: your opinion, what is the most convincing argument right now
Speaker 2: for lower interest rights?
Speaker 8: Like right today, there isn't a convincing argument. There really
Speaker 8: is too much uncertainty about what's happening with the conflict
Speaker 8: and the Middle East. We still haven't had the tear
Speaker 8: eff effects roll off. I think we can still build
Speaker 8: a case for the next move is a rate cut.
Speaker 4: I think that is still appropriate.
Speaker 8: I'd like to hear how Kevin worsh build that, because
Speaker 8: I would build that with some weakness in the labor
Speaker 8: market potential. That's not something we've ever heard from him
Speaker 8: per se on this. But there's a case for the
Speaker 8: next move is a rate cut. But it's really hard
Speaker 8: to say that should be happening right now and these
Speaker 8: should be big cuts. And that's where I think, you know,
Speaker 8: if he wants to make that case, it would be
Speaker 8: really interesting to hear him make it.
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