WEBVTT - Traders Eye Renewed Iran Peace Push 0:00:00.080 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.160 us live on YouTube. 0:00:27.720 --> 0:00:31.480 What's wonderful about this? Our guests get lost in the building, 0:00:31.600 --> 0:00:32.479 there's so many. 0:00:32.320 --> 0:00:35.280 Floors, get snacks and stuff, or they go shopping. 0:00:35.479 --> 0:00:38.800 You know, Madison Avenue is just so close joining us now, 0:00:39.920 --> 0:00:42.200 just back from the new Prada store. 0:00:42.440 --> 0:00:44.320 Thanks guys. 0:00:44.320 --> 0:00:47.400 Did you see the product expansion the store? They bought 0:00:47.400 --> 0:00:50.320 the building and they just blew it out one hundred 0:00:50.320 --> 0:00:54.960 percent is well? What does the luxury boom? Alicia Levine 0:00:55.160 --> 0:01:00.920 say about the caution the worry the consumer in America? 0:01:00.960 --> 0:01:02.800 I mean, there's like two worlds out there. 0:01:02.880 --> 0:01:05.200 It's two worlds out there. I mean, look, it's obvious. 0:01:05.440 --> 0:01:09.400 I think that if you just look at results of luxury. 0:01:10.120 --> 0:01:15.600 You know, asset prices have skyrocketed since twenty twenty, and 0:01:16.280 --> 0:01:20.240 global wealth owners have simply become wealthare And if you 0:01:20.280 --> 0:01:24.360 had your assets in the US, you're about seventy five 0:01:24.360 --> 0:01:28.280 percent wealthier than you were six years ago. And it's evident. 0:01:28.319 --> 0:01:31.200 I mean, if you just look at the airlines, they're 0:01:31.240 --> 0:01:35.200 talking about one hundred and ten dollars oil prices, raising 0:01:35.600 --> 0:01:37.399 estimates because demand is so. 0:01:37.520 --> 0:01:41.839 Rgic Christ fifty six fifty seven United Airlines out of Newark. 0:01:41.880 --> 0:01:45.160 It's the one benchmark I use in two cups of coffee. 0:01:45.160 --> 0:01:48.720 You go, it was seven five hundred dollars business class. Well, 0:01:48.760 --> 0:01:51.960 you'd be enjoying that this morning at ten one hundred. 0:01:51.960 --> 0:01:52.800 Oh boy, there you go. 0:01:53.360 --> 0:01:54.280 That's that's your list. 0:01:54.320 --> 0:01:55.360 So what do we do with Alicia? 0:01:55.400 --> 0:01:57.480 I mean, it seems like the market's trying to discount, 0:01:57.560 --> 0:01:58.480 trying to price. 0:01:58.240 --> 0:02:00.000 In I guess higher energy costs. 0:02:00.440 --> 0:02:04.160 I guess maybe some higher inflation, maybe even some slower 0:02:04.200 --> 0:02:05.000 economic growth. 0:02:05.240 --> 0:02:06.800 Has that changed the way you view the market? 0:02:07.120 --> 0:02:09.720 So it has not changed. And we've had some really 0:02:09.760 --> 0:02:14.760 interesting discussions in our investment Strategy Committee where we discuss 0:02:14.840 --> 0:02:17.680 all these things. And we came into the year, you know, 0:02:18.160 --> 0:02:21.040 overweight the US and we have a healthy allocation to 0:02:21.120 --> 0:02:25.720 international because we recognized earnings our moving higher, develop international 0:02:25.720 --> 0:02:27.919 and emerging markets for the first time in a long time. 0:02:29.240 --> 0:02:31.520 So we came into the year we were not one 0:02:31.560 --> 0:02:36.080 of the dollar is getting crushed shops. We were I'd 0:02:36.080 --> 0:02:39.680 say more ambivalent about it. This could see some dollar weakness, 0:02:39.680 --> 0:02:42.040 but not overall because the US economy is so strong, 0:02:42.360 --> 0:02:45.000 and we really expected close to three percent growth this year, 0:02:45.280 --> 0:02:48.560 you know, on January first, twenty twenty six, so we 0:02:48.680 --> 0:02:51.760 never really changed our views. You have to be concerned 0:02:51.760 --> 0:02:55.040 about tail risk. I think what we've seen since the 0:02:55.160 --> 0:02:57.960 cease fire and some of the leaks about what the 0:02:58.000 --> 0:03:00.359 discussions were about, you've got to bring the tails in right. 0:03:00.440 --> 0:03:03.040 You're not going to get the best case scenario where 0:03:03.480 --> 0:03:08.639 US owns oil globally, but you're not also getting you're 0:03:08.639 --> 0:03:13.440 not getting a catastrophe either. And so therefore, if I 0:03:13.480 --> 0:03:15.839 can dare say the word tariffs, which nobody has talked 0:03:15.840 --> 0:03:18.000 about in the last six weeks, I can say, if 0:03:18.000 --> 0:03:20.400 you go back a year ago, right, but the market 0:03:20.440 --> 0:03:23.680 priced in when it's not the worst case scenario, we 0:03:23.800 --> 0:03:25.840 bring in the left tail risk and we continue with 0:03:25.880 --> 0:03:28.000 our story. And the story is earners are moving higher 0:03:28.040 --> 0:03:29.520 three percent from the beginning of the year. 0:03:29.760 --> 0:03:32.520 Alicia Levine with this with BNY well through thrilled that 0:03:32.600 --> 0:03:34.960 she's with us this morning. She's under selling herself. I'll 0:03:35.000 --> 0:03:37.560 talk about that in a moment. Good morning around the world, 0:03:37.560 --> 0:03:40.600 Good morning across America. The way you choose to listen 0:03:40.640 --> 0:03:44.080 to us major good morning to YouTube. Alicia Levine was 0:03:44.080 --> 0:03:46.240 one of the first people to say, hey, stupid, look 0:03:46.280 --> 0:03:49.480 at YouTube. It's what everybody's using. Because her kids are 0:03:49.480 --> 0:03:52.600 glued to it, absolutely glued to it. They do. They 0:03:52.600 --> 0:03:56.400 look in they go Lego construction and there's like four 0:03:56.440 --> 0:04:00.280 hundred videos abound how to put legos together. Make sure 0:04:00.280 --> 0:04:03.800 you're underselling yourself. You had the courage here with your 0:04:03.840 --> 0:04:09.440 prodigious math skills to say, have courage stay in the market. 0:04:09.840 --> 0:04:13.240 The percentage of people, particularly institutions that were you know, 0:04:13.280 --> 0:04:16.320 they didn't where, they weren't in Chicago looking at cartosis 0:04:16.520 --> 0:04:19.280 and the answer is they missed this. Yep, what's the 0:04:19.279 --> 0:04:21.039 pop now after the shortcover? 0:04:21.600 --> 0:04:24.800 So look, thank you for that. It's not easy, as 0:04:24.800 --> 0:04:28.440 you know, I think. Here we're now looking at earning season. 0:04:28.520 --> 0:04:30.920 So now we got to the nitty gritty, what are 0:04:30.920 --> 0:04:33.320 the fundamentals going to tell us? So that three percent 0:04:33.400 --> 0:04:37.720 earnings increase in expectations driving into something like fifteen or 0:04:37.760 --> 0:04:41.200 sixteen percent earnings growth for the year has come from 0:04:41.200 --> 0:04:44.440 the energy sector, obviously, because the earnings are now massively 0:04:44.440 --> 0:04:49.039 positive and not negative materials. And also our old favorite 0:04:49.120 --> 0:04:51.279 of the tech sector, remember dance with the one that 0:04:51.360 --> 0:04:54.560 brought you. So that's what's driving earnings higher. What has 0:04:54.680 --> 0:04:57.960 not happened is that we haven't seen companies guide down. 0:04:58.400 --> 0:05:02.520 We haven't heard a discussion about hire input costs, and 0:05:02.839 --> 0:05:05.520 analysts have not put pen to paper yet because why 0:05:05.520 --> 0:05:08.200 would you. An earning season is this week starting and 0:05:08.279 --> 0:05:10.719 the next three weeks we will know a lot. So 0:05:10.760 --> 0:05:12.919 I guess that's what we're looking at. We're really looking at. 0:05:13.200 --> 0:05:15.480 You know, what are the sectors that are most exposed 0:05:15.839 --> 0:05:18.600 to higher input? Cause from the energy side, I'll say this, 0:05:18.720 --> 0:05:23.040 the airlines are remarkable. And we have a merger possible 0:05:23.080 --> 0:05:25.320 merger announcement this morning too, So. 0:05:25.400 --> 0:05:29.080 Okay, stop the show. We go to aircraft carrier Lander 0:05:29.360 --> 0:05:33.119 lives at Newark. Paul Sweeney, are you kidding me? No way? 0:05:33.320 --> 0:05:34.679 I mean way the regulators. 0:05:35.080 --> 0:05:37.440 So I asked Jen Rey, who's our you know, anti 0:05:37.560 --> 0:05:40.200 trust analyst at Bloomberg Intelligence where the regulators ever allowed 0:05:40.200 --> 0:05:40.480 that deal? 0:05:40.520 --> 0:05:41.599 And she's like, no way. 0:05:41.920 --> 0:05:43.960 Can you can you get her run? Or are you 0:05:44.000 --> 0:05:46.479 going to steal it? We're working on it. He steals 0:05:46.480 --> 0:05:50.240 our guest folks at ten am. It's flud. She's ruthless, scarletless, 0:05:50.320 --> 0:05:53.880 absolutely ruthless. January is world class in this. On This 0:05:54.000 --> 0:05:55.839 Paul Sweeney with Alisia Levine. 0:05:55.880 --> 0:05:57.839 At least before we got into this war. 0:05:58.400 --> 0:06:01.920 Aspect to the market, that black Swan, one of the 0:06:01.960 --> 0:06:04.320 bigger stories was just AI and how do I. 0:06:04.279 --> 0:06:05.120 Play AI now? 0:06:05.160 --> 0:06:07.279 Because it used to be I just buy the hyperscalers 0:06:07.279 --> 0:06:09.640 and whoever spending the money, that's where I want to 0:06:09.640 --> 0:06:12.600 own it. Now the market seems to be saying winners, 0:06:12.720 --> 0:06:14.960 losers were not sure kind of buckets. 0:06:15.279 --> 0:06:16.080 How do you guys think of it? 0:06:16.120 --> 0:06:17.880 So I think you want to look at what was 0:06:17.920 --> 0:06:21.400 working before the war, And interestingly, what was working before 0:06:21.400 --> 0:06:23.679 the war, about four or five months before was energy 0:06:23.920 --> 0:06:26.880 because energy is powering this. So energy is a winner 0:06:26.920 --> 0:06:29.839 from the war. Energy was a winner beforehand. So you 0:06:29.920 --> 0:06:33.560 want to play build out. You want to play things 0:06:33.960 --> 0:06:36.000 right because I think what we learned in the software 0:06:36.000 --> 0:06:39.960 sector that there's some risk to the terminal value as 0:06:40.040 --> 0:06:43.520 yet unknown what the discount should be. It looks like 0:06:43.560 --> 0:06:46.599 the market is paying you to play right because the 0:06:46.640 --> 0:06:49.320 discount and software has become so extreme. You've got names 0:06:49.360 --> 0:06:53.000 down fifty percent. But ultimately, I think what you're playing 0:06:53.080 --> 0:06:56.320 here is the hardware side, the scare city side, the 0:06:56.480 --> 0:07:01.760 energy side, the commodity side, and the builds out. And 0:07:01.920 --> 0:07:04.760 so we like industrials, we like energy, and we like 0:07:04.839 --> 0:07:07.760 materials here because that's what you are going to need 0:07:07.800 --> 0:07:09.720 for the build out. Now. The other thing if you 0:07:09.720 --> 0:07:12.800 look at just memory, is that that was this was 0:07:12.840 --> 0:07:17.160 a very sleepy area of the Semis that just exploded 0:07:17.520 --> 0:07:20.640 in the last eight months because that also was scared. 0:07:21.280 --> 0:07:22.640 Come from Michael. 0:07:23.200 --> 0:07:24.800 Yeah, others, What. 0:07:24.760 --> 0:07:28.120 Are your kids doing? Alicia Livin's kids are well behaved. 0:07:28.520 --> 0:07:30.240 What are they doing with a AI? Do you have 0:07:30.320 --> 0:07:33.480 like one problem child? It's totally all day in their 0:07:33.520 --> 0:07:34.800 bedroom just killing AI. 0:07:35.720 --> 0:07:37.920 No, but I wish I did. I wish I did. 0:07:38.080 --> 0:07:41.040 It's like the future. I'm waiting for some of the 0:07:41.080 --> 0:07:43.760 offspring to go. You know, well, I'm in anthropic this 0:07:43.880 --> 0:07:45.320 you know stuff I don't understand. 0:07:45.920 --> 0:07:48.600 Well, I mean, you talk to the kids. I mean, 0:07:48.760 --> 0:07:52.120 it is their life. It's not something that they use, 0:07:52.200 --> 0:07:52.920 it's just there. 0:07:53.520 --> 0:07:55.920 It's part of the research process, it's part of their 0:07:55.960 --> 0:07:59.680 process of learning, it's part of who they are. 0:08:00.000 --> 0:08:01.840 One of my heroes is Kent, a husband who wrote 0:08:01.880 --> 0:08:05.000 a book called Iceberg Risk. It's about you know, think 0:08:05.080 --> 0:08:09.360 of the Titanic movie with Kate Winslet and the other guy. 0:08:09.480 --> 0:08:11.760 They're on the tip of the bow looking at the icebergs. 0:08:12.000 --> 0:08:15.040 Except Ken opens a book with two statisticians. One of 0:08:15.120 --> 0:08:17.800 them is as nerdy as Alicia Levine, and they're certain 0:08:17.840 --> 0:08:20.080 they're not going to hit an iceberg because that's what 0:08:20.120 --> 0:08:24.080 the distribution says. And buried in his book is heavyweight 0:08:24.520 --> 0:08:30.120 binomial theorem on the xyz space the volatility matrix of 0:08:30.160 --> 0:08:33.920 a given derivative instrument. Can AI help you when you 0:08:33.960 --> 0:08:35.480 were at Chicago killing it? 0:08:35.960 --> 0:08:36.320 Oh? 0:08:36.320 --> 0:08:38.320 It helps all the time. It helps right now. We 0:08:38.360 --> 0:08:40.920 all use AI at the bank, all of us use 0:08:40.960 --> 0:08:43.200 it for everything, for daily, for everything. 0:08:43.679 --> 0:08:47.040 Forevery because I agree, my life would have been different. 0:08:47.120 --> 0:08:49.000 It would have been very different, the way our lives 0:08:49.000 --> 0:08:52.280 would have been different if we had, you know, technology 0:08:52.320 --> 0:08:54.280 in our pocket in a way. I mean some of 0:08:54.320 --> 0:08:57.040 us whose typewriters just going to say, just going to. 0:08:56.960 --> 0:08:59.000 Say, you know, they don't unlictit is too young, you 0:08:59.120 --> 0:09:03.240 didn't know what to typewrite. It help me alsha with 0:09:03.679 --> 0:09:07.600 the estimate forward on the standard of course, five hundred, 0:09:07.600 --> 0:09:11.120 everybody's recapitulate and seven thousand plus. Can I make some 0:09:11.160 --> 0:09:12.880 news today? Can we get to eight thousand? 0:09:13.160 --> 0:09:14.920 Can we get to eighth? O? Look, we're in print 0:09:14.960 --> 0:09:18.920 at seventy six hundred. Okay, three weeks ago when I 0:09:19.040 --> 0:09:22.280 kept it at seventy six hundred, and we're still there. 0:09:22.320 --> 0:09:26.400 It's Look, it's a midterm election year. Things get very volatile. 0:09:26.720 --> 0:09:30.280 Since nineteen thirty eight, the pattern has never been broken. 0:09:30.640 --> 0:09:34.280 As a historian, I'd have to say, if we just 0:09:34.320 --> 0:09:37.640 get away with a seven to nine percent draw down, 0:09:38.000 --> 0:09:41.400 I'll consider myself lucky. But we do see a rally 0:09:41.440 --> 0:09:44.120 into the year. I would think that you really have 0:09:44.120 --> 0:09:46.079 to pay attention to input costs here because right now 0:09:46.080 --> 0:09:49.280 expectations are for the highest margins. Ever, not sure that's realistic. 0:09:49.400 --> 0:09:52.160 Alicia, Thank you so much. Alicia Levine, head of investment 0:09:52.240 --> 0:09:57.880 strategy ban Why Wealth, thank her. Stay with us. More 0:09:58.000 --> 0:10:00.880 from Bloomberg Surveillance coming up after this. 0:10:08.120 --> 0:10:11.720 You're listening to the Bloomberg Surveillance podcast. Catch US Live 0:10:11.800 --> 0:10:14.920 weekday afternoons from seven to ten am Eastern Listen on 0:10:15.040 --> 0:10:18.680 Applecarplay and Android Otto with the Bloomberg Business app, or 0:10:18.840 --> 0:10:20.360 watch US Live on YouTube. 0:10:20.800 --> 0:10:23.719 Shannon O'Neill owns a high ground on a study of 0:10:23.800 --> 0:10:27.559 Latin America. She drives so much of the research capability 0:10:28.240 --> 0:10:31.040 at the Consul on Foreign Relations. We're really honored she 0:10:31.040 --> 0:10:35.240 could show up, given a war, given a geopolitics, Shannon, 0:10:35.280 --> 0:10:39.679 the output of CFR and Foreign Affairs Magazine is a 0:10:39.800 --> 0:10:43.240 national treasure. Over the last what is it forty eight days? More? Yeah? 0:10:43.360 --> 0:10:46.200 We up to five? Oh yet close close, you know, 0:10:46.320 --> 0:10:50.280 whatever it is, Shannon, Michael O'Hanlon from Brooks in there, 0:10:50.440 --> 0:10:53.080 the gentleman from King's College writing on warre them halfway 0:10:53.080 --> 0:10:57.720 through the article, and on and on and on. Where's 0:10:57.760 --> 0:11:02.680 the realist thought? Now? The heritage of Kissinger, the heritage 0:11:02.720 --> 0:11:08.920 of Robert D. Kaplan, the heritage of Kindie Rice. Where's 0:11:09.120 --> 0:11:12.240 realist foreign policy given this war? 0:11:13.920 --> 0:11:16.359 Well, the great thing about CFRs there's a lot of perspectives, 0:11:16.360 --> 0:11:18.040 and we've got a great lineup of folks that look 0:11:18.040 --> 0:11:20.280 at Iran and look at the Middle East more broadly. 0:11:20.720 --> 0:11:23.240 But I think what we are seeing from lots of 0:11:23.280 --> 0:11:26.920 those scholars is, you know, looking at this and this 0:11:27.000 --> 0:11:27.320 is one of. 0:11:27.320 --> 0:11:28.880 The most difficult situations. 0:11:28.880 --> 0:11:31.280 And this is partly why the United States, for years 0:11:31.280 --> 0:11:33.839 there's been tensions with the Iranian regime, but nobody went 0:11:33.840 --> 0:11:36.600 to war because it was such a pickle to get 0:11:36.640 --> 0:11:38.840 out of. And we're seeing that. We're seeing that this 0:11:39.000 --> 0:11:42.720 asymmetric warfare basically which United States has a long history with. 0:11:43.040 --> 0:11:45.040 We're in that right now where they can shut down 0:11:45.040 --> 0:11:46.920 the strait of our rooves with some drones, with some 0:11:47.000 --> 0:11:50.240 fast foods. We have the most powerful navy in the world. 0:11:50.679 --> 0:11:54.120 Nate Swanson just publishing is a resident senior fellow. That 0:11:54.240 --> 0:11:57.160 means he gets our coffee, gets sharing his coffee. Is 0:11:57.400 --> 0:12:01.440 that means okay? You know, seriously, director for Iran, for 0:12:01.520 --> 0:12:06.720 the National Security Council, I mean Nate Swanson publishing this morning, 0:12:06.760 --> 0:12:12.240 Shannon O'Neill, Trump is still underestimating Tehran's resolve. Full the 0:12:12.320 --> 0:12:17.160 cultural aspects of Persia, the levant in America into the debate. 0:12:18.880 --> 0:12:21.480 You know, I think it's right. You see, if you remember, 0:12:21.600 --> 0:12:23.680 it seems like an eons ago, but just at the 0:12:23.679 --> 0:12:25.880 start of this year you saw the Trump administration go 0:12:25.960 --> 0:12:28.880 into Venezuela and remove the head of state there, set 0:12:28.960 --> 0:12:30.839 up a regime that's very friendly to the United States 0:12:30.920 --> 0:12:33.559 and has been exporting oil since then. And I think 0:12:33.600 --> 0:12:36.439 there probably was a little bit of a misperception that 0:12:36.800 --> 0:12:40.040 Iran could be as easy, and just as you're saying, right, 0:12:40.040 --> 0:12:43.360 there's a huge difference in terms of size, huge difference 0:12:43.400 --> 0:12:45.920 in terms of culture, huge difference in terms of the 0:12:45.960 --> 0:12:49.280 resolve of the regime and the ideological nature, which wasn't 0:12:49.280 --> 0:12:51.800 the case. So I think there's a mismatch here which 0:12:51.840 --> 0:12:54.280 has gotten us where we are today, Shannon. 0:12:54.360 --> 0:12:58.240 At this stage, what would be a reasonable I guess 0:12:58.280 --> 0:13:00.360 ceasefire agreement with Iran? 0:13:00.840 --> 0:13:03.280 And do we have the right people negotiating this? 0:13:04.760 --> 0:13:06.520 You know, it seems I think we may end up 0:13:06.559 --> 0:13:08.600 in a space there's lots of different possibilities, but we 0:13:08.640 --> 0:13:10.679 may end up in a space where we don't have 0:13:10.720 --> 0:13:14.120 a war. We have some oil coming out, but we 0:13:14.160 --> 0:13:17.360 don't really have oil either. We get into this freeze 0:13:17.800 --> 0:13:20.160 where it's not a hot war. But it's hard for 0:13:20.200 --> 0:13:23.160 me to see where we find real resolution here. So 0:13:23.559 --> 0:13:27.000 a shaky cease fire, but also challenges for the rest 0:13:27.000 --> 0:13:29.760 of the Middle East, right, because this isn't just now Iran. 0:13:29.840 --> 0:13:31.800 This has to do with Lebanon, it has to do 0:13:31.920 --> 0:13:33.960 with other parts of the Middle East, So it will 0:13:34.000 --> 0:13:36.760 be I can imagine a scenario where we're not in 0:13:36.760 --> 0:13:39.200 a hot war, but we continue to see these real 0:13:39.320 --> 0:13:41.200 tensions and flare ups. 0:13:42.400 --> 0:13:45.560 What are the next steps here? I mean, it seems like, 0:13:45.760 --> 0:13:49.160 you know, both sides are ratcheting up the rhetoric here. 0:13:48.880 --> 0:13:52.400 Is there an argument that this is a really, really 0:13:52.440 --> 0:13:54.679 a pressure point for a Ran, that they do need 0:13:55.240 --> 0:13:56.400 peace here in this region? 0:13:57.760 --> 0:14:00.439 You know, I think Iran has come out of this surprise. Well, 0:14:00.440 --> 0:14:02.720 there's a great column this morning from Javier Blass in 0:14:02.800 --> 0:14:05.600 Bloomberg that you know, I read it, I recommend everybody read. 0:14:05.920 --> 0:14:07.640 But the idea here is in the end, they kind 0:14:07.679 --> 0:14:10.520 of came out winning. Yes, they have had real challenges. 0:14:10.559 --> 0:14:12.600 There have been you know, leaders killed and the like, 0:14:12.720 --> 0:14:15.880 but they're selling more oil, they're making more money on 0:14:15.960 --> 0:14:19.520 the international markets, and they've been able to consolidate control 0:14:19.720 --> 0:14:22.400 in fun. I think the interesting thing here is while 0:14:22.400 --> 0:14:24.680 it's the United States and Iran that are negotiating here, 0:14:24.960 --> 0:14:27.880 the countries that have been hit hardest by this are 0:14:28.920 --> 0:14:31.120 those in Asia, right in many of these countries in 0:14:31.120 --> 0:14:33.400 the Philippines, and like they're really having a hard time 0:14:33.480 --> 0:14:35.560 keeping the lights on because they are the countries that 0:14:35.600 --> 0:14:38.320 took the oil, that took the natural gas and that 0:14:38.480 --> 0:14:41.640 really took lots of the petrochemicals, the helium. You know, 0:14:41.720 --> 0:14:44.480 Asian supply chains depend on a lot of what comes 0:14:44.480 --> 0:14:46.120 out of the Middle East. So that is an area 0:14:46.120 --> 0:14:48.400 of the world that is being hit hardest, even if 0:14:48.400 --> 0:14:50.000 they're not right after negotiating. 0:14:50.160 --> 0:14:52.640 What's to the headlines right now with doctor O'Neil, folks, 0:14:52.640 --> 0:14:55.000 I mean, this is a telegraph in London. Love their work, 0:14:55.400 --> 0:14:58.880 really really current, like t live for Bloomberg as well. 0:14:59.680 --> 0:15:05.000 China East tanker sails through Armas despite Trump blockade, and 0:15:05.040 --> 0:15:07.680 the trick is the tankers didn't go to Iranian ports. 0:15:08.120 --> 0:15:11.240 And there's if I read the quick article, folks, there's 0:15:11.280 --> 0:15:14.720 three tankers out there trying to slide by because they're 0:15:14.720 --> 0:15:17.640 not out of Iranian ports. I mean, what is your 0:15:17.720 --> 0:15:21.720 study of this, Shannon O'Neill. Of blockades, I mean, this 0:15:21.760 --> 0:15:25.040 is not Aubrey and maderin you know, a Patrick O'Brien 0:15:25.160 --> 0:15:29.160 Napoleonic War novel. Russell Crawl's not out in the Persian 0:15:29.160 --> 0:15:32.280 golf getting it done. How do blockades work, Shannon? 0:15:33.560 --> 0:15:36.360 I mean, the US could blockade all the ships. The 0:15:36.440 --> 0:15:39.600 question is geopolitically do they want to? I mean, as 0:15:39.640 --> 0:15:42.440 you Remember there's a planned meeting between she and Trump 0:15:42.480 --> 0:15:44.840 coming up in May, so just a month plus away. 0:15:45.360 --> 0:15:48.080 And you know, do you want to stop oil that 0:15:48.560 --> 0:15:50.280 China depends upon? 0:15:50.480 --> 0:15:50.680 Right? 0:15:51.000 --> 0:15:53.880 Trump doesn't want to see a pullback on the Chinese 0:15:53.960 --> 0:15:56.560 side there, and so perhaps they're going to let ships 0:15:56.600 --> 0:15:59.040 go through, not because they can't stop them, they could, 0:15:59.480 --> 0:16:02.600 but for g political reasons. You also saw, speaking of blockades, 0:16:02.960 --> 0:16:05.320 you saw the United States let a Russian tanker full 0:16:05.320 --> 0:16:07.760 of oil get into Cuba just a couple of weeks ago. 0:16:08.080 --> 0:16:11.840 So there is other reasons for the sort of geopolitical 0:16:11.920 --> 0:16:13.760 lens why you might let ships through. 0:16:14.000 --> 0:16:17.600 Shenon At this stage, do you think a diplomatic breakthrough 0:16:17.760 --> 0:16:20.320 is likely in the near term or are both sides 0:16:20.480 --> 0:16:22.120 just so entrench that maybe not. 0:16:23.640 --> 0:16:25.040 You know, they have said that they're going to go 0:16:25.120 --> 0:16:27.800 back to the table and have conversations, but it's hard 0:16:27.800 --> 0:16:30.200 for me to see what can be put on the 0:16:30.240 --> 0:16:34.760 table between the two governments that really leads to an agreement. 0:16:34.920 --> 0:16:38.040 I do think the Uuradians have been emboldened after what's 0:16:38.040 --> 0:16:41.160 happened over these last forty eight days to state their case. 0:16:41.760 --> 0:16:45.000 And for the Trump administration, while you know he often 0:16:45.000 --> 0:16:48.240 declares victory on various things. It's hard to see what 0:16:48.480 --> 0:16:51.080 the US could agree to. So I think a sort 0:16:51.080 --> 0:16:55.560 of a ceasefire or a continuing freezing of the conflict 0:16:55.600 --> 0:16:57.240 maybe where we end up for a while. 0:16:57.320 --> 0:17:00.560 Paul kind of do one Latin American question. Though Shannon's 0:17:00.560 --> 0:17:05.600 people aren't angry at Shannon Cuba. I remember my parents 0:17:05.760 --> 0:17:10.000 hiding the newspapers of the Cuban missile crisis. There's all 0:17:10.040 --> 0:17:16.080 that baggage. Are we beyond America's baggage on Cuba? 0:17:16.880 --> 0:17:16.960 No? 0:17:17.359 --> 0:17:19.960 I think here, actually, the Trump administration in the United 0:17:20.000 --> 0:17:23.120 States has has more leeway. This really is an area 0:17:23.160 --> 0:17:26.240 where there's a deeper set of connections, and the Cuban 0:17:26.280 --> 0:17:30.000 government right now is much more transactional than ideological, very 0:17:30.000 --> 0:17:33.199 different than the Iranian government. And so we do know 0:17:33.240 --> 0:17:36.000 that there's conversations going on between some in the Cuban 0:17:36.040 --> 0:17:38.919 government and some in the Trump administration. You know, perhaps 0:17:38.960 --> 0:17:41.200 there's a space there where you could find some sort 0:17:41.240 --> 0:17:44.560 of of deal or some sort of of agreement between 0:17:44.560 --> 0:17:47.920 the two. But you know, right now, I'm sitting in Miami, 0:17:48.000 --> 0:17:50.640 actually here down attending a conference, and obviously there's strong 0:17:50.640 --> 0:17:53.119 feelings down here about the future of Cuba. 0:17:53.200 --> 0:17:58.000 She's buying six thousand square feet and coral gables. Shannon Oni, 0:17:58.160 --> 0:18:01.960 congratulations to mister Frohman, to Kurt's Falen and all Foreign 0:18:01.960 --> 0:18:05.920 Affairs magazine. You people are leading the debate. Shannon O'Neil 0:18:06.000 --> 0:18:10.840 is with the Counsul on Foreign Relations. Stay with us. 0:18:11.040 --> 0:18:14.320 More from Bloomberg Surveillance coming up after this. 0:18:21.560 --> 0:18:25.120 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:18:25.200 --> 0:18:28.320 weekday afternoons from seven to ten am Eastern. Listen on 0:18:28.440 --> 0:18:31.840 Apple Karplay and Android Auto with the Bloomberg Business app, 0:18:32.000 --> 0:18:33.680 or watch US live on YouTube. 0:18:33.880 --> 0:18:37.960 Adam Farstrup right now, is leading the pack in chart 0:18:38.040 --> 0:18:41.080 and his set of charts in his research Don't Fall 0:18:41.840 --> 0:18:47.119 is absolutely to die for. He has a killer scattered 0:18:47.119 --> 0:18:49.520 dot chart here. That's a dark you know, it's like 0:18:49.560 --> 0:18:51.960 the dots with a fed It's like little Polka dot. 0:18:51.960 --> 0:18:55.199 It looks like a Damien Hurst print. Falling growth doesn't 0:18:55.240 --> 0:19:01.280 lower inflation expectations. Get his fabulous work from Schroeder where 0:19:01.280 --> 0:19:03.880 he has had a multi ascid. How do you put 0:19:03.920 --> 0:19:06.359 the charts together? Do you do it yourself at two am? 0:19:06.520 --> 0:19:08.600 Or do you have a team that helps We have 0:19:08.640 --> 0:19:11.919 an amazing team. So our economics team in London is 0:19:11.960 --> 0:19:14.719 the one that's really driven that scenario analysis you're looking for, 0:19:15.000 --> 0:19:17.679 looking at trying to help us understand what happens from 0:19:17.720 --> 0:19:19.119 here with this degree of uncertainty. 0:19:19.560 --> 0:19:22.359 The fact is the equity markets are walking away because 0:19:22.480 --> 0:19:27.520 double digit earnings expectation. Do Schroders believe double digit earnings 0:19:27.600 --> 0:19:29.359 will continue given a war? 0:19:30.320 --> 0:19:33.120 You know, it's the question we're debating this morning at 0:19:33.119 --> 0:19:36.679 four am, not two am. But we actually think that 0:19:36.720 --> 0:19:38.800 the earnings are pretty resilient from here, and we've been 0:19:38.840 --> 0:19:41.480 saying we sound like a broken record. You have that right, 0:19:41.680 --> 0:19:44.919 and you think, surely the risk of recession potentially is 0:19:45.000 --> 0:19:47.240 rising here. And I think it would be naive to 0:19:47.280 --> 0:19:51.280 say it's not that chart that you're referencing. A stagflationary 0:19:51.400 --> 0:19:53.920 risk scenario is really starting to come into frame. 0:19:54.320 --> 0:19:56.080 But when you look at what's happening with the. 0:19:56.040 --> 0:20:02.200 Earnings power in US equities today, we're seeing companies continuing 0:20:02.240 --> 0:20:05.399 to maintain that optimism. They haven't cut their forecasts yet. 0:20:05.600 --> 0:20:08.879 Whether that's a degree of uncertainty or unwillingness to acknowledge 0:20:09.040 --> 0:20:10.280 energy prices or not yet. 0:20:10.320 --> 0:20:12.520 Yeah, we say ninety eight dollars a parallel. 0:20:12.600 --> 0:20:16.000 Yeah, absolutely, so Adam, here in the US, how do 0:20:16.000 --> 0:20:18.200 you think about asset allocation, stocks. 0:20:17.800 --> 0:20:20.240 Bonds, and commodities alternatives. I know, where are you guys 0:20:20.240 --> 0:20:21.879 today versus maybe where you were at the beginning of 0:20:21.880 --> 0:20:22.200 the year. 0:20:22.560 --> 0:20:25.760 So where we are today is really starting to wonder 0:20:25.760 --> 0:20:29.440 about the diversification pieces of our portfolio that have worked 0:20:29.440 --> 0:20:31.440 to this point. So things like energy. Look at the 0:20:31.480 --> 0:20:34.440 volatility that we've now had in the energy price. Can 0:20:34.480 --> 0:20:37.680 any of us actually map out I'm not smart enough 0:20:37.680 --> 0:20:40.840 anyways to figure out the spread between the future's market 0:20:40.880 --> 0:20:44.040 and energy and the physical market and energy. So you 0:20:44.040 --> 0:20:47.680 look at the data spread the data brent rather and 0:20:48.200 --> 0:20:52.080 so from an allocation standpoint, we still like equities. 0:20:52.480 --> 0:20:53.960