April 15, 2024 • 24 mins
Featuring:
Fleur Hassan-Nahoum, Outgoing Deputy Mayor for Jerusalem and Current Special Envoy for the Foreign Ministry of Jerusalem joins us to discuss Iran's attack on Israel.
Joe Mathieu, Co-Host of Balance of Power on Bloomberg TV and Radio, joins us from Washington D.C. To discuss how US leaders will respond to the Iranian attack.
George Cipolloni, Portfolio Manager at Penn Mutual Asset Management, sits down with us to discuss his perspectives on US markets and the fiscal implications of geopolitics.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg
Daybreak Aisia podcast. I'm Doug Prisner. You can join Brian
Curtis and myself for the stories, making news and moving
markets in the Apec region. You can subscribe to the
show anywhere you get your podcast and always on Bloomberg Radio,
(00:23):
the Bloomberg Terminal, and the Bloomberg Business app Our guest
is Fleur Hassan chum outgoing Deputy Mayor of Jerusalem Or
she is also the current Special Envoy for the Foreign
Ministry of Jerusalem, and she has just flown from Jerusalem
landed in New York City just this morning. Flour, thank
(00:45):
you so much for making time to chat with us.
Before we get into the particulars about what's happening geopolitically,
can you tell me what your experience was like being
in Israel during the attack on Saturday.
Speaker 2 (00:59):
So, in fact, I was in the airport about to
bord a flight to New York when we were told
that the airspace was going to close down at one
in the morning. Originally because they knew that Iran had
already sent out their missiles and so they calculated when
it was going to be landing, and then they moved
it forward to twelve thirty. So at one point I
(01:20):
actually didn't know if I was going to be able
to get on that flight, but thankfully we got out
just in time, and my family, my husband and children,
who remained in Jerusalem, spent the whole night in the shelter,
scared with terrible noise from the rockets and of course
from the anti rocket fire.
Speaker 1 (01:41):
So we have an emergency meeting underway now at this
hour at the United Nations representatives from the UK, France,
Switzerland calling for some restraint. Do you have a sense
of what people in Israel are saying that they would
like the government to do under these circumstances.
Speaker 2 (02:00):
So, first of all, the people of Israel are very traumatized,
not just from a very difficult night last night, whereby
miracle and of course the investment that the Israeli government
has put into anti missile fire, and also of course
the help of the Americans and the British, but we're
traumatized from October seventh. We're in the middle of a
very cruel war that has taken so many of our
(02:21):
people that have still got hostages in Gaza Hamas again
this morning, rejected another peace deal. Everything could stop in
Gaza in one hour if Haramas accepted the terms, the
very generous terms of the ceasefire deal. So Israel's already traumatized.
This is just an added, an added concern. And we
(02:45):
you know, I think it's interesting that the UN Security
Council is calling for restraint on Israel. Well, why didn't
anybody call for ISAMs re strength before they fired over
two hundred rockets overtook a sovereign country from their territory.
Speaker 1 (03:01):
It's an interesting point you make, and I'm sure that
there were a lot of people that share that perspective.
But for the moment now, with the risk of escalation,
is there a moment that we just have to take
a kind of a breath, a pause and look for
some sort of resolution that is not about escalation.
Speaker 2 (03:20):
Well, Israel has never acted impulsively. We did not act
impulsively after October seventh. It took us two and a
half weeks to plan what we were going to do
and go into Gaza. And we will not act impulsively now.
We will think about the threat. We will think about
it as threat still exists. Ultimately, all Israel wants is
to defend and protect its citizens. We took our eyes
(03:43):
off a ball one terrible day on October seventh, and
look what happened.
Speaker 1 (03:47):
What type of support right now is there for the
policy of the current Prime minister in net Nyahou? I
mean among the population in Israel, is it sharply divided
populace or is there more kind of unity? From your
point of.
Speaker 2 (04:02):
View, Well, we came into October seventh a very divided
country because of the constitutional reforms that Nataniajo and his
government wanted to push through. Some of the reforms were necessary,
but it was done in such an inept way that
it really divided the country, and of course the opposition
took the opportunity to politicize the situation, and so we
(04:24):
went into a We went into seventh of October a
very divided country. Since the seventh of October, we've seen
unprecedented unity. But again now you're beginning to see the cracks.
You have, of course, the hostage families that are pushing
for a deal. You have the opposition politicizing the fact
that there hasn't been a hostage deal, which I don't
think there's anything to do with the government more to
(04:44):
do with the intransigence of Ramas, and Nataniello has lost
a lot of support. There was a poll I think
last week that said only fifteen or twenty percent of
the population one into continue as prime minister. But I
actually believe it would be very damaging to have an
election in the middle of a war. I do believe
that the minute the war is over, we should have
an election. We shouldn't wait until the end of the administration,
(05:08):
which would be twenty twenty six. I think we should
have an election. People should be accountable for what happened
that horrible day. But at the moment people are calling
for his resignation. Now that that's not going to happen.
You don't change horses in the middle of a.
Speaker 3 (05:20):
Race, flour.
Speaker 2 (05:21):
You have to see this through.
Speaker 1 (05:23):
You mentioned a moment ago, I'm sorry to interrupt. You
mentioned a moment ago that Hamas has rejected the latest
ceasefire proposal. We know that the US cutter in Egypt
are brokering the talks, and I'm trying to get your
sense of what this weekend attack might do to those conversations.
Do you expect it to kind of create greater urgency
and trying to seek a resolution or do you think
(05:45):
this is going to create a greater divide in trying
to find an agreement.
Speaker 2 (05:51):
I actually think, I mean, nothing can be as bad
as the situation that we ever come up. So maybe
the fact that Israel could attack Iran, this could really
conflagate into a very horrible regional war and even a
world war. I wouldn't you know, if is Al didn't
have the anti missile fire defense system it has, we
(06:12):
would have had yesterday a genocide in Israel with a
three hundred plus missiles that were thrown, including ballistic missiles.
And so the fact that we have a strong defense
does not mean that Iran can attack Israel with impunity
and everybody sits. So I may maybe there's a chance
that with all of this mess there can be some
(06:34):
type of regional arrangement that includes the hostages being returned
and talk about guards of the day after the war,
the day after Kamas. It's all can no longer live
with a terrorist group such as Kamas threatening its people
on its border. And so the world understands that. I
certainly the moderate Arab countries understand that the Sunny countries
(06:55):
like the UAE in Saudi Arabia, they certainly understand who
Hamas are, the Muslim blah blahdah. They kicked them out
of their own countries. And so if the Western world
actually understands that Israel can no longer live with Hamas,
and we can start talking about how the Palestinian people
get a decent future for themselves, then maybe maybe there's
a chance that this could calm down.
Speaker 1 (07:14):
So, from what I understand, Israel's war cabinet was in
session on Sunday trying to work out a possible response.
Can can you take me inside the political makeup of
the war cabinet and talk to me, give me a
little bit of insight into the dynamics and how they
are playing out.
Speaker 2 (07:33):
Yes, so the war cabinet is actually comprised of what
we're calling a unity government. In other words, on the
seventh of October, after the terrible massacre happened, and it's
a now who call for a unity government, and two
of the leaders of the opposition joined him, And so
the security cabinet now consists of not just people on
(07:55):
the right, but people in the center and people on
the left, as well as of course the military leadership
and So what I would say is there are differing
opinions in the Walk cabinet, but everybody is either a general,
an ex chief of staff, or somebody very high up
in the current government. And there are rumors if he
is ready pressally talking about the fact that in fact
(08:16):
the center and left ex chiefs of staff wanted an
immediate reprisal and that the rest of the cabinets didn't.
Then I heard two hours later that it was the
other way around. So you never know because things get leaked,
and of course everything is off the record in the
War cabinet, but there are definitely divisions, and there are
(08:37):
people who want to attack Iran quickly and decisively, and
there are other people that want to calm the situation
down and see what will happen, and see how the
UN reacts, and see how the United States can get
more involved and try and guarantee our security, you know.
But ultimately, the way I see it is that Iran
(08:59):
has got away with so much for so long. They
are the biggest exporters of terrorism. They're working through their
proxies Juahamas, Husbola, the hotels who attack American assets as
you know we have, They've got groups in Iraq, they've
got groups in Afghanistan, and they've got Kata as their mouthpiece.
So Iran has never actually had the faith to attack
(09:23):
on their territory. It's always been too proxies. And now
you know the reckoning is coming right to them. The
question is what will they do with this? But I
think that ultimately the world who's going to have to
face Iran either now or in a few years, and
let's hope they don't get nuclear weapons.
Speaker 1 (09:39):
Well leave it there. Fleur Hassan Home, the outgoing Deputy
Mayor of Jerusalem also current Special Envoy to the Foreign
Ministry of Jerusalem, joining here on DA break, Gasia. This
is Bloomberg. Let's take a closer look at what's happening
with respect to Iran's attack over the weekend on Israel.
(10:02):
Let's bring in Joe Matthew, co host of Balance of
Power on Bloomberg TV and Radio. Joe, you and I
were talking a short while ago about the risk of
retaliation on the part of Israel, And earlier this hour
I was speaking with a current Special Envoy for the
Foreign Ministry for Jerusalem and she was trying to give
me an understanding of what was going on within the
(10:23):
War Cabinet in Israel. They had a meeting over the
weekend and one of the things that struck me is
how mercurial this is. I mean, it's still very, very fluid.
I don't think anyone has a definite position. She talked
about the fact that there's a kind of a dynamic
happening within the war cabinet, and I don't think that
it's coalesced around a kind of a central point of view.
(10:44):
I mean, this is a remarkable time that Israel finds
itself in. Yes, there's warre in Gaza. We understand that
for the last six months it's been just this sense
of upheaval within Israel and now this, I mean, do
you think this is going to play out in the
psyche of the American population that finds itself gripped by
(11:08):
the story that we've been describing for the last six months.
Speaker 4 (11:11):
Well, you're asking all the right questions here, Doug, and
it's really it's difficult to tell. There's going to be
an actual way to measure that, most likely this week
with a vote in the House of Representatives, and we're
not sure how that's going to go. We understand that
the President convene to call this afternoon the White House
just let us know this with the leaders of the
(11:33):
Senate in the House, Chuck Schumer, Mitch McConnell, Speaker Johnson,
and of course Minority Leader HAKM Jeffries to talk about
the urgent need to pass and the National Security supplemental
that has already cleared the Senate. It's unclear that that
will even happen because Speaker Johnson has a fractured Republican
(11:54):
conference that doesn't want to see this move in one
block and may not want to see Ukraine funding move
at all. One thing I will tell you, though, Doug
is Steve Scalise, the Majority leader, issued a statement earlier
today saying in light of Iran's attack, the House will
change its legislative schedule next week to consider legislation that,
as he puts it, supports our ally Israel. It makes
(12:16):
no mention of Ukraine. So this may depend on the
conversation Mike Johnson had with Donald Trump at mar A Lago.
His influence here is going to have a lot to
do with the outcome as the White House works overtime
to try to prevent Israel from retaliating against Iran. That
may be a fool's errand it's very difficult to tell
(12:37):
at this early hour, but if there is an over
the top response from Israel, it could make it more
difficult to pass funding here in the US because of
opposition from Progressive Democrats.
Speaker 1 (12:46):
So alluded to these sharp divisions within the GOP, and
I'm wondering if there are other voices that we should
be You mentioned Steve Scalise, other voices that we should
be paying close attention to in the week ahead.
Speaker 4 (12:59):
Well, it's going to be Mike Johnson more than anyone,
because people just don't know exactly what the speaker is
going to do here, and he has very little time
to make some decisions on this, as I mentioned, coming
off of his visit to mar A Lago with Donald Trump,
and they surely spoke about Ukraine funding while he was there,
not necessarily knowing the outcome of these attacks. But to
(13:21):
get back to where you started our conversation here and
what's taking place right now in Tel Aviv, for instance,
where the lack of casualties, the lack of damage has
really left them with a decision to make. Here is
REEL could limit its strike because of this but Benjamin Ettnyah,
who is under enormous pressure from the right inside his
(13:43):
government to do something. Just imagine, Doug, if we weren't
telling this remarkable story of ninety nine percent of these
rockets and missiles of being knocked out of the sky,
in that world, you could have hundreds of Israelis who
were killed. And the government does feel like there's a
need to say something about that, even as the White
(14:05):
House says take the win.
Speaker 1 (14:07):
I was going to ask you about whether we know
anything about what has been happening in terms of communication
between the White House and Netan Yahoo's office. Do we
know that the President became concerned about an overreaction here
and maybe was forceful in saying you know, I know
that that was kind of the message that was delivered
after October seventh. You know, the Biden administration tried to
(14:29):
issue a very cautionary kind of guidance here. It was
the same thing happening over the weekend. Do you think,
well they spoke today.
Speaker 4 (14:38):
You know, the New York Times has been reporting that
the President told Benjamin Netanyahoo that if he does strike
back against Iran, that the US will not back that move.
If you look at the readout from the White House,
he talks about speaking with Netanyahu to reaffirm America's ironclad
commitment to the security of Israel. So he's really kind
(14:59):
of damned on two sides here, and the White House
will be in an incredibly awkward position if Israel decides
to go hard on this. Look, you know, we've heard
conversations for the last twenty four hours now, and a
lot of them broke out on Sunday morning television where
a lot of Hawks had things to say about this.
John Bolton, which it should come as no surprise, said
(15:20):
that this is the opportunity that Israel has now to
destroy Iran's nuclear weapons program. That would be the extreme
response in this case, and it would likely provoke something more.
The idea of this being escalatory as opposed to a
standoff is what we're talking.
Speaker 1 (15:34):
About, Joe. Before I let you go the notion of ceasefire,
I know that Hamas has rejected a proposal that was
put forward over the weekend. Do you think this gives
a greater urgency to try to try to find a
solution on that front as well?
Speaker 4 (15:47):
Well, Look, I'd love to say yes, it's hard to tell.
We heard from John Kirby on this earlier today. The
White House is just asking Hamas to take the deal
knowing that you know, they've left Cairo. They're not at
the table right now. They may be continuing to share information,
but you know they're waiting for somebody to call them back,
and that's not a great situation to be in.
Speaker 5 (16:07):
Doug.
Speaker 4 (16:07):
There's a real worry right now by a lot of
the folks that we're talking to that the hostages Hamas
has been talking about and dealing with here, many of
them may not be alive or able to be identified.
That would be a game changer.
Speaker 1 (16:22):
Joe, always a pleasure. Thanks for making time for us.
A Joe Matthew, co host of Balance of Power, which
you can hear on Bloomberg Radio and watch on Bloomberg TV.
Let's get to our guest. George Sibaloni is with us.
George is portfolio manager at Penn Mutual Asset Management. He
(16:44):
joins us from Philadelphia. Thanks for making time for us
on a Sunday night. George, we can talk about FED policy,
but I want to get your sense of how geopolitical
tension right now and these events that we've been talking about,
whether it's Israel, Gaza, Israel now and Iran the attack
over the weekend. How that's impacting your thinking when it
comes to how markets are behaving and how to put
(17:07):
capital to work.
Speaker 5 (17:08):
Hey deal, great to be with you again, and yeah,
first of all, first and foremost prayers to everyone in
the Middle East.
Speaker 3 (17:14):
Hopefully it does not escalate.
Speaker 5 (17:16):
So Yeah, as a portfolio manager, you just mentioned geopolitical risk,
and that's one of the risks that we have to
be cognizant of. It's one that we don't think about
on a daily basis, but when it shows up, it's
important to know that in your portfolio you have some
margin of safety. And so I think if we're looking
at some areas in the market right now, obviously the
ones that are acting a little and I don't want
(17:38):
to say strangely, but gold, for example, has been up
a lot over this past year.
Speaker 3 (17:42):
And while I.
Speaker 5 (17:43):
Mean, you know, gold obviously would be a good hedge
right now, if you think about longer treasuries, which really
haven't done as well, that might be a pretty good
hedge too, for you know, at least for some margin
of safety.
Speaker 1 (17:54):
Yeah, it's very interesting that you mentioned gold intra day
Friday we top twenty four hundred announce that was another
record high. We've settled back. I'm looking at a spot
price right now at around twenty three fifty seven. You
mentioned the bond market, and it's been very interesting to gauge.
You know what the bond market is trying to tell us,
and we know what the Fed has been saying. I
(18:16):
mean that they are less apt to kind of cut
interest rates. They want to really be confident that the
inflation demon has been slayed and that you know, the
issue has been put to rest. Are you seeing a
lot more volatility in the bond market between let's say
now in the end of the year, we.
Speaker 5 (18:35):
Are doug in And it's amazing this skew that we're
starting to see in terms of the SMP. If you
think about where bottom back in last fall, it was
mainly because interest rates the ten year, for example, hit
five percent. The market does not like five percent on
the ten year. So as interest rates fell, the stock
market resumed its path higher and it was a very
(18:55):
strong rally. Now if you just look at from the
end of March to now, the SMP's down about three percent,
and so this this latest skew in terms of interest
rates going from four twenty to four point fifty. I
think we're at a very important point as to what
comes next. You mentioned the Fed. Obviously the market was
completely wrong in pricing in more than one hundred and
(19:16):
sixty basis points worth of cuts, and now we're at
around forty basis points, and we still are not certain
given the data that we are seeing, given the you know,
the up move in oil and gas for example, and
other items. Obviously we're not even sure if the Fed's
going to be able to cut it all this year now,
so there is some doubt.
Speaker 1 (19:34):
So does growth hold up or are we talking about
a situation that may be best described as stagflation? Is
that a real risk?
Speaker 5 (19:42):
And that's exactly the word that's That's one of the
things I've written down because now now that threat comes
into it and we haven't seen an environment like that
in a very, very long time. So going back to
your first question, you know, in terms of growth stocks,
the momentum factor has been a huge factor for what
has done well in the markets, and it's left almost
everything else in the dust. I like dividend guild stocks,
(20:04):
they've done relatively poorly. I love value stocks, they've done
relatively poorly, and the market just once momentum and growth.
And so now as we get up to this level
again in the interest rates of around four and a
half percent on the tenure, this next move up could
challenge those valuations for growth stocks.
Speaker 1 (20:23):
So we had earnings from the big banks, a few
of them last Friday, JP Morgan among them better than
expected first quarter profit and revenue. But one of the
things that Jamie Diamond was pointing out is that higher
interest rates are forcing the banks to pay out more
more than they thought they would have to pay out
in customer deposits, and Diamond went on to say that
(20:43):
he cannot say whether or not the economy is going
to go into a recession, but the chance of bad
outcomes right now, in Diamond's view, is higher than people think.
Would you agree with that?
Speaker 5 (20:55):
I would, And Diamond is such a gem and he's
so unique from you. Most CEOs just want to give
a rosy and optimistic point of view. Jamie's been a
little bit wrong, I'd say, over the past year, because
he has been. He's given the negative side too. None
of those have really manifested themselves yet. But yes, he
gives a more balanced view of what of the potential outcomes,
(21:16):
and I do think like that. I think most portfolio
managers think in terms of outcome, and we have to
weigh the possibility of positive and negative outcomes. And so
in this moment right now, yes, if you look at
for example, banks in particular, their net interest income has
been challenged and that's one of the reasons why all
the banks, just about all them that went down on
their earnings, which we're generally pretty good for the last
(21:37):
three months, but now how are they going to be
for the next few quarters?
Speaker 3 (21:40):
And I think that's that's the question. Now.
Speaker 1 (21:42):
So much of what we've seen lately in terms of
market gains has been in some way tied to this
artificial intelligence theme. Are you still a buyer of that?
Speaker 5 (21:53):
So as a then yield in value investor, we don't
get a lot of easy ways to play that.
Speaker 3 (21:59):
Now.
Speaker 5 (22:00):
I will say, what is starting to creep up is
the energy demand is going to be so significant it
should benefit utilities which look pretty cheap here. So I
think that is one way where we could participate versus
the direct impact of buying microsoftware and Vidia for example,
which again are a little bit outside of our universe.
But yes, I think that trend obviously is a lot
of the growth is already priced in, so they're going
(22:22):
to have to continue to keep doing well.
Speaker 3 (22:23):
But outside of that, again.
Speaker 5 (22:25):
If you just look at energy or utilities in some
other areas that you wouldn't necessarily think of from an
AI standpoint, I do think there could be some benefit
there as well.
Speaker 1 (22:34):
So I'm wondering whether or not the government's attempt to
stimulate the economy, whether through the Inflation Reduction Act we're
talking about some of the green initiatives, or maybe just
infrastructure as a pure play, roads and bridges. I mean,
let's think materials, let's think industrial shares. Do they represent
value in your thinking?
Speaker 3 (22:53):
They really do.
Speaker 5 (22:53):
And so one area that has not been discussed very
much has been commodities. Almost every really looks good. I mean,
they've kind of not gone up as much as the
S and P. But you know, we touched on gold,
for example, which is outside of your question, but gold
miners look really cheap, even relative to the price of gold.
Aluminum for example, looks pretty cheap. Copper prices are starting
(23:16):
to go up, and now those miners are starting to
do well, so yes, to your point, these underlying commodities,
you know, there's been some nice pocketive value there and
some of these stocks are just starting to look good again.
Speaker 1 (23:27):
Are you fully invested right now or are you sitting on
a little bit of cash?
Speaker 5 (23:30):
George, We always have a little bit of cash, I
would say for us, so we can go up to
twenty percent in cash, and we certainly don't have anywhere
near that level. We are closer to fully invested. We
have about three and a half percent in cash. I
will say, we do have a lot of so our
margin of safety is going to be our front end debt,
so we have a lot of short term bonds that
are issued by companies that have more cash than debt.
(23:52):
I do think good balance sheets, high quality balance sheets
is a great place to hide in an environment where
we see some volatility.
Speaker 1 (23:59):
George will leave it there. Thanks for making time to
chat with us. George Sippoloni is portfolio manager at Pen
Mutual Asset Management. On the line from Philadelphia here on
Daybreak Asia. This has been the Bloomberg Daybreak Asia podcast,
bringing you the stories making news and moving markets in
the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube.
(24:19):
To get more episodes of this and other shows from Bloomberg,
subscribe to the podcast on Apple, Spotify, or anywhere else
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Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg
Daybreak Aisia podcast. I'm Doug Prisner. You can join Brian
Curtis and myself for the stories, making news and moving
markets in the Apec region. You can subscribe to the
show anywhere you get your podcast and always on Bloomberg Radio,
(00:23):
the Bloomberg Terminal, and the Bloomberg Business app Our guest
is Fleur Hassan chum outgoing Deputy Mayor of Jerusalem Or
she is also the current Special Envoy for the Foreign
Ministry of Jerusalem, and she has just flown from Jerusalem
landed in New York City just this morning. Flour, thank
(00:45):
you so much for making time to chat with us.
Before we get into the particulars about what's happening geopolitically,
can you tell me what your experience was like being
in Israel during the attack on Saturday.
Speaker 2 (00:59):
So, in fact, I was in the airport about to
bord a flight to New York when we were told
that the airspace was going to close down at one
in the morning. Originally because they knew that Iran had
already sent out their missiles and so they calculated when
it was going to be landing, and then they moved
it forward to twelve thirty. So at one point I
(01:20):
actually didn't know if I was going to be able
to get on that flight, but thankfully we got out
just in time, and my family, my husband and children,
who remained in Jerusalem, spent the whole night in the shelter,
scared with terrible noise from the rockets and of course
from the anti rocket fire.
Speaker 1 (01:41):
So we have an emergency meeting underway now at this
hour at the United Nations representatives from the UK, France,
Switzerland calling for some restraint. Do you have a sense
of what people in Israel are saying that they would
like the government to do under these circumstances.
Speaker 2 (02:00):
So, first of all, the people of Israel are very traumatized,
not just from a very difficult night last night, whereby
miracle and of course the investment that the Israeli government
has put into anti missile fire, and also of course
the help of the Americans and the British, but we're
traumatized from October seventh. We're in the middle of a
very cruel war that has taken so many of our
(02:21):
people that have still got hostages in Gaza Hamas again
this morning, rejected another peace deal. Everything could stop in
Gaza in one hour if Haramas accepted the terms, the
very generous terms of the ceasefire deal. So Israel's already traumatized.
This is just an added, an added concern. And we
(02:45):
you know, I think it's interesting that the UN Security
Council is calling for restraint on Israel. Well, why didn't
anybody call for ISAMs re strength before they fired over
two hundred rockets overtook a sovereign country from their territory.
Speaker 1 (03:01):
It's an interesting point you make, and I'm sure that
there were a lot of people that share that perspective.
But for the moment now, with the risk of escalation,
is there a moment that we just have to take
a kind of a breath, a pause and look for
some sort of resolution that is not about escalation.
Speaker 2 (03:20):
Well, Israel has never acted impulsively. We did not act
impulsively after October seventh. It took us two and a
half weeks to plan what we were going to do
and go into Gaza. And we will not act impulsively now.
We will think about the threat. We will think about
it as threat still exists. Ultimately, all Israel wants is
to defend and protect its citizens. We took our eyes
(03:43):
off a ball one terrible day on October seventh, and
look what happened.
Speaker 1 (03:47):
What type of support right now is there for the
policy of the current Prime minister in net Nyahou? I
mean among the population in Israel, is it sharply divided
populace or is there more kind of unity? From your
point of.
Speaker 2 (04:02):
View, Well, we came into October seventh a very divided
country because of the constitutional reforms that Nataniajo and his
government wanted to push through. Some of the reforms were necessary,
but it was done in such an inept way that
it really divided the country, and of course the opposition
took the opportunity to politicize the situation, and so we
(04:24):
went into a We went into seventh of October a
very divided country. Since the seventh of October, we've seen
unprecedented unity. But again now you're beginning to see the cracks.
You have, of course, the hostage families that are pushing
for a deal. You have the opposition politicizing the fact
that there hasn't been a hostage deal, which I don't
think there's anything to do with the government more to
(04:44):
do with the intransigence of Ramas, and Nataniello has lost
a lot of support. There was a poll I think
last week that said only fifteen or twenty percent of
the population one into continue as prime minister. But I
actually believe it would be very damaging to have an
election in the middle of a war. I do believe
that the minute the war is over, we should have
an election. We shouldn't wait until the end of the administration,
(05:08):
which would be twenty twenty six. I think we should
have an election. People should be accountable for what happened
that horrible day. But at the moment people are calling
for his resignation. Now that that's not going to happen.
You don't change horses in the middle of a.
Speaker 3 (05:20):
Race, flour.
Speaker 2 (05:21):
You have to see this through.
Speaker 1 (05:23):
You mentioned a moment ago, I'm sorry to interrupt. You
mentioned a moment ago that Hamas has rejected the latest
ceasefire proposal. We know that the US cutter in Egypt
are brokering the talks, and I'm trying to get your
sense of what this weekend attack might do to those conversations.
Do you expect it to kind of create greater urgency
and trying to seek a resolution or do you think
(05:45):
this is going to create a greater divide in trying
to find an agreement.
Speaker 2 (05:51):
I actually think, I mean, nothing can be as bad
as the situation that we ever come up. So maybe
the fact that Israel could attack Iran, this could really
conflagate into a very horrible regional war and even a
world war. I wouldn't you know, if is Al didn't
have the anti missile fire defense system it has, we
(06:12):
would have had yesterday a genocide in Israel with a
three hundred plus missiles that were thrown, including ballistic missiles.
And so the fact that we have a strong defense
does not mean that Iran can attack Israel with impunity
and everybody sits. So I may maybe there's a chance
that with all of this mess there can be some
(06:34):
type of regional arrangement that includes the hostages being returned
and talk about guards of the day after the war,
the day after Kamas. It's all can no longer live
with a terrorist group such as Kamas threatening its people
on its border. And so the world understands that. I
certainly the moderate Arab countries understand that the Sunny countries
(06:55):
like the UAE in Saudi Arabia, they certainly understand who
Hamas are, the Muslim blah blahdah. They kicked them out
of their own countries. And so if the Western world
actually understands that Israel can no longer live with Hamas,
and we can start talking about how the Palestinian people
get a decent future for themselves, then maybe maybe there's
a chance that this could calm down.
Speaker 1 (07:14):
So, from what I understand, Israel's war cabinet was in
session on Sunday trying to work out a possible response.
Can can you take me inside the political makeup of
the war cabinet and talk to me, give me a
little bit of insight into the dynamics and how they
are playing out.
Speaker 2 (07:33):
Yes, so the war cabinet is actually comprised of what
we're calling a unity government. In other words, on the
seventh of October, after the terrible massacre happened, and it's
a now who call for a unity government, and two
of the leaders of the opposition joined him, And so
the security cabinet now consists of not just people on
(07:55):
the right, but people in the center and people on
the left, as well as of course the military leadership
and So what I would say is there are differing
opinions in the Walk cabinet, but everybody is either a general,
an ex chief of staff, or somebody very high up
in the current government. And there are rumors if he
is ready pressally talking about the fact that in fact
(08:16):
the center and left ex chiefs of staff wanted an
immediate reprisal and that the rest of the cabinets didn't.
Then I heard two hours later that it was the
other way around. So you never know because things get leaked,
and of course everything is off the record in the
War cabinet, but there are definitely divisions, and there are
(08:37):
people who want to attack Iran quickly and decisively, and
there are other people that want to calm the situation
down and see what will happen, and see how the
UN reacts, and see how the United States can get
more involved and try and guarantee our security, you know.
But ultimately, the way I see it is that Iran
(08:59):
has got away with so much for so long. They
are the biggest exporters of terrorism. They're working through their
proxies Juahamas, Husbola, the hotels who attack American assets as
you know we have, They've got groups in Iraq, they've
got groups in Afghanistan, and they've got Kata as their mouthpiece.
So Iran has never actually had the faith to attack
(09:23):
on their territory. It's always been too proxies. And now
you know the reckoning is coming right to them. The
question is what will they do with this? But I
think that ultimately the world who's going to have to
face Iran either now or in a few years, and
let's hope they don't get nuclear weapons.
Speaker 1 (09:39):
Well leave it there. Fleur Hassan Home, the outgoing Deputy
Mayor of Jerusalem also current Special Envoy to the Foreign
Ministry of Jerusalem, joining here on DA break, Gasia. This
is Bloomberg. Let's take a closer look at what's happening
with respect to Iran's attack over the weekend on Israel.
(10:02):
Let's bring in Joe Matthew, co host of Balance of
Power on Bloomberg TV and Radio. Joe, you and I
were talking a short while ago about the risk of
retaliation on the part of Israel, And earlier this hour
I was speaking with a current Special Envoy for the
Foreign Ministry for Jerusalem and she was trying to give
me an understanding of what was going on within the
(10:23):
War Cabinet in Israel. They had a meeting over the
weekend and one of the things that struck me is
how mercurial this is. I mean, it's still very, very fluid.
I don't think anyone has a definite position. She talked
about the fact that there's a kind of a dynamic
happening within the war cabinet, and I don't think that
it's coalesced around a kind of a central point of view.
(10:44):
I mean, this is a remarkable time that Israel finds
itself in. Yes, there's warre in Gaza. We understand that
for the last six months it's been just this sense
of upheaval within Israel and now this, I mean, do
you think this is going to play out in the
psyche of the American population that finds itself gripped by
(11:08):
the story that we've been describing for the last six months.
Speaker 4 (11:11):
Well, you're asking all the right questions here, Doug, and
it's really it's difficult to tell. There's going to be
an actual way to measure that, most likely this week
with a vote in the House of Representatives, and we're
not sure how that's going to go. We understand that
the President convene to call this afternoon the White House
just let us know this with the leaders of the
(11:33):
Senate in the House, Chuck Schumer, Mitch McConnell, Speaker Johnson,
and of course Minority Leader HAKM Jeffries to talk about
the urgent need to pass and the National Security supplemental
that has already cleared the Senate. It's unclear that that
will even happen because Speaker Johnson has a fractured Republican
(11:54):
conference that doesn't want to see this move in one
block and may not want to see Ukraine funding move
at all. One thing I will tell you, though, Doug
is Steve Scalise, the Majority leader, issued a statement earlier
today saying in light of Iran's attack, the House will
change its legislative schedule next week to consider legislation that,
as he puts it, supports our ally Israel. It makes
(12:16):
no mention of Ukraine. So this may depend on the
conversation Mike Johnson had with Donald Trump at mar A Lago.
His influence here is going to have a lot to
do with the outcome as the White House works overtime
to try to prevent Israel from retaliating against Iran. That
may be a fool's errand it's very difficult to tell
(12:37):
at this early hour, but if there is an over
the top response from Israel, it could make it more
difficult to pass funding here in the US because of
opposition from Progressive Democrats.
Speaker 1 (12:46):
So alluded to these sharp divisions within the GOP, and
I'm wondering if there are other voices that we should
be You mentioned Steve Scalise, other voices that we should
be paying close attention to in the week ahead.
Speaker 4 (12:59):
Well, it's going to be Mike Johnson more than anyone,
because people just don't know exactly what the speaker is
going to do here, and he has very little time
to make some decisions on this, as I mentioned, coming
off of his visit to mar A Lago with Donald Trump,
and they surely spoke about Ukraine funding while he was there,
not necessarily knowing the outcome of these attacks. But to
(13:21):
get back to where you started our conversation here and
what's taking place right now in Tel Aviv, for instance,
where the lack of casualties, the lack of damage has
really left them with a decision to make. Here is
REEL could limit its strike because of this but Benjamin Ettnyah,
who is under enormous pressure from the right inside his
(13:43):
government to do something. Just imagine, Doug, if we weren't
telling this remarkable story of ninety nine percent of these
rockets and missiles of being knocked out of the sky,
in that world, you could have hundreds of Israelis who
were killed. And the government does feel like there's a
need to say something about that, even as the White
(14:05):
House says take the win.
Speaker 1 (14:07):
I was going to ask you about whether we know
anything about what has been happening in terms of communication
between the White House and Netan Yahoo's office. Do we
know that the President became concerned about an overreaction here
and maybe was forceful in saying you know, I know
that that was kind of the message that was delivered
after October seventh. You know, the Biden administration tried to
(14:29):
issue a very cautionary kind of guidance here. It was
the same thing happening over the weekend. Do you think,
well they spoke today.
Speaker 4 (14:38):
You know, the New York Times has been reporting that
the President told Benjamin Netanyahoo that if he does strike
back against Iran, that the US will not back that move.
If you look at the readout from the White House,
he talks about speaking with Netanyahu to reaffirm America's ironclad
commitment to the security of Israel. So he's really kind
(14:59):
of damned on two sides here, and the White House
will be in an incredibly awkward position if Israel decides
to go hard on this. Look, you know, we've heard
conversations for the last twenty four hours now, and a
lot of them broke out on Sunday morning television where
a lot of Hawks had things to say about this.
John Bolton, which it should come as no surprise, said
(15:20):
that this is the opportunity that Israel has now to
destroy Iran's nuclear weapons program. That would be the extreme
response in this case, and it would likely provoke something more.
The idea of this being escalatory as opposed to a
standoff is what we're talking.
Speaker 1 (15:34):
About, Joe. Before I let you go the notion of ceasefire,
I know that Hamas has rejected a proposal that was
put forward over the weekend. Do you think this gives
a greater urgency to try to try to find a
solution on that front as well?
Speaker 4 (15:47):
Well, Look, I'd love to say yes, it's hard to tell.
We heard from John Kirby on this earlier today. The
White House is just asking Hamas to take the deal
knowing that you know, they've left Cairo. They're not at
the table right now. They may be continuing to share information,
but you know they're waiting for somebody to call them back,
and that's not a great situation to be in.
Speaker 5 (16:07):
Doug.
Speaker 4 (16:07):
There's a real worry right now by a lot of
the folks that we're talking to that the hostages Hamas
has been talking about and dealing with here, many of
them may not be alive or able to be identified.
That would be a game changer.
Speaker 1 (16:22):
Joe, always a pleasure. Thanks for making time for us.
A Joe Matthew, co host of Balance of Power, which
you can hear on Bloomberg Radio and watch on Bloomberg TV.
Let's get to our guest. George Sibaloni is with us.
George is portfolio manager at Penn Mutual Asset Management. He
(16:44):
joins us from Philadelphia. Thanks for making time for us
on a Sunday night. George, we can talk about FED policy,
but I want to get your sense of how geopolitical
tension right now and these events that we've been talking about,
whether it's Israel, Gaza, Israel now and Iran the attack
over the weekend. How that's impacting your thinking when it
comes to how markets are behaving and how to put
(17:07):
capital to work.
Speaker 5 (17:08):
Hey deal, great to be with you again, and yeah,
first of all, first and foremost prayers to everyone in
the Middle East.
Speaker 3 (17:14):
Hopefully it does not escalate.
Speaker 5 (17:16):
So Yeah, as a portfolio manager, you just mentioned geopolitical risk,
and that's one of the risks that we have to
be cognizant of. It's one that we don't think about
on a daily basis, but when it shows up, it's
important to know that in your portfolio you have some
margin of safety. And so I think if we're looking
at some areas in the market right now, obviously the
ones that are acting a little and I don't want
(17:38):
to say strangely, but gold, for example, has been up
a lot over this past year.
Speaker 3 (17:42):
And while I.
Speaker 5 (17:43):
Mean, you know, gold obviously would be a good hedge
right now, if you think about longer treasuries, which really
haven't done as well, that might be a pretty good
hedge too, for you know, at least for some margin
of safety.
Speaker 1 (17:54):
Yeah, it's very interesting that you mentioned gold intra day
Friday we top twenty four hundred announce that was another
record high. We've settled back. I'm looking at a spot
price right now at around twenty three fifty seven. You
mentioned the bond market, and it's been very interesting to gauge.
You know what the bond market is trying to tell us,
and we know what the Fed has been saying. I
(18:16):
mean that they are less apt to kind of cut
interest rates. They want to really be confident that the
inflation demon has been slayed and that you know, the
issue has been put to rest. Are you seeing a
lot more volatility in the bond market between let's say
now in the end of the year, we.
Speaker 5 (18:35):
Are doug in And it's amazing this skew that we're
starting to see in terms of the SMP. If you
think about where bottom back in last fall, it was
mainly because interest rates the ten year, for example, hit
five percent. The market does not like five percent on
the ten year. So as interest rates fell, the stock
market resumed its path higher and it was a very
(18:55):
strong rally. Now if you just look at from the
end of March to now, the SMP's down about three percent,
and so this this latest skew in terms of interest
rates going from four twenty to four point fifty. I
think we're at a very important point as to what
comes next. You mentioned the Fed. Obviously the market was
completely wrong in pricing in more than one hundred and
(19:16):
sixty basis points worth of cuts, and now we're at
around forty basis points, and we still are not certain
given the data that we are seeing, given the you know,
the up move in oil and gas for example, and
other items. Obviously we're not even sure if the Fed's
going to be able to cut it all this year now,
so there is some doubt.
Speaker 1 (19:34):
So does growth hold up or are we talking about
a situation that may be best described as stagflation? Is
that a real risk?
Speaker 5 (19:42):
And that's exactly the word that's That's one of the
things I've written down because now now that threat comes
into it and we haven't seen an environment like that
in a very, very long time. So going back to
your first question, you know, in terms of growth stocks,
the momentum factor has been a huge factor for what
has done well in the markets, and it's left almost
everything else in the dust. I like dividend guild stocks,
(20:04):
they've done relatively poorly. I love value stocks, they've done
relatively poorly, and the market just once momentum and growth.
And so now as we get up to this level
again in the interest rates of around four and a
half percent on the tenure, this next move up could
challenge those valuations for growth stocks.
Speaker 1 (20:23):
So we had earnings from the big banks, a few
of them last Friday, JP Morgan among them better than
expected first quarter profit and revenue. But one of the
things that Jamie Diamond was pointing out is that higher
interest rates are forcing the banks to pay out more
more than they thought they would have to pay out
in customer deposits, and Diamond went on to say that
(20:43):
he cannot say whether or not the economy is going
to go into a recession, but the chance of bad
outcomes right now, in Diamond's view, is higher than people think.
Would you agree with that?
Speaker 5 (20:55):
I would, And Diamond is such a gem and he's
so unique from you. Most CEOs just want to give
a rosy and optimistic point of view. Jamie's been a
little bit wrong, I'd say, over the past year, because
he has been. He's given the negative side too. None
of those have really manifested themselves yet. But yes, he
gives a more balanced view of what of the potential outcomes,
(21:16):
and I do think like that. I think most portfolio
managers think in terms of outcome, and we have to
weigh the possibility of positive and negative outcomes. And so
in this moment right now, yes, if you look at
for example, banks in particular, their net interest income has
been challenged and that's one of the reasons why all
the banks, just about all them that went down on
their earnings, which we're generally pretty good for the last
(21:37):
three months, but now how are they going to be
for the next few quarters?
Speaker 3 (21:40):
And I think that's that's the question. Now.
Speaker 1 (21:42):
So much of what we've seen lately in terms of
market gains has been in some way tied to this
artificial intelligence theme. Are you still a buyer of that?
Speaker 5 (21:53):
So as a then yield in value investor, we don't
get a lot of easy ways to play that.
Speaker 3 (21:59):
Now.
Speaker 5 (22:00):
I will say, what is starting to creep up is
the energy demand is going to be so significant it
should benefit utilities which look pretty cheap here. So I
think that is one way where we could participate versus
the direct impact of buying microsoftware and Vidia for example,
which again are a little bit outside of our universe.
But yes, I think that trend obviously is a lot
of the growth is already priced in, so they're going
(22:22):
to have to continue to keep doing well.
Speaker 3 (22:23):
But outside of that, again.
Speaker 5 (22:25):
If you just look at energy or utilities in some
other areas that you wouldn't necessarily think of from an
AI standpoint, I do think there could be some benefit
there as well.
Speaker 1 (22:34):
So I'm wondering whether or not the government's attempt to
stimulate the economy, whether through the Inflation Reduction Act we're
talking about some of the green initiatives, or maybe just
infrastructure as a pure play, roads and bridges. I mean,
let's think materials, let's think industrial shares. Do they represent
value in your thinking?
Speaker 3 (22:53):
They really do.
Speaker 5 (22:53):
And so one area that has not been discussed very
much has been commodities. Almost every really looks good. I mean,
they've kind of not gone up as much as the
S and P. But you know, we touched on gold,
for example, which is outside of your question, but gold
miners look really cheap, even relative to the price of gold.
Aluminum for example, looks pretty cheap. Copper prices are starting
(23:16):
to go up, and now those miners are starting to
do well, so yes, to your point, these underlying commodities,
you know, there's been some nice pocketive value there and
some of these stocks are just starting to look good again.
Speaker 1 (23:27):
Are you fully invested right now or are you sitting on
a little bit of cash?
Speaker 5 (23:30):
George, We always have a little bit of cash, I
would say for us, so we can go up to
twenty percent in cash, and we certainly don't have anywhere
near that level. We are closer to fully invested. We
have about three and a half percent in cash. I
will say, we do have a lot of so our
margin of safety is going to be our front end debt,
so we have a lot of short term bonds that
are issued by companies that have more cash than debt.
(23:52):
I do think good balance sheets, high quality balance sheets
is a great place to hide in an environment where
we see some volatility.
Speaker 1 (23:59):
George will leave it there. Thanks for making time to
chat with us. George Sippoloni is portfolio manager at Pen
Mutual Asset Management. On the line from Philadelphia here on
Daybreak Asia. This has been the Bloomberg Daybreak Asia podcast,
bringing you the stories making news and moving markets in
the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube.
(24:19):
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