January 5, 2026 • 36 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Venezuela Regroups With New President, Old Repression Tactics
Venezuela’s government is reasserting itself after the capture of Nicolás Maduro, swearing in Delcy Rodríguez as acting president and flashing warning signs that a new wave of repression has begun.
As the government continued to churn inside the presidential palace Miraflores, Venezuela’s military counterintelligence officials have been patrolling the streets of Caracas, according to at least two witnesses. At least seven journalists and members of the press were detained on Monday morning and early afternoon, most of them at the National Assembly and its surroundings, according to the national press workers syndicate.
Heavily armed security forces and pro-government motorcycle gangs known as colectivos were seen roaming the capital, at times stopping drivers and checking their phones. While they aren’t as influential as they were at the height of Maduro’s power, the State Department has said they have been responsible for killings during protests.
Venezuela’s information ministry didn’t immediately respond to a request for comment.
Today's show features:
- Rockford Weitz, Professor of Practice & Director of the Maritime Studies Program at Tufts University's Fletcher School of Law and Diplomacy, on US military action in Venezuela
- Mike Collins, Managing Director and Executive Portfolio Advisor for Fixed Income at PGIM, on key developments in the bond market
- Bloomberg Economics Geo-Economic Analyst for Latin America Jimena Zuniga on the global economic implications of the US ousting Nicolas Maduro from power
- Sam Stovall, Chief Investment Strategist for CFRA Research, on the investing outlook to begin 2026
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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 Bloomberg Business
Week Daily reporting from the magazine that helps global leaders
stay ahead with insight on the people, companies, and trends
shaping today's complex economy. Plus global business finance and tech
(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:32):
While the US ray that captured Venezuela and President Nicholas
Maduro put America's allies and adversaries definitely unnoticed, President Trump
has a new World Order tim of his own. At
least that's how it's been reporting out.
Speaker 3 (00:44):
Yeah. In the aftermath of the stunning late night operation
at Sammaduro and his wife wist from a guarded military
base near Caracas to a New York jail, President Trump
demonstrated just how far the US is willing to go
to eliminate a leader seen as a threat to American
interests and security. So we're looking at the challenges that
come next. Those are the ones that are presented by
(01:04):
the US raid on Venezuela. We welcome Rockford Whites, President,
Professor of Practice and Director of the Maritime Studies program
at Toft's Universities, Fletcher's School, Fletcher School of Law and Diplomacy.
He joins US from Tucson, Arizona. Professor, Good to have
you on the program. What do you believe is the
true motivation of the US when it comes to Venezuela,
(01:26):
great question.
Speaker 4 (01:27):
What we're looking at here is this is a geopolitical
competition between the United States and China and Russia over
who is the main ally of Venezuela in the Caribbean.
Speaker 5 (01:40):
Wow.
Speaker 3 (01:41):
Okay, So before what we saw at late Friday and
early Saturday, what would you have said is the true ally?
Who would you have said is a true ally? And
then now after how does the US become the true ally?
Speaker 5 (01:56):
Okay? All right, so great quest. I love these questions.
Speaker 4 (01:59):
So before it was a combination of China was their
geoeconomic ally helping them with infrastructure, Russia was a military
ally with basing rights there and supporting their military. And
even Iran, even though it's not a great power, was
helping Venezuela. So they had that was their sort of
cast of characters, as well as Cuba. Cuba's frankly a
(02:20):
little bit more reliant on Venezuela than vice versa. Everything
has changed since Saturday morning in the sense that there
is obviously new leadership in Venezuela, a transition leadership. It's
unclear who will be in charge in the long run,
but it's very clear that the great power that's going
(02:42):
to have the most influence over Venezuela is now the
United States.
Speaker 2 (02:46):
What I'm wondering, Professor White, you know, what's the international
precedent for doing something like this? I mean, how should
we read what is essentially a kidnapping of a leader
of a foreign country and his wife, removal of the
leader from said country. What's it akin to in our
past history, our recent past history. And to be fair,
it's not the first time the US or others have
(03:09):
removed a global leader or worked behind the scenes to
support US friendly groups leaders in foreign countries. So we
get that we're not all naive, but I'm just curious,
are we setting up for kind of a leader grab
around the world among countries and among global powers?
Speaker 5 (03:30):
Great?
Speaker 4 (03:30):
Another great question, thank you, So let me try to
answer it using history. So it was actually ironically thirty
six years ago to the day that the United States
took Noriega from Panama, and that's the closest parallel. So
he also was charged with narco trafficking. He was also
(03:50):
then taken to the United States for prosecution. They also
justified it in exactly the same way. There was an
indictment against him in the United States, so that covered
the domestic law piece. And then under the UN Charter,
countries are allowed self defense and it also self defense
of their population. So it was framed this was back
in nineteen ninety under Bush Senior as no Diego as
(04:13):
a narco trafficker and therefore must be taken care of
to protect the American people from the drug trade. That
is allowed under the UN Charter as self defense, so
that covers you under international law. Again, every legal issue
is gray, so people will say it's against international law,
but you can make a case that it's consistent with
international law and the UN Charter. You can make a
(04:34):
case that it's consistent with domestic law. And I would
say it does set a precedent that other narco trafficking
leaders around the world could be taken not just by
the United States but by others.
Speaker 5 (04:49):
But this doesn't really apply to Taiwan.
Speaker 4 (04:51):
I've spent a lot of time in Taiwan, and narco
trafficking is not their game, and so I think that
the precedent can be narrowed.
Speaker 5 (04:58):
But it doesn't. It also means that.
Speaker 4 (05:02):
Other large countries, other great powers like China and Russia,
will look at this to see how they can use
it to their advantage.
Speaker 3 (05:08):
Well, you mentioned Taiwan, but what about Russia, and what
about Vladimir Putin in Russia? Could he use this as
justification for doing something to Zelenski.
Speaker 4 (05:18):
So Putin will try to come up with any justification
to go after Zelenski. But Zelenski clearly is not a
narco trafficker. I don't think anyone's saying that, so we
can argue not. The other thing is Zelensky has very
powerful friends right next door, the NATO, the Northern Niactary Organization.
Poland borders Ukraine the US. Although Trump has not supported
(05:42):
as much as maybe previous presidents have, We're behind Zelensky.
Zelensky's got powerful friends. Venezuela really didn't have powerful friends
in this part of the world. China is a very
strong navy around Taiwan, for example, they don't have a
major naval presence in the Caribbean as well.
Speaker 5 (06:01):
It is a naval power.
Speaker 4 (06:02):
It's not nearly as strong as either China or the
United States, but it doesn't have a major Caribbean presence.
So what's fundamentally happened is in the Americas, the US
is the major great power with the major military And
I will just note this because it is important for
the bigger conversation. The Trump administration did issue its national
(06:22):
security strategy just last month. It said we're going to
focus more attention on the Americas, and it was consistent
with this operation in Venezuela, though I will admit I
was surprised at how much force was used to take
Maduro and his wife one hundred and fifty aircraft.
Speaker 5 (06:40):
I mean, this was a major operation on Saturday.
Speaker 2 (06:44):
Wow, so many different places to go. Well, having said that,
you know, listening to a lot of the coverage here
on Bloomberg, professor wise, it sounds also like that the
US intelligence has been on the ground for some time.
We're going to talk about this a little bit later
on on on our broadcast, but that they had help
(07:04):
in kind of pulling this together. Is that a bad
assumption or read into the US getting an assist from
other leaders in Venezuela.
Speaker 5 (07:16):
I think it's an accurate read.
Speaker 4 (07:18):
I've been following this basically United days since Saturday, a
lot of coffee. But basically what has happened is it's
not surprising the United States has been focused on Maduro
and his regime. Really, it's been bipartisan. Biden also had
a bounty out for Maduro to be removed. So Maduro
(07:39):
is not popular internationally, he's not popular domestically. He's essentially
clinging on to power. I thought one of the most
interesting things was that his almost his entire security staff
were Cubans. This has come out from multiple sources, so
it's not surprising that the United States would spend a
couple months gathering intelligence. I have to say that this
(08:01):
was almost perfectly executed from a special operations perspective. They
had one mission kidnap said what kidnapped, but sees Maduro
and his wife take them to the United States. At
the same time, essentially take out the Venezuelan military. So
the Venezuelan Navy essentially no longer exists. Same for the
(08:23):
Air Force, no more radar, any tanks they had are
probably gone. So this was executed very well, and of
course intelligence was involved, so and Trump even said that publicly,
CIA is already there. So I would say public sources
have verified it, multiple sources.
Speaker 5 (08:40):
I think it's probably accurate to say that's correct.
Speaker 3 (08:43):
Well, that's one part of the mission, and that was
certainly this mission. But I think many critics out there
and even observers saying, now comes the hard part, the
potential power vacuum. And we've seen what quote unquote nation
building for the United STS data has looked like in
the past. How does that play out? What is the
(09:04):
right way for the US to do that?
Speaker 4 (09:07):
This is literally what I think is the most important
question for today. So I call this the Day After challenge.
This is a big deal. It's going to be very
difficult to smoothly create a transition to a new government
in a peaceful way without triggering an insurgency. The Venezuelan
(09:28):
military wasn't really strong before Saturday. They're really not strong
now that being said, similar to Vietnam, similar to Colombia.
I used to live in Colombia. I know the country well.
I've been to Venezuela as well as a tourist in
the nineties. There's parts of Venezuela that are the perfect
guerrilla warfare area. The United States has, I think no
interest in a long term occupation of Venezuela because it
(09:51):
would not be it would not be pretty, and it
would look similar to some of our misadventures in the
Middle East. I think the model to look cat is Panama.
You have in Venezuela a recognized opposition. You have Maria
Karina Machado, who is the recent Nobel Peace Prize winner.
You have at Mundo Gonzales, who is the declared winner
(10:13):
internationally recognized of the last presidential election. They're friends, They're
a good opposition. I think what can happen is that
they can be brought into this process and that the
US can help them establish some level of control. Probably
involves a few hundred, maybe a few thousand elite American
(10:36):
troops guarding say the presidential palace in Caracas, and essentially
having a presence at all the major military bases, certainly
around Caracas, and then eventually that gets transitioned over to
the new government. It's going to be hard. The essentially
Venezuela has had a dysfunctional government since nineteen ninety nine.
Speaker 5 (11:00):
Maduro was in power for over ten years as a dictator.
Speaker 4 (11:04):
All of his allies are in the National Assembly, they're
in the government, they're in the military. There's narco traffickers
who are well armed. So it's not going to be easy,
but I do think it's possible.
Speaker 5 (11:14):
I also, I think it's.
Speaker 4 (11:15):
Very different from Iraq or Afghanistan because there's no religious
element here.
Speaker 5 (11:20):
Venezuelan's not only.
Speaker 4 (11:21):
Are they all Christian, that are all Catholic, So there's
no that's not a piece of It doesn't mean it's easy.
I think it's going to take a lot of bandwidth
to do it.
Speaker 5 (11:28):
Well.
Speaker 4 (11:28):
I'm not sure if the Trump administration is ready to
do it, but we will see.
Speaker 5 (11:34):
We will see.
Speaker 3 (11:36):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (11:44):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas during
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Speaker 2 (11:58):
Money Managers, They've been loading up on Benel and debth
This is one of the stories that we've been reporting
out here at Bloomberg. This has been happening in the
past few months as President Trump ramped up pressure on
President Maduro, with some investors seeing the potential for restructuring
as early as this year. And then, of course Tim,
then we had the weekend happened.
Speaker 3 (12:15):
So with more on that, let's head to Sarasota, Florida,
and to Mike Collins, managing director, an executive portfolio advisor
on the multisector team over at PGIM. PGIM fixed Income
approximately one and a half trillion dollars and total assets
under management for PGM fixed Income it's more than one
billion dollars, Mike, big picture, how big of a deal
is it what happened in Venezuela, especially when it comes
(12:36):
to the global market and investing landscape. How are you
looking at it?
Speaker 6 (12:40):
Yeah?
Speaker 5 (12:40):
Tim and Catroll, Happy New Year. Great, great to be here.
Speaker 6 (12:43):
You know, I get these questions all the time whenever
you have these geopolitical flaw ups around the world, whether
they're in Asia, the Middle East, or Latin America. And
my answer is always the same, you know, kind of
fade the headlines is generally the knee jerk instinct that
you should have as an investor. You should really focus
on the fundamentals of the global economy, the fundamentals of
(13:04):
the US economy, where growth is going.
Speaker 5 (13:07):
To be, where inflation is going to be.
Speaker 6 (13:09):
Obviously, commodity prices are in the headlines today with the
Venezuela thing. But remember Venezuela is producing now less than
one percent of global oil. Remember sixty years ago, back
when I was born, they were producing fifteen percent of
the world's oil, and now they're less than one percent, right,
So they have taken a huge fall from grace. They
(13:29):
do not have a big impact economically on the global stage.
Sixty years ago, believe it or not, Venezuela was in
the top quartile of all countries in terms of GDP
per capita. Today they are at the bottom of the list, right,
And you think of other countries where they've been geopolitical
flare ups. Typically these countries don't have huge international economic implications.
(13:51):
So that's why the markets are just kind of, you know,
whistling past the graveyard here and just ignoring the geopolitical risk.
That is the standard playbook.
Speaker 3 (14:00):
Michael, just forgive me. I want to go back more
than a trillion dollars over at PGM fixed income under management.
I misspoke earlier, Okay, so if that's why, if that's
why we're seeing sort of the relative calm today, let's
then focused on focus on kind of what comes next
and the political and potential implications for that, because I
(14:20):
think that is a big question that investors have right now.
I mean, certainly people don't want to see some prolonged
and you know, dare I say boots on the ground
mission in the country. But but I think that I mean,
to me, going into this week, that was a big
concern that I thought investors would have. What if this
actually gets turns into something a kind of like we've
(14:40):
seen with past quote unquote nation building activities from the US.
Speaker 6 (14:45):
We've spent most of the weekend and a lot of
this morning doing deep dives into the situation in ven Azuell.
I mean, I'm fortunate to work on this gigantic team
where we have you know, geopolitic political analysts, we have
really deep economic analytical resources. We have people who've been
in the military, so we have a lot of great
(15:05):
color just from our own team and our and our contacts.
And there's really two scenarios right One team is the
one you pointed out that that things do get ugly
that Venezuela kind of gets worse, conditions get worse, that
the US tries to do a more aggressive takeover, and
it gets really messy some of the situations in the
Middle East that your last guest was talking about. But
(15:27):
there's also this upside scenario, right, and I think it
kind of confirms the fact that we're moving into this,
you know, G three ish type of world and the
US is certainly trying to take the lead there and
showing that, hey, we have control of the Americas here,
which could result in better outcomes for countries like Venezuela,
(15:50):
could result in better outcomes for the US, could result
in better outcomes for other Latin American countries, right, And
I think that's what the markets are focusing on. And
we were looking at all the merging market debt quotes
and runs out there right now, and generally the bonds
are trading better, right, And I think they're looking at
this as potentially the upside scenario, not the downside.
Speaker 5 (16:12):
But you're absolutely right.
Speaker 6 (16:13):
I mean, we really have to keep our radar attentive
to those potential downside risks.
Speaker 2 (16:18):
Yeah, Mike, on that point, A raftive investment firm Yeing
opportunities in Venezuela after that US strike. Trebeca Investment Partners
is sending a team to excuse me, Caracos this week
to inspect potential assets, calling it a gold rush.
Speaker 5 (16:33):
Have you guys changed.
Speaker 2 (16:36):
Any of your investment thesis when it comes to Venezuela
at this point are.
Speaker 6 (16:41):
Not yet well. Remember they've been pretty heavily sanctioned in
terms of trading and also trading some of their security.
So good news is for people have a huge emerging
market debt team and big investments around the world in
emerging market debt. You know, this could potentially free up
trading opportunities and relative value opportunity. I mean again, these bonds,
(17:01):
some of their bonds have you know, doubled or tripled
over the last over the last few weeks, so they're
still creating It really just stress levels. Right, we're talking
you know, twenty thirty cents on the dollar. But you know,
there are opportunities, for sure, there are going to be
a lot of relative opportunities. We're looking at even places
like Columbia today we're talking about where their local interest
(17:22):
rates are really high and their credit spreads are pretty wide,
and so you know, I think it sets up the
world for better relative value trading opportunities, and that's something
we're really looking to capitalize on.
Speaker 2 (17:32):
So, Mike, if you had to kind of make a bet,
I mean, is it fifty percent that the fortunes and
maybe economic and investment outlook for Venezuela are changing for
the better at this point?
Speaker 6 (17:43):
Or is it? You know, I would say it's a
little better than a coin toss carola probably, but higher odds.
Maybe I'm just you know, talking our book or agreeing
with the market's reaction so far. But yeah, but it
certainly feels like, you know, when you're having more private
sector resources coming to a country that's been totally mismanaged
in terms of their natural resources in their politics, you know,
(18:06):
there is I think a higher likelihood of a better
outcome there. But you know, the road to that better
outcome can be really long, right, and what with all.
Speaker 2 (18:16):
Kinds of problems, right, lots of bumps can always happen.
Certainly in a situation like this, many would.
Speaker 5 (18:21):
Agree with that.
Speaker 2 (18:21):
Hey, Mike, before you go, I'm thinking about the US
this week. We do get a jobs report on Friday,
We have a bunch of economic news. We did see
the US treasury curve move down today, a little bit
of economics news today. What is more important though, in
terms of the US Treasury trade at this point is
it the US economy what the Fed does ultimately, just
give us about thirty forty seconds on that, if you would.
Speaker 6 (18:44):
Yeah, again, it's going back to the fundamentals, Carol, Right,
And if you're looking at US growth, I mean, if anything,
expectations for growth this year have ticked up over the
last few months. We're entering twenty twenty six with really
strong kind of real GDP or consumption and capital expenditure expectations,
you know, momentum going into this year. So most forecasts
(19:07):
now for US GDP have two handles right where it's
not that long ago, they're.
Speaker 5 (19:11):
In the ones.
Speaker 6 (19:11):
I think the recession risks have moderated in the US
and we've taken hour probabilities down, and the upside risk
to growth to more productivity from AI maybe too higher
inflation and permanently higher rates has gone up. And that's
actually not a great environment for risk assets necessarily.
Speaker 7 (19:32):
Right.
Speaker 6 (19:32):
So we've been threading this needle. We call it the
muddle through scenario where you kind of run at two percent,
you have inflation stuck. You know, between two and three
the fetiaeses a couple of times. That's a great environment
for growth and for inflation and for financial assets.
Speaker 1 (19:47):
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Speaker 3 (20:01):
A big question that many people have been asking in
the wake of the US strikes in Venezuela and the
capture of President Nicholas Maduro is what comes next? The
surgical extraction of Maduro is done, but what about the
future of the country. Him and a Sunia is Bloomberg
Economics geoeconomic analysts for Latin America. She joins U from
the Bloomberg Buenos Aires Bureau Jimana, It's good to have
(20:22):
you on the program. You and the team right. The
range of possible outcomes is wide. What are some of
these outcomes?
Speaker 8 (20:29):
Thank you thanks for having me. I think there are
We can point out three possible scenarios for Venezuela going forward.
The first one is that after this transition, there is
the establishment of a stable, market friendly, pro West democratic
government in Venezuela, and that would probably, of course be
(20:51):
the best and most favorable outcome for Venezuela on the world,
with consequences for debt markets, all prices, the Venezuela and
diaspora and beyond.
Speaker 3 (21:04):
I just want to jump in. I just want to
jump in here on this one. Who would be the
leader of the country in a scenario such as this.
Speaker 8 (21:10):
I think in this scenario there are two dise things possibility.
There could be one interpretation that is, the US has
just cleared the path for the constitutional order to be restored,
and in that case, the leader that should assume the
government should be the winner of the twenty twenty four
presidential elections. However, there's also the possibility that that leader,
because of all the constit institutional disorder that has been
(21:32):
in the past few years, there could be a call
for a constitutional assembly, a constituent assembly, so that the
government draft so that the country drafts the new constitution
and then calls for presidential elections again, in which I
think that Maria Corina Matchello, the winner of the Nobel
(21:52):
Peace Prize and the leading figure in the opposition the
winner of the twenty twenty three primaries who did not
could not run into a four because she was barred
by the government. I think she would be in the
most favorable position position to win.
Speaker 2 (22:05):
A man how much of a guarantee, I guess is
the question. I want that Venezuela does ultimately have a lasting,
market friendly, pro democratic government.
Speaker 8 (22:19):
I think, of course, that's a messy path, right, It's
not easy. Venezuela currently has still a military military that
for years has been very intertwined with the regime. They
have privileges, they have businesses. There's also paramilitary militias that
have arms and have interests and control certain areas. There
(22:40):
are elements of foreign governments like Hezbola and fark and
Eland from Colombia, and so it's a very challenging situation
for a government to take over. And that's part of
the reason why the Trump administration has said, however controversial,
this is that they are running the country, meaning that
they are allowing the vice president of the regime, now
(23:03):
sworn in President else Rodriguez, to take over because the
regime does actually have the levers of power to keep
things under control and avoid scenario of chaos and in fighting.
The key question is whether this is the first step
of a transition that over time, you know, for example,
(23:24):
by disarming our militias, by cracking down on drug trafficking,
et cetera, can lead to an opposition taking over down
the line under conditions that allow it to establish civilian
control of armed forces and project political and economic stability.
Speaker 2 (23:41):
He man For those who aren't familiar with the Venezuelan economy,
what is it today and what are the Venezuelan people
facing in terms of inflation and the economy?
Speaker 5 (23:52):
What could it be?
Speaker 8 (23:55):
I think thank you for that question, because that's what
many people may not have so top of mind. Venezuela
used to be among the richest and largest economies in
the region, an economy of about four hundred billion dollars
with the GDP per capital of about thirteen thirteen thousand
per capita, which is puts it squarely in the middle
(24:18):
income bracket along with countries like Argentina or Uruguay. And
it was a country of regional and global relevance because
it also sits on the largest share of oil reserves.
And now Venezuela is a lower income country of about
the GDP about one hundred one hundred billion of GDP
(24:40):
per capita in the four thousands, and impoverished population. Eight
million people have left the country. And so the upside
if Venezuela could recover its political and economic normalcy, it's
enormous towards that path of economic significance it had in
the past.
Speaker 3 (24:57):
Okay, you've certainly laid out one scenario here. Two more
scenarios that you mentioned. I want to make sure we
get to those two. What is the worst possible outcome
for Venezuela.
Speaker 8 (25:08):
I think the worst possible outcome, the risks of that
one are reduced now, would be that there is not
a power vacuum right with the Exito Maduro, that there
is a power vacuum, and then different factions fight for power,
and therefore there is the establishment of a credible, stable,
democratic government. Is begins to seem unachievable. There could be
(25:32):
a search in violence, There could be exacerbating migration and
migration and securities spillovers to other countries in Latin America,
and things could go worse Latin America. Venezuela now has
a GDP about one hundred billion dollars, but it used
to be about half that much in the twenty twenty bottom.
(25:53):
Also similar with oil production, it's not about a million
down from two point five million bars day before the collapse,
but it was about half less than half this much
in the trough. So things could go worse, and so
that's definitely the worst case.
Speaker 2 (26:10):
You know him And the other thing I think about
my daughter, you know, who has studied some of Latin America,
South American in terms of the history, it has had
kind of a tortured relationship, certainly with US involvement, and
it's not always been a good one. How do we
ensure that what happens isn't just protecting business interests but
instead really once again putting Venezuela on a path to
(26:34):
long term prosperity.
Speaker 8 (26:36):
No, absolutely, I think that that brings me to a
third scenario, which is that the US sort of running
the country via the pressure exerted over the Zi Rodriguez
or elements of Javis who might succeed her. If this
lingers into the future, that's an intermediate outcome that might
(26:58):
you know, look more stable into so they're not being
in fighting or a very chaotic situation, but would still
be an authoritarian, non democratic government and non sovereign. In addition,
I think the risk of that scenario is there in
the sense that the US could be more focused on
the resources. The Trump administrations transaction or in nature, might
(27:22):
lead them to prioritize some economic policy measures and delay
the democratic transition. Trump may shift gears and focus on
domestic issues and leave the democratic transition and attended. But
there are also things mitigating that risk, And one key
issue I would highlight is that the Venezuela's incentives are
(27:42):
fairly aligned with the US incentives in the sense that
it is in Venezuela's interest also to recover its economic institutions,
open up its energy sectors so that it.
Speaker 5 (27:53):
Can take off.
Speaker 8 (27:54):
And probably a democratic opposition which would be ideally positioned
to win up elections, would probably also be pro West
and pro US. So I think that that limits the
risk that the US is says to stay.
Speaker 3 (28:07):
On stay with us. More from Bloomberg Business Week Daily
coming up after this.
Speaker 1 (28:16):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to fiveys During the
listen on Applecarplay and Android Otto with the Bloomberg Business
app or watch us live on YouTube.
Speaker 2 (28:30):
We've got markets stocks in particular off their best levels
of the session, still up about seven tens of a
percent on the S and P five hundred, Nasdaq one
hundred and ten right now up about eight tens of
a percent. We have seen more names higher in today's session,
so it's been largely a risk on trade today. But
just feel like investors are kind of coming off some
of those highs or earlier highs.
Speaker 3 (28:51):
This might not have been on the predictions for the
analysts out there who with their Wall Street target guessing
not well, let's see what says still politics maybe, but
in general right. Sam Stoveall's chief investment strategist at Safare Research.
He joins us from Allentown, Pennsylvania. Sam, we wanted to
talk general markets with you, but I mean we got
to talk about the topic that really is gathering all
(29:13):
the news today, and that's everything happening with Nicholas Maduro
and in Venezuela, and it's seemingly not affecting at least
the equity market in terms of investor concerns. Investors bullish today.
How do you explain it?
Speaker 7 (29:27):
Well, Tim, I think it really is what we've seen
in the past that military events, going all the way
back to World War Two, most of them have really
ended up being more headline events than bottom line events,
and I think this one would be the same. Of course,
you know, you do have some areas like energy prices
(29:47):
that are rising for today, but expectations are that should
we be able to improve the transportation, refining, and so
forth coming out of Venezuela, then they're one percent and
exposure or contribution to worldwide energy could be on the
rise and that would bring down energy prices in the
(30:07):
longer term. So you know, in general, I think it
just adds to the overall risk on feeling that we
started to get at the beginning of this new year.
Speaker 2 (30:17):
I will say, though, you know, Sam, it does feel
like there's like national security issues that a lot of
nations are thinking about what they need to be secure,
and maybe COVID taught us all having supply chains concentrated
in certain parts of the world not necessarily a good thing,
and so people are thinking about AI and the technology
and what's needed in terms of rare materials in order
(30:40):
to kind of keep that engine going. So I'm trying
to understand what that means then if there is a
bit of a grab around the world as different nations
shore up their national security interests and concerns, what that
means for the investment environment? Is it more friendly?
Speaker 5 (30:58):
Is it more volatile?
Speaker 2 (30:59):
In general?
Speaker 7 (31:02):
I think it's probably a little less friendly. We started
out twenty twenty five to worry about tariffs, indicating that
we're probably going to get thrown back into a smooth
holly kind of situation back in nineteen thirty, where you
know that would end up causing all of the trading
partners to become adversaries. So with countries now playing it,
(31:23):
we're likely to play it very cautiously, wanting to hold
on to whatever rare earth minerals that they have, energy
that they have, etc. Then it would probably make these
trading partners less likely to cooperate, and that could end
up being a concern that could hold back prices and
optimism in the intermediate and longer term.
Speaker 3 (31:45):
In your role at CFRA, how do you look at
oil prices. I know that's not necessarily your BALI wick,
but I'm wondering if that's if it does have a
broader effect, and we know it has a broader effect
on the economy, and therefore I'm wondering if, in your view,
how it affects markets, Like, what does it possibly mean
(32:06):
that all this oil could come online?
Speaker 7 (32:09):
Well, there's an old saying that for every ten dollars
increase or decrease in the price of oil will raise
or lower GDP by about twenty percent of one basis points.
So you know, the thought being then that you know,
with higher energy prices that actually could end up slowing
overall growth, with lower energy prices could actually be contributing
(32:32):
to that. And so as a result, yes, longer term
energy because we still haven't switched over to sell powered
et cetera, that energy, you know, the carbon materials still
end up being the dominant energy force, and so we're
going to have to be playing with that for quite
some time.
Speaker 2 (32:52):
Hey, Sam, you know, in terms of markets, and I'm
just thinking about here, we are coming off of three
really strong years for the S and P five hundred
one wonders whether or not it could be four in
a row. Having said that, I think a lot about earnings.
We know JP Morgan will kind of officially unofficially kick
it all off on January thirteenth. What are your expectations
(33:13):
for earnings and whether or not that is a fundamental
catalyst for equities in particular to maybe move to the
upside or continue to move higher.
Speaker 7 (33:22):
Sure well, I'll answer a couple of those questions. First off,
we had a three peat. We've had three three peats
over the last eighty five years. In the S and
P five hundred, we've had two four peats and only
one five peat. So you could say that the atmosphere
is getting pretty rare up here and it's less likely
(33:45):
that we will end up with a four peat. Doesn't
mean we're not going to have a double digital or
that we will not have a positive move we don't
get the double digit gain. Actually, in that fourth year,
after the third double digit advance, we have seen the
market up by more about ten percent on average, rising
(34:06):
sixty percent of the time, So you could say that
that is favorable. What would be driving that well? Earnings growth?
The Q four twenty twenty five estimate right now is
for a seven percent gain. According to SMP capital IQ
consensus estimates, we're looking for a fourteen percent gain for
all of twenty twenty six and inching our way up
(34:29):
to about a fifteen percent advance in twenty twenty seven.
So with investors being concerned a bit about valuations, certainly
that is being in a sense whittled away at by
the improving earnings outlook that we've been seeing over this
year and next year.
Speaker 2 (34:46):
What about midterms? Throw that into the mix. How does
that complicate or change things?
Speaker 7 (34:52):
Yes, well, that ends up being a big headwind overall,
because midterm election years have actually seen the SMP post
only a three point eight percent annual increase, and that
compares with the nine point three percent that we normally
get in the S and P five hundred in those
three other years. Also, the frequency was really a coin
(35:14):
toss up fifty five percent of the time versus seventy
six percent of the time for the other three years.
Speaker 5 (35:22):
And in terms of.
Speaker 7 (35:22):
Volatility, average drawdown of eighteen percent, which is the highest
of the four years in the presidential cycle. So essentially,
we could end up with a good year, but it's
likely to be a very bumpy one.
Speaker 1 (35:37):
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(35:57):
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Speaker 7 (36:08):
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(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:32):
While the US ray that captured Venezuela and President Nicholas
Maduro put America's allies and adversaries definitely unnoticed, President Trump
has a new World Order tim of his own. At
least that's how it's been reporting out.
Speaker 3 (00:44):
Yeah. In the aftermath of the stunning late night operation
at Sammaduro and his wife wist from a guarded military
base near Caracas to a New York jail, President Trump
demonstrated just how far the US is willing to go
to eliminate a leader seen as a threat to American
interests and security. So we're looking at the challenges that
come next. Those are the ones that are presented by
(01:04):
the US raid on Venezuela. We welcome Rockford Whites, President,
Professor of Practice and Director of the Maritime Studies program
at Toft's Universities, Fletcher's School, Fletcher School of Law and Diplomacy.
He joins US from Tucson, Arizona. Professor, Good to have
you on the program. What do you believe is the
true motivation of the US when it comes to Venezuela,
(01:26):
great question.
Speaker 4 (01:27):
What we're looking at here is this is a geopolitical
competition between the United States and China and Russia over
who is the main ally of Venezuela in the Caribbean.
Speaker 5 (01:40):
Wow.
Speaker 3 (01:41):
Okay, So before what we saw at late Friday and
early Saturday, what would you have said is the true ally?
Who would you have said is a true ally? And
then now after how does the US become the true ally?
Speaker 5 (01:56):
Okay? All right, so great quest. I love these questions.
Speaker 4 (01:59):
So before it was a combination of China was their
geoeconomic ally helping them with infrastructure, Russia was a military
ally with basing rights there and supporting their military. And
even Iran, even though it's not a great power, was
helping Venezuela. So they had that was their sort of
cast of characters, as well as Cuba. Cuba's frankly a
(02:20):
little bit more reliant on Venezuela than vice versa. Everything
has changed since Saturday morning in the sense that there
is obviously new leadership in Venezuela, a transition leadership. It's
unclear who will be in charge in the long run,
but it's very clear that the great power that's going
(02:42):
to have the most influence over Venezuela is now the
United States.
Speaker 2 (02:46):
What I'm wondering, Professor White, you know, what's the international
precedent for doing something like this? I mean, how should
we read what is essentially a kidnapping of a leader
of a foreign country and his wife, removal of the
leader from said country. What's it akin to in our
past history, our recent past history. And to be fair,
it's not the first time the US or others have
(03:09):
removed a global leader or worked behind the scenes to
support US friendly groups leaders in foreign countries. So we
get that we're not all naive, but I'm just curious,
are we setting up for kind of a leader grab
around the world among countries and among global powers?
Speaker 5 (03:30):
Great?
Speaker 4 (03:30):
Another great question, thank you, So let me try to
answer it using history. So it was actually ironically thirty
six years ago to the day that the United States
took Noriega from Panama, and that's the closest parallel. So
he also was charged with narco trafficking. He was also
(03:50):
then taken to the United States for prosecution. They also
justified it in exactly the same way. There was an
indictment against him in the United States, so that covered
the domestic law piece. And then under the UN Charter,
countries are allowed self defense and it also self defense
of their population. So it was framed this was back
in nineteen ninety under Bush Senior as no Diego as
(04:13):
a narco trafficker and therefore must be taken care of
to protect the American people from the drug trade. That
is allowed under the UN Charter as self defense, so
that covers you under international law. Again, every legal issue
is gray, so people will say it's against international law,
but you can make a case that it's consistent with
international law and the UN Charter. You can make a
(04:34):
case that it's consistent with domestic law. And I would
say it does set a precedent that other narco trafficking
leaders around the world could be taken not just by
the United States but by others.
Speaker 5 (04:49):
But this doesn't really apply to Taiwan.
Speaker 4 (04:51):
I've spent a lot of time in Taiwan, and narco
trafficking is not their game, and so I think that
the precedent can be narrowed.
Speaker 5 (04:58):
But it doesn't. It also means that.
Speaker 4 (05:02):
Other large countries, other great powers like China and Russia,
will look at this to see how they can use
it to their advantage.
Speaker 3 (05:08):
Well, you mentioned Taiwan, but what about Russia, and what
about Vladimir Putin in Russia? Could he use this as
justification for doing something to Zelenski.
Speaker 4 (05:18):
So Putin will try to come up with any justification
to go after Zelenski. But Zelenski clearly is not a
narco trafficker. I don't think anyone's saying that, so we
can argue not. The other thing is Zelensky has very
powerful friends right next door, the NATO, the Northern Niactary Organization.
Poland borders Ukraine the US. Although Trump has not supported
(05:42):
as much as maybe previous presidents have, We're behind Zelensky.
Zelensky's got powerful friends. Venezuela really didn't have powerful friends
in this part of the world. China is a very
strong navy around Taiwan, for example, they don't have a
major naval presence in the Caribbean as well.
Speaker 5 (06:01):
It is a naval power.
Speaker 4 (06:02):
It's not nearly as strong as either China or the
United States, but it doesn't have a major Caribbean presence.
So what's fundamentally happened is in the Americas, the US
is the major great power with the major military And
I will just note this because it is important for
the bigger conversation. The Trump administration did issue its national
(06:22):
security strategy just last month. It said we're going to
focus more attention on the Americas, and it was consistent
with this operation in Venezuela, though I will admit I
was surprised at how much force was used to take
Maduro and his wife one hundred and fifty aircraft.
Speaker 5 (06:40):
I mean, this was a major operation on Saturday.
Speaker 2 (06:44):
Wow, so many different places to go. Well, having said that,
you know, listening to a lot of the coverage here
on Bloomberg, professor wise, it sounds also like that the
US intelligence has been on the ground for some time.
We're going to talk about this a little bit later
on on on our broadcast, but that they had help
(07:04):
in kind of pulling this together. Is that a bad
assumption or read into the US getting an assist from
other leaders in Venezuela.
Speaker 5 (07:16):
I think it's an accurate read.
Speaker 4 (07:18):
I've been following this basically United days since Saturday, a
lot of coffee. But basically what has happened is it's
not surprising the United States has been focused on Maduro
and his regime. Really, it's been bipartisan. Biden also had
a bounty out for Maduro to be removed. So Maduro
(07:39):
is not popular internationally, he's not popular domestically. He's essentially
clinging on to power. I thought one of the most
interesting things was that his almost his entire security staff
were Cubans. This has come out from multiple sources, so
it's not surprising that the United States would spend a
couple months gathering intelligence. I have to say that this
(08:01):
was almost perfectly executed from a special operations perspective. They
had one mission kidnap said what kidnapped, but sees Maduro
and his wife take them to the United States. At
the same time, essentially take out the Venezuelan military. So
the Venezuelan Navy essentially no longer exists. Same for the
(08:23):
Air Force, no more radar, any tanks they had are
probably gone. So this was executed very well, and of
course intelligence was involved, so and Trump even said that publicly,
CIA is already there. So I would say public sources
have verified it, multiple sources.
Speaker 5 (08:40):
I think it's probably accurate to say that's correct.
Speaker 3 (08:43):
Well, that's one part of the mission, and that was
certainly this mission. But I think many critics out there
and even observers saying, now comes the hard part, the
potential power vacuum. And we've seen what quote unquote nation
building for the United STS data has looked like in
the past. How does that play out? What is the
(09:04):
right way for the US to do that?
Speaker 4 (09:07):
This is literally what I think is the most important
question for today. So I call this the Day After challenge.
This is a big deal. It's going to be very
difficult to smoothly create a transition to a new government
in a peaceful way without triggering an insurgency. The Venezuelan
(09:28):
military wasn't really strong before Saturday. They're really not strong
now that being said, similar to Vietnam, similar to Colombia.
I used to live in Colombia. I know the country well.
I've been to Venezuela as well as a tourist in
the nineties. There's parts of Venezuela that are the perfect
guerrilla warfare area. The United States has, I think no
interest in a long term occupation of Venezuela because it
(09:51):
would not be it would not be pretty, and it
would look similar to some of our misadventures in the
Middle East. I think the model to look cat is Panama.
You have in Venezuela a recognized opposition. You have Maria
Karina Machado, who is the recent Nobel Peace Prize winner.
You have at Mundo Gonzales, who is the declared winner
(10:13):
internationally recognized of the last presidential election. They're friends, They're
a good opposition. I think what can happen is that
they can be brought into this process and that the
US can help them establish some level of control. Probably
involves a few hundred, maybe a few thousand elite American
(10:36):
troops guarding say the presidential palace in Caracas, and essentially
having a presence at all the major military bases, certainly
around Caracas, and then eventually that gets transitioned over to
the new government. It's going to be hard. The essentially
Venezuela has had a dysfunctional government since nineteen ninety nine.
Speaker 5 (11:00):
Maduro was in power for over ten years as a dictator.
Speaker 4 (11:04):
All of his allies are in the National Assembly, they're
in the government, they're in the military. There's narco traffickers
who are well armed. So it's not going to be easy,
but I do think it's possible.
Speaker 5 (11:14):
I also, I think it's.
Speaker 4 (11:15):
Very different from Iraq or Afghanistan because there's no religious
element here.
Speaker 5 (11:20):
Venezuelan's not only.
Speaker 4 (11:21):
Are they all Christian, that are all Catholic, So there's
no that's not a piece of It doesn't mean it's easy.
I think it's going to take a lot of bandwidth
to do it.
Speaker 5 (11:28):
Well.
Speaker 4 (11:28):
I'm not sure if the Trump administration is ready to
do it, but we will see.
Speaker 5 (11:34):
We will see.
Speaker 3 (11:36):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (11:44):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas during
Listen on Apple Karplay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 2 (11:58):
Money Managers, They've been loading up on Benel and debth
This is one of the stories that we've been reporting
out here at Bloomberg. This has been happening in the
past few months as President Trump ramped up pressure on
President Maduro, with some investors seeing the potential for restructuring
as early as this year. And then, of course Tim,
then we had the weekend happened.
Speaker 3 (12:15):
So with more on that, let's head to Sarasota, Florida,
and to Mike Collins, managing director, an executive portfolio advisor
on the multisector team over at PGIM. PGIM fixed Income
approximately one and a half trillion dollars and total assets
under management for PGM fixed Income it's more than one
billion dollars, Mike, big picture, how big of a deal
is it what happened in Venezuela, especially when it comes
(12:36):
to the global market and investing landscape. How are you
looking at it?
Speaker 6 (12:40):
Yeah?
Speaker 5 (12:40):
Tim and Catroll, Happy New Year. Great, great to be here.
Speaker 6 (12:43):
You know, I get these questions all the time whenever
you have these geopolitical flaw ups around the world, whether
they're in Asia, the Middle East, or Latin America. And
my answer is always the same, you know, kind of
fade the headlines is generally the knee jerk instinct that
you should have as an investor. You should really focus
on the fundamentals of the global economy, the fundamentals of
(13:04):
the US economy, where growth is going.
Speaker 5 (13:07):
To be, where inflation is going to be.
Speaker 6 (13:09):
Obviously, commodity prices are in the headlines today with the
Venezuela thing. But remember Venezuela is producing now less than
one percent of global oil. Remember sixty years ago, back
when I was born, they were producing fifteen percent of
the world's oil, and now they're less than one percent, right,
So they have taken a huge fall from grace. They
(13:29):
do not have a big impact economically on the global stage.
Sixty years ago, believe it or not, Venezuela was in
the top quartile of all countries in terms of GDP
per capita. Today they are at the bottom of the list, right,
And you think of other countries where they've been geopolitical
flare ups. Typically these countries don't have huge international economic implications.
(13:51):
So that's why the markets are just kind of, you know,
whistling past the graveyard here and just ignoring the geopolitical risk.
That is the standard playbook.
Speaker 3 (14:00):
Michael, just forgive me. I want to go back more
than a trillion dollars over at PGM fixed income under management.
I misspoke earlier, Okay, so if that's why, if that's
why we're seeing sort of the relative calm today, let's
then focused on focus on kind of what comes next
and the political and potential implications for that, because I
(14:20):
think that is a big question that investors have right now.
I mean, certainly people don't want to see some prolonged
and you know, dare I say boots on the ground
mission in the country. But but I think that I mean,
to me, going into this week, that was a big
concern that I thought investors would have. What if this
actually gets turns into something a kind of like we've
(14:40):
seen with past quote unquote nation building activities from the US.
Speaker 6 (14:45):
We've spent most of the weekend and a lot of
this morning doing deep dives into the situation in ven Azuell.
I mean, I'm fortunate to work on this gigantic team
where we have you know, geopolitic political analysts, we have
really deep economic analytical resources. We have people who've been
in the military, so we have a lot of great
(15:05):
color just from our own team and our and our contacts.
And there's really two scenarios right One team is the
one you pointed out that that things do get ugly
that Venezuela kind of gets worse, conditions get worse, that
the US tries to do a more aggressive takeover, and
it gets really messy some of the situations in the
Middle East that your last guest was talking about. But
(15:27):
there's also this upside scenario, right, and I think it
kind of confirms the fact that we're moving into this,
you know, G three ish type of world and the
US is certainly trying to take the lead there and
showing that, hey, we have control of the Americas here,
which could result in better outcomes for countries like Venezuela,
(15:50):
could result in better outcomes for the US, could result
in better outcomes for other Latin American countries, right, And
I think that's what the markets are focusing on. And
we were looking at all the merging market debt quotes
and runs out there right now, and generally the bonds
are trading better, right, And I think they're looking at
this as potentially the upside scenario, not the downside.
Speaker 5 (16:12):
But you're absolutely right.
Speaker 6 (16:13):
I mean, we really have to keep our radar attentive
to those potential downside risks.
Speaker 2 (16:18):
Yeah, Mike, on that point, A raftive investment firm Yeing
opportunities in Venezuela after that US strike. Trebeca Investment Partners
is sending a team to excuse me, Caracos this week
to inspect potential assets, calling it a gold rush.
Speaker 5 (16:33):
Have you guys changed.
Speaker 2 (16:36):
Any of your investment thesis when it comes to Venezuela
at this point are.
Speaker 6 (16:41):
Not yet well. Remember they've been pretty heavily sanctioned in
terms of trading and also trading some of their security.
So good news is for people have a huge emerging
market debt team and big investments around the world in
emerging market debt. You know, this could potentially free up
trading opportunities and relative value opportunity. I mean again, these bonds,
(17:01):
some of their bonds have you know, doubled or tripled
over the last over the last few weeks, so they're
still creating It really just stress levels. Right, we're talking
you know, twenty thirty cents on the dollar. But you know,
there are opportunities, for sure, there are going to be
a lot of relative opportunities. We're looking at even places
like Columbia today we're talking about where their local interest
(17:22):
rates are really high and their credit spreads are pretty wide,
and so you know, I think it sets up the
world for better relative value trading opportunities, and that's something
we're really looking to capitalize on.
Speaker 2 (17:32):
So, Mike, if you had to kind of make a bet,
I mean, is it fifty percent that the fortunes and
maybe economic and investment outlook for Venezuela are changing for
the better at this point?
Speaker 6 (17:43):
Or is it? You know, I would say it's a
little better than a coin toss carola probably, but higher odds.
Maybe I'm just you know, talking our book or agreeing
with the market's reaction so far. But yeah, but it
certainly feels like, you know, when you're having more private
sector resources coming to a country that's been totally mismanaged
in terms of their natural resources in their politics, you know,
(18:06):
there is I think a higher likelihood of a better
outcome there. But you know, the road to that better
outcome can be really long, right, and what with all.
Speaker 2 (18:16):
Kinds of problems, right, lots of bumps can always happen.
Certainly in a situation like this, many would.
Speaker 5 (18:21):
Agree with that.
Speaker 2 (18:21):
Hey, Mike, before you go, I'm thinking about the US
this week. We do get a jobs report on Friday,
We have a bunch of economic news. We did see
the US treasury curve move down today, a little bit
of economics news today. What is more important though, in
terms of the US Treasury trade at this point is
it the US economy what the Fed does ultimately, just
give us about thirty forty seconds on that, if you would.
Speaker 6 (18:44):
Yeah, again, it's going back to the fundamentals, Carol, Right,
And if you're looking at US growth, I mean, if anything,
expectations for growth this year have ticked up over the
last few months. We're entering twenty twenty six with really
strong kind of real GDP or consumption and capital expenditure expectations,
you know, momentum going into this year. So most forecasts
(19:07):
now for US GDP have two handles right where it's
not that long ago, they're.
Speaker 5 (19:11):
In the ones.
Speaker 6 (19:11):
I think the recession risks have moderated in the US
and we've taken hour probabilities down, and the upside risk
to growth to more productivity from AI maybe too higher
inflation and permanently higher rates has gone up. And that's
actually not a great environment for risk assets necessarily.
Speaker 7 (19:32):
Right.
Speaker 6 (19:32):
So we've been threading this needle. We call it the
muddle through scenario where you kind of run at two percent,
you have inflation stuck. You know, between two and three
the fetiaeses a couple of times. That's a great environment
for growth and for inflation and for financial assets.
Speaker 1 (19:47):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to five eastering. Listen
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Speaker 3 (20:01):
A big question that many people have been asking in
the wake of the US strikes in Venezuela and the
capture of President Nicholas Maduro is what comes next? The
surgical extraction of Maduro is done, but what about the
future of the country. Him and a Sunia is Bloomberg
Economics geoeconomic analysts for Latin America. She joins U from
the Bloomberg Buenos Aires Bureau Jimana, It's good to have
(20:22):
you on the program. You and the team right. The
range of possible outcomes is wide. What are some of
these outcomes?
Speaker 8 (20:29):
Thank you thanks for having me. I think there are
We can point out three possible scenarios for Venezuela going forward.
The first one is that after this transition, there is
the establishment of a stable, market friendly, pro West democratic
government in Venezuela, and that would probably, of course be
(20:51):
the best and most favorable outcome for Venezuela on the world,
with consequences for debt markets, all prices, the Venezuela and
diaspora and beyond.
Speaker 3 (21:04):
I just want to jump in. I just want to
jump in here on this one. Who would be the
leader of the country in a scenario such as this.
Speaker 8 (21:10):
I think in this scenario there are two dise things possibility.
There could be one interpretation that is, the US has
just cleared the path for the constitutional order to be restored,
and in that case, the leader that should assume the
government should be the winner of the twenty twenty four
presidential elections. However, there's also the possibility that that leader,
because of all the constit institutional disorder that has been
(21:32):
in the past few years, there could be a call
for a constitutional assembly, a constituent assembly, so that the
government draft so that the country drafts the new constitution
and then calls for presidential elections again, in which I
think that Maria Corina Matchello, the winner of the Nobel
(21:52):
Peace Prize and the leading figure in the opposition the
winner of the twenty twenty three primaries who did not
could not run into a four because she was barred
by the government. I think she would be in the
most favorable position position to win.
Speaker 2 (22:05):
A man how much of a guarantee, I guess is
the question. I want that Venezuela does ultimately have a lasting,
market friendly, pro democratic government.
Speaker 8 (22:19):
I think, of course, that's a messy path, right, It's
not easy. Venezuela currently has still a military military that
for years has been very intertwined with the regime. They
have privileges, they have businesses. There's also paramilitary militias that
have arms and have interests and control certain areas. There
(22:40):
are elements of foreign governments like Hezbola and fark and
Eland from Colombia, and so it's a very challenging situation
for a government to take over. And that's part of
the reason why the Trump administration has said, however controversial,
this is that they are running the country, meaning that
they are allowing the vice president of the regime, now
(23:03):
sworn in President else Rodriguez, to take over because the
regime does actually have the levers of power to keep
things under control and avoid scenario of chaos and in fighting.
The key question is whether this is the first step
of a transition that over time, you know, for example,
(23:24):
by disarming our militias, by cracking down on drug trafficking,
et cetera, can lead to an opposition taking over down
the line under conditions that allow it to establish civilian
control of armed forces and project political and economic stability.
Speaker 2 (23:41):
He man For those who aren't familiar with the Venezuelan economy,
what is it today and what are the Venezuelan people
facing in terms of inflation and the economy?
Speaker 5 (23:52):
What could it be?
Speaker 8 (23:55):
I think thank you for that question, because that's what
many people may not have so top of mind. Venezuela
used to be among the richest and largest economies in
the region, an economy of about four hundred billion dollars
with the GDP per capital of about thirteen thirteen thousand
per capita, which is puts it squarely in the middle
(24:18):
income bracket along with countries like Argentina or Uruguay. And
it was a country of regional and global relevance because
it also sits on the largest share of oil reserves.
And now Venezuela is a lower income country of about
the GDP about one hundred one hundred billion of GDP
(24:40):
per capita in the four thousands, and impoverished population. Eight
million people have left the country. And so the upside
if Venezuela could recover its political and economic normalcy, it's
enormous towards that path of economic significance it had in
the past.
Speaker 3 (24:57):
Okay, you've certainly laid out one scenario here. Two more
scenarios that you mentioned. I want to make sure we
get to those two. What is the worst possible outcome
for Venezuela.
Speaker 8 (25:08):
I think the worst possible outcome, the risks of that
one are reduced now, would be that there is not
a power vacuum right with the Exito Maduro, that there
is a power vacuum, and then different factions fight for power,
and therefore there is the establishment of a credible, stable,
democratic government. Is begins to seem unachievable. There could be
(25:32):
a search in violence, There could be exacerbating migration and
migration and securities spillovers to other countries in Latin America,
and things could go worse Latin America. Venezuela now has
a GDP about one hundred billion dollars, but it used
to be about half that much in the twenty twenty bottom.
(25:53):
Also similar with oil production, it's not about a million
down from two point five million bars day before the collapse,
but it was about half less than half this much
in the trough. So things could go worse, and so
that's definitely the worst case.
Speaker 2 (26:10):
You know him And the other thing I think about
my daughter, you know, who has studied some of Latin America,
South American in terms of the history, it has had
kind of a tortured relationship, certainly with US involvement, and
it's not always been a good one. How do we
ensure that what happens isn't just protecting business interests but
instead really once again putting Venezuela on a path to
(26:34):
long term prosperity.
Speaker 8 (26:36):
No, absolutely, I think that that brings me to a
third scenario, which is that the US sort of running
the country via the pressure exerted over the Zi Rodriguez
or elements of Javis who might succeed her. If this
lingers into the future, that's an intermediate outcome that might
(26:58):
you know, look more stable into so they're not being
in fighting or a very chaotic situation, but would still
be an authoritarian, non democratic government and non sovereign. In addition,
I think the risk of that scenario is there in
the sense that the US could be more focused on
the resources. The Trump administrations transaction or in nature, might
(27:22):
lead them to prioritize some economic policy measures and delay
the democratic transition. Trump may shift gears and focus on
domestic issues and leave the democratic transition and attended. But
there are also things mitigating that risk, And one key
issue I would highlight is that the Venezuela's incentives are
(27:42):
fairly aligned with the US incentives in the sense that
it is in Venezuela's interest also to recover its economic institutions,
open up its energy sectors so that it.
Speaker 5 (27:53):
Can take off.
Speaker 8 (27:54):
And probably a democratic opposition which would be ideally positioned
to win up elections, would probably also be pro West
and pro US. So I think that that limits the
risk that the US is says to stay.
Speaker 3 (28:07):
On stay with us. More from Bloomberg Business Week Daily
coming up after this.
Speaker 1 (28:16):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to fiveys During the
listen on Applecarplay and Android Otto with the Bloomberg Business
app or watch us live on YouTube.
Speaker 2 (28:30):
We've got markets stocks in particular off their best levels
of the session, still up about seven tens of a
percent on the S and P five hundred, Nasdaq one
hundred and ten right now up about eight tens of
a percent. We have seen more names higher in today's session,
so it's been largely a risk on trade today. But
just feel like investors are kind of coming off some
of those highs or earlier highs.
Speaker 3 (28:51):
This might not have been on the predictions for the
analysts out there who with their Wall Street target guessing
not well, let's see what says still politics maybe, but
in general right. Sam Stoveall's chief investment strategist at Safare Research.
He joins us from Allentown, Pennsylvania. Sam, we wanted to
talk general markets with you, but I mean we got
to talk about the topic that really is gathering all
(29:13):
the news today, and that's everything happening with Nicholas Maduro
and in Venezuela, and it's seemingly not affecting at least
the equity market in terms of investor concerns. Investors bullish today.
How do you explain it?
Speaker 7 (29:27):
Well, Tim, I think it really is what we've seen
in the past that military events, going all the way
back to World War Two, most of them have really
ended up being more headline events than bottom line events,
and I think this one would be the same. Of course,
you know, you do have some areas like energy prices
(29:47):
that are rising for today, but expectations are that should
we be able to improve the transportation, refining, and so
forth coming out of Venezuela, then they're one percent and
exposure or contribution to worldwide energy could be on the
rise and that would bring down energy prices in the
(30:07):
longer term. So you know, in general, I think it
just adds to the overall risk on feeling that we
started to get at the beginning of this new year.
Speaker 2 (30:17):
I will say, though, you know, Sam, it does feel
like there's like national security issues that a lot of
nations are thinking about what they need to be secure,
and maybe COVID taught us all having supply chains concentrated
in certain parts of the world not necessarily a good thing,
and so people are thinking about AI and the technology
and what's needed in terms of rare materials in order
(30:40):
to kind of keep that engine going. So I'm trying
to understand what that means then if there is a
bit of a grab around the world as different nations
shore up their national security interests and concerns, what that
means for the investment environment? Is it more friendly?
Speaker 5 (30:58):
Is it more volatile?
Speaker 2 (30:59):
In general?
Speaker 7 (31:02):
I think it's probably a little less friendly. We started
out twenty twenty five to worry about tariffs, indicating that
we're probably going to get thrown back into a smooth
holly kind of situation back in nineteen thirty, where you
know that would end up causing all of the trading
partners to become adversaries. So with countries now playing it,
(31:23):
we're likely to play it very cautiously, wanting to hold
on to whatever rare earth minerals that they have, energy
that they have, etc. Then it would probably make these
trading partners less likely to cooperate, and that could end
up being a concern that could hold back prices and
optimism in the intermediate and longer term.
Speaker 3 (31:45):
In your role at CFRA, how do you look at
oil prices. I know that's not necessarily your BALI wick,
but I'm wondering if that's if it does have a
broader effect, and we know it has a broader effect
on the economy, and therefore I'm wondering if, in your view,
how it affects markets, Like, what does it possibly mean
(32:06):
that all this oil could come online?
Speaker 7 (32:09):
Well, there's an old saying that for every ten dollars
increase or decrease in the price of oil will raise
or lower GDP by about twenty percent of one basis points.
So you know, the thought being then that you know,
with higher energy prices that actually could end up slowing
overall growth, with lower energy prices could actually be contributing
(32:32):
to that. And so as a result, yes, longer term
energy because we still haven't switched over to sell powered
et cetera, that energy, you know, the carbon materials still
end up being the dominant energy force, and so we're
going to have to be playing with that for quite
some time.
Speaker 2 (32:52):
Hey, Sam, you know, in terms of markets, and I'm
just thinking about here, we are coming off of three
really strong years for the S and P five hundred
one wonders whether or not it could be four in
a row. Having said that, I think a lot about earnings.
We know JP Morgan will kind of officially unofficially kick
it all off on January thirteenth. What are your expectations
(33:13):
for earnings and whether or not that is a fundamental
catalyst for equities in particular to maybe move to the
upside or continue to move higher.
Speaker 7 (33:22):
Sure well, I'll answer a couple of those questions. First off,
we had a three peat. We've had three three peats
over the last eighty five years. In the S and
P five hundred, we've had two four peats and only
one five peat. So you could say that the atmosphere
is getting pretty rare up here and it's less likely
(33:45):
that we will end up with a four peat. Doesn't
mean we're not going to have a double digital or
that we will not have a positive move we don't
get the double digit gain. Actually, in that fourth year,
after the third double digit advance, we have seen the
market up by more about ten percent on average, rising
(34:06):
sixty percent of the time, So you could say that
that is favorable. What would be driving that well? Earnings growth?
The Q four twenty twenty five estimate right now is
for a seven percent gain. According to SMP capital IQ
consensus estimates, we're looking for a fourteen percent gain for
all of twenty twenty six and inching our way up
(34:29):
to about a fifteen percent advance in twenty twenty seven.
So with investors being concerned a bit about valuations, certainly
that is being in a sense whittled away at by
the improving earnings outlook that we've been seeing over this
year and next year.
Speaker 2 (34:46):
What about midterms? Throw that into the mix. How does
that complicate or change things?
Speaker 7 (34:52):
Yes, well, that ends up being a big headwind overall,
because midterm election years have actually seen the SMP post
only a three point eight percent annual increase, and that
compares with the nine point three percent that we normally
get in the S and P five hundred in those
three other years. Also, the frequency was really a coin
(35:14):
toss up fifty five percent of the time versus seventy
six percent of the time for the other three years.
Speaker 5 (35:22):
And in terms of.
Speaker 7 (35:22):
Volatility, average drawdown of eighteen percent, which is the highest
of the four years in the presidential cycle. So essentially,
we could end up with a good year, but it's
likely to be a very bumpy one.
Speaker 1 (35:37):
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(35:57):
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Speaker 7 (36:08):
Mm HM
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