June 13, 2025 • 45 mins
Watch Tom and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Surveillance hosted by Tom Keene & Paul SweeneyJune 13th, 2025
Featuring:
1) Tina Fordham, founder at Fordham Global Foresight, joins for a discussion on the reshaped geopolitical landscape after Israel's strike on Iran. The conflict could impact oil prices, with scenarios ranging from a moderate increase to $75 per barrel if Iran's oil facilities are attacked, to a more extreme scenario of $130 per barrel if the Strait of Hormuz is closed. The US's role in the conflict is uncertain, with possible scenarios including Tehran trying to keep the US out of the war, symbolic attacks against the US, or Iran targeting US positions in the region.
2) Mick Mulroy, co-founder of the Lobo Institute and former Deputy Assistant Secretary of Defense for the Middle East, on Israel striking Iran and the consequences for the US and Middle East. The attacks risk plunging the Middle East into crisis, hitting the global economy, and escalating into a broader regional conflict, with the US and other nations calling for diplomatic de-escalation.
3) Rebecca Patterson, former Chief Investment Strategist at Bridgewater Associates, discusses the potential for Treasuries and the Dollar becoming a safe haven amid Middle East tensions and whether US exceptionalism is fading. Treasuries rose due to escalating Israel-Iran tensions, strong auctions, and cooling inflation data, with yields falling 1-2 basis points across the curve.
4) Gautam Mukunda, Professor at Yale School of Management and Bloomberg Opinion columnist, discusses the US' role in the Israel-Iran conflict and how it could affect the upcoming Iran Nuclear Deal talks. President Trump urges Iran to accept a nuclear deal to avoid further attacks, after Israel bombed Iran's atomic facilities and killed top commanders. Israel struck around 100 targets across Iranian cities, causing oil prices to surge and investors to buy havens, and Iran responded with a wave of drones towards Israel.
5) Matt Luzzetti, Chief Economist at Deutsche Bank, talks about the changing US economic outlook amid rising Middle East tensions. Treasuries rose due to escalating Israel-Iran tensions, strong auctions, and cooling inflation data, with yields falling 1-2 basis points across the curve. duropean government bonds initially jumped but then reversed gains as focus turned to the impact of higher oil prices on inflation.
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Transcript
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
Surveillance Podcast. Catch us live weekdays at seven am Eastern
on Apple CarPlay or Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
(00:25):
us live on YouTube.
Speaker 2 (00:27):
I've been anticipating this all morning.
Speaker 3 (00:29):
Tina Fordham is exquisite on our fractured international relations with
Fordham Global Insight, her academics at Columbia among others, and
of course her work over the years of the Eurasia
Group now Fordham Global Foresight.
Speaker 2 (00:44):
Tina, within your wonderful note this morning, you just cut
to the chase.
Speaker 3 (00:48):
Nuclear states in active conflict is not business as usual?
Speaker 2 (00:54):
How should the White House the State Department? Respond?
Speaker 4 (01:00):
Thanks? Tom. I think that we've got to be very
focused on the fact that we're not just looking at
a bold Israeli attack on Iran taking out at least
twenty of its senior personnel at one time, as well
as some attacks on nuclear facilities, but the Ukrainian spiderweb attack,
(01:23):
drone attack deep into Russia, which of course has nuclear capability,
and the teraf War all happening at the same time.
For investors that are having flashbacks to the last round
of Iran Israel tensions in twenty twenty four. We're in
a really different environment. But I didn't answer your question
(01:44):
about what the White House and the State Department should do.
At the moment, it looks like the White House is
trying to give the impression that they were on board
with these attacks, when almost every thing that we're hearing
is that the White House was cautioning Natanaho not to
(02:05):
go for it. So both Natagnyaho and Zelensky and Ukraine,
you know, really not heating Washington's warnings.
Speaker 5 (02:15):
So what does that say about our position in the
world in terms of shaping events that are in our
best interest, Because, as you mentioned in Ukraine and now
most recently in the Middle East, it appears that we
perhaps didn't don't have the influence we once did.
Speaker 4 (02:34):
Well, we don't seem able to deter leaders who are
willing to take advantage of an opportunistic moment, and that's
where we are. There is a perceived power vacuum, and
both Ukraine and Israel, which of course are in very
different conflicts that I don't mean to draw equivalentss between them,
but part of being in a geopolitical risk supercycle is
(02:56):
the notion that the global guardrails which deter more dramatic
escalations are not working, and so that's where we find ourselves.
Having said that, of course, the United States has a
lot of cards. In particular, if Israel wants to you know,
truly a degrade Iran's nuclear facilities, that will require the
(03:22):
involvement of US long range bunk or buster bombs if to.
Speaker 2 (03:28):
Ford him with US.
Speaker 3 (03:29):
And we will continue here light economic data posts when
you will enjoy the Michigan reports that we see here
at ten am this morning. Thank you so much on
YouTube of Fiery live chat over these military and political
moments of the nation.
Speaker 2 (03:45):
Tina, let me ask the question, and you're so wonderfully
a political I think I can get away with.
Speaker 3 (03:50):
This for our audiences and their politics of say the
left and the right, of Democrat and Republican.
Speaker 2 (03:59):
This question is going to come up this weekend.
Speaker 3 (04:02):
Are we at this moment because of the unique policy
and approach of Donald Trump in his second term? Are
we going to get naval gazing into next week into
August into twenty twenty six that says we have this
conflict this war because of President Trump.
Speaker 2 (04:22):
Are we going to get there? Tom?
Speaker 4 (04:26):
I love that question, and you know that I'm not
afraid of being bold. I mean, I think one of
the tragedies of the present moment is that every single
issue that the US is facing is now left coded
and right coded in a way which is very bad
for the world and for dealing with threats. I am
(04:48):
in this role and in this seat because I think
that in order for commerce and financial markets to function,
we need safety and stability. And unfortunately, it's very difficult
to have those convers stations, even on Wall Street anymore,
without going down some kind of rabbit hole of whether
one is defending Ukraine policy or is pro or anti Israel,
(05:11):
when what we really need to be looking at as
investors is the potential for conflicts to move from regional
to systemic, to generate shocks from acid prices or to growth.
And we're not having those conversations anymore.
Speaker 3 (05:24):
Ten fortum, I've stood outside that quiet room at the
White House down in the basement below the Roosevelt Room,
where the President will meet with a National Security Council.
I assume they'll be in that closed you know, the
famous room in all that, I would suggest we have
a fractured process under NSC right now, with Marco Rubio
(05:44):
having was it Paul five jobs, he's mowing the lawn whatever.
What's going to go on at that eleven am meeting today, Tina.
Speaker 4 (05:52):
Fordham, Yes, eleven Am, no rush, you know it will
it will have been something like ten hours since the
bombs first dropped. I think they're going to be playing cleanup,
to be honest, those warnings from the White House to
NATANYAHUO were pretty well known in analysts and intelligence circles.
(06:12):
Now the President has had to come out saying he'd
been warning Iran all along. I think that's probably true.
The prospects for diplomacy now are zero between Israel, Iran,
and the United States. And what we're waiting for again
in terms of the scale of the response is does
Iran have anything left to respond with the one hundred
(06:37):
or sore drones that were launched seem to have been intercepted.
And how much further we're will Israel go. I've seen
some estimates twelve days and then going further. And will
the US actively get involved providing that kind of support
I mentioned. I don't think the White house will want
to go there.
Speaker 5 (06:56):
Tina, You've recently published some work entitled ever going back
to Normal, and that was before the last twelve hours.
What do you mean by we're never going back to normal?
Speaker 4 (07:07):
Well, I put this report together developing an evidence space
to really try to assess whether we are indeed experiencing
more geopolitical risks or not. And this speaks to Tom's
earlier point, which is basically, is this the fault of
the Trump administration. The answer is no, We've seen an
acceleration of geopolitical risk. Events they started to pick up
(07:30):
in the aftermath of the global financial crisis around about
twenty ten, really accelerated, whether measured by trade in tariffs,
or cyber attacks or conflicts. Lots of different variables that
we looked at. But again it's that combination of more guardrails, sorry,
more drivers of geopolitical risk and weaker guard rails, diplomacy norms,
(07:53):
even just you know, the deterrence factor when those things
break down. We're seeing a lot of nations willing to
take chance.
Speaker 3 (08:00):
Tina, Thank you so much, Rave Reviews for the quality
of his conversation on YouTube LiveChat. Thank you so much,
gentlemen and gentle ladies.
Speaker 5 (08:08):
For that.
Speaker 2 (08:08):
Tina Fordham is with Fordham Global Insight.
Speaker 1 (08:17):
You're listening to the Bloomberg Surveillance podcast. Catch us live
weekday afternoons from seven to ten am Eastern Listen on
Applecarplay and Android Auto with the Bloomberg Business app, or
watch us live on YouTube right now.
Speaker 3 (08:30):
We are honored to bring you. As Paul mentioned, a
marine mcmulroy, co founder of the Lobo Institute, the former
Deputy Assistant Secretary of Defense for the Middle East. Make
if I get out a map of the forty to
fifty thousand Americans at some nineteen sites in the Middle East,
with a substantial presence in Kuwait, don de behrein to
(08:51):
cut her over to the United Arab Emirates strapped across
the Persian Gulf.
Speaker 2 (08:56):
What is the risk to American military personnel at this moment?
Speaker 6 (09:03):
Good to be with you all again. Obviously a big
concern around stated essentially that if they were attacked, that
they would go after US personnel and facilities. That would
be a huge strategic mistake. That's one of the reasons
why I think Secretary of Rubio made it clear that
this was a unilateral attack Byron not by the United States,
(09:24):
So they would be drawing the United States into a
conflict that they're already having with Israel. So they would
be fighting a regional superpower, if you will, plus US.
So I don't think they will. Hopefully they will have
better ideas and not do that. But if they did,
I think we have done everything we can to mitigate
(09:44):
that threat, to get people out that don't need to
be there, and of course bring in air and missile
defense systems, which is the most likely way they would
attack us. To defend these positions.
Speaker 3 (09:55):
Mick, I don't want to go back to Eisenhower or
to nineteen seventy ninety either, but the absolute memory of
pros like you is the absolutely stunning war on the
border of Iraq and Iran in the Iran in the
nineteen eighties that colors everything about Persia about Iran. They
(10:18):
don't have that capability for large war like they did
in the middle nineteen eighties, do.
Speaker 6 (10:24):
They They do not, And of course this is after
multiple attacks by Israel on Iran that have been mitigating
their air missile defense systems, their ability to launch cruise missiles,
ballistic missiles and produce them. So this is something I
think Israel took the opportunity to mitigate, not just their
(10:46):
nuclear facilities, let's remember that's what we're talking about, but
they also went after their ballistic missile launch sites, manufacturing centers,
air bases, military bases, and essentially eliminated their entire general
staff Major General Bulgary On down, essentially their joint chiefs
of staff and the entire staff was eliminated, plus most
(11:08):
of their senior nuclear scientists. They took every opportunity with this,
and say it might actually last up to two weeks,
so this might not.
Speaker 7 (11:16):
Be over, Mick.
Speaker 5 (11:18):
Let's talk about timing. Why do you believe Israel acted now?
Speaker 6 (11:23):
There's some speculation they were concerned about the agreement that
the United States in Iran looked like they might be
willing to agree to, which would have been very similar
at least from what we see in reporting as the
twenty fifteen JCPOA, the one that the United States unitedly
withdrew from in twenty eighteen, and something that I think
Israel found to be unacceptable. It would have allowed some
(11:47):
type of richment in Iran to continue. Some would say
that that's why they did it. There might have been intelligence.
I'm not aware of it, but of course because I
don't have access to it, that they were getting closer
to a nuclear weapon and that was the trigger point
for Israel. But certainly I think the United States would
have rather seen a nuclear agreement, a new one that
(12:09):
both parties could agree to oran in the United States,
rather than see this escalate and to it could be
a long term conflict that could continue to escalate nck.
Speaker 5 (12:18):
What does this say about the role of the United
States in this region at this particular time. We know
that the Trump administration was pushing for a diplomatic resolution and
maybe a nuclear deal, and there were planned talks this
weekend and then this happened, So what does that say
about the US role here?
Speaker 6 (12:36):
So I agree, I agree with the premise that this
was something the US did not want to see. They
wanted to see a nuclear agreement that would have been
acceptable to US, perhaps a slightly better for US than
the twenty fifteen So politically.
Speaker 2 (12:50):
It would have it would have landed well.
Speaker 6 (12:53):
But that's unlikely to happen now. The Iman meetings that
were set for Sunday or completely off and there's literally
no chance that we're going to get back to that
place and back around made it clear that if their
facilities would ever attacked, that they would spend all of
their effort trying to get to a nuclear weapon. So
that's another concern that we have. The United States, of course,
does not want to see another war start in the
(13:14):
Middle East. That's not in anybody's interest, certainly not the
countries of the Middle East. So hopefully we can play
a role that de escalates this as quickly as possible.
One way to do so, of course, is to protect
Israel if they see a large amount of incoming missiles
and drones like they saw back in October.
Speaker 2 (13:32):
We welcome all of.
Speaker 3 (13:33):
You across the nation with us now. McMurray. Rebecca Patterson
will be with us here in a bit again. Our
team led by Ethan Bronner in Tel Aviv monitoring each
moment of this. We've had reports recently of continued attacks.
We'll have to get more verification of that. Mcmurroy, I
have a presidential tweet in front of me. It is
(13:54):
too long to waste time with precious time with I
should say, but to end the presidential tweet, Iran must
make a deal before there is nothing left and say
what was once known as the Iranian Empire. No more death,
no more destruction, all caps. Just do it before it's
too late. God bless you all. With great respect from
(14:17):
the Arc of Dwight David Eisenhower out to President Obama.
Speaker 2 (14:22):
Mick Molroy.
Speaker 3 (14:23):
Do we have a coherent Middle East policy at this moment?
Speaker 6 (14:30):
It does not appear that we are actually running the
show when it comes to this, and less one believes
that this was to force around to the table. I
think that's very unlikely that they. I mean, this was
a complete disaster for Iran. They have been shown that
they have almost no ability to defend themselves. For them
(14:51):
to then come to the table and come to an
agreement with the US would be the ultimate humiliation. They
will have to respond to this attack, and they will
likely not want to have any discussions going forward. They
have made it clear that they're now will try to
get to a nuclear weapon. The US, of course, will
always play a key and vital part of the Middle East.
(15:13):
It is in our own interest to do so, and
I think ultimately if we can get this back on track,
it would be in our interests as well as Iran
and all that countries in the region. Do have a
diplomatic resolution, and if that means a new nuclear agreement,
that would be good. It's very difficult to see how
we can get there from here right now.
Speaker 5 (15:31):
Mick, Within Iran, do we have a sense of You
mentioned the senior leadership was dealt a big, big blow
in this attack here. How about just the leadership, the
political leadership in Iran? How stable is that given you know,
this really a surprising attack here.
Speaker 6 (15:48):
Well, this is one of the reasons why I think
Prime Minister Nan Yahoo came out and said this was
the time, This was the time for the Iranian people
to rise up against the Iranian regime which has done
nothing to help them because of their near continuous desire
to be at constant war with their neighbors. Of course,
they support all the proxies that continuously attack not only
(16:10):
Israel but the United States. Up until nine to eleven,
Hesbolo was the biggest killer of Americans, the biggest terrorist
organization killer of Americans. So they caused this, and now
they've come home to you know, to roost, so to speak.
Whether they can change that in or on this this
is their opportunity. The leadership has been decimated. They are
(16:31):
obviously in very direk the economic situation will have to
see it has to be organic, I think for it
to take take hold. But they are in a very
bad place and we have to see whether they have
the capacity istry around that is unclear.
Speaker 3 (16:46):
Make We hope to speak to you next week with
the Lobo Institute and of course his service to the
Pentagon and the United States Marines. Mcmulroy starts us off
this morning. Futures negative sixty or the vix out, two
big figures as Paul mentioned over twenty twenty point one
five brent crewed seventy four dollars seventy seven cents up
per barrel.
Speaker 2 (17:06):
Too short.
Speaker 3 (17:06):
A visit this morning with Rebecca Patterson with a consul
and foreign relations, a student of the Litmus paper of
the system the currency.
Speaker 2 (17:16):
This is an upset.
Speaker 3 (17:18):
This is a continued cacophony of events that we see.
We clearly have a threatened dollar down ten percent. How
does this add to the burden of a weaker dollar.
Speaker 8 (17:33):
I think what we're seeing overnight in this morning is
some very modest dollar strength the DXY Dollar Index modest
and I expected it right, and you're seeing a bigger
reaction in gold. You're seeing a reaction in the Swiss
frank so other quote unquote safe havens, some fall in
ten year bond yields, although not much. Again, so I
(17:55):
think even though we are getting the typical flight to
safety reaction in market that we've seen sadly too many
times over our careers, the fact that the dollar rally
is so muted, I think tom speaks to what's happening
with the dollar more broadly.
Speaker 2 (18:10):
Now, thank you.
Speaker 5 (18:11):
So, Global Wall Street waking up to this news just
another issue. I'm not going to call it a headwind
per se, but another issue for Global Wall Strate and
global investors to deal with. How to historically, how have
you kind of viewed some of these global tensions and
how it informs your investment outlook.
Speaker 8 (18:30):
Yeah, I mean, as horrible as these events are from
a humanitarian point of view, I think for financial markets
you always go back to what is going to be
the global or regional economic impact, and in this case,
it's looking at what will hire crude oil prices and
gas natural gas prices due to the global economy. What
(18:52):
will potentially a slowdown in international flights. Do we see
that in the airline stocks today and can there be
contagious So the marker I'd be watching is an escalation
in this conflict. If the Strait of horn Moots would
be the red line. If we see any attempt to
close the strait. That hurts Iran itself because it needs
(19:13):
to ship its energy out of there, especially to China,
but it hurts everyone and that would be a big
stagflationary step forward if it happens. I think probably a
low probability, but you need to keep an eye out
for it.
Speaker 3 (19:25):
With your work with JPM Morgan and of course with Bridgewater.
Back to City Road in London, I'm going to say
there's a conceit that the United States is distant from
all this. There's two oceans in the way. It's in
bred in our culture to say it's their problem and
their problem is continental Europe and over to the United Kingdom.
(19:46):
With your global work that you've done over the years, Rebecca,
how does this affect Europe? In London more so? Now?
To me, they're shockingly close to the Greater Persian Gulf absolutely.
Speaker 8 (19:59):
I mean they rely on oil and energy imports a
lot more than the US. We're self sufficient effectively and energy,
So they're going to be much more vulnerable to that
as well as just trade between the Middle East and Europe.
But I do think the US is more vulnerable than
normal right now because even though the hard data, so
(20:20):
to speak, the economy in the US is moderating but
still solid, you do have this heightened level of uncertainty
among businesses in particular. You're just adding more fuel to
that fire with this. If you want business activity to pause,
this is going to contribute to that.
Speaker 3 (20:36):
Paul publishing last night, Michael Ferole JP Morgan models out
to Q four Q four of this year. JP Morgan
is modeling a sub one percent GDP for that quarter.
Speaker 5 (20:48):
So, Rebecca, given what Thomas just mentioning that about slow
in growth but not recessionary scenarios, what does that suggest
to you for investors where they should be maybe position
in this slower growth world.
Speaker 7 (21:01):
Yeah.
Speaker 8 (21:01):
I mean we've seen this trend already this year, but
I think it continues that large cap stocks that are
more able to weather these storms outperform small caps, which
need that sick locality, that momentum plus lower rates to
really outperform. So you want to be in large caps,
and you probably want to keep quote unquote barbelling your
portfolio in that both within stocks have the consumer staples,
(21:23):
have the save stocks, but then have some tech to
play the long term AI theme. And if there's no
turn in consumer sentiment and then globally, I'm pounding my
fist on the table on this one. Gold keeps going higher.
Speaker 7 (21:35):
Thank you, Tom.
Speaker 8 (21:37):
I've been bullish on gold for a couple of years,
and this is yet another reason, sadly that you want
to keep in that even it's up thirty percent year today.
Speaker 3 (21:45):
Such a pro gold up thirty six dollars thirty four
to thirty eight. One final question Kindeth Pollock and Ambassador
Shapiro published this morning at the Console and Foreign Relations
in Foreign Affairs magazine. When those fancy people in international
relations talk to a market.
Speaker 2 (22:03):
Beast like you, what do they ask you?
Speaker 8 (22:06):
You know, I've really enjoyed being part of the Council
on Foreign Relations to try to tie the policy and
economics with the financial markets because they all affect each other.
In fact, we had an event yesterday on foreign direct
investment to the United States and what some of the
uncertainty we're living through, what some of the policies could
do to foreign direct investments so they're thinking about the
(22:27):
policy of Commerce Secretary Lutenux FastTrack proposal. I'm thinking about
if we have less FDI to the US. FDI today
accounts for about eight million jobs and about a quarter
of all US manufacturing jobs. If FDI slows because of
global policy concerns, how does that feed through to our
(22:48):
equity market, to household wealth, to the dollar. So I'm
trying to square that circle at the Council on Foreign
Relations and learning a lot from my colleagues.
Speaker 3 (22:58):
Frankly, Rebecca, thank you so much, Thank you, thank you
so much for coming in early this morning. Ms Patterson
with the Console and Foreign Relations as a senior fellow,
and of course heard years i should say, with Bridgewater
and with JP Morgan and bestmer Trust as well.
Speaker 1 (23:12):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Apple Corplay and Android
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Just say Alexa play Bloomberg eleven thirty.
Speaker 3 (23:29):
To short A visit this morning with Rebecca Patterson with
the Consul and Foreign Relations, a student of the litmus
paper of the system the currency. This is an upset.
This is a continued cacophony of events that we see.
We clearly have a threatened dollar down ten percent. How
(23:51):
does this add to the burden of a weeker dollar.
Speaker 8 (23:56):
I think what we're seeing overnight in this morning is
some very much oddest dollar strength. The DXY Dollar index
modest and I expected it right. And you're seeing a
bigger reaction in gold. You're seeing a reaction in the
Swiss frank so other quote unquote safe havens, some fall
in ten year bond yields, although not much. Again, so
(24:18):
I think even though we are getting the typical flight
to safety reaction in markets that we've seen sadly too
many times over our careers, the fact that the dollar
rally is so muted, I think tom speaks to what's
happening with the dollar more broadly.
Speaker 5 (24:33):
Now, thank you so, Global Wall Street waking up to
this news just another issue. I'm not gonna call it
a headwind per se, but another issue for Global Wall
Strate and global investors to deal with.
Speaker 7 (24:46):
How historically, how have you kind.
Speaker 5 (24:47):
Of viewed some of these global tensions and how it
informs your investment outlook.
Speaker 8 (24:53):
Yeah, I mean, as horrible as these events are from
a humanitarian point of view, I think for financial markets
you always go back to what is going to be
the global or regional economic impact, and in this case,
it's looking at what will hire crude oil prices and
gas natural gas prices due to the global economy. What
(25:15):
will potentially a slow down in international flights. Do we
see that in the airline stocks today? And can there
be contagion? So the marker I'd be watching is an
escalation in this conflict. If the Strait of horm Moots
would be the red line. If we see any attempt
to close the strait, that hurts Iran itself because it
(25:36):
needs to ship its energy out of there, especially to China,
but it hurts everyone and that would be a big
stagflationary step forward. If it happens. I think probably a
low probability, but you need to keep an eye out
for it with.
Speaker 3 (25:49):
Your work with JP Morgan and of course with Bridgewater.
Back to City Road in London, I'm going to say
there's a conceit that the United States is distant from
all this. There's two oceans in the way. It's in
bred in our culture to say it's their problem, and
their problem is continental Europe and over to the United Kingdom.
With your global work that you've done over the years, Rebecca,
(26:13):
how does this affect Europe and London more so? Now?
To me, they're shockingly close to the Greater Persian Gulf absolutely.
Speaker 8 (26:22):
I mean they rely on oil and energy imports a
lot more than the US. We're self sufficient effectively and energy,
so they're going to be much more vulnerable to that
as well as just trade between the Middle East and Europe.
But I do think the US is more vulnerable than
normal right now because even though the hard data, so
(26:43):
to speak, the economy in the US is moderating but
still solid, you do have this heightened level of uncertainty
among businesses in particular. You're just adding more fuel to
that fire with this. If you want business activity to pause,
this is going to contribute to that.
Speaker 3 (26:59):
Publishing last night, Michael Faroli, JP Morgan models out.
Speaker 2 (27:03):
To Q four Q four of this year, JP.
Speaker 3 (27:06):
Morgan is modeling a sub one percent yep GDP for
that quarter.
Speaker 5 (27:11):
So, Rebecca, given what Thomas just mentioning, they about slow
in growth but not recessionary scenarios, what does that suggest
to you for investors where they should be maybe positioned
in this slower growth world.
Speaker 7 (27:24):
Yeah.
Speaker 8 (27:24):
I mean we've seen this trend already this year, but
I think it continues that large cap stocks that are
more able to weather these storms outperform small caps, which
need that sickleicality, that momentum plus lower rates to really outperform.
So you want to be in large caps, and you
probably want to keep quote unquote barbelling your portfolio in
that both within stocks have the consumer staples, have the
(27:47):
save stocks, but then have some tech to play the
long term AI theme. And if there's no turn in
consumer sentiment and then globally I'm pounding my fist on
the table on this one. Gold keeps going higher.
Speaker 7 (27:58):
Thank you, Tom.
Speaker 8 (28:00):
I've been bullish on gold for a couple of years,
and this is yet another reason, sadly that you want
to keep in that evens up thirty percent year today,
such a pro.
Speaker 3 (28:08):
Gold of thirty six dollars thirty four to thirty eight.
One final question Kindeth Pollock and Ambassador Shapiro published this
morning at the Council and Foreign Relations in a Foreign
Affairs magazine.
Speaker 2 (28:21):
When those fancy people.
Speaker 3 (28:23):
In international relations talk to a market beast like you,
what do they ask you?
Speaker 8 (28:29):
You know, I've really enjoyed being part of the Council
on Foreign Relations to try to tie the policy and
economics with the financial markets, because they all affect each other.
In fact, we had an event yesterday on foreign direct
investment to the United States and what some of the
uncertainty we're living through, what some of the policies could
do to foreign direct investments. So they're thinking about the
(28:50):
policy of Commerce Secretary Lutnx FastTrack proposal. I'm thinking about
if we have less FDI to the US. FDI today
accounts for about eight million jobs and about a quarter
of all US manufacturing jobs. If FDI slows because of
global policy concerns, how does that feed through to our
(29:11):
equity market, to household wealth, to the dollar. So I'm
trying to square that circle at the Council on Foreign
Relations and learning a lot from my colleagues.
Speaker 3 (29:20):
Frankly, Rebecca, thank you so much, Thank you so much
for coming in early this morning. Ms Patterson with the
Console on Foreign Relations as a senior fellow, and of
course uh hear years I should say, with Bridgewater and
with JP Morgan and best in my trust as well.
Speaker 1 (29:41):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. You can also watch us
live every weekday on YouTube and always on the Bloomberg terminal.
Speaker 3 (29:56):
You continue our coverage here of the attacks by Israel
across a wren and usually qualified this morning to speak
as god a Macunda. Professor yale A School of Management,
in his study of the presidency is well, we got
a four hour conversation.
Speaker 2 (30:15):
Coming in here, Goud.
Speaker 3 (30:16):
I mean, we're gonna squeeze it in rather quickly as well.
Secretary of State Rubio follows on from Hamilton, I'm gonna
say Quincy Adams.
Speaker 2 (30:26):
And other worthies of the nineteenth century to Dean Rusk
in others.
Speaker 3 (30:31):
Do we have an operative Secretary of State with an
operative American foreign policy right now?
Speaker 9 (30:37):
It certainly doesn't look that way. The conflict between rubio
statement which disassociated ourselves from the US from the attacks.
Speaker 2 (30:43):
From what I just read, is really noticeable.
Speaker 9 (30:47):
I mean, the Trump administration kind of takes, you know,
like everybody running in different directions as it's operating principle,
But that's really not a great idea when bombs are
going off, and so this might be a time worse
message discipline and actual strategic thinking would be well rewarded.
Speaker 7 (31:02):
Got him.
Speaker 5 (31:02):
I think it seems like President Trump and his administration
move moving towards a peace negotiation in this.
Speaker 7 (31:09):
Part of the world, Yet in Israel wasn't on the
same page. And they went and they acted officially. Here
what does that do for US policy? Now? Where is
our position in that part of the world now?
Speaker 9 (31:20):
Really bad, certainly much worse than it could be. So
let's split this out in two things. One is, this
is just a dramatic statement of the complete collapse of
American influence under the Trump administration, not just in the
Middle East, but particularly in the Middle East. If there
is any country that the United States should be able
to influence at is Israel. And and Trump was very
clear he did not want this happen in the israelis
that hey, we're doing this anyways, So says that people
(31:42):
do not take Trump seriously. But the broader thing is,
with any operation like this, you want to differentiate between
right strategic, operational tactical. So at the operational and the
technical level. This was done with the normal extraordinary skill
we expect from the IDEF in Israeli intelligence, they're really
good at this, and they showed this over and over
again and they they you know, early returns are impressive
(32:02):
in terms of that. Yeah, but this is a strategic catastrophe.
The Trump administration's policy, joined with the net NAH policy
of pulling out of the Iranian nuclear agreement, left Trump
frantically negotiating to try to get an agreement with Iran
that was considerably inferior to the one that he exited. Right,
and the deadline that people aren't talking about yet is
(32:25):
in four months, are the snapback authority, that is, the
authority to reimpose the sanctions that we had that the
Obama administration had coordinated to keep Iran from doing. Right,
that snapback authority goes away, So the ability to get everyone,
essentially everyone in the world who would all agree that
we were going to stop the Iranians from doing this
in four months, that goes away. Does anyone think that
(32:45):
any of the remaining signatories are going to authorize snapback
after this?
Speaker 3 (32:48):
I'm going to take a risk that everyone got him
except your class at Yale everyone has their head spinning.
They can't keep straight what Secretary of State John Carrey did.
They can't keep straight what happened under Bush, the younger
Bush the older. It's a cacophony of diplomacy. And I'm
just going to bring it back to Sadat nineteen sixty seven,
(33:10):
you had the new Non Proliferation Treaty of nineteen sixty eight.
Ken Polyk instructs me, you go to a twenty fifteen agreement.
Is all this multi decade diplomacy just blown to smithereens
this morning.
Speaker 9 (33:25):
Uh, it's been unraveling for a long time. This is
just one more blow to that. And the great fear
I think that everybody has is that Iran will at
this point and will withdrawal from the NPT.
Speaker 2 (33:34):
And make their own chemicals, their own yellow cake, right.
Speaker 9 (33:36):
And wish they've been doing. And let's be very clear,
right when they were under the Iran Nuclear Agreement, which
there were no accusations they had violated, they were enriching
up to a very low threshold. Since we pulled out
of the agreement, they've been enriching up to a threshold
that you only do if you're trying to make nuclear wes.
There's no reason to take me enrich uranium as.
Speaker 2 (33:55):
Much as theyre going. It's the mathematics here, folks.
Speaker 3 (33:57):
On uranium two thirty five is eighty percent is like
being sure my teeth are done correctly with nuclear energy.
But if you go over twenty percent and then you
get up to eighty percent, that's where we get into trouble.
Speaker 9 (34:10):
And so they're very close, essentially in a snario that
we call breakout, where it would not take them very
long at all to go from the uranium they have
to uranium that is that is actually usable in a
nuclear weapon, and from there you then have to go
and they have to deploy it. Right, So there's still
lots of steps between having the uranium in the bomb,
but that is the key step. And so the sort
(34:31):
of orientation of policy that we're going to bluster and
threaten and not work with anyone else has just been
a strategic failure of unbelievable proportions. And now like so,
when we withdrew from the j from the Iron Nuclear
Deal in twenty nineteen, Secretary Pompeo tried to invoke snapback instead.
The Iranians are in violation and we need to have
(34:52):
the sanctions again, and our own allies, the British and French,
were sort of you pulled out of the deal. You
don't get to do that anymore, you do not have
the authority, and they just ignored us.
Speaker 7 (35:02):
So we have.
Speaker 9 (35:02):
Lost all of our leverage for no reason other than
Donald Trump wanted to bluster about how he could make
a better deal than Barack Obama did.
Speaker 7 (35:09):
And he could. So, Okay, where do we go from here?
Speaker 5 (35:12):
If I'm the United States diplomatic community, where do we
go from here? As Marco Ruby fly over to Israel,
I mean, how do we perhaps? Is it even maybe
Donald Trump got elected by saying, hey.
Speaker 7 (35:26):
That's not our problem, Yeah, let them let them fix it.
And I would argue, at least half the country agrees
with him. So is this his policy playing out?
Speaker 2 (35:34):
Yeah?
Speaker 9 (35:35):
I mean the Middle East, it's like it's like the Godfather, right,
Like every time we think we're out, they pull us
back in, and this is just that over and over again.
I do think that there's going to be some to that.
A lot of this is going to be driven basically
by how smart the Iranians are. If I were the Iranians,
I would be like I'm going to I'll launch some drones,
I'll launch the missiles, and then I'll play the victim here, right,
I got I got to ride this out for four months,
(35:57):
and I get to trade with the rest of the
world a much better.
Speaker 2 (36:00):
Four months is not that long.
Speaker 9 (36:01):
And if the Audians are smart enough to say, I
will take the.
Speaker 3 (36:04):
Hit a amount of time, you got to come back
next week. I really I think our audience really wants
to hear this. You know, folks on international relations, we're
trying to look at the market with futures.
Speaker 2 (36:14):
Negative fifty four.
Speaker 3 (36:15):
But this is the extraordinary times for all of you,
whatever your political presentation.
Speaker 2 (36:21):
We welcome all of you on YouTube.
Speaker 3 (36:23):
Subscribe to Bloomberg Podcast. Professor mccuinde, Thank you so much.
Got to mccuinde, professor Eale University and writing.
Speaker 4 (36:30):
For Bloomberk Opinion.
Speaker 1 (36:31):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. You can also listen live
on Amazon Alexa from our flagship New York station, Just
Say Alexa Play Bloomberg eleven thirty joining.
Speaker 3 (36:49):
Us at this moment will be Matt Zetti and Eric Stein.
Mett Zetti with Deutsche Bank. Now they're chief kind of
asstilled that he could be with us this morning.
Speaker 2 (36:59):
I think the worst job on Wall Street this.
Speaker 3 (37:01):
Morning is Brett Ryan, because you're going to turn to
your colleague Brett Ryan and say, we have to blow
up the weekend research report around the cacophony of our
domestic relations. You are a soul of Los Angeles. What
we see within our politics. I believe we have a
parade this weekend and now we have a true war
(37:23):
without question in the levant. What's the Deutsche Bank thrust
within your conference call this morning to publish for Monday.
Speaker 10 (37:32):
Yeah, you know, I think you know, as we think
about the FED and we think about the economy, what
we are seeing now is overlaying another meaningful supply shock
on the economy at a time where I think policymakers,
the FED you certainly would not like to see another
supply shock hitting any economy.
Speaker 2 (37:47):
Does that embed inflation higher? Is that the summary of it?
Speaker 7 (37:50):
It does?
Speaker 10 (37:51):
I mean, it's another one that I think, you know,
the FED would kind of quote unquote like to look through.
But at the same time, we know, especially inflation expectations
are very sense to oil prices and gas prices. You know,
it's at the forefront of consumers. So you know, we'll
see what the University of Michigan says today, but I
think more important will be what it says at the
end of the month and the next month, because the
FED is quite sensitive to inflation expectations, not just universe
(38:13):
to Michigan, but these other measures, and they are all
highly sensitive to oil and gas prices. I think that's
the key consideration for the best just.
Speaker 5 (38:19):
Over the past couple of days, is CPI and a
PPI data to just at least for now and maybe
even looking back a month, inflation is not there, at
least maybe to the levels some people thought.
Speaker 7 (38:30):
Is that was that helpful the last couple days that data.
Speaker 10 (38:33):
I think it is helpful, but I also kind of
want to take a step back, right. I think we
get focused on very short term trends. The last one
or two data points, and certainly the last three data
points for core CPI and core PC I think are
going to look pretty subdued. But the first two months
of the year we're very strong. So if you annulyze
over the first five months of the year for core PC,
we're basically printed two point nine percent. There's a lot
(38:53):
of residual seasonality in the data, and so I think
the FED is probably not going to emphasize one or
two data points. I think they're going to look at
stronger inflation to start the year. They're going to look
at stilly anticipated rise in inflation driven by tariffs and
oil prices ahead, and I would anticipate that their messaging
messaging doesn't really change all that much next week.
Speaker 5 (39:12):
So what are the key data points here do you
think for this economy that you're focusing on again? Now
we have to kind of think about higher energy prices,
perhaps for a longer period than maybe we had initially thought.
What are the key drivers for you that you're looking
at and to get a sense of this economy here.
Speaker 10 (39:26):
I think for the market and for us, it's two things.
One it's the labor market and is that really weakening
materially or not. I think you got a job report
last week that that was resilient in many ways. It
was not overly robust, But when you look at measures
of labor market slack, they're basically stable over the past
six to nine months, the unemployment rate, quits rate U six,
(39:47):
everything that you would look at, but you do see
some creep higher and continuing jobless claims, and that can
be a worry. So that whether or not that continues
is the first data point, and then the second one
is over the next seven months, do we get clear
evidence of the tariff effaccident. I think that'll be a
very important driver of the market.
Speaker 3 (40:02):
Matt Leaztti with US Deutsche Bank. Can we continue here
with conversation linking in economics, finance, investment into as I
said earlier, fractured international relations. In the last five minutes,
the tape turns around a bit, goes the other way,
with the VIX again over twenty futures negative fifty seven,
down futures negative four to twenty five. The VIX now
(40:22):
extends out round it down negative one point two percent.
Brent crewed, the global oil price seven point four percent move,
American oil eight percent move on Brent seventy four dollars
fifty cents.
Speaker 5 (40:37):
Well, Matt, given all the teriff related uncertainty that's been
in the market, the consumer seems to be hanging in
there in terms of spending, and so on.
Speaker 7 (40:47):
How do you view the consumer these days.
Speaker 10 (40:49):
I think from an aggregate perspective, it makes a lot
of sense that they're hanging in there. You know, if
you look at aggregate income growth from last week's job support,
it's up five percent in nominal terms year on year.
With that kind of income growth, it would be surprising
to see the consumer softening materially. The saving rate earlier
this year had actually creeped up to five percent, which
is relatively high compared to what we've been over the
(41:10):
past several months. We got the flow funds data yesterday
about net worth and income that remains in your record
high levels. If you look at kind of liabilities or
debt relative income, taking out the pandemic, we're at the
lowest level since the nineteen nineties. Really, those are all
metrics which from an aggregate perspective would tell you, yes,
there's uncertainty and there's concerns, but the aggregates that kind
(41:32):
of go into the US consumer are all pretty resilient
at the moment.
Speaker 3 (41:34):
But this is our heart of the matter and really
harkens back, folks. It seems ages ago, I think it
was four or five days ago. I'll give the ft credit.
Somebody had the non aggregated consumer spending of America where
the upper fancy people like Lisa Matteo, they're spending over.
Speaker 2 (41:50):
Fifty percent of our income. That's shocking. It used to
be twenty something percent. We're not aggregate America.
Speaker 3 (41:58):
How do you pull off that X exercise on your
Excel spreadsheets?
Speaker 10 (42:02):
Look, you're absolutely right, you know, the aggregate picture does
not give you the distributional picture. And I think one
of the clearest data points that I see from that
is the FED has this shed survey and they go
on and they ask, you know, if you were to
have to finance a four or five hundred dollars expense, how.
Speaker 7 (42:19):
Would you be able to do it?
Speaker 10 (42:20):
And it's you know, roughly half of the population would
have to borrow in order to finance that. And so
I think that is a data point which tells you
that there is clear distributional issues. From the Fed's perspective,
they are worried about the aggregate picture, the labor market
and inflation because they can't really impact the distributional items.
Speaker 7 (42:38):
Fiscal policy can.
Speaker 10 (42:39):
And as we looked forward to this one big beautiful bill,
the distributional assessment of that is that you actually hurt
the bottom part of the income distribution, given what's happening
with medicaid and snap in those items.
Speaker 3 (42:50):
I got to squeeze this in here, Ken Rogoff, in
my Book of the Summer, two thirds of the way
through the book comes to a complete halt as he
goes over the Deutsche Bank researcher David folkerts landou Garber
and Dowley.
Speaker 10 (43:04):
So I've been reading that book in anticipation that this
question would come up.
Speaker 2 (43:07):
Oh did you I did? Yes, look at that, Lisa,
I mean you scaled out period.
Speaker 3 (43:11):
Explain to our audience what David folkerts Lando did in
economics that Ken Rogof thinks is so important.
Speaker 7 (43:17):
Look, Tom, I have to be honest.
Speaker 10 (43:19):
I've come on this program a lot over the past
several years and you often bring this up, and I
don't think I fully realized how influential that paper was
until kind of reading.
Speaker 2 (43:26):
Through Ken, I need to move the euro.
Speaker 3 (43:31):
It's got to go on my resume, continuing, Yeah, what
did DFL do?
Speaker 7 (43:34):
Look at it?
Speaker 10 (43:35):
It's it's what they were calling the Brenton Woods Program
Brentwoods two, and it was, you know, a focus on
global capital flows as being a really critical driver for
bond markets and interest rates and and FX. And it
was a precursor to Ben Bernanke's Global Savings Squad discussions
in the mid two thousands. And the idea was the
(43:57):
US was running these very large trade deficits and current
account deficits and that was leading to a recycling of
funds back into the US economy, particularly in bond markets,
keeping term premia low.
Speaker 2 (44:07):
Right.
Speaker 10 (44:07):
And you know, I think that was I really grew
to appreciate how influential that that research was just because
of time.
Speaker 3 (44:14):
Slam it forward to your colleague George Sarahvellos. Are you
guys modeling a further ten percent decline a US dollar?
Speaker 2 (44:22):
We are?
Speaker 10 (44:22):
And I think if you just kind of bring that forward,
the discussion now is if we are really going to
be bringing down trade deficits over time, there is going
to be less global funds to.
Speaker 7 (44:33):
Flow back into the US.
Speaker 2 (44:34):
Eric stein is head, That's good, okay.
Speaker 10 (44:38):
And so that I mean higher term premia, higher estremia
across the US assets, including bonds.
Speaker 3 (44:43):
Thank you for you get an A plus for studying ROGU.
Speaker 2 (44:46):
Thank you, Matt Lozetti, thank you so much greatly. Appreciated.
Doctor Lozetti is with Deutsche Bank.
Speaker 1 (44:51):
This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each weekday,
seven to ten am Eastern on Bloomberg dot com, the
iHeartRadio app, tune In, and the Bloomberg Business app. You
can also watch us live every weekday on YouTube and
(45:12):
always on the Bloomberg terminal
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Surveillance Podcast. Catch us live weekdays at seven am Eastern
on Apple CarPlay or Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
(00:25):
us live on YouTube.
Speaker 2 (00:27):
I've been anticipating this all morning.
Speaker 3 (00:29):
Tina Fordham is exquisite on our fractured international relations with
Fordham Global Insight, her academics at Columbia among others, and
of course her work over the years of the Eurasia
Group now Fordham Global Foresight.
Speaker 2 (00:44):
Tina, within your wonderful note this morning, you just cut
to the chase.
Speaker 3 (00:48):
Nuclear states in active conflict is not business as usual?
Speaker 2 (00:54):
How should the White House the State Department? Respond?
Speaker 4 (01:00):
Thanks? Tom. I think that we've got to be very
focused on the fact that we're not just looking at
a bold Israeli attack on Iran taking out at least
twenty of its senior personnel at one time, as well
as some attacks on nuclear facilities, but the Ukrainian spiderweb attack,
(01:23):
drone attack deep into Russia, which of course has nuclear capability,
and the teraf War all happening at the same time.
For investors that are having flashbacks to the last round
of Iran Israel tensions in twenty twenty four. We're in
a really different environment. But I didn't answer your question
(01:44):
about what the White House and the State Department should do.
At the moment, it looks like the White House is
trying to give the impression that they were on board
with these attacks, when almost every thing that we're hearing
is that the White House was cautioning Natanaho not to
(02:05):
go for it. So both Natagnyaho and Zelensky and Ukraine,
you know, really not heating Washington's warnings.
Speaker 5 (02:15):
So what does that say about our position in the
world in terms of shaping events that are in our
best interest, Because, as you mentioned in Ukraine and now
most recently in the Middle East, it appears that we
perhaps didn't don't have the influence we once did.
Speaker 4 (02:34):
Well, we don't seem able to deter leaders who are
willing to take advantage of an opportunistic moment, and that's
where we are. There is a perceived power vacuum, and
both Ukraine and Israel, which of course are in very
different conflicts that I don't mean to draw equivalentss between them,
but part of being in a geopolitical risk supercycle is
(02:56):
the notion that the global guardrails which deter more dramatic
escalations are not working, and so that's where we find ourselves.
Having said that, of course, the United States has a
lot of cards. In particular, if Israel wants to you know,
truly a degrade Iran's nuclear facilities, that will require the
(03:22):
involvement of US long range bunk or buster bombs if to.
Speaker 2 (03:28):
Ford him with US.
Speaker 3 (03:29):
And we will continue here light economic data posts when
you will enjoy the Michigan reports that we see here
at ten am this morning. Thank you so much on
YouTube of Fiery live chat over these military and political
moments of the nation.
Speaker 2 (03:45):
Tina, let me ask the question, and you're so wonderfully
a political I think I can get away with.
Speaker 3 (03:50):
This for our audiences and their politics of say the
left and the right, of Democrat and Republican.
Speaker 2 (03:59):
This question is going to come up this weekend.
Speaker 3 (04:02):
Are we at this moment because of the unique policy
and approach of Donald Trump in his second term? Are
we going to get naval gazing into next week into
August into twenty twenty six that says we have this
conflict this war because of President Trump.
Speaker 2 (04:22):
Are we going to get there? Tom?
Speaker 4 (04:26):
I love that question, and you know that I'm not
afraid of being bold. I mean, I think one of
the tragedies of the present moment is that every single
issue that the US is facing is now left coded
and right coded in a way which is very bad
for the world and for dealing with threats. I am
(04:48):
in this role and in this seat because I think
that in order for commerce and financial markets to function,
we need safety and stability. And unfortunately, it's very difficult
to have those convers stations, even on Wall Street anymore,
without going down some kind of rabbit hole of whether
one is defending Ukraine policy or is pro or anti Israel,
(05:11):
when what we really need to be looking at as
investors is the potential for conflicts to move from regional
to systemic, to generate shocks from acid prices or to growth.
And we're not having those conversations anymore.
Speaker 3 (05:24):
Ten fortum, I've stood outside that quiet room at the
White House down in the basement below the Roosevelt Room,
where the President will meet with a National Security Council.
I assume they'll be in that closed you know, the
famous room in all that, I would suggest we have
a fractured process under NSC right now, with Marco Rubio
(05:44):
having was it Paul five jobs, he's mowing the lawn whatever.
What's going to go on at that eleven am meeting today, Tina.
Speaker 4 (05:52):
Fordham, Yes, eleven Am, no rush, you know it will
it will have been something like ten hours since the
bombs first dropped. I think they're going to be playing cleanup,
to be honest, those warnings from the White House to
NATANYAHUO were pretty well known in analysts and intelligence circles.
(06:12):
Now the President has had to come out saying he'd
been warning Iran all along. I think that's probably true.
The prospects for diplomacy now are zero between Israel, Iran,
and the United States. And what we're waiting for again
in terms of the scale of the response is does
Iran have anything left to respond with the one hundred
(06:37):
or sore drones that were launched seem to have been intercepted.
And how much further we're will Israel go. I've seen
some estimates twelve days and then going further. And will
the US actively get involved providing that kind of support
I mentioned. I don't think the White house will want
to go there.
Speaker 5 (06:56):
Tina, You've recently published some work entitled ever going back
to Normal, and that was before the last twelve hours.
What do you mean by we're never going back to normal?
Speaker 4 (07:07):
Well, I put this report together developing an evidence space
to really try to assess whether we are indeed experiencing
more geopolitical risks or not. And this speaks to Tom's
earlier point, which is basically, is this the fault of
the Trump administration. The answer is no, We've seen an
acceleration of geopolitical risk. Events they started to pick up
(07:30):
in the aftermath of the global financial crisis around about
twenty ten, really accelerated, whether measured by trade in tariffs,
or cyber attacks or conflicts. Lots of different variables that
we looked at. But again it's that combination of more guardrails, sorry,
more drivers of geopolitical risk and weaker guard rails, diplomacy norms,
(07:53):
even just you know, the deterrence factor when those things
break down. We're seeing a lot of nations willing to
take chance.
Speaker 3 (08:00):
Tina, Thank you so much, Rave Reviews for the quality
of his conversation on YouTube LiveChat. Thank you so much,
gentlemen and gentle ladies.
Speaker 5 (08:08):
For that.
Speaker 2 (08:08):
Tina Fordham is with Fordham Global Insight.
Speaker 1 (08:17):
You're listening to the Bloomberg Surveillance podcast. Catch us live
weekday afternoons from seven to ten am Eastern Listen on
Applecarplay and Android Auto with the Bloomberg Business app, or
watch us live on YouTube right now.
Speaker 3 (08:30):
We are honored to bring you. As Paul mentioned, a
marine mcmulroy, co founder of the Lobo Institute, the former
Deputy Assistant Secretary of Defense for the Middle East. Make
if I get out a map of the forty to
fifty thousand Americans at some nineteen sites in the Middle East,
with a substantial presence in Kuwait, don de behrein to
(08:51):
cut her over to the United Arab Emirates strapped across
the Persian Gulf.
Speaker 2 (08:56):
What is the risk to American military personnel at this moment?
Speaker 6 (09:03):
Good to be with you all again. Obviously a big
concern around stated essentially that if they were attacked, that
they would go after US personnel and facilities. That would
be a huge strategic mistake. That's one of the reasons
why I think Secretary of Rubio made it clear that
this was a unilateral attack Byron not by the United States,
(09:24):
So they would be drawing the United States into a
conflict that they're already having with Israel. So they would
be fighting a regional superpower, if you will, plus US.
So I don't think they will. Hopefully they will have
better ideas and not do that. But if they did,
I think we have done everything we can to mitigate
(09:44):
that threat, to get people out that don't need to
be there, and of course bring in air and missile
defense systems, which is the most likely way they would
attack us. To defend these positions.
Speaker 3 (09:55):
Mick, I don't want to go back to Eisenhower or
to nineteen seventy ninety either, but the absolute memory of
pros like you is the absolutely stunning war on the
border of Iraq and Iran in the Iran in the
nineteen eighties that colors everything about Persia about Iran. They
(10:18):
don't have that capability for large war like they did
in the middle nineteen eighties, do.
Speaker 6 (10:24):
They They do not, And of course this is after
multiple attacks by Israel on Iran that have been mitigating
their air missile defense systems, their ability to launch cruise missiles,
ballistic missiles and produce them. So this is something I
think Israel took the opportunity to mitigate, not just their
(10:46):
nuclear facilities, let's remember that's what we're talking about, but
they also went after their ballistic missile launch sites, manufacturing centers,
air bases, military bases, and essentially eliminated their entire general
staff Major General Bulgary On down, essentially their joint chiefs
of staff and the entire staff was eliminated, plus most
(11:08):
of their senior nuclear scientists. They took every opportunity with this,
and say it might actually last up to two weeks,
so this might not.
Speaker 7 (11:16):
Be over, Mick.
Speaker 5 (11:18):
Let's talk about timing. Why do you believe Israel acted now?
Speaker 6 (11:23):
There's some speculation they were concerned about the agreement that
the United States in Iran looked like they might be
willing to agree to, which would have been very similar
at least from what we see in reporting as the
twenty fifteen JCPOA, the one that the United States unitedly
withdrew from in twenty eighteen, and something that I think
Israel found to be unacceptable. It would have allowed some
(11:47):
type of richment in Iran to continue. Some would say
that that's why they did it. There might have been intelligence.
I'm not aware of it, but of course because I
don't have access to it, that they were getting closer
to a nuclear weapon and that was the trigger point
for Israel. But certainly I think the United States would
have rather seen a nuclear agreement, a new one that
(12:09):
both parties could agree to oran in the United States,
rather than see this escalate and to it could be
a long term conflict that could continue to escalate nck.
Speaker 5 (12:18):
What does this say about the role of the United
States in this region at this particular time. We know
that the Trump administration was pushing for a diplomatic resolution and
maybe a nuclear deal, and there were planned talks this
weekend and then this happened, So what does that say
about the US role here?
Speaker 6 (12:36):
So I agree, I agree with the premise that this
was something the US did not want to see. They
wanted to see a nuclear agreement that would have been
acceptable to US, perhaps a slightly better for US than
the twenty fifteen So politically.
Speaker 2 (12:50):
It would have it would have landed well.
Speaker 6 (12:53):
But that's unlikely to happen now. The Iman meetings that
were set for Sunday or completely off and there's literally
no chance that we're going to get back to that
place and back around made it clear that if their
facilities would ever attacked, that they would spend all of
their effort trying to get to a nuclear weapon. So
that's another concern that we have. The United States, of course,
does not want to see another war start in the
(13:14):
Middle East. That's not in anybody's interest, certainly not the
countries of the Middle East. So hopefully we can play
a role that de escalates this as quickly as possible.
One way to do so, of course, is to protect
Israel if they see a large amount of incoming missiles
and drones like they saw back in October.
Speaker 2 (13:32):
We welcome all of.
Speaker 3 (13:33):
You across the nation with us now. McMurray. Rebecca Patterson
will be with us here in a bit again. Our
team led by Ethan Bronner in Tel Aviv monitoring each
moment of this. We've had reports recently of continued attacks.
We'll have to get more verification of that. Mcmurroy, I
have a presidential tweet in front of me. It is
(13:54):
too long to waste time with precious time with I
should say, but to end the presidential tweet, Iran must
make a deal before there is nothing left and say
what was once known as the Iranian Empire. No more death,
no more destruction, all caps. Just do it before it's
too late. God bless you all. With great respect from
(14:17):
the Arc of Dwight David Eisenhower out to President Obama.
Speaker 2 (14:22):
Mick Molroy.
Speaker 3 (14:23):
Do we have a coherent Middle East policy at this moment?
Speaker 6 (14:30):
It does not appear that we are actually running the
show when it comes to this, and less one believes
that this was to force around to the table. I
think that's very unlikely that they. I mean, this was
a complete disaster for Iran. They have been shown that
they have almost no ability to defend themselves. For them
(14:51):
to then come to the table and come to an
agreement with the US would be the ultimate humiliation. They
will have to respond to this attack, and they will
likely not want to have any discussions going forward. They
have made it clear that they're now will try to
get to a nuclear weapon. The US, of course, will
always play a key and vital part of the Middle East.
(15:13):
It is in our own interest to do so, and
I think ultimately if we can get this back on track,
it would be in our interests as well as Iran
and all that countries in the region. Do have a
diplomatic resolution, and if that means a new nuclear agreement,
that would be good. It's very difficult to see how
we can get there from here right now.
Speaker 5 (15:31):
Mick, Within Iran, do we have a sense of You
mentioned the senior leadership was dealt a big, big blow
in this attack here. How about just the leadership, the
political leadership in Iran? How stable is that given you know,
this really a surprising attack here.
Speaker 6 (15:48):
Well, this is one of the reasons why I think
Prime Minister Nan Yahoo came out and said this was
the time, This was the time for the Iranian people
to rise up against the Iranian regime which has done
nothing to help them because of their near continuous desire
to be at constant war with their neighbors. Of course,
they support all the proxies that continuously attack not only
(16:10):
Israel but the United States. Up until nine to eleven,
Hesbolo was the biggest killer of Americans, the biggest terrorist
organization killer of Americans. So they caused this, and now
they've come home to you know, to roost, so to speak.
Whether they can change that in or on this this
is their opportunity. The leadership has been decimated. They are
(16:31):
obviously in very direk the economic situation will have to
see it has to be organic, I think for it
to take take hold. But they are in a very
bad place and we have to see whether they have
the capacity istry around that is unclear.
Speaker 3 (16:46):
Make We hope to speak to you next week with
the Lobo Institute and of course his service to the
Pentagon and the United States Marines. Mcmulroy starts us off
this morning. Futures negative sixty or the vix out, two
big figures as Paul mentioned over twenty twenty point one
five brent crewed seventy four dollars seventy seven cents up
per barrel.
Speaker 2 (17:06):
Too short.
Speaker 3 (17:06):
A visit this morning with Rebecca Patterson with a consul
and foreign relations, a student of the Litmus paper of
the system the currency.
Speaker 2 (17:16):
This is an upset.
Speaker 3 (17:18):
This is a continued cacophony of events that we see.
We clearly have a threatened dollar down ten percent. How
does this add to the burden of a weaker dollar.
Speaker 8 (17:33):
I think what we're seeing overnight in this morning is
some very modest dollar strength the DXY Dollar Index modest
and I expected it right, and you're seeing a bigger
reaction in gold. You're seeing a reaction in the Swiss
frank so other quote unquote safe havens, some fall in
ten year bond yields, although not much. Again, so I
(17:55):
think even though we are getting the typical flight to
safety reaction in market that we've seen sadly too many
times over our careers, the fact that the dollar rally
is so muted, I think tom speaks to what's happening
with the dollar more broadly.
Speaker 2 (18:10):
Now, thank you.
Speaker 5 (18:11):
So, Global Wall Street waking up to this news just
another issue. I'm not going to call it a headwind
per se, but another issue for Global Wall Strate and
global investors to deal with. How to historically, how have
you kind of viewed some of these global tensions and
how it informs your investment outlook.
Speaker 8 (18:30):
Yeah, I mean, as horrible as these events are from
a humanitarian point of view, I think for financial markets
you always go back to what is going to be
the global or regional economic impact, and in this case,
it's looking at what will hire crude oil prices and
gas natural gas prices due to the global economy. What
(18:52):
will potentially a slowdown in international flights. Do we see
that in the airline stocks today and can there be
contagious So the marker I'd be watching is an escalation
in this conflict. If the Strait of horn Moots would
be the red line. If we see any attempt to
close the strait. That hurts Iran itself because it needs
(19:13):
to ship its energy out of there, especially to China,
but it hurts everyone and that would be a big
stagflationary step forward if it happens. I think probably a
low probability, but you need to keep an eye out
for it.
Speaker 3 (19:25):
With your work with JPM Morgan and of course with Bridgewater.
Back to City Road in London, I'm going to say
there's a conceit that the United States is distant from
all this. There's two oceans in the way. It's in
bred in our culture to say it's their problem and
their problem is continental Europe and over to the United Kingdom.
(19:46):
With your global work that you've done over the years, Rebecca,
how does this affect Europe? In London more so? Now?
To me, they're shockingly close to the Greater Persian Gulf absolutely.
Speaker 8 (19:59):
I mean they rely on oil and energy imports a
lot more than the US. We're self sufficient effectively and energy,
So they're going to be much more vulnerable to that
as well as just trade between the Middle East and Europe.
But I do think the US is more vulnerable than
normal right now because even though the hard data, so
(20:20):
to speak, the economy in the US is moderating but
still solid, you do have this heightened level of uncertainty
among businesses in particular. You're just adding more fuel to
that fire with this. If you want business activity to pause,
this is going to contribute to that.
Speaker 3 (20:36):
Paul publishing last night, Michael Ferole JP Morgan models out
to Q four Q four of this year. JP Morgan
is modeling a sub one percent GDP for that quarter.
Speaker 5 (20:48):
So, Rebecca, given what Thomas just mentioning that about slow
in growth but not recessionary scenarios, what does that suggest
to you for investors where they should be maybe position
in this slower growth world.
Speaker 7 (21:01):
Yeah.
Speaker 8 (21:01):
I mean we've seen this trend already this year, but
I think it continues that large cap stocks that are
more able to weather these storms outperform small caps, which
need that sick locality, that momentum plus lower rates to
really outperform. So you want to be in large caps,
and you probably want to keep quote unquote barbelling your
portfolio in that both within stocks have the consumer staples,
(21:23):
have the save stocks, but then have some tech to
play the long term AI theme. And if there's no
turn in consumer sentiment and then globally, I'm pounding my
fist on the table on this one. Gold keeps going higher.
Speaker 7 (21:35):
Thank you, Tom.
Speaker 8 (21:37):
I've been bullish on gold for a couple of years,
and this is yet another reason, sadly that you want
to keep in that even it's up thirty percent year today.
Speaker 3 (21:45):
Such a pro gold up thirty six dollars thirty four
to thirty eight. One final question Kindeth Pollock and Ambassador
Shapiro published this morning at the Console and Foreign Relations
in Foreign Affairs magazine. When those fancy people in international
relations talk to a market.
Speaker 2 (22:03):
Beast like you, what do they ask you?
Speaker 8 (22:06):
You know, I've really enjoyed being part of the Council
on Foreign Relations to try to tie the policy and
economics with the financial markets because they all affect each other.
In fact, we had an event yesterday on foreign direct
investment to the United States and what some of the
uncertainty we're living through, what some of the policies could
do to foreign direct investments so they're thinking about the
(22:27):
policy of Commerce Secretary Lutenux FastTrack proposal. I'm thinking about
if we have less FDI to the US. FDI today
accounts for about eight million jobs and about a quarter
of all US manufacturing jobs. If FDI slows because of
global policy concerns, how does that feed through to our
(22:48):
equity market, to household wealth, to the dollar. So I'm
trying to square that circle at the Council on Foreign
Relations and learning a lot from my colleagues.
Speaker 3 (22:58):
Frankly, Rebecca, thank you so much, Thank you, thank you
so much for coming in early this morning. Ms Patterson
with the Console and Foreign Relations as a senior fellow,
and of course heard years i should say, with Bridgewater
and with JP Morgan and bestmer Trust as well.
Speaker 1 (23:12):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Apple Corplay and Android
Auto with the Bloomberg Business app. You can also listen
live on Amazon Alexa from our flagship New York station,
Just say Alexa play Bloomberg eleven thirty.
Speaker 3 (23:29):
To short A visit this morning with Rebecca Patterson with
the Consul and Foreign Relations, a student of the litmus
paper of the system the currency. This is an upset.
This is a continued cacophony of events that we see.
We clearly have a threatened dollar down ten percent. How
(23:51):
does this add to the burden of a weeker dollar.
Speaker 8 (23:56):
I think what we're seeing overnight in this morning is
some very much oddest dollar strength. The DXY Dollar index
modest and I expected it right. And you're seeing a
bigger reaction in gold. You're seeing a reaction in the
Swiss frank so other quote unquote safe havens, some fall
in ten year bond yields, although not much. Again, so
(24:18):
I think even though we are getting the typical flight
to safety reaction in markets that we've seen sadly too
many times over our careers, the fact that the dollar
rally is so muted, I think tom speaks to what's
happening with the dollar more broadly.
Speaker 5 (24:33):
Now, thank you so, Global Wall Street waking up to
this news just another issue. I'm not gonna call it
a headwind per se, but another issue for Global Wall
Strate and global investors to deal with.
Speaker 7 (24:46):
How historically, how have you kind.
Speaker 5 (24:47):
Of viewed some of these global tensions and how it
informs your investment outlook.
Speaker 8 (24:53):
Yeah, I mean, as horrible as these events are from
a humanitarian point of view, I think for financial markets
you always go back to what is going to be
the global or regional economic impact, and in this case,
it's looking at what will hire crude oil prices and
gas natural gas prices due to the global economy. What
(25:15):
will potentially a slow down in international flights. Do we
see that in the airline stocks today? And can there
be contagion? So the marker I'd be watching is an
escalation in this conflict. If the Strait of horm Moots
would be the red line. If we see any attempt
to close the strait, that hurts Iran itself because it
(25:36):
needs to ship its energy out of there, especially to China,
but it hurts everyone and that would be a big
stagflationary step forward. If it happens. I think probably a
low probability, but you need to keep an eye out
for it with.
Speaker 3 (25:49):
Your work with JP Morgan and of course with Bridgewater.
Back to City Road in London, I'm going to say
there's a conceit that the United States is distant from
all this. There's two oceans in the way. It's in
bred in our culture to say it's their problem, and
their problem is continental Europe and over to the United Kingdom.
With your global work that you've done over the years, Rebecca,
(26:13):
how does this affect Europe and London more so? Now?
To me, they're shockingly close to the Greater Persian Gulf absolutely.
Speaker 8 (26:22):
I mean they rely on oil and energy imports a
lot more than the US. We're self sufficient effectively and energy,
so they're going to be much more vulnerable to that
as well as just trade between the Middle East and Europe.
But I do think the US is more vulnerable than
normal right now because even though the hard data, so
(26:43):
to speak, the economy in the US is moderating but
still solid, you do have this heightened level of uncertainty
among businesses in particular. You're just adding more fuel to
that fire with this. If you want business activity to pause,
this is going to contribute to that.
Speaker 3 (26:59):
Publishing last night, Michael Faroli, JP Morgan models out.
Speaker 2 (27:03):
To Q four Q four of this year, JP.
Speaker 3 (27:06):
Morgan is modeling a sub one percent yep GDP for
that quarter.
Speaker 5 (27:11):
So, Rebecca, given what Thomas just mentioning, they about slow
in growth but not recessionary scenarios, what does that suggest
to you for investors where they should be maybe positioned
in this slower growth world.
Speaker 7 (27:24):
Yeah.
Speaker 8 (27:24):
I mean we've seen this trend already this year, but
I think it continues that large cap stocks that are
more able to weather these storms outperform small caps, which
need that sickleicality, that momentum plus lower rates to really outperform.
So you want to be in large caps, and you
probably want to keep quote unquote barbelling your portfolio in
that both within stocks have the consumer staples, have the
(27:47):
save stocks, but then have some tech to play the
long term AI theme. And if there's no turn in
consumer sentiment and then globally I'm pounding my fist on
the table on this one. Gold keeps going higher.
Speaker 7 (27:58):
Thank you, Tom.
Speaker 8 (28:00):
I've been bullish on gold for a couple of years,
and this is yet another reason, sadly that you want
to keep in that evens up thirty percent year today,
such a pro.
Speaker 3 (28:08):
Gold of thirty six dollars thirty four to thirty eight.
One final question Kindeth Pollock and Ambassador Shapiro published this
morning at the Council and Foreign Relations in a Foreign
Affairs magazine.
Speaker 2 (28:21):
When those fancy people.
Speaker 3 (28:23):
In international relations talk to a market beast like you,
what do they ask you?
Speaker 8 (28:29):
You know, I've really enjoyed being part of the Council
on Foreign Relations to try to tie the policy and
economics with the financial markets, because they all affect each other.
In fact, we had an event yesterday on foreign direct
investment to the United States and what some of the
uncertainty we're living through, what some of the policies could
do to foreign direct investments. So they're thinking about the
(28:50):
policy of Commerce Secretary Lutnx FastTrack proposal. I'm thinking about
if we have less FDI to the US. FDI today
accounts for about eight million jobs and about a quarter
of all US manufacturing jobs. If FDI slows because of
global policy concerns, how does that feed through to our
(29:11):
equity market, to household wealth, to the dollar. So I'm
trying to square that circle at the Council on Foreign
Relations and learning a lot from my colleagues.
Speaker 3 (29:20):
Frankly, Rebecca, thank you so much, Thank you so much
for coming in early this morning. Ms Patterson with the
Console on Foreign Relations as a senior fellow, and of
course uh hear years I should say, with Bridgewater and
with JP Morgan and best in my trust as well.
Speaker 1 (29:41):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. You can also watch us
live every weekday on YouTube and always on the Bloomberg terminal.
Speaker 3 (29:56):
You continue our coverage here of the attacks by Israel
across a wren and usually qualified this morning to speak
as god a Macunda. Professor yale A School of Management,
in his study of the presidency is well, we got
a four hour conversation.
Speaker 2 (30:15):
Coming in here, Goud.
Speaker 3 (30:16):
I mean, we're gonna squeeze it in rather quickly as well.
Secretary of State Rubio follows on from Hamilton, I'm gonna
say Quincy Adams.
Speaker 2 (30:26):
And other worthies of the nineteenth century to Dean Rusk
in others.
Speaker 3 (30:31):
Do we have an operative Secretary of State with an
operative American foreign policy right now?
Speaker 9 (30:37):
It certainly doesn't look that way. The conflict between rubio
statement which disassociated ourselves from the US from the attacks.
Speaker 2 (30:43):
From what I just read, is really noticeable.
Speaker 9 (30:47):
I mean, the Trump administration kind of takes, you know,
like everybody running in different directions as it's operating principle,
But that's really not a great idea when bombs are
going off, and so this might be a time worse
message discipline and actual strategic thinking would be well rewarded.
Speaker 7 (31:02):
Got him.
Speaker 5 (31:02):
I think it seems like President Trump and his administration
move moving towards a peace negotiation in this.
Speaker 7 (31:09):
Part of the world, Yet in Israel wasn't on the
same page. And they went and they acted officially. Here
what does that do for US policy? Now? Where is
our position in that part of the world now?
Speaker 9 (31:20):
Really bad, certainly much worse than it could be. So
let's split this out in two things. One is, this
is just a dramatic statement of the complete collapse of
American influence under the Trump administration, not just in the
Middle East, but particularly in the Middle East. If there
is any country that the United States should be able
to influence at is Israel. And and Trump was very
clear he did not want this happen in the israelis
that hey, we're doing this anyways, So says that people
(31:42):
do not take Trump seriously. But the broader thing is,
with any operation like this, you want to differentiate between
right strategic, operational tactical. So at the operational and the
technical level. This was done with the normal extraordinary skill
we expect from the IDEF in Israeli intelligence, they're really
good at this, and they showed this over and over
again and they they you know, early returns are impressive
(32:02):
in terms of that. Yeah, but this is a strategic catastrophe.
The Trump administration's policy, joined with the net NAH policy
of pulling out of the Iranian nuclear agreement, left Trump
frantically negotiating to try to get an agreement with Iran
that was considerably inferior to the one that he exited. Right,
and the deadline that people aren't talking about yet is
(32:25):
in four months, are the snapback authority, that is, the
authority to reimpose the sanctions that we had that the
Obama administration had coordinated to keep Iran from doing. Right,
that snapback authority goes away, So the ability to get everyone,
essentially everyone in the world who would all agree that
we were going to stop the Iranians from doing this
in four months, that goes away. Does anyone think that
(32:45):
any of the remaining signatories are going to authorize snapback
after this?
Speaker 3 (32:48):
I'm going to take a risk that everyone got him
except your class at Yale everyone has their head spinning.
They can't keep straight what Secretary of State John Carrey did.
They can't keep straight what happened under Bush, the younger
Bush the older. It's a cacophony of diplomacy. And I'm
just going to bring it back to Sadat nineteen sixty seven,
(33:10):
you had the new Non Proliferation Treaty of nineteen sixty eight.
Ken Polyk instructs me, you go to a twenty fifteen agreement.
Is all this multi decade diplomacy just blown to smithereens
this morning.
Speaker 9 (33:25):
Uh, it's been unraveling for a long time. This is
just one more blow to that. And the great fear
I think that everybody has is that Iran will at
this point and will withdrawal from the NPT.
Speaker 2 (33:34):
And make their own chemicals, their own yellow cake, right.
Speaker 9 (33:36):
And wish they've been doing. And let's be very clear,
right when they were under the Iran Nuclear Agreement, which
there were no accusations they had violated, they were enriching
up to a very low threshold. Since we pulled out
of the agreement, they've been enriching up to a threshold
that you only do if you're trying to make nuclear wes.
There's no reason to take me enrich uranium as.
Speaker 2 (33:55):
Much as theyre going. It's the mathematics here, folks.
Speaker 3 (33:57):
On uranium two thirty five is eighty percent is like
being sure my teeth are done correctly with nuclear energy.
But if you go over twenty percent and then you
get up to eighty percent, that's where we get into trouble.
Speaker 9 (34:10):
And so they're very close, essentially in a snario that
we call breakout, where it would not take them very
long at all to go from the uranium they have
to uranium that is that is actually usable in a
nuclear weapon, and from there you then have to go
and they have to deploy it. Right, So there's still
lots of steps between having the uranium in the bomb,
but that is the key step. And so the sort
(34:31):
of orientation of policy that we're going to bluster and
threaten and not work with anyone else has just been
a strategic failure of unbelievable proportions. And now like so,
when we withdrew from the j from the Iron Nuclear
Deal in twenty nineteen, Secretary Pompeo tried to invoke snapback instead.
The Iranians are in violation and we need to have
(34:52):
the sanctions again, and our own allies, the British and French,
were sort of you pulled out of the deal. You
don't get to do that anymore, you do not have
the authority, and they just ignored us.
Speaker 7 (35:02):
So we have.
Speaker 9 (35:02):
Lost all of our leverage for no reason other than
Donald Trump wanted to bluster about how he could make
a better deal than Barack Obama did.
Speaker 7 (35:09):
And he could. So, Okay, where do we go from here?
Speaker 5 (35:12):
If I'm the United States diplomatic community, where do we
go from here? As Marco Ruby fly over to Israel,
I mean, how do we perhaps? Is it even maybe
Donald Trump got elected by saying, hey.
Speaker 7 (35:26):
That's not our problem, Yeah, let them let them fix it.
And I would argue, at least half the country agrees
with him. So is this his policy playing out?
Speaker 2 (35:34):
Yeah?
Speaker 9 (35:35):
I mean the Middle East, it's like it's like the Godfather, right,
Like every time we think we're out, they pull us
back in, and this is just that over and over again.
I do think that there's going to be some to that.
A lot of this is going to be driven basically
by how smart the Iranians are. If I were the Iranians,
I would be like I'm going to I'll launch some drones,
I'll launch the missiles, and then I'll play the victim here, right,
I got I got to ride this out for four months,
(35:57):
and I get to trade with the rest of the
world a much better.
Speaker 2 (36:00):
Four months is not that long.
Speaker 9 (36:01):
And if the Audians are smart enough to say, I
will take the.
Speaker 3 (36:04):
Hit a amount of time, you got to come back
next week. I really I think our audience really wants
to hear this. You know, folks on international relations, we're
trying to look at the market with futures.
Speaker 2 (36:14):
Negative fifty four.
Speaker 3 (36:15):
But this is the extraordinary times for all of you,
whatever your political presentation.
Speaker 2 (36:21):
We welcome all of you on YouTube.
Speaker 3 (36:23):
Subscribe to Bloomberg Podcast. Professor mccuinde, Thank you so much.
Got to mccuinde, professor Eale University and writing.
Speaker 4 (36:30):
For Bloomberk Opinion.
Speaker 1 (36:31):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. You can also listen live
on Amazon Alexa from our flagship New York station, Just
Say Alexa Play Bloomberg eleven thirty joining.
Speaker 3 (36:49):
Us at this moment will be Matt Zetti and Eric Stein.
Mett Zetti with Deutsche Bank. Now they're chief kind of
asstilled that he could be with us this morning.
Speaker 2 (36:59):
I think the worst job on Wall Street this.
Speaker 3 (37:01):
Morning is Brett Ryan, because you're going to turn to
your colleague Brett Ryan and say, we have to blow
up the weekend research report around the cacophony of our
domestic relations. You are a soul of Los Angeles. What
we see within our politics. I believe we have a
parade this weekend and now we have a true war
(37:23):
without question in the levant. What's the Deutsche Bank thrust
within your conference call this morning to publish for Monday.
Speaker 10 (37:32):
Yeah, you know, I think you know, as we think
about the FED and we think about the economy, what
we are seeing now is overlaying another meaningful supply shock
on the economy at a time where I think policymakers,
the FED you certainly would not like to see another
supply shock hitting any economy.
Speaker 2 (37:47):
Does that embed inflation higher? Is that the summary of it?
Speaker 7 (37:50):
It does?
Speaker 10 (37:51):
I mean, it's another one that I think, you know,
the FED would kind of quote unquote like to look through.
But at the same time, we know, especially inflation expectations
are very sense to oil prices and gas prices. You know,
it's at the forefront of consumers. So you know, we'll
see what the University of Michigan says today, but I
think more important will be what it says at the
end of the month and the next month, because the
FED is quite sensitive to inflation expectations, not just universe
(38:13):
to Michigan, but these other measures, and they are all
highly sensitive to oil and gas prices. I think that's
the key consideration for the best just.
Speaker 5 (38:19):
Over the past couple of days, is CPI and a
PPI data to just at least for now and maybe
even looking back a month, inflation is not there, at
least maybe to the levels some people thought.
Speaker 7 (38:30):
Is that was that helpful the last couple days that data.
Speaker 10 (38:33):
I think it is helpful, but I also kind of
want to take a step back, right. I think we
get focused on very short term trends. The last one
or two data points, and certainly the last three data
points for core CPI and core PC I think are
going to look pretty subdued. But the first two months
of the year we're very strong. So if you annulyze
over the first five months of the year for core PC,
we're basically printed two point nine percent. There's a lot
(38:53):
of residual seasonality in the data, and so I think
the FED is probably not going to emphasize one or
two data points. I think they're going to look at
stronger inflation to start the year. They're going to look
at stilly anticipated rise in inflation driven by tariffs and
oil prices ahead, and I would anticipate that their messaging
messaging doesn't really change all that much next week.
Speaker 5 (39:12):
So what are the key data points here do you
think for this economy that you're focusing on again? Now
we have to kind of think about higher energy prices,
perhaps for a longer period than maybe we had initially thought.
What are the key drivers for you that you're looking
at and to get a sense of this economy here.
Speaker 10 (39:26):
I think for the market and for us, it's two things.
One it's the labor market and is that really weakening
materially or not. I think you got a job report
last week that that was resilient in many ways. It
was not overly robust, But when you look at measures
of labor market slack, they're basically stable over the past
six to nine months, the unemployment rate, quits rate U six,
(39:47):
everything that you would look at, but you do see
some creep higher and continuing jobless claims, and that can
be a worry. So that whether or not that continues
is the first data point, and then the second one
is over the next seven months, do we get clear
evidence of the tariff effaccident. I think that'll be a
very important driver of the market.
Speaker 3 (40:02):
Matt Leaztti with US Deutsche Bank. Can we continue here
with conversation linking in economics, finance, investment into as I
said earlier, fractured international relations. In the last five minutes,
the tape turns around a bit, goes the other way,
with the VIX again over twenty futures negative fifty seven,
down futures negative four to twenty five. The VIX now
(40:22):
extends out round it down negative one point two percent.
Brent crewed, the global oil price seven point four percent move,
American oil eight percent move on Brent seventy four dollars
fifty cents.
Speaker 5 (40:37):
Well, Matt, given all the teriff related uncertainty that's been
in the market, the consumer seems to be hanging in
there in terms of spending, and so on.
Speaker 7 (40:47):
How do you view the consumer these days.
Speaker 10 (40:49):
I think from an aggregate perspective, it makes a lot
of sense that they're hanging in there. You know, if
you look at aggregate income growth from last week's job support,
it's up five percent in nominal terms year on year.
With that kind of income growth, it would be surprising
to see the consumer softening materially. The saving rate earlier
this year had actually creeped up to five percent, which
is relatively high compared to what we've been over the
(41:10):
past several months. We got the flow funds data yesterday
about net worth and income that remains in your record
high levels. If you look at kind of liabilities or
debt relative income, taking out the pandemic, we're at the
lowest level since the nineteen nineties. Really, those are all
metrics which from an aggregate perspective would tell you, yes,
there's uncertainty and there's concerns, but the aggregates that kind
(41:32):
of go into the US consumer are all pretty resilient
at the moment.
Speaker 3 (41:34):
But this is our heart of the matter and really
harkens back, folks. It seems ages ago, I think it
was four or five days ago. I'll give the ft credit.
Somebody had the non aggregated consumer spending of America where
the upper fancy people like Lisa Matteo, they're spending over.
Speaker 2 (41:50):
Fifty percent of our income. That's shocking. It used to
be twenty something percent. We're not aggregate America.
Speaker 3 (41:58):
How do you pull off that X exercise on your
Excel spreadsheets?
Speaker 10 (42:02):
Look, you're absolutely right, you know, the aggregate picture does
not give you the distributional picture. And I think one
of the clearest data points that I see from that
is the FED has this shed survey and they go
on and they ask, you know, if you were to
have to finance a four or five hundred dollars expense, how.
Speaker 7 (42:19):
Would you be able to do it?
Speaker 10 (42:20):
And it's you know, roughly half of the population would
have to borrow in order to finance that. And so
I think that is a data point which tells you
that there is clear distributional issues. From the Fed's perspective,
they are worried about the aggregate picture, the labor market
and inflation because they can't really impact the distributional items.
Speaker 7 (42:38):
Fiscal policy can.
Speaker 10 (42:39):
And as we looked forward to this one big beautiful bill,
the distributional assessment of that is that you actually hurt
the bottom part of the income distribution, given what's happening
with medicaid and snap in those items.
Speaker 3 (42:50):
I got to squeeze this in here, Ken Rogoff, in
my Book of the Summer, two thirds of the way
through the book comes to a complete halt as he
goes over the Deutsche Bank researcher David folkerts landou Garber
and Dowley.
Speaker 10 (43:04):
So I've been reading that book in anticipation that this
question would come up.
Speaker 2 (43:07):
Oh did you I did? Yes, look at that, Lisa,
I mean you scaled out period.
Speaker 3 (43:11):
Explain to our audience what David folkerts Lando did in
economics that Ken Rogof thinks is so important.
Speaker 7 (43:17):
Look, Tom, I have to be honest.
Speaker 10 (43:19):
I've come on this program a lot over the past
several years and you often bring this up, and I
don't think I fully realized how influential that paper was
until kind of reading.
Speaker 2 (43:26):
Through Ken, I need to move the euro.
Speaker 3 (43:31):
It's got to go on my resume, continuing, Yeah, what
did DFL do?
Speaker 7 (43:34):
Look at it?
Speaker 10 (43:35):
It's it's what they were calling the Brenton Woods Program
Brentwoods two, and it was, you know, a focus on
global capital flows as being a really critical driver for
bond markets and interest rates and and FX. And it
was a precursor to Ben Bernanke's Global Savings Squad discussions
in the mid two thousands. And the idea was the
(43:57):
US was running these very large trade deficits and current
account deficits and that was leading to a recycling of
funds back into the US economy, particularly in bond markets,
keeping term premia low.
Speaker 2 (44:07):
Right.
Speaker 10 (44:07):
And you know, I think that was I really grew
to appreciate how influential that that research was just because
of time.
Speaker 3 (44:14):
Slam it forward to your colleague George Sarahvellos. Are you
guys modeling a further ten percent decline a US dollar?
Speaker 2 (44:22):
We are?
Speaker 10 (44:22):
And I think if you just kind of bring that forward,
the discussion now is if we are really going to
be bringing down trade deficits over time, there is going
to be less global funds to.
Speaker 7 (44:33):
Flow back into the US.
Speaker 2 (44:34):
Eric stein is head, That's good, okay.
Speaker 10 (44:38):
And so that I mean higher term premia, higher estremia
across the US assets, including bonds.
Speaker 3 (44:43):
Thank you for you get an A plus for studying ROGU.
Speaker 2 (44:46):
Thank you, Matt Lozetti, thank you so much greatly. Appreciated.
Doctor Lozetti is with Deutsche Bank.
Speaker 1 (44:51):
This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each weekday,
seven to ten am Eastern on Bloomberg dot com, the
iHeartRadio app, tune In, and the Bloomberg Business app. You
can also watch us live every weekday on YouTube and
(45:12):
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