This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
Well, our next guest is former Deputy Assistant Secretary of Defense, a retired CIA officer, and a retired US Marine reservist, having served for two decades. It's both a commissioned and enlisted Marine Carol. He's also the co founder of the Lobo Institute. It's an organization that, in its own words, quote, advises consults and teaches on current and future conflicts, how to end conflicts and prevent their recurrence. I not to help those who've been most effective.
Very pleased to have with us. Mick mulroy on Zoom from Montana. Mick, nice to have you here with Tim and myself. So many questions I ran, what do they know? USA Toururhan, Russia maybe looking to distract, you know, the focus off Ukraine. There's so many things being floated China. President g not addressing what happened in terms of the conflict. If you were back at the Cia. What are the scenarios that you would be coming up with for President Biden and the US national security teams.
So good to be with you all. There's many issues to be addressed. Of course, this was an intelligence failure, predominantly by the Israelis, but also quite frankly by the United States and other regional actors, and that does have to be addressed, but it's not the most pressing right now. We'd be talking about the hostages. We of course have responsibility for American hostages. They are it looks like up to one hundred many of them who are at Gaza
right now. There are reports that they are in tunnels and the tunnels are wired, so a traditional hostage rescue would be exceptionally difficult. And I think we're going to have to look at our partners in the region Egypt, Katar that have some kind of leverage over Amas to try to recover all the hostages, of course, including the Americans. So that's one effort I think that we would need to look at. The other effort we need to look at is just how involved Iran was in this operation.
There's many indicators it was a very complex operation. There was technical devices that brought down the communications in Israel. Obviously, the weaponry and the equipment does indicate that Iran was involved.
There's also been reporting that they were involved. But I think the IC needs to make a determination of just what their level of involvement is because that would go toward potentially freezing the six billion dollars that we just negotiated, and then of course what to be done against Iran, if anything, if they were directly responsible for this.
Well, let's start with the hostage as part of this, because hostages have long been a part of I don't want to say relations, but they've long been a part of the skirmishes between Palestinians and Israelis, namely on the Palestinian side. But prisoner swaps have often heard, sometimes after years of holding hostages. But one hundred and fifty hostages, Mick, this is a huge, huge number. What are the what is Hamas looking for with holding these people hostage?
It is definitely a huge number, and the complexity of that from a military toile recovery would be enormous on top of all the other things I already mentioned. So I think what are they trying to get from that? They're probably going to use hostages as human shields. So every place that they think the Israelis are likely to strike and are striking right now, there may be a hostage. Unfortunately, in those locations they're going to use them for bargaining tools.
They've already announced that they're going to start executing a hostage every hour on the hour. That would put a lot of pressure on Israel to mitigate what is coming, which is likely a ground invasion into Gaza. They're going to use them to try to recover their own that are held inside Israel Hamas prisoners, for example, to try to recover them. They're going to use them. Unfortunately, all against the law of armed conflict in every international protocol.
Most of them are civilians, but obviously Hamas does not care about that.
Nick.
I do wonder what you see as the biggest concern and risk for the world right now as we watch this. It's very easy, I think sometimes unfortunately for folks who are not in it. We just talked with our Ethan Brawner, who is in Tel Aviv. He's our Israel Bureau chief
and so is hearing it, seeing it firsthand. But the world has to be concerned about increasingly all of these geopolitical events, whether it's Ukraine or what's going on in Israel right now, what do you see is the biggest risk right now?
So I think the biggest risk regarding this conflict is that Iran decides to engage all of its proxies to come at every different angle into Israel. So if they initiate Lebanese Heslo for example, or they just initiate themselves, they have about one hundred and fifty thousand rockets and missiles that they could launch into Israel, which would overwhelm any system, any air defense system, including the Iron Dobe.
And they also have militias in Syria. So if this happened, I think that the United States would become more and more likely to get directly involved militarily as it could overwhelm the IDEA and the security services in Israel, and that could lead to a much broader regional war, potentially bring in or on directly, and that of course would be another war in the Middle East, and this one very substantial. We'll talk about that on top of what's happening right now.
Yeah, talk about that a little bit. In the US's involvement and what you and your opinion think that the US should actually do not just to rescue the Americans who've been held hostage, but also to make sure that parties, whoever they are at this point, are held accountable for what happened on Saturday and what continues to happen in Israel.
So militarily, the Pentagon announced the deployment of an aircraft carrier strike group, so the General Low Board Strike Group. That's one aircraft perria, two destroyers and two cruisers. It's substantial, and it's going to be parked off of Israel. Quite frankly, that is both a deterrence so that if any other country decide might be thinking about jumping into this, they have to consider that presence right there, which is an incredible amount of military capability. The second thing that I
think the United States is already doing. We keep pre planned munitions pre staged in Israel for our own purposes. Israel, I believe, has already asked you to be able to get access to that, and I think we're going to do that. That's a lot of ammunition that they can use in their grind offensive at a time when ammunition and weapons are in a shortage all around the world life, mostly from the Ukraine conflict. And the third is I
think helped them with intelligence. Obviously that's been an issue, but they need intelligence to be able to accurately plan their upcoming ground invasion, and I think the United States can do that all before becoming directly involved. That is likely where the United States is right now.
Your Lobo Institute, it's all about conflicts, current future otherwise. And you advise clients about this and consult on this specifically at a time when we still have a war in Ukraine and now we have this, what's the message to global companies to governments about security issues international security issues at a time like today And just got about a minute unfortunately.
Yeah, slowly understand. So thanks for bringing up Logo Institute. It is a group of people not only that we're in the agency and the military, but also in the UN for example USAID. So it really covers the gamut of both your military types and your essentially humanitarian types. And that is really what the message is of Lobo Institute is that it is not just one tool to
help in conflicts, it's a multiple tools tools. For example, if the economic conditions in some countries don't improve then we're always going to have a terrorist issue from that country. It's just as a matter of fact. So that's what we focus on. We work for the UN we work for the US State Department. In areas where it's seemingly endless, wars continue to happen, and unfortunately wars continue to be started.
All right, Going to leave it on that note, Thank you so much. We so appreciate your insight on this difficult day and just trying to make some sense out of it, certainly for all of the Bloomberg audiences that are out there. Mick Mulury, thank you so much. On zoom from Montana. He's co founder of the Lobo Institute. He's also former deput Assistant Secretary of Defense and a retired CIA officer, and so much more so, incredible insight and perspective on this.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from three to six Eastern Listen on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business app, or wants us Live on YouTube.
US for Long with Tim Stenovic. Life here on Bloomberg Business Week, our coverage of the Hamas Israel conflict continues to be fair. Conflict feels like an easy word. Hamas really attacking Israel over the weekend Saturday surprise attack on Israel by the Palestinian Group may represent one of the biggest failures by Israeli intelligence since the Yam Kapor War of nineteen seventy three. We've been talking about this. The attack involved dozens of infiltrations by land and sea, together
with rocket attacks. A sophisticated assault, but as we just talked about, you know that it was also in some ways, you know, very basic in terms of gliders, right, all those bulldozers, like. It wasn't necessarily technologically sophisticated, but nonetheless it was rather broad and it definitely took some kind of planning to get into it.
And it's certainly one that intelligence agencies missed and they were supposed to pick up on. That's a bigger conversation for now, though. Let's get to doctor Ariel Cohen, a non resident Senior Fellow at the Atlantic Council's Eurasia Center, also a member of the Council of Foreign Relations. He's also a consultant where he works with companies, NGOs and
governments on international security, oil and gas strategy. He's got a client list that includes Fortune five hundred companies, as well as USAID, the World Bank, the Pentagon, and the US Senate. He's also been in the Israeli Defense Forces. He served in the IDF, Israel's national military. Very pleased to have you join us, doctor Cohen, this afternoon. How are you.
I'm very worried. Families cold up in reserves, friends of friends being killed, and the horrible pictures of close to a thousand Israeli's Jews, Arabs, Muslims, Christians killed. Also, people from Nepal, people from Thailand murdered in cold blood, children taking hostage to Gaza, eighty five year olds in Wiltshire killed, parents executed in front of their children. Horrible, horrible images.
So how does this happen? And how does Israeli intelligence, which is considered top among the world, how does it fail?
Israel right now is in a response mode into Gaza and very concerned about possible escalations in the West Bank, Judean, Samaria and Lebanon, where Chrisballa, the fully owned subsidiary of Iran, is aiming tens of thousands of more powerful rockets than those from Gaza on hyper Tel Aviv and other cities. And the accounting for this failure is going to come, but it's probably going to come later on after the
shooting stops in the meantime. Yes, you're absolutely right. It's an intelligence failure of historic proportions like the Young Keeper War, or worse because during the war Young Keeper War, it was soldiers who were killed. It was armies who clashed, not peaceful villagers and attendeeeds of a raid in the desert who were surrounded and murdered. Two hundred and sixty people were killed in a raide young people. So in
that respect it's worse. The accounting, probably the judiciary inquiry commission like the Grand Commission of nineteen seventy four, is probably going to happen. I cannot imagine Prime Minister Natanyao, Defense Minister Yov Gallant de Mosad director, the Shinbet Security Service director, the Chief of Intelligence for the Army and the Chief for the Army to keep their jobs.
Wow, that's a long list of people, doctor Cohen, As we just heard a few minutes ago from our own Charlie Pellett Bloomberg headline crossing that said Delta Airlines will cancel its flights to and from Tel Aviv through October thirty. First, certainly, Delta Airlines thinks the conflict is going to last until at least the end of the month, when they're going to revisit whether they do flights there. How do you see this playing out?
Well, First of all, this concerns me because my daughter and her husband are supposed to fly back to Israel this week on Delta. My daughter runs Cyberwell and online organization that fights anti Semitism in social media. Would she have returned, No, she's in the States right now.
But would she have returned on her ticket if it was available?
Oh? Yeah, absolutely. She has a crew of colleagues to run, she's the CEO of this nonprofit, and she would go back. Possibly should be called up because she served in the idea as well.
We should note that we should note I just want to jump in. We should note that Lal, the flag carrier for Israel, the nation's carrier, has increased the number of flights to try to bring Israelis back to Israel who have been called.
Up, and Israelis are volunteering to go back from all over the world. To save their country. I say saved deliberately because the threat, the threat to the cities and villages of Israel not just from Gaza, but also from Hama's presence in the West Bank, Islamic Jihad, which is fully supported and funded by Iran, and from Kibala. This
is an existential threat. And if it escalates to the point where big cities like Hypen in Tel Aviv are bombed severely, if there is a threshold the victims of killed and wounded, I estimate it roughly around ten thousand. If that reaches these numbers, Israel may retaliate up to and including unconventional warfare.
Against ira Do you mean nuclear weapons?
Unconventional warfare? And by the way, the fact that we the United States are moving the carrier battle Group to eastern Mediterranean is as strong warning to the Islamic Republic and its leaders and to Syria not to escalate. And if they don't heed that warning, I do not exclude a situation in which the United States and Israel go for a joint operation for the first time in history.
What's the risk for Israel. I'm doing too much, retaliating too much, and what's the risk of not doing enough.
Israel did not retaliate too much for twenty years. Give a take since two thousand and seven, when Israel fully evacuated Gaza, when Gaza had an airport, a seaport, agriculture, and all Israeli settlements were relegated out of Gaza, and then kamaskar Is shooting rockets and the blockade on the Israeli side with the Egyptian borders still open came into play. And even with that, when you look at pictures that photographs of Gaza in between these escalations, there were restaurants,
there were shops opened. They were not starving by any stretch of imagination. And deliberate escalation by Kama's leadership led to what just happened, including taking people hostage, including many many victims on Israeli side, but also there has to be unfortunately victims amongst civilian populations when Israel targets and
hits Kamas command posts, Hamas rocket launchers, et cetera. Now, going forward, I think Israel got to a point where it will try to destroy the Kamas command structure and Palestinian Islamic JIOD command structure. If this will lead to the collapse of the Kammas theocratic dictatorship. Don't forget a lot of people in Gaza back in the day when the last elections happened in two thousand and five, voted
for Kamas. And now the little public opinion reached search that happens indicate that half or more of residents of guds And may have had enough with these finacs.
We were speaking with doctor Eryl Cohen, non Resident Senior Fellow at the Atlantic Councils Eurasia Center and a member of the Council of Foreign Relations, Good to get his thoughts up.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business app and YouTube. You can also listen live on Amazon Alexa from our flagship New York station just say Alexa playing Bloomberg eleven thirty.
All right, we do want to go to our next guest, because continue to cover the attack in Israel and understand the situation at large, if you will, Tim, and we keep talking about size and scope, it's something we're all about at Bloomberg, but really understanding the significance of what happened in surprise attack and what ultimately means longer term.
Yeah, very pleased to have with us. Danny Danone, a senior member of the Kiness set Or Parliament, also sits on Israel's Foreign Affairs and Defense Committee, former Deputy Defense Minister, former Israeli Ambassador to the UN. He's also a chairman of the World Licud party of Prime Minister Benjamin n Yahoo. Ambassador denn Is with us from Tel Aviv. Ambassador, good
to have you with us this afternoon. I think a question that so many people are asking is how did Israeli security apparatus miss this?
You know, today we had a very long discussion on the fall and a further defense committee exactly about this issue. And I think it would take us some time to do the popular inquiry. But we can admit and react to admit we were caught by surprise, exactly like what happened fifty years ago on Young kipul Wo. The always took advantage of a Jewish holiday and we were court by surprise. But you know, it's more than just a surprise. We were not ready for the brutality, for the barbaric
approach of those militias. You know, when they entered these were they didn't attack a military basis. They went to peaceful communities on the border, dragged families out of the homes, executed them, and dragged a dozen of them into gather. And today when we start to count the numbers, it's very hard for us. More than one victims in one day. We never saw such a twasitive since the date of
the Holocaust. So for us to see those videos and footage of Barbarica terrorists entering homes, taking elderly people and kids and committing a massacre, it is very hard for us. We feel the pain im it well, all of us, but we gather the strength to stand up and to fight back, and we would start to fight back in the next few days.
You know, as you say, this is unusual, especially for the attack on civilians. Heard ever make sense in a situation like this. But how do you think about this approach that we saw by Hamas in terms of this attack.
Well, you know, we shouldn't look for logic when you deal with terrorists, same for ninety eleven with al Qaida or Isis. You know, it's not the same logic. Way we think about goals and moving forward. You know, we left Gaza. We left Gaza eighteen years ago. We took out all the Jewish communities and we hope that it will be a peaceful entity next to us. Then look what happened. Hamas took over, kicked out the Palestinal authority
and it became a hub for terrorism. And all the funds that the international community spends on Gaza goes for terrorism, for digging tunnels, developing the techniques, and we saw the capabilities. You know, they came from the sea, from the Earl, from the font tunnels, and the main goal was to sow destruction in our communities, chaos. And they think that maybe it will sell them, but they will learn very soon that it was a great mistake. They will pay
a heavy price. We will hand them down and I think they will fill the might of the idea in the near future. And I call the government of it well to make a very clear statement that the goal of the operation should be to eradicate Hamas period, to finish it, not to have another round and then a seat fire, because then we will wake up in a few years with another attack.
Mister ambassador, how do you how do you eradicate harmas from Gaza.
Well, first of all, i'm i'm, I have to acknowledge it's not going to be an easy task. It would require a lot of efforts, but they basically you have to conquer the land and to make the distinction between the population and the militants. You know, as we speak, we're sending messages to certain neighborhood in Gaza calling for the residents to move out from those neighborhoods. You know, we do not have a desire to toward civilian population.
Unlike Hamas, they commit a double walk crin the target civilians and then they hide behind civilians and they use them as human shields.
We have the exact opposite.
The goal is to minimize the casualties among civilians and we're trying to convince them to move away from the strategic Ramas headquarters.
Ambassador, how do you do this? Though we talked about if Iran, although our officials have come out and said specifically I'm sorrying about our National Security Council spokesman John Kirby talking on MSNBC on CNN saying that they do not have any specific intelligence or evidence that points to
direct participation by Iran in these attacks against Israel. But if indeed and Israel moves forward with some deep retaliation, and ultimately, if Iran is involved in some way and you engage Iran, and then you know, as we heard from an earlier guest, to Iran and all of its proxies, whether it's Syria, whether it's Lebanon, I mean, how do you how do you avoid this not getting out of control worse than it is already.
So w Iran, it's very involved in everything in the region. They spend billions on promoting chaos, instability, funding Hamas and his Balam and training both proxies, and we know that they're very involved. There are some speculation about, you know, their desire to block a piece deal between Saudi Arabia and Israel, and maybe that's why, because there is no reason for the timing. You know, nothing happened. You know,
it was an unprovoked attack. So maybe one of the speculations that they wanted to delay any progress in the negotiations with the saudiast But the Iranians should know that we are not playing games. If his Ballad will attack us, we will retaliate and it will be painful.
For his Balad and also for the Lebanese people.
We have seen the Prime Minister Benjamin and Yahou talking on via television earlier this evening talking about unifying the party. How important is that and how likely is that in this environment?
So I think it's time for unity.
You know, I think we understand now that we we don't have the luxury of arguing on internally domestic issues. You know, the enemy of the Haramas that do not make the distinction between a coalition and a position.
And I hope that we will have a unity government soon.
Is it likely? Is it likely from what you are hearing.
Yes, I think it's it's moving to that direction. It's not going to last forever. But for the time we were involved in a war against Ramas, I think it can be helpful. You know, the people of Israel, you know, we are under a very main your emotional stress in the last few days, you know, seeing those footage, knowing that today as we speak, you have kids, toddlers, toddlers you know, at the age of three years old in the hand of Ramas, women that they were raped and
dragged in together. This is the you know, you know, we built a Jewish state in order to protect the Jewish people. And we never thought that somebody would come into Israel and they commit such a noble a tuasity against ussadors.
The government is the right thing.
Just see the.
Last minute that we have with you. How far geographically is Israel willing to go to defend itself? Is it willing to go to Iran? Is it willing to go to the north. Is it willing to go you know, we know it's willing to go into Gaza. How far is it willing to go?
And we just have about twenty five thirty seconds.
Please, we don't have a desire to expand the wall. We focus on the wall against Ramas period. But if we don't have a choice, we will go anywhere around the world to protect ourselves.
All right, We're leave it at that note. Be well and be safe. Danny Dnone, senior member of the Kanesset Parliament, sitting on Israel's Foreign Affairs and Defense Committee, former Deputy Defense Minister, former Israeli Ambassador to the UN, Chairman of the World the coup party of course of the Prime Minister, and he of course was joining us from Tel Aviv.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or watch us live on YouTube.
We're going to continue on with that surprise Hamas attack on Israel. One of the big questions what Iran knew? What will be the geopolitical responses and alliances as a result of the attack. As for Iran, Aaron may have known about the deadly attacks by Hamas militants, although a US official coming out on various cable channels and saying at this point intelligence is saying no, they did not know anything about this attack. So let's get into it.
Because Prime Minister Benjamin NETANYAHUO of Israel says We're going to change the Middle East in a big way, and you do wonder about how things are going forward.
We've got a couple of great guests with us this afternoon, Major General retired Maston Robinson, a geopolitical and intelligence advisor at Academy Securities. Also with us. We have Academy Securities Director and head of macro Strategy, Peter Cheer joining us this afternoon. I want to start with you, Major General, really appreciate you taking the time. What do you think when you hear Benjamin Netanya who say that we are going to change the Middle East.
Yeah, he wants to send a loud, resounding message to his people that this won't be tolerated and the time has come to take the gloves off, and Hamas will pay a heavy, heavy price. That's the easy part. The hard part is does a saucer draw in Lebanese tsbla's growing siri on the rons has drawing even Russian support.
That'll be the capitalist It's really unknown right now. But I think the embarrassment that Israel is feeling right now, having been surprised and the population having put their complete trust in both the advanced warning and the security architecture they're used to, the Prime ministers has got to do something significant enough to regain that confidence and to establish to the rest of the Middle East Israel is not to be trumphed for it. It's the only way they'll survive.
You make me think, Major General, of my conversation that Carol and I just had with Ambassador Danny Denone, I asked him, I posed that question to him, how far geographically is Israel willing to go to defend its borders. Is it going to go attack has Belaw? Is it going to go attack Iran? Is it going to go
beyond Hamas and Gaza? And he told us Carol, he told us, right now, we are folks on Hamas and eradicating Hamas, but we will go as far as we need to go around the world in order to protect Israel.
Yeah, and I certainly wouldn't want to start speculating that they're going to go further than Hamas. But if you Israel is always believed, right, wrong or indifferent that virtually every country within you know, five hundred miles is part of their enemy, I don't think that's realistically true today. I think that there's some strong, you know, possibility of relationships that they're going to want to not unravel if
they can keep from doing so. And keep in mind that that there are a number of Middle East countries are still under the accords, that the Abraham Cords that they're still held to. So you would think that they in this particular case, that Saudi and Jordan and u A and that they would sit this out. But there's no guarantee that it's hard to believe that Hamas planned
this and execute to something discomplicated all by itself. No proof yet that Iran was involved, but they they certainly would would not surprise anybody if Iran or Heswela were involved at least in the plan. And of course if Hesbelog gets involved, they got at least the two if another three front rule, or that Israel was doing.
It, and that's what we're all worried about. And that certainly was one of the concerns, I would say earlier in the day in the financial markets here in the United States, Peter Kamanian on this. You're head of macro strategy over at Academy Securities. You know, geopolitics, I don't have to tell you has lots of market implications short and then sometimes longer term. We saw play out and oil prices a little bit of a flight to safety. Defense docks here in the US. Airlines are under pressure.
We definitely saw it play out today. Energy names on the equity side of things, certainly rallying. What are you keeping an eye on? What are you telling clients? What are you being asked?
You know, I think about all of the above. I guess I would say we kind of start what seems most obvious, like oil should continue to go higher. With this right, there is a threat to oil supply chains, so I see oil going higher as one thing. I also think rates are going to go lower though, So despite higher oil, yes, that would seem inflationary, the Fed's not going to worry about that, the markets aren't going to worry about that. You have a flight to safety.
So you're seeing rates go lower. The Feds folk today and actually kind of already fell into the camp that I think we've been saying before this occurred, no more hikes this year. So that helped equities, and I think equities are kind of the wildcard. Do they follow the bad news as good because yields are lower, or do they start getting worried about what this means for the global economy. All of a sudden, you have the US potentially helping allies on two fronts. What does it mean
for the rest of the world. So I think equities are really the wildcard. They responded nicely to day to lower yields. I think that might continue, but I'd want to pair back risk if this is going to escalate.
Hey, Peter, if I may follow with you, you know, how does this complicate maybe the Fed's world two more meetings November one, December thirteenth. We get FOMC minutes this week from the most recent meeting, we get reads on inflation. But how does potentially and again where three? It looks like starting on a four days in terms of the attack on Israel, and we don't know what's going to happen the rest of the week or how long this
goes on. But how does this potentially complicate the FED thinking about monetary policy and maybe looking to ease conditions a little bit? Although the market has done a lot of the Fed's work as of late.
Yeah, I think the FED has been and they do not want to do anything. So I think they've been looking for the data to give them excuses to do nothing, and unfortunately this probably gives them the excuse to do nothing. They are certainly not going to hike in the face of this frustration. People might talk about oil prices going higher, they will ignore that right, they will view it as transitory. It's something beyond their control, so they won't ease anytime soon.
But I think this takes any hike conversations off the table for now.
General I want to bring you back into the conversation and I'll ask you about the US's role here and to what extent you think that the US should get involved beyond sending a carrier and a group of ships on its way from the Mediterranean. Right now, Look, Americans have been killed. We have reason to believe per Hamas that Americans have been captured. That's what we heard from our Washington d C reporter just a few minutes ago. What should the US involvement be?
Yeah, I don't things see doubt the US will be involved when because of munitions and comes to naval activity, collection, architecture, jets.
But.
Keep Mount Israel is extraordinarily well equipped. The question is how long the war goes, how deep their munitions supply, said is and we would certainly help them with that. And the other piece that I think we could is we could certainly work behind the scenes with the other Gulf states, like I said, Audi Arabia to try to facilitate a more neutral status with them, or even a diplomatic status with them, to try to bring this to
a closure on a corporate pace. But we'd have to give something up to do that.
Well, that's why I think this was so surprising to so many people, Major General, is that anyone who's been to Israel understands the might of the Israeli military. You can't go anywhere in the country without seeing members of the IDF CAROL carrying automatic weapons at bus stations. It's a normal, everyday thing. That's why it's so surprising that Hamas militants were able to get so far, so quickly, and into so many different military bases in such a short period of time.
Which General makes us think about this intelligence failure, how are you thinking about that and concerns about what might be being missed currently as we speak.
Yeah, so absolutely, the intelligence failure and the security architecture's response was a failure. But just like in America, when something catastrophic happens, no matter how bad the failure was, it has a bonding effect. It brings the country together. So I don't think you're going to see Israelis that are throwing potshots at the government. They're saying I would survive.
What do I need to do? And that's the beauty of Israel Is every single person in that country considers them part of the security architecture, and they are all going to be whether it's intelligence, whether it's gathering, or whether it's manning a weapon or a security station. They're going to be all in for survival. In their mind, they are surrounded by enemy and they have nothing but complete also survival as an end state. If they don't, if they can't be successful.
We've heard the Prime Minister already calling for unification within his government. Peter Chier, really quickly, ten seconds, what's top of mind for you as we head into a busy week for the markets.
No thing we all have to watch is where this head's on social media?
Right?
Who wins the kind of social media a war? So I think there's going to be an intelligence operation on our side. They're going to compat this, and that becomes the risk that this escalates into a US versus them and it goes beyond just a regional battle, in which case then I think yields go much lower, but stocks have to fall in that case.
Peter Cheer and Major General Maston Robson of Academy Securities, thank you both so much.
Bromack a journal how about you let me drive?
Oh no, no, no, no, alay please, I'll do these.
Wait, I want to drive.
It's a good question.
Good This is good drive to the clothes for me. Think well it down on Bluebird Radio.
All right, everybody, eighteen minutes left to go in the first trading session of the week. Of course, it is Monday, October ninth, Carol Master Tim Stanovick live here at Bloomberg Headquarters in our Bloomberg Interactive Broker Studio on YouTube and Bloomberg Originals, and we've got a little bit of a rally underway here. Who to thunk considering the news flow over the weekend, the attack on Israel Baijamas, and we're trying to gauge it. Of course, the bond market is
closed here in the United States. We have maybe that's why have in bid. No, that's a really good point because I think before on Friday we teased forward and saying it's going to be bank earnings, it's going to be inflation reads here in the United States Thursday Fed minutes, and yet we're definitely top of mind.
Something very different at this Maybe the FED speakers we heard from today are driving this market. That's certainly what it feels like. Let's see what David Deets has to say. Our Drive to the closed guest this afternoon, senior portfolio strategist at Pepack Private Wealth Management, joining us from a summit New Jersey this afternoon.
David, how are you doing great? Tim, and Carroll's happy to be with you.
Well, thanks for joining us on what we've certainly considered a somber day, given everything that we've been talking about it for the last hour. We are bloomberg, though, we are show focused on markets, and we are just seventeen minutes away from the clothes on this kind of holiday trading day, I think you could call it. How do you explain the turnaround inequities that we saw today?
Well, certainly there was a knee jerk reaction for safe haven buying and all sorts of things like bonds and the dollar, and to buy up of course energy out of fear of energy supplies. But I think during the course of the day you put your finger out at Tim. There was some duvish talk from a Federal Reserve officials talking about how the bond market has done a lot of our workforce and therefore maybe we're best off just
taking a wait and see attitude. And during the we have seen the odds of a rate hike by the FED in November, go down just since Friday, So that's a big positive. But I think also cooler heads have said, you know, what are the possibilities of a huge spike in oil because of this? And quite frankly, the world today is so much different than it was fifty years ago in the yam Kapur war. We are energy sufficient here. Palestine and Israel are not big energy produced. This is a couple offshore.
Yeah, but the concern. The concern isn't that, you know, we're going to see disruptions from Israel and Palestine. The concern is that it'll set off some sort of broader conflict and we'll see broader supply destructions within the region because the region is a huge oil supplier.
You are absolutely right, And the real problem is if it turns out that Iran was a big supporter or somehow helped instigate this attack by Hamas, you know, that could reinstitute or cause the United States the reinstitute embargoes on their production. It could also halt a thaw in relationships that we're seeing between the United States and Saudi Arabia. Here is the wildcar, which wildcar could throw everything into a tailspin is that Straits of Hormuz. Twenty million barrels
of oil passed through there regularly. That is the economic choke point for the world. If for some and Iran where to put a blockade there, all bets are off. But that's certainly not the way you want to bet right now.
And energy certainly has been a bet that you have made. David, talk to us about how you're looking at it on this Monday.
Yeah.
Absolutely, So longer term, you know, all the think tanks say we are going to be using more oil by the end of this decade than we do now. We're going to be using more oil by the year twenty fifty. So demand is going to continue. There's many areas of the world, particularly in Asia, which are not prepared financially or otherwise to make a big fast switch to green. At the same time, of course, producers are saying, gee, you know, we are getting negative vibes from governments and
policy makers. They don't want us to produce. They're putting more and more barriers in the way. We may not be able to make a return on investment, and so therefore supply is starting to drop. Demand continues. That's a recipe for higher prices.
So wait, so where do you commit money still in the energy space.
Well, stay diversified. But I mean, you know, we can't overlook the fact that the largest player publicly trade player out or Exon, is making a potentially sixty billion dollar bet on another company which has all these resources in the permiam. If a company like Exon felt that oil didn't have a strong future, why would they do that? I think there's another thing at play there.
And of course you're talking about pioneer natural Resources buy in.
Their natural resources, and that deal has not been confirmed, but it looks like it's well on its way. So here's the thing. So what I think is going on is coming like Exon saying because of the low equity valuations out there, is cheaper to drill, as it were on Wall Street than to actually spend money to hire people and commit resources in IRL in the real world.
And therefore I'm taking my queue there and saying, well, if a company like Exon thinks is cheaper to buy oil companies rather than drill, I think as part of a diversified portfolio makes a lot of sense. Plus, if you like dividends and you're worried a potential inflation and for example, geopolitical risks we saw today, good addition to your portfolio.
What about Chevron, which Israel ordered to shut down of a major gas field run by Chevron in the eastern Mediterranean, so they were there were some safety concerns as the fighting continues on thoughts specifically on Chevron, Yeah.
We like Chevron. You know, low debt member the dow uh, you know, wonderful management under I believe it's mister worth there. They are, you know, diversified, globally integrated, so they're in all facets. Now, mind you the fact that Israel has them to stop work on one of their platforms, that's kind of a detail right now, because there's a very small part of their overall production in Israel doesn't have the capability to cut off a lot of oil. But you know that is good. But we also we also
like Xon. I think for a lot of reasons, people have even more skeptical of Exxon. I think the evaluation is lower. They're more geographically diversified, and over the long run, I would want to bet against Xon either.
Okay, well, before we let you go, just in the last two minutes, that we have with you. I want to talk about what's what we have upcoming. We hear from some of the big banks already starting this week. We got some inflation numbers coming on Thursday, we got consumer sentiment on Friday. What's the most important in the near term catalyst.
I think those inflation numbers. The inflation numbers have been driving the higher interest rates, in driving the hawker system.
The FED.
If we see something that looks like it's getting way too hot, I think that puts the marketing to lockdown as they worry about what the Fed's reaction is going to be. And of course it can work the other around. On the earnings, obviously you buy stocks or earnings. The problem is Q three earnings are going to be the fourth quarter in a row of negative year over year results. So you're not going to have a whole lot to point to to say, hey, let's go commit a lot
more money in the market. On the nails, I think they're going to be cautious on the outlook. How can they not be with all of the bacco issues. On the other hand, I think if the bond you'll start dropping off. I think that's gonna be your callloser better market ahead.
Do you like Wells Fargo twenty five seconds though? Is that correct?
Yeah? Exactly. Well, they're going to be one of the three of the big six that's going to report strong year over year results. They're going to be up about forty percent versus last year. Also, you know, they're trading at about tangible book value, about eight times earnings, and they have potential because they're cutting costs. They have to because of scandals in the past, and I think ultimately the Center Reserve will allow them to take the asset
cap off, which will allow them to grow. They're sticking with the domestic focus. They're number one or number two in all their markets. Then you know, when times they're tough, you want to go with the big guys.
City Group, JP Morgan, and Wells Farg are all reporting on Friday the thirteenth, saying.
Anything, we're going to be in LA.
We are going to be in LA still Friday the thirteen.
Yeah, we'll still be doing the show.
Thanks to David des Ever at PEPAG Private Wealth Management.
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