Don't See Oil North of $70 Without Escalation: Kamel

joining US? Now? Is I have a COMMEL practice head focused on the Middle East, North Africa as other well as others at Eurasia Group joining US now on the phone? Can I get it? Just get a sense? Is it over? I am? Well, let's I think we're off the peak of the crisis. The Araanians conducted what is I think a largely symbolic attack on basis that hosts U S troops in Iraq. Those attacks were very calibrated. They were designed not to cause casualties or not to create conditions

for Trump to overreact. The President speaking in in a few minutes, so we'll hear more from him, but I expect movement towards less less tensions. So I am. Are you surprised that the Iranian response was I guess as restrained as it was because I guess that what we had heard up until today was the general that was taken out was such a large figure and an important figure in Tehran. Are you surprised that the response wasn't

maybe even more pronounced. Well, I think that everything that we've been hearing from the Iranians hinted as at a much more robust military response. So to a certain extent, they did exercise the level of restraint over here. So um, I think I'm pretty sure that there are regional powers that have tried to to be into ease tensions, international powers as well to really calm their Iranians down. Now, another factor I think that helped calm the situation is

that the Iranians are thinking the long term. They want the US out of Iran, and they're fine with that as a long term victory, something that cements their power in the Middle East. So let's talk about that, because that was one of my main questions when I was reading all of this Iran. Iran wants the US out of Iraq, right, I mean it wants them to bodraw their troops. Does sort of pushing down the tensions accelerate that process, and it appears that the Iraqis are more

eager to get the U S troops out. Well, I think that the less miniatary confrontation that you have in Iraq between the US and Iran, the easier it will be for President Trump to withdraw forces. He can't easily do it under fire as and when he's been attacked in Iraq left and right. When there are tensions between Iran, moving towards a widespread confrontation absent that any form of really going down away, moving away from tension creates easier

conditions for that. But again, I think that there are local dynamics here. The ir Arcus themselves feel that US presence in the country has become challenging a little bit problematic. So I think it will see more domestic pressure on the US, perhaps, if not to withdraw, to severely restrict US operations in the country. Well, at the top of the hour, we will be hearing from President Trump. Will

you'll be making comments on the Iran situation? What do you what will you be listening for in his comments, what do you think Iranians Iranians will be listening for. I think the Iranians are expecting big boards the President to declare victory, victory, victorian, that he's done what no other could could do. I think that's that's that will happen in some way, shape or form. I think the key issue for the Iranians is to see whether Mr Trump will authorize some form of follow up in terms

of reaction. That's what they really care about. If there is no US response in in reaction to the missile attacks from Iran, I think the Iranians would feel much more comfortable as and we're moving away from a sharper escalation. So that's what I think what the press press conferences about. The press conference for the President himself is not just

about Iran. This is about positioning himself as a strong leader, someone that has been able to do things that other leaders or other US presidents were not able to do. So it's it's also made for domestic consumptional for domestic audience in the US. So let's talk about the price

of oil. It is down today and having the biggest two day down draft since December two, and I'm wondering whether this is the beginning of more to come in the senses as people realize, or isn't gonna necessarily be a disruption and supply all of a sudden things start to look a little bit more oversupplied with a demand that seems to be basically balanced at this point. Well,

I think that is that's a very interesting idea. Perhaps some of that risk that will will will be taken off, I think will be reflected in all the prices, so we'll the some form of a depth, maybe a few dollars. But again, it's not that Iran or U s Irn tensions have become zero that we're returning to a stable equilibrium. There are many problems still in the Middle East that could cause those disruptions. It's not like we've we've returned stability.

The demand and supply picture, I think is a little bit complicated. But we do have the US China trade agreement that could also help maybe provide some boost to oil prices, maybe not to maybe not lift them up to seventy. But I think we're in a world where sixty five dollars it seems to be the bottom or or could be the bottom in this environment. Uh, absent any real confrontation or real outages in the Middle East, you're not really talking about oil moving north of seventy

on a or in a strong direction. Really, we need to see data from US shell hard evidence that US shows the seb it in that investments in US share that is actually much lower, much more prudent, and therefore supply it will be limited. So I am get a sense of kind of the next steps for Iran. I guess from your perspective, what is it in Iran's best interest rate here to say, okay, this is over Essentially, Well, I don't think the irene is are going to be

a fully thing that it's over. They'll say that they are fighting really an effort or struggle to get the US out to make the region region governed government by states that are inherently part of it. And I think the key word here is get the getting the US to withdraw from different places. I don't think that the U. S C. Run relationship is going to be okay anytime soon. Mr Trump has withdrawn from the j C p o A, he has killed a senior Iranian commander he had, he

has sanctioned the country. So we still have a long term issue around the US Iran relationship and whether you can get a pathway that is sustainable that gets us away from confrontation and towards the excavation. But certainly we were away from the peak of a crisis. Just real quick here about thirty seconds. I'm wondering President Trump is going to speak in response to the Iranian retaliation. What do you expect him to say? Or what do you want?

What do you what are you looking for? I think it's going to say that that the Iranian response was weak and therefore there there it's not necessary for the US to move and do much more, and that US power remains robust, and he is ready when their Indians do something that crosses the line to respond. Am Kamal, thank you so much for joining us a M as a practice head Middle East and North Africa for the Eurasia Group. Some of the smartest folks out there, and

we're talking about geopolitics. He's based uh in London and Tom King was recently this earlier this week at their offices at Eurasia Group, getting a great over view of all things geopolitical, whether it's the Middle East or China and Hong Kong. They do some great work and we appreciate them. Coming on Bloomberg Radio, the question of the

day is it over? Are we done with the brief, very brief, if perhaps non existent, and recognizable turmoil that we saw in markets due to Iran US relations tends tensing up joining us now Scott Reren, Senior Global market strategist, it was Fargo Investment Institute overseers overseeing nearly two trillion dollars joining us from St. Louis, Missouri? Is it over? Scott? Well, Lisa,

Happy New Year? And probably while the market appears to think we're not going to see uh too much of an escalation, you know, we think at least in the in the near term, we're likely to see uh some more tip for tad, a little bit more escalation. But you know that's not really changing and has not changed really what our outlook is as we look out over, Scott, give us your outlook for given the incredible kind of market uh. You know a response we saw in what

do you do for an encore here? Well, I tell you it's it's it's tough, Paul, and what we've been doing UM. For during the second half of we raised a little cash, we backed off of industrials, We've got a little less cyclical, And that's pretty much our stance right now because for us, UH stocks are very close to fair value. We still like tech, we still like

consumer discretionary, we still like financials. But you know, if we see a total return somewhere in the mid single digit area, I think that's about right UM for us. Probably the the the upside surprise. You have to ask yourself, you know, how much chasing are we going to see here, because there's a lot of underinvested, whether they're professionals or retail investors, a lot of people with cash on the sidelines.

We've seen a little chasing here. And then I think also a factor that that could make our outlook too conservatives, too conservative, is if we see UH the international economy stabilized and do a little bit better than what we thought. So I think those are a couple of the factors that we're trying to keep a close eye on, trying to project, But for right now, we think stocks are

pretty close to fair value. There was a conversation on Bloomberg Television this morning about this idea that seems to be pervasive in markets, which is, honestly, unless we get a massive shock, stocks are going to keep rallying. Risk assets look good and you don't want to miss out. The problem is, if we see a shock is the big caveat and it seems like if we see a shock, everyone's going to try to escape out of the same

narrow exit. How concerned are you about the lack of hedging and sort of the crowdedness of some of these risk trades. Well, you know, a lot of times, you know, as she is, you approach a market high, and if you look at the performance, for instance, between the SNP equalated index and just the S and P, you know, the performance is starting to widen there a little bit. It's nowhere near what you usually see at the market top.

So really, you know, I think there's a decent amount of liquidity in the market, but if you really see a meaningful shock um as is usually the case, you know there's there's a lack of liquidity on the way down. I mean, the bids just go away, um and and and there's not a lot of people stepping in to buy, and that's where you see these big gaps down, So I think I'm not sure that's going to be any worse than it has been on meaningful, big shocks in

the past. And it's certainly something that you want to think about. And you know that's why, you know, we've talked to our our clients. You know, we had leaned hard towards stocks, you know, for really the last eight years, and for instance, you know, if you're in a sixty forty stock bomb type of portfolio, we want our clients to be pretty close to that right now, because, as I said, you know, there's a lot of disks out there.

Stocks are not cheap um, and we just want to be a little more careful here than we had been in previous years. Scott, I want to get your thoughts on valuations in the equity market. We've seen obviously move up in the sp with very little to know earnings growth. Give us a sense of kind of where we are

valuation wise historically. Well, you know, we've got a one seventy five number out there, so right now you're looking at about eighteen points six times uh this year's earnings, and if you look at you know, over the last twenty years or so, you know, the average forward price to earnings ratio would be let's say sixteen points three something like that, so you know you're certainly trading at

a premium to that. Now you could make the argument, uh that you know, we're in a lower interest rate environment, that feds eazy, people are under invested, and so it's common that you get this push up in valuations in the in the later stages of a cycle. So you know, valuations are are above average. Um, we would argue that

they're not meaningfully stretched. I mean, if you look back at the FED model, and I haven't run these numbers lately, but if you looked at that correlation over a long period time, it probably suggests the p on the SMP should be you know, twenty eight or some crazy number like that. So you know, these correlations haven't held. It makes some sense that we're a little bit of a premium, but we don't think there's too much upside in terms of evaluations from here. We need to see some underlying

earnings growth. Scott, thanks so much for joining us. We appreciate you coming on. Scott Wren, senior global market strategist for Wells Fargo Investment Institute, joining us on the phone from St. Louis time to check in with Bloomberg Opinion. We're joined by Opinion Coomas Justin Fox. He joins us here and I'm Bloomberg Interactive Brokers to deal with a fascinating come about a story that I'm very interested in, which is has the US past peak auto? Are people

still going to drive cars going forward? Justin takes a look at it in terms of our team still driving cars. So Justin, thanks so much for joining us. What's going I know when I turned seventeen that day I was at the DMV getting my license. I never looked back. Is that still happening? Um less and less, although a lot of it among sixteen and seventeen year olds is basically because in lots of states you can barely drive

even after you get your license. There are all of these restrictions, and so there's really been a collapse in the percentage of sixteen year olds getting license. It's a little more than half what it was in the eighties, back when we got our lessons. Um and you get two older ages and it and it's not as big a decline, but basically every age court in the cohort in the US below forty five is less. People are less likely to have licenses than they were in the

early eighties. How much is this due to people moving to cities and moving away from more suburban and rural areas. I mean, since the eighties, I think most development and most population growth has been in suburbian not in cities, even though there's been a modest return over the past um twenty years or so. And I mean this trend first got a lot of attention um probably seven or

eight years ago. A researcher named Michael Sivak, who was then at the University of Michigan, sort of pointed it out. The media picked up on it, and a lot of it was a pretty precipitous decline in like two thousand seven, two thousand eight, two thousand nine, and a lot of that was gas was really expensive and the economy was awful and there was so there was a little bit of a bounce back in two thousand fifteen and two thousand sixteen. But what's really interesting is that has now stopped.

When you look at the percentage of teams getting licenses and everybody getting licenses, it's just stopped rising. Let's see uber impact, you know, when I was down at Duke University recently, somebody was telling me, like when I was there, parking impossible to get now, like lots of parking spaces around the kids aren't bringing their cars because they just uber everywhere. Yeah, I mean, I'm sure that is an

element in a lot of places. It's like sixteen year olds aren't supposed to be able to take uber um, but happens all uh man. They can tell you with their parents and all, but supposedly. But I'm sure that is part of it. There are alternatives like that. I'm sure smaller families are part of it, so there aren't five different kids to get around. If it's one or two, then a parent might be able to do it and

they spend more time with them. And I mean, there was a big like public transportation um sort of hit it's all modern low in the US in the in the eighties, and then had another drop in the mid nineties when gas prices were super cheap and and the economy was booming. But it rose a lot um through about two thousand fourteen. But it's not rising lightly either, so it is kind of I mean, one thing, if you look at older Americans or just people with jobs,

telecommuting people. More people are able to do jobs without driving there. But I think it's really confusing. I gotta say, I'm not I'm not totally getting any of these explanations because I know I grew up in New York City, and yes, I failed my driver's task more than once. It wasn't my fault, let's not talk about it. But it was a sick shift and the guy hated me.

But it's okay, I've forgiven you if you're listening. But I will say sort of, um, I will say that it was a source of deep anxiety growing up, Like what happens if you're you can't leave a big city. I mean, how do you not have a license? How do you travel somewhere and rent a car? I'm sorry that I just don't believe that simply uh, having an uber once in a while changes that. I think, I mean,

for most people, it doesn't. It's still clear that most Americans get driver's licenses, most Americans have cars, but I think there's a larger minority that will not. And I just and I don't you know, I don't see car use collapsing. But it's pretty clear when you look at like per capita miles traveled, it's stopped rising. Well. But this the interesting point here is how autonomous driving will actually play into this. And I know that my ten year old sometimes asks me, you know, am I ever

gonna have to go to the driver's license? Do I have to get on that. I'm like, no, no, no, please, You're fine. And I think about it, and you know, is there going to be just this model of managing these cars that are kind of driving themselves around and maximizing their use instead of having people with a bunch

of cars parked in there driving. I mean, yes, someday, but I I will say, people have spent a huge amount of time and energy talking and thinking about that over the past few years, and it doesn't seem like it's going to be happening for another decade or two at the earliest. So your son is still gonna have to drive if if you want them to drive. So I'll tell him. I'll tell him lots of scary stories. When the guy comes in and says, are you scared? Little?

I hate nervous drivers. Anyway, I'm not I'm not going to relive it over on the air, except that I just did, how many cars do you have, faull Um boy in our family? I'm gonna say three, yes, why have four kids? Are you know that that that's such an one of them as a pickup truck, which my friends are just shocked that we have in this And how old were they when I started driving all of them? So he had more than more than two kids, so that they had to shuttle themselves around. Justin Fox, thank

you so much for being with us. Justin Fox is a Bloomberg opinion columnist. Great column about lots of American teens still shutting cars right now. My big question is given the fact that Iran can't necessarily be seen internally as standing down, I do wonder what the response is going to be. Chris lew joining us for now, Senior fellow at the University of Virginia Miller Center, also former Deputy Secretary of Labor under President Obama. He has served

in a variety of administrations over decades. Thank you so much for being with us. On the phone from Charlottesville, Virginia. I just want to first get reaction. If you were listening to President Trump's comments on Iran, what was your takeaway? Well, I thought it was encouraging in the sense that, you know, he was offered an off ramp to de escalate, and it appears that he is taking that for now. Um, it will be interesting to see what the Iranians think of this. I mean, he he was, in my mind

taking sort of a premature victory lap. I'm not sure that will play that well, and I think there are still remain questions what the long term strategy is. I mean, he talked about imposing additional economic sanctions, trying to get NATO involved in this, trying to negotiate a new deal. But you know, if we simply take a look at where we are now and where we were when he took office, it's hard to say that we are in a better situation now than where we were with the

Iran nuclear deal. It's interesting, Chris, maybe take a step back here, given what we heard from the president here, what do you think the administration's strategy is here just over the less several days as it relates to our rent. You know, I think it's been a little confusing, and I think that's you know, the legitimate questions that members of Congress are asking about, you know, whether there was uh an imminent attack that they were trying to prevent

and killing celemony. Uh, you know what the long term strategy is with regard to run and so I think, Um, look, I think it was helpful to have the President out there speaking, but I'm not sure he necessarily answered any of those questions. I'm wondering also what the broader message from this incident would be if URON does not retaliate

any further. I know that there have been a number of reports that Kim John un over in North Korea is suspected to be incentivized to double down on his nuclear production simply because he doesn't want to be taken out by a drone either. So, uh, was what was your sense of that? Well, I think that's exactly right.

I mean, I think, um, the minute the president ripped up a RAN nuclear deal, it makes it certainly harder to try to um execute any kind of deal with North Korea, because you know, the president the United States can't be trusted to live up to their arrangements. UM. I also think you know, this was as much of anything unimportant, Um, the last night's attack was a way that the Iranian leadership could show that there are people that they were taking this seriously, but you know, I

think we should make the mistake. I mean, this is a very dangerous regime that will figure out other ways to strike back either Americans, allies, American businesses in ways that maybe are as dangerous but are less able, were less able to put our fingers that they did. Chris, there's some that are suggesting that there is some politics involved here and what's going on with Iran in terms of uh the United States, uh, you know, taking out

General Solimany as it relates to impeachment. Do you think there's a tie in there to what extent you know, Look, I I I don't want to speculate on that. I'd like to think that this was, um, this was a thought out strategy. UM. That being said, Look, obviously we've been talking about this attack for what the last five or six days and not talking about impeachment. Impeachment is still obviously out there on the horizon and probably shorter

term horizon. But I think it does ray sort of broader issues as to um, what the administration's broader policy is, and it's very muddled at the moment, and I'm sure the actions over the last five or six days haven't really clarified that in any way. What's your sense of the recent developments about impeachment, about the fact that Senate Democrats are trying to figure out how to pass it off to Senate without necessarily getting a sort of wash,

a whitewashing of the whole affair. Yeah, you know, I look, I think it's interesting. I mean, um, you know, UM, I think the speaker, Speaker Pelosi will probably send over the article's impeachment, she says soon. Um. And what we've seen over the last couple of weeks since the House

past impeachment was a number of developments. We've seen, um, some important reporting out of the New York Times about other meetings that happened in the White House, UM on the holding of Ukrainian aid that we didn't know about an advance. We've had the release of some documents that show, um, um, greater involvement by the White House in this decision. And we obviously have the big news from the other day that John Bolton, the former National Security Advisors, willing to testify.

So what that shows you is that there are additional a lot of additional documents, additional witnesses and testimony, and So even if, UM, even if Democrats were not able to get an agreement up front that those documents and witnesses would be part of a Senate trial, they've certainly made a public case that we're only seeing basically the tip of the iceberg right now. UM. This I think

will clearly be revisited. Even if the Senate trial starts without an agreement on additional witnesses, there will be motion by Senate Democrats to try to call those witnesses. And frankly, a lot of this is going to rely on whether it was handful of moderate Senate Republicans UM, and whether they're willing to break from their leadership and call some

of these witnesses. So we're speaking with Chris Lucy and your fellow at the University of Virginia Miller Center, also former Deputy Secretary of Labor under President Obama, host of other governmental service jobs that he has served in roles

that he has served throughout his career. I am wondering, you know, I want to go back to Paul's question where he was asking about the relation between UH the strikes over in Iran as well as UH, you know, the impeachment trials and does this give President Trump much more popularity among Republicans and support among Republicans just because it seems to have been incredibly successful. You know, look, I think I think the jury is still out on this right now, Um the um. Some of the recent

polling it shouldn't surprise you. I mean everything in this country right now breaks on partisan lines, shows that about fifty of Americans UM opposed the president's handling of the situation in Iran right now. UM. You know again, I think we'll have to wait and see what the longer term developments on this are. I mean, you were only, as I said, you know, five or six days from the original um killing, and I think obviously less than

twenty four hours away from last night's events. And so we're gonna have to let this play out a couple more news cycles to see what happens. So, Chris, just going back to impeachment real quickly. I'm just kind of wondering what next steps are because we're obviously an uncharted

territory here. Who do you think has the leverage here? Uh, between the Democrats and Republicans here, because it's you know, Speaker Pelosi withholding the articles impeachment is unusual, I guess, just given by the little bit of precedent with that we do have. Well, look, I think the initial leverage right now is being held by the Senate Republican leader, Mitch McConnell. I mean, obviously he controls um the he controls the process. He's got the fifty one votes to

move forward. Word. But I think, you know, I think the challenge will be for him to keep some of those moderate Republicans in line when Senate Democrats start asking for additional votes and so, um, you know, I think that, you know, I think we've only sort of seen the first um, you know, um card being played at this point, and it will be interesting to see how things play out. And and again, you know, whether House Democrats try in some way to call John Bolton as some part of

a formal hearing. I mean, he said he will testify but for the Senate. But um, there's no reason, frankly at this point why you would not testify before the House as well. Chris LEU, thank you so much for being with us in all your commentary. Chris Lew Senior Fellow at the University of Virginia Miller Center, also former Deputy Secretary of Labor under President Obama, among other roles.

Thanks for listening to the Bloomberg pl podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney and Lisa bram Woyds I'm on Twitter at Lisa Bramwoyits one before the podcast. You can always catch us worldwide. I'm Bloomberg Radio