Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside my co host Matt Miller.
Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moving news.
Find the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. Right now, we want to get to the ground in Tel Aviv. We're joined by Galit Alstein. She is the economic and government reporter with Bloomberg News based in Tel Aviv. Galit, thanks so much for joining us. I know this is an incredibly difficult time for everyone in that part of the world. What can you tell us about the latest reporting on the ground.
So basically we're looking at a couple of things here on the southern front of Israel, which is in the Gaza vicinity. Until this morning at least, there were still infiltrations of AMAS militant attackers who went to managed to come through the fence. This was on a much lower scale than it obviously was on Saturday when they came by, as it turns out, by the hundreds. By the way, the ideas is talking about one thousand hamas attackers who came who broke the fence and just went into Israel
on Saturday morning. So what I started saying is that until this morning, we were still seeing infiltrations on a much smaller scale, and there were still combat arenas in the south of Israel, with defense forces trying to get hold of Israelis, Israeli communities and settlements in the south of Israel and trying to sort of, you know, clean them of potential you know, attackers there and at the same time trying to evacuate a lot of the not
a lot of actually most of the settlements, Israeli settlements and communities were just by the Gaza fence, about twenty four of them, I think, and I think that so far fifteen have been evacuated and they're still working on the rest. So that is what is going on on the south of Israel later on today, and that is basically under control at this time. In the North of Israel,
it has been relatively quiet until this afternoon. It is still not not a very bad situation there, but we have seen a bit of mortar fire fired from Lebanon, and there were also there was also a very minor infiltration and the idea DS. I'm just I'm looking at my phone to be exact, and what they said. They did put out a message about a couple of hours ago that they had killed a number of armed suspects
that infiltrated into Israel from Lebanese territory. Isbela has denied connection with this, which is important because you know, everyone is also now looking at Frizabella to see if they will join the attacks on Israel to form like a sort of multifront arena.
Can I ask Matt Miller here in New York and really appreciate you joining us, and I understand how difficult it must be to report on this right now, But what do we know about Israel's plans to go into Gaza? And how are you know, uh, you know, civilians in Gaza going to get out because of course they've got borders on all sides and the ocean and the med so it seems like they're stuck. How can they get out if Israel's going to sweep in militarily.
Yeah, so this is a very good question because you know, Matt, we've been hearing idea for officials who have been briefing journalists about twice or more than that every day, and just this morning of the idea of spokes on people told us some journalists that they will be evacuating Gaza when asked if Israel will actually be evacuating Gaza, because Israel does not you know, does not control Gaza at this time, so he said no, but we will recommend
they evacuate, you know, on their own. And this is a very good question that has not been answered answered yet and this is definitely something to keep pushing the ideas to give answers on because the answer to that is not clear. Although the idea is saying we will want people to evacuate, we do not know how. We do know that at this time the Gaza Strip has been cut off from electricity of supply, water supply, fuel supply, and other supplies as well because all passages have been
shut down. One of the main passages, by the way, the Arrest passage, was one of the breach points through which the attackers came through on Saturday, and Idea of officials have been telling us on record, we're not in a hurry, you know, to rebuild this passage because this is what it was used for.
So what do we know about the hostages and maybe any plans to get them back?
Yeah, So so you know, obviously, you know, all sides are keeping their cards very very very close to their chests at this point. There have been various reports today about about some sort of negotiations going on, mainly negotiations to free women and children who were taken hostage into Gaza in turn for for women prisoners of Hamas that
are being held in Israel. An official Israeli source, high ranking official Israeli source who asked not to be named, but he had he has denied that explicitly, and I think that Hama, although to be frank, I'm not sure who in Hamas have also just over the past hour deny that there's any negotiations going on. So it's nothing very firm, you know, that is going on at this stage.
All right, Glit, thank you so much for joining us. We know it's very very difficult time and we appreciate getting some of your time in your reporting. Galitz Altstein israel economy and government reporter with Bloomberg News based in Tel Aviv. So we will continue to bring you the latest reporting on this situation.
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You want to continue to follow the story in Israel, the war there with Hamas militants. Roz Mathieson joins us. She's the news director for e m e A Europe, Middle East and Africa for Bloomberg News based in I think London. Roz, thanks so much for joining us. I know it's a busy, busy time here. I guess one of the questions over here that a lot of folks are asking, I'm sure it's the same there is just
how did this happen? What happened to the vaunted intelligence of not only Israel but everybody else in that part of the world, including the US and the West.
Well, that is the ultimate question, and it may take weeks or even months until we understand some of that, because, as you can say, this seems to have been an absolute surprise very early on Saturday morning that this kind of infiltration could happen into Israel itself and Israeli intelligence is famed for its ability, They're known for it. They share their intel with their key allies, including the US, and so what went wrong here? Because this operation by
Hamas must have been months in the planning. It was very intricate, it was very detailed, it was very carefully carried out. How is it that no one in the
Israeli intelligence community got wind of this? And so obviously, you know, lots of questions now that are going on to the Defense Force in all of that, and they're saying it's going to take the weeks, if not months to try and understand where the failures were in this, but obviously very much caught by surprise, and you can see, you know that the perhaps of recriminations that may come from that down the track, including for the Prime Minister
Benjamin Netanyahu right now the country very much rallying behind him in this moment, but there are also questions already coming about the failure here of the government to have known about this.
So Ras, as far as we know now, you had this multi point breach of the Israeli border, right the attacks and also hostage taking. Did the did the I guess attackers then pull back into Gaza and other sort of cross border areas, and does it look like they're trying to draw Israeli forces into those areas well.
In fact, if anything, they seem to have been trying to push further into some Jewish communities that are in that area that's very close to the Gaza Strip and in the south of Israel, and trying to push on into communities and towns. And some of that is about attacking Israeli military posts in the area. Some of it has been unfortunate, attacking civilians in the area, and in some cases, you say, taking those civilians back into the
Gaza Strip for whatever reason. Is that to use them as hostages for whatever purposes, but certainly drawing some of them back into the Gaza area. So it's about sort of just sending the message to Israel, you know what, you're not safe inside your own border.
We can come for you, and we will.
But it's also about sort of using hostages for sort of further purposes as this conflict goes on. I mean, there are real pressions about whether this now leads to a full scale ground invasion by Israel of Palestine territories, including the Gaza Strip. So the purpose of those hostages. Well, one can only guess at that.
Do we know anything about personnel numbers, how many the attackers had, and do we know anything about you know, equipment. I imagine they weren't coming in tanks, just shoulder launch rockets and you know, in machine guns or what do we know about that sort of thing?
Well?
Interesting, it was a fairly sophisticated operation. In Hamas has been fighting in some measure for decades against Israel, and they're supported. They've been supported over the years financially and in other ways by Iran.
Of course, there are questions about how much around may or.
May not have been involved in this particular episode that we're seeing now, but these are sort of been carrying out guerrilla warfare of some of some extent, you know, for years, so they're very highly trained. There are apparently systems of tunnels they may have used. They use mechanized parachutes to literally parachute themselves into into Israeli territory. And quite an organized, coordinated operation. So this is not just
sort of random groups roaming around it. It is quite organized and sophisticated.
So as we've seen video coverage of you know, it seems like tanks massing on personnel carriers massing on Israeli side. The reports this morning of a call up of three hundred thousand reserves. Is it the expectation that Israel at some point in the near future will make a full scale invasion of that part of Gaza.
It's certainly seen as probable. I mean, this is a severe attack on Israel. The high number of civilian casualties that we've seen it will compel the government to act.
In the past, they've retaliated in different ways.
Maybe they've struck through sort of rocket fire back into the Gaza strip. We're seeing that already. If they blame Iran, they tend to hit Araand's proxies elsewhere in the area. This goes beyond what we've seen in a very long time in terms of the level of the attack on Israel, which will probably lead to a much bigger scale retaliation. And that's why the idea of a full scale ground war now really is on the table. I mean, the Israeli government's talking me about months of campaign here in
military campaign. This is not going to be over in the next couple of days. They really are going to turn the screws on Gaza. They're turning the water off, they're turning the power off. They're going to make life for people living in Gaza extremely miserable. So we really are looking at the prospect of a full scale ground war now in the Middle East.
I mean, given the size of the attack and the support that Iran has historically provided to Hamas and has Belah, it seems difficult to imagine the Iranians didn't know, even if you maybe say they weren't involved in the actual planning, which the Wall Street Journal has reported that they were courting unidentified members of Comas and Hezbollah. What does this mean for Israel I mean in terms of markets rise?
And they hate to bring it back to that, but you know, we've looked at oil coming up roughly four to five percent. If we get solid evidence that Iran is behind this, does that push the price higher? Are there are those flows completely cut off?
Well, that becomes a real question right now. What you're seeing, obviously is a reaction in financial markets around.
The world, be it riskier assets and also oil.
And that's sort of a knee joke response to the extent of the conflict so far.
But if you get contagion.
Which means you're pulling in other plays in the Middle East, particularly around and.
If all supply is affected, because right.
Now where we are, there's no disruption to all supply, and so the price move is simply a reaction a
question so risk being priced into the market. But if you get to the point that supply is really disrupted through the straits there, I mean Iran has been pumping oil again with the US that of turning a slight blind eye to that, then you're going to get real ishoes about around supply, and that feeds not just into the all MICA but also into broader questions around global inflation, the problems for interest rates around the world, higher for
longer for interest rates, so there are real possible contagion effects for markets here in the longer term. And that's what people are really watching is does this stay contained where it is or does it draw in a run and suddenly you've got a much broader regional coldlip that's really affecting things like all supply.
Ris to the effect that Israel does in fact amount some type of invasion. Is there any census the timing Is this in a matter of days or is the weeks I just don't how long it takes for them to get mobilized. It seems like Israel would probably be on a high level alert at all times anyway, But do we any sense of timing.
It's very unclear and much might depend on how things go in terms of any push by Israel into the Gaza strip, whether Israel takes the initiative and stuff striking targets inside Iran. I mean, they also may opt if they do want to do something against Iran, to hit one of Iran's proxies in the region, which they've done before.
There'll be a high level of caution about.
Taking that step with Iran, as I said, because that just like escalates significantly the tension in the whole region.
And the US and other players.
You know, allies of Israel are being very very cautious about that and urging Israel to be careful and walk the steps on this.
No one really seems to be agitating.
For an immediate strike on Iran, and certainly Iran doesn't seem to be showing an inclination to directly attack Israel.
And so that's possibly some way off.
We first probably need to see how things play out in the Gaza strip, but certainly it does remain to keep question in the minds of many people is where does this begin and where is it? Where on Earth is it going to end?
Just to wrap our heads around this geographically raz does it look like most of the attackers came out of Gaza and missiles coming out of Lebanon at the West Bank and Jerusalem seem problem free at the at the moment.
Well, certainly the attacks of mostly come out of Gaza, but we are seeing some skirmishes involving Hesblah, which is obviously from the Lebanon side of things, and we've seen some rockets fired by Hesbealah into Israel.
We've seen Israel files and rockets back.
We're now seeing reports that a handful of people May Palestines may have attempted. It's across from the Lebanon side into Israel and we're seeing retaliation going on there. So it is happening on both ends, but it's mostly concentrated in the South.
Hi Ros, thanks so much for joining us. Roz Mathison, news director for Bloomberg News over in London.
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Right now, when we're going to get back to the story at hand, the conflict in Israel, and we're going to do that today with doctor Ariel Cohen, Senior fellow at the Atlantic Council Eurasia Center, also a member of the Council Foreign Relations, someone who's steeped in all things geopolitical issues on that type that part of the world. Doctor Cohen, Thanks for joining us here. We'd love to just we've had a full I guess, twenty four hours to kind of figure out what's going at forty eight
hours to figure out what's going on there. What's your I guess initial take, maybe informed take is what we've witnessed since Saturday morning.
First of all, we witnessed an attack on Israeli civilians that we did not see that level of death since the Holocaust. Probably in the end of the day it's going to be eight hundred and nine hundred people killed in one day, rape, taking people hostage and prisoner, including little children, murdering.
Parents in front of the.
Children, put posting rape on social media, desecration of corpses, etc.
These are horrifying pictures on the Israeli front.
This is the largest Israeli failure since the Yom Kipur War, the October War of nineteen seventy three. The Israeli intelligence, the shin Bed, the Security Service, the Mossad, the external intelligence, and the military intelligence failed to understand what was right
in front of them. I was reading newspapers with reports of the meetings of all these organizations with the Iranians Islamic Revolutionary Guard Corps in Beirut and asking a question that the Israeli leaders should have asked, what's.
Going on here? Why the meeting?
They were meeting weekly or bi weekly in Beirut. They also are connecting through Turkey, which gave shelter to senior Kamas operators. And then the question that I am focused on now is whether he's Balah they fully owned subsidiary of Iranian Revolutionary Guard Corps. The leader of his Bala Sheek Nasa has a title of representative of the Supreme Leader of Iran in Lebanon, Are they entering the frame?
If they do, this is a very very serious threat to Israeli existence because his Bala reportedly has between one hundred and two hundred thousand rockets, whereas Kamas was shooting into Israel at a rate of two thousand rockets in twenty minutes. A thousand rockets, what is it a two hundred rockets a minute that the Israeli iron dome system, one of the most advanced of the world, was overwhelmed. Now we may have higher rates of bigger rockets hitting strategic places.
Like the refinery in Haifa and turning Israeli cities.
Where my relatives live all over the country where I used to live myself, turning that into a fiery inferno.
In that case, Israeli leaders, including.
The head of the Mossada, David Barnea, about two weeks ago, said that they will have the top leadership of around responsible in Tehran and news flash, Israeli airplanes do not have the range to hit Iran without help from the Arab allies or Arab friends, and if such health will not be forthcoming, Israel may use its rockets, whether land based rockets or rockets, missiles on its submarines, two Hiterranean targets, including Tehran and including the oil terminal in.
Barbas, Doctor con what do you expect Israel to do in response? And when do you expect them to do that?
They're doing it now.
Israel mobilized three hundred thousand of the reserves, that's two thirds of the reserves are mobilized already.
The moralist high. I am monitoring.
What's up feeds of apartment buildings and relatives and sources, and the morales high. The leadership is trying to figure out what to do, maybe not as fast as we would like. For example, when Tamas was running over the villa and towns in southern Israel and people were stuck under fire, it took sometimes eight to ten hours for security forces to arrive.
Now, of course, the response is going to be.
Faster, and I'm sure that the Israeli air force and missile forces are getting ready if Habala is involved.
And right now these very minutes.
We see reports about exchanges of fire along the Lebanese border, and yesterday Tamas was shooting missiles into the Cheba farm area that they claim not the Lebanese government but Chrisbala is claiming a little piece of territory between Israel, Syria and Lebanon. If that escalates, all bets are off. The Bandara bas oil terminal of Iran is in the range of Israeli missiles, the oil prices may jump and the
US support. Now we see the carrier battle group moving to eastern Mediterranean in a clear signal to Iran that if they Activatebella, we may see for the first time a joint Israeli American operation against Iranian targets in the Middle East.
So I guess.
Israeli defense forces would sweep through Gaza and secure the border with the West Bank while they then move north, pushing into Lebanon. Is that the idea Militarily.
If Hiszbala opens, Israelis will need to destroy whatever known targets are. The problem in Lebanon is that there are a lot of tunnels. They need to secure the West Bank, not just the line between Israel and the West Bank.
This is not recognized international border.
Israel occupies parts of the west Bank, but any kind of terrorist activity out of the West Bank should in missiles killing civilians will require a response, and this is a big challenge for small country like Israel, a country is size of New Jersey with population about nine point
two million people. That you have an active front in the south in Gaza where a thousand people got killed, You have a very unstable West Bank where Kamas is competing with Palestinian authority for power, and you have Hisbala with fifty thousand fighters and hundreds of thousands of rockets.
This is a huge challenge for.
Israel, all right, So, doctor Cohen, here is there any appetite for some type of I don't know less lethal type of solution here? Is there any room for that? Is there any psyche for that in Israel at the moment?
No. In terms of Gaza, absolutely not.
When you see, say, sweep through the Gaza strip, which is not big, it's I think nine by fourteen miles, a lot of it heavily built.
The problem is the Israelis are not.
Happy to kill civilians, but Hamas deliberately puts its military targets inside mosques, inside schools and hospitals, and there's no choice under international law. If the military targets are within civilian population, you are allowed under the international law to hit the military targets Israelis, for example.
Do what they call knock on the roof.
They warn the citizens to leave buildings, and sometimes they manage and sometimes Kamas prevents them from leaving.
So Gaza is going to be softened as.
A target by the air force and artillery before they move in, so sweep, yes, maybe within a week, not immediately, because they do not want to lose their boys and girls. Understandably, we did the same in Iraq. Okay, you don't go in before the targets is suffered. And Withibala, if they really enter the war, they will be bombed and shelled before the land operation begins.
Is there, doctor Cohne, Is there any way to evacuate civilians from Gaza at all? Because they have border on all three sides and the Mediterranean on the other.
Absolutely, and here the United States, Saudi Arabia and others can do a lot of favor to the civilian population and Goza.
Well.
First of all, when you say civilians, I would probably focus on women and children first and foremost, because a lot of able bodied men are pressed into membership in Hamas and Islamic JIP and civilians can go into two directions. One open spaces fields, fields and desert land in Gaza and stay there with tents, or.
Go to the Egyptian border and convince it.
The international community should convince the Egyptians to let the civilians enter and accommodate the civilians.
Because we do not want.
Any civilian casualtism on eva side Israel or Gaza to be hurt. And then those who remain and fight, their blood is on them. In terms of Lebanon, same thing. Lebanon is much bigger than Gaza. The civilians should exit the sous in case the balloon goes up.
On the south.
Okay, doctor Cohen, thank you so much for joining us. I appreciate your thoughts in your analysis, Doctor Eryl. He's the senior fellow at the Atlanta Council Eurasia Center, also a former member of the Council Foreign Relations, one of the leading voices. Their intentions obviously running extraordinarily high. The next several days, I guess we'll show a lot show the world where this thing may develop over the coming days, weeks, and months, and we'll certainly have the full reporting.
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Matt Miller, Paul Sweeney live here in our Bloomberg Interactive Brokers studio, streaming as well on YouTube. So check us out over there. Let's bring in our good friend Mike mcglohan. He's the senior macro strategist for Bloomberg Intelligence. He's based down in our Miami office. And Mike, we see oil surging here, no surprise, WTI up over four percent. We're now about eighty six dollars a barrel here. Historically, you've
got a ton of experience in this mic. When you see, you know, geopolitical conflicts breakout, particularly in the Middle East. How do traders in the oil pits, how do they kind of parse this stuff out?
The quote my son's or adults like yours, they would teach me the worm meh, the word meth. From what you'd see in crude oil today of four percent, it's kind of a normal day for crude oil. I'm not saying what happened with the how messiresrail conflict isn't normal, but it's it's indicative of what's happening in crude oil. Cruel peak at the end of September around ninety five oh
three so far, that's the high for the year. I think it's the market's retesting that, but it's also showing the resilience of manage money net positions are just starting to roll over their way too long.
It looks like it's probably peaked.
It's showing the more significant tilt globally towards this event might accelerate that tilt towards recession. And one thing also you're seeing what it's doing is you look at the front the back month futures. In terms of Fed Fund futures, I mean Fed Fund future is just for October of next year, down fifteen basis points. That implies that to you, not yield when we see it open up tonight will
be down ten or so basis points. So to me, this might mark the peak that I've been looking for in crude oil and for bond yields, and to sustain higher prices, you need a major cutback and supply maybe from Iran, but there are only a million barrels a day. To put that in context, the excess of supply over demand in the US and Canada is six million barrel's day about.
I just don't understand why we don't rally to far higher prices. I mean, my last week we saw barrels of WTI trade for ninety five dollars. That was well September twenty eighth, Right, If you liked it at ninety five, then it's now, you know, trading at eighty six while we're looking at the worst geopolitical eruption in Israel in fifty years. Why why wouldn't you back up the truck at this.
Level it was already backed up. That's a key point.
And member man positions of hedge funds, they were the most long at that period since November of last year, when CRUILL peaked around ninety three, now peaked around ninety five. But it's also that macro economic bent match, and it's that tilt towards recession. Remember it's this is a major difference when we were young in the seventies and we had these kind of issues. The US is a net exporter and a massive surplus kicking in.
So also remember what happened two two thousand and eight.
CRUIL peaked at one forty seven dollars a barrel, and it was a lot of that was positions. It wasn't really a strong fundamental reason. And when that tilts down, which it is or in the middle of that, then you have the major repercussions of going towards recession. And I think that's the case. Is so to me, that peak at ninety five was probably synonymous with bond yields peaking around five percent.
Just a little history lesson right of what happened during the yam Kapur War, because well, I was born like a month later in nineteen seventy three, but I remember distinctly a few years later on my aunt, who had had a Mustang, got a little Honda Accord because you know exactly the oil, the oil what was it like in the oil embargo as it was referred to, sort of started with with that war, right.
Yeah, so air oil bargues I love going back to nineteen seventy three seventy four, that's the first time crudell kind of really got to near twenty and that started a trend in crudell being the worst performing commodity a bar none even compare it to copper and soybeans and broad commodities.
I love publishing on this. It just doesn't go up. It does and it.
Spikes, it makes it go down. It's its own worst enemy versus things like copper. At least it made a new high last year. It's backed up. And if you compare it to soybeans, which I published this morning, soybeans way outperformed Crudel over time. So that to me is one that's changed the world and for people like me in the seventies. When I was pumping gas in nineteen seventy nine, we had a price in half gallons because
it went over a dollar a gallon. The world's changed and that's what's really happened, and that's happening now and it's showing up every day in this commodity that is right now. The same price is first traded in two thousand and seven. And that's why I like to look at it as if we were a month ago when this happened.
That was Kruel's an upswing.
It might have pumped up ten dollars, but sorready started tilting back down for the global recession, which most people know that's coming, particularly if you look at leading indicators and economics, and after this conflict will trigger that Cruel will probably go to forty dollars bills. I've been saying that for a long time. I've been early, I've been wrong. But now that I see what's happening, it's its own worst enemies. It's spiking again. And you see what's happening.
The stock market goes down. And if this tilts a normal correction in the stock market, that's the number one pressure for Crudel the last few years. Every time stock market drops twenty percent and it Fed saves it, Crueil drops forty percent.
But this time will the FED save it?
So, Mike, you know, I, as Matt mentioned, you know, oil peak just you know, back in the late September. But since then it's it's been coming back. When we were down, you know, obviously down in the low eighties for the weekend news here, and was that as you're suggesting kind of pricing in a recession.
Oh, sure, it's starting a tilt there.
So the low for the year w WTR Crudell sixty three dollars and sixty four cents. Now, if you had told anybody that a year ago, they would have said no, you couidding even be one in front of that, A one handle might know. So I have to point out there's a few things I did get right, and that is you never want to buy it when it spikes at that velocity. And every single time we spike it a symemal velocity of last year, you always have a recession.
Now we're still a FED tightening. So yes, it's bounced from the low. Was low was eighty one dollars and fifty cents. But the average price for this year, about seventy seven dollars, is the same as about two thousand and six. At least gold has made a new high. So I look at this way. Crudeau might have peaked around ninety five. It looks like gold might be putting the bottom around eighteen hundred. Remember, we'll see what's happening
with this conflict. It's making the world realize. Okay, Well, the dollar is the best place to be, particularly with the high yields. And if you get a recession, Crudel almost always gets cheap. It almost has to get cheap to reset itself. That's what's been missing so far this year.
So in a geopolitical in a world where we've got Ukraine, the Middle East. Is there anything else on the commodity infrastructure that you're suggest people either get long or short.
Well, the best foreign commodity this year is orange juice.
It's one twentieth the amount of trading as wheat, and that's just more of an inventory thing. But the key thing I look at overall looking forward is let's look at historically, the best performing commodity almost all of history is gold. And except in demand pull periods when you pull up things like gold and copper, but particular in recessions, gold is the best performer. And I think it's just a matter of time it kicks in and does what
it almost has does. Remember remember thinking about gold, you can store it on your body. It's cheap, it's not expensive. Crudles a toxic chemical, it's very expensive to store. That will show up over time. So if you invested interested in energy crudel, it's better to invest in the equities. Yet if you invest it, and you can still invest in physical gold and ETF and I think I think that's still gonna be one of the best form of commodities this year. Now this year it's app only about
two percent. It was up almost ten and I think it's just came back to good support, and if we get toward the recession, I think it's gonna kind of meet at the same price as wherever they meet with the S and P five hundred.
By the way, you rather have the ETF than just actually buying gold bars like a New Jersey senator and putting them under your bed.
Yeah, I've enjoyed beating the gold space and if that was me, it'd probably be lost or stolen. I know my grandmother who was born in Germany during the war, they still store some gold in their in their underwear drawer, like okay, but I mean there's always it's diversity. The thing about ETFs is you can buy, hold and store that metal for virtually nothing. Compared to history, it was very difficult to do and you still have to pay for the storage and you have the risk.
ETFs.
I'm not saying they're risk free, but there's so much easier to get exposure. And the key thing that's really push for gold this year is that high interest rate you can be you know, the the output for the two you know that giant sucking sound of being up up of about five percent might have peaked with the FED potentially pivoting at some point, and that means gold will gains a little bit of accolades because it's that it doesn't earn interest, and it's that that the man
pulling else to the stock market. If the stock marker's peak, gold should be one of the best performed.
It sounds like bitcoin, only not nearly as good, right, because well, you can keep bitcoin on your person too, and a lot more of it.
Big difference with bitcoin.
It's the best performing asset in history, and it's volatility's about two to three times a gold and Matt, we all know what happens in recessions when people hit the bit and things. You sell your winners and you sell the high volatility assets first. And that's what I'm still worried about bitcoin. And if we have a normal recession, Bitcoin's going to go down with risk assets. At some point we might get to another bridge and lack more
like gold and long bunds. But today you see what's happening on compared to compared to Monday of Friday, it's down about two percent. Ethereum is down about four percent, and I expect that to continue if we have a normal recession.
All right, Mike, thanks so much for joining us. As always, Mike mcloanh directing to the point on his call. There, Mike McLoone, senior macro strategist, Bloomberg Intelligence from our Miami Beach office.
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I'll tell you what. Whenever there is a major geopolitical issue anywhere in the globe, one of the first people we go to is Jack Divine. He's a president and founding partner of the.
Arc And Group.
He is a thirty two year veteran of the Central Intelligence Agency. He has been stationed all over the world. He's a publisher of the book Good Hunting and American Spymaster Story, which I highly recommend was excellent read. Jack. Here, we are back in the Middle East again with more conflict here. Let me just start with the intelligence area here. What happened been that the vaunted Israeli intelligence, the American intelligence did not pick this up.
Well, I think everybody scratching their head. I think everyone recognizes it for a failure. When you look at israel I mean, I've worked closely with them over the years. They're very talented, they were at the cutting edge of technology. They know their target right, they know the threat, They've applied a lot of the fine technology. So we have to ask ourselves today how did Hamas get past that?
And then the second area is the human sources. And again I think many of us probably were relying on the Israelis to have Hamas covered in a way that somehow it would have been an early warning. It's the early warning that you miss. Parts of intelligence are not unusual, but they miss that early warning something pretty good like this.
There has to be an examination of conscience by all intelligence service that asks or do we have the right balance between technology and human and are we applying the right way? And what countermatters are we dealing with. So I think it's a tragic situation and an intelligence failure that lawrance after action, very careful analysis.
What do you think Hamas? And maybe if it's working with HASBLA or others. What's ultimately their goal here, because now they've broken through borders at multiple points in Israel and carried out horrific terrorist attacks.
Was that it?
Or do you think there's there's there's more to come. Are they trying to bait you know, Israel into Gaza, Are they trying to blow up this conflict even further? Or do you think that was you know, this was the plan and it was accomplished.
I think there's a lot of complex geopolitical issues behind it. Whether the organizers of it took all of them into consideration and played a great chess game remains to be seen. I'm allowing that it's possible. What I think what we're seeing is what there was. Other words, they decided that at a certain point they were going to attack. This has been long in coming. I think they needed it
to sustain themselves and to push back. The thing that is stunning about it is that this is totally different in the level of sophistication and coordination, and I believe they had help. I mean, it's hard for me today. I may be proven wrong, but this looks like help from people that have done complicated operations, and specifically the Iranians. So the Iranians have one set of things at play, you know, Mas has some the Russians were right in
approving it, and they have things to play. There's the Sauti Israeli prospects of the peace agreement, establishing relationships, if you will. So there's a lot of play. But I think Hamask just wanted to have a successful operation. This may exceed their expectations, but I think they weren't. They weren't doing it on the fly. They executed their plan and I think we saw it after that. I think it's the Israelis that have the game. They will they
will decide how this plays out. I mean, him all women forced that they could flatten the country if they wanted to, So they have to calibrate it. But I think that Hamas can come back with new tricks. I think they pretty well run the course. Can his ballage jump in? Can there be problems in the West Bank? All that remains to be seen. But I don't think it's any in anyone's handbook. This part they're playing. I think they're planning day by day.
Jack, you bring up some bigger issues as it relates to Iran, maybe even Russia. You know, I guess that the issue is that ties in with Ukraine. I mean, what role do you think the United States should play in the coming days and weeks now.
I've been talking about it for some time. I think there's a grand struggle that is taking place in front of us in terms of the balance of power. On the one side, you have the democratic forces and its allies, and the other you have the non democratic forces on the other There is a big game that's being played well beyond Ukraine. Ukraine was clearly the first manifestation of it, but you have Russia, China, Iran, North Korea. But now they're extending it and trying to spread spread the faith
of the Gospel if you like the other countries. If you look at Latin America, there's turmoil there in terms of elections, and in Africa, tremendous turmoil. It's very reminiscent. I hate to say it because, well, you're a Cold warrior, but it's so reminiscent of the international dimension of the Cold War, where the West and its allies were fighting them and counterpunching everywhere. Every once there to be a hot war so I think we're looking at it, and we have to look at a bigger scale. This is
not just a fight between Hamas and Israel. There is this like Ukraine is going to alder the geopolitical dynamic of the balance of power, and now we're in the big time where things can get misunderstood, misconstrued and we end up expanding hot wars.
Are you concerned about the impact the impact of this, I don't know if if you're saying this is kind of an axis of evil here the Russians, the Chinese, the Iranians, and North Korea, but certainly a lot of those countries have been aim for misinformation. And US elections were approaching one and you know, you've got a radical contingent in Congress that seems to, if not support Putin, at least be opposed to Ukrainian aid. Are are you worried that they've sort of infected the US Congress.
We're in a new age where artificial intelligence disinformation is part of the realm, as part of the big game, if you will, and the Russians have been using them for some time. I think there was a general slowness in recognizing the breadth of it. Including involvement in our elections, which was I was more upset about the fact that they were involved in not that they were collecting information, but that they were playing in internal US affairs. Is
really quite unprecedented. I mean, there's a little dabbling here and here in history, and the same is true on our site. We do not meddle inside their country. This dynamics, so this information and I would just bring it to the moment. This information is very much part of the Hamas if you like, and its allies propaganda. The propaganda
is out there mobilizing their friends, and it's dynamic. I also should have put a footnote the cyber attacks at the very beginning of the Hamas attack are very impressive. So you're looking at that new dimension of war, just like you're looking at new dimensions of war in Ukraine.
This experience will not only be lessons learned for intelligence officers, but it's also going to be lessons like lessons learned on war fighting and how we are going to deal with this, and it won't be just in the Middle East. So I think hold on to your seat.
Jack, thirty seconds left. What do you think is Israel does next? How do you think they react.
I think they have no choice but to use an iron hand, and with that will come, you know, repercussions. I don't see how it's possible feasible that had a soft landing negotiators. I think it's nonsense to suggests that at this point, when you look at the savagery of it, How of the Israelis that have suffered so much in history, how does the government stay in power and not set this right? So I think the repercussions are going to be very hard. I take that word everybody better. It'll
be hard landing with long term implication. Getting back to the peace DAGs.
Actually, Jack, I'm sorry, I just got to leave it there just because of time, But thanks as always, Jack Divine, President, founding partner of the ARC and Group.
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Let's go to our next guest right here to get a sense of kind of a broader view of these markets here in the context of what is just another piece in the wall here in terms of geopolitical issues. Quincy Crosby joins us. She is the chief of Global Strategist for LPL Financial. Quincy, thanks so much for joining
us here. Based upon your experience when you wake up to find an event like this, what's happening in Israel or what's happening in Ukraine and other parts of the world, in your experience, how do you kind of view markets in this how do you view positioning? Is it let's just kind of not you know, make quick changes, or how do you typically react?
Well, you know, very often the first response in a mar is sell first, ask questions later. We didn't see that in this market. It's actually been maybe because it was the weekend, the market had time to assimilate what was going on. But you don't want to do anything drastic because there's still uncertainty hovering over the market. Now
you would want to go into treasuries, obviously gold. You see that the treasure market will open, and you want to see the stocks that you want to buy may wind up being even more attractive than even in this death by a thousand cuts that we've had in the
market over the last number of sessions. So again you don't want to be but I will say this, we're paying attention to energy, crude oil is hyper hyper alert to any rumor, any chatter of whether or not this conflict will expand into the deeper Middle East and or producing region. And also defense stocks. There is no doubt about it that we need more defense spending, and I think it's going to happen because of this in Ukraine.
Obviously you have to imagine it will expand given what we've heard from Netan Yahoo and also given his position there. I wonder what you think about treasuries now. The market is closed today for the bond market is closed today for Columbus Day. But we have yields hovering at very high levels. So for example, the ten year right now at four eighty, the twenty year at five sixteen, five seventeen,
and the thirty year at almost five percent. You know, typically this is a place at Quincy where you see investors go for safe haven and right now would be a time when they would use that, do they?
You know?
When the market opens, buy up these treasuries and force those yields back down.
I think you'll probably see that.
It won't just be.
Investors.
I think it's going to be global if the situation remains the same, or certainly if it looks as if there's going to be an escalation in terms of what Israel intends to do.
So Quincy. I mean, I guess one of the questions here for in investors is is this kind of the new normal? I guess, I mean, do I need to have my portfolio structure in such a way that, you know, it just seems to be more and more uncertainly out there. From a geald political perspective, do you view it that way? Or is this kind of we shouldn't go that far?
I guess I don't think we should go that far. I mean, let me say that if the European Union, the US, China for example, can contain this event to just the region, it will be it will be significant for the concept of g A political cooperation. Nobody wants to see this expand maybe has blocked does Humasque, but overall, uh, there's a broad consensus that this can't go beyond these borders.
So that would be good that would be positive. But overall, you know, we have to look in Washington as to whether or not Washington can come together come up with a concrete package for defense, not just for the Israeli side and Ukraine, but for the United States. We're short in terms of defense spending. It's down, and we don't have the stock calls that we need. It must be done. Maybe this will be the impetus for it. There's nothing
better than strength. There's nothing better than a government that is intact that actually helps prevent this kind of event.
So it would help a Speaker of the House maybe the first step.
Paul pointing out that we don't even have a Speaker of the House here. And part of the problem was obviously that the far right didn't want to fund any more support for Ukraine. And you have to wonder, I guess Israel is a different story, especially for the far right. But does the political situation in the US concern you at all? Quincy?
Oh?
Yes it does.
Again, if I were, let's say, you know, I wanted to do something militarily overseas, this would be a good time because just the way Hamas looked at what was going on in Israel and the strikes and so on. It's always a good time when a government seems as though it is not integrated properly. And you're right about the conservative element in terms of spending more defense for Israel. Very strong evangelical Christian base that is very pro Israel and has been historically all right.
So Quincy, let's step back. Earnings are starting off in ernest. Later this week, we'll get the banks here. What are you looking for in this earnings cycle?
This is crucial and I'm glad that we start officially with the banks, especially JP Morgan. I want to hear what they have to say about the consumer credit card delinquencies, late payments, whether and who's being affected the most. I think we know that it is lower wage journals, but we want to hear from them rather than this conjecture, than the headlines that we see every day. They will
have a good handle on it. Also, they're going to tell us about loan growth from their customers, from their client base overall, not just credit cards, and the guidance
that the companies have. This is crucial because one of the things that is concerning and has been for some time, but it's been holding up, is margin compression, because if we see margin compression deepening, and we don't think it's going to be, but if we do, they're going to have to cut costs and that is going to affect the labor market, which is actually held up as we
know and indicates resilience. But any sense that companies need to cut costs in order to get that bottom line, it is going to hit the labor market, which will hit the consumers. And then that leads you to the worry over a darker landing as opposed to a softer landing. We don't expect it, but we're watching for.
It absolutely, all right, Quincy, thank you so much for joining us. I always appreciate getting your perspective. Quincy Crosby. She is the chief Global strategist at LPL Financial. Again, geopolitical risks front and center here. Central bank policy also a big issue for these markets. And then starting really later this week, particularly on Friday, with the big banks, we're going to start getting into the earning season.
Thanks for listening to the Bloomberg Markets podcasts. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller I'm on Twitter at Matt Miller nineteen seventy three.
And I'm Faull Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio