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Check in with her. Next, I guess Mick Molroy.
He's a co founder of the Lobo Institute, former paramilitary operations officer at the CIA, and former US Marine Infantry officer for sixteen years, so we thank him for his service.
Mick, it is bad.
In the Middle East, and it looks like it's gonna get worse. What do you believe Israel should do at this point?
You know, I think I heard that every day when I came into my office when I was responsible for the Middle Least, and it's not always that bad.
But you're right.
I agree with you.
It is bad right now in two ways. Obviously, Israel has to go and destroy the enemy that attack them on October seven, but the people of the Gods of the Palestinian also need to be allowed basic necessities such as food, water and medicine, and it looks like that is two things that we're going to do everything we can. We'd be in the United States to make happen. Very difficult in a situation like this, but necessary, and I think we're going to do it.
I wonder about the actual tools and technology that modern armies use because we see so much reporting about Hamas having this underground tunnel network, which sounds terrifying, but of course there were such underground tunnel networks in previous wars, you know, decades and decades ago. So do we have ordinance that can reach deep underground and destroy a network of tunnels?
So yes, The problem is when those tunnels are under buildings, there is ordinance that has the ability. It's time delayed so it penetrates into the ground before it detonates and then causes this concussion that can collapse tunnels. Now, if there are some of the tunnels in Gaza are up to two hundred feet underground, it won't work for them. And then on top of that, so subterranean fighting to your point of your question, yes, we've been doing that
for a while. But the complicated factor in here is normally you could just use combat engineers, seal them up, explode ordinance above them, collapse them. But now we have up to two hundred and twenty plus hostages that might be in those tunnels, and you can't do any of those tactics that we've done in the past or that
has been done in the past. When it comes to subterranean warfare, you have to go mile by mile, and there's over three hundred miles to try to recover these hostages at the same time you're fighting the enemy.
This brings up another interesting point, and it's like, I guess a moral battle that any army is going to have internally, At what point do you say, we do not negotiate with terrorists and we're going to move ahead with our main aim, which is destroyed hamas you know. Essentially, I mean, is it even possible to say we will sacrifice these hostages in order to achieve our goal.
So it is possible to do that, I don't think it should be done or will be done. Ultimately, militaries are there to protect their civilians, just like our military is to protect the United States and everybody in it. So, although it makes it much more complicated and quite frankly, it brings a lot more risk to the force to try to recover hostages. That's that's part of what we do, and I think they will focus on doing both. It would have been much better.
I mean, the problem is obviously in order to you know, in order to try and get those two hundred and twenty hostages back, you could risk losing exponentially more soldiers.
That's you could you will risk losing more soldiers. Yes, there's no easy decision here, but every time you send in a hostage rescue force, you are risking the force to rescue in most cases one individual and it's a mission failure if the hostage taker just turns and shoots a person at the last second. But you're still risking the entire force in the process, and sometimes they use it as a way to lure end forces to attack them.
That happens all not all the time, but certainly in most hostage rescue situations here it could happen up to
two hundred and twenty times. So because they could be separated, they're not going to be in the same place, and it's going to be extraordinarily difficult, and it's something that the IDF is grasping right now, I think and hopefully, and I think we do have members of JASOK and the CIA on the ground helping them, but they have very effective special operations and this is just a very complicated military problem.
Mick.
What do you believe at this time is the risk of this becoming a more regional conflict? You know, whether Siri or lebanonwear are we in that regard?
So listening to I thought it was high, and then listening to the Iranian statements yesterday, I think it's higher. So that is one of the reasons why I think the United States has been so proactive at moving now a second aircraft carry strike group to the eastern Mediterranean,
something that's unprecedented. Now there's a the twenty six MEW, the Marine Expeditionary Unit is being retasked there, and I think you're going to see more and more resources coming to the region because I believe, we think Iran wants this to expand let's hope it doesn't. Let's hope the United States doesn't have to get involved, but it looks like it's heading that way, and Iran can easily make this go from a one front war if you will,
to a three to four front war. And if they get involved directly, then this is going to be a regional war.
So where did the other countries align?
If the US is drawn in to a broader regional conflict, what happens?
What do the Saudis do? You know? What are the Turks?
Do?
They're in NATO? Are they are they on our side against Iran?
So when it turns into a war against Iran, if that's what happens a little bit, let's hope it does not. That would not be good for anybody the region or the United States, and certainly not Iran. Then the Saudis and all these Gulf states who do have some political ties and sympathies, certainly to the Palestinians, it could shift quite a bit because they are no friends of the Iranians. In fact, most of the Iranian efforts have been targeted
toward them. If you think about the Huthis and Yemen toward Saudi Arabia and the uae I. Don't think they'll become actively involved, but certainly that'll change the calculus for them. If this becomes a Israel, Iran and US conflict that goes well beyond Gaza. That said, it is not going to be in anybody's interests. This is going to be very destabilizing, its ruin economies, and it could be very
substantial if you think about it. There's several nuclear powered countries that would be involved in that, and Iran is on the precipice of getting their own nuclear weapon, and I don't know what that status is now out of the government, but it could be very close and that's something they could be racing toward right now.
McK prime Minister net Yale, who had an interesting weekend over social media seemingly putting the blame on the intelligence apparatus of Israel for the October seventh attack, how do you put all of that into context with what the military is trying to achieve here.
So I believe in the old adage, you know the buck stops here concept. You know, you're a charge, you're in charge for everything that happens or fails to happen. It was obviously an intelligence failure, but more than that, it was a security failure because even if you did not know that they were coming, the reaction times, quite frankly from what I've seen, are unacceptable, especially in a country the size of Israel and that's and that's that's
saying something. But it's also important to point out that we had a pretty massive intelligence failure and I think we have the best intelligence services in the world on nine to eleven. So it's less about poking fingers and more about you know, that needs to be addressed by Israel. I know they know this, it's not the thing that you know, it's a surprise to them. After that. I think they will. They just don't have time to do it now. It's going to have to be on their
to do list right after this. Uh, this current conflict is over.
So Mick, just as observers here, should we set in for a long grinding type of action here or is there any scenario where there could be something quick, decisive, measured in days not months.
So there could be, but I think that would require the Israelis changing their objective. If they want to destroy which is a military term, destroy Hamas, that makes them essentially completely ineffective in carrying out their military although in their case terroraced mission, unless they reconstitute themselves. If that is still their objective, it's going to take months and months to do that. In Gaza. If you look at MOSL in twenty sixteen, it took nine months and there's
only nine thousand fighters. Gaza has forty thousand fighters. And then if they want them to prevent them from reconstituting themselves, they're going to have some kind of occupation. They can't just leave and let it go because Aron will move right in, pick up the pieces and start harming them and all that immediately. So they're going to have to
be some kind of force. Maybe it's not Israelis. Maybe there's an international force, peacekeeping force that can move in to help with the rebuilding of the area and of course humanitarian assistants, but also to ensure that Hamas does not reconstitute itself. That's something that's actively being discussed. Much easier said than done, that's something that I think should be looked at all.
Right, Mick, thank you so much for joining us.
Really appreciate getting your perspective, your analysis. Mick mulroy, he's a co founder of the Lobo Institute. Lots of experience in that part of the world. Former Power Military operations officer at CIA, former US Marine Infantry officer, senior fellow at the Middle East Institute, So a lot of experience in that part of the world and with those types of geopolitical challenges.
You're listening to the Team ken'shur Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
All right, it looks like we are moving towards labor piece in the auto industry. GM reach is tenant of agreement today with UAW ending a six week strike. Let's break it down with a Gabby Coppola, auto industry reporter for Bloomberg News. Gabby, this seems like I guess the last deal to get done here. Anything unusual in this deal relative to what we saw from four to INSTALLANTUS.
Not yet.
We don't have enough details to say if there is big, you know, differences, I don't. I mean, I think obviously they followed the pattern and on wages, you know, twenty five percent over four years and eight months, plus inflation protection or inflation adjustments. I think that money for retirees had been one of the big sticking points towards the end for GM, and that's why you saw I THEK UAW actually expanding their strike this weekend against GM before
it got done. But I think I think temps and retiree you know, money for pensioneers and retirees with the sticking points, and we don't We'll see what that extras little strike did if that bug GM up to be in the same place as Fordham, stillant.
Is or not right, because walk us through the differences between these three auto manufacturers. They're all big, right, but GM has a lot more I think retirees to consider. GM has, for example, more temp workers than than Ford, maybe a little fewer than Stillanis.
So there are differences between these three companies.
That's exactly right.
I mean, I think once Ford set the pattern on wages, that was the pattern, you know, But then you get into some of these other issues exactly what you mentioned. JAM has much bigger pool of retirees than say Stilantis does, but Stilantis, you know, has fewer plants in the US than Ford and GM.
Ford has the most.
And the temp worker issue, that was an interesting one because Ford has always kind of been the boy scout here of the D three, like they always like to brag that they have more American you know, workers and you know, full time workers in their counterparts. And that's true. So it was kind of less painful for them to bring up the temps than it would have been for a GM in Stilantis. So they were Yeah, I think they're probably happy to see GM and Bland is getting pushed to where they are in that.
Regard because Ford had what a GM has like ten percent of its workers at any given time or temps right right, so that a little more and Ford far fewer.
Ford was like around what we reported going to the strike was Ford was around three percent. I think JAM was around nine or ten percent, and Silantis was.
Like twelve percent. And I think one of the things that really strikes.
Me mat just looking at this what the contract they got, it is like complete.
They completely turned the tables.
You know, the companies were really used to going into these things and squeezing the union.
Harder and harder.
Silantis wanted even more flexibility to use more temp workers. They wanted to eliminate, you know, thousands of jobs. They wanted to close this engine and complex in Trenton, Michigan, Toledo Machining, and.
None of that happened.
I mean, they put it price Delanta's put a vehicle back in Velvedere or Illinois. That was a huge deal because that was a major issue for the UAW. That was you know, thirteen hundred people got laid off the spring when Silantis idled that plant, and it really did not look like it was coming back. So I think what really strikes me is just how much the union
really turned the tables on the companies. It went from the union, you know, really getting pretty concessionary, you know, modest wage increases, things like that, ever since the bankruptcy, you know, ever since two thousand and seven, really even before the bankruptcy when they started making cuts to kind of help the automakers survive what was coming.
And this, I mean, this is what May said he was going to do, and you know he did do it.
Like they really I'm not saying they got everything they wanted, but they got a lot and they definitely be back to aut of the confessions that companies were looking for.
So what what did turn the tables there, Gabby? Was it just simply catching up and trying to get back what they had conceided over the last twelve to fourteen years, or is something fundamentally changed within that relationship.
I think it was a few different factors.
I mean, one, I think the automakers knew they needed to pay more because of inflation, right, I mean I always remind people of this that, you know, we saw during the pandemic, the labor market's been very tight. Ever since then, inflation has been really you know, the highest, and you know interest rates are high. That was really squeezing people. I mean, don't forget a temp worker. You know it takes landing for instance. You know, they had
the biggest number of temp workers. Those people made fifteen dollars and seventy eight cents an hour. And then you think about all the inflation that happened over the past couple of years, you know, the non union employers, the Amazon, Starbucks, everybody was raising wages to respond to the tight labor market and inflation. And the company, the car companies kind of hadn't done that. They hadn't paid the bill, right,
the bill was coming. So I think for sure part of it was like they legitimately knew they had to pay more. I think part of it was, yes, you know, after two thousand and eight, people really feel like they deserved the mentality of the Union is that we gave these concessions to you guys to get you through. They weren't supposed to be permanent, right, And the car companies were like, no, this is our new business model, this is our new labor costs, this is our new operating.
The forget, by the way, Gabby is it is some of this also, for example Stilantis. It's easier for them to agree because, as you say, they don't really make that much stuff in this country.
And if they're gonna if somehow.
Magically Dodge and Chrysler become brands where they're gonna produce more cars.
I mean, that doesn't seem like it's gonna happen.
Now.
They'll make them in Canada, or they'll make them in Mexico. I mean, this is essentially the Union sealing its fate in terms of uh, not not going to add any extra capacity in the US for a few years.
Are we well?
I think you know that is certainly a concern, I think, and I've even heard that concern express from some people in the labor movement, like, oh, I hope we didn't do so much that we're now going to shield ourselves from future investment. I'm not, you know, I am. I am not going to rush to judgment. I'm gonna wait and see what happens. I look forward to doing a lot more reporting in the coming weeks, talking to people on the executive side to say, wow, what are you.
Guys gonna do here?
You know?
But yeah, it's not It's true people want what flavor costs.
On the other hand, you've got the Inflation Reduction Act, You've got all these incentives, you know. And I didn't mention, but obviously I think the biggest thing was Sean Fain and new leadership at the UAW.
This is very.
Different, more hard left, more you know, just really more radical, more just more militant.
Well, and I wouldn't I wouldn't want to.
I wouldn't use the term unbribeable Gabby, because I would want wouldn't want to make that allegation, you know. But but past union leaders that are in prison, right, Yeah.
Absolutely, I mean I think that, you know, I would say that some things that were great that the Sean pain and the leadership did was they brought this level of transparency to the union and to the process of negotiation. I mean, Fain was on there every week doing these Facebook live you know, updates speaking directly to the membership.
You know, in the past, this was something that happened behind.
Closed doors with a few group of men, you know, and that would come out and be like here's the deal, you know, and there was a lot of a lot of mistrust between the leadership and the membership, especially once the you know, corruption scandal started. So in some ways you kind of had to have this like clean break
with the past and do things really different. And I think that Spain just really won the trust of people, and it feels like a much more democratic union and honestly like a healthier union just from like an engagement standpoint. And I think that gave them.
A lot of power.
You know. I don't think they could have gone on forever, right, Like people were starting to hurt, especially people have been on strike since September fifteenth, like at the g plant, you know, the you know, stuff like truck Plant and Michigan Ford.
You know, people were getting tired, right Sure.
Hey, Gabby, do you think d UAW takes these wins and maybe it goes down south to some of these non unionized plan that's definitely.
They're one hundred percent that's the plan. I mean last night Sean Fain, when who was going over the Ford details, he said, just going to be the big three. It's going to be the Big four, five six, meaning they have did the whole of these contracts. Was this is our calling card to the non union plans?
Fascinating.
I wonder when we get more details, if we're going to find out cool stuff like, uh, what cars is Dodge going to build?
What cars?
I mean, is Chrysler only going to have the PACIFICA or are we going to find out plans.
For the future Productler has shown a lot of Chrysler is really trying to go beyond you know, the minivan. Well, I mean, we'll see what the actual industrialization plan is. But I mean they brought out a lot of really sleek looking kind of crossovers kind of you know, I've been a very kind of post hopefully like your more affordable kind of stylish that would kind of appeel to, I think to like younger people, you know, that kind of you don't necessarily have kids twenties and thirties.
Crossfire after the crossfire was pretty cool at the TI time.
Yep, all right, all right, Gabby, thank you so much for joining us.
Gabby Coppola, auto industry reporter for Bloomberg News and Journeys on this gym reaching a tentative agreement with the UIW ending a six week strike. So your dollge Challenger with the scatpack was actually made in Canada, right, Yeah, whereas my BMW was made in Tennessee.
That's right. So I bought an American all.
The BMW X cars, so all the SUVs are made here in America, all right, So I bought Americans.
About that.
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All right, let's get back to Israel.
We want to broaden our discussion out to kind of a geopolitical discussion of that region of the world, and we can do that with Ambassador Adam Early. He is a principal at American Consultants. He was a former US Ambassador to the Kingdom of Bahrain from two thousand and seven to twenty eleven, so he knows that part of the world. Ambassador, thanks so much for joining us here. I guess there's a million ways to go here. It seems like Israel is really ramping up its attacks in Gaza.
One of the concerns, obviously for you know, the United States and others, is what is the risk right now? Do you believe of this kind of regional conflict kind of and focused on Gaza expanding into a more of a regional conflict bringing in other players. Where are we on that risk spectrum right now?
Well, it's already started. Frankly, over the last two weeks, you've seen pretty constant exchange of fire between Hesbela in the south of Lebanon and Israeli forces in the north of Israel. It hasn't gotten as much attention as obviously the hostilities in Gaza, but both sides have suffered dozens of casualties in that on that front. And then States has been attacked dozens of times in the last couple of weeks in its forces in Iraq and Syria have been attacked by drones and missiles.
Fired by groups controlled by Iran in those territories.
So you know, I would call it a not even a boil, but a kind of simmering of the pot, which we see as the heat rises.
The question is will it will it reach a high boil?
And frankly, that's what the Biden administration is spending a lot of its time tending to.
I wonder first, I want to say that nothing justifies the attacks that we saw on October seventh from Hamas into Israel. And I don't want anyone to think that
I that I'm going there. But did this did this whole tragedy evolve in a sense from the attempt of the US to normalize relations between the Saudis and Israeli's I only ask because I saw who's the New York Times columnist that you loved pretty much, Tom Friedman, I think, wrote a piece saying, you know, when when we saw a picture of an Israeli like defense minister getting all suited up to pray in Jetta, that it was sure to outrage the Arabic world.
Well, the short answer, in my opinion is no. But remember everything is connected, right. But the reason I'll explain why I say no, But at the same time, there's a connection. You know, this attack which involved thousands of Palestinians invading Israel on by air, through paragliding, land and sea, right, was and seizing pre determined targets, right, was a complex operation that that book.
Israel totally by surprise.
Now, you don't do something like that without years of careful planning and preparation.
Right.
Okay, So the rock Prochemont between Israel and Saudi Arabia, it's only been the last couple of months, right, So clearly.
Hamas has been planning this for a while, right.
And and one cannot say that the.
Provocation or the what set this in motion was Israel stauding normalization. However, however, and this is where the connection comes in. Hamas uh Is.
Is competing for political power among the Palestinian and Arab street let's say, so you know, they saw themselves as maybe getting out maneuvered a little bit by Israel in its rapprochemot with the Arab states like Bahrain, like Uae, like Morocco, who were all signatories of the Abraham Accords, which is where we were trying to bring Saudi Arabia. So again it's not unconnected, But at the same time, it's not Saudi related.
It is basically peace related.
In other words, Hamas, which is a military terrorist organization, doesn't benefit from peace, right, they only benefit from continued conflict.
Adam or I want to get your thoughts here on these hostages, because that is just a difficult, difficult situation for Israel. What is the role that Qatar is playing in this? And is there any scenario where this ends?
Well, you know, there's been a lot of how should I put it, there's been a lot of esteem being let off in the media and about Katar, And you know, Katar is a country that I know very well, I've worked in, and it's again, it's very complicated.
But here's the here's the bottom line. The bottom line is that Cutter's relationships with Hamas have come about at the request of and with the cooperation.
Of the United States and Israel over the last twenty years fifteen twenty years. Why because Hamas is a terrorist organization, we can't deal with them.
We need somebody who can, and we've.
Chosen we, meaning the United States in Israel, have chosen Cutter as our preferred intermediary. So when people say Cutter supports Hamas. That's really not fair because Cutter is kind of doing us a favor in terms of being a channel to Hamas to help stop hostilities, help release hostage, which is, help get money and supplies to God to
Palestinian civilians. Now, what's different in the present conflict really is that, you know, the United States and Israel has decided, have decided right rightfully, So I believe, you know, no more negotiations, no more business at all with Hamas.
That's over. We've gone from you know.
Tolerating an inconvenience to needing to eliminate a serious threat that puts Kutar in a difficult position. What they're trying to do, I think again, with US and Israeli cooperation is negotiate the release of these hostages so that Israel can then go in and flatten Hamas.
Will they succeed I doubt it.
Why because Hamas recognizes that the only thing standing between it and the full force of Israeli military are two hundred hostages.
So I wonder you know that's problematic in Gaza, and then on the northern border with Lebanon, you've got Iran lobbing missiles in via its proxy has Belah right, And it looks like from the rhetoric. You know, Mick Malroy just told us from the Lobo instuot he thinks Iran wants this conflict to broaden out.
Is that inevitable as well?
I think that's a little simplistic that Iran wants this conflict to broaden out? What does Iran want?
Iran wants two things.
It wants the United States out of the Middle East, and it wants Israel to be eliminated, right at least if you believe what the Iranian leaders have been saying for the past forty years. So the question for Iran is how to best achieve those objectives, right, is it by launching a full scale war between Lebanon Throughsbaula and Israel, which Israel, by the way, which if it happened, Israel would by the way, destroy Beirute, I mean destroy it, right yep?
Or does it?
You know?
So?
I think I think frankly, Iran is kind of figuring its way, feeling its way through to see what's the best use of its exact courses.
Us unfortunately, just leave it there because of time up against the time Costramper really appreciate getting your time. Admiral Adam Early, he's a principal at a Barrow American Consultants, giving us his perspective on the developing situation in it.
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All right, I am, I'm gonna be honest with the people.
I'm not looking forward to talking to our next guest here because our guest wrote this. The last time the Federal Reserve raised its benchmark interest rate and held it there for a considerable period of time was in two thousand and six. In two thousand and seven, that episode and in calamity. This time maybe different, after all, with the benefit of hindsight, policymakers can do better, but you can't count on that outcome. Ed Harrison Joints says he's
a senior editor for Bloomberg News. He joints us here in our Bloomberg Interactive Brokers studio. Ed Boy, I remember that time period really well, and it was scary for everybody, And I was a seasoned Wall Street veteran.
I didn't know what was gonna happen.
Talk to us about the parallels you see maybe from today back to two thousand and six, two thousand and seven.
Yeah, a great set up there. I have to say that I do remember it well in terms of the housing bubble. But the thing that people don't really remember as well in retrospect is that everything looked pretty good by and large right up until the very end. Was that holding interest rates at a high level over a considerable period of time that ended up hurting the economy.
You know, BERNANKI, he raised the interest rates up to a certain level and then they were They stayed there for more than a year, and it was in that period of time that things started to fall apart. And so that's the thing to be worried about. We're not in that period yet. We're still in the hiking period. We're still getting to that level. But once we get there and stay there, that's when we have to be worried.
Of course, it's not just rates that are interesting right now, it's growth. Right five point four percent in Q three was the Atlanta now GDP forecast. We saw a reading the other day at four point nine percent, so just huge. But how much of that is fueled by deficit spending? And how is that different than our situation in two thousand and six because we're running now two trillion deficit and pushing out total government debt to over thirty three trillion dollars.
Yeah, you know, I don't think that that number, that two trillion number in the deficit from this past year is sustainable for the longer period of time. And so just from a pure growth trajectory perspective, it would suggest that in twenty twenty four we're gonna come down from those levels that you can't consume. The way that I was putting it in the piece that I wrote that you were flagging is that it's almost like the cash
out mortgages people had. They had that little extra bit of money in their pockets as a result of the appreciation and their home values. We have that little bit extra of money in our pockets because of the transfer from the deficits. But once that goes away, then I think you will see people start to spend incrementally less money than they were before, and so then that growth number is gonna come.
Down, all right, any reason to believe our Federal Reserve has learned its lesson, internalized the lesson back from the Great Financial Crisis, and maybe how it acts going forward.
Meaning by the way, meaning what Paul, Because I sense that you think the Fed needs to start cutting rates, maybe in a preemptive thing.
I think that No, No, I think they need to just hang for a little while. But yes, in twenty twenty four. I do believe a rate cut at some point next year. But do you think the Feds kind of internalize what happened back in the day.
I think they have, like on multiple levels. I mean, I'll give you three different points. One is, in terms of eighteen nineteen, you know, when bad things happened in the leverage loan and in the high yield market, that you saw that the Fed stopped their rate hikes at
two point five percent. The second thing is the fact that when we saw bad things happen in March with Silicon Valley Bank, they came in there and they, you know, in sort of almost a precise way, they created a liquidity vision just for that specific part of the economy, without like you know, flooding the entire economy with money.
And then the third thing I would say is is that the FED is much more focused now on making sure that the you know, the people who are the last on the employment ladders I still have a chance to get in there. They don't want to go to the days where you know, people get hired and then like you know, three months later they're the first to be let go. They want the cycle to last, and Jerome Palace talked about that.
So but I mean, if we're focused on growth, if we're focused on unemployment, are we still watching what's going on with inflation? Because that is the other part of the dual mandate that they've been talking about for two years, right and promising us that they're going to get it back down to two percent.
We're still more than fifty percent above that. So do they just give up on that?
No?
And you know, I think that's the tricky part, and that's the scary part in the sense that really, if we're three percent now on almost all levels, there's no way, especially with unemployment where it is, you know, which is below four percent, that they can do anything but hold. There's no way they can cut with inflation at those levels. So that almost guarantees a repeat of the hike and hold for a long period of time that we saw
that caused so much pain fifteen years ago. So I think that it's very unlikely that we're gonna get out of this cycle without something breaking. The question is is what is it gonna be and when it's gonna happen, and what's their reaction gonna be once that does happen.
So if we get I mean, we say two trillion dollar budget deficits are unsustainable, but who's gonna change that?
Right?
I mean, it doesn't look like we're gonna have a much smaller deficit. I mean maybe if it's a trillion dollars that's much smaller, but still too much. Right, Are we gonna see the budget deficits continue to run at this level? And if we don't, the FED has to cut in order to pad the economy.
Well, you know, I would look at it in terms of what I would call the monetary offset. You know, we know from the past, when the fiscal policy is pumping money in, the FED feels compelled to do something about it. And so everyone's talking about rate cuts in twenty twenty four. If we still have these deficits, adding spending, keeping the GDP growth high, we could be talking about
rate hikes in twenty twenty four. I think that that is a potential that we actually get another rate hike, not in December, but in December and then again later, or you know, even multiple rate hikes in twenty twenty four.
And I'm trying to refinance the mortgage. My man, I need rates to come down a little bit, so work.
With me here. Labor market.
I tell you what, I haven't understood this labor market really at all. I'm just so shocked that it remains so robust here. And some people tell me it's the hoarding of workers. I don't know what that means.
I don't know how that robust I think is a question.
A lot of people are starting to ask, yeah, what are you thinking.
Yeah, I think that it is. It's bifurcated in the sense that it isn't as robust as we think, right, because when you look at continuing claims, they're very high, and they remain high. But at the same time, when you ask businesses, how do you feel, they're like, you know, we're not getting enough workers. There aren't enough workers out there. I think that there's people. When people talk about the
skills mismatch, it really is there. So the people who are not getting employed are remaining on the unemployment rules for considerably longer than we would like. But at the same time, there's still that dearth. I think it's because we're in the baby bust period. That's those people who were born after sixty four coming into the prime. All of the baby boomers are leaving, and that's leaving us,
you know, with a shortage of workers. And as a result of that, it's putting upward pressure on on wage games and that's helping bolster the economy in some ways.
I don't know, I'm still here.
You think the Fed's can make a mistake, and I don't know what a mistake is raising I would think it would be a mistake. But do you think the FED makes a mistake because I'm not sure what's going to break out there, like the housing market back in the day.
Well, you know, the question is is it is it a mistake for them to take the punch bowl away? I mean, if you look at any chart of the S and P five hundred over the last fifteen years, it looks pretty astonishing.
Taking the punch bowl away in this sense would mean holding, right, No, taking the punch bowl away would mean raising holding. Is the punch bowl still there, which is crazy to think about because they've gone up five hundred and fifty basis points in less than two years. But at the same time, the fiscal span is just like a machine, right yeah.
I mean you have these two forces going against one another, and so they're thinking, Okay, once this machine starts to dwindle, then we can we can sort of passively tighten. You know, they haven't said those words exactly, but if.
You listen to lots pretty much said that right, right, Yeah, we're passively tightening because real interest rates are going up.
Yeah.
And moreover, when you have all of this money being pumped out in terms of deficit spending, that means that you, as a result, need more higher rates to absorb all of that.
All Right, that wasn't so bad.
Ed Harrison, thanks so much for joining us. Ed Harrison's the senior editor Bloomberg News.
You're listening to the tape can'cher live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app Bloomberg Dot Com and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
Kaylee linestings and she's host a Bloomberg sound on and Bloomberg's Crypto. And we also are joined today by Amy Lee Copeland. She is a partner at Rouse and Copeland. That's a law firm based in Georgia.
So we want to check out with both of these folks. Katie.
Let's start with you on the Republican front Lots of movement there in the list of potential nominees here, Mike Pence dropping out, Nicky Haley rising in the polls. What's the feeling in DC these days?
Well, at least the field pole is narrowing. We've had a number of candidates competing for the Republican nomination, and slowly we've start to see them trickling out of the race as it becomes abundantly clear that Donald Trump is still far and away the front runner. That said, there are some people on the upswing. Mike Pence is now out. He has not actually endorsed any one of the remaining candidates yet, so we'll see if he throws his support
behind someone else, of course's former boss. In Iowa, which is really where a lot of these races are now focusing, is still leading by dozens of points at forty three percent, but Nicki Haley at sixteen percent, which now ties her with Ron DeSantis. He actually has moved from nineteen percent in Iowa and August down to sixteen, whereas she's jumped from about six percent in the polls up to sixteen. So she's really one that is ascendant right now exactly.
Well as it relates to former President Donald Trump, obviously, one of the big big issues for his candidacy would be his legal challenges, particularly well, there's one big one down in Georgia. Amy Lee Copeland, thanks so much for joining us. Talk to us about what's the lay of the land down in Georgia these days for the former president and he's illegal woes there.
Hey, good afternoon. Right now, nineteen defendants have been indicted in this massive Georgia Rico indictment. Four people have entered please of guilty, including three of Trump's legal advisors and a bail bondsman's with connection to the Trump campaign. The DA's office has approached six other defendants to try to solicit please or to at least engage in plea negotiations, without any success. And they have confirmed to CNN at least that Trump and Giuliani and Eastman and Meadows have
not been offered pleased. So the case continues to go along with the documentary evidence. And now the attorneys who are pleading guilty and agreeing to testify truthfully er in Jenna Elicu's case, cooperate fully against the former president.
So Amy Lee, what's the worst case scenario for Donald Trump?
Well, the worst case scenario is that he goes to trial and gets convicted. There are documents that the DA has encountered. Remember there was not just a grand jury in this case, but a special purpose grand jury then investigated for over a year. It hurt testimony from seventy five witnesses, including election deniers, and this special purpose grand jury issued recommendations that people being guided, and a regular grand jury didn't indict. So the case is moving along.
It should go to trial probably after the January sixth trial in DC, and that looks like it might be even in summer of twenty twenty four.
I'm just wondering because you know, we have an election denier now as Speaker of the House, and that after January sixth, So and then if Donald Trump becomes the US president, he would I guess, have the power to pardon himself.
Right, So, not in Georgia. Not in Georgia, I see, not for state interesting, not for stay condition.
Yeah, but it's not imaginable.
That he would be jailed in Georgia and elected US president and not be you know, let out to go to Washington, DC.
Right.
Well, no, I don't know, Kaylee. We kind of talk about this, Kayley. But let's be honest. The polls are telling you that his voters don't care. How does a party kind of deal with all his legal challenges here.
Well, there's still contending with it, Paul. But to your point, his base of support, that core base of Trump voters, always Trump voters, don't seem to have been rattled at all by each and every case that has brought against him, both civil and criminal. In fact, it really only seems to cement it as he kind of tries to frame this as a narrative in which the Justice Department is being weaponized against him. You look at the gag order that was just reinstated here in Washington in the case
that Judge Chutkin is precise. That's the Jacksmith election interference case that was brought here in Washington, d C. The federal one that gag Orger reinstated as his team tries
to appeal it. And he said, that's another example of the Biden administration being weaponized against him, even though this is a separate branch of government that we're talking about here, But it's that narrative that this persecution of a political opponent is what Trump is experiencing right now, seems to make those people who are supportive of him even more so. And that's something that the other Republican contenders for the
nomination are having to wrestle with. How do you avoid alienating that base of support while also trying to go on the attack against a front runner. It's very difficult, as we've seen proven time and again.
Amy, If President Trump were your client, what would you advise him at this point? Is a plea deal even possible? Is it?
Just what would you say to him?
Well, what I would say to him? And the advice that he takes seems to be dramatically different if you read about his other legal travails in the news right now, I suspect that he is going to go to trial. I cannot imagine that this former president would come forward and enter a guilty plea or even seek a guilty plea. And Steve Sadal, his attorney, has basically said as much that the Trump position is that these witnesses are actually going to help them and that it's not going to
be a problem for him. I fully anticipate that he will go to trial. I suspect though, that they are relying on a principle called jury nullification, that one person is just going to hold out and say there's no way we're going to convict the former president, which would launched the case into a mistrial and the DA could try it again or not.
It's fascinating and unprecedented, right, We've never dealt with anything like this. What's the chances, Amy Lee, that this that this ends up going to the Supreme Court.
Well, to get to the Supreme Court, it would first have to go through the Georgia Court of Appeals, the Georgia Supreme Court, and then the US Supreme Court can only hear it is the Georgia Supreme Court. Yeah, yeah, it could take a bath in it.
So Kaylee, what's the what's the feeling in Washington, d C? The Republican National Committee. I mean, it just seems like the Trump campaign, the Trump presence, the Trump positioning with the voters is so strong that he is the presumptive front runner.
Now, is that kind of the feeling?
It is?
It feels not necessarily like a solidified inevitability, but at the moment, it seems highly likely that Trump would be the Republican nominee barring something really unforeseen happening. That is kind of the feeling. And then it becomes one of general election politics, because just because the former president can lead in the Republican primary and win primary elections, that doesn't necessarily translate come or November twenty twenty four in
the general election. That said, we have started to see the gap between Trump and Biden closing. I believe the real kill of politics, average of polling, if it's a Trump and Biden rematch in twenty twenty four, which by the way, polling indicates voters do not want to happen. But if that happens, they're effectively tied within the margin of error, so it would be a very close one.
Amy.
As you look at all of the legal issues that the former president Trump is dealing with, which ones would present the most peril do you think.
Well, I think they all do. I think probably the easiest one is for the government to prove is the classified documents case. That seems like a real red light green light sort of issue. Georgia's, though, cannot be underestimated in the peril it poses to the former president. With the attorney advisors who've already pleaded guilty, they have admitted that some statements were false statements like the bals electors were the duly certified and electors duly certified and elected
electors of the state of Georgia. Jenna Ellis's guilty plea admits that it was false that dead people in Georgia voted or that felons voted, and some of those claims were the ones that mister Trump repeated in his call to Secretary of State Brad Raffensberger to find seven and eighty votes, even with other pleas. With Miss Powell's plea too, with the voting machines that those were breached and the voter data was taken, so everything presents a unique peril
to the former president. But I think probably the classified documents would be the easiest for the government to prove, followed shortly and closely by the Georgia case.
All right, Amily Copeland, thank you so much for joining us. Emily Copeland. She's a partner at Rouse and Copeland in Georgia, and she is all in the state of Georgia. Undergraduate degree from the University of Georgia and then a law degree from the University of Georgia as well. So all in there on the Georgia and Kaylee Lines, host of Bloomberg Sound On and Bloomberg's Crypto, just giving us a little sense of the lay of the land. Boy, the next twelve plus months are going to be absolutely crazy
from a political perspective. Not only do you have a presidential election, but you've got one of the former president who presumably.
You're listening to the tape Catcher live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship York station. Just say Alexa playing Bloomberg eleven thirty.
Let's stock Apple Computer Apple?
Why not? I mean, you know, it's not even called Apple Computer more. Apple Inc. I guess is the new one.
But that's stock. Let's just refresh our memories here. Two point sixty five trillion dollar market cap for Apple. The stock's up thirty percent this year. It's up about seven tenths today. They're goind have a product launch today. Kind of unusual timing. It seems like to me maybe they'll unveil some new Imax, MacBook pros, all that kind of stuff.
So let's break it down with Mark German.
He's a chief corresponding covering technology and Apple for Bloomberg News. I have no idea where he is, but he's joining us somewhere via zoom.
Hey, Mark, thanks so much for joining us here.
What are they calling this product launch tonight?
Something halloweenish?
I think maybe they should call it Apple Computer Inc. Again.
Right.
They changed the name to Apple Ink in two thousand and seven when they started selling the iPhone and some of the other mobile products. But today is all going to be about computers. The answer your question, they're dubbing the event tonight Scary Fast. Right, that's a flick at Halloween right in the US and elsewhere Tuesday evening, October thirty first. But they're also going to be holding their keynote tonight on Monday evening, which is a first, a
nighttime event. Usually their keynotes would start about fifteen minutes from now, but instead it's not going to start in for several hours. Now. The scary Fast is a double meaning because they're referring to their new chips and like you said, these new processors will be going into the MacBook Pro as well as the iMac, so.
Is you know, it's we don't really talk about the computers as much as you know, the Imax and the MacBook pros and that kind of stuff. It's all about the phone and the wearables and all that kind of stuff.
Just refresh our memories.
What the you know, the computer part of their business means to them.
Yeah, the computer part of the business means a lot more than the revenue it generates. It generates between let's say six and ten billion dollars a quarter, right, it generates about ten to eleven percent of their annual revenue each year. But it means so much more than that. Their most vocal consumers are the ones who are Mac loyalists.
These are the people who tell their friends to buy a Mac, to tell their friends to buy other Apple products, to tell their friends to buy iPhones, right, to tell their friends to buy iPads. Now, the other thing Apple's trying to do is they're trying to get people to buy multiple products, right, They're trying to get people to buy not only a Mac, but buy an iPhone, buy an iPad as well, and create that full ecosystem. And in many ways, the Mac sits at the center of
the ecosystem. So it generates only about ten percent of revenue, but it's so much more important than that.
Mark, talk to us about kind of the chips that are going into these things these days. Where are they getting their chips and where's Apple And I know there's been talk time to time producing their own chips. Just give us a kind of an update of what's happening on the chip side of the business.
Yeah, So today they're geting introduced three new chips, the M three pro and the threemacs, and these are their next generation versions of their in house Mac processors. These are chips designed and developed entirely by Apple using what's known as an instruction set or a core framework license from ARM. Right, We've been talking about ARM a lot lately, and they're actually manufactured in Taiwan by a company called TSMC,
So these are in house designs. And to make it very clear, this is the same exact chip technology that they've been using in the iPhone and the iPad and the Apple Watch for many years now. And the benefits for a computer are tremendous battery life, speed, efficiency, the ability to sort of customize the processor and the software to work together to create a better user experience. Before this transition, they were using Intel, which meant Intel was
developing and producing the hardware the components. Apple was producing the software, and so that necessitated a mix. Right, Apple is doing one thing, Intel's doing another thing, and sometimes the hardware and the software can integrate as well as it does today as it does today because they have
one company now developing everything. So it's actually a pretty unique thing in the industry and that has led to big revenue jumps, usability as well as customer satisfaction on the company's computers.
Lately.
Mark Let's switch gears and talk about China. It's obviously such a huge part of the Apple investment story, both as a supply chain issue in terms of sourcing product as well as being an end market for its products. So arguably there aren't too many companies more exposed to China than Apple. What's the concern there on the demand side, on the customer sales side, it just feels like there might be a growth in nationalism within China that may affect Apple product sales.
What do we know right now?
We really won't know for sure until the very end of January or early February when Apple announces it's Q one results. That's going to be the first full quarter of iPhone fifteen sales, and really the first full quarter until we start to catch win that maybe there's an issue with Apple and China related to government bands, increased nationalism, and the new Huawei Mate phone, right, and so we
really have to wait to know for sure. But the tea leads, we're reading the demand, we're seeing the anecdotal evidence, some of the reports, the research reports were seen from there is indicative that there may be a little bit of a slowdown in China. Now, if you were to look at Apple's website, if you were to look at the lines at the retail stores in China, You're not really going to see the full picture. Right, Those are
going pretty positive evidence of good things happening there. But as you know, the majority of people don't buy their iPhones through Apple, they buy them through carrier stores and such, right, and so we really got to wait to see the
full numbers to get the full picture. But if the latest reporting out of the region is to believe, there's a bit of a slow down there, which obviously, given that Greater China is about a fifth of Apple sales and is where the majority of products are produced, anything going on negatively in China is something that we and investors and analysts very much need to pay attention to, so our eyes are glued to that situation.
How much of a.
I guess is the Apple brand valued in China?
Among Yeah, the Apple brand is extremely strong in China. It's known as a very applent brand. It's one of the top tier brands. You can put it in the same category of things like Chanelle and Louis Baton and YSL potentially right right up there with fashion brands and so in China, many people consider it a mix of technology and fashion. That's why the Apple Watch is so popular there. That's why the high priced Max are gaining
in popularity there. That's why people in China are springing for the highest tier iPhones right these fifteen hundred dollars US equivalent plus devices. But clearly the brand is taking a little bit of It's on a little bit of shaky ground right now. I wouldn't call it a three alarmed fire, but it's something we're watching and once we get the numbers in the next few months, we'll really know how bad the situation is there.
All right, Mark, thanks so much for joining us. Always appreciate getting a few minutes of your time. Mark German. He's the chief correspondent Technology and of course that means Apple for Bloomberg News. He is based out in our Los Angeles bureau, which is an awesome office there.
Thanks for listening to the Bloomberg Markets podcasts. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer.
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