Putin Is Doubling Down on Support of Assad, Ariel Cohen Says

Here to tell us about Syria is Dr Ariel Cohen, Senior Fellow of the Atlantic Council. He is also the director of the Center for Energy and Natural Resources and Geopolitics at the Institute for Analysis of Global Security, and

Dr Cohen joins us from Washington. Dr Cohen, in the context of your sort of dual roles energy natural resources as well as politics, or if you could speak to the issue of natural resource as a strategic issue for the Russians, Is there anything that Rex Tillerson, he's formally of course chief executive X on mobile. Is there anything that he can say or do that would soften Vladimir

Putin's position when it comes to Russia and Syria. I doubt it because putting his doubling down on his support of Bashar Assad, he probably did not expect Donald Trump to turn against Russia and against Russian alliance with assad. Um. As you know, Trump called us At an animal. He has written him off just after the administration said maybe, uh, pushing as Adat was not a priority, and then of course assad went and did something so horrible as guessing children. Uh.

Tillerson is in Moscow. He is um actually decorated Russian um, beneficiary of the Order of Friendship given to him by Putting himself several years ago for the X on Russia X and ross neft Um big oil deal. He understands Russian predicament um. Russia is pretty much a one uh one pony trick, one p show with oil and gas and some of other um raw materials. Russia exports lumbert timber,

some metals, and of course weapons and nuclear reactors. Of course, as you saw with the bankruptcy of Westinghouse, Russian Rossatom is going to be in a better position to sell reactors around the world. But basically Russia is a bad economic situation and what it's doing in Syria is making that situation much much worse. Wait, well to that point, Dr Colm, what I don't fully understand is why Russia is so loyal to the shar Asad and why they

are so committed to being involved in the Syria Civil war. Uh. They want to support uh their ally UH, not just Bashar, his father Hafez was Russian ally going all the way back to the nineties seventies. UH. They have a strategic relationship with the Allawi's, with a sect that Bashar and his father came from. It's essential in Alloite Ala White regime, and also Russia in Iran are in a strategic alliance as well as the terrorists Iranian offshoot called Kisbala in Lebanon.

So this is the anti Western, anti Sunni Arab bloc in the Middle East. It is the Iranian Crescent going all the way from Tehran to the Mediterranean, and Russia is a very very important part of that. Is there any possibility that the Saudis will come in and maybe change the agreement to curtail the increase of oil because if Russia is dependent on revenue from oil production, why would the Saudis as Sunni state that is really in

confrontation with Iran and with bush are Al Assad. Why would the Saudis continue behavior that in a sense offers the Russians a financial incentive to keep doing what they're doing. Well, Russians are not happy with the oil at fifty, They would much of it have an oil at seventy five or But for the Sauties it's also a challenge. They five. They try to cut a deal with Puchin, in with

Iran and limit the production. But guess what, every time the production the price because of the production cut goes to sixty. Our shale producers in the United States, in the oil sands in Canada and other shale producers can pump more and the price almost automatically drives down back to fifty or even below fifty. The Salis have their own huge um economic problem with cheap oil. They are in deficit. Uh, they are preparing Saudi Aramco for an I p O that's always going to be the largest

I p O in the world. So Satis don't have a lot of margin. But we'll see if the Russians are really are not playing ball. Is Iranians are still threatening. Yes, the versalities still have the spare capacity to flood the market and drive oil to Let's say, at which point it's not good news for our domestic shell producers. Real quick, At what point do you think that the economic issues that Russia is facing with lower oil prices and sanctions

will feed into their willingness to compete continue supporting Syria. Well, there two or three challenges here. Number one, Uh, the Russians are very careful how they intervene in Syria. It's a relatively small force. It's not alone a lot of ground troops. It's more air force. But uh, the first sort of ringer for the Russians was at the G seven meeting where us uk um and maybe Germany. I know,

actually Germany was against it. They tried uh to impose additional sanctions against Russia because of the Syrian chemical attack. Italy and Germany where against it. But the Russians continue, then we might have to say, maybe they will do more sanctions. I'm so sorry, We're gonna have to leave it there. We can talk all afternoon. Dr Ariel Cohen, Senior Fellow at the Atlantic Council, also director of the Center for Energy Natural Resources, and geopolitics at the Institute

for Analysis of Global Security. We want to get the voice of an executive from the automobile industry joining us now as Ian Robertson. He is a member of the Board of Management and Global Sales and Marketing director for BMW. He joins us today from the New York International Auto Show, taking place at the Jacob Javits Center in New York. Ian Robertson, thank you very much for being with us.

Good to be with you. All right. I want to give you the chance, first of all, just to give us an update on some sales reports that you've just released, and then we'll get into the details of what you're unveiling, what you're showing off at the New York International Auto Show. You know, we just announced quality results. They're up around

five and a half percent. But I think a notable achievement was we did two fifty four thousand sales in March alone, and it wouldn't have been that long ago where that sort of number would have been almost an impossible dreams. So I'm delighted with the performance. Right around the world during Q one, we've heard a lot, particularly in the US, about lower resale values of cars and that you know, frankly, people have been saturated, They borrowed so much that they aren't going to buy that much

more in the near future. How come BMW isn't reflecting that in their March sales. You know, I'm on the record of saying at the start of that I thought the US market had pete. I thought it was being over pushed. I thought there was a lot of inventory on the ground, and you know that proved to be the case. We we cut our inventory a lot last year.

We didn't chase the last volume, which I think was an important step because at the end of the day, you know, we're driving for a profitability position as well. Um So from that perspective, you know, our results actually underscore that. As we come into this year, GDP numbers are good, the unemployment figures are also good, and I think, you know, there are some encouraging signs on Wall Street. Having said all of that, I don't expect a lot of upside in the in the US market this year

as well. So I'm very much in the position of we're going to a flat maybe single digit growth. We saw that in Q one. Let's see how it develops. During the rest of the year, But I don't think there's a big upside in the US market this year. Ian Robertson, you almost didn't make it into the automobile industry. You studied marine science at I guess the University of Whales, right, and you were not going to be in a desert

or in the North Sea. You wanted to be in something that you were passionate about when you when you joined the Rover at the age of seventeen, did you ever think you'd be talking about electric and electric hybrid cars? I think what BMW sold twenty thousand of them, or at least delivered more than twenty thousand so far. That's true. I actually joined the car industry straight from university when I was twenty one, but that's a long time ago

as well. Now it's thirty eight years uh this this year, so you know, from that perspective, the industry has changed a lot. But you know, I'm also of the opinion that what we're going to see in the next five or seven years will probably be more changed than we've seen in the past hundred and the car the street BMW included is just over a hundred years old and that's because we're seeing new path trains, we're seeing new materials,

were saying new ways of designing cars. We're seeing the customer behaving in a way which they haven't done in the past. Because you know, we're at the moment, for example, renting cars by the minute in many, many cities around the world. So all of these changes brought about by digitalization, brought about by the new way of thinking with autonomous driving and electro mobility are actually changing the whole perspective

of the industry. It's really really exciting times. Which market around the world is the one that has the greatest demand for electric cars right now? You know, it very much depends at this stage in the development what governments are doing. And you know the example I always use is Norway. You know, around about six seven years ago Northern Norwegian government, by the way, about the Norwegian economy is based on oil, they decided that they wanted to

go for electromobility. As such, they put a big incentive in place, no v A T on the cars. They allowed people to drive in the bus lane. So if you work downtown in Oslo, you can say forty five minutes in the morning, forty five minutes in the afternoon, free charging, free infrastructure. Last year, over twenty of the total market was electric. If you look at other governments who've done similar things, that's where it really works well. And I think we are seeing now an acceleration of

this right around the world. You know, I'm struck by the US and how different it is in the U s which is the biggest car market. Correct or is China Ano the biggest car up market or is it still the US? It's still the US right now. China is now the biggest car market in the world. China overtook the US three or four years ago. Wow, and way behind the times. Thank you for that clarification. So in the US, which is a massive car market, you have people going to trucks, uh, and you have you know,

this sort of move back toward fossil fuel vehicles. Is there any concern or downside risk that this move to electric won't go quickly enough to justify the investments that BMW is making in the technology. You know, we we look at every market individually, and as I said, government policy plays a big part in the actual takeup of electronome ability. But over time, you know, we are always seeing the reduction in emission levels. It's a very very

important topic for US and the industry in total. So overall this is a progressive position around the world. So, yes, trucks are important here. By the way, trucks are important or s A V s are important in many many markets around the world. In our Q one here in the US, we did around trucks, um. But at the same time that also tells you that the market is non trucks. So from that perspective, it's a good balance. Now, Ian Robertson, are you're going to be in Coachella this

uh this weekend? I'm not. I'm I'm back in Europe and I'm under Shane High Alright. The reason I asked exactly twelve hours of time delay? Well, the reason I asked us because of course BMW is debuting a variety of models, the BMW I three Electric. It will be at the Music Festival, uh this coming weekend. Tell us about the I performance line. You know, I performance is in good shape. And this morning in the World Car Awards, the I three picked up the Urban Car of the Year,

so another accolade. And you know last year we did sixty two thousand electric cars. We're aiming to do a hundred thousand this year. Q one would tell us where on target to achieve that, and that tells you this momentum is building. So you know, another addition to the range is the five thirty can be used in the multiple occupancy lanes in California. That's the first as well.

There are more cars in the pipeline, so we have an I eight roadster that's coming, and of course we've announced an electric I three, an electric Mini, and what we're calling the I Next vehicles. So the trend is is very very clear all around the world. Thank you so much. Fascinating to hear the new developments. Ian Robertson, member of the board of Management and a global sales and marketing director for BMW. He was speaking from the Javit Center where the New York International Auto Show is.

Right now and tomorrow we will be broadcasting live from the New York International Auto Show at the Javit Center to bring you the newest models, the latest automative trends and sales outlook. So I'm sure we'll be talking a lot more about electric and the push into more varieties of such vehicles. I'm Lisa Baram Away's here with pim Fox.

This is Bloomberg. We are about to get earnings starting tomorrow from the biggest bank starting with JP Morgan City Group and Wells Fargo, and there are a lot of questions. I mean, we know that bond trading revenues are supposed to be us and if it, we also know that some of the loan loss provisions that they've been setting aside are expected to increase. To make sense of all of this and give a better vision into what we should look for, I want to bring in Michael Scanlon,

who's a portfolio manager for Menu Life Asset Management. Michael, what are you looking for? What do you want to know from tomorrow's earnings results? Well, good morning and thanks for having me. So there'll be a number of key things that people will be focused on with this round of earnings. You know, it looks like the market related earnings. Market related revenues are going to be up year over year, largely largely driven by fixed trading, fixed income currencies and commodities.

On the net interest margin side, you know, they'll be people will be more focused on what the commentary is in light of the fact that the yield on the tenure has gone down, uh thus far this quarter. And the other thing to really keep a focus on is credit. You know, there's been obviously a lot written, a lot in the press the last handful of weeks here on credit, whether it's subprime auto or the credit card companies. Uh So, just that there's any change there in terms of realized

charge off rates are commentary around future expectations. Michael, is JP more get expensive if you believe that they're going to earn eight bucks a year? Uh So, the well, the eight dollar year number is even a little above where the street is for next year. But you know when you look at that company, um, you know, just looking at on a multiple basis, you know, near term, uh, it might be a little bit stretched, but obviously this is a franchise that has tremendous earnings power going forward.

And when you think about the potential lightning for the regulatory environment or potentially a lighter ce car touch, uh, you know, your capital return story could really increase materially there,

which obviously drives a much better total return for shareholders. Well, Michael, talking about the regulatory regime, do you expect that any of the banks will address some of the optimism that we've seen from investors that there will be sort of a pullback with respect particularly to capital requirements that that force these banks to hold chillions of dollars of h

safe assets. Well, maybe you get some commentary around that and some optimistic views, but I mean, frankly, nobody has insight into exactly what's going to go on there in terms of lightning the touch. Uh So it would all be very subjective comments, uh, and nothing that you could objectively measure at this point. Although Michael, as a portfolio manager, when do you have to see something concrete in order to decide whether or not to buy into this idea

of less regulation and perhaps lower capital buffers. Yeah, so right now, I think when you look at the stocks, that's still sort of uh, you know, not really priced into the stocks. It's still somewhat of a free call

option on the future. I think when you look at a lot of these franchises, and you know, we've talked about GP Morgan specifically, I mean that's a company where, um, you know, they've still got a lot of earnings leverage going forward, and then if you're talking about taking their payout ratio between buy back and dividends, you know, somewhere closer to a full return of earn is on an annual basis. Um. You know, at this point, I don't

think the market is pricing that in it all. So if we do get positive, um, you know, concrete details on exactly what's going on there, that could drive further upside. Michael, I want to get your thoughts on Wells Fargo and the performance that Tim Sloan is doing. Stock is down about two and three quarters of our percent so far this year, pays nearly a three percent dividend. How's Tim

Sloan reviving Wells Fargo? Yeah, so obviously Wells fargoes and the crosshairs right now in terms of the fact that this this issue from late last year is still lingering. Uh, that's not a stock that we currently have in our portfolio. The issue, I'm sorry, Michael, the issue that you're referencing has to do with the opening of fraudulent accounts by members of the workforce at Wells Fargo in order to meet sales goals. At least that's the allegations, correct, correct, Yeah,

just the aggressive sales tactics. And you know what ultimately looks like some fraud um and clawback executive pay clawbacks actly two and the cloud back executive compensation in light of the discoveries there. You know, I think when you look at Wells, obviously still a great franchise. Uh, you know, right now, we don't own the stock in the portfolio. We think there's still a bit of an overhang with this ongoing investigation. Maybe the news even gets a little

bit worse from here. Um. But frankly, when we look at our portfolio, we like some of these names that have more capital markets exposure because we think there's more upside there. So some of our bigger holdings in the portfolio GP Oregon City Group, which is got to bias towards that side of the market. Michael, where do you think the positive momentum is coming from within the credit side? Is it coming from the incredible amount of investment rate

bond issuance? Is it coming from uncertainty around the FED? What's your view on this? Yeah, I would say it's a combination of both those things. Actually. I mean, you think about what everything is going on around the world in terms of central bank activity right now. You know, the Fed's already increased rates, are going to continue increasing rates this year. Obviously, recently we've gotten some updates in terms of the expectation that the FED might be shrinking

the balance sheet come the end of the year. The ECB is contemplating doing a rate hike and potentially lightening their balance sheet as well, So that should induce some more volatility into rates, which is ultimately good for these uh, these banks which are sensitive to that part of the market and their earnings. Uh. And then you know you also spoke about issuance, right, I mean, whether it's hie yield investment grade that the bond markets are definitely still

open for business. All these deals are multiple times over subscribe, so um, you know that's that side of the business for these folks is very strong right now. So that means that you like JP Morgan and City Group to the top fixed income trading revenue shops by by revenue globally. I think that's a fair comment. Yeah, and then we also own uh Goldman Sacks as well, which would have

exposed to that part of the market. Michael Scalon, we just quickly your thoughts on the re emergence of Glass Stiegel at least coming from Washington and several proposals that we expect from the Treasury secret To Stephen Manuchin. Yes, I can't say, um, I have any terribly unique ins into the expectations there. What I would say is, you know, we live in a very different world today from the structure of the capital markets perspective, UM, and it's going

to take a pretty unique proposal. I'm not sure they could go back to what was in place in the late nineties. That probably have to do something which is pretty materially different. UM. So we'll have to wait and see what the structure of the proposals will look like. Al Right, I want to thank you very much for joining us. Michael Scanlon his portfolio manager from Manual Life

Asset Management. He joins us from Boston, home to Bloomberg twelve hundred and of course, so we're talking about bank stocks, and banks will be releasing their earnings, beginning with JP Morgan. They will release their earnings tomorrow. We will cover them right here on Bloomberg Live. And also city groups they'll be coming out with their earnings as well. We also look forward to Wells Fargo and then I guess the next week put it on your calendar. We've got black

Rock Reports, right, biggest ETF house. There you go while coming up, you know, Lisa brahma Witz, I think of May and I think of Memorial Day. You know what I think of the Indianapolis five race. Yes, you don't think about that? No? Al right, well you are going to think about it, because not only is the Indianapolis five taking place, but the weekend, I believe the weekend before that, two weekends before that, there's gonna be a

major auction of classic automobiles in Indianapolis. And we're lucky to have Dave Majors. He's the chief executive officer of Meekam Auctions, joining us along with Frank Meekam. He's the director of Consignment also obviously of Mekam Auctions. Gentlemen, thank

you very much for being here in the studio. Um, you know, I want to start off with you, Dave, maybe just give us an overview of the market, because boy, you know, if you look at the prices of muscle cars and we'll define that or you'll help us define uh uh, they are just skyrocketed. What is the reason

behind this and is it sustainable? Well that the entire collector car market has been a great market for the last ten fifteen years, and I think the numbers if you look at various research collector car markets returned over fo over the last ten years. As a as an alternative asset class, our bread and butter is the American muscle car. Of course, we we sell pre war, we have exotics, and we do a lot of sixties and seventies American muscle cars. And I think right now nothing

is hotter than that market. And it's the as as Frank Meekham has described it. It's the blue collar collector market, the high end market, the high end Ferrari European market is cooled off just a little bit, but as it does, we're seeing our market really start to pick up in a lot of activity, particularly uh a latter part of two thousand sixteen and so far in seventeen. Uh. Frank, to that point, what is the price the average price some of your muscle cars that they've been retailing for

in the past year, and who are the biggest buyers. Well, you take a look at the price of the American muscle cars. You're seeing cars that uh eighteen months ago that we're fifty sixty thousand trading close to over a hundred thousand. I think your average price is going to be in that fifty to seventy range on American muscle cars.

But you have cars that you get up on the high end, uh of the elite cars, the heavy COODA convertibles, the uh ZL ones, the the top collector talking to corvettes, and a variety of of makes right, because it's all over the map. Yeah yeah, So okay, so let's let's let's do this. And I want to start off by just you know, favoring Greg Jared in our newsroom because I understand that you've got a n Pontiac GTO convertible that is coming on the auction block. What what what

kind of price range are you talking about there? Well, when you the g t O convertible that we have is a great car to talk about because when you talk about the muscle car era, that is truly the first car of the era and what what is known as the car that started the era. So you're talking about a car that is going to be in the seventy thousand dollar range. And Dave, you know, as we talk about seventy two hundred thousand dollars blue collar car. I mean it's not quite blue collar anymore. Who are

the buyers of this? Well, buyers tend to be um entrepreneurs who have been very successful in their businesses. Some of them looked to collector cars as an investment, but a great many of them are looking to collect your cars as as just a passion that happens to have a good investment returns as well. It's the stock portfolio you can take to the park and show your friends on Sunday afternoon. How many cars do you have? Again, I have more than my share. It somewhere around twelve.

Somewhere around twelve. I like that. It's always good to be vague when you go past a dozen. Uh. You know. I want to ask you though about the issue of providence, because a lot of people who collect automobiles, just like anything else, they want to know who owned it. They want to know whether the engine is the original engine, whether it's been restored. Maybe you could just define fink some of these details, because you know, you talk about is it a driver, is it a show car? Is

it a barn find? Well, it's like any other collectible. Uh, there's different grades of collectibility. Uh. You start at your entry level uh driver and collector cars UM that are anywhere from ten to thirty thousand dollars and start working your way up. But when you start talking about providence, UH, you're talking about things. Does it has uh factory paperwork for when the car was sold new? Do you have

the original invoice or a build sheet? I'm thinking of this nine Ford Mustang at is coming up for auction, right. I think it's got number it's number two, serial number two that rolled off the the production line and the only other car H serial number one is that of course at the museum. When you talk about such huge returns and from the from an investment standpoint, Dave, have you ever in your history working with muscle cars or

uh collectors cars, ever seen such quick appreciation? Well, I think, particularly for some cars, UM, you know, the appreciation was might have been on that level of unsustainable. But the American muscle cars really are just starting to take off.

And I think one of the things that we're most proud of is we're starting to see American cars sixties and seventies American muscle cars bring two and three million dollars at auction, which puts them in the same class as the traditional high value European cars, and so we're generating respect. But but is this sort of gay mean the rapid game is this unprecedented for American moss of cars? Well, oftentimes the question is is the is the rapid gain

of bubble? But bubbles typically are driven by by speculation, and this is a market that's not driven by speculation. This is driven by patient So um, it's this is unlike other financial markets where you see the the ups and downs that are driven by supply and demand. This is this is driven by people that truly love the cars that they're buying that happened to be good investments and good investment returns as well. So you know, I don't see this market, you know, functioning like other markets

and having corrections. Well, Greg Jared in our newsroom has just to signal me that he'd like me to purchase the g t O. The GTO He says he deserves it. I don't know, maybe he deserves the sixty nine Chevrolet Camaro SS that's also coming on the auction block. What he estimate that to go for? Well, Camaros have always been our bread and butter. It's a car that the American public has always recognized, uh, you know, probably one of the behind only Mustang and Corvette is the number

one brand in the American car world. Um, it's a car that it can be very reasonable and you can get in the twenty thirty thou range where you can have a Camaro that'll bring six seved So Greg Jarrett now has his face pressed against the glass and I'm saying, please, please, We'll save him. Maybe you could chill out that three million dollars. He's even allowed to touch it if it's well.

We appreciate, we appreciate you guys coming in here. Dave Major's chief executive officer of Makom Auctions, as well as Frank Meecom, director of consignment at the firm, which is based in Walworth, Wisconsin, which is where my mother is from. So nice to see you guys. Thanks for listening to the Bloomberg pien L podcast. You can subscribe and listen to interviews at iTunes, SoundCloud, or whatever podcast platform you prefer. I'm Pim Fox. I'm out there on Twitter at pim Fox.

I'm out there on Twitter at Lisa Abramo it's one before the podcast. You can always catch us worldwide on Bloomberg Radio