This is the Bloomberg Surveillance Podcast.
I'm Lisa A.
Bramwoid's, along with Tom Keen and Jonathan Ferrell, join us each day for insight from the best in economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app.
Joining us right now is John Mclelthwaite, the Bloomberg News editor in chief, joining us from our London studio. John, thanks so much for taking the time this morning. Keeps the occasion of your discussion. Most recently, mister Kissinger, this boy so timely.
That well, that was his one hundredth birthday. But I suppose I've interviewed him over the over the decades and different capacities, and I think the main thing about him being aged one hundred is that he had the ability to look back over that life and it does go right the way back. We have a actually other good column this morning by Andrew Kluth, who's from that one of my columns from Germany. He talks about Heinz Kissinger, as he was born and the world in which he arrived.
You know, Kissinger was born very obviously back in nineteen twenty three, I think two years later Adolf Hitler came to his home time of Firth to denounce it as a kind of haven of sort of Jewish people. Basically, for the first sort of fourteen fifteen years of his life he was continually chased, harried and messed around before he escaped, first to London and then to New York.
And I think that that sort of beginning, you know, he offers a perspective on the whole of recent history in a way that struck me that only weirdly, the queen in recent times has been similar to the extent of you know, Kissinger met everybody. He saw a vast amount of history in his life, ironic for somebody who began life as a history professor exactly.
And you know, John, one of my earliest memories as a child is my father and my older brother arguing at the dinner table about Vietnam, about Henry Kissinger, about all of those things. He has served officially and unofficially twelve presidents, from President Kennedy the President Biden. Have we ever seen a diplomat with that range of experience, well, I.
Think we have. And they were the ones that he studied. They it was people like Mesenik and Taryon and people like that. Those were his heroes who lived in a time of kind of warfare in Europe and it was about bringing the peace. That's how he first emerged as a kind of semi public figure, was writing about the Congress of Vienna and things like that. But those were people who came and went. Obviously it was a different time, there were fewer democratic governments, and it had a different,
very different feeling, But those were the people. Those were the thoughts that he carried throughout his life, this idea that nation have kind of sets of interests and it's about paying attention to those interests, but at the same time trying to to try and bring some degree of kind of loftier aims to it, but never forgetting you know that the rail in rail politic was something that was very close to his heart.
John. I think you know, for many folks around the world, not just in America, Henry Kissinger kind of represents the whole post World War two thinking about global diplomacy. Global I just just the way the East versus the West that's changed recently in the last four or five six years, where a lot of countries are seemingly more nationalistic.
America first, for it.
Yes, you just you heard him on that clip in America first, that was very un Kissinger. He didn't he didn't like that. He was acutely aware of America's set of interests, just as I think he would argue he was acutely aware of China's set of interests. But he thought that America should play a role that was bigger than that. And again that was partly because he I think he did not least as a refugee you came to America. He saw America something bigger than that. But
also for political reasons. If you have a hegemon, you know, again controversial issue whether hegemons exist. But for time it was Britain, and he liked the way that the British politicians in the nineteenth century managed to keep the peace by balancing different people against each other. And he thought America should do the same, and that was its role. It had two roles. One was to promote American interest democracy,
but the other was just to keep the peace. And so when it came to things like China and what was happening there, he was absolutely kind of clear that you couldn't just go to the Chinese and give them a lecture on human rights. And at this point plenty of people listening to this, so well, that was typical Kissinger. He never cared about those things. I think he did. I think he understood, perhaps farm Or with one more personal experience and most of his critics, just how horrific
man could be. To man, you know, he is not just growing up in Nazi Germany as a twenty year old, he went back and visited a concentration camp. He saw a huge amount of sort of evil done to people in his youth, so he wasn't unaware of that side of things. His main thing was to try and project to kind of peace.
John, we were speaking about this earlier on Bloomberg Television, and I have to say, I keep thinking in my head about the change of social media and the change of the way that information is transmitted, and how he viewed that as he did see the world and a sort of right and wrong and trying to push forward certain ideals, how he viewed that effort at a time where the mode of communication was very different.
I think that's really at least I think that's a really good point. The answer is that kind of and it's not. You know, it's possible to admire Kissinger and be aware of his be aware of his faults, but the kind of paranoid, secretive side of Hendrick Kissinger, I mean, social media was a nightmare. He didn't like that, and he you know, and actually he would argue, look, he could not. It would have been far far more difficult to go reach out to China and bring them in
from the cold in an era of social media. He you know, he went, he went to China on these secret missions he did, and because of that he was able to get Mao to effectively agree to come in. That changed the world history. Ditto the negotiations the Russians, Dito other things. His critics will immediately say, well, yes, and he also bombed Cambodia in the in the background, Well yes, that that would also be part of it. But his underlying, his underlying thing was to find different
ways to bring people together. The interesting, one, very interesting thing from his perspective was he sometimes talked about the fact that leaders didn't get the same degree of kind of break that they once did. His last book, which was a portrait of six people who he admired, people Margaret Thatcher and Lee Kuan Knew and Richard Nixon, wasn't that great a one. But the stuff on Shelde Gaull particularly,
I thought was an amazing piece of history. But what he what entreat him a bit was you know, you look at somebody like Winston church or you look at somebody like Kennedy, would they have survived in an era of as much intrusion from great journalists like all of us, or certainly the two of you would. Would they have survived? And that would in the era of gaffes and things? Would somebody like Churchill have continued? We don't know exactly,
but he was. He was very acutely conscious of the need to have leaders who could sort of look more long term, who could sort of think about the underlying elements.
Hey, John, do we know how mister Kishener felt about the relationship between the US and China? That's kind of I guess you've ad over the last three four or five six years. You know, if at the very least a technology called war, if not something a little bit more.
Yeah, this is somewhat self referential, and I apologize to people for it, but that I used to do a regular interview with him at the New Economy Forum. And it began as we were in the foothills of a Cold War and the Cold War, and then we were on the edge of a precipice on the Cold War, and then we were near the Helm High Mountain passes. You know, it just generally got worse. I think right now,
I think he was. He got gradually more and more pessimistic about it, I think, and I think with good reason, and what I think he despaired of a bit. On the American side, we see to spare to people who sort of understood China and were willing to look towards
a sort of bigger goal. And so those people who criticized Henrik Gistjoe, you know, in some cases very obviously correctly for not doing as much about human rights as perhaps you could, they sometime, you know, hit the lessons of his life were that you had to talk, you have to get people to come together to do things. And you see what he managed to do in the Middle East, especially in the context of what's happening now, and you do get some sense of the importance of
rail politic. One thing I said to Lisa earlier, which I think is probably true, is that you know, you look at American foreign policy, this arch rail politica. If he had been running American foreign policy over the past thirty years, do you think that America and the cause of diplomacy would be better or not? I think it probably would be better.
Very good, John mccordthwaite, thank you so much for a couple of minutes of your time. We really appreciate John mccorthwaite. Bloomberg News editor in chief Hughes reporting to us from London on the passing of Henry Kissinger.
Neil Dutta, head of economics at Renaissance Macro Research, joining us now fresh off his Thanksgiving holiday. Neil, does this data just sort of underscore this soft landing nirvana that you really pin pinned over the last few months.
Well, thank you, Lisa, you're giving me too much credit. I think I pinned it over the last few weeks. But you know, I do think that the data is lining up and we're on a glide path now to a rate cut, probably by March. Frankly, if you look at core PC inflation since June, it's up just two point three percent at an annual rate.
And there's a lot of disinflation in the pipeline as we know. We know that, you know, when we look at.
Car prices at the wholesale level that's declining. We see that pretty much month in and month out. That's going to bleed into core consumer prices over the next few months. We know that rendeal inflation is moderating, that's going to also bleed into core inflation over the next few months. And the normalization of supply chain should take pressure off
of prices for core consumer goods outside of cars. So I think it's highly likely that you know, core inflation is you know, running sub to and a half for probably you know, on a six month basis by the first quarter of next year. And you know, when you think about the FED is giving us the playbook, I mean, if we just want to read it, Waller basically told us this week that he's following sort of a standard Taylor rule type or framework, and if inflation slows, the FED will cut it.
Really is that simple.
I don't want to make a judgment about whether that's right or wrong, but that's what they're going to do.
So I think, sorry Tony cut in here, but I'm just struck by what you were saying earlier in the year, when you were saying people have underestimated how much momentum there is in the economy and that come next year, we're going to be surprised by the stickiness of the inflation, the stickiness of just what we see in terms of growth.
How do you pair that idea.
And the fact that we continue to get better than expected economic data, how do you pair that with ongoing disinflation in tandem with what the FED was hoping for? And even then some well, I mean, the.
Economy is whole up, but it's clear that there's more disinflation despite that growth. And you know, I think the FED is looking at what's happening with realized inflation, right, So the fact that actual inflation is moderating, that will pressure them to cut interest rates because they don't want to get real interest rates in their framework unduly high, too high. And so I think, really that's what it comes down to. And as I say, I mean, part of this job isn't so much what I think they
should do. But what I think they will do and what they're telling us what they what they will do. If inflation continues to come in like it's been coming in, the FED is going to respond to that. I don't think it's a situation where they're cutting aggressively. I mean, I think part of the issue right now, Lisa is that, you know a lot of folks aren't used to the FED just surgically cutting interest rates.
I mean, it's usually they do a lot or nothing at all.
But I think what we're talking about for next year, for twenty twenty four is really a recalibration of monetary not unlike frankly, what we saw in nineteen ninety five, where the FED came off of air very very aggressive tightening and cut rates a few times, trying to just basically trying to.
You know, fine tune.
You know, their their monetary policy, which frankly, I think you know they can justify that based on the inflation data as it's going to come in.
Well, I know that earlier in the year you were also talking about how inflation is going to be higher for a longer period of time. Do you still think that, I mean, I.
Do, but the question is around the time horizon. I mean, I think that the economy is growing above trend. That's ultimately going to have some effects on prices. But I you know, there is a lot of disinflation in the process and in train, and the FED is going to respond to that.
You Know, the issue, frankly.
Is does the soft landing enthusiasm today does that reignite inflation later. I think that that's something that Feds should keep in the back of the of their mind. Frankly, that may be one reason, you know, kind of puts a ceiling on.
How many cuts they can do.
But I do think we have to get through this period of disinflation first, and I think the FED is going to react to that disinflation, which is why I think they'll cut interest rates and they'll probably front load the cuts and sort of get it out of the system quickly. Look, they're already telling you that they're going to cut rates. I mean, they were at.
Four in June, as Mike.
As Mike mentioned, they went to two in September, and they might they might signal that, you know, a pause in December and pencil in three three cuts for twenty twenty four. I mean, that doesn't tell you when they do it, and that's why I said I think given the glide path and inflation that we're likely to get, they probably do it sooner than later.
Neil, I'm curious from your vantage point, a lot of people have been saying it's going to be the bond market's dream and that you're going to get an ongoing rally in bonds that that will tee off an equity
market rally. Do you agree with that type of recipe or do you think that it's not so simple, especially if there is a longer term question embedded in bonds of what the new neutral rate is that actually solid inflation but not overly hot a bank that's a central bank that's surgically cutting that's really positive for risk, but not necessarily on the other side for bonds.
Well, I mean, I think.
It probably may weigh on longer term rates obviously, right, I mean, but that's I.
Mean again for the stock market.
I mean, it's it's ultimately an environment where companies can make money, which should continue to help, you know, stock prices go higher.
Neil Dudda of Renaissance Macro, thank you so much for being with us.
The latest from four this morning, a new range for twenty twenty three adjusted earnings before interest ten billion to ten point five billion, the previous range before suspending guidance eleven to twelve. We've got a lot to talk about. We can do that now with John Lord of four C five. Good morning, John, Good morning. Let's talk about it. Where is it? Where's my ten billion dollar buyback? Why a different approach from you and the team.
Well, we have a great plan in our Ford plus plan, and we're focused on investing in growth and profitability and through that rewarding our shareholders with a higher price, plus also paying out forty to fifty percent of our free cash flow in dividends. And so we're investing in the business. We have three great segments that are growth segments, Ford Pro Our commercial business margins in the mid teens for us,
that's very high in our industry. Profits are going to almost double this year, more than double this year, and we have a great opportunity with the mostes. We have to drive significant profitability.
Costs to gun up as well. So let's talk about the labor contract nine hundred dollars to the cost of each car. Off the back of that UAW contract now just for our audience, because you're aware of these figures already, GM, who we spoke to yesterday are at five seventy five. I'm still trying to sit here and work out how do we get from five to seventy five GM and nine hundred dollars to the cost of each car forward? What is that about?
Well, when you look at it, we're five hundred dollars to start in twenty twenty four, and that grows over time as wages increase. The biggest increase in this contract is gross wage increase. It's significant over twenty five percent. And then our footprint in the US is bigger than General Motors. But the rest of that, I'm not exactly sure why their number is that much lower than ours. That's something that would have unpacked with them. We know
what we've done with this contract. We know what the start point is. It's sixty to seventy basis points on our income statement basis. And now what we need to do is we need to work on driving productivity and efficiencies and reducing the labor hours, the hours it takes to build a vehicle and reducing that cost. And that's what we're going to be focused on going forward.
So it's going to be cost reductions rather than trying to raise prices for the end consumer.
Is that right?
Well, now you have to think about pricing differently in our industry because all segments aren't the same. There's different pricing power across the segments. That's why we feel that what we did in segmenting the business and having the transparency around that, it's important. If you look at the commercial business in pro we believe they're still pent up demand and pricing power there. However, in blue in the more of the retail consumer segment, you're going to see
prices come down. We've been consistent talking about that. Back in thirteen thirteen point four percent of disposable income to buy a vehicle went up to fifteen point seven and twenty twenty two it's down to fourteen point five percent roughly. Now we see that coming back to thirteen point four percent as you move through twenty twenty four.
Well, when you talk about lower price points, I think about some of the Chinese car manufacturers and the production much more cheaply of electric vehicles in particular, that are really making a competitive advantage. How do you compete with them, especially given the labor contracts and some of the other working operating costs that you're dealing with.
Yeah, it's a good point, and that's something that we're very focused on. Again, the segmentation, each segment is different. We've seen prices come down now in the electric segment much quicker than we expected, and the reason for that is that we're moving out of the early adopters who are willing to pay for higher prices. Early majority customers aren't. They're not willing to pay that premium. So we're seeing those come down and we expect them to equalize with
gas prices. So it's all going to be about cost in efficiency, capital efficiency, et cetera. We have to get more competitive on cost and that's what we're focused on in our second generation and third generation vehicles.
What is handing with demand in the evase? What is hanpden mag is this real pushback that changes to approach.
I think what it is is it's the adoption rate. It's that flatter than what we had expected. That increase isn't as great fifty percent up this year from sales standpoints, so they're coming. It's going to be part of the industry. Eventually we'll get to those higher growth rates. So we have to adjust our capital investment. We have to adjust our approach in the near turn.
That sounds like a change in execution, no strategy.
Absolutely, it is a change in execution.
Not strategy.
So let's talk about the numbers. You've pushed at twelve billion an EV related and vestments. Should we expect to say a little bit more of that going on?
Depends on the customer and the adoption rate and how that pushes out. If the adoption rate starts to grow faster, we'll increase our capital investments.
Let's get through the guide. I've got two points. Sure, I want to say if these is still up tonight, So you did expect half the sales to be electric vehicles by twenty thirty, still the case.
Now we think it's going to be less than that.
Given where how much slimmer by Johon.
We haven't put a number on that yet. We're still looking at what that rate will be. I think we'll know more as we go through next year.
Is it the same for margins on those evs as well? Do you have to reassess how big those margins will be?
Yeah?
I think as the industry adjusts, you have to look at that. But we're targeting. We've set up our business structure and we think the right target is around the eight percent or high single digits.
You said that you're very focused on trying to be competitive in the ev spice on price. Is that when we asked about margin compression, you're basically saying, we're going to see as we go on what the competitive landscape looks like. But how do you plan to reduce costs? Is it going to be with job cuts? Is it going to be with more automation.
So when yes, absolutely, automation that is going to be a key part of what we do. Now when you look at this contract, it's also important to understand for us where the battery plants are and the battery plants aren't part of the contract, and so that's important for
vertical integration. And when you're talking about electric vehicles, battery and design is really important and the efficiency of that battery and getting the smallest battery possible in so that second generation design is going to be critical from a cost standpoint. And then overall for us as a company, we have work to do on our cost and quality, and we're focused on that. We've made significant progress over
the last few years. We've restructured international operations, we moved out of autonomous vehicles and pulled capital investment out of that. Focused on L two. We have the best driving system out there and blue crews according to consumer reports. So we're making the adjustments as we go.
When you talk about automation and you know there's a question around job cuts and how much this will reduce the overall number of workers who will have to be employed to make cars, is that what you foresee that there is going to be a fewer team of professionals that are creating vehicles in say five years, think today at the Ford plants.
So in certain areas there may be in other areas we see growth. The key is driving efficiency and productivity. So more coming out per unit of labor doesn't necessarily mean you take the labor out that you get more productivity. That's what we need to drive towards.
Let's finish on a dedicate question. I asked this question a lot, and I'd like to ask it directly.
If you.
Is a Ford F one fifty lightning truck which weighs about six pounds really good for the environment because I struggle with the association between these heavy electrified trucks and climate change. What is the relationship? Are we kind of kidding ourselves here?
I don't think so. I think that there's two things about the electric truck. One, it's moving into electric is important for the overall environment, that's true. But number two, you also have to think about the consumer and what that truck can do. It fills a niche that hadn't been out there. There are certain individuals that just will not drive an internal combustion vehicle. They never had access to a vehicle and utility like a pickup truck. They
now have that. Plus, for our commercial customers, it's a tool, it's a generator. They use it on the job site to power. Now you don't have gas generators sitting out there. It's electric. It's coming from the vehicle itself. So it is a good step forward in the environmental push in reducing the CO two footprint that comes.
Sition will continue. It's going to hear from you, gra it's getting update and the numbers as wow. Thank you, John, I appreciate it.
John.
Load of that.
The forward CFO Cassie Perrot joined us now fixed income portfolio manager at JP Morgan Asset Management. Causie, good morning to you.
Good morning.
The world's moving towards you lower bond yots, maybe a slow economy in our future. How are you thinking about fixed income now?
So you're right, yields have moved lower.
What we've had is the situation where the narrative can take you much further than what's actually happening in terms of reality. And so we looked at the move higher and yields in September and October getting to five percent on the tenure, and we dated. We did think that that was just a bit too far in terms of a move, and that we would look back and view this as honestly a great buying opportunity. We've had a
positive view on fixed income this year. Yield to move back down and that's essentially brought us back to where we were before the September FMC meeting. So what I'm really focused on right now continues to be the inflation data. So the inflation data, you know, what do we benchmark ourselves against. It's coming down, it's still above the Fed's target. So you have people on both sides saying we haven't
done enough, but maybe we have. I look at what they projected in September, and September was a fairly hawkish meeting for them. They were projecting inflation of three point seven percent on.
Core PCEE today's number.
If it comes in on consensus at eight point thirty, we'll be down to three and a half percent on the year over your rate, and we'll be down to two point six percent on the six month run rate. So bottom line, inflation is coming down faster than they expected.
We think that the Fed's last rate hike was to lie. We've had that call for quite a while. Now we're sticking to that.
Call, and that makes the moves for yields asymmetric. We can move a little bit higher here, for sure. I mean there's a lot of volatility on every given day. But on the other hand, we can move a lot lower if next year we're looking at rate cuts.
You said the narrative can take you much further than the reality. Does that mean that we're in a trader's market?
So I do think that the technicals and the positioning are very important.
You need to understand not just what's going on, but what is.
The sentiment around what's going on, And you had a couple things that were really fueling that that bearish sentiment in October. One of them was the fact that you had a blockbuster GDP report and there was uncertainty about what was going to come next. Right, we've now at least gotten to the point where we feel comfortable that we're not going to see another five point two percent on real GDP and nine percent on nominal GDP. Atlanta FED tracking has come out, we're normalizing back to around
two percent, so we can feel comfortable with that. I think the other thing that you're not hearing any words about anymore is the deficit. Right, the auctions, at least, I know you love watching the auctions.
They've been mixed, right, You've had some weak ones, you've had some poor ones.
In fact, you had that five basis point tail on the thirty year auction on November ninth that ended up being a great entry point into the bond market. And so you know, sometimes the market fixates on something. Ultimately, we think it's going to be about the fundamentals. Again, what's our view on inflation, at what's our view on the FED. Ultimately, it's not about if people will buy treasuries.
It's at what price do they think it's fair? And if inflation's coming down and the FED is done jump in, the price is fair.
Why isn't the deficit part of the fundamentals?
I mean, I think it is part of the fundamentals in terms of the growth and inflation outlook.
But here's the thing.
The deficit was wider than expected this year, but inflation came down. When you're a country that can print their own currency and they have their own reserve currency, it's.
Not really about default risk. We're not worried about the treasury defaulting, right.
The risk is inflation if you print too much money.
We are not seeing inflation.
That's because the increase in the deficit this year was because of two factors. One higher interest cost, but more importantly, lower tax revenue. We're not talking about fiscal stimulus here. We're talking about an economy that was normalizing revenues that were falling, and then a government that has to fund more because the FED stepping out of the way.
It strikes me that you said that the moves now are asymmetric when it comes to the bond market. It makes sense to me on the short end, because if the FED is done raising rates, sure, I can imagine that that's the case for the long end though, So there just are so many variables, as John was mentioning earlier, whether it's the deficit or whether it's the fact that the FED cutting rates sooner leads to perhaps higher inflation
over the longer period of time. How much less conviction do you have over your longer term bond yield call on the tenure.
So there's multiple parts to that question.
One the first thing that comes to mind is that we are moving into regime where we should be seeing the curve steepen. So the part of the curve that we should see the most rally, the most moved lower if the FED is cutting rates, is going to be that front end. So I would agree the asymmetry around yields is more compelling in the front end than that
is in the long end. And I do think that structurally, longer term, we are exiting a period of financial repression, and so we are probably at a point and this is a good thing for bond investors. You know, we're not dealing with negative real yields anymore. We're not dealing with thirty percent of the global bond index having negative yields.
This is ultimately a good thing higher real yields, but it does mean that we're not necessarily looking at fifty basis points on the tenure next time we're in a recession, which is what we saw during COVID.
It's what LASA complained about it for ten years in every single column. Yes, the world of negative.
Rates true one percent. I stand by it.
I think everyone does. It was ridiculous. Honestly, what was absurd about that period is we all knew it was absurd. It was unlike one of those bubbles that people would come on and sort of like rationalize and justify. It's one of those things where we all knew it was absurd, but it was pinned their place there by policy. Policy was deliberately anchoring it, and that was what was totally absurd and original about that moment.
The biggest surprise for me is that we heard all these people saying the world was going to fall when you didn't have zero rates, and the fact that it hasn't continues to be one of the biggest surprises that we haven't seen. The complete demolition of balance sheets that were really grown up, that were really raised in zero rate posts.
How many people came on this show and said the long convaiable lacks would be thirty years lung. Hardly only one did, No one did, And now it's like, yeah, they're longer, much longer. Cassie got to see Cassie Barrett of JP Morgan Asset Management the news yesterday evening. I'm sure most of you are up to date foreign policy.
Giant Secretary of State in the nineteen seventies, Henry Kissinger has died, aged one hundred and place to say, we can catch up with Norman raw, the former senior US intelligence official and non resident senior advisor at the Center for Strategic and International Studies. Norman, first of all, to you, sir, I know you knew Secretary Kissinger. Can you just help us understand how his approach to foreign policy changed everyone else's approach for the decades afterwards?
Yes, good morning. Well.
Henry Kissinger was a titanic if controversial figure who brought to his work a sense of the importance of a balance of power. He was a creature of a very interesting time. A Jew in Nazi Germany, a military intelligence officer in the Second World War, a scholar during the most dangerous days of the Cold War. His background in the Congress of the end of eighteen fifteen and that period gave him a sense of the importance of ensuring
that key powers found war less palatable than engagement. And also he brought together a sense of the United States would triangulate, would be closer relations with key powers than they would with themselves, to enable that process to continue. Since that time, every Secretary of State has attempted to emulate doctor Kissinger's approach, but no one has achieved his extraordinary successes.
Henry Kissinger was a highly polarizing person. A lot of people point to the fact that he kind of rejected idealism and really was a pragmatist and really talked about the goals that you ended up achieving rather than the methods of how to achieve them. Where does that play in the strategy of foreign policy today in America?
Well, Henry Kissinger's quote on that issue, I think probably would be a country that seeks moral perfection and its foreign policy will achieve neither that perfection nor security. And I think we see a sense of this in the United States today in how it deals with the world. There are key core interests, there are lesser interests that can be discarded or at least put aside for the moment.
And I think that's how the Biden administration is approaching the world, China, climate change, international institutions, avoiding conflicts which would disrupt the US economy.
Do you think that society has shifted dramatically enough to not really go along as much with that type of ethos as it did in the nineteen seventies. I was going to say, you know, how much of social media changed the picture? How much has the immediate imagery? Is there some kind of shift in the population that makes that difficult.
It's certainly a very different world.
But I think we need to recall that nineteen sixty eight in the late sixties in general were an extraordinary time in the US and European society, with the protests against Vietnam, the protest against our US actions in Cambodia, the US actions in Chile. I mean, this was also a very polarizing figure and he was able to navigate through that period, which also included Watergate, to achieve the successes with the Soviet Union, China and the Arab peace disengagements which have lasted fifty years.
We now need to talk about modern war and twenty twenty three normal let's talk about Israel and Hamas. Hostages have been released, two hundred trucks of value to going in every single day into Gaza. What's the argument against extending this ceasefire?
Norman, Well, the argument against extending the ceasefire would be that allows for the survival of Hamas, an organization which continues to state that it is interested in the eradication of Israel and those who live there.
So, if you believe the.
Phrase never again is as a driver, you must eradicate Hamas only to move to a peace process that is legitimate. I mean, the idea of a two state solution is certainly everyone's goal, but no one is looking for the Palestinian state to be led by Hamas.
So Hamas must be removed.
From this equation if we are to move forward with peace and a lasting sense of security for the Israeli people.
Norman, do have a sense of where Iran is in all of these negotiations. There was a report yesterday at Saudi Arabia is talking about maybe even giving aid to Iran if they would call back their proxy fighters, whether it was Hasblah or whether it was Hamas, to try to create more stability in the Middle East. Do you buy into any of these things getting traction well.
Saudi Arabia, the Emirates, and other Gulf states have certainly attempted to achieve a detent with Iran, much as Kissinger looked at or to taunt with Russia and Destante in essence means you don't empower your adversary, but you create conditions by which the adversary is not interested in war with Saudi Arabia and the Emirates and others. There is the issue of US sanctions, so there is a limited amount of engagement in which they can they can put forward to Iran.
Iran has multiple.
Incentives to continue its current efforts in the region, but very few drivers for involvement in the conflict itself.
And I think over time, what we're watching is that Iran is not a winner.
In this conflict, that its allies have not been able to change the military balance, and it risks losing its primary Sunni proxy partner.
Two words eradicate Hamas Norman. What does that mean? In practice?
It means eradicating Hamas's senior leadership, the operational leadership. But it doesn't mean destroying thirty to forty thousand fighters, who, by the way, will remain heavily armed in the post conflict environment. And those fighters and their indoctrinated families and culture must be dealt with. Where to prevent the rise of a Haamas two point zero or an isis and in the Arab world and I've spoken with a number
of senior artificials. They have a concern that this conflict could produce exactly that, not only in Gaza, but in places ranging from Southeast Asia to Subsai Heal Africa. So their comment is we've got to avoid this turning into another problem, just as Elpada turned into Isis Norman.
You said that these fighters are still going to be there and heavily armed, that some of the sentiment and education has to be dealt with. What do you mean, how is that accomplished?
Well, there is a track record for this.
Saudi Arabia, the Emirates have actually an excellent record of de radicalization, and we've learned a lot from them as they've dealt with their own culture and the region as well. But This requires giving the Palestine people a sense of hope, a sense of security, and dealing with the witch's brew of multiple Palestinian splinter organizations, most of which are dedicated to violence and the destruction of Israel and the United States.
With that, a mind morment just to find a question from us, how do you expect the knischa of this wall to develop to change in the coming weeks and months.
This remains a likely long term conflict, although it will play out not necessarily in terms of a traditional war. There are so many factors in here that need to be put together. I think the United States will focus on hostages, hot return of hostages, preventing and expansion the conflict,
laying the groundwork for the future. But beyond that, I think we're off the map and we should have a lot of patients and look for a lower intensity conflict that protects civilian lives while eradicating a terrorist organization.
Norman, Thank you, sir, Field contribution always foundingable nomen roll there cs is.
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