Bloomberg Audio Studios, Podcasts, radio News.
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amerie Hordernt. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business app. So here's the late
sis this morning. The Middle East conflict entering at sixth day with no signs of eas inc Iran allowing to intensify tax in the coming days. Brian Garner a stefail, writing prices, inflation, and jobs continue to be the most important issues to voter. US national security and foreign policy trail far behind. Brian joined us now for more Bran. That begs the question how much risk is the president willing to take care?
I think he's all in at this point.
You know, maybe if the markets start to back up again, then he reconsiders, because he you know, as we've known throughout the Trump presidency.
He does point to the markets as a.
Barometer for his political success, but for now, I think he's all in.
So Brian, when you say the markets, which market are we tilkn abativity to the now? Or is a gas prices does the energy move actually matts out?
Right? We're actually in the fog of war, right, John Jonathan. It's tough to figure out which markets we are talking about. You know, I was listening to you guys earlier, and you're talking about the kind of the very modest responses that we've had, and that you know, a lot, especially on the equity side, that people think that this is going to be very short and that there is a buying opportunity here and that it's all going to be fine at the end of the day. And that may
be correct. I'm not here to say, you know, that's not the correct view. But there is a risk that this goes on for longer than what people are pricing in today.
I mean, it's the old line.
Wars are really easy to start, their much harder to stop, and so nobody, but nobody knows for how long this is going to go on and what the ramifications are for the economy.
Yeah, markets though stock markets in particular, watch PCE CPI, all sorts of alphabet soup of different indicators, a lot of individual consumers. Just look at the price of gas that's put on a billboard and that has been going up sharply over the past couple of days. I just wonder how far that can go before that gets the White House's attention more than anything that's happening in stocks.
I think when we get into the summer season, let's see what it's like when we get closer to the driving season of post Memorial Day, when Americans hit the road and when they head to the airports, our airline tickets price is going to start to go up as fuel prices potentially rise. So again, this is a potential political risk for the administration. Let's go back a little bit to October when he was meeting in Asia right ahead of the November elections, which were state and local
but a referendum on the Trump administration. And what we saw was, I think was a reaction to a perception that the president was too interested internationally not enough on domestic affordability issues, and there was a pushback from voters. You know, we've got the midterm elections in November, and this is a significant political risk for the administration and Republicans generally.
Talking about the midterm elections, President Trump hasn't weighed in on a really contentious race in Texas for.
Quite a while.
Now it's headed to run off for between two Republican candidates, John Corner and the senator who has been a long standing Republican in the Congress, and Texas Attorney General Ken Paxton. Now President Trump is getting in there saying I'm going to endorse somebody and the other person's going to drop out. Does this indicate he's going to take a more significant role in some of these races.
I think we've already had those those indications. Uh uh, Lisa, I mean going back for months. I mean it was it was the White House that was really behind a lot of the redistricting efforts in Texas and in other states. The President and the White House is throwing its full weight, has been throwing its full weight unsuccessfully so far to get Indiana to redistrict.
The White Houses all in they they really want.
To maintain a especially a House Republican majority so they can avoid investigations in a in a in the second half of the term and try and get some of the legislative agenda through which would be blocked if Democrats flipped the House, much less the Senate. But yeah, I think I think we have had all along lots of indications that this White House is all in on the on the midterm elections and maintaining a majority for Republicans.
So, Brian, without of mind, as we started the air, we had a flurry of populist proposals one after another, day after day, and it's kind of gone quiet. We can need that efit sometimes say so, Jonathan.
I think it's a little quiet because you know, obviously the big headlines of the day, the only headline of the day is Iran.
But behind the scenes there are still things going on.
Now you want, I think Republicans want those back in the headlines, and they want they want to be seen as as addressing affordability issues.
So they are going to pivot at some point.
And and you know the rest of the agenda, the deregulatory agenda that doesn't need Congressional support, that continues as as is. You know, there have been moves among the banking regulators. You know, I do a lot of work with my KBW colleagues on banking regulation.
There's a lot of work going on there.
So the the agenda is generally on track. The problem is that it's being drowned out by everything else, and they're going to try and pivot and you know, message that they're working on affordability issues, but the war complicates that. There's no easy way to shift a war off of the headlines and off the top story of the evening news and.
Get back to those affordability issues.
Ryan does want to infilm the other I think that's what we're really trying to get to.
Here.
Are we underestimating the president's willingness to pursue his goals in the Middle East despite the way you.
Know, I think what we have seen throughout this year, the first year plus of the second term, is that he is looking legacy wise. He is looking more internationally than we would have maybe have expected him to do so going into the year Venezuela.
Hear the engagement with the EU and NATO about future policy.
So I think we have to try and figure out how he sees his legacy and what he wants to get within the concept two of maintaining a majority in the midterms. But what I think the signals have been all along that he is very interested in a foreign policy type legacy. He keeps pointing to it, He keeps pointing to the peace talks that he is engaged in, and I think he sees that in an historical context as potentially his biggest legacy.
Stay with us. More Bloomberg surveillance coming up.
After this.
US and Israeli military strikes, creating the largest power of vacuum in Iran for decades, with a slim chance of a popular uprising, several candidates are reportedly angling to take control. The former Deputy National Security advice of Victoria codes right in the following. Indications are that another theocratic protegev company is said to take charge. This doesn't provide any opening to an end of hostilities. Victoria joins US now for more, Victoria,
welcome to the program. The operation in Venezuela was surgical Caracas had Dousi Rodriguez. How different is the operation in Iran and what's available to transition to in Saehran?
Well, it's radically different.
I mean, this is obviously a very significant military campaign that the President has initiated. Against the Islamic Republic, which is going extremely well. By the way, we are seeing a dramatic reduction in the number of missiles around is able to fire off at their neighbors and at Israel, and that means that they're running out of missiles. That we've also degraded their missile defense systems and their launchers. So that is going according to plan, and I think
we'll see that campaign continue. But yes, we do have this vacuum at the top of the Iranian government. There is a very hardline cleric, Alireza Arafi, who is considered for Supreme Leader. He's not very well known, he does have some support in the military. Another name that's been
floated as Hassan Ruhani. Your audience may remember him. He was president from twenty thirteen to twenty twenty one and was the lead negotiator on the Obama era nucle deal that did bring a fairly significant economic relief to Iran, so that he might be fairly a fairly popular name. And then finally you have the son of the deceased Supreme Leader of Taiba Kamani. He is a much more I think polarizing figure. He's known for being extremely corrupt. He does not have a great deal of support in
the army. So his name is obviously very well known. He has a lot of power, but it's not clear that that's going to be well received by the Iranian people.
Well, given the objectives of the US government, how well received would it be by the American government? Victoria, what's your sense on what would be palatable to this White House.
No, I don't think that would be that would be well received at all, And I wouldn't give him a particularly long life expectancy if that, if that were to happen, And so I do think you're going to have an ongoing sort of search for individuals that are more pro American, that are willing to sort of oversee more of a
t transition period. And don't count the Iranian people out. Obviously, they've taken things into their own hands before in nineteen seventy nine, and the issues surrounding the protests that we saw in December and early January haven't gone away. As a matter of fact, they've been made worse by the military action of the United States. These are endemic economic problems. They have just run away inflation and their currency is cratering. And everyone is fleeing what's left of their stock market,
So you have a really really horrible economic situation. Eventually that does drive people out onto the streets. So, especially with the regime being revealed to be so weak as the American intervention has revealed them to be, I do think we have more than more a greater chance perhaps of a popular uprising victoria.
Everything that you're talking about to find a new leader or to coalesce around what that new leadership might look like takes time. Do you have a sense of how long that really implies that this conflict could go on?
Well, what it means is that they can't really make decisions while they're in this kind of liminal state without major leadership. And when you're involved in, you know, a major military conflict, that kind of vacuum of leadership can be extremely deadly. So I think that is why you're seeing some rather bizarre decisions out of Tehran, like the intense attacks on countries that had been mediators for them, like Oman and Qatar. You know, the launching of a
missile toward Turkey. All of these things suggests that nobody's really firmly in charge.
So I don't think.
Anybody knows how long this is going to go on, nor do they know how effective any new leadership would be once it's chosen.
A number of analysts have raised the point that, yes, the US clearly has superior military power, as does Israel, and there's increasing pressure by other regional countries to stop ran. At the same time, there have been questions around ammunition ammunitions more broadly, and whether the United States is running to an uncomfortably low place.
What do you make of that? Well, I agree with Secretary Haig Seth what he said yesterday that for this engagement, I think we're well supplied. I think we will be fine for the weeks, not months, that are likely to be the time period for this for this episode. What concerns me more is if we were in a longer
term war with a more powerful adversary, namely China. And at the Heritage Foundation, we've recently done our first large scale AI based simulation of what that would look like over a year's period, and given the capabilities of AI, we've been able to run thousands of scenarios for both US and China, and the ammunition is the terrifying part. We really we run out pretty quickly in that kind of a conflict. So I think we're ok for a run.
I'm very concerned though, going forward that our stockpiles will be way too low, and so we're very hopeful that Congress uses the one point five trillion dollar defense budget that President Trump has proposed to really remedy that deficit.
Victoria, I think we're all in trade.
Now.
What else comes out when you perform that scenario analysis, Well, I.
Mean, it really was fascinating to see. I mean, we call it Project Title Wave. It's on our website. Obviously, it's the first report we've ever done that. The US government asked us to redact parts of it. They didn't they didn't want our conclusions and recommendations to be publicly publicly available, and we did agree to do that on the basis that they would work with us on them. So we're working on that, and ammunition is one key
piece of it. The other piece we looked at closely was energy, because if we're in a conflict with China, that's likely in the Pacific, closer to China itself, and we would have to project power across the Pacific, which means we would have to get all this ammunition and other material across the ocean, and that's also very concerning. We don't have the tankers that we would need to move. We have plentiful energy here at home, obviously, but we don't have the means to move it the way we
would need to in that kind of a conflict. So we have, we've it was a fascinating project. We're considering doing another very similar related project on European conflict with Russia, and so I think it's a it's a really interesting example of how artificial intelligence is transforming policy analysis.
Stay with US mult Bloomberg Surveillance coming up after this. Executives from hyposcapas and artificial intelligence firms signing a White House pledge to cover electricity bills for data sense of projects. Jettish of what you imply at rightsing the media has it backwards. Data centers won't push on pricing, they will actually push down pricinc Jet joins us now for more. Jeed, welcome.
I've been looking forward to this conversation. I want to give you some time just to explain why you believe that's the case.
Well, thanks for having me.
We're actually out with our racks and stacks which is our monthly Data center empower index today. So a lot of data, a lot of things to talk about. And I think, you know, on the heels of the pledge from the White House, from the tech companies, if you just think about it, what the utilities are going to get is subsidized generation, and so is that going to drive up or downpricing? I think I would say it obviously would drive down. And so I think there's a
fear narrative around data centers. You know, not in my backyard type of phenomenon, but that is is if we look at what is driving up prices and we've written about this in our report Pain at the Plug and if you look at PGM, which is the most notable rto experiencing that that's not a function of data centers that are driving that up.
Jed how much is assuming a really rapid build out of some of the power centers that a lot of big techniques are looking to engage with. In other words, is there a time mismatch here Until they get those power plants up and running, they will be sucking demand away from utilities.
I'm not so sure that that is true, actually, I mean when we in our you know, when I mean, the data shows that there is a rapid increase, a surge, if you will, of gas turbines to provide base load power, and so you know, I'm not sure that that is a true statement in terms of that they're going to be sucking the power from the the rate based or constituents. I think that is a fear narrative that's being driven, but I don't think that's supported by the data that that we are seeing.
So how do you.
Explain the fact that utility bills have been going up so significantly, in particular power bills in a lot of locations, particularly those closer to a lot of these AI.
Centers, such as where in Texas for example, So in Texas, which does have you know, I don't think that you're seeing AI data centers that are directly driving up pricing
in Texas specifically. So I think what you are seeing is is you're seeing certainly a migration shift to Texas in terms of population increase, and you're seeing you know, a very favorable industrial permitting and industry which is obviously increasing load of which you know, data centers are part of that where you're seeing the highest increase in electricity pricing in the US.
I mean, I live in Massachusetts.
My electricity prices are through the roof Connecticut, New York, California, Illinois.
You know, you're you're seeing.
Very high pricing there and you're not seeing data centers.
So what do you think is driving it?
Then?
I think the so I think it's starts to get into. You know, when you start digging into it, what you'll see is transmission. Most of what we talk about is on the generation or the capacity side, and a lot of these markets have been deregulated for the capacity, but are not deregulated for transmission and distribution. And the more renewables that you're going to have, you're going to stress the system over a certain percentage, and is that variability
ticks up. We found that most rtos have over ten percent of variable assets. That the generation will actually be usurped by the variability costs, and that's requiring more transmission. And so when you look at those states with very high RPS subsidies, you're actually seeing the highest power pricing. Now some will push back and say, hey, causation is
not correlation, and that's fair. I think some of this is being figured out, and obviously there's going to be some impact in terms of adding data centers which do act like a semi fab or a steel mill, et cetera.
But if you now have.
Your tech firms that have all made a pledge that they're going to bring their own capacity and they're also going to be responsible for interconnects, that's a huge underwritten subsidy for that power, which should lead to lower prices, not higher prices.
So genet you is explain this runs contrary to the popular narrative you hear so much of on programs like this. As you and the team identify these data points, what do you believe the investment opportunity is.
Well, I think the obvious one is you need to have ge Vernovaz a core holding within your portfolio. And the most pushback that we get on that one is all the stocks run. You know, we picked it up it I think it was around two hundred dollars per share and it's now at eight hundred and thirty dollars per share. But you're continuing to see we haven't even seen all of the maintenance in the service side of the business that flows into the into the model.
So we still continue to believe that.
There's upside to that one on the nuclear side, BWX technology or centrist on sharing up the supply chain, so anything that's baslow. What we are seeing is the economy in the US is shifting from a largely service focused or highly optimate optimized energy efficient economy that if we move to a multipolar economic system globally, that's going to
require shoring that requires a lot more power. And then specifically baseload not surge or peak, so that's benefiting, that's going to benefit net gas, coal, hydroelectric, geothermal, and I might be missing one or two, but that's really the driver here. So you're seeing the contribution of baseload being valued more than that or surge peak.
This is the Bloomberg Savandans podcast, bringing you the best in markets, economics, angio politics. You can watch the show live on bloombag TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the bloom Blog terminal and the Bloomberg Business Amp