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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordern. 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. With the latest of Bloomberg's Mike Shepard Sharp walk us through the latest and the latest developments over the last few days on this front.
Well, there's really been a lot happening with respect to Intel. We've chronicled over the years, thanks for our colleague Ian King, all of the company's struggles, and they really reached an inflection point last month. We saw that really rough earnings outlook that they gave toward the end of August that sent the company's share sliding by the most in decades, and since then everybody's been wondering where do they go
from here? Well, the company has had a board meeting, they've decided to cut more than fifteen thousand jobs try to trim ten billion dollars in spending. But now we're getting a few other bits of good news this week.
One of them is this news from the company and from the Pentagon and Commerce Department that Intel is eligible for up to three billion dollars for military chip production, and this company's roughly twenty billion dollars in loans and grants that Intel is due to receive for commercial production under the Chips and Science Act that the President was
just talking about in that clip. The company also announced this week of partnership with Amazon World Services to produce a multi billion dollar and it's a multi billion dollar initiative to produce semiconductors for artificial intelligence for Amazon's cloud computing arm This is potentially more significant than the military chip we were just talking about, only because it shows that Intel is developing a commercial customer base that could feed some of the new plants and support some of
the new plants that Biden was talking about and hoping to see built.
This isn't just about building manufacturing bases in the United States. This is a national security concern. Why is the ministration coming out and touting this but at the same time looking to block. Now there's an extension when it comes to Nipon Steel, an ally of the United States, a Japanese company, and they're fourteen billion dollar takeover of US steel.
Well, on the steel front, it's very much a politically charged question because Nipon Steels attempted buy US steel. There is such symbolism and it is so freighted with US steal being an iconic company for the US and especially for President Joe Biden, who hails from Pennsylvania. So the
resistance politically lead to that proposal is not surprising. I think we have to separate a little bit that national security front on chips because that is a really core and consequential technology that if the US loses any ground to China on this front, it would be a potential risk militarily in the Pacific.
Basin chev Do you know what the national security concerns are when it comes to US steel and Nippon Steel.
You know, one of the concerns is that, you know, Nipon Steel actually does a fair amount of business in China, and would would US steals production somehow be vulnerable to shifts, you know, once the company takes over. If the transaction were ultimately improved, approved, and it is not looking terribly favorable, would some of the production be shifted over there? And if US steel makes some advances domestically and you know, perfect some of its techniques, would those get transferred somehow
to production in China. So what they're worried about is that nexus of US production with Chinese production that Nippon still ultimately have control over, should it somehow pull off a trans completion of this deal.
Call me cynical here, but when I saw that it was pushed back until after the election, this particular decision with Knee Pun Steel, I thought to myself, well, doesn't that make it convenient for a lot of the politicians They can rail against it, say they're completely you know, for keeping US businesses domestic in their entire ownership, and then approve it later when it seems like there's no better option really for US steal? Is that the right way to read this?
Well, Lisa, I'll share your cynicism. It really did look like a convenient move to push it after the election, to also remove it as an issue if the decision
were made before November fifth. That would expose the current Democratic nominee and presidential Canada Kamala Harris, accusations that no matter which way it goes, it would somehow be harming US industry and if they decided to approve it, it would hurt the party's standing with union workers, whose votes and support they really need come November.
I shaf appreciate the update down in Washington Bloomberg's My Shepherd with the latest on several fronts. Listen to this for a forecast. It comes from Max Light in a city thinking prices will actually grind lower over the next three to six months, and afterage sixty dollars a barrel in twenty twenty five, Max joins is now for more Max. We've got plenty to talk about, and lots of commodities to discuss as well, but let's start with crude. Why isn't this a bigger factor in your roundelook? Sure?
I mean, just to clarify, in the short run, we're seeing a lot of upside risks in the oil market. We have an average price forecast of seventy seventy four dollars for Brent for the fourth quarter of this year, so there's upside risk from what's going on in the Middle East in terms of potential risk premium in the market, Russia, Ukraine, hurricane risk, Libya's outage is ongoing, and you may go
on for months and months. The market may continue to get a boost from the FED cutting cycle in the very short run, But I guess the broader dynamic, which we've been highlighting since at least January of this year, is that they're slowing demand growth, whether it's led by China or just a broader global cyclical weakness, and it's being met by solid non OPEC plus supply growth. So OPEK plus has a problem, and they have a problem
with spare capacity. They've been cutting for two years, so you know they've got a big decision to make in early December.
There's a question about whether oil is getting increasingly divorced from the economic cycle in terms of an indicator, and whether there is divergency in China and the makes it increasingly confusing. As well as the transformation of a lot of the energy ecosystems to electric vehicle and other types of renewable energy sources. How much do you attribute that transformation or transition as part of that sort of decline and demand.
Yeah, we think that's a big, big part of the story. So there's a structural part of it which is being led by China, which is investing massively in the energy transition, and in response to shocks, China's probably going to double down on that investment in the energy transition and specifically going to accelerate the adoption of electric vehicles, which retail adoption was around fifty four percent last month of electric vehicles, which is up about twenty percentage points over the last
twelve months, so massive. China's basically solving all the problems we talk about in the West with respect to electric vehicles. We talk about range anxiety, price anxiety, charging anxiety, weather anxiety, latest vehicles, the latest batteries. Some of them haven't been mass produced yet in terms of the vehicles and the batteries, but you know, they're solving these problems. And it's evidence in the data, and it's evidence in the slowing in
oil demand growth. And there's a cyclical element as well, which is you know why the Fed's most likely going to be starting a pretty aggressive cutting cycle this week.
What I find fascinating is the oil used to be sort of a geopolitical temperature taker, or at least an economic temperature taker, and now it seems to be shifting a bit to precious metals. You expect that precious metals will actually get arguably the biggest boost from some of the rate cuts that we're expecting to see. Can you explain why that is and why that's maybe the better macroeconomic indicator right now than oil.
Yeah, we're really excited about precious metals, particularly silver, but also gold. But the reason why silver looks super interesting right now is, you know, I spoke a bit about how oil is negatively exposed to China's energy transition. Silver is positively exposed to China's energy transition has this bifurcat economy where energy transition sectors are relatively strong and the cyclical, the housing, the private sector, the prices of property, wealth impacts,
they're all super negative sentiments, quite negative in China. Silver's also bullishly exposed to that. The retail retail buying of silver just started to pick up over the last couple of months. You're seeing the first kind of imports of silver in bar and coin form into China that we've seen for years. And years and years. So silver's kind of uniquely exposed in a bullish way to both the bearish part of China and the bullish part of China.
It's going into solar panels on the energy transition side in particular, as well as ebs. Yeah, obviously, both gold and silver are super exposed to lower real rates in the US weakening US growth for years, and we're going to probably get a big wealth shift into gold and silver from US and global investors exposed to their own regional cutting cycles.
Max, do you continuously see central banks buying goal to diversify away from the US dollar.
Continuously certainly received for the next twelve to eighteen months. Tough to forecast beyond that horizon. That's a long enough horizon for me, but yes, certainly there's enough treasury holdings left to sell to buy more, much more.
Gold, Max, We've got to do more of this. Appreciate the clarity on the outlook, sir. Thank you. Max. Later in the of Citry, I just want to pause and talk about the biggest story of the last twenty four hours. Just pause. Imagine you received this movie script. Imagine you saw this movie at the theater. I don't think you'd believe it. I think you think this was a stretch. What took place in Lebanon in the last twenty four hours.
Thousands of pages in Lebanon exploding yesterday simultaneously, all at the same time, killing several people and leaving almost three thousand wounded across the country, including hundreds of members of the hospital. Militant groups accusing is of orchestraking the attack. Israel declining to comment, let's head over to the region and cantshat with Jamanabas said, you now joining us now from Dubai Jamala, walk me through this. This looked like an action movie out of Hollywood. It was not. It
was real life. What do we know happened?
That's it.
Feeling of shock, disbelief, fear is prevailing right now in Lebanon. So what we do know is at three thirty pm local time yesterday these pages all exploded simultaneously. The Lebanon Health Minister just put out a statement now saying twy eight hundred people were injured. Twelve people were killed, including two children, and many of them are in serious condition. They are about two hundred to three hundred as serious cases.
Interestingly enough, The Iranian ambassador was also harmed in this attack, and both Hesbelah and the Lebanese government were very quick to blame Israel, with the Lebanese Prime Minister Najidmiati saying that this is an attack on Lebanon sovereignty. Israel themselves have declined to comment and they haven't said anything about the incident. But what this constitutes is uh Ah an embarrassing security breach for Hesbela. It is the biggest security
breach ever. And lots of people were saying, what were these operatives doing walking around with pagers? Anyway, And you have to rewind back to this speech that Hassen Losarella, the commander in chief of Hesbella, gave back in February, where he warns military operatists to not use their cell phones out of concerns that they may be intercepted by Israeli intelligence and he thought that maybe if they use these low tech devices, the pagers, it would be safer.
But obviously you fast forward to today and what we're seeing is a massive intelligence and security breach and now Hesbela is on the defensive.
Jumana, is this a case of escalation to de escalate or do we think or do you think, haw you reine the tea leaves Isra wants to escalate, to escalate. What happens next?
I think, Amrie, that we are seeing a whole new level of warfare, and what we have seen since October seven is daily crossfire, exchange of fire on that border uh with Israel, the northern border. What this has meant now is we're moving towards a new type of warfare, and this is cyber warfare. A lot more question marks,
a lot of different operators going behind the scenes. If you look at all of the cybersecurity comments that came through yesterday, trying to understand exactly what happened, it's still not clear. But what has emerged is this feeling that these devices had been tampered with in potentially a different country and therefore the shipments that came through just a week ago. According to a Lakhbard, this is a news agency that's closely associated to Hasbala. We're all contaminated with
these explosive devices. So it does raise a lot of questions about the new type of warfare that we're entering into. But certainly Lebanon is on a high state of alert
and even if you rewind back earlier on in the day. Yesterday, the Israeli government, the Prime Minister Nataieha, was saying that they've got a new war objective now and that is ensuring that security on the northern border is taken care of so that people can start return running back to their homes because since October seven, there has been this daily exchange of crossfire and people have been forced to evacuate,
and so they want to resume some normalcy. And the question is, unless there is a diplomatic solution, will this open the door to a larger scale operation.
Shocking scenes yesterday, Jemana, thank you as always, Jemina have sent you there of Bloomberg leading our coverage out of the region. This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, angiopolitics. You can watch the show live on Bloomberg 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 Bloomberg Terminal and the Bloomberg Business app.