Erdogan Wants His Power Entrenched, Rahman Says

Monday morning, and we'll do it again, Miss Ramen. Over the weekend there was a headline that basically said, the United States has a big old air force base in Turkey, and Turkey is not happy with our big old air force base in Turkey, and that's creating a lot of tension. Give us briefing right now and that real visceral thing for Arijuan and Trump, which is a huge US presence

in southern Turkey. Thanks for having me, Tom, Yeah, I think look that the context here is a quickly deteriorating relationship between Turkey and the US where absolutely everything is in play, from air bases to US sanctions on how Bank, to corporation in Syria, to US funding of Turkey's current account.

I mean, the relationship is really on the precipice, and I think that's why we still assume some degree of rationality on the side of Rod And I do think he will signal a commitment this week to release the pastor, as well as some decisive action by the Central Bank, because otherwise he's looking at much much more difficult choices

that could undermine his political mega project back home. Which what underpins your confidence that that will happen, both in terms of the relations of the pastor and the actual move to do what's needed domestically higher interest rates, perhaps tied the fiscal policy. What gives you confidence that's about to happen. It's it's really looking at the alternative. So

what's what's the counter factual? If Dan does not allow the central Bank to move decisively this week, if this row with the US is not de escalated, Essentially he's looking at two options capital controls, which for a country as dependent on foreign exchange as Turkeys, would be absolutely disastrous, a massive blow to investor confidence, far more than we've

seen over the course of the last few weeks. Or indeed, and I'm a stand by agreement because he will need external funding for the current account, and of course that would come with conditions and constraints that would undermine a large part of Rodan's political narrative. Remember, he has made political hay of the fact he was the leader who kicked the I M s our and return full sovereignty

to Turkey. So to now have to accept an I m F program with all of the conditions that that would impose on him, I think would be a massive humiliation for him, and I just I find those two options so unpalatable for him that although we moved by the Central Bank would be difficult, it's far easier than the alternative. I'm just wondering, though, whether he has no choice, whether he's been completely overtaken by events now and something that might have worked a week two weeks ago, we'll

just no longer work. That the highest short term interest rates and time of fiscal policy won't regain confidence to this market, and they'll have to institute the emergency measures that you just pointed out, Mitch Well, I I think there is a precedent for the dynamic that we're currently seeing.

Back in May, I think you could see a very decisive rate hike by the central Bank, let's say five d to thousand basis points, five to tentage points, that kind of number, and then every one would say, look, you know, this is not what I support. But the sun Traw Bank is independent. I think that would stop

the immediate bleeding. And then you're right. We would need to see alba Iraq being able to demonstrate he's a positive influence on Araduan by coming forward with a much broader and comprehensive strategy of economic reform that includes the consolidation is one of his legs. Now, is that likely? I think highly, highly questionable. But again the alternatives I think are so impalatable, both economically and politically. I think we are going to see some fairly decisive action this

week in our time. Fox for a Monday dumb question of the Day, I'll ask it, But the midge, what does Mr arad One want? I mean, I understand he's pushing back against the US first set of reasons, and there's a traditional German Turkish relationship. I get all that, But what's it really want with allies and non allies? I think Tom Ultimately, we we've seen it crystallized on the back of the presidential election. I think he wants to ultimately institution analize and entrench his power and those

around him. And anything that could potentially complicate or undermine the institutionalization of power, I think he will. He will be a threat. He has his presidential system in place, he has his preferred successes now all around the cabinet table, and ultimately wants, I think, to to move that mega

political project of his forward. Now being dependent on foreign capital, having to raise interest rates, having to be dictated to eventually by external actors of the markets, I think undermines that that that mega project that he is that he is so desperately seeking to implement. Does Germany? Does Germany come in the next couple of days, I mean, just want to final question, Madge if we could. I mean, Germany has an historic and unique relationship with the people

of Turkey. Does chance or miracle coming unilaterally and try to fix this in terms of the politics. So there's definitely something to this. There is a state visit between Aridoan and Merkel at the end of September, and I think that will be used as a vehicle to try and pass diplomatic messages onto the Turks around what the Germans think Turkey needs to do. I think, like the US, they think the plan the government's presented does not fit

for purpose. It's largely cosmetic. That a structural crisis was likely returning the economy because of all of the rule of law violations and the undermining of investor confidence we've seen over the last two years. So I think there will be that there is a context for Germany to

try and influence actions in Turkey. And of course that's a big concern in Germany at least because they're implementing an agreement that is stemming the flow of migrants into Germany, which is you know, in fifteen was massively important for angler Merkell survival. So the Europeans are watching this closely. Miss thank you so much for Raman with the international relations update that overlays and the finance that economics and

the investment. We're looking. What John and I try to do in the modern media is we always cite everything, and what you don't see is we and our great team are scrambling to separate out from like legitimate news organizations. John, we just walked through that twenty minutes ago. With the market moving tweet. Yeah, fact is the tweet moved the market. The tweet did move the market to some extent. We saw some Turkish lera come in, we saw euro dollar flat on the session, and we saw US futures past

some of the early losses. It was a tweet essentially communicating on Twitter, which has now been completely unconfirmed. Um the US Anchor Embassy official speaking to Reuters saying they haven't issued a statement regarding the US pastor Brunson. This is from Ruyters, This is from anchor. This is the

reporting coming from Roy. So is this after a tweet suggested that the pastor Andrew Branson, who was facing espionage and terrorism allegations related to that fail and ultimately is that the epicenter of the spat between the US and Turkey. There was a tweet suggesting he would be released. And now we are seeing, according to Routers Reuters that the Anchor Embassy is saying, nah, we haven't said anything about it. And to show you the market reaction, we have to

live with. Lower numbers are stronger Lira. We weren't from about seven o two exploded down to six point six zero, six point five zero, and now we've come about eight five back to six point man, this is the danger of getting unverified news on Twitter. It moves markets. People make stuff up. It's unconfirmed reports, and we're seeing it again. I don't want to speculate about the why that that tweet came out. I'm just going do you know what

we did learn from that tweet? Though? That the market is assigning great importance to the to the poster and his release. Um, yeah, yeah, there's there's yes. I think that's true. I want to bring Georget Boll, a b n am Ro Bank currency and commodity strategist joining us now, Georget, great to have you with us on the program. I would have thought the more important piece of this puzzle was getting a real domestic response higher rates kind of

fiscal policy. But off the back of an unconfirmed turning out to be false tweet that the pastor would be released, we saw a sizeable market move. Is it that important the US side of this story, Georget, Yeah, yeah, that's right. The thing is just that if you look at this kind of volatility in the market, marketers relatively thin and not a lot of people want to be in the Turkeys clear in the current environment on the other hand, you know they are also afraid to be caught on

the wrong side of the market. If you get like, yeah, now I had an exponential weakening off the lira. Um if you now get an kind of communication that may be despat between the US and Turkey, may be cooling down or into calming or on the other hand, if you were to get an announcement with sounds a bit credible, could be a combination of interest rate higher or anything else, then you can also see a quite recovery of the lira because people say, okay, we were negative, let's skal

a little bit back. So this is quite a dangerous market. And yeah, you get volatility like this because the factor is barely a market Georgia, what is your call on end? If that's the global proxy, deepest market, stronger yen fear in the market one tense sixty. Clearly we're seeing that

his A, B and EMMO. Do you have a call on end and if you have to change it in the last two trading days, Yes, we have a call on end and we have not changed in the last two trading days for the end of the third quarters, at the end of September, any end of the year, we have one ten in dollar yen. You know, the nervousness you see currently in the market is more visible in Urian because there is some kind of nervousness about the Euro as well. We don't completely share that nervousness,

but it is something you see in market. So Urian is the one which is more slid down for the day. And there's also something we yeah, in terms of possible quantation risk reflected in market jury and it's more than one to watch than Dolian as well as yours with at amoment which is making a low again. So so overall, yeah, on quotation, I would look at Urine and euroswizz gold

is less for good indicator at the moment um. And then yeah, Dolly and you have effect two currencies which are the most liquid in which all both qualify for a safe haven which are the dollar in the end, So there the the the effect is not that visible. Some big calls coming in on euro dollar this morning on this program, John Jet, we caught up with Kitchukes of Socken about thirty minutes ago looking for euro dollar

to strike one ten um. What's your call on you're a dollar now and has it changed in the last couple of weeks and why no. We have, in fact, for for quite some time already want ten um And it was a bit yeah questioning because one fifteen was

a quite crucial level. And then because of the nervousness about Turkey and possible spill over to Europe, Yeah, it becomes more likely to effects one then and that for us would be the lowest points because I see towards the end of the year and next year you're straightening or recovering again, because you also expect that the dollar will pick around those levels. So so we have one

tim poo the end of September. George Broll, thank you so much for joining us across all of our Bloomberg platforms of the A, B and AM world timely to say this is the right guy to talk to, Stephen Gandell. It's made a career of being testy and asking the right questions. There's different kinds of journalists, phim and then there's journalists that come from the Washington Universe city of St.

Louis and they make people squirrel. Then let's go. So this is a squirm back away streets of Wall Street and watching the bubble pop. Yeah, well the bubbles for Mr Musk. Tell me. That tell me the squirm factor of Mr Musk now secured financing and yet the deals going forward. Right, So I think the squirming factors a lot on the board, right, because they seemed clear from the statement the next day that they were kind of uh,

you know, in the dark. Maybe they had a conversation, but they did no way knew this tweet was coming from Wall Street right there. Squirming. And and now if possibly the Sawdies or someone was going to uh you know, had secured funding for this deal, right, was going to fund it. The fact that now Musk is under investigation by the SEC, it's gonna make anyone really scorm me. I mean, that's the scormiest person right now. Whoever, if there was someone who was going to fund this deal,

why why? I mean if they're already in with with Elon Musk. This is not the first time that Elon Musk has done something that has upset the status quo and the way the companies are either rush, but this is the first time that's put him himself in jeopardy as as the CEO, because the SEC could based on this and it's it's potentially market madulation. They could bar him from being an officer, and he this company is

so entwined with him, right, You're not just investors. Let me just push back on that, because that is something that is true. Whether he did this tweet for four dollars go private transaction or not. Every investor had already bet the farm on Elon Musk running the company. Correct. Yes, but when you make a deal with Elon must to take his company private, you take the biggest risk right away in this stuff, which is that he says something

stupid that moves the stock. Right. If you're thinking, Okay, I'm gonna do a deal with him, I'm gonna get him private, I'm gonna remove this risk. Now the risk is even biggo, it's even bigger the elephant in the room for me. What you're gonna write for for Bloomberg Opinion, Steven get dealt with this is. Musk has notified Tesla board August two on wanting to privatize. But that could have been like August two at nine pm versus reruns

of Azie and Harriet. I mean, we don't know if he even got out in front on this tweet and told the board. I mean, we don't know, do we. You know, boards have a lot of discussions. Uh So he had discussion with um soft Bank, which didn't you know, go very far. So people have these kind of discussions, right, and he can kind of use that for cover, But it does not sound like they had the type of discussions that usually have before you make a tweet like

this or before you uh make something public. And there was no press release, there was no filing with the Securities in Exchange commissioned, there was nothing. There's a lot of potential conflicts of here. Any reasonable board would have a special non conflicted you know, panel or group to investigate this. Okay, but that they're just drawing up the

special group now agreed. But I go back to the original point, which is that Tesla is a company run by a gentleman who doesn't use any rule book, right, And you do that, I agree, But you it wasn't necessarily run by someone who's under investigation by the SEC who could be removed, right, And so I don't know how you put seventy billion dollars in the company that way. And I'm not saying the SEC and that really goes after him and he can say we had these discussions

and funding secured. Was was a loose term, and you know, it's it's been well established that CEOs can use Twitter. So I'm not sure the ses after him. But at the very least, the biggest risk of this deal is now the fact that he's he's created this sec investigation.

I'll go with that. But is it the biggest risk media is it's somebody lost report at one point seven billion because he didn't want to use the rule book that this bar at General Motors would have to use, meaning that so got killed, right, and so there's lawsuits coming. It's that you're saying that to me, it's almost I'm not saying it's a bigger risk. But it's a huge distraction, isn't it. It's a it's a huge distraction because it

puts Musk at legal risk. I think you know, the money they if if they get fine, I mean they'll have to they'll have to have some class action lawsuits and they'll be It's it's a big distraction. But I think the bigger issue for the deal is that it puts Muske at risk. But you know, I mean, the bigger issue could because it's it's kind of a dumb transaction too. I mean, there are we're relatively good public company.

I can't assure you that it's a good stock, but I think it's a better public company than is a private company because stock pairs are paying what hundred and forty times two years out earnings. If you're James Murdoch, you're on the board, you've been there for less than two years. What kinds of conversations are you're having with your own counsel or maybe you don't have counsel. UM, I think you're I don't I don't know what legal

risk he has other than UM. I mean, I think he's on the board because I would guess that he's on the board because he sees this as the future, and I would think that he'd be on the board UM and and sees Musk as a visionary. So I don't know if I think it's probably he's probably like a lot of the Tesla shareholders who are just you know, they they believe in this vision. Thanks very much for

being with us, Stephen Gandel Bloomberg opinion on Tesla. There has been any number of topics in this really interesting August. We could start with Turkey. We could end with the politics of the nation, but one of them has been Tesla, and a Bloomberg survey carefully done show that to seven five of the people talking about Tesla PIM have never been into Tesla, and that would include me. Should we talk to someone who actually has a Tesla owner Tesla driver?

And I gotta say, I did test drive at Tesla and I was completely bowled over. It was an amazing experience. It's like the center of gravity has shifted, and the stock has done done so poorly forty two point five percent per year from inception, and it's down a little bit from two thousand seven. Matthew Winkler with US emeritus editor in chief of Bloomberg News and Tesla owner. When you hear the Tesla gloom and Doom crew, as a car guy, which you are, how do you respond on So,

first of all, thank you very much for that. I'm not a car guy. Um. You know, before I had a Tesla, I had a thirteen year old Toyota Avalon and that was solely because it has a great back seat. And when I tested my Tesla, the one that I have now, which I bought in two thousand fourteen, it was because of its back seat. They are all kinds

of other things. Of course they come with it. But but the answer to your question is, uh, you shouldn't ask, actually me, Um, you should ask the people actually own the shares of Tesla, who, according to data compiled by Bloomberg, which all of our users can access, shows um a greater loyalty and commitment to Tesla than is seen in

any other automaker, which is astounding to me. In other words, the people with the most at stake, who are the investors who are following Tesla and following Tesla's experience with its owners and I'll get to that in a second, have made Tesla the most lucrative, as you said. But also here's the here's the real surprise. The least volatile

UM share among automakers major competitors. Why is that. Partly it's because of the sales growth of Tesla, which is an exponential multiple of the sales growth of other carmakers. And you could say, okay, they're starting from a very low base, but that is also in the context of at some point, so many more of us, a multiple of us, are going to be driving electric vehicle. So Tesla is the only carmaker that is fully committed to

doing that. And then finally, if you just went to Consumer Reports, which everybody can do, and see what do the people like me think about Tesla. You know, the Models is the highest rated car in the world according to Consumer Reports, and the Model three, which is meant to be a vehicle for everybody, every man, every woman, has the highest owner satisfaction. So you didn't do this just because you wanted your kids to think you were cool. Actually, one of the appeals of the Tesla was that I

could put two grandchildren there. You go in the in the back seat and they've got and they've got you know this whatever five point seat belt system, so it's totally safe, and that was cool. It was really cool that I could do that. Well, okay, I'm just gonna throw some some issues at you and you can tell me what you think. A hundred years ago, the vehicles on the road in the United States were electric that

didn't work out. There was a lot of money spent, a lot of cheering, a lot of people lost money. In addition, if you go on forums online and you read what Tesla owners say about getting very minor parts in order to fix their cars that have been minor fender benders. People wait two three months at a certain point, do you think that patients is exhausted after they've spent a hundred thousand dollars for an automobile? Um? Well, according to the data, apparently not, because, uh, the sales growth

continues unabated. So nobody is perfect, obviously, but putting that in context, the sales growth is unabated. To your question about electric vehicles, way back when, you know, it was Edison himself, Thomas Edison who thought, uh, that was the future. Ironically, it was Thomas Edison who dismissed Nicola Tesla is at one point colleague rival you could say, uh, and his invention of the alternating uh current motor um as impractical. And of course we all we all embrace a C today.

So I would say Nicola Tesla, who um, you know, did so many things anticipating the twenty one century, including by the way, uh you know, moving pictures and audio video and all that that all comes out of Nicola Tesla. He did that. So you know, if you go back in time, the electric vehicle was the right idea. It's where we should have gone Edison in fact said as much. He was very disappointed that we wound up with a internal combustion engine. For as long as we have, well

you wonder world be in ten years. I've got to cover this man because it's so important. You were truly one of the leaders within journalism on regge f D. You led the charge. And we've seen all sorts of stuff about Mr Musk the litigation. We've done three interviews today on it as well. And this folds into the fact does this guy get a different rule book? Does he does? Does does an executive at this firm, entrepreneur, owner, et cetera played by a different rule book than the

CEO of Colgate just as one example? And this goes into disclosure, doesn't it. Yeah, I mean I think it's a hard question to answer. I mean, obviously there are, to say the least idiosyncrasies and to say the worst

maybe irregularities. Um, but in the age of Twitter, which we're all in, all kinds of things are happening with respect to disclosure that were unimaginable when we did the coverage of selective disclosure back in the nineties of Bloomberg News, which led to, as you say, the reg f D regulation. We need to go back to that or do we

need to find something new given modern digital distribution. I mean, if you ask me, greater transparency is always preferred, and we should do everything we can uh in our public markets to perpetuate and accentuate transparency. So anything that gets in the way of that, I guess I'm in the opposition. Matt Winker, think you so much as emeritus editor in chief and writing intelligently on Tesla actually going down the silent world. Grand Chors. Thanks for listening to the Bloomberg

Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.