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We efforted Richard Haas yesterday we are unable to get him. We have him today and we extend out here commercial free for you. In a conversation with the President Emeritus, the consun Foreign Relations and of course senior counselor. Was someen of you partners with Paul Far.
More than that.
The single best clarity before the attack I put out on Twitter in LinkedIn Ambassador Has's essay in the Financial Times. It's forever ago.
Richard. It was three or four days ago.
You wrote a jewel of short clarity of what to do, what to hope for. If you wrote that essay now, how would you change it?
Well, good morning, Tom, and thank you. Look, the United States faced difficult decisions in the aftermath of the Israeli actions. We chose the path of acting in this case to do an intense but idealistically or optimally narrow, military strike against Iran. What's so interesting to me if I had
to say one thing at this point. If you think about this crisis over the last ten or so days, the first week was dominated by Israel, it deciding in the aftermath of October seventh, the weakening of Iran's proxies, it was going to act against the Iranian nuclear program and more broadly against the Iranian political leadership. Then the United States decided this was the moment to set back the Iranian nuclear program. But now initiative has passed to
Iran for the first time in this crisis. It's the Iranian leaders who control as much as anybody. How this unfolds from this point on, And that's what's different. If I were writing today, indeed I will be writing later today.
That's what's different.
For the first time since this phase of the crisis began, decision making, if you will, is in the hands of Iran more than Israel, more than the United States.
Investor has and I want to make clear here that Richard Hass redefined the international relations debate with the invention of the Internet. At the Council Unfeigned Relations John Bellinger at CFR, Richard Has writes a blistering essay with his legal expertise. Does President Trump have the authority to strike Iran? From where you sit with all your work back to Northern Ireland. Did the president have the ability to act
from the executive branch? Or did you need to use a different process with Congress?
And the president had the authority like all of his predecessors if you look at the history of a modern American foreign policy initiative, and foreign policy has decidedly passed to the executive I mean, Tom, what was it sixty years ago Arthur Slessinger Junior wrote his essay and book about the impurial presidency. This is nothing new. Congress virtually never ever fulfills its constitutional obligation to declare war, and we have used military force hundreds of times in the
absence of anything so formal. So I just flat out disagree with that kind of a narrow legalist interpretation. That said, if I had been advising President Trump, I would have said, take a page out of the book of President Bush,
the father push forty one. Do things with the internationally with building on the International Atomic Energy Agency skating report of Iran, Do things with the Congress, do things with the American public if you're going to use military force, people should come to conclude that you tried to do diplomacy and at the end of the day you reluctantly had to use it. But also, by the way, would have helped this president with his magabase. So I think
he should have gone about this differently. But did he under American political tradition? Did he possess the authority to do what he did?
Absolutely, Richard.
As the world awaits some type of response to moren do we have any good information as to their capabilities today from just their military capabilities into their leadership because Israel has dealt a blow to their leadership, what should we expect.
No, they're both good points. I actually think they're unlikely to retaliate. My reading of the Iranians is they're focused on regime survival. In some ways. This is the second great difficult period crisis for Iran's leadership since their nineteen seventy nine revolution, the first one being a decade later during the Iran Or War. So my guess is they're going to focus on regime consolidation. Down the road, they
may focus on reconstituting their nuclear program. We have no idea how much of their nuclear program is intact, but I think it is difficult for the Iranian leadership to act. They're trying to stay off the net because they don't want to give signals for Americans or Israelis to target them. They obviously have lost control over the airspace of their own country. Their proxies are much diminished, so I don't
think they have very good options. That said, they can still lob missiles at the forty thousand American soldiers in the region. They can play havoc with shipping. It doesn't take a lot to drive insurance rates up. They can do asymmetrical warfare using cyber or terrorism, so they actually have lots of capability. You don't have to compete with US be two stealth fighters in order to be militarily effective.
But I just think that the Iranians right now, their priority in the short is not to retaliate against the United States.
Richard Haus with US, we continue with Ambassador House Paul Sweene, and I welcome all of you across the nation are continuing that coverage. Here a difference this morning, the markets are open. We will consider the markets across the arc of the show. We thank Golder mount Avali from London for being with us. Jumana Brasseti from Dubai, and we continue here on YouTube and on all of our commute our audio radio affiliates as well, and we say good morning.
Paul Richard.
For many observers, the American strike on the nuclear facilities in around was a bold strike, a surprising strike. Does that have an impact in other parts of the world. I'm thinking about Ukraine and Russia, thinking about China. How do you think those actors are viewing this?
It was surprising more in the tactical rather than strategic sense. We've been talking for years that we weren't going to let her On gain nuclear weapons or even get close to them. What was surprising, for how tactically was when the President talked about his two week last chance for diplomacy to work that turned out to be a faint or a ruse. I think it was surprising tactically, not strategically.
I think the rest of the world took note both that the United States acted as well as how effectively the US military looked. What was brought together was was criite extraordinary. My guess is the Russians probably have liked this crisis any time. They like when energy prices go up. They like when the United States expends munitions in other parts of the world. That means we don't have to give to Ukraine. People aren't talking as much about Ukraine.
I thought it was quite interesting at the G seven that Ukraine almost seemed to be something of an afterthought. So the Russians have to like that. My guess isn't The Chinese are probably concerned about on the opposite side of the coin, as a massive energy importer. They don't much like instability in the Middle East, but all of them have to be happy. I would think that the United States is once again involved in the Middle East.
That means we have less bandwidth, less ability to focus on safety Stasia or Taiwan, or on helping Ukraine.
Richard Haass with us and folks, I can't say enough about this. This is a book you can throw at your smart alec kids, the college brats. They're home from Oberlin and you throw this book at him, and you won't hurt them because it's beautifully brief bill of obligations. I can't say enough about Richard Haas's cry for citizenship in America. I can't again, I can't say enough about it. I'll put that out on Twitter and LinkedIn as well. Part of our bill of obligations, Richard Haass is to
have a coherent foreign policy. We can go back to clash of civilizations staggered a Zakaria in a post American world. Robert Cappen coming up in a bit, maybe with a Kissingerian realist theory. What's the host theory you observe at the State Department right now?
Well, State Department Israel to observe. It's actually a sad story over the last decade or two of the weakening of an institution, the hollowing out of the Foreign Service, more broadly, the hollowing out of our interest or capability in terms of diplomacy, in terms of the whole mission of the Agency for International Development, the whole promotion of democracy and American values around the world. We have dramatically weakened one of the principal instruments of American national security.
We've then compounded a top with the hollowing out of the National Security Council. This is an administration, I would argue that is in some ways it's put itself dangerously dependent on a top down approach to foreign policy, where the president does things and quite honestly, the rest of
the administration falls in behind. I don't see an awful lot of ground up analysis, but I do worry about what's been now more than what decade and a half of the weakening of the diplomatic dimension instrument of American foreign policy and national security Richard.
Some folks are even discussing, probably a small chance, but still discussing regime change in a rent How do you think about that topic?
A couple of ways.
One is I find regime change in the category of wish, not a strategy. If Bibi Netsnahu, the Prime Minister of Israel, or Donald Trump said to their generals, I want regime change, they wouldn't know how to implement it. Regime change is not something you can design an operation to bring about. Colin Powell used to say, the military military instruments do two things. They destroy and they kill. Regime change is not is not on the menu. So that's one thing.
Second of all, you never know if you can bring about You also never know what comes of it. You know what would follow this regime? Is it necessarily something that you want for all, you know, nuclear materials which are clearly still existing around could get into the hands of all sorts of groups that might be in the Be careful what you wish for. So I take, I take regime changes, unseerious foreign policy. If it comes about,
it's going to come from within Iran. It's not going to come, if you will, from Israeli or American bayonets.
Do we underestimate, ambassador, has the military violence of the theocracy in Iran? The news flow to me, Ambassador, with the respect of my colleagues, is so simplistic. Iatola theocracy, the people of Iran. What's in between them? And the answer is a harsh dictatorship.
Right, You've got that, You've got all sorts of citizen groups that are uh, listen to them, the so called basis, you know, the the guys who used to come out with the sticks and beat beat up on the Green Movement protesters. And then you've got formal authorities, uh, the military and and.
And so forth.
So this is this is a regime that has tools, if you will, time of repression in addition to what it can do as a more traditional marilitary In addition to its its proxies. But this is a this is a system, it's been in place now for more than half a century, that has instruments of repression and coercion.
Paul, I remember exactly where I was in the shock of the hostages. Are you ready a country road in Pittsfield, Vermont, on a cold, cold November day, walking down the road, trying not to slip in my two tone Tony Lahma cowboy boots, and we were in shock. Is a nation over the failed hostage event?
Yep?
Absolutely, Richard, give us the point of view of Israel here. A lot of folks are saying this might be a special time for Israel to kind of reset the Middle East as it takes care of, you know, many of what it perceives to be its enemies, including obviously a Ran most recently, can Israel change its position in the Middle East or the balance of power in the Middle East?
Well, I would argue Israel has much improved its strategic position, mainly through the weakening of Iran's proxies as Bola first and foremost Amas secondarily, then through regime change what we saw in Syria. Israel has improved its position against Iran, but hasn't resolved it. By that, I mean Iran remains hostile to Israel has capabilities. And again we don't know how much of their nuclear components survived. For all we know, a lot of them were parked in undisclosed location. So
Israel is not out of the woods there. And even more, Israel's not out of the woods dealing with Gaza or with the three million Palestinians in the West Bank. And I think that's still the biggest strategic question. So Israel has the Iranian dimension and still has the Palestinian dimension very much.
Richard has one final question Paul and I in our broadcast yesterday, Paul, please help me.
I agree that we.
Were thunder struck by the acuity and concision of our Chairman of the Joint chief of Staff. I was blown away by his report. Richard Hass you're the grizzled veteran. What did you think of the press conference of our Chairman of the Joint chiefs of Staff.
Tom He was impressive. General Carilla, the head of Central Command, is impressive. Let me just make a larger point. When I look at American society, I think there's two great pools of talent one is in the American military. The professionalization there is awesome. And the other is something you guys, you have all deal with all the time, which is the best of American corporate leadership. These are people who know how to run big operations and do it in
a really responsible, accountable way. So I'm not surprised when I see great talent in the military rise to the top. It is a meritocracy. These people are tested and they are responsible for large numbers of lives. So I find the post Vietnam American military is quite an extraordinary institution.
Richard Huss, thank you so much. Just send of you partners and a course is definitive work. The Council on Foreign Relations Ambassador House back decades to the diplomacy of a Northern Ireland solution.
You're listening to the Bloomberg Surveillance podcast. Catch US Live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch US Live on YouTube.
There is an approach that each expert in international relations and geopolitics takes. We had Richard Haass with this earlier. Ambassador Hass looking at the fabric of American culture and extending it out across his treatment of foreign policy, Robert D. Kaplan, over a stretch of over twenty books, just simply speaks of the map. If you're one of those believers in get out the map and look at it, Kaplan is definitive. His new tour de force is Wasteland a world in permanent crisis.
This is coming off my.
Book of the year a few years ago, The Loom of Time from Morocco to Persia. Robert Chaplin, thank you so much for joining us. I'll cut to the chase. You say, technology has permanently changed our map, our geography. Is that true of this war with Israel and Iran?
Yes, it is to an extent, because Iran is a long distance from Israel on the map.
But yet the.
Israelis and of course the Americans have condensed that distance through technology. The America excuse me. The Americans sent B two bombers all the way from the center of the United States white Men Air Force based in Missouri to bomb Iran, so that Iran is is close to America in you know, in in operational terms, as you know, as Kansas was to the Indian wars in the middle of the nineteenth century. And let me just make one
thing very clear here. Yeah, people who are saying that this could this could lead to another you know, forever forever war, Middle East quagmire, they're making a mistake of category. Iraq is in different was in a different category than Iran. Iraq was in the category of Vietnam and Afghanistan and Korea in the sense that it involved tens of thousands of ground troops which got stuck literally in a quagmire. Here we're dealing with just air and naval sets. The
war could go in a number of ways. There could be blowback, but as long as we stick with air and naval assets, there's not going to be a quagmire. There's going to be something different. It may be something bad, but it will simply exist in a category different from those four forever wars Korea, Vietnam, Iraq, and Afghanistan.
Robert, what do you expect the response from Iran will be?
I think there will be a response. It may take a few days or a few weeks. It may be a terrorist attack in Europe. It may be an attack by Shia, a pro Iranian Shia militia in Iraq on US troops not too far away. There certainly will be blowback, but it's going to take a few months at least to really just whether this decision by President Trump to bomb the Iranian nuclear facilities was a wise or an unwise decision. It will unfold stages, and.
You're the loom of time, and folks, I can't say enough about this is your single concise read on the span from Morocco to the Eastern Arab world and over to Persia. You talked there, Robert Kaplan, about the giant of your academics, which is Clifford Gertz, and it's the idea of culture described for our American audience today, the Persian culture, the Persian culture extant since the theocracy of nineteen seventy nine.
Yes, Persia. Iran is not the Arab world. It is not Iraq, it is not Syria, it is not Libya. Iran has been a nation state of sorts on the Iranian plateau for thousands of years. Iran was the world's first superpower and antiquity. You're dealing with a highly sophisticated, highly evolved organ you know, culture and civilization where there is not one center of political power, but multiple centers of political power. Uh. You know, I've been to Iran
several times. It takes two hours in traffic to drive from one end of Tehran to the other. Being in Iran is like being in Egypt or India, and that is it's overwhelming. You feel overwhelmed. So the so the idea that you know that a singular attack on nuclear facilities is going in a linear fashion to lead to a regime change is far too simplistic. They're you know, they're very very well likely could be a regime evolution, as I call it, but it will involve many other factors,
and it will be internally driven. It won't be imposed from the outside.
Robert, what do you think our the US strategy should be towards Iran at this point? Again, the over the weekend, a significant escalation and military action, it should be our strategic view.
Well, at this point, we should try, as President Trump said, to keep it a one off that we try as hard as we can not to attack again, not to respond again. You know, if they're just going to do a desultory pin prick response like they did after President Trump bordered the assassination of Kassamsuleimani, the head of the El Kutz force, back in twenty twenty. In January twenty twenty, I think it was there's no need to spawn, you know, the policy now should be to lower the temperature, not
talk about changing a regime from the outside. Because the damage has been done. It will take days or weeks to more properly assess exactly how much damage was done. But the idea that the Uranians are just going to rebuild their nuclear facilities is very simplistic. They're never going to rebuild it to the point that Fardeau or Natans was, you know, way before they get to that point, the Israelis will be able to attack them. So this attack really did do substantial damage.
What do you expect Israel to do here? Because a lot of folks are suggesting this is a unique time for Israel here in terms of exerting and expending and its role within the Middle East and add to its security. Is this a unique time for Israel?
Yes, it is because you know, Benjamin Netanyahu, love em or hate him, is a world historical figure. People may forget Clinton, Obama and Biden and half of the European prime ministers, you know, who will be forgotten in the
course of the decades. But decades from now, people will be writing biographies about Netanyahu, you know, because he's been in power so long, and the way he was able to, you know, achieve tactical surprise in his attacks on Iran, and then I'll use the word manipulate President Trump into taking action on his own is is nothing short of extraordinary.
I think with these the smart thing for the Israelis to do now, now that they got help from the US, is to give the US something that is start the process of withdrawing from Gaza.
Robert Kevin one final question, and one's going to run on with the day. And again, folks, I can't say enough about Wasteland. Robert Caplin's new effort in The Loom of Time, my book of the year. You wrote a monograph I'm going to call it The Tragic Mind, taking us back to Greek mythology and how we need tragedy to move forward. Does President Trump have a tragic mind in there somewhere? Is there a philosophy of tragedy?
Is a foundation strength? Very hard?
Yeah, Tom, that's a very hard question to answer. Because I don't sense it. I think he's too vain and superficial to really have a deeply, a deeply developed sense of tragedy. But I could be wrong. I could be wrong on this because the person who really did have a deeply evolved sense of tragedy was President George H. W. Bush,
who is very cautious and another. You know, the great thing about his administration was not what happened, but all the bad things that did not happen because of governance.
This has been wonderful, Robert Kaplam, thank you so much. It's a muster read folks wasteland, a world in permanent crisis.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Corplay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
Lri Calvicina joins us for a quick discussion here this morning with the RBC Capital Marcus Lorie. How did your strategy change this weekend as you published for Monday?
How do you amend to a new war.
Hi Hi, Tom, So, thanks for having me. To be honest,
we didn't change anything. We had done a piece about a week ago laying out our framework for how we were thinking about rising tensions in the Middle East and escalations, and I would say, you know, while while I got more convinced that we needed to have some sort of short term market draw down, which obviously we haven't gotten so far yet, we really just continued to focus on the things we've been focusing on, and I would say, you know, maybe where our view is a little differentiated.
Everyone's debating the oil price supply disruption potential. We obviously agree that's one big transmission mechanism to equities. We also think that you have to look at it through the lens of valuation. Heightened uncertainty on geopolitics typically suppresses pes in the S and P. Five hundred. And also, we're
very concerned about sentiment. This has been a market that has been melting up because of very very modest inflections in various sentiment gauges, and we think that those sentiment gauges could be at risk down the road from an episode like this.
Laurie listening to the FED last week again, they don't seem to be in any rush to cut rates here, so that maybe puts even more pressure on corporate earnings here. What is your sense of kind of where corporate earnings are? Is there a risk to I don't know out of the upside where the downside from here?
It's a great question, Paul, and I'll say our rates team is still looking for September cuts, but they have also highlighted the risk that perhaps the FED starts a little bit later, and so we do think that could potentially be a headwind for equities if you start to see those cuts pushed out. I would say from an earnings perspective, you know, we are sitting at two fifty eight in our own twenty twenty five Sep. Five hundred
and forecast. It's a little bit below consensus. On a bottom up basis, we think that's still the right number for this moment in time. If we look at gauges of earning sentiment, they've rebounded, but they're about as good as they tend to get if you're not coming off of an extreme low on a big crisis.
That's right where I wanted to go.
As we staggered towards July fifteenth, I mean, folks, with all the distractions, I guess it's about earnings. LORI, where is the street now?
Is the street still.
Overestimating earnings and then they pull them down?
Or we now as a consensus going the.
Other way where we're low balling like Lori Kelvisina and we'll drag it up later.
Which is it?
So?
Look, I think we're in a discovery process, right and I think that we've had these massive uncertainties from tariffs, and we've listened to a bunch of companies that just came out in the last reporting, Sayson saying, you know, Frankly, I think they were in a state of shock, but saying, look, you know, we can manage through this, we can mitigate.
We're going to pass things on through pricing and customers are just going to eat it and there's not going to be any erosion in demand at least that's what you're hearing from more sort of the industrial side of the economy. We're going to see if that's right. The consumer companies having a much tougher time, you know, and Frankly have sounded less optimistic, and we're going to see
how they're feeling as well. But you know, I think there's still a little bit of downside risk to the bottom of consensus numbers here and there, And you know that contrasts with the numbers having you know, kind of rebounded a bit in here, and so, you know, my my concern is that we're going to see things go the other way a bit.
Paul Discovery process, they were a great barbine.
They play blues like.
Nobody Lord to the extent that some level of terriffs are year to stay. Does that suggest that the bigger you are, the better you are on your income statement to deal with that, that would suggest, you know, big cap stable companies versus maybe smaller mid.
Camp Yeah, that's generally the rule of thumb we use, Paul whenever there is something that poses a challenge to corporate America to manage through. The smaller companies unfortunately don't tend to manage through it quite as well. And that's because they have less bargaining power, whether you're looking at sort of their employees, whether you're looking at their suppliers. And you know, it's interesting, Paul, I was, I can't remember what survey this came out in last year. I
think it might have been the Duke's CFO survey. But they did, you know, sort of a study on are you using AI or not? Are you using automation tools? And bigger This wasn't necessarily a big cap versus small cap, but bigger companies were more likely to be using those automation tools and to be using tools like AI to
enhance their efficiencies than smaller companies. And so you know, even frankly, some of the tools that are being engaged with are just different when you're looking from big cap companies small cap companies.
Lurri Cavasena, thank us so much, RBC Capital Markets.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Coarclay, and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.
Now, the markets we really wanted to focus in here, and they have in studio Paul Sank coming up on oil world class and even better, Steven Englander with its Sandra Charter Bank joining us at the studio. Now, folks, this is going to be a window in the global Wall Street where they don't just look at yen in euro Steven Englander, you walked in and you said, cad yen, which is the number of Japanese yen per Canadian dollar since a pandemic. It's been massively strung Canada weekend.
And it's reversed.
How do you glean information from a study of Canada versus Japan.
Well, you know, I'm thinking of it more short term that you know, even though yen traditionally is a safe haven, it's it's still low yielding, has the lowest drilled interest rates. The politics are kind of a little bit soft, and it's very exposed to higher oil prices, whereas some of the.
Weakness we're seeing today in dollar yen as well.
Yeah, and you know, and what you're seeing is is that the end is actually one of the weakest currencies overnight. Canada is holding in there because it does have oil. You know, it's trade related.
It's not as.
Exposed to to July the ninth, and you start of say, if things go south that you know, maybe cad is continues to hang in there.
But you know, yeah, you bet at.
The standard charter bank is strong, loooning weaker.
Yeah, well, we don't bet, but it's certainly sort of something that we sink, we we would think about if you're asking us, you know how markets might trade.
Put me in my place there?
Why did you save the interview?
Steve Hall?
Has a world of rising tariffs impacted your view of currencies here. We don't know where the tariffs are going to shake out, but we do know that we got to pay attention to these things for at least for the next several years. How does that impact your view?
Well, it's made very complicated because there are three factors that are involved. One is that they've increased the risk premium on US assets a lot.
Part weaker dollar, yeah.
Partly because of you know, the expansion of the envelope of tariffs beyond what anybody thought was reasonable, but also the possibility that they can do everything else with the same kind of broader envelope of policy options. Second thing is it's risk off for the rest of the world. You know, if you get tariffed up, that's no fun. It's going to disrupt trade.
And the third thing.
Is that normally you would sort of say, look if your if US tariffs on Europe go up, the euro would fall, although that hasn't been the case yet because the risk premium has dominated. How you weigh all those three is very complicated.
I look, Steve Angloder in my book of the Summer Ken Rogoff out of Harvard, our dollar year problem fabulous, fabulous, look back at Rudy Donbush and the late Stan Fisher and all in our dollar for the greater public listening right now, should they have dollar worries?
Yeah? They should.
I think that the You know what makes America great, I think is the ability to attract money from abroad at low interest rates. That's been the history of the last twenty or thirty years. Invested in new technologies, get high rates of return and do very well of it. You know, the US is like a big hedge fund.
Do you suggest that's bro I love that. Can we steal that?
Yeah?
Lisa right, that the US is like a big edge fun My book of the Year by Ruster Sherman. Rockefeller now is basically a trease on capitalism in America. Steven Anglicher the Standard Charter Bank with this on quote, the US is like a hedge fund. Is this the financialization of America? It's only giving gains.
To the elite, not necessarily.
I think everyone benefits, you know, from the development of new technologies. I mean, even if you're poor, having a cell phone with remarkable capabilities is a wonderful thing. But I do think it's dependent on being able to borrow cheaply as long as you're running a current account deficit, and that's not going to go away, so, you know.
And my worry about the dollar is that some of the policies that are being pursued and that are contemplated may raise the cost of capital to the most dynamic sector of the US and that would be a pity.
Speaking of the US dollar year date, we've seen it down you know, eight to nine percent, having a little bit of a bounce back today, maybe risk even how much more downside do you think there could be? Because I've been asking, I don't know anything about your world, the currency business. So my stock question is are we ever going to see a bear market in the dollar? I've been asking that for six years. Are we starting to see the beginning of one? Or is this just a trade?
It could be if you think of say we have you know, another session a year from now, and tax build has passed, tariffs have been resolved, and the US is growing sluggishly, has a big fiscal deficit, has a big current account deficit.
That could be real trouble for the dollar.
What does one final question, what does the standard Charter bank, with all of your heritage of the Pacific RIM and particularly down south over to India, what do you see of a vibrancy in the Pacific RIM right now?
Ex China, you know, they're hit with the same issues everybody else has hit. You know, there's the deflation being exported from China. There's loss of confidence because of the you know, the risk on the tariff side. So you know, nothing is catastrophic, but a lot is sluggish.
I look, you know, just in the space folks, I can do this on the Bloomberg Professional Service. I got like a five standard deviation plus two to minus three on Taiwan dollar. I got a massively strong Taiwan dollar Sing dollar in the rest is that on an asymmetric basis? Is that strong EM or is that weak US? Or is it something different?
Well, there's a lot of speculation on you know, what's causing these moves, and I think there's some anticipation that perhaps currency adjustment was substitute for some of the trade impediment adjustment that the US wants that you know, especially Asian currencies as a group, may prefer to allow their and he's to appreciate rather than sort of say, use that as a leakage. Yeah yeah, but rather than open up vulnerable sectors like farming and stuff where which is
politically important, they say, let's socialize this. Everybody will take the hit through the exchange.
And you know, my keymail me and he says, Tom, use the damn terminal. So yeah, I'm doing the t function.
Yeah a monthly.
I'm trying to impress englander.
Here.
I got Taiwan dollar in April plus two standard deviations on trend and now it's minus exactly minus three. That's a five standard deviations swing. That's it's it's like more than substantial.
Was that?
Will you come back now that we use the terminal?
I'm always impressed when I talk to you. Well please, there you go.
So that's what the third divorce lawyers, Thank you so much, greatly appreciate it. He's with a standard charter at Bank and Studio.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
They emailed the White House today, I say, can you give me an oil tweet from the president because we got Paul Sanki coming and joining us. Paul Sanki, Sankie researcher four. Our conversation we're going to do quickly here the President of the United States moments ago, all caps. Everyone, come keep oil prices down.
Period.
I'm watching exclamation point. You're playing right into the hands of the enemy. Don't do it. What would you say to the White House and the manipulation of oil prices?
H I think the best trade is of oil of the Chinese. And so they're the real you know, the under the power underneath this order is there is that buying an Iranian crude.
They put the bid on oil.
They put the bid on Iranian oil so that the main buyer, by far, you know, eighty percent of Iranian oil is a lot of it actually goes to Malaysia and then is reflagged. So you see that Malaysia exports more oil to China than it produces oil, so it's obviously smuggled. And basically the other manipulation is the White House turning their blind eye. And this is the second
administration that's done that to all these sanctions. So you know, you haven't really interrupted Russian oil despite all the sanctions. Iranian oil as of today is still flowing as it was that you know, recent, very high levels compared to history, and so there has been you know, concerted efforts not to get the oil interrupted, and nobody, including Iran, wants
to interrupt the oil. The other thing here is that, you know, people seem to think that there's some sort of gate at the Straits of hor Moves when they talk about closing the Straits of horr Moos, you know,
they think Iran has the power to do that. The real question is does Iran start shooting missiles at tankers, which is really going to be dramatic if it happens, And of course that's what happened in the tanker War of the seventies between Iran and a Rock, where they were both firing missiles, and that's actually what got us the nineteen seventies high in oil prices, which was over one hundred dollars a barrel.
Given that background, why isn't Brent crude north of one hundred dollars today?
There's plenty of oil, and you know, Chinese demand is weak, suppliers abundon. I think to me, Tom and I have known each other twenty five years. What's so extraordinary about the current market is firstly that we're a one hundred and three million barrels a day of demand, you know, an extraordinary number, one hundred and three million barrels a day of every day, you know, so this is like
one thy three hundred barrels a second of consumption. But even more extraordinarily, which we would never have thought you could do twenty years ago, you've got capacity of you know, one hundred and eight million barrels a day, so there's
actually five million barrels a day spare. The interesting thing about the spec capacity is it's all in the Gulf, so the market is clearly as further to the answer to your question is the market is thinking that the risk of interruption in the Straits of horn Moves is low. Basically because China, US, Europe, everybody set out pretty much maybe less so want the oil to keep flowing, and that the Iranian's only source of revenue now dollar revenue
is going to be oil. So it's difficult to see exactly who wants to shut the straits of war moves, and I think the odds on various betting sites are far too high. It's actually quoted at thirty percent chance the straits are shut by the end of June, which I just think is extremely unlikely because I don't even know how you would shut it short of sending missiles.
If you take the risk premium, assuming there's some risk premium in global crude today, if you take that out, is a market still pushing this monority lower?
Yes, I think so. I mean I think that you know, we are in a plentiful supply situation. The one thing that hasn't turned out well for the Bears has been
that demand remains pretty strong, particularly Middle Eastern heat. So we saw a very cold winter in the globally in you know the key markets, which would be Northeast, Asia, Europe, and the US that gave us a lot of extra demand, a million over a million miles a day of extra demand just on than Q one and now we're getting a good four hundred thousand bars a day of extra demand because of the massive heat that we've had in
the Middle East. You're doing if you think it's hot in New York today, Abby Dabbi recorded fifty three degrees I think, which is one hundred and twenty seven degrees in the shade in May. And as a result, experts have been a bit constrained. Now having said that Saudi is now all of them have now started sending as much oil out of the Gulf as possible. So we really need some incremental geopolitical disaster to make well go high.
Can we do something quaint like an individual stack?
Yeah, I don't know if he still does OXI Vicky over at Axey with Warren Buffet twenty seven percent ownership of Berkshire at the way, debt encumbered.
Essentially, his stock's gone nowhere for ten years. Akson has sixty some thousand employees. Oxy's teen swings thirteen thousand employees. Is mister Buffet got himself into a problem.
Warren Buffet, as you call him, owns actually more dollars of Chevron than he does of Oxy. So my thought is that if he wanted to engineer something. Yeah, you know that you could. You could roll it all up into Chevron and move on. So that's one option. But of course Chevron's buying Hess at the moment, and we're
in arbitration on that deal. So I think a lot will obviously depend on whether that arbitration says that Exxon has a right of first refusal on the assets in Guyana or whether Chevron simply wins the deal and moves on. If Chevron wins Hess, it's in terrific shape. It's got a great asset base with that extra Guyana leg that
they really need to make them source complete. The beauty of Oxy for a Chevron would be that it would catapult them pretty much beyond Exxon, you know, which would be a historic moment for them.
To be larger and more international than the Exon.
Not more international, but larger because they've become the largest player in the Permian. Chevron actually in twenty twenty, when Xon was really struggling badly, went up to a higher market cap. And I can tell you there was champagne corks in the corridors of San Romano when Chevron. If you think about the his but today, you know, would Exon do another big deal? I think the main thing
here is Thomas is the Trump. You know, would Trump be more ready to allow Exon for Conico, Phillips, you know some of these mega deals that they sort of have to do now because it doesn't look like oil is going to get much out of a call it sixty to eighty range. And really the thing for these companies to do is to merge and create synergies and increase returns.
I got eight ways to go here, I got time for one question is as simply as I camp Paul Sank for our American audience, what is our biggest misconception of oil production and the Persian golf? After we all read Daniel Jurgen's surprise, what's a thing we get wrong?
Now?
I think the single biggest thing people get wrong is they think that, you know, there's there's more environmentally friendly alternative to oil. When ail is naturally occurring, always say it's liquid solar power. So the big idea is oil
just has a very bad public image. It's actually, if we could if gas was announced as an invention today, the word world would celebrate that we found the solution to our energy problems that are environmental problems, and US emissions are down based on our increased use of natural gas. It's as simple as that. That's how we've actually reduced CO two over time. The biggest misconception in the Gulf, I think, is that they're all much more friendly and
talking to each other than you realize. You know, you see all these back channels, and you can see that even the US is talking to Iran. So I think there's you know, a whole different level here for conspiracy theorists, which is that you know, a lot of these guys are much more trying to sort this out. And I'm actually believing I'm not quite optimistic here, Tom, because I believe that if you can actually have some sort of transition in Iran, and that's going to be a terrible challenge.
You know, you're going to be in a Venezuela situation quite possibly. In the seventy nine revolution, there was significant civil war fighting in Iran for at least a year or two posts the revolution. I mean that they continue to basically fight within Iran, and at the moment there's no opposition nor opposition leader in Iran, So you worry that it's likely to go to the Revolutionary Guard, who are effectively not just a military force, there an economic force.
So they run the u at the Iranian economy. And as a result, the thing I'd be watching for is for a split in the Revolutionary Guard.
Right at the time I got to ask how attached is a revolutionary regard to Ayotola.
I mean, that's their job. Their job is not military, their job is to protect the revolution, and they've turned that into a massive, sort of corrupt they're sort of like a cartel. They're like a government cartel that they're crooks, their criminals. All these guys should be out, you know, we've got to get rid of them. And I just hope the Iranian people, who, as you said, have a wonderful culture, can come through it.
So wrong, be a stranger your weekend note, You tore apart me, you tore apart financial media. You said you'd done seventeen things. Will you come back or.
Are we like you lumping us in with everyone? So you're on a special list.
Man, you're on the yes every time. But you know you don't pay me, So if you want to pay me, may I'll come a day, Okay, I think Lisa likes, get them.
A case of Kirkling hot dogs.
Can we dogs.
Have a quarter hot dog every morning, so I'm always in the market for hot dogs.
Thank you, thank you, thank.
You so much for joining us.
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