Trump Reshapes Global Order With Maduro Capture

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The first name on the list was Edward Morse. Absolutely definitive within the global zeitgeis, if you will, the Washington Consensus on Petroleum. All sorts of efforts here, including his work with the Council on Foreign at Relations, and we're honored that doctor Morris would join us in our studio today.

The timeline is very, very long. The timeline includes not just what must be done on the oils patch, but also includes how do you get this government to cooperate with the United States? And yes, starting out on a good foot, but this can't be done without a change in the entire view of the government of how they do what they do. They're there to make money, they're there to control things, and they can't do that and have the oil patch resume what it was like twenty five years ago.

This is a transactional president. You have lived, with your iconic work at City Group, a transactional big American banks enjoying losing big money in Latin America and other places. What do you perceive as a relationship of President Trump with mister Diamond, with mister moynihan and with other financiers of America.

Well, he's got a good relationship with the financial sect for all kinds of good reasons that we can get into. That's a separate subject. But here the capital has to come from oil companies, and oil companies look at risk. They look at the risk in the marketplace, what is a supply demand balance, They look at the risks of an investment, and in the case of Venezuela, they need a lot of capital going into infrastructure, and that infrastructure has to be in place before the oil comes out

Chevron debt eleven point seven percent, that's where they are right now.

Just as an example, what do you think the US government or what do you think those energy companies would need from the US government in terms of assurances or whatever to commit that capital.

Do you think, well, they need the reassurance from the Venezuelan side as well as from the US government, because the US government said that it's not taking over Venezuela have good point, so it needs it needs to have the confidence, which will be step by step, and I suspect that the first step will be with Chevron to see whether they can make good in short term of

Takos to just describe the energy when we talk about Venezuela, what do they have, what do they need?

How big are they is?

How important is this because I understand there's a lot underground, it's quite important.

So the world is known for a long time that Venezuela has the largest known oil reserves in the world. The problem is it's not the kind of oil that the rest of the world needs or wants. And the problem is it's in Venezuela, and it's complicated oil to get out of the ground. But they've done it before, and they've managed to go from under two million barrels a day to three and a half million barrels a day in a relatively short period of time a couple

Edard wars with this for a lengthy conversation this morning with heart Tree and of course Definitive It's City Group, among other services to the United States over his long decades on petroleum on Hydrocarbon's I believe I've shared the stage with you and Shannon O'Neil at the Council on Foreign Relations. Doctor O'Neil was on with us recently exceptionally gloomy about Venezuela's ability to reorganize given an event like what we've seen. I assume you've been to Caracas more

Well, you have to be a little bit optimistic given the change that has already taken place. So changing getting Maduro out of that position is a major step. And now the government is in a crisis of survival. That survival will require them to collaborate with the US. So the options that they have are quite limited. Who is going to replace the US at this moment in time?

Is it your understanding, just based upon the limited reporting that we have in the last forty eight hours, that the government of Venzezezuela was in contact with the Trump administration if to facilitate that mister Maduro being taken.

Look, it could not have been done without there being some contact within the government. We know from reporting that the intelligence operations preceded this. They were on the ground, they had to have help to be on the ground, and undoubtedly they were not taken by surprise because of the smooth way events went on over the weekend.

I do think China is viewing what's going on these days.

China's in a big difficult position they have. They are massive creditor to Venezuela. Venezuela has been part of central to the Belton Road initiative enlarging China's influence in Latin America. Excuse me and it's been, frankly a failure. They have between fifty and one hundred billion of debt. Their operations right now are to export oil to pay for that debt. The US controls they are exports out of Venezuela. So they had, Yes, they came down and condemned the US government.

Some resolution on.

So I think we'll see quiet diplomacy with China and the US rather than stamping on the foot or saying anything about military force.

In my reading, I've heard that. But what does Edward Morris, I'm going to butcher the pronunciation, doctor Morris. Do we need to show the flag this morning and Kaushing Port in Taiwan? Does the US Navy need to get over there, and you know, like Perry centuries ago, show the flag, tim.

I think the US showed the flag before Madua was taken out. They showed the flag with a massive military seal to Taiwan, right, and the military has been there the navy has been there. China is not in a position to fool around with the US, even with much of the US naval fleet now around Venezuela. So I think it's going to be stepping you know, very lightly on what would happen Van.

Morris with his folks a special edition of Bloomberg Surveillance. We really held back the commercial interruptions to give you this conversation for America. Around the world. You have such a relationship with Faisal and on in Saudi Arabia. How does the Middle East in general, and particularly read and Jetta, how do they respond to these actions?

There is my quite quietly, Riata is looking at the global setting. They know that Venezuela could be a threat to the production agreement within OPEK plus, but not in the short run. And the short run they're looking at the year ahead. The year ahead is quite uncertain and quite messy, and it was that way before the taking

Folks I failed the fall, I've failed. Ed Morris nailed the decline in oil. Do we have a lower oil target from her for heartreat?

So we don't know how low the price will go. It's lifted a little bit by the geopolitical risk. I'd say the supply demand balance, which is higher supply than the race demand now and going forward, is for oil testing branded forty okay, And I think testing branded forty is something the Saudia's can swallow. How much lower than that they can swallow? It is not known.

I want to get to say, because Paul's got any questions. So you're going to go visit Trump. President Trump is going to bean Edward Morris coffee with the President. You're going to talk about a transactional American president. And I know you're going to get a phone call from Ottawa where Mark Kearney is going to go Edmonton's playing Ottawa, Edmore's come join me at an Ottawa senator's hockey game. I mean, this is the way it's going to work. What do you say to Mark Kearney of Canada.

Well, so with Trump, because I haven't answered your question if I say that Trump, and what I said to Trump is your policy on energy dominance is a wonderful strategy. But mister President, I think you're ignoring some things about

The moment to do away with the Jones Act.

This is the moment to do it, I mean, and also to tell the President energy dominance a good idea needs a little bit of massaging at the edge.

I mean. The photograph of Theodore Roosevelt with a map of Venezuela behind him from I believe Paul nineteen oh nine was just stunning. I mean, this history going back here, Paul Sweeney with Edward Morris.

So when you go down to Houston, you talk to these big energy companies today, are they happy with what's going on in the last twenty four or forty eight hours, or are they apprehensive that they see a big opportunity here.

They see a better opportunity that than they've seen in years, but they are apprehensive. The risk of putting capital, their capital, their shareholders capital at risk looms extremely large in their minds. So there's not going to be a rush to put money into Venezuela until we see what the structure of the investment might look like.

I'm surprised I don't see a move in WTI and Brent Crewe today. Now, I couldn't have told you is it going to be a five percent or down five percent? But I kind of got nothing going on here today.

Well, in my prepared remarks, I thought that was the first question.

I didn't know.

You know that we're going to have prices go down a load.

Its surveillance. You know, we make it up as we're winging it.

No, I'm not surprised. Okay, there is no change in the energy market period.

There you go, all right, So, but I think at some point it just feels like almost Opeck and Opeck plus become less and less relevant every day.

Opeck and OUTPECK plus have become less relevant every day since the beginning of this decade. And when we look at the positions that have put this in, it's not just the rise of Guyana and Brazil and Argentina again, but it really is the US, the US, you know, I have this battle with my colleagues at work almost every day. The US is not just a crude oil producer. It is a massive liquids producer. We are a producer of twenty three to twenty four million barrels a day,

I would be out. We're going to have to wrap it up here with Mark Champion coming up, folks from Europe, with all of his decades of experience, Doctor Morris. Some of the the highlights of my career here than with you in with Daniel Jurgen. If I was to get Jurgen in morse together and look at his the prize, just the romance that I, as a kid in college read cover to cover. We got to find the romance for Venezuela, to save a society, to save a region,

I know that I'm not going to bring the romance back, and Dan Jurgen certainly has the ability.

To do it.

By the way, I was an early reader of the Prize. He and I knew each other in graduate school. We were in different graduate schools. And when he wrote The Price, the original version that I read was actually twice as long as a version in print, So he had to cut out a lot of wonderful text in order to put out that brilliant book.

The book was it, Paul? It was You had to walk around even if you didn't read it. You walked a walk it. Yeah, to be cool. You're gonna talk about this unique American relationship with various and sundry banana republics Reagan and Granada and the rest. Can we develop a new process with central in Latin America or will this be the same old, same world through the rest of the Trump term.

Now, I think I think there is a process going on. If we look at elections that have taken place in Latin America, there's a rebellion in those countries against corruption. There's a move from the corrupt left to the right. We've had a corrupt right in the past, but it's been a very constructive set of moves from reelections. So I think I think Latin America is in a very good position now, better position than it's been in a

Wow, Paul, we got to mark Champion, but doctor Morris, I got to bring this up, Paul said, you got to ask the question time, what's it mean for land Man?

Thank you very much for inviting me.

This had a pleasure to be more. Thank you so much. We're the hard Tree And of course doctor Morris was City Group for many years. Edward Warrice there stay with us. More from Bloomberg Surveillance coming up after this.

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Keith Leernert, he's the CIO and chief market strategist at Truest Keith, So we think about twenty twenty six year, we got geopolitics front and center here today to start kind of the year off, right, let's step back to just a little bit there. What are your outlook for markets in twenty twenty six after just outstanding results and equities and bonds and commodities in twenty twenty five.

Yeah, well, first, great to kind of bring in the new year with you guys.

Great to be on.

So our look that we published in December was called the seventh Inning Stretch, and the way we thought about it is, you know, we've come a long way in the economic cycle and the markets. It was a good time to kind of access where we are and our bottom line is, you know, our way the evidence approach suggests it is still upside in both the economy and the stock market. So let me just share a couple of stats with you.

The first one is, you.

Know, we just had our third year anniversary of the bullmarket late last year. When we look historically, there's been seven bull markets that has had a third year anniversary, all them sore gains over the next year. It's only a sample size of seven, but as a starting point, that's a positive. If I lay on top of that that the Fed once again in December cut rates when when the SMP was close to all time highs.

When you test that out about a year.

Later, the market has been up more than ninety percent of the time, so that's also a positive. And then you mentioned the earning side. You know, the pe for the overall market last year was flat. For the technology sector it was actually down. And all the games really last year were earnings. As we move forward, we expect low double digit earnings again that should support the overall market. I will say it is a mid timber election year.

What I got most wrong last year was, as in the triple leverage, all cash run for the entire year. Paul cratered great. I mean that Cratered you learned. What'd you get most wrong? Last year?

When I get most most wrong, I would say, I thought, you know, when think about the April trade side, we downgraded equities in February.

We told a lot of investors do not sell at the lowest.

But then after we had the initial pop, we took a.

Little bit off the table.

So I think that's probably if you say what you got most wrong. What I'm proud of is that we didn't stay there too long. We then upgraded stocks are shortly thereafter. But it was you know, we follow this way of the evidence approach, and you know it overall led us directly in the right way.

So fixed income here high single did your returns in twenty twenty five in twenty six? Is it just a function of clipping the coupon?

Do you think?

Yeah?

I think so for the most part, I mean our house views is the ten year drifts towards three seventy five, So maybe you get a little bit of price appreciation, and you know, relative to the last ten fifteen years, you know, yields are still somewhat attractive.

So yeah, we think, you know, we we basically clipped the coupon.

That's why I with an overall assd allocation, we still have a modest equity tilt, and we still all year along. Last year we had our position in gold, which we call the MVP, and we still like gold as we move into this year, at least from a portfolio diversification standpoint, Say.

To people, Keith, like they participated, but maybe they were you know, sixty forty they were more fixed income or Paul, how I mean, how many people are in cash? The money mark fronts three point x percent. Yeah, Kathy Jones is not agen. She's the only one that hasn't. Hey, Keith Lerner, you're talking to Kathy Jones and Charles Schwab or anybody else. When did you make the shift to equities?

Well, you know, you know, I don't think it's like on off switch. In our review, we actually have, you know, just kind of targeted levels of cash. We've been telling folks if you have excess cash to work that in the market. It could be inequities, it could be in fixed income. And you know you just mentioned yeah, bond's underperformed stocks. But you know, you really what you're paying for or what you're looking for for fixed income is to clip that coupone for income and some stability.

So I would still be working that money in.

And we still think there's upside in the equity market, in the fixed income market, and we do think that will likely see one to two rate cuts this year, which means those short term money market rates are likely to come down.

Or is our fixed income.

Had says the error of you know, buying the T bills and just chilling is likely over.

So I think there's still opportunity.

Kathy Jones is at peace sitting in her studio because Keith saying, take the coupe part and say think one more for Keith Learner.

Hey, Keith, as good as the equity returns in the US in twenty twenty five, they were better outside of the US. How do you think about US versus the rest of the world in terms of the equity markets in twenty.

Six Yeah, big picture, we have a modest over to the US.

We have over the last fifteen.

Months increased our international We have a global bull market on the way. I would just say, though a lot of focus on how much in the US underperformed last year zoom out. The year before, the US had outperformed international developed by the most in the nineties, and it's still more than about double the performance of international.

Over the last five years. So listen. I think there's opportunities globally.

I want to have more allocation there, but we still have a bias for the US because their earning trends still remain strongest domestically.

Keith, Thank you so much. Keith lerner with us with Truis to get us started in the equity markets. Stay with us. More from Bloomberg Surveillance coming up after this.

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Joining us now for Too Sure a visit. Henrietta Treys joins us from Data Partners. Henriette an open question, what will you study and listen for on Capitol Hill this morning?

Yeah, that's the question of the hour.

I would say that the White House likes to tell Capitol Hill that they are incredibly transparent, and I think what they mean by that is that they talk a lot, and they tell voters, they tell lawmakers what they're thinking in real time. So one of the things that's most important to me is what comes after Venezuela. Obviously we're

Henrietta, what are you with twenty four hours of hindsight here? What do you think the political calculus was for President Trump and his advisors as it relates to going into another perhaps open ended commitment to another country versus kind of what he said on the campaign trail about that that's not what we're going to do here. We're going to get ourselves away from that type of foreign policy. How do you think that worked out?

Yeah?

I think so far what's happened is that no one can say anything negative about what actually went down. There's no military desk on the United States side. It was fast. Maduro and his wife are in the United States already awaiting trial right now. So it's going to be the fallout and sort of wrangling members going forward that they're going to need to do with every single piece in

So I think that's going to be successful.

I imagine they lose two votes on the Senate side and maybe two votes on the House side, but they can keep descent at bay, keep the war powers resolutions at bay, and that's going to be their number one priority.

Keep the Republican rank and file in line.

Do you think President Trump or in the midterm elections Republican Party will pay any price here for this type of farm policy, That's the question.

I would say no, mostly because American voters do not care about foreign policy. So unless they're our military desks, this can go downward. But there's not an upside for the president here. Gas prices are already low. It's going to take years to bring Venezuelan and oil onto the market.

Any of the trades with this Vada partner as we continue. Where they're into this closing hour of Bloomberg surveillance is seven o'clock. Are here in New York Internet our Michael mcgloan, Damien Sasa, Edward Morris, Mark Champion, I think from London, as well as Lisa Matteo Henrietta. Unspoken in the X number of briefings I've read in the last forty hours fifty hours, is the United States military and particularly our Navy. Is the feeling in your context that our military is stretched?

I don't get that impression, mostly because as you've seen federal spending on the Navy, on the Coastguard, on the Marines, everything has gone up. This year, federal spending is up

Your bottom Dalla that request is coming.

In one of the things you might like to do is delay that request so it doesn't look like this incursion is costing money. They can push it out into February and March. I suspect there will be a short term cr that punts on long term solutions to the Department of Defense and spending there. But there's going to be more money flowing to defense.

It's Washington fighting the last war where what we need is another aircraft carrier or is the answer six million drones?

Oh man, are you bringing in shipbuilding? I will talk about that all day. I mean, I know your agent shipbuilding.

Your agent called me at three am and said, Tom, shipbuilding, Henrietta.

Yeah, I mean, if you're going to bring up trade and you know what we're doing on tariffs and all that, it's very much associated with shipbuilding.

You can see it.

And the President's you know, not finished but endeavored trade deals with Japan, with South Korea, with China, bringing shipbuilding back to the United States. So that is definitely a part of what President Trump wants. Actual physical you know, almost like battleship the game.

Make sure you have them ships here in the United States.

They're actively working to build that out, Henrietta.

We are obviously folcusing today and probably for the days to come on geopolitics. But don't we have to keep this government open? What's the status there?

We sure knew.

The government is prepared to shut down on February first if they don't reach a deal. The reality on that is that, as I mentioned, Defense is not even funded, the Labor Department is not funded. So we're at the same sort of negative for the market situation going into February as we were back in October, where we lapps labor data and BLS data, et cetera.

So there's a lot of work to be done in.

The House and the Senator on two totally different pages, which is why I suggest that maybe we'll get one to even three long term bills funding various sectors of the federal government. But for the most part, we're going to be operating on a short term basis. Probably into March. I could see another cr My odds was shutdown are low twenty five percent or lower, but it's going to be a major topic of discussion to the end of this month.

What else is on the agenda for Congress? You're going forward here, because again I'm assuming geopolitics is going to supersede a lot of this at least in the coming back.

Yes, yeah, for sure. And so anything that you thought was going to happen is not going to happen.

So a second reconciliation bill is highly unlikely. The one caveat I'd put on that is to say that there is an effort from Lindsay Graham, the chairman of the Senate Budget Committee, to deployed military spending into a second reconciliation bill, which would be pretty novel in terms of

Very quickly here a NERD question unered Greg Giroux or Greg Polling Acts. Has mister Trump lost the Latino vote and did he get back the Latino vote this weekend?

That is definitely a great demographic question. The Venezuela vote is heavily concentrated in Florida. I would suggest it's maybe worth two or three percentage points from the Latino vote in the state of Florida, but it's not widespread throughout the nation, and the Latino voter from Jersey, Virginia, Tennessee, even across the country, certainly California. You've seen absolute hemorrhage support for President Trump in the week of his immigration

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As you mentioned, Kathy Jones joins if she's fixed income strategists at Charles Schwubb, can't you got eight ways to go here? Let me pick up on what mister Lerner said is that even if you own in Vidia, there's a place for bonds, notes and bills. Explain to the tech bro why they should be looking at your world.

Yeah, I mean one of the basics of asset allocation is to have some risk assets and some less risky assets, so you get diversification, and they're not correlated with each other, so that gives you that efficient You want to be on that efficient frontier right where your return is is high, but your risk is mitigated. And that's the combination, the magic combination when you do asset allocation that you're aiming for.

We've got it feels like a steepening yield curve here. How do you think about that? What does it mean for the marketplace?

Yeah, We've been riding the steepening Eiel curve trade for about a year now, and I think one of the questions I have is whether that continues in light of the expectations of lower inflation due to lower oil prices. I think it's premature to make that decision right now, but as things are playing out, perhaps there will be the expectation of more supply lower oil prices in the future, therefore less inflation. But for now, you know, we still have the feti using, so that means short end probably

I was channeling Paul this morning. First chart I looked at on the Bloomberg terminal was the difference in yield between a five year and a thirty year Paul. The only reason I did that was Steve Major. Yep, it wasn't. It wasn't an original thought from Tom Kane. Explain to our audience. They know that vanilla is the two ten spread. You can go three months to thirty year, like the whole curve. Explain the efficacy of pistachio the five year to thirty years spread.

Yeah, I think when you're looking at five year to thirty year, what you're really trying to do is scope out the really long term, what really long duration can do for you. When you go into the thirty year, it's going to be more volatile and it's going to really reflect the long duration view. Right, you take a fair amount of duration risk in that. I take a

In twenty twenty five, you got paid for taking some credit risk. How about in twenty six are you gonna get paid for credit risk? Or do I just stay a little bit closer in on my credit.

Yeah, the credit spreads are still tight. We're seeing some deterioration in the underlying market. Again, we'd be cautious. It's not that you can't take some credit risk, it's that you don't want to take too much credit risk. And this is a highly unstable environment right now to try to predict, you know, where corporate profits are going to go. They look good, but you know it's priced in a lot of priced in, so we'd be kind of cautious.

That don't mean to interrupt, but that sounds exactly like ninety days ago, one hundred and eighty days ago, two hundred and seventy days ago. Remember before the earning season. Yeah, OMG, we're not sure. And then what is it January fourteenth, fifteenth.

Whammo, some solid earnings across the board. Here in twenty twenty six. Here are there sectors that screenwall for you. How are you thinking about finding opportunity this year?

Yeah, we like tips. We think they're well priced for real return, so you get a positive real return. And I think the investors really haven't latched onto this because I've had some difficulty kind of reading the tips market. But we think tips look pretty good. We think munis are undervalued there right now, and that's because supply has been really large. But if you're in a higher tax bracket and a high tax even if you're not in a high tax bracket, they can make sense for tax equivalent.

I wouldn't ask you this question in March or August, but it's January, and my jargon police are out in force. What in God's name is a tip?

Oh, treasury inflation protective securities.

So you're betting on inflation there.

Well, what you're doing is you're buying a treasury that's index to the CPI, and it's the overall CPI, so not excluding food and energy. So right now, the way their price, you're going to get one or two percent above inflation whatever that right turns out to be. So that gives you a real positive, real return kind of no matter what happens.

You and lizz Anne look look tanned and rested. Did Kevin Gordon get any time out? Did he work every day?

Kevin had a good vacation in there, He had some time on. He had like twelve hours like you give a much chance every once in a while.

Jathy, thank you so much again, thank you for helping us with the FED decides as well. That would be January twenty ninth, Miss Jones is with Charles Schwad.

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