Markets Pricing in US Strikes on Iran
47:44 Share

This is an iHeart Podcast.

As a global leader in alternatives today, PGM is capturing the potential of tomorrow. So as you look to diversify your portfolio, PGM offers expertise in seeding, developing and managing a broad range of liquid and illiquid strategies. With over $320 billion in alts across public and private markets, we are helping clients achieve their long-term goals. PGM. Our investments shape tomorrow, today.

For enterprise organizations, managing all your food needs is a tall order. But with EasyCater, you get a single workplace food vendor with the tools and resources to make it easy, giving teams across your organization an easy way to order from a huge variety of restaurants, all on one platform. All while consolidating your corporate food spend so you can control costs, streamlining billing and payment and simplifying reporting.

EasyCater, your business tool for food. To learn more, visit easycater.com slash podcast. How can you free your team from time-consuming office tasks? Amazon Business empowers leaders to not only streamline purchasing, but better support their teams.

Smart business buying tools enable buyers to find and purchase items fast so they can focus on strategy and growth. It's time to free up your teams and focus on your future. Learn more about the technology, insights, and support available at AmazonBusiness.com. Bloomberg Audio Studios, podcasts, radio, news. ♪

This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. We efforted richer highs yesterday. We were unable to...

to get him we have him today and we extend out here commercial free for you in a conversation with the president emeritus the council on foreign relations and of course senior counselor with centerview partners but Paul far more than that the single best clarity before the attack I put out on Twitter and LinkedIn

Ambassador Haas's essay in the Financial Times of—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 10 or so days, the first week was dominated by Israel.

It deciding in the aftermath of October 7th, 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. Ambassador Haas, and I want to make clear here that Richard Haas redefined the international relations debate with the invention of the internet at the Council on Foreign Relations. John Bellinger at CFR, Richard Haas,

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 he need to use a different process with Congress? - The president had the authority like all of his predecessors. If you look at the history of modern American foreign policy,

initiative in foreign policy has decidedly passed to the executive. I mean, Tom, what was it, 60 years ago, Arthur Schlesinger Jr. wrote his essay and book about the imperial 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, Bush 41.

Do things internationally with building on the International Atomic Energy Agency scathing 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.

It also, by the way, would have helped this president with his MAGA base. 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 from Iran, 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 1979 revolution, the first one being a decade later during the Iran-Iraq 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 40,000 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 capabilities. You don't have to compete with B-2 stealth fighters in order to be militarily effective. But I just think the Iranians right now,

their priority in the short run is not to retaliate against the United States. Richard Haass with us. We continue with Ambassador Haass. Paul Sweeney and I welcome all of you across the nation. Our continuing coverage here. A difference this morning. The markets are open. We will consider the markets across the arc of the show. We thank Goldner Montevalli from London for being with us. Germano Bersacci from Dubai. And we continue here on YouTube and all of our online

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 iran 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 had been talking for years that we weren't going to let Iran gain nuclear weapons or even get close to them. What was surprising, perhaps tactically, was when the president talked about his two week last chance for diplomacy to work. That turned out to be a feint 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 U.S. military looked. What was brought together was quite extraordinary. My guess is the Russians probably have liked this crisis. Anytime 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 G7 conference

that Ukraine almost seemed to be something of an afterthought. So the Russians have to like that. My guess is 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

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 say East Asia or Taiwan or on helping Ukraine. - Richard Haass with us and folks, I can't say enough about this is a book you can throw at your smart aleck kids, the college brats, their home from Oberlin. And you throw this book at them and you won't hurt them because it's beautifully brief.

Bill of Obligations. I can't say enough about Richard Haass's cry for citizenship in America. Again, 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 policy.

foreign policy we can go back to clash of civilizations staggered as zakaria in a post-american world robert t kaplan coming up in a bit maybe with a kissingerian realist theory what's the house theory you observe at the state department right now the state department there's very little to observe uh it's actually a sad story over the last what 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 it, Tom, with the hollowing out of the National Security Council.

This is an administration, I would argue, that is, in some ways, has 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, a decade and a half of the weakening of the diplomatic instrument of American foreign policy and national security.

Richard, some folks are even discussing probably a small chance, but still discussing regime change in Iran. 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 Netanyahu, 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, military instruments do two things. They destroy and they kill. Regime change is not on the menu. So that's one thing. Second of all, you never know if you can bring it back. You also never know what comes of it.

What would follow this regime? Is it necessarily something that you want? For all you know, nuclear materials, which are clearly still exist in Iran, could get into the hands of all sorts of groups. That might be in the be careful what you wish for. So I take regime change as unserious.

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 haas the military violence of the theocracy in iran this the the news flow to me ambassador with respect to my colleagues

is so simplistic ayatollah theocracy the people over ran what's in between them and the answer is a harsh dictatorship right you've got that you've got all sorts of your citizen groups that are

listen to them, the so-called the guys who used to come out with the sticks and beat up on the green movement protesters. And then you've got formal authorities, military and so forth. So this is a regime that has tools, if you will, Tom, of repression.

in addition to what it can do as a more traditional military, in addition to its proxies. But this is a system that'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? Yep. 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 Llama cowboy boots. And we were in shock as 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 Iran 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, Hezbollah first and foremost, Hamas secondarily, then through regime change, what we saw in Syria.

Israel has improved its position against Iran, but hasn't resolved it. And 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 locations. 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 3 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, I have one final question. Paul and I in our broadcast yesterday, Paul, please help me. I agree that we were thunderstruck by the acuity and concision of our chairman of the Joint Chiefs of Staff.

I was blown away by his report, Richard Haass. 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 Carrillo, 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 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 Haass, thank you so much. The Centerview Partners and, of course, his definitive work, the Council on Foreign Relations. Ambassador Haass backed decades to the diplomacy of a Northern Ireland solution.

If this government spending in defense goes towards things like R&D that have dual-use civilian purposes, you could get spillovers that actually end up enhancing productivity in Europe and so have a more long-lasting impact on growth.

To learn more about the intersection of national security and global trade, subscribe to PGM's The Outthinking Investor in your favorite podcast app.

For enterprise organizations, managing all your food needs is a tall order. But with EasyCater, you get a single workplace food vendor with the tools and resources to make it easy, giving teams across your organization an easy way to order from a huge variety of restaurants, all on one platform. All while consolidating your corporate food spend so you can control costs, streamlining billing and payment and simplifying reporting.

EasyCater, your business tool for food. To learn more, visit easycater.com slash podcast. How can you free your team from time-consuming office tasks? Amazon Business empowers leaders to not only streamline purchasing, but better support their teams.

Smart business buying tools enable buyers to find and purchase items fast so they can focus on strategy and growth. It's time to free up your teams and focus on your future. Learn more about the technology, insights, and support available at AmazonBusiness.com. You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple Podcasts.

CarPlay and Android Auto 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 us earlier, Ambassador Haass, 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 20 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 coming off my book of the year a few years ago, The Loom of Time from Morocco to Persia. Robert Kaplan, 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 American, excuse me, the American sent B-2 bombers all the way from the center of the United States, Whiteman Air Force Base in Missouri to bomb Iran. So that Iran is as close to America in operational terms

as Kansas was to the Indian Wars in the middle of the 19th century. And let me just make one thing very clear here. Yeah, people who are saying that this could lead to another forever war, Middle East quagmire, they're making a mistake of category.

Iraq 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 assets. 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 pro-Iranian Shia militia in Iraq on U.S. troops not too far away. There certainly will be blowback, but it's going to take a few months at least to

to really register whether this decision by President Trump to bomb the Iranian nuclear facilities was a wise or an unwise decision. It will unfold in stages. And you're the loom of time. And folks, I can't say enough about this. 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 Geertz.

And it's the idea of culture. Describe for our American audience today the Persian culture, the Persian culture extant since the theocracy of 1979. 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 in antiquity. You're dealing with a highly sophisticated, highly evolved culture and civilization where there is not one center of political power, but multiple centers of political power.

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. That is, it's overwhelming. You feel overwhelmed.

So the idea 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 very well likely true.

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 US strategy should be towards Iran at this point? Again, over the weekend, a significant escalation in military action. What should be our strategic plan?

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 pinprick response like they did after President Trump ordered the assassination of Kavanaugh,

Qasem Soleimani, the head of the al-Quds Force back in 2020, in January 2020, I think it was. There's no need to respond. 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 Iranians are just going to rebuild their nuclear facilities is very simplistic. They're never going to rebuild it to the point that Ferdow or Natanz 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 expanding and its role within the Middle East and adding to its security. Is this a unique time for Israel?

Yes, it is because Benjamin Netanyahu, love him or hate him, is a world historical figure. People may forget Clinton, Obama, and Biden, and half of the European prime ministers who will be forgotten in the course of the decades, but decades from now, people will be writing biographies about Netanyahu.

Because he's been in power so long, and the way he was able to 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 nothing short of extraordinary. Right.

I think what the smart thing for the Israelis to do now, now that they got help from the U.S., is to give the U.S. something. That is, start the process of withdrawing from Gaza. Robert Kepin, one final question. We've got to run on with the day. And again, folks, I can't say enough about wasteland.

Robert Kaplan'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 as a foundation to strength? That's a 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 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. You know, the great thing about his administration was not what happened, but all the bad things that did not happen because of his governance. This has been wonderful. Robert Kaplan, thank you so much. It's a must-read, folks. Wasteland, a world in permanent crisis. This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple CarPlay 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 1130. Lori Kalfasina joins us for a quick discussion here this morning with RBC Capital Markets. Lori, how did your strategy change this weekend as you publish for Monday? How do you amend to a new war?

- 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 I got more convinced that we needed to have some sort of short-term market drawdown, 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&P 500. 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, either the upside or the downside from here?

Sure, 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 258 in our own 2025 S&P 500 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 earnings 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 stagger towards July 15th. 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 are we now as a consensus going the other way where we're lowballing like Lori Kelfasina 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 season 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 up 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 concern is that we're going to see things go the other way a bit.

Paul, discovery process, they were a great bar band at Duke Law. They played blues like nobody. Laurie, to the extent that some level of tariffs are here 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 big cap, stable companies versus maybe small and mid cap?

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 can't remember what survey this came out in last year. I think it might have been the Duke 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 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 to small cap companies. Laurie Calvisina, thank you so much. RBC Capital Markets.

For enterprise organizations, managing all your food needs is a tall order. But with EasyCater, you get a single workplace food vendor with the tools and resources to make it easy, giving teams across your organization an easy way to order from a huge variety of restaurants, all on one platform. All while consolidating your corporate food spend so you can control costs, streamlining billing and payment and simplifying reporting.

EasyCater, your business tool for food. To learn more, visit easycater.com slash podcast. How can you free your team from time-consuming office tasks? Amazon Business empowers leaders to not only streamline purchasing, but better support their teams.

Smart business buying tools enable buyers to find and purchase items fast so they can focus on strategy and growth. It's time to free up your teams and focus on your future. Learn more about the technology, insights, and support available at AmazonBusiness.com. Thrivent can help you plan your finances for the people, causes, and community you love. What makes Thrivent different? Financial services and generosity programs are combined to help you build the financial roadmap for the future.

while also creating opportunities to give back along the way. Visit Thrivent.com to learn more. Thrivent, where money means more.

This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple CarPlay 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 have in studio Paul Sankey coming up on oil, world-class, and even better, Stephen Englender with Standard Chartered Bank joining us in studio.

Now, folks, this is going to be a window into global Wall Street where they don't just look at yen and euro. Stephen 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 strong Canada, weak yen, 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 still low yielding, has the lowest real interest rates. The politics are kind of a little bit soft and it's very exposed to higher oil prices.

Some of the weakness we're seeing today in dollar yen as well. Yeah. And what you're seeing is that the yen is actually one of the weakest currencies overnight. Canada is holding in there because it does have oil. It's not as exposed to July the 9th.

And you sort of say if things go south, that maybe CAD continues to hang in there, but yen could be exposed. So your bet at the Standard Chartered Bank is strong loonie.

weaker yen well we we don't bet but it's certainly sort of something that we we think we would think about this if you're asking us you know how markets might trade see how he put me in my place there why don't you save the interview Steve how 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

We've got to pay attention to these things, at least for the next several years. How does that impact your view? Well, it's very complicated because there are three factors that are involved. One is that they've increased the risk premium on US assets a lot. OK. Partly-- The weaker dollar. Yeah, partly because of 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 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 Vanglader, my book of the summer, Ken Rogoff out of Harvard,

Our dollar, your problem. Fabulous, fabulous. Look back at Rudy Dornbush 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 20 or 30 years. Invest it in new technologies, get high rates of return, and do very well of it. You know, the U.S. is like a big hedge fund. Do you suggest that's, oh, I love that. Can we steal that? Yeah. Lisa, write that down. The U.S. is like a big hedge fund.

My book of the year by Ruchia Sharma at Rockefeller now is basically a treatise on capitalism in America. Stephen Englund, the standard charter bank with us on quote, the U.S. 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 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 U.S. And that would be a pity. Speaking of the U.S. dollar, you know, we've seen it down, you know, 8%, 9%, having a little bit of a bounce back today, maybe risk havens.

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 another session a year from now.

And tax bill has passed, tariffs have been resolved, and the U.S. 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 Chartered 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 here, 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 and the rest.

Is that, on an asymmetric basis, is that strong EM or is that weak U.S. 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 will substitute for some of the trade impediment adjustment that the U.S. wants. That, you know, especially Asian currencies as a group,

may prefer to allow their currencies to appreciate rather than sort of say... Use that as a leakage. Yeah. But rather than open up vulnerable sectors like farming and stuff which is politically important, they say, let's socialize this. Everybody will take the hit through the exchange rate. You know, Mike emailed me and he says, Tom, use the damn terminal. So, you know, I'm doing the TE function on 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. Okay, okay. That's a five standard deviation swing. That's a move. It's like more than substantial. Will you come back now that we use the terminal?

I'm always impressed when I talk to you. Oh, well, please. There you go. That's what the third divorce lawyer said. Stephen Egliter, thank you so much. Greatly appreciate it. He's with the Standard Charter Bank and Studio. This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple Podcasts.

Apple CarPlay 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 1130. I emailed the White House today. I said, can you give me an oil tweet from the president? Because we've got Paul Sankey coming in. Joining us, Paul Sankey, Sankey researcher for our conversation. We're going to do quickly here. The president of the United States moments ago, all caps.

Everyone, comma, 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 on the manipulation of oil prices? I think the best traders of oil are the Chinese. And so they're the real, you know, the power underneath this all is their buying of Iranian crude.

They put the bid on oil. They put the bid on Iranian oil. So they're the main buyer by far. You know, 80% of Iranian oil is, a lot of it actually goes to Malaysia and then is re-flagged. 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 at, 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 Hormuz when they talk about closing the Straits of Hormuz. 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 70s between Iran and Iraq, where they were both firing missiles. And that's actually what got us the 1970s high in oil prices, which was over $100 a barrel. Given that background, why isn't Brent crude north of $100 today?

There's plenty of oil and, you know, Chinese demand is weak, supply is abundant. I think to me, Tom and I have known each other 25 years. What's so extraordinary about the current market is firstly that we're at 103 million barrels a day of demand, you know, an extraordinary number, 103 million barrels a day of every day, you know, so this is like 1,300 barrels a second of consumption.

But even more extraordinarily, which we would never have thought you could do 20 years ago, you've got capacity of 108 million barrels a day. So there's actually 5 million barrels a day spare. The interesting thing about the spare capacity is it's all in the Gulf. So the market is clearly, further to the answer to your question, is the market is thinking that the risk of interruption in the Straits of Hormuz is low, basically because China, US, Europe, everybody, Saudi pretty much, maybe less so,

want the oil to keep flowing and that the Iranians' 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 Hormuz. And I think the odds on various betting sites are far too high. It's actually quoted at 30% 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 the market still pushing this commodity lower? Yes, I think so. I mean, I think that 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 globally. Really?

In, you know, the key markets, which would be Northeast Asia, Europe and the U.S., that gave us a lot of extra demand, a million and over a million barrels a day of extra demand just on weather and Q1. And now we're getting a good 400,000 barrels 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, Abu Dhabi recorded 53 degrees, I think, which is 127 degrees in the shade.

in May and as a result, exports 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 oil go higher here. Paul, can we do something quaint like an individual stack?

Yeah, I don't know if he still does that. Vicki over at Oxy with Warren Buffet, 27% ownership at Berkshire Hathaway. Debt encumbered. Essentially, the stock's gone nowhere for 10 years. Exxon has 60-some thousand employees. Oxy's teen suites, 13,000 employees. Has Mr. 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... Picks up the phone. Yeah, you know, that 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 the 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 the company. Would it be larger and more international than Exxon? Not more international, but larger, because they'd become the largest player in the Permian. Chevron actually, in 2020, when Exxon 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 Ramon when Chevron, if you think about the histories, but...

Today, you know, would Exxon do another big deal? I think the main thing here is, Thomas, is the Trump, you know, would Trump be more ready to allow Exxon for ConocoPhillips, 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 60 to 80 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. As simply as I can, Paul Sankey, for our American audience, what is our biggest misconception of oil production in the Persian Gulf after we all read Daniel Yergin's The Prize? What's the thing we get wrong now?

I think the single biggest thing people get wrong is they think that, you know, there's a more environmentally friendly alternative to oil when oil is naturally occurring. We 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 world would celebrate that we found the solution to our energy problems and our environmental problems. And U.S. emissions are down based on our increased use of natural gas. It's as simple as that. That's how we've actually

reduce CO2 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 U.S. 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, believe it or 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're going to be in a Venezuela situation quite possibly. In the 1979 revolution, there was significant civil war fighting in Iran for at least a year or two post the revolution. I mean, they continued 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, they're an economic force, so they run the Iranian economy. And as a result, the thing I'd be watching for is for a split in the Revolutionary Guard. I'm running out of time. I've got to ask, how attached is the Revolutionary Guard to Ayatollah? 100%. I mean, 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, they're crooks, they're 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 strongly. Don't be a stranger. Your weekend note, you tore apart me, you tore apart financial media.

You said you'd done 17 things. Will you come back or are we like you lumping us in with everyone else here? Tom, you're on a special list, man. You're on the yes every time. But you know, you don't pay me. So, you know, if you want to pay me, mate, I'll come back and sit with you three hours a day. You think Lisa likes me? Lisa, get him some Kirkland. Get him a case of Kirkland hot dogs.

Can we do that? From Costco, yes. Well, actually, my dogs have a quarter hot dog every morning, so I'm always in the market for hot dogs. Paul Sankey, thank you. Thank you so much for joining us. This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, and anywhere else you get your podcasts.

Listen live each weekday, 7 to 10 a.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

For enterprise organizations, managing all your food needs is a tall order. But with EasyCater, you get a single workplace food vendor with the tools and resources to make it easy, giving teams across your organization an easy way to order from a huge variety of restaurants, all on one platform. All while consolidating your corporate food spend so you can control costs, streamlining billing and payment and simplifying reporting.

EasyCater, your business tool for food. To learn more, visit easycater.com slash podcast. Thrivent can help you plan your finances for the people, causes, and community you love. What makes Thrivent different? Financial services and generosity programs are combined to help you build a financial roadmap for the future while also creating opportunities to give back along the way. Visit Thrivent.com to learn more. Thrivent, where money means more.

In business, plans change fast and your brand has to keep up. That's why teams rely on 4imprint for promotional products that deliver. 4imprint offers thousands of options including apparel, drinkware, tech, and trade show gear. Many available with 24-hour turnaround, helping you move quickly and never compromise in quality. You'll enjoy free samples, expert support, and every order back by their 360-degree guarantee. So it arrives right and on time. Explore more at 4imprint.com.

This is an iHeart Podcast.