Latest / Bloomberg Intelligence / Oil Markets Say Full-Blown War With Iran Is Unlikely

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Oil Markets Say Full-Blown War With Iran Is Unlikely · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you.
• 0:05
  Speaker 1: Along with my co host Lisa Brahma Wicks. Each day
• 0:07
  Speaker 1: we bring you the most noteworthy and useful interviews for
• 0:10
  Speaker 1: you and your money. Whether at the grocery store or
• 0:12
  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
• 0:15
  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:17
  Speaker 1: at Bloomberg dot com to get a sense of where
• 0:20
  Speaker 1: oil is going to go or could go in a
• 0:22
  Speaker 1: world that has heightened political tensions coming out of the
• 0:26
  Speaker 1: Mid East. We welcome Dr Ellen Wald. She's president of
• 0:29
  Speaker 1: Transversal Consulting. She's also a nonresident Senior Fellow at the
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  Speaker 1: Atlantic Council's Global Energy Sector and a Bloomberg opinion contributor
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  Speaker 1: based in Jacksonville. Dr Wall, thanks so much for joining
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  Speaker 1: us again. Looking at the oil over the last couple
• 0:41
  Speaker 1: of days since the news broke out, we certainly saw
• 0:44
  Speaker 1: him move up in oil, but perhaps not as much
• 0:45
  Speaker 1: as some traders had been thinking, or some observers had
• 0:49
  Speaker 1: been thinking. What's the market telling us? Yeah, I think
• 0:51
  Speaker 1: that the market is telling us right now is that
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  Speaker 1: war is a very unlikely possibility and we can see
• 0:58
  Speaker 1: that the prices win up after the event happened. We
• 1:01
  Speaker 1: saw rise about really less than four percent for Brent.
• 1:06
  Speaker 1: Brent was up, and that tells us that markets believed
• 1:09
  Speaker 1: that some sort of temporary disruption to oil supplies or
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  Speaker 1: oil transportation was likely, but that some kind of big
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  Speaker 1: military conflagration, some kind of of all out war situation
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  Speaker 1: is really still a very unlikely possibility. Otherwise the market,
• 1:26
  Speaker 1: the price of oil would have gone out much more
• 1:28
  Speaker 1: and been much more sustained rise. In fact, we've really
• 1:31
  Speaker 1: seen prices come back down today. Brent was up about
• 1:35
  Speaker 1: a little over seventy much earlier this morning, but it
• 1:38
  Speaker 1: since come down quite a bit, as I think people
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  Speaker 1: realize that there's a lot of rhetoric going back and forth,
• 1:45
  Speaker 1: but that really the tensions are really in this in
• 1:49
  Speaker 1: this rhetoric, that there's very little military activity. And in fact,
• 1:53
  Speaker 1: one of the interesting developments is that we've seen is
• 1:56
  Speaker 1: that the Saudis are sending their defense minister, who is
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  Speaker 1: the brother of Crown Prince Mohammed bin Salman, to the
• 2:03
  Speaker 1: United States to try to deescalate uh these tensions. And
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  Speaker 1: that's one of the reasons is that Saudi Arabia and
• 2:10
  Speaker 1: and you A particularly, they don't want to get involved
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  Speaker 1: in a war because any kind of military action against
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  Speaker 1: Iran is going to involve have to involve them, and
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  Speaker 1: they don't want to be part of any even a
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  Speaker 1: coalition against this, and so really, you know, they like
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  Speaker 1: to kind of beat the war drone, but when push
• 2:28
  Speaker 1: comes to shove, they don't want a war. What about
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  Speaker 1: Iraq voting to kick US troops out of the nation,
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  Speaker 1: how could that potentially play into some of what's going on.
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  Speaker 1: So this is a really interesting development. I think we
• 2:42
  Speaker 1: need to look at exactly what did actually happen in
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  Speaker 1: the Iraqi parliament. One of the important things to remember
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  Speaker 1: is that this is a temporary government that that Iraq
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  Speaker 1: as their prime minister, and the government resigned UH several
• 2:54
  Speaker 1: weeks ago due to all of the political unrest that
• 2:57
  Speaker 1: have been going on there, particularly the fact that that
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  Speaker 1: that particular government was seen as very much in favor
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  Speaker 1: of Iran and supporting Iran's influence in the region, and
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  Speaker 1: there have been massive protests against that. So what we
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  Speaker 1: what we did see from what I understand, the vote
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  Speaker 1: by the Rocki Parliament was basically to ask the Iraqi
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  Speaker 1: government to cancel assistance to the US led anti Asis coalition,
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  Speaker 1: to expel foreign troops from Iraq, file a complaint about
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  Speaker 1: the US, and investigate the US bombings, and that this
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  Speaker 1: isn't a binding um a binding legislation in anyway. It's
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  Speaker 1: really kind of a resolution. But apparently they really can't
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  Speaker 1: kick the U s out because the security agreement that
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  Speaker 1: that the US and Iraq have after the war means
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  Speaker 1: that they really need to give I think at least
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  Speaker 1: a year's notice to actually leave. So this is really
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  Speaker 1: a symbolic way of saying, um, you know, we we
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  Speaker 1: don't approve of what you did. But keep in mind
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  Speaker 1: also that um Kurdish element Kurdish members of parliament and
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  Speaker 1: also Senday members of parliament. I think we're not even
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  Speaker 1: really present or included in this, So it was really
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  Speaker 1: a reflection of the elements of parliament who support Iran. Ellen,
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  Speaker 1: what is the what do you think will happen in
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  Speaker 1: terms of retaliation? I think that's kind of the next
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  Speaker 1: up here. People are kind of, you know, sensing when
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  Speaker 1: will Iran retaliate, how will it retaliate, and maybe how
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  Speaker 1: this might escalate. What is your best guess at this point. Well,
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  Speaker 1: that's that's really the big question on everyone's minds is
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  Speaker 1: what's the response going to be. Are we going to
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  Speaker 1: see some kind of drone strike like we saw on
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  Speaker 1: a Ramco facilities. I mean, that was really kind of
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  Speaker 1: a stunning event that we saw in September, because a
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  Speaker 1: lot of people didn't believe that Iran had the capability
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  Speaker 1: to do that, or they know how, or the knowledge
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  Speaker 1: of the detailed knowledge of a Ramco facility. So it's
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  Speaker 1: certainly possible that we might see and attempt at something
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  Speaker 1: like that. There could be a cyber attack. We really
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  Speaker 1: need to take into consideration what Iran is capable of
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  Speaker 1: at this point. U clearly closing the Streets of Horror
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  Speaker 1: moves would be a major deal. Most people do consider
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  Speaker 1: that or would consider that an act of war. But
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  Speaker 1: keep in mind that also harms Iran because they also
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  Speaker 1: rely on the Streets of Horror moves to continue their
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  Speaker 1: illicit oil trade, so that would also harm their ability
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  Speaker 1: to make any money off of their oil. One of
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  Speaker 1: the things I think we need to be really careful about, though,
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  Speaker 1: is that there's a lot of traffic in the Persian
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  Speaker 1: Gulf right now, even more and the previous attacks we
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  Speaker 1: saw on tankers in the region. We're really just confined
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  Speaker 1: to small tankers carrying crude to a products. But if
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  Speaker 1: we did see an attack on an actual crude oil tanker,
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  Speaker 1: that could cause not just an issue militarily, but it
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  Speaker 1: could also cause an environmental disaster, and those are the
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  Speaker 1: kinds of things have to be really careful about. Ellen Wald,
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  Speaker 1: thank you so much for being with us as always
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  Speaker 1: and sharing your insights. Elean Wald, president of Transversal Consulting
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  Speaker 1: and a nonresident Senior Fellow at the Atlantic Council's Global
• 5:58
  Speaker 1: Energy Center, joining us give us some perspective, Well, the
• 6:14
  Speaker 1: rhetoric between the US and Iran is getting increasingly heated,
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  Speaker 1: but you wouldn't know it if you took a look
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  Speaker 1: at equities. Actually on the day, the NASDAC has now
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  Speaker 1: turned marginally positive, up nine tenths of what one tenth
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  Speaker 1: of a percentage point, and you're seeing the SMP just
• 6:31
  Speaker 1: barely negative, which raises a question, how concerning is it
• 6:35
  Speaker 1: that traders seem to be completely complacent the idea of
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  Speaker 1: an escalating conflict and what has been described as a
• 6:41
  Speaker 1: tinder box of the Middle East. Joining US now, as
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  Speaker 1: Phil Orlando, Chief Equity markets stragist and head of Client
• 6:46
  Speaker 1: portfolio Management Federated Investors, which oversees more than eighty billion
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  Speaker 1: dollars in equities and joins us here in our interactive
• 6:53
  Speaker 1: broker studio. So, Phil, does that concern you? The complacency?
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  Speaker 1: So the Dow Jones was down three hundred points or
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  Speaker 1: so on Friday, so and I think that was appropriate.
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  Speaker 1: And then waking up this morning the futures at five am,
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  Speaker 1: we're down another couple hundred points. And I think what's
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  Speaker 1: happened over the course of the last few hours that
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  Speaker 1: investors have actually thought through this? What are the Iranians
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  Speaker 1: gonna do? Are they going to declare war in the
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  Speaker 1: United States? That would be suicidal? Uh? Do they have
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  Speaker 1: the ability to have a deleterious impact on the energy market.
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  Speaker 1: You've got something like twenty or twenty percent of the
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  Speaker 1: world's crude flows through the straits of hormones. So could
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  Speaker 1: uh that turn into a problem from us? Absolutely, But
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  Speaker 1: we're in a very different place than they were in
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  Speaker 1: the seventies. Uh we were, you know, we we're now
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  Speaker 1: generating twelve and a half million barrels a day. We're
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  Speaker 1: the largest oil producer in the world. I've heard this
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  Speaker 1: argument that basically Iran doesn't have that many tools to
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  Speaker 1: retaliate against the US. That said, if they were retaliated
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  Speaker 1: in any form, which seems highly likely given their threats
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  Speaker 1: and given their past trajectory, what's the risk on the
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  Speaker 1: opposite side, that President Trump has some sort of massive response, uh,
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  Speaker 1: to sort of prove a point, and it sort of
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  Speaker 1: leads leads things. Uh from that, well, it's a fair
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  Speaker 1: point leads so because he said publicly that that if
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  Speaker 1: you do something, we're going to have a disproportionate response,
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  Speaker 1: and could that escalate into you know, a military conflict.
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  Speaker 1: Absolutely do I think we'll win that sure? But but uh,
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  Speaker 1: from from an uncertainty standpoint, and I think that's the
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  Speaker 1: point you're trying to get to, does that create a
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  Speaker 1: potential air pocket for the market? Could stocks be down,
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  Speaker 1: you know, four or five percent over the space of
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  Speaker 1: a couple of weeks? Is this as this you know,
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  Speaker 1: sort of plays out in the answer that's absolutely yes.
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  Speaker 1: But but at the end of the day, do we
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  Speaker 1: think that the United States ends up on top in
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  Speaker 1: in in this scenario? I think the answer to that
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  Speaker 1: question is also yes, and I think investors are sort
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  Speaker 1: of looking through that in terms of what are the
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  Speaker 1: underlying fundamentals of the market, and you know, could we know,
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  Speaker 1: you know, could we see a couple of percent down? Look,
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  Speaker 1: we're up forty percent since Christmas Eve a year ago.
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  Speaker 1: I mean that's phenomenal. And if we give up five
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  Speaker 1: percent here, okay, fine, it's probably healthy. It washes out
• 9:15
  Speaker 1: some weekends and then we start to work higher again.
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  Speaker 1: So for you absolutely killed it with your bullish equity
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  Speaker 1: call in again, market up significant in the calendar year.
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  Speaker 1: What does the market do for an encore in Well,
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  Speaker 1: in a word, higher, Uh not, We're not gonna be
• 9:34
  Speaker 1: up or percent again. Well, we're sort of in the
• 9:37
  Speaker 1: eight to ten percent neighborhood. We think we get up
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  Speaker 1: to about the thirty five hundred level, which would be
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  Speaker 1: on a total return basis, about ten percent from where
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  Speaker 1: we started the year. Uh. We think there will be
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  Speaker 1: potentially increased volatility and and certainly developments here in the
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  Speaker 1: Middle East would qualify as as a source of of instability. Uh,
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  Speaker 1: we've got this election coming up. Uh, that certainly could
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  Speaker 1: be a problem. Do we do we consummate the China
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  Speaker 1: deal the way we think we will. We've got a
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  Speaker 1: positive view on that, but certainly you've got no way
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  Speaker 1: of knowing if there are going to be any fits
• 10:12
  Speaker 1: and starts here. So there's any number of things that, uh,
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  Speaker 1: could create roadblocks here that could create a little volatility
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  Speaker 1: in the meantime. When you talk about air pockets lower
• 10:21
  Speaker 1: and that things should continue to grind higher despite those
• 10:24
  Speaker 1: air pockets, what would you be buying if there is
• 10:28
  Speaker 1: some sort of significant decline. Sure, so I'll take a
• 10:31
  Speaker 1: look at some of the things we did towards the
• 10:33
  Speaker 1: end of the year. Uh, we've gotten more aggressive and
• 10:36
  Speaker 1: domestic small cap, We've gotten more domestic aggressive in domestic
• 10:41
  Speaker 1: large cap value versus growth, took some profits in growth.
• 10:45
  Speaker 1: Value is underperformed growth by something like eleven percentage points
• 10:49
  Speaker 1: over the last year. And then emerging markets. Emerging markets
• 10:52
  Speaker 1: have underperformed the SMP by basis points in the last year. Uh.
• 10:57
  Speaker 1: This China US trade deal, that's gonna be good for China.
• 11:00
  Speaker 1: What's going on in the energy market right now with
• 11:02
  Speaker 1: higher energy prices, that's gonna be good for both Brazil
• 11:05
  Speaker 1: and Russia. Well, I've just mentioned three of the major
• 11:08
  Speaker 1: economies that comprise the emerging markets an index that we
• 11:11
  Speaker 1: just said is underperformed by basis points over the last year.
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  Speaker 1: So so if I've got some fresh money to play with,
• 11:17
  Speaker 1: domestic small cap, domestic large cap, value, and emerging markets
• 11:20
  Speaker 1: are three areas that I've looked at well in filled
• 11:24
  Speaker 1: the as I think back in the performance that we
• 11:26
  Speaker 1: had in equity markets in twenty nineteen is essentially all
• 11:29
  Speaker 1: multiple expansion. We didn't have a whole lot of earnings growth.
• 11:32
  Speaker 1: How critical is it that we get the high single digit,
• 11:36
  Speaker 1: close to ten percent earnings growth that we're seeing and
• 11:38
  Speaker 1: also are expecting the SMP this year. So what what
• 11:40
  Speaker 1: happened last year in terms of earnings was not unexpected.
• 11:44
  Speaker 1: You think about that, we had about a twenty five
• 11:46
  Speaker 1: or thirty percent earnings increase eighteen over seventeen, largely because
• 11:51
  Speaker 1: of the fiscal policy changes. Last year should have been
• 11:54
  Speaker 1: a year of consolidation. From an earning standpoint, we were
• 11:57
  Speaker 1: roped sort of small, single digit. We'll probably end up
• 12:00
  Speaker 1: you know, three to five percent something like that. This year,
• 12:03
  Speaker 1: we think we're gonna be up you know, maybe eight
• 12:06
  Speaker 1: percent something like that. It's not gonna be phenomenal, but
• 12:09
  Speaker 1: we're gonna get more multiple expansion. And the reason for
• 12:12
  Speaker 1: that is core PC inflation sitting here at one point
• 12:15
  Speaker 1: six percent, benchmark ten year treasury yields are below one
• 12:19
  Speaker 1: one eight percent. In that kind of an environment, multiple
• 12:23
  Speaker 1: should comfortably be at eighteen or nineteen times earnings. So
• 12:27
  Speaker 1: so you know, investors did look at and say, well,
• 12:30
  Speaker 1: the average multiple in stocks over the last you know,
• 12:33
  Speaker 1: fifty seventy hundred years fourteen or fifteen times earnings. We're
• 12:36
  Speaker 1: sitting at seventeen times now. Therefore the market's overvalued. That
• 12:40
  Speaker 1: argument is flawed, and the reason it's flawed is that
• 12:44
  Speaker 1: the market does not trade at some multiple based upon
• 12:47
  Speaker 1: what history suggests. It's a function and inverse mathematical relationship
• 12:52
  Speaker 1: between where interest rates and inflation are on the one hand,
• 12:55
  Speaker 1: and where price earnings ratios are in the other. With
• 12:58
  Speaker 1: so with benign interest rate to an inflation we should
• 13:01
  Speaker 1: get more multiple expansion over the course of the next year.
• 13:04
  Speaker 1: Just real quick, here, what roles the Fed play? How
• 13:06
  Speaker 1: much more more juice does the Fed give us equities
• 13:10
  Speaker 1: if it cuts rates again? Feds done? Feds on hold,
• 13:13
  Speaker 1: We've seen the last of the Fed last year. We
• 13:16
  Speaker 1: will not see them change interest rates. In our view,
• 13:19
  Speaker 1: for the rest of this year. Upper band of the
• 13:21
  Speaker 1: funds rates days at one spot seven five. Okay, but
• 13:25
  Speaker 1: you don't think that it's gonna Do you think that
• 13:26
  Speaker 1: if they were to cut rates that would help stocks, Well,
• 13:29
  Speaker 1: it would. I don't know what the justification for that
• 13:32
  Speaker 1: would be, because we do expect that there will be
• 13:35
  Speaker 1: a re acceleration of both economic growth and corporate earnings
• 13:39
  Speaker 1: growth in the back half of the year. The first
• 13:41
  Speaker 1: quarter is going to be a problem, alright, Just just
• 13:43
  Speaker 1: to be clear that the whole Boeing shutdown situation is
• 13:46
  Speaker 1: going to have a derivative impact throughout the economy. Normal
• 13:50
  Speaker 1: first quarter seasonal stuff. We've got some you know, some
• 13:53
  Speaker 1: lagging stuff going with China trade. But as we get
• 13:56
  Speaker 1: through that, as we get to the middle of the year,
• 13:58
  Speaker 1: in our view, we're gonna start to see economic growth
• 14:01
  Speaker 1: in corporate during this growth start to accelerate. Philorlando, thank
• 14:03
  Speaker 1: you so much for joining us. Really appreciate you being
• 14:06
  Speaker 1: in our Bloomberg Interactive Broker studio. Phil Orlando, chief equity
• 14:09
  Speaker 1: market strategist and head of Client portfolio Management at Federated Investors.
• 14:30
  Speaker 1: You know, after increasing SMP five, investors are looking for
• 14:35
  Speaker 1: some places that might offer some better risk reward opportunity.
• 14:38
  Speaker 1: One of those areas has been emerging markets. We want
• 14:42
  Speaker 1: to talk emerging markets. We talked to our good friend
• 14:43
  Speaker 1: Eric Fine, portfolio manager for Emerging markets fixed income and
• 14:47
  Speaker 1: Van Eck, a Global based here in New York City.
• 14:50
  Speaker 1: Eric joins us here in our Bloomberg Interactive Broker studio.
• 14:52
  Speaker 1: So before we just get to a broad kind of
• 14:55
  Speaker 1: emerging markets view, as we head into what does the
• 14:59
  Speaker 1: last seven two hours in terms of geopolitical risk coming
• 15:02
  Speaker 1: out of the Mid East, how does that factor into
• 15:05
  Speaker 1: your modeling, your calculus as you just think about, you know,
• 15:08
  Speaker 1: emerging markets. Sure with Hi, Paul High, Lisa having near
• 15:11
  Speaker 1: thanks so so the UH, I'd say the first thing
• 15:15
  Speaker 1: is there are a lot of emerging market countries and
• 15:18
  Speaker 1: companies in the region that issue, and that's where I'm
• 15:20
  Speaker 1: more comfortable saying that there could be an impact UM.
• 15:23
  Speaker 1: And I would say that the countries that are UH
• 15:27
  Speaker 1: the most subject to this are Iraq Um, which is
• 15:31
  Speaker 1: now being threatened by sanctions. The bonds are down and
• 15:33
  Speaker 1: maybe another two points today and yields aren't that high there, right,
• 15:37
  Speaker 1: That's the thing for a lot of these UM for
• 15:40
  Speaker 1: a lot of countries that are ultimately dependent on some
• 15:42
  Speaker 1: bottom up development that can change quickly. Um um. You
• 15:46
  Speaker 1: often see the last price before the event as being
• 15:50
  Speaker 1: a generic price for risk in a low yield world.
• 15:53
  Speaker 1: Oh it's this rating, it's got this yield that yields
• 15:56
  Speaker 1: a little too high and own it not Oh, it's
• 15:58
  Speaker 1: got this bottom up specific fund im And also I
• 16:00
  Speaker 1: think sanctions risking Iraq um uh does is a real
• 16:04
  Speaker 1: issue and uh this really started with Iraq war and
• 16:07
  Speaker 1: and the sort of opening that that creates to Iran.
• 16:10
  Speaker 1: Let me put it that way. The natural um I'd
• 16:12
  Speaker 1: say Saudi is is another country that could be affected
• 16:14
  Speaker 1: by this, and that it's a regular issuer, and it
• 16:17
  Speaker 1: would seem reasonable to me to expect Iran to leverage
• 16:24
  Speaker 1: Yemen over over Saudi. That was the pea stalks look
• 16:29
  Speaker 1: like to me like they've broken down um and there
• 16:31
  Speaker 1: I think the issue is that Saudi's a regular issue
• 16:34
  Speaker 1: or they've got big fiscal deficits um and the yields
• 16:37
  Speaker 1: are really low. You have three percent yield, so a
• 16:39
  Speaker 1: lot of this isn't priced so regionally. I think there's
• 16:42
  Speaker 1: some very specific implications that are important and that are
• 16:45
  Speaker 1: generally adverse. And I think that the main names names
• 16:48
  Speaker 1: national names would be Iraq and uh uh and Saudi
• 16:52
  Speaker 1: um um. In terms of anything more broadly, UM, I
• 16:55
  Speaker 1: would say it's uh, it's it's a bit of a stretch.
• 16:58
  Speaker 1: I think you really have to First, I think one
• 17:01
  Speaker 1: should be reluctant to hang an entire portfolio thesis based
• 17:04
  Speaker 1: on developments in the Middle East. You know, it's just
• 17:07
  Speaker 1: really really trick um and uh um. And second, central
• 17:11
  Speaker 1: banks are so activated now UM that it's arguably a
• 17:14
  Speaker 1: positive UM. And Third, I caution that this is what happened.
• 17:19
  Speaker 1: As dramatic as it is, it is a line cross
• 17:21
  Speaker 1: UM is part of of of broader trends that have
• 17:25
  Speaker 1: already started. The borders that existed are being rethought UM.
• 17:30
  Speaker 1: And this and this didn't just start last week, Okay.
• 17:32
  Speaker 1: Arguably positive because it could potentially ignite the central banks
• 17:37
  Speaker 1: out there to stimulate further. Is that the idea, UM,
• 17:41
  Speaker 1: it's a reminder that to to the extent that central
• 17:44
  Speaker 1: banks were getting a little emboldened by growth, or we're
• 17:47
  Speaker 1: at risk of it, I think it's a little too
• 17:49
  Speaker 1: early to say that they were getting emboldened by by growth,
• 17:51
  Speaker 1: but to the extent that that was a scenario or
• 17:53
  Speaker 1: a month or two from now, maybe that's put back
• 17:55
  Speaker 1: a few more months. I don't think it's a complete
• 17:57
  Speaker 1: I don't think you're gonna see statements from central banks
• 18:00
  Speaker 1: on this, but it's we will be reminded of Central
• 18:03
  Speaker 1: bank forbearance. What are the big conundrums is how much
• 18:07
  Speaker 1: further the Federal Reserve than the ECB can can stimulate
• 18:10
  Speaker 1: global risk markets? And I have to wonder, you know,
• 18:14
  Speaker 1: doesn't at a certain point further rate cuts signal that
• 18:17
  Speaker 1: the economy is even worse than people expected, and it
• 18:20
  Speaker 1: doesn't really give that much of a boost to uh
• 18:23
  Speaker 1: sort of the relative valuations and risk assets. Wow. The
• 18:26
  Speaker 1: third question, and we're into this issue of the reversal rate.
• 18:29
  Speaker 1: I think it's the hugest question, and it's going to
• 18:32
  Speaker 1: be a question we're gonna be asking for years is
• 18:35
  Speaker 1: are we at the end? Are we? Is this experiment over? Um?
• 18:39
  Speaker 1: I would you know, I call myself a recovering economist,
• 18:43
  Speaker 1: so my and I'm going to give a you know
• 18:45
  Speaker 1: that kind of economics type of answer, which it depends, right,
• 18:48
  Speaker 1: it depends on this which like economists anonymous, there should
• 18:53
  Speaker 1: should be after the financial crisis, the global financials where
• 18:55
  Speaker 1: there should be like it's any bar in midtown, you know,
• 18:57
  Speaker 1: sitting on the end. I think the issue is clearest
• 19:01
  Speaker 1: in Europe, where you've seen a very dramatic increase in
• 19:04
  Speaker 1: the balance sheet and really no transmission into growth. It's
• 19:07
  Speaker 1: mercier in uh in in the U S where you
• 19:10
  Speaker 1: can see some success, but um, Europe has a uh.
• 19:15
  Speaker 1: Europe is really where I think that that issue is
• 19:16
  Speaker 1: coming to the four One way of putting your question
• 19:20
  Speaker 1: is or one way of answering your question is, yeah,
• 19:23
  Speaker 1: some of the central banks, maybe all of the developed ones,
• 19:25
  Speaker 1: but certainly I think Europe's at the forefront of the problems.
• 19:28
  Speaker 1: UM uh. They either high rates and uh and bankrupt governments,
• 19:34
  Speaker 1: or they cut rates and bankrupt financial systems, which are
• 19:39
  Speaker 1: contingent liability of governments. So that's a way of describing
• 19:42
  Speaker 1: the condom. If they keep interest rate slow, the financial
• 19:45
  Speaker 1: banking pensions is in the financial system, um UM doesn't
• 19:49
  Speaker 1: earn enough to remain solvent. Arguably right or that's a
• 19:53
  Speaker 1: challenge long term. I'm just a big picture theory theoretical,
• 19:56
  Speaker 1: so UM and uh UM. But if rates are raised
• 19:59
  Speaker 1: to a level that that the banking system, for example
• 20:02
  Speaker 1: in Europe, is probably lobbying for UM. Then government borrowing
• 20:06
  Speaker 1: costs become a real issue, particularly for the peripheral, higher
• 20:10
  Speaker 1: indebted countries. Now this is very theoretical, not really what
• 20:14
  Speaker 1: we do day to day. Any I think it's a
• 20:16
  Speaker 1: great question, what are you playing in what's your highest
• 20:18
  Speaker 1: conviction idea UM highest conviction ideas. Two groups of ideas.
• 20:22
  Speaker 1: One is I think it is going to be a
• 20:23
  Speaker 1: bumpy road, part partially because of the reasons Lisa mentioned
• 20:26
  Speaker 1: longer term, so maybe you know second, third quarter. And
• 20:29
  Speaker 1: one of the problems I have is a lot of
• 20:31
  Speaker 1: people think what I'm about to say is it will
• 20:32
  Speaker 1: have a good quarter or so and then then it
• 20:34
  Speaker 1: will be tricky. But one group of ideas is the
• 20:37
  Speaker 1: ones that that we think should last the whole year,
• 20:39
  Speaker 1: and they're similar to what we do what we did
• 20:41
  Speaker 1: last year. Things where we're waking up in the morning
• 20:43
  Speaker 1: and not thinking about these sorts of questions where we're
• 20:45
  Speaker 1: not thinking about Middle East developments, we're not thinking about
• 20:48
  Speaker 1: oil upper down or rates upper down. So Argentina comes
• 20:51
  Speaker 1: to mind. We're waking up in the morning and following Argentina,
• 20:53
  Speaker 1: we think there's too much pessimism that government's basically market
• 20:56
  Speaker 1: friendly and as and the biggest determined to remind people,
• 21:00
  Speaker 1: the biggest determined of present value in a dicing in
• 21:04
  Speaker 1: a potential default situation is nonpayment when you're and that's
• 21:08
  Speaker 1: when you should be discounting a zero payment at and
• 21:11
  Speaker 1: so you're losing a lot of money as long as
• 21:13
  Speaker 1: they're staying current, which all indications are they plan on it.
• 21:16
  Speaker 1: Um Um. I think that's a very very good situation,
• 21:18
  Speaker 1: but again, bottom up, uncorrelated. We're waking up looking doing
• 21:21
  Speaker 1: our day job. That's one Uruguay another really interesting local market,
• 21:26
  Speaker 1: not big part of the index, but we have significant
• 21:28
  Speaker 1: exposure there. You're getting around ten percent yields UM low
• 21:31
  Speaker 1: and declining inflation and a new government elected to deal
• 21:34
  Speaker 1: with their one problem fiscal But again I'm waking up
• 21:36
  Speaker 1: in the morning looking for the next few quarters. Are
• 21:38
  Speaker 1: they dealing with their fiscal programs? So those are some
• 21:40
  Speaker 1: of the unusual ones that could last for your Ukraine's
• 21:43
  Speaker 1: another one i am F program. The more mainstream ones
• 21:46
  Speaker 1: that could benefit UM but may not last the whole
• 21:49
  Speaker 1: year are Indonesia, Growth reform, South Africa, a lot of
• 21:53
  Speaker 1: bad News priced in and Brazil really can't say enough
• 21:56
  Speaker 1: good things about Brazil. Fine wonderful, wonderful synopsis, Zil, Argentina, Uruguay.
• 22:02
  Speaker 1: Some of the picks here, Eric Fine, portfolio manager of
• 22:04
  Speaker 1: Emerging Marcus Fixing Come Strategy at Vanneck Global, based in
• 22:08
  Speaker 1: New York. Joining us here in our interactive broker studios.
• 22:25
  Speaker 1: As time continues, we are piecing together the movie that
• 22:28
  Speaker 1: is Carlos Gones life. Joining us now is Alan Kat's
• 22:31
  Speaker 1: financial investigations team leader for Bloomberg News based in Paris,
• 22:36
  Speaker 1: and Alan Woman put out a piece this morning really
• 22:40
  Speaker 1: detailing everything we know about his arrest, his a hundred
• 22:44
  Speaker 1: days in solitary confinement through to his escape from Japan.
• 22:49
  Speaker 1: Can you give us a sense of sort of the
• 22:52
  Speaker 1: narrative here as it unfolds. So, the way it worked
• 22:55
  Speaker 1: with Carlos Gone was that he was arrested back in
• 22:58
  Speaker 1: November of twenty eighteen, and as you mentioned, he spent
• 23:02
  Speaker 1: a lot of time and saw their confinement. They kept
• 23:04
  Speaker 1: sort of releasing him and then re arresting him. Uh,
• 23:07
  Speaker 1: And there was a very sort of confusing period. Uh.
• 23:10
  Speaker 1: But things got a lot more pressure packed uh in
• 23:14
  Speaker 1: December of this year so he had already been either
• 23:17
  Speaker 1: in jail or under house arrest for for more than
• 23:20
  Speaker 1: a year, and UH this December he found out that
• 23:23
  Speaker 1: his trial was likely to be delayed, possibly in one
• 23:28
  Speaker 1: sort of leaving him in a legal limbo for at
• 23:30
  Speaker 1: least another year. Japanese prosecutors had begun interviewing UH some
• 23:35
  Speaker 1: of his family members, including his son Anthony, who they
• 23:38
  Speaker 1: also accused of having been involved in some of the
• 23:40
  Speaker 1: financial shenanigans. They claimed that that Carlos Gone was involved
• 23:44
  Speaker 1: in UH and he didn't there didn't seem to be
• 23:46
  Speaker 1: any way out, and that that appears to be sort
• 23:49
  Speaker 1: of the real motive for him to leave now. But
• 23:52
  Speaker 1: the other issue was an issue of opportunity. Right, so
• 23:55
  Speaker 1: when in any sort of spy caper, you know, Ocean's
• 23:58
  Speaker 1: eleven type scenario, you need to have sort of that
• 24:00
  Speaker 1: moment when the time is right to jump. And it
• 24:04
  Speaker 1: appears that he had been preparing this for months, dealing
• 24:07
  Speaker 1: with people who have been specialized for decades in you know,
• 24:11
  Speaker 1: ex fil trading, UH executives who are have been kidnapped
• 24:15
  Speaker 1: or re recovering abducted children, or fighting on various sides
• 24:19
  Speaker 1: of militia and during a civil war, UM, and he'd
• 24:22
  Speaker 1: been dealing with them for months. But one of the
• 24:24
  Speaker 1: things that came up just now was that there was
• 24:26
  Speaker 1: a combination of it was a holiday period in Japan,
• 24:30
  Speaker 1: so government offices were going to be closed for several
• 24:33
  Speaker 1: days at least, and one of the main groups that
• 24:36
  Speaker 1: have been sort of following Going every time he would
• 24:38
  Speaker 1: leave his apartment was where series of private investigators paid
• 24:41
  Speaker 1: for by Nissan Ghones lawyer had protested this was violating
• 24:45
  Speaker 1: his rights, and those investigators appears to have appeared to
• 24:48
  Speaker 1: have backed off, and so that gave Going this moment
• 24:51
  Speaker 1: the sort of golden chance he that he had to take,
• 24:53
  Speaker 1: or felt he had to take UH if he was
• 24:55
  Speaker 1: ever going to get out of Japan, And so he
• 24:56
  Speaker 1: did UH and amazingly was successful in Hi amazing stories. So, Allen,
• 25:01
  Speaker 1: I think the next big piece of news is Mr
• 25:04
  Speaker 1: Gohen is saying he's gonna have a press conference I
• 25:06
  Speaker 1: guess in Lebanon sometime this week. Give us the details
• 25:09
  Speaker 1: are what we know. Uh. He's going to speak in
• 25:12
  Speaker 1: Lebanon on Wednesday at three pm local time. UH. And
• 25:17
  Speaker 1: he claims, or through his lawyers mostly he claims that
• 25:21
  Speaker 1: he is going to use this to try to press
• 25:23
  Speaker 1: his case for why UH the allegations against him or untrue,
• 25:29
  Speaker 1: politically motivated part of a vendetta against him, both by
• 25:33
  Speaker 1: people within Nissan also UH from the Japanese government. UH
• 25:38
  Speaker 1: in large part because of his efforts who merge Nissan
• 25:42
  Speaker 1: with Renault. As you may know, Renault, the French carmaker,
• 25:46
  Speaker 1: ownscent of Nissan, nissancent of Renault. But in this alliance
• 25:50
  Speaker 1: that they've had for the last twenty years, Renault has
• 25:52
  Speaker 1: essentially had the upper hand for most of the time
• 25:54
  Speaker 1: since it essentially saves Nissan from bankruptcy when they when
• 25:57
  Speaker 1: they first did the deal. Um, So this press conference
• 26:00
  Speaker 1: is going to be going essentially going side of the
• 26:03
  Speaker 1: story now he's had He had one video press conference
• 26:07
  Speaker 1: that he did while he was still under house arrest
• 26:09
  Speaker 1: in Japan, which supposedly was going to unveil all sorts
• 26:12
  Speaker 1: of new information that was going to be terrible for
• 26:15
  Speaker 1: new sounding great for Carlos. Gone didn't really come up
• 26:18
  Speaker 1: with much new. So it's not clear, at least not
• 26:21
  Speaker 1: clear to me, that that there's necessarily going to be
• 26:23
  Speaker 1: a lot of new information or a lot of really
• 26:25
  Speaker 1: exculpatory information that that going is going to come out
• 26:28
  Speaker 1: with on Wednesday. But it's certainly going to be exciting.
• 26:30
  Speaker 1: It's certainly give me exciting exactly right, Alan Cats, thanks
• 26:32
  Speaker 1: so much for joining us Allen as a financial Investigations
• 26:35
  Speaker 1: team leader for Bloomberg News in our Paris bureau. What's
• 26:38
  Speaker 1: this fascinating story continuing to unfold? I'm really looking forward
• 26:42
  Speaker 1: to see what Mr Gohan says that this press conference
• 26:45
  Speaker 1: on Wednesday maybe gets more details as well as who
• 26:48
  Speaker 1: plays Carlos Cone in the upcoming roid biopic that we
• 26:51
  Speaker 1: can expect. Thanks for listening to the Bloomberg Piano podcast.
• 26:54
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
• 26:57
  Speaker 1: or whatever podcast platform you prefer. On Paul Sween, I'm
• 27:00
  Speaker 1: on Twitter at pt Sweeney. I'm Lisa abram Woods. I'm
• 27:03
  Speaker 1: on Twitter at Lisa abram woits one. Before the podcast,
• 27:06
  Speaker 1: you can always catch us worldwide on'm Bloomberg Radio.