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Israel and Gaza, Choice Hotels, and Bank Earnings · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
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Speaker 1: my co host Matt Miller.
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Speaker 1: All right, let's get returned to Gleitt alsteinch Isy, Israel
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Speaker 1: economy and a government reporter for Bloomberg News. She joins
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Speaker 1: us from Tel Aviv and Gleat. I think the message
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Speaker 1: there has been pretty consistent, a message of support by
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Speaker 1: the US, the US people for the people of Israel.
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Speaker 1: What's the feeling in Israel these days as to maybe
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Speaker 1: next steps.
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Speaker 3: Yeah, so, first of all, just on the feeling and
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Speaker 3: on the sentiment here and as well, so I think
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Speaker 3: President Biden's support is very well noted. Also in the public.
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Speaker 3: It is being talked about, it is being discussed, and
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Speaker 3: people are I would actually say that generally speaking, the
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Speaker 3: public here is very much moved by his speech last
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Speaker 3: week and also by the fact that he has taken
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Speaker 3: the time to speak to Israelis in various press conferences
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Speaker 3: and media briefing is I think roughly three times today.
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Speaker 3: Apart from that, we're hearing that Israel and we have
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Speaker 3: an official Prime minister, a spokesperson who says this to
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Speaker 3: Bloomberg today on the record. They're saying that even after
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Speaker 3: everything that happened in the hospital yesterday, the Gaza explosion
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Speaker 3: in the hospital that Israel says it was not involved
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Speaker 3: in in any way, they they still want to move
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Speaker 3: forward with the original plan, so to say, and dismantle
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Speaker 3: Hamas in Gaza. And since this cannot be accomplished according
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Speaker 3: to you know, any expert you would speak to without
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Speaker 3: some sort of ground maneuver, then is that this is
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Speaker 3: still coming up. We don't know when and how exactly.
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Speaker 3: It is noteworthy to say that although the general concept
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Speaker 3: of a ground maneuver has been pretty much established and
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Speaker 3: is very you know, anticipated by everyone, some questions like
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Speaker 3: what would be the magnitude of this maneuver, what would
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Speaker 3: be the goals, when would it stop, you know, what
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Speaker 3: would be the exit point? These are still open questions
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Speaker 3: that are being debated. And I think this is connected
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Speaker 3: in a way to President Biden's visit here today. You know,
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Speaker 3: questions like kids Israel going to reconquer the Gaza Strip,
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Speaker 3: which is something that the US is said to be
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Speaker 3: very opposed to. And questions of that sort are still
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Speaker 3: open and are still you know, being answered and will
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Speaker 3: be answered over the next few days and weeks, maybe
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Speaker 3: even monthly.
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Speaker 2: Assume gleat, what do you expect a ground invasion to
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Speaker 2: actually commence?
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Speaker 4: Uh?
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Speaker 2: Is it fair to say probably not while the US
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Speaker 2: president is on the ground in Israel.
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Speaker 3: Yeah, that is a safe to say that. However, President
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Speaker 3: Biden is due to leave here very very soon. This
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Speaker 3: is very important and like I think you both mentioned
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Speaker 3: the historical visit of of the US president visiting Israel
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Speaker 3: in wartime, this has never happened before. And and yet
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Speaker 3: he's about to leave Israel sometimes very soon. I think
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Speaker 3: he's done with all his meetings here and and all briefings.
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Speaker 3: So we are getting some some talk and reports about
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Speaker 3: other leaders coming through Israel. I don't think this has
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Speaker 3: been totally confirmed yet, but talk of British Prime Minister
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Speaker 3: Rishi Sunak, that is all that is also said to
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Speaker 3: be on his way here. Maybe French President Emanuel mccon
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Speaker 3: also on his way here. So so basically until all
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Speaker 3: leaders have left Israel, a ground invasion is not expected.
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Speaker 1: Now, Okay, Glee, thank you so much once again for
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Speaker 1: sharing some time with us. Galit Alstein, who really appreciate
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Speaker 1: your reporting. Cheesy Israel economy and government reporter with Bloomberg
4:17
Speaker 1: News joining us live from Tel Aviv.
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Speaker 5: You're listening to the Team Ken's Are Live program Bloomberg
4:23
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg dot Com,
4:27
Speaker 5: the iHeartRadio app and the Bloomberg Business app, or listen
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Speaker 5: on demand wherever you get your podcasts.
4:34
Speaker 1: Morgan Stanley out with some numbers, as John was just
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Speaker 1: reporting stockdown about six percent. Just the latest and long
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Speaker 1: line over the last several days of the big commercial banks,
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Speaker 1: the big investment banks reporting numbers, and we want to
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Speaker 1: talk banks. One of our go to voices is Chris Whalen.
4:48
Speaker 1: He's a chairman of Whalen Global Advisors.
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Speaker 6: Chris, thanks so much for taking the time to chat
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Speaker 6: with us.
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Speaker 1: Morgan Stanley doesn't have the big commercial bank that benefits
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Speaker 1: from net interest income, but boy, we've seen some of
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Speaker 1: the big commercial banks like JP Morgan, Lake City really
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Speaker 1: racking up the net interest income. What are some of
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Speaker 1: the takeaways you've had over the last several days from
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Speaker 1: some of these big banks.
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Speaker 7: Well, that's the narrative, Matthew. But I would say if
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Speaker 7: you look at the numbers, you would have to say
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Speaker 7: that net interesting incomes flat for the industry. You know,
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Speaker 7: Morgan Stanley, Goldman, Sachs, see other brokerage firms. In other words,
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Speaker 7: they have a broker dealer, it's their biggest business, have
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Speaker 7: to pay market rates. So they've seen their cost of
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Speaker 7: funds rise much faster than the commercial banks. On the
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Speaker 7: other hand, they don't have a marked to market problem
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Speaker 7: because they tend to keep their assets very short, so
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Speaker 7: you'll notice that they're reported, you know, adjusted accumulated other
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Speaker 7: comprehensive income is much much lower than the big banks.
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Speaker 7: So they don't hold assets, say trade assets, and that's
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Speaker 7: the big difference. But cost of funds is there. It's
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Speaker 7: probably the biggest pain point. Low volumes is the second
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Speaker 7: payment point at this point.
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Speaker 2: You know, I look at I always look Chris at
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Speaker 2: these banks and any companies really versus peers on a
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Speaker 2: five year basis, just because just because the Bloomberg defaults
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Speaker 2: to that, and I've been doing it for twenty five
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Speaker 2: years but Morgan Stanley is still the big winner among
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Speaker 2: the big Wall Street banks.
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Speaker 6: I mean with total return.
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Speaker 2: They're up almost ninety percent, compared to Goldman's axes in
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Speaker 2: second place about fifty percent, and everybody else below it.
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Speaker 2: So this bank is still I would say, the cream
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Speaker 2: of the crop on wall Stree.
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Speaker 8: Would you agree?
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Speaker 5: Yes?
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Speaker 7: In the US Morgan Stanley is clearly the winner. Mister
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Speaker 7: Gorman realized that he had to pay for a lot
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Speaker 7: of businesses that at the time looked expensive, but when
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Speaker 7: you look back today, you could say he made a
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Speaker 7: good trade. There's no other assets to buy. There's no
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Speaker 7: more significant asset managers than a Goldman or any other
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Speaker 7: bank could really buy. You could buy Schwab, but it's
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Speaker 7: too expensive at three and a half times book go lower.
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Speaker 7: But my point is is that in the US Morgan
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Speaker 7: Stanley's clearly the most diversified business with three legs of
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Speaker 7: the stool, asset management bank, investment bank right, and then
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Speaker 7: in Europe it's UBS.
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Speaker 1: So one of the questions I have, Chris, is you
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Speaker 1: mentioned just UBS, and I used to work at Credit Swiss,
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Speaker 1: so I have.
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Speaker 6: A little bit of an interest.
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Speaker 1: Yeah, But the question is can the European banks, and
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Speaker 1: we'll hear their earnings next week. Well, any of the
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Speaker 1: big European banks, can they ever consider themselves global players?
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Speaker 1: Or if they just seated that business to the JP Morgan's,
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Speaker 1: the Goldman's and Morgan Stanleys.
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Speaker 7: It's hard for them because in Europe you don't have
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Speaker 7: a middle market business. Look at Deutsche Bank. They don't
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Speaker 7: have that core business that comes with deposits that really
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Speaker 7: underpins the US banks. So they try and be global banks.
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Speaker 7: They do private banking, they do investment banking, but there's
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Speaker 7: no core. Now Credit Swiss was a little different, as
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Speaker 7: you know, because they had a big US mortgage business
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Speaker 7: US and UPS is discovering that they can't sell it,
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Speaker 7: by the way, so that's fascinating. They owned the rump
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Speaker 7: of the private label mortgage business from the two thousand
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Speaker 7: and eight crisis. They have the biggest service or it's
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Speaker 7: only about one hundred billion dollars to ay you went,
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Speaker 7: but still they can't sell it. I mean even Apollo
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Speaker 7: would buy it, So that tells you something. And you know,
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Speaker 7: UPS is clearly the WI sometimes there's the biggest retail bank,
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Speaker 7: but I would not put them in the same category
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Speaker 7: as ups.
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Speaker 2: Bringing it back to the US we had in March,
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Speaker 2: you know, something almost broke, or maybe it broke, and
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Speaker 2: then the FED was quick to fix it. In terms
8:39
Speaker 2: of banks hold to maturity portfolios, yesterday we had Bank
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Speaker 2: America reporting kind of downplaying their holding maturity portfolio. But
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Speaker 2: all of the big banks are stuck with treasuries you know,
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Speaker 2: that are underwater. Basically, how does that shake out, you think,
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Speaker 2: especially if the FED continues raising rates, or if the market,
9:00
Speaker 2: if the bond vigilantes continue raising rates.
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Speaker 7: Basically, if you use Bank America as an example, they
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Speaker 7: have typically kept a lot of their loan production and
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Speaker 7: that's always been there ever since the crisis. They got
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Speaker 7: out of correspondent lending, but they have a big branch network,
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Speaker 7: so they ride a lot of mortgages and they would
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Speaker 7: keep them. I have a three. I have friends who
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Speaker 7: have two and a halfs from Bank America. So my
9:25
Speaker 7: point is is that they could have sold those loans
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Speaker 7: for one oh four when they were first created, right,
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Speaker 7: but they kept them. So now it's a drag on
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Speaker 7: earnings because as their cost of funds goes up, the
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Speaker 7: twos and the two and a halfs and the threes
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Speaker 7: aren't going anywhere because they're not going to prepay. Matthew,
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Speaker 7: you know what I mean. There's a wonderful chart on
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Speaker 7: the Bloomberg that shows the duration index for Giny May
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Speaker 7: Securities and it shows the Powell panic in twenty nineteen
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Speaker 7: when they started pushing durations down from you know, five
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Speaker 7: down to two in one year, which we would have
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Speaker 7: thought was impossible. By the way, the during COVID they
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Speaker 7: pushed the duration further down, the one for the entire
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Speaker 7: gentimin cupplex. Think about that. Yeah, and now of course
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Speaker 7: it's comed back up. But that's why Silicon Bell at
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Speaker 7: Bank failed, right, exactly simple.
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Speaker 1: All right, Chris, always good to check in with. You
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Speaker 1: get your thoughts on the global banking space. A lot
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Speaker 1: of big banks reporting the numbers. Want to stay ahead
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Speaker 1: of that, Chris Whalen, He's a chairman Whalen Global Advisors.
10:24
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10:43
Speaker 1: Matt Miller Paul Sweny live here in our Bloomberg Interactive
10:46
Speaker 1: Bookers studio. Some pending potential m and a in the
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Speaker 1: hotel business. Wyndham Hotels called Choice Hotels Internationals takeover offer
10:54
Speaker 1: quote underwhelming. Rejecting a proposal that would create a budget
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Speaker 1: hotel behemoth, Choice is offering to pay ninety dollars to
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Speaker 1: sharing cash and stock and a deal valued at nine
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Speaker 1: point eight billion dollars including the assumption of debt. That's
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Speaker 1: according to a statement Tuesday. The deal price is thirty
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Speaker 1: percent more than Wyndam's closing stock price on Monday. Joining
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Speaker 1: us today is Patrick Patios, CEO of Choice Hotels. He's
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Speaker 1: also a former US Navy officer, so of course we
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Speaker 1: thank him for service. But in my opinion, the highlight
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Speaker 1: of his resume is that he graduated from Duke University
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Speaker 1: met so he gets a special.
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Speaker 6: Pat on the back.
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Speaker 1: Patrick, thanks for joining us here. Talk to us about
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Speaker 1: the status of your pending acquisition offer for Windom. Where
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Speaker 1: does it stand right now?
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Speaker 9: Be with you Matt as well.
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Speaker 10: We have essentially gotten to a point we after six
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Speaker 10: months of dialogue where it made sense for us to
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Speaker 10: bring our proposal public because we believe it's very shareholder friendly.
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Speaker 10: We think it's very good for our franchisees and for
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Speaker 10: their franchisees, and it's pro competitive.
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Speaker 9: So we put our offer on the table.
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Speaker 10: They essentially decided about three weeks ago to disengage, and
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Speaker 10: it made sense for us to bring this offer to
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Speaker 10: the shareholders and the franchisees, and it gives us an
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Speaker 10: opportunity now.
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Speaker 9: To talk about it. If you look at their shareholders,
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Speaker 9: we're really offering them to pay them a multiple and
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Speaker 9: earnings multiple that they've never really achieved on their own.
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Speaker 9: Except for a very short spike during the COVID period,
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Speaker 9: we normally trade about two to three times higher from
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Speaker 9: a multiple perspective, So their shareholders are getting a significant
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Speaker 9: premium and they're getting to participate in a really significant
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Speaker 9: opportunity on the upside for the combined company. So that's
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Speaker 9: that's where we are today right now, Paul and Matt.
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Speaker 10: We really are hoping the other side, the Windom team
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Speaker 10: will engage with us again to really drive what I
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Speaker 10: think would be a truly value creating opportunity for everybody.
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Speaker 2: What's the business that you're most interested in in terms
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Speaker 2: of hotels, is it you know, economy, one night stays,
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Speaker 2: is it extended stays?
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Speaker 6: Is it you know? What do you need to add.
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Speaker 2: To your portfolio to bring your business to where you
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Speaker 2: want it?
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Speaker 10: Well, I think if you look at the hotel space
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Speaker 10: and the travel sector in general, there are a lot
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Speaker 10: of large players now that weren't here five ten years ago.
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Speaker 5: So you have.
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Speaker 10: Airbnb, you have vrbo, you have a lot of what
13:16
Speaker 10: I call alternative lodging options. And so to compete in
13:20
Speaker 10: that environment, you need to be able to provide your
13:23
Speaker 10: franchisees with.
13:24
Speaker 9: The tools they need to be successful.
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Speaker 10: And what we're seeing for our franchisees and for theirs
13:28
Speaker 10: as well, is all their costs are going up. Labor
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Speaker 10: costs are going up, insurance costs, property taxes, their debt service.
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Speaker 9: So what we're able to provide, and we've shown this
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Speaker 9: is the ability to lower their operating costs.
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Speaker 10: The number one thing I hear from our franchisees is
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Speaker 10: bring us more direct bookings, lower our operating costs, and
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Speaker 10: make your loyalty program that much bigger. So by doing
13:51
Speaker 10: a transaction like this, and we've shown this with our
13:54
Speaker 10: recent acquisition of Radison. We have a real opportunity to
13:56
Speaker 10: improve the unit economics for each one of our franchisees, and.
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Speaker 9: That's why they're excited about an opportunity like this.
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Speaker 1: So from the from the perspective of getting some type
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Speaker 1: of deal done with wind and what are the real
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Speaker 1: sticking points? From the other side, is it simply price.
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Speaker 6: Or what else is the headwind?
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Speaker 9: Well, it's interesting.
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Speaker 10: One of their arguments is that they believe our stock
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Speaker 10: is overvalued. And what's interesting is we decided to do
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Speaker 10: something very unusual. On the fifth of September. We offered
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Speaker 10: to let them come in and look at our books
14:28
Speaker 10: and they said great, They sent us over a list,
14:30
Speaker 10: we sent it back, and then they never availed themselves
14:32
Speaker 10: with that opportunity. So we really wanted to be able
14:35
Speaker 10: to show them the value of our business and have
14:38
Speaker 10: them understand that by being part of the combined company,
14:41
Speaker 10: their shareholders would win, and they never really availed themselves
14:44
Speaker 10: of that opportunity. The second thing they bring up is
14:47
Speaker 10: execution risk, and that's become a bit of a go
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Speaker 10: to for companies that don't want to do deals.
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Speaker 9: It's not based in the facts.
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Speaker 10: We've been well advised around what it will take to
14:56
Speaker 10: get a deal like this done, and we think there's
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Speaker 10: a real opportunity for the two of us to work
15:01
Speaker 10: together to make that happen. And when you hear from
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Speaker 10: our franchisees about how excited they are about our ability
15:06
Speaker 10: to improve their operating performance, it's really a win win
15:10
Speaker 10: for everybody.
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Speaker 1: Is there a path to restarting these discussions here, what
15:15
Speaker 1: are next steps for you?
15:18
Speaker 6: Or have you really kind of put this on the
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Speaker 6: back burner.
15:21
Speaker 11: No.
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Speaker 10: Absolutely, we're pretty determined to re engage. We really want
15:27
Speaker 10: to make that happen. We think it's the right thing
15:29
Speaker 10: for everybody, for the franchisees, the shareholders, the associates, and
15:33
Speaker 10: the guests that are out there.
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Speaker 9: It really provides a nice premiere hotel.
15:38
Speaker 10: Platform for that value driven leisure and business traveler that
15:42
Speaker 10: doesn't exist today, and we think together we can create
15:44
Speaker 10: something pretty exciting. So we're simply asking the other side
15:47
Speaker 10: to re engage with us and let's move the ball forward.
15:51
Speaker 2: Let's get back to the price earnings comparison you were
15:54
Speaker 2: making earlier. I've pulled up a chart just to look
15:56
Speaker 2: at what investors are willing to pay for Wyndham hotels
16:01
Speaker 2: earnings right now for current earnings, it's twenty one point eight,
16:07
Speaker 2: so call it twenty two, and it's been around that
16:10
Speaker 2: level taking out the covid era spike for the last
16:13
Speaker 2: ten years. If you look at how much investors are
16:17
Speaker 2: willing to pay for forward earnings, we're looking at seventeen
16:21
Speaker 2: point two right now, and it's pretty much hovered between
16:25
Speaker 2: you know, sixteen and twenty for the past few years,
16:31
Speaker 2: and before that it was much much lower. What are
16:33
Speaker 2: you talking about offering for earnings either now or estimated earnings?
16:39
Speaker 10: So what we're really looking at in this transaction is
16:42
Speaker 10: taking their business and applying our multiple, which as I
16:46
Speaker 10: mentioned before, is two to three times bigger than theirs.
16:49
Speaker 10: There's a reason for that. The reason is we have
16:51
Speaker 10: a higher growth story than they have had traditionally, and
16:55
Speaker 10: we think by combining the two companies, there's an ability
16:57
Speaker 10: to unlock value in their brand that as a standalone
17:01
Speaker 10: company they're unable.
17:02
Speaker 9: To do today.
17:02
Speaker 10: So we really feel like having that larger scale allows
17:05
Speaker 10: us to really open up value, create more brand equity,
17:09
Speaker 10: and drive the growth in their brands in addition to
17:12
Speaker 10: our own, and it really accelerates the growth for everybody.
17:15
Speaker 1: Patrick, instead of M and A, could it see could
17:17
Speaker 1: you see a partnership similar to MGM Mariot.
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Speaker 10: So that would be something like the combination of the
17:24
Speaker 10: loyalty programs. There's always relationships. We have them today with
17:29
Speaker 10: certain travel partners where we have our rewards program that
17:32
Speaker 10: links up that provides an opportunity for companies to work together.
17:36
Speaker 10: I think on a transaction like this, it really makes
17:38
Speaker 10: sense to do the full embrace and really bring the
17:41
Speaker 10: full value that we can bring to their shareholders and
17:45
Speaker 10: our own as well as the both of our franchise
17:47
Speaker 10: e basis. So something like that is a little bit
17:50
Speaker 10: of a small cheese when you can have the big opportunity,
17:53
Speaker 10: I think it makes the most sense to go forward
17:55
Speaker 10: with a full embrace and combine the two businesses.
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Speaker 1: All right, Patrick, thank you so much for joining us.
18:00
Speaker 1: Patrick Patience, he's the CEO of Choice Hotels that simber
18:04
Speaker 1: is C tickers c HH to put into your Bloomberg terminal.
18:08
Speaker 1: Get a sense there. And again they would like to
18:10
Speaker 1: pursue this acquisition of Wyndham, but Wyndham has officially rejected
18:16
Speaker 1: the acquisition. Again a nine point eight billion dollar takeover bid.
18:19
Speaker 5: There you're listening to the team Ken's our live program
18:23
Speaker 5: Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com,
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Speaker 5: the iHeartRadio app, and the Bloomberg Business App, or listen
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Speaker 5: on demand wherever you get your podcasts.
18:35
Speaker 1: Nathan Dean joins the senior policy analyst focusing on the
18:38
Speaker 1: US government for Bloomberg Intelligence's down in Washington, DC. Nathan
18:42
Speaker 1: talk to us about like the practical impact if we
18:45
Speaker 1: have a shutdown next month of the US government. That
18:48
Speaker 1: means stuff doesn't just get done, nobody gets paid.
18:52
Speaker 6: What's the feeling done?
18:53
Speaker 2: Save us money? Right, Nathan? Because I sit around in
18:55
Speaker 2: my car listening to Bloomberg Radio and get so angry
18:58
Speaker 2: about the death sits and the debt picture, and I
19:01
Speaker 2: think man might as well just shut down the government.
19:04
Speaker 2: But that actually is not less expensive, is it?
19:08
Speaker 5: Yeah?
19:08
Speaker 8: Exactly?
19:08
Speaker 12: You know, during the best base case scenario is are
19:11
Speaker 12: obviously the base case to go off of is what
19:13
Speaker 12: happened under the Trump administration.
19:15
Speaker 8: We had a thirty five days shutdown.
19:16
Speaker 12: You know, you've lost about eleven billion dollars in economic
19:19
Speaker 12: activity the country or sorry, when the government went it reopened,
19:22
Speaker 12: was able to regenerate around eight billion over that, so
19:25
Speaker 12: but we were.
19:25
Speaker 8: Still down three billion.
19:27
Speaker 12: And see, that's the problem is is that when they
19:29
Speaker 12: say let's just shut the government down, everybody will save money. No, No,
19:32
Speaker 12: the government still operates. It's the portions of the government
19:36
Speaker 12: that are considered non essential that shut down. But ultimately
19:39
Speaker 12: those payers are those workers are always paid back when
19:41
Speaker 12: the government reopens.
19:43
Speaker 8: You know.
19:43
Speaker 12: So markets tend to think of shutdowns almost like a
19:46
Speaker 12: you know, when it actually happens, we're not quite sure
19:48
Speaker 12: what's happening.
19:49
Speaker 8: There's some inks for a couple of days.
19:51
Speaker 12: But then once they realize that the economic impact is
19:54
Speaker 12: just you know, it's bad but not like groundbreaking, then
19:58
Speaker 12: markets tend to.
19:58
Speaker 8: Actually move up towards the end of a shutdown or
20:00
Speaker 8: just act normally.
20:02
Speaker 1: Nathan, we don't have a speaker, we've got this of
20:05
Speaker 1: the House, we've got this looming government shutdown. What's the
20:09
Speaker 1: feeling when you talk to your contacts down there in
20:12
Speaker 1: DC about how this is all going to play out?
20:14
Speaker 6: Because, I mean, the feeling.
20:15
Speaker 1: Here from New York is it's why should we expect
20:18
Speaker 1: anything other than a shutdown?
20:21
Speaker 12: So to answer your question, nobody knows. I mean, there's
20:24
Speaker 12: this general consensus that you know, this idea that Jim
20:27
Speaker 12: Jordan's going to lose the second ballot, which should start
20:30
Speaker 12: in about five minutes. You know, there's this idea of
20:33
Speaker 12: Patrick McHenry the speaker pro tempt gaining additional power so
20:37
Speaker 12: that he can over the next thirty days deal with
20:39
Speaker 12: Ukraine and Israel AID and so forth like that. Nobody
20:42
Speaker 12: knows how that's going to play out. But what we
20:43
Speaker 12: do know is think about the catalysts that are coming up.
20:46
Speaker 12: So you've got Israel Ukraine AID, you know, general support
20:50
Speaker 12: for that. Obviously the Ukraine is a little bit different,
20:52
Speaker 12: but general support. You've got this shutdown in overmus seventeenth.
20:55
Speaker 12: If Jim Jordan becomes the speaker, well, if he proceeds
20:58
Speaker 12: with his plan, the Bloomberg News was reporting about that
21:01
Speaker 12: he wants to kick the can down to April. Shutdown
21:03
Speaker 12: thread is low. If they can't get the Republicans united
21:06
Speaker 12: around that, the shutdown thread is really high. But when
21:09
Speaker 12: it comes to the shutdown, the real concern for markets
21:12
Speaker 12: is that if you go into let's say past thirty
21:14
Speaker 12: five days and this goes in the twenty twenty four,
21:17
Speaker 12: not only do you have to worry about the economic impact.
21:20
Speaker 12: You also have to worry about things like snap benefits
21:23
Speaker 12: running out, and if you have exposure to grocery stores
21:25
Speaker 12: come twenty twenty four, that may be something to keep
21:28
Speaker 12: in the back of your mind. But ultimately these things
21:31
Speaker 12: always end up being solved by bardie partisan deals. It's
21:34
Speaker 12: just the political roadblocks and the political games that you
21:37
Speaker 12: have to.
21:37
Speaker 8: Run through to get to that bipartisan deal.
21:41
Speaker 2: So I aid to Ukraine and Israel or front and center.
21:46
Speaker 2: What about things like safe banking and salt tax deductions?
21:53
Speaker 2: Has everyone lost sight of those things? You know?
21:57
Speaker 12: I'm great, Yeah, he asked that question because every day
21:59
Speaker 12: we don't have a speaker, odds of bills like safe
22:02
Speaker 12: banking or crypto or data privacy amongst children I'm sorry, David,
22:06
Speaker 12: privacy for children technology companies.
22:09
Speaker 8: Every day that we.
22:10
Speaker 12: Don't have a speaker, the odds of those bills passing
22:12
Speaker 12: decreases because what happens is you're not spending time actually
22:16
Speaker 12: working on those bills, and nobody in Congress is paying
22:18
Speaker 12: attention to.
22:19
Speaker 8: Them at the moment.
22:20
Speaker 12: You need, folks that aren't you accustomed to these issues,
22:23
Speaker 12: just start debate, start discussion, having hearings, votes, et cetera.
22:26
Speaker 12: And so if this speaker issue or debate dysfunction, whatever
22:30
Speaker 12: you call it, continues to bleed through the rest of
22:32
Speaker 12: the fall, then we get into twenty twenty four and
22:35
Speaker 12: something like safe banking. Well, you know, if people aren't
22:38
Speaker 12: paying attention to it, pretty soon they're going to pay
22:40
Speaker 12: attention to the elections and they're not.
22:42
Speaker 8: Even going to care about these bills.
22:43
Speaker 12: So, you know, we have a lot of bills that
22:45
Speaker 12: we are tracking out there that are like tied to
22:47
Speaker 12: a specific portfolio or industry, and every single day that
22:51
Speaker 12: this dysfunction continues, the odds of those bills passing decreases.
22:54
Speaker 8: Just a little bit.
22:55
Speaker 2: But as we approach the election, I would guess sall
23:00
Speaker 2: deductions are going to come into sharper focus because it
23:04
Speaker 2: started to become an issue. You know, the Republicans raised
23:10
Speaker 2: taxes on us, and that doesn't look good when they're
23:13
Speaker 2: running for reelection. So now I'm starting to hear from
23:16
Speaker 2: both sides support for raising the cap.
23:21
Speaker 12: Support from both sides, most likely in New Jersey or
23:23
Speaker 12: New York or California if you taught somebody you know which,
23:28
Speaker 12: don't get me wrong, for those of you in New
23:29
Speaker 12: York and New Jersey.
23:30
Speaker 8: I really hope this works out for you.
23:32
Speaker 12: But you know, really though, the more important thing to
23:35
Speaker 12: say here is that, you know, Democrats have been using
23:38
Speaker 12: salt as a way to attack the Republicans and adds.
23:40
Speaker 12: Bloomberg News had an article about that earlier this week.
23:43
Speaker 12: And you know, the challenge for the salt deduction advocates,
23:47
Speaker 12: of the ones who don't want to get rid of
23:48
Speaker 12: the cap is how do you pay for it? Because
23:50
Speaker 12: it's an easy thing for somebody from the state of
23:53
Speaker 12: like Tennessee or Colorado for example, to say, you know, look,
23:57
Speaker 12: if we give this to the folks in New York
23:59
Speaker 12: and New Jersey, you know, how do we pay for it?
24:01
Speaker 12: And that's just a big challenge, you know. Certainly, I
24:04
Speaker 12: think the salt Deduction Caucus, you know, their their their
24:07
Speaker 12: matra is we just want to nibble of salt, a
24:10
Speaker 12: piece of salt.
24:10
Speaker 8: We don't want it back.
24:11
Speaker 12: They're certainly going to try hard, and I think there
24:13
Speaker 12: are some, you know, real chances that they can get there.
24:16
Speaker 12: But again, they're really not going to negotiate this until
24:19
Speaker 12: after the election.
24:20
Speaker 8: This is the year. Twenty twenty four is the year
24:22
Speaker 8: for bringing out these ideas.
24:24
Speaker 12: Trying to get people comfortable positions and so forth like that,
24:27
Speaker 12: and then after the elections you have a real strong,
24:29
Speaker 12: you know, impetus to do something.
24:31
Speaker 13: Then.
24:32
Speaker 1: So, Nathan, we're just kind of having the big big
24:35
Speaker 1: banks report their earnings and we've heard a lot of
24:37
Speaker 1: the you know, the executives you know, talk about some
24:40
Speaker 1: of the higher capital requirements, debt requirements and things like that.
24:44
Speaker 6: That kind of stuff. Is that still coming from Washington?
24:49
Speaker 8: Yeah? Absolutely so. Brian moynan from Bank of America just.
24:52
Speaker 12: Did an interview with David Weston yesterday about this, and
24:55
Speaker 12: you talked about what was known as the Basel three endgame. No,
24:57
Speaker 12: this is a proposal that's out there and this would
25:00
Speaker 12: raise for capital requirements for the biggest banks.
25:02
Speaker 8: So the JP Morgan's though so.
25:03
Speaker 12: Forth by about nineteen percent. You know, there is some angst,
25:08
Speaker 12: I would think, or at least I would say, not
25:10
Speaker 12: just amongst you know, Republicans, but also some moderate Democrats.
25:14
Speaker 12: But what's the impact here on mortgage lending, what's the
25:17
Speaker 12: impact on the economy, because you know, in this times
25:20
Speaker 12: of economic uncertainty, is this really the time that we
25:22
Speaker 12: want to drive capital requirements higher? You know, mister Moynihan
25:26
Speaker 12: even said, look, if you're going to raise capital on
25:28
Speaker 12: us that nineteen percent, we could probably deal with it.
25:30
Speaker 12: But a lot of lending is going to go to
25:32
Speaker 12: non bank financials like hedge funds and stuff for like that.
25:34
Speaker 12: That's counterintuitive to what regulators want to do. So we've
25:38
Speaker 12: seen the Federal Reserve somewhat on the defensive defensive about this.
25:42
Speaker 12: I think they're still going to move forward and try
25:43
Speaker 12: and finalize this year. It's a three year implementation. After that,
25:47
Speaker 12: the comment deadline is November thirtieth, so we won't see
25:49
Speaker 12: any action from the FEN until after that. Federalization is
25:52
Speaker 12: probably going to be about a year from now, but
25:54
Speaker 12: certainly tweaks could be on the horizon here because I
25:57
Speaker 12: think the Fed is getting a little bit different response,
26:00
Speaker 12: not only just from the industry but some of those
26:02
Speaker 12: moderate lawmakers as they had originally intended.
26:04
Speaker 1: Well, Nathan, that's kind of already happened. The whole growth
26:07
Speaker 1: of the private credit business, which is just booming, is
26:10
Speaker 1: a you know, many folks feel like as a direct
26:12
Speaker 1: result of the regulations instituted after the Great Financial Crisis.
26:17
Speaker 12: Yeah, absolutely, I mean, the Financial Stability Oversight Council which
26:20
Speaker 12: is a superbody, regulatory body almost called the super Friends,
26:23
Speaker 12: led by Treasury. You know, they've been looking at this
26:26
Speaker 12: for a while now, but they really haven't done anything.
26:28
Speaker 12: I mean, there's been lots of studies and guidances and
26:30
Speaker 12: so forth like that. There's some discussion about, you know,
26:33
Speaker 12: changing some Trump era guidance to make it easier to
26:36
Speaker 12: declare one of these non banks.
26:38
Speaker 8: What is known systemically is important. If they were to
26:40
Speaker 8: pick on.
26:40
Speaker 12: Blackrock, for example, they could hit Blackrock with capital requirements.
26:44
Speaker 12: But in the same breath, Treasury Secretary Janet Yon has
26:47
Speaker 12: always said, I don't want to target Blackrock, but maybe
26:50
Speaker 12: the activities of Blackrock. And again I'm just picking on
26:52
Speaker 12: Blackrock here, So you know, I think this signals to
26:55
Speaker 12: us is that the FSOC really doesn't know what it
26:57
Speaker 12: wants to do. And oh, by the way, we have
26:59
Speaker 12: an election in twenty twenty four, so if the Republicans
27:02
Speaker 12: win the White House, all this work essentially stops. So
27:05
Speaker 12: when it comes to the regulation of the non bank sector,
27:08
Speaker 12: you know, twenty twenty four is going to be another
27:10
Speaker 12: year of studying and analyzing and so forth like that.
27:13
Speaker 12: If BIND wins reelection, then you're gonna start seeing a
27:17
Speaker 12: little bit more of maybe if you're a black Rock,
27:20
Speaker 12: or if you're Vanguard, or if you're.
27:21
Speaker 8: Just you know, what is considered systemically important.
27:24
Speaker 12: Yeah, then you're going to get a look at and
27:26
Speaker 12: see maybe there's a different regulatory regime for you.
27:28
Speaker 6: All right, good stuff, Nathan Dean.
27:29
Speaker 1: I don't know why Nathan just doesn't go across the street,
27:32
Speaker 1: go to Copitol Hill and just tell these people get
27:34
Speaker 1: something done. I mean, he's smart, he's reasonable. I'd listen
27:37
Speaker 1: to him, Nathan Dean. I mean, senior policy analysts does
27:40
Speaker 1: the US government stuff.
27:41
Speaker 6: I don't know. Bloomberg Intelligence, smart guy, reasonable.
27:44
Speaker 5: You're listening to the tape Can's are live program Bloomberg
27:47
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the
27:51
Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
27:54
Speaker 5: You can also listen live on Amazon Alexa from our
27:57
Speaker 5: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
28:03
Speaker 1: I Met Kumar joins the c a CIO of Parent
28:06
Speaker 1: Handsome Values to talk about these markets. I mean, thanks
28:09
Speaker 1: so much for taking the time. Just first of all,
28:11
Speaker 1: just tell us how you guys at your shop. How
28:13
Speaker 1: do you guys approach the market.
28:16
Speaker 13: We tend to have thank you for first, Paul for
28:18
Speaker 13: having me on the show. We tend to have a
28:21
Speaker 13: very long term view in terms of the stocks that
28:24
Speaker 13: we look at. We are very equity focused, so typically
28:28
Speaker 13: you know, five percent year view on individual stocks and
28:32
Speaker 13: their growth out look at et cetera. And obviously when we
28:35
Speaker 13: go through a mudical cycles, joint appeard given the cycles
28:38
Speaker 13: of getting shorter and shorter.
28:40
Speaker 1: All right, So there's so many cross currents for investors
28:45
Speaker 1: to kind of deal with these days, whether it's earnings
28:47
Speaker 1: that we're just dealing with earnings, whether it's the geopolitical
28:49
Speaker 1: issues across the globe, rising interest rates, kind of what's
28:54
Speaker 1: your call right here?
28:55
Speaker 6: What do you? How are you guys? How have you
28:57
Speaker 6: positioned your portfolio?
29:00
Speaker 13: So, look, when we when we look out next five years,
29:03
Speaker 13: there's a few factors to look at. I mean, what
29:06
Speaker 13: is the peak industry where it's going to be And
29:09
Speaker 13: that's partly a factor in the cost of capital and
29:12
Speaker 13: valuations that we look at the stocks. And let's say,
29:16
Speaker 13: if we are hired for longer, which is one of
29:18
Speaker 13: the more reasonably accepted case, are we in stocks that
29:23
Speaker 13: can justify that kind of cost of capital and can
29:28
Speaker 13: compensate with cash flow and other things. Those those things
29:31
Speaker 13: we look at. Geopolitical issues, of course, I mean, are
29:34
Speaker 13: have been a factor, and there's always I cannot have
29:37
Speaker 13: been a one manager for seven years at Threading. I've
29:39
Speaker 13: never remembered a time where there was not much uncertainty,
29:42
Speaker 13: whether it was US presidential elections or you know, US
29:46
Speaker 13: banks facing problems one after the other, and this time
29:51
Speaker 13: is no different. But I guess what a five year
29:54
Speaker 13: outlook allows us to do is look past some of
29:58
Speaker 13: the short term noise and focus on solid business models
30:02
Speaker 13: and companies that have a true economic advantage and a
30:07
Speaker 13: business model advantage over the others. So in that context,
30:10
Speaker 13: if we look out five to ten years, obviously cloud
30:13
Speaker 13: and internet is going to be, you know, a very
30:16
Speaker 13: lasting theme. I mean, the next three dollars of growth
30:19
Speaker 13: is we're going to come from there, and software and
30:21
Speaker 13: semiconductors are kind of not in bold, So we are
30:24
Speaker 13: obviously very focused on both those segments, and then also
30:28
Speaker 13: on biotechnology and life sciences slash devices, where basically we'll
30:33
Speaker 13: be solving lots of healthcare problems with the help of
30:37
Speaker 13: compute actually because a lot of the biotech and device
30:41
Speaker 13: research has been augmented with the application of you know,
30:46
Speaker 13: advances in a cloud.
30:48
Speaker 6: That's where I wanted to go. That's where I wanted
30:50
Speaker 6: to go.
30:50
Speaker 1: It seems like, you know, earlier this year AI was
30:54
Speaker 1: just all the rage. Now maybe the focuses on Ozebic
30:58
Speaker 1: or something like that. I don't know, But how do
31:00
Speaker 1: you guys think about AI and how does that kind.
31:04
Speaker 6: Of influence where you go? How do you how do
31:06
Speaker 6: you play AI?
31:09
Speaker 13: So look, AI as a theme for the next five
31:11
Speaker 13: to ten years is going to be around, and simply
31:14
Speaker 13: because of the ease of access. I mean, if you
31:18
Speaker 13: wanted to I mean, if you flash back to two thousand,
31:22
Speaker 13: if you want to do a new startup where you
31:24
Speaker 13: buy a bunch of computers and servers and you know,
31:26
Speaker 13: and they become obsolete every year. Fast forward now, if
31:30
Speaker 13: you want to start up startup, I mean, you just
31:32
Speaker 13: rent something on Amazon Cloud or Microsoft as you're Google, right,
31:37
Speaker 13: and it's no different for AI as well. I mean
31:40
Speaker 13: you can basically run your AI workloads on each of
31:43
Speaker 13: these cloud servers. So the most you know, obvious and
31:47
Speaker 13: the first order beneficiaries are obviously the hardware suppliers who
31:51
Speaker 13: supply the semiconduct of chips to these, and then and
31:54
Speaker 13: then the service providers themselves, so the hyperscalers and the
31:57
Speaker 13: cloud service providers the ones. But really what we're looking
32:02
Speaker 13: at is what problems are these AI use cases solving.
32:06
Speaker 13: And obviously, you know, GPT has been one of the
32:09
Speaker 13: most obvious ones we've heard about in the last one
32:12
Speaker 13: year especially, But there's a lot of lateral and vertical
32:16
Speaker 13: applications for AI. Like I said, in healthcare, a lot
32:20
Speaker 13: of the wet lab data, which is be a primary
32:23
Speaker 13: focus of biaritic research, I mean a lot of a
32:26
Speaker 13: lot of the data can serve towards sort of you know,
32:32
Speaker 13: a driven models, which can tell you the impact of
32:36
Speaker 13: a receptor or a drug on its target.
32:40
Speaker 2: I mean you you have a truly international resume. You
32:45
Speaker 2: started your studies at the Indian Institute of Technology. You've
32:48
Speaker 2: worked at Swiss Reading, Columbia, thread Needle, You've been a
32:51
Speaker 2: visiting lecturer at the London Business School, and I hear
32:53
Speaker 2: you're in Florida right now. Are there regions that you
32:57
Speaker 2: like better than the others? The US, you know, still
33:01
Speaker 2: the leader when it comes to the kind of investing
33:03
Speaker 2: you're interested in. Are there other places where you find
33:05
Speaker 2: good value?
33:07
Speaker 13: Well, for me, the US Obviously I love a few
33:10
Speaker 13: of the other international areas as well, but for me,
33:12
Speaker 13: the US is kind of paramount because I mean, look,
33:15
Speaker 13: when it comes to technology and biotechnology, there is no
33:19
Speaker 13: close second to the United States and the kind of
33:23
Speaker 13: talent and resource and university research still we have. I mean,
33:27
Speaker 13: as part of our philanthropy, we are also involved with
33:30
Speaker 13: a lot of the universities in early stage research. But
33:33
Speaker 13: when it comes to anything from cancer to semiconductors to AI,
33:41
Speaker 13: all the bleeding companies are based here in the US,
33:44
Speaker 13: and all the breakthrough research is happening here. So at
33:48
Speaker 13: least I know that there's other countries where you can
33:52
Speaker 13: claim the next centuries theirs, but I don't see the
33:55
Speaker 13: next decade going anywhere from the State.
33:58
Speaker 1: All right, I mean, thanks so much, Jeh for taking
33:59
Speaker 1: the time. We really appreciate getting some of your thoughts
34:02
Speaker 1: on mid Kumar. He's the CIO. The firm is called
34:05
Speaker 1: Parham hence Values LLC. So given us thoughts on the
34:09
Speaker 1: markets focusing on technology and biotechnology.
34:12
Speaker 5: You're listening to the tape can't live program Bloomberg Markets
34:16
Speaker 5: weekdays at ten am Eastern on Bloomberg Radio, the tune
34:19
Speaker 5: in app, Bloomberg dot Com, and the Bloomberg Business App.
34:22
Speaker 5: You can also listen live on Amazon Alexa from our
34:25
Speaker 5: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
34:31
Speaker 1: President Biden, we saw Lader today, we heard him speak.
34:34
Speaker 6: He was in Israel.
34:35
Speaker 1: Believe he wheels up on the way back. But obviously
34:39
Speaker 1: the big issue, just really during this visit was the
34:42
Speaker 1: hospital explosion in Gaza and how that is going to
34:46
Speaker 1: impact the whole situation. Bobby Ghost joins, as he's the
34:49
Speaker 1: editor with Bloomberg Opinion, we appreciate getting a few more
34:52
Speaker 1: minutes of his time. He joins us here in our
34:54
Speaker 1: Bloomberg Interactive Brokers studio. So, Bobby, the explosion we saw
34:57
Speaker 1: at the hospital doesn't make things any easier over there,
35:01
Speaker 1: does it.
35:01
Speaker 6: How do you think about that?
35:02
Speaker 4: No, it made things a lot harder for President Biden.
35:05
Speaker 4: He was meant, in addition to traveling to Israel, he
35:07
Speaker 4: was meant to have a summit with the President of
35:10
Speaker 4: Egypt and the King of Jordan, two very very important
35:14
Speaker 4: neighbors of Israel, and people who would have to be
35:17
Speaker 4: part of the solution here, and they basically canceled on him,
35:22
Speaker 4: canceled on the President of the United States, which I can't,
35:26
Speaker 4: off the top of my head think of another occasion
35:28
Speaker 4: when that's happened. Because they joined a rush to immediately
35:34
Speaker 4: blame the explosion on Israel. The assumption was that it
35:39
Speaker 4: was an Israeli missile that blew up that hospital. Now overnight,
35:44
Speaker 4: we've had other people look into this, the US, the Pentagon.
35:52
Speaker 4: It was a huge explode.
35:54
Speaker 2: You think of the maass missiles or whatever other splinter group.
35:57
Speaker 2: This was as kind of small and not quite power
36:00
Speaker 2: enough to destroy an entire hospital.
36:02
Speaker 4: It depends on what they fall on, and it depends
36:05
Speaker 4: what they're carrying when they fall. So a missile is
36:07
Speaker 4: loaded with fuel. If it falls before that fuel has
36:11
Speaker 4: been expended, then that fuel will will create a big fireball.
36:15
Speaker 4: And if it lands on something else that is flammable,
36:18
Speaker 4: like a casual weapons, that will also create a fireball.
36:21
Speaker 4: I am not suggesting for a moment, I know the
36:23
Speaker 4: answer to the question whose rocket made the damage, but
36:27
Speaker 4: there is now room for doubt. And the President upon
36:30
Speaker 4: arrival in Israel, one of the first things he said
36:35
Speaker 4: was that Israel didn't do it, and he's based he
36:37
Speaker 4: was asked and he says he's basing that on the
36:40
Speaker 4: intelligence he was shown from the Defense Department. So American
36:43
Speaker 4: intelligence has looked at this, Israeli intelligence has looked at this.
36:46
Speaker 4: They are claiming at this point it's only a claim.
36:50
Speaker 4: They are claiming that a missile fired by slamming Chihad,
36:54
Speaker 4: which is, if you like Hamas's younger cousin, that a
36:59
Speaker 4: miss that a rocket that they have set off in
37:03
Speaker 4: the direction of Israel misfired and landed on this hospital
37:08
Speaker 4: and created this fireball.
37:09
Speaker 2: I want to ask about. So he gave a really
37:12
Speaker 2: impassioned speech this morning, and I want to get your
37:14
Speaker 2: take on that, because I thought it was incredibly well done,
37:19
Speaker 2: certainly well written and well delivered speech, and he made
37:22
Speaker 2: some important points. On the other hand, he's made some
37:24
Speaker 2: missteps over the past few days. He said that or
37:29
Speaker 2: implied that there were confirmed pictures of beheaded babies, right,
37:33
Speaker 2: which led to a real concern, a fair concern I
37:37
Speaker 2: think about misinformation coming from the Israeli side. Now he
37:40
Speaker 2: says that the other team did it, which is I
37:43
Speaker 2: think a really poor choice of phrase, right, as if
37:46
Speaker 2: these are two teams, and considering what he said earlier,
37:52
Speaker 2: it seems like he's willing to take Israeli propaganda and
37:56
Speaker 2: just continue to spread it. What do you think of.
38:00
Speaker 4: That, Well, he does have a history of shooting from
38:03
Speaker 4: the hip, and then the White House later has to
38:06
Speaker 4: sort of take back what he said. We're seeing that
38:09
Speaker 4: happen again in real time. I agree with you the
38:13
Speaker 4: choice of the word the other team seems terribly inappropriate.
38:18
Speaker 4: I prefer my folksy rhetoric from Dan rather than the
38:23
Speaker 4: President of the United States. But in the instance about
38:28
Speaker 4: the about the explosion in the in the hospital, he's
38:33
Speaker 4: not He doesn't seem to be shooting off the hip there.
38:36
Speaker 4: He's saying that this is specific intelligence shown to him,
38:39
Speaker 4: not by the Israelis, by the Pentagon, the Pentagon, by
38:43
Speaker 4: the Defense Department, Which makes this slightly different that the
38:46
Speaker 4: sort of off the cuff statement he made about the babies,
38:49
Speaker 4: that that was a very very ill conceived thing for
38:53
Speaker 4: a man who, let's not forget, prides himself at being
38:58
Speaker 4: a world statesman, prides himself at having been in the
39:01
Speaker 4: weeds of foreign policy for four decades.
39:04
Speaker 2: About standing with Goldenmeyer, you know, I thought was pretty impressive.
39:09
Speaker 2: Call back to nineteen seventy three, what did you think
39:11
Speaker 2: about the speech?
39:12
Speaker 4: I like the speech. I thought it was, as you say, passionate,
39:16
Speaker 4: well written, and well delivered. But I don't think anybody
39:19
Speaker 4: in Israel was in any doubt that the President of
39:22
Speaker 4: the United States was behind them. I mean, we can
39:25
Speaker 4: discuss whether it's worth him saying it one more time,
39:28
Speaker 4: and whether it carries more impact if he says it
39:31
Speaker 4: in Jerusalem rather than says it from the Oval Office.
39:34
Speaker 4: Perhaps it does. But there's another constituency, another audience in
39:38
Speaker 4: the Middle East that he needed to speak to, an
39:40
Speaker 4: audience that is sort of enraged at the moment, that
39:45
Speaker 4: for whom that speech would have gone down like a
39:48
Speaker 4: lead balloon. Again, I say, the King of Jordan, the
39:54
Speaker 4: President of Egypt, recipients of enormous amounts of American aid,
39:59
Speaker 4: two of the most important non NATO allies of the
40:03
Speaker 4: United States, blowing off the President of the United States.
40:07
Speaker 4: That's very, very bad news.
40:08
Speaker 1: So how should we take this? How should how should
40:13
Speaker 1: the President take it? I mean, I agree it sounds
40:16
Speaker 1: I don't remember that ever happening. So what does that
40:18
Speaker 1: really tell you?
40:20
Speaker 8: Well, that tells.
40:20
Speaker 4: That tells me that you know that the the the
40:23
Speaker 4: Arab Street, the mythical sometimes mythical Arab street, this case,
40:28
Speaker 4: real is is mad as hell, and even their rulers,
40:31
Speaker 4: not necessarily elected rulers, are frightened off going against the street,
40:37
Speaker 4: no matter how much evidence the United States and Israel
40:39
Speaker 4: put forward. I can't imagine the King of Jordan or
40:43
Speaker 4: the President of Egypt standing before cameras and saying, oh,
40:47
Speaker 4: we got it wrong, sorry, folks, it was it was
40:49
Speaker 4: our own It was it was amasso islamping you had
40:52
Speaker 4: that did this. It was not the Israelis. I don't
40:54
Speaker 4: think that they will run against the opinion of their people,
40:58
Speaker 4: even when that opinion is wrong. Now, what Biden has
41:00
Speaker 4: done since that opening, those opening remarks, he's done the
41:04
Speaker 4: right things. He's he's sort of lent into this idea
41:07
Speaker 4: of forcing the Israelis to allow humanitarian aid to get
41:12
Speaker 4: to Gaza. That was very, very important. Now, that would
41:16
Speaker 4: have been much more striking if he had made that
41:18
Speaker 4: announcement with the with King Abdullah and President CEC standing
41:22
Speaker 4: on either side of him. Okay, that photo op didn't happen,
41:26
Speaker 4: But if he can continue to hold Israelis to this,
41:29
Speaker 4: allowing humanitarian supplies, making a greater effort not to hit
41:33
Speaker 4: civilian targets, maybe holding back on that ground offensive that
41:37
Speaker 4: they've been preparing for. Then his trip will not have
41:40
Speaker 4: been entirely wasted.
41:41
Speaker 2: I wonder what you know when I see these I
41:45
Speaker 2: can understand the tragedies of any helpless woman or children
41:53
Speaker 2: or men for that matter, you know, being killed civilians
41:56
Speaker 2: being killed in acts of terrorism or acts of war.
42:00
Speaker 2: But I I have to question when I see the
42:05
Speaker 2: protests against Israel in the Middle East and here on
42:08
Speaker 2: college campuses, whether or not these people saw what Hamas
42:13
Speaker 2: did last Saturday. I mean, the President repeated it, and
42:16
Speaker 2: it shouldn't be forgotten. They came out and killed in
42:20
Speaker 2: very brutal ways, kids dancing at a peace festival, you know,
42:24
Speaker 2: went into a kibbutz. They killed parents in front of
42:26
Speaker 2: their children. They killed children in front of parents. They
42:29
Speaker 2: there are reports of rape and as the President did say,
42:32
Speaker 2: the headings and you know, burning people alive.
42:34
Speaker 8: Did did Did no one see this?
42:36
Speaker 5: No?
42:37
Speaker 4: They did?
42:37
Speaker 2: And how actually justify protesting against you know, the retaliation
42:41
Speaker 2: for that act.
42:42
Speaker 4: I wrote a piece about this on Monday. I wondered,
42:45
Speaker 4: I think I lost Monday, that sorry, Monday before this,
42:48
Speaker 4: right loast Monday. Uh, making this exact point that that
42:51
Speaker 4: Hamas in those early days after that that terrorist attack,
42:56
Speaker 4: had lost the international war of images. That you know,
43:00
Speaker 4: that nobody could could any longer pretend that Hamas was
43:04
Speaker 4: a legitimate resistance group, that this was terrorism, pure and simple,
43:09
Speaker 4: and the people who did this were terrorists, pure and simple.
43:12
Speaker 4: And I have to say that for a New York minute,
43:16
Speaker 4: it really did shock the Arab world, and there was
43:21
Speaker 4: it's hard to think back even to a few days
43:24
Speaker 4: back because so much has happened since then, but there
43:27
Speaker 4: was a moment of pause, a sharp intake of breath.
43:30
Speaker 4: If you've covered the Middle East as long as I have,
43:33
Speaker 4: it was a really really important moment, and then it passed.
43:37
Speaker 4: This is the nature of war. It's the nature of
43:39
Speaker 4: war of images just as much as is the nature
43:41
Speaker 4: of war.
43:42
Speaker 9: Twenty four hour news cycle.
43:43
Speaker 4: And in a fog, this sort of thing will happen
43:47
Speaker 4: over and over again. There will be a fresh image
43:49
Speaker 4: that'll grab attention, then that attention will sort of go away.
43:52
Speaker 4: Another fresh image and that'll grab attention. Right now, all
43:56
Speaker 4: the images are coming out of Gaza, and that's where
44:00
Speaker 4: attention and anger is focused.
44:03
Speaker 1: And the next one's presumably what happened when we do,
44:06
Speaker 1: in fact get a Israeli movement, whether they attack, go
44:10
Speaker 1: and send in troops, that's when we'll get those images
44:13
Speaker 1: as well. Bobby, thank you so much once again for
44:14
Speaker 1: joining us.
44:15
Speaker 6: Bobby Go.
44:15
Speaker 1: She's the editor of Bloomberg Opinion. Just we're really appreciatting
44:18
Speaker 1: some of his time here. Again, his columns, I highly
44:21
Speaker 1: recommend them. Get set an alert like I did on
44:24
Speaker 1: the Bloomberg terminal, then you won't miss them. You go
44:26
Speaker 1: to Bloomberg dot com slash Opinion, and that's where you
44:29
Speaker 1: get the good work of our opinion columns for Bloomberg Opinion.
44:33
Speaker 1: Just outstanding work across the board. I can't say enough
44:36
Speaker 1: about our Bloomberg Opinion Folks.
44:38
Speaker 6: There, you're listening to the tape.
44:40
Speaker 5: Can's our live program Bloomberg Markets weekdays at ten am
44:44
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44:48
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44:50
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44:54
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44:58
Speaker 1: We started the morning with the President Biden in Israel
45:03
Speaker 1: and making his comments there after meetings with Israeli leaders
45:08
Speaker 1: and once again talking about the solidarity between the US
45:12
Speaker 1: and Israel. Of course, the backdrop of that was news
45:15
Speaker 1: of that terrible explosion at the hospital in Gaza, and
45:19
Speaker 1: we want to kind of bring all this together, and
45:21
Speaker 1: we do that with Mick Maulroy, co founder of the
45:23
Speaker 1: Lobo Institute. He's a senior fellow at the Middle East Institute,
45:27
Speaker 1: former Assistant Secretary of Defense for the Middle East at
45:30
Speaker 1: the USTA Department of Defense. He was in paramilitary operations
45:33
Speaker 1: officer at CIA, former US Marine, so just tremendous experience
45:38
Speaker 1: in that part of the world. Mick, let's start with
45:40
Speaker 1: that explosion at the hospital. There's I guess a little
45:44
Speaker 1: bit confusion as to who is responsible based upon the
45:48
Speaker 1: information you've seen, based upon the people you've talked to,
45:51
Speaker 1: how do you think that played out and who kind
45:53
Speaker 1: of instigated that.
45:56
Speaker 11: So, yes, there certainly was confusion. A moss came out
45:59
Speaker 11: quickly and blamed it on the IDF. The IDF, I
46:02
Speaker 11: think rightfully spent time to look at it and determine,
46:06
Speaker 11: at least from their perspective what happened, and they indicated
46:10
Speaker 11: after that that it looked like it was a pig
46:13
Speaker 11: So the Palestinian Islamic Shihad rocket that malfunction and hit
46:18
Speaker 11: the side of the building. And now the United States
46:20
Speaker 11: has come out and what I expected, because they have
46:24
Speaker 11: so many intelligence assets in the regions, that they could
46:27
Speaker 11: do that and look at that for their own perspective
46:29
Speaker 11: and come up with their own conclusions. And they concluded
46:32
Speaker 11: that it was in fact, not the IDF, but an
46:36
Speaker 11: errant rocket that either was lined up incorrectly and hit
46:40
Speaker 11: the side of the hospital or the engine on it
46:44
Speaker 11: failed and it hit the hospital with a lot of
46:46
Speaker 11: its rocket fuel still in it, which is what caused
46:50
Speaker 11: a lot of the casualties.
46:51
Speaker 1: Unfortunately, Yeah, okay, is there do you believe we will
46:55
Speaker 1: ever really know definitively who fired that rocket?
47:00
Speaker 11: So I believe with the information that would be available
47:03
Speaker 11: to the US intelligence community, both imagery signals intelligence about
47:09
Speaker 11: talking on the ground prior to the Ladge, I think
47:13
Speaker 11: we have a pretty good idea. Obviously I can't see
47:16
Speaker 11: that information, but I think if the US came to
47:18
Speaker 11: that conclusion, they have a pretty definitive idea that that
47:22
Speaker 11: was in fact a pig pij excuse me, rocket all right.
47:26
Speaker 1: So I guess another big part of this story or
47:30
Speaker 1: the president's trip to Israel, is that the part of
47:33
Speaker 1: his trip where he was going to beet with Arab
47:35
Speaker 1: leaders in Jordan canceled really kind of at the last moment.
47:38
Speaker 1: And how significant is that from your perspective make in
47:42
Speaker 1: terms of the present's ability to try to promote some
47:45
Speaker 1: type of peaceful movement forward.
47:48
Speaker 11: So it's very unfortunate, especially since it turns out it
47:51
Speaker 11: wasn't a strike by the idea, not that a lot
47:54
Speaker 11: of these leaders would acknowledge that even though we determined it.
47:59
Speaker 11: Because it's going to take dialogue. We're in the middle
48:01
Speaker 11: of trying to establish a humanitarian corridor, humanitarian pause, get
48:06
Speaker 11: foot into Gaza. That requires dialogues at a very high level,
48:10
Speaker 11: and of course any potential in the future for a
48:13
Speaker 11: cessation of hostilities is going to require dialogue. So it's
48:17
Speaker 11: certainly not helpful. We do have ongoing diplomatic missions in
48:20
Speaker 11: all these countries, so the dialogue can continue, but having
48:23
Speaker 11: the president in the region, I think this was a
48:27
Speaker 11: big missed opportunity.
48:28
Speaker 8: Yep.
48:30
Speaker 1: So we still have the images and the news reports
48:32
Speaker 1: mix of the of Israel mounting its resources, its materiel
48:37
Speaker 1: and resources on the border. So I guess the question
48:40
Speaker 1: for a lot of folks is just when will they
48:44
Speaker 1: go into the Gaza Strip? How would they go into
48:47
Speaker 1: the Gaza Strip? Maybe what's their strategy at this stage?
48:50
Speaker 6: What do you think will happen?
48:53
Speaker 11: So it is unclear what is taking this time, why
48:58
Speaker 11: the pause so to speak, because they've been prepared and
49:01
Speaker 11: prepped in an assembly area ready to go in for
49:04
Speaker 11: quite some time. It may be that they're really trying
49:07
Speaker 11: to gather more intelligence. It may be that there is
49:09
Speaker 11: hostage negotiations which you've seen reported today in which you're
49:13
Speaker 11: trying to get them out prior to and of course
49:16
Speaker 11: they got to they have to realize they being the IDF,
49:19
Speaker 11: that Hamas wants them to do this. It was planned
49:22
Speaker 11: probably at the same time they planned the attack into Israel.
49:26
Speaker 11: So they're assessing all of that when they go in.
49:30
Speaker 11: If they go in, I think they're going to go
49:32
Speaker 11: in very hard from the north, from the Eres border checkpoints,
49:38
Speaker 11: because that is where you can get in funnel all
49:41
Speaker 11: of these armored personnel carriers and tanks into that area
49:45
Speaker 11: and then when they hit Gaza City, it's going to
49:47
Speaker 11: be extraordinarily violent and destructive, and that's why it's a
49:51
Speaker 11: good thing that a lot of civilians have already left
49:54
Speaker 11: the northern part of Goza.
49:55
Speaker 1: And I guess just as well, with President Biden in
50:00
Speaker 1: Israel today, there's reports that perhaps leaders from other Western countries,
50:04
Speaker 1: the UK, mister Sunak and Macron of France, they're considering
50:10
Speaker 1: going to Israel as well.
50:11
Speaker 6: I presumably, if you're you.
50:13
Speaker 1: Know, you would not launch a campaign with such folks
50:17
Speaker 1: in country.
50:20
Speaker 11: So I think that's a fair assumption. It's obviously dangerous
50:23
Speaker 11: enough for these heads of states to go into a
50:25
Speaker 11: conflict area, especially one where rockets and missiles are essentially
50:29
Speaker 11: free firing. But I do think going there and delivering
50:33
Speaker 11: a message that is consistent, you know, probably discussed in
50:37
Speaker 11: advance between the US, UK and France is very helpful
50:41
Speaker 11: when it's very really reassuring to Israel, and it does
50:44
Speaker 11: show a ran for example, that they need to stay
50:46
Speaker 11: out of this, and so I imagine those messages are
50:49
Speaker 11: just being repeated. But I agree with you it's unlikely,
50:52
Speaker 11: although not impossible, that they could launch this ground invasion
50:55
Speaker 11: during a time when they when one of these heads
50:57
Speaker 11: of states is in Tel AVIVI you.
51:00
Speaker 6: Know two aircraft carrier groups. I don't care who you
51:03
Speaker 6: are or where you are.
51:05
Speaker 1: That gets your attention here. Are you surprised that there
51:08
Speaker 1: a second carrier group went into the region there?
51:12
Speaker 11: Somewhat surprised, but I agree it definitely should get ran
51:16
Speaker 11: Hezbolah and any other group that wants to join this
51:19
Speaker 11: as attention. These are two of the most advanced aircraft
51:23
Speaker 11: carriers in the world. Combined, there's about sixteen squadrons of
51:27
Speaker 11: fighters and support aircraft. There's I don't know four or
51:30
Speaker 11: five destroyers which all have shift ashore artillery, and then
51:35
Speaker 11: there's cruisers and there's a marine expeditionary unit en route
51:39
Speaker 11: to the area. So this is an incredible amount of
51:41
Speaker 11: both airpower, seapower, and potentially even ground powder. I think
51:45
Speaker 11: that's very unlikely to be used in this region to
51:48
Speaker 11: set a very strong message of deterrence.
51:51
Speaker 1: Mick, just about thirty seconds left. Do you have any
51:53
Speaker 1: updated sourcing on what's happening in Ukraine that unfortunately that
51:57
Speaker 1: has from the Ukraine's perspective, taken kind of a back
52:00
Speaker 1: burner here.
52:02
Speaker 11: Yes, it has, so we've seen what looks like the
52:05
Speaker 11: entry of the attackers, which is a long range artillery
52:09
Speaker 11: weapon that we gave to the Ukrainians, one that was
52:12
Speaker 11: somewhat controversial, but one that also gives them the ability
52:16
Speaker 11: to hit any Russian positions from their front lines now.
52:19
Speaker 11: So any Russian military capacity in Ukraine right now can
52:24
Speaker 11: be hit with these munitions that can be fired out
52:26
Speaker 11: of the high marks. So that's the most significant update.
52:29
Speaker 11: The Ukrainians are making slow gains and they are striking
52:33
Speaker 11: in the rear in Crimea, and I think those are
52:36
Speaker 11: both important in the controlled areas also, so this is
52:40
Speaker 11: an important step. They do need to get the resupplied,
52:44
Speaker 11: and they do need to support to pass in Congress
52:47
Speaker 11: to be able to go forward and really make some
52:49
Speaker 11: gains in this counter offensive.
52:50
Speaker 1: All right, Mick, thanks so much for joining us. We
52:52
Speaker 1: always appreciate getting some of your time. Give us the
52:55
Speaker 1: benefit of your great experience in all things geopolitics. Mick mulright,
53:00
Speaker 1: he's a co founder of the Lobo Institute, and you
53:03
Speaker 1: know has just have tremendous experience in that part of
53:06
Speaker 1: the world and in these types of situations.
53:08
Speaker 2: Look, thanks for listening to the Bloomberg Markets podcasts. You
53:13
Speaker 2: can subscribe and listen to interviews at Apple Podcasts or
53:16
Speaker 2: whatever podcast platform you prefer. I'm Matt Miller. I'm on
53:20
Speaker 2: Twitter at Matt Miller nineteen seventy three.
53:23
Speaker 6: And I'm Faul Sweeney.
53:24
Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
53:26
Speaker 1: can always catch us worldwide at Bloomberg Radio